On The Beach Share Discussion Threads

[74tom] 03/12/2024 14:07

Agree completely on the last point. The buyback will support the shares considerably, I'd assume £250k per day, so ~125k shares on the buy side that weren't there before. Look at MOON, FCH & TRST to see the impact that can have.

[adamb1978] 03/12/2024 13:55

Hi Tom

Yes, that demonstrates my point. They need the cash to fund the seasonal working capital of the business.

So to the point that others have suggested, namely that they have £96m surplus cash sitting idly on their balance sheet, they categorically don't. As I've said before, they need that cash to buy capacity over the seasonally quieter months and which shows up in your figures. Your figures will comprise low cash + high debtors (for example) at the interim point, but high cash and low debtors at the year end point.

Hence they need the cash rather than it being excess cash as others have suggested.

On your point "Clearly they aren't going to distribute all of their working capital" - well others (not you!) have suggested the cash (if not all the working cap) can be distributed! It clearly can't.

OTB are cheap and starting to have excess cash hence the divi and buyback, but they do need the vast majority of the cash which they have to fund the company.

Adam

[74tom] 03/12/2024 13:31

Adam, maybe read my post again and you might understand the point I was making? Your comments suggest you don't understand how a balance sheet works, it doesn't become weak in January & strong in July, it's strong full stop.

Using net working capital removes the net cash / net debt timing issue.

There are essentially 5 moving parts to their balance sheet.

1. Cash

2. RCF / debt

3. Trust account

4. Receivables

5. Payables

The net working capital figure (per my workings, DYOR) for the last 8 normal half year periods is as follows;

H119 £51.8m
H219 £56.7m
H122 £66.3m
H222 £69.5m
H123 £69.7m
H223 £87.9m
H124 £93.4m
H224 £119.4m

As you can see, it has steadily increased as the business has grown.

Clearly they aren't going to distribute all of their working capital, however it is a competitive advantage & has significant value.

[seroserio] 03/12/2024 13:07

He's not. Stop using stupid exclamation marks.
All of us invested here (including Adam) know the score.

[ianio5691] 03/12/2024 13:04

Bore off Adam.
The share price is unjustifiably low.
The business is flying and they are generating cash!
Overdue a re-rate so onwards and upwards.
Stop trying to put a negative spin!

[robhammers] 03/12/2024 13:04

Still only 1.5% yield

[weemonkey] 03/12/2024 12:53

Have been through last 4 full years and that cash number has gone up every year.That isthe point surely.Covid has left these shares unjustifiably ignored.. bargain

[adamb1978] 03/12/2024 12:45

74Tom -

Good to see someone posting figures but with all due respect, the figures are missing the point - you need to look at seasonality in the business so the mid year low points. Various retailers have had Jan year ends before as it inflates the optics of how strong their balance sheet is (ie flush with cash after xmas).

If you run the same figures as you have but with March interim figures, you'll see a completely different picture. OK balance sheet, but net debt figures - net debt was £47m at March 2024, which then swings back to cash at Sept 2024. It'll then swing back into the red at March 2025 etc etc etc

OTB are cheap, and are starting to have surplus cash (hence divi and buyback) but its not £96m surplus

Adam

[74tom] 03/12/2024 12:32

"This performance was driven by a combination of initiatives, including the successful integration with Ryanair, ongoing investment in our proprietary technology platform and further enhancements to our differentiated customer proposition. The partnership has facilitated an improved customer journey for those booking Ryanair flights as part of an OTB package, whilst enabling increased operational efficiency and a greater focus on areas of strategic value. What's more, the agreement and significant upgrades to our technology have supported a doubling of our addressable market, following the addition of city breaks to our offering alongside planned investment in Ireland."

Pretty sure that the market hasn't factored in a doubling of their addressable market...

[ianio5691] 03/12/2024 12:23

Looking harder and harder to buy in any quantity...
This could go mental shortly!

[74tom] 03/12/2024 11:58

The figure I look at is net working capital, which is cash + receivables + trust account minus payables.

Over the last 5 'normal' periods (so excluding FY20 & 21) this figure has been;

FY18 - £30m
FY19 - £56.7m
FY22 - £69.5m
FY23 - £87.9m
FY24 - £119.4m

We can see that upon completion of the £25m buyback + 2.1p (£3.3m) final dividend, their pro forma net working capital will return to £91.1m, so still above the FY23 closing figure. This illustrates that the buyback is covered by less than 1 years FCF, which is quite spectacular.

However, the most notable aspect of today's RNS is the medium term guidance. If the current business can deliver this level of cash generation, then anything close to their medium term guidance of £85m in adjusted PBT will throw off bucketloads of cash. On a 6% FCF yield this would be a £1.4b market cap (£85m / 0.06), factor in the impact of continued buybacks and the share price could rise multiples.

Even if they don't reach £85m, the point is there appears to be huge margin of safety down here which could easily support a share price of £4+

[aishah] 03/12/2024 11:51

There's certainly scramble for shares now. Await broker upgrades which together with the buybacks should keep momentum going imo.

[ianio5691] 03/12/2024 11:29

There goes 200p!

Could get interesting from now on.....

[highlands] 03/12/2024 11:10

They are obviously sitting on a large pile of cash, hence the share buy back and divi payout

[undervaluedassets] 03/12/2024 10:42

They do not have much to fund

It is a room full of clever people, computers and clever software and that is it.

reminds me of Rightmove.

Asset light business model

Has anyone seen any broker targets?

[julianlau] 03/12/2024 10:11

On The Beach Group - OTB - 4*

Total Transaction Value of £1.2 billion, representing a 15% YOY increase and marking its third consecutive year of record-breaking results. Revenue rose 14% to £128.2 million, driven by market expansion

hxxps://wealthoracle.co.uk/detailed-result-full/OTB/1043

[jm65] 03/12/2024 10:06

Positive write-up on Stockopedia today :-)

[adamb1978] 03/12/2024 10:01

It is their cash but it's not cash which they could just pay back to shareholders - they need it to fund the seasonality in their business.

THink of Turkey farmers - lots of cash comes in in December and funds them for the rest of the year. So a Turkey farmer with a Dec or Jan year end would look flush with cash, but they need it to get through to next year.

OTB is similar

[undervaluedassets] 03/12/2024 09:53

cos other people on this board are questioning whether it is .

I think it is important as the cash makes up one-third of the market cap..

There is an argument that says, Discount the cash, and you get a really low PE. This is an old-fashioned bargain.

though whether this hopeless UK market will ever find it is another matter.

[adamb1978] 03/12/2024 09:36

Undervalued - the £96m is clearly their cash. I'm not sure why you are questioning this?

[ianio5691] 03/12/2024 09:34

Be nice to see 300p before Christmas...

[flc] 03/12/2024 09:09

They've turned this around very well and we should see some upward movement from here.

[undervaluedassets] 03/12/2024 09:08

also..

The Group remains in a strong financial position with combined cash balances of £235.7m (2023: £184.4m):

· Group cash, excluding amounts held in trust, of £96.2m (30 September 2023: £75.8m).

· Customer prepayments held in a ringfenced trust account of £139.5m (30 September 2023: £108.6m).

Net finance income in the year has increased to £5.3m (2023 restated: £2.4m) due to the impact of higher base rates.