TIDMHSW
RNS Number : 8628I
Hostelworld Group PLC
10 August 2023
Hostelworld Group plc
("Hostelworld" or the "Group" or the "Company")
Interim Results 2023
Largest H1 revenue on record
10th August 2023: Hostelworld, a leading global Online Travel
Agent (OTA) focused on the hostel market, is pleased to announce
its interim results for the six-month period ended 30 June 2023
Strong financial delivery and strategic progress in H1 2023:
-- Record first half Net GMV (2) and generated revenue (3) , of
EUR339.5m (+57% year on year) and EUR51.5m (+57% year on year)
respectively
-- Robust booking growth across all regions: Central America,
South Asia and southern European countries ahead of pre COVID-19
levels
-- Improved marketing efficiency powered by social strategy
-- Increasing operating leverage through marketing efficiency
and operating cost discipline
-- Strong cash conversion driving growth in operating cashflows
- Debt refinancing completed with materially lower interest
rates
Well positioned for further profitable growth:
-- Strong category growth, stronger HW growth with the
resumption of cross border travel post Omicron and Social strategy
driving share gains
-- Continued investment in Social platform: richer profiles,
messaging capabilities and launch of Linkups (hostel hosted
events)
-- Highly cash generative business model, continuing to
deleverage
-- Reiterating FY 2023 earnings guidance of adjusted EBITDA
EUR16.5m - EUR17.0m
-- Firmly on track to meet November 2022 Capital Market Day
growth targets
Financial highlights: [1]
-- Net GMV [2] of EUR339.5m (+57% year on year)
-- Net Revenue of EUR45.8m, H1 2022 EUR28.0m (+64% year on
year)
-- Net bookings totalled 3.40m, H1 2022: 2.07m (+64% year on
year)
-- Net Average Booking Value ("ABV") of EUR15.15, H1 2022:
EUR15.82, a 4% decrease driven by a greater proportion of Asian
destination bookings, partially offset by continued bed price
inflation
-- Direct marketing costs as a percentage of revenue [3]
amounted to 51%, H1 2022: 60% (-9%)
-- Adjusted EBITDA of EUR5.1m, H1 2022: EUR5.2m loss
-- L oss in the period of EUR7.5m, H1 2022: EUR14.3m
Balance sheet and cash flow:
-- As at 30 June 2023 total cash and cash equivalents of
EUR10.7m (31 December 2022: EUR19.0m) and total net debt [4] of
EUR16.2m (31 December 2022: EUR21.6m)
-- Completed refinancing of EUR30.0m legacy debt facility,
replacing with a new EUR20.0m facility from AIB. New facility
comprises a EUR10.0m term loan, a EUR7.5m RCF (reduced to EUR5.0m
in July) and a EUR2.5m undrawn overdraft
-- In July 23 the interest rate on AIB debt facility reduced
from 3.75% to 3.25% over EURIBOR, EUR2.5m reduction in RCF balance
to EUR5.0m
-- Net asset position of EUR45.7m (31 December 2022:
EUR52.2m)
Gary Morrison, Chief Executive Officer, commented:
I am delighted to report record generated revenues and improving
adjusted EBITDA margins for the half year to date, driven by the
continued execution of our Social strategy and operational cost
discipline. This performance also translated directly into strong
growth in operating cashflow year on year, which in turn enabled us
to strengthen our balance sheet by refinancing our legacy COVID-19
era debt facility at significantly lower interest rates.
In addition, I am very pleased to see the global hostelling
category showing double digit bednight growth year on year for the
first half of the year, and even stronger growth from Hostelworld
with the resumption of cross border travel post Omicron in 2022. In
particular, long-haul bookings have grown 70% year on year and
"follow on" bookings after an initial flight [5] have grown 95%
year on year. By geography, Europe has recorded strong year over
year growth overall, with revenue growth outpacing net bookings
growth through continued bed price inflation. Bookings into
Southern Europe and other low-cost destinations such as Central
America and South Asia have also been exceptionally strong,
exceeding pre COVID-19 levels.
During the first half we also made progress on modernising our
platform to enable us to support faster execution of our growth
strategy. In particular, we made significant progress refactoring
key parts of our core platform into a series of microservices,
which enable us to access more of the native capabilities of our
cloud provider and pay for the computing resources we use
"on-demand".
Finally, I am very proud of the progress we have made on our ESG
strategy, and to see that progress recognised externally by being
shortlisted for two "Sustainability Business Impact Awards" by
Chambers Ireland and reaching Silver accreditation status by
Investors in Diversity for building a flexible and inclusive
workplace.
Trading Update:
During the first six months of the year, we have seen strong
year on year growth in our business as our customers booked their
hostelling trips around the world again, driving growth in net
bookings (3.4m, +64% year on year) and net revenue (EUR45.8m, +64%
year on year).
As the year has progressed, we have seen several factors impact
our trading economics versus 2022. In particular, ABVs [6] have
contracted by -4% year on year (H1 2023: EUR15.15) driven by
geographical mix with a greater proportion of Asian destination
bookings, partially offset by continued bed price inflation. Direct
marketing cost as a percentage of net revenue has also reduced
versus 2022, primarily driven by our social strategy which drives
new and existing customers to use our mobile native apps. Overall,
we expect direct marketing costs as a percentage of net revenue
will remain within our guidance range of 50-55% over 2023 as we
continue to optimise marketing investments for long term growth in
new customers and direct margin.
On the supply side, we estimate global hostel sales measured in
bednights increased by 14% [7] year on year, driven by modest
increases in occupancy rates and category capacity. By geography,
we recorded significant year over growth in bednights across South
Asia, Oceania and the Middle East and Africa; with Central America
remaining above pre-Covid levels. Similarly, we estimate that the
bednight sales from hostels connected to our platform also grew by
14% over the same period, driven by the addition of new hostels to
our platform throughout H1 2023. As outlined in our Capital Markets
Day presentation in November 2022, we plan to grow our market
coverage [8] over the coming years by adding more hostels to our
platform in key markets around the world.
Finally, we have seen a significant improvement in operating
cash performance, with cash generation of EUR10.6m in H1 2023
compared to a cash reduction of EUR0.8m in H1 2022, enabled by the
business's characteristic of strong cash conversion and tight
operating cost management. We further strengthened our financial
position through the voluntary early debt repayment of EUR10m in
April 2023 and the successful refinancing of our legacy debt
facility with a new 3-year facility, totalling EUR17.5m, with
Allied Irish Bank plc ('AIB') in May 2023. This new facility, with
materially lower interest costs, represents a strong endorsement of
our post-pandemic performance, and consolidates the firm
foundations upon which we will drive profitable growth and
shareholder value. This has resulted in a reduction in our net debt
from EUR21.6m as at 31 December 2022 to EUR16.2m as at 30 June
2023.
Outlook:
The Board remains confident in the long-term resilience of our
business model and the potential of our differentiated growth
strategy and reiterating earnings guidance of adjusted EBITDA in
the range of EUR16.5 million to EUR17 million for the full year,
absent any deterioration in the macro-economic climate, the
re-introduction of travel restrictions or other air travel related
disruptions.
Analyst Presentation
A presentation will be made to analysts today at 9.30am, 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.
Webcast Link
https://stream.brrmedia.co.uk/broadcast/64c7a5d3a1eaa5d77603f6d1
Event: Hostelworld - Interim Results
Date: Thursday, August 10th, 2023
For further information please contact:
Hostelworld Group plc Corporate@hostelworld.com
Gary Morrison, Chief Executive Officer
Caroline Sherry, Chief Financial Officer
David Brady, Head of Commercial Finance
Powerscourt hostelworld@powerscourt-group.com
Eavan Gannon / Nick Dibden +44 (0) 20 7250 1446
About Hostelworld Group
Hostelworld Group Plc is a ground-breaking social network
powered Online Travel Agent (OTA) focused on the hostelling
category, with a clear mission to help travellers find people to
hang out with. Our mission statement is founded on the insight that
the vast majority of travellers go hostelling as a means to meet
other people, which we facilitate through a series of social
features on our platform that connect our travellers in hostels and
cities based on their booking data. To date the strategy has been
extraordinarily successful, generating significant word of mouth
recommendations from our customers and strong endorsements from our
Hostel partners.
Founded in 1999, Hostelworld is a well-known trusted brand with
almost 250 employees across 11 countries; hostel partners in over
180 countries; and a strong commitment to building a better world
in all that we do. In particular, our focus in the last few years
has been on improving the sustainability of the hostelling
industry, through our membership of the Global Sustainable Tourism
Council (GSTC); our active involvement in the Global Tourism
Plastics Initiative (GTPI); our partnerships with Bureau Veritas to
establish emissions benchmarks for the hostelling industry; and our
recent partnership with South Pole to be a Climate Neutral Group in
2021 and 2022.
Cautionary statements
This announcement contains forward-looking statements. These
statements relate to the future prospects, developments and
business strategies of Hostelworld. Forward-looking statements are
identified by the use of such terms as "believe", "could",
"envisage", "estimate", "potential", "intend", "may", "plan",
"will" or variations or similar expressions, or the negative
thereof. Any forward-looking statements contained in this
announcement are based on current expectations and are subject to
risks and uncertainties that could cause actual results to differ
materially from those expressed or implied by those statements. If
one or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, Hostelworld's actual
results may vary materially from those expected, estimated or
projected. Any forward-looking statements speak only as at the date
of this announcement. Except as required by law, Hostelworld
undertakes no obligation to publicly release any update or
revisions to any forward-looking statements contained in this
announcement to reflect any change in events, conditions or
circumstances on which any such statements are based after the time
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
Throughout the first half of the year, we have continued to
execute our growth strategy as outlined in our Capital Markets Day
in November 2022. This strategy, together with a continued focus on
costs has delivered record generated revenues and improved EBITDA
margins. I am pleased to report we continued to make progress
modernising our platform and advancing our sustainability and
DE&I strategies, and particularly gratified to see these
efforts recognised externally through accreditations and
sustainability focused award nominations.
Executing our growth strategy
During the first six months of the year, we continued to execute
our differentiated growth strategy which focuses on helping our
customers find people to hang out with through a series of social
features embedded within our mobile native apps. This growth
strategy was developed in 2021 and launched in Q2 2022, based on
the insight that the vast majority of travellers go hostelling as a
means to meet other people. To date the strategy has been
extraordinarily successful, generating significant word of mouth
recommendations from our customers, strong endorsements from our
hostel partners and significant growth in bookings via our mobile
native Apps relative to other higher cost channels.
Over the first half of this year, we have continued to invest in
our social platform by enabling richer user profiles which enable
social members to upload their own profile photo, add more details
on their travel related interests, where they have lived, and
languages spoken. In parallel, we have also added more messaging
functionality to our social platform, similar to what users would
see with more mainstream instant messaging products. Collectively
these enhancements have generated significant increases in customer
engagement, with the volume of messages being sent over our
platform increasing 2.4x in July relative to January this year.
In parallel we also launched Hostel hosted LinkUps in London and
Lisbon in February this year. This is a completely unique product
in the travel landscape, which enables hostels to promote their own
events ('LinkUps') to all of our social members who are staying in
the destination via our mobile native apps. For our social member
customers, this provides them with an even greater range of things
to do when travelling to new destinations, and even more
opportunities to meet people to hang out with while travelling.
Since launching the product in February, we have expanded the
range of cities month over month with a full global launch in July.
So far, the product has exceeded all our expectations, with 54% of
social members with a
booking now being able to see at least one LinkUp during their
stay dates. Over the balance of the year, we will continue to
increase LinkUps inventory and add more new features to this
product.
Investing in our platform
During 2022, we migrated our entire technology stack to the
cloud in the first half of the year, the first major milestone of
our platform modernization program and exiting our on-premises data
centres. During the second half of 2022 and into the first half of
2023, we have been upgrading our key legacy backend applications to
make them "cloud native".
Over the medium term, migrating from a cloud hosted stack to a
series of cloud native applications will deliver many advantages,
such as application level "on demand" scaling, a more flexible
microservices based architecture, and more opportunities to use off
the shelf services from our cloud services provider. This will
include services such as artificial intelligence and machine
learning optimisation engines, which are now powering some of our
key services. Collectively, these technology benefits will flow
through into faster execution of our growth strategy and reduced
hosting costs.
Progressing our ESG agenda
In parallel with helping millions of travellers in our category
Meet The World(R), we are also committed to building a better world
in everything we do.
We have made significant progress on the sustainability
framework we developed in partnership with Bureau Veritas. This
purpose-built framework enables hostels to assess, compare and
communicate sustainability achievements to customers and other key
stakeholders. The framework directly aligns with the Global
Sustainability Tourism Council's (GSTC) sustainable tourism
criteria focussed on four pillars: Sustainability Management,
Socio-Economic, Cultural Impact and Environmental Impact. By
specifically tailoring these pillars for independent hostels, we
can account for the attributes unique to the hostel category, as
compared to other accommodation types. Each criterion in our
'Staircase to Sustainability' framework aligns to one of the 17 UN
Sustainability Development Goals.
Details of the pillars have been published and communicated to
our hostel partners, through our dedicated sustainability website
and via a monthly B2B sustainability newsletter. The framework will
be showcased at our upcoming hostel conferences in Bogota and
Copenhagen, ahead of an official Q4 2023 launch. Early 2024 will
see us publishing compliance to these criteria on our booking site,
such that our customers can make more informed decisions as to the
sustainability of the hostel they are booking.
Outside of Hostelworld events, we continued to promote the
inherent sustainability of hostels this year including
participating in a first of its kind hostel focussed panel at
GSTC's flagship event in May. We are also about to commence work on
a second edition of last year's hostel focussed emission report
with Bureau Veritas. Due in Q4, this report will further build on
the findings from the 2022 edition which showed that hostels
produce 75% less emissions than a relevant subset of their hotel
counterparts. H1 2023 has very much focussed on the research and
content creation required to promote the framework details to our
hostel partners, well ahead of launch date. This pre-launch
education and advocacy work is critical to the success of the
framework once live. The framework has been shortlisted for a
Sustainable Business Impact Award by Chambers Ireland. We plan to
promote compliance with these criteria on our booking site, such
that our customers can make more informed decisions in selecting a
hostel.
Hostelworld is a Climate Neutral company, a status that is
independently verified and awarded by emissions reduction
specialists South Pole each year. Our ultimate goal however is to
achieve Net Zero status, by 2040, absorbing more emissions than we
emit to help limit global warming. We will do this through
reporting on our Green House Gas emissions, eliminating carbon
emissions in line with the 2015 Paris Agreement and by offsetting
any remaining emissions through socially responsible projects. To
this end, we are very proud to be a signatory of Global Optimism
& Amazon's Climate Pledge initiative. The Climate Pledge brings
the world's top companies together to accelerate joint action,
cross-sector collaboration, and responsible change.
Climate-conscious travellers want to know how to travel
sustainably, and ensure they leave a positive mark on the
communities they visit. Through our online series 'Sustainability
Stories by Hostelworld' we are showcasing the inspiring work
hostels are doing for their local communities and environment,
offering hostellers the opportunity to volunteer, so they too can
make a real difference. Hostelworld is committed to providing
resources for travellers to educate themselves in ways to travel
responsibly. Sustainability focussed 'link ups' are now available
on our app, and our customers will soon have the option to offset
the carbon of their hostel stay on our platform should they wish to
do so.
Inclusivity is at the core of hostelling and of the Hostelworld
culture. We were very proud to have recently been awarded the
Silver Accreditation by the Irish Centre for Diversity, building on
the Bronze Accreditation we received in 2022. This accreditation
was awarded based on measuring people's sense of fairness,
belonging and equity, collated through a detailed survey. Our
diverse and inclusive culture has also been shortlisted for a
Sustainable Business Impact Award by Chambers Ireland.
Summary
Overall, I am very pleased with the work we have completed and
the progress we have made in the first six months of the year. I
would like to take this opportunity to thank the Hostelworld team
for their commitment to the success of our company, and to thank
our shareholders for their continued support.
As the year progresses, the Board will continue to evaluate
internal and external opportunities that will deliver value for
shareholders. In particular, the Board will evaluate opportunities
to invest in our differentiated growth strategy which helps new and
existing customers find people to hang out with while hostelling,
and adds, to our platform, a broader catalogue of group focused
travel products beyond hostel accommodation.
Gary Morrison
Chief Executive
10 August 2023
Interim Management Report
Financial Review
Highlights
-- Group net bookings increase of 64% (H1 2022: 562%
increase)
-- Net average booking value of EUR15.15 (-4% year on year)
driven by a greater proportion of Asian destination bookings,
partially offset by continued bed price inflation
-- Net revenue of EUR45.8m (H1 2022: EUR28.0m), an increase of
64%
-- Marketing costs per net booking of EUR7.78, a decrease of
EUR1.68 compared to H1 2022 cost EUR9.46
-- Total operating expenses of EUR47.6m (H1 2022: EUR40.5m)
-- Operating loss of EUR1.7m (H1 2022: EUR12.6m loss)
-- Adjusted EBITDA of EUR5.1m (H1 2022: EUR5.2m loss)
-- Loss for the six-month period to 30 June 2023 of EUR7.5m (H1
2022: EUR14.3m)
-- Adjusted loss per share 1.9 EUR cent (H1 2022: adjusted loss
per share 7.8 EUR cent)
-- Basic loss per share of 6.23 EUR cent (H1 2022: basic loss
per share 12.19 EUR cent)
-- Total cash and cash equivalents as at 30 June 2023 of
EUR10.7m (31 December 2022: EUR19.0m)
-- Net asset position as at 30 June 2023 of EUR45.7m (31
December 2022: EUR52.2m)
Revenue and operating loss
The Group's net bookings totalled 3.4m, an increase of 64%
compared to H1 2022 (H1 2022: 2.1m). Net revenue for the period was
EUR45.8m (H1 2022: EUR28.0m), an increase of 64% driven by strong
performances in key European, Asian and Oceania markets.
At 30 June 2023, the Group held EUR8.6m of customer deposits
relating to bookings made under the free cancellation policy (31
December 2022: EUR3.0m). This balance will largely unwind in H2
2023.
Operating expenses totalled EUR47.6m (H1 2022: EUR40.5m).
EUR7.1m increase year on year driven by an increase in direct
marketing costs of EUR6.9m and a EUR0.5m increase in credit card
fees, directly related to revenue increases. Direct marketing costs
as a percentage of revenue was 51% (H1 2022: 60%). This was due to
a combination of normal travel patterns resuming in primary markets
and the app-centric social strategy driving marketing efficiencies.
Credit card fees totalled EUR1.5m (H1 2022: EUR1.0m).
The group incurred a foreign exchange gain of EUR0.1m (H1 2022:
loss EUR0.5m). Current year gain arose with the weakening of the US
dollar against the Euro. Group operating loss amounted to EUR1.7m
(H1 2022: EUR12.6m). Adjusted EBITDA EUR5.1m, an increase of
EUR10.3m from an EBITDA loss of EUR5.2m in H1 2022. Year on year
improvement driven by strong booking recovery.
Earnings per share
Basic and diluted loss per share for the Group was 6.23 EUR cent
(H1 2022 basic loss per share: 12.19 EUR cent).
Adjusted loss per share was 1.9 EUR cent per share (H1 2022 loss
per share: 7.8 EUR cent per share). On 20 February 2023 the company
issued 1,027,655 shares to satisfy restricted share awards granted
by the Company at a value of EUR0.01 per share. On 29 March 2023
3,315,153 shares were issued to HPS on issuance of warrants. On 16
May 2023 the company issued 1,645,994 shares to satisfy long term
incentive plan awards. The weighted average number of shares in the
period was 120.4m (H1 2022: 117.2m) and the total number of shares
at the balance sheet date was 123.5m (H1 2022: 117.5m).
Net debt and financing
At the balance sheet date cash and cash equivalents totalled
EUR10.7m (31 December 2022: EUR19.0m). The Group has borrowings of
EUR17.4m (31 December 2022: EUR31.1m).
In May 2023 the Group completed a refinance of its legacy debt
facility, which was drawn down in February 2021 during COVID-19
trading. A new 3-year facility was signed with Allied Irish Banks
plc ('AIB'). This facility is comprised of a EUR10.0m term loan, a
EUR7.5m revolving credit facility ('RCF') and an undrawn EUR2.5m
overdraft. In July 2023 the RCF reduced to EUR5.0m. Altogether
EUR17.4m was drawn down from AIB, net of arrangement fee, and
utilised to repay the former debt facility held with HPS. Balance
of repayment to HPS comprised of the Group's cash reserves.
The AIB term loan and RCF each had an initial interest rate
payable of 3.75% over EURIBOR. In July 2023 this reduced to 3.25%,
as the ratio of Net Debt to adjusted EBITDA was less than 2 times
as at 30 June 2023. The interest rate will reduce to 2.65% over
EURIBOR where the ratio of Net Debt to adjusted EBITDA is less than
1 times.
The former debt facility was a EUR30.0m 5-year term loan
facility with HPS. An amount of EUR28.8m, net of original issue
discount, was drawn down on 23 February 2021. In April 2023 the
Group made a voluntary early repayment of EUR10.0m of its EUR30.0m
term loan facility with HPS, prior to its full prepayment in May
2023. The HPS debt facility bore interest at a margin of 9% per
annum over EURIBOR. In total across April and May repayments
totalled EUR34.1m, comprising of EUR30.0m principal and EUR4.1m
PIK.
Finance costs
The Group incurred EUR1.9m of finance costs in H1 2023 (H1 2022:
EUR2.1m). Decrease year on year is due to a EUR10.0m repayment of
the HPS facility in April 2023 and final repayment in May 2023.
Exceptional items
Exceptional items EUR3.6m (H1 2022: EUR0.5m) are identified due
to their nature or materiality to help the reader form a better
view of overall and adjusted trading. Current year exceptional
items comprise of costs incurred in exiting the HPS facility,
including EUR0.7m of an early repayment penalty interest, EUR2.8m
accelerated interest costs which relate to transaction costs
capitalised on drawdown of HPS facility in February 2021, which
were expected to be amortised over a 5-year period to 2026 and
EUR0.1m of transaction costs.
Prior year exceptional items related to a final settlement
amount paid to the founder of Counter App Limited, in respect of
their shareholders agreement and other contractual relationships
with the group and associated legal costs.
Taxation
The Group corporation tax charge for the six-month period is
forecast at EUR0.1m (H1 2022: EUR0.04m) and primarily relates to
our international operations where tax losses from our Irish
operations cannot be utilised. The Group has taken the forecasted
full year earnings or loss for each group entity to calculate the
effective tax rate for the six-month period ending to 30 June
2023.
The deferred tax amortisation charge for the six-month period
totalled EUR0.3m (H1 2022: credit of EUR0.4m). Prior year deferred
tax credit relating to a creation of a deferred tax asset for
capital allowances not utilised and available for future offset.
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.
The Group has availed of the Irish Revenue tax warehousing
scheme and deferred payment of all Irish employer taxes from
February 2021 to March 2022. Total amount warehoused at 30 June
2023 amounted to EUR9.5m (31 December 2022: EUR9.4m) as the Group
has incurred an interest charge of 3% on the outstanding warehoused
liability debt since 01 May 2023. The Group has agreed with the
Irish Revenue Commissioners to not repay any balance due on the
warehoused facility until April 2024. The Group continues to
monitor and comply with the appropriate Revenue guidelines
applicable to this scheme.
Share based payment
The share-based payment expense of EUR0.9m (H1 2022: EUR1.2m)
reflects the share-based payment charge arising on the issuance of
options in accordance with the Group's Restricted Share Award,
Long-Term Incentive Plan ("LTIP") and Save as you Earn ("SAYE")
plan.
On 20 February 2023 the company issued 1,027,655 shares to
satisfy restricted share awards granted by the Company at a value
EUR0.01 per share in relation to RSU 2021 which vested in equal
tranches in February 2022 and February 2023, and on 16 May 2023 the
company issued 1,645,994 shares to satisfy long term incentive plan
awards in relation to LTIP 2020 which vested at 75%.
Dividend
The Board does not expect to pay a cash dividend under its
current policy in respect of the 2023 financial year. Any payment
of cash dividends 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.
Related parties
Related party transactions are disclosed in note 15 to the
condensed group financial statements.
Principal 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. The Board considers the risks and uncertainties
described in detail in the Annual Report and Financial Statements
for the year ended 31 December 2022, published on 3 April 2023, to
remain applicable. Any changes to this evaluation and a description
of the risks and uncertainties are set out within the Appendix to
this document on pages 29 to 32 .
Caroline Sherry
Chief Financial Officer
10 August 2023
RESPONSIBILITY STATEMENT
Each of the Directors of Hostelworld Group plc (as listed on
pages 90 and 91 of the Annual Report and Financial Statements for
the year ended 31 December 2022, published on 3 April 2023) confirm
that, to the best of each person's knowledge and belief:
1. The condensed set of Group financial statements has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 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 Caroline Sherry
Chief Executive Officer Chief Financial Officer
10 August 2023 10 August 2023
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2023
Six months Six months
ended ended Six months
30 June 2023 30 June 2023 ended Six months Year
Pre Exceptional Exceptional 30 June 2023 ended ended 31
(Note 5) Total 30 June 2022* December 2022*
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------- ---------------- ---------------- --------------- ---------------- ----------------
Notes (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
------- ---------------- ---------------- --------------- ---------------- ----------------
Revenue 3 45,837 - 45,837 27,955 69,690
------- ---------------- ---------------- --------------- ---------------- ----------------
Operating
expenses
before
impairment 4 (47,521) (79) (47,600) (40,456) (83,113)
------- ---------------- ---------------- --------------- ---------------- ----------------
Share of result
of associate 88 - 88 4 (206)
------- ---------------- ---------------- --------------- ---------------- ----------------
Reversal of /
(impairment)
of trade
receivables 7 - 7 (88) 18
------- ---------------- ---------------- --------------- ---------------- ----------------
Operating loss (1,589) (79) (1,668) (12,585) (13,611)
------- ---------------- ---------------- --------------- ---------------- ----------------
Finance costs (1,901) (3,514) (5,415) (2,079) (4,301)
------- ---------------- ---------------- --------------- ---------------- ----------------
Loss before
taxation (3,490) (3,593) (7,083) (14,664) (17,912)
------- ---------------- ---------------- --------------- ---------------- ----------------
Taxation 6 & 10 (413) - (413) 378 649
------- ---------------- ---------------- --------------- ---------------- ----------------
Loss for the
period
attributed to
the equity
owners of the
parent company (3,903) (3,593) (7,496) (14,286) (17,263)
------- ---------------- ---------------- --------------- ---------------- ----------------
Basic and
diluted loss
per share (EUR
cent) 7 (6.23) (12.19) (14.71)
------- ---------------- ---------------- --------------- ---------------- ----------------
*Exceptional Costs for the period ended 30 June 2022 (EUR470k)
and year ended 31 December 2022 (EUR835k) comprised of items
included in operating expenses.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2023
Six months ended Six months ended Year
30 June 2023 30 June 2022 ended 31
December 2022
EUR'000 EUR'000 EUR'000
-------------------------------------------------------- ----------------- ----------------- ---------------
(Unaudited) (Unaudited) (Audited)
----------------- ----------------- ---------------
Loss for the period (7,496) (14,286) (17,263)
----------------- ----------------- ---------------
Items that may be reclassified subsequently to profit
or loss:
----------------- ----------------- ---------------
Exchange differences on translation of foreign
operations (25) 10 (11)
----------------- ----------------- ---------------
Total comprehensive loss for the period attributable to
equity owners of the parent company (7,521) (14,276) (17,274)
----------------- ----------------- ---------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
Six months Six months Year
ended ended ended 31
30 June 30 June December
2023 2022 2022
EUR'000 EUR'000 EUR'000
------ ------------ ------------ ----------
Notes (Unaudited) (Unaudited) (Audited)
------ ------------ ------------ ----------
Non-current assets
------ ------------ ------------ ----------
Intangible assets 8 69,457 76,411 73,358
------ ------------ ------------ ----------
Property, plant and equipment 9 1,047 958 735
------ ------------ ------------ ----------
Deferred tax assets 10 8,861 8,767 9,174
------ ------------ ------------ ----------
Investment in associate 1,068 1,190 980
------ ------------ ------------ ----------
Cash and cash equivalents 750 750 750
------ ------------ ------------ ----------
81,183 88,076 84,997
------ ------------ ------------ ----------
Current assets
------ ------------ ------------ ----------
Trade and other receivables 11 4,515 cap3,948 3,246
------ ------------ ------------ ----------
Cash and cash equivalents 9,947 22,580 18,212
------ ------------ ------------ ----------
Corporation tax 1 15 22
------ ------------ ------------ ----------
14,463 26,543 21,480
------ ------------ ------------ ----------
Total assets 95,646 114,619 106,477
------ ------------ ------------ ----------
Issued capital and reserves
attributable to equity
owners of the parent
------ ------------ ------------ ----------
Share capital 12 1,235 1,175 1,175
------ ------------ ------------ ----------
Share premium 12 14,328 14,328 14,328
------ ------------ ------------ ----------
Other reserves 12 4,235 6,273 6,432
------ ------------ ------------ ----------
Retained earnings 25,885 32,251 30,308
------ ------------ ------------ ----------
Total equity attributable
to equity holders of the
parent company 45,683 54,027 52,243
------ ------------ ------------ ----------
Non-current liabilities
------ ------------ ------------ ----------
Lease liabilities - 8 -
------ ------------ ------------ ----------
Trade and other payables 13 6,833 9,436 9,438
------ ------------ ------------ ----------
Borrowings 14 9,870 29,655 30,869
------ ------------ ------------ ----------
16,703 39,099 40,307
------ ------------ ------------ ----------
Current liabilities
------ ------------ ------------ ----------
Trade and other payables 13 24,579 20,380 12,863
------ ------------ ------------ ----------
Borrowings 14 7,522 184 244
------ ------------ ------------ ----------
Lease liabilities 826 710 547
------ ------------ ------------ ----------
Corporation tax 333 219 273
------ ------------ ------------ ----------
33,260 21,493 13,927
------ ------------ ------------ ----------
Total liabilities 49,963 60,592 54,234
------ ------------ ------------ ----------
Total equity and liabilities 95,646 114,619 106,477
------ ------------ ------------ ----------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2023
Share capital Share premium Retained earnings Other reserves Total
Notes EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------ -------------- -------------- ------------------ --------------- ---------
As at 31 December 2021
(audited) 1,163 14,328 45,140 6,475 67,106
------ -------------- -------------- ------------------ --------------- ---------
Total comprehensive loss for
the period 12 - - (14,286) 10 (14,276)
------ -------------- -------------- ------------------ --------------- ---------
Issue of shares 12 12 - - - 12
------ -------------- -------------- ------------------ --------------- ---------
Credit to equity for equity
settled share-based payments - - - 1,185 1,185
------ -------------- -------------- ------------------ --------------- ---------
Transfer on exercise, vesting
or expiry of share-based
payments - - 1,397 (1,397) -
------ -------------- -------------- ------------------ --------------- ---------
As at 30 June 2022
(unaudited) 1,175 14,328 32,251 6,273 54,027
------ -------------- -------------- ------------------ --------------- ---------
Total comprehensive loss for
the period 12 - - (2,977) (21) (2,998)
------ -------------- -------------- ------------------ --------------- ---------
Issue of shares 12 - - - - -
------ -------------- -------------- ------------------ --------------- ---------
Credit to equity for equity
settled share-based payments - - - 1,214 1,214
------ -------------- -------------- ------------------ --------------- ---------
Transfer on exercise, vesting
or expiry of share-based
payments - - 1,034 (1,034) -
------ -------------- -------------- ------------------ --------------- ---------
As at 31 December 2022
(audited) 1,175 14,328 30,308 6,432 52,243
------ -------------- -------------- ------------------ --------------- ---------
Total comprehensive loss for
the period 12 - - (7,496) (25) (7,521)
------ -------------- -------------- ------------------ --------------- ---------
Issue of shares 12 60 - - - 60
------ -------------- -------------- ------------------ --------------- ---------
Credit to equity for equity
settled share-based payments - - - 901 901
------ -------------- -------------- ------------------ --------------- ---------
Transfer on exercise, vesting
or expiry of warrants 12 - - 3,073 (3,073) -
------ -------------- -------------- ------------------ --------------- ---------
As at 30 June 2023
(unaudited) 1,235 14,328 25,885 4,235 45,683
------ -------------- -------------- ------------------ --------------- ---------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2023
Six months Six months Year
ended ended ended 31
Notes 30 June 30 June December
2023 2022 2022
EUR'000 EUR'000 EUR'000
-------- ------------ ------------ ----------
(Unaudited) (Unaudited) (Audited)
-------- ------------ ------------ ----------
Cash flows from operating activities
-------- ------------ ------------ ----------
Loss before taxation (7,083) (14,664) (17,912)
-------- ------------ ------------ ----------
Amortisation and depreciation 4 5,971 5,733 11,597
-------- ------------ ------------ ----------
Share of result of associate (88) (4) 206
-------- ------------ ------------ ----------
Net profit on disposal of leases 4 - - (1)
-------- ------------ ------------ ----------
Net loss on disposal of property,
plant and equipment 4 - - 1
-------- ------------ ------------ ----------
Finance costs 1,901 2,079 4,301
-------- ------------ ------------ ----------
Finance costs (exceptional) 5 3,514 - -
-------- ------------ ------------ ----------
Employee equity settled share-based
payment expense 939 1,195 2,396
-------- ------------ ------------ ----------
Changes in working capital items:
-------- ------------ ------------ ----------
Increase in trade and other payables 9,111 8,974 1,457
-------- ------------ ------------ ----------
Increase in trade and other receivables (1,269) (1,946) (1,244)
-------- ------------ ------------ ----------
Cash generated from operations 12,996 1,367 801
-------- ------------ ------------ ----------
Interest paid (2,210) (449) (180)
-------- ------------ ------------ ----------
Income tax paid (19) (78) (1,370)
-------- ------------ ------------ ----------
Net cash generated from / (used
in) operating activities 10,767 840 (749)
-------- ------------ ------------ ----------
Cash flows from investing activities
-------- ------------ ------------ ----------
Acquisition/development of intangible
assets 8 (1,544) (2,327) (4,597)
-------- ------------ ------------ ----------
Purchases of property, plant and
equipment 9 (61) (148) (196)
-------- ------------ ------------ ----------
Net cash used in investing activities (1,605) (2,475) (4,793)
-------- ------------ ------------ ----------
Cash flows from financing activities
-------- ------------ ------------ ----------
Proceeds received on issue of 33 - -
warrants
-------- ------------ ------------ ----------
Debt costs capitalised 14 (170) - -
-------- ------------ ------------ ----------
Proceeds from borrowings 14 17,369 - -
-------- ------------ ------------ ----------
Repayment of borrowings 14 (34,066) - -
-------- ------------ ------------ ----------
Repayments of obligations under
lease liabilities (568) (312) (752)
-------- ------------ ------------ ----------
Net cash used in from financing
activities (17,402) (312) (752)
-------- ------------ ------------ ----------
Net decrease in cash and cash
equivalents (8,240) (1,947) (6,294)
-------- ------------ ------------ ----------
Cash and cash equivalents at the
beginning of the period 18,962 25,267 25,267
-------- ------------ ------------ ----------
Effect of foreign exchange rate
changes (25) 10 (11)
-------- ------------ ------------ ----------
Cash and cash equivalents at
the end of the period 10,697 23,330 18,962
-------- ------------ ------------ ----------
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 registered office of the Company is One Chamberlain Square,
Birmingham, B3 3AX.
The condensed Group financial statements of the Company for the
six months ended 30 June 2023 comprise the Company and its
subsidiaries (together referred to as "the Group"). The condensed
Group financial statements for the period ended 30 June 2023 have
neither been audited or reviewed.
The information for the year ended 31 December 2022 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 09
August 2023.
2. ACCOUNTING POLICIES
Basis of preparation
The annual financial statements of the Group will be prepared in
accordance with United Kingdom adopted International Financial
Reporting Standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with United Kingdom adopted International Accounting
Standard 34 'Interim Financial Reporting'.
Going concern
The directors, after making enquiries, have a reasonable
expectation that the Group has adequate resources to continue
operating as a going concern for the foreseeable future.
Across H1 2023 we have seen strong month on month growth in new
customers, new bookings and an increase in net revenue as the Group
recovered from COVID-19. Revenue for H1 2023 totalled EUR45.8m (H1
2022: EUR28.0m). At 30 June 2023 the Group was in a net asset
position of EUR45.7m (31 December 2022: EUR52.2m) and a net debt
position of EUR16.2m (31 December 2022: EUR21.6m).
In May 2023, the Group refinanced its 5 year EUR30.0m legacy
term loan facility entered into during COVID-19 with HPS Investment
Partners LLC or subsidiaries or affiliates thereof ('HPS'). On 23
February 2021 an amount of EUR28.8m was drawn down on the facility.
In May 2023 the Group fully refinanced this debt facility following
agreeing a new 3--year facility with Allied Irish Banks plc
('AIB'). This new facility comprised a EUR10.0m term loan, a
EUR7.5m revolving credit facility ('RCF') and an undrawn EUR2.5m
overdraft. The term loan and RCF each have an initial interest rate
payable of 3.75% over EURIBOR, reducing to 3.25% where the ratio of
Net Debt to adjusted EBITDA is less than 2 and, 2.65% where the
ratio is less than 1. This new facility, will materially lower
interest costs, significantly strengthen the Group's balance sheet
and consolidates the firm foundations upon which the Group will
drive profitable growth and create shareholder value.
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
signing 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 did not
have a 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.
Key judgements and sources of estimation uncertainty
In preparing these condensed Group financial statements, the
directors have made judgements in applying the Group's 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. In preparing the condensed
Group financial statements, the significant judgements made by
management in applying the Group's accounting policies and the key
sources of estimation uncertainty were the same as those applied to
the consolidated financial statements for the year ended 31
December 2022. The Annual Report was published on 3 April 2023.
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 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
exceptional 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
2023 2022 2022
EUR'000 EUR'000 EUR'000
-------------------------- -------------------------- -------------------------- ---------------------------
(Unaudited) (Unaudited) (Audited)
-------------------------- -------------------------- ---------------------------
Europe 26,840 18,665 45,936
-------------------------- -------------------------- ---------------------------
Americas 8,957 7,513 15,719
-------------------------- -------------------------- ---------------------------
Asia, Africa and Oceania 10,040 1,777 8,035
-------------------------- -------------------------- ---------------------------
Total revenue 45,837 27,955 69,690
-------------------------- -------------------------- ---------------------------
For the six-month period ended 30 June 2023, an amount of
EUR5,613k was deferred to the balance sheet (30 June 2022:
EUR5,429k).
Disaggregation of revenue is presented as follows:
Six months ended 30 Six months ended 30 Year ended 31 December
June 2023 June 2022 2022
EUR'000 EUR'000 EUR'000
------------------------------------- ---------------------- ----------------------- -----------------------
(Unaudited) (Unaudited) (Audited)
---------------------- ----------------------- -----------------------
Technology and data processing fees 45,362 27,872 69,363
---------------------- ----------------------- -----------------------
Ancillary services and advertising
revenue 475 83 327
---------------------- ----------------------- -----------------------
Total revenue 45,837 27,955 69,690
---------------------- ----------------------- -----------------------
In the six months ended 30 June 2023, the Group generated 99%
(30 June 2022: 100%) of its revenues from the technology and data
processing fees that it charged to accommodation providers.
4. OPERATING EXPENSES EXCLUDING IMPAIRMENT
Loss for the period has been arrived at after charging/
(crediting) the following operating costs:
Six months ended Six months ended Year ended 31 December 2022
30 June 2023 30 June 2022
EUR'000 EUR'000 EUR'000
------------------------------------------- ----------------- ----------------- ----------------------------
(Unaudited) (Unaudited) (Audited)
----------------- ----------------- ----------------------------
Marketing expenses 26,826 20,050 42,233
----------------- ----------------- ----------------------------
Staff costs 9,739 8,703 18,078
----------------- ----------------- ----------------------------
Credit card processing fees 1,452 918 2,047
----------------- ----------------- ----------------------------
Loss on disposal of property, plant &
equipment - - 1
----------------- ----------------- ----------------------------
Profit on disposal of lease liability - - (1)
----------------- ----------------- ----------------------------
Exceptional items 79 470 835
----------------- ----------------- ----------------------------
Foreign exchange (gain)/ loss (106) 519 714
----------------- ----------------- ----------------------------
Other administrative costs 3,765 4,063 7,710
----------------- ----------------- ----------------------------
Total administrative expenses 41,755 34,723 71,617
----------------- ----------------- ----------------------------
Depreciation of property, plant and
equipment 526 428 968
----------------- ----------------- ----------------------------
Amortisation of intangible fixed assets 5,445 5,305 10,629
----------------- ----------------- ----------------------------
Amortisation of R&D tax credit (126) - (101)
----------------- ----------------- ----------------------------
Total operating expenses excluding
impairment 47,600 40,456 83,113
----------------- ----------------- ----------------------------
Total administration expenses increased by EUR7,032k to
EUR41,755k (30 June 2022: EUR34,723k), predominantly due to an
increase in direct marketing costs of EUR6,837k to EUR26,456k (30
June 2022: EUR19,619k), as revenue increased.
Included in staff costs in the prior year are income related to
government assistance totalling EUR376k for a subsidy received
under the Employment Wage Subsidy Scheme in Ireland, no relief has
been received in 2023.
Included within administration expenses in the current period is
a total credit of EUR62k (H1 2022: EURnil) in relation to an
R&D tax credit claimed in respect of projects completed in
2022.
5. EXCEPTIONAL ITEMS
Six months ended 30 June Six months ended 30 June Year ended 31 December
2023 2022 2022
EUR'000 EUR'000 EUR'000
------------------------- -------------------------- --------------------------- ---------------------------
(Unaudited) (Unaudited) (Audited)
-------------------------- --------------------------- ---------------------------
Litigation settlements - 470 519
-------------------------- --------------------------- ---------------------------
Restructuring costs 3,593 - 316
-------------------------- --------------------------- ---------------------------
Total exceptional items 3,593 470 835
-------------------------- --------------------------- ---------------------------
The exceptional items for the six months period amounted to
EUR3,593k (30 June 2022: EUR470k). Current year exceptional items
comprise of costs incurred in exiting the HPS facility, including
EUR687k of an early repayment penalty interest, EUR2,827k
accelerated interest costs which relate to transaction costs
capitalised on drawdown of HPS facility in February 2021, which
were expected to be amortised over a 5-year period to 2026 and
EUR79k of transaction costs which do not meet the criteria for
capitalisation. In the prior year, exceptional items relate to a
final settlement amount paid to the founder of Counter App Limited,
on their exit from the company and associated legal costs.
6. TAXATION
The corporation tax charge for the six-month period is forecast
at EUR100k (30 June 2022: EUR37k). 2023 and 2022 charge relate
primarily to our overseas operations where tax losses from our
Irish operations cannot be utilised.
Taxation charge represents the best estimate of the average
annual effective tax rate expected for the full year applied to the
pre-tax profit or loss of each group entity during the six-month
period. In calculating the expected tax rate, the Group has taken
the forecasted full year 2023 earnings or loss of each group
entity.
7. LOSS PER SHARE
Basic loss per share is computed by dividing the net loss 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 2022 30 June 2022 December 2022
(Unaudited) (Unaudited) (Audited)
-------------- -------------- ---------------
Weighted average number of shares in issue ('000s) 120,395 117,165 117,338
-------------- -------------- ---------------
Loss for the period (EUR'000s) (7,496) (14,286) (17,263)
-------------- -------------- ---------------
Basic and diluted loss per share (EUR cent) (6.23) (12.19) (14.71)
-------------- -------------- ---------------
On 20 February 2023 the company issued 1,027,655 shares to
satisfy restricted share awards granted by the Company at a value
EUR0.01 per share, and on 16 May 2023 the company issued 1,645,994
shares to satisfy long term incentive plan awards.
In connection with the incumbent HPS facility set out in note
14, Hostelworld agreed to issue warrants over 3,315,153 ordinary
shares of EUR0.01 each in the capital of Hostelworld (equivalent to
2.85% of Hostelworld's current issued share capital at the time of
issue of the warrants) to HPS. The warrants could be exercised at
any time during the term of the loan and for a twelve-month period
following its scheduled termination at an exercise price of EUR0.01
per ordinary share. Shares issued will be the same class and carry
the same rights as existing shares. On 29 March 2023 3,315,153
shares were issued to HPS on issuance of warrants.
The weighted average number of shares in the period was 120.4m
(H1 2022: 117.2m) and the total number of shares at the balance
sheet date was 123.5m (H1 2022: 117.5m).
Diluted loss per share is computed by adjusting the weighted
average number of ordinary shares in issue to assume conversion of
all potential dilutive ordinary shares. The issue of warrants and
share options and share awards (note 12) are the Company's only
potential dilutive ordinary shares. Ordinary shares potentially
issuable from share-based payment arrangements and warrants are
anti-dilutive due to the loss in the financial period meaning there
is no difference between basic and diluted earnings per share.
8. INTANGIBLE ASSETS
Additions during the period comprised of capitalised development
costs of EUR1,520k (30 June 2022: EUR2,256k), software additions of
EUR24k (30 June 2022: Nil) and an acquisition of a domain name of
EURNil (30 June 2022: EUR71k). There were no disposals. Offsetting
additions is a total amortisation charge of EUR5,445k for the
period ended 30 June 2023 (30 June 2022: EUR5,305k).
9. PROPERTY, PLANT AND EQUIPMENT
The Group recognised additions during the six months ended 30
June 2023 totalling EUR61k (30 June 2022: EUR148k) for computer
equipment and EUR40k (30 June 2022: EUR944k) for right-of-use lease
additions. In addition, the Group recognised an increase of EUR737k
in the carrying value of the right-of-use lease assets upon the
modification of an existing lease pertaining to the Group's Dublin
office space. There has been no disposal of assets during the
period (30 June 2022: EURNil). Total depreciation charge is EUR526k
for the period ended 30 June 2023 (30 June 2022: EUR428k ).
10. DEFERRED TAXATION
30 June 30 June 31 December 2022
2023 2022
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Opening balance 9,174 8,352 8,352
------------ ------------ -----------------
(Cost) / Credit to the consolidated income statement (313) 415 822
------------ ------------ -----------------
8,861 8,767 9,174
------------ ------------ -----------------
The deferred tax amortisation cost for the six-month period
totalled EUR313k (30 June 2022: credit of EUR415k). Prior year
credit relates to a deferred tax asset created for capital
allowances not utilised and available for future offset.
At 30 June 2023 the carrying value of deferred tax assets
amounted to EUR8,861k (31 December 2022: EUR9,174k). Deferred tax
assets are recognised to the extent that it is probable that
taxable profits will be available in future periods. Recognition of
deferred tax assets is reliant on detailed forecast information
regarding the future performance of business. The Group does not
have any binding fixed term contracts in place which guarantee
profitability. The Group has been loss making since 2020 as a
direct consequence of COVID-19. The Group is budgeted to return to
a profit before tax driven by a recovery to normal trading, which
forms the basis of the recoverability of the deferred tax asset.
The recognition and recoverability of the deferred tax asset is
based on the Group's ability to generate sufficient taxable profits
in future financial years. As part of our recoverability analysis,
the Group has performed a sensitivity analysis on taxable profits
growth over the next five years. The Group's forecasted taxable
profits would have to decline by over 10% over the next five years
before there is a risk that the deferred tax asset is not fully
recovered in that period.
11. TRADE AND OTHER RECEIVABLES
30 June 30 June 31 December 2022
2023 2022
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Amounts falling due within one year
------------ ------------ -----------------
Trade receivables 1,191 719 611
------------ ------------ -----------------
Prepayments and accrued income 922 773 1,265
------------ ------------ -----------------
Value added tax 2,402 2,456 1,370
------------ ------------ -----------------
4,515 3,948 3,246
------------ ------------ -----------------
12. SHARE CAPITAL
No of shares of EUR0.01 Share capital EUR'000 Share premium EUR'000 Total EUR'000
each (thousands)
At 31 December 2022 117,511 1,175 14,328 15,503
-------------------------- ---------------------- ---------------------- --------------
Share issue - Restricted
share award, 20 February
2023 1,028 10 - 10
-------------------------- ---------------------- ---------------------- --------------
Warrant issue to HPS, 29
March 2023 3,315 33 - 33
-------------------------- ---------------------- ---------------------- --------------
Share issue - Long term
incentive plan, 16 May
2023 1,646 17 - 17
-------------------------- ---------------------- ---------------------- --------------
At 30 June 2023 123,500 1,235 14,328 15,563
-------------------------- ---------------------- ---------------------- --------------
The Group has one class of ordinary shares which carry no right
to fixed income. The share capital of the Group is represented by
the share capital of the parent company, Hostelworld Group plc. All
the Company's shares are allotted, called up, fully paid and quoted
on the London Stock Exchange and Euronext Dublin.
Reconciliation and movement in other reserves during the period
as follows:
Foreign currency translation Share based payment reserve Warrant reserve Total
reserve
EUR'000 EUR'000 EUR'000 EUR'000
----------------------------- ---------------------------- ---------------- --------
At 31 December 2021 40 3,362 3,073 6,475
----------------------------- ---------------------------- ---------------- --------
Exchange differences on
translation of foreign
operations 10 - - 10
----------------------------- ---------------------------- ---------------- --------
Credit to equity for equity
settled share-based
payments - 1,185 - 1,185
----------------------------- ---------------------------- ---------------- --------
Transfer on exercise,
vesting or expiry of
share-based payments - (1,397) - (1,397)
----------------------------- ---------------------------- ---------------- --------
At 30 June 2022 50 3,150 3,073 6,273
----------------------------- ---------------------------- ---------------- --------
Exchange differences on
translation of foreign
operations (21) - - (21)
----------------------------- ---------------------------- ---------------- --------
Credit to equity for equity
settled share-based
payments - 1,214 - 1,214
----------------------------- ---------------------------- ---------------- --------
Transfer on exercise,
vesting or expiry of
share-based payments - (1,034) - (1,034)
----------------------------- ---------------------------- ---------------- --------
At 31 December 2022 29 3,330 3,073 6,432
----------------------------- ---------------------------- ---------------- --------
Exchange differences on
translation of foreign
operations (25) - - (25)
----------------------------- ---------------------------- ---------------- --------
Credit to equity for equity
settled share-based
payments - 901 - 901
----------------------------- ---------------------------- ---------------- --------
Transfer on exercise,
vesting or expiry of
warrants - - (3,073) (3,073)
----------------------------- ---------------------------- ---------------- --------
At 30 June 2023 4 4,231 - 4,235
----------------------------- ---------------------------- ---------------- --------
13. TRADE AND OTHER PAYABLES
30 June 30 June 31 December 2022
2023 2022
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Non-current liabilities
------------ ------------ -----------------
Payroll taxes 6,833 9,436 9,438
------------ ------------ -----------------
The Group has availed of the Irish Revenue tax warehousing
scheme and deferred payment of all Irish employer taxes from
February 2021 to March 2022. Total amount warehoused at 30 June
2023 amounted to EUR9,486k (31 December 2022: EUR9,438k) including
interest of EUR50k (31 December 2022: EURNil). The Group has agreed
with the Irish Revenue Commissioners to not repay any amounts due
on the warehoused facility until April 2024. An amount of EUR2,653k
is included within current liabilities. The Group incurs an annual
interest charge of 3% on the outstanding warehoused liability debt
which commenced on 01 May 2023. The Group continues to monitor and
comply with the appropriate Revenue guidelines applicable to this
scheme.
30 June 30 June 31 December 2022
2023 2022
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Non-current payroll taxes (warehoused) 6,833 9,436 9,438
------------ ------------ -----------------
Current payroll taxes (warehoused) 2,653 - -
------------ ------------ -----------------
9,486 9,436 9,438
------------ ------------ -----------------
30 June 30 June 31 December 2022
2023 2022
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Current liabilities
------------ ------------ -----------------
Trade payables 5,907 7,758 3,944
------------ ------------ -----------------
Accruals and other payables 6,546 5,585 5,136
------------ ------------ -----------------
Deferred revenue 8,883 6,472 3,201
------------ ------------ -----------------
Payroll taxes* 3,243 565 582
------------ ------------ -----------------
24,579 20,380 12,863
------------ ------------ -----------------
*2023 amounts includes EUR2,653k of payroll taxes warehoused
At 30 June 2023, EUR8,618k of revenue was deferred relating to
free cancellation bookings (31 December 2022: EUR3,005k) and
EUR265k relates to featured listings (31 December 2022: EUR178k).
Increase in provision directly driven by increase in bookings and
revenue.
Included in accruals and other payables is a credit provision
amounting to EUR150k (31 December 2022: EUR150k) for vouchers and
incentives to customers for use on future bookings reflecting the
expected value attached to vouchers. There is uncertainty on the
value of the credit provision given it is based on the probability
that a customer will use their voucher. The provision has not been
discounted.
14. BORROWINGS
30 June 30 June 31 December 2022
2023 2022
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Opening balance 31,113 28,209 28,209
------------ ------------ -----------------
Drawdown 17,369 - -
------------ ------------ -----------------
Repayments (34,066) - -
------------ ------------ -----------------
Transaction costs capitalised related to borrowings (170) - -
------------ ------------ -----------------
Finance costs 1,838 1,630 4,243
------------ ------------ -----------------
Finance costs - exceptional items 2,827
------------ ------------ -----------------
Finance interest paid (1,519) - (1,339)
------------ ------------ -----------------
17,392 29,839 31,113
------------ ------------ -----------------
In 2021 the Group signed a EUR30.0m five-year term loan facility
with certain investment funds and accounts of HPS Investment
Partners LLC (or subsidiaries or affiliates thereof). On 05 April
2023 the Group repaid EUR10m of the HPS facility and on 09 May 2023
the amount owing on the facility was repaid in full. An early
repayment penalty of 2% applied. Total repayment penalty costs of
EUR686k are included within Note 5 Exceptional items.
The April and May repayments totalled EUR34,066k which comprise
of EUR30,000k principal and EUR4,066k PIK interest.
Cash interest paid to 30 June 2023 totalled EUR1,519k (30 June
2022: EURnil). Increase year on year driven by all interest in the
first year of the HPS facility after drawdown being rolled up and
capitalised as PIK interest. Between the first and third
anniversaries of drawdown, Hostelworld elected to capitalise 4.0%
per annum of the accruing interest with the balance of the interest
during that period.
A new 3-year facility was signed with Allied Irish Banks plc
('AIB') on 9 May 2023. This facility is comprised of a EUR10,000k
term loan, a EUR7,500k revolving credit facility ('RCF') and an
undrawn EUR2,500k overdraft. An amount of EUR17,369k was drawn
down, net of arrangement fee. Amount drawn down was utilised to
repay the HPS facility.
The AIB term loan and RCF each had an initial interest rate
payable of 3.75% over EURIBOR. In July 2023 this reduced to 3.25%,
when the ratio of Net Debt to adjusted EBITDA was less than 2
times. The interest rate will reduce to 2.65% over EURIBOR where of
Net Debt to adjusted EBITDA is less than 1 times.
Financial covenants attached to the facility are set out as
follows:
1. Maintaining a minimum cash balance on hand of EUR6m;
2. Ensuring an interest cover of not less than 3:1. Interest
cover is defined as the ratio of Adjusted EBITDA to Gross Interest
Paid in respect of any Relevant Period. Covenant is tested
quarterly, based on the prior 12-month actuals; and
3. Ensuring the Groups adjusted leverage ratio does not exceed
3:1. Adjusted leverage is defined as the ratio of Net Debt on the
last day of each quarter to Adjusted EBITDA in respect of the 12
months to the quarters reporting date.
The debt is guaranteed by the Group's principal trading entity
Hostelworld.com Limited, who has provided the lenders with a
customary security package over its assets.
Borrowings are classified in the consolidated statement of
financial position as:
30 June 30 June 31 December 2022
2023 2022
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Non-current borrowings 9,870 29,655 30,869
------------ ------------ -----------------
Current borrowings 7,522 184 244
------------ ------------ -----------------
17,392 29,839 31,113
------------ ------------ -----------------
15. GROUP STRUCTURE AND RELATED PARTY TRANSACTIONS
There are no changes to the Group structure or related party
transactions to highlight in respect of H1 2023 and no related
party transactions to highlight.
16. EVENTS AFTER THE REPORTING DATE
There have been no significant events, outside the ordinary
course of business, affecting the Group since 30 June 2023.
APPIX 1: 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: loss / earnings before
interest, tax, depreciation, and amortisation, excluding
exceptional and non-cash items ("adjusted EBITDA"), adjusted loss /
profit after taxation; adjusted loss or earnings per share. An
explanation of each APM and its purpose within the Group is set out
from page 222 within the Annual Report and Financial Statements for
the year ended 31 December 2022, published on 3 April 2023.
Adjusted EBITDA
Relates to loss / earnings before interest, tax, depreciation
and amortisation, excluding exceptional and non-cash items
("Adjusted EBITDA"). Exceptional items by their nature and size can
make interpretation of the underlying trends in the business more
difficult. We believe this APM reflects the key drivers of
profitability for the Group and removes those items which do not
impact underlying trading performance.
Reconciliation between loss for the year and adjusted
EBITDA:
30 June 30 June
2023 2022
EUR'000 EUR'000
------------------------- ---------------------------
Loss for the year (7,496) (14,286)
------------------------- ---------------------------
Taxation 413 (378)
------------------------- ---------------------------
Net finance costs 1,901 2,079
------------------------- ---------------------------
Net finance costs (exceptional) 3,514 -
------------------------- ---------------------------
Operating loss (1,668) (12,585)
------------------------- ---------------------------
Depreciation 526 428
------------------------- ---------------------------
Amortisation of development costs 1,524 1,378
------------------------- ---------------------------
Amortisation of acquired intangible assets 3,921 3,927
------------------------- ---------------------------
R&D Tax Credit (126) -
------------------------- ---------------------------
Share of result of associate (88) (4)
------------------------- ---------------------------
Exceptional items 79 470
------------------------- ---------------------------
Share based payment expense 939 1,195
------------------------- ---------------------------
Adjusted EBITDA 5,107 (5,191)
------------------------- ---------------------------
Adjusted loss after taxation ("Adjusted PAT")
Adjusted profit/(loss) after taxation is an APM 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 for the
year:
30 June 30 June
2023 2022
EUR'000 EUR'000
------------------------ --------------------------
Adjusted EBITDA 5,107 (5,191)
------------------------ --------------------------
Depreciation (526) (428)
------------------------ --------------------------
Amortisation of development costs (1,524) (1,378)
------------------------ --------------------------
Net finance costs (1,901) (2,079)
------------------------ --------------------------
Net finance costs (exceptional) (3,514) -
------------------------ --------------------------
R&D Tax Credit 126 -
------------------------ --------------------------
Share of result of associate 88 4
------------------------ --------------------------
Corporation tax (100) (37)
------------------------ --------------------------
Adjusted loss after taxation (2,244) (9,109)
------------------------ --------------------------
Exceptional items (79) (470)
------------------------ --------------------------
Amortisation of acquired intangible assets (3,921) (3,927)
------------------------ --------------------------
Share based payment expense (939) (1,195)
------------------------ --------------------------
Deferred taxation (313) 415
------------------------ --------------------------
Loss for the year (7,496) (14,286)
------------------------ --------------------------
Adjusted loss per share
Adjusted EPS is an APM 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.
30 June 30 June
2023 2022
Adjusted loss after taxation EUR'000 (2,244) (9,109)
---------------------- ----------------------
Weighted average shares in issue ('m) 120 117
---------------------- ----------------------
Adjusted EPS (1.9) (7.8)
---------------------- ----------------------
Adjusted free cash flow
Free cash flow adjusted for refinance cashflow movements and
exceptional cost outflows. Free Cash Flow Conversion has been
adjusted for capital expenditure, acquisition of intangible assets,
net finance costs and excludes the effect of exceptional costs.
It is a key measure which shows the cash the Group is
generating/ using as it excludes certain items which to not relate
to the day-to-day activities of the Group.
30 June 31 December
2023 2022
EUR'000 EUR'000
--------- ------------
Net decrease in cash and cash equivalents (8,240) (6,294)
--------- ------------
Add back
--------- ------------
Repayment of borrowings 34,066 -
--------- ------------
Proceeds from borrowings (17,369) -
--------- ------------
Transaction costs capitalised 170 -
--------- ------------
Proceeds received on issue of warrants (33) -
--------- ------------
Warehoused payroll taxes - (1,389)
--------- ------------
Exceptional items* 778 806
--------- ------------
Adjusted free cash flow / (absorption) 9,372 (6,877)
--------- ------------
Adjusted EBITDA profit 5,107 1,321
--------- ------------
Adjusted free cash flow / (absorption) % [conversion] 183% (521%)
--------- ------------
* Exceptional items included in adjusted free cash flow exclude
professional fees included in liabilities at reporting date not
paid.
Net average booking value ("ABV")
Net average booking value is a key performance revenue measure
which looks at the average value paid by a customer for a booking.
It is a key performance indicator of the value of bookings and
commission earned on generated bookings.
30 June 30 June
2023 2022
EUR'000 EUR'000
----------------------- --------------------------
Gross revenue 59,267 37,598
----------------------- --------------------------
Cancellations (7,769) (4,801)
----------------------- --------------------------
Revenue 51,498 32,797
----------------------- --------------------------
Deferred revenue movement (5,613) (5,429)
----------------------- --------------------------
Counter revenue 109 52
----------------------- --------------------------
Roamies revenue 44 -
----------------------- --------------------------
Adjustments to revenue** (171) 803
----------------------- --------------------------
Advertising income 475 83
----------------------- --------------------------
Volume incentive rebates (505) (351)
----------------------- --------------------------
Net revenue 45,837 27,955
----------------------- --------------------------
*Gross booking revenue less cancellations
**primarily relates to recognition of refunds, chargebacks and
voucher provisioning.
30 June 30 June
2023 2022
Revenue (EUR'000) 51,498 32,797
-------- --------
Net bookings (#'000) 3,398 2,073
-------- --------
Net ABV generated EUR cent per share 15.15 15.82
-------- --------
Net gross merchandise value (GMV)
Net GMV represents the gross transaction value of bookings on
our platform less cancellations.
It is an APM which shows the total value of transactions
executed through our platform.
30 June 30 June
2023 2022
EUR'000 EUR'000
-------- --------
Net GMV 339,547 216,287
-------- --------
Direct marketing costs as a % of revenue
Direct marketing costs as a percentage of revenue is an APM
which looks at the percentage of paid marketing cost per value of
bookings.
30 June 30 June
2023 2022
EUR'000 EUR'000
-------- --------
Direct Marketing Costs* 26,456 19,619
-------- --------
Revenue [Net GBR] 51,498 32,797
-------- --------
Direct Marketing Costs as a % of Revenue** 51% 60%
-------- --------
*Total Marketing Costs are EUR26,826k (H1 2022: EUR20,050k),
within this balance Direct Marketing Costs total EUR26,456k (H1
2022: EUR19,619k). Balance relates to brand marketing.
**In the prior year direct costs as a % of revenue was presented
using % of net revenue. Net revenue considers deferred revenue,
other ancillary revenues as well as rebates. Revenue [generated
revenue] has been used to calculate this percentage in the current
year as this better aligns to how this metric is viewed internally
by the Group.
APPIX 2: PRINCIPAL RISKS AND UNCERTAINTIES
The Group's risk register identifies key risks including any
emerging risks and monitors progress in managing and mitigating
these risks. Each risk identified is subject to an assessment
incorporating likelihood of occurrence and potential impact on the
Group. The Group's risk register is subject to review by the Senior
Leadership Team ('SLT') and Executive Leadership Team ('ELT') prior
to reporting to the Audit Committee and Board.
The principal risks and uncertainties faced by the Group are
reported annually within the Annual Report and Financial Statements
for the year ended 31 December 2022, published on 3 April 2023.
A review was performed of the risk register during H1 2023. The
risks included have not materially changed from those reported
within the Annual Report.
Strategic & Technological, Financial Operational
external risk Cyber & Data risk & Regulatory
risk risk
========================================
Unchanged
level of * Macroeconomic conditions * Data security * Taxation * Third party reliance
risk
* Competition * Cyber * Financial * Climate change and sustainability
* IT platforms and technological innovation * Regulation
* Search engine algorithms * Business continuity
* Brand and reputation
=========== ========================================================== ================================================ ================ ========================================
Decreasing * People
level of * Impact of uncontrollable events on our business and
risk the leisure travel industry [Pandemic]
=========== ========================================================== ================================================ ================ ========================================
The following changes were made:
1. The risk profile of the following risks has decreased in 2023
in regard to the probability of the occurrence of the risk on the
Group or the impact it would have in terms of reputation or
cost.
-- People related risk has decreased as while the recruitment
environment remains highly competitive, attrition levels are not as
high as during 2022. Additionally, headcount levels are expected to
remain consistent with the Group.
-- The risk related to the impact of uncontrollable events on
our business and the leisure travel industry has decreased
reflecting the lowering of the specific COVID-19 related risk when
considering pandemic related risk. Trading has largely returned to
normal.
2. Our risks have evolved in some areas to take into account two
key themes - impact of artificial intelligence on our business and
the impact of our growing social platform, including Linkups, o how
we manage our regulations, data and cyber security.
We have not identified any emerging risks. The principal risks
and uncertainties which are applicable for the second half of the
year are summarised below.
Material risks
-- Macroeconomic conditions
-- The Group's financial performance is largely dependent on the
wide availability of, and demand for travel services. The demand
for travel services is influenced by a range of macroeconomic
circumstances and their impact on consumers discretionary spending
levels. Economic activity, employment levels, inflation, interest
rates, foreign exchange movements and access to credit are among
the factors that can impact travel demand.
-- Data security
-- The security of the confidential business information we
generate when engaging in e-commerce and the personal data we
capture from customers and employees is essential to maintaining
confidence in our services. As an online platform, we are
constantly exposed to threats in the form of internal and external
attacks or disruption to our systems or those of our third-party
suppliers.
-- Cyber security
-- The Group like other companies is susceptible to cyberattacks
which could compromise the integrity of our systems and the
security of our data. Cyberattacks by individuals, groups of
hackers and state-sponsored organisations are increasing in
frequency. The tools and techniques used in such attacks continue
to evolve in sophistication.
-- People
-- The Group is dependent on its ability to attract, retain and
develop creative, committed and skilled employees in order to
achieve its strategic objectives. While attrition rates in the
latter half of 2022 into 2023 have reduced, the recruitment
environment remains intense. People risk has decreased in 2023 but
may increase in future if the Group does not keep pace with market
developments.
-- Financial risk
-- The Group's activities expose it to a variety of financial
risks; market risk (particularly exchange rates), credit risk and
liquidity risk. The Group proactively manages financial risk by
seeking to minimise potential adverse effects on its financial
performance.
-- Competition
-- The risks posed by competition where we compete for supply of
hostel inventory and customers could adversely impact our market
share and future growth of the business. Our competition may have
more resources than we do, enabling them to compete more
effectively.
-- IT platforms and technological innovation
-- The ever-increasing pace of change of new technology,
infrastructure and software offerings change how customers
research, purchase, and experience travel. We must stay abreast of
technological innovation and change, both in our product offerings
and supporting infrastructure, or risk becoming irrelevant to the
modern customer. We invest a significant amount in product and user
experience functions.
-- Third party reliance
-- We rely on hostel accommodation providers to provide us with
our inventory. Any limitations on such will directly impact our
business and results of operations.
-- We rely on a number of key third-party providers within our
technology environment for our cloud storage and databases. Any
interruption in service from any of these providers may lead to a
loss in revenue, loss in site and app functionality, increased
input from customer services and engineer time, and ultimately if
we experience multiple failures we risk reputational and brand
damage.
-- The Group relies on payment processors and payment card
schemes to execute certain components of the payments process.
There is a risk that the Group may not maintain its relationships
with these third parties on favorable terms or that the transaction
fees imposed by these providers are increased.
-- Search engine algorithms and managing our marketing channels
-- We rely significantly on practices such as Search Engine
Optimisation and Search Engine Marketing to improve our visibility
in relevant search results. Search engines frequently update and
change the logic that determines the placement and display of
results. As these algorithms evolve, our marketing strategy is at
risk of falling behind and not remaining competitive. Our costs to
improve or maintain our placement in search results can increase
which directly impacts our results and margins.
-- Climate change and sustainability
-- Climate change and sustainability continue to be areas of
increased focus for the Group and are further evolving as areas of
heightened concern with consumers and stakeholders. There is a
request for more accountability from our customers, employees, and
other stakeholders as to the Group's actions to limit its direct
and indirect impact on climate change.
-- Impact of uncontrollable events on our business and the leisure travel industry
-- The threat of a global pandemic (similar to COVID-19),
terrorist attacks in key cities and aircrafts in flight,
geopolitical conflicts, climate change, natural disasters or other
adverse events outside of the control of the Group may reduce
demand for or prevent the ability to travel to affected regions.
This may result in risk to the health of our employees and
customers and may have consequential negative impact on economic
activity.
-- Regulation
-- The Group's business is global and highly regulated, and is
exposed to issues such as competition, licensing of local
accommodation and experiences, language usage, web-based trading,
consumer compliance, taxation, intellectual property, trademarks,
data protection and information security and commercial disputes in
multiple jurisdictions. Regulatory and legal requirements and
uncertainties around these issues could subject the Group to
business constraints, increased regulatory and compliance costs,
and other complexities which may otherwise harm our business.
-- Business continuity
-- Failure in our IT systems or third party hosted services on
which we rely could disrupt availability of our booking engines and
payments platforms, or availability of administrative services.
-- Brand and reputation
-- Hostelworld is a world leading OTA focused on the hostel
market. We rely on the strength of our brand in the market to
attract customers to our platform and to secure bookings. Consumer
trust and confidence in our brand is therefore essential to ongoing
revenue stability and growth. Negative publicity could impact brand
perception, consumer loyalty and ultimately revenues.
-- Taxation
-- Due to the global nature of our business, tax authorities in
other jurisdictions may consider certain taxes as due in their
jurisdiction. If those tax authorities take a different view than
the Group as to the basis on which the Group is subject to tax, it
could result in the Group having to account for tax that it
currently does not collect or pay. Additional employee locations in
a remote working environment also could give rise to potential tax
implications.
[1] 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 and reconciliations to IFRS measures are provided in
the APMs section on pages 26 to 29.
[2] Net GMV is gross transaction value of the bookings less
cancellations.
[3] Generated revenue is gross revenue less cancellations and
excludes impact of deferred revenue.
[4] Net debt is cash less outstanding debt, including term loan,
revolving credit facility and warehoused payroll taxes.
[5] Follow on bookings post a flight are bookings made by
customers where the customer's nationality is different from the
country where the booking was made.
6 ABVs are calculated using generated revenues less
cancellations divided by net bookings.
7 At the end of March 2022 all online travel agents delisted
accomodation, including hostels located in Russia and Belarus from
their platforms, including HW. Including this reduction in capacity
reduces the global hostel sales growth in bednights to
approximately 12% year on year.
8 Market coverage is calculated by estimating the total number
of bednights sold via hostels connected to our platform divided by
the estimated total number of bednights sold across all hostels in
the category.
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END
IR EAEPNEEADEAA
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