TIDMHSW
RNS Number : 6779A
Hostelworld Group PLC
28 March 2017
Hostelworld Group plc
("Hostelworld" or the "Group")
Preliminary Results for the Year Ended 31 December 2016
Hostelworld, the world's leading hostel-focused online booking
platform, is pleased to announce its preliminary results for the
year ended 31 December 2016.
Operational Highlights
-- FY 2016 performance in line with expectations
-- Total group bookings 1% lower, reflecting reduced investment
in lower margin bookings and tough mid-year market conditions; H2
group bookings up 2% against H2 2015
-- Strong core Hostelworld brand bookings growth of 18%; H2 growth of 21% against H2 2015
-- Good progress in mobile, with 49% of Hostelworld brand
bookings from mobile devices (2015: 41%)
-- Marketing efficiencies driving more profitable booking mix
- Bookings from not-paid-for channels grew to 61% of total (2015: 58%)
- Marketing expenses as a percentage of revenue decreased to 41% (2015: 45%)
-- Higher commission bookings using Elevate product increased to
30% of group total (2015: 18%)
-- Asia remains fastest growing destination
Financial Highlights
-- Adjusted EBITDA of EUR23.9m up 7% on a constant currency
basis with revenue flat; reported adjusted EBITDA up 1% on revenue
4% lower
-- Adjusted EBITDA margin increased to 30% (2015: 28%)
-- Adjusted Earnings Per Share of EUR0.20 (2015: EUR0.22)
-- Group adjusted profit after tax of EUR19.4m (2015: EUR21.0m)
-- Strong underlying cash conversion of 90% and cash balances of EUR24.6m
-- Proposed final dividend per share of 10.4 euro cent,
reflecting 75% distribution of adjusted profit after tax for the
year in line with our stated policy
-- Proposed supplementary dividend of 10.5 euro cent per share
which reflects the strong balance sheet and cash generative
business model
Feargal Mooney, Chief Executive Officer, commented:
"As widely reported, 2016 was challenging for the travel
industry, which had to contend with the impact of terrorist attacks
and the implications of Brexit. Whilst our performance,
particularly in our key European market during the second and third
quarters of the year, was impacted by these events the Group saw
improved momentum in the latter part of 2016 which has continued
through the first quarter of 2017.
Our continued focus on key strategic initiatives is supporting
year on year bookings growth, and together with our highly cash
generative business model positions us well to benefit from
continued market growth."
ends
This announcement contains inside information which is disclosed
in accordance with the Market Abuse Regulation (EU) No.
596/2014.
For further information please contact:
Hostelworld Group plc today: +44 (0) 20 7067 0000
Feargal Mooney, Chief Executive thereafter: +353 (0) 1
Officer 498 0700
Weber Shandwick +44 (0) 20 7067 0000
Nick Oborne
Tom Jenkins
Chairman's Statement
2016 marked our first full year as a publicly listed Company. As
widely reported, this year was challenging for the travel industry,
which had to contend with the impact of terrorist attacks and the
implications of Brexit. Whilst our performance, particularly in our
key European market during the second and third quarters of the
year, was impacted by these events, our results demonstrate the
strength of the overall business model and our ability to execute
strongly on our strategy, We continue to create value for
shareholders by meeting the needs of our consumers in a marketplace
that continues to grow and change quickly.
Results and financial position
The Group's flagship brand, Hostelworld, represented 87% of
total Group bookings as compared to 73% in 2015. Business momentum
improved materially in the latter part of the year, with overall
Group bookings 2% higher than the same period in 2015. This
compared to a 4% decline in the first half of 2016. This was a
reflection of the success of our strategic focus on growing the
Hostelworld brand, which has meant that the impact of the
anticipated decline in the rate of bookings from supporting
channels on overall group performance has eased during 2016. This
trend is expected to continue.
Adjusted EBITDA for the year was EUR23.9m (2015: EUR23.6m)
which, as stated in our pre-close update, is in line with the
Board's expectations for the year.
The Group's business model continued to be strongly cash
generative, with adjusted free cash flow of EUR21.5m (2015:
EUR15.3m), contributing to a strong balance sheet at the period
end. Unrestricted cash balances at year end were up 116% at
EUR24.6m (2015: EUR11.4m).
Dividend and Capital Structure
Consistent with the guidance set out in our 2015 prospectus, the
Board is recommending a full year final dividend of 10.4 euro cent
per share which reflects the distribution of 75% of the Adjusted
Profit after Taxation for the year.
In light of the Group's strong free cash flow, the Board has
reviewed its approach to returning capital to shareholders in order
to ensure that the Group maintains an efficient and prudent capital
structure, which looks to provide increased returns to
shareholders, whilst at the same time retaining flexibility for
capital and other investment opportunities.
In the absence of other investment opportunities at present, and
in recognition that the Group's cash resources are currently
greater than those required to meet the prudent requirements of the
business, the Board is proposing to distribute EUR10m of surplus
cash to shareholders via a supplementary dividend. This
supplementary dividend of 10.5 euro cent per share is discretionary
and non-recurring. The Board will keep under review the best method
of returning surplus cash to shareholders, including by way of
further supplementary dividends or share buy-backs.
Board Composition
The Board meets regularly and provides the appropriate mix of
support, encouragement and challenge of the Executive Directors
from the Non-Executive Directors. During the year, the Board
undertook an appraisal of the Directors, as well as of the Board
and each of its Sub-Committees, which concluded that the Board is
functioning effectively and has the appropriate balance of
experience, capabilities and viewpoints. I would like to thank my
fellow Non-Executive Directors, Michael Cawley (Senior Independent
Director and Audit Committee Chairman) and Andy McCue (Remuneration
Committee Chairman) for their contribution and efforts.
The composition of the Board is fully compliant with the UK
Corporate Governance Code as applied to small companies.
People
On behalf of the Board, I would like to thank all members of the
Hostelworld team under the leadership of Feargal Mooney for their
commitment and hard work during the year. They are focused on
serving and advancing the hostel market - both hostel users and
hostel owners and operators; and are continuously innovating to
swiftly adapt to changes in the market place, many of which are
driven by new interactive technologies that are highly relevant to
our consumers.
Outlook
The investment in our technology and brand has placed the Group
in a strong position to capture future growth in the hostel sector.
The Board is encouraged by the flow of increased high quality
hostel supply in key destinations and by the Group's ability to
demonstrate the attractiveness of our product offering to property
owners and to our target audience of young independent travellers.
The strength of our people, brand and technology, along with our
ability to innovate, serves to enhance our prospects in our core
marketplace and provides opportunities for incremental revenue and
profit going forward.
I am pleased to report that 2017 has started well. Total Group
bookings are ahead of last year and there is positive momentum
across the business.
Richard Segal
Chairman
27 March 2017
Chief Executive's Statement
I am pleased to report Group results for the year ended 31
December 2016.
Continued strategic progress
Set in the context of very challenging market conditions,
particularly in Europe in the key second and third quarters, I am
pleased with overall performance for the year. We maintained our
focus on the execution of our strategy across mobile, brand
marketing, flexible pricing, geographic diversification and a more
efficient booking mix, which has led to an improved performance in
the latter part of the year and encouraging momentum in the first
quarter of 2017.
Bookings
Bookings for the Group's primary Hostelworld brand, which
contribute 87% of total Group bookings, grew by 18% in the year
with an average growth rate of 21% for the final six months of the
year (2015: growth of 17%). Total Group bookings and revenues for
the year declined by 1% (72,168 bookings) and 4% (EUR3.0 million)
respectively as we successfully focused on driving bookings growth
in our flagship brand, and proactively managed the decline in our
supporting brands. Revenues were flat on a constant currency
basis.
We are pleased with the continued progress made in managing our
marketing investment, driving efficiencies in cost-per-click and
cost-per-booking which has resulted in a more profitable booking
mix. In 2016, bookings from not-paid-for channels increased to 61%
of overall Group bookings (2015: 58%), and marketing expenses as a
percentage of net revenue decreased to 41% (2015: 45%). We are
confident that our marketing and mobile led strategy, with the goal
of diversifying online marketing channels and increasing
Hostelworld brand awareness, will continue to drive efficiencies in
our acquisition costs.
Brand
If 2015 was the year of launching and testing the 'Meet The
World' proposition targeting budget-conscious independent
travellers, 2016 was the year of expanding this brand proposition
globally across digital-only channels.
This move to concentrate on digital channels allowed us to
penetrate more markets, be more targeted, and focus heavily on
being ever-present in social media. With digital channels being
more cost efficient, Hostelworld was able to increase its reach
across campaigns, driving more impressions to more customers in
highly relevant media. With 18-34 year olds consuming increasing
amounts of content across social media, we were pleased with
significant growth in our Facebook, YouTube and Instagram channels.
Our fan following across all social media grew in 2016 by over 145%
to 1.4m.
We increased our video output by almost 40% during the year,
successfully enabling Hostelworld to showcase the modern hostelling
experience in a compelling format. The pinnacle of this activity
was the global launch of our second major brand campaign: In Da
Hostel with 50 Cent.
Parodying the cult-status MTV Cribs episodes, world famous
rapper 50 Cent showcased the TOC Hostel in Barcelona to the world,
breaking down outdated perceptions of hostels through a 2 1/2
minute video that went viral across the globe with over 80 million
views.
We also secured markedly increased PR coverage globally,
combining a mix of market-leading data insight stories with more
fun items of content ('Human Beer Pong' and 'Skyping the parents
whilst getting a Tattoo'). Hostelworld now benefits from an
increase in traffic to its blog via the content it creates,
achieving over 1m visits to the blog in December 2016 alone.
Technology and Mobile
We have made good progress with our technology platform over the
year. The consolidation of Hostelbookers onto the Hostelworld
Technology platform in January 2016 realised significant
operational and maintenance efficiencies. This was quickly followed
by the launch of the fully responsive Hostelworld website by the
end of the Q1, thus successfully completing two large scale
projects.
We significantly increased our investment in Conversion
Optimisation which has delivered improvements in traffic conversion
throughout the year.
In addition to the progress on our fully responsive website, we
also made good progress against our commitment to provide a truly
contextual experience for our customers ensuring that the
Hostelworld App becomes much more than a booking facility and forms
part of a customer's journey. We released two significant
contextual features, first partnering with Trip.com (formerly
Gogobot) in providing destination specific content for Hostelworld
mobile app customers. We followed this in quarter four with the
launch of the Hostelworld Noticeboard which allows our hostel
partners to communicate to Hostelworld customers within the
Hostelworld Mobile App with unique content specific to a hostel's
activities.
Our mobile led strategy has resulted in mobile (including
tablet) representing 49% of Hostelworld brand bookings for the year
(2015: 41%).
Pricing and yield management
The year saw encouraging growth in our Elevate programme, with
30% of 2016 Group bookings delivered to properties participating in
"Elevate", an increase from 18% in 2015.
The Elevate programme gives accommodation providers the
opportunity to increase their prominence in search lists
dynamically in exchange for a higher commission rate of up to 8%
above the relevant base commission rate. We also offer a premium
listing feature, which enables accommodation providers to purchase
fixed slots at the top of Hostelworld's and our other brands'
results on a monthly cycle. The Elevate functionality was rolled
out to the Hostelbookers platform in January 2016.
In 2016, we also enhanced the offering of revenue management
services to our properties with the intention of helping them to
improve their yield per bednight.
Asia
We continued to focus on increasing our customer base and
revenue in emerging markets. In 2016, we grew our hostel supply
base by 21% in key Asian markets. Asia remains our fastest growing
destination continent with group-wide booking growth of 12% in
2016.
We opened a new office in Seoul and engaged in local marketing
to leverage the strong Hostelworld brand awareness in the South
Korean marketplace. We demonstrated our medium and long term
commitment to this market by continuing to invest in local
marketing despite weaker short-term demand for travel to Europe in
response to terrorist incidents.
South Korea remains our seventh highest customer nationality for
Hostelworld bookings.
Evolving strategic focus
We believe our four strategic pillars have now evolved into core
capabilities embedded across the Group. Therefore, towards the end
of 2016, we began a review of our strategies to ensure we remain
properly focused on the customer and maintain our competitive
position in our core markets. We will continue to raise the
awareness of the hostelling concept amongst current and potential
category users and increasingly drive revenue per customer across
our base.
We understand that our travellers are a community of passionate,
budget conscious and social travellers of all ages, who see travel
as an important part of their life. We shall continue to focus our
strategies to deliver a superior experience for our current and
future hostel traveller.
During 2017 and beyond we will focus on:
1. Investing in our Core Product. Our customers expect a booking
platform that delivers a seamless experience that is flexible, fast
and frictionless when booking a hostel. We will ensure to keep pace
in delivering content and features across all channels and
platforms to meet fast changing customer expectations.
2. Differentiating our offering. We want to deliver products and
features that are unique to the hostel product and enable customers
to have a great experience before, during and after the trip.
3. Establishing a vibrant community. We understand our customers
are passionate about travel and hence want to enable community
features that allow them to connect to the hostel and to each other
via our platform during all stages of travel (pre-, during-,
post-).
4. Drive loyalty and revenue per customer. Our customers
increasingly expect a personalised service and we want to tailor
our experience so they increasingly book with Hostelworld. Our
customers also have needs for various different travel services
which we can offer on our platform.
The market
The first independent study of the global hostel market was
published by Phocuswright in May 2016. This study was based on a
hostel operator survey (1,000 respondents), consumer survey of
2,700 hostel travellers from six key consumer markets and 800
non-hostel travellers, as well as a series of interviews with key
hostel operators and stakeholders. The findings of the study
include:
-- Phocuswright projects 7% - 8% hostel revenue growth per year
through 2018 for the global hostel market, when it estimates that
the total hostel market will reach nearly $7 billion in
revenue.
-- Hostel travellers are more likely to have university degrees
and place travel at the top of their list for discretionary spend,
travelling longer and spending more on travel than other travellers
in most markets profiled by Phocuswright.
-- Online channels accounted for two-thirds of global hostel
revenue in 2014 (compared with less than 40% of hotel gross
bookings globally). More than 70% of online hostel bookings are
made via an online travel agent.
Phocuswright highlighted the substantial opportunity for hostels
to expand their clientele beyond their traditional core customer
base. Using the US market as an example, it segmented travellers
into four categories based on their likelihood of a future hostel
stay:
1. Hostellers: (15% of total) - Travellers who have stayed in
hostels within the past year (Phocuswright's "hostel travellers"
comprise the primary market of this study).
2. Potentials: (31%) - Non-hostel millennial travellers who
indicated that they are at least "moderately" likely to consider
hostels for a future leisure trip.
3. Possibles: (25%) - Non-hostel millennial travellers who
indicated three clear travel attitudes from the question, which
make them suitable for the hostel experience:
a. Price sensitivity;
b. A desire to have a social experience when traveling (i.e. meet people); and
c. Privacy was a cited reason for not staying in a hostel.
4. Unaddressables: (29%) - Non-hostel millennial travellers who
are not price sensitive and are looking for the comfort and
amenities of hotels and, therefore, are very unlikely to consider
hostels.
Phocuswright's conclusions give us additional confidence in the
strength of our target market and the long term opportunities it
offers the Group as the leading provider of bookings into this
niche market.
People
We continue to invest in talent across the business especially
in technology, marketing and other customer facing functions. We
are fortunate to retain an excellent and diverse pool of talented
individuals working in our global team who are critical to our
success and who deliver an exceptional service to our customers. I
would like to thank the entire team for their work in 2016.
Outlook
The Group saw improved momentum in the latter part of 2016 which
has continued through the first quarter of 2017. Our continued
focus on key strategic initiatives is supporting year on year
bookings growth, and together with our highly cash generative
business model positions us well to benefit from continued market
growth.
Feargal Mooney
Chief Executive
27 March 2017
Financial Review
Introduction
-- Strong Hostelworld brand bookings growth of 18%, total Group bookings decline of 1%
-- Gross average booking value of EUR11.6, decrease of 4%
-- Net revenue was flat on a constant currency basis
-- Marketing expenses represented 41% of Net Revenue (2015: 45%)
-- Increase in Adjusted EBITDA of 7% on a constant currency basis; 1% reported
-- Adjusted EBITDA margin of 30% (2015: 28%)
-- Strong underlying cash conversion (90%) and final dividend of 10.4 euro cent per share
-- Supplementary dividend of 10.5 euro cent per share
Key Performance Indicators
2016 2015 % change
------------------------ ---------- ----- ---------
Bookings - Hostelworld
brand (m) 6.2 5.2 18%
Bookings - supporting
brands and channels
(m) 0.9 2.0 -53%
Total Booking Volume
(m) 7.1 7.2 -1%
Net Revenue (EURm) 80.5 83.5 -4%
Average Booking Value
("ABV") (gross) (EUR) 11.6 12.1 -4%
Adjusted EBITDA 23.9 23.6 1%
------------------------ ---------- ----- ---------
Overall Group bookings declined by 1% in 2016, driven by softer
demand in European destinations as a result of geopolitical events,
in particular in the second and third quarters, and by the strategy
to optimise margin performance especially on the supporting brand
channels.
The Group's flagship brand is Hostelworld which now accounts for
circa 87% of Group bookings (2015: 73%). The Group has continued to
focus its attention and resources on this brand, increasing its
relevance to and reach amongst the target young independent
traveller as evidenced by its continued strong bookings growth of
18% in 2016 (2015: 17%). Whilst bookings of the Hostelworld brand
grew, those of the Group's supporting brands (notably
Hostelbookers) were 53% lower in 2016.
Bookings in not-paid-for channels represented 61% of total
bookings (2015: 58%). The Group's booking volumes are seasonal and
peak between May and August during the summer travel period in the
northern hemisphere.
The associated Total Transaction Values ("TTV") in 2016 were
EUR559m (2015: EUR634m), while average commission rates in 2016
increased to 13.8% (2015: 13.1%).
The total Group bookings decline of 1%, combined with a decrease
in Average Booking Value ("ABV") of 4% during the year resulted in
an overall decrease in net revenue of EUR3.0m. The Group's ABV
decreased due to a number of factors including the evolving
geographic mix, the continued higher proportional growth in
bookings of shorter duration including from mobile devices, the
greater percentage of bookings into hostel dorm beds and exchange
rate movements. These factors were partially offset by increased
penetration of the Elevate pricing product. In 2016, 30% (2015:
18%) of Group bookings attracted higher commission at average
commission rate of 17.3% (2015: 16.2%).
While the Group operates in one segment and is managed as such,
business performance is reviewed on a bookings volume and average
booking value basis for both the Hostelworld brand as well as all
supporting brands (including Hostelbookers, Hostels.com, booking
engines and affiliates).
Adjusted EBITDA
The Group uses Earnings before Interest, Tax, Depreciation and
Amortisation, excluding the impact of exceptional items (Adjusted
EBITDA) as a key performance indicator when measuring the outcome
in the business from one period to the next, and against budget.
Exceptional items are non-recurring and by their nature and size
can make interpretation of the underlying trends in the business
more difficult. We believe this Adjusted EBITDA measure more
accurately reflects the key drivers of profitability for the Group
and removes those items which do not impact underlying trading
performance, thereby making comparisons more meaningful.
Administration expenses reduced from EUR64.1m in 2015 to
EUR57.4m in 2016. A key contributory factor was reduced marketing
expenses in 2016, which came in at EUR32.8m in 2016 (41% of Net
Revenue) versus EUR37.4m in 2015 (45% of Net Revenue). This
decrease in marketing costs is due to the increased proportion of
bookings sourced from non-paid channels and increased efficiencies
in managing cost per booking for paid channels.
Total staff costs reduced from EUR16.9m in 2015 to EUR16.7m in
2016 with a reduction in headcount from 256 in 2015 to 241 in 2016.
Under IFRS, costs relating to product development for which a
future benefit is derived is required to be capitalised and
amortised over the expected period the benefit is derived. Of the
total staff costs incurred, EUR2.3m was capitalised in 2016 (2015:
EUR4.2m) in relation to product development. This was largely
relating to mobile developments and increased usability of our
platform.
Reconciliation between Operating Profit and Adjusted EBITDA:
EURm 2016 2015
----------------------------- ----- -----
Operating profit 0.2 7.2
Depreciation 0.9 0.8
Amortisation of development
costs 3.2 1.4
Amortisation of acquired
intangible assets 10.6 9.9
Impairment charges 8.2 0.0
Exceptional items 0.4 4.3
Share option charge 0.4 0.0
Adjusted EBITDA 23.9 23.6
----------------------------- ----- -----
Exceptional items for the year were EUR0.4m, primarily
redundancy related costs (2015: EUR4.3m). Exceptional items during
2015 of EUR4.3m mostly related to fees incurred in relation to the
IPO.
Adjusted EBITDA increased from EUR23.6m in 2015 to EUR23.9m in
2016 driven by prudent cost management. Adjusted EBITDA margin
increased from 28% of net revenue in 2015 to 30% in 2016.
Adjusted Profit after Taxation
EURm 2016 2015
-------------------------------- ------- -------
Adjusted EBITDA 23.9 23.6
Depreciation (0.9) (0.8)
Amortisation of development
costs (3.2) (1.4)
Corporation tax (0.5) (0.4)
-------------------------------- ------- -------
Adjusted Profit after Taxation 19.4 21.0
-------------------------------- ------- -------
Exceptional costs (0.4) (4.3)
Amortisation of acquired
intangibles (10.6) (9.9)
Net financial costs (0.1) (30.9)
Other gains 0.0 104.2
Share option charge (0.4) 0.0
Impairment charges (8.2) 0.0
Deferred taxation 1.1 1.0
-------------------------------- ------- -------
Profit for the year 0.8 81.2
-------------------------------- ------- -------
Adjusted Profit after Taxation is a metric that the Group uses
to calculate the dividend payout for the year, subject to Company
Law requirements regarding distributable profits. It excludes
exceptional costs, amortisation of acquired domain and technology
intangibles, impairment charges, net finance costs, share option
charges and deferred taxation which can have large impacts on the
reported result for the year, and which can make underlying trends
difficult to interpret.
Adjusted Profit after Taxation decreased from EUR21.0m to
EUR19.4m due to higher amortisation of development costs in
2016.
Based on the weighted average shares in issue during 2016,
reported Earnings per Share ("EPS"), as set out in Note 10 to the
financial statements is 0.01 euro cent per share for the financial
year (2015: earnings per share 4.46 euro cent). Using Adjusted
Profit after Taxation as the measure of earnings would result in an
adjusted EPS of 20 euro cent per share for the year. The
corresponding EPS for 2015 calculated on the same basis, using the
number of shares in issue as at 31 December 2015 is 22 euro cent
per share.
Other gains and net finance costs
Given that the capital nature of the Group post IPO is fully
equity funded, there is no net finance charge in 2016.
In 2015, as part of the IPO, EUR181.4m was paid to former
shareholders of the Group as consideration for preference shares
and the redemption of shareholder loans and accrued interest. The
remaining balance of shareholder loans and interest was waived or
exchanged for shares in the newly listed entity. This resulted in
an exceptional gain of EUR104.2m in 2015. Interest accrued on
former shareholder loans up to the date of the IPO was
EUR30.9m.
Share Based Payments
The Group implemented a long term incentive plan in April 2016
as detailed in the Remuneration Report and, in accordance with
IFRS2, has recognised a non-cash charge of EUR0.4m (2015:
EURnil).
Impairment Charge
In 2016, following a review of trading performance and due to
bookings and revenue being less than previously projected in the
associated legal entity, the directors reassessed the estimated
future cashflows associated with the Hostelbookers intellectual
property assets. This led to the recognition of an impairment
charge of EUR8.2m in relation to the value of the Hostelbookers
domain names. The estimated useful life of these domain names was
also reduced to a period of eight years from 1 January 2016.
Taxation
The Group corporation tax charge of EUR0.5m (2015: EUR0.4m)
results in an effective tax rate (corporation tax as a percentage
of Adjusted EBITDA) of 2.0% (2015: 1.5%). The low effective tax
rate is primarily as a result of carried forward tax losses arising
from the previous capital structure of the Group.
The outcome of the impairment review resulted in a reduction in
the carrying value of the deferred tax liability. This was
partially offset by the amortisation of deferred tax assets,
resulting in overall net deferred tax credit of EUR1.1m in
2016.
The deferred taxation credit of EUR1.0m in 2015 arose primarily
in relation to acquired intangibles and the partial recognition of
carried forward tax losses.
Adjusted Free Cashflow conversion
EURm 2016 2015
--------------------------------- -------- ------
Adjusted EBITDA 23.9 23.6
Capitalised development spend (2.4) (4.3)
Capital expenditure (0.7) (3.2)
Interest and tax paid (0.3) 0.2
Net movement in working capital
(1) 1.0 (1.1)
--------------------------------- -------- ------
Adjusted Free Cashflow 21.5 15.3
--------------------------------- -------- ------
Adjusted FCF conversion 90% 65%
--------------------------------- -------- ------
(1) changes in working capital excludes
the effects of exceptional costs
The Group has a business model which produces strong free cash
flow conversion, with a negative working capital cycle on
operational cash flows. In 2015 there was a higher than normal
level of investment in capital expenditure due to spend of EUR2.0m
on leasehold improvements and fixtures and fittings as the Group
entered into new leases in London and Dublin. In 2016, investment
in leasehold improvements and fixtures and fittings amounted to
EUR0.03m. The lower level of capitalised development expenditure
and capital expenditure in 2016 has resulted in adjusted free
cashflow conversion of 90%.
On 21 October 2015, in connection with the IPO, the Group
entered into a working capital facility with AIB Bank plc (the
"Revolving Credit Facility") for EUR2.5m. During the year end to 31
December 2016, there have been no drawdowns under this facility
(period to 31 December 2015: EURnil).
Total Cash at 31 December 2016 was EUR24.6m (2015: EUR13.6m), of
which EURnil is restricted (2015: EUR2.2m held in a restricted
account as part of a guarantee related to the lease of the Dublin
office). In 2015, the Group entered into a guarantee with AIB Bank
plc related to the lease of office space in Dublin (as disclosed in
Note 12 to the financial statements). The guarantee initially
required that EUR2.2m remain on deposit with the bank. This
requirement was removed by AIB Bank plc during 2016. There were no
borrowings at 31 December 2016 (2015: EURnil).
Foreign exchange risk
The Group's primary operating currency is the euro. The Group
also has significant sterling and US dollar cash flows. Restated on
a constant currency basis, revenues have increased by 0.1%
(EUR0.1m) and Adjusted EBITDA has increased by 7% (EUR1.5m) in
2016. Constant currency is calculated by applying the average
exchange rates for the year ended 31 December 2016 to the financial
results for the year ended 31 December 2015. The Group's principal
policy is to match cashflows of like currencies, with excess
sterling and US dollar revenues being settled into euros on a
timely basis.
Dividend
The Group is committed to an attractive dividend policy, and is
pleased to recommend a full year final dividend payout of EUR9.9m
equating to 10.4 euro cent per share. This is in addition to the
interim dividend of 4.8 euro cent per share paid in September 2016.
This payout of EUR14.5m or 15.2 euro cent per share reflects a
distribution of 75% of the Adjusted Profit after Taxation for the
year ended 31 December 2016. In May 2016, the Group paid a maiden
dividend of EUR2.6m or 2.75 cent per share in respect of the period
from Admission on 02 November 2015 to 31 December 2015.
The Board has reviewed its approach to returning capital to
shareholders in order to ensure that the Group maintains an
efficient and prudent capital structure, which looks to provide
increased returns to shareholders, whilst at the same time
retaining flexibility for capital and other investment
opportunities. In the absence of other investment opportunities at
present, and in recognition that the Group's cash resources are
currently greater than those required to meet the prudent
requirements of the business, the Board is proposing to distribute
EUR10.0m of surplus cash to shareholders via a supplementary
dividend. This supplementary dividend of 10.5 euro cent per share
is discretionary and non-recurring. It will be paid to shareholders
on the register at 28 April 2017. The Board will keep under review
the best method of returning surplus cash to shareholders,
including by way of a supplementary dividend or a share
buy-back.
Mari Hurley
Chief Financial Officer
27 March 2017
HOSTELWORLD GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2016
2016 2015
Notes EUR'000 EUR'000
Revenue 3 80,514 83,451
Administrative expenses 4 (57,397) (64,087)
Depreciation and amortisation 4 (14,731) (12,170)
Impairment losses 4 (8,199) -
Operating profit 187 7,194
Financial income 5 8
Financial costs 7 (59) (30,866)
Other gains 7 - 104,158
Profit before taxation 133 80,494
Taxation 8 651 680
--------- ---------
Profit for the year attributable to the equity owners of the parent company 784 81,174
--------- ---------
Basic and diluted earnings per share (cents) 9 0.01 4.46
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2016
2016 2015
EUR'000 EUR'000
Profit for the year 784 81,174
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (680) 333
-------- --------
Total comprehensive income for the year attributable
to equity owners of the parent company 104 81,507
-------- --------
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
2016 2015
Notes EUR'000 EUR'000
Non-current assets
Intangible assets 10 139,619 158,972
Property, plant and equipment 3,058 3,523
Deferred tax assets 659 1,325
-------- --------
143,336 163,820
Current assets
Trade and other receivables 11 2,627 3,249
Corporation tax - 3
Cash and cash equivalents 12 24,632 13,620
-------- --------
27,259 16,872
-------- --------
Total assets 170,595 180,692
-------- --------
Issued capital and reserves attributable to equity owners of the parent
Share capital 956 956
Other reserves 3,628 3,628
Foreign currency translation reserve 15 695
Share based payment reserve 351 -
Retained earnings 154,986 161,418
-------- --------
Total equity attributable to equity holders of the parent company 159,936 166,697
-------- --------
Non-current liabilities
Deferred tax liabilities 764 2,563
-------- --------
764 2,563
Current liabilities
Trade and other payables 13 9,669 11,405
Corporation tax 226 27
-------- --------
9,895 11,432
-------- --------
Total liabilities 10,659 13,995
-------- --------
Total equity and liabilities 170,595 180,692
-------- --------
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2016
Foreign Share
Currency Based
Retained Translation Payment
Share Capital Share Premium Earnings Other Reserves Reserve Reserve Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
As at 1 January
2015 30 13,521 (158,101) - 362 - (144,188)
-------------- -------------- -------------- -------------- -------------- -------- ----------
Elimination on
reorganisation (30) (13,521) - - - - (13,551)
Issue of
capital (net
of costs) 956 238,345 - - - - 239,301
Merger reserve - - - 3,628 - - 3,628
Capital
reduction - (238,345) 238,345 - - - -
Total
comprehensive
income for the
year - - 81,174 - 333 - 81,507
As at 31
December 2015 956 - 161,418 3,628 695 - 166,697
-------------- -------------- -------------- -------------- -------------- -------- ----------
Total comprehensive income/(expense) for the year - - 784 - (680) - 104
Dividends - - (7,216) - - - (7,216)
Credit to equity for equity-settled share based payments - - - - - 351 351
As at 31 December 2016 956 - 154,986 3,628 15 351 159,936
---- -------- ----- ------ --- --------
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2016
2016 2015
Notes EUR'000 EUR'000
Cash flows from operating
activities
Profit before tax 133 80,494
Depreciation of property,
plant and equipment 4 886 813
Amortisation of intangible
assets 4 13,845 11,357
Impairment of intangible
assets 4 8,199 -
Transaction costs (included
within financing activities) - 4,546
Loss on disposal of property,
plant and equipment 4 19 251
Financial income (5) (8)
Financial expense 7 59 30,866
Other gains 7 - (104,158)
Employee equity settled share
based payment expense 15 362 -
Changes in working capital
items:
Decrease in trade and other
payables (1,553) (940)
Increase in trade and other
receivables (24) (1,117)
-------- ----------
Cash generated from operations 21,921 22,104
Interest paid (59) (79)
Interest received 5 8
Income tax (paid)/refunded (280) 319
-------- ----------
Net cash from operating activities 21,587 22,352
-------- ----------
Cash flows from investing
activities
Acquisition/capitalisation
of intangible assets (2,500) (4,321)
Purchases of property, plant
and equipment (746) (3,168)
Net cash used in investing
activities (3,246) (7,489)
-------- ----------
Cash flows from financing
activities
Dividends 17 (7,216) -
Repayment of shareholders'
loans - (195,125)
Proceeds on issue of shares,
net of expenses - 173,607
-------- ----------
Net cash used in financing
activities (7,216) (21,518)
-------- ----------
Net increase/(decrease) in
cash and cash equivalents 11,125 (6,655)
Cash and cash equivalents
at the beginning of the year 13,620 19,942
Effect of exchange rate changes
on cash and cash equivalents (113) 333
-------- ----------
Cash and cash equivalents
at the end of the year 24,632 13,620
Restricted cash balances 12 - (2,225)
-------- ----------
Unrestricted cash balances
at the end of the year 24,632 11,395
-------- ----------
HOSTELWORLD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND BASIS OF PREPARATION
The financial information, comprising of the consolidated income
statement, consolidated statement of comprehensive income,
consolidated statement of financial position, consolidated
statement of changes in equity, consolidated statement of cashflows
and related notes, has been taken from the consolidated financial
statements of Hostelworld Group plc ("Company") for the year ended
31 December 2016, which were approved by the Board of Directors on
27 March 2017. The financial information does not constitute
statutory accounts within the meaning of sections 435(1) and (2) of
the Companies Act 2006 or contain sufficient information to comply
with the disclosure requirements of International Financial
Reporting Standards ("IFRS").
An unqualified report on the consolidated financial statements
for the year ended 31 December 2016 has been given by the auditors,
Deloitte. It did not include reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report and did not contain any statement under section 498 (2) or
(3) of the Companies Act 2006. The consolidated financial
statements will be filed with the Registrar of Companies, subject
to their approval by the Company's shareholders at the Company's
Annual General Meeting on 1 June 2017.
The Company, is a public limited company incorporated in the
United Kingdom on the 9 October 2015. The registered office of the
Company is High Holborn House, 52 - 54 High Holborn, London, WC1V
6RL, United Kingdom.
The Company and its subsidiaries (together "the Group") provide
software and data processing services that facilitate hostel,
B&B, hotel and other accommodation bookings worldwide.
Basis of Preparation
The consolidated financial statements incorporate the financial
statements of the Company and its directly and indirectly owned
subsidiaries, all of which prepare financial statements up to 31
December. The consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards
(IFRS), International Financial Reporting Interpretations Committee
(IFRIC) interpretations and those parts of the Companies Act 2006,
applicable to companies reporting under IFRS. The Group financial
statements have been prepared in accordance with IFRSs adopted by
the European Union ("the EU") which comprise standards and
interpretations approved by the International Accounting Standards
Board ("IASB").
On 2 November 2015, as part of a reorganisation, the ultimate
parent of the Group changed from H&F Wings Lux 1 S.à r.l to
Hostelworld Group plc. On that date, the Company obtained control
of the entire share capital of Wings Lux 2 S.à r.l which in turn
owned the entities within the existing Hostelworld Group. This
transaction falls outside the scope of IFRS 3 "Business
Combinations". Accordingly, following the guidance regarding the
selection of an appropriate accounting policy provided by IAS 8
"Accounting policies, changes in accounting estimates and errors",
the transaction has been accounted for in these financial
statements using the principles of merger accounting set out in FRS
102 The Financial Reporting Standard Applicable in the UK and
Republic of Ireland. This policy, which does not conflict with
IFRS, reflects the economic substance of the transaction.
The consolidated financial statements have been prepared on the
historical cost basis. The principal accounting policies adopted
are set out below.
The directors have assessed the ability of the Company and Group
to continue as a going concern and are satisfied that it is
appropriate to prepare the financial statements on a going concern
basis of accounting. In doing so, the directors have assessed that
there are no material uncertainties to the Group's and Company's
ability to continue as a going concern for the foreseeable future,
being a period of at least 12 months from the date of approval of
the financial statements.
2. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies, the
directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors considered relevant. Actual results may differ from these
estimates.
(a) The critical judgements that have been made that have the
most significant effect on the amounts recognised in the
consolidated financial statements are set out below:
Useful lives for amortisation of intangible assets
Intangible assets are disclosed in Note 10. The amortisation
charge is dependent on the estimated useful lives of the assets.
The directors regularly review estimated useful lives of each type
of intangible asset and change them as necessary to reflect its
current assessment of remaining lives and the expected pattern of
future economic benefit embodied in the asset. Changes in asset
lives can have a significant impact on the amortisation charges for
that year.
Capitalisation of Development Costs
Development costs are capitalised in accordance with accounting
policies. Determining the amount to be capitalised requires the
directors to make assumptions regarding expected future cash
generation of the asset and expected period of benefit.
(b) Key sources of estimation that have been made that have the
most significant effect on the amounts recognised in the
consolidated financial statements are set out below:
Impairment of goodwill and intangible assets
The directors assess annually whether goodwill has suffered any
impairment, in accordance with the relevant accounting policy, and
the recoverable amounts of cash-generating units are determined
based on value-in-use calculations that require the use of
estimates. Intangible assets are assessed for possible impairment
where indicators of impairment exist.
Following an impairment review of the Hostelbookers intellectual
property assets (see Note 10), the Directors reassessed the
estimated remaining useful life of the related domains and
reassessed the remaining useful life as being 8 years from the
start of 2016. The Group had previously assessed the useful
economic life as being 17 remaining years from the start of 2016.
This had an impact of increasing the amortisation charge for the
year by EUR629k.
Further details on the assumptions used are set out in Note
10.
Deferred Tax
Deferred tax assets are recognised for all unused tax losses to
the extent that it is probable that taxable profits will be
available in future periods against which the losses can be
utilised. Judgement is required to determine the amount of deferred
tax assets that can be recognised, based upon the likely timing and
level of future taxable profits.
3. REVENUE & SEGMENTAL ANALYSIS
The Group is managed as a single business unit which provides
software and data processing services that facilitate hostel, hotel
and other accommodation worldwide, including ancillary on-line
advertising revenue.
The directors determine and present operating segments based on
the information that is provided internally to the CEO, who is the
Company's Chief Operating Decision Maker (CODM). When making
resource allocation decisions, the CODM evaluates booking numbers
and average booking value. The objective in making resource
allocation decisions is to maximise consolidated financial
results.
The CODM assesses the performance of the business based on the
consolidated adjusted profit/(loss) after tax of the Group for the
year. This measure excludes the effects of certain income and
expense items, which are unusual by virtue of their size and
incidence, in the context of the Group's ongoing core operations,
such as the impairment of intangible assets and one-off items of
expenditure.
All segmental revenue is derived wholly from external customers
and, as the Group has a single reportable segment, inter-segment
revenue is zero.
The Group's major revenue-generating asset class comprises its
software and data processing services and is directly attributable
to its reportable segment operations. In addition, as the Group is
managed as a single business unit, all other assets and liabilities
have been allocated to the Group's single reportable segment.
There have been no changes to the basis of segmentation or the
measurement basis for the segment profit or loss.
Reportable segment information is presented as follows:
2016 2015
EUR'000 EUR'000
Europe 49,497 53,812
Americas 14,938 14,951
Asia, Africa and Oceania 16,079 14,688
---------- ----------
Total revenue 80,514 83,451
---------- ----------
The Group's non-current assets are located in Ireland,
Luxembourg and the UK. Out of the total non-current assets in the
Group of EUR143,336k (2015: EUR163,820K), the non-current assets of
the group located in the UK are EUR4,259k (2015: EUR14,252k).
4. OPERATING EXPENSES
Profit for the year has been arrived at after
charging/(crediting) the following operating costs:
2016 2015
Note EUR'000 EUR'000
Marketing expenses 32,842 37,410
Credit card processing fees 1,931 1,958
Staff costs 6 14,359 12,721
Loss on disposal of property,
plant and equipment 19 251
FX (gain)/loss (214) 239
Exceptional Items 5 449 4,267
Other administrative costs 8,011 7,241
---------- --------
Total administrative expenses 57,397 64,087
Depreciation of tangible
fixed assets 886 813
Amortisation of intangible
fixed assets 10 13,845 11,357
Impairment of intangible
assets 10 8,199 -
---------- --------
Total operating expenses 80,327 76,257
---------- --------
Auditors' remuneration
During the year, the Group obtained the following services from
its Auditors:
2016 2015
EUR'000 EUR'000
Fees payable for the statutory
audit of the Company 35 35
Fees payable for other services:
- statutory audit of subsidiary
undertakings 115 115
- tax advisory services - 4
- other assurance services - 191
- corporate finance services - 854
- other services 12 91
---------- --------
Total 162 1,290
---------- --------
The figures in 2015 relating to other assurance services,
corporate finance services and other services all relate to the IPO
and Group reorganisation which occurred in November 2015.
5. EXCEPTIONAL ITEMS
2016 2015
EUR'000 EUR'000
Merger and acquisition (credit)/costs (64) 3,994
Redundancy costs 526 211
Integration and relocation
(credit)/costs (13) 573
Non-recurring gain - (511)
Total exceptional items 449 4,267
---------- --------
Foreign exchange rate and other movements between recognition
and settlement dates drove the write back of certain previously
recognised exceptional items. 2016 redundancy costs mostly relate
to the restructuring of certain Group functions following the
consolidation of Hostelbookers onto the Hostelworld technology
platform. Merger and acquisition costs were incurred during 2015 in
relation to the listing of the Company (the "IPO"), and the related
reorganisation of the Group. 2015 Redundancy costs relate to the
restructuring of the Group following the acquisition of Hostelworld
Services Limited (formerly Hostelbookers.com Limited) in 2013. The
integration and relocation costs in 2015 primarily related to the
costs incurred for office moves in both Dublin and London. The
non-recurring gain in 2015 of EUR511k related to the release of an
accrual related to the potential indirect taxes of the
Hostelbookers business where the liability was settled in 2015.
6. STAFF COSTS
The average monthly number of people employed (including
executive directors) was as follows:
2016 2015
Average number of persons employed
Administration and sales 154 155
Development and information technology 87 101
----- -----
Total number 241 256
----- -----
The aggregate remuneration costs of these employees is analysed
as follows:
2016 2015
Notes EUR'000 EUR'000
Staff costs comprise:
Wages and salaries 14,162 14,756
Social security costs 1,591 1,669
Pensions costs 316 240
Other benefits 239 233
Long-term employee incentive
costs 15 362 -
Capitalised development
labour (2,311) (4,177)
---------- --------
Total 14,359 12,721
---------- --------
7. FINANCIAL COSTS AND OTHER GAINS
2016 2015
EUR'000 EUR'000
Finance costs:
Interest payable on shareholders'
loans - 30,786
Bank charges 59 80
-------- --------
Total finance costs 59 30,866
-------- --------
Other gains
Other gains in 2015 related solely to the write off of
shareholder loans of EUR104,158k as part of the Group
reorganisation in November 2015.
8. TAXATION
2016 2015
EUR'000 EUR'000
Corporation tax:
Current year 440 297
Adjustments in respect of
prior years 27 58
---------- ----------
Total 467 355
Deferred tax (1,118) (1,035)
---------- ----------
Total (651) (680)
---------- ----------
Corporation tax is calculated at 12.5% (2015: 12.5%) of the
estimated taxable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions. The charge for the year can be reconciled
to the consolidated income statement as follows:
2016 2015
EUR'000 EUR'000
Profit before tax on continuing
operations 133 80,494
-------- ----------
Tax at the Irish corporation tax
rate of 12.5% (2015: 12.5%) 17 10,062
Effects of :
Tax effect of expenses/(income)
that are not taxable/deductible
in determining taxable profit 436 (8,228)
Tax effect of utilisation of tax
losses not previously recognised (166) (1,767)
Capital allowances in excess of
depreciation (1,753) (416)
Effect of different tax rates of
subsidiaries operating in other
jurisdictions 134 280
Reversal/(recognition) of deferred
tax asset on tax losses 654 (669)
Adjustments in respect of prior
years 27 58
-------- ----------
Total for the year (651) (680)
-------- ----------
The Group has an unrecognised deferred tax asset as at 31
December 2016 of EUR3,527k (31 December 2015:EUR3,834k) which has
not been recognised in the consolidated financial statements as
there is insufficient evidence that the asset will be recovered in
the foreseeable future.
9. EARNINGS PER SHARE
Basic and diluted earnings per share are calculated by dividing
the net profit attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the
year.
2016 2015
Weighted average number of shares
in issue ('000s) 95,571 18,217
Profit for the year (EUR'000s) 784 81,174
------- -------
Basic and diluted earnings cents
per share 0.01 4.46
------- -------
Actual earnings per share, calculated by dividing the net profit
attributable to ordinary shareholders by the actual number of
ordinary shares in issue at 31 December 2016, is EUR0.01 (2015:
earnings per share of EUR0.85).
10. INTANGIBLE ASSETS
The table below shows the movements in intangible assets for the
year:
Capitalised
Affiliates Development
Goodwill DomainNames Technology Contracts Costs Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Cost
Balance at 1
January 2015 47,274 214,640 13,325 5,500 1,414 282,153
Additions - - - - 4,333 4,333
Disposals - - - - - -
Effect of foreign
currency exchange
difference - - - - (12) (12)
Balance at 31
December 2015 47,274 214,640 13,325 5,500 5,735 286,474
--------- ------------ ----------- ----------- ------------- ----------
Balance at 1
January 2016 47,274 214,640 13,325 5,500 5,735 286,474
Additions - - 118 - 2,385 2,503
Transfer from
tangible assets - - 383 - - 383
Effect of foreign
currency exchange
difference - - (12) - - (12)
--------- ------------ ----------- ----------- ------------- ----------
Balance at 31
December 2016 47,274 214,640 13,814 5,500 8,120 289,348
--------- ------------ ----------- ----------- ------------- ----------
Accumulated
amortisation
and impairment
Balance at 1
January 2015 (29,426) (68,102) (12,701) (5,500) (416) (116,145)
Charge for year - (9,687) (235) - (1,435) (11,357)
Balance at 31
December 2015 (29,426) (77,789) (12,936) (5,500) (1,851) (127,502)
--------- ------------ ----------- ----------- ------------- ----------
Balance at 1
January 2016 (29,426) (77,789) (12,936) (5,500) (1,851) (127,502)
Charge for year - (10,316) (326) - (3,203) (13,845)
Impairment - (8,199) - - - (8,199)
Transfer from
tangibles assets - - (187) - - (187)
Effect of foreign
currency exchange
difference - - 4 - - 4
Balance at 31
December 2016 (29,426) (96,304) (13,445) (5,500) (5,054) (149,729)
--------- ------------ ----------- ----------- ------------- ----------
Carrying amount
At 31 December
2015 17,848 136,851 389 - 3,884 158,972
--------- ------------ ----------- ----------- ------------- ----------
At 31 December
2016 17,848 118,336 369 - 3,066 139,619
--------- ------------ ----------- ----------- ------------- ----------
Goodwill
The goodwill balance at 31 December 2016 relates to an
investment in Hostelworld.com Limited in 2009 which resulted in a
goodwill amount of EUR17,848k. The carrying value of this balance
as at 31 December 2016 is EUR17,848k (2015: EUR17,848k).
Goodwill, which has an indefinite useful life, is subject to
annual impairment testing, or more frequent testing if there are
indicators of impairment. The cash flow projections are initially
based on the three year budgets approved by the directors and
extended out for a further 12 years. The cash-flow projections take
into account key assumptions including historical trading
performance, anticipated changes in future market conditions,
industry and economic factors and business strategies.
The pre-tax discount rate which has been applied in determining
value in use is 13.7% (2015: 11.4%). The discount rate is based on
the Group estimated weighted average cost of capital adjusted for
the business specific risk of the CGU. Based on the 2017 budget,
growth rates are assessed based on approved budgets and forecast
and range from 5% to 10% over the forecast period after 2017. Cash
flows beyond the 15 year period are extrapolated using the
estimated long- term growth rate of 2% (2015: 2%).
Following impairment testing, no impairment was recognised for
goodwill in 2016.
Other Intangible Assets
Additions during the year comprised of internally generated
additions of EUR2,311k (2015:EUR4,177k) and other separately
acquired additions of EUR192k (2015:EUR156k).
In 2016, following a review of trading performance and due to
bookings and revenue being less than previously projected, the
directors reassessed the estimated cashflows associated with the
Hostelbookers intellectual property assets. The cash flow
projections are initially based on the three year budgets approved
by the directors and extended out for a further 4 years in
accordance with the remaining estimated useful life. The cash-flow
projections take into account key assumptions including historical
trading performance, anticipated changes in future market
conditions, industry and economic factors and business strategies.
There are no reasonable possible changes to the assumptions
presented above that would result in any further impairment
recorded in each of the years presented in these financial
statements.
The pre-tax discount rate which was applied in determining value
in use was 14.7%. The discount rate was based on the Group
estimated weighted average cost of capital adjusted for business
specific risk of the CGU.
Following the impairment testing, an impairment charge of
EUR8,199k was recognised in relation to the value of the
Hostelbookers domain names. There were no indicators to require an
impairment test of other intangible assets in the current year.
The estimated useful life of these domain names was also reduced
to a period of 8 years from 1 January 2016 to be amortised on a
reducing balance basis.
11. TRADE AND OTHER RECEIVABLES
2016 2015
EUR'000 EUR'000
Amounts falling due within one year
Trade receivables 892 621
Prepayments and accrued income 731 822
Value Added Tax 1,004 1,806
---------- --------
2,627 3,249
---------- --------
The carrying value of trade and other receivables also
represents their fair value. Trade receivables are non-interest
bearing and trade receivable days are 4 days (2015: 3 days). Given
the nature of the business, allowance for impairment of receivables
is not material.
12. CASH AND CASH EQUIVALENTS
2016 2015
EUR'000 EUR'000
Cash and cash equivalents 24,632 13,620
Restricted cash balances - (2,225)
-------- --------
Unrestricted cash balances 24,632 11,395
-------- --------
The Group entered into a guarantee with AIB Bank plc during 2015
related to the lease of office space in Dublin. The guarantee
initially required that EUR2,225k remain on deposit with the bank.
The requirement was removed by AIB Bank plc during 2016.
13. TRADE AND OTHER PAYABLES
2016 2015
EUR'000 EUR'000
Amounts falling due within one year
Trade payables 3,344 5,439
Accruals and other payables 5,797 5,168
Payroll taxes 524 694
Value Added Tax 4 104
9,669 11,405
---------- ------------
The average credit period for the Group in respect of trade
payables is 32 days (2015: 26 days).
14. COMMITMENTS AND CONTINGENCIES
(i) OPERATING LEASES
At the reporting date, the Group had commitments under
non-cancellable operating leases which fall due as follows:
2016 2015
EUR'000 EUR'000
Operating leases
Within one year 933 994
Within two to five years 3,118 3,682
More than five years 1,864 2,433
-------- --------
5,915 7,109
-------- --------
All operating lease commitments relate to buildings. These
relate to two leases of office space in the UK and Ireland. These
leases are due to expire in 2025 and 2035 respectively. If the
Group was to exercise available break options, the leases would
expire in 2020 and 2025 respectively.
The operating lease charge included in the consolidated income
statement was EUR1,003k in 2016 (2015: EUR928k).
(ii) CONTINGENCIES
In the normal course of business the Group may be subject to
indirect taxes on its services in certain foreign jurisdictions.
The directors perform ongoing reviews of potential indirect taxes
in these jurisdictions. Although the outcome of these reviews and
any potential liability is uncertain, no provision has been made in
relation to these taxes as the directors believe that it is not
probable that a material liability will arise.
15. SHARE-BASED PAYMENTS
The Group has a share option scheme for executives and selected
management of the Company and its subsidiaries. The first awards
were granted in 2016. The Group recognised an expense of EUR362k
(2015: EURNIL) related to equity-settled share-based payment
transactions in the Consolidated Income Statement during the
year.
2016 Long Term Incentive Plan Scheme ("LTIP")
In April 2016, the Group introduced a Long Term Incentive Plan.
An invitation to participate was made to Executive Directors and
selected management. The proportion of the invitation which vests,
will depend on the Adjusted Earnings per Share (EPS) performance
and Total Shareholder Return (TSR) of the Group over a three year
period ("the performance period"). The invitations made in 2016
will potentially vest in 2019.
Up to 70% of the shares/options subject to an invitation will
vest according to the Group's adjusted EPS growth compared with
target during the performance period. Up to 30% of the
shares/options subject to an invitation will vest according to the
Group's TSR performance during the performance period measured
against the TSR performance indicators approved by the Remuneration
committee. An invitation will lapse if a participant ceases to be
an employee or an officer within the Group before the vesting
date.
A summary of the status of the LTIP as at 31 December 2016 is
presented below:
Fair value
Grant Expiry Exercise at grant
Option series Number date date price date
Granted on 5 April 5 April
5 April 2016 928,464 2016 2023 EURNil EUR3.88
--------------- -------- -------- -------- --------- -----------
Details of the share options outstanding during the year are as
follows:
2016
Number of share
options
Outstanding at beginning of year -
Granted during the year 928,464
Forfeited during the year -
Exercised during the year -
Expired during the year -
----------------
Outstanding at the end of the year 928,464
Exercisable at the end of the year -
----------------
The awards will vest on the later of the 3rd anniversary of the
grant and the determination of the performance condition, and will
then remain exercisable until the 7th anniversary of the date of
grant, provided the individual remains an employee or officer of
the Group. Although the awards will vest in 2019 the measurement
period for performance conditions is over 3 years from 1 January
2016 to 31 December 2018.
Share options under the LTIP scheme have an exercise price of
nil. The remaining weighted average life for share options
outstanding is 2.26 years.
Fair value of options granted during the year:
At the invitation grant date, the fair value per conditional
award and the assumptions used in the calculations
are as follows:
Invitation grant award date 5 April 2016
Year of potential vesting 2019
Share price at grant date EUR3.11
Exercise price per share option EURNIL
Expected volatility of company
share price 30%
Expected life 3 years
Expected dividend yield 5.1%
Risk free interest rate 0.4%
Weighted average fair value
at grant date EUR3.88
Valuation model Monte Carlo model
Expected volatility was determined in line with market
performance of the company and comparator companies as there was
insufficient historic data available for the company at the grant
date of the awards. Market based vesting conditions, such as the
TSR condition, have been taken into account in establishing the
fair value of equity instruments granted. Non-market based
performance conditions, such as the EPS conditions, were not taken
into account in establishing the fair value of equity instruments
granted, however the number of equity instruments included in the
measurement of the transaction is adjusted so that the amount
recognised is based on the number of equity instruments that
eventually vest
16. RELATED PARTY TRANSACTIONS
SUBSIDIARIES
The following is a list of the Company's current investments in
subsidiaries, including the name, country of incorporation, and
proportion of ownership interest:
Place of
Business
and Registered
Company Office Holding Nature of Business
Wings Lux 2 S.à Luxembourg 100%* Intermediate holding
r.l. company
Wings Lux 3 S.à Luxembourg 100% Intermediate holding
r.l. company
Wings Holdco Ltd Ireland 100% Intermediate holding
company
WRI Nominees DAC Luxembourg** 100%* Holding of IP
Hostelworld.com Ireland 100%* Technology trading
Ltd company
Hostelworld Korea Korea 100% Marketing services
Ltd company
Cornetto Bidco Jersey 100% Intermediate holding
Ltd company
Hostelworld Services UK 100% Technology trading
Limited company
* held directly by the Company
** WRI Nominees DAC is dually incorporated in Luxembourg and
Ireland with registered offices in both locations. Its place of
business is in Luxembourg.
All subsidiaries have the same reporting date as the Company
being 31 December.
On 22 February 2016, H&F Wings Bidco Limited changed its
name to Wings Bidco Limited and H&F Wings Holdco Limited
changed its name to Wings HoldcoLimited.
On 26 February 2016, H&F Wings Lux 2 S.à r.l. changed its
name to Wings Lux 2 S.à r.l. and H&F Wings Lux 3 S.à r.l.
changed its name to Wings Lux 3 S.à r.l.
On 14 March 2016, Hostelworld Korea Limited was
incorporated.
On 12 April 2016, Anytrip.com Limited was dissolved.
On 28 June 2016, Wings Holdco Limited and Hostelworld.com
Limited converted to a private company limited by shares and WRI
Nominees Limited converted to a designated activity company.
During 2016 a decision was made to wind up the following
companies by way of members' voluntary winding up: Boo Travel
Limited, Wings Corporate Services Limited, WRI Holdings, Wings
Bidco Limited and Web Reservations International.
DIRECTORS' REMUNERATION
2016 2015
EUR'000 EUR'000
Salaries, fees, bonuses and benefits
in kind 958 956
Amounts receivable under long-term
incentive schemes 122 -
Pension contributions 57 23
-------- --------
Total 1,137 979
-------- --------
KEY MANAGEMENT PERSONNEL
The Group's key management comprise the Board of Directors and
senior management having authority and responsibility for planning,
directing and controlling the activities of the Group.
2016 2015
EUR'000 EUR'000
Short term benefits 2,090 2,342
Share based payments 252 -
Post employment benefits 112 52
---------- ----------
Total 2,454 2,394
---------- ----------
Transactions between the Group and the Related Parties and the
balances outstanding are disclosed below:
During 2016, the former controlling shareholder of the Group,
H&F Wings Lux 1 S.à r.l. paid a discretionary bonus payment of
EUR1,559k (EUR1,400k net of employer taxes) to certain senior
management and employees of the Group in relation to their
performance up to the date of Admission. The Group did not bear any
costs associated with this payment. Mr. Feargal Mooney, executive
director and CEO, received an award of EUR850k.
In 2015, the former controlling shareholder of the Group,
H&F Wings Lux 1 S.à r.l. agreed to pay Richard Segal a sum of
EUR5,000k (net sum of EUR2,500k) and any employer tax liability
that accrued to the company in full satisfaction of an agreement
with him dated 28 September 2011. For administration purposes the
sum was paid by the Group and reimbursed by the shareholders.
Trading transactions made by the Group with H&F Wings Lux 1
S.à.r.l, and its related entites during the year amounted to EURNil
(2015: EUR5,893k).
17. DIVIDENDS
Amounts recognised as distributions to equity holders in the
financial year:
2016 2015
EUR'000 EUR'000
Final 2015 dividend of EUR0.0275
per share (paid 31 May 2016) 2,628 -
Interim 2016 dividend of EUR0.048
per share (paid 27 September 2016) 4,588 -
7,216 -
-------- --------
Proposed final dividend for the
year ended 31 December 2016 of EUR0.104
per share (2015: EUR0.0275 per share) 9,939 2,628
-------- --------
Proposed supplementary dividend
of EUR0.105 per share (2015: EURnil) 10,035 -
-------- --------
In accordance with the Group's dividend policy, the directors
recommend the payment of a final dividend for 2016 of EUR0.104 per
share amounting to EUR9.9m (2015: EUR0.0275 per share amounting to
EUR2.6m).
Additionally the directors recommend the payment of a
discretionary, non-recurring supplementary dividend of EUR0.105 per
share amounting to EUR10.0m (2015: EURnil).
The proposed dividends are to be approved by the shareholders at
the 2017 AGM on 1 June 2017.
18. EVENTS AFTER THE BALANCE SHEET DATE
There were no significant events after the balance sheet
date.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKODDCBKDBNB
(END) Dow Jones Newswires
March 28, 2017 02:01 ET (06:01 GMT)
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