TIDMHSW
RNS Number : 4849S
Hostelworld Group PLC
17 March 2021
LEI:213800OC94PF2D675H41
Hostelworld Group plc
("Hostelworld" or the "Group" or the "Company")
Preliminary Results for the Year ended 31 December 2020
FY2020 financial results in line with expectation
Group well positioned for a recovery in travel
17(th) March 2021: Hostelworld, a leading global OTA focused on
the hostel market, is pleased to announce its preliminary results
for the year ended 31 December 2020.
Strategic developments
-- Enhanced customer experience through a significantly faster
website and more seamless check-out flow.
-- Improved booking experience, adding flexible booking options
including PayNow and additional payment types
including Google pay and Apple pay.
-- Improved search experience by enhancing our sort order
algorithms to provide more personalised search results.
-- Rolled out a new promotional configuration platform for our
hostel partners, significantly increasing the proportion of
discounted rates available to our customers.
-- Consolidated our tracking, attribution and bidding tools
within Google's product suite to optimise our marketing spend -
made significant progress towards our goal of optimising paid spend
based on predicted new customer values versus customer acquisition
costs.
-- Cloud migration and platform modernisation workstreams
underway, which will enable faster execution of our growth strategy
and reduce cost over the medium term.
Financial highlights
-- Full year net booking volumes declined by 79% (2019: -6%).
-- Net revenue of EUR15.4m, a decline of 81% compared to 2019 (2019: EUR80.7m).
-- Net Average Booking Value ("ABV") of EUR9.33, a 22% decline
versus 2019 (EUR11.97), due to the impact of increased
cancellations and reduced bed prices across all markets.
-- Cancellations of EUR6.2m (2019: EUR9.3m) , as customers who
had booked under the free cancellation policy had their travel
plans suspended.
-- Marketing costs reduced by 72% to EUR9.3m in 2020 (2019:
EUR32.7m), aligning spend to sales volumes.
-- Administrative expenses reduced by 43% to EUR36.1m in 2020
(2019: EUR63.4m), including both fixed and variable costs.
-- Adjusted EBITDA loss of EUR17.3m, down from EUR20.5m profit in 2019.
-- Adjusted free cash flow absorption of -71% (2019: 53%).
Balance sheet and cash flow
-- Raised gross proceeds of EUR15.2m through an equity placing in June 2020.
-- Total cash at 31 December 2020 of EUR18.2m (2019: EUR19.4m)
of which EUR1.2m is a short-term invoice financing facility (2019:
EURnil). EUR7m RCF remained undrawn as at 31 December 2020.
-- Balance sheet further strengthened post year end in February
2021 with a new EUR30 million term loan facility.
-- No cash dividends in 2020 due to COVID-19 uncertainty.
Gary Morrison, Chief Executive Officer, commented:
"2020 has been an extremely challenging year for both
Hostelworld and the entire global travel industry. In light of the
unprecedented challenges presented by the pandemic, our key
priorities have been to (i) support our employees, customers and
hostel partners; (ii) increase our liquidity, and (iii) accelerate
the execution of our core platform roadmap.
During the year we delivered significant improvements in
marketing capabilities, user experience and inventory
competitiveness. These improvements will have further strengthened
the competitiveness of our platform relative to our capabilities in
Q4'19, when we had returned bookings to growth.
As vaccination programmes continue to be rolled out in our key
geographies across the world, I am confident our loyal customer
base has a strong desire to travel once restrictions allow, even
more so after a prolonged period of confinement. Furthermore, I
continue to see significant opportunities to build a broader
catalogue of relevant experiential travel products and services
beyond hostel accommodation, and opportunities to connect
like-minded travellers with each other via social features on our
platform.
I remain confident that Hostelworld will emerge from the
pandemic stronger than before and able to seize market
opportunities when normal travel patterns resume".
Outlook:
While the near-term outlook for the travel industry remains
challenging and highly uncertain, we continue to expect the pace of
recovery to be driven by changes in travel guidance in individual
markets, which we hope to see accelerate as vaccination programmes
are rolled out across our key geographies. Given the continued
uncertainty relating to the timing of the recovery, the Group is
unable to provide guidance for FY2021.
The Board does not expect to issue a dividend under its current
policy in respect of the 2020 financial year.
We remain convinced that when travel restrictions are lifted, we
will be well positioned to benefit from the recovery in demand,
driven by our improved platform and loyal customer base.
Analyst Presentation
A presentation will be made to analysts today at 9.00am, a copy
of which will be available on our Group website
http://www.hostelworldgroup.com. If you would like to attend or
dial into the presentation, please contact Powerscourt on the
contact details provided below:
For further information please contact:
Hostelworld Group plc
Gary Morrison, Chief Executive
Officer
Caroline Sherry, Chief Financial
Officer
Rudolf O'Kane, Head of Commercial
Finance +353 (0) 1 498 0700
Powerscourt hostelworld@powerscourt-group.com
Lisa Kavanagh / Jack Shelley +44 (0) 20 7250 1446
Eavan Gannon / Jack Hickey +353 87 236 5973
About Hostelworld Group
Hostelworld Group, the global hostel-focused online booking
platform, inspires passionate travellers to Meet The World, and
come back with life-changing stories to tell. Our customers are not
your average tourists; they crave cultural connection and unique
experiences that we make possible by providing an unbeatable
selection of hostels in unmissable locations - all in the palm of
their hand.
It is the social nature and community feel of hostels and their
environment that enable travellers to embrace journeys of
discovery, adventure and meaning. We have more than 13 million
reviews across over 17,000 hostels in more than 179 countries,
making our brand the leading online hub for social travel. Our
website operates in 19 different languages and our mobile app in 13
languages .
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 materialise, 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.
Chairman's Statement
We began 2020 in confident mood on the back of our return to
bookings growth in late 2019. While January and February showed
early promise it quickly became apparent that the year's trading
would be massively affected by the travel restrictions imposed to
deal with the spread of COVID-19. As demand plummeted our priority
was to secure the viability of the Group and I'm happy to report
that we are now in a strong financial position which will ensure we
can participate profitably in the expected return to normal levels
of demand.
I can also report that in addition to the sterling work on fund
raising and cost reduction, the team, led by our CEO Gary Morrison
continues to make substantial progress on our Roadmap for Growth
strategy ensuring our customer proposition is greatly enhanced and
the Group is well placed to capitalise on the market upturn.
COVID-19 Response
As COVID-19 expanded globally, leading to an effective shutdown
of the global travel market, we reacted swiftly to protect the
business and to enable us to navigate through this crisis. From the
outset our focus has been the wellbeing of our employees, to
support our hostel partners and customers and to strengthen the
Group's balance sheet.
Given the challenges and liquidity constraints the Group faced
as a result of the fallout from COVID-19, we undertook a number of
actions to ensure the financial stability of the company. This
included measures to reduce variable and fixed costs and conserve
our cash. As part of the process we accessed government supports
where available and the Board along with the executive leadership
team deferred a portion of their salaries and fees for 2020.
We took actions to protect the health and safety of our
employees, and to support our hostel partners to capitalise on
demand as restrictions eased and to ensure we continued to engage
with our customer base. Detailed contingency plans were also drawn
up to ensure business continuity in light of evolving government
guidelines.
Dividend and Capital Structure
In light of the ongoing uncertainty around COVID-19, the Board
took the decision to cancel the proposed final dividend of 2.1c per
share (representing a EUR2.0 million cash outflow), in respect of
the 2019 financial year. In June the Board took the further
decision to suspend a cash dividend in respect of the 2020
financial year. The Board recognises the importance of dividends to
shareholders but believed that cancelling the cash dividend was the
right course of action in these exceptional circumstances.
Consequently, in August we declared the issue of new ordinary
shares by way of a bonus issue to shareholders. Future cash
dividends will be subject to the Group generating adjusted profit
after tax, the Group's cash position and any restrictions in the
Group's banking facilities.
In June, we announced a non-pre-emptive placing and the issuing
of new ordinary shares representing up to approximately 19.9% of
the Company's existing ordinary share capital and raised gross
proceeds of approximately EUR15.2 million. Further liquidity was
raised through a EUR7 million three-year revolving credit facility
and a short-term EUR3.5 million invoice financing facility.
In January 2021, in light of the agreement of a new EUR30
million term loan facility, we repaid the amount owing on the
short-term financing facility and signed a deed of release on the
revolving credit facility, which was undrawn. In February 2021 we
drew down the EUR30 million term loan facility. Together these
actions materially strengthened the Group's capital base in an
uncertain environment.
Board Composition
I would like to personally thank all the members of the Board
for their commitment and diligence and hugely appreciate the
dedication and teamwork they showed throughout the year as the
entire world grappled with the consequences and challenges COVID-19
and the lockdowns presented.
The composition of the Board is fully compliant with the 2018 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 disclosed to the market in September, TJ Kelly announced his
plans to step down as Chief Financial Officer. We thank TJ for his
contribution during his time at Hostelworld and wish him every
success for the future. Having made a significant contribution to
the finance team at Hostelworld, I'm delighted that Caroline Sherry
has stepped into the role, following a transition period. Caroline
has been a welcome addition to the Hostelworld team since joining
in November 2019 from Glanbia plc's Performance Nutrition division
where she was Director of Financial Planning and Analysis. Prior to
this, Caroline held a number of strategic and commercial finance
roles at Ulster Bank Group, a subsidiary of NatWest Group. Caroline
is a fellow of the Institute of Chartered Accountants in Ireland
and completed her training in PwC.
There were no other changes to the Audit Committee, Remuneration
Committee and Nomination Committee during the year.
Climate Change
I welcome the introduction in 2020 of a new listing rule on
climate-related disclosure requirements for companies with a
premium listing on a UK stock exchange. The new requirements, which
apply to accounting periods beginning on or after 1 January 2021
and which can be traced back to the historic 2015 Paris Agreement
on Climate Change, are an appropriate response to the need to
improve the information made available by industry about climate
change risk. The Board will look to ensure that Hostelworld
complies with its obligations in this area and will provide
oversight and leadership on this important issue.
Colleagues, Customer and Shareholders
On behalf of the Board, I would like to thank all members of the
Hostelworld team for their unfailing commitment, support and hard
work throughout the year.
I would also like to thank our customers and hostel partners,
whom we continue to place at the heart of our business, for their
loyalty and support. We look forward to working together in 2021,
as our unique customer base return to travelling the world, in a
safe and supportive environment.
Finally, thank you to our shareholders for their continued
support and commitment. While this has without question been a
challenging year, and the near-term outlook remains uncertain, we
look forward to returning our business to growth once again and
delivering value for all our shareholders.
Michael Cawley
Chairman
16 March 2021
Chief Executive's Review
2020 has been an extremely challenging year for both Hostelworld
and the entire global travel industry. While we began the year in a
strong position following a return to bookings growth in Q4'19, the
COVID-19 outbreak started affecting the travel industry in March
and severely impacted demand for the remainder of the year. As the
outbreak started to spread, we took swift action to reduce costs
and conserve cash whilst also prioritising our resources towards to
strengthening our core platform. I remain confident that our loyal
customer base will have more desire than ever to travel and meet
other like-minded travellers once restrictions are lifted, and I
further believe our business model and the improvements to our
platform will position us well to capitalise on those opportunities
when demand returns.
COVID-19 response
In light of the unprecedented challenges presented by the
pandemic, our key priorities have been to (i) support our
employees, customers and hostel partners; (ii) increase our
liquidity; and (iii) progress our Roadmap for Growth.
Supporting our employees, customers and hostel partners
In March, we established a Remote Community Hub to support our
employees with the shift to remote working, providing wellbeing
resources, social activities and a mentorship programme.
We provided support to our hostel partners, including detailing
COVID-19 policies on our site and hosting 170 hostel webinars with
content specifically designed to help them navigate the challenges
of operating and converting demand in the current environment. We
also introduced a sanitation badge for Hostels to provide details
of their compliance to locally applicable Covid-19 containment
measures on our platform. We also launched 'Hostel Heroes'
acknowledging the support hostels were providing to front line
workers and continued our HOSCARS virtually, celebrating the best
hostels on our site.
Finally, to support our customers we launched a 'Beds for
Backpackers' programme, which provided free accommodation in
hostels for stranded travellers. We also introduced marketing
initiatives to continue engagement with our loyal customer base,
including experiences such as 'Virtually a hostel', as well as
hosting virtual social events to bring together like-minded
travellers during COVID-19. In 2020, we received an average
customer service satisfaction score of 86%. Similarly, in a recent
survey completed by our property partners we received a score of
4.2 out of 5 for the support we provided in 2020.
Increasing our liquidity
As the outbreak started to accelerate in March, we implemented a
wide-ranging programme of cost reductions and initiatives to
conserve cash. This included a significant reduction in staff
costs; reducing our variable marketing spend to match demand; and
minimising discretionary operating costs. As cancellations started
to rise to unprecedented levels, we offered customers a range of
refund options, including credits in excess of the original value
of the booking which could be redeemed for up to two years.
In June 2020 we increased our liquidity through an equity
placing raising gross proceeds of EUR15.2m. We also agreed terms
for a three-year revolving credit facility to provide up to EUR7
million of additional liquidity, and a EUR3.5 million short-term
invoice financing facility. In August 2020 the trading outlook
deteriorated again as global lockdowns and travel restrictions came
back into force. We looked to strengthen our balance sheet, and in
February 2021 we drew down a new EUR30 million term loan facility.
This facility ensures we can withstand a further prolonged period
of depressed demand and emerge in a materially stronger position
when normal demand patterns resume. As part of the new facility, we
repaid the amount owing on the short-term financing facility agreed
in June 2020 and signed a deed of release on the unused revolving
credit facility.
Throughout the pandemic we have sought to proactively engage
with our shareholders given the fast-moving environment we find
ourselves operating in and I would like to thank all of them for
their continued support through these challenging times.
Progress on our Roadmap for Growth
During the year, we have taken the opportunity to deploy
significant enhancements to strengthen our core platform, including
some additional items originally planned for 2021. We expect these
enhancements will result in strengthened marketing capabilities, an
improved user experience and increased inventory competitiveness
when normal travel patterns resume.
Key Operational Highlights and Results
We entered the year in a strong position, having successfully
returned the business to net bookings growth in Q4 2019. We had
also increased the number of hostels listed on our platform to
17,700 by year end 2019, up from 16,500 at the end of 2018.
However, in early March we saw a sharp reduction in our trading
performance as the COVID-19 outbreak expanded from China into Asia,
and then into the US and Europe. In late June we saw a very modest
recovery in domestic bookings, followed by some recovery in short
haul bookings into Europe in July and early August as travel
restrictions were eased. In late August, we saw a further marked
deterioration in bookings and bed prices as travel restrictions
tightened globally again.
Throughout the pandemic we have also seen an increase in the
rate of hostel closures compared to historical rates, which we have
partially offset by increased new sign ups to our platform. As of
31 December 2020, we had 17,200 Hostels listed on our platform, a
decrease of 2.8% compared to the prior years. We also saw that many
hostels remained open during 2020, but at very low occupancy
levels.
As the pandemic progressed, we took the opportunity to
accelerate delivery of the Roadmap for Growth items planned for the
balance of 2020, together with some additional items we had planned
for 2021. Throughout the year we delivered a number of significant
core platform enhancements designed to improve our marketing
capabilities, user experience and inventory competitiveness. These
improvements included: consolidating our tracking, attribution and
bidding tools within Google's product suite to optimise our
marketing spend; making progress towards our goal of optimising
paid channel spend based on predicted new customer value versus
customer acquisition cost; transitioning our legacy website to a
progressive web app, enabling a significantly faster user
experience; deploying a new promotional configuration platform for
our hostel partners, significantly increasing the proportion of
discounted rates available to our customers; and launching PayNow,
which allows our customers to pay upfront for non-refundable
bookings at participating hostels with an option to pay via Google
pay or Apple pay.
Going forward into 2021, we will continue our platform
modernisation programme, with our main focus on transitioning our
technology stack into the Cloud and continuing to refactor our
legacy core platform applications into microservices. This will
further strengthen our core business, enable faster execution of
our growth strategy and reduce cost over the medium term.
Our Strategy
In March 2020, I updated the market on the progress of our core
Roadmap for Growth strategy and detailed our future growth strategy
for the next 3-5 years. This longer-term strategy will deliver
growth by providing a broader catalogue of experiences beyond
hostel accommodation to our customer base, coupled with the
addition of social features to enable our customers to explore the
world together with other like-minded travellers. I also announced
our intention to accelerate this strategy via an increased focus on
potential M&A targets in addition to organic initiatives;
funded through a combination of existing cash reserves, a modest
level of debt and a rebased dividend policy.
Shortly after delivering this update, the COVID-19 outbreak
sharply reduced demand across the global travel industry. This
necessitated a swift change in our short-term priorities away from
M&A targets towards reducing costs and increasing liquidity.
This was the appropriate response to ensure the Group could
withstand a prolonged period of depressed demand until normal
travel patterns resume, whereupon we could continue our longer term
growth strategy.
As vaccination programmes continue to be rolled out in our key
geographies across the world, I remain confident that our core
customer base has a strong desire to travel, even more so after a
prolonged period of confinement. I also continue to see the same
opportunities to build a broader catalogue of relevant experiential
travel products beyond hostel accommodation, and opportunities to
connect like-minded travellers with each other via social features
on our platform. With the Group's deep knowledge of experiential
travellers built up over 20 years, our trusted brand, and a loyal
and relevant customer base, I continue to believe in our longer
term growth strategy and that we are uniquely positioned to enable
our customers to Meet the World (R) together with other like-minded
travellers.
In parallel with our longer term growth strategy, we are
continuing to integrate Counter and Goki into our core platform
offering for our hostel partners. These solutions have been
designed for the unique requirements of the hostel industry, and I
am pleased with the progress the teams have made this year,
particularly given the challenging COVID-19 backdrop and the
pressures the hostel industry has been facing.
Business Model
We are a global OTA focused on the hostel market. Our core
online platform provides the opportunity for predominately hostel
owners, as well as other low-cost accommodation providers to
advertise their accommodation to independent travellers looking for
unique and social experiences. Most of our revenue is generated
through taking a commission from bookings made through our
technology platform, including the Hostelworld website, and via our
Apps. This efficient business model has very favourable working
capital attributes and strong cash conversion.
Following the introduction of a free cancellation booking option
in 2018, this year we have launched a number of initiatives to
provide our customers with even more flexibility around their
bookings on our platform. This includes the introduction of new
flexible non-refundable rates, allowing a booking to be changed
directly with the hostel; aligning our free cancellation policies
to hostel's cancellation policies; and finally allowing credits to
be used across the vast majority of rate plan types. As referenced
previously, we have also introduced PayNow, allowing travellers to
pay 100% upfront on non-refundable rates at participating hostels
and to do so through Google Pay or Apple Pay.
Investing in People
Over the last two years we have significantly strengthened our
executive team, across all areas of the business. I am confident
that the strength and depth of our leadership team will enable us
to trade through the current challenging trading environment and
position the Group for growth when we emerge from the crisis.
During the year we launched several new employee initiatives,
with the objective of enabling our talent to deliver for the
business. We built on our existing Diversity and Inclusion
("D&I") work, establishing a D&I working group to develop
our strategy further. Having moved to remote working in March, we
communicated a new agile working approach which post COVID-19 will
enable employees to 'work from anywhere' in the country they are
employed, work abroad for up to 30 days and increase flexible
working. We also established recognition programmes and provided
benefits to employees to continue to show appreciation and
acknowledge the dedication of our teams. I would like to take this
opportunity to thank all of our employees for their continued hard
work and commitment in this sustained period of uncertainty.
Dividends and Capital Allocation
In light of the significant uncertainty presented by COVID-19
the Board and I took the decision in March to suspend the final
2019 cash dividend. In June we suspended cash dividends for the
foreseeable future. In September, in lieu of a cash dividend, we
issued new ordinary shares by way of a bonus issue to shareholders.
The Board and I continue to believe the appropriate allocation of
capital resources is critical to ensuring the long-term growth of
the business and optimisation of shareholder returns.
Outlook
While the short to mid-term outlook for the travel industry
remains challenging and uncertain, we continue to expect the pace
of recovery to be driven by changes in travel guidance in
individual markets, which we hope to see accelerated with the start
of vaccination programmes worldwide.
Whilst this recovery is likely to take some time and the
consumer sentiment will continue to be uncertain, the Board remains
confident in the resilience and flexibility of our business model,
and that we are well positioned to execute on our strategy.
As demand recovers, the Board will continue to evaluate internal
and external opportunities that will deliver value for
shareholders, in particular the significant potential to enhance
future growth through building out a broader catalogue of
experiential travel products beyond hostel accommodation and
opportunities to connect like-minded travellers with each other via
social features on our platform.
I remain confident that Hostelworld will emerge from the
COVID-19 crisis stronger than before and be able to seize market
opportunities when normal travel patterns resume.
Gary Morrison
Chief Executive
16 March 2021
Financial Review
Introduction
-- Hostelworld brand net bookings decline of 78% (2019: -5%);
total Group net bookings decline of 79% (2019: -6%)
-- Net Average Booking Value ("ABV") of EUR9.33, a 22% decline versus 2019 (EUR11.97)
-- Net revenue of EUR15.4m, an 81% decline compared to 2019 (2019: -2%)
-- Total marketing spend of EUR9.3m, a 72% reduction on 2019 (2019: EUR32.7m)
-- Total administrative costs of EUR36.1m, a 43% reduction on 2019 (2019: EUR63.4m)
-- Exceptional items totalled EUR3.0m (2019: EUR3.1m)
-- Adjusted EBITDA loss of -EUR17.3m (2019: EUR20.5m profit)
-- Adjusted free cash flow absorption of -71% (2019: 53%)
-- Basic loss per share of -45.68 EUR cent (2019: basic earnings per share 8.64EUR cent)
2020 Key Performance Indicators
2020 Change versus
PY 2019
Net Bookings - Hostelworld brand 1.44m (78%)
--------------------- -------------------
Net Revenue EUR15.4m (81%)
--------------------- -------------------
Net Average Booking Value ("ABV") EUR9.33 (22%)
--------------------- -------------------
Adjusted EBITDA -EUR17.3m (185%)
--------------------- -------------------
Adjusted EBITDA Margin -113% (138%)
--------------------- -------------------
Return on Capital Employed -18% (219%)
--------------------- -------------------
Adjusted Free Cash Absorption -71% (12%)
--------------------- -------------------
Adjusted Loss per Share 20.76 euro cent (237%)
--------------------- -------------------
The Group uses Alternative Performance Measures ('APMs') which
are non-IFRS measures to monitor the performance of its operations
and of the Group as a whole. These APMs along with their
definitions are provided in the Appendix "Alternate Performance
Measures" which form part of the Annual Report.
Revenue and operating (loss):
Revenue for the period was EUR15.4m a decline of 81% compared to
2019 (2019: EUR80.7m), reflecting the detrimental impact COVID-19
has had on the business and the wider travel and leisure industry.
Adjusted EBITDA loss of EUR17.3m, which was a decline of EUR37.8m
from 2019. Adjusted EBITDA margin was -113% compared to +25% in
2019.
Bookings and revenue
Despite a positive start to the year, following a return to net
bookings growth during Q4 2019, bookings significantly declined in
late Q1 2020 as extensive travel restrictions were put in place in
response to COVID-19. We experienced a small uptick in bookings
during the summer season, but trading deteriorated significantly
from the end of August onwards as global lockdowns and travel
restrictions came into force. The Group's net booking volumes
declined by 79% in 2020 (2019: 6% decline). 2020 cancellations were
EUR6.2m (32% of gross revenue) compared to 2019 EUR9.3m (10% of
gross revenue), as customers who had booked under the free
cancellation policy had their travel plans suspended. The global
disruption of the travel industry caused by the COVID-19 pandemic,
has resulted in a significantly increased cancellation rate as a
portion of revenue. The profile of these cancellations is such that
there is a higher proportion of longer lead time higher value
bookings. Net Average Booking Value ("ABV"), the average value paid
by a customer for a net booking, declined by 22% in 2020 (2019: 3%
growth) primarily due to the increase in cancellations and the
impact of reduced bed prices across all markets.
At 31 December 2020, we held EUR3.1m of customer deposits
relating to bookings made under the free cancellation policy (2019:
EUR2.8m), of this EUR2.9m relates to bookings already cancelled. We
recognised EUR2.6m of previously deferred revenue in 2020, (2019:
(EUR0.1m). Revenues for the period, net of cancellations, of
EUR15.4m represents an 81% decline versus the same time last year
(2019: EUR80.7m).
Throughout the pandemic the Group has proactively managed
marketing costs, matching marketing spend to sales volumes. Total
marketing spend was EUR9.3m in 2020 (2019: EUR32.7m). In addition,
the Group also took significant and immediate action across all
areas of spend, both fixed and variable. These measures resulted in
a 43% reduction in total administrative expenses, from EUR63.4m in
2019 to EUR36.1m.
The Group has availed of the Irish Revenue tax warehousing
scheme and deferred payment on all Irish employer taxes since
February 2020. We continue to monitor and comply with the
appropriate revenue guidelines applicable to this scheme. We also
availed of assistance under the Coronavirus Job Retention Scheme in
the UK and the temporary COVID-19 Wage Subsidy Scheme in
Ireland.
Exceptional items
Exceptional items are identified due to their nature or
materiality to help the reader form a better view of overall and
adjusted trading. The Group incurred EUR3.0m of exceptional cost
items 2020 (2019: EUR3.1m), EUR1.3m of which related to merger and
acquisition costs (2019: EUR2.1m) and EUR1.7m of which was invested
in the realignment of our Product and Technology teams (2019:
EUR1.0m).
Share based payment
The share-based payment expense of EUR0.4m (2019: EUR0.2m)
reflects the share-based payment charge arising on the issuance of
options in accordance with the Group's Long-Term Incentive Plan
("LTIP") and Save As You Earn ("SAYE") plan. The increase year on
year is representative of the LTIP 2020 scheme which includes a
wider pooling of employees as the scheme was extended to senior
management.
(Loss) / Earnings per share
Basic loss per share for the Group was 45.68 EUR cent (2019
basic earnings per share: 8.64 EUR cent). The 2019 earnings per
share figures have been restated to incorporate the 1,636,252 new
Hostelworld Group ordinary shares that were issued in September
2020. The weighted average number of shares in issue during the
period was adjusted to include these bonus shares as if they were
issued 1 January 2019.
The decline in EPS year on year was driven by a EUR57.3m
decrease in the Group's profits for the period. Adjusted loss per
share was 20.76 EUR cent per share (2019 earnings per share: 15.2
EUR cent per share). The weighted average number of shares in the
period was 107.0m and the total number of shares issued at the
balance sheet date was 116.3m.
Intangible asset impairment
In 2020 the Group recorded an impairment of EUR15.0m on its
intangible assets associated with Hostelbookers and
Hostelworld.com. Carrying value of intangible assets at 31 December
2020 totals EUR86.3m, a decrease of EUR22.9m from the prior year.
The Group capitalised development costs of EUR3.7m in the year,
(2019: EUR2.8m) and had an amortisation charge for the year of
EUR11.7m (2019: EUR11.5m)
Deferred tax
The Group are carrying a deferred tax asset of EUR7.6m (2019:
EUR6.6m). Deferred tax assets are recognised to the extent that it
is probable that future taxable profits will be available against
which any unused tax losses and unused tax credits can be utilised.
Future taxable profits for recoverability of the deferred tax asset
has been estimated using the Board approved five-year plan.
Lease liability
At the balance sheet date, the carrying value of the lease
liability totalled EUR4.3m (2019 EUR4.3m). These assets relate to
the Group's lease commitments for office space in Ireland, UK,
Portugal and China.
Net debt and financing
As at balance sheet date the Group had debt of EUR1.2m (2019:
nil) relating to a short-term invoice financing facility. The Group
also had a EUR7m revolving credit facility which as at 31 December
2020 remained undrawn. In January 2021 amounts owing on the
short-term invoice financing facility were repaid in full and the
Group signed a deed of release on the revolving credit
facility.
In February 2021 the Group signed a EUR30m five-year term loan
facility with certain investment funds and accounts of HPS
Investment Partners LLC or subsidiaries or affiliates thereof. An
amount of EUR28.8m was drawn down on 23 February 2021.
In January 2021 the Group also agreed revised covenant terms
with AIB on a rental guarantee for the Central Park office, Dublin,
the Group's headquarters where financial covenants and parent
company guarantee were waived.
At 31 December 2020 the Group was in compliance with all
financial covenants in place.
Taxation
The Group recorded a corporation tax credit of EUR0.6m (2019:
EUR1.2m charge). Trading losses arising in 2020 have been carried
back to 2019 and set against taxable profits arising in that year
resulting in a refund owing to the Group in respect of tax paid in
2020.
Related party transactions
Related party transactions are disclosed in note 22 to the Group
financial statements.
Adjusted free cash (absorption) / flow
The decline in adjusted free cash (absorption) / flow conversion
from 53% in 2019 to (71)% in 2020 reflects the impact of the losses
made in 2020. The adjusted EBITDA loss made in the period has
resulted in a Free Cash outflow of EUR(12.3)m compared to an inflow
of EUR10.9m in 2019, with the net benefit of a EUR8.9m positive
working capital. The positive working capital movement of EUR8.9m
is due to a EUR5.6m increase in creditors and a EUR3.3m decrease in
debtors. The EUR5.6m increase in creditors is due to cash
conservation measures taken including the warehousing of Irish
employer taxes. The decline in debtors is due to lower VAT receipts
as revenues and operating costs declined and the receipt of a
debtor from the liquidation of a Group entity in 2019. Total cash
at 31 December was EUR18.2m (2019: EUR19.4m), of which EUR3.1m are
customer deposits related to bookings made under the free
cancellation policy (2019: EUR2.8m) and EUR1.2m relating to a
short-term invoice financing facility (2019: EURnil).
Dividend
As announced on 24 June 2020, the Board does not expect to pay a
cash dividend under its current policy in respect of the 2020
financial year. On 17 September 2020, the company issued 1,636,252
bonus shares to shareholders in lieu of a cash dividend at value
EUR0.01 per share. Future payment of cash dividends will be subject
to the Group generating adjusted profit after tax, the Group's cash
position and any restrictions in the Group's debt facility.
Caroline Sherry
Chief Financial Officer
16 March 2021
HOSTELWORLD GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2020
2020 2019
Notes EUR'000 EUR'000
------ ----------- ---------
Revenue 3 15,364 80,672
------ ----------- ---------
Administrative expenses 4 (36,119) (63,434)
------ ----------- ---------
Depreciation and amortisation 4 (14,132) (13,946)
------ ----------- ---------
Impairment of intangible assets 4 (14,996) -
------ ----------- ---------
Operating (loss) / profit (49,883) 3,292
------ ----------- ---------
Financial income 8 59
------ ----------- ---------
Financial costs 7 (246) (224)
------ ----------- ---------
Share of results of associate 13 (374) (116)
------ ----------- ---------
(Loss) / profit before taxation (50,495) 3,011
------ ----------- ---------
Taxation 8 1,638 5,383
------ ----------- ---------
(Loss) / profit for the year attributable
to the equity owners of the parent
Company (48,857) 8,394
------ ----------- ---------
Basic and diluted (loss) / earnings
per share (euro cent) 9 (45.68) 8.64
------ ----------- ---------
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2020
2020 2019
EUR'000 EUR'000
--------- --------
(Loss) / profit for the year (48,857) 8,394
--------- --------
Items that may be reclassified subsequently to profit
or loss:
--------- --------
Exchange differences on translation of foreign operations (7) (1)
--------- --------
Total comprehensive (loss) / income for the year
attributable
to equity owners of the parent Company (48,864) 8,393
--------- --------
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER
2020
2020 2019
Notes EUR'000 EUR'000
------ -------- --------
Non-current assets
------ -------- --------
Intangible assets 10 86,252 109,120
------ -------- --------
Property, plant and equipment 11 4,480 5,353
------ -------- --------
Deferred tax assets 12 7,596 6,727
------ -------- --------
Investment in associate 13 2,349 2,723
------ -------- --------
100,677 123,923
------ -------- --------
Current assets
------ -------- --------
Trade and other receivables 15 1,681 4,980
------ -------- --------
Corporation tax 54 -
------ -------- --------
Cash and cash equivalents 16 18,189 19,365
------ -------- --------
19,924 24,345
------ -------- --------
Total assets 120,601 148,268
------ -------- --------
Issued capital and reserves attributable
to equity owners of the parent
------ -------- --------
Share capital 17 1,163 956
------ -------- --------
Share premium 17 14,328 -
------ -------- --------
Foreign currency translation
reserve 8 15
------ -------- --------
Share based payment reserve 1,210 788
------ -------- --------
Retained earnings 81,156 130,013
------ -------- --------
Total equity attributable to
equity holders of the parent
company 97, 865 131,772
------ -------- --------
Non-current liabilities
------ -------- --------
Deferred tax liabilities 12 - 144
------ -------- --------
Deferred consideration - 873
------ -------- --------
Lease liabilities 14 2,492 3,422
------ -------- --------
2,492 4,439
------ -------- --------
Current liabilities
------ -------- --------
Trade and other payables 18 17,036 11,074
------ -------- --------
Borrowings 19 1,164 -
------ -------- --------
Lease liabilities 14 1,803 869
------ -------- --------
Corporation tax 241 114
------ -------- --------
20,244 12,057
------ -------- --------
Total liabilities 22,736 16,496
------ -------- --------
Total equity and liabilities 120,601 148,268
------ -------- --------
The financial statements were approved by the Board of Directors
and authorised for issue on 16 March 2021 and signed on its behalf
by:
Gary Morrison Caroline Sherry
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 2020
Share Share Retained Foreign Share based Total
capital Premium earnings currency payment
translation reserve
reserve
Notes EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------ --------- --------- ---------- ------------- ------------ ---------
Balance at
1 January
2019 956 - 134,650 16 630 136,252
------ --------- --------- ---------- ------------- ------------ ---------
Effect of
initial application
of IFRS 16 - - (416) - - (416)
------ --------- --------- ---------- ------------- ------------ ---------
Balance at
1 January
2019 - as
restated 956 - 134,234 16 630 135,836
------ --------- --------- ---------- ------------- ------------ ---------
Total comprehensive
income for
the year - - 8,394 (1) - 8,393
------ --------- --------- ---------- ------------- ------------ ---------
Dividends 24 - - (12,615) - - (12,615)
------ --------- --------- ---------- ------------- ------------ ---------
Credit to
equity for
equity settled
share based
payments - - - - 158 158
------ --------- --------- ---------- ------------- ------------ ---------
Balance at
31
December
2019 956 - 130,013 15 788 131,772
------ --------- --------- ---------- ------------- ------------ ---------
Total comprehensive
(loss) for
the year - - (48,857) (7) - (48,864)
------ --------- --------- ---------- ------------- ------------ ---------
Issue of
ordinary
shares for
cash 17 191 15,042 - - - 15,233
------ --------- --------- ---------- ------------- ------------ ---------
Share issue
cost 17 - (698) - - - (698)
------ --------- --------- ---------- ------------- ------------ ---------
Bonus Issue
shares 17 16 (16) - - - -
------ --------- --------- ---------- ------------- ------------ ---------
Credit to
equity for
equity settled
share-based
payments - - - - 422 422
------ --------- --------- ---------- ------------- ------------ ---------
Balance at
31
December
2020 1,163 14,328 81,156 8 1,210 97,865
------ --------- --------- ---------- ------------- ------------ ---------
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2020
Notes 2020 2019
EUR'000 EUR'000
--------------------------------------- ------ --------- ---------
Cash flows from operating activities
------ --------- ---------
(Loss) / profit before tax (50,495) 3,011
------ --------- ---------
Depreciation of property, plant
and equipment 4 2,458 2,425
------ --------- ---------
Amortisation of intangible assets 4 11,674 11,521
------ --------- ---------
Impairment of intangible assets 4 14,996 -
------ --------- ---------
Share of results of associate 13 374 116
------ --------- ---------
Net profit on disposal property,
plant and equipment 4 (55) -
------ --------- ---------
Financial income (8) (59)
------ --------- ---------
Financial expense 7 246 224
------ --------- ---------
Employee equity settled share-based
payment expense 21 428 156
------ --------- ---------
Changes in working capital items:
------ --------- ---------
Increase / (decrease) in trade
and other payables 5,586 (2,252)
------ --------- ---------
Decrease / (increase) in trade
and other receivables 3,299 (2,166)
------ --------- ---------
Cash generated from operations (11,497) 12,976
------ --------- ---------
Interest paid (246) (224)
------ --------- ---------
Interest received 8 59
------ --------- ---------
Income tax refund / (paid) 698 (1,516)
------ --------- ---------
Net cash (used in) / from operating
activities (11,037) 11,295
------ --------- ---------
Cash flows from investing activities
------ --------- ---------
Acquisition/development of intangible
assets 10 (3,802) (2,915)
------ --------- ---------
Purchases of property, plant
and equipment 11 (64) (190)
------ --------- ---------
Acquisition of investment in
associate 13 - (1,075)
------ --------- ---------
Net cash used in investing activities (3,866) (4,180)
------ --------- ---------
Cash flows from financing activities
------ --------- ---------
Deferred consideration 13 (503) -
------ --------- ---------
Proceeds from issue of share
capital 17 15,233 -
------ --------- ---------
Issue costs paid 17 (698)
------ --------- ---------
Proceeds from borrowings 19 3,454 -
------ --------- ---------
Repayment of borrowings 19 (2,290)
------ --------- ---------
Repayments of obligations under
lease liabilities 14 (1,462) (1,109)
------ --------- ---------
Dividends paid 24 - (12,615)
------ --------- ---------
Net cash from / (used in) financing
activities 13,734 (13,724)
------ --------- ---------
Net (decrease) in cash and cash
equivalents (1,169) (6,609)
------ --------- ---------
Cash and cash equivalents at
the beginning of the year 19,365 25,974
------ --------- ---------
Effect of foreign exchange rate (7) -
changes
------ --------- ---------
Cash and cash equivalents at
the end of the year 16 18,189 19,365
------ --------- ---------
HOSTELWORLD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
1. GENERAL INFORMATION AND BASIS OF PREPARATION
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 Floor 2, 52 Bedford
Row, London, WC1R 4LR, 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.
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 2020, which were approved by the Board of
Directors on 16 March 2021. 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 2020 has been given by the auditors,
Deloitte Ireland LLP. 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 26 April 2021.
Going concern
The Directors, after making enquiries, have a reasonable
expectation that the Group and Company has adequate resources to
continue operating as a going concern for the foreseeable
future.
While we entered 2020 with positive momentum, trading since
late-January has been challenged by the outbreak of the COVID-19
virus. From mid-March the Group were severely impacted with high
cancellation rates and very low booking volumes. Global travel
demand remained muted throughout 2020 with ongoing travel
restrictions continuing to severely impact the global travel
industry. Revenue for the year totalled EUR15.4m (2019: EUR80.7m)
and the Group incurred a loss before taxation of EUR50.5m (2019:
profit before taxation EUR3.0m). Losses have continued subsequent
to the year end. At 31 December 2020 the Group was in a net asset
position of EUR97.9m (2019: EUR131.8m).
In response to the breakout of COVID-19 immediate action was
taken by the Directors to preserve the Group's cash position.
Actions taken include the decision not to pay the final 2019
dividend, to suspend any cash dividends in 2020, a Group-wide
scaled redundancy program, reduced hours and deferred pay for our
employees and Directors, the renegotiation of credit terms with key
vendors, availing of debt warehousing of Irish employer taxes, the
elimination of all non-essential operating costs including
marketing, recruitment, travel and other variable overheads, and
availing of Government COVID-19 supports in both Ireland and the
UK.
The Directors have taken steps to ensure adequate liquidity is
available to the Group for the likely duration of the crisis and
the recovery period. The Group has retained its financial strength
and at 31 December 2020 held a cash balance of EUR18.2 million
(2019: EUR19.4 million) and held committed undrawn funds available
of EUR7 million relating to a revolving credit facility that can be
drawn down up to November 2023. The Group availed of a short-term
invoice financing facility amounting to EUR3.5 million in June
2020, with an amount owing of EUR1.2 million at 31 December 2020.
On 29 June 2020, the Company issued Ordinary Shares by way of a
Placing, raising gross proceeds of EUR15.2m.
Throughout COVID-19 two forecasts were developed under a base
case and stress-case scenario analysis. Both scenarios included
differing assumptions with regard to cost cutting measures,
projected revenue flows and return to recovery assumptions,
projected net cash flows from operations and available sources of
funding. Whilst performance initially tracked in-line with our base
case assumptions from the end of August onwards trading outlook
deteriorated significantly as global lockdowns and travel
restrictions came into force. As a result of this deterioration in
trading, we revised downwards our base outlook, reflecting the
impact of the pandemic being deeper and longer than originally
anticipated. A five-year profit and loss ("P&L") outlook was
prepared which is conservative in its assumptions. This outlook
does not factor in any upside from global mass vaccination
programmes, full recovery is not expected to happen until FY-23
with average booking values assumed to be low and cost per booking
assumed to be elevated throughout the five-year cycle. Our stress
case scenario has not changed and assumes depressed volumes
throughout H1 2021 with minimal recovery in H2 2021. Operating
expenses would be further reduced in 2021 to reflect lower activity
levels.
On the basis of the five-year P&L outlook which identified a
liquidity need and in light of the considerable uncertainty on the
duration and severity of the COVID-19 pandemic the Directors took
additional steps to strengthen the Group's Balance sheet. The Group
entered a EUR30 million term loan facility with HPS Investment
Partners, LLC. On 23 February 2021 the Group drew down EUR28.8
million, net of an original issue discount. The facility is single
drawdown and bears interest at a margin of 9.0% per annum over
EURIBOR (with a EURIBOR floor of 0.25% per annum). The facility
agreement includes the following financial covenants: (1) adjusted
net leverage (Hostelworld has to ensure that total net debt is no
more than 3.0 x adjusted EBITDA from 31 December 2023 to 30
September 2024, and no more than 2.5 x adjusted EBITDA from 31
December 2024 onwards); and (2) minimum liquidity (Hostelworld has
to ensure that at close of business on the last business day of
each month until it is testing the adjusted net leverage ratios
there is free cash in members of the Group which have guaranteed
repayment of the facility of at least EUR6.0 million). Security on
the facility includes the share capital of the group, the bank
accounts of the group and the Group's intellectual property.
In January 2021 the Group repaid the amount owing on the
short-term invoice financing facility, and a consent letter was
signed by Hostelworld and AIB amending the loan agreement in place
to permit the taking of security, removal of the parent guarantee
and the removal of the financial covenants. In February 2021 a deed
of release was signed on the EUR7m revolving credit facility. Cash
flow forecasts were updated to reflect movements including early
repayment of the short-term invoice financing facility and drawdown
of the HPS term loan facility. Having considered the Group's five
year P&L outlook, cash flow forecasts prepared for 12 months
from date of signing, 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 and Company has sufficient resources to
continue in operation for the foreseeable future, a period of not
less than 12 months from the date of this report, and accordingly,
they continue to adopt the going concern basis in preparing the
Group financial statements.
Basis of Preparation
The financial statements have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and International Financial
Reporting Standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
IFRS as adopted by the European Union ("the EU") comprise
standards and interpretations approved by the International
Accounting Standards Board ("IASB"). The consolidated financial
statements comply with Article 4 of the EU IAS Regulation. IFRS
adopted by the EU differs in certain respects from IFRS issued by
the IASB. References to IFRS hereafter refer to IFRS adopted by the
EU.
The consolidated financial statements have been prepared under
the historical cost basis. The investment in associate is accounted
for using the equity method.
In the preparation of these consolidated financial statements
the accounting policies set out below have been applied
consistently by all Group companies. The consolidated financial
statements are presented in euro, which is the functional currency
of all Group companies.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgment or complexity, or areas where assumptions
and estimates are significant to the consolidated financial
statements are disclosed in note 2.
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 Company's and Group'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.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the year in which the estimate is revised if the revision affects
only that year, or in the year of the revision and future years if
the revision affects both current and future years. In particular,
information about significant areas of estimation that have the
most significant effect on the amounts recognised in the
consolidated financial statements are described below and in the
respective notes to the consolidated financial statements.
(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 in note 1. Determining the amount to be capitalised
requires the Directors to make judgements regarding expected future
cash generation of the asset.
Accounting for Exceptional items
Exceptional items by their nature and size can make
interpretation of the underlying trends in the business more
difficult. Such items may include restructuring, material merger
and acquisition costs, profit or loss on disposal or termination of
operations, litigation settlements, legislative changes, material
acquisition integration costs and profit or loss on disposal of
investments. Judgement is used in assessing the particular items
which by virtue of their scale and nature should be disclosed as
exceptional items.
(b) The key sources of estimation uncertainty that have been
made that have the most significant effect on the amounts
recognised in the consolidated financial statements are set out
below:
Going concern
The Directors have a reasonable expectation that the Group has
adequate resources to continue operating as a going concern for the
foreseeable future. Management judgement and estimate is required
in forecasting cashflow projections incorporating the impact of
COVID-19. At 31 December 2020 the Group held a cash and cash
equivalents balance of EUR18.2m (2019: EUR19.4m) and was in a net
asset position of EUR97.9m (2019: EUR131.8m). The Directors have
taken steps to ensure adequate liquidity is available to the Group
throughout this period. The details of the going concern scenarios,
key assumptions and mitigating actions are outlined in the going
concern statement on page 123. Based on these scenarios and the
resources available to the Group, the Directors believe the Group
has sufficient liquidity to remain a going concern 12 months from
date of signing of the accounts.
The most significant factor impacting our projections for going
concern relates to COVID-19 and what impact COVID-19 will have on
trading volumes. We considered the impact on the Group of operating
in a zero-revenue environment for 2021 but carrying the current
level of operating costs for and carrying 25% of the overall
budgeted direct costs (pay per click marketing spend primarily that
is directly linked to revenue). Under this scenario the Group
continues to have sufficient cash resources to operate as a going
concern.
Deferred tax asset recognition and recoverability of deferred
tax assets
Deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available in future periods
against which the reversal of temporary differences can be
deducted. Recognition, therefore, involves judgement regarding the
future financial performance of the particular legal entity or tax
Group in which the deferred tax asset exists. The extent to which
it is probable that taxable profits will be available in future
periods is an estimate assessed based on the approved five-year
budget and long-term forecasts upon initial recognition and at each
reporting date. At 31 December 2020 the carrying value of deferred
tax assets amounted to EUR7.6m (2019: EUR6.7m). Based on the Board
approved five-year outlook there are sufficient taxable profits to
demonstrate the asset could be substantially utilised by 31
December 2025. A decline in taxable profits from amounts included
in our five-year budgeted projections would impact the amount of
the deferred tax asset which would be recovered over the next five
years.
Carrying value of goodwill and intangible assets
The Directors assess annually whether goodwill has suffered any
impairment, in accordance with the relevant accounting policy and
intangible assets are assessed for possible impairment where
indicators of impairment exist. The recoverable amounts of
cash-generating units ("CGUs") are determined based on the higher
of fair value or value-in-use calculations. Management judgement
and estimation is required in forecasting future cash flows of
cash-generating units including incorporating the impact of
COVID-19, the discount rates applied to these cashflows, the
expected long-term growth rate of the applicable business and
terminal values. The carrying amount of goodwill at 31 December
2020 amounted to EUR17.9m (2019: EUR17.9m) and the carrying amount
of domain names amounted to EUR64.2m (2019: EUR88.4m). In 2020 the
Group recognised an impairment charge of EUR15.0m (2019: EURnil).
Further details on the assumptions used and sensitivity analysis
are set out in note 10.
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 Chief Executive
Officer, who is the Company's Chief Operating Decision Maker
("CODM"). When making resource allocation decisions, the CODM
evaluates booking numbers and average booking value. The objective
in making resource allocation decisions is to maximise consolidated
financial results.
The CODM assesses the performance of the business based on the
consolidated adjusted profit/ (loss) after tax of the Group for the
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 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:
2020 2019
EUR'000 EUR'000
-------------------------- -------- --------
Europe 7,354 46,994
-------- --------
Americas 3,779 15,672
-------- --------
Asia, Africa and Oceania 4,231 18,006
-------- --------
Total revenue 15,364 80,672
-------- --------
As at 31 December 2020, EUR197k of revenue relating to free
cancellation bookings has been deferred (2019: EUR2,777k).
Disaggregation of revenue is presented as follows:
2020 2019
EUR'000 EUR'000
-------- --------
Technology and data processing fees 14,251 78,571
-------- --------
Advertising revenue and ancillary services 1,113 2,101
-------- --------
Total revenue 15,364 80,672
-------- --------
Revenue has declined by 81% in 2020 as booking volumes declined
as COVID-19 impacted the business (2019: 2% decline). In the year
ended 31 December 2020, the Group generated 93% (2019: 97%) of its
revenues from the technology and data processing fees that it
charged to accommodation providers.
Revenue is recognised at the time the reservation is made in
respect of non-refundable commission on the basis that the Group
has met its performance obligations at the time the booking is
made. In respect of the free cancellation product, which offers the
traveller the opportunity to make a booking on a free cancellation
basis and to receive a refund of their deposit in certain
circumstances, such related revenue is not recognised until the
last cancellation date has passed as one party can withdraw from
the contract until such a date has passed. Deferred revenue is
expected to be recognised within twelve months of initial
recognition.
Advertising revenue and revenue generated from other services
are recognised over the period when the service is performed.
The Group's non-current assets are located in Ireland,
Australia, the United Kingdom, Portugal, and China and
disaggregated as follows:
2020 2019
Notes EUR'000 EUR'000
-------- ------------------------- -------- --------
Total Non-Current Assets 100,677 123,923
-------- --------
Broken out as:
------- -------- --------
96,9
Ireland 51 119,770
-------- --------
2, 3
Australia 49 2,723
-------- --------
United Kingdom 922 947
-------- --------
Portugal 430 483
-------- --------
China 25 -
-------- --------
4. OPERATING EXPENSES
(Loss)/profit for the year has been arrived at after
charging/(crediting) the following operating costs:
2020 2019
Notes EUR'000 EUR'000
------ -------- --------
Marketing expenses 9,260 32,712
------ -------- --------
Staff costs 6 16,759 16,881
------ -------- --------
Credit card processing fees 571 2,515
------ -------- --------
Loss on disposal PPE 12 -
------ -------- --------
Profit on disposal PPE (67) -
------ -------- --------
Exceptional items 5 2,989 3,066
------ -------- --------
FX (gain) / loss (152) 72
------ -------- --------
Other administrative costs 6,747 8,188
------ -------- --------
Total administrative expenses 36,119 63,434
------ -------- --------
Impairment of intangible assets 10 14,996 -
------ -------- --------
Depreciation of tangible fixed assets 11 2,458 2,425
------ -------- --------
Amortisation of intangible fixed
assets 10 11,674 11,521
------ -------- --------
Total operating expenses 65,247 77,380
------ -------- --------
Total administration expenses decreased by EUR27,315k compared
to the prior financial year, driven by the reduction of
nonessential operating costs, as a result of COVID-19.
Included in staff costs are government assistance amounts
totalling EUR1,085k (2019: EURnil) for furloughed employees under
the Coronavirus Job Retention Scheme in the UK and subsidy received
under the temporary COVID-19 Wage Subsidy Scheme in Ireland.
Auditor's remuneration
During the year, the Group obtained the following services from
its auditor - Deloitte Ireland LLP:
2020 2019
EUR'000 EUR'000
---------------------------------------------- -------- --------
Fees payable for the statutory audit
of the Company and consolidated financial
statements 42 42
-------- --------
Fees payable for other services:
-------- --------
- statutory audit of subsidiary undertakings 135 181
-------- --------
- tax advisory services - -
-------- --------
- audit related assurance services 194 10
-------- --------
- corporate finance services - -
-------- --------
- other non-audit services 57 -
-------- --------
Total 428 233
-------- --------
5. EXCEPTIONAL ITEMS
2020 2019
EUR'000 EUR'000
------------------------------ -------- --------
Merger and acquisition costs 1,332 2,115
-------- --------
Restructuring costs 1,657 951
-------- --------
Total 2,989 3,066
-------- --------
Merger and acquisition costs of EUR1,332k (2019: EUR2,115k)
relates to professional fees incurred in the year on related
activity.
Restructuring costs of EUR1,657k (2019: EUR951k) include costs
relating to an internal realignment of our technology and product
departments and relating staff restructuring costs, and
professional fees incurred in current year on review of funding
options for the group.
6. STAFF COSTS
The average monthly number of people employed (including
Executive Directors) was as follows:
2020 2019
Average number of persons employed
----- -----
Administration and sales 137 189
----- -----
Development and information technology 152 125
----- -----
Total 289 314
----- -----
The aggregate remuneration costs of these employees is analysed
as follows:
2020 2019
Notes EUR'000 EUR'000
------ -------- -----------
Staff costs comprise:
------ -------- -----------
Wages and salaries 15,550 16,026
------ -------- -----------
Social security costs 1,935 2,177
------ -------- -----------
Pensions costs 447 466
------ -------- -----------
Other benefits 734 347
------ -------- -----------
Long-term employee incentive costs 21 428 156
------ -------- -----------
Capitalised development labour (2,335) (2,291)
-------- -----------
Total 16,759 16,881
------ -------- -----------
In addition to staff costs disclosed above termination benefits
disclosed within note 5 exceptional items restructuring costs
totalled EUR935k (2019: EUR951k).
Increase year on year in capitalised development labour relates
to work completed by the Group on the Roadmap to Growth
initiatives.
7. FINANCIAL COSTS
Notes 2020 2019
EUR'000 EUR'000
------ -------- --------
Interest on lease liabilities 14 182 178
------ -------- --------
Other finance costs 64 46
------ -------- --------
Total 246 224
------ -------- --------
8. TAXATION
2020 2019
Notes EUR'000 EUR'000
------ -------- --------
Corporation tax:
------ -------- --------
Current year (credit) / charge (395) 1,184
------ -------- --------
Adjustments in respect of prior years (230) 38
------ -------- --------
Total (625) 1,222
------ -------- --------
Origination and reversal of temporary
differences 12 (1,013) (6,605)
------ -------- --------
Total (1,638) (5,383)
------ -------- --------
Corporation tax is calculated at 12.5% (2019: 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:
2020 2019
EUR'000 EUR'000
--------- --------
(Loss) / profit before tax on continuing operations (50,495) 3,011
--------- --------
Tax at the Irish corporation tax rate of 12.5%
(2019: 12.5%) (6,312) 376
--------- --------
Effects of:
--------- --------
Tax effect of expenses that are not deductible
in determining taxable profit 3,831 371
--------- --------
Tax effect of losses not utilised 2,789 -
--------- --------
Tax effect of losses carried back (578) -
--------- --------
Tax effect of income taxed at different rates (49) -
--------- --------
Depreciation (less than) / in excess of capital
allowances (167) 123
--------- --------
Effect of different tax rates of subsidiaries
operating in other jurisdictions 91 261
--------- --------
Recognition of deferred tax asset (1,013) (6,552)
--------- --------
Adjustments in respect of prior years (230) 38
--------- --------
Total (1,638) (5,383)
--------- --------
As a result of the impact of COVID-19 Irish Revenue introduced a
temporary acceleration of corporation tax loss relief under section
396D TCA 1997 which provides for a temporary acceleration of
corporation tax loss relief for accounting periods affected by
COVID-19. The measure allowed companies to estimate their trading
losses for certain accounting periods and carry back up to 50% of
those losses estimated against chargeable profits in the preceding
account period. The Group availed of this measure with regard to
the period ended 31 December 2020. An estimate of the corporation
tax loss for the period ended 31 December 2020 was calculated and
an amount of available trading losses was used to partially offset
trading profits in the period ended 31 December 2019. As a result
of this relief, the Group was entitled to a refund from the Irish
tax authorities for corporation tax paid in 2019. At 31 December
2020, the Group has reassessed the position with regard to trading
losses to ensure that the value of losses carried back to the 2019
period were not in excess of available losses in 2020. On review of
the position, it was concluded that the losses carried back were
calculated accurately and no adjustment was required.
The Group has an unrecognised deferred tax asset as at 31
December 2020 as a result of an impairment of intellectual property
in 2020 during the year totalling EUR1,871k (2019: EURnil).
In addition, the Group has unused trading tax losses of
EUR17,689k (2019: nil) available for offset against future profits
arising. A deferred tax asset has not been recognised in respect of
such losses as it is not considered probable that there will be
future trading profits available against which the deferred tax
asset can be unwound, beyond those used to assess the
recoverability of the existing deferred tax asset at 31 December
2020. All tax losses available may be carried forward
indefinitely.
9. (LOSS) / EARNINGS PER SHARE
Basic (loss) / earnings per share is computed by dividing the
net (loss) / profit for the year available to ordinary shareholders
by the weighted average number of ordinary shares outstanding
during the year.
2020 2019
Weighted average number of shares in issue
('000s) 106,947 97,207*
--------- --------
(Loss) / profit for the year (EUR'000s) (48,857) 8,394
--------- --------
Basic earnings per share (euro cent) (45.68) 8.64
--------- --------
*The 2019 earnings per share figures have been restated to
incorporate the 1,636,252 new Hostelworld Group ordinary shares
that were issued in September 2020. The weighted average number of
shares in issue during the period was adjusted to include these
bonus shares as if they were issued 1 January 2019.
Diluted (loss) / earnings per share is computed by adjusting the
weighted average number of ordinary shares in issue to assume
conversion of all potential dilutive ordinary shares. Share options
and share awards are the Company's only potential dilutive ordinary
shares. Ordinary shares potentially issuable from share-based
payment arrangements are anti-dilutive due to the loss in the
financial year meaning there is no difference between basic and
diluted earnings per share.
2020 2019
Weighted average number of ordinary shares
in issue ('000s) 106,947 97,207
-------- -------
Effect of dilutive potential ordinary
shares:
-------- -------
Share options ('000s) - 5
-------- -------
Weighted average number of ordinary shares
for the purpose of diluted earnings per
share ('000s) 106,947 97,212
-------- -------
Diluted earnings per share (euro cent) (45.68) 8.64
-------- -------
10. INTANGIBLE ASSETS
The table below shows the movements in intangible assets for the
year:
Goodwill Domain Technology Affiliates Capitalised Total
Names Contracts Development
Costs
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
---------- ---------- ----------- ----------- ------------- ----------
Cost
---------- ---------- ----------- ----------- ------------- ----------
Balance at 1 January
2019 47,274 214,640 14,068 5,500 11,525 293,007
---------- ---------- ----------- ----------- ------------- ----------
Additions - 68 - - 2,847 2,915
---------- ---------- ----------- ----------- ------------- ----------
Balance at 31 December
2019 47,274 214,708 14,068 5,500 14,372 295,922
---------- ---------- ----------- ----------- ------------- ----------
Additions - - 153 - 3,649 3,802
---------- ---------- ----------- ----------- ------------- ----------
Disposals for the
period - - (121) - - (121)
---------- ---------- ----------- ----------- ------------- ----------
Balance at 31 December
2020 47,274 214,708 14,100 5,500 18,021 299,603
---------- ---------- ----------- ----------- ------------- ----------
Accumulated amortisation
and impairment
---------- ---------- ----------- ----------- ------------- ----------
Balance at 1 January
2019 (29,426) (116,700) (13,808) (5,500) (9,847) (175,281)
---------- ---------- ----------- ----------- ------------- ----------
Charge for year - (9,674) (103) - (1,744) (11,521)
---------- ---------- ----------- ----------- ------------- ----------
Balance at 31 December
2019 (29,426) (126,374) (13,911) (5,500) (11,591) (186,802)
---------- ---------- ----------- ----------- ------------- ----------
Charge for year - (9,118) (132) - (2,424) (11,674)
---------- ---------- ----------- ----------- ------------- ----------
Disposals for the
period - - 121 - - 121
---------- ---------- ----------- ----------- ------------- ----------
Impairment recognised - (14,996) - - - (14,996)
---------- ---------- ----------- ----------- ------------- ----------
Balance at 31 December
2020 (29,426) (150,488) (13,922) (5,500) (14,015) (213,351)
---------- ---------- ----------- ----------- ------------- ----------
Carrying amount
---------- ---------- ----------- ----------- ------------- ----------
At 31 December 2019 17,848 88,334 157 - 2,781 109,120
---------- ---------- ----------- ----------- ------------- ----------
At 31 December 2020 17,848 64,220 178 - 4,006 86,252
---------- ---------- ----------- ----------- ------------- ----------
Capitalised development cost additions during the year comprised
of internally generated additions of EUR2,335k (2019: EUR2,291k)
and other separately acquired additions of EUR1,314k (2019:
EUR556k). Hostelworld continue to utilise affiliate contracts to
generate revenue and continue to pay affiliate partner
commissions.
Impairments
The carrying value of the goodwill balance at 31 December 2020
is EUR17,848k (2019: EUR17,848k) and relates to an investment in
Hostelworld.com Limited by the Group in 2009. Goodwill, which has
an indefinite useful life, is subject to annual impairment testing,
or more frequent testing if there are indicators of impairment.
Following impairment testing based on the assumptions below, no
impairment was recognised for goodwill in 2020.
In 2020, as a result of a strategic review of the business by
the Directors, it was determined to cease actively marketing our
Hostelbookers brand name. An impairment loss of EUR494k was
recognised based on the carrying value at 31 December 2020. The
recoverable amount was EURnil.
In 2020 following a review of COVID trading performance and
booking performance, the Directors reassessed the estimated cash
flows associated with the Hostelworld.com intellectual property
assets. This led to the recognition of an impairment charge of
EUR14,502k in relation to the value of the Hostelworld.com domain
name. The recoverable amount of the related CGU was calculated at
EUR64,220k.
Cash generating units ("CGUs") to which goodwill and
intellectual property have been allocated represent the lowest
level at which the assets are monitored for internal reporting
purposes. The recoverable amount of goodwill and intellectual
property allocated to a CGU is determined based on a value in use
computation. The key assumptions for calculating value in use of
the CGUs are discount rates, growth rates and cash flows. They are
described as follows:
Discount rates
2020 2019
EUR'000 EUR'000
------------------------------------- -------- --------
Pre-tax discount rate; Goodwill 13.2% 12.2%
-------- --------
Pre-tax discount rate: Intellectual
Property 14.69% 11.93%
-------- --------
The pre-tax discount rates are based on the Group's weighted
average cost of capital, calculated using the Capital Asset Pricing
Model adjusted for the Group's specific beta coefficient together
with a country risk premium to take account of the countries from
where the CGU derives its cash flows.
Growth rates
Growth rates are assessed based on the Board approved five-year
2021 budget. As part of the budget we have utilised 2019 as the
base year in our reforecasts and we have measured our growth each
year as a percentage of 2019 volumes through COVID and the recovery
of the Group from the impacts of COVID until 2023, with a moderate
uptick in growth rates in 2024 and 2025.
For goodwill a terminal value of 2% (2019: 2.8%) growth into
perpetuity was used to extrapolate cash flows beyond the five-year
budget period. This growth rate does not exceed the long-term
average growth rate for the industry in which each CGU operates.
For intellectual property growth rates included beyond the
five-year budget period ranged from 8% to 3%.
Cash flows
The cash flow projections are based on a five-year budget
formally approved by the Board of Directors. In preparing the 2021
budget and strategic plan, management considered industry market
research and analysis prepared on COVID-19 and the travel industry
pertaining to estimated return to growth of the market, customer
and consumer behaviours, competitor activity and developing trends
in the industry in which the CGU operates in.
Management have also considered the Group's history of earnings,
internal focus on the roadmap to growth through COVID-19 downtime,
past experience and cash flow generation. Capital expenditure
requirements to maintain the CGUs performance and profitability
assume that historic investment patterns will be maintained.
Working capital requirements are forecast to move in line with
activity.
Sensitivity analysis
The key assumptions underlying the impairment reviews are set
out above. Sensitivity analysis has been conducted in respect of
each of the CGUs using the following sensitivity assumptions: a 1%
increase in the discount rate; 10% decline in revenue in each of
the Board approved five-year numbers and nil terminal value growth.
Under each scenario no impairment was identified. From our
sensitivity analysis we identified that Goodwill would need to have
nil terminal value growth and an increase in discount rate of 2.4%
to be considered impaired.
11. PROPERTY, PLANT AND EQUIPMENT
The table below shows the movements in property, plant and
equipment for the year:
Right-of-Use Leasehold Fixtures Computer Total
Assets Property & Equipment Equipment
(Leasehold Improvements
Property)
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------- -------------- ------------- ----------- --------
Cost
------------- -------------- ------------- ----------- --------
Balance at 1 January
2019 4,294 1,855 823 4,239 11,211
------------- -------------- ------------- ----------- --------
Additions 39 22 - 168 229
------------- -------------- ------------- ----------- --------
Disposals - - - (748) (748)
------------- -------------- ------------- ----------- --------
Balance at 31 December
2019 4,333 1,877 823 3,659 10,692
------------- -------------- ------------- ----------- --------
Additions 1,681 23 - 41 1,745
------------- -------------- ------------- ----------- --------
Remeasurement 129 - - - 129
------------- -------------- ------------- ----------- --------
Disposals (769) (334) (169) (214) (1,486)
------------- -------------- ------------- ----------- --------
Balance at 31 December
2020 5,374 1,566 654 3,486 11,080
------------- -------------- ------------- ----------- --------
Accumulated depreciation
------------- -------------- ------------- ----------- --------
Balance at 1 January
2019 - (652) (435) (2,574) (3,661)
------------- -------------- ------------- ----------- --------
Charge for year (1,061) (317) (125) (922) (2,425)
------------- -------------- ------------- ----------- --------
Disposals - - - 747 747
------------- -------------- ------------- ----------- --------
Balance at 31 December
2019 (1,061) (969) (560) (2,749) (5,339)
------------- -------------- ------------- ----------- --------
Charge for year (1,518) (258) (102) (580) (2,458)
------------- -------------- ------------- ----------- --------
Disposals 492 334 158 213 1,197
------------- -------------- ------------- ----------- --------
Balance at 31 December
2020 (2,087) (893) (504) (3,116) (6,600)
------------- -------------- ------------- ----------- --------
Carrying amount
------------- -------------- ------------- ----------- --------
At 31 December 2019 3,272 908 263 910 5,353
------------- -------------- ------------- ----------- --------
At 31 December 2020 3,287 673 150 370 4,480
------------- -------------- ------------- ----------- --------
The adoption of IFRS 16 on 1 January 2019, resulted in the Group
recognising right-of-use assets of EUR4,294k on that date. These
assets relate to the Group's lease commitments for office space in
Ireland, UK, Portugal and China. The average lease term of leases
entered at 31 December 2020 is 3 years. The maturity analysis of
lease liabilities is presented in note 14.
12. DEFERRED TAXATION
The following are the major deferred taxation liabilities and
assets recognised by the Group and movements thereon during the
current and prior reporting year:
Accelerated
Taxation Depreciation
EUR'000
-----------------------
As at 1 January 2019 (163)
-----------------------
Credited to the income statement 6,605
-----------------------
Credited to retained earnings (IFRS 16) 141
-----------------------
As at 1 January 2020 6,583
-----------------------
Credited to the income statement 1,013
-----------------------
As at 31 December 2020 7,596
-----------------------
The following is the analysis of the deferred taxation balances
for financial reporting purposes:
2020 2019
EUR'000 EUR'000
------------------------------- -------- --------
Deferred taxation assets 7,596 6,727
-------- --------
Deferred taxation liabilities - (144)
-------- --------
Net deferred taxation assets 7,596 6,583
-------- --------
The deferred tax credit for the year ended 31 December 2020 of
EUR1,013k (2019: EUR6,746k) relates to a deferred tax asset created
in the current year for capital allowances not utilised and
available for future offset. The 2019 credit relates to a timing
difference which arose from a Group reorganisation that completed
on 12 March 2019 in which certain assets of a Group subsidiary were
acquired by Hostelworld.com Limited. Deferred tax is determined
using tax rates and laws enacted or substantively enacted by the
reporting date. The total tax charge in future periods will be
affected by any changes to the applicable tax rates in force in
jurisdictions in which the Group operates and other relevant
changes in tax legislation.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profits will be available against
which any unused tax losses and unused tax credits can be utilised.
Future taxable profits have been estimated using the Board approved
five-year plan and adjusted for base case COVID-19 assumptions.
Within the five-year plan it is assumed that the Group is
profitable from 2023, and the deferred tax asset can be
substantially utilised by 31 December 2025. The Directors have
reviewed the recoverability of the deferred tax asset at the
reporting date and are satisfied that it is probable that the
deferred tax asset can be utilised.
13. INVESTMENT IN ASSOCIATE
The Group own 7,645,554 shares (49% of the share capital) of
Goki Pty Limited, an Australian resident company. Goki Pty
Limited's principal activity is software development and principal
place of business is Australia. The investment in an associate was
accounted for using the equity method. The Group has significant
influence but not control over the entity, due to the nature of its
voting rights. The Group controls 49% of the voting rights and is
not entitled to appoint 50% or more of the total number of
Directors to the Board.
Deferred consideration of EUR1,266k (2019: EUR1,763k) is due to
be paid in full by July 2021.
Summarised financial information in respect of Goki Pty Limited
is set out below. This represents the amounts in Goki Pty Limited's
financial statements prepared in accordance with IFRSs.
Statement of financial position of Goki Pty Limited as at 31
December 2020:
2020 2019
EUR'000 EUR'000
-------------------------------------- -------- --------
Non-current assets 9 7
-------- --------
Current assets 1,829 2,441
-------- --------
Non-current liabilities - -
-------- --------
Current liabilities (200) (46)
-------- --------
Equity attributable to owners of the
company 1,638 2,402
-------- --------
Income statement of Goki Pty Limited for the year/period ended
31 December 2020:
2020 2019*
EUR'000 EUR'000
-------- --------
Revenue 28 64
-------- --------
Loss after tax (764) (236)
-------- --------
Other comprehensive income attributable to - -
the owners of the company
-------- --------
Total comprehensive loss (764) (236)
-------- --------
Group share of results of associate (374) (116)
-------- --------
*2019 income statement from the period 22 July 2019 to 31
December 2019
Reconciliation of the above summarised financial information to
the carrying amount of the Group's interest in Goki Pty Limited
recognised in the consolidated financial statements:
2020 2019
EUR'000 EUR'000
-------- --------
Net assets of Goki Pty Limited 1,638 2,402
-------- --------
Proportion of the Group's ownership interest
in the associate 49% 49%
-------- --------
Group share of net assets 803 1,177
-------- --------
Goodwill and transaction costs 2,868 2,868
-------- --------
Other adjustments (1,322) (1,322)
-------- --------
Carrying amount of the Group's interest in
associate 2,349 2,723
-------- --------
Other adjustments relate to the elimination of the Group's 49%
equity investment within the net assets of Goki Pty Limited and
amounts to 49% of the share capital of Goki PTY Limited.
Commitment to extend loan to associate:
Under the terms of the shareholder purchase agreement, there is
a USD 500k loan facility option available to Goki Pty Limited by
the Group until July 2022. This loan is interest bearing and if
drawn, repayable in full in July 2022. The Group treats this
facility as a commitment to extend a loan to associate until such
time as it becomes probable that it will be required.
The Directors assessed the credit risk of this commitment and
determined there was no evidence to recognise an expected credit
loss on it.
14. LEASE LIABILITIES
Lease liabilities relate to the Group's lease commitments for
office space in Ireland, Portugal, UK and China.
The movement in the Group's right-of-use assets during the
period is set out in note 11. The movement in the Group's lease
liabilities during the period is as follows:
2020 2019
EUR'000 EUR'000
-------- --------
Opening lease liability 4,291 -
-------- --------
Recognition on transition to IFRS 16 - 5,361
-------- --------
Additions 1,681 31
-------- --------
Disposals (344) -
-------- --------
Lease term remeasurement 129 8
-------- --------
Payments (1,555) (1,287)
-------- --------
Lease interest 182 178
-------- --------
Foreign exchange differences on lease payments (89) -
-------- --------
Closing lease liability 4,295 4,291
-------- --------
In line with our lease agreement on the Dublin office, a rent
review was completed in Q2 2020 which resulted in an increase in
the lease liability and right of use asset of EUR129k.
The maturity analysis of these lease liabilities is as
follows:
2020 2019
EUR'000 EUR'000
----------- ----------
Maturity analysis
----------- ----------
Within one year 1,940 999
----------- ----------
Between one and five years 2,660 3,475
----------- ----------
Over 5 years - 243
----------- ----------
Less unearned interest (305) (426)
----------- ----------
Total 4,295 4,291
----------- ----------
2020 2019
----------- ----------
EUR'000 EUR'000
----------- ----------
These liabilities are classified in the consolidated statement
of financial position as:
Non-current lease liabilities 2,492 3,422
----------- ----------
Current lease liabilities 1,803 869
----------- ----------
Total 4,295 4,291
----------- ----------
The Group has used the following practical expedients permitted
by the standard on transition and at each reporting date - the use
of a single discount rate to a portfolio of leases with reasonably
similar characteristics, the accounting for operating leases with a
remaining lease term of less than 12 months as at 1 January 2019 as
short-term leases and the use of hindsight in determining the lease
term where the contract contains options to extend or terminate the
lease. The Group has elected not to reassess whether a contract is
or contains a lease at the date of initial application. Instead,
for contracts entered into before the transition date the Group
relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.
At 31 December 2020, the Group is committed to EUR19k (2019:
EUR6k) for short term leases. The total cash outflow for leases
amount to EUR1,607k during 2020 (2019: EUR1,293k).
There is a clear payment schedule associated with our lease
liabilities and based on our cash flow forecasts the Group does not
face any significant liquidity risk with regards to its lease
liabilities.
Amounts recognised in consolidated income statement:
2020 2019
EUR'000 EUR'000
--------------------------------------- -------- --------
Depreciation expense on right-of-use
assets 1,518 1,061
-------- --------
Interest expense on lease liabilities 182 178
-------- --------
Expense relating to short term leases 52 5
-------- --------
Total 1,752 1,244
-------- --------
15. TRADE AND OTHER RECEIVABLES
2020 2019
EUR'000 EUR'000
-------- --------
Amounts falling due within one year
-------- --------
Trade receivables 188 873
-------- --------
Prepayments and other receivables 1,191 2,291
-------- --------
Value added tax 302 1,816
-------- --------
Total 1,681 4,980
-------- --------
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 (2019: 4 days).
In 2019, an amount of EUR1,214k was included in other
receivables which relates to amounts due to the Group on completion
of the liquidation of WRI Nominees DAC which was received in H2
2020 (see note 22).
Reduction in trade receivables and value added tax year on year
reflective of COVID-19 related decline in booking volumes.
The Group always recognises lifetime expected credit losses
("ECLs") for trade receivables estimated using a provision matrix
based on the Group's historical credit loss experience, adjusted
for factors that are specific to the debtors, general economic
conditions and an assessment of both the current as well as the
forecast direction of conditions at the reporting date, including
time value of money where appropriate. The historical loss rates
are adjusted to reflect current and forward economic factors if
there is evidence to suggest these factors will affect the ability
of the customer to settle receivables under COVID.
Movement in the expected credit loss for trade receivables is as
follows:
2020 2019
EUR'000 EUR'000
-------- --------
At the beginning of the year 212 163
-------- --------
(Decrease)/increase in loss allowance recognised
during the year (18) 49
-------- --------
At the end of the year 194 212
-------- --------
The net movement in the expected credit loss has been included
in the income statement.
16. CASH AND CASH EQUIVALENTS
2020 2019
EUR'000 EUR'000
-------- --------
Cash and cash equivalents 18,189 19,365
-------- --------
Total 18,189 19,365
-------- --------
Included within cash and cash equivalents number is an amount
not available for use by the group EUR1,500k (2019: EURnil)
relating to a rent security deposit. In April 2021 the amount will
reduce to EUR750k in line with underlying security agreement.
Balance of cash and cash equivalents comprise cash and short term
bank deposits only.
17. SHARE CAPITAL
No of shares Ordinary Share premium Total
of EUR0.01 shares
each
(thousands) EUR'000 EUR'000 EUR'000
------------- --------- -------------- --------
At 31 December 2019 95,571 956 - 956
------------- --------- -------------- --------
Share Issue - 29 June
2020 19,114 191 14,344 14,535
------------- --------- -------------- --------
Bonus Issue - 17 September
2020 1,636 16 (16) -
------------- --------- -------------- --------
At 31 December 2020 116,321 1,163 14,328 15,491
------------- --------- -------------- --------
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.
On 29 June 2020, the Company issued 19,114,155 Ordinary Shares
at EUR0.79695 per share by way of a Placing, raising gross proceeds
of EUR15,233k. EUR698k of directly attributable share issue costs
have been recognised as a deduction from share premium.
On 17 September 2020, the company issued 1,636,252 bonus shares
to shareholders in lieu of a cash dividend at value EUR0.01 per
share.
18. TRADE AND OTHER PAYABLES
2020 2019
EUR'000 EUR'000
-------- --------
Amounts falling due within one year
-------- --------
Trade payables 2,258 2,493
-------- --------
Accruals and other payables 9,003 4,100*
-------- --------
Deferred revenue 207 2,981*
-------- --------
Deferred consideration (note 13) 1,266 890
-------- --------
Payroll taxes 4,302 610
-------- --------
Total 17,036 11,074
-------- --------
At 31 December 2020, EUR197k of revenue was deferred relating to
free cancellation bookings (2019: EUR2,777k) and EUR10k was
deferred relating to featured listings (2019: EUR204k).
Included in accruals and other payables is a credit provision
amounting to EUR1,528k (2019: EUR322k) for vouchers and incentives
to customers for use on future bookings, and an amount of EUR2,889k
(2019: EUR48k) relating to customers who have cancelled their free
cancellation booking but have not been refunded. Both increased
compared to 2019 due to additional options recognised for customers
whose travel was disrupted by COVID-19. The Group has availed of
the Irish Revenue tax warehousing scheme and deferred payment on
all Irish employer taxes from February 2020. Total amount
warehoused at 31 December 2020 amounted to EUR4,140k (2019:
EURnil). The Group continues to liaise with Irish Revenue on the
matter and comply with all appropriate guidelines applicable.
The average credit period for the Group in respect of trade
payables is 23 days (2019: 18 days). The Directors consider that
the carrying amount of trade payables approximates to their fair
value.
*An amount of EUR322k has been restated in the prior year as a
reclassification between deferred revenue and accruals and other
payables to better reflect the nature of the liability and to
provide better information for comparability to the users of the
accounts.
19. BORROWINGS
On 22 June 2020 the Group entered a 'Prompt Pay' which is a
short term invoice financing facility with Allied Irish Banks PLC.
It is repayable in full by 23 April 2021. Total amount outstanding
at 31 December 2020 amounted to EUR1,164k. A flat rate interest
applies of 1.45% per annum. Hostelworld.com Limited must ensure it
maintains a cash balance of no less than EUR8.67m for the period
ending 30th September 2020, EUR5.75m for the period ending 31
December 2020 and EUR1.42m for the period ending 31 March 2021. The
facility was guaranteed by Hostelworld Group plc. On 26 January
2021 the amount owing on the facility was repaid in full. Please
see subsequent event note 26.
In the period the Group entered a three-year revolving credit
facility for EUR7m with the Governor and Company of the Bank of
Ireland to assist with the investing and development needs of the
business. No amounts were drawn down at 31 December 2020. The
facility was guaranteed by fixed and floating debenture over the
assets of Hostelworld.com Limited to include proprietary interest
in any Hostelworld booking platform, technology and intellectual
property, group guarantees for the full amount of borrowings and a
subordination deed between Hostelworld.com Limited, Hostelworld
Group Plc and the Bank subordinating the repayment of all monies
due by Hostelworld.com Limited to Hostelworld Group Plc in
accordance with the provisions contained therein. The facility bore
interest at the bank cost of funds +2.3% margin. Hostelworld.com
Limited was to retain minimum cash balances of 20% of drawn
facilities and the revolving credit facility was required to return
to credit 20 days per annum. Hostelworld.com Limited were also
required to maintain a minimum tangible net worth of not less than
EUR90m. No amounts were drawn down at 31 December 2020, in respect
of the revolving credit facility. Amounts available to the Group
consist of three tranches of EUR2m to EUR2.5m each dependent on
incremental revenue targets achieved.
On 10 February 2021 the Group signed a deed of release exiting
the undrawn facility in place. Please see subsequent event note
26.
20. 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.
21. SHARE BASED PAYMENTS
Long Term Incentive Plan ("LTIP") scheme
The Group operate a Long Term Incentive Plan for executive
Directors and selected management. The proportion of each award
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").
For the 2020 scheme up to 25% of the shares/options subject to
an award will vest according to the Group's adjusted EPS growth
compared with target during the performance period. Up to 75% 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. For schemes in 2018 and 2019 up to 70% of the
shares/options subject to an award 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 award will
lapse if a participant ceases to be an employee or an officer
within the Group before the vesting date and is not subject to good
leaver provisions.
During the year ended 31 December 2020, the Remuneration
Committee approved the grant of 3,793,200 share options pursuant to
the terms and conditions of the Group's LTIP Rules (2019: 1,267,463
options).
In 2020, EUR356k was expensed in the consolidated income
statement in relation to the Group's LTIP schemes (2019:
EUR77k).
Details of the share options outstanding during the year are as
follows:
2020 2019
No. of share No. of share
options options
------------- -------------
Outstanding at beginning of year 1,501,647 875,957
------------- -------------
Granted during the year 3,793,200 1,267,463
------------- -------------
Forfeited during the year (1,430,375) (641,773)
------------- -------------
Exercised during the year - -
------------- -------------
Expired during the year - -
------------- -------------
Outstanding at the end of the year 3,864,472 1,501,647
------------- -------------
Exercisable at the end of the year - -
------------- -------------
Included in the number of options forfeited in 2020, are 282,500
of the 2018 awards which did not meet the vesting conditions based
on performance conditions from 1 January 2018 to 31 December 2020
(2019: 373,210 options of the 2017 awards which did not meet the
vesting conditions based on performance conditions from 1 January
2017 to 31 December 2019).
If the conditions are met, the remaining 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 or is subject to good
leaver provisions. The measurement period for the 2019 and 2020
awards for performance conditions is over 3 years from 1 January
2019 to 31 December 2021 and from 2 May 2020 to 1 May 2023
respectively.
Share options under the LTIP scheme have an exercise price of
GBPnil. The fair value, at the grant date, of the TSR-based
conditional awards was measured using a Monte Carlo simulation
model.
Fair value of options granted during the year:
At the grant date, the fair value per conditional award and the
assumptions used in the calculations are as follows:
April 2019 June August November May 2020
2019 2019 2019
Year of potential 2022 2022 2022 2022 2023
vesting
----------- -------- -------- --------- ----------
Number of share
options granted 933,995 76,204 187,842 69,422 3,793,200
----------- -------- -------- --------- ----------
Share price at GBP1.95 GBP2.07 GBP1.50 GBP1.32 GBP0.74
grant date
----------- -------- -------- --------- ----------
Exercise price GBPnil GBPnil GBPnil GBPnil GBPnil
per share option
----------- -------- -------- --------- ----------
Expected volatility
of Company share
price 46.1% 42.1% 40.0% 40.1% 51.86%
----------- -------- -------- --------- ----------
Expected life 3 years 3 years 3 years 3 years 3 years
----------- -------- -------- --------- ----------
Expected dividend
yield 4.3% 4.9% 4.9% 6.0% 6.06%
----------- -------- -------- --------- ----------
Risk free interest
rate 0.71% 0.56% 0.43% 0.51% 0.08%
----------- -------- -------- --------- ----------
Weighted average GBP1.93 GBP1.97 GBP1.27 GBP1.16 GBP.4882
fair value at
grant date
----------- -------- -------- --------- ----------
Remaining weighted
average life of
options (years) 1.25 1.42 1.64 1.87 2.33
----------- -------- -------- --------- ----------
April 2018 June 2018 December 2018
----------- ---------- --------------
Year of potential vesting 2021 2021 2021
----------- ---------- --------------
Number of share options granted 499,554 175,723 98,520
----------- ---------- --------------
Share price at grant date GBP3.86 GBP3.15 GBP1.99
----------- ---------- --------------
Exercise price per share GBPnil GBPnil GBPnil
option
----------- ---------- --------------
Expected volatility of Company
share price 46.0% 47.0% 41.5%
----------- ---------- --------------
Expected life 3 years 3 years 3 years
----------- ---------- --------------
Expected dividend yield 3.8% 4.8% 7.6%
----------- ---------- --------------
Risk free interest rate 0.88% 0.76% 0.75%
----------- ---------- --------------
Weighted average fair value GBP3.35 GBP2.64 GBP1.48
at grant date
----------- ---------- --------------
Remaining weighted average
life of options (years) 0.27 0.49 0.93
----------- ---------- --------------
Expected volatility was determined based on the market
performance of the Company over a period of 36 months prior to the
date of grant for all the 2020 and 2019 awards. For all awards up
to and including the June 2018 awards, 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 2020, the Remuneration
Committee approved the granting of share options under a SAYE
scheme for all eligible employees across the Group. 27 employees
availed of the scheme in 2020 (2019: 31 employees availed of the
2019 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 for Irish and UK based
employees in line with amounts permitted under tax legislation in
both jurisdictions.
The total expected cost of the 2020 SAYE scheme was estimated at
EUR77k of which EUR10k has been recognised in the consolidated
income statement for the year ended 31 December 2020. The remaining
EUR67k will be charged against profit or loss in equal instalments
over the remainder of the three-year vesting period.
The total expected cost of the 2019 SAYE scheme was estimated at
EUR63k of which EUR59k (2019: EUR10k) has been recognised in the
consolidated income statement to date.
Number of SAYE share options
granted
2020 2019
--------------- --------------
Outstanding at beginning of year 290,592 165,162
--------------- --------------
Granted during the year 358,305 258,757
--------------- --------------
Forfeited during the year (208,106) (133,327)
--------------- --------------
Outstanding share options granted at
end of year 440,791 290,592
--------------- --------------
Fair value of options granted during the year:
At the grant date, the fair value per conditional award and the
assumptions used in the calculations are as follows:
Scheme UK office Irish UK office Irish office Irish office
office
Grant date August August October October 2019 September
2020 2020 2019 2018
---------- --------- ---------- -------------- --------------
Year of potential 2023 2023 2022 2022 2021
vesting
---------- --------- ---------- -------------- --------------
Share price
at grant date GBP0.63 EUR0.70 GBP1.30 EUR1.52 EUR2.40
---------- --------- ---------- -------------- --------------
Exercise price
per share
option GBP0.50 EUR0.56 GBP1.17 EUR1.30 EUR2.56
---------- --------- ---------- -------------- --------------
Expected volatility
of company
share price 54.2% 54.2% 39.5% 39.5% 47.5%
---------- --------- ---------- -------------- --------------
Expected life 3 years 3 years 3 years 3 years 3 years
---------- --------- ---------- -------------- --------------
Expected dividend
yield 6.13% 6.13% 9.3% 9.3% 6.9%
---------- --------- ---------- -------------- --------------
Risk free
interest rate -0.03% -0.03% 0.51% 0.51% (0.40%)
---------- --------- ---------- -------------- --------------
Weighted average
fair value
at grant date GBP0.20 EUR0.22 GBP0.21 EUR0.24 EUR0.45
---------- --------- ---------- -------------- --------------
Valuation Black Black Black Black Scholes Black Scholes
model Scholes Scholes Scholes
---------- --------- ---------- -------------- --------------
Expected volatility was determined in line with market
performance of the Company for the 2020 and 2019 schemes. For the
2018 schemes, 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 EUR72k (2019: EUR79k) in relation to the SAYE
schemes, together with the charge in respect of the long-term
incentive plan for the year of EUR356k (2019: EUR77k) is the total
charge in respect of share-based payments. The LTIP and SAYE
schemes are accounted for as equity settled in the financial
statements.
Overall, the Group recognised an expense of EUR428k (2019:
EUR156k) relating to equity settled share-based payment
transactions in the consolidated income statement during the
year.
Cash settled share-based payments
During 2018, the Group issued to certain individuals share
appreciation rights ("SARs"), in the form of Phantom Shares that
require the Group to pay the intrinsic value of the SAR at the date
of exercise. The Group has recorded liabilities of EUR7k and a
corresponding expense of EUR7k in relation to these SARs as at 31
December 2020 (2019: EUR7k). The fair value of these SARs was
determined by using a Black Scholes model.
22. RELATED PARTY TRANSACTIONS
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note. Transactions
between the Group and its associates are disclosed below.
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
Hostelworld.com 100%* Technology trading One Central Park,
Limited company Leopardstown,
196 Ordinary shares Dublin 18,
@EUR1 Ireland
-------- -------------------------- ----------------------------
Hostelworld Services 100% Marketing and research Rua Antònio Nicolau
Portugal LDA and development D'Almeida,
500 Ordinary shares services company 45, 5th Floor,
@EUR1 4100-320 Oporto,
Portugal
-------- -------------------------- ----------------------------
Hostelworld Business 100% Business information Suite 304, Block 2,
Consulting (Shanghai) consulting and marketing No.425 Yanping Road,
Co., Limited** planning Jing'an District, Shanghai
China 200042
425 2 304
, , 200042.
-------- -------------------------- ----------------------------
Hostelworld Services 100%* Marketing services Floor 2,
Limited and technology trading 52 Bedford Row,
104123 Ordinary company London,
shares @GBP0.001 WC1R 4LR, UK
-------- -------------------------- ----------------------------
Counter App Limited 51% Technology company One Central Park
51 Ordinary shares Leopardstown
@EUR1 Dublin 18
Ireland
-------- -------------------------- ----------------------------
* held directly by the Company
** 3 Million RMB contributed by Hostelworld.com Limited for 100%
ownership of subsidiary
Unless otherwise stated, all subsidiaries have the same
reporting date as the Company being 31 December.
On 19 June 2020, "Project Hydra Funding Limited" was
incorporated as a 100% subsidiary of Hostelworld Group plc. The
company was a Jersey registered company and the company was
involved in the transfer of funds from the equity raise to
Hostelworld Group PLC which raised gross proceeds of EUR15.2m. The
entity was subsequently liquidated on 10 July 2020.
On 4 June 2020 a new subsidiary was incorporated "Hostelworld
Business Consulting (Shanghai) Co., Limited" and became a 100%
owned subsidiary of Hostelworld.com Limited. The principal activity
of this subsidiary is business information consulting and marketing
planning.
On 1 August 2019, Hostelworld Technology Solutions Limited was
incorporated in Ireland and became a 100% owned subsidiary of
Hostelworld.com Limited. On 8 November 2019, following a share
subscription, Hostelworld Technology Solutions became a 51% owned
subsidiary of Hostelworld.com Limited. On 7 February 2020,
Hostelworld Technology Solutions Limited changed its name to
Counter App Limited.
On 12 March 2019, Hostelworld.com Limited acquired intangible
assets from WRI Nominees DAC for consideration of EUR151m. Both of
these companies are 100% owned subsidiaries of Hostelworld Group
plc. While this transaction had no impact on our underlying trade,
the reorganisation resulted in the recognition of a deferred tax
asset of EUR6.9m. On the same date, WRI Nominees DAC was liquidated
by way of members' voluntary winding up.
ASSOCIATES
The following details the Company's current investment in
associates, including the name, country of incorporation, and
proportion of ownership interest:
Company Holding Nature of Business Registered Office
Goki Pty Limited 49% Technology company 477 Kent St, Sydney
NSW 2000, Australia
-------- ------------------- ---------------------
On 21 June 2019, Hostelworld.com Limited signed an agreement to
purchase 7,645,554 shares in an Australian incorporated proprietary
company limited by shares. The purchase consideration for this
transaction was USD 3m. This transaction was completed on 22 July
2019 and on this date, an investment in associate was recognised in
the consolidated financial statements.
Under the terms of the shareholder purchase agreement, there is
a USD 500k loan facility option available to Goki Pty Limited by
the Group until July 2022 (see note 13).
Directors' remuneration
2020 2019
EUR'000 EUR'000
---------------------------------------------- -------- --------
Salaries, fees, bonuses and benefits in
kind 1,147 1,107
-------- --------
Amounts receivable under long-term incentive
schemes 102 44
-------- --------
Termination benefits - -
-------- --------
Pension contributions 64 61
-------- --------
Total 1,313 1,212
-------- --------
Retirement benefit charges of EUR64k (2019: EUR61k) arise from
pension payments relating to 3 Executive Directors (2019: 2).
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.
2020 2019
EUR'000 EUR'000
-------- --------
Short term benefits 2,899 2,607
-------- --------
Share based payments charge 271 72
-------- --------
Termination benefits 289 854
-------- --------
Post-employment benefits 133 118
-------- --------
Total 3,592 3,651
-------- --------
23. FINANCIAL RISK MANAGEMENT
23.1 Financial risk factors
The Directors manage the Group's capital, consisting of both
debt and equity, to ensure that the Group will be able to continue
as a going concern while also maximising the return to
stakeholders. As part of this process, the Directors review
financial risks such as liquidity risk, credit risk, foreign
exchange risk and interest rate risk regularly.
Liquidity risk
Cash flow forecasting is monitored by rolling forecasts of the
Group's liquidity requirements to ensure it has sufficient cash to
meet operational needs while maintaining sufficient headroom on its
undrawn committed borrowing facilities at all times so that the
Group does not breach covenants on any of its facilities. Such
forecasting takes into consideration the Group's debt financing
plans.
The table below analyses the Group's financial liabilities into
relevant maturity groupings based on the remaining period at the
reporting date to the contractual maturity date. The Group had no
derivative financial liabilities in the current or prior year. The
amounts disclosed in the table are the contractual undiscounted
cash flows.
Notes 2020 2019
EUR'000 EUR'000
-------- --------
Up to 1 year
-------- --------
Trade and other payables 18 11,205 10,142
--- -------- --------
Total up to 1 year 11,205 10,142
-------- --------
2020 2019
EUR'000 EUR'000
-------- --------
Between 1 and 2 years
-------- --------
Deferred consideration - 890
-------- --------
Total between 1 and 2 years - 890
-------- --------
Total 11,205 11,032
-------- --------
Interest rate risk
The group monitors its exposure to interest rate risk based on
interest rates at which companies in the Group borrow at. During
2020 the Group was not materially exposed to interest rate risk.
The Group had one drawn down facility in place as detailed in note
19.
Credit risk and foreign exchange risk
The Directors monitor the credit rate risks associated with
loans, trade receivables and cash and cash equivalent balances on
an on-going basis. The majority of the Group's trade receivable
balances are due for maturity within 5 days and largely comprise
amounts due from the Group's payment processing agents.
Accordingly, the associated credit risk is determined to be low.
These trade receivable balances, which consist of euro, US dollar
and Sterling amounts, are settled within a relatively short period
of time, which reduces any potential foreign exchange exposure
risk. At 31 December 2020, all material cash balances are held with
banks with a minimal credit rating of BBB-, as assigned by
international credit rating agencies. As a result, the credit risk
on cash balances is limited. The carrying value of trade
receivables, trade payables and cash and cash equivalents is a
reasonable approximation of their fair value. The Group does not
enter into or trade financial instruments, including derivative
financial instruments, for speculative purposes.
The Directors' objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. In order to maintain or adjust the capital
structure, the Directors may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or
sell assets. In 2020 cash dividends were suspended due to COVID-19
uncertainty.
The Group will ensure it retains sufficient reserves to manage
its day to day cash requirements, including capital expenditure
requirements, whilst ensuring appropriate dividends are distributed
to shareholders.
24. DIVIDS
Amounts recognised as distributions to equity holders in the
financial year:
2020 2019
EUR'000 EUR'000
-------------------------------------------- -------- --------
Final 2018 dividend of EUR0.09 per share
(paid 5 June 2019) - 8,601
-------- --------
Interim 2019 dividend of EUR0.042 per
share (paid 20 September 2019) - 4,014
-------- --------
- 12,615
-------- --------
The Group announced on 26 March 2020 that it was not proceeding
with a final 2019 dividend as part of its measures to protect
balance sheet strength and liquidity during the COVID-19
pandemic.
On 24 June 2020 the Group announced that the Board does not
expect to pay a cash dividend under its current policy in respect
of the 2020 financial year. The Board made this decision after
assessing current trading, the continued requirement for cash
conservation and the on-going uncertainty of the full impact of
COVID-19. Future cash dividend payments will be subject to the
Group generating adjusted profit after tax, the Group's cash
position, any restrictions in the Group's banking facilities and
subject to compliance with Companies Act 2006 requirements
regarding ensuring sufficiency of distributable reserves at the
time of paying the dividend.
On 25 August 2020, the company issued 1,636,252 bonus shares to
shareholders in lieu of a cash dividend at value EUR0.01 per share.
See note 17.
25 . PARENT COMPANY EXEMPTION
The Company has taken advantage of the exemption provided under
section 408 of the Companies Act 2006 not to publish its individual
income statement and related notes.
26. EVENTS AFTER THE BALANCE SHEET DATE
On 25 January 2021 the Group signed head of terms on a EUR30
million term loan facility, and on 23 February 2021 the Group drew
down EUR28.8 million, net of original issue discount. The facility
is single drawdown and bears interest at a margin of 9.0% per annum
over EURIBOR (with a EURIBOR floor of 0.25% per annum). The
facility agreement includes the following financial covenants: (1)
adjusted net leverage (Hostelworld has to ensure that total net
debt is no more than 3.0 x adjusted EBITDA from 31 December 2023 to
30 September 2024, and no more than 2.5 x adjusted EBITDA from 31
December 2024 onwards); and (2) minimum liquidity (Hostelworld has
to ensure that at close of business on the last business day of
each month until it is testing the adjusted net leverage ratios
there is free cash in members of the Group which have guaranteed
repayment of the facility of at least EUR6.0 million). The lenders
have the right to require repayment of the facility if Hostelworld
is subject to a change in control and Hostelworld has the option to
repay the facility early (subject to the prepayment fees referred
to below). Security on the facility includes the share capital of
the Group, the bank accounts of the Group and the Group's
intellectual property. In connection with the facility, Hostelworld
has 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) to the lender. The
Warrants may 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 26 January 2021 the Group repaid its short-term invoice
financing facility in full. On 10 February 2021 the Group signed a
deed of release on its three-year revolving credit facility which
was not drawn down at year end.
There have been no other significant events, outside the
ordinary course of business, affecting the Group since 31 December
2020.
Additional Information
Appendix: 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,
Adjusted Free Cash (Absorption) / Flow and Adjusted Free Cash
(Absorption) / Flow conversion.
Adjusted EBITDA
The Group uses (Loss) / Earnings before Interest, Tax,
Depreciation and Amortisation, excluding exceptional and non-cash
items ("Adjusted EBITDA") as a key performance indicator when
measuring the outcome in the business from one period to the next,
and against budget. Exceptional items by their nature and size can
make interpretation of the underlying trends in the business more
difficult. We believe this alternative performance measure reflects
the key drivers of profitability for the Group and removes those
items which do not impact underlying trading performance.
Reconciliation between (Loss) / Profit for the year and Adjusted
EBITDA:
EUR'm 2020 2019
(Loss) / profit for
the year (48.9) 8.4
------- ------
Taxation (1.6) (5.4)
------- ------
Net finance costs 0.2 0.2
------- ------
Share of result of associate 0.4 0.1
------- ------
Operating (loss) / profit (49.9) 3.3
------- ------
Depreciation 2.5 2.4
------- ------
Amortisation of development
costs 2.4 1.7
------- ------
Amortisation of acquired
intangible assets 9.3 9.8
------- ------
Impairment of intangibles 15.0 -
------- ------
Exceptional items 3.0 3.1
------- ------
Share based payment
expense 0.4 0.2
------- ------
Adjusted EBITDA (17.3) 20.5
------- ------
Adjusted (Loss) / Profit after Taxation
Adjusted (Loss) / Profit after Taxation is an alternative
performance measure that the Group uses to calculate the dividend
pay-out for the year, subject to Company Law requirements regarding
distributable profits and the dividend policy within the group. It
excludes exceptional items, amortisation of acquired domain and
technology intangibles, net finance costs, share based payment
expenses and deferred taxation which can have large impacts on the
reported result for the year, and which can make underlying trends
difficult to interpret.
Reconciliation between Adjusted EBITDA and (Loss) / Profit for
the Year:
EUR'm 2020 2019
Adjusted EBITDA (17.3) 20.5
------- ------
Depreciation (2.5) (2.4)
------- ------
Amortisation of development
costs (2.4) (1.7)
------- ------
Net finance costs (0.2) (0.2)
------- ------
Share of result of
associate (0.4) (0.1)
------- ------
Corporation tax 0.6 (1.2)
------- ------
Adjusted (loss) /
profit after Taxation (22.2) 14.8
------- ------
Exceptional items (3.0) (3.1)
------- ------
Amortisation of acquired
intangible assets (9.3) (9.8)
------- ------
Share based payment
expense (0.4) (0.2)
------- ------
Impairment charges (15.0) -
------- ------
Deferred taxation 1.0 6.6
------- ------
(Loss) / profit for
the year (48.9) 8.4
------- ------
Adjusted (Loss) / Earnings per share
Adjusted EPS is an alternative performance measure that excludes
exceptional items, amortisation of acquired domain and technology
intangibles, net finance costs, share based payment expenses and
deferred taxation which can have large impacts on the reported
result for the year, and which can make underlying trends difficult
to interpret.
2020 2019
Adjusted (loss) /
profit after Taxation (22.2) 14.8
-------- ------
Weighted average
shares in issue ('m) 106.9 97.2*
-------- ------
Adjusted EPS (20.76) 15.2
-------- ------
* The 2019 earnings per share figures have been restated to
incorporate the 1,636,252 new Hostelworld Group ordinary shares
that were issued in September 2020. The weighted average number of
shares in issue during the period was adjusted to include these
bonus shares as if they were issued 1 January 2019.
Adjusted Free Cash (absorption) / flow
The Group uses adjusted Free Cash Flow to measure the amount of
underlying cash generation and the cash available for distribution
and allocation. The Group calculates adjusted Free Cash Flow as the
adjusted EBITDA for the group before Capital Expenditure,
capitalised development spend, acquisition and disposal of
undertakings and adjusting for interest, tax and movements in
working capital.
EUR'm 2020 2019
Adjusted EBITDA (17.3) 20.5
------- ------
Intangible asset
additions (3.8) (2.9)
------- ------
Capital expenditure (0.1) (0.2)
------- ------
Deferred Consideration
/ Acquisition of
associate (0.5) (1.1)
------- ------
Net Interest and
tax paid 0.5 (1.7)
------- ------
Net movement in working
capital 8.9 (3.7)
------- ------
Adjusted free cash
(absorption) / flow (12.3) 10.9
------- ------
Adjusted free cash
(absorption) / flow
conversion (71%) 53%
------- ------
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END
FR GPURAWUPGPUQ
(END) Dow Jones Newswires
March 17, 2021 03:00 ET (07:00 GMT)
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