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Holiday retailer On the Beach shrugs off impact of hot summer

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Holiday retailer On the Beach shrugs off impact of hot summer
FILE PHOTO: Visitors relax on deckchairs in the sunshine on the beach by Brighton Pier in Brighton, Britain, June 28, 2018. REUTERS/Henry Nicholls   -   Copyright  Henry Nicholls(Reuters)
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LONDON (Reuters) – British holiday retailer On the Beach <OTB.L> said it was on track to meet forecasts as its business model shielded it from the impact of the hot weather, which has hit bigger rivals TUI Group <TUIT.L> and Thomas Cook <TCG.L>.

Shares in On the Beach, a 14-year old company started in a terraced house which is now worth over 500 million pounds climbed 15 percent on Thursday, after it reassured that profit would come in broadly in line with guidance.

That came after holiday giant TUI said a summer heatwave in northern Europe would prevent it from beating forecasts and Thomas Cook downgraded its profit outlook as people chose to enjoy the heat at home instead of go abroad.

On the Beach currently has about a 20 percent share of Britain’s online short-haul beach holiday market with TUI and Thomas Cook its biggest competitors, but unlike them, it sells package holidays it builds through flights and hotel space sold by other operators.

“Whereas the tour operators, if they don’t sell a holiday, they will have a loss… because they still have to pay the supplier and pay for the aircraft, we don’t have any costs incurred if we don’t sell a holiday,” Chief Financial Officer Paul Meehan said in an interview.

That has dented the likes of TUI and Thomas Cook at a time when fewer people have bought holidays, particularly the higher-margin, last-minute bookings which come when northern European summer weather is cooler.

“The agility of the On the Beach model comes through in times when demand is less,” Meehan added.

When fewer people search for holidays online, On the Beach also has lower marketing costs, helping boost its bottom line.

Analysts are expecting On the Beach to report adjusted pretax profit in the range of 33.5 million pounds to 34.2 million pounds for the 12 months ended Sept. 30 2018.

“Today’s trading announcement highlights the potential for dynamic packaging businesses such as On the Beach to take share in the long term,” Peel Hunt analyst Ivor Jones said in a note.

On the Beach, which focuses on the lower end of the market, also announced a 20 million pound acquisition on Thursday, buying Classic Collection Holidays to give it exposure to the luxury holiday segment.

(Reporting by Sarah Young; Editing by Jan Harvey)

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