Holiday firm On The Beach has revealed a significant rise in annual profits, crediting consumers who are determined to "protect their holiday" spending despite wider economic pressures.
Strong Financial Performance and Consumer Trends
The Manchester-based company reported an 11% increase in pre-tax profits to £27.9 million for the year ending 30 September. The group served 1.7 million customers, with underlying profits surging by 20% to reach £35 million.
Chief Executive Shaun Morton stated that demand remains robust. "Booking trends indicate that consumers will continue to protect their holiday," he said. This sentiment is supported by the company's own research, which found that spending on holidays is the most protected discretionary category for the public over the next year, ranking above home improvement, hobbies, and wellbeing.
Forward Momentum and Strategic Shifts
The firm's momentum has carried into the new financial year. Bookings for the upcoming winter season are 15% higher year-on-year, while reservations for summer 2026 are already 8% ahead of the equivalent point last year. This has led management to express confidence in delivering "another record summer" next year.
However, these results follow a profit warning issued in September, where the company cautioned that earnings would fall short of most analysts' expectations of £38.4 million. In response, On The Beach took decisive action by closing its loss-making business-to-business division, Classic Collection. This move resulted in total losses of £16 million, including an £8.4 million write-down and redundancy costs.
Market Reaction and Analyst Caution
Investors reacted positively to the latest update, with shares jumping 14% in Tuesday morning trading. The company confirmed it is on track for underlying profits between £39 million and £43 million in the current financial year.
Despite this optimism, some analysts have raised concerns. Katie Cousins, an equity analyst at Shore Capital, noted disappointment with recent downgrades. She questioned whether management's ambitious long-term targets—including £2.5 billion in total transaction value and £85 million in adjusted pre-tax profit by 2028—are still realistic, stating "the targets imply more than doubling the business."
Changing Booking Habits and Demographic Shifts
The company also highlighted evolving consumer behaviour. Travellers are increasingly waiting until closer to their departure date to book, creating trading pressure. Simultaneously, there is a growing expectation for a "seamless, tech-driven booking experience."
Demographic trends are favourable, with strong booking intent among younger age groups. The 25-34 age bracket shows the highest uptake of package holidays, with consistent yearly growth. Notably, the firm's research indicates that 38% of Gen Z are now more likely to book a package holiday compared to five years ago.
As a precautionary measure, On The Beach has increased its provisions for bad debts, with expected credit losses rising to £2.5 million from £1.7 million the previous year.
