On the Beach shares slide as Iran war hits holiday demand
Impact of Iran Conflict on On the Beach and Travel Industry
By Simone Lobo
May 12 (Reuters) - On the Beach reinstated its annual profit forecast on Tuesday but at a level below its previous estimate, sending the package holiday group's shares 18% lower as it faces a possible long-term hit to global travel from the Iran war.
The British group's customers pulled back on holidays to destinations such as Turkey, Cyprus and Egypt near the conflict zone, forcing it to withdraw forecasts in March as U.S.-Israeli strikes against Iran upended global travel and hurt demand.
Booking Trends and Consumer Sentiment
While bookings have stabilised since the end of March, many travellers are taking a "wait and see" approach leading to subdued demand as the conflict continues for the third month, On the Beach said on Tuesday.
Its shares were down 14.5% to 145 pence per share at 1218 GMT. Including Tuesday's losses, the stock has fallen almost 28% since pulling forecasts on March 12.
'Lasting Effect' of War
CEO Shaun Morton cautioned that the war was going to have a "lasting effect" on consumers.
"Regardless of when the conflict in the Middle East ends and some of those concerns start to subside, I think we're going to see the shock of that continue with consumers for probably at least the next eight to 12 months," Morton told investors.
Changing Travel Preferences and Company Strategy
Tourists across Europe and beyond are rethinking travel plans in a world of expensive oil, tight jet fuel supply, higher costs of essentials and the conflict disrupting popular travel routes. Many are booking later and building in flexibility.
On the Beach plans to focus marketing spending on peak holiday periods to draw customers and highlight value, in response to rising competition and the shorter gap between bookings and departures, Morton said.
Financial Performance and Outlook
Summer Holiday Highly Valued
The company reported 9% growth in bookings in the most recent six weeks as it heads into the key summer period.
"Experience tells us that consumers value their summer holiday incredibly highly and I am confident that On the Beach is well placed to satisfy this demand," Morton said.
RBC Capital Markets analysts said the company was "well placed to recover strongly against an improving backdrop."
Profit Forecast and Results
On the Beach forecast adjusted pretax profit of 18 million pounds to 25 million pounds ($24.4 million to $33.9 million) for the year ending September 30, below previous expectations of 39 million pounds to 43 million pounds.
Profit for the six months ended March 31 fell 72.6% to 2.3 million pounds after a roughly 700,000-pound hit from Iran war-linked cancellations.
($1 = 0.7377 pounds)
(Reporting by Simone Lobo in Bengaluru; Writing by Pushkala Aripaka; Editing by Subhranshu Sahu and Keith Weir)
