FY16 Preliminary Results Presentation December 2016
Agenda Simon Cooper FY16 Highlights CEO Wendy Parry Financial Performance FY16 CFO Evolution of Key Drivers Simon Cooper Summary and Outlook CEO Q and A 2
Profit & Loss Account – UK Segment FY16 EBITDA growth of 25.5% in the UK Strong growth year on year: Revenue +12.3% EBITDA +25.5% Efficient increase in our market traffic share with marketing spend excluding offline as a % of revenue falling to 44.7% Investment in place in supply function supports increasing % of direct contracting and fixed and variable cost per booking dropped from 16.0% to 14.6% of Revenue EBITDA % revenue at 35.8% in FY16 up from 32.0% in FY15 3
Profit and Loss Account - International Investment continues in Sweden to build scale and brand Success in international markets defined as profitable performance within 2-3 years of launch at scale OTB has invested to grow its share of market both online and offline 4
Profit and Loss Account - Group Underlying profit before tax +47% increase YOY External financing costs reduced significantly through renegotiation of facilities post IPO Shareholder loan interest and amortisation of acquired intangibles below underlying profit before tax Effective tax rate in FY15 affected by disallowed shareholder interest 5 Note: Effective tax rate is based on corporation tax divided by retained earnings excluding deal fees and amortisation of intangibles
Balance Sheet All customer monies are paid into a trust account which is effectively a debtor to the business Net cash position has increased from £10.9m to £26.1m Bank loans repaid in full out of the Group’s existing cash balances post IPO Seasonal cash flow requirements are covered by a revolving credit facility 6
Cash Flow Strong cash conversion at 90% The Board recommends a dividend of 2.2p per share and thereafter intends to adopt a progressive dividend policy £3m of deal costs accrued in FY15 relating to the IPO were paid in the first half of FY16 7 Source: Company Information
Business Highlights OTB is disrupting the retail of beach holidays through innovative technology and customer value proposition Structural Market A number of external events disrupted the overall holiday market Growth & Market OTB continued to grow share of market, growing daily unique visitors to site by 12.6% YOY Share Growth Continued investment in technology and talent increased the pace of innovation Optimise Customer Proposition 77% increase in smartphone bookings YOY with 96% increase YOY in visitors logging in to site Focus on profitable growth drove revenue per booking up 7.5% YOY Leverage £ Revenue Direct contracts achieving up to 70% of forward arrivals by month Efficiencies in online marketing reduced spend as a % of revenue to 44.7% (FY15 48.6%) Drive Efficient Share Growth & Offline investment continues to increase awareness of our brand nationally Strengthen Brand Drive Operational 47% YOY growth in Underlying Group PBT Leverage & Expand Strong growth in Sweden with Norway launch planned for December 2016 Internationally 8
Disruptive retailer of beach package holidays On the Beach has the product advantages of a tour operator with the model advantages of an OTA Tour OTA Operator Cost Base HIGH LOW Risk HIGH LOW Margin HIGH LOW Product NARROW BROAD Range Specialist Generalist 9
Market FY16 The market backdrop in FY16 was unsettled by multiple external events Short haul beach online versus offline (UK) Overall short haul beach holiday volumes are resilient and online penetration continues to increase 16,000 Short haul beach offline Short haul beach online +7% 14,000 +5% 12,000 Dynamic packaging offers greater value and flexibility and steals share from traditional package 10,000 2 8,000 6,000 2016 was disrupted by multiple external events 4,000 2,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Traditional package versus dynamic package 4 25% 20% Traditional Package 3 Dynamically Packaged 15% 10% 5% 0% 2010 2011 2012 2013 2014 -5% -10% 10
Competitive Landscape and Barriers to Success On the Beach sells high margin tour operator style product with a lightweight OTA style fixed cost base FOCUS EXPERTISE AGILITY SCALE BRAND UK Short Haul Beach Online - Estimated Market Share Tour operator short haul volumes (m pax) 10 TUI 9 Thomas Cook 8 -7% Jet2holidays 7 Cosmos Holidays 6 Olympic Holidays 5 On The Beach 4 Travel Republic Low Cost Holidays 3 Love Holidays 2 Easyjet Holidays 1 JET2 Other OTA 0 Other tour operator 2008 2009 2010 2011 2012 2013 2014 2015 2016 11
Key Drivers of Growth
Innovate through investment in talent & technology Continued investment into in-house technology extends our ability to out innovate the competition Technology platform architecture Continued investment in our technology capability will allow us to innovate at an increasing pace Service management, monitoring and alerting Team is currently 75 specialists Management information system Technology platform Evolution to an ever more agile way of working Geolocation CMS CRM Services Basket New features building on our existing platform Backoffice Recommendat myOTB Deals app App ion engine API app Flights app Hotels app Currency App Manage Your Search Order Personalisation Booking Service Processing Data aggregation Data acquisition 13
Optimise Customer Proposition Our ambition is to drive a fully personalised cross-device experience for all users on all devices Logged in visitors FY16 vs FY15 Revenue per Revenue per Conversion unique visitor booking 4,500,000 4,000,000 3,500,000 3,000,000 Increases to Revenue per UV driven through multiple projects: 2,500,000 2,000,000 Device level 1,500,000 1,000,000 Log in and cross device optimisation 500,000 - Real time personalisation FY15 FY16 Off site personalisation Smartphone Bookings FY16 vs FY15 Increase in +13% 120,000 mobile RPUV Traffic shaping 100,000 The features we are developing are supported by the infrastructure 80,000 that has been built into the heart of our platform over a number of years 60,000 40,000 20,000 - FY15 FY16 14
Leverage Increased £ Revenue We have scaled our supply function to achieve significant incremental net margin contribution Investment made in FY14 and FY15 to scale our supply function Direct contracting - share of monthly arrivals FY14 to FY17 80.0% 70% Direct contracting hotels performs ahead of expectations 70.0% 60.0% Future opportunities include: 50.0% 40.0% Product : Expand product offering to address long haul and luxury 30.0% segments 20.0% 10.0% Exclusivity: See over 0.0% May 14 Jul 14 Sep 14 May 15 Jul 15 Sep 15 May 16 Jul 16 Sep 16 May 17 Jul 17 Jan 14 Mar 14 Nov 14 Jan 15 Mar 15 Nov 15 Jan 16 Mar 16 Nov 16 Jan 17 Mar 17 Investments made to technology to optimise point of sale margin Revenue per product type FY15 vs FY16 Hotels (3rd party) Hotels (direct contract) Transfers (direct contract) Flights Other 15
Target exclusivity Driving an increasing % of exclusivity presents a huge margin opportunity Independent hoteliers want to spread their distribution Hotels: Incremental volume / margin opportunity B2B airlines need a distribution partner without aircraft HIGH Total UK We can drive incremental volume and higher margin at point of sale >10% exclusivity ‒ With exclusive programme of flying Sales Volume and Margin Opportunity TARGET AREA ‒ By driving UK OTA rate and total exclusivity in hotels ‒ By ringfencing last room availability UK OTA 10% exclusivity Whilst maintaining a risk-free model Ringfenced last room availability 6% UK OTA rate exclusivity Standard direct contracts – 3-4% disintermediate 3 rd parties Long tail 3 rd party stock LOW 16
Drive Efficient Market Share Growth Superior customer proposition delivers increased margins and fuels market share growth Growing share cost effectively The business has historically invested c.50% of growing revenue in marketing to drive share Online Marketing 46.0% 49.9% 50.7% 48.6% 44.7% spend as % of £1.40 Revenue £1.20 A multi-channel strategy supported by sophisticated in house bid +£0.36 modelling and attribution tool allows efficient share growth £1.00 Revenue per daily UV £0.80 ‒ Advantage maintained through continued Investment into: +£0.18 £0.60 Marketing cost per daily UV ‒ Cross device attribution through login £0.40 +£0.24 EBITDA per ‒ Econometric attribution of offline advertising £0.20 daily UV £0.00 ‒ Data management platform integration FY12 FY13 FY14 FY15 FY16 % Revenue spent on online marketing – monthly evolution 75% 70% FY14 FY15 FY16 65% 60% 55% 50% 45% 40% 35% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 17
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