TIDMHSW
RNS Number : 6999J
Hostelworld Group PLC
21 August 2019
Hostelworld Group plc
("Hostelworld" or the "Group")
2019 Interim Results Announcement
Roadmap for Growth progressing well
21 August 2019: Hostelworld, the global hostel-focussed online
booking platform, is pleased to announce its interim results for
the period ended 30 June 2019.
Operational & Financial Summary
-- The Group delivered revenue of EUR38.8m in H1 2019 (H1 2018:
EUR42.6m). Excluding the impact of deferred revenue(1) , Group
revenue was EUR43.2m (H1 2018: EUR46.8m)
-- Hostelworld brand gross bookings of 3.7m in H1 2019 (H1 2018:
3.8m). Group total gross bookings of 3.8m (H1 2018: 4.0m)
reflecting the continued managed decline in supporting brands
-- Net of cancellations Hostelworld brand bookings of 3.4m (H1
2018: 3.7m). Total Group bookings of 3.5m (H1 2018: 3.9m)
-- Average Booking Value ("ABV") of EUR12.8 (H1 2018: EUR12.2),
a 6% increase on H1 2018, 2% increase on a
constant currency basis
-- 7% increase in net bookings from the app (from 36% of net
bookings in H1 2018 to 43% of net bookings in H1 2019)
-- The Group delivered Adjusted EBITDA(2) of EUR8.9m in H1 2019
(H1 2018: EUR10.4m), a 15% decrease (9%
decrease when excluding the impact of deferred revenue)
-- Adjusted Earnings per Share(2) of 6.44 euro cent (H1 2018: 7.93 euro cent)
-- Strong cash flow generation with adjusted free cash
conversion of 108% (H1 2018: 131%) and adjusted free
cash flow(2) of EUR9.6m (H1 2018: EUR13.6m)
-- Interim dividend of 4.2 euro cent per share (H1 2018: 4.8
euro cent), in line with stated dividend
policy. We continue to review all options on how we return capital to shareholders
Strategic Highlights
-- 'Roadmap for Growth' strategy to invest in our core platform
is progressing well, with investment in key elements including core
search experience, payments, customer booking experience, rate
plans, 3(rd) party connectivity and supplier facing platforms
-- Strategic investment of US$3m announced in Tipi Pty Ltd
("Tipi"), an innovative hostel focussed technology company which
will complement our product offering benefiting our customers and
hostel partners
-- Strengthened management team with appointment of new Chief
Supply Officer, Chief Marketing Officer and Chief Human Resources
Officer.
Gary Morrison, Chief Executive Officer, commented:
"While we are pleased with overall progress made during H1,
particularly with regards to our 'Roadmap for Growth' strategy,
booking demand over the peak summer period has been somewhat lower
than anticipated. The first half financial performance was also
significantly impacted by higher than anticipated inflation in
performance marketing channels and the effect of the full global
roll out of the free cancellation product being included for the
whole period for the first time.
As noted, we have made good progress on our 'Roadmap for Growth'
strategy during the first half of the year, including improving the
core search experience and adding unique hostel content, in
addition to initial steps to improve our connectivity with our
hostel partners and suppliers. We have also announced a strategic
investment in Tipi, an innovative hostel focussed technology
company, which will enhance our product offering for both our
customers and hostel partners.
The market remains highly competitive and as noted in our AGM
statement, this continued into the peak summer period. Coupled with
higher than anticipated inflation in performance marketing channels
and the financial effect of increased investment in our 'Roadmap
for Growth' during the second half of the year, means that EBITDA
for the full year is likely to be below 2018.
We continue to operate in an attractive and growing market, and
I remain confident about the opportunity to capitalise on the
significant growth opportunities we have identified. I believe the
operational and strategic improvements we have put in place in the
first half, should enable us to return the business to volume
growth during 2020 and we continue to assess opportunities, both
organic and inorganic, which could enable us to accelerate that
growth."
Analyst Presentation
A presentation will be made to analysts today at 9.00am, a copy
of which will be available on our Group website
http://www.hostelworldgroup.com. If you would like to attend or
dial into the presentation, please contact Powerscourt on the
contact details provided below.
A copy of the presentation will be available on our Group
website www.hostelworldgroup.com
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
Notes
(1) Deferred revenue is the result of the rollout of our free
cancellation booking option in 2018, which was a key product
release to broaden our customer offering. EUR4.4m (H1 2018:
EUR4.2m) of revenue collected from customers will be recognised,
net of any future cancellations, once the option to cancel the
booking has passed.
(2) The Group has adopted IFRS 16 Leases from 1 January 2019, as
disclosed in note 2 to the condensed consolidated financial
statements. The Group has applied the modified retrospective
approach, and as a result it has not restated prior periods on
adoption in its financial statements. For comparative purposes
several H1 2018 comparatives have been restated in this
announcement to reflect the impact of adopting IFRS 16, in order to
give a true and fair comparative of underlying performance.
For further information please contact:
Hostelworld Group plc
Gary Morrison, Chief Executive
Officer +353 (0) 1 498 0700
TJ Kelly, Chief Financial Officer +353 (1) 1 498 0700
Powerscourt hostelworld@powerscourt-group.com
Lisa Kavanagh/ Jack Hickey +44 (0) 20 7250 1446
About Hostelworld Group
Hostelworld Group is a global hostel-focussed online booking
platform, sparking social experiences for young and independent
travellers.
Our customers are not your average tourists; they crave unique
experiences that we facilitate with the best choice of hostels
around the world offered in 19 languages across the website and 13
languages on our app of our core brand Hostelworld.
We have 20 years' experience as the hostel Online Travel Agent
("OTA") experts, and today we work with over 17,400 hostel
properties globally, in addition to 20,000 other forms of budget
accommodation.
Our customers have access to an extensive database of more than
12 million customer reviews which allows them to choose the hostel
that's right for them.
Since 1999 we've partnered with hostels worldwide, enabling them
to manage and distribute their inventory to our highly engaged and
valuable global customer base.
HOSTELWORLD GROUP PLC
INTERIM MANAGEMENT REPORT
To the members of Hostelworld Group plc
Cautionary statement
This Interim Management Report (IMR) has been prepared solely to
provide additional information to shareholders to assess the
Group's strategies and the potential for those strategies to
succeed. The IMR should not be relied on by any other party or for
any other purpose.
The IMR contains certain forward-looking statements. These
statements are made by the directors in good faith based on the
information available to them up to the time of their approval of
this report but such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
This interim management report has been prepared for the Group
as a whole and therefore gives greater emphasis to those matters
which are significant to Hostelworld Group plc and its subsidiary
undertakings when viewed as a whole.
Chief Executive's Review
Operational review
While we are pleased with overall progress made during H1,
particularly with regards to our 'Roadmap for Growth' strategy, the
softness in booking demand noted in our AGM statement continued
over the peak summer period resulting in overall bookings being
somewhat lower than anticipated. The first half financial
performance was also significantly impacted by higher than
anticipated inflation in performance marketing channels and the
effect of the full global roll out of the free cancellation product
being included for the whole period for the first time.
Strategic update
In our most recent annual report, we detailed the Group's
'Roadmap for Growth' programme which was developed in order to
capitalise on the significant growth opportunities for the business
that we have identified, and to return the Group to volume growth
during 2020. This programme will strengthen our core platform,
enhance the experience for all our customers and close the
competitive and technological deficits which we had previously
identified. As we also indicated, we continue to appraise
complementary acquisitions and partnerships that could accelerate
our growth or provide us with a unique capability to improve our
offering to our customers or hostel partners.
-- Strategic investment
We are delighted to announce today a strategic investment made
in July 2019 in an innovative hostel focussed technology company
Tipi Pty Ltd ("Tipi"), based in Sydney Australia, which provides
technology solutions to the hostel market, enabling guests to
check-in and download their digital key prior to arrival. For
hostel owners, this streamlines check-in, lowers staff overheads
and creates a mobile community to engage more effectively with
their guests. During their stay, guests can meet other people
staying at the same time, see what's on at the hostel and browse
local experiences, increasing ancillary revenue and improving guest
satisfaction scores.
Hostelworld will pay US$3m for a minority shareholding in Tipi.
This investment will enable Tipi to embark on its ambitious growth
plans over the next three years and to provide smart technology
solutions to hostels which will complement our product offering.
This solution provides a significantly enhanced customer experience
while positioning Hostelworld to play a more active and central
role in the hostel ecosystem. Existing Tipi management will
continue to develop and grow the business. The investment required
for this year will be funded out of Hostelworld's existing cash
resources. The Tipi website can be found at www.tipi.travel.
-- Enhancing the core search experience and creating unique hostel content
As we invest in our core product roadmap, we are significantly
enhancing the core search experience for our customers. Development
is largely complete on delivering a foundational platform which
optimises search results across property rankings and our Elevate
and Featured Listings products, with early test results indicating
positive conversion uplift potential. Our focus will remain on
further optimising this during the second half of the year and into
2020. We have also invested in delivering unique hostel content
across a subset of our hostel supply base, where initial tests
results have also been positive, and we will continue to rollout
this unique hostel content and other content types during the
second half of this year.
-- Improving the booking experience
We have been focusing on improving the customer booking
experience through a range of initiatives including the ability to
add and remove nights to existing bookings online. We also expect
the rollout of our improved payments platform at the end of the
year, with our first customers and hostels using this platform in
Q1 2020. Over time this platform will feature a range of additional
payment types and bank transfer methods with additional booking
currencies available shortly afterwards. This has taken longer than
previously anticipated due to the complexity of the engineering
work involved and our decision to recruit a specialist payments
expert who joined the Group in May to provide the experience and
leadership to deliver this important programme.
To enhance our customers' experience, we are in the process of
migrating our website to a progressive Web App platform. This will
improve site speed and enable a more modern app-like experience,
whilst further reducing our technical debt. We anticipate that this
migration will be largely complete by the end of the current
year.
-- Developing our supplier facing platform
We have rolled out a number of enhancements to our supplier
facing platforms in H1 2019, with additional improvements due
during the second half of the year across both our extranet and
Backpacker Online ("PMS") platforms. We are also actively pursuing
additional opportunities to strengthen our PMS position in the
industry across organic, partnership and inorganic means. We are
also actively increasing the breadth of rate plan configurations we
offer hostels and improving the connectivity to hostels that
connect to our platform via 3(rd) party platforms. We have launched
a number of new rate plan features during H1 2019 with more due
later this year, which will further strengthen our inventory
competitiveness.
-- Continued investment in our senior management team
In order to ensure continued delivery against our 'Roadmap for
Growth', we have continued to invest in our management team with a
number of significant hires during the period. In April 2019,
Fabrizio Giulio joined Hostelworld as Chief Supply Officer, having
previously worked with Expedia Group. Yale Varty has joined the
Group as Chief Marketing Officer in August 2019, having most
recently led the marketing organisation at ASOS. Jody Jordan will
join us as Chief Human Resources Officer from Kerry Group, having
previously worked at Paddy Power and Vodafone. We are also actively
recruiting for a Chief Product Officer.
With the new management team now in place, the focus during the
second half of the year will be on the continued delivery of the
Group's strategic plan and driving the operational benefits from
the investments and enhancements that we have recently made to
return the business to volume growth during 2020.
Business Model
In operating a global hostel-focussed online booking platform,
we offer a simple and comprehensive online mechanism that gives
providers of hostels and other budget accommodation a shop window
to show their accommodation to young and independent travellers. We
provide the technology solution to facilitate bookings between the
hostel and traveller, offering a high-quality booking experience
that provides us with commission based revenue. At the time of
booking, hostel travellers pay a deposit directly to us, and the
remainder of the cost of their stay directly to the hostel at the
time of their visit. The deposit equates to our revenue from the
transaction. This efficient business model has favourable working
capital attributes and strong cash conversion.
In early 2018 we rolled out a global free cancellation model to
further broaden our product offering. This booking option was
initially rolled out on a phased basis during the first six months
of the year before the full global rollout commenced in July. This
has impacted on comparative figures for H1 2019. As with the other
deposit models, at the time of booking, hostel travellers pay a
deposit directly to us, and the remainder of the cost of their stay
directly to the hostel at the time of their visit. If the hostel
traveller cancels their free cancellation booking, within a
specified period, we will refund their deposit. The introduction of
the free cancellation booking option has resulted in a portion of
gross bookings being cancelled and the deposits refunded to
customers. The free cancellation product is working well with
underlying cancellation rates remaining within our expected
range.
Summary
I believe that the operational and strategic improvements that
we have made during the first half of this year, combined with a
stronger leadership team, will set the business on a solid path to
return to volume growth during 2020. I outlined my strategy in the
'Roadmap for Growth' in November 2018 and I am pleased to report
that we are making good progress on implementing the key elements
of that strategy. Inevitably when implementing a big programme of
change management, some elements take longer to execute than
originally anticipated and whilst we are ahead of schedule in some
parts of the strategy, some of our planned improvements have taken
longer to implement. Accelerating these changes through additional
investment and management focus will be our key priority during the
second half.
I am particularly encouraged that we have also identified a
number of additional opportunities for product enhancements and
diversification beyond those originally anticipated last November.
The early indications from the improvements already made are
positive and I am confident that once we have implemented the
changes and enhancements targeted in the 'Roadmap to Growth', the
business will be significantly competitively strengthened and
well-positioned to capitalise on the growth opportunities we have
identified.
After one year at Hostelworld, I continue to see significant
opportunities for future growth beyond an OTA for hostel
accommodation. As we progress our strategy and assess the
opportunity to monetise the "other 16 hours of the day," there are
clear areas of potential opportunity such as in ancillary products
on our own booking platform and in partnership with hostels and
other businesses to market their products to a wider group of our
customers when they have arrived at their destinations.
Outlook
The market remains highly competitive and as noted in our AGM
statement, this continued into the peak summer period. Coupled with
higher than anticipated inflation in performance marketing channels
and the financial effect of increased investment in our 'Roadmap
for Growth' during the second half of the year, means that EBITDA
for the full year is likely to be below 2018.
Hostelworld continues to operate in an attractive and growing
market and remains confident about the opportunity to capitalise on
the significant growth opportunities we have identified. We believe
the operational and strategic improvements we have put in place in
the first half, should enable us to return the business to volume
growth during 2020 and we continue to assess opportunities, both
organic and inorganic, which could enable us to accelerate that
growth.
Gary Morrison
Chief Executive
20 August 2019
Financial Review
Key Performance Indicators
% Change
Constant
H1 2019 H1 2018 % Change Currency FY 2018
------------------------------ ------- ------- -------- --------- -------
Gross Bookings
Bookings - Hostelworld brand
(m) 3.66 3.80 (4%) 7.27
Bookings - supporting brands
and channels (m) 0.09 0.16 (44%) 0.28
Total Booking Volume (m) 3.75 3.96 (5%) 7.55
------------------------------- ------- ------- -------- --------- -------
Net Bookings
Net Bookings - Hostelworld
brand (m) 3.41 3.71 (8%) 6.96
Total Net Group Bookings
Volume (m) 3.50 3.87 (10%) 7.24
------------------------------- ------- ------- -------- --------- -------
Average Booking Value ("ABV")
(gross) (EUR) 12.84 12.15 6% 2% 11.89
------------------------------- ------- ------- -------- --------- -------
Revenue (EURm) 38.8 42.6 (9%) (12%) 82.1
------------------------------- ------- ------- -------- --------- -------
Deferred Free Cancellation
Revenue (EURm) 4.4 4.2 5% 2% 2.9
------------------------------- ------- ------- -------- --------- -------
Adjusted EBITDA (EURm) (1) 8.9 10.4 (15%) (17%) 22.5
------------------------------- ------- ------- -------- --------- -------
(1) H1 2018 and Financial Year 2018 Adjusted EBITDA have been
adjusted for the impact of the Group adopting IFRS 16 Leases. Refer
to Note 2 to the Condensed Consolidated Financial Statements for
further details.
The Group believes that both gross booking volume ("Gross
Bookings", "Bookings") and booking volume net of cancellations
("Net Bookings") are key performance indicators and are critical in
assessing the operational performance of the business.
The Hostelworld brand continues to operate in a highly
competitive market, which has also been combined with some recent
weaker consumer demand. The business also continues to invest in
its core platform in order to improve its flexibility and improve
the experience of our customers bringing it up to competitive
parity. As a result, the Group's gross booking volumes declined by
5% in the six months ended 30 June 2019 (2018: 2% growth) driven by
a decline in performance in our core Hostelworld brand in the
period which fell by 4% compared to the same period last year
(2018: 6% growth).
There was strong growth from net bookings generated in the
Hostelworld app which grew by 7% during the period to 43% of net
bookings (2018: 36% of net bookings). Net bookings generated from
the app and mobile web channels represented 61% of Group net
bookings (2018: 55%). The Group's booking volumes and revenue
recognition are seasonal and peak between May and August during the
summer travel period in the northern hemisphere.
The Group's core brand, Hostelworld, now represents 98% of Group
bookings compared to 96% in the six months ended 30 June 2018. The
Group has continued to deliberately focus its marketing initiatives
and technology investments on this core brand, whilst continuing
the managed decline in bookings of the Group's supporting brands
which was 44% in the six months ended 30 June 2019 (2018: 47%
decline).
In 2018 in response to customer demand, the Group rolled out a
free cancellation booking option, to further broaden our product
offering. This led to a deferral of revenue recognition, which has
had an impact on reported earnings during H1 2019 of EUR4.4m (2018:
EUR4.2m), however this has not had an impact on cash receipts. At
30 June 2019, EUR7.3m represents the total deferred revenue balance
(30 June 2018: EUR4.2m) from free cancellation bookings that has
been collected from customers and will be recognised in future
periods, net of any future cancellations, when the last
cancellation date has passed. Any cancellations that were processed
by customers up to and including 30 June 2019 have been refunded
and are not included in this deferred revenue balance.
The introduction of the free cancellation booking option has
resulted in a portion of gross bookings being cancelled and
refunded to customers. Total Group bookings, net of any
cancellations processed by 30 June 2019, have declined by 10% in H1
2019 (2018: 1% decline), with Hostelworld brand net bookings
declining by 8% (2018: 3% growth). Underlying cancellation rates
continue to perform in line with our expectations.
Group revenue decreased by 9% for the six month period ended 30
June 2019 to EUR38.8m (2018: EUR42.6m), which corresponds to a 12%
decrease on a constant currency basis. This is partially as a
result of the impact of the free cancellation booking option with
cancelled bookings increasing to 0.25m bookings (2018: 0.09m
bookings). The increase in cancellation numbers is driven by timing
of the full global rollout which was in July 2018. All of the
marketing costs in relation to these bookings have been recognised
in the six month period ended 30 June 2019.
Average Booking Value ("ABV") is the average value paid by a
customer for a gross booking. ABV increased by 6% during the period
(2018: flat), and on a constant currency basis grew by 2% for the
six months. The average commission rate in the six months ended 30
June 2019 increased to 16.0% (2018: 15.3%), primarily driven by the
effects of base commission increases in February 2018 and January
2019. These commission increases and the positive impact of
exchange rates were partially offset by the continued decline in
the number of bed nights per booking with the continued shift to
mobile bookings and a slight reduction in the underlying base price
per bed.
The Group continues to actively manage its marketing mix with
marketing investment as a percentage of revenue of 42% in the six
months ended 30 June 2019 as compared to 43% in the same period in
2018. Excluding the impact of deferred free cancellation revenue in
the period, marketing investment would be 37% of revenue (2018:
39%). This has reduced due to a planned reduction in category
advertising, offset by higher than anticipated cost inflation in
performance marketing channels, and increased cancellations in H1
2019 relative to H1 2018 due to the phased launch of the free
cancellation product in H1 2018.
Adjusted EBITDA
The Group uses Earnings before Interest, Tax, Depreciation and
Amortisation, excluding exceptional and non-cash 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 by their nature and size can make interpretation
of the underlying trends in the business more difficult. We believe
this alternative performance measure reflects the key drivers of
profitability for the Group and removes those items which do not
impact underlying trading performance.
The Group has adopted IFRS 16 Leases from 1 January 2019, as
disclosed in note 2 to the condensed consolidated financial
statements. The Group has applied the modified retrospective
approach, and as a result it has not restated prior periods on
adoption in its financial statements. For comparative purposes
Adjusted EBITDA for prior periods has been restated to reflect the
impact of adopting IFRS 16, in order to give a true and fair
comparative of underlying performance.
Financial
Restated Comparatives (EURm) H1 2018 Year 2018
-------------------------------------------------------- -------- -----------
Adjusted EBITDA- as previously reported 9.8 21.4
Impact of IFRS 16 Leases if applied retrospectively(2) 0.6 1.1
-------------------------------------------------------- -------- -----------
Adjusted EBITDA - including the impact of
IFRS 16 Leases 10.4 22.5
-------------------------------------------------------- -------- -----------
(2) Refer to Note 2 to the Condensed Consolidated Financial
Statements for further details.
Adjusted EBITDA of EUR8.9m (2018: EUR10.4m) has decreased by
EUR1.5m (14%) in the six months to 30 June 2018 and by 17% on a
constant currency basis. Adjusted EBITDA as a percentage of revenue
declined to 23% (2018: 24%). Adjusted EBITDA has been impacted by
the reduction in bookings during the period and by the rollout of
the free cancellation product, which has resulted in increased
cancellations numbers in H1 2019.
Administration expenses decreased by EUR1.8m (6%) to EUR31.4m in
the six months ended 30 June 2019. A contributory factor in this
was the refocussing of the marketing strategy away from high
profile brand advertising campaigns towards marketing activities
that focussed on core customer acquisition.
Gross staff costs (excluding share based payment expense and
before the impact of capitalised development labour) decreased from
EUR9.5m to EUR8.9m. Average headcount increased by 7% from 281 in
the six months ended 30 June 2018 to 300 in the six months ended 30
June 2019, as the Group continues to invest in a technology
development centre in Portugal which will further increase the
development capacity of the Group.
Excluding the impact of the level of development labour
capitalised in accordance with IFRS standards (2019: EUR0.5m; 2018:
EUR0.8m), share based payment expense and the impact of a bonus
accrual, staff costs increased by 2% on a constant currency basis,
reflecting the increasing headcount in the Group at a lower base
cost per employee.
Reconciliation between Operating Profit and Adjusted EBITDA:
EURm Adjusted
Adjusted Financial Reported
H1 2018 Year 2018 Reported Financial
H1 2019 (3) (3) H1 2018 Year 2018
---------------------------- ------- -------- ---------- -------- ----------
Operating profit 0.5 3.0 6.8 2.9 6.7
Depreciation 1.1 1.1 2.2 0.6 1.2
Amortisation of development
costs 0.8 0.9 1.9 0.9 1.9
Amortisation of acquired
intangible assets 5.1 5.0 10.3 5.0 10.3
Exceptional items 1.3 0.0 1.6 0.0 1.6
Share based payment expense
/ (credit) 0.1 0.4 (0.3) 0.4 (0.3)
---------------------------- ------- -------- ---------- -------- ----------
Adjusted EBITDA 8.9 10.4 22.5 9.8 21.4
---------------------------- ------- -------- ---------- -------- ----------
(3) H1 2018 and Financial Year 2018 Operating Profit and
Adjusted EBITDA have been adjusted for the impact of the Group
adopting IFRS 16. Refer to Note 2 to the Condensed Consolidated
Financial Statements for further details.
The exceptional costs for the six months ended 30 June 2019 of
EUR1.3m (2018: EURnil) were primarily restructuring and merger and
acquisition related costs.
The share based payment expense for the period reflects the
share based payment charge arising on the issuance of options in
accordance with the Group's Long Term Incentive Plan ("LTIP") and
Save as you Earn ("SAYE") plan.
Adjusted Profit after Taxation
EURm Adjusted Reported
Adjusted Financial Financial
H1 2018 Year 2018 Reported Year 2018
H1 2019 (4) (4) H1 2018
---------------------------- ------- -------- ---------- -------- ----------
Adjusted EBITDA 8.9 10.4 22.5 9.8 21.4
Depreciation (1.1) (1.1) (2.2) (0.6) (1.2)
Amortisation of development
costs (0.8) (0.9) (1.9) (0.9) (1.9)
Finance charge - Leased
Assets (0.1) (0.1) (0.2) 0.0 0.0
Corporation tax (0.8) (0.7) (0.8) (0.7) (0.8)
----------------------------- ------- -------- ---------- -------- ----------
Adjusted Profit after
Taxation 6.2 7.6 17.4 7.6 17.5
Exceptional items (1.3) 0.0 (1.5) 0.0 (1.5)
Amortisation of acquired
intangibles (5.1) (5.0) (10.3) (5.0) (10.3)
Share based payment expense
/ (credit) (0.1) (0.4) 0.3 (0.4) 0.3
Deferred taxation 6.9 (0.1) (0.2) (0.1) (0.2)
----------------------------- ------- -------- ---------- -------- ----------
Profit for the period 6.5 2.0 5.7 2.0 5.7
----------------------------- ------- -------- ---------- -------- ----------
(4) H1 2018 and Financial Year 2018 Adjusted EBITDA and Adjusted
Profit after Taxation have been adjusted for the impact of the
Group adopting IFRS 16. Refer to Note 2 to the Condensed
Consolidated Financial Statements for further details.
Adjusted Profit after Taxation ("Adjusted PAT") is an
alternative performance measure that the Group uses to calculate
the dividend payout for the year, subject to Company Law
requirements regarding distributable profits. It excludes
exceptional items, amortisation of acquired domain and technology
intangibles, net finance costs, share based payment expenses 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 PAT decreased from EUR7.6m to EUR6.1m in the six months
to 30 June 2019 reflecting the marginal impact of the reduction in
Net Bookings during the period.
Based on the weighted average number of shares in issue during
the six months ended 30 June 2019, reported Earnings per Share
("EPS") is 6.82 euro cents per share (30 June 2018: 2.14 euro
cent). Using Adjusted PAT as the measure of earnings would result
in an adjusted EPS of 6.44 euro cent per share for the year. The
corresponding adjusted EPS for 30 June 2018 calculated on the same
basis, using the weighted average number of shares in issue as at
30 June 2018 and adjusting for the impact of IFRS 16 is 7.93 euro
cent per share. Adjusted EPS is an alternative performance measure
that excludes exceptional items, amortisation of acquired domain
and technology intangibles, net finance costs, share based payment
expenses and deferred taxation which can have large impacts on the
reported result for the year, and which can make underlying trends
difficult to interpret.
Taxation
The Group's corporation tax charge of EUR0.8m (2018: EUR0.7m)
results in an effective tax rate (corporation tax as a percentage
of Adjusted EBITDA) of 8.5% (2018: 7%) and 192% of reported profit
before taxation, which is after amortisation of acquired intangible
assets of EUR5.1m and exceptional costs of EUR1.3m (2018: 24% of
reported profit before taxation of EUR2.8m, which is adjusted for
the impact of IFRS 16).
The Groups' deferred tax credit for the six months ended 30 June
2019 of EUR6.9m (2018: EUR0.1m charge) primarily relates to a group
reorganisation that is referred to in note 5 and note 14 to the
condensed consolidated financial statements.
Adjusted Free Cash flow conversion
EURm Adjusted Reported
Adjusted Financial Financial
H1 2018 Year 2018 Reported Year 2018
H1 2019 (5) (5) H1 2018
------------------------ --------- -------- ---------- -------- ----------
Adjusted EBITDA 8.9 10.4 22.5 9.8 21.4
Capitalised development
spend (0.5) (0.9) (1.8) (0.9) (1.8)
Capital expenditure (0.1) (0.2) (0.7) (0.2) (0.7)
Interest and tax paid (0.5) (0.3) (0.8) (0.3) (0.8)
Net movement in working
capital (6) 1.8 4.7 2.6 4.7 2.6
------------------------- --------- -------- ---------- -------- ----------
Adjusted Free Cash flow 9.6 13.6 21.8 13.1 20.7
------------------------- --------- -------- ---------- -------- ----------
Adjusted Free Cash flow
conversion 108% 131% 97% 133% 97%
------------------------- --------- -------- ---------- -------- ----------
(5) H1 18 and Financial Year 2018 Adjusted EBITDA and Adjusted
Free Cash Flow have been adjusted for the impact of the Group
adopting IFRS 16. Refer to Note 2 to the Condensed Consolidated
Financial Statements for further details.
(6) 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. The movement in working capital in the
first six months of 2019 was at a lower level than in the same
period in 2018 and includes the impact of a debtor related to a
group reorganisation in H1 2019. Adjusted free cash flow conversion
of 108% in 2019 (2018: 131%) includes the impact of EUR4.4m (2018:
EUR4.2m) of revenue related to free cancellation bookings that was
received but deferred. Excluding the impact of the deferral of the
revenue related to free cancellation bookings and the impact of the
timing of a debtor related to a group reorganisation, adjusted free
cash flow conversion would have been a normalised 81% (2018:
93%).
Total Cash at 30 June 2019 was EUR25.4m (30 June 2018:
EUR22.9m), of which EURnil is restricted (30 June 2018: EURnil).
There were no borrowings at 30 June 2019 (30 June 2018:
EURnil).
Foreign exchange risk
The Group's primary operating currency is the euro. The Group
also has significant sterling and US dollar cash flows. Overall on
a constant currency basis, exchange rate movements had a positive
impact on revenue and Adjusted EBITDA. However there was a partial
offsetting negative effect on marketing expenses, as the majority
of marketing investment is denominated in US dollars, and there was
a foreign exchange loss of EUR0.1m included in administration
expenses (2018: EUR0.01 gain) as referred to in note 4 to the
condensed consolidated financial statements.
During the period the average US dollar to euro exchange rate
strengthened by 7% and the average sterling to euro exchange rate
strengthened by 1% in comparison to the prior period. Restated on a
constant currency basis, ABV has increased by 2%, revenues have
decreased by 12% and Adjusted EBITDA has decreased by 17% for the
six months ended 30 June 2019. Constant currency is calculated by
applying the average exchange rates for the six months period ended
30 June 2019 to the financial results for the six months period
ended 30 June 2018 on a month by month basis. The Group's principal
policy is to match cash flows of like currencies, with excess
sterling and US dollar revenues being settled into euros on a
timely basis.
Related party transactions
Related party transactions are disclosed in note 14 to the
condensed consolidated financial statements. A group reorganisation
completed on 12 March 2019 resulting in a deferred tax asset of
EUR6.9m. There have been no other changes in the related party
transactions described in the last annual report which would have
had a material effect on the financial position or performance of
the Group.
Risks and uncertainties
The principal risks and uncertainties facing the Group remain
those disclosed in the annual report for the year ended 31 December
2018. While the nature of the principal risks and uncertainties
faced by the Group remain unchanged on the whole, external
geopolitical factors and an increasingly competitive marketplace
have changed the Group's risk profile in certain areas. Amongst the
most significant of these factors are increased competition, and
the proposed exit of the United Kingdom from membership of the
European Union (known as "Brexit").
The Brexit uncertainties in relation to the movement of people
may result in the reduction of bookings particularly into and from
the UK travel market. In addition, a decline in macroeconomic
conditions in the UK could negatively impact consumer confidence
and reduce spending in all areas including the wider travel sector.
Both of these scenarios may impact on Group revenue and
performance. However, the Group is a global business and continues
to grow its international footprint and presence across its key
markets. In the six months ended 30 June 2019, the UK as a
destination represented 6% of total group bookings (2018: 6%) and
14% of group bookings were from UK nationals (2018: 14%). Through
continued international expansion and diversification, the Group
will seek to naturally mitigate the impacts of Brexit. However the
directors will continue to assess the potential impact on the Group
of a number of Brexit scenarios and to implement any necessary
remediation steps to mitigate its impact on the Group.
The business operates in an increasingly competitive marketplace
and our relative scale and size could impact our ability to keep
pace with changes in customer behaviour and technology change. We
have seen increased competition from other online travel agents
("OTAs") during the period, which has contributed to cost inflation
in performance marketing channels. In response to this the Group
continues to invest in its core platform and is now focussed on
productively deploying resources to drive customer acquisition. A
key component of this strategy is leveraging our data assets to
ensure we understand our customers and their travel needs.
A detailed explanation of the risks and how the Group seeks to
mitigate the risks, can be found on pages 30 to 34 of the 2018
Annual Report which is available at www.hostelworldgroup.com.
Going concern
As stated in note 2 to the condensed consolidated financial
statements, the directors are satisfied that regardless of the
uncertainty surrounding Brexit scenarios the Group has sufficient
resources to continue in operation for the foreseeable future, a
period of not less than 12 months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing the condensed consolidated financial statements.
Board update
Andy McCue stepped down from his position as a Non-Executive
Director and Chairman of the Remuneration Committee, effective 31
May 2019. Carl G. Shepherd, who joined the Board as a Non-Executive
Director on 1 October 2017, has replaced Andy McCue as Senior
Independent Non-Executive Director and Chairman of the Remuneration
Committee.
Following a thorough search process, Evan Cohen was appointed as
an Independent Non-Executive Director from 14 August 2019. Evan has
also been appointed to the Audit, Remuneration and Nomination
committees. Evan is a management and strategy consultant with over
20 years' experience in the technology sector. He brings a wealth
of experience having held senior positions in several well-known
global technology and media companies, including Lyft and
Foursquare.
Dividend
The directors are pleased to declare an interim dividend of
EUR4.0m or 4.2 euro cent per share (2018: 4.8 euro cent per share)
which is in line with the Group's current dividend policy (a payout
of between 70% and 80% of full year Adjusted Profit after Tax).
This interim dividend has not been included as a liability in these
condensed consolidated financial statements. The interim dividend
is payable on 20 September 2019 to all shareholders on the Register
of Members on 30 August 2019.
In June 2019, the Group paid a final dividend of EUR8.6m or 9.0
euro cent per share in respect of the financial year ending 31
December 2018. After payment of the interim dividend for 2019, the
Group will have returned EUR60.7m to shareholders in dividends
since IPO in November 2015.
As part of our capital allocation strategy we continue to assess
opportunities, both organic and inorganic, which would enable us to
accelerate growth. We also continue to review all options on how we
return capital to shareholders.
Gary Morrison TJ Kelly
Chief Executive Officer Chief Financial Officer
20 August 2019 20 August 2019
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
(a) The condensed set of consolidated financial statements has
been prepared in accordance with IAS 34 'Interim Financial
Reporting';
(b) The interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) The interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the board
Gary Morrison TJ Kelly
Chief Executive Officer Chief Financial Officer
20 August 2019 20 August 2019
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2019
Six months ended Six months Year
30 June 2019 ended ended 31
30 June December 2018
2018
EUR'000 EUR'000 EUR'000
Notes (Unaudited) (Unaudited) (Audited)
Revenue 3 38,823 42,621 82,087
Administrative expenses 4 (31,360) (33,243) (61,939)
Depreciation and amortisation 4 (7,015) (6,518) (13,453)
Operating profit 448 2,860 6,695
Financial income 20 4 20
Financial costs (74) (31) (63)
Profit before taxation 394 2,833 6,652
Taxation 5 6,126 (789) (961)
Profit for the period attributed to the equity owners
of the parent company 6,520 2,044 5,691
----------------- ------------ ---------------
Basic earnings per share (euro cent) 6 6.82 2.14 5.95
Diluted earnings per share (euro cent) 6 6.82 2.13 5.95
----------------- ------------ ---------------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2019
Six months ended Six months ended Year
30 June 2019 30 June 2018 ended 31
December 2018
EUR'000 EUR'000 EUR'000
(Unaudited) (Unaudited) (Audited)
Profit for the period 6,520 2,044 5,691
Items that may be reclassified subsequently to profit or
loss:
Exchange differences on translation of foreign operations (1) (2) (2)
---------------- ---------------- ---------------
Total comprehensive income for the period attributable to
equity owners of the parent company 6,519 2,042 5,689
---------------- ---------------- ---------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
30 June 30 June
2019 2018 31 December 2018
EUR'000 EUR'000 EUR'000
Notes (Unaudited) (Unaudited) (Audited)
Non-current assets
Intangible assets 7 112,323 123,117 117,726
Property, plant and equipment 8 6,585 3,356 3,256
Deferred tax assets 5 7,024 278 99
125,932 126,751 121,081
Current assets
Trade and other receivables 9 5,307 4,365 2,814
Cash and cash equivalents 25,396 22,895 25,974
30,703 27,260 28,788
----------- ----------- -----------------
Total assets 156,635 154,011 149,869
----------- ----------- -----------------
Issued capital and reserves attributable to equity owners of
the parent
Share capital 10 956 956 956
Foreign currency translation reserve 15 16 16
Share based payment reserve 757 1,386 630
Retained earnings 132,091 135,591 134,650
Total equity attributable to equity holders of the parent
company 133,819 137,949 136,252
----------- ----------- -----------------
Non-current liabilities
Lease liabilities 3,776 - -
Deferred tax liabilities 227 359 262
----------- ----------- -----------------
4,003 359 262
Current liabilities
Trade and other payables 11 17,048 14,909 12,946
Lease liabilities 1,055 - -
Corporation tax 710 794 409
18,813 15,703 13,355
----------- ----------- -----------------
Total liabilities 22,816 16,062 13,617
----------- ----------- -----------------
Total equity and liabilities 156,635 154,011 149,869
----------- ----------- -----------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2019
Foreign currency
translation Share based
Share capital Retained earnings reserve payment reserve Total
Notes EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Balance at 1
January 2018 956 145,015 18 960 146,949
-------------- ------------------ ------------------ ---------------- ---------
Total
comprehensive
income for the
period - 2,044 (2) - 2,042
Dividends - (11,468) - - (11,468)
Credit to equity
for equity
settled share
based payments - - - 426 426
Balance at 30
June 2018
(unaudited) 956 135,591 16 1,386 137,949
-------------- ------------------ ------------------ ---------------- ---------
Total
comprehensive
income for the
period - 3,647 - - 3,647
Dividends - (4,588) - - (4,588)
Debit to equity
for equity
settled share
based payments - - - (756) (756)
Balance at 31
December 2018
(audited) 956 134,650 16 630 136,252
-------------- ------------------ ------------------ ---------------- ---------
Effect of initial
application of
IFRS 16 2 - (478) - - (478)
Balance at 1
January 2019 -
as restated 956 134,172 16 630 135,774
Total
comprehensive
income for the
period - 6,520 (1) - 6,519
Dividends 12 - (8,601) - - (8,601)
Credit to equity
for equity
settled share
based payments - - - 127 127
As at 30 June
2019
(unaudited) 956 132,091 15 757 133,819
-------------- ------------------ ------------------ ---------------- ---------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2019
Six months Six months Year
ended ended ended
30 June 2019 30 June 2018 31 December
2018
EUR'000 EUR'000 EUR'000
(Unaudited) (Unaudited) (Audited)
Cash flows from operating activities
Profit before tax 394 2,833 6,652
Depreciation of property, plant
and equipment 1,111 598 1,232
Amortisation of intangible assets 5,904 5,920 12,221
Financial income (20) (4) (20)
Financial expense 74 31 63
Employee equity settled share
based payment expense/ (credit) 127 440 (346)
Changes in working capital items:
Increase in trade and other payables 4,610 5,063 3,129
(Increase)/ decrease in trade
and other receivables (2,493) (399) 1,152
------------- ------------- -------------
Cash generated from operations 9,707 14,482 24,083
Interest paid (74) (31) (63)
Interest received 20 4 20
Income tax paid (453) (275) (749)
------------- ------------- -------------
Net cash from operating activities 9,200 14,180 23,291
------------- ------------- -------------
Cash flows from investing activities
Acquisition/capitalisation of
intangible assets (501) (929) (1,839)
Purchases of property, plant
and equipment (121) (180) (714)
------------- ------------- -------------
Net cash used in investing activities (622) (1,109) (2,553)
------------- ------------- -------------
Cash flows from financing activities
Repayments of obligations under
lease liabilities (555) - -
Dividends paid (8,601) (11,468) (16,056)
------------- ------------- -------------
Net cash used in financing activities (9,156) (11,468) (16,056)
------------- ------------- -------------
Net (decrease)/ increase in cash
and cash equivalents (578) 1,603 4,682
Cash and cash equivalents at
the beginning of the period 25,974 21,294 21,294
Effect of foreign exchange rate
changes - (2) (2)
------------- ------------- -------------
Cash and cash equivalents at
the end of the period 25,396 22,895 25,974
------------- ------------- -------------
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 30 JUNE 2019
1. GENERAL INFORMATION
Hostelworld Group plc, hereinafter "the Company", is a public
limited company incorporated in the United Kingdom on the 9 October
2015. The condensed consolidated financial statements of the
Company for the six months ended 30 June 2019 comprise the Company
and its subsidiaries (together referred to as "the Group"). The
condensed consolidated financial statements for the period ended 30
June 2019 are unaudited.
The information for the year ended 31 December 2018 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditors
reported on those accounts and their report was unqualified, did
not draw attention to any matters by way of emphasis and did not
contain a statement under section 498(2) or (3) of the Companies
Act 2006.
These condensed consolidated financial statements were
authorised for issue by the Board of Directors of Hostelworld Group
plc on 20 August 2019.
2. ACCOUNTING POLICIES
Basis of preparation
The annual financial statements of the Group are prepared in
accordance with IFRSs as adopted by the European Union. The
condensed consolidated financial statements included in this
half-yearly financial report has been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting',
as adopted by the European Union.
Going concern
The directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future, a
period of not less than 12 months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing the condensed consolidated financial statements.
Changes in accounting policies
Aside from the adoption of IFRS 16, which is described on the
pages that follow, since the last Annual Report there are a number
of amendments to existing accounting standards that have been
adopted. These had no material impact on the condensed consolidated
financial statements. The same accounting policies and methods of
computation are followed compared with the most recent annual
consolidated financial statements.
There are no new IFRIC interpretations that are effective for
the first time for the financial year beginning on 1 January 2019
that have had a material impact on the Group.
IFRS 16
In the current period, the Group has applied IFRS 16 Leases
which replaced IAS 17 Leases and related interpretations. IFRS 16
provides guidance on the classification, recognition and
measurement of leases. The standard has primarily affected the
accounting for the Group's operating leases relating to office
premises. The Group has applied IFRS 16 from its effective date, 1
January 2019.
Under the new standard, the distinction between operating and
finance leases is removed for lessees and almost all leases are
reflected in the statement of financial position. As a result, an
asset (the right of use of the leased item) and a financial
liability to pay rental expenses are recognised. Fixed rental
expenses are removed from the consolidated income statement and are
replaced with finance costs on the lease liability and depreciation
on the right of use asset. The only exemptions are short-term and
low-value leases. The standard introduces new estimates and
judgemental thresholds that affect the identification,
classification and measurement of lease transactions. More
extensive disclosures, both qualitative and quantitative, are also
required.
The Group's accounting policy under IFRS 16 is as follows:
For contracts where the Group is a lessee, a right of use asset
is recognised, representing the Group's right to use the underlying
asset and a lease liability is also recognised for the Group's
obligation to make lease payments during the lease term. The lease
term of the different contracts is determined as the
non-cancellable period of each of the leases considering the option
to extend and to terminate where it is reasonably certain to
exercise that option.
The right of use asset is initially measured at cost and
subsequently valued at cost less accumulated depreciation and
impairment losses. It is adjusted where a lease modification
results in a remeasurement of the lease liability. The right of use
asset is amortised on a straight line basis over the shorter of the
lease term or the estimated useful life of the underlying
asset.
The carrying value of these assets are reviewed at the end of
each reporting period to determine whether there is any indication
that the assets have suffered an impairment loss. The accounting
policy for impairment of right of use assets is detailed in the
accounting policy for "Impairment of tangible and intangible assets
other than goodwill" in the last Annual Report.
Lease liabilities are measured at the present value of the
future lease payments. The lease payments are discounted using the
average of the Group's incremental borrowing rate and rental yields
in similar economic environments. Subsequently the lease liability
is increased to reflect interest on the lease liability and reduced
for payments made. The lease liability is remeasured for lease
modifications or reassessments.
Payments associated with short-term leases are recognised on a
straight-line basis as an expense in profit or loss. Short-term
leases are leases with a lease term of 12 months or less.
Deferred tax is recognised on the temporary differences arising
between the carrying amount of the right of use asset and the lease
liability.
The Group adopted the new standard by applying the modified
retrospective approach and availed of the recognition exemption for
short-term leases. Payments associated with short-term leases are
recognised on a straight-line basis as an expense in profit or
loss. Short-term leases are leases with a lease term of 12 months
or less.
The Group has not restated the prior period on adoption, as
permitted under the specific transitional provisions in the
standard. The reclassifications and the adjustments arising from
the new leasing rules are therefore recognised in the opening
balance sheet on 1 January 2019.
On transition, the lease liability was based on the present
value of remaining lease payments and the right of use asset was an
amount equal to the lease liability adjusted for prepaid/accrued
payments. The lease payments have been discounted using the average
of the Group's incremental borrowing rate and rental yields in
similar economic environments. Given the main operating lease
commitments of the Group relate to leases of office space in
Ireland, UK and Portugal, the Eurozone rental yield was used in
calculating the discount rate. This resulted in a discount rate of
3.3% applied to the lease liabilities on 1 January 2019.
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard - the use
of a single discount rate to a portfolio of leases with reasonably
similar characteristics, the accounting for operating leases with a
remaining lease term of less than 12 months as at 1 January 2019 as
short-term leases and the use of hindsight in determining the lease
term where the contract contains options to extend or terminate the
lease. The Group has elected not to reassess whether a contract is,
or contains a lease at the date of initial application. Instead,
for contracts entered into before the transition date the group
relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.
The following reconciliation shows the difference between the
operating lease commitments as disclosed in the 2018 Annual Report
(under IAS 17) and the lease liability recognised in the
consolidated statement of financial position on 1 January 2019,
date of initial application of IFRS 16:
EUR000
Operating lease commitments disclosed as at 31
December 2018 4,502
Adjustments as a result of a different treatment
of extensions/ termination options 1,470
Discounted using average of Group's incremental
borrowing rate and Eurozone rental yields (611)
--------
Lease liability recognised as at 1 January 2019 5,361
--------
The adoption of the new standard had the following impact on the
Group's consolidated income statement and consolidated statement of
financial position from 1 January 2019 to 30 June 2019:
Consolidated Income Statement - Administrative expenses
decreased by EUR566k as the Group previously recognised rental
expenses therein. Depreciation and finance costs increased by
EUR510k and EUR89k respectively, as a result of the requirement to
capitalise a right of use asset and depreciate over the term of the
lease, and the resulting finance cost which is applied annually to
the lease liability. As a result, operating profit, Adjusted EBITDA
and Adjusted PAT (existing alternative performance measures as
defined in the Interim Management Report) are impacted by the
implementation of IFRS 16.
Total lease expenses will increase in the early years of
implementation of IFRS 16 due to the front-loading effect of
finance charges versus the straight-line rent expense under IAS 17
Leases.
Consolidated Statement of Financial Position - At 1 January
2019, the Group calculated the lease commitments outstanding and
applied the appropriate discount rate to calculate the present
value of the lease commitment which are recognised as a liability
and a right of use asset on the Group's statement of financial
position.
The change in accounting policy had the following impact on the
statement of financial position as at 1 January 2019 and 30 June
2019:
30 June 2019 01 January
2019
EUR000 EUR000
Right of use assets 3,809 4,294
Lease liabilities 4,831 5,361
The net impact on opening retained earnings of the Group on
adoption of IFRS 16 was a decrease of EUR478k as detailed
below:
EUR000
Retained earnings as at 31 December 2018 134,650
Initial application of IFRS 16 (1,067)
Release of lease incentive accrual 508
Recognition of deferred tax asset on initial
application of IFRS 16 81
-------------------
Opening retained earnings as at 01 January 2019 134,172
-------------------
Accounting estimates and judgements
In preparing these condensed consolidated financial statements,
the directors have made judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
Aside from the adoption of IFRS 16, the significant judgements
made by the directors in applying the Group's accounting policies
and the key sources of estimation uncertainty were the same as
those that applied to the consolidated financial statements as at
and for the year ended 31 December 2018.
Lease term of contracts with extension or break options
The lease term is determined as the non-cancellable term of the
lease, together with any periods covered by an option to extend the
lease if it is reasonably certain to be exercised, or any periods
covered by an option to terminate the lease (break option), if it
is reasonably certain not to be exercised. The Group has a number
of leases which contain break options and applies judgement in
evaluating whether it is reasonably certain not to exercise the
option. On commencement of a lease the directors consider all
relevant factors that create an incentive for it to exercise the
option. After the commencement date, the directors reassess the
lease term if there is a significant event or change in
circumstances that is within its control and affects its ability to
exercise (or not to exercise) the option.
Discount rate for lease liability calculation
The directors assess the discount rate to be used at the lease
commencement to calculate the present value of lease payments. The
average of the Group's incremental borrowing rate and the Eurozone
rental yield is used in calculating the discount rate. The
operating lease commitments of the Group relate to leases of office
space in Ireland, UK and Portugal. This resulted in a discount rate
of 3.3% applied to the lease liabilities recognised at the date of
initial recognition.
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 bookings worldwide, including ancillary
online advertising revenue.
The directors determine and present operating segments based on
the information that is provided internally to the Chief Executive
Officer, 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
period. 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 revenue is derived wholly from external customers and is
generated from a large number of customers, none of whom is
individually significant.
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:
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
EUR'000 EUR'000 EUR'000
(Unaudited) (Unaudited) (Audited)
Europe 22,423 25,778 49,060
Americas 7,383 7,757 15,149
Asia, Africa and Oceania 9,017 9,086 17,878
Total revenue 38,823 42,621 82,087
-------------- -------------- -------------
For the six month period ended 30 June 2019, EUR4,447k of
revenue relating to free cancellation bookings that were made has
been deferred (2018: EUR4,236k).
Disaggregation of revenue is presented as follows:
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
EUR'000 EUR'000 EUR'000
(Unaudited) (Unaudited) (Audited)
Technology and data processing
fees 37,822 41,423 79,696
Ancillary services and advertising
revenue 1,001 1,198 2,391
Total revenue 38,823 42,621 82,087
-------------- -------------- -------------
In the six months ended 30 June 2019, the Group generated 97%
(2018: 97%) of its revenues from the technology and data processing
fees that it charged to accommodation providers.
Revenue is recognised at the time the reservation is made in
respect of non-refundable commission on the basis that the Group
has met its performance obligations at the time the booking is
made. In respect of the free cancellation product, which offers the
traveller the opportunity to make a booking on a free cancellation
basis and to receive a refund of their deposit in certain
circumstances, such related revenue is not recognised until the
last cancellation date has passed as one party can withdraw from
the contract until such a date has passed. Deferred revenue is
expected to be recognised within twelve months of initial
recognition.
The Group's booking volumes and revenue recognition are seasonal
and peak between May and August during the summer travel period in
the northern hemisphere.
Advertising revenue and revenue generated from other services
are recognised over the time period when the service is
performed.
4. OPERATING EXPENSES
Profit for the period has been arrived at after charging/
(crediting) the following operating costs:
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
EUR'000 EUR'000 EUR'000
(Unaudited) (Unaudited) (Audited)
Marketing expenses 16,225 18,360 31,203
Staff costs 8,521 9,119 17,179
Credit card processing fees 1,318 1,236 2,379
Exceptional items 1,285 - 1,590
FX loss/ (gain) 112 (15) 64
Other administrative costs 3,899 4,543 9,524
------------- ------------- -------------
Total administrative expenses 31,360 33,243 61,939
------------- ------------- -------------
Depreciation of property,
plant and equipment 1,111 598 1,232
Amortisation of intangible
fixed assets 5,904 5,920 12,221
------------- ------------- -------------
Total operating expenses 38,375 39,761 75,392
------------- ------------- -------------
Administration expenses decreased by EUR1,883k to EUR31,360k in
the six months ended 30 June 2019. A contributory factor in this
was the refocussing of the marketing strategy away from high
profile brand advertising campaigns towards marketing activities
that focussed on core customer acquisition.
The exceptional costs for the six months ended 30 June 2019 of
EUR1,285k (2018: EURnil) were primarily costs relating to the
restructure of the senior management team and merger and
acquisition related costs.
Depreciation costs increased by EUR510k due to the adoption of
IFRS 16 and the associated depreciation charge for the right of use
assets recognised from 1 January 2019.
5. TAXATION
The corporation tax charge for the six month period is EUR754k
(2018: EUR684k), representing the best estimate of the average
annual effective tax rate expected for the full year, applied to
the pre-tax income of the six month period.
The deferred tax credit for the six month period of EUR6,880k
(2018: EUR105k charge) primarily relates to a timing difference
which arose from a group reorganisation that completed on 12 March
2019 in which certain assets of a group subsidiary were acquired by
Hostelworld.com Limited. The 2018 charge relates to the movement in
deferred tax assets offset by the movement in deferred tax
liabilities.
6. EARNINGS PER SHARE
Basic earnings per share is computed by dividing the net profit
for the period available to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the
period:
Six months Six months Year
ended ended ended 31
30 June 2019 30 June 2018 December
2018
(Unaudited) (Unaudited) (Audited)
Weighted average number of shares
in issue ('000s) 95,571 95,571 95,571
Profit for the period (EUR'000s) 6,520 2,044 5,691
Basic earnings euro cent per
share 6.82 2.14 5.95
------------- ------------- ----------
Diluted earnings per share is computed by dividing the net
profit for the period by the weighted average number of ordinary
shares outstanding and, when dilutive, adjusted for the effect of
all potentially ordinary shares.
Six months Six months Year
ended ended ended 31
30 June 2019 30 June 2018 December
2018
Number of Shares: (Unaudited) (Unaudited) (Audited)
Weighted average number of ordinary
shares in issue ('000s) 95,571 95,571 95,571
Effect of dilutive potential
ordinary shares:
Share options ('000s) 69 481 11
------------- ------------- ----------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share ('000s) 95,640 96,052 95,582
Diluted earnings euro cent per
share 6.82 2.13 5.95
------------- ------------- ----------
7. INTANGIBLE ASSETS
The table below shows the movements in intangible assets for the
period:
Capitalised
Domain Affiliates Development
Goodwill Names Technology Contracts Costs Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Cost
Balance at 1 January
2018 47,274 214,640 13,887 5,500 9,867 291,168
Additions - - 122 - 807 929
Balance at 30 June
2018 47,274 214,640 14,009 5,500 10,674 292,097
---------- --------- ---------- ---------- ------------ ----------
Additions - - 59 - 851 910
Balance at 31 December
2018 47,274 214,640 14,068 5,500 11,525 293,007
Additions - - - - 501 501
Balance at 30 June
2019 47,274 214,640 14,068 5,500 12,026 293,508
---------- --------- ---------- ---------- ------------ ----------
Accumulated amortisation
and impairment
Balance at 1 January
2018 (29,426) (106,453) (13,702) (5,500) (7,979) (163,060)
Charge for the period - (4,939) (53) - (928) (5,920)
Balance at 30 June
2018 (29,426) (111,392) (13,755) (5,500) (8,907) (168,980)
---------- --------- ---------- ---------- ------------ ----------
Charge for the period - (5,308) (53) - (940) (6,301)
Balance at 31 December
2018 (29,426) (116,700) (13,808) (5,500) (9,847) (175,281)
Charge for the period - (5,035) (80) - (789) (5,904)
Balance at 30 June
2019 (29,426) (121,735) (13,888) (5,500) (10,636) (181,185)
---------- --------- ---------- ---------- ------------ ----------
Carrying amount
At 30 June 2018 17,848 103,248 254 - 1,767 123,117
---------- --------- ---------- ---------- ------------ ----------
At 31 December 2018 17,848 97,940 260 - 1,678 117,726
---------- --------- ---------- ---------- ------------ ----------
At 30 June 2019 17,848 92,905 180 - 1,390 112,323
---------- --------- ---------- ---------- ------------ ----------
Additions during the period comprised of internally generated
additions of EUR501k (2018: EUR807k) and other separately acquired
additions of EURnil (2018: EUR122k). At 30 June 2019 and 30 June
2018, there were no indicators that the intangible assets of the
Group are carried at an amount higher than their recoverable
amount.
8. PROPERTY, PLANT AND EQUIPMENT
On adoption of IFRS 16 on 1 January 2019, the Group recognised
right of use assets of EUR4,294k in relation to its leased assets,
primarily being leases of office space in Ireland, UK and Portugal.
At 30 June 2019, the value of these assets was EUR3,809k.
During the six months ended 30 June 2019, the Group invested
EUR121k in additional property, plant and equipment (30 June 2018:
EUR180k).
9. TRADE AND OTHER RECEIVABLES
30 June 30 June 31 December
2019 2018 2018
EUR'000 EUR'000 EUR'000
(Unaudited) (Unaudited) (Audited)
Amounts falling due within one
year
Trade receivables 1,219 1,129 1,067
Other receivables 1,225 - -
Prepayments and accrued income 1,551 1,473 804
Value Added Tax 1,312 1,763 943
5,307 4,365 2,814
----------- ----------- ------------
The amount included in other receivables relates to cash
proceeds due to the Group on completion of the liquidation of WRI
Nominees DAC (referred to in note 14).
10. SHARE CAPITAL
Share capital as at 30 June 2019 amounted to EUR955,708 (30 June
2018: EUR955,708). There were no additional shares issued during
the six month period ending 30 June 2019.
11. TRADE AND OTHER PAYABLES
30 June 30 June 31 December
2019 2018 2018
EUR'000 EUR'000 EUR'000
(Unaudited) (Unaudited) (Audited)
Amounts falling due within one
year
Trade payables 3,685 3,077 2,361
Accruals and other payables 4,355 5,484 5,937
Deferred revenue 8,433 5,757 4,095
Payroll taxes 575 591 553
17,048 14,909 12,496
----------- ----------- ------------
At 30 June 2019, EUR7,339k deferred revenue related to free
cancellation bookings is included in deferred revenue (30 June
2018: EUR4,236k). The accruals and other payables balance at 30
June 2018 included a lease incentive accrual which was released as
part of the initial application of IFRS 16 and the balance as at 31
December 2018 was recognised as an adjustment to Retained
Earnings.
12. DIVIDENDS
Amounts recognised as distributions to equity holders in the
financial period:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
EUR'000 EUR'000 EUR'000
Final 2017 dividend of EUR0.120
per share (paid 14 June 2018) - 11,468 11,468
Interim 2018 dividend of EUR0.048
per share (paid 21 September
2018) - - 4,588
Final 2018 dividend of EUR0.09
per share (paid 5 June 2019) 8,601 - -
---------- ---------- -------------
8,601 11,468 16,056
---------- ---------- -------------
Interim dividend for the year
ended 31 December 2019 of EUR0.042
per share (2018: EUR0.048 per
share) 4,014 4,588 -
----- -----
The directors declare an interim dividend of 4.2 euro cent per
share amounting to EUR4.0m (30 June 2018: EUR4.6m) be paid to
shareholders on 20 September 2019. This dividend has not been
included as a liability in these condensed consolidated financial
statements. The interim dividend is payable to all shareholders on
the Register of Members on 30 August 2019.
13. SHARE BASED PAYMENTS
During the six months ended 30 June 2019, there were two
invitations made to executive directors and selected management to
participate in the Group's long term incentive plan ("LTIP"). On 3
April 2019, 933,995 nil cost options were granted and these options
will vest on 2 April 2022 subject to meeting performance
conditions. At 30 June 2019, 56,150 of these share options have
been forfeited leaving 877,845 still in issue. On 3 June 2019, a
further 76,204 nil cost options were granted and will vest on 2
June 2022. All of these options are still in issue as at 30 June
2019.
During the six months ended 30 June 2018, there were two
invitations made to executive directors and selected management to
participate in the Group's LTIP scheme. On 11 April 2018, 499,554
nil cost options were granted and these options will vest on 10
April 2021 subject to meeting performance conditions. At 30 June
2019, 356,628 of these share options have been forfeited leaving
142,926 still in issue. On 29 June 2018, a further 175,723 nil cost
options were granted and will vest on 28 June 2021. All of these
options are still in issue as at 30 June 2019.
On 5 December 2018, 98,520 nil cost options were granted and
will vest on 4 December 2021. All of these options are still in
issue as at 30 June 2019.
On 29 March 2017, 847,663 nil cost share options were granted to
employees as part of the LTIP scheme. 454,024 of these share
options have been forfeited leaving 393,639 still in issue at 30
June 2019. These share options will vest on 28 March 2020, subject
to meeting performance conditions.
On 5 April 2016, 928,464 nil cost share options were granted to
employees as part of a long term incentive plan. Due to vesting
conditions not being satisfied, there are no remaining outstanding
options from this award.
Details of the share options outstanding during the period are
as follows:
30 June 2019 30 June 2018 31 December
2018
No. of share No. of share No. of share
options options options
Outstanding at beginning
of period 875,957 1,324,039 1,324,039
Granted during the period 1,010,199 675,277 773,797
Forfeited during the period (121,299) (224,023) (1,221,879)
Exercised during the period - - -
Expired during the period - - -
--------------- --------------- ---------------------
Outstanding at the end
of the period 1,764,857 1,775,293 875,957
Exercisable at the end - - -
of the period
--------------- --------------- ---------------------
As at 30 June 2019, there have been 272,027 options granted to a
number of eligible employees in the Group as part of a Save as You
Earn scheme (30 June 2018: 181,208 options). As at 30 June 2019,
146,266 of these options have been cancelled (30 June 2018: 40,431
options).
14. RELATED PARTY TRANSACTIONS
As part of a group reorganisation, Hostelworld.com Limited
acquired certain assets from WRI Nominees DAC for a consideration
of EUR151m on 12 March 2019. Both of these companies are 100% owned
subsidiaries of Hostelworld Group plc. As a result of this
transaction, a timing difference arose and a deferred tax asset of
EUR6.9m was recognised in the condensed consolidated financial
statements. On the same date, WRI Nominees DAC was liquidated by
way of members' voluntary winding up.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation.
On 11 June 2018, Feargal Mooney resigned as Chief Executive
Officer and as a director of the Company and on 17 June 2018, Mari
Hurley resigned as Chief Financial Officer and resigned as director
of the Company on 10 April 2018. Details of both termination
arrangements are disclosed in the 2018 Annual Report and are
available on our corporate website at www.hostelworldgroup.com.
On 14 August 2019, Evan Cohen was appointed a director of the
Company. On 31 May 2019, Andy McCue resigned as a director of the
Company.
15. EVENTS AFTER THE REPORTING DATE
An interim dividend declaration of 4.2 euro cent per share
amounting to EUR4.0m (30 June 2018: EUR4.6m) is referred to in note
12 above.
On 21 June 2019, Hostelworld.com Limited signed an agreement to
purchase 7,645,554 shares in an Australian incorporated proprietary
company limited by shares. The purchase consideration for this
transaction was USD 3.0m. This transaction was completed on 22 July
2019 and on this date, an investment in associate was recognised in
the consolidated financial statements.
There were no other material subsequent events since the
reporting date.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFLTTIIIFIA
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