TIDMHSW
RNS Number : 3443K
Hostelworld Group PLC
10 April 2018
Hostelworld Group plc
("Hostelworld" or the "Group")
Preliminary Results for the Year ended 31 December 2017
10 April 2018: Hostelworld, the world's leading hostel-focused
online booking platform, is pleased to announce its preliminary
results for the year ended 31 December 2017.
Operational Highlights
-- FY 2017 performance in line with the board's expectations
-- Group bookings increased by 6% (to 7.5m bookings) with core Hostelworld brand bookings up 13%
-- Continued delivery on marketing efficiencies:
- Bookings from not-paid-for channels 63% of total (2016:
61%)
- Marketing investment represented 38% of Net Revenue (2016:
41%)
-- 54% of bookings coming from mobile devices, up from 47% in 2016
-- Continued strong performance in Asia with inbound bookings growth of 12%
-- New technology centre established in Portugal to increase capacity in product development.
Financial Highlights
-- Group Net Revenue increased by 8% to EUR86.7m (2016:
EUR80.5M); 10% increase at constant currency
-- Average Booking Value ("ABV") of EUR11.6, flat on 2016 and up
2% at constant currency (2016: 4% decline);
-- Adjusted EBITDA increased by 10% to EUR26.4m (2016:
EUR23.9m); 13% increase at constant currency
-- Adjusted EBITDA Margin consistent at 30% (2016: 30%)
-- Group Adjusted Profit after Tax up 12% to EUR21.7m (2016:
EUR19.4m); 16% increase at constant currency
-- Reported Profit after Tax of EUR11.2m (2016: EUR0.8m)
-- Adjusted pro-forma Earnings Per Share of 22.73 euro cent per
share (2016: 20.27 euro cent per share), an increase of 12%
-- Strong underlying adjusted free cash conversion of 81% (2016: 90%)
-- Cash balances of EUR21.3 m at 31 December 2017 (2016:
EUR24.6m), after payment of EUR24.8m of dividends in the year ended
31 December 2017
-- Proposed 15% increase in final dividend of 12.0 euro cent per
share (2016: 10.4 euro cent), resulting in full year dividend of
17.1 euro cent per share, in line with stated dividend policy
Feargal Mooney, Chief Executive Officer, commented:
"In 2017, a double digit increase in Hostelworld brand bookings
underpinned a record adjusted EBITDA of EUR26.4m.
In recognition of the importance of technology in our business
we invested in a new development centre in Porto and plan to
substantially expand our commitment there in 2018 in order to
increase the pace and volume of new product features and
functionality for our customers and hostel partners.
Market conditions, particularly in Europe, remain uncertain and
while volume bookings are in line with expectations, weaker
exchange rates, particularly for the US dollar, remain a
significant headwind.
We continued our program of pricing initiatives in Q1 2018, with
changes to base rate commissions making a positive contribution to
ABV.
In addition, the pilot launch of our new free cancellation
booking option in February 2018, resulted in a noticeable increase
in conversion and booking levels. We therefore plan to introduce
this model more widely, which we see as a key strategic move for
the business. We anticipate this product to be earnings enhancing
in the medium term but will result in a deferral of revenue
recognition which will affect reported earnings in 2018, its first
year, but will not impact on cash receipts.
This new product together with increased technology investment
will substantially improve our offering to customers and our
competitive position and underpin the Board's confidence that we
will see bookings growth in 2018 and beyond."
ends
A presentation will be made to analysts at 9.00am today, a copy
of which will be available on our Group website
http://www.hostelworldgroup.com. If you would like to attend the
presentation, please contact Powerscourt on the contact details
below.
For further information please contact:
Hostelworld Group plc
Feargal Mooney, Chief Executive Officer +353 (0) 1 498 0700
Powerscourt hostelworld@powerscourt-group.com
Lisa Kavanagh + 44 (0) 20 7250 1446
Selene Alford/Jack Hickey +353 87 642 88 44 / + 353 83 4488
339
About Hostelworld Group
Hostelworld Group is the world's leading hostel-focused online
booking platform. Connecting travellers with hostels around the
world, Hostelworld offers more than ten million customer reviews
across 36,000 properties in more than 170 countries, making the
brand the leading online hub for social travel. The website
operates in 19 different languages and mobile app operates in 13
different languages.
Hostelworld travellers are a unique, passionate breed; they want
to see the world, make new connections and crave the adrenaline of
new adventures. Hostelworld inspires them to 'Meet the World'
through the social nature of hostels that turbo-charges their
journeys and helps create unforgettable memories.
Headquartered in Dublin, Hostelworld has offices around the
world in London, Porto, Seoul, Shanghai and Sydney with
approximately 250 employees. The Hostelworld Group listed on the
main London and Irish stock exchanges in November 2015.
Chairman's Statement
I am pleased to present my first Chairman's statement for
Hostelworld, having assumed the role of Chairman on 1 December
2017.
2017 was a year of strong bookings growth for Hostelworld, in
the midst of continued challenges for the travel industry. The
industry continues to be impacted by Brexit uncertainty and
terrorist attacks, which particularly affect our key European
destinations. We have continued to create value for our
shareholders by meeting customer needs in a rapidly changing
marketplace.
Results and financial position
Overall Group bookings grew by 6% in the year, compared to a
decline of 1% in 2016, with bookings in the Hostelworld brand
growing by 13% in the year (2016: 18%). It was a year in which we
saw very strong growth of 11% in H1 2017 somewhat offset by lower
bookings growth of 1% in the latter part of the year as we lapped
stronger comparatives. The Group's flagship brand, Hostelworld,
represented 93% of total Group bookings as compared with 87% in
2016. On a Group basis net revenue increased by 8% in 2017,
compared to a 4% decline in 2016.
Adjusted EBITDA for the year was EUR26.4m (2016: EUR23.9m) and
operating profit for the year was EUR11.9m (2016: EUR0.2m) which,
as stated in our pre-close update, is in line with the Board's
expectations for the year.
The business continues to be strongly cash generative, with
adjusted free cash flow of EUR21.5m (2016: EUR21.5m), contributing
to a strong balance sheet at the year end. Cash balances at year
end were EUR21.3m (2016: EUR24.6m), after payment of EUR24.8m of
dividends during the year.
Dividend and Capital Structure
The Board is recommending a full year final dividend of 12.0
euro cent per share which reflects the distribution of 75% of the
Adjusted Profit after Taxation for the year.
The Board continues to review its approach to returning capital
to shareholders, providing returns to shareholders whilst retaining
flexibility for capital and other investment opportunities.
Board Composition
The composition of the Board is fully compliant with the UK
Corporate Governance Code as applied to small companies. The Board
has undertaken an appraisal of the directors, as well as of the
Board and each sub-committee, which concluded that the Board is
functioning effectively.
As was announced in our interim results, Richard Segal stepped
down from the Board as Chairman on 1 December 2017 and as director
from 31 December 2017 after a period of six years with the
business. I would like to thank Richard for his valuable guidance
and contribution to the Group during his tenure as non-executive
Chairman.
Carl Shepherd was appointed as Non-Executive Director on 1
October 2017 and brings a wealth of experience in the online travel
industry, as co-founder of Homeaway Inc. Éimear Moloney was
appointed as Non-Executive Director on 27 November 2017, bringing
with her years of senior investment management and business
experience.
Following these appointments, a number of changes have been made
to the composition of the sub-committees of the Board. Andy McCue
has assumed the role of Senior Independent Director and remains as
Chair of the Remuneration Committee. Éimear Moloney now serves as
Chair of the Audit Committee.
In December, Mari Hurley announced her intention to resign as
Chief Financial Officer and Director. I would like to thank her for
her strong financial leadership during her eleven years with the
Group and to wish her well in her future endeavours.
People
On behalf of the Board, I would like to thank all members of the
Hostelworld team for their commitment and hard work during the
year. I would like to particularly acknowledge the efforts of our
new software development team based in Porto.
Outlook
The continued investment in our technology development
capability and brand has placed the Group in a good position to
capture future growth in the hostel sector. These factors together
with the strong skillset of our people and an increased focus on
product innovation will enhance our prospects in our core
marketplace and provide opportunities for incremental growth in the
years ahead.
Michael Cawley
Chairman
9 April 2018
Chief Executive's Statement
Hostelworld continues to be a young and ambitious global
business which focusses on facilitating a social travel experience
for millennials and others seeking a sense of adventure, community
and interaction with like-minded international travellers. By
focussing on hostels, and a young demographic customer base, we
believe we are better positioned to benefit from the inherent
growth of the sector and to compete more effectively with
generalist online travel agents (OTAs).
Our growth has been delivered through continued investment in
our core technology platform and in an expanding array of
differentiated product features, which aim to address a larger
community of hostel guests and increase our revenue per customer.
We do this through continued investment in technology (in
particular mobile), brand marketing, and geographic diversification
supported by a range of pricing initiatives.
Growth
Bookings for the Group's primary Hostelworld brand, which
contribute 93% of total Group bookings, grew by 13% in the year
(2016: 18%). Total Group bookings and revenues for the year
increased by 6% and 8% respectively (2016: 1% decline and 4%
decline) as we successfully focussed on driving bookings growth in
our flagship brand, and proactively managed the decline in our
supporting brands.
We are pleased with the continued progress made in managing our
marketing investment, driving efficiencies in cost-per-click and
cost-per-booking which has resulted in a more profitable booking
mix. In 2017, bookings from not-paid-for channels increased to 63%
of overall Group bookings (2016: 61%), and marketing expenses as a
percentage of net revenue decreased to 38% (2016: 41%). We are
confident that our marketing and mobile led strategy, with the goal
of diversifying online marketing channels and increasing
Hostelworld brand awareness, will continue to deliver an efficient
customer acquisition strategy, driving future growth.
Technology and Mobile
2017 was a transformational year for Hostelworld technology.
Alongside our continuous delivery of mobile and website products,
we also commissioned and set up a new software development office
in Porto, where we had 24 people employed at 31 December 2017.
Based on its initial success, we plan to substantially expand this
new software delivery centre during 2018, as we expect it to play a
significant role in Hostelworld's future success. In addition to
investing in new capacity, we also placed considerable focus on
training and upskilling to ensure an agile and delivery focussed
culture which will increase future efficiency, morale and knowledge
retention across the entire technology division.
In terms of product delivery, mobile led the way with innovative
products such as the highly popular Speak The World translation
tool, as well as pilot launches of Hostel Chat and Extend Your
Stay. Our mobile first strategy has resulted in mobile (including
tablet) representing 54% of Hostelworld group bookings for the year
(2016: 47%). In terms of offering better flexibility to our
customers and providing better yield management tools to our hostel
partners, we completed the rollout of non-refundable rates and
followed this up in 2018 with the pilot launch of free cancellation
bookings, a product which allows us to offer our customers greater
flexibility and improves our own competitive position. The pilot
launch resulted in a noticeable increase in conversion and booking
levels, and we therefore plan to introduce this model more widely,
which we see as a key strategic move for the business. We
anticipate this product to be earnings enhancing in the medium term
but will result in a deferral of revenue recognition which will
impact reported earnings in 2018, its first year, but will not
impact on cash receipts.
Brand marketing
Strong performance in Hostelworld brand bookings (+13%) and
bookings growth from direct channels are encouraging signs that
Hostelworld's brand activity is having a positive effect for the
business. The focus for brand activity has been driving reach and
penetration in more markets globally, whilst also being present in
those markets more frequently. Hostelworld is seeing signs across
many of the brand channels that this strategy is paying off,
including through healthy growth in app downloads (up 49% to 2.2m
downloads in 2017).
Following 2016's award winning In Da Hostel with 50 Cent
campaign, Hostelworld continued its successful 'Unexpected Guest'
strategy, with a hugely provocative, perception-busting campaign
involving Charlie Sheen's antics in hostels. Launching in March
2017, this campaign contributed to the 13% growth in Hostelworld
brand bookings in 2017.
2017 also saw our first product-driven marketing campaign, with
the launch of Speak The World. With the objective of
differentiating Hostelworld's app from the competition whilst also
driving app downloads, Speak The World leveraged Hostelworld's
strong brand positioning to create a useful translation tool which
allows travellers to speak in 45 different languages. The campaign
not only generated a huge amount of PR across 16 markets, but saw a
100% increase in app downloads across the key summer months, and
has produced over 3.5 million translations to date.
Through Social, Hostelworld's following has reached over 2m fans
across Facebook, Twitter, YouTube and Instagram combined; a 50%
increase in the period. Greater reach and penetration of markets
globally on Social has contributed to over 12m unique visitors to
the Hostelworld Blog - driving traffic through the marketing
funnel.
Supporting our brand initiatives, we launched a major PR event
in September, creating the world's first ever Sand Hostel on the
Gold Coast, Australia. This was Hostelworld's most successful PR
campaign to date and brought to life the key attributes of the
hostel experience that feature across all of our brand campaigns:
sociability, security and availability of private rooms.
Asia
Inbound growth remained strong with 12% year on year ("YoY")
increase in bookings to Asian destinations during 2017. Asia now
represents 21% of group-wide bookings with Thailand consistently
featuring in our top 3 global destinations over the course of 2017.
Vietnam was the fastest growing destination in our global top 10
with 22% YoY growth over 2016. Indonesia is another high growth
destination in the region with 32% YoY growth in bookings. We
continue to focus on adding supplementary supply in the Asian
region and appointed an agent in Thailand in the latter half of the
year, to support out Shanghai based team and bolster inventory in
this key inbound market.
Outbound growth proved more challenging in 2017. The transition
to a single brand in the Korean market coupled with both global and
Asian political unrest hampered progress in the region. In response
to this, however, we launched a number of new initiatives in Korea
including Hostelworld hosted travel seminars and the company's
first ever student ambassador program. We also worked closely with
several key influencers in the market. In addition we transitioned
to a new paid search agency and expanded the team on the ground
leaving us well positioned to explore new opportunities for growth
in 2018 and beyond.
Pricing and yield management
The year saw encouraging growth in our Elevate programme, with
34% of 2017 Group bookings delivered to properties participating in
Elevate, an increase from 30% in 2016.
The Elevate programme gives accommodation providers the
opportunity to increase their prominence in search lists
dynamically in exchange for a higher commission rate of up to 10%
above the relevant base commission rate. We also offer a premium
listing feature, which enables accommodation providers to purchase
fixed slots at the top of Hostelworld's and our other brands'
results on a monthly cycle. In 2017, we continued to expand the
offering of revenue management services to our properties so as to
assist them in improving their yield per bednight. In February
2018, we continued our program of pricing initiatives, introducing
changes to base rate commissions which will contribute to ABV
during 2018.
Implementing our strategy
Through 2017 we have continued to develop and implement our
strategy. As part of this process we have simplified our strategy
to three key objectives to ensure focus and delivery across the
business.
This will also ensure we remain properly focussed on the
customer and maintain our competitive position in our core markets.
We will continue to raise the awareness of the hostelling concept
amongst current and potential category users, build on the social
nature of our customer base to develop the Hostelworld Community
and increasingly drive revenue per customer across our base.
During 2018 our strategic objectives will be:
1. Competing on Core Product Functionality and Differentiating
USPs. Our customers continue to expect a booking platform that
delivers a simple, seamless experience that is flexible and fast
when booking a hostel. We will continue to invest in our core
technology to ensure we keep pace in delivering content and
features across all our channels and platforms that not only meet
fast changing customer expectations, but also differentiates our
offering from generalist OTAs.
2. Increasing Customer Lifetime Value. We will deliver products
and features that are unique to the hostel product and enhance our
customers experience before, during and after the trip. In this
context, we aim to increase customer loyalty thereby increasing the
lifetime value of our customers.
3. Building the Hostelworld Community. The Hostel marketplace
revolves around the sociability of hostel customers. Through
enhanced blog features encouraging community engagement, as well as
expanding our range of social features such as Hostel Noticeboard,
Hostel Chat and more, we will enable social interaction with other
hostel travellers and with hostel operators throughout the journey,
building a unique Hostelworld Community.
Business model
In operating the world's leading hostel-focussed online booking
platform, we offer a simple and comprehensive online mechanism that
gives providers of hostels and other budget accommodation a shop
window to show their accommodation to young independent travellers.
We facilitate bookings between the two, offering a top-class
booking experience that provides us with commission-based
revenue.
At the time of booking, hostel travellers pay a deposit directly
to us, and the remainder of the cost of their stay directly to the
hostel at the time of their visit. The deposit equates to our
revenue from the transaction. This efficient business model has
favourable working capital attributes and strong cash conversion.
Debt collection and invoicing overheads are all minimised. During
2017, we rolled out a new offering to accommodation providers and
consumers which enabled properties to offer a non refundable rate
product which retained the simplicity of the original Hostelworld
model, whilst offering customers and properties alike the benefits
of this choice in product offering. We will continue to test
alternative product offerings during 2018 so as to offer customers
a wider choice. In this regard in early 2018 we have piloted a free
cancellation model to further broaden our product offering.
The market
The first independent study of the global hostel market ("First
Edition") was published by Phocuswright in May 2016 with a
follow-on study ("Second Edition") published in April 2018. Both
studies relied on hostel operator surveys (1,000 respondents) while
the First Edition also included a consumer survey of 2,700 hostel
travellers from six key consumer markets and 800 non-hostel
travellers and interviews with key hostel operators and
stakeholders.
The topline findings of the most recent Second Edition
include:
-- Phocuswright estimates total property count globally of
approximately 18,200 in 2016, increasing significantly from 15,600
properties in 2014.
-- Phocuswright projects 5% hostel revenue growth per year
through 2020 for the global hostel market (on pace with the global
hotel industry), when it estimates that the total hostel market
will reach nearly $6.4 billion in revenue.
-- Online channels accounted for 61% of global hostel revenue in
2016 with 75% of online hostel bookings made via an online travel
agent.
Phocuswright's conclusions give us additional confidence in the
strength of our target market and the long term growth
opportunities it offers the Group as a leading provider of bookings
into this niche market.
People
In December 2017, we announced that Mari Hurley would be leaving
the business to take up an opportunity outside the Group during the
first half of 2018. I would like to thank Mari for her significant
contribution to Hostelworld over many years with the Group and wish
her well for the future.
In January 2018, we welcomed Kristof Fahy as our first ever
Chief Customer Officer, reflecting our increased focus on ensuring
that the customer remains at the heart of our strategy, and that
our investments in technology and marketing are always informed by
the rapidly changing preferences of our young demographic customer
base.
During 2017, we expanded our technology capacity with the
addition of a new, young and ambitious technology team in Porto,
and we will continue to expand this presence during 2018.
We continue to invest in talent across the business especially
in technology, marketing and other customer facing functions. We
are fortunate to retain an excellent and diverse pool of talented
individuals working in our global team who are critical to our
success and who deliver an exceptional service to our customers. I
would like to thank the entire team, in Dublin, London, Porto,
Seoul, Shanghai and Sydney, for their work in 2017.
Outlook
In recognition of the importance of technology in our business,
we invested in a new development centre in Porto in 2017 and plan
to substantially expand our commitment there in 2018 in order to
increase the pace and volume of new product features and
functionality for our customers and hostel partners.
Market conditions, particularly in Europe, remain uncertain and
while volume bookings in the first quarter of 2018 are in line with
expectations, weaker exchange rates, particularly for the US
dollar, remain a significant headwind.
We continued our program of pricing initiatives in Q1 2018, with
changes to base rate commissions making a positive contribution to
ABV.
In addition, the pilot launch of our new free cancellation
booking option in February 2018, resulted in a noticeable increase
in conversion and booking levels. We therefore plan to introduce
this model more widely, which we see as a key strategic move for
the business. We anticipate this product to be earnings enhancing
in the medium term but will result in a deferral of revenue
recognition which will impact reported earnings in 2018, its first
year, but will not impact on cash receipts.
This new product together with increased technology investment
will substantially improve our offering to customers and our
competitive position and underpins the Board's confidence that we
will see bookings growth in 2018 and beyond.
Feargal Mooney
Chief Executive
9 April 2018
Financial Review
Introduction
-- Strong Hostelworld brand bookings growth of 13%, total Group bookings growth of 6%
-- Gross Average Booking Value of EUR11.6, flat on 2016
-- Net revenue increased by 10% on a constant currency basis; 8% on a reported basis
-- Marketing expenses represented 38% of Net Revenue (2016: 41%)
-- Increase in Adjusted EBITDA of 13% on a constant currency basis; 10% on a reported basis
-- Adjusted EBITDA margin of 30% (2016: 30%)
-- Strong underlying cash conversion (81%) and final dividend of 12.0 euro cent per share
Key Performance Indicators
% change
% change constant
2017 2016 Reported currency
------------------------------- ----- ----- ---------- ----------
Bookings - Hostelworld brand
(m) 7.0 6.2 13%
Bookings - supporting brands
and channels (m) 0.5 0.9 -41%
Total Booking Volume (m) 7.5 7.1 6%
Average Booking Value ("ABV")
(gross) (EUR) 11.6 11.6 0% 2%
Net Revenue (EURm) 86.7 80.5 8% 10%
------------------------------- ----- ----- ---------- ----------
Adjusted EBITDA 26.4 23.9 10% 13%
------------------------------- ----- ----- ---------- ----------
Group bookings increased by 6% in 2017, driven by strong booking
performance in the core Hostelworld brand which grew 13% in the
year. The strong growth was skewed towards H1 2017, with Group
bookings growth of 11% (H2 2017: 1% growth) which was partially
attributed to different demand seasonality between 2017 and 2016,
particularly pronounced in European destinations as a result of
geopolitical events.
The Group's core brand, Hostelworld, represents 93% of Group
bookings (2016: 87%). The Group has continued to deliberately focus
its marketing initiatives and technology investments on this brand,
whilst bookings of the Group's supporting brands declined by 41% in
2017 (2016: 53% decline).
Bookings in not-paid-for channels represented 63% of total
bookings (2016: 61%). The Group's booking volumes are seasonal and
peak between May and August during the summer travel period in the
northern hemisphere.
The associated Total Transaction Values ("TTV") in 2017 were
EUR576m (2016: EUR559m), while the average commission rate in 2017
increased to 14.3% (2016: 13.8%).
While the Group operates in one segment and is managed as such,
business performance is reviewed on a bookings volume and average
booking value basis for both the Hostelworld brand as well as all
supporting brands (including Hostelbookers, Hostels.com, booking
engines and affiliates).
Group net revenue increased by EUR6.2m (2016: decline of
EUR3.0m) during the year, an 8% increase year on year and a 10%
increase in constant currency.
ABV was flat during the year, reflecting a 3.5% increase in H1
2017 and a 4% decrease in H2 2017. An increase in the underlying
base price per bed and the positive impact of pricing initiatives,
including Elevate, were offset by the continued decline in the
number of bed nights per booking and the negative impact of
exchange rate movements in 2017. On a constant currency basis ABV
grew by 2% for the full year.
The Group continues to actively manage its marketing mix with
marketing investment as a percentage of net revenue declining from
41% in 2016 to 38% in 2017. While exchange rate movements had a
negative impact on Net Revenue and Adjusted EBITDA, there was a
partial offsetting benefit to marketing expenses as the majority of
marketing investment is denominated in US dollars.
Adjusted EBITDA
The Group uses Earnings before Interest, Tax, Depreciation and
Amortisation, excluding exceptional and non-cash items (Adjusted
EBITDA) as a key performance indicator when measuring the outcome
in the business from one period to the next, and against budget.
Exceptional items by their nature and size can make interpretation
of the underlying trends in the business more difficult. We believe
this non-GAAP measure reflects the key drivers of profitability for
the Group and removes those items which do not impact underlying
trading performance.
Group Adjusted EBITDA of EUR26.4m (2016: EUR23.9m) has increased
by EUR2.5m (10%) in the year and by 13% on a constant currency
basis. Adjusted EBITDA as a percentage of Net Revenue remained
stable at 30% (2016: 30%).
Administration expenses increased by EUR3.0m (5%) to EUR60.4m in
2017. A contributory factor in this increase was the increase in
staff and other administration costs due to the investment in a
technology development centre in Portugal during the year which
will further increase the development capacity of the Group.
Gross staff costs (excluding share based payment expense)
increased from EUR16.3m to EUR18.7m. Average headcount increased by
5% from 241 in 2016 to 254 in 2017. Excluding the impact of the
level of development labour capitalised in accordance with IFRS
standards (2017: EUR1.7m; 2016: EUR2.3m), share based payment
expense and the impact of a bonus accrual in 2017, staff costs
increased by 5% on a constant currency basis.
Reconciliation between Operating Profit and Adjusted EBITDA
EUR'm 2017 2016
----------------------------- ------ -----
Operating profit 11.9 0.2
Depreciation 1.1 0.9
Amortisation of development
costs 2.9 3.2
Amortisation of acquired
intangible assets 10.4 10.6
Impairment charge 0.0 8.2
Exceptional items (0.5) 0.4
Share based payment
expense 0.6 0.4
----------------------------- ------ -----
Adjusted EBITDA 26.4 23.9
----------------------------- ------ -----
Exceptional gains for the year of EUR0.5m were due to the
release of an accrual relating to previously recognised merger and
acquisition costs (2016: exceptional costs of EUR0.4m were
primarily redundancy related costs).
Adjusted Profit after Taxation
EUR'm 2017 2016
----------------------------- ------- -------
Adjusted EBITDA 26.4 23.9
Depreciation (1.1) (0.9)
Amortisation of development
costs (2.9) (3.2)
Corporation tax (0.7) (0.5)
----------------------------- ------- -------
Adjusted Profit after
Taxation 21.7 19.4
----------------------------- ------- -------
Exceptional costs 0.5 (0.4)
Amortisation of acquired
intangibles (10.4) (10.6)
Net finance costs (0.1) (0.1)
Share based payment
expense (0.6) (0.4)
Impairment charge 0.0 (8.2)
Deferred taxation 0.1 1.1
----------------------------- ------- -------
Profit for the year 11.2 0.8
----------------------------- ------- -------
Adjusted Profit after Taxation (Adjusted "PAT") is a metric that
the Group uses to calculate the dividend payout for the year,
subject to Company Law requirements regarding distributable
profits. It excludes exceptional costs, amortisation of acquired
domain and technology intangibles, impairment charges, net finance
costs, share based payment expenses and deferred taxation which can
have large impacts on the reported result for the year, and which
can make underlying trends difficult to interpret.
Adjusted PAT increased by 12% from EUR19.4m to EUR21.7m (2016:
8% decline) and 16% on a constant currency basis during the
year.
Based on the weighted average number of shares in issue during
2017, reported Earnings per Share ("EPS"), as set out in Note 10 to
the financial statements, is 11.77 euro cent per share for the
financial year (2016: earnings per share 0.82 euro cent). Using
Adjusted PAT as the measure of earnings would result in an adjusted
EPS of 22.73 euro cent per share for the year. The corresponding
EPS for 2016 calculated on the same basis, using the weighted
average number of shares in issue as at 31 December 2016 is 20.27
euro cent per share.
Net finance costs
Given that the capital nature of the Group post IPO is fully
equity funded, there is minimal net finance costs in 2017 of
EUR0.1m (2016: EUR0.1m).
Share Based Payment Expense
The Group implemented a long term incentive plan in April 2016
and a Save As You Earn ("SAYE") scheme in 2017 as detailed in the
Remuneration Report. In accordance with IFRS2, the Group has
recognised a non-cash charge of EUR0.6m in 2017 (2016:
EUR0.4m).
Impairment Charge
The impairment charge of EUR8.2m in 2016 was a result of a
review of trading performance of the Hostelbookers brand. At 31
December 2017, there are no indicators that the Hostelbookers
intellectual property assets are carried at an amount higher than
their recoverable amount.
Taxation
The Group corporation tax charge of EUR0.7m (2016: EUR0.5m)
results in an effective tax rate (corporation tax as a percentage
of Adjusted EBITDA) of 2.7% (2016: 2.0%) and 6% of reported profit
before taxation (2016: 352%, which is after an impairment charge of
EUR8.2m). The low effective tax rate is primarily as a result of
carried forward tax losses arising from the previous capital
structure of the Group.
The Group's deferred tax credit for the year ended 31 December
2017 was EUR0.1m and it relates to the amortisation of deferred tax
liabilities and recognition of deferred tax assets reduced by the
amortisation of deferred tax assets. The overall net deferred tax
credit of EUR1.1m in 2016 mainly relates to the reduction in
carrying value of the deferred tax liability arising from the
impairment of the Hostelbookers intellectual property assets.
Adjusted Free Cash Flow Conversion
EUR'm 2017 2016
--------------------------- ------ ------
Adjusted EBITDA 26.4 23.9
Acquisition of intangible
assets (1.8) (2.4)
Capital expenditure (1.8) (0.7)
Interest and tax paid (0.6) (0.3)
Net movement in working
capital (1) (0.7) 1.0
--------------------------- ------ ------
Adjusted Free Cash
flow 21.5 21.5
--------------------------- ------ ------
Adjusted Free Cash
Flow conversion 81% 90%
--------------------------- ------ ------
(1) changes in working capital
excludes the effects of
exceptional costs
The Group has a business model which produces strong free cash
flow conversion, with 81% of Adjusted EBITDA converting into cash
during the year (2016: 90%). In 2017, there was a higher investment
in capital expenditure with a total of EUR1.8m in the year (2016:
EUR0.7m), primarily due to the opening of a development centre in
Portugal. The movement in working capital in 2017 was at a lower
level than in 2016 due to a delay in a VAT reclaim, which was
received in early 2018. Adjusting for this the adjusted free cash
flow conversion would have been 86% in 2017 (2016: 90%).
On 21 October 2015, in connection with the IPO, the Group
entered into a working capital facility with AIB Bank plc (the
"Revolving Credit Facility") for EUR2.5m. There were no draw downs
under this facility from the date it was entered in to, and as a
result during 2017 this facility was cancelled by the Group.
Total cash at 31 December 2017 was EUR21.3m (2016: EUR24.6m), of
which EURnil is restricted (2016: EURnil). There were no borrowings
at 31 December 2017 (2016: EURnil).
Foreign Exchange Risk
The Group's primary operating currency is the euro. The Group
also has significant sterling and US dollar cash flows. Restated on
a constant currency basis, revenues have increased by 10% and
Adjusted EBITDA has increased by 13% in 2017. Constant currency is
calculated by applying the average exchange rates for the year
ended 31 December 2017 to the financial results for the year ended
31 December 2016. The Group's principal policy is to match cash
flows of like currencies, with excess sterling and US dollar
revenues being settled into euros on a timely basis.
Dividend
The Group maintains an attractive dividend policy, and the
directors are pleased to recommend a full year final dividend
payout of EUR11.5m equating to 12.0 euro cent per share. This is in
addition to the interim dividend of EUR4.8m or 5.1 euro cent per
share paid in September 2017. This payout of EUR16.3m or 17.1 euro
cent per share reflects a distribution of 75% of the Adjusted PAT
for the year ended 31 December 2017, and an increase of 13% on the
dividend for 2016 (15.2 euro cent per share).
The final dividend of 12.0 euro cent per share is to be approved
by shareholders at the 2018 AGM on 11 June 2018. If approved, the
dividend will be paid on 14 June 2018 to members appearing on the
register at close of business on 11 May 2018.
The Board continually reviews its approach to returning capital
to shareholders in order to ensure that the Group maintains an
efficient and prudent capital structure, which looks to provide
increased returns to shareholders, whilst at the same time
retaining flexibility for capital and other investment growth
opportunities. After payment of the proposed final dividend for
2017 the Group will have returned EUR43.5m to shareholders in
dividends since listing in November 2015.
Mari Hurley
Chief Financial Officer
9 April 2018
HOSTELWORLD GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2017
2017 2016
Notes EUR'000 EUR'000
Revenue 3 86,672 80,514
Administrative expenses 4 (60,380) (57,397)
Depreciation and amortisation 4 (14,395) (14,731)
Impairment losses 4 - (8,199)
Operating profit 11,897 187
Financial income 9 5
Financial costs 7 (75) (59)
Profit before taxation 11,831 133
Taxation 8 (582) 651
Profit for the year attributable to the equity owners of the parent company 11,249 784
--------- --------
Basic earnings per share (euro cent) 9 11.77 0.82
Diluted earnings per share (euro cent) 9 11.71 0.82
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2017
2017 2016
EUR'000 EUR'000
Profit for the year 11,249 784
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations 3 (680)
-------- --------
Total comprehensive income for the year attributable
to equity owners of the parent company 11,252 104
-------- --------
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2017
2017 2016
Notes EUR'000 EUR'000
Non-current assets
Intangible assets 10 128,108 139,619
Property, plant and equipment 3,774 3,058
Deferred tax assets 480 659
-------- -------
132,362 143,336
Current assets
Trade and other receivables 11 3,966 2,627
Cash and cash equivalents 21,294 24,632
-------- -------
25,260 27,259
-------- -------
Total assets 157,622 170,595
-------- -------
Issued capital and reserves attributable to equity owners of the parent
Share capital 956 956
Other reserves - 3,628
Foreign currency translation reserve 18 15
Share based payment reserve 960 351
Retained earnings 145,015 154,986
-------- -------
Total equity attributable to equity holders of the parent company 146,949 159,936
-------- -------
Non-current liabilities
Deferred tax liabilities 457 764
-------- -------
457 764
Current liabilities
Trade and other payables 12 9,832 9,669
Corporation tax 384 226
-------- -------
10,216 9,895
-------- -------
Total liabilities 10,673 10,659
-------- -------
Total equity and liabilities 157,622 170,595
-------- -------
The financial statements were approved by the Board of Directors
and authorised for issue on 9 April 2018 and signed on its behalf
by:
FEARGAL MOONEY MARI HURLEY
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
Hostelworld Group plc. registration number 9818705 (England and
Wales)
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2017
Share
Foreign Currency Based
Translation Payment
Note Share Capital Retained Earnings Other Reserves Reserve Reserve Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
As at 1 January
2016 956 161,418 3,628 695 - 166,697
-------------- ------------------ -------------- ------------------ -------- ---------
Total
comprehensive
income for the
year - 784 - (680) - 104
Dividends 16 - (7,216) - - - (7,216)
Credit to equity
for
equity-settled
share based
payments - - - - 351 351
As at 31 December
2016 956 154,986 3,628 15 351 159,936
-------------- ------------------ -------------- ------------------ -------- ---------
Total
comprehensive
income for the
year - 11,249 - 3 - 11,252
Dividends 16 - (24,848) - - - (24,848)
Release of merger
reserve - 3,628 (3,628) - - -
Credit to equity
for
equity-settled
share based
payments - - - - 609 609
As at 31 December
2017 956 145,015 - 18 960 146,949
-------------- ------------------ -------------- ------------------ -------- ---------
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2017
2017 2016
Notes EUR'000 EUR'000
Cash flows from operating
activities
Profit before tax 11,831 133
Depreciation of property,
plant and equipment 4 1,064 886
Amortisation of intangible
assets 4 13,331 13,845
Impairment of intangible
assets 4 - 8,199
Loss on disposal of property,
plant and equipment 4 - 19
Financial income (9) (5)
Financial expense 7 75 59
Employee equity settled share
based payment expense 14 623 362
Changes in working capital
items:
Increase/ (decrease) in trade
and other payables 149 (1,553)
Increase in trade and other
receivables (1,340) (24)
--------- -----------
Cash generated from operations 25,724 21,921
Interest paid (75) (59)
Interest received 9 5
Income tax paid (551) (280)
--------- -----------
Net cash from operating activities 25,107 21,587
--------- -----------
Cash flows from investing
activities
Acquisition/capitalisation
of intangible assets (1,820) (2,500)
Purchases of property, plant
and equipment (1,780) (746)
Net cash used in investing
activities (3,600) (3,246)
--------- -----------
Cash flows from financing
activities
Dividends paid 16 (24,848) (7,216)
--------- -----------
Net cash used in financing
activities (24,848) (7,216)
--------- -----------
Net (decrease)/ increase
in cash and cash equivalents (3,341) 11,125
Cash and cash equivalents
at beginning of year 24,632 13,620
Effect of foreign exchange
rate changes 3 (113)
--------- -----------
Cash and cash equivalents
at end of year 21,294 24,632
--------- -----------
Changes in liabilities arising
from financing activities
1 January Financing Non-cash 31 December
2017 cash flows changes 2017
Borrowings - - - -
---------- ----------- --------- -----------
Total liabilities from financing
activities - - - -
---------- ----------- --------- -----------
HOSTELWORLD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2017
1. GENERAL INFORMATION AND BASIS OF PREPARATION
The financial information, comprising of the consolidated income
statement, consolidated statement of comprehensive income,
consolidated statement of financial position, consolidated
statement of changes in equity, consolidated statement of cash
flows and related notes, has been taken from the consolidated
financial statements of Hostelworld Group plc ("Company") for the
year ended 31
December 2017, which were approved by the Board of Directors on
9 April 2018. The financial information does not constitute
statutory accounts within the meaning of sections 435(1) and (2) of
the Companies Act 2006 or contain sufficient information to comply
with the disclosure requirements of International Financial
Reporting Standards ("IFRS").
An unqualified report on the consolidated financial statements
for the year ended 31 December 2017 has been given by the auditors,
Deloitte. It did not include reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report and did not contain any statement under section 498 (2) or
(3) of the Companies Act 2006. The consolidated financial
statements will be filed with the Registrar of Companies, subject
to their approval by the Company's shareholders at the Company's
Annual General Meeting on 11 June 2018.
The Company, is a public limited company incorporated in the
United Kingdom on the 9 October 2015. The registered office of the
Company is High Holborn House, 52 - 54 High Holborn, London, WC1V
6RL, United Kingdom.
The Company and its subsidiaries (together "the Group") provide
software and data processing services that facilitate hostel,
B&B, hotel and other accommodation bookings worldwide.
Basis of Preparation
The consolidated financial statements incorporate the financial
statements of the Company and its directly and indirectly owned
subsidiaries, all of which prepare financial statements up to 31
December. The consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards
(IFRS), International Financial Reporting Interpretations Committee
(IFRIC) interpretations and those parts of the Companies Act 2006,
applicable to companies reporting under IFRS. The Group financial
statements have been prepared in accordance with IFRSs adopted by
the European Union ("the EU") which comprise standards and
interpretations approved by the International Accounting Standards
Board ("IASB").
The consolidated financial statements have been prepared on the
historical cost basis. The principal accounting policies adopted
are set out below.
The directors have assessed the ability of the Company and Group
to continue as a going concern and are satisfied that it is
appropriate to prepare the financial statements on a going concern
basis of accounting. In doing so, the directors have assessed that
there are no material uncertainties to the Group's and Company's
ability to continue as a going concern for the foreseeable future,
being a period of at least 12 months from the date of approval of
the financial statements.
2. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies, the
directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors considered relevant. Actual results may differ from these
estimates.
(a) The critical judgements that have been made that have the
most significant effect on the amounts recognised in the
consolidated financial statements are set out below:
Capitalisation of development costs
Development costs are capitalised in accordance with accounting
policies. Determining the amount to be capitalised requires the
directors to make assumptions regarding expected future cash
generation of the asset and expected period of benefit.
Tax provisioning
The Group, as a global business, is subject to both
international and local transfer pricing legislation. The directors
review the transfer pricing position to ensure any potential
exposure is adequately assessed.
(b) Key sources of estimation that have been made that have the
most significant effect on the amounts recognised in the
consolidated financial statements are set out below:
Useful lives for amortisation of intangible assets
Intangible assets are disclosed in Note 10. The amortisation
charge is dependent on the estimated useful lives of the assets.
The directors regularly review estimated useful lives of each type
of intangible asset and change them as necessary to reflect its
current assessment of remaining lives and the expected pattern of
future economic benefit embodied in the asset. Changes in asset
lives can have a significant impact on the amortisation charges for
that year.
Impairment of goodwill and intangible assets
The directors assess annually whether goodwill has suffered any
impairment, in accordance with the relevant accounting policy, and
the recoverable amounts of cash-generating units are determined
based on value-in-use calculations that require the use of
estimates. Intangible assets are assessed for possible impairment
where indicators of impairment exist.
Following an impairment review of the Hostelbookers intellectual
property assets in 2016 (see Note 10), the directors reassessed the
estimated remaining useful life of the related domains as being 8
years from the start of that year. The Group had previously
assessed the useful economic life as being 17 remaining years from
the start of 2016. This had an impact of increasing the
amortisation charge for that year by EUR629k and by EUR462k in
2017.
Further details on the assumptions used are set out in Note
10.
Deferred Tax
Deferred tax assets are recognised for all unused tax losses to
the extent that it is probable that taxable profits will be
available in future periods against which the losses can be
utilised. Judgement is required to determine the amount of deferred
tax assets that can be recognised, based upon the likely timing and
level of future taxable profits.
3. REVENUE & SEGMENTAL ANALYSIS
The Group is managed as a single business unit which provides
software and data processing services that facilitate hostel, hotel
and other accommodation worldwide, including ancillary on-line
advertising revenue.
The directors determine and present operating segments based on
the information that is provided internally to the CEO, who is the
Company's Chief Operating Decision Maker (CODM). When making
resource allocation decisions, the CODM evaluates booking numbers
and average booking value. The objective in making resource
allocation decisions is to maximise consolidated financial
results.
The CODM assesses the performance of the business based on the
consolidated adjusted profit/(loss) after tax of the Group for the
year. This measure excludes the effects of certain income and
expense items, which are unusual by virtue of their size and
incidence, in the context of the Group's ongoing core operations,
such as the impairment of intangible assets and one-off items of
expenditure.
All segmental revenue is derived wholly from external customers
and, as the Group has a single reportable segment, inter-segment
revenue is zero. Revenue 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:
2017 2016
EUR'000 EUR'000
Europe 52,114 49,497
Americas 16,196 14,938
Asia, Africa and Oceania 18,362 16,079
---------- ----------
Total revenue 86,672 80,514
---------- ----------
The Group's non-current assets are located in Ireland,
Luxembourg, Portugal, Korea and the UK. Out of the total
non-current assets in the Group of EUR132,362k (2016: EUR143,336k),
the non-current assets of the group located in the UK are EUR2,659k
(2016: EUR4,259k).
4. OPERATING EXPENSES
Profit for the year has been arrived at after charging/
(crediting) the following operating costs:
2017 2016
Note EUR'000 EUR'000
Marketing expenses 33,068 32,842
Credit card processing fees 2,048 1,931
Staff costs 6 17,543 14,359
Loss on disposal of property,
plant and equipment - 19
FX gain (102) (214)
Exceptional Items 5 (494) 449
Other administrative costs 8,317 8,011
---------- -------
Total administrative expenses 60,380 57,397
Depreciation of property,
plant and equipment 1,064 886
Amortisation of intangible
fixed assets 10 13,331 13,845
Impairment of intangible
assets 10 - 8,199
---------- -------
Total operating expenses 74,775 80,327
---------- -------
Auditors' remuneration
During the year, the Group obtained the following services from
its Auditors:
2017 2016
EUR'000 EUR'000
Fees payable for the statutory
audit of the Company 35 35
Fees payable for other services:
- statutory audit of subsidiary
undertakings 115 115
- tax advisory services - -
- other assurance services - -
- corporate finance services - -
- other services 4 12
---------- --------
Total 154 162
---------- --------
5. EXCEPTIONAL ITEMS
2017 2016
EUR'000 EUR'000
Merger and acquisition credit (494) (64)
Redundancy costs - 526
Integration and relocation
credit - (13)
Total (494) 449
---------- --------
The credit of EUR494k in 2017 relates to the release of an
accrual relating to previously recognised merger and acquisition
costs within the Group. In 2016, foreign exchange rate and other
movements between recognition and settlement dates drove the write
back of certain previously recognised exceptional items. Redundancy
costs mostly relate to the restructuring of certain Group functions
following the consolidation of Hostelbookers onto the Hostelworld
technology platform.
6. STAFF COSTS
The average monthly number of people employed (including
executive directors) was as follows:
2017 2016
Average number of persons
employed
Administration and sales 165 154
Development and information
technology 89 87
----- -----
Total 254 241
----- -----
The aggregate remuneration costs of these employees is analysed
as follows:
2017 2016
Notes EUR'000 EUR'000
Staff costs comprise:
Wages and salaries 16,073 14,162
Social security costs 1,800 1,591
Pensions costs 356 316
Other benefits 438 239
Long-term employee incentive
costs 14 623 362
Capitalised development
labour (1,747) (2,311)
------------ --------
Total 17,543 14,359
------------ --------
7. FINANCIAL COSTS
2017 2016
EUR'000 EUR'000
Bank charges 75 59
-------- --------
Total 75 59
-------- --------
8. TAXATION
2017 2016
EUR'000 EUR'000
Corporation tax:
Current year 686 440
Adjustments in respect
of prior years 24 27
---------- ----------
Total 710 467
Deferred tax credit (128) (1,118)
---------- ----------
Total 582 (651)
---------- ----------
Corporation tax is calculated at 12.5% (2016: 12.5%) of the
estimated taxable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions. The charge for the year can be reconciled
to the consolidated income statement as follows:
2017 2016
EUR'000 EUR'000
Profit before tax on continuing operations 11,831 133
-------- --------
Tax at the Irish corporation tax rate
of 12.5% (2016: 12.5%) 1,479 17
Effects of :
Tax effect of expenses that are not
deductible in determining taxable
profit 515 436
Tax effect of utilisation of tax losses
not previously recognised (1,662) (166)
Capital allowances in excess of depreciation (293) (1,753)
Effect of different tax rates of subsidiaries
operating in other jurisdictions 299 134
Reversal of deferred tax asset on
tax losses 220 654
Adjustments in respect of prior years 24 27
-------- --------
Total 582 (651)
-------- --------
The Group has an unrecognised deferred tax asset as at 31
December 2017 of EUR3,125k (31 December 2016: EUR3,527k) which has
not been recognised in the consolidated financial statements as
there is insufficient evidence that the asset will be recovered in
the foreseeable future.
9. EARNINGS PER SHARE
Basic earnings per share is computed by dividing the net profit
for the year available to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the year.
2017 2016
Weighted average number of
shares in issue ('000s) 95,571 95,571
Profit for the year (EUR'000s) 11,249 784
-------- ------
Basic earnings euro cents per
share 11.77 0.82
-------- ------
Diluted earnings per share is computed by dividing the net
profit for the year by the weighted average number of ordinary
shares outstanding and, when dilutive, adjusted for the effect of
all potentially ordinary shares.
2017 2016
Weighted average number of
ordinary shares in issue ('000s) 95,571 95,571
Effect of dilutive potential
ordinary shares:
Share options ('000s) 473 -
------- ------
Weighted average number of
ordinary shares for the purpose
of diluted earnings per share
('000s) 96,044 95,571
------- ------
Diluted earnings euro cents
per share 11.71 0.82
------- ------
Actual earnings per share, calculated by dividing the net profit
attributable to ordinary shareholders by the actual number of
ordinary shares in issue at 31 December 2017, is 11.77 euro cent
(2016: earnings per share of 0.82 euro cent).
10. INTANGIBLE ASSETS
The table below shows the movements in intangible assets for the
year:
Capitalised
Domain Affiliates Development
Goodwill Names Technology Contracts Costs Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Cost
Balance at 1
January 2016 47,274 214,640 13,325 5,500 5,735 286,474
Additions - - 118 - 2,385 2,503
Transfers from
tangible assets - - 383 - - 383
Effect of foreign
currency exchange
difference - - (12) - - (12)
Balance at 31
December 2016 47,274 214,640 13,814 5,500 8,120 289,348
----------- ---------- ----------- ----------- ------------- ----------
Balance at 1
January 2017 47,274 214,640 13,814 5,500 8,120 289,348
Additions - - 73 - 1,747 1,820
Balance at 31
December 2017 47,274 214,640 13,887 5,500 9,867 291,168
----------- ---------- ----------- ----------- ------------- ----------
Accumulated amortisation
and impairment
Balance at 1
January 2016 (29,426) (77,789) (12,936) (5,500) (1,851) (127,502)
Charge for year - (10,316) (326) - (3,203) (13,845)
Impairment - (8,199) - - - (8,199)
Transfer from
tangible assets - - (187) - - (187)
Effect of foreign
currency exchange
difference - - 4 - - 4
----------- ---------- ----------- ----------- ------------- ----------
Balance at 31
December 2016 (29,426) (96,304) (13,445) (5,500) (5,054) (149,729)
----------- ---------- ----------- ----------- ------------- ----------
Balance at 1
January 2017 (29,426) (96,304) (13,445) (5,500) (5,054) (149,729)
Charge for year - (10,149) (257) - (2,925) (13,331)
Balance at 31
December 2017 (29,426) (106,453) (13,702) (5,500) (7,979) (163,060)
----------- ---------- ----------- ----------- ------------- ----------
Carrying amount
At 31 December
2016 17,848 118,336 369 - 3,066 139,619
----------- ---------- ----------- ----------- ------------- ----------
At 31 December
2017 17,848 108,187 185 - 1,888 128,108
----------- ---------- ----------- ----------- ------------- ----------
Goodwill
The goodwill balance at 31 December 2017 relates to an
investment in Hostelworld.com Limited in 2009 which resulted in a
goodwill amount of EUR17,848k. The carrying value of this balance
as at 31 December 2017 is EUR17,848k (2016: EUR17,848k).
Goodwill, which has an indefinite useful life, is subject to
annual impairment testing, or more frequent testing if there are
indicators of impairment. The cash flow projections are initially
based on the three year budgets approved by the directors and
extended out for a further 2 years. The cash flow projections take
into account key assumptions including historical trading
performance, anticipated changes in future market conditions,
industry and economic factors and business strategies.
The pre-tax discount rate which has been applied in determining
value in use is 10.7% (2016: 13.7%). The discount rate is based on
the Group estimated weighted average cost of capital adjusted for
the business specific risk of the CGU. The revised discount rate in
2017 of 10.7% was calculated from first principles by a third party
professional advisor. Based on the 2018 budget, growth rates are
assessed based on approved budgets and forecast and range from 5%
to 8% over the forecast period after 2018. Cash flows beyond the 5
year period are extrapolated using the estimated long- term growth
rate of 2.5% (2016: 2%).
There are no material changes to the assumptions presented above
that would result in any further impairment recorded in each of the
years presented in these financial statements.
Following impairment testing, no impairment was recognised for
goodwill in 2017.
Other Intangible Assets
Additions during the year comprised of internally generated
additions of EUR1,747k (2016: EUR2,311k) and other separately
acquired additions of EUR73k (2016: EUR192k).
There were no indicators to require an impairment test of
intangible assets in the current year. In 2016, following a review
of trading performance and due to bookings and revenue being less
than previously projected, the directors reassessed the estimated
cash flows associated with the Hostelbookers intellectual property
assets. This led to the recognition of an impairment charge of
EUR8,199k in relation to the value of the Hostelbookers domain
names. The estimated useful life of these domain names was also
reduced to a period of 8 years from 1 January 2016 to be amortised
on a reducing balance basis. The cash flow projections take into
account key assumptions including historical trading performance,
anticipated changes in future market conditions, industry and
economic factors and business strategies. There are no material
changes to the assumptions presented above that would result in any
further impairment recorded in the current year.
11. TRADE AND OTHER RECEIVABLES
2017 2016
EUR'000 EUR'000
Amounts falling due within one
year
Trade receivables 1,017 892
Prepayments and accrued income 932 731
Value Added Tax 2,017 1,004
---------- -------
Total 3,966 2,627
---------- -------
The carrying value of trade and other receivables also
represents their fair value. Trade receivables are non-interest
bearing and trade receivable days are 4 days (2016: 4 days). Given
the nature of the business, allowance for impairment of receivables
is not material.
12. TRADE AND OTHER PAYABLES
2017 2016
EUR'000 EUR'000
Amounts falling due within one year
Trade payables 2,265 3,344
Accruals and other payables 7,007 5,797
Payroll taxes 560 524
Value Added Tax - 4
Total 9,832 9,669
---------- ----------
The average credit period for the Group in respect of trade
payables is 20 days (2016: 32 days). The directors consider that
the carrying amount of trade payables approximates to their fair
value.
13. COMMITMENTS AND CONTINGENCIES
(i) Operating Leases
At the reporting date, the Group had commitments under
non-cancellable operating leases which fall due as follows:
2017 2016
EUR'000 EUR'000
Operating leases
Within one year 1,017 933
Within two to five years 3,077 3,118
More than five years 1,294 1,864
-------- --------
Total 5,388 5,915
-------- --------
All operating lease commitments relate to buildings. These
relate to three leases of office space in Ireland, UK and Portugal.
These leases are due to expire in 2035, 2025 and 2022 respectively.
If the Group was to exercise available break options, the leases in
Ireland and the UK would expire in 2025 and 2020 respectively.
The operating lease charge included in the consolidated income
statement was EUR1,040k in 2017 (2016: EUR1,003k).
(ii) Contingencies
In the normal course of business the Group may be subject to
indirect taxes on its services in certain foreign jurisdictions.
The directors perform ongoing reviews of potential indirect taxes
in these jurisdictions. Although the outcome of these reviews and
any potential liability is uncertain, no provision has been made in
relation to these taxes as the directors believe that it is not
probable that a material liability will arise.
14. SHARE-BASED PAYMENTS
Since 2016, the Group has a share option scheme for executives
and selected management of the Company and its subsidiaries. During
the year ended 31 December 2017, the Remuneration Committee
approved the granting of shares under a Save As You Earn ("SAYE")
scheme for all eligible employees across the Group. Both schemes
are accounted for as equity-settled in the financial statements.
The Group recognised an expense of EUR623k (2016: EUR362k) relating
to equity-settled share-based payment transactions in the
consolidated income statement during the year.
Long Term Incentive Plan ("LTIP") scheme
In April 2016, the Group introduced a Long Term Incentive Plan.
An invitation to participate was made to executive directors and
selected management in April 2016 and in March 2017. The proportion
of the invitation which vests, will depend on the Adjusted Earnings
per Share ("EPS") performance and Total Shareholder Return ("TSR")
of the Group over a three year period ("the performance period").
The invitations made in 2016 and 2017 will potentially vest in 2019
and 2020 respectively.
Up to 70% of the shares/options subject to an invitation will
vest according to the Group's adjusted EPS growth compared with
target during the performance period. Up to 30% of the
shares/options subject to an invitation will vest according to the
Group's TSR performance during the performance period measured
against the TSR performance indicators approved by the Remuneration
Committee. An invitation will lapse if a participant ceases to be
an employee or an officer within the Group before the vesting
date.
A summary of the status of the LTIPs granted as at 31 December
2017 is presented below:
Fair value
Option Expiry Exercise at grant
series Number Grant date date price date
2016 LTIP 928,464 5 April 2016 5 April GBPNil GBP2.07
2023
2017 LTIP 847,663 29 March 29 March GBPNil GBP1.92
2017 2024
----------- --------- ------------- ---------- --------- -----------
Details of the share options outstanding during the year are as
follows:
2017 2016
No. of No. of
share options share options
Outstanding at beginning of
year 928,464 -
Granted during the year 847,663 928,464
Forfeited during the year (452,088) -
Exercised during the year - -
Expired during the year - -
--------------- ---------------
Outstanding at the end of the
year 1,324,039 928,464
Exercisable at the end of the
year - -
--------------- ---------------
The awards will vest on the later of the 3rd anniversary of the
grant and the determination of the performance condition, and will
then remain exercisable until the 7th anniversary of the date of
grant, provided the individual remains an employee or officer of
the Group. Although the awards will vest in 2019 and 2020 the
measurement period for performance conditions is over 3 years from
1 January 2016 to 31 December 2018 and from 1 January 2017 to 31
December 2019 respectively.
Share options under the LTIP scheme have an exercise price of
nil. The remaining weighted average life for share options
outstanding is 1.26 years (2016 grant) and 2.24 years (2017 grant).
In 2017, the Remuneration Committee approved to apply dividend
equivalents to the 2016 LTIP awards. The incremental fair value of
EUR226k will be expensed over the remaining vesting period.
Fair value of options granted during the year:
At the invitation grant date, the fair value per conditional
award and the assumptions used in the calculations are as
follows:
Invitation grant award 29 March 5 April
date 2017 2016
Year of potential vesting 2020 2019
Share price at grant date GBP2.33 GBP2.49
Exercise price per share
option GBPNil GBPNil
Expected volatility of
Company share price 46% 30%
Expected life 3 years 3 years
Expected dividend yield 5.7% 5.1%
Risk free interest rate 0.21% 0.4%
Weighted average fair
value at grant date GBP1.92 GBP2.07
Monte Carlo Monte Carlo
Valuation model model model
Expected volatility was determined in line with market
performance of the Company and comparator companies as there was
insufficient historic data available for the Company at the grant
date of the awards. Market based vesting conditions, such as the
TSR condition, have been taken into account in establishing the
fair value of equity instruments granted. Non-market based
performance conditions, such as the EPS conditions, were not taken
into account in establishing the fair value of equity instruments
granted, however the number of equity instruments included in the
measurement of the transaction is adjusted so that the amount
recognised is based on the number of equity instruments that
eventually vest.
Save As You Earn ("SAYE") scheme
During the year ended 31 December 2017, the Remuneration
Committee of the Board of Directors approved the granting of share
options under a SAYE scheme for all eligible employees based in
Ireland and the UK. 73 employees availed of the scheme. The scheme
will last three years and employees may choose to purchase shares
at the end of the three year period at the fixed discounted price
set at the start. The share price for the scheme has been set at a
20% discount in line with amount permitted under tax legislation in
both jurisdictions.
The total expected cost of the SAYE scheme was estimated at
EUR200k over the three year service period of which EUR37k has been
recognised in the consolidated income statement for the year ended
31 December 2017. The remaining EUR163k will be charged against
profit or loss in equal instalments over the remainder of the three
year vesting period.
No. of share
options granted
2017
Outstanding at beginning of year -
Granted during the year 181,208
Cancelled during the year (9,875)
-----------------
Outstanding share options granted
at end of year 171,333
-----------------
Fair value of options granted during the year:
At the invitation grant date, the fair value per conditional
award and the assumptions used in the calculations are as
follows:
Scheme UK office Irish office
Invitation grant award
date 5 July 2017 5 July 2017
Year of potential vesting 2020 2020
Share price at grant date GBP3.37 EUR4.00
Exercise price per share
option GBP2.78 EUR3.24
Expected volatility of
company share price 45.0% 44.6%
Expected life 3 years 3 years
Expected dividend yield 4.0% 4.0%
Risk free interest rate 0.38% 0.38%
Weighted average fair
value at grant date GBP0.99 EUR1.10
Black-Scholes Black-Scholes
Valuation model model model
Expected volatility was determined in line with market
performance of the Company and comparator companies as there was
insufficient historic data available for the Company at the grant
date of the awards.
The charge of EUR37k in relation to the SAYE scheme, together
with the expense in respect of the long-term incentive plan for the
year of EUR586k (2016: EUR362k) is the total charge in respect of
share-based payments, which has been recognised directly in
equity.
15. RELATED PARTY TRANSACTIONS
SUBSIDIARIES
The following is a list of the Company's current investments in
subsidiaries, including the name, country of incorporation, and
proportion of ownership interest:
Company Holding Nature of Business Registered Office
WRI Nominees 100%* Holding of IP Floor 2, One Central
DAC Park, Leopardstown,
Dublin 18, Ireland
5, Rue Guillaume
Kroll, L-1882 Luxembourg
**
Hostelworld.com 100% Technology trading company Floor 2, One Central
Limited Park, Leopardstown,
Dublin 18, Ireland
Hostelworld Korea 100% Marketing services company Unit 1103, Hongwoo
Limited 2 Building, 22 Seocho-daero,
78-gil, Seocho-gu,
Seoul, Republic
of Korea
Hostelworld Services 100% Marketing and research Aviz Trade Center,
Portugal LDA and development services Rua Engenheiro Ferreira
company Dias, 924, 2(nd)
Andar, Sala E27,
4100-246 Porto,
Portugal
Hostelworld Services 100%* Marketing services and High Holborn House,
Limited technology trading company 52 - 54 High Holborn,
London, WC1V 6RL,
United Kingdom
* held directly by the Company
** WRI Nominees DAC is dually incorporated in Luxembourg and
Ireland with registered offices in both locations. Its place of
business is in Luxembourg.
All subsidiaries have the same reporting date as the Company
being 31 December.
On 24 March 2017, Hostelworld Services Portugal LDA was
incorporated. On 13 November 2017, Wings Lux 3 S.à r.l. and
Cornetto Bidco Limited transferred their shares in Hostelworld
Services Limited to the Company. On 21 December 2017, WRI Nominees
DAC purchased 96 ordinary shares in Hostelworld.com Limited which
represents a 49% ownership. Hostelworld Group plc owns the
remaining 51% directly (2016: 100%).
During 2017, as part of a group reorganisation, Wings Lux 2 S.à
r.l., Wings Lux 3 S.à r.l., Wings Holdco Limited and Cornetto Bidco
Limited were liquidated/ wound up. In 2016, Boo Travel Limited,
Wings Corporate Services Limited, WRI Holdings, Wings Bidco Limited
and Web Reservations International were liquidated by way of
members' voluntary winding up and Anytrip.com Limited was
dissolved.
On 28 June 2016, Hostelworld.com Limited converted to a private
company limited by shares and WRI Nominees Limited converted to a
designated activity company. On 14 March 2016, Hostelworld Korea
Limited was incorporated.
Directors' remuneration
2017 2016
EUR'000 EUR'000
Salaries, fees, bonuses and
benefits in kind 1,321 958
Amounts receivable under long-term
incentive schemes 207 122
Pension contributions 58 57
-------- --------
Total 1,586 1,137
-------- --------
Key management personnel
The Group's key management comprise the Board of Directors and
senior management having authority and responsibility for planning,
directing and controlling the activities of the Group.
2017 2016
EUR'000 EUR'000
Short term benefits 2,882 2,090
Share based payments 420 252
Post employment benefits 112 112
---------- ----------
Total 3,414 2,454
---------- ----------
During 2016, the former controlling shareholder of the Group,
H&F Wings Lux 1 S.à r.l. paid a discretionary bonus payment of
EUR1,559k (EUR1,400k net of employer taxes) to certain senior
management and employees of the Group in relation to their
performance up to the date of Admission. The Group did not bear any
costs associated with this payment. Mr. Feargal Mooney, executive
director and CEO, received an award of EUR850k.
16. DIVIDENDS
Amounts recognised as distributions to equity holders in the
financial year:
2017 2016
EUR'000 EUR'000
Final 2016 dividend of EUR0.104
per share (paid 6 June 2017) 9,939 -
Supplementary 2016 dividend
of EUR0.105 per share (paid
6 June 2017) 10,035 -
Interim 2017 dividend of EUR0.051
per share (paid 22 September
2017) 4,874 -
Final 2015 dividend of EUR0.0275
per share (paid 31 May 2016) - 2,628
Interim 2016 dividend of EUR0.048
per share (paid 27 September
2016) - 4,588
24,848 7,216
--------- --------
Proposed final dividend for the year
ended 31 December 2017 of EUR0.12
per share (2016: EUR0.104 per share) 11,468 9,939
--------- --------
In accordance with the Group's dividend policy, the directors
recommend the payment of a final dividend for 2017 of EUR0.12 per
share amounting to EUR11.5m (2016: EUR0.104 per share amounting to
EUR9.9m).
The proposed dividends are to be approved by the shareholders at
the 2018 AGM on 11 June 2018.
17. EVENTS AFTER THE BALANCE SHEET DATE
There were no significant events after the balance sheet
date.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UGUWCCUPRGRB
(END) Dow Jones Newswires
April 10, 2018 02:00 ET (06:00 GMT)
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