ON THE BEACH (OTB)

Shares - - TALKING POINT -

We be­lieve On The Beach (OTB) is a great busi­ness with a su­perb track record of us­ing tech­nol­ogy and mar­ket­ing to at­tract cus­tomers and get them to spend money.

It is an on­line re­tailer of mainly short-haul beach hol­i­days, al­low­ing peo­ple to build their own va­ca­tion by pick­ing their flights, ho­tels and ser­vices.

Cus­tomers are reg­u­larly drawn to On The Beach for its wider se­lec­tion of flights and ho­tels at at­trac­tive prices com­pared to tour op­er­a­tors, which of­ten of­fer less flex­i­ble pack­ages at a higher price tag.

It has a be­spoke in-house rec­om­men­da­tion sys­tem which works by tak­ing cues from how some­one browses its web­site and dy­nam­i­cally adapts the con­tent pre­sented. It per­son­alises hol­i­day sug­ges­tions based on var­i­ous facets of ho­tel and flight brows­ing de­tail.

On The Beach con­tin­u­ously tests changes to its web­site to see the most ef­fec­tive ways of con­vert­ing vis­i­tors to sales. This test­ing also helps en­sure the brows­ing and trans­ac­tion process is as smooth as pos­si­ble for the cus­tomer.

Fur­ther­more, it has in­vested in book­ing man­age­ment ca­pa­bil­i­ties and re­minder func­tion­al­ity so that cus­tomers can in­ter­act with the com­pany via an app be­fore, dur­ing and af­ter their hol­i­days. The com­pany also of­fers a 24 hour tele­phone ser­vice if prob­lems arise dur­ing some­one’s hol­i­day.

All of th­ese ini­tia­tives help to im­prove cus­tomer sat­is­fac­tion and drive re­peat book­ings. The com­pany said in Novem­ber that its re­peat pur­chase rates had in­creased sig­nif­i­cantly in 2018.

The group is ex­pand­ing out­side of the UK and now has a pres­ence in Swe­den, Nor­way and Den­mark. In­ter­na­tional op­er­a­tions are cur­rently loss-mak­ing as the com­pany en­ters new ter­ri­to­ries.

On The Beach ben­e­fits from both or­ganic and ac­quis­i­tive growth, with the lat­ter in­clud­ing own­er­ship of Sun­shine.co.uk, an on­line low-cost travel agent; and Clas­sic Col­lec­tion which is a busi­ness-to-busi­ness provider of pack­aged lux­ury beach hol­i­days to off­line travel agents in the UK.

It plans to launch an on­line B2B plat­form for Clas­sic Col­lec­tion’s travel agent users, lev­er­ag­ing On The Beach’s ex­ist­ing tech­nol­ogy and breadth of sup­ply.

Group pre-tax profit is ex­pected to rise from £26.7m in 2018 to £40.5m in 2019, ac­cord­ing to con­sen­sus es­ti­mates. The shares look great value at 14.4 times fore­cast earn­ings when you con­sider that rate of pre­dicted growth.

Nu­mis an­a­lyst Richard Stu­ber fore­casts 16% com­pound an­nual growth in earn­ings per share be­tween 2018 and 2021.

On The Beach has a £47.3m net cash po­si­tion, ef­fec­tively giv­ing it the fi­nan­cial fire­power to con­sider fur­ther ac­qui­si­tions and/or money to sup­port the busi­ness if times get tougher.

The group is look­ing to boost its long-haul beach hol­i­day sales and bolt-on ac­qui­si­tions could po­ten­tially help to ac­cel­er­ate this strat­egy.

THE ON­LINE HOL­I­DAY RE­TAILER HAS THE SKILLS TO SUC­CEED

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