On The Beach labelled ‘cash machine’ following Ryanair partnership
On The Beach has been labelled a “cash machine” by analysts after the group issued its first dividend since the pandemic.
The company has reported revenue growth of 11 per cent in the last six months thanks, in part, to its partnership with low-cost carrier Ryanair.
The Manchester-based travel agent and Ryanair, which had been at loggerheads over cancellation refunds, entered a partnership earlier this year.
The ceasefire between the two seems to be paying off.
The group’s gross profit after marketing rose 38 per cent in the six months, while adjusted operating profit totalled £8.1m, up 93 per cent from the year before.
Meanwhile, its overall capacity to beach destinations rose seven per cent compared to last year, allowing it to continue to sell discount holiday deals as the summer approaches.
On The Beach also chose to issue a 0.9p per share interim dividend, the first since February 2020, citing “the board’s continued confidence in the group’s prospects”.
This led Peel Hunt’s Jones and Jack to label the group a “cash machine”, stating that the massive £196m stockpile of customer payments made in advance of travel “is a potential source of material shareholder value, depending on regulatory change”.
“However, there is clearly some pressure on the consumer of value holidays and management’s guidance that the business is trading in line with consensus is clearly based on line of sight to the year-end,” said the analysts, leading them to lower its profit forecast from £44.1m to £40.5m following the results.
Over the last six months, the group’s share price has risen 53.8 per cent as investors have bought back into its long-term growth story.