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

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

  • On The Beach forecasts full-year results missing expectations
  • Shares drop most on record as company blames weaker pound

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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.

On the Beach shares tend to track movements in the pound

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 by Namitha Jagadeesh