Tour operator On the Beach cancels dividend and withdraws guidance
Travel operator On the Beach has cancelled its dividend and withdrawn guidance for 2020 as part of a raft of measures to protect the firm against the coronavirus outbreak.
In addition, chief executive Simon Cooper will forego his salary, whilst the rest of the tour firm’s board will take a 20 per cent pay cut.
The spread of the disease, which has led to travel bans and border closures around the world, has played havoc with the tourism industry, with many companies seeing a complete collapse of bookings.
However, On the Beach stressed that due to its “asset light” business model – which means it has no existing commitments to airlines or hotels – it is well placed to “take advantage of the multitude of opportunities these market conditions present”.
The firm said that most travel firms would have committed costs of up to 70 per cent of their revenues, but in the current situation the figure was only three per cent for On the Beach.
The company added that due to its position as the only UK travel firm which holds customers’ funds until the point of travel, it is not reliant on cash from forward bookings for its survival.
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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Last year it renewed its existing Revolving Credit Facility to provide up to £50m to manage seasonal working capital requirements.
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.
Cooper said: “On the Beach was created with an asset light model to ensure its survival in the inconceivable market conditions in which we now find ourselves.
“Unlike the majority of larger tour operators, online travel agents and airlines, all customer funds are held in a ring-fenced trust account so that if the scenario above prevailed and all forward bookings were to seek a refund of their prepaid holiday monies, in the main this could be facilitated without impacting group cash.
“Against the backdrop of the impossible market conditions in which we find ourselves, the resilience of On the Beach’s asset-light and flexible business model becomes clear.
“Whilst the coming months will continue to present a huge challenge, I look forward to the multitude of opportunities which lie ahead.”