Listed OTA On the Beach has taken steps to improve liquidity by agreeing new bank loan arrangements tied to an issuing of shares representing nearly 20% of its existing share capital.
The firm said the shares placing will be participated in by all company director and certain members of the management team and will contribute around £1.08 million in aggregate.
The Manchester-based agency is working with Numis Securities Limited and Peel Hunt LLP, who will operate as joint book runners for the shares placing.
The “non-pre-emptive” placing of the shares, for 1p each, is being conducted as an “accelerated bookbuild”, will be available to new and existing investors and represents 19.9% of existing share capital.
The OTA also announced it has secured an incremental £25 million rolling credit facility under the Coronavirus Large Business Interruption Loan Scheme with Lloyds Bank.
This will expire in May 2022 and is on top of an existing £50 million facility that remains in place which is due to expire in December 2023.
As a result, the firm now has available a maximum of £75 million in working capital.
And Lloyds has agreed to amend existing financial covenants, giving it “greater operating flexibility to support incremental investment”.
For as long as the coronavirus interruption loan facility remains in place, the OTA will be subject to certain restrictions on paying dividends.
Revised banking facilities outlined in an update on the impact of the COVID-19 crisis are “inter-conditional on the shares placing”, On The Beach said.
In a statement to the stock market it added: “The Directors believe that the net proceeds from the placing, together with the revised banking facilities, will provide OTB with even greater resilience, flexibility and firepower through the current downturn to enable OTB to exit this extended disruptive period in a strong position and to ensure the Group continues to progress towards its long-term vision to become Europe’s leading online retailer of beach holidays.”
Simon Cooper, chief executive of On the Beach Group, said: “The fundraising and banking facilities announced today 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.
“Importantly, the additional funding will enable the group to consider commercial opportunities simultaneously with a strong balance sheet to support its growth ambitions.
“The funding will also enable the Group to increase its online and offline marketing spend to meet pent up consumer demand when it returns, so as to make substantial market share gains and deliver long term growth for shareholders.
“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.
“I would like to take this opportunity to thank our existing shareholders and look forward to welcoming new shareholders to our register.
“I would also like to thank the wider team across the Group for the resilience and professionalism they have shown in helping our customers through these challenging times.”
On The Beach said it has consulted with its major institutional shareholders ahead of the announcement of the shares placing which was opted for to “minimises cost, time to completion and management distraction during an important and unprecedented time for the sector and the company”.
It said the board’s unanimous view is that the placing was in the best interest of shareholders, as well as wider stakeholder, and will promote the long-term success of he company.
On The Beach expects to see a £35 million hit in the first half if its financial year due to holidays that have been cancelled because of the COVID-19 travel restrictions.
Prior to the lockdown it had seen a 29% increase in sales, excluding its Classic Collection business, for summer 2020 following the demise of Thomas Cook.
It also said it had seen a record increase in brand awareness following “significant” investment in offline advertising which it had expected to pay back in the second half of 2020.
The firm said it expects second half results to also be impacted dependent on how long travel restrictions remain in place.
It had already taken steps to reduce cash outlay and amend an existing £50 million rolling credit facility (RCF) leaving it with net debt of £9.7 million in April, down from £25.3 million in February.
On The Beach said its “theoretical stress test” of UK airspace being closed until the end of September has become “increasingly plausible” since its last update in April and so it has taken the steps to agree supplementary financing.
The company said: “The directors believe the additional headroom will 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.
“A disciplined approach to investment will be maintained, in line with the group’s track record.”
