The UKs leading online retailer of beach holidays Interim Results for the six months ended 31 March 2016
Agenda Simon Cooper H116 Highlights CEO Wendy Parry Financial Performance H116 CFO Evolution of Key Drivers Simon Cooper Summary and Outlook CEO Q and A 2
H116 highlights OTB continues to disrupt the retail of beach holidays through innovative technology and customer value proposition 17% YOY increase in daily unique visitors to site in H116 Structural Market Noticeable shift in consumer appetite away from the Eastern Mediterranean Growth & Market Share Growth Shift towards a later booking pattern – expectation of a strong lates market Continued investment into IT function allows us to increase the pace of innovation Optimise Customer YOY RPUV increases on smartphone, desktop and tablet of +18% +19% and +6% respectively Proposition >40% of all visits to site now on smartphone 21% YOY increase in H116 Revenue to £35m Leverage £ Revenue Direct contracting averaging 57% of all hotel buying Proof of concept flight programme more than 50% sold Efficiencies in online marketing reduced spend from 48.8% of revenue in H115 to 46.3% in H116 Drive Efficient Share 54% of H116 traffic to site from brand and direct sources Growth & Strengthen Brand National TV campaign has continued to increase front of mind awareness of OTB brand Fixed and variable costs as % of Revenue -16% YOY Drive Operational 37% YOY growth in H116 EBITDA to £11.6m and 53% growth in group underlying PBT Leverage & Expand Internationally Traffic in Sweden growing 140% YOY and brand share of traffic almost double H115 3
Business Model ADDRESSABLE MARKET +17% STRUCTURAL MARKET Short haul beach OTB share of Online GROWTH & MARKET Unique visitors holidays dynamically market traffic penetration SHARE GROWTH packaged +4% OPTIMISE CUSTOMER £ Revenue per Revenue per Conversion PROPOSITION & booking unique visitor LEVERAGE £ REVENUE +21% Revenue DRIVING EFFICIENT Marketing Marketing SHARE GROWTH & spend per Unique visitors investment unique visitor STRENGTHENING BRAND -16% Fixed and Variable Costs OTB’s business model is centred on driving efficient growth in market share while maintaining and improving both conversion and £ revenue per booking SCALE DRIVES Our strategic initiatives are focused on driving the performance of all of these levers +37% OPERATIONAL LEVERAGE EBITDA growth is the cumulative effect of improvements in performance of all of the EBITDA levers individually 4
Disruptive retailer of beach package holidays On the Beach has the product advantages of a tour operator with the model advantages of an OTA OTB HIGH £MPB Basket Value /Margin Opportunity LOW £177 TOUR OPERATORS GENERALISED OTAS PRODUCT ADVANTAGES PRODUCT DISADVANTAGES £MPB 5 x higher than OTA £MPB often £30-50 Specialised offering Generalised offering Multiple elements Single element, commodity High basket values purchase Higher margin opportunity Low basket values ATOL Financial protection Lower margin opportunity relative High margin tour to multiple-element operator product with GENERALISED OTAS TOUR OPERATORS a low cost, no risk OTA MODEL ADVANTAGES MODEL DISADVANTAGES model Cost base 3-5 x OTA Cost base £20-40 per booking Majority offline sales Majority online sales Technology led businesses Legacy technologies High fixed cost base Low fixed cost base Limited product coverage Broad product coverage Limited product flexibility OTB Cost base LOW HIGH £25 5
Profit & Loss Account – UK Segment H116 EBITDA growth of 37% YOY YTD growth year on year: P&L UK Segment Revenue +21% Six months ended 31 March (£m) H1 FY16 H1 FY15 Change % EBITDA +37% Revenue 35.0 28.9 21.1% Efficient increase in our market traffic share Marketing costs excluding offline (16.2) (14.1) with marketing spend excluding offline as a % of revenue falling to 46.3% Offline (2.2) (1.5) Total Marketing (18.4) (15.6) - % of Revenue (excluding offline) 46.3% 48.8% Investment in place in supply function supports Revenue after marketing costs 16.6 13.3 24.8% increasing % of direct contracting and fixed and Variable costs (1.9) (2.2) variable cost per booking dropped from 15.9% Overhead costs (2.8) (2.4) to 13.4% of Revenue Holding Company costs (0.3) (0.2) EBITDA 11.6 8.5 36.5% EBITDA % revenue at 33% in H116 up from 29% - % of Revenue 33.1% 29.4% in H115 Daily Unique Visitors '000 26,377 22,528 17.1% Revenue per daily UV 1.33 1.28 3.9% Variable cost % Revenue 5.4% 7.6% Overhead cost % Revenue 8.0% 8.3% 6
Profit and Loss Account - International Investment continues in Sweden to build scale and brand Success in international markets will be P&L International Segment profitable performance within 2-3 years of launch at scale Six months ended 31 March (£m) H1 FY16 H1 FY15 Change % Revenue 0.51 0.24 112.5% OTB has invested to grow its share of market both online and offline Marketing costs excluding offline (1.09) (0.66) Offline (0.25) Improvements delivered to site to support Total Marketing (1.34) (0.66) growth are expected to increase efficiency of future market rollout Revenue after marketing costs (0.83) (0.42) Variable costs (0.11) (0.03) Overhead costs (0.10) (0.10) EBITDA (1.04) (0.55) Daily Unique Visitors 1,131,702 471,300 140.1% 7
Profit and Loss Account - Group Underlying profit before tax +53.2% increase YOY P&L Total External financing costs reduced significantly Six months ended 31 March (£m) H1 FY16 H1 FY15 Change % through renegotiation of facilities post IPO EBITDA UK segment 11.6 8.5 36.5% EBITDA International segment (1.0) (0.6) Group EBITDA 10.6 7.9 34.2% Shareholder loan interest and amortization Depreciation and amortisation (1) of acquired intangibles below underlying (1.0) (0.8) profit before tax EBIT 9.6 7.1 35.2% External Financing costs (0.1) (0.7) Non trading costs - (0.2) Profit Before Tax 9.5 6.2 53.2% Effective tax rate in FY15 affected by Corporation Tax (1.9) (1.1) disallowed shareholder interest Profit after Tax Underlying 7.6 5.1 49.0% Shareholder Interest - (3.8) Deal Fees - - Amortisation of acquired intangibles (2.1) (2.1) Deferred tax on amortisation of acquired intangibles 1.0 0.4 Retained Earnings 6.5 (0.4) Effective tax rate 20.0% 45.8% 8 Note: Effective tax rate is based on corporation tax divided by retained earnings excluding deal fees and amortisation of intangibles
Balance Sheet Balance Sheet H1 2016 H1 2015 All customer monies are paid into a trust account which is Tangible Assets 0.9 0.7 effectively a debtor to the business Intangible Assets - IT development 3.0 2.3 Intangible Assets - Acquired Intangibles 42.0 46.2 Intangible Assets Goodwill 21.5 21.5 Total Fixed Assets 67.4 70.7 Net debt has reduced from £22.3m to £6.6m Trade debtors 89.4 77.9 Trust Account 38.9 34.0 Cash - - Other debtors 3.0 2.0 The bank loan related to a term loan of £22m raised in Interest Rate Hedge - 0.1 October 2013 as part of the financing for the investment by Inflexion. This was repaid in full out of the Group’s Total Current Assets 131.3 114.0 existing cash balances post IPO Trade creditors (98.6) (80.2) Corporation tax payable (3.3) (1.3) Other taxes and social security 0.2 (0.4) Accrued expenses (11.6) (9.5) Seasonal cash flow requirements are covered by a Derivative Financial Instruments 3.1 (0.7) revolving credit facility of up to £35m which is drawn Total net current liabilities (110.2) (92.1) down as required NET CURRENT ASSETS 21.1 21.9 Deferred Taxation (7.7) (9.2) Bank facility (6.6) (4.6) Bank term loan - (18.9) Amortised Term Loan fees (FRS4) - 1.2 Total Bank (6.6) (22.3) Net assets 74.2 61.1 Net Debt (6.6) (22.3) Net Trade Drs/Crs 29.7 31.7 9
Cash Flow Cash is invested in areas that drive growth Cash Flow H1 2016 H1 2015 Opening Cash Balance Total 34.8 31.0 Opening Cash Balance Trust 23.9 20.5 Working capital movement relates to the seasonality Opening Cash Balance excluding trust balance 10.9 10.5 of the business with c.50% of bookings travelling between June and August EBITDA 10.6 7.9 Decrease/(increase) in working capital (7.6) (5.3) Movement in Trust balance (14.9) (13.5) The Board intends to adopt a progressive dividend Purchase of plant and equipment (0.6) (0.2) policy, declaring a first dividend in respect of FY16 Capitalised Dev Expenditure (1.2) (0.9) Operating Cash Flow (13.7) (12.0) Operating cash/EBITDA -129.2% -151.9% Corporation tax (0.7) (0.7) £3m of deal costs accrued in FY15 relating to the IPO Deal costs paid (3.0) - have been paid in H116 Non underlying costs - (0.2) Interest received 0.1 0.1 Interest paid (0.1) (0.6) Livingbridge exit/Inflexion investment Primary raise Repayment of borrowings (1.6) Proceeds from issue of share capital Net increase/(decrease) in cash excluding trust account (17.5) (15.1) Closing Cash Flow excluding trust balance (6.6) (4.6) Closing Cash Balance Trust 38.9 34.0 Closing cash balance Total 32.3 29.4 10 Source: Company Information
Key Drivers of Growth
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