9th Aug 2019 08:55
(Alliance News) - On the Beach Group PLC shares fell sharply on Friday after the holiday firm issued a profit warning due to the weakness of sterling against the euro ahead of Brexit.
Shares in On the Beach were down 16% at 376.32 pence in London in morning trade.
The package holiday company now expects its annual performance to fall below board expectations as "the increased likelihood of a no deal Brexit" has caused sterling to devalue against the euro since the start of May, accelerating in late July and "continuing into August".
Despite higher second-half demand, sterling weakness has caused "a significant increase" in On the Beach prices compared to "competitors with currency hedges". On The Beach didn't provide any information in its statement Friday on the currency hedging that it does, if any.
Because On the Beach's main focus is on growing the business, relative price increases have made it tough to gain market share and maintain margins at the same time. It is for this reason that 2019 performance is expected to fall below the expectations of the On the Beach board.
Chief Executive Simon Cooper said: "In what is a difficult general economic climate, we remain confident in the resilience and flexibility of our business model, focusing on profitable growth and an ability to capitalise on any structural changes in the market. In FY19 we have invested significantly in our infrastructure, talent and technology to ensure that we build strong foundations to support our strategic objectives."
On the Beach said it has increased investment "despite the difficult market conditions" and is expecting its international platforms to produce significant revenue growth during the second half of the year, and is expecting "marketing efficiencies" to improve as well, which is expected to shrink its loss before interest, depreciation, taxation and amortisation.
The company said it is "actively" considering acquisition opportunities.
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