ELECTRONIC TRANSMISSION DISCLAIMER IMPORTANT NOTICE

ELECTRONIC TRANSMISSION DISCLAIMER
IMPORTANT NOTICE: You must read the following disclaimer before continuing. The following notice
applies to the attached document, which has been made available to you in electronic form, and you are
therefore advised to read this notice carefully before reading, accessing or making any other use of the
attached document. In accessing the document, you agree to be bound by the following terms and
conditions, including any modifications to them from time to time, each time you receive any information
from us as a result of such access. You acknowledge that this electronic transmission and the delivery of the
attached document is confidential and intended only for you, and you agree you will not forward,
reproduce, copy, download or publish this electronic transmission or the attached document (electronically
or otherwise) to any other person. Failure to comply with this notice may result in a violation of applicable
securities laws.
This electronic transmission, the attached document and the offer referred to therein, when made, are only
addressed to and directed at persons in member states (‘‘Member States’’) of the European Economic
Area (‘‘EEA’’) who are ‘‘qualified investors’’ within the meaning of Article 2(1)(e) of the Prospectus
Directive (Directive 2003/71/EC and amendments thereto, including Directive 2010/73/EU, to the extent
implemented in the relevant Member State of the EEA) and any implementing measure in each relevant
Member State of the EEA (the ‘‘Prospectus Directive’’) (‘‘Qualified Investors’’). In addition, in the United
Kingdom, this document is being distributed only to, and is directed only at, Qualified Investors: (i) who
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Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘‘Order’’) and
Qualified Investors falling within Article 49(2)(a) to (d) of the Order; and (ii) to whom it may otherwise
lawfully be communicated (all such persons together being referred to as ‘‘relevant persons’’). This
document must not be acted on or relied on: (i) in the United Kingdom, by persons who are not relevant
persons; and (ii) in any Member State of the EEA other than the United Kingdom, by persons who are not
Qualified Investors. Any investment or investment activity to which this document relates is available only
to: (i) in the United Kingdom, relevant persons; and (ii) in any Member State of the EEA other than the
United Kingdom, Qualified Investors, and will be engaged only with such persons.
Nothing in this electronic transmission or the attached document constitutes an offer of securities for sale
in the United States or any other jurisdiction where it is unlawful to do so. The securities have not been
and will not be registered under the US Securities Act of 1933, as amended (the ‘‘Securities Act’’), or with
any securities commission or regulatory authority of any state or other jurisdiction of the United States,
and may not be offered, sold, pledged or otherwise transferred except pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the Securities Act and applicable state or
local securities laws. Any offer of securities for sale will be made (i) in the United States only to a person
that the seller and any person acting on its behalf reasonably believes is a qualified institutional buyer
(‘‘QIB’’) as defined in and in accordance with Rule 144A under the Securities Act (‘‘Rule 144A’’); or (ii) in
an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act,
in each case in accordance with any applicable securities laws of any state or jurisdiction of the United
States or pursuant to an exemption from, or in a transaction not subject to, the registration requirements
of the Securities Act and applicable state or local securities laws.
Confirmation of your representation. By accepting electronic delivery of the attached document, you are
deemed to have represented to Numis Securities Limited (‘‘Numis’’) and On the Beach Group plc (the
‘‘Company’’) that (i) you are acting on behalf of, or you are either (a) an institutional investor outside the
United States (as defined in Regulation S under the Securities Act); or (b) in the United States and a QIB
that is acquiring securities for your own account or for the account of another QIB; (ii) if you are in the
United Kingdom, you are a relevant person; (iii) if you are in any Member State of the EEA other than the
United Kingdom, you are a Qualified Investor; and (iv) if you are outside the United States, the United
Kingdom and the EEA (and the electronic mail addresses that you gave us and to which this document has
been delivered are for accounts not located in such jurisdictions), you are a person into whose possession
this document may lawfully be delivered in accordance with the laws of the jurisdiction in which you are
located.
The attached document has been made available to you in an electronic form. You are reminded that
documents transmitted via this medium may be altered or changed during the process of electronic
transmission and consequently none of the Company, Numis, or any of their respective affiliates, directors,
officers, employees or agents accepts any liability or responsibility whatsoever in respect of any difference
between the document distributed to you in electronic format and any hard copy version. By accessing the
attached document, you consent to receiving it in electronic form. A hard copy of the document will be
made available to you only upon request.
Restriction. Nothing in this electronic transmission or the attached document constitutes, or may be used
in connection with, an offer of securities for sale to persons other than the specified categories of
institutional investors described above and to whom they are directed, and access has been limited so that
they shall not constitute a general solicitation. If you have gained access to this transmission contrary to the
foregoing restrictions, you will be unable to subscribe for any of the securities described herein.
None of Numis, any of its respective affiliates, or any of their respective directors, officers, employees or
agents accepts any responsibility whatsoever for the contents of this document or for any statement made
or purported to be made by it, or on its behalf, in connection with the issuer or the offer. Numis and any of
its respective affiliates accordingly disclaim all and any liability, whether arising in tort, contract, or
otherwise which they might otherwise have in respect of such document or any such statement. No
representation or warranty, express or implied, is made by Numis or any of its respective affiliates as to the
accuracy, completeness, reasonableness, verification or sufficiency of the information set out in this
document.
Numis is acting exclusively for the Company and no one else in connection with the offer referred to
herein. Numis will not regard any other person (whether or not a recipient of this document) as their client
in relation to the offer referred to herein, and will not be responsible to anyone other than the Company
for providing the protections afforded to their clients or for giving advice in relation to the offer or any
transaction or arrangement referred to herein.
You are responsible for protecting against viruses and other destructive items. Your receipt of the
attached document via electronic transmission is at your own risk, and it is your responsibility to take
precautions to ensure that it is free from viruses and other items of a destructive nature.
On the Beach
SEPTEMBER 2015
PROSPECTUSSEPTEMBER 2015
PROSPECTUS
This document, which comprises a prospectus relating to On the Beach Group plc prepared in accordance with the
Prospectus Rules made under section 73A of FSMA, has been approved by the FCA in accordance with section 87A of
FSMA, and has been made available to the public in accordance with paragraph 3.2 of the Prospectus Rules.
Applications have been made: (i) to the FCA for all of the issued and to be issued Shares to be admitted to the premium
listing segment of the Official List; and (ii) to the London Stock Exchange for such Shares to be admitted to trading on
the London Stock Exchange’s main market for listed securities. Admission to trading on the London Stock Exchange’s
main market for listed securities constitutes admission to trading on a regulated market. No application has been, or is
currently intended to be, made for the Shares to be admitted to listing or trading on any other exchange. In the Offer,
46,739,130 Sale Shares are being offered by the Selling Shareholders for sale and 5,434,782 New Shares are being offered
by the Company for subscription. Conditional dealings in the Shares are expected to commence on the London Stock
Exchange at 8.00 a.m. on 23 September 2015. It is expected that Admission will become effective, and that unconditional
dealings in the Shares will commence on the London Stock Exchange, at 8.00 a.m. on 28 September 2015 (International
Security Identification Number: GB00BYM1K758). Dealings on the London Stock Exchange before Admission will only
be settled if Admission takes place. All dealings before the commencement of unconditional dealings will be on a ‘‘when
issued’’ basis, and will be of no effect if Admission does not take place, and such dealings will be at the sole risk of the
parties concerned.
The Company and its Directors (whose names appear on page 40 of this Prospectus) accept responsibility for the
information contained in this Prospectus. To the best of the knowledge of the Company and the Directors (each of whom
has taken all reasonable care to ensure that such is the case), the information contained in this Prospectus is in
accordance with the facts and contains no omission likely to affect the import of such information.
Prospective investors are advised to examine all the risks that might be relevant in connection with an investment in the
Shares. Prospective investors should read the entirety of this Prospectus, and in particular the section entitled Part 1:
‘‘Risk Factors’’, for a discussion of certain risks and other factors that should be considered in connection with any
investment in the Shares. Prospective investors should be aware that an investment in the Company involves a degree of
risk and that, if one or more of the risks described in this Prospectus were to occur, investors may find that their
investment is materially and adversely affected. Accordingly, an investment in the Shares is only suitable for investors who
are knowledgeable in investment matters and who are able to bear the loss of up to the whole or part of their investment.
ON THE BEACH GROUP PLC
(incorporated under the Companies Act 2006 and registered in England and Wales with registered number 9736592)
Prospectus
Offer of 46,739,130 Sale Shares and 5,434,782 New Shares of £1.50 each at an Offer Price
of 184 pence per Share
Admission of all issued shares to the premium listing segment of the Official List
and to trading on the London Stock Exchange’s main market for listed securities
Global Co-ordinator, Sponsor and Bookrunner
Numis Securities Limited
Expected issued share capital immediately following Admission
Number of Shares
130,434,763
Aggregate nominal value of the Shares
£195,652,145
The Selling Shareholders are offering 46,739,130 Sale Shares in aggregate for sale under the Offer and the Company is
offering up to 5,434,782 New Shares for subscription under the Offer. The New Shares will rank pari passu in all respects
with the Sale Shares and will carry the right to receive all dividends and distributions declared, made or paid on or in
respect of the Sale Shares after Admission.
Numis Securities Limited (‘‘Numis’’) has been appointed as Global Co-ordinator, Sponsor and Bookrunner in
connection with Admission and the Offer and is authorised and regulated by the FCA in the United Kingdom and is
acting exclusively for the Company and no one else in connection with the Offer and Admission, and will not regard any
other person (whether or not a recipient of this Prospectus) as a client in relation to the Offer and Admission and will
not be responsible to anyone other than the Company for providing the protections afforded to its clients or for giving
advice in relation to the Offer, Admission or any transaction, matter or arrangement referred to in this Prospectus.
Apart from the responsibilities and liabilities, if any, that may be imposed on Numis by FSMA or the regulatory regime
established under it, or under the regulatory regime of any jurisdiction where the exclusion of liability under the relevant
regulatory regime would be illegal, void or unenforceable, Numis and its affiliates do not accept any responsibility
whatsoever for, or makes any representation or warranty, express or implied, as to the contents of this Prospectus or for
any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Shares or
the Offer and nothing in this Prospectus will be relied upon as a promise or representation in this respect, whether or not
to the past or future. Numis and its affiliates accordingly disclaim all and any responsibility or liability, whether arising in
tort, contract or otherwise (save as referred to above), which it might otherwise have in respect of this Prospectus or any
such statement.
Unless required to do so by law or regulation, the Company does not envisage publishing any
supplementary prospectus or an update statement, as the case may be.
Prior to making any decision as to whether to invest in the Shares, prospective investors should read this
Prospectus in its entirety. In making an investment decision, each investor must rely on its own
examination, analysis and enquiry of the Company and the terms of the Offer, including the merits and
risks involved. Investors who subscribe for or purchase Offer Shares will be deemed to have acknowledged
that: (i) they have not relied on Numis or any person affiliated with Numis in connection with any
investigation of the accuracy of any information contained in this Prospectus or their investment decision;
and (ii) they have relied only on the information contained in this Prospectus.
No person has been authorised to give any information or make any representations other than those
contained in this Prospectus and, if given or made, such information or representations must not be relied
on as having been authorised by or on behalf of the Company, the Directors or Numis. Neither the delivery
of this Prospectus nor any subscription, sale or purchase made under it shall, under any circumstances,
create any implication that there has been no change in the business affairs of the Company or the Group
since the date of this Prospectus, or that the information in this Prospectus is correct as of any time
subsequent to its date. Recipients of this Prospectus are authorised solely to use this Prospectus for the
purpose of considering an acquisition or subscription of the Shares, and may not reproduce or distribute
this Prospectus, in whole or in part, and may not disclose any of the contents of this Prospectus or use any
information in it for any purpose other than considering an investment in the Shares. Such recipients of
this Prospectus agree to the foregoing by accepting delivery of this Prospectus.
None of the Company, Numis or any of their respective representatives is making any representation to
any prospective investor in the Shares regarding the legality of an investment in the Shares by such
prospective investor under the laws applicable to such prospective investor. The contents of this Prospectus
should not be construed as legal, financial or tax advice. Each prospective investor should consult his, her
or its own legal, financial or tax adviser for legal, financial or tax advice.
NOTICE TO CERTAIN INVESTORS
The Shares are subject to selling and transfer restrictions in certain jurisdictions. Prospective investors
should read the restrictions described under paragraph 50 of Part 13: ‘‘Details of the Offer’’. Each investor
in the Shares will be deemed to have made the relevant representations described in that paragraph.
The distribution of this Prospectus and the Offer in certain jurisdictions may be restricted by law. Other
than in the United Kingdom, no action has been or will be taken by the Company, the Selling Shareholders
or Numis to permit a public offering of the Shares or to permit the possession or distribution of this
Prospectus (or any other offering or publicity materials or application forms relating to the Shares). In
particular, no actions have been taken to allow for a public offering of the Shares under the applicable
securities laws of Australia, Canada, Japan, South Africa, New Zealand, Switzerland or the United States.
Accordingly, neither this Prospectus nor any advertisement or any other offering material may be
distributed or published in any jurisdiction except under circumstances that will result in compliance with
all applicable laws and regulations. Persons into whose possession this Prospectus comes should inform
themselves about and observe any such restrictions. Any failure to comply with these restrictions may
constitute a violation of the securities laws of any such jurisdiction.
This Prospectus does not constitute or form part of any offer or invitation to sell or issue, or any
solicitation of any offer to purchase or subscribe for, any securities in any jurisdiction to whom or in which
such offer, invitation or solicitation is unlawful, and in particular is not for distribution in or into Australia,
Canada, Japan, South Africa, New Zealand, Switzerland or the United States. The Shares have not been
and will not be registered under the applicable securities laws of Australia, Canada, Japan or South Africa
and, subject to certain exceptions, may not be offered or sold, directly or indirectly, in or into Australia,
Canada, Japan or South Africa or to any resident thereof.
The Company is not and will not be registered under the Investment Company Act. The Shares have not
been and will not be registered under the Securities Act, or with any securities commission or regulatory
authority or under the laws of any state or jurisdiction of the United States. Accordingly, the Shares will
constitute ‘‘restricted securities’’ within the meaning of Rule 144(a)(3) of the Securities Act, and may not
be offered, sold, resold, delivered, distributed or otherwise transferred, directly or indirectly, in, into or
from the United States except pursuant to a registration statement that has been declared effective under
the Securities Act or in transactions exempt from, or not subject to, the registration requirements of the
ii
Securities Act or any applicable state or local securities laws of the United States. The Shares are being
offered and sold outside the United States in reliance on Regulation S under the Securities Act, and within
the United States only to a person the seller and any person acting on behalf of the seller reasonably
believes to be a QIB in reliance on Rule 144A. Prospective investors are hereby notified that sales of
Shares may be made in reliance on an exemption from the provisions of Section 5 of the Securities Act.
There will be no public offering of the Shares in the United States.
The Shares have not been approved or disapproved by the US Securities and Exchange Commission, any
state securities commission in the United States or any other US regulatory authority, nor have any of the
foregoing authorities passed upon or endorsed the merits of the offering of the Shares or the accuracy or
adequacy of this Prospectus. Any representation to the contrary is a criminal offence in the United States.
Neither the Company nor any of its subsidiaries is required to file periodic reports under Section 13 or
Section 15(d) of the US Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’). For so long as
any Shares are ‘‘restricted securities’’ within the meaning of Rule 144(a)(3) of the Securities Act, the
Company will, during any period in which it is neither subject to Section 13 or 15(d) of the Exchange Act
nor exempt from reporting pursuant to Rule 12g3-2(b) of the Exchange Act, provide, upon written request,
to holders of Shares, any owner of any beneficial interest in Shares or any prospective purchaser
designated by such holder or owner, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
The enforcement by investors of civil liabilities under the US federal securities laws may be adversely
affected by the fact that the Company is incorporated outside the United States, and that some of its
directors, and the experts named herein, are residents of a foreign country. As a result, it may be difficult
or impossible for investors to effect service of process within the United States upon the Company, its
directors or the experts named herein, or to realise against them upon judgments of courts of the United
States predicated upon civil liabilities under the federal securities laws of the United States or ‘‘blue sky’’
laws of any state within the United States. In addition, investors should not assume that the courts of the
United Kingdom: (a) would enforce judgments of US courts obtained in actions against such persons
predicated upon civil liabilities under the federal securities laws of the United States or ‘‘blue sky’’ laws of
any state within the United States; or (b) would enforce, in original actions, liabilities against such persons
predicated upon civil liabilities under the federal securities laws of the United States or ‘‘blue sky’’ laws of
any state within the United States.
All prospective purchasers of Shares are urged to consult with their own tax advisors concerning the US
federal income tax considerations associated with acquiring, owning and disposing of Shares in light of
their particular circumstances, as well as any considerations arising under the laws of any non-US state,
local or other taxing jurisdiction.
INTERPRETATION
Certain terms used in this Prospectus are defined in Part 16: ‘‘Definitions’’ and certain technical and other
items are defined and explained in Part 17: ‘‘Glossary’’.
All references to time in this Prospectus are to London time, unless otherwise stated.
iii
TABLE OF CONTENTS
Page
Part
Summary information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
Part 1—Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
Part 2—Presentation of Financial and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36
Part 3—Directors, Secretary, Registered and Head Office and Advisers . . . . . . . . . . . . . . . . . . .
41
Part 4—Expected Timetable of Principal Events and Offer Statistics . . . . . . . . . . . . . . . . . . . . . .
43
Part 5—Information on the Company and the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44
Part 6—Directors, Senior Management and Corporate Governance . . . . . . . . . . . . . . . . . . . . . .
64
Part 7—Reasons for the Offer, Use of Proceeds, Dividends and Dividend Policy . . . . . . . . . . . . .
69
Part 8—Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70
Part 9—Operating and Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76
Part 10—Capitalisation and Indebtedness Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
93
Part 11—Historical Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
95
Part 12—Unaudited Pro Forma Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
136
Part 13—Details of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
141
Part 14—Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
147
Part 15—Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
155
Part 16—Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
188
Part 17—Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
193
1
SUMMARY INFORMATION
Summaries are made up of disclosure requirements known as ‘‘Elements’’. These Elements are numbered
in Sections A to E (A.1 to E.7).
This summary contains all the Elements required to be included in a summary for this type of securities
and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering
sequence of the Elements.
Even though an Element may be required to be inserted in the summary because of the type of securities
and issuer, it is possible that no relevant information can be given regarding that Element. In this case, a
short description of the Element is included in the summary with the mention of ‘‘not applicable’’.
Section A—Introduction and warnings
A.1
Warnings
THIS SUMMARY SHOULD BE READ AS AN INTRODUCTION TO
THIS PROSPECTUS. ANY DECISION TO INVEST IN THE SHARES
SHOULD BE BASED ON CONSIDERATION OF THIS PROSPECTUS
AS A WHOLE BY THE INVESTOR, INCLUDING IN PARTICULAR THE
RISK FACTORS.
Where a claim relating to the information contained in this Prospectus is
brought before a court, the plaintiff investor might, under the national
legislation of the member state of the European Economic Area, have to
bear the costs of translating this Prospectus before the legal proceedings
are initiated.
Civil liability attaches only to those persons who have tabled the summary
including any translation thereof, but only if the summary is misleading,
inaccurate or inconsistent when read together with the other parts of this
Prospectus or it does not provide, when read together with other parts of
this Prospectus, key information in order to aid investors when considering
whether to invest in such securities.
A.2
Resale by
Financial
Intermediaries
Not applicable. The Company is not engaging any financial intermediaries
and has not given consent to the use of this Prospectus for subsequent
resale or final placement of Shares by financial intermediaries.
Section B—Issuer
B.1
Legal and
Commercial Name
The Company’s legal and commercial name is On the Beach Group plc.
B.2
Domicile; Legal
form; Legislation;
Country of
Incorporation
The Company is a public limited company incorporated in England and
Wales under the Companies Act 2006 (the ‘‘Companies Act’’) with
registered number 9736592. It is domiciled in the United Kingdom.
B.3
Issuer’s Current
Operations &
Principal Activities
The Group is a leading online retailer of affordable short-haul beach
holidays, primarily targeting customers in the United Kingdom under the
‘‘On the Beach’’ brand. The Group currently has a market share of the
UK online short-haul beach holiday market of approximately 17 per cent.
Its two largest competitors are TUI Travel and Thomas Cook
(source: CAA, UK Short Haul Beach Online Estimates). The Group entered
the Swedish market in early 2015, and in the short term intends to expand
into Norway and/or Denmark.
2
Section B—Issuer
The Group’s technology platform enables customers to package
dynamically the constituent components of their holiday (including flights,
hotels and transfers) to customise holidays from millions of flight and
hotel combinations. The Group’s search facility connects customers to
suppliers of travel products. Each travel product is booked separately. The
Group’s dynamic packaging is different to the traditional package holidays
offered by many tour operators, where packages of flights, hotels and
other products are fixed by operators at the outset.
The Group is completely independent from airlines and hotels, so that it
can offer customers a full market range of flight and hotel products
bookable through online channels (including by desktop, mobiles, tablets
and apps) and over the phone.
B.4a
Significant Trends
UK short-haul beach holidays
The UK dynamic packaging market in which the Group operates grew by
a compound annual growth rate of 9.9 per cent. in the period from 2009 to
2014 (source: Euromonitor, Growth in Dynamic Packages). There has been
an overall growth in short-haul holidays in the United Kingdom (defined
as UK consumers travelling to destinations less than 6 hours flight from
the UK mainland), with an overall decrease in long-haul holidays (source:
Mintel, Package vs Independent Holidays UK, April 2015).
The beach element of the holiday market is the most popular holiday type
amongst UK consumers. Approximately 48 per cent. of UK holidaymakers
who travel overseas have taken a beach holiday in the last 12 months,
compared to 19 per cent. for city breaks, 15 per cent. for cultural/history
breaks and 6 per cent. for cruises (sources: Mintel, Beach Holidays—UK,
January 2015).
Dynamic packages as a share of the wider UK market
Dynamic packaging is a booking process that allows customers to book
their own combinations of flights, hotels and transfers from millions of
available options on a website or through the app of an OTA or tour
operator. The dynamic packaging market in the United Kingdom is
forecast to grow at the expense of the share of the market held by
traditional package holidays. The dynamically packaged holiday market in
the United Kingdom is forecast to grow at the expense of traditional
pre-packaged holidays from 2014 to 2019. During this period, traditional
package holiday sales are forecast to decline by a compound annual
growth rate of 3.9 per cent. in the United Kingdom, whilst dynamic
packaging sales are forecast to grow by a compound annual growth rate of
1.7 per cent. over this same period (source: Euromonitor, Growth in
Dynamic Packages).
3
Section B—Issuer
Online penetration of UK leisure package holidays
Online penetration in the UK package holiday market has steadily
increased from 48 per cent. in 2012 to 52 per cent. in 2014 and is forecast
to reach 59.5 per cent. by 2019. The forecast compound annual growth
rate for online package holiday sales in the United Kingdom is 2.1 per
cent. in constant prices for the period from 2014 to 2019 (or 2.3 per cent.
for the period from 2012 to 2019) (source: Euromonitor, Online Sales By
Market). In the Netherlands and certain Scandinavian countries, online
penetration in flights and hotels is already between 60 and 82 per cent.
(source: Euromonitor, % Online Share for Air Only, Packages, Lodging Only)
and the Board expects that online penetration of packaged holidays will
continue to rise.
The European package holiday market
Sales in the package holiday sector in Belgium, Denmark, France,
Germany, Italy, Netherlands, Norway, Spain and Sweden amounted to
EUR 55 billion in 2014. Online sales penetration in the same sector and
markets is expected to grow from 26 per cent. in 2014 to 30 per cent. in
2018 (sources: Euromonitor, Offline and Online Intermediaries Sales by
Market; Euromonitor, Online Intermediaries Sales by Market).
The Swedish market
Package holiday sales in Sweden grew, on a compound annual growth rate
basis of 1.5 per cent. between 2012 and 2014 to reach EUR 2,291 million
in 2014. Offline value sales for package holidays saw a decrease of 7 per
cent. in 2014. Online sales for package holidays, however, continued to
grow, increasing by 1.5 per cent. in the same year. Online sales of package
holidays accounted for EUR 1,543 million in 2014, which represented
67 per cent. of total travel intermediaries’ sales in Sweden for the year.
Online package holiday value sales are projected to increase by 17 per
cent. in Sweden between 2014 and 2018 (source: Euromonitor, Online Sales
by Market).
Barriers to entry
The Group focuses on a niche in the market between traditional tour
operators and generalist OTAs. The Group has spent over 11 years
developing and refining its business model to focus on enabling customers
to dynamically package holidays to short-haul beach destinations through
its sophisticated online platform. The Board believes this model would be
difficult for competitors, be they new entrants, traditional tour operators,
generalist OTAs or low-cost carriers, to replicate.
4
Section B—Issuer
B.5
Group Structure
Immediately prior to Admission, the Company will become the holding
company of the Group, and the principal subsidiaries and subsidiary
undertakings of the Company will be as follows:
Company
number
Name
On the Beach Topco
Limited(1)(3) . . . . . . . . . . . . .
On the Beach Trustees Limited .
On the Beach Bidco Limited(3) .
On the Beach Travel Limited . .
On the Beach Limited(2) . . . . .
On the Beach Beds Limited . . .
On the Beach Holidays Limited
(dormant) . . . . . . . . . . . . . .
(1)
(2)
(3)
B.6
Notifiable
Interests
Proportion of
ownership
interests
(%)
Place of
incorporation
08703800
09118946
08703901
06286904
03162982
06294605
United
United
United
United
United
United
Kingdom
Kingdom
Kingdom
Kingdom
Kingdom
Kingdom
100
100
100
100
100
100
04921509
United Kingdom
100
Directly owned subsidiary. All other subsidiaries will be held indirectly.
On the Beach Limited has a Swedish trading division which has a corporate identity
number of 516408-9186.
On the Beach Topco Limited and On the Beach Bidco Limited were both incorporated
on 24 September 2013. There was no trade or any other transaction within either entity
prior to the Acquisition of the Group on 4 October 2013.
As at the date of this Prospectus, to the extent known by the Company, the
Company is owned or controlled by Inflexion, which holds 100 per cent. of
the voting rights attached to the issued share capital of the Company.
Immediately following Admission, to the extent known by the Company, it
is expected that the following persons will be interested (directly or
indirectly) in 3 per cent. or more of the Company’s issued ordinary share
capital:
Name of Shareholder
Inflexion . . . . . . . . . . .
Simon Cooper . . . . . . .
Schroder Investment
Management . . . . . . .
Hargreave Hale Ltd . . .
River & Mercantile
Asset Management
LLP . . . . . . . . . . . .
The Independent
Investment Trust PLC
Newton Inv
Management Ltd . . . .
Alistair Daly . . . . . . . .
Jonathan Smith . . . . . .
Wendy Parry . . . . . . . .
No. of Shares
% of issued ordinary
share capital
% of voting rights
48,432,801
14,163,688
37.1
10.9
37.1
10.9
11,500,000
6,000,000
8.8
4.6
8.8
4.6
6,000,000
4.6
4.6
5,150,000
3.9
3.9
4,750,000
4,149,943
4,149,943
4,149,943
3.6
3.2
3.2
3.2
3.6
3.2
3.2
3.2
The Company and Inflexion are parties to a relationship agreement (the
‘‘Relationship Agreement’’) that will become effective upon Admission.
Following Admission, no Shareholder will have any special voting rights
over any Shares, and all Shares will rank pari passu in all respects with all
other Shares.
5
Section B—Issuer
B.7
Financial
Information
The tables below set out summary financial information of the Group for
the financial years ended 30 September 2012, 30 September 2013 and
30 September 2014 and the nine month periods ended 30 June 2014 and
30 June 2015:
Combined and consolidated income statement
9m to June
30 September 30 September 30 September
2014
9m to June
2012
2013
2014
(unaudited)
2015
£’000
£’000
£’000
£’000
£’000
Total transaction value*
230,931
280,888
359,831
270,939
354,607
Revenue . . . . . . . . .
Administrative
expenses before
amortisation and
exceptional costs . . .
30,972
37,548
45,768
33,863
48,250
(21,954)
(26,266)
(32,979)
(24,505)
(34,815)
Group operating profit
before amortisation
and exceptional costs
Exceptional costs . . . .
Amortisation of
intangible assets . . .
9,018
—
11,282
—
12,789
(3,724)
9,358
(3,663)
13,435
—
(5,312)
(3,962)
(4,191)
Group operating profit
8,130
(888)
(958)
3,753
1,733
9,244
Finance costs . . . . . .
Interest on shareholder
loans . . . . . . . . . .
Finance income . . . . .
(196)
(14)
(1,735)
(1,378)
(1,401)
(3,969)
93
(4,759)
227
(6,961)
154
(5,108)
91
(5,830)
125
Net finance costs . . . .
(4,072)
(4,546)
(8,542)
(6,395)
(7,106)
Profit/(loss) before
taxation . . . . . . . .
Taxation . . . . . . . . .
4,058
(1,733)
5,778
(2,340)
(4,789)
(962)
(4,662)
(952)
2,138
(1,125)
Profit/(loss) and total
comprehensive
income for the year/
period . . . . . . . . .
2,325
3,438
(5,751)
(5,614)
1,013
Earnings per share
(expressed in pence
per share):
Basic and diluted
earnings per share . .
177p
262p
* This is a non-GAAP measure.
6
10,324
(438)p
(428)p
76p
Section B—Issuer
Combined and consolidated balance sheet
30 September
2012
30 September
2013
30 September
2014
30 June
2015
£’000
£’000
£’000
£’000
Assets
Non-current assets
Intangible assets . . . . . . . . . . . .
Property, plant and equipment . . .
Deferred tax . . . . . . . . . . . . . .
28,380
339
525
28,501
579
135
71,854
656
—
69,125
652
—
Total non-current assets . . . . . . .
29,244
29,215
72,510
69,777
Current assets
Trade and other receivables . . . . .
Other financial assets . . . . . . . .
Cash and cash equivalents . . . . . .
7,587
—
27,154
15,003
—
33,321
24,734
65
31,003
66,884
9
62,125
Total current assets . . . . . . . . .
34,741
48,324
55,802
129,018
Total assets . . . . . . . . . . . . . .
63,985
77,539
128,312
198,795
—
—
395
470
Equity
Share capital . . . . . . . . . . . . . .
On the Beach Travel Limited
invested capital . . . . . . . . . . .
Retained deficit . . . . . . . . . . . .
(1,891)
—
1,547
—
—
(5,751)
—
(4,738)
Equity shareholder funds . . . . . .
(1,891)
1,547
(5,356)
(4,268)
Total (deficit)/equity . . . . . . . . .
(1,891)
1,547
(5,356)
(4,268)
Non-current liabilities
Loans and borrowings . . . . . . . .
Deferred tax . . . . . . . . . . . . . .
(39,211)
—
—
—
(79,065)
(9,668)
(82,719)
(8,937)
Total non-current liabilities . . . . .
(39,211)
—
(88,733)
(91,656)
Current liabilities
Corporation tax payable . . . . .
Derivative financial instruments
Loans and borrowings . . . . . .
Trade and other payables . . . .
.
.
.
.
(1,126)
(92)
(1,981)
(23,466)
(660)
(299)
(43,903)
(31,130)
(832)
(689)
(3,140)
(40,274)
(1,490)
(3,411)
(3,140)
(103,366)
.
.
.
.
Total current liabilities . . . . . . .
(26,665)
(75,992)
(44,935)
(111,407)
Total liabilities . . . . . . . . . . . .
(65,876)
(75,992)
(133,668)
(203,063)
Total equity and liabilities . . . . .
63,985
77,539
128,312
198,795
Certain significant changes to the Group’s financial position and trading
results occurred during the financial years ended 30 September 2012,
30 September 2013 and 30 September 2014 and the nine month periods
ended 30 June 2014 and 30 June 2015. These changes are set out below:
The Group’s operations are principally in the United Kingdom, which in
the financial year ended 30 September 2014, accounted for over 99 per
cent. of the Group’s bookings. The Group’s TTV in the UK Segment was
£358.3 million for the year ended 30 September 2014. For the nine month
period ended 30 June 2015, TTV in the United Kingdom was
£350.4 million, which is an increase of 29.8 per cent. from the nine month
period ended 30 June 2014. The Group’s TTV in the International
Segment (from the Group’s Swedish website sales) for the year ended
30 September 2014 was £1.6 million. For the nine month period ended
30 June 2015, the TTV was £4.2 million, compared to TTV of £1.1 million
in the nine month period ended 30 June 2014.
7
Section B—Issuer
The Group’s EBITDA in the UK Segment increased from £9.9 million for
the year ended 30 September 2012 to £14.1 million for the financial year
ended 30 September 2014. The growth in the year ended 30 September
2014 was suppressed by the Group’s investment of £1.0 million in offline
advertising and set up costs for the Group’s direct contracting function.
This investment has, however, led to accelerated growth in the nine month
period ended 30 June 2015, with nine month year-on-year growth in
EBITDA in the United Kingdom of 48.6 per cent. (from £10.4 million in
the nine month period ended 30 June 2014 to £15.4 million in the nine
month period ended 30 June 2015).
There has been no significant change in the financial position or trading
results of the Group since 30 June 2015.
B.8
Pro Forma
Information
The unaudited pro forma net assets statement set out below has been
prepared to illustrate the effects of the offer, Reorganisation and
re-financing on the consolidated net assets of the Group, had the offer,
Reorganisation and re-financing taken place as at 30 June 2015. The pro
forma net asset statement has been prepared for illustrative purposes only
in accordance with Annex II of the Prospectus Rules. Because of its
nature, such statement addresses a hypothetical situation, and therefore
does not represent the Group’s financial position or results on 30 June
2015. The unaudited pro forma statement of net assets is based on the
combined and consolidated balance sheet of the Group as at 30 June 2015.
No account has been taken of any results or other activity since 30 June
2015.
Group as at
30 June
2015
£’000
Net proceeds of
the Offer
receivable by
the Company
Reorganisation Re-financing
£’000
£’000
£’000
Unaudited
Pro Forma
Total
£’000
Assets
Non-current assets
Intangible assets . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . .
69,125
652
—
—
—
—
—
—
69,125
652
Total non-current assets . . . . . . . . . .
69,777
—
—
—
69,777
Current assets
Trade and other receivables . . . . . . . .
Cash and cash equivalents . . . . . . . . .
66,893
62,125
—
6,408
—
(3,082)
—
(6,978)
66,893
58,473
. . . . . . . . . . . .
129,018
6,408
(3,082)
(6,978)
125,366
. . . . . . . . . . . . . . . .
198,795
6,408
(3,082)
(6,978)
195,143
Total current assets
Total assets
Non-current liabilities
Shareholder loans . . . . . . . . . . . . .
External bank debt . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . .
(68,881)
(13,838)
(8,937)
—
—
—
68,881
—
—
—
13,838
—
—
—
(8,937)
Total non-current liabilities . . . . . . . .
(91,656)
—
68,881
13,838
(8,937)
(3,140)
(1,490)
(3,411)
(103,366)
—
—
—
—
—
—
—
—
(6,860)
—
—
—
(10,000)
(1,490)
(3,411)
(103,366)
Current liabilities
External bank debt . . . . . .
Current income tax liabilities
Other financial liabilities . . .
Trade and other payables . .
Total current liabilities
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
. . . . . . . . . .
(111,407)
—
—
(6,860)
(118,267)
Total liabilities . . . . . . . . . . . . . . .
(203,063)
—
68,881
6,978
(127,204)
Net assets . . . . . . . . . . . . . . . . .
(4,268)
6,408
65,799
—
8
67,939
Section B—Issuer
B.9
Profit Estimate
Not applicable. This Prospectus does not include any profit forecasts or
estimates.
B.10
Audit Report
Qualifications
Not applicable. There are no qualifications in any audit report on the
historical financial information included in this Prospectus.
B.11
Insufficiency of
Working Capital
Not applicable. The Company is of the opinion that, taking into account
the net proceeds receivable by the Company from the Offer and the bank
facilities available to the Company and the Group (which reference to
‘‘Group’’ for the purposes of this paragraph includes the Company
following completion of the Reorganisation), the working capital available
to the Company and the Group is sufficient for the Company’s and the
Group’s present requirements, that is, for at least the next 12 months
following the publication of this Prospectus.
Section C—Securities
C.1
Securities Offered
The Offer comprises an offering to certain institutional and other
investors of up to 5,434,782 New Shares and 46,739,130 Sale Shares
(together, the ‘‘Offer Shares’’).
When admitted to trading, the Shares will have an ISIN Number
of GB00BYM1K758, SEDOL number BYM1K75 and will trade under the
symbol ‘‘OTB’’.
C.2
Currency
The Shares will be denominated in pounds sterling.
C.3
Issued Shares
As at the date of this Prospectus, the issued share capital of the Company
is £50,000, divided into one ordinary share of £1 and one redeemable
preference share of £49,999.
The nominal value of the total issued share capital of the Company
immediately following Admission will be £195,652,145, divided into
130,434,763 Shares of £1.50 each. All Shares in issue on Admission will be
fully paid.
C.4
Rights
The Shares will rank pari passu in all respects with each other, including
for voting and dividend rights and rights on a return of capital.
Subject to the provisions of the Companies Act, any equity securities
issued by the Company for cash must first be offered to Shareholders in
proportion to their holdings of Shares. The Companies Act and the Listing
Rules allow for the disapplication of pre-emption rights which may be
waived by a special resolution of the Shareholders, either generally or
specifically, for a maximum period not exceeding five years.
Except in relation to dividends which have been declared and rights on a
liquidation of the Company, the Shareholders have no rights to share in
the profits of the Company.
The Shares are not redeemable. However, the Company may purchase or
contract to purchase any of the Shares on- or off-market, subject to the
Companies Act and the requirements of the Listing Rules.
C.5
Restrictions on
Transferability
Not applicable. The Shares are freely transferable and there are no
restrictions on transfer.
9
Section C—Securities
C.6
Application for
Admission
Application has been made to the FCA for the Shares to be admitted to
the premium listing segment of the Official List of the FCA and to the
London Stock Exchange for the Shares to be admitted to trading on the
London Stock Exchange’s main market for listed securities.
No application has been made or is currently intended to be made for the
Shares to be admitted to listing or trading on any other exchange.
C.7
Dividend Policy
Whilst the Group operates a highly cash generative business model, the
Board intends for the significant majority of profits to be reinvested in the
business to support further growth. The Board intends to declare its first
dividend in respect of the year ended 30 September 2016. Thereafter, the
Group will adopt a progressive dividend policy.
Section D—Risks
D.1
Key Information
on the Key Risks
(Company &
Industry)
Difficult macroeconomic circumstances in the United Kingdom could reduce
demand for the Group’s products.
In the year ended 30 September 2014, customers in the United Kingdom
accounted for approximately 99 per cent. of the Group’s bookings.
Accordingly, changes in the demand for travel products or difficult
macroeconomic circumstances in the United Kingdom could have a
material adverse effect on the Group’s business, financial condition and
results of operations.
The Group operates in an increasingly competitive environment.
The Group operates in the highly competitive travel industry and
competes with a variety of companies, including established and emerging
online and traditional retailers of travel-related services. Currently, these
direct competitors include, among others, traditional travel agencies and
tour operators, other OTAs, travel suppliers (such as airlines, hotel
companies and tour operators), metasearch companies, online portals and
search engines. If the Group is unable to respond effectively to
competition, this could have a material adverse effect on the Group’s
business, financial condition, results of operations and prospects.
The Group is dependent on key personnel and its ability to attract skilled senior
personnel.
The success of the Group will depend upon the performance and expertise
of its current and future senior management, each of whom has significant
relevant experience within the online/travel retail segments. An inability to
hire, train and retain a sufficient number of qualified employees could
materially hinder the Group’s business by, for example, delaying its ability
to bring new products and services to market or impairing the success of
its operations. Even if the Group is able to maintain its employee base, the
resources needed to attract and retain such employees, as well as to
update their skills as the technological demands of the Group’s industry
change, may adversely affect its profits, growth and operating revenue.
10
Section D—Risks
The Group may be unable to innovate to provide functionality that consumers
demand and keep up with rapid technological changes.
The Group’s success depends on its ability to innovate and to provide
functionality that makes its websites and mobile apps user-friendly for
customers. The Group must continue to invest significant resources in
research and development to improve the speed, accuracy and
comprehensiveness of its products. If the Group is unable to continue
offering innovative products, it may be unable to attract additional
consumers or retain its current consumers, which could have a material
adverse effect on its business, results of operations, financial condition and
prospects.
The Group may be unable to adapt its IT infrastructure to technological
developments or industry trends.
The Group depends on the use of sophisticated information technologies
and systems. Delays or difficulties in implementing new or enhanced
systems may keep the Group from achieving the desired results in a timely
manner, to the extent anticipated, or at all, and the Group may also be
unable to devote adequate financial resources to develop or acquire new
technologies and systems in the future, which could have a material
adverse effect on its business, results of operation, financial condition and
prospects.
The Group may fail to address the challenges presented by recent trends in social
media, consumer adoption and use of mobile devices.
In recent years, use of social media websites, such as Facebook, and
mobile devices including smartphones and tablets have become
increasingly prevalent. The emergence of mobile platforms has led to
increasing use by consumers of standalone mobile applications or ‘‘apps’’
to research and book travel. If the Group does not remain competitive on
this front (which will involve the expenditure of significant resources), it
may lose market share to existing competitors or new entrants, and its
future growth and results of operations could be adversely affected.
The Group may be unable to protect its intellectual property effectively from
misappropriation by others, including current or potential competitors.
The Group’s success and ability to compete depend, in part, upon its
technology and other intellectual property. The Group protects its logo,
brand name, websites’ domain names and its content and proprietary
technology by relying on domain names, trademarks, copyrights, trade
secret laws and confidentiality agreements. However, the Group cannot
assure prospective investors that the steps it has taken will in all instances
preserve its ability to enforce its intellectual property rights or prevent
unprotected disclosure or misappropriation of its proprietary information.
Unauthorised use and misuse of the Group’s intellectual property or
disclosure of its proprietary information could have a material adverse
effect on its business, financial condition and results of operations.
11
Section D—Risks
The Group relies on the strength of its brand, which can be affected by the actions
of the Group’s suppliers.
The Group’s brand, image and reputation are important to its business.
Any negative event, such as a poor quality of products being provided by
the Group’s travel suppliers, that do not meet customers’ expectations, or
the failure to reimburse for products not effectively provided, often leads
to customer complaints which can result in damage to the Group’s image,
reputation or brand. In addition, failure to use appropriate promotion and
marketing channels could adversely affect its business, financial condition
and results of operations.
Certain third parties may seek to hinder or block the Group’s access to their
websites.
The Group aggregates data from various sources to build a cache of flight
inventory. The Group does not have relationship agreements with certain
airlines, but is currently able to use technology to access such suppliers’
products and then present certain flight inventory to its customers. From
time to time, certain third-parties have sought to hinder or block the
Group’s (and other OTAs’) access to their websites using technological,
legal or other means and may do so in the future. If the Group’s access to
flight inventory data is limited by these or similar actions, its offering may
be less extensive, which could have a material adverse effect on its
business, financial condition, results of operations and prospects.
The Group is one of several OTAs involved in litigation with Ryanair in
connection with Ryanair’s efforts to prevent OTAs from booking and selling its
flights.
The Group generates a significant amount of its business from the
booking of Ryanair flights. Ryanair does not allow OTAs to integrate their
flight booking system with its own and, in 2008, Ryanair began to take
action against OTAs including OTB Limited in an attempt to enforce its
distribution policy. These legal proceedings allege infringement of the
terms of use of the Ryanair website, infringement of Ryanair’s intellectual
property rights in its trademarks and database and unfair commercial
practices. It has taken five years from issue of proceedings to reach a final
decision on jurisdiction. The Group expects that the Irish proceedings,
including any appeal, may not be resolved until 2018/19, but that
EU-related aspects of the claim mean that if a reference to the European
Court of Justice is necessary, the final resolution of this case may not be
until 2021. Litigation is unpredictable. The foregoing time estimate is
subject to unexpected applications, appeals or other delays which could
mean that the final resolution of the dispute might take until 2022 or later.
The Group cannot assure prospective investors that it will prevail in these
proceedings and, if Ryanair were to prevail, this could have a material
adverse effect on the Group’s business, financial condition and results of
operations.
D.3
Key Information
on the Key Risks
(Shares)
Trading market for the Shares
The share price of newly listed companies can be highly volatile and
shareholdings illiquid. The market price of the Shares may be subject to
wide fluctuations in response to many factors, some specific to the Group
and its operations and others to the broader equity markets in general. In
addition, stock markets have from time to time experienced extreme price
and volume fluctuations which could adversely affect the market price of
the Shares.
12
Section D—Risks
Future sales of Shares could cause the Share price to fall.
Sales of Shares by significant investors could depress the market price of
the Shares. A substantial amount of Shares being sold, or the perception
that sales of this type could occur, could also depress the market price of
the Shares. Both scenarios may make it more difficult for Shareholders to
sell the Shares at a time and price that they deem appropriate.
The Company may in the future issue new Shares, which may dilute
Shareholders’ equity.
The Company has no current plans to issue more equity. It may, however,
decide to do so in the future. If pre-emption rights in the Articles are
disapplied, any additional equity financing may be dilutive to those
Shareholders who cannot, or choose not to, participate in such financing.
Section E—Offer
E.1
Net Proceeds &
Expenses
Through the sale of the Sale Shares pursuant to the Offer, it is expected
that the Selling Shareholders will receive net proceeds of approximately
£83,849,999. Additionally, the issue of 5,434,782 New Shares by the
Company is expected to raise approximately £6.4 million of net proceeds
for the Company (after deducting underwriting commissions and other
estimated Offer-related fees and expenses of approximately £2.7 million).
Other than in respect of expenses of, or incidental to, Admission and the
Offer which will be paid by the Company, there are no commissions, fees
or expenses to be charged to investors by the Company or the Selling
Shareholders under the Offer.
E.2a
Reasons for
Offer & Use of
Proceeds
The Board believes that the Offer and Admission will position the Group
for its next stage of development, including further raising the profile of
the Group, assisting in retaining and incentivising employees and
providing it with a structure for future growth.
Admission will also enable the Selling Shareholders to partially realise
their investment in the Company. No proceeds of the offer of Sale Shares
will be received by the Company.
The majority of the gross proceeds of the offer of New Shares will be used
by the Company to fund expenses associated with the Offer, including
paying the Exit Fee to Inflexion 2010 General Partner Guernsey LP
pursuant to the Investment Agreements. It is estimated that the Exit Fee
will be £902,656.
The net proceeds of approximately £6.4 million will be used to repay
accrued interest on loan notes of approximately £3.6 million, with the
remainder being used for general working capital purposes.
E.3
Terms &
Conditions
The Offer comprises an offer of 46,739,130 Sale Shares to be sold and
5,434,782 New Shares to be issued at a price of £1.84 each.
Under the Offer, the Offer Shares are being offered for sale or
subscription (as appropriate) to certain institutional and other investors in
the United Kingdom and elsewhere outside the United States in reliance
on Regulation S under the Securities Act, and in the United States only to
QIBs in reliance on Rule 144A or another exemption from the registration
requirements under the Securities Act.
13
Section E—Offer
Admission is expected to become effective, and dealings in the Shares are
expected to commence on the London Stock Exchange, at 8.00 a.m. on
28 September 2015.
The Offer is subject to the satisfaction of conditions contained in the
Underwriting Agreement. These conditions include those which are
customary for transactions of this type, including Admission becoming
effective by no later than 8.00 a.m. on 28 September 2015 (or such later
time and/or date as the Company and Numis may agree, not being later
than 8.00 a.m. on 1 October 2015) and the Underwriting Agreement not
having been terminated prior to Admission.
None of the Offer Shares may be offered for subscription, sale or purchase
or be delivered, or be subscribed, sold or delivered, and this Prospectus
and any other offering material in relation to the Offer Shares may not be
circulated, in any jurisdiction where to do so would breach any securities
laws or regulations of any such jurisdiction or give rise to an obligation to
obtain any consent, approval or permission, or to make any application,
filing or registration.
E.4
Material Interests
There are no interests known to the Company that are material to the
Offer or Admission or which are conflicting interests.
E.5
Selling
Shareholders/
Lock-up
arrangements
Selling Shareholders
46,739,130 Sale Shares will be sold by the Selling Shareholders pursuant to
the Offer (representing approximately 35.8 per cent. of the issued share
capital of the Company following Admission).
The Offer will provide the Selling Shareholders with a partial realisation
of their investment in the Company.
Lock-up arrangements
Pursuant to the terms of the Underwriting Agreement, the Executive
Directors and certain persons connected with them and Inflexion have
agreed to certain lock-up restrictions in respect of the Shares that will be
held by them following Admission.
The Executive Directors and certain persons connected with them are
subject to a 12 month lock-up period following Admission, and Inflexion is
subject to a lock-up period ending the longer of six months from the date
of Admission or the date of publication of the audited financial results of
the Company for the year ended 30 September 2015, during which time
they may not dispose of any interest in their Shares.
Pursuant to their respective lock-up arrangements, the Executive
Directors and certain persons connected with them and Inflexion have
agreed that, for a further six month period following the expiry of their
lock-up periods referred to above, they will not dispose of any Shares or
interests in Shares other than through Numis with a view to maintaining
an orderly market in the Company’s securities.
All lock-up arrangements and orderly market arrangements are subject to
certain customary exceptions.
E.6
Dilution
The New Shares will represent approximately 4.2 per cent. and the Sale
Shares will represent approximately 35.8 per cent. of the expected
enlarged issued share capital of the Company immediately following
Admission.
14
Section E—Offer
E.7
Expenses charged
to investors
Not applicable. Other than in respect of expenses of, or incidental to,
Admission and the Offer which will be paid by the Company, there are no
commissions, fees or expenses to be charged to investors by the Company
or the Selling Shareholders under the Offer.
15
PART 1
RISK FACTORS
Investing in and holding Shares involves financial risk. Prospective investors in the Shares should carefully
review all of the information contained in this Prospectus and should pay particular attention to the
following risks associated with an investment in the Shares, the Group’s business and the industry in which
it participates.
The risk factors set out below apply to the Company and Group as at the date of this document. For the
purposes of this Part 1, the term ‘‘Group’’ includes the Company following completion of the
Reorganisation.
Prospective investors should note that the risks relating to the Group’s business, its industry and the
Shares summarised in the section of this Prospectus headed ‘‘Summary Information’’ are the risks that the
Company believes to be the most essential to an assessment by a prospective investor of whether to consider
an investment in the Shares. However, as the risks which the Group faces relate to events and depend on
circumstances that may or may not occur in the future, prospective investors should consider not only the
information on key risks summarised in the section of this Prospectus headed ‘‘Summary Information’’ but
also, among other things, the risks and uncertainties described below.
The risks and uncertainties described below are not an exhaustive list and do not necessarily comprise all,
or explain all, of the risks associated with the Group and the industry in which it participates or an
investment in the Shares. They comprise the material risks and uncertainties in this regard that are known
to the Company and should be used as guidance only. Additional risks and uncertainties relating to the
Group and/or the Shares that are not currently known to the Company, or which the Company currently
deems immaterial, may arise or become (individually or collectively) material in the future, and may have a
material adverse effect on the Group’s business, results of operations, financial condition and prospects. If
any such risk or risks should occur, the price of the Shares may decline and investors could lose part or all of
their investment.
Prospective investors should consider carefully whether an investment in the Shares is suitable for them in
the light of the information in this Prospectus and their personal circumstances. Prospective investors
should consult a legal adviser, an independent financial adviser or a tax adviser for legal, financial or tax
advice if they do not understand any part of this Prospectus.
RISKS RELATED TO THE GROUP’S BUSINESS
The Group generates most of its revenue from customers in the United Kingdom. Difficult macroeconomic
circumstances in the United Kingdom could reduce demand for the Group’s products.
In the year ended 30 September 2014, customers in the United Kingdom accounted for approximately
99 per cent. of the Group’s bookings. Accordingly, changes in the demand for travel products in the United
Kingdom, including as a result of the factors discussed elsewhere in these risk factors, could have a
material adverse effect on the Group’s overall results. For example, if difficult macroeconomic
circumstances in the United Kingdom cause a sustained and/or significant fall in the demand for travel
products, it may have a material adverse effect on the Group’s business, financial condition and results of
operations. See also the risk factor entitled ‘‘Declines or disruptions in the overall level of leisure travel activity
due to a downturn in discretionary spending levels may reduce demand for the Group’s offering’’.
The Group operates in an increasingly competitive environment.
The Group, whose business consists primarily of its travel websites, operates in the highly competitive
travel industry, of which the Group’s core market is short-haul beach holidays for UK customers. Factors
affecting the competitive success of the Group’s business include the prices it offers consumers, the
availability of travel supply (e.g. flights to and hotels in the relevant beach holiday destinations), brand
recognition, its ability to attract new customers at reasonable acquisition costs, customer service, ease of
use, fees charged to travellers, accessibility and reliability.
The Group competes with a variety of companies, including established and emerging online and
traditional retailers of travel-related services. Currently, these direct competitors include, among others:
•
traditional travel agencies and tour operators, including pan-European brands Thomas Cook (‘‘TC’’)
and TUI;
•
other online travel agents (‘‘OTAs’’);
•
travel suppliers, such as airlines, hotel companies and tour operators, many of which have their own
branded websites, in addition to their retail outlets; and
•
metasearch companies, online portals and search engines.
16
Traditional travel agencies and tour operators: TC and TUI are the leading market players which have an
interest in, in aggregate, two-thirds of the UK market for package holidays. In the face of stiff competition
from OTAs, traditional tour operators continue to experiment with their mix of online platforms and
high-street retail outlets and have the financial resources to invest and expand their online and mobile
sales channels.
OTAs: The Group faces competition from other OTAs, such as Travel Republic and lowcostholidays,
which in some cases may offer more attractive products for both travellers and suppliers, offer products on
more favourable terms, such as lower prices (including as a result of accepting lower operating revenue),
increased or exclusive product availability, absence of fees or more favourable connectivity and inventory.
These more favourable terms could make the offerings of other OTAs more attractive to consumers than
the Group’s. In the Scandinavian markets into which the Group is expanding, there are incumbent OTAs
that are already established in the relevant market. The Group also faces competition from Expedia, an
OTA which offers its customers single element products (e.g. flight only) and packaged holidays (e.g. flight
and hotel combined) to a range of holiday destinations, including beach destinations, city breaks and
cottage hire (which is differentiated from the Group, which specialises in dynamically packaged beach
holidays).
Travel suppliers: Many airline operators and hotel suppliers, including suppliers with which the Group
conducts business, have been increasingly focusing on increasing online demand on their own websites
rather than relying on third-party distributors such as OTAs, including the Group’s own website. For
example, certain low-cost carriers (such as Ryanair), which have gained segment share at the expense of
network carriers, seek to distribute their online supply exclusively through their own websites. Other travel
suppliers may seek to limit the Group’s access to their products to create, distribute and promote on
specific distribution channels custom-made offers based on their own products. Where there is no
relationship agreement, the Group cannot assure prospective investors that the Group’s Direct Connect
technology will continue to enable it to access such products.
In addition, travel suppliers who sell on their own websites may offer products and services on more
favourable terms, including lower prices, increased or exclusive product availability, all-in packages
combining airline, hotel and/or car rental products, absence of fees or unique access to which could make
their offerings more attractive to consumers than the Group’s.
Metasearch companies, online portals and search engines: The activities of online travel metasearch sites,
such as Kayak, Skyscanner, Trivago, Travelsupermarket and Momondo, which utilise their search
technology to aggregate travel search results across travel supplier, OTA and other websites as well as
similar services offered by large online portal and search companies, such as Google and Yahoo! affect the
markets in which the Group operates.
Whilst the Group does not view metasearch companies and search engines as direct competitors as the
majority do not currently allow customers to book a dynamically packaged holiday (but rather single
element products (e.g. flights or hotels only)) and typically no bookings are made through their websites,
this could change. In addition, metasearch companies and search engines may merge, or develop a
successful metasearch holiday offering (rather than single element), which would change the distribution
channels from which the Group would sell its holidays.
Furthermore, large established internet search engines with substantial resources, expertise in developing
online commerce and facilitating internet traffic and brand recognition are creating (and the Company
expects them to continue to create) inroads into the online travel channel, as evidenced by recent
technological innovations and proposed and actual acquisitions by companies such as Google or Microsoft.
For example, in July 2010 Google acquired ITA Software, a US-based flight information software
company. The next year, Google launched ‘‘Google Flights’’ in the United States, an enhanced single
element metasearch flight tool offering access directly on its search engine to a large inventory of travel
products, including from GDS operators, but excluding OTA search results. Google Flights was partially
launched in Europe in 2013 and, despite Google’s agreement in February 2014 to comply with certain
requirements against the background of antitrust proceedings against Google pending before the
European Commission, the Group cannot assure prospective investors that Google or other competitors
will not roll out this service or similar services. These activities could result in increased competition from
supplier websites and higher customer acquisition costs for OTAs.
If any of the above were to occur, and the Group were unable to respond effectively, it could have a
material adverse effect on the Group’s business, financial condition, results of operations and prospects.
17
The Group is dependent on key personnel and its ability to attract skilled senior personnel.
The success of the Group will depend upon the performance and expertise of its current and future senior
management, each of whom has significant relevant experience within the online/travel retail segments.
The Group cannot assure prospective investors that they will continue to serve in their current roles. The
departure of key personnel from the Group without an adequate replacement may have a material adverse
effect on the Group’s business, results of operations, financial condition or prospects.
Competition for well-qualified employees in certain aspects of the Group’s business, including senior
management, software engineers, developers, marketing and supplier relationship managers and other
business, finance and technology professionals remains intense. Staff with the specialised skills the Group
requires are difficult and time-consuming to recruit and, as a result, such skills can be in short supply. The
Group typically needs a long time to hire and train replacement personnel, and it takes time for newly
recruited specialists to learn the Group’s systems and business before they become productive.
An inability to hire, train and retain a sufficient number of qualified employees could materially hinder the
Group’s business by, for example, delaying its ability to bring new products and services to market or
impairing the success of its operations. Even if the Group is able to maintain its employee base, the
expenditure of resources needed to attract and retain such employees, as well as to update their skills as
the technological demands of the Group’s industry change, may adversely affect its profits, growth and
operating revenue.
The Group may be unable to innovate to provide functionality that consumers demand and keep up with rapid
technological changes.
The Group’s success depends on its ability to innovate and to provide functionality that makes its websites
and mobile apps user-friendly for customers. The Group regularly adapts travel related products and
features. The Group’s technology needs to keep up with changes in its suppliers’ websites and inventory.
For example, airlines are increasingly selling flights on an unbundled basis, whereby an airline charges
separately for the component parts of a flight (seat type/seat selection, tax, luggage and so forth)
separately. This industry trend affects the Group’s Direct Connect products in particular, and requires the
Group to adapt its technology to keep pace with these new pricing features.
The Group must continue to invest significant resources in research and development to improve the
speed, accuracy and comprehensiveness of its products. If the Group is unable to continue offering
innovative products, it may be unable to attract additional consumers or retain its current consumers,
which could have a material adverse effect on its business, results of operations, financial condition and
prospects.
Some of the Group’s current and potential competitors, including large traditional travel service providers,
have longer operating histories, larger customer bases, greater brand recognition and/or significantly
greater financial, marketing, personnel, technical and other resources than the Group does, and may be
better placed to invest in (although not necessarily better able to exploit) rapid technological changes. The
Group’s current and potential competitors may develop technology similar to or better than the Group’s
which could result in it losing its competitive advantage over time and negatively affect the Group’s overall
competitive position. Increased competition may result in reduced operating revenue, as well as loss of
market share, brand recognition and competitiveness, which could have a material adverse effect on the
Group’s business, financial condition and results of operations.
The Group may be unable to adapt its IT infrastructure to technological developments or industry trends.
The Group depends on the use of sophisticated information technologies and systems, including
customised in-house technology and systems used to attract customers to its websites, for website visability,
mobile apps, product building and pricing, reservations, customer service, internal and external
communications, procurement, payments, fraud detection, administration and reporting. As its operations
grow in size, scope and complexity, the Group must continuously improve and upgrade its systems and
infrastructure to offer an increasing number of travellers enhanced products, features and functionalities,
while maintaining the reliability and integrity of its systems and infrastructure.
Expanding the Group’s systems and infrastructure to meet any projected increases in business volume may
require it to commit substantial financial, operational and technical resources before those increases
materialise, with no assurance that they actually will. Furthermore, delays or difficulties in implementing
new or enhanced systems may keep the Group from achieving the desired results in a timely manner, to the
18
extent anticipated, or at all, and the Group may also be unable to devote adequate financial resources to
develop or acquire new technologies and systems in the future which could have a material adverse effect
on its business, results of operation, financial condition and prospects.
The Group may fail to address the challenges presented by recent trends in social media, consumer adoption and use
of mobile devices.
In recent years, use of social media websites, such as Facebook.com (‘‘Facebook’’) and mobile devices
including smartphones and tablets have become increasingly prevalent. The emergence of mobile
platforms has led to increasing use by consumers of standalone mobile applications or ‘‘apps’’ to research
and book travel. In addition, Facebook has launched enhanced search functionality for data included
within its website, which may develop into alternative research resources for travellers. In addition, social
media websites may also introduce new dynamics into the competitive landscape. For example, consumers
may more easily share reviews with other users of social media websites, which may ultimately be spread
among a very large number of actual and potential customers. The Group may have limited ability to
control the dissemination of, or respond to, in particular unfavourable customer reviews, which may
significantly harm the Group’s reputation in the markets in which it operates.
The trends in consumer adoption and use of mobile devices (i.e. smartphones and tablets) also create new
challenges for the Group’s business in terms of developing new platforms and optimising the customer
experience across multiple devices. Furthermore, given the device sizes and technical limitations of mobile
devices, mobile consumers may not be willing to download multiple apps from multiple travel service
providers, and instead prefer to use one or a limited number of apps for their mobile travel activity. As a
result, the consumer experience with mobile apps as well as brand recognition and loyalty are likely to
become increasingly important.
The Group believes that it will be increasingly important for it to effectively offer its products through
mobile apps and on mobile optimised websites on smartphones and tablets and to integrate the customer
experience across the multiple devices that customers may use to access the Group’s products. As a result,
the Group intends to continue to spend significant resources maintaining, developing and enhancing its
websites, including its mobile optimised websites, and its mobile apps and other technology. If the Group is
unable to continue to innovate rapidly and create new, user-friendly and differentiated mobile offerings
and efficiently and effectively advertise and distribute on these platforms, or if the Group’s mobile apps are
not downloaded and used by travel consumers, the Group could lose market share to existing competitors
or new entrants, and its future growth and results of operations could be adversely affected.
Moreover, the consumer shift to mobile devices could enable device companies that have substantial
market shares in the mobile devices industry and that control the operating systems of these devices, such
as Apple’s iOS and Google’s Android, to compete directly with the Group. Apple and Google have more
experience producing and developing mobile apps and have access to greater resources than the Group. To
the extent Apple or Google use their mobile operating systems or app distribution channels to favour any
such travel service offerings of their own, the Group’s business could be adversely affected. If the Group
does not remain competitive on this front, it may lose market share as customers increasingly make their
bookings on mobile devices.
The Group may be unable to protect its intellectual property effectively from misappropriation by others, including
current or potential competitors.
The Group’s success and ability to compete depend, in part, upon its technology and other intellectual
property, including its brand. The Group’s websites rely on content and technology intellectual property,
much of which the Group regards as proprietary. The Group protects its logo, brand name, websites’
domain names and its content and proprietary technology by relying on domain names, trademarks,
copyrights, trade secret laws and confidentiality agreements.
However, not all of the Group’s intellectual property has been or can be protected by registration. If
someone else were to copy or otherwise obtain and use the Group’s proprietary technology or content
without its authorisation or to develop similar technology independently, the Group’s competitive
advantage based on its technology could be threatened. In addition, effective trademark, copyright, patent
and trade secret protection may not be available in every jurisdiction in which the Group competes.
Policing unauthorised use of the Group’s proprietary information is difficult and expensive. As the Group
expands to new jurisdictions, some of which may have less robust protections for intellectual property, the
cost of protecting, and the risk of third-party infringement of, its intellectual property increases.
19
The Group cannot assure prospective investors that the steps it takes will in all instances preserve its ability
to enforce its intellectual property rights or prevent unprotected disclosure or misappropriation of its
proprietary information. Unauthorised use and misuse of the Group’s intellectual property or disclosure of
its proprietary information could have a material adverse effect on its business, financial condition and
results of operations. In addition, although the Group seeks to protect its intellectual property through
confidentiality or non-disclosure agreements and agreements not to compete with the Group, these
agreements typically have terms that end after several years. Furthermore, the Group may need to go to
court or other tribunals to enforce its intellectual property rights, to protect its trade secrets or to
determine the validity and scope of the proprietary rights of others. The legal remedies available to the
Group may not adequately compensate the Group for the damages caused by unauthorised use, which
could have a material adverse effect on its business, financial condition and results of operations.
The Group relies on the strength of its brand, which may be affected by the actions of the Group’s suppliers.
The Group’s brand, image and reputation are important to its business. The Group’s success over the years
has largely depended on its ability to develop its brand and image as one of the leading online beach
holiday companies in the United Kingdom.
Consumers expect that the Group will offer a large selection of high quality travel products at low prices
and this reputation has strengthened its image and brands. Any negative event, such as a poor quality of
products provided by the Group’s travel suppliers (over which it has no direct control) and offered through
its websites, that do not meet customers’ expectations, or the failure to reimburse for products not
effectively provided, often leads to customer complaints. These can result in damage to the Group’s image,
reputation or brand which can, in turn, have a material adverse effect on the Group’s business, financial
condition and results of operations. The Group’s reputation can also be damaged when customer
complaints or negative reviews of the Group or its activities are exchanged on public social networks’
websites. The Group receives complaints in the ordinary course of its business, and seeks to address them
to protect its reputation.
The Group’s brand is a key asset of its business and the strength of its brand is directly related to the cost
of customer acquisition. A strong brand means the Group is less reliant on non-branded key-word traffic to
its websites, for which it pays on a ‘pay per click’ basis via search bid auctions. The Group has spent
considerable financial and human resources to date on the establishment and maintenance of its brand and
it will continue to invest in, and devote resources to, advertising and marketing, as well as other brandbuilding efforts to preserve and enhance consumer awareness of its brand. However, there is no assurance
that the Group will be able to enhance or maintain its brand’s value, and a material increase in the cost of
customer acquisition could adversely affect the Group’s business, financial condition and results of
operations.
There is a risk that third parties could bid against the Group on internet search auctions for travel-related
keywords which directly relate to the Group’s brand. This might increase the Group’s marketing costs. If a
third-party were to win such auctions, their use of terminology directly related to the Group’s brand could
confuse current and potential customers, and have a material adverse effect on the Group’s profile and
reputation.
Some of the Group’s competitors use marketing channels the Group is not familiar with to maintain
customer awareness of their brands. For example, the Group has only limited experience in using television
and other traditional media channels as a means of promoting and marketing its products. Substantially all
of the Group’s advertising activities are online. Failure to use appropriate promotion and marketing
channels could adversely affect its business, financial condition and results of operations.
From time to time, third parties (such as tour providers at local resorts or transport providers) fraudulently
hold themselves out as affiliates of or otherwise aligned with the Group’s brand (such as by wearing
uniforms intended to convey an affiliation). The Group may not always be aware of or able to intervene in
such incidents, and poor service by such third parties could have a negative effect on the Group’s
reputation and brand.
The Group cannot assure prospective investors that the Group will be able to successfully maintain or
enhance consumer awareness of its brand. If the Group is unable to maintain or enhance consumer
awareness of its brands and generate demand in a cost-effective manner, it would negatively affect its
ability to compete in the travel industry and would have a material adverse effect on its business. As new
media, such as social media, and devices, such as smartphones and tablets, continue to develop, the Group
20
will need to expend additional funds to promote its brand awareness on such media and devices. If the
Group is unable to adapt to such new media forms and devices, it may lose online travel segment share,
which would have a material adverse effect on the Group’s business. See also ‘‘The Group may fail to
address the challenges presented by recent trends in social media, consumer adoption and use of mobile
devices.’’
The Group relies on its reputation to attract and retain customers.
The Group’s reputation is key to its future success, in terms of the way in which it conducts its business, the
customers it attracts and the financial results which it achieves. A number of factors could damage the
Group’s reputation, making it more difficult for the Group to attract and retain customers. These factors
(some of which the Group has experienced in the past and may do so in the future) include:
•
negative publicity resulting from lawsuits;
•
negative media coverage, reviews (including on public social networks’ websites) or customer
complaints relating to customer service and/or poor quality of products;
•
a decline in the quality or selection of the travel products and services provided by airlines, hotels and
other suppliers;
•
the Group’s inability to provide the level of customer service demanded by its customers;
•
human error on the part of the Group’s employees, travel providers or third-party service providers;
•
interruptions in service caused by failure or malfunction of the Group’s technical systems; or
•
damage, such as theft of personal data, resulting from hacking or infection with viruses or other
malware.
Such negative developments need not actually occur to cause reputational damage; even an incorrect
perception among consumers can damage the Group’s image. Furthermore, the Group can be adversely
affected by developments over which the Group has no control and with which the Group is not involved.
For example, although the Group is not contractually responsible for poor hotelier service, customers that
booked a holiday through the Group may nonetheless perceive the Group as the ‘‘service provider’’ and, as
a result, view the Group in a negative light.
Damage to the Group’s reputation can cause users to choose its competitors over the Group or may make
suppliers less willing to do business with the Group which would, in turn, have a material adverse effect on
the Group’s business, financial condition and results of operations.
Certain third parties may seek to hinder or block the Group’s access to their websites.
The Group aggregates data from various sources to build a cache of flight inventory, which enables the
Group to offer its customers an extensive array of flight options from multiple suppliers, giving the
customer flexibility and choice when booking their dynamically packaged beach holiday through the
Group’s websites.
Although the Group has formal agreements in place with both third parties and direct providers of all
hotel accommodation and ancillary services, it does not have relationship agreements with certain airlines.
The Group is currently able to use technology to access such suppliers’ products and then present certain
flight inventory to its customers after they have deployed the Group’s search and booking engine via the
Group’s website.
From time to time, certain third-parties have sought to hinder or block the Group’s (and other OTAs’)
access to their websites using technological, legal or other means, and may do so in the future. For
example, certain airlines have installed technologies which try to restrict OTAs from accessing their
websites. To date, the Group has been able to limit the effect of such technological measures, but cannot
guarantee that it will be able to continue to do so in the future. See ‘‘The Group is one of several OTAs
involved in litigation with Ryanair in connection with Ryanair’s efforts to prevent OTAs from booking and
selling its flights.’’
If the Group’s access to flight inventory data is limited by these or similar actions, its offering may be less
extensive, which could have a material adverse effect on its business, financial condition, results of
operations and prospects.
21
The Group is one of several OTAs involved in litigation with Ryanair in connection with Ryanair’s efforts to prevent
OTAs from booking and selling its flights.
The Group generates a significant amount of its business from the booking of Ryanair flights. In the
financial year ended 31 September 2014, Ryanair represented approximately 5.6 per cent. of revenue as
part of the Group’s beach holiday offering.
Ryanair’s distribution policy is that customers book all Ryanair flights either directly through its own
website or telephonic booking service, or indirectly via GDS including Travelport, Sabre and Amadeus.
Ryanair does not allow OTAs to integrate their flight booking system with its own. In 2008, Ryanair began
to take action against OTAs including the Group in an attempt to enforce its distribution policy. These
legal proceedings allege infringement of the terms of use of the Ryanair website, infringement of Ryanair’s
intellectual property rights in its trademarks and database and unfair commercial practices.
Ryanair filed proceedings in 2010 against OTB Limited in the High Court in the Republic of Ireland
relating to the process by which OTB Limited collects data from Ryanair’s website. OTB Limited
aggregates data from various sources to build a cache of flight inventory, which enables it to offer its
customers Ryanair flights through the Group’s website. There is no contract between OTB Limited and
Ryanair. OTB Limited acts as agent on behalf of its customers at the point of sale of the Ryanair flight to
such customers. Ryanair objects to this practice, and is claiming (amongst other things):
•
breach of contract, on the basis that OTB Limited is bound by Ryanair’s terms and by offering Ryanair
flights to OTB Limited’s customers it is in breach of those terms; and
•
OTB Limited’s infringement of Ryanair’s database rights.
To date, there have been approximately 24 reported decisions in proceedings brought by Ryanair in six
other EU member states (many in relation to interim relief and jurisdiction, rather than the merits). The
proceedings have taken several years to reach trial. In Ireland, proceedings against Bravofly Rumbo, which
made an initial public offering in 2014, have been underway for approximately five years and may not be
resolved until 2019 (if appealed). Proceedings against the same group in Spain have been unsuccessful, as
have Spanish proceedings brought by Ryanair against eDreams, another OTA that made an initial public
offering in 2014.
It is difficult to estimate a timeframe for the current proceedings. It has taken five years from issue of
proceedings to reach a final decision on jurisdiction. The Group expects that the Irish proceedings,
including any appeal, may not be resolved until 2018/19 but that EU-related aspects of the claim mean that
if a reference to the European Court of Justice is necessary the final resolution of this case may not be
until 2021. Litigation is unpredictable. The foregoing time estimate is subject to unexpected applications,
appeals or other delays, which could mean that the final resolution of the dispute might take until 2022 or
later.
However, the Group cannot assure prospective investors that it will prevail in these proceedings. If Ryanair
were to prevail in its proceedings against OTB Limited, it could have a material adverse effect on the
Group’s business. In particular, if a court were temporarily or permanently to enjoin the Group from
booking Ryanair flights, the Group’s offerings to prospective customers may be less extensive. The Group
may not be able to offer its customers the best value flights directly through its website. Consequently, the
Group may have to find alternative hotel inventory if flights are not readily available at commercially
reasonable rates to fly to such destinations where such hotels are located. Furthermore, if Ryanair were to
prevail, it could increase the risk that other carriers decide to adopt similar policies, or otherwise attempt
to use legal or technological or other means to restrict the Group’s ability to access and distribute their
products and services. See the above risk factor entitled ‘‘Certain third parties may seek to hinder or block the
Group’s access to their websites.’’ As a result, Ryanair’s partial or complete success in these proceedings
could have a material adverse effect on the Group’s business, financial condition and results of operations.
The Group’s business could be negatively affected by changes in search engine algorithms and search engine
relationships.
The Group utilises to a significant extent internet search engines, principally through the purchase of
travel-related keywords, in particular on Google, and inclusion in metasearch results, to generate traffic to
its websites. The purchase of travel-related keywords consists of anticipating what words and terms
consumers will use to search for travel on internet search engines and then bidding on those words and
22
terms in the applicable search engine’s auction system. The Group bids against other advertisers for
preferred placement on the applicable internet search engine’s results page.
The Group also generates a significant proportion of its bookings on its websites from ‘‘organic traffic’’
resulting from customers clicking a non-paid results link in a Google or other search engine. The Group’s
positioning on such search engines’ search results depends on algorithms designed by the various search
engine providers such as Google and is based on various criteria including, in particular, the historical level
of traffic on its websites. As a result, if search engine providers such as Google change their search
algorithms in a manner that is competitively disadvantageous to the Group, whether to support their own
travel-related services or otherwise, the Group’s ability to generate traffic to its websites would be harmed
which, in turn, could adversely affect the Group’s business, market share and financial performance. In
addition, if the Group were to fail to maintain its current strong levels of traffic and its search rankings fall
as a consequence thereof, its free traffic would fall and its revenue, business and financial performance
could be adversely affected. For example, in July 2012, the Group’s website was affected by the Penguin 1.0
Google update, which treated the large volume of historic back-links as ‘‘unnatural’’. Once the Group built
a natural back-link profile, its rankings returned to the previous level. It is also possible that search engines
could change the criteria they apply to paid search dynamics so as to negatively affect the placement and
display of results relating to the Group pursuant to a consumer’s search.
Furthermore, a significant amount of traffic is directed to the Group’s websites through its participation in
pay-per-click and display advertising on internet media properties and search engines whose pricing and
operating dynamics can experience rapid change, both technically and competitively. If one or more of
such arrangements are terminated or if competitive dynamics further affect market pricing in a negative
manner, the Group may experience a decline in traffic on its websites which, in turn, could adversely affect
its revenue, business, financial condition and results of operations.
Moreover, changes in the Group’s relationships with certain search engines, metasearch or affiliate
partners that feature links to the Group’s sites could limit the Group’s access to customers at a reasonable
cost which, in turn, could adversely affect its revenue, business, financial condition and results of
operations.
The Group’s exposure to certain risks will increase as it expands into markets outside the United Kingdom.
Nearly all of the Group’s customers are in the United Kingdom. However, the Group expanded its
geographic footprint into Sweden in January 2015, and plans further expansion in Scandinavia in the short
term. To achieve widespread acceptance as the Group enters additional countries and markets, the Group
must continue to tailor its products and business model to the characteristics of such countries and
markets. These include travel supplier relationships, traveller preferences and adding additional languages
to its website interfaces. In each additional market that the Group enters, it will need to address the
particular economic, currency, political and regulatory risks associated with such markets. These may
include, among other things, finding new acquisition partners, hiring and training new call centre staff with
local language skills and an understanding of the local market, adapting to alternative payment methods
favoured in that market, implementing new fraud systems and processing additional currencies.
As the Group seeks to continue to expand its operations into new geographies as part of its growth
strategy, increasing the awareness, perceived quality and perceived different attributes of the Group’s
brand and image into new European countries will be vital to expand its customer base, which is likely to
involve a large marketing expenditure.
Learning the customs and cultures of various countries, particularly with respect to travel patterns and
practices, and subsequently integrating the Group’s operations across different cultures and languages, can
be difficult, costly and divert management and personnel resources. In particular, establishing effective
payment processing systems in the countries and markets the Group enters can be time-consuming and
challenging.
The Group expects to continue to face ongoing and additional risks in operations outside the United
Kingdom. These risks may include:
•
different regulatory requirements, including data privacy requirements, consumer protection and
retail regulations, labour laws and anti-competition regulations, and the Group’s general ability to
comply with local laws and regulations and increased compliance costs associated therewith;
•
diminished ability to enforce the Group’s contractual rights;
23
•
increased risk and limits on the Group’s ability to enforce intellectual property rights;
•
consumer preferences for local providers;
•
financial risk arising from transactions in multiple currencies, including the Group’s failure to
adequately manage those risks; and
•
difficulties in managing staffing due to language and cultural differences.
If the Group is not able to effectively control these risks, it could have a material adverse effect on the
Group’s business, financial condition and results of operations.
The Group may be involved in other litigation.
In addition to its involvement in the Ryanair litigation mentioned above, the Group may, from time to
time, become involved in legal actions in connection with the activities it carries out. In addition to being a
defendant, the Group may also act as a claimant or counterclaimant in certain actions and there can be no
assurance that any claim or counterclaim will be resolved in the Group’s favour. In addition, the Group
may not make adequate provisions for potential litigation-related liabilities. Litigation, whether or not
determined in the Group’s favour of or settled by the Group, can be costly and may divert the efforts and
attention of the Group’s management and other personnel from normal business operations. Further,
claimants against the Group may be able to devote substantially greater financial resources in litigating
claims than the Group is able to. The occurrence of any of these events may have a material adverse effect
on the Group’s reputation, business, results of operations, financial condition or prospects.
The Group generates the majority of its revenue from customers booking beach holidays, and so is dependent upon
this type of holiday remaining popular with consumers.
The Group derived approximately 92.4 per cent. of its revenue for the financial year ended 30 September
2014 from selling beach holidays to the leisure market in the United Kingdom.
Although beach holidays are one of the most popular type of holidays for UK consumers, with short-haul
beach holidays to the Western Mediterranean being particularly popular, there is no guarantee that this
trend will continue. If beach holidays were to fall out of favour with consumers in the Group’s key
geographies and it were unable to adapt quickly to provide alternative holiday packages (e.g. city breaks),
it could have a material adverse effect on the Group’s business, results of operations, financial condition
and prospects.
The Group relies on third parties for the provision of certain services and systems.
The Group relies on third-party service providers for flights, hotels, transfers and other services, and it may
in the future migrate additional services to third-party providers.
The Group currently relies on certain third-party computer systems, service providers and software
companies to:
•
process credit or debit card payments, including fraud prevention and detection systems;
•
provide computer infrastructure critical to its business, including hosting, internet bandwidth and
firewall protection;
•
provide reporting data, including data analysis and benchmarking; and
•
facilitate customer acquisition, including agreements with metasearch engines.
If these third parties were to experience difficulty meeting the requirements or standards as advertised on
the Group’s website, it could damage the Group’s reputation or make it difficult for the Group to operate
certain aspects of its business. In addition, if such third-party service providers were to suspend or cease
operations, or face financial distress or other business disruption, the Group could suffer increased costs
and delays in its ability to provide similar services until an equivalent service provider is found or the
Group develops replacement technology or operations. Any transition of services currently provided by the
Group to a third-party provider could result in labour-related costs or disruptions. If the Group were to fail
to replace any such defaulting service provider, it could have a material adverse effect on its revenue. If the
Group is unsuccessful in choosing or managing its partners who thereby fail to meet its quality standards, it
could have a material adverse effect on the Group’s business, results of operations, financial condition and
prospects.
24
The Group’s success is dependent on its ability to maintain relationships with its technology partners. If the
Group’s arrangements with any of such third parties were impaired or terminated, the Group may not be
able to find an alternative source of systems support on a timely basis or on commercially reasonable
terms, which could result in significant additional cost or disruptions to its businesses. In addition, some of
the Group’s agreements with third-party service providers can be terminated by those parties on short
notice and, in many cases, provide no recourse for service interruptions. One or more such events could
have a material adverse effect on the Group’s reputation, business, financial condition and results of
operations.
A significant proportion of the Group’s supplier and agency relationships are on short-term contracts and
terminable on short notice.
Many of the formal agreements the Group has entered into with hotel suppliers are short-term contracts,
providing the Group’s counterparties with a right to terminate at short notice or without notice. While in
certain cases the Group has entered into long-term agreements, no assurances can be given that certain
hotel suppliers will not reduce or eliminate incentives paid to the Group, attempt to charge travel agencies
for content, credit or debit card fees or other services, or otherwise attempt to change the financial terms
of the Group’s agreements, any of which could reduce the Group’s revenue, thereby adversely affecting its
business, financial condition and results of operations.
Under certain of the Group’s agreements with hotel suppliers, no sales incentive will be due to the Group
unless the Group meets certain minimum sales thresholds by selling a certain number of beds to its
customers. Any requirement to repay any sales incentive bonus in part or in full may have a material
adverse effect on the Group’s business, financial condition and results of operations.
To the extent any of the Group’s travel suppliers reduce or eliminate the incentive payments they pay to
the Group, the Group’s revenue may be reduced unless the Group is able to compensate for such
reduction by increasing the service fees the Group charges to its customers in a sustainable manner.
However, any increase in service fees may also result in a loss of potential customers.
The Group’s processing, storage, use and disclosure of personal data could give rise to liabilities as a result of
governmental and/or industry regulation, conflicting law requirements and differing views of personal privacy
rights.
Customer information is increasingly subject to legislation, regulation and industry policies in numerous
jurisdictions around the world. As the Group expands the number of places where it operates, the Group
faces additional challenges to comply with these requirements and restrictions, which are not, and may not
in the future be, necessarily consistently applied. Such regulations and policies are typically intended to
protect the privacy and security of personal information (including credit or debit card information) that is
collected, processed and transmitted in or from the governing jurisdiction. The Group could be adversely
affected if legislation, regulations or other requirements are expanded (for example, the new General Data
Protection Regulation referred to in Part 8: ‘‘Regulation’’ of this prospectus) to require changes in the
Group’s current business practices or if governing jurisdictions or industry groups interpret or implement
their requirements in ways that negatively affect the Group’s business, financial condition and results of
operations.
Moreover, the Group’s failure to comply with any of these requirements or interpretations could have a
material adverse effect on its reputation and operations and subject the Group to litigation. As privacy and
data protection have become more sensitive issues for regulators and consumers, the Group may also
become exposed to potential liabilities as a result of differing views on the protections that should apply to
travel and/or online data. These and other privacy and security developments are difficult to anticipate and
could adversely affect the Group’s business and financial performance.
The Group is exposed to risks of security breaches associated with online commerce security.
In the processing of the Group’s customer transactions, the Group receives and stores a large volume of
personally identifiable information and it relies on information collected online for the purposes of
advertising to visitors to its websites. Substantial or ongoing security breaches, whether instigated internally
or externally on the Group’s systems or other internet-based systems, could significantly harm the Group’s
business, including its relations with its suppliers. The Group incurs, and expects to continue to incur,
substantial expense to protect itself against, and remedy, security breaches and their consequences. The
Group relies on encryption and authentication technology to effect secure transmission of confidential
25
customer information, including credit or debit card numbers. However, advances in technology or other
developments could result in a compromise or breach of the technology that the Group uses to protect
customer and transaction data.
It is possible that computer circumvention capabilities, new discoveries or advances or other developments,
including the Group’s own acts or omissions, could result in a party (whether internal, external, an affiliate
or unrelated third-party) compromising or circumventing its security systems and stealing customer
transaction/personal data or its proprietary information or cause significant interruptions in its operations.
For example, in August 2015, holiday company Thomson announced a high-profile security breach that
exposed its customers’ personal information. The Group cannot guarantee that its security measures will
prevent data breaches, or that third-party service providers will be successful in implementing security
systems to prevent data breaches. Failure to improve the Group’s standards or a substantial data breach in
any of its businesses, or in the systems of third parties upon which the Group relies, could expose the
Group to a risk of loss or litigation and possible liability and could significantly harm its business. The
Group’s insurance may not be adequate to reimburse the Group for losses caused by security breaches.
Security breaches could also damage the Group’s reputation and cause existing and potential customers to
lose confidence in its security, which would have a negative effect on the value of its brands and the
demand for its products. Moreover, public perception concerning general security and privacy on the
internet could adversely affect customers’ willingness to use the Group’s websites. A publicised breach of
security, even if it were only to affect other companies conducting business over the internet, could inhibit
the growth of consumers’ willingness to provide private information or effect commercial transactions on
the internet and, therefore, demand for the Group’s products as a means of conducting commercial
transactions.
System interruption may cause the Group to lose customers or forego business opportunities.
The Group caches data from its suppliers’ computer systems and websites and then presents this
information to customers on its own website, which assists in facilitating and processing the purchase of
dynamically packaged beach holidays. The inability of the Group and/or its suppliers to maintain and
improve their respective information technology systems and infrastructure may result in system
interruptions. Like many online businesses, the Group and its suppliers have experienced and may in the
future experience system interruptions. Any interruptions, outages or delays in systems the Group utilises
or deterioration in their performance could impair the Group’s ability to process user traffic and
transactions and decrease the quality of products that the Group can offer to consumers.
The Group currently operates three data processing and hosting facilities, two of which are located in
Manchester and one of which is located in London. Currently, some of the functions performed by these
facilities are redundant for backup purposes (with the databases of each facility being synchronised in
predetermined intervals with the databases of the other facilities).
Fire, flood, power loss, telecommunications failure, physical break-ins, earthquakes, acts of war or
terrorism, acts of God, computer viruses, electronic intrusion attempts from both external and internal
sources and similar events or disruptions may affect, damage or interrupt computer or communications
systems or business processes or data at any time. For example, the Group may experience security
intrusions and attacks on its systems for fraud or service interruption (called ‘‘denial of service’’ attacks)
that may make portions of its websites slow or unavailable for certain periods. Although the Group has
taken measures to protect certain portions of its facilities, assets and data, if the Group were to experience
frequent or persistent system failures or security breaches, such events could significantly curtail its ability
to conduct its business and generate revenue, and its reputation and brand could be harmed.
While the Group has backup systems and contingency plans for critical aspects of its operations and
business processes, the Group’s disaster recovery or business continuity planning may not be sufficient. In
addition, the Group may have inadequate insurance coverage or insurance limits to compensate for losses
from a major interruption, and remediation may be costly and have a material adverse effect on its
financial condition and results of operations. See the risk factor entitled ‘‘The Group’s insurance policies
may not cover, or fully cover, certain types of losses. ’’
26
The growth of the Group’s business depends on access to a large selection of hotel offerings, many of which the
Group obtains by direct contracting with hotel suppliers.
An important component of the Group’s business success depends on its ability to obtain, maintain and
expand relationships with hotel suppliers by means of its direct contracting system. Maintaining and
expanding such relationships is important for the Group’s profitability, with a portion of its revenue
(3.7 per cent. in the year ended 30 September 2014) being derived from incentive payments and fees
negotiated with the Group’s hotel suppliers, being hotel aggregators with which the Group has entered
into formal relationships.
Reductions in overall supply via direct contracting could adversely affect the quantity of products the
Group is able to sell to its customers and the revenue that the Group makes per booking which may, in
turn, have a material adverse effect on its business, financial condition and results of operations.
The Group relies on ‘white label’ agreements for its ancillary sales, which are subject to a number of limitations.
In general, the Group’s arrangements with its ‘white label’ sourcing partners for ancillary sales (excluding
coach and private taxi transfers) do not require them to make available on the Group’s websites any
specific quantity of airport hotels or car parking, or to make the hotel room or accommodation
reservations available in any geographic area at any particular price. Any amendment or termination of the
Group’s relationships with any of its white label sourcing partners, as well as inability or unwillingness on
the part of any of its white label sourcing partners to perform their obligations could divert its customers’
demand for its white label sourcing partners’ products to competitors’ websites, and have a material
adverse effect on an important revenue stream for the Group.
The Group generates a substantial portion of its revenue from its hotels activities. Changes in customer patterns
with respect to the proportion of the aggregate spend on the hotel element of a holiday may adversely affect the
Group.
The Group’s revenue depends on its ability to allow customers to book dynamically packaged beach
holidays on its website, consisting of a flight product and a hotel booking that travellers customise based on
their individual specifications by combining select products from different travel suppliers. The Group’s
hotel business contributed 48.8 per cent. of its TTV in the nine month period ended 30 June 2015. The
revenue margin per booking for the hotel element is substantially greater than the flight element. If
customers were to decide to spend a greater proportion of their aggregate holiday spend on the flight
element relative to the hotel element of their dynamically packaged holiday, this may reduce the Group’s
revenue which could, in turn, have a material adverse effect on the Group’s business, financial condition
and results of operations.
Claims by third parties that the Group infringes on their intellectual property rights could result in significant costs
and may impair the Group’s ability to use certain intellectual property.
The Group may face claims that it has infringed the patents, copyrights, trademarks or other intellectual
property rights of others. In addition, to the extent that the Group’s employees, contractors or other third
parties with which the Group does business use intellectual property owned by others in their work for the
Group, disputes may arise as to the rights in related or resulting know-how and inventions. Intellectual
property litigation is complex, expensive and time-consuming and may divert managerial attention and
resources from the Group’s business objectives. Successful infringement claims against the Group could
result in significant monetary liability, including any indemnification due to travel suppliers for claims
made against them. Such claims could also delay or prohibit the use of existing, or the release of new,
products, services or processes and the development of new intellectual property. The Group could be
required to obtain licenses to use the intellectual property that is the subject of the infringement claims,
which may be expensive to obtain and resolution of these matters may not be available on acceptable terms
within a reasonable time frame or at all. Intellectual property claims against the Group could result in a
loss of intellectual property protections that relate to certain parts of the Group’s business, and therefore
could have a material adverse effect on its business, financial condition and results of operations.
The Group’s insurance policies may not cover, or fully cover, certain types of losses.
The Board believes the Group maintains insurance policies customary (including the terms of, and the
coverage provided by, such insurance) for the industry in which it operates and considers the Group’s
insurance coverage to be adequate both as to risks and amounts for the business the Group conducts.
27
However, there can be no assurance that all types of potential losses are insured or that policy limits would
be adequate to cover them. Furthermore, the scope of insurance policies maintained by and available to
the Group may vary from that of insurance policies typically maintained by OTAs in jurisdictions in which
the Group operates outside of the United Kingdom. Any uninsured loss or a loss in excess of insured limits
could adversely affect the Group’s existing operations, which could, in turn, have a material adverse effect
on the Group’s business, results of operations, financial condition or prospects.
The Group could experience business disruption arising from Euro instability, particularly as it seeks to expand its
international operations.
The continued existence of the Euro as a currency in its current form is not certain. If any country were to
leave the Eurozone, or if the Eurozone were to dissolve entirely, the treatment of debt and payment
obligations previously denominated in Euro would be uncertain. Whether such obligations were
re-denominated into a new currency would depend on a number of factors, including the place of payment,
the place of incorporation of the debtor and the governing law of the relevant contract or transaction. The
partial or total collapse of the Euro may lead to a number of operational and practical issues for the
Group, particularly as it seeks to expand its international operations which could, in turn, have a material
adverse effect on the Group’s business, results of operations, financial condition or prospects.
The Group’s business and financial performance could be negatively affected by adverse tax events.
The Group is subject to corporate income tax, withholding tax, value added tax, payroll taxes and social
security taxes and in certain countries to local taxes on income or assets. The estimated net result of the
Group’s business is based on tax rates that currently prevail, as well as current legislation, jurisprudence,
regulations and interpretations by local tax authorities. A change in applicable corporate tax rates or in
general of any tax rule or interpretation made by local tax authorities will affect its net results of
operations. The countries in which the Group operates could either increase the applicable income tax
rates and/or seek to enlarge the taxable basis to generate more tax revenue.
The application of tax laws, rules and regulations to the Group’s business is subject to interpretation by the
competent tax authorities. The Group relies on generally available interpretations of tax laws and
regulations in the jurisdictions in which it operates. The Group cannot assure prospective investors that tax
authorities will agree with the Group’s interpretations. Similarly, the Group may, from time to time,
change the way it organises and conducts its business operations to enhance efficient management of its
business, the tax consequences of which may be viewed by the tax authorities of the relevant jurisdictions
differently from the Group. This could result in a reassessment by tax authorities, increasing the Group’s
tax expense for past periods and may trigger penalties and interest for the underpayment of taxes.
The Group pays income tax in the countries in which its operating companies are resident, irrespective
generally of where its customers are located or where the travel products are actually purchased or
consumed by its customers. The payment of income tax in the relevant countries in which the Group
operates is based on the current internationally accepted tax rules and transfer pricing framework. The
current rules, based on which taxable profits are allocated, may change or be interpreted differently in the
future, which would result, for example, in taxable profits being (partly) allocated to countries where
customers are located or where the travel product is actually consumed. This may lead to a shift of taxable
profits to other countries where less favourable tax rates and rules regarding the determination of taxable
income are applicable. The allocation of the Group’s taxable profits to a different country mix may affect
its future income tax expense.
In the Group’s industry, tax authorities focus increasingly on the actual behaviour of travel agents in
addition to the contractual relationship between the travel agent and its customers to determine whether
or not the travel agent is a disclosed agent for VAT purposes. This may affect the determination of the
country in which VAT is due as well as the basis on which VAT is due. While the Board believe that the
Group has taken a prudent position in this respect, the Group cannot assure prospective investors that tax
authorities will take the same view, which may affect the amount of VAT which is due on the services which
the Group renders to its customers.
Tax authorities of a country may consider that VAT is due in their country, for example, because the
customer is a resident of that country or because the travel service is deemed to be used and enjoyed in
that country, whereas the Group may take the view that VAT is not due in that country. If tax authorities
successfully enforce their different view, they may require the Group to pay tax which it currently does not
28
collect or pay. Passing on the cost of additional taxes to the customer may reduce the demand for the
Group’s services.
Although the Group believes its tax position is true and accurate and it has taken a prudent position for
the purpose of recognising a provision for tax risks, the position taken by tax authorities based on tax audits
could be different from the position which the Group has taken, which could result in the Group having to
pay more taxes than expected, which would have a material adverse effect on the Group’s business, results
of operations, financial condition or prospects.
The Group is exposed to foreign currency exchange rate fluctuations.
The Group buys and sells products in foreign currencies and the prices on its websites are therefore subject
to fluctuations in the exchange rate. The Group is not currently materially exposed to transaction effects as
it forward covers and sells to match prices set in the system and any translation effects are not material.
However, exchange rate fluctuations could have a material adverse effect on the price that the Group can
offer products to its customers which could, if the prices were to increase to an unattractive level for
customers, reduce demand and therefore have a material adverse effect on the Group’s business, results of
operations, financial performance or prospects.
The Group is exposed to risks associated with payment fraud.
The Group has historically suffered, and expects to continue to suffer, from internet-related fraud. The
Group is liable for accepting fraudulent credit or debit cards and is subject to other payment disputes with
its customers for such sales. In instances in which the Group is unable to combat the use of fraudulent
credit or debit cards, the Group is liable vis-à-vis suppliers for the entire airfare (even though the Group
does not bear inventory risk). Its revenue from such sales could also be subject to automatic chargebacks
related to fraudulent transactions from credit or debit card processing companies or demands from the
relevant banks. If fraud levels were to increase significantly, it could have a material adverse effect on the
Group’s business, financial condition and results of operations.
The Group’s ability to detect and combat increasingly sophisticated fraudulent schemes may be negatively
affected by the adoption of new payment methods, the emergence of new technology platforms such as
smartphones and tablets and expansion into new markets. Whilst the Group has fraud protection measures
in place, if the Group is unable effectively to combat the use of fraudulent credit cards or debit cards on its
websites and is forced to invest in more sophisticated and expensive anti-fraud technologies, the additional
costs could have a material adverse effect on its results of operations.
RISKS RELATING TO THE TRAVEL INDUSTRY
Declines or disruptions in the overall level of leisure travel activity due to a downturn in discretionary spending
levels may reduce demand for the Group’s offering.
The Group’s revenue is directly related to the overall level of leisure travel activity which is, in turn, largely
dependent on discretionary spending levels. Discretionary spending generally declines during recessions
and other periods in which disposable income is adversely affected. As a substantial portion of leisure
travel expenditure is discretionary, such expenditure tends to decline or grow more slowly during economic
downturns or periods when discretionary spending levels are depressed. For example, if mortgage interest
rates were to rise as a result of an increase in the Bank of England base rate, it is likely that overall levels of
discretionary spending would decline, which could have a material adverse effect on the Group’s business,
financial condition, results of operations and prospects. See also the risk factor entitled ‘‘The Group
generates most of its revenue from customers in the United Kingdom. Difficult macroeconomic circumstances
in the United Kingdom could reduce demand for the Group’s products.’’
The Group’s business could be adversely affected by the occurrence of events affecting travel safety, such as natural
disasters and political and social instability, which are outside its control.
The travel industry is sensitive to safety concerns. The Group’s business could be adversely affected by the
occurrence of travel-related accidents, such as airplane crashes (whether caused by human or technical
defaults or otherwise), incidents of actual or threatened terrorism, political instability or conflict or other
events whereby travellers become concerned about safety issues, including as a result of unusual weather
patterns or natural disasters (such as hurricanes, tsunamis, earthquakes or volcanic ash clouds), potential
outbreaks of epidemics or pandemics (such as influenza, H1N1 virus, Avian Flu or Severe Acute
29
Respiratory Syndrome outbreaks) or other human or natural disasters (such as those that may result in
exposure to radiation). For example, the volcanic ash cloud over Iceland in April 2010 had a very
significant short term adverse effect on the travel industry. In addition, political and social instability in
Africa, the Middle East and Europe, such as in Libya, Egypt and Syria since late 2010, the ongoing
hostilities in Ukraine, the terrorist attacks in Tunisia in June 2015 and fears that such instability could
deepen or spread, could have a material adverse effect on the Group’s business, financial performance and
results of the Group’s operations. Such concerns, or concerns arising from similar events in the future, are
outside the Group’s control and could result in a significant decrease in demand for the Group’s travel
products. Any such decrease in demand, depending on its scope and duration, together with any other
issues affecting travel safety, could materially and adversely affect the Group’s business and financial
performance over the short and long term. The occurrence of such events could result in a decrease in
Group customers’ appetite to travel and adversely affect the Group’s business, financial condition and
results of operations.
Moreover, due to the seasonal nature of the Group’s business, the occurrence of any of the events
described above during the Group’s peak summer or holiday travel seasons, or when customers are
considering booking their summer vacations, could exacerbate or disproportionately magnify the adverse
effects of any such event and, as a result, could materially and adversely affect the Group’s business or
financial performance. See also the risk factor entitled ‘‘The Group’s business experiences seasonal
fluctuations and comparisons of sequential periods’ results may not be meaningful.’’
The Group’s business may be negatively affected by adverse changes in the markets in which its suppliers operate, or
by the deterioration of the financial condition of its suppliers.
As the Group is an intermediary in the travel industry, a substantial portion of its revenue is affected by the
fares and tariffs charged by the Group’s suppliers (including airlines and hotels) and the volume of
products offered by its suppliers.
In particular, as a significant portion of the Group’s revenue depends on the Group’s sales of flight
products, the Group could be adversely affected by changes in the airline industry, including consolidation
or bankruptcies and liquidations and, in many cases, the Group will have no control over such changes.
Events or weaknesses specific to the flight travel industry that could negatively affect the Group’s business
include air fare fluctuations, airport, airspace and landing fee increases, seat capacity constraints, removal
of destinations or flight routes, travel-related strikes or labour unrest, imposition of taxes or surcharges by
regulatory authorities and fuel price volatility. In addition, the implementation of further transaction costs
(such a fee being charged by airlines per booking) would be applied across all OTAs, and it is likely that
some if not all of the fee would be passed on to customers.
Even though no more than 12 per cent. of the Group’s revenue comes from any third-party hotel supplier
and 5.6 per cent. from any flight supplier, if one or more of the Group’s major suppliers on which it is
reliant for flight and hotel bookings were to suffer a deterioration in its financial condition or restructures
its operations, it could have a material adverse effect on the Group’s business, financial condition, results
of operations and prospects.
The Group’s businesses are subject to a complex regime of rules and regulations.
The Group’s business is highly regulated and subject to a complex regime of laws, rules and regulations
concerning air transportation, travel, online commerce, financial services, consumer rights and data
protection, among others. The Group’s business and financial performance could be adversely affected by
unfavourable changes in, or interpretations of, existing laws, rules and regulations, or the promulgation of
new laws, rules and regulations applicable to the Group and its businesses. In particular, any further
tightening of the European legislation relating to packaged travel could adversely affect the Group’s
business. For example, the amendment of the European Package Travel Directive 90/314/EEC on
packaged travel, packaged holidays and packaged tours proposed by the European Commission in July
2013, if adopted, would extend the scope of the directive to more dynamic forms of packaged travel, which
could increase the costs of conducting the Group’s business and subject it to additional responsibilities and
liabilities.
Another example of increased regulation in the travel industry arises out of the memorandum of
understanding reached between the Competition and Markets Authority (the ‘‘CMA’’) and the CAA in
June 2014. In working together with the CMA, the CAA looks to further the interests of users of air
transport services regarding the range, availability, continuity, cost and quality of airport operation services
30
through the promotion of effective competition. In furthering this objective, the CAA from time to time
may contact travel agents and tour operators to review their terms, conditions or business practices. For
example, when the Group launched its low deposit scheme, it worked with the CAA to ensure that how the
Group delivered the scheme on its websites fell within CAA/CMA guidelines (fees and additional costs
were clearly promoted to consumers to ensure fair and transparent decision making). Another example
was when the CAA contacted a number of online travel agents and flight-only OTAs to require that the
costs for credit cards compared to debit cards be included at the first stage of the flight search results.
There is, and will likely continue to be, an increasing number of laws, regulations and court decisions
pertaining to the internet and online commerce and consumer law in general, which may relate to liability
for information retrieved from or transmitted over the internet, display of certain taxes, discounts and fees,
online editorial and user-generated content, user privacy, behavioural targeting and online advertising,
taxation, liability for third-party activities, rights and remedies for consumers and the quality of products
and services. For example, in certain jurisdictions where the Group operates, local regulations impose
restrictions on or prohibit the credit/debit card operations that it can perform, to protect the privacy and
security of personal information that is collected, processed and transmitted in or from the governing
jurisdiction. The growth and development of online commerce has also recently prompted calls for more
stringent consumer protection laws and more aggressive enforcement efforts by regulatory authorities,
including on price transparency, that may impose additional burdens on online businesses generally. These
include increased costs associated with stronger data protection systems, fines and a loss of competitive
advantage as a result of any disclosure related to operations. Such trends are likely to continue in the
future. Furthermore, if such laws and regulations are not enforced equally against the Group’s competitors
in a particular market, the Group’s compliance with such laws and regulations may put it at a competitive
disadvantage vis-à-vis competitors who do not comply with such requirements. See also the risk factor
entitled ‘‘The Group’s processing, storage, use and disclosure of personal data could give rise to liabilities as a
result of governmental and/or industry regulation, conflicting law requirements and differing views of personal
privacy rights.’’
The Group’s business strategy involves expansion into new jurisdictions, which could have legal, regulatory
(including license) or tax requirements with which the Group is currently not familiar. Compliance with
such requirements will place demands on the Group’s time and resources, and the Group may nonetheless
experience unforeseen and potentially adverse legal, regulatory or tax consequences. A failure by the
Group is to comply with these laws and regulations may subject it to fines, penalties and potential criminal
sanctions, as well as publicity which may be harmful to the Group’s reputation.
The Group is required to hold certain licenses or accreditations that are critical to its business.
In some jurisdictions in which the Group operates, it is required to hold various travel agency and other
licenses and accreditations and pay certain license fees. Regulatory authorities have a relatively broad
discretion whether to grant, renew and revoke licenses and approvals and to implement regulations.
Accordingly, regulatory authorities could prevent or temporarily suspend the Group from carrying on
some or all of its activities or otherwise penalise the Group if its practices are found not to comply with the
then current regulatory or licensing requirements or any interpretation of such requirements by the
regulatory authority. For instance, in order for the Group to sell air travel (which forms part of its
dynamically packaged holidays) it must either hold a ‘‘Flight Plus’’ ATOL or be a member of an ATOL
accredited body. If the Group failed to retain its ATOL licence, it could deter customers from booking
their holiday with the Group, as they will not have the peace of mind that their money (including any
deposit) is protected by the ATOL scheme and that they can get home if their travel company collapses.
This could have a material adverse effect on the Group’s business, financial condition, results of operations
and prospects.
The Group’s business experiences seasonal fluctuations and comparisons of sequential quarters’ results may not be
meaningful.
The Group’s revenue and operating results have varied, and the Board expects they will continue to vary
over time. This is in large part attributable to the fact that the Group’s business experiences seasonal
fluctuations, which are a function of seasonal trends for travel products, in particular leisure travel.
Because the Group generates the largest portion of its revenue from hotel and flight bookings and this
revenue is generally recognised at the time of booking, these trends cause the Group’s revenue to be
highest in the periods during which travellers book their vacations. Therefore, the Group’s revenue tends
to be lower in the quarter ending 31 December than in other quarters and typically highest in the quarter
31
ending 31 March, corresponding to bookings for the busy spring and summer travel seasons. As a result,
sequential period-on-period comparisons of the Group’s revenue, cash flows and operating results may not
be meaningful.
The Group’s business is influenced by the level of internet penetration in its markets.
The Group generates its revenue through the online sale of beach holidays. As a result, the Group’s
business is affected by the level of internet penetration in the countries in which it operates (currently the
United Kingdom and Sweden), and in particular the proportion of travel bookings made through the
internet. Online penetration remains high in Scandinavia and the United Kingdom, where relatively high
income and tech-savvy consumers have embraced online booking.
In addition, the Group continues to seek to expand its international presence and a successful entrance
into new countries will depend on the level of internet penetration in such countries. A slower adoption of
use of the internet by consumers as an e-commerce platform for leisure holidays in the countries the
Group enters compared to the countries in which it currently operates, could adversely affect the Group’s
growth prospects and results of operations.
Linked to the level of internet penetration is the level of package holiday sales online penetration, defined
by Euromonitor International as the percentage of total retail package holiday sales made online.
According to Euromonitor International, the online penetration of package holidays in the United
Kingdom was 52 per cent. in 2014, and is expected to be 55 per cent. in 2016. In Sweden, package holiday
sales online penetration was 67 per cent. in 2014. Sales in the package holiday sector in Belgium, Denmark,
France, Germany, Italy, Netherlands, Norway, Spain and Sweden amounted to A55 billion in 2014. Online
sales penetration in the same sector and markets is expected to grow from 26 per cent. in 2014 to 30 per
cent. in 2018 (sources: Euromonitor, Offline and Online Intermediaries Sales by Market; Euromonitor, Online
Sales by Market). However, there can be no guarantee that online travel penetration will continue to grow
or remain at current levels. As the substantial majority of the Group’s operations are in Europe, a slowing
of the growth in online travel penetration in Europe, or a fall, could have an adverse effect on its growth
prospects and its business, financial condition and results of operations.
RISKS RELATING TO THE OFFER AND THE SHARES
There is no existing market for the Shares.
There is presently no public trading market for the Shares, and the Group cannot assure prospective
investors that a liquid market for the Shares will develop following Admission. If an active and liquid
trading market does not develop or is not sustained, the liquidity and trading price of the Shares could be
materially adversely affected, and investors may have difficulty selling their Shares. Even if an active
trading market develops, the market price for the Shares may fall below the Offer Price, perhaps
substantially. As a result of fluctuations in the market price of the Shares, investors may not be able to sell
their Shares at or above the Offer Price, or at all.
The market price of the Shares may fluctuate significantly in response to a number of factors, many of which will be
out of the Group’s control.
The Offer Price may not be indicative of the market price for the Shares following Admission. Publiclytraded securities from time to time experience significant price and volume fluctuations that may be
unrelated to the operating performance of the company that has issued them. The market price of the
Shares may prove to be highly volatile in response to a number of factors, many of which are beyond the
Group’s control. These include variations in operating results in the Group’s reporting periods, cyclical
fluctuations in the performance of the Group’s business, changes in financial estimates by securities
analysts, changes in market valuation of similar companies, announcements by the Group of significant
contracts, acquisitions, joint ventures, or capital commitments, speculation (whether or not well-founded)
regarding the intentions of the Group’s major shareholders or significant sales of Shares by any such
shareholders or short selling of the Shares, speculation (whether or not well-founded) regarding possible
changes in the Group’s management team, loss of one or more major suppliers, additions or departures of
key personnel, any shortfall in revenue or any increase in losses from levels expected by securities analysts,
and future issues or sales of Shares. Any or all of these events could result in a material decline in the price
of the Shares. Investors may not be able to sell their shares at or above the Offer Price, or at all.
32
Shareholders may not be able to exercise their pre-emption rights.
In the case of certain increases in the Company’s share capital, the existing holders of the Shares generally
would be entitled to pre-emption rights pursuant to the Companies Act unless such rights have been
waived by a special resolution of the Shareholders at a general meeting or, in certain circumstances,
pursuant to the Articles. Holders of Shares outside the United Kingdom may not be able to exercise their
pre-emption rights in respect of Shares unless exemptions from any overseas securities law requirements
are available and the Company decides to comply with local law and regulations. In particular, US holders
of the Shares may not be able to exercise pre-emption rights unless the Shares or other securities issued by
the Company are registered under the Securities Act, or an exemption from the registration requirements
is available. The Company cannot assure prospective investors that any exemption from such overseas
securities law requirements would be available to enable US and other non-UK holders to exercise such
pre-emption rights or, even if available, that the Company will seek to rely on any such exemption.
It may be difficult to enforce US or other foreign law judgments against the Company or its officers and directors.
The Company is a public company incorporated under the laws of England and Wales. The Directors are
citizens or residents of countries other than the United States, and all or substantially all of the assets of
such persons and the Company are located outside the United States. As a result, it may be difficult for
investors to effect service of process within the United States upon the Company or such persons, or to
enforce outside of the United States judgments obtained against the Company or such persons in the
United States, including without limitation judgments based upon the civil liability provisions of the US
federal securities laws or the laws of any state or territory within the United States. In addition, an award
or awards of punitive damages in actions brought in the United States or elsewhere may be unenforceable
in the United Kingdom. Investors may also have difficulties enforcing, in original actions brought in courts
in jurisdictions outside the United States, liabilities under US securities laws.
Exchange rate fluctuations may affect the value of Shares.
The Shares will be quoted and any dividends to be paid in respect of them will be in pounds sterling. An
investment in Shares by an investor in a jurisdiction whose principal currency is not pounds sterling
exposes the investor to foreign currency rate risk. Any depreciation of the pound sterling in relation to
such foreign currency will reduce the value of the investment in the Shares or any dividends in foreign
currency terms.
Shareholders may earn a negative or no return on their investment in the Company, and the Company’s ability to
pay dividends may be restricted.
The Group’s results of operations and financial condition are entirely dependent on the trading
performance of the members of the Group. The Group currently conducts substantially all of its operations
through OTB Topco’s subsidiaries and such entities generate substantially all of the Group’s operating
income and cash flow, with OTB Topco having no direct operations or significant assets other than the
investment in its subsidiaries.
As a holding company, the Company’s ability to pay dividends in the future is affected by a number of
factors, principally the Company’s ability to receive sufficient dividends from its subsidiaries. The payment
of dividends by subsidiaries depends largely on their financial condition and ability to generate profits. In
addition, because the subsidiaries are separate and distinct legal entities, they will have no obligation to
pay any dividends or to lend or advance the Company funds. They may be restricted from doing so by
contract, including other financing arrangements, provisions in their constitutional documents or the
applicable laws and regulations of the various countries in which they operate. These factors could limit or
prohibit the payment of dividends to the Company by its subsidiaries, which could restrict the Company’s
ability to pay dividends to Shareholders. Furthermore, although the Shareholders have passed a resolution
approving the cancellation of the amount standing to the credit of the Company’s share premium account
to create distributable reserves equal to that amount for the Company, there can be no guarantee that the
necessary court order confirming this will be granted, or that the court will not impose conditions in any
such order limiting the circumstances in which any reserves created are to be distributable.
As a result, Shareholders may not receive any return on an investment in the Shares unless they are able to
sell the Shares for a price greater than that which they paid for them.
33
The issue of additional Shares in the Company in connection with future acquisitions, any share incentive or share
option plan or otherwise may dilute all other shareholdings.
The Group may seek to raise financing to fund future acquisitions and other growth opportunities. The
Group may, for these and other purposes, such as in connection with share incentive and share option
plans, issue additional equity or convertible equity securities. As a result, the Company’s existing
Shareholders may suffer dilution in their percentage ownership or the price of the Shares may be adversely
affected.
Inflexion will retain a significant interest in the Company following Admission, and its interests may differ from
those of the other Shareholders.
Following Admission, Inflexion will hold 37.13 per cent. of the Company’s issued share capital. Therefore,
it may be able to exercise negative control over certain matters by blocking a special resolution of the
Company. The interests of Inflexion and the Shareholders that acquire Ordinary Shares in the Offer may
not be aligned. Inflexion may make acquisitions of, or investments in, other businesses in the same sector
as the Company. These businesses may be, or may become, competitors of the Company. In addition,
funds or other entities managed or advised by Inflexion may be in direct competition with the Company on
potential acquisitions of, or investments in, certain businesses. Inflexion and the Company have entered
into a Relationship Agreement, which governs certain aspects of Inflexion’s conduct in relation to the
Company. However, these agreements and other measures may be insufficient to safeguard the interests of
other Shareholders.
Substantial future sales of Shares (including sales by certain Existing Shareholders including Inflexion or the
Directors, following the expiry of the terms of the lock-up arrangements) could affect the market price of the Shares.
Following Admission, it is expected that Inflexion and the Directors will in aggregate hold voting rights in
respect of approximately 60.00 per cent. of the Company’s issued share capital. The Executive Directors
and certain persons connected to them are subject to a 12 month lock-up period following Admission, and
Inflexion is subject to a lock-up period ending the longer of six months from the date of Admission or the
date of publication of the audited financial results of the Company for the year ended 30 September 2015.
In addition, the Executive Directors and Inflexion have agreed that, for a further six month period
following the expiry of their lock-up periods, they will not dispose of any Shares or interests in Shares other
than through Numis. After the expiry of such arrangements, the Shares held by them will be freely
transferrable. In addition, Numis may elect to waive such lock-up arrangements in certain circumstances.
The Company cannot predict what effect, if any, future sales of Shares, or the availability of Shares for
future sale, will have on the market price of Shares. Sales of substantial numbers of Shares in the public
market following the Offer, or the perception or any announcement that such sales could occur, following
the expiry of any lock-up arrangements, could adversely affect the market price of the Shares, and may
make it more difficult for investors to sell their Shares at a time and price which they deem appropriate.
Such sales may also make it more difficult for the Company to issue equity securities in the future at a time
and at a price that it deems appropriate. During the periods immediately before and after the periods of
sales restriction provided for by these lock-up arrangements, the market price of the Shares may fall in
anticipation of a sale of Shares. Following the expiry of these arrangements, there will be no contractual
restriction on the sale of the Shares owned by the Shareholders who were previously subject to them. The
Group cannot predict whether a substantial number of Shares in addition to those which will be available
in the Offer will be sold in the open market following the expiration or waiver of these restrictions. In
particular, there can be no assurance that after the restrictions expire, or before such time if any such
restrictions are waived, such Shareholders will not reduce their holdings of Shares.
US holders of the Shares may suffer adverse tax consequences if the Company is characterised as a passive foreign
investment company.
Generally, if, for any taxable year, at least 75 per cent. of the Company’s gross income is passive income, or
at least 50 per cent. of the value of the Company’s assets are attributable to assets that produce passive
income or are held for the production of passive income, including cash, the Company would be
characterised as a passive foreign investment company, or PFIC, for US federal income tax purposes. For
purposes of these tests, passive income includes dividends, interest and gains from the sale or exchange of
investment property and rents and royalties other than rents and royalties which are received from
unrelated parties in connection with the active conduct of a trade or business. If the Company is
characterised as a PFIC, US holders of the Shares may suffer adverse tax consequences, including having
34
gains realised on the sale of the Shares treated as ordinary income, rather than capital gain, the loss of the
preferential rate applicable to dividends received on the Shares by individuals who are US holders and
having interest charges apply to distributions by the Company and the proceeds of sales of the Shares. See
paragraph 2 of Part 14: ‘‘Taxation’’.
The Company’s status as a PFIC will depend on the composition of its income and the composition and
value of its assets (which, assuming the Company is not a ‘‘controlled foreign corporation’’ under
Section 957(a) of the Code for the year being tested, may be determined in large part by reference to the
market value of the Shares, which may be volatile) from time to time. With respect to the 2015 taxable year
and foreseeable future taxable years, the Company does not anticipate that it will be a PFIC based upon
the expected value of its assets, including any goodwill and the expected composition of the Company’s
income and assets. However, the Company’s status as a PFIC is a fact-intensive determination made on an
annual basis and the Board cannot provide any assurances regarding the Company’s PFIC status for the
current or future taxable years. The Board does not currently intend to provide the information necessary
for US holders to make a ‘‘qualified electing fund’’, or QEF, election if the Company is treated as a PFIC
for any taxable year and prospective investors should assume that a QEF election will not be available.
35
PART 2
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
General
Investors should only rely on the information in this Prospectus (and any supplementary prospectus
produced to supplement the information contained in this Prospectus). No person has been authorised to
give any information or to make any representations other than those contained in this Prospectus in
connection with the Offer and, if given or made, such information or representations must not be relied
upon as having been authorised by or on behalf of the Company, the Directors or Numis. No representation
or warranty, express or implied, is made by Numis in relation to the contents of this Prospectus, including
its accuracy or completeness, and nothing in this Prospectus shall be relied upon as a promise or
representation in this respect as to the past or future. Without prejudice to any obligation of the Company
to publish a supplementary prospectus pursuant to section 87(G)(1) of FSMA and paragraph 3.4.1 of the
Prospectus Rules, neither the delivery of this Prospectus nor any subscription, sale or purchase of Shares
pursuant to the Offer shall, under any circumstances, create any implication that there has been no change
in the business or affairs of the Company or the Group since the date of this Prospectus or that the
information in this Prospectus is correct as of any time subsequent to its date.
As required by the Prospectus Rules, the Company will update the information provided in this Prospectus
by means of a supplement to it if a significant new factor that may affect the evaluation by prospective
investors of the Offer occurs prior to Admission or if this Prospectus contains any material mistake or
inaccuracy. Any supplement to this Prospectus will be subject to approval by the FCA and will be made
public in accordance with the Prospectus Rules. If a supplement to this Prospectus is published prior to
Admission then, to the extent provided in section 87Q of FSMA, investors shall have the right to withdraw
their subscriptions or purchases made prior to the publication of the supplement. Such withdrawal must be
done within the time limits set out in the supplement (if any) (which shall not be shorter than two working
days after publication of the supplement).
The contents of this Prospectus are not to be construed as legal, business or tax advice. Each prospective
investor should consult its, his or her own lawyer, financial adviser or tax adviser for legal, financial or tax
advice in relation to any subscription, purchase or proposed subscription or purchase of Shares. In making
an investment decision, each prospective investor must rely on its, his or her own examination, analysis and
enquiry of the Company and the terms of the Offer, including the merits and risks involved.
This Prospectus is not intended to provide the basis of any credit or other evaluation and should not be
considered as a recommendation by any of the Company, the Directors, Numis or any of their respective
representatives that any recipient of this Prospectus should subscribe for or purchase any of the Offer
Shares. Prior to making any decision as to whether to subscribe for or purchase any of the Offer Shares,
prospective investors should read the entirety of this Prospectus. Investors should ensure that they read the
whole of this Prospectus and not just rely on key information or information summarised within it.
Investors who subscribe for or purchase Offer Shares will be deemed to have acknowledged that: (i) they
have not relied on Numis or any person affiliated with Numis in connection with any investigation of the
accuracy of any information contained in this Prospectus for their investment decision; and (ii) they have
relied only on the information contained in this Prospectus and no person has been authorised to give any
information or to make any representations concerning the Company or the Shares (other than as
contained in this Prospectus) and, if given or made, any such other information or representations must
not be relied upon as having been authorised by or on behalf of the Company, the Directors or Numis.
None of the Company, the Directors, Numis or any of their representatives is making any representation to
any offeree, subscriber or purchaser of Offer Shares regarding the legality of an investment by such
offeree, subscriber or purchaser.
In connection with the Offer, Numis and any of its affiliates, acting as investors for their own accounts, may
subscribe for or purchase Offer Shares and, in that capacity, may retain, purchase, sell, offer to sell or
otherwise deal for their own accounts in such Offer Shares, its or their other securities of the Company or
other related investments in connection with the Offer or otherwise. Accordingly, references in this
Prospectus to the Offer Shares being offered, subscribed, acquired, placed or otherwise dealt in should be
read as including any issue, offer or sale to, or subscription, purchase, dealing or placing by, Numis or any
of its affiliates acting as an investor for its or their own account(s). Numis does not intend to disclose the
extent of any such investment or transactions otherwise than in accordance with any legal or regulatory
obligation to do so.
36
Presentation of financial information and non-financial operating data
The combined and consolidated financial information in Part 11: ‘‘Historical Financial Information’’ has
been prepared in accordance with the requirements of the Prospectus Directive Regulations and the
Listing Rules and in accordance with the basis of preparation. The basis of preparation and significant
IFRS accounting policies are further explained in the notes to the financial information set out in
Section B of Part 11: ‘‘Historical Financial Information’’.
Financial information
The Company was incorporated on 17 August 2015 in order to acquire 100 per cent. of the share capital of
OTB Topco, and on completion of the Reorganisation will become the holding company for the Group. As
a consequence, there is no historical financial information relating to the Company. Rather, the historical
financial information in this Prospectus relates to the Operating Group. For further information, see the
definition of ‘‘Group’’ in Part 16: ‘‘Definitions’’ and paragraph 2(a) of Section B, Part II: ‘‘Historical
Financial Information’’.
The Group presents its annual accounts as of 30 September in each financial year. The interim financial
information included in Section B, Part 11: ‘‘Historical Financial Information’’ has been drawn up to
30 June 2015.
The combined and consolidated financial information included in Part 11: ‘‘Historical Financial
Information’’ for the three years ended 30 September 2014 and the nine months ended 30 June 2015 has
been reported on in accordance with Standards for Investment Reporting issued by the Auditing Practices
Board in the United Kingdom and have been prepared in accordance with the basis of preparation
included in paragraph 2(a) of Section B of Part 11: ‘‘Historical Financial Information’’.
None of the financial information used in this Prospectus has been audited in accordance with auditing
standards generally accepted in the United States of America (‘‘US GAAS’’) or auditing standards of the
Public Company Accounting Oversight Board (United States) (‘‘PCAOB’’). US GAAS and the auditing
standards of the PCAOB do not provide for the expression of an opinion on accounting standards which
have not been finalised and are still subject to modification, as is the case with accounting standards as
adopted for use in the EU and included in Part 11: ‘‘Historical Financial Information’’. Accordingly, it
would not be possible to express any opinion on the financial information in Part 11: ‘‘Historical Financial
Information’’ under US GAAS or the auditing standards of the PCAOB. In addition, there could be other
differences between the auditing standards issued by the Auditing Practices Board in the United Kingdom
and those required by US GAAS or the auditing standards of the PCAOB. Potential investors should
consult their own professional advisers to gain an understanding of the financial information’’ in
Part 11: ‘‘Historical Financial Information’’ and the implications of differences between the auditing
standards noted herein.
Pro forma financial information
In this Prospectus, any reference to ‘‘pro forma’’ financial information is to information which has been
extracted without material adjustment from the unaudited pro forma financial information contained in
Section A of Part 12: ‘‘Unaudited Pro Forma Financial Information’’, which is based on the consolidated
interim financial information of the Group as at 30 June 2015 as set out in Section B of Part 11: ‘‘Historical
Financial Information’’. The unaudited pro forma financial information has been prepared to illustrate the
effect of the Offer, Reorganisation and re-financing as if it had taken place on 30 June 2015.
Due to its nature, the unaudited pro forma financial information addresses a hypothetical situation and,
therefore, does not represent the Group’s actual financial position or results. It may not, therefore, give a
true picture of the Group’s financial position. The pro forma financial information has been prepared for
illustrative purposes only in accordance with Annex II of the Prospectus Directive Regulation.
Non-IFRS financial information
This Prospectus contains certain financial measures that are not defined or recognised under IFRS,
including TTV, EBITDA, revenue per daily unique visitor, overhead costs, variable costs and marketing
costs. Information regarding these measures is sometimes used by investors to evaluate the efficiency of a
company’s operations and its ability to employ its earnings toward repayment of debt, capital expenditures
and working capital requirements. There are no generally accepted principles governing the calculation of
these measures and the criteria upon which these measures are based can vary from company to company.
37
These measures, by themselves, do not provide a sufficient basis to compare the Company’s performance
with that of other companies, and should not be considered in isolation or as a substitute for operating
profit or any other measure as an indicator of operating performance, or as an alternative to cash
generated from operating activities as a measure of liquidity.
Revenue per daily unique visitor is a robust benchmark that measures the quality of the traffic a brand
generates from its website platforms. It helps inform the Board how much each daily unique visitor is
worth. It provides the Group with a monetisation model that links two traditional e-commerce benchmarks
(that of conversion and revenue per booking). The revenue per daily unique visitor metric both simplifies
and aligns the finance and marketing function with one trading metric: Revenue per booking multiplied by
conversion equals revenue per daily unique visitor.
TTV, which is stated net of Value Added Tax and associated taxes, does not represent the Group’s statutory
turnover. TTV represents the price at which goods or services have been sold across the Group’s various
platforms. TTV is calculated by taking the volume of bookings multiplied by the average booking value. It
allows the Board to measure customer value and, more importantly, make commercial decisions on pricing
as the basis of customer value.
EBITDA represents operating profit before depreciation, amortisation, holding company costs and non
underlying costs, and TTV represents total transaction value. The Board uses EBITDA and TTV (amongst
other things) as key performance indicators of the Group’s business and to evaluate the performance of its
operations, to develop budgets and to measure its performance against those budgets.
The Board believes EBITDA to be a useful supplemental tool to assist in evaluating operating
performance because it eliminates depreciation and amortisation. The Board believes that such measures
provide useful supplemental information without regard to such items. EBITDA and EBITDA-related
measures are not a measurement of performance under IFRS and should not be considered by prospective
investors in isolation or as a substitute for measures of profit, or as an indicator of the Group’s operating
performance or cash flows from operating activities as determined in accordance with IFRS.
The Board has presented these supplemental measures because it uses them to manage the Group’s
business. In addition, the Board believes that EBITDA and EBITDA-related measures are commonly
reported by comparable businesses and used by investors and analysts in comparing the performance of
businesses without regard to depreciation and amortisation, which can vary significantly depending upon
accounting methods. EBITDA and EBITDA-related measures may not be comparable to similarly-titled
measures disclosed by other companies, and prospective investors should not use these non-IFRS
measures as a substitute for the figures provided in the Group’s historical financial information included in
Section B of Part 11: ‘‘Historical Financial Information’’.
Currency presentation
Unless otherwise indicated, all references in this Prospectus to:
•
‘‘sterling’’, ‘‘pounds sterling’’, ‘‘GBP’’, ‘‘£’’, or ‘‘pence’’ are to the lawful currency of the United
Kingdom;
•
‘‘dollars’’, ‘‘US dollars’’ or ‘‘$’’ are to the lawful currency of the United States of America; and
•
‘‘euros’’ or ‘‘A’’ are to be the lawful currency of the European Monetary Union.
The Company prepares its financial statements in pounds sterling.
Roundings
Certain data in this Prospectus, including financial, statistical, and operating information, have been
rounded. As a result of the rounding, the totals of data presented in this Prospectus may vary slightly from
the actual arithmetic totals of such data. Percentages in tables have been rounded and accordingly may not
add up to 100 per cent.
Market, industry and economic data
Unless the source is otherwise identified, the market, economic and industry data and statistics in this
Prospectus constitute Directors’ estimates, using underlying data from third parties. The Company
obtained market and economic data and certain industry statistics from internal reports, as well as from
third-party sources as described in the footnotes to such information. The Company confirms that all
38
third-party information set out in this Prospectus has been accurately reproduced and that, so far as the
Company is aware and has been able to ascertain from information published by the relevant third-party,
no facts have been omitted which would render the reproduced information inaccurate or misleading.
Where third-party information has been used in this Prospectus, the source of such information has been
identified. Such third-party information has not been audited or independently verified.
This Prospectus includes market share, industry and forecasts that the Company has obtained from
industry publications, surveys and internal company sources. As noted in this Prospectus, the Company has
obtained market and industry data relating to the Group’s business from providers of industry data,
including:
•
BDRC—Holiday Trends Report, 2013
•
Euromonitor International
•
Mediacom—ontheBeach.co.uk Brand Tracking Results, 23rd March 2015
•
Mintel—Beach Holidays—UK, January 2015
•
Mintel—Package vs Independent Holidays UK, April 2015
•
Google Analytics
•
Hitwise
Market and industry data are inherently predictive and speculative, and are not necessarily reflective of
actual market conditions. Statistics in such data are based on market research, which itself is based on
sampling and subjective judgments by both the researchers and the respondents, including judgments
about what types of products and transactions should be included in the relevant market. The value of
comparisons of statistics for different markets is limited by many factors, including that: (i) the markets are
defined differently; (ii) the underlying information was gathered by different methods; and (iii) different
assumptions were applied in compiling the data. Consequently, the industry publications and other reports
referred to above generally state that the information contained therein has been obtained from sources
believed to be reliable, but that the accuracy and completeness of such information is not guaranteed and,
in some instances, these reports and publications state expressly that they do not assume liability for such
information. Research by Euromonitor International Limited should not be considered as the opinion of
Euromonitor International Limited as to the value of any security or advisibility of investing in the
Company.
Information regarding forward-looking statements
This Prospectus includes forward-looking statements. These forward-looking statements involve known
and unknown risks and uncertainties, many of which are beyond the Company’s control and all of which
are based on the Directors’ current beliefs, expectations and assumptions about future events.
Forward-looking statements are sometimes identified by the use of forward-looking terminology such as
‘‘believes’’, ‘‘expects’’, ‘‘may’’, ‘‘will’’, ‘‘could’’, ‘‘should’’, ‘‘shall’’, ‘‘risk’’, ‘‘intends’’, ‘‘estimates’’, ‘‘aims’’,
‘‘plans’’, ‘‘predicts’’, ‘‘continues’’, ‘‘assumes’’, ‘‘positioned’’ or ‘‘anticipates’’ or the negative of those terms,
other variations on those terms or comparable terminology. These forward-looking statements include all
matters that are not historical facts. They appear in a number of places throughout this Prospectus, and
include statements regarding the intentions, beliefs and current expectations of the Directors or the
Company concerning, among other things, the results of operations, financial condition, liquidity,
prospects, growth, strategies, and dividend policy of the Company and the industry in which it operates.
In particular, the statements under the following headings ‘‘Summary Information’’, Part 1: ‘‘Risk Factors’’,
Part 5: ‘‘Information on the Company and the Group’’ and Part 9: ‘‘Operating and Financial Review’’
regarding the Company’s strategy and other future events or prospects are forward-looking statements.
These forward-looking statements and other statements contained in this Prospectus regarding matters
that are not historical facts involve predictions. No assurance can be given that such future results will be
achieved; actual events or results may differ materially as a result of risks and uncertainties facing the
Company. Such risks and uncertainties could cause actual results to vary materially from the future results
indicated, expressed, or implied in such forward-looking statements. Please refer to Part 1: ‘‘Risk Factors’’
for further information in this regard.
The forward-looking statements contained in this Prospectus speak only as of the date of this Prospectus.
The Company, the Directors and Numis expressly disclaim any obligation or undertaking to update these
39
forward-looking statements contained in this Prospectus to reflect any change in their expectations or any
change in events, conditions, or circumstances on which such statements are based unless required to do so
by applicable law, the Prospectus Rules, the Listing Rules or the Disclosure and Transparency Rules.
Prospective investors should note that the contents of these paragraphs relating to forward-looking
statements are not intended to qualify the statements made as to sufficiency of working capital in this
Prospectus.
No incorporation of website information
The contents of the Company’s website, any website mentioned in this Prospectus or any website directly
or indirectly linked to these websites have not been verified and do not form part of this Prospectus, and
prospective investors should not rely on such information.
40
PART 3
DIRECTORS, SECRETARY, REGISTERED AND HEAD OFFICE AND ADVISERS
Directors . . . . . . . . . . . . . . . . . . . . .
Richard Segal (Chairman)*
Simon Cooper (Chief Executive Officer)
Gwendoline (Wendy) Parry (Chief Financial Officer)
Lee Ginsberg (Non-Executive Director)
David Kelly (Non-Executive Director)
Company secretary . . . . . . . . . . . . . .
Kirsteen Vickerstaff (General Counsel)
Registered office . . . . . . . . . . . . . . . .
Park Square
Bird Hall Lane
Cheadle Heath
Stockport SK3 0XN
United Kingdom
Global Co-ordinator, Sponsor and
Bookrunner . . . . . . . . . . . . . . . . .
Legal advisers to the Company as to
UK law . . . . . . . . . . . . . . . . . . . . .
Legal advisers to the Company as to
US law . . . . . . . . . . . . . . . . . . . . .
Legal advisers to the Global
Co-ordinator, Sponsor and
Bookrunner as to UK law and
US law . . . . . . . . . . . . . . . . . . . . .
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
United Kingdom
Taylor Wessing LLP
5 New Street Square
London
EC4A 3TW
United Kingdom
Goodwin Procter LLP
The New York Times Building
620 Eighth Avenue
New York, NY
10018-1405
United States of America
Simmons & Simmons LLP
CityPoint
One Ropemaker Street
London
EC2Y 9SS
United Kingdom
Auditors . . . . . . . . . . . . . . . . . . . . . .
KPMG LLP
1 St Peter’s Square
Manchester
M2 3AE
United Kingdom
Reporting Accountants . . . . . . . . . . .
PricewaterhouseCoopers LLP
33 Wellington Street
Leeds
LS1 4JP
United Kingdom
*
Richard was appointed as a director of the Company on 17 August 2015, but his position as Chairman is not effective until
Admission.
41
Registrars . . . . . . . . . . . . . . . . . . . .
Financial public relations advisers to
the Company . . . . . . . . . . . . . . . .
Capita Asset Services
The Registry
34 Beckenham Road
Kent
BR3 4TU
United Kingdom
Citigate Dewe Rogerson
3 London Wall Buildings
London
EC2M 5SY
United Kingdom
42
PART 4
EXPECTED TIMETABLE OF PRINCIPAL EVENTS AND OFFER STATISTICS
Event
Time and date
Expected timetable of principal events
Announcement of Offer Price . . . . . . . . . . . . . . . . . . . . . . . . .
Commencement of conditional dealings in the Shares on the
London Stock Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prospectus published . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Admission and commencement of unconditional dealings in the
Shares on the London Stock Exchange . . . . . . . . . . . . . . . . .
CREST accounts credited in respect of uncertificated Shares . . .
Share certificates in respect of certificated Shares despatched . .
..
7.00 a.m. on 23 September 2015
..
..
8.00 a.m. on 23 September 2015
23 September 2015
..
..
..
8.00 a.m. on 28 September 2015
28 September 2015
12 October 2015
All times are London, UK times. Each of the times and dates in the above timetable is indicative only
and is subject to change without further notice.
Offer statistics
Offer Price (per Share) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of Shares in issue immediately prior to Admission . . . . .
Number of Shares in the Offer . . . . . . . . . . . . . . . . . . . . . . . . .
—to be sold by the Selling Shareholders (the Sale Shares) . . . .
—to be issued by the Company (the New Shares) . . . . . . . . . .
Percentage of the existing issued share capital to be issued
pursuant to the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of Shares in issue immediately following Admission . . . .
Expected market capitalisation of the Company at the Offer
Price(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected net proceeds of the Offer receivable by the Company(2)
Estimated net proceeds of the Offer receivable by the Selling
Shareholders(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
184 pence
130,434,763
52,173,912
46,739,130
5,434,782
.
.
37.4 per cent.
130,434,763
.
.
approximately £240.0 million
approximately £6.4 million
.
approximately £83.8 million
(1)
The market capitalisation of the Company at any given time will depend on the market price of the Shares at that time. There
can be no assurance that the market price of a Share will equal or exceed the Offer Price.
(2)
After deduction of estimated commissions, fees and expenses payable by the Company of £2,688,955.
(3)
After deduction of estimated commissions, fees and expenses payable by the Selling Shareholders of £2,150,000.
43
PART 5
INFORMATION ON THE COMPANY AND THE GROUP
Investors should read this Part 5 in conjunction with the more detailed information contained in this
Prospectus, including the risk factors appearing in Part 1: ‘‘Risk Factors’’ and financial and other
information appearing in Part 9: ‘‘Operating and Financial Review’’. Where stated, financial information in
this Part 5 has been extracted without material adjustment from Part 11: ‘‘Historical Financial
Information’’.
1.
BACKGROUND
The Group is a leading online retailer of affordable short-haul beach holidays, primarily targeting
customers in the United Kingdom under the ‘‘On the Beach’’ brand. The Group currently has a market
share of the UK online short-haul beach holiday market of approximately 17 per cent. Its two largest
competitors are TUI Travel and Thomas Cook (source: CAA, UK Short Haul Beach Online Estimates). The
Group entered the Swedish market in early 2015, and in the short term intends to expand into Norway
and/or Denmark.
The Group’s technology platform enables customers to package dynamically the constituent components
of their holiday (including flights, hotels and transfers) to customise holidays from millions of flight and
hotel combinations. The Group’s search facility connects customers to suppliers of travel products. Each
travel product is booked separately. The Group’s dynamic packaging is different to the traditional package
holidays offered by many tour operators, where packages of flights, hotels and other products are fixed by
operators at the outset.
The Group is completely independent from airlines and hotels, so that it can offer customers a full market
range of flight and hotel products bookable through online channels (including by desktop, mobiles, tablets
and apps) and over the phone.
The Group has a differentiated customer proposition focused on three key areas:
•
Simplicity: the Group’s online platform provides ease of navigation, clarity and transparency;
•
Value: the Group offers choice, flexibility, competitive pricing and relevant products, combined with
financial protection and high service standards; and
•
Personalisation: the Group visually tailors and personalises the customer experience across each
device that customers use to visit the Group’s websites based on customer preference to maximise
customer conversion rates.
The Group’s competitive advantages are based on the strength of its customer proposition, plus the
following core strengths which help it to increase scale and revenue:
•
Focus: The Group’s focus on offering customers short-haul beach holidays sets it apart from
generalist OTAs. Approximately 93 per cent. of the Group’s sales of holidays were booked via its
online platform for the nine month period ended 30 June 2015. It has a lower fixed-cost base than
most traditional ‘‘bricks and mortar’’ tour operators. In addition, because the Group has no stock
commitments with airlines or hotels, it can provide a more flexible range of beach holiday products to
its customers, and does not need to factor in unsold stock into its sales prices. The Group’s online
business model means it is cash generative with favourable working capital dynamics, which allows it
to invest into key areas such as brand, technology and customer service.
•
Expertise: The Group has an effective and committed management team, with over 50 years of travel
and online experience in aggregate. The Group has operated exclusively in the beach holiday segment
for 11 years and has built up considerable consumer and market know-how. By utilising site visitor
profiling technology, the Group is able to personalise the customer experience by offering more
relevant product options and targeted deals.
•
Agility: A flat, entrepreneurial culture is engrained across the business to drive innovation of ideas
and enable the Group to continually evolve by improving those elements of its business which will
have the biggest effect on revenue and customer experience. This culture, coupled with the Group’s
technological platform which was wholly developed and is maintained in-house, enables data to be
aggregated, filtered and enriched with speed and efficiency which, in turn, allows the Group to
improve its offering and create a seamless customer experience over multiple devices. Over the
financial years ended 30 September 2013 and 30 September 2014, customer conversion rates on
44
smartphones, desktops and tablets increased by 20 per cent., 22 per cent. and 22 per cent.,
respectively.
•
Brand: The Group’s focus as a short-haul beach holiday provider allows it to direct its marketing
efforts on creating a brand that specialises in a certain segment of the market. The strength of the ‘‘On
the Beach’’ brand has helped the Group increase its share of traffic from branded, free and direct
sources from 40 per cent. in the financial year ended 30 September 2012 to 55 per cent. in the nine
month period ended 30 June 2015 (source: Google Analytics). The strength of the Group’s brand is
instrumental in minimising the Group’s cost per acquisition.
Currently, there is a structural shift in the travel intermediaries market towards online channels and
dynamically packaged holidays to give consumers flexibility and a broader product choice, both of which
are core features of the Group’s business model (source: Euromonitor, Online Sales by Market; Euromonitor
Growth in Dynamic Packages). This shift provides the Group with added flexibility and breadth of product
offering. The United Kingdom and Scandinavian online short-haul beach holiday market is continuing to
grow, with the Group well positioned to take further market share from mainstream ‘‘bricks and mortar’’
competitors with extensive retail stores and a more limited customer proposition than the Group’s current
offering.
The UK and continental European OTA markets include a wide range of public and private companies,
some of which have a clear regional focus, while others operate across regions and worldwide. Market
participants vying for the same consumer travel spending as the Group include other OTAs, traditional
(offline) travel agencies and travel suppliers themselves, such as airlines, hotels and tour operators.
For the financial year ended 30 September 2014, the Group reported revenue for the United Kingdom of
£45.6 million and EBITDA of £15.4 million. For the nine month period ended 30 June 2015, the Group
reported revenue for the United Kingdom of £47.7 million and EBITDA of £15.4 million.
2.
HISTORY AND DEVELOPMENT
The first Group company was established by current CEO Simon Cooper in 2003, and became a trading
subsidiary of On the Beach Limited in 2008. Mr Cooper was also a founder of On the Beach Limited
(formerly known as On the Piste Travel Limited) which was incorporated in 1996. The Group initially
operated on a digital platform operated by Teletext Holidays, with bookings being taken via a call centre.
In October 2004, the Group launched its first ‘static’ website to show hotels to prospective customers.
Shortly thereafter, the Group began to develop an offers-based website providing dynamically packaged
holidays, which launched in September 2005. At this stage, the Group had access to a single hotelaggregator (known as a ‘bed-bank’) and one provider of flight data. During this time, the Group’s call
centre function expanded rapidly.
In 2007, the private equity firm Livingbridge (then known as ISIS) acquired a majority stake in the Group.
The Group continued to develop its website specialising in beach holidays, offering dynamic packages
focusing on the search and demand patterns of consumers who would otherwise book from traditional tour
operators.
Following the investment by Livingbridge, the executive and senior management team of the Group grew
and the proportion of online bookings increased. By 2011, approximately 79 per cent. of the Group’s
bookings were made online, with the remainder being made via the call centre.
In 2011, the Group launched its own proprietary technology platform which is characterised by flexible,
modularised architecture to enable the Group to handle data with speed and efficiency. The platform has
allowed the Group continuously to improve its offering and create a seamless customer experience over
multiple devices, such as desktops and smartphones.
In 2011, the Group acquired a technology platform, brand and URL from ResortTaxis.com out of
administration for approximately £10,000 to assist with transporting holidaymakers from overseas airports
to their destination hotels. The Group later rebranded this initiative as ‘‘On the Beach Transfers’’.
In January 2012, the Group launched its 24-hour telephone support service to provide customers with
access to the Group’s service team throughout their holidays.
In October 2013, Inflexion (a partnership whose general partner is advised by the private equity firm
Inflexion Private Equity Partners LLP) acquired a majority stake in the Group from Livingbridge. Since
then, the Group has improved its revenue by developing and optimising its technology platform across
45
multiple devices, grown its direct contracting system, maximise its brand awareness by continuing to invest
in online and TV advertising, expand its offering of holiday ancillaries (e.g. transfers and insurance
products) and begun international expansion.
In early 2015, the Group launched an international platform in Sweden under the ‘‘ebeach.se’’ domain
name, and plans further expansion into Norway and/or Denmark in the short term.
3.
MARKET OVERVIEW
UK short-haul beach holidays
The Group’s core market is UK short-haul beach holidays that are booked online. The UK dynamic
packaging market in which the Group operates grew at a compound annual growth rate of 9.9 per cent. in
the period 2009 to 2014 (source: Euromonitor, Growth in Dynamic Packages). Bookings from the United
Kingdom accounted for over 99 per cent. of the Group’s bookings in the financial year ended
30 September 2014.
There has been an overall growth in short-haul holidays in the United Kingdom (defined as UK consumers
travelling to destinations less than 6 hours flight from the UK mainland), with an overall decrease in
long-haul holidays. The compound annual growth rate for short-haul holidays from the United Kingdom
was 4.7 per cent. for the period from 2010 to 2014, compared to a decline in long-haul holidays of 1.3 per
cent. over the same period. In 2014, UK travellers made approximately 12.3 million visits abroad to
short-haul package holiday destinations compared to approximately 3.83 million visits abroad to long-haul
package holiday destinations (source: Mintel, Package vs Independent Holidays UK, April 2015).
The Board believes this trend is largely attributable to the costs associated with long-haul flying
(particularly the increasing costs of jet fuel and the Air Passenger Duty on all long-haul flights from the
United Kingdom). In addition, the Board believes there has been an overall increase in the quality (both in
terms of services and facilities) of hotels in the western Mediterranean to compete with hotels in long-haul
destinations.
The beach holiday category is the most popular holiday type amongst UK consumers. Approximately
48 per cent. of UK holidaymakers who travel overseas have taken a beach holiday in the last 12 months,
compared to 19 per cent. for city breaks, 15 per cent. for cultural/history breaks and 6 per cent. for cruises.
Mintel estimates the value of the overseas beach holiday market at £10.7 billion (excluding flight costs)
(source: Mintel, Beach Holidays—UK, January 2015).
Dynamic packages as a share of the wider UK market
Dynamic packaging is a booking process that allows customers to book their own combinations of flights,
hotels and transfers from millions of available options on a website or through the app of an OTA or tour
operator.
The key drivers of growth in dynamic packaging are:
•
increased market share of European short-haul low cost carriers at the expense of main carriers. In
terms of UK outbound beach holidays, the proportion booked through low cost carriers as a
percentage of all flights has increased from 43 per cent. in 2008 to 63 per cent. in 2014 (source: CAA,
Low Cost Flights vs All Flights UK);
•
the search by UK consumers for greater flexibility and value to maximise their holiday budgets, which
is a cause and result of increasing online penetration; and
•
the increasing ability of consumers to create their own holidays through advanced filtering options and
high quality hotel sales information.
The dynamically packaged holiday market in the United Kingdom is forecast to grow from 2014 to 2019 at
the expense of traditional pre-packaged holidays. During this period, traditional package holiday sales are
forecast to decline by a compound annual growth rate of 3.9 per cent. in the United Kingdom, whilst
dynamic packaging sales are forecast to grow by a compound annual growth rate of 1.7 per cent. (source:
Euromonitor, Growth in Dynamic Packages).
Euromonitor estimate the proportion of UK package holiday sales that are dynamically packaged was
£2.72 billion in 2009, rising to £4.37 billion in 2014 and representing a compound annual growth rate of
9.9 per cent. UK traditional package holiday sales reduced from £8.97 billion to £6.54 billion over the same
46
period, representing a compound annual growth rate of minus 6.1 per cent (source: Euromonitor, UK
Growth in Dynamic Package v Traditional Package Holidays).
Online penetration of UK leisure package holidays
Online penetration in the UK package holiday market has steadily increased from 48 per cent. in 2012 to
52 per cent. in 2014, and is forecast to reach 59.5 per cent. by 2019. The forecast compound annual growth
rate for online package holiday sales in the United Kingdom is 2.1 per cent. for the period from 2014 to
2019 (or 2.3 per cent for the period from 2012 to 2019) (source: Euromonitor, Online Sales By Market).
In the UK market in 2014, online penetration of travel sales made via intermediaries was 52 per cent. for
package holidays, 85 per cent. for accommodation (sold as a single component) and 81 per cent. for flights
(sold as a single component). In the UK market, by 2019 online penetration rates of accommodation and
flights sold as single components via intermediaries are projected to rise to 89 per cent. and 84 per cent.
respectively, and online penetration rates of package holidays are projected to rise to 59.5 per cent.
(source: Euromonitor, Online Intermediaries Sales by Market).
In the Netherlands and certain Scandinavian countries, online penetration in flights and hotels is already
between 60 and 82 per cent. (source: Euromonitor, % Online Share for Air Only, Packages, Lodging Only),
and the Board expects that online penetration of packaged holidays will continue to rise.
The European package holiday market
Sales in the package holiday sector in Belgium, Denmark, France, Germany, Italy, Netherlands, Norway,
Spain and Sweden amounted to A55 billion in 2014. Online sales penetration in the same sector and
markets is expected to grow from 26 per cent. in 2014 to 30 per cent. in 2018 (sources: Euromonitor, Offline
and Online Intermediaries Sales by Market; Euromonitor, Online Sales by Market).
The Swedish market
Package holiday sales in Sweden grew, on a compound annual growth rate basis of 1.5 per cent. between
2012 and 2014 to reach A2,291 million in 2014. Offline value sales for package holidays saw a decrease of
7 per cent. in 2014. Online sales for package holidays, however, continued to grow, increasing by 1.5 per
cent. in the same year. Online sales of package holidays accounted for A1,543 million in 2014, which
represented 67 per cent. of total travel intermediaries’ sales in Sweden for the year. Online package
holiday value sales are projected to increase by 17 per cent. in Sweden between 2014 and 2018 (source:
Euromonitor, Online Sales by Market).
Barriers to entry for competitors
The Group focuses on a niche in the market between traditional tour operators and generalist OTAs. The
Group has spent over 11 years developing and refining its business model, and the Board believes that
there are significant barriers to entry for companies looking to compete in the short-haul beach holiday
market.
The Group focuses on enabling customers to dynamically package holidays to short-haul beach
destinations through its online platform. The Board believes this model would be difficult for competitors,
be they new entrants, traditional tour operators, generalist OTAs or low-cost carriers to replicate.
Tour operators
•
High fixed-costs: Core operations are typically run from high street shops, which leads to high
fixed-cost bases and operational inefficiencies. This traditional offline focus has discouraged tour
operators from investing heavily to increase their online penetration, limiting tour operators’ ability to
cost-effectively replicate the Group’s online, low fixed-cost base business model. Management
estimates the Group’s fixed cost per booking, to be approximately £23 for the financial year ended
30 September 2014, which the Board believes is appreciably lower than that for tour operators.
•
Conflicts of interest: Tour operators are typically committed to fill a certain capacity for flights and
hotels. As a result, tour operators would be acting against their own interests and potentially
negatively affecting their own profitability by offering customers the choice of flights and hotels from a
variety of providers.
47
•
Incomplete offering: A comparative lack of inventory and technology infrastructure makes it difficult
for tour operators to provide a similar level of choice and flexibility that the Group is able to offer to
its customers.
Generalist OTAs
•
Dependence on Global Distribution Systems: OTAs typically depend on Global Distribution Systems
for hotel room and flight availability, which limits their ability to respond quickly to searches (as they
are dependent on the response times of the relevant Global Distribution System), and the choices that
are available via searches.
•
Lack of specialist knowledge: OTAs typically have no specialist focus on beach holidays. In addition,
without a brand associated with beach holidays, generalist OTAs may struggle to make a positive
return bidding on generic beach holiday keywords and, as a result, do not directly compete with the
Group for traffic to their websites.
•
Lack of dynamic packaging: The majority of generalist OTAs specialise in single element bookings
(e.g. either flights or hotels) and their technological platforms are not optimised to offer customers
the ability to dynamically package these constituent parts into a single bespoke holiday offering.
Low-cost carriers
•
Incomplete offering: The single element offering of low-cost flights means the current platforms of
low-cost carriers only offer hotels as an ancillary product. Development of expertise would be
required (particularly in terms of building supplier and hotel relationships) for low-cost carriers to
offer the breadth of products that the Group currently offers.
•
Conflicts of interest: Similarly to tour operators, low cost carriers’ interests are aligned with offering
self-operated flights, which disincentives them from offering a broad range of products, therefore
limiting consumer choice.
New entrants
•
Building a strong brand: The Group has spent 11 years growing brand recognition in the short-haul
beach holiday sector online and, more recently, offline via TV advertising and through developing the
Group’s bid modelling tool. For the nine month period ended 30 June 2015, the Group’s share of
traffic from branded, free and direct sources was 55 per cent. (source: Google Analytics). New entrants
would lack this advantage, meaning their proportion of branded traffic would likely be lower for a
significant period of time following launch. Non-branded traffic costs more per click than branded
traffic and drives lower conversion rates than branded traffic and, as a result, a lack of branded traffic
will have a significant effect on profitability for a new entrant. In addition, because of the lack of
history of new entrants, the search engine quality score for new entrants will be lower. The Group’s
conversion rates on non-branded traffic will also be higher than that of a new entrant into the market
given the sophistication of the Group’s technology platform and the wide recognition of the Group’s
brand across users who continue to visit the Group’s website via non-branded keywords.
•
Lack of existing relationships: New entrants have limited access to hotel suppliers due to a lack of
existing relationships, potentially resulting in higher costs per booking and higher costs for consumers
or lower revenue for the new entrant. Lack of hotel supplier relationships also reduces the breadth of
product offering, overall user experience and choice.
•
Costs of developing a suitable technology platform: A significant investment in time and money is
required to achieve agility and scalability of a suitable platform to compete with the in-house
technology that the Group has developed over a number of years.
•
Developing scale: The scale of the Group’s operation drives competitive input rates and lowers fixedcosts per booking which would be difficult for a new entrant to replicate. In addition, the modular
nature of the Group’s platform is easily scalable into new markets and able to handle increased
transaction volumes, which may not be the case for new entrants.
48
4.
KEY STRENGTHS OF THE GROUP
A focus on online, dynamically packaged beach holidays for UK customers gives the Group significant
advantages over its market competitors
The Group is a leading provider of dynamically packaged beach holidays for UK customers and possesses
significant advantages over its key market competitors.
The Group has operated exclusively in the beach holiday segment for 11 years, and has built up
considerable know-how in understanding what its customers want from a beach holiday. The Group’s focus
on beach holidays sets it apart from the generalist OTAs, which gives it a competitive advantage as it can
tailor its business model to exclusively serve the online beach segment. Generalist OTAs find it more
difficult to prioritise single sector, single market projects based on the ability to deliver significant financial
returns. The Group’s focus on the beach segment has allowed it to concentrate its marketing efforts in
creating a brand that specialises in a certain segment of the holiday market that resonates with beach
holiday makers. The strength of the ‘‘On the Beach’’ brand has helped increase its share of traffic from
branded, free and direct sources from 40 per cent. in the financial year ended 30 September 2012 to 55 per
cent. in the nine month period ended 30 June 2015 (source: Google Analytics). The Group’s brand has been
instrumental in driving down the Group’s cost per acquisition.
Furthermore, when compared to other categories of holiday (for example, city breaks), beach holidays
provide a resilient offering with less volatility with regard to aggregate passenger numbers and
destinations, with the majority of outbound UK consumers travelling to either Spain or Greece according
to the CAA (sources: Mintel, Beach Holidays—UK, January 2015; CAA). These destinations also represent
the largest proportion of the Group’s revenue over the last three years, demonstrating the Group’s focused
offerings.
The Group’s online offering also is founded upon a lower fixed-cost base compared to tour operators,
whose business models (including ‘‘bricks-and-mortar’’ retail stores, significant levels of committed beds
and in-house airline capacity) have resulted in them operating higher fixed-cost base models, with a limited
opportunity to provide a broader range of products to consumers. These traditional tour operators’
business models are restrained by in-house and committed capacity in flights and hotels; in contrast, the
Group has no stock commitments and therefore is able to provide more choices. As a result of these
market dynamics, within the UK short-haul beach holiday market, the Group has increased its UK
outbound passenger numbers by 125 per cent. from 2011 to 2014, whilst Thomas Cook and TUI Travel’s
outbound UK and Ireland passenger numbers for short-haul beach holiday destinations have declined by
21 per cent. and 8 per cent. over the same time period, respectively.
The Group’s ability to enable customers to dynamically package holidays is different from generalised
OTAs, who typically provide only a single element offering (mainly flights), which have a lower basket
value and are lower revenue products in comparison to packaged offerings comprising multiple elements.
In particular, the Group’s ability to dynamically package its offerings (which represented 92.4 per cent. of
the Group’s TTV for the financial year ended 30 September 2014) enables customers to select flight and
hotel options from different suppliers with complete flexibility on dates and timings in comparison to
traditional package holidays. This difference represents a high revenue opportunity for the Group as it is
able to leverage revenue on multiple elements where the customer is focused on the aggregate package
price.
Experienced and entrepreneurial management team with significant travel and online experience
The Group has an effective and committed management team with over 50 years of travel and online
experience in aggregate. A flat, entrepreneurial culture is engrained across the business to drive innovation
of ideas. In particular, the founder and Chief Executive Officer Simon Cooper has significant experience in
the travel industry, having founded On the Piste (a ski tour operator) in 1996, a business which was
eventually sold to TUI Travel in 2008.
Chief Financial Officer Wendy Parry has also held Managing Director, Commercial Director and Finance
Director roles at divisions of Holidaybreak plc and Booker, whilst Jonathan Smith, the Chief Technology
Officer, and Alistair Daly, the Chief Marketing Officer, have significant online experience, having held
senior roles at Moneysupermarket.com and Lastminute.com, respectively. William Allen, the Supply
Director, and Oliver Garner, the International Director, have held senior commercial and marketing
positions at MyTravel and On Holiday Group, and Thomas Cook, Thomson and Hotels.com, respectively.
49
Agile, scalable and flexible in-house technological platform supported by a robust MI platform
The Group’s in-house technological platform has been designed, assembled and maintained through
approximately £11.6 million of investment over the last five years, replacing a third-party technology
solution. By developing an in-house platform, the Group is able to respond to changing market dynamics
with greater agility, scalability and flexibility.
The Group’s technology platform is modular, with each component being written and maintained in-house
which enables data to be aggregated with speed and efficiency. Moreover, the modular architecture of the
platform is easily scalable into new markets and able to handle increased transaction volumes. Parallel
teams are able to work on the individual modules within the overall e-commerce platform, whilst the
Group’s data caching system promotes high performance and scalability.
Importantly, the technological platform is supported by a robust MI platform, which provides a single
source of data for all business areas to inform rapid decision making. In particular, the MI platform
enables daily split testing to measure customers’ booking experiences, tests on conversion and revenue to
optimise revenue per daily unique visitor and improve traffic through the Group’s bid modelling tool.
UK market-leading customer proposition focused on simplicity, value, personalisation and
differentiation
The Group has a customer proposition that appeals across a wide range of customer segments across the
United Kingdom and is focused on simplicity, value, personalisation and differentiation. Simplicity is core
to the Group’s proposition, with the Group undertaking split testing to simplify and improve the online
booking process and offer clarity and transparency. These tests are based on customer insight and are
prioritised by the Group according to what changes to the technological platform are likely to have the
greatest effect on customer conversion rates and revenue.
In terms of value, the Group offers competitively priced holidays on account of its low fixed-cost base and
ability to source a broad range of flights, hotels and ancillary products. The majority of flights are sourced
from the United Kingdom’s largest low cost carriers, with the Group’s pricing logic aiming to leverage
greater point of sale revenue. Furthermore, the Group’s recent initiatives, such as its direct contracting
system, have complemented third-party supply (particularly in hotel bookings).
The Group is also increasingly personalising the customer experience. Site visitor profiling is able to track
and record details of user interaction with the Group’s websites and targeted deals are provided to
customers according to their individual site visitor profile. Personalisation is integrated into the Group’s
CRM system for personalised email marketing campaigns both during the research period and
subsequently to drive repeat purchases and bookings. For example, the Group presents ‘‘personalised star
hotels’’ to customers looking at up to 15 facets of their search history and has experienced conversion rates
for these hotels which are up to three times higher than when the relevant hotels are not presented to
customers on a personalised basis.
The Group has developed a ‘‘Platinum’’ microsite which it can direct customers to through its
personalisation platform. The ‘‘Platinum’’ microsite has a more upmarket design than the Group’s
standard booking path and, through a combination of the ‘‘Platinum’’ microsite and the Group’s
personalisation platform, sales of luxury hotels by the Group have increased by 165 per cent. from the nine
month period ended 30 June 2014 to the nine month period ended 30 June 2015.
If a customer books more than defined number of days in advance of departure, the customer is able to
take advantage of the Group’s low deposit scheme. Currently the prescribed number of days is 45, however
management has the flexibility to amend this and has done so frequently in the past. When a low deposit
offer is in operation, a customer can secure his or her booking with a deposit which is a percentage of the
normal deposit level described above. The deposit paid by the customer is therefore typically lower than
the flight cost. This deposit is paid into the trust and released the following day. The Group pays the full
flight cost on booking and therefore funds the balance above the deposit from cash and debt facilities. The
remainder of the balance due from the customer is then payable normally 28 days after booking for the
flight cost and 14 days before departure date for hotel and other elements. The balance of the flight
deposit is released from the trust, and all other customer monies are held in trust until the customer
returns from holiday. This offer is in contrast to other OTAs, who typically charge customers the full
balance between 8 and 12 weeks prior to holiday departure. See paragraph 4 of Part 8 ‘‘Regulation’’.
50
These above factors underpin a differentiated customer proposition that is focused exclusively on beach
holidays, as a result of which branded and free traffic accounts for approximately 70 per cent. of all
bookings that are made. Furthermore, the Group has a strong Net Promoter Score of 67 (source: BDRC,
Holiday Trends Report, 2013) and repeat booking volumes have grown by 48 per cent. on a compounded
annual basis from the financial year ended 30 September 2011 to the financial year ended 30 September
2014, demonstrating the strength of the Group’s customer proposition in driving continued growth in
booking volumes. Repeat booking volumes were 45,652, 70,576 and 96,705 for the financial years ended
30 September 2012, 30 September 2013 and 30 September 2014, respectively.
Along with the Group’s strong Net Promoter Score, the Group has found that customer complaint ratios
have decreased from the financial year ended 30 September 2013 to the nine month period ended 30 June
2015 from 0.88 per cent. of total passengers to 0.86 per cent. of total passengers. The Board believes that
these complaint ratios are broadly comparable with those of its competitors.
Efficient business model supporting increased investment in demand generation
As a result of the Group’s agile, online technological platform and customer proposition, the Group
operates with a low fixed-cost base that enables it to allocate a larger portion of its revenue into marketing
spending in comparison to traditional tour operators, who often have a significantly higher fixed-cost base
as a result of their legacy ‘‘bricks and mortar’’ retail stores. In particular, the Group invests in non-branded
advertising initiatives such as Google and other pay-per-click mechanisms. This has resulted in the Group
taking a 31 per cent. share of generic beach holiday traffic in the United Kingdom on Google in May 2015
(as compared to Thomas Cook’s 9 per cent. share) (source: Google Analytics). As at 20 June 2015, the
Group had a 17 per cent. share of beach holiday keywords on a paid search (as compared to
lowcostholidays’ 11.1 per cent. share and Thomas Cook’s 4.9 per cent. share) (source: Hitwise). This drives
an increase in total traffic to the Group’s websites. For the period between the financial year ended
30 September 2012 and the financial year ended 30 September 2014, traffic growth to the Group’s websites
grew by a compound annual growth rate of 14 per cent. but fixed and variable costs as a percentage of
revenue fell at a compound annual growth rate of 14 per cent. In the same period, revenue per daily
unique visitor grew by a compound annual growth rate of 6 per cent. A positive virtuous circle is created
where customers migrate from using non-branded to branded advertising mechanisms to make further
repeat bookings, which further lowers the Group’s fixed-cost base and increases the operational
leveragability and efficiency of its business model.
Strong financial track record of growth, profitability and cash generation
The Group has a strong financial track record of growth, profitability and cash generation. From the
financial year ended 30 September 2012 to the financial year ended 30 September 2014, TTV grew at a
compound annual growth basis of 24.8 per cent., with revenue growing by 21.5 per cent. on the same basis.
These increases are the result of the Group increasing its UK market share, on account of increasing
overall online penetration in the UK market and a greater share of the online market being captured by
the Group.
The Group has also increased profitability over the last three financial years and maintains good EBITDA
margins (as a percentage of revenue) despite marketing investment to grow traffic share and continued
investment in IT, service and supply. From the financial year ended 30 September 2012 to the financial year
ended 30 September 2014, EBITDA grew at a compound annual growth basis of 19.2 per cent. The growth
in the year ended 30 September 2014 was affected by a £1 million investment into offline and direct
contracting which has accelerated the growth in EBITDA in the nine months to 30 June 2015, with
EBITDA growth year-on-year of 48.6 per cent. For the financial year ended 30 September 2014, EBITDA
margin (as a percentage of revenue) was 30.9 per cent. (33.1 per cent. excluding offline marketing spend).
Finally, the Group operates a cash generative business model that has favourable working capital
dynamics, as payment is received from customers when it is due to suppliers (except in the case of the
Group’s low deposit and pay later schemes). In addition, the Group has no stock commitment and,
therefore, does not make supplier pre-payments based on allocations.
51
5.
OBJECTIVES AND STRATEGY FOR THE GROUP
Continued evolution of the customer proposition
The Group intends to enhance the customer booking experience through the ongoing delivery of split
testing and trialling of changes and improvements, such as personalisation and further development of the
Group’s multi-device capabilities.
The Group has licenced third-party software to review user videos and monitor customer behaviour to
determine the areas of its websites which are most frequently scanned by visitors, which support the
Group’s existing MI functionalities. In order to improve personalisation, it is intended that existing
customers will have accounts automatically created for them, whilst new features will also become available
to the Group’s account holders.
Personalisation of customer experience
Multi-device capabilities will be further developed through the employment of specialist staff, further
development of existing online tools and enhanced customer communication. Specialist staff will work to
enhance the 24-7 telephone hotline in order to increase customer satisfaction. A number of existing online
tools are being further developed. Notably, the Group intends to develop its ‘‘Mobile Manage Your
Booking’’ system and products to enhance customers’ pre-trip experiences (including auto check-in for
flights and auto-appending ancillaries post-booking). Finally, the Group intends to improve customer
communication through developing a pre-trip programme, SMS Day of Departure feature and Post Trip
CRM Programme, all of which will be measured through Net Promoter Score and Feefo customer
satisfaction scores.
Leverage revenue performance
The Board believes that a number of opportunities exist to further leverage revenue per booking to
enhance profitability. These opportunities include investment into the Group’s direct contracting system to
dis-intermediate third-party suppliers of beds and the implementation of flexible payment terms offered to
customers, as well as increasing levels of existing and new ancillary products.
The Group’s direct contracting system represents a significant opportunity to increase revenue, as it
removes the necessity to source bed supply through third-party intermediaries that charge a margin on
each customer transaction. The Group can leverage higher revenues through prompt payment mechanisms
to hoteliers without affecting the Group’s operating cash flows. The Group has identified and is focusing
on properties that provide the highest revenue in each destination. The Board believes that the Group is
well positioned to scale its direct contracting system so as to achieve a net margin contribution of
£7.9 million in the financial year ended 30 September 2019.
Furthermore, the Group intends to continue to offer flexible payment options for customers prior to them
departing on holiday. This enables customers to pay their total booking price in instalments, through which
the Group plans to charge fees that increase the revenue per booking.
The Group intends to launch two new flexible payment options for customers, being ‘‘Pay Later’’ and
‘‘Hold that Price’’. ‘‘Pay Later’’ will target late booking customers, who will be provided with credit from
Paypal until the relevant holiday is paid in full, while ‘‘Hold that Price’’ will target early booking customers,
allowing them to reserve a holiday for a finite period of time for a small fee.
Enhancement of the Group’s bid modelling tool and app launch to increase market share of total
traffic
The Group intends to enhance its bid modelling tool to enable it to recognise the same user across
different devices, such as desktop and tablet. In addition, work has been undertaken on the Group’s bid
modelling tool to be able to analyse customer trends more closely and understand the effect of individual
keywords and campaigns.
Furthermore, the Group intends to continue to invest in offline advertising in order to drive brand
awareness and reduce reliance on non-brand paid search activity. This offline advertising will be supported
by an integrated and personalised CRM programme with the aim of increasing the level of repeat
bookings.
52
Finally, the recent launch by the Group of iOS and Android apps has enabled customers to gain access to
the Group’s brand throughout the whole holiday booking process and increase their level of brand
engagement at each stage of the booking cycle. In addition, the Group expects that diversion of increasing
levels of traffic towards its apps will result in a reduction in overall marketing spending and offer the
Group opportunities to increase revenue by selling ‘in-resort’ products to its customers.
The Group’s share of market traffic to its websites has grown at a compound annual growth rate of
12.9 per cent. over the period between the financial year ended 30 September 2012 and the financial year
ended 30 September 2014, with a compound annual growth rate of 14.4 per cent. more daily unique visitors
to the Group’s websites over that same period (source: Hitwise).
Continued expansion in Sweden and launch in further markets outside the United Kingdom
The Group intends to expand its business model in certain other European markets to address the
EUR 55 billion package holiday market opportunity in Belgium, Denmark, France, Germany, Italy,
Netherlands, Norway, Spain and Sweden (source: Euromonitor, Off and Online Intermediaries Sales by
Market). The Group entered the Swedish market in early 2015 and proposes to expand into Norway and/or
Denmark, given certain similarities between the UK and Scandinavian package holiday markets. These
similarities include a strong and growing dynamic packaged holiday market, forecast low-cost carrier
penetration growth and high consumer propensity to book package holidays online (source: Euromonitor,
Off and Online Intermediaries Sales by Market; Euromonitor, Online Sales by Market).
The Group’s expansion programme into Sweden required an upfront outlay in development, content and
marketing resource, which the Board estimates will total approximately £3 million. The Board estimates it
will take two to three years to reach the break-even point with a payback period of four to five years
post-entry. The majority of investment into the Swedish proposition is variable marketing expenditure and
the Group expects to leverage its core competencies from the United Kingdom (including paid search
efficiencies and the ability to leverage conversion and revenue from a growing number of daily unique
visitors). Should the Swedish expansion progress as expected, the intention is to expand into Norway
and/or Denmark in the short term, followed by two further markets in Central and/or Northern Europe in
the short to medium term.
6.
MARKETING
The Group’s marketing activities focus principally on three areas: customer acquisition through online
channels, brand awareness and repeat bookings.
Marketing activities aim to drive high-quality traffic to the Group’s websites but also support phone
bookings through the Group’s contact centre. The Group is now the third most well-known brand for
beach holidays in the United Kingdom, with a 14 per cent. spontaneous awareness score. The proportion
of traffic coming to the Group’s websites from branded, free and direct sources is increasing and, in the
nine month period to 30 June 2015, represented 55 per cent. of overall traffic mix (compared to 52 per
cent. for the nine month period to 30 June 2014) (source: Google Analytics, Mediacom, ontheBeach.co.uk
Brand Tracking Results, 23rd March 2015).
Customer acquisition
The Group acquires customers from the following principal sources:
Branded and free traffic
Branded and free traffic includes:
•
paid online advertising whereby search-engine providers are paid (on a cost-per-click basis) to display
sponsored links to the Group’s websites at the top of search results for certain keywords, including
branded search terms such as ‘‘On the Beach’’ or ‘‘OntheBeach.co.uk’’ (‘‘Paid-for Branded Traffic’’);
•
customers typing in the URL of one of the Group’s websites (e.g. ‘‘onthebeach.co.uk’’) directly into an
internet browser’s address bar and/or customers being directed to the Group’s websites through email,
such as clicking on a link on the Group’s email newsletters (‘‘Direct Traffic’’);
•
customers being directed to the Group’s websites by the natural search results of search engines
(‘‘Organic Traffic’’);
53
•
customers being directed to the Group’s websites through social media, such as by clicking on a link
on the Group’s Facebook page or Twitter page (‘‘Social Traffic’’); and
•
customers downloading and being directed to the Group’s apps (‘‘Mobile Apps traffic’’).
Paid-for Branded Traffic
Paid-for branded traffic is a crucial factor in driving down the costs of customer acquisitions, as the Group
pays less per click for branded searches as there is less demand in the bidding process from competitors for
these terms. The Group has historically committed significant resources to paid online advertising, which
the Board believes increases paid-for branded traffic.
Direct Traffic
The Group’s brand recognition attracts a high volume of traffic to its websites and, in the nine month
period to 30 June 2015, the proportion of traffic coming to the Group’s websites from branded, free and
direct sources represented 55 per cent. of overall traffic mix. Direct Traffic helps to deliver more revenue
for the Group as customer acquisition costs are lower, with the Group paying fewer fees to search engines
in respect of such visitors (source: Google Analytics).
Organic Traffic and Social Traffic
The Group carries out search engine optimisation to improve the rankings of the Group in search engines’
natural search results through modifications of design or content on the actual website pages, which
includes optimising the use of tags and keywords within each webpage, tagging videos and images and
using descriptive language, URLs and site maps.
Furthermore, the Group has improved its brand visibility and customer engagement through the effective
utilisation of social media, and currently has over 217,000 Facebook followers, 92,000 Google Plus
followers and 35,000 Twitter followers.
Mobile Apps Traffic
The Group’s Mobile Apps Traffic is currently sourced from iOS and Android devices for smartphones and
tablets. By 30 June 2015, the Group’s app downloads had exceeded 260,000 (source: iTunes Apple Store MI).
Mobile apps represent three per cent. of total traffic to the Group’s websites and approximately two per
cent. of its total bookings.
Non-Branded Traffic
Non-branded traffic includes:
•
generic paid online advertising whereby search-engine providers are paid (on a cost-per-click basis) to
display sponsored links to the Group’s websites at the top of search results for certain keywords and
generic search terms such as ‘‘family holidays’’ and are paid (on a cost-per-click basis) to display
retargeting adverts on search engines and targeted adverts on social media sites (‘‘Non-Branded Paid
Traffic’’);
•
customers being directed to the Group’s website through price comparison websites such as
TravelSupermarket and TripAdvisor (‘‘Meta Traffic’’); and
•
customers being directed through affiliate content websites such as Quidco and TopCashback
(‘‘Affiliate Traffic’’).
Non-Branded Paid Traffic
The Group uses internet search engines, principally through the purchase of travel-related keywords, in
particular on Google, to generate traffic to the Group’s websites. The cost of travel-related keywords
consists of anticipating what words and terms consumers will use to search for travel on internet search
engines and then bidding on those words and terms in the applicable search engine’s auction system. The
Group bids against other advertisers for preferred placement on the search engine’s results page. The
Group monitors, using robust MI and analytic tools, the return on investment of travel-related keywords so
that those non-branded search terms that result in the highest return per click are prioritised in the bidding
process.
54
Personalised direct communications
The Board believes the Group has a clear understanding of its UK customers through robust MI and
analytical tools. The Group tags its UK customers with a third-party socio-demographic code, based on UK
postcode, which allows the Group to recognise repeat customers moving through life stages and drives an
understanding of customers who make repeat purchases. The Group also analyses the search and order
history that customers or prospective customers have made on its websites and mobile platforms (e.g. the
star rating of hotels, flight destinations, price points etc.) which enables it to provide customers with
relevant product options when returning to the Group’s websites or through direct email campaigns. The
Group’s understanding of its customers helps to drive effective traffic shaping and improved revenue.
Offline advertising
The Group’s historic advertising efforts have focused primarily on online digital marketing. The Board
believes that continued investment (both online and offline) is important to retaining and expanding the
Group’s market share.
The Group commenced a twelve-week TV campaign in the Midlands region on 26 December 2013. During
the TV campaign, the Group’s prompted brand awareness in the Midlands region rose from a pre-TV
advertising score of 21 per cent. to 39 per cent. during the TV advertising campaign (source: Mediacom,
ontheBeach.co.uk Brand Tracking Results, 23rd March 2015).
The TV campaign was extended in March 2014 to the North West region and Scotland. In addition, the
Group increased its existing expenditure on advertising in the Midlands region. During this phase of TV
advertising, the Group’s year-on-year bookings for the North West region, Scotland and the Midlands
region outperformed other regions in the United Kingdom and this continued following the conclusion of
the TV advertising (with the Group’s year-on-year bookings for the TV advertising regions averaging
36 per cent. compared to 17.7 per cent. for other regions during the period from 15 March 2014 to
31 August 2014).
The Group continued with a £1.5 million investment in a TV campaign which commenced on 26 December
2014 and ended on 14 February 2015. More regions were targeted in this campaign, including Mid-West
England (the Midlands, HTV West, Central and South-West regions), North England (the Granada,
Yorkshire and Border regions) and Scotland (the North and Central regions).
The Group experienced a seven per cent. increase in bookings for the nine month period ended 30 June
2015 in those regions exposed to TV advertising for the first time compared to those regions where there
was no TV advertising. The Group generated a three per cent. increase in spontaneous brand awareness
from 11 per cent. to 14 per cent., which placed the Group as the third most recognised brand for beach
holidays in the United Kingdom (source: Mediacom, ontheBeach.co.uk Brand Tracking Results, 23rd March
2015).
The Board believes that regional and national TV advertising will increase brand awareness and accelerate
branded searches. The Group is planning a national campaign for the financial year ending 30 September
2016 that will include the London and Meridian regions, with investment in offline advertising expected to
be an amount equal to 2.5 per cent. of revenue margin for the financial year ended 30 September 2016.
The Board expects to deliver a positive return from TV advertising activity over the next 24 months. The
Group also intends to expand its targeted offline marketing activities to include outdoor advertisements,
radio and social media.
Repeat customers
The Group has implemented and continues to implement a strategy for attracting repeat customers. The
Group has experienced increased customer loyalty over the last three financial years, which has been
demonstrated by customers purchasing additional holidays after their first purchase.
Repeat customers (defined as customers who had made a previous purchase from the Group using the
same email address in the previous five calendar years) accounted for 20.5 per cent. of the Group’s
bookings volumes for the year ended 30 September 2011, compared to 30.4 per cent. for the year ended
30 September 2014 and representing a compound annual growth rate of 48.8 per cent. The percentage of
total customers that are repeat customers has increased notwithstanding growth in new customers during
these periods. Repeat booking volumes were 45,652, 70,576 and 96,705 for the financial years ended
30 September 2012, 30 September 2013 and 30 September 2014, respectively.
55
The Group has implemented and continues to implement a strategy for attracting repeat customers by
aiming to provide excellent customer service supported by increased personalisation. Repeat customers are
a key driver of customer acquisitions from unpaid and lower cost sources, such as natural and branded
search results, thereby lowering the Group’s per booking customer acquisition costs.
7.
BOOKING CHANNELS
The Group’s customers can book their flights, hotels and other supplementary products through various
channels and the Group’s integrated platforms enables them to dynamically package these constituent
parts into a bespoke holiday. The vast majority of the Group’s bookings are processed online and can be
completed either on a desktop or laptop computer through its websites, on a mobile device such as a
smartphone or tablet, or on the Group’s iOS or Android apps. In addition, for the nine month period to
30 June 2015, approximately 6 per cent. of the Group’s bookings were processed offline by its contact
centre operations. The Group’s contact centre operations primarily deal with customers from its websites
who have specific requests, such as multi-family bookings where one family wants half board and the other
family wants full-board but would like to book together to be sure they are on the same flight and at the
hotel for the duration of their stay.
Desktop and laptop computer bookings
The Group operates three branded domains, being onthebeach.co.uk, onthebeachtransfers.co.uk and
ebeach.se. Its websites have been designed to provide a simple and personalised experience to customers
and are reviewed and upgraded regularly.
Using the Group’s websites, customers can easily and quickly review the pricing and availability of all of
the Group’s services and products, evaluate and compare options and book and purchase such services and
products online within minutes and in a variety of languages, including English and Swedish.
Typically, a transaction using one of the Group’s websites involve the following steps:
Landing page. The customer is directed to a landing page on the Group’s website, which is relevant to the
keyword term he or she searched for using a search engine or which the Group’s MI and analytical tools
have provided.
Search and select flight. A customer conducts a search for flights based on the city of departure and
destination, dates of travel and flexibility. The Group’s websites’ search capabilities employ scalable search
and routing logic that return comprehensive results without increasing search response times. The Group’s
web-based booking engines have been designed to cache data from its suppliers’ systems in order to deliver
near real-time information to customers.
Search and select hotel. The Group’s websites display to the customer matching selections that are available
in a user-friendly format listed in pricing order and that also provide the customer with available special
offers or provide additional information about the hotel. The Group’s websites allow customers to sort or
refine search results by further defining certain parameters, including: price range, preferred hotel, star
rating, board basis (e.g. all inclusive, full board etc.) and hotel amenities (e.g. air conditioning, by the beach
etc.).
Review. After a customer has selected its flight and hotel, the Group’s websites provide the customer with
an opportunity to review the details of the dynamically packaged holiday being purchased and the terms
and conditions of such purchase. At this stage, the Group’s websites re-connect to the end suppliers or
intermediaries to confirm the availability and pricing of the products selected. Customers will also be
shown options to purchase transfers, extra baggage allowances and other ancillary services.
Payment. The Group offers its customers a variety of payment methods, including debit cards or credit
cards, in multiple currencies and the option to pay a deposit with the balance to follow in due course or to
pay the full amount in the first instance. The payment gateways for sales on the Group’s websites are
secured.
Confirmation. The customer is provided with a validation on screen and is sent an email with
confirmation of his or her purchase a few minutes after payment is accepted.
56
Mobile bookings
Over the past few years, mobile devices (including smartphones and tablets) have become an increasingly
important channel for customers to make holiday bookings, and the Board expects this trend to continue.
Interactions are no longer contained within a single moment in time or a single touch point thanks to the
increase in device accessibility—spanning smartphones, tables, laptops and desktop computers—and
convenient access to cloud-based services. The Board believes customers also increasingly plan and book
their journeys when they happen to have free time slots, irrespective of their immediate whereabouts and
mobile devices afford customers that convenience to make travel arrangement while on the go.
The Group is actively engaged in the design, rollout and improvement of applications for mobile devices.
In 2013, the Group launched its first mobile web browser. Since then, the Group has continuously
developed its websites for mobile devices. For the financial year ended 30 September 2014, 70 per cent. of
all mobile traffic to the Group’s websites originated from an iOS device. For the nine months ended
30 June 2015, the proportion of iOS device traffic as a percentage of all mobile traffic was 64 per cent.
(source: Google Analytics).
The Group also experienced significant increases in orders by customers using tablets and smart phones via
mobile optimised web browsers. Approximately 10.5 per cent. of the Group’s holidays were booked
through the Group’s smartphone mobile web browser device in the nine month period ended 30 June 2015,
compared with approximately 6.1 per cent. in the nine month period ended 30 June 2014.
Combining tablets and smartphones, these channels represented an average of 39 per cent. of all orders for
the financial year ended 30 September 2014 compared with an average of 24 per cent. for the financial year
ended 30 September 2013. Average order values and the time gap between booking and departing are
similar across platforms.
The Group launched its first iOS mobile app for smart-phone and tablet in September 2014. By 30 June
2015, the Group’s app downloads had exceeded 260,000 (source: iTunes Apple Store MI). Mobile apps
represent three per cent. of total traffic to the Group’s websites and approximately two per cent. of its total
orders. The Group launched its first Android app in July 2015.
The Board believes that a key step in improving the Group’s customer proposition is to fully integrate it
across multiple devices (e.g. desktops, laptops, tablets and smartphones). Over the financial years ended
30 September 2012, 30 September 2013 and 30 September 2014, customer conversion rates on
smartphones, desktops and tablets increased by 20 per cent., 22 per cent. and 22 per cent., respectively.
The Group plans to continue to develop specific software and applications under a variety of new
platforms and operating systems, which are generally expected by its customers to offer the same features
and to be as easily operated as desktop interfaces. This has required and will continue to require the
Group to make significant financial and operational investments to develop its proprietary systems.
Contact centre
Although a vast majority of the Group’s bookings are completed automatically without any human
intervention, its in-house contact centre located in Cheadle Heath, United Kingdom handles offline sales
and post-sales customer service support. Customers can call the contact centre seven days a week to
consult with dedicated sales representatives, receive comprehensive, near real-time product information
and make holiday bookings. Sales representatives in the contact centre are able to assist the Group’s
customers in several languages to cover its principal geographical markets, including English and Swedish.
The Group’s contact centre is equipped with systems which allow it to monitor the performance of its
representatives and they are remunerated according to clear key performance indicators. The Group
utilises software allowing it to log-on to customer calls to perform random checks on its contact centre on a
real-time basis. This system allows the Group to monitor the number of waiting calls and limit customer
aborted calls on its hotlines due to unacceptably long waiting times, helping the Group to maintain high
contact centre conversion and customer satisfaction scores. This feedback loop helps to enhance the
Group’s customer proposition and overall customer loyalty as evidenced by the Group’s strong Net
Promoter Score of 67 (source: BDRC, Holiday Trends Report, 2013).
8.
COMPETITION
The UK and European OTA markets include a wide range of public and private companies, some of which
have a clear regional focus while others operate across regions and worldwide. Market participants vying
57
for the same consumer travel spending as the Group include other OTAs, traditional (offline) travel
agencies and travel suppliers themselves, such as airlines, hotels and tour operators. The UK and
European travel market is, therefore, very competitive, although the competition is primarily from
companies that offer a different customer proposition to that of the Group. The principal competitors in
the Group’s market include:
OTAs
OTAs enable customers to purchase individual elements of a trip (such as a flight or a hotel) from various
providers. A distinction can be drawn between the Group and other OTAs in that they principally focus on
a single element rather than providing customers with a dynamically packaged holiday.
The European OTA sector is itself highly fragmented and competitive, with one in three beach holiday
bookings now being made via an OTA. Leading OTAs now feature strongly in the ATOL top ranking list
and, although beach holiday booking remains multi-channel, the role of the OTA is set to expand. (source:
Mintel, Beach Holidays—UK, January 2015)). While there are a number of global OTAs with brand
presence across multiple countries, each country has regional OTAs competing in their respective markets.
Traditional travel agencies (‘‘TTAs’’)
In the United Kingdom, where the Group generates most of its revenue, the majority of travel bookings
are still made through TTAs. TTAs provide pan-European beach package holidays but, unlike the Group,
do not typically provide customers with the ability to package these holidays dynamically. Instead, they
typically focus on providing traditional package holidays, which may lead to limited choice and flexibility
for customers (along with typically higher prices).
Other than TUI, Thomas Cook and Kuoni, TTAs are typically smaller than OTAs and therefore lack the
scale, brand recognition and technological resources often associated with OTAs. TTAs tend to have fewer
employees and rely more on manual processes that may not be as efficient as the automation used by many
OTAs. The presence of independent travel agencies has decreased over recent years, with many TTAs
being acquired by larger tour operators which lack independence and can be limited in the products that
they offer as a result.
Since their inception, OTAs have gained market share from TTAs on a gross bookings basis and the Group
expects this trend to continue. In the UK, the total number of travel intermediary outlets (including
currency exchange services) has been in decline over the period from 2008 to 2014, falling from 6,087 in
2008 to 4,995 in 2014. (source: Euromonitor, Number of Outlets).
Airline and hotel direct websites
Airlines and hotels are partners and suppliers of OTAs and have benefitted from cooperation since OTAs
began operating. However, airlines and hotels as suppliers have also tried to diversify their distribution
channels and acquire customers directly and, as such, may be seen as being competitors of OTAs with
regard to customer acquisition. Airline and hotel direct websites, like OTAs, have shown strong growth in
the past years.
The Board believes that airline and hotel direct websites pose less competition to the Group than more
traditional OTA models, as they look to sell flights or hotels on a single element basis and, therefore, do
not address the Group’s core market in providing customers with ability to book dynamically packaged
beach holidays. In addition, the hotels offered by the Group are typically independent hotels, rather than
large chains, and thus are more reliant on distributors in order to sell their products.
Pure metasearch companies
Metasearch companies, such as Tripadvisor, Travelsupermarket and Trivago, are distributors of OTAs. In
addition, Google has established Google Flights, a metasearch service in the United States and Europe.
Whilst metasearch companies source customers and send them to OTAs’ and suppliers’ websites to
complete a booking, offering a broad choice of products and the ability to compare prices, pure
metasearch companies do not aggregate for holidays, instead offering only single element bookings.
58
9.
INFORMATION TECHNOLOGY SYSTEMS
The Group has invested £11.6 million over the last five years to develop its in-house technology platform
which it launched in 2011, having previously relied on a platform developed and run for the Group by a
third-party technology solution provider. The new platform gives the Group flexibility and agility, which
was not possible with its previous solution.
IT architecture
The Group has proprietary technologies which provide high levels of reliability, security and scalability and
which have been designed to handle high transaction volumes across all its websites. The Group’s
technologies include the following (each of which is described in further detail under the headings below):
•
the Group’s e-commerce platform;
•
the Group’s aggregation technology;
•
the Group’s split testing capabilities;
•
the Group’s bespoke MI platform;
•
the Group’s automatic monitoring of data by its service management team; and
•
the Group’s security monitoring software and fraud-detection systems.
The Board believes that the modularised, scalable and flexible architecture of the Group’s technologies
will allow the Group to develop ongoing improvements in functionality, sustain high growth and expand
rapidly to address new business opportunities.
E-commerce platform
The Group operates an increasingly robust e-commerce platform with highly efficient processes, focused
around the integration of search services, inventory sourcing, product customisation, dynamic pricing,
inventory management, booking, accounting/reporting, collection and payment. The platform allows the
Group to offer a wide variety of products sourced in close to real time from supplier systems and other
sources of product data. In addition, the platform allows the Group to complete a high percentage of
transactions automatically, thereby reducing the average cost per transaction. For certain travel product
suppliers, the Group’s booking system accesses their public websites directly using the Group’s aggregation
technology.
Aggregation technology
The Group has developed its own data aggregation technology which allows the Group to gather product
information directly from suppliers’ websites ready for display on the Group’s own websites. In some cases,
the data is not available through any other source. The Group’s technology provides it with a competitive
advantage as it allows the Group to collect supplier product data more frequently and also to collect data
tailored to its requirements. This, in turn, improves data accuracy which provides the Group’s customers
with the best possible prices whilst protecting revenue and reducing cancellation rates. It closely mimics the
behaviour of humans when accessing supplier websites, making it difficult to detect as automated activity
and, therefore, difficult to block.
The Group’s aggregation technology also allows for simultaneous searching of multiple suppliers and other
sources of data in real time to present to users a curated list of product information, availability and prices.
It uses multi-tiered caching for accelerated performance which manages and protects against slowdowns in
suppliers’ systems which could negatively affect the Group’s websites. Detailed product information is
captured to support advanced searches and sorting, filtering features and input prices are fed through
in-house pricing logic designed to allow granular control of pricing policies. Split testing of changes to
pricing and discounting is used to improve revenue whilst maintaining customer conversion rates. The
technology is easily extendable to support new product types as currently product lines are filtered to
‘beach only’ destinations, but supply is readily available for other trip types.
Split testing
The Group’s e-commerce platform has split testing capabilities built into its core functions for pricing as
well as user experience. Split testing is a process whereby the Group makes changes to pricing policies or
59
the user experience and exposes those changes to only a portion of users on its websites. The rest of the
users see an unaltered version of the websites and therefore constitute the control group for comparison.
The effect of the changes can then be measured by comparing the commercial performance of the test
group and the control group with detailed and close to real time analytics tools. All changes to the Group’s
websites are tested in this way, which gives the Group confidence that the regular improvements to its
websites are in fact delivering measurable benefit.
MI platform
The Group has built a bespoke MI platform using Microsoft SQL Server Business Intelligence tools as a
platform, which it developed in-house to meet the exact needs of the business. The MI platform has a wide
range of analytics tools and metrics to provide detailed and specific insight into the commercial
performance of, and user behaviour on, the Group’s websites. Example reports include conversion by
destinations searched on the websites and funnel analytics (reviewing the volume of searches that
commence on the home page and then complete with a booking). Additionally, most of the information is
generated in close to real time allowing early insight into the websites that are performing, which promotes
rapid and informed decision making. The MI platform is fully integrated into the Group’s split testing
technology and allows the Group to accurately and quickly understand the effect of changes made to the
user experience and pricing policies.
Service management
The Group’s service management team has created a range of management, monitoring and alerting tools
to ensure high service availability and optimise performance. The Group monitors third-party data with the
aim of improving the speed and quality of data and the performance of the Group’s internal systems.
Furthermore, the key performance indicators of the Group’s service management team are monitored with
data which is visible on wall boards, web tools and mobile devices.
The Group’s alerting system responds in real-time to issues and provides early warnings to service
management and live support teams through the delivery of the following functionalities:
•
around the clock incident management provides robust trouble-shooting and well defined escalation
processes;
•
post incident problem management identifies root causes and defines remedial actions where
necessary to prevent repeat incidents;
•
pre-emptive problem management is driven through trend analysis of key performance indicators
which predict reliability issues before they affect live service;
•
an active capacity management process ensures high platform performance and maintains scalability;
•
a continuous service improvement regime constantly looks for opportunities to improve performance;
and
•
high security infrastructure with regular vulnerability scanning in-house and by third parties supports
Payment Card Industry Data Security Standard compliancy.
Security
The Group is committed to protecting the security of its customers’ information. The Group’s information
security team is responsible for implementing and maintaining controls to prevent unauthorised users from
accessing the Group’s systems or to protect them from denial of services and other cyber-attacks. These
controls include the implementation of information security policies and procedures, security monitoring
software, access policies, password policies, physical access limitations and detection and monitoring of
fraud from internal staff. The Group also operates fraud detection systems which use transaction patterns
and other data sources seeking to prevent fraudulent transactions in real time.
10. REGULATION
The Group is subject to a number of laws and regulations, including those regarding ATOL and consumer
protection aspects such as price display, sales of packages, e-commerce and data protection. Further detail
of the regulatory landscape in which the Group operates is provided in Part 8: ‘‘Regulation’’.
60
11. SUPPLIER RELATIONSHIPS
An important component of the success of the Group’s business depends on its ability to maintain, expand
and further diversify its relationships with suppliers and partners to enable the Group to provide a wide
product offering through its websites to its customers. Access to market-leading flight inventory and
relevant, competitively priced hotels and ancillaries sourced directly and from third parties is material to
the Group’s current and future performance.
The Group operates under the agency model, meaning it acts as an agent for suppliers or consumers (as
appropriate) in booking flights, hotels and ancillary products rather than being the primary obligor. This
means that inventory and financial risk lies with the primary obligor rather than the Group.
Flights
The Group’s holiday sales are predominantly underpinned by low-cost airlines. Flight bookings which are
sourced and fulfilled through the Group’s websites are via non-contractual relationships using direct APIs,
intermediaries or the Group’s proprietary data aggregation technology, which allow the Group to gather
product information directly from suppliers’ websites and display them on the Group’s own websites.
In early 2013, the Group signed a contract with Travelport (a GDS service provider) that allows scheduled
and certain low-cost carrier seats to be searched for and booked through the GDS system. To date, due to
limited volumes of scheduled airline passengers, the Group does not receive material incentives from the
GDS provider.
In the nine month period to 30 June 2015, flights accounted for 48 per cent. of the Group’s TTV and
generated a revenue margin for the Group of 3.3 per cent.
Hotels
The Group has entered into a number of agreements with hotel suppliers (primarily independent hotels or
small hotel chains) and supplier intermediaries that are short-term and provide both counterparties with a
right to terminate on short notice or without notice. This currently includes seven partnerships with thirdparty bed-banks.
The Group receives commission from the sale of beds sourced from third-party bed-banks, the amount of
which varies by bed-bank provider. The Group receives incentives from its third-party bed-bank suppliers
based on the volume of bookings completed by the Group and such incentives are payable based on a
formula that requires a minimum level of sales. Incentive ratchets are in place should specific volume
thresholds be reached.
The Group has implemented an in-house function to contract directly with hotels (through ‘‘On the Beach
Beds’’), being its direct contracting system. Incremental revenue is available through the disintermediation
of third-party bed-banks (as no fee is payable to third-party bed-banks). The Board believes that
incremental revenue is also available through the Group’s direct contracting system as prompt payment to
hoteliers by the Group can result in hoteliers offering better rates.
The Group’s direct contracting system is based on relevant, high volume 3, 4 and 5 star hotels identified
through the Group’s in-house MI platforms. Contracts are negotiated by the Group’s team of hotel
contractors and maintained on its direct contracting system by an administration team. The Group’s direct
contracting system also connects directly to hotel channel management tools enabling access to the latest
offers and last-room availability, reducing the administration required to maintain relationships with
thousands of low volume hotel suppliers (known as the long-tail stock).
In the nine month period to 30 June 2015, the Group reached a 50 per cent. share with direct contracts
with 4 percentage points of incremental revenue as a percent of TTV. An increased investment to scale the
function in March 2014 delivered a £1.4 million revenue increase over the same period last year, which the
Board believes will allow the Group to increase revenue with a modest further investment in technology
and resource.
The Group’s direct contracting system is a key contributor to low-input prices and the ability to negotiate
advantageous contract terms with third-party bed-banks. The ability to disintermediate the third-party
bed-banks and provide prompt payment directly to the hotelier is a differentiator that the Board believes
will underpin future business and revenue growth.
61
In the nine month period to 30 June 2015, hotels accounted for 48.8 per cent. of the Group’s TTV. Over
this same period, hotels booked through the Group’s direct contracting system generated a revenue margin
for the Group of 22.8 per cent. while other hotels generated a revenue margin for the Group of 18.6 per
cent.
Transfers
The Group operates an in-house transfer management system which enables customers to book coach and
taxi transfers with third-party providers for the journey from the airport to the hotel through the Group’s
website. This model benefits from a relatively low administration overhead compared to partnering with a
third-party provider and the ownership of the integration platform helps to maintain high standards of
customer service. The product is fully integrated into the Group’s online search service and included in the
Group’s websites in real-time, to help drive revenue both on the supply and customer side.
Revenue for the 12 months ended 30 June 2015 was £5.4 million and 66 per cent. of customers who book
flight and hotel products on the Group’s website also purchase a transfer. Over this same period, transfers
accounted for 2.5 per cent. of the Group’s TTV.
Insurance
The Group makes regulated sales of travel insurance through its websites as an appointed representative of
Maintenance Assist Limited. The travel insurance can only be sold alongside a holiday (or elements of a
holiday) and not on a standalone basis. The sale (and administration) of insurance is highly regulated,
further details of which can be found in Part 8: ‘‘Regulation’’ of this Prospectus.
The insurance product option was integrated into the Group’s websites in December 2014 and allows
customers to purchase the insurance product at the end of the booking path. In the nine month period to
30 June 2015, insurance has increased to a take-up rate of 16.4 per cent. and delivered an increase in
revenue per booking of 1 per cent.
Ancillary sales
Ancillary sales (excluding coach and private taxi transfers) have historically not been material to the
Group’s revenue performance. The Group relies on one principal white label sourcing partner for airport
parking and airport hotel bookings. In the nine month period to 30 June 2015, ancillary sales generated a
revenue margin for the Group of 44.7 per cent.
Following the Group’s launch of its iOS and Android apps, the Board believes there is a significant
opportunity to sell ‘in-resort’ ancillary products through mobile booking channels, which will drive further
revenue growth. The Group will be able to tailor the type of products it offers customers through its apps
on the basis of destination, hotel location, customer profile and other customer preference information it
has acquired during the booking process. The Group intends to start selling ‘in-resort’ products in the short
to medium term via its mobile app.
12. INTELLECTUAL PROPERTY
The Group’s intellectual property rights include trademarks and domain names associated with the name
‘On the Beach’, as well as other rights arising from agreements relating to its websites content and
technology. The Board regards the Group’s intellectual property as a factor contributing to its success. The
Group relies on trademark law, copyright law, trade secret protection, non-competition and confidentiality
agreements with its employees and some of its partners to protect its intellectual property rights.
The Group requires its employees to enter into agreements to keep confidential all information relating to
the Group’s customers, methods, business and trade secrets during and after their employment with the
Group. The Group’s employees are required to acknowledge and recognise that all inventions, trade
secrets, works of authorship, developments and other processes made by them during their employment
are the property of the Group. The Group has registered its material domain names and has full legal
rights over these domain names for the period for which such domain names are registered.
13. PROPERTY
The Group operates solely from its office in Park Square, Bird Hall Lane, Cheadle Heath, Stockport
SK3 0XN, United Kingdom.
62
14. EMPLOYEES
As at 22 September 2015 (being the latest practicable date prior to the publication of this Prospectus) and
as at 30 September 2014, the Group had 323 and 239 employees, respectively. The table below sets out the
number of employees of the Group as at 30 September 2012, 2013 and 2014 and 30 June 2015.
As at 30 September
2012
2013
2014
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information technology (including websites
developers) . . . . . . . . . . . . . . . . . . . . .
Marketing . . . . . . . . . . . . . . . . . . . . . . . .
Contact centre . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . .
................
and mobile platform
................
................
................
................
As at
30 June 2015
.....
33
23
29
36
.
.
.
.
30
9
71
25
42
11
74
27
55
17
92
46
63
26
147
51
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
The Group employs a number of temporary workers in its contact centre, with numbers fluctuating
throughout each year in line with the seasonality of holiday bookings. For the financial year ended
30 September 2014, the average number of temporary full time equivalent employees was 48.1 and, for the
nine month period ended 30 June 2015, this number reduced to 47.4.
15. INSURANCE
The Board believes the Group maintains insurance policies customary (including the terms of, and the
coverage provided by, such insurance) for the industry in which it operates to cover certain risks. The
Board considers the Group’s insurance coverage to be adequate both as to risks and amounts for the
business the Group conducts.
16. HEALTH AND SAFETY
Employee health and safety is of high importance to the Group and specific employees are responsible for
implementing the Group’s health and safety policies at the Group’s workplace (including those relating to
fire safety and first aid). Such policies are regularly reviewed and updated to take account of new
legislative requirements and best practice as well as to reflect new or increased health and safety risks.
63
PART 6
DIRECTORS, SENIOR MANAGEMENT AND CORPORATE GOVERNANCE
1.
DIRECTORS
The following table lists the names, dates of birth, positions and dates of appointment as a director for
each Director:
Name
Date of birth
Position
Date appointed
as a Director
Richard Segal . . . . . . . . . . . . . . . . .
20 May 1963
Chairman(1)
17 August 2015
Simon Cooper . . . . . . . . . . . . . . . . .
2 July 1972
Chief Executive Officer
17 August 2015
Wendy Parry . . . . . . . . . . . . . . . . . .
17 October 1961
Chief Financial Officer
17 August 2015
Lee Ginsberg . . . . . . . . . . . . . . . . . .
31 August 1957
Non-Executive Director
17 August 2015
David Kelly . . . . . . . . . . . . . . . . . . .
23 September 1963
Non-Executive Director
28 August 2015
(1)
Richard was appointed as a director of the Company on 17 August 2015, but his position as Chairman is not effective until
Admission.
The business address of all of the Directors is Park Square, Bird Hall Lane, Cheadle Heath, Stockport
SK3 0XN, United Kingdom.
The management expertise and experience of each of the Directors is set out below:
Richard Segal (Chairman)
Richard Segal is currently a director of the Company and will be Chairman of the Company with effect
from Admission. He is also Chairman of HostelWorld Group and Encore Tickets. Previously, Richard was
Chairman for Esporta and Barratts PriceLess, a founding partner of 3i Quoted Private Equity, a
non-executive director at The Kyte Group, Chief Executive Officer at PartyGaming Plc and Odeon
Cinemas (where he led a management buy-out from the Rank Group) and Managing Director of Rank
Group’s entertainment sector. He holds a BA in economics from Manchester University and is a member
of the Institute of Chartered Accountants of England and Wales.
Simon Cooper (Chief Executive Officer)
Simon Cooper is founder of the Group and Chief Executive Officer of the Company. He began his career
in the travel industry while attending university, when he founded a ski company called On the Piste. He
focused the business towards groups of students wanting to go on budget-friendly ski holidays to the
French Alps via coach. Simon Cooper operated On the Piste from 1996 to 2008. Meanwhile, in 2004,
Simon began work on a new venture: On the Beach.
Wendy Parry (Chief Financial Officer)
Wendy Parry joined the Group in April 2010 as Chief Financial Officer. Wendy qualified as a chartered
accountant at KPMG and, before joining the Group, she held a wide variety of senior commercial,
financial and operational roles within large private and listed companies. She has held Managing Director,
Commercial Director and Finance Director roles at divisions of Holidaybreak plc, she was Finance
Director at Booker Foodservice Ltd and Liverpool John Moores University and she was Group Chief
Accountant of Courtaulds Textiles plc.
Lee Ginsberg (Non-Executive Director)
Lee Ginsberg joined the Company in August 2015 as Senior Independent Non-Executive Director and
Chairman of the Audit Committee. He is a Chartered Accountant by profession and was previously Chief
Financial Officer of Domino’s Pizza Group plc. Prior to his role at Dominos Pizza Group plc, Lee held the
post of Group Finance Director at Health Club Holdings Limited, formerly Holmes Place plc, where he
also served for 18 months as Deputy Chief Executive. Lee is a non-executive director and Chairman of the
Audit and Risk Committee of Mothercare plc and is a non-executive director and Chairman of the Audit
and Risk Committee of Trinity Mirror plc. Lee is also the non-executive Deputy Chairman, senior
independent director and Chairman of the Audit Committee of Patisserie Valerie Holdings plc.
64
David Kelly (Non-Executive Director)
David Kelly joined the Company in August 2015 as a Non-Executive Director and Chairman of the
Remuneration Committee.
David was previously the Operations Director at Amazon from 1998 to 2000, the Chief Operating Officer
at Lastminute.com from 2000 to 2003 the Vice President, Operations/Chief Operating Officer at eBay
from 2003 to 2007 and Senior Vice President of International at Rackspace from 2010 to 2012. In 2007,
David co-founded mydeco.com and, more recently, has built a wide portfolio of non-executive and advisory
positions—including Chairman/Non-Executive Director of Love Home Swap, Pure 360 and Car Loan 4U.
2.
SENIOR MANAGERS
The Company’s Senior Managers, in addition to the Executive Directors listed above, are as follows:
Name
Date of birth
Position
Date appointed
as an Employee
of the Group
Alistair Daly . . . . . . . . . . . . . . .
13 April 1970
Chief Marketing Officer
10 June 2008
Jonathan Smith . . . . . . . . . . . . .
12 November 1970
Chief Technology Officer
16 November 2009
William Allen . . . . . . . . . . . . . .
4 September 1965
Supply Director
24 March 2014
Oliver Garner . . . . . . . . . . . . . .
20 June 1980
International Director
1 October 2014
Kirsteen Vickerstaff . . . . . . . . . .
28 March 1979
General Counsel and
Company Secretary
11 June 2015
The management expertise and experience of each of the Senior Managers is set out below:
Alistair Daly (Chief Marketing Officer)
Alistair Daly is Chief Marketing Officer for the Group with responsibility for demand generation, online
conversion, repeat purchase and ongoing management of the customer service function as well as forward
looking brand strategy. Previously, Alistair was Marketing Director at Lastminute.com and has over
20 years marketing and advertising experience with brands such as Prudential, HSBC and VisitBritain.
Jonathan Smith (Chief Technology Officer)
Jonathan Smith is Chief Technology Officer for the Group with responsibility for the ongoing development
and management of all aspects of the Company’s technology platform and infrastructure as well as the
Group’s forward-looking technology strategy. Previously, Jonathan was IT Director at
Moneysupermarket.com and a senior technology and systems management consultant for Azlan plc.
Jonathan spent his early career as a software developer and database systems consultant.
William Allen (Supply Director)
William Allen is the Supply Director for the Group with responsibility for all sourcing and operations of
accommodation, flight, transfer and ancillary suppliers including the Group’s direct contracting system.
Previously, William was Managing Director at bedbank On Holiday Group and Overseas Purchasing
Director for MyTravel UK. William has 25 years of experience negotiating and managing supplier
relationships in the short-haul beach market.
Oliver Garner (International Director)
Oliver Garner is the International Director of the Group, responsible for leading the strategic, operational
development and performance of the Group’s international business. Oliver joined the Group in 2014 from
Expedia Inc, where he was Marketing Director EMEA, responsible for business performance in the
United Kingdom and Ireland, Nordics and new and emerging markets. Oliver has also held senior
managerial roles in both TUI and Thomas Cook, focusing particularly on their online channels of
distribution.
65
Kirsteen Vickerstaff (General Counsel and Company Secretary)
Kirsteen Vickerstaff is General Counsel and Company Secretary for the Group and is a solicitor with over
10 years post-qualification experience. She qualified at Squire Sanders in corporate finance where she
advised private and listed companies on mergers and acquisitions, private equity, initial public offerings,
reverse takeovers, company law and company secretarial matters. Prior to joining the Group, she was
Senior Legal Counsel for Phones 4u and its group (including an insurance business) where she handled all
legal matters for the Group including contracts, compliance and regulatory issues, governance and
company secretarial matters.
3.
CORPORATE GOVERNANCE
The Board is committed to the highest standards of corporate governance and to maintaining a sound
framework for the control and management of the Group.
3.1 The Board
The Board is responsible for leading and controlling the Group and has overall authority for the
management and conduct of the Group’s business, strategy and development. The Board is also
responsible for ensuring the maintenance of a sound system of internal control and risk management
(including financial, operational and compliance controls and for reviewing the overall effectiveness of
systems in place) and for the approval of any changes to the capital, corporate and/or management
structure of the Group.
3.2 Overview of compliance with corporate governance and requirements
Board and committee independence
The UK Corporate Governance Code recommends that, other than in the case of a UK listed company
that is a ‘‘smaller company’’ (as defined in the UK Corporate Governance Code as being a company that is
below the FTSE 350, as the Company is expected to be), at least half the board of directors of a UK listed
company, excluding the chairman, should comprise non-executive directors determined by the Board to be
independent in character and judgement and free from relationships or circumstances which may affect, or
could appear to affect, the director’s judgement. The UK Corporate Governance Code recommends that a
‘‘smaller company’’ should have at least two independent non-executive directors. As of the date of this
Prospectus, the Board consists of two Non-Executive Directors (excluding the Chairman) and two
Executive Directors. The Company regards both of the Non-Executive Directors ‘‘independent
non-executive directors’’ within the meaning of the UK Corporate Governance Code and free from any
relationship that could materially interfere with the exercise of their independent judgement. The Board is
satisfied that this is the case notwithstanding the fact that both Non-Executive Directors are also
non-executive directors of Trinity Mirror plc.
The UK Corporate Governance Code recommends that the chairman of a company admitted to the
premium listing segment of the Official List should meet the independence criteria set out in the UK
Corporate Governance Code. The Board regards Richard Segal as an ‘‘independent non-executive
director’’ within the meaning of the UK Corporate Governance Code. In reaching this determination, the
Board has had regard to: (i) Richard’s shareholding in OTB Topco (to be in the Company following the
Reorganisation); and (ii) the material business relationships he has developed within the Group over his
tenure as Non-Executive Chairman of OTB Topco since October 2013. The Board is satisfied with the
judgment, experience and approach adopted by Richard and has determined that Richard is of
independent character and judgment, notwithstanding the circumstances described at (i) and (ii) above.
Senior Independent Director
The UK Corporate Governance Code recommends that the board of directors of a company with a
premium listing on the Official List should appoint one of the Non-Executive Directors to be the Senior
Independent Director to provide a sounding board for the chairman and to serve as an intermediary for
the other directors when necessary. The Senior Independent Director should be available to shareholders
if they have concerns which contact through the normal channels of the Chairman, CEO or other
Executive Directors has failed to resolve or for which such contact is inappropriate. Lee Ginsberg has been
appointed Senior Independent Director.
66
3.3 Board committees
As envisaged by the UK Corporate Governance Code, the Board has established three committees: an
Audit Committee, a Nomination Committee and a Remuneration Committee.
Audit Committee
The Audit Committee assists the Board in discharging its responsibilities with regard to financial reporting,
external and internal audits and controls, including reviewing and monitoring the integrity of the Group’s
annual and interim financial statements, reviewing and monitoring the extent of the non-audit work
undertaken by external auditors, advising on the appointment of external auditors, overseeing the Group’s
relationship with its external auditors, reviewing the effectiveness of the external audit process and
reviewing the effectiveness of the Group’s internal control review function. The ultimate responsibility for
reviewing and approving the annual report and accounts and the half-yearly reports remains with the
Board. The Audit Committee will give due consideration to laws and regulations, the provisions of the UK
Corporate Governance Code and the requirements of the Listing Rules.
The UK Corporate Governance Code recommends that an audit committee should comprise at least three
members who are Independent Non-Executive Directors (other than the Chairman), and that at least one
member should have recent and relevant financial experience. The Audit Committee will be chaired by
Lee Ginsberg, and its other members will be David Kelly and Richard Segal. The Directors consider that
Lee Ginsberg has recent and relevant financial experience. The Audit Committee will meet not less than
two times a year.
The Audit Committee has taken appropriate steps to ensure that the Auditors are independent of the
Company and obtained written confirmation from the Auditors that they comply with guidelines on
independence issued by the relevant accountancy and auditing bodies.
Appointments to the Audit Committee will be made by the Board, on recommendation by the Nomination
Committee. Appointments to the Audit Committee will be for a period of up to three years and may be
extended for further periods of up to three years, provided the Director whose appointment is being
considered still meets the criteria for membership.
When appropriate, the Audit Committee will meet with the Group’s senior managers in attendance. The
Audit Committee will also meet separately at least once a year with the Group’s external and internal
auditors without management present. From Admission, the chairman of the Audit Committee will be
available at annual general meetings of the Company to respond to questions from Shareholders on the
Audit Committee’s activities.
Nomination Committee
The Nomination Committee will assist the Board in discharging its responsibilities relating to the
composition and make-up of the Board and any committees of the Board. It will also be responsible for
periodically reviewing the Board’s structure and identifying potential candidates to be appointed as
Directors or committee members as the need may arise. The Nomination Committee will be responsible
for evaluating the balance of skills, knowledge and experience and the size, structure and composition of
the Board and committees of the Board, retirements and appointments of additional and replacement
Directors and committee members and will make appropriate recommendations to the Board on such
matters.
The UK Corporate Governance Code recommends that a majority of the members of a nomination
committee should be Independent Non-Executive Directors. The Nomination Committee will be chaired
by Richard Segal, and its other members will be Lee Ginsberg and David Kelly. The Nomination
Committee will meet not less than twice a year.
From Admission, the Nomination Committee will also generate a report to be included in the Company’s
annual report. This will describe the activities of the Nomination Committee, including the process used to
make appointments and explain if external advice or open advertising has not been used.
Remuneration Committee
The Remuneration Committee will assist the Board in determining its responsibilities in relation to
remuneration, including making recommendations to the Board on the Company’s policy on executive
remuneration, including setting the over-arching principles, parameters and governance framework of the
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Group’s remuneration policy and determining the individual remuneration and benefits package of each of
the Executive Directors and the Company secretary. The Remuneration Committee will also ensure
compliance with the UK Corporate Governance Code in relation to remuneration wherever possible.
The UK Corporate Governance Code, as it will apply to the Company on Admission, provides that a
remuneration committee should comprise at least two members who are Independent Non-Executive
Directors (other than the Chairman). The Remuneration Committee will be chaired by David Kelly, and
its other members will be Lee Ginsberg and Richard Segal. The Remuneration Committee will meet not
less than twice a year.
Appointments to the Remuneration Committee will be made by the Board, on recommendation by the
Nomination Committee. Appointments to the Remuneration Committee will be made for a period of up to
three years, which may be extended for further periods of up to three years, provided the Director whose
appointment is being considered still meets the criteria for membership.
4.
SHARE DEALING CODE
The Company has adopted, with effect from Admission, a code of securities dealings in relation to the
Shares which is based on, and is at least as rigorous as, the model code as published in the Listing Rules.
The code adopted will apply to the Directors and other persons discharging managerial responsibilities
within the Group. The Directors will take all reasonable steps to secure compliance.
5.
RELATIONSHIP AGREEMENT
On 23 September 2015, the Company and Inflexion entered into the Relationship Agreement. The
principal purpose of the Relationship Agreement is to ensure that the Company will be capable of carrying
on its business independently of Inflexion for so long as Inflexion (together with its concert parties) holds a
Controlling Interest.
Pursuant to the Relationship Agreement (and for so long as Inflexion holds a Controlling Interest):
(i) the parties shall procure that all transactions and relationships between the Company and any
other member of the Group and Inflexion (or any of its associates) are conducted at arm’s length
and on normal commercial terms; and
(ii) Inflexion shall (and shall procure that each of its associates shall), amongst other matters: (i) not
take any action that would have the effect of preventing the Company from complying with its
obligations under the Listing Rules; and (ii) not propose or procure the proposal of a shareholder
resolution which is intended or appears to be intended to circumvent the proper application of
the Listing Rules.
The Relationship Agreement will be effective as from Admission and remain in effect for so long as:
(i) Inflexion (and/or any of its associates or concert parties) holds a Controlling Interest; and
(ii) the Ordinary Shares are admitted to the premium listing segment of the Official List maintained
by the FCA.
Following Admission, for so long as there is a controlling shareholder (as defined in the Listing Rules), the
Articles allow for the election or re-election of any independent director to be approved by separate
resolutions of (i) the Company’s shareholders and (ii) the Company’s shareholders excluding any
controlling shareholder. If either of the resolutions is defeated, the Company may propose a further
resolution to elect or re-elect the proposed independent director, which (a) may be voted on within a
period commencing 90 days and ending 120 days from the original vote, and (b) may be passed by a vote of
the shareholders of the Company voting as a single class. Furthermore, in the event that the Company
wishes the FCA to cancel the listing of the Shares on the premium listing segment of the Official List or
transfer the Shares to the standard listing segment of the Official List, the Company must obtain at a
general meeting the prior approval of (y) a majority of not less than 75 per cent. of the votes attaching to
the shares voted on the resolution, and (z) a majority of the votes attaching to the shares voted on the
resolution excluding any shares voted by a controlling shareholder. In all other circumstances, controlling
shareholders have and will have the same voting rights attached to the Shares as all other shareholders.
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PART 7
REASONS FOR THE OFFER, USE OF PROCEEDS, DIVIDENDS AND DIVIDEND POLICY
1.
REASONS FOR THE OFFER
The Board believes that the Offer and Admission will position the Group for its next stage of development,
including further raising the profile of the Group, assisting in retaining and incentivising employees and
providing it with a structure for future growth.
Admission will also enable the Selling Shareholders to partially realise their investment in the Company.
2.
USE OF PROCEEDS
The majority of the gross proceeds of the offer of New Shares will be used by the Company to fund
expenses associated with the Offer, including paying the Exit Fee to Inflexion 2010 General Partner
Guernsey LP pursuant to the Investment Agreements. Further information on the Exit Fee is set out in
paragraph 11 of Part 15: ‘‘Additional Information’’.
The net proceeds of approximately £6.4 million will be used to repay accrued interest on loan notes of
approximately £3.6 million with the remainder being used for general working capital purposes.
3.
DIVIDENDS AND DIVIDEND POLICY
Since being incorporated on 17 August 2015, the Company has not yet paid a dividend.
Whilst the Group operates a highly cash generative business model, the Board intends for the significant
majority of profits to be reinvested in the business to support further growth. The Board intends to declare
its first dividend in respect of the year ended 30 September 2016. Thereafter, the Group will adopt a
progressive dividend policy.
The ability of the Company to pay dividends is dependent on a number of factors and there is no assurance
that the Company will pay dividends or, if a dividend is paid, what the amount of such dividend will be. See
Part 1: ‘‘Risk Factors’’. Consequently, investors may not receive any return on investment unless they sell
their Shares for a price greater than that which they paid for them.
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PART 8
REGULATION
The Group’s business is highly regulated and subject to a complex regime of laws, rules and regulations
concerning air transportation, travel, online commerce, financial services, consumer rights and data
protection, among others. As the Group seeks to continue to expand its operations into new jurisdictions,
it will encounter legal, regulatory or tax requirements with which it is currently not familiar. Likewise, such
regulations can be amended or interpreted in a manner that is unfavourable to the Group and its business.
Compliance with such requirements, which could conflict between jurisdictions, would result in a greater
regulatory compliance burden for the Group’s business, and as a result could increase its costs of
compliance, or could otherwise be detrimental to its business.
As far as the Directors are aware, in addition to the discussion below and the risks included in Part 1:
‘‘Risk Factors’’ of this Prospectus, there are currently no significant factors, including unusual or
infrequent events or new developments, relating to governmental, economic, financial, monetary or
political policies or other factors that might materially affect, or materially affects, directly or indirectly, the
Group’s operations.
The Group’s operations are principally in the United Kingdom, where it has to comply with a number of
European Union regulations and national implementing legislation and domestic legislation that is
applicable to its business. Compliance with such regulations, as implemented in the relevant jurisdictions,
is critical to its business. Certain of these regulations that the Board believe most directly apply to the
Group’s business are set forth below.
1.
REGULATION SPECIFIC TO THE TRAVEL INDUSTRY
Package Travel Directive
The scope of the EU Package Travel Directive 90/314/EEC on package travel, package holidays and
package tours (the ‘‘Package Travel Directive’’) is limited to the non-occasional sale of package tours by an
‘‘organiser’’ (person who organises packages and sells or offers them for sale, whether directly or through a
retailer) or a ‘‘retailer’’ (person who sells or offers for sale packages put together by an organiser) to a
consumer, to the exclusion of individually organised tours or to the delivery of single travel services, such
as a scheduled flight or hotel accommodation.
For the purposes of the Package Travel Directive, ‘‘package’’ means a combination previously put together
by an organiser or a combination of elements tailored by the travel agent at the request of the consumer
including not fewer than two of the following elements: transportation, accommodation or other tourist
services not ancillary to transportation or accommodation but which account for a significant part of the
package. Additionally, in order to be covered under the ‘‘package’’ definition, such combinations are
required to be sold or offered for sale at an inclusive price and the services must cover a period of more
than 24 hours or include overnight accommodation. The EU member countries were allowed to implement
a more extensive regime and, accordingly, the implementation of the Package Travel Directive may differ
from one EU member country to another.
If the Group were to act as an organiser or retailer of a package, its activities would be affected by the
Package Travel Directive and implementing national legislations, primarily with respect to: (i) minimum
standards concerning the information to be provided to consumers; (ii) formal requirements for package
travel contracts, including mandatory rules concerning cancellation, modification and the civil liability of
package tour organisers or retailers; and (iii) providing effective protection to consumers in the event of
the package tour organiser’s insolvency, namely repayment of the price and repatriation of consumers.
Under the Package Travel Directive, member states were allowed to choose between mandatory joint
liability of the organiser and the retailer or to split liabilities in consideration of organisers and retailer’s
traditional roles and responsibilities; therefore, a company within the Group could be subject to different
standards of liability depending on the jurisdictions in which it operates. For instance, in the Group’s core
market in the United Kingdom, liability is split between organisers and retailers. However, for French and
Spanish consumers for example, the Group would be subject to mandatory joint liability.
The Group does not currently offer ‘packages’ within the meaning of the Package Travel Directive: instead,
it provides a search facility to enable the customer’s connection to suppliers of travel products. Each travel
product the customer chooses is a separate booking, independent of other travel products booked at the
same time.
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However, on 28 May 2015, the European Commission confirmed a political agreement to the Package
Travel Directive (the ‘‘Proposal’’) to bring it up to date with developments in the travel market, such as
consumers’ increased preference for dynamic packages, where they create their own customised travel
arrangements with the assistance of different online or offline operators instead of opting for pre-arranged
products. The objective of the Proposal is, among others, to extend the current protection for traditional
pre-arranged packages to a new combination of travel services. If those new combinations of travel services
feature the characteristics associated with packages, the consumer is protected under the new rules.
Depending on what kind of package is purchased, the proposed changes to the Package Travel Directive
will offer: (i) consumer improved protection rights, such as more predictable prices and increased
cancellation rights; and (ii) protection to buyers of customised travel arrangements in the event of a
packaged tour organiser’s insolvency. The European Parliament is expected to confirm the text of the
Council’s political agreement with a vote in second reading at an upcoming plenary session. The text will
undergo a legal-linguist revision before the Council can formally approve it. It should be published in the
Official Journal of the EU before end 2015. Implementation of the Proposal could lead to increased costs
and increased commitments by the Group towards its customers if suppliers of travel products default on
their performance obligations.
EC Regulations governing airline industry services
The Group’s business is affected by various EC regulations governing services in the airline industry. These
regulations include:
EC Regulation No. 261/2004
EC Regulation No. 261/2004 establishes common rules on compensation and assistance to passengers in
the event of denied boarding and of cancellation or long delay of flights (more than three hours may
qualify). While this regulation is primarily addressed to airline carriers, as intermediaries or agents the
Group is required to comply with the obligations set forth in the regulation on the airline carrier’s behalf.
Failing to do so could result in the airline carrier having a compensation claim against the Group. A
proposal for a revised regulation was published on 13 March 2013 and has been submitted to the European
Parliament. The implementation of such proposal could lead to the expansion of the rights of passengers
and, accordingly, this may affect the Group’s internal policies.
EC Regulation No. 1008/2008
EC Regulation No. 1008/2008 on common rules for the operation of air services governs certain price
display information. While primarily addressed to airline carriers, this regulation also requires the Group
to comply with the rules set forth therein. For European and certain non-European airline carriers, it
codifies the pricing freedom principle and sets forth certain information obligations vis-à-vis customers.
National-level regulation
ATOL Licence
The laws of certain jurisdictions set forth additional license or other requirements for the operation of the
Group’s online travel agency business. These requirements vary from one jurisdiction to another and
compliance costs associated therewith can be significant. For instance, the Group is subject to the UK Civil
Aviation (Air Travel Organisers’ Licensing (‘‘ATOL’’)) Regulations (the ‘‘ATOL Regulations’’),
administered by the UK Civil Aviation Authority that have introduced a protection scheme for holiday
packages. According to the ATOL Regulations, most UK tour operators selling air travel are required to
hold an ATOL licence. Pursuant to an amendment to the ATOL Regulations made in 2012, the scope of
the ATOL Regulations has been extended to ‘‘flight-plus’’ arrangements.
The Group holds an ATOL licence with the appropriate level of authorisation for its requirements. The
scope of the protection for customers under ATOL is limited to the financial failure of a company in the
Group’s supply chain (e.g. a hotel or airline goes into insolvency). In the event of a natural disaster or
other act of God resulting in bookings being cancelled, the Group (in its capacity as agent and not as
principal) is refunded by the airline and the Group then reimburses the customer. The Group would also
cancel the accommodation and refund the customer net of any accommodation providers’ cancellation
charges (usually zero in such circumstances).
71
In order to meet the conditions of issue of the ATOL licence, the Group operates a trust account, under
which all funds (with some exceptions) received by the Group from consumers are paid into a trustee
account and then only upon satisfaction of certain conditions can the funds be paid to the Group.
ABTA membership
The Group is also a member of the Association of British Travel Agents (‘‘ABTA’’), and as such is bound to
abide by the ABTA code of conduct and the ABTA articles of association and has in place a bond in a form
which, together with the trust account referred to above, is acceptable to the ABTA board for the
protection of monies taken by a member for the provision of travel arrangements.
Swedish regulations
The Group complies with certain regulations in Sweden, including the provision of a variable bond to the
Swedish administrative authority, Kammarkollegiet.
Companies who arrange or sell travel arrangements are subject to the provisions of the Swedish Travel
Guarantees Act (1972:204) (‘‘TGA’’) and must lodge a travel guarantee with Kammarkollegiet before these
arrangements can be marketed or sold. The purpose of the TGA is to provide financial protection for
travellers if a travel arrangement is cancelled or interrupted, usually as the result of the bankruptcy of the
travel operator.
The amount secured by the guarantee can be used to recompense the costs of any advance payment, full
payment, value of the benefits included in the travel agreement and possible costs for repatriation. If the
tour has for some reason not been completed, the guarantee can be used to reimburse the travellers
affected. The provision of the bond ensures that only travel companies with sufficient funding to offer
protection to their customers actually venture into the travel business.
Air Passenger Duty
Air passenger duty (‘‘APD’’) is a per passenger charge on out-bound air travel from UK airports (other
than the Scottish Highlands and Islands and long haul flights from Northern Ireland). APD is paid by the
airlines to HMRC, although it is typically passed on to passengers via ticket prices.
The level of duty varies depending on the class of travel (with economy class having a smaller charge) and
the distance travelled which, from April 2015 is split into two bands. Band A includes flights under 2,000
miles (which includes flights to destinations like Spain, Croatia, Turkey and the Canary Islands) and
band B includes flights over 2,000 miles (which includes destinations like Egypt, Thailand and the US).
A number of exemptions apply depending on the age of the passenger. Children under two years of age
who do not have their own seat are exempt from APD as are children under 12 in the lowest class of travel.
From 1 May 2016, children under 16 in the lowest class of travel will also be exempt from APD.
2.
CONSUMER LAW
Consumers are protected by a raft of interwoven EU and UK primary and secondary legislation and
consumer law is an area of law which is constantly evolving. The key pieces of legislation are outlined
below.
General Consumer Law & Consumer Rights Act 2015
Currently, UK general consumer legislation is fragmented across multiple pieces of legislation. For the
provision of services, the key legislation includes:
•
the Supply of Goods and Services Act 1982 (‘‘SGSA’’) which implies various terms into contracts to
supply a service;
•
the Sale and Supply of Goods to Consumers Regulations 2002 (SI 2002/3045) (‘‘SSGCRs’’); and
•
the Unfair Contract Terms Act 1977 (‘‘UCTA’’) and the Unfair Terms in Consumer Contract
Regulations 1999 (SI 1999/2083) (‘‘UTCCRs’’), which restrict the ability of a supplier to exclude or
limit its liability for terms implied under the SGSA.
The Consumer Rights Act 2015 (‘‘CRA’’) received Royal Assent on 26 March 2015 and will be brought into
force in October 2015. It consolidates existing consumer law, and although for the most part, the law set
72
out in the CRA is similar to existing law, there are some changes (for example, customers will have
statutory remedies of ‘repeat performance’ and price reduction if a service does not conform to the
contract). The Group will need to review and, where appropriate, update existing processes and customer
documentation as a result of the change in law.
Consumer Rights Directive
The Consumer Rights Directive (2011/83/EU) (the ‘‘Consumer Rights Directive’’) was implemented into
UK law by two sets of regulations:
•
the Consumer Rights (Payment Surcharges) Regulations 2012 (‘‘Payment Surcharges Regulations’’),
which came into force on 6 April 2013, and which ban excessive payment surcharges; and
•
the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013
(SI 2013/3134) (‘‘Consumer Contracts Regulations’’), which came into force on 13 June 2014, and
which set out the new rules for on premises, off premises and distance contracts, including
information to be given prior to conclusion of the contract, requirements during the sale process and
cancellation rights (which are not applicable to holidays) and other rights and remedies for the
customer after the sale.
Unfair Commercial Practices Directive
The Unfair Commercial Practices Directive (2005/29/EC) (the ‘‘UCPD’’) was transposed into UK law
through the Consumer Protection from Unfair Trading Regulations (SI 2008/1277) (‘‘CPUT’’) and sought
to harmonise unfair trading laws across all EU member states and establishes a single regulatory
framework to govern unfair commercial practices. It sets out a general prohibition on traders treating
consumers unfairly and requires businesses not to mislead customers through acts or omissions or subject
them to aggressive commercial practices. Breach of the CPUT regulations can lead to criminal offences
and, following an amendment to the regulations in 2014, consumer claims for civil redress.
3.
MARKETING & DATA PROTECTION
Advertising
Advertising, in whatever form (including advertising which appears online or on social media) must comply
with UK advertising codes of practice, consumer protection laws (including CPUT), the BIS pricing
practices guide, and sector-specific laws and regulations (e.g. FCA rules on consumer credit advertising
and FCA rules on financial promotions) and must not infringe upon any third-party intellectual property
rights.
Data protection and privacy
In collecting and using personal data about its customers, the Group must comply with multiple sources of
UK and EU legislation, including:
•
the EU data protection regime within Directive 95/46/EC on the protection of individuals with regard
to the processing of personal data and on the free movement of such data, and the UK data protection
regime, where the collection and use of personal data is primarily governed by the Data Protection
Act 1998. Together, this legislation sets out general principles of data protection and specific rules
relating to the collection, storage, handling, security, use, and destruction of personal data; and
•
the Privacy and Electronic Communications (EC Directive) Regulations 2003 (SI 2003/2426) (as
amended), in relation to obtaining the consent of consumers to receive electronic marketing
communications, and in relation to the use of cookies and similar technologies.
The European Commission has proposed a reform of the European Union’s data protection rules,
involving a draft Regulation setting out a general EU framework for data protection and a draft Directive
on protecting personal data and the way it is processed. On 24 June 2015, official discussions commenced
between the European Commission, the European Parliament and the European Council, which are
expected to produce the final version of the General Data Protection Regulation (‘‘GDPR’’) in early 2016.
The aim of the GDPR, once finalised, is for data protection laws to be completely harmonised across
Europe. The reform of data protection legislation will involve additional requirements and administrative
obligations on the Group.
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4.
FINANCIAL SERVICES
Insurance Mediation Directive
The Group makes regulated sales of travel insurance via its website as an appointed representative (‘‘AR’’)
of Maintenance Assist Limited (the ‘‘Principal’’). The travel insurance can only be sold alongside a holiday
(or elements of a holiday) and not on a standalone basis. The sale (and administration) of insurance is
highly regulated by the FCA, pursuant to:
•
European legislation (primarily EU Directive 2002/92/EC, known as the ‘‘Insurance Mediation
Directive’’ or ‘‘IMD’’), although at present, travel insurance is exempt from the IMD requirements;
•
UK primary legislation (Financial Services and Markets Act 2000 (as amended) (‘‘FSMA’’));
•
UK secondary legislation (in particular the Financial Services and Markets Act 2000 (Regulated
Activities) Order 2001 (SI 2001/544) (as amended) (‘‘RAO’’); and
•
the FCA handbook (including its perimeter guidance and supervisory manuals and the insurance
conduct of business sourcebook),
(together, the ‘‘FCA Rules’’).
Because the Group acts as an AR, it is not directly authorised by the FCA, and has no direct regulatory
obligations to the FCA, and the Principal takes the full regulatory risk for any failure to comply with FCA
Rules. However, the Group is bound by contractual obligations to comply with all applicable regulatory
requirements, so is in effect bound to ensure that it sells the travel insurance in accordance with the FCA
Rules. Because sales are only made on the website and not via telephone, it is easier to control compliance,
and the customer journey and sales process must be reviewed on behalf of the underwriters and the
Principal to ensure they comply with the requirements. With proposals in an advanced stage to extend the
scope of the IMD in 2016 or 2017 to include the sale of travel insurance, this may increase the Group’s
administrative burden.
Consumer credit
The regulation of consumer credit in the United Kingdom materially changed in April 2014 when the FCA
took over regulation of consumer credit from the OFT. The regulatory framework now consists of FSMA
and its secondary legislation, retained provisions in the Consumer Credit Act 1974 (‘‘CCA’’) and its
retained secondary legislation, and rules and guidance in the FCA Handbook, including the Consumer
Credit sourcebook (‘‘CONC’’).
Firms who previously had consumer credit licences granted by the OFT could apply for interim
permissions under the new FCA consumer credit regime, but in order to convert these into full
permissions, this required a full and detailed application to the FCA with supporting application forms,
business plans and documentation.
The Group has already completed its full application to the FCA, which was granted, so the Group is now
fully authorised by the FCA to carry out certain regulated consumer credit activities. In particular, it holds
permission to carry out:
•
credit broking (e.g. offering customers the opportunity to take credit from a third-party); and
•
limited permission lending (e.g. offering customers credit itself). ‘‘Limited permission lending’’ is a
permission granted only to lower risk firms whose lending activities are secondary to their primary
business activities, and the regulatory regime is therefore considerably lighter than for firms with full
lending permission (e.g. credit card companies).
Although it has held the authorisation to do so since 1 May 2015, the Group has not carried on any
regulated consumer credit activities other than the new Paypal credit payment option referred to below.
The Group currently offers a low deposit scheme, where customers pay a low deposit starting at £50 per
person, then pay the remainder of their holiday in two instalments, the first being the balance of the
deposit (usually the balance of the cost of their flight) which is payable within 28 days of booking, and the
second being the balance of the holiday which is payable two weeks prior to their departure. The low
deposit scheme falls outside of the scope of the consumer credit regime (there is no ‘credit’ for the
purposes of the legislation, and even if there were, the scheme would fall under the ‘instalment exemption’
set out in Article 60(F)(2) of the RAO). See paragraph 7 of Part 9: ‘‘Operating and Financial Review’’.
74
The Group applied for its authorisation to carry out regulated consumer credit activities to enable it to be
able to add credit facilities to support the purchase of holidays via its website (either lending itself pursuant
to its authorisation to carry out limited permission lending, or to offer customers credit from a third-party
pursuant to its authorisation to carry out credit broking).
The Group has an agreement with Paypal for the provision of additional payment options for customers
purchasing holidays from the Group. As well as the usual payment options open to customers (i.e. credit
and debit card payments and the low deposit scheme), customers will also be able to pay via a normal
Paypal account, or to open a Paypal credit account (which is akin to a credit card but it is paperless and
linked to a Paypal account) in order to pay for their holiday. The Group is to run a trial of these additional
payment options which is expected to take place during September 2015, although the timing of this trial is
yet to be confirmed. Offering customers the facility to open a Paypal credit account involves the regulated
activity of credit broking and the Group will need to comply with the relevant provisions of the legislation,
for example the rules with regard to credit advertising.
To the extent the Group begins to carry out further regulated consumer credit activities, it will need to
comply with the extensive and complex web of rules under the FCA consumer credit regime, including how
the credit is advertised, the pre-sales, sales and post-sales process and documentation and also
management of customer credit accounts and enforcement action.
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PART 9
OPERATING AND FINANCIAL REVIEW
The following is a discussion of the Group’s results of operations and financial condition. Prospective investors
should read the following discussion, together with the whole of this Prospectus, including Part 1: ‘‘Risk Factors’’
and Part 11: ‘‘Historical Financial Information’’ and should not just rely on the key or summarised information
contained in this Part 9.
Unless otherwise stated, the financial information in this Part 9 relates to financial information that has been
extracted without material adjustment from Part 11: ‘‘Historical Financial Information’’.
This Part 9 contains ‘‘forward-looking statements’’. Those statements are subject to risks, uncertainties and other
factors that could cause the Group’s future results of operations or cash flows to differ materially from the results of
operations or cash flows expressed or implied in such forward-looking statements. See Part 2: ‘‘Presentation of
Financial and Other Information’’.
1.
OVERVIEW
The Group specialises in short-haul beach holidays, servicing approximately 1.1 million passengers in the
12 month period ended 30 June 2015. The Group currently has a market share of the UK online short-haul
beach holiday market of approximately 17 per cent. (source: CAA, UK Short Haul Beach Online Estimates;
ATOL Data), with its two largest competitors being TUI Travel and Thomas Cook. In particular, the
Group specialises in offering dynamically packaged beach holidays (representing 92.4 per cent. of the
Group’s revenue for the financial year ended 30 September 2014), where customers are able to choose the
components of their holidays as opposed to being offered traditional package holidays.
The Group operates solely under the trademarked brand ‘‘On the Beach’’ in the United Kingdom. The
Group is independent and has no fixed ties to airlines or hotels, meaning that it can offer customers a full
market range of flight and hotel products bookable through online channels (including by desktop,
mobiles, tablets and apps) and over the phone. The Group takes no stock commitment for either flights or
beds.
The Group directly contracts hotels through On the Beach Beds Ltd. In-house accommodation accounted
for 42.5 per cent. of all hotel sales for the nine month period ended 30 June 2015. Historically, all hotel
sales were generated from third-party bed-banks and the Group currently has seven partnerships with
third-party bed-banks. The Group’s in-house direct contracting system allows it to better control hotel
distribution and leverage increased revenue.
In addition, the Group operates an in-house transfer business that allows consumers to attach airport
transfers (coach or private taxi) between their flights and hotels. In the financial year ended 30 September
2014, 64.8 per cent. of all holidays had a transfer attached to the booking and this has increased to 66.4 per
cent. in the nine month period ended 30 June 2015.
The Group is classed as a travel agent rather than a tour operator. While the Group does not sell
traditional package holidays, all holidays it sells are protected under the CAA ATOL scheme.
The Group organises its operations into two principal financial reporting segments, being UK (the ‘‘UK
Segment’’) (the Group’s established market) and international (the ‘‘International Segment’’) (the
Group’s new market). In each of the UK Segment and the International Segment, the Group offers
dynamically packaged holidays but with options to book single element products such as flights or hotels.
The Group’s operations are principally in the United Kingdom, which in the financial year ended
30 September 2014, accounted for over 99 per cent. of the Group’s bookings. The Group’s TTV in the UK
Segment was £358.3 million for the year ended 30 September 2014. For the nine month period ended
30 June 2015, TTV in the United Kingdom was £350.4 million, which is an increase of 29.8 per cent. from
the nine month period ended 30 June 2014. The Group’s TTV in the International Segment (from the
Group’s Swedish website sales) for the year ended 30 September 2014 was £1.6 million. For the nine month
period ended 30 June 2015, the TTV was £4.2 million, compared to TTV of £1.1 million in the nine month
period ended 30 June 2014.
The Group’s EBITDA in the UK Segment increased from £9.9 million for the year ended 30 September
2012 to £14.1 million for the financial year ended 30 September 2014. The growth in the year ended
30 September 2014 was suppressed by the Group’s investment of £1.0 million in offline advertising (see
paragraph 2.5 of this Part 9: ‘‘Operating and Financial Review’’) and set up costs for the Group’s direct
76
contracting function (see paragraph 2.8 of this Part 9: ‘‘Operating and Financial Review’’). This investment
has, however, led to accelerated growth in the nine month period ended 30 June 2015, with nine month
year on year growth in EBITDA in the United Kingdom of 48.6 per cent. (from £10.4 million in the nine
month period ended 30 June 2014 to £15.4 million in the nine month period ended 30 June 2015).
The following table sets out a summary of the Group’s operating profit for the financial years ended
30 September 2012, 30 September 2013 and 30 September 2014 and the nine month periods ended 30 June
2014 and 30 June 2015:
Year ended
30 September
Nine months ended
30 June
2014
(unaudited)
2015
£m
£m
2012
£m
2013
£m
2014
£m
.
.
.
.
.
.
.
.
230.9
31.0
(14.3)
(3.4)
(3.5)
(0.2)
(0.2)
(0.4)
280.9
37.5
(18.8)
(3.2)
(3.2)
(0.3)
(0.2)
(0.5)
359.8
45.8
(24.8)
(3.7)
(3.9)
(0.3)
(0.3)
—
270.9
33.9
(18.4)
(2.7)
(2.9)
(0.2)
(0.3)
—
354.6
48.2
(26.2)
(3.6)
(4.2)
(0.3)
(0.3)
(0.2)
......
(22.0)
(26.3)
(33.0)
(24.5)
(34.8)
Group operating profit before amortisation and
exceptional costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.0
11.3
12.8
9.4
13.4
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.9
12.2
13.4
9.8
14.2
TTV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing Costs . . . . . . . . . . . . . . . . . . . . . . . .
Variable Costs . . . . . . . . . . . . . . . . . . . . . . . . .
Overhead Costs . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Holding Company Costs . . . . . . . . . . . . . . . . . .
Non underlying costs . . . . . . . . . . . . . . . . . . . . .
Administrative expenses before amortisation and
exceptional costs(1) . . . . . . . . . . . . . . . . . . . . .
(1)
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.
Administrative expenses presented in Section B of Part 11: ‘‘Historical Financial Information’’.
77
2.
SIGNIFICANT FACTORS AFFECTING THE GROUP’S FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Group’s business model is centred on driving efficient growth in market share whilst maintaining and
improving both conversion and revenue per booking. The Group’s strategic initiatives are focused on
improving the performance of these levers, as summarised in the diagram below:
ADDRESSABLE MARKET
STRUCTURAL
MARKET
GROWTH &
MARKET
OPTIMISE
CUSTOMER
PROPOSITION
& LEVERAGE £
MARGIN
Short-haul
beach holidays
dynamically
packaged
£ Revenue per
booking
Online
penetration
OTB share of
market traffic
Daily
unique visitors
Revenue per
daily unique
visitor
Conversion
Revenue
DRIVING
EFFICIENT
SHARE
GROWTH &
STRENGTH OF
BRAND
Daily unique
visitors
Marketing
spend per daily
unique visitor
Marketing
investment
Fixed and
variable costs
SCALE DRIVES
OPERATIONAL
LEVERAGE
EBITDA
28AUG201507504469
Source: Company information
The Group’s operating and financial results during the periods under review have been materially affected
by the factors discussed below.
2.1 Growth in the online segment of the UK market for short-haul beach holidays
There has been an overall growth in short-haul holidays from the United Kingdom (defined as UK
consumers travelling to destinations less than 6 hours flight from the UK mainland), with an overall
decrease in long-haul holidays. The compound annual growth rate for short-haul holidays from the United
Kingdom was 4.7 per cent. for the period from 2010 to 2014, compared to a decline in long-haul holidays of
1.3 per cent. over the same period. In 2014, there were approximately 12.3 million UK visits abroad to
short-haul package holiday destinations compared to approximately 3.8 million UK visits abroad to
long-haul package holiday destinations (source: Mintel, Package vs Independent Holidays UK, April 2015).
The Board believes this trend has been principally driven by the costs associated with long-haul flying
(particularly fuel price volatility and the Air Passenger Duty on all long-haul flights from the United
Kingdom (see paragraph 1 of Part 8: ‘‘Regulation’’)). In addition, the Board believes there has been an
overall increase in the quality (both in terms of services and facilities) of hotels in Western Europe that
compete with hotels in long-haul destinations, improving the attractiveness to UK consumers of short-haul
holidays.
The beach element of the holiday market is the most popular holiday type amongst UK consumers.
Approximately 48 per cent. of UK holidaymakers who travel overseas have taken a beach holiday in the
78
last 12 months, compared to 19 per cent. for city breaks, 15 per cent. for cultural/history breaks and 6 per
cent. for cruises. Mintel estimates the value of the overseas beach holiday market at £10.7 billion
(excluding flight costs) (sources: Mintel, Beach Holidays—UK, January 2015).
In addition to the increasing migration to online purchasing forecast by Euromonitor, the Board expects
the Group to continue to increase its share of the online short-haul beach holiday market in line with its
current growth strategy.
There is also increasing online penetration of the UK package holiday market, being 48.3 per cent. in 2012
and forecast to reach 59.5 per cent. in 2019 with a projected compound annual growth rate of 2.3 per cent.
in constant prices over this same period (source: Euromonitor, Online Sales by Market).
The dynamically packaged holiday market in the United Kingdom is forecast to grow at the expense of
traditional pre-packaged holidays from 2014 to 2019. During this period, traditional package holiday sales
are forecast to decline by a compound annual growth rate of 3.9 per cent. in the United Kingdom, whilst
dynamic packaging sales are forecast to grow by a compound annual growth rate of 1.7 per cent. over this
same period (source: Euromonitor, Growth in Dynamic Packages).
Euromonitor estimate the proportion of UK package holiday sales that are dynamically packaged was
£2.72 billion in 2009, rising to £4.37 billion in 2014 and representing a compound annual growth rate of
9.9 per cent. UK traditional package holiday sales reduced from £8.97 billion to £6.54 billion over the same
period, representing a compound annual growth rate of minus 6.1 per cent (source: Euromonitor, UK
Growth in Dynamic Package v Traditional Package Holidays).
The Board believes that the key driver of this growth in dynamic packaging is increasing online
penetration, which has allowed consumers to create their own holiday packages through access to millions
of flight and hotel combinations with access to transparent prices. This has provided consumers with the
ability to make their own choices while reducing the need for human intervention or support from retail
stores.
2.2 Increasing traffic
The Group’s model is centered on increasing its market share whilst maintaining and improving its
customer conversion rates and revenue per booking.
The Group’s share of market traffic to its websites has grown by 12.9 per cent. compound annual growth
over the period between the financial year ended 30 September 2012 and the financial year ended
30 September 2014, with 14.4 per cent. compound annual growth in daily unique visitors to the Group’s
websites over that same period (source: Hitwise).
The Group has been increasing marketing spend in offline channels to increase brand awareness. The
Board believes that the strength of the Group’s brand and customer proposition has led to an increased
proportion of branded traffic and repeat purchase rate. In addition, the iOS and Android apps launched by
the Group in the past two financial years have helped to increase its share of branded traffic. Maintaining
branded traffic allows the Group to grow its market share whilst sustaining its revenue performance.
The Group’s cost per daily unique visitor (defined as total marketing expenses divided by number of daily
unique visitors) was £0.46 per daily unique visitor and £0.51 per daily unique visitor for the financial years
ended 30 September 2013 and 30 September 2014, respectively.
The Group uses a mixture of proprietary and third-party technology to manage its digital advertising
channels. The technology provides flexibility, speed-to-market and a robust insight into performance across
digital channels. The Group’s cross-channel attribution technology informs its budget allocations and
increases efficiency by measuring the effectiveness of all digital marketing channels. The Group’s
predictive bid technology automatically manages spend across search engines and regularly refines the
accuracy of the Group’s forecast models.
2.3 Driving efficient share growth
The Group’s marketing cost as a percentage of revenue (excluding offline marketing expenditure) rose
from 45.9 per cent. in the financial year ended 30 September 2012 to 49.9 per cent. for the financial year
ended 30 September 2013. This rise was driven by a management decision to accelerate traffic share at a
time when management was of the view that there was a low level of competition in the marketplace.
79
In the financial years ended 30 September 2013 and 30 September 2014 and the nine month period ended
30 June 2015, the Group spent an amount equal to approximately 50 per cent. of its revenue on marketing
to increase its market share. The Group also carried out regional offline advertising during the financial
year ended 30 September 2014 and the nine month period ended 30 June 2015 (see paragraph 2.5 of this
Part 9: ‘‘Operating and Financial Review’’). In addition, the Board believes that the Group’s multi-channel
offering and proprietary technology have resulted in an organic increase in the Group’s market share.
The Group is now the third most well-known brand for beach holidays in the United Kingdom with a
14 per cent. spontaneous awareness score (source: Mediacom, ontheBeach.co.uk Brand Tracking Results,
23rd March 2015). The proportion of traffic coming to the Group’s websites from branded, free and direct
sources is increasing and, in the nine month period to 30 June 2015, represented 55 per cent. of overall
traffic mix (compared to 52 per cent. for the nine month period to 30 June 2014).
2.4 Optimisation of the Group’s customer proposition has led to increased customer conversion rates
and revenue
As shown in paragraph 6 of this Part 9: ‘‘Operating and Financial Review’’, the Group has achieved
23.5 per cent growth in revenue per daily unique visitor in the nine month period ended 30 June 2015
compared to the nine month period ended 30 June 2014. This has contributed to an acceleration in
revenue growth which has increased from a compound annual growth rate of 22 per cent. for the three
years period ended 30 September 2014 to a growth rate of 41 per cent. for the nine month period ended
30 June 2015.
These metrics have been underpinned by the Group’s proprietary technology and customer proposition,
including;
(a) regular split testing to simplify the booking process;
(b) flexible customer payment schemes;
(c) user-level personalisation in close to real time; and
(d) the Group’s increasingly sophisticated bid modelling tool.
The Group has experienced an increase in the number of bookings in each of the last three financial years.
The Group made 271,196 bookings and 325,867 bookings for the financial years ended 30 September 2013
and 30 September 2014, respectively. The Group has handled the increase in bookings while, at the same
time, has improved its technology infrastructure so that further increases bookings can be fulfilled at a
lower cost per booking. The Board believes that, since the establishment of the Group’s new technology
platform in 2011, the Group has been able to address increases in booking numbers by making only limited
additional capital expenditures to expand the Group’s data warehousing and processing capabilities.
2.5 Accelerated brand awareness through offline TV advertising and supporting digital channels
The Group’s historic advertising efforts have focused primarily on online digital marketing. The Board
believes that continued investment (both online and offline) is important to retaining and expanding the
Group’s market share.
Offline advertising in the financial year ended 30 September 2014
The Group commenced a twelve-week TV campaign in the Midlands on 26 December 2013. The Board
attributes the increase in year on year bookings for the Midlands region that outpaced other regions in the
United Kingdom and which was sustained following the conclusion of the TV campaign, to the TV
campaign.
During the TV campaign, the Group’s prompted brand awareness in the Midlands region rose from a
pre-TV campaign advertising score of 21 per cent. to 39 per cent. during the TV advertising campaign
(source: Mediacom, ontheBeach.co.uk Brand Tracking Results, 23rd March 2015).
The TV campaign was extended in March 2014 to two additional two UK regions, the North West region
and Scotland. During this phase of TV advertising, the Group’s year-on-year bookings for the TV
advertising regions averaged 36 per cent. compared to 17.7 per cent. for other regions during the period
from 15 March 2014 to 31 August 2014. The Group’s total investment in TV advertising for the financial
year ended 30 September 2014 was £1.0 million.
80
Offline advertising in the nine month period ended 30 June 2015
The Group continued with a £1.5 million investment in a TV campaign which commenced on 26 December
2014 and ended on 14 February 2015. More UK regions were targeted in this campaign, including
Mid-West England (the Midlands, HTV West, Central and South-West regions), North England (the
Granada, Yorkshire and Border regions) and Scotland (the North and Central regions).
The Group generated a three percentage point increase in spontaneous brand awareness from 11 per cent.
to 14 per cent., which placed the Group as the third most recognised brand for beach holidays in the
United Kingdom (source: Mediacom, ontheBeach.co.uk Brand Tracking Results, 23rd March 2015).
Offline advertising in future financial years
The Board believes that regional and national TV advertising will increase brand awareness and accelerate
and increase branded searches. The Group is planning a national campaign in the financial year ended
30 September 2016, with investment in offline advertising expected to be an amount equal to 2.5 per cent.
of revenue margin for the financial year ended 30 September 2016. The Board expects to deliver a positive
return from TV advertising activity over the next 24 months.
2.6 Trends towards consumers booking on mobile devices
Over the past few years, mobile devices (including smartphones and tablets) have become an increasingly
important channel for customers to make holiday bookings and the Board expects this trend to continue.
Interactions are no longer contained within a single moment in time or a single touch point due to the
increase in device accessibility—spanning smartphones, tablets, laptops and desktop computers—and
convenient access to cloud-based services. The Board believes customers also increasingly plan and book
their journeys when they happen to have free time slots, irrespective of their immediate whereabouts and
mobile devices afford customers that convenience to make travel arrangement while on the go.
The Group is actively engaged in the design, rollout and improvement of applications for mobile devices.
In 2013, the Group launched its first mobile web browser. Since then, the Group has continuously
developed its websites for mobile devices. For the financial year ended 30 September 2014, 70 per cent. of
all mobile traffic to the Group’s websites originated from an iOS device. For the nine month period ended
30 June 2015, the proportion of iOS device traffic as a percentage of all mobile traffic was 64 per cent.
(source: Google Analytics).
The Group also experienced significant increases in orders by customers using tablets and smart phones via
mobile optimised web browsers. Approximately 10.5 per cent. of the Group’s holidays were booked
through the Group’s smartphone mobile web browser device in the nine month period ended 30 June 2015,
compared with approximately 6.1 per cent. in the nine month period to 30 June 2014.
Combining tablets and smartphones, these channels represented an average of 39 per cent. of all orders for
the financial year ended 30 September 2014 compared with an average of 24 per cent. for the financial year
ended 30 September 2013. Average order values and the time gap between booking and departing are
similar across platforms (source: Google Analytics).
The following table sets out a summary of the Group’s orders by platform for the financial years ended
30 September 2013 and 30 September 2014:
Orders by platform
Year ended
30 September
2013
2014
Nine months
ended 30 June
2014
2015
Non desktop(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Desktop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total orders(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24%
76%
100%
38%
62%
100%
37%
63%
100%
49%
51%
100%
(1)
Non desktop means smart-phone and tablet orders, whether through apps or browsers.
(2)
Order data sourced from Google Analytics. Orders comprise all customer bookings including those which are subsequently
cancelled in advance of travel. The order data by platform shown above is believed to be consistent with the bookings by
platform trend.
The Group launched its first iOS mobile app for smart-phone and tablet in September 2014. By 30 June
2015, the Group’s app downloads had exceeded 260,000 (source: iTunes Apple Store MI). Mobile apps
81
represent three per cent. of total traffic to the Group’s websites and approximately two per cent. of its total
orders. The Group launched its first Android app in July 2015.
2.7 Increasing number of bookings from repeat customers
The Group has implemented and continues to implement a strategy for attracting repeat customers.
During the periods under review, the Group experienced increased customer loyalty, which was
demonstrated by customers purchasing additional holidays after their first purchase. Repeat customers
(defined as customers who had made a previous purchase from the Group using the same email address in
the previous five calendar years) accounted for 20.5 per cent. of the Group’s bookings volumes for the year
ended 30 September 2011, compared to 30.4 per cent. for the year ended 30 September 2014, representing
a compound annual growth rate of 48.8 per cent. The percentage of total customers that are repeat
customers has increased notwithstanding growth in new customers during these periods.
The Group has implemented and continues to implement a strategy for attracting repeat customers by
aiming to provide an excellent customer service supported by an increasingly personalised experience,
which builds a dialogue with existing and lapsed customers (defined as customers who had made a previous
purchase from the Group but have not done so for three or more years) over the medium to long term.
Repeat customers are a key driver of customer acquisitions from unpaid and lower cost sources, such as
natural and branded search results, thereby lowering the Group’s per booking customer acquisition costs.
2.8 Increasing number of in-house accommodation bookings through the Group’s direct contracting
system
The Group has implemented an in-house function to contract directly with hotels (through ‘‘On the Beach
Beds’’), being its direct contracting system. Incremental revenue is available through the disintermediation
of third-party bed-banks (as no fee is payable to third-party bed-banks). The Board believes that
incremental revenue is also available through the Group’s direct contracting system as prompt payment to
hoteliers by the Group can result in hoteliers offering better rates.
The Group’s direct contracting system is based on relevant, high volume 3, 4 and 5 star hotels identified
through the Group’s in-house MI platforms. Contracts are negotiated by the Group’s team of hotel
contractors and maintained on its direct contracting system by an administration team. The Group’s direct
contracting system also connects directly to hotel-channel management tools enabling access to the latest
offers and last-minute room availability, reducing the administration required to maintain relationships
with thousands of low volume hotel suppliers (known as the long-tail stock).
The Group’s direct contracting system is a key contributor to low input prices and the ability to negotiate
advantageous contract terms with third-party bed-banks. The ability to disintermediate the third-party
bed-banks and provide prompt payment directly to the hotelier is a differentiator that the Board believes
will underpin future business and revenue growth.
In addition, bookings made directly with hoteliers produce less than half the number of operational
changes and complaints than beds booked from third-party bed-banks. The high volume of the Group’s
bookings also allows it to target marketing contributions from in-resort suppliers such as attractions and
tourist organisations.
In the nine month period ended 30 June 2015, the Group had up to a 50 per cent. share with direct
contracts with 4 per cent. of incremental revenue. An increased investment to scale the function in March
2014 delivered a £1.4 million revenue increase over the same period last year, which the Board believes will
allow the Group to increase revenue with a modest further investment in technology and resource.
In the nine month period ended 30 June 2015, hotels booked through the Group’s direct contracting
system generated a revenue margin for the Group of 22.8 per cent. while other hotels generated a revenue
margin for the Group of 18.56 per cent.
Transfers
The Group operates an in-house transfer management system which enables customers to book coach and
taxi transfers with third-party providers for the journey from the airport to the hotel through the Group’s
website. This model benefits from a relatively low administration overhead compared to partnering with a
third-party provider and the ownership of the integration platform helps to maintain high standards of
82
customer service. The product is fully integrated into the Group’s online search service and included in the
Group’s websites in real-time, to help drive revenue both on the supply and customer side.
Revenue for the 12 months ended 30 June 2015 was £5.4 million and 66 per cent. of customers who booked
flight and hotel products on the Group’s websites also purchased a transfer. Over this same period,
transfers accounted for 2.5 per cent. of the Group’s TTV.
Insurance
The Group makes regulated sales of travel insurance through its websites as an appointed representative of
Maintenance Assist Limited. The travel insurance can only be sold alongside a holiday (or elements of a
holiday) and not on a standalone basis. The sale (and administration) of insurance is highly regulated and
further details can be found in Part 8: ‘‘Regulation’’.
The insurance product option was integrated into the Group’s websites in December 2014 and allows
customers to purchase the insurance product at the end of the booking path. In the nine month period
ended 30 June 2015, insurance has increased to a take-up rate of 16.4 per cent. and delivered an increase in
revenue per booking of 1 per cent.
Ancillary sales
Ancillary sales (excluding coach and private taxi transfers) have historically not been material to the
Group’s revenue performance. The Group relies on one principal white label sourcing partner for airport
parking and airport hotel bookings. In the nine month period to 30 June 2015, ancillary sales generated a
revenue margin for the Group of 44.7 per cent.
Following the Group’s launch of its iOS and Android apps, the Board believes there is a significant
opportunity to sell ‘in-resort’ ancillary products through mobile booking channels which will drive further
revenue growth. The Group intends to start selling ‘in-resort’ products in the short to medium term via the
mobile app.
3.
RECENT DEVELOPMENTS, CURRENT TRADING AND PROSPECTS
In the period since 30 June 2015, the Group’s strong financial performance has continued and the Group is
trading in line with the Board’s expectations.
4.
DESCRIPTION OF KEY INCOME STATEMENT ITEMS
4.1 TTV
TTV represents the total transaction value of all flight and hotel, flight only and hotel only sales, calculated
by aggregating the gross price paid by customers for their bookings.
4.2 Revenue
Revenue is measured at the fair value of consideration received or receivable, net of cancellations and
discounts. It is recognised on the date of booking. The Group’s gross commission is earned as agent for the
supplier or consumer in purchases of travel products such as flight tickets or hotel accommodation from
third-party suppliers.
4.3 Marketing Costs
Marketing spend represents the investment into media and the resulting demand generated through
initiatives such as paid search engine marketing, digital display (banners on third-party websites) and off
line marketing programmes such as TV advertising. The spend may be associated with paying a search
engine for clicks on the Group’s websites, or paying a partner a percentage commission for a booking or
indeed paying in advance for advertising spots on television.
4.4 Variable costs
Variable costs consist of contact centre wages, credit card fees and communication costs.
83
4.5 Overhead costs
Overhead costs consist of salaries, IT hosting and support costs, office costs and other administrative costs,
excluding depreciation and amortisation.
4.6 Finance costs
External finance costs consist of bank interest on the Group’s term loan and overdraft interest net of
interest earned on money held in the Group’s trust account.
4.7 Shareholder interest
Shareholder interest consists of interest on various shareholder loans which will be paid down in full as
part of the Reorganisation.
4.8 Holding company costs
Holding company costs consist of non-executive directors’ fees and other fees paid to Inflexion Private
Equity Partners LLP.
4.9 Non underlying costs
Non trading costs which do not relate to the UK or international trading segments.
5.
RESULTS OF OPERATIONS
The following table sets out the combined and consolidated income statement for the UK Segment for the
financial years ended 30 September 2012, 30 September 2013 and 30 September 2014 and the nine month
periods ended 30 June 2014 and 30 June 2015:
UK Segment
TTV . . . . . . . . . . . . . . . . .
Revenue . . . . . . . . . . . . . . .
Revenue after marketing costs .
Variable costs . . . . . . . . . . . .
Overhead costs . . . . . . . . . . .
Depreciation and amortisation(1)
EBIT . . . . . . . . . . . . . . . . .
EBITDA . . . . . . . . . . . . . . .
EBITDA % revenue . . . . . . .
(1)
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Year ended 30 September
CAGR
2012
2013
2014
12 - 14
£m
£m
£m
%
230.1
280.8
358.3
24.8
30.9
37.5
45.6
21.5
16.7
18.8
21.5
13.5
(3.4)
(3.2)
(3.5)
(3.4)
(3.4)
(3.9)
(1.0)
(1.2)
(1.3)
8.9
11.0
12.8
20.1
9.9
12.2
14.1
19.2
32.0
32.8
30.9
Nine months ended 30 June
2014
(unaudited)
2015
%Y-Y
£m
£m
%
269.9
350.4
29.8
33.8
47.7
41.1
15.9
23.0
44.7
(2.7)
(3.6)
(2.8)
(4.0)
(1.0)
(1.2)
9.4
14.2
51.1
10.4
15.4
48.6
30.8
32.4
Excludes amortisation of brand and website technology intangible assets.
5.1 TTV
TTV increased from £230.1 million for the financial year ended 30 September 2012 to £358.3 million for
the financial year ended 30 September 2014, representing a compound annual growth rate of 24.8 per cent.
The growth throughout the period was predominantly due to a 14.4 per cent. compound annual growth in
traffic to the Group’s websites, stronger year on year conversion with an increase of 3.7 per cent. on a
compound basis and higher average revenue per booking.
For the nine month period ended 30 June 2015, the TTV of £350.4 million was 29.8 per cent. ahead of the
nine month period ended 30 June 2014. This growth throughout the period was primarily due to a 14.6 per
cent. increase in year-on-year traffic to the Group’s websites with a 5.6 per cent. increase in customer
conversion rates. This resulted in a 21.1 per cent. increase in bookings at a higher revenue per booking.
Year-on-year growth is driven by the Group continually improving the customer proposition (including
through enhancing customer personalisation, offering flexible payment schemes and providing a high level
of customer service).
The Board expects that the percentage of TTV attributable to hotels will increase through selling of higher
value products using customer personalisation technology and the Group’s direct contracting system.
84
5.2 Revenue
Revenue increased from £30.9 million for the financial year ended 30 September 2012 to £45.6 million for
the financial year ended 30 September 2014, representing a compound annual growth rate of 21.5 per cent.
Revenue per daily unique visitor was £0.85 for the financial year ended 30 September 2012 and increased
by 6.2 per cent. on a compound basis to £0.96 for the financial year ended 30 September 2014. Revenue per
booking also increased over the same period from £133.4 to £140.0.
For the nine month period ended 30 June 2015, revenue was £47.7 million, a 41.1 per cent. increase on the
same period in the prior year. Revenue per daily unique visitor for the nine month period ended June 2015
was 23.5 per cent. higher than for the comparable period in the prior year and revenue per booking was
16.6 per cent. higher at £162.4. Several factors have led to the rise in average revenue per booking,
including an increase in the volume of in-house accommodation bookings, the launch of a new insurance
product (see paragraph 2.8 of this Part 9: ‘‘Operating and Financial Review’’) and increased attachment
rates of in-house transfers to bookings.
5.3 Marketing and advertising expenses
Marketing and advertising expenses (excluding offline advertising) as a percentage of revenue increased
from 46.0 per cent. for the financial year ended 30 September 2012 to 50.7 per cent for financial year
ended 30 September 2014. The rise in marketing and advertising expenses over this period was primarily
due to an increase in paid online advertising to accelerate the Group’s growth in market share and number
of daily unique visitors (resulting in a 14.4 per cent. increase on a compound basis). In 2014, the Group
invested in its first offline UK regional TV campaign. An initial trial was launched in the Midlands region
in December 2013, during which there was a significant increase in the Group’s brand awareness. As a
result, the trial was extended to two further regions, the North West region and Scotland. The total
investment in TV advertising during the financial year ended 30 September 2014 was £1.0 million.
For the nine month period ended 30 June 2015, marketing and advertising expenses (excluding offline
advertising) represented 48.6 per cent. of revenue, compared to 50.0 per cent. for the prior year period.
This improvement was as a result an increase in revenue per daily unique visitor of 23.5 per cent. over the
same period and improvements in the efficiency of marketing spend driven from investment in the Group’s
bid modelling tool. Following the success of the initial offline campaign in 2014, investment in UK regional
television advertising continued in early 2015 to engage a wider audience across the United Kingdom. This
cost was £1.5 million in total.
5.4 Revenue after marketing costs
Revenue after marketing costs increased from £16.7 million for the financial year ended 30 September
2012 to £21.5 million for the financial year ended 30 September 2014, representing a 13.5 per cent. increase
on a compound basis.
For the nine month period ended 30 June 2015, revenue after marketing costs increased from £15.9 million
to £23.0 million (representing a 44.7 per cent. increase on the comparable period in the prior year).
5.5 Costs
The following table sets out a summary of costs for the financial years ended 30 September 2012,
30 September 2013 and 30 September 2014 and the nine month periods ended 30 June 2014 and 30 June
2015:
Year ended
30 September
Nine months ended
30 June
2014
(unaudited)
2015
£m
£m
2012
£m
2013
£m
2014
£m
Variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overhead costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation/amortisation(1) . . . . . . . . . . . . . . . . . . .
3.4
3.4
1.0
3.2
3.3
1.2
3.5
3.9
1.3
2.7
2.8
1.0
3.6
4.0
1.2
Total costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.8
7.7
8.7
6.5
8.8
(1)
Excludes amortisation of brand and website technology intangible assets.
85
%
Revenue
%
Revenue
%
Revenue
%
Revenue
%
Revenue
Variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overhead costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation/amortisation . . . . . . . . . . . . . . . . . . . . .
10.8%
11.0%
3.2%
8.5%
8.8%
3.2%
7.7%
8.6%
2.9%
7.9%
8.3%
3.0%
7.5%
8.2%
2.5%
Total costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25.2%
20.5%
19.2%
19.3%
18.4%
5.6 Variable costs
Variable costs have decreased as a percentage of revenue from 10.8 per cent. in the financial year ended
30 September 2012 to 7.7 per cent. in the financial year ended 30 September 2014. Variable costs also
decreased as a percentage of revenue from 7.9 per cent. in the nine month period ended 30 June 2014 to
7.5 per cent. in the nine month period ended 30 June 2015.
This reduction over this period was the result of increased efficiencies in the contact centre, where the
proportion of holidays booked online has increased from 88.2 per cent. in the financial year ended
30 September 2012 to 89.5 per cent. in the financial year ended 30 September 2014. This has increased
further in the nine month period ended 30 June 2015 to 93.6 per cent.
Over the financial years from 30 September 2012 to 30 September 2014, the proportion of business
transacted on debit cards has also increased from 57.5 per cent. to 72.8 per cent., respectively (thereby
reducing card costs). The Board considers that variable costs are closely linked to booking volumes.
5.7 Overhead costs
As a percentage of revenue, overhead expenses reduced for the financial year ended 30 September 2012
from 11 per cent. to 8.8 per cent. for the financial year ended 30 September 2013 as the Group’s business
gained operational leverage. The reduction slowed in the financial year ended 30 September 2014 as the
Group invested in its direct contracting function to drive revenue through disintermediation of third-party
suppliers.
For the nine month period ended 30 June 2015, overhead expenses as a percentage of revenue remained
constant at 8.2 per cent. compared to the comparable period in the previous year with operational leverage
offset by the investment in its direct contracting function year-on-year.
5.8 Holding company costs
Following Admission, the Board expects the incremental costs of being a listed company to be broadly in
line with historic holding company costs (excluding any costs arising from awards under the LTIP in the
near future).
5.9 EBITDA for the UK Segment
The Group increased EBITDA for the UK Segment by a compound annual growth rate of 19.2 per cent.
from £9.9 million for the financial year ended 30 September 2012 to £14.1 million for the financial year
ended 30 September 2014, with investment in 2014 in offline and direct contracting suppressing growth in
EBITDA. EBITDA performance for nine months ended 30 June 2015 reached £15.4 million versus
£10.4 million for the nine months ended 30 June 2014, an increase of 48.6 per cent with the accelerated
growth being delivered as a result of the investments made in the financial year ended 30 September 2014.
5.10 International Segment
The following table sets out a summary of the combined and consolidated income statement and the
number of bookings for the International Segment for the financial years ended 30 September 2012,
86
30 September 2013 and 30 September 2014 and the nine month periods ended 30 June 2014 and 30 June
2015:
Year ended
30 September
International
TTV . . . . . . . . . . . . . . .
Revenue . . . . . . . . . . . .
Revenue after Marketing
Variable costs . . . . . . . .
Overhead costs . . . . . . .
EBITDA . . . . . . . . . . . .
2012
£m
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2013
£m
.
.
.
.
.
.
0.9
0.1
—
—
—
—
0.1
—
—
—
—
—
Number of bookings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,725
190
2014
£m
1.6
0.1
(0.6)
—
(0.1)
(0.7)
1,231
Nine months ended
30 June
2014
(unaudited)
2015
£m
£m
1.1
0.1
(0.5)
—
(0.1)
(0.6)
837
4.2
0.5
(1.0)
(0.1)
(0.2)
(1.3)
3,572
During the financial year ended 30 September 2012, the Group offered a hotel-only proposition into seven
European markets. While sales were evidenced, the profitability of the venture was under pressure due to
the low booking values associated with single element sales and the high marketing expenses of competing
with other single element OTAs via Google. The Group’s management took the decision to withdraw
investment from this offering and review the Group’s expansion strategy for the following financial year.
In October 2014, the Group recruited a Director of International with significant online travel experience
in markets outside of the United Kingdom to oversee the roll-out of the Group’s international offering.
The Group focused its point of sale holiday platform in Sweden (under the eBeach brand name) which has
traded in line with Board expectations. In the nine month period ended 30 June 2015, TTV was
£4.2 million. The Group launched a national TV campaign in Sweden in May 2015 (at a cost of
£0.2 million) that drove an increase in branded visitors to the Group’s websites with branded share rising to
23 per cent. in that same month. The Group plans to launch new point of sale platforms in Norway and/or
Denmark in the short term, subject to Sweden’s performance in the financial year ended 30 September
2015.
5.11 Retained earnings
The following table sets out a summary of the Group’s retained earnings for the financial years ended
30 September 2012, 30 September 2013 and 30 September 2014 and the nine month periods ended 30 June
2014 and 30 June 2015:
Year ended
30 September
2012
£m
Group operating profit before amortisation
costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Exceptional costs . . . . . . . . . . . . . . . . . . .
Amortisation of intangible assets . . . . . . . .
and exceptional
................
................
................
Group operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit/(loss) before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit/(loss) for the year/period . . . . . . . . . . . . . . . . . . . . . . . . .
2013
£m
2014
£m
9.0 11.3 12.8
—
— (3.7)
(0.9) (1.0) (5.3)
Nine months ended
30 June
2014
(unaudited)
2015
£m
£m
9.4
(3.7)
(4.0)
13.4
—
(4.2)
1.7
9.2
(1.4)
(5.1)
0.1
(1.4)
(5.8)
0.1
(4.8)
(4.7)
2.1
(1.7) (2.3) (1.0)
(0.9)
(1.1)
(5.6)
1.0
8.1
10.3
3.8
(0.2)
— (1.7)
(4.0) (4.8) (7.0)
0.1
0.2
0.1
4.0
2.3
5.7
3.4
(5.8)
5.12 Taxation (charge)/credit on ordinary activities
The Group recorded a taxation charge on ordinary activities of £1.7 million, £2.3 million and £1 million for
the financial years ended 30 September 2012, 30 September 2013 and 30 September 2014, respectively.
87
This taxation charge was £0.9 million and £1.1 million for the nine month periods ended 30 June 2014 and
30 June 2015, respectively.
The unaudited statutory rate of tax applicable was 25.3 per cent., 23.6 per cent. and 22 per cent. for the
financial years ended 30 September 2012, 30 September 2013 and 30 September 2014, respectively and
22 per cent. and 20.7 per cent. for the nine month periods ended 30 June 2014 and 30 June 2015,
respectively. The equivalent effective tax rate for the financial years ended 30 September 2012,
30 September 2013 and 30 September 2014 was 42.7 per cent., 40.5 per cent. and 32.7 per cent.,
respectively and the equivalent effective tax rate for the nine month periods ended 30 June 2014 and
30 June 2015 was 40.3 per cent. and 20.8 per cent., respectively. The Board currently expects that the
effective tax rate of the Group shall be broadly in line with the statutory rate of tax on an ongoing basis.
This was affected in all periods by disallowed shareholder interest under the Advance Thin Capitalisation
Agreement programme and, in the year ended 30 September 2014, by a deferred tax credit of £0.7 million
which is released in line with the amortisation of £4.3 million on the valuation of acquired intangibles of
£30.1 million (representing the Group’s brand) and £22.5 million (representing the Group’s technology) on
the investment by Inflexion in October 2013. The deferred tax credit for the nine month period ended
30 June 2015 was £0.7 million.
5.13 Profit/(loss) for the year/period
The Group recorded profit of £2.3 million, £3.4 million and a loss of £5.8 million for the financial years
ended 30 September 2012, 30 September 2013 and 30 September 2014, respectively. These figures were a
loss of £5.6 million and a profit of £1 million for the financial periods ended 30 June 2014 and 30 June
2015, respectively.
This recorded profit was after charging shareholder interest on shareholder loans associated with
Livingbridge’s investment over the financial years ended 30 September 2012 and 30 September 2013 and
Inflexion’s investment over the financial year ended 30 September 2014 of £4.0 million, £4.8 million, and
£7.0 million, respectively and over the nine month periods ended 30 June 2014 and 30 June 2015 of
£5.1 million and £5.8 million, respectively. The shareholder interest charged in 2012 and 2013 was paid in
October 2013 when Inflexion made its investment and the interest charged in 2014 was compounded into
the loan balance at the end of the year. In the financial year ended 30 September 2014, the exceptional
costs include deal fees charged to the profit and loss account of £3.7 million, which were costs associated
with the investment by Inflexion.
6.
KEY PERFORMANCE INDICATORS
The following table sets out a summary of selected unaudited key performance indicators of the Group for
the financial years ended 30 September 2012, 30 September 2013 and 30 September 2014 and the nine
month periods ended 30 June 2014 and 30 June 2015:
Year ended 30 September
2012
Number of bookings ‘000 . . . . . . .
Revenue per booking (£)(1) . . . . . .
Daily unique visitors(2) . . . . . . . . .
Conversion rate %(3) . . . . . . . . . .
Revenue per daily unique visitor
(£)(4) . . . . . . . . . . . . . . . . . . . .
Marketing as a % of revenue(5) . . .
Variable cost as a % of revenue(6) .
Overhead cost as a % of revenue(7)
2013
2014
.
231,634
271,196
325,867
.
133.4
138.3
140.0
. 36,438,507 40,278,249 47,671,666
.
0.64
0.67
0.68
.
.
.
.
0.85
46.0
10.8
11.0
0.93
49.9
8.5
8.8
0.96
50.7
7.7
8.6
CAGR
12 - 14
Nine months ended 30 June
%
2014
2015
Y-Y
18.6%
242,664
293,809
2.4%
139.3
162.4
14.4% 34,346,458 39,378,033
3.7%
0.71
0.75
6.2%
0.98
50.0
7.9
8.3
(1)
The revenue per booking value is revenue divided by the number of bookings.
(2)
The number of daily unique visitors to the websites.
(3)
Conversion rate: The total number of bookings divided by total daily unique visitors.
(4)
Revenue per daily unique visitor: The total pound revenue divided by the total daily unique visitors.
(5)
Marketing expenses excluding offline advertising expenses divided by revenue.
(6)
Variable costs include wages in the contact centre, card costs and communications divided by revenue.
(7)
Overhead costs excluding depreciation divided by revenue.
88
1.21
48.6
7.5
8.2
21.1
16.6
14.6
5.6
23.5
7.
LIQUIDITY AND CAPITAL RESOURCES
7.1 Overview
The Group generated positive net cash in all financial periods under review in this section apart from the
financial year ended 30 September 2014, when £8.9 million was paid to various sellers in connection with
Livingbridge’s exit and Inflexion’s investment.
The following table sets out the cash flow information for the Group for the financial years ended
30 September 2012, 30 September 2013 and 30 September 2014 and the nine month periods ended 30 June
2014 and 30 June 2015:
Year ended
30 September
2012
£m
2013
£m
2014
£m
Cash flows from operating activities . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities . . . . . . . . . . . . . . . . . . . . .
18.4
9.6
6.2
(1.0) (1.3) (24.8)
(1.3) (2.1) 16.3
Net increase/(decrease) in cash and cash equivalents . . . . . . . .
16.1
6.2
Cash and cash equivalents at beginning of year/period . . . . . . .
11.0
Cash and cash equivalents at end of year/period . . . . . . . . . . .
27.1
Nine months ended
30 June
2014
(unaudited)
2015
£m
£m
17.2
(24.4)
17.0
35.0
(1.6)
(2.3)
(2.3)
9.8
31.1
27.1
33.3
33.3
31.0
33.3
31.0
43.1
62.1
7.2 Cash generated from operating activities
The following table sets out selected cash flow information for the Group for the financial years ended
30 September 2012, 30 September 2013 and 30 September 2014 and the nine month periods ended 30 June
2014 and 30 June 2015:
Year ended
30 September
Cash flows from operating activities
Profit before taxation . . . . . . . .
Adjustments for:
Depreciation . . . . . . . . . . . . . .
Amortisation of intangible assets
Finance costs . . . . . . . . . . . . . .
Finance income . . . . . . . . . . . .
.......................
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2012
£m
2013
£m
4.1
5.8
2014
£m
Nine months ended
30 June
2014
(unaudited)
2015
£m
£m
(4.8)
(4.7)
2.1
0.2
0.3
0.3
0.9
0.9
5.3
4.1
4.8
8.7
(0.1) (0.2) (0.1)
0.2
4.0
6.5
(0.1)
0.3
4.2
7.1
(0.1)
5.9
(34.1)
47.6
13.6
(42.1)
65.8
13.5
23.7
Increase in trade and other receivables . . . . . . . . . . . . . . . . . .
Increase in trade and other payables . . . . . . . . . . . . . . . . . . . .
9.2
—
9.8
Decrease/(increase) in working capital . . . . . . . . . . . . . . . . . . .
9.8
11.6
9.4
(7.5) (9.8)
7.9
9.6
0.4
(0.2)
Tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.5) (2.4) (1.5)
(0.1)
— (1.5)
(1.1)
(1.1)
(1.2)
(1.1)
Net cash inflow from operating activities . . . . . . . . . . . . . . . . .
18.4
17.2
35.0
9.6
6.2
Trust account
The Group provides clear and comprehensive consumer protection as it holds an ATOL licence and all
customer monies are held in a trust account until after the provision of the holiday service. The trust
account is governed by a deed between the Group, the Civil Aviation Authority Air Travel Trustees, ABTA
and independent trustees (Barclays Wealth), which determines the inflows and outflows from the account.
All customer receipts are paid into the trust account in full before the holiday departure date. These
payments are held in the trust account until the service is provided—for flights on payment to the supplier
and for hotels and ancillaries on the customer’s return from holiday. The Group does not therefore use
customer pre-payments to fund its business operations.
89
Other than when a customer utilises the low deposit scheme, a customer booking in advance will pay:
(a) a deposit at the time of booking (which will cover the flight cost, plus a minimal hotel deposit and any
ancillary costs payable up front); this amount will pass through the trust and be paid to the flight
provider at the time of booking; and
(b) the balance of their holiday cost at least 14 days before departure. This amount is paid into the trust
until the customer returns from holiday, when it is released to the Group. This will typically be in
advance of the hotel or bed bank suppliers being paid.
Similarly, a customer making a late booking within 14 days of the departure date will pay the full cost when
booking. The full amount will be paid into the trust, with flight costs paid to the flight provider on booking
and the related customer payment released from the trust the following day. The balance will remain in the
trust until the customer returns from holiday, as described above. Customers booking outside of 14 days
can choose to pay in full, as opposed to deposit and balance, at the time of booking in which case the
cashflows follow those booked within 14 days.
Low deposit scheme
If a customer books more than defined number of days in advance of departure, the customer is able to
take advantage of the Group’s low deposit scheme. Currently the prescribed number of days is 45, however
management has the flexibility to amend this and has done so frequently in the past. When a low deposit
offer is in operation, a customer can secure his or her booking with a deposit which is a percentage of the
normal deposit level described above. The deposit paid by the customer is therefore typically lower than
the flight cost. This deposit is paid into the trust and released the following day. The Group pays the full
flight cost on booking and therefore funds the balance above the deposit from cash and debt facilities. The
remainder of the balance due from the customer is then payable normally 28 days after booking for the
flight cost and 14 days before departure date for hotel and other elements. The balance of the flight
deposit is released from the trust, and all other customer monies are held in trust until the customer
returns from holiday. This offer is in contrast to other OTAs, who typically charge customers the full
balance between 8 and 12 weeks prior to holiday departure. See paragraph 4 of Part 8: ‘‘Regulation’’.
Increased use of the low deposit scheme therefore has a cash flow effect on the Group and exposes the
Group to the additional risk of customer cancellation, however it is an important aspect of the Group’s
strategy to drive conversion rates and often enables customers to benefit from lower prices given LCCs
generally offer lower prices the earlier the booking is made. Cancellation rates have been low historically.
The amount of the low deposit as a percentage of the total booking price varies subject to a minimum of
£50, the exact terms of the low deposit scheme vary from month to month and provide management a lever
to manage the level of cash in the business.
Historic operating cashflows
The Group’s cash generated from operating activities decreased from a cash inflow of £18.4 million in the
financial year ended 30 September 2012 to inflows of £9.6 million and £6.2 million in the financial years
ended 30 September 2013 and 30 September 2014, respectively. This was due to an increase in cash held in
the trust on the initial set up of the trust in July 2011. The Group’s cash inflow increased from £17.2 million
in the nine month period ended 30 June 2014 to £35.0 million in the nine month period ended 30 June
2015, because of increased profit before tax and an increase in inflow from working capital due to growth
in volumes where customers have paid cash in advance of travel into the trust. The Group operates a highly
cash generative business model and makes no stock commitment.
January is the peak month for traffic and booked sales (accounting for 13.9 per cent. of bookings for the
financial year ended 30 September 2014) and in February to September sales are relatively stable (with
monthly bookings ranging for the financial year ended 30 September 2014 from 7.3 per cent. to
10.7 per cent.). The period prior to Christmas is quiet, particularly November and December (with
monthly bookings for the financial year ended 30 September 2014 being 3.1 per cent. and 3.7 per cent.,
respectively).
Approximately fifty per cent. of customers travelled in the period June through August in the financial year
ended 30 September 2014 and the Group experiences a similar peak each year. Consequently, the Group’s
cash flows (excluding any cash held in the Trust) experiences a trough prior to June through August and a
cash balance peak in September (excluding restricted cash held). In contrast, only approximately nine per
cent. of customers travelled in the period November through February in the financial year ended
90
30 September 2014. The Group maintains a working capital facility with Lloyds to cover seasonal
requirements and the Group regularly monitors its liquidity position.
7.3 Cash flows from investing activities
The following table sets out selected cash flow information for the Group for the financial years ended
30 September 2012, 30 September 2013 and 30 September 2014 and the nine month periods ended 30 June
2014 and 30 June 2015:
Year ended
30 September
Cash flows from investing activities
Acquisition of shares . . . . . . . . . . . . . . . .
Purchase of property, plant and equipment
Purchase of intangible assets . . . . . . . . . .
Interest received . . . . . . . . . . . . . . . . . . .
2012
£m
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2013
£m
2014
£m
Nine months ended
30 June
2014
(unaudited)
2015
£m
£m
.
.
.
.
—
— (23.1)
(0.3) (0.5) (0.4)
(0.8) (1.1) (1.5)
0.1
0.3
0.2
(23.1)
(0.3)
(1.1)
0.1
—
(0.3)
(1.4)
0.1
Net cash outflow from investing activities . . . . . . . . . . . . . . . . .
(1.0) (1.3) (24.8)
(24.4)
(1.6)
The Group’s cash from investing activities increased from an outflow of £1.0 million in the financial year
ended 30 September 2012 to £1.3 million and £24.8 million in the financial years ended 30 September 2013
and 30 September 2014, respectively. The outflow reduced from £24.4 million in the nine month period
ended 30 June 2014 to £1.6 million in the nine month period ended 30 June 2015 with the year to
30 September 2014 and the nine months to 30 June 2014 affected by the acquisition of shares in the Group
of £23.1 million.
Purchase of property, plant and equipment is primarily IT equipment for staff and data centres and, in the
financial year ended 30 September 2013, £0.3 million from the relocation of the Group’s office to larger
premises to accommodate growth in November 2012.
Purchase of intangible assets is capitalised costs of IT development. IT development costs as a percentage
of total revenue increased marginally from 2.6 per cent. in the financial year ended 30 September 2012 to
2.9 per cent. and 3.3 per cent. in the financial years ended 30 September 2013 and 30 September 2014,
respectively. For the nine month periods ended 30 June 2014 to 30 June 2015, this reduced from 3.3 per
cent. to 3.1 per cent., respectively. The increased investment in staff has underpinned acceleration of the
Group’s product development. The Board believes IT innovation is important to increase customer
conversion rates and revenue growth opportunities. The Group plans to invest material staff resources into
IT development across the multiple platforms (desktop, smartphone, tablet and apps) to support both the
UK Segment and the International Segment.
7.4 Cash flows from financing activities
The following table sets out selected cash flow information for the Group for the financial years ended
30 September 2012, 30 September 2013 and 30 September 2014 and the nine month periods ended 30 June
2014 and 30 June 2015:
Year ended
30 September
Cash flows from financing activities
2012
£m
Proceeds from issue of share capital . . . . . . . . . . . . .
Proceeds from borrowings . . . . . . . . . . . . . . . . . . . .
Repayment of borrowings . . . . . . . . . . . . . . . . . . . . .
Proceeds from related party loan notes on acquisition
Repayment of related party loan notes on acquisition
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Net cash (outflow)/inflow from financing activities . . . . . . . . . . .
2013
£m
2014
£m
—
—
0.1
—
—
20.3
(1.3) (2.1) (1.5)
—
—
41.9
—
— (44.5)
(1.3) (2.1)
16.3
Nine months ended
30 June
2014
(unaudited)
2015
£m
£m
0.1
20.3
(0.8)
41.9
(44.5)
0.1
—
(2.4)
—
—
17.0
(2.3)
The Group’s net cash out flow from financing activities increased from £1.3 million in the financial year
ended 30 September 2012 to £2.1 million in the financial year ended 30 September 2013 to an inflow of
£16.3 million in the financial year ended 30 September 2014. The increase in the financial year ended
91
30 September 2014 was primarily due to the net effect of finance raised for the acquisition by Inflexion net
of loans repaid. The repayment of borrowings in the financial years ended 30 September 2012 and
30 September 2013 related to shareholder loans and, in the financial year ended 30 September 2014,
related to repayment of the Group’s bank term loan of £11.0 million (which was part of the financing for
the investment by Inflexion in October 2013). The Group’s net cash flow from financing activities
decreased from an inflow of £17.0 million in the nine month period ended 30 June 2014 to an outflow of
£2.3 million in the nine month period ended 30 June 2015 due to the effect of the acquisition in October
2013 outlined above.
As at the date of this document, the shareholder loans comprise loan notes created by the following
instruments:
(a) the consideration loan note instrument entered into by OTB Bidco constituting £13,805,525.56
12 per cent. unsecured loan notes due 2019;
(b) the consideration loan note instrument entered into by On the Beach Travel Limited constituting
£1,127,725.89 12 per cent. unsecured loan notes due 2019;
(c) the management loan note instrument entered into by OTB Topco constituting £12,018,192.36
12 per cent. unsecured loan notes due 2019;
(d) the investor loan note instrument entered into by OTB Bidco (as amended and restated immediately
prior to Admission as part of the Reorganisation) constituting £42,573,105.92 12 per cent. loan notes
due 2019; and
(e) the vendor loan note instrument entered into by OTB Topco constituting £1,500,000 12 per cent.
unsecured loan notes due 2019.
7.5 Cash and borrowings
The following table sets out the cash and cash equivalents and indebtedness for the financial years ended
30 September 2012, 30 September 2013 and 30 September 2014 and the nine month periods ended 30 June
2014 and 30 June 2015:
Year ended
30 September
Nine months ended
30 June
2014
(unaudited)
2015
£m
£m
2012
£m
2013
£m
2014
£m
.........................
in the trust . . . . . . . . . . . . . . . . .
27.1
17.0
33.3
18.2
31.0
20.5
43.3
42.6
62.1
56.6
.........................
.........................
(0.3)
—
—
—
(20.5)
1.3
(21.3)
1.4
(18.0)
1.1
External loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.3)
—
(19.2)
(19.9)
(16.9)
(40.9) (43.9) (63.1)
(61.2)
(68.8)
(19.2)
(11.4)
Cash and cash equivalents .
Above includes balance held
Borrowings
Bank loan . . . . . . . . . . . .
Amortised term loan fees .
Shareholder loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (debt)/cash (excluding trust balances and shareholder
loans) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.8
15.1
(8.7)
The trust was set up in July 2011 and the balance at 30 September 2011 was £6.6 million.
The bank loan relates to a term loan of £22.0 million raised on 4 October 2013 as part of the financing for
the investment by Inflexion, being the First Lloyds Facility. It is intended that the First Lloyds Facility be
repaid in full out of the Group’s existing cash balances following Admission. The Company has entered
into the Second Lloyds Facility, being a revolving credit facility of up to £35 million. OTB Topco, OTB
Bidco and certain other members of the Group will accede to the Second Lloyds Facility on Admission.
Drawdown of the loan under the Second Lloyds Facility is subject to evidence that the Reorganisation has
taken effect, Admission, the First Lloyds Facility being repaid in full, OTB Topco, OTB Bidco and certain
other members of the Group having executed an accession deed, in respect of the Second Lloyds Facility
and certain customary conditions (such as receipt of corporate authorities and legal opinions).
The Group’s average month end net debt (excluding trust balances and shareholder loans) for the
12 month period ended 30 June 2015 was £16.7 million.
8.
CRITICAL ACCOUNTING POLICIES
The Group’s critical accounting judgements and estimates are described in note 3 to the combined and
consolidated historical financial information presented in Section B of Part 11: ‘‘Historical Financial
Information’’.
92
PART 10
CAPITALISATION AND INDEBTEDNESS STATEMENT
The Company’s capitalisation as at 17 August 2015 (being the date of incorporation) was £50,000, divided
into one ordinary share of £1 and one redeemable preference share of £49,999 and its cash was £1.
The table below set out the Group’s indebtedness as at 31 July 2015 and the Group’s capitalisation as at
30 June 2015. This statement of capitalisation and indebtedness has been prepared under IFRS using
policies which are consistent with those used in the preparing the Group’s financial information for the
nine month period ended 30 June 2015 as set out in Section B of Part 11: ‘‘Historical Financial
Information’’.
The indebtedness information as at 31 July 2015 has been extracted without material adjustment from the
Group’s unaudited accounting records.
The capitalisation information as at 30 June 2015 has been extracted without material adjustment from the
Group’s financial information for the nine month period ended 30 June 2015 as set out in Section B of
Part 11: ‘‘Historical Financial Information’’.
Capitalisation and indebtedness
31 July 2015
(unaudited)
£’000
Total current debt
Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,143)
Total current debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,143)
Total non-current debt (excluding current portion of the long term debt)
Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unguaranteed / unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(13,945)
(69,583)
Total non-current debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(83,528)
Notes:
The Group’s debt is shown net of unamortised issue costs.
The Group’s secured liabilities relate to bank loans.
The Group has no guaranteed debt.
The Group’s unsecured / unguaranteed liabilities relate to the Shareholder loans.
Shareholders’ equity
30 June 2015
£’000
Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
470
470
Note:
Shareholders’ equity does not include the profit and loss account reserve.
93
The following table sets out the net consolidated financial funds of the Group as at 31 July 2015:
31 July 2015
(unaudited)
£’000
Net indebtedness
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash equivalents (restricted cash trust accounts) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,894
58,547
Total liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68,441
Current financial receivable
Current bank debt
Current portion of non current debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,143)
Current financial debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,143)
Net current financial indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,298
Non-current bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current financial debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(13,945)
(69,583)
Non current financial indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(83,528)
Net financial indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(18,230)
Notes:
The Group has no indirect or contingent indebtedness as at 31 July 2015.
The Group’s debt is shown net of unamortised issue costs.
The Group has derivatives not reflected in the analysis above with the following fair values as at 31 July
2015:
Liability
(unaudited)
£’000
Foreign current hedging
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,806)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,806)
94
PART 11
HISTORICAL FINANCIAL INFORMATION
SECTION A: ACCOUNTANTS’ REPORT
26AUG201506570176
The Directors
On the Beach Group plc
Park Square
Bird Hall Lane
Cheadle
SK3 0XN
Numis Securities Limited (the ‘‘Sponsor’’)
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
23 September 2015
Dear Sirs
On the Beach Group plc
We report on the combined and consolidated financial information of the Group (being On the Beach
Travel Limited and its subsidiaries prior to 4 October 2013, and On the Beach Topco Limited and its
subsidiaries thereafter) for the years ended 30 September 2012, 30 September 2013 and 30 September
2014, and the nine months ended 30 June 2015 set out in Section B of Part 11: ‘‘Historical Financial
Information’’ below (the ‘‘Financial Information Table’’). The Financial Information Table has been
prepared for inclusion in the prospectus dated 23 September 2015 (the ‘‘Prospectus’’) of On the Beach
Group plc (the ‘‘Company’’) on the basis of the accounting policies set out in note 2 to the Financial
Information Table. This report is required by item 20.1 of Annex I to the PD Regulation and is given for
the purpose of complying with that item and for no other purpose.
We have not audited the financial information for the nine months ended 30 June 2014 and accordingly do
not express an opinion thereon.
Responsibilities
The Directors of the Company are responsible for preparing the Financial Information Table in
accordance with the basis of preparation set out in note 2(a) to the Financial Information Table.
It is our responsibility to form an opinion as to whether the Financial Information Table gives a true and
fair view, for the purposes of the Prospectus and to report our opinion to you.
Save for any responsibility which we may have to those persons to whom this report is expressly addressed
and for any responsibility arising under item 5.5.3R(2)(f) of the Prospectus Rules to any person as and to
the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and
will not accept any liability to any other person for any loss suffered by any such other person as a result of,
arising out of, or in connection with this report or our statement, required by and given solely for the
purposes of complying with item 23.1 of Annex I to the PD Regulation, consenting to its inclusion in the
Prospectus.
PricewaterhouseCoopers LLP, Benson House, 33 Wellington Street, Leeds, LS1 4JP
T: +44 (0) 1132 894 000, F: +44 (0) 1132 894 460, www.pwc.uk
PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC303525. The registered office of PricewaterhouseCoopers LLP is
1 Embankment Place, London WC2N 6RH. PricewaterhouseCoopers LLP is authorised and regulated by the Financial Conduct Authority for designated investment business.
UKMATTERS:35977341.1
95
Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the
amounts and disclosures in the financial information. It also included an assessment of significant
estimates and judgments made by those responsible for the preparation of the financial information and
whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and
adequately disclosed.
We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
financial information is free from material misstatement whether caused by fraud or other irregularity or
error.
Our work has not been carried out in accordance with auditing or other standards and practices generally
accepted in the United States of America and accordingly should not be relied upon as if it had been
carried out in accordance with those standards and practices.
Opinion
In our opinion, the Financial Information Table gives, for the purposes of the Prospectus dated
23 September 2015, a true and fair view of the state of affairs of the Group as at the dates stated and of its
profits/losses, cash flows and changes in equity for the periods then ended in accordance with the basis of
preparation set out in note 2(a) to the Financial Information Table.
Declaration
For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the
Prospectus and declare that we have taken all reasonable care to ensure that the information contained in
this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to
affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I to
the PD Regulation.
Yours faithfully
PricewaterhouseCoopers LLP
Chartered Accountants
96
SECTION B: HISTORICAL FINANCIAL INFORMATION OF THE GROUP
COMBINED AND CONSOLIDATED INCOME STATEMENT
For the years ended 30 September 2012, 30 September 2013, 30 September 2014
and the 9 month periods ended 30 June 2014 (unaudited) and 30 June 2015
2012
£’000
2013
£’000
2014
£’000
9m to June
2014
(unaudited)
£’000
230,931
280,888
359,831
270,939
354,607
30,972
37,548
45,768
33,863
48,250
(24,505)
(34,815)
12,789
9,358
13,435
(3,724)
(5,312)
(3,663)
(3,962)
—
(4,191)
Note
Total transaction value* . . . . . . . . . . . . . .
Revenue . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative expenses before
amortisation and exceptional costs . . . . .
5
(21,954) (26,266) (32,979)
Group operating profit before amortisation
and exceptional costs . . . . . . . . . . . . . .
Exceptional costs . . . . . . . . . . . . . . . . . . .
Amortisation of intangible assets . . . . . . . .
9,018
7
—
(888)
Group operating profit . . . . . . . . . . . . . . .
11,282
—
(958)
9m to June
2015
£’000
8,130
10,324
3,753
1,733
9,244
(196)
(3,969)
93
(14)
(4,759)
227
(1,735)
(6,961)
154
(1,378)
(5,108)
91
(1,401)
(5,830)
125
Net finance costs . . . . . . . . . . . . . . . . . . .
(4,072)
(4,546)
(8,542)
(6,395)
(7,106)
Profit/(loss) before taxation . . . . . . . . . . .
4,058
5,778
(4,789)
(4,662)
2,138
(1,733)
(2,340)
(962)
(952)
2,325
3,438
(5,751)
(5,614)
177p
262p
Finance costs . . . . . . . . . . . . . . . . . . . . . .
Interest on shareholder loans . . . . . . . . . .
Finance income . . . . . . . . . . . . . . . . . . . .
Taxation . . . . . . . . . . . . . . . . . . . . . . . . .
8
8
9
11
Profit/(loss) and total comprehensive
income for the year/period . . . . . . . . . .
Earnings per share (expressed in pence
per share):
Basic and diluted earnings per share . . . . .
*
12
This is a non-GAAP measure. See note 2(j).
97
(438)p
(428)p
(1,125)
1,013
76p
COMBINED AND CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the parent
On the Beach
Travel Limited
Retained
Share capital invested capital
earnings
Total equity
£’000
£’000
£’000
£’000
Balance at 1 October 2011 . . . . . . . . . . . . . . . . . . .
(4,216)
(4,216)
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at 30 September 2012 . . . . . . . . . . . . . . . . .
—
—
2,325
(1,891)
—
—
2,325
(1,891)
Balance at 1 October 2012 . . . . . . . . . . . . . . . . . . .
—
(1,891)
—
(1,891)
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at 30 September 2013 . . . . . . . . . . . . . . . . .
—
—
3,438
1,547
—
—
3,438
1,547
Balance at 1 October 2013 . . . . . . . . . . . . . . . . . . .
—
1,547
—
1,547
......
......
......
370
25
—
—
—
—
—
(5,751)
370
25
(5,751)
......
......
395
—
(5,751)
(1,547)
(5,356)
Issue of shares on incorporation (note 1) . . .
Issue of shares . . . . . . . . . . . . . . . . . . . . . .
Loss for the year . . . . . . . . . . . . . . . . . . . .
Changes in ownership interests on acquistion
(note 1) . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at 30 September 2014 . . . . . . . . . . .
(1,547)
—
Balance at 1 October 2014 . . . . . . . . . . . . . . . . . . .
Issue of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit for the period . . . . . . . . . . . . . . . . . . . . . . . .
395
75
—
—
(5,751)
—
1,013
(5,356)
75
1,013
Balance at 30 June 2015 . . . . . . . . . . . . . . . . . . . . .
470
—
(4,738)
(4,268)
98
COMBINED AND CONSOLIDATED BALANCE SHEET
Note
30 September
2012
£’000
30 September
2013
£’000
13
14
20
28,380
339
525
28,501
579
135
71,854
656
—
69,125
652
—
29,244
29,215
72,510
69,777
7,587
—
27,154
15,003
—
33,321
24,734
65
31,003
66,884
9
62,125
Total current assets . . . . . . . . . . . . . . . . . . .
34,741
48,324
55,802
129,018
Total assets . . . . . . . . . . . . . . . . . . . . . . . . .
63,985
77,539
128,312
198,795
—
—
395
470
Assets
Non-current assets
Intangible assets . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . .
Deferred tax . . . . . . . . . . . . . . . . . . . . . . . .
Total non-current assets . . . . . . . . . . . . . . .
Current assets
Trade and other receivables . . . . . . . . . . . . .
Other financial assets . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . .
Equity
Share capital . . . . . . . . . . . . . . . . . . . . . . . .
On The Beach Travel Limited invested
capital . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained deficit . . . . . . . . . . . . . . . . . . . . . .
16
23
17
21
30 September
2014
£’000
30 June
2015
£’000
(1,891)
—
1,547
—
—
(5,751)
—
(4,738)
Equity shareholder funds . . . . . . . . . . . . . . .
(1,891)
1,547
(5,356)
(4,268)
Total (deficit)/equity . . . . . . . . . . . . . . . . . .
(1,891)
1,547
(5,356)
(4,268)
(39,211)
—
—
—
(79,065)
(9,668)
(82,719)
(8,937)
(39,211)
—
(88,733)
(91,656)
Non-current liabilities
Loans and borrowings . . . . . . . . . . . . . . . . .
Deferred tax . . . . . . . . . . . . . . . . . . . . . . . .
19
20
Total non-current liabilities . . . . . . . . . . . . .
Current liabilities
Corporation tax payable . . . . . .
Derivative financial instruments
Loans and borrowings . . . . . . .
Trade and other payables . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(1,126)
(92)
(1,981)
(23,466)
(660)
(299)
(43,903)
(31,130)
(832)
(689)
(3,140)
(40,274)
(1,490)
(3,411)
(3,140)
(103,366)
Total current liabilities . . . . . . . . . . . . . . . .
(26,665)
(75,992)
(44,935)
(111,407)
Total liabilities . . . . . . . . . . . . . . . . . . . . . .
(65,876)
(75,992)
(133,668)
(203,063)
Total equity and liabilities . . . . . . . . . . . . . .
63,985
77,539
128,312
198,795
23
19
18
99
COMBINED AND CONSOLIDATED CASH FLOW STATEMENT
For the years ended 30 September 2012, 30 September 2013, 30 September 2014
and the 9 month periods ended 30 June 2014 (unaudited) and 30 June 2015
Cash flows from operating activities
Profit/ (loss) before taxation . . . . .
Adjustments for:
Depreciation . . . . . . . . . . . . . . . . .
Amortisation of intangible assets . .
Finance costs . . . . . . . . . . . . . . . .
Finance income . . . . . . . . . . . . . .
30 June
2014
(unaudited)
£’000
30 June
2015
£’000
2012
£’000
2013
£’000
2014
£’000
..............
4,058
5,778
(4,789)
(4,662)
2,138
.
.
.
.
195
888
4,165
(93)
252
958
4,773
(227)
292
5,312
8,696
(154)
223
3,962
6,486
(91)
268
4,191
7,231
(125)
9,357
5,918
13,703
13,500
23,665
9,156
(1,508)
(1,463)
19,418
(1,094)
(1,097)
37,368
(1,199)
(1,164)
6,185
17,227
35,005
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Changes in working capital:
Decrease/(increase) in working capital . . . . . . . . . . . .
9,213
11,534
9,767
450
Cash generated from operations . . . . . . . . . . . . . . . . .
Tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,980 11,984
(500) (2,417)
(75)
(4)
Net cash inflow from operating activities . . . . . . . . . .
18,405
Cash flows from investing activities
Acquisition of shares in Group (includes NCI—see
note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of property, plant and equipment . . . . . .
Purchase of intangible assets . . . . . . . . . . . . . . . .
Interest received . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
9,563
(201)
.
.
.
.
—
— (23,098)
(233)
(497)
(369)
(818) (1,079) (1,506)
93
227
154
(23,098)
(324)
(1,111)
91
—
(264)
(1,462)
125
Net cash outflow from investing activities . . . . . . . . . .
(958) (1,349) (24,819)
(24,442)
(1,601)
—
—
75
(1,310) (2,047) (1,499)
—
—
20,319
—
—
41,912
—
— (44,491)
51
(750)
20,319
41,912
(44,491)
75
(2,357)
—
—
—
Cash flows from financing activities
Proceeds from issue of share capital . . . . . . . . . . . . .
Repayment of borrowings . . . . . . . . . . . . . . . . . . . .
Proceeds from borrowings on acquisition . . . . . . . . .
Proceeds from related party loan notes on acquisition
Repayment of related party loan notes on acquisition
.
.
.
.
.
Net cash (outflow)/inflow from financing activities . . .
(1,310) (2,047)
16,316
17,041
(2,282)
Net increase/(decrease) in cash and cash equivalents . .
16,137
6,167
(2,318)
9,826
31,122
Cash and cash equivalents at beginning of year/period .
11,017
27,154
33,321
33,321
31,003
Cash and cash equivalents at end of year/period . . . . .
27,154
33,321
31,003
43,147
62,125
100
1.
GENERAL INFORMATION
On the Beach Topco Limited (‘‘OTB Topco’’) is a company incorporated and domiciled in the UK.
The address of the registered office is: Park Square, Bird Hall Lane, Cheadle, SK3 0XN. OTB Topco is the
holding company of On the Beach Bidco Limited (‘‘OTB Bidco’’) and its subsidiaries, whose principal
activity is the provision of an internet travel agent, trading under the name On the Beach. The registered
number of OTB Topco is 8703800.
On 4 October 2013, OTB Bidco acquired the entire share capital of On the Beach Travel Limited (‘‘OTB
Travel’’) (the ‘‘Acquisition’’). Prior to the Acquisition, OTB Travel was the parent company within the
Group. At the date of the Acquisition, the ultimate parent of OTB Bidco was OTB Topco.
For the purposes of this historical financial information, the term ‘‘Group’’ means prior to 4 October 2013,
OTB Travel and its consolidated subsidiaries and undertakings, and thereafter, OTB Topco and its
consolidated subsidiaries and undertakings. Following Admission, the ‘‘Group’’, unless the context
otherwise requires, shall mean On the Beach Group plc (the ‘‘Company’’) and its consolidated subsidiaries
and undertakings.
2.
ACCOUNTING POLICIES
(a) Basis of preparation
The constituent parts of the Group during the track record period are explained in note 1. The combined
and consolidated historical financial information therefore presents a financial track record of the Group
for the years ended 30 September 2012, 30 September 2013, 30 September 2014 and the 9 month periods
ended 30 June 2014 and 30 June 2015 of those businesses which were part of the Group at the date of this
document.
The historical financial information is prepared for the purposes of inclusion in the Prospectus of the
Company for the purposes of admission on the main market operated by the London Stock Exchange. This
financial information has been prepared in accordance with the requirements of the Prospectus Directive
regulation and the Listing Rules and in accordance with International Financial Reporting Standards as
adopted by the European Union (‘‘IFRS’’), except as noted below.
IFRS does not provide for the preparation of combined and consolidated financial information and,
accordingly, in preparing the combined and consolidated financial information certain accounting
conventions commonly used for the preparation of historical financial information for inclusion in
investment circulars, as described in the Annexure to SIR 2000 (Investment Reporting Standard applicable
to public reporting engagements on historical financial information) issued by the UK Auditing Practices
Board, have been applied. The application of these conventions results in a material departure from IFRS.
In other respects IFRS has been applied.
Due to a change in capital structure of the Group on 4 October 2013, the historical financial information is
prepared on a combined and consolidated basis which reflects the following:
(i) For the years ended 30 September 2012 and 2013
The financial information is based on the consolidated financial statements of OTB Travel.
(ii) For the year ended 30 September 2014
The financial information is a combination of the consolidated financial information of OTB Travel
and its subsidiaries, On the Beach Beds Limited and On the Beach Limited, for the period from
1 October 2013 to 4 October 2013 and the consolidated financial information of OTB Topco from
5 October 2013 to 30 September 2014.
(iii) For the nine months ended 30 June 2014
The financial information is a combination of the consolidated financial information of OTB Travel
and its subsidiaries, On the Beach Beds Limited and On the Beach Limited, for the period from
1 October 2013 to 4 October 2013 and the consolidated financial information of OTB Topco from
5 October 2013 to 30 June 2014.
(iv) For the nine months ended 30 June 2015
The financial information is based on the consolidated financial statements of OTB Topco.
101
The Group’s deemed transition date to IFRS is 1 October 2011. The principles and requirements for first
time adoption of IFRS are set out in IFRS 1 ‘‘First-time adoption of International Financial Reporting
Standards’’. IFRS 1 allows certain exemptions in the application of particular standards to prior periods in
order to assist companies with the transition process. In this regard, the Group has not applied the
requirements of IFRS 3 to acquisitions that occurred before 1 October 2011.
This combined and consolidated historical financial information is prepared on a going concern basis and
under the historical cost convention, as modified for the revaluation of certain financial instruments. The
historical financial information is presented in thousands of pounds sterling (‘‘£’’) except when otherwise
indicated.
The combined and consolidated historical financial information has not been prepared in accordance with
IAS 33 given the changes in the capital structure. An illustrative earnings per share measure for the three
years and nine months is included in note 12 to present the earnings attributable to the shares as at
Admission.
The preparation of historical financial information in conformity with IFRS requires the use of estimates
and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of
revenue and expenses during the reporting period. Although these estimates are based on management’s
reasonable knowledge of the amount, event or actions, actual results may differ from those estimates.
The principal accounting policies adopted in the preparation of the combined and consolidated financial
information are set out below. The policies have been consistently applied to all the years presented, unless
otherwise stated.
(b) Going concern
This historical financial information relating to the Group has been prepared on the going concern basis.
After making appropriate enquiries, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable future and for at least twelve
months from the date of this historical financial information. For these reasons the Directors continue to
adopt the going concern basis in preparing the Group’s historical financial information.
The cashflow projections are the sole responsibility of the Directors based upon their present plans,
expectations and intentions. In this context, the Directors have prepared and considered cash flow
projections for the Group for a period extending one year from the date of approval of this historical
financial information. Based on these cash flows, and having regard to the provision of the debt facilities as
described in notes 19 and 26 to this historical financial information the Directors are satisfied that the
Group are able to meet their liabilities as and when they fall due for the foreseeable future and for a
minimum period of twelve months from the date of this historical financial information.
(c) New standards, amendments and interpretations
IFRS, expected to be applicable in so far as this is currently known to the annual financial statement of the
Group for the year ended 30 September 2015, have been applied. The accounting policies adopted in the
presentation of the historical financial information reflect the adoption of the following new standards as
of 1 October 2014:
IFRS 10, ‘Consolidated financial statements’ builds on existing principles by identifying the concept of
control as the determining factor in whether an entity should be included within the consolidated financial
statements of the parent company. The standard provides additional guidance to assist in the
determination of control where this is difficult to assess.
IFRS 11, ‘Joint arrangements’ focuses on the rights and obligations of the parties to the arrangement
rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures.
Joint operations arise where the investors have rights to the assets and obligations for the liabilities of an
arrangement. A joint operator accounts for its share of the assets, liabilities, revenue and expenses. Joint
ventures arise where the investors have rights to the net assets of the arrangement; joint ventures are
accounted for under the equity method. Proportional consolidation of joint arrangements is no longer
permitted.
IFRS 12, ‘Disclosures of interests in other entities’ includes the disclosure requirements for all forms of
interests in other entities, including joint arrangements, associates, structured entities and other off
balance sheet vehicles.
102
Amendment to IAS 32, ‘Financial instruments: Presentation’ on offsetting financial assets and financial
liabilities. This amendment clarifies that the right of set-off must not be contingent on a future event. It
must also be legally enforceable for all counter-parties in the normal course of business, as well as in the
event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms.
Amendments to IAS 36, ‘Impairment of assets’, on the recoverable amount disclosures for non-financial
assets. This amendment removed certain disclosures of the recoverable amount of cash generating units
(‘‘CGUs’’) which had been included in IAS 36 by the issue of IFRS 13.
Amendment to IAS 39, ‘Financial instruments: Recognition and measurement’ on the novation of
derivatives and the continuation of hedge accounting. This amendment considers legislative changes to
‘over-the-counter’ derivatives and the establishment of central counter-parties. Under IAS 39 novation of
derivatives to central counter-parties would result in discontinuance of hedge accounting. The amendment
provides relief from discontinuing hedge accounting when novation of a hedging instrument meets
specified criteria.
IFRIC 21, ‘Levies’, sets out the accounting for an obligation to pay a levy if that liability is within the scope
of IAS 37 ‘Provisions’. The interpretation addresses what the obligating event is that gives rise to pay a levy
and when a liability should be recognised.
Other standards, amendments and interpretations which are effective for the financial period ended
30 September 2015 are not material to the Group.
(d) New standard, amendments and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual
periods beginning after 1 July 2015, and have not been applied in preparing these combined and
consolidated historical financial information. None of these is expected to have a significant effect on the
combined and consolidated historical financial information of the Group, except the following set out
below:
IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial
assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the
guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9
retains but simplifies the mixed measurement model and establishes three primary measurement
categories for financial assets: amortised cost, fair value through other comprehensive income (‘‘OCI’’)
and fair value through profit and loss. The basis of classification depends on the entity’s business model
and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are
required to be measured at fair value through profit or loss with the irrevocable option at inception to
present changes in fair value in OCI not recycled. There is now a new expected credit losses model that
replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes
to classification and measurement except for the recognition of changes in own credit risk in OCI, for
liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge
effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship
between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one
management actually use for risk management purposes. Contemporaneous documentation is still
required but is different to that currently prepared under IAS 39. The standard is effective for accounting
periods beginning on or after 1 January 2018. Early adoption is permitted. The Group is yet to assess
IFRS 9’s full effect.
IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes
principles for reporting useful information to users of financial statements about the nature, amount,
timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.
Revenue is recognised when a customer obtains control of a good or service and thus has the ability to
direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 ‘Revenue’
and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual
periods beginning on or after 1 January 2018 and earlier application is permitted. The Group is still
assessing the effect of IFRS 15.
103
(e) Basis of consolidation
(i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The
Group controls an entity when the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the
entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
They are deconsolidated from the date that control ceases.
(ii) Transactions eliminated on consolidation
Intragroup balances, and any gains and losses or income and expenses arising from intragroup
transactions, are eliminated in preparing the combined and consolidated financial information. Gains
arising from transactions with jointly controlled entities are eliminated to the extent of the Group’s
interest in the entity. Losses are eliminated in the same way as gains, but only to the extent that there
is no evidence of impairment.
(f) Goodwill
Goodwill arising on the acquisition of subsidiary undertakings and trade and assets represents the excess of
the cost of acquisition over the fair value of the identifiable assets and liabilities at the date of acquisition.
Goodwill is initially recognised as an asset at cost and is subsequently remeasured at cost less any
accumulated impairments losses. Goodwill which is recognised as an asset is reviewed for impairment at
least annually. Any impairment is recognised immediately in the income statement and is not subsequently
reversed. On disposal of a subsidiary the attributable amount of goodwill is included in the determination
of the profit or loss on disposal.
For the purposes of impairment testing, goodwill is allocated to the cash generating units expected to
benefit from the combination. If the recoverable amount is less than the carrying amount of the unit, the
impairment loss is allocated to first reduce the amount of goodwill allocated to the unit and then the other
assets in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
An impairment loss is reversed if there has been a change in the estimates used to determine the
recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount
does not exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
(g) Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities
at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at
the foreign exchange rate ruling at that date.
Foreign exchange differences arising on translation are recognised in the income statement.
(h) Financial instruments
(i) Derivative financial instruments
The Group enters into forward foreign exchange contracts to manage exposure to foreign exchange
rate risk. Further details of these derivative financial instruments are disclosed in note 23 of this
historic financial information. Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently remeasured to their fair value at each reporting date.
The resulting gain or loss is recognised in the profit or loss immediately.
(ii) Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they
are measured at amortised cost using the effective interest method, less any impairment losses.
(iii) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are
repayable on demand and form an integral part of the Group’s cash management are included as a
component of cash and cash equivalents for the purpose only of the cash flow statement.
104
All customer monies are held in a trust account until after the provision of the holiday service. The
trust account is governed by a deed between the Group, the Civil Aviation Authority Air Travel
Trustees, ABTA and independent trustees (Barclays Wealth), which determines the inflows and
outflows from the account.
All customer receipts are paid into the trust account in full before the holiday departure date. These
payments are held in the trust account until the service is provided—for flights on payment to the
supplier and for hotels and ancillaries on the customer’s return from holiday. The Group does not
therefore use customer pre-payments to fund its business operations. See note 17.
(iv) Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they
are measured at amortised cost using the effective interest method.
(v) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs.
Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the
effective interest method, less any impairment losses.
(i) Revenue recognition
Commission is measured at the fair value of consideration received or receivable, net of cancellations and
discounts. Cancellations are estimated at the reporting date based on the historical profile of bookings.
Revenue on bookings is recognised on the date of booking.
The Group’s commission is earned as an agent for the supplier or consumer in purchases of travel products
such as flight tickets or hotel accommodation from third party suppliers.
(j) Total Transaction Value
Total transaction value (‘‘TTV’’) is a non-GAAP measure and does not represent the Group’s statutory
turnover as the Group acts as an agent. TTV represents the price at which goods and services have been
sold to the consumer by the principal.
(k) Business combinations
All business combinations are accounted for by applying the acquisition method. Business combinations
are accounted for using the acquisition method as at the acquisition date, which is the date on which
control is transferred to the Group.
For acquisitions, the Group measures goodwill at the acquisition date as:
(i) the fair value of the consideration transferred; plus
(ii) the recognised amount of any non-controlling interests in the acquiree; plus
(iii) the fair value of the existing equity interest in the acquiree; less
(iv) the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities
assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are
expensed as incurred. Any contingent consideration payable is recognised at fair value at the acquisition
date. If the contingent consideration is classified as equity, it is not remeasured and settlement is
accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent
consideration are recognised in profit or loss.
(l) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment losses.
105
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of
each part of an item of property, plant and equipment. The estimated useful lives are as follows:
Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixtures and fittings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 years
5 years
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
Assets held under finance leases are depreciated over their expected useful economic lives on the same
bases as owned assets, or where shorter, over the term of the relevant lease. The gain or loss arising on the
disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of
the asset and is recognised in income.
(m) Intangible assets and goodwill
(i) Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to
cash-generating units and is not amortised but is tested annually for impairment. In respect of equity
accounted investees, the carrying amount of goodwill is included in the carrying amount of the
investment in the investee.
(ii) Website and development costs
Expenditure on research activities is recognised in the income statement as an expense as incurred.
Expenditure on development activities is capitalised if the product or process is technically and
commercially feasible and the Group intends to and has the technical ability and sufficient resources
to complete development, future economic benefits are probable and if the Group can measure
reliably the expenditure attributable to the intangible asset during its development. Development
activities involve a plan or design for the production of new or substantially improved products or
processes. The expenditure capitalised includes the cost of materials and direct labour. Other
development expenditure is recognised in the income statement as an expense as incurred. Capitalised
development expenditure is stated at cost less accumulated amortisation and less accumulated
impairment losses.
(iii) Brand
Upon acquisition of the Group by OTB Topco, the On the Beach brand was identified as a separately
identifiable asset.
(iv) Website technology
Upon the acquisition of the Group by OTB Topco, the core platform was identified as a separately
identifiable asset. The Core Platform provides infrastructure to host, maintain and develop the
website.
(v) Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful
lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life
and goodwill are systematically tested for impairment at each balance sheet date. Other intangible
assets are amortised from the date they are available for use. The estimated useful lives are as follows:
Website technology: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Website & development costs: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brand: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10 years
3 years
15 years
(n) Impairment of non-financial assets
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangibles assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where the asset does not generate cash flows that are independent from other
assets, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair
value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time value of
106
money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be
tested individually are grouped together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other assets or groups of assets (the
‘‘cash-generating unit’’, or ‘‘CGU’’). The goodwill acquired in a business combination, for the purpose of
impairment testing, is allocated to CGUs. Subject to an operating segment ceiling test, for the purposes of
goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level
at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting
purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to
benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated
recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in
respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units,
and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.
(o) Employee benefits
The Group operates a defined contribution pension scheme. A defined contribution scheme is a
post-employment benefit plan under which OTB Topco pays fixed contributions into a separate entity and
will have no legal or constructive obligation to pay further amounts. Obligations for contributions to
defined contribution pension plans are recognised as an expense in the income statement in the years
during which services are rendered by employees.
(p) Debt
Debt is initially stated at the amount of net proceeds after the deduction of issue costs. The carrying
amount is increased by the finance cost using the EIR method in respect of the accounting period and
reduced by payments made in the period.
(q) Financing income and expenses
Financing expenses comprise interest payable, finance charges on shares classified as liabilities and finance
leases recognised in profit or loss using the effective interest method, unwinding of the discount on
provisions, and net foreign exchange losses that are recognised in the income statement (see foreign
currency accounting policy). Borrowing costs that are directly attributable to the acquisition, construction
or production of an asset that takes a substantial time to be prepared for use, are capitalised as part of the
cost of that asset. Financing income comprise interest receivable on funds invested, dividend income, and
net foreign exchange gains.
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest
method. Dividend income is recognised in the income statement on the date the entity’s right to receive
payments is established. Foreign currency gains and losses are reported on a net basis.
(r) Exceptional costs
The Group presents on the face of the income statement, those material items of income and expense
which, because of the nature or expected infrequency of events giving rise to them, merit separate
presentation to allow shareholders to understand better the elements of financial performance in the year,
so as to facilitate comparison with prior years and to assess better trends in financial performance.
(s) Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income
statement except to the extent that it relates to items recognised directly in equity, in which case it is
recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax
rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. The following temporary
differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit other than in a business combination, and
107
differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted
at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be
available against which the temporary difference can be utilised.
(t) Provisions
Provisions are created where the Group has a present obligation as a result of a past event, where it is
probable that it will result in an outflow of economic benefits to settle the obligation and where it can be
reliably measured.
(u) Operating leases
Leases where the lessor retains substantially all the risks and rewards of ownership are classified as
operating leases. Lease payments are charged to the income statement on a stringent basis over the term of
the lease.
(v) Segmental reporting
IFRS 8 requires operating segments to be reported in a manner consistent with the internal reporting
provided to the chief operating decision maker. The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified as the
management team, including the Chief Executive Officer, Chief Operating Officer and Chief Finance
Officer. For management purposes, the Group is organised into segments based on location, and
information is provided to the management team on these segments for the purposes of resource
allocation and segment performance management and monitoring.
The management team considers there to be two reportable segments:
(i) Core—activity via UK website (‘‘UK’’)
(ii) Sweden—activity via Swedish website (eBeach.se) (‘‘International’’)
(w) Capital Management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain
an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
3.
CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group’s combined and consolidated financial information under IFRS requires the
Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities. Estimates and judgements are continually evaluated and
are based on historical experience and other factors including expectations of future events that are
believed to be reasonable under the circumstances. Actual results may differ from these estimates.
The Directors consider that the following estimates and judgements are likely to have the most significant
effect on the amounts recognised in the combined and consolidated financial information.
(a) Goodwill
The calculation for considering the impairment of the carrying amount of goodwill requires a comparison
of the present value of cash generating units for which goodwill has been allocated, to the value of goodwill
in the combined and consolidated balance sheet. The calculation of present value requires an estimate of
the future cash flows expected to arise from the cash-generating units and the selection of a suitable
discount rate. Such calculations require judgement relating to the appropriate discount factors and
long-term growth prevalent in a particular market as well as short and medium-term business plans. The
Directors draw upon experience and sensitivity analysis as well as external resources in making these
judgements.
108
(b) Useful economic life of intangible assets
The Group’s policy for applying useful economic lives and residual value of intangible assets has been
determined through applying historical experience and taking into consideration the nature of assets and
their intended use.
(c) Income taxes
Estimates may be required in determining the level of current and deferred income tax assets and
liabilities, which the Directors believe are reasonable and adequately recognise any income tax related
uncertainties. Various factors may have favourable or adverse effects on the income tax assets or liabilities.
These include an estimate of allowable interest deduction which is permitted within HMRC’s thin
capitalisation rules.
4.
BUSINESS COMBINATIONS
On 4 October 2013, the Group acquired all of the ordinary shares in OTB Travel for £30,748,000, satisfied
in cash, vendor loans and £11,178,000 via equity instruments issued. The activity of the Group acquired is
that of an internet travel agent. The purpose of the business combination was to facilitate the sale of the
Group to the current controlling party. The subsidiary contributed net profit of £8,642,000 to the
consolidated net profit for the year ended 30 September 2014.
The acquisition had the following effect on the Group’s assets and liabilities:
Recognised values
on acquisition
£’000
Acquiree’s net assets at the acquisition date:
Intangible assets . . . . . . . . . .
Property plant and equipment
Trade and other receivables . .
Cash and cash equivalents . . .
Trade and other payables . . . .
Loans and borrowings . . . . . .
Deferred tax liabilities . . . . . .
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52,592
579
20,422
25,724
(34,909)
(44,491)
(10,713)
Net identifiable assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,204
Consideration paid:
Cash price paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan notes issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vendor loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,070
11,178
1,500
Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,748
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,544
The goodwill arising for the acquisition is attributable to the strength of the management team and the
growth prospects of the Group.
Acquisition-related costs of £3,724,000 have been charged to exceptional costs (see note 7) in the
combined and consolidated income statement for the year ended 30 September 2014.
The fair value and gross contractual amount of trade and other receivables is £20,422,000.
Acquisition of shares in Group of £23,098,000 in the cash flow statement includes the £18,070,000 above,
with a remaining payment on acquisition for non-controlling interests.
5.
SEGMENTAL REPORTING
As explained in note 2(v) above, the management team considers the reportable segments to be UK and
International. All segment revenue, operating profit, assets and liabilities are attributable to the Group
109
from its principal activities as an online travel agent, and all revenue is generated from external customers
only.
Year ended 30 September 2012
UK
International
Total
£’000
£’000
£’000
Income
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,901
71
30,972
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Holding company board costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,876
(162)
(1,057)
(25)
—
(26)
9,851
(162)
(1,083)
Segment operating profit/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,657
(51)
8,606
Other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(525)
49
Group operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,130
Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,165)
93
Profit before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,058
Year ended 30 September 2013
UK
International
Total
£’000
£’000
£’000
Income
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,535
13
37,548
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Holding company board costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,211
(165)
(1,167)
(47)
—
(43)
12,164
(165)
(1,210)
Segment operating profit/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,879
(90)
10,789
Other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(465)
Group operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,324
Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,773)
227
Profit before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,778
Year ended 30 September 2014
UK
International
Total
£’000
£’000
£’000
Income
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45,621
147
45,768
EBITDA . . . . . . . . . . . . . . . .
Holding company board costs
Depreciation and amortisation
Exceptional acquisition costs .
14,081
(339)
(5,558)
(3,724)
(661)
—
(46)
—
13,420
(339)
(5,604)
(3,724)
4,460
(707)
3,753
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Segment operating profit/(loss) and Group operating profit/(loss) . . . . .
Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8,696)
154
Loss before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,789)
110
9 months ended 30 June 2014
(unaudited)
UK
International
Total
£’000
£’000
£’000
Income
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33,765
98
33,863
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Holding company board costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,394
(263)
(4,155)
(547)
—
(31)
9,847
(263)
(4,186)
Segment operating profit/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,976
(578)
5,398
Acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,665)
Group operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,733
Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,486)
91
Loss before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,662)
9 months ended 30 June 2015
UK
International
Total
£’000
£’000
£’000
Income
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,721
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Holding company board costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,446
(285)
(4,406)
(1,253)
—
(53)
14,193
(285)
(4,459)
Segment operating profit/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,755
(1,306)
9,449
529
48,250
Other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(205)
Group operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9,244)
Finance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7,231)
125
Profit before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,138
6.
EMPLOYEES AND DIRECTORS
(a) Staff numbers
Average monthly number of people (including Executive Directors) employed:
By reportable segment:
UK . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . .
Year ended
30 September
2012
Year ended
30 September
2013
Year ended
30 September
2014
9 months ended
30 June 2014
(unaudited)
9 months ended
30 June 2015
181
4
161
8
241
8
234
6
299
8
185
169
249
240
307
111
(b) Staff costs
The aggregate payroll costs of these persons were as follows:
Year ended
30 September
2012
£’000
Year ended
30 September
2013
£’000
Year ended
30 September
2014
£’000
9 months ended
30 June 2014
(unaudited)
£’000
9 months ended
30 June 2015
£’000
4,632
4,957
5,972
4,365
5,326
5
443
4
477
17
565
10
415
29
491
5,080
5,438
6,554
4,790
5,846
Year ended
30 September
2012
£’000
Year ended
30 September
2013
£’000
Year ended
30 September
2014
£’000
9 months ended
30 June 2014
(unaudited)
£’000
9 months ended
30 June 2015
£’000
600
4
785
3
672
3
505
2
513
2
604
788
675
507
515
Year ended
30 September
2012
£’000
Year ended
30 September
2013
£’000
Year ended
30 September
2014
£’000
9 months ended
30 June 2014
(unaudited)
£’000
9 months ended
30 June 2015
£’000
133
—
192
—
145
3
95
2
108
2
133
192
148
97
110
Wages and salaries . . . . . . . . . .
Defined contribution pension
cost (note 6(f)) . . . . . . . . . . .
Social security costs . . . . . . . . .
(c) Directors’ emoluments
Aggregate emoluments . . . . . . .
Defined contribution pension . .
(d) Highest paid director
Aggregate emoluments . . . . . . .
Defined contribution pension . .
(e) Key management compensation
Key management comprises the Executive Directors, their compensation is as follows:
Wages and salaries . . . . . . . . . .
Short-term non-monetary
benefits . . . . . . . . . . . . . . . .
Post-employment benefits . . . . .
Year ended
30 September
2012
£’000
Year ended
30 September
2013
£’000
Year ended
30 September
2014
£’000
9 months ended
30 June 2014
(unaudited)
£’000
9 months ended
30 June 2015
£’000
594
778
597
449
448
6
4
7
3
11
3
13
2
11
2
604
788
611
464
461
Pension costs under defined contribution schemes are included in the post-employment benefits disclosed
above.
(f) Retirement benefits
The Group offers membership of several defined contribution pension schemes to eligible employees, the
only pension arrangements operated by the Group. The schemes are defined contribution schemes and the
pensions cost in the 9 months to 30 June 2015 was £29,000 (9 months to 30 June 2014 (unaudited): £10,000,
year ended 30 September 2014: £17,000, year ended 30 September 2013: £4,000, year ended 30 September
2012: £5,000).
112
7.
EXCEPTIONAL ITEMS
As referred to in note 1, on 4 October 2013, OTB Bidco acquired the entire issued share capital of OTB
Travel. Non-recurring acquisition related costs of £3,724,000 were incurred in the year ended 30 September
2014 (9 months ended 30 June 2014 (unaudited): £3,663,000). All such costs have been treated as
non-deductible for tax purposes and have increased the tax charge by £819,000 in the year ended
30 September 2014 (9 months ended 30 June 2014 (unaudited): £806,000)
8.
FINANCE COSTS
Year ended
30 September
2012
£’000
Year ended
30 September
2013
£’000
Year ended
30 September
2014
£’000
9 months ended
30 June 2014
(unaudited)
£’000
9 months ended
30 June 2015
£’000
Bank loan interest . . . . . . . . . .
Amortisation of bank loan
arrangement fees . . . . . . . . .
52
4
1,735
1,378
1,401
144
10
—
—
—
Finance costs . . . . . . . . . . . . .
196
14
1,735
1,378
1,401
Loan note interest . . . . . . . . . .
Other interest . . . . . . . . . . . . .
3,790
179
4,692
67
6,961
—
5,108
—
5,830
—
Interest on shareholder loans . .
3,969
4,759
6,961
5,108
5,830
Total finance costs . . . . . . . . . .
4,165
4,773
8,696
6,486
7,231
Year ended
30 September
2012
£’000
Year ended
30 September
2013
£’000
Year ended
30 September
2014
£’000
9 months ended
30 June 2014
(unaudited)
£’000
9 months ended
30 June 2015
£’000
227
154
9.
FINANCE INCOME
Bank interest receivable . . . . . .
93
91
125
10. AUDITOR REMUNERATION
During the year, the Group obtained the following services from OTB Topco’s auditors at costs as detailed
below:
Year ended
30 September
2012
£’000
Fees payable to Company’s
auditor and its associates for
other services:
—The audit of Company’s
subsidiaries . . . . . . . . . . . . .
—Non-audit services . . . . . . . .
—Tax advisory services . . . . . . .
Year ended
30 September
2013
£’000
Year ended
30 September
2014
£’000
9 months ended
30 June 2014
(unaudited)
£’000
9 months ended
30 June 2015
£’000
35
—
—
36
—
—
37
5
14
28
4
—
35
4
—
35
36
56
32
39
113
11. TAXATION
Year ended
30 September
2012
£’000
Year ended
30 September
2013
£’000
Year ended
30 September
2014
£’000
9 months ended
30 June 2014
(unaudited)
£’000
9 months ended
30 June
2015
£’000
854
1,508
1,679
1,430
1,856
467
444
—
—
—
1,321
1,952
1,679
1,430
1,856
330
8
316
40
74
32
Total deferred tax . . . . . . . . . .
412
388
(note 20)
Total tax charge . . . . . . . . . . . .
1,733
2,340
Current tax on profits/(losses)
for the year . . . . . . . . . . . . .
Adjustments in respect of prior
years/periods . . . . . . . . . . . .
Total current tax . . . . . . . . . . .
Deferred tax on profits for the
year
Origination and reversal of
temporary differences . . . . . .
Effect of change in tax rate . . .
Adjustments in respect of prior
years/periods . . . . . . . . . . . .
(727)
1
(479)
1
(731)
—
—
—
(717)
(478)
(731)
962
952
9
1,125
The tax charge differs from the standard rate of corporation tax in the UK. The differences are explained
below:
Year ended
Year ended
Year ended
30 September 30 September 30 September
2012
2013
2014
£’000
£’000
£’000
Profit/(loss) on ordinary activities
before tax . . . . . . . . . . . . . . . . . .
9 months ended
30 June
9 months ended
2014
30 June
(unaudited)
2015
£’000
£’000
4,058
5,778
(4,789)
(4,662)
2,138
Profit/(loss) on ordinary activities
multiplied by the rate of
corporation tax in the UK of
20.67% (30 September 2014: 22%,
30 June 2014: 22%, 30 September
2013: 23.6%, 30 September 2012:
25.3%) . . . . . . . . . . . . . . . . . . . .
Effects of: Other expenses not
deductible . . . . . . . . . . . . . . . . . .
Amortisation deductible . . . . . . . . .
Short term timing differences . . . . .
Adjustments in respect of prior
years/periods . . . . . . . . . . . . . . . .
1,028
1,358
(1,054)
(1,026)
442
113
—
51
12
6
488
2,003
—
4
1,940
137
(99)
723
65
(105)
541
476
9
—
—
Total taxation charge . . . . . . . . . . .
1,733
2,340
962
952
1,125
Reductions in the UK corporation tax rate from 23 per cent. to 21 per cent. (effective from 1 April 2014)
and 20 per cent. (effective from 1 April 2015) were substantively enacted on 2 July 2013. In the Budget on
8 July 2015, the Chancellor announced additional planned reductions to 18 per cent. by 2020. This will
reduce the Company’s future current tax charge accordingly. The deferred tax balances at 30 June 2015
have been calculated based on the rate of 20 per cent. substantively enacted at the balance sheet date.
Future rate reductions would further reduce the UK deferred tax assets recognised but the actual effect
will be dependent on the deferred tax position at the time.
114
12. EARNINGS PER SHARE
9 months ended
30 June
9 months ended
2014
30 June
(unaudited)
2015
£’000
£’000
Year ended
Year ended
Year ended
30 September 30 September 30 September
2012
2013
2014
£’000
£’000
£’000
Profit/(loss) for the year/period . . . .
Weighted average number of
ordinary shares in issue for the
year/period
Basic earnings per share (number of
shares) . . . . . . . . . . . . . . . . . . . .
Basic earnings per share (in pence
per share) . . . . . . . . . . . . . . . . . .
2,325
3,438
1,313,000
1,313,000
177
262
(5,751)
(5,614)
1,313,000
1,013
1,313,000
(438)
1,326,000
(428)
76
There are no shares or options with a dilutive effect and hence the basic and diluted earnings per share are
the same.
The earnings per share presented for the years ended 30 September 2012 and 30 September 2013 are
based on the issued share capital of OTB Topco as at 30 June 2015 (see note 1).
As the Company will not be listed until Admission, an illustrative earnings per share (‘‘EPS’’) calculation
has been presented below using the Shares of On the Beach Group plc as existing immediately prior to
Admission and following the share restructure described in note 26, in order to demonstrate the earnings
attributable to the Shares prior to Admission. The calculation of illustrative basic earnings per Share is
based on profit attributable to Shareholders, as disclosed below, and on 124,999,981 Shares.
Profit/(loss) for the year/period . . .
Year ended
30 September
2012
£’000
Year ended
30 September
2013
£’000
2,325
3,438
9 months ended
30 June
9 months ended
2014
30 June
(unaudited)
2015
£’000
£’000
Year ended
30 September
2014
£’000
(5,751)
(5,614)
Basic earnings per share (in pence
per share) . . . . . . . . . . . . . . . .
1.86
2.75
(4.60)
(4.49)
Basic weighted average number of
shares . . . . . . . . . . . . . . . . . . . 124,999,981 124,999,981 124,999,981 124,999,981
1,013
0.81
124,999,981
The above analysis represents a non-GAAP metric and has been included to assist understanding of the
Group’s business and should be used in conjunction with the relevant GAAP numbers.
13. INTANGIBLE ASSETS
Goodwill
£’000
2012
Website &
development
costs
£’000
Total
£’000
Cost
At 1 October 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,977
—
2,562
818
29,539
818
At 30 September 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,977
3,380
30,357
Accumulated amortisation
At 1 October 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
1,089
888
1,089
888
At 30 September 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
1,977
1,977
26,977
1,403
28,380
Net book amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At 30 September 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
115
Goodwill
£’000
2013
Website &
development
costs
£’000
Total
£’000
Cost
At 1 October 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,977
—
—
3,380
1,079
(49)
30,357
1,079
(49)
At 30 September 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,977
4,410
31,387
Accumulated amortisation .
At 1 October 2012 . . . . . .
Charge for the year . . . . .
On disposals . . . . . . . . . . .
.
.
.
.
.
.
.
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.
.
.
.
.
.
.
.
—
—
—
1,977
958
(49)
1,977
958
(49)
At 30 September 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
2,886
2,886
Net book amount
At 30 September 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,977
1,524
28,501
Website
technology
£’000
Total
£’000
Brand
£’000
Goodwill
£’000
2014
Website &
development
costs
£’000
.
.
.
.
—
—
30,080
—
26,977
(26,977)
21,544
—
4,410
—
—
1,506
—
—
22,512
—
31,387
(26,977)
74,136
1,506
At 30 September 2014 . . . . . . . . . . . . . . . . . . . . .
30,080
21,544
5,916
22,512
80,052
Accumulated amortisation
At 1 October 2013 . . . . . . . . . . . . . . . . . . . . . . . .
Charge for the year . . . . . . . . . . . . . . . . . . . . . . .
—
2,005
—
—
2,886
1,056
—
2,251
2,886
5,312
At 30 September 2014 . . . . . . . . . . . . . . . . . . . . .
2,005
—
3,942
2,251
8,198
Net book amount
At 30 September 2014 . . . . . . . . . . . . . . . . . . . . .
28,075
21,544
1,974
20,261
71,854
Cost
At 1 October 2013 . . . . .
Eliminated on acquisition
Arising on acquisition . .
Additions . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
.
30 June 2015
Website &
development
Website
costs
technology
£’000
£’000
Brand
£’000
Goodwill
£’000
Total
£’000
Cost
At 1 October 2014 . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,080
—
21,544
—
5,916
1,462
22,512
—
80,052
1,462
At 30 June 2015 . . . . . . . . . . . . . . . . . . . . . . . . . .
30,080
21,544
7,378
22,512
81,514
Accumulated amortization
At 1 October 2014 . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for the period . . . . . . . . . . . . . . . . . . . . . .
2,005
1,504
—
—
3,942
999
2,251
1,688
8,198
4,191
At 30 June 2015 . . . . . . . . . . . . . . . . . . . . . . . . . .
3,509
—
4,941
3,939
12,389
Net book amount
At 30 June 2015 . . . . . . . . . . . . . . . . . . . . . . . . . .
26,571
21,544
2,437
18,573
69,125
(a) Website and development costs
Additions in each year relate to the development of software. The amortisation period for website
development costs is 3 years straight line. Amortisation has been recognised within operating profits.
116
(b) Impairment of goodwill
Goodwill acquired through business combinations has been allocated for impairment testing purposes to
two cash generating units, for impairment testing purposes. This represents the lowest level within the
Group at which goodwill is monitored for internal management purposes.
The Group performed its annual impairment test as at 30 June 2015 on the two cash generating units. The
recoverable amount of the CGU has been determined based on the value in use calculations using cash
flow projections derived from financial budgets and projections covering a five year period. The forecasts
are then extrapolated in perpetuity based on an estimated growth rate of 2 per cent. (all other periods
2 per cent.), being the Directors’ estimated view of the long term compound growth in the economy. This is
deemed appropriate because the CGU is considered to be a long term business. Management estimates
discount rates using pre-tax rates that reflect current market assessments of the time value of money and
the risks specific to this CGU. The discount rate applied is 15 per cent. (all other periods 15 per cent.).
The main assumptions on which the forecast cash flows were based include the level of sales and
administrative expenses within the business and have been set by the Directors based on their past
experience of the business and its industry, together with their expectations of the market. The level of
sales depends upon the size of the markets in which the Group operates together with the Directors’
estimations of its market share and competitive pressures, including the level of supplier overrides.
Administrative expenses are dependent upon the net costs to the business of purchasing services. Expenses
are based on the current cost base of the Group adjusted for variable costs and known plans for the
business.
(c) Website technology
Website technology is the core platform that provides the infrastructure to host and develop the website.
The amortisation period for website technology is 10 years straight line. Amortisation has been recognised
within operating profit.
(d) Sensitivity to changes in assumptions
Sensitivity analysis has been completed on key assumptions in the goodwill impairment model in isolation,
and the headroom is significant. This indicates that the value in use will be equal to its carrying amount
following a reduction in EBITDA of 60 per cent. Management believes that no reasonably possible change
in any of the above key assumptions would cause the carrying value of the unit to exceed its recoverable
amount.
14. PROPERTY, PLANT AND EQUIPMENT
Fixtures and
fittings
£’000
2012
Computer
equipment
£’000
Total
£’000
Cost
At 1 October 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
124
31
1,012
202
1,136
233
At 30 September 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
155
1,214
1,369
Accumulated depreciation
At 1 October 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90
21
745
174
835
195
At 30 September 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
111
919
1,030
Net book amount
At 30 September 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44
295
339
117
Fixtures and
fittings
£’000
2013
Computer
equipment
£’000
Total
£’000
Cost
At 1 October 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
155
181
(109)
1,214
316
(658)
1,369
497
(767)
At 30 September 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
227
872
1,099
Accumulated depreciation
At 1 October 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
111
32
(105)
919
220
(657)
1,030
252
(762)
At 30 September 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38
482
520
Net book amount
At 30 September 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
189
390
579
Fixtures and
fittings
£’000
2014
Computer
equipment
£’000
Total
£’000
Cost
At 1 October 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
227
24
—
At 30 September 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
251
Accumulated depreciation
At 1 October 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38
30
—
482
262
(3)
520
292
(3)
At 30 September 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68
741
809
Net book amount
At 30 September 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
183
473
656
872
345
(3)
1,214
30 June 2015
Fixtures and
Computer
fittings
equipment
£’000
£’000
1,099
369
(3)
1,465
Total
£’000
Cost
At 1 October 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
251
—
1,214
264
1,465
264
At 30 June 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
251
1,478
1,729
Accumulated depreciation
At 1 October 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68
13
741
255
809
268
At 30 June 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81
996
1,077
Net book amount
At 30 June 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
170
482
652
15. INVESTMENTS
The Group consists of the parent company, OTB Topco, incorporated in the UK and a number of
subsidiaries held directly or indirectly by OTB Topco.
118
The table below shows details of the wholly owned subsidiaries of the Group.
Subsidiary
On
On
On
On
On
On
(1)
the
the
the
the
the
the
Beach
Beach
Beach
Beach
Beach
Beach
Nature of business
Limited(1) . . . . .
Beds Limited . . .
Bidco Limited . .
Travel Limited . .
Trustees Limited
Holidays Limited
.
.
.
.
.
.
.
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.
Internet travel agent
Internet travel agent
Holding company
Internet travel agent
Employee trust
Dormant
Country of
incorporation
Proportion of
ordinary
shares
held by
parent
%
UK
UK
UK
UK
UK
UK
Proportion of
ordinary
shares
held by the
Group
%
100
100
100
100
100
100
100
100
100
100
100
100
On the Beach Limited has a Swedish trading division which has a corporate identity number of 516408-9186.
There are no restrictions on OTB Topco’s ability to access or use the assets and settle the liabilities of OTB
Topco’s subsidiaries.
16. TRADE AND OTHER RECEIVABLES
30 September
2012
£’000
30 September
2013
£’000
30 September
2014
£’000
30 June
2015
£’000
7,071
195
321
13,431
1,222
350
22,343
2,058
333
63,275
3,214
395
7,587
15,003
24,734
66,884
Amounts falling due within one year:
Trade receivables — net . . . . . . . . . . . . . . . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All receivables are reviewed regularly to assess any associated credit risk. There are no significant
concentrations of credit risk. No impairment has been made to the amounts included above. Fair value is
equal to carrying value for each of the amounts above.
17. CASH AND CASH EQUIVALENTS
Cash at bank and in hand . . . . . . . . . . . . . . . . . . . .
Trust account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30 September
2012
£’000
30 September
2013
£’000
30 September
2014
£’000
30 June
2015
£’000
10,122
17,032
15,123
18,198
10,550
20,453
5,571
56,554
27,154
33,321
31,003
62,125
Trust accounts are restricted cash held separately and only accessible at the point the customer has
travelled.
18. TRADE AND OTHER PAYABLES
Current
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other tax and social security payable . . . . . . . . . . . .
Accruals and deferred income . . . . . . . . . . . . . . . . .
30 September
2012
£’000
30 September
2013
£’000
30 September
2014
£’000
30 June
2015
£’000
18,744
570
4,152
25,340
748
5,042
34,045
144
6,085
92,579
729
10,058
23,466
31,130
40,274
103,366
The fair value of financial liabilities approximates their carrying value due to short maturities. Financial
liabilities are denominated in pounds sterling.
119
19. BORROWINGS
30 September
2012
£’000
Non-current
Bank borrowings . . . . . .
Shareholder loans:
Amounts owed to related
Amounts owed to related
Amounts owed to related
Management . . . . . . .
Current
Bank borrowings . . . . . .
Amounts owed to related
Amounts owed to related
Management . . . . . . .
30 September
2013
£’000
30 September
2014
£’000
30 June
2015
£’000
.....................
—
—
16,015
13,838
parties—Livingbridge . . . . .
parties—Inflexion . . . . . . .
parties—Directors &
.....................
23,628
—
—
—
—
47,855
—
52,281
15,583
—
15,195
16,600
39,211
—
63,050
68,881
39,211
—
79,065
82,719
313
1,668
—
29,791
3,140
—
3,140
—
—
14,112
—
—
1,981
43,903
3,140
3,140
41,192
43,903
82,205
85,859
.....................
parties—Livingbridge . . . . .
parties—Directors &
.....................
Total borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . .
The nominal value of these borrowings at each reporting date is as follows:
Bank Loan A . . . . . . . . . . . . . . . . . . . . . .
Bank Loan B . . . . . . . . . . . . . . . . . . . . . . .
Amounts owed to Livingbridge . . . . . . . . . .
Amounts owed to Inflexion . . . . . . . . . . . .
Amounts owed to Directors & Management
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.
.
.
30 September
2012
£’000
30 September
2013
£’000
30 September
2014
£’000
30 June
2015
£’000
—
—
15,402
—
10,663
—
—
15,402
—
10,663
9,429
11,000
—
42,573
13,518
7,071
11,000
—
50,761
13,518
26,065
26,065
76,520
82,350
Interest rates applicable are as follows:
30 September
2012
%
Bank loan A . . . . . . . . . . . . . . . .
Bank loan B . . . . . . . . . . . . . . . .
A loan notes (Livingbridge) . . . . .
A (PIK) Loan notes (Livingbridge)
AA loan notes (Livingbridge) . . . .
B & C loan notes (Livingbridge) . .
E loan notes (Directors &
Management) . . . . . . . . . . . . . .
Investor A loans (Inflexion) . . . . .
B & C loans (Directors &
Management) . . . . . . . . . . . . . .
.
.
.
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.
.
.
.
.
.
.
30 September
2013
%
30 September
2014
%
30 June
2015
%
.
.
.
.
.
.
—
—
13%
4%
10%
13%
—
—
14%
4%
10%
14%
LIBOR + 4.5%
LIBOR + 5.0%
—
—
—
—
LIBOR + 4.5%
LIBOR + 5.0%
—
—
—
—
...
...
13%
—
14%
—
—
12%
—
12%
...
—
—
12%
12%
Loan notes are unsecured payment in kind notes maturing in 2020. The term loans (Bank loan A and
B) are secured against the Group’s assets.
120
Borrowings have the following maturity profile:
30 September
2012
£’000
30 September
2013
£’000
30 September
2014
£’000
30 June
2015
£’000
Less than one year . . . . . . . . . . . . . . . . . . . . . . . . .
Two to five years . . . . . . . . . . . . . . . . . . . . . . . . . .
Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,981
47,379
—
49,360
—
—
4,161
135,900
—
4,045
132,882
—
Total repayment (including interest) . . . . . . . . . . . .
49,360
49,360
140,061
136,927
—
(16,539)
(840)
(690)
(120)
(667)
(13)
(3,770)
(656)
—
—
—
—
(16,539)
(840)
(690)
(120)
(667)
(13)
(3,770)
(656)
—
—
—
(2,635)
—
—
—
—
—
—
—
—
(43,886)
(1,720)
(15,300)
(1,859)
—
—
—
—
—
—
—
—
(35,698)
(1,720)
(15,300)
26,065
26,065
76,520
82,350
Property, plant
and equipment
£’000
Capitalised
development costs
£’000
Tax assets/
(liabilities)
£’000
Less interest cash flows:
Bank borrowings . . . . . . . . . . . . . .
A loan stock . . . . . . . . . . . . . . . . .
A (PIK) loan stock . . . . . . . . . . . . .
AA loan stock . . . . . . . . . . . . . . . .
B loan stock . . . . . . . . . . . . . . . . .
C loan stock . . . . . . . . . . . . . . . . .
E loan stock . . . . . . . . . . . . . . . . .
Deferred consideration . . . . . . . . . .
Completion loan . . . . . . . . . . . . . .
Investor A loans (Inflexion) . . . . . .
B loans (Directors & Management) .
C loans (Directors & Management) .
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.
Total principal cash flows . . . . . . . . . . . . . . . . . . . .
20. DEFERRED TAX
Intangible asset
revaluation
£’000
30 September 2012
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
786
—
—
(261)
786
(261)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
786
(261)
525
30 September 2013
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
398
—
—
(263)
398
(263)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
398
(263)
135
30 September 2014
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(9,670)
110
—
—
(108)
110
(9,778)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9,670)
110
(108)
(9,668)
30 June 2015
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(9,032)
122
—
—
(27)
122
(9,059)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9,032)
122
(27)
(8,937)
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalised development costs . . . . . . . . . . . . . . . . . . . . . . . . . .
121
1 October
2011
£’000
Recognised in
income
£’000
30 September
2012
£’000
893
(261)
(107)
—
786
(261)
632
(107)
525
1 October
2012
£’000
Recognised in
income
£’000
30 September
2013
£’000
786
(261)
(388)
(2)
398
(263)
525
(390)
135
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalised development costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible asset revaluation . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . .
Capitalised development costs . . . . . . . . . . . . . . . . .
1 October
2013
£’000
Acquired in
business
combination
£’000
Recognised in
income
£’000
30 September
2014
£’000
—
398
(263)
(10,520)
—
—
850
(288)
155
(9,670)
110
(108)
135
(10,520)
717
(9,668)
Intangible asset revaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalised development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1 October
2014
£’000
Recognised in
income
£’000
30 June
2015
£’000
(9,670)
110
(108)
638
12
81
(9,032)
122
(27)
(9,668)
731
(8,937)
Deferred tax assets are only recognised to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against which the temporary difference
can be utilised.
21. CALLED UP SHARE CAPITAL
30 September
2012
£’000
Allotted, called up and fully paid
A ordinary shares . . . . . . . . . . . .
B ordinary shares . . . . . . . . . . . .
C ordinary shares . . . . . . . . . . . .
D ordinary shares . . . . . . . . . . . .
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.
.
30 September
2013
£’000
30 September
2014
£’000
Issue of
shares
£’000
30 June
2015
£’000
—
—
—
—
—
—
—
—
32
9
350
4
—
—
75
—
32
9
425
4
—
—
395
75
470
On 4 October 2013 the following shares were issued by OTB Topco: 643,997 £0.05 A ordinary shares for
£32,200, 186,000 B £0.05 ordinary shares for £9,300, 140,000 £2.50 C ordinary shares for £350,000, and
356,000 £0.01 D ordinary shares for £3,560. All of A, B, C and D share issues have been settled in cash.
The holders of A, B and C ordinary shares are entitled to receive dividends as declared from time to time.
Furthermore, the holders of A and D ordinary shares are entitled to one vote per share at meetings of
OTB Topco.
During the period ended 30 June 2015, 30,000 additional C ordinary shares were issued at their nominal
value of £2.50 per share.
22. COMMITMENTS AND CONTINGENCIES
(a) Capital commitments
The Group had no capital commitments for the years ended 30 September 2012, 2013 and 2014 and for the
periods ended 30 June 2014 (unaudited) and 30 June 2015.
122
(b) Operating lease commitments
The future aggregate minimum lease payments under non-cancellable operating leases as follows:
30 September
2012
£’000
30 September
2013
£’000
30 September
2014
£’000
30 June 2015
£’000
Land & Buildings
One year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Two to five years . . . . . . . . . . . . . . . . . . . . . . . .
Over 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . .
39
1,260
252
197
800
1,028
228
714
714
143
771
514
1,551
2,025
1,656
1,428
The Group’s lease commitments relate to its head office.
(c) Contingencies
In September 2010, proceedings were initiated against On the Beach Limited by Ryanair alleging
infringement of, inter alia, it’s intellectual property rights. The amount of the claim by Ryanair is
unquantifiable by the Group as at the date of this document, given that the legal proceedings are still at an
early stage and the Group’s expectation that final resolution of the dispute might take some time.
23. FINANCIAL INSTRUMENTS
Details of significant accounting policies and methods adopted, including criteria for recognition, the basis
of measurement and the basis on which income and expenses are recognised, in respect of each class of
financial asset, financial liability and equity instrument are disclosed in note 2, accounting policies.
30 September
2012
£’000
30 September
2013
£’000
30 September
2014
£’000
30 June
2015
£’000
Financial assets
Fair value through profit and loss
Interest rate swap . . . . . . . . . . . . . . . . . . . . . . .
Loans and receivables
Cash and cash equivalents . . . . . . . . . . . . . . . . .
Trade and other receivables (note 16) . . . . . . . . .
—
—
65
9
27,154
7,266
33,321
14,653
31,003
24,401
62,125
66,489
Total financial assets . . . . . . . . . . . . . . . . . . . . .
34,420
47,974
55,469
128,623
Financial liabilities
Fair value through profit and loss
Forward exchange contracts . . . . . . . . . . . . . . . .
Financial liabilities measured at amortised cost
Trade and other payables (note 18) . . . . . . . . . . .
Borrowings (note 19) . . . . . . . . . . . . . . . . . . . . .
(92)
(299)
(689)
(3,411)
(18,744)
(41,192)
(25,340)
(43,903)
(34,045)
(82,205)
(92,579)
(85,859)
Total financial liabilities . . . . . . . . . . . . . . . . . .
(59,936)
(69,243)
(116,250)
(174,438)
The following table provides the fair values of the Group’s financial assets and liabilities:
2012
£’000
Financial assets designated as fair value through
profit and loss
Interest swap rate . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial liabilities designated as fair value through
profit and loss
Forward exchange contracts . . . . . . . . . . . . . . . . . . .
Financial liabilities held at amortised cost
Loan notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . .
123
30 September
2013
£’000
2014
£’000
.
—
—
65
.
(92)
(299)
(689)
.
.
30 June
2015
£’000
9
FV Level
2
(3,411)
2
(40,879) (43,903) (93,819) (98,010)
—
— (11,569) (14,648)
2
2
There is no difference between the carrying value and fair value of cash and cash equivalents, trade and
other receivables and trade and other payables.
(a) Financial assets and liabilities designated at fair value through profit and loss
The table below analyses financial instruments measured at fair value, into a fair value hierarchy based on
the valuation technique used to determine fair value.
(i) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
(ii) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices)
(iii) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs)
Interest rate hedge
Level 1
£’000
At 30 September 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At 30 June 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward contracts
At
At
At
At
30
30
30
30
September 2012
September 2013
September 2014
June 2015 . . . .
—
—
Level 1
£’000
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.
.
.
.
.
.
.
—
—
—
—
Level 2
£’000
65
9
Level 2
£’000
(92)
(299)
(689)
(3,411)
Level 3
£’000
—
—
Level 3
£’000
—
—
—
Treasury risk overview
The Group is exposed to a variety of financial risks as set out below:
(iv) Market Risk
The Group’s key financial market risks are in relation to foreign currency rates. Foreign currency risk
results from the substantial cross-border element of the Group’s trading and arises on sales and purchases
that are denominated in a currency other than the functional currency of the business. Group cash
resources are matched with the net funding requirements sourced from three sources namely internally
generated funds, loan facilities and bank funding arrangements.
The foreign currency risk is managed at Group level by the purchase of foreign currency contracts for use
as a commercial hedge.
During the course of the period there has been no changes to the market risk or manner in which the
Group manages its exposure.
The Group is exposed to interest rate risk that arises principally through the Group’s floating rate bank
loans.
Liquidity risk, credit risk and capital risk is considered below. The executive team is responsible for
implementing the risk management strategy to ensure that appropriate risk management framework is
operating effectively, embedding a risk mitigation culture throughout the Group. The Board are provided
with a consolidated view of the risk profile of the Group. All major exposures are identified and mitigating
controls identified and implemented.
Regular management reporting and assessment of the effectiveness of controls provide a balanced
assessment of the key risks and the effectiveness of controls.
The Group does not speculate with derivatives or other financial instruments.
Interest rate risk
The Group is exposed to interest rate risk because entities in the Group borrow funds at fixed and floating
rates. The risk is mitigated by the Group maintaining an appropriate mix between fixed and floating rate
borrowings, and by the used of interest rate swap contracts.
124
Interest rate swap contracts
The Group entered into an interest rate swap instrument during the year. This instrument enabled the
Group to mitigate interest rate fluctuation risk. Under interest rate swap contracts, the Group agrees to
exchange the difference between fixed and floating rate interest amounts calculated on agreed notional
principal amounts. Such contracts enable the Group to mitigate the risk of changing the cash flow
exposures on the issued variable rate debt held. The fair value of the interest rate swaps at the reporting
date is determined by discounting the future cash flows using the curves at the reporting date and the
credit risk inherent in the contracts.
The following table details the notional principal amounts and remaining terms of interest rate swap
contracts outstanding at the reporting date:
June 2015
Outstanding
Trade
date
Effective
date
Termination
Notional
Fixed
date
Currency amount Fair value rate %
Receive fixed pay floating contracts . . 25-Nov-13 07-Jan-14 30-Sep-16
GBP 14,652
(9)
2%
September 2014
Outstanding
Trade
date
Effective
date
Termination
Notional
Fixed
date
Currency amount Fair value rate %
Receive fixed pay floating contracts . . 25-Nov-13 07-Jan-14 30-Sep-16
GBP 14,652
(65)
2%
At the balance sheet date the interest rate profile of the Group’s interest-bearing financial instruments
was:
Fixed rate instruments
2012
£’000
Financial liabilities
Bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30 September
2013
2014
£’000
£’000
30 June
2015
£’000
313
40,879
—
43,903
19,155
63,050
16,978
68,881
41,192
43,903
82,205
85,859
Sensitivity analysis
As all instruments are fixed any change of basis points in interest rates at the balance sheet date would
have no effect on equity and profit or loss. This calculation assumes that the change occurred at the
balance sheet date and had been applied to risk exposures existing at that date.
This analysis assumes that all other variables, in particular foreign currency rates, remain constant and
considers the effect of financial instruments with variable interest rates, financial instrument at fair value
through profit or loss or available for sale with fixed interest rates and the fixed rate element of interest
rate swaps.
The fair value of the interest rate swaps for all periods was determined by discounting the future cash flows
using yield curve data at the reporting date. The interest rate swaps settle on a quarterly basis. The Group
will settle the difference between the fixed and floating interest rate on a net basis. Hedge accounting has
not been applied to these derivative instruments.
Foreign currency risk management
The majority of the Group’s purchases are sourced from outside the United Kingdom and as such the
Group is exposed to the fluctuation in exchange rates (currencies are principally Sterling, US Dollar, Euro
and Swedish Krona). The Group places forward cover on the net foreign currency exposure of its
purchases. The Group foreign currency requirement is reviewed twice weekly and forward cover is
purchased to cover expected usage.
125
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary
liabilities at the reporting date is as follows:
30 September
2013
2012
Euro (E’000)
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .
30 June
2015
2014
839
659
2,506
1,458
(14,180) (18,048) (27,063) (73,798)
12,596
16,689
24,677
68,058
(745)
(700)
2012
US Dollar ($’000)
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
120
30 September
2013
2014
—
—
—
45
(900)
30 September
2012
2013
2014
Cash . . . . . . . . . . . . . . . . .
Trade payables . . . . . . . . .
Trade receivables . . . . . . . .
Forward exchange contracts
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.
30 June
2015
19
(94)
378
(338) (1,824) (2,994)
364
1,018
2,280
—
Swedish Krona (SEK ‘000)
(4,282)
(336)
30 June
2015
—
—
37
—
17
—
7
—
163
—
74
—
423
(6)
289
(490)
37
24
237
216
Foreign currency sensitivity
The Group is mainly exposed to US Dollars and Euros. The following table details the Group sensitivity to
a percentage change in Pounds Sterling against these currencies. The sensitivity analysis of the Group’s
exposure to foreign currency risk at the reporting date has been determined based on a 10 per cent. change
taking place at the beginning of the financial period and held constant throughout the reporting period:
30 September
2012
2013
2014
£’000
£’000
£’000
Euro—10%
Weakening—10% . .
Strengthening—10%
US Dollar
Weakening—10% . .
Strengthening—10%
SEK
Weakening—10% . .
Strengthening—10%
30 June
2015
£’000
.......................................
.......................................
(39)
75
(22)
26
(67)
82
(168)
219
.......................................
.......................................
—
—
6
26
(150)
123
19
(24)
.......................................
.......................................
—
—
—
—
—
—
(20)
24
The Group uses forward exchange contracts to hedge its foreign currency risk against sterling. The forward
contracts have maturities of less than one year after the balance sheet date.
126
As a matter of policy the Group does not enter into derivative contracts for speculative purposes. The
details of such contracts at the year-end, by currency were:
Foreign currency
E’000
EUR
Notional Value
£’000
Fair value
£’000
30 June 2015
Less than 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 to 6 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 to 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
77,625
15,554
3,225
57,673
11,391
2,351
(2,877)
(410)
(74)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
96,404
71,415
(3,361)
£’000
E’000
£’000
30 September 2014
Less than 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 to 6 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 to 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,275
3,969
6,548
16,283
3,162
5,232
(443)
(61)
(117)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,792
24,677
(621)
E’000
£’000
30 September 2013
Less than 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 to 6 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 to 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,327
2,101
2,183
13,043
1,791
1,855
(998)
(150)
(149)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,611
16,689
(1,297)
E’000
£’000
£’000
£’000
30 September 2012
6 to 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
615
487
2
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
615
487
2
Foreign currency
Kr’000
SEK
Notional Value
£’000
30 June 2015
Less than 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 to 6 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,200
200
485
16
(10)
(1)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,400
501
(11)
Foreign currency
$’000
USD
Notional Value
£’000
30 June 2015
Less than 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 to 6 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,820
460
1,189
321
(31)
(8)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,280
1,510
(39)
Fair value
£’000
Fair value
£’000
$’000
£’000
£’000
30 September 2014
Less than 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
6
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
6
—
127
$’000
£’000
£’000
30 September 2013
Less than 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
599
377
(7)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
599
377
(7)
(v) Credit risk
Credit risk refers to the risk that counterparty will default on
financial loss to the Group. Credit risk arises from cash balances
well as credit exposures to customers, including outstanding
committed transactions. Credit risk is managed separately for
exposures.
its contractual obligations resulting in
and derivative financial instruments, as
receivables, financial guarantees and
treasury and operating related credit
The ageing of trade receivables at the balance sheet date was:
Not
past due
£’000
At
At
At
At
30
30
30
30
September 2012
September 2013
September 2014
June 2015 . . . . .
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7,064
13,425
22,340
63,270
Past due
0 - 30 days
£’000
1
3
1
2
Past due
> 30 days
£’000
6
3
2
3
Total
£’000
7,071
13,431
22,343
63,275
The maximum exposure to credit risk at each reporting date is the fair value of financial assets and trade
receivables.
(vi) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
It is Group policy to maintain a balance of funds, borrowing, committed bank loans and other facilities
sufficient to meet anticipated short-term and long-term financial requirements. In applying the policy the
Group continuously monitors forecast and actual cash flows against the maturity profiles of financial assets
and liabilities. It is Group policy to ensure that a specific level of committed facilities is always available
based on forecast working capital requirements. Cash forecasts identifying the Group’s liquidity
requirements are produced and are sensitised for different scenarios including, but not limited to,
decreases in profit margins and weakening of sterling against other functional currencies.
128
The following are the contractual maturities of financial liabilities:
Carrying
amount
£’000
Financial liabilities at amortised cost
30 September 2012
Trade payables . . . . . . . . . .
Other payables . . . . . . . . . .
Bank loans . . . . . . . . . . . . .
Other interest bearing loans .
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30 September 2013
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest bearing loans . . . . . . . . . . . . . . . . . . . . . .
30 September 2014
Trade payables . . . . . . . . . .
Other payables . . . . . . . . . .
Any other liabilities . . . . . . .
Bank loans . . . . . . . . . . . . .
Other interest bearing loans .
30 June 2015
Trade payables . . . . . . . . . .
Other payables . . . . . . . . . .
Bank loans . . . . . . . . . . . . .
Other interest bearing loans .
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Contractual
cash flows
£’000
Within
1 year
£’000
Between
1 and 5 years
£’000
18,744
4,722
313
40,879
18,744
4,722
313
49,047
18,744
4,722
313
1,668
—
—
—
47,379
64,658
72,826
25,447
47,379
£’000
£’000
£’000
£’000
25,340
5,790
43,903
25,340
5,790
49,360
25,340
5,790
49,360
—
—
—
75,033
80,490
80,490
—
£’000
£’000
£’000
£’000
34,045
6,085
144
19,155
63,050
34,045
6,085
144
23,062
116,999
34,045
6,085
144
4,161
—
—
—
—
18,901
116,999
122,479
180,335
44,434
135,900
£’000
£’000
.
.
.
.
£’000
£’000
92,579
10,787
16,978
68,881
92,579
10,787
19,928
116,999
92,579
10,787
4,045
—
—
—
15,883
116,999
189,225
240,293
107,411
132,882
Capital management
It is the Group’s policy to maintain an appropriate equity capital base so as to maintain investor, creditor
and market confidence and to sustain the future development of the business.
The capital structure of the Group consists of the net cash (borrowings disclosed in note 19) and equity of
the Group as disclosed in note 21. The Group is not subject to any externally imposed capital
requirements.
24. RELATED PARTY TRANSACTIONS
The following transactions were carried out with related parties:
(a) Loan notes
Movement in the year/period:
Livingbridge . . . . . . . . . . . . . . . . . .
Inflexion . . . . . . . . . . . . . . . . . . . .
Directors and members of the close
family of directors . . . . . . . . . . . .
30 September
2012
£’000
30 September
2013
£’000
30 September
2014
£’000
30 June 2014
(unaudited)
£’000
30 June 2015
£’000
15,641
—
15,402
—
47,855
46,450
4,426
—
196
13,583
13,137
1,405
129
Loan notes issued are unsecured. Loan notes are to be settled in cash upon maturity. Interest is charged on
the outstanding balances at the rates set out in note 19.
The outstanding balance of the above transactions at the year end date was:
30 September
2012
£’000
30 September
2013
£’000
30 September
2014
£’000
30 June 2014
(unaudited)
£’000
30 June 2015
£’000
25,296
—
29,791
—
—
47,855
—
46,450
—
52,281
15,583
14,112
15,195
14,749
16,600
30 September
2012
£’000
30 September
2013
£’000
30 September
2014
£’000
30 June 2014
(unaudited)
£’000
30 June 2015
£’000
—
63
—
63
227
—
185
—
222
—
Issued to:
Livingbridge . . . . . . . . . . . . . . . . . .
Inflexion . . . . . . . . . . . . . . . . . . . .
Directors and members of the close
family of directors . . . . . . . . . . . .
(b) Management fees
Fees charged by:
Inflexion . . . . . . . . . . . . . . . . . . . .
Livingbridge . . . . . . . . . . . . . . . . . .
Fees charged by related parties are settled in cash. All amounts owing had been settled prior to the year
end date.
In addition, an Exit Fee (estimated to be £902,656) will be paid by the Group to Inflexion 2010 General
Partner Guernsey LP immediately following Admission pursuant to the Investment Agreement. The Exit
Fee will be triggered by, amongst other things, a listing of the Company and is equal to the sum of 1 per
cent. of the enterprise value of the Company (reduced proportionately to reflect the fact that the listing of
the Company is not a disposal of the entire issued share capital of the Company).
25. ULTIMATE PARENT COMPANY AND PARENT COMPANY OF LARGER GROUP
The ultimate controlling party of OTB Topco is deemed to be OTB Holdings Limited Partnership (acting
by its general partner Inflexion 2010 General Partner Limited) as a result of its majority shareholding in
OTB Topco. OTB Topco was incorporated on 24 September 2013.
The consolidated financial statements of the Group are available to the public and can be obtained from
Companies House, Crown Way, Cardiff CF14 3UZ.
26. POST BALANCE SHEET EVENTS
(a) Second Lloyds Facility
The Company entered into the Second Lloyds Facility on 18 September 2015 with Lloyds. OTB Topco,
OTB Bidco and certain other members of the Group will accede to the Second Lloyds Facility on
Admission. A revolving credit facility is being made available under the terms of the Second Lloyds Facility
in an aggregate amount of up to £35,000,000.
Drawdown of the loan under the Second Lloyds Facility is subject to evidence that the Reorganisation has
taken effect, Admission, the First Lloyds Facility being repaid in full, OTB Topco, OTB Bidco and certain
other members of the Group having executed an accession deed in respect of the Second Lloyds Facility
and certain customary conditions (such as receipt of corporate authorities and legal opinions).
The borrowing limits under the Second Lloyds Facility will vary monthly throughout the period of the
Second Lloyds Facility to reflect the seasonal borrowing requirements of the Group, ranging from
£2,000,000 in one month to the full £35,000,000 in another month.
The Second Lloyds Facility will be available up to the second anniversary of the closing date (or for a
shorter period of time at the Company’s discretion). It is to be repaid in monthly installments which vary in
accordance with the Group’s seasonal requirements. No early prepayment fees are payable.
130
The margin contained in the Second Lloyds Facility is dependent on gross leverage ratio and the rate per
annum ranges from 1.10 per cent. to 1.90 per cent. for the utilised facility and 0.39 per cent. to 0.67 per
cent. for the non-utilised facility.
The terms of the Second Lloyds Facility include the following financial covenants:
(i) that the ratio of total debt to EBITDA in respect of any relevant period shall not exceed 2:1 (with
a one-off increase to a ratio of 2.5:1); and
(ii) that the ratio of EBITDA to finance charges in respect of any relevant period shall not be less
than 5:1.
(b) Reorganisation
In connection with Admission, the Group has undertaken a reorganisation of its corporate structure that
will result in the Company becoming the ultimate holding company of the Group and OTB Topco
becoming the Company’s direct subsidiary. The Company was incorporated on 17 August 2015 and, in
connection with the Offer, the Reorganisation is due to take place immediately prior to Admission to
result in the Company becoming the ultimate holding company of the Group and OTB Topco becoming
the Company’s direct subsidiary. On incorporation and immediately prior to publication of this Prospectus,
the share capital of the Company was £50,000, divided into one ordinary share of £1 and one redeemable
preference share of £49,999, both of which were allotted to Inflexion. The consideration for the issue of the
redeemable preference share on incorporation was an undertaking by Inflexion to pay cash of £49,999,
while the consideration for the issue of the ordinary share on incorporation was £1 which was paid in cash
by Inflexion. As part of the Reorganisation, Inflexion shall pay the £49,999 outstanding in respect of its
redeemable preference share in the Company, following which the redeemable preference share shall be
immediately redeemed by the Company out of the proceeds of the Offer receivable by the Company.
The insertion of the Company as a new holding company constitutes a group reorganisation and will be
accounted for using merger accounting principles. The Reorganisation will not be effective until
immediately prior to Admission and the consolidated financial statements plc will be presented as if the
Company had always been part of the same group.
As part of the Reorganisation, shareholder loan notes outstanding immediately prior to Admission of
£67,328,107 will be exchanged for shares. The accrued but unpaid interest thereon (excluding the loan
notes held by Inflexion) of £3,568,013 will be paid in cash.
(c) Adoption of employee share plans
On 3 September 2015, the Company adopted the LTIP and the SIP conditional upon Admission.
No awards have been made conditional upon Admission. The LTIP and the SIP are further described in
paragraph 9 of Part 15: ‘‘Additional Information’’ of this document.
(d) Relationship Agreement
On 23 September 2015, the Company and Inflexion entered into the Relationship Agreement. The
principal purpose of the Relationship Agreement is to ensure that the Company will be capable of carrying
on its business independently of Inflexion for so long as Inflexion (together with its concert parties) holds a
Controlling Interest.
Pursuant to the Relationship Agreement (and for so long as Inflexion holds a Controlling Interest):
(i) the parties shall procure that all transactions and relationships between the Company and any
other member of the Group and Inflexion (or any of its associates) are conducted at arm’s length
and on normal commercial terms; and
(ii) Inflexion shall (and shall procure that each of its associates shall), amongst other matters: (i) not
take any action that would have the effect of preventing the Company from complying with its
obligations under the Listing Rules; and (ii) not propose or procure the proposal of a shareholder
resolution which is intended or appears to be intended to circumvent the proper application of
the Listing Rules.
The Relationship Agreement will be effective as from Admission and remain in effect for so long as:
(i) Inflexion (and/or any of its associates or concert parties) holds a Controlling Interest; and
131
(ii) the Ordinary Shares are admitted to the premium listing segment of the Official List maintained
by the FCA.
27. EXPLANATION OF TRANSITION TO IFRS
The date of the Group transition to IFRS for the purposes of this document is 1 October 2011 (the
‘‘Transition Date’’).
The accounting policies described in note 2 were applied when preparing the combined and consolidated
historical financial information for the years ended 30 September 2012, 30 September 2013, 30 September
2014, the 9 months ended 30 June 2014 (unaudited) and the 9 months ended 30 June 2015 and the
combined and consolidated balance sheet as at the Transition Date.
In preparing its opening IFRS combined and consolidated balance sheet and adjusting amounts reported
previously in the financial statements prepared in accordance with UK GAAP (Generally Accepted
Accounting Practice in the UK, previous GAAP), the Group has applied IFRS 1 First-Time Adoption of
International Financial Reporting Standards, which contains a number of voluntary exemptions and
mandatory exceptions from the requirement to apply IFRS retrospectively.
Adjustments Made in Connection with Transition to IFRS
This is the first combined and consolidated historical financial information prepared in accordance with
IFRS. The following material adjustments were made to the UK GAAP financial statements in connection
with the transition to IFRS:
(a) To align the presentation of certain items of assets and liabilities, income and expenses with the
requirements of IFRS, the Group made a number of adjustments from the UK GAAP financial
statements.
(b) The major adjustments were:
(i) Under Adopted IFRSs, website development costs are recognised as intangibles, rather than
expensed in the profit and loss account, and amortised over their useful economic life. As such
the carrying value of development costs has been reclassified to intangible assets. In addition,
certain existing website development assets have been reclassified from property, plant and
equipment to intangible costs (IAS 38 Intangible assets in the subsequent tables).
(ii) Under Adopted IFRS’s derivatives must be separately disclosed. As a result the foreign exchange
balances have been revalued to prevailing spot rates (IAS 39 Financial instruments in the
subsequent tables).
(iii) The reclassification of development costs and associated amortisation has created timing
differences with the underlying tax base. As a result a deferred tax liability has been created
(IAS 12 Deferred tax in the subsequent tables).
(iv) Under Adopted IFRSs, goodwill is not amortised, but is instead subject to periodic impairment
reviews. As such previous amortisation has been reversed (IAS 38 Intangible assets (goodwill) in
the subsequent tables).
132
Reconciliations to IFRS of data provided under previous GAAP are provided in the tables below.
1 October 2011
UK GAAP
£’000
IAS 38
Intangible
assets
£’000
IAS 12
Deferred tax
£’000
Total effect
of change to
IFRS
£’000
Under IFRS
£’000
Assets
Non-current assets
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . .
26,977
68
541
—
1,407
(240)
—
—
—
—
1,407
(240)
26,977
1,475
301
Total non-current assets . . . . . . . . . . . . . . .
27,586
1,167
—
1,167
28,753
Current assets . . . . . . . . . .
Trade and other receivables
Cash and cash equivalents .
Deferred tax . . . . . . . . . . .
.
.
.
.
7,414
11,018
894
—
—
—
—
—
—
—
(262)
—
—
—
(262)
7,414
11,018
632
Total current assets . . . . . . . . . . . . . . . . . .
19,326
—
(262)
(262)
19,064
Total assets . . . . . . . . . . . . . . . . . . . . . . . .
46,912
1,167
(262)
905
47,817
Equity
Share capital . . . . . . . . . . . . . . . . . . . . . . .
Share premium . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . .
(1,015)
(126)
6,262
—
—
(1,167)
—
—
262
—
—
(905)
(1,015)
(126)
5,357
Total equity . . . . . . . . . . . . . . . . . . . . . . . .
5,121
(1,167)
262
(905)
4,216
Non-current liabilities
Financial liabilities . . . . . . . . . . . . . . . . . .
(35,759)
—
—
—
(35,759)
Total non-current liabilities . . . . . . . . . . . .
(35,759)
—
—
—
(35,759)
Current liabilities
Trade and other payables . . . . . . . . . . . . . .
Current tax liabilities . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . .
(16,274)
—
(16,274)
—
—
—
—
—
—
—
—
—
(16,274)
—
(16,274)
Total liabilities . . . . . . . . . . . . . . . . . . . . .
(52,033)
—
—
—
(52,033)
Total equity and liabilities . . . . . . . . . . . . .
(46,912)
262
(905)
(47,817)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
133
(1,167)
IAS 38
Total
IAS 39
Intangible IAS 38
IAS 12
effect of
Financial
assets
Intangible Deferred change to
UK GAAP instruments (goodwill)
assets
tax
IFRS
Under IFRS
£’000
£’000
£’000
£’000
£’000
£’000
£’000
30 September 2013
Assets
Non-current assets
Goodwill . . . . . . . . . . . . . . . .
Other intangible assets . . . . . .
Property, plant and equipment
Deferred tax . . . . . . . . . . . . .
.
.
.
.
22,109
50
585
433
—
—
—
—
4,868
—
—
—
—
1,474
(6)
—
—
—
—
(298)
4,868
1,474
(6)
(298)
26,977
1,524
579
135
Total non-current assets . . . . . . . . .
23,177
—
4,868
1,468
(298)
6,038
29,215
Current assets
Trade and other receivables . . . . . .
Cash and cash equivalents . . . . . . .
14,966
33,352
37
(31)
—
—
—
—
—
—
37
(31)
15,003
33,321
Total current assets . . . . . . . . . . . .
48,318
6
—
—
—
6
48,324
Total assets . . . . . . . . . . . . . . . . . .
71,495
6
4,868
1,468
(298)
6,044
77,539
Equity
Share capital . . . . . . . . . . . . . . . . .
Share premium . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . .
(1,020)
(126)
5,643
—
—
(6)
—
—
(4,868)
—
—
(1,468)
—
—
298
—
—
(6,044)
(1,020)
(126)
(401)
Total equity . . . . . . . . . . . . . . . . . .
4,497
(6)
(4,868)
(1,468)
298
(6,044)
(1,547)
Current liabilities
Trade and other payables . .
Other financial instruments
Loan notes . . . . . . . . . . . .
Current tax liabilities . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
. (31,429)
.
—
. (43,903)
.
(660)
299
(299)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
299
(299)
—
—
(31,130)
(299)
(43,903)
(660)
Total liabilities . . . . . . . . . . . . . . . . (75,992)
—
—
—
—
—
(75,992)
Total equity and liabilities . . . . . . . (71,495)
(6)
(4,868)
(1,468)
298
(6,044)
(77,539)
Reconciliation of profit for the year ended 30 September 2013
UK GAAP
£’000
Effect of
transition to
adopted IFRSs
£’000
Adopted
IFRSs
£’000
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,548
(27,421)
—
1,155
37,548
(26,266)
Group operating profit before amortisation . . . . . . . . . . . . . . . . . .
10,127
1,155
11,282
Amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,434)
1,476
Group operating profit after amortisation . . . . . . . . . . . . . . . . . . .
7,693
2,631
Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,773)
227
—
—
(4,773)
227
Net finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,546)
—
(4,546)
Profit before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,147
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,309)
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
838
2,631
(31)
2,600
(958)
10,324
5,778
(2,340)
3,438
Notes to the reconciliation of profit:
(a) Under adopted IFRSs the accounting policy for goodwill is such that goodwill is not amortised but
tested annually for impairment. As such the amortisation charge was removed from the combined and
consolidated income statement.
134
(b) Under adopted IFRSs the costs of acquisition costs cannot be added to the cost of investment. As
such the costs have been written off in the year.
(c) Under adopted IFRSs development costs must be capitalised. As such expenses incurred to develop
the website have been capitalised as intangible assets. The costs in the year have been added to
intangible assets. Amortisation of the carrying value of the capitalised assets has been charged to the
combined and consolidated income statement.
135
PART 12
UNAUDITED PRO FORMA FINANCIAL INFORMATION
SECTION A: UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma statement of net assets for the Group set out below has been prepared on the
basis set out in the notes below to illustrate the effect of the Offer, Reorganisation and re-financing on the
net assets of the Group, had the Offer, Reorganisation and re-financing taken place on 30 June 2015.
The unaudited pro forma information has been prepared for illustrative purposes only and, by its nature,
addresses a hypothetical situation and does not, therefore, represent the Group’s actual financial position
or results.
The unaudited pro forma information does not constitute financial statements within the meaning of
Section 434 of the Companies Act 2006. Shareholders should read the whole of this document and not rely
solely on the summarised financial information contained in this Part 12 (‘‘Unaudited Pro Forma Financial
Statement of Net Assets’’). PricewaterhouseCoopers LLP’s report on the unaudited pro forma statement of
net assets is set out on Section B of this Part 12 (‘‘Unaudited Pro Forma Financial Statement of Net
Assets’’).
The unaudited pro forma statement of financial position has been prepared on a basis consistent with the
accounting policies of the Group which are under IFRS and on the basis set out in the notes below, and in
accordance with Annex II to the Prospectus Directive Regulation. It should be read in conjunction with the
notes below.
The unaudited pro forma statement of net assets is compiled from the combined and consolidated balance
sheet of the Group as at 30 June 2015 as set out in Part 11: ‘‘Historical Financial Information’’. There is no
financial information for the Company, which was incorporated on 17 August 2015; accordingly, the
Company is excluded from the unaudited pro forma statement of net assets.
In addition, the unaudited pro forma financial information does not purport to represent what the Group’s
financial position and results of operations actually would have been if the Offer, Reorganisation and
re-financing had been completed on the dates indicated nor do they purport to represent the results of
operations for any future period or the financial condition at any future date.
136
Shareholders should read the whole of this Prospectus and not rely solely on the summarised financial
information contained in this Part 12: ‘‘Unaudited Pro Forma Financial Information’’.
Group as at
30 June 2015
£’000
(Note 1)
Net proceeds of the
Offer receivable by
the Company
£’000
(Note 2)
Reorganisation
£’000
(Note 3)
Re-financing
£’000
(Note 4)
Unaudited
Pro Forma
Total
£’000
Assets
Non-current assets
Intangible assets . . . . . . . . . . .
Property, plant and equipment
69,125
652
—
—
—
—
—
—
69,125
652
Total non-current assets . . . . .
69,777
—
—
—
69,777
Current assets
Trade and other receivables . .
Cash and cash equivalents . . .
66,893
62,125
—
6,408
—
(3,082)
—
(6,978)
66,893
58,473
Total current assets . . . . . . . .
129,018
6,408
(3,082)
(6,978)
125,366
Total assets . . . . . . . . . . . . . .
198,795
6,408
(3,082)
(6,978)
195,143
Non-current liabilities
Shareholder loans . . . . . . . . .
External bank debt . . . . . . . . .
Deferred tax liability . . . . . . .
(68,881)
(13,838)
(8,937)
—
—
—
68,881
—
—
—
13,838
—
—
—
(8,937)
Total non-current liabilities . .
(91,656)
—
68,881
13,838
(8,937)
.
.
.
.
(3,140)
(1,490)
(3,411)
(103,366)
—
—
—
—
—
—
—
—
(6,860)
—
—
—
(10,000)
(1,490)
(3,411)
(103,366)
Total current liabilities . . . . . .
(111,407)
—
—
(6,860)
(118,267)
Total liabilities . . . . . . . . . . . .
(203,063)
—
68,881
6,978
(127,204)
Net assets . . . . . . . . . . . . . . .
(4,268)
6,408
65,799
—
Current liabilities
External bank debt . . . . . . . .
Current income tax liabilities
Other financial liabilities . . . .
Trade and other payables . . .
67,939
Notes
1.
The financial information has been extracted, without material adjustment, from the combined and
consolidated financial information of the Group as at 30 June 2015 as set out in Section B of Part 11:
‘‘Historical Financial Information’’.
2.
This column reflects the net proceeds of the Offer receivable by the Company being gross proceeds of
£10 million receivable by the Company, less estimated fees and expenses in relation to the Offer of
£2.7 million payable by the Company. In addition, the Exit Fee (estimated to be £902,656) will be paid
by the Company to Inflexion 2010 General Partner Guernsey LP immediately following Admission
pursuant to the Investment Agreements and in connection with the listing of the Company. The
remaining new proceeds of £3,326,000 will be used by the Company to partly repay the existing
external bank debt (see note 4).
3.
This column reflects the net effect of the following adjustments relating to the Reorganisation as set
out below:
Reorganisation
a.
The Company was incorporated on 17 August 2015 and, in connection with the Offer, the
Reorganisation is due to take place immediately prior to Admission to result in the Company
becoming the ultimate holding company of the Group and OTB Topco becoming the Company’s
direct subsidiary. On incorporation and immediately prior to publication of this Prospectus, the
share capital of the Company was £50,000, divided into one ordinary share of £1 and one
redeemable preference share of £49,999, both of which were allotted to Inflexion. The
consideration for the issue of the redeemable preference share on incorporation was an
137
undertaking by Inflexion to pay cash of £49,999, while the consideration for the issue of the
ordinary share on incorporation was £1 which was paid in cash by Inflexion. As part of the
Reorganisation, Inflexion shall pay the £49,999 outstanding in respect of its redeemable
preference share in the Company, following which the redeemable preference share shall be
immediately redeemed by the Company out of the proceeds of the Offer receivable by the
Company.
b.
The insertion of the Company as a new holding company constitutes a group reorganisation and
will be accounted for using merger accounting principles. The Reorganisation will not be effective
until immediately prior to Admission and the consolidated financial statements will be presented
as if the Company had always been part of the same group.
c.
As part of the Reorganisation, shareholder loan notes as at 30 June 2015 of £65,798,656 will be
exchanged for shares. The accrued but unpaid interest thereon of £3,082,000 as at 30 June 2015
will be paid in cash.
4.
This column reflects the re-financing that is taking place in connection with the Offer and Admission,
being the repayment of the existing external bank debt of £16,978,000 (of which £3,140,000 is classified
within current liabilities and £13,838,000 is classified within non-current liabilities as at 30 June 2015).
This repayment will be refunded using a drawdown of £10,000,000 available at Admission under the
new Second Lloyds Facility, and the remaining balance of £6,978,000 will be funded from the Group’s
cash balance (having taken into account the remaining proceeds of the Offer).
5.
No adjustment has been made to take account of trading results or other transaction undertaken by
the Group since 30 June 2015.
138
SECTION B: ACCOUNTANTS’ REPORT ON PRO FORMA FINANCIAL INFORMATION
26AUG201506570176
The Directors
On the Beach Group plc
Park Square
Bird Hall Lane
Cheadle
SK3 0XN
Numis Securities Limited (the ‘‘Sponsor’’)
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
23 September 2015
Dear Sirs
On the Beach Group plc (the ‘‘Company’’)
We report on the pro forma financial information (the ‘‘Pro Forma Financial Information’’) set out in
section A of Part 12: ‘‘Unaudited Pro Forma Financial Information’’ of the Company’s prospectus dated
23 September 2015 (the ‘‘Prospectus’’) which has been prepared on the basis described in the notes to the
Pro Forma Financial Information, for illustrative purposes only, to provide information about how the
proposed Offer, Reorganisation and re-financing might have affected the financial information presented
on the basis of the accounting policies to be adopted by the Company in preparing the financial statements
for the period ending 30 September 2015. This report is required by item 7 of Annex II to the PD
Regulation and is given for the purpose of complying with that PD Regulation and for no other purpose.
Responsibilities
It is the responsibility of the directors of the Company to prepare the Pro Forma Financial Information in
accordance with Annex II of the PD regulation.
It is our responsibility to form an opinion, as required by item 7 of Annex II to the PD Regulation as to the
proper compilation of the Pro Forma Financial Information and to report our opinion to you.
In providing this opinion we are not updating or refreshing any reports or opinions previously made by us
on any financial information used in the compilation of the Pro Forma Financial Information, nor do we
accept responsibility for such reports or opinions beyond that owed to those to whom those reports or
opinions were addressed by us at the dates of their issue.
Save for any responsibility which we may have to those persons to whom this report is expressly addressed
and for any responsibility arising under item 5.5.3R(2)(f) of the Prospectus Rules to any person as and to
the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and
will not accept any liability to any other person for any loss suffered by any such other person as a result of,
arising out of, or in connection with this report or our statement, required by and given solely for the
purposes of complying with item 23.1 of Annex I to the PD, consenting to its inclusion in the Prospectus.
PricewaterhouseCoopers LLP, Benson House, 33 Wellington Street, Leeds, LS1 4JP
T: +44 (0) 1132 894 000, F: +44 (0) 1132 894 460, www.pwc.uk
PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC303525. The registered office of PricewaterhouseCoopers LLP is
1 Embankment Place, London WC2N 6RH. PricewaterhouseCoopers LLP is authorised and regulated by the Financial Conduct Authority for designated investment business.
UKMATTERS:35977341.1
139
Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. The work that we performed for the purpose of making this
report, which involved no independent examination of any of the underlying financial information,
consisted primarily of comparing the unadjusted financial information with the source documents,
considering the evidence supporting the adjustments and discussing the Pro Forma Financial Information
with the directors of the Company.
We planned and performed our work so as to obtain the information and explanations we considered
necessary in order to provide us with reasonable assurance that the Pro Forma Financial Information has
been properly compiled on the basis stated and that such basis is consistent with the accounting policies of
the Company.
Our work has not been carried out in accordance with auditing standards or other standards and practices
generally accepted in the United States of America and accordingly should not be relied upon as if it had
been carried out in accordance with those standards and practices.
Opinion
In our opinion:
a)
the Pro Forma Financial Information has been properly compiled on the basis stated; and
b)
such basis is consistent with the accounting policies of the Company.
Declaration
For the purposes of Prospectus Rule 5.5.3 R(2)(f) we are responsible for this report as part of the
Prospectus and we declare that we have taken all reasonable care to ensure that the information contained
in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely
to affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I to
the PD Regulation.
Yours faithfully
PricewaterhouseCoopers LLP
Chartered Accountants
140
PART 13
DETAILS OF THE OFFER
1.
SUMMARY OF THE OFFER
This Part 13 should be read in conjunction with Part 4: ‘‘Expected Timetable of Principal Events and Offer
Statistics’’.
52,173,912 Offer Shares are available under the Offer, comprising 5,434,782 New Shares to be issued by
the Company and 46,739,130 Sale Shares to be sold by the Selling Shareholders. The Offer Price is
184 pence per Share.
Shares other than the New Shares will represent 95.8 per cent. of the total issued share capital of the
Company immediately following Admission.
Under the Offer, the Offer Shares are being made available to certain institutional and other investors in
the United Kingdom and elsewhere outside of the United States in reliance on Regulation S and in
accordance with other applicable laws, and in the United States only to QIBs in reliance on Rule 144A or
another exemption from the registration requirements of the Securities Act. Certain restrictions that apply
to the distribution of this Prospectus and the Shares being issued and sold under the Offer in certain
jurisdictions are described in paragraph 50 of this Part 13: ‘‘Details of the Offer’’.
When admitted to trading, the Shares will be registered with ISIN GB00BYM1K758 and SEDOL number
BYM1K75 and will trade under the symbol ‘‘OTB’’. Admission is expected to take place and unconditional
dealings in the Shares are expected to commence on the London Stock Exchange on 28 September 2015.
The New Shares being issued by the Company will, on Admission, rank pari passu in all respects with, and
will rank in full for all dividends and other distributions after that date declared, made or paid on, all
Shares then in issue. The Sale Shares being sold by the Selling Shareholders will be sold together with the
right to receive all dividends and other distributions after that date declared, made or paid on all Shares
after Admission. The Shares will be freely transferable.
Immediately following Admission, it is expected that 37.8 per cent. of the Company’s issued ordinary share
capital will be held in ‘‘public hands’’ (within the meaning of paragraph 6.1.19R of the Listing Rules).
2.
ALLOCATION AND PRICING
All Shares sold or issued pursuant to the Offer will be sold or issued, payable in full, at the Offer Price.
Allocations under the Offer and the Offer Price were determined by the Company and Inflexion in
consultation with Numis. A number of factors were considered in determining the Offer Price and the
basis of allocation under the Offer, including the level and nature of demand for Shares and the objective
of encouraging the development of an orderly after-market in the Shares.
Upon accepting any allocation, prospective investors are contractually committed to acquire the number of
Shares allocated to them at the Offer Price and, to the fullest extent permitted by law, are deemed to have
agreed not to exercise any rights to rescind or terminate, or withdraw from, such commitment.
The rights attaching to the Shares will be uniform in all respects and they will form a single class for all
purposes.
Each investor is required to pay the Offer Price for the Shares sold or issued to such investor in such
manner as directed by Numis.
Liability for stamp duty and stamp duty reserve tax is described in Part 14: ‘‘Taxation’’.
3.
DEALINGS AND ADMISSION
It is expected that dealings in the Shares will commence on a conditional basis on the London Stock
Exchange at 8.00 a.m. on 23 September 2015. The earliest date for settlement of such dealings will be
28 September 2015. All dealings in the Shares prior to the commencement of unconditional dealings will
be on a ‘‘when issued basis’’, will be of no effect if Admission does not take place and such dealings will be
at the sole risk of the parties concerned.
Admission is expected to become effective, and unconditional dealings in the Shares are expected to
commence on the London Stock Exchange, at 8.00 a.m. on 28 September 2015. It is expected that Shares
allocated to investors will be delivered in uncertificated form and settlement will take place through
141
CREST on 28 September 2015 or as soon thereafter as is practicable. Temporary documents of title will
not be issued.
4.
CREST
CREST is a paperless settlement system enabling securities to be transferred and held by electronic means
rather than by a certificate or written instrument. The system is designed to reduce the costs of settlement
and facilitate the processing of settlements and the updating of registers, through an electronic settlement
system. Shares held by the Company’s shareholders in CREST will be in electronic form and evidence of
title to Shares will be established on an electronic register maintained by the Registrar which can only be
altered by an electronic instruction sent through CREST. It will be possible for shareholders in CREST to
transfer their Shares without executing written stock transfer forms.
With effect from Admission, the Articles will permit the holding of Shares under the CREST system. The
Company has applied for the Shares to be admitted to CREST with effect from Admission. Accordingly,
settlement of transactions in the Shares following Admission may take place within the CREST system if
any shareholder so wishes. CREST is a voluntary system and holder of Shares who wish to receive and
retain share certificates will be able to do so. An investor applying for Shares under the Offer may,
however, elect to receive Shares in uncertificated form if such investor is a system-member (as defined in
the CREST Regulations) in relation to CREST.
5.
UNDERWRITING ARRANGEMENTS
The Company, the Directors, the Selling Shareholders and Numis entered into the Underwriting
Agreement pursuant to which Numis agreed, subject to certain conditions, to procure subscribers for the
New Shares to be issued by the Company and purchasers for the Sale Shares to be sold by the Selling
Shareholders in the Offer, or failing which to subscribe for or purchase such Shares themselves, at the
Offer Price.
The Underwriting Agreement provides that the obligations of Numis are conditional upon the satisfaction
of certain conditions, including Admission occurring by no later than 8.00 a.m. on 28 September 2015 or
such later time and/or date as the Company and Numis may agree (not being later than 1 October 2015).
Further details of the terms of the Underwriting Agreement are set out in paragraph 10 of Part 15:
‘‘Additional Information’’.
6.
LOCK-UP ARRANGEMENTS
Pursuant to the Underwriting Agreement, the Executive Directors and certain persons connected with
them and Inflexion have each undertaken, subject to certain exceptions, that they will be subject to certain
lock-up arrangements with respect to the Shares and related securities. Each of the Executive Directors
and certain persons connected with them and Inflexion has given certain customary representations,
warranties and undertakings to Numis in respect of the lock-up arrangements.
Further details of the lock-up arrangements are set out in paragraph 10 of Part 15: ‘‘Additional
Information’’.
7.
SELLING AND TRANSFER RESTRICTIONS
Other than in the United Kingdom, no action has been or will be taken in any jurisdiction that would
permit a public offering of the Offer Shares pursuant to the Offer, or possession or distribution of this
Prospectus or any other offering material or application relating to the Offer Shares in any country or
jurisdiction where action for that purpose is required. Accordingly, the Offer Shares may not be offered or
sold, directly or indirectly, in connection with the Offer and neither this Prospectus nor any other offering
material or advertisement in connection with the Offer Shares may be distributed or published in or from
any country or jurisdictions, except in circumstances that will result in compliance with any and all
applicable rules and regulations of any such country or jurisdiction. This Prospectus does not constitute an
offer to subscribe for or purchase any of the Offer Shares pursuant to the Offer to any person in any
jurisdiction to whom it is unlawful to make such offer or solicitation in such jurisdiction.
The distribution of this Prospectus and the Offer in certain jurisdictions may be restricted by law and
therefore persons into whose possession this Prospectus comes should inform themselves about and
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observe any restrictions, including those set out in the paragraphs that follow. Any failure to comply with
these restrictions may constitute a violation of the securities laws of any such jurisdiction.
7.1 European Economic Area
In relation to each Member State which has implemented the Prospectus Directive (each, a ‘‘Relevant
Member State’’) no Shares have been offered or will be offered pursuant to the Offer to the public in that
Relevant Member State prior to the publication of a prospectus in relation to the Shares which has been
approved by the competent authority in that Relevant Member State or, where appropriate, approved in
another Relevant Member State and notified to the competent authority in that Relevant Member State,
all in accordance with the Prospectus Directive, except that offers of Shares may be made to the public in
that Relevant Member State at any time under the following exemptions under the Prospectus Directive, if
they are implemented in that Relevant Member State:
(a) to any legal entity which is a ‘‘qualified investor’’ as defined under the Prospectus Directive
(‘‘Qualified Investor’’);
(b) to fewer than 100, or, if the Relevant Member State has implemented the relevant provision of the
2010 PD Amending Directive, 150, natural or legal persons (other than Qualified Investors as defined
in the Prospectus Directive) subject to obtaining the prior consent of Numis for any such offer; or
(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of Shares shall result in a requirement for the publication of a prospectus
pursuant to Article 3 of the Prospectus Directive or any measure implementing the Prospectus Directive in
a Relevant Member State.
For the purposes of this provision, the expression an ‘‘offer to the public’’ in relation to any Shares in any
Relevant Member State means the communication in any form and by any means of sufficient information
on the terms of the Offer and any Shares to be offered so as to enable a prospective investor to decide to
subscribe for any Shares, as the same may be varied in that Member State by any measure implementing
the Prospectus Directive in that Member State. The expression ‘‘Prospectus Directive’’ means Directive
2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent
implemented in the Relevant Member State), and includes any relevant implementing measure in each
Relevant Member State and the expression ‘‘2010 PD Amending Directive’’ means Directive 2010/73/EU.
In the case of any Shares being offered to a financial intermediary as that term is used in Article 3(2) of the
Prospectus Directive, such financial intermediary will also be deemed to have represented, acknowledged
and agreed that the Shares acquired by it in the Offer have not been acquired on a nondiscretionary basis
on behalf of, nor have they been acquired with a view to their offer or resale to persons in circumstances
which may give rise to an offer of any Shares to the public other than their offer or resale in a Relevant
Member State to Qualified Investors as so defined or in circumstances in which the prior consent of Numis
has been obtained to each such proposed offer or resale. The Company, Numis and their affiliates, and
others will rely upon the truth and accuracy of the foregoing representation, acknowledgement and
agreement. Notwithstanding the above, a person who is not a Qualified Investor and who has notified
Numis of such fact in writing may, with the prior consent of Numis, be permitted to acquire Shares in the
Offer.
7.2 United Kingdom
In the United Kingdom, this Prospectus is being distributed to, and is directed only at, ‘‘qualified
investors’’ (as defined in the Prospectus Directive) who are also: (i) persons having professional experience
in matters relating to investments falling within the definition ‘‘investment professionals’’ in Article 19(5)
of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the
‘‘Order’’); or (ii) high net worth bodies corporate, unincorporated associations and partnerships and
trustees of high value trusts as described in Article 49(2) of the Order and other persons to whom it may
lawfully be communicated. Any investment or investment activity to which this communication relates is
only available to and will only be engaged in with such persons and persons within the United Kingdom
who receive this Prospectus (other than persons falling within (i) and (ii) above) should not rely on or act
upon this Prospectus.
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7.3 United States
The Company has not been, and will not be, registered under the Investment Company Act and, as such,
investors will not be entitled to the benefits of the Investment Company Act. No offer, purchase, sale or
transfer of the Shares may be made except under circumstances which will not result in the Company being
required to register as an investment company under the Investment Company Act.
The Shares have not been and will not be registered under the Securities Act, or with any securities
commission or regulatory authority of any state or other jurisdiction of the United States. Accordingly, the
Shares will constitute ‘‘restricted securities’’ within the meaning of Rule 144(a)(3) of the Securities Act and
may not be offered, sold, resold, delivered, distributed or otherwise transferred, directly or indirectly, in,
into or from the United States except pursuant to a registration statement that has been declared effective
under the Securities Act or an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and in compliance with any applicable securities laws of any state of the
United States.
The Offer Shares are being offered and sold: (i) outside the United States in reliance on Regulation S; and
(ii) in the United States only to a person the seller or any persons acting on its behalf reasonably believes
to be a QIB in reliance on Rule 144A or another exemption from the registration requirements of the
Securities Act.
In addition, until 40 days after the commencement of the offering of the Offer Shares, an offer or sale of
Offer Shares in the United States by any dealer (whether or not participating in the offering) may violate
the registration requirements of the Securities Act if such offer or sale is made otherwise than in
accordance with Rule 144A.
7.4 Australia
This document:
(a) does not constitute a prospectus or a product disclosure statement under the Corporations Act 2001
of the Commonwealth of Australia (the ‘‘Australia Corporations Act’’);
(b) does not purport to include the information required of a prospectus under Part 6 D.2 of the Australia
Corporations Act or a product disclosure statement under Part 7.9 of the Australia Corporations Act;
(c) has not been, nor will it be, lodged as a disclosure document with the Australian Securities and
Investments Commission (‘‘ASIC’’), the Australian Securities Exchange operated by ASX Limited or
any other regulatory body or agency in Australia; and
(d) may not be provided in Australia other than to select investors (‘‘Exempt Investors’’) who are able to
demonstrate that they:
(i) fall within one or more of the categories of investors under section 708 of the Australia
Corporations Act to whom an offer may be made without disclosure under Part 6 D.2 of the
Australia Corporations Act; and
(ii) are ‘‘wholesale clients’’ for the purpose of section 761G of the Australia Corporations Act.
The Offer Shares may not be directly or indirectly offered for subscription or purchased or sold, and no
invitations to subscribe for, or buy, the Offer Shares may be issued, and no draft or definitive offering
memorandum, advertisement or other offering material relating to any Offer Shares may be distributed,
received or published in Australia, except where disclosure to investors is not required under Chapters 6D
and 7 of the Australia Corporations Act or is otherwise in compliance with all applicable Australian laws
and regulations. By submitting an application for the Offer Shares, each purchaser of or subscriber for
Offer Shares represents and warrants to the Company, the Selling Shareholders, Numis and their affiliates
that such purchaser or subscriber is an Exempt Investor.
As any offer of Offer Shares under this Prospectus, any supplement or the accompanying prospectus or
other document will be made without disclosure in Australia under Parts 6D.2 and 7.9 of the Australia
Corporations Act, the offer of those Offer Shares for resale in Australia within 12 months may, under the
Australia Corporations Act, require disclosure to investors if none of the exemptions in the Australia
Corporations Act applies to that resale. By applying for the Offer Shares, each purchaser of or subscriber
for Offer Shares undertakes to the Company, the Selling Shareholders and Numis that such purchaser or
subscriber will not, for a period of 12 months from the date of issue or purchase of the Offer Shares, offer,
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transfer, assign or otherwise alienate those Offer Shares to investors in Australia except in circumstances
where disclosure to investors is not required under the Australia Corporations Act or where a compliant
disclosure document is prepared and lodged with ASIC.
8.
TERMS AND CONDITIONS OF THE OFFER
Each investor who applies to acquire the Offer Shares will be bound by the following terms and conditions.
8.1 Agreement to acquire Offer Shares
Conditional on: (i) Admission occurring and becoming effective by 8.00 a.m. on or prior to 28 September
2015 (or such later time and/or date as Numis and the Company may agree (not being later than 1 October
2015)); and (ii) the investor being allocated Offer Shares, an investor who has applied for Offer Shares
agrees to acquire those Offer Shares allocated to it by Numis (such number of Offer Shares not to exceed
the number applied for by such investor) at the Offer Price. To the fullest extent permitted by law, each
investor acknowledges and agrees that it will not be entitled to exercise any remedy of rescission at any
time. This does not affect any other rights an investor may have. Each such investor is deemed to
acknowledge receipt and understanding of this Prospectus and in particular the risk and investment
warnings contained in this Prospectus..
8.2 Payment for Offer Shares
Each investor must pay the Offer Price for the Offer Shares issued to the investor in the manner directed
by Numis.
If any investor fails to pay as so directed by Numis, the relevant investor’s application for Offer Shares may
be rejected.
If Admission does not occur, subscription monies will be returned without interest at the risk of the
applicant.
8.3 Representations, warranties, undertakings, agreements and acknowledgements
Each investor and, in the case of paragraph (l) below, a person who agrees on behalf of an investor, to
purchase Offer Shares under the Offer and/or who authorises Numis to notify the investor’s name to the
Registrar, will be deemed to represent, warrant, undertake, agree and, acknowledge to Numis, the
Registrar and the Company that:
(a) in agreeing to purchase Offer Shares, the investor is relying solely on this document, any
supplementary prospectus and any regulatory announcement issued by or on behalf of the Company
on or after the date hereof and prior to Admission, and not on any other information or
representation concerning the Company, the Selling Shareholders or the Offer. The investor agrees
that none of the Company, Numis or the Registrar nor any of their respective officers or directors will
have any liability for any other information or representation. The investor irrevocably and
unconditionally waives any rights it may have in respect of any other information or representation;
(b) apart from the responsibility and liabilities, if any, that may be imposed on Numis by FSMA or the
regulatory regime established under it, or under the regulatory regime of any jurisdiction where the
exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, the
content of this document is exclusively the responsibility of the Company and the Directors and none
of Numis, the Registrar nor any person acting on their behalf nor any of their respective affiliates is
responsible for or shall have any liability for any information, representation or statement contained
in this document or any information published by or on behalf of the Company, and none of Numis,
the Registrar nor any person acting on their behalf nor any of their respective affiliates will be liable
for any decision by an investor to participate in the Offer based on any information, representation or
statement contained in this document or otherwise;
(c) it has not relied on any information given or representations, warranties or statements made by the
Company, the Directors, the Selling Shareholders, any of the Numis, the Registrar or any other
person in connection with the Offer other than information contained in this document and/or any
supplementary prospectus or regulatory announcement issued by or on behalf of the Company on or
after the date hereof and prior to Admission. The investor irrevocably and unconditionally waives any
rights it may have in respect of any other information or representation;
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(d) Numis is not making any recommendations to the investor or advising it regarding the suitability or
merits of any transaction it may enter into in connection with the Offer and the investor acknowledges
that participation in the Offer is on the basis that it is not and will not be a client of Numis and that
Numis is acting for the Company and no one else in connection with the Offer and will not be
responsible to anyone other than its clients for the protections afforded to its clients, nor for providing
advice in relation to the Offer, the contents of this document or any transaction, arrangements or
other matters referred to herein, or in respect of any representations, warranties, undertakings or
indemnities contained in the Underwriting Agreement or for the exercise or performance of Numis’
rights and obligations under the Underwriting Agreement, including any right to waive or vary any
condition or exercise any termination right contained therein;
(e) it has complied with its obligations in connection with money laundering and terrorist financing under
the Proceeds of Crime Act 2002, the Terrorism Act 2000 and the Money Laundering
Regulations 2003, and applicable legislation in any other jurisdiction (together, the ‘‘Money
Laundering Regulations’’) and, if it is making payment on behalf of a third party, it has obtained and
recorded satisfactory evidence to verify the identity of the third party as required by the Money
Laundering Regulations;
(f) it is entitled to purchase the Offer Shares under the laws of all relevant jurisdictions which apply to it;
it has fully observed such laws and obtained all governmental and other consents which may be
required under such laws and complied with all necessary formalities; it has paid all issue, transfer or
other taxes due in connection with its acceptance in any jurisdiction; and it has not taken any action or
omitted to take any action which will or may result in any of Numis, the Company, the Selling
Shareholders, the Registrar or any of their respective directors, officers, agents, employees or advisers
acting in breach of the legal and regulatory requirements of any jurisdiction in connection with the
Offer or, if applicable, its acceptance of or participation in the Offer;
(g) in the case of a person who agrees on behalf of an investor, to purchase Offer Shares under the Offer
and/or who authorises Numis to notify the investor’s name to the Registrar, that person represents
and warrants that he has authority to do so on behalf of the investor; and
(h) it will pay to Numis (or as it may direct) any amounts due from it in accordance with this document on
the due time and date set out herein.
The Company, the Selling Shareholders and Numis will rely upon the truth and accuracy of the foregoing
representations, warranties, undertakings, agreements and acknowledgements. If any of the foregoing
representations, warranties, undertakings, agreements and acknowledgements are no longer accurate or
have not been complied with, the investor shall promptly notify the Company.
8.4 Miscellaneous
The rights and remedies of the Company, the Selling Shareholders, Numis and the Registrar under these
terms and conditions are in addition to any rights and remedies which would otherwise be available to each
of them and the exercise or partial exercise of one will not prevent the exercise of others.
On application, if an investor is a discretionary fund manager, that investor may be asked to disclose in
writing or orally to Numis the jurisdictions in which its funds are managed or owned. All documents will be
sent at the investor’s risk. They may be sent by post to such investor at an address notified to Numis.
The contract to acquire Offer Shares, the appointments and authorities mentioned herein and the
representations, warranties and undertakings set out herein will be governed by, and construed in
accordance with, English law. For the exclusive benefit of Numis, the Company, the Selling Shareholders
and the Registrar, each investor irrevocably submits to the exclusive jurisdiction of the English courts in
respect of these matters. This does not prevent an action being taken against an investor in any other
jurisdiction.
In the case of a joint agreement to acquire Offer Shares, references to an ‘‘investor’’ in these terms and
conditions are to each of the investors who are a party to that joint agreement and their liability is joint and
several.
Numis and the Company expressly reserve the right to modify the terms of the Offer (including, without
limitation, its timetable and settlement) at any time before closing.
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PART 14
TAXATION
1.
UK TAXATION
The following is a summary of certain UK tax considerations relating to an investment in the Shares. It assumes that
the Company is and remains resident for applicable tax purposes solely in the United Kingdom.
The comments set out below are based on current UK law and published HMRC practice (which is not binding on
HMRC), as at the date of this Prospectus, and which may be subject to change, possibly with retrospective effect.
They are intended as a general guide and apply only to Shareholders resident and, in the case of individuals,
domiciled for tax purposes in the United Kingdom (except insofar as express reference is made to the treatment of
non-UK residents), who hold their Shares as an investment and who are the absolute legal and beneficial owners of
them (and the shares are not held through an Individual Savings Account or a Self Invested Personal Pension). The
discussion does not address all possible tax consequences relating to an investment in the Shares. Certain categories
of Shareholders, including but not limited to those carrying on certain financial activities, those subject to specific
tax regimes or benefitting from certain reliefs or exemptions, those connected with the Company and those for whom
the Shares are employment-related securities, may be subject to special rules and this summary does not apply to
such Shareholders.
Shareholders or prospective Shareholders who are in any doubt about their tax position and/or who are
resident or otherwise subject to taxation in a jurisdiction outside the United Kingdom, should consult their
own professional advisers immediately.
1.1 Taxation of dividends
(a) The Company will not be required to withhold amounts on account of UK tax at source when paying a
dividend.
(b) A UK resident individual Shareholder who receives a dividend from the Company will be entitled to a
tax credit which may be set off against the Shareholder’s total income tax liability. The tax credit will
be equal to 10 per cent. of the aggregate of the dividend and the tax credit (the ‘‘gross dividend’’).
Such an individual Shareholder who is liable to income tax at the basic rate will be subject to tax on
the dividend at the rate of 10 per cent. (2015/16) of the gross dividend, so that the tax credit will satisfy
in full such Shareholder’s liability to income tax on the dividend. In the case of such an individual
Shareholder who is liable to income tax at the higher rate, the tax credit will be set against but not
fully match the Shareholder’s tax liability on the gross dividend and such Shareholder will have to
account for additional income tax equal to 22.5 per cent. (2015/16) of the gross dividend (which is also
equal to 25 per cent. of the cash dividend received) to the extent that the gross dividend when treated
as the top slice of the Shareholder’s income falls above the threshold for higher rate income tax. In the
case of such an individual Shareholder who is subject to income tax at the additional rate, the tax
credit will also be set against but not fully match the Shareholder’s liability on the gross dividend and
such Shareholder will have to account for additional income tax equal to 27.5 per cent. (2015/16) of
the gross dividend (which is also equal to approximately 30.6 per cent. of the cash dividend received)
to the extent that the gross dividend when treated as the top slice of the Shareholder’s income falls
above the threshold for additional rate income tax.
(c) A UK resident individual Shareholder who is not liable to income tax in respect of the gross dividend
and other UK resident taxpayers who are not liable to UK tax on dividends, including pension funds
and charities, will not be entitled to claim repayment of the tax credit attaching to the dividend.
(d) Shareholders that are within the charge to corporation tax will be subject to corporation tax on
dividends paid by the Company, unless (subject to special rules for such Shareholders that are small
companies) the dividends fall within an exempt class and certain other conditions are met. Each
Shareholder’s position will depend on its own particular circumstances, although it would normally be
expected that the dividends paid by the Company would fall within an exempt class. Regardless of
whether dividends fall within an exempt class, such Shareholders will not be entitled to a tax credit
attaching to the dividend.
(e) Non-UK resident Shareholders will not generally be able to claim repayment from HMRC of any part
of the tax credit attaching to dividends paid by the Company. A shareholder resident outside the
United Kingdom may also be subject to foreign taxation on dividend income under local law.
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Shareholders who are not resident for tax purposes in the United Kingdom should obtain their own
tax advice concerning tax liabilities on dividends received from the Company.
(f) On 8 July 2015, the Chancellor announced in Summer Budget 2015 that legislation will be
implemented, taking effect from April 2016, to abolish the current dividend tax credit for individuals.
It is proposed that it will be replaced with a new tax-free allowance of £5,000 in dividend income per
tax year. Dividend income in excess of the tax-free allowance will be taxed at the following rates:
(i) 7.5 per cent. (basic rate taxpayers);
(ii) 32.5 per cent. (high rate taxpayers); and
(iii) 38.1 per cent. (additional rate taxpayers).
The new legislation is expected to form part of the Finance Bill 2016.
1.2 Taxation of Capital Gains
(a) Individual and corporate Shareholders who are resident in the United Kingdom may, depending on
their circumstances (including the availability of allowances, exemptions or reliefs) be liable to UK
taxation on capital gains in respect of any gains arising from a sale or other disposal of Shares.
(b) An individual Shareholder who is only temporarily resident outside the United Kingdom may, under
anti-avoidance legislation, still be liable to UK tax on any capital gain realised (subject to available
allowances, exemptions or reliefs) upon a sale or other disposal of Shares.
(c) Shareholders who are not resident in the United Kingdom and, in the case of an individual
Shareholder, not temporarily non-resident, will not be liable for UK tax on capital gains realised on a
sale or other disposal of Shares unless such Shares are used, held or acquired for the purposes of a
trade, profession or vocation carried on in the United Kingdom through a branch or agency or, in the
case of a corporate Shareholder, through a permanent establishment.
(d) Shareholders who are not resident in the United Kingdom may be subject to foreign taxation on any
gain under local law.
1.3 UK inheritance tax
Shares will be assets situated in the United Kingdom for the purposes of UK inheritance tax. A gift of such
assets by, or upon the death of, an individual holder of such assets may (subject to certain exemptions and
reliefs) give rise to a liability to UK inheritance tax, even if the holder is or was neither domiciled in the
United Kingdom nor deemed to be domiciled there, under certain rules relating to long residence or
previous domicile. Generally, UK inheritance tax is not chargeable on gifts to individuals if the transfer is
made more than seven complete years prior to death of the donor. For inheritance tax purposes, a transfer
of assets at less than full market value may be treated as a gift and particular rules apply to gifts where the
donor reserves or retains some benefit. Special rules also apply to close companies and to trustees of
settlements who hold Shares bringing them within the charge to inheritance tax. Holders of Shares should
consult an appropriate professional adviser if they make a gift of any kind or intend to hold any Shares
through a trust or similar indirect arrangements. They should also seek professional advice in a situation
where there is potential for a double charge to UK inheritance tax and an equivalent tax in another country
or if they are in any doubt about their UK inheritance tax position.
1.4 Stamp duty and stamp duty reserve tax (‘‘SDRT’’)
The statements in this section are intended as a general guide to the current UK stamp duty and SDRT
position. Investors should note that certain categories of person are not liable to stamp duty or SDRT and
others may be liable at a higher rate or may, although not primarily liable for tax, be required to notify and
account for SDRT under the Stamp Duty Reserve Tax Regulations 1986.
1.5 General
(a) Except in relation to depositary receipt systems and clearance services (to which the special rules
outlined below apply), no stamp duty or SDRT will arise on the issue of Shares in registered form by
the Company.
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(b) An unconditional agreement to transfer Shares will normally give rise to a charge to SDRT at the rate
of 0.5 per cent. of the amount or value of the consideration payable for the transfer. SDRT is a liability
of the purchaser.
(c) Instruments transferring Shares will generally be subject to stamp duty at the rate of 0.5 per cent. of
the consideration given for the transfer (the amount of duty to be rounded up to the next £5, if
necessary). The purchaser normally pays the stamp duty. An exemption from stamp duty is available
on an instrument transferring the Shares where the amount or value of the consideration is £1,000 or
less, and it is certified on the instrument that the transaction effected does not form part of a larger
transaction or series of transactions in respect of which the aggregate amount or value of the
consideration exceeds £1,000.
(d) If a duly stamped or exempt transfer completing an agreement to transfer Shares is produced within
six years of the date on which the agreement is made (or, if the agreement is conditional, the date on
which the agreement becomes unconditional), any SDRT paid is generally repayable, normally with
interest, and otherwise the SDRT charge is cancelled.
1.6 CREST
Paperless transfers of Shares within the CREST system are generally liable to SDRT, rather than stamp
duty, at the rate of 0.5 per cent. of the amount or value of the consideration payable. CREST is obliged to
collect SDRT on relevant transactions settled within the CREST system. Deposits of Shares into CREST
will not generally be subject to SDRT or stamp duty, unless the transfer into CREST is itself for
consideration.
1.7 Depositary receipt systems and clearance services
Following the European Court of Justice decision in C-569/07 HSBC Holdings Plc and Vidacos Nominees
Limited v The Commissioners for Her Majesty’s Revenue & Customs and the First-tier Tax Tribunal
decision in HSBC Holdings Plc and The Bank of New York Mellon Corporation v The Commissioners for
Her Majesty’s Revenue & Customs, HMRC has confirmed that 1.5 per cent. SDRT is no longer payable
when new shares are issued to a clearance service or depositary receipt system.
Where Shares are transferred (as opposed to issued) (a) to, or to a nominee or an agent for, a person
whose business is or includes the provision of clearance services or (b) to, or to a nominee or an agent for,
a person whose business is or includes issuing depositary receipts, stamp duty or SDRT will generally be
payable at the higher rate of 1.5 per cent. of the amount or value of the consideration given (rounded up in
the case of stamp duty, if necessary, to the next £5) or, in certain circumstances, the value of the Shares.
Any liability for stamp duty or SDRT in respect of a transfer into a clearance service or depositary receipt
system, or in respect of a transfer within such a service, which does arise, will strictly be accountable by the
clearance service or depositary receipt system operator or their nominee, as the case may be, but will, in
practice, be payable by the participants in the clearance service or depositary receipt system.
There is an exception from the 1.5 per cent. charge on the transfer to, or to a nominee or agent for, a
clearance service where the clearance service has made and maintained an election under section 97A(1)
of the Finance Act 1986, which has been approved by HMRC. In these circumstances, SDRT rather than
stamp duty at the rate of 0.5 per cent. of the amount or value of the consideration payable for the transfer
will arise on any transfer of Shares into such an account and on subsequent agreements to transfer such
Shares within such account.
The sale of Shares by the Selling Shareholders under the Offer will give rise to a charge to stamp duty
and/or SDRT as described above. The Selling Shareholders will meet the liability to stamp duty and/or
SDRT of initial purchasers of Shares pursuant to the Offer at the normal rate 0.5 per cent that will arise on
such sale under the Offer.
Any person who is in any doubt as to his or her taxation position or who is liable to taxation in any
jurisdiction other than the United Kingdom should consult his or her professional advisers.
2.
US TAXATION
The following is a summary of certain material US federal income tax considerations relating to the acquisition,
ownership and disposition of the Shares by a US holder (as defined below). This summary addresses only the US
federal income tax considerations for US holders that are initial purchasers of the Shares pursuant to the offering
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and that will hold such Shares as capital assets for US federal income tax purposes. This summary does not address
all US federal income tax matters that may be relevant to a particular US holder. This summary does not address tax
considerations applicable to a holder of Shares that may be subject to special tax rules including, without limitation,
the following:
•
banks, financial institutions or insurance companies;
•
brokers, dealers or traders in securities, currencies, commodities, or notional principal contracts;
•
tax-exempt entities or organisations, including an ‘‘individual retirement account’’ or ‘‘Roth IRA’’ as defined
in Section 408 or 408A of the Code (as defined below), respectively;
•
real estate investment trusts, regulated investment companies or grantor trusts;
•
persons that hold the Shares as part of a ‘‘hedging,’’ ‘‘integrated’’ or ‘‘conversion’’ transaction or as a position
in a ‘‘straddle’’ for US federal income tax purposes;
•
partnerships (including entities classified as partnerships for US federal income tax purposes) or other
pass-through entities, or persons that will hold the Shares through such an entity;
•
certain former citizens or long term residents of the United States;
•
holders that own directly, indirectly, or through attribution 10 per cent. or more of the voting power or value of
the Shares and shares; and
•
holders that have a ‘‘functional currency’’ for US federal income tax purposes other than the US dollar.
Further, this summary does not address the US federal estate, gift, or alternative minimum tax considerations, or
any US state, local, or non-US tax considerations of the acquisition, ownership and disposition of the Shares.
This description is based on the US Internal Revenue Code of 1986, as amended (the ‘‘Code’’); existing, proposed
and temporary US Treasury Regulations promulgated thereunder, administrative and judicial interpretations
thereof; and the income tax treaty between the United Kingdom of Great Britain and Northern Ireland and the
United States in each case as in effect and available on the date hereof. All the foregoing is subject to change, which
change could apply retroactively, and to differing interpretations, all of which could affect the tax considerations
described below. There can be no assurances that the US Internal Revenue Service (the ‘‘IRS’’) will not take a
contrary or different position concerning the tax consequences of the acquisition, ownership and disposition of the
Shares or that such a position would not be sustained. Holders should consult their own tax advisers concerning the
US federal, state, local and non-US tax consequences of acquiring, owning, and disposing of the Shares in their
particular circumstances.
For the purposes of this summary, a ‘‘US holder’’ is a beneficial owner of Shares that is (or is treated as), for US
federal income tax purposes:
•
an individual who is a citizen or resident of the United States;
•
a corporation, or other entity that is treated as a corporation for US federal income tax purposes, created or
organised in or under the laws of the United States, any state thereof, or the District of Columbia;
•
an estate, the income of which is subject to US federal income taxation regardless of its source; or
•
a trust, if a court within the United States is able to exercise primary supervision over its administration and
one or more US persons have the authority to control all of the substantial decisions of such trust or has a valid
election in effect under applicable US Treasury Regulations to be treated as a United States person.
If a partnership (or any other entity treated as a partnership for US federal income tax purposes) holds Shares, the
US federal income tax consequences relating to an investment in the Shares will depend in part upon the status of
the partner and the activities of the partnership. Such a partner or partnership should consult its tax advisor
regarding the US federal income tax considerations of acquiring, owning and disposing of the Shares in its
particular circumstances.
As indicated below, this discussion is subject to US federal income tax rules applicable to a ‘‘passive foreign
investment company,’’ or a PFIC.
Persons considering an investment in the Shares should consult their own tax advisors as to the particular
tax consequences applicable to them relating to the acquisition, ownership and disposition of the Shares,
including the applicability of US federal, state and local tax laws and non-US tax laws.
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2.1 Distributions
Subject to the discussion under the heading ‘‘Passive Foreign Investment Company Considerations’’ below,
the gross amount of any distribution (before reduction for any amounts withheld in respect of UK
withholding tax) actually or constructively received by a US holder with respect to Shares will be taxable to
the US holder as a dividend to the extent of the US holder’s pro rata share of the Company’s current and
accumulated earnings and profits as determined under US federal income tax principles.
Distributions in excess of earnings and profits will be non-taxable to the US holder to the extent of, and
will be applied against and reduce, the US holder’s adjusted tax basis in the Shares. Distributions in excess
of earnings and profits and such adjusted tax basis will generally be taxable to the US holder as either
long-term or short-term capital gain depending upon whether the US holder has held the Shares for more
than one year as of the time such distribution is received. However, since the Company does not calculate
its earnings and profits under US federal income tax principles, it is expected that any distribution will be
reported as a dividend, even if that distribution would otherwise be treated as a non-taxable return of
capital or as capital gain under the rules described above.
Non-corporate US holders may qualify for the preferential rates of taxation with respect to dividends on
Shares applicable to long-term capital gains (i.e., gains from the sale of capital assets held for more than
one year) applicable to qualified dividend income (as discussed below) if the Company is a ‘‘qualified
foreign corporation’’ and certain other requirements (discussed below) are met. A non-United States
corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend
is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation if it
is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of
Treasury of the United States determines is satisfactory for purposes of this provision and which includes
an exchange of information provision.
The Company, which is incorporated under the laws of the United Kingdom, believes that it qualifies as a
resident of the United Kingdom for purposes of, and is eligible for the benefits of, the Convention between
the Government of the United States of America and the Government of the United Kingdom and
Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect
to Taxes on Income and on Capital Gains, signed on July 24, 2001, or the US-UK Tax Treaty, although
there can be no assurance in this regard. Further, the IRS has determined that the US-UK Tax Treaty is
satisfactory for purposes of the qualified dividend rules and that it includes an exchange-of-information
program. Therefore, subject to the discussion under the heading ‘‘Passive Foreign Investment Company
Considerations’’ below, such dividends will generally be ‘‘qualified dividend income’’ in the hands of
individual US holders, provided that a holding period requirement (more than 60 days of ownership,
without protection from the risk of loss, during the 121-day period beginning 60 days before the
ex-dividend date) and certain other requirements are met. The dividends will not be eligible for the
dividends-received deduction generally allowed to corporate US holders.
A US holder generally may claim the amount of any UK withholding tax as either a deduction from gross
income or a credit against US federal income tax liability. However, the foreign tax credit is subject to
numerous complex limitations that must be determined and applied on an individual basis. Generally, the
credit cannot exceed the proportionate share of a US holder’s US federal income tax liability that such US
holder’s taxable income bears to such US holder’s worldwide taxable income. In applying this limitation, a
US holder’s various items of income and deduction must be classified, under complex rules, as either
‘‘foreign source’’ or ‘‘US source.’’ In addition, this limitation is calculated separately with respect to
specific categories of income. The amount of a distribution with respect to the Shares that is treated as a
‘‘dividend’’ may be lower for US federal income tax purposes than it is for UK income tax purposes,
potentially resulting in a reduced foreign tax credit for the US holder. Each US holder should consult its
own tax advisors regarding the foreign tax credit rules.
In general, the amount of a distribution paid to a US holder in a foreign currency will be the dollar value of
the foreign currency calculated by reference to the spot exchange rate on the day the US holder receives
the distribution, regardless of whether the foreign currency is converted into US dollars at that time. Any
foreign currency gain or loss a US holder realises on a subsequent conversion of foreign currency into US
dollars will be US source ordinary income or loss. If dividends received in a foreign currency are converted
into US dollars on the day they are received, a US holder should not be required to recognise foreign
currency gain or loss in respect of the dividend.
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2.2 Sale, exchange or other taxable disposition of the Shares
A US holder will generally recognise gain or loss for US federal income tax purposes upon the sale,
exchange or other taxable disposition of Shares in an amount equal to the difference between the US
dollar value of the amount realised from such sale or exchange and the US holder’s tax basis for those
Shares. Subject to the discussion under the heading ‘‘Passive Foreign Investment Company
Considerations’’ below, this gain or loss will generally be a capital gain or loss. The adjusted tax basis in the
Shares generally will be equal to the cost of such Shares. Capital gain from the sale, exchange or other
taxable disposition of Shares of a non-corporate US holder is generally eligible for a preferential rate of
taxation applicable to capital gains, if the non-corporate US holder’s holding period determined at the
time of such sale, exchange or other taxable disposition for such Shares exceeds one year (i.e., such gain is
long-term taxable gain). The deductibility of capital losses for US federal income tax purposes is subject to
limitations under the Code. Any such gain or loss that a US holder recognises generally will be treated as
US source income or loss for foreign tax credit limitation purposes.
2.3 Medicare tax
Certain US holders that are individuals, estates or trusts are subject to a 3.8 per cent. tax on all or a portion
of their ‘‘net investment income,’’ which may include all or a portion of their dividend income and net
gains from the disposition of Shares. Each US holder that is an individual, estate or trust is urged to
consult its tax advisors regarding the applicability of the Medicare tax to its income and gains in respect of
its investment in the Shares.
2.4 Passive foreign investment company considerations
If the Company is classified as a passive foreign investment company (‘‘PFIC’’) in any taxable year, a US
holder would be subject to special rules generally intended to reduce or eliminate any benefits from the
deferral of US federal income tax that a US holder could derive from investing in a non-US company that
does not distribute all of its earnings on a current basis.
A corporation organised outside the United States generally will be classified as a PFIC for US federal
income tax purposes in any taxable year in which, after applying certain look-through rules with respect to
the income and assets of its subsidiaries, either: (i) at least 75 per cent. of its gross income is ‘‘passive
income’’ or (ii) at least 50 per cent. of the average quarterly value of its total gross assets (which, assuming
the Company is not a controlled foreign corporation for the year being tested, would be measured by the
fair market value of the Company’s assets, and for which purpose the total value of the Company’s assets
may be determined in part by the market value of the Shares and the Company’s ordinary shares, which
are subject to change) is attributable to assets that produce ‘‘passive income’’ or are held for the
production of ‘‘passive income.’’
Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from
commodities and securities transactions, the excess of gains over losses from the disposition of assets which
produce passive income, and includes amounts derived by reason of the temporary investment of funds
raised in offerings of the Shares. If a non-US corporation owns directly or indirectly at least 25 per cent. by
value of the stock of another corporation, the non-US corporation is treated for purposes of the PFIC tests
as owning its proportionate share of the assets of the other corporation and as receiving directly its
proportionate share of the other corporation’s income. If the Company is classified as a PFIC in any year
with respect to which a US holder owns the Shares, the Company will continue to be treated as a PFIC
with respect to such US holder in all succeeding years during which the US holder owns the Shares,
regardless of whether the Company continues to meet the tests described above.
Whether the Company is a PFIC for any taxable year will depend on the composition of its income and the
projected composition and estimated fair market values of the Company’s assets in each year, and because
this is a factual determination made annually after the end of each taxable year, there can be no assurance
that the Company will not be considered a PFIC in any taxable year. The market value of the Company’s
assets may be determined in large part by reference to the market price of the Shares and the Company’s
ordinary shares, which is likely to fluctuate after the offering. Based on the foregoing, with respect to the
2015 taxable year and foreseeable future tax years, the Company does not anticipate that it will be a PFIC
based upon the expected value of its assets, including any goodwill, and the expected composition of the
Company’s income and assets, however, as previously mentioned, the Board cannot provide any assurances
regarding the Company’s PFIC status for the current, prior or future taxable years.
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If the Company is a PFIC, and you are a US holder, then unless you make one of the elections described
below, a special tax regime will apply to both: (a) any ‘‘excess distribution’’ by the Company to you
(generally, your ratable portion of distributions in any year which are greater than 125 per cent. of the
average annual distribution received by you in the shorter of the three preceding years or your holding
period for the Shares); and (b) any gain realised on the sale or other disposition of the Shares. Under this
regime, any excess distribution and realised gain will be treated as ordinary income and will be subject to
tax as if: (a) the excess distribution or gain had been realised ratably over your holding period; (b) the
amount deemed realised in each year had been subject to tax in each year of that holding period at the
highest marginal rate for such year (other than income allocated to the current period or any taxable
period before the Company became a PFIC, which would be subject to tax at the US holder’s regular
ordinary income rate for the current year and would not be subject to the interest charge discussed below);
and (c) the interest charge generally applicable to underpayments of tax had been imposed on the taxes
deemed to have been payable in those years. In addition, dividend distributions made to you will not
qualify for the lower rates of taxation applicable to long-term capital gains discussed above under the
heading ‘‘Distributions.’’
Certain elections exist that may alleviate some of the adverse consequences of PFIC status and would
result in an alternative treatment (such as mark-to-market treatment) of the Shares. If a US holder makes
the mark-to-market election, the US holder generally will recognise as ordinary income any excess of the
fair market value of the Shares at the end of each taxable year over their adjusted tax basis, and will
recognise an ordinary loss in respect of any excess of the adjusted tax basis of the Shares over their fair
market value at the end of the taxable year (but only to the extent of the net amount of income previously
included as a result of the mark-to-market election). If a US holder makes the election, the US holder’s tax
basis in the Shares will be adjusted to reflect these income or loss amounts. Any gain recognised on the
sale or other disposition of Shares in a year when the Company is a PFIC will be treated as ordinary
income and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income
previously included as a result of the mark-to-market election). The mark-to-market election is available
only if the Company is a PFIC and the Shares are ‘‘regularly traded’’ on a ‘‘qualified exchange.’’ The
Shares will be treated as ‘‘regularly traded’’ in any calendar year in which more than a de minimis quantity
of the Shares are traded on a qualified exchange on at least 15 days during each calendar quarter (subject
to the rule that trades that have as one of their principal purposes the meeting of the trading requirement
as disregarded). It is not clear whether the London Stock Exchange is a qualified exchange for this purpose
and, consequently, if the Shares are regularly traded, the mark-to-market election may not be available to a
US holder.
If the Company is a PFIC for any year during which a US holder holds the Shares, the Company must
generally continue to be treated as a PFIC by that US holder for all succeeding years during which the US
holder holds the Shares, unless the Company ceases to meet the requirements for PFIC status and the US
holder makes a ‘‘deemed sale’’ election with respect to the Shares. If such election is made, the US holder
will be deemed to have sold the Shares it holds at their fair market value on the last day of the last taxable
year in which the Company qualified as a PFIC, and any gain from such deemed sale would be subject to
the consequences described above. After the deemed sale election, the US holder’s Shares with respect to
which the deemed sale election was made will not be treated as shares in a PFIC unless the Company
subsequently becomes a PFIC.
The tax consequences that would apply if the Company were a PFIC would also be different from those
described above if a US holder were able to make a valid ‘‘qualified electing fund,’’ or QEF, election.
However, the Board does not currently intend to provide the information necessary for US holders to
make a QEF election if the Company were treated as a PFIC for any taxable year and prospective investors
should assume that a QEF election will not be available. US Holders should consult their tax advisors to
determine whether any of these above elections would be available and if so, what the consequences of the
alternative treatments would be in their particular circumstances.
If the Company is determined to be a PFIC, the general tax treatment for US Holders described in this
section would apply to indirect distributions and gains deemed to be realised by US Holders in respect of
any of the Company’s subsidiaries that also may be determined to be PFICs.
If a US holder owns Shares during any taxable year in which the Company is a PFIC, the US holder
generally will be required to file an IRS Form 8621 (Information Return by a Shareholder of a Passive
Foreign Investment Company or Qualified Electing Fund) with respect to the company, generally with the
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US holder’s federal income tax return for that year. If the Company were a PFIC for a given taxable year,
then you should consult your tax advisor concerning your annual filing requirements.
The US federal income tax rules relating to PFICs are complex. Prospective US investors are urged to
consult their own tax advisers with respect to the acquisition, ownership and disposition of the Shares, the
consequences to them of an investment in a PFIC, any elections available with respect to the Shares and
the IRS information reporting obligations with respect to the acquisition, ownership and disposition of the
Shares.
2.5 Backup withholding and information reporting
US holders generally will be subject to information reporting requirements with respect to dividends on
the Shares and on the proceeds from the sale, exchange or disposition of Shares that are paid within the
United States or through US-related financial intermediaries, unless the US holder is an ‘‘exempt
recipient.’’ In addition, US holders may be subject to backup withholding on such payments, unless the US
holder provides a taxpayer identification number and a duly executed IRS Form W-9 or otherwise
establishes an exemption. Backup withholding is not an additional tax, and the amount of any backup
withholding will be allowed as a credit against a US holder’s US federal income tax liability and may entitle
such holder to a refund, provided that the required information is timely furnished to the IRS.
2.6 Foreign asset reporting
Certain US holders who are individuals are required to report information relating to an interest in the
Shares, subject to certain exceptions (including an exception for shares held in accounts maintained by US
financial institutions) by filing IRS Form 8938 (Statement of Specified Foreign Financial Assets) with their
federal income tax return. US holders are urged to consult their tax advisors regarding their information
reporting obligations, if any, with respect to their ownership and disposition of the Shares.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS
THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR. EACH PROSPECTIVE
INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES
TO IT OF AN INVESTMENT IN THE SHARES IN LIGHT OF THE INVESTOR’S OWN
CIRCUMSTANCES.
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PART 15
ADDITIONAL INFORMATION
1.
RESPONSIBILITY STATEMENT
The Company and the Directors, whose names appear on page 40 of this Prospectus, accept responsibility
for the information contained in this Prospectus. To the best of the knowledge and belief of the Company
and the Directors (each of whom has taken all reasonable care to ensure that such is the case), the
information contained in this Prospectus is in accordance with the facts and does not omit anything likely
to affect the import of such information.
2.
INCORPORATION AND SHARE CAPITAL
2.1 The Company was incorporated and registered in England and Wales on 17 August 2015 as a public
company limited by shares under the Companies Act with the name ‘‘On the Beach Group plc’’ and
with the registered number 9736592. On 3 September 2015, the Company was granted a certificate
under section 761 of the Companies Act entitling it to commence business and to exercise its
borrowing powers.
2.2 The Company’s registered office is at Park Square, Bird Hall Lane, Cheadle Heath, Stockport
SK3 0XN. The Company’s telephone number is +44 (0) 161 444 0910.
2.3 The principal laws and legislation under which the Company operates and the Shares have been
created are the Companies Act and regulations made under that Act.
2.4 The business of the Company, and its principal activity, is to act as the holding company of the
companies listed in paragraph 14.2 below.
2.5 The share capital history of Company is as follows:
(a) on incorporation and immediately prior to publication of this Prospectus, the share capital of the
Company was £50,000, divided into one ordinary share of £1 and one redeemable preference share of
£49,999, both of which were allotted to Inflexion; and
(b) immediately following completion of the Offer, the issued share capital of the Company is expected to
be £195,652,145 comprising 130,434,763 Shares of £1.50 each (all of which will be fully paid or
credited as fully paid, one redeemable preference share of £49,999 and 356,000 deferred shares of
£0.00001 each.
2.6 The consideration for the issue of the redeemable preference share on incorporation was an
undertaking by Inflexion to pay cash of £49,999, while the consideration for the issue of the ordinary
share on incorporation was £1 which was paid in cash by Inflexion.
2.7 On 21 September 2015, by resolutions of the Company in general meeting:
(a) the Company was authorised to carry out a court-approved capital reduction post-Admission in
accordance with the Companies Act in order to provide it with certain distributable reserves to pay
dividends;
(b) the Company shall adopt new articles of association in the form presented to the general meeting
immediately prior to the matters described in paragraphs 2.7(c) and 2.7(d)(i) below taking place;
(c) the ordinary share of £1 in the Company issued on incorporation and the E ordinary share of £131.61
in the Company be subdivided and consolidated into one A ordinary share of £132.61 in the Company;
(d) the Directors were generally and unconditionally authorised for the purposes of section 551 of the
Companies Act to exercise all or any powers of the Company to allot shares in the Company up to an
aggregate nominal amount of £187,500,103 in connection with the Reorganisation, comprising:
(i) one new E ordinary share of £131.61;
(ii) in connection with the Share Exchange:
(A)
new A ordinary shares of £132.61 each;
(B)
new B ordinary shares of £132.61 each;
(C)
new C ordinary shares of £132.61 each; and
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(D)
new D ordinary shares of £0.00001 each;
(iii) in connection with the repayment of loan notes in the Company, up to 36,591,358 Shares of £1.50
each;
(e) the Directors were empowered to allot equity securities (within the meaning of section 560(1) of the
Companies Act) for cash as if section 561(1) of the Companies Act did not apply to any such
allotment, such power being limited to the allotment of shares pursuant to the authorities described in
paragraph 2.7(d) above;
(f) the Company shall adopt new articles of association in the form presented to the general meeting
immediately prior to the matter described in paragraph 2.7(g) below taking place, being the Articles, a
summary of which is included at paragraph 4 of this Part 15 ‘‘Additional Information’’; and
(g) the various classes of ordinary shares in the Company be converted into Shares (being a single class of
ordinary shares in the Company with the same economic and voting rights) by way of a sub-division or
otherwise, in such manner as may be approved by the Board in accordance with the Reorganisation
Deed.
Such authorities shall expire (unless previously revoked, varied or renewed) on 31 December 2015 (save
that, in the case of the resolutions described in paragraphs 2.7(d) and 2.7(e) above, the Company may
before the expiry of such period make an offer or agreement which would or might require shares to be
allotted or rights to be granted after expiry of such authorities or powers and the Directors may allot the
shares or grant rights to subscribe for or convert any security into a share in pursuance of such offer or
agreement as if the authorities or powers conferred by these resolutions had not expired).
2.8 On 21 September 2015, by resolutions of the Company in general meeting, conditional on Admission:
(a) the Directors were generally and unconditionally authorised for the purposes of section 551 of the
Companies Act to exercise all or any powers of the Company:
(i) to allot Shares up to an aggregate nominal amount equal to £9,000,000 in connection with the
Offer; and
(ii) following Admission, to allot Shares and to grant rights to subscribe for or to convert any security
into Shares:
(A) up to an aggregate nominal amount equal to £65,217,381.50 (being equivalent to one-third of
the nominal value of the issued share capital of the Company immediately following
Admission); and
(B) comprising equity securities (as defined in the Companies Act) up to an aggregate nominal
amount equal to £130,434,763.00 (being equivalent to two-thirds of the nominal value of the
issued share capital of the Company immediately following Admission) in connection with
an offer by way of a rights issue,
such authorities to expire (unless previously revoked, varied or renewed) on the earlier of the end
of the next annual general meeting of the Company and close of business on the date which is
fifteen months after the date of the general meeting at which the resolution was passed (save that
the Company may before the expiry of such period make an offer or agreement which would or
might require Shares to be allotted or rights to be granted to subscribe for or convert any security
into a Share, after expiry of these authorities and the Directors may allot the Shares or grant
rights to subscribe for or convert any security into a Share in pursuance of such offer or
agreement as if the authorisations conferred by this resolution had not expired);
(b) the Directors were empowered to allot equity securities (within the meaning of section 560(1) of the
Companies Act) for cash as if section 561(1) of the Companies Act did not apply to any such
allotment, such power being limited to:
(i) the allotment of shares pursuant to the authorities described in paragraph 2.8(a)(i) above;
(ii) the allotment of equity securities in connection with an offer of equity securities to the
Shareholders in proportion (or as nearly may be) to their existing holding and to people who hold
other equity securities, if this is required by the rights of those securities, or, if the Directors
consider it necessary, as permitted by the rights of those securities, but in each case subject to
such exclusions or other arrangements as the Directors deem necessary or expedient in relation
156
to fractional entitlements or any legal or practical problems under the laws of any territory, or the
requirements of any regulatory body or stock exchange; and
(iii) the allotment of equity securities for cash (other than as described in (i) and (ii) above) with an
aggregate nominal value of up to £19,565,214.45 (being equivalent to 10 per cent. of the nominal
value of the issued share capital of the Company immediately following Admission),
such powers to expire (unless previously revoked, varied or renewed) on the earlier of the end of the
next annual general meeting of the Company and close of business on the date which is fifteen months
after the date of the general meeting at which the resolution was passed (save that the Company may
before the expiry of such period make an offer or agreement which would or might require Shares to
be allotted or rights to be granted after expiry of these powers and the Directors may allot the Shares
or grant rights to subscribe for or convert any security into a Share in pursuance of such offer or
agreement as if the powers conferred by this resolution had not expired);
(d) the Company was generally and unconditionally authorised to make market purchases of Shares
pursuant to section 701 of the Companies Act, subject to the following conditions:
(i) the maximum number of Shares authorised to be purchased may not be more than the number
equal to 19,565,214.45 (being equivalent to 10 per cent. of the number of shares comprised in the
issued share capital of the Company immediately following Admission);
(ii) the minimum price (excluding expenses) which may be paid for a Share is its nominal value at the
time of purchase;
(iii) the maximum price (excluding expenses) which may be paid for a Share shall be the higher of:
(A) an amount equal to 105 per cent. of the average of the middle market quotations of a Share
as derived from the London Stock Exchange Daily Official List for the five business days
immediately preceding the day on which a Share is contracted to be purchased; and
(B) an amount equal to the higher of the price of the last independent trade of a Share and the
highest current independent bid for a Share as derived from the London Stock Exchange
Trading System (‘‘SETS’’) as stipulated by Article 5(1) of Commission Regulation (EC)
22 December 2003 implementing the Market Abuse Directive as regards exemptions for
buy-back programmes and stabilisation of financial instruments (No 2273/2003);
such authority to expire (unless previously revoked, varied or renewed) on the earlier of the end
of the next annual general meeting of the Company and close of business on the date which is
fifteen months after the date of the general meeting at which the resolution was passed so that
the Company may, before the expiry of the authority enter into a contract to purchase Shares
which will or may be executed wholly or partly after the expiry of such authority; and
(e) the Company was authorised in accordance with the Articles, until the Company’s next annual general
meeting, to call general meetings on 14 clear days’ notice.
2.9 Save as disclosed above and in paragraph 9 below:
(a) no share or loan capital of the Company has, within three years of the date of this Prospectus, been
issued or agreed to be issued, or is now proposed to be issued, fully or partly paid, either for cash or
for a consideration other than cash, to any person;
(b) there has been no change in the amount of the issued share or loan capital of the Company and no
material change in the amount of the issued share or loan capital of any other member of the Group
(other than intra-group issues by wholly owned subsidiaries) within three years of the date of this
Prospectus;
(c) no commissions, discounts, brokerages or other special terms have been granted by the Company in
connection with the issue or sale of any share or loan capital of the Company; and
(d) no share or loan capital of the Company is under option or agreed conditionally or unconditionally to
be put under option.
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2.10 The Company will be subject to the continuing obligations of the UK Listing Authority with regard to
the issue of Shares for cash. The provisions of section 561(1) of the Companies Act (which confer on
Shareholders rights of pre-emption in respect of the allotment of equity securities which are, or are to
be, paid up in cash other than by way of allotment to employees under an employees’ share scheme as
defined in section 1166 of the Companies Act) apply to the unissued share capital of the Company (in
respect of which the Directors have authority to make allotments pursuant to section 551 of the
Companies Act as referred to in paragraph 55.6 above), except to the extent such provisions have been
disapplied as referred to in paragraph 55.6 above.
2.11 The Directors fully intend to comply with the guidelines on ‘‘Directors’ Powers to Allot Share Capital
and Disapply Shareholders’ Pre-Emption Rights’’ as published by the Association of British Insurers
and not to allot shares for cash on a non-pre-emptive basis:
(a) in excess of an amount equal to 5% of the Company’s issued ordinary share capital; or
(b) in excess of an amount equal to 7.5% of the Company’s issued ordinary share capital in a rolling
three-year period,
in each case other than in connection with an acquisition or specified capital investment which is
announced contemporaneously with the allotment, or which has taken place in the preceding
six-month period and is disclosed in the announcement of the allotment.
2.12 As at 22 September 2015, being the latest practicable date prior to the publication of this Prospectus,
the Company did not hold any Shares in treasury.
2.13 There are no present plans to undertake a rights issue or to allot new Shares, other than as set out in
paragraph above.
2.14 The Company has no convertible securities, exchangeable securities or securities with warrants in
issue.
3.
REORGANISATION
3.1 Pre-Admission steps under the Reorganisation
On 23 September 2015, the Reorganisation Deed was entered into by the Company, OTB Topco, OTB
Bidco and the Existing Shareholders. Pursuant to the Reorganisation Deed, the following steps will be
carried out under the Reorganisation immediately prior to Admission to result in the Company becoming
the holding company of OTB Topco (which is the Group’s existing holding company):
(a) Step 1
Inflexion shall transfer the loan notes in OTB Bidco held by it to OTB Topco and OTB Topco shall issue
replacement loan notes to Inflexion.
(b) Step 2
Inflexion shall subscribe for one redeemable preference share of £49,999 in the capital of OTB Topco in
consideration for the repayment of £49,999 of the principal amount of the loan notes held by it in OTB
Topco.
(c) Step 3
A new E ordinary share of £131.61 in the Company shall be issued to Inflexion and then be subdivided and
consolidated with the ordinary share of £1 in the Company which was issued to Inflexion on incorporation
into an A ordinary share of £132.61 in the Company.
(d) Step 4
The Company and the Existing Shareholders shall effect the Share Exchange whereby each of the Existing
Shareholders will transfer all of the shares in OTB Topco held by them to the Company in exchange for the
allotment and issue by the Company of an equivalent number of shares in the Company.
The nominal value of the shares issued by the Company will be greater than the nominal value of the
shares in OTB Topco, but the number and rights of the shares will be identical.
158
The below table sets out the proposed share capital of OTB Topco immediately prior to the Share
Exchange and the proposed share capital of the Company immediately following the Share Exchange:
Share capital of OTB Topco
immediately prior to the Share
Exchange
Share capital of the Company
immediately following the Share
Exchange
643,997 A ordinary shares of £0.05 each
643,997 A ordinary shares of £132.61 each
186,004 B ordinary shares of £0.05 each
186,004 B ordinary shares of £132.61 each
170,000 C ordinary shares of £2.50 each
170,000 C ordinary shares of £132.61 each
356,000 D ordinary shares of £0.01 each
356,000 D ordinary shares of £0.00001 each
one redeemable preference share of £49,999
one redeemable preference share of £49,999
(e) Step 5
The Existing Loan Note Holders shall transfer the loan notes in OTB Topco held by them to the Company
(other than accrued interest in respect of certain loan note holders) and the Company shall issue
replacement loan notes to the Existing Loan Note Holders.
(f) Step 6
The various classes of ordinary shares in the Company other than the D ordinary shares shall be converted
into Shares (being a single class of ordinary shares in the Company with the same economic and voting
rights) by way of a sub-division and re-designation. The conversion ratio shall take into account the then
relative values of each class of ordinary share in the Company. The D ordinary shares shall be redesignated as deferred shares of £0.00001 each.
(g) Step 7
The Company shall repay the loan notes in the Company in full by way of the issue of Shares to the
Existing Loan Note Holders. The number of Shares to be issued shall be calculated to reflect the value of
the loan noted being repaid.
3.2 Post-Admission steps under the Reorganisation
It is intended that the following steps will be carried out under the Reorganisation following Admission
pursuant to the Reorganisation Deed:
(a) Step 1
Inflexion shall pay the £49,999 outstanding in respect of its redeemable preference share in the Company,
following which the redeemable preference share shall be immediately redeemed by the Company out of
the proceeds of the offer of New Shares.
(b) Step 2
The Company shall pay the Exit Fee to Inflexion 2010 General Partner Guernsey LP and then contribute
the remaining proceeds from the Offer to OTB Topco by way of a gift.
OTB Topco shall settle in cash accrued interest on certain loan notes and transaction costs incurred in
connection with the Offer.
(c) Step 3
The various classes of ordinary shares in OTB Topco shall be subdivided and consolidated into ordinary
shares with the same rights.
(d) Step 4
The Company will undertake a court-approved capital reduction in accordance with the Companies Act in
order to provide it with certain distributable reserves to pay dividends post-Admission.
(e) Step 5
Surplus holding companies may be wound up in due course to reduce the administrative burden on the
Group and help prevent future dividend blocks.
159
3.3 Structural changes to the Group under the Reorganisation
The structure chart below illustrates the structure of the Group as at the date of this Prospectus, before
completion of the steps of the Reorganisation due to take place immediately prior to Admission.
Management
Inflexion
B/C/D Ordinary Shares
A Ordinary Shares
On the Beach
Topco Limited
100%
100%
On the Beach
Trustees Limited
On the Beach
Bidco Limited
100%
On the Beach
Travel Limited
100%
100%
On the Beach
Limited
On the Beach
Beds Limited
100%
On the Beach
Holidays Limited
(Dormant)
160
22SEP201519312854
The structure chart below illustrates the structure of the Group at Admission, following completion of the
Reorganisation steps which will take effect immediately prior to Admission.
Public
Investors
Management
Inflexion
Shares
On the Beach
Group plc
100%
On the Beach
Topco Limited
100%
100%
On the Beach
Trustees Limited
On
On The
the Beach
Beach
Bidco Limited
100%
On the Beach
Travel Limited
100%
100%
On the Beach
Limited
On the Beach
Beds Limited
100%
On the Beach
Holidays Limited
(Dormant)
161
22SEP201519312993
4.
ARTICLES OF ASSOCIATION
The Articles, which were adopted by a special resolution of the Company on 21 September 2015, contain
certain provisions, the material provisions of which are set out below. This is a description of significant
rights and does not purport to be complete or exhaustive.
4.1 Objects
Pursuant to section 31 of the Companies Act, the objects for which the Company is established are
unrestricted and the Company has full power and authority to carry out any object not prohibited by law.
4.2 Votes of members
Subject to the provisions of the Companies Act and to any special rights or restrictions as to voting
attached to any shares or call of shares or otherwise provided by the Articles:
(a) on a show of hands of every member who is present in person shall have one vote;
(b) every proxy present who has been duly appointed by more than one member entitled to vote on the
resolution and is instructed by one or more of those members to vote for the resolution and by one or
more others to vote against it, or is instructed by one or more of those members to vote in a way and is
given discretion as to how to vote by one or more others (and wishes to use that discretion to vote in
the other way) shall have one vote for and one vote against the resolutions;
(c) every corporate representative present who has been duly authorised by a corporation shall have the
same voting rights as the corporation would be entitled to; and
(d) on a poll, every member who is present in person or by duly appointed proxy or corporate
representative shall have one vote for every share of which he is the holder or in respect of which his
appointment of proxy or corporate representative has been made.
4.3 Restriction on rights of members where calls outstanding
Unless the Board otherwise determines, no member shall be entitled to receive any dividend or to be
present and vote at a general meeting or at any separate general meeting of the holders of any class of
shares either personally or by proxy, or to be reckoned in a quorum, or to exercise any other right or
privilege conferred by membership in respect of a share held by him in relation to meetings of the
Company unless and until he shall have paid all calls or other sums presently due and payable by him,
whether alone or jointly with any other person, to the Company.
4.4 Transfer of shares
Subject to the provisions in the Articles regarding uncertificated shares, all transfers of certificated shares
may be effected by transfer in writing in any usual or common form or in any other form acceptable to the
Board and may be under hand only. The instrument of transfer shall be signed by or on behalf of the
transferor and (except in the case of fully paid shares) by or on behalf of the transferee. In relation to both
certificated and uncertificated shares, the transferor shall remain the holder of the shares concerned until
the name of the transferee is entered in the register in respect of such shares. All instruments of transfer
which are registered may be retained by the Company. Transfers of uncertified shares may be effected by
means of a relevant system (i.e. CREST).
4.5 Dividends
Subject to the provisions of the Companies Act and of the Articles, the Company may by ordinary
resolution declare dividends to be paid to members according to their respective rights and interests but no
such dividends shall exceed the sum recommended by the Board. All unclaimed dividends may be made
use of by the Board for the Company’s benefit until claimed. Any dividend unclaimed for 12 years shall
revert to the Company.
4.6 Capitalisation of profits and reserves
(a) The Board may, with the sanction of an ordinary resolution of the Company, capitalise any sum
standing to the credit of any of the Company’s reserve accounts (including any share premium
account, capital redemption reserve, or other undistributable reserve) or any sum standing to the
credit of profit and loss account.
162
(b) Such capitalisation shall be effected by appropriating such sum to the holders of ordinary shares on
the register of members of the Company at the close of business on the date of the resolution (or such
other date as may be specified in such resolution or determined as provided in such resolution) in
proportion to their holdings of ordinary shares and applying such sum on their behalf in paying up in
full unissued ordinary shares (or, subject to any special rights previously conferred on any shares or
class of shares for the time being issued, unissued shares of any other class not being redeemable
shares) for allotment and distribution credited as fully paid up to and amongst them in proportion to
their holdings.
(c) The Board may do all acts and things considered necessary or expedient to give effect to any such
capitalisation, with full power to the Board to make such provision as it thinks fit for any fractional
entitlements which would arise on the basis aforesaid (including provisions whereby fractional
entitlements are disregarded or the benefit of such fractional entitlements accrues to the Company
rather than to the members concerned). The Board may authorise any person to enter on behalf of all
the members interested into an agreement with the Company providing for any such capitalisation
and matters incidental to such capitalisation and any agreement made under such authority shall be
effective and binding on all concerned.
4.7 Share capital
(a) Variation of rights
Whenever the share capital of the Company is divided into different classes of shares, the special rights for
the time being attached to any share or class of share in the Company may, subject to the provisions of the
Companies Act, be varied or abrogated either with the consent in writing of the holders of not less than
three-quarters in nominal value of the issued shares of the class or with the sanction of an extraordinary
resolution passed at a separate general meeting of the holders of the shares of the class (but not otherwise)
and may be so varied or abrogated whilst the Company is a going concern or during or in contemplation of
a winding-up. To every such separate general meeting all the provisions of the Articles relating to general
meetings of the Company and to the proceedings at such general meetings shall with necessary
modifications apply, except that:
(i)
the necessary quorum shall be two persons holding or representing by proxy at least one-third
in nominal value paid up of the issued shares of the class (but so that if at any adjourned
meeting a quorum as defined above is not present, any one holder of any shares of the class
present in person or by proxy shall be a quorum); and
(ii)
any holder of shares of the class present in person or by proxy may demand a poll and every
such holder shall on a poll have one vote for every share of the class held by him.
The Article only applies to the variation or abrogation of the special rights attached to some only of the
shares of any class as if each group of shares of the class differently treated formed a separate class the
special rights of which are to be varied.
(b) Special rights
The special rights attached to any class of shares having preferential rights shall not, unless otherwise
expressly provided by the terms of issue of that class of shares, be deemed to be varied:
(i)
by the allotment or issue of further shares ranking as regards participation in the profits or
assets of the Company in some or all respects equally with such shares but in no respect in
priority to such shares;
(ii)
by the purchase by the Company of any of its own shares (and the holding of any such shares as
treasury shares); or
(iii)
the Board resolving that a class of shares shall become, or the operator of the relevant system
permitting such class of shares to be, a participating security (the phrases ‘‘operator’’, ‘‘relevant
system’’ and ‘‘participating security’’ having the meanings set out in the CREST Regulations).
(c) Sub-division of shares
Whenever the Company sub-divides its shares, or any of them, into shares of smaller nominal value, the
Company may, by ordinary resolution determine that, as between the shares resulting from the
163
sub-division, any of them may have any preference or advantage or be subject to any restriction as
compared to the others.
(d) Purchase of own shares
Where there are in issue convertible securities convertible into or carrying a right to subscribe for equity
shares of a class proposed to be purchased, a separate meeting of the holders of the convertible securities
must be held and their approval by extraordinary resolution obtained before the Company enters into any
contract to purchase equity shares of the relevant class. Subject to this and notwithstanding anything to the
contrary contained in the Articles, the rights and privileges attached to any class of shares shall be deemed
not to be altered or abrogated by anything done by the Company in pursuance of any resolution passed
under the powers conferred by the Companies Act.
4.8 Directors
(a) Number of directors
The directors of the Company shall not be less than two or more than eight in number. The Company may
by ordinary resolution from time to time vary the minimum number and/or maximum number of directors.
(b) Directors’ fees
The ordinary remuneration of the directors shall from time to time be determined by the Board except that
such remuneration shall not exceed £600,000 per annum in aggregate or such higher sum as may from time
to time be determined by ordinary resolution of the Company and shall (unless such resolution otherwise
provides) be divisible among the directors as the Board may agree, or, failing agreement, equally, except
that any director who shall hold office for part only of the period in respect of which such remuneration is
payable shall be entitled only to rank in such division for a proportion of remuneration related to the
period during which he has held office. Any director who holds any executive office may be paid such extra
remuneration or may receive such other benefits as the Board may determine.
(c) Directors’ expenses
The Board may repay to any director all such reasonable expenses as he may properly incur in attending
and returning from meetings of the Board or of any committee of the Board or shareholders’ meetings or
otherwise in connection with the performance of his duties as a director of the Company.
(d) Directors’ pensions and other benefits
The Board shall have power to pay and agree to pay gratuities, pensions or other retirement,
superannuation, death or disability benefits to (or to any person in respect of) any director or ex-director
and for the purpose of providing any such gratuities, pensions or other benefits to contribute to any
scheme or fund or to pay premiums.
(e) Directors’ permitted interests
Provided that he has declared to the directors the nature and extent of any interest, a director may (save as
to the extent not permitted by law), have an interest of the following kind, namely:
(i)
where a director (or a person connected with him) is party to, or directly or indirectly
interested in, or has any duty in respect of, any existing or proposed contract, arrangement or
transaction with the Company or any other undertaking in which the Company is interested;
(ii)
where a director (or a person connected with him) is a director, employee or other officer of,
or a party to any arrangement or transaction with, or interested in, any body corporate
promoted by the Company or in which the Company is interested;
(iii)
where a director (or a person connected with him) is directly or indirectly interested in shares
or share options of the Company or is directly or indirectly interested in shares or share
options of, or an employee, director or other officer of a parent undertaking of, or a subsidiary
undertaking of a parent undertaking of, the Company;
(iv)
where a director (or a person connected with him) holds and is remunerated in respect of any
office or place of profit (other than the office of auditor) under the Company or body
corporate in which the Company is interested;
164
(v)
where a director is given, or is to be given, a guarantee in respect of an obligation incurred by
or on behalf of the Company or any body corporate in which the Company is interested;
(vi)
where a director (or a person connected with him or of which he is a member or employee)
acts (or any body corporate promoted by the Company or in which the Company is interested
of which he is a director, employee or other officer acts) in a professional capacity for the
Company or any body corporate promoted by the Company or in which the Company is
interested (other than as auditor) whether or not he or it is remunerated for this;
(vii)
an interest which cannot reasonably be regarded as likely to give rise to a conflict of interest; or
(viii) any other interest authorised by ordinary resolution.
No authorisation pursuant to the Articles shall be necessary in respect of the above interests.
(f) Authorisation of directors’ interests
(i)
The directors shall have the power, subject to the Articles, to authorise any matter which would
or might otherwise constitute or give rise to a breach of the duty of a director to avoid a
situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may
conflict, with the interests of the Company. Any authorisation will only be effective if any
quorum requirement at any meeting in which the matter was considered is met without
counting the director in question or any other interested director and the matter was agreed to
without their voting or would have been agreed to if their votes had not been counted. The
Board may impose limits or conditions on any such authorisation or may vary or terminate it at
any time.
(ii)
Subject to the Companies Act, the Company may by ordinary resolution ratify any contract,
transaction or arrangement, or other proposal, not properly authorised by reason of a
contravention of any provisions of the Articles.
(iii)
Subject to the article as summarised in paragraph 4.9(f)(iv) below, if a director, otherwise than
by virtue of his position as director, receives information in respect of which he owes a duty of
confidentiality to a person other than the Company, he shall not be required:
(A) to disclose such information to the Company or to the directors, or any other officer or
employee of the Company; or
(B) otherwise to use such information for the purpose of or in connection with the
performance of his duties as a director.
(iv)
Where such duty of confidentiality arises out of a situation in which he has, or can have, a
direct or indirect interest that conflicts, or possibly may conflict, with the interests of the
Company the article as summarised in paragraph 4.9(f)(iii) shall apply only if the conflict arises
out of a matter which is permitted or has been authorised by the Articles (subject to any
imposed restrictions).
(g) Provisions applicable to declarations of interest
Subject to the Companies Act and the Articles summarised in paragraph 4.9(e), a director shall declare to
the other directors the nature and extent of his interest:
(i)
if such interest is permitted under the Articles and is an interest which may reasonably be
regarded as likely to give rise to a conflict of interest;
(ii)
if he is in any way, directly or indirectly, interested in a proposed transaction or arrangement
with the Company; or
(iii)
if he is in any way, directly or indirectly, interested in a transaction or arrangement that has
been entered into by the Company, unless the interest has been so declared.
A director need not declare an interest:
(i)
if it cannot reasonably be regarded as likely to give rise to a conflict of interest;
(ii)
if, or to the extent that, the other directors are already aware of it (or ought reasonably to be
aware); or
165
(iii)
if it concerns terms of his service contract that have been or are to be considered by a meeting,
or a committee, of the directors appointed for the purpose.
(h) Appointment of executive directors
The Board may from time to time appoint one or more of their body to be the holder of any executive
office (including, where considered appropriate, the office of chairman or deputy chairman) on such terms
and for such period as they may (subject to the provisions of the Companies Act) determine and, without
prejudice to the terms of any contract entered into in any particular case, may at any time revoke or vary
the terms of any such appointment.
(i) Powers of executive directors
The Board may entrust to and confer upon any director holding any executive office any of the powers
exercisable by them as directors upon such terms and conditions and with such restrictions as they think fit
and either collaterally with or to the exclusion of their own powers, and may from time to time revoke,
withdraw, alter or vary all or any of such powers.
4.9 Appointment and retirement of directors
(a) Power of Company to appoint directors
The Company may by ordinary resolution appoint any person who is willing to act to be a director, either
to fill a vacancy or as an addition to the existing Board.
(b) Power of the Board to appoint directors
Without prejudice to the power of the Company in general meeting pursuant to any of the provisions of
the Articles to appoint any person to be a director, the Board may appoint any person who is willing to act
to be a director, either to fill a vacancy or as an addition to the existing Board. Any director so appointed
must retire from office at, or at the end of, the next following annual general meeting and will then be
eligible to stand for election but shall not be taken into account in determining the directors or the number
of directors who are to retire by rotation at that meeting.
(c) Retirement by rotation
At each annual general meeting, one-third of the directors for the time being shall retire from office by
rotation (or, if their number is not a multiple of three, the number nearest to but not exceeding one-third)
and shall so retire provided always that all directors must be subject to re- election at intervals of no more
than three years.
(d) Selection of directors to retire by rotation
The directors to retire by rotation shall include (so far as necessary to obtain the number required) any
director who is due to retire at the meeting by reason of age or who wishes to retire and not to offer
himself for re-election. Any further directors so to retire shall be those of the other directors subject to
retirement by rotation who have been longest in office since their last re-election and so that as between
persons who became or were last re-elected directors on the same day those to retire shall, unless they
otherwise agree among themselves, be determined by lot together with those who in the absence of any
such retirement would continue in office for a period in excess of three years. A retiring director shall be
eligible for re-election.
(e) Vacation of office
The office of a director shall be vacated by that director if:
(i)
he ceases to be a director by virtue of any provision of the Companies Act or he becomes
prohibited by law from being a director;
(ii)
he becomes bankrupt, has an interim receiving order made against him, makes any
arrangement or compounds with his creditors generally or applies to the court for an interim
order under section 253 of the Insolvency Act 1986 in connection with a voluntary arrangement
under that Companies Act;
166
(iii)
he is, or may be suffering from mental disorder and either:
(A) he is admitted to hospital in pursuance of an application for admission for treatment
under the Mental Health Act 1983 or, in Scotland, an application for admission under the
Mental Health (Scotland) Act 1960; or
(B) an order is made by a court having jurisdiction (whether in the United Kingdom or
elsewhere) in matters concerning mental disorder for his detention or for the appointment
of a receiver, curator bonis or other person to exercise powers with respect to his property
or affairs;
(iv)
he resigns by writing under his hand left at the Company’s registered office or he offers in
writing to resign and the Board resolves to accept such offer;
(v)
he shall for more than six consecutive months have been absent without permission of the
Board from meetings of the Board held during that period and the Board resolves that his
office be vacated; or
(vi)
notice stating he is removed from office as a director is served upon him signed by all his
co-directors who must account to the members at the next general meeting of the Company. If
a director holds an appointment to an executive office which automatically determines on his
removal from office under this or the preceding sub-paragraph, such removal shall be deemed
an act of the Company and shall have effect without prejudice to any claim for damages for
breach of any contract of service between him and the Company.
(f) Removal of directors
The Company may in accordance with and subject to the provisions of the Companies Act by ordinary
resolution of which special notice has been given remove any director from office (notwithstanding any
provision of the Articles or of any agreement between the Company and such director, but without
prejudice to any claim he may have for damages for breach of any such agreement) and elect another
person in place of a director so removed from office.
4.10 Shareholder meetings
The Company must in each year hold a general meeting as its annual general meeting (‘‘AGM’’). Not more
than 15 months can elapse between AGMs. An AGM must be convened, unless all shareholders entitled to
attend and vote agree to short notice, on giving 21 days’ notice in writing to the members of the Company.
Other meetings can be convened by the Company from time to time referred to as extraordinary general
meetings (‘‘GMs’’). The length of written notice to convene such a meeting is 14 clear days.
GMs can be convened on shorter notice with the agreement of shareholders being a majority in number
and holding not less than 95 per cent. in nominal value of the shares giving a right to attend and vote at the
meeting.
Shareholders need not attend a meeting of the Company in person but can do so by way of a validly
appointed proxy. Proxies are appointed in accordance with the Articles. In essence, to be validly appointed,
details of the proxy must be lodged at the Company’s registered office no later than 48 hours before the
commencement of the relevant meeting. Failure to lodge details of the appointed proxy in accordance with
the Articles could result in the vote of the proxy being excluded on any resolution and possibly to the
exclusion of the proxy from the meeting unless they were also a shareholder.
If a shareholder is a corporation, whether or not a company, it can pass a resolution of its directors or
other governing body to authorise such person as it thinks fit to act as its representative at any meeting of
the Company or class meeting of shareholders of the Company.
4.11 Notification of major holdings of Shares
Whilst disclosure of shareholdings is not a requirement of the Articles, chapter 5 of the Disclosure and
Transparency Rules makes provision regarding notification of certain shareholdings and holdings of
financial instruments.
167
Where a person holds voting rights in the Company as shareholder or through direct or indirect holdings
of financial instruments, then the person has an obligation to make a notification to the FCA and the
Company of the percentage of voting rights held where that percentage reaches, exceeds or falls below
three per cent. or any whole percentage figure above three per cent.
The requirement to notify also applies where a person is an indirect shareholder and can acquire, dispose
of or exercise voting rights in certain cases.
5.
DIRECTORS’, SENIOR MANAGERS’ AND OTHER INTERESTS
5.1 The names of the Directors and Senior Managers, their functions within the Group and brief
biographies are set out in Part 6: ‘‘Directors, Senior Management and Corporate Governance’’.
5.2 Each of the Directors can be contacted at the Company’s head office address at Park Square, Bird
Hall Lane, Cheadle Heath, Stockport SK3 0XN, United Kingdom.
5.3 The table below sets out the interests of the Directors and Senior Managers (and of certain persons
connected with them) in the share capital of the Company (all of which, unless otherwise stated, are
beneficial) as at the date of this document and as they are expected to be immediately following
completion of the Reorganisation and Admission:
At the date of this document
% of issued
ordinary
No. of
share
% of voting
Shares
capital
rights
Name
Director
Richard Segal .
Simon Cooper(1)
Wendy Parry . .
Lee Ginsberg .
David Kelly . . .
Senior Manager
Alistair Daly . .
Jonathan Smith
William Allen .
Oliver Garner .
Kirsteen
Vickerstaff . .
Immediately prior to Admission(2)
% of issued
ordinary
No. of
share
% of voting
Shares
capital
rights
Immediately following Admission
% of issued
ordinary
No. of
share
% of voting
Shares
capital
rights
.
.
.
.
.
.
.
.
.
.
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,768,170
17,708,618
5,187,428
—
—
1.4
13.6
4.0
—
—
1.4
13.6
4.0
—
—
406,680
14,163,688
4,149,943
—
—
0.3
10.9
3.2
—
—
0.3
10.9
3.2
—
—
.
.
.
.
.
.
.
.
—
—
—
—
—
—
—
—
—
—
—
—
5,187,428
5,187,428
937,130
707,268
4.0
4.0
0.7
0.5
4.0
4.0
0.7
0.5
4,149,943
4,149,943
749,704
565,815
3.2
3.2
0.6
0.4
3.2
3.2
0.6
0.4
. .
—
—
—
—
—
—
—
—
—
(1)
The interests of Simon Cooper in the share capital of the Company include the interests held by The Sule Cooper 2014
Discretionary Settlement (of which Simon’s wife Sule Cooper is the sole beneficiary).
(2)
Following completion of the Reorganisation described in paragraph 3.1 of this Part 15: ‘‘Additional Information’’.
Save as set out in this paragraph 5.3, none of the Directors or Senior Managers has, or on Admission, will
have any interests, beneficial or non-beneficial, in the share capital of the Company or any of its
subsidiaries.
5.4 No Director has or has had any interest in any transaction which is or was unusual in its nature or
conditions or is or was significant to the business of the Group and which was effected by the Group in
the current or immediately preceding financial year or which was effected during an earlier financial
year and remains in any respect outstanding or unperformed.
5.5 As at 22 September 2015 (being the latest practicable date prior to the date of this Prospectus) and
save in respect of the loans being capitalised as part of the Reorganisation, there were no outstanding
loans granted by any member of the Group to any Director or Senior Manager, nor by any Director or
Senior Manager to any member of the Group, nor was any guarantee which had been provided by any
member of the Group for the benefit of any Director or Senior Manager, or by any Director or Senior
Manager for the benefit of any member of the Group, outstanding.
168
5.6 The companies and partnerships of which the Directors and Senior Managers are, or have been,
within the past five years, members of the administrative, management or supervisory bodies or
partners (excluding the Company) are as follows:
Name
Current or former directorships/partnerships
Position still
held (Y/N)
Director
Richard Segal . . . . . .
Zezees Limited
Hampstead Theatre Limited
Spread A Smile
Spencer Walk Residents Association Limited
Anytrip.com Limited
Hostelworld Services Limited
On The Beach Bidco Limited
On The Beach Topco Limited
Full House Topco Limited
New Holding Limited
BL HC (DSCH) Limited
BL HC (DSCLI) Limited
BL HC Dollview Limited
BL HC Health And Fitness Holdings Limited
BL HC Invic Leisure Limited
BL HC Property Holdings Limited
BL Health Clubs PH No 1 Limited
BL Health Clubs PH No 2 Limited
Esporta Financial Services Limited
Esporta H & F Propco (1A) Limited
Esporta H & F Propco (2A) Limited
Esporta Health & Fitness Limited
Esporta Health & Racquets Club Gloucester Limited
Esporta Health & Racquets Club Hamilton Limited
Esporta Health Club Peterborough Limited
Esporta Health Clubs Limited
Esporta Limited
Esporta Management Services Limited
Esporta Non Racquets Limited
Esporta Racquets And Non Racquets Holdings Limited
Esporta Racquets Limited
Esporta Tennis Clubs Limited
I S L Leisure Limited
Invicta (Club Indigo) Limited
Invicta Leisure (Brentwood) Limited
Invicta Leisure (Manchester) Limited
Invicta Leisure (Plymouth) Limited
Invicta Leisure (Sunderland) Limited
Invicta Leisure (Swansea) Limited
Invicta Leisure (Tennis) Limited
Ocean Park Leisure Limited
Riverside Limited
Riverside Racquet Centre Limited
The Riverside Health & Racquets Club Northwood Limited
The Royal County of Berkshire Health & Racquets Club Limited
The Charles Kalms, Henry Ronson Immanuel College
EG01 Limited
Bridge BP Realisations Limited
Cookridge Hall Country Club Limited
Esporta Chislehurst Limited
Esporta Health & Racquets Club Lichfield Limited
Esporta Health Club Northampton Limited
Esporta Health Club Repton Park Limited
Esporta Health Club Rustington Limited
Esporta Health Club Wolverhampton Limited
Esporta Lifestyle Clubs Limited
169
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
Name
Current or former directorships/partnerships
Position still
held (Y/N)
Esporta Racquets Clubs Limited
Humberston Country Club Limited
Invicta Leisure (Brighton) Limited
Invicta Leisure (Financial Services) Limited
Invicta Leisure (Overseas) Limited
Northwood Developments Limited
Riverside Childcare Limited
Riverside Chiswick Limited
Riverside Croydon Limited
Surrey Tennis & Country Club (STCC) Limited
The Norfolk Health & Racquets Club Limited
The Oxford Health & Racquets Club Limited
Three Years Limited
Two Years Limited
N
N
N
N
N
N
N
N
N
N
N
N
N
N
Simon Cooper . . . . . .
On
On
On
On
On
On
On
the
the
the
the
the
the
the
Beach
Beach
Beach
Beach
Beach
Beach
Beach
Limited
Holidays Limited
Beds Limited
Travel Limited
Bidco Limited
Topco Limited
Trustees Limited
Y
Y
Y
Y
Y
Y
Y
Wendy Parry . . . . . . .
On
On
On
On
On
On
On
the
the
the
the
the
the
the
Beach
Beach
Beach
Beach
Beach
Beach
Beach
Travel Limited
Limited
Beds Limited
Bidco Limited
Holidays Limited
Topco Limited
Trustees Limited
Y
Y
Y
Y
Y
Y
Y
Lee Ginsberg . . . . . . .
Oriole Restaurants Limited
Mothercare Plc
Trinity Mirror Plc
Patisserie Holdings Plc
Cantina Laredo (UK) Limited
D.P. Newcastle Limited
Domino’s Pizza Group Plc
Domono’s Pizza UK & Ireland Limited
DP Capital Limited
DP Group Developments Limited
DP Realty Limited
DP Milton Keynes Limited
DPG Holdings Limited
Domino’s Leasing Limited
Domino’s Pizza Germany (Holdings) Limited
Domino’s Pizza Germany Limited
Domino’s Pizza West Country Limited
DP Beach A Limited
DP Beach B Limited
DP Shayban Limited
D A Hall Trading Limited
Daht Limited
MLS Ltd
Y
Y
Y
Y
Y
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
David Kelly . . . . . . . .
Holiday Extras Investments Limited
Skillvillage Limited
Purepromoter Group (Holdings) Limited
Xbridge Limited
Camelot UK Lotteries Limited
Trinity Mirror Plc
Camelot Global Services Limited
Zuto Holdings Limited
Zuto Limited
Y
Y
Y
Y
Y
Y
Y
Y
Y
170
Name
Current or former directorships/partnerships
Position still
held (Y/N)
Rackspace Limited
Basekit Platform Limited
Y
Y
Alistair Daly . . . . . . .
Oliver Daly Limited
Karen Daly Limited
On the Beach Travel Limited
On the Beach Beds Limited
On the Beach Bidco Limited
On the Beach Holidays Limited
On the Beach Limited
On the Beach Topco Limited
Y
Y
Y
Y
Y
Y
Y
Y
Jonathan Smith . . . . .
On
On
On
On
On
On
Y
Y
Y
Y
Y
Y
William Allen . . . . . . .
On Holiday Group Limited
Euro Rooms Worldwide Limited
Oliver Garner . . . . . .
None
N/A
Kirsteen Vickerstaff . .
None
N/A
Senior Manager
the
the
the
the
the
the
Beach
Beach
Beach
Beach
Beach
Beach
Travel Limited
Beds Limited
Bidco Limited
Holidays Limited
Limited
Topco Limited
Y
Y
5.7 Save as set out in paragraph 5.6 above, none of the Directors or Senior Managers has any business
interests, or performs any activities, outside the Group which are significant with respect to the
Group.
5.8 The Company and the Directors are not aware of any arrangements the operation of which may at a
subsequent date result in a change in control of the Company.
5.9 Save as set out in paragraph 5.10 below, at the date of this Prospectus, none of the Directors or Senior
Managers has at any time within the previous five years:
(a) had any convictions in relation to fraudulent offences;
(b) been associated with any bankruptcies, receiverships or liquidations acting in the capacity of any of the
positions set out against the name of the Director or Senior Manager in paragraph 5.6 above;
(c) been subject to any official public incrimination and/or sanctions by any statutory or regulatory
authorities (including designated professional bodies); or
(d) been disqualified by a court from acting as a member of the administrative, management or
supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any
issuer.
5.10 William Allen was a director of On Holiday Group Limited until 9 July 2015. This company entered
into a members’ voluntary liquidation on 10 June 2014 and is currently in liquidation. Richard Segal
resigned as a director of Bridge BP Realisations Limited on 9 December 2011. This company entered
administration on 8 December 2011, a creditors’ voluntary liquidation on 28 November 2012 and is
currently in liquidation.
5.11 As at the date of this Prospectus, there are no:
(a) potential conflicts of interest between any duties to the Company of the Directors and Senior
Managers and their private interests and/or other duties; or
(b) arrangements or understandings with major shareholders, customers, suppliers or others pursuant to
which any Director or Senior Manager was selected as a Director or Senior Manager (respectively).
5.12 Save for the Company’s code on dealings in securities and the lock-up agreements described in
paragraph 49 of Part 13: ‘‘Details of the Offer’’, there are no restrictions agreed by any Director or
Senior Manager on the disposal within a certain time of their holdings in the Company’s securities.
171
6.
INTERESTS OF SIGNIFICANT SHAREHOLDERS
6.1 As at the date of this Prospectus, to the extent known by the Company, the Company is owned or
controlled by Inflexion, which holds 100 per cent. of the voting rights attached to the issued share
capital of the Company.
6.2 Immediately following Admission, to the extent known by the Company, it is expected that the
following persons will be interested (directly or indirectly) in 3 per cent. or more of the Company’s
issued ordinary share capital:
Name of Shareholder
Inflexion . . . . . . . . . . . . . . . . . . . . . . . . . .
Simon Cooper . . . . . . . . . . . . . . . . . . . . . .
Schroder Investment Management . . . . . . .
Hargreave Hale Ltd . . . . . . . . . . . . . . . . . .
River & Mercantile Asset Management LLP
The Independent Investment Trust PLC . . .
Newton Inv Management Ltd . . . . . . . . . . .
Alistair Daly . . . . . . . . . . . . . . . . . . . . . . .
Jonathan Smith . . . . . . . . . . . . . . . . . . . . .
Wendy Parry . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
No. of Shares
% of issued
ordinary share
capital
% of voting
rights
48,432,801
14,163,688
11,500,000
6,000,000
6,000,000
5,150,000
4,750,000
4,149,943
4,149,943
4,149,943
37.1
10.9
8.8
4.6
4.6
3.9
3.6
3.2
3.2
3.2
37.1
10.9
8.8
4.6
4.6
3.9
3.6
3.2
3.2
3.2
6.3 Save as set out above, the Company is not aware of any person who has, or will immediately following
Admission have, a notifiable interest of 3 per cent. or more of the issued share capital of the
Company.
6.4 No Shareholder set out above has (nor will it have) different voting rights attached to the Shares it
holds to those held by the other Shareholders.
6.5 For a description of the steps that the Company has taken to ensure that the Company will be capable
of carrying on its business independently of Inflexion for so long as Inflexion (together with its concert
parties) holds a Controlling Interest, please see paragraph 11(d) (Relationship Agreement) of this
Part 15: ‘‘Additional Information’’.
7.
DIRECTORS’ SERVICE AGREEMENTS, LETTERS OF APPOINTMENT, REMUNERATION
AND OTHER MATTERS
7.1 The Directors and their functions are set out in Part 6: ‘‘Directors, Senior Management and
Corporate Governance’’.
7.2 Set out below are summary details of the Company’s terms of appointment with the Executive
Directors:
(a) Simon Cooper (Chief Executive Officer) entered into a service agreement with the Company dated
22 September 2015. Simon is entitled to receive an annual salary of £127,000 plus a discretionary
contractual bonus and is eligible to participate in the LTIP. Simon’s appointment is terminable at any
time on six months’ notice given by either party. The Company is entitled to terminate Simon’s
employment by payment of a cash sum in lieu of notice, equal to: (i) his basic salary that would have
been payable; and (ii) any accrued but untaken holiday pay entitlement. Simon’s appointment may be
terminated summarily by the Company if he is, amongst other things, guilty of dishonesty or serious
misconduct which renders him unfit to continue as an executive of the Company. The service
agreement does not provide for any extra payment to be given to Simon upon termination of his
employment.
(b) Wendy Parry (Chief Financial Officer) entered into a service agreement with the Company dated
22 September 2015.Wendy is entitled to receive an annual salary of £127,000 plus a discretionary
contractual bonus and is eligible to participate in the LTIP. Wendy’s appointment is terminable at any
time on six months’ notice given by either party. The Company is entitled to terminate Wendy’s
employment by payment of a cash sum in lieu of notice, equal to: (i) her basic salary that would have
been payable; and (ii) any accrued but untaken holiday pay entitlement. Wendy’s appointment may be
terminated summarily by the Company if she is, amongst other things, guilty of dishonesty or serious
misconduct which renders her unfit to continue as an executive of the Company. The service
172
agreement does not provide for any extra payment to be given to Wendy upon termination of her
employment.
7.3 Set out below are summary details of the Company’s terms of appointment with the Non-executive
Directors:
(a) Richard Segal has entered into the terms of an appointment letter as non-executive Chairman dated
3 September 2015, which will become effective on Admission. Richard’s appointment is for an initial
period of two terms of three years each from the date of Admission. The annual fee payable is
£100,000 and the notice period for either party to terminate the agreement is three months.
(b) Lee Ginsberg has entered into the terms of an appointment letter as non-executive director dated
17 August 2015. Lee’s appointment is for an initial period of two terms of three years each from the
date of Admission. The annual fee payable is £45,000, together with £5,000 per annum while Lee
performs his duties as senior independent non-executive director and £7,500 per annum while Lee
performs his duties as chairman of the audit committee. The notice period for either party to
terminate the agreement is three months.
(c) David Kelly has entered into the terms of an appointment letter as non-executive director dated
28 August 2015. David’s appointment is for an initial period of two terms of three years each from the
date of Admission. The annual fee payable is £45,000, together with £5,000 per annum while David
performs his duties as chairman of the remuneration committee. The notice period for either party to
terminate the agreement is three months.
7.4 Save as set out in paragraphs 7.2 and 7.3 above, there are no existing or proposed service agreements
or letters of appointment between the Directors and any member of the Group.
7.5 In anticipation of Admission, the Remuneration Committee undertook a review of the Group’s
remuneration policy for senior management, including the Executive Directors, in order to ensure
that it is appropriate for the listed company environment. In undertaking this review, the
Remuneration Committee sought independent, specialist advice.
7.6 The Company’s remuneration strategy is to provide pay packages that attract, retain and motivate
high-calibre talent to help ensure its continued growth and success as a listed company.
7.7 The Company’s remuneration strategy aims to encourage and support a high performance culture,
reward for achievement of the Group’s corporate strategy and delivery of sustainable growth and align
the interests of the Executive Directors, senior management and employees to the long-term interests
of shareholders, whilst ensuring that remuneration and incentives adhere to the principles of good
corporate governance and support good risk management practice and sustainable Company
performance.
7.8 Consistent with this remuneration strategy, the Remuneration Committee has agreed a structure for
future remuneration arrangements for Executive Directors and senior management, taking into
account evolving market and best practices. Remuneration will be set at a level that is considered by
the Remuneration Committee to be appropriate for the size and nature of the business. Performancerelated pay will be based on stretching targets, and will form an important part of the overall
remuneration package. There will be an appropriate balance between short and longer-term
performance targets linked to delivery of the Group’s business plan.
7.9 The Company intends to deliver this policy for senior management, including Executive Directors, via
a remuneration framework which combines base salary, benefits, an annual bonus plan and sharebased awards under the LTIP.
7.10 It is intended that the following arrangements will form part of the remuneration policy from
Admission subject to formal approval by shareholders at the first annual general meeting of the
Company following Admission:
(a) Base salary
The base salaries for Executive Directors and senior management will depend on their experience and the
scope of their role as well as having regard to practices at peer companies of equivalent size and
complexity. In considering the base salary (and other elements of remuneration) of Executive Directors
and senior management, due regard will be taken of the pay and conditions of the workforce generally.
Base salaries will typically be reviewed on an annual basis. Base salaries on Admission for both Simon
173
Cooper and Wendy Parry are £127,000 but will be increased to £200,000 and £175,000, respectively from
1 January 2016 as part of the normal annual salary review. In setting the base salaries, the Committee
recognises that these are below the market median but has given regard to the material shareholding in the
Company of the current Executive Directors and a desire to focus the remuneration structure on a
long-term strategy.
(b) Annual bonus plan
Executive Directors and senior management are eligible to participate in a cash bonus plan. Annual
bonuses will be primarily linked to the Company’s annual financial performance. The maximum
opportunity for Executive Directors is proposed to be 100 per cent. of salary.
(c) LTIP
Awards under the LTIP will normally be granted annually to Executive Directors and selected senior
management. It is expected that these awards will vest at the end of a three year period subject to the
recipient’s continued employment at the date of vesting and satisfaction of the performance conditions. It
is anticipated that the first awards to be granted under the LTIP to the Executive Directors (and other
selected members of senior management) will be made during the course of 2016. The maximum value of
the Shares underlying the initial LTIP Awards may not exceed 150 per cent. (or 200 per cent. in exceptional
circumstances) of an individual’s annual salary based on the market value of a Share at the close of the
previous financial year. The detail of the performance metrics, targets and weightings will be set at the
time awards are granted. Further details of the LTIP are provided in paragraph 9.1 of this Part 15.
(d) Minimum shareholding requirement
Whilst the current Executive Directors have significant shareholdings in the Company, the Remuneration
Committee wishes to ensure that a shareholding guideline is in place to cater for future Executive
Directors who may not hold shares. Accordingly, the Remuneration Committee has also adopted formal
shareholding guidelines that will encourage the Executive Directors to build up over a five year period and
then subsequently hold a shareholding equivalent to 150 per cent. of their base salary. This policy ensures
that the interests of Executive Directors and those of shareholders are closely aligned.
(e) SIP
The Executive Directors and senior management will be entitled to participate in any all-employee share
schemes adopted by the Company, for example the new SIP, on the same terms as other employees. A
summary of the proposed terms of the SIP are provided in paragraph 9.2 of this Part 15.
(f) Recruitment policy
New Executive Director and senior management hires will be offered remuneration packages in line with
the Company’s remuneration policy in force at the time. In addition to the above elements of
remuneration, the Committee may, in exceptional circumstances, consider it appropriate to grant an award
under a different structure in order to facilitate the buyout of outstanding awards held by an individual on
recruitment. Any buyout award would be limited to what the Remuneration Committee considers to be a
fair estimate of the value of awards foregone when leaving the former employer and will be structured so
as to take into account other key terms, such as vesting schedules and performance targets, of the awards
which are being replaced.
The Remuneration Committee will keep the remuneration arrangements for the Executive Directors and
key senior management under review taking into consideration business strategy over the period; overall
corporate performance; market conditions affecting the Company; and evolving best practice.
(g) Chairman and Non-Executive Director fees
The Chairman’s and the other Non-Executive Directors’ fees will be set at a level to reflect the amount of
time and level of involvement required in order to carry out their duties as members of the Board and its
committees, and to attract and retain Non-Executive Directors of a high calibre with relevant commercial
and other experience. Fee levels are set by reference to non-executive director fees at companies of similar
size and complexity and general increases for salaried employees within the Company. The fee paid to the
Chairman is determined by the Remuneration Committee, while the fees for other Non-Executive
Directors are determined by the Board as a whole. Additional fees are payable for acting as Senior
Independent Director and as Chairman of the Board’s Audit and Remuneration Committees.
Non-Executive Directors are not eligible to participate in any of the Company’s incentive arrangements.
174
7.11 The details of the Company’s Executive Director remuneration arrangements, including the operation
of the Company’s incentive plans and payments made under them, will be set out each year in a
remuneration report contained in the Company’s annual report. The Company will be required to
submit its remuneration policy (as it relates to the Directors) to a binding vote of Shareholders at the
first annual general meeting of the Company following Admission. It is the current intention of the
Remuneration Committee that the Remuneration policy for Directors will apply for three years from
its date of approval. Accordingly, the Company will outline the detail of its future policy relating to
the Directors’ remuneration, including participation in the annual bonus plan and LTIP, in its annual
report and accounts for the financial year ending 30 September 2015.
8.
DIRECTORS’ AND SENIOR MANAGERS’ REMUNERATION IN THE YEAR ENDED
30 SEPTEMBER 2014
8.1 Under the terms of their service agreements, letters of appointment and applicable incentive plans, in
the year ended 30 September 2014, the aggregate remuneration and benefits to the directors of OTB
Topco and the senior management of the Group who served during 2014, consisting of seven
individuals, was £749,212.
8.2 There is no arrangement under which any Director has waived or agreed to waive future emoluments
nor has there been any waiver of emoluments during the financial year immediately preceding the
date of this Prospectus.
8.3 For the year ended 30 September 2014, the Group made pension contributions of £3,120 on behalf of
Simon Cooper (but did not otherwise make any pension contributions or other retirement related
benefits on behalf of the Directors and Senior Managers who served during 2014).
9.
SHARE PLANS
See below a summary of the principal terms of the share plans proposed to be approved and adopted by
the Company on Admission, being the LTIP and the SIP.
9.1 The LTIP
Under the LTIP, awards may be granted in the form of options to acquire Shares (‘‘Options’’) and/or
conditional rights to acquire Shares (‘‘Conditional Share Awards’’) (together, ‘‘Awards’’).
The Remuneration Committee will supervise the operation of the LTIP and the grant of Awards.
Options may be granted with an exercise price of nil or nominal value.
It is proposed that the first set of Awards will be granted in the form of nil-cost Options in January 2016
and will be based 70 per cent. on EPS performance targets and 30 per cent. on share price conditions
measured over the period beginning on 1 October 2015 until 30 September 2018.
(a) Participation
Employees and executive directors of the Group may participate in the LTIP at the absolute discretion of
the Remuneration Committee.
(b) Timing of grant of Awards
Except as otherwise provided, the grant of Awards may only be made at times permitted by the Model
Code contained in the Listing Rules issued by the UK Listing Authority (as amended from time to time)
and any code adopted by the Company or any order or regulation governing dealing in shares by which the
Company is bound that may be issued from time to time.
(c) Dilution limits
The maximum number of Shares over which Awards may be granted under the LTIP and under any other
employees share scheme in any 10 year period may not exceed 10 per cent. of the number of Shares in
issue from time to time.
Awards which have lapsed or have been surrendered shall not count towards this dilution limit.
175
(d) Individual participation limit
The number of Shares (based on the market value as at the final day of the Company’s prior financial year)
over which Awards under the LTIP may be granted to a participant in any financial year of the Company
may not exceed 150 per cent. of his annual basic salary. If exceptional circumstances arise, the
Remuneration Committee may grant Awards outside this limit.
(e) Performance conditions and vesting
Awards will normally vest after a minimum period of three years from the date of grant. Vesting of Awards
will be subject to the achievement of appropriate performance conditions as determined by the
Remuneration Committee at the date of grant and will be subject to the participant continuing to be an
employee or director of the Group at the time of vesting.
If an event occurs which causes the Remuneration Committee to consider that any performance condition
subject to which an Award has been granted is no longer appropriate, that condition may be substituted,
varied or waived as is considered reasonable in the circumstances and produces a fairer measure of
performance.
(f) Cessation of employment
Unvested Awards will normally lapse on cessation of employment.
If a participant ceases employment as a result of death, ill health, injury or disability, retirement,
redundancy or being employed by an entity which is transferred out of the Group or for any other reason
as determined by the Remuneration Committee, the Award will not lapse and will instead continue until
the normal time of vesting.
Awards will normally be pro-rated to reflect the time from the date of grant of the Award until the date of
cessation.
(g) Change of control and other corporate events
If there is a change of control of the Company as a result of a takeover, a court-sanctioned compromise or
arrangement or a voluntary winding up (or any other similar event including a demerger)
The proportion of an Award will vest to the extent determined by the Remuneration Committee in its
absolute discretion and taking into account the period of time the Award has been held by the Participant
and the extent to which the performance conditions have been achieved.
Options to the extent vested may be exercised for a period of 6 months and if not so exercised will lapse at
the end of such period unless the Remuneration Committee determines that a longer period shall apply.
Where appropriate, and with the agreement of an acquiring company, Awards may be exchanged for
Awards over shares in the acquiring company.
(h) Dividend equivalent
An Award may include the right to additional Shares or cash amount on vesting/exercise of an amount
equal to dividends paid during the life of the Award in respect of the number of Shares over which the
Award has vested. Such amount will assume the reinvestment of dividends and (unless the Remuneration
Committee determine otherwise) will include special dividends and dividends in specie.
(i) Malus & clawback
The Remuneration Committee may determine at the time of grant of an Award that such Awards shall be
subject to malus and/or clawback.
If an Award is made subject to malus, the Remuneration Committee at any time before an Award has
vested, reduce the number of Shares subject to the Award (including to nil) in the following circumstances:
(i) discovery of a material misstatement resulting in an adjustment in the audited consolidated
accounts of the Company or the audited accounts of any member of the Group; and/or
(ii) action or conduct of participant which, in the reasonable opinion of the Remuneration
Committee, amounts to employee misbehaviour, fraud or gross misconduct.
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If an Award is subject to clawback, then for a period of two years following the date of vesting, then if any
of the following circumstances arise the Remuneration Committee may in its absolute discretion require
the relevant Award Holder to transfer some or all of the Shares that were subject to his Award or pay an
equivalent cash amount:
(i) discovery of a material misstatement resulting in an adjustment in the audited consolidated
accounts of the Company or the audited accounts of any member of the Group for a period that
was wholly or partly before the end of the period over which the Performance Target applicable
to an Award was assessed; and/or
(ii) action or conduct of an Award Holder which, in the reasonable opinion of the Remuneration
Committee, amounts to employee misbehaviour, fraud or gross misconduct.
(j) Taxation
Under the terms of the LTIP, the participant agrees to pay to the relevant company in the Group any
amount of income tax and national insurance contributions (or overseas equivalents) that the relevant
company is required to withhold and/or account to any fiscal authority. To the extent permitted by law,
such liabilities may be deducted from other payments due to the participant and the relevant company in
the Group may withhold and sell Shares to which the participant may otherwise be entitled under the LTIP
in order to meet such liabilities. To the extent permitted by law, national insurance contribution (or
overseas equivalent) may include employer contributions.
(k) Variation of share capital
In the event of any variation in the share capital of the Company, the number of Shares subject to an
Award, the description of the Shares, the exercise price (where relevant), or any one or more of these, may
be adjusted in such manner as the Remuneration Committee may determine.
(l) Amendment of the LTIP
The Remuneration Committee may from time to time amend the rules of the LTIP (including for the
purposes of establishing a sub-plan for the benefit of employees located overseas).
However, no amendment may be made without the prior approval of the Company in general meeting for
the benefit of existing or future Participants to the Rules relating to:
(i) the basis for determining an employee’s entitlement (or otherwise) to be granted an Award
and/or to acquire Shares on the exercise of an Option and/or to become absolutely entitled to
Shares subject to a Conditional Share Award (as the case may be) under the LTIP;
(ii) the persons to whom an Award may be granted;
(iii) the limit on the aggregate number of Shares over which Awards may be granted;
(iv) the limit on the number of Shares over which Awards may be granted to any one employee;
(v) the adjustment of Awards on a capitalisation issue, rights issue, open offer, sub-division or
consolidation of shares or reduction of capital or any other variation of capital; or
(vi) the rule relating to amendments to the LTIP,
except for amendments which are minor and benefit the administration of the LTIP or in order to take
account of a change of legislation or to obtain or maintain favourable tax, exchange control or regulatory
treatment for participants in the LTIP, the Company or some other Group company.
(m) Term of the LTIP
The life of the LTIP will be 10 years and no Award may be granted more than 10 years after the date on
which the LTIP was adopted.
(n) Pension benefits
Awards under the LTIP are not pensionable.
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9.2 The SIP
The SIP has been designed to satisfy the conditions set out in schedule 2 to the Income Tax (Earnings &
Pensions) Act 2003 (‘‘ITEPA’’) so that Shares may be provided to employees of the Group in a tax-efficient
manner.
The SIP will operate through a UK resident trust (‘‘SIP Trust’’) which will be administered by professional
third party trustees (‘‘Trustees’’). The Trustees will acquire Shares (by subscription or purchase on the
market) which are then held on behalf of participants in the SIP (‘‘Participants’’).
(a) Eligibility
All UK resident employees who have been employed within the Group for a minimum qualifying period
specified by the Remuneration Committee in relation to any particular proposed award (not being more
than 18 months or such other period as may be specified by the legislation from time to time) are eligible
to participate in the SIP on similar terms.
(b) Dilution limits
The maximum number of Shares over which awards may be granted under the LTIP and under any other
employees share scheme in any 10 year period may not exceed 10 per cent. of the number of Shares in
issue from time to time.
Awards which have lapsed or have been surrendered shall not count towards this dilution limit.
(c) Types of award which may be granted
Under the SIP, the Remuneration Committee may make the following types of award:
(i) free share award;
(ii) partnership share award; and/or
(iii) matching share award.
Dividend shares may also be acquired.
The Remuneration Committee may make different types of award in different financial periods. The
principal features of these different types of award are set out below.
(i) Free Shares
Awards of free Shares (‘‘Free Shares’’) may be made to Participants up to a maximum value of
£3,600 per Participant in each tax year (or such other maximum from time to time permitted by
the legislation). Free Shares must be offered to all Participants on similar terms but the number
awarded can be determined by reference to the employee’s remuneration, length of service,
number of hours worked and/or the satisfaction of fair and objective performance criteria.
(ii) Partnership Shares
The Remuneration Committee may allow Participants the opportunity to purchase Shares
(‘‘Partnership Shares’’) out of their pre-tax salary, up to a maximum of £1,800 per tax year or
10 per cent. of pre-tax salary if lower (or such other limits from time to time permitted by the
legislation). The purchase price will be deducted from salary subject to a minimum specified by
the Remuneration Committee, which may not be greater than £10 on any occasion (or such other
amount from time to time specified by the legislation).
The salary allocated to Partnership Shares can be accumulated for a period of up to 12 months
(‘‘Accumulation Period’’) or Partnership Shares can be purchased out of deductions from the
Participant’s pre-tax annual basic salary when those deductions are made. A Participant and the
Company may agree to vary the amount of salary deductions and the intervals of those
deductions. If there is an Accumulation Period, the number of Shares purchased shall be
determined by dividing the Participant’s aggregate pay deducted during the Accumulation Period
by the market value of the Partnership Shares.
Once acquired, Partnership Shares may be withdrawn from the SIP by the Participant at any time.
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(iii) Matching Shares
Where Participants purchase Partnership Shares, they may be given up to two free Shares
(‘‘Matching Shares’’) for every purchased Partnership Share. If Matching Shares are allocated, all
Participants who have purchased Partnership Shares must be awarded Matching Shares on the
same basis.
(iv) Dividend Shares
Participants may be required or permitted to purchase additional Shares (‘‘Dividend Shares’’)
using dividends received by them in respect of their Shares held under the SIP.
(d) Holding period and cessation of employment
All Free Shares and Matching Shares must normally remain within the SIP Trust for a period of 3 to
5 years, as specified by the Remuneration Committee at the time the awards are made, unless the
Participant ceases to be employed within the Group.
If a Participant ceases to be an employee within the Group by reason of death, injury or disability,
redundancy, retirement, by reason of a relevant transfer within the meaning of the Transfer of
Undertakings (Protection of Employment) Regulations 2006 or by reason of the Participant’s employing
company ceasing to a member of the Group (each a ‘‘Good Leaver’’) his Free Shares and/or Matching
Shares will be transferred to him (or to his personal representative).
The Remuneration Committee may, in its discretion, provide that if a Participant ceases to be an employee
of the Group within a period specified by the Remuneration Committee at the date the award is made in
circumstances when he is not a Good Leaver, his Free Shares and Matching Shares will be forfeited and he
will have no further entitlement to them.
(e) Rights relating to the Shares
Shares held under the SIP shall, subject to the provisions of the SIP, rank pari passu in all respects with
other Shares.
Where Shares are held under the SIP by the Trustee on behalf of a Participant, the Trustee must obtain
from, and comply with, any voting instructions given by the Participant and otherwise, save as required or
permitted by the SIP, deal with a Participant’s Shares only in accordance with his directions.
(f) Corporate events
In the event of a general offer being made to Shareholders (or similar takeover event taking place) during
a holding period, Participants will be able to direct the Trustee as to how to act in relation to their Shares
held in the SIP. In the event of a corporate re-organisation, any Shares held by Participants may be
replaced by equivalent shares in a new holding company.
(g) Variation of share capital
Shares, or rights to them, acquired by Participants on a variation of share capital of the Company will
usually be treated in the same way as the Shares acquired or awarded under the SIP, in respect of which the
rights were conferred and as if they were acquired or awarded at the same time.
(h) Amendments to the SIP
The Remuneration Committee may alter the SIP but certain alterations cannot take effect without the
approval of the Company’s shareholders in general meeting, unless they are minor amendments to the
benefit of the administration of the SIP, to take account of the change in legislation, are to obtain or
maintain favourable tax, exchange control or regulatory treatment for Participants in the SIP or for any
member of the Group, being amendments to the class of eligible employees, the limits on the number of
new Shares which may be issued under the SIP, the maximum entitlement of an individual Participant, the
price payable for Shares by a Participant, the adjustments that may be made in the event of any variation to
the share capital of the Company and the basis for determining any Participant’s entitlement to Shares. No
alteration to the SIP can be made which would adversely prejudice (to a material extent) the rights
attaching to Shares acquired by the Participants.
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(i) Pension benefits
Awards under the SIP are not pensionable.
10. UNDERWRITING AGREEMENT
On 23 September 2015, the Company, the Directors, the Selling Shareholders and Numis entered into the
Underwriting Agreement. Pursuant to the terms of the Underwriting Agreement:
(a) the Company confirmed the appointment of Numis as global co-ordinator, sponsor and bookrunner
and underwriter in connection with the application for Admission and the Offer;
(b) the Company has agreed, subject to certain conditions, to allot and issue, at the Offer Price, the New
Shares to be issued in connection with the Offer;
(c) the Selling Shareholders have agreed, subject to certain conditions, to sell, at the Offer Price, the Sale
Shares to be sold in connection with the Offer;
(d) Numis has agreed, subject to certain conditions, to procure subscribers for the New Shares and
purchasers for the Sale Shares or, failing which, itself to subscribe for New Shares and/or to purchase
Sale Shares at the Offer Price;
(e) the Company has agreed that a base commission of 2 per cent. will be payable to Numis for New
Shares sold on Admission, together with an incentive commission of up to 1.5 per cent.;
(f) each of the Selling Shareholders has agreed that a base commission of 2 per cent. will be payable to
Numis in respect of the Sale Shares held by them and sold on Admission, together with an incentive
commission of up to 1.5 per cent.;
(g) the obligations of Numis to procure subscribers and/or purchasers for or, failing which, itself to
subscribe for or purchase New Shares and Sale Shares (as the case may be) are subject to certain
conditions. These conditions include the absence of any breach of warranty or undertaking given by
the Company, the Directors or the Selling Shareholders under the Underwriting Agreement and
Admission occurring by no later than 8.00 a.m. (London time) on 28 September 2015 (or such later
time and/or date as Numis and the Company may agree but, in any event, no later than 8.00 a.m. on
1 October 2015). In addition, Numis has the right to terminate the Underwriting Agreement,
exercisable in certain circumstances, prior to Admission. The circumstances include, among others, of
certain material adverse changes in the condition (financial, operational, legal or otherwise) or in the
earnings, management, business affairs, solvency, business prospects or financial prospectus of the
Company or the Group and certain changes in political, financial or economic conditions. If this right
is exercised, the Offer will lapse, the Company will not seek Admission and any moneys received from
investors in respect of the Offer will be returned without interest;
(h) the Company has agreed to pay certain of the costs, charges, fees and expenses relating to the Offer
(together with any related value added tax) and the Selling Shareholders have agreed to pay any
stamp duty payable on the transfer of the Sale Shares;
(i) each of the Company, the Directors and the Selling Shareholders has given certain warranties and
undertakings to Numis;
(j) the Company has given an indemnity covering certain customary matters to Numis;
(k) the parties to the Underwriting Agreement have given certain covenants to each other regarding
compliance with laws and regulations affecting the making of the Offer in relevant jurisdictions;
(l) each of the Executive Directors and certain persons connected with them and Inflexion has agreed
that, during the 12 month period following Admission, subject to certain customary exceptions, he or
she will not, (and will procure that none of his or her connected persons acting on his or her behalf
will) without the prior written consent of Numis directly or indirectly, offer, issue, lend, mortgage,
assign, charge, pledge, sell or contract to sell, issue options in respect of, or otherwise dispose of,
directly or indirectly, or announce an offering of any Shares (or any interest in therein or in respect
thereof) or any other securities exchangeable for, or convertible into, or substantially similar to,
Shares or enter into any transaction with the same economic effect as the foregoing;
(m) Inflexion has agreed that, during the period ending the longer of six months from the date of
Admission or the date of publication of the audited financial results of the Company for the year
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ended 30 September 2015, subject to certain customary exceptions, it will not, (and will procure that
none of its connected persons acting on its behalf will) without the prior written consent of Numis
directly or indirectly, offer, issue, lend, mortgage, assign, charge, pledge, sell or contract to sell, issue
options in respect of, or otherwise dispose of, directly or indirectly, or announce an offering of any
Shares (or any interest in therein or in respect thereof) or any other securities exchangeable for, or
convertible into, or substantially similar to, Shares or enter into any transaction with the same
economic effect as the foregoing; and
(n) in addition to the lock-up arrangements described in paragraphs (l) and (m) above, each of the
Executive Directors and certain persons connected with them and Inflexion have agreed that, for a
further six month period following the expiry of their lock-up periods referred to above, subject to
certain customary exceptions, they will not dispose of any Shares or interests in Shares other than
through Numis with a view to maintaining an orderly market in the Company’s securities.
10.2 The customary exceptions to the lock-up arrangements referred to in paragraphs 10.1(l) and
(m) above include the following:
(a) selling any Sale Shares pursuant to the Offer;
(b) accepting a general offer made to all holders of issued and allotted Shares made in accordance with
the City Code on terms which treat all such holders alike and which has become or been declared
unconditional in all respects, or been recommended for acceptance by the Directors;
(c) executing and delivering an irrevocable commitment or undertaking to accept a general offer (without
any further agreement to transfer or dispose of any Shares or any interest therein) as is referred to in
paragraph 10.2(b);
(d) selling or otherwise disposing of Shares pursuant to any offer by the Company to purchase its own
Shares which is made on identical terms to all holders of Shares in the Company;
(e) transferring or disposing of Shares pursuant to a compromise or arrangement between the Company
and its creditors, or any class of them, or between the Company and its members, or any class of them,
which is agreed to by the creditors or members and (where required) sanctioned by the court under
the Companies Act;
(f) taking up or disposing of any rights granted in respect of a rights issue or other pre-emptive share
offering by the Company;
(g) disposing of Shares in accordance with any order made by a court of competent jurisdiction; or
(h) in the case of the Executive Directors only, disposing or agreeing to dispose of Shares, or any interest
therein, following the death of the relevant Shareholder.
11. MATERIAL CONTRACTS
Set out below is a summary of: (a) each material contract (other than a contract in the ordinary course of
business) to which the Company or another member of the Group is a party which has been entered into
within the two years immediately preceding the date of this Prospectus; and (b) any other contract (other
than a contract in the ordinary course of business) entered into by the Company or another member of the
Group which contains a provision under which any member of the Group has any obligation or entitlement
which is material to the Group as at the date of this Prospectus.
(a) Underwriting Agreement
Details of the Underwriting Agreement are set out in paragraph 10 above.
(b) Reorganisation Deed
The Reorganisation Deed was entered into by The Company, OTB Topco, OTB Bidco, the Selling
Shareholders and others on 23 September 2015. The Reorganisation Deed sets out the steps required to be
carried out by the Company (or otherwise involving the Company) in connection with the Reorganisation
prior to and following the date of Admission. Details of the Reorganisation are set out in paragraph 3 of
this Part 15: ‘‘Additional Information’’.
181
(c) Investment Agreements
The Existing Investment Agreement was entered into by OTB Topco, OTB Bidco and various shareholders
and investors in OTB Topco and OTB Bidco including Simon Cooper and Inflexion on 4 October 2013.
The Existing Investment Agreement sets out the terms pursuant to which the shareholders and investors
invested in shares in OTB Topco and loan notes in OTB Bidco. The Existing Investment Agreement
contains a number of customary provisions for an agreement of this nature, including warranties,
information rights, corporate governance, restrictions on disposals of shares and reserve matters requiring
consent. It also provides for the Exit Fee (as described below).
As part of the Reorganisation, the following matters will take place immediately prior to Admission:
(i) in connection with the Share Exchange:
(A) the New Investment Agreement (which will be on identical terms to the Existing Investment
Agreement except that it will relate to the Company rather than OTB Topco) will be entered
into by the Company, OTB Bidco, the Existing Shareholders, Inflexion and others; and
(B) the Existing Investment Agreement will be terminated; and
(ii) as the final step of the Reorganisation prior to Admission, the New Investment Agreement will
be terminated, save as to the provisions relating to the Exit Fee.
Under the New Investment Agreement, the payment of the Exit Fee will be triggered by, amongst other
things, a listing of the Company and is equal to the sum of 1 per cent. of the enterprise value of the
Company (reduced proportionately to reflect the fact that the listing of the Company is not a disposal of
the entire issued share capital of the Company). The Board expects that the Exit Fee payable by the
Company to Inflexion 2010 General Partner Guernsey LP will be £902,656. After payment of the Exit Fee,
the remaining provisions of the New Investment Agreement relating to the Exit Fee will terminate.
(d) Relationship Agreement
On 23 September 2015, the Company and Inflexion entered into the Relationship Agreement. The
principal purpose of the Relationship Agreement is to ensure that the Company will be capable of carrying
on its business independently of Inflexion for so long as Inflexion (together with its concert parties) holds a
Controlling Interest.
Pursuant to the Relationship Agreement (and for so long as Inflexion holds a Controlling Interest):
(i) the parties shall procure that all transactions and relationships between the Company and any
other member of the Group and Inflexion (or any of its associates) are conducted at arm’s length
and on normal commercial terms; and
(ii) Inflexion shall (and shall procure that each of its associates shall), amongst other matters: (i) not
take any action that would have the effect of preventing the Company from complying with its
obligations under the Listing Rules; and (ii) not propose or procure the proposal of a shareholder
resolution which is intended or appears to be intended to circumvent the proper application of
the Listing Rules.
The Relationship Agreement will be effective as from Admission and remain in effect for so long as:
(i) Inflexion (and/or any of its associates or concert parties) holds a Controlling Interest; and
(ii) the Ordinary Shares are admitted to the premium listing segment of the Official List maintained
by the FCA.
(e) First Lloyds Facility
OTB Topco and OTB Bidco entered into the First Lloyds Facility on 4 October 2013 with Lloyds. Two
facilities were made available under the terms of the First Lloyds Facility (being ‘‘Facility A’’ and
‘‘Facility B’’) in amounts of £11,000,000 each.
Both Facility A and Facility B have been drawn in full.
Facility A is available for a four year term expiring on 30 September 2017, to be repaid in quarterly
installments as set out in the First Lloyds Facility. Facility B is available for a five year term expiring on
4 October 2018, to be repaid in full on the date of expiry. Facility A is available to be repaid at the
182
discretion of OTB Topco, however, all repayment installments outstanding under the First Lloyds Facility
will reduce pro rata by the amount cancelled.
It is intended that the First Lloyds Facility will be repaid in full out of the Group’s existing cash balances
following Admission.
(f) Second Lloyds Facility
The Company entered into the Second Lloyds Facility on 18 September 2015 with Lloyds. OTB Topco,
OTB Bidco and certain other members of the Group will accede to the Second Lloyds Facility on
Admission. A revolving credit facility is being made available under the terms of the Second Lloyds Facility
in an aggregate amount of up to £35,000,000.
Drawdown of the loan under the Second Lloyds Facility is subject to evidence that the Reorganisation has
taken effect, Admission, the First Lloyds Facility being repaid in full, OTB Topco, OTB Bidco and certain
other members of the Group having executed an accession deed in respect of the Second Lloyds Facility
and certain customary conditions (such as receipt of corporate authorities and legal opinions).
The borrowing limits under the Second Lloyds Facility will vary monthly throughout the period of the
Second Lloyds Facility to reflect the seasonal borrowing requirements of the Group, ranging from
£2,000,000 in one month to the full £35,000,000 in another month.
The Second Lloyds Facility will be available up to the second anniversary of the closing date (or for a
shorter period of time at the Company’s discretion). It is to be repaid in monthly installments which vary in
accordance with the Group’s seasonal requirements. No early prepayment fees are payable.
The margin contained in the Second Lloyds Facility is dependent on gross leverage ratio and the rate per
annum ranges from 1.10 per cent. to 1.90 per cent. for the utilised facility and 0.39 per cent. to 0.67 per
cent. for the non-utilised facility.
The terms of the Second Lloyds Facility include the following financial covenants:
(i) that the ratio of total debt to EBITDA in respect of any relevant period shall not exceed 2:1 (with
a one-off increase to a ratio of 2.5:1); and
(ii) that the ratio of EBITDA to finance charges in respect of any relevant period shall not be less
than 5:1.
12. RELATED PARTY TRANSACTIONS
Save as set out below, there are no related party transactions that were entered into by members of the
Group during the period covered by the financial information contained in Part 11: ‘‘Historical Financial
Information’’ and during the period from 1 October 2014 to 23 September 2015 (being the date of this
Prospectus).
Save as set out below, since the date of its incorporation on 17 August 2015 until 23 September 2015 (being
the date of this Prospectus) the Company has not entered into any related party transactions.
The following table sets out the loan notes and accrued interest outstanding to related parties of the Group
for the financial years ended 30 September 2012, 30 September 2013 and 30 September 2014 and the nine
month periods ended 30 June 2014 and 30 June 2015:
Issued to:
Livingbridge . . . . . . . . . . . . . . . . . .
Inflexion . . . . . . . . . . . . . . . . . . . .
Directors and members of the close
family of directors . . . . . . . . . . . .
30 September
2012
£’000
30 September
2013
£’000
30 September
2014
£’000
30 June 2014
(unaudited)
£’000
30 June 2015
£’000
25,296
—
29,791
—
—
47,855
—
46,450
—
52,281
15,583
14,112
15,195
14,749
16,600
The loan notes and accrued interest are being capitalised in full as part of the Reorganisation (further
details of which are set out in paragraph 56 of this Part 15: ‘‘Additional Information’’).
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The following table sets out the management fees paid to related parties of the Group for the financial
years ended 30 September 2012, 30 September 2013 and 30 September 2014 and the nine month periods
ended 30 June 2014 and 30 June 2015:
Fees charged by:
Inflexion . . . . . . . . . . . . . . . . . . . .
Livingbridge . . . . . . . . . . . . . . . . . .
30 September
2012
£’000
30 September
2013
£’000
30 September
2014
£’000
30 June 2014
(unaudited)
£’000
30 June 2015
£’000
—
63
—
63
227
—
185
—
222
—
OTB Limited and On The Beach Beds Limited (‘‘OBBL’’) entered into an agency agreement on
1 September 2011 pursuant to which OBBL appointed OTB Limited as its non-exclusive agent for the sale
and promotion of accommodation (the ‘‘Accommodation’’) owned and/or operated by a third-party
accommodation provider (a ‘‘Accommodation Provider’’) and OBBL acts as booking agent for various
Accommodation Providers.
OTB Limited is entitled to a commission from the Accommodation Provider for the sum of 15 per cent. of
the gross rate (inclusive of any VAT, local taxes and any commissions payable by the Accommodation
Provider).
The agreement shall continue in force until terminated by either party giving not less than three months’
written notice. However, OBBL may give notice in writing to OTB Limited terminating the agreement with
immediate effect if the Accommodation Providers cease to use OBBL as their booking agent.
On 23 September 2015, the Company, OTB Topco, OTB Bidco and the Existing Shareholders entered into
the Reorganisation Deed pursuant to which the Company will become the holding company of OTB Topco
immediately prior to Admission. Further details of the Reorganisation Deed are provided at paragraph 3
in Part 15 of this document.
In addition, an Exit Fee (estimated to be £902,656) will be paid by the Group to Inflexion 2010 General
Partner Guernsey LP immediately following Admission pursuant to the Investment Agreement. The Exit
Fee will be triggered by, amongst other things, a listing of the Company and is equal to the sum of 1 per
cent. of the enterprise value of the Company (reduced proportionately to reflect the fact that the listing of
the Company is not a disposal of the entire issued share capital of the Company).
On 23 September 2015, the Company and Inflexion entered into the Relationship Agreement. The
principal purpose of the Relationship Agreement is to ensure that the Company will be capable of carrying
on its business independently of Inflexion for so long as Inflexion together with its concert parties holds a
Controlling Interest. For more information on the Relationship Agreement, please see section 11 of this
Part 15: ‘‘Additional Information’’.
13. LITIGATION
13.1 Save for the Ryanair litigation (details of which are provided below), there are no governmental, legal
or arbitration proceedings (including such proceedings which are pending or threatened of which the
Company or the Group is aware) during the 12 months preceding the date of this Prospectus, which
may have, or in the recent past have had, a significant effect on the Company’s and/or the Group’s
financial position or profitability.
13.2 Ryanair initiated legal proceedings in the Irish High Court in September 2010 and served those
proceedings in December 2010 claiming that OTB Limited:
(a) was in breach of the terms and conditions of use of Ryanair’s website, which stated that only the
private use of the website was allowed and expressly prohibited the data aggregation method used
by OTB Limited;
(b) violated Ryanair’s rights as author and manufacturer of the database of flights contained on its
website;
(c) infringed intellectual property rights over software used on its website; and
(d) is liable for ‘‘passing off’’, in that OTB Limited is allegedly representing to its customers that it
has an affiliation with Ryanair, and other infringements.
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13.3 Ryanair is seeking damages for breach of contract, damages in tort, aggravated or exemplary damages,
an account of profits OTB Limited made as a result of OTB Limited’s alleged infringement of
Ryanair’s trademarks and/or database rights and injunctive relief.
13.4 The data aggregation method that is the subject of Ryanair’s claim is used by the Group to access
Ryanair flight inventory. This facilitates customers purchasing Ryanair flight tickets on the Group’s
website. OTB Limited charges the customer a contingency fee in the event that a booking is made.
Data aggregation is the use of software to scan third-party websites to collect commercial information
about products and services the third-party offers. The Group has not entered into an agreement with
Ryanair, whose policy is to sell its tickets only through its own website.
13.5 OTB Limited challenged the jurisdiction of the Irish Courts in the first instance. The Irish High Court
accepted jurisdiction. OTB Limited appealed to the Supreme Court in Ireland and, following
agreement between the parties, the proceedings were stayed pending the outcome of the appeal. On
19 February 2015, the Supreme Court in Ireland upheld the High Court’s decision and confirmed that
the Irish courts had jurisdiction over the claim.
13.6 Following the judgment of the Supreme Court, the stay was lifted, and Ryanair served a Statement of
Claim on 22 April 2015. On 4 June 2015, OTB Limited served a Notice for Particulars on Ryanair
seeking further information in relation to the allegations raised in the Statement of Claim. Following
receipt of the response to the Notice for Particulars, OTB Limited will prepare its defence which it
anticipates to serve on Ryanair in the last quarter of 2015.
13.7 The Company expects that the Irish proceedings, including any appeal, may not be resolved until
2018/19 but that EU-related aspects of the claim mean that if a reference to the European Court of
Justice is necessary the final resolution of this case may not be until 2021. Litigation is unpredictable.
The foregoing time estimate is subject to unexpected applications, appeals or other delays which could
mean that the final resolution of the dispute might take until 2022 or later.
13.8 The amount of the claim by Ryanair is unquantifiable by the Company as at the date of this
Prospectus, given that the legal proceedings are still at an early stage and the Company’s expectation
that final resolution of the dispute might take some time.
14. INVESTMENTS, SUBSIDIARIES AND PRINCIPAL ESTABLISHMENTS
14.1 The Company currently has no principal investments (in progress or planned for the future on which
the Directors have made firm commitments or otherwise) other than the subsidiary undertakings
listed below.
14.2 Immediately prior to Admission, the Company will become the holding company of the Group and
the principal subsidiaries and subsidiary undertakings of the Company will be as follows:
Company
number
Name
On
On
On
On
On
On
On
the
the
the
the
the
the
the
Beach
Beach
Beach
Beach
Beach
Beach
Beach
Topco Limited(1) . . . . . . . . .
Trustees Limited . . . . . . . . .
Bidco Limited . . . . . . . . . .
Travel Limited . . . . . . . . . .
Limited(2) . . . . . . . . . . . . . .
Beds Limited . . . . . . . . . . .
Holidays Limited (dormant)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
08703800
09118946
08703901
06286904
03162982
06294605
04921509
Place of
incorporation
United
United
United
United
United
United
United
Proportion of
ownership interests
(%)
Kingdom
Kingdom
Kingdom
Kingdom
Kingdom
Kingdom
Kingdom
(1)
Directly owned subsidiary. All other subsidiaries will be held indirectly.
(2)
On the Beach Limited has a Swedish trading division which has a corporate identity number of 516408-9186.
100
100
100
100
100
100
100
14.3 As at the date of this Prospectus, the following establishment is the only principal establishment of the
Group (which is used as an office building):
Establishment
Tenure
Park Square, Bird Hall Lane, Cheadle Heath, Stockport SK3 0XN, United Kingdom . . . . .
185
Leasehold
15. WORKING CAPITAL
The Company is of the opinion that, taking into account the net proceeds receivable by the Company from
the Offer and the bank facilities available to the Company and the Group (which reference to the
‘‘Group’’, for the purposes of this paragraph 15, includes the Company following completion of the
Reorganisation), the working capital available to the Company and the Group is sufficient for the
Company’s and the Group’s present requirements, that is, for at least the next 12 months following the
publication of this Prospectus.
16. MATERIAL INTERESTS
There are no interests known to the Company that are material to the Offer or Admission or which are
conflicting interests.
17. SIGNIFICANT CHANGE
There has been no significant change in the trading or financial position of the Operating Group since
30 June 2015, being the date to which the combined and consolidated historical financial information for
the Operating Group set out in Section B of Part 11: ‘‘Historical Financial Information’’ was prepared.
There has been no significant change in the trading or financial position of the Company since 17 August
2015 (being the date the Company was incorporated).
18. CONSENT
PricewaterhouseCoopers LLP has given and has not withdrawn its written consent to the inclusion in this
Prospectus of its reports set out in Section A of Part 11: ‘‘Historical Financial Information’’ and Section B
of Part 12: ‘‘Unaudited Pro Forma Financial Information’’ in the form and context in which they appear
and has authorised the contents of such reports solely for the purposes of Rule 5.5.3R(2)(f) of the
Prospectus Rules. A written consent under the Prospectus Rules is different from a consent filed with the
SEC under section 7 of the Securities Act. PricewaterhouseCoopers LLP has not filed and will not be
required to file a consent under section 7 of the Securities Act.
19. STATUTORY AUDITORS
The Group’s auditors are KPMG LLP of 1 St Peter’s Square, Manchester M2 3AE, United Kingdom, who
are a member firm of the Institute of Chartered Accountants in England and Wales.
20. MISCELLANEOUS
20.1 Whilst there are no provisions in the Articles that require disclosure of shareholding ownership, the
Disclosure and Transparency Rules require a member to notify the Company if the voting rights held
by such member (including by way of certain financial instruments) reach, exceed or fall below 3 per
cent. and each 1 per cent. threshold thereafter up to 100 per cent. Under the Disclosure and
Transparency Rules, certain voting rights in the Company may be disregarded.
20.2 The financial information contained in this Prospectus does not constitute full statutory accounts as
referred to in section 434(3) of the Companies Act.
20.3 The total expenses of the Offer and Admission, whether incidental or otherwise, payable by the
Company including the London Stock Exchange fee, professional fees and the costs of preparation,
printing and distribution of documents, are estimated to amount to approximately £2,688,955
(inclusive of recoverable VAT).
20.4 Each Share will be offered at a premium of approximately £0.34 to its nominal value of £1.50 each.
20.5 No Shares have been marketed to, nor are available for purchase in whole or in part by, the public in
the United Kingdom or elsewhere in conjunction with the Offer and this Prospectus does not
constitute an offer or the solicitation of an offer to the public in the United Kingdom to subscribe for
or buy any securities in the Company or any other entity.
21. TAKEOVER BIDS
The City Code is issued and administered by Takeover Panel. The Company is subject to the City Code and
therefore its Shareholders are entitled to the protections afforded by the City Code.
186
22. MANDATORY BIDS
Rule 9 of the City Code provides that, except with the consent of the Takeover Panel, when: (a) any person
acquires, whether by a series of transactions over a period of time or not, an interest in shares which (taken
together with shares in which persons acting in concert with it are interested) carry 30 per cent. or more of
the voting rights of a company; or (b) any person, together with persons acting in concert with it, is
interested in shares which in the aggregate carry not less than 30 per cent. of the voting rights of a company
but does not hold shares carrying more than 50 per cent. of such voting rights and such person, or any
person acting in concert with it, acquires an interest in any other shares which increases the percentage of
shares carrying voting rights in which it is interested, then, in either case, that person, together with the
persons acting in concert with it, is normally required to extend offers in cash, at the highest price paid by it
(or any persons acting in concert with it) for shares in the company within the preceding 12 months, to the
holders of any class of equity share capital whether voting or non-voting and also to the holders of any
other class of transferable securities carrying voting rights.
23. SQUEEZE-OUT
Under the Companies Act, if a ‘‘takeover offer’’ (as defined in section 974 of the Companies Act) is made
for the Shares and the offeror were to acquire, or unconditionally contract to acquire, not less than 90 per
cent. in value of the Shares to which the takeover offer relates (the ‘‘Takeover Offer Shares’’) and not less
than 90 per cent. of the voting rights attached to the Takeover Offer Shares within three months of the last
day on which its offer can be accepted, it could acquire compulsorily the remaining 10 per cent. It would do
so by sending a notice to outstanding Shareholders telling them that it will acquire compulsorily their
Takeover Offer Shares and then, six weeks later, it would execute a transfer of the outstanding Takeover
Offer Shares in its favour and pay the consideration to the Company, which would hold the consideration
on trust for outstanding Shareholders. The consideration offered to the Shareholders whose Takeover
Offer Shares are acquired compulsorily under the Companies Act must, in general, be the same as the
consideration that was available under the takeover offer.
24. SELL-OUT
The Companies Act also gives minority Shareholders a right to be bought out in certain circumstances by
an offeror who has made a takeover offer. If a takeover offer related to all the Shares and at any time
before the end of the period within which the offer could be accepted the offeror held or had agreed to
acquire not less than 90 per cent. of the Shares to which the offer relates, any holder of Shares to which the
offer related who had not accepted the offer could by a written communication to the offeror require it to
acquire those Shares. The offeror is required to give any Shareholder notice of his right to be bought out
within one month of that right arising. The offeror may impose a time limit on the rights of the minority
Shareholders to be bought out, but that period cannot end less than three months after the end of the
acceptance period. If a Shareholder exercises his or her rights, the offeror is bound to acquire those Shares
on the terms of the offer or on such other terms as may be agreed.
25. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents are available for inspection during usual business hours on any weekday
(Saturdays, Sundays and English public holidays excepted) for a period of 12 months from Admission at
the offices of Taylor Wessing LLP, 5 New Street Square, London EC4A 3TW, United Kingdom:
(a) the Articles;
(b) the combined and consoldiated financial information in respect of the three financial years ended
30 September 2012, 2013 and 2014 and the nine month period ended 30 June 2015 together with the
related report from PricewaterhouseCoopers LLP, which are set out in Part 11: ‘‘Historical Financial
Information’’;
(c) the report prepared by PricewaterhouseCoopers LLP on the pro forma financial information set out
in section B of Part 12: ‘‘Unaudited Pro Forma Financial Information’’;
(d) the letters of consent referred to in paragraph 18 above; and
(e) this Prospectus.
Dated: 23 September 2015
187
PART 16
DEFINITIONS
The following definitions apply throughout this Prospectus unless the context requires otherwise:
2010 PD Amending Directive . . . . . . .
2010 EU directive (2010/73/EU), which amended the Prospectus
Directive;
Admission . . . . . . . . . . . . . . . . . . . .
the admission of the Offer Shares to the premium listing
segment of the Official List and to trading on the London Stock
Exchange’s main market for listed securities becoming effective
in accordance with, respectively, the Listing Rules and the
Admission and Disclosure Standards;
Admission and Disclosure Standards .
the current edition of the Admission and Disclosure Standards
published by the London Stock Exchange;
Articles of Association or Articles . . .
the articles of association of the Company which were adopted,
conditional only on Admission, by a special resolution passed on
21 September 2015 (and as amended from time to time after
that date);
Audit Committee . . . . . . . . . . . . . . .
the audit committee of the Board;
Auditors . . . . . . . . . . . . . . . . . . . . . .
KPMG LLP, 1 St Peter’s Square, Manchester M2 3AE;
Board . . . . . . . . . . . . . . . . . . . . . . .
the board of Directors;
certificated or in certificated form . . .
a share or other security (as appropriate) not in uncertificated
form (that is, not in CREST);
Chairman . . . . . . . . . . . . . . . . . . . .
the chairman of the Board;
CHAPS . . . . . . . . . . . . . . . . . . . . . .
clearing house automated payment system;
City Code . . . . . . . . . . . . . . . . . . . . .
the UK City Code on Takeovers and Mergers, as amended,
supplemented or replaced;
Closing Date . . . . . . . . . . . . . . . . . .
28 September 2015, being the expected date of Admission;
Companies Act . . . . . . . . . . . . . . . . .
the UK Companies Act 2006, as amended;
Company . . . . . . . . . . . . . . . . . . . . .
On the Beach Group plc;
Controlling Interest . . . . . . . . . . . . .
the ability to control or exercise 20 per cent. or more of the votes
able to be cast on all or substantially all matters at the
Company’s general meetings;
CREST . . . . . . . . . . . . . . . . . . . . . .
the relevant system (as defined in the CREST Regulations) for
paperless settlement of sales and purchases of securities and the
holding of shares in uncertificated form in respect of which
Euroclear is the operator (as defined in the CREST
Regulations);
CREST Regulations . . . . . . . . . . . . .
the Uncertificated Securities Regulations 2001 (SI 2001/3755),
as amended;
Directors . . . . . . . . . . . . . . . . . . . . .
the Executive Directors and the Non-Executive Directors;
Disclosure and Transparency Rules . .
the disclosure rules and transparency rules of the FCA made for
the purposes of Part VI of FSMA in relation to the disclosure of
information by an issuer whose financial instruments are
admitted to trading on a regulated market in the United
Kingdom;
EBITDA . . . . . . . . . . . . . . . . . . . . . .
earnings before interest, taxes, depreciation and amortisation;
EU . . . . . . . . . . . . . . . . . . . . . . . . .
the European Union, first established by the treaty made at
Maastricht on 7 February 1992;
188
Euroclear . . . . . . . . . . . . . . . . . . . . .
Euroclear UK & Ireland Limited, the operator (as defined in
the CREST Regulations) of CREST;
European Economic Area or EEA . . .
together, the EU, Iceland, Norway and Liechtenstein;
Executive Directors . . . . . . . . . . . . . .
the executive directors of the Company;
Existing Investment Agreement . . . . .
the investment agreement dated 4 October 2013 between OTB
Topco, OTB Bidco and various shareholders and investors in
OTB Topco and OTB Bidoco including Simon Cooper and
Inflexion (as amended and restated from time to time);
Existing Loan Note Holder . . . . . . . .
a holder of loan notes in the capital of OTB Topco as at the date
of this document;
Existing Shareholder . . . . . . . . . . . .
a holder of Existing Shares;
Existing Shares . . . . . . . . . . . . . . . .
the shares in the capital of OTB Topco as at the date of this
document;
Exit Fee . . . . . . . . . . . . . . . . . . . . . .
the exit fee payable to Inflexion 2010 General Partner
Guernsey LP by the Company pursuant to the Investment
Agreements;
FCA . . . . . . . . . . . . . . . . . . . . . . . . .
the UK Financial Conduct Authority;
First Lloyds Facility . . . . . . . . . . . . .
the facility agreement dated 4 October 2013 between OTB
Topco, OTB Bidco and Lloyds (as amended and restated from
time to time);
FSMA . . . . . . . . . . . . . . . . . . . . . . .
the Financial Services and Markets Act 2000, as amended;
Group . . . . . . . . . . . . . . . . . . . . . . .
(i) as at the date of this document and at all times prior to
completion of the Reorganisation, the Operating Group; and (ii)
following completion of the Reorganisation immediately prior to
Admission, the Company and its subsidiaries and subsidiary
undertakings from time to time;
Group Company . . . . . . . . . . . . . . . .
a company within the Group;
HMRC . . . . . . . . . . . . . . . . . . . . . . .
HM Revenue and Customs;
IFRS . . . . . . . . . . . . . . . . . . . . . . . .
International Financial Reporting Standards, as adopted in the
EU;
Independent Non-Executive Directors
the ‘‘independent non-executive directors’’ of the Company,
within the meaning of the UK Corporate Governance Code;
Inflexion . . . . . . . . . . . . . . . . . . . . .
OTB Holdings Limited Partnership (acting by its general
partner Inflexion 2010 General Partner Limited);
Investment Agreements . . . . . . . . . . .
the Existing Investment Agreement and the New Investment
Agreement;
Investment Company Act . . . . . . . . .
US Investment Company Act of 1940, as amended;
Listing Rules . . . . . . . . . . . . . . . . . .
the rules of the FCA relating to admission to the Official List
made in accordance with section 73A(2) of FSMA;
Livingbridge . . . . . . . . . . . . . . . . . . .
Livingbridge EP LLP and Livingbridge VC LLP;
Loan Note Exchange . . . . . . . . . . . . .
the exchange of loan notes in OTB Topco for loan notes in the
Company pursuant to the Reorganisation Deed;
London Stock Exchange . . . . . . . . . .
London Stock Exchange plc;
Lloyds . . . . . . . . . . . . . . . . . . . . . . .
Lloyds Bank plc (company number 00002065);
LTIP . . . . . . . . . . . . . . . . . . . . . . . .
the On the Beach Group plc Long Term Incentive Plan to be
adopted by the Company on Admission;
189
Member States . . . . . . . . . . . . . . . . .
member states of the EEA;
Money Laundering Regulations . . . . .
the Money Laundering Regulations 2007 (SI 2007/2157), as
amended;
New Investment Agreement . . . . . . . .
the investment agreement to be entered into by the Company,
OTB Bidco, the Existing Shareholders, Inflexion and others
immediately prior to Admission as part of the Reorganisation
(as amended and restated from time to time);
New Shares . . . . . . . . . . . . . . . . . . .
the 5,434,782 new Shares to be offered for subscription by the
Company under the Offer;
Nomination Committee . . . . . . . . . . .
the nomination committee of the Board;
Non-Executive Directors . . . . . . . . . .
the non-executive directors of the Company (including the
Chairman);
Numis . . . . . . . . . . . . . . . . . . . . . . .
Numis Securities Limited of 10 Paternoster Square, London
EC4M 7LT, United Kingdom;
Official List . . . . . . . . . . . . . . . . . . .
the Official List of the UK Listing Authority;
Offer . . . . . . . . . . . . . . . . . . . . . . . .
the offer of Offer Shares to certain institutional and other
investors in the United Kingdom and elsewhere as described in
Part 13: ‘‘Details of the Offer’’;
Offer Price . . . . . . . . . . . . . . . . . . . .
the price at which each Share is to be sold or issued (as the case
may be) under the Offer, being 184 pence;
Offer Shares . . . . . . . . . . . . . . . . . .
the Existing Shares and the New Shares to be sold at the Offer
Price pursuant to the Offer;
Operating Group . . . . . . . . . . . . . . .
prior to 4 October 2013, On the Beach Travel Limited and its
Subsidiaries from time to time and thereafter until immediately
prior to Admission, On the Beach Topco Limited and its
Subsidiaries from time to time;
OTB Bidco . . . . . . . . . . . . . . . . . . . .
On the Beach Bidco Limited (company number 08703901);
OTB Limited . . . . . . . . . . . . . . . . . .
On the Beach Limited (company number 03162982);
OTB Topco . . . . . . . . . . . . . . . . . . . .
On the Beach Topco Limited (company number 08703800);
Prospectus . . . . . . . . . . . . . . . . . . . .
this document;
Prospectus Directive . . . . . . . . . . . . .
the EU Prospectus Directive (2003/71/EC) (and any
amendments to it, including the 2010 PD Amending Directive,
to the extent implemented by the Relevant Member State) and
any relevant implementing measure in each Relevant Member
State;
Prospectus Directive Regulation . . . .
the EU Prospective Directive Regulation (2004/89/EC);
Prospectus Rules . . . . . . . . . . . . . . .
the rules of the FCA made for the purposes of Part VI of FSMA
in relation to offers of securities to the public and the admission
of securities to trading on a regulated market;
QIB . . . . . . . . . . . . . . . . . . . . . . . . .
‘‘qualified institutional buyer’’ as defined in Rule 144A under
the Securities Act;
Registrars . . . . . . . . . . . . . . . . . . . .
Capita Asset Services, The Registry, 34 Beckenham Road, Kent
BR3 4TU, United Kingdom;
Regulation S . . . . . . . . . . . . . . . . . .
Rules 901 to 905 (including Preliminary Notes) of Regulation S
promulgated under the Securities Act;
Relationship Agreement . . . . . . . . . .
the relationship agreement between the Company and Inflexion.
See section 11 of Part 15: ‘‘Additional Information’’;
190
Relevant Member State . . . . . . . . . . .
a Member State which has implemented the Prospectus
Directive;
Remuneration Committee . . . . . . . . .
the remuneration committee of the Board;
Reorganisation . . . . . . . . . . . . . . . . .
the reorganisation of the Company in preparation for the Offer
(to occur immediately prior to Admission) as described in
paragraph 3 of Part 15: ‘‘Additional Information’’;
Reorganisation Deed . . . . . . . . . . . . .
the reorganisation deed dated 23 September 2015 between the
Company, OTB Topco, OTB Bidco, the Selling Shareholders
and others;
Reporting Accountant . . . . . . . . . . . .
PricewaterhouseCoopers LLP of Benson House, 33 Wellington
Street, Leeds LS1 4JP, United Kingdom;
RPI . . . . . . . . . . . . . . . . . . . . . . . . .
the UK retail prices index;
Sale Shares . . . . . . . . . . . . . . . . . . .
the 46,739,130 Shares in issue immediately prior to Admission
which are to be offered for sale by the Selling Shareholders
under the Offer;
SEC . . . . . . . . . . . . . . . . . . . . . . . . .
the US Securities and Exchange Commission;
Second Lloyds Facility . . . . . . . . . . .
the facility agreement dated 18 September 2015 entered into
between the Company and Lloyds (to be acceded to by OTB
Topco, OTB Bidco and certain other members of the Group on
Admission) (as amended and restated from time to time);
Securities Act . . . . . . . . . . . . . . . . . .
US Securities Act of 1933, as amended;
Selling Shareholders . . . . . . . . . . . . .
means Inflexion, Simon Cooper, Wendy Parry, Richard Segal,
Alistair Daly, Jonathan Smith and certain other current and
former employees and non-executive directors of the Group,
who are each selling Sale Shares pursuant to the Offer;
Senior Independent Director . . . . . . .
the ‘‘senior independent director’’, as referred to in the UK
Corporate Governance Code;
Senior Managers . . . . . . . . . . . . . . .
certain members of the Company’s management team (other
than the Directors), details of whom are set out in Part 6:
‘‘Directors, Senior Management and Corporate Governance’’;
Share Exchange . . . . . . . . . . . . . . . .
the exchange of shares in OTB Topco for shares in the Company
pursuant to the Reorganisation Deed;
Shareholders . . . . . . . . . . . . . . . . . .
the holders of Shares from time to time;
Shares . . . . . . . . . . . . . . . . . . . . . . .
ordinary shares of £1.50 each in the capital of the Company
having the rights set out in the Articles;
SIP . . . . . . . . . . . . . . . . . . . . . . . . .
the On the Beach Group plc Share Incentive Plan to be adopted
by the Company on Admission;
Subsidiary . . . . . . . . . . . . . . . . . . . .
has the meaning given to it in section 1159 of the Companies Act
and includes group companies included in the consolidated
financial statements of the Group from time to time;
Takeover Panel . . . . . . . . . . . . . . . . .
the UK Panel on Takeovers and Mergers;
UK Corporate Governance Code . . . .
the UK Corporate Governance Code published by the Financial
Reporting Council in September 2012, as amended;
UK Listing Authority . . . . . . . . . . . .
the FCA in its capacity as the competent authority for the
purposes of Part VI of FSMA;
uncertificated or in uncertificated
form . . . . . . . . . . . . . . . . . . . . . . .
in relation to a share or other security, a share or other security
title to which is recorded on the relevant register of the share or
191
security concerned as being held in uncertificated form in
CREST and title to which, by virtue of the CREST Regulations,
may be transferred through CREST;
Underwriting Agreement . . . . . . . . . .
the underwriting and sponsor agreement dated 23 September
2015 and entered into by the Company, the Directors, the
Selling Shareholders and Numis;
United Kingdom or UK . . . . . . . . . .
the United Kingdom of Great Britain and Northern Ireland;
United States or US . . . . . . . . . . . . .
the United States of America, its territories and possessions, any
State of the United States of America, and the District of
Columbia; and
VAT . . . . . . . . . . . . . . . . . . . . . . . . .
UK value added tax.
192
PART 17
GLOSSARY OF TERMS
The following technical terms or other abbreviations (or variations of them) are used in this Prospectus:
ABTA . . . . . . . . . . . . . . . . . . . . . . . .
Association of British Travel Agents;
Android . . . . . . . . . . . . . . . . . . . . . .
a mobile operating system based on the Linux kernel and
currently developed by Google;
API . . . . . . . . . . . . . . . . . . . . . . . . .
an application-programming interface, being a set of
programming instructions and standards for accessing a
web-based software application or web tool;
app or application . . . . . . . . . . . . . .
a self-contained program or piece of software designed to fulfil a
particular purpose, usually downloaded by a user to a mobile
device;
ATOL . . . . . . . . . . . . . . . . . . . . . . .
Air Travel Organiser Licensing, a CAA scheme intended to
protect consumers who have purchased package holidays and
flights from a member tour operator;
bed-bank . . . . . . . . . . . . . . . . . . . . .
a specialist database dedicated to supplying hotel capacity to
tour operators, traditional travel agents and OTAs (see also
direct contracting);
bid modelling tool . . . . . . . . . . . . . .
the Group’s in-house technology used for the automatic
controlling of bids as part of its paid search marketing;
CAA . . . . . . . . . . . . . . . . . . . . . . . .
the UK Civil Aviation Authority;
cookie . . . . . . . . . . . . . . . . . . . . . . .
data generated by a website saved by a user’s web browser, and
used to track the user’s future web activity;
CRM . . . . . . . . . . . . . . . . . . . . . . . .
customer relationship management, being an approach to
managing a company’s interactions with current and future
customers;
daily unique visitors . . . . . . . . . . . . .
the number of individuals, as defined by an IP address and a
further identifier, frequenting pages from the Group’s websites
during a 24 hour period, regardless of how often they visit
during this 24 hour period;
Direct Connect and Direct Connects .
the proprietary technology the Group uses to distribute certain
network and low-cost carrier flight products by either connecting
customers directly to an airline’s proprietary inventory platform
that the Group can access under a formal agreement or by
facilitating customers to book via an airline’s public access
website, in each case, without the intermediation of a GDS;
direct contracting . . . . . . . . . . . . . . .
the sourcing of hotel beds for customers directly from hotels,
rather than via third-party bed-banks as intermediaries (see also
bed-bank);
direct contracting system . . . . . . . . .
a database allowing an OTA to source beds for customers by
contracting directly with hotels rather than from third-party
bed-banks as intermediaries;
dynamic packaging . . . . . . . . . . . . . .
package holidays including at least two travel products
(e.g. flight and hotel) which customers can build in a
personalised way on a website or through the app of a OTA or
tour operator;
dynamically packaged holidays . . . . .
holiday packages consisting of at least two travel products (eg,
flight and hotel), which customers can select and combine
themselves (see also traditional package holidays);
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EBITDA . . . . . . . . . . . . . . . . . . . . . .
earnings before interest, tax, depreciation and amortisation;
GDS or Global Distribution System . .
a global distribution system, also referred to as a computer
reservation service, which provides a centralised, comprehensive
repository of travel products, including availability and pricing of
seats on airline flights and hotel accommodations;
iOS . . . . . . . . . . . . . . . . . . . . . . . . .
a mobile operating system created and developed by Apple Inc.;
IT . . . . . . . . . . . . . . . . . . . . . . . . . .
information technology;
MI . . . . . . . . . . . . . . . . . . . . . . . . . .
management information;
Net Promoter Score . . . . . . . . . . . . .
a score based on customer responses to assist companies in
getting a clear measure of their performance in identifying
customers who are ‘‘promoters’’ and likely to recommend a
company’s services to others;
online penetration . . . . . . . . . . . . . .
the relationship between the number of online package holiday
retails sales value and the total package holidays retail sales
value;
OTA . . . . . . . . . . . . . . . . . . . . . . . .
online travel agency;
split testing . . . . . . . . . . . . . . . . . . .
a process whereby the Group makes changes to pricing policies
of the user experience on its websites and exposes these changes
only to a portion of users on its websites to measure the effect of
the changes;
traditional package holidays . . . . . . .
holiday packages consisting of at least two travel products (eg,
flight and hotel), which are pre-set by the travel agent or tour
operator, and which customers cannot vary (see also dynamically
packaged holidays);
TTV . . . . . . . . . . . . . . . . . . . . . . . . .
the total transaction value of all flight and hotel, flight only and
hotel only sales, calculated by aggregating the gross price paid by
customers for their bookings; and
white label . . . . . . . . . . . . . . . . . . . .
the marketing by one company under its own brand of a product
provided by another company.
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On the Beach
SEPTEMBER 2015
PROSPECTUSSEPTEMBER 2015
PROSPECTUS