UK travel company On The Beach share price slumps after profit warning
Shares in UK travel company On The Beach have tumbled by over 16 per cent this morning after it warned its profits this year will be lower than expected. It said the tumbling pound and Brexit uncertainty are hurting its business model.
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As a smaller travel firm, On The Beach does not hedge – meaning take precautions that can be quite costly – against currency movements, unlike its competitors. It said this meant sterling’s devaluation has led to significant price increases for the firm, which it passes on to customers.
“These relative price increases make it difficult for the group to gain share of market while maintaining margins,” On The Beach said.
Growing fear of a no-deal Brexit pushed sterling to its lowest value against the dollar in over two years at the start of August and has seen it slide against the euro.
Over the last month, the pound has fallen 2.3 per cent against the euro to stand at €1.084 today.
The UK holiday industry has struggled with the fall as well as general uncertainty over Brexit and higher fuel and hotel costs. Stalwart Thomas Cook in May issued its third profit warning within a year in May.
Chief executive of On The Beach Simon Cooper said: “In what is a difficult general economic climate, we remain confident in the resilience and flexibility of our business model, focusing on profitable growth and an ability to capitalise on any structural changes in the market.”
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“In full-year 2019 we have invested significantly in our infrastructure, talent and technology to ensure that we build strong foundations to support our strategic objectives.”