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On the Beach Group Plc shares plunged after the UK-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 percent in London, the most since their listing in September 2015.
Rival tour operators may be hedged at 1.14 pounds per euro, leaving On the Beach’s pricing at about a 7 percent disadvantage to peers because of its commission-based, no-inventory model, according to Citi analyst Laurence Jarvis-Smith, citing the UK company’s management.
The pound slid to a two-year low of 1.08 euros on Friday on news of a shrinking UK economy.
“This pricing differential has effectively cut On the Beach’s outperformance of industry bookings” from about 10 percent to being in line with the market, Jarvis-Smith wrote in a note.
A year ago, On the Beach bought Classic Collection for $25 million.
©2019 Bloomberg L.P.