TIDMHSW
RNS Number : 4712V
Hostelworld Group PLC
10 August 2022
HOSTELWORLD GROUP PLC - INTERIM FINANCIAL REPORT
FOR THE HALF YEARED 30 JUNE 2022
Hostelworld Group plc
("Hostelworld" or the "Group" or the "Company")
Interim Results 2022
Strong recovery continues into summer 2022
10th August 2022: Hostelworld, a leading global Online Travel
Agent (OTA) focused on the hostel market, is pleased to announce
its interim results for the six-month period ended 30 June 2022
Significant developments
-- Net Bookings 59% of H1 2019 levels with an increasing
percentage achieved as we moved through the period. January
bookings were at 33% of January 2019 while June bookings were at
80% of June 2019. Net revenue reached 104% of 2019 levels up from
34% in January, driven by higher average booking values
-- While overall EBITDA was negative for H1 2022, June was
positive reflecting the increased level of bookings in that
month
-- 30 June 2022 cash balance EUR23.3m, strong balance sheet and
liquidity going into H2 2022 - well positioned to invest to
accelerate growth and subject to no further deterioration in the
macroeconomic / geo-political backdrop
-- Delivering a differentiated growth strategy capitalising on
the unique needs of the hostelling category
-- Progressed ESG strategy achieving climate neutral
accreditation in partnership with South Pole
Financial highlights [1]
-- Net Revenue of EUR28.0m in the period (H1 2021: EUR2.9m),
increase of 866% driven by pent up demand as travel restrictions
eased in H1 2022
-- Net bookings totalled 2.1m (H1 2021: 0.3m)
-- Net Average Booking Value ("ABV") of EUR15.82, a 35% increase
(H1 2021: EUR11.72), due to favourable geographical mix, price
inflation, recovery of underlying bed prices and longer length of
stay bookings
-- Cost per net booking was EUR9.46, a EUR3.23 increase over the
same period last year (H1 2021: EUR6.24)
-- Direct marketing costs as a percentage of net revenue
amounted to 70%, (H1 2021: 69%). Marketing costs expected to
normalise to circa 50-55% range over 2023 as normal travel patterns
resume
-- L oss in the period of EUR14.3m (H1 2021: EUR20.3m)
-- Adjusted EBITDA loss of EUR5.2m (H1 2021: EUR9.7m loss)
Balance sheet and cash flow:
-- Total cash and cash equivalent as at 30 June 2022 of EUR23.3m
(H1 2021: EUR33.7m)
-- Net asset position of EUR54m (H1 2021: EUR81m) with available
capital to invest to accelerate growth
Gary Morrison, Chief Executive Officer, commented:
"We are encouraged by the strong recovery we have seen in the
first six months of the year across all demand segments and
destinations, which demonstrate the ability of our business to
capture pent-up demand as the travel market returns.
In particular, booking demand into Europe, our largest
destination in 2019, remains strong with our top markets in
Southern Europe exceeding 2019 levels. We also witnessed booking
momentum slowly returning in Oceania and Asian destinations from a
very low level in January, with booking demand in June at 43% of
2019 levels. Finally, long-haul bookings have reached 75% of 2019
levels in June, with trips from the US and Canada into European
destinations above 2019 levels.
We are pleased to report continued progress across all aspects
of our differentiated growth strategy, that capitalises on the
unique customer needs and attributes of the hostelling category. In
particular, we are encouraged by the initial take-up of our
'Social' features by our customers. In parallel, we continue to
make good progress on our platform modernisation strategy, having
now migrated our platform to the cloud and exited our on-premise
data centres.
As we look to the future, we remain confident that our loyal
customer base has the flexibility, the means and the desire to
travel and meet other like-minded travellers as travel restrictions
continue to ease.
Trading Update:
During the first six months of the year, we have seen strong
month on month growth in new customers, net bookings and net
revenue as the impact of the Omicron outbreak subsided.
Specifically, June 2022 net bookings reached 80% of June 2019
levels (up from 33% in January), and net revenue reached 104% of
2019 levels (up from 34% in January), driven by higher average
booking values.
As the recovery progressed we have seen several factors impact
our trading economics versus 2019. In particular, net revenue
growth has outpaced net bookings growth driven by a steady increase
in average net booking values versus 2019. This has been driven
primarily by bed price inflation (resulting from destination
specific recovery rates versus 2019), which has been partially
offset by a reduction in blended commission rates (due to the
removal of Elevate in 2020), and higher cancellation rates (in part
driven by a higher proportion of free cancellation bookings).
Direct marketing cost as a percentage of net revenue has also
grown versus 2019, driven by our focus on new customer growth,
underpinned by our ability to predict the lifetime value of these
new customers versus their acquisition cost; higher cost per clicks
("CPCs") in paid marketing channels (driven by higher average
booking values); lower conversion rates in destinations where some
level of restrictions persist and finally higher cancellation rates
(in part driven by a higher proportion of free cancellation
bookings).
Overall, we expect direct marketing costs as a percentage of net
revenue will remain at H1 2022 levels for the balance of the year,
before normalising to circa 50-55% range over 2023 as we continue
to optimise marketing investments for long term growth in new
customers and direct margin. In parallel, we also expect our
'Social' strategy to improve our business model over time by
driving new and existing customers to use our iOS and Android
Apps.
We have seen a significant improvement in operating cash
performance with monthly operating cost cash burn reduced to a
nominal level and the business returning to cash generative in Q2.
As at 30 June, cash totalled EUR23.3m, down EUR2.0m as compared to
cash as at 31 December 2021. We will continue to maintain our cost
discipline on an on-going basis and may look to refinance our
current debt facility in 2023.
On the supply side, despite more than two years of depressed
demand due to COVID-19 there has been only a very modest 8% net
reduction in the number of hostels on our platform as of June 30
compared to levels at the end of 2019. These have been driven by
continuous additions to the platform. For clarity, this reduction
does not include hostels removed temporarily from our platform in
Belarus and Russia, due to the ongoing conflict in the region.
Outlook:
The Board remains confident in the long-term resilience of our
business model and the potential of our differentiated growth
strategy. The trends in H1 2022 are encouraging and indicate that
where markets open up for travel, demand will recover to 2019
levels and that we can gain our share of that growth. In the
absence of any further deterioration in the macro-economic climate,
disruption to airline schedules, or escalation of the conflict in
the Ukraine, we expect to be EBITDA positive in H2 2022."
Analyst Presentation
A presentation will be made to analysts today at 9.00am, a copy
of which will be available on our Group website:
http://www.hostelworldgroup.com . If you would like to dial into
the presentation, please contact Powerscourt on the contact details
provided below.
Webcast Link
https://stream.brrmedia.co.uk/broadcast/62e3fed204182f363ba97f1d
Event Title: Hostelworld Group PLC - Preliminary Results
2022
Confirmation Code: 435675
Dial-in Phone Numbers: New York New York: +1 212 999 6659
UK Toll Free: 0808 109 0700
UK-Wide: +44 (0) 33 0551 0200
USA Toll Free: 1 866 966 5335
For further information please contact:
Hostelworld Group plc Corporate@hostelworld.com
Gary Morrison, Chief Executive
Officer
Caroline Sherry, Chief Financial
Officer
David Brady, Head of Commercial
Finance
Powerscourt hostelworld@powerscourt-group.com
Eavan Gannon / Nick Dibden +44 (0) 20 7250 1446
About Hostelworld Group
Hostelworld Group is a leading Online Travel Agent focused on
the hostelling category, with a well-known trusted brand, 13.7
million reviews and a loyal customer base built up over 22 years.
Our core business provides our customers with hostel accommodation
options and hostel focused small group adventure tour products
(Roamies) in over 180 countries worldwide via our website and
native app platforms in 19 languages. In parallel with helping
millions of hostel focused travellers Meet The World(R), we are
also committed to building a better world in everything we do. In
particular, we are increasing our focus on improving the
sustainability of the hostelling industry, through our active
involvement in the Global Tourism Plastics Initiative (GTPI), led
by the UN Environment Programme and the World Tourism Organization
(UNWTO); our membership of the Global Sustainable Tourism Council
(GSTC); and our recent partnership with the South Pole to offset
all our greenhouse gas emissions in 2021.
Cautionary statements
This announcement contains forward-looking statements. These
statements relate to the future prospects, developments and
business strategies of Hostelworld. Forward-looking statements are
identified by the use of such terms as "believe", "could",
"envisage", "estimate", "potential", "intend", "may", "plan",
"will" or variations or similar expressions, or the negative
thereof. Any forward-looking statements contained in this
announcement are based on current expectations and are subject to
risks and uncertainties that could cause actual results to differ
materially from those expressed or implied by those statements. If
one or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, Hostelworld's actual
results may vary materially from those expected, estimated or
projected. Any forward-looking statements speak only as at the date
of this announcement. Except as required by law, Hostelworld
undertakes no obligation to publicly release any update or
revisions to any forward-looking statements contained in this
announcement to reflect any change in events, conditions or
circumstances on which any such statements are based after the time
they are made.
The information contained in this Announcement is subject to
change without notice and except as required by applicable law or
regulation (including to meet the requirements of the Listing
Rules, the Euronext Dublin Listing Rules, MAR, the Financial
Services and Markets Act 2000, Euronext Dublin and/or the Central
Bank of Ireland), the Company expressly disclaims any obligation or
undertaking to publish any updates or revisions to any
forward-looking statements contained in this Announcement to
reflect any changes in the Company's expectations with regard
thereto or any changes in events, conditions or circumstances on
which any such statements are based. Statements contained in this
Announcement regarding past trends or activities should not be
taken as representation that such trends or activities will
continue in the future. You should not place undue reliance on
forward-looking statements, which speak only as of the date of this
Announcement.
No statement in this Announcement is intended to be a profit
forecast and no statement in this Announcement should be
interpreted to mean that earnings per share of the Company for the
current or future years would necessarily match or exceed the
historical published earnings per share of the Company.
Interim Management Report
To the members of Hostelworld Group plc
Cautionary statement
This Interim Management Report (IMR) has been prepared to
provide additional information to shareholders to assess the
Group's strategies and the potential for those strategies to
succeed. The IMR should not be relied on by any other party or for
any other purpose.
The IMR contains certain forward-looking statements. These
statements are made by the directors in good faith based on the
information available to them up to the time of their approval of
this report but such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
This interim management report has been prepared for the Group
as a whole and therefore gives greater emphasis to those matters
which are significant to Hostelworld Group plc and its subsidiary
undertakings when viewed as a whole.
Chief Executive's Review
Over the first 6 months of the year, I am pleased to report we
made solid progress on all elements of our strategy.
We launched a series of differentiated social features on our
iOS and Android Apps, driven by the insight that the majority of
travellers in our category choose to go hostelling to meet other
people. We also continued to invest in our marketing technology
platform, which allows us to allocate marketing spend to maximise
new customer acquisition, underpinned by our ability to predict the
lifetime value of these new customers (versus acquisition cost) in
a granular fashion. We also made progress on modernising our
platform to enable us to support faster execution of our growth
strategy. This included migrating our platform to the Cloud and
exiting our on-premise data centres. In partnership with South
Pole, the Group progressed its ESG agenda towards climate neutral
accreditation and developed a roadmap to promote the inherent
sustainability advantages of hostel accommodation.
Executing our growth strategy
During the first six months of the year, we continued to execute
our differentiated growth strategy, which capitalises on the unique
needs of the hostelling category.
Our growth strategy seeks to capitalise on three unique
attributes of our customers and their needs as a category, relative
to the mainstream leisure category:
1. Helping our customers find people to hang out with while travelling
The majority of our customers, 60% of which are travelling solo,
choose to stay in hostels as means to meet other people (not
because they are cheap). Our CRM activities indicate that when
these social interactions take place, the experience is magical for
our customers and consequently we launched a series of 'Social'
features, in April this year, using the data from our platform to
help our travellers find people to hang out with. These features
help our travellers understand what kinds of travellers will be
staying at a hostel on the dates they are booking for, and also
help them meet other travellers based on their shared
interests.
Although it is too early to report on the results of these
releases, we are encouraged to see that our "power users" are using
these features. Over the next 18 months we intend to optimise these
'Social' features, and we are excited by the prospect of delivering
more magical experiences for more of our customers. Over time, we
expect that these features will encourage more travellers in the
category to use our platform, and eventually provide confidence for
other youth/student travellers to meet new people to hang out with
via solo travel in hostels.
2. Leveraging our customer's booking patterns to optimise marketing allocation
The majority of mainstream leisure travellers tend to take a
single destination trip, once a year or less. This is in sharp
contrast to hostellers, the majority of whom go on a trip
comprising multiple destinations, with some taking multiple trips
per year, and with many coming back over several years.
The relatively high frequency of customer bookings over time
post-acquisition has allowed us to build accurate models for our
category that predict the future revenue of new customers after
only 28 days of observation. This in turn enables us to invest a
greater proportion of revenue in new customer acquisition with a
high degree of confidence in the future revenue of these new
customers, and confidence in the return of those marketing
investments over time.
3. Providing additional relevant travel products to our Customer base
In general, mainstream leisure customers tend to purchase
ancillary products such as ground transportation, car rentals, and
things to do when they arrive in the destination. Hostellers, on
the other hand, are more interested in other group orientated
travel products which provide additional opportunities to find
people to hang out with. These products would include group
adventure tours, events that hostels create and operate themselves,
and opportunities to meet other hostellers staying in the same
destination for walks, bike rides and generally socialising. In
December 2021, we started building out our group orientated travel
product catalogue with the launch of Roamies, a new hostel focused
short adventure tour product developed with G Adventures. The
product is unique in combining the social experience provided by
hostel accommodation and guided adventure tours fulfilled by G
Adventures. Over the next 18 months we will continue to build out
this catalogue, starting with the launch of 'LinkUps' in August
this year. This product allows our customers to set up their own
group events in a destination, which we will publish to all of our
customers who will be in the same destination at the same time as
the event date.
Investing in our platform
During the first six months of the year, we migrated platform to
the Cloud, exiting our on-premise data centres, and starting the
process of upgrading key legacy backend applications to make them
"cloud native". Over the next 12-18 months we plan to continue
upgrading the rest of the legacy backend applications in the same
way.
In parallel, we also completed the acquisition of the remaining
shares in Counter App Limited in March this year and successfully
bought the platform in-house in early May. As part of the original
shareholders' agreement with Counter's founders, we included an
option for Hostelworld to take full ownership of Counter in
accordance with an acquisition process which was to commence in
November 2022. Earlier this year, we agreed with Counter's founders
to accelerate the timeline by which we would acquire full share
ownership and assume full operational control of the platform. This
enabled us to more tightly integrate Counter into Hostelworld's
ecosystem to accelerate its growth and align it more fully with our
overall platform modernisation strategy.
Progressing our ESG agenda
In parallel with helping millions of travellers in our category
Meet The World(R), we are also committed to building a better world
in everything we do.
We have been increasing our focus on improving the
sustainability of the hostelling category through our involvement
in the Global Tourism Plastics Initiative (GTPI), led by the UN
Environment Programme and the World Tourism Organization (UNWTO);
our membership of the Global Sustainable Tourism Council (GSTC);
and our recent partnership with the South Pole to offset all our
greenhouse gas emissions in 2021.
A key part of our focus on sustainability over the coming years
will be to design and implement a program to help our hostel
partners make progress towards more sustainable operations. To that
end, we have been working closely with our hostel partners, the
GSTC and a number of other relevant bodies to build out a set of
relevant sustainability criteria aligned to GSTC standards and
exploring ways to capture hostel's compliance with these criteria
in a low-cost and effective way.
In the first six months of the year we also introduced several
new policies to support our employees. These new policies are in
addition to our existing agile working, working from abroad, paid
wellbeing and parental leave day policies to promote flexibility
and work-life balance when working from home. We have also become
proud supporters of the 30% Club Ireland in May this year and will
start our D&I accreditation journey in the second half of the
year.
Summary
Overall, I am very pleased with the work we have completed and
the progress we have made in the first six months of the year. I
would like to take this opportunity to thank the Hostelworld team
for their commitment to the success of our company, and to thank
our shareholders for their continued support.
As demand recovers, the Board will continue to evaluate internal
and external opportunities that will deliver value for
shareholders, in particular, investing in our differentiated growth
strategy which helps new and existing customers find people to hang
out with while hostelling, and adds a broader catalogue of group
focused travel products beyond hostel accommodation to our
platform.
Gary Morrison
Chief Executive
10 August 2022
Interim Management Report
Financial Review
Highlights
-- Group net bookings increase of 562% (H1 2021: 73%
decline)
-- Net Average Booking Value ("ABV") of EUR15.82, a 35% increase
versus H1 2021 (EUR11.72)
-- Net revenue of EUR28.0m, an increase of 866% compared to H1
2021 (H1 2021: EUR2.9M, a decline of 76% to H1 2020)
-- Marketing costs per net booking of EUR9.46, an increase of
EUR3.23 compared to H1 2021 cost EUR6.24
-- Total operating expenses of EUR40.5m (H1 2021: EUR22.0m)
-- Operating loss of EUR12.6m (H1 2021: EUR19.3m loss)
-- Loss for the six-month period to 30 June 2022 of EUR14.3m (H1
2021: EUR20.3m)
-- Adjusted EBITDA loss of EUR5.2m (H1 2021: EUR9.7m loss)
-- Adjusted EBITDA margin of -19% (H1 2021: -335%)
-- Adjusted loss per share 7.8 EUR cent (H1 2021: adjusted loss
per share 12.0 EUR cent)
-- Basic loss per share of 12.19 EUR cent (H1 2021: basic loss
per share 17.5 EUR cent)
-- Total cash and cash equivalent as at 30 June 2022 of EUR23.3m
(H1 2021: EUR33.7m)
-- Net asset position of EUR54m (H1 2021: EUR81m) with available
capital to invest to accelerate growth
Revenue and operating loss
The Group's net bookings totalled 2.1m (H1 2021: 0.3m), which
represents 59% of 2019 volumes. Revenue for the period was EUR28.0m
(H1 2021: EUR2.9m), an increase of 866% driven by strong booking
demand as key markets recovered and travel restrictions eased. Net
Average Booking Value ("ABV"), the average value paid by a customer
for a net booking, increased by 35% during the first six months of
the year (H1 2021: 24% increase), driven by bed price inflation
factors relating to destination specific recovery rates where a
higher proportion of bookings came from higher-value destinations
such as Europe and North America. This has been partially offset by
a reduction in our blended commission rate driven by the removal of
Elevate in 2020, and higher cancellation rates driven by a higher
proportion of free cancellation bookings.
At 30 June 2022, the Group held EUR8.5m of customer deposits
relating to bookings made under the free cancellation policy (H1
2021: EUR3.0m), of this EUR2.1m relates to bookings already
cancelled (H1 2021: EUR1.9m). Deferred revenue increased by EUR5.4m
in H1 2022 (H1 2021: increase of EUR0.9m) with a higher proportion
of customers opting for a free cancellation booking as compared to
same period last year.
Operating expenses before impairment totalled EUR40.5m (H1 2021:
EUR22.0m). Increase year on year is due to an increase in direct
marketing spend. Total marketing spend was EUR20.1m in H1 2022 (H1
2021: EUR2.4m) with direct marketing costs totalling EUR19.6m (H1
2021: EUR2.0m). Direct marketing costs as a percentage of net
revenue was 70% (H1 2021: 69%). Excluding the impact of direct
marketing costs, administration expenses have increased by 31%
compared to H1 2021 (H1 2022: EUR15.2m, H1 2021: EUR11.6m).
The group incurred a foreign exchange loss of EUR0.5m (H1 2021:
loss EUR0.1m) which arose with the strengthening of the US dollar
against the Euro. Group operating loss amounted to EUR12.6m (H1
2021: EUR19.3m). Adjusted EBITDA loss of EUR5.2m, a decrease of
EUR4.5m from H1 2021. This improvement is driven by a combination
of strong booking recovery as travel restrictions ease and the
group continued focus on maintaining operating costs.
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 EUR0.5m of exceptional cost
items in H1 2022 relating to a final settlement amount paid to the
founder of Counter App Limited, in respect of their shareholders
agreement and other contractual relationships with the group (H1
2021: EUR0.6m related to costs associated with a Group-wide staff
restructure).
Share based payment
During 2022 the Company granted an award to selected employees,
including the executive directors and members of the management
team. In total 3,415,668 nil cost options were granted. The 2022
awards granted will vest after a three-year period. Vesting will be
dependent upon the participant being employed by Hostelworld as of
the vesting date and satisfactory personal performance.
At 30 June 2021 2,456,763 awards had been granted. The 2021
awards vested in two tranches. 1.2m shares vested in February 2022,
and the remaining 50% of the plan shares will vest on 28 February
2023.
The share-based payment expense of EUR1.2m (H1 2021: EUR0.4m)
reflects the share-based payment charge arising on the issuance of
options in accordance with the Group's Restricted Share Award,
Long-Term Incentive Plan ("LTIP") and Save as you Earn ("SAYE")
plan.
Earnings per share
Basic and diluted loss per share for the Group was 12.19 EUR
cent (H1 2021 basic loss per share: 17.50 EUR cent).
Adjusted loss per share was 7.8 EUR cent per share (H1 2021 loss
per share: 12.0 EUR cent per share). During 2022, the company
issued 1,184,211 shares to satisfy restricted share awards granted
by the Company at a value EUR0.01 per share. The weighted average
number of shares in the period was 117.2m (H1 2021: 116.3m) and the
total number of shares at the balance sheet date was 117.5m (H1
2021: 116.3m).
Net debt and financing
At the balance sheet date cash and cash equivalents totalled
EUR23.3m (H1 2021: EUR33.7m). The Group has borrowings of EUR29.8m
(H1 2021: EUR26.2m). In February 2021 the group signed a EUR30m
5-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, net of original issue
discount, was drawn down on 23 February 2021.
Finance costs
The Group incurred EUR2.1m of finance costs in H1 2022 (H1 2021:
EUR1.4m) with the increase due to interest costs recognised on the
HPS term loan facility which was drawn down on 23 February
2021.
Under the terms of the agreement the group elected to capitalise
all interest in year 1 of the facility. In year 2 the group have
elected to capitalise 4% and pay 5% cash interest. In H1 2022
EUR0.5m has been paid (H1 2021: EURnil) to HPS Investment Partners
LLC (or subsidiaries or affiliates thereof).
Taxation
The Group corporation tax charge for the six-month period is
forecast at EUR0.04m (H1 2021: EUR0.1m) and primarily relates to
our UK and Portuguese operations where tax losses from our Irish
operations cannot be utilised. The Group has taken the forecasted
full year earnings or loss for each group entity to calculate the
effective tax rate for the six-month period ending to 30 June
2022.
The deferred tax credit for the six-month period totalled
EUR415k (30 June 2021: EUR403k) relating to a creation of a
deferred tax asset for capital allowances not utilised and
available for future offset. Deferred tax assets are recognised to
the extent that it is probable that future taxable profits will be
available against which any unused tax losses and unused tax
credits can be utilised.
The Group has availed of the Irish Revenue tax warehousing
scheme and deferred payment on all Irish employer taxes from
February 2021 to March 2022. Total amount warehoused at 30 June
2022 amounted to EUR9.4m (30 June 2021: EUR6.4m). We continue to
monitor and comply with the appropriate Revenue guidelines
applicable to this scheme.
Dividend
The Board does not expect to pay a cash dividend under its
current policy in respect of the 2022 financial year. Any payment
of cash dividends will be subject to the Group generating adjusted
profit after tax, the Group's cash position, any restrictions in
the Group's banking facilities and subject to compliance with
Companies Act 2006 requirements regarding ensuring sufficiency of
distributable reserves at the time of paying the dividend.
Related parties
Related party transactions are disclosed in note 16 to the
condensed group financial statements.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on future Group performance and could
cause actual results to differ materially from expected and
historical results. The Board considers the risks and uncertainties
described in detail in the Annual Report and Financial Statements
for the year ended 31 December 2021, published on 6 April 2022, to
remain applicable. Any changes to this evaluation and a description
of the risks and uncertainties are set out within the Appendix to
this document on pages 29 to 32.
Caroline Sherry
Chief Financial Officer
10 August 2022
RESPONSIBILITY STATEMENT
Each of the Directors of Hostelworld Group plc (as listed on
pages 74 to 76 of the Annual Report and Financial Statements for
the year ended 31 December 2021, published on 6 April 2022) confirm
that, to the best of each person's knowledge and belief
1. The condensed set of Group financial statements has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34 'Interim Financial Reporting';
2. The interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
3. The interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board
Gary Morrison Caroline Sherry
Chief Executive Officer Chief Financial Officer
10 August 2022 10 August 2022
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2022
Six months Six months Year
ended ended ended
30 June 30 June 31
2022 2021 December
2021
EUR'000 EUR'000 EUR'000
------ ------------ ------------ -----------
Notes (Unaudited) (Unaudited) (Audited)
------ ------------ ------------ -----------
Revenue 3 27,955 2,891 16,901
------ ------------ ------------ -----------
Operating expenses before
impairment 4 (40,544) (21,978) (49,386)
------ ------------ ------------ -----------
Share of result of associate 4 (170) (225)
------ ------------ ------------ -----------
Impairment of intangible
assets 7 - - (367)
------ ------------ ------------ -----------
Operating loss (12,585) (19,257) (33,077)
------ ------------ ------------ -----------
Finance costs (2,079) (1,441) (3,501)
------ ------------ ------------ -----------
Loss before taxation (14,664) (20,698) (36,578)
------ ------------ ------------ -----------
Taxation credit 5 & 9 378 341 562
------ ------------ ------------ -----------
Loss for the period attributed
to the equity owners of
the parent company (14,286) (20,357) (36,016)
------ ------------ ------------ -----------
Basic and diluted loss
per share (EUR cent) 6 (12.19) (17.50) (30.96)
------ ------------ ------------ -----------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2022
Six months ended Six months ended Year
30 June 2022 30 June 2021 ended 31
December 2021
EUR'000 EUR'000 EUR'000
----------------- ----------------- ---------------
(Unaudited) (Unaudited) (Audited)
----------------- ----------------- ---------------
Loss for the period (14,286) (20,357) (36,016)
----------------- ----------------- ---------------
Items that may be reclassified subsequently to profit or
loss:
----------------- ----------------- ---------------
Exchange differences on translation of foreign operations 10 8 32
----------------- ----------------- ---------------
Total comprehensive loss for the period attributable to
equity owners of the parent company (14,276) (20,349) (35,984)
----------------- ----------------- ---------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
30 June 30 June 31 December
2022 2021 2021
EUR'000 EUR'000 EUR'000
------ ------------ -------------- --------------
(as restated) (as restated)
------ ------------ -------------- --------------
Notes (Unaudited) (Unaudited) (Audited)
------ ------------ -------------- --------------
Non-current assets
------ ------------ -------------- --------------
Intangible assets 7 76,411 79,719 79,390
------ ------------ -------------- --------------
Property, plant and equipment 8 958 3,447 293
------ ------------ -------------- --------------
Deferred tax assets 9 8,767 7,999 8,352
------ ------------ -------------- --------------
Investment in associate 1,190 2,179 1,186
------ ------------ -------------- --------------
Cash and cash equivalents [2] 750 750 750
------ ------------ -------------- --------------
88,076 94,094 89,971
------ ------------ -------------- --------------
Current assets
------ ------------ -------------- --------------
Trade and other receivables 10 3,948 1,949 2,002
------ ------------ -------------- --------------
Cash and cash equivalents 2 2 22,580 32,952 24,517
------ ------------ -------------- --------------
Corporation tax 15 34 18
------ ------------ -------------- --------------
26,543 34,935 26,537
------ ------------ -------------- --------------
Total assets 114,619 129,029 116,508
------ ------------ -------------- --------------
Issued capital and reserves attributable to equity owners
of the parent
------ ------------ -------------- --------------
Share capital 11 1,175 1,163 1,163
------ ------------ -------------- --------------
Share premium 11 14,328 14,328 14,328
------ ------------ -------------- --------------
Other reserves 6,273 4,669 6,475
------ ------------ -------------- --------------
Retained earnings 32,251 60,799 45,140
------ ------------ -------------- --------------
Total equity attributable to equity holders of the parent
company 54,027 80,959 67,106
------ ------------ -------------- --------------
Non-current liabilities
------ ------------ -------------- --------------
Lease liabilities 13 8 2,018 -
------ ------------ -------------- --------------
Trade and other payables 12 9,436 - 8,049
------ ------------ -------------- --------------
Borrowings 14 29,655 26,200 28,209
------ ------------ -------------- --------------
39,099 28,218 36,258
------ ------------ -------------- --------------
Current liabilities
------ ------------ -------------- --------------
Trade and other payables 12 20,380 18,113 12,795
------ ------------ -------------- --------------
Borrowings 14 184 - -
------ ------------ -------------- --------------
Lease liabilities 13 710 1,446 86
------ ------------ -------------- --------------
Corporation tax 219 293 263
------ ------------ -------------- --------------
21,493 19,852 13,144
------ ------------ -------------- --------------
Total liabilities 60,592 48,070 49,402
------ ------------ -------------- --------------
Total equity and liabilities 114,619 129,029 116,508
------ ------------ -------------- --------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2022
Share capital Share premium Retained earnings Other reserves
Total
Notes EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------ ---------------- ---------------- -------------------- ----------------- ---------
As at 31 December
2020 (audited) 1,163 14,328 81,156 1,218 97,865
------ ---------------- ---------------- -------------------- ----------------- ---------
Total comprehensive
loss for the period - - (20,357) 8 (20,349)
------ ---------------- ---------------- -------------------- ----------------- ---------
Creation of warrant
reserve - - - 3,073 3,073
------ ---------------- ---------------- -------------------- ----------------- ---------
Credit to equity for
equity settled
share-based payments - - - 370 370
------ ---------------- ---------------- -------------------- ----------------- ---------
As at 30 June 2021
(unaudited) 1,163 14,328 60,799 4,669 80,959
------ ---------------- ---------------- -------------------- ----------------- ---------
Total comprehensive
loss for the period 11 - - (15,659) 24 (15,635)
------ ---------------- ---------------- -------------------- ----------------- ---------
Credit to equity for
equity-settled share
based payments - - - 1,782 1,782
------ ---------------- ---------------- -------------------- ----------------- ---------
As at 31 December
2021 (audited) 1,163 14,328 45,140 6,475 67,106
------ ---------------- ---------------- -------------------- ----------------- ---------
Total comprehensive
loss for the period 11 - - (14,286) 10 (14,276)
------ ---------------- ---------------- -------------------- ----------------- ---------
Issue of shares 11 12 - - - 12
------ ---------------- ---------------- -------------------- ----------------- ---------
Credit to equity for
equity settled
share-based payments - - - 1,185 1,185
------ ---------------- ---------------- -------------------- ----------------- ---------
Transfer on exercise,
vesting or expiry of
share-based payments 15 - - 1,397 (1,397) -
------ ---------------- ---------------- -------------------- ----------------- ---------
As at 30 June 2022
(unaudited) 1,175 14,328 32,251 6,273 54,027
------ ---------------- ---------------- -------------------- ----------------- ---------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2022
Year
Six months Six months ended ended 31 December 2021
ended 30 June 2021
Notes 30 June 2022
EUR'000 EUR'000 EUR'000
-------- --------------- ------------------- -------------------------
(Unaudited) (Unaudited) (Audited)
-------- --------------- ------------------- -------------------------
Cash flows from operating activities
-------- --------------- ------------------- -------------------------
Loss before taxation (14,664) (20,698) (36,578)
-------- --------------- ------------------- -------------------------
Amortisation and depreciation 4 5,733 8,447 12,411
-------- --------------- ------------------- -------------------------
Impairment of intangible assets - - 367
-------- --------------- ------------------- -------------------------
Share of result of associate (4) 170 225
-------- --------------- ------------------- -------------------------
Net profit on disposal of leases - - (793)
-------- --------------- ------------------- -------------------------
Finance costs 2,079 1,441 3,501
-------- --------------- ------------------- -------------------------
Net (profit) / loss on disposal of
property, plant and equipment - (112) 492
-------- --------------- ------------------- -------------------------
Employee equity settled share-based
payment expense 1,195 367 2,162
-------- --------------- ------------------- -------------------------
Changes in working capital items:
-------- --------------- ------------------- -------------------------
Increase in trade and other payables 8,974 1,201 5,074
-------- --------------- ------------------- -------------------------
(Increase) in trade and other receivables (1,946) (268) (321)
-------- --------------- ------------------- -------------------------
Cash generated from / (used in) operations 1,367 (9,452) (13,460)
-------- --------------- ------------------- -------------------------
Interest paid (449) (105) (155)
-------- --------------- ------------------- -------------------------
Income tax (paid)/received (78) 9 (136)
-------- --------------- ------------------- -------------------------
Net cash generated from / (used in)
operating activities 840 (9,548) (13,751)
-------- --------------- ------------------- -------------------------
Cash flows from investing activities
-------- --------------- ------------------- -------------------------
Acquisition/development of intangible
assets 7 (2,327) (756) (4,397)
-------- --------------- ------------------- -------------------------
Purchases of property, plant and equipment 8 (148) (15) (75)
-------- --------------- ------------------- -------------------------
Net cash used in investing activities (2,475) (771) (4,472)
-------- --------------- ------------------- -------------------------
Cash flows from financing activities
-------- --------------- ------------------- -------------------------
Deferred consideration - (124) (345)
-------- --------------- ------------------- -------------------------
Transaction costs related to borrowings 14 - (862) (862)
-------- --------------- ------------------- -------------------------
Proceeds from borrowings 14 - 28,800 28,800
-------- --------------- ------------------- -------------------------
Repayment of borrowings 14 - (1,164) (1,164)
-------- --------------- ------------------- -------------------------
Repayments of lease liabilities (312) (828) (1,160)
-------- --------------- ------------------- -------------------------
Net cash (used in) / generated from
financing activities (312) 25,822 25,269
-------- --------------- ------------------- -------------------------
Net (decrease) / increase in cash and cash
equivalents (1,947) 15,503 7,046
-------- --------------- ------------------- -------------------------
Cash and cash equivalents at the beginning
of the period 25,267 18,189 18,189
-------- --------------- ------------------- -------------------------
Effect of foreign exchange rate changes 10 10 32
-------- --------------- ------------------- -------------------------
Cash and cash equivalents at the end of
the period 23,330 33,702 25,267
-------- --------------- ------------------- -------------------------
NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Hostelworld Group plc, hereinafter "the Company", is a public
limited company incorporated in the United Kingdom on the 9 October
2015.
The registered office of the Company is One Chamberlain Square,
Birmingham, B3 3AX.
The condensed Group financial statements of the Company for the
six months ended 30 June 2022 comprise the Company and its
subsidiaries (together referred to as "the Group"). The condensed
Group financial statements for the period ended 30 June 2022 have
neither been audited or reviewed.
The information for the year ended 31 December 2021 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditors
reported on those accounts and their report was unqualified, did
not draw attention to any matters by way of emphasis and did not
contain a statement under section 498(2) or (3) of the Companies
Act 2006.
These condensed Group financial statements were authorised for
issue by the Board of Directors of Hostelworld Group plc on 10
August 2022.
2. ACCOUNTING POLICIES
Basis of preparation
The annual financial statements of the Group will be prepared in
accordance with United Kingdom adopted International Financial
Reporting Standards. The condensed set of financial statements
included in this half--yearly financial report has been prepared in
accordance with United Kingdom adopted International Accounting
Standard 34 'Interim Financial Reporting'.
Going concern
The directors, after making enquiries, have a reasonable
expectation that the Group has adequate resources to continue
operating as a going concern for the foreseeable future.
Across H1 2022 we have seen strong month on month growth in new
customers, new bookings and net revenue as the impact of the
Omicron variant subsided worldwide. Revenue for H1 2022 totalled
EUR28.0m (H1 2021: EUR2.9m). The Group incurred a loss before
taxation of EUR14.7m (H1 2021: EUR20.7m). At 30 June 2022 the Group
was in a net asset position of EUR54.0m (31 December 2021:
EUR67.1m) and held a cash balance of EUR23.3m (31 December 2021:
EUR25.3m). The group also has a debt facility in place relating to
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, net of original issue discount. Further detail on
covenants in place are disclosed in the Annual Report and Financial
Statements for the year ended 31 December 2021 on pages 190 and
191. The group are in compliance with the minimum liquidity
covenants that apply at 30 June 2022 being a minimum liquidity
balance of EUR6m on hand.
The Directors have assessed a going concern period through to 30
September 2023 and have modelled a base and stress case scenarios
considering factors such as increased average booking values due to
booking mix and price inflation, marketing cost per booking, demand
on supply levels and disruptions within the wider industry for
airline cancellation, and the level of booking recovery
particularly in Oceania and Asian destinations as booking momentum
slowly returns. The Directors have also considered the impact of
climate risk in these scenarios concluding that it is not expected
to have a significant impact over the going concern period. 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. It is assumed under both scenarios that full
recovery in the travel section is not expected to happen until
FY-23. Our stress case scenario assumes more depressed volumes. In
both scenarios, the Group has sufficient cash reserves
available.
Having considered the Group's cash flow forecasts, current and
anticipated trading volumes, together with current and anticipated
levels of cash, debt and the availability of committed borrowing
facilities, the directors are satisfied that the Group has
sufficient resources to continue in operation for the foreseeable
future, a period of not less than 12 months from the date of
signing of this report, and accordingly, they continue to adopt the
going concern basis in preparing the condensed Group financial
statements.
Changes in accounting policies
Since the last Annual Report there are a number of amendments to
existing accounting standards that have been adopted. These had no
material impact on the condensed Group financial statements. The
same accounting policies and methods of computation are followed
compared with the most recent annual Group financial statements
with one exception.
Upon review of the April 2022 IFRIC Agenda item "Demand Deposits
with Restrictions on Use arising from a Contract with a Third Party
(IAS 7 Statement of Cash Flows)-Agenda Paper 3" the Group has
changed the presentation of cash and cash equivalents which are not
available for use for the period ended 30 June 2021. The amount of
EUR750k, which relates to a rental guarantee in place, has been
classified in non-current assets as the guarantee was in place for
a period of longer than 12 months after balance sheet date. This
has no impact on net assets, net debt or the Group's profit for the
period ended 30 June 2021 .
Key judgements and sources of estimation uncertainty
In preparing these condensed Group financial statements, the
directors have made judgements in applying the Group's accounting
policies and there are key sources of estimation uncertainty which
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing the condensed Group financial statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those applied to the consolidated financial
statements for the year ended 31 December 2021. The annual report
was published on 6 April 2022.
3. REVENUE & SEGMENTAL ANALYSIS
The Group is managed as a single business unit which provides
software and data processing services that facilitate hostel, hotel
and other accommodation bookings worldwide, including ancillary
online advertising revenue.
The directors determine, and present operating segments based on
the information that is provided internally to the Chief Executive
Officer, who is the Company's Chief Operating Decision Maker
("CODM"). When making resource allocation decisions, the CODM
evaluates booking numbers and average booking value. The objective
in making resource allocation decisions is to maximise consolidated
financial results.
The CODM assesses the performance of the business based on the
consolidated adjusted loss after tax of the Group for the period.
This measure excludes the effects of certain income and expense
items, which are unusual by virtue of their size and incidence, in
the context of the Group's ongoing core operations, such as the
impairment of intangible assets and exceptional items of
expenditure.
All revenue is derived wholly from external customers and is
generated from a large number of customers, none of whom is
individually significant.
The Group's major revenue-generating asset class comprises its
software and data processing services and is directly attributable
to its reportable segment operations. In addition, as the Group is
managed as a single business unit, all other assets and liabilities
have been allocated to the Group's single reportable segment. There
have been no changes to the basis of segmentation or the
measurement basis for the segment profit or loss.
Reportable segment information is presented as follows:
Six months ended 30 June Six months ended 30 June Year ended 31 December
2022 2021 2021
EUR'000 EUR'000 EUR'000
-------------------------- -------------------------- -------------------------- ---------------------------
(Unaudited) (Unaudited) (Audited)
-------------------------- -------------------------- ---------------------------
Europe 18,665 989 10,713
-------------------------- -------------------------- ---------------------------
Americas 7,513 1,470 5,213
-------------------------- -------------------------- ---------------------------
Asia, Africa and Oceania 1,777 432 975
-------------------------- -------------------------- ---------------------------
Total revenue 27,955 2,891 16,901
-------------------------- -------------------------- ---------------------------
For the six-month period ended 30 June 2022, an amount of
EUR5,429k was deferred to the balance sheet (for the six months
ended 30 June 2021: an amount of EUR894k was deferred to the
balance sheet).
Disaggregation of revenue is presented as follows:
Six months ended 30 Six months ended 30 Year ended 31 December
June 2022 June 2021 2021
EUR'000 EUR'000 EUR'000
------------------------------------- ---------------------- ----------------------- -----------------------
(Unaudited) (Unaudited) (Audited)
---------------------- ----------------------- -----------------------
Technology and data processing fees 27,872 2,872 16,849
---------------------- ----------------------- -----------------------
Ancillary services and advertising
revenue 83 19 52
---------------------- ----------------------- -----------------------
Total revenue 27,955 2,891 16,901
---------------------- ----------------------- -----------------------
In the six months ended 30 June 2022, the Group generated 100%
(30 June 2021: 99%) of its revenues from the technology and data
processing fees that it charged to accommodation providers.
4. OPERATING EXPENSES EXCLUDING IMPAIRMENT
Loss for the period has been arrived at after charging/
(crediting) the following operating costs:
Six months ended Six months ended Year ended 31 December 2021
30 June 2022 30 June 2021
EUR'000 EUR'000 EUR'000
------------------------------------------- ----------------- ----------------- ----------------------------
(Unaudited) (Unaudited) (Audited)
----------------- ----------------- ----------------------------
Marketing expenses 20,050 2,424 13,792
----------------- ----------------- ----------------------------
Staff costs 8,703 7,267 15,546
----------------- ----------------- ----------------------------
Credit card processing fees 918 129 573
----------------- ----------------- ----------------------------
Loss on disposal of property, plant & - 6 -
equipment
----------------- ----------------- ----------------------------
Profit on disposal of property, plant &
equipment - - (301)
----------------- ----------------- ----------------------------
Profit on disposal of lease liability - (118) -
----------------- ----------------- ----------------------------
Exceptional items 470 589 587
----------------- ----------------- ----------------------------
Foreign exchange loss 519 125 419
----------------- ----------------- ----------------------------
Other administrative costs 4,063 3,095 6,229
----------------- ----------------- ----------------------------
Movement in expected credit loss 88 14 129
----------------- ----------------- ----------------------------
Total administrative expenses 34,811 13,531 36,974
----------------- ----------------- ----------------------------
Depreciation of property, plant and
equipment 428 1,158 1,519
----------------- ----------------- ----------------------------
Amortisation of intangible fixed assets 5,305 7,289 10,892
----------------- ----------------- ----------------------------
Total operating expenses excluding
impairment 40,544 21,978 49,386
----------------- ----------------- ----------------------------
Total administration expenses increased by EUR21,280k to
EUR34,811k (30 June 2021: EUR13,531k), predominantly due to an
increase in marketing costs which is driven by a EUR17,668k
increase in direct marketing costs to EUR19,619k (30 June 2021:
EUR1,951k).
Included in staff costs are government assistance amounts
totalling EUR376k (30 June 2021: EUR892k) for a subsidy received
under the Employment Wage Subsidy Scheme in Ireland. Prior year
amounts included amounts received for furloughed employees under
the Coronavirus Job Retention Scheme in the UK.
The exceptional costs for the six months period amounted to
EUR470k (30 June 2021: EUR589k). In the current year, these costs
relate to a final settlement amount paid to the founder of Counter
App Limited, on their exit from the company and associated legal
costs. Prior year exceptional costs primarily related to staff
costs incurred as part of primarily relate to staff costs incurred
as part of an implementation of a simpler and more efficient growth
orientated organisational structure and a release of costs
previously accrued for due to a revision of estimate within merger
and acquisition related costs.
Six months ended 30 June Six months ended 30 June Year ended 31 December
2022 2021 2021
EUR'000 EUR'000 EUR'000
---------------------------- ------------------------- -------------------------- --------------------------
(Unaudited) (Unaudited) (Audited)
------------------------- -------------------------- --------------------------
Litigation settlements 470 - -
------------------------- -------------------------- --------------------------
Merger & acquisition costs - (133) (127)
------------------------- -------------------------- --------------------------
Restructuring costs - 722 715
------------------------- -------------------------- --------------------------
Total exceptional items 470 589 588
------------------------- -------------------------- --------------------------
5. TAXATION
The corporation tax charge for the six-month period is forecast
at EUR37k (30 June 2021: EUR62k). 2022 and 2021 charge relate
primarily to our UK and Portuguese operations where tax losses from
our Irish operations cannot be utilised.
Taxation charge represents the best estimate of the average
annual effective tax rate expected for the full year applied to the
pre-tax profit or loss of each group entity during the six-month
period. In calculating the expected tax rate, the Group has taken
the forecasted full year 2022 earnings or loss of each group
entity.
6. LOSS PER SHARE
Basic loss per share is computed by dividing the net loss for
the period available to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the
period:
Six months Six months Year
ended ended ended 31
30 June 2022 30 June 2021 December 2021
(Unaudited) (Unaudited) (Audited)
-------------- -------------- ---------------
Weighted average number of shares in issue ('000s) 117,165 116,321 116,321
-------------- -------------- ---------------
Loss for the period (EUR'000s) (14,286) (20,357) (36,016)
-------------- -------------- ---------------
Basic and diluted loss per share (EUR cent) (12.19) (17.50) (30.96)
-------------- -------------- ---------------
During 2022, the company issued 1,184,211 shares to satisfy
restricted share awards granted by the Company at a value EUR0.01
per share. The weighted average number of shares in the period was
117.2m (H1 2021: 116.3m) and the total number of shares at the
balance sheet date was 117.5m (H1 2021: 116.3m).
Diluted loss per share is computed by adjusting the weighted
average number of ordinary shares in issue to assume conversion of
all potential dilutive ordinary shares. The issue of warrants and
share options and share awards (note 11) are the Company's only
potential dilutive ordinary shares. Ordinary shares potentially
issuable from share-based payment arrangements and warrants are
anti-dilutive due to the loss in the financial period meaning there
is no difference between basic and diluted earnings per share.
7. INTANGIBLE ASSETS
Additions during the period comprised of capitalised development
costs of EUR2,256k (30 June 2021: EUR756k) and an acquisition of a
domain name of EUR71k (30 June 2021: EURnil). There were no
disposals.
At 31 December 2021 the group took an impairment on capitalised
development costs of EUR367k which related to an impairment of a
specific project following management decision to cease ongoing
investment.
At 30 June 2022 management performed a review of the carrying
value of our intangible assets to assess if there were indicators
of further impairment present. The impairment testing of goodwill
and Hostelworld.com intellectual property at the reporting date is
based on the key assumptions disclosed in the 2021 Annual Report,
updated to take account of our latest projections (as further
described in the going concern section). The testing did not result
in any impairment at the balance sheet date.
8. PROPERTY, PLANT AND EQUIPMENT
The Group recognised additions during the six months ended 30
June 2022 totalling EUR148k (30 June 2021: additions of EUR15k) for
computer equipment and right-of-use lease asset additions EUR944k
(30 June 2021: additions of EUR116k.)
There has been no disposal of assets for the six months period
ended 30 June 2022 (30 June 2021: disposals of assets with net book
value of EUR6k.)
9. DEFERRED TAXATION
30 June 30 June 31 December 2021
2022 2021
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Opening balance 8,352 7,596 7,596
------------ ------------ -----------------
Credit to the consolidated income statement 415 403 756
------------ ------------ -----------------
8,767 7,999 8,352
------------ ------------ -----------------
The deferred tax credit for the six-month period totalled
EUR415k (30 June 2021: EUR403k) relates to a deferred tax asset
created in the current year for capital allowances not utilised and
available for future offset.
At 30 June 2022 the carrying value of deferred tax assets
amounted to EUR8,767k (30 June 2021: EUR7,999k). Deferred tax
assets are recognised to the extent that it is probable that
taxable profits will be available in future periods. The extent to
which it is probable that taxable profits will be available in
future periods is an estimate assessed based on a Board approved
five-year budget and long-term forecasts upon initial recognition
and at each reporting date. Future taxable profits have been
estimated using the board approved 5-year plan in November 2021 and
adjusted for latest projections presented to the Board in March
2022. The group has made a loss in 2020, 2021 and for the period
ending 30 June 2022 as a direct impact of COVID-19. The outlook
includes an assumption regarding return to profit as we assume a
recovery of bookings and revenue with full trading recovery
included in 2023, and a modest growth rate applied to profits from
2023. A decline in taxable profits from amounts included in our
five-year outlook would impact the amount of the deferred tax asset
which would be recovered over the next five years. Should taxable
profits decline 5% over the next 5 years the deferred tax asset
would still be recoverable.
10. TRADE AND OTHER RECEIVABLES
30 June 30 June 31 December 2021
2022 2021
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Amounts falling due within one year
------------ ------------ -----------------
Trade receivables 719 449 220
------------ ------------ -----------------
Prepayments and accrued income 773 1,051 978
------------ ------------ -----------------
Value added tax 2,456 449 804
------------ ------------ -----------------
3,948 1,949 2,002
------------ ------------ -----------------
Increase in value added tax year on year relates to amounts
reclaimable from the revenue commissioners at 30 June 2022 relating
to increased marketing costs settled.
11. SHARE CAPITAL
No of shares of EUR0.01 Share capital EUR'000 Share premium EUR'000 Total EUR'000
each (thousands)
At 30 June 2021 and 31
December 2021 116,321 1,163 14,328 15,491
------------------------- ---------------------- ---------------------- --------------
Share issue - 22 February
2022 1,184 12 - 12
------------------------- ---------------------- ---------------------- --------------
At 30 June 2022 117,505 1,175 14,328 15,503
------------------------- ---------------------- ---------------------- --------------
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 19 February 2021, the group agreed to issue warrants of
3,315,153 ordinary shares of EUR0.01 Each in the capital of
Hostelworld (equivalent to 2.85% of Hostelworld's current issued
share capital). At 30 June 2022 no warrants had been exercised.
On 22 February 2022, the company issued 1,184,211 shares to
satisfy restricted share awards granted by the Company at a value
EUR0.01 per share.
Reconciliation and movement in other reserves during the period
as follows:
Foreign currency translation Share based payment reserve Warrant reserve Total
reserve
EUR'000 EUR'000 EUR'000 EUR'000
----------------------------- ---------------------------- ---------------- --------
At 31 December 2020 8 1,210 - 1,218
----------------------------- ---------------------------- ---------------- --------
Issue of warrants - - 3,073 3,073
----------------------------- ---------------------------- ---------------- --------
Exchange differences on
translation of foreign
operations 8 - - 8
----------------------------- ---------------------------- ---------------- --------
Credit to equity for equity
settled share based
payments - 370 - 370
----------------------------- ---------------------------- ---------------- --------
At 30 June 2021 16 1,580 3,073 4,669
----------------------------- ---------------------------- ---------------- --------
Exchange differences on
translation of foreign
operations 24 - - 24
----------------------------- ---------------------------- ---------------- --------
Credit to equity for equity
settled share based
payments - 1,782 - 1,782
----------------------------- ---------------------------- ---------------- --------
At 31 December 2021 40 3,362 3,073 6,475
----------------------------- ---------------------------- ---------------- --------
Exchange differences on
translation of foreign
operations 10 - - 10
----------------------------- ---------------------------- ---------------- --------
Credit to equity for equity
settled share based
payments - 1,185 - 1,185
----------------------------- ---------------------------- ---------------- --------
Transfer on exercise,
vesting or expiry of
share-based payments - (1,397) - (1,397)
----------------------------- ---------------------------- ---------------- --------
At 30 June 2022 50 3,150 3,073 6,273
----------------------------- ---------------------------- ---------------- --------
12. TRADE AND OTHER PAYABLES
30 June 30 June 31 December 2021
2022 2021
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Non-current liabilities
------------ ------------ -----------------
Payroll taxes 9,436 - 8,049
------------ ------------ -----------------
The Group has availed of the Irish Revenue tax warehousing
scheme and deferred payment on all Irish employer taxes from
February 2021 to March 2022. Total amount warehoused at 31 March
2022 amounted to EUR9,436k (30 June 2021: EUR6,421k included within
current liabilities). At 31 December 2021 and 30 June 2022 amounts
warehoused are recognised as non-current reflecting the intention
and unconditional right not to repay balance within 12 months.
30 June 30 June 31 December 2021
2022 2021
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Current
------------ ------------ -----------------
Trade payables 7,758 2,905 5,425
------------ ------------ -----------------
Accruals and other payables 5,585 6,353 6,113
------------ ------------ -----------------
Deferred revenue 6,472 1,102 1,036
------------ ------------ -----------------
Payroll taxes 565 6,609 221
------------ ------------ -----------------
Deferred consideration - 1,144 -
------------ ------------ -----------------
20,380 18,113 12,795
------------ ------------ -----------------
At 30 June 2022, EUR6,447k of revenue was deferred relating to
free cancellation bookings (30 June 2021: EUR1,090k) and EUR25k
relates to featured listings deferred revenue (30 June 2021:
EUR12k). Movement upwards in provision directly driven by increase
in bookings and revenue.
Included in accruals and other payables is a credit provision
EUR325k (30 June 2021: EUR1,573k) for various credits and
incentives to customers for use on future bookings. Decrease year
on year mainly relate to a large volume of incentives which are due
to expire in August 2022. An amount of EUR2,094k (30 June 2021:
EUR1,937k) relating to customers who have cancelled their free
cancellation booking but have not been refunded.
Increase in trade payables is driven by an increase in direct
marketing costs and amounts owing to suppliers at the reporting
date.
13. 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 8. The movement in the Group's lease liabilities during the
period is as follows:
30 June 30 June 31 December 2021
2022 2021
EUR'000 EUR'000 EUR'00
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Opening lease liability 86 4,295 4,295
------------ ------------ -----------------
Additions 944 82 82
------------ ------------ -----------------
Modification - - 33
------------ ------------ -----------------
Disposals - (118) (3,164)
------------ ------------ -----------------
Lease term remeasurement - 34 -
------------ ------------ -----------------
Payments (319) (953) (1,340)
------------ ------------ -----------------
Lease interest 11 69 102
------------ ------------ -----------------
Foreign exchange differences on lease payments (4) 55 78
------------ ------------ -----------------
718 3,464 86
------------ ------------ -----------------
There has been no disposal of lease liability for the six months
period ended 30 June 2022. Additions for the six months period
ended 30 June 2022 relate to new lease commitments for office space
in Dublin and the UK.
These liabilities are classified in the consolidated statement
of financial position as:
30 June 30 June 31 December 2021
2022 2021
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Non-current lease liabilities 8 2,018 -
------------ ------------ -----------------
Current lease liabilities 710 1,446 86
------------ ------------ -----------------
718 3,464 86
------------ ------------ -----------------
14. BORROWINGS
30 June 30 June 31 December 2021
2022 2021
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Opening balance 28,209 1,164 1,164
------------ ------------ -----------------
Drawdown - 28,800 28,800
------------ ------------ -----------------
Repayments - (1,164) (1,164)
------------ ------------ -----------------
Loan issuance costs - issue of warrants - (3,073) (3,073)
------------ ------------ -----------------
Transaction costs related to borrowings - (862) (862)
------------ ------------ -----------------
Finance costs 1,630 1,335 3,344
------------ ------------ -----------------
29,839 26,200 28,209
------------ ------------ -----------------
In 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). 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). In the
first year following drawdown, all interest rolled up and
capitalised. Between the first and third anniversaries of drawdown,
Hostelworld elected to capitalise 4.0% per annum of the accruing
interest with the balance of the interest during that period (and
all interest accruing after the third anniversary of drawdown)
being cash pay. Interest paid to 30 June 2022 totalled EUR427k (30
June 2021: EURNil).
These borrowings are classified in the consolidated statement of
financial position as:
30 June 30 June 31 December 2021
2022 2021
EUR'000 EUR'000 EUR'000
------------ ------------ -----------------
(Unaudited) (Unaudited) (Audited)
------------ ------------ -----------------
Non-current borrowings 29,655 26,200 28,209
------------ ------------ -----------------
Current borrowings 184 - -
------------ ------------ -----------------
29,839 26,200 28,209
------------ ------------ -----------------
Included in current borrowings is cash interest accrued at the
balance sheet date. This was paid in August 2022.
15. SHARE BASED PAYMENTS
Restricted share option ("RSU"):
During the six months ended 30 June 2022, the Directors approved
the grant of an RSU to selected employees, including the executive
directors and members of the management team. In total 3,415,668
nil cost options were granted. For the 2022 awards issued the
normal vesting date will be 4 April 2025.
In 2021 the Directors approved the grant of 2,456,763 shares.
2021 awards granted vested in two tranches. 1.2m shares were
exercised in February 2022. EUR1,397k (2021: EURnil) was
transferred between share-based payment reserve and retained
earnings. The remaining 50% of the plan shares will vest on 28
February 2023.
Vesting for both plans will be dependent upon the participant
being employed by Hostelworld as of the vesting date and
satisfactory personal performance.
30 June 2022 30 June 2021 31 December 2021
No. of share options No. of share options No. of share options
--------------------- --------------------- ---------------------
Outstanding at beginning of period 2,329,810 - -
--------------------- --------------------- ---------------------
Granted during the period 3,415,668 2,456,763 2,642,212
--------------------- --------------------- ---------------------
Forfeited during the period (122,719) (80,827) (312,402)
--------------------- --------------------- ---------------------
Exercised during the period (1,184,211) - -
--------------------- --------------------- ---------------------
Total 4,438,548 2,375,936 2,329,810
--------------------- --------------------- ---------------------
Long-term incentive plan ("LTIP")
During the six-months ended 30 June 2022, there has been no
invitation made to executive directors and selected management to
participate in the Group's long-term incentive plan (30 June 2021:
2,336,885 nil cost options were granted, and these options will
vest on 26 April 2024 subject to meeting performance
conditions.)
Details of the LTIP share options outstanding during the period
are as follows:
30 June 2022 30 June 2021 31 December 2021
No. of share options No. of share options No. of share options
--------------------- --------------------- ---------------------
Outstanding at beginning of period 4,741,475 3,864,472 3,864,472
--------------------- --------------------- ---------------------
Adjustment applied - 55,262* 55,262*
--------------------- --------------------- ---------------------
Revised balance outstanding at beginning of
period 4,741,475 3,919,734 3,919,734
--------------------- --------------------- ---------------------
Granted during the period - 2,336,885 2,336,885
--------------------- --------------------- ---------------------
Forfeited during the period (220,882) (608,594) (1,515,144)
--------------------- --------------------- ---------------------
Exercised during the period - - -
--------------------- --------------------- ---------------------
Expired during the period - -
--------------------- --------------------- ---------------------
Outstanding at the end of the period 4,520,593 5,648,025 4,741,475
--------------------- --------------------- ---------------------
Exercisable at the end of the period - - -
--------------------- --------------------- ---------------------
* 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. An adjustment was made to the LTIP schemes in 2021, when
approved by the Remuneration Committee, to ensure that award
holders are no better or worse off following the bonus issue than
they were beforehand.
Save As You Earn ("SAYE"):
Following the withdrawal of Ulster Bank from the Irish market in
2021, the Group have not approved the granting of any new SAYE
scheme in 2022.A scheme was approved in 2020 and 2021. The schemes
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. As at 30 June 2022 246,590 shares were outstanding (30
June 2021: 277,624).
16. GROUP STRUCTURE AND RELATED PARTY TRANSACTIONS
On 12 May 2022, a resolution was passed to liquidate Counter App
Limited, a subsidiary of Hostelworld.com Limited. The trade was
transferred to another Group entity, Hostelworld.com Limited.
There are no other changes to the Group structure or related
party transactions to highlight in respect of H1 2022 and no other
related party transactions.
17. EVENTS AFTER THE REPORTING DATE
There have been no significant events, outside the ordinary
course of business, affecting the Group since 30 June 2022.
APPIX 1: ALTERNATIVE PERFORMANCE MEASURES
The Group uses the following alternative performance measures
('APMs') which are non-IFRS measures to monitor the performance of
its operations and of the Group as a whole: loss / earnings before
interest, tax, depreciation and amortisation, excluding exceptional
and non-cash items ("adjusted EBITDA"), adjusted loss / profit
after taxation; adjusted loss or earnings per share.
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 for the year and adjusted
EBITDA:
30 June 30 June
2022 2021
EUR'000 EUR'000
--------------------------- ---------------------------
Loss for the year (14,286) (20,357)
--------------------------- ---------------------------
Taxation (378) (341)
--------------------------- ---------------------------
Net finance costs 2,079 1,441
--------------------------- ---------------------------
Operating loss (12,585) (19,257)
--------------------------- ---------------------------
Depreciation 428 1,159
--------------------------- ---------------------------
Amortisation of development costs 1,378 1,435
--------------------------- ---------------------------
Amortisation of acquired intangible assets 3,927 5,853
--------------------------- ---------------------------
Share of result of associate (4) 170
--------------------------- ---------------------------
Exceptional items 470 589
--------------------------- ---------------------------
Share based payment expense 1,195 367
--------------------------- ---------------------------
Adjusted EBITDA loss (5,191) (9,684)
--------------------------- ---------------------------
Adjusted loss after taxation ("Adjusted PAT")
Adjusted 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 for the
year:
30 June 30 June
2022 2021
EUR'000 EUR'000
-------------------------- ----------------------------
Adjusted EBITDA loss (5,191) (9,684)
-------------------------- ----------------------------
Depreciation (428) (1,159)
-------------------------- ----------------------------
Amortisation of development costs (1,378) (1,435)
-------------------------- ----------------------------
Net finance costs (2,079) (1,441)
-------------------------- ----------------------------
Share of result of associate 4 (170)
-------------------------- ----------------------------
Corporation tax (37) (62)
-------------------------- ----------------------------
Adjusted loss after taxation (9,109) (13,951)
-------------------------- ----------------------------
Exceptional items (470) (589)
-------------------------- ----------------------------
Amortisation of acquired intangible assets (3,927) (5,853)
-------------------------- ----------------------------
Share based payment expense (1,195) (367)
-------------------------- ----------------------------
Deferred taxation 415 403
-------------------------- ----------------------------
Loss for the year (14,286) (20,357)
-------------------------- ----------------------------
Adjusted loss 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.
30 June 30 June
2022 2021
Adjusted loss after taxation EUR'000 (9,109) (13,951)
---------------------- -----------------------
Weighted average shares in issue ('m) 117 116
---------------------- -----------------------
Adjusted EPS (7.8) (12.0)
---------------------- -----------------------
Net average booking value ("ABV")
Net average booking value is a key performance revenue measure
which looks at the average value paid by a customer for a
booking.
30 June 30 June
2022 2021
EUR'000 EUR'000
------------------------- -----------------------------
Net revenue 27,955 2,891
------------------------- -----------------------------
Deferred revenue movement 5,429 924
------------------------- -----------------------------
Counter revenue (52) -
------------------------- -----------------------------
Adjustments to revenue* (803) (74)
------------------------- -----------------------------
Advertising income (83) (19)
------------------------- -----------------------------
Volume incentive rebates 351 1
------------------------- -----------------------------
Net general booking revenue 32,797 3,722
------------------------- -----------------------------
*primarily relates to recognition of refunds, chargebacks and
voucher provisioning.
30 June 30 June
2022 2021
Net general booking revenue (GBR) (EUR'000) 32,797 3,722
-------- --------
Net bookings (#'000) 2,073 313
-------- --------
Net ABV generated EUR cent per share 15.82 11.90
-------- --------
APPIX 2: PRINCIPAL RISKS AND UNCERTAINTIES
The Group's risk register identifies key risks including any
emerging risks and monitors progress in managing and mitigating
these risks. Each risk identified is subject to an assessment
incorporating likelihood of occurrence and potential impact on the
Group. The Group's risk register is subject to review by the
Executive Leadership Team ('ELT') prior to reporting to the Audit
Committee and Board.
The principal risks and uncertainties faced by the Group are
reported annually within the Annual Report and Financial Statements
for the year ended 31 December 2021, published on 6 April 2022.
A review was performed of the risk register during H1 2022. The
following changes were made:
1. The risk profile of the following risks has increased in 2022
in regard to the probability of the occurrence of the risk on the
group or the impact it would have in terms of reputation or
cost.
-- Macroeconomic environment increased due to increased
inflation and the foreign exchange implications of the euro
weakening against the US dollar. Increasing price inflation may
make it unaffordable for people to travel.
-- Climate change increased due to a growing expectation from
investors and stakeholders and also due to increased regulation in
the area.
-- Within third party risk we have also increased the risk
relating to our reliance on hostels for our inventory being
advertised. Within key markets there is a pressure on inventory to
keep pace with the levels of pent-up demand.
-- People risk increased due to a heightened difficulty finding
new hires and remaining competitive against peer companies.
-- IT Platforms and technological innovation increased due to
the level of technological debt being carried in the group.
2. In 2022 we have presented a number of our risks in a different manner as follows:
-- We have included a risk addressing the impact of COVID-19,
terrorism, geopolitical conflicts, and other uncontrollable events
on leisure travel. This increases the scope of the previous risk
relating to the impact of terrorism on leisure travel, including
other uncontrollable events.
o In the case of COVID-19 this was previously addressed
specifically in many of the risks due to pervasive and novel
impact. As our assessment of this risk matures we are considering
COVID-19 primarily within this risk.
o We are closely monitoring the geopolitical climate following
Russia's invasion of Ukraine. Less than 0.1% of our hostel
inventory were based in Russia and Belarus and these have been
removed from our platform. To date we have not seen a material
impact in our booking numbers as a result of the conflict but we
continue to closely monitor the situation.
-- We have included 'Financial Risk' which encompasses market
risk, liquidity risk, managing credit risk associated with our debt
facility, and other financial related matters.
-- A lower risk level has been assigned to "working capital
investment and going concern" risk as disclosed in the 2021 annual
report given the group's increased booking volumes, cash balance
and net asset position. This is no longer disclosed within
principal risks and uncertainties.
We have not identified any emerging risk. The principal risks
and uncertainties which are applicable for the second half of the
year are summarised below.
Material risks
-- Macroeconomic conditions
-- The Group's financial performance is largely dependent on the
wider availability of, and demand for travel services. The demand
for travel services is influenced by a range of macroeconomic
circumstances and their impact on consumers discretionary spending
levels. Economic activity, employment levels, inflation, interest
rates, foreign exchange movements and access to credit are among
the factors that can impact travel demand which we are monitoring
closely across 2022. Increasing price inflation may make it
unaffordable for people to travel.
-- Management and the Board regularly monitor a range of
trading, market and economic indicators in order to determine any
risk to financial performance due to macroeconomic uncertainties
and any potential mitigating actions that should be taken.
Offsetting the prominence of this risk is the profile of our high
value target customers who are more likely to take on debt to go on
trip and see it as a rite of passage. The average booking value of
a hostel stay is also lower than a hotel and a more affordable
booking option.
-- Impact of COVID-19, terrorism, geopolitical conflicts, and
other uncontrollable events on leisure travel
-- There remains a risk of travel restrictions relating to new
strains or waves of COVID-19. This could adversely affect our
business in affected regions. We are also exposed to the ability of
other businesses within the travel industry to meet increased
demands as restrictions ease continues to see COVID-19 related
impacts. Staff shortages and flight cancellations negatively impact
our business.
-- The continued threat of terrorist attacks in key cities and
on aircraft in flight may reduce the appetite of the leisure
traveller to undertake trips particularly to certain geographies,
resulting in declining revenues. Geopolitical conflicts, natural
disasters or other adverse events outside of the control of the
Group may also reduce demand for or prevent the ability to travel
to affected regions.
-- People
-- The Group is dependent on its ability to attract, retain and
develop creative, committed and skilled employees in order to
achieve its strategic objectives. The Group had been feeling the
effects of the global increase in attrition related to COVID-19
("the great resignation"), and although attrition has slowed in
2022, the Group is finding it increasingly difficult to remain
competitive to attract talent, which has the potential to further
disrupt the business.
-- Data security
-- The security of the confidential business information we
generate when engaging in e-commerce and the personal data we
capture from customers and employees is essential to maintaining
consumer and travel service provider confidence in our services. As
an online platform, we are constantly exposed to cyber security
related threats in the form of internal and external attacks or
disruption on our systems or those of our third-party
suppliers.
-- Cyber security
-- The Group like other companies is susceptible to cyberattacks
which could compromise the integrity of our systems and the
security of our data. Cyberattacks by individuals, groups of
hackers and state-sponsored organisations are increasing in
frequency and sophistication and are constantly evolving. The tools
and techniques used in such attacks become ever more
sophisticated.
-- Financial risk
-- The Group's activities expose it to a variety of financial
risks; market risk (particularly exchange rates), credit risk and
liquidity risk. The Group proactively manages financial risk by
seeking to minimise potential adverse effects on its financial
performance.
-- Management and the Board regularly monitor a range of
trading, market and economic indicators in order to determine any
risk to financial performance due to macroeconomic uncertainties
and mitigating actions that are required.
-- Competition
-- The risks posed by competition where we compete for supply of
hostel inventory and customers could adversely impact our market
share and future growth of the business. Our competition may have
more resources than we do which may enable them to compete more
effectively.
-- IT platforms and technological innovation
-- Over recent years the ever-increasing pace of change of new
technology, new infrastructure and new software offerings have
changed how customers research, purchase and experience travel.
Unless we continue to stay abreast of technology innovation and
change, we risk becoming irrelevant to the modern customer. We
invest a significant amount of our product and user experience
functions.
-- Additionally, the Group has continued with the ongoing
modernisation of our underlying platform to
enable us to support faster execution across our core platform.
There is a risk that the technical debt the group has may affect
the stability of the underlying platform.
-- Third party reliance
-- We rely on hostel accommodation providers to provide us with
our inventory. Any limitations on such will directly impact our
business and results of operations. This risk has increased post
COVID-19 as inventory supply in key markets is a concern.
-- We rely on a number of key third-party providers within our
technology environment for our cloud storage and databases. Any
interruption in service from any of these providers may lead to a
loss in revenue, loss in site and app functionality, increased
input from customer services and engineer time, and ultimately if
we experience multiple failures we risk reputational and brand
damage.
-- The Group relies on payment processors and payment card
schemes to execute certain components of the payments process.
There is a risk that the Group may not maintain its relationships
with these third parties on favorable terms or that the transaction
fees imposed by these providers are increased.
-- Search engine algorithm
-- We rely significantly on practices such as Search Engine
Optimisation and Search Engine Marketing to improve our visibility
in relevant search results. Search engines frequently update and
change the logic that determines the placement and display of
results. As these algorithms become more sophisticated, we risk
being significantly behind in our marketing strategy and unable to
be competitive in the current environment. Our costs to improve or
maintain our placement in search results can increase which
directly impacts our results and margins.
-- Climate change, sustainability, and corporate social responsibility
-- Climate change, sustainability, and corporate social
responsibility continue to be areas of increased focus for the
Group and are further evolving as areas of heightened concern with
consumers and stakeholders. There is a request for more
accountability from our customers, employees, and other
stakeholders as to what the Group is doing to limit its direct and
indirect impact on climate change. The group has integrated an
analysis of the impact of climate change on the budgeting and
forecasting process of the group.
-- Regulation
-- Hostelworld's business is global and highly regulated, and is
exposed to issues such as competition, licensing of local
accommodation and experiences, language usage, web-based trading,
consumer compliance, tax, intellectual property, trademarks, data
protection and information security and commercial disputes in
multiple jurisdictions. Regulatory and legal requirements and
uncertainties around these issues could subject the Group to
business constraints, increased regulatory and compliance costs and
other complexities which may otherwise harm our business.
-- Business continuity
-- Failure in our IT systems or those on which we rely such as
third party hosted services could disrupt availability of our
booking engines and payments platforms, or availability of
administrative services at our office locations.
-- Brand and reputation
-- Hostelworld is a world leading OTA focused on the hostel
market. We rely on the strength of our brand in the market to
attract customers to our platform and to secure bookings. Consumer
trust and confidence in our brand is therefore essential to ongoing
revenue stability and growth. Negative publicity could impact brand
perception and consumer loyalty and ultimately revenue.
-- Taxation
-- Due to the global nature of our business, tax authorities in
other jurisdictions may consider that certain taxes are due in
their jurisdiction. If those tax authorities take a different view
than the Group as to the basis on which the Group is subject to
tax, it could result in the Group having to account for tax that it
currently does not collect or pay. Recent trends of diversified
employee locations in a hybrid working environment increase the
potential for new taxation obligations.
[1] The Group uses Alternative Performance Measures ('APMs')
which are non-IFRS measures to monitor the performance of its
operations and of the Group as a whole. These APMs along with their
definitions and reconciliations to IFRS measures are provided in
the APMs section on pages 27 and 28.
[2] Cash and Cash equivalents has been restated to reflect an
April 2022 IFRIC publication regarding the presentation of amounts
as non current where the funds are not available for use by the
group in the next year.
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END
IR EAXPNEELAEFA
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