ADVERTISEMENT

Brexit’s Latest Victim Is a Travel Firm With No Sterling Hedge

On the Beach Plunges as Weak Pound Seen Hitting Annual Profit

(Bloomberg) --

On the Beach Group Plc shares plunged after the U.K.-based online seller of package vacations warned full-year profit will miss expectations because of the weakening pound.

The currency has been falling on the increased likelihood of a no-deal Brexit, reducing On the Beach’s ability to offer cheaper prices than more traditional tour operators, for which it is known. Unlike larger peers, On The Beach doesn’t hedge currencies for its travel packages.

“As OTB remains focused on profitable growth, these relative price increases make it difficult for the group to gain share of market while maintaining margins,” the company said Friday.

The shares fell as much as 24% in London, the most since their listing in September 2015.

Brexit’s Latest Victim Is a Travel Firm With No Sterling Hedge

Rival tour operators may be hedged at 1.14 pounds per euro, leaving On the Beach’s pricing at about a 7% disadvantage to peers because of its commission-based, no-inventory model, according to Citi analyst Laurence Jarvis-Smith, citing the U.K. company’s management. The pound slid to a two-year low of 1.08 euros on Friday on news of a shrinking U.K. economy.

“This pricing differential has effectively cut On the Beach’s outperformance of industry bookings” from about 10% to being in line with the market, Jarvis-Smith wrote in a note.

--With assistance from Namitha Jagadeesh.

To contact the reporters on this story: Lisa Pham in London at lpham14@bloomberg.net;John Lauerman in London at jlauerman@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, ;Beth Mellor at bmellor@bloomberg.net, Paul Jarvis, Tom Lavell

©2019 Bloomberg L.P.