On The Beach raised £67m by placing 19.9% new shares to allow it to “capitalise on the multiple opportunities that these market conditions are likely to present”.
The company added that it had a ring-fenced fund to provide customers with refunds.
The group also agreed to increase to its existing banking facilities in the form of an incremental £25m revolving credit facility under the CLBILS with Lloyds Banking Group. As a result, it now has maximum working capital facilities of £75m available.
CEO Simon Cooper said: “The fundraising and banking facilities will provide On the Beach with greater flexibility and firepower to ensure the group is ready to take advantage of the multiple opportunities that are likely to arise across the travel industry, as and when the world emerges from the ongoing crisis.
“There is no doubt that the group’s asset light and flexible model, combined with its ring-fenced trust account for customer funds, helps to differentiate On the Beach from its competitors and has stood us apart when providing customers the refunds they are entitled to in these difficult times.”
The firm also said that it was forecasting a £35m one-off charge in its first half results, which were due on 30 June, due to cancelled bookings.
The group said that, in the first four months of 2020, following the collapse of the Thomas Cook Group, the company had priced competitively and increased market share with sales growth of 29%.
It said that the length of the current airspace closure was unknown, but it felt that the majority of bookings taken in the first half of the year would not travel as planned in the second.
In April On the Beach said that it was suspending full year guidance and that it would not be declaring an interim dividend in the current financial year.
The group's CEO was also forgoing his salary and the remainder of the board have voluntarily agreed to a 20% reduction in salary and fees.
The company told the market that it had an “asset light, flexible, no inventory risk model and no fixed commitments on hotel rooms or airplane seats”. It added that, if demand fell away completely then the fixed cost base will drop to c.3% of aspirational sales (or one twentieth of the costs of a similar sized asset heavy operator).
The company described itself as the only listed UK travel business that operated a fully ring fenced customer trust account in which customer funds were held until the point of travel. “Therefore the group, unlike the majority of online travel agents, tour operators and airlines, does not rely on cash received for forward bookings to trade. Monies that have been received for holidays that are cancelled by a closure of airspace can be repaid to customers in cash with limited impact on the group's working capital.”
Two weeks ago the company issued a letter to customers, outlining its refund policy. The group said: “The coronavirus pandemic and subsequent lockdown has led to the cancellation of millions of flight and holiday bookings, leaving countless numbers of travellers out of pocket.
“At On the Beach we are very concerned about the amount of vouchers and credit notes being offered to customers who are clearly entitled to a cash refund. We believe that in offering these, some companies are undermining trust in the travel industry and mistreating consumers. I’d like to take the opportunity to clarify our own position on refunds, in the hope that you will feel confident booking with On the Beach in the future.
“On the Beach have been clear from the beginning of the crisis that we intend to refund customers in cash, and within 14 days of cancellation, as per the Package Travel Regulations. Whilst we have made good progress, refunding nearly half of the monies owed to our customers, we haven’t yet been able to refund the majority of the flight element of bookings. This is due to many airlines breaching their legal obligations to refund cancelled bookings within seven days.
“Since the middle of March, we have been lobbying the government and regulators such as the Civil Aviation Authority to enforce the rules. We are hopeful that airlines will start to process refunds so that we can return them to customers as soon as physically possible.”
Insight: How successful a company is post-pandemic depends a great deal on how it behaves now, when customers and suppliers need them most. It would be cheap at this point to pile in with a comment on UK prime minister Boris Johnson and his Rasputin, Dominic Cummings, so this hack will resist the temptation.
There is some relevance to be had when looking at the Durham staycationer, as the UK is currently suffering from a government which is unwilling to be drawn on the specifics of lockdown, and/or is letting people and companies act on “instinct” - as per Johnson. Despite constantly knocking at the door of Number 10, ABTA has been unable to get clarity on a change to the refund position, as has been seen in Europe. Instead, the CMA is investigating, leaving companies to choose between prosecution and bankruptcy.
This gives On The Beach the chance to set itself apart by offering refunds - a happy byproduct of having the funds to be able to do it. Larger players may not have the option. The next game will be to see how long it can last. Hopefully longer than Johnson and Cummings.