LONDON (ShareCast) - (Sharecast News) - Full-year profit at On The Beach fell 26% as the online package holiday company took a hit from the collapse of Thomas Cook.
In the year to 30 September, pre-tax profit declined to £19.4m from £26.1m in 2018, even as revenue rose 35% to £140.4m. On The Beach said it incurred costs of £25.6m to help organise alternative travel arrangements for customers who were left stranded by Thomas Cook, which went bust in September.

Chief executive Simon Cooper said: "Following the failure of Thomas Cook Group, all teams across our business responded exceptionally to ensure that customers were either re-booked or refunded in the shortest possible time while maintaining high quality customer care.

"The first quarter of our financial year (calendar Q4) has historically been the quietest trading period for the group. The failure of TCG has led to a material shift in market dynamics as it had a 20% share of beach holiday passengers and approximately 20% of the seat capacity to beach holiday destinations. This has created a significant short-term lack of seat capacity as well as an unprecedented opportunity in the medium term to gain share."

The company said it had seen "strong" search demand throughout the period following the demise of Thomas Cook, albeit the loss of seat capacity has led to a supply/demand imbalance, with a significant increase in flight pricing.

At 0943 GMT, the shares were up 0.2% at 435p.

Russ Mould, investment director at AJ Bell, said: "On one hand the failure of the UK travel agent has caused On The Beach's pre-tax profit to slump because it had to incur extra costs of helping customers who were previously booked to fly with Thomas Cook find alternative travel arrangements or providing refunds.

"On the other it has removed a player which had a 20% market share of beach holidays and airline capacity to beach holiday destinations. This creates a 'once in a lifetime' opportunity to grab some of this market share which explains why On The Beach has flagged a desire to spend more money on marketing and keep its prices competitive in order to scoop up more customers.

"That sounds a fair strategy but On The Beach won't be the only one with this idea. We already know that airlines have been racing to increase capacity to capitalise on this opportunity and so holiday sellers will naturally be doing the same. For example, EasyJet has already flagged that it will give its package holiday business another push.

"On The Beach will have to spend money to make money which is likely to see its costs go up in the short-term. The key measures of success will be the time it takes to make a return on this investment and whether it can hold on to any new customers beyond a single holiday booking."

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