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On The Beach raises £67mln to strengthen balance sheet as coronavirus hits travel sector

The holiday firm added that due to booking cancellations and refunds, it expects to take a £35mln charge in its first half

On the Beach Group - On The Beach raises £67mln to strengthen balance sheet as coronavirus hits travel sector

On The Beach Group PLC (LON:OTB) has raised £67.3mln in a share placing to bolster its balance sheet as the coronavirus pandemic continued to batter the travel industry.

The package holiday seller said it had raised the funds through the issue of around 26.1mln shares at the firm’s closing price on Thursday of 257.5p.

READ: On The Beach says it is resilient amid travel industry slump caused by coronavirus

Announcing the fundraising plans after market close yesterday, On The Beach said as a result of the disruption and a “dramatic fall in holiday booking volumes” during the pandemic, it expected to incur a £35mln charge in its first half as it was forced to reverse bookings made for the summer.

The firm also predicted that the impact of the pandemic will be “deeper and longer lasting” on the travel industry and will “lead to a dramatic change in the competitive landscape”.

However, the company said the additional funds will provide it with “even greater resilience, flexibility and firepower through the current downturn” and allow the group to “simultaneously increase investment in its digital platforms; continue to drive brand through investment in online and offline marketing activity; improve conversion with attractive low deposit schemes; and react to commercial opportunities in the UK and internationally”.

“The board believes that the mitigating actions taken by OTB management, combined with the net proceeds proposed to be raised from the Placing and the revised banking facilities, will enable OTB to protect and preserve the group's strong market position; ensuring a high level of preparedness for market recovery over time”, On The Beach said.

“The group will have sufficient flexibility to operate through and beyond a prolonged period of continuing disruption, whilst having the headroom available to invest to drive the maximum possible market share gain as the recovery begins, and to react fully to commercial opportunities when they arise”, the firm added.

In a note on Friday, analysts at house broker Peel Hunt retained their ‘buy’ rating and 400p price target, saying they expected the firm’s interims on 30 June will be “a little more positive in terms of trading” and they expected “a few more bookings from optimists spending some of their enforced [coronavirus] savings on securing a holiday to look forward to in 2021”.

The broker added that the company can settle down on its cash pile to sit out the pandemic, however many of its competitors “are not so lucky” with smaller operators having “no way to survive the cash crunch in the travel industry”.

Shares in the company climbed 4.9% to 270p in early deals.

Quick facts: On the Beach Group

Price: 264.5 GBX

LSE:OTB
Market: LSE
Market Cap: £416.22 m
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