Profit warning from Onthebeach reiterates difficulty in Tour Operator market

All,

On the Beach Group have issued a trading Update this morning with profit warning for FY19 due to currency headwinds from Sterling weakness. This is not new news but acknowledgment from one of Thomas Cook’s competitors the difficulties in the market.

Thomas Cook are 100% hedged for operational exposures for the Summer 2019. But as a rule, TCG do not hedge their translation impact on profits generated outside the UK. According to TCG, If March month- end closing rates for the Euro and Swedish Krona were maintained throughout the remainder of FY19, there would be a negative year-on-year translation impact on EBIT of approximately £15 million.

However, current rates for £/€ is 1.08 versus March rate of 1.17. £/SEK is 11.61 versus 12.12 at March month end. Sterling weakness is in their favour for profits generated outside of the UK. EBIT, all things equal, should be rising as a result.

In either case, the Company carries Euro denominated debt which should have an offsetting effect on resulting leverage.

On the Beach have noted demand has strengthened into H2 but sterling weakness has weakened margins.

Note TUI results are due out next Tuesday morning.

Tomas

On the Beach Group plc

("On the Beach", "OTB", the "Company" or the "Group")

Trading Update

On the Beach Group plc (LSE: OTB.L), the UK's leading online retailer for beach holidays, today issues an update on current trading.

Current Trading

On the Beach operates a flexible model incorporating dynamic rather than currency hedged pricing for the packages that it provides its customers. With the increased likelihood of a no deal Brexit, Sterling has significantly devalued against the euro since the beginning of May and this accelerated at the end of July, continuing into August. Whilst the Group has seen a strengthening of demand in H2, this weakening of Sterling leads to a significant increase in OTB prices versus full risk competitors with currency hedges. As OTB remains focused on profitable growth, these relative price increases make it difficult for the Group to gain share of market while maintaining margins.

As a result, the Group anticipates delivering a full year performance below the Board's expectations.

Strategic Progress

 Despite the difficult market conditions in FY19, the Group has continued to increase investment in both talent and infrastructure in the areas that we believe offer the most significant expansion opportunities. As a result, we have made excellent progress towards delivering our strategy.

 · Following our head office move into Manchester in November 2018, to underpin our objective to recruit and retain the very best digital talent, we have accelerated the pace at which we are adding digital headcount to our teams. We have also reorganised the technology and product functions to allow us to better scale and increase the pace at which we evolve our platform to support our strategic objectives.

· We acquired Classic Collection Holidays in August 2018 to support our objective to offer our competitively priced beach holidays to a wide range of intermediaries through an online portal. Classic Package Holidays was launched at the end of March 2019 and is now live with over 1,000 agents. We expect that by the end of FY19, more than 1,500 agents will be using the platform and are confident that this new channel will deliver a meaningful contribution to Group performance in FY20.

· We continue to directly integrate scheduled long haul carriers into our platform. British Airways and Emirates are live on site and further integrations will be completed imminently. We will enter FY20 with all key airline partners integrated whilst we continue to build our portfolio of directly contracted hotels. In FY19 we have grown long haul revenues by more than 100% and are excited about the medium term opportunities that these new destinations offer.

· Our international platforms will deliver significant revenue growth in H2 FY19 with a substantial improvement in marketing efficiencies and therefore a reduced EBITDA loss.

· We continue to actively explore acquisition opportunities and are delighted that Adam Hansen will join us later in August from Rothschild as Corporate Development Director.

Simon Cooper, Chief Executive of On the Beach Group plc, commented:

 "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."