On the Beach
GROUP PLC
ANNUAL REPORTS & ACCOUNTS
For the Year ended 30 September 2015
On the Beach is a fast-growing,
leading online retailer of beach
holidays.
Welcome to On the Beach
1 Desktop 2 Laptop 3 Tablets (iOS & Android) 4 Smartphones (iOS & Android)
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On the Beach is one of the UK’s largest online retailers of beach
holidays with a 17% share of the UK online short haul beach
holiday market.
With significant opportunities for growth, we’re
on a long-term mission to become Europe’s
leading online retailer of beach holidays, so
our story’s only really just begun.
Here at On the Beach we’re providing a significant structural
challenge to legacy tour operators and travel agents as we continue
our journey to disrupt the online retail of beach holidays with our
scalable, flexible, innovative technology, a strong customer value
proposition and a low cost base. Our model is customer-centric,
asset light, profitable and cash generative.
Visit us online at www.onthebeachgroupplc.com
Contents
Simplicity
Value
Personalisation
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Strategic Report
Governance
Financial Statements
03 At a glance
20 Chairman’s introduction
54 Consolidated income
04 Chairman’s statement
21 Directors’ biographies
06 Chief Executive’s report
23 Corporate Governance
08 Key performance indicators
10 Chief Financial Officer’s
report
13 Principal risks
and uncertainties
16 Corporate social
responsibility
18 Awards & Achievements
Statement
27 Report of the Nomination
Committee
28 Report of the Audit
Committee
31 Directors’ Remuneration
Report
45 Directors’ Report
49
Independent Auditors’
Report to the members
of On the Beach Group plc
statement
55 Consolidated balance sheet
56 Consolidated statement
of cash flows
57 Consolidated statement
of changes in equity
58 Notes to the consolidated
Financial statements
84 Company balance sheet
87 Notes to the Company
financial statements
89 Shareholder information
Annual Report & Financial Statements 2015
On the Beach Group plc
01
Strategic Report
03 At a glance
04 Chairman’s statement
06 Chief Executive’s report
08 Key performance indicators
10 Chief Financial Officer’s report
13 Principal risks and uncertainties
16 Corporate social responsibility
18 Awards & Achievements
2004
Founded by
Simon Cooper.
First website
launched.
79 per cent of the
Group’s bookings were
made online.
On the Beach launched
its own proprietary
technology platform.
2007
Livingbridge
acquired a
majority stake
in the Group
for £36 million
2011
Launched an
international platform
in Sweden under the
“ebeach.se” domain name
On 28 September, On the Beach
listed on the London Stock
Exchange.
93 per cent of the Group’s
bookings were made online.
2015
02 Annual Report & Financial Statements 2015
On the Beach Group plc
2013
Inflexion Equity
Partners acquired
a majority stake
in the Group from
Livingbridge.
2014
On the Beach
continues to optimise
its technology
platform, grow its direct
contracting and invest
into TV advertising.
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At a glance
On the Beach has experienced strong growth, recorded a high
level of consumer engagement on mobile devices and invested
in international expansion under the eBeach brand.
adjusted
underlying Profit
before tax up by
46.5%
Financial highlights Group
> Group revenue is up by 37.9% to £63.1m (FY14: £45.8m)
> Group operating profit before amortisation and exceptional costs up by 39.4%
to £17.5m (FY14: £12.5m)
> Group operating profit is up by 113.5% to £8.0m (FY14: £3.8m)
> Group adjusted underlying profit before tax (1) up by 46.5% to £14.5m
(FY14: £9.9m)
> Adjusted proforma earnings per share of 8.9p is 43.5% up on last year (FY14: 6.2p)
> Strong cash conversion of 99.5% (FY14: 66.4%)
> Net external cash at year end of £10.9m (FY14: £8.6m debt)
(1) Adjusted underlying profit before tax is stated before exceptional costs of £4.9m (FY14: £3.5m), amortisation of acquired intangibles of £4.3m
(FY14: £4.3m) and shareholder interest £7.8m (FY14: £7.0m)
Financial highlights UK
> Total transaction value up 26.6% to £453.6m (FY14: £358.3m)
> Revenue up 37.1% to £62.5m (FY14: £45.6m)
> Revenue after marketing costs up 41.4% to £30.4m (FY14: £21.5m)
> EBITDA (after holding company costs) up 44.9% to £20.0m (FY14: £13.8m)
Operational highlights UK
> Daily unique visitors increased by 14% to 54.4m (FY14: 47.7m)
> Mobile traffic share increased to 61.2% (FY14: 49.0%)
> Branded and free traffic as a percentage of overall increased to 54.8%
(FY14: 50.6%)
> Revenue per daily unique visitor increased by 19.9% to £1.15 (FY14: £0.96m)
> Listed on the London Stock Exchange on 28 September 2015
Operational highlights International
> Increased investment to drive share growth in Sweden £1.8m (FY14: £0.7m)
> Daily unique visitors increased by 179.2% to 1.48m (FY14: 0.53m)
> Total transaction value up by 250% to £5.6m (FY14: £1.6m)
> Launched first TV advertising campaign in May 2015
Annual Report & Financial Statements 2015
On the Beach Group plc
03
Chairman’s Statement
This is the Company’s first annual report as a listed company and
it has been a year of great progress and one in which several
notable milestones were reached; not least our Admission to the
London Stock Exchange on 28 September 2015.
During the year, the Group arranged beach holidays for more
than one million passengers from the UK for the first time, an
international platform was launched in Sweden under the “ebeach.
se” domain name and the Group recorded the highest level
of consumer engagement on mobile devices, with tablets and
mobiles accounting for 61% of traffic.
Since being established by Simon Cooper in 2004, On the Beach
has grown and developed at a striking pace and its impressive and
talented management team have made enormous strides across
every facet of the organisation. I joined the Group in October 2013
and have witnessed first-hand the Group accelerate its progress
and expansion; notably in the areas of optimising its technology
platform across multiple devices, personalising an attractive
consumer product, driving branded awareness, direct contracting
hotels and overseas expansion.
It gives me great pleasure to introduce
the Group’s results for the year
ended 30 September 2015. UK
segment total transaction value
increased by 26.6%, revenue
by 37.1%, EBITDA by 44.9% and
Group underlying profit before
tax by 46.5%. On every key
measure, the business has
performed exceptionally. The
Group has a very impressive record of
revenue and profit growth and it has been able
to grow its profitability at a faster rate than revenues,
demonstrating its ability to leverage its low fixed cost base. The
Group has also invested for the future – in its people, technology
and brand. As a result, it has the infrastructure and foundations in
place to enable it to continue to grow and flourish.
A company with outstanding
talent, pioneering technology
and huge potential.
Richard Segal
CHAIRMAN
04 Annual Report & Financial Statements 2015
On the Beach Group plc
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The Group’s transformation over the last decade has been
based around a customer proposition that focuses on
simplicity, value and personalisation. The Group’s online
platform provides ease of navigation, clarity and transparency.
Consumers get supreme value with extensive choice, flexibility,
competitive pricing, flexible payment plans, relevant products
and, importantly, financial protection and high service
standards. In the fast moving and changing technological
world in which we now live, the Group utilises customer
preferences to personalise the customer experience across
each device which a customer may use to visit the Group’s
websites, in order to maximise conversion rates.
A key strength within On the Beach is its singular focus on
online, dynamically packaged beach holidays. The Group
recognises the importance families and individuals place on
selecting all the ingredients that together make the picture-
perfect beach holiday. A flat, entrepreneurial, customer-
focused culture is engrained across the business. This delivers
high levels of customer satisfaction, drives
innovation of ideas and enables
the Group to continually evolve
by improving those elements of
its business which will have the
biggest effect on the customer
experience and revenue
generation.
People are at the heart of
the organisation. From the outset,
there has been a determination to
recruit and retain the very best employees.
Finding individuals with the strongest skills and
attitude has been central to On the Beach’s success.
This philosophy has been extended to the formation of
the Board of Directors and I’m delighted to have recently
welcomed to the Board Lee Ginsberg and David Kelly, two
non-executive directors who have brought with them a wealth
of experience and expertise.
The Board regularly monitors risk and control processes to
ensure they support the Group’s strategy and objectives.
The financial results for the year ended 30 September 2015
were very encouraging and provide the Group with a strong
platform on which to build in the new financial year. The
Group’s scale, market position, technology, brand strength
and committed team combine to provide a strong foundation
from which we can grow and extend. The first quarter of
the financial year, which is a quieter period from a financial
performance point of view, has started strongly and is in line
with the Board’s expectations. This impressive performance,
given the tragic recent events in Sharm El Sheikh and Paris,
underscores the resilience and agility of the Group’s operating
model. The Board remains confident about the Group’s
prospects.
Listing a company is an immensely time consuming process,
especially for senior management and the finance team.
Delivering outstanding financial results at the same time
as undertaking this process is a tribute to everyone in the
business and to the quality of the business itself. I would
like to conclude by expressing my thanks to all the Group’s
employees for what has been an extremely busy and
successful year.
Richard Segal
Chairman
9 December 2015
Annual Report & Financial Statements 2015
On the Beach Group plc
05
Chief Executive’s Report
I am delighted to present the Company’s first annual report since
becoming a listed company on 28 September 2015.
On the Beach is a dynamic, entrepreneurial and ambitious business
and our recent listing represents the beginning of the next phase of
the Group’s development. We deliver beach holidays to our customers
that are tailored to their individual needs. We are driven to constantly
improve the quality and value we provide to our customers.
I am grateful to be supported by talented, enthusiastic and motivated
colleagues who are supportive, professional and commercially driven. It
gives me great pleasure to report that during the financial year ended
30 September 2015 we had an extremely strong year achieving growth
in UK revenue and Group underlying profit before tax of 37.1% and
46.5% respectively.
Our continued growth has been delivered by executing a simple
strategy to optimise our customer proposition to increase conversion
and improve margin while driving an efficient increase in our market
traffic share.
Growth
Growth in the financial year ended 30 September 2015 (“FY15”) has
come as a result of:
> Driving an efficient increase in our share of a growing market,
while investment into our brand has also increased awareness
(daily unique visitors +14% year on year (“YOY”) to 54.4m)
> Optimisation of our market-leading customer proposition to drive
increased engagement and online conversion (online conversion
+8% YOY)
>
>
Incremental value per website visitor has been gained through
personalisation technology providing customers with the right
product at the right time
Increasing the directness of our relationships with end suppliers
to drive increased revenue (revenue per unique visitor +20%
YOY to £1.15)
> Leveraging our lean cost base versus asset heavy tour operator
competitors
> 93% of bookings are made via our online platform delivering cost
efficiencies and incremental margin
> Expanding our model into new source markets, beginning with
Sweden and with plans to extend this further under our eBeach
brand into further source markets
On the Beach continues
to disrupt the online retail
of beach holidays by using
its innovative technology
platform to drive a market-
leading customer proposition
focused on great value beach
holidays.
Simon Cooper
CHIEF EXECUTIVE OFFICER
06 Annual Report & Financial Statements 2015
On the Beach Group plc
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Market
Demand for beach holidays has continued to increase and online
penetration continues to grow. For the first time more than half of
all beach holidays are now booked online and as a pure play online
retailer, On the Beach is well-placed to benefit from this ongoing
structural shift in consumer behaviour. In FY15, the Group has
cemented its position as the leading online retailer of beach holidays
with more than 54 million unique visitors to site and more than 1 million
passengers booking their short haul beach holidays via our website.
Investment in Brand
We have continued to invest in the sophistication of our in-house bid
modelling (that optimises the value gained from our multi-channel
marketing spend) and this in turn has allowed us to take an increasing
share of market traffic, cost effectively. Our brand continues to
strengthen, supported by our investment into offline marketing activity
and in FY15 55% of traffic to site was from branded and free sources
(FY14: 51%). Planning for an extended offline campaign in FY16 is
complete and our new advert will air nationally on Boxing Day.
In FY15 we also launched iPhone, iPad and Android apps, achieving
circa 400,000 downloads by the year end.
Investment in People and Product
We continue to add talent to our technology team to ensure that we
can remain at the forefront of innovation in our sector. Leveraging our
bespoke personalisation technology allows us to show more relevant
product to an increasing proportion of site visitors and in turn this
allows us to create deeper customer engagement and drive both
conversion and margin. Our bespoke testing framework, which allows
us to test variations of the user experience against a control, has also
allowed us to drive further improvements to device level conversion
and our traffic is now over 60% from mobile devices.
We have maintained investment into our service function in order
to provide the highest level of customer support for all of our valued
customers and are delighted that our Net Promoter Scores and repeat
purchase rates have increased significantly through FY15.
We have been able to drive growth in our direct contracting function,
building on the strong foundations which were put in place in the
prior financial year. In FY15 we have beaten our internal targets driving
43% of total hotel buying through in-house capability with incremental
margin contribution and this together with multiple other initiatives has
driven an increase in revenue per booking of 16% year on year.
Our scalable business model allows us to leverage our lightweight cost
base reducing fixed and variable costs as a percentage of revenue
despite a significant investment into technology, service and supply
functions.
International
Following the launch of our first international market, Sweden, at
the start of the 2015 calendar year, we have made progress in
growing unique visitors and generating bookings and revenues. Daily
unique visitors to site in FY15 were up 179%. We have also made
improvements to customer proposition which have led to an increase
in total transaction value value of 250%. We will further develop the
strong growth of the brand that we have generated in Sweden with a
TV campaign in January 2016 and will launch our second new market
in early 2016.
Strategy and Growth
The Group has a mission to make it simple for customers to plan,
find and book their perfect beach holiday and a vision to be Europe’s
leading online retailer of beach holidays.
The Group has delivered significant growth within a growing market
over the last three years by evolving a strategy based around the
following principles:
1. Driving an efficient increase in market traffic share
2. Optimisation and personalisation of the customer proposition
across multiple devices
3. Leveraging revenue through payment options and direct
product sourcing
4. Expanding our model into new source markets in Northern
and Central Europe
Strategy and Growth
To deliver the above we recognise the importance of a continued
investment into our people and our platform which allows us to innovate
at an increasing pace and in doing so, out-innovate the competition.
Our key strategic pillars for 2016 are:
1. Driving an efficient increase in market traffic share:
•
Investing in an efficient multi-channel approach supported by
increasingly sophisticated bid modelling and attribution.
• Strengthening brand awareness through offline advertising.
•
Increasing direct to site traffic by building apps complementary
to the onsite experience.
2. Optimisation and personalisation of the customer proposition
and customer experience:
• Driving an increasingly simplified customer experience across
multiple devices by continually testing changes to the website
•
versus a control to drive increased conversion.
Increasing the level of onsite and offsite personalisation at an
individual user level.
• Expand product offering to address a wider customer
demographic.
• Recruitment and development of specialist staff to (a) develop
online tools, (b) deliver enhanced customer communication
and (c) enhance the 24/7 in resort support service to increase
customer satisfaction.
3. Leveraging revenue through payment options and direct
product sourcing:
•
Increasing the proportion of direct product sourcing and target
core market rate exclusivity.
• Optimising the point of sale margin through margin split testing,
competitor analysis and in-resort contributions.
• Monetising a suite of innovative and attractive customer and
supplier payment options.
4. Expanding our model into new source markets in Northern
and Central Europe:
• Delivering improvements to key drivers of conversion, cost per
unique visitor and branded share of traffic.
• Driving positive returns with a significant market share in Sweden.
• Rolling out fully formed proposition into further source markets.
Current Trading and Outlook
Since the beginning of the new financial year, On the Beach has continued
to perform strongly and I remain optimistic about the future. I believe the
foundations we have put in place for direct contracting, personalisation and
internationalisation, combined with our strengthening brand awareness,
continue to offer significant growth opportunities.
Our continuing investment into talent means we are well placed to increase
the pace at which we innovate and thereby further differentiate our
market-leading customer proposition and our growing scale means that
we continue to leverage operational efficiencies, increasing our profits as a
percentage of revenue.
The start of FY16 has been marred by the terrible events in Egypt and in
Paris and our thoughts are with all of those affected. We have worked
hard to ensure that all On the Beach customers in Sharm el Sheikh were
repatriated in an orderly fashion and those that were due to travel to the
Red Sea prior to Christmas have been offered alternative holidays. As
an OTA we have no commitments to flight or hotel capacity and are well
positioned to react quickly to changes in consumer demand. We have
enjoyed a strong start to the new financial year and performance is in line
with the Board’s expectations. I remain confident for the year ahead as
we focus on our strategic objectives while investing to deliver long-term,
sustainable returns for our shareholders.
Simon Cooper
Chief Executive Officer
9 December 2015
Annual Report & Financial Statements 2015
On the Beach Group plc
07
Key Performance Indicators
UK Segment: Total Transaction Value (£m)
Total Transaction Value
Total sales value of all customer bookings made with On the Beach
Continuing growth with an increase of 27% over the previous year
Marketing Spend (excluding Offline)
as % Revenue
For the year to 30th September as a percentage of revenue decreased
to 48.6% (2014: 50.7%) with total spend of £30.4m (2014: £23.1m)
£358m
£281m
£454m
£230m
45.9%
49.9%
50.7%
48.6%
60%
50%
40%
30%
20%
10%
0%
£50m
£40m
£30m
£20m
£10m
£0m
2012
2013
2014
2015
2012
2013
2014
2015
Offline Spend
Marketing Spend (excl. offline)
Marketing (excl offline) % revenue
Daily Unique Visitors (millions)
& Revenue per Daily UV
Costs as % Revenue
Daily UVs
Number of individuals, as defined by an IP address, visiting pages
from the onthebeach.co.uk website during a 24 hour period
Daily UVs have increased 14% over the previous year whilst Revenue
per Daily UV has increased 20% over the previous year
Fixed Costs
Includes head office salaries, office related costs and IT expenditure
Variable Costs
Comprise mainly of contact centre wages and credit card fees
£0.85
£0.93
£0.96
£1.15
60
50
40
30
20
10
0
£1.20
£1.00
£0.80
£0.60
£0.40
£0.20
£0.00
V
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12%
10%
8%
6%
2012
2013
2014
2015
2012
2013
2014
2015
Variable Costs %
Fixed Costs %
08 Annual Report & Financial Statements 2015
On the Beach Group plc
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Key Performance Indicators
continued
Direct Contracting %
Operating Cash & Cash Conversion %
Direct Contracting: sourcing hotel beds for customers directly from
hotels rather than via third-party bed-banks as intermediaries
Continuing growth into FY15 with 48% of hotels directly contracted
in September 2015
Operating Cash: cash generated from continuing operations
less capital expenditure in respect of continuing operations
Cash Conversion: Operating Cash before exceptional items
as a percentage of adjusted EBITDA
50%
40%
30%
20%
10%
0%
20
15
m
£
10
5
0
150%
100%
50%
0%
2013
2014
2015
2012
2013
2014
2015
Operating Cash
Cash Conversion %
International Segment: Total Transaction
Value (£m)
Underlying profit before tax
Total Transaction Value: total sales value of all customer bookings
made via ebeach.se
‘Hard launch’ in Sweden in early 2015 led to an increase of £4m TTV
for the 12 months to 30 September over the year
Underlying profit before tax: Group operating profit (1) including
finance costs before amortisation and exceptional costs
Investment in offline campaign and direct contracting in FY14
accelerates growth in FY15 despite £1.1m increased investment
in International expansion
£5.6m
£8.0m
£10.5m
£9.9m
£14.5m
£1.6m
2014
2015
2012
2013
2014
2015
(1) Includes amortisation of development costs but excludes amortisation of
acquired brand and website technology intangible assets of £4.9m (2014: £3.4m)
Annual Report & Financial Statements 2015
On the Beach Group plc
09
Chief Financial Officer’s Review
The Group organises its operations into two principal financial reporting
segments, being UK (the “UK Segment”) (the Group’s established market)
and international (the “International Segment”) (the Group’s new market).
In each of the UK Segment and the International Segment, the Group
realises 94% of revenue from dynamically packaged holidays with the
remainder single element products such as flights or hotels.
UK Segment performance
TTV
Revenue
Revenue after marketing costs
Variable costs
Overhead costs
Holding Company costs
Depreciation and amortisation (1)
EBIT
EBITDA
EBITDA % revenue
2015
£m
453.6
62.5
30.4
(4.9)
(5.1)
(0.4)
(1.7)
18.3
20.0
32.0%
Change
%
26.6%
37.1%
41.4%
46.4%
44.9%
2014
£m
358.3
45.6
21.5
(3.5)
(3.9)
(0.3)
(1.3)
12.5
13.8
30.3%
(1) Excludes amortisation of acquired brand and website technology
intangible assets of £4.3m (2014: £4.3m)
Total transaction value
For the year ended 30 September 2015, total transaction value (TTV)
increased by 26.6% to £453.6m (2014: £358.3m). Growth during the year
was driven by a 14% increase in traffic to the “On the Beach” website
which continues to increase its share of a growing market. The continual
optimisation of our customer proposition led to increased conversion of
bookings to daily unique visitors at 0.71% (2014: 0.68%) and higher average
booking values (ABV) of £1,181, a 7.5% increase on last year (2014: £1,099).
Our personalised customer experience, flexible payment options and high
level of customer service continue to increase customer engagement and
growth.
A successful year with:
> Strong TTV growth in the UK
up 27% to £453.6m
> UK Revenue growth of 37%
> UK EBITDA growth of 45%
and
> Strong cash conversion
Wendy Parry
CHIEF FINANCIAL OFFICER
10 Annual Report & Financial Statements 2015
On the Beach Group plc
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Revenue and marketing costs
Revenue increased by 37.1% to £62.5m (2014: £45.6m) with
increases in volume, average booking values and margin per
booking. Revenue per daily unique visitor grew 19.9% in the year
to £1.15 (2014 £0.96) and revenue per booking was 16.4% higher
at £162.8 (2014: £139.9) largely due to increasing the directness
of relationships with our suppliers through the volume of in-house
accommodation bookings to 40.7% (2014: 20.6%), the launch of a
new insurance product and increased attachment rates of in-house
transfers to bookings.
Marketing expenses (excluding offline) for the year to 30 September
2015 as a percentage of revenue decreased to 48.6% (2014: 50.7%)
with total spend of £30.4m (2014: £23.1m) driving an efficient
increase in our share as we continue to invest in the sophistication
of our in house bid tools. We have increased spend in the year on
the Group’s offline TV advertising campaign to £1.7m (2014: £1.0m)
as it was extended across wider regional coverage of the UK and we
have seen a significant increase in brand awareness and the share of
branded traffic to 55% (2014: 50.6%).
UK segment EBITDA
We continue to leverage our lean cost base and as a result there has
been a fall in costs as a percentage of revenue overall (even despite
additional investment of £0.6m in infrastructure to support direct
contracting):
Variable costs % revenue
Overhead costs % revenue
Holding Company costs % revenue
Total
2015
7.8%
8.2%
0.6%
16.6%
2014
7.7%
8.6%
0.7%
16.9%
Variable costs, which comprise mainly contact centre wages
and credit card fees, are closely linked to booking volumes and
remain broadly in line with last year at 7.8% of revenue. Continued
operational leverage and the revenue benefit of direct relationships
reduced overhead costs as a percentage of revenue to 8.2% (2014:
8.6%).
Holding company costs have increased in the year £0.1m to £0.4m
(2014: £0.3m) due to additional expenditure required to fulfil the
requirements of a listed company.
EBITDA increased by 45% to £20.0m (2014: £13.8m). EBITDA as a
percentage of revenue increased from 30.3% to 32%.
International Segment performance
Underlying Profit before tax and retained earnings
The Group reports underlying profit before tax before shareholder
interest (2), amortisation of acquired intangibles and deal costs to allow
better interpretation of the underlying trend in profit before tax.
Group operating profit before
amortisation (1) and exceptional costs
Non Underlying Costs
Finance Costs
Finance Income
Underlying Profit before tax
Exceptional costs
Amortisation of acquired intangibles
Shareholder loan interest
(Loss) before taxation
Taxation
(Loss) for the year
2015
£m
2014
£m
Change
%
16.4
(0.3)
(1.8)
0.2
14.5
(4.9)
(4.3)
(7.8)
(2.5)
(2.0)
(4.5)
11.8
(0.3)
(1.7)
0.1
9.9
(3.4)
(4.3)
(7.0)
(4.8)
(1.0)
(5.8)
39.0%
46.5%
47.9%
(1) Includes amortisation of development costs but excludes amortisation of
acquired brand and website technology intangible assets of £4.3m (2014:
£4.3m
(2) Interest on shareholder loans will no longer be incurred following the IPO
as shareholder loan notes were repaid in full by way of the issue of shares to
loan note holders
Finance costs
The finance cost for the year was £1.8m (2014: £1.7m) and included
amortisation costs of fees of £0.3m (2014: £0.3m) in respect of the term
loan of £22.0 million raised on 4 October 2013 as part of the financing
for the investment by Inflexion which was repaid in full out of the Group’s
existing cash balances following admission. The Group has entered
into a new revolving credit facility of up to £35 million: please see “IPO
refinancing” section below.
Exceptional items
Exceptional items for the year to 30 September 2015 were £4.9m
(2014: £3.4m). Total fees incurred in relation to the IPO were £5.2m, of
which £4.9m has been expensed through the Income Statement as an
exceptional item with the balance of £0.3m being charged to the share
premium account. In 2014 £3.4m of deal costs were charged to the
income statement in connection with the investment by Inflexion on 4
October 2013.
TTV
Revenue
Revenue after marketing costs
Variable costs
Overhead costs
EBITDA
2015
£m
5.6
0.7
(1.5)
(0.1)
(0.2)
(1.8)
2014
£m
1.6
0.1
(0.6)
-
(0.1)
(0.7)
Taxation
The Group tax charge of £2.0m represents an effective rate (1) of 30.5%
(2014: 32.7%) which was higher than the average standard UK rate of
20.5% (2014: 22%). This was affected in both periods by disallowed
shareholder interest under the Advance Thin Capitalisation Agreement
and a deferred tax credit of £0.9m (2014: £0.7m) which is released in line
with the amortisation of £4.3m on the valuation of acquired intangibles
on the investment by Inflexion in October 2013. Following the repayment
of shareholder debt on 28 September the effective rate will decrease in
the year to 30 September 2016.
In early 2015, the Group launched an international platform in
Sweden under the ‘ebeach.se’ domain. The Group has focused
on growing market share both online and offline and launched a
national TV campaign in Sweden in May 2015 (at a cost of £0.2m).
This drove an increase in branded visitors to the Group’s website
with branded share rising to 23% in that same month.
In the 12 months to 30 September, the Swedish business generated
TTV of £5.6m (2014: £1.6m), revenue of £0.7m (2014: £0.1m) and
an EBITDA loss of £1.8m (2014: £0.7m). Losses are derived almost
entirely from the marketing investment required to drive branded
awareness and share of traffic which will in turn improve efficiency.
(1) Effective tax rate is calculated as taxation charge divided by underlying
profit before tax plus shareholder interest
Annual Report & Financial Statements 2015
On the Beach Group plc
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Earnings per share
Basic earnings per share, calculated for the current and comparative
period, is based on the number of shares in issue immediately following
the IPO on 28 September 2015 and has reduced from a loss per share for
the previous year of 7.9 pence to a loss per share in the current year of 5.8
pence.
The adjusted proforma basic earnings per share based on adjusted
underlying earnings increased 43.5% to 8.9 pence (2014: 6.2 pence).
The table below shows the adjustment from actual earnings to adjusted
earnings:
Incorporation and capital reduction
On 17th August 2015, On the Beach Group PLC was incorporated and
registered in England and Wales under the Companies Act 2006 as a
public limited company.
The Company has reduced its share capital by means of a court-
sanctioned reduction in capital in order to provide it with the
distributable reserves required to support the intended dividend
policy. The capital reduction received court approval on 18 November
2015 and is detailed in the post balance sheet events note 24 on page
83.
Dividend
Whilst the Group operates a highly cash generative business model,
the Board intends for the significant majority of profits to be reinvested
to support further growth. The Group is committed to a progressive
dividend policy and the current intention of the Board is to pay a
dividend in relation to the financial year ending 30 September 2016.
Thereafter, the Group will adopt a progressive dividend policy.
Wendy Parry
CHIEF FINANCIAL OFFICER
9 December 2015
(Loss) for the year
Add back:
Exceptional Costs
Amortisation of acquired intangibles
Shareholder Interest
Deferred tax on acquired intangibles
Underlying Profit for the year
Number of ordinary shares in issue at 2015 year
end; assumed to be outstanding for the full year
and comparative period (millions)
Adjusted proforma earnings per share (pence)
2015
£m
(4.5)
2014
£m
(5.8)
4.9
4.3
7.8
(0.9)
11.6
130
3.4
4.3
7.0
(0.8)
8.1
130
8.9
6.2
Cash flow and net debt
The Group continues to see strong cash generation with operating cash
flows 108% higher at £18.1m (2014: £8.7m), resulting in strong cash
conversion of 99.5% (2014: 66.4%).
EBITDA
Capitalised development spend
Movement in working capital (1)
Capital expenditure
Operating cash flow (2)
Operating cash conversion
2014
£m
13.1
(1.5)
(2.5)
(0.4)
8.7
2015
£m
18.2
(2.0)
2.2
(0.3)
18.1
99.5% 66.4%
(1) Movement in working capital has been adjusted to exclude £3.1m inflow
from IPO cost accruals at 30 September 2015
(2) The statutory FY14 cash flows have been amended in the table above
to aid comparability between periods
Accounting for the IPO and refinancing
In preparation for the IPO, the Group undertook a capital reorganisation
and refinancing, and executed a complex steps plan which included the
creation of a new holding company, share exchanges and repayment
arrangements for previous shareholders and bank debt. By applying
the principles of reverse acquisition accouting in accordance with IFRS 3
“business combinations”, the results of the Group are presented as if On
the Beach Group plc had always owned the On the Beach Topco Limited.
Further details about the accounting for the IPO are disclosed within notes
2(a) and 19 to the financial statements.
On 18 September 2015, in connection with the IPO, the Group entered
into a new revolving credit facility (RCF) of £35m with Lloyds. There was no
drawdown on the RCF outstanding at 30 September 2015. Borrowing limits
vary throughout the period of the Facility to reflect the seasonal borrowing
requirements of the group as a result of the flexible payment options given
to customers throughout the year.
Primary proceeds of £10m from the IPO have been used to repay
management loan interest of £2.8m and deal fees to date of £1m with a
further £3.3m yet to be paid related to the IPO and the balance of £3m is
available for investment in the future growth of the business.
Net debt has reduced in the year with cash at bank and in hand position at
the year- end of £10.9m (2014 net debt £8.6m).
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Principal Risks and uncertainties
The Board has overall responsibility for ensuring maintenance of a sound system of internal control and
risk management. It reviews the effectiveness of the Group’s risk and control processes to support its
strategy and objectives.
Risks are discussed as a matter of course at every Board meeting and formal risk registers are maintained
and updated on at least an annual basis. The Audit Committee has the responsibility to review the
Group’s internal controls and risk management systems.
The Directors have carried out a robust assessment of the principal risks and uncertainty facing the
company, including those which could threaten its business model, future performance, solvency
or liquidity. This section of the Strategic Report sets out those key risks, together with an explanation
of how those risks are mitigated and/or managed.
1. TRADING
Operational Risks
Description of Risk
Mitigation & Management
1.1.
Consumer
Confidence Risk
Economic factors (e.g. recession, interest rate
changes) can affect consumer confidence and reduce
discretionary spend, leading to reduced demand for
holidays.
Acts of terrorism (such as the recent ISIS attacks) or
political unrest can result in a destination or area
being unavailable or becoming less popular, which
can lead to a reduction in bookings and/or stretched
demand and limited supply in other areas.
We are expanding our range of hotels to attract a
new target audience (e.g. our new luxury range) who
may be less likely to be affected by a decrease in
discretionary spending. International expansion could
also help mitigate UK specific economic factors.
We continue to offer flexible payment options such
as our low deposit scheme and Paypal Credit to
mitigate the impact of a reduction or a decrease in
discretionary spending, and we continue to explore
new and innovative consumer propositions.
We offer a wide spread of holidays in a wide range of
destinations and as we do not commit to stock, we are
well placed to react to a transient shift in consumer
appetite.
Operational Risks
Description of Risk
Mitigation & Management
The Group has a dedicated in-house team of IT
experts whose purpose is to maintain and develop
its proprietary technology, and it invests significantly
in its technology and its people to ensure that it can
continue to operate as it does currently.
1.2.
Supply Chain
Risk
The Group does not have relationship agreements
in place with certain airlines. The Group is currently
able to use technology to access flight data and
place bookings on behalf of customers. From time
to time, certain airlines have sought to hinder or
block the Group’s access to their websites using
technological, legal or other means and may do
so in the future. If successful, the Group’s offering
may be less extensive which could have a material
adverse effect on the Group’s business.
If an airline were to collapse as a result of a
financial failure, this could result in significant direct
and indirect costs for the Group (e.g. the cost of
refunding customers the money paid for the flight,
plus loss of margin on the accommodation element
of the holiday).
Annual Report & Financial Statements 2015
On the Beach Group plc
13
1. TRADING continued
Operational Risks
Description of Risk
Mitigation & Management
1.3.
Reputation
Risk
The Group relies on the strength of its brand to
attract customers to and secure bookings through
the website. Any events or circumstances which
give rise to adverse publicity, for example a serious
injury or death of a customer, or poor customer
experience (either on holiday or with the Group’s
sales or after sales services), could cause brand/
reputation damage and lead to a loss of goodwill.
The Group monitors customer satisfaction on a
regular basis and acts on feedback received.
On the Beach Beds Limited contracts directly with
hotels and it has an internal dedicated function, whose
role it is to ensure that the hotels adequately self-
regulate in relation to quality issues, such as health &
safety and customer service.
Operational Risks
Description of Risk
Mitigation & Management
1.4.
Competition
Risk
The Group operates in a very competitive market. If
competitors offer a more compelling proposition, this
could have a material adverse effect on the Group’s
financial position and prospects.
The Group monitors competitor pricing constantly
to ensure deals are priced competitively and offers
unique payment options such as the low deposit
scheme.
Operational Risks
Description of Risk
Mitigation & Management
1.5.
Systems &
Technology
Risk
A significant business interruption could impact on the
Group’s ability to trade and/or manage the business.
The Group is exposed to risks of security breaches
associated with online commerce security (e.g. loss of
customer data).
If the Group’s technology can’t keep up with growing
demand, this could affect our ability to deliver planned
growth. Changes in search engine algorithms or
search engine relationships could adversely affect the
ability to drive traffic to the website.
The Group has comprehensive business continuity
and disaster recovery plans, and robust back up
and failover facilities.
The Group has stringent security in place which is
regularly tested and audited. The Group is PCI DSS
compliant which involves regular external audits.
The Group regularly assesses capacity and
utilisation of the system, and carries out a full review
every 6 months to ensure that the longer term
infrastructure plan is aligned with predicted growth
and capacity needs.
Operational Risks
Description of Risk
Mitigation & Management
1.6.
People
Risk
The Group’s ability to achieve its strategic objectives is
dependent on certain key personnel, plus its ability to
attract and retain skilled staff.
The Group has a comprehensive succession plan in
place at executive and senior management level.
The Group’s location means that it is competing with
many other digital / technology-focused businesses for
the best talent.
The Group will continue to monitor and benchmark
salaries and packages to ensure it remains
competitive, and is structuring LTIP awards in order
to incentivise key executives and senior managers.
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2. FINANCE
Operational Risks
Description of Risk
Mitigation & Management
2.1.
Foreign
Exchange
Risk
The Group’s costs of sale are incurred in a different
currency to that in which it sells. If the currency in
which the Group is buying changes unfavourably, this
means the margin is uncertain/volatile.
The Group places forward contracts based on
forecasted orders and sets prices to reflect the
blended FX rate achieved in those contracts. Hedge
effectiveness and stability of euro rates is monitored
regularly.
Operational Risks
Description of Risk
Mitigation & Management
2.2.
Working
Capital Risk
Given the seasonality of the business, cash flow is
volatile which could lead to a lack of liquidity and an
inability to trade.
The business maintains a working capital facility with
Lloyds to cover seasonal requirements and the Group
regularly monitors its liquidity position.
Operational Risks
Description of Risk
Mitigation & Management
2.3.
VAT
Complexity
Due to the complexity of VAT rules in the travel
industry, HMRC could disagree with the VAT treatment
the Group has applied, which could result in additional
unrecoverable VAT, plus interest and penalties, and
the costs of litigation if we chose to challenge the
decision.
The Group engages VAT specialists in the travel
industry to provide advice on current VAT treatment
and VAT developments. This enables us to
budget appropriately and make any changes to
documentation and processes that will support the
VAT position.
3. LEGAL
Operational Risks
Description of Risk
Mitigation & Management
3.1.
Litigation
Risk
The Group is one of several online travel agents
involved in litigation with Ryanair in connection with
Ryanair’s efforts to prevent OTAs from booking and
selling its flights. Litigation is unpredictable and if
Ryanair were to prevail, this could have a material
impact on the Group’s business.
The Group has instructed an expert legal team
(including a specialist law firm and a senior QC) with
particular expertise and experience in such cases to
maximise its chances of success.
Operational Risks
Description of Risk
Mitigation & Management
3.2.
Regulatory
Risk
The Group’s business is highly regulated and is subject
to a complex regime of laws, rules and regulations
concerning travel, online commerce, financial
services, consumer rights, and data protection. A
breach of these laws could have serious financial and
reputational implications for the Group.
The Company Secretary is a qualified lawyer and
advises the Group on current and forthcoming legal
requirements. The Group also has external legal
advisers in place to provide proactive and responsive
legal advice in relation to legal and regulatory
requirements.
Unfavourable changes to or interpretation of these
laws or the introduction of new laws could adversely
affect the Group’s business and financial performance.
For example, it is likely that reform of the Package
Travel Directive could increase the costs of conducting
the Group’s business and subject it to additional
responsibilities and liabilities.
The Group reviews closely the draft proposals for
law reform at each stage of the legislative process,
which enables it to perform impact assessments and
to put in place arrangements to mitigate the impact
of legislative change. The Group also participates in
industry steering and advisory groups, through which
it is able to lobby on legislative change.
Annual Report & Financial Statements 2015
On the Beach Group plc
15
Corporate Social
Responsibility
On the Beach can be distilled into two words, ‘Sunshine Innovation’,
which shines throughout our business’s culture. Our bright, sunny
and friendly people, coupled with our smart thinking and smart
technology gives On the Beach the edge over our competition.
Our flat structure empowers employees to make decisions to
improve customer experience and drive innovation throughout
the Group.
People are our business
Recruiting, engaging and retaining staff with the right On the Beach DNA is critical to us and we have
exciting plans to continue this investment and develop our fantastic working environment to further
support our values and vision to be Europe’s leading online retailer of beach holidays.
We’re proud to have a fantastic team culture too. To encourage this, our teams get state of the art
technology to work with, a subsidised canteen, a casual dress code and a chill out area; as well as golf, bowls
and badminton on site. We also offer staff research and development time to develop innovative ideas with
their colleagues and help be part of a flourishing business.
We have relationships with local colleges and universities, plus On the Beach runs an annual ‘Ruby Academy’ to help
support and develop graduates in gaining the skills to be successful within our Development Team and beyond, while
attracting the brightest graduate talent to our team.
Employee Involvement & Engagement
The Group recognises the importance of good communication with its employees and engages with its employees to ensure that employees are:
(i) provided with information on matters of concern to them as employees, for example, via the Group’s intranet, an all-employee
“Communication Group” email address, the ‘Octopus system’ (for contact centre agents who do not have a company email address),
and noticeboards throughout the office;
(ii) consulted on a regular basis so the views of employees can be taken into account, including through line managers, employee satisfaction
questionnaires, employee suggestion box (physical and electronic) and because of the flat structure and informal approach, through direct
communication with the executive team (which is encouraged);
(iii) encouraged to feel part of the Company and be ‘bought-in’ to its long-term future, including oversight by the Remuneration Committee
to ensure employees are incentivised in line with the Group’s strategy, the issue of shares (prior to listing) to certain key employees,
participation in a bonus scheme linked to company performance, and in due course, participation in an all-employee share
incentive plan, and for senior employees, participation in a long-term incentive plan; and
(iv) aware of the financial and economic factors affecting the performance of the Company, including an annual business
update presentation to employees and access to real-time management information, subscriptions to industry
magazines, as well as regular communication via email.
Equality and Diversity
The Group is committed to the avoidance of discrimination and encouraging diversity amongst our employees. We treat all
employees and applicants fairly and with respect. We seek to create an environment in which individual differences and
the contributions of all our staff are recognised and valued. Please see the Diversity section on page 26 for further details.
Employment of Disabled Persons
The Group’s policies and procedures and Company Handbook contain policies in relation to the employment of
disabled persons which are carefully adhered to.
Selection for employment, promotion, training and development (as well as other benefits and awards) are made
on the basis of merit, aptitude and ability and the Group does not tolerate discrimination in any form, including in
relation to disabled candidates.
The Group puts in place an ‘Employee Wellbeing Plan’ (EWP) with all disabled employees (and indeed any employees
who need support with any health conditions, physical or mental). Each EWP is designed to ensure the Group is meeting
all the needs of the relevant employee, for example risk assessments, and details of all adjustments which need to be
made to accommodate the additional needs of the relevant employees, e.g. disabled parking space, step-free access, and
specific workstation needs.
16 Annual Report & Financial Statements 2015
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Anti-corruption and Bribery
On the Beach is committed to operating ethically and employees do not actively seek gifts or favours from any of our suppliers, or from other
persons or organisations with whom we associate. We have top level commitment to anti-bribery and corruption, and ensure all employees behave
professionally, fairly and with integrity in all our business dealings and relationships wherever we operate, and implement and enforce effective
systems to counter bribery.
We are set up to fully support our employees, should they need to raise concerns about unethical, criminal or dangerous activities within the
Group, and as such provide a confidential whistleblowing telephone line, though an independent and impartial organisation.
Community and Environment
Our employees are encouraged to seek opportunities to arrange fundraising events and initiatives for local charities or those close to their friends
and families, with the support of On the Beach.
We believe that On the Beach has a responsibility to care for and protect the environment in which it operates. We encourage our employees to
print documents and emails only when necessary, and to securely dispose of paper using the confidential shredding recycling bins. We are fully
committed to improving environmental performance across all of our business activities, and continue to encourage our employees and business
partners to join us in this effort.
Greenhouse Gas Emissions
Because the Group’s business is online only, with no retail footprint, and the Group operates out of one head office location, the Group’s
environmental footprint is small, as demonstrated by the relative emissions, by revenue, as set out in the table below.
We have calculated our Scope 1 and 2 greenhouse gas emissions in accordance with the mandatory reporting requirements set out in the
Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013. The Group’s head office is a leasehold property and all electricity
and gas is provided through and billed by the landlord. The Group has therefore relied on information provided by the landlord. We understand
that the landlord followed the methodology of ISO 14064-1 using emission factors from UK Government Conversion Factors for Company
Reporting 2014.
The emissions are based on electricity and gas usage from 1 June 2014 to 31 May 2015, so they do not correspond exactly to the financial year
ended 30 September 2015. This is because the Company does not, as at the date of this report, have access to information about its energy
consumption from 1 June 2015 to 30 September 2015. However, the Company believes that its energy consumption for this period will correspond
closely to the equivalent period during 2015 and the Company will publish the up to date information on its website (onthebeachgroupplc.com)
when available.
Greenhouse Gas Emissions by Scope
Scope 1
Gas consumption
Scope 2
Electricity consumption
Total emissions
Relative emissions, by revenue
Unit
Quantity
Tonnes CO2e
Tonnes CO2e
Tonnes CO2e
Tonnes CO2e/£m revenue
27.36
306.35
333.72
5.3
Just a Drop – 24 hour badminton challenge
Our employees are encouraged to seek opportunities to
arrange fundraising events and initiatives for local charities or
those close to their friends and families, with the support of
On the Beach.
This year, seven colleagues took part in a 24 hour badminton
challenge to raise money for Just a Drop, a fantastic charity that
provides clean, sustainable drinking water for communities
who need it most. Launching at World Travel Market in 1998,
the charity has a close relationship with the travel industry and
it was therefore the team’s choice to show support through
the sporting event.
The rules were simple; at least 2 people had to be on court
playing badminton at any one time, rotating for 24 hours.
Cheered on by colleagues and customers monitoring the
team’s progress on social media, the seven players completed
the challenge and surpassed their target.
With great support from the rest of the company, the team
raised £1415.96 for the deserving cause.
Annual Report & Financial Statements 2015
Annual Report & Financial Statements 2015
On the Beach Group plc
On the Beach Group plc 17
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Awards & Achievements
On the Beach at The Travolution Awards 2015
TRAVOLUTION AWARDS 2015
Best Travel Agent Website Award
Best Use of Search Engine Marketing Award
MEN AWARDS 2015
Business of the Year Award
TRAVOLUTION AWARDS 2014
Brand of the Year - On the Beach
NORTHERN TECH AWARDS 2014
Overall Winner – On the Beach
NORTH WEST FINANCE DIRECTOR AWARDS 2013
Finance Director of the Year - Wendy Parry
TOP 20 RISING STARS OF THE REGION’S TECHNOLOGY COMMUNITY
Awarded to On the Beach
18 Annual Report & Financial Statements 2015
On the Beach Group plc
Governance
20 Chairman’s introduction
21 Directors’ biographies
23 Corporate Governance Statement
27 Report of the Nomination Committee
28 Report of the Audit Committee
31 Directors’ Remuneration Report
45 Directors’ Report
49
Independent Auditors’ Report to the members of On the Beach Group plc
Annual Report & Financial Statements 2015
On the Beach Group plc
19
Chairman’s introduction
On 28 September 2015, the Company achieved a premium listing of its
shares on the London Stock Exchange. I am pleased to present the
Company’s first Corporate Governance Statement as a publicly listed
company.
Compliance with UK Corporate Governance Code 2014
The Board is committed to high standards of corporate governance and as
a listed company whose reporting period commenced on 1 October 2014,
the Company has to comply with the new UK Corporate Governance Code
2014 (the Code), or provide an explanation where it has not complied with
a provision of the Code.
As the Company was only listed for the last three days of the reporting
period, it was not possible (or in some cases, relevant) for the Company to
have complied with all provisions of the Code in that timeframe. However,
this was purely as a result of the very short time between listing and year
end, and during the next reporting period, the Company expects to comply
with the Code in its entirety, and indeed already has the governance
structure and arrangements in place in order to do so.
Role & Effectiveness of the Board
As part of the IPO process, we reviewed the existing Board and considered
the changes required in order to:
(a) achieve compliance with the Code;
(b) constitute an effective Board focused on the long-term success
of the Company;
(c) secure independent, Non-Executive Directors with the ability to
challenge constructively but also to use their expertise to support
the development of the Company and its strategy; and
(d) ensure the correct balance of skills, experience, independence
and knowledge.
The key output of that exercise was the appointment of two new
independent Non-Executive Directors, following a thorough and carefully
considered recruitment process. I am delighted to welcome David Kelly
and Lee Ginsberg (who is our Senior Independent Director) to the Board
as independent Non-Executive Directors. In the months since their
appointment, they have demonstrated not only the value of their respective
knowledge, skills and experience, but equally importantly, that they are a
perfect cultural fit for On the Beach and its values.
Shareholder Engagement
We are committed to engaging and maintaining an active dialogue with all
our shareholders. I would like to encourage our shareholders to attend our
Annual General Meeting which will be held at 11am on 5 February 2016 at
Park Square, Bird Hall Lane, Cheadle, SK3 0XN. It will provide an excellent
opportunity to meet the Executive and Non-Executive Board Directors and
to visit our head office.
I am satisfied that this Board is in the best position to be able to work
effectively together to drive the long term growth and success of the
Company. We will continue to review developments in corporate
governance best practice and seek to apply them to the Company.
Richard Segal
NON-EXECUTIVE CHAIRMAN
On the Beach Group plc
Richard Segal
NON-EXECUTIVE CHAIRMAN
On the Beach Group plc
20 Annual Report & Financial Statements 2015
On the Beach Group plc
Directors’ biographies
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Simon Cooper
CHIEF EXECUTIVE OFFICER
Wendy Parry
CHIEF FINANCIAL OFFICER
Richard Segal
CHAIRMAN
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The first Group company was
established by CEO Simon Cooper
in 2004, and became a trading
subsidiary of On the Beach Limited in
2008. Simon was also a founder of On
the Piste Travel Limited incorporated in
1996. The Group initially operated on
a digital platform operated by Teletext
Holidays, with bookings being taken via
a call centre. The Company launched
its first website in 2004 and expanded
rapidly, securing private equity
investment from Livingbridge in 2007.
Simon recruited the current Executive
team and continued to drive growth
in On the Beach, securing further
investment from Inflexion private
equity in 2013.
Wendy Parry joined the Company in
April 2010 as Chief Financial Officer.
Wendy qualified as a chartered
accountant at KPMG and, before
joining the Company, she held a wide
variety of senior commercial, financial
and operational roles within large
private and listed companies. She has
held Managing Director, Commercial
Director and Finance Director roles at
divisions of Holidaybreak plc, she was
Finance Director at Booker Foodservice
Ltd and Liverpool John Moores
University and she was Group Chief
Accountant of Courtaulds Textiles plc.
Richard Segal is Chairman of the
Company. He is also Chairman of
HostelWorld Group plc and Encore
Tickets. Previously, Richard was
Chairman for Esporta and Barratts
PriceLess, a founding partner of 3i
Quoted Private Equity, a non-executive
director at The Kyte Group, Chief
Executive Officer at PartyGaming Plc
and Odeon Cinemas (where he led a
management buy-out from the Rank
Group) and Managing Director of Rank
Group’s entertainment sector. He holds
a BA in economics from Manchester
University and is a member of the
Institute of Chartered Accountants
of England and Wales.
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Appointed to board:
17 August 2015
Independent:
N/A
Appointed to board:
17 August 2015
Independent:
N/A
Appointed to board:
17 August 2015
Independent:
Yes
External appointments:
None
External appointments:
None
Committee memberships:
N/A
Committee memberships:
N/A
External appointments:
Zezees Limited
Hampstead Theatre Limited
Spread A Smile
Spencer Walk Residents Association
Limited
Anytrip.com Limited
Hostelworld Group plc
Full House Topco Limited
Committee memberships:
Audit, Nomination (chairman),
Remuneration
Annual Report & Financial Statements 2015
On the Beach Group plc
21
Directors’ biographies
continued
Lee Ginsberg
NON-EXECUTIVE DIRECTOR
David Kelly
NON-EXECUTIVE DIRECTOR
Lee Ginsberg joined the Company in September 2015
as Senior Independent Non-Executive Director and
Chairman of the Audit Committee. He is a Chartered
Accountant by profession and was previously Chief
Financial Officer of Domino’s Pizza Group plc. Lee
joined Domino’s Pizza in 2004 and retired on 02 April
2014. Prior to his role at Dominos Pizza Group plc, Lee
held the post of Group Finance Director at Health Club
Holdings Limited, formerly Holmes Place plc, where he
also served for 18 months as Deputy Chief Executive.
Lee is a non-executive director and Chairman of the
Audit and Risk Committee of Mothercare plc and is a
non-executive director and Chairman of the Audit and
Risk Committee of Trinity Mirror plc. Lee is also the
non-executive Deputy Chairman, senior independent
director and Chairman of the Audit Committee of
Patisserie Valerie Holdings plc.
Lee is also the senior independent non-executive
Director and Chairman of the Audit Committee of
Softcat Plc having joined the board in September 2015.
Appointed to board:
17 August 2015
Independent:
Yes
External appointments:
Oriole Restaurants Limited
Mothercare Plc
Trinity Mirror Plc
Patisserie Holdings Plc
Cantina Laredo (UK) Limited
Softcat Plc
David Kelly joined the Company in August 2015
as a Non-Executive Director and Chairman of the
Remuneration Committee. David was previously the
Operations Director at Amazon from 1998 to 2000, the
Chief Operating Officer at Lastminute.com from 2000
to 2003 the Vice President, Operations/Chief Operating
Officer at eBay from 2003 to 2007 and Senior Vice
President of International at Rackspace from 2010 to
2012.
In 2007, David co-founded mydeco.com and, more
recently, has built a wide portfolio of non-executive and
advisory positions – including Chairman/Non-Executive
Director of Love Home Swap, Pure 360 and Zuto.
Appointed to board:
28 August 2015
Independent:
Yes
External appointments:
Holiday Extras Investments Limited
Purepromoter Group (Holdings) Limited
Xbridge Limited
Camelot UK Lotteries Limited
Trinity Mirror Plc
Camelot Global Services Limited
Zuto Holdings Limited
Zuto Limited
Committee memberships:
Audit (chairman), Nomination, Remuneration
Committee memberships:
Audit, Nomination, Remuneration (chairman)
22 Annual Report & Financial Statements 2015
On the Beach Group plc
Corporate Governance Statement
Introduction
This section explains key features of the Company’s governance structure and how it complies with The UK Corporate Governance Code published
in 2014 by the Financial Reporting Council. This section also includes items required by the Listing Rules and the Disclosure and Transparency Rules
(DTRs). The Code is available on the Financial Reporting Council website at www.frc.org.uk.
Compliance with the 2014 Code
The Company is committed to achieving and maintaining the highest standards of corporate governance. During the financial year ending 30
September 2015 (the “reporting period”) the Company was compliant with the main and supporting principles of good corporate governance set out in
the Code, save for three areas of non-compliance which are highlighted below, and are a result of the very short period (three days) between listing and
the end of the reporting period. During the next reporting period, the Company expects to comply with the Code in its entirety, and indeed already has
the governance structure and arrangements in place in order to do so.
Details and explanations of the application of the principles of corporate governance are set out in the following sections of this Corporate Governance Statement.
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Code reference
A.4.2
Area of non-compliance
The chairman did not hold meetings with the
non-executive directors without the executives
present.
The non-executive directors did not meet
without the chairman present to appraise the
chairman’s performance.
Explanation for non-compliance
In the short period of three days between listing and the end of the
reporting period, it was not practical for this to take place. Since the
end of the reporting period, the chairman has held one meeting with
the non-executive directors without the executives present, and further
meetings have been booked in every three months thereafter.
It was neither practical nor desirable for this to take place in the
reporting period, given that sufficient time had not passed to enable
a full appraisal of the chairman’s performance. This appraisal has been
scheduled for the end of the tenth month of the next reporting period
to enable a meaningful and constructive appraisal of the chairman’s
performance.
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A.4.2
B.4.1
The chairman should ensure that new directors
receive a full, formal and tailored induction
on joining the board. As part of this, directors
should avail themselves of opportunities
to meet major shareholders.
Lee Ginsberg and David Kelly were appointed during August 2015,
at the height of the IPO process. Although the IPO process in itself
served as a form of induction, it was not practical for a formal and
tailored induction to take place prior to the end of the reporting
period. However, since the end of the reporting period, this has
now taken place.
Leadership
Role of the Board
BOARD
OF
DIRECTORS
Executive
Directors
Nomination
Committee
Renumeration
Committee
Audit
Committee
Executive
Team
Annual Report & Financial Statements 2015
On the Beach Group plc
23
Corporate Governance Statement
The Board is comprised of five members: the Chairman, two Executive
Directors and two Non-Executive Directors. Details of the skills and
expertise of each member of the Board is set out in the profiles on
pages 21 and 22.
The Board has reserved certain specific matters to itself for decision.
The full schedule of matters reserved to the Board is available in the
Corporate Governance section of the Company’s website, or from the
Company Secretary upon request, but the key matters include:
The Board is responsible for leading and controlling the Group and
has overall authority for the management and conduct of the Group’s
business, strategy and development. The Board is also responsible
for ensuring the maintenance of a sound system of internal control
and risk management (including financial, operational and compliance
controls and for reviewing the overall effectiveness of systems in place)
and for the approval of any changes to the capital, corporate and/or
management structure of the Group.
The Executive Directors are supported by an executive team to whom
the Board delegates the detailed implementation of matters approved
by the Board and the day-to-day operational aspects of the business,
who cascade this responsibility throughout the Group. The Board has
close contact with the wider executive team, who are regularly invited
to attend meetings of the Board to provide functional presentations in
relation to strategic matters of interest to the Board.
Board Committees
The Board has delegated certain responsibilities to three Board
Committees to assist it with discharging its duties. A summary of the
terms of reference for each Committee is set out below but the full
terms of reference are available on the Company’s website and from
the Company Secretary upon request.
• Approval of (and changes to) annual operating and capital
expenditure budgets
• Extension of the Group’s activities into new business
or geographic areas.
• Changes to the Group’s capital or corporate structure,
including acquisitions and disposals;
• Financial reporting and controls;
•
Internal controls, including maintenance of a sound system
of internal control and risk management;
• Approval of major contracts and commitments;
• Communication with shareholders;
• Board membership and senior appointments.
• Remuneration;
• Delegation of authority to committees and below board level;
• Corporate governance matters;
• Approval of policies adopted by the Group.
Committee
Audit
Remuneration
Role and Terms of Reference
Reviews and reports to the Board on the Group’s financial reporting,
internal control and risk management systems, whistleblowing, internal
audit and the independence and effectiveness of the external auditors.
Members
Lee Ginsberg (Chair)
David Kelly
Richard Segal
Report on pages:
28
Responsible for all elements of the remuneration of the Executive
Directors and the Chairman, and other members of senior
management.
Nomination
Committee
Reviews structure, size and composition of Board and its Committees
and makes appropriate recommendations to Board.
David Kelly (Chair)
Lee Ginsberg
Richard Segal
Richard Segal (Chair)
David Kelly
Lee Ginsberg
31
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Board and Committee Meetings
Board meetings (and Audit Committee meetings, where appropriate)
are scheduled to coincide with the Company’s financial reporting
calendar, including the announcement of full and half year results, and
the AGM.
The Company has a Board and Committee calendar, which is updated
and circulated on a monthly basis and which sets out all matters to
be covered by the Board and Committees over a rolling twelve-month
period, including standard business, matters directly linked with
financial reporting and results, corporate governance requirements,
ongoing training for the Board and an annual Board strategy day.
During the reporting period, two Board meetings were held, both of
which related directly to the IPO process, and the approval of a number
of new policies adopted as part of the work stream to review the
Company’s financial position and prospects procedures. Both Board
meetings were attended by all Directors.
Board and Committee Meetings
Since the end of the reporting period, three Board meetings were held,
which were attended by all Directors. A further eight Board meetings
are planned for the remainder of the reporting period, including one
day dedicated to strategy. Further Board meetings will be held to the
extent required.
Due to the short period between listing and the end of the financial
year, there were no Committee meetings held during the reporting
period, but since then, there have been two meetings of the Audit
Committee, three meetings of the Remuneration Committee and one
meeting of the Nomination Committee (each attended by all members
of the Committees). Further meetings of each of the Committees have
been planned for the remainder of the new reporting period.
24 Annual Report & Financial Statements 2015
On the Beach Group plc
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Insurance Cover
The Company has made arrangements for appropriate insurance
cover to be put in place in respect of legal action against its directors.
Division of responsibilities
The roles of Chairman and Chief Executive Officer are not exercised
by the same individual. The division of responsibilities between the
Chairman and the Chief Executive Officer has been defined, formalised
in writing, and approved by the Board.
The Chairman is responsible for:
•
the leadership and effectiveness of the Board, setting its
agenda and ensuring sufficient time is available for discussion
of agenda items, in particular strategic issues;
• ensuring that all Directors receive accurate, timely and clear
information on financial, business and corporate matters to make
sound Board decisions;
facilitating the effective contribution of non-executive Directors;
•
• ensuring constructive relations between executive and non
executive Directors;
• ensuring effective communication with shareholders; and
• ensuring that the performance of individual Directors, the Board
as a whole and its Committees is evaluated at least once a year.
The Chief Executive Officer is responsible for managing the business
and driving it forward, including the responsibility for:
the operations of the Group.
•
• developing Group objectives and strategy, having regard to the
Group’s responsibilities to its shareholders, customers, employees
•
and other stakeholders;
following presentation to, and approval by, the Board, for the
successful implementation and achievement of those strategies
and objectives;
• ensuring that the Group’s businesses are managed in line with
strategy and approved business plans, and comply with applicable
legislation and Group policy;
• ensuring effective communication with shareholders; and
• setting Group human resource policies, including management
development and succession planning for the senior executive
team.
Non-Executive Directors and Senior Independent
Director
In addition to the Chairman, the Company has two independent
Non-Executive Directors, who are appointed to bring independence,
impartiality, wide experience, special knowledge and personal qualities
to the Board.
The Code recommends that the board of directors of a company with
a premium listing on the Official List should appoint one of the Non-
Executive Directors to be the Senior Independent Director to provide
a sounding board for the chairman and to serve as an intermediary for
the other directors when necessary. The Senior Independent Director
should be available to shareholders if they have concerns which
contact through the normal channels of the Chairman, CEO or other
Executive Directors has failed to resolve or for which such contact is
inappropriate. Lee Ginsberg has been appointed Senior Independent
Director.
As noted above, in the short period of three days between listing and
the end of the reporting period, it was not practical for the Chairman
and Non-Executive Directors to meet formally without the Executive
Directors present. However, since the end of the reporting period,
the chairman has held one meeting with the non-executive directors
without the executives present, and further meetings have been
scheduled on a quarterly basis thereafter.
For the same reason, and also because insufficient time had passed
since the Board was constituted to enable a meaningful evaluation,
the Non-Executive Directors did not meet to evaluate and appraise
the Chairman’s performance. This has been diarised for the end of
the tenth month of the reporting period when a more meaningful and
constructive evaluation can take place.
Non-Executive Directors
Where directors have a concern which cannot be resolved about the
company or a proposed action, their concern would be minuted by
the Company Secretary following the relevant Board or Committee
meeting.
EFFECTIVENESS
Composition of the Board: balance of skills and
independence
The Code recommends that, as a ‘‘smaller company’’, the Company
should have at least two independent non-executive directors.
The Board consists of two Non-Executive Directors (excluding the
Chairman) and two Executive Directors. The Company regards both
of the Non-Executive Directors ‘‘independent non-executive directors’’
within the meaning of the Code and free from any relationship that
could materially interfere with the exercise of their independent
judgement. The Board is satisfied that this is the case notwithstanding
the fact that both Non-Executive Directors are also non-executive
directors of Trinity Mirror plc, on the grounds that in the context of
both Directors’ wider business interests and activities, having two
directorships in common does not threaten their independence
from each other. Indeed, the Board believes that this common link
strengthens the relationships within the Board.
Lee Ginsberg holds a minor shareholding in the Company of 16,300
Ordinary Shares, representing 0.013% of the Company’s issued
ordinary share capital. The Board does not consider this to threaten
Lee’s independence given the shareholding is minor and is not material
in the context of Lee’s wider business interests and shareholdings.
The UK Corporate Governance Code recommends that the chairman
of a company admitted to the premium listing segment of the Official
List should meet the independence criteria set out in the Code. The
Board regards Richard Segal as an ‘‘independent non-executive
director’’ within the meaning of the UK Corporate Governance Code.
In reaching this determination, the Board has had regard to: (i)
Richard’s shareholding in the Company; and (ii) the material business
relationships he has developed within the Group over his tenure as
Non-Executive Chairman of The Group since October 2013. The Board
is satisfied with the judgement, experience and approach adopted by
Richard and has determined that Richard is of independent character
and judgement, notwithstanding the circumstances described at (i)
and (ii) above, on the grounds that in the context of Richard’s wider
business interests and shareholdings, this is not material and therefore
unlikely to challenge his independence.
The Board considers, on the recommendation of the Nomination
Committee, that the Board and its Committees have the appropriate
balance of skills, experience, independence and knowledge of the
Company taking into account the respective skills, experience,
independence and knowledge of each of the Directors. This will
continue to be monitored by the Nomination Committee.
Appointments to the Board
The Nomination Committee leads the process for Board appointments
and makes recommendations to the Board. Please see page XX for the
report of the Nomination Committee.
The Board can appoint any person to be a Director, either to fill
a vacancy or as an addition to the existing Board. Any Director so
appointed shall hold office only until the next AGM and shall then be
eligible for election by the shareholders.
Following recommendations from the Nomination Committee,
the Board considers that all Directors continue to be effective,
committed to their roles and are able to devote sufficient time to their
duties. Accordingly, all Directors will seek election at the Company’s
forthcoming AGM.
Non-executive directors are typically expected to serve two three-year
terms, although the Board may invite the Director to serve for an
additional period.
Annual Report & Financial Statements 2015
On the Beach Group plc
25
Information and Support
All Board Directors have access to the Company Secretary, who
advises them on governance matters. The Chairman and the Company
Secretary work together to ensure that board papers are clear,
accurate, delivered in a timely manner to Directors and are of sufficient
quality to ensure the Board can discharge its duties.
Specific business-related presentations are given by senior
management as part of board meetings where appropriate. As well as
the support of the Company Secretary, Directors have access to the
Company’s professional advisers where considered necessary.
Evaluation
The Board is committed to, and understands the value and importance
of the evaluation and appraisal of the performance of the Board, its
Committees, and of the individual Directors and the Chairman. In
particular, the Board intends to review the composition, experience
and skills to ensure that the Board and its Committees continue
to work effectively and that the Directors are demonstrating a
commitment to their roles.
As the Board is so newly constituted, no such evaluations have yet
taken place, but we have scheduled these evaluations to take place in
the next reporting period, and we look forward to reporting the results
of these evaluations in our next annual report.
INVESTOR RELATIONS
The Company is committed to engaging and maintaining an active
dialogue with all of its shareholders. In addition to the investor
roadshows held as part of the IPO process, the Company is planning
to roll out an investor relations programme over the next reporting
period to enable dialogue and meetings between the Executive
Directors and institutional investors, fund managers and analysts. At
these meetings, a wide range of relevant issues including strategy,
performance, management and governance will be discussed within
the constraints of information which has already been made public.
The Board is aware that institutional shareholders may be in more
regular contact with the Company than other shareholders, but care
is exercised to ensure that any price-sensitive information is released
to all shareholders, institutional and private, at the same time, in
accordance with the Financial Conduct Authority requirements.
Questions from individual shareholders are generally dealt with by the
Executive Directors.
All shareholders can access announcements, investor presentations
and the Annual Report on the Company’s corporate website (www.
onthebeachgroupplc.com).
The Senior Independent Director, Lee Ginsberg, is available to
shareholders if they have concerns which cannot be raised through
the normal channels or if such concerns have not been resolved.
Arrangements can be made to meet with him through the Company
Secretary.
Compliance with 7.2.6R DTR
In accordance with the requirements of the Disclosure and
Transparency Rules, Rule 7.2.6R, the Directors’ Report on page 45
contains details of significant shareholdings, special rights attached
to securities and voting rights and all other matters required to be
disclosed.
Approved by the board and signed on its behalf:
Kirsteen Vickerstaff
COMPANY SECRETARY
On the Beach Group plc
9 December 2015
Diversity
We fully support the aims, objectives and recommendations outlined
in Lord Davies’ Report “Women on Boards” and are aware of the
need to increase the number of women on our Board and in senior
positions throughout the Group. However, we do not consider that
it is in the best interests of the Company and its shareholders to set
prescriptive targets for gender on the Board and we will continue to
make appointments based on merit, against objective criteria to ensure
we appoint the best individual for each role.
As at 30 September 2015, the average age of the Group’s employees
was 32 years old and the gender split between employees was as
follows:
Male
Female
Directors of the Company
Exec / Senior management
Other employees
4
17
111
1
9
120
Percentage
of female
employees
20%
35%
52%
AGM
Our first Annual General Meeting will be held at 11am on 5 February
2016 at Park Square, Bird Hall Lane, Cheadle, SK3 0XN. All shareholders
will have the opportunity to attend and vote, in person or by proxy, at
the AGM. The notice of the AGM is in the booklet which is enclosed
with this report, and sets out the business of the meeting and an
explanatory note. Separate resolutions are proposed in respect of
each substantive issue.
All members of the Board will be present at the AGM and will be able to
answer any questions from shareholders.
Commitment and External Directorships
Any external appointments or other significant commitments of the
Directors require the prior approval of the Board.
The Chairman and the Non-Executive Directors each hold external
directorships, and these are disclosed within their profiles on pages 21
and 22.
The Board is comfortable that these do not impact on the time that
any Director devotes to the Company and in the Board’s view, these
external directorships enhance the collective experience of the Board.
Directors’ Conflicts of Interests
Directors have a statutory duty to avoid situations in which they have or
may have interests that conflict with those of the Company, unless that
conflict is first authorised by the Board. This includes potential conflicts
that may arise when a Director takes up a position with another
Company. The Company’s Articles of Association enable the Board to
authorise potential conflicts of interest which may arise and to impose
limits or conditions, as appropriate, when giving any authorisation.
Any decision of the Board to authorise a conflict of interest is only
effective if it is agreed without the conflicted Director(s) voting or
without their vote(s) being counted. In making such a decision, the
Directors must act in a way they consider in good faith will be the most
likely to promote the success of the Company.
The Company maintains a register of related parties and register of
directors’ interests, which is reviewed by the Board on a regular basis.
Development of Directors
Although it was not possible to arrange a full induction for the new
Non-Executive Directors immediately upon appointment and prior to
the end of the reporting period, a full induction has now taken place,
which was tailored to the individual requirements of each Director.
The Chairman will continue to review training needs for Directors
according to their individual needs – this will be reviewed on an
ongoing basis and as part of the formal annual appraisal process. The
Company Secretary has arranged training sessions for Directors as part
of Board Meetings on a quarterly basis.
26 Annual Report & Financial Statements 2015
On the Beach Group plc
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Report of Nomination Committee
Richard Segal
NON-EXECUTIVE CHAIRMAN
On the Beach Group plc
I am pleased to introduce the report of the Nomination Committee for
the reporting period ended 30 September 2015.
The members of the Nomination Committee comprise myself
(Chairman), Lee Ginsberg and David Kelly, all of whom have been a
member since the Nomination Committee was formed in September
2015 in anticipation of listing.
The Code recommends that the Committee is comprised of a
majority of independent Non-Executive Directors. All members of the
Committee are independent, so the composition of the Committee is
compliant with the Code.
The Company Secretary acts as Secretary to the Committee and by
invitation, the meetings of the Committee may be attended by the CEO,
CFO or other individuals or external advisers.
Role of the Committee
The Committee has primary responsibility for leading the process
for board appointments and make recommendations to the
board, bearing in mind the need for diversity (including gender
and background) consideration and a balance of skills, experience,
independence and knowledge across the Board, taking care to ensure
that appointees have enough time available to devote to the position.
The Committee will also make recommendations to the Board
concerning the reappointment of any Non-Executive Director as they
reach the end of the period of their initial term of appointment (three
years) and at appropriate intervals during their tenure, having regard to
their performance and ability to continue to contribute to the Board in
the light of the knowledge, skills and experience required.
The Committee also considers and makes recommendations to
the Board on the annual election and re-election of any Director
by shareholders, after evaluating the balance of skills, knowledge,
independence and experience of each Director.
On the recommendation of the Committee, all Directors will seek
election at the Company’s forthcoming AGM.
Diversity
The Committee will take into account various factors before
recommending any new appointments to the Board, including
the relevant skills to perform the role, experience, independence,
knowledge and diversity (gender, background and otherwise).
The Company values equality and diversity and understands the
benefits of a diverse Board and supports the recommendations of
Lord Davies’ review.
The utmost priority for the Committee is to ensure that the best
candidate is selected to join the Board and this approach will continue
to be followed without the need for prescriptive or quantitative targets.
Activities of the Nomination Committee
The Committee did not meet formally during the reporting period. The
first meeting of the Committee took place on 4 December 2015, to
evaluate and recommend that the Directors be proposed for election
at the AGM.
Prior to the creation of the Nomination Committee, the Company
engaged with Skill Capital, an external executive recruitment consultant
in connection with the search for Non-Executive Directors, and the
individuals met with me in my capacity of Chairman of the Board and
with the Executive Directors on a one-to-one basis.
I will be available at the AGM to answer any questions on the work of
the Committee.
Richard Segal
CHAIRMAN, NOMINATION COMMITTEE
Annual Report & Financial Statements 2015
On the Beach Group plc
27
Report of the Audit Committee
Members of the Audit Committee
Chairman
Lee Ginsberg
Members
David Kelly
Richard Segal
The code recommends that the Audit Committee should comprise at
least three members, or in the case of smaller Companies two, all of
whom should be independent Non-Executive Directors with at least
one member having recent and relevant financial experience. I am
the Independent Non-Executive with extensive recent and relevant
financial experience and am pleased to confirm that all members have
had experience in large organisations (Directors’ biographies appear
on pages 21 and 22).
By invitation, the meetings of the Audit Committee may be attended
by the Chief Executive Officer, Chief Financial Officer and Company
Secretary. The KPMG audit engagement partner and team are
also invited to attend Audit Committee meetings to ensure full
communication of matters relating to the audit.
Role of the Audit Committee
The committee is a sub-committee of the Board and its terms of
reference were approved in contemplation of Admission and are fully
aligned to the Code. The primary function of the Committee is to assist
the Board in fulfilling its responsibilities to protect the interest of the
shareholders with regard to the integrity of the financial reporting,
audit and the operation of internal controls. This includes a review of
significant issues and judgements, policies and disclosures.
During the IPO process, as part of completing the Group’s Financial
Position, Prospects and Procedures report (FPPP), the Directors,
supported by PWC, undertook a detailed assessment of the following
key areas:
• Management reporting framework including the information
provided to the Board;
• Board governance and Committees including procedures
for risk assessment and management;
• Financial accounting and reporting procedures, audit arrangements
and reporting standards;
• Significant transaction complexity, potential financial exposure
or risk;
• Budgeting and forecasting procedures and controls; and
•
Information technology environment including strategy,
governance and organisation.
The Directors recognise the need to maintain the financial reporting
procedures, review them on an ongoing basis and adapt them to
changing circumstances. Their continuous review will form part of the
Committee’s agenda going forward together with its wider roles and
responsibilities set out below.
Lee Ginsberg
CHAIR OF THE AUDIT COMMITTEE
Lee Ginsberg
CHAIR OF THE AUDIT COMMITTEE
Dear Shareholder
I am pleased to have been appointed as Chairman of the Audit
Committee and to present the Company’s first Audit Committee Report
following its admission to the premium listing segment of the official list
on 28 September 2015. Due to the very short time between admission
and the year end of 30 September 2015, no committee meetings
took place between these two dates. Following the year end, however,
the Committee has met on two occasions prior to the approval of
the financial statements. As a result, this report focuses on the work
undertaken to transition from the Group’s private company status to a
PLC and the focus of the Committee going forward.
28 Annual Report & Financial Statements 2015
On the Beach Group plc
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Work undertaken by the Committee in relation to
2015 Financial Statements
Although the Committee did not come into operation until 3 September
2015, a number of significant matters have been discussed and
considered:
• Approved 2015 audit plan;
• Reviewed the integrity of the draft financial statements for the year
ended 30 September 2015, appropriateness of accounting policies
and going concern assumption;
• Considered the auditors’ report regarding their findings on the
2015 results;
• Reviewed and recommended approval of the 2015 Annual Report
and Financial Statements, including advising the board on whether
taken as a whole, it is fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Company’s performance, business model and strategy;
• Confirmed compliance or explained deviation from the UK
Corporate Governance Code;
• Reviewed audit and non-audit expenditure with the external
auditors during the year; and
• Having reviewed the performance, effectiveness and qualifications
of the auditors, recommended their re-appointment at the AGM.
Internal audit
The Group did not have a stand-alone Internal Audit Department
during the year. As part of its review of financial position, prospects and
procedures during the IPO, the need for an internal audit function was
considered. Management considers that a stand-alone internal audit
department is not appropriate on the grounds that:
• The business operates from a single site;
• Procedures and routines are well established across the business;
and
• There is a significant degree of senior oversight, particularly in
respect of ongoing business performance, involving both the CEO
and CFO.
The Committee is happy that the current system is adequate and will, as
part of its remit, evaluate the effectiveness and robustness of the current
system of control as the Group grows as to whether an independent
Internal Audit Department would be more appropriate and to set down
the guidelines for the operation of such a department.
Internal Controls
The Board acknowledges its responsibility for establishing and
maintaining the Group’s system of internal controls. The Board has
reviewed the effectiveness of internal controls as part of the FPPP
process which concluded that control activities are largely in place but
are not always formally documented or evidenced. The Board confirms
that actions it considers necessary to remedy this are in the process of
being remedied in formalised documented procedures. The Board has
established a well-defined organisation structure with clear operating
procedures, lines of responsibility and delegated authority to Executive
management.
The key elements of the Group’s system of internal controls which have
been in place throughout the year under review and up to the date of this
report include:
Risk Management
Risks are highlighted through a number of different reviews and
culminate in a risk register and this process was formalised as part of the
FPPP process prior to Admission. The register identifies the risk area, the
probability of the risk occurring, the impact if it does occur and the actions
being taken to manage the risk to the desired level. The Committee
has considered the process by which the Group approaches risk
management and is satisfied that the Group has systems and procedures
in place to identify, evaluate and manage all material risks to the business,
in accordance with the Turnbull Guidance.
Financial Reporting
Monthly management accounts provide relevant, reliable and up-to-
date financial and non-financial information to management and the
Board. Annual budgets, performance targets and long range financial
plans allow management to monitor the key business and financial
activities and the progress towards achieving the financial objectives.
Monitoring of controls
There are policies and procedures in place to ensure the integrity
and accuracy of the accounting records and to safeguard the Group’s
assets. There are formal whistleblowing’ procedures by which staff can,
in confidence, raise concerns about possible improprieties.
Website development
There are clear procedures for prioritising and controlling website
development. Each project has a defined investment case detailing the
scope and benefits.
Viability Statement
In accordance with provision C.2.2 of the 2014 revision of the Code, the
Directors have assessed the prospects of the Company over the three
year period to 30 September 2018, being the period considered under
the Group’s three year strategic plan.
The Directors confirm that they have a reasonable expectation that the
Group will continue to operate and meet its liabilities, as they fall due,
for the next three years. In making this statement the Directors have
considered the Group’s current position and prospects, the Group’s
strategy, and the principal risks facing the Group as detailed on pages
13 and 15 and the potential impact of these on the business model,
future performance and liquidity over the period. In its assessment
of the viability of the Group, the Directors have performed sensitivity
analysis on the key assumptions underlying the cash flow forecasts
of the Group, both individually and in unison. The Directors have also
taken account of the Group’s ability to renew the revolving credit facility
at an appropriate level.
External Auditor
The Committee oversees the Group’s relationship with the external
auditor. The Committee holds meetings with the auditor without
management present with the purpose of understanding the auditor’s
views on the control and governance environment and management’s
effectiveness within it. To fulfil its responsibilities in respect of
the independence and effectiveness of the external auditor, the
Committee reviewed:
• The audit work plan for the Group;
• The detailed findings of the audit, including a discussion of any
major issues that arose during the audit;
• The letter from KPMG confirming its independence and objectivity;
and
• The audit fee and the extent of non-audit services provided during
the year.
Non-audit services
The Company’s external auditors may also be used to provide specialist
advice where, as a result of their position as auditors, they either must,
or are best placed to, perform the work in question. A formal policy
is in place in relation to the provision of non-audit services by the
external auditors to ensure that there is adequate protection of their
independence and objectivity.
The Company’s policy is that, except in exceptional circumstances,
non-audit fees to the audit firm should not exceed 70% of the amount
of the audit fee for the current financial year (audit fee £55,000
discounted in FY15 to £45,000)). In addition, all non-audit work in
excess of £15,000 should be the subject of a competitive tender.
It should be noted that, in the current year (FY15), it was disclosed that
fees totalling £50,000 were paid to KPMG (excluding audit fees for
FY14) (£35,000 for the 9 month audit required as part of the IPO, and
£15,000 for IFRS related advice).
Annual Report & Financial Statements 2015
On the Beach Group plc
29
Significant accounting matters
The Committee has discussed and debated the critical accounting
judgements and key sources of estimation uncertainty set out in note
1 to the financial statements with management and the auditors. As a
result of our review, the Committee has identified the following items that
require particular judgement or have significant potential impact on the
interpretation of the Annual Report and Financial Statements.
Accounting
for the IPO
The Group engaged appropriate legal, accounting and tax advisers to develop a steps plan to facilitate a
Group structure commensurate with its new status on the main market of the London Stock Exchange.
The Group engaged advisers who had been involved in the establishment of the structure at inception and
who had maintained a close involvement with the Group and the structure’s evolution through to IPO. The
steps developed included detailed articulation of the accounting treatment necessary both pre and post
the IPO and we have worked closely with our advisers to ensure the necessary accounting entries have
been executed correctly.
The Committee has reviewed the judgements made by management in the amount of costs attributable
to the issue of new shares and charged to share premium (£0.3m), and those expensed directly to the
income statement and are content with the assumptions made and the judgements applied.
Capitalised
website
development
costs
The Group incurs significant internal costs in respect of the development of the On the Beach and ebeach
websites. The accounting for these costs as either development costs which are capitalised as intangible
assets (for enhancement of the website) or expensed as incurred (in respect of maintenance) involves
judgement.
The Audit Committee has reviewed management’s application of the accounting policy adopted and the
assessment of whether current projects meet the criteria required for costs to be capitalised and consider
the approach and application of this policy to be appropriate.
Revenue
recognition
The timing and element of judgement included in recognition of Group revenue has been considered
through review of the Group’s accounting policies and discussions with management covering the internal
controls in place.
The Committee reviewed the types of revenue, how each is accounted for, the key judgements and
estimates involved in recognition and how these are managed by the business to ensure appropriate
accounting can be applied. In respect of overrider income this is only recognised when we have
confirmation of a figure from the supplier or when the cash has been paid and the Committee is satisfied
that Management has established procedures which are embedded in the monthly and annual reporting
cycles to ensure that accounting records reflect the current position in respect of these items.
“
Great service from On the Beach, everything was laid
out exactly what we required. All I can say at this time
is well done to the staff for the great service.
“
CUSTOMER FEEDBACK
30 Annual Report & Financial Statements 2015
On the Beach Group plc
Remuneration Report
Annual Statement of the Chairman of the Remuneration Committee
Dear Shareholder
I am delighted to have been appointed as the Chairman of the
Remuneration Committee, and I am pleased to present the Company’s
first remuneration report as a listed company.
The Remuneration Committee understands the emphasis placed
on, and the scrutiny of, executive pay, and as a newly listed company
we have been focused on transitioning effectively into a listed
environment.
With that in mind, the Remuneration Committee has met three
times since then. My aim has been to create a policy that aligns all
stakeholders interests, ensures remuneration policy supports the
business strategy, focuses on the long term success of the Company,
enables us to retain and recruit executives in a competitive sector, sets
challenging targets and is fair to all concerned, with an appropriate
balance between fixed and variable pay and immediate and long-term
remuneration.
We have set the remuneration policy having regard to the substantial
shareholdings of the existing Executive Directors, but also with a view
to designing a flexible policy which, in the future, enables the Company
to attract new executives with a competitive package.
David Kelly
CHAIRMAN OF THE REMUNERATION COMMITTEE
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We’ve been booking our main summer holiday with On The Beach for
five years now and all have gone perfectly smoothly - much more so
than dealing with a High Street travel agent. Great accommodation
every time (twice to Majorca and once each to Malta, Corfu and
mainland Spain) and plenty of choice of convenient flights at good
prices. The free accommodation for our young daughter has been
especially welcome. It has all been so smooth that we have never had
cause to contact On The Beach after booking. Highly recommended.
“
CUSTOMER FEEDBACK
Annual Report & Financial Statements 2015
On the Beach Group plc
31
Remuneration highlights for the 2015 financial year
Prior to and at the time of listing, executive reward was carefully
reviewed and scrutinised to ensure appropriate remuneration
arrangements were in place to support the next phase of the
Company’s growth strategy. This included:
•
•
•
•
the preparation of a set of core remuneration principles for
inclusion within the Prospectus. These have been further
developed and are included within the remuneration policy;
transitioning from a private company to a listed company with the
associated development of a new remuneration policy and
associated incentive plans;
linking the remuneration of Executive Directors to the performance
of the Company. The remuneration policy aims to support a high
performance culture. Annual bonus measures are based on
financial targets that link directly to both strategic and operational
initiatives of the Company; and
the launch of a new Long Term Incentive Plan with the first grants
to be made during 2016. Awards will vest at the end of three
years subject to satisfaction of the performance conditions
and will be subject to a further two year holding period.
The performance metrics will be based 70% on EPS performance
and 30% on share price performance.
Key activities of the remuneration committee
The Remuneration Committee’s key activities during the 2015 financial
year were focused on the:
• Agreement of the Remuneration Committee’s terms of reference;
• Formulation of the Company Remuneration Policy as a listed
company;
• Setting the policy for Chairman, and with the Board, the policy
for Non-Executive Director fees;
•
Implementing the Company’s new Long-Term Incentive Plan;
• Determining the level of bonus payments in respect of this
financial year; and
• Drafting the Company’s first Remuneration Report as a listed
company.
This report has been prepared in accordance with The Large and
Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013, the UKLA Listing Rules and the UK
Corporate Governance Code. The report is split into three parts:
• This Annual Statement.
• The Director’s Remuneration Policy which sets out the Company’s
remuneration policy for directors and the key factors that were
taken into account in setting the policy. This policy will be put to
a binding shareholder vote at the 2016 AGM and will apply for three
years from the date of approval.
• The Annual Report on Remuneration which sets out payments
made to the Directors and details the link between Company
performance and remuneration for the 2015 financial year.
The Annual Report on Remuneration together with this statement
is subject to an advisory shareholder vote at the AGM on
5 February 2016.
I hope that you find the information in this Report helpful and I look
forward to your support at the Company’s Annual General Meeting.
The Remuneration Committee takes the views of its shareholders
seriously and intends to maintain an open dialogue to seek their views.
I am always happy to hear from the Company’s shareholders and you
can contact me via the Company Secretary if you have any questions
on this Report or more generally in relation to the Company’s
remuneration.
David Kelly
CHAIRMAN OF THE RENUMERATION COMMITTEE
9 December 2015
32 Annual Report & Financial Statements 2015
On the Beach Group plc
Remuneration Report
Remuneration Policy
Policy summary
The Remuneration Committee determines the remuneration policy
for the Executive Directors, Chairman and other senior executives for
current and future years.
The Remuneration Committee considers that a successful
remuneration policy needs to be sufficiently flexible to take account
of future changes in the Company’s business environment and in
remuneration practice. The Policy is designed around the following key
principles:
• Shareholder alignment - Ensure a strong link between reward
and individual and Company performance to align the interests
of Executive Directors, senior management and employees with
those of shareholders;
• Competitive remuneration - Maintain a competitive package
against businesses of a comparable size and nature in order
to attract, retain and motivate high-calibre talent to help ensure
the Company’s continued growth and success as a listed company;
• Strategic alignment – Provide a package with an appropriate
balance between short and longer term performance targets linked
to the delivery of the Company’s business plan;
• Performance focused compensation – Encourage and support
a high performance culture; and
• Setting appropriate performance conditions - in line with the
agreed risk profile of the business.
The Remuneration Committee will review annually the remuneration
arrangements for the Executive Directors and key senior management
drawing on trends and adjustments made to all employees across the
Group and taking into consideration:
• business strategy over the period;
• overall corporate performance;
• market conditions affecting the Company;
• changing practice in the markets where the Company
competes for talent; and
• changing views of institutional shareholders
and their representative bodies.
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Discretion
The Remuneration Committee has discretion in several areas of Policy
as set out in this report. The Remuneration Committee may also
exercise operational and administrative discretions under relevant plan
rules approved by shareholders as set out in those rules. In addition,
the Remuneration Committee has the discretion to amend the Policy
with regard to minor or administrative matters where it would be, in
the opinion of the Remuneration Committee, disproportionate to seek
or await shareholder approval.
It is the Remuneration Committee’s intention that commitments
made in line with its policies prior to the date of the 2016 AGM will be
honoured, even if satisfaction of such commitments is made post the
AGM and may be inconsistent with the remuneration policies set out
below.
Differences in policy from the wider employee
population
The Group aims to provide a remuneration package for all employees
that is market competitive and operates the same reward and
performance philosophy throughout the business. As with many
companies, the Group operates variable pay plans primarily focussed
on mid to senior management level.
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Annual Report & Financial Statements 2015
On the Beach Group plc
33
The following table sets out each element of remuneration and how it
supports the Company’s short and long term strategic objectives.
Base Salary
Short and long term strategic objectives
Provides a base level of remuneration to support recruitment and
retention of Executive Directors with the necessary experience and
expertise to deliver the Company’s strategy.
Opportunity
Base salaries will be set at an appropriate level within a comparator group
of comparable sized listed companies and will normally increase in line
with increases made to the wider employee workforce.
Individuals who are recruited or promoted to the Board may, on occasion,
have their salaries set below the targeted policy level until they become
established in their role. In such cases subsequent increases in salary may
be higher than the average until the target positioning is achieved.
The Committee recognises that the current base salaries for Executive
Directors are below the market level but when setting the base salaries
has given regard to the considerable shareholding in the Company of
the current Executive Directors and a desire to focus the remuneration
structure on a long-term strategy.
Benefits
Short and long term strategic objectives
Provides a competitive level of benefits.
Operation
Salaries are reviewed annually and any changes are effective from 1 January in
the financial year.
When determining an appropriate level of salary, the Remuneration
Committee considers:
•
•
•
•
•
•
remuneration practices within the Company;
the performance of the individual Executive Director;
the individual Executive Director’s experience and responsibilities;
the general performance of the Company;
salaries within the ranges paid by the companies in the comparator group
used for remuneration benchmarking; and
the economic environment.
Performance metrics used, weighting and time period applicable
None
Operation
The Executive Directors receive benefits which include family private health
cover.
The Remuneration Committee recognises the need to maintain suitable flexibility
in the determination of benefits that ensure it is able to support the objective of
attracting and retaining personnel. Accordingly, the Remuneration Committee
would expect to be able to adopt benefits such as relocation expenses, car
allowance benefit, death in service life assurance, travel expenses (including tax if
any), tax equalisation and support in meeting specific costs incurred by directors.
Opportunity
The maximum will be set at the cost of providing the benefits described.
Performance metrics used, weighting and time period applicable
None
Pensions
Short and long term strategic objectives
Due to their considerable shareholdings, the current Executive Directors
are not provided with pension funding.
Operation
On recruitment, the Committee maintains the ability to provide pension
funding in the form of a salary supplement, which would not form part of
the salary for the purposes of determining the extent of participation in the
Company’s incentive arrangements.
Opportunity
15% of base salary p.a.
Performance metrics used, weighting and time period applicable
None
34 Annual Report & Financial Statements 2015
On the Beach Group plc
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Annual Bonus Plan
Short and long term strategic objectives
The Annual Bonus Plan provides a significant incentive to the Executive
Directors linked to achievement in delivering goals that are closely aligned
with the Company’s strategy and the creation of value for shareholders.
In particular, the Plan supports the Company’s objectives allowing the
setting of annual targets based on the businesses’ strategic objectives at
that time, meaning that a wider range of performance metrics can be used
that are relevant and achievable but ensures bonuses are only payable on
achievement of budgeted levels of profit before tax (pre exceptional items)
(“PBT”).
Operation
For every £1 above the Board approved PBT budget, a proportion will go into a
bonus pot which will be used to fund Executive and Senior Manager bonuses.
The Remuneration Committee will determine the bonus payable after the year
end based on performance against objectives and targets. Bonus payments per
individual will be both proportionate to the overall size of the bonus pot and each
individual’s performance versus their personal objectives.
Annual bonuses are paid in cash after the end of the financial year to which they
relate.
On change of control the Remuneration Committee may pay bonuses on a pro
rata basis measured on performance up to the date of change of control.
Malus will apply up to the date of the bonus determination and clawback will
apply for two years from the date of bonus determination.
Opportunity
The maximum bonus opportunity is 100% of base salary.
Performance metrics used, weighting and time period applicable
Performance is measured over the financial year.
A bonus pot is only formed if budgeted PBT is met. The bonus payout is then
determined based on the satisfaction of a range of key strategic objectives.
The Remuneration Committee retains discretion in exceptional circumstances
to change performance measures and targets and the weightings attached
to performance measures part-way through a performance year if there is a
significant and material event which causes the Remuneration Committee to
believe the original measures, weightings and targets are no longer appropriate.
Discretion may also be exercised in cases where the Remuneration Committee
believe that the bonus outcome is not a fair and accurate reflection of business
performance.
The Remuneration Committee is of the opinion that given the commercial
sensitivity arising in relation to the detailed financial targets used for the annual
bonus, disclosing precise targets for the bonus plan in advance would not be in
shareholder interests. Actual targets, performance achieved and awards made
will be published at the end of the performance periods so shareholders can fully
assess the basis for any pay-outs under the annual bonus.
HMRC Share Incentive Plan
Short and long term strategic objectives
To encourage wide employee share ownership and thereby align
employees’ interests with shareholders.
Operation
The Company has a share incentive plan in which the Executive Directors are
eligible to participate (which is HMRC approved and is open to all eligible staff).
Opportunity
UK scheme in line with HMRC limits as amended from time to time.
Performance metrics used, weighting and time period applicable
None
Shareholding Requirement
Short and long term strategic objectives
To support long term commitment to the Company and the alignment of
Executive Director interests with those of shareholders.
Operation
The Remuneration Committee has adopted formal shareholding guidelines that
will encourage the Executive Directors to build up over a five year period and
then subsequently hold a shareholding equivalent to a percentage of base salary.
Adherence to these guidelines is a condition of continued participation in the
equity incentive arrangements.
Opportunity
150% of salary.
Performance metrics used, weighting and time period applicable
None
Annual Report & Financial Statements 2015
On the Beach Group plc
35
Long-Term Incentive Plan
Short and long term strategic objectives
Awards are designed to incentivise the Executive Directors to maximise
total shareholder returns by successfully delivering the Company’s
objectives and to share in the resulting increase in total shareholder
value.
The use of earnings per share (“EPS”) ensures Executive Directors are
focused on ensuring the annual profit performance targeted by the
Annual Bonus Plan flows through to long-term sustainable EPS growth.
The use of absolute TSR measures the success of the implementation
of the Company’s strategy in delivering a minimum level of return.
Opportunity
Award maximum of 150% of base salary.
At least 25% of the award will vest for threshold performance. 100%
of the award will vest for maximum performance. Straight line vesting
between these points.
Operation
Awards are granted annually to Executive Directors in the form of nil cost
options. These will vest at the end of a three year period subject to:
•
•
the Executive Director’s continued employment at the date of vesting; and
satisfaction of the performance conditions.
The Remuneration Committee may award dividend equivalents on awards to
the extent that these vest.
A further two year holding period post vesting will apply.
Malus will apply for the two year period from grant to vesting with clawback
applying for the two year period post vesting.
Performance metrics used, weighting and time period applicable
The performance conditions for awards are currently split between EPS growth
(70%) and absolute total shareholder return (“TSR”) (30%).
The Remuneration Committee may change the balance of the measures, or use
different measures for subsequent awards, as appropriate. No material change
will be made to the type of performance conditions without prior shareholder
consultation.
The Remuneration Committee retains discretion in exceptional circumstances
to change performance measures and targets and the weightings attached to
performance measures part-way through a performance period if there is a
significant and material event which causes the Remuneration Committee to
believe the original measures, weightings and targets are no longer appropriate.
Discretion may also be exercised in cases where the Remuneration Committee
believe that the vesting outcome is not a fair and accurate reflection of business
performance.
Non-Executive Director fees
Short and long term strategic objectives
Provides a level of fees to support recruitment and retention of Non-
Executive Directors with the necessary experience to advise and assist
with establishing and monitoring the Company’s strategic objectives.
Operation
The Board as a whole is responsible for setting the remuneration of the
Non-Executive Directors, other than the Chairman whose remuneration is
considered by the Remuneration Committee and recommended to the Board.
Non-Executive Directors are paid a base fee and additional fees for chairmanship
of committees. The chairman of the Company does not receive any additional
fees for membership of committees.
Fees are reviewed annually based on equivalent roles in an appropriate
comparator group used to review salaries paid to the Executive Directors.
Non-Executive Directors do not participate in any variable remuneration or
benefits arrangements.
Opportunity
The base fees for Non-Executive Directors are set at a market rate.
Performance metrics used, weighting and time period applicable
None
In general the level of fee increase for the Non-Executive Directors will be set
taking account of any change in responsibility and will take into account the
general rise in salaries across the UK workforce.
The Company will pay reasonable expenses incurred by the Chairman and
Non-Executive Directors.
36 Annual Report & Financial Statements 2015
On the Beach Group plc
Recruitment policy
The Company’s approach when setting the remuneration of any newly
recruited Executive Director will be assessed in line with the same
principles for the Executive Directors, as set out in the remuneration
policy table above. The Remuneration Committee’s approach to
recruitment remuneration is to pay no more than is necessary to
attract candidates of the appropriate calibre and experience needed
for the role from the market in which the Company competes.
The Remuneration Committee will have regard to guidelines and
shareholder sentiment regarding one-off or enhanced short-term
or long-term incentive payments made on recruitment and the
appropriateness of any performance measures associated with an
award.
The remuneration package for a new Executive Director would be set
in accordance with the terms of the Company’s approved policy. Given
a new Executive Director would not have the significant shareholding
of the current Executive Directors, the base salary on recruitment
may be higher than the incumbent and they will be entitled to a cash
supplement of 15% of salary in lieu of pension contributions. In the
year of recruitment, the maximum variable pay will be 250% of salary
(other than in exceptional circumstances where up to 350% of salary
may be made if sign-on compensation is provided).
The Remuneration Committee’s policy is not to provide sign on
compensation. However, in exceptional circumstances where
the Remuneration Committee decides to provide this type of
compensation it will endeavour to provide the compensation
in equity, subject to a holding period during which cessation of
employment will generally result in forfeiture and subject to the
satisfaction of performance targets. The maximum value of this one-
off compensation will be proportionate to the overall remuneration
offered by the Company and in all circumstances is limited to 100%
of salary. The Committee will carefully consider this matter to ensure
consistency with the principles outlined earlier, particularly in relation to
shareholder alignment, and will take appropriate external advice before
finalising a decision in this regard and where practical consult with the
Company’s key shareholders.
The Remuneration Committee’s policy is not to provide buy outs as
a matter of course. However, should the Remuneration Committee
determine that the individual circumstances of recruitment justified the
provision of a buyout, the equivalent value of any incentives that will
be forfeited on cessation of a director’s previous employment will be
calculated taking into account the following:
•
•
the proportion of the performance period completed on the date
of the director’s cessation of employment;
the performance conditions attached to the vesting of these
incentives and the likelihood of them being satisfied; and
• any other terms and condition having a material effect on their
value (“lapsed value”);
The Remuneration Committee may then grant up to the same value as
the lapsed value, where possible, under the Company’s incentive plans.
To the extent that it was not possible or practical to provide the buyout
within the terms of the Company’s existing incentive plans, a bespoke
arrangement would be used.
Where an existing employee is promoted to the Board, the policy
set out above would apply from the date of promotion but there
would be no retrospective application of the policy in relation
to subsisting incentive awards or remuneration arrangements.
Accordingly, prevailing elements of the remuneration package for an
existing employee would be honoured and form part of the ongoing
remuneration of the person concerned. These would be disclosed to
shareholders in the Remuneration Report for the relevant financial
year.
The Company’s policy when setting fees for the appointment of new
Non-Executive Directors is to apply the policy which applies to current
Non-Executive Directors.
Service agreements and letters of appointment
Each of the Executive Directors’ service agreements is for a rolling term
and may be terminated by the Company or the Executive Director by
giving 6 months’ notice.
The Remuneration Committee’s policy for setting notice periods is that
a 6 month period will apply for Executive Directors. The Remuneration
Committee may in exceptional circumstances arising on recruitment,
allow a longer period of up to 12 months, which would in any event
reduce to 6 months following the first year of employment.
The Non-Executive Directors of the Company (including the Chairman)
do not have service contracts. The Non-Executive Directors are
appointed by letters of appointment. Each independent Non-Executive
Director’s term of office runs for two consecutive terms of 3 years each
from 28 September 2015, unless terminated earlier upon 3 months’
written notice by either party or upon their resignations.
The terms of the non-executive directors’ positions are subject to their
re-election by the Company’s shareholders at the AGM scheduled to
be held on 5 February 2016 and to re-election at any subsequent AGM
at which the non-executive directors stand for re-election.
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“
I have booked with OTB the
last four years and never had
a problem with anything.
Everything was easy to
complete and will continue
booking my future holidays
with On the Beach.
“
CUSTOMER FEEDBACK
Annual Report & Financial Statements 2015
On the Beach Group plc
37
Illustrations of the application of the remuneration policy
The chart below illustrates the remuneration that would be paid to each of the Executive Directors, based on salaries
with effect from 1 January 2016, under three different performance scenarios: (i) Minimum; (ii) On-target; and (iii)
Maximum. The elements of remuneration have been categorised into three components: (i) Fixed; (ii) Annual Bonus;
and (iii) LTIP, with the assumptions set out below:
Element
Minimum
On-Target
Maximum
Fixed (salary, benefits and pension)
Included
Included
Included
Annual Bonus
No variable payable
50% of maximum bonus
100% of maximum bonus
Long-Term Incentive Plan
No annual minimum
Multiple year and variable
50% of the maximum award
100% of the maximum award
In accordance with the regulations share price growth has not been included. In addition, dividend equivalents have not been added to LTIP share
awards.
CEO (£000)
Maximum
On-Target
Minimum
29%
45%
100%
29%
43%
22%
33%
£0
£100
£200
£300
£400
£500
£600
£700
£800
At minimum variable remuneration is 0% of salary; at target, variable remuneration represents 124% of salary and at maximum, variable remuneration
represents 249% of fixed remuneration.
Salary, Benefits & Pension Bonus LTIP
CFO (£000)
Maximum
On-Target
Minimum
29%
45%
100%
28%
43%
22%
33%
£0
£100
£200
£300
£400
£500
£600
£700
At minimum variable remuneration is 0% of salary; at target, variable remuneration represents 124% of salary and at maximum, variable remuneration
represents 247% of fixed remuneration.
Salary, Benefits & Pension Bonus LTIP
38 Annual Report & Financial Statements 2015
On the Beach Group plc
Payment for loss of office
The Remuneration Committee will honour Executive Directors’ contractual entitlements. Service contracts do not contain liquidated damages clauses. If
a contract is to be terminated, the Remuneration Committee will determine such mitigation as it considers fair and reasonable in each case. There are
no contractual arrangements that would guarantee a pension with limited or no abatement on severance or early retirement. There is no agreement
between the Company and its Executive Directors or employees, providing for compensation for loss of office or employment that occurs because of a
takeover bid.
The Remuneration Committee reserves the right to make additional payments where such payments are made in good faith in discharge of an existing
legal obligation (or by way of damages for breach of such an obligation); or by way of settlement or compromise of any claim arising in connection with
the termination of an Executive Director’s office or employment.
When determining any loss of office payment for a departing individual the Remuneration Committee will always seek to minimise cost to the Company
whilst seeking to address the circumstances at the time.
Remuneration element
Salary, benefits and pension
Annual Bonus Plan
LTIP
Treatment on Exit
Salary, benefits and pension will be paid over the notice period. The Company has discretion to make a
lump sum payment on termination equal to the salary, value of benefits and value of company pension
contributions payable during the notice period. In all cases the Company will seek to mitigate
any payments due.
If the executive is a good leaver, bonus will be pro-rated to time and performance for year of cessation.
Otherwise, no bonus payable for year of cessation.
If the executive is a good leaver, LTIP award will be pro-rated to time and performance in respect of each
subsisting LTIP award. Otherwise, any unvested LTIP awards will vest. The Remuneration Committee has
the discretion to pro-rate the maximum number of shares to the time from the date of grant to the date of
cessation. It is the Remuneration Committee’s intention to only use this discretion in circumstances where
there is an appropriate business case which will be explained in full to shareholders.
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A good leaver reason is defined as cessation in the following circumstances:
• death;
•
•
•
•
• employing company ceasing to be a Group company;
ill-health;
injury or disability;
redundancy,
retirement with agreement of employer;
•
transfer of employment to a company which is not
a Group company; and
• at the discretion of the Remuneration Committee (as described above).
It is the Remuneration Committee’s intention to only use this discretion
in circumstances where there is an appropriate business case which will
be explained in full to shareholders.
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Change of control
The Remuneration Committee’s policy on the vesting of incentives on a change of control is summarised below:
Name of Incentive Plan
Annual Bonus Plan
Change of Control
Pro-rated to time and performance to the
date of the change of control.
Discretion
The Remuneration Committee has discretion to continue
the operation of the Plan to the end of the bonus year.
LTIP
The number of shares subject to subsisting
LTIP awards vesting on a change of control
will be pro-rated to time and performance.
The Remuneration Committee retains absolute discretion
regarding the proportion vesting, taking into account time
and performance.
There is a presumption that the Remuneration Committee will
pro-rate to time. The Remuneration Committee will only waive
pro-rating in exceptional circumstances where it views the
change of control as an event which has provided a material
enhanced value to shareholders which will be fully explained
to shareholders. In all cases the performance conditions must
be satisfied.
Statement of conditions elsewhere in the company
The Remuneration Committee considers pay and employment conditions across the Company when reviewing the remuneration of the Executive
Directors and other senior employees. In particular, the Remuneration Committee considers the range of base pay increases across the Group. While
the Company does not directly consult with employees as part of the process of reviewing executive pay and formulating the remuneration policy set
out in this report, the Company does receive updates from the Executive Directors on their discussions and reviews with senior management and
employees.
The Company does not use remuneration comparison measurements.
Consideration of shareholder views
The Remuneration Committee takes the views of the shareholders seriously and these views are taken into account in shaping remuneration policy
and practice. Shareholder views are considered when evaluating and setting remuneration strategy and the Remuneration Committee commits to
consulting with key shareholders prior to any significant changes to its remuneration policy.
Annual Report & Financial Statements 2015
On the Beach Group plc
39
Remuneration Report
Annual Report on Remuneration
Executive Directors (Audited)
The table below sets out the single total figure of remuneration and breakdown for each Executive Director in
respect of the 2015 financial year. Comparative figures for the 2014 financial year have also been provided. Figures
provided have been calculated in accordance with the new UK disclosure requirements: the Large and Medium-Sized
Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (Schedule 8 to the Regulations).
It should be noted that the statutory disclosure requirement is to disclose the sums paid during the period in which
the Company was listed. However, the Company has opted for enhanced disclosure and the sums below reflect the
sums paid during the full financial year ended 30 September 2015.
In accordance with the regulations share price growth has not been included. In addition, dividend equivalents have not been added to LTIP share awards.
Name
Salary (1) (2)
(£’000)
2015
2014
Benefits (2)
(£’000)
Bonus
(£’000)
LTIP
(£’000)
Pension (2)
(£’000)
Total (2)
(£’000)
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Simon
Cooper
Wendy
Parry
127
127
127
127
1
2
1
2
-
-
-
-
-
-
-
-
2
-
3
-
131
131
129
129
Notes:
(1) Executive Director salaries were reviewed on Admission and will increase with effect from 1 January 2016 to £200,000 for Simon Cooper
and £175,000 for Wendy Parry.
(2) These amounts show the total amounts for the whole financial year. The statutory amounts in respect of the 3 days of the financial year
in which the Company was listed are 3/365ths of the amounts shown, (e.g. salary for this period for each Executive Director was £1,043.84).
Non-executive Directors (Audited)
The table below sets out the single total figure of remuneration and breakdown for each Non-executive Director.
(In £s thousand)
Name
Richard Segal
Chairman
Lee Ginsberg
Senior Independent Director, Chairman - Audit Committee
David Kelly
Renumeration Committee
2015 (1)
Taxable
Fees Benefits Total
2014
Taxable
Fees Benefits Total
77
7
5
-
-
-
77
89
7
5
-
-
-
-
-
89
-
-
(1) These amounts show the total amounts for the whole financial year. The statutory amounts in respect of the 3 days of the financial year
in which the Company was listed are 3/365ths of the amounts shown.
Additional information regarding single figure table (audited)
The Remuneration Committee considers that performance conditions for all incentives are suitably demanding, having regard to the business strategy,
shareholder expectations, the markets in which the Group operates and external advice. To the extent that any performance condition is not met, the
relevant part of the award will lapse. There is no retesting of performance.
Bonus awards (audited)
No bonuses were awarded during 2015. Whilst a bonus pot was available, the Remuneration Committee used its discretion not to award a bonus given the
considerable shareholding of the Executive Directors on admission and bonuses which were made to other senior employees on admission.
40 Annual Report & Financial Statements 2015
On the Beach Group plc
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Long term incentives awarded in 2015 (audited)
There were no awards made during 2015. The first awards under the new LTIP plans will be made during 2016.
Payments to past Directors / payments for loss of office (audited)
There were no payments in the financial year.
Statement of Directors’ shareholdings and share interests (audited)
Shareholding requirements in operation at the Company are currently 150% of base salary for the CEO and the CFO.
Executive Directors are required to build up their shareholdings over a reasonable amount of time which would
normally be five years. The number of shares of the Company in which current directors had a beneficial interest and
details of long-term incentive interests as at 30 September 2015 are set out in the table below.
Director
Simon Cooper
Wendy Parry
Shareholding
requirement
(% of salary)
Current
shareholding (1)
(% of salary)
Beneficially
Owned
Shares
Unvested LTIP
interests subject
to performance
conditions
Shareholding
requirement met?
150%
150%
3,392%
7,023%
-
-
-
-
Yes
Yes
(1) The share price of 218 pence as at 30 September 2015 has been taken for the purpose of calculating the current shareholding as a percentage of salary.
Unvested LTIP shares and options do not count towards satisfaction of the shareholding guidelines.
No changes in the above Directors’ interests have taken place between 30 September 2015 and the date of this report.
Non-executive directors are not subject to a shareholding requirement. Details of their interests in shares
are set out below:
Director
Richard Segal
Lee Ginsberg
David Kelly
Shares held
30 September 2015
406,680
16,300
-
Comparison of overall performance and pay (TSR graph)
It should be noted that the Company listed on 28 September 2015 and therefore has limited listed share price history
until the financial year end on 30 September 2015. Therefore it is not felt to be appropriate to present a comparison
of performance versus a comparator in the report this year.
Chief Executive Officer historic remuneration
The table below sets out the total remuneration delivered to the Chief Executive Officer over the last two years valued
using the methodology applied to the single total figure of remuneration. The Remuneration Committee does not
believe that the remuneration payable in its earlier years as a private company bares any comparative value to that
paid in its later years and therefore the Remuneration Committee has chosen to disclose remuneration only for the
two most recent financial years:
Chief Executive Officer
Total Single Figure (£000s)
Annual bonus payment level achieved (% of maximum opportunity)
LTIP vesting level achieved (% of maximum opportunity)
It should be noted that the Company only introduced the LTIP on Admission.
2015
131
-
n/a
2014
131
-
n/a
Annual Report & Financial Statements 2015
On the Beach Group plc
41
Change in Chief Executive Officer’s remuneration compared with employees
The following table sets out the change in the remuneration paid to the Chief Executive Officer from 2014 to 2015
compared with the average percentage change for employees.
The Chief Executive Officer’s remuneration disclosed in the table below has been calculated to take into account base
salary, taxable benefits, and annual bonus (including any amount deferred). The employee pay (on which the average
percentage change is based) is calculated using the increase in the earnings of full-time UK employees using P60 and
P11d data from tax years 2014 and 2015. Part time employees have been excluded from the analysis, as have any
employees who have been promoted or changed role. The employee analysis is done on a matched basis that such
same individuals appear in the 2014 and 2015 populations.
Salary
Taxable
Benefits
Bonus
£’000
£’000
Percentage
Change
£’000
£’000
Percentage
Change
£’000
£’000
Percentage
Change
2015
2014
2015
2014
2015
2014
Chief Executive Officer
127
127
Total pay
1,983
1,904
Number of employees
Average per employee
50
40
50
38
-
4%
0%
4%
1
8
-
-
1
6
-
-
0%
0%
-
-
-
-
-
206
153
35%
50
4
50
3
0%
35%
Relative importance of the spend on pay
The table below sets out the relative importance of spend on pay in the 2015 financial year and 2014 financial year
compared with other disbursements. All figures provided are taken from the relevant Company Accounts.
Disbursements from profit
in 2015 financial year
(£m)
Disbursements from profit
in 2014 financial year
(£m)
Profit distributed by way of dividend
Overall spend on pay including Executive Directors
-
7,735
-
5,784
% change
-
34%
Shareholder voting at general meeting
This is the Company’s first year as a public company and therefore the 2016 AGM will be the first. This means that
there is no historic voting to disclose on the Company’s executive remuneration.
Implementation of remuneration policy in financial year 2016
The Remuneration Committee proposes to implement the policy for 2016 as set out below:
Name
Simon Cooper
Wendy Parry
Salary (£)
Salary (£)
2016 (1)
200,000
175,000
2015
127,000
127,000
Percentage
Change
57%
38%
(1) Note that the salary increases will be with effect from 1 January 2016 following a review of base salary levels prior to admission.
42 Annual Report & Financial Statements 2015
On the Beach Group plc
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Changes to NED Fees
No changes are proposed to the current fee components in place. Breakdown of fee components will remain as follows:
Chairman Fee
SID Fee
Base Fee
Chair of Audit Committee Fee
Chair of Remuneration Committee Fee
£100,000
£50,000
£45,000
£7,500
£5,000
Benefits and Pension
No changes are proposed to benefits or pension.
Bonus Plan
The maximum bonus opportunity for the Executive Directors remains at 100% of salary.
A bonus pot will be determined based on achievement of budgeted Group Profit Before Tax.
The proportion of the pot allocated to individuals will be based on the achievement of key strategic objectives which
for the 2016 financial year will include:
• Achievement of group budgeted PBT;
• Growth in sales in Sweden in line with budget;
• Growth in UK total transaction value in line with budget;
• Revenue growth per daily unique visitor;
• Reduction in core overheads costs; and
• Personal objectives.
The Remuneration Committee is of the opinion that given the commercial sensitivity arising in relation to the
detailed financial targets used for the annual bonus, disclosing precise targets for the bonus plan in advance would
not be in shareholder interests. Actual targets, performance achieved and awards made will be published at the end
of the performance periods so shareholders can fully assess the basis for any pay-outs under the annual bonus.
LTIP Award
It is intended that the first grant under the LTIP will be made during 2016.
The maximum LTIP awards for the Executive Directors will be 150% of salary.
The performance conditions will be based 70% on EPS performance and 30% on absolute TSR measured over a
three year period.
“
We have used On the Beach many times and have been well
looked after each time, easy booking and friendly staff. We had
to change our flights on our last visit to Lanzarote when my wife
suffered 2nd degree burns. Rang On the Beach and explained the
situation we found ourselves in and they could not have been
more helpful.
“
CUSTOMER FEEDBACK
Annual Report & Financial Statements 2015
On the Beach Group plc
43
Composition and terms of reference of the Remuneration Committee
The Board has delegated to the Remuneration Committee, under agreed terms of reference, responsibility for the
remuneration policy and for determining specific packages for the Chairman, Executive Directors and such other senior
employees of the Group as the Board may determine from time to time. The terms of reference for the Remuneration
Committee are available on the Company’s website, onthebeachgroupplc.com, and from the Company Secretary at the
registered office.
All members of the Remuneration Committee are independent non-executive directors and were appointed on 28
September 2015. The Remuneration Committee receives assistance from the CEO, CFO and Company Secretary, who
attend meetings by invitation, except when issues relating to their own remuneration are being discussed. During the
short period of 3 days between listing to the financial year end, it was not possible for the Remuneration Committee to
meet but as noted above, since then, the Remuneration Committee met 3 times All meetings of the Committee were
attended by all members of the Committee, as well as the Executives and the Company Secretary.
Advisers to the Remuneration Committee
Following a formal tendering process carried out by the Board prior to the IPO of the Company, the Committee has
engaged the services of PricewaterhouseCoopers LLP (PwC) as independent remuneration adviser.
During the financial year, PwC advised the Company on all aspects of remuneration policy for Executive Directors
and members of the Executive Team and the associated drafting for the Prospectus. PwC also provided advice to the
Company in relation to the drafting and implementation of executive and employee incentives and advice in relation to
company pension arrangements.
The Remuneration Committee is satisfied that the advice received was objective and independent. PwC is a member of
the Remuneration Consultants Group and the voluntary code of conduct of that body is designed to ensure objective
and independent advice is given to remuneration committees.
PwC received a fixed fee of £41,000 for their advice during the year to 30 September 2015 (for advice to the Committee
and to management).
On behalf of the board
David Kelly
CHAIR OF THE REMUNERATION COMMITTEE
9 December 2015
44 Annual Report & Financial Statements 2015
On the Beach Group plc
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Directors’ Report
The Directors have pleasure in submitting their report and the audited financial
statements of On the Beach Group plc (the “Company”) and its subsidiaries
(together the “Group”) for the financial year to 30 September 2015.
Statutory Information
Information required to be part of the Director’s Report can be found elsewhere in this document, as indicated in the
table below and is incorporated into this Report by reference:
Section of Report
Amendment of the Articles
Page reference
Directors’ Report
Appointment and replacement of Directors
Directors’ Report
Board of Directors
Community
Directors’ indemnities
Directors’ interests
Directors’ responsibility statement
Disclosure of information to Auditors
Corporate Governance Statement
Strategic Report; Corporate Social Responsibility
Director’s Report
Directors’ Report
Directors’ Report
Directors’ Report
Employee involvement
Corporate Social Responsibility
Employees with disabilities
Corporate Social Responsibility
Future developments of the business
Going concern
Strategic Report
Directors’ Report
Greenhouse gas emissions
Corporate Social Responsibility
Independent Auditors
Political donations
Post-balance sheet events
Directors’ Report
Directors’ Report
Directors’ Report
Powers for the Company to issue or buy back its shares
Directors’ Report
(page 46)
(page 46)
(page 23)
(page 17)
(page 47)
(page 25)
(page 48)
(page 47)
(page 16)
(page 16)
(page 3)
(page 47)
(page 17)
(page 47)
(page 47)
(page 47)
(page 46)
Powers of the Directors
Corporate Governance Statement (page 23) and Directors’ Report (page 46)
Research and development activities
Restrictions on transfer of securities
Results and dividends
Rights attaching to shares
Risk management
Share capital
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
(page 47)
(page 46)
(page 47)
(page 46)
Strategic Report (page 13) and note 20 to the consolidated financial statements
Directors’ Report
Significant related party agreements
Note 23 to the consolidated financial statements
Significant shareholders
Directors’ Report
Statement of corporate governance
Corporate Governance Statement
Substantial shareholdings
Directors’ Report
(page 46)
(page 47)
(page 23)
(page 47)
Annual Report & Financial Statements 2015
On the Beach Group plc
45
Management Report
This Directors’ Report, on pages 45 to 48, together with the Strategic
Report on pages 3 to 18, form the Management Report for the
purposes of DTR 4.1.5R.
Strategic Report
The Strategic Report, which can be found on pages 3 to 18, sets out
the development and performance of the Group’s business during
the financial year, the position of the Group at the end of the year and
a description of the principal risks and uncertainties (including the
financial risk management position) which is set out on pages 13 to 15.
All information required by s417 Companies Act 2006 is incorporated
by reference to the Strategic Report.
UK Corporate Governance Code
The company’s statement with regards to its adoption of the UK
Corporate Governance Code can be found in the Statement of
Corporate Governance on pages 23. The Corporate Governance
Report forms part of this Directors’ Report and is incorporated into it
by reference.
Appointment and replacement of Directors
The appointment and replacement of Directors of the Company is
governed by the Articles of Association.
Amendment of Articles of Association
The Company’s Articles of Association may only be amended by way
of a special resolution at a general meeting of the shareholders. No
amendments are proposed to be made at the forthcoming Annual
General Meeting.
Share capital and control
As at the date of this report, the Company’s issued share capital
comprises ordinary shares of £0.01 each (by virtue of a capital
reduction which took effect on 18 November 2015) which are listed
on the London Stock Exchange (LSE: OTB.L). The ISIN of the shares is
GB00BYM1K758.
The issued share capital of the Company as at 30 September 2015,
comprised 130,434,763 ordinary shares of £1.50 each. Further
information regarding the Company’s issued share capital can be found
on page 57 of the financial statements. Details of the movements in
issued share capital during the year are provided in note 19 to the
Group’s financial statements contained on page 76. All the information
detailed in note 19 on page 76 forms part of this Directors’ Report and
is incorporated into it by reference.
At the Annual General Meeting of the Company to be held on 5
February 2016 the Directors will seek authority from shareholders to
allot shares in the capital of the Company (i) up to a maximum nominal
amount of £434,782.55 (43,478,255 shares of £0.01 each); and (ii) up
to a further £434,782.55 (43,478,255 shares of £0.01 each) where the
allotment is in connection with a rights issue, in each case representing
approximately one third of the Company’s issued ordinary share
capital. In addition to the authority to allot shares, the Directors will
be seeking authority to allot equity securities for cash in connection
with a rights issue or otherwise up to a maximum nominal amount of
£65,217.38 (representing approximately 5% of the Company’s issued
ordinary share capital).
Authority to purchase own shares
The Directors will seek authority from shareholders at the forthcoming
Annual General Meeting for the Company to purchase, in the market,
up to a maximum of 10% of its own ordinary shares either to be
cancelled or retained as treasury shares. The Directors will only
use this power after careful consideration, taking into account the
financial resources of the Company, the Company’s share price and
future funding opportunities. The Directors will also take into account
the effects on earnings per share and the interests of shareholders
generally.
Rights attaching to shares
All shares have the same rights (including voting and dividend rights
and rights on a return of capital) and restrictions as set out in the
Articles, described below. Except in relation to dividends which
have been declared and rights on a liquidation of the Company, the
shareholders have no rights to share in the profits of the Company.
46 Annual Report & Financial Statements 2015
On the Beach Group plc
Rights attaching to shares
The Company’s shares are not redeemable. However, following any
grant of authority from shareholders, the Company may purchase or
contract to purchase any of the shares on or off market, subject to the
Companies Act 2006 and the requirements of the Listing Rules.
No Shareholder holds shares in the Company which carry special rights
with regard to control of the Company. There are no shares relating
to an employee share scheme which have rights with regard to control
of the Company that are not exercisable directly and solely by the
employees, other than in the case of the On the Beach Share Incentive
Plan, where share interests of a participant in such scheme can be
exercised by the personal representatives of a deceased participant in
accordance with the Scheme rules.
Voting rights
Each ordinary share entitles the holder to vote at general meetings
of the Company. A resolution put to the vote of the meeting shall be
decided on a show of hands unless a poll is demanded. On a show
of hands, every member who is present in person or by proxy at a
general meeting of the Company shall have one vote. On a poll, every
member who is present in person or by proxy shall have one vote
for every share of which they are a holder. The Articles provide a
deadline for submission of proxy forms of not than less than 48 hours
before the time appointed for the holding of the meeting or adjourned
meeting. No member shall be entitled to vote at any general meeting
either in person or by proxy, in respect of any share held by him, unless
all amounts presently payable by him in respect of that share have
been paid. Save as noted, there are no restrictions on voting rights nor
any agreement that may result in such restrictions.
Restrictions on transfer of securities
The Articles do not contain any restrictions on the transfer of ordinary
shares in the Company other than the usual restrictions applicable
where any amount is unpaid on a share. Certain restrictions are
also imposed by laws and regulations (such as insider trading and
marketing requirements relating to close periods) and requirements
of the Listing Rules and the Company share dealing code whereby
Directors and certain employees of the Company require Board
approval to deal in the Company’s securities.
On 23 September 2015, the Company, the Directors, the selling
shareholders and Numis Securities Limited entered into an
underwriting agreement (the “Underwriting Agreement’) in accordance
with which:
• The Executive Directors and Inflexion (the “Locked-up
Shareholders”) have agreed to certain lock-up restrictions in respect
of the Shares that will be held by them following Admission.
• The Executive Directors are subject to a 12 month lock-up period
following Admission and Inflexion is subject to a lock-up period
ending the longer of six months from the date of Admission or the
date of publication of the audited financial results of the Company
for the year ended 30 September 2015, during which time they
may not dispose of any interest in their Shares.
• Pursuant to their respective lock-up arrangements, the Executive
Directors and Inflexion have agreed that, for a further six month
period following the expiry of their lock-up periods referred to
above, they will not dispose of any Shares or interests in Shares
other than through Numis with a view to maintaining an orderly
market in the Company’s securities.
All of the above arrangements are subject to certain customary
exceptions.
Change of control
Save in respect of a provision of the Company’s share schemes which
may cause options and awards granted to employees under such
schemes to vest on takeover, there are no agreements between the
Company and its Directors or employees providing for compensation
for loss of office or employment (whether through resignation,
purported redundancy or otherwise) because of a takeover bid.
The Revolving Credit Facility contains customary prepayment,
cancellation and default provisions including, if required by a lender,
mandatory prepayment of all utilisations provided by that lender upon
the sale of all or substantially all of the business and assets of the
Group or a change of control.
2015 Annual General Meeting
The Annual General Meeting will be held at 11 am on 5 February 2016
at the Company’s registered office at Park Square, Bird Hall Lane,
Stockport, Manchester, SK3 0XN.
The Notice of Meeting which sets out the resolutions to be proposed
at the forthcoming AGM specifies deadlines for exercising voting rights
and appointing a proxy or proxies to vote in relation to resolutions
to be passed at the AGM. All proxy votes will be counted and the
numbers for, against or withheld in relation to each resolution will be
announced at the AGM and published on the Company’s website.
Change in substantial shareholdings since
admission
At 30 September 2015, the Company had been notified, in accordance
with chapter 5 of the Financial Conduct Authority’s Disclosure and
Transparency Rules (“DTR5 Notification”),
of the following significant interests:
Shareholder
Number of
ordinary
shares / voting
rights notified
Percentage of
voting rights
over ordinary
shares of 150p
each
Schroders plc
9,577,677
7.34%
The Independent
Investment Trust PLC
5,150,000
3.95%
As at the date of this report, no further DTR5 Notifications had been received.
Note: The DTR5 Notifications set out above only represent changes notified to the Company
since listing on 28 September 2015 and the Company’s prospectus (available on the
Company’s website onthebeachgroupplc.com) on page 172 sets out a list of persons who,
to the extent known to the Company as at admission, were interested (directly or indirectly)
in 3 per cent or more of the Company’s issued ordinary share capital. As far as the
Company is aware as at the date of this report, there have been no further changes.
Transactions with related parties
The material transactions with related parties during the year were:
Relationship Agreement: The Relationship Agreement was entered
into on 23 September 2015 between the Company and Inflexion, and
its principal purpose is to ensure that the business will be capable of
carrying on its business independently of Inflexion for so long as they
hold a controlling interest.
Reorganisation Agreement: The Reorganisation Deed was entered
into by the Company, On the Beach Topco Limited, On the Beach
Bidco Limited and pre IPO shareholders, and contained certain
reorganisation steps that took place in connection with the IPO within
the Group.
Events post year end
In the Company’s IPO prospectus, the Company noted its intention to
reduce its share capital by means of a court sanctioned reduction in
capital in order to provide it with the distributable reserves required to
support the intended dividend policy. The capital reduction received
Court approval on 18 November 2015.
Going concern
The directors have prepared cash flow forecasts that include key
assumptions in respect of the trading subsidiary’s booking numbers,
booking profiles, commission rates and trade debtor collection periods.
In making their assessment, management have performed sensitivity
analysis on the forecasts. After making appropriate enquiries, the
Directors have a reasonable expectation that the Company and the
Group as a whole have adequate resources to continue in operational
existence for the foreseeable future (at least one year from the
date when financial statements are signed) on both base case and
sensitised forecasts. Accordingly, the financial statements have been
prepared on a going concern basis.
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Indemnities and insurance
The Company maintains appropriate insurance to cover Directors’
and officers’ liability for itself and its subsidiaries. The Company
also indemnifies the Directors under a qualifying indemnity for the
purposes of section 236 of the Companies Act 2006 in the Articles.
Such indemnities contain provisions that are permitted by the Director
liability provisions of the Companies Act and the Company’s Articles.
Research and development
Innovation, specifically in the customer proposition on the website, is
a critical element of the strategy, and therefore of the future success
of the Group. Accordingly the majority of the Group’s research and
development expenditure is predominantly related to this area.
Suppliers
The Group’s policy is to pay suppliers and creditors sums due in
accordance with the payment terms agreed in the relevant contract
with each such supplier/creditor.
Environmental
Information on the Group’s greenhouse gas emissions is set out in the
Corporate Social Responsibility section on page 17 and forms part of
this report by reference.
Financial instruments
Details of the financial risk management objectives and policies of the
Group, including hedging policies and exposure of the entity to price
risk, credit risk, liquidity risk and cash flow risk are given on pages 78 to
81 in note 20 to the consolidated financial statements.
Political contributions
Neither the Company nor any of its subsidiaries made any political
donations or incurred any political expenditure during the year.
External branches
The Group has a Swedish branch (identity number 516408-9186) to
enable it to execute its strategy on international expansion.
Results and dividends
The Group’s and Company’s audited financial statements for the year
are set out on pages 58 to 83. The Directors do not recommend the
payment of a dividend for 2015.
Independent auditors
KPMG LLP has confirmed its willingness to continue in office as auditor
of the Group. In accordance with section 489 of the Companies Act
2006, separate resolutions for the reappointment of KPMG LLP as
auditors of the Group and for the Audit Committee to determine
the remuneration will be proposed at the forthcoming AGM of the
Company.
Disclosure of information to auditor
Each of the Directors has confirmed that:
(i) so far as the Director is aware, there is no relevant audit
information of which the Company’s auditor is unaware; and
(ii) the Director has taken all the steps that he/she ought to have
taken as a Director to make him/herself aware of any relevant audit
information and to establish that the Company’s auditor is aware of
that information.
This confirmation is given and should be interpreted in accordance
with the provisions of Section 418 of the Companies Act 2006.
Annual Report & Financial Statements 2015
On the Beach Group plc
47
“
I love this company. I have
already booked two holidays
through them and the
process was quick and easy.
We were kept informed all
the way through our booking
process right up until our
holiday. We have now booked
another holiday through
them and I shall be using
On the Beach the next time
as well. I cannot fault them
in any way as any problems
are dealt with straight away
and they have excellent
management. I highly
recommend them. When I
want a holiday this is the first
place I look as I trust and
respect them.
“
CUSTOMER FEEDBACK
Directors’ responsibilities statement
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have prepared the
Group financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union, and
the parent company financial statements in accordance with United
Kingdom Accounting Standards and applicable law (UK Generally
Accepted Accounting Practice) including FRS 102 The Financial
Reporting Standard applicable in the UK and Republic of Ireland.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of the
profit or loss of the Group for that period. In preparing these financial
statements, the Directors are required to:
• Properly select and apply consistently suitable accounting policies;
• make judgements and accounting estimates that are reasonable
and prudent;
• state whether IFRSs as adopted by the European Union and
applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the Group
and parent Company financial statements respectively; and
• make an assessment of the Company’s ability to continue as a
going concern
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the parent company and enable them to ensure
that its financial statements comply with the Companies Act 2006.
They have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the group and to prevent and
detect fraud and other irregularities.
The directors confirm that to the best of their knowledge:
•
•
•
the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
company and the undertakings included in the consolidation taken
as a whole;
the strategic report includes a fair review of the development and
performance of the business and the position of the issuer and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face;
the annual report and accounts, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the group’s position and performance,
business model and strategy.
Approval of the Annual Report
The Strategic Report and Corporate Governance Report were
approved by the Board on 4 December 2015.
Approved by the board and signed on its behalf:
Kirsteen Vickerstaff
COMPANY SECRETARY
9 December 2015
48 Annual Report & Financial Statements 2015
On the Beach Group plc
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Independent Auditor’s Report to the
Members of On the Beach Group plc
Opinions and conclusions arising from our audit
1 Our opinion on the financial statements
is unmodified
We have audited the financial statements of On the Beach Group Plc for
the year ended 30 September 2015 set out on pages 53 to 88.
In our opinion:
the financial statements give a true and fair view of the state of the
•
Group’s and of the parent company’s affairs as at 30 September
2015 and of the Group’s loss for the year then ended;
•
•
•
the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union;
the parent company financial statements have been properly
prepared in accordance with FRS 102 “The Financial Reporting
Standard Applicable in the UK and Republic of Ireland”; and
the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006; and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
2 Our assessment of risks of material
misstatement
In arriving at our audit opinion above on the financial statements the
risks of material misstatement that had the greatest effect on our audit
were as follows:
Accounting for the IPO
Refer to page 30 (Audit Committee Report), page 58 (Accounting
policies) and page 64 (financial disclosures).
The risk – In preparation for the IPO, the Group undertook a capital
reorganisation and refinancing, and executed a complex step
plan which included the creation of a new holding company, share
exchanges, repayment arrangements for previous shareholders and
bank debt.
The accounting treatments for the capital reorganisation require
the directors to apply judgement because of the range of possible
accounting treatments that may be applicable. The appropriate
accounting for the steps plan reflected a significant risk of material
misstatement due to the magnitude and complexity of the accounting
entries.
Significant transaction costs were incurred as part of the process,
including legal and professional fees in relation to the IPO. The
accounting treatment for these transaction costs requires the directors
to apply significant judgement in assessing whether the costs are
recognised in profit and loss or directly in equity.
Our response – In this area, our audit procedures included:
• We tested the validity and accurate reflection of each of the steps
to create the new corporate structure. In doing so, we agreed that
the share transactions and the capitalisation of shareholder loans
were consistent with Board resolutions and Companies House
submissions. We evaluated the consistency of the amounts with the
underlying shareholder and loan agreements. We tested the funds
flow for the IPO transaction by agreeing the primary proceeds to
bank statements and third party invoices.
• We critically assessed the accounting treatment of these transactions
adopted by the directors. In doing so, we used our own financial
reporting specialists to assist us in challenging the directors’
assumptions in recording the accounting treatments and evaluated
if they were in line with the appropriate accounting standards.
• We critically assessed and challenged the classification of the costs
incurred during the IPO process within the financial statements
by determining whether they (i) related directly to any debt issued
or taken on, (ii) related to activities other than equity transactions,
such as listing existing shares, or (iii) related jointly to equity
transactions and other activities. We agreed a sample of the
transaction costs incurred to third party invoices to determine
whether the classification in the financial statements was consistent
with the nature of services provided (as noted above). In particular,
we assessed the appropriateness of the presentation of transaction
costs against share premium, capitalised against financial liabilities or
as an expense in the Consolidated profit and loss account.
• We also considered the adequacy and accuracy of the group’s
disclosures about the steps plan to reflect the movement from the
opening equity position at the start of the financial period ended 30
September 2014 to the closing equity position at the end of the
financial year ended 30 September 2015.
Capitalised website development costs (Net book value of £2.6m).
Refer to page 30 (Audit Committee Report), page 58 (Accounting policies)
and page 64 (Financial disclosures).
The risk – The Group incurs significant internal costs in relation to the
ongoing development of the On the Beach and eBeach websites. The
accounting for these costs as either intangible fixed assets or expensed
items in the Consolidated Income Statement involves judgement and
is dependent upon the nature of the related development. More
specifically, the costs are either capital in nature (relating to the
development of the website) or expenditure in nature (relating to the
operations of the website).
Our response – In this area, our audit procedures included the following
areas:
• We evaluated the Group’s processes and controls over the
identification and classification of website development costs, which
comprise primarily of internal staff costs.
• We selected a sample of website development projects and critically
assessed whether or not the nature of the work performed was
capital in nature.
• We agreed a sample of capitalised development costs in the period
back to payroll records to ensure that the spend had been incurred
and that only persons employed as website developers had been
included within the costs capitalised. We also made inquiries with a
sample of IT developers to confirm their day to day responsibilities
and the nature of the projects they worked on. We challenged the
directors on their approach in identifying operations and
development costs using their understanding of the IT team’s day to
day activities and job roles. We critically assessed the overall level of
IT staff costs expensed and capitalised during the year through a year
on year comparison.
Annual Report & Financial Statements 2015
On the Beach Group plc
49
3 Our application of materiality and an
overview of the scope of our audit
The materiality for the Group financial statements as a whole was
set at £0.5m, determined with reference to a benchmark of Group
profit before tax, normalised to exclude this year’s exceptional costs
in relation to IPO of £3.8m and £1.0m (as disclosed in note 6 and note
8 respectively) and shareholders’ interest as disclosed in note 8, of
£10.3m, of which it represents 4.8%.
We report to the Audit Committee any corrected or uncorrected
identified misstatements exceeding £25,000, in addition to other
identified misstatements that warranted reporting on qualitative
grounds.
Of the Group’s eight reporting components, we subjected five to a full
scope audit for Group reporting purposes Three entities were out of
scope for Group reporting purposes as they were not considered to
be significant. Our full scope audit work covered 100% of the Group’s
profit before tax and revenues and 99.9% of total assets.
The Group audit team carried out the work on all the components at
the Group’s offices in Cheadle. The component materialities, which
ranged from £0.2m to £0.4m, were set by the Group audit team having
regard to the mix of size and risk profile of the Group across the
components.
4 Our opinion on other matters prescribed
by the Companies Act 2006 is unmodified
6 We have nothing to report in respect of the
matters on which we are required to report
by exception
Under ISAs (UK and Ireland) we are required to report to you if, based
on the knowledge we acquired during our audit, we have identified
other information in the annual report that contains a material
inconsistency with either that knowledge or the financial statements, a
material misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
• we have identified material inconsistencies between the
knowledge we acquired during our audit and the directors’
statement that they consider that the annual report and financial
statements taken as a whole is fair, balanced and understandable
and provides the information necessary for shareholders to
assess the Group’s performance, business model and strategy; or
the Audit Committee Report does not appropriately address
•
matters communicated by us to the audit committee.
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
• adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
the parent company financial statements and the part of the
•
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
In our opinion:
• certain disclosures of directors’ remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit; or
• a Corporate Governance Statement has not been prepared
by the company.
Under the Listing Rules we are required to review:
•
•
the directors’ statement, set out on page 47, in relation to going
concern and longer-term viability; and
the part of the Corporate Governance Statement on pages 23
relating to the company’s compliance with the eleven provisions
of the 2014 UK Corporate Governance Code specified for our
review.
We have nothing to report in respect of the above responsibilities.
•
•
•
the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies
Act 2006;
the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
the information given in the Corporate Governance Statement
set out on page 29 with respect to internal control and risk
management systems in relation to financial reporting
processes and about share capital structures is consistent with
the financial statements.
5 We have nothing to report on the disclosures
of principal risks
Based on the knowledge we acquired during our audit, we have
nothing material to add or draw attention to in relation to:
•
the directors’ statement of Report of the Audit Committee on
pages 28 to 30, concerning the principal risks, their management,
and, based on that, the directors’ assessment and expectations
of the group’s continuing in operation over the three years to 30
September 2015; or
•
the disclosures in note 1 of the financial statements concerning
the use of the going concern basis of accounting.
50 Annual Report & Financial Statements 2015
On the Beach Group plc
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Scope and responsibilities
As explained more fully in the Directors’ Responsibilities Statement set out on page 48, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view. A description of the scope of an audit of financial statements is
provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. This report is made solely to the company’s members
as a body and is subject to important explanations and disclaimers regarding our responsibilities, published on our website at www.kpmg.com/uk/
auditscopeukco2014a, which are incorporated into this report as if set out in full and should be read to provide an understanding of the purpose of
this report, the work we have undertaken and the basis of our opinions.
Mick Davies (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peter’s Square
Manchester
M2 3AE
9 December 2015
Annual Report & Financial Statements 2015
On the Beach Group plc
51
Statement of Directors’ responsibilities
in respect of the Annual Report and the
Financial Statements
The directors are responsible for preparing the Annual Report and the group and parent company financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare group and parent company financial statements for each financial year. Under that law they are
required to prepare the group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the
parent company financial statements in accordance with UK Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the
UK and Republic of Ireland.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state
of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial
statements, the directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
•
•
•
for the group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;
for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the parent company financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will
continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and
disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements
comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of
the group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration
Report and Corporate Governance Statement that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the directors in respect of the annual financial report
We confirm that to the best of our knowledge:
•
•
the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and
the directors’ report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings
included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for
shareholders to assess the group’s position and performance, business model and strategy.
Wendy Parry
CHIEF FINANCIAL OFFICER
9 December 2015
52 Annual Report & Financial Statements 2015
On the Beach Group plc
Financial Statements
Year ended 30 September 2015
54 Consolidated income statement
55 Consolidated balance sheet
56 Consolidated Cash Flow
57 Statement of changes in equity
58 Notes to the financial statements
84 Company balance sheet
85 Statement of Cash Flows
86 Statement of Changes in Equity
87 Notes to the Company financial statements
Annual Report & Financial Statements 2015
On the Beach Group plc
53
Consolidated income statement
and statement of comprehensive income
For the year ended 30 September 2015 and 53 weeks ended 30 September 2014
For the 53
weeks ended
30 September
Total transaction value i)
Revenue
Administrative expenses before amortisation and exceptional costs
Group operating profit before amortisation and exceptional items
Exceptional costs
Amortisation of intangible assets
Group operating profit
Finance costs
Shareholder interest
Exceptional finance costs
Finance income
Net finance costs
Loss before taxation
Taxation
Loss for the year/period
Other comprehensive income
Total comprehensive income loss for the year/period
Attributable to:
Equity holders of the parent
Note
5
6
2015
£’000
2014
£’000
459,149
359,831
63,124
45,768
(45,657)
(33,238)
17,467
12,530
6
(3,831)
(3,466)
(5,622)
(5,311)
8,014
3,753
8
8
8
8
(1,796)
(1,735)
(7,845)
(6,961)
(1,037)
206
-
154
(10,472)
(8,542)
(2,458)
(4,789)
9
(2,030)
(962)
(4,488)
(5,751)
-
-
(4,488)
(5,751)
(4,488)
(5,751)
Basic and diluted earnings per share attributable to the equity Shareholders of the Company:
From loss for the year
10
(5.8p)
(7.9p)
Adjusted proforma earnings per share ii)
10
8.9p
6.2p
Adjusted profit measure
Adjusted underlying PBT
(before Shareholder interest, amortisation of acquired intangibles and exceptional costs)
6
14,513
9,896
i) This is a non GAAP measure, refer to note 2(l), Total Transaction Value
ii) This is a non GAAP measure, refer to note 10
The company has no other comprehensive income in the current or prior period.
The notes on pages 58 to 83 form part of the financial statements.
54 Annual Report & Financial Statements 2015
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Consolidated balance sheet
As at 30 September 2015 and 30 September 2014
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Other financial assets
Derivative financial instruments
Total current assets
Total assets
Equity
Share capital
Share premium
Retained earnings
Capital contribution reserve
Merger reserve
Total equity/ (Deficit)
Non-current liabilities
Loans and borrowings
Deferred tax
Total non-current liabilities
Current liabilities
Corporation tax payable
Derivative financial instruments
Loans and borrowings
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
For the 53
weeks ended
30 September
Note
2015
£’000
2014
£’000
11
12
14
15
20
20
68,226
71,853
529
657
68,755
72,510
29,998
24,734
34,775
31,003
-
677
65
-
65,450
55,802
134,205
128,312
19
195,652
111,437
13,856
-
(10,239)
(5,751)
550
-
(132,093)
(111,042)
67,726
(5,356)
17
18
20
17
16
-
8,680
8,680
79,065
9,668
88,733
2,110
-
-
832
689
3,140
55,689
40,274
57,799
44,935
66,479
133,668
134,205
128,312
The financial statements from pages 58 to 83 were approved by the Board of Directors and authorised for issue.
Wendy Parry
CHIEF FINANCIAL OFFICER
9 December 2015
On the Beach Group plc . Reg no 09736592
Annual Report & Financial Statements 2015
On the Beach Group plc
55
Consolidated statement of cash flows
For the year ended 30 September 2015 and 53 weeks ended 30 September 2014
For the 53
weeks ended
30 September
Note
2015
£’000
2014
£’000
21
19,431
14,961
(1,736)
(1,508)
17,695
13,453
-
(352)
2,453
(369)
(1,995)
(1,507)
12
11
206
(2,141)
10,000
75
154
731
-
395
17
(20,500)
(2,637)
500
-
(1,422)
(1,392)
(3,568)
(333)
-
-
(15,248)
(3,634)
306
10,550
15
10,550
-
10,856
10,550
Cash generated from operations
Tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Acquisition of shares in Group
Purchase of property, plant and equipment
Purchase of intangible assets
Interest received
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of share capital following Group restructure
Proceeds from issue of share capital
Repayment of borrowings
Capital contribution
Interest paid
Payment of shareholder interest
Share issue costs
Net cash (outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash at beginning of year
Cash at end of year
56 Annual Report & Financial Statements 2015
On the Beach Group plc
Consolidated statement of changes in equity
For the year ended 30 September 2015 and 53 weeks ended 30 September 2014
Share capital
Share
premium
Merger
reserve
Balance on incorporation
Issue of shares
£000
89,996
21,441
Total comprehensive loss for the period
-
Balance at 30 September 2014
111,437
Issue of shares
Debt for equity
New shares issued (primary offerings)
Capital contribution
Transaction costs offset against equity
Redemption of preference share
Total comprehensive loss for the period
21,176
54,887
8,152
-
-
-
-
£’000
-
-
-
-
-
12,391
1,848
-
(333)
(50)
-
£000
(89,677)
(21,365)
-
(111,042)
(21,051)
-
-
-
-
-
-
Capital
contribution
reserve
Retained
earnings
£000
£000
-
-
-
-
-
-
-
500
-
50
-
-
-
(5,751)
(5,751)
-
-
-
-
-
-
(4,488)
(10,239)
Total
£000
319
76
(5,751)
(5,356)
125
67,278
10,000
500
(333)
-
(4,488)
67,726
Balance at 30 September 2015
195,652
13,856
(132,093)
550
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Annual Report & Financial Statements 2015
On the Beach Group plc
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Notes to the financial statements
For the year ended 30 September 2015
1. General Information
On the Beach Group plc is a public limited company which is listed on the London Stock Exchange and is domiciled and incorporated in the United
Kingdom under the Companies Act 2006. The address of the registered office is given on the inside of the back cover.
2. Accounting Policies
a) Summary of impact of Group restructure and Initial Public Offering
The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. The financial information
presented is at and for the financial year ended 30 September 2015 and for the 53 weeks ended 30 September 2014.
On 28 September 2015, the Group listed its shares on the London Stock Exchange. In preparation for the Initial Public Offering (“IPO”) the Group was
restructured. The restructure has impacted a number of the current year and comparative primary financial statements and notes.
For the consolidated financial statements of the Group, prepared under IFRS, the principles of reverse acquisition accounting under IFRS 3 ”Business
Combinations” have been applied. The steps to restructure the Group had the effect of On the Beach Group Plc (“Plc”) being inserted above On the Beach
Topco Limited of which the shareholders exchange their shares and loan notes for shares in plc.
By applying the principles of reverse acquisition accounting, the Group is presented as if Plc has always owned the On the Beach Topco Group. The
comparative Income Statement and Balance Sheet are presented in line with the previously presented On the Beach Topco Limited. The comparative
and current year consolidated reserves of the Group are adjusted to reflect the statutory share capital, share premium and merger reserve of Plc as if
it had always existed, adjusted for movements in the underlying On the Beach Topco share capital and reserves until the share for share exchange. The
steps taken to restructure the Group are explained in more detail in note 19.
b) Basis of preparation
The consolidated financial statements presented in this document have been prepared in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union. The Company’s financial statements have been prepared in accordance with IFRS as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006. The Company has taken advantage of the exemption provided under
section 408 of the Companies Act 2006 not to publish its individual income statement and related notes.
The main trading Group, On the Beach Topco Limited, previously 1st time adopted IFRSs in the financial 53 weeks period ended 30 September 2014.
This was a new group and as there was nothing in it prior to the acquisition of On the Beach Travel Limited. Hence there were no IFRS reconciliations
needed to be included.
In preparing these newer group consolidated financial statements, they have reflected, under reverse acquisition accounting, the amounts reported in
that previous group.
As a result there are no IFRS reconciliations that need to be included.
These are the first set of consolidated financial statements of On the Beach Group Plc, which is the new ultimate holding company of the On the Beach
Topco Limited Group following the reorganisation of the Group to facilitate the Initial Public Offering.
c) Going concern
The financial results relating to the Group have been prepared on the going concern basis. After making appropriate enquiries, the directors have a
reasonable expectation that the group has adequate resources to continue in operational existence for at least one year from the date that the financial
statements are signed and for at least one year from the date of these financial results. For these reasons they continue to adopt the going concern basis
in preparing these financial statements..
d) New standards, amendments and interpretations
The accounting policies adopted in the presentation of the financial statements reflect the adoption of the following new standards as of 1 October 2014:
IFRS 10, ‘Consolidated financial statements’ builds on existing principles by identifying the concept of control as the determining factor in whether an
entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the
determination of control where this is difficult to assess.
IFRS 12, ‘Disclosures of interests in other entities’ includes the disclosure requirements for all forms of interests in other entities, including joint
arrangements, associates, structured entities and other off balance sheet vehicles. 102 Amendment to IAS 32, ‘Financial instruments: Presentation’ on
offsetting financial assets and financial liabilities. This amendment clarifies that the right of set-off must not be contingent on a future event. It must
also be legally enforceable for all counter-parties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The
amendment also considers settlement mechanisms.
Amendments to IAS 36, ‘Impairment of assets’, on the recoverable amount disclosures for non-financial assets. This amendment removed certain
disclosures of the recoverable amount of cash generating units (‘‘CGUs’’) which had been included in IAS 36 by the issue of IFRS 13. Amendment to IAS
39, ‘Financial instruments: Recognition and measurement’ on the novation of derivatives and the continuation of hedge accounting. This amendment
considers legislative changes to ‘over-the-counter’ derivatives and the establishment of central counter-parties. Under IAS 39 novation of derivatives to
central counter-parties would result in discontinuance of hedge accounting. The amendment provides relief from discontinuing hedge accounting when
novation of a hedging instrument meets specified criteria.
IFRIC 21, ‘Levies’, sets out the accounting for an obligation to pay a levy if that liability is within the scope of IAS 37 ‘Provisions’. The interpretation addresses
what the obligating event is that gives rise to pay a levy and when a liability should be recognised. The adoption of the above standards did not have a
material impact upon the financials statements.
58 Annual Report & Financial Statements 2015
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e) New standard, amendments and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 October 2015, and
have not been applied in preparing these combined and consolidated financial statements. None of these is expected to have a significant effect on
the combined and consolidated financial statements of the Group, except the following set out below:
IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete
version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments.
IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised
cost, fair value through other comprehensive income (‘‘OCI’’) and fair value through profit and loss. The basis of classification depends on the entity’s
business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured
at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycled. There is now a new
expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to
classification and measurement except for the recognition of changes in own credit risk in OCI, for liabilities designated at fair value through profit
or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic
relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk
management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is
effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The Group is yet to assess IFRS 9’s full effect.
IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes principles for reporting useful information to users
of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.
Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from
the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective
for annual periods beginning on or after 1 January 2018 and earlier application is permitted. The Group is still assessing the effect of IFRS 15.
f) Basis of consolidation
The group’s consolidated financial statements consolidate the financial statements of On the Beach Group plc and all of its subsidiary undertakings
i. Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has power over the investee, the company is exposed,
or has rights to variable returns from its involvement with the subsidiary and the company has the ability to use its power of the investee to affect
the amount of investor’s returns.
ii. Transactions eliminated on consolidation
Intragroup balances, and any gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the
consolidated financial information. Gains arising from transactions with jointly controlled entities are eliminated to the extent of the Group’s
interest in the entity. Losses are eliminated in the same way as gains, but only to the extent that there is no evidence of impairment.
g) Goodwill
Goodwill arising on the acquisition of subsidiary undertakings and trade and assets represents the excess of the cost of acquisition over the fair value
of the identifiable assets and liabilities at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently remeasured at
cost less any accumulated impairments 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 is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised.
h) Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional
currency at the foreign exchange rate ruling at that date.
Foreign exchange differences arising on translation are recognised in the income statement.
Annual Report & Financial Statements 2015
On the Beach Group plc
59
i) Financial Instruments
i. Derivative financial instruments
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 20 of these financial statements. Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently re-measured to their fair value at each reporting date. The resulting gain or loss
is recognised in the profit or loss immediately.
ii. 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.
iii. Cash and cash equivalents
Cash and cash equivalents comprise 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 and cash equivalents for the purpose only of the cash flow statement.
All 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, ABTA and independent trustees (Barclays Wealth), which determines the inflows and
outflows from the account.
All 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
does not therefore use customer pre-payments to fund its business operations.
iv. Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the
effective interest method.
v. Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest
bearing borrowings are stated at amortised cost using the effective interest method, less any impairment losses.
j) Segment reporting
IFRS 8 requires operating segments to be reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has
been identified as the management team, including the Chief Executive Officer and Chief Finance 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 two reportable segments:
(i) Core—activity via UK website (‘‘UK’’)
(ii) Sweden—activity via Swedish website (eBeach.se) (‘‘International’’)
k) Revenue recognition
Commission is measured at the fair value of consideration received or receivable, net of VAT, cancellations, discounts and other associated taxes.
Cancellations are estimated at the reporting date based on the historical profile of bookings. Revenue on bookings is recognised on the date of
booking.
The Group’s commission is earned as an agent for the supplier or consumer in purchases of travel products such as flight tickets or hotel
accommodation from third party suppliers. Overrides are also earned from suppliers. These are recognised within revenue when the Group becomes
entitled to it based on supplier terms, which is when relevant targets are achieved.
l) Total Transaction value
Total transaction value (‘‘TTV’’) is a non-GAAP measure and does not represent the Group’s statutory turnover as the Group acts as an agent. TTV
represents the price at which goods and services have been sold to the consumer by the principal net of VAT, cancellation and discounts.
m) Dividend distribution
Dividend distribution to the Groups 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.
60 Annual Report & Financial Statements 2015
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n) 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.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. 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 profit or loss.
o) 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:
Office equipment
Fixtures and fittings
3 years
5 years
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
Assets held under finance leases are depreciated over their expected useful economic lives on the same bases as owned assets, or where shorter,
over the term of the relevant lease. 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.
p)
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
• 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. Brand
Upon acquisition of the Group by OTB Topco, the On the Beach brand was identified as a separately identifiable asset.
iii. 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:
Website & development costs:
Brand:
10 years
3 years
15 years
Annual Report & Financial Statements 2015
On the Beach Group plc
61
q)
Impairment of non-financial assets
At each balance sheet date, the group reviews the carrying amounts of its tangible and intangibles 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. 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”). 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.
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.
r) Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments
made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight line basis over the
period of the lease.
s) Employee benefits
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.
t) Debt
Debt is initially stated at the amount of net proceeds after the deduction of issue costs. The carrying amount is increased by the finance cost in
respect of the accounting period and reduced by payments made in the period.
u) Financing income and expenses
Financing expenses comprise interest payable, finance charges on shares classified as liabilities and finance leases 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 comprise interest receivable on
funds invested, dividend income, and net foreign exchange gains.
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.
v) Exceptional costs
The Group presents on the face of the income statement, those 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 better assess trends in financial performance.
w) 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.
62 Annual Report & Financial Statements 2015
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w) Taxation
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.
x) Share capital
Ordinary shares are classified as equity. Preference shares are classified as liabilities where in substance they have features of debt instruments,
otherwise they are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the
proceeds.
Where the Group purchases its own equity share capital, the consideration paid is deducted from equity attributable to the Group’s owners until
the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received is included in equity attributable the
Group’s owners.
y) 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.
z) 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.
As explained in the basis of preparation accounting policy, the Group’s financial statements reflect the continuation of the preexisting group headed
by On the Beach Topco Limited. The 2015 weighted average number of shares has been stated as the weighted average number of shares in the
period from the date of the Group reorganisation to the balance sheet date. The 2014 weighted average number of shares has been stated as if the
Group reorganisation set out in note 19 had occurred at the beginning of the comparative period.
aa) 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.
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 IFRSs 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.
a. Goodwill
The calculation for considering the impairment of the carrying amount of goodwill requires a comparison of the present value of cash
generating units for which goodwill has been allocated, to the value of goodwill in the consolidated balance sheet. The calculation of present
value requires an estimated of the future cash flows expected to arise from the cash-generating units and the selection of a suitable discount
rate. Such calculations require judgement relating to the appropriate discount factors and long-term growth prevalent in a particular market as
well as short and medium term business plans. The Directors draw upon experience and sensitivity analysis as well as external resources in
making these judgements.
Annual Report & Financial Statements 2015
On the Beach Group plc
63
w) Taxation
b. 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 specifically
provides for the cancellation of bookings. The provision is estimated by applying historical cancellation data to untraveled bookings at the
reporting date.
c. Capitalisation of 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. Development costs that are directly attributable to the design and testing of identifiable and unique software products, websites
and systems controlled by the group are recognised as intangible assets if the recognition criteria set out in the accounting policies 2p)i above
are met.
d. IPO costs
Determining the amounts to be recognised in share premium and those expenses within the income statement involves judgement.
Costs that are deemed to directly relate to the issue of new shares have been recognised within share premium.
4. Business combinations
On 4th October 2013, the Group acquired all of the ordinary shares in On the Beach Travel Limited for £30,748,000, satisfied in cash, vendor loans
and £11,178,000 via equity instruments issued. The activity of the group acquired is that of an internet travel agent. The purpose of the business
combination is to facilitate the sale of the group to the current controlling party. In the 51 weeks to 30 September 2014 the subsidiary contributed
revenue of £45,768,000 and a net profit of £8,642,000 to the consolidated revenue and net profit for the year.
The acquisition had the following effect on the Group’s assets and liabilities.
Acquiree’s net assets at the acquisition date:
Intangible assets
Property plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax liabilities
Net identifiable assets and liabilities
Consideration paid:
Cash price paid
Equity instruments issued
Vendor Loans
Total consideration
Goodwill
2014
Recognised values
on acquisition
£000
54,114
597
20,422
42,733
(97,955)
(10,707)
9,204
18,070
11,178
1,500
30,748
21,544
The goodwill arising for the acquisition is attributable to the strength of the management team and the growth prospects of the Group.
Non-recurring acquisition-related costs of £3,466,000 have been charged to exceptional costs (see note 6) in the combined and consolidated income
statement for the year ended 30 September 2014.
The fair value and gross contractual amount of trade and other receivables is £20,422,000.
64 Annual Report & Financial Statements 2015
On the Beach Group plc
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5. Segmental reporting
As explained in note 2j, the management team considers the reportable segments to be ‘‘Core’’ and ‘‘International’’. All segment revenue, operating
profit, assets and liabilities are attributable to the group from its principal activities as an online travel agent.
2015
For the 53 weeks ended 30 September
2014
Core
£’000
International
£’000
Total
£’000
Core
£’000
International
£’000
Total
£’000
62,451
673
63,124
45,621
147
45,768
20,438
(456)
19,982
(6,023)
(3,831)
10,128
(1,782)
-
(1,782)
(74)
-
(1,856)
21,544
46,505
529
-
177
-
18,656
(456)
18,200
(6,097)
(3,831)
8,272
(258)
8,014
(1,796)
(7,845)
(1,037)
206
(2,458)
21,544
46,682
529
14,081
(339)
13,742
(5,558)
(3,466)
4,718
(661)
-
(661)
(46)
-
(707)
21,544
50,213
657
-
96
-
13,420
(339)
13,081
(5,604)
(3,466)
4,011
(258)
3,753
(1,735)
(6,961)
-
154
(4,789)
21,544
50,309
657
Income
Revenue
EBITDA
Holding company costs
EBITDA after holding company costs
Depreciation and amortisation
Exceptional acquisition costs
Segment operating profit/(loss)
Non-underlying costs
Group operating profit
Finance costs
Shareholder interest
Exceptional finance costs
Finance income
Loss before taxation
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
6. Operating profit
a) Operating expenses
Expenses by nature including exceptional items and amortisation charges:
Marketing
Depreciation
Staff costs
IT hosting, licences & support
Credit / Debit Card Charges
Other
Total Administrative expenses
Exceptional costs
Amortisation of intangible assets
Total exceptional and cost amortisation
Total expenses
For the 53 weeks
ended 30 September
2014
£’000
24,297
306
4,703
766
1,668
1,498
2015
£’000
33,359
477
6,189
969
2,445
2,218
45,657
33,238
3,831
5,622
9,453
3,466
5,311
8,777
55,110
42,015
Annual Report & Financial Statements 2015
On the Beach Group plc
65
b. Exceptional items
Exceptional IPO costs relate to costs associated with the Initial Public offering of On the Beach Group plc shares on the London Stock Exchange on 28
September 2015.
A total of £5,201,000 costs were incurred as a result of the IPO. A total of £333,000 of these costs have been recognised directly in equity as they are
costs that relate to the issue of new shares, £3,831,000 have been recognised within exceptional. Other exceptional costs totalling £1,037,000 have
been recognised in the year. These relate to loan arrangement fees associated with the old facility and have been recognised as exceptional interest
costs.
Prior year exceptional costs relate to acquisition related expenses (see note 4).
c. Services provided by the company auditors
During the year, the Group obtained the following services from the operating company’s auditors.
Fees payable for the audit of the Company and consolidated financial statements
Fees payable for other services:
– audit related assurance services
– other assurance services
d. Adjusted PBT
For the 53 weeks
ended 30 September
2015
£’000
45
50
15
110
2014
£’000
37
5
14
56
Management measures the overall performance of the Group by reference to Adjusted underlying PBT, a non-GAAP measure:
Loss before taxation
Exceptional costs
Amortisation of acquired intangibles
Shareholder interest
Exceptional finance costs
Adjusted underlying PBT
For the 53 weeks
ended 30 September
2015
£’000
(2,458)
3,831
4,258
7,845
1,037
14,513
2014
£’000
(4,789)
3,466
4,258
6,961
-
9,896
This adjusted profit measure is applied by management to understanding the earnings trend of the group and is considered the most meaningful
measure by which to assess the true operating performance of the group
66 Annual Report & Financial Statements 2015
On the Beach Group plc
7. Employees and Directors
a) Payroll costs
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Defined contribution pension cost
Social security costs
Staff costs above include employee costs capitalised as part of software development.
b) Employee numbers
Average monthly number of people (including Executive Directors) employed:
By reportable segment:
UK
International
c) Directors’ emoluments
The remuneration of Directors was as follows:
Aggregate emoluments
Defined contribution pension
All remuneration was paid by On the Beach Limited, a subsidiary company of the group.
The remuneration of the highest paid director was as follows:
Aggregate emoluments
Defined contribution pension
2015
£’000
7,735
41
729
8,505
2015
£’000
309
10
319
2015
£’000
386
2
388
2015
£’000
143
2
145
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G
o
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e
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n
a
n
c
e
For the 53 weeks
ended 30 September
2014
£’000
5,972
17
565
6,554
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
For the 53 weeks
ended 30 September
2014
£’000
241
8
249
For the 53 weeks
ended 30 September
2014
£’000
673
3
676
For the 53 weeks
ended 30 September
2014
£’000
144
3
147
Annual Report & Financial Statements 2015
On the Beach Group plc
67
d) Key management compensation
During the year to 30 September 2015, key management comprised the members of the executive team. The composition and number of people
within key management increased by two to six members of the Executive during the year following the growth of the business.
Remuneration of all key management (including directors) was as follows:
Wages and salaries
Short-term non-monetary benefits
Post-employment benefits
e) Retirement benefits
For the 53 weeks
ended 30 September
2015
£’000
739
8
2
749
2014
£’000
508
6
3
517
The Group offers membership to a defined contribution pension scheme to eligible employees, the only pension arrangements operated by the
Group. The schemes are defined contribution schemes and the pensions cost in the year was £29,000, (£10, 000 period ended 30 September 2014).
8. Finance income and finance costs
a) Finance costs
Bank loan interest
Amortisation of bank loan arrangement fees
Finance costs
Share holder interest
Exceptional finance costs - bank loan arrangement fees
Total finance costs
For the 53 weeks
ended 30 September
2015
£’000
1,488
308
1,796
7,845
1,037
10,678
2014
£’000
1,399
336
1,735
6,961
-
8,696
The group opted to settle its interest rate swap agreement as part of its Group restructure on 28th September 2015. The Group incurred a charge as
a result of the transaction which was expensed fully in the year ended 30 September 2015.
b) Finance income
Bank interest receivable
For the 53 weeks
ended 30 September
2015
£’000
206
2014
£’000
154
68 Annual Report & Financial Statements 2015
On the Beach Group plc
9. Taxation
Current tax on losses for the year/period
Adjustments in respect of prior years
Total current tax
Deferred tax on profits for the year
Origination and reversal of temporary differences
Total deferred tax (note 18)
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c
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For the 53 weeks
ended 30 September
2015
£’000
2,973
45
3,018
-
(988)
(988)
2014
£’000
2,001
-
2,001
-
(1,039)
(1,039)
Total tax charge
2,030
962
The differences between the total taxation shown above the amount calculated by applying the standard UK corporation taxation rate to the profit
before taxation on continuing operating are as follows. The Group earns its profits primarily in the UK therefore the rate used for taxation is the
standard rate for UK corporation tax.
i
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a
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c
i
a
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Profit/(loss) on ordinary activities before tax
For the 53 weeks
ended 30 September
2015
£’000
(2,458)
2014
£’000
(4,789)
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m
e
n
t
s
Profit/(loss) on ordinary activities multiplied by the rate of corporation tax in the UK of 20.5%
(30 September 2014: 22%)
(504)
(1,054)
Effects of:
Other expenses not deductible
Income not taxable
Adjustments in respect of prior years/periods
Total taxation charge
2,489
2,003
-
45
2,030
(5)
18
962
The tax charge for the year is based on the effective rate of UK Corporation tax for the period of 20.5% (2014: 22%). Reductions in the UK corporation
tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. Further
reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015. This will reduce
the company’s future current tax charge accordingly and reduce the deferred tax liability at 30 September 2015.
Annual Report & Financial Statements 2015
On the Beach Group plc
69
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/period.
Loss for the year/period
Basic weighted average number of Ordinary Shares (m)
Basic earnings per share (in pence per share)
For the 53 weeks
ended 30 September
2015
£’000
(4,488)
78
(5.8p)
2014
£’000
(5,751)
73
(7.9p)
Basic and diluted earnings per share are the same as there is no difference between the basic and diluted number of shares.
Adjusted earnings per share
Adjusted earnings per share are calculated by dividing adjusted underlying earnings after tax of On the Beach Group plc by the weighted average
number of ordinary shares issued during the year/period.
Adjusted underlying earnings after tax
(before shareholder interest, amortised acquired intangibles and deal costs)
Weighted average number of Ordinary Shares (m)
Adjusted earnings per share (in pence per share)
Adjusted underlying earnings after tax
(before shareholder interest, amortised acquired intangibles and deal costs)
Number of Ordinary Shares (m)
Adjusted proforma earnings per share (in pence per share)
For the 53 weeks
ended 30 September
2014
£’000
8,075
73
11.1p
For the 53 weeks
ended 30 September
2014
£’000
8,075
130
6.2p
2015
£’000
11,630
78
14.9p
2015
£’000
11,630
130
8.9p
The weighted average number of shares for both the current and preceding years has been stated as if the Group reorganisation (note 19) had
occurred at the beginning of the comparative year.
Adjusted underlying earnings after tax is calculated as follows:
Profit / (loss) before taxation
Exceptional costs
Amortisation of acquired intangibles
Shareholder interest
Exceptional finance costs
Adjusted underlying PBT
Less taxation
Current
Deferred tax (excluding deferred tax movements relating to amortisation of acquired intangibles)
Adjusted underlying earnings after tax
70 Annual Report & Financial Statements 2015
On the Beach Group plc
For the 53 weeks
ended 30 September
2015
£’000
(2,458)
3,831
4,258
7,845
1,037
14,513
(3,019)
136
(2,883)
11,630
2014
£’000
(4,789)
3,466
4,258
6,961
-
9,896
(2,001)
180
(1,821)
8,075
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11. Intangible assets
Arising on acquisition (note 4)
Additions
At 1 October 2014
Additions
At 30 September 2015
Accumulated amortisation
Arising on acquisition (note 4)
Charge for year
At 1 October 2014
Charge for the year
At 30 September 2015
Net book amount
At 30 September 2015
Brand
Goodwill
development Technology
Total
Website &
Website
£’000
30,079
-
£’000
21,544
-
30,079
21,544
-
-
30,079
21,544
-
2,005
2,005
2,005
4,010
-
-
-
-
-
Costs
£’000
1,523
1,505
3,028
1,995
5,023
-
1,055
1,055
1,364
2,419
£’000
22,513
-
22,513
-
22,513
-
2,251
2,251
2,253
4,504
£’000
75,659
1,505
77,164
1,995
79,159
-
5,311
5,311
5,622
10,933
26,069
21,544
2,604
18,009
68,226
At 30 September 2014
28,074
21,544
1,973
20,262
71,853
Impairment of goodwill
Goodwill acquired through business combinations has been allocated for impairment testing purposes to one cash generating units, for impairment
testing purposes. This represents the lowest level within the Group at which goodwill is monitored for internal management purposes.
The Group performed its annual impairment test as at 30 June 2015 on the cash generating units. The recoverable amount of the CGU has been
determined based on the value in use calculations using cash flow projections derived from financial budgets and projections covering a five year
period. The forecasts are then extrapolated in perpetuity based on an estimated growth rate of 2 per cent. (all other periods 2 per cent.), being the
Directors’ estimated view of the long term compound growth in the economy. 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 15 per cent. (all other periods 15 per cent.). The main assumptions on which the forecast cash
flows were based include the level of sales and administrative expenses within the business and have been set by the Directors based on their past
experience of the business and its industry, together with their expectations of the market. The level of sales depends upon the size of the markets
in which the Group operates together with the Directors’ estimations of its market share and competitive pressures, including the level of supplier
overrides.
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 and known plans for the business.
Development costs
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 domain name acquisition costs and the development of software. The amortisation period for website development
costs is 3 years straight line. Domain names are amortized over 10 years. Amortisation has been recognised within operating expenses.
Sensitivity to changes in assumptions
Sensitivity analysis has been completed on key assumptions in isolation, and the headroom taken is significant. This indicates that the value in use will
be equal to its carrying amount following a reduction in EBITDA of 95%. Management believes that no reasonably possible change in any of the above
key assumptions would cause the carrying value of the unit to exceed its recoverable amount.
Annual Report & Financial Statements 2015
On the Beach Group plc
71
12. Tangible assets
Cost or valuation
Acquired upon acquisition (note 4)
Additions
Disposals
At 1 October 2014
Additions
Disposals
At 30 September 2015
Accumulated deprecation
Acquired upon acquisition (note 4)
Charge for the year
At 1 October 2014
Charge for the year
Disposals
At 30 September 2015
Net book amount
At 30 September 2015
At 30 September 2014
Fixtures & Fittings Office Equipment
£’000
189
24
-
213
2
-
215
-
16
16
146
-
162
53
197
£’000
408
345
(3)
750
350
(11)
Total
£’000
597
369
(3)
963
352
(11)
1,089
1,304
-
290
290
331
(8)
613
476
460
-
306
306
477
(8)
775
529
657
The depreciation expense of £477,000 for the year ended 30 September 2015 and the depreciation expense of £306,000 for the period ended 30
September 2014 have been recognised within administrative expenses.
72 Annual Report & Financial Statements 2015
On the Beach Group plc
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13. Investments
Principal subsidiary undertakings of the Group consists of the parent company, On the Beach Group plc, incorporated in the UK and a number of
subsidiaries held directly by On the Beach Group plc, which is incorporated in the UK.
The table below shows details of the wholly owned subsidiaries of the Group.
Subsidiary
On the Beach Topco Limited
On the Beach Limited*
On the Beach Beds Limited
On the Beach Bidco Limited
On the Beach Travel Limited
On the Beach Trustees Limited
On the Beach Holidays Limited
Nature
of business
Country
of incorporation
Proportion of
ordinary shares
held by parent
Proportion of
ordinary shares
held by the Group
Holding Company
Internet travel agent
Internet travel agent
Holding company
Internet travel agent
Employee trust
Dormant
UK
UK
UK
UK
UK
UK
UK
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
*On the Beach Limited has a Swedish trading division which has a corporate identity number of 516408-9186
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 dues within one year:
Trade receivables – net
Other receivables
Prepayments
Other taxes and social security reclaimable
15. Cash and cash equivalents
Trust accounts are restricted cash held separately and only accessible at the point the customer has travelled.
Cash at bank and in hand
Trust account
16. Trade and other payables
Current
Trade payables
Other tax and social security payable
Accruals and deferred income
2015
£’000
28,047
1,255
309
387
2014
£’000
22,279
2,124
331
-
29,998
24,734
2015
£’000
10,856
23,919
34,775
2015
£’000
45,865
-
9,824
55,689
2014
£’000
10,550
20,453
31,003
2014
£’000
34,045
144
6,085
40,274
Annual Report & Financial Statements 2015
On the Beach Group plc
73
17. Borrowings
Unsecured borrowing at amortised cost
Shareholder loan notes:
Amounts owed to group undertakings - Inflexion
Amounts owed to group undertakings - Directors & Management
Secured borrowing at amortised cost
Bank loans
Total Borrowings
Amounts due for settlement within 12 months
Amounts due for settlement after 12 months
Total Borrowings
Interest rates on outstanding loans:
Bank loan A
Bank loan B
Investor A loan notes (Inflexion)
B & C loan notes (Directors & Management)
a) Bank loans
2015
£’000
2014
£’000
-
-
-
-
-
-
-
-
-
47,855
15,195
63,050
19,155
19,155
82,205
3,140
79,065
82,205
2015
2014
LIBOR + 4.5%
LIBOR + 4.5%
LIBOR + 5.0%
LIBOR + 5.0%
12%
12%
12%
12%
On 28th September 2015, the Group repaid the outstanding facilities as part of the Group restructure.
The Company entered into the Second Lloyds Facility on 18 September 2015 with Lloyds. A revolving credit facility is being made available under the
terms of the Second Lloyds Facility in an aggregate amount of up to £35,000,000.
The borrowing limits under the facility will vary monthly throughout the period of the Second Lloyds Facility to reflect the seasonal borrowing
requirements of the Group, ranging from £2,000,000 in one month to the full £35,000,000 in another month. The Second Lloyds Facility will be
available up to the second anniversary of the closing date (or for a shorter period of time at the Company’s discretion). It is to be repaid in monthly
instalments which vary in accordance with the Group’s seasonal requirements. No early repayment fees are payable.
The margin contained in the Second Lloyds Facility is dependent on gross leverage ratio and the rate per annum ranges from 1.10%. to 1.90% for the
utilised facility and 0.39% to 0.67% for the non-utilised facility.
The terms of the facility include the following financial covenants:
(i) that the ratio of total debt to EBITDA in respect of any relevant period shall not exceed 2:1 (with a one-off increase to a ratio of 2.5:1); and
(ii) that the ratio of EBITDA to finance charges in respect of any relevant period shall not be less than 5:1.
b) Shareholder loan notes
On the 28th September 2015, the outstanding loan notes were exchanged for shares in On the Beach Group plc.
74 Annual Report & Financial Statements 2015
On the Beach Group plc
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18. Deferred tax
Additions in the year relate to the development of software. The amortisation period for website development costs is 3 years straight line. Domain
names are amortized over 10 years. Amortisation has been recognised within operating expenses.
2015
Assets
Liabilities
Total
2014
Assets
Liabilities
Total
On incorporation
Acquired in business combination
Recognised in income
30 September 2014
Recognised in income
30 September 2015
Intangible
asset
revaluation
Property,
plant and
equipment
Capitalised
development
Costs
Tax assets
/(liabilities)
£’000
£’000
£’000
£’000
-
(8,818)
(8,818)
-
(9,670)
(9,670)
173
-
173
110
-
110
-
(35)
(35)
-
(108)
(108)
Intangible
asset
revaluation
Property,
plant and
equipment
Capitalised
development
Costs
£’000
-
(10,520)
850
(9,670)
852
(8,818)
£’000
-
102
8
110
63
173
£’000
-
(289)
181
(108)
73
(35)
173
(8,853)
(8,680)
110
(9,778)
(9,668)
Total
£’000
-
(10,707)
1,039
(9,668)
988
(8,680)
Annual Report & Financial Statements 2015
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75
19. Share capital
Allotted, called up and fully paid
130,434,763 Ordinary shares or £1.50 each (2014:nil)
A Ordinary Shares
B Ordinary Shares
C Ordinary Shares
D Ordinary Shares
2015
£’000
195,652
-
-
-
-
2014
£’000
-
9,083
2,624
99,730
-
195,652
111,437
The share capital of the Group is represented by the share capital of the parent company, On the Beach Group plc. This company was incorporated
on 17 August 2015 to act as a holding company of the Group. Prior to this the share capital of the Group was represented by the share capital of the
previous parent, On the Beach Topco Limited.
The table below summarises the movements in share capital during the year ended 30 September 2015.
Ordinary
shares
Redeemable
preference shares
At date of incorporation of On the Beach Group plc
Share for share exchange
Capitalisation of loan notes
Issue of shares upon IPO
Redemption
Shares
-
88,408,621
36,591,360
5,434,782
-
a)
b)
c)
d)
e)
£’000
Shares
-
132,613
54,887
8,152
-
1
-
-
-
(1)
-
£’000
50
-
-
-
(50)
-
130,434,763
195,652
a) On the Beach Group plc was incorporated on 17 August 2015 and issued one ordinary share of £1 at par and one redeemable preference
share of £49,999 at par.
b) On 28 September 2015 as part of the Group restructure the company issued £132,612,935 of shares as follows:
• 643,995 A Shares of £132.61 each
• 186,004 B Shares of £132.61 each
• 170,000 C Shares of £132.61 each
• 356,000 D Shares of £0.0001 each
• 1 E Share of 131.61 each
The 1 Ordinary share was subsequently consolidated with the E Share to form 1 A Share
The entire A, B and C shares were then exchanged for the entire share capital of On the Beach Topco Limited. The shares were subsequently
converted into 88,408,621 ordinary shares with nominal value of £1.50 each.
c) The company issued 36,591,360 Ordinary shares with nominal value of £1.50 in exchange for settlement of the former ultimate parent loan
notes and the management loan notes held within On the Beach Topco Limited.
d) On Admission on 28 September 2015 a further 5,434,782 shares with nominal value of £1.50 were issued to public investors.
e) The company repurchased and cancelled the redeemable preference share of £49,999 for cash consideration of £49,999
76 Annual Report & Financial Statements 2015
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20. 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
Fair value through profit and loss
Interest rate swap
Forward exchange contracts
Loans and receivables
Cash and cash equivalents
Trade and other receivables (note 14)
Total financial assets
Financial liabilities
Fair value through profit and loss
Forward exchange contracts
Financial liabilities measured at amortised cost
Trade and other payables (note 16)
Borrowings (note 17)
Total financial liabilities
2015
£’000
2014
£’000
-
677
65
-
34,775
29,302
64,754
31,003
24,403
55,471
-
(689)
(45,865)
-
(34,045)
(82,205)
(45,865)
(116,939)
The following table provides the fair values of the Group’s financial assets and liabilities:
Financial assets designated as fair value through profit and loss
Interest rate swap
Forward exchange contracts
Financial liabilities designated as fair value through profit and loss
Forward exchange contracts
Financial liabilities held at amortised cost
Loan notes
Bank borrowings
FV Level
2
2
2
2
2
2015
£’000
-
677
-
-
-
2014
£’000
65
-
(689)
(93,819)
(11,569)
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.
Annual Report & Financial Statements 2015
On the Beach Group plc
77
a) Fair value estimation
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)
Interest rate hedge
As at 30 September 2015
As at 30 September 2014
Forward Contracts
As at 30 September 2015
As at 30 September 2014
Level 1
£’000
Level 2
£’000
Level 3
£’000
-
-
-
65
-
-
Level 1
£’000
Level 2
£’000
Level 3
£’000
-
-
677
(689)
-
-
b) Financial Risk Management
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
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 floating rate bank loans.
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.
d)
Interest rate risk
The Group only have fixed rate facilities and so are not exposed to fluctuations in exchange rates.
i.
Interest rate swap contracts
The Group entered into an interest rate swap instrument during the prior year. This instrument enabled the Group to mitigate interest rate
fluctuation risk. Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest
amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing the cash flow
exposures on the issued variable rate debt held.
78 Annual Report & Financial Statements 2015
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As part of the group restructure, the loan and interest rate cap were settled prior to the year end. As a result the Group no longer has any outstanding
contracts.
The fair value of the interest rate swaps at the prior year reporting date was determined by discounting the future cash flows using the curves at the
reporting date and the credit risk inherent in the contracts.
The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding at the 30 September 2014:
Outstanding receive fixed pay floating contracts
25-Nov-13 07-Jan-14 28-Sep-15
GBP
14,652
65
2.00%
Trade
date
Effective Termination
date
date
Currency
Notional
amount
£’000
Fair
value
£’000
Fixed
rate
%
ii. Foreign currency risk management
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
Cash
Trade payables
Forward exchange contracts
US Dollar
Cash
Trade payables
Forward exchange contracts
Swedish Krona
Cash
Trade payables
Trade receivables
Forward exchange contracts
2015
€’000
3,648
2014
€’000
2,675
(44,708)
(32,956)
40,079
29,605
(981)
(676)
2015
$000
283
2014
$000
(87)
(2,187)
(1,013)
2,110
206
1,061
(39)
2014
2014
Kr ‘000
Kr ‘000
1,901
(119)
2,145
(2,100)
1,827
173
-
-
-
173
Annual Report & Financial Statements 2015
On the Beach Group plc
79
iii. Foreign currency sensitivity
The following table details the Group sensitivity to a percentage change in Pounds Sterling against these currencies. 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:
Euro 10%
Weakening - 10%
Strengthening - 10%
US Dollar
Weakening -10%
Strengthening - 10%
Swedish Krona
Weakening -10%
Strengthening - 10%
2015
£’000
81
(66)
12
(15)
(16)
13
2014
£’000
(67)
82
(150)
123
-
-
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.
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:
2015
Foreign
currency
Notional
value
€’000
£’000
Fair
value
£’000
2014
Foreign
currency
Notional
value
€’000
£’000
29,204
21,289
473
20,088
16,136
5,050
5,825
-
3,667
4,255
-
95
85
-
2,969
6,496
52
2,385
5,191
41
Fair
value
£’000
(502)
(74)
(136)
(1)
40,079
29,211
653
29,605
23,753
(713)
2014
Foreign
currency
Notional
value
$’000
£’000
Fair
value
£’000
731
330
-
1,061
436
195
-
631
5
4
-
9
2015
Foreign
currency
Notional
value
$’000
1,390
545
175
£’000
902
352
113
2,110
1,367
Fair
value
£’000
12
6
2
20
2015
Foreign
currency
Notional
value
Kr ’000
£’000
Fair
value
£’000
1,800
300
-
2,100
140
24
-
164
-
-
-
-
EUR 30 September
Less than 3 months
3 to 6 months
6 to 12 months
Greater than 12 months
Total
USD 30 September
Less than 3 months
3 to 6 months
6 to 12 months
Total
SEK 30 September 2015
Less than 3 months
3 to 6 months
6 to 12 months
Total
80 Annual Report & Financial Statements 2015
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e) Credit risk
Credit risk refers to the risk that counter-party 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.
The ageing of trade receivables at the balance sheet date was:
At 30 September 2015
At 30 September 2014
Not past
due
Past due
0-30 days
Past due
>30 days
£’000
28,043
22,276
£’000
£’000
3
1
1
2
Total
£’000
28,047
22,279
The maximum exposure to credit risk at each reporting date is the fair value of financial assets and trade receivables.
f) 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
Carrying
amount
Contractual
cash flows
Within 1
year
Between 1
and 5 years
Sept-15
Trade payables
Other payables
Sept-14
Trade payables
Other payables
Any other liabilities
Bank loans
Other interest bearing loans
iv. Capital management
£’000
45,865
9,824
55,689
£’000
34,045
6,085
144
19,155
63,050
122,479
£’000
45,865
9,824
55,689
£’000
34,045
6,085
144
23,062
116,999
180,335
£’000
45,865
9,824
55,689
£’000
34,045
6,085
144
4,161
-
44,435
£’000
-
-
-
£’000
-
-
-
18,901
116,999
135,900
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 17) and equity of the Group as disclosed in note 19.
The Group is not subject to any externally imposed capital requirements.
Annual Report & Financial Statements 2015
On the Beach Group plc
81
21. Cash flow
Profit/(loss) before taxation
Adjustments for:
Depreciation
Amortisation of intangible assets
Finance costs
Finance income
Acquisition costs
IPO costs
Changes in working capital:
Increase in trade and other receivables
Increase in trade and other payables
(Increase)/decrease in cash held in trust
Cash generated from underlying operational activities
Deal costs paid
Cash generated from operational activities
22. Commitments and contingencies
a) Capital commitments
The company had no capital commitments for the years ended 30 September 2014 and 2015.
b) Operating lease commitments
The future aggregate minimum lease payments under non-cancellable operating leases as follows:
One year
Two to Five Years
Over 5 years
The Group’s lease commitments relate to its head office.
c) Contingencies
For the 53 weeks
ended 30 September
2015
£’000
(2,458)
477
5,622
10,678
(206)
-
3,831
17,944
(4,877)
10,559
(3,466)
2,216
20,160
(729)
19,431
2014
£’000
(4,789)
306
5,312
8,696
(154)
3,466
-
12,837
(9,769)
10,135
1,758
2,124
14,961
-
14,961
2015
2014
Land
Buildings
Land
& Buildings
£’000
£’000
114
800
457
228
913
685
1,371
1,826
In September 2010, proceedings were initiated against On the Beach Limited by Ryanair alleging infringement of, inter alia, it’s intellectual property
rights. The amount of the claim by Ryanair is unquantifiable by the Group as at the date of this document, given that the legal proceedings are still at
an early stage and the Group’s expectation that final resolution of the dispute might take some time.
82 Annual Report & Financial Statements 2015
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23. Related party transactions
Prior to 28 September 2015, On the Beach Topco was controlled by Inflexion Private Equity Partners LLP.
The following transactions were carried out with related parties:
Loan notes
Inflexion
Directors and close family members
Management fees
Fees charged by:
Inflexion
2015
£’000
-
-
-
2014
£’000
47,855
15,195
63,050
2015
£’000
2014
£’000
1,180
227
Fees charged by related parties are settled in cash. All amounts owing had been settled prior to the year-end date. Included in the management
fee above, an exit fee totalling £902,656 was paid to inflexion following admission. The Exit Fee is equal to the sum of 1% of the enterprise value of
the Company (reduced proportionately to reflect the fact that the listing of the Company is not a disposal of the entire issued share capital of the
Company).
24. Subsequent events
Reduction of capital, cancellation of share premium account and cancellation of capital redemption reserve
As contemplated in the prospectus dated 23 September 2015 for Company’s IPO and pursuant to a resolution of the shareholders of the Company
passed on 21 September 2015, the Company has completed a reduction of capital, cancellation of share premium account and cancellation of capital
redemption reserve (the “Reduction & Cancellation”).
The Reduction & Cancellation was formally approved by the High Court of Justice, Chancery Division, on 18 November 2015. Following registration of
the order of the High Court with Companies House, the Reduction & Cancellation became effective on 18 November 2015.
Following the Reduction & Cancellation, the issued share capital of the Company consists of 130,434,763 ordinary shares of £0.01 each, as at 18
November 2015.
The effect of the Reduction & Cancellation is to create distributable reserves to support the Board’s future dividend policy.
Annual Report & Financial Statements 2015
On the Beach Group plc
83
Company balance sheet
At 30 September 2015
Fixed Assets
Investments
Current Assets
Debtors
Cash at bank
Creditors: amounts falling due within one year
Net Assets
Equity
Share capital
Share premium
Capital contribution reserve
Retained earnings
The financial statements from pages 85 to 88 were approved by the Board of Directors and authorised for issue.
Wendy Parry
CHIEF FINANCIAL OFFICER
9 December 2015
On the Beach Group plc . Reg no 09736592
Note
2015
£’000
3
132,613
4
71,502
5,353
76,855
5
(2,544)
206,924
195,652
13,856
550
(3,134)
206,924
84 Annual Report & Financial Statements 2015
On the Beach Group plc
Statement of Cash Flows
For the period ended 30 September 2015
Profit/(loss) before taxation
Changes in working capital :
Increase in trade and other payables
Increase in trade and other receivables
Net cash inflow from operating activities
Cash flows from investing activities
Acquisition of shares in Group
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Capital contribution
Net cash (outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
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Note
5
4
2015
£’000
(3,134)
(3,134)
2,544
(71,502)
(68,958)
(72,092)
3
(132,613)
(132,613)
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m
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s
209,508
550
210,058
5,353
-
5,353
Annual Report & Financial Statements 2015
On the Beach Group plc
85
Statement of Changes in Equity
For the period ended 30 September 2015
Balance on incorporation
Group restructure, share for share exchange
Total comprehensive loss for the period
Balance at 30 September 2015
For the 53
weeks ended
30 September
Share
capital
Share
Capital
Retained
premium contribution earnings
£’000
£’000
£’000
£’000
-
-
-
195,652
13,856
550
-
-
Total
£’000
-
210,058
-
-
-
(3,134)
(3,134)
195,652
13,856
550
(3,134)
206,924
86 Annual Report & Financial Statements 2015
On the Beach Group plc
Notes to the Company financial statements
1. Accounting policies
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 company was incorporated on 17 August 2015 and therefore no comparative information has been
presented.
Basis of preparation
These financial statements were prepared in accordance with Financial Reporting Standard 102 The Financial Reporting Standard applicable in the
UK and Republic of Ireland (“FRS 102”) as issued in August 2014. The presentation currency of these financial statements is sterling. All amounts in the
financial statements have been rounded to the nearest £1,000.
The financial information presented is at and for a 45 day period ended 30 September 2015.
As permitted by Section 408 of the Companies Act 2006, an entity profit and loss account is not included as part of the published consolidated
financial statements of On the Beach Group plc. The loss for the financial period dealt with in the financial statements of the parent company is
£3,134,000.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.
The financial statements are prepared on the historical cost basis.
The directors have used the going concern principal on the basis that the current financial projections and facilities of the consolidated group will
continue in operating for the foreseeable future.
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Investment in subsidiaries
Investments in subsidiaries are held at cost, less any provision for impairment. Annually, the Directors consider whether any events or circumstances
have occurred that could indicate that the carrying amount of fixed asset investments may not be recoverable, if such circumstances do exist, a full
impairment review is undertaken to establish whether the carrying amount exceeds the higher of net realisable value or value in use. If this is the case,
an impairment charge is recorded to reduce the carrying value of the related investment.
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Related party transactions
Under the provisions of FRS 102.33.1A, the company is exempt from disclosing the details of related party transactions on the basis that they are
wholly owned subsidiaries.
2. Directors’ emoluments
The Company has no employees other than the Directors. Full details of the Directors remuneration and interests are set out in the Directors
Remuneration Report on pages 31 to 44.
3.
Investments
At the beginning of the period
Additions
At the end of the period
Investment in
subsidiary undertakings
£’000
-
132,613
132,613
The investment made in the year relates to the capital re-organisation of the Group as disclosed in note 19 of the consolidated financial statements.
Annual Report & Financial Statements 2015
On the Beach Group plc
87
4. Debtors
Amounts owed by group undertakings
2015
£’000
71,502
Amounts owed by Group undertakings are non-interest bearing, unsecured and repayable on demand. The amounts are due from On the Beach
Topco limited, a wholly owned subsidiary.
5. Creditors due within one year
Accruals
6. Called-up share capital
Allotted, called-up and fully paid
Ordinary shares of £1.50 each
Movement in share capital for the Company is as follows:
Balance on incorporation
Group restructure, share for share exchange
Balance at 30 September 2015
7. Contingent liabilities and guarantees
The company is a guarantor to a borrowing facility relating to a rolling credit facility provided to the Group.
The amount borrowed under this agreement at 30 September 2015 was £nil.
2015
£’000
2,544
Number
Amount
’000
£’000
130,434,769
195,652
130,434,769
195,652
£000
-
195,652
195,652
88 Annual Report & Financial Statements 2015
On the Beach Group plc
Shareholder information
Registered Office
Park Square,
Bird Hall Lane,
Cheadle
SK3 0XN
Tel: 0161 444 0910
Web: www.onthebeach.co.uk
Investor relations: corporate@onthebeach.co.uk
Company Secretary
Kirsteen Vickerstaff
Park Square
Bird Hall Lane
Cheadle
SK3 0XN
Corporate Brokers
Numis Securities Limited
10 Paternoster Row
London
EC4M 7LT
Independent auditors
KPMG
1 St Peter’s Square
Manchester
M2 3AE
Registrar
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Corporate solicitors
Squire Patton Boggs
Trinity Court
16 John Dalton Street
Manchester
M60 8HS
Corporate PR advisers
FTI Consulting
200 Aldersgate
Aldersgate Street
London
EC1A 4HD
Annual Report & Financial Statements 2015
On the Beach Group plc
89
“
I booked a 10 day holiday to Tenerife in August through On the Beach. The whole
process was stress free and so easy. I was able to pay in instalments at my own
leisure right up until 2 weeks before the holiday. The transfers were waiting for us
as soon as we arrived at the airport and 2 days before we left our transfer pick up
times were sent to our hotel room.
“
Would book through On the Beach again, very pleased!
CUSTOMER FEEDBACK
Registered Office
Park Square,
Bird Hall Lane,
Cheadle
SK3 0XN
www.onthebeachgroupplc.com (Corporate)
www.onthebeach.co.uk (UK)
www.ebeach.se (Sweden)