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On the Beach is a fast-growing,
leading online retailer of beach holidays
Aeroworks, 5 Adair St, Manchester M1 2NQ
www.onthebeachgroupplc.com (Group)
www.onthebeach.co.uk / www.sunshine.co.uk / www.classic-collection.co.uk / www.classic-package.co.uk (UK)
www.ebeach.se / www.ebeach.no / www.ebeach.dk (International)
On the Beach Group plc
Annual Report & Accounts
For the year ended 30 September 2020
TOTAL FINANCIAL
P R O T E C T I O N
2
2
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
In this report
Strategic Report
Governance
06 Our History Timeline
07 At a Glance
11 Handling the COVID-19 pandemic
13 Chairman’s Statement
16 Business Model
17 Chief Executive’s Review
19 Strategy
24 Key Performance Indicators
28 Financial Review
32 Risk Management
43 Viability Statement
46 Stakeholders and s.172 Statement
54 Our People
57 Corporate and Social Responsibility
61 Non-Financial Information Statement
63 Chair’s Introduction
64 Directors’ Biographies
66 Corporate Governance Statement
76 Report of the Nomination Committee
78 Report of the Audit Committee
84 Directors’ Remuneration Report
107 Other Statutory and Regulatory Disclosures
113 Statutory Auditor’s Report to the Members of
On the Beach Group plc
121 Statement of Directors’ Responsibilities
Financial Statements
123 Consolidated Income Statement and
Statement of Comprehensive Income
124 Consolidated Balance Sheet
125 Consolidated Statement of Cash Flows
126 Consolidated Statement of Changes in Equity
127 Notes to the Consolidated Financial Statements
162 Company Balance Sheet
163 Company Statement of Changes in Equity
164 Notes to the Company Financial Statements
166 Glossary of Alternative Performance Measures (“APMs”)
170 Shareholder Information
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
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STRATEGIC REPORT
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
I
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Strategic Report
06 Our History Timeline
07 At a Glance
11 Handling the COVID-19 Pandemic
13 Chairman’s Statement
16 Business Model
17 Chief Executive’s Review
19 Strategy
24 Key Performance Indicators
28 Financial Review
32 Risk Management
43 Viability Statement
46 Stakeholders and s.172 Statement
54 Our People
57 Corporate and Social Responsibility
61 Non-Financial Information Statement
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
5
5
Strategic Report
Our History Timeline
STRATEGIC REPORT
**Add timeline picture**
4
1
0
2
OTB grew its
Direct Contracting
and invested in
TV advertising
2015
Launched its first
international
platform in Sweden.
Listed on the
London stock
exchange
013
2
Inflexion acquired
a majority stake
79% of the Group’s
bookings were
made online
Livingbridge acquired
a majority stake
1
1
0
2
7
0
0
2
Established by
Simon Cooper
4
0
0
2
2
0
1
6
Achieves
outstanding profit
growth against
a challenging
market backdrop
2
0
1
7
Acquired
Sunshine.co.uk Limited
Launched in Norway
Acquired
Classic Collection.
Soft launch in Denmark
Launched Classic
Package Holidays.
Opened a new Digital HQ
in Manchester. Launched
long haul
2
0
1
8
2
0
1
9
Raised £67m as a result
of a share placing.
Redesigned customer
booking path
2020
OUR
HISTORY
TIMELINE
6
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Strategic Report
At a Glance
On the Beach made excellent progress prior to the outbreak
of COVID-19 and is well placed to capitalise on the inevitable
structural changes as the market normalises post pandemic. We
look to the future with confidence.
Group overview
2020
2019
Change
Adjusted (1)
GAAP
Adjusted (1)
GAAP
Adjusted (1)
Group revenue
Revenue as Agent
Revenue as Principal
£71.2m
£33.7m
£147.5m
£140.4m
£54.3m
£16.9m
£16.8m
£92.5m
£85.4m
£16.9m
£55.0m
£55.0m
Group gross profit
£53.4m
£16.0m
£99.1m
£92.0m
Gross profit as Agent
£50.8m
£13.5m
£92.0m
£84.9m
Gross profit as Principal
Group profit/(loss) before tax
£2.6m
£0.6m
£2.6m
£7.1m
£7.1m
(£46.3m)
£34.5m
£19.3m
Basic (loss)/earnings per share
(0.5p)
(27.6p)
21.3p
11.9p
Total dividend payable
-
-
3.3p
3.3p
(52%)
(41%)
(69%)
(46%)
(45%)
(63%)
(98%)
-
-
GAAP
(76%)
(80%)
(69%)
(83%)
(84%)
(63%)
-
-
-
(1) Denotes a non-GAAP measure. An explanation of this measure and reconciliation to the closest GAAP measure is included in the APM Glossary on page 166
COVID-19 pandemic impact
Certain costs, including the exceptional impact of COVID-19, have been excluded from performance measures in this statement as
the Board consider this necessary to provide a fair, balanced and understandable view of the performance of the Group.
Whilst the underlying result has still been significantly impacted by COVID-19, the Board believe that adjusting for the items
shown in the table below provides a clearer reflection of the Group’s performance in the period. The Group organised package
holidays for customers which have since been cancelled, or are to be cancelled, due to airspace closures, cancelled flights and
government advice and/or regulations on travel. See below for details of the adjustments.
The Group has not estimated the financial impact of, or made an adjustment for, the significant reduction in booking volumes this
year as a result of COVID-19.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
7
STRATEGIC REPORT Strategic Report
At a Glance
A summary of the adjustments between Adjusted and GAAP measures, split between the COVID-19 impact and other costs, is
shown below:
2020
Adjusted
COVID-19
adjustment
Other
adjustments
Total
adjustments
GAAP
Group revenue (1)
£71.2m
(£37.5m)
Group Cost of Sales (2)
(£17.8m)
£0.1m
£53.4m
(£37.4m)
-
-
-
(£37.5m)
£33.7m
£0.1m
(£17.7m)
(£37.4m)
£16.0m
Group Gross Profit
Group overheads
Share Based Payments (3)
Acquired Intangibles Amortisation
Other exceptional operating costs (4)
(£52.8m)
(£4.3m)
(£5.2m)
(£9.5m)
(£62.3m)
-
-
-
-
-
£0.6m
£0.6m
£0.6m
(£5.5m)
(£5.5m)
(£5.5m)
(£4.3m)
(£0.3m)
(£4.6m)
(£4.6m)
Group profit/(loss) before tax
£0.6m
(£41.7m)
(£5.2m)
(£46.9m)
(£46.3m)
(1) The impact of lost revenue due to cancelled bookings resulting from the COVID-19 pandemic
(2) Commission no longer payable to travel agents for holidays cancelled as a result of the COVID-19 pandemic, less additional direct costs incurred as a result of
cancelled bookings
(3) Costs relating to the expected cost of shares granted to employees as part of LTIP or other share schemes
(4) Supplier prepayment provision £2.2m, exceptional development spend £0.7m, legal fees & claims £0.9m, facility arrangement fees £0.5m, redundancy costs £0.7m
offset by contributions from the Government furlough scheme £0.7m
Thomas Cook Group plc Impact to 2019
On 23 September 2019, Thomas Cook Group plc (“TCG”) announced that it had ceased trading and had entered compulsory
liquidation. There was a one-off exceptional cost associated with helping customers to organise alternative travel arrangements and
lost margin on cancelled bookings.
A summary of the adjustments between Adjusted and GAAP measures, split between the TCG impact and other costs, is shown
below:
Group revenue (1)
Group Cost of Sales
Group Gross Profit
Group overheads
Share Based Payments (2)
Acquired Intangibles Amortisation
Other exceptional operating costs (2)
2019
Adjusted
TCG impact
adjustment
Other
adjustments
Total
adjustments
GAAP
£147.5m
(£7.1m)
(£48.4m)
£99.1m
(£64.6m)
-
-
-
-
(£7.1m)
(£0.6m)
-
-
(£0.6m)
-
-
-
(£7.5m)
(£0.7m)
(£5.5m)
(£1.3m)
(£7.1m)
£140.4m
-
(£7.1m)
(£8.1m)
(£0.7m)
(£5.5m)
(£1.9m)
(£48.4m)
£92.0m
(£72.7m)
(£0.7m)
(£5.5m)
(£1.9m)
Group profit before tax
£34.5m
(£7.7m)
(£7.5m)
(£15.2m)
£19.3m
(1) The impact of lost revenue due to cancelled bookings resulting the failure of TCG
(2) Costs relating to the expected cost of shares granted to employees as part of LTIP or other share schemes
(2)
Incremental operating costs relating to the management of the failure of TCG
8
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
A full explanation of all adjusted performance measures is included in the glossary.
Overview of the year
›
Due to COVID-19 and subsequent restrictions on travel, the focus of the Group has been to strengthen its financial
position, ensure the safety and wellbeing of colleagues and deliver the best possible customer service in a complex
and ever-changing environment.
› We moved quickly to ensure that we had the liquidity needed for whatever disruption lay ahead, raising a net £65m
›
›
›
›
›
›
›
›
from an equity placing and securing total banking facilities of £75m.
Following the reopening of airspace at the end of the first UK lockdown in early July, the Group was pleased that its
customers were once again able to enjoy international beach holidays, albeit this freedom was short-lived and the
subsequent impact on consumer confidence has led to significant reductions in seat capacity over the winter. This
position was further exacerbated by a four week ban on international leisure travel which began on 5 November.
As a result, revenue of £33.7m is down (76%) on prior year. Adding back the impact of cancellations in the year
adjusted revenue is £71.2m, which is down (52%) vs prior year.
Of the total exceptional adjustment in the period of £42.0m, £41.7m represents the cost of COVID-19, primarily due to
cancellations or expected cancellations and associated administrative expenses.
The loss before tax of £46.3m is due to both a significant reduction in new bookings and the cancellations referred to
above.
Despite the disruption, the Group’s liquidity position remains strong. Total cash at 30 September 2020 was £36.5m
(excluding customer monies held in trust of £25.8m) and has strengthened further to £51m at 30 November 2020.
The Group’s £75m RCF facility has been undrawn since the equity placing in May.
The Directors believe that the Group’s asset light business model, strong liquidity position and trust account protection
for customers positions us well to see through the COVID-19 disruption and prosper when normal market conditions
return.
The Group continues to work hard to refund all customers in cash and in full where their holidays are cancelled. On
the Beach promptly refunds the hotel and transfer elements of cancelled holidays from its fully ring-fenced customer
trust account. There have and continue to be substantial delays in receiving refunds from airlines for monies paid in
advance. The Group continues to pursue these rightful refund claims on behalf of its customers and refunds flight
monies as soon as they are received from the airlines. In many cases, we have refunded customers in advance of
receiving the flight monies from airlines.
Customer refund status at 30 November 2020
›
Hotels and transfers £72m.
Flights £93m.
Total cash refunds since 15 March 2020 of £165m divided
between:
›
›
›
Monies received from airlines for cancelled flights £89m.
› We are awaiting refunds for cancelled flights of £4m, where
we have refunded flight costs in advance of receipt from
airlines, in order to protect the brand and generate customer
goodwill.
Liquidity
›
›
›
›
›
On 22 May 2020 the Group received £65.1m net of fees for a
share placing of 19.9% of the Group’s share capital.
On this date, following receipt of share proceeds, Group cash
was £50.5m.
On 30 November the Group had net cash and equivalents of
£51m, excluding customer prepayments (of £21.1m) which are
held in a ring-fenced trust account.
The Group has access to a £75m credit facility which is
undrawn.
The Group’s monthly cash burn is c.£2m in the event that no
revenue is received.
Total cash refunds since 15 March 2020
£165.0m
Hotels and transfers
£72.0m
Flights
£93.0m
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
9
STRATEGIC REPORT Strategic Report
At a Glance
Who we are and what we do
From humble beginnings in 2004 as a start-up business, to our 2015 listing on the London Stock Exchange; we have come a long
way. We make it easy for people to find, book and enjoy their perfect beach holiday and with significant opportunities for growth,
we’re on a long-term mission to become Europe’s leading online retailer of beach holidays.
By using our innovative technology, low-cost base and strong customer-value proposition to provide a structural challenge to
legacy tour operators, we continue our journey to disrupt the online retail of beach holidays. Our model is customer-centric, asset-
light, profitable and cash generative.
We operate under five brands:
2%
24%
Sells luxury beach holidays through network
of third party offline travel agencies
1%
% of Adjusted
Group revenue
in FY20
Online portal offering third party offline
travel agencies access to wide range
of holiday products.
Online retailer of travel products to
Scandinavian consumers
Market
FY20 highlights
73%
Online retailers of travel
products to UK consumers
Our values and culture
We live by our core values:
UK’s third largest ATOL holder
29% sales growth for Summer 2020
departures in first four months of FY20
Over 20% of online sales in short haul
beach holiday market
Largest increase in advertising awareness
of any brand in the UK in December 2019
Only listed UK travel business that
operates a fully ring-fenced customer trust
account
Extended Classic Package Holiday offering
to c.2,500 agents across the UK
85% of total hotel buying through
direct contracting
Redesigned customer booking path
Raised £65m (net of fees) as a result of the
share placing in May 2020
For more information, see: https://www.youtube.com/
watch?v=6dZxWaUt6i8&t=1s and pages 56 and 69.
10
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Strategic Report
Handling the COVID-19 pandemic
Our people have responded incredibly well to the
unprecedented challenges of COVID-19. We took swift and
affirmative action to ensure our employees’ safety, look after
our customers, protect our stakeholders, keep our operations
running and conserve cash. We summarise below how the
pandemic has affected us and the action we have taken.
During the year we received 628,228 customer messages,
representing a 259% YOY increase and the number of date
change requests over the year increased by 308%. Since
March we have also received over 300,000 messages on
social media and have handled over 50,000 calls through our
contact centre.
Governance and co-ordination
Our People
The response to COVID-19 has required strong leadership
and decision-making in a rapidly evolving set of
circumstances. This has been achieved from the very earliest
days of the crisis including:
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ą
A much increased frequency of Board meetings.
An intense response led by the Chief Executive and the
Executive Team.
Daily cross-departmental operational calls attended by
all relevant Executive Team members.
Daily or weekly Executive Team meetings as required.
Weekly Senior Management Team meetings.
Effective engagement and co-ordination with
Government and regulators.
Regular clear and transparent communications to our
customers and colleagues, as set out in more detail
below.
Customers
The pandemic has presented huge challenges for travel
businesses in terms of customer service. Since the start of
the pandemic, our contact centre has been inundated with
an overwhelming volume of messages, and we have had to
quickly adapt to these ever-changing workloads.
To improve efficiency and minimise duplication of work, we
acted quickly and pro-actively sent out communications to
customers in order to try and reduce the number of inbound
communications. We funnelled all customer communications
through one means of contact, ensuring we could respond to
queries more quickly while also prioritising the most time-
sensitive requests.
Government advice changed frequently, so we ensured
we kept affected customers updated via emails containing
comprehensive information on their options, rights and next
steps, as well as creating a dedicated COVID-19 FAQs page
with up-to-date information. Since March, we have sent nearly
two million service emails to our customers.
Since the very start of the pandemic, we have been committed
to refunding customer money for cancelled holidays in cash,
rather than a voucher or refund credit note. In most cases,
we refunded hotel and transfer money within 14 days of
cancellation, and refunded the flight cost as soon as we
received this from the airline. In some cases, where there had
been long delays in receiving the flight portion of the refund,
we refunded customers before we received this cost back
from the airline.
In line with Government guidance, our colleagues have
been working remotely since March. When it became clear
in February that a lockdown was a possibility, we updated
our business continuity plan and our teams worked day and
night to implement the plans, upgrading VPN access, rolling
out video-conferencing solutions and getting computer
equipment set up in our colleagues’ homes. Everyone settled
in quickly to working effectively from home and we are now
using technology more than ever to stay well connected. The
swift and successful implementation of changing how we
worked highlighted how dynamic, resilient and committed our
employees are. The changes also highlighted the importance
of extending flexibility to employees around their work
commitments during this unprecedented period, in relation to
childcare and/or health related considerations.
Since the beginning of the pandemic, we have utilised the
Coronavirus Job Retention Scheme (“CJRS”). In the first 3
months of the scheme, those colleagues earning less than
£25,000 per annum, we topped up their pay to ensure they
received full pay whilst on furlough. For furloughed colleagues
whose salary, at 80%, exceeded the £2,500 cap prescribed
by the CJRS, we topped up their pay so they received 80%
pay. The scheme has allowed us to protect jobs for the longer
term and has enabled us to retain our capacity to scale up in
line with customer demand. We put in place various support
and communication mechanisms to maintain good working
relationships with colleagues, including:
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ą
ą
ą
ą
ą
Weekly company-wide calls so that employees could
raise issues and concerns (anonymously if preferred) and
the Executive Team could cascade information on the
Group’s response to the pandemic;
Access to mental health support outside of the
Group, for example through our Employee Assistance
Programme;
Support and guidance produced as to how employees
could work safely from home;
Pulse surveys on how our employees were feeling and
what support they needed;
Numerous social and wellbeing initiatives to keep up
morale, including a Wellbeing slack channel, regular
Friday social events including quizzes and talent shows
as well as various competitions;
We kept in regular contact with our furloughed
colleagues, keeping them up to date with our future
plans for returning to work and ensuring they had the
opportunity to ask questions and raise concerns. There
has been continued support in place through their
manager, the People Team and the Employee Assistance
Programme.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
11
STRATEGIC REPORT Strategic Report
Handling the COVID-19 pandemic
Moreover, the practices adopted by some airlines and package
organisers in relation to vouchers/refund credit notes in lieu
of a cash refund raises a number of other concerns from
both a consumer and competition point of view. We strongly
believe that where vouchers/refund credit notes are offered,
this should be alongside the option of a cash refund. If
additional liquidity is necessary, this should be sought from
shareholders and lenders – not from consumers. Consumers
who take vouchers have no choice as to who they book their
next holiday with – they either lose their money, or they have
to book their next flight or holiday with the same airline or
holiday company, irrespective of how they have been treated.
This can lead to a lack of competition and an uneven playing
field, especially for those businesses such as the Group who
refund in cash rather than using vouchers/refund credit notes.
It also leaves these captive customers potentially exposed to
the risk of exploitation through higher prices being charged
when they come to rebook.
We strongly believe that regulatory reform is required
in relation to financial protection afforded to consumers.
Throughout the pandemic, the Group has, in most cases, been
refunding the non-flight elements of customers’ bookings
in line with the timescales prescribed by the Package Travel
Regulations. We have been able to do this because we
operate a trust account, which is controlled by an independent
third party trustee. The trust holds customer monies until
the customer has returned from holiday (with the exception
of flight costs which are paid immediately to the flight
operator). Trust accounts are not common in the industry
and the model currently adopted by many travel operators
has significant shortfalls in its financial resilience. Airlines
do not currently provide any financial security against their
failure and the majority of travel businesses use customer
funds as a key source of working capital – meaning they are
reliant on monies from new bookings to fulfil their obligations
for existing bookings. We believe action needs to be taken
to protect consumers in the future by ensuring the sector’s
finances can be more robust and in this respect we have been
advocating the advantage of trust accounts to Government
and regulators.
Other issues are invariably emerging as this pandemic
continues and we shall continue to actively engage with the
Government and regulators accordingly.
Ensuring financial viability
The Group operates in one of the sectors most impacted by
the pandemic. A number of actions have therefore been taken
to ensure that the Group’s financial position is resilient to even
the most severe scenarios modelled.
These actions included:
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The available credit facility was extended to £75m on 22
May 2020.
Net cash of £65m was raised through an equity placing
on 22 May 2020.
No interim dividend was paid in the year, and no final
dividend is being proposed.
The CEO waived his salary for the remainder of the
financial year from March 2020 and voluntary pay
cuts were taken by the rest of the Board and senior
leadership team.
No cash bonuses have been awarded across the Group
for FY20.
Government schemes were utilised, including CJRS.
Offline marketing spend was paused.
Online marketing costs naturally fell as a result of
significant reduction in demand and reduction in
competition leading to reduced costs per click and a
reduction in overall traffic to the site.
These actions, including other cost cutting measures, reduced
the monthly cash costs for the Group to c.£2m whilst
operating in a zero revenue environment. During this time, the
Group continued to invest in core strategic areas to ensure
that it is well positioned when demand for booking holidays
returns.
Industry impact
The COVID-19 crisis has shone a harsh light on the travel
sector. Whilst it has undoubtedly been an incredibly difficult
time for the industry, we feel that the stance taken by some
airlines and package holiday organisers has led to many
consumers being let down.
Since early April 2020, the Group has been in regular dialogue
with Government and regulators such as the CAA and CMA in
relation to the conduct of airlines and travel operators during
the pandemic. One such issue we have raised has been the
difficultly and delay in obtaining cash refunds from airlines
for flights cancelled or affected by COVID-19. Such actions
have put the Group in an impossible position as it has meant
that we cannot refund customers the flight portion of their
holiday within the 14 day timescale set out in the Package
Travel Regulations. Not only does this expose the Group to
claims and chargebacks from customers but fundamentally
it means that customers are missing out on refunds they are
legally entitled to (airlines are obliged under Regulation (EC)
No 261/2004 to provide a cash refund within 7 days of the
flight cancellation). As a result, the Group has, in many cases,
paid flight refunds to customers prior to receipt of the monies
from the airlines.
12
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Strategic Report
Report from the Chairman of the Board
I am pleased to present the annual
report and accounts of the Group
for the year ended 30 September
2020 (“FY20”).
COVID-19 has presented the travel
industry with unexpected and
extraordinary challenges, and has
therefore had a substantial impact
on the Group’s financial results,
as explained in further detail later
in this report. Due to the carefully
considered decisions that have
been made during the year and
thanks to the incisive leadership of
Simon Cooper and his team, the
Group finished the year in as strong
a position as it could have given the
circumstances, and is well-placed
to grow in the long term, even if
disruption continues for a sustained
period of time.
Strategic marketing investment
early in FY20
The failure of the Thomas Cook
Group (“TCG”) in September
2019 created an opportunity for
the Group to take market share
at an increased rate, in support
of our long-term goals. During
the first four months of FY20,
the Group priced competitively
and significantly increased brand
marketing activity, resulting in
our highest ever year-on-year
growth in brand awareness. As a
consequence we saw sales growth
of 28 per cent (excluding Classic
Collection Holidays) for summer
2020 departures.
This sales momentum was of
course reversed due to COVID-19,
but brand awareness has remained
significantly higher than prior to the
campaign and the Group intends
to capitalise on the benefits of this
brand building when demand for
beach holidays returns.
Navigation of COVID crisis
When it became clear in late
February 2020 that COVID-19
was spreading through Europe,
the Group took swift and decisive
mitigating actions to minimise its
cash burn, reducing marketing
costs and overheads and in early
April 2020, it extended its then
£50m revolving credit facility with
Lloyds Bank plc (“Lloyds”) to all
months of the year.
As the pandemic developed
through April and May, it became
apparent that the Group’s
theoretical stress tests of airspace
closures until the end of September
2020 had become increasingly
plausible, implying greater pressure
on all travel companies and
signalling a more profound reset of
the competitive landscape.
Having evaluated the threats
and opportunities posed by the
intensification of the pandemic, the
Board decided in May 2020 it was
in the Group’s best interests to seek
supplementary financing to provide
greater resilience and flexibility
through the downturn to ensure it
was best placed to take advantage
of organic and acquisitive growth
opportunities.
The Board appointed NM
Rothschild & Co to provide
independent advice on debt and
equity funding options, and after
careful consideration, decided to
proceed with an equity fundraise
of up to 19.9% of the Group’s
share capital, whilst at the same
time, seeking a £25m increase
in its revolving credit facility
with Lloyds via the Coronavirus
Large Business Interruption Loan
Scheme (“CLBILS”). The Group
was delighted with the support it
received from its shareholders and
from Lloyds, with both equity and
debt workstreams being completed
on 22 May 2020. With the £67m
raised via the share placing, and the
£75m facility, the Group put itself in
the strongest possible position.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
13
Richard Pennycook
Chairman of the Board, On the Beach Group plc
“
The Group has
demonstrated resilience
through what has been
a very difficult year and
I am extremely proud
of the commitment our
colleagues have shown
during these exceptional
times. Despite the
significant challenges
that COVID-19 continues
to present, we see
excellent opportunities
for the Group and
look to the future with
confidence.
”
STRATEGIC REPORT Strategic Report
Report from the Chairman of the Board
Customer service
Board Changes
During FY20, our customer service has
been focused on two of the biggest
operational challenges that the Group
has ever faced.
For the first quarter of FY20, our
teams were focused on supporting
c.100,000 customers affected by
the TCG failure. The Group has a
detailed crisis management plan in
place to deal with supplier failures.
The execution of this plan by a cross-
departmental crisis management team
meant that an incredibly complex
and difficult situation was managed
smoothly, with positive impacts for
the Group’s stakeholders, particularly
customers, who received either a
replacement flight or a cash refund.
The vast majority of cash refunds
were processed within 14 days of
cancellation.
Since March 2020, the focus of the
majority of our colleagues has been
on managing the operational fallout of
COVID-19 cancellations and disruption.
Against the backdrop of these
unprecedented challenges, alongside
tens of thousands of customers facing
great uncertainty and wishing to
re-arrange or cancel their holidays, it
has been impossible to provide the
level of service we ordinarily strive
to provide. Having said that, our
incredible colleagues have worked with
dedication, passion and resilience to
serve our customers and I express my
sincere thanks to them for all of their
work.
I would also like to thank our many
loyal customers who have been
understanding of the unprecedented
situation we have all faced.
As previously announced, Paul Meehan
stepped down from the Board on 17
July 2020, having been CFO since
2017. Our thanks go to Paul for the
very significant contribution that
he made to the Board and to the
wider Group and for supporting a
seamless transition to Shaun Morton,
who was previously the Group’s
Director of Finance and who was
appointed CFO on Paul’s departure.
Since he has stepped into the CFO
position, Shaun has demonstrated
exceptional leadership through the
most challenging of times and is a great
asset to the Board and the Group.
David Kelly, who is Senior Independent
Director and Chair of the Remuneration
Committee, has also taken on the role
of Designated Non-Executive Director
for Employee Engagement. This is
an important role which ensures the
voice of our colleagues is represented
consistently and effectively in the
boardroom. David’s experience,
enthusiasm and energy for all things
“People” will be invaluable in this
regard.
Governance
The Board’s activities and processes
have changed and adapted as a result
of the events of this year, and these
changes have been working well. As a
Board we are committed to the highest
standards of corporate governance,
as outlined in detail in our Governance
Report on pages 63 to 121.
During the year, we have been further
embedding the requirements of the
UK Corporate Governance Code 2018
(‘Code’), particularly the renewed focus
on identifying and engaging with all
our stakeholders. Our s.172 statement
on pages 46 to 53 sets out our
consideration of our key stakeholders in
our decision making and we have also
discussed separately within our People
section on page 54 our approach to
employee engagement in response to
the Code.
Regulatory change needed in the
industry
Consumer trust in the travel industry is
currently at a record low and rebuilding
that trust is essential.
At the start of the COVID-19 crisis the
priority for the industry was survival
and then, at least for responsible
businesses, the priority became making
sure that those consumers who wanted
refunds got them. But we now need to
go further. There are systemic problems
that need to be addressed. Problems
that contributed to past market failures
– not just in the past few months, but
over the past few years – which we
believe will cause future failures if
not addressed. The industry needs
to reform to protect consumers, to
protect and promote competition in the
interests of consumers, and to protect
businesses and jobs.
One such area where we believe
reform is required is in relation to
the protection of customer monies.
For many consumers, their annual
holiday represents their largest annual
purchase. If consumers cannot trust
that their money is safe, they will be
reluctant to book holidays, and the
industry will suffer. Differences in the
way in which customer monies are
held means that those airlines and
package holiday organisers who use
customer monies as working capital
are more likely to treat customers badly
when there is a market shock (to which
the travel sector is prone). It also puts
those responsible companies like ours,
who hold customer monies on trust, at
a competitive disadvantage. Reform
is needed to ensure that customer
monies are always safe, and to ensure
that there is a level playing field. In this
respect we continue to advocate the
benefit of ring fencing customer monies
to Government and regulators.
Richard Pennycook
Chairman of the Board
On the Beach Group plc
10 December 2020
14
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
“ Adam CRM Manager
We aim to provide a
fantastic personalised
journey from research
to post-purchase,
understanding the users
desires at every point
of the process, and
delivering the content
to inform, inspire and
engage.”
Favourite Beach:
Santa Monica Beach, California
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
15
15
STRATEGIC REPORT
Strategic Report
Business Model
STRUCTURAL
MARKET
GROWTH &
MARKET
SHARE
GROWTH
PERSONALISE
CUSTOMER
PROPOSITION
& LEVERAGE
£ REVENUE
DRIVE
EFFICIENT
SHARE
GROWTH &
STRENGTHEN
BRAND
ADDRESSABLE MARKET
Short haul
beach holidays
dynamically
packaged
X
Online
penetration
X
OTB share of
market traffic
=
Unique
visitors
X
£ Revenue per
booking
X
Conversion
=
Revenue per
unique
visitor
=
Revenue
-
Unique
visitors
X
Marketing
spend per
unique visitor
=
Marketing
investment
-
Fixed and
Variable Costs
SCALE
DRIVES
OPERATIONAL
LEVERAGE
OTB’s business model is centred on driving efficient growth in
market share while maintaining and improving both conversion
and £ revenue per booking
Our strategic initiatives are focused on driving the performance
of all of these levers
Profit growth is the cumulative effect of improvements in
performance of all of the levers individually
=
PBT
16
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Strategic Report
Chief Executive’s review
The Group continues to be a
dynamic, entrepreneurial and
ambitious business delivering
value for money beach holidays
that are personalised to our
customers’ individual needs. The
Group maintains a daily focus to
improve the quality of its customer
proposition and the value that it
provides to its growing customer
base.
This has been a challenging year for
us, as it has for the rest of the travel
industry and it is likely that we will
see several years of change in the
industry over the next six to twelve
months which will include a level of
consolidation and changes to how
the sector is regulated.
The Group is already well
positioned to benefit from the
changes we are likely to see post-
pandemic. Our business model is
established as a low cost operating
model, for an increasingly digitised
industry where consumers are
seeking increased convenience,
choice, and a personalised
experience with financial protection.
Up until February 2020, we
continued to invest in both online
and offline marketing activity and
these investments led to record
levels of brand awareness and
branded traffic. Our expansion into
longer haul destinations and our
B2B presence via Classic Collection
and Classic Package Holidays were
both running well ahead of plan
prior to the COVID-19 shutdown
and we look forward to continuing
this progress as the market
normalises.
COVID-19 impact and response
The health and wellbeing of our
team members and our customers
is and always will be the Group’s
top priority. Throughout the past
9 months, I am delighted that my
colleagues have responded with
speed and professionalism to the
many challenges that COVID-19
has presented.
COVID-19 has significantly
impacted the entire global travel
industry. Our trading performance
has been impacted by both a
material reduction in underlying
bookings from February 2020 and
the reversal of revenue generated
for bookings received in the year
that have either been cancelled or
are likely to be cancelled.
The Group took early action in the
period to manage risk and conserve
cash:
ą
ą
In an environment of limited
demand, the Group’s variable
marketing costs reduced to
almost nil.
Further actions to limit other
non-essential costs in a zero
revenue environment resulting
in monthly cash costs of c.£2m
across the Group.
ą
ą We utilised CJRS to reduce staff
costs where it was appropriate
to do so.
The Group has maintained
all costs associated with the
delivery of its future strategy,
the call centre has operated
a full service and suppliers
(including hotels) have all been
paid within agreed terms.
The Board, the Executive
Team and senior management
all agreed to reductions in
their salaries and fees during
the year. This is alongside
no bonuses being awarded
across the Group in the current
financial year.
ą
ą
ą On 8 April 2020 the Group
reached agreement with its
bank, Lloyds to: extend the
£50m RCF to all months of
each year; extend the term to
December 2023; and reset
covenant tests for all periods up
to and including June 2021.
On 21 May 2020 the Group
agreed an increase to these
facilities, in the form of an
incremental £25m RCF under
the CLBILS with Lloyds,
expiring in May 2022. The
recently renegotiated £50m
RCF remains in place, expiring
in December 2023. As a result,
the Group now has available
to it maximum working capital
facilities of £75m.
In addition, on 22 May 2020 the
Group issued the equivalent of
19.9% of issued share capital
with no discount, raising £65m
cash, net of fees.
ą
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
17
Simon Cooper
Chief Executive Officer
“
The flexibility and asset
light nature of our
business model together
with our recently
strengthened balance
sheet and trust account
protection for customers
positions us well to see
through the COVID-19
disruption and prosper
when normal market
conditions return.
”
STRATEGIC REPORT Strategic Report
Chief Executive’s review
We believe that the above measures
allow the Group to simultaneously
increase investment in its digital
platforms; continue to drive brand
through investment in online and offline
marketing activity; improve conversion
with attractive low deposit schemes;
and react to commercial opportunities
in the UK and internationally as
demand begins to normalise.
Refunds for COVID-19
impacted bookings
When a customer books a holiday, all
funds paid to the Group, excluding any
flight costs which are paid immediately
to the flight operator, are held in a
ring-fenced trust account until the
customer returns from their holiday,
at which point the funds are released
to the Group to pay the hotel and
transfer providers. As such the majority
of affected customers have received
refunds for hotels and transfers within
14 days of cancellation, as stipulated
by the Package Travel Regulations.
Refunds due to customers for the
flight element of their holiday have
been paid as soon as the refund was
received from the airline. To comply
with EU261 an airline must offer a
cash refund for cancelled flights and
this must be reimbursed within 7 days.
During this period, there has been
widespread non-compliance with
this regulation by airlines which has
impacted the Group’s ability to provide
timely refunds for customers’ flights.
Notwithstanding our repeated requests
to the Government and regulators to
enforce this legislation, in many cases
this non-compliance continues.
During this period it has been
necessary, in some instances, to
refund customers for cancelled flights
in advance of receiving refunds from
airlines. This action has been taken
where the Directors believe the
brand and / or customers have been
significantly impacted by delays to
flight refunds caused by airlines. As
at 30 September there was £25m of
refunds paid to customers in advance
of receiving refunds from airlines which
by 30 November had reduced to £4m.
As at 30 September On the Beach
had processed £151m in refunds
to customers for cancelled holidays
which represented the vast majority of
all refunds due for cancelled holidays
travelling in the financial year. The
Group remains committed to ensuring
that customers receive any refunds due
for cancelled flights, in cash, and unlike
many peers in the industry has not
issued any vouchers or refund credit
notes in lieu of cash refunds.
Industry developments
The Group is the only listed UK travel
business that operates a fully ring-
fenced customer trust account in which
customer funds, excluding those paid
to airlines, are held until the customer
returns from their holiday. Therefore,
the Group does not rely on cash
received for forward bookings to trade.
Monies that have been received for
holidays that are cancelled by a closure
of airspace can be repaid to customers
in cash with limited impact on the
Group’s working capital.
Companies operating in the travel
industry have historically traded using
advance holiday receipts as working
capital. We expect that there will likely
be regulatory changes to the system
of financial protection and protection
of customer prepayments in the travel
industry to protect both customers and
the taxpayer.
In the event that regulators require
travel operators to implement ring-
fencing of customer prepayments
(or impose financial penalties for not
operating with this type of structure)
the Group is well placed given it already
operates a trust account structure.
Current Trading & Outlook
ą Booking volumes in October and
ą
November 2020 were significantly
below normal levels as consumer
appetite for booking holidays
remained subdued.
Legislation passed by the
Government on 4 November made
leisure travel from England illegal
during the period from 5 November
to 1 December 2020 (inclusive).
ą A number of factors continue to
supress demand such as regularly
changing FCO advice, onerous
destination entry requirements and
quarantine restrictions.
18
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
ą
ą Reduced consumer confidence over
the summer and in recent months
has resulted in the reduction and
consolidation of airline flying
schedules this winter.
In a normal year, holiday bookings
would peak in January for travel
from March – September. Booking
volumes and the timing of the
peak in FY21 will be significantly
influenced by the evolution of the
COVID-19 pandemic and UK and
European Government policy in
response to it. Whilst the wider
environment therefore remains
uncertain, the Board remains
confident in the resilience and
flexibility of the Group’s business
model and believes there is an
unprecedented opportunity to
significantly increase market share
over the medium to long term as
demand returns.
The Board will continue to evaluate
internal and external opportunities
that will both increase scale and
deliver value for shareholders.
ą
In light of the continued market
uncertainties, the Group is maintaining
its suspension of full year guidance for
FY21 until such time that there is more
certainty over the timing of, and extent
to which travel can return to normal.
On the Beach continues to successfully
build a leading position as more
consumers discover the ease of use
and vast choice of beach holidays
across our platforms. The flexibility
and asset light nature of our business
model, together with our recently
strengthened balance sheet and the
actions we have taken since March,
means we are well placed to capitalise
on the inevitable structural changes in
the market post COVID-19. As a result,
the Board continues to look to the
future with confidence.
The Board will provide a further update
on trading on the date of our AGM on 5
February 2021.
Simon Cooper
Chief Executive Officer
10 December 2020
Strategic Report
Strategy
Our vision is to build Europe’s leading
online beach holiday retailer via a single
platform, multi brand strategy
UK
To reach the widest
possible audience of
beach holidaymakers
V E S
IN
T I N T A L E N T AND TEC
H
N
O
L
O
G
Y
BRAND
DIFFERENTIATE
LONG
SHORT
HAUL
HAUL
B2C
B2B
INSPIRE
PERSONALISE
EUROPE
T
O
E
X
TEND CORE C A P A B I L I T IE S
To support the integration
and revenue expansion of
beach focused brands
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
19
STRATEGIC REPORT
Strategic Report
Strategy
Strategy and growth
On the Beach continues to deliver significant growth in its core and adjacent markets by evolving a strategy based on
the following strategic pillars:
Investing in talent and technology to
extend core capabilities
› Continuing to invest in our people
and our platform to allow us to
innovate at an increasing pace
› Investing in our people to ensure
that we drive optimum performance
from a growing talent base
› Evolving platform capabilities to
simplify the integration of further
brands
Leveraging increased revenue
through direct and differentiated
supply
› Enhancing our programme of direct
and differentiated supply
› Building our in-house capability to
increase visibility of differentiated
product
› Leveraging our multi-brand
capability to offer our partners the
widest range of distribution options
Driving an efficient increase in
traffic through branded and direct
channels
› Investing in an efficient multi-
channel approach supported by
our sophisticated bid management
capability
› Increasing investment offline in
conjunction with econometric
modelling capability to strengthen
brand awareness and consideration
Personalising our customer
experiences
› Driving an increasingly simplified,
tailored customer experience
› Showing the most relevant product
to all site visitors at the earliest
possible opportunity
› Optimising our multifunctional app
to increase customer engagement
Inspiring holidaymakers with
destination agnostic search
technologies
› Optimising destination agnostic
search technologies
› Leveraging capabilities to retail
a wider range of product from a
wider range of suppliers
Reaching an ever wider audience
of beach holidaymakers through
product, channel and geographic
extension
› Expanding our long haul offering to
monetise existing search volumes
› Growing share of B2B sales
through the CPH online agent-
facing portal
› Evolving the product portfolio of the
Classic luxury B2B brand
› Leveraging our core capabilities to
grow market share in Scandinavia
› Seeking value-enhancing M&A
opportunities
20
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
142536
Our strategy in action
Case study - Redesigning the experience of booking a holiday
Strategic pillars in action:
3
Over the course of spring and summer 2020, we ran four “Design Sprints” (a user centred design technique
developed by Jake Knaap while at Google Ventures). It is a highly collaborative process, involving teams from across
the business; from Design, Research, Product and Technology, to Marketing. With the teams’ objective being, within a
week, to identify and understand a real business problem, design a solution and test quickly with real users.
Our approach was to work through the customer experience of booking a holiday and focus on a different stage of the
booking path for each sprint. The area of focus for the four sprints included:
ą
ą
ą
ą
Research & Screen, with the target of meeting customer holiday enquiry and search needs that are more
specific to the individual.
Search results can be overwhelming, with multiple options and detailed content. Our goal was to design a
solution that allows all customer mindsets to navigate this and confidently make their selection.
Account creation is a priority in both establishing an improved post-book experience as well as an important
step in personalising the search and booking experience.
Customise and refine holiday details so that it fits their specific needs.
The outputs from these Design Sprints have created a programme of work that are priority deliverables for the
Product and Technology functions as we move into 2021.
Stakeholder engagement: The process of redesigning our entire booking path relies on a good understanding of our
current and potential customers’ needs. We therefore extensively tested the new designs and have taken users’
feedback onboard before progressing.
New booking path (Desktop/Mobile)
Original booking path
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
21
STRATEGIC REPORT
Strategic Report
Strategy
Case study - Designing and launching our new marketing campaign
Strategic pillars in action:
2
This year’s campaign had one very clear and important objective: make On the Beach famous offline. In the 15 years
since its creation, On the Beach has become one of the leading players in the holiday market, predominantly through
its in-house technological capabilities and its investment into paid online search. Despite this, awareness for the
brand lagged behind in comparison to the Company’s size and market share (20% share of the online sales in the
short haul beach market). With this campaign, we hoped to grow our awareness considerably by moving the brand
into new visual and strategic territory. Building on our warmth and wit from previous campaigns, we had the largest
creative budget we have had to date to produce something that would elevate On the Beach to become a household
name.
Implementation & creativity
In the planning stages of the campaign, it became clear that to meet our objectives we needed a creative platform,
not a one-off campaign. We work in an incredibly homogenous category when it comes to offline advertising, so we
knew that to get cut through, we needed to produce an advert that really stood out from the crowd. Despite having
large online budgets, our offline budget currently cannot compete with those of the larger tour operators, so, if we
can’t outshout the competition in terms of media spend, we have to outshout them in terms of creative. To do that,
we produced something truly different and unique.
Results
The results have been incredible:
ą
ą
ą
According to YouGov, On the Beach saw the largest increase in advertising awareness of any brand in the UK
in December 2019.
We were named ‘Ad of the week’ by Campaign upon launching, and our radio ad was the winner of February’s
Aerial Award. We also won Multimedia Broadcasting Ad of the Year at this year’s Prolific North Awards.
We’ve seen an unprecedented uplift across all brand metrics recorded in our quarterly tracker, with on the
beach seeing the largest percentage point shift for prompted awareness, prompted ad awareness, prompted
consideration and spontaneous awareness within our competitor set:
ą Prompted brand awareness: 65% (+15 ppts)
ą Prompted consideration: 29% (+10 ppts)
ą Prompted advertising awareness: 25% (+13 ppts)
ą Spontaneous brand awareness: 11% (+7 ppts)
ą Spontaneous advertising awareness: 8% (+5 ppts)
ą Spontaneous beach holiday awareness: 30% (+12 ppts)
Through our ‘Everything’s Better On the Beach’ campaign, we created something unexpected and completely
different to what the category is known for. We’ve had a great response from consumers as well as those within the
industry. Our ads were bold, funny and standout, with the results speaking for themselves.
22
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
People and Culture
We are working towards being the leading tech and product
function in the North West – we want to be THE team in
which people aspire to work so that we can attract and retain
the best talent.
In the tech and product team, we believe in people over
process, context over control and promoting autonomy,
mastery and purpose to free our people to do their best work.
We want our colleagues to be extraordinary talent, highly
effective collaborators and creatives - we simply want the
best.
We are working towards becoming recognised as having
a leading culture, brand and technical identity with high
engagement and employee satisfaction.
Please see the People section on pages 54 to 56 for more
information in relation to our colleagues and culture.
Investment in technology
Strategic pillars in action
1
2
3
4
5
6
If a global pandemic has proven one thing that is critical to
the success of any business, it is the ability to rapidly react
and adjust in order to not only survive but also thrive. Crisis
creates opportunity. Fortunately for the Group, the continuing
investment in our people to help evolve our culture has
allowed us to accelerate our product experience and platform
innovation during these uncertain times.
New priorities accelerate multi-brand evolution
COVID-19 has presented a unique opportunity to accelerate
key architectural work that in the future will improve our ability
to onboard new brands, as well as better supporting the ones
we already have. As new strategic initiatives are focussed on
increasing flexibility, this architectural realignment will allow
us to on-board new supply, to internationalise and to scale
even more quickly than before. Delivery of these priorities
demands we take bigger, bolder steps than would normally
be possible when competing with shorter term opportunities.
As we come to the end of half a year of strategically focussed
work, we have grasped this opportunity to strengthen our core
platform and put in place the foundations to support rapid
onboarding of new brands in the future.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
23
STRATEGIC REPORTHOTELSCUSTOMERCONTENTPAYMENTSFLIGHTSUAPIUAPIUAPIUAPIDATA PLATFORMANCILLARIESUAPIUAPI Strategic Report
Key Performance Indicators
Financial KPI’s
OTB revenue
OTB revenue after online marketing costs
s
n
o
i
l
l
i
M
£100
£90
£80
£70
£60
£50
£40
£30
£20
£10
-
£45.6
£37.5
£30.9
£89.3
£90.3
£81.9
£70.2
£62.5
£50.4
£70.0
£60.0
£50.0
s
n
o
i
l
l
i
M
£40.0
£30.0
£60.5
£56.2
£48.4
£38.9
£32.1
£36.2
£20.0
£16.7
£18.8
£22.5
£10.0
-
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY12
FY13
FY14
FY15 FY16 FY17 FY18 FY19
FY20
OTB online marketing spend % revenue
OTB EBITDA % revenue
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
50.7%
49.9%
48.6%
45.9%
44.6%
40.9%
37.1%
33.0%
28.1%
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
45.0
40.0
35.0
30.0
s
n
o
i
l
l
i
M
25.0
20.0
15.0
10.0
5.0
0.0
42.4%
42.9%
40.5%
32.7%
32.1%
32.0%
30.9%
35.8%
50.0%
45.0%
40.0%
35.0%
30.0%
25.0%
21.1%
20.0%
15.0%
10.0%
5.0%
0.0%
FY12
FY13
FY14
FY15 FY16 FY17 FY18 FY19
FY20
FY12
FY13
FY14
FY15 FY16 FY17 FY18 FY19
FY20
Online marketing spend (£m)
Online spend as % of adjusted revenue
EBITDA
EBITDA % Revenue
OTB EBITDA
37.9
38.8
33.2
25.1
20.0
14.1
12.3
9.9
10.6
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
s
n
o
i
l
l
i
M
FY12
FY13
FY14
FY15 FY16 FY17 FY18 FY19
FY20
24
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Strategic Report
Key Performance Indicators
Non-Financial KPI’s
Directly contracted hotel supply
Net Promoter score
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
59
58
57
56
55
54
53
FY15
FY16
FY17
FY18
FY19
FY20
FY17
FY18
FY19
Description: Tracking % of total hotel buying via direct
contracting (as opposed to through third party sourced
product).
Performance: We have continued to increase our proportion
of directly contracted product this year. Benefits of direct
contracting include increased access to exclusive rates, ring-
fenced capacity and OTA exclusivity. It also supports improved
customer satisfaction scores as complaint ratios on directly
contracted product are significantly lower than third party
sourced products.
Link to strategy
4
Voluntary employee turnover
35%
30%
25%
20%
15%
10%
5%
0%
Description: Index that measures willingness of customers
to recommend the Company’s services to others. It gauges a
customer’s overall satisfaction and provides us with insight into
our customers’ views.
Performance: Following the outbreak of COVID-19 , we
stopped sending out questionnaires to customers given very
few customers were travelling due the closure of airspace.
As a result, we do not have an accurate NPS for FY20 and
accordingly is not included in the table above. We have
recommenced sending out the questionnaires and NPS for
FY21 which will be included in next year’s report. We are
committed to improving customer satisfaction and continue
to find new ways to give our customers the very best On the
Beach experience.
Link to strategy:
1
3
NPS is a metric used for the Executive bonus scheme (although
no bonus operated in FY20).
Employee engagement
FY18
FY19
FY20
Description: Voluntary turnover tracks the number of employees
who have left of their own volition and provides a measure of
our ability to retain employees.
Performance: We were pleased to see voluntary turnover
reduce by a further 2% this year to 19%. Some parts of our
business have higher turnover than others, particularly the
contact centre. This is not something unique to the Company,
with staff turnover in the call centre industry being higher than
the national average. We are, however, committed to investing
in our employees as growing and retaining our talent base is
critical to achieving our strategic objectives (see page 54 to 56
for more information)
6
6.2
6.4
6.6
6.8
7
7.2
7.4
FY20
FY19
FY18
FY17
Description: Overall employee engagement score from the
employee ‘Hive’ surveys (administered by a third party).
Performance: 84% of our colleagues responded with an overall
average score of 7.2 out of 10, in line with our 2019 result.
Whilst we always strive to improve our position, we feel that
this is a positive outcome given the challenges presented by
COVID-19 and reflective of our continued investment in our
culture and people (for more Information see page 54 to 56).
Link to strategy
1
Link to strategy
1
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
25
STRATEGIC REPORT Strategic Report
Key Performance Indicators
Non-Financial KPI’s
Brand & Free and Non-Brand Sessions (m)
Promoted brand awareness
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
-
54%
39.7
57%
47.0
61%
48.4
67%
56.0
54%
35.4
30.1
33.5
35.6
31.2
28.1
72%
40.5
15.8
80%
70%
60%
50%
40%
30%
20%
10%
0%
FY15
FY16
FY17
FY18
FY19
FY20
70%
60%
50%
40%
30%
20%
10%
0%
65%
44%
44%
50%
Non-Brand Sessions
Brand Sessions
Brand Share
FY17
FY18
FY19
FY20
Description: Data shows the percentage share of sessions that
have come from Brand and Non-Brand channels.
Description: Data based on a survey that asks participants to
select all travel brands they have heard of from a list.
Performance: We have continued to increase our share of
Brand & Free traffic over the last year, making Marketing spend
much more efficient and showing the rewards of investment
into brand activity and above the line advertising.
Performance: This year saw our largest growth in brand
awareness to date, with a 30% (15ppts) increase compared to
the same time in FY19.
Link to strategy
2
Link to strategy
2
Promoted brand consideration
Spontaneous beach awareness
29%
19%
18%
19%
35%
30%
25%
20%
15%
10%
5%
0%
30%
16%
18%
14%
35%
30%
25%
20%
15%
10%
5%
0%
FY17
FY18
FY19
FY20
FY17
FY18
FY19
FY20
Description: Data based on a survey that asks participants
to select all travel brands they would consider for their next
holiday from a list.
Description: Data based on a survey that asks participants to
name travel brands that come to mind when thinking about a
beach holiday.
Performance: This year saw our largest growth in brand
consideration to date, with a 53% (10ppts) increase compared
to the same time in FY19.
Performance: This year saw our largest growth in beach holiday
awareness to date, with a 67% (12ppts) increase compared to
the same time in FY19.
Link to strategy
2
Link to strategy
2
26
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
General Counsel and Company Secretary
“ Kirsteen
On the Beach is one of the
few travel businesses that
protects customer money in
a ringfenced trust account.
The whole system of financial
protection for airlines and
travel companies needs to be
reformed to ensure consistent
consumer protection and
a level playing field for
businesses.”
Favourite Beach:
Corralejo, Fuerteventura
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
27
27
STRATEGIC REPORT
Strategic Report
Financial review
Shaun Morton
Chief Financial Officer
“
During a challenging
year, we have focussed
on strengthening our
balance sheet and
remain confident in the
long-term prospects of
the Group.
”
The Group organises its operations into four principal financial reporting
segments, being OTB (onthebeach.co.uk and sunshine.co.uk), International
(ebeach.se, ebeach.no and ebeach.dk), CCH (Classic Collection Holidays) and
CPH (Classic Package Holidays).
As a principal, CCH accounts for revenue on a “travelled” basis and therefore
reports revenue on a gross basis. In each of the OTB, International and CPH
segments, the Group offers dynamically packaged holidays acting as an agent
rather than a principal and accounts for revenue on a “booked” basis.
OTB performance
2020
2020
2019
Adjusted
£m
GAAP
£m
Adjusted
£m
Revenue
50.4
15.9
90.3
Online marketing costs
(14.2)
(14.2)
(29.8)
Offline marketing costs
Revenue after marketing costs
Variable costs
Fixed costs
(8.7)
27.5
(5.8)
(8.7)
(7.0)
(5.8)
(11.1)
(11.1)
Depreciation and amortisation
(5.5)
Exceptional operating costs
Share based payments
Amortisation of acquired
intangibles
Operating profit/(loss)
EBITDA
EBITDA %
Performance Summary
-
-
-
5.1
10.6
21%
(5.5)
(4.5)
0.6
(4.4)
(37.7)
(27.8)
-
(5.4)
55.1
(7.2)
(9.0)
(4.6)
-
-
-
34.3
38.9
43%
2019
GAAP
£m
83.3
(29.8)
(5.4)
48.1
(7.2)
(9.0)
(4.6)
(1.2)
(0.7)
(4.4)
21.0
30.0
36%
As is widely reported, the travel industry has been severely impacted by the
COVID-19 pandemic. As a result, adjusted revenue of £50.4m is down (44%)
YOY, £16.0m of which was earned in H2 and is predominantly for departures
in winter 20/21 and summer 2021.
In response to the restrictions imposed on travel due to COVID-19, the Group
took swift and decisive action to reduce costs. This included the suspension
of all offline marketing campaigns which were launched in H1 following the
collapse of TCG.
Online marketing costs for the year were £14.2m, down (52%) YOY and only
£2.5m in H2. Online marketing costs naturally fluctuate with demand and
have therefore reduced to low levels in H2 as the cost per visitor and the
number of visitors to the website have reduced to background levels.
Exceptional operating costs of £4.5m relate to legal and professional fees,
operating costs in response to COVID-19, and supplier provisions.
28
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
EBITDA
Overhead as % of revenue
2020
2020
2019
2019
Adjusted GAAP Adjusted
GAAP
%
%
12%
36%
%
8%
%
9%
22%
70%
10%
11%
34%
106%
18%
20%
Variable costs %
revenue
Fixed costs %
revenue
Overheads %
revenue
Overheads as a percentage of revenue have increased to
106% (FY19: 20%). This increase is the result of a reduction
in revenue earned due to European travel restrictions and
a significant reduction in consumer demand. The Group is
well-positioned to return to a pre-COVID operating leverage
position once market conditions return to normal.
Included within fixed costs are costs related to covering
public liability insurance excesses on incidents in resort for
holidays booked since the Package Travel Regulations were
implemented in July 2018.
Adjusted EBITDA of £10.6m (FY19: £38.8m) decreased
by 73% and adjusted EBITDA as a percentage of revenue
decreased to 21% (FY19: 43%). The closest GAAP equivalent
measure to Adjusted EBITDA is operating loss which was
£37.7m (FY19: profit £21.0m). This decrease is attributable to
the reduction in demand due to COVID-19 and the resulting
impact on operating leverage.
International segment performance
2020
2020
2019
Adjusted
£m
GAAP
£m
Adjusted
£m
2019
GAAP
£m
0.3
0.1
(0.2)
(0.2)
0.1
(0.1)
(0.2)
(0.2)
1.4
-
(0.2)
(0.4)
1.4
-
(0.2)
(0.4)
(0.1)
(0.1)
(0.1)
(0.1)
Revenue
Revenue after
marketing costs
Variable costs
Fixed costs
Depreciation and
amortisation
Operating profit/
(loss)
EBITDA
(0.3)
(0.5)
(0.6)
(0.4)
(0.6)
(0.7)
(0.7)
(0.6)
Performance summary
In the first four months to January 2020, bookings were down
4% YOY. This reduction follows the collapse of TCG, resulting
uncertainty around the Ving airline and a general softening of
demand for overseas travel in Sweden in particular.
The International segment operated until this point at a
breakeven level at revenue after marketing. Thereafter, the
onset of the COVID-19 pandemic resulted in a significant
reduction in demand.
Scandinavia has experienced a similar slowdown in consumer
demand as the UK. As a result adjusted revenue was down
(79%) to £0.3m (FY19: £1.4m). Including the impact of
cancellations, revenue was £0.1m and down (64%) YOY
(FY19: £1.4m).
Adjusted EBITDA was a loss of (£0.3m) (FY19: (£0.6m) due to
a reduction in marketing spend. The closest GAAP equivalent
measure to International EBITDA is operating loss which
decreased to (£0.6m) (FY19: (£0.7m)).
The International segment comprises websites in Sweden,
Norway, and Denmark operating under the ‘www.ebeach.se’,
‘www.ebeach.no’, and ‘www.ebeach.dk’ domains.
Classic performance
2020
2020
2019
2019
Adjusted
£m
GAAP
£m
Adjusted
£m
GAAP
£m
16.9
16.9
55.0
55.0
2.6
1.6
(1.3)
(2.2)
2.6
1.6
(1.3)
(2.2)
7.2
6.3
(1.2)
(2.9)
7.2
6.3
(1.2)
(2.9)
(0.1)
(0.1)
(0.2)
(0.2)
-
-
(1.1)
(0.1)
(2.0)
(3.2)
-
-
2.0
2.2
(1.1)
(0.7)
0.2
1.5
Revenue
Gross profit
Gross profit after
marketing costs
Variable costs
Fixed costs
Depreciation and
amortisation
Amortisation
of acquired
intangibles
Exceptional
operating costs
Operating profit/
(loss)
EBITDA
(1.9)
(2.0)
As a principal (rather than an agent) Classic accounts for
revenue on a "travelled" basis and reports revenue on a gross
basis.
Revenue decreased by 69% to £16.9m and the business
made an operating loss of £3.2m (FY19: profit £0.2m). As
Classic accounts for revenue on a travelled basis, H2 revenue
was £1.4m as very few customers chose to travel over this
period.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
29
STRATEGIC REPORT Strategic Report
Financial review
Revenue is stated net of £10.7m of COVID-19 related
cancellations. However, whilst a number of customer holidays
were cancelled, for a full refund, c.40% of bookings have been
amended to a future travel date. Revenue associated with
these bookings is £8m, which should be earned in FY21.
Throughout the pandemic, the team at Classic have been
focused on continuing to deliver the high levels of customer
service that our partners have become accustomed to and
have received an industry award this year for service levels
provided over the summer.
The management team continues to develop the luxury, tailor-
made and long haul propositions, brochures for which have
been produced for distribution this winter.
CPH performance
Financing and liquidity
The Group has in place a RCF of up to £75m with Lloyds. The
drawdown at 30 September 2020 was £nil (FY19: £nil) and
the peak drawdown for the year was £30.0m.
As mentioned earlier, the Group has renewed and extended
its Banking facilities. Details of the current facility limits and
maturity dates are as follows:
Facilities
£m
Issued
Expiry
Original RCF
£50m Apr 2020 Dec 2023
New CLBILS
facility
£25m May 2020
May
2022
Total facility
£75m
Drawn at 30
September
2020
£nil
£nil
£nil
2020
2020
2019
Adjusted
£m
GAAP
£m
Adjusted
£m
2019
GAAP
£m
Share based payments
The Group has an LTIP scheme in place which vests based on
performance criteria. In accordance with IFRS 2, the group
has recognised a non-cash credit of £0.6m (FY19: charge
£0.7m). The credit this year relates to the reversal of benefits
accrued for the 2018 incentive scheme.
Taxation
The Group tax credit of £7.5m represents an effective rate
of 19% (FY19: 19%) which was consistent with the average
standard UK rate of 19% (FY19: 19%).
Revenue
Gross profit/(loss)
Gross profit after
marketing costs
3.6
0.1
0.8
(2.5)
(0.1)
(2.8)
0.8
0.3
0.1
Variable costs
(0.3)
(0.3)
(0.2)
Fixed costs
(1.1)
(1.1)
(1.0)
Depreciation and
amortisation
Operating profit/
(loss)
(0.2)
(0.2)
-
(1.7)
(4.4)
(1.1)
EBITDA
(1.5)
(4.2)
(1.1)
0.7
0.2
-
(0.2)
(1.0)
-
(1.2)
(1.2)
CPH provides an online B2B platform that enables high street
travel agents to sell dynamically packaged holidays to their
customers. The platform was successfully launched in Q3 of
FY19.
Adjusted revenue for the period was £3.6m, and adjusted
EBITDA was (£1.5m). After accounting for COVID-19 related
cancellations revenue was £0.8m and operating losses were
(£4.4m).
The gross loss of (£2.5m) is stated after all costs incurred on
cancelled bookings.
The CPH trading result has been significantly impacted by
COVID-19, both due to a drop in demand, and the cancellation
of a significant proportion of bookings made for travel this
year.
Prior to the onset of the pandemic significant progress had
been made with the strategy to increase distribution of CPH
product which is now available in c.2,400 high street travel
agents. Agent activity had also significantly increased prior to
the onset of the COVID-19 pandemic, and over 1,400 agents
have now booked a CPH holiday.
30
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Cash flow
Total cash at 30 September 2020 was £36.5m (FY19: £54.8m).
2019
£m
19.3
10.3
-
0.7
2.4
(5.6)
(3.8)
23.3
(4.0)
(5.1)
Profit/(loss) before tax
2020
£m
(46.3)
Depreciation and amortisation
11.4
Net finance (income)/ costs
Share based payments
0.4
(0.6)
Movement in working capital
(58.0)
Movement in trust account
Corporation Tax
Cash generated from
operating activities
Other Cash Flows
Capitalised development
expenditure
Capital expenditure net of
proceeds
Net finance income/(costs)
Payment of lease liabilities
Dividends paid
Deferred consideration
Net cash flows
Opening cash balance
18.3
(0.2)
(75.0)
(1.0)
(0.4)
(0.4)
(2.6)
-
(8.4)
54.8
Net (debt)/cash
(28.6)
Proceeds from share issue
Closing cash at bank
Closing trust balance
65.1
36.5
25.8
The main movements relate to:
ą Group loss before tax £46.3m
ą Movements in working capital:
ą
ą
ą
ą
ą
The unwind of a normal working capital position
resulting from very low levels of trading and travel
for summer 2020. This impacts Classic working
capital in particular which operates on a negative
working capital cycle
The Group refunded a number of customers in
advance of receiving refunds from airlines. At
the year end this gap was £25m, and as at 30
November 2020 has narrowed to £4m
Other working capital timing, including the timing of
receipts of monies held in trust which can only be
withdrawn once customers have been refunded
Other cash flows as shown in the adjacent table of
£8.4m relating to interest, capital expenditure and
dividends.
Net proceeds of £65.1m from shares issued 22
May 2020.
Dividend
As announced on 8 April 2020, no interim dividend
was declared during FY20. In view of the exceptional
circumstances and the likelihood that disruption will continue
into 2021, the Board is not recommending a final dividend in
respect of FY20.
Shaun Morton
Chief Financial Officer
10 December 2020
(3.0)
-
(0.4)
(4.6)
(2.7)
(15.8)
47.3
54.8
-
54.8
44.0
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
31
STRATEGIC REPORT
Strategic Report
Risk management
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.
Our risk management process
The Board has overall responsibility for risk oversight and
maintaining a robust risk management and internal control
system. The Board determines the extent of risk the Company
is willing to take in order to achieve its strategic objectives
and which risks pose the greatest threats and opportunities,
having regard to the internal and external environments
in which we operate. The Board is supported by the Audit
Committee, which has responsibility for reviewing the
effectiveness of risk management and the internal control
processes.
The Group continuously identifies and reviews business
risks. This includes the monitoring of key risks, identification
of emerging risks, determination of treatment in taking into
account risk appetite, and evaluation and reporting on how
those risks may affect the achievement of business objectives.
Risk identification and assessment
On a day-to-day basis, each business area is responsible for
identifying, analysing, evaluating, managing and monitoring
the risks and emerging risks in their respective areas. Risks
are identified at an early stage and mitigated or escalated as
appropriate. The Executive Team meet on a weekly basis and
should there be any significant new risks or change in status
to existing significant risks, then this is discussed and action
taken as appropriate. As well as this on-going monitoring and
managing of risk, the Executive Team formally review risk on a
bi-annual basis. This review includes a detailed assessment of
new and existing identified risks, emerging risks, the likelihood
of each risk occurring and the potential impact, together with
controls and mitigating procedures in place. This information
is combined to form the Group risk register. The risk register
and report is then reviewed with the Audit Committee and
presented to the Board on an annual basis. The Board assess
the output of this work, confirming whether all principal risks
have been captured and addressed as well as considering
any areas and behaviours which could bring about new risks,
and different combinations of risk with other potentially larger
impacts.
Through these processes, we identify our main business,
strategic, financial, operational and compliance risks and
create action plans and controls to mitigate them to the extent
appropriate to our risk appetite.
The Audit Committee monitors the effectiveness of the risk
management system through regular updates from the
Executive Team and reviews the timeliness and effectiveness
of corrective action taken by management. The Audit
Committee also considers the findings and recommendations
of the external auditor throughout the year in relation to
the implementation and effectiveness of risk management
processes and internal controls (please see the Audit
Committee Report on page 78 for more details).
Principal risks and uncertainties
The Directors have carried out a robust assessment of
the principal risks and uncertainties facing the Company,
including any emerging risks, and those which could threaten
its business model, growth, future performance, solvency or
liquidity. The principal risks and uncertainties identified are
detailed in this section. This is not exhaustive, and additional
risks and uncertainties may prove to have a material effect on
the Group. Certain changes have been made to the principal
risks and uncertainties reported in the previous year as a result
of this assessment, namely due to the effects of COVID-19,
which has had a wide ranging impact on virtually every
principal risk, as well as introducing new risks for example
around recovering airline refunds. Rather than include a
separate standalone risk for COVID-19, the Company has
reported on the impact of the pandemic on each of its principal
risks, as set out in the table below. The Company has taken
the same approach with regards to risks arising out of Brexit.
Link with Strategy
For each risk highlighted, we have specified the strategic
pillars (as outlined in Strategy section of this report) that these
risks impact.
These are:
1 Investing in talent and technology to extend core
1
capabilities.
2
Driving an efficient increase in traffic through
branded and direct channels.
3
Personalising customer experiences.
4
5
6
Leveraging increased revenue through direct and
differentiated supply.
Inspiring holidaymakers with destination agnostic
search technologies.
Reaching an ever-wider audience of beach holidaymakers
through product, channel and geographic expansion.
32
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Consumer Demand
Impact
A recession or reduced economic growth can lead to reduced job security and a reduction in consumer leisure spending.
A weak pound makes holidays and consumer spending abroad more expensive. High-profile corporate failures reduces
consumer confidence to make ‘big ticket’ purchases, particularly well in advance.
Terrorist attacks, war/acts of force and civil unrest undermine consumer confidence and cause consumer behaviour to shift
suddenly (e.g. by choosing not to book a holiday, delaying booking or booking a different destination or a ‘staycation’).
Continued uncertainty over the Brexit outcome and the resulting economic position could lead to a material reduction in
consumer demand for holidays.
COVID-19 has caused consumer behaviour to shift with many people choosing not to book a holiday or delaying booking. It has
had a huge impact on the economy and led to reduced job security. Health concerns and anxiety in relation to the virus could
lead to a continued reduction in consumer demand for holidays which could be exacerbated if there are further waves and/or
further travel restrictions.
Emerging Risks/Change in the Year
The COVID-19 pandemic, as well as continuing Brexit uncertainty/political turmoil in the UK has heightened this risk
significantly.
Key Mitigations
The Group’s flexible payment arrangements enable customers to spread the cost of their holiday. The Group’s ATOL bonding
and other financial protections, together with its consumer trust account arrangements (where customer monies other than
those paid to airlines are held safely in a trust until they travel), provide compelling reasons for customers to have confidence in
the Group over other competitors.
In an environment of rapidly shifting consumer demand, the Group’s flexible and asset-light business model means it is well
placed to respond to sudden shifts in consumer demand.
The Group anticipates that COVID-19 will present opportunities for the Group to increase its market share and help strengthen
consumer confidence in the Group.
Strategic pillars impacted
Direction of travel
1
2
4
6
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
33
STRATEGIC REPORT
Strategic Report
Risk management
Flight Supply
Impact
As is the case with all online travel agents (“OTA”), a lack of flight supply/capacity impacts the Group’s ability to fulfil consumer
demand for holidays.
For several low-cost airlines, the Group does not have agreements in place and instead acts as the customer’s agent. Certain
airlines may not wish to accept bookings from the Group’s customers and might seek to impede the Group’s access to flight
data and bookability.
Certain airlines may use technological and other means to prevent the Group’s bookings or to apply a price difference to make
the Group’s bookings more expensive. This could make the Group’s offering less extensive or more expensive which could have
a material adverse effect on the Group.
The Group is one of several online travel agents 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 case has
been dormant for over two years with no material developments in that period (though see emerging risks section in relation to
correspondence exchanged with Ryanair this year). Other airlines could seek to emulate Ryanair’s claim against OTAs. Litigation
is unpredictable and if Ryanair were to prevail, this could have a material impact on the Group’s business.
In order to mitigate flight supply risk, the Group may take allocations of seats on certain key routes, which may involve some
limited risk. If the Group cannot sell the seats profitably or the programme is cancelled, this could lead to material costs for the
Group.
Emerging Risks/Change in the Year
During the year, the Group has been in discussions with Ryanair in relation to refunds in respect of flights cancelled during the
pandemic. We set out below the risks relating to recovering airline refunds, but as a result of those discussions and chargebacks
claims made by the Group, Ryanair intimated that the litigation referred above could be restarted. As of writing, no further legal
action has been taken but the threat of such legal action recommencing increases the flight supply risk.
Certain airlines continue to try and prevent the Group from booking seats on their flights.
There is uncertainty in relation to aviation rights in the event of a no-deal Brexit. New aviation rights need to be agreed with the
remaining EU member states and standalone agreements need to be reached with non-EU members (to the extent not already
agreed). Without such a deal, planes cannot fly. While it is considered highly unlikely that no aviation deal will be done, there
is a theoretical risk that if agreements are not reached, planes cannot fly, so the Group would be unable to offer flights to its
customers which would significantly impact the business and the whole travel industry.
Key Mitigations
The Group is successfully building relationships with a wider range of airlines, including preferential commercial terms and rates.
The Group’s focus on beach holidays means its customers are concentrated on certain routes and its scale means that it can
easily fill seats on these routes. This is attractive to airlines looking to fill seats on new routes (including those replacing TCG
capacity) and the Group is in commercial discussions with a number of airlines.
The Group’s proprietary technology is industry leading and enables it to ensure that its operations are robust.
Where allocations of flight seats are taken, this will be on routes where there is strong demand, and the Group will seek to build
flexibility into the contract to enable cancellation when demand is lower than expected.
We have expert external legal advisers for any potential disputes with airlines which seek to prevent the Group booking seats
for its customers.
Strategic pillars impacted
Direction of travel
1
4
6
34
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Supplier Failure
Impact
In the event of a major airline failure, the Group must replace the customer’s flight arrangements, or refund the customer in
full for the holiday, with no ability to claim back the costs from the failed airline or any bond or effective insurance or the ATOL
scheme/CAA (which protects consumers, not package organisers). This leads to loss of margin on cancelled bookings, and
incremental costs to arrange alternative flights.
The Group must refund customers within 14 days of cancellation, but it may take some weeks to recover monies via chargeback
claim, creating a cash flow impact.
Failure of a major bedbank or key hotel partner would cause operational disruption.
Emerging Risks/Change in the Year
TCG’s collapse crystallised this key risk for the Group, however COVID-19 has increased the risk of further supplier failures. The
risk is exacerbated if there are further waves and/or further travel restrictions.
Key Mitigations
The Group has detailed and well-rehearsed plans in place to deal with a major airline failure, having dealt with many airline
failures, including Monarch and TCG failures.
The Group has a working capital facility in place to ensure it has sufficient funds to refund/replace customer bookings. The
Group pays for flights using credit/debit cards which include chargeback rights, which enable the Group to recover the cost.
In these challenging market conditions, we have made preparations in the event bedbanks and other partners fail. We are
closely monitoring the financial health of suppliers and taking steps to mitigate risk, such as only agreeing prepayment deals
with well established hotels.
The challenging market conditions will inevitably mean some travel organisers and suppliers will collapse but such failures could
create opportunities for the Group to gain market share. Following the renegotiation of our banking facilities and the equity raise
during the year, the Group is in a strong position to take advantage of opportunities post-COVID-19.
Strategic pillars impacted
Direction of travel
1
2
4
6
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
35
STRATEGIC REPORT
Strategic Report
Risk management
Competition Risk
Impact
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. New entrants to the market increase competition.
Emerging Risks/Change in the Year
COVID-19 will increase the chance of competitors potentially failing.
COVID-19 has seen the rise of refund credit notes in lieu of cash refunds (see page 12 for more information on this issue). This
could increase the competition risk for the Group as it creates captive consumers for those organisers issuing the credit notes,
thereby potentially reducing the demand for the Group's offering.
Key Mitigations
The Group has a strong brand and offers a great value proposition to customers as well as flexible payment options. The
Group’s investment in marketing, talent and its infrastructure means it can compete to attract and convert customers.
Strategic pillars impacted
Direction of travel
1
2
4
6
36
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Package Organiser Liability
Impact
For all holiday bookings made after 1 July 2018, these are treated as “packages” and On the Beach /Sunshine/Classic/CPH
(as applicable) is the “package organiser” which means the Group is responsible for the proper performance of the package.
The Group can therefore be held liable for death/personal injury or illness suffered by customers that are the fault of any of the
suppliers. In the event of a catastrophic injury/fatality, or multiple injuries, the cost could run into millions of pounds.
Package organiser status brings with it other onerous responsibilities including finding replacements/providing refunds where
flights are cancelled (through airline insolvency or otherwise) or there is a major change to the customer’s holiday and providing
accommodation where customers are stranded.
For holiday bookings made prior to 1 July 2018, On the Beach and Sunshine did not act as package organiser and do not have
legal liability for claims for injury/illness arising out of these bookings. However, certain claimant solicitors will try to argue that
these were packages in any event.
Emerging Risks/Change in the Year
In the current climate, less people are going on holiday which reduces claims, however we anticipate an increase in COVID-19
related claims e.g. customers claiming they caught COVID-19 whilst on holiday.
Conditions in the insurance markets are difficult due to COVID pressures, and travel is one of the most affected industries. In
line with general market trends, we have seen an increase in insurance costs. We have appointed new insurance advisers and
insurance brokers to help us ensure we have the appropriate insurance in place on the best possible terms.
Key Mitigations
For bookings made prior to 1 July 2018, On the Beach and Sunshine acted only as travel agent and not as principal or package
organiser and our processes, practices and paperwork firmly support this.
The Group has public liability insurance in place to cover its risks as a package organiser as well as thorough claims reporting,
investigation and handling processes. The Group has indemnities in place with most suppliers, to enable recovery.
The Group has a health and safety management system in place and works with its suppliers to ensure that customers’ health
and safety is monitored throughout the supply chain. We have taken additional health and safety steps in light of COVID and
liaised with external health and safety advisers in this respect.
Strategic pillars impacted
Direction of travel
1
2
4
6
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
37
STRATEGIC REPORT
Strategic Report
Risk management
Recoverability of airline refunds
Impact
The COVID-19 crisis has brought with it new risks as a package organiser in relation to refund obligations where the airline is:
(i) not refunding flight costs in a timely fashion; or
(ii) not refunding flight costs at all because the flight is still going ahead.
In relation to not refunding flight costs in a timely manner, where a customer’s holiday is cancelled, the Group has an obligation
under the Package Travel Regulations (PTRs) to refund that customer in cash in 14 days. Airlines have an obligation under
Regulation (EC) No 261/2004 to refund the flight cost in 7 days, but many airlines have been taking months to refund and/or
putting additional obstacles in the way of claiming these monies. The Group has had to refund many customers in advance of
getting the monies from the airlines.
In relation to airlines not refunding flight costs when the flight is going ahead, this causes issues when the FCO is advising
against all but essential travel to the relevant destination or the government imposes a travel ban. If the customer cancels their
holiday due to FCO travel advice, the Group’s policy is to offer the customer a choice to keep or cancel their holiday or change
the dates where available. If the customer cancels, the Group will refund all elements of the holiday save the flight cost, whereby
we will only refund such flight costs if the flight is cancelled and/or refunded by the airline. Whilst the Group is confident of the
legal position that FCO advice does not automatically trigger cancellation under Reg 12(7) of PTRs and we can robustly defend
this approach, we anticipate we will receive claims from customers who have not received a full refund.
Emerging Risks/Change in the Year
New risk this year in light of the pandemic.
Key Mitigations
In relation to airline refunds, in most cases, the Group waits until it receives the refund from the airline before the customer
is refunded but if that refund is not forthcoming then the Group will often taken the decision to refund the customer before
it receives the monies from the airlines. Where the Group has a relationship with the airline, we are engaging to agree a
payment schedule. We pay airlines on virtual card which means we have chargeback rights to recover the sums if these are
not paid voluntarily, and we are confident of recovery due to legal advice received and past experience. We have also taken
an assignment of rights from customers so that we can pursue sums from airlines where we have refunded the customer in
advance of receiving the cash ourselves.
In relation to potential claims from customers who have cancelled their holiday due to FCO advice, we have a strong legal
position to resist the obligation to refund the flight element where the flight goes ahead and the package can be performed.
Strategic pillars impacted
Direction of travel
1
4
6
38
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Regulatory Breach
Impact
The Group’s business is highly regulated and is subject to a complex regime of laws, rules and regulations concerning travel and
aviation, 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 existing laws could adversely affect the Group’s business and financial
performance.
Emerging Risks/Change in the Year
There is regulatory focus on the travel industry, its handling of the pandemic, and in particular refund policies. Customers who
are frustrated with delayed refunds are likely to make complaints to regulators, who may seek to take action. On the Beach has
been criticised for its decision not to refund flight costs where FCO advises against all but essential travel and the airline doesn’t
refund the flight.
Key Mitigations
The Group has an internal legal team and external legal advisers to advise the Group on current and forthcoming legal
requirements and to manage legal and regulatory issues as they arise.
The Group reviews draft proposals for law reform and participates in industry steering, policy groups and advisory committees,
through which it is able to lobby on legislative change.
Unlike many of its competitors, the Group has refunded in cash, not in vouchers or refund credit notes, which is an area of focus
for regulators. On the Beach ’s decision on refund of flight costs where FCO advises against all but essential travel was based
on robust legal advice and we have a strong legal position if challenged.
Strategic pillars impacted
Direction of travel
1
2
3
4
5
6
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
39
STRATEGIC REPORT
Strategic Report
Risk management
Damage to Brand/Reputation
Impact
The Group is one of the UK’s largest online beach holiday retailers and relies on the strength of its brand to attract customers to
its website and to secure bookings. Failure to maintain and protect our brand, or any events or circumstances which give rise to
adverse publicity, could cause brand/reputation damage, lead to a loss of goodwill and reduced customer demand to book with
the Group, impacting traffic and revenue.
Emerging Risks/Change in the Year
Following the launch of our new marketing campaign in December 2019, our prompted brand awareness reached 65% which
is our highest level to date. However, COVID-19 has inevitably had an impact on our reputation. The uncertainty re the ability to
travel and operational issues connected with the restart of travel (including flight cancellations and hotel closures and changes)
meant that we were inundated with an overwhelming volume of messages and we were unable to respond to complaints
and issues as swiftly as we would normally. This, coupled with our stance on flight refunds when the flight goes ahead
notwithstanding FCO advice, has had some impact on our reputation.
Key Mitigations
We invest heavily in our brand, through a broad variety of online and offline marketing and PR campaigns, to build brand
awareness and consideration. We have internal and external PR advisers to support us to manage any PR incidents.
In relation to COVID-19, we took the decision to refund those customers whose flight had been cancelled and were waiting
for a refund of their flight costs to help preserve our reputation. We have been working closely with the press and have built
up good relations with a number of publications. We continue to invest significant resource in social media and overtime in the
contact centre to manage customer communications.
Strategic pillars impacted
Direction of travel
1
2
3
4
5
6
Exchange Rate Fluctuation
Impact
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 or the booking could fall into a loss.
A weak pound makes holidays and consumer spending abroad more expensive. If the pound weakens, tour operators have a
competitive advantage over OTAs.
Emerging Risks/Change in the Year
The prospect of a no-deal Brexit has destabilised currency markets.
Key Mitigations
The Group sets prices at prevailing spot rates and places forward contracts based on orders. Hedge effectiveness and stability
of Euro rates is monitored regularly.
Where the pound strengthens, online travel agents have a competitive advantage over tour operators as their pricing will be
more competitive.
Strategic pillars impacted
Direction of travel
2
4
6
No change
40
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
IT Systems and Data Security
Impact
The Group is exposed to security threats and the associated risk of breach whereby a third party could illegally gain access to
our customers’ or employees’ personal data, resulting in damage to brand, material fines and litigation. This would impact traffic,
revenue and profit as legislation (e.g. GDPR) significantly increased the fines that could be levied in the event of a data breach
and the Group could receive civil claims.
The Group’s growth strategy is to build Europe’s leading online beach holiday retailer via a single platform, multi-brand strategy.
Our IT platforms must be scalable, robust and reliable. If our systems can’t keep up with growing demand, this could affect our
ability to deliver growth.
Emerging Risks/Change in the Year
As M&A remains part of our future strategy, the need for a scalable, robust platform is even more critical.
The significant increase in employees working at home as a result of the pandemic is having to be sustained over a far longer
period than first envisaged, this could increase the Group's IT and information security risks.
Key Mitigations
Security policies, processes and technology are well defined and robust with regular testing/audits undertaken with all findings
actioned as priority. The Group is PCI DSS compliant using an external Qualified Security Assessor (QSA) to inform and maintain
best practice.
Investment has increased in the area of security with the recruitment of a new Information Security Officer supported by
external security consultancy expertise.
The scalability and performance of our platform is a priority for our ‘Tech & Product’ teams and we continue to invest heavily in
talent and technology in this area.
Strategic pillars impacted
Direction of travel
1
2
3
4
5
6
Business Interruption
Impact
A significant business interruption could impact on the Group’s ability to trade and/or manage the business, for example, an
event preventing head office access, website or systems downtime or restrictions on taking or making payments.
Emerging Risks/Change in the Year
COVID-19 resulted in a significant business interruption which massively impacted our ability to trade whilst moving the
business to work remotely for a sustained period of time resulting in substantial changes to the way we operate.
Key Mitigations
The Group’s business continuity & disaster recovery plan was successfully implemented to support the business in its response
to COVID. Both this plan and the supporting backup and failover facilities are regularly reviewed to ensure their continued
validity.
Strategic pillars impacted
Direction of travel
2
3
5
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
41
STRATEGIC REPORT
Strategic Report
Risk management
People Risk
Impact
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 North West, where the Group’s Digital HQ is located, is an area where there is a high degree of competition for
digital talent.
The Group relies on key personnel and if those key personnel were unable to carry out their role, this could have a material
effect on the Group’s business.
Emerging Risks/Change in the Year
Brexit poses a risk as, if there is a restriction on the free movement of people, this will impact on the Group’s ability to attract and
retain EU staff which could in turn have a negative effect on the diversity of our staff.
The effect of lockdown, furloughing and general uncertainty in the travel industry as a result of COVID-19 could potentially
impact the Group’s ability to retain some key employees.
Key Mitigations
We provide an excellent working environment for our employees, and a very positive, informal and open culture, which
contributes to our ability to recruit and retain staff.
The Group has various remuneration tools to recruit and retain employees, including base salary, bonus and share schemes
including a HMRC-approved Share Incentive Plan and a Long-Term Incentive Plan.
We have a succession plan in place and invest in leadership development to ensure we have a strong and diverse talent
pipeline. On the Beach has a Tier 2 Sponsorship Licence to broaden our pool of talent and this would mitigate the risk if EU rules
on freedom of movement change.
We have continually communicated with our employees throughout the pandemic and taking steps to safeguard their
wellbeing.
Strategic pillars impacted
Direction of travel
1
2
3
4
5
6
No change
42
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Strategic Report
Viability statement
The objective of the viability statement is for the Directors
to report on their assessment of the prospects of the Group
meeting its liabilities over the assessment period, taking into
account the Group’s available financing facilities, business
model, strategy, regulatory environment, principal risks and
uncertainties, recent financial performance, outlook, and
current financial position.
Once those scenarios have been identified, the Group then
considers the most effective means of mitigating the risks
they pose. This is achieved through reviewing the existing
procedures and controls already in practice that serve as key
mitigations to those risks, and also considering where those
controls and procedures could be revised or improved upon to
better protect the Group as a going concern.
Assessment of Prospects
Assessment of Viability
The Board has determined that a period of three years to 30
September 2023 is the most appropriate period to provide
its viability statement. The Group prepares rolling three-
year strategic plans and cash flows, so setting the viability
statement period at three years enables the assessment to
be made based on reasonable expectations in terms of the
reliability and accuracy of forecasts. The Directors believe
that projections which extend beyond three years become
significantly less meaningful given the dynamic and volatile
nature of the industry in which the Group operates.
The Group’s overall business model (illustrated on page
16) and its strategy (as outlined in the Strategy section of
the report) are central to assessing its future prospects. As
such, key factors likely to affect the future development,
performance and position of the Group are:
ą
ą
ą
ą
Technology platform & personalisation: continuous
investment is made in developing platform technologies
and personalisation techniques which lead to
improvements for consumers, suppliers and employees;
Brand and marketing: our strong brand and efficient
marketing tools enables us to continue to take share of
market traffic;
Differentiated supply: the Group can leverage increased
revenue through direct and differentiated supply; and
People: the Group’s continued success and growth are
dependent on the ability to attract, retain and motivate a
highly skilled workforce, with a particular focus on digital
talent.
The Group’s prospects are assessed primarily through its
strategic planning process. The planning process is based on
three limbs which are:
ą
ą
ą
The preparation of cash flow forecasts to cover the
period for which we are assessing the potential impact
of events on the Group’s viability. The forecasts will
be initially based on previously approved financial
statements and then extrapolated to cover the period we
are reviewing;
A review of the specific sensitivities on those cash
flow forecasts relevant to the Group, with a view to
highlighting potential areas of stress for the business;
and
A review designed to estimate the impact of specific
events and or circumstances which could be reasonably
expected to occur, that have the potential to affect the
viability of the Group.
The output of the Group’s strategic and financial planning
process reflects the Board’s best estimate of the future
prospects of the business. To make the assessment of viability,
however, additional scenarios have been modelled over
and above those in the ongoing plan, based upon a number
of the Group’s principal risks and uncertainties which are
documented on pages 32 to 42.
These scenarios were overlaid into the plan to quantify the
potential impact of one or more of these crystallising over the
assessment period. While each of the Group’s principal risks
has a potential impact and has therefore been considered as
part of the assessment, only those that represent severe but
plausible scenarios have been modelled.
These were:
Scenario 1: Airline failure
Link to risk - supplier failure
Although the Group does not expect another airline failure
in the immediate future, the possibility remains that another
supplier could fail leading to a large exceptional cost to cover
the necessary refunds to customers and any other related
costs. This model was thoroughly tested last year whilst
dealing with the TCG failure and the Group remains confident
that the short-term cash impact, before our chargeback claim
is processed, can be covered by existing cash reserves or if
necessary, utilising the Group’s banking facility.
The Group has reviewed the list of its airline suppliers and
does not consider any major airlines to be notable failure risks.
In any event, the Group remains prepared for such a failure
through the combination of this hypothetical planning process
and its recent experience of dealing with actual airline failures.
Scenario 2: GDPR fine or other major one-off cost.
Link to risk - regulatory breach
A serious GDPR breach can attract a fine of €20m or 4% of
turnover, whichever is greater. For the Company, this would be
€20m (£17m). The Group takes data protection very seriously
and a series of controls and monitoring is in place to ensure
compliance, the impact of such a fine has been considered.
The Group has considered the cash headroom over the next
three years, and is comfortable that such a fine would not
jeopardise the viability of the Group.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
43
STRATEGIC REPORT Strategic Report
Viability statement
Scenario 3: Extended closure of airspace/restrictions on travel
due to COVID-19
Link to risk – Customer confidence, supplier failure, flight
supply, recoverability of airline refunds
There is a risk that there will be a prolonged period of
restriction on overseas travel due to COVID-19. This would
inhibit the Group’s ability to generate revenue and cash. The
Group has considered the impact to cash of operating in a
zero revenue environment but carrying the current level of
operating costs for a 12 month period and is satisfied that
cash reserves would sustain the Group.
In addition, a stress test has been performed, to assume a
zero revenue environment throughout the viability period. The
Group considers this to be an implausible scenario given the
level of bookings taken since April 2020, industry predictions,
discussions with airlines and the recent news about the
vaccine. In this remote scenario, the cash reserves would
sustain the Group’s current operating costs to September
2022. Mitigating actions, such as significantly reducing
marketing and headcount costs, would, however, be taken to
enable the Group to continue for a substantially longer period
of time without using the £25m CLBILS loan (which expires in
June 2022) or the £50m Revolving Credit Facility (which has a
renewal date of December 2023).
The above scenarios are designed to allow the Group to
review the maximum impact that such situations could
have, for instance the maximum fine or the failure of a major
supplier, in order to consider situations which could threaten
its viability should they arise. However, as described above
there are controls and monitoring processes in place to allow
us to observe the likelihood of these scenarios occurring and
also to ensure we are best prepared to mitigate the impact on
the business.
The planning process has indicated that through a mix of the
available reserves, the Group’s banking facility and real world
experience of dealing with similar situations in the past that
it would be capable of absorbing the potential impact on the
business and remain a viable going concern.
Viability Statement
Based on their assessment of prospects and viability above,
the Directors confirm that they have a reasonable expectation
that the Group will be able to continue in operation and meet
its liabilities as they fall due over the three-year period ending
30 September 2023.
Going Concern
As at 30 September 2020 Cash, excluding cash held in trust,
was £36.5m (30 September 2019 cash of £54.8m).
As travel restrictions were imposed a number of actions
were taken immediately to reduce cash costs and protect the
financial position of the Group:
ą
Marketing costs were reduced to almost £nil and limited
other non-essential costs.
44
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
ą
ą
ą
ą
ą
The low deposit offer was reduced on 25 February for
new bookings travelling within 90 days to ensure flight
costs were covered in full.
The CEO sacrificed his salary and the remainder of the
Board voluntarily agreed to a 20% reduction in salary
and fees and the executive and senior management
team took a voluntary paycut.
No bonuses have been awarded across the Group in the
current financial year.
The Group participated in the Coronavirus Job Retention
Scheme and obtained a refund of Corporation Tax paid
The Group did not declare an interim dividend and is not
proposing a final dividend for the year to 30 September
2020.
The Group has also taken a number of actions to improve
overall liquidity to ensure that it is well placed to operate
through the pandemic and to trade once travel restrictions are
eased. These actions included reaching an agreement with
Lloyds Bank to increase maximum available debt facilities:
ą
ą
ą
ą
extended the £50m RCF drawdown limit to all months
of each year
extended the term to December 2023
reset covenant tests for all periods up to and including
June 2021
accessed an incremental £25m RCF under CLBILS,
expiring in May 2022
In addition, on 22 May the Group issued new shares
generating £65m incremental liquidity (net of fees). The net
proceeds from the share placing, together with the revised
banking facilities, provides the Group with greater resilience
through the current downturn and will enable the Group to
exit this extended disruptive period in a strong position.
Where holidays are cancelled as a result of the COVID-19
pandemic, the Group is committed to refunding customers
in cash rather than vouchers. These cash refunds are fully
funded from the trust account (where refunds are for hotel
and transfer payments) or are a pass-though from airlines.
Therefore, there is no net cash outflow for refunds processed.
The Directors have modelled a number of scenarios
considering factors such as airline and hotelier resilience,
employee absence and customer behaviour/demand. As part
of this exercise, the Directors modelled what they consider to
be a severe downside scenario of no travel or bookings until
January 2022. Even in this scenario, the Group would have no
requirement to draw down on its current facilities.
Given the assumptions above, the Directors remain confident
in their response to the pandemic and will continue to operate
in an agile way adapting to any applicable government
guidance. Therefore it is considered appropriate to continue
to adopt the going concern basis in preparing these financial
statements.
“
Tamas Commercial Manager
In order to maximise OTB’s share
of market, it is fundamental to
negotiate the most competitive
conditions, optimise sales
performance, target new
products and maintain successful
relationships with key hotel
supply partners.”
Favourite Beach: Agios Stefanos
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
45
STRATEGIC REPORT Strategic Report
Section 172 statement and stakeholder engagement
Section 172(1) statement
The Directors believe they have acted at all times to promote the success of the Company for the benefit of its members as a
whole. In doing so, the Board has considered the interests of a range of stakeholders impacted by the business, as well as having
regard for the matters set out in s.172(1) of the Companies Act 2006, namely:
ą
ą
ą
ą
ą
ą
the likely consequences of any decisions in the long term;
the interests of the Company’s employees;
the need to foster the Company’s business relationships with suppliers, customers and others;
the impact of the Company’s operations on the community and the environment;
the desirability of the Company maintaining a reputation for high standards of business conduct; and
the need to act fairly as between members of the Company.
More information about our key stakeholders, how we engage with them and how Directors have regard for stakeholder matters
when making decisions is set out in the tables below.
Further details on how the Directors’ duties are discharged and the oversight of these duties are included in the Governance
section on pages 63 to 121.
Other broader factors considered by the Board, including the impact of the Company’s operations on the community and
environment, desirability to carry out business responsibly and ethically and acting in the interests of employees are covered in the
Corporate Social Responsibility section on pages 57 to 60 and Our People section on pages 54 to 56.
Stakeholders
We seek to achieve our strategic objectives by taking into account the needs of our stakeholders and the impact our business may
have on them. The Board is aware that its decisions may impact on one or more groups of stakeholders and that their needs may
differ in some circumstances. Effective engagement ensures that stakeholder interests are considered in Board discussions and
decisions.
SHAREHOLDERS
Why they to matter us?
Our shareholders are investors in and owners of our
business, providing the capital we need to invest in
and grow the business
What matters to them
›
›
›
›
›
›
Long-term growth delivered through
successful implementation of strategy
Operational and financial performance
Risk management
Talent & succession planning
Liquidity and dividend policy
ESG matters
How we engage
›
›
›
Roadshows
Annual Report, websites and statements
Ongoing dialogue and individual
engagement with shareholders
Outcomes/highlights for 2020
›
›
›
›
Meetings with major shareholders in relation to the
equity raise.
Both the Chairman and the Chair of the
Remuneration Committee had calls/meetings with
shareholders during the course of the year.
The Remuneration Committee has listened to and
taken on board feedback in relation to remuneration
arrangements.
Votes from shareholders representing 83% of share
capital at 2020 AGM.
How the Board engages and considers the interests of our
stakeholders
›
›
›
›
›
›
Directors meet and speak with investors on a regular
basis, principally through investor roadshows and
the AGM.
Regular updates by the Chief Executive
Meetings and calls with large investors in relation to
specific issues arising.
Engagement on remuneration matters via the
Remuneration Committee Chair
The non-executive Directors are available to meet
with shareholders at the AGM and will engage with
investors on topic-specific matters, as required.
Investor feedback is collated after each roadshow
and shared with the Board.
46
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
CUSTOMERS
Why they to matter us?
Customers are at the heart of our business and we are always
striving to exceed their expectations. It’s vital that we engage
with our customers in order to know what they are feeling
so that we can improve their experience and satisfaction.
Customer satisfaction is critical to the long term satisfaction of
the Group in driving bookings growth.
What matters to them
› Value for money
› Diverse range of travel products
›
› Customer journey experience by making it easier for
customers to find and buy their preferred holiday
Payment options including low deposits
› Customer service and support
›
Financial protection and the protection and reassurance of
booking a package holiday
How we engage
› We regularly conduct surveys, focus groups, usability and
›
›
›
in depth interviews with current and potential customers
Investment in our social media presence to provide both
proactive and reactive communications to customers
Feedback from third party travel agents
Provision of clear and transparent information on our
website (e.g. FAQ and travel information pages) and in our
direct written and spoken communications with customers
› Our dedicated customer service team and 24/7 in-resort
line
Outcomes/highlights for 2020
› COVID-19 has been very difficult for our customers.
The uncertainty over travel restrictions, quarantine
requirements and anxiety in relation to the virus meant
that many thousands of our customers wanted to re-
arrange or cancel their holidays. Where airlines were
delaying in providing refunds (see page 12), customers
were understandably frustrated. This all resulted in our
contact centre being inundated with an overwhelming
volume of messages and calls and whilst we worked
quickly to adapt to these ever-changing workloads,
ultimately it has been impossible to provide the level
of service we ordinarily strive to provide. You can read
more about what measures we put in place to deal with
customer communications on page 11. We also took steps
to engage with customers and address their concerns and
issues, such as refunding some customers for their flights
before receiving the monies from the airlines.
› Re-designed our customer booking path. For more
information see page 21.
› We are proud to have the second highest Trust Pilot score
amongst our competitors, reflecting our commitment to
customer experience and satisfaction.
› One of our strategic objectives is to expand our long
haul offering, therefore understanding customer needs
and expectations and specific long haul behavioural
patterns (and how they differ versus short haul) is
essential. During the year we rolled out an extensive
exploratory research program, using a hybrid approach
(desk research, qualitative and quantitative research,
discussing and/or surveying approx. 1000 people in the
process).
› During the year On the Beach and Sunshine.co.uk
resigned from ABTA, which is a trade association
representing a wide range of travel agents, operators
and OTAs. Given that broad membership, ABTA’s
views will not always be representative of all members
and following ongoing discussions with ABTA about
refunds due to customers when FCO advises against
all but essential travel but the flight goes ahead (see
page 36), we did not feel that ABTA represented our
interests as an OTA and accordingly took the difficult
decision to resign. In doing so, we considered the needs
of our customers. All flight-inclusive packages continue
to be financially protected under the ATOL scheme
and non-flight packages also continue to be financially
protected, now by way of an insurance policy which
offers the same level of cover as the previous ABTA
bond. We have ensured that we have put in place
appropriate complaints and dispute mechanisms and
have clearly communicated these arrangements with
customers.
How the Board engages and considers the interests of our
stakeholders
›
› Reviews strategy and monitors performance during the
year with the aim of meeting customers’ needs more
effectively.
The Board receives regular updates on matters relating
to customers, including the results of customer surveys,
and information and trends relating to customer
satisfaction and feedback. This feeds into strategic
decisions, such as investment approved to re-design
the booking path.
The Board monitors and reviews developments
concerning changes to our IT platforms which will
allow us to continually improve service delivery to our
customers.
Executive bonus linked to Net Promoter Score.
›
›
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
47
STRATEGIC REPORT Strategic Report
Section 172 statement and stakeholder engagement
OUR PEOPLE
Why they to matter us?
Our people are integral to achieving our strategic
objectives. We know that when colleagues are engaged
they are happier, more motivated and invested in
helping us achieve our goals and in turn grow the
business. We continue to value and regularly seek
feedback from colleagues, helping us to understand how
we can increase engagement across all areas of the
business.
What matters to them
Successful and rewarding careers
Development and progression
Remuneration and benefits programme
Recognition
›
›
›
›
› Ways of working and culture
Diversity and inclusion
›
Knowing concerns are being listened to.
›
How we engage
› Weekly company-wide communication
forum ‘Beach Life’
› Weekly communication emails
›
Hive survey – our annual engagement
survey. We also conduct pulse surveys and
polls to check how colleagues are feeling as
well as helping us measure progress against
our engagement scores.
Pier Groups are forums which bring
colleagues from across various different
departments, providing a mechanism to
give feedback and raise concerns on an on-
going basis.
Employees are encouraged to take part
in various steering groups such as the
Diversity and Inclusion Action Group where
employees can actively participate to make
a difference.
›
›
Outcomes/highlights for 2020
›
›
›
›
Ensuring a safe working environment for all
Group employees in response to the COVID-19
pandemic.
Maintenance of our Hive Survey engagement
score at 7.2, which is the same score as last year
notwithstanding the challenges posed by the
pandemic.
Following the COVID-19 outbreak, we
increased the frequency of our company wide
communication forums to take place on a weekly
basis, giving management the opportunity to
listen and respond to employees’ concerns and
allowing management to cascade information and
strategic priorities during a difficult time.
Introduced new recognition schemes such as
Colleague of the Week which has also help
embed our values as the award is awarded
for personifying our values “bold”, “open” or
“dynamic”.
› We have invested heavily in social and wellbeing
activities to maintain morale during the pandemic.
By listening to our people we have been able to
make improvements in areas which have been
acknowledged in our Hive surveys.
›
How the Board engages and considers the interests of our
stakeholders
›
›
›
The People function regularly reports to the Board
and the Board reviews and approves the People
strategy.
The Executive Directors attend the weekly
company-wide communication forums and report
back to the Board on employee sentiment and
employee issues and concerns arising out these
sessions and the Hive surveys which feed into
strategy and decision-marking.
David Kelly is the designated non-executive
director for employee engagement. This
facilitates on-going engagement at a Board
level and ensures employee views and concerns
are taken into account in the Board-decision
making process. Such engagement is also
relevant for the Remuneration Committee when
considering remuneration arrangements for senior
management and the Group generally.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
SUPPLIERS AND PARTNERS
Why they to matter us?
Building strong working relationships with our suppliers
and partners is vital to the operational success of our
business. Effective engagement is critical for ensuring
that we can offer a diverse and quality range of travel
products and for obtaining value for money. We rely on
our suppliers to help meet our customers’ needs and to
ensure the reliability of our services. Regular engagement
with suppliers also helps mitigate risk, ensuring we are
partnering with ethical suppliers who take appropriate
health and safety measures and provide high standards of
customer care.
What matters to them
›
›
›
›
Fair payment terms, particularly as they
navigate COVID-19
A partner that can deliver tour operator scale
volumes
Collaboration
Being treated fairly
How we engage
›
›
›
Through supplier relationship management
- regular review meetings and ongoing
feedback to maintain openness and to
improve value from supplier relationships.
Through responsible contracting, trust and
ethics. We conduct regular audits (either
on-site and/or via self-assessment) primarily
focussed on health & safety and issues such
as modern slavery. We also have policies on
Bribery and Corruption.
Through industry conferences and events.
Outcomes/highlights for 2020
›
›
›
COVID-19 has created uncertainty and placed
financial pressures on many of our suppliers.
We supported our suppliers by ensuring prompt
payment, before and during the COVID-19
pandemic.
Building relationships with suppliers has meant
that we have delivered more than 85% of total
hotel buying through direct contracting in FY20.
Following the TCG collapse, through our supplier
network, we were able to negotiate better rates
and access to hotels which were previously
almost exclusively served by TCG.
› We have increased the number of on-site hotel
›
health and safety audits carried out.
Through Classic Collection Holiday's relationships
with third party offline agents, we have
successfully extended the Classic Package
Holidays offering to c.2500 travel agents across
the UK.
How the Board engages and considers the interests of our
stakeholders
›
›
›
›
The Chief Supply Officer regularly reports to the
Board and the Board discusses supplier issues
and takes them into consideration when making
decisions and setting strategy, including long-haul
expansion and opportunities post COVID-19.
The Chief Supply Officer and Company Secretary
are both members of the Group's Health &
Safety Committee and they regular report to the
Board on health and safety issues. The Board
oversees implementation of the Group's Safety
Management System.
As part of its risk management procedures,
the Board assesses all business continuity risk
including the loss of key suppliers (see page 35).
The Board is committed to high standards of
ethical business conduct and takes a zero-
tolerance approach to bribery and corruption. It
also reviews the Company’s Modern Slavery Act
Statement annually.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
49
STRATEGIC REPORT Strategic Report
Section 172 statement and stakeholder engagement
COMMUNITIES AND SOCIETY
Why they to matter us?
We want to look after the communities we operate in – it’s
where our employees and their families live. We have a
responsibility to ensure that we are contributing to society
and we’re committed to doing the business the right way.
What matters to them
›
›
›
›
Ethical businesses managed responsibly
Building partnerships that support and create
positive impact and outcomes for society
Environmental impact
Source of future employment and
opportunities
How we engage
›
›
›
›
Creating partnerships with local charities
Regular dialogue, events and direct
engagement activities
Community investment and employee
nominated charities
In building our sustainability strategy,
colleagues on the ESG Committee have
helped to prioritise proposed key goals for the
Group under the United Nations Sustainable
Development Goals.
Outcomes/highlights for 2020
›
›
›
›
Fundraisers for Stockport Food Bank and
the Booth Centre at Christmas.
£10,000 donation to Manchester Central
Food bank to help people who had fallen on
hard times as a result of the pandemic.
Hosted a number of events for students to
inspire the next generation of professionals
to get involved in tech and digital
Sponsored the Body Language podcast
series, which focused on matters such as
body confidence and self-esteem, especially
among women and young adults.
How the Board engages and considers the interests of
our stakeholders
›
›
The newly formed ESG Committee is
headed up by CFO who will report back
to the Board on ESG related matters and
strategy.
The Board supports investments, both
time and money, in communities local to
our operations and endorses a culture
of volunteering and giving back.
For more information see the Corporate and Social
Responsibility section on pages 57 to 60.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
REGULATORS
Why they to matter us?
How we engage
The Civil Aviation Authority (CAA) oversees the Air
Travel Organisers' Licensing (ATOL) scheme which
protects customers in the event of a travel company
failure. We comply with the ATOL regulations and
engage with the CAA to maintain a constructive and
trusted relationship.
There are other aspects of our business that
have oversight by regulators, for example the
Financial Conduct Authority in relation to travel
insurance offered on our site, the ICO (Information
Commissioner’s Office) regulates compliance with
privacy laws and there are also various consumer
rights regulated by bodies such as Competition
Markets Authority and the Advertising Standards
Authority.
Engaging with regulators and the Government
also enables us to ensure that policy makers and
regulators understand our business and we seek to
ensure that they see the impact of their decisions on
our business and where possible to influence them
to make decisions that would benefit On the Beach's
customers and our other stakeholders.
What matters to them
›
›
›
Our regulators expect us to meet relevant
legal requirements and to treat our
customers and employees and other
stakeholders in a fair way.
Responding in a timely and constructive
manner.
Open dialogue and collaborative
approach.
› We engage with some regulators, such as the
CAA on a more regular basis. We engage through
reporting, audits and direct consultation. Engagement
has increased in frequency during the COVID-19
pandemic.
› We also engage with the CAA and the wider travel
community at industry meetings such as the Air Travel
Insolvency Protection Advisory Committee (ATIPAC).
› We have an open dialogue and engage with other
regulators such as the ICO, CMA and FCA to ensure
that we can address their priorities and any concerns
they have.
Through engagement, we are able to ensure we
continue to meet the high standards expected by
regulators.
›
Outcomes/highlights for 2020
›
›
Active participation in policy development, particularly
in relation to the COVID-19 pandemic where we have
been in discussion with regulatory bodies and the
Government in relation to a number of issues arising
out of the pandemic. For more information, see page
12.
Implemented changes on our website in light of
new guidance issued by the CMA on hotel booking
platforms.
How the Board engages and considers the interests of our
stakeholders
›
›
The Company Secretary is a member of ATIPAC
which is a forum in which travel trade and consumer
representatives combine to give informed practical
advice to regulatory authorities. The Company
Secretary regularly attends ATIPAC meetings
which enables the business to listen to the views
of regulators and also engage with the wider travel
community and report back to the Board.
The Company Secretary reports to the Board on
regulatory and compliance issues that may impact the
Group. The Board discusses the relevant issues and
takes them into consideration when making decisions
and setting strategy.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
51
STRATEGIC REPORT Strategic Report
Section 172 statement and stakeholder engagement
Board decision making in practice - case study
One of the principle set of decisions made by the Board this year was the Group's response to the COVID-19 crisis. We detail
below how the Board considered stakeholder interests when discharging their duties under s.172 of the Companies Act. Further
information on how the Group has navigated the pandemic is set out on pages 11 to 12.
COVID-19 response
Section 172 factors considered: Long-term impact, employees, reputation, business relationships, acting fairly between
investors
Customers: The Board considered the impact on customers,
particularly in relation to cancellations and refunds and how
to maintain high standards of service given the disruption,
the huge volumes of customer messages and calls, the delay
in airlines providing refunds and the ever changing travel
restrictions and quarantine requirements. The Board also
considered how customer priorities might change in the
near term and future.
Employees: The Board considered the health, safety and
wellbeing of all employees, the infrastructure required
to enable employees to work from home and related
information security risks. The People function regularly
reported to the Board on employee wellbeing and People
strategy, whereby a number of scenarios were modelled
depending on how the crisis developed.
Shareholders: Board considered the liquidity and financial
position of the Group
Outcome: Customers are central to our decision making. The
Board was satisfied with the detailed operational plans put in
place and approved measures to try and maintain customer
goodwill such as refunding some customers for their flights
before receiving the monies from the airlines.
Outcome: The Board was satisfied that there were sufficient
measures in place to protect the health, safety and wellbeing of
our employees and continues to monitor this situation. Actions
were taken to try and reduce the impact on employees, e.g. the
Board and Executive Team agreed to salary/fees reduction.
Outcome: The Board approved a range of actions taken to
reduce cash outflows as detailed on page 12, including the
decision not to declare an interim dividend. Such measures
balanced the need for short-term cash preservation against the
longer term expectations of shareholders.
The Board determined that supplementary financing would
provide greater resilience, flexibility and firepower through the
downturn and ensure the Group would be best placed to take
advantage of organic and acquisitive growth opportunities
arising. The Board accordingly sought independent external
advice on various debt and equity funding options, which led
to the Board approving the extension of the Group's facilities
in the form of an incremental £25m RCF under CBILS and
to issue up to 19.9% of the existing issued share capital on
a non-pre-emptive basis via a cash-box placing. The Board
was mindful that this would mean that smaller shareholders
would unfortunately not be able to participate, but after much
consideration felt that the cash-box placing was the best
structure to proceed with on the basis that it would minimise
costs, was quicker than other structures and would thereby
also reduce management distraction during an important
and unprecedented time for the sector and the Company.
The Company engaged with major shareholders who were
supportive of the proposed placing.
The equity raise and facility amendments have secured the
liquidity required for the Company to execute its long-term
strategic plans, including investment in talent, technology and
marketing and reacting to acquisition opportunities which will
ultimately resulting in value creation for our shareholders and
will benefit our wider stakeholders.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Suppliers: The Board considered the financial health
and viability of suppliers, continuity plans in the event
of key supplier failure, assessing opportunities in the
event of supplier and competitor failures and overseeing
relationships with certain key suppliers (via reports from the
Executive Team), in particular airlines and their delay/failure
in providing refunds in relation to cancelled bookings
Regulators & society: The Board considered how some other
travel businesses were not operating legally/responsibly in
the wake of the pandemic, for example by not paying out
refunds or only issuing refund credit notes or misleading
customers to accept such credit notes. This behaviour
creates an uneven playing field, is unfair on consumers and
accordingly at odds with the interests of regulatory bodies.
It also undermines consumer trust in the travel industry as a
whole which could affect the Group.
Outcome: The Board is committed to ensuring that strong
working relationships with suppliers are maintained and the
Board supported the continued prompt payment of suppliers
to help minimise the impact of the pandemic on their financial
health. It is inevitable that some travel businesses will fail as a
result of COVID-19 and the Board is mindful that maintaining
good relationships with suppliers will potentially allow us to
capitalise more quickly/easily on opportunities in the event
of such failures. In this respect the Board, is kept informed
of industry activity and this feeds into their discussions and
decisions in relation to strategy.
Outcome: The Board approved a strategy to actively engage
with regulators and Government in relation to regulating action
and reform required. By continuing this engagement, we are
building stronger relationships with regulatory bodies and
policy makers and trying to ensure that our customers and
other consumers are treated fairly. Please see page 12 for more
information.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
53
STRATEGIC REPORT Strategic Report
Our people
Our colleagues are critical to our success. We recognise the
importance of continuing to invest in attracting, developing
and retaining the very best talent and creating a culture where
everyone can do their best work.
The On the Beach strategic ambitions are enabled by our
People strategy, which is to:
ą Optimise our organisational design
ą
Invest in diverse talent
ą
Build an inclusive, high-performance culture
ą Deliver a high-quality and scalable people service
Impact of COVID-19
Since March 2020 the priority for the business has been to
deal with the operational challenges presented by COVID-19,
supporting our customers and protecting the long-term
future of the business. This has meant that some of our
planned strategic projects for the People function have been
scaled back during this period, instead focusing on a period
of consolidation and embedding initiatives that have already
been rolled out.
It’s been a challenging year for our colleagues as we continue
to deal with the ongoing impact of COVID-19, and the effect
that this has had on people both at home and at work. Our
focus during this period has been to ensure that people can
be as productive and engaged at home as they would be in
the office. This has meant ensuring people have a safe home
working environment, they have the technology and tools to
do their job and that we have the communication mechanisms
in place to support good working relationships. Virtual
technologies are now fully embedded in our ways of working
and enable colleagues to maintain open communication with
their manager, other colleagues and the wider business. We
have also invested heavily during this period in social and
wellbeing activities and continue to seek out ways in which to
maintain morale.
The People team have been heavily involved in the rollout of
the Coronavirus Job Retention Scheme and supporting the
business in ensuring we have the optimal organisation design
to seize potential opportunities and set us up for long-term
success.
Approach to investing and rewarding our workforce
Reward & Recognition
Reward and recognition form an integral part of the
employment relationship. We’re committed to ensuring we
value the contribution of all our colleagues in achieving our
business goals.
We continue to ensure that our approach to reward is fair
and competitive, aligning both with industry benchmarks and
local markets. Our banding structure supports our ability to
benchmark salaries internally and understand relatives when
making decisions about reward.
As part of our total reward package we offer a number of non-
financial benefits, including; Death in Service, Cycle2Work
Scheme and the Simplyhealth Optimise Health Plan. This
provides colleagues with a range of healthcare benefits
including cashback on everyday healthcare costs, access to
a GP 24 hours a day, free face-to face counselling, plus an
Employee Assistance Line offering confidential specialist
advice 24 hours a day, so our employees feel well supported
no matter where they are or what time it is.
Our Colleague Recognition Scheme enables managers to
recognise and celebrate the achievements of our colleagues
where behaviours and ways of working further embed our
company values. Our weekly company-wide communications
showcase our colleagues of the week and e-vouchers are
issued to recognise individual contributions that go above and
beyond. Our annual Colleague Recognition Awards, which
occur in December, will this year be aligned to our refreshed
company values.
We also have a number of share schemes in place, including
a HMRC-approved Share Incentive Plan in place to encourage
wide employee share ownership and thereby align employees’
interests with shareholders.
Learning and development
Managers have a significant impact on building and sustaining
employee engagement, playing a key role in demonstrating
our values and developing our company culture. To help realise
our strategic ambitions we’ve been building on the capability
of our people manager community through our ‘Manager
Essentials’ training. As part of this programme we’ve explored
a number of topics designed to build their confidence in
managing people. This development is not only an investment
in our managers, but in their teams by ensuring they have the
right support in place to be successful in their role.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Social & Wellbeing
Diversity & Inclusion
At On the Beach, we recognise the value of building positive
relationships with colleagues and having strong social
connections in the workplace. This year we have continued
to invest in company-wide and departmental social events
to bring colleagues together, whether that in person or
more recently in a virtual environment, to maintain a sense
of cohesion around our company culture. These events are
not only an opportunity to socialise but also afford us the
opportunity to celebrate our achievements as a business and
as individuals.
In addition to social events we’ve focused our efforts on
supporting well-being and colleague mental health during
extended periods of isolation from colleagues, family and
friends during COVID-19. We’ve utilised our communication
channels to set up well-being groups to source and share
ideas from across the business. With over a third of colleagues
being active participants in this group we’ve been able
to arrange virtual exercise classes, run regular wellbeing
competitions and initiatives around mental health. In addition
we’ve extended our Employee Assistance Programme, which
previously applied to those with 12 months service, to cover
all colleagues from their first day of employment. We have
also rolled out resilience training to colleagues, which is
designed to help people adapt and cope with stress, difficult
situations, and the inevitable obstacles that day to day life
brings, a particularly valuable skill as an extended period of
social restriction continues.
Job description refresh & goal setting
To deliver our strategy a clear link must be established
between company, departmental and individual goals,
ensuring we’re all aligned and working in the same direction.
This year, managers and the People team have invested
heavily in refreshing job descriptions for every role, as well
as embedding the new goal setting framework. This ensures
everyone is clear on how they, both as individuals and a
collective, contribute to the overall success of the business and
there is a clear path set out for achieving this.
Job Evaluation & Banding Structure
This year, we completed a job evaluation exercise and
implemented a new banding structure for roles across the On
the Beach Group. This has helped to define the expectations
of individual roles, as well as show how departments and
job families come together to deliver our company goals. It
has laid the foundation for both career development and our
rewards and benefits strategy, enabling a structured and
consistent approach to decision making.
Being diverse at On the Beach means having a team that
reflects the world we live in and the customers we serve.
We know that when teams are diverse, they bring a range
of voices, perspectives and experiences, and in turn perform
better, are more creative and as a business we make better
decisions. By recognising and encouraging diversity we can
make people feel valued, more able to put forward different
ways of thinking and create a sense of belonging for everyone.
Our Equality and Diversity policy details our approach to
promoting equality, diversity and inclusion in our workplace.
The effectiveness is governed via our assurance processes
with oversight by the Executive Team.
This year we bought together departmental representatives
across the business to establish a colleague-led Diversity &
Inclusion Action Group. Through this we are able to generate
ideas to support the Diversity & Inclusion agenda, seek regular
feedback and input from colleagues, and ensure that we are
held to account on our commitments. This group is sponsored
and chaired by a member of the Executive Team and is
supported by the People team. Through this group we have
committed to:
Ensuring there is a clear governance framework for Diversity
& Inclusion – this includes setting out responsibilities across
the management function for delivery, establishing our Group
wide diversity data and targets, whilst auditing our current
policies and documentation against the backdrop of Diversity
& Inclusion.
Raising the profile and awareness of Diversity & Inclusion
amongst colleagues – this involves creating more prominence
around Diversity & Inclusion, with regular features as part
of our company-wide communication. We are creating
a Diversity & Inclusion resource hub for all colleagues
with shared material that promotes understanding and
engagement, alongside continuing a program to develop
education and awareness of Diversity and Inclusion amongst
our colleagues.
Leveraging recruitment activity to improve the diversity of our
workforce – this involves reviewing our recruitment material
to ensure that it is inclusive and encouraging a diverse range
of potential applicants as well as working more closely with
recruitment partners who can provide access to diverse pools
of candidates.
We have already embarked on training this year, rolling out
Diversity and Equality training for all and Unconscious Bias
for our manager community. This year, for the first time, our
engagement survey will provide data on how diverse and
inclusive colleagues think we are, providing a benchmark to
track our achievements going forward. We recognise that
there is still work to do, but we’re committed to making a
positive difference and putting a sustained and collective
effort behind our Diversity and Inclusion goals.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
55
STRATEGIC REPORT Strategic Report
Our people
Our diversity
Employment of Disabled Persons
Colleague Engagement
Board
20%
5
80%
Male
Female
Senior management (1)
41%
41
59%
Male
Female
Other employees
62%
449
38%
Male
Female
Note
1. Defined as Executive Team
members who are not on the
Board and direct reports into
all Executive Team members.
All figures above are correct
as at 30 September 2020.
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 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.
Values and culture
Company strategy was at the heart of our
values refresh in 2019, which took into
account the results of the Group-wide
culture survey that we carried out that year.
This was key to ensuring that our culture
and strategic aims align, setting us up for
long-term sustainable success. Since the
new values were launched, we’ve been
embedding this work through our goal
setting and feedback process, as well as
our Colleague Recognition Scheme.
You can find out more about how values by
watching our video at https://www.youtube.
com/watch?v=6dZxWaUt6i8&t=1s.
Some upcoming work looking at a
company-wide policy re-fresh provides the
opportunity to ensure that our values are
reflected throughout our working practices.
Through our annual engagement survey,
we’re able to measure and track the degree
to which colleagues feel our day-to-day
behaviours are aligned with our company
values, a critical measure in understanding
the success of our company culture.
56
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
We know that when colleagues are
engaged they are happier, more motivated
and invested in helping us achieve our
goals. We continue to value and regularly
seek feedback from colleagues, helping
us to understand how we can increase
engagement across all areas of the business.
We run an annual engagement survey
(HIVE) which provides both a company view
as well as a departmental breakdown. These
are interspersed with pulse surveys and
polls as a quick ‘temperature check’ on how
colleagues are feeling, as well as helping
us measure progress against different
engagement scores. Our ‘Pier Group’ forum
brings colleagues together from across
various departments, providing a mechanism
to give feedback and raise concerns on an
on-going basis.
We regularly communicate with our
colleagues through a range of channels
(such as our weekly company-wide
communication forum ‘Beach Life’ and
weekly communication emails) so we can
ensure that across the Group employees
understand our strategic priorities, know
how they can contribute and are supported
to deliver our goals.
Through our most recent employee HIVE
engagement survey, we sought feedback on
the following:
ą
Communication & Collaboration
ą
Leadership & Management
ą
Personal Development & Performance
ą
COVID-19 & Remote working
ą
Company Practices & Remuneration
ą Working Relationships & Reputation
ą Diversity & Inclusion
84% of our colleagues responded with
an overall average score of 7.2 out of 10,
in line with our 2019 result. Whilst we
always strive to improve our position, we
believe this is a positive outcome given the
challenges presented by COVID-19.
In addition to the above, we support
colleague engagement via our designated
NED, David Kelly, an approach that enables
us to:
ą
ą
ą
ensure there are agreed methods in
place for on-going engagement to
understand the views and concerns of
colleagues
ensure that the views and concerns of
colleagues are represented and taken
into account in the Board decision-
making process
ensure that the Board takes
appropriate steps to evaluate the
impact of business proposals and
developments on colleagues, and
considers what steps should be taken
to mitigate any adverse impact.
Strategic Report
Corporate and social responsibility
A responsible and sustainable business
Our ESG Strategy
Environmental, Social and Governance (ESG) has become
increasingly important to our stakeholders, particularly
investors, customers and employees. We are committed to
conducting our business in a manner that supports universal
human rights and is environmentally and socially responsible.
During the year, we have reviewed and developed our
ESG strategy, with the aim of aligning with the UN Global
Compact’s universally-accepted business principles and we
prioritise what we do to contribute to the UN Sustainable
Development Goals. See below for more information.
Our ESG Committee, which was formed this year, works with
the business to shape ESG strategy and goals. The Committee
is chaired by our CFO, who provides updates to the Executive
Team and Board.
We are still developing our ESG programme. Whilst we
made progress during the year, including developing a
more cohesive ESG strategy and carrying out various ESG
initiatives, we had to pare back some of our ESG projects and
priorities given the unprecedented challenges the business
was facing in light of COVID-19. One of our priorities for
FY21 is to undertake a thorough review of the issues that
affect our business the most to see where we can make
the most impact and in turn further refine our strategy and
priorities accordingly. Part of this review will involve engaging
stakeholders to gain their feedback. We will also look to set
some meaningful goals against which we can measure our
ESG progress and consider how best to report this progress to
our stakeholders.
Our ESG focus areas
Environment
Focus:
ą
ą
ą
Managing our environmental impact
Investing in technology to help further our sustainability
agenda
Efficient use of resources
Social
Focus:
ą
ą
ą
Supporting local initiatives across community groups
and charities
Aiming for high standards of health, safety & employee
wellbeing
Skilled, diverse and productive workforce
Governance
Focus:
ą
ą
ą
Strong and transparent governance - ensuring we do
business the right way
Sustainable supply chain
Engaging with customers and stakeholders to ensure we
continually improve our services
Sustainable Development Goals
The global Sustainable Development Goals (SDGs) were adopted by UN member
states in September 2015, covering 17 key areas aimed at creating a world that is
comprehensively sustainable, socially fair, environmentally secure, economically prosperous,
inclusive and predictable by 2030. Although we can have a positive impact in some way on all the
SDGs, the key SDGs directly supported by our business and focused on in our ESG strategy are:
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
57
STRATEGIC REPORT Strategic Report
Corporate and social responsibility
Environment
We take our responsibility regarding the environment seriously and are committed to reducing our impact wherever possible.
As an internet-based business based in three UK office locations, with just under 500 employees, our direct environmental
footprint is relatively small. However we appreciate that we very much have a role to play in protecting our environment and have
continued to make a concerted effort to reduce our carbon footprint through various initiatives across our business, including:
ą
ą
ą
ą
ą
Reducing our reliance on printing by promoting a paperless office environment. We encourage our employees, partners and
suppliers to do everything electronically, including invoicing and contracting and virtually all bookings with customers are
managed online.
Putting provisions in place to support mandatory recycling across our offices;
Focussing on conserving energy and other natural resources and improving the efficacy of those resources e.g. we have put
in place stop taps for water consumption and all of our offices have controlled lighting, air conditioning and power down
options for televisions and PCs.
Re-using office furniture and equipment or donating to charity where possible.
Reducing the need for travel and encouraging the use of more sustainable public transport with colleagues for example with
the Cycle2Work Scheme, interest-free loans on tram and train season tickets, making these more affordable for our teams.
Prior to COVID-19, we had already invested in online meeting technology which helped reduce the impact of working across three
office locations. During the initial outbreak of the pandemic, we made further investment to significantly improve that technology
to enable employees to continue communicating with each other and keep operations going during lock-down. This has triggered
discussions as to how we operate in the future given the positive effect remote working can have for some of our employees and
the potential it has to help minimise the impact of our operations on the environment. We will explore this as part of our review in
FY21 as well as giving further consideration to additional environmental goals that could benefit society and the communities in
which we operate.
Greenhouse Gas Emissions
Because the Group’s business is primarily online, with no retail footprint, our carbon emissions are small, as demonstrated by the
table below.
The Group’s footprint has reduced relative to last year as we have surrendered floor space in the Cheadle office, and due to
COVID-19 the majority of employees have been working from since March.
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 Director’s Reports) Regulations 2013.
Greenhouse gas emissions by Scope
Scope 1 (Direct)
Gas consumption
Scope 2 (Indirect)
Unit
FY20
Quantity1
FY19
Quantity
YOY change
Tonnes CO2e
56.36
128.06
(56%)
Electricity consumption
Tonnes CO2e
462.69
585.88
Total emissions
Tonnes CO2e
519.05
713.94
Relative emissions, by Group revenue
Tonnes CO2e/£m
Group revenue
17.96
4.8
(21%)
(27%)
274%
Relative emissions by Group revenue before
exceptional cancellations
Tonnes CO2e
7.60
4.84
57%
Relative intensity by Employee numbers
Tonnes CO2e
0.9
1.4
(31%)
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Gas
Electricity
Total emissions
Proportion consumed in UK
Unit
kWh
kWh
kWh
FY20
Quantity
FY19
Quantity
YOY change
1,123,845
1,658,451
109,117
696,548
1,232,962
2,354,998
100%
100%
(32%)
(84%)
(48%)
-
Note
1. All figures for both FY20 and FY19 include the combined totals for our Digital HQ, Operational HQ and Worthing office.
Social
From providing opportunities for young people to supporting
charitable initiatives, making a meaningful contribution to the
communities in which we operate is something which we
are passionate about. Here are just a few of the community
focussed activities that we were involved in this year:
Charity
The business has a policy in place to support colleague
fundraising initiatives and events, and will match all donations
raised by individuals and teams.
We always try to give back to our local communities as
much as possible and this year has been no different. With
fundraisers for both Stockport Food Bank and The Booth
Centre, On the Beach employees produced piles of donations
for both charities around Christmas time.
At the start of the pandemic, we also donated £10,000 to
Manchester Central Food Bank to help people who had fallen
on hard times as a result of the COVID-19 outbreak, with 50%
of this coming from CEO, Simon Cooper.
Random acts of kindness day
In February, we celebrated Random Acts of Kindness Day
by giving away three On the Beach holiday vouchers worth
£500 to the public. To win a voucher, members of the public
had to find the inflatables we hid in popular locations around
Manchester city centre, by following our social media feeds for
clues on where they could be found.
We set up live video feeds to capture the moment each
inflatable was found and the three live videos were seen by
almost 30,000 people as viewers tuned in to see who would
win the prize.
Body Positivity Podcast
Holidays are precious and should provide an opportunity to
relax and recharge, with a sense of freedom and without fear
of judgment.
That’s why, following on from our previous campaigns around
body positivity, we were delighted to sponsor the Body
Language podcast series, which focused on matters such as
body confidence and self-esteem, especially among women
and young adults.
We were proud to be adding our voice to the honest and open
discussion around some of the body-related expectations and
pressures that any of us can experience in daily life.
A Part of the Digital Community and inspiring the next
generation
Up until the first lock-down commenced in March, we regularly
hosted events at our Aeroworks office, which raised our
profile in the region’s digital community as well as supporting
our recruitment aims. This year we have hosted a variety of
talks for people in the tech industry, including UX Crunch,
NSManchester, NWRUG, WebManchester, MancML, Dot Net
North and Data Science Festival.
We hosted a series of UX experience days in partnership with
Manchester Digital. The aim was to inspire the next generation
of professionals to get involved in tech and digital. Students
who attended got to experience a tech work environment for
themselves and got to meet people in the industry, with the
chance to ask any questions they might have about a possible
future career.
We also hosted Lancaster University software engineering
students in our Aeroworks office, with one of our Senior
Developers delivering a lecture at the university. The aim was
to give insight to students about professional life and what
to expect as well as increasing awareness of opportunities in
the North West. These sessions also covered diversity, mental
health and imposter syndrome.
Outside of tech, we have also hosted several fun events to
engage with influencers interested in the industry and have
created a community of brand advocates to further our reach
on social media.
Inclusive design
As everyone will have an accessibility need at some point,
our approach to Inclusive Design ensures that our product is
accessible and usable by as many people as possible.
Accessibility needs might be:
ą
ą
ą
Permanent: A disability such as the loss of a limb, sight,
hearing or speech.
Temporary: An injury or illness, affecting the way
someone interacts with a device. E.g. wearing a cast on
your arm due to an accident.
Situational: When someone’s environment affects the
way they use their device. E.g. bright sunlight on your
mobile phone, making it difficult to see the screen. Or
carrying a child, meaning you can only use the device
with one hand.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
59
STRATEGIC REPORT Strategic Report
Corporate and Social Responsibility
Modern Slavery Act
‘Modern Slavery’ is a crime which encompasses slavery,
servitude, forced or compulsory labour and human trafficking.
The Group has a zero tolerance approach to any form of
modern slavery. We are committed to acting with integrity
and transparency to help eradicate any modern slavery
in our business and supply chain. In accordance with the
Modern Slavery Act 2015, the Group has a modern slavery
statement which can be found on our website www.
onthebeachgroupplc.com/responsibility.
Supply chains
We expect all suppliers to implement a zero-tolerance
approach to slavery, forced labour and human trafficking, and
to comply with all local and national laws and regulations.
All hotels are required to complete self-assessment audits
which cover various topics including compliance with law and
regulations.
Data security
We meet our legal and regulatory duties and responsibilities
for protecting the personal data we have within our care. Our
policies and procedures are built on the world-recognised
principles contained within the EU General Data Protection
Regulation.
Health and safety
We are committed to maintaining and developing a culture of
safety and risk awareness throughout our organisation to the
benefit of our employees, clients, suppliers and customers. We
have a comprehensive health and safety management system
in place, which is has been reviewed and approved by the
Board, who has ultimate responsibility for health and safety.
We work with suppliers to ensure that customers’ health and
safety is monitored throughout the supply chain. The Chief
Supply Officer and General Counsel are members of the
Health & Safety Committee which meets on a quarterly basis
and report to the Board on Health and Safety matters.
Focussing more on employee health and safety, we have a
health and safety policy which is supported by mandatory
health and safety online training for employees. We also
provide specialist information and briefings internally as
appropriate, for example we created working from home
guidelines to help employees continue to work safely from
home during the pandemic.
.
In the redesign of the new booking path (see page 21 for more
details), we have addressed some of the most common Web
Content Accessibility Guideline (WCAG) failures, such as:
ą
ą
ą
Using colours that provide a higher contrast to improve
legibility of text and icons.
Ensuring that touch target areas are an adequate size -
allowing for users on touch-screen devices to tap links
easily, without frustration.
Ensuring that all form fields have visible labels at all
times, allowing forms to be completed with ease.
We continue to learn and spread knowledge of accessibility
guidance across departments through our newly formed
network of Inclusivity Champions, allowing us to improve our
product at every customer touch point.
Our People
Our people are integral to achieving our strategic objectives.
We are passionate about creating a workplace and culture
which attracts, retains and develops the best talent. We want
our colleagues to feel safe; supported and respected; treated
fairly and taken care of; listened to; and motivated to achieve
their full potential.
A focus for us this year has been mental health, and in
particular the health of our colleagues. As well as introducing
free lunchtime Yoga sessions, we hosted regular Swedish
Fikas, in honour of our international brand, to encourage
colleagues to take a mid-morning break and socialise with a
coffee and pastry.
In January, instead of Blue Monday we hosted ‘Brew Monday’
on what is claimed to be the most depressing day of the
year. Designed so that colleagues could take the time to chat
over a cup of detox tea and enjoy some healthier cakes and
vegan snacks, we also handed out leaflets with tips and tricks
on how to boost mental wellbeing as well as useful sources
to help anyone who may be in need. We also encouraged
colleagues to donate to the Samaritans, who help to save lives
and offer support for those experiencing loneliness.
For more information, including our approach to diversity and
inclusion, see Our People section on pages 54 to 56.
Governance
Anti-Corruption and Bribery
We are committed to operating ethically and employees do
not actively seek gifts or favours from any of our suppliers, or
from other persons or organisations that we associate with.
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 maintain an Anti-Bribery and
Corruption policy which is supported with mandatory online
training for all employees. 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.
60
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Strategic Report
Non-Financial Information Statement
The table below sets out where the information required to be disclosed under sections 414CA and 414CB Companies Act 2006
can be found in this Annual Report.
Reporting
requirement
Environmental
matters
Employees
Social matters
Human rights
Anti-corruption and
anti-bribery
Business model
Non-financial KPIs
Description of
principal risks
Policies and standards
Where to read more in this report to understand
the impact on the business, and the outcome of
applying our policies
The Company does not have a specific policy on environmental issues, however, more information on
our business impact on the environment can be found in the Corporate Responsibility Report, pages 57
and 60, which also contains the statutory carbon emission and energy data on page 58.
›
›
›
›
›
›
›
›
›
›
›
›
›
›
›
Equality and diversity policy
Whistleblowing policy
HR policies including adoption leave,
parental leave
Health & Safety policy
Staff handbook
Health & Safety policy
Staff handbook
Modern Slavery Statement
Anti-Slavery and Human Trafficking
Policy
Data retention and destruction policy
Data handling and data quality policy
Employee data privacy policy
Anti-bribery and anti-corruption policy
Whistleblowing policy
Staff handbook
›
›
›
›
›
›
›
›
›
›
›
›
Our People, pages 54 to 56
Stakeholder engagement and s.172
statement, pages 46 to 53
COVID-19 response, page 11
Principal risks and uncertainties, pages
32 to 42
Corporate and social responsibility,
pages 57 to 60
Stakeholder engagement and s.172
statement, pages 46 to 53
Corporate and social responsibility,
pages 57 to 60
Corporate and social responsibility,
pages 57 to 60
Audit Committee report, pages 78 to
83
Business model, page 16
Non-financial key performance
indicators, pages 25 to 26
Principal risks and uncertainties, pages
32 to 42
Note
Certain group policies are not published externally
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
61
STRATEGIC REPORT Governance
63 Chair’s introduction
64 Directors’ biographies
66 Corporate Governance Statement
76 Report of the Nomination Committee
78 Report of the Audit Committee
84 Directors’ Remuneration Report
107 Other Statutory and Regulatory Disclosures
113 Statutory Auditor’s Report to the Members of
On the Beach Group plc
121 Statement of Directors’ Responsibilities
62
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Governance
Chairman’s introduction
Culture
The Board has an important role in
defining the culture of the Group.
Understanding the current culture
provides a deeper insight into the
organisation. During my time at On
the Beach, my initial very positive
impressions of its culture and
values have been further confirmed.
By spending time with the business
and its people I have seen that
the culture and the Company’s
values of being open, bold and
dynamic are clearly embedded and
genuinely lived. A priority for my
Chairmanship is to see that the
Board continues to help sustain
and evolve this positive culture by
having the right capability at Board
level and the right engagement
with stakeholders outside the
boardroom.
Conclusion
I believe that the Board remains
effective and continues to work
very well. With the expectation
that the year ahead will continue
to very challenging, the Board
will continue to work with the
Executive to deliver on our strategic
priorities while ensuring that
we continue to safeguard our
business and the wellbeing of our
employees, customers, partners
and communities.
Richard Pennycook
Chairman of the Board
On the Beach Group plc
10 December 2020
Compliance with UK Corporate
Governance Code
This is the Company’s first year
reporting under the principles of
the new UK Corporate Governance
Code 2018. The Board recognises
and applauds the increasing
emphasis on corporate purpose,
culture, risk and stakeholder
relations. The Code focuses on
demonstrating how the governance
of a company contributes to its
long term sustainable success. We
continue to develop our governance
and strategy in ways that support
our vision of being Europe’s leading
online beach holiday retailer.
The requirements of the Code and
our compliance with it are described
throughout this report. There is
only one area of non-compliance,
relating to the composition of the
Audit Committee, which requires
the appointment of an additional
Non-Executive Director. Due to the
challenges of COVID-19 we put
the search on hold, but it has now
recommenced.
Board changes during FY20
Board succession planning has
been an important area of focus
during FY20 with Paul Meehan
stepping down as CFO and Shaun
Morton, who was previously the
Group’s Director of Finance, taking
his place as CFO.
We intend to appoint an additional
Non-Executive Director to the
Board and you can read more about
this, and the change in CFO, in the
Nomination Committee report on
pages 76 to 77.
Board effectiveness
The Board undertook a thorough
and tailored internal review of
its effectiveness during the year.
The process undertaken and
the findings of the review can
be found on page 74. We had
intended to carry out an external
Board evaluation this year, but
this exercise was put on hold in
light of challenges the Board faced
as a result of COVID-19. It is our
intention however to carry out the
external evaluation next year and
this will be reported on in next
year’s annual report.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
63
Richard Pennycook
Chairman of the Board, On the Beach Group plc
I am pleased to present our corporate
governance report, which outlines our
corporate governance structures and
procedures, as well as summarising the work
of the Board and its Committees to illustrate
how we have discharged our responsibilities
during the year.
It is the Board’s role to provide effective
leadership in promoting the long-term
success of the Company and to deliver
sustainable value for shareholders. The
Board is responsible for ensuring that the
Company conducts its business ethically and
in a manner which contributes positively to
wider society, having regard to the interests
of its different stakeholders.
As Chairman, I am responsible for building
and leading an effective Board. During
the year, we have been implementing the
new requirements of the 2018 Corporate
Governance Code including those relating
to communication between the Board
and the Company’s stakeholders. It has
of course been an incredibly difficult year,
dominated by the response required to the
COVID-19 pandemic. The Board took swift
action to protect the health and wellbeing of
our colleagues and customers, to manage
risk and to conserve cash, and in doing so
maintaining the strength of the Company for
the long-term.
GOVERNANCE Governance
Board of Directors*
Richard Pennycook
NON-EXECUTIVE CHAIRMAN AND CHAIR OF NOMINATION
COMMITTEE
Simon Cooper
CHIEF EXECUTIVE OFFICER
Shaun Morton
CHIEF FINANCIAL OFFICER
Appointed to Board:
1 April 2019
Independent:
Yes
Listed Company Appointments:
Howden Joinery Group plc (Non-
Executive Chairman)
Committee Memberships:
Nomination (Chair), Remuneration,
Audit and Disclosure
Appointed to Board:
17 August 2015
Independent:
No
Listed Company Appointments:
None
Committee Memberships:
Disclosure (Chair)
Appointed to Board:
17 July 2020
Independent:
No
Listed Company Appointments:
None
Committee Memberships:
Disclosure
Experience and contribution
Richard Pennycook joined On the Beach
as Chairman of the Board and of the
Nomination Committee on 1st April 2019.
Richard brings extensive experience in
both private and public retail and consumer
businesses, including fast-growing online
businesses.
Richard is also Non-Executive Chairman
of Howden Joinery Group plc, a position
he has held since 2016, having joined
the Board as a Non-Executive Director in
2013. He was previously Non-Executive
Chairman of The Hut Group from 2012
to 2018, having worked with this fast-
growing technology unicorn in an advisory
capacity since 2008.
Prior to his Non-Executive career, Richard
was CEO of The Co-operative Group
from 2013 to 2017, and before this held
main Board roles at a number of public
companies, including Wm Morrison
Supermarkets plc, RAC plc, HP Bulmer
Holdings plc, Laura Ashley Holdings plc
and J D Wetherspoon plc.
Experience and contribution
Simon Cooper is the founder and Chief
Executive Officer of On the Beach.
Simon began his career in the travel
industry while attending university
when he founded ski holiday company
‘On the Piste’ in 1996, which went on
to be purchased by Thomson (now TUI)
in 2008.
Simon has extensive travel experience,
with over 20 years in the industry,
and as the founder of On the Beach
he has a detailed understanding of
the business and all operations. He
led the company through both its IPO
process in 2015 and the acquisitions of
Sunshine.co.uk and Classic Collection
Holidays. As a seasoned entrepreneur
and the founder of the business,
Simon brings key expertise in strategy
development and execution to the
Company.
Simon is also a Non-Executive Director
of CurrentBody.com Limited.
64
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Experience and contribution
Shaun is the Chief Financial Officer. He
joined On the Beach as Director of Finance
in February 2018 and was instrumental
with dealing with the Group’s response to
the failure of TCG, the acquisition of Classic
Collection and the delivery of the Group’s
share placing and CLBILS facility. Shaun
is experienced in financial planning and
strategy, including adept management of
financial risks and business development,
and he has a deep understanding of the
Group’s business, relationships and the
sectors in which it operates.
Prior to joining On the Beach, Shaun held
senior finance roles at Deloitte, Asda
and ghd hair where he was Director of
Finance for the Group. Shaun is a qualified
Chartered Accountant and trained with
Deloitte LLP.
Elaine O’Donnell
INDEPENDENT NON-EXECUTIVE DIRECTOR
David Kelly
SENIOR INDEPENDENT DIRECTOR
Appointed to Board:
3 July 2018
Independent:
Yes
Listed Company Appointments:
Games Workshop Group plc
(currently non-executive director and
Chair of Audit Committee but due to
be appointed non-executive chair with
effect from 1 January 2021)
Studio Retail Group plc (Chair of
Audit Committee and Designated
Employee Engagement NED)
Committee Memberships:
Audit (Chair), Nomination,
Remuneration
Appointed to Board:
28 August 2015
Independent:
Yes
Listed Company Appointments:
The Gym Group plc (Designated
Employee Engagement NED)
Reach PLC (Chair of the
Remuneration Committee)
Committee Memberships:
Remuneration (Chair), Audit
Nomination,
Experience and contribution
Through her other appointments Elaine
brings to the Board extensive experience
as a Non-Executive Director and Chair
of not only Audit, Risk, Nomination and
Remuneration committees but also
previously as Chair of the Board of Alliance
Fund Managers (AFM), a wholly owned
subsidiary of MSIF. Elaine is a Chartered
Accountant and brings online retail
industry experience to the Company, as
well as experience in regulated industries.
Elaine was previously a Partner at Ernst
& Young LLP where she specialised
in Corporate Finance, Mergers and
Acquisitions, where she worked with a
diverse range of businesses.
Experience and contribution
David joined On the Beach in August
2015 as Non-Executive Director and
Chair of the Remuneration Committee.
His previous experience spans a variety
of complementary sectors, and he brings
online travel industry knowledge from
positions at Lastminute.com, Holiday
Extras and Love Home Swap, along with a
broad ecommerce background having held
senior roles at Amazon, eBay and Qliro.
His current appointments also align with
his position at On the Beach as they
afford him extensive knowledge of both
Non-Executive Directorships and Chair of
Committee Roles. Specifically at On the
Beach, David has in-depth knowledge of
the business, being the Group’s longest
serving Non-Executive Director and the
Company’s Senior Independent Director.
Chairman
Executive Directors
Non-executive Directors
40%
40%
20%
20%
40%
40%
Simon Cooper ą16
David Kelly ą 5
Elaine O’Donnell ą 2
Richard Pennycook ą 1
Shaun Morton 1
Tenure in years
* Paul Meehan was a Director
during the year but ceased to
be a Director on 17 July 2020.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
65
GOVERNANCE Governance
Corporate Governance Statement
Compliance with the UK Corporate Governance Code
The principles set out in the 2018 UK Corporate Governance Code (the Code) emphasise the value of good corporate governance
to the long-term sustainable success of listed companies. These principles, and the supporting provisions cover five broad themes
and the Board is responsible for ensuring that the Company has appropriate frameworks in place to comply with the requirements
of the Code.
The Corporate Governance section of the Annual Report explains how we have applied the main principles of the Code and
complied with its relevant provisions.
A copy of the Code is publically available on the website of the Financial Reporting Council (FRC), www.frc.org.uk.
During FY20, we have complied with all provisions of the Code with the exception of provision 24 with regards to the Chairman of
the Board being a member of the Audit Committee. The Audit Committee is currently comprised of the three independent directors
and the intention was for Richard Pennycook to step down when the new non-executive director was appointed. However the
recruitment process for that new non-executive director was temporarily paused in light of the on-going challenges the Board faced
as a result of COVID-19. Richard Pennycook’s extensive financial experience has proved valuable to the Audit Committee and hence
why it was felt it was in the best interests of the Company for Richard to stay on the Committee until the new non-executive director
was appointed. The recruitment process for the new non-executive director has recommenced and is well underway (as explained
in more detail in the Nomination Committee Report on pages 76 to 77) and Richard will step down from the Audit Committee once
the new non-executive director has been appointed.
Code Section
Contents
Board Leadership and Purpose
Division of Responsibilities
Composition, Succession and Evaluation
Audit, Risk and Internal Control
Remuneration
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Board of Directors
Governance structure
Board Leadership and Purpose
Non-Executive Directors
Board and Committee meetings
Governance Structure
Division of Responsibilities
Board Composition
Appointments to the Board
Composition, Succession and Evaluation
Board Evaluation
Nomination Committee Report
Audit Committee Report
Remuneration at a glance
Annual statement of the Chair of the
Remuneration Committee
Summary of Remuneration Policy
Annual Report on Remuneration
Pages
64-72
71-73
73-77
78-83
84-106
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Governance structure
The Board has agreed an effective governance framework whose structure is set out below:
Board
Chaired by Richard Pennycook
The Board is responsible for promoting the long-term sustainable success of the
Company through setting a clear purpose and strategy, which creates long-term
value for shareholders, whilst having regard to the interests of wider stakeholders.
The Board 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 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.
Audit Committee
Remuneration Committee
Nomination Committee
Chaired by Elaine O’Donnell
Chaired by David Kelly
Chaired by Richard Pennycook
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 Statutory
Auditor.
The Audit Committee Report can
be read on pages 78 to 83.
Responsible for all elements of
the remuneration of the Executive
Directors and the Chair and other
members of senior management.
The Remuneration Committee
Report can be read on pages 84
to 106.
Reviews structure, size and
composition of the Board
and makes appropriate
recommendations to the Board.
The Nomination Committee
Report can be read on pages 76
to 77.
CEO and Executive Team
The Board delegates the day-to-day responsibility for running the Group to the CEO,
who is responsible for all commercial, operational, risk and financial elements. He is also
responsible for management and development of the strategic direction for consideration
and approval by the Board. The Executive Team assists the CEO to implement the
strategy as approved by the Board. The Board has close contact with the 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.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
67
GOVERNANCE Governance
Corporate Governance Statement
The Board has also established a Disclosure Committee who is 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.
Terms of reference
Each Committee has terms of reference which are available in the Governance section on the Company’s website (www.
onthebeachgroup.co.uk).
Board activity in FY20
Details of the main areas of focus of the Board and its Committees during the year are summarised below:
Topic
Key activity
Strategic matters
Significant projects:
COVID-19
Business performance
Risk management and
internal controls
Governance and Legal
People, culture and
Board effectiveness
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Regularly reviewed performance against the Group’s strategy
Received presentations from management in relation to business strategy and
performance
In-depth reviews of M&A pipeline and specific M&A opportunities.
Regular meetings to assess the impact of the COVID-19 pandemic on consumer
behaviour and the Company’s people, performance and future plans.
Considering and approving the Company’s response to the pandemic across all areas of
the business.
Approved issue of 26.1m shares in May 2020 (representing 19.9% of existing issued
share capital) raising £67.3m
Approved re-negotiation of existing £50m RCF facility and additional £25m RCF under
the Coronavirus Large Business Interruption Loan Scheme.
For more information on our response to COVID-19 see pages 11 to 12.
Received regular updates from Chief Executive Officer and Chief Financial Officer.
Reviewed the Group’s debt, capital and funding arrangements.
Approved the annual budget and business plan.
Approved the full year results, half year results and the annual report.
Monitored the Group’s financial performance and financial results.
Received updates on technology related developments.
Reviewed principal risks and uncertainties
Reviewed and confirmed the Group’s viability statement and going concern status
Reviewed effectiveness of the Group’s systems of internal controls and risk
management
Reviewed output of cyber security risk assessment and monitored progress made with
regards to improvements made to the Company’s IT systems and infrastructure.
Received and reviewed regular reports in relation to material legal matters.
Received and reviewed updates on regulatory and governance developments (including
2018 Code).
Reviewed and updated the terms of reference of the Board Committees.
Approved the Board’s skills matrix.
Discussed specific issues raised by shareholders and other stakeholders.
Discussed the results of employee wide ‘Hive pulse’ surveys.
Received regular updates from Director of People.
Received regular updates from the Group’s Diversity and Inclusion Steering Group.
Oversaw the search process and approved the appointment of Shaun Morton as CFO
following recommendation from the Nomination Committee.
Considered succession planning for the Board and Executive team.
Undertook an evaluation of the Board’s effectiveness, the effectiveness of each
committee and individual directors.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Board Leadership and Company Purpose
Our purpose, values, and culture
Role of the Board
The Board has overall responsibility for establishing the
Company’s purpose, values and strategy to deliver the long-
term sustainable success of the Company, generate value for
shareholders and to contribute to our wider society. The Board
recognises that it is accountable to stakeholders for ensuring
that the Group is appropriately managed and achieves its
objectives in a way that is supported by the right culture and
behaviours.
Our governance structure is set out on page 67 and provides
clear lines of accountability and responsibility. The Board
delegates some of its responsibilities to its committees to
assist it in carrying out its function of ensuring effective
independent oversight. Details of the significant topics
discussed and considered by the Board and its committees
during this year are summarised on page 68. Responsibility
for day-to-day operations is delegated by the Board to the
Executive Directors but the Board has reserved certain specific
matters to itself for decision. Please see the Company’s
website for the full schedule of matters reserved to the Board.
Sustainability of business model
The Group's business model is set out on page 16. The Board
closely monitors performance and ensures its actions promote
the long term sustained success of the Company, that the
Group’s business model remains sound and that the Executive
Team is supported in assessing opportunities and risks to the
future success of the business. The Board does this through:
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Reports from and discussions with the Executive
Team and other members of senior management on
issues affecting the business and industry trends and
developments.
Engagement with key stakeholders – see pages 46 to
53.
Evaluating strategic opportunities to consider how these
will support the business model.
Maintaining a sound system of risk oversight and
internal controls, including reviewing principal risks and
uncertainties and identifying key and emerging risks and
considering how they may affect the model - pages 32
to 42.
In assessing the Group's prospects and viability for the
purposes of the viability statement (see pages 43 to 44),
the Board considers key factors likely to affect the future
development, performance and position of the Group.
Purpose – why we do what we do. Our purpose is to make
it easy for people to find, book and enjoy their perfect beach
holiday. Our purpose drives every business decision we make
and ensures everyone who works with us is focused on doing
those things that make it happen.
Values – underpin who we are and what we do. We’re proud
to have the following values at the heart of the business:
We're Bold
We set our sights high and we
deliver. That means we seek out
new adventures near and far, do
things differently and have the
confidence to make bold choices.
And we like to stand out from the
crowd too.
We’re Open
We pride ourselves on being great
hosts; warm and welcoming, a bit
like your favourite beach. We're a
down to earth and friendly bunch
who work together with a shared
sense of purpose - and purposefully
open and inclusive attitude.
We’re Dynamic
Travel is part of who we are and
embedded in everything we do. We
don't sit still and are always moving
ahead, learn quickly and find creative
ways of doing things. Fast, flexible
and full of energy; that's us.
These values are embedded in our business and guide how
we work. Nurturing a culture which supports us in achieving
our vision is essential - our company values provide the
framework around which that culture is built and thrives. For
more information see Our People section on pages 54 to 56.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
69
GOVERNANCE Governance
Corporate Governance Statement
Culture - how we work together. Culture determines the
way that things are done in a business; the unwritten rules
that influence individual and group behaviour and attitudes.
Ensuring the link between purpose, strategy, values and
culture is critical to achieving the Company’s vision and to
creating long-term sustainability in our working approach.
Culture is established by leadership and by example, but this
also needs to be underpinned by clear policies and codes of
conduct which ensure that the Company’s obligations to its
shareholders and other stakeholders are clearly understood
and met.
The Board uses a number of indicators to inform its regular
assessment of whether the culture continues to be appropriate
and its alignment with the Group’s purpose, values and
strategy, including:
ą
Culture survey - Reviewing the feedback from the
externally facilitated Group-wide culture survey that
was carried out for the first time last year. The overall
results from this survey were very positive with lower
cultural stress levels than average. The results informed
a refresh of the Company’s values and we have built
on these with competency frameworks and a new
approach to managing performance to drive the values
and behaviours that support our strategic aims and what
we want to see more of.
Hive surveys - Reviewing the feedback from annual Hive
employee survey which captures feedback on a range of
topics, as well as gauging overall engagement levels.
Employee retention – The Board receives regular
updates on HR matters. Our employees are one of our
greatest assets and retaining their services is a key
element of our strategy. Voluntary employee turnover is
2% lower than for FY19 and is aligned to a strong level
of engagement with the Company’s strategy.
Compliance - The Group has robust policies in place
in relation to areas such an anti-bribery and anti-
corruption, anti-slavery and human trafficking and
whistleblowing. These policies are regularly reviewed
and actively promoted through online training and
checks for successful completion of initial and updated
training and guidance. These policies and processes are
overseen by the Audit Committee as described on pages
78 to 83, and an independent whistleblowing process
monitored by the Board as described on page 83.
Risk – The Board also assesses management’s attitude
to risk. This is predominantly done through direct
engagement with management at Board meetings.
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Our whistleblowing policy encourages employees to raise
any concerns about illegal or improper behaviour without
fear of victimisation, discrimination or disadvantage. We have
whistleblowing telephone service run by an independent
organisation, allowing employees to raise concern on an
entirely confidential basis. The Audit Committee receives
regular reports on the use of the service and concerns raised.
For more information on our culture and how we invest and
reward our workforce, see the ‘Our People’ section on pages
54 to 56.
Stakeholder engagement
The Board seeks to understand the views of our stakeholders
and engage with them in a variety of ways to ensure that
stakeholder interests can be considered during our discussions
and decision making. The section 172 report and stakeholder
engagement section of the Strategic report on pages 46 to
53 set out how the Board engages with and encourages
participation from stakeholders and the effect the engagement
has had on decisions taken by the Board during the year.
Our People section on pages 54 to 56 sets out how we
actively engage with our workforce. You can also find out
more about our culture and our commitment to our employees
in this section. In line with the Code, David Kelly has been
appointed as the Non-Executive Director responsible for
workforce engagement activities. Further information on
David’s appointment is included in Our People section.
Shareholder engagement
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.
During the year, the Chairman wrote to our major shareholders
at the time of publishing our 2019 Annual Report in January
2020 to offer a meeting/call with himself, David Kelly or Elaine
O’Donnell to discuss any matters concerning matters to be
conducted at the AGM. A number of shareholders took up
this offer and we had direct engagement with shareholders
representing approximately 56% of our issued share capital.
There was also additional engagement with investors
during the year outside the usual programme in relation to
important issues such as the equity raise, where we had direct
engagement with shareholders representing approximately
56% of our issued capital. We also engaged with shareholders
representing approximately 55% of our issued share capital
in respect of the the announcement released on 8 April 2020
regarding the Company’s COVID-19 and banking facilities
update.
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
legal requirements.
Questions from individual shareholders are generally dealt
with by the Executive Directors.
All shareholders can access announcements, investor
presentations and the Annual Report on the Company’s
corporate website (www.onthebeachgroupplc.com). The
Chairman, Richard Pennycook, 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.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Board and Committee Meetings
The Board held nine scheduled meetings during the year, at which it considered all matters of a routine and strategic nature,
structured through clear agenda setting, written reports and presentations from both internal members of staff as well as external
advisers and consultants. In addition, weekly/fortnightly Board calls were arranged during more intense periods such as the lead
up to the equity raise, and the board met separately, as required, to discuss urgent matters and approve event-driven items such
as the Group’s strategy and response to the COVID-19 pandemic and the appointment of Shaun Morton as CFO. The table below
shows meeting attendance for scheduled meetings during the year. There were a further 24 Board calls during the year, in addition
to the scheduled meetings.
Director
Richard Pennycook
Simon Cooper
Shaun Morton1
David Kelly
Elaine O’Donnell
Paul Meehan2
Scheduled Board
meetings
Audit Committee
Remuneration Committee
Nomination Committee
9/9
9/9
1/1
9/9
9/9
8/8
3/3
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3/3
3/3
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3/3
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3/3
3/3
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3/3
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3/3
3/3
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Shaun Morton was appointed on 17 July 2020
1
2 Paul Meehan stepped down from the Board on 17 July 2020
Information and Support
All Directors have access to the Company Secretary, who advises them on governance matters. Directors receive and access their
Board papers via an electronic portal. The Chair and the Company Secretary work together to ensure that Board papers are clear,
accurate and 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.
Division of responsibilities
Chief Executive Officer
Simon Cooper, as CEO, is responsible for managing the
business and driving it forward, including the responsibility for:
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The operations of the Group.
Developing Group objectives and strategy, having
regard to the Group’s responsibilities to its shareholders,
customers, employees and other stakeholders;
Following presentation to, and approval by, the Board,
for the successful implementation and achievement of
those strategies and objectives;
Ensuring that the Group’s businesses are managed in
line with strategy and approved business plans, and
comply with applicable legislation and Group policy;
Ensuring effective communication with shareholders;
and
Setting Group human resource policies, including
management development and succession planning for
the senior executive team.
Clear division of roles and responsibilities
The roles of Chairman and Chief Executive Officer
are exercised by different individuals. The division of
responsibilities between the Chairman and the Chief Executive
Officer have been defined, formalised in writing, and approved
by the Board.
Chairman
Richard Pennycook, as Chairman is responsible for:
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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;
Ensuring constructive relations between Executive and
Non-Executive Directors;
Ensuring effective communication with shareholders;
Ensuring that the performance of individual Directors,
the Board as a whole and its Committees is evaluated at
least once a year.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
71
GOVERNANCE Governance
Corporate Governance Statement
Chief Financial Officer
Shaun Morton, as CFO, is responsible for:
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Supporting the CEO in developing the Group’s strategy
and its implementation;
Managing all aspects of the Group’s financial affairs;
Establishing financial processes and maintaining
adequate internal controls over financial reporting;
Representing the Group to external stakeholders.
Senior Independent Director
David Kelly as Senior Independent Director is responsible for:
acting as a sounding board for the Non-Executive
Chairman and supporting him in ensuring the Board is
effective and that constructive relations are maintained;
acting as an intermediary for the other Directors when
necessary;
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The designated NED is not expected to take on responsibilities
otherwise carried out by executive directors or the People
function.
The designated NED’s duties in relation to colleague
engagement include:
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Quarterly review of colleague engagement survey with
People function to:
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discuss key areas of concern
identify actions and areas of focus
review previously agreed actions and impact
Quarterly review of key metrics and insights, including
but not limited to; voluntary turnover, sickness absence,
leaver surveys; and
Lead quarterly Board agenda item on colleague
engagement
being available to shareholders in order to understand
their issues and concerns in order to relay to the Board.
Company Secretary
The Company Secretary acts as secretary to the Board and its
Committees and her appointment and removal is a matter for
the Board as a whole. The Company Secretary is a member of
the Executive Team and all Directors have access to her advice
and services.
In certain circumstances, Board Committees and individual
Directors may wish to take independent professional advice
in connection with their responsibilities and duties, and, in
this regard, the Company will meet the reasonable costs and
expenses incurred and the Company Secretary will assist in
arranging such advice.
Time commitments of Non-Executive Directors
All Directors are expected to dedicate sufficient time to
discharge their responsibilities. Non-Executive Directors are
advised when appointed of the time required to fulfil the
role and asked to confirm that they can make the required
commitment. Each individual’s commitment to their role is
reviewed annually and any external appointments or other
significant commitments of the Directors require the prior
approval of the Board. The Board will take into consideration
the time commitment required by the Non-Executive
Director in their role as a Board Director, Committee Chair or
Committee member in giving any such permission.
Non-Executive Directors
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 Non-
Executive Directors provide a strong independent element on
the Board and are well placed to constructively challenge and
help develop proposals on strategy and succession planning.
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 performance.
These regular appraisals are important to evaluate the
knowledge and skills of members of the Board.
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. No such concerns arose during
the financial year.
Designated Non-Executive Director for Employee Engagement
David Kelly, as the designated NED will be expected to:
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ą
ensure there are agreed methods in place for on-going
engagement to understand the views and concerns of
employees;
ensure that the views and concerns of employees
are represented and taken into account in the Board
decision-making process;
ensure that the Board takes appropriate steps
to evaluate the impact of business proposals;
developments on employees, and considers what steps
should be taken to mitigate any adverse impact;
ensure a feedback mechanism is in place to share with
employees how the Board plans to respond to their
views or concerns; and
track and report achievements of the role in supporting
employees engagement.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
During the year, Elaine O'Donnell approached the Board in
relation to her proposed appointment of Chair of the Board
of Games Workshop Group plc. The Board considered that
Elaine had already been a non-executive director of Games
Workshop since 2013, that this would be her only Chair of
the Board role and having discussed the role with Elaine, the
Board was confident that Elaine could continue to devote
sufficient time to the Company's affairs. Accordingly consent
was given in relation to Elaine's new role.
The Board and Nomination Committee do not consider
that any of the Non-Executive Directors have too many
other commitments which would render them unable to
devote sufficient time to the Company’s activities. The other
directorships of the Non-Executive Directors, are set out in
their biographies on pages 64 to 65. None of the Directors
hold directorships in FTSE 100 companies.
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 that they consider
is in good faith, and 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.
Composition, Succession and Evaluation
The Nomination Committee supports the Board by leading
the process for the appointment of Board members and senior
management, ensuring that such appointments are in line with
the Company’s succession plans. Further information on the
work of the Nomination Committee can be found on pages 76
to 77.
Board Composition
During the year the Board reviewed the overall balance of
skills, experience, independence and knowledge of the Board
and Committee members. Further details of this review are set
out in the Nomination Committee report on pages 76 to 77.
As required by the Code, at least 50% of the Board, excluding
the Chairman, are independent Non-Executive Directors.
The Board is currently comprised of five members: the Non-
Executive 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 64 to
65.
The Board reviews the independence of its Non-Executive
Directors as part of the annual Board and Director evaluation
process. The Nominations Committee also considers Non-
Executive Director independence on an ongoing basis as part
of its consideration of the composition of the Board. The Board
has determined that all the Non-Executive Directors who
served during the year were independent and that, before and
upon appointment as Chairman, Richard Pennycook met the
criteria of independence as outlined in the Code.
The Board also believes that each of the Non-Executives has
retained independence of character and judgement and has
not formed associations with management or others that may
compromise their ability to exercise independent judgement or
act in the best interests of the Group.
Appointments to the Board
The Nomination Committee, which is chaired by the Chairman
of the Board and comprises all Non-Executive Directors, leads
the process for Board appointments, which are made on
merit, against objective criteria, and makes recommendations
to the Board. 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. 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. Any term beyond
six years is subject to a rigorous review, taking into account
the need for progressive refreshment of the Board. For further
details of the work of the Nomination Committee, including the
appointment of Shaun Morton as CFO, please see the report
of the Nomination Committee on pages 76 to 77.
Development of Directors
The Company has an induction programme for all new
Directors joining the Board. Each induction is tailored to the
relevant Director’s experience and background with the aim
of enhancing their understanding of the Group’s strategy,
business, operating divisions, employees, customers, suppliers
and advisers and the role of the Board in setting the tone of
our culture and the governance standards.
All Directors are kept informed of changes in relevant
legislation and regulations and of changing financial and
commercial risks, and the Chairman continually reviews the
training needs of Directors according to their individual needs.
This review is ongoing and forms part of the annual appraisal
process.
The Directors attend development days during the year
where they are provided with updates on developments and
training on certain areas in order to deepen and develop their
understanding of particular areas of the business. These
development days are in addition to the regular training
arranged by the Company Secretary. Directors also undertake
individual training which gives them the opportunity to
undertake a ‘deep dive’ into certain areas of the business.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
73
GOVERNANCE Governance
Corporate Governance Statement
Board and Committee 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 internal 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. As highlighted in the Chairman’s introduction, we had intended to carry
out an external Board evaluation this year, but this exercise was put on hold in light of challenges the Board faced as a result of
COVID-19. We will however carry out an external evaluation during FY21 and this will be reported on in next year’s report.
As part of the internal evaluation process, questionnaires were completed by each Board member in order to compare performance
against the 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 which was discussed 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 the evaluation identified some
actions that could be taken to further improve Board effectiveness including:
Finding
Action for FY21
Increased
focus on
diversity
Continued
focus on
succession
planning
ą Board diversity is recognised as an area for improvement and has influenced the brief for the new non-
executive Director search
ą Continued roll-out of Unconscious Bias training for manager community
ą Working with the Diversity & Inclusion Action Group to oversee progress against the commitments re:
ą
ą
ą
Ensuring there is a clear governance framework for Diversity & Inclusion;
Raising the profile and awareness of Diversity & Inclusion amongst colleagues;
Leveraging recruitment activity to improve the diversity of our workforce.
(see page 55 for more information).
Nomination Committee meeting diarised to review career and development plans for the Executive Team
to ensure that there is adequate talent pool of potential Executive directors and review talent development
throughout the Group
Increased
focus on ESG
ESG Committee will conduct a thorough review of the issues that affect the Group’s business the most to see
where we can make the most impact and in turn refine our strategy and priorities accordingly for FY21. The
CFO, who heads up the ESG Committee, will present to the Board accordingly.
Director
training
The evaluation identified that further training would be beneficial in certain areas including in respect of risks
the Group faces, for example risk appetite training.
During the year, the Senior Independent Director evaluated the performance of the Chairman, who in turn evaluated the
performance of each Director. In addition, the Non Executive Directors met independently from the Executive Directors to discuss
with the Chairman the overall functioning of the Board and the Chairman’s contribution in making it effective.
Following the above evaluations, the Directors concluded that the Board and its Committees operate effectively and that each
Director continues to contribute and demonstrates commitment to the role.
74
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
“
Tom Content Manager
As our lifestyles change, so does
the way in which we consume
content. Long dwell times have
been replaced by on-the-go
experiences, and it’s my team’s
job to ensure we’re positioning
hotel, destination, holiday and
blog content in such a way that
caters to our customers’ browsing
habits, whilst still giving them
all the information they need to
make a decision.”
Favourite Beach: Playa Ancon, Cuba
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
75
GOVERNANCE Governance
Report of the Nomination Committee
The Committee met 3 times during the year and member
attendance is shown below.
Member
Status
Appointment
date
Attendance
Richard
Pennycook
(Chair)
Independent
April 2019
David Kelly
Independent
August 2015
Elaine
O’Donnell
Independent
July 2018
3/3
3/3
3/3
The Committee’s composition meets the requirements of the
Code.
Appointment of new Chief Financial Officer
A large part of the Committee’s work centres on the oversight
of succession planning: ensuring plans are in place for the
orderly and progressive refreshing of the Board and to
identify and develop individuals with potential for Board and
Executive Team positions. This planning came to the fore
when Paul Meehan decided to step down as Chief Financial
Officer. Shaun Morton had previously been identified by the
Committee as a natural successor to Paul. The Committee
considered the role, the capabilities required and the current
Board composition and determined that Shaun was an
outstanding candidate. Shaun was previously the Group’s
Finance Director and was heavily involved in dealing with the
failure of TCG, the acquisition of Classic Collection and the
delivery of the Company’s recent share placing and CLBILS
facility. Shaun has been instrumental in shaping the Group’s
response strategy to COVID-19. Accordingly the Committee
recommended Shaun’s appointment to the Board, which
became effective on 17 July 2020. Shaun’s appointment is
subject to approval by shareholders at the forthcoming AGM.
You can read more about Shaun’s experience and skills on
page 64.
Paul Meehan worked closely with Shaun to ensure an orderly
handover. Shaun also completed a tailored induction. As
Shaun was already very familiar with the workings of the
Group, his induction focussed more on the governance,
regulatory and legal aspects of his new role, as well as
briefings with the Chairman and Non-Executive Directors and
meetings with key shareholders and advisers.
New Non-Executive Director
We reported last year that we were looking to appoint a
new Non-Executive Director. We had initiated that search
process but following the outbreak of COVID-19, and the
unprecedented challenges it presented, the Committee
took the decision to pause the search. That search has now
recommenced. The results of our annual review of Board
composition (see below) and the annual Board evaluation (see
page 74) has helped to shape the role specification for the
new Non-Executive role.
Richard Pennycook
Chairman, Nomination Committee
I am pleased to introduce the report of the Nomination
Committee for the year ended 30 September 2020.
Role of the Committee
The principal role of the Committee is to keep under review
the structure, size and composition of the Board, make
appropriate recommendations to the Board with respect
to any necessary changes and succession planning for the
Board and senior leadership positions, including in relation to
ensuring and encouraging diversity in leadership positions.
The Committee’s full roles and responsibilities are set out
in written terms of reference, which are available on the
Company’s website at www.onthebeachgroupplc.com/
investor-centre/corporate-governance.
Membership and meetings
The Committee meets at least twice annually and at such
other times as are necessary to discharge its duties. Only
members of the Committee have the right to attend meetings.
The Chief Executive Officer, Chief Financial Officer, as well
as external advisers and others attend for all or part of
Committee meetings by invitation when appropriate. The
Company Secretary acts as secretary to the Committee.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Board composition and skills
As part of its review of Board composition, the Committee
reviewed the skills, diversity and capabilities of current Board
members. This involved self-assessment by each director
of their skills, areas of functional expertise and sectoral
experience. The exercise gave the Committee an overview
of overall skills and experience, identified where there are
opportunities to further grow the Board’s collective knowledge
and informed us of those skills we may wish to prioritise when
preparing future role briefs. Indeed the output of this year’s
review has meant that we have revised the candidate brief
for the new Non-Executive Director role, including focussing
on candidates that can bring, inter alia, governmental/public
affairs experience.
As part of the review of Board composition, the Committee
also considered:
ą
ą
ą
ą
ą
ą
the independence of Non-Executive Directors,
considering the judgement, thinking and constructive
challenge that they demonstrate in the Board;
the balance on the Board between Executive and Non-
Executive Directors;
diversity of the Board, including age, gender and
ethnicity;
the business strategy and how the Board skills and
capability mix aligns with the current composition;
length and tenure;
the effectiveness review of the Board, its principal
Committees, the Chairman and individual Directors.
Having carried out the review, the Committee is satisfied
that the Board has the necessary mix of skills and experience
to fulfil its role effectively. However notwithstanding the
foregoing, we are mindful that the diversity of the Board could
be improved and that the Chairman of the Board should not
be a member of the Audit Committee under the Code. We
therefore believe that appointing an additional Non-Executive
Director will ensure that the Board continues to have the skills
and experience required to support the development and
delivery of the Company’s strategy.
All Directors are subject to annual re-election. Further details
about the particular skills, knowledge and experience each
Director brings to the Board can be found in the Directors’
biographies on pages 64 to 65.
In the coming year, the Committee will have renewed focus on
reviewing the career and development plans for the Executive
Team to ensure that there is adequate talent pool of potential
Executive directors and review talent development throughout
the Group to ensure there is a sufficient and diverse pipeline of
talent available to execute the Company's current and future
strategy.
Diversity
Diversity (in all respects including in terms of socio-economic
background, race, ethnicity, gender, sexual orientation, age,
physical abilities, religious and political beliefs) is critical to
the future success of the business and the Committee fully
appreciates the benefit of a diverse Board in ensuring the
broadest range of views, constructive debate and challenge
and in good decision making. As part of its review of Board
composition, the Nomination Committee has again considered
the diversity of the Board, noting that in order to bring the
widest range of perspectives to the Company, which would
in turn lead to increased creativity, innovation, debate,
understanding and ultimately better decision making as a
whole, diversity should remain a key factor in determining
appropriate nominations.
The Company and Committee agrees with the aims and
objectives of the Hampton-Alexander Review on FTSE
women leaders and the Parker Review on ethnic diversity
of UK boards and of the Women on Boards Davies Review
and is committed to diversity on the Board. Whilst noting the
recommendations of the Reviews, the Company’s policy is to
appoint the best possible candidate considered on merit and
against objective criteria, rather than set objectives on gender
that may deflect from achieving this fundamental target on
each occasion. As such, while we do not set any particular
targets, we continue to take diversity in its wider context into
account and recommend only the most appropriate candidates
for appointment to the Board. We appreciate, however, we
have progress to make in terms of improving the diversity of
the Board and the Executive Team and we will look to address
this during future appointments.
More information on our approach to diversity and inclusion,
including details about the gender balance of the Board and
senior management can be found in the ‘Our People’ section
of this Report on pages 54 to 56.
Succession planning and talent pipeline
Committee effectiveness
Throughout the reporting period, the Committee continued
to review the leadership talent pipeline and succession plans
for the Board, and senior management and the designated
short and long-term caretakers for each Board and senior role,
focusing on resolving key areas of vulnerability and taking
account of the continuing need to consider gender and ethnic
diversity. The Committee takes an active interest in the quality
and development of talent and capabilities within the Group,
ensuring that appropriate opportunities are in place to develop
high-performing individuals.
As part of the annual Board evaluation, all members of the
Nomination Committee participated in an evaluation of the
Committee. This concluded that the Committee performs
effectively, with a strong pipeline of candidates resulting in an
excellent recent appointment to the Board. Further details of
the evaluation can be found on page 74.
Richard Pennycook
Chairman, Nomination Committee
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
77
GOVERNANCE
Governance
Report of the Audit Committee
I am pleased to present the Audit Committee Report for 2020. This
report is intended to provide shareholders with an insight into how
key topics were considered during the year, together with how the
Committee discharged its responsibilities.
The role of the Audit Committee is to monitor and review the integrity
of financial information and to provide assurance to the Board that the
Group’s internal controls and risk management systems are appropriate
and regularly reviewed. We also oversee the work of the external auditor,
approve their remuneration, review and evaluate their performance and
recommend their appointment.
During the year, the Audit Committee dedicated substantial time to
reviewing the Group’s financial statements at both half and full year.
We also continued to focus on particular topics such as the Group’s
risk management programme, IT infrastructure and cybersecurity. The
dramatic impact of COVID-19 has highlighted the importance of risk
management, strong internal controls and business continuity planning
and we have spent a significant amount of time assessing the impact of
COVID-19 on the business, including in relation to the measurement of
assets and liabilities at the year-end and our Going Concern and Viability
Statements. Monitoring the impact of COVID-19 will continue to be a
key area of focus for the Committee as the situation continues to evolve.
With the assistance of management and our external auditor, EY,
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. There has been
no correspondence from the Financial Reporting Council during the
financial year.
Elaine O’Donnell
Chair of the Audit Committee
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Role
The main roles and responsibility of the Committee are set out in its terms of reference. The terms of reference are reviewed
annually by the Committee and proposed changes recommended to the Board. The current terms of reference can be found at the
Company’s website at www.onthebeachgroupplc.com. The Committee’s main responsibilities are:
Financial reporting
To review the reporting of financial and other information to the shareholders of the Company and
monitor the integrity of the financial statements, including the application of key judgements in
determining reported outcomes to ensure that they are fair, balanced and understandable.
External audit
To review the effectiveness and objectivity of the external audit process, assess the independence
and objectivity of the external auditor and ensure appropriate policies and procedures are in place to
protect such independence. The Committee is also responsible for developing and implementing the
Group’s policy on the provision of non-audit services by the external auditor.
Internal audit
To review regularly the need for an internal audit function and to evaluate the effectiveness and
robustness of the current internal control systems.
To review and assess the adequacy of the systems of internal control and risk management and
monitor the risk profile of the business. Review the Company’s procedures for raising concerns.
Risk management,
internal controls and
compliance
Committee composition
The Committee currently comprises three members as detailed below. The Committee members bring a wide range of financial
and commercial expertise necessary to fulfil the Committee’s duties. Summary biographies of each member of the Committee
are included on pages 64 to 65. All members of the Committee are considered to be independent. The Board is satisfied that the
Committee’s Chair, Elaine O’Donnell, has extensive recent and relevant financial experience and that the Committee as a whole has
competence relevant to sector in which the Group operates.
Whilst the Board believes the Committee to have the appropriate composition, skills and experience to discharge its
responsibilities, it is mindful that the Chairman should not be a member of the Audit Committee under the Code. Richard
Pennycook’s extensive financial experience has proved valuable to the Audit Committee, particularly during this difficult year
and hence why it was felt it was in the best interests of the Company for Richard to stay on the Committee until a new non-
executive director was appointed. The search for an additional Non-Executive Director is underway (as explained in more detail in
the Nomination Committee Report on page 76) and Richard Pennycook will accordingly step down from being a member of the
Committee once the new non-executive director has been appointed.
Committee meetings
The Committee met 3 times during the year and member attendance is shown below.
Member
Status
Appointment date
Attendance
Elaine O’Donnell (Chair)
Independent
July 2018*
Richard Pennycook
Independent
April 2019
David Kelly
Independent
August 2015
3/3
3/3
3/3
* Elaine was appointed a member of the Committee in July 2018 and appointed Chair in September 2019.
The agenda for each meeting reflects the annual reporting cycle of the Group and particular matters for the Committee’s
consideration. Only members of the Committee are entitled to attend meetings; however standing invitations are extended to the
Chief Financial Officer, Chief Executive, the Company Secretary and external auditor. In addition the Committee also invites other
senior finance and business managers to attend certain meetings. This allows the Committee to be given a deeper level of insight
on certain business matters. During the year the Committee met with the external auditor without the Executive Directors being
present.
The Company Secretary is secretary to the Committee.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
79
GOVERNANCE Governance
Report of the Audit Committee
How the Committee Discharged its Responsibilities in FY20
Financial Reporting
Significant matters relating to the Financial Statements considered by the Committee
As part of the process of monitoring the integrity of the financial information presented in the half-year results and the Annual
Report and Accounts, the Committee reviewed the key accounting policies and judgements adopted by management to ensure
that they were appropriate. The significant areas of judgement identified by the Committee, in conjunction with management
and the external auditor, together with a number of areas that the Committee deemed significant in the context of the financial
statements are set out below:
Description of focus area
Audit Committee action
Adjustments and estimates relating to the COVID-19
pandemic
The recognition of costs and provisions relating to disruption
caused by the COVID-19 pandemic is an area of significant
judgement. These adjustments relate primarily to lost revenue
resulting from the cancellation of bookings in the financial year
and beyond. The judgement includes the loss of revenues caused
by the cancellation and refund of bookings, off-set by extent to
which related holiday costs can be recovered.
Areas of judgement and estimation include:
ą
ą
ą
Cancellation provision: This is dependent on the extent
to which holidays booked in the financial year which
are travelling in future periods will be cancelled due to
COVID-19, and dependent on the ability of the Group to
mitigate costs relating to these cancellations.
Airline debtor recoverability: At the year end, there is a
balance due from airlines for cancelled flights. Whilst
significant amounts have been received post year
end, a balance remains which has been assessed for
recoverability risk, and whether any provision is required.
Supplier prepayment recovery: In the normal course of
business the Group will advance payments to certain
hotel suppliers for holidays booked. Due to the level
of cancellations over the summer, management has
considered whether these prepayments are recoverable.
Revenue recognition
The Committee have reviewed the key judgements
and estimates involved in arriving at the overall
adjustment and are satisfied with the approach of
management.
This review included reviewing the judgements and
estimates for each material component. This review
was supported by accounting papers provided by
management.
The Audit Committee is satisfied that, based on
all information available at the time of signing the
accounts, the judgements that have been made are
reasonable.
The Audit Committee has also considered the
presentation of the adjustments in the Financial
Statements and given their material nature is satisfied
that separate disclosure of this adjustment supports a
fair, balanced and understandable presentation of the
accounts.
Dependent on the contract with the customer and the nature of
services provided the Group will either recognise revenue on a
booked basis where it acts as an agent or a travelled basis where
it acts as principal. Where the Group operates as an agent a
provision for expected cancellations is also recorded.
The Audit Committee has considered management’s
judgements on the appropriateness of the revenue
recognition policy.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Description of focus area
Audit Committee action
Capitalised website development costs
The Group incurs significant internal costs in respect of the
development of the Group’s 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.
This year, the proportion of development costs that have been
capitalised is lower than what would be expected in a normal
year. This is due to the extent to which the development team
have supported more operational tasks that have been specific to
the Group’s response to COVID-19. Development costs, where
a future economic benefit can be demonstrated, have been
capitalised in line with the Group’s accounting policy.
New Accounting Standards
IFRS 16 ‘Leases’ is effective for the year ending 30 September
2020.
Valuation of Goodwill, Intangibles and Investments
The estimated recoverable value of the Group’s intangible assets
is subjective due to inherent uncertainty involved in forecasting
and discounting future cash flows.
The principle uncertainty is the extent to which these intangible
assets will continue to generate cash flows for the Group and
whether this is sufficient to support the asset value.
This year, management has considered whether the value of
these assets has been impaired by the current disrupted market.
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.
During the financial year, the Committee received
reports from management in relation to the adoption
of IFRS 16, which was applied in the Group’s interim
financial statements. These papers included the
proposed disclosures in relation to this standard for
the Annual Report.
Following discussions with management and the
Statutory Auditor, the Committee approved the
disclosures of IFRS 16.
The Committee have reviewed the accounting and
are satisfied with the approach of management. The
Committee are satisfied with the key assumptions
used in the forecast, including the use of sensitivities
growth rates and discount rates.
Fair, balanced and understandable
The Committee considered whether the half year results and the Annual Report and Accounts were fair, balanced and
understandable and whether the information provided was sufficient for a reader of the statements to understand the Group’s
position and performance, business model, risks and strategy.
In arriving at its assessment the Committee has:
ą
ą
ą
ą
taken into consideration that the Annual Report has been reviewed at several levels within the Group ensuring overall
balance and consistency;
received an early draft of the Annual Report to enable sufficient time for comment and review;
satisfied itself that there is a robust process in place to support the fair, balanced and understandable assessment;
considered the External Auditor’s review of the Annual Report.
The Directors’ statement on a fair, balanced and understandable Annual Report and Accounts is set out on page 121 of this
Report.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
81
GOVERNANCE Governance
Report of the Audit Committee
Going concern and Viability statement
The Committee reviewed the appropriateness of adopting the
going concern basis of accounting in preparing the full year
financial statements and assessed whether the business was
viable in accordance with the Code. The assessment included
a review of the principal risks facing the Group, their financial
impact, how they are managed, the availability of finance,
including the new CLBILS funding secured in May 2020, and
the Company’s choice of a three-year assessment period. This
was supported by a very thorough paper from the CFO. The
Group’s viability statement is on pages 43 and 44.
External Audit
External Auditor effectiveness and appointment
The Committee oversees the Group’s relationship with the
external auditor and reviews and makes recommendations
regarding their reappointment. Throughout the year, the
Committee has considered the on-going effectiveness of EY,
looking at the quality of their reports to the Committee, the
performance of the EY team both in and outside Committee
meetings and how EY have interacted and challenged
management. As well as this on-going review the Committee
considered the effectiveness of EY as part of the 2020 year-
end process. The Committee took a number of factors into
account when considering the effectiveness of the external
audit including:
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ą
ą
ą
ą
ą
ą
The quality of the audit planning covering the approach,
scope and levels of fees for the audit;
Delivery and execution of the agreed external audit
process for FY20;
The experience, industry knowledge and expertise of the
EY audit engagement team;
EY’s explanation of significant risks to audit quality by
reference to the Company’s specific circumstances and
changes to the risks, including COVID-19 implications;
The competence with which EY handled and
communicated the key accounting and audit judgments;
The communication and engagement between
management, EY and the Committee;
The steps taken by EY to ensure their objectivity and
indepedence.
The Committee also sought the views of key members of the
finance team, senior management and Directors on the audit
process and the quality and experience of the audit partners
engaged in the audit.
The Committee has concluded that overall, EY has carried
out its audit for 2020 effectively and efficiently and that EY
continues to provide constructive and independent challenge
to management and consistently demonstrates a realistic and
commercial view of the business. Accordingly the Committee
recommended to the Board, which in turn is recommending to
shareholders at the forthcoming AGM, that EY should continue
as external auditor of the Group.
EY was appointed auditor to the Group in March 2019
following a competitive audit tender process that commenced
towards the end of 2018. The lead audit partner will rotate
every five years to ensure independence. While the Company
is not a FTSE 350 listed company, we continue to comply with
the UK Competition and Markets Authority’s Statutory Audit
Services Order which states, among other matters, that FTSE
350 listed companies should put their external audit contract
out to public tender at least every ten years. The Group
intends to remain in full compliance with the requirement to
carry out a formal tender at least once every ten years.
Independence and objectivity
The Committee takes steps to ensure that the external auditor
remains objective and independent through a combination of:
ą
ą
ą
assurances provided by EY on the safeguards in place to
maintain independence;
oversight of the non-audit services policy and fees paid
(see below); and
oversight of policy on employing former auditors.
Non-audit services
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
policy ensures that the Group benefits from the cumulative
knowledge and experience of its auditor while ensuring at
the same time that the auditor maintains the same degree of
objectivity and independence.
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 £242,000). In addition, all non-
audit work in excess of £15,000 should be the subject of a
competitive tender.
Non-audit fees are monitored by the Committee and the
Committee is satisfied that all non-audit work undertaken
this year was in line with our policy and did not detract from
the objectivity and independence of the external Auditors.
The fees paid to EY in respect of non-audit services during the
year related to the review of interim Financial Statements and
the ATOL return and totalled £50,000, representing 20.7% of
the total audit fee (2019: £55,000, representing 29.7% of the
total audit fee). These non-audit services are considered to be
closely related to the work performed by EY as auditor of the
Group and therefore the auditor is the appropriate firm to carry
out the services.
Internal audit
The Committee has again 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:
ą
ą
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.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
The Committee was satisfied that management had given
sufficient assurances that other monitoring processes
(including internal reviews of the Group’s operations
undertaken periodically by senior finance staff) were being
applied and would be developed using the existing expertise
of the finance department to help ensure that the Group’s
system of internal control was functioning as intended. The
Committee has also gained assurance from reports from
the external auditors with regard to internal control and risk
management, supplemented by extended assurance reviews
by external consultants in key risk areas. For example this year,
third party consultants were appointed to conduct a review of
the Group’s processes and controls in relation to information
security and data protection.
The Committee will, as part of its remit, continue to evaluate
the effectiveness and robustness of the current system of
control. As the business continues to grow in size and breadth,
the Committee will consider in FY21 whether an independent
Internal Audit Department would be more appropriate
and to set down the guidelines for the operation of such
a department, or alternatively, whether the Group should
operate a rolling programme of internal audit with the support
of an external adviser.
Risk management and Internal Control
The Board is responsible for establishing, maintaining
and monitoring the Group’s system of risk management
and internal control and reviewing its effectiveness. The
Committee monitors the performance of management in this
area. We have an ongoing process for identifying, evaluating
and managing the principal risks faced by the Group. The
Group’s risks are monitored by the Audit Committee on behalf
of the Board which sets aside time for an in-depth discussion
of notable or changing risks to the business. A description
of the process for managing risk together with a description
of the principal risks and strategies to manage those risks is
provided on pages 32 to 42.
Internal control systems are designed to meet the particular
needs of the Group and the risks to which it is exposed. Such
systems are designed to manage rather than eliminate the
risk of not achieving business objectives and can only provide
reasonable and not absolute assurance against material
misstatement or loss. The Board seeks to manage this risk by
having established a well-defined organisational structure,
clear operating procedures, embedded lines of responsibility,
delegated authority to executive management and a
comprehensive financial reporting process.
Key features of the Group’s system of internal control and risk
management are:
ą
ą
Risks are highlighted through a number of different
reviews and culminate in the 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 a desired level. The
risk register is updated twice a year by the Executive
Team and approved by the Board annually.
Monthly consolidated Group management accounts.
These 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. 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.
Annual budget and quarterly reforecast against which
management monitor the key business and financial
activities towards achieving the financial objectives each
month.
Detailed appraisal and authorisation procedures for
capita and operational expenditure.
Embedded policies and procedures to ensure the
integrity and accuracy of accounting records and to
safeguard the Group’s assets.
Defined management structure and delegation of
authority to Committees of the Board and associated
business units.
Anti-bribery, security and compliance training for all
employees.
Monitoring of any whistleblowing or fraud reports.
Recruitment standards and training to ensure the
integrity and competence of staff.
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ą
ą
ą
ą
ą
ą
In addition, the Audit Committee receives detailed reports
from the external auditor in relation to the financial statements
and the Group’s system of internal controls. The Chair of the
Audit Committee also has regular interaction with the external
auditor and senior members of the Group finance department
in order to monitor and assess the effectiveness of the Group’s
system of internal controls.
The Board, through the Audit Committee, has reviewed the
effectiveness of the Group’s system of internal controls in
operation across the Group. This review covered the material
controls, including financial, operational and compliance, as
well as risk management arrangements. No significant control
failings or weaknesses were identified during the period under
review.
Whistleblowing
The Group has a formal whistleblowing policy in place which
provides details of how employees can raise concerns in
relation to the Group’s activities or the actions of any employee
of the Group on a confidential basis. This policy is reviewed
annually by the Audit Committee. The Group provides a
whistleblowing telephone service run by an independent
organisation, allowing employees who do not wish to use
normal internal line management channels, 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.
Committee Effectiveness review
The Committee has reviewed and considered the
effectiveness of its performance during the year. The review
included views of members of the Committee and of regular
attendees at the various meetings (including the Executive
Directors). The review indicated that the Committee continues
to perform well with no significant concerns.
Elaine O’Donnell
Chair, Audit Committee
10 December 2020
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83
GOVERNANCE Governance
Remuneration Report
Annual Statement of the Chairman of the Remuneration
Committee
In terms of action we took in relation to our workforce during
the pandemic:
ą
ą
ą
ą
ą
ą
ą
ą
Weekly company-wide calls held so that employees
could raise issues and concerns (anonymously if
preferred) and the Executive Team could cascade
information on the Group’s response to the pandemic;
Mental health support available outside of the Group, for
example through our Employee Assistance Programme;
Support and guidance produced as to how employees
could work safely from home;
Pulse surveys on how our employees were feeling and
what support they needed;
Numerous social and wellbeing initiatives to keep up
morale;
We kept in regular contact with our furloughed
colleagues, keeping them up to date with our future
plans for returning to work and ensuring they had the
opportunity to ask questions and raise concerns;
In the first 3 months of the scheme, for those employees
earning less than £25,000 per annum who were placed
on furlough, we topped up their pay to ensure that such
employees received full pay whilst on furlough;
Furloughed employees whose salary, at 80%, exceeded
the £2,500 cap prescribed by the scheme, were topped
up to receive 80% pay.
From a remuneration point of view, the CEO volunteered to
forgo his salary for 7 months of the year and the remainder
of the Board voluntarily agreed to a 20% reduction in salary
and fees for 6 months of the year. The Executive and Senior
Management Teams also voluntarily reduced their salary by up
to 20% for a period of 3 months. There were no other salary
reductions throughout the Group other than the reductions
agreed with the Board and senior management. You can
find out more information on how we have responded to the
COVID-19 pandemic, including more information on the
above actions on pages 11 to 12.
The Committee recognises the Executive Team’s strong
contribution during the year, the actions taken to mitigate the
impact of the global pandemic and to protect the Group for the
long term. However, as announced in April 2020, no bonus
will be paid to employees, including the Executive Directors,
in respect of FY20. In addition, the performance targets for
the LTIP awards granted in FY18 were not met, and therefore
these awards will lapse in full. No discretion was exercised to
adjust the outcomes.
During FY21 we will continue to face the challenge of
managing the ongoing disruption to the business caused by
COVID-19 while building on the momentum of the strategy to
date.
David Kelly
Chair, Remuneration Committee
As Chair of the Remuneration Committee, I am pleased to
present the Company’s Remuneration Report for the year to
30 September 2020.
Review of FY20
During the first half of the financial year, we made very good
progress on the implementation of our strategy. The failure
of TCG created a unique opportunity for the Group and
during the first four months of the financial year, the Group
priced competitively and increased market share, with sales
growth of nearly 30 per cent (excluding Classic Collection
Holidays) for summer 2020 departures. This performance was
supported by a significant increase in offline marketing spend
in the early months of FY20 which resulted in the Group's
highest ever year-on-year growth in brand awareness. Our
new Classic Package Holidays brand was also performing
well in its first year post launch and we were continuing to
expand our long haul offering.
Despite this excellent progress, the outbreak of COVID-19 led
to a rapid slowdown in demand for foreign travel followed by
a complete closure of airspace across Europe by mid-March.
Bookings fell sharply and a significant proportion of holidays
booked in H1 and due to travel in H2 were cancelled.
However the early action we took to manage risk and
conserve cash in the wake of the outbreak has stood us in
good stead. You can read more about these actions on pages
11 to 12.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Board changes
As announced in June 2020, Paul Meehan stepped down as
CFO, and from the Board, on 17 July 2020. The remuneration
terms agreed by the Committee in respect of Paul’s departure
are in line with our Directors’ Remuneration Policy and include
no special arrangements. Reflecting Paul’s performance during
his tenure, the Committee determined that Paul should be
treated as a good leaver for the purposes of his outstanding
LTIPs, which all remain subject to their original performance
conditions and vesting terms. Full details are set out on page
99.
We were delighted to welcome Shaun Morton to the Board
as our new CFO on 17 July 2020. As part of his appointment,
the Committee took the opportunity to set Shaun’s pension
contribution at 3% of eligible earnings, in line with the rest
of the workforce. Shaun’s salary is set at a lower level than
his predecessor, reflecting that Shaun is new to the role. As
Shaun becomes established in the role, his salary will be
reviewed, in line with the Directors’ Remuneration Policy. No
buyout awards were made. There are a number of legacy
share awards made to Shaun prior to his appointment as
CFO which either operate as “restricted share awards” with
no performance criteria, or where the performance criteria
are specific strategic targets rather than the EPS/TSR metrics
in the LTIP awards for Executive Directors. These remain in
place on the terms set prior to Shaun’s appointment as CFO,
consistent with the Directors’ Remuneration Policy.
FY21 Remuneration approach
Key decisions by the Remuneration Committee in respect of the
remuneration of the Executive Directors in FY21 include:
ą
ą
ą
Neither Simon nor Shaun will receive a salary increase
during FY21 (the average increase across the wider
workforce will be 1%)
The maximum bonus opportunity remains unchanged
at 100% of salary and the bonus will continue to be
based on Group PBT (70% weighting), and non-financial
targets relating to net promoter score and employee
engagement (30% weighting). The forward-looking
targets are deemed to be commercially sensitive but full
details will be disclosed on a retrospective basis in next
year’s Annual Report and Accounts.
It is intended that LTIP awards will be granted during
FY21 of 100% of salary for Simon Cooper (reflecting his
material shareholding) and 200% of salary for Shaun
Morton (to support him in building his shareholding and
aligning interests with shareholders). The performance
conditions will be based 70% on EPS performance
and 30% on absolute TSR measured over a three year
period. Targets will be disclosed at the time of grant in
the RNS announcements.
Corporate Governance developments
The Committee actively monitors developments in corporate
governance and the guidelines produced by shareholders and
their representative bodies. Whilst we had already made a
number of early changes to align with the 2018 Code and the
new regulatory requirements, we have taken further steps
for 2019/20, including the alignment of Shaun’s pension
contribution with the wider workforce noted above, and the
disclosure of our CEO pay ratio.
During the year, we operated within the Directors’
Remuneration Policy (“Policy”) that was approved by the
shareholders at the 2019 AGM, a summary of which can be
found in the next section. That Policy is due for review and
approval by shareholders at the 2022 AGM. We did consider
the possibility of bringing forward the triennial review of the
Policy for a vote at the forthcoming 2021 AGM in order to
update the Policy in response to the revised UK Corporate
Governance Code but given that:
ą
ą
ą
we are satisfied that the Policy continues to support
the Company’s strategy for the forthcoming year: to
retain and motive our management team, to drive strong
returns for our shareholders and to promote the long-
term success of the Company;
the pension provision for Executive Directors is now
aligned with the wider workforce;
we have introduced a policy that post-cessation of
employment, Directors should continue to be bound
by any holding period for any share awards they have
received, as if they were still in employment.
we have chosen to operate the existing Policy through FY21.
We will therefore review the Policy in full over the course of
FY21 and will engage with our shareholders in relation to
any revised proposed remuneration framework so that it can
effectively support our senior leaders and align our growth
strategy as it continues to evolve. We will also ensure that
there is engagement with the wider workforce to explain how
executive remuneration aligns with the wider company policy.
The Committee has considered and believes that the current
Policy and practices are consistent with the six factors set out
in Provision 40 of the Code (see page 88 for more information
in this respect) and the Committee will review and ensure that
our new policy continues to adhere to these principles.
Key activities of the Remuneration Committee
Key activities of the Remuneration Committee during the year
included:
ą
ą
ą
ą
ą
ą
ą
ą
ą
ą
Agreeing the performance against the targets and
vesting of the 2017 LTIP awards.
Setting the performance targets for the Executive
Directors FY20 annual bonus.
Agreeing the population, award levels and performance
targets for the FY20 LTIP awards and restricted share
awards.
Determining leaver terms regarding Paul Meehan, CFO
and approving remuneration package for new CEO,
Shaun Morton.
Approving the Directors’ Remuneration Report for the
FY19 Annual Report.
Reviewing Group-wide pay and conditions and share
plans.
Reviewing base salaries of Executive Directors and
Executive Team.
Reviewing feedback from 2020 AGM.
Review performance of independent advisers and fees
over the year.
Monitoring the developments in the corporate
governance environment and investor expectations.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
85
GOVERNANCE Governance
Remuneration Report
Annual Statement of the Chairman of the Remuneration Committee
In summary, the Committee is committed to ensuring that
we are responsive to developments in best practice, as
well as a transparent approach in respect of executive pay.
Should you have any queries or comments on this Report, or
more generally in relation to the Company’s remuneration,
then please do not hesitate to contact me via the Company
Secretary.
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.
David Kelly
Chair of the Remuneration Committee
Shareholder engagement
The Company is committed to maintaining good
communications with shareholders to ensure an open
and transparent dialogue around executive remuneration
arrangements. The AGM offers an opportunity for the
Committee to meet and communicate with investors, giving
shareholders the opportunity to raise any issues or concerns
they may have.
The Remuneration Committee considers shareholder feedback
received on the Directors’ Remuneration Report each year
and guidance from shareholder representative bodies more
generally. Ahead of the publication of last year’s Annual
Report, Richard Pennycook as Chairman of the Board and
David Kelly as chair of the Remuneration Committee led an
engagement process with major shareholders to discuss,
inter alia, the remuneration arrangements for the year ended
30 September 2019, for which the majority of shareholders
expressed their support for the arrangements.
Shareholders’ views are key inputs when shaping
remuneration policy and as mentioned above, we will be
consulting with major shareholders during FY21 in relation to
the proposed new Policy.
Remuneration Report
This report has been prepared in accordance with The Large
and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013 (as amended
in 2018 and 2019), the UKLA Listing Rules and the UK
Corporate Governance Code. The report is split into four parts:
ą
ą
ą
ą
This Annual Statement.
Remuneration at a glance.
A summary of The Directors’ Remuneration Policy which
was approved by shareholders at the 2019 AGM and
which will continue to apply without amendment for the
forthcoming year.
The Annual Report on Remuneration which sets out
payments made to the Directors and details the link
between Company performance and remuneration
for the 2020 financial year. The Annual Report on
Remuneration together with this statement is subject to
an advisory shareholder vote at the 2021 AGM.
86
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Remuneration at a glance
FY20 Implementation of Policy
FY21 Implementation of Policy
Salary
ą
Pension
Bonus
LTIP
ą
ą
ą
ą
ą
ą
Salary increase of 1.5% for Simon Cooper and former CEO Paul
Meehan (effective 1 January 2020). Increase was in-line with
the average increase provided across the wider workforce:
ą
Simon Cooper (CEO): £207,060 (FY19: 204,000)
ą
Paul Meehan (Former CFO): £314,650 (FY19: 310,000)
ą
Shaun Morton (CFO): £250,000
Simon Cooper (CEO): 3% of eligible earnings (in line with wider
workforce)
Paul Meehan (Former CFO): 15% of salary
Shaun Morton (CFO): 3% of eligible earnings (in line with wider
workforce)
The bonus scheme did not operate in FY20
Performance conditions for FY18 LTIP award (performance
period ending 30 September 2020) were not met.
LTIP awards were granted to Simon Cooper (100% of salary)
and Paul Meehan (200% of salary).
ą
No salary increase in FY21 (average
increase across the wider workforce
will be 1%)
ą
No changes (all Executive Directors in
line with wider workforce)
ą Max opportunity: 100% of salary
ą
Performance targets:
ą PBT: 70% weighting
ą Net Promoter Score and Employee
Engagement Score: 30% weighting
ą
ą
Simon Cooper: 100% of salary
Shaun Morton: 200% of salary
Shareholding
requirement
Executive Directors must establish a shareholding of 200% of salary over a 5 year period. In addition to the
in-employment requirement, Directors continue to be bound by any holding period for any share awards they
hold after leaving employment with the Group.
COVID-related actions
Action taken
Salary
reductions
Government
support
CEO volunteered to forgo 100% of his salary for 7 months (March to September).
ą
ą Other Board members voluntarily agreed to a 20% reduction in salary and fees for 6 months (April to
September).
Executive and Senior Management team also agreed to a voluntary reduction in salary of up to 20% for 3
months.
The Group used the Coronavirus Job Retention Scheme to protect jobs for the longer term and enable the
Group to retain its capacity to scale up in line with customer demand.
In the first 3 months of the scheme, furloughed employees whose normal salary was less than £25,000
were topped up to full pay. Furloughed employees whose salary, at 80%, exceeded the £2,500 cap
prescribed by the CJRS were topped up to receive 80% pay.
The remainder of the workforce remained employed on full pay.
ą
ą
ą
ą
Variable pay
ą No annual bonus plan was operated across the Group.
LTIP Performance
Threshold
(25% vests)
Maximum
(100% vests)
EPS1
TSR2
29.25p
8%
29.25p
15%
1 EPS for year ending 30 September 2020.
2 Annualised TSR of the Company over the three year period to 30 September 2020.
Actual
0.4p
-13.4%
Outcome
0%
0%
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
87
GOVERNANCE Governance
Remuneration Report
CEO remuneration outcome
2019/20 Maximum
(inc 50% share price growth)
209
207
414
207
2019/20 Target
209
124
259
2019/20 Fixed
209
2019/20 Actual
89
£0
£250
£500
£750
£1,000
Remuneration (£’000)
Fixed (Salary, benefits and pension)
Bonus
LTIP
Impact of share price appreciation
UK Corporate Governance Code
Clarity
Predictability
Our current Policy is structured in a way that clearly supports
the financial objectives and the strategic priorities of the Group.
The remuneration arrangements and Policy are clearly disclosed
each year in the Annual Report. The Policy is well understood
internally by Executives and the Committee regularly engages
with shareholders to explain our approach to executive pay.
The Committee sets specific targets for different levels of
performance which are communicated to Executives and
disclosed to shareholders. A potential range of performance
scenarios and remuneration outcomes are set out in the chart
above.
Simplicity
Proportionality
The Policy consists of three main elements: salary, annual
bonus and a single LTIP, so the incentive arrangements are
considered easy to communicate. The annual bonus award is
based on a combination of clearly defined financial and non-
financial targets. The vesting of LTIP awards is based on EPS
growth and relative TSR performance. No complex structures
are used to facilitate the operation of the incentive plans and
payments are made either in cash or shares.
Variable performance related elements represent a significant
proportion of total remuneration opportunity for Executive
Directors and the Committee considers appropriate financial
and non-financial performance measures each year to ensure
that there is a clear link to strategy. The Committee may
exercise discretion to ensure that payouts are appropriate
and are aligned with underlying performance.
Risk
Alignment with culture
There is an appropriate mix of fixed and variable pay and
financial and non-financial objectives. There are measures in
place to ensure alignment with long-term shareholder interests
such as post-vesting retention periods and shareholding
requirements. Comprehensive clawback and malus provisions
are in place across all incentive plans and the Committee’s
ability to use its discretion to override formulaic outcomes are
considered important controls to prevent inappropriate reward
outcomes.
Remuneration arrangements for the Executive Directors are
flowed down through the organisation to ensure that there
are common goals. In determining Executive remuneration
policies and practices, the Committee considers the overall
remuneration framework for our wider workforce and
ensures that such policies and practices are consistent with
the Company’s purpose, values and strategy.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Governance
Summary of Remuneration Policy
Introduction
The Directors’ Remuneration Policy (the ‘Policy’) was approved by shareholders at the AGM on 7 February 2019 (81.80% of votes
cast being in favour) and became effective from that date. There are no proposals to amend the Directors’ Remuneration Policy at
the 2021 AGM.
A summary of the policy (with updated references, where relevant) is included for reference to assist with the understanding of the
contents of this report. The full policy is detailed in our 2018 Annual Report, which can be found in the ‘Investors centre’ section
under ‘Reports and presentations’ on the Company’s website (www.onthebeachgroupplc.com).
The following table summarises 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
Operation
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.
Salaries are reviewed annually and any changes are normally
effective from 1 January in the financial year. The Committee
considers a number of factors when determining an appropriate
level of salary such as remuneration practices within the
Company and the economic environment.
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. The Committee recognises
that Simon Cooper’s current base salary is below the
market level, but it has given regard to Simon’s considerable
shareholding in the Company, and the desire to focus the
remuneration structure on a long term strategy.
Performance metrics used, weighting and time period
applicable
None
Benefits
Short and long term strategic objectives
Operation
Provides a competitive level of benefits
The Executive Directors receive benefits which include family
private health cover. The Remuneration Committee recognises
the need to maintain suitable flexibility in the determination of
benefits to ensure it is able to support the objective of attracting
and retaining personnel.
Opportunity
The maximum will be set at the cost of providing the benefits
described.
Performance metrics used, weighting and time period
applicable
None
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89
GOVERNANCE Governance
Summary of Remuneration Policy
Pensions
Short and long term strategic objectives
Operation
To provide a competitive level or retirement benefits.
On recruitment, the Committee maintains the ability to provide
pension funding in the form of a salary supplement, which would
not form part of the salary for the purposes of determining the
extent of participation in the Company’s incentive arrangements.
Opportunity
Performance metrics used, weighting and time period applicable
15% of base salary for existing Executive Directors
(although both Executive Directors currently receive
contributions equivalent to 3% of eligible earnings, which
is in line with the rest of the workforce). The Committee
intends to align pension contribution with the wider
workforce for any Executive Director recruited in the
future.
None
Annual Bonus Plan
Short and long term strategic objectives
Operation
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.
Annual bonuses are part paid in cash and part in shares. Up to
50% of any award will be deferred into shares for two years.
Malus will apply up to the date of the bonus determination
and clawback will apply for two years from the date of bonus
determination.
Opportunity
The maximum bonus opportunity is 100% of base salary.
Performance metrics used, weighting and time period
applicable
Performance is measured over the financial year. The majority
of the annual bonus will be based on performance against
stretching PBT targets, with the balance based on non-financial
metrics which are aligned to the business strategy.
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 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.
The Remuneration Committee retains discretion in exceptional
circumstances to change performance measures and targets
and the weightings attached to performance measures part-way
through a performance year if there is a significant and material
event which causes the Remuneration Committee to believe
the original measures, weightings and targets are no longer
appropriate. Discretion may also be exercised in cases where the
Remuneration Committee believe that the bonus outcome is not
a fair and accurate reflection of business performance.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Long-Term Incentive Plan (LTIP)
Short and long term strategic objectives
Operation
Awards are designed to incentivise the Executive Directors
to maximise total shareholder returns by successfully
delivering the Company’s objectives and to share in the
resulting increase in total shareholder value.
The use of:
› EPS ensures Executive Directors are focused on
ensuring the annual profit performance targeted by
the Annual Bonus Plan flows through to long-term
sustainable EPS growth.
absolute TSR measures the success of the
implementation of the Company’s strategy in delivering
a minimum level of return.
›
Awards are granted annually to Executive Directors in the form of
nil cost options. These will vest at the end of a three year period
subject to:
›
›
the Executive Director’s continued employment at the date of
vesting; and
satisfaction of the performance conditions.
The Remuneration Committee may award dividend equivalents
on awards to the extent that these vest.
A further two year holding period post vesting will apply. Malus
will apply for the period from grant to vesting with clawback
applying for the two year period post vesting.
Opportunity
Maximum award of 200% of base salary. 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 EPS growth (70%) and TSR (30%). The Remuneration
Committee may change the balance of the measures, or use
different measures for subsequent awards, as appropriate.
No material change will be made to the type of performance
conditions without prior shareholder consultation.
The Remuneration Committee retains discretion in exceptional
circumstances to change performance measures and targets
and the weightings attached to performance measures part-way
through a performance period if there is a significant and material
event which causes the Remuneration Committee to believe
the original measures, weightings and targets are no longer
appropriate. Discretion may also be exercised in cases where the
Remuneration Committee believe that the vesting outcome is not
a fair and accurate reflection of business performance.
HMRC Share Incentive Plan
Short and long term strategic objectives
Operation
To encourage wide employee share ownership and thereby
align employees’ interests with shareholders.
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.
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91
GOVERNANCE Governance
Summary of Remuneration Policy
Shareholding Requirement
Short and long term strategic objectives
Operation
To support long term commitment to the Company and
the alignment of Executive Director interests with those of
shareholders.
Opportunity
200% of salary.
The Remuneration Committee has adopted formal shareholding
guidelines that will encourage the Executive Directors to
build up over a five year period and then subsequently hold
a shareholding equivalent to a percentage of base salary.
Adherence to these guidelines is a condition of continued
participation in the equity incentive arrangements.
Performance metrics used, weighting and time period
applicable
None
Non-Executive Director Fees
Short and long term strategic objectives
Operation
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.
The Board as a whole is responsible for setting the remuneration
of the Non-Executive Directors, other than the Chairman whose
remuneration is considered by the Remuneration Committee and
recommended to the Board.
Non-Executive Directors are paid a base fee and additional fees
for acting as chair of committees. The Chair of the Board does
not receive any additional fees for membership of committees.
Fees are typically reviewed every three years based on equivalent
roles in an appropriate comparator group used to review salaries
paid to the Executive Directors. Fees may be reviewed more
regularly than this in exceptional circumstances, such as a
significant increase in the size or complexity of the business.
Non-Executive Directors do not participate in any variable
remuneration or benefits arrangements.
Performance metrics used, weighting and time period
applicable
None
Opportunity
The base fees for Non-Executive Directors are set at a
market rate. In general, the level of fee increase for the
Non-Executive Directors will be set taking account of any
change in responsibility and will take into account the
general rise in salaries across the UK workforce.
The Company will pay reasonable expenses incurred by the
Chairman and Non-Executive Directors.
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Governance
Annual Report on Remuneration
The Remuneration Committee’s Annual Report on remuneration for the year ended 30 September 2020 is set out below. The
Statutory Auditor is required to report on the following information up to and including the Statement of Director’s Shareholdings
requirement and Share Interests.
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 as set out on pages 19 to 23. In the diagram below,
we summarise how the Company’s strategic priorities are aligned with the remuneration policy.
Strategic priority
1
2
3
4
5
6
Investing in talent and technology to extend core capabilities.
Driving an efficient increase in traffic through branded and direct channels.
Personalising our customer experience.
Leveraging increased revenue through direct and differentiated supply.
Inspiring holidaymakers with destination agnostic search technologies.
Reaching an ever-wider audience of beach holidaymakers through product, channel and geographic expansion.
Metric
Scheme
Measurement period
Link with strategy
Profit Before Tax (PBT)
Annual bonus
1 year
Progress towards the following strategic priorities
drive an increase in profit:
1
2
3
4
5
6
Employee Engagement
Score (EES)
Annual bonus
1 year
Employee satisfaction is impacted by the following
strategic priorities:
1
1
Customer Satisfaction/Net
Promoter Score (NPS)
Annual bonus
1 year
Customer satisfaction will be positively impacted
by the following strategic priorities:
Earnings Per Share (EPS)
LTIP scheme
3 years
Absolute Total Shareholder
Return (TSR)
LTIP scheme
3 years
1
3
5
6
Progress towards the following strategic priorities
drive an increase in earnings over the longer term:
1
2
3
4
5
6
Progress towards the following strategic priorities
drive earnings growth, and in turn should provide
returns for shareholders in the long-term through
share price growth and dividends:
1
2
3
4
5
6
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93
GOVERNANCE
Governance
Annual Report on Remuneration
Single total figure of remuneration
Executive and Non-Executive Directors (Audited)
The table below sets out the single total figure of remuneration and breakdown for each Executive and Non-Executive Director in
respect of the 2020 financial year. Comparative figures for the 2019 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), as amended in
2018 and 2019.
Single total figure of remuneration for Executive Directors (audited)
Simon Cooper
Shaun Morton(1)
Paul Meehan(2)
2020
(£’000)
2019
(£’000)
2020
(£’000)
2019
(£’000)
Fixed Pay
Base Salary (3)
Benefits (4)
Pension (5)
Total Fixed Pay
Bonus (6)
Variable Pay
LTIP (7), (8)
Total Variable Pay
2020
(£’000)
86
2
1
89
0
0
0
2019
(£’000)
204
1
1
206
0
99
99
52
0.5
0.5
53
0
0
0
Total Single Figure of Remuneration
89
305
53
-
-
-
-
-
-
-
-
234
310
2
39
275
0
0
0
275
2
45
357
93
185
278
635
Notes:
(1) Shaun Morton joined the Board on 17 July 2020. The 2020 remuneration data reflects pay for the period in which he was a Director of the Company.
(2) Paul Meehan stood down as a Director on 17 July 2020 and the 2020 remuneration data reflects pay for the period in which he was a Director of the Company.
(3) Simon Cooper’s salary was increased to £207,060 with effect from 1 January 2020 however Simon voluntarily sacrificed his salary for 7 months of the year from
March 2020 to September 2020 in light of the COVID-19 pandemic. Consistent with rest of the Board, Paul Meehan voluntarily agreed to a 20% pay cut from April
and this was applicable for 3 months until he announced his resignation in June.
(4) Taxable benefits received were family medical insurance.
(5) Pension benefits in respect of Simon Cooper and Shaun Morton are employer contributions to the Group workplace pension scheme (3% of eligible earnings) in line
with the rest of workforce. Paul Meehan was previously made a payment in lieu of pension contributions equivalent to 15% of his base salary.
(6) Annual bonus payments for performance in the relevant financial year. For FY20, no bonuses have been paid.
(7) The value of the LTIP for 2020 for Simon Cooper and Paul Meehan relates to the 2018 award, which had a three year performance period ending 30 September 2020.
Based on performance over this period, the Remuneration Committee determined that none of the award would vest.
(8)
The value of the LTIP for 2019 relates to the 2017 award, which had a three-year performance period ending 30 September 2019. Based on performance over this
period, the Remuneration Committee determined that 22.9% of the maximum award vested on 26 November 2019, equivalent to 22,776 nil-cost options in the
case of Simon Cooper and 42,705 nil-cost options in the case of Paul Meehan. The value of the award included above is therefore £98,847.84 in the case of Simon
Cooper and £185,339.70 in the case of Paul Meehan, based on the closing share price of 434 pence at the vesting date. In the case of Simon Cooper £56,068.08 of
the £98,847.84 and in the case of Paul Meehan £99,502.65 of the £185,339.70 is attributable to share price appreciation over the period to the vesting date based
on the original share price of 201 pence used to determine the original number of awards on grant.
94
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Single total figure of remuneration for non-executive directors (audited)
Fixed Pay
Fees(3)
Benefits
Pension
Total Fixed Pay
Variable Pay
Bonus
LTIP
Total Variable Pay
Richard Pennycook (1)
David Kelly (2)
Elaine O’Donnell
2020
(£’000)
2019
(£’000)
2020
(£’000)
2019
(£’000)
2020
(£’000)
2019
(£’000)
145
0
0
145
0
0
0
67
0
0
67
0
0
0
57
0
0
57
0
0
0
95
0
0
95
0
0
0
51
0
0
51
0
0
0
57
0
0
57
0
0
0
Total Single Figure of Remuneration
145
67
57
95
51
57
Notes:
(1) The 2019 remuneration data reflects that Richard Pennycook was appointed Non-Executive Chairman of the Board and Chair of the Nomination Committee from 1
April 2019.
(2) The 2019 remuneration data reflects that David Kelly acted as interim Chairman of the Board and interim Chair of the Nomination Committee from 1 December 2018
until 31 March 2019, for which role he received an additional fee of £32,667. David Kelly resumed his role as Senior Independent Director from 1 April 2019 and
continued to Chair the Remuneration Committee following Richard Pennycook’s appointment as Chairman of the Board on 1 April 2019.
(3) All Non-Executive Directors voluntarily agreed to a 20% reduction in their fees for 6 months of the year from April 2020 to September 2020 in light of COVID-19 .
Additional information regarding single figure table (audited)
The Remuneration Committee considers that performance conditions for all incentives are suitably demanding, having regard to the
business strategy, shareholder expectations, the markets in which the Group operates and external advice. To the extent that any
performance condition is not met, the relevant part of the award will lapse. There is no retesting of performance.
Bonus awards (audited)
2020 annual bonus awards and performance targets
For the year ended 30 September 2020, the maximum bonus opportunity for Simon Cooper and the former CFO, Paul Meehan,
would have been 100% of salary.
As noted in the Chairman’s statement, the performance of the Group in H2 has been significantly impacted by COVID-19 and the
Group took swift and affirmative action in response. The Committee recognises the strong contribution of the Executive Directors
and the wider Executive team during FY20, and the actions taken to mitigate the impact of the global pandemic and protect the
Group for the long term. Notwithstanding this, as announced in April 2020, the Committee determined (with the agreement of the
CEO) that it would not be appropriate to pay a bonus to employees, including the Executive Directors for FY20. The annual bonus
plan was therefore cancelled for the year.
Paul Meehan stepped down as CFO on 17 July. As noted above, Paul did not receive any bonus in respect of FY20. Please see
page 99 for further details of Paul’s leaving arrangements.
Shaun Morton joined the Board on 17 July 2020. At such point, it had already been agreed that no bonuses would be awarded
throughout the Group, therefore he was not eligible for a bonus in respect of the period from 17 July 2020 to 30 September 2020.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
95
GOVERNANCE Governance
Annual Report on Remuneration
Long term incentives awarded in FY18 with performance period ending in 2020
Simon Cooper and Paul Meehan were both granted awards on 20 December 2017 with a three year performance period
commencing on 1 October 2017 and ending on 30 September 2020. The awards were due to vest in December 2020.
Performance under the awards was based on EPS (70% weighting) and annualised TSR (30% weighting), as set out below.
The EPS condition applying to 70% of the awards is provided in the table below:
EPS for year ending 30 September 2020
Less than 29.25p
29.25p
35.75p or above
Vesting
0%
25%
100%
Between 29.25p and 35.75p
Straight line vesting between 25% and 100%
Actual EPS: 0.4p
0%
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 2020
Less than 8%
8%
15% or above
Between 8% and 15%
Actual TSR: -13.4%
Vesting
0%
25%
100%
Straight line vesting between 25% and 100%
0%
Based on the above performance outcomes, none of the awards vested. No discretion was applied to the final vesting outcome
shown above.
96
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Long term incentives awarded in 2020 (audited)
The table below sets out the details of the Long-Term Incentive Plan awards granted in the 2020 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
Paul
Meehan
LTIP –
nil cost
option
LTIP –
nil cost
option
100% of
salary
200% of
salary
£204
53,487
Nil
25%
£620
162,559
Nil
25%
30 December
2022
30 December
2022
EPS (70%)
Absolute TSR
(30%)
EPS (70%)
Absolute TSR
(30%)
The awards were granted on 3 December 2019. The number of shares awarded is calculated using the closing share price on 30
September 2019, which was £3.814.
The EPS condition applying to 70% of the awards is provided in the table below:
Performance tier
Cumulative EPS over the three financial years
FY20, FY21 and FY22(1)
% of EPS element capable of vesting
Below threshold
Less than 77.7 pence
Threshold
Maximum
77.7 pence
94.9 pence or above
0%
25%
100%
Between threshold and maximum
Between 77.7 and 94.9 pence
25% - 100% pro-rata on a straight line
basis
(1) Cumulative EPS means the sum of the actual EPS for FY20, FY21 and FY22.
The Absolute TSR condition applying to 30% of the awards is provided in the table below:
Performance tier
Below threshold
Threshold
Maximum
Annualised TSR over the three year
performance period
Less than 8%
8%
15% or above
Vesting
0%
25%
100%
Between threshold and maximum
Between 8% and 15%
25% - 100% pro-rata on a straight line
basis
Absolute TSR is averaged over a one month period prior to the beginning and end of the performance period.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
97
GOVERNANCE Governance
Annual Report on Remuneration
Shaun Morton was granted an award under the LTIP scheme during the year under the review, albeit this award was granted whilst
Shaun was acting as Director of Finance and prior to him becoming an Executive Director on 17 July 2020:
Director
LTIP
Value of
award
Face value of award
(£’000)
Number of shares
awarded
Exercise Price
(£)
Performance
conditions
Shaun Morton
LTIP – nil cost
option
50% of
salary
£67.5
17,698
Nil
None - subject
to continued
employment
The award was granted on 3 December 2019. The number of shares awarded is calculated using the closing share price on 30
September 2019, which was £3.814.
Payments for loss of office (audited)
Paul Meehan ceased to be a Director with effect from 17 July 2020 but was placed on garden leave until 29 December 2020
(Termination Date).
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ą
ą
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Paul was entitled, under his service agreement, to receive his salary and contractual benefits up to the Termination Date.
The Committee agreed to make a lump sum payment to Paul in respect of his basic salary accruing from 17 July 2020 to
the Termination Date, equal to £142,802.69, together with a sum in lieu of pension contributions equal to £23,598.75. Paul
was also paid a sum in lieu of 5.5 days’ accrued but untaken holiday equal to £6,656.06. Paul will continue to receive other
contractual benefits (such as family medical insurance) until the Termination Date (equal to £1,309.55).
The Committee determined that Paul was a good leaver in relation to outstanding LTIP awards. In accordance with the rules
of the LTIP, the outstanding awards will vest on their normal vesting dates, after a pro rata reduction to reflect the period of
time served during the applicable vesting period. The awards will only vest to the extent the relevant performance conditions
(measured over the full performance period) are achieved. All outstanding awards will remain subject to malus and clawback.
As set out in more detail above, in relation to the LTIP award granted to Paul in FY18, which had a three-year performance
period ending 30 September 2020, based on performance over this period, the Remuneration Committee determined that
none of the award would vest.
Paul received no other payments by way of compensation for loss of office.
The Company has a policy that post-cessation of employment, Directors should continue to be bound by any holding period
for any share awards they have received, as if they were still in employment. Paul will abide by this policy.
There were no other payments to past Directors or payments for loss of office to Directors during FY20.
98
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Statement of directors’ shareholdings and share interests (audited)
Director
Share plan awards subject
to performance condition(1)
Share plan awards subject
to continued employment
Share plan interests
vested but unexercised
Shares held
outright(2)
Simon Cooper
Shaun Morton
145,015
45,000(4)
Paul Meehan(7)
382,011(8)
-
88,881(5)
-
50,298(3)
15,763(6)
42,705(9)
11,719,300
0
26,105
Between 30 September and the date of this report (10 December 2020), Simon Cooper and Shaun Morton’s shareholdings and
share interests remained unchanged.
Notes:
(1) Including the 2018 LTIP award for which the performance period ended on 30 September 2020. Although the performance outcome was nil, the award did not formally
lapse until 8 December 2020.
(2) This information includes holdings of any connected persons.
(3) Simon Cooper’s 2016 LTIP award vested on 27 November 2018 and his 2017 award vested on 26 November 2019. Performance in relation to both awards was
based on EPS (70% weighting and annualised TSR (30% weighting) over the three-year period to 30 September 2018 and 30 September 2019 respectively. 30%
of the 2016 award vested, equivalent to 27,522 nil-cost options and 22.9% of the 2017 award vested, equivalent to 22,776 nil-cost options.
(4) Shaun has not been granted any awards to date in his capacity as an Executive Director (however it is intended that he will be granted awards during FY21 in line
with the Remuneration Policy – see page 91). Shaun was granted LTIP awards during his tenure as Director of Finance. In this respect, Shaun has been granted a total
of 45,000 share plan awards which are subject to performance conditions.
(5) As per above, Shaun has not been granted any share plan awards in his capacity as an Executive Director. However during Shaun’s tenure as Director of Finance, he
was granted awards over 88,881 shares which are subject to continued employment. These awards are due to vest between September 2021 and September 2022.
(6) As per above, Shaun has not been granted any share plan awards in his capacity as an Executive Director. However during Shaun’s tenure as Director of Finance, he
was granted awards over 15,763 shares which vested on 30 September 2020 but have not yet been exercised.
(7) Figures for Paul Meehan are as at 17 July 2020, the date he stepped down as CFO and from the Board
(8) These awards will be pro-rated to reflect the period of time served during the applicable vesting period. For Paul’s 2018 award (for which the performance period
ended on 30 September 2020) the maximum number of shares under award was 94,578, however none of the award vested. Paul’s 2019 award is over a maximum
number of 124,874 shares and Paul’s 2020 award is over a maximum number of 162,559. Performance in relation to both awards is based on EPS (70% weighting
and annualised TSR (30% weighting) over the three-year period to 30 September 2021 and 30 September 2022 respectively.
(9) Paul Meehan’s 2017 LTIP award vested on 26 November 2019. Performance was based on EPS (70% weighting and annualised TSR (30% weighting) over the
three-year period to 30 September 2019. 22.9% of the 2017 award vested, equivalent to 42,705 nil-cost options.
The table below sets out details of the share options exercised by Executive Directors during the year:
Director
Share plan interests exercised during the year to 30 September 2020
Number of options exercised
Share price on date of exercise
Simon Cooper
Shaun Morton
Paul Meehan
-
-
-
N/A
N/A
N/A
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
99
GOVERNANCE Governance
Annual Report on Remuneration
The table below sets out the current shareholding and includes the shareholding requirement for the Executive Directors:
Director
Shareholding
requirement
Shares held for purpose of shareholding
requirement(1)
Number of shares
% of salary(2)
Shareholding requirement
met?
Simon Cooper
200% of salary
11,745,957
13,841%
Shaun Morton(3)
200% of salary
Paul Meehan(4)
200% of salary
55,461
48,738
54%
38%
Yes
No
No
Notes:
(1) Shares included for the purposes of measuring the shareholding requirement include shares owned outright (including those by connected persons), vested but
unexercised share options and unvested shares subject to continued employment only (on a net of tax basis).
(2) The share price of 244 pence as at 30 September 2020 (the last business day of the financial year ending 30 September 2020) has been taken for the purpose of
calculating the current shareholding as a percentage of salary.
(3) Shaun Morton joined the Company as CFO on 17 July 2020 and has five years from this date to build up his shareholding requirement.
(4) Data for Paul Meehan is correct as at 17 July 2020 which is the date he stepped down as a CFO and a director. The Company has introduced a policy that that post-
cessation of employment, Directors should continue to be bound by any holding period for any share awards they have received, as if they were still in employment
and Paul will abide by this policy
Non-Executive Directors are not subject to a shareholding requirement. Details of their interests in shares are set out below:
Director
Shares held 30 September 2020
Richard Pennycook
David Kelly
Elaine O'Donnell
45,970
7,228
8,417
Between 30 September and 10 December 2020, the Non-Executive Director’s interest in shares remained unchanged.
100
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
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 both the FTSE 250 and
FTSE Small Cap indices. These indices were chosen as they reflect an index to which the Group has been a constituent since the
IPO in 2015. 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. 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 2020.
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On the Beach
FTSE Small Cap
FTSE 250
Chief Executive Officer historical remuneration
The table below sets out the total remuneration delivered to the Chief Executive Officer since Admission:
Chief Executive Officer
2020
2019
2018
2017
2016
2015
Total Single Figure (£000s)
89
305
316
201
239
131
Annual bonus payment level achieved (% of
maximum opportunity)
LTIP vesting level achieved (% of maximum
opportunity)
-
-
-
-
-
27.8%
-
22.9%
30%
N/A
N/A
N/A
It should be noted that the Company only introduced the LTIP on admission to the London Stock Exchange, with the first grant
made in May 2016.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
101
GOVERNANCE
Governance
Annual Report on Remuneration
Change in Directors’ remuneration compared with employees
The following table sets out the percentage change in the salary/fees, benefits and bonus for each Director from 2019 to 2020
compared with the average percentage change for employees’.
Executive Directors
Simon Cooper
Paul Meehan
Shaun Morton(1)
Non-Executive Directors
Richard Pennycook
David Kelly
Elaine O'Donnell
Wider workforce
Average employee of the Company
Average employee – Group wide(4)
Notes:
Salary/fees
Benefits
Bonus
(58%)
(25%)
N/A
(10%)(2)
(40%)(3)
(10%)
N/A
3.6%(5)
-
-
N/A
-
-
-
N/A
-
-
(100%)
N/A
-
-
-
N/A
(100%)
(1) Shaun Morton was appointed to the Board on 17 July 2020, therefore there is no FY19 comparison.
(2) Richard Pennycook’s fees for FY19 have been annualised for the purposes of calculating the percentage change (Richard was appointed part way through FY19).
(3) David Kelly received additional fees of £32,667 in FY19 in relation to the period where he acted as interim Chair of the Board and interim Chair of the Nomination
Committee, which is the reason for the different percentage change in comparison to the other Non-Executive Directors.
(4) As the only employees of the Company are its Directors, we have presented data based on average remuneration for employees across the Group.
(5) Average employee percentage change is based on earnings of full time employees that were employed throughout the current and comparison period.
The employee engagement committee and other engagement initiatives continue to meet and have a tangible input into all matters
affecting the company, including remuneration and benefits. Further details on these initiatives can be found on pages 54 to 56.
Relative importance of the spend on pay
The table below sets out the relative importance of spend on pay in the 2019 and 2020 financial years compared with other
disbursements. All figures provided are taken from the relevant Company Accounts.
Disbursements from profit in
2020 financial year
Disbursements from profit in
2019 financial year
Profit distributed by way of
dividend
Overall spend on pay including
Executive Directors
(£m)
2.6
19.0
(£m)
4.3
19.9
% change
(40%)
(5%)
102
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
CEO pay ratio reporting
In accordance with the Companies (Miscellaneous Reporting) Regulations 2018, we have set out below the ratio of CEO pay (based
on single total figure of remuneration) to that of UK employees for 2020. The calculation has been performed in line with ‘Option A’
and is based on the total single figure of remuneration methodology.
Year
Methodology
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
2019/20
Option A
5:1
3:1
2:1
We used ‘Option A’ as we believe this is the most statistically robust method and is in line with the general preference of institutional
shareholders. All figures are calculated using pay and benefits data for the financial year to 30 September 2020 for individuals
employed as at the financial year end. The pay ratio has been calculated using the actual pay and benefits received in FY20. No
elements of pay were omitted. Full-time equivalent figures were determined by up-rating relevant pay elements based on the
average proportion of full-time hours the employee worked during the year and (for joiners during the year) the proportion of the year
they were employed. Employees who left during the year were not included in the calculation. The CEO’s single figure remuneration
reflects his voluntary waiver from March to September 2020 and each employee’s total pay and benefits was calculated taking into
account any reduced level of pay during the year (for example during a period of voluntary salary reduction, or whilst furloughed
under the Coronavirus Government Job Retention Scheme, although furloughed employees earning less than £25,000 received full
pay during the first three months of the scheme.
The table below sets out the salary, and total pay and benefits, for each of the 3 quartile employees (P25, P50 and P75)
25th percentile (P25)
Median (P50)
75th percentile (P75)
Salary
Total pay and benefits
£19,000
£19,568
£25,712
£26,382
£36,069
£37,114
The Committee believes that the median ratio is consistent with the pay, reward and progression policies for the Group’s employees.
Base salaries of all employees, including our Executive Directors, are set with reference to a range of factors including market
practice, experience and performance in role. In reviewing the ratios the Committee also noted that the CEO’s remuneration package
is weighted more heavily towards variable pay (including the bonus and LTIP) than the wider workforce due to the nature of the role,
and this means the ratio is likely to fluctuate depending on the performance of the business and associated outcomes of incentive
plans in each year.
Given the material reduction in CEO pay this financial year, the pay ratio is expected to increase next year. If Simon Cooper had not
taken any voluntary reductions to salary this financial year, the median pay ratio would have been 8.1.
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 was
subject to a shareholder vote at the AGM on 7 February 2019 and the Directors’ Annual Report on Remuneration was subject to a
shareholder vote at the AGM on 6 February 2020, the results of which were as follows:
Resolution
Ordinary Resolution to approve the Directors’ Remuneration Policy (2019
AGM)
Ordinary Resolution to approve the directors’ remuneration report for the
year ended 30 September 2019 (2020 AGM)
For
Against
Withheld
76,896,941
17,107,090
274,790
(81.80%)
(18.20%)
89,498,760
17,298,452
1,978,770
(83.80%)
(16.20%)
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
103
GOVERNANCE Governance
Annual Report on Remuneration
Ahead of the publication of last year’s Annual Report, Richard Pennycook as Chairman and David Kelly as chair of the
Remuneration Committee led an engagement process to discuss, inter alia, the remuneration arrangements for the year ended
30 September 2019. Whilst the Company’s major shareholders were supportive of such arrangements and indeed there was no
significant minority vote against the resolution to approve the Directors’ Remuneration Report at the 2020 AGM, the Committee is
however mindful of comments received from investors in relation to the payment of Paul Meehan’s bonus, namely the fact that all
of Paul’s bonus was paid in cash. The Committee made the decision to not defer any of Paul’s bonus award into shares in view of
the low-level pay-out of the bonus (30% of maximum opportunity) and the fact that no bonus has been paid out since FY16. The
Committee however has reflected on this feedback and had any bonuses been payable this year, then a proportion of such bonus
would have been deferred into shares.
Implementation of remuneration policy in financial year FY21
The Remuneration Committee proposes to implement the policy for 2021 as set out below. In implementing the policy, the
Committee will continue to take into account factors such as remuneration packages available with comparable companies, the
Company’s overall performance, internal relativities, achievement of corporate objectives, individual performance and experience,
general market and wider economic trends.
Salary
The Remuneration Committee has determined that no salary increases will be applied for Simon Cooper and Shaun Morton for
FY21 due to current trading performance in light of COVID-19.
Name
Simon Cooper
Shaun Morton
NED fees
Salary (£)
Percentage Change
2021
2020
£207,060
£207,060
£250,000
£250,000
-
-
The Non-Executive Directors’ fees were reviewed in September 2018. Non-Executive Director fees are typically reviewed every
three years other than in exceptional circumstances. No change to the fees will be made in FY21.
Position
Chairman Fee
Base Fee
Additional fees are paid for:
Senior Independent Director
Chair of Audit Committee
Chair of Remuneration Committee
Fee
£161,000
£48,000
£6,000
£9,000
£9,000
No additional fee is paid to the Chairman as the Chair of the Nomination Committee
Remuneration for employees below Board level
Remuneration packages for all Group employees may comprise both fixed and variable elements. Generally, the more senior the
individual, the greater the variable pay offer as a proportion of overall pay due to the ability of senior managers to impact more
directly upon Company performance. As well as assessing the remuneration packages of the Executive Directors, the Committee
reviews the remuneration of the senior management team and is kept informed of remuneration developments across the Group
including the salary increases and employee benefits of the wider employee population.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
The Committee does not consult directly with colleagues when determining the Remuneration Policy for Executive Directors.
However, awards under the LTIP scheme are operated for other colleagues to ensure alignment of objectives across the Group and
pension entitlement for the current Executive Directors is in line with the rest of the workforce.
We are currently conducting a comprehensive review of our reward strategy and total remuneration structure across the Group to
ensure it is aligned with culture, values, strategy, and has consistency across banding structure. This work, which is being overseen
by the Committee started towards the end of FY20 and will continue over FY21.
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.
In line with the current Policy, 70% of the annual bonus for FY21 will be based on PBT performance, with the remaining 30%
based on performance against non-financial targets aligned with the company’s strategy. For FY21, the non-financial metrics will
again be based on Net Promoter Score and Employee Engagement Score
The Remuneration Committee is of the opinion that given the commercial sensitivity arising in relation to the detailed performance
targets used for the annual bonus, disclosing precise targets for the bonus plan in advance would not be in shareholder interests.
Actual targets will be published following the end of the performance period in line with established practice so shareholders can
fully assess the basis for any pay-outs under the annual bonus.
To ensure that the bonus opportunity results in shareholder alignment and provides greater retention value, up to 50 per cent of any
bonus payment will be deferred into nominal cost share options for two years. Malus and clawback provisions will apply.
LTIP award
It is intended that a grant under the LTIP will be made during FY21. The LTIP award for Simon Cooper will be 100% of salary
(below the 200% of salary limit under the Policy), consistent with FY20, to reflect his material shareholding. The LTIP award for
Shaun Morton will be 200% of salary, consistent with the previous CFO, to help build his shareholding and align with shareholder
interests. The performance conditions will be based 70% on EPS performance and 30% on absolute TSR measured over a three
year period. We are currently finalising the performance targets for the award, which will be disclosed in the RNS announcement
accompanying the grant, as well as in next year’s Directors’ Remuneration Report.
The Committee believes that these two measures are transparent, easy to understand, easy to track and communicate, cost
effective to measure and fundamentally aligned to the Group’s strategic goals.
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 in line with the Code
and are available on the Company’s website, www.onthebeachgroupplc.com.
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 3 times during FY20 and member attendance is set out
below:
David Kelly (Chair)
Elaine O’Donnell
Richard Pennycook
Member from
Meetings attended
August 2015
July 2018
April 2019
3/3
3/3
3/3
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
105
GOVERNANCE Governance
Annual Report on Remuneration
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.
The Remuneration Committee is satisfied that the advice received was objective and independent and that all individuals who
provided remuneration advice to the Committee have no connections with the Company or its Directors that may impair their
independence. 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 £47,950 for their advice during the year to 30 September 2020.
On behalf of the Board
David Kelly
Chair of the Remuneration Committee
10 December 2020
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Governance
Other Statutory and Regulatory Disclosures
Statutory Information
Strategic Report
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
Page reference
All sections under the heading “Strategic Report” on page
5 of this document comprise the Strategic Report. The
Strategic Report 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 32 to 42.
Employee engagement
page 56
Management Report
Employment of
disabled persons
page 56
Future developments of
the business
pages 19-23, 43
Engagement with
suppliers, customers
and others
Stakeholder
engagement and s.172
statement
pages 46-53
pages 46-53
Viability statement
pages 43-44
Directors’ interests
pages 64-65, 73
Directors
Responsibilities
Statement
Greenhouse gas
emissions
Risk management
page 121
pages 58-59
Strategic Report (pages
32 to 42) and note 24 to
the consolidated financial
statements
Human rights and anti-
bribery and corruption
Diversity
page 60
page 55
Non-financial key
performance indicators
pages 25-26
Directors’ Report
All sections under the heading “Governance” on page 62
of this document comprise the Directors’ Report for On
the Beach Group plc (company number 09736592) (the
“Company”) and its subsidiaries (together the “Group”) for the
financial year to 30 September 2020.
This Directors’ Report (pages 62 to 121) together with the
Strategic Report (pages 6 to 61) form the Management
Report for the purposes of DTR 4.1.8R.
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 66 to 74. The Corporate
Governance Statement forms part of this Directors’ Report
and is incorporated into it by reference.
Directors
The names of the directors who held office during the year
are set out on pages 64 and 65. Biographical details of all the
directors serving at the date of this annual report are shown
on pages 64 and 65. Subject to law and the Company’s
Articles of Association, the Directors may exercise all of the
powers of the Company and may delegate their power and
discretion to Committees.
Appointment and replacement of Directors
The appointment and replacement of directors is governed
by the Company’s Articles of Association, the UK Corporate
Governance Code, the Companies Act 2006 and related
legislation. The directors may from time to time appoint one
or more directors. The Board may appoint any person to be a
director (so long as the number of directors does not exceed
the limit prescribed in the Articles). Under the Articles, any
such director shall hold office only until the next AGM and
shall then be eligible for election. The Articles also require that
at each AGM any director who held office at the time of the
two preceding AGMs and who did not retire at either of them
must retire, and any director who has been in office, other
than a director holding an executive position, for a continuous
period of nine years or more must retire from office. However,
in accordance with previous years and in accordance with best
practice, all Directors will submit themselves for re-election at
the AGM each year. Any director who retires at an AGM may
offer himself for re-appointment by the shareholders.
Shaun Morton will stand for election and all other Directors
will retire and stand for re-election at the 2021 AGM.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
107
GOVERNANCE Governance
Other Statutory and Regulatory Disclosures
The Board was very conscious of the need to respect pre-
emption as far as possible, and this was a key area of focus
with advisers and we ensured that the marketing process
and also the allocation policy adopted by the brokers were
designed in such a way as to respect pre-emption. Prior to
launching the equity raise, we engaged with shareholders
who had been wall crossed via our brokers and through that
process, we understood our shareholders’ views on the equity
raise and understood whether it was going to be something
that our shareholders were going to be supportive of. The
placing was over-subscribed, with no discount applied in
respect of the placing price.
Authority to purchase own shares
The Company was authorised by shareholders at the last
AGM to purchase, in the market, up to 13,121,373 shares
(equivalent to 10% of the Company’s ordinary share capital
as at 20 December 2019). No shares were bought back
under this authority for the year ended 30 September 2020.
This authority will expire at the conclusion of the 2021 AGM,
at which a resolution will be proposed for its renewal. 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
and the On the Beach Long Term Incentive Plan, where share
interests of a participant in such schemes can be exercised
by the personal representatives of a deceased participant in
accordance with the Scheme rules.
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
2020 comprised 157,362,037 ordinary shares of £0.01 each.
Further information regarding the Company’s issued share
capital can be found on page 153 of the financial statements.
Details of the movements in issued share capital during
the year are provided in note 22 to the Group’s financial
statements contained on page 153. All the information
detailed in note 22 on page 153 forms part of this Directors’
Report and is incorporated into it by reference.
At the Annual General Meeting of the Company held on 6
February 2020 the Directors were granted authority from
shareholders to allot shares in the capital of the Company up
to a maximum nominal amount of £874,758.17 (87,475,817
shares of £0.01 each), half of which amount may solely be
used in connection with a pre-emptive rights issue. The
Directors will seek to renew this authority at the 2021 AGM.
Allotment of equity securities for cash
During the year under review, the Company completed a non-
pre-emptive placing, pursuant to which it issued an aggregate
of 26,143,500 new ordinary shares of £0.01 each to certain
institutional and qualified professional investors at a placing
price of 257.5p per ordinary share. The aggregate nominal
value of ordinary shares issued pursuant to the placing was
£261,435. The aggregate gross consideration received by
the Company in respect of the placing was £67.3m. The
closing price of an ordinary share on 21 May 2020 (being
the business day by which the placing price was fixed) was
257.5p.
In accordance with the Pre-Emption Group’s Statement of
Principles, the Directors confirm the net proceeds raised
were c.£65m and the proceeds will provide the Group
with greater resilience, flexibility and firepower through the
current downturn to enable the Group to exit this extended
disruptive period in a strong position and to ensure the Group
continues to progress towards its long-term vision to become
Europe’s leading online retailer of beach holidays. No shares
were issued for cash in the three year period preceding the
placing (other than in respect of shares issued pursuant to
the Company’s employee share schemes). Prior to preparing
for the equity raise, the Board carefully considered all options,
including whether to do a full rights issue so as to respect pre-
emption. Unfortunately, given the long timelines involved and
the expense and complexity of the process, the Board decided
it was in the best interests of the Company to proceed with
the 19.9% cash box placing equity raise.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Voting rights
Employee share schemes
The Company has three employee share schemes in place:
ą
ą
ą
A HMRC-approved Share Incentive Plan (“SIP”) to
encourage wide employee share ownership and thereby
align employees’ interests with shareholders;
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. The
Company also makes grants of nil cost share options
under the LTIP plan in the form of restricted stock
awards to key employees for retention purposes, and
these are accompanied by a CSOP market value option
for tax efficiency purposes; and
A Save As You Earn Plan (“SAYE”) which is an all
employee savings related share option plan. Although
the SAYE was approved at the 2018 AGM, it has not
yet been rolled out to employees and there are no
immediate plans to do so.
Further details are provided in the Directors’ Remuneration
Report on pages 84 to 106.
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 poll and 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.
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.
As the Group holds Air Travel Organiser’s Licences, the ATOL
Standard Terms will apply. Those terms include provisions on
change of control.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
109
GOVERNANCE Governance
Other Statutory and Regulatory Disclosures
Annual General Meeting
The Annual General Meeting will be held at 11 am on 5 February 2021 at the Company’s headquarters at Aeroworks, 5 Adair
Street, Manchester, M1 2NQ. In light of the ongoing COVID-19 pandemic and in anticipation of social distancing measures
remaining in force, the AGM is currently intended to be held as a closed meeting. Directors who are also shareholders will attend
the AGM in person to ensure that a valid meeting is held, but regrettably other shareholders will not be permitted to attend in
person. However, should guidance issued by the UK Government change in advance of the meeting, then the Board will look
to hold an open meeting if this can be done safely and we will update shareholders accordingly if that is the case. In the event
that the AGM does run as a closed meeting, shareholders will be invited to submit in advance any questions on either the formal
business of the meeting or matters they would have asked at the Company’s usual post-meeting Q&A. Shareholders will also be
encouraged to appoint the Chairman of the meeting as their proxy and give their instructions on how they wish the Chairman to
vote on the proposed resolutions.
Notifiable Changes to Substantial Shareholdings
During the year the Company has been notified, in accordance with Chapter 5 of the Financial Conduct Authority’s Disclosure
Guidance and Transparency Rules (DTR5) of the following increases or decreases in significant interests in the issued ordinary
share capital of the Company. Such notifications are published as an RNS and are also available on the Company’s Website
(https://www.onthebeachgroupplc.com/investor-centre/rns)
The figures below represent the number of shares and how that translates to a percentage shareholding in the Company as at
the date on which the change was notified. The holdings may have changed since notification but any further notification is not
required until the next applicable threshold in DTR5 is crossed.
Please note there will be other shareholders with substantial shareholdings who are not listed below because their shareholdings
has not increased above or decreased below a threshold during the year. For example, as at the date of this report, Simon Cooper
and his PCAs continue to hold 11,719,300 shares (7.45% of the issued share capital).
Name of Shareholder
Number of shares
Nature of holding as per
disclosure
Date of Notification
AXA Investment Managers
6,925,219
5.28%
18 October 2019
M&G Plc
11,082,598
8.45%
22 October 2019
Prudential plc group of companies*
0
0
22 October 2019
Royal London Asset Management
6,541,066
4.99%
23 October 2019
Mawer Investment Management
13,139,043
10.01%
24 February 2020
The Independent Investment trust plc
-
Below 3%
24 March 2020
Armor Advisors
3,755,565
2.9%
1 April 2020
Mawer Investment Manager Ltd.
18,318,261
11.64%
25 May 2020
Hawksford Trustees Jersey Ltd (as trustees
of the SC 2014 Settlement)
9,684,999
6.15%
28 May 2020
Mawer Investment Management
18,896,038
12.01%
27 November 2020
* The notifications from M&G and Prudential on 22 October 2019 relate to their demerger
Between 30 September 2020 and the date of this report no further interests have been notified to the Company in accordance
with DTR5.
A list of our substantial shareholders is available on our corporate website.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Transactions with related parties
There were no related party transactions during the year. See note 27 to the consolidated financial statements.
Events post year end
There are no events post year end to report.
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. Such indemnities were in force throughout the period under review and are in force as at the date of this
report.
Save for the indemnities disclosed in this report, there are no other qualifying third party indemnity provisions in force.
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.
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 154 to 159 in note 24 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 123 to 165.
The Group has adopted a progressive dividend policy. Whilst the Group operates a highly cash generative business model, a
significant majority of profits are reinvested in the business to support further growth.
Notwithstanding the foregoing as announced on 8 April 2020, no interim dividend was declared during FY20. In view of the
exceptional circumstances and the likelihood that disruption will continue into 2021, the Board is not recommending a final
dividend in respect of FY20.
Information to be disclosed under Listing Rule 9.8.4R
Disclosures required by the FCA’s Listing Rule 9.8.4R can be found on the following pages:
Information required
Subsection of LR9.8.4R
Page reference
Details of long-term incentive schemes
Waiver of emoluments by a director
Allotments of equity securities for cash
(4)
(5)
(7)
page 97
page 95
page 108
Save as set out above, there is no other information to disclose in relation to the provisions of Listing Rule 9.8.4R.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
111
GOVERNANCE Governance
Other Statutory and Regulatory Disclosures
Auditor
The auditor, Ernst & Young LLP, is willing to continue in office and a resolution for its re-appointment as auditor of the Company
will be submitted to the AGM.
Disclosure of information to the 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 10 December 2020.
Approved by the board and signed on its behalf:
K Vickerstaff
Company Secretary
10 December 2020
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Governance
Statutory Auditor’s Report to the Members of On the
Beach Group plc
Opinion
In our opinion:
› On the Beach Group plc’s group financial statements and parent company financial statements (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 2020 and of the group’s loss
for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
›
›
Accounting Practice; 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.
We have audited the financial statements of On the Beach Group plc which comprise:
Group
Parent company
Consolidated Income Statement and Statement of Comprehensive
Income for the year then ended
Company Balance sheet as at 30 September 2020
Consolidated balance sheet as at 30 September 2020
Consolidated Statement of Cash Flows for the year then ended
Company Statement of Changes in Equity for the year
then ended
Related notes 1 to 8 to the financial statements
including a summary of significant accounting policies
Consolidated Statement of Changes in Equity for the year then ended
Related notes 1 to 27 to the financial statements,
including a summary of significant accounting policies
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that
has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting
Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom
Generally Accepted Accounting Practice).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report below. We are independent of the group and parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs (UK) require us to
report to you whether we have anything material to add or draw attention to:
›
managed or mitigated;
›
the disclosures in the annual report set out on pages 32 to 42 that describe the principal risks and explain how they are being
›
the directors’ confirmation set out on page 32 in the annual report that they have carried out a robust assessment of the principal
risks facing the entity, including those that would threaten its business model, future performance, solvency or liquidity;
the directors’ statement set out on page 44 in the financial statements about whether they considered it appropriate to adopt the
going concern basis of accounting in preparing them, and their identification of any material uncertainties to the entity’s ability to
continue to do so over a period of at least twelve months from the date of approval of the financial statements
› whether the directors’ statement in relation to going concern required under the Listing Rules in accordance with Listing Rule
9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
›
the directors’ explanation set out on page 43 in the annual report as to how they have assessed the prospects of the entity, over
what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have
a reasonable expectation that the entity will be able to continue in operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
113
GOVERNANCE
Governance
Statutory Auditor’s Report to the Members of On the
Beach Group plc
Overview of our audit approach
Key audit matters
› Revenue recognition
›
Impact of COVID-19
› Goodwill, intangible and tangible assets carrying value
Audit scope
› We performed an audit of the complete financial information of 12 components.
› The components where we performed full audit procedures accounted for 100% of Loss
before tax and 100% Normalised profit before tax adjusted for the impact of exceptional
items, 100% of Revenue and 100% of Total assets.
Materiality
› Overall group materiality of £897,000 which represents 5% of Normalised
profit before tax adjusted for the impact of exceptional items.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Key observations
communicated to the
Audit Committee
Our journal entry and data
analytics testing
procedures did not
identify any instances of
management override in
the recognition of revenue
or evidence of material
misstatements across the
Group in the financial year.
Based on the audit
procedures performed we
did not identify evidence
of material misstatements
in the revenue recognised
in the current year.
Risk
Our response to the risk
Revenue Recognition (£33.7m of risk,
PY comparative £140.4m)
We have performed the following procedures:
Identified and assessed the key controls over revenue
recognition for all trading entities within the Group.
Refer to the Audit Committee Report
(page 78); Accounting policies (page
132); and Note 3 of the Consolidated
Financial Statements (page 137)
Given the high volume, low
value nature of the revenue
transactions in the business, we have
determined the revenue recognition risk
to be related to management override
through journals made to revenue
outside of the standard booking process
throughout the year.
For the On the Beach ‘OTB’,
International ‘Int’l’ and Classic
Package ‘CPH’ segments the
revenue is reported on an agent basis
(net) and the risk is
therefore also applicable to
gross costs.
For the Classic segment,
revenue is reported on a
principal basis (gross) and the
risk therefore only applies to
revenue.
Tested all material manual journal entries impacting on
revenue which fall outside of the standard booking
process journals for evidence of management override.
Performed monthly analytical review on revenue
and gross margin for each trading entity comparing
actual results with prior year and investigating
and corroborating unusual peaks and troughs in
movements.
Adopted a data analytics approach to corroborate our
expectation of the relationship between gross revenue,
trade receivables and cash receipts (all segments)
and gross costs, trade payables and cash payments
(OTB, Int’l & CPH) in relation to the standard booking
process. Any exceptions to our expectation above our
testing threshold have been fully investigated and
substantively tested.
We performed full scope audit procedures which
covered 100% of revenue.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Key observations
communicated to the
Audit Committee
Based on our procedures
performed we are
satisfied with, the
completeness and
accuracy of the
cancellations recorded in
the year and the
cancellation provision
recognised at yearend,
the recognition of the
receivable relating
to airline refunds /
chargeback claims and
the recoverability of
supplier receivables,
including airline and
hotelier receivables
We are satisfied that the
COVID-19 related
items are disclosed
appropriately in the
financial statements and
that the use of APMs
throughout the Annual
Report and Accounts is
appropriate.
Risk
Our response to the risk
Impact of COVID-19 (41.7m
of risk)
Refer to the Audit Committee
Report (page 78); Accounting
policies (page 137); and Note 3
of the Consolidated
Financial Statements (page
138)
We have identified a significant
risk during our year-end audit
in relation to the accounting
implications following the
COVID-19 pandemic and the
impact on the year end results.
The COVID-19 pandemic has
significantly affected the
trading conditions of the Group
and multiple account balances.
We consider the risk to be
focused around the following
areas:
ą Completeness and
accuracy of both the
cancellations recorded
in the year and the
cancellation provision
recognised in relation to
estimated levels of future
cancellations expected
for bookings made prior
to 30 September 2020
materialise;
ą Appropriateness of the
recognition of the
receivable relating to
airline refunds/chargeback
claims;
ą
ą
Recoverability of
supplier receivables
including airline receivable
and hotelier prepayments;
Presentation and
disclosure of these
COVID-19 related
balances as exceptional
items and the use of
alternative performance
measures
We have performed the following procedures:
Identified and assessed the key controls over the appropriateness
of the exceptional item.
Cancellations recorded in year
Independently reperformed management’s calculation of the
cancellations processed in the year using a data analytics
approach to challenge the completeness and accuracy of the
associated lost margin.
Cancellation provision
Critically challenged the appropriateness of the cancellation
rates adopted by management with reference to external data
sources including projected travel industry recovery and actual
cancellation rates since March 2020
Independently recalculated the cancellation provision by using
a data analytics approach to apply management’s cancellation
assumptions to the open bookings at 30 September 2020
Selected a sample of bookings and agreed sales value, flight cost,
hotel cost and transfer cost to third party evidence to support the
integrity of the datasets used in our analytics techniques
Recognition of airline receivable
Assessed whether reimbursement for cancelled flights is virtually
certain based on the contractual terms with both the airlines
and chargeback companies, and therefore whether the airline
receivable should be recognised.
Recoverability of supplier receivables
Assessed the reasonableness of the recoverability of the airline
receivable balance due back under EU 261 Regulations by
testing a sample of bookings to post year-end settlements
as well as evaluating the completeness and appropriateness
of managements corresponding provision where recovery is
considered at risk.
Corroborated the appropriateness of the carrying value of hotelier
prepayments with reference to independent confirmations
from hoteliers of outstanding balances and utilisation periods
considering the financial viability of the hotels, and compared the
prepayment against future bookings.
Presentation and disclosure
Assessed the rationale for alternative performance measures
used, their role in reporting a fair, balanced and understandable
assessment of performance and whether appropriate
reconciliations to GAAP measures were provided.
We performed full scope audit procedures which covered 100%
of the related balances.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
115
GOVERNANCE
Governance
Statutory Auditor’s Report to the Members of On the
Beach Group plc
Key observations
communicated to the Audit
Committee
Based on our procedures
performed we are
satisfied that the excess
of discounted cash flows
in comparison to CGU
carrying values confirming
no impairment is required.
Risk
Our response to the risk
Carrying value of goodwill,
intangible and tangible
assets
We have performed the following procedures:
Identified and assessed the key controls over the
appropriateness of the exceptional item.
There is a goodwill balance on
consolidation of £40.2m (2019:
£40.2m), intangible assets
balance of £39.5m (2019:
£88.2m) and tangible assets
balance of £9.8m (2019:
£10.5m).
Annual impairment
assessments are required in
respect of the carrying value
of these assets and due to the
inherent uncertainty involved
in forecasting and discounting
future cash flows, heightened
by the uncertainties of the
COVID-19 pandemic, there
is a risk that the goodwill,
intangible and tangible assets
may be impaired.
Compared the cancellation assumptions applied in the
projected financial information used to those used in the
calculation of the exceptional cancellation provision.
Critically assessed the projected financial information used to
external data sources including projected travel industry
recovery.
Used our EY Valuation team specialists to assess the
discount rate by reference to industry benchmarks.
Obtained financial information from the subsequent period to
consider the actual results in comparison to the forecast and
assessed historic accuracy of management’s budgeting
process.
Performed independent sensitivities on the forecast cash
flows including reduction in growth rates and delaying return
to recovery and concluded no impairment.
Checked impairment disclosures for completeness and
accuracy.
We performed full scope audit procedures which covered
100% of the related balances.
In the prior year, our auditor’s report included a key audit matter in relation exceptional items arising as a result of the failure of
Thomas Cook. In the current year, this is no longer a Key Audit Matter on the basis the event was one-off and the impact was non-
recurring.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for
each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into
account size, risk profile, the organisation of the group and changes in the business environment when assessing the level of work to
be performed at each entity.
Of the 12 components selected, we performed an audit of the complete financial information of all 12 components (“full scope
components”) which were selected based on their size or risk characteristics.
The reporting components where we performed full scope audit procedures accounted for 100% of the Group’s Loss before tax and
100% of the Group’s profit before tax adjusted for exceptional items, 100% of the Group’s Revenue and 100% of the Group’s Total
assets.
All audit work performed for the purposes of the audit was undertaken by the Group audit team.
116
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Impact of COVID-19
As a result of the COVID-19 outbreak and resulting lockdown restrictions we have modified our audit strategy to allow for the year
end audit to be performed remotely. This approach was supported through remote user access to the Group’s financial systems and
the use of EY software collaboration platforms for the secure and timely delivery of requested audit evidence.
We have also revisited our procedures in respect of the Directors’ going concern assessment, taking into account the nature of
the Group, its business model and related risks. We evaluated the Directors’ assessment of the Group’s ability to continue as a
going concern, including the consistency of the cash flow forecasts, the key assumptions within the scenarios modelled and the
available sources of liquidity with the findings from other areas of the audit. We assessed the impact of additional stress testing
on the going concern assessment. We have also reviewed the disclosures contained within the Annual Report and consolidated
financial statements in relation to this issue and consider them to describe adequately the impact of COVID-19 on the Group as at 30
September 2020.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the
audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our
audit procedures.
Using professional judgement we determined materiality to be £897,000 (2019: £1,360,000).
In determining our benchmark for materiality we considered a number of different metrics used by investors and other users of the
financial statements. We consider that analysts are focused on the speed at which underlying operations and revenue are returning
to normal. Setting materiality when the business has been impacted by COVID19 requires greater auditor judgement. We continue
to believe that a materiality based on profit before tax adjusted for exceptional items is appropriate given the nature of the group, but
2020 results have been distorted as a result of the pandemic. For the current year, we have sought to derive a normalised basis for
setting that profit measure and we have set at 5% of the average profit before tax adjusted for exceptional items for FY20, FY19 and
FY18.
This approach is a change from the prior year (which was based on 5% of profit before tax adjusted for exceptional items).
We determined materiality for the Group to be £897,000, which is 5% of normalised profit before tax adjusted for exceptional costs
(£17,392,000).
We determined materiality for the Parent Company to be £897,000, which is 2% of Equity, (on the basis of being a non-trading
holding company), capped at the materiality of the Group.
During the course of our audit, we reassessed initial materiality and noted no changes.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
117
GOVERNANCE Governance
Statutory Auditor’s Report to the Members of On the
Beach Group plc
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was
that performance materiality was set at £673,000 (2019: £680,000) which represents 75% (2019: 50% due to first year audit) of
group materiality. For areas relating to COVID-19 that we have assessed as being of greater importance to the users of the financial
statements we have worked to lower levels of performance materiality, these include the areas listed within the “Impact of COVID-19”
key audit matter described above.
Audit work at the 12 components for the purpose of obtaining audit coverage over significant financial statement accounts is
undertaken based on a percentage of total performance materiality. The performance materiality set for each component is based
on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that
component. In the current year, the range of performance materiality allocated to components was £135,000 to £572,000.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £45,000, which
is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative
grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of
other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 1-121, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in
this report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we
are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other
information and to report as uncorrected material misstatements of the other information where we conclude that those items meet
the following conditions:
› Fair, balanced and understandable set out on page 121 – the statement given by the directors that they consider the annual
report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for
shareholders to assess the group’s performance, business model and strategy, is materially inconsistent with
our knowledge obtained in the audit; or
› Audit committee reporting set out on pages 78 to 83 – the section describing the work of the audit committee does not
appropriately address matters communicated by us to the audit committee; or
› Directors’ statement of compliance with the UK Corporate Governance Code set out on page 66 – the parts of the directors’
statement required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance Code
containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly
disclose a departure from a relevant provision of the UK Corporate Governance Code.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
›
the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
›
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of
the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us 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
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 121, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do
so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements
due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud,
through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified
during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with
governance of the entity and management.
Our approach was as follows:
› We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that
the most significant frameworks which are directly relevant to specific assertions in the financial statements are those that
relate to the reporting framework (IFRS, FRS 102, the Companies Act 2006 and UK Corporate Governance Code)
› We understood how On the Beach Group plc is complying with those frameworks by making enquiries of management,
those responsible for legal and compliance procedures and the Company Secretary. We corroborate our enquiries through
our review of board minutes and papers provided to the Audit Committee and discussions with the Audit Committee.
› We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur
by meeting with management and those charged with governance where it considered there was a susceptibility to fraud.
We also considered performance targets and the propensity to influence efforts made by management to manage earnings.
Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk. These
procedures included testing manual journals and were designed to provide reasonable assurance that the financial
statements were free from fraud and error.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
119
GOVERNANCE
Governance
Statutory Auditor’s Report to the Members of On the
Beach Group plc
›
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations.
Our procedures involved journal entry testing, with a focus on manual consolidation journals, and journals indicating large or
unusual transactions based on our understanding of the business; enquiries of Legal Counsel, Group management and
focused testing, as referred to in the key audit matters section above. In addition, we completed procedures to conclude on
the compliance of the disclosures in the Annual Report and Accounts with the requirements of the relevant accounting
standards, UK legislation and the UK Corporate Governance Code 2016.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters we are required to address
› We were appointed by the company on 7 March 2019 to audit the financial statements for the year ending 30 September 2019
and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments is 2 years, covering the year
ending 30 September 2019 and the year ending 30 September 2020.
› The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we
remain independent of the group and the parent company in conducting the audit.
› The audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Victoria Venning
Senior Statutory Auditor
for and on behalf of Ernst & Young LLP, Statutory Auditor
Manchester
10 December 2020
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Governance
Statement of Directors’ Responsibilities
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:
ą
ą
ą
ą
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
Each of the Directors, being Simon Cooper, Shaun Morton, Richard Pennycook, Elaine O’Donnell and David Kelly, confirm that to
the best of their knowledge:
ą
ą
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.
The Directors 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.
Shaun Morton
Chief Financial Officer
10 December 2020
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
121
GOVERNANCE Financial Statements
123 Consolidated Income Statement and
Statement of Comprehensive Income
124 Consolidated Balance Sheet
125 Consolidated Statement of Cash Flows
126 Consolidated Statement of Changes in Equity
127 Notes to the Consolidated Financial Statements
162 Company Balance Sheet
163 Company Statement of Changes in Equity
164 Notes to the Company Financial Statements
166 Glossary of Alternative Performance Measures (“APMs”)
122
122
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Financial Statements
Consolidated Income Statement and Statement of
Comprehensive Income
Year ended 30 September 2020
Revenue
Cost of sales
Gross profit
Administrative expenses
Group operating (loss)/profit
Finance costs
Finance income
Net finance (costs)/income
(Loss)/profit before taxation
Taxation
Note
4,5
6
8
8
9
Restated
(note 2)
2019
£’m
140.4
(48.4)
92.0
(72.7)
19.3
(0.5)
0.5
-
19.3
(3.7)
2020
£’m
33.7
(17.7)
16.0
(61.9)
(45.9)
(0.8)
0.4
(0.4)
(46.3)
7.5
(Loss)/profit for the year
(38.8)
15.6
Other comprehensive income:
Net gain/(loss) on cashflow hedges
Total comprehensive (loss)/income for the year
Attributable to:
Equity holders of the parent
Basic and diluted earnings per share attributable to the equity
Shareholders of the Company:
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
Adjusted (loss)/earnings per share *
Adjusted profit measure*
Adjusted PBT (before amortisation of acquired intangibles,
exceptional & non underlying costs and share based payments) *
10
10
10
6
* This is a non GAAP measure, refer to notes.
The notes on pages 127 to 161 form part of the financial statements.
0.1
(38.7)
(0.1)
15.5
(38.7)
15.5
(27.6p)
(27.6p)
(0.5p)
11.9p
11.9p
21.3p
0.6
34.5
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
123
FINANCIAL STATEMENTS
Financial Statements
Consolidated Balance Sheet
Year ended 30 September 2020
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment property
Total non-current assets
Current assets
Trade and other receivables
Assets held for sale
Derivative financial instruments
Corporation tax receivable
Trust account
Cash at bank
Total current assets
Total assets
Equity
Share capital
Share premium
Retained earnings
Capital contribution reserve
Merger reserve
Total equity
Non-current liabilities
Deferred tax
Trade and other payables
Total non-current liabilities
Current liabilities
Corporation tax payable
Trade and other payables
Provisions
Derivative financial instruments
Total current liabilities
Total liabilities
Total equity and liabilities
Note
11
12
13
15
16
24
17
22
23
23
23
23
21
18
18
18
24
2020
£’m
79.6
9.9
0.6
90.1
104.7
-
0.5
4.5
25.8
36.5
172.0
262.1
1.6
64.8
215.0
0.5
(129.5)
152.4
2.6
3.8
6.4
-
92.4
10.9
-
103.3
109.7
262.1
Restated
(note 2)
2019
£’m
Restated
(note 2)
2018
£’m
85.1
10.6
0.6
96.3
94.6
0.2
-
-
44.0
54.8
193.6
289.9
1.3
-
256.9
0.5
(129.5)
129.2
6.1
4.2
10.3
0.2
136.9
12.3
1.0
150.4
160.7
289.9
88.2
9.2
0.8
98.2
71.4
0.5
0.1
0.7
38.4
47.3
158.4
256.6
1.3
-
245.2
0.5
(129.5)
117.5
7.2
4.5
11.7
-
127.4
-
-
127.4
139.1
256.6
The financial statements from pages 123 to 165 were approved by the Board of Directors and authorised for issue.
Shaun Morton
Chief Financial Officer
Thursday, 10 December 2020
On the Beach Group plc. Reg no 09736592
124
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Financial Statements
Consolidated Statement of Cash Flows
Year ended 30 September 2020
(Loss)/profit before taxation
Adjustments for:
Depreciation
Amortisation of intangible assets
Finance costs
Finance income
Share based payments
Changes in working capital:
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Decrease/(increase) in trust account
Cash flows from operating activities
Cash used in operating activities
Tax paid
Net cash outflow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from disposal of assets held for sale
Purchase of intangible assets
Interest received
Contingent consideration
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Equity dividends paid
Interest paid on borrowings
Interest paid on lease liabilities
Payment of lease liabilities
Net cash inflow from financing activities
Net increase in cash at bank and in hand
Cash at bank and in hand at beginning of year
Cash at bank and in hand at end of year
Note
12
11
8
8
2020
£’m
(46.3)
1.9
9.5
0.8
(0.4)
(0.6)
(35.1)
(7.4)
(50.6)
18.3
(39.7)
(74.8)
(0.2)
(75.0)
(1.2)
0.2
(4.0)
0.4
-
(4.6)
65.1
(2.6)
(0.6)
(0.2)
(0.4)
61.3
(18.3)
54.8
36.5
Restated
(note 2)
2019
£’m
19.3
1.6
8.7
0.5
(0.5)
0.7
30.3
(22.2)
24.6
(5.6)
(3.2)
27.1
(3.8)
23.3
(3.3)
0.3
(5.1)
0.5
(2.7)
(10.3)
-
(4.6)
(0.3)
(0.2)
(0.4)
(5.5)
7.5
47.3
54.8
The notes on pages 127 to 161 form part of the financial statements.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
125
FINANCIAL STATEMENTS Financial Statements
Consolidated Statement of Changes in Equity
Year ended 30 September 2020
Share
capital
£’m
Share
premium
£’m
Merger
reserve
£’m
Capital
contribution
reserve
£’m
Retained
earnings
£’m
Total
£’m
Balance at 30 September 2018 restated (note 2)
1.3
Share based payments including tax
Dividends paid during the year
Total comprehensive income for the year restated
(note 2)
Balance at 30 September 2019
Share based credit including tax
Shares issued during the year
Costs related to shares issued
Dividends paid during the year
Total comprehensive loss for the year
-
-
-
1.3
-
0.3
-
-
-
-
-
-
-
-
-
67.0
(2.2)
-
-
(129.5)
0.5
245.2
117.5
-
-
-
-
-
-
0.8
(4.6)
0.8
(4.6)
15.5
15.5
(129.5)
0.5
256.9
129.2
-
-
-
-
-
-
-
-
-
-
(0.6)
-
-
(2.6)
(0.6)
67.3
(2.2)
(2.6)
(38.7)
(38.7)
Balance at 30 September 2020
1.6
64.8
(129.5)
0.5
215.0
152.4
The notes on pages 127 to 161 form part of these financial statements.
126
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Financial Statements
Notes to the Consolidated Financial Statements
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 170
2. Accounting Policies
a) 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.
These financial statements are presented in pounds sterling (£’m) because that is the currency of the primary economic environment in
which the Group operates.
b) Going concern
On the Beach Group covers its daily working capital requirements by means of cash and a Revolving Credit Facility (“RCF”).
As at 30 September 2020 cash, excluding cash held in trust, was £36.5m (30 September 2019 cash of £54.8m).
As travel restrictions were imposed a number of actions were taken immediately to reduce cash costs and protect the financial
position of the Group:
ą
ą
ą
ą
ą
ą
Marketing costs were reduced to almost £nil and limited other non-essential costs
The low deposit offer was reduced on 25 February for new bookings travelling within 90 days to ensure flight costs
were covered in full
The CEO sacrificed his salary and the remainder of the Board voluntarily agreed to a 20% reduction in salary and fees
No bonuses have been awarded across the Group in the current financial year
The Group participated in the Coronavirus Job Retention Scheme and obtained a refund of Corporation Tax paid
The Group did not declare an interim dividend and is not proposing a final dividend for the year to 30 September 2020
The Group has also taken a number of actions to improve overall liquidity to ensure that it is well placed to operate through the
pandemic and to trade once travel restrictions are eased. These actions included reaching an agreement with Lloyds Bank to
increase maximum available debt facilities:
ą
ą
ą
ą
extended the £50m RCF drawdown limit to all months of each year
extended the term to December 2023
reset covenant tests for all periods up to and including June 2021
accessed an incremental £25m RCF under CLBILS, expiring in May 2022
In addition, on 22 May the Group issued new shares generating £65.1m incremental liquidity (net of fees). The net proceeds
from the share placing, together with the revised banking facilities, provides the Group with greater resilience through the current
downturn and will enable the Group to exit this extended disruptive period in a strong position.
Where the Group has been unable to deliver the package holiday the Group is committed to refunding customers in cash rather
than vouchers. These cash refunds are fully funded from the trust account (where refunds are for hotel and transfer payments) or
are a pass-though from airlines. Therefore, there is no net cash outflow for refunds processed.
The Directors have modelled a number of scenarios considering factors such as airline and hotelier resilience, employee absence
and customer behaviour / demand. As part of this exercise, the Directors modelled what they consider to be a severe downside
scenario of no travel or bookings until January 2022. Even in this scenario, the Group would have no requirement to draw down on
its current facilities.
Given the assumptions above, the Directors remain confident in their response to the pandemic and will continue to operate in an
agile way adapting to any applicable government guidance. Therefore it is considered appropriate to continue to adopt the going
concern basis in preparing these financial statements.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
127
FINANCIAL STATEMENTS Financial Statements
Notes to the Consolidated Financial Statements
c) New Standards, Amendments and Interpretations
The Group has adopted the following standards, amendments and interpretations in these financial statements:
›
IFRS 16 Leases
IFRS 16 “Leases” replaces the current IAS 17 “Leases” and its associated interpretative guidance. The standard sets out the principles
for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most leases on the balance
sheet. The Group adopted IFRS 16 using the full retrospective method of adoption, with the initial application of 1 October 2019.
The Group elected to use the transition practical expedient to not reassess whether a contract is, or contains, a lease at 1 October
2019. Instead, the Group applied the standard only to contracts that were previously identified as leases applying IAS 17 and
IFRIC 4 at the date of initial application. The Group also elected to use the recognition exemptions for lease contracts that, at the
commencement date, have a lease term of 12 months or less and do not contain a purchase option (short-term leases), and lease
contracts for which the underlying asset is of low value (low-value assets).
The effect of adopting IFRS 16 is, as follows:
Impact on the statement of financial position (increase/(decrease)):
At 30 September
2020
At 30 September
2019
At 30 September
2018
Assets
Property, plant and equipment
Prepayments
Total assets
Equity
Retained earnings
Total equity
Liabilities
Lease Liabilities
Total liabilities
£’m
3.7
0.3
4.0
(0.2)
(0.2)
4.2
4.2
£’m
4.2
0.1
4.3
(0.2)
(0.2)
4.5
4.5
£’m
4.7
(0.1)
4.6
(0.1)
(0.1)
4.7
4.7
As at 30 September 2020, as a result of transition total assets increased to £262.0m from £258.0m, total liabilities increased to
£109.6m from £105.4m, and total equity decreased to £152.4m from £152.6m.
As at 30 September 2019, as a result of transition total assets increased to £289.9m from £285.6m, total liabilities increased to
£160.7m from £156.2m, and total equity decreased to £129.2m from £129.4m.
As at 30 September 2018, as a result of transition total assets increased to £256.6m from £252.0m, total liabilities increased to
£139.1m from £134.4m, and total equity decreased to £117.5m from £117.6m.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Impact on the statement of profit or loss (increase/(decrease)) for the year ended 30 September 2020:
Depreciation expense
Rent expense
Finance costs
Profit for the period
Impact on consolidated statement of cash flows (increase/(decrease)):
Profit before taxation
Depreciation
Finance costs
Net cash flows from operating activities
Interest paid on lease liabilities
Payment of lease liabilities
Net cash flows from financing activities
2020
£'m
(0.5)
0.6
(0.2)
(0.1)
2020
£'m
(0.1)
0.5
0.2
0.6
(0.2)
(0.4)
(0.6)
2019
£'m
(0.5)
0.6
(0.2)
(0.1)
2019
£'m
(0.1)
0.5
0.2
0.6
(0.2)
(0.4)
(0.6)
There is no material impact on other comprehensive income or the basic and diluted earnings per share.
Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases for which it is the lessee,
except for short-term leases and leases of low-value assets. The Group recognised lease liabilities to make lease payments and right-of-
use assets representing the right to use the underlying assets. In accordance with the full retrospective method of adoption, the Group
applied IFRS 16 at the date of initial application as if it had already been effective at the commencement date of existing lease contracts.
As at 30 September 2018, 30 September 2019 and 30 September 2020:
ą
ą
ą
ą
Right-of-use assets were recognised and presented as ‘Property, plant and equipment’ in the statement of financial position.
Additional lease liabilities were recognised and included under ‘Trade and other payables’.
‘Prepayments’ related to previous operating leases were derecognised.
‘Retained earnings’ decreased due to the net impact of these adjustments.
For the year ended 30 September 2020:
ą
ą
ą
ą
Depreciation expense increased because of the depreciation of additional assets recognised (i.e., increase in right-of-use
assets, net of the decrease in ‘Property, plant and equipment’). This resulted in increases in ‘Administrative expenses’ of
£0.5m (2019: £0.5m).
Rent expense included in ‘Administrative expenses’, relating to previous operating leases, decreased by £0.6m (2019:
£0.6m).
‘Finance costs’ increased by £0.2m (2019: 0.2m) relating to the interest expense on additional lease liabilities recognised.
Cash outflows from operating activities increased by £0.6m (2019: £0.6m) and cash outflows from financing activities
decreased by the same amount, relating to decrease in operating lease payments and increases in principal and interest
payments of lease liabilities.
Standards not yet effective
A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2020 and
earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these
consolidated financial statements as they do not have a material effect on the Group’s financial statements.
The following amended standards are not expected to have a significant impact on the Group’s consolidated financial statements:
ą
ą
ą
Amendments to References to Conceptual Framework in IFRS Standards;
Definition of a Business (Amendments to IFRS 3); and
Definition of material - amendments to IAS 1 and IAS 8
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
129
FINANCIAL STATEMENTS Financial Statements
Notes to the Consolidated Financial Statements
d) 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.
ii.
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.
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.
e) Goodwill
Goodwill arising on the acquisition of subsidiary undertakings and trade and assets represents the excess of the cost of acquisition over
the fair value of the identifiable assets and liabilities at the date of acquisition. Goodwill is initially recognised as an asset at cost and is
subsequently remeasured at cost less any accumulated impairments losses. Goodwill which is recognised as an asset is reviewed for
impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed. On
disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
For the purposes of impairment testing, goodwill is allocated to the cash generating units expected to benefit from the combination. If the
recoverable amount is less than the carrying amount of the unit, the impairment loss is allocated to first reduce the amount of goodwill
allocated to the unit and then the other assets in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent
period.
An impairment loss recognised for goodwill is not reversed. Impairment losses recognised for other assets is reversed only if the reasons
for the impairment have ceased to apply.
f) 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.
g) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another
entity.
i.
Financial Assets
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other
comprehensive income (OCI), and fair value through profit or loss. In order for a financial asset to be classified and measured
at amortised cost, the financial asset is under a ‘hold to collect’ business model and it needs to give rise to cash flows that are
‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding.
Trade and other Receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition, they are measured at amortised
cost using the effective interest method, less any impairment losses. Gains and losses are recognised in profit or loss when the
asset is derecognised, modified or impaired.
Cash at Bank
Cash at bank comprises cash balances and call deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management are included as a component of cash at bank for the purpose only of the
cash flow statement.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Trust account
All ATOL protected customer monies are held in a trust account until after the provision of the holiday service. The trust
account is governed by a deed between the Group, the Civil Aviation Authority Air Travel Trustees and independent
trustees (Travel Trust Services Limited), which determines the inflows and outflows from the account.
All ATOL protected customer receipts are paid into the trust account in full before the holiday departure date. These
payments are held in the trust account until the service is provided—for flights on payment to the supplier and for hotels
and ancillaries on the customer’s return from holiday. The Group does not therefore use customer prepayments to fund its
business operations.
ii.
Financial Liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and
borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
Trade and Other Payables
Trade and other payables including deferred consideration are recognised initially at fair value and net of directly attributable
transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.
Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the Effective Interest
Rate (“EIR”) amortisation process.
Revolving credit facility
All financial liabilities are recognised initially at fair value and net of directly attributable transaction costs. After initial recognition,
interest- bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are
recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
iii. 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 24 of these financial statements. Such derivative financial instruments
are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at
fair value.
Fair Value Hedges
All derivative financial instruments are assessed against the hedge accounting criteria set out in IFRS 9. On initial designation
of the derivative as a hedging instrument, the Group formally documents the relationship between the hedging instrument and
hedged item. This includes identification of the hedging instrument, the hedged item, the risk management objectives and
strategy in understanding the hedge transaction and the hedged risk, together with the methods that will be used to assess the
effectiveness of the hedging relationship.
The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether
the hedging instruments are expected to be highly effective in offsetting the changes in the fair value of the respective hedged
items attributable to the hedged risk.
Derivatives are initially recognised at the fair value on the date a derivative contract is entered into and are subsequently
remeasured at each reporting date at their fair value. The change in the fair value of a hedging instrument is recognised in the
statement of profit or loss as other expense. The change in the fair value of the hedged item attributable to the risk hedged is
recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit or loss as other
expense.
Cash Flow Hedges
For derivatives that are designated as cash flow hedges and where the hedge accounting criteria are met, the effective portion of
changes in the fair value is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is
recognised immediately in profit or loss as part of finance costs. Amounts accumulated in equity are recognised in profit or loss
when the income or expense on the hedged item is recognised in profit or loss.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
131
FINANCIAL STATEMENTS
Financial Statements
Notes to the Consolidated Financial Statements
h) 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 four reportable segments:
i.
ii.
iii.
iv.
“OTB” - activity via UK websites (www.onthebeach.co.uk, www.sunshine.co.uk and www.onthebeachtransfers.co.uk)
“International” - activity via Swedish, Norwegian and Danish websites (www.eBeach.se, www.eBeach.no and www.eBeach.dk)
“Classic” - activity via the Tour Operator, Classic Collection Holidays Limited and subsidiaries
“CPH” - activity via the Classic Package Holidays online business to business portal
i) Revenue Recognition
IFRS 15 Revenue from Contracts with Customers is a principle-based model of recognising revenue from customer contracts. It has a five-
step model that requires revenue to be recognised when control over goods and services are transferred to the customer. The standard
requires the Group to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of
the model to contracts with their customers. The following paragraphs describes the types of contracts, when performance obligations are
satisfied, and the timing of revenue recognition. Further details of the disaggregation of revenue are disclosed in note 4 of these financial
statements.
As Agent:
The Group acts as agent when it is not the primary party responsible for providing the components that make up the customers
booking and it does not control the components before they are transferred to customers. Revenue comprises the fair value of the
consideration received or receivable in the form of commission. Commissions are earned from the consumer through purchases
of travel products such as flight tickets or hotel accommodation from third party suppliers. Commission is recognised when the
performance obligation of arranging and facilitating the customer to enter into individual contracts with suppliers is satisfied, usually on
delivery of the booking confirmation.
Cancellations are estimated at the reporting date based on the historical profile of cancellations. Revenue is stated net of cancellations
and expected cancellations.
Revenue earned from sales through CPH are stated net, with the commission payable to agents recognised in the cost of sales.
As Principal:
The Group acts as principal when it is the primary party responsible for providing the components that make up the customer’s
booking and it controls the components before transferring to the customer.
Revenue represents amounts received or receivable for the sale of package holidays and other services supplied to the customers.
Revenue is recognised when the performance obligation of delivering an integrated package holiday is satisfied, usually over the
duration of the holiday.
Revenue is stated net of discounts, rebates, refunds and value added tax.
j) Override Income
The Group has agreements with suppliers whereby volume-related rebates are received in connection with the travel arrangements
made with the customer. The income received from suppliers relates to reduction in cost of sales (corresponding increase in
commission received), and as such is considered part of the Group’s revenue. The Group has some agreements whereby receipt of the
income is conditional on the Group achieving agreed volume targets.
For agreements not linked to volume targets, override income is recognised when earned by the Group, which occurs when all
obligations conditional for earning income have been discharged, and the income can be measured reliably based on the terms of the
contract, which is usually once the booking has been confirmed with the supplier.
For agreements where volume targets are in place, income is recognised once the target has been achieved. For volume targets
which span the year end, the Group is required to make estimates in determining the amount and timing of recognition of override. In
determining the amount of volume-related allowances recognised in any period, management estimate the probability that the Group
will meet contractual target volumes, based on historical and forecast performance.
Amounts due but not yet recovered relating to override income are recognised within trade and other receivables.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
k) Dividend Distribution
Final dividend distribution to the Group’s shareholders is recognised as a liability in the Group’s financial statements in the period in which
the dividends are approved by the Group’s shareholders.
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 on which control is transferred to the Group.
For acquisitions, the Group measures goodwill at the acquisition date as:
›
›
›
›
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquire; plus
the fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred. Any
contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity,
it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent
consideration are recognised in the income statement.
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:
Fixtures, fittings and equipment Buildings
Buildings freehold
3-10 years
50 years
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in income.
n) Investment Property
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties
are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of
investment properties is recognised as other income in the income statement. Properties are externally valued on the basis of fair value at
the balance sheet date.
o) Held for Sale Assets
Assets are classified as held for sale if their carrying amount is expected to be recovered or settled principally through sale rather than
through continuing use. The asset must be available for immediate sale and the sale must be highly probable within one year of the
reporting date. Held for sale assets are measured at the lower of carrying value and fair value less costs to sell.
p) Intangible Assets
Research and Development
i.
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.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
133
FINANCIAL STATEMENTS
Financial Statements
Notes to the Consolidated Financial Statements
ii. Brand
Upon acquisition of the Group by OTB Topco, the On the Beach brand was identified as a separately identifiable asset. Acquisitions
of Sunshine.co.uk and Classic Collection Holidays Limited resulted in the brand of each being identified and recognised separately from
goodwill at fair value.
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
Agent relationships
Customer relationships
10 years
3 years
10-15 years
15 years
5 years
iv. Customer and agent relationships
Upon the acquisition of Classic Collection Holidays Limited, customer relationships were identified as a separately identifiable assets.
Classic Collection’s revenue is driven by a very high volume of repeat customers due to its bespoke holiday packages and the target
market. Repeat customers are from two broad segments - independent travel agents and direct customers and individuals booking
directly. There is a defined margin and attrition profile differential between the two customer groups and as such two separate assets
were identified.
q) Impairment of Non-Financial Assets
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there
is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are
independent from other assets, the group estimates the recoverable amount of the cash generating unit to which the asset belongs. The
recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell.
Goodwill is required to be tested for impairment annually, or more frequently where there is an indication that the goodwill may be
impaired. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units, or
(“CGU”). Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been
allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal
reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the
synergies of the combination. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose
of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating
unit”).
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment
losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount
of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata
basis.
r) Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the
use of an identified asset for a period of time in exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-
value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the
underlying assets.
i.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available
for use). Right- of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. The
recognised right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful
lives of the assets, as follows:
Buildings
10 years
The right-of-use assets are also subject to impairment. The Group’s right-of-use assets are included as a separate category in
property, plant and equipment.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
ii.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments
to be made over the lease term. In calculating the present value of lease payments, the Group uses the incremental borrowing
rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the
lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the
lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to
determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
The Group’s lease liabilities are included in trade and other payables.
s) Employee Benefits
i.
ii.
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.
Share-Based Payment Transactions
Employees (including senior executives) of the Group receive remuneration in the form of share-based payments, whereby
employees render services as consideration for equity instruments (equity-settled transactions). Employees working in the
business development group are granted share appreciation rights, which are settled in cash (cash-settled transactions).
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate
valuation model, further details of which are given in note 25.
That cost is recognised in employee benefits expense (note 7a), together with a corresponding increase in equity (other capital
reserves), over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period).
The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the
extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will
ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative
expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of
awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity
instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other
conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions.
Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there
are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions
have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective
of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are
satisfied.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share
(further details are given in note 10).
t) Financing Income and Expenses
Financing expenses comprises 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 comprises 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.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
135
FINANCIAL STATEMENTS
Financial Statements
Notes to the Consolidated Financial Statements
u) Exceptional Costs
Exceptional items are material items of income and expense which, because of the nature and expected infrequency of events giving rise
to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, so as to
facilitate comparison with prior years and to assess better trends in financial performance.
v) Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent
that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively
enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill;
the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and
differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the
temporary difference can be utilised.
w) Share Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a
deduction from the proceeds.
x) Share Premium and Other Reserves
The amount subscribed for the ordinary shares in excess of the nominal value of these new shares is recorded in ‘share premium’. The
amount subscribed for the preference shares in excess of the nominal value of these new preference shares is recorded in ‘other reserves’.
Costs that directly relate to the issue of ordinary shares are deducted from share premium net of corporation tax.
The merger reserve represents the amount subscribed for the ordinary shares in excess of the nominal value of the shares issued in
exchange for the acquisition of subsidiaries.
y) 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.
z) 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.
aa) 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.
ab) Non Statutory Measures
One of the Groups KPI’s is adjusted profit before tax. When reviewing profitability, the Directors use an adjusted profit before taxation
(“PBT”) in order to give a meaningful year-on-year comparison. Whilst we recognise that the measure is an alternative (non-Generally
Accepted Accounting Principles (“non-GAAP”)) performance measure which is also not defined within IFRS, this measure is important and
should be considered alongside the IFRS measures.
Adjusted PBT is calculated by adjusting for material items of income and expenditure where because of the nature and expected
infrequency of events giving rise them, merit separate presentation to allow shareholders a better understanding of the financial
performance in the period.
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ac) COVID-19 impact
Determining the amounts to be provided for the bookings affected by the pandemic involves judgement and is dependent upon a
number of assumptions by management including the number of bookings that will be cancelled due to travel restrictions. The Group
expects travel to be disrupted and cancellations to continue above normal levels throughout 2021. Sensitivity analysis was performed
based on various scenarios, management believe that the amounts recognised are the best estimate of the costs the Group will incur.
ad) Thomas Cook Group plc impact
On 23 September 2019, TCG announced that it had ceased trading and entered compulsory liquidation. There was a one-off exceptional
cost associated with helping customers to organise alternative travel arrangements and lost margin on cancelled bookings.
The adjustment of £7.1m to revenue represents the lost revenue associated with providing refunds and the costs associated with
organising alternative travel arrangements for customers. This totalled £25.6m and is stated net of a chargeback claim of £18.5m. The
£0.6m of other exceptional operating costs relates to the incremental operational costs of managing the process and the loss of monies
held by TCG agents.
3. Critical Accounting Estimates and Judgements
The Group’s accounting policies have been set by management. The application of these accounting policies to specific scenarios requires
reasonable estimates and assumptions to be made concerning the future. These are continually evaluated based on historical experience
and expectations of future events. The resulting accounting estimates will, by definition, seldom equal the related actual results. Under
IFRS estimates or judgements are considered critical where they involve a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities from period to period. This may be because the estimate or judgement involves matters which are highly
uncertain or because different estimation methods or assumptions could reasonably have been used.
Critical Accounting Judgements
Revenue from Contracts with Customers
The Group applied the following key judgements on the agent vs principal status of each segment as well as the number of performance
objections in each.
Performance Obligations
Revenue in the OTB, International and CPH segments is recognised based on there being a single performance obligation to at the point
of booking. This is to arrange and facilitate the customer entering into individual contracts with principal suppliers providing holiday related
services including flights, hotels and transfers. For the OTB, International and CPH segments, there is not a significant integration service
and responsbility for providing the services remains with the principal suppliers.
The Group has concluded that under IFRS 15 for revenue in the Classic segment, a package holiday constitutes the delivery of one distinct
performance obligation which includes flights, accommodation, transfers and other holiday-related services. In formulating this conclusion,
management has assessed that it provides a significant integration service to collate all of the elements within a customer’s specification
to produce one integrated package holiday. Management has further analysed the recognition profile and concluded that under IFRS 15,
revenue and corresponding cost of sales should be recognised over the period a customer is on holiday.
Agent vs Principal
Determining whether an entity is acting as a principal or as an agent requires judgement and has a significant effect on the timing and
amount (gross or net basis) of revenue by the Group. As an agent, revenue is recognised at the point of booking on a net basis. As a
principal, revenue is recognised on a gross basis over the duration of the holiday.
In line with IFRS 15, management have concluded that revenue in the OTB, International and CPH segments will continue to be treated
as an agent on the basis that the performance obligation is to arrange for another entity to provide the goods or services. This assessment
has given consideration that there is no inventory risk and limited discretion in establishing prices. Revenue in the Classic segment will
continue to be treated as a principal on the basis that Classic have the primary responsibility for fulfilling the package holiday for the
customer.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
137
FINANCIAL STATEMENTS
Financial Statements
Notes to the Consolidated Financial Statements
Critical Accounting Estimates
COVID-19
On 11 March 2020 the World Health Organised declared COVID-19 a global pandemic. On 17 March 2020, the Foreign and
Commonwealth Office advised against all non-essential travel overseas, initially for a period of 30 days. This initial lockdown remained
in place for several months and airlines ceased the majority of flying schedules until 1 July 2020. Following the reopening of airspace,
whilst some flying resumed, a significant number of holidays have been cancelled due to reductions in flying schedules and changeable
government restrictions. Post year-end, disruption to leisure travel has continued, including more recently a four week ban on international
leisure travel which started on 5 November 2020.
In relation to flights cancelled during the financial year, the Group has considered the impact of the pandemic on the recoverability of
supplier prepayments including amounts paid to airlines in lieu of flights which have been cancelled. The Group has a legal right to a refund
under EU261/2004; the airline has an obligation to refund in the event that the flight is cancelled. EU 261 provides strict guidelines for
the compensation of travellers whose flights are delayed, cancelled, or overbooked while travelling in or to EU countries. The rules apply
to any flights that originate in an EU country. Where an airline is not forthcoming with a refund owed the Group exercises its chargeback
rights are as governed by the card scheme rules. The Group has a right to make a chargeback when (i) the merchant (airline) was unable
or unwilling to provide the purchased services; or (ii) the cardholder is entitled to a refund under the merchant’s cancellation policy. A
chargeback asset was recognised in the prior year relating to TCG and recovered in full, further supporting the Group’s recognition of the
airline receivables amount.
Where a flight has been cancelled, the Group has recognised a net receivable for the expected recoverable amount in accordance with the
considerations above.
In relation to bookings which are due to travel after the year-end, the primary judgements are as follows:
ą
The extent to which holidays will be impacted by the pandemic, either directly due travel restrictions or indirectly due to
reductions in flying schedules. Management have estimated that the level of disruption will gradually reduce through FY21
and will return to normal levels for the next winter season. The level of forward bookings beyond summer 2021 is not
significant and any changes to this assumption would not have a material impact.
ą
The level of revenue that will be reversed as a result of the cancellations and the extent to which the Group can mitigate costs
related to the cancellation, such as flight, hotel and other supplier costs. The Group has assumed the majority of the these
costs can be recovered where holidays are cancelled by the Group.
Determining the amounts to be provided for the bookings affected by the pandemic involves judgement and is dependent upon a number
of assumptions by management including the number of bookings that will be cancelled due to travel restrictions. The Group expects travel
to be disrupted and cancellations to continue above normal levels throughout 2021. Sensitivity analysis was performed based on various
scenarios, including the duration and severity of travel disruption resulting from the pandemic and the extent to which supplier costs can
be recovered or avoided for cancelled holidays. Specifically regarding the proportion of holidays that will be cancelled, Management have
considered a range of scenarios and believe that the amounts recognised are Management’s best estimate of the costs the Group will
incur.
A summary of the adjustments between Adjusted and GAAP measures, split between the COVID-19 impact and other costs, is shown
below:
Group revenue
Revenue as agent
Revenue as principal
Group cost of sales
Other exceptional operating costs
Group profit before tax
2020
COVID-19
£'m
(37.5)
-
0.1
(4.3)
(41.7)
The total exceptional costs in the period of £41.7m represents the estimated cost of COVID-19 to trading in the period. This is primarily the
cost of COVID-19 related cancellations or expected cancellations of £37.4m. The adjustment also includes a provisions against amounts
due from suppliers of £2.2m, exceptional development spend of £0.7m and legal and professional fees of £1.4m. During the year, £0.7m
of redundancy costs were offset by £0.7m of contributions in relation to the Coronavirus Job Retention Scheme.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Impairment of intangible assets and goodwill
Intangible assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be
recoverable. Goodwill is reviewed for impairment on an annual basis. When a review for impairment is conducted, the recoverable
amount is determined based on the higher of value in use and fair value less costs to sell. The value in use method requires the
Group to determine appropriate assumptions (which are sources of estimation uncertainty) in relation to the cash flow projections
based on the latest budget, the long-term growth rate to be applied to these cash flow projections and the risk-adjusted pre-tax
discount rate used to discount the assumed cash flows to present value.
The Group has concluded that the carrying value of the intangibles and goodwill is appropriate (after considering certain
sensitivities which are set out in note 11).
4. Revenue
In line with IFRS 15, the Group is required to disaggregate its revenue to show the main drivers of its revenue streams. Revenue is
accounted for at the point the Group has satisfied its performance obligations, details of the revenue performance obligations are set out in
note 2i of these financial statements.
Year ended 30 September 2020
Revenue before exceptional cancellations
Sales as agent
Sales as principal
Total Revenue before exceptional cancellations
Exceptional cancellations*
Total Revenue
OTB
£’m
50.4
-
50.4
(34.5)
15.9
0.3
-
0.3
(0.2)
0.1
Revenue before exceptional cancellations
Sales as agent
Sales as principal
Total Revenue before exceptional cancellations
Exceptional cancellations**
Total Revenue
Year ended 30 September 2019
OTB
£’m
90.3
-
90.3
(7.0)
83.3
Int’l
£’m
1.4
-
1.4
-
1.4
* Exceptional cancellations in the year ended 30 September 2020 relate to the impact of COVID-19 (See note 3)
**Exceptional cancellations in the year ended 30 September 2019 relate to the impact of TCG.
Details of receivables arising from contracts with customers are set out in note 15.
Int’l
£’m
Classic
£’m
CPH
£’m
Total
£’m
-
16.9
16.9
-
16.9
Classic
£’m
-
55.0
55.0
-
55.0
3.6
-
3.6
(2.8)
0.8
CPH
£’m
0.8
-
0.8
(0.1)
0.7
54.3
16.9
71.2
(37.5)
33.7
Total
£’m
92.5
55.0
147.5
(7.1)
140.4
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
139
FINANCIAL STATEMENTS
Financial Statements
Notes to the Consolidated Financial Statements
5. Segmental Report
As explained in note 2h, the management team considers the reportable segments to be ‘‘OTB’’, “International”, ‘‘Classic’’ and “CPH”. All
segment revenue, operating profit assets and liabilities are attributable to the Group from its principal activities.
OTB, International and CPH recognise revenue as agent on a net basis. Classic recognises revenue as a principal on a gross basis.
2020
Restated (note 2)
2019
OTB
£’m
Int’l
£’m
Classic
£’m
CPH
£’m
Total
£’m
OTB
£’m
Int’l
£’m
Classic
£’m
CPH
£’m
Total
£’m
50.4
0.3
16.9
3.6
71.2
90.3
1.4
55.0
0.8
147.5
Income
Revenue before exceptional
cancellations
Exceptional cancellations*
(34.5)
(0.2)
-
Total Revenue
15.9
0.1
16.9
(2.8)
0.8
(37.5)
33.7
(7.0)
83.3
-
1.4
-
(0.1)
(7.1)
55.0
0.7
140.4
Adjusted EBITDA
10.6
(0.3)
(1.9)
(1.5)
Share based credit/(charge)
0.6
-
-
-
6.9
0.6
Impact of COVID-19
(38.7)
(0.2)
(0.1)
(2.7)
(41.7)
Impact of TCG
Other exceptional costs
-
(0.3)
-
-
-
-
-
-
-
(0.3)
38.9
(0.6)
2.2
(1.1)
39.4
(0.7)
-
(7.2)
(1.0)
-
-
-
-
-
-
(0.4)
(0.3)
-
-
(0.1)
-
(0.7)
-
(7.7)
(1.3)
EBITDA
(27.8)
(0.5)
(2.0)
(4.2)
(34.5)
30.0
(0.6)
1.5
(1.2)
29.7
Depreciation and amortisation
(9.9)
(0.1)
(1.2)
(0.2)
(11.4)
(9.0)
(0.1)
(1.3)
-
(10.4)
Group operating loss
(37.7)
(0.6)
(3.2)
(4.4)
(45.9)
21.0
(0.7)
0.2
(1.2)
19.3
Finance costs
Finance income
Loss before taxation
Non-current assets
Goodwill
31.6
-
Other intangible assets
30.1
0.1
Property, plant and equipment
8.1
Investment property
-
-
-
4.6
8.9
1.8
0.6
4.0
0.3
-
-
(0.8)
0.4
(46.3)
40.2
39.4
9.9
0.6
(0.5)
0.5
19.3
40.2
44.9
10.6
0.6
31.6
34.5
8.9
-
-
0.1
-
-
4.6
10.0
1.7
0.6
4.0
0.3
-
-
*
Exceptional cancellations in the year ended 30 September 2020 relate to the impact of COVID-19. Exceptional cancellations in the year ended 30 September 2019 relate
to the impact of TCG.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
6. Operating expenses
a) Operating expenses
Expenses by nature including exceptional items and impairment charges:
Marketing
Depreciation
Staff costs (including share based payments)
IT hosting, licences & support
Office expenses
Credit/debit card charges
Insurance
Other
2020
£’m
22.8
1.9
14.6
2.4
0.8
1.7
1.6
2.0
2019
£’m
36.3
1.6
14.7
2.1
0.8
2.8
0.6
3.2
Administrative expenses before exceptional cost & amortisation of intangible assets
47.8
62.1
Impact of COVID-19
Impact of Thomas Cook
Other exceptional costs
Amortisation of intangible assets
Exceptional costs and amortisation of intangible assets
Administrative expenses
4.3
-
0.3
9.5
14.1
61.9
-
0.6
1.3
8.7
10.6
72.7
b) Other operating exceptional items
The exceptional costs for the year ended 30 September 2020 of £0.3m relate to legal and professional fees.
The exceptional costs for the year ended 30 September 2019 of £1.3m relate to £0.3m non-underlying property costs, £0.8m
relating to organisational restructuring costs and £0.2m relating to other exceptional costs.
c) Services provided by the company auditor
During the year, the Group obtained the following services from the operating company’s auditor.
Audit of the parent company financial statements
Amounts receivable by the Company’s auditor and its associated in respect of:
›
›
›
Audit of financial statements of subsidiaries pursuant to legislation
Review of interim financial statements
Other assurance services
2020
£’m
2019
£’m
0.1
0.2
-
-
0.3
0.1
0.1
-
-
0.2
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
141
FINANCIAL STATEMENTS
Financial Statements
Notes to the Consolidated Financial Statements
d) Adjusted PBT
Management measures the overall performance of the Group by reference to Adjusted PBT, a non-GAAP measure as it gives a
meaningful year on year comparison of the Group’s performance:
Profit before taxation
Impact of exceptional COVID-19 cancellations
Impact of exceptional Thomas Cook cancellations
Other exceptional costs
Total exceptional costs
Amortisation of acquired intangibles
Share based payments charge*
Adjusted PBT
Restated
(note 2)
2019
£’m
19.3
-
7.7
1.3
9.0
5.5
0.7
34.5
2020
£’m
(46.3)
41.7
-
0.3
42.0
5.5
(0.6)
0.6
*
The share based payment charge represents the expected cost of shares vesting under the Group’s Long Term Incentive Plan. These charges are added back to the
adjusted profit measure as they do not necessarily relate to the performance of the Group in the current financial year.
7. Employees and Directors
a) Payroll Costs
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Defined contribution pension cost
Social security costs
Share-based payment (credit)/charges
2020
£’m
17.9
0.3
1.8
(0.6)
19.4
2019
£’m
17.2
0.3
1.7
0.7
19.9
Staff costs above include £4.0m (2019: £5.1m) employee costs capitalised as part of software development. During the year
£0.7m was claimed in relation to the Coronavirus Job Retention Scheme. As a non-recurring item, this has been netted off against
other exceptional costs in relation to COVID-19 cancellations described in note 3.
b) Employee Numbers
Average monthly number of people (including Executive Directors) employed:
By reportable segment:
OTB
Int’l
Classic
CPH
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
2020
No.
2019
No.
419
10
116
5
550
404
13
99
5
521
c) Directors’ Emoluments
The remuneration of Directors was as follows:
Aggregate emoluments
Defined contribution pension
Share-based payment charges
Remuneration was paid by On the Beach Limited, a subsidiary companies of the Group.
The remuneration of the highest paid director was as follows:
Aggregate emoluments
Share-based payment charges
d) Key Management Compensation
Key management comprised the seven members of the executive team.
Remuneration of all key management (including directors) was as follows:
Wages and salaries
Short-term non-monetary benefits
Share-based payment charges
2020
£’m
0.9
-
0.1
1.0
2020
£’m
0.3
0.1
0.4
2019
£’m
1.0
-
(0.1)
0.9
2019
£’m
0.4
-
0.4
2020
£’m
1.6
-
0.1
1.7
2019
£’m
1.9
-
0.1
2.0
e) Retirement Benefits
Included in pension contributions payable by the Group of £0.3m (2019: £0.2m) is £42,000 (2019: £26,000) of contributions that the
Group made to a personal pension scheme in relation to one Executive Director.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
143
FINANCIAL STATEMENTS
Financial Statements
Notes to the Consolidated Financial Statements
8. Finance Income and Finance Costs
a) Finance Costs
Rolling credit facility interest
Interest on lease liabilities
Finance costs
b) Finance Income
Bank interest receivable
Finance income
9. Taxation
Current tax on profit 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
Total deferred tax
Total tax charge
2020
£’m
0.6
0.2
0.8
2020
£’m
0.4
0.4
2020
£’m
(4.0)
-
(4.0)
(3.5)
(3.5)
(7.5)
2019
£’m
0.3
0.2
0.5
2019
£’m
0.5
0.5
2019
£’m
4.8
(0.1)
4.7
(1.0)
(1.0)
3.7
The differences between the total taxation shown above and the amount calculated by applying the standard UK corporation taxation
rate to the profit before taxation on continuing operating are as follows.
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by the effective rate of corporation tax in the UK of 19%
(2019: 19%)
Effects of:
Adjustments in respect of prior years
Impact of difference in current and deferred tax rates
Total taxation charge
2020
£’m
(46.3)
2019
£’m
19.3
(8.8)
3.7
-
1.3
(7.5)
(0.1)
0.1
3.7
The tax charge for the year is based on the effective rate of UK corporation tax for the period of 19% (2019:19%).
The deferred tax liability at 30 September 2020 has been calculated at the UK corporation tax rate of 19%.
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ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
10. Earnings Per Share
Basic earnings per share are calculated by dividing the profit attributable to equity holders of On the Beach Group plc by the weighted
average number of ordinary shares issued during the year.
Diluted earnings per share is calculated by dividing the profit attributable to equity holders of On the Beach Group plc by the weighted
average number of Ordinary Shares issued during the period plus the weighted average number of Ordinary Shares that would be
issued on the conversion of all dilutive potential ordinary shares into Ordinary Shares. Adjusted earnings per share figures are calculated
by dividing adjusted earnings after tax for the year by the weighted average number of shares.
Year ended 30 September 2020
Basic EPS
Diluted EPS*
Adjusted EPS
Basic weighted
average number
of Ordinary Shares
(m)
Total
earnings
£’m
Pence
per share
140.2
140.2
140.2
(38.8)
(38.8)
(0.7)
(27.6p)
(27.6p)
(0.5p)
* There was no difference in the weighted average number of shares used for the calculation of basic and diluted loss per share as the effect of all potentially dilutive
shares outstanding was anti-dilutive.
Year ended 30 September 2019
Basic EPS
Diluted EPS
Adjusted EPS
Adjusted earnings after tax is calculated as follows:
Profit for the year after taxation
Adjustments (Net of Tax at 19%):
Impact of exceptional COVID-19 cancellations
Impact of exceptional Thomas Cook cancellations
Other exceptional costs
Amortisation of acquired intangibles
Share based payment charges*
Adjusted earnings after tax
*
The share based payment charges are in relation to options which are not yet exercisable.
131.1
131.4
131.1
15.6
15.6
27.9
11.9p
11.9p
21.3p
Restated
(note 2)
2019
£’m
15.6
-
6.2
1.0
4.5
0.6
27.9
2020
£’m
(38.8)
33.8
-
0.3
4.5
(0.5)
(0.7)
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145
FINANCIAL STATEMENTS
Financial Statements
Notes to the Consolidated Financial Statements
11. Intangible Assets
Brand
Goodwill
Website &
development
Costs
Website
technology
Customer
relationships
£’m
£’m
£’m
£’m
£’m
Total
£’m
Cost
At 1 October 2018
35.9
39.7
Additions
Revaluation
At 30 September 2019
Additions
-
-
35.9
-
-
0.5
40.2
-
At 30 September 2020
35.9
40.2
Accumulated amortisation
At 1 October 2018
Charge for the year
At 30 September 2019
Charge for the year
At 30 September 2020
Net book amount
At 30 September 2020
At 30 September 2019
10.3
2.4
12.7
2.4
15.1
-
-
-
-
-
20.8
23.2
40.2
40.2
6.5
5.1
-
11.6
4.0
15.6
1.5
3.2
4.7
4.0
8.7
6.9
6.9
22.8
6.5
111.4
-
-
22.8
-
22.8
11.2
2.4
13.6
2.4
16.0
6.8
9.2
-
-
6.5
-
6.5
0.2
0.7
0.9
0.7
1.6
4.9
5.6
5.1
0.5
117.0
4.0
121.0
23.2
8.7
31.9
9.5
41.4
79.6
85.1
Goodwill
Goodwill acquired in a business combination is allocated on acquisition to the CGUs that are expected to benefit from that business
combination. The carrying amount of goodwill has been allocated as follows:
Reportable segment
OTB
OTB
CCH
CPH
CGU
OTB
Acquisitions
On the Beach Travel Limited
Sunshine
Sunshine.co.uk Limited
Classic
CPH
Classic Collection Limited
Classic Collection Limited
As at 30
September
2020
£’m
As at 30
September
2019
£’m
21.5
10.1
4.6
4.0
40.2
21.5
10.1
4.6
4.0
40.2
Impairment of Goodwill
On the Beach and Sunshine are considered to be one reportable segment, as they are internally reported and managed as one entity, but
for impairment review purposes they are treated as separate CGU’s as they have independent cash inflows. Goodwill acquired through
Sunshine.co.uk has been allocated to the “Sunshine” cash generating unit. Goodwill acquired through the Classic collection acquisition has
been allocated to the “Classic” and “CPH” cash generating units.
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“OTB” CGU
The Group performed its annual impairment test as at 30 September 2020 on the “OTB” cash generating unit (“CGU”). The recoverable
amount of the CGU has been determined based on the value in use calculations using cash flow projections derived from financial
budgets and projections covering a three-year period. The initial two years are based on the latest budget, year three is extrapolated at a
growth rate of 2 percent (2019: 5 percent) and the forecasts are then extrapolated in perpetuity based on an estimated growth rate of 2
percent (2019: 2 percent), this being the Directors’ estimated view best estimate of the future prospects of the business. This is deemed
appropriate because the CGU is considered to be a long-term business. Management estimates discount rates using pre-tax rates that
reflect current market assessments of the time value of money and the risks specific to this CGU. The discount rate applied is 11 percent
(2019: 9.5 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.
“Sunshine” CGU
The Group performed its annual impairment test as at 30 September 2020 on the “Sunshine” cash generating unit (“CGU”). The
recoverable amount of the CGU has been determined based on the value in use calculations using cash flow projections derived
from financial budgets and projections covering a three-year period. The initial two years are based on the latest budget, year three is
extrapolated at a growth rate of 2 percent (2019: 5 percent) and the forecasts are then extrapolated in perpetuity based on an estimated
growth rate of 2 percent (2019: 2 percent), this being the Directors’ estimated view best estimate of the future prospects of the business.
This is deemed appropriate because the CGU is considered to be a long-term business. Management estimates discount rates using pre-
tax rates that reflect current market assessments of the time value of money and the risks specific to this CGU. The discount rate applied is
11 percent (2019: 9.5 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.
“Classic” CGU
The Group performed its annual impairment test as at 30 September 2020 on the “Classic” 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 three year period. The initial two years are based on the latest budget, year three is extrapolated at a 2 percent
growth rate (2019: flat growth rate), the forecasts are then extrapolated in perpetuity based on at a 2 percent growth rate (2019: flat
growth rate). This is deemed appropriate based on the Directors’ best estimate of the future prospects of the business. Management
estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to
the CGU. The discount rate applied is 11 percent (2019: 9.5 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.
“CPH” CGU
The Group performed its annual impairment test as at 30 September 2020 on the “CPH” cash generating unit (“CGU”). The recoverable
amount of the CGU has been determined based on the value in use calculations using cash flow projections derived from financial budgets
and projections covering a three-year period. The initial two years are based on the latest budget, year three is extrapolated at a growth
rate of 2 percent (2019: 2 percent).
The forecasts are then extrapolated in perpetuity based on a 2 percent growth rate (2019: 2 percent). This is deemed appropriate based
on the Directors’ best estimate of the future prospects of the business. Management estimates discount rates using pre-tax rates that
reflect current market assessments of the time value of money and the risks specific to the CGU. The discount rate applied is 11 percent
(2019: 9.5 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.
The “international” CGU has been internally developed and as such, has no goodwill.
Administrative expenses are dependent upon the net costs to the business of purchasing services. Expenses are based on the current cost
base of the Group adjusted for variable costs.
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147
FINANCIAL STATEMENTS
Financial Statements
Notes to the Consolidated Financial Statements
Impact of COVID-19 on impairment considerations
The Group does not consider that any CGU has been automatically impaired as a result of the pandemic. All CGUs remain viable trading
long term assets which the Group expects to continue to generate positive cash flows. Inherent in the impairment test is a period of
disruption followed by a gradual recovery. Sensitivities have been applied to both the extent of and period of disruption and the Group is
satisfied that sufficient headroom still exists to support the asset value.
Development Costs
The Group capitalises development projects where they satisfy the requirements for capitalisation in accordance with the IAS 38 and
expense projects that relate to ongoing maintenance and support. Capitalised development costs are not treated as a realised loss for the
purpose of determining the Company’s distributable profits as the costs meet the conditions requiring them to be treated as an asset in
accordance with IAS 38.
Research and development costs that are not eligible for capitalisation have been expensed in the period incurred, in 2020 this was £1.3m
(2019: £0.3m), and they are recognised in administrative expenses. £0.7m of the expensed costs in the current year were due to projects
no longer viable due to the impact of COVID-19.
Sensitivity to Changes in Assumptions
Sensitivity analysis has been completed on key assumptions in isolation, and the headroom taken is significant. 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. The key assumptions are discount factor, long term growth rates and short term trading volumes/cash flows. Sensitivities have
been applied on all of these assumptions.
12. Tangible Assets
Cost
At 1 October 2018 restated (note 2)
Additions
Revaluation
Transfer assets under construction
At 1 October 2019
Additions
At 30 September 2020
Accumulated deprecation
At 1 October 2018 restated (note 2)
Charge for the year
Disposals
At 1 October 2019
Charge for the year
At 30 September 2020
Net book amount
At 30 September 2020
At 30 September 2019
Freehold
property
Right-of-use
asset (note 19)
Fixtures,
fittings and
equipment
Assets under
construction
£’m
2.0
-
(0.3)
-
1.7
-
1.7
-
-
-
-
-
-
1.7
1.7
£’m
5.3
-
-
-
5.3
-
5.3
0.6
0.5
-
1.1
0.5
1.6
3.7
4.2
£’m
1.5
1.2
-
3.2
5.9
1.2
7.1
0.1
1.1
-
1.2
1.4
2.6
4.5
4.7
£’m
1.1
2.1
-
(3.2)
-
-
-
-
-
-
-
-
-
-
-
Total
£’m
9.9
3.3
(0.3)
-
12.9
1.2
14.1
0.7
1.6
-
2.3
1.9
4.2
9.9
10.6
The depreciation expense of £1.9m for the year ended 30 September 2020 and the depreciation expense of £1.6m for the year ended 30
September 2019 have been recognised within administrative expenses.
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13. Investment Property
At 1 October 2018
Revaluation
At 1 October 2019
Revaluation
At 30 September 2020
Total
£’m
0.8
(0.2)
0.6
-
0.6
Investment property relates to a freehold property acquired as part of the acquisition of Classic Collection Holidays. A portion of the
building earns rental income and has been classified as an investment property. Rental income of £0.1m (2019: £0.1m) was recorded in
the income statement in the current period.
The fair value of investment property was determined by external, independent property valuers, having appropriate recognised
professional qualifications and recent experience in the location and category of the property being valued. The independent valuers
provide the fair value of the Group’s investment property annually. All of the investment properties have been categorised as a Level 2 fair
value based on the inputs to the valuation technique used.
14. Investments
The parent company, On the Beach Group plc, is incorporated in the UK and directly holds a number of subsidiaries. The registered
address for each subsidiary is Aeroworks, 5 Adair Street, Manchester, M1 2NQ.
The table below shows details of the wholly owned subsidiaries of the Group.
Subsidiary
On the Beach Topco Limited
On The Beach Limited*
On The Beach Beds Limited
On The Beach Bid Co Limited
On the Beach Travel Limited
On the Beach Trustees Limited
On the Beach Holidays Limited
Sunshine.co.uk Limited
Sunshine Abroad Limited
Classic Collection Holidays Limited
Classic Collection Aviation Limited
Nature of business
Holding Company
Internet Travel Agent
In-house Bedbank
Holding Company
Holding Company
Employee Trust
Dormant
Internet Travel Agent
Dormant
Tour Operator
Transport Broker
Classic Collection Holiday, Travel & Leisure Limited
Dormant
Saxon House Properties Limited
Property Management
Classic Package Holidays Limited
Travel Agent
*
On the Beach Limited has a Swedish trading division which has a corporate identity number of 516408-9186.
Proportion of ordinary
shares held by the Group
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
There are no restrictions on the Company’s ability to access or use the assets and settle the liabilities of the Company’s subsidiaries.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
149
FINANCIAL STATEMENTS Financial Statements
Notes to the Consolidated Financial Statements
15. Trade and Other Receivables
Amounts falling due within one year:
Trade receivables – net
Other receivables
Prepayments
Restated
(note 2)
2019
£’m
64.7
28.5
1.4
2020
£’m
58.9
43.6
2.2
104.7
94.6
For the year ended 30 September 2020, other receivables includes £34.3m receivable in respect of amounts due from airlines as a result
of exceptional COVID-19 cancellations. By 30 September £89.5m had fallen due from airlines in respect of flights cancelled in the year.
In determining the recoverability of these amounts the Group has considered, the amount of cash received by 30 November, chargeback
and other legal rights. By 30 November, of the balance that was due at the year end, £6.5m remains outstanding which the Group is
confident it will recover.
For the year ended 30 September 2019, other receivables includes £18.5m receivable in respect of chargeback claims following the
failure of the Thomas Cook Group on 23 September 2019. The amount has been fully recovered in the current year.
16. Assets Held for Sale
Properties held for sale
2020
£’m
-
-
2019
£’m
0.2
0.2
The Group acquired two properties through the purchase of Sunshine.co.uk, both properties have been sold.
17. Trust account
Trust accounts are restricted cash held separately and only accessible at the point the customer has travelled or booking is cancelled and
refunded.
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18. Trade, Other Payables and Provisions
Non-current
Lease liabilities (note 19)
Current
Trade payables
Accruals and other payables
Lease liabilities (note 19)
Provision
Restated
(note 2)
2019
£’m
2020
£’m
3.8
4.2
80.2
11.8
0.4
96.2
10.9
107.1
121.6
15.0
0.3
141.1
12.3
153.4
For the year ended 30 September 2020, the £10.9m provision is in respect of expected future cancellations in relation to bookings taken
before 30 September 2020. We expect to this provision to be utilised over the next year. Trade payables includes £9.0m in respect of
refunds owed to customers, with the related receivable from the airlines recognised in trade receivables. Where the refunds are not
received from the airline the Group has a legally enforceable right to offset the recognised amounts. The Group has opted to show the
figures gross due to no option to settle on a net basis or realise the asset and settle the liability simultaneously. For details of assumptions,
see note 3.
In the prior year, the £12.3m provision is in respect of the TCG failure. The amount recognised is an estimate of the cost the Group will
incur to fulfil its obligations to customers under the ATOL regulations to arrange refunds or alternative flights.
19. Leases
The Group has lease contracts for two properties, both with a lease term of 10 years. With the exception of short-term leases and
leases of low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset and a lease liability. The Group
classifies its right-of-use assets in a consistent manner to its property, plant and equipment (see note 12).
Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the
right-of-use asset can only be used by the Group.
Amounts recognised in profit or loss
The following lease-related expenses were recognised under IFRS 16 in the profit or loss:
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Total amount recognised in profit or loss
Restated
(note 2)
2019
£’m
0.5
0.2
0.7
2020
£’m
0.5
0.2
0.7
Set out below are the carrying amounts of lease liabilities (included trade and other payables) and the movements during the period:
As at 1 October
Accretion of interest
Payments
As at 30 September
Current (note 18)
Non-current (note 18)
2020
£’m
4.5
0.2
(0.4)
4.2
0.4
3.8
2019
£’m
4.7
0.2
(0.4)
4.5
0.3
4.2
The Group had total cash outflows for leases of £0.4m in 2020 (£0.4m in 2019). The above table satisfies the requirements of IAS 7.44A
to present a net debt reconciliation.
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151
FINANCIAL STATEMENTS
Financial Statements
Notes to the Consolidated Financial Statements
20. Borrowings
Bank Facility
On 8 April 2020, the Group extended its revolving credit facility with Lloyds Bank plc to 31 December 2023.
The borrowing limits under the facility increased to £50.0m. No early repayment fees are payable.
The interest rate payable is equal to LIBOR plus a margin. The margin contained within the Facility is dependent on net leverage ratio and
the rate per annum is 3.75% for the facility or any unpaid sum.
The terms of the facility include the following financial covenants:
(i)
(ii)
(iii)
(iv)
that the ratio of adjusted EBITDA to net finance charges in respect of any relevant period shall not be less than 5:1;
that the ratio of total net debt to adjusted EBITDA in respect of the relevant period ending 30 June 2020 shall not exceed 2.25:1
and any relevant period ending on or after 30 September 2021 shall not exceed 2:1;
that the total net debt on the last day of the relevant period ending 30 September 2020 shall not exceed £10.0m; and
that the EBITDA in the relevant period ending 30 September 2020 shall not be less than a loss of £(11.6M).
There have been no covenant breaches in the year and there are none expected in the next 12 months.
In addition, on 21 May 2020, the Group secured a revolving credit facility with Lloyds Bank plc pursuant to the Coronavirus Large Business
Interruption Loan Scheme (CLBILS) to 21 May 2022.
The borrowing limits under the CLBILS facility is £25.0m and include the same financial covenants as the extended revolving credit facility.
The interest rate payable is equal to the Base Rate plus a margin. The margin contained within the facility is 2.30% per annum for the
facility or any unpaid sum.
Covenant tests have been amended up to and including 30 June 2021 to account for the impact of COVID-19 on the Group’s results, tests
return to normal from 30 September 2021.
The RCF is available for other credit uses including currency hedging liabilities and corporate credit cards.
At 30 September 2020, the liabilities for these other credit uses was £nil, the amount drawn down at year-end was £nil and there has
been nothing drawn down post year-end.
21. Deferred tax
2020
Assets
Liabilities
Total
2019
Assets
Liabilities
Total
Intangible assets
Property, plant and
equipment
Share-based
payments
£’m
-
(6.2)
(6.2)
-
(6.5)
(6.5)
£’m
-
(0.1)
(0.1)
-
(0.1)
(0.1)
£’m
0.2
-
0.2
0.5
-
0.5
Losses and
unused tax
relief
£’m
3.5
-
3.5
-
-
-
Tax assets/
(liabilities)
£’m
3.7
(6.3)
(2.6)
0.5
(6.6)
(6.1)
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Intangible
asset
Property, plant and
equipment
Share based
payments
30 September 2018
Recognised in income
Recognised in equity
30 September 2019
Recognised in income
Recognised in equity
30 September 2020
£’m
(7.6)
1.1
-
(6.5)
0.3
-
(6.2)
£’m
0.1
(0.2)
-
(0.1)
-
-
(0.1)
£’m
0.3
0.1
0.1
0.5
(0.2)
(0.1)
0.2
Losses and
unused tax
relief
£’m
-
-
-
-
3.5
-
3.5
Total
£’m
(7.2)
1.0
0.1
(6.1)
3.6
(0.1)
(2.6)
The deferred tax asset includes an amount of £3.5m which relates to carried forward tax losses. The Group has concluded that the
deferred assets will be recoverable using the estimated future taxable income based on the approved projections and plans for the
Group. The losses can be carried forward indefinitely and have no expiry date.
22. Share Capital
Allotted, called up and fully paid
2020
£’m
2019
£’m
157,362,037 ordinary shares @ £0.01 each (2019: 131,154,058 @ £0.01 each)
1.6
1.3
During the year, the Group issued 26,143,500 shares via a share placing with a nominal value of £0.01 each, no discount was offered on
the value of the shares. The Group issued an additional 64,479 with a nominal value of £0.01. The holders of ordinary shares are entitled
to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Group.
23. Reserves
The analysis of movements in reserves is shown in the statement of changes in equity.
Details of the amounts included in other reserves are set out below.
During the year ended 30 September 2018, the Group issued 607,747 shares with a nominal value of £0.01 each to form part of the
acquisition of Classic. The consideration value of the shares issued was £2.6m. The excess above the nominal value of the shares was
credited to the merger reserve. The capital redemption reserve arose as a result of the redemption of preference shares in the year ended
30 September 2015.
The capital redemption reserve arose as a result of the redemption of preference shares in the year ended 30 September 2015.
During the year ended 30 September 2020, the Group issued 26,143,500 shares via a share placing with a nominal value of
£0.01 each, no discount was offered on the value of the shares. The consideration value of the shares issued was £65m, net of fees. The
excess above the nominal value of the shares was credited to the share premium.
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153
FINANCIAL STATEMENTS
Financial Statements
Notes to the Consolidated Financial Statements
24. Financial Instruments
Details of significant accounting policies and methods adopted, including criteria for recognition, the basis of measurement and the basis
on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are
disclosed in the statement of accounting policies.
At the balance sheet date the Group held the following:
Financial assets
FV Level
Derivative financial assets designated as hedging instruments
Forward exchange contracts
Financial assets at amortised cost
Trust account
Cash at bank
Trade and other receivables (note 15)
Total financial assets
Financial liabilities
Derivatives designated as hedging instruments
Forward exchange contracts
Financial liabilities at amortised cost
Trade and other payables (note 18)
Total financial liabilities
2
2
2020
£’m
2019
£’m
0.5
-
25.8
36.5
102.5
44.0
54.8
93.2
165.3
192.0
-
(1.0)
(96.2)
(141.1)
(96.2)
(142.1)
Derivative Financial Instruments
The Group enters into derivative financial instruments with various financial institutions which are valued using present value calculations.
The valuation methods incorporate various inputs including the foreign exchange spot and forward rates, yield curves of the respective
currencies and currency basis spreads between the respective currencies.
Revolving Credit Facility
In order to fund seasonal working capital requirements, the Group has a revolving credit facility with Lloyds Bank plc. The borrowing limits
under the facility is £75m per month, subject to covenant compliance, at year end the facility was nil (2019: nil).
For details of the revolving credit facility, see note 20.
The following table provides the fair values of the Group’s financial assets and liabilities:
Forward exchange contracts
FV level
2
2020
£’m
0.5
Restated
(note 2)
2019
£’m
(1.0)
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.
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a) Measurement of Fair Values
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as
follows:
(i) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
(ii) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices)
(iii) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
Forward contracts
As at 30 September 2020
As at 30 September 2019
Level 1
£’m
Level 2
£’m
Level 3
£’m
-
-
0.5
(1.0)
-
-
The forward contracts have been fair valued at 30 September 2020 with reference to forward exchange rates that are quoted in an
active market, with the resulting value discounted back to present value.
b) Financial Risk Management
The Group’s principal financial liabilities, other than derivatives, comprise revolving credit facility, as well as trade and other payables.
The main purpose of these financial liabilities is to finance the Group’s operations. The Group’s principal financial assets include trade
receivables, and cash at bank that derive directly from its operations.
In the course of its business, the Group is exposed to market risk (including foreign exchange risk and interest rate risk), credit risk,
liquidity risk and technology risk. The Group’s overall risk management strategy is to minimise potential adverse effects on the financial
performance and net assets of the Group. These policies are set and reviewed by senior finance management and all significant financing
transactions are authorised by the Board of Directors.
c) Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.
The Group’s key financial market risks are in relation to foreign currency rates. Foreign currency risk results from the substantial cross-
border element of the Group’s trading and arises on sales and purchases that are denominated in a currency other than the functional
currency of the business. Group cash resources are matched with the net funding requirements sourced from three sources namely
internally generated funds, loan facilities and bank funding arrangements.
The foreign currency risk is managed at Group level by the purchase of foreign currency contracts for use as a commercial hedge. During
the course of the period there has been no changes to the market risk or manner in which the Group manages its exposure. The Group is
exposed to interest rate risk that arises principally through the Group’s revolving credit facility.
Liquidity risk, credit risk and capital risk is considered below. The executive team is responsible for implementing the risk management
strategy to ensure that appropriate risk management framework is operating effectively, embedding a risk mitigation culture throughout
the Group. The Board are provided with a consolidated view of the risk profile of the Group. All major exposures are identified and
mitigating controls identified and implemented. Regular management reporting and assessment of the effectiveness of controls provide a
balanced assessment of the key risks and the effectiveness of controls.
The Group does not speculate with derivatives or other financial instruments.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Group’s exposure to the risk of changes in market interest rates is only through the revolving credit facility which is
subject to fluctuations in LIBOR.
Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign
exchange rates. The majority of the Group’s purchases are sourced from outside the United Kingdom and as such the Group is exposed
to the fluctuation in exchange rates (currencies are principally Sterling, US Dollar, Euro and Swedish Krona). The Group places forward
cover on the net foreign currency exposure of its purchases. The Group foreign currency requirement is reviewed twice weekly and
forward cover is purchased to cover expected usage.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
155
FINANCIAL STATEMENTS
Financial Statements
Notes to the Consolidated Financial Statements
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
Trade receivables
Forward exchange contracts
Balance sheet exposure
US Dollar
Cash
Trade payables
Forward exchange contracts
Balance sheet exposure
Swedish Krona
Cash
Trade receivables
Forward exchange contracts
Balance sheet exposure
Norwegian Krona
Cash
Trade receivables
Forward exchange contracts
Balance sheet exposure
Moroccan Dirham
Trade payables
Forward exchange contracts
Balance sheet exposure
156
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
2020
€’m
6.5
2019
€’m
9.6
(47.9)
(78.8)
10.2
11.8
(19.4)
2020
$ ‘m
0.6
(2.7)
0.6
(1.5)
2020
Kr ‘m
0.3
-
-
0.3
2020
Kr ‘m
0.1
-
-
0.1
2020
MAD
‘m
-
-
-
2.3
67.7
0.8
2019
$ ‘m
0.7
(2.4)
2.0
0.3
2019
Kr ‘m
1.0
0.3
-
1.3
2019
Kr ‘m
0.3
0.1
-
0.4
2019
MAD
‘m
(0.3)
0.2
0.1
Foreign Currency Sensitivity
The following table details the Group sensitivity to a percentage change in pounds sterling against these currencies with regards to
equity. The sensitivity analysis of the Group’s exposure to foreign currency risk at the reporting date has been determined based on a 10
per cent change taking place at the beginning of the financial period and held constant throughout the reporting period:
Euro
Weakening - 10%
Strengthening - 10%
US Dollar
Weakening - 10%
Strengthening - 10%
2020
£’m
(1.7)
1.7
(0.1)
0.1
2019
£’m
(1.1)
1.1
(0.1)
0.1
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:
Foreign
currency
2020
Notional
value
2019
Fair
value
Foreign
currency
Notional
value
Fair
value
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
MAD
30 September
Less than 3 months
3 to 6 months
Total
7.9
-
-
9.3
1.6
-
(0.5)
-
-
7.9
10.9
(0.5)
48.9
12.5
28.3
89.7
Foreign
currency
2020
Notional
value
Fair
value
Foreign
currency
Notional
value
Fair
value
0.6
0.6
-
-
-
-
0.6
0.6
-
-
-
-
1.7
0.9
0.5
3.1
Foreign
currency
2020
Notional
value
Fair
value
Foreign
currency
Notional
value
Fair
value
0.3
0.1
0.6
1.0
43.7
11.2
25.8
80.7
2019
-
-
-
-
1.4
0.7
0.4
2.5
2019
-
-
-
-
-
-
-
-
-
1.8
0.2
2.0
0.1
-
0.1
-
-
-
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
157
FINANCIAL STATEMENTS Financial Statements
Notes to the Consolidated Financial Statements
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.
Trade Receivables
The ageing of trade receivables at the balance sheet date was:
As at 30 September 2020
As at 30 September 2019
Not past
due
£’m
58.5
63.8
Past due 0-30
days
£’m
Past due >30
days
£’m
0.2
0.5
0.2
0.4
Total
£’m
58.9
64.7
In line with IFRS 9, the Group applies the simplified approach for the impairment of trade receivables and therefore does not track changes
in credit risk, instead a loss allowance is recognised based on lifetime expected credit lossess at each reporting date. The Group uses a
provision matrix to measure expected credit losses based on historical cancellation rates and considers forward-looking factors including
the impact of COVID-19. There has been £0.5m of impairment charged to trade receivables in the current year (2019: £0.4m).
Financial Instruments and Cash Deposits
As part of credit risk, the Group is subject to counterparty risk in respect of the cash and cash equivalents held on deposit with banks and
foreign currency financial instruments. The Group generally deposits cash and undertakes currency transactions with highly-rated banks.
The Group considers that its cash and cash equivalents have low credit risk based on the external credit ratings of the counterparties.
No collateral or credit enhancements are held in respect of any financial derivatives. The maximum exposure to credit risk at each
reporting date is the fair value of financial assets and trade receivables.
Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. It is Group policy to maintain a
balance of funds, borrowing, committed bank loans and other facilities sufficient to meet anticipated short-term and long-term financial
requirements. In applying the policy the Group continuously monitors forecast and actual cash flows against the maturity profiles of
financial assets and liabilities. It is Group policy to ensure that a specific level of committed facilities is always available based on forecast
working capital requirements. Cash forecasts identifying the Group’s liquidity requirements are produced and are sensitised for different
scenarios including, but not limited to, decreases in profit margins and weakening of sterling against other functional currencies.
The following are the contractual maturities of financial liabilities:
Financial liabilities at amortised cost
Carrying
amount
Contractual
cash flows
Within 1
year
1 to 5
years
> 5 years
Sep-20
Trade payables
Lease liabilities
Other payables
Sep-19
Trade payables
Lease liabilities
Other payables
£’m
80.2
4.2
11.8
96.2
£’m
80.2
4.9
11.8
96.9
£’m
80.2
0.6
11.8
92.6
121.6
121.6
121.6
4.5
15.0
5.3
15.0
0.5
15.0
141.1
141.9
137.1
£’m
-
3.0
-
3.0
-
2.8
-
2.8
£’m
-
1.3
-
1.3
-
2.0
-
2.0
158
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
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 20) and equity of the Group as disclosed in note
23. The Group is not subject to any externally imposed capital requirements.
25. Share-Based Payments
The following table illustrates the number of, and movements in, share options granted by the Group
Outstanding at the beginning of the year
Granted during the year
Lapsed during the year
Vested during the year
Forfeited during the year
Outstanding at the year end
LTIP
CSOP & RSA
Total
No. of share options
(thousands)
No. of share options
(thousands)
No. of share options
(thousands)
1,746
703
(292)
(63)
(28)
2,066
458
180
-
-
(66)
572
2,204
883
(292)
(63)
(94)
2,638
LTIP
The LTIP scheme started on 26 May 2016 and the Group has awarded nil-cost options under the scheme each year since then.
The vesting of 30% of the award will be dependent on a relative Total Shareholder Return (“TSR”) performance condition measure
over the performance period and the vesting of 70% of the award will be dependent on the satisfaction of an Earnings per
Share (“EPS”) target. For the 2016-2019 schemes the EPS target is measured at the end of the three-year performance period
commencing on the first day of the financial period in which they are awarded in. For the 2020 LTIP scheme the EPS target is
measured across a three-year performance period, to the end of year ending September 2022.
During the prior year, the Group awarded nil-cost options to certain key management within the business. The vesting of these
awards will be dependent on EBITDA. On 29 June 2020, an additional 30,000 shares were granted. For these options awarded,
the vesting will be dependent on achieving a best quarter EBITDA between 1 January 2021 and 31 March 2022.
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
159
FINANCIAL STATEMENTS
Financial Statements
Notes to the Consolidated Financial Statements
During the current year, the Group awarded nil-cost options to certain key employees within the business. The vesting of these
awards will be dependent on set departmental targets.
Exercise
price
Expected
volatility
Option
Life
Risk
free
rate
Dividend
yield
Non-
vesting
conditions
Fair
value at
grant
date
(%)
(years)
(%)
(%)
(%)
(£)
No. of
options
awarded
Share
price at
grant
date
(£)
180,728
4.120
421,698
4.120
61,400
3.910
143,268
3.910
127,113
4.500
296,596
4.500
132,923
4.440
310,153
4.440
805,000
4.630
30,000
3.020
176,331
4.340
411,438
4.340
35,000
4.340
3,374
4.212
7,872
4.212
(£)
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Award date
26 May 2017 (TSR
dependent)
26 May 2017 (EPS
dependent)
31 May 2017 (TSR
dependent)
31 May 2017 (EPS
dependent)
20 December 2017
(TSR dependent)
20 December 2017
(EPS dependent)
12 February 2019
(TSR dependent)
12 February 2019
(EPS dependent)
9 July 2019 (EBITDA
dependant)
29 June 2020
(EBITDA dependant)
3 December 2019
(TSR dependent)
3 December 2019
(EPS dependent)
3 December 2019
(EBITDA dependent)
18 February 2020
(TSR dependent)
18 February 2020
(EPS dependent)
18 February 2020
(performance target
dependent)
10 March 2020 (TSR
dependent)
10 March 2020 (EPS
dependent)
30%
3.0
0.07%
0.75%
-
3.0
0.07%
0.75%
30%
3.0
0.07%
0.79%
-
3.0
0.07%
0.79%
30%
3.0
0.54%
0.62%
-
3.0
0.54%
0.62%
43%
3.0
0.73%
0.74%
-
-
-
3.0
0.73%
0.74%
3.0
0.73%
0.74%
1.3
0.47%
0.76%
38%
3.0
0.47%
0.76%
-
3.0
0.47%
0.76%
38%
3.0
0.47%
0.76%
38%
3.0
0.47%
0.76%
-
3.0
0.47%
0.76%
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
2.890
4.030
2.590
3.820
1.880
4.420
4.341
1.810
4.520
2.992
1.900
4.240
4.240
1.900
4.115
4.115
1.900
2.632
15,000
4.212
Nil
38%
3.0
0.47%
0.76%
7,079
2.698
16,518
2.698
Nil
Nil
38%
3.0
0.47%
0.76%
-
3.0
0.47%
0.76%
Expected volatility is estimated by considering historic average share price volatility at the grant date.
160
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Restricted Share Award (nil-cost option) and CSOP
The RSA scheme started on 27 October 2017, the Group awarded nil-cost options to key employees excluding Executive
Directors. The awards will vest after three years, on 27 October 2020, subject to continued employment, but with no other
performance conditions. During FY19, awards were made which will vest on 15 October 2021 or 12 February 2022 as applicable
under the same terms. A further award was made during the year. The awards will vest on 3 December 2022 subject to continued
employment but no other performance conditions.
The number of shares subject to the CSOP Awards has been determined by reference to the mid-market price of a share on date
of award. In order to optimise the post-tax value of the LTIP for participants, the Company has granted market-value options as
defined under UK tax legislation (“CSOP Options”) to the participants.
Type
Award
year
No. of
shares
Share
price at
grant
date
(£)
RSA
2018
185,888
4.273
CSOP
2018
138,924
4.273
RSA
2019
108,110
4.265
CSOP
2019
99,239
4.265
RSA
2020
99,076
4.340
CSOP
2020
80,745
4.340
Exercise
price
Expected
volatility
Option
Life
Risk free
rate
Dividend
yield
Non-
vesting
conditions
Fair
value at
grant
date
(years)
(%)
(%)
(%)
(£)
(£)
Nil
Nil
Nil
Nil
Nil
Nil
(%)
N/A
N/A
N/A
N/A
N/A
N/A
3.0
3.0
3.0
3.0
3.0
3.0
0.55%
0.73%
0.55%
0.73%
0.54%
0.74%
0.54%
0.74%
0.47%
0.76%
0.47%
0.76%
The following has been recognised in the income statement during the year:
LTIP
RSA
Total share scheme charge
26. Commitments and Contingencies
a) Capital Commitments
No capital commitments during the year.
b) 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.
27. Related Party Transactions
No related party transactions have been entered into during the year.
Transactions with key management personnel have been disclosed in note 7(d).
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
161
Nil
Nil
Nil
Nil
Nil
Nil
2020
£’m
(0.8)
0.2
(0.6)
4.200
Nil
4.071
Nil
4.242
Nil
2019
£’m
0.1
0.6
0.7
FINANCIAL STATEMENTS Financial Statements
Company Balance Sheet
Year ended 30 September 2020
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
Merger reserve
Capital contribution reserve
Retained earnings
Total equity
Note
2020
£’m
2019
£’m
4
5
6
132.6
132.6
145.5
-
145.5
(17.5)
-
(17.5)
260.6
1.6
64.8
2.6
0.5
191.1
260.6
68.0
0.2
68.2
(1.0)
(0.1)
(1.1)
199.7
1.3
-
2.6
0.5
195.3
199.7
The loss for the year ended 30 September 2020 dealt with in the financial statements of the parent company is £1.0m (2019: loss
£0.4m).
The financial statements were approved by the Board of Directors and authorised for issue.
Shaun Morton
Chief Financial Officer
Thursday, 10 December 2020
On the Beach Group plc. Reg no 09736592
162
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Financial Statements
Company statement of changes in equity
Year ended 30 September 2020
Balance at 30 September 2018
Shares issued during the year
Share-based payment charges
Dividends paid during the year
Total comprehensive profit/(loss) for the year
Balance at 30 September 2019
Shares issued during the year
Costs related to shares issued
Share based payment charges including tax
Dividends paid during the year
Total comprehensive profit/(loss) for the year
Share
capital
Share
premium
Merger
reserve
Capital
contribution
Retained
earnings
£’m
1.3
-
-
-
-
1.3
0.3
-
-
-
-
£’m
-
-
-
-
-
-
67.0
(2.2)
-
-
-
£’m
2.6
-
-
-
-
£’m
0.5
-
-
-
-
£’m
199.6
-
0.7
(4.6)
(0.4)
2.6
0.5
195.3
-
-
-
-
-
-
-
-
-
-
-
-
(0.6)
(2.6)
(1.0)
Total
£’m
204.0
-
0.7
(4.6)
(0.4)
199.7
67.3
(2.2)
(0.6)
(2.6)
(1.0)
Balance at 30 September 2020
1.6
64.8
2.6
0.5
191.1
260.6
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
163
FINANCIAL STATEMENTS Financial Statements
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.
Basis of Preparation
These financial statements were prepared in accordance with Financial Reporting Standard 102. The Financial Reporting Standard
is 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 £1,000,000.
The financial information presented is at and for the years ended 30 September 2020 and 30 September 2019.
As permitted by Section 408 of the Companies Act 2006, an entity profit and loss account is not included as part of the published
consolidated financial statements of On the Beach Group plc. The loss for the year ended 30 September 2020 dealt with in the financial
statements of the parent company is £1.0m (2019: loss £0.4m).
Under the provisions of FRS 102.1.12B, the company is exempt from preparing a company statement of cash flows.
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.
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.
Accounting Estimates and Judgements
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.
Net assets of the parent company exceed that of the consolidated Group primarily due to a capital reorganisation in 2015. The value
of investments held combined with the amount owed by subsidiary undertakings is supported by net assets of the subsidiaries plus
forecasted future discounted cash flows.
Details of the subsidiaries are listed in note 14 to the consolidated financial statements.
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 84 to 106.
3. Share-Based Payments
The Company recognised total credit of £0.6m (2019: expenses £0.7m) in the year in relation to the Long Term Incentive Plan. Details of
this scheme are described in note 25 to the consolidated financial statements.
Investments
4.
The £132,613,000 investment in subsidiary undertakings made in 2015 relates to the capital re-organisation of the Group in 2015.
There has been no movement in the current year.
164
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
5. Debtors
Amounts falling due within one year:
Amounts owed by group undertakings
6. Creditors Due Within One Year
Current
Amounts owed to group undertakings
Bank overdraft
Other taxes and social security
Accruals
7. Called-Up Share Capital
Allotted, called up and fully paid
157,362,037 ordinary shares @ £0.01 each (2019: 131,154,058 @ £0.01 each)
2020
£’m
145.5
145.5
2020
£’m
16.1
-
0.2
1.2
17.5
2019
£’m
68.0
68.0
2019
£’m
-
-
0.2
0.8
1.0
2020
£’m
2019
£’m
1.6
1.6
1.3
1.3
During the year, the Group issued 26,143,500 shares via a share placing with a nominal value of £0.01 each, no discount was
offered on the value of the shares. The Group issued an additional 64,479 with a nominal value of £0.01. The holders of ordinary
shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the
Group.
8. 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 2020 was £nil (2019: £nil).
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
165
FINANCIAL STATEMENTS
Glossary of Alternative Performance Measures (APMs)
APM
Definition
Reconciliation to closest GAAP measure
Adjusted OTB
EBIT
Adjusted OTB EBIT is based on OTB operating
profit before the impact of exceptional costs,
amortisation of acquired intangibles and the
non-cash cost of the share based payment
schemes. Exceptional costs consists of
exceptional cancellations as result of COVID-19
in 2020 and TCG failure in 2019, and other
exceptional costs that derive from events or
transactions that fall outside of the normal
activities of the Group. These costs/income are
excluded by virtue of their size and in order to
reflect management’s view of the performance
of the segment.
Adjusted OTB operating profit (£m)
2020
2019
OTB Operating Profit
(37.7)
21.0
Exceptional costs
Share Based Payments
Amortisation of acquired intangibles
Adjusted OTB EBIT
39.0
(0.6)
4.4
5.1
8.2
0.7
4.4
34.3
Adjusted OTB
EBITDA
Adjusted OTB EBITDA is based on OTB
operating profit before depreciation,
amortisation, impact of exceptional costs
and the non-cash cost of the share based
payment schemes. Exceptional costs consists of
exceptional cancellations as result of COVID-19
in 2020 and TCG failure in 2019, and other
exceptional costs that derive from events or
transactions that fall outside of the normal
activities of the Group. These costs/income are
excluded by virtue of their size and in order to
reflect management’s view of the performance
of the segment.
Adjusted OTB EBITDA (£m)
2020
2019
OTB Operating Profit
(37.7)
21.0
Exceptional costs
Share Based Payments
Depreciation and amortisation
Amortisation of acquired intangibles
39.0
(0.6)
5.5
4.4
8.2
0.7
4.6
4.4
Adjusted OTB EBITDA
10.6
38.9
International
EBITDA
International EBITDA is based on International
operating loss before depreciation and
amortisation.
Adjusted
International
EBITDA
Adjusted International EBITDA is based on
International operating loss before depreciation,
amortisation and the impact of exceptional
costs. Exceptional costs consists of exceptional
cancellations as result of COVID-19 in 2020 and
TCG failure in 2019, and other exceptional costs
that derive from events or transactions that fall
outside of the normal activities of the Group.
These costs / income are excluded by virtue of
their size and in order to reflect management’s
view of the performance of the Segment.
Classic
EBITDA
Classic EBITDA is based on Classic operating
profit before depreciation and amortisation.
International EBITDA (£m)
2020
2019
International Operating Loss
Depreciation and amortisation
International EBITDA
(0.6)
0.1
(0.5)
(0.7)
0.1
(0.6)
International EBITDA (£m)
2020
2019
International Operating Loss
(0.6)
(0.7)
Depreciation and amortisation
Exceptional costs
0.1
0.2
0.1
-
International EBITDA
(0.3)
(0.6)
Classic EBITDA (£m)
2020
2019
Classic Operating Loss
Depreciation and amortisation
Classic EBITDA
(3.2)
1.2
(2.0)
0.2
1.3
1.5
166
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
5.5
(0.6)
41.7
0.3
0.6
2020
(38.8)
(0.5)
33.8
0.3
4.5
5.5
0.7
7.7
1.3
34.5
2019
15.6
0.6
6.2
1.1
4.5
APM
Definition
Reconciliation to closest GAAP measure
Adjusted
Profit before
Tax
Adjusted Profit before Tax is based on
Profit before Tax adjusted for the impact of
exceptional costs, amortisation of acquired
intangibles and the non-cash cost of the
share based payment schemes. Exceptional
cancellations consist of cancellations as
result of COVID-19 in 2020 and TCG failure
in 2019. These costs/income are excluded
by virtue of their size and in order to reflect
management’s view of the performance of
the Group.
Amortisation of acquired intangibles
Share Based Payments
Impact of exceptional cancellations
Other exceptional costs
Adjusted Profit before Tax
Adjusted Profit before Tax (£m)
2020
2019
Profit before Tax
(46.3)
19.3
Adjusted
Profit after
Tax
Adjusted Profit after Tax is based on
Profit after Tax adjusted for the impact of
exceptional costs, amortisation of acquired
intangibles and the non-cash cost of the
share based payment schemes. Exceptional
cancellations consist of cancellations as
result of COVID-19 in 2020 and TCG failure
in 2019. These costs/income are excluded
by virtue of their size and in order to reflect
management’s view of the performance of
the Group.
Adjusted Profit after Tax (£m)
Profit for the year
Share based payments (net of tax)
Impact of exceptional cancellations
(net of tax)
Other exceptional costs (net of tax)
Amortisation of acquired intangibles
(net of tax)
Adjusted Profit after Tax
(0.7)
27.9
Adjusted EPS Adjusted EPS is calculated on the weighted
average number of ordinary share in issue,
using the adjusted profit after tax.
Adjusted EPS (£m)
Adjusted Profit after Tax
Basic weighted average number of
Ordinary Shares (m)
2020
(0.7)
2019
27.9
140.2
131.1
Adjusted EPS (p)
(0.5)
21.3
Exceptional
costs
Exceptional costs are certain costs/income
that derive from events or transactions that
fall outside of the normal activities of the
Group. These costs/income are excluded
from various performance measures by virtue
of their size and in order to better reflect
management’s view of the performance of
the Group.
Exceptional costs (£m)
Impact of COVID-19
Impact of TCG
Other exceptional costs
Exceptional costs
2020
41.7
-
0.3
42.0
2019
-
7.7
1.3
9.0
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
167
FINANCIAL STATEMENTS Glossary of Alternative Performance Measures (APMs)
APM
Definition
Reconciliation to closest GAAP measure
Operating
cash
conversion
Operating cash conversion is EBITDA
divided by cash generated from operating
activities. These cash flows are excluded
from various performance measures
by virtue of their size and in order to
better reflect management’s view of the
performance of the Group.
OTB adjusted
revenue after
marketing
cost
OTB adjusted revenue after marketing
cost is revenue after “OTB” online and
offline marketing costs.
Operating
profit before
amortisation
and
exceptional
costs
Operating profit before amortisation
and exceptional costs is based on
Group operating profit, adjusting for
amortisation of acquired intangibles
and the impact of exceptional
costs. Exceptional costs consists of
exceptional cancellations as result of
COVID-19 in 2020 and TCG failure in
2019, and other exceptional costs that
derive from events or transactions that
fall outside of the normal activities of
the Group.
Operating cash conversion (£m)
2020
2019
Profit before taxation
(46.3)
19.3
Depreciation
Amortisation
Net finance (income)/costs
Share based payments
EBITDA
Movement in working capital
Movement in Trust account
Cash generated from operating activities
OTB adjusted revenue after marketing cost
(£m)
OTB adjusted revenue
OTB online marketing costs
OTB offline marketing costs
1.9
9.5
0.4
(0.6)
(35.1)
(58.0)
18.3
(74.8)
1.6
8.7
0.0
0.7
30.4
2.3
(5.6)
27.1
2020
2019
50.4
(14.2)
(8.7)
90.3
(29.8)
(5.4)
Total OTB marketing
(22.9)
(35.2)
OTB adjusted revenue after marketing costs
27.5
55.1
Operating profit before amortisation and
exceptional costs (£m)
Operating profit
Exceptional costs
Amortisation of intangibles
2020
2019
(46.3)
19.3
42.0
9.5
9.0
8.7
Operating profit before amortisation and
exceptional costs (£m)
5.2
37.0
OTB
EBITDA as a
percentage
of adjusted
revenue
OTB EBITDA as a percentage of adjusted
revenue is based on the adjusted OTB
EBITDA divided by the revenue generated
in the OTB business before the impact
of exceptional cancellations. Exceptional
cancellations relate to COVID-19 in 2020
and TCG failure in 2019.
OTB EBITDA as a percentage of adjusted
revenue
2020
2019
Revenue
Exceptional cancellations
Adjusted revenue
Adjusted OTB EBITDA
OTB EBITDA as a percentage of revenue
15.9
34.5
50.4
10.6
21%
83.3
7.0
90.3
38.9
43%
168
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
APM
Definition
Reconciliation to closest GAAP measure
International
revenue after
marketing
costs
International revenue after marketing
costs is based on international revenue
after all marketing costs
Classic
adjusted
EBITDA
Adjusted Classic EBITDA is based
on Classic operating profit before
depreciation, amortisation and
the impact of exceptional costs.
Exceptional costs consists of
exceptional cancellations as result of
COVID-19 in 2020 and TCG failure
in 2019, and other exceptional
costs that derive from events or
transactions that fall outside of
the normal activities of the Group.
These costs/income are excluded
by virtue of their size and in order
to reflect management’s view of the
performance of the segment.
International revenue after marketing costs (£m)
2020
2019
Revenue
Marketing costs
International revenue after marketing costs
0.1
(0.2)
(0.1)
1.4
(1.4)
-
Classic adjusted EBITDA (£m)
2020
2019
Classic Operating Loss
Impact of exceptional cancellations
Other exceptional costs
Depreciation and amortisation
Amortisation of acquired intangibles
Adjusted Classic EBITDA
OTB EBITDA
OTB EBITDA is based on OTB
operating profit before depreciation
and amortisation.
OTB EBITDA (£m)
OTB Operating Loss
Depreciation and amortisation
OTB EBITDA
CPH EBITDA
CPH EBITDA is based on OTB
operating profit before depreciation and
amortisation.
OTB EBITDA (£m)
CPH Operating Loss
Depreciation and amortisation
CPH EBITDA
OTB EBITDA (£m)
CPH Operating loss
Depreciation and amortisation
Exceptional costs
Adjusted CPH EBITDA
Adjusted CPH
EBITDA
Adjusted CPH EBITDA is based on CPH
operating profit before depreciation,
amortisation and the impact of
exceptional costs. Exceptional costs
consists of exceptional cancellations as
result of COVID-19 in 2020 and TCG
failure in 2019, and other exceptional
costs that derive from events or
transactions that fall outside of the normal
activities of the Group. These costs /
income are excluded by virtue of their size
and in order to reflect management’s view
of the performance of the Segment.
(3.2)
0.1
-
0.1
1.1
(1.9)
0.2
0.4
0.3
0.2
1.1
2.2
2020
2019
(37.7)
21.0
9.9
9.0
(27.8)
30.0
2020
2019
(4.4)
(1.2)
0.2
-
(4.2)
(1.2)
2020
2019
(4.4)
(1.2)
0.2
2.7
-
0.1
(1.5)
(1.1)
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
169
FINANCIAL STATEMENTS Shareholder Information
Registered Office
5 Adair Street,
Manchester
M1 2NQ
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)
Web: www.ebeach.dk (Denmark)
Web: www.sunshine.co.uk (UK)
Web: www.classic-collection.co.uk (UK)
Investor relations: corporate@onthebeach.co.uk
Cautionary statement
The purpose of this Annual Report is to provide
information to the members of the Company. The
Company and its Directors accept no liability to third
parties in respect of this Annual Report save as would
arise under English law.
This Annual Report contains certain forward-looking
statements with respect to the financial condition,
results, operations and businesses of the Company.
Forward looking statements are sometimes, but not
always, identified by their use of a date in the future or
such words as ‘anticipates’, ‘aims’, ‘due’, ‘will’, ‘could’,
‘may’, ‘should’, ‘expects’, ‘believes’, ‘intends’, ‘plans’,
‘targets’, ‘goal’ or ‘estimates’. These forward-looking
statements involve risk and uncertainty because they
relate to events and depend on circumstances that
may or may not occur in the future.
There are a number of factors that could cause actual
results or developments to differ materially from
those expressed or implied by these forward-looking
statements, including factors outside the Company’s
control. The Forward-looking statements reflect the
knowledge and information available at the date
of preparation of this Annual Report and will not
be updated during the year. Nothing in this Annual
Report should be construed as a profit forecast.
170
ON THE BEACH GROUP PLC | ANNUAL REPORT & ACCOUNTS 2020
Company Secretary
Kirsteen Vickerstaff
5 Adair Street,
Manchester
M1 2NQ
United Kingdom
Corporate Brokers
Peel Hunt LLP
Moor House
120 London Wall
EC2Y 5ET
Numis Securities Limited
10 Paternoster Row
London
EC4M 7LT
Statutory Auditors
Ernst & Young LLP
2 St Peter’s Square
Manchester
M2 3DF
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Corporate solicitors
Addleshaw Goddard LLP
One Peter’s Square
Manchester
M2 3DE
Corporate PR advisers
FTI Consulting
200 Aldersgate
Aldersgate Street
London
EC1A 4HD
For your notes
For your notes
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On the Beach is a fast-growing,
leading online retailer of beach holidays
Aeroworks, 5 Adair St, Manchester M1 2NQ
www.onthebeachgroupplc.com (Group)
www.onthebeach.co.uk / www.sunshine.co.uk / www.classic-collection.co.uk / www.classic-package.co.uk (UK)
www.ebeach.se / www.ebeach.no / www.ebeach.dk (International)
On the Beach Group plc
Annual Report & Accounts
For the year ended 30 September 2020
TOTAL FINANCIAL
P R O T E C T I O N