THE UK S LEADING ONLINE RETAILER OF BEACH HOLIDAYS FY18 RESULTS PRESENTATION

Transcription

1 THE UK S LEADING ONLINE RETAILER OF BEACH HOLIDAYS FY18 RESULTS PRESENTATION November 2018

2 AGENDA FY18 Market Dynamics FY18 Financial Performance Paul Meehan - CFO Evolution of Key Drivers Simon Cooper CEO Q & A CAUTIONARY STATEMENT This presentation may contain certain forward-looking statements with respect to the financial condition, results, operations and businesses of the Company. Forward looking statements are sometimes, but not always, identified by their use of a date in the future or such words as anticipates, aims, due, will, could, may, should, expects, believes, intends, plans, targets, goal or estimates. These forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements, including factors outside the Company's control. The forward-looking statements reflect the knowledge and information available at the date of preparation of this presentation and will not be updated during the year. Nothing in this presentation should be construed as a profit forecast. 2

3 Paul Meehan Chief Financial Officer FY18 Market Dynamics FY18 Financial Performance

4 FY18 Market Dynamics The collapse of Monarch in early FY18 was followed by a heatwave in H218 Monarch failed on the 02/10/17 As presented at the H1 update, the lack of seats in the market for winter departures led to a significant increase in the price for these seats Where incremental capacity was scheduled to replace the Monarch programme this was for departures post April 1st More profound where Monarch had a high share of seats on a route Estimated impact of 1.1m EBITDA The effect unwound as more seats were made available to market in H218 Exceptional hot weather from May to August led to a slowdown in bookings for departure across the summer period Against this backdrop there was widespread tour operator discounting of distressed inventory in this lates period This effect was particularly profound in Scandinavia Estimated impact of 1.5m - 2.0m EBITDA YOY booking growth and booked flight pricing for Winter 17/18 departures 60% 50% 40% 30% 20% 10% - Jun (10%) Jul Aug Sep Oct Nov Dec Jan Feb Mar (20%) (30%) Monarch collapse Bookings YOY Seat price YOY % YOY sales by month for Summer 18 departures 25% 20% 15% 10% 5% - 3 (5%) Oct-Apr May Jun Jul Aug

5 Profit and Loss Account UK Segment FY18 UK EBITDA growth of 14% Change m m % Revenue % Online Marketing costs (33.2) (33.5) Off-line Marketing costs (4.1) (3.5) Total Marketing (37.3) (37.0) 1% Revenue after marketing costs % Variable costs (6.6) (4.9) Fixed costs (6.7) (6.2) Holding Company costs excluding SBP (0.8) (0.6) EBITDA % EBITDA % 42.4% 40.5% Online Marketing % 37.2% 40.9% Total Marketing % 41.8% 45.2% Variable costs % revenue 7.4% 6.0% Fixed costs % revenue 7.5% 7.6% Total Overheads % revenue 14.9% 13.6% Daily Unique Visitors (m) UK growth year on year Revenue +9% (H1 +18%, H2 +1%) Revenue after marketing +16% EBITDA +14% Online marketing spend decreased from 40.9% to 37.2% 17% increase in Offline spend to drive greater brand awareness Overheads excluding Holding Company costs increased to 14.9% of revenue reflecting: Higher average booking values Operational investment ahead of Package Travel Regulations Impact of sunshine.co.uk acquisition Holding Company costs increase due to NIC on SBP UK EBITDA % increased 190 bps to 42.4% 5

6 Profit and Loss Account International FY18 Revenue (6%) YOY Change m m % Revenue (6%) Online Marketing costs (2.5) (2.9) Off-line Marketing costs (0.5) (0.4) Total Marketing (3.0) (3.3) 10% Revenue after marketing costs (1.4) (1.6) 13% Variable costs (0.3) (0.2) Fixed costs (0.5) (0.2) EBITDA (2.2) (2.0) (10%) Exceptional summer weather in H2 in Scandinavia constrained holiday demand Widespread discounting of distressed product by leading tour operators OTB reduced marketing activity to a background level, with a significant impact on revenue but a saving versus expected losses - reinvest at start of FY19 Launched ebeach.dk in Denmark, investment naturally limited by lack of demand in the background market 6

7 Profit and Loss Account Classic Collection EBITDA contribution post acquisition of 1.1m 2018 m Revenue 13.2 Gross Profit 1.7 Gross Profit after marketing costs 1.6 Variable costs (0.1) Fixed costs (0.4) EBITDA 1.1 OTB acquired Classic Collection Holidays on 15 August 2018 for a net consideration of 20.0m As it is a principal rather than an agent, Classic reports on a travelled basis Classic Collection contributed EBITDA of 1.1m in period since acquisition 7

8 Profit and Loss Account Group Adjusted profit before tax +18% YOY Change m m % UK EBITDA exc Share Based Payments % International EBITDA (2.2) (2.0) Classic EBITDA Group EBITDA exc Share Based Payments % Depreciation and amortisation (3.2) (2.6) EBIT exc Share Based Payments % Finance costs / Other income 0.1 (0.1) Adjusted Profit Before Tax % Corporation Tax* (5.9) (5.6) Adjusted Profit After Tax % Exceptional and one-off costs (1.2) (2.2) Share Based Payments (1.2) (0.4) Amortisation of acquired intangibles (3.8) (3.4) ATCA tax credit Retained earnings % Adjusted profit before tax increased by 18% to 33.6m Adjusted profit after tax increased by 21% to 27.7m Amortisation increases as a consequence of continued investment in our Technology Platform Exceptional costs relate to: One-off litigation and property costs Costs relating to the acquisition of Classic Collection SBP charges reflect 3 full years of LTIP schemes Adjusted EPS increased by 20.5% to 21.2p Total Dividend per share of 3.3p, +17.9% Earnings per share Basic % Adjusted % Dividend per share (pence) % * Corporation Tax charge on underlying profit 8

9 Balance sheet All customer monies are paid into a trust account which is effectively a debtor to the business Seasonal cash flow requirements are covered by a revolving credit facility which is drawn down as required. This is not utilised at year end The FY17 7m provision for Monarch has been fully utilised in the year 9

10 Cash Flow Continued Strong Cash Conversion Change m m % EBITDA % Capitalised development spend (3.8) (2.7) 39% Movement in working capital (1.9) (3.3) Capital expenditure (2.2) (0.6) Operating cash flow % Operating cash conversion 79% 79% Underlying operating cash flow 90% 88% Corporation tax (7.1) (5.1) Acquisition of subsidiary, net of cash acquired 1.0 (5.8) Contingent consideration for Sunshine (3.0) - Non-underlying costs (1.5) (2.7) Interest (0.1) (0.1) Dividends paid (3.9) (4.0) Net increase in cash excl trust account % Closing cash excl trust account Closing trust account balance Closing cash balance Total % Operating cash flow of 28.9m, 79% (FY m, 79%) Adjusted for: 1.1m Capex relating to the new office 2.4m Classic Collection operating cash flows post acquisition Underlying operating cash conversion 90% (LY excludes Sunshine acquisition 88%) 3m deferred consideration for the FY17 acquisition of Sunshine.co.uk was paid in the period ( 12m total) Acquisition of Classic Collection for 20.0m, funded by cash: 17.2m paid in year 2.7m deferred consideration due FY19 0.8m deferred working capital cash 2.6m shares issued ( 3.3m) working capital cash adjustment 20.0m Net Consideration Classic Collection acquisition of 17.2m cash paid, less 18.2m cash acquired ( 1.0m net) 10

11 Segmental P&L FY18 FY17 Change Core B2B* Int'l Group Core Int'l Group Core Int'l Group m m m m m m m % % % Revenue % (6%) 25% Gross Profit before marketing % (6%) 11% Gross Profit after marketing (1.4) (1.6) % 13% 21% Variable costs (6.6) (0.1) (0.3) (7.0) (4.9) (0.2) (5.1) Fixed costs (6.7) (0.4) (0.5) (7.6) (6.2) (0.2) (6.4) Holding Company costs excluding SBP (0.8) - - (0.8) (0.6) - (0.6) Adjusted EBITDA (2.2) (2.0) % (10%) 18% Dep'n & Amotisation (2.8) (0.2) (0.2) (3.2) (2.4) (0.2) (2.6) Finance Costs (0.1) - (0.1) Adjusted PBT (2.4) (2.2) % (9%) 18% * B2B represents Classic Collection from the acquisition date of 15 August 11

12 UK KPIs: FY13 to FY18 Traffic Growth ('000 Daily Unique Visitors) 80,000 70,000 60,000 Revenue per Daily Unique Visitor ( ) , ,000 30,000 FY13 FY14 FY15 FY16 FY17 FY FY13 FY14 FY15 FY16 FY17 FY18 Revenue ( m) FY13 FY14 FY15 FY16 FY17 FY18 Fixed and Variable Costs as % Revenue 25% 20% 15% 10% 5% Revenue after Marketing Spend ( m) FY13 FY14 FY15 FY16 FY17 FY18 EBITDA ( m) % FY13 FY14 FY15 FY16 FY17 FY18 0 FY13 FY14 FY15 FY16 FY17 FY18 12

13 Simon Cooper Chief Executive Officer Evolution of Key Drivers

14 14

15 Our core: Innovate through investment in talent & technology Relocating our headquarters should allow us to double the pace of innovation across the next 3 years Retention Implemented reward schemes to incentivise our teams for the long term Technology platform Recruitment November move to a new digital HQ Recruited a new CTO from Betsson.com with experience of scaling technology teams Continue to grow our technology team via a twice annual Ruby Academy Our contact centre specialists will remain in Cheadle office Reorganisation of our modular platform architecture and our reporting lines to allow for greater team scalability Continued agility of our working methodologies Continuing to build innovative new features to benefit our customers 15

16 Our core: Drive traffic through branded and direct channels We continue to invest in proprietary tools to allow us to grow traffic share efficiently Multi-channel strategy supported by attributed in house bid modelling allows efficient share growth Econometric Modelling Efficiencies in online spend allow for increased investment offline App engagement has increased significantly YOY Branded share of traffic continues to increase to 66% of overall traffic in H218 FY19 campaign will optimise assets from FY18 campaigns FY19 offline media planning allows for always-on strategy Repeat purchase volume and rates continue to increase and complaint ratios continue to fall Repeat as % of all bookings 300,000 Repeat booking volumes and % 250, , , ,000 50, % 28.2% 33.7% 34.4% 39.9% 44.5% FY13 FY14 FY15 FY16 FY17 FY18 16

17 Our core: Personalise offering to drive conversion Our ambition is to drive a fully personalised cross-device experience for all users Revenue per booking Conversion Revenue per unique visitor Data science Continued innovation supports improving RPUV Smartphone traffic now 65% of total traffic Smartphone bookings increased by 48% YOY Enhanced split test capability drives improvements to revenue per UV Qualitative (lab based) and quantitative (split test based) testing of all new functionality Continued improvements to personalisation technology Data science input has improved personalisation technology Significant further opportunities exist by developing this capability Over FY19, we will be enhancing our capabilities to predict purchase intent Split testing 17

18 HIGH Volume / Margin Opportunity Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Our core: Drive revenue through direct & differentiated supply Driving an increasing % of exclusivity continues to present a huge margin / volume opportunity Investment made to scale our supply function Scale and disintermediation drives margin growth Direct contracting function performed in line with expectations c.70% of hotels directly contracted, driving >50% of Group revenues Increasing % of sales into differentiated hotels Significant increase in sales to Turkey and longer haul destinations Resource added to contracting team Increased investment into contracting platform FY17 FY18 we have used differentiated supply to drive volume and market share gains FY19-FY20 convert differentiated supply position into incremental margin and negotiate access to package rate contracts to support launch of Classic Package Holidays Direct contracting - share of monthly arrivals 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Hotel contracting: Incremental margin / volume opportunity UK OTA exclusivity UK rate exclusivity H217 H218 23% 31% Standard direct contract 18 3 rd party provided long tail

19 Our core: Inspire customers who are destination agnostic Our technology now allows holidaymakers to search all destinations simultaneously Package Travel Directive came into effect on the 1/7/18 Rebuilt deals engine powers new destination agnostic search functionality Customers can compare deals across destinations and departure dates Full site rollout is ongoing Deals functionality Opaque path allows us to develop functionality to address adjacent markets Long haul: requires access to ITX (opaque) fares Package rates: Some hotels will offer favourable package rates Classic Package Holidays: An online portal for high street agents and homeworkers 19

20 Expansion opportunities Huge opportunities exist to build share of adjacent market International Long haul 3 Scandinavian markets live with.dk launched in FY18 Strong H1 performance in Sweden Significant reduction in investment in H2 as market impacted by warm weather throughout Scandinavia with tour operators discounting distressed inventory Further internationalisation possible organically or via acquisition 4 million holidaymakers book long haul beach packages each year with an ABV of 1,000pp+ (2x the spend pp on short haul) OTB site handles 10m searches pa for long haul destinations Offline More than 5 million holidaymakers book short haul beach packages each year through offline channels Classic Collection sells luxury short haul beach through a network of 1800 agencies and homeworkers OTB will assist the existing business to develop its offering to include longer haul beach and an increase in tailor-made itineraries OTB will leverage its IT platform to build an agent-facing online portal providing access to mainstream short haul beach holiday product under the Classic Package Holidays brand Intend to soft launch this platform in calendar Q418 with a full launch in calendar Q119 Currently integrating scheduled carriers and adding long haul hotel stock into an opaque deals-based booking path Expect significant progress throughout FY19 selling Dubai, the Indian Ocean, Thailand and areas of the Caribbean As we build our long haul portfolio we will make it available through our B2B brands Hotel Only & Villas We are enhancing our meta search capability through the sunshine.co.uk brand Allows us to offer a portfolio of hotel product through the largest hotel only OTAs (Tripadvisor and Trivago) Leverage our deals functionality to sell package holidays through meta partners Introduce suppliers of beach villa product in our core destinations to target extended family groups 20

21 Appendix

22 OTB History 2015 Ebeach.se launched IPO 2017 Acquired and replatformed sunshine.co.uk Ebeach.no launched Passenger numbers Investment into offline advertising and direct contracting 2016 Launched drive to contract exclusive product Excess charter supply Growing online penetration Online share of short haul beach First version website, paid search ,000 passengers First round private equity Executive and senior management team recruited Technology team recruited, complete platform rebuild End 2011 Tech and MI platforms relaunched 9% 13% 14% nd round private equity 16% 17% 18% 21%

23 Business Model ADDRESSABLE MARKET STRUCTURAL MARKET GROWTH & MARKET SHARE GROWTH Short haul beach holidays dynamically packaged X Online penetration X OTB share of market traffic = Unique visitors X PERSONALISE CUSTOMER PROPOSITION & LEVERAGE REVENUE Revenue Conversion per booking X Conversion = Revenue per Unique visitor = Revenue - DRIVE EFFICIENT SHARE GROWTH & STRENGTHEN BRAND Unique visitors X Marketing spend per unique visitor = Marketing investment = Fixed and Variable Costs - SCALE DRIVES OPERATIONAL LEVERAGE OTB s business model is centered on driving efficient growth in market share while 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 = PBT 23

24 Disruptive retailer of beach package holidays On the Beach has the product advantages of a tour operator with the model advantages of an OTA Tour Operator OTA HIGH Cost Base LOW HIGH Risk LOW HIGH Margin LOW NARROW Product Range BROAD Specialist Generalist 24

25 OTB Cash Flow - Seasonality OTB Peak booking trading period between January and June and travelled June and August Booked by month OTB Revenue recognised on a booked basis Calendar Q4 is quiet Traffic volumes increase following Christmas as customers start to research for the following summer Travelled by month Booked by month FY18 FY17 16% 14% 12% 10% 8% 6% 4% 2% 0% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Peak departure months are July and August July / August 2018 affected by heatwave Travelled by month FY18 FY17 Funds Flow Invest in marketing and low deposits to drive bookings but margin and cash are earned on a travelled basis 25 16% 14% 12% 10% 8% 6% 4% 2% 0% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

26 Millions Millions Cash Flow: Cash Profile Facility used to fund low deposits during peak trading periods between January and June Bank balance profile FY Oct Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep Annual cash cycle sees investment into working capital as bookings are achieved in Jan - June, with cash unwinding from the trust as customers travel RCF facility renegotiated in Aug 18. The maximum facility available has been reduced from 35.0m to 28.5m, maximum drawdown in FY18 was 29.5m Funding of low deposits FY18 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct