Analysis: Classic Collection left high and dry

On the Beach’s profit warning and announcement that it is to wind up Classic Collection last week represented a twin blow to the company’s previously smooth ascent to becoming the fifth-largest Atol holder.

 

The company downgraded its full year profit forecast by up to 10%, going from confidence “in delivering” more than £38 million in May to projecting profits of £34.5 million to £35.5 million in its September 24 trading update ahead of ending its financial year on September 30.

 

The revised sum remains a healthy, in line with a “third consecutive record year of growth” and summer bookings “12% ahead of last year”.

 

But investors reacted negatively with the announcement triggering an immediate 20% fall in share price, and the shares remained 15% down on their pre-update value at the start of the following week and 25% down on a month earlier.

 

On the Beach announced the “orderly wind down” of Classic Collection, following “a small loss in the year”, to allow it to focus on “the higher growth potential” of its consumer business – contradicting previous results statements which highlighted the growth potential of the B2B sector.

 

It sweetened the news for investors by announcing a £25-million buy-back of shares, having already completed a £30-million buy-back this year.

 

Yet as recently as May the group was reporting “solid progress” and 36% growth in Classic Collection bookings in the six months to March which gave it “confidence the segment can return to profitability” this year.

 

Twelve months earlier, amid a restructuring and merger of the Classic brands, On the Beach remained confident enough to assert the businesses still “represent a meaningful part of our group”.

 

It noted then: “We expect the B2B channel’s profitability to improve once the key measures identified to simplify its operating model have been implemented.”

The company had already reported incurring £1.5 million in redundancy costs in the “consolidation of certain group functions” between On the Beach and Classic Collection Holidays” in its 2023 results.

 

It considered selling Classic Collection Holidays in early 2024 but decided against and plumped instead for winding up the business, writing off £4.6 million in goodwill and transferring the remaining assets to Classic Package Holidays, which rebranded as Classic Collection.

 

The group valued the remaining goodwill associated with Classic Collection at £4 million in May this year and its intangible assets at £4.9 million, meaning it has written off near to another £9 million on its balance sheet.

 

An ‘earnings enhancing’ acquisition

On the Beach acquired Classic Collection for £20 million in August 2018, saying it “believed the acquisition would be earnings enhancing in the first full year of ownership”.

 

Classic had reported an operating profit of £2.6 million and assets of £18 million in its most recent financial year.

 

The operator employed 124 staff and sold through a network of third-party travel agencies.

 

On the Beach pledged to invest in Classic’s luxury holidays portfolio and an online booking portal giving agents access to mainstream beach holidays. It launched the Classic Package Holidays portal in February 2019, and both Classic brands launched long-haul offerings which grew as a proportion of the overall business.

In annual results for 2021, On the Beach described the Classic businesses as an “expansion area”, increasing its “addressable market [by] about eight million holidaymakers”.

 

A year later, it described both brands as “well-positioned to deliver growth” despite the “competitive landscape for our B2B businesses” post-pandemic which had resulted in “slower than expected” growth.

 

Highly experienced trade executive Andy Freeth was appointed chief executive of the Classic brands’ parent company in November 2022 “to drive continued growth” and in full-year results to September 2023, the group was still confidently forecasting a “return to B2B profitability” in 2024.

 

But by March 2024 Freeth was gone, with the company announcing job losses and the brands’ merger.

 

On the Beach insisted it remained “committed to growing the business and supporting the trade” and reported “solid progress” 14 months later in May 2025. But barely four months on, Classic Collection has gone.