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On the Beach
Group plc
ANNUAL REPORT & ACCOUNTS
For the year ended 30 September 2016
On the Beach is a fast-growing,
leading online retailer of
beach holidays
TOTAL FINANCIAL
P R O T E C T I O N
WELCOME TO ON THE BEACH
One of the UK’s largest online
retailers of beach holidays with a
20% share of the 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.
1 Desktop
2 Laptop
3 Tablets (iOS & Android)
4 Smartphones (iOS & Android)
2
4
4
1
3
Visit us online at
www.onthebeachgroupplc.com (Corporate)
www.onthebeach.co.uk (UK)
www.ebeach.se (Sweden)
www.ebeach.no (Norway)
CONTENTS
Simplicity
Value
Personalisation
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Strategic Report
Governance
Financial Statements
03 At a glance
26 Chairman’s introduction
61 Consolidated income statement and
04 Chairman’s statement
27 Directors’ biographies
statement of comprehensive
06 Chief Executive’s report
29 Corporate Governance Statement
income
09 Key performance indicators
34 Report of the Nomination
62 Consolidated balance sheet
11 Chief Financial Officer’s report
Committee
63 Consolidated statement of cash
14 Risk management and principal
36 Report of the Audit Committee
flows
risks and uncertainties
39 Directors’ Remuneration Report
64 Consolidated statement of
21 Corporate social responsibility
53 Directors’ Report
changes in equity
24 Awards & achievements
57
Independent Auditor's Report to
65 Notes to the consolidated
the members of On the Beach
financial statements
Group plc
90 Company balance sheet
91 Company statement of cash flows
92 Company statement of changes in
equity
93 Notes to the Company financial
statements
95 Shareholder information
Annual Report & Accounts 2016
On the Beach Group plc
01
STRATEGIC REPORT
2004
Established
by CEO Simon
Cooper and
launched its first
website.
03 At a glance
04 Chairman’s statement
06 Chief Executive’s report
09 Key performance indicators
11 Chief Financial Officer’s report
14 Principal risks and uncertainties
21 Corporate social responsibility
24 Awards & Achievements
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
2013
Inflexion Equity
Partners acquired
a majority stake
in the Group from
Livingbridge.
2014
On the Beach
continued to
optimise its technology
platform, grew its
direct contracting and
invested into TV
advertising
Launched an international
platform
in Sweden under the
“ebeach.se” domain name
On 28 September,
On the Beach listed on the
London Stock Exchange.
2015
2016
On the Beach
achieves
outstanding profit
growth against a
challenging market
backdrop
02
Annual Report & Accounts 2016
On the Beach Group plc
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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.
Financial highlights Group
› Group revenue increased 13.0% to £71.3m (FY15: £63.1m)
› Group operating profit before amortisation and exceptional costs increased 30.3% to £22.8m (FY15: £17.5m)
› Group operating profit increased 110.0% to £16.8m (FY15: £8.0m)
› Group profit before tax increased 776% to £16.9m (FY15: a loss of £2.5m)
› Adjusted underlying profit before tax (1) increased 46.9% to £21.3m (FY15: £14.5m)
› Basic and diluted earnings per share of 11.0p is a 290% increase on prior year (FY15: 5.8p)
› Adjusted proforma earnings per share of 13.0p is a 46.1% increase on prior year (FY15: 8.9p)
› Strong cash conversion of 90.1% (FY15: 99.5%)
› Net external cash (2) at year end of £26.1m (FY15: £10.9m)
› Maiden final dividend proposed of 2.2p per share (FY15: Nil)
(1) Group adjusted underlying profit before tax is the profit/(loss) before taxation excluding share based payments £0.1m (FY15: £nil), exceptional costs
of £nil (FY15: £4.9m), amortisation of acquired intangibles of £4.3m (FY15: £4.3m), shareholder interest £nil (FY15: £7.8m) and exceptional finance
costs £nil (FY15: £1.0m)
(2) Net external cash is defined as cash and cash equivalents excluding the trust accounts
Financial highlights UK
› Revenue up 12.3% to £70.2m (FY15: £62.5m)
› UK operating profit increased 87.1% to £18.9m (FY15: £10.1m)
› Revenue after marketing costs up 18.4% to £36.0m (FY15: £30.4m)
› UK EBITDA up 25.5% to £25.1m (FY15: £20.0m)
› UK EBITDA as a percentage of revenue increased to 35.8% (FY15: 32.0%)
Financial highlights International
› Revenue increased 57.1% to £1.1m (FY15: £0.7m)
›
International EBITDA loss maintained at £1.8m (FY15: £1.8m), demonstrating continued
investment to drive market share growth in Sweden
› Online cost per unique visitor reduced 18% to £1.0 (FY15: £1.2)
Operational highlights UK
› Daily unique visitors increased by 12.6% to 61.3m (FY15: 54.4m)
› Efficiencies in online marketing reduced spend as a percentage of revenue to 44.7% (FY15: 48.6%)
› Branded and free traffic increased 11.0% to 54.0% of overall (FY15: 54.8%)
› Directly contracted hotel product increased to 57% (FY15: 41%)
› Revenue per daily unique visitor maintained at £1.15 (FY15: £1.15)
Annual Report & Accounts 2016
On the Beach Group plc
03
CHAIRMAN’S STATEMENT
A COMPANY WITH OUTSTANDING
TALENT, PIONEERING TECHNOLOGY
AND HUGE POTENTIAL.
Richard Segal
CHAIRMAN
I am pleased to report that during the 2016 financial year the business
continued to improve its market position and generate impressive growth
in its profitability.
As widely reported, this financial year was particularly challenging for the
travel industry, which had to adapt to terrorist attacks, the corporate failure
of a large budget tour operator and the impact of currency fluctuations.
Despite this difficult trading backdrop, On the Beach’s agile business model
and focused approach enabled it to deliver adjusted underlying Group
profit before tax performance of £21.3m which was ahead of market
expectations and up 46.9% on the prior year. At the same time, adjusted
proforma EPS of 13.0p was up 46.1%. Given the difficult year for the travel
industry, I would like to thank and commend Simon Cooper and his team
for this admirable performance.
On the Beach’s balance sheet remains strong with external cash balances
at the year-end of £26.1m (2015: £10.9m). The Board is pleased to
recommend a maiden final dividend of 2.2p per share for FY16.
During FY16, On the Beach’s UK segment continued to gain market
share, with daily unique visitors to site increasing 12.6% to 61.3m. Given
the volatility experienced during the year, especially following a number
of terrorist incidents, the Board made a conscious decision to accept
slower revenue growth at 12.3% to £70.2m. This decision was taken
to avoid the business chasing unprofitable growth. At the same time,
marketing efficiencies were generated utilising On the Beach’s bespoke bid
management capability, which ensured that UK revenue after marketing
costs was up 18.4% to £36.0m.
The Board believes that overall demand for short haul beach holidays
was suppressed in FY16 versus the previous year; especially during the
second calendar quarter, with the last quarter of the financial year showing
greater resilience. Investment into the On the Beach brand in recent years
has made it one of the most visible online beach holiday brands in the
UK. This investment has delivered growth and means that On the Beach
is well-placed to benefit from the ongoing structural shifts in consumer
behaviour; especially with respect to gaining market share from traditional
tour operators.
On the Beach’s first international market, Sweden, launched in January
2015. During FY16 good progress was made in growing unique visitors
and generating bookings and revenues. Daily unique visitors to the eBeach
site in FY16 were up 53% to 2.3m, cost per visitor reduced by 18% and,
importantly, branded visits increased by 113% to 445k visits or 19.8% of
total traffic. Based on the performance in Sweden, the business will be
launching its second international site in Norway during December 2016.
On a personal level, I am hugely enthused by the quality of what the On the
Beach team delivers to our customers. The entire company is customer
centric; from the provision of an extensive and diversified range of
accommodation, flights and transfers, to our modular and agile technology
that provides truly personalised holidays in real time across multiple
devices; the creative and efficient marketing and first rate customer service.
Employees throughout the Group are focused on delivering excellent-
value beach holidays that meet the individual demands of a wide range of
customers.
04
Annual Report & Accounts 2016
On the Beach Group plc
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CHAIRMAN’S STATEMENT
This commitment to our customers drives the business to continuously
innovate and improve and is helping to secure an ever-increasing level
of repeat business from our loyal customers, as well as attracting new
customers. I wish to thank every colleague within On the Beach for their
hard work, efforts, dedication and continued support.
Following a carefully planned and thorough succession planning and
recruitment process, we announced on 29 November 2016 that Wendy
Parry will retire as Chief Financial Officer and will be succeeded by Paul
Meehan in January 2017. Paul joins us from Gala Coral Interactive, where
he was Finance Director, and (latterly) Director of Online Merger Integration
overseeing the merger between Ladbrokes and Gala Coral. We are
delighted that the completion of the merger means Paul can join us in
January 2017, and we look forward to welcoming him. Paul is an excellent
cultural fit and has a wealth of knowledge and experience that will be
invaluable to the Group as it continues on its strong growth trajectory.
Wendy (who remains a shareholder in the business) has kindly agreed to
be available as long as is required to ensure a full and orderly handover.
Wendy has been with the business since April 2010 and I would like to
express my thanks for her valuable and insightful contribution. Everyone
at On the Beach wishes Wendy and her husband, Mike, an enjoyable and
fulfilling retirement.
The Board has a wide range of responsibilities and I would like to thank
my fellow non-executive directors, Lee Ginsberg and David Kelly, for their
contribution and support. The Board works effectively as a team with
the right mix of enquiry and support of the Executive Directors from the
Non-Executive Directors. The Board carefully reviews ongoing trading
performance, agrees upon the Group’s future strategic direction, monitors
risk and control processes and ensures that general corporate governance
is appropriately managed. During the year, we undertook an evaluation of
the directors and the functioning of the Board and its committees.
This demonstrated that we have the appropriate balance of skills,
experience and perspectives on the Board, which operates effectively and
is properly engaged.
The Board is committed to profitable growth and the delivery of long-term
value for our shareholders. The performance in FY16 was impressive and
provided good foundations for the new financial year.
The first quarter of our financial year (calendar quarter four) is historically
the quietest trading period for the Group and is influenced by the timing
of when the low cost carriers release their spring/summer capacity.
Comparisons between this quarter and the same period last year are
complicated by the widespread cancellations to Egypt experienced in
November 2015 and the subsequent surge in re-bookings to alternative
destinations. Taking these factors into account, the Board is pleased to
report that current performance is in line with expectations and believes
the business is well positioned for the key trading period that commences
in late December and continues into Q1 2017.
We expect and have planned for some of the key trends seen in FY16 to
remain prevalent in FY17; namely the shift in demand from the Eastern
Mediterranean, the overcapacity of seats versus demand on high-volume
routes leading to aggressive seat-only pricing and pressure on bed capacity
in key Western Mediterranean destinations in peak periods. The Board
also believes that some of the wider macroeconomic trends will lead to a
shortening of lead times throughout FY17, similar to those witnessed in
the lead up to summer 2016. Notwithstanding these conditions, the Board
remains confident of meeting market expectations for the financial year
and will provide a further trading update at our AGM on 2 February 2017.
The business continues to invest across the organisation – in its people,
technology and brand. Its strategic direction centres around the delivery
of profitable market share growth through the provision of an excellent
value-proposition, increasing customer retention, attracting new customers,
margin optimisation, controlling overheads and expanding the territories in
which we operate.
I remain enthusiastic about On the Beach’s future and look forward to the
continued development of the business. As a Board, we remain confident
about our prospects and that our strategy and business plan will allow On
the Beach to grow and create value for our shareholders.
Our AGM will be held at 11am on Thursday 2 February 2017 at the
Company’s headquarters at Park Square, Bird Hall Lane, Cheadle, SK3 0XN.
I look forward to welcoming shareholders.
Richard Segal
CHAIRMAN
6 December 2016
Annual Report & Accounts 2016
On the Beach Group plc
05
CHIEF EXECUTIVE’S REPORT
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
On the Beach continues to be a dynamic, entrepreneurial and ambitious
business. We deliver value for money beach holidays to our customers
that are personalised to their individual needs. We maintain a daily focus
to improve the quality of our customer proposition and the value that we
provide to our growing customer base.
In a difficult market, we have continued to grow market share, with daily
unique visitors to site in the UK increasing 12.6% to 61.3m (2015: 54.4m).
We have focused on driving this share growth efficiently with improvements
to our bespoke bid management capability driving online marketing spend
as a percentage of revenue down 8% to 44.7% (2015: 48.6%) and our
revenue after marketing costs increased 18.4% to £36.0m (2015: £30.4m).
›
›
›
›
›
increasing engagement by encouraging visitor login with logged in users
up 100% YOY;
increasing the directness of our relationships with end suppliers to
achieve 57% of hotels sourced directly;
continuing to provide the highest possible level of customer service by
investing in our service staff and function to increase repeat purchase
volumes by 19.4% YOY;
further leveraging our lean cost base versus asset-heavy tour operator
competitors; and
investing to increase our market share in Sweden and with plans to
extend this further under our eBeach brand into further Scandinavian
markets.
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 amidst
difficult market conditions providing further evidence of our ability to gain
market share from traditional tour operators.
Growth
Growth has come as a result of:
› driving an efficient increase in our share of market, while investment
into our brand has also increased awareness (daily unique visitors
increased 12.6% to 61.3m, revenue after marketing costs increased
18.4% and prompted brand awareness increased to 46%);
› optimisation and personalisation of our market-leading, multi-device
customer proposition to maintain revenue per unique visitor despite
the difficult market backdrop with an increase in smartphone bookings
of 74% year-on-year("YOY");
Market
As stated in the Group’s trading update on 25 October 2016, demand for
beach holidays remained resilient in the third calendar quarter despite the
impact of repeated terrorist attacks on consumer confidence. We believe
that overall demand for short-haul beach holidays was suppressed versus
the previous year but that a continued growth in online penetration will
have resulted in our addressable market being flat YOY. As one of the most
visible online beach holiday brands we remain well-placed to benefit from
this ongoing structural shift in consumer behaviour. The effect of events in
2016 was as follows:
› acts of terrorism in Egypt, Tunisia and Turkey drove demand from the
Eastern Mediterranean to the Western Mediterranean;
› a reprogramming of capacity out of the Eastern Mediterranean led to
flight overcapacity into the Western Mediterranean and a mismatch
between flight capacity and bed capacity;
06
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On the Beach Group plc
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CHIEF EXECUTIVE’S REPORT
› average basket values fell because of flight overcapacity and loss of
higher-value Eastern Mediterranean destinations;
› an increasing proportion of tour operator capacity was sold on a seat
›
only basis and it is likely that tour operator risk capacity will be
reprogrammed in FY17;
further terrorist atrocities in France and Belgium dampened consumer
confidence, leading to a shortening of lead times and ultimately
transient shrinkage in the overall number of passengers taking short-
haul beach holidays;
›
late availability into key properties in key destinations in the Western
Mediterranean was limited following a Europe-wide exodus from the
›
Eastern Mediterranean;
consumer confidence was impacted both and after the EU referendum;
and
› Low Cost Travel Group disrupted the dynamics of the online beach
holiday market from the start of 2016 until its failure in mid-July.
Investment in Brand
We have continued to invest in an efficient multi-channel approach
supported by our sophisticated bid management capability (which
optimises the value gained from our multi-channel marketing spend) and
this in turn has allowed us to continue to take share of market traffic, more
cost effectively than ever before. Despite the disruptive actions of Low Cost
Travel Group immediately prior to its demise, our strong performance in
the second half of the year is testament to our bid management capabilities
as we focused on driving share efficiently with revenue after marketing in
the second half of the year up 13.5% YOY. The auction dynamics improved
immediately after the Low Cost Travel Group’s administration and remained
benign to the end of FY16.
Our brand continues to strengthen, supported by our investment into a
fully national offline marketing activity and in FY16, we consolidated our
position as the third best known beach holiday brand nationally. Planning
for an extended offline campaign in FY17 is complete and our new advert
will air nationally on Christmas Day. In the two years since we have launched
iPhone, iPad and Android apps, we have achieved circa 800,000 downloads
and an increasing percentage of traffic and bookings via our apps. We
have also invested to build booking management capabilities into our apps
so that customers can interact with us via the app throughout the period
before, during and after their holidays.
Investment in People
We continue to invest in talent across the business and in particular
in our customer facing functions and our digital and technological
capability to ensure that we remain at the forefront of innovation in our
sector. Leveraging our bespoke personalisation technology allows us to
show the most relevant product to all users on all devices at the earliest
possible opportunity 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 almost 70% from mobile devices with 46%
from smartphones alone.
We have increased our investment to multi-skill our customer-facing staff to
ensure that we can provide an even higher level of customer support for all
of our valued customers and are delighted that our Net Promoter Scores
have been maintained and that our repeat purchase rates continued to
increase significantly through FY16. We have also realigned our UK and
international marketing capabilities and ensured that we are well-positioned
to merchandise our growing proportion of exclusive product to the widest
possible customer audience.
While the Group has made these investments into digital and technology,
service and supply, our scalable business model has continued to allow us
to leverage our lightweight cost base, reducing fixed and variable costs as a
percentage of revenue.
Investment in Product
We have been able to drive growth in our direct contracting function,
building on the strong foundations which were put in place in previous
years. From a standing start in early 2014 we have beaten our internal
targets contracting 33% more hotels in FY16 and delivering 57% of total
hotel buying through in house capability, with significant incremental
margin contribution. The increasing proportion of directly contracted
product also supports the improved customer satisfaction scores as
complaint ratios on directly contracted product are significantly lower than
third party sourced product.
Annual Report & Accounts 2016
On the Beach Group plc 07
CHIEF EXECUTIVE’S REPORT
Our continued focus to strengthen our relationships with key overseas
suppliers is giving us increased access to exclusive rates, ringfenced
capacity and OTA exclusivity while maintaining our no risk, lightweight
business model. In FY16 for the first time we have partnered with a small
number of overseas airlines to launch and distribute a proof of concept
programme of 55,000 flight seats to some of our main destinations. Against
a difficult market backdrop with significant oversupply into the Western
Mediterranean and weak seat pricing we were pleased with the results
with the best loaded routes 95% sold. During the course of the year we
have built new capabilities internally to allow us to support an increased
programme of flying in FY17.
We have also invested significantly in our search technologies to support
our strategic objective to drive an increasing proportion of differentiated
flight and hotel product and to allow us to build innovative search tools for
customers who are destination agnostic.
International
Following the launch of our first international market, Sweden, in January
2015, we have continued to leverage our core capabilities to make progress
in growing unique visitors and generating bookings and revenues. Our
target in Sweden was defined as breakeven within three years of launch
and our focus in our second full year in the market was to drive significant
gains in market traffic share in a cost effective manner, while increasing
awareness of our brand.
Daily unique visitors to site in FY16 were up 53% while cost per visitor
reduced by 18%. Branded visits to site increased by 113% and reached
19.8% of total site traffic and our losses have narrowed in the second half
of the year. We will further develop the strong growth of the brand that
we have generated in Sweden with a TV campaign in December 2016. As
a result we will be launching our second international site in Norway in the
coming weeks.
Strategy and Growth
It continues to be the Group’s mission to make it simple for customers to
plan, find and book their perfect beach holiday with a vision to be Europe’s
leading online retailer of beach holidays.
On the Beach has delivered significant growth within a growing market
over the last three years by evolving a strategy based around the following
principles:
1. Out-innovating through agility and investment in talent and technology
2. Driving an efficient increase in market share
3. Optimising and personalising our multi-device customer proposition
4. Leveraging increased revenue through direct and differentiated supply
5. Expanding our model into new source markets and products
Our key strategic pillars for FY17 are:
1. Out-innovating through agility and investment in talent and technology:
› Continued investment into our people and our platform which allows us
to innovate at an increasing pace and in doing so, stay ahead of the
competition.
08
Annual Report & Accounts 2016
On the Beach Group plc
2. Driving an efficient increase in market share:
›
Investing in an efficient multi-channel approach supported by our
sophisticated bid management capability
Increasing investment offline to strengthen brand awareness
›
› Seeking value-enhancing merger and acquisition opportunities
3. Optimising and personalising our multi-device customer proposition:
› Driving an increasingly simplified customer experience across multiple
devices by continually testing changes to the website versus a control to
increase conversion
› Encouraging login and showing the most relevant product to all site
visitors on all devices at the earliest possible opportunity
› Building a multifunctional app to engage directly with users and provide
a higher standard of service in an efficient manner
4. Leveraging increased revenue through direct and differentiated supply:
› Building a programme of direct and differentiated supply to leverage
margin and gain market share
› Build in-house capability to increase visibility of differentiated product
› Differentiate exclusive product offering through innovative and
attractive customer and supplier payment terms
5. Expanding our model into new source markets and products:
› Leveraging core capabilities to expand internationally, 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
› Expanding our product offering to address a wider customer
demographic
› Building tools to inspire customers who are destination agnostic
Current Trading and Outlook
The first quarter of our financial year (calendar quarter four) is historically
the quietest trading period for the Group and is influenced by the timing
of when the low cost carriers release their spring/summer capacity.
Comparisons between this quarter and the same period last year are
complicated by the widespread cancellations to Egypt experienced in
November 2015 and the subsequent surge in re-bookings to alternative
destinations. Taking these factors into account, the Board is pleased to
report that current performance is in line with expectations and believes
the business is well positioned for the key trading period that commences
in late December and continues into Q1 2017.
We expect and have planned for some of the key trends seen in FY16 to
remain prevalent in FY17; namely the shift in demand from the Eastern
Mediterranean, the overcapacity of seats versus demand on high volume
routes leading to aggressive seat-only pricing and pressure on bed capacity
in key Western Mediterranean destinations in peak periods. The Board
also believes that some of the wider macroeconomic trends will lead to a
shortening of lead times throughout FY17, similar to those witnessed in
the lead up to summer 2016. Notwithstanding these conditions, the Board
remains confident of meeting market expectations for the financial year
and will provide a further trading update at our AGM on 2 February 2017.
Simon Cooper
CHIEF EXECUTIVE OFFICER
6 December 2016
KEY PERFORMANCE INDICATORS
UK Segment: Revenue
Marketing spend as a percentage of revenue
Continuing growth with an increase of 12% on the prior year
Marketing % of revenue decreased to 44.7% (2015: 48.6%) excluding offline
and to 48.7% (2015: 51.3%) including offline.
£62m
£46m
£38m
£31m
£70m
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60%
50%
40%
30%
20%
10%
0%
49.9%
45.9%
52.8%
50.7%
51.3%
48.7%
£60m
£50m
48.6%
44.7%
£40m
£30m
£20m
£10m
£0m
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
Marketing Spend (excl. offline)
Offline Spend
Marketing (excl offline) % revenue
Marketing % revenue total
Daily UVs (millions) & revenue per daily UV
Costs as percentage of 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 by 12.6% whilst revenue per daily UV has
been maintained
Fixed Costs
Includes head office salaries, office related costs and IT expenditure
Variable Costs
Comprise mainly of contact centre wages and credit card fees
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£0.96
£0.93
£0.85
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7%
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2012
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2016
Daily UVs 2012 - 2015
Daily UVs 2016
Revenue per Daily UV
Variable Costs
Fixed Costs
Annual Report & Accounts 2016
On the Beach Group plc 09
KEY PERFORMANCE INDICATORS
Direct contracting as a percentage of bed supply
Operating cash and cash conversion as a
percentage of adjusted EBITDA
Direct Contracting: sourcing hotel beds for customers directly from hotels
rather than via third-party bed-banks as intermediaries
Continuing growth to 57%
Operating Cash: cash generated from continuing operations less capital
expenditure
Cash Conversion: Operating cash before exceptional items as a percentage
of adjusted EBITDA
60%
50%
40%
30%
20%
10%
0%
25
20
15
10
5
0
m
£
140%
120%
100%
80%
60%
40%
20%
0%
2013
2014
2015
2016
2012
2013
2014
2015
2016
Operating Cash
Cash Conversion %
International Segment: Revenue
Adjusted underlying profit before tax
Share growth with an increase in revenue of 57%
Adjusted underlying profit before tax (1)
YOY growth 46.9%
£1.1m
£21.3m
£14.5m
£8.0m
£10.5m
£9.9m
£0.7m
£0.1m
2014
2015
2016
2012
2013
2014
2015
2016
(1)
Adjusted underlying profit before tax is stated before exceptional costs of £nil (2015:
£4.9m), amortisation of acquired intangibles of £4.3m (2015: £4.3m), share based payments
£0.1m (2015: £nil) and shareholder interest £nil (2015: £7.8m)
10
Annual Report & Accounts 2016
On the Beach Group plc
CHIEF FINANCIAL OFFICER’S REVIEW
THE GROUP HAS ACHIEVED
OUTSTANDING PROFIT GROWTH AGAINST
A CHALLENGING MARKET BACKDROP
WITH GROWTH IN ADJUSTED UNDERLYING
GROUP PROFIT BEFORE TAX AT 46.9% AND
CASH CONVERSION STRONG AT 90.1%.
Wendy Parry
CHIEF FINANCIAL OFFICER
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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 markets).
In each of the UK Segment and the International Segment, the Group offers
dynamically packaged holidays but with options to book single element
products such as flights or hotels.
UK Segment performance
Revenue
Revenue after marketing costs
Variable costs
Overhead costs
Holding Company costs
Depreciation and amortisation (1)
EBIT
EBITDA
EBITDA % revenue
2016
£m
70.2
36.0
(4.3)
(6.0)
(0.6)
(2.0)
23.1
25.1
35.8%
2015
Change
%
12.3%
18.4%
26.2%
25.5%
£m
62.5
30.4
(4.9)
(5.1)
(0.4)
(1.7)
18.3
20.0
32.0%
(1) Excludes amortisation of acquired brand and website technology intangible
assets of £4.3m (2015: £4.3m)
Revenue and marketing costs
Revenue increased by 12.3% to £70.2m (2015: £62.5m) with slower than
expected revenue growth given the challenging market conditions. Revenue
per daily unique visitor was maintained in the year at £1.15 (2015 £1.15)
and revenue per booking was 7.5% higher at £175.2 per booking (2015:
£162.9) largely due to increasing the directness of relationships with our
suppliers through the volume of in-house accommodation bookings to
57.4% (2015: 40.7%).
Marketing expenses (excluding offline) for the year to 30 September 2016
as a percentage of revenue decreased to 44.7% (2015: 48.6%) with total
spend of £31.4m (2015: £30.4m) 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 £2.8m (2015: £1.7m) as it was extended to a full national
campaign resulting in an increase in prompted brand awareness to 46%.
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.
Variable costs % revenue
Overhead costs % revenue
Holding Company costs % revenue
Total
2016
6.1%
8.5%
0.9%
15.5%
2015
7.8%
8.2%
0.6%
16.6%
Annual Report & Accounts 2016
On the Beach Group plc 11
CHIEF FINANCIAL OFFICER’S REVIEW
Variable costs, which comprise mainly of contact centre wages and credit
card fees, are closely linked to booking volumes and have improved from
IT developments in the ability for Customers to manage their bookings
more effectively online and the new EU fee interchange regulations, falling
to 6.1% of revenue (2015: 7.8%). Continued operational leverage and
the revenue benefit of direct relationships reduced overhead costs as a
percentage of revenue to 7.8% (2015: 8.2%) however, as a result of the
strong results a performance related bonus for Executive Directors and
senior management of £0.5m has been included bringing the total costs as
a percentage of revenue to 8.5%. Holding company costs have increased
in the year by £0.2m to £0.6m (2015: £0.4m) due to additional expenditure
required to fulfil the requirements of a listed company and share based
payment charges of £0.1m (2015: nil).
EBITDA of £25.1m (2015: £20.0m) increased by 25.5% and EBITDA as a
percentage of revenue increased from 32.0% to 35.8%. The closest GAAP
equivalent measure to EBITDA is UK operating profit which increased by
87.1% to £18.9m (2015: £10.1m).
International Segment performance
Adjusted underlying profit before tax
The Group reports adjusted underlying profit before tax to highlight
the impact of one-off and other discrete items and to allow better
interpretation of the underlying performance of the business.
Group profit/(loss) before taxation
Amortisation of acquired intangibles
Share based payments
Shareholder loan interest (1)
Exceptional costs
Exceptional finance costs
2016
2015
Change
£m
16.9
4.3
0.1
-
-
-
£m
%
(2.5)
776.0%
4.3
-
7.8
3.9
1.0
Adjusted underlying profit before tax
21.3
14.5
46.9%
(1) 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
Revenue
Revenue after marketing costs
Variable costs
Overhead costs
EBITDA
2016
2015
Change
£m
1.1
(1.4)
(0.2)
(0.2)
(1.8)
£m
0.7
(1.5)
(0.1)
(0.2)
(1.8)
%
57.1%
6.7%
0.0%
Finance costs
The finance cost for the year was £0.1m (2015: £1.8m) and included
amortisation costs of fees of £nil (2015: £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. This loan was repaid in full out of the Group’s
existing cash balances following admission in September 2015. The Group
has a revolving credit facility of up to £35 million to cover seasonal working
capital requirements but with strong cash management the maximum
drawdown during the year was £13.5m.
In early calendar year 2015, the Group launched an international platform
in Sweden under the ‘www.ebeach.se’ domain. The Group has focused
on growing market share both online and offline with a second year of a
national TV campaign.
Share based payments
The Group implemented a long term incentive plan in May 2016 as detailed
in the remuneration report and, in accordance with IFRS2, has recognised a
non-cash charge of £0.1m.
In the 12 months to 30 September 2016, the Swedish business generated
revenue of £1.1m (2015: £0.7m) and an EBITDA loss was maintained at
£1.8m (2015: £1.8m) with efficiencies gained from growth of the brand
narrowing losses in the second half to 40% down YOY. Losses are derived
almost entirely from the marketing investment required to drive branded
awareness with branded share increasing to 19.8% (2015: 14.2%). The
closest GAAP equivalent measure to EBITDA is operating loss which was
maintained at £1.9m (2015: £1.9m).
Exceptional items
Exceptional items for the year to 30 September 2016 were £nil (2015:
£4.9m). The costs in 2015 related to deal costs in relation to the IPO.
Taxation
The Group tax charge of £2.6m represents an adjusted effective tax rate(1)
of 12.5% (2015: 30.5%) which was lower than the standard UK rate of
20% (2015: 20.5%). In 2016 this was affected by a deferred tax credit of
£0.9m (2015: £0.9m) released in line with the amortisation of £4.3m on the
valuation of acquired intangibles. This has also been revalued in the year in
line with the reduction in forward corporation tax rates to 17% leading to
an additional deferred tax credit of £0.9m. In 2015 the effective rate was
additionally affected by disallowed shareholder interest under the Advance
Thin Capitalisation Agreement.
(1) Adjusted effective tax rate is calculated as taxation charge divided by
adjusted underlying profit before tax plus shareholder interest
12
Annual Report & Accounts 2016
On the Beach Group plc
CHIEF FINANCIAL OFFICER’S REVIEW
Earnings per share
Basic earnings per share, calculated for the current and comparative
period, is based on the weighted average number of shares in issue and
has improved to 11.0 pence in the current year from a loss per share in
the previous year of 5.8 pence. The adjusted proforma basic earnings per
share based on adjusted underlying earnings increased 46.1% to 13.0
pence (2015: 8.9 pence). The table below shows the adjustment from actual
earnings:
Profit/(Loss) for the year
Share based payments
Exceptional costs
Amortisation of acquired intangibles
Shareholder interest
Deferred tax asset on acquired intangibles
Underlying profit for the year
2016
2015
£m
14.3
0.1
-
4.3
-
(1.8)
16.9
£m
(4.5)
-
4.9
4.3
7.8
(0.9)
11.6
Number of ordinary shares in issue at year end;
130.4
130.4
assumed to be outstanding for the full year
comparative period (millions)
Adjusted proforma earnings per share (pence)
13.0
8.9
Cash flow and net debt
The Group continues to see strong cash generation with adjusted operating
cash flows 15.5% higher at £20.9m (2015: £18.1m), resulting in strong cash
conversion of 90.1% (2015: 99.5%).
EBITDA
Share based payment charges
Capitalised development spend
Movement in working capital (1)
Capital expenditure
Adjusted operating cash flow
Operating cash conversion
2016
2015
£m
23.3
0.1
(2.4)
0.6
(0.6)
21.0
£m
18.2
-
(2.0)
2.2
(0.3)
18.1
90.1%
99.5%
(1) Movement in working capital has been adjusted to exclude £3.1m inflow
from IPO cost accruals at 30 September 2015 and an outflow of £3.0m in
2016
Net debt has reduced in the year with cash at bank and in hand position at
the year- end of £26.1m (2015 £10.9m).
Capital reduction
On 18 November 2015, the Company completed a reduction of capital,
whereby the entire amount outstanding on the Company’s share premium
account was cancelled and the nominal value of each issued ordinary share
in the capital of the Company was reduced from £1.50 to £0.01. The capital
reduction created significant distributable reserves that are available for
future dividends and returns to shareholders.
Dividend
In line with previous stated policy, the Directors are recommending a
final dividend for the year of 2.2 pence per ordinary share. Subject to
shareholders’ approval at the Annual General Meeting (‘AGM’) on 2 February
2017, the dividend will be paid on 7 February 2017 to shareholders on the
register of members at the close of business on 6th January 2017.
Wendy Parry
CHIEF FINANCIAL OFFICER
6 December 2016
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Annual Report & Accounts 2016
On the Beach Group plc 13
RISK MANAGEMENT & PRINCIPAL RISKS AND
UNCERTAINTIES
The Board believes that effective risk management is critical to ensure that the Group can deliver on its strategic objectives
and to ensure long-term sustainable growth. As such, 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.
In this section of the Strategic Report, we explain our approach to risk management, set out the principal risks and uncertainties,
together with an explanation of how those risks are managed and we outline how the risk profile has changed since the 2015
Annual Report.
RISK MANAGEMENT - RESPONSIBILITIES
Area of the business
Risk management role
Board
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.
Audit Committee
The Audit Committee has the responsibility to review the Group’s internal controls and risk management systems.
Executive management
team
identifying, monitoring and managing risk on a daily basis;
The executive management team are responsible for:
›
› promptly highlighting to the Board any major risks to the business of which the Board are not aware, together
with their proposals for management of those risks;
›
› maintaining risk registers and sharing these with the Board and Audit Committee as set out below.
implementing action plans for management of risks as agreed with the Board; and
RISK MANAGEMENT – PROCEDURES
1.
2.
3.
Identification and evaluation of risks: Identify key risks, assess likelihood and quantify impact, identify current management and mitigation, and
proposed action plan. Record in risk registers which are reviewed and approved by the Board.
Management of risks: the executive management implement the risk management plans agreed by Board and monitor changes in risks or risk
management plans on an ongoing basis, reporting to Board as part of monthly Board meetings or on an ad hoc basis as appropriate. Where
management identifies a major new risk, or a significant increase to an existing risk, management arrange a planning session with each area of the
business represented to agree a bespoke and detailed risk management plan, so that if the risk materialises, it can be managed in an orderly fashion.
Monitoring: risk registers are reviewed and updated twice annually as a matter of course by the executive management team, as well as on an ad
hoc basis as required. Risk registers are reviewed on an annual basis by the Board and the Audit Committee as part of their review of internal
controls and risk management procedures.
14
Annual Report & Accounts 2016
On the Beach Group plc
RISK MANAGEMENT & PRINCIPAL RISKS AND UNCERTAINTIES
CHANGE TO RISK PROFILE SINCE 2015 ANNUAL REPORT
The nature of the principal risks and uncertainties faced by the Group remain, on the whole, the same as last year, although the risk profile has changed in a
number of areas. Two key factors affecting the Group’s risk profile are Brexit and terrorism. We do not consider that these constitute new risks but rather, they
are factors which exacerbate existing risks in a number of areas, as outlined below.
Factor
Risks impacted
Explanation
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Vote to leave the
European Union
(known as “Brexit”)
Consumer confidence
Supply chain risk (supplier failure)
Competition risk
People risk
Foreign exchange risk
VAT complexity
Regulatory risk
Terrorism
Consumer confidence
Supply chain risk (supplier failure)
Competition risk
System risk (data security)
People risk
› Since the referendum, the currency markets have destabilised and the
pound has dropped significantly in value, making holidays more expensive
and causing greater currency fluctuations.
› Economists have warned that the UK may fall into a recession post Brexit and
this could also impact on consumer confidence.
› Uncertainty remains as to the impact of Brexit on UK law and VAT law.
› The uncertain trading environment has increased risks to the business in
terms of supplier failure, but also mitigated the competition risk as
competitors with less resilient business models have failed (e.g. the failure of
Low Cost Travel Group “LCTG”).
› The Group employs many EU citizens, in key areas such as IT development,
and restrictions on freedom of movement may restrict the Group’s ability to
attract and retain talent.
› The rise in terrorism generally, and in particular in traditional beach holiday
destinations, has had and will continue to have a significant impact
on consumer confidence and it has reshaped the entire market dynamic
for holidays with a shift in consumer preference from Eastern to Western
Mediterranean destinations and a shortening of lead times.
› The company’s business model is resilient to transient shifts in consumer
preference given that it does not commit to stock, but this creates a risk for
the company in that the shortening of lead times and the lack of availability in
key destinations at high season can restrict the company’s ability to compete
in a late market.
› The challenging market backdrop increases the risk of supplier failure but
also mitigates competition risk where competitors (such as smaller OTAs) fail.
› Terrorists could seek to launch cyber-attacks, increasing the Company’s data
security risk.
› A terrorist attack on the UK could put the Company’s employees at risk
(either at or outside the workplace).
Annual Report & Accounts 2016
On the Beach Group plc 15
PRINCIPAL RISKS AND UNCERTAINTIES
1. TRADING
Operational Risks
Risk Description and Impact
Mitigation & Management
Direction of
Change
1.1.
Consumer
Confidence Risk
A recession or reduced economic growth can
lead to reduced job security and a reduction in
consumer leisure spending capacity. A weak pound
makes holidays more expensive. The Brexit vote
has increased this risk.
Innovative payment solutions to mitigate reduction
in discretionary spending.
Expansion of target audience to attract customers
less affected
Failures of other OTAs (e.g. LCTG) make customers
nervous about booking holidays.
Competitive pricing and value proposition as well
as exclusive offers agreed with top hotels secure
bookings even in a challenging market.
Terrorist attacks, especially those in tourist resorts,
undermine consumer confidence and cause
consumer behaviour to shift: some may choose
not to book a holiday, some will delay booking
their holidays (causing a shortening of lead times),
and some may choose a different destination
(e.g. the shift from east to west Mediterranean
destinations).
ATOL and ABTA bonding as well as trust protection
give customers confidence in booking with OTB.
Robust and agile business model.
Operational Risks
Risk Description and Impact
Mitigation & Management
1.2.1
Supply Chain Risk
(Security of supply)
The Group does not have relationship agreements
in place with a number of airlines. The Group is
currently able to use technology to access flight
data and place bookings on behalf of customers.
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.
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.
Any legal challenges will be vigorously defended.
16
Annual Report & Accounts 2016
On the Beach Group plc
PRINCIPAL RISKS AND UNCERTAINTIES
1. TRADING - continued
Operational Risks
Risk Description and Impact
Mitigation & Management
Direction of
Change
1.2.2
Supply Chain Risk
(Supplier failure)
If a supplier were to collapse, 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). In the
case of the failure of a major low cost carrier, this
could have catastrophic consequences for the
Group.
Easyjet and Ryanair are considered as extremely
low risk of failure.
The Group closely monitors supplier failure risk
and puts in place risk management plans where
appropriate.
The failure of a bedbank or a hotel is of limited
impact.
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Operational Risks
Risk Description and Impact
Mitigation & Management
1.3.
Reputation Risk
The Group relies on the strength of its brand
to attract customers to its website and secure
bookings. Any events or circumstances which
give rise to adverse publicity 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.
Measures are put in place to prevent any
reputational issues from occurring, and where
any incidents do arise, these are handled by
senior management with the assistance of our
experienced public relations advisers where
appropriate.
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Operational Risks
Risk Description and Impact
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
shortening of lead times and the lack of availability
in key destinations at high season could restrict the
company’s ability to compete in a late market.
The Group monitors competitor pricing constantly
to ensure deals are priced competitively and offers
unique payment options such as the low deposit
scheme.
The challenging market dynamics mean that
smaller OTAs will be likely to fail, creating
opportunities for OTB to take market share and to
reduce paid search marketing costs.
Annual Report & Accounts 2016
On the Beach Group plc 17
PRINCIPAL RISKS AND UNCERTAINTIES
1. TRADING - continued
Operational Risks
Risk Description and Impact
Mitigation & Management
Direction of
Change
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 has a comprehensive business
continuity and disaster recovery plan, and robust
back up and failover facilities.
The Group is exposed to risks of security breaches
associated with online commerce security (e.g. loss
of customer data).
The Group has stringent security in place which is
regularly tested and audited. The Group is PCI DSS
compliant which involves regular external audits.
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 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.
Recent algorithm changes by Google have been
advantageous to OTB.
Operational Risks
Risk Description and Impact
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’s
location means that it is competing with many other
digital / technology-focused businesses for the best
talent.
The Group has a comprehensive succession plan
in place at executive and senior management level.
The Group will continue to monitor and
benchmark salaries and packages (including LTIPs
and other share schemes) to ensure it remains
competitive and adequately incentivises key
management.
18
Annual Report & Accounts 2016
On the Beach Group plc
PRINCIPAL RISKS AND UNCERTAINTIES
2. FINANCE
Operational Risks
Risk Description and Impact
Mitigation & Management
Direction of
Change
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.
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Operational Risks
Risk Description and Impact
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
Risk Description and Impact
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 ensure our
documentation and processes support our VAT
position.
3. LEGAL
Operational Risks
Risk Description and Impact
Mitigation & Management
Direction of
Change
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 protect its legal position and maximise its
chances of success.
3.1.
Litigation Risk
Ryanair litigation: The Group is one of several
online travel agents involved in litigation with
Ryanair in connection with Ryanair’s efforts to
prevent OTAs from booking and selling its flights.
The legal process is ongoing but remains at an
early stage. The position remains as disclosed
in our Prospectus, save that (with regard to
paragraph 13.6 on page 185), OTB only received
Ryanair’s response to the Notice for Particulars in
September 2016 so this has caused a delay to the
anticipated timescales set out in the prospectus.
Litigation is unpredictable and if Ryanair were to
prevail, this could have a material impact on the
Group’s business.
Annual Report & Accounts 2016
On the Beach Group plc 19
PRINCIPAL RISKS AND UNCERTAINTIES
3. LEGAL - continued
Operational Risks
Risk Description and Impact
Mitigation & Management
Direction of
Change
3.1 (continued)
Litigation Risk
OTB acts as a travel agent and not as principal in
relation to each holiday element, and it does not
sell “packages”. OTB’s processes, practices and
paperwork firmly support this and it is considered
to have the strongest agency/package defence in
the industry. OTB has increased its insurance cover
this year and has indemnities from a number
of its key suppliers. OTB works with its suppliers
to ensure that customers’ health and safety is
monitored throughout the supply chain.
Personal injury claims: Due to the proliferation
of claimant law firms and claims companies
offering “no-win-no-fee” arrangements, there
has been an increase in personal injury claims
across the industry (e.g. holiday sickness, trips
and falls, swimming pool and balcony incidents).
Despite the fact that OTB is an agent and does
not sell “packages” as defined in the Package
Travel Regulations, claimant solicitors often argue
otherwise and if OTB were found by a court to
have sold a “package” then OTB could be liable for
damages as well as reputational damage if liability
is proved. When the Package Travel Directive
comes into force in 2018, the definition of package
will change, and it is likely that OTB will at that point
be selling packages, so will have to defend personal
injury claims on the basis of liability.
Operational Risks
Risk Description and Impact
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.
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 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.
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.
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On the Beach Group plc
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.
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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:
› 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;
› 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);
› 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,
participation in an all-employee share incentive plan (and in due course,
subject to the approval of shareholders at the AGM, through the launch
of a sharesave/save as you earn plan), and for senior employees,
participation in a long- term incentive plan; and
› 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.
Annual Report & Accounts 2016
On the Beach Group plc 21
Modern Slavery Act
The Modern Slavery Act 2015 has introduced changes in UK law focused
on increasing transparency in supply chains. In relation to this Act, the
Company is conducting an assessment of all supply chain processes, to
highlight any potential areas of concern in relation to modern slavery. The
Company is committed to ensuring modern slavery is not taking place
within the business or any supply chains and the Company will look to
strengthen any processes highlighted as part of our assessment. The
Company will publish a statement approved by the board and will continue
to monitor obligations under the Act. The statement will describe any steps
taken to ensure modern slavery and human trafficking is not taking place
within the business or any supply chain. The statement will be published on
the Company’s website within the next few months.
Community and Environment
We are passionate about giving back to the local community and always
encourage and support employees who wish to arrange fundraising events
or initiatives.
This year we sponsored Rails Girls Manchester, a local event which aims to
open up technology and make it more approachable for girls and women.
As well as sponsorship, we also sent two of our experienced developers to
the event to be mentors to the attendees.
Our in-house development team and innovative technology has always
been an aspect of the business we are extremely proud of, and this
therefore felt like an area we could really give back to.
We understand our responsibility to protect the environment in which we
operate and are committed to doing so. We encourage our employees to
follow the same ethical code in their day to day roles; from only printing
documents where necessary, to recycling any waste appropriately. We have
also installed timed lighting in a number of our meeting rooms in order to
reduce wasted energy.
CORPORATE SOCIAL RESPONSIBILITY
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 32 for
further details and for a breakdown of the numbers of persons of each
gender who are: directors of the company, senior managers of the
company and company employees.
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. Moreover,
if any employees should become disabled during the course of their
employment there are policies in place to oversee the continuation of their
employment and to arrange training for these employees.
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, through
an independent and impartial organisation.
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On the Beach Group plc
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CORPORATE SOCIAL RESPONSIBILITY
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, with all employees currently located
on two floors, 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.
There has been an increase in overall emissions since those figures released in last year’s annual report. This is due to the increased activity on site which is a
consequence of the growth of the business (e.g. we have taken on more office space in our building). When revenue is taken into account, our relative emissions
remain low.
Greenhouse Gas Emissions by Scope
Scope 1
Gas consumption
Scope 2
Electricity consumption
Total emissions
Relative emissions, by revenue
Unit
2016
2015
2015
Quantity1
Quantity2
Quantity3
(updated)
(estimated)
Tonnes CO2e
85.28
28.46
27.36
Tonnes CO2e
Tonnes CO2e
Tonnes CO2e/£m
revenue
455.07
540.35
326.45
354.91
7.6 5.6
306.35
333.72
5.3
1 These figures are based on information from 1 June 2015 to 31 May 2016 so they do not correspond exactly to the reporting period, as the information is not yet
available for the year from 1 June 2016 to 30 September 2016 but we believe energy consumption will closely correspond to the equivalent period in 2015. The updated
figures for 2016 will be included in next year’s annual report.
2 This reflects the actual figures for the period from 1 October 2014 to 30 September 2015.
3 These were the figures included in the 2015 annual report and related to the year from 1 June 2014 to 31 May 2015.
Annual Report & Accounts 2016
On the Beach Group plc 23
AWARDS & ACHIEVEMENTS
On the Beach at MEN Awards 2015
On the Beach at The Sun Travel Editor's Awards 2016
TRAVOLUTION AWARDS 2016
Best Technology Team
TTG TOP 50 TRAVEL AGENTS 2016
Top Online Travel Agent
THE SUN TRAVEL AWARDS 2016
Travel Editor's Award
BVCA MANAGEMENT TEAM AWARDS 2016
National CEO of the Year - Simon Cooper
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
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Annual Report & Accounts 2016
On the Beach Group plc
GOVERNANCE
26 Chairman’s introduction
27 Directors’ biographies
29 Corporate Governance Statement
34 Report of the Nomination Committee
36 Report of the Audit Committee
39 Directors’ Remuneration Report
53 Directors’ Report
57 Independent Auditor's Report to the members of On the Beach Group plc
Annual Report & Accounts 2016
On the Beach Group plc 25
CHAIRMAN’S INTRODUCTION
Richard Segal
CHAIRMAN
I am pleased to present our corporate governance report, which outlines
the details of our corporate governance arrangements and reports on the
activities of the Nomination, Remuneration and Audit Committees during
the year.
Compliance with UK Corporate Governance Code 2014
In our report last year, the Company had only been listed for three days
prior to the end of the period and as a result, there were a small number
of areas of non-compliance with the provisions of the UK Corporate
Governance Code 2014 (the “Code”).
These issues have been addressed during the course of the year and I am
delighted to confirm that the Company is now in full compliance with the
provisions of the Code and the report which follows this introduction will set
out in detail how the Company ensures its compliance with the Code.
The UK Corporate Governance Code 2016, released in April 2016 (the “New
Code”), applies to accounting periods beginning on or after 17 June 2016,
so the New Code applies to the Company with effect from 1 October 2016.
The Company is reviewing the new requirements to ensure that it complies
with the New Code, and we will report on our compliance with the New
Code in next year’s annual report.
Board Composition
There were no Board changes during the financial year to 30 September
2016, but a key area of focus of the Board and the Nomination Committee
during the year was to review succession planning arrangements for the
Executive Directors and the senior management team to ensure that
adequate arrangements are in place and also to consider diversity on the
Board and across the organisation as a whole.
During the year, the Nomination Committee ran a specific succession
planning and recruitment process focused on the Chief Financial Officer
(CFO) role, in anticipation of Wendy Parry’s retirement plans. The outcome
of this exercise was the appointment of Paul Meehan as Wendy’s successor
with effect from January 2017. The report of the Nomination Committee
provides further details on this exercise.
26
Annual Report & Accounts 2016
On the Beach Group plc
Board Evaluation
We have carried out a full, thorough and tailored Board Evaluation exercise
this year. This covered the Board itself, each of the Committees, and an
evaluation of each individual Director’s performance. Details are provided
on page 33.
Market Abuse Regulation
The Market Abuse Regulation (“MAR”) came into force on 3 July 2016, and
the Company has reviewed and updated its policies and procedures to
ensure compliance with the provisions of MAR, which includes the creation
of a new Disclosure Committee, whose job it is to monitor the Company’s
compliance with MAR, and make decisions about disclosure of information.
More details are set out on page 30.
Shareholder Engagement
We are committed to engaging and maintaining an active dialogue with
all our shareholders. Further details are set out on page 33. I would like
to encourage our shareholders to attend our Annual General Meeting
which will be held at 11am on 2 February 2017 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
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.
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Richard Segal is Chairman of the
Company. He is also Chairman of
HostelWorld Group plc, Racing Post
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.
Appointed to board:
17 August 2015
Independent:
N/A
External appointments:
None
Committee memberships:
Disclosure (Chairman)
Appointed to board:
17 August 2015
Independent:
N/A
External appointments:
None
Committee memberships:
Disclosure
Appointed to board:
17 August 2015
Independent:
Yes
External appointments:
Spread A Smile
Hostelworld Group plc
Encore Tickets
Racing Post
Committee memberships:
Audit, Nomination (chairman),
Remuneration, Disclosure
Annual Report & Accounts 2016
On the Beach Group plc 27
DIRECTORS’ BIOGRAPHIES
Lee Ginsberg
NON-EXECUTIVE DIRECTOR
David Kelly
NON-EXECUTIVE DIRECTOR
Lee Ginsberg joined the Company in August
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 Domino's 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,
a non-executive director and Chairman of the
Audit and Risk Committee of Trinity Mirror plc
and a non-executive director of Softcat Plc. Lee is
also the non-executive Deputy Chairman, senior
independent director and Chairman of the Audit
Committee of Patisserie Valerie Holdings plc.
Appointed to board:
17 August 2015
Independent:
Yes
External appointments:
Softcat Plc
Oriole Restaurants
Mothercare Plc
Trinity Mirror Plc
Patisserie Holdings Plc
Committee memberships:
Audit (chairman), Nomination, Remuneration
28
Annual Report & Accounts 2016
On the Beach Group plc
David Kelly joined the Company in August 2015
as a Non-Executive Director and Chairman
of the Remuneration Committee. David is
currently a Non-Executive Director of The Gym
Group Plc. He 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 and Pure 360.
Appointed to board:
28 August 2015
Independent:
Yes
External appointments:
The Gym Group Plc
Love Home Swap
Holiday Extras
Pure 360
Simply Business
Camelot UK Lotteries
Trinity Mirror Plc
Committee memberships:
Audit, Nomination, Remuneration (chairman)
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 2016
(the “reporting period”) the Company was compliant with the Code in its entirety. There are no areas of non-compliance and this was achieved through the
strong governance structure in place.
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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LEADERSHIP
Role of the Board
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On the Beach Group plc 29
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
27 and 28.
› Delegation of authority to committees and below board level;
› Corporate governance matters; and
› Approval of policies adopted by the Group.
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.
Matters Reserved to the Board
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:
› 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;
Board Committees
The Board has delegated certain responsibilities to four 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.
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
regularly and which sets out all matters to be covered by the Board and
Committees over a rolling twelve-month period, including strategy, standard
business, matters directly linked with financial reporting and results,
corporate governance requirements and ongoing training for the Board.
During the reporting period, twelve Board meetings were held. All Board
meetings were attended by all Directors.
There have been 5 meetings of the Audit Committee, 6 meetings of the
Remuneration Committee, 3 meetings of the Nomination Committee and
4 meetings of the Disclosure Committee (each attended by all members of
the Committees).
Disclosure Committee
In relation to the Market Abuse Regulation (EU) No 596/2014 which came
into force on 3 July 2016, the company has established a Disclosure
Committee. The role of the committee is to maintain procedures, systems
and controls for the identification, treatment and disclosure of inside
information and for complying with the obligations falling on the Company
and its directors and employees under the Market Abuse Regulation and
the Listing Rules of the London Stock Exchange.
The Disclosure Committee reviews market announcements, identifies
potential inside information, creates and amends insider information lists
and implements disclosure procedures.
Committee
Audit Committee
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:
36
Remuneration
Committee
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
Disclosure
Committee
Responsible for overseeing the Company’s compliance with the Market
Abuse Regulation and making decisions (with support of advisers) on when
information must be disclosed to the market.
Simon Cooper (Chair)
Richard Segal
Wendy Parry
39
34
N/A
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Annual Report & Accounts 2016
On the Beach Group plc
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CORPORATE GOVERNANCE STATEMENT
Insurance Cover
The Company has made arrangements for appropriate insurance cover to
be put in place in respect of legal action against its directors.
performance. These regular appraisals are important to evaluate the
knowledge and skills of members of the board.
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 and 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;
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› 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;
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› 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.
Regularly, following the end of board meetings the Chairman and Non-
Executive Directors meet formally without the Executive Directors present
in order to provide evaluation on the Executive Directors. Similarly, the
Non-Executive Directors meet to evaluate and appraise the Chairman’s
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 as
‘‘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 OTB
since October 2013. The Board is satisfied with the judgment, experience
and approach adopted by Richard and has determined that Richard is of
independent character and judgment, 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.
Annual Report & Accounts 2016
On the Beach Group plc 31
CORPORATE GOVERNANCE STATEMENT
Appointments to the Board
The Nomination Committee leads the process for Board appointments and
makes recommendations to the Board. Please see page 34 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 (with the
exception of Wendy Parry, who will retire with effect from 16 January 2017).
Paul Meehan 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.
Diversity
We are aware of the need to keep under review the diversity of our Board
and our organisation as a whole in all respects including in terms of socio-
economic background, race, ethnicity, gender, sexual orientation, age,
physical abilities, religious beliefs, political beliefs and other ideologies.
It is important that we maintain a diverse workforce across all these areas,
but one particular area of focus for the organisation is gender diversity.
In the technology industry as a whole, there is a considerable gender
imbalance, with significantly more men than women going into the industry.
This trend is reflected in On the Beach’s IT development team, but we are
committed to taking steps to attract and retain women into our IT team
(such as our recent involvement with Rails Girls Manchester, see page 22
for more details).
We are also conscious of the gender imbalance on our Board, which is
predominantly male. The Nomination Committee considered this issue
during the year (especially in light of Wendy Parry’s retirement) and it was
agreed that the Board should not specifically look to recruit a Director
to address gender balance, and that any Board appointments would be
overseen by the Nomination Committee and would be on the basis of merit
against objective criteria to ensure we appoint the best individual for each
role. However the Company will continue to monitor diversity both on the
Board and across the business to ensure diversity and equal opportunities.
As at 30 September 2016, the average age of our 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
15
132
1
5
153
Percentage
of female
employees
20%
25%
53%
AGM
Our second Annual General Meeting will be held at 11am on 2 February
2017 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.
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On the Beach Group plc
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 27 and
28.
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
The Company has an induction programme for all new directors joining the
board. 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.
Information and Support
All 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.
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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 53 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:
K Vickerstaff
COMPANY SECRETARY
6 December 2016
CORPORATE GOVERNANCE STATEMENT
Board 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. The Board
has carried out an evaluation 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.
A formal internal evaluation was undertaken. It was decided that it was not
necessary to carry this out externally and that an in-house review would be
the most simple and effective method of evaluating the Board, particularly
as it is the first Board evaluation for the Company. This allowed a firsthand
assessment in order to gain a clear picture of any improvements which
could be made.
As part of the evaluation process, questionnaires were completed by each
board member in order to compare performance against the Corporate
Governance Code. The questionnaire covered leadership, effectiveness,
accountability, shareholder relations, meetings and administration.
The Board approved the agreed questionnaires and then these were
completed electronically. Results were analysed and the Company
Secretary prepared a report for the Chairman. This was tabled for
discussion at a Board meeting.
The evaluation established that the Board and its Committees were
operating effectively and efficiently, with good leadership and accountability.
The Board dynamic works well, with great dedication and commitment
of each of the Board Members, and with the appropriate level of support
and challenge from Non-Executive Directors. No major issues arose, but
it was agreed that Board Meeting agenda should be restructured to give
more priority and dedicated time to discussions on strategy. It was also
agreed that the issue of Board diversity be considered by the Nomination
Committee (see pages 34 and 35).
INVESTOR RELATIONS
The Company is committed to engaging and maintaining an active dialogue
with all of its shareholders. The Company has rolled out an investor
relations programme enabling 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 are 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 legal
requirements.
Annual Report & Accounts 2016
On the Beach Group plc 33
REPORT OF NOMINATION COMMITTEE
Richard Segal
CHAIRMAN, NOMINATION COMMITTEE
I am pleased to introduce the report of the Nomination Committee for the
year ended 30 September 2016.
Members of the Nomination Committee
Chairman
Members
Richard Segal David Kelly
Lee Ginsberg
› Composed of three independent Non-Executive Directors
› At least two meetings held per year
› Meetings are attended by the Chief Financial Officer, Chief Executive,
Company secretary and other relevant attendees by invitation.
Three meetings were held during the year:
Meetings
attending/Total
meetings held attended
Percentage
of meetings
3/3 100%
Richard Segal
David Kelly 3/3 100%
3/3 100%
Lee Ginsberg
Role of the Committee
The Committee has primary responsibility for leading the process for board
appointments and making recommendations to the board, bearing in mind
the need for diversity 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.
Succession Planning
The Committee carried out an extensive review of the Group’s succession
planning arrangements for the Executive Directors, the executive team
and the senior management team, including the employees regarded as
key for the ongoing success of the Group. The Committee examined the
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Annual Report & Accounts 2016
On the Beach Group plc
risks identified in the succession plan, and recommended that certain
actions took place to address any risk areas, including working with the
Remuneration Committee to ensure that the remuneration for these
individuals was at an appropriate level and in an appropriate structure to
incentivise and retain talent in the business.
Retirement and succession of CFO
During the year, Wendy Parry expressed a wish to retire during 2017,
though she agreed to remain in the business until such time as a suitable
successor could be identified and recruited. This enabled us to ensure that
the CFO succession project was very carefully planned and managed. The
key stages of the process were as follows:
1. Planning
› Review of the current scope of the CFO and preparation of a new CFO
role profile with a list of skills, attributes and experience required from a
new CFO
› Review and restructure of the current finance team and role
descriptions
› Engagement of an external executive search firm, Skill Capital, to
undertake a talent mapping exercise to assist the planning and
timetable for the succession. Skill Capital has no other connection with
the Group.
2. Recruitment
› Skill Capital approached candidates who met the criteria on a no-names
basis. This led to a short list of potential candidates for review by the
Company.
› Two individuals were identified as particularly strong candidates, and
(having signed a strict non-disclosure agreement) were invited to
interviews with the CEO, the Chairman and the Senior Independent
Director.
› Paul Meehan was identified as the strongest candidate who was an
outstanding fit for the business with fantastic skills and experience.
REPORT OF NOMINATION COMMITTEE
› Discussions were held with Paul (with the assistance of Skill Capital) with
regard to package expectations (please see page 39 in the
Remuneration Committee’s report for further details).
3. Appointment & handover
› The Committee recommended to the Board that an offer be made
to Paul in line with the package recommended to the Board by the
Remuneration Committee.
› An offer was made to Paul, which was accepted on 28 November 2016
and a start date was agreed as 16 January 2017.
› A retirement date was agreed with Wendy of 16 January 2017 to tie in
with Paul’s start date, but Wendy has agreed to be available as long as is
required to ensure a full and orderly handover.
Diversity
The Company values equality and diversity (in all respects including in terms
of socio-economic background, race, ethnicity, gender, sexual orientation,
age, physical abilities, religious and political beliefs) and understands the
benefits of a diverse Board.
The Nomination Committee considered the diversity on the Board during
the year, and in particular noted that there is a gender imbalance and
ethnicity imbalance. The Nomination Committee leads Board appointments
and it was agreed that, both specifically in relation to the appointment of
the new CFO, and also generally in relation to Board appointments, diversity
and equality remained a key value for the company, and that it was the
utmost priority for the Committee to ensure that where there is a vacancy
on the Board, selection is on the basis of merit against objective criteria
to ensure we appoint the best individual for each role. It was also agreed
that the Board should not specifically look to recruit a Director to address
the current imbalance of gender and ethnicity. However the Company will
continue to monitor diversity both on the Board and across the business to
ensure diversity and equal opportunities.
Board Evaluation & Re-election of Directors
The Committee reviewed the results of the Board evaluation and Director
appraisal process as described on page 33 and has recommended to the
Board, after evaluating the balance of skills, knowledge, independence and
experience of each Director, that all Directors (with the exception of Wendy
Parry, who will retire with effect from 16 January 2017) will seek re-election,
and that Paul Meehan will seek election, at the Company’s forthcoming
AGM.
I will be available at the AGM to discuss any questions that shareholders
have in relation to the work of the Committee.
Richard Segal
CHAIRMAN, NOMINATION COMMITTEE
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Annual Report & Accounts 2016
On the Beach Group plc 35
REPORT OF THE AUDIT COMMITTEE
Lee Ginsberg
CHAIR OF THE AUDIT COMMITTEE
I am pleased to present the Audit Committee Report for 2016. This has
been the first full year as a listed company.
With the assistance of management and the external auditor, the
Committee has considered the main financial reporting issues, estimates
and judgements, and we believe that the information in the Annual Report
is fair, balanced, and understandable and clearly explains progress against
our strategic and operating objectives.
We believe that rigorous internal controls and robust risk management
processes are an essential part of delivering shareholder value. The
Committee has assisted the Board in performing a review of effectiveness
of the processes and systems in place.
Members of the Nomination Committee
Chairman
Members
Lee Ginsberg David Kelly
Richard Segal
› Composed of three independent Non-Executive Directors
› Lee Ginsberg is considered by the Board to have extensive recent and
relevant financial experience and all members have had experience in
large organisations (Directors’ biographies appear on pages 27 and 28).
› At least three meetings held per year
› Meetings are attended by the Chief Financial Officer, Chief Executive,
Company Secretary and external auditor by invitation
Five meetings were held during the year:
Meetings
attending/Total
meetings held attended
Percentage
of meetings
Lee Ginsberg
5/5 100%
David Kelly 5/5 100%
5/5 100%
Richard Segal
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On the Beach Group plc
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REPORT OF THE AUDIT COMMITTEE
Financial Reporting
The primary role of the Committee in relation to financial reporting is to
review and monitor the integrity of the financial statements, including
annual and half-year reports, result announcements, dividend proposals
and any other formal announcement relating to the Group’s financial
performance.
The Committee has looked at the quality and appropriateness of the
accounting principles and policies adopted and whether management had
made appropriate underlying estimates and judgements. In carrying out
this review, the Committee has looked at management reports in respect
of the main financial reporting issues and judgements made, together with
reports prepared by the external auditor on the 2016 half-year statement
and Annual Report 2016.
Work undertaken by the Committee in relation to 2016 Financial
Statements
The Committee has reviewed the content of the 2016 Annual Report and
considered whether, taken as a whole, in its opinion it is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Company’s position, performance, business
model and strategy.
The Committee was provided with a draft of the Annual Report in order to
assess the strategic direction and key messages being communicated.
The Committee provided feedback highlighting any areas in which they felt
that further clarity or information was required and this was then
incorporated into the report provided for Audit Committee approval.
Internal audit
The Group did not have a stand-alone Internal Audit Department during the
year. The Committee has reviewed the need for an internal audit function
during the year and considers that having no internal audit function is
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 will, as part of its remit, continue to 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.
In line with its terms of reference, during the year, the Audit Committee
has undertaken reviews and internal audits on the Company’s processes,
procedures and safeguards, commissioning external independent reports
where required.
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 Audit Committee reviewed the
findings of the external auditor in respect of both the financial
statements for the six-month period ending 31 March 2016 and for the
year ended 30 September 2016.
› The Committee is mindful of its responsibility to ensure that the
external auditor maintains its independence and objectivity. It has
therefore reviewed, and is satisfied with, the independence of KPMG as
the external auditor; and
› The audit fee and the extent of non-audit services provided during the
year.
KPMG was appointed auditor to the Group in 2007. The mandatory firm
rotation (MFR) rules in the UK introduce requirements that all EU public
interest entities (PIEs) must tender their audit contract at least every 10
years and change or rotate their auditor at least every 20 years. As the
Group is not FTSE 350, audit tenure is measured from the point at which
the Group became a PIE, being 28 September 2015, the date on which
the Group became listed. As such, the Group will need to run a tender
process by 2025. However, the Audit Committee will continue to review the
relationship with the external auditor, and may tender its audit contract
earlier than this, if the Committee believes this is necessary or desirable.
Non-audit services
The Company’s external auditor 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 auditor
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 £90,000). 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 (FY16), it was disclosed that fees
totalling £nil were paid to KPMG for non-audit services.
Whistleblowing
A whistleblowing policy has been adopted which includes access to a
whistleblowing telephone service run by an independent organisation,
allowing employees to raise concerns on an entirely confidential basis. The
Committee receives regular reports on the use of the service, any significant
reports that have been received, the investigations carried out and any
actions arising as a result.
Annual Report & Accounts 2016
On the Beach Group plc 37
REPORT OF THE AUDIT COMMITTEE
Risk Management and Internal Control
The primary role of the Audit Committee in relation to risk management
and internal controls is to review the effectiveness of risk management
systems and related internal controls to ensure that any issues that have
arisen are properly dealt with, and that going forward the systems are fit for
purpose. The Committee performs its duties by:
› Reviewing annually the Group’s system of internal control; and
› Reviewing reports from the external auditors on any issues identified
in the course of their work, including an internal control report on
control weaknesses, and ensuring that there is an appropriate response
from management.
The Group has in place internal controls and risk management systems in
relation to its financial reporting process and preparation of consolidated
accounts. These systems include policies and procedures to ensure
that adequate accounting records are maintained and transactions are
recorded accurately and fairly to permit the preparation of financial
statements in accordance with IFRS. The internal control systems include:
Component
Approach
Risk Management
Financial Reporting
Risks are highlighted through a number of different reviews and culminate in
a risk register. 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.
Consolidated Group management accounts are produced monthly
and provide relevant, reliable and up-to-date financial and non-financial
information to management and the Board including an income statement,
balance sheet and cash flow statement.
Basis for assurance
Updated by Executive team twice a
year and reviewed and approved by
the Board annually
Results are reviewed each month
by management, the Executive
team and the Board. Results are
compared against expectations and
significant variances are explained by
management.
Budgeting and
reforecasting
The Group produces an annual budget and quarterly reforecast against
which management monitor the key business and financial activities towards
achieving the financial objectives each month.
Performed using a bottom-up
approach with reviews performed by
the Executive team and the Board.
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.
The review by the audit committee highlighted that effective risk management
and internal controls are in place.
The Committee has performed a
rigorous and robust review of internal
controls during the year including:
› Review of risk registers
› Assessment of compliance with
corporate governance code
› Delegated authority and approval
limits
› Review of business continuity plan
› Basis and monitoring of capitalised
website development costs
The Committee, with the assistance of management and KPMG, identified areas of financial statement risk and judgement as described below:
Description of focus area
Audit Committee action
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.
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 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.
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 override 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.
Lee Ginsberg
CHAIR OF THE AUDIT COMMITTEE
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REMUNERATION REPORT
Annual Statement of the Chairman of the Remuneration Committee
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CHAIRMAN OF THE REMUNERATION COMMITTEE
As Chairman of the Remuneration Committee, I am pleased to present the
Company’s Remuneration Report for the year to 30 September 2016.
The Directors’ Remuneration Policy was subject to a binding shareholder
vote at the 2016 AGM and the Remuneration Committee were very pleased
to receive overwhelming support from our shareholders, with 92.95% of
proxy votes being in favour. We believe that this policy is fit for purpose and
therefore do not propose to make any amendments this year. For ease of
reference, a summary of the policy has been included in this report.
As outlined last year, the remuneration policy is designed to support the
strategic objectives of the Company and to enable the business to attract,
retain and motivate the quality of senior management needed to shape
and execute the business strategy, aligning all stakeholders’ interests. This
is achieved by the use of fair but challenging targets with an appropriate
balance between fixed and variable pay, and short and long term
remuneration.
In our first full year since listing, the Company’s performance has been
strong with growth in adjusted underlying PBT of 46.9% year-on-year.
Our executive team, led by Simon and Wendy, have been instrumental in
driving these results and have performed strongly in their roles.
As noted in the Chairman’s statement and the report of the Nomination
Committee, Wendy Parry is to retire with effect from January 2017 and
will be succeeded by Paul Meehan. As part of the succession planning
and recruitment process, the Committee was involved in shaping
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a remuneration package for the new CFO which is in line with our
remuneration policy, investor sentiment and which provides rewards and
incentives in line with strategy. We are delighted to welcome Paul in January
and we wish Wendy a fantastic retirement.
Remuneration highlights for the 2016 financial year
2016 was the first full year for On the Beach as a public company. In 2016,
remuneration highlights included the following:
› As outlined in our 2015 report, the Executive Directors received salary
increases effective from 1 January 2016 following the review carried
out at the time of listing. The Remuneration Committee reviewed
salaries during the year and determined that no salary increases would
be awarded in 2017.
› Annual bonus measures were based on financial targets that link
directly to both strategic and operational initiatives of the Company. A
bonus of 27.8% of salary was approved by the Remuneration
Committee for the Executive Directors.
› The first Long-Term Incentive Plan award was granted during the year.
This award will vest at the end of three years and will be subject to a
further two year holding period. The performance metrics will be based
70% on EPS performance and 30% on returns to shareholders.
Annual Report & Accounts 2016
On the Beach Group plc 39
REMUNERATION REPORT
Key activities of the remuneration committee
The Remuneration Committee met 6 times during 2016 and its key activities
were as follows:
I hope that you find the information in this Report helpful and informative
and I look forward to your continued support at the Company's Annual
General Meeting.
The Remuneration Committee values all feedback from shareholders and
as a public company, we aim to engage with our investors on a regular
basis. 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
CHAIR OF THE REMUNERATION COMMITTEE
› Reviewed the 2016 Remuneration Report;
› Launched the Company’s all-employee share incentive plan;
› Discussed annual bonus awards for Executive Directors;
› Granted the Company’s first Long-Term Incentive Plan (LTIP) to eligible
participants;
› Discussed succession planning and the talent pipeline for senior
management;
› Recommended to the Board a remuneration package for the incoming
CFO;
› Reviewed the Executive Directors’ remuneration arrangements for
2017; and
› Drafted the Company’s Remuneration Report for 2016.
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.
› A brief summary of the Company’s remuneration policy for Directors.
› The Annual Report on Remuneration which sets out payments made
to the Directors and details the link between Company performance
and remuneration for the 2016 financial year. The Annual Report
on Remuneration together with this statement is subject to an advisory
shareholder vote at the AGM on 2 February 2017.
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REMUNERATION REPORT
SUMMARY OF REMUNERATION POLICY
Introduction
The Directors’ Remuneration Policy (the ‘Policy’) was approved by shareholders at the AGM on 5 February 2016 (92.95% of votes cast being in favour) and
became effective from that date. There are no proposals to amend the Directors' Remuneration Policy at the AGM on 2 February 2017.
A summary of the policy is included for reference to assist with the understanding of the contents of this report. The full policy is detailed in our 2015 Annual
Report, which can be found in the ‘Investors centre’ section under ‘Reports and presentations’ on the Company’s website.
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.
Operation
Salaries are reviewed annually and any changes are effective from 1 January
in the financial year.
Opportunity
Base salaries will be set at an appropriate level within a comparator group
of listed companies of comparable size and will normally increase in line
with increases made to the wider employee workforce.
Performance metrics used, weighting and time period applicable
None
Benefits
Short and long term strategic objectives
Provides a competitive level of benefits.
Operation
The Executive Directors receive benefits which include family private health
cover.
Opportunity
The maximum will be set at the cost of providing the benefits described.
Performance metrics used, weighting and time period applicable
None
Annual Report & Accounts 2016
On the Beach Group plc 41
SUMMARY OF REMUNERATION POLICY
Pensions
Short and long term strategic objectives
Due to their considerable shareholdings, the current Executive Directors
are not provided with pension funding.
Opportunity
15% of base salary p.a.
Annual Bonus Plan
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.
Performance metrics used, weighting and time period applicable
None
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.
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.
Annual bonuses are paid in cash after the end of the financial year to which
they relate.
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.
Long-Term Incentive Plan (LTIP)
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.
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.
›
A further two year holding period post vesting will apply.
Malus is applied up to the date of the bonus determination and during the
three year period from grant to vesting for the LTIP. Clawback will apply
for two years from the date of bonus determination and for the two year
period post vesting for the LTIP.
Opportunity
Maximum award 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.
Performance metrics used, weighting and time period applicable
The performance conditions for awards are currently split between
earnings per share (“EPS”) growth (70%) and absolute total shareholder
return (“TSR”) (30%).
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SUMMARY OF REMUNERATION POLICY
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 registered 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.
Opportunity
150% of salary.
Performance metrics used, weighting and time period applicable
None
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
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.
Opportunity
The base fees for Non-Executive Directors are set at a market rate.
Performance metrics used, weighting and time period applicable
None
Annual Report & Accounts 2016
On the Beach Group plc 43
SUMMARY OF REMUNERATION POLICY
How remuneration links with strategy
It is essential that a fair, competitive and attractive remuneration policy is in place in order to ensure the future success of the Company. Our remuneration
policy is designed to be fair and competitive, support the strategic objectives of the Company, and motivate the Executive Directors to deliver the short and long
term strategy. In the table below, we summarise the performance measures for our incentive arrangements and how they are aligned with the business strategy.
Strategic priority
Incentive measures
Incentive scheme
Out – innovating through agility and
investment in talent and technology
Revenue growth and personal objectives
Annual Bonus Plan
Driving an efficient increase in market traffic
share
Marketing cost as a % of revenue and personal
objectives
Annual Bonus Plan
Optimisation and personalization of the
customer proposition across multiple devices
Personal objectives
Annual Bonus Plan
Leveraging revenue through direct and
differentiated supply
Revenue growth and personal objectives
Annual Bonus Plan
Expanding our model into new source
markets and products
Growth in International sales and other new
products and personal objectives
Annual Bonus Plan
Delivery of shareholder value
Absolute TSR and EPS
LTIP
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REMUNERATION REPORT
ANNUAL REPORT ON REMUNERATION
Single total figure of remuneration (audited)
Executive Directors (Audited)
The table below sets out the single total figure of remuneration and breakdown for each Executive Director in respect of the
2016 financial year. Comparative figures for the 2015 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).
Salary (1)
(£’000)
2016
2015
182
127
163
127
Name
Simon
Cooper
Wendy
Parry
Benefits
(£’000)
Bonus
(£’000)
LTIP
(£’000)
Pension
(£’000)
Total
(£’000)
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
1
2
1
2
56
49
-
-
-
-
-
-
-
-
2
-
239
131
214
129
Notes:
(1) Executive Director salaries were reviewed on Admission and increased with effect from 1 January 2016 to £200,000
for Simon Cooper and £175,000 for Wendy Parry.
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
Chairman - Remuneration Committee
2016
Taxable
Fees Benefits Total
2015
Taxable
Fees Benefits Total
100
58
50
-
-
-
100
77
58
50
7
5
-
-
-
77
7
5
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.
Annual Report & Accounts 2016
On the Beach Group plc 45
ANNUAL REPORT ON REMUNERATION
Bonus awards (audited)
A bonus pot for Executive and Senior Manager bonuses is formed from a proportion of the excess PBT above a pre-determined target. For 2016, the UK IFRS
profit before tax excluding exceptional items was £21.8m (before any bonuses are paid), which was £1.7m above the target for the year. The Remuneration
Committee has determined that the resulting bonus pot was £0.4m (excluding NI).
The Remuneration Committee determined that, due to strong performance against the key strategic objectives, it was appropriate to distribute this bonus pot to
Executives and Senior Managers. The following bonus awards were approved by the Remuneration Committee:
Director
Simon Cooper
Wendy Parry
Maximum bonus
opportunity
(% of salary)
100%
100%
Bonus awarded
(% of maximum)
Bonus awarded
(% of salary)
Bonus awarded
(£’000)
27.8%
27.8%
27.8%
27.8%
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Long term incentives awarded in 2016 (audited)
The table below sets out the details of the Long-Term Incentive Plan awards granted in the 2016 financial year. Vesting will
be determined according to the achievement of performance conditions as outlined below.
Director
LTIP
Value of award
Face value
of award
(£’000)
Number of
shares awarded
Exercise
Price (£)
Percentage of
award vesting
at threshold
performance
Performance
period end date
Performance
conditions
Simon Cooper
Wendy Parry(1)
LTIP – nil
cost
option
LTIP – nil
cost
option
100% of salary
200
91,743
Nil
25%
100% of salary
175
80,275
Nil
25%
30 September
2018
EPS (70%)
Absolute TSR (30%)
30 September
2018
EPS (70%)
Absolute TSR (30%)
Notes:
(1) Wendy Parry will retire in January 2017. As she is retiring with the agreement of the Board, she will be a good leaver
for the purposes of the LTIP scheme, so her award will be pro-rated to time and performance.
The awards were granted on 20 May 2016. The number of shares awarded is calculated using the closing share price on 30 September 2015, which was 218p,
as disclosed in the Admission document.
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ANNUAL REPORT ON REMUNERATION
The EPS condition applying to 70% of the awards is provided in the table below.
EPS for year ending 30 September 2018
Vesting
Less than 21.5p
21.5p
23.3p or above
0%
25%
100%
Between 21.5p and 23.3p
Straight line vesting between 25% and 100%
The Absolute TSR condition applying to 30% of the awards is provided in the table below.
Annualised TSR of the Company over the
three year period to 30 September 2018
Less than 15%
15%
25% or above
Vesting
0%
25%
100%
Between 15% and 25%
Straight line vesting between 25% and 100%
Absolute TSR is averaged over a one month period prior to the beginning and end of the performance period or such shorter period as is available.
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 five year period, which as noted below has been met
in full. 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 2016 are set out in the table below.
Director
Simon Cooper
Wendy Parry
Shareholding
requirement
(% of salary)
Current
shareholding (1)
(% of salary)
Beneficially
Owned
Shares
150%
150%
2,042%
4,761%
-
-
Unvested LTIP
interests subject
to performance
conditions
91,743
80,275
Shareholding
requirement met?
Yes
Yes
(1) The share price of 200.75 pence as at 30 September 2016 has been taken for the purpose of calculating the current shareholding as a percentage of salary.
Unvested LTIP awards do not count towards satisfaction of the shareholding guidelines.
No changes in the above Directors’ interests have taken place between 30 September 2016 and the date of this report.
Annual Report & Accounts 2016
On the Beach Group plc 47
ANNUAL REPORT ON REMUNERATION
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 2016
406,680
16,300
-
Comparison of overall performance and pay (TSR graph)
The graph below shows the value of £100 invested in the Company’s shares since listing compared to the FTSE Small Cap
index. The graph shows the Total Shareholder Return generated by both the movement in share value and the reinvestment
over the same period of dividend income. The Remuneration Committee considers that the FTSE Small Cap index is the
appropriate comparator as On the Beach is a constituent of this index. This graph has been calculated in accordance with
the Regulations. It should be noted that the Company listed on 28 September 2015 and therefore only has a listed share
price for the period from 28 September 2015 to 30 September 2016.
150
130
110
90
70
50
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FTSE Small Cap
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ANNUAL REPORT ON REMUNERATION
Chief Executive Officer historical remuneration
The table below sets out the total remuneration delivered to the Chief Executive Officer over the last three 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 bears any comparative value to
that paid in its later years and therefore the Remuneration Committee has chosen to disclose remuneration only for
the three 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.
2016
239
27.8%
n/a
2015
2014
131
-
n/a
131
-
n/a
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 2015 to 2016 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 (with the salary increase effective from 1 January 2016 pro-rated for the year), 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 2015 and 2016. Part time
employees have been excluded from the analysis, as have any employees who have been promoted or changed role.
£’000
Salary
£’000
Percentage
Change
£’000
Taxable
Benefits
£’000
Percentage
Change
£’000
Bonus
£’000
Percentage
Change
2016
2015
2016
2015
2016
2015
Chief Executive Officer
182
127
+43%
Total pay
3,486
1,983
+43%
Number of employees
Average per employee
86
41
50
40
+72%
+2%
1
20
-
-
1
8
-
-
0%
+150%
-
-
56
382
86
4
-
N/A
206
+85%
50
4
+72%
0%
Relative importance of the spend on pay
The table below sets out the relative importance of spend on pay in the 2015 and 2016 financial years compared with
other disbursements. All figures provided are taken from the relevant Company Accounts.
Disbursements from profit
in 2016 financial year
(£m)
Disbursements from profit
in 2015 financial year
(£m)
Percentage
change
Profit distributed by way of dividend
Overall spend on pay including Executive Directors
2.9
8.6
-
7.7
-
12%
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On the Beach Group plc 49
ANNUAL REPORT ON REMUNERATION
Shareholder voting at general meeting
The Committee is committed to shareholder dialogue, seeks to ensure optimal alignment for all stakeholders and to ensure
shareholders’ views are taken into account in shaping remuneration policy and practice. The Directors’ Remuneration Policy
and Annual Report on Remuneration were subject to a shareholder vote at the AGM on 5 February 2016, the results of
which were as follows:
Resolution
Ordinary Resolution to approve
the Directors' remuneration policy for the
year ended 30 September 2015
Ordinary Resolution to approve
the Directors' remuneration report for the
year ended 30 September 2015
For
92,568,002
(92.95%)
99,590,133
(100%)
Against
7,022,131
(7.05%)
For
0
(0%)
0
(0%)
0
(0%)
Implementation of remuneration policy in financial year 2017
The Remuneration Committee proposes to implement the policy for 2017 as set out below:
Name
Simon Cooper
Wendy Parry
Salary (£)
Salary (£)
Percentage
Change
2017 (1)
200,000
175,000 (1)
2016
200,000
175,000
0%
0%
Notes:
(1) Wendy Parry will retire with effect from January 2017 and will be succeeded by Paul Meehan. The Remuneration Committee recommended to the Board a
remuneration package for Paul of £250,000 basic salary and bonus, LTIP and other benefits in line with the remuneration policy. The salary agreed with Paul Meehan
is considerably more than the salary that was paid to Wendy Parry on the grounds that Paul will not initially have the significant shareholding in the Company that
Wendy has. The Committee is satisfied, having taken advice from PWC as external remuneration consultants, that Paul Meehan’s package is in line with market practice.
Changes to NED Fees
No changes are proposed to the current fee components in place. The breakdown of fee components will remain as follows:
Chairman Fee
Base Fee
Additional fees are paid for:
Senior Independent Director
Chair of Audit Committee
Chair of Remuneration Committee Fee
£100,000
£45,000
£5,000
£7,500
£5,000
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ANNUAL REPORT ON REMUNERATION
Benefits and Pension
No changes are proposed to benefits or pension.
Annual Bonus Plan
The maximum bonus opportunity for the Executive Directors will remain 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
2017 financial year will include:
› Achievement of group budgeted PBT;
› Generation of sales from international sites in line with budget;
› Growth in UK revenue 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 a grant under the LTIP will be made during 2017. 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.
Illustrations of the application of the remuneration policy
Element
Description
Minimum
On-Target
Maximum
Salary, benefits and pension
Salary, benefits and pension (fixed)
Included
Included
Included
Annual Bonus
Annual bonus
No variable payable
50% of maximum bonus
100% of maximum bonus
Long-Term Incentive Plan
Award under the Long-Term
Incentive Plan
No annual minimum
Multiple year and variable
62.5% of the maximum
award
100% of the maximum
award
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ANNUAL REPORT ON REMUNERATION
Dividend equivalents have not been added to LTIP share awards.
CEO (£'000)
CEO (£'000)
Maximum
On-Target
Minimum
29%
41%
100%
29%
43%
20%
38%
£0
£100
£200
£300
£400
£500
£600
£700
£800
Salary, Benefits & Pension Bonus LTIP
At minimum, variable remuneration is 0% of salary; at target, variable remuneration represents 144% of salary and at maximum, variable remuneration
represents 250% of salary. Benefits are assumed to be in line with those received during 2016.
Given the change in CFO partway through the 2017 financial year we have not provided a graph illustrating the implementation of remuneration in 2017 for this
role.
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. 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. The Remuneration Committee met 6 times during 2016.
Advisers to the Remuneration Committee
During the financial year the Committee took advice from PricewaterhouseCoopers LLP (PwC) who were retained as external
independent remuneration advisors to the Committee.
During the financial year, PwC advised the Company on all aspects of remuneration policy for Executive Directors and
members of the Executive Team including the grant of the first LTIP award.
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 fees of £11,250 for their advice during the year to 30 September 2016.
On behalf of the board
David Kelly
CHAIR OF THE REMUNERATION COMMITTEE
6 December 2016
52
Annual Report & Accounts 2016
On the Beach Group plc
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 2016.
Statutory Information
Information required to be part of the Directors’ 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
Appointment and replacement of Directors
Page reference
Directors’ Report
Directors’ Report
Board of Directors
Community
Directors’ indemnities
Directors’ interests
Corporate Governance Statement
Strategic Report; Corporate Social Responsibility
Corporate Governance Statement; Directors’ Report
(pages 31 and page 55)
Corporate Governance Statement
Directors’ responsibility statement
Statement of Directors' Responsibilities
Disclosure of information to Auditors
Directors’ Report
Employee involvement
Employees with disabilities
Future developments of the business
Going concern
Greenhouse gas emissions
Independent Auditors
Names and details of all Directors
Political donations
Post-balance sheet events
Corporate Social Responsibility
Corporate Social Responsibility
Strategic Report
Directors’ Report
Corporate Social Responsibility
Directors’ Report
Directors' Biographies
Directors’ Report
Directors’ Report
Powers for the Company to issue or buy back its shares
Directors’ Report
Powers of the Directors
Corporate Governance Statement; Directors’ Report
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
Directors’ Report
Significant related party agreements
Note 22 to the consolidated financial statements
Significant shareholders
Directors’ Report
Statement of corporate governance
Corporate Governance Statement
Substantial shareholdings
Directors’ Report
Strategic Report and note 19 to the consolidated financial statements (page 14)
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(page 59)
(page 56)
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(page 22)
(page 03)
(page 55)
(page 23)
(page 56)
(page 27)
(page 56)
(page 55)
(page 54)
(page 54)
(page 55)
(page 54)
(page 56)
(page 54)
(page 54)
(page 89)
(page 55)
(page 29)
(page 55)
Annual Report & Accounts 2016
On the Beach Group plc 53
DIRECTORS’ REPORT
Management Report
This Directors’ Report, on pages 53 to 56, together with the Strategic
Report on pages 3 to 24, form the Management Report for the purposes
of DTR 4.1.5R.
At the AGM on 2 February 2017, the Company will seek shareholder
consent to create a Save As You Earn/Sharesave Plan to further
incentivise a wider population of its staff through share ownership.
Further details are provided in the AGM Notice.
Strategic Report
The Strategic Report, which can be found on pages 3 to 24, 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 14 to 20.
UK Corporate Governance Code
The Company’s statement with regards to its adoption of the UK
Corporate Governance Code can be found in the Corporate Governance
Statement on pages 29 to 33. The Corporate Governance Statement
forms part of this Directors’ Report and is incorporated into it by
reference.
Appointment and replacement of Directors
At each Annual General Meeting each Director then in office shall retire
from office with effect from the conclusion of the meeting. When a
Director retires at an Annual General Meeting in accordance with the
Articles of Association of the Company, the Company may, by ordinary
resolution at the meeting, fill the office being vacated by re-electing the
retiring Director.
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
The Company’s issued share capital comprises ordinary shares of £0.01
each 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 2016
comprised 130,434,763 ordinary shares of £0.01 each. Further
information regarding the Company’s issued share capital can be found
on page 82 of the financial statements. Details of the movements in
issued share capital during the year are provided in note 18 to the
Group’s financial statements contained on page 82. All the information
detailed in note 18 on page 82 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 2 February
2017 the Directors will seek authority from shareholders to allot shares
in the capital of the Company up to a maximum nominal amount of
£434,782.55 (43,478,255 shares of £0.01 each).
Employee share schemes
The Company has two employee share schemes in place:
› A HMRC-approved Share Incentive Plan (“SIP”) to encourage wide
employee share ownership and thereby align employees’ interests
with shareholders; and
› A Long Term Incentive Plan (“LTIP”) under which nil cost share options
are granted to Executive Directors and senior management linked
to achievement in delivering goals which are closely aligned with the
Company’s strategy and the creation of value for shareholders.
Further details are provided in the Directors’ Remuneration Report on
pages 42 and 43.
54
Annual Report & Accounts 2016
On the Beach Group plc
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. 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 Market
Abuse Regulation and the Company’s securities dealing code whereby all
employees of the Company require approval to deal in the Company’s
securities.
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DIRECTORS’ REPORT
Following the disposal of part of their shareholding in the Company on 9
August 2016, Inflexion entered into a deed whereby they agreed not to
dispose of any ordinary shares for a period of 90 days (subject to waiver by
Numis and 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.
Annual General Meeting
The Annual General Meeting will be held at 11 am on 2 February 2017 at
the Company’s registered office at Park Square, Birdhall 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.
Substantial shareholdings
As at 30 September 20161, the following shareholders held 3% or more
of the Company’s issued shares. This reflects all notifications made to the
company in accordance with Chapter 5 of the Financial Conduct Authority’s
Disclosure and Transparency rules (DTR 5):
Name of Shareholder
OTB Holdings Limited
Partnership (Inflexion)
Hawksford Trustees Jersey
Ltd as trustees of the Sule
Cooper 2014 Settlement
Number of
shares
% of issued
shares
PDMR /
PCA
38,432,801
29.5%
None
12,129,387
9.3%
PCA of
Simon
Cooper2
Schroder Plc
9,577,667
7.33%
None
River and Mercantile Asset
Management LLP
6,361,131
4.87%
None
Hargreave Hale Limited
6,406,578
4.91%
None
Independent Investment
Trust
5,150,000
3.95%
None
Wendy Parry
4,149,943
3.18%
PDMR
Alistair Daly
4,149,943
3.18%
PDMR
Jonathan Smith
4,149,943
3.18%
PDMR
(1) No interests have been disclosed to the Company in accordance with DTR 5 between 30
September 2016 and the date of this report.
(2) Simon Cooper does not himself hold shares that exceed 3% of the issued shares. There has been
no change to Simon’s shareholding since IPO (he holds 2,034,301, being 1.56% of the issued
capital).
Transactions with related parties
There were no related party transactions during the year.
Events post year end
There were no events post year end to report.
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 on both base case and sensitised forecasts. Accordingly,
the financial statements have been prepared on a going concern basis.
Viability statement
In accordance with the provision of 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 2019, 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 14
to 20 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, taking into account all of the risks in the risk
management section on page 14 to 20. The Directors have also taken
account of the Group’s ability to renew the credit facility at an appropriate
level.
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 23 and forms part of this
report by reference.
Annual Report & Accounts 2016
On the Beach Group plc 55
DIRECTORS’ REPORT
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 83 to 87 in
note 19 to the consolidated financial statements and forms part of this
report by reference.
“
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 60 to 94.
The Directors recommend payment of a final dividend of 2.2 pence per
share (2015: £Nil) to be paid on 7 February 2017 to shareholders on the
register of members at 6 January 2017, subject to approval
at the 2017 AGM.
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 auditors are 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.
Approval of the Annual Report
The Strategic Report and Corporate Governance Report were approved by
the Board on 6 December 2016.
Approved by the board and signed on its behalf:
Kirsteen Vickerstaff
COMPANY SECRETARY
6 December 2016
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
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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 2016 set out on pages 60 to 94.
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 2016
›
›
›
and of the Group’s profit 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 UK Accounting Standards, including 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 risk
of material misstatement that had the greatest effect on our audit was as
follows:
Capitalised website development costs £2.4m (2015:£2.0m)
Refer to page 36 (Audit Committee Report), page 68 (Accounting policies)
and page 77 (Financial disclosure).
The risk – The Group incurs significant internal costs in relation to the
ongoing website and development cost of the On the Beach and eBeach
websites. The determination of whether these costs are capital or
expenditure involves judgement and is dependent upon the nature of the
related development. More specifically, the costs are either capital in nature
(relating to the enhancement of the website) or expenditure in nature
(relating to the operations and ongoing maintenance of the website).
Our response – In this area, our audit procedures included the following
areas:
› We have 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 to determine
whether they satisfied the requirements for capitalisation in accordance
with IAS 38, which included an assessment of the nature of the project.
› We considered whether or not the nature of the work performed meet
the general requirements of IAS 38 criteria, including the technical
feasibility of completing the intangible asset so that it will be available
for use or sale; its intention to complete the intangible asset and use or
sell it; its ability to use or sell the intangible asset; how the intangible
asset will generate probable future economic benefits; the availability
of adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset and its ability to
reliably measure the expenditure attributable to the intangible asset
during its development.
› 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 which were
expensed of £384k (2015: £373k) and capitalised of £2.4m (2015:
£2.0m) through a year on year comparison.
› We also considered the adequacy of the group's disclosures about the
degree of judgement involved in the recognition of intangible assets
relating to website development costs.
Our audit in the prior year included a significant risk in respect of the IPO
accounting. We have not assessed the risk over the accounting of the IPO
as one of the risks that had the greatest effect on our audit this year, due to
the fact that this was a non-recurring transaction relating to last year, and,
therefore, it is not separately identified in our report this year.
3. Our application of materiality and an overview of
the scope of our audit
Materiality for the Group financial statements as a whole was set at £0.9m
(2015: £0.5m, determined with reference to a benchmark of Group profit
before tax, of which it represents 5.0% (2015: 4.8% (normalised to exclude
last year’s exceptional costs).
We reported to the Audit Committee any corrected or uncorrected
identified misstatements exceeding £42,500 (2015: £25,000), in addition
to other identified misstatements that warranted reporting on qualitative
grounds.
Of the Group’s eight reporting components (2015: eight), we subjected four
(2015: five) to a full scope audit for Group reporting purposes. Four entities
(2015: three) were out of scope for Group reporting purposes as they were
not considered to be significant. Our full scope audit work covered 100%
(2015: 100%) of the Group’s profit before tax and revenues and 99.9%
(2015: 99.9%) of total assets.
The Group audit team carried out the work on all components at the
Group’s offices in Cheadle. The component materialities, which ranged from
£0.01m to £0.9m, were set by the Group audit team having regard to the
mix of size and risk profile of the Group across the reporting components.
Annual Report & Accounts 2016
On the Beach Group plc 57
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ON THE BEACH GROUP PLC
4. Our opinion on other matters prescribed by the
Companies Act 2006 is unmodified
In our opinion:
›
›
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.
Under the Listing Rules we are required to review:
›
›
the directors’ statements, set out on pages 55, in relation to going
concern and longer-term viability; and
the part of the Corporate Governance Statement on page 29 to 33
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.
Scope and responsibilities
As explained more fully in the Directors’ Responsibilities Statement set
out on page 59, 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
6 December 2016
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 titled Viability Statement on pages 55,
concerning the principal risks, their management, and, based on that,
the directors’ assessment and expectations of the group’s continuing in
operation over the 3 years to 30 September 2019; or
the disclosures in note 1 of the financial statements concerning the use
of the going concern basis of accounting.
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 position
and 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
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.
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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 management 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
6 December 2016
Annual Report & Accounts 2016
On the Beach Group plc 59
FINANCIAL STATEMENTS
Year ended 30 September 2016
61 Consolidated income statement and statement of comprehensive income
62 Consolidated balance sheet
63 Consolidated statement of cash flows
64 Consolidated statement of changes in equity
65 Notes to the consolidated financial statements
90 Company balance sheet
91 Company statement of cash flows
92 Company statement of changes in equity
93 Notes to the company financial statements
95 Shareholder information
60
Annual Report & Accounts 2016
On the Beach Group plc
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CONSOLIDATED INCOME STATEMENT AND
STATEMENT OF COMPREHENSIVE INCOME
Year ended 30 September 2016
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 income/(costs)
Profit/(loss) before taxation
Taxation
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income loss for the year/period
Attributable to:
Equity holders of the parent
Profit/(loss) attributable for the year
Basic and diluted earnings per share attributable to the equity Shareholders of the Company:
Basic and diluted earnings per share
Adjusted proforma basic earnings per share*
Adjusted profit measure
For the 53
weeks ended
30 September
Note
2016
£’000
2015
£’000
4
5
5
7
7
7
7
71,321
63,124
(48,528)
(45,657)
22,793
17,467
-
(3,831)
(5,971)
(5,622)
16,822
8,014
(100)
-
-
230
130
(1,796)
(7,845)
(1,037)
206
(10,472)
16,952
(2,458)
8
(2,645)
(2,030)
14,307
(4,488)
-
-
14,307
(4,488)
14,307
(4,488)
14,307
(4,488)
9
9
11.0p
(5.8p)
13.0p
8.9p
Adjusted underlying PBT
(before Shareholder interest, amortisation of acquired intangibles and exceptional costs)*
5
21,315
14,513
*This is a non GAAP measure, refer to note 9
The company has no other comprehensive income in the current or prior period.
The notes on pages 65 to 89 form part of the financial statements
Annual Report & Accounts 2016
On the Beach Group plc 61
CONSOLIDATED BALANCE SHEET
At 30 September 2016
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments
Total current assets
Total assets
Equity
Share capital
Share premium
Retained earnings
Capital contribution reserve
Merger reserve
Total equity
Non-current liabilities
Deferred tax
Total non-current liabilities
Current liabilities
Corporation tax payable
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
For the 53
weeks ended
30 September
Note
2016
£’000
2015
£’000
10
11
13
14
19
64,662
68,226
747
529
65,409
68,755
29,933
29,998
51,632
34,775
1,683
677
83,248
65,450
148,657
134,205
18
1,304
195,652
-
13,856
212,427
(10,239)
500
550
(132,093)
(132,093)
82,138
67,726
17
7,007
7,007
8,680
8,680
3,647
2,110
15
55,865
55,689
59,512
57,799
66,519
66,479
148,657
134,205
The financial statements from pages 61 to 89 were approved by the Board of Directors and authorised for issue.
Wendy Parry
CHIEF FINANCIAL OFFICER
6 December 2016
On the Beach Group plc. Reg no 09736592
62
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On the Beach Group plc
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CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 30 September 2016
Profit/(Loss) before taxation
Adjustments for:
Depreciation
Amortisation of intangible assets
Finance costs
Finance income
IPO costs
Share based payment charges
Changes in working capital:
Decrease/(increase) in trade and other receivables
Increase in trade and other payables
Decrease in trust account
Cash generated from underlying operating activities
IPO costs paid
Cash generated from operating activities
Tax paid
Net cash inflow from operating activities
Cash flows from investing activities
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
For the 53
weeks ended
30 September
Note
2016
£’000
2015
£’000
16,952
(2,458)
397
5,971
100
(230)
-
105
477
5,622
10,678
(206)
3,831
-
23,295
17,944
247
1,999
(4,877)
10,559
(1,661)
(3,466)
585
2,216
23,880
20,160
(3,010)
(729)
20,870
19,431
(2,780)
(1,736)
18,090
17,695
(617)
(352)
(2,407)
(1,995)
230
206
(2,794)
(2,141)
-
-
-
-
(100)
-
-
10,000
75
(20,500)
500
(1,422)
(3,568)
(333)
(100)
(15,248)
11
10
16
15,196
306
14
10,856
10,550
26,052
10,856
Annual Report & Accounts 2016
On the Beach Group plc 63
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 30 September 2016
Share capital
Share
premium
Merger
reserve
Capital
contribution
reserve
Balance at 30 September 2014
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
£’000
111,437
21,176
54,887
8,152
-
-
-
-
£’000
£’000
£’000
-
-
12,391
1,848
-
(333)
(50)
-
(111,042)
(21,051)
-
-
-
-
-
-
-
-
-
-
500
-
50
-
Balance at 30 September 2015
195,652
13,856
(132,093)
550
Retained
earnings
£’000
(5,751)
-
-
-
-
-
-
(4,488)
(10,239)
Capital reduction
(194,348)
(13,856)
Share based payment charges
Total comprehensive profit for the year
-
-
Balance at 30 September 2016
1,304
-
-
-
-
-
-
(50)
208,254
-
-
105
14,307
212,427
(132,093)
500
Total
£’000
(5,356)
125
67,278
10,000
500
(333)
-
(4,488)
67,726
-
105
14,307
82,138
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 both share capital and capital contribution reserve and cancellation of share premium account
(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.
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On the Beach Group plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year ended 30 September 2016
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 page 95.
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 years ended 30 September 2016 and 30 September 2015.
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 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 for the prior year, the Group is presented as if Plc has always owned the On the Beach Topco Group.
The comparative 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.
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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 Financial Reporting Standard 102 “The Financial
Reporting Standard applicable in the United Kingdom and the Republic of Ireland” (“FRS 102”) 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.
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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 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 not yet adopted
The following Adopted IFRSs have been issued but have not been applied by the Group in these financial statements. The Group is currently assessing the effect
of these standards on the financial statements.
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IFRS 15 Revenue from contracts with customers (European Union effective date 1 January 2018).
FRS 16 Leases (European Union effective date 1 January 2019).
The following Adopted IFRSs have also been issued but have not been applied by the Group in these financial statements. Their adoption is not expected to have
a material effect on the financial statements.
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Accounting for Acquisitions of Interests in Joint Operations – Amendments to IFRS 11 (European Union effective date 1 January 2016).
Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38 (European Union effective date 1 January 2016).
Agriculture: Bearer Plants – Amendments to IAS 16 and IAS 41 (European Union effective date 1 January 2016).
Equity Method in Separate Financial Statements – Amendments to IAS 27 (European Union effective date 1 January 2016).
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (European Union effective date 1
January 2016).
Investment entities: Applying the Consolidation Exception – Amendments to IFRS 10, IFRS 12 and IAS 28 (European Union effective date 1 January 2016).
›
› Disclosure Initiative – Amendments to IAS 7 (European Union effective date 1 January 2017).
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IFRS 9 Financial Instruments (European Union effective date 1 January 2018).
Annual improvements to IFRS – 2012 to 2014 Cycle.
Annual Report & Accounts 2016
On the Beach Group plc 65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
e) Basis of consolidation
The group’s consolidated financial statements consolidate the financial statements of On the Beach Group plc and all of its subsidiary undertakings.
i. Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has power over the investee, the company is exposed, or has rights
to variable returns from its involvement with the subsidiary and the company has the ability to use its power of the investee to affect the amount of
investor’s returns.
ii. Transactions eliminated on consolidation
Intragroup balances, and any gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated
financial information. Gains arising from transactions with jointly controlled entities are eliminated to the extent of the Group’s interest in the entity. Losses
are eliminated in the same way as gains, but only to the extent that there is no evidence of impairment.
f) Goodwill
Goodwill arising on the acquisition of subsidiary undertakings and trade and assets represents the excess of the cost of acquisition over the fair value of
the identifiable assets and liabilities at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently remeasured at cost less
any accumulated 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 unit 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.
g) Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign
exchange rate ruling at that date.
Foreign exchange differences arising on translation are recognised in the income statement.
h) Financial instruments
i. Derivative financial instruments, including hedge accounting
The group enters into forward foreign exchange contracts to manage exposure to foreign exchange rate risk. Further details of these derivative financial
instruments are disclosed in note 19 of these financial statements.
On initial designation of the derivative as a hedging instrument, the Group formally documents the relationship between the hedging instrument and
hedged item, including the risk management objectives and strategy in understanding the hedge transaction and the hedged risk, together with the
methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge
relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be highly effective in offsetting the changes in the fair value
or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80 –
125 percent.
Derivatives are recognised initially at fair value; any attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial
recognition, derivatives are measured at fair value, and changes therein are charged immediately in the profit and loss account.
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. 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 prepayments to fund its business operations.
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On the Beach Group plc
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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.
i) Segment reporting
IFRS 8 requires operating segments to be reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The
chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the
management team, including the Chief Executive Officer and Chief 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’’)
Revenue recognition
j)
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 when specific thresholds are met. These are recognised within revenue when the Group
becomes entitled to it based on supplier terms, which is when relevant thresholds are met.
k) Dividend distribution
Final 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.
l) 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 at 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.
m) 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.
Annual Report & Accounts 2016
On the Beach Group plc 67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
n)
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
Impairment of non-financial assets
o)
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 the cash-generating unit, or (“CGU”). Subject to an
operating segment ceiling test, for the purposes of goodwill impairment testing, the CGU 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 the CGU are allocated first to reduce the carrying amount of any goodwill allocated to the unit, and
then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.
p) 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.
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On the Beach Group plc
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q) Employee benefits
i. Pension scheme
The Group operates a defined contribution pension scheme. A defined contribution scheme is a post-employment benefit plan under which the Company
pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to
defined contribution pension plans are recognised as an expense in the income statement in the years during which services are rendered by employees.
ii. Share-based payment transactions
Equity-settled awards are valued at grant date, and the difference between the grant date fair value and the consideration paid by the employee is charged
as an expense in the income statement spread over the vesting period. Fair value of the awards are measured using Black-Scholes and Monte Carlo pricing
models. The credit side of the entry is recorded in equity.
Financing income and expenses
r)
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.
s) 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.
Taxation
t)
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable or receivable on the taxable income or loss for the
year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they
will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be
utilised.
u) 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.
v) 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.
w) 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 pre-existing 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.
Annual Report & Accounts 2016
On the Beach Group plc 69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
x) 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.
y) 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 bookings not travelled at the reporting date.
3. Critical accounting estimates and judgements
The Group’s accounting policies have been set by management. The application of these accounting policies to specific scenarios requires reasonable estimates
and assumptions to be made concerning the future. These are continually evaluated based on historical experience and expectations of future events. The
resulting accounting estimates will, by definition, seldom equal the related actual results. Under IFRS estimates or judgements are considered critical where
they involve a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities from period to period. This may be because the
estimate or judgement involves matters which are highly uncertain, or because different estimation methods or assumptions could reasonably have been used.
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 2n(i) above are met.
70
Annual Report & Accounts 2016
On the Beach Group plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4. Segmental reporting
As explained in note 2i, 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.
Income
Revenue
2016
2015
Core
£’000
International
£’000
Total
£’000
Core
£’000
International
£’000
Total
£’000
70,177
1,144
71,321
62,451
673
63,124
EBITDA before holding company costs
25,739
(1,802)
Holding company costs
EBITDA after holding company costs
Depreciation and amortisation
Exceptional acquisition costs
(607)
25,132
(6,257)
-
-
(1,802)
(111)
-
Segment operating profit/(loss)
18,875
(1,913)
20,438
(456)
19,982
(6,023)
(3,831)
10,128
(1,782)
-
(1,782)
(74)
-
(1,856)
23,937
(607)
23,330
(6,368)
-
16,962
(140)
16,822
(100)
-
-
230
16,952
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
21,544
42,853
747
-
265
-
21,544
43,118
747
21,544
46,505
529
-
177
-
Non-underlying costs
Group operating profit
Finance costs
Shareholder interest
Exceptional finance costs
Finance income
Profit/(loss) before taxation
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
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i
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t
a
t
e
m
e
n
t
s
5. 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
2015
£’000
33,359
477
6,189
969
2,445
2,218
2016
£’000
35,591
397
7,808
878
1,519
2,335
48,528
45,657
-
5,971
5,971
3,831
5,622
9,453
54,499
55,110
Annual Report & Accounts 2016
On the Beach Group plc 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
b. Exceptional items
Prior year exceptional 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.
In the prior year, 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 were recognised in the prior year. These relate to loan arrangement fees associated with the old facility and have been recognised as
exceptional interest costs.
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 underlying PBT
2016
£’000
90
-
3
93
Management measures the overall performance of the Group by reference to adjusted underlying PBT, a non-GAAP measure:
Profit/(loss) before taxation
Exceptional costs
Amortisation of acquired intangibles
Shareholder interest
Exceptional finance costs
Share based payments charge
Adjusted underlying PBT
2016
£’000
16,952
-
4,258
-
-
105
21,315
2015
£’000
45
50
15
110
2015
£’000
(2,458)
3,831
4,258
7,845
1,037
-
14,513
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.
72
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On the Beach Group plc
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t
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m
e
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t
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. 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
Share-based payment charges
Staff costs above include £2,407,000 (2015: £1,995,000) 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
Share-based payment charges
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
Share-based payment charges
2016
£’000
8,618
46
799
105
2015
£’000
7,735
41
729
-
9,568
8,505
2016
£’000
299
16
315
2016
£’000
623
-
29
652
2016
£’000
206
-
15
221
2015
£’000
309
10
319
2015
£’000
386
2
-
388
2015
£’000
143
2
-
145
Annual Report & Accounts 2016
On the Beach Group plc 73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
d) Key management compensation
Key management comprised the six members of the executive team.
Remuneration of all key management (including directors) was as follows:
Wages and salaries
Short-term non-monetary benefits
Post-employment benefits
Share-based payment charges
e) Retirement benefits
2016
£’000
759
8
-
75
842
2015
£’000
739
8
2
-
749
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 £46,000 ( 2015: £41,000 ).
7. Finance income and finance costs
a) Finance costs
Bank loan interest
Rolling credit facility interest
Amortisation of bank loan arrangement fees
Finance costs
Share holder interest
Exceptional finance costs - bank loan arrangement fees
Total finance costs
2016
£’000
-
100
-
100
-
-
100
2015
£’000
1,488
-
308
1,796
7,845
1,037
10,678
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
2016
£’000
230
2015
£’000
206
74
Annual Report & Accounts 2016
On the Beach Group plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. Taxation
Current tax on profit/(loss) for the year
Adjustments in respect of prior years
Total current tax
Deferred tax on profits for the year
Origination and reversal of temporary differences
Impact of change in tax rate
Total deferred tax (note 17)
Total tax charge
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t
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g
i
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R
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G
o
v
e
r
n
a
n
c
e
2016
£’000
4,318
-
4,318
-
(776)
(897)
(1,673)
2015
£’000
2,973
45
3,018
-
(988)
-
(988)
2,645
2,030
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
F
n
a
n
c
i
a
l
Profit/(loss) on ordinary activities before tax
Profit/(loss) on ordinary activities multiplied by the rate of corporation tax in the UK of 20%
(30 September 2015: 20.5%)
Effects of:
Other expenses not deductible
Adjustments in respect of prior years/periods
Effect of rate changes on deferred tax
Total taxation charge
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t
a
t
e
m
e
n
t
s
2016
£’000
16,952
2015
£’000
(2,458)
3,390
(504)
152
-
(897)
2,645
2,489
45
-
2,030
The tax charge for the year is based on the effective rate of UK Corporation tax for the period of 20% (2015: 20.5%). There has been reductions in the
UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) with further reductions to 19% (effective
from 1 April 2017) and 17% (effective 1 April 2020) which was substantively enacted on 6 September 2016. This will reduce the company’s future
current tax charge accordingly and reduce the deferred tax liability at 30 September 2016.
Annual Report & Accounts 2016
On the Beach Group plc 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. Earnings per share
Basic and diluted earnings per share are calculated by dividing the profit attributable to equity holders of On the Beach Group plc by the weighted
average number of ordinary shares issued during the year.
Adjusted pro-forma basic earnings per share figures are calculated by dividing adjusted profit after tax for the year by the weighted average number
of shares.
Basic and diluted earnings per share are the same as there is no difference between the basic and diluted number of shares.
Year end 30 September 2016
Basic and diluted EPS
Adjusted proforma basic EPS
Year end 30 September 2015
Basic EPS
Adjusted proforma basic EPS
Adjusted basic EPS
Adjusted underlying earnings after tax is calculated as follows:
Profit/(loss) for the year before taxation
Deferred tax movements relating to amortisation of acquired intangibles
Amortisation of acquired intangibles
Share based payments charge
Exceptional costs
Shareholder interest
Exceptional finance costs
Adjusted underlying earnings
Weighted average
number of Ordinary
Shares (m)
Total earnings
£’000
Pence per
share
130.4
130.4
78.0
130.4
78.0
14,307
16,922
(4,488)
11,630
11,630
2016
£’000
14,307
(1,748)
4,258
105
-
-
-
16,922
11.0
13.0
(5.8)
8.9
14.9
2015
£’000
(4,488)
(853)
4,258
-
3,831
7,845
1,037
11,630
76
Annual Report & Accounts 2016
On the Beach Group plc
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. Intangible assets
Cost
At 1 October 2014
Additions
At 1 October 2015
Additions
Disposals
At 30 September 2016
Accumulated amortisation
At 1 October 2014
Charge for year
At 1 October 2015
Charge for the year
Disposals
At 30 September 2016
Net book amount
At 30 September 2016
Brand
Goodwill
development Technology
Total
Website &
Website
£’000
£’000
30,079
21,544
-
-
30,079
21,544
-
-
-
-
30,079
21,544
2,005
2,005
4,010
2,005
-
6,015
-
-
-
-
-
-
Costs
£’000
3,028
1,995
5,023
2,407
(3,628)
3,802
1,055
1,364
2,419
1,713
(3,628)
504
£’000
£’000
22,513
-
22,513
-
-
22,513
2,251
2,253
4,504
2,253
-
6,757
77,164
1,995
79,159
2,407
(3,628)
77,938
5,311
5,622
10,933
5,971
(3,628)
13,276
24,064
21,544
3,298
15,756
64,662
At 30 September 2015
26,069
21,544
2,604
18,009
68,226
Impairment of goodwill
Goodwill acquired through business combinations has been allocated for impairment testing purposes to one cash generating unit, this being the Group as a
whole. 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 September 2016 on the cash generating unit (“CGU”). The recoverable amount of the CGU has been
determined based on the value in use calculations using cash flow projections derived from financial budgets and projections covering a five year period. The
initial three years grow 20 percent over the period, years’ four and five are extrapolated at a growth rate of 5 percent; the forecasts are then extrapolated in
perpetuity based on an estimated growth rate of 2 percent, this 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 7.53 percent (all other periods 7.53 percent.). 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 the development of software. The amortisation period for website development costs is 3 years straight line. Domain names are
amortised 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 93%. 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 & Accounts 2016
On the Beach Group plc 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. Tangible assets
Cost
At 1 October 2014
Additions
Disposals
At 1 October 2015
Additions
Disposals
At 30 September 2016
Accumulated depreciation
At 1 October 2014
Charge for the year
Disposals
At 1 October 2015
Charge for the year
Disposals
At 30 September 2016
Net book amount
At 30 September 2016
At 30 September 2015
Fixtures & Fittings Office Equipment
Total
£’000
213
2
-
215
16
(20)
211
16
146
-
162
16
(20)
158
53
53
£’000
750
350
(11)
1,089
601
(590)
1,100
290
331
(8)
613
381
(588)
406
694
476
£’000
963
352
(11)
1,304
617
(610)
1,311
306
477
(8)
775
397
(608)
564
747
529
The depreciation expense of £397,000 for the year ended 30 September 2016 and the depreciation expense of £477,000 for the year ended 30
September 2015 have been recognised within administrative expenses.
78
Annual Report & Accounts 2016
On the Beach Group plc
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. 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.
13. Trade and other receivables
Amounts falling dues within one year:
Trade receivables – net
Other receivables
Prepayments
Other taxes and social security reclaimable
14. 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
15. Trade and other payables
Current
Trade payables
Accruals
2016
£’000
27,764
1,272
328
569
2015
£’000
28,047
1,255
309
387
29,933
29,998
2016
£’000
26,052
25,580
51,632
2016
£’000
47,562
8,303
55,865
2015
£’000
10,856
23,919
34,775
2015
£’000
45,865
9,824
55,689
Annual Report & Accounts 2016
On the Beach Group plc 79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. Borrowings
Bank facility
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 prepayment 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.
The Company renewed the existing Lloyds Facility on 3rd November 2016 with Lloyds to extend the facility until 30 September 2018. The terms of this
renewed facility continue as per the description above.
80
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. 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 amortised over 10 years. Amortisation has been recognised within operating expenses.
2016
Assets
Liabilities
Total
2015
Assets
Liabilities
Total
30 September 2014
Recognised in income
30 September 2015
Recognised in income
30 September 2016
Intangible
asset
revaluation
£’000
Property,
plant and
equipment
Capitalised
development
Costs
Other
Tax assets
/(liabilities)
£’000
£’000
£’000
£’000
-
(7,069)
(7,069)
-
(8,818)
(8,818)
16
-
16
173
-
173
-
-
-
-
(35)
(35)
46
-
46
-
-
-
62
(7,069)
(7,007)
173
(8,853)
(8,680)
Intangible
asset
revaluation
Property,
plant and
equipment
Capitalised
development
Costs
Other
Total
£’000
(9,670)
852
(8,818)
1,749
(7,069)
£’000
110
63
173
(157)
16
£’000
(108)
73
(35)
35
-
£’000
-
-
-
46
46
£’000
(9,668)
988
(8,680)
1,673
(7,007)
Annual Report & Accounts 2016
On the Beach Group plc 81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Share capital
Allotted, called up and fully paid
130,434,763 Ordinary shares @ £0.01 each (2015:130,434,763 @ £1.50 each)
2016
£’000
1,304
1,304
2015
£’000
195,652
195,652
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.
On 18 November 2015 the Company completed a reduction of share capital (the ‘Capital Reduction’), whereby the entire amount outstanding on the Company’s
share premium account and capital redemption reserve were cancelled. The Capital Reduction has created a significant amount of distributable reserves for the
Company as disclosed in the consolidated statement of changes in equity.
82
Annual Report & Accounts 2016
On the Beach Group plc
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. 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
Derivative financial assets
Forward exchange contracts used for hedging
Loans and receivables
Cash and cash equivalents
Trade and other receivables (note 13)
Total financial assets
Financial liabilities
Trade payables (note 15)
Total financial liabilities
2016
£’000
2015
£’000
1,683
677
51,632
29,036
82,351
34,775
29,302
64,754
(47,562)
(47,562)
(45,865)
(45,865)
The following table provides the fair values of the Group's financial assets and liabilities:
Derivative financial assets
Forward exchange contracts
FV Level
2016
£’000
2015
£’000
2
1,683
677
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 & Accounts 2016
On the Beach Group plc 83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
a) Fair value estimation
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.
(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)
Forward Contracts
As at 30 September 2016
As at 30 September 2015
b) Financial Risk Management
Level 1
£’000
Level 2
£’000
Level 3
£’000
-
-
1,683
677
-
-
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 subsidiary level by the purchase of foreign currency contracts for use as a commercial hedge; this is managed by On the
Beach Limited and On the Beach Beds Limited. During the course of the period there has been no changes to the market risk or manner in which the Group
manages its exposure. The Group is exposed to interest rate risk that arises principally through the Group’s revolving credit facility.
Liquidity risk, credit risk and capital risk is considered below. The executive team is responsible for implementing the risk management strategy to ensure that
appropriate risk management framework is operating effectively, embedding a risk mitigation culture throughout the Group. The Board are provided with a
consolidated view of the risk profile of the Group. All major exposures are identified and mitigating controls identified and implemented. Regular management
reporting and assessment of the effectiveness of controls provide a balanced assessment of the key risks and the effectiveness of controls.
The Group does not speculate with derivatives or other financial instruments.
d)
Interest rate risk
The Group only have a revolving credit facility which is subject to fluctuations in LIBOR.
84
Annual Report & Accounts 2016
On the Beach Group plc
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
e) 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
2016
€’000
5,110
2015
€’000
3,648
(46,497)
(44,708)
44,875
40,079
3,488
(981)
2016
$000
218
(559)
350
9
2015
$000
283
(2,187)
2,110
206
2016
2015
Kr ‘000
Kr ‘000
3,667
(137)
3,379
1,901
(119)
2,145
(3,220)
(2,100)
3,689
1,827
Annual Report & Accounts 2016
On the Beach Group plc 85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Foreign currency sensitivity
The following table details the Group sensitivity to a percentage change in Pounds Sterling against these currencies with regards to equity. The sensitivity
analysis of the Group’s exposure to foreign currency risk at the reporting date has been determined based on a 10 per cent change taking place at the
beginning of the financial period and held constant throughout the reporting period:
Euro
Weakening - 10%
Strengthening - 10%
US Dollar
Weakening -10%
Strengthening - 10%
Swedish Krona
Weakening -10%
Strengthening - 10%
2016
£’000
(335)
274
(1)
1
37
(30)
2015
£’000
81
(66)
12
(15)
(16)
13
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:
2016
Foreign
currency
Notional
value
€’000
£’000
31,275
25,637
5,950
7,650
4,960
6,516
Fair
value
£’000
1,400
183
97
2015
Foreign
currency
Notional
value
€’000
£’000
29,204
21,289
5,050
5,825
3,667
4,255
44,875
37,113
1,680
40,079
29,211
Fair
value
£’000
477
95
85
657
Fair
value
£’000
12
6
2
20
2015
Foreign
currency
Notional
value
$’000
1,390
545
175
£’000
902
352
113
2,110
1,367
2015
Foreign
currency
Notional
value
Kr ’000
£’000
Fair
value
£’000
1,800
300
2,100
140
24
164
-
-
-
2016
Foreign
currency
Notional
value
$’000
295
50
5
350
£’000
217
37
3
257
2016
Foreign
currency
Notional
value
Kr ’000
(3,120)
(100)
£’000
(272)
(8)
(3,220)
(280)
Fair
value
£’000
10
2
-
12
Fair
value
£’000
(8)
(1)
(9)
EUR 30 September
Less than 3 months
3 to 6 months
6 to 12 months
Total
USD 30 September
Less than 3 months
3 to 6 months
6 to 12 months
Total
SEK 30 September 2016
Less than 3 months
3 to 6 months
Total
86
Annual Report & Accounts 2016
On the Beach Group plc
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
f) Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises from
cash balances and derivative financial instruments, as well as credit exposures to customers, including outstanding receivables, financial guarantees and
committed transactions. Credit risk is managed separately for treasury and operating related credit exposures.
The ageing of trade receivables at the balance sheet date was:
At 30 September 2016
At 30 September 2015
Not past
due
Past due
0-30 days
Past due
>30 days
£’000
27,756
28,043
£’000
£’000
4
3
4
1
Total
£’000
27,764
28,047
The maximum exposure to credit risk at each reporting date is the fair value of financial assets and trade receivables.
g) 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
Sept-16
Trade payables
Other payables
Sept-15
Trade payables
Other payables
Carrying
amount
Contractual
cash flows
Within 1
year rs
£’000
47,562
8,303
55,865
£’000
45,865
9,824
55,689
£’000
47,562
8,303
55,865
£’000
45,865
9,824
55,689
£’000
47,562
8,303
55,865
£’000
45,865
9,824
55,689
h) Capital management
It is the Group’s policy to maintain an appropriate equity capital base so as to maintain investor, creditor and market confidence and to sustain the
future development of the business.
The capital structure of the Group consists of the net cash (borrowings disclosed in note 16) and equity of the Group as disclosed in note 18.
The Group is not subject to any externally imposed capital requirements.
Annual Report & Accounts 2016
On the Beach Group plc 87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. Share based payments
At 30 September 2016, the Group has the following share-based payment arrangement.
Long-term incentive plan (equity-settled)
The group operates a long term incentive plan "LTIP" for Executive Directors and certain key senior managers. During the year, the Group awarded 633,282
nil cost options under the scheme. For the purposes of IFRS 2, the grant date was deemed to be 26 May 2016. The extent to which such awards will vest will
depend on the Group's performance over a three year period commencing from 1 October 2015. The vesting in September 2018 (Vesting Date) of 30% of
the award will be dependent on an absolute TSR performance condition measure over the performance period and the vesting of 70% of the award will be
dependent on the satisfaction of an earnings per share target measured at the end of the performance period.
All share-based incentives are subject to service conditions. Such conditions are not taken into account in the fair value of the service received.
The fair value of services received in return for share-based incentives is measured by reference to the fair value of share-based incentives granted.
The LTIP awards have been valued using the Monte Carlo model for the TSR element and the Black Scholes model for the EPS element and the resulting share-
based payment charge is being spread evenly over the period between the grant date and the Vesting Date.
Share price
at grant date
Exercise
price
Expected
volatility
Option
Life
Risk free
rate
Dividend Non-
yield vesting
conditions
(£)
2.595
2.595
(£)
Nil
Nil
(%)
(years)
(%)
(%)
30%
-
3.0
3.0
0.44%
0.44%
2.00%
2.00%
(%)
0.0
0.0
Fair value
at grant
date
(£)
0.806
2.470
26 May 2016 (TSR dependent)
26 May 2016 (EPS dependent)
Expected volatility is estimated by considering historic average share price volatility at the grant date.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Outstanding at the year end
2016 2015
No of No of
options options
-
633,282
-
633,282
-
-
-
-
The total share based payment charge for the year ended 30 September 2016 is £105,000 (2015: £nil). The company charge for the year was £105,000.
88
Annual Report & Accounts 2016
On the Beach Group plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21. Commitments and contingencies
a) Capital commitments
The company had no capital commitments for the years ended 30 September 2016 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
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2015
Land
& Buildings
Land
& Buildings
£’000
340
1,359
1,359
3,058
£’000
114
800
457
1,371
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The Group's lease commitments relate to its head office. During the year the Group signed a ten year lease on its head office; the head office remains in the
same location and has expanded the floor space available. During the year £333,000 (2015: £220,000) was recognised as an expense in the income statement in
respect of operating leases.
c) Contingencies
In September 2010, proceedings were initiated against On the Beach Limited by Ryanair alleging infringement of, inter alia, its intellectual property rights.
Proceedings remain at an early stage and there have been no material developments. Therefore the amount of the claim by Ryanair is unquantified as at the
date of this document. The Group expects that final resolution of the dispute might take some time.
22. 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:
Fees charged by:
Inflexion
2016
£’000
2015
£’000
-
1,180
Fees charged by related parties are settled in cash. All amounts owing had been settled prior to the year-end date. Included in the prior year 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).
Annual Report & Accounts 2016
On the Beach Group plc 89
COMPANY BALANCE SHEET
At 30 September 2016
Fixed assets
Investments
Current assets
Debtors
Cash at bank
Creditors: amounts falling due within one year
Corporation tax
Net assets
Equity
Share capital
Share premium
Capital contribution reserve
Retained earnings
The financial statements were approved by the Board of directors and authorised for issue.
Wendy Parry
CHIEF FINANCIAL OFFICER
6 December 2016
On the Beach Group plc Registered number 09736592
Note
2016
£’000
2015
£’000
3
132,613
132,613
4
75,303
71,502
-
5,353
75,303
76,855
5
(394)
(85)
(479)
(2,544)
-
(2,544)
207,437
206,924
1,304
195,652
-
500
13,856
550
205,633
(3,134)
207,437
206,924
90
Annual Report & Accounts 2016
On the Beach Group plc
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COMPANY STATEMENT OF CASH FLOWS
Year ended 30 September 2016
Profit/(loss) before taxation
Share based payment charges
Changes in working capital:
(Decrease)/increase in trade and other payables
(Increase) in trade and other receivables
Net cash outflow 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 inflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
2016
£’000
511
105
616
2015
£’000
(3,134)
-
(3,134)
5
4
3
(2,361)
2,544
(3,819)
(71,502)
(6,180)
(68,958)
(5,564)
(72,092)
-
-
-
-
-
(132,613)
(132,613)
209,508
550
210,058
(5,564)
5,353
5,353
(211)
-
5,353
Annual Report & Accounts 2016
On the Beach Group plc 91
COMPANY STATEMENT OF CHANGES IN EQUITY
Year ended 30 September 2016
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
(194,348)
(13,856)
(50)
208,254
-
-
1,304
-
-
-
-
-
105
408
-
105
408
500
205,633
207,437
Balance on incorporation
Group restructure, share for share exchange
Total comprehensive loss for the period
Balance at 30 September 2015
Capital reduction
Share based payment charges
Total comprehensive loss for the period
Balance at 30 September 2016
92
Annual Report & Accounts 2016
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.
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 the years ended 30 September 2016 and 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 profit for the year ended 30 September 2016 dealt with in the financial statements of the parent company is
£408,000 (2015: £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 detail of the Directors’ remuneration and interests are set out in the Directors’ Remuneration
Report on pages 39 to 52.
3. Investments
The £132,613,000 investment in subsidiary undertakings made in the prior year relates to the capital re-organisation of the Group last year. There has been
no movement in the current year.
Annual Report & Accounts 2016
On the Beach Group plc 93
NOTES TO THE COMPANY FINANCIAL STATEMENTS
4. Debtors
Amounts falling due within one year:
Amounts owed by group undertakings
Other taxes and social security
Prepayments
2016
£’000
75,159
130
14
2015
£’000
71,502
-
-
75,303
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
Current
Bank overdraft
Trade payables
Accruals
6. Called-up share capital
Allotted, called up and fully paid
130,434,763 Ordinary shares @ £0.01 each (2015:130,434,763 @ £1.50 each)
The movement on share capital and share premium is as follows:
Balance at 30 September 2015
Capital reduction
Balance at 30 September 2016
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 2016 was £nil (2015: £nil).
2016
£’000
211
38
145
394
2016
£’000
1,304
1,304
2015
£’000
-
-
2,544
2,544
2015
£’000
195,652
195,652
Share
capital
Share
premium
£’000
£’000
195,652
13,856
(194,348)
(13,856)
1,304
-
94
Annual Report & Accounts 2016
On the Beach Group plc
SHAREHOLDER INFORMATION
Registered Office
Park Square,
Bird Hall Lane,
Cheadle
SK3 0XN
United Kingdom
Tel: c/o FTI Consulting on 020 3727 1000
Web: www.onthebeachgroupplc.com (Corporate)
Web: www.onthebeach.co.uk (UK)
Web: www.ebeach.se (Sweden)
Web: www.ebeach.no (Norway)
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 & Accounts 2016
On the Beach Group plc 95
Park Square,
Bird Hall Lane,
Cheadle
SK3 0XN
United Kingdom
www.onthebeachgroupplc.com (Corporate)
www.onthebeach.co.uk (UK)
www.ebeach.se (Sweden)
www.ebeach.no (Norway)