Thursday 21 May 2020 5:31 pm

On the Beach to place 20 per cent of share capital in Covid-19 fundraise

Travel company On the Beach has announced it will place new shares worth up to 20 per cent of its existing share capital to raise additional funding through the coronavirus crisis.

The step is the latest that the firm has taken in order to shore up its finances in the face of the crisis, which has crippled travel demand around the world.

Read more: Tour operator On the Beach cancels dividend and withdraws guidance

In an accompanying trading update, On the Beach said that it had taken the steps so as to ensure it is better placed than its peers to survive the crisis.

Chief executive Simon Cooper said: “The fundraising and banking facilities announced today will provide On the Beach with greater flexibility and firepower to ensure the Group is ready to take advantage of the multiple opportunities that are likely to arise across the travel industry, as and when the world emerges from the ongoing crisis. 

“There is no doubt that the Group’s asset light and flexible model, combined with its ring-fenced trust account for customer funds, helps to differentiate On the Beach from its competitors and has stood us apart when providing customers the refunds they are entitled to in these difficult times.

The firm also said that it was forecasting a £35m one-off charge in its first half results, which are due on 30 June, due to cancelled bookings.

Following the collapse of rival Thomas Cook last September, On the Beach saw its sales increase 29 per cent in the first four months of the financial year, before the coronavirus crisis took hold.

However, with the spread of the coronavirus into the Canary Islands in February, the firm said it saw bookings begin to collapse.

In addition to the placing, the firm has already cancelled its dividend and withdrawn guidance for the year, as well as cutting pay for its executives.

Last year it renewed its existing Revolving Credit Facility to provide up to £50m to manage seasonal working capital requirements.

Read more: Holiday firm On The Beach has taken a £25m hit from the collapse of Thomas Cook

On the Beach has run extensive tests on future scenarios, finding that even if demand remained low until next March it will still retain significant headroom.

In early February On the Beach took steps to reduce costs due to the limited revenue scenario, saying that it had reduced expenditure to £2m a month.

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