The group said demand for short-haul beach holidays was hit by a combination of terrorist attacks, the Brexit vote, the weaker pound and disruption from the collapse of rival Lowcostholidays.
It slowed UK revenue growth to protect earnings, with group-wide underlying profits rising to £21.3 million for the year to the end of September, up from £14.5 million a year earlier.
On The Beach chairman Richard Segal said: "T his financial year was particularly challenging for the travel industry, which had to adapt to terrorist attacks, the corporate failure of a large budget tour operator and the impact of currency fluctuations."
The group saw holidaymakers switch from the Eastern Mediterranean to the Western Mediterranean after terrorism in Egypt and Tunisia and political instability in Turkey.
Further attacks in Paris and Brussels impacted the short-haul beach holiday market, while consumer confidence was also knocked in the lead-up to and immediately after the EU referendum.
Cheadle-based On The Beach said demand picked up over the summer, but it expects some of the trends seen over the past year to continue, in particular the shift away from Turkey and Eastern Mediterranean markets.
The group delivered lower-than-expected revenue growth in the UK at 12.3%, but increased daily unique visitors by 12.6% to 61.3 million in the UK.
Underlying earnings in the UK lifted 25.5% to £25.1 million.
Simon Cooper, chief executive of On The Beach Group, said: " These results are testament to the strength and flexibility of our agile business model amidst difficult conditions in the travel industry."
On a bottom-line basis, the group swung out of the red with profits of £16.9 million against a £2.5 million loss the previous year, which included costs of its stock market flotation in September 2015.
Shares rose 8% after the full-year results and as the group announced its maiden dividend payout, at 2p a share.