TIDMHSW
RNS Number : 8461V
Hostelworld Group PLC
12 August 2020
Hostelworld Group PLC - Interim Financial Report
For the half year ended 30 June 2020
LEI:213800OC94PF2D675H41
Hostelworld Group plc
("Hostelworld" or the "Group" or the "Company")
Interim Results 2020
H1 2020 in line with expectations; modest increase in bookings
in recent weeks in line with the easing of travel restrictions.
Accelerated delivery of Roadmap for Growth initiatives
12 August 2020: Hostelworld, a leading global OTA focused on the
hostel market, is pleased to announce its interim results for the
period ended 30 June 2020
Financial highlights:
-- Net revenue of EUR12.0m in H1 2020, a decline of 69% (H1
2019: EUR38.8m), driven by COVID-19 led travel restrictions from
late Q1
-- Total Group net bookings decline of 67% (H1 2019: -10%)
-- Net booking volume decline from 3.5m to 1.1m, with
cancellations EUR5.4m (H1 2019: EUR4.8m)
-- Net Average Booking Value EUR9.45 (H1 2019: EUR12.40),
reflecting increased cancellations which had longer lead times and
higher ABVs
-- Marketing costs in Q2 reduced to match revenue volumes. Total
H1 2020 marketing costs of EUR7.5m were 76% of net revenue
(excluding deferred revenue), an EUR8.8m reduction compared to H1
2019 (H1 2019: EUR16.2m, 37%)
-- Q2 operating costs, excluding marketing overheads, reduced by
20% to EUR5.5m, down from EUR6.9m in Q1 2020 (14% reduction
compared to EUR6.6m in Q2 2019)
-- Adjusted EBITDA loss of EUR8.3m (H1 2019: EUR8.9m profit), in
line with guidance
-- Basic loss per share of 18.90 EUR cent (H1 2019 basic
earnings per share: 6.82 EUR cent)
Balance sheet and cash flow:
-- Raised gross proceeds of EUR15.2 million ([1]) through a
non-pre-emptive placing of and direct subscription for new ordinary
shares in June 2020
-- Committed EUR7m three-year revolving credit facility secured,
undrawn as at 30 June 2020([2])
-- Closing cash position EUR32.9m (H1 2019 EUR25.4m) includes
cash on hand of EUR29.4m and a EUR3.5m short-term financing
facility
-- Customer deposits related to bookings made under the free
cancellation policy amounted to EUR3.3m (H1 2019: EUR7.3m), of
which EUR2.7m relate to bookings already cancelled
-- Adjusted free cash absorption (33%), (H1 2019 adjusted free
cash flow 108%)
-- Cash dividends for 2020 remain suspended due to COVID-19
uncertainty. In lieu of a cash dividend the Board is proposing to
issue new ordinary shares, by way of bonus issue, to shareholders
based on a value of 1.0 EUR cent per share and subject to
shareholder approval
-- It is the intention that the number of shares that a
shareholder will need to hold to qualify for each new bonus issue
share will be calculated by dividing the prevailing average share
price (in EUR cent) prior to the publication of the shareholder
circular by 1.0 EUR cent. The record date for the bonus issue will
be set out in the shareholder circular
Gary Morrison, Chief Executive Officer, commented:
"The COVID-19 pandemic has resulted in significant trading
disruption for our business and the global travel industry. From
the outset our focus has been the wellbeing of our employees, to
support our hostel partners and customers and to strengthen the
Group's balance sheet. We entered the year in a strong position,
having delivered a return to net bookings growth during Q4 2019,
however, COVID-19 drove a sharp reduction in our trading
performance. We reacted swiftly and purposefully to protect the
business and to enable us to navigate through this crisis. Our
initial efforts were focussed on cash preservation and in June we
took action to strengthen our balance sheet, via a debt facility
and an equity raise. Together these actions provide the Group with
the financial strength to operate through this crisis and
beyond.
Over the last few months we have taken the opportunity to
accelerate our Roadmap for Growth program to strengthen our core
platform, completing items planned for H2 2020 and 2021 ahead of
schedule. Consistent with our growth strategy, which builds on our
Roadmap for Growth, we also intend to broaden the catalogue of
experiences and social features we offer our customers, beyond
hostel accommodation. Given the current trading backdrop, we remain
focused on organic initiatives in the near term, until a resumption
of normal trading.
While the short-term outlook for the travel industry remains
extremely challenging, I remain confident that Hostelworld will
emerge from the COVID-19 crisis stronger than before. I would like
to take this opportunity to thank all of our employees for their
continued hard work and commitment, and our customers and
shareholders for the support they have shown through these
challenging times."
Trading update and outlook:
In recent weeks we have seen an increase in demand as travel
restrictions have eased, and we are tracking slightly ahead of our
Base Case scenario. This recovery started with very modest growth
in domestic bookings in June, and more recently has progressed to
very modest growth in domestic and short-haul bookings into Europe.
Overall, we expect the pace of recovery to mirror changes in travel
guidance in individual markets over the coming months, both
positive and negative. Elsewhere, source markets in the Americas,
Asia and Oceania continue to remain very depressed.
As the recovery has progressed, we have seen a steady reduction
in cancellation rates, and an increase in conversion rates as
consumers certainty with respect to their travel plans has
improved, compared to significantly stressed levels during Q2. This
has led to higher marketing costs as a percentage of net revenue in
the near term, which we expect to gradually normalise as normal
travel patterns resume.
On the supply side, despite significantly depressed demand
during Q2, we have seen only a modest reduction in the number of
hostels on our platform compared to year end 2019 levels. We are
also working with the hostelling industry to ensure we display
details of the additional COVID-19 policies at each hostel in a
consistent manner. Overall, we are encouraged that our travellers
are continuing to book Dorms in the majority of cases - with only a
slight shift to date in accommodation mix towards Private rooms
versus Dorm accommodation across markets.
Overall while bookings continue to trend well below normalised
patterns, and assuming a gradual improvement in the macro travel
environment, we expect the recovery to improve further in Q3 and Q4
2020, albeit net bookings will remain at significantly reduced
levels when compared to 2019. Whilst this recovery is likely to
take some time and the consumer environment will continue to be
uncertain and challenging, the Board remains confident in the
resilience and flexibility of our business model, and that we are
well positioned to execute on our strategy and build market share
as demand recovers. In parallel, the Board will continue to
evaluate internal and external opportunities that will deliver
value for shareholders, in particular the significant potential to
enhance future growth primarily through building out a broader
catalogue of experiential travel products beyond hostel
accommodation.
In light of continued market uncertainty, the Group is not in a
position to provide full year guidance until such time as the
overall impact of COVID-19 on the Group becomes clearer.
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 dial into
the presentation, please contact Powerscourt on the contact details
provided below.
For further information please contact:
Hostelworld Group plc Tel: +353 (0) 1 498 0700
Gary Morrison Chief Executive Officer
TJ Kelly Chief Financial Officer
Rudolf O'Kane Head of Commercial
Finance
Powerscourt hostelworld@powerscourt-group.com
Lisa Kavanagh/ Jack Hickey +44 (0) 20 7250 1446
About Hostelworld Group
Hostelworld Group, the global hostel-focussed online booking
platform, inspires passionate travellers to Meet The World, and
come back with life-changing stories to tell. Our customers are not
your average tourists; they crave cultural connection and unique
experiences that we make possible by providing an unbeatable
selection of hostels in unmissable locations - all in the palm of
their hand.
It is the social nature and community feel of hostels and their
environment that enable travellers to embrace journeys of
discovery, adventure and meaning. We have more than 13 million
reviews across more than 17,700 hostels in more than 179 countries,
making our brand the leading online hub for social travel. Our
website operates in 19 different languages and our mobile app in 13
languages.
Cautionary statements
This Announcement may contain, and the Company may make verbal
statements containing, "forward-looking statements" with respect to
certain of the Company's plans and its current goals and
expectations relating to its future financial condition,
performance, strategic initiatives, objectives and results.
Forward-looking statements sometimes use words such as "aim",
"anticipate", "target", "expect", "estimate", "intend", "plan",
"goal", "believe", "seek", "may", "could", "outlook" or other words
of similar meaning. By their nature, all forward-looking statements
involve risk and uncertainty because they relate to future events
and circumstances which are beyond the control of the Company. As a
result, the actual future financial condition, performance and
results of the Company may differ materially from the plans, goals
and expectations set forth in any forward-looking statements. Any
forward-looking statements made in this Announcement by or on
behalf of the Company speak only as of the date they are made.
The information contained in this Announcement is subject to
change without notice and except as required by applicable law or
regulation (including to meet the requirements of the Listing
Rules, the Euronext Dublin Listing Rules, MAR, the Financial
Services and Markets Act 2000, Euronext Dublin and/or the Central
Bank of Ireland), the Company expressly disclaims any obligation or
undertaking to publish any updates or revisions to any
forward-looking statements contained in this Announcement to
reflect any changes in the Company's expectations with regard
thereto or any changes in events, conditions or circumstances on
which any such statements are based. Statements contained in this
Announcement regarding past trends or activities should not be
taken as representation that such trends or activities will
continue in the future. You should not place undue reliance on
forward-looking statements, which speak only as of the date of this
Announcement.
No statement in this Announcement is intended to be a profit
forecast and no statement in this Announcement should be
interpreted to mean that earnings per share of the Company for the
current or future years would necessarily match or exceed the
historical published earnings per share of the Company.
Interim Management Report
To the members of Hostelworld Group plc
Cautionary statement
This Interim Management Report (IMR) has been prepared 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
The COVID-19 outbreak has generated significant trading
disruption across the whole of the travel industry. In light of the
unprecedented challenges presented by the pandemic, o ur key
priorities have been to (i) support our employees, customers and
hostel partners; (ii) increase our liquidity and; (iii) progress,
where possible, our Roadmap for Growth. While the short-term
outlook for the travel industry still remains challenging and
uncertain, I remain confident that Hostelworld will emerge from the
COVID-19 crisis stronger than before and be able to seize market
opportunities when normal travel patterns resume.
COVID-19 update
We entered the year in a strong position having delivered a
return to net bookings growth during the final quarter of 2019,
ahead of market expectations. The impact of COVID-19 has, however,
driven a sharp reduction in trading performance in H1 2020. The
Group delivered a H1 2020 EBITDA loss of EUR8.3 million, within the
guidance range provided of EUR8 million to EUR9 million (H1 2019
EBITDA: EUR8.9 million).
-- Variable marketing reduced immediately to match booking
demand, which will deliver an expected annualised saving of
EUR21m([3])
-- Staff costs were reduced, across all locations, from April
onwards. This included salary deferrals, reduced working hours,
short-term lay-offs and redundancies, resulting in a 23% reduction
in wages and salaries, annualised versus Q1 2020(1)
-- Deferral of a proportion of the Board, Executive and Senior
Management salaries for 2020
-- Discretionary operating costs reduced to a minimum, with only
those costs associated with the delivery of the Group's future
strategy retained; this is expected to deliver a 29% reduction in
other operating costs, annualised, versus Q1 2020 (1)
-- We accessed government support, where available, including
job retention schemes in the UK and Ireland and the warehousing of
Irish employer taxes
-- We offered customers a range of refund options, including
credits incremental to the original value of the booking. As at 30
June 2020, total customer deposits relating to bookings made under
the free cancellation policy amounted to EUR3.3 million, of which
EUR2.7 million relate to bookings already cancelled
-- Given current trading, the Group's focus on cash
conservation, and given the uncertainty that remains over the full
impact of COVID-19, the Board announced on 24 June, the suspension
of a cash dividend under its current policy in respect of the 2020
financial year
As we progressed through the second quarter, Hostelworld's
liquidity remained strong, however, given the uncertainty caused by
COVID-19, we felt it prudent to secure additional sources of
funding to materially strengthen the Group's balance sheet
position.
On the 25(th) June 2020, the Group completed a placing of
19,114,155 new ordinary shares, raising gross proceeds of EUR15.2
million through an accelerated book build. The placing share price
of 79.68 cent represented a discount of 7.1 per cent. to the
closing share price of 85.78 cent on 24(th) June 2020. Further
liquidity was raised through a EUR7 million three-year revolving
credit facility and a short-term EUR3.5 million invoice financing
facility which will be used to discharge a limited number of large
partner invoices. As at 30 June our cash position remains strong
with EUR32.9m of cash on hand (excluding the benefit of EUR3.5m
debt-financing, this reduces to EUR29.4m net cash). This additional
liquidity will enable the Group to emerge in a materially stronger
position as travel restrictions start to ease and accelerate growth
as demand returns.
Strategy & growth
In November 2018 I announced our Roadmap for Growth strategy to
strengthen our core business and return the business to growth over
the following two years. At that time, we anticipated that the
benefits of the Roadmap for Growth would result in a return to
bookings growth during 2020, so it was particularly pleasing that
this was achieved in Q4'19.
Since our full year results in March 2020, we have taken the
opportunity to accelerate the deployment of the residual items
planned for the balance of 2020, together with some additional
items we had planned for 2021. As of the end of June we have
delivered a number of significant core platform enhancements
designed to improve our marketing capabilities, user experience and
inventory competitiveness. These improvements include:
consolidating our tracking, attribution and bidding tools within
Google's product suite to optimise our marketing spend;
transitioning our legacy website to a progressive web app, enabling
a significantly faster user experience; and launching PayNow, which
allows travellers to pay upfront for non-refundable bookings with
an option to pay via Google pay or Apple pay, expanding the number
of booking options available to our customers. Taken collectively,
I am confident that our core platform is stronger than when we
entered this crisis, which will allow us to compete more
effectively as normal travel patterns resume.
In addition to updating on our core Roadmap for Growth program
in March 2020, I also detailed our three-year growth strategy,
which would deliver growth by providing a broader catalogue of
experiences beyond hostel accommodation to our customer base,
coupled with the addition of social features to enable our
customers to explore the world together with other like-minded
travellers. Since March we have continued to make progress on this
strategy, albeit that we remain focused on organic initiatives in
the near term until we return to normal trading levels. I will
update on our progress versus our three-year growth strategy in
more detail at our FY'20 results early next year.
Dividend
As previously communicated, the Group has suspended the payment
of cash dividends for the foreseeable future in light of the
current uncertainty due to COVID-19. Consequently, the Board is
proposing to issue new ordinary shares by way of a bonus issue to
shareholders, in lieu of a cash dividend, equating to 1.0 EUR cent
per share and subject to shareholder approval at a general meeting
which the Group anticipates will take place before 30 September
2020. Thereafter the payment of cash dividends will be subject to
the Group generating adjusted profit after tax, the Group's cash
position and any restrictions in the Group's banking
facilities.
Gary Morrison
Chief Executive
11 August 2020
Financial Review
Highlights:
-- Hostelworld brand net bookings decline of 67% (H1 2019: -8%);
total Group net bookings decline of 67% (H1 2019: -10%)
-- Net Average Booking Value ("ABV") of EUR9.45, a 24% decline
versus H1 2019 (EUR12.40)
-- Revenue of EUR12.0m, a 69% decline compared to H1 2019 (H1
2019: -9%)
-- Total marketing spend of EUR7.5m, a 54% reduction on H1 2019
(H1 2019: EUR16.2m)
-- Total operating costs of EUR30.7m, a 20% reduction on H1 2019
(H1 2019: EUR38.4m)
-- Exceptional items totalled EUR3.0m, (H1 2019: EUR1.3m)
-- Adjusted EBITDA loss of EUR8.3m, (H1 2019: EUR8.9m
profit)
-- Adjusted free cash flow absorption of (33%) (H1 2019:
108%)
-- Basic loss per share of 18.90 EUR cent (H1 2019: basic
earnings per share 6.82 EUR cent)
The Group uses Alternative Performance Measures ('APMs') which
are non-IFRS measures to monitor the performance of its operations
and of the Group as a whole. These APMs along with their
definitions are provided in the Appendix to the Interim Financial
Report which form part of the Interim Management Report.
Revenue and operating (loss):
Revenue for the period was EUR12.0m a decline of 69% compared to
H1 2019, reflecting the detrimental impact COVID-19 has had on the
travel and leisure industry.
Group Operating Loss declined by EUR19.1m, to a loss of
(EUR18.6m) as revenues declined significantly from mid-March
onwards as travel restrictions increased globally. Adjusted EBITDA
Loss of (EUR8.3m), a decline of EUR17.0m from H1 2019. Adjusted
EBITDA Margin was -68% compared to 23% in H1 2019.
Bookings and revenue
Despite a positive start to the year, following a return to net
bookings growth during Q4'19, bookings significantly declined in
late Q1 2020 as extensive travel restrictions were put in place in
response to COVID-19.
The Group's net booking volumes declined by 67% in H1 2020 (H1
2019: 10% decline). Net Average Booking Value ("ABV"), the average
value paid by a customer for a net booking, declined by 24% during
the first six month of the year (H1 2019: 3% growth) primarily
reflecting increased cancellations with longer lead times and
higher ABV plus the impact of reduced bed prices across all
markets.
The global disruption of the travel industry caused by the
COVID-19 pandemic, has resulted in a significantly increased
cancellation rate. In the context of a net booking decline of 67%
in H1 2020, (from 3.5 million to 1.1 million), H1 2020
cancellations were (EUR5.4m) compared to H1 2019: (EUR4.8m), as
customers who had booked under the free cancellation policy had
their travel plans suspended.
At 30 June 2020, we held EUR3.3m of customer deposits relating
to bookings made under the free cancellation policy (H1 2019:
EUR7.3m), of this EUR2.7m relates to bookings already cancelled. We
recognised EUR2.2m of previously deferred revenue in H1 2020, (H1
2019: (EUR4.4m). Revenues for the period, net of cancellations, of
EUR12.0m represents a 69% decline versus the same time last year
(H1 2019: EUR38.8m). Throughout the pandemic the Group has
proactively managed marketing costs, matching marketing spend to
sales volumes. Total marketing spend was EUR7.5m in H1 2020 (H1
2019: EUR16.2m).
In addition, the Group also took significant and immediate
action across all areas of spend, both fixed and variable. These
measures resulted in a EUR7.7m reduction in total operating costs
to EUR30.7m in H1 2020 compared to the same period last year (H1
2019: EUR38.4m). Administration expenses, excluding the impact of
exceptional cost items, were EUR20.7m, a 31% reduction when
compared to H1 2019 (H1 2019: EUR30.1m).
Since the end of Q1 we have taken a number of actions to reduce
staff costs, including the implementation of a redundancy
programme, reducing working hours on those teams that are at
reduced capacity and accessing the Irish and UK Government wage
subsidy schemes. These actions have resulted in a reduction in
staff costs from EUR4.6m in Q1 2020 to EUR3.8m Q2 2020.
Exceptional items
Exceptional items are identified due to their nature or
materiality to help the reader form a better view of overall and
adjusted trading. The Group incurred EUR3.0m of exceptional cost
items in H1 2020, including costs associated with a group-wide
staff restructuring, costs associated with the realignment of our
Product and Technology teams and merger and acquisition related
costs (H1 2019: EUR1.3m).
Share based payment
The share-based payment expense of EUR0.3m (H1 2019: EUR0.1m)
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. The charge includes
the reversal of benefits accrued for options which have been
forfeited during the year and for the 2017 plan, which is now
unlikely to vest in full.
Earnings per share
Basic loss per share for the Group was (18.90) EUR cent (H1 2019
basic earnings per share: 6.82 EUR cent). This decline was driven
by a EUR24.6m decrease in the Group's profits for the period.
Adjusted loss per share, after the exceptional items described
above, was 11.1 EUR cent per share (H1 2019 earnings per share: 6.4
EUR cent per share). The weighted average number of shares in the
period was 95.7m and the total number of shares issued at the
balance sheet date was 114.7m.
Interest
The Group incurred EUR0.1m of finance costs in H1 2020, relating
to leased assets (H1 2019: EUR0.1m).
Net debt and financing
As at 30 June, the Group had secured a EUR3.5m short-term
invoice financing facility. The Group has also agreed a EUR7m
revolving credit facility, as at 30 June 2020, this facility was
not drawn down. The Group has agreed revised covenant terms with
AIB on a rental guarantee for the Central Park office, Dublin, the
Group's headquarters where a minimum EBITDA covenant was waived and
there was reduction in minimum net assets from EUR100m to EUR67m.
As at 30 June, the Group was not in breach of any covenants.
Taxation
The Group corporation tax credit of EUR0.3m (2019: EUR0.8m
charge) is accrued based on the Group's outlook on the full year
results. The Group has taken the estimated impact of COVID-19 on
the full year performance into consideration in determining the
effective tax rate for the half year ended 30 June 2020.
The Group has availed of the Irish Revenue tax warehousing
scheme and deferred payment on all Irish employer taxes to 30 June
2020. We continue to monitor and comply with the appropriate
Revenue guidelines applicable to this scheme.
Adjusted free cash flow conversion
The decline in adjusted free cash (absorption) / flow conversion
from 108% in H1 2019 to 33% in H1 2020 reflects the impact of the
losses made in H1 2020. The adjusted EBITDA loss made in the period
has resulted in a Free Cash outflow of EUR2.8m compared to an
inflow of EUR9.6m in H1 2019, with the net benefit of a EUR9.6m
positive working capital inflow partly offset by a EUR1.8m
exceptional cash outflow. The positive working capital movement of
EUR9.6m includes a EUR2.7m decrease in debtors and a EUR7.0m
increase in creditors. The decline in debtors is due to the receipt
of a debtor in relation to a reorganisation in 2019 and due to
lower VAT receipts as a result of a decline in revenue and a
reduction in operating costs. The EUR7.0m increase in creditors due
to cash conservation measures taken including the warehousing of
Irish employer taxes. Total cash at 30 June 2020 was EUR32.9m (H1
2019: EUR25.4m), of which EUR3.3m are customer deposits related to
bookings made under the free cancellation policy (H1 2019: EUR7.3m)
and EUR3.5m relating to a short-term invoice financing facility
(2019: EURnil). There were no other borrowings at 30 June 2020
(2019: EURnil).
Dividend
As announced on 24 June 2020, the Board does not expect to pay a
cash dividend under its current policy in respect of the 2020
financial year. Thereafter payment of cash dividends will be
subject to the Group generating adjusted profit after tax, the
Group's cash position and any restrictions in the Group's banking
facilities.
Consequently, the Board is proposing to issue new ordinary
shares by way of a bonus issue to shareholders, in lieu of a cash
dividend, equating to 1.0 EUR cent per share and subject to
shareholder approval at a general meeting which the Group
anticipates will take place before 30 September 2020.
Related party transactions
Related party transactions are disclosed in note 15 to the
condensed group financial statements.
Principle risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on future Group performance and could
cause actual results to differ materially from expected and
historical results. While the Board considers the risks and
uncertainties described in detail in the Annual Report and
Financial Statements for the year ended 31 December 2019, issued on
04 March 2020, to remain applicable, the Board has also considered
an additional risk factor, relating to the financial and
operational impacts associated with COVID-19, to be applicable in
the second half of the year. A description of the risks and
uncertainties, including the risks associated with COVID-19, are
set out on the next page.
Gary Morrison TJ Kelly
Chief Executive Officer Chief Financial Officer
11 August 2020 11 August 2020
Principle risks and uncertainties
The principal risks and uncertainties faced by the Group are
reported annually within Annual Report and Financial Statements for
the year ended 31 December 2019, issued on 04 March 2020, and are
summarised below. In light of the COVID-19 pandemic the Group has
considered the impact of COVID-19 on the business and reassessed
risk factors accordingly.
Within emerging risks, we have considered the risk factors
associated with Going Concern and Capital Structure which are
included in our risk register but were not disclosed in the Annual
Report at 31 December 2019. Since that date the materiality of
these risks have changed in light of COVID-19 and resultant changes
to the business in H1 2020.
Material risks
-- Macro-economic conditions
-- Summary: Perceived or actual economic conditions, including
slowing or negative economic growth, rising unemployment rates,
weakening currencies, higher taxes or tariffs could impair customer
spending and adversely affect travel demand. In addition, events
beyond our control such as unusual or extreme weather, travel
related health concerns including pandemics and epidemics or
travel-related accidents can disrupt travel and result in declines
in travel demand.
i. Impact COVID-19: Given the recent COVID-19 pandemic,
management have had to mitigate against the risk and through taking
necessary actions to conserve cash. Cash conservation measures
include v endor management [negotiation of terms and bases of
engagement; review of internal and external resources [payroll /
contractors; review of dividend policy and withdrawal of dividend
if required; review of customer refund policies; review of direct
marketing spend; and s ourcing of alternate forms of debt and
equity.
-- Impact of terrorism threat on leisure travel
-- Summary: The threat of terrorist attacks in cities and on
flights may reduce the appetite of the leisure traveller to certain
geographies, resulting in declining revenues.
-- No significant changes from our assessment made at 31 December 2019.
-- Competition
-- Summary: The risks posed by competition in areas of supply,
customers and technology could adversely impact our market share
and future growth of the business.
-- No significant changes from our assessment made at 31 December 2019.
-- Search Engine Algorithms
-- Summary: We rely significantly on practices such as Search
Engine Optimisation ("SEO") and Search Engine Marketing ("SEM") to
improve our visibility in relevant search results. Search Engines
frequently update and change the logic that determines the
placement and display of results. There is a risk of l oss of
organic free traffic being supplemented by lower margin paid
bookings.
-- No significant changes from our assessment made at 31 December 2019.
-- Brand
-- Summary: Negative publicity could impact brand perception and
consumer loyalty and ultimately revenue.
-- COVID-19 impact: There is a risk that our brand could be
impacted through measures we have taken through COVID-19, including
our refund policy. Our brand portfolio is managed through social
media channels and customer service team. There is a Crisis
Management Policy in place which includes appropriate escalation
where there is a risk of brand damage. Our Exceptional Refund
Policy details COVID-19 refunds which are issued on a
case-by-case.
-- Data Security
-- Summary: Risk of cyber security related attack or disruption,
including by criminals, hacktivists or foreign governments on our
systems or those of third-party suppliers.
-- COVID-19 impact: The shift to remote working during COVID-19
(beginning 12 March 2020) changed the risk profile of certain data
processing activities and gives rise to ongoing data security
challenges.
-- As we plan for a level of return of colleagues to our
offices, the COVID-19 Return to Work Protocol (Ireland) and Working
Safely During Coronavirus Guidelines (UK) require us to capture
from colleagues and office visitors, new categories of sensitive
personal health data that we would not have obtained before. The
GDPR places significant data security and regulatory compliance
obligations on us when processing such data.
-- We manage these risks through level 1 PCI compliance with the
guidelines of the payment card industry and preparing to comply
with certain aspects of Payment Services Directive 2 (PSD2) in 2021
as it relates to customer payment - customer authentication
security measures.
-- We have in place a Comprehensive privacy compliance programme
to align with our on-going obligations under the GDPR
compliance.
-- We have r eviewed the impact on servers of increased remote
access loads with teams working from home.
-- We have issued g uidance to all colleagues during COVID-19
regarding the personal data and data security implications of the
pandemic and new remote working.
-- Regulation
-- Summary: The global nature of our business means we are
exposed to issues regarding competition, licensing of local
accommodation, language usage, web-based trading, consumer
compliance, tax, intellectual property, trademarks, data security
and commercial disputes in multiple jurisdictions.
-- COVID-19 impact: COVID-19 has led to increased focus by
consumer rights regulators on the online sales practices of tourism
and travel focussed companies and may have an impact on the Group's
brand if the Group's sales practices were investigated and assessed
to be non-compliant.
-- COVID-19 has heightened our obligations under employment and
health and safety laws to protect the safety, health and welfare of
colleagues in the workplace.
-- The GDPR imposes particular compliance obligations with
respect to our COVID-19 response measures with risk of fines and
other enforcement mechanisms being imposed by a data protection
authority.
-- We have responded to these evolving risks by monitoring the
regulations and evolving landscape closely. In line with guidance
from the Irish and UK governments, we have developed a robust
COVID-19 Response Plan including adopting protocols around
returning colleagues back to the office environment.
-- Tax
-- Summary: Risk relating to the identification and evaluation
of tax legislative changes and impact on the Group. Recommendations
made by the OECD in relation to Base Erosion and Profits Shifting
("BEPS") may result in additional material tax being suffered by
the Group or additional reporting and disclosure obligations. The
group is following an action plan to ensure BEPs compliance.
-- Business Continuity
-- Summary: Failure in our IT systems or those on which we rely
such as third party hosted services could disrupt availability of
our booking engines and payments platforms, or availability of
administrative services at our office locations, with an adverse
impact to our customer service.
-- COVID-19 impact: The outbreak of COVID-19 led to substantial
business and operational disruptions across the Group and resulted
in Hostelworld and our third-party suppliers seeking to suspend or
be excused from certain contractual obligations. We updated our
standard contractual terms in early 2020 to provide more robust and
comprehensive contractual provisions regarding force majeure
(covering epidemics/ pandemics) and BCP (requiring suppliers to
implement the provisions of our BCP at any time.
-- As Part of COVID-19 BCP invocation all employees have been
working from home via Hostelworld secured endpoint devices that
were configured and rolled out in 2019. All teams had tested access
and functionality and only small adjustment was needed to have all
teams operational very quickly. All laptops are encrypted and
protected with anti-virus and anti-malware software .
-- People
-- Summary: The Group is dependent on ability to attract, retain
and develop creative, committed and skilled employees so as to
achieve its strategic objectives.
-- COVID-19 impact: The Group operates from five global offices,
which provides flexibility for location of key talent, thereby
opening a larger talent pool to select from. Through COVID-19 there
is a move to increased remote working which further enhances
this.
-- Brexit
-- Summary: The Group is exposed to Brexit-related risks and
uncertainties in relation to its continued impact on global markets
and currency exchange rate fluctuations. Developments to
international laws and regulations continue to be closely monitored
as Brexit proceeds. The Group's multinational structure with Head
Office in Dublin provides some natural mitigation to the potential
impact.
Emerging risks
-- Going Concern
-- Summary: Risk that the Group will not be able to continue in
operation and meet its liabilities as they fall due and that the
company will not be able to source additional financing to remain
viable. Risk that the travel sector will not return to trading
volumes in line with expectations. Given that trading volumes are
impacted, there is a risk that intangible assets may need to be
impaired as cashflows don't support their current carrying
values.
-- Management response: Robust assessment by Directors of
principal risks facing group including those that threaten its
business model, future performance, solvency or liquidity. Focus on
working capital management, cash generation and managing supplier
and customer relationships. Review of all P&L, cashflow and
balance sheet forecasting over short and medium term, including
robust review of assumptions therein, with active accountability
for performance established. Key metrics and reporting reviewed
regularly in management accounts and at management meetings.
-- Capital Structure
-- Summary: The Group has reviewed its capital structure and
strengthened its capital base with two landmark transactions in
June 2020 - an Equity Placing and Debt Raising. Equity Placing
leads to higher scrutiny from shareholders both participating and
non-participating. Debt creates repayment obligations and covenants
and requires constant monitoring of HWG leverage and liquidity.
-- Management response: We have corporate finance advisers
regularly consulted to discuss optimal capital structure, we have
adopted prudent forecasting of cash resources and we closely
monitor of financial obligations created by debt raising.
Our other emerging risks for payment processor, climate change
and mergers and acquisitions have not materially changed from our
assessment made at 31 December 2019.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
1. The condensed set of group financial statements has been
prepared in accordance with IAS 34 'Interim Financial
Reporting';
2. 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
3. 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
11 August 2020 11 August 2020
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2020
Six months Six months Year
ended ended ended
30 June 30 June 31
2020 2019 December
2019
EUR'000 EUR'000 EUR'000
------ ------------ ------------ ----------
Notes (Unaudited) (Unaudited) (Audited)
------ ------------ ------------ ----------
Revenue 3 12,034 38,823 80,672
------ ------------ ------------ ----------
Administrative expenses 4 (23,670) (31,360) (63,434)
------ ------------ ------------ ----------
Depreciation and amortisation 4 (7,001) (7,015) (13,946)
------ ------------ ------------ ----------
Operating (loss) / profit (18,637) 448 3,292
------ ------------ ------------ ----------
Financial income 8 20 59
------ ------------ ------------ ----------
Financial costs (111) (74) (224)
------ ------------ ------------ ----------
Share of result of associate (100) - (116)
------ ------------ ------------ ----------
(Loss) / profit before
taxation (18,840) 394 3,011
------ ------------ ------------ ----------
Taxation 5 762 6,126 5,383
------ ------------ ------------ ----------
(Loss) / profit for the
period attributed to the
equity owners of the parent
company (18,078) 6,520 8,394
------ ------------ ------------ ----------
Basic and diluted (loss)
/ earnings per share (euro
cent) 6 (18.90) 6.82 8.78
------ ------------ ------------ ----------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2020
Six months ended Six months ended Year
30 June 2020 30 June 2019 ended 31
December 2019
EUR'000 EUR'000 EUR'000
----------------- ----------------- ---------------
(Unaudited) (Unaudited) (Audited)
----------------- ----------------- ---------------
(Loss) / profit for the period (18,078) 6,520 8,394
----------------- ----------------- ---------------
Items that may be reclassified subsequently to profit or
loss:
----------------- ----------------- ---------------
Exchange differences on translation of foreign operations - (1) (1)
----------------- ----------------- ---------------
Total comprehensive (loss) / income for the period
attributable to equity owners of the parent
company (18,078) 6,519 8,393
----------------- ----------------- ---------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
30 June 30 June 31 December 2019
2020 2019
EUR'000 EUR'000 EUR'000
------ ------------ --------------- -----------------
Notes (Unaudited) (Unaudited) (Audited)
------ ------------ --------------- -----------------
Non-current assets
------ ------------ --------------- -----------------
Intangible assets 7 105,626 112,323 109,120
------ ------------ --------------- -----------------
Property, plant and equipment 8 5,703 6,585 5,353
------ ------------ --------------- -----------------
Deferred tax assets 7,162 7,024 6,727
------ ------------ --------------- -----------------
Investment in associate 2,623 - 2,723
------ ------------ --------------- -----------------
121,114 125,932 123,923
------ ------------ --------------- -----------------
Current assets
------ ------------ --------------- -----------------
Trade and other receivables 9 2,306 5,307 4,980
------ ------------ --------------- -----------------
Cash and cash equivalents 32,908 25,396 19,365
------ ------------ --------------- -----------------
Corporation tax 116 - -
------ ------------ --------------- -----------------
35,330 30,703 24,345
------ ------------ --------------- -----------------
Total assets 156,444 156,635 148,268
------ ------------ --------------- -----------------
Issued capital and reserves attributable to equity
owners of the parent
------ ------------ --------------- -----------------
Share capital 10 1,147 956 956
------ ------------ --------------- -----------------
Share Premium 10 14,344 - -
------ ------------ --------------- -----------------
Foreign currency translation reserve 15 15 15
------ ------------ --------------- -----------------
Share based payment reserve 1,091 757 788
------ ------------ --------------- -----------------
Retained earnings 111,935 132,091 130,013
------ ------------ --------------- -----------------
Total equity attributable to equity holders of the
parent company 128,532 133,819 131,772
------ ------------ --------------- -----------------
Non-current liabilities
------ ------------ --------------- -----------------
Lease Liabilities 3,571 3,776 3,422
------ ------------ --------------- -----------------
Deferred tax liabilities 112 227 144
------ ------------ --------------- -----------------
Deferred Consideration 882 - 873
------ ------------ --------------- -----------------
4,565 4,003 4,439
------ ------------ --------------- -----------------
Current liabilities
------ ------------ --------------- -----------------
Trade and other payables 11 18,046 17,048 11,074
------ ------------ --------------- -----------------
Borrowings 12 3,454 - -
------ ------------ --------------- -----------------
Lease liabilities 1,847 1,055 869
------ ------------ --------------- -----------------
Corporation tax - 710 114
------ ------------ --------------- -----------------
23,347 18,813 12,057
------ ------------ --------------- -----------------
Total liabilities 27,912 22,816 16,496
------ ------------ --------------- -----------------
Total equity and liabilities 156,444 156,635 148,268
------ ------------ --------------- -----------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2020
Share capital Foreign Share based Retained Total
currency payment earnings
Share Premium translation reserve
Reserve
Notes EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------ -------------- --------------- --------------- --------------- --------------- ---------
Balance at 31
December 2018
(audited) 956 - 16 630 134,650 136,252
------ -------------- --------------- --------------- --------------- --------------- ---------
Effect of
initial
application
of IFRS 16 - (416) (416)
------ -------------- --------------- --------------- --------------- --------------- ---------
Balance at 1
January 2019 956 - 16 630 134,234 135,836
------ -------------- --------------- --------------- --------------- --------------- ---------
Total
comprehensive
income for
the period - - (1) - 8,394 8,393
------ -------------- --------------- --------------- --------------- --------------- ---------
Dividends - - - - (12,615) (12,615)
------ -------------- --------------- --------------- --------------- --------------- ---------
Credit to
equity for
equity
settled share
based
payments - - - 158 - 158
------ -------------- --------------- --------------- --------------- --------------- ---------
Balance at 31
December 2019
(audited) 956 - 15 788 130,013 131,772
------ -------------- --------------- --------------- --------------- --------------- ---------
Total
comprehensive
loss for the
period - - - - (18,078) (18,078)
------ -------------- --------------- --------------- --------------- --------------- ---------
Issue of
ordinary
shares for
cash 10 191 15,042 - - - 15,233
------ -------------- --------------- --------------- --------------- --------------- ---------
Share issue
cost 10 - (698) - - - (698)
------ -------------- --------------- --------------- --------------- --------------- ---------
Credit to
equity for
equity
settled
share-based
payments - - - 303 - 303
------ -------------- --------------- --------------- --------------- --------------- ---------
As at 30 June
2020
(unaudited) 1,147 14,344 15 1,091 111,935 128,532
------ -------------- --------------- --------------- --------------- --------------- ---------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2020
Year
Six months Six months ended ended
ended 30 June 2019 31 December 2019
Notes 30 June 2020
EUR'000 EUR'000 EUR'000
-------- --------------- ------------------- -------------------
(Unaudited) (Unaudited) (Audited)
-------- --------------- ------------------- -------------------
Cash flows from operating activities
-------- --------------- ------------------- -------------------
(Loss)/profit before taxation (18,840) 394 3,011
-------- --------------- ------------------- -------------------
Depreciation of property, plant and equipment 4 1,301 1,111 2,425
-------- --------------- ------------------- -------------------
Amortisation of intangible assets 4 5,700 5,904 11,521
-------- --------------- ------------------- -------------------
Share of result of associate 100 - 116
-------- --------------- ------------------- -------------------
Financial income (8) (20) (59)
-------- --------------- ------------------- -------------------
Financial expense 111 74 224
-------- --------------- ------------------- -------------------
Loss on disposal of property, plant and 11 - -
equipment
-------- --------------- ------------------- -------------------
Employee equity settled share-based payment
expense 303 127 156
-------- --------------- ------------------- -------------------
Changes in working capital items:
-------- --------------- ------------------- -------------------
Increase / (decrease) in trade and other
payables 6,972 4,610 (2,252)
-------- --------------- ------------------- -------------------
Decrease / (increase) in trade and other
receivables 2,674 (2,493) (2,166)
-------- --------------- ------------------- -------------------
Cash (used by) / generated from operations (1,676) 9,707 12,976
-------- --------------- ------------------- -------------------
Interest paid (111) (74) (224)
-------- --------------- ------------------- -------------------
Interest received 8 20 59
-------- --------------- ------------------- -------------------
Income tax received / (paid) 64 (453) (1,516)
-------- --------------- ------------------- -------------------
Net cash (used by) / generated from operating
activities (1,715) 9,200 11,295
-------- --------------- ------------------- -------------------
Cash flows from investing activities
-------- --------------- ------------------- -------------------
Acquisition/capitalisation of intangible assets 7 (2,206) (501) (2,915)
-------- --------------- ------------------- -------------------
Purchases of property, plant and equipment 8 (59) (121) (190)
-------- --------------- ------------------- -------------------
Acquisition of investment in associate 9 - (1,075)
-------- --------------- ------------------- -------------------
Net cash used in investing activities (2,256) (622) (4,180)
-------- --------------- ------------------- -------------------
Cash flows from financing activities
-------- --------------- ------------------- -------------------
Repayments of obligations under lease
liabilities (475) (555) (1,109)
-------- --------------- ------------------- -------------------
Proceeds from issue of share capital 10 15,233 - -
-------- --------------- ------------------- -------------------
Issue costs paid 10 (698) - -
-------- --------------- ------------------- -------------------
Dividends paid 13 - (8,601) (12,615)
-------- --------------- ------------------- -------------------
Proceeds from borrowings 12 3,454 - -
-------- --------------- ------------------- -------------------
Net cash generated from / (used by) financing
activities 17,514 (9,156) (13,724)
-------- --------------- ------------------- -------------------
Net increase / (decrease) in cash and cash
equivalents 13,543 (578) (6,609)
-------- --------------- ------------------- -------------------
Cash and cash equivalents at the beginning of
the period 19,365 25,974 25,974
-------- --------------- ------------------- -------------------
Effect of foreign exchange rate changes - - -
-------- --------------- ------------------- -------------------
Cash and cash equivalents at the end of the
period 32,908 25,396 19,365
-------- --------------- ------------------- -------------------
NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS
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 group financial statements of the Company for
the six months ended 30 June 2020 comprise the Company and its
subsidiaries (together referred to as "the Group"). The condensed
group financial statements for the period ended 30 June 2020 are
unaudited.
The information for the year ended 31 December 2019 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 group financial statements were authorised for
issue by the Board of Directors of Hostelworld Group plc on 11
August 2020.
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 group financial statements included in this half-yearly
financial report has been prepared in accordance with Inter
national Accounting Standard 34 'Interim Financial Reporting', as
adopted by the European Union.
Going concern
Immediate action was taken by the directors in response to the
breakout of COVID-19 to preserve the Group's cash position. Actions
taken include the decision not to pay the final 2019 dividend, a
group-wide scaled redundancy program, reduced hours and deferred
pay for our employees and directors, the renegotiation of credit
terms with key vendors, availing of debt warehousing of Irish
employer taxes, the elimination of all non-essential operating
costs including marketing, recruitment, travel and other variable
overheads, and availing of Government COVID-19 supports in both
Ireland and the UK.
Since mid-March 2020 when the full force of the COVID-19
outbreak was felt on trading, the group has been reforecasting on a
bi-weekly basis its cash position for 2020 and 2021. The directors
have reviewed a number of stress case cash flow scenarios which
have evolved over time. These scenarios reflect changes in key
assumptions in areas such as timing of recovery, cost conservation
and availability of alternate sources of capital.
-- Our base-case cashflow scenario assumes a moderate uptick in
net bookings from H2 2020, with a steady yet modest recovery
through 2021.
-- Our 2nd wave case assumes a more conservative performance in
2020, with signs of progressive recovery from Q2 2021 onwards.
These scenarios include various mitigation measures including
the deferral of certain cashflows and additional cost cutting
measures. In both scenarios, the Group has sufficient cash reserves
available.
The directors have taken steps to ensure adequate liquidity is
available to the Group for the likely duration of the crisis and
the recovery period. The Group has a cash balance of EUR32.9
million (2019: EUR19.4 million) and has committed undrawn funds
available of EUR7 million relating to a revolving credit facility
that can be drawn down up to 30th November 2023. The group availed
of a short-term liquidity loan amounting to EUR3.5m in June 2020.
On 29 June 2020, the Company issued Ordinary Shares by way of a
Firm Placing and Open Offer, raising gross proceeds of
EUR15,233k.
Having considered the Group's cash flow forecasts, current and
anticipated trading volumes, together with current and anticipated
levels of cash, debt and the availability of committed borrowing
facilities, 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, and accordingly, they continue to adopt the going concern
basis in preparing the condensed group financial statements.
Changes in accounting policies
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 group financial statements. The
same accounting policies and methods of computation are followed
compared with the most recent annual group financial statements.
For the period ended 30 June 2020 the following accounting
policies, not disclosed in the last annual report, are also
significant.
Share Capital
Incremental costs directly attributable to the issue of ordinary
shares are recognised as a deduction from share premium.
Government Grants
Government grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions attaching
to them and that the grants will be received. Government grants
that are receivable as compensation for expenses or losses already
incurred or for the purpose of giving immediate financial support
to the Group with no future related costs are recognised in profit
or loss in the period in which they become receivable. Amounts are
recognised as income over the periods necessary to match them with
the related costs and are deducted in reporting the related
expense.
There are no new IFRIC interpretations that are effective for
the first time for the financial year beginning on 1 January 2020
that have had a material impact on the Group.
Key judgements and sources of estimation uncertainty
In preparing these condensed group financial statements, the
directors have made judgements in applying the groups accounting
policies and there are key sources of estimation uncertainty which
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
Impact of COVID-19 and Going Concern
The impact of COVID-19 on the Group's trading and resultant
actions taken by the Group, to mitigate against this impact, have
caused us to reconsider whether previous assumptions on
provisioning balances, deferred revenue and impairment testing are
still valid and appropriate. The group has reviewed the recoverable
amount of assets including intangible assets, associate investment
and plant, property and equipment. Management have considered
whether any impairment existed at the reporting date, or
subsequently to the date that the condensed group financial
statements were approved for issue by the board of directors. In
making this assessment the board approved 5-year plan has been
adjusted for base case and 2(nd) wave case assumptions, assessing
the impact of a period of prolonged decline in revenue and
profitability. The result of this assessment is that management
have concluded that goodwill is fully recoverable at 30 June 2020.
We have performed procedures under IAS 36 on intangible assets and
are satisfied that our recoverable amount of these assets exceeds
the carrying value, therefore no impairment required. The net book
value of plant property and equipment, at 30 June 2020, amounts to
EUR5.7m, of which EUR4.1m are right of use assets. We have also
considered the carrying value of our investment in associate of
EUR2.6m under IAS 36. Our review of the commercial proposition of
the investment, which is in its start-up stage and has just
commenced trading, does not identify any impairment losses.
The impact of COVID-19 on going concern is also a key accounting
judgement for the group and is discussed in detail in our basis of
preparation note.
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 (loss) / profit 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 ended 30 June Six months ended 30 June Year ended 31 December
2020 2019 2019
EUR'000 EUR'000 EUR'000
-------------------------- -------------------------- -------------------------- ---------------------------
(Unaudited) (Unaudited) (Audited)
-------------------------- -------------------------- ---------------------------
Europe 5,272 22,423 46,994
-------------------------- -------------------------- ---------------------------
Americas 3,099 7,383 15,672
-------------------------- -------------------------- ---------------------------
Asia, Africa and Oceania 3,663 9,017 18,006
-------------------------- -------------------------- ---------------------------
Total revenue 12,034 38,823 80,672
-------------------------- -------------------------- ---------------------------
For the six-month period ended 30 June 2020, the revenue balance
included cancellations of (EUR2,188k) relating to free cancellation
bookings that were previously deferred (for the six months ended 30
June 2019: revenue of EUR4,447k was recorded relating to free
cancellation bookings which was previously deferred).
Disaggregation of revenue is presented as follows:
Six months ended 30 Six months ended 30 Year ended 31 December
June 2020 June 2019 2019
EUR'000 EUR'000 EUR'000
------------------------------------- ---------------------- ----------------------- -----------------------
(Unaudited) (Unaudited) (Audited)
---------------------- ----------------------- -----------------------
Technology and data processing fees 11,453 37,822 78,571
---------------------- ----------------------- -----------------------
Ancillary services and advertising
revenue 581 1,001 2,101
---------------------- ----------------------- -----------------------
Total revenue 12,034 38,823 80,672
---------------------- ----------------------- -----------------------
In the six months ended 30 June 2020, the Group generated 95%
(2019: 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. Advertising revenue and revenue generated from other
services are recognised over the time-period when the service is
performed.
4. OPERATING EXPENSES
(Loss) / profit for the period has been arrived at after
charging the following operating costs:
Six months ended Six months ended Year ended 31 December 2019
30 June 2020 30 June 2019
EUR'000 EUR'000 EUR'000
------------------------------------------- ----------------- ----------------- ----------------------------
(Unaudited) (Unaudited) (Audited)
----------------- ----------------- ----------------------------
Marketing expenses 7,466 16,225 32,712
----------------- ----------------- ----------------------------
Staff costs 8,673 8,521 16,881
----------------- ----------------- ----------------------------
Credit card processing fees 476 1,318 2,515
----------------- ----------------- ----------------------------
Loss on disposal of property, plant and 11 - -
equipment
----------------- ----------------- ----------------------------
Exceptional items 2,996 1,285 3,066
----------------- ----------------- ----------------------------
FX loss 7 112 72
----------------- ----------------- ----------------------------
Other administrative costs 4,041 3,899 8,188
----------------- ----------------- ----------------------------
Total administrative expenses 23,670 31,360 63,434
----------------- ----------------- ----------------------------
Depreciation of property, plant and
equipment 1,301 1,111 2,425
----------------- ----------------- ----------------------------
Amortisation of intangible fixed assets 5,700 5,904 11,521
----------------- ----------------- ----------------------------
Total depreciation and amortisation 7,001 7,015 13,946
----------------- ----------------- ----------------------------
Total operating expenses 30,671 38,375 77,380
----------------- ----------------- ----------------------------
Administration expenses decreased by EUR7,401k compared to the
same period in 2019, driven by the reduction of non-essential
operating costs, as a result of COVID-19. Other administrative
costs have increased, compared to the same period in 2020 relating
to EUR170k dilapidation costs for a move in our UK office. Included
in staff costs are government assistance amounts totalling EUR289k
(30 June 2019: EURnil) for furloughed employees under the
Coronavirus Job Retention Scheme in the UK and subsidy received
under the temporary COVID-19 Wage Subsidy Scheme in Ireland.
The exceptional costs for the six months period amounted to
EUR2,996k (30 June 2019: EUR1,285k) were primarily costs relating
to an organisational restructure and merger and acquisition related
costs.
Six months ended 30 June Six months ended 30 June Year ended 31 December
2020 2019 2019
EUR'000 EUR'000 EUR'000
---------------------------- ------------------------- -------------------------- --------------------------
(Unaudited) (Unaudited) (Audited)
------------------------- -------------------------- --------------------------
Merger & acquisition costs 2,262 731 2,115
------------------------- -------------------------- --------------------------
Restructuring costs 734 554 951
------------------------- -------------------------- --------------------------
Total Exceptional items 2,996 1,285 3,066
------------------------- -------------------------- --------------------------
5. TAXATION
The corporation tax credit for the six-month period is EUR294k
(30 June 2019: charge EUR754k representing the best estimate of the
average annual effective tax rate expected for the full year,
applied to the pre-tax (loss) / income of the six-month period. I n
calculating the expected tax rate, the group has taken the base
case forecast which reflects the impact of COVID-19 on trading
performance.
The deferred tax credit for the six-month period of EUR468k (30
June 2019: EUR6,880k) relates to the movement in deferred tax
assets offset by the movement in deferred tax liabilities. The 2019
credit 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. Deferred tax assets are recognised to the extent that it
is probable that future taxable profits will be available against
which any unused tax losses and unused tax credits can be utilised.
Future taxable profits have been estimated using the board approved
5-year plan and adjusted for base case COVID-19 assumptions.
6. (LOSS) / EARNINGS PER SHARE
Basic (loss) / earnings per share is computed by dividing the
net (loss) / 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 2020 30 June 2019 December 2019
(Unaudited) (Unaudited) (Audited)
-------------- -------------- ---------------
Weighted average number of shares in issue ('000s) 95,676 95,571 95,571
-------------- -------------- ---------------
(Loss) / profit for the period (EUR'000s) (18,078) 6,520 8,394
-------------- -------------- ---------------
Basic (loss) / earnings euro cent per share (18.90) 6.82 8.78
-------------- -------------- ---------------
Diluted (loss) / earnings per share is computed by dividing the
net (loss) / 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. Ordinary shares
potentially issuable from share-based payment arrangements are
anti-dilutive due to the loss in the financial year meaning there
is no difference between basic and diluted earnings per share.
Six months ended 30 June Six months ended 30 June Year ended 31 December
2020 2019 2019
Number of Shares: (Unaudited) (Unaudited) (Audited)
--------------------------- --------------------------- ---------------------------
Weighted average number of
ordinary shares in issue
('000s) 95,676 95,571 95,571
--------------------------- --------------------------- ---------------------------
Effect of dilutive
potential ordinary shares:
--------------------------- --------------------------- ---------------------------
Share options ('000s) - 69 5
--------------------------- --------------------------- ---------------------------
Weighted average number of
ordinary shares for the
purposes of diluted
earnings per share
('000s) 95,676 95,640 95,576
--------------------------- --------------------------- ---------------------------
Diluted (loss) / earnings
euro cent per share (18.90) 6.82 8.78
--------------------------- --------------------------- ---------------------------
7. INTANGIBLE ASSETS
Additions during the period comprised of internally generated
additions of EUR2,206k (2019: EUR501k). At 30 June 2020 and 30 June
2019, 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
The group recognised additions during the six months ended 30
June 2020 totalling EUR1,662k including right of use additions for
our lease for the UK office totalling EUR1,603k. In the prior year
the group adopted IFRS 16. 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, and invested EUR121k in
additional plant, property and equipment.
For the six months period the group also disposed of assets with
a net book value of EUR11k and recognised a loss on disposal (2019:
EURnil).
9. TRADE AND OTHER RECEIVABLES
30 June 30 June 31 December 2019
2020 2019
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Amounts falling due within one year
------------ ------------ -----------------
Trade receivables 226 1,219 873
------------ ------------ -----------------
Prepayments and accrued income 1,435 2,776 2,291
------------ ------------ -----------------
Value Added Tax 645 1,312 1,816
------------ ------------ -----------------
2,306 5,307 4,980
------------ ------------ -----------------
Movement in prepayments and accrued income relates primarily to
the receipt of EUR1,219k due to cash proceeds received by the Group
on completion of the liquidation of WRI Nominees DAC in the prior
year (see note 15). Reduction in other receivable balances are
reflective of COVID-19 related decline in booking volumes.
10. SHARE CAPITAL
At 30 June 2020 No of Shares Share Capital EUR'000 Share Premium EUR'000
Ordinary Shares of EUR0.01 each 114,684,933 1,147 15,042
------------- ---------------------- ----------------------
Share issue costs - - (698)
------------- ---------------------- ----------------------
114,684,933 1,147 14,344
------------- ---------------------- ----------------------
At 31 December 2019 and 30 June 2019
------------- ---------------------- ----------------------
Ordinary Shares of EUR0.01 each 95,570,778 956 -
------------- ---------------------- ----------------------
On 29 June 2020, the Company issued 19,114,155 Ordinary Shares
at EUR0.79695 per share by way of a Firm Placing and Open Offer,
raising gross proceeds of EUR15,233k. EUR698k of directly
attributable share issue costs have been recognised as a deduction
from share premium.
11. TRADE AND OTHER PAYABLES
30 June 30 June 31 December 2019
2020 2019
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Amounts falling due within one year
------------ ------------ -----------------
Trade payables 5,044 3,685 2,493
------------ ------------ -----------------
Accruals and other payables 9,078 4,640 4,099
------------ ------------ -----------------
Deferred revenue 949 8,148 2,982
------------ ------------ -----------------
Deferred Consideration 893 - 890
------------ ------------ -----------------
Payroll taxes 2,082 575 610
------------ ------------ -----------------
18,046 17,048 11,074
------------ ------------ -----------------
At 30 June 2020, EUR589k deferred revenue related to free
cancellation bookings is included in deferred revenue (30 June
2019: EUR7,339k) and EUR360k relates to featured listings deferred
revenue (30 June 2019: EUR809k). Increase in trade payables
reflects revised payment terms with key vendors. Included in
accruals and other payables is a credit provision EUR1,724k (30
June 2019: EUR285k) for various credits and incentives to customers
for use on future bookings, and an amount of EUR2,677k (30 June
2019: EUR64k) relating to customers who have cancelled their free
cancellation booking but have not been refunded which have both
increased compared to the same period in H1 2019 due to additional
options recognised for customers whose travel was disrupted by
COVID-19. Also included in accruals and other payables is an
interest accrual on short term borrowings totalling EUR38k (note
12) (2019: nil). Increase in payroll taxes to 30 June 2020 reflects
the warehousing of Irish employer taxes.
12. BORROWINGS
On 22 June 2020 the group entered a 'Prompt Pay' (AIB Product
Name) short term invoice financing facility with Allied Irish Banks
PLC repayable in full by 23 April 2021. Total amount drawn down at
30 June 2020 amounted to EUR3,454k. A flat rate interest applies on
loan balance of 1.45% per annum. Hostelworld.com Limited must
ensure it maintains a cash balance of no less than EUR8.67m for the
period ending 30(th) September 2020, EUR5.75m for the period ending
31 December 2020 and EUR1.42m for the period ending 31 March 2021.
Our cash balance at 30 June 2020 amounted to EUR32.9m and we are
not expecting to breach any covenants.
In the period the Group entered a three-year revolving credit
facility for EUR7m with the Governor and Company of the Bank of
Ireland to assist with the investing and development needs of the
business. The facility is guaranteed by fixed and floating
debenture over the assets of Hostelworld.com Limited to include
proprietary interest in any Hostelworld booking platform,
technology and intellectual property, group guarantees for the full
amount of borrowings and a subordination deed between
Hostelworld.com Limited, Hostelworld Group Plc and the Bank
subordinating the repayment of all monies due by Hostelworld.com
Limited to Hostelworld Group Plc in accordance with the provisions
contained therein. The facility bears interest at the bank cost of
funds +2.3% margin. Hostelworld.com Limited is to retain minimum
cash balances of 20% of drawn facilities and the revolving credit
facility must return to credit 20 days per annum. Hostelworld.com
Limited must also maintain a minimum tangible net worth of not less
than EUR90m. No amounts were drawn down at 30 June 2020, in respect
of the revolving credit facility. Amounts available to the group
consist of three tranches of EUR2m to EUR2.5m each dependent on
incremental revenue targets achieved.
13. DIVIDS
Amounts recognised as distributions to equity holders in the
previous financial period:
Six months ended 30 June 2019 Year ended 31 December 2019
EUR'000 EUR'000
------------------------------ ----------------------------
Final 2018 dividend of EUR0.09 per share (paid 5 June
2019) 8,601 8,601
------------------------------ ----------------------------
Interim 2019 dividend of EUR0.042 per share (paid 20
September 2019) 4,014
------------------------------ ----------------------------
8,601 12,615
------------------------------ ----------------------------
The Group announced on 26 March 2020 that it was not proceeding
with a final 2019 dividend as part of its measures to protect
balance sheet strength and liquidity during the COVID-19 pandemic.
On 24 June 2020 the Group announced that the Board does not expect
to pay a cash dividend under its current policy in respect of the
2020 financial year. The Board made this decision after assessing
current trading, the continued requirement for cash conservation
and the on-going uncertainty of the full impact of COVID-19. Future
cash dividend payments will be subject to the Group generating
adjusted profit after tax, the Group's cash position, any
restrictions in the Group's banking facilities and subject to
compliance with Companies Act 2006 requirements regarding ensuring
sufficiency of distributable reserves at the time of paying the
dividend.
The Board is proposing to issue new ordinary shares by way of a
bonus issue to shareholders, in lieu of a cash dividend, equating
to 1.0 EUR cent per share and subject to shareholder approval at a
general meeting which the Group anticipates will take place before
30 September 2020
14. SHARE BASED PAYMENTS
During the six-months ended 30 June 2020, there was one
invitation made to executive directors and selected management to
participate in the Group's long-term incentive plan ("LTIP"). On 2
May 2020, 3,793,200 nil cost options were granted, and these
options will vest on 1 May 2023 subject to meeting performance
conditions based on the Company's adjusted earnings per share for
the year ending 31 December 2022 and absolute total shareholder
return during the period of three years commencing on the Award
Date. All of these options are still in issue as at 30 June
2020.
During the year ended 31 December 2019, the Remuneration
Committee approved the grant of 1,267,463 share options pursuant to
the terms and conditions of the Group's LTIP Rules (2018: 773,797
options). These were granted in four separate offerings.
During the six-month period ended 30 June 2020 an amount of
25,389 was forfeited in relation to the 2019 LTIP grants, and 9,044
were forfeited in relation to the 2018 LTIP grants.
Details of the share options outstanding, excluding SAYE, during
the period are as follows:
30 June 2020 30 June 2019 31 December 2019
No. of share options No. of share options No. of share options
--------------------- --------------------- ---------------------
Outstanding at beginning of period 1,501,647 875,957 875,957
--------------------- --------------------- ---------------------
Granted during the period 3,793,200 1,010,199 1,267,463
--------------------- --------------------- ---------------------
Forfeited during the period (34,433) (121,299) (641,773)
--------------------- --------------------- ---------------------
Exercised during the period - - -
--------------------- --------------------- ---------------------
Expired during the period - - -
--------------------- --------------------- ---------------------
Outstanding at the end of the period 5,260,414 1,764,857 1,501,647
--------------------- --------------------- ---------------------
Exercisable at the end of the period - - -
--------------------- --------------------- ---------------------
As at 30 June 2020, there have been 530,784 options granted to a
number of eligible employees in the Group as part of a Save as You
Earn scheme (30 June 2019: 272,027 options). As at 30 June 2020,
313,708 of these options have been cancelled (30 June 2019: 146,266
options).
15. RELATED PARTY TRANSACTIONS
On 04 June 2020 a new subsidiary was incorporated "Hostelworld
Business Consulting (Shanghai) Co., Limited". The principal
activity of this subsidiary is business information consulting and
marketing planning.
In the prior year 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 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 group financial
statements. On the same date, WRI Nominees DAC was liquidated by
way of members' voluntary winding up.
16. EVENTS AFTER THE REPORTING DATE
The Board is proposing to issue new ordinary shares by way of a
bonus issue to shareholders in lieu of a cash dividend, equating to
1.0 EUR cent per share and subject to shareholder approval at a
general meeting which the Group anticipates will take place before
30 September 2020
There were no material subsequent events since the reporting
date.
APPIX: ALTERNATIVE PERFORMANCE MEASURES
The Group uses the following Alternative Performance Measures
('APMs') which are non-IFRS measures to monitor the performance of
its operations and of the Group as a whole: Earnings before
Interest, Tax, Depreciation and Amortisation, excluding exceptional
and non-cash items ("Adjusted EBITDA"), Profit after Taxation
("Adjusted PAT"), Adjusted EPS, Adjusted Free Cash Flow and
Adjusted Free Cash Flow conversion.
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.
Reconciliation between (Loss) / Profit for the year and Adjusted
EBITDA:
EURm H1 2020 H1 2019
(Loss) / profit for the year (18.1) 6.5
-------- --------
Taxation 0.7 6.1
-------- --------
Net finance costs (0.1) (0.1)
-------- --------
Share of result of associate (0.1) -
-------- --------
Operating (loss) / profit (18.6) 0.5
-------- --------
Depreciation 1.3 1.1
-------- --------
Amortisation of development costs 1.1 0.8
-------- --------
Amortisation of acquired intangible assets 4.6 5.1
-------- --------
Exceptional items 3.0 1.3
-------- --------
Share based payment expense 0.3 0.1
-------- --------
Adjusted EBITDA (8.3) 8.9
-------- --------
Adjusted Profit after Taxation ("Adjusted PAT")
Adjusted Profit after Taxation ("Adjusted PAT") is an
alternative performance measure that the Group uses to calculate
the dividend pay-out for the year, subject to Company Law
requirements regarding distributable profits and the dividend
policy within the group. 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.
Reconciliation between Adjusted EBITDA and (Loss) / Profit for
the Year:
EURm H1 2020 H1 2019
Adjusted EBITDA (8.3) 8.9
-------- --------
Depreciation (1.3) (1.1)
-------- --------
Amortisation of development costs (1.1) (0.8)
-------- --------
Net finance costs (0.1) (0.1)
-------- --------
Share of results of associate (0.1) -
-------- --------
Corporation tax 0.3 (0.8)
-------- --------
Adjusted (loss) / profit after Taxation (10.6) 6.2
-------- --------
Exceptional items (3.0) (1.3)
-------- --------
Amortisation of acquired intangibles (4.6) (5.1)
-------- --------
Share based payment expense (0.3) (0.1)
-------- --------
Deferred taxation 0.4 6.9
-------- --------
(Loss) / profit for the period (18.1) 6.5
-------- --------
Adjusted EPS
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.
EURm H1 2020 H1 2019
Adjusted (loss) / profit after taxation (10.6) 6.2
-------- --------
Weighted average shares in issue ('m) 95.7 95.6
-------- --------
Adjusted EPS (11.1) 6.4
-------- --------
Adjusted Free Cash Flow
The Group uses adjusted Free Cash Flow to measure the amount of
underlying cash generation and the cash available for distribution
and allocation. The Group calculates adjusted Free Cash Flow as the
adjusted EBITDA for the group before Capital Expenditure,
capitalised development spend, acquisition and disposal of
undertakings and adjusting for interest, tax and movements in
working capital.
EURm H1 2020 H1 2019
Adjusted EBITDA (8.3) 8.9
-------- --------
Capitalised development spend (2.2) (0.5)
-------- --------
Capital expenditure (0.1) (0.1)
-------- --------
Acquisition of associate - -
-------- --------
Interest and tax paid - (0.5)
-------- --------
Net movement in working capital 7.8 1.8
-------- --------
Adjusted free cash (absorption) / flow (2.8) 9.6
-------- --------
Adjusted free cash (absorption) / flow conversion (33)% 108%
-------- --------
(1) (The placing share price of 79.68 cent represented a
discount of 7.1 per cent. to the closing share price of 85.78 cent
on 24th June)
2 Subject to certain minimum revenue related drawndown
conditions
3 Measured by comparing the difference between the annualised
figure as at 31 March 2020 and the annualised figure as at 31 May
2020
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 FFFFLTAILLII
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