SLIDE 1
Agenda
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FY15 Preliminary Results Presentation 9 th December 2015 Agenda - - PowerPoint PPT Presentation
FY15 Preliminary Results Presentation 9 th December 2015 Agenda - - PowerPoint PPT Presentation
FY15 Preliminary Results Presentation 9 th December 2015 Agenda Simon Cooper FY15 Highlights CEO Wendy Parry Financial Performance FY15 CFO Evolution of Key Drivers Simon Cooper Summary and Outlook CEO Q and A 2 FY15
SLIDE 2
SLIDE 3
FY15 Highlights
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Source: Company information Note: Financials are based on audited IFRS accounts
37% YOY increase in Revenue to £62.5m (FY14: £45.6m) 20% YOY increase in Revenue per Unique Visitor from £0.96 to £1.15 Direct contracting averaged 45% of all hotel buying in FY15 with exit rate of 51%
Leverage £ Revenue
By continual optimisation of the customer proposition OTB has doubled its market traffic share since
FY12 whilst driving improvements to both conversion and margin
OTB is delivering real-time individual user level personalisation to an increasing % of visitors
Optimise Customer Proposition
Overall short haul beach market continues to grow and online penetration is increasing 14% YOY increase in daily unique visitors to site to 54.4m (FY14: 47.7m) 27% YOY increase in total transaction value to £453.6m (FY14: £358.3m)
Structural Market Growth & Market Share Growth
Fixed costs as % of Revenue continue to drop despite significant investment into direct contracting 45% YOY growth in EBITDA to £20m at 32% of Revenue and 47% growth in underlying PBT Bookings in Sweden have grown at 250% YOY and Norway site is launched
Drive Operational Leverage & Expand Internationally
Efficiencies in online marketing reduced spend to 48.6% of revenue for FY15 (FY14: 50.7%) 54.8% of traffic to site from brand and direct sources (FY14: 50.6%) OTB apps achieved almost 400,000 downloads and contributed 3.7% of total traffic in Sept 15
Drive Efficient Share Growth & Strengthen Brand
OTB is disrupting the retail of beach holidays through innovative technology and customer value proposition
SLIDE 4
Business Model
£ Revenue per booking Conversion Unique visitors Revenue per unique visitor OTB share of market traffic Online penetration Revenue Marketing investment
EBITDA
Fixed and Variable Costs Unique visitors Marketing spend per unique visitor Short haul beach holidays dynamically packaged
OPTIMISE CUSTOMER PROPOSITION & LEVERAGE £ REVENUE DRIVING EFFICIENT SHARE GROWTH & STRENGTHENING BRAND STRUCTURAL MARKET GROWTH & MARKET SHARE GROWTH SCALE DRIVES OPERATIONAL LEVERAGE
ADDRESSABLE MARKET
+14% +16%
+4%
+20% +37% +45% 4
OTB’s business model is centred on driving efficient growth in market share whilst
maintaining and improving both conversion and £ revenue per booking
Our strategic initiatives are focused on driving the performance of all of these levers EBITDA growth is the cumulative effect of improvements in performance of all of the
levers individually
Source: Management Information Note: Financials for OTB are based on audited accounts for FY15 when compared to FY14
SLIDE 5
On the Beach has the product advantages of a tour operator with the model advantages of an OTA
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LOW HIGH Basket Value /Margin Opportunity LOW HIGH Cost base
Source: Company information
Disruptive retailer of beach package holidays
OTB £MPB £163 OTB £27 Cost base 3-5 x OTA
Majority offline sales Legacy technologies High fixed cost base Limited product coverage Limited product flexibility
TOUR OPERATORS PRODUCT ADVANTAGES
High margin tour
- perator product with
a low cost OTA model
Cost base £20-40 per booking
Majority online sales Technology led businesses Low fixed cost base Broad product coverage
£MPB often £30-50
Generalised offering Single element, commodity
purchase
Low basket values Lower margin opportunity relative
to multiple-element
GENERALISED OTAS PRODUCT DISADVANTAGES
£MPB 5 x higher than OTA Specialised offering Multiple elements High basket values Higher margin opportunity ATOL Financial protection
TOUR OPERATORS MODEL DISADVANTAGES GENERALISED OTAS MODEL ADVANTAGES
SLIDE 6
Profit & Loss Account – UK Segment
FY15 EBITDA growth of 45% YOY
YTD growth year on year: TTV +27% Revenue +37% EBITDA +45% Efficient increase in our market traffic share
with marketing spend excluding offline as a %
- f revenue falling to 48.6%
Despite additional investment to support the
growth in direct contracting of £0.6m overhead as % of revenue fell from 8.6% to 8.2%
Holding Company costs have increased £0.1m
due to additional costs to fulfil the requirements of a plc
EBITDA % revenue at 32% after significant
investment for growth in offline and direct contracting in FY14
(1) Variable costs % revenue include wages in the contact centre, card costs and communications divided by revenue (2) Overhead costs % revenue is overhead costs excluding depreciation divided by revenue Source: Company Information Note: Financials are based on audited IFRS accounts
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P&L UK Segment Year ending 30 Sep (£m) FY12A FY13A FY14A FY15A TTV 230.1 280.8 358.3 453.6
- growth %
22.0% 27.6% 26.6% Revenue 30.9 37.5 45.6 62.5 Marketing costs excluding offline (14.2) (18.7) (23.1) (30.4) Offline (1.0) (1.7) Total Marketing (14.2) (18.7) (24.1) (32.1)
- % of Revenue (excluding offline)
46.0% 49.9% 50.7% 48.6% Revenue after marketing costs 16.7 18.8 21.5 30.4 Variable costs (3.3) (3.2) (3.5) (4.9) Overhead costs (3.5) (3.4) (3.9) (5.1) Holding Company costs (0.2) (0.2) (0.3) (0.4) EBITDA 9.7 12.0 13.8 20.0
- growth %
23.7% 15.0% 44.9%
- % of Revenue
31.4% 32.0% 30.3% 32.0% Daily Unique Visitors '000 36,439 40,278 47,672 54,410 Bookings '000 232 271 326 384 Conversion 0.64% 0.67% 0.68% 0.71% Revenue per Booking 133.2 138.4 139.9 162.8 Revenue per daily UV 0.85 0.93 0.96 1.15 Variable cost % Revenue (1) 10.7% 8.5% 7.7% 7.8% Overhead cost % Revenue (2) 11.3% 9.1% 8.6% 8.2%
SLIDE 7
Profit and Loss Account - International
Investment in Sweden to build scale and brand
Success in international markets will be
profitable performance within 2-3 years of launch at scale
After a soft launch in FY14, in FY15 OTB has
invested to grow its share of market both
- nline and offline whilst driving
improvements to conversion and non branded cost per UV
Improvements delivered to site to support
the Swedish launch are expected to increase efficiency of future market rollout
Source: Company Information Note: Financials are based on audited IFRS accounts International only
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P&L International Segment Year ending 30 Sep (£m) FY12A FY13A FY14A FY15A TTV 0.9 0.1 1.6 5.6 Revenue 0.1
- 0.1
0.7 Marketing costs excluding offline (0.1) (0.1) (0.7) (1.8) Offline (0.4) Total Marketing (0.1) (0.1) (0.7) (2.2) Revenue after marketing costs
- (0.1)
(0.6) (1.5) Variable costs
- (0.1)
Overhead costs
- (0.1)
(0.2) EBITDA
- (0.1)
(0.7) (1.8) Bookings 1,725 190 1,231 4,736
SLIDE 8
Profit and Loss Account - Group
Underlying profit before tax +46.5% increase YOY
Shareholder loan interest and amortisation
- f acquisition intangibles below underlying
Profit after tax
Future cash conversion combined with the
reduction of debt will reduce financing costs
Effective tax rate in FY14 and FY15 was
affected by disallowed shareholder interest under the ATCA which will no longer be there in FY16 as shareholder debt was repaid by issue of shares
To ensure alignment with investors the
Board will implement an executive / senior management LTIP which targets EPS
- verperformance and share price growth
Source: Company Information Note: Financials are based on audited IFRS accounts Note: Effective tax rate is based on corporation tax divided by retained earnings excluding deal fees and amortisation of intangibles
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P&L Total Year ending 30 Sep (£m) FY12A FY13A FY14A FY15A EBITDA UK segment 9.7 12.0 13.8 20.0 EBITDA International segment
- (0.1)
(0.7) (1.8) Group EBITDA 9.7 11.9 13.1 18.2 Depreciation and amortisation (1) (1.1) (1.1) (1.3) (1.8) EBIT 8.6 10.8 11.8 16.4 External Financing costs (0.1) 0.2 (1.6) (1.6) Non trading costs (0.5) (0.5) (0.3) (0.3) Profit Before Tax 8.0 10.5 9.9 14.5 Corporation Tax (1.7) (2.3) (1.8) (2.9) Profit after Tax Underlying 6.3 8.2 8.1 11.6 Shareholder Interest (4.0) (4.8) (7.0) (7.8) Deal Fees
- (3.4)
(4.9) Amortisation of acquired intangibles
- (4.3)
(4.3) Deferred tax on amortisation of acquired intangibles
- 0.9
0.9 Retained Earnings 2.3 3.4 (5.7) (4.5) Effective tax rate 42.5% 40.4% 62.1% 43.3%
SLIDE 9
Balance Sheet
All customer monies are paid into the trust
account which is effectively a debtor to the business
Deferred tax liability relates to deferred tax on
the valuation of intangibles (£30.1m Brand and £22.5m technology) on acquisition which is released over 15 years
The bank loan related to a term loan of £22.0
million raised on 4 October 2013 as part of the financing for the investment by Inflexion. This was repaid in full out of the Group’s existing cash balances following Admission on 28 September 2015. The Company has entered into a revolving credit facility of up to £35 million which will be drawn down as required
Source: Company Information Note: Financials are based on audited IFRS accounts 1 Total Fixed Assets excludes deferred taxation 2 calculation trade debtors plus trust account less trade creditors
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Balance Sheet FY12A FY13A FY14A FY15A Tangible Assets 0.3 0.6 0.7 0.5 Intangible Assets - IT development 1.4 1.5 2.0 2.6 Intangible Assets - Acquired Intangibles
- 48.3
44.1 Intangible Assets Goodwill 27.0 27.0 21.5 21.5 Total Fixed Assets
28.7 29.1 72.5 68.7
Trade debtors 7.1 13.3 22.3 28.0 Trust Account 17.0 18.2 20.5 23.9 Cash 10.1 15.1 10.5 10.9 Other debtors 0.5 1.6 2.5 1.6 Interest Rate Hedge
- 0.1
- Total Current Assets
34.7 48.2 55.9 64.4
Trade creditors (18.7) (25.2) (34.0) (45.0) Corporation tax payable (1.1) (0.7) (0.8) (2.1) Other taxes and social security (0.6) (0.7) (0.1) 0.4 Accrued expenses (4.2) (5.0) (6.1) (10.7) Derivative Financial Instruments (0.1) (0.3) (0.7) 0.7 Total net current liabilities
(24.7) (31.9) (41.7) (56.7)
NET CURRENT ASSETS
10.0 16.3 14.2 7.7
Deferred Taxation 0.5 0.1 (9.7) (8.7) Bank term loan (0.3)
- (20.5)
- Amortised Term Loan fees (FRS4)
- 1.3
- Total Bank
(0.3)
- (19.2)
- Net assets
38.9 45.5 57.8 67.7 Net Debt
9.8 15.1 (8.7) 10.9
Net Trade Drs/Crs
5.4 6.3 8.8 6.9
SLIDE 10
Cash Flow FY12A FY13A FY14A FY15A Opening Cash Balance Total 11.0 27.1 33.3 31.0 Opening Cash Balance Trust 6.6 17.0 18.2 20.5 Opening Cash Balance excluding trust balance 4.4 10.1 15.1 10.5 EBITDA 9.7 11.9 13.1 18.2 Decrease/(increase) in working capital 9.8 0.4 (0.2) 5.7 Movement in Trust balance (10.4) (1.2) (2.3) (3.5) Purchase of plant and equipment (0.3) (0.5) (0.4) (0.3) Capitalised Dev Expenditure (0.8) (1.1) (1.5) (2.0) Operating Cash Flow
8.0 9.5 8.7 18.1
Operating cash/EBITDA 82.5% 79.8% 66.4% 99.5% Corporation tax (0.5) (2.4) (1.5) (1.7) Deal costs paid
- (0.5)
Non underlying costs (0.5) (0.5) (0.3) (0.3) Interest received 0.1 0.2 0.2 0.2 Interest paid (0.1)
- (1.3)
(1.4) Livingbridge exit/Inflexion investment
- (1.7)
(8.9) (3.5) Primary raise 10.0 Repayment of borrowings (1.2) (0.3) (1.5) (20.5) Proceeds from issue of share capital
- 0.1
0.1 Net increase/(decrease) in cash excluding trust account
5.7 5.0 (4.6) 0.4
Closing Cash Flow excluding trust balance 10.1 15.1 10.5 10.9 Closing Cash Balance Trust 17.0 18.2 20.5 23.9 Closing cash balance Total 27.1 33.3 31.0 34.8
Cash Flow
Cash conversion is strong at 99% and cash is reinvested in areas that drive growth
On The Beach has strong cash conversion and supplier
payments are working capital neutral apart from the low deposit scheme
The business has no stock commitment and low levels
- f capital expenditure
IT development expenditure runs at c3% of revenue
and is capitalised in line with IFRS requirements
The working capital and cash profile are seasonal. The
business maintains a revolving credit facility to cover any working capital requirements mainly relating to the low deposit scheme
£10m primary raise used to pay management loan
interest and deal costs with c£3m invested to drive growth
The Board intends to adopt a progressive dividend
policy, declaring a first dividend in respect of FY16
Source: Company Information Note: Financials are based on audited IFRS accounts
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SLIDE 11
Key Drivers of Growth
SLIDE 12
Market Growth & Market Share Growth
Our addressable market is growing and OTB continues to grow share of market
Overall short haul beach holiday volumes are growing Online penetration continues to increase Forecast growth in online short haul beach is +7% CAGR (2015-19)
versus historic growth at +5% CAGR (2010-2015)
Dynamic packaging offers greater value and flexibility than traditional
package
OTB continues to take share of this growing market whilst tour
- perators continue to cut mainstream short haul capacity
Short haul beach online versus offline (UK)
Source: Mintel / ONS data, 2013 PhoCusWright report, International Telecommunication Union (ITU), Euromonitor Note: Euromonitor data is based on retail value on an annual basis at year-on-year exchange rates 1 Euromonitor, Growth in Dynamic Packages 2 Mintel data 3 Euromonitor data for 2015-2018 4 Projected CAGR for OTB – 2012-2019
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2 3 4
OTB share of market traffic FY12 – FY15
FY12 FY13 FY14 FY15 Brand Share Non Brand Share
14.5%
2000 4000 6000 8000 10000 12000 14000 16000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Short haul beach offline Short haul beach online
+5% +7%
SLIDE 13
On the Beach sells high margin tour operator style product with a lightweight OTA style fixed cost base
Source: Company information; CAA 2014 data
Competitive Landscape
UK Short Haul Beach Online - Estimated Share
On the Beach is well placed to continue to take share of market
from:
Smaller OTAs who lack scale, strength of brand and technology
capability
Tour operators who have a completely different model and cost
base
Both struggle to compete against OTB for traffic on generic beach
holiday keywords
Non branded cost per unique visitor is well in excess of the
revenue opportunity even with a highly optimised beach holiday proposition and efficient demand generation
Tour operators continue to reduce their capacity in mainstream
short haul beach
TUI continues to execute a strategy to sell higher value,
differentiated product
Thomas Cook continues to downsize capacity Growth in online penetration is slow
27% 14% 7% 17% 35% TUI Thomas Cook Jet 2 Holidays Tour Operators Smaller OTAs OTB
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SLIDE 14
Optimise Customer Proposition
Our ambition is to drive a fully personalised cross-device experience for all users on all devices
Source: Management Information
Projects which optimise the customer proposition can be used to
increase either conversion or margin or both. These include:
‒ Device level split testing to simplify user journey ‒ Uniquely attractive flexible customer payment schemes ‒ User-level personalisation in real time onsite and individually
tailored CRM
‒ Scaling direct contracting function ‒ Increasingly sophisticated traffic shaping driving higher returns
from paid search channels
In FY15 we increased Revenue per UV by 20% from each one of the
54m daily UVs to site
We are able to innovate at pace supported by the infrastructure that
has been built into the heart of our platform over the last 5 years
£ Revenue per Unique Visitor FY12 – FY15
14
Device level conversion improvement FY15 YOY
0.00 0.20 0.40 0.60 0.80 1.00 1.20 FY12 FY13 FY14 FY15 Direct contracting revenue per UV Revenue per UV
Revenue per booking Conversion Revenue per unique visitor
0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% 0.80% 0.90% 1.00% Desktop Tablet Smartphone FY14 FY15
SLIDE 15
Leverage £ Revenue
We are well positioned to scale our supply function to achieve significant incremental net margin contribution
The infrastructure is in place to allow us to scale our supply function
with minimal incremental overhead
Target for FY16 is 52% total hotels through in house function at
4.5% incremental margin
In FY16 we will also develop our directional selling capability to
drive UK rate exclusivity and concept product
Further incremental margin opportunities exist as the business
continues to grow:
Flights: Progress made on flight seat distribution agreements –
target incremental sales and increased margin
Ancillaries:
Increased ancillary margin and marketing contributions from in resort suppliers
Product: Expand product offering to address long haul and luxury
segments
Technology: Use technology to optimise point of sale margin
Source: Management information
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Direct contracting - share of hotel sales Q1 14 to date Revenue per product type
Hotels (3rd party) Hotels (direct contract) Transfers (direct contract) Flights Other 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% Jan 14 Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15
SLIDE 16
Drive Efficient Share Growth
Superior customer proposition delivers increased margins and fuels market share growth
For the past 3 years the business has invested c.50% of revenue in
marketing to drive share growth in a growing market
Growth in Revenue per UV is well in excess of increase in cost per
UV
50% spend balances short term sales and EBITDA growth and
longer term investment into strength of brand which underpins longer term EBITDA growth
A multi-channel strategy supported by sophisticated in house bid
modelling and 3rd party attribution tool allows efficient share growth
‒ Spending has become increasingly efficient in H2 whilst YOY traffic
growth has been maintained
‒ Redeployment of online spend to offline advertising supports
strong growth of brand
Growing share cost effectively
Source: Management Information
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£0.00 £0.20 £0.40 £0.60 £0.80 £1.00 £1.20 £1.40 FY12A FY13A FY14A YTD June 2015
+£0.10 EBITDA per daily UV +£0.30 Revenue per daily UV +£0.17 Marketing cost per daily UV
Marketing spend as % of Revenue 46.0% 50.7% 49.9% 48.6%
% Revenue spent on online marketing – monthly evolution
40.0% 45.0% 50.0% 55.0% 60.0% Jan Feb Mar Apr May Jun Jul Aug Sep FY14 FY15
FY15A
SLIDE 17
Strengthen Brand
Developing an integrated and personalised customer engagement programme drives retention of almost 35%
Improvements in repeat bookings are driven by Strengthening of brand presence across multiple touch points Increased investment into service pre, during and post holiday Increasingly personalised content delivered at the appropriate
time through sophisticated CRM programme
Strengthening net promoter score and <0.9% complaint ratio Repeat bookers have an increased propensity to bypass paid channels iPhone, iPad and Android app downloads are expected to increase
share of free traffic
Investment into offline advertising in FY14 and FY15 has driven
significant growth in branded traffic
The proportion of traffic coming to site from branded, free and direct
sources is increasing and stands at 55% of overall traffic mix
Increasing volumes of branded traffic and repeat business drive long
term cost per acquisition efficiency
Repeat booking volumes and % of overall business
17
Source: Management data
Repeat as % of all bookings
Branded / free share of traffic FY12 – FY15 (m)
Branded and Free traffic mix
5 10 15 20 25 30 35 FY12 FY13 FY14 FY15
40.5% 50.6% 41.9% 54.8%
27% CAGR
20000 40000 60000 80000 100000 120000 140000 FY12 FY13 FY14 FY15
50% CAGR
16.1% 30.4% 22.8% 32.8%
SLIDE 18
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£ Fixed / Variable Cost Per Booking
On the Beach sells high margin tour operator style product with a lightweight OTA style fixed cost base
Drive Operational Leverage
Fixed / Variable costs as % Revenue FY14 vs FY15
OTB fixed and variable cost per booking is well below tour operator
competitors
Tour operators fixed and variable cost per booking is in excess of
OTB Revenue per booking
94% of OTB bookings are transacted online versus 50% and 39%
for TUI and TC respectively
OTB fixed and variable costs as a % of revenue are reducing through
- perational leverage
‒ 7% YOY reduction excluding incremental investment into supply
function
‒ Supply infrastructure in place will support growth aspirations ‒ Scalable model supports further leverage of a low fixed cost base
50 100 150 200 250 OTB TUI TC
7X OTB 8X OTB
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% FY14 FY15 Supply costs Fixed costs excl supply function Variable costs
- 7.1%
SLIDE 19
Expand Internationally
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Similar trends in Europe to the core UK market represent an attractive expansion opportunity for OTB
Source: Company information, Euromonitor Note: Euromonitor data represents retail value on an annual basis at year-on-year exchange rates; Western Europe (excl. UK) comprises the sum of the following markets: Belgium, Denmark, France, Germany, Italy, Netherlands, Norway, Spain and Sweden 1Growth rate measured from FY15 to FY16
2014 Western European package holiday market (€bn) Share of European Leisure Package Holiday market 2014
TUI Thomas Cook Kuoni Other
Online penetration in Europe is low but growing at a faster rate
than the UK1
Low cost carriers are expanding their fleets and opening up flights
to beach destinations from departure points throughout Europe
The market is dominated by legacy tour operators who have held a
stranglehold over seat supply
The key drivers of success in new source markets will be: Driving non-branded cost per click efficiencies Improving non-branded conversion Increasing branded share of traffic Our objective in Sweden is to deliver a positive return within a finite
time period whilst achieving significant share of market
Expected breakeven 2-3 years, payback in 4-5 years Fixed cost to divest <100k per market The intention is to roll out further markets in 2016
2.0 1.4 7.7 16.5 11.4 4.2 1.0 8.0 2.3
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 0.00 5.00 10.00 15.00 20.00 €bn TTV Online Penetration Rate
SLIDE 20
Summary & Outlook
20
We have enjoyed a strong start to the new FY and performance is in line with the Board’s expectations
Our direct supply function is performing ahead of expectations driving increased margin
- pportunities
Leverage £ Revenue
We have maintained the throughput of innovative ways to personalise the customer
proposition Optimise Customer Proposition
In our core UK market, we continue to grow our share of a growing market with increasing
efficiency Structural Market Growth & Market Share Growth
We continue to drive operational leverage and EBITDA as a % of Revenue is improving We remain excited about the international opportunity
Drive Operational Leverage & Expand Internationally
We launch our first full national TV campaign on Boxing Day