REG - Hostelworld Grp PLC - Interim results 2023
10/08/2023 07:00
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RNS Number : 8628I Hostelworld Group PLC 10 August 2023
Hostelworld Group plc
("Hostelworld" or the "Group" or the "Company")
Interim Results 2023
Largest H1 revenue on record
10th August 2023: Hostelworld, a leading global Online Travel Agent (OTA)
focused on the hostel market, is pleased to announce its interim results for
the six-month period ended 30 June 2023
Strong financial delivery and strategic progress in H1 2023:
· Record first half Net GMV(2) and generated revenue(3),
of €339.5m (+57% year on year) and €51.5m (+57% year on year)
respectively
· Robust booking growth across all regions: Central America, South Asia and
southern European countries ahead of pre COVID-19 levels
· Improved marketing efficiency powered by social strategy
· Increasing operating leverage through marketing efficiency and operating
cost discipline
· Strong cash conversion driving growth in operating cashflows - Debt
refinancing completed with materially lower interest rates
Well positioned for further profitable growth:
· Strong category growth, stronger HW growth with the resumption of cross
border travel post Omicron and Social strategy driving share gains
· Continued investment in Social platform: richer profiles, messaging
capabilities and launch of Linkups (hostel hosted events)
· Highly cash generative business model, continuing to deleverage
· Reiterating FY 2023 earnings guidance of adjusted EBITDA €16.5m -
€17.0m
· Firmly on track to meet November 2022 Capital Market Day growth targets
Financial highlights: 1 (#_ftn1)
· Net GMV 2 (#_ftn2) of €339.5m (+57% year on year)
· Net Revenue of €45.8m, H1 2022 €28.0m (+64% year on year)
· Net bookings totalled 3.40m, H1 2022: 2.07m (+64% year on year)
· Net Average Booking Value ("ABV") of €15.15, H1 2022: €15.82, a 4%
decrease driven by a greater proportion of Asian destination bookings,
partially offset by continued bed price inflation
· Direct marketing costs as a percentage of revenue 3 (#_ftn3) amounted to
51%, H1 2022: 60% (-9%)
· Adjusted EBITDA of €5.1m, H1 2022: €5.2m loss
· Loss in the period of €7.5m, H1 2022: €14.3m
Balance sheet and cash flow:
· As at 30 June 2023 total cash and cash equivalents of €10.7m (31 December
2022: €19.0m) and total net debt 4 (#_ftn4) of €16.2m (31 December
2022: €21.6m)
· Completed refinancing of €30.0m legacy debt facility, replacing with a
new €20.0m facility from AIB. New facility comprises a €10.0m term loan, a
€7.5m RCF (reduced to €5.0m in July) and a €2.5m undrawn overdraft
· In July 23 the interest rate on AIB debt facility reduced from 3.75% to
3.25% over EURIBOR, €2.5m reduction in RCF balance to €5.0m
· Net asset position of €45.7m (31 December 2022: €52.2m)
Gary Morrison, Chief Executive Officer, commented:
I am delighted to report record generated revenues and improving adjusted
EBITDA margins for the half year to date, driven by the continued execution of
our Social strategy and operational cost discipline. This performance also
translated directly into strong growth in operating cashflow year on year,
which in turn enabled us to strengthen our balance sheet by refinancing our
legacy COVID-19 era debt facility at significantly lower interest rates.
In addition, I am very pleased to see the global hostelling category showing
double digit bednight growth year on year for the first half of the year, and
even stronger growth from Hostelworld with the resumption of cross border
travel post Omicron in 2022. In particular, long-haul bookings have grown 70%
year on year and "follow on" bookings after an initial flight 5 (#_ftn5) have
grown 95% year on year. By geography, Europe has recorded strong year over
year growth overall, with revenue growth outpacing net bookings growth through
continued bed price inflation. Bookings into Southern Europe and other
low-cost destinations such as Central America and South Asia have also been
exceptionally strong, exceeding pre COVID-19 levels.
During the first half we also made progress on modernising our platform to
enable us to support faster execution of our growth strategy. In particular,
we made significant progress refactoring key parts of our core platform into a
series of microservices, which enable us to access more of the native
capabilities of our cloud provider and pay for the computing resources we use
"on-demand".
Finally, I am very proud of the progress we have made on our ESG strategy, and
to see that progress recognised externally by being shortlisted for two
"Sustainability Business Impact Awards" by Chambers Ireland and reaching
Silver accreditation status by Investors in Diversity for building a flexible
and inclusive workplace.
Trading Update:
During the first six months of the year, we have seen strong year on year
growth in our business as our customers booked their hostelling trips around
the world again, driving growth in net bookings (3.4m, +64% year on year) and
net revenue (€45.8m, +64% year on year).
As the year has progressed, we have seen several factors impact our trading
economics versus 2022. In particular, ABVs 6 (#_ftn6) have contracted by -4%
year on year (H1 2023: €15.15) driven by geographical mix with a greater
proportion of Asian destination bookings, partially offset by continued bed
price inflation. Direct marketing cost as a percentage of net revenue has also
reduced versus 2022, primarily driven by our social strategy which drives new
and existing customers to use our mobile native apps. Overall, we expect
direct marketing costs as a percentage of net revenue will remain within our
guidance range of 50-55% over 2023 as we continue to optimise marketing
investments for long term growth in new customers and direct margin.
On the supply side, we estimate global hostel sales measured in bednights
increased by 14% 7 (#_ftn7) year on year, driven by modest increases in
occupancy rates and category capacity. By geography, we recorded significant
year over growth in bednights across South Asia, Oceania and the Middle East
and Africa; with Central America remaining above pre-Covid levels. Similarly,
we estimate that the bednight sales from hostels connected to our platform
also grew by 14% over the same period, driven by the addition of new hostels
to our platform throughout H1 2023. As outlined in our Capital Markets Day
presentation in November 2022, we plan to grow our market coverage 8 (#_ftn8)
over the coming years by adding more hostels to our platform in key markets
around the world.
Finally, we have seen a significant improvement in operating cash performance,
with cash generation of €10.6m in H1 2023 compared to a cash reduction of
€0.8m in H1 2022, enabled by the business's characteristic of strong cash
conversion and tight operating cost management. We further strengthened our
financial position through the voluntary early debt repayment of €10m in
April 2023 and the successful refinancing of our legacy debt facility with a
new 3-year facility, totalling €17.5m, with Allied Irish Bank plc ('AIB') in
May 2023. This new facility, with materially lower interest costs, represents
a strong endorsement of our post-pandemic performance, and consolidates the
firm foundations upon which we will drive profitable growth and shareholder
value. This has resulted in a reduction in our net debt from €21.6m as at 31
December 2022 to €16.2m as at 30 June 2023.
Outlook:
The Board remains confident in the long-term resilience of our business model
and the potential of our differentiated growth strategy and reiterating
earnings guidance of adjusted EBITDA in the range of €16.5 million to €17
million for the full year, absent any deterioration in the macro-economic
climate, the re-introduction of travel restrictions or other air travel
related disruptions.
Analyst Presentation
A presentation will be made to analysts today at 9.30am, a copy of which will
be available on our Group website: http://www.hostelworldgroup.com
(http://www.hostelworldgroup.com) . If you would like to dial into the
presentation, please contact Powerscourt on the contact details provided
below.
Webcast Link
https://stream.brrmedia.co.uk/broadcast/64c7a5d3a1eaa5d77603f6d1
(https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fstream.brrmedia.co.uk%2Fbroadcast%2F64c7a5d3a1eaa5d77603f6d1&data=05%7C01%7Cdavid.brady%40hostelworld.com%7Cc4090fa0043f476b59be08db91e3c2df%7Cd0cd9790608d443fb92b11d38e2ec1d8%7C1%7C0%7C638264179668230619%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=lY8Qg80W5E03yx9T61knyz84lXU%2B%2BElAI7Hqpio5jqQ%3D&reserved=0)
Event: Hostelworld - Interim Results
Date: Thursday, August 10th, 2023
For further information please contact:
Hostelworld Group plc
Corporate@hostelworld.com (mailto:Corporate@hostelworld.com)
Gary Morrison, Chief Executive Officer
Caroline Sherry, Chief Financial Officer
David Brady, Head of Commercial Finance
Powerscourt
hostelworld@powerscourt-group.com (mailto:hostelworld@powerscourt-group.com)
Eavan Gannon / Nick Dibden
+44 (0) 20 7250 1446
About Hostelworld Group
Hostelworld Group Plc is a ground-breaking social network powered Online
Travel Agent (OTA) focused on the hostelling category, with a clear mission to
help travellers find people to hang out with. Our mission statement is founded
on the insight that the vast majority of travellers go hostelling as a means
to meet other people, which we facilitate through a series of social features
on our platform that connect our travellers in hostels and cities based on
their booking data. To date the strategy has been extraordinarily successful,
generating significant word of mouth recommendations from our customers and
strong endorsements from our Hostel partners.
Founded in 1999, Hostelworld is a well-known trusted brand with almost 250
employees across 11 countries; hostel partners in over 180 countries; and a
strong commitment to building a better world in all that we do. In particular,
our focus in the last few years has been on improving the sustainability of
the hostelling industry, through our membership of the Global Sustainable
Tourism Council (GSTC); our active involvement in the Global Tourism Plastics
Initiative (GTPI); our partnerships with Bureau Veritas to establish emissions
benchmarks for the hostelling industry; and our recent partnership with South
Pole to be a Climate Neutral Group in 2021 and 2022.
Cautionary statements
This announcement contains forward-looking statements. These statements relate
to the future prospects, developments and business strategies of Hostelworld.
Forward-looking statements are identified by the use of such terms as
"believe", "could", "envisage", "estimate", "potential", "intend", "may",
"plan", "will" or variations or similar expressions, or the negative thereof.
Any forward-looking statements contained in this announcement are based on
current expectations and are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed or implied by
those statements. If one or more of these risks or uncertainties materialize,
or if underlying assumptions prove incorrect, Hostelworld's actual results may
vary materially from those expected, estimated or projected. Any
forward-looking statements speak only as at the date of this announcement.
Except as required by law, Hostelworld undertakes no obligation to publicly
release any update or revisions to any forward-looking statements contained in
this announcement to reflect any change in events, conditions or circumstances
on which any such statements are based after the time they are made.
The information contained in this Announcement is subject to change without
notice and except as required by applicable law or regulation (including to
meet the requirements of the Listing Rules, the Euronext Dublin Listing Rules,
MAR, the Financial Services and Markets Act 2000, Euronext Dublin and/or the
Central Bank of Ireland), the Company expressly disclaims any obligation or
undertaking to publish any updates or revisions to any forward-looking
statements contained in this Announcement to reflect any changes in the
Company's expectations with regard thereto or any changes in events,
conditions or circumstances on which any such statements are based. Statements
contained in this Announcement regarding past trends or activities should not
be taken as representation that such trends or activities will continue in the
future. You should not place undue reliance on forward-looking statements,
which speak only as of the date of this Announcement.
No statement in this Announcement is intended to be a profit forecast and no
statement in this Announcement should be interpreted to mean that earnings per
share of the Company for the current or future years would necessarily match
or exceed the historical published earnings per share of the Company.
Interim Management Report
To the members of Hostelworld Group plc
Cautionary statement
This Interim Management Report (IMR) has been prepared to provide additional
information to shareholders to assess the Group's strategies and the potential
for those strategies to succeed. The IMR should not be relied on by any
other party or for any other purpose.
The IMR contains certain forward-looking statements. These statements are made
by the directors in good faith based on the information available to them up
to the time of their approval of this report but such statements should be
treated with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such forward-looking
information.
This interim management report has been prepared for the Group as a whole and
therefore gives greater emphasis to those matters which are significant to
Hostelworld Group plc and its subsidiary undertakings when viewed as a whole.
Chief Executive's Review
Throughout the first half of the year, we have continued to execute our growth
strategy as outlined in our Capital Markets Day in November 2022. This
strategy, together with a continued focus on costs has delivered record
generated revenues and improved EBITDA margins. I am pleased to report we
continued to make progress modernising our platform and advancing our
sustainability and DE&I strategies, and particularly gratified to see
these efforts recognised externally through accreditations and sustainability
focused award nominations.
Executing our growth strategy
During the first six months of the year, we continued to execute our
differentiated growth strategy which focuses on helping our customers find
people to hang out with through a series of social features embedded within
our mobile native apps. This growth strategy was developed in 2021 and
launched in Q2 2022, based on the insight that the vast majority of
travellers go hostelling as a means to meet other people. To date the strategy
has been extraordinarily successful, generating significant word of mouth
recommendations from our customers, strong endorsements from our hostel
partners and significant growth in bookings via our mobile native Apps
relative to other higher cost channels.
Over the first half of this year, we have continued to invest in our social
platform by enabling richer user profiles which enable social members to
upload their own profile photo, add more details on their travel related
interests, where they have lived, and languages spoken. In parallel, we have
also added more messaging functionality to our social platform, similar to
what users would see with more mainstream instant messaging products.
Collectively these enhancements have generated significant increases in
customer engagement, with the volume of messages being sent over our platform
increasing 2.4x in July relative to January this year.
In parallel we also launched Hostel hosted LinkUps in London and Lisbon in
February this year. This is a completely unique product in the travel
landscape, which enables hostels to promote their own events ('LinkUps') to
all of our social members who are staying in the destination via our mobile
native apps. For our social member customers, this provides them with an even
greater range of things to do when travelling to new destinations, and even
more opportunities to meet people to hang out with while travelling.
Since launching the product in February, we have expanded the range of cities
month over month with a full global launch in July. So far, the product has
exceeded all our expectations, with 54% of social members with a
booking now being able to see at least one LinkUp during their stay dates.
Over the balance of the year, we will continue to increase LinkUps inventory
and add more new features to this product.
Investing in our platform
During 2022, we migrated our entire technology stack to the cloud in the first
half of the year, the first major milestone of our platform modernization
program and exiting our on-premises data centres. During the second half of
2022 and into the first half of 2023, we have been upgrading our key legacy
backend applications to make them "cloud native".
Over the medium term, migrating from a cloud hosted stack to a series of cloud
native applications will deliver many advantages, such as application level
"on demand" scaling, a more flexible microservices based architecture, and
more opportunities to use off the shelf services from our cloud services
provider. This will include services such as artificial intelligence and
machine learning optimisation engines, which are now powering some of our key
services. Collectively, these technology benefits will flow through into
faster execution of our growth strategy and reduced hosting costs.
Progressing our ESG agenda
In parallel with helping millions of travellers in our category Meet The
World®, we are also committed to building a better world in everything we
do.
We have made significant progress on the sustainability framework we developed
in partnership with Bureau Veritas. This purpose-built framework enables
hostels to assess, compare and communicate sustainability achievements to
customers and other key stakeholders. The framework directly aligns with the
Global Sustainability Tourism Council's (GSTC) sustainable tourism criteria
focussed on four pillars: Sustainability Management, Socio-Economic, Cultural
Impact and Environmental Impact. By specifically tailoring these pillars for
independent hostels, we can account for the attributes unique to the hostel
category, as compared to other accommodation types. Each criterion in our
'Staircase to Sustainability' framework aligns to one of the 17 UN
Sustainability Development Goals.
Details of the pillars have been published and communicated to our hostel
partners, through our dedicated sustainability website and via a monthly B2B
sustainability newsletter. The framework will be showcased at our upcoming
hostel conferences in Bogota and Copenhagen, ahead of an official Q4 2023
launch. Early 2024 will see us publishing compliance to these criteria on our
booking site, such that our customers can make more informed decisions as to
the sustainability of the hostel they are booking.
Outside of Hostelworld events, we continued to promote the inherent
sustainability of hostels this year including participating in a first of its
kind hostel focussed panel at GSTC's flagship event in May. We are also about
to commence work on a second edition of last year's hostel focussed emission
report with Bureau Veritas. Due in Q4, this report will further build on the
findings from the 2022 edition which showed that hostels produce 75% less
emissions than a relevant subset of their hotel counterparts. H1 2023 has very
much focussed on the research and content creation required to promote the
framework details to our hostel partners, well ahead of launch date. This
pre-launch education and advocacy work is critical to the success of the
framework once live. The framework has been shortlisted for a Sustainable
Business Impact Award by Chambers Ireland. We plan to promote compliance with
these criteria on our booking site, such that our customers can make more
informed decisions in selecting a hostel.
Hostelworld is a Climate Neutral company, a status that is independently
verified and awarded by emissions reduction specialists South Pole each year.
Our ultimate goal however is to achieve Net Zero status, by 2040, absorbing
more emissions than we emit to help limit global warming. We will do this
through reporting on our Green House Gas emissions, eliminating carbon
emissions in line with the 2015 Paris Agreement and by offsetting any
remaining emissions through socially responsible projects. To this end, we are
very proud to be a signatory of Global Optimism & Amazon's Climate Pledge
initiative. The Climate Pledge brings the world's top companies together to
accelerate joint action, cross-sector collaboration, and responsible change.
Climate-conscious travellers want to know how to travel sustainably, and
ensure they leave a positive mark on the communities they visit. Through our
online series 'Sustainability Stories by Hostelworld' we are showcasing the
inspiring work hostels are doing for their local communities and environment,
offering hostellers the opportunity to volunteer, so they too can make a real
difference. Hostelworld is committed to providing resources for travellers to
educate themselves in ways to travel responsibly. Sustainability focussed
'link ups' are now available on our app, and our customers will soon have the
option to offset the carbon of their hostel stay on our platform should they
wish to do so.
Inclusivity is at the core of hostelling and of the Hostelworld culture. We
were very proud to have recently been awarded the Silver Accreditation by the
Irish Centre for Diversity, building on the Bronze Accreditation we received
in 2022. This accreditation was awarded based on measuring people's sense of
fairness, belonging and equity, collated through a detailed survey. Our
diverse and inclusive culture has also been shortlisted for a Sustainable
Business Impact Award by Chambers Ireland.
Summary
Overall, I am very pleased with the work we have completed and the progress we
have made in the first six months of the year. I would like to take this
opportunity to thank the Hostelworld team for their commitment to the success
of our company, and to thank our shareholders for their continued support.
As the year progresses, the Board will continue to evaluate internal and
external opportunities that will deliver value for shareholders. In
particular, the Board will evaluate opportunities to invest in our
differentiated growth strategy which helps new and existing customers find
people to hang out with while hostelling, and adds, to our platform, a broader
catalogue of group focused travel products beyond hostel accommodation.
Gary Morrison
Chief Executive
10 August 2023
Interim Management Report
Financial Review
Highlights
· Group net bookings increase of 64% (H1 2022: 562% increase)
· Net average booking value of €15.15 (-4% year on year) driven by a
greater proportion of Asian destination bookings, partially offset by
continued bed price inflation
· Net revenue of €45.8m (H1 2022: €28.0m), an increase of 64%
· Marketing costs per net booking of €7.78, a decrease of €1.68 compared
to H1 2022 cost €9.46
· Total operating expenses of €47.6m (H1 2022: €40.5m)
· Operating loss of €1.7m (H1 2022: €12.6m loss)
· Adjusted EBITDA of €5.1m (H1 2022: €5.2m loss)
· Loss for the six-month period to 30 June 2023 of €7.5m (H1 2022:
€14.3m)
· Adjusted loss per share 1.9 € cent (H1 2022: adjusted loss per share 7.8
€ cent)
· Basic loss per share of 6.23 € cent (H1 2022: basic loss per share 12.19
€ cent)
· Total cash and cash equivalents as at 30 June 2023 of €10.7m (31 December
2022: €19.0m)
· Net asset position as at 30 June 2023 of €45.7m (31 December 2022:
€52.2m)
Revenue and operating loss
The Group's net bookings totalled 3.4m, an increase of 64% compared to H1 2022
(H1 2022: 2.1m). Net revenue for the period was €45.8m (H1 2022: €28.0m),
an increase of 64% driven by strong performances in key European, Asian and
Oceania markets.
At 30 June 2023, the Group held €8.6m of customer deposits relating to
bookings made under the free cancellation policy (31 December 2022: €3.0m).
This balance will largely unwind in H2 2023.
Operating expenses totalled €47.6m (H1 2022: €40.5m). €7.1m increase
year on year driven by an increase in direct marketing costs of €6.9m and a
€0.5m increase in credit card fees, directly related to revenue increases.
Direct marketing costs as a percentage of revenue was 51% (H1 2022: 60%). This
was due to a combination of normal travel patterns resuming in primary markets
and the app-centric social strategy driving marketing efficiencies. Credit
card fees totalled €1.5m (H1 2022: €1.0m).
The group incurred a foreign exchange gain of €0.1m (H1 2022: loss €0.5m).
Current year gain arose with the weakening of the US dollar against the Euro.
Group operating loss amounted to €1.7m (H1 2022: €12.6m). Adjusted EBITDA
€5.1m, an increase of €10.3m from an EBITDA loss of €5.2m in H1 2022.
Year on year improvement driven by strong booking recovery.
Earnings per share
Basic and diluted loss per share for the Group was 6.23 € cent (H1 2022
basic loss per share: 12.19 € cent).
Adjusted loss per share was 1.9 € cent per share (H1 2022 loss per share:
7.8 € cent per share). On 20 February 2023 the company issued 1,027,655
shares to satisfy restricted share awards granted by the Company at a value of
€0.01 per share. On 29 March 2023 3,315,153 shares were issued to HPS on
issuance of warrants. On 16 May 2023 the company issued 1,645,994 shares to
satisfy long term incentive plan awards. The weighted average number of shares
in the period was 120.4m (H1 2022: 117.2m) and the total number of shares at
the balance sheet date was 123.5m (H1 2022: 117.5m).
Net debt and financing
At the balance sheet date cash and cash equivalents totalled €10.7m (31
December 2022: €19.0m). The Group has borrowings of €17.4m (31 December
2022: €31.1m).
In May 2023 the Group completed a refinance of its legacy debt facility, which
was drawn down in February 2021 during COVID-19 trading. A new 3-year facility
was signed with Allied Irish Banks plc ('AIB'). This facility is comprised of
a €10.0m term loan, a €7.5m revolving credit facility ('RCF') and an
undrawn €2.5m overdraft. In July 2023 the RCF reduced to €5.0m.
Altogether €17.4m was drawn down from AIB, net of arrangement fee, and
utilised to repay the former debt facility held with HPS. Balance of repayment
to HPS comprised of the Group's cash reserves.
The AIB term loan and RCF each had an initial interest rate payable of 3.75%
over EURIBOR. In July 2023 this reduced to 3.25%, as the ratio of Net Debt to
adjusted EBITDA was less than 2 times as at 30 June 2023. The interest rate
will reduce to 2.65% over EURIBOR where the ratio of Net Debt to adjusted
EBITDA is less than 1 times.
The former debt facility was a €30.0m 5-year term loan facility with HPS. An
amount of €28.8m, net of original issue discount, was drawn down on 23
February 2021. In April 2023 the Group made a voluntary early repayment
of €10.0m of its €30.0m term loan facility with HPS, prior to its full
prepayment in May 2023. The HPS debt facility bore interest at a margin of 9%
per annum over EURIBOR. In total across April and May repayments totalled
€34.1m, comprising of €30.0m principal and €4.1m PIK.
Finance costs
The Group incurred €1.9m of finance costs in H1 2023 (H1 2022: €2.1m).
Decrease year on year is due to a €10.0m repayment of the HPS facility in
April 2023 and final repayment in May 2023.
Exceptional items
Exceptional items €3.6m (H1 2022: €0.5m) are identified due to their
nature or materiality to help the reader form a better view of overall and
adjusted trading. Current year exceptional items comprise of costs incurred in
exiting the HPS facility, including €0.7m of an early repayment penalty
interest, €2.8m accelerated interest costs which relate to transaction costs
capitalised on drawdown of HPS facility in February 2021, which were expected
to be amortised over a 5-year period to 2026 and €0.1m of transaction costs.
Prior year exceptional items related to a final settlement amount paid to the
founder of Counter App Limited, in respect of their shareholders agreement and
other contractual relationships with the group and associated legal costs.
Taxation
The Group corporation tax charge for the six-month period is forecast at
€0.1m (H1 2022: €0.04m) and primarily relates to our international
operations where tax losses from our Irish operations cannot be utilised. The
Group has taken the forecasted full year earnings or loss for each group
entity to calculate the effective tax rate for the six-month period ending to
30 June 2023.
The deferred tax amortisation charge for the six-month period totalled €0.3m
(H1 2022: credit of €0.4m). Prior year deferred tax credit relating to a
creation of a deferred tax asset for capital allowances not utilised and
available for future offset. Deferred tax assets are recognised to the extent
that it is probable that future taxable profits will be available against
which any unused tax losses and unused tax credits can be utilised.
The Group has availed of the Irish Revenue tax warehousing scheme and deferred
payment of all Irish employer taxes from February 2021 to March 2022. Total
amount warehoused at 30 June 2023 amounted to €9.5m (31 December 2022:
€9.4m) as the Group has incurred an interest charge of 3% on the outstanding
warehoused liability debt since 01 May 2023. The Group has agreed with the
Irish Revenue Commissioners to not repay any balance due on the warehoused
facility until April 2024. The Group continues to monitor and comply with the
appropriate Revenue guidelines applicable to this scheme.
Share based payment
The share-based payment expense of €0.9m (H1 2022: €1.2m) reflects the
share-based payment charge arising on the issuance of options in accordance
with the Group's Restricted Share Award, Long-Term Incentive Plan ("LTIP") and
Save as you Earn ("SAYE") plan.
On 20 February 2023 the company issued 1,027,655 shares to satisfy restricted
share awards granted by the Company at a value €0.01 per share in relation
to RSU 2021 which vested in equal tranches in February 2022 and February 2023,
and on 16 May 2023 the company issued 1,645,994 shares to satisfy long term
incentive plan awards in relation to LTIP 2020 which vested at 75%.
Dividend
The Board does not expect to pay a cash dividend under its current policy in
respect of the 2023 financial year. Any payment of cash dividends will be
subject to the Group generating adjusted profit after tax, the Group's cash
position, any restrictions in the Group's banking facilities and subject to
compliance with Companies Act 2006 requirements regarding ensuring sufficiency
of distributable reserves at the time of paying the dividend.
Related parties
Related party transactions are disclosed in note 15 to the condensed group
financial statements.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which could have a
material impact on future Group performance and could cause actual results to
differ materially from expected and historical results. The Board considers
the risks and uncertainties described in detail in the Annual Report and
Financial Statements for the year ended 31 December 2022, published on 3 April
2023, to remain applicable. Any changes to this evaluation and a description
of the risks and uncertainties are set out within the Appendix to this
document on pages 29 to 32.
Caroline Sherry
Chief Financial Officer
10 August 2023
RESPONSIBILITY STATEMENT
Each of the Directors of Hostelworld Group plc (as listed on pages 90 and 91
of the Annual Report and Financial Statements for the year ended 31 December
2022, published on 3 April 2023) confirm that, to the best of each person's
knowledge and belief:
1. The condensed set of Group financial statements has been prepared
in accordance with United Kingdom adopted International Accounting Standard 34
'Interim Financial Reporting';
2. The interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and uncertainties for the
remaining six months of the year); and
3. The interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board
Gary Morrison
Caroline Sherry
Chief Executive Officer
Chief Financial Officer
10 August 2023
10 August 2023
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2023
Six months ended Six months ended
30 June 2023 30 June 2023 Six months ended
Pre Exceptional Exceptional 30 June 2023 Six months ended Year
(Note 5) Total 30 June 2022* ended 31
December 2022*
€'000 €'000 €'000 €'000 €'000
Notes (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
Revenue 3 45,837 - 45,837 27,955 69,690
Operating expenses before impairment 4 (47,521) (79) (47,600) (40,456) (83,113)
Share of result of associate 88 - 88 4 (206)
Reversal of / (impairment) of trade receivables 7 - 7 (88) 18
Operating loss (1,589) (79) (1,668) (12,585) (13,611)
Finance costs (1,901) (3,514) (5,415) (2,079) (4,301)
Loss before taxation (3,490) (3,593) (7,083) (14,664) (17,912)
Taxation 6 & 10 (413) - (413) 378 649
Loss for the period attributed to the equity owners of the parent company
(3,903) (3,593) (7,496) (14,286) (17,263)
Basic and diluted loss per share (€ cent) 7 (6.23) (12.19) (14.71)
*Exceptional Costs for the period ended 30 June 2022 (€470k) and year ended
31 December 2022 (€835k) comprised of items included in operating expenses.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2023
Six months ended Six months ended Year
30 June 2023 30 June 2022 ended 31
December 2022
€'000 €'000 €'000
(Unaudited) (Unaudited) (Audited)
Loss for the period (7,496) (14,286) (17,263)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (25) 10 (11)
Total comprehensive loss for the period attributable to equity owners of the (7,521) (14,276) (17,274)
parent company
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
Six months ended Six months ended Year
30 June 2023 30 June 2022 ended 31
December 2022
€'000 €'000 €'000
Notes (Unaudited) (Unaudited) (Audited)
Non-current assets
Intangible assets 8 69,457 76,411 73,358
Property, plant and equipment 9 1,047 958 735
Deferred tax assets 10 8,861 8,767 9,174
Investment in associate 1,068 1,190 980
Cash and cash equivalents 750 750 750
81,183 88,076 84,997
Current assets
Trade and other receivables 11 4,515 cap3,948 3,246
Cash and cash equivalents 9,947 22,580 18,212
Corporation tax 1 15 22
14,463 26,543 21,480
Total assets 95,646 114,619 106,477
Issued capital and reserves attributable to equity owners of the parent
Share capital 12 1,235 1,175 1,175
Share premium 12 14,328 14,328 14,328
Other reserves 12 4,235 6,273 6,432
Retained earnings 25,885 32,251 30,308
Total equity attributable to equity holders of the parent company 45,683 54,027 52,243
Non-current liabilities
Lease liabilities - 8 -
Trade and other payables 13 6,833 9,436 9,438
Borrowings 14 9,870 29,655 30,869
16,703 39,099 40,307
Current liabilities
Trade and other payables 13 24,579 20,380 12,863
Borrowings 14 7,522 184 244
Lease liabilities 826 710 547
Corporation tax 333 219 273
33,260 21,493 13,927
Total liabilities 49,963 60,592 54,234
Total equity and liabilities 95,646 114,619 106,477
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2023
Share capital Share premium Retained earnings Other reserves Total
Notes €'000 €'000 €'000 €'000 €'000
As at 31 December 2021 (audited) 1,163 14,328 45,140 6,475 67,106
Total comprehensive loss for the period - - (14,286) 10 (14,276)
12
Issue of shares 12 12 - - - 12
Credit to equity for equity settled share-based payments - - - 1,185 1,185
Transfer on exercise, vesting or expiry of share-based payments - - 1,397 (1,397) -
As at 30 June 2022 (unaudited) 1,175 14,328 32,251 6,273 54,027
Total comprehensive loss for the period - - (2,977) (21) (2,998)
12
Issue of shares 12 - - - - -
Credit to equity for equity settled share-based payments - - - 1,214 1,214
Transfer on exercise, vesting or expiry of share-based payments - - 1,034 (1,034) -
As at 31 December 2022 (audited) 1,175 14,328 30,308 6,432 52,243
Total comprehensive loss for the period - - (7,496) (25) (7,521)
12
Issue of shares 12 60 - - - 60
Credit to equity for equity settled share-based payments - - - 901 901
Transfer on exercise, vesting or expiry of warrants - - 3,073 (3,073) -
12
As at 30 June 2023 (unaudited) 1,235 14,328 25,885 4,235 45,683
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2023
Six months Six months Year
ended ended ended 31 December 2022
Notes 30 June 2023 30 June 2022
€'000 €'000 €'000
(Unaudited) (Unaudited) (Audited)
Cash flows from operating activities
Loss before taxation (7,083) (14,664) (17,912)
Amortisation and depreciation 4 5,971 5,733 11,597
Share of result of associate (88) (4) 206
Net profit on disposal of leases 4 - - (1)
Net loss on disposal of property, plant and equipment 4 - - 1
Finance costs 1,901 2,079 4,301
Finance costs (exceptional) 5 3,514 - -
Employee equity settled share-based payment expense 939 1,195 2,396
Changes in working capital items:
Increase in trade and other payables 9,111 8,974 1,457
Increase in trade and other receivables (1,269) (1,946) (1,244)
Cash generated from operations 12,996 1,367 801
Interest paid (2,210) (449) (180)
Income tax paid (19) (78) (1,370)
Net cash generated from / (used in) operating activities 10,767 840 (749)
Cash flows from investing activities
Acquisition/development of intangible assets 8 (1,544) (2,327) (4,597)
Purchases of property, plant and equipment 9 (61) (148) (196)
Net cash used in investing activities (1,605) (2,475) (4,793)
Cash flows from financing activities
Proceeds received on issue of warrants 33 - -
Debt costs capitalised 14 (170) - -
Proceeds from borrowings 14 17,369 - -
Repayment of borrowings 14 (34,066) - -
Repayments of obligations under lease liabilities (568) (312) (752)
Net cash used in from financing activities (17,402) (312) (752)
Net decrease in cash and cash equivalents (8,240) (1,947) (6,294)
Cash and cash equivalents at the beginning of the period 18,962 25,267 25,267
Effect of foreign exchange rate changes (25) 10 (11)
Cash and cash equivalents at the end of the period 10,697 23,330 18,962
NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Hostelworld Group plc, hereinafter "the Company", is a public limited company
incorporated in the United Kingdom on the 9 October 2015.
The registered office of the Company is One Chamberlain Square, Birmingham, B3
3AX.
The condensed Group financial statements of the Company for the six months
ended 30 June 2023 comprise the Company and its subsidiaries (together
referred to as "the Group"). The condensed Group financial statements for
the period ended 30 June 2023 have neither been audited or reviewed.
The information for the year ended 31 December 2022 does not constitute
statutory accounts as defined in section 434 of the Companies Act 2006. A copy
of the statutory accounts for that year has been delivered to the Registrar of
Companies. The auditors reported on those accounts and their report was
unqualified, did not draw attention to any matters by way of emphasis and did
not contain a statement under section 498(2) or (3) of the Companies Act 2006.
These condensed Group financial statements were authorised for issue by the
Board of Directors of Hostelworld Group plc on 09 August 2023.
2. ACCOUNTING POLICIES
Basis of preparation
The annual financial statements of the Group will be prepared in accordance
with United Kingdom adopted International Financial Reporting Standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with United Kingdom adopted
International Accounting Standard 34 'Interim Financial Reporting'.
Going concern
The directors, after making enquiries, have a reasonable expectation that the
Group has adequate resources to continue operating as a going concern for the
foreseeable future.
Across H1 2023 we have seen strong month on month growth in new customers, new
bookings and an increase in net revenue as the Group recovered from COVID-19.
Revenue for H1 2023 totalled €45.8m (H1 2022: €28.0m). At 30 June 2023 the
Group was in a net asset position of €45.7m (31 December 2022: €52.2m) and
a net debt position of €16.2m (31 December 2022: €21.6m).
In May 2023, the Group refinanced its 5 year €30.0m legacy term loan
facility entered into during COVID-19 with HPS Investment Partners LLC or
subsidiaries or affiliates thereof ('HPS'). On 23 February 2021 an amount of
€28.8m was drawn down on the facility. In May 2023 the Group fully
refinanced this debt facility following agreeing a new 3‐year facility with
Allied Irish Banks plc ('AIB'). This new facility comprised a €10.0m term
loan, a €7.5m revolving credit facility ('RCF') and an undrawn €2.5m
overdraft. The term loan and RCF each have an initial interest rate payable of
3.75% over EURIBOR, reducing to 3.25% where the ratio of Net Debt to adjusted
EBITDA is less than 2 and, 2.65% where the ratio is less than 1. This new
facility, will materially lower interest costs, significantly strengthen the
Group's balance sheet and consolidates the firm foundations upon which the
Group will drive profitable growth and create shareholder value.
Having considered the Group's cash flow forecasts, current and anticipated
trading volumes, together with current and anticipated levels of cash, debt
and the availability of committed borrowing facilities, the directors are
satisfied that the Group has sufficient resources to continue in operation for
the foreseeable future, a period of not less than 12 months from the date of
signing of this report, and accordingly, they continue to adopt the going
concern basis in preparing the condensed Group financial statements.
Changes in accounting policies
Since the last Annual Report there are a number of amendments to existing
accounting standards that have been adopted. These did not have a material
impact on the condensed Group financial statements. The same accounting
policies and methods of computation are followed compared with the most recent
annual Group financial statements.
Key judgements and sources of estimation uncertainty
In preparing these condensed Group financial statements, the directors have
made judgements in applying the Group's accounting policies and there are key
sources of estimation uncertainty which affect the application of accounting
policies and the reported amounts of assets and liabilities, income and
expense. Actual results may differ from these estimates. In preparing the
condensed Group financial statements, the significant judgements made by
management in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those applied to the consolidated
financial statements for the year ended 31 December 2022. The Annual Report
was published on 3 April 2023.
3. REVENUE & SEGMENTAL ANALYSIS
The Group is managed as a single business unit which provides software and
data processing services that facilitate hostel, hotel and other accommodation
bookings worldwide, including ancillary online advertising revenue.
The directors determine, and present operating segments based on the
information that is provided internally to the Chief Executive Officer, who is
the Company's Chief Operating Decision Maker ("CODM"). When making resource
allocation decisions, the CODM evaluates booking numbers and average booking
value. The objective in making resource allocation decisions is to maximise
consolidated financial results. The CODM assesses the performance of the
business based on the consolidated adjusted loss after tax of the Group for
the period. This measure excludes the effects of certain income and expense
items, which are unusual by virtue of their size and incidence, in the context
of the Group's ongoing core operations, such as the impairment of intangible
assets and exceptional items of expenditure.
All revenue is derived wholly from external customers and is generated from a
large number of customers, none of whom is individually significant. The
Group's major revenue-generating asset class comprises its software and data
processing services and is directly attributable to its reportable segment
operations. In addition, as the Group is managed as a single business unit,
all other assets and liabilities have been allocated to the Group's single
reportable segment. There have been no changes to the basis of segmentation or
the measurement basis for the segment profit or loss.
Reportable segment information is presented as follows:
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
€'000 €'000 €'000
(Unaudited) (Unaudited) (Audited)
Europe 26,840 18,665 45,936
Americas 8,957 7,513 15,719
Asia, Africa and Oceania 10,040 1,777 8,035
Total revenue 45,837 27,955 69,690
For the six-month period ended 30 June 2023, an amount of €5,613k was
deferred to the balance sheet (30 June 2022: €5,429k).
Disaggregation of revenue is presented as follows:
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
€'000 €'000 €'000
(Unaudited) (Unaudited) (Audited)
Technology and data processing fees 45,362 27,872 69,363
Ancillary services and advertising revenue 475 83 327
Total revenue 45,837 27,955 69,690
In the six months ended 30 June 2023, the Group generated 99% (30 June 2022:
100%) of its revenues from the technology and data processing fees that it
charged to accommodation providers.
4. OPERATING EXPENSES EXCLUDING IMPAIRMENT
Loss for the period has been arrived at after charging/ (crediting) the
following operating costs:
Six months ended Six months ended Year ended 31 December 2022
30 June 2023 30 June 2022
€'000 €'000 €'000
(Unaudited) (Unaudited) (Audited)
Marketing expenses 26,826 20,050 42,233
Staff costs 9,739 8,703 18,078
Credit card processing fees 1,452 918 2,047
Loss on disposal of property, plant & equipment - - 1
Profit on disposal of lease liability - - (1)
Exceptional items 79 470 835
Foreign exchange (gain)/ loss (106) 519 714
Other administrative costs 3,765 4,063 7,710
Total administrative expenses 41,755 34,723 71,617
Depreciation of property, plant and equipment 526 428 968
Amortisation of intangible fixed assets 5,445 5,305 10,629
Amortisation of R&D tax credit (126) - (101)
Total operating expenses excluding impairment 47,600 40,456 83,113
Total administration expenses increased by €7,032k to €41,755k (30 June
2022: €34,723k), predominantly due to an increase in direct marketing costs
of €6,837k to €26,456k (30 June 2022: €19,619k), as revenue increased.
Included in staff costs in the prior year are income related to government
assistance totalling €376k for a subsidy received under the Employment Wage
Subsidy Scheme in Ireland, no relief has been received in 2023.
Included within administration expenses in the current period is a total
credit of €62k (H1 2022: €nil) in relation to an R&D tax credit
claimed in respect of projects completed in 2022.
5. EXCEPTIONAL ITEMS
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
€'000 €'000 €'000
(Unaudited) (Unaudited) (Audited)
Litigation settlements - 470 519
Restructuring costs 3,593 - 316
Total exceptional items 3,593 470 835
The exceptional items for the six months period amounted to €3,593k (30 June
2022: €470k). Current year exceptional items comprise of costs incurred in
exiting the HPS facility, including €687k of an early repayment penalty
interest, €2,827k accelerated interest costs which relate to transaction
costs capitalised on drawdown of HPS facility in February 2021, which were
expected to be amortised over a 5-year period to 2026 and €79k of
transaction costs which do not meet the criteria for capitalisation. In the
prior year, exceptional items relate to a final settlement amount paid to the
founder of Counter App Limited, on their exit from the company and associated
legal costs.
6. TAXATION
The corporation tax charge for the six-month period is forecast at €100k (30
June 2022: €37k). 2023 and 2022 charge relate primarily to our overseas
operations where tax losses from our Irish operations cannot be utilised.
Taxation charge represents the best estimate of the average annual effective
tax rate expected for the full year applied to the pre-tax profit or loss of
each group entity during the six-month period. In calculating the expected
tax rate, the Group has taken the forecasted full year 2023 earnings or loss
of each group entity.
7. LOSS PER SHARE
Basic loss per share is computed by dividing the net loss for the period
available to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the period:
Six months Six months Year
ended ended ended 31
30 June 2022 30 June 2022 December 2022
(Unaudited) (Unaudited) (Audited)
Weighted average number of shares in issue ('000s) 120,395 117,165 117,338
Loss for the period (€'000s) (7,496) (14,286) (17,263)
Basic and diluted loss per share (€ cent) (6.23) (12.19) (14.71)
On 20 February 2023 the company issued 1,027,655 shares to satisfy restricted
share awards granted by the Company at a value €0.01 per share, and on 16
May 2023 the company issued 1,645,994 shares to satisfy long term incentive
plan awards.
In connection with the incumbent HPS facility set out in note 14, Hostelworld
agreed to issue warrants over 3,315,153 ordinary shares of €0.01 each in the
capital of Hostelworld (equivalent to 2.85% of Hostelworld's current issued
share capital at the time of issue of the warrants) to HPS. The warrants could
be exercised at any time during the term of the loan and for a twelve-month
period following its scheduled termination at an exercise price of €0.01 per
ordinary share. Shares issued will be the same class and carry the same rights
as existing shares. On 29 March 2023 3,315,153 shares were issued to HPS on
issuance of warrants.
The weighted average number of shares in the period was 120.4m (H1 2022:
117.2m) and the total number of shares at the balance sheet date was 123.5m
(H1 2022: 117.5m).
Diluted loss per share is computed by adjusting the weighted average number of
ordinary shares in issue to assume conversion of all potential dilutive
ordinary shares. The issue of warrants and share options and share awards
(note 12) are the Company's only potential dilutive ordinary shares. Ordinary
shares potentially issuable from share-based payment arrangements and warrants
are anti-dilutive due to the loss in the financial period meaning there is no
difference between basic and diluted earnings per share.
8. INTANGIBLE ASSETS
Additions during the period comprised of capitalised development costs of
€1,520k (30 June 2022: €2,256k), software additions of €24k (30 June
2022: Nil) and an acquisition of a domain name of €Nil (30 June 2022:
€71k). There were no disposals. Offsetting additions is a total
amortisation charge of €5,445k for the period ended 30 June 2023 (30 June
2022: €5,305k).
9. PROPERTY, PLANT AND EQUIPMENT
The Group recognised additions during the six months ended 30 June 2023
totalling €61k (30 June 2022: €148k) for computer equipment and €40k (30
June 2022: €944k) for right-of-use lease additions. In addition, the Group
recognised an increase of €737k in the carrying value of the right-of-use
lease assets upon the modification of an existing lease pertaining to the
Group's Dublin office space. There has been no disposal of assets during the
period (30 June 2022: €Nil). Total depreciation charge is €526k for the
period ended 30 June 2023 (30 June 2022: €428k).
10. DEFERRED TAXATION
30 June 30 June 31 December 2022
2023 2022
€'000 €'000 €'000
(Unaudited) (Unaudited) (Audited)
Opening balance 9,174 8,352 8,352
(Cost) / Credit to the consolidated income statement (313) 415 822
8,861 8,767 9,174
The deferred tax amortisation cost for the six-month period totalled €313k
(30 June 2022: credit of €415k). Prior year credit relates to a deferred tax
asset created for capital allowances not utilised and available for future
offset.
At 30 June 2023 the carrying value of deferred tax assets amounted to
€8,861k (31 December 2022: €9,174k). Deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available in
future periods. Recognition of deferred tax assets is reliant on detailed
forecast information regarding the future performance of business. The Group
does not have any binding fixed term contracts in place which guarantee
profitability. The Group has been loss making since 2020 as a direct
consequence of COVID-19. The Group is budgeted to return to a profit before
tax driven by a recovery to normal trading, which forms the basis of the
recoverability of the deferred tax asset. The recognition and recoverability
of the deferred tax asset is based on the Group's ability to generate
sufficient taxable profits in future financial years. As part of our
recoverability analysis, the Group has performed a sensitivity analysis on
taxable profits growth over the next five years. The Group's forecasted
taxable profits would have to decline by over 10% over the next five years
before there is a risk that the deferred tax asset is not fully recovered in
that period.
11. TRADE AND OTHER RECEIVABLES
30 June 30 June 31 December 2022
2023 2022
€'000 €'000 €'000
(Unaudited) (Unaudited) (Audited)
Amounts falling due within one year
Trade receivables 1,191 719 611
Prepayments and accrued income 922 773 1,265
Value added tax 2,402 2,456 1,370
4,515 3,948 3,246
12. SHARE CAPITAL
No of shares of €0.01 each (thousands) Share capital €'000 Share premium €'000 Total €'000
At 31 December 2022 117,511 1,175 14,328 15,503
Share issue - Restricted share award, 20 February 2023 1,028 10 - 10
Warrant issue to HPS, 29 March 2023 3,315 33 - 33
Share issue - Long term incentive plan, 16 May 2023 1,646 17 - 17
At 30 June 2023 123,500 1,235 14,328 15,563
The Group has one class of ordinary shares which carry no right to fixed
income. The share capital of the Group is represented by the share capital of
the parent company, Hostelworld Group plc. All the Company's shares are
allotted, called up, fully paid and quoted on the London Stock Exchange and
Euronext Dublin.
Reconciliation and movement in other reserves during the period as follows:
Foreign currency translation reserve Share based payment reserve Warrant reserve Total
€'000 €'000 €'000 €'000
At 31 December 2021 40 3,362 3,073 6,475
Exchange differences on translation of foreign operations 10 - - 10
Credit to equity for equity settled share-based payments - 1,185 - 1,185
Transfer on exercise, vesting or expiry of share-based payments - (1,397) - (1,397)
At 30 June 2022 50 3,150 3,073 6,273
Exchange differences on translation of foreign operations (21) - - (21)
Credit to equity for equity settled share-based payments - 1,214 - 1,214
Transfer on exercise, vesting or expiry of share-based payments - (1,034) - (1,034)
At 31 December 2022 29 3,330 3,073 6,432
Exchange differences on translation of foreign operations (25) - - (25)
Credit to equity for equity settled share-based payments - 901 - 901
Transfer on exercise, vesting or expiry of warrants - - (3,073) (3,073)
At 30 June 2023 4 4,231 - 4,235
13. TRADE AND OTHER PAYABLES
30 June 30 June 31 December 2022
2023 2022
€'000 €'000 €'000
(Unaudited) (Unaudited) (Audited)
Non-current liabilities
Payroll taxes 6,833 9,436 9,438
The Group has availed of the Irish Revenue tax warehousing scheme and deferred
payment of all Irish employer taxes from February 2021 to March 2022. Total
amount warehoused at 30 June 2023 amounted to €9,486k (31 December 2022:
€9,438k) including interest of €50k (31 December 2022: €Nil). The Group
has agreed with the Irish Revenue Commissioners to not repay any amounts due
on the warehoused facility until April 2024. An amount of €2,653k is
included within current liabilities. The Group incurs an annual interest
charge of 3% on the outstanding warehoused liability debt which commenced on
01 May 2023. The Group continues to monitor and comply with the appropriate
Revenue guidelines applicable to this scheme.
30 June 30 June 31 December 2022
2023 2022
€'000 €'000 €'000
(Unaudited) (Unaudited) (Audited)
Non-current payroll taxes (warehoused) 6,833 9,436 9,438
Current payroll taxes (warehoused) 2,653 - -
9,486 9,436 9,438
30 June 30 June 31 December 2022
2023 2022
€'000 €'000 €'000
(Unaudited) (Unaudited) (Audited)
Current liabilities
Trade payables 5,907 7,758 3,944
Accruals and other payables 6,546 5,585 5,136
Deferred revenue 8,883 6,472 3,201
Payroll taxes* 3,243 565 582
24,579 20,380 12,863
*2023 amounts includes €2,653k of payroll taxes warehoused
At 30 June 2023, €8,618k of revenue was deferred relating to free
cancellation bookings (31 December 2022: €3,005k) and €265k relates to
featured listings (31 December 2022: €178k). Increase in provision directly
driven by increase in bookings and revenue.
Included in accruals and other payables is a credit provision amounting to
€150k (31 December 2022: €150k) for vouchers and incentives to customers
for use on future bookings reflecting the expected value attached to vouchers.
There is uncertainty on the value of the credit provision given it is based on
the probability that a customer will use their voucher. The provision has not
been discounted.
14. BORROWINGS
30 June 30 June 31 December 2022
2023 2022
€'000 €'000 €'000
(Unaudited) (Unaudited) (Audited)
Opening balance 31,113 28,209 28,209
Drawdown 17,369 - -
Repayments (34,066) - -
Transaction costs capitalised related to borrowings (170) - -
Finance costs 1,838 1,630 4,243
Finance costs - exceptional items 2,827
Finance interest paid (1,519) - (1,339)
17,392 29,839 31,113
In 2021 the Group signed a €30.0m five-year term loan facility with certain
investment funds and accounts of HPS Investment Partners LLC (or subsidiaries
or affiliates thereof). On 05 April 2023 the Group repaid €10m of the HPS
facility and on 09 May 2023 the amount owing on the facility was repaid in
full. An early repayment penalty of 2% applied. Total repayment penalty costs
of €686k are included within Note 5 Exceptional items.
The April and May repayments totalled €34,066k which comprise of €30,000k
principal and €4,066k PIK interest.
Cash interest paid to 30 June 2023 totalled €1,519k (30 June 2022: €nil).
Increase year on year driven by all interest in the first year of the HPS
facility after drawdown being rolled up and capitalised as PIK interest.
Between the first and third anniversaries of drawdown, Hostelworld elected
to capitalise 4.0% per annum of the accruing interest with the balance of the
interest during that period.
A new 3-year facility was signed with Allied Irish Banks plc ('AIB') on 9 May
2023. This facility is comprised of a €10,000k term loan,
a €7,500k revolving credit facility ('RCF') and an
undrawn €2,500k overdraft. An amount of €17,369k was drawn down, net of
arrangement fee. Amount drawn down was utilised to repay the HPS facility.
The AIB term loan and RCF each had an initial interest rate payable of 3.75%
over EURIBOR. In July 2023 this reduced to 3.25%, when the ratio of Net Debt
to adjusted EBITDA was less than 2 times. The interest rate will reduce to
2.65% over EURIBOR where of Net Debt to adjusted EBITDA is less than 1
times.
Financial covenants attached to the facility are set out as follows:
1. Maintaining a minimum cash balance on hand of €6m;
2. Ensuring an interest cover of not less than 3:1. Interest cover is
defined as the ratio of Adjusted EBITDA to Gross Interest Paid in respect of
any Relevant Period. Covenant is tested quarterly, based on the prior 12-month
actuals; and
3. Ensuring the Groups adjusted leverage ratio does not exceed 3:1.
Adjusted leverage is defined as the ratio of Net Debt on the last day of each
quarter to Adjusted EBITDA in respect of the 12 months to the quarters
reporting date.
The debt is guaranteed by the Group's principal trading entity Hostelworld.com
Limited, who has provided the lenders with a customary security package over
its assets.
Borrowings are classified in the consolidated statement of financial position
as:
30 June 30 June 31 December 2022
2023 2022
€'000 €'000 €'000
(Unaudited) (Unaudited) (Audited)
Non-current borrowings 9,870 29,655 30,869
Current borrowings 7,522 184 244
17,392 29,839 31,113
15. GROUP STRUCTURE AND RELATED PARTY TRANSACTIONS
There are no changes to the Group structure or related party transactions to
highlight in respect of H1 2023 and no related party transactions to
highlight.
16. EVENTS AFTER THE REPORTING DATE
There have been no significant events, outside the ordinary course of
business, affecting the Group since 30 June 2023.
APPENDIX 1: ALTERNATIVE PERFORMANCE MEASURES
The Group uses the following alternative performance measures ('APMs') which
are non-IFRS measures to monitor the performance of its operations and of the
Group as a whole: loss / earnings before interest, tax, depreciation, and
amortisation, excluding exceptional and non-cash items ("adjusted EBITDA"),
adjusted loss / profit after taxation; adjusted loss or earnings per share.
An explanation of each APM and its purpose within the Group is set out from
page 222 within the Annual Report and Financial Statements for the year ended
31 December 2022, published on 3 April 2023.
Adjusted EBITDA
Relates to loss / earnings before interest, tax, depreciation and
amortisation, excluding exceptional and non-cash items ("Adjusted EBITDA").
Exceptional items by their nature and size can make interpretation of the
underlying trends in the business more difficult. We believe this APM reflects
the key drivers of profitability for the Group and removes those items which
do not impact underlying trading performance.
Reconciliation between loss for the year and adjusted EBITDA:
30 June 30 June
2023 2022
€'000 €'000
Loss for the year (7,496) (14,286)
Taxation 413 (378)
Net finance costs 1,901 2,079
Net finance costs (exceptional) 3,514 -
Operating loss (1,668) (12,585)
Depreciation 526 428
Amortisation of development costs 1,524 1,378
Amortisation of acquired intangible assets 3,921 3,927
R&D Tax Credit (126) -
Share of result of associate (88) (4)
Exceptional items 79 470
Share based payment expense 939 1,195
Adjusted EBITDA 5,107 (5,191)
Adjusted loss after taxation ("Adjusted PAT")
Adjusted profit/(loss) after taxation is an APM that the Group uses to calculate the dividend pay-out for the year, subject to Company Law requirements regarding distributable profits and the dividend policy within the Group. It excludes exceptional items, amortisation of acquired domain and technology intangibles, net finance costs, share based payment expenses and deferred taxation which can have large impacts on the reported result for the year, and which can make underlying trends difficult to interpret.
Reconciliation between adjusted EBITDA and loss for the year:
30 June 30 June
2023 2022
€'000 €'000
Adjusted EBITDA 5,107 (5,191)
Depreciation (526) (428)
Amortisation of development costs (1,524) (1,378)
Net finance costs (1,901) (2,079)
Net finance costs (exceptional) (3,514) -
R&D Tax Credit 126 -
Share of result of associate 88 4
Corporation tax (100) (37)
Adjusted loss after taxation (2,244) (9,109)
Exceptional items (79) (470)
Amortisation of acquired intangible assets (3,921) (3,927)
Share based payment expense (939) (1,195)
Deferred taxation (313) 415
Loss for the year (7,496) (14,286)
Adjusted loss per share
Adjusted EPS is an APM that excludes exceptional items, amortisation of
acquired domain and technology intangibles, net finance costs, share based
payment expenses and deferred taxation which can have large impacts on the
reported result for the year, and which can make underlying trends difficult
to interpret.
30 June 30 June
2023 2022
Adjusted loss after taxation €'000 (2,244) (9,109)
Weighted average shares in issue ('m) 120 117
Adjusted EPS (1.9) (7.8)
Adjusted free cash flow
Free cash flow adjusted for refinance cashflow movements and exceptional cost
outflows. Free Cash Flow Conversion has been adjusted for capital expenditure,
acquisition of intangible assets, net finance costs and excludes the effect of
exceptional costs.
It is a key measure which shows the cash the Group is generating/ using as it
excludes certain items which to not relate to the day-to-day activities of the
Group.
30 June 31 December
2023 2022
€'000 €'000
Net decrease in cash and cash equivalents (8,240) (6,294)
Add back
Repayment of borrowings 34,066 -
Proceeds from borrowings (17,369) -
Transaction costs capitalised 170 -
Proceeds received on issue of warrants (33) -
Warehoused payroll taxes - (1,389)
Exceptional items* 778 806
Adjusted free cash flow / (absorption) 9,372 (6,877)
Adjusted EBITDA profit 5,107 1,321
Adjusted free cash flow / (absorption) % conversion 183% (521%)
* Exceptional items included in adjusted free cash flow exclude professional
fees included in liabilities at reporting date not paid.
Net average booking value ("ABV")
Net average booking value is a key performance revenue measure which looks at
the average value paid by a customer for a booking. It is a key performance
indicator of the value of bookings and commission earned on generated
bookings.
30 June 30 June
2023 2022
€'000 €'000
Gross revenue 59,267 37,598
Cancellations (7,769) (4,801)
Revenue 51,498 32,797
Deferred revenue movement (5,613) (5,429)
Counter revenue 109 52
Roamies revenue 44 -
Adjustments to revenue** (171) 803
Advertising income 475 83
Volume incentive rebates (505) (351)
Net revenue 45,837 27,955
*Gross booking revenue less cancellations
**primarily relates to recognition of refunds, chargebacks and voucher
provisioning.
30 June 30 June
2023 2022
Revenue (€'000) 51,498 32,797
Net bookings (#'000) 3,398 2,073
Net ABV generated € cent per share 15.15 15.82
Net gross merchandise value (GMV)
Net GMV represents the gross transaction value of bookings on our platform
less cancellations.
It is an APM which shows the total value of transactions executed through our
platform.
30 June 30 June
2023 2022
€'000 €'000
Net GMV 339,547 216,287
Direct marketing costs as a % of revenue
Direct marketing costs as a percentage of revenue is an APM which looks at the
percentage of paid marketing cost per value of bookings.
30 June 30 June
2023 2022
€'000 €'000
Direct Marketing Costs* 26,456 19,619
Revenue [Net GBR] 51,498 32,797
Direct Marketing Costs as a % of Revenue** 51% 60%
*Total Marketing Costs are €26,826k (H1 2022: €20,050k), within this
balance Direct Marketing Costs total €26,456k (H1 2022: €19,619k). Balance
relates to brand marketing.
**In the prior year direct costs as a % of revenue was presented using % of
net revenue. Net revenue considers deferred revenue, other ancillary revenues
as well as rebates. Revenue [generated revenue] has been used to calculate
this percentage in the current year as this better aligns to how this metric
is viewed internally by the Group.
APPENDIX 2: PRINCIPAL RISKS AND UNCERTAINTIES
The Group's risk register identifies key risks including any emerging risks
and monitors progress in managing and mitigating these risks. Each risk
identified is subject to an assessment incorporating likelihood of occurrence
and potential impact on the Group. The Group's risk register is subject to
review by the Senior Leadership Team ('SLT') and Executive Leadership Team
('ELT') prior to reporting to the Audit Committee and Board.
The principal risks and uncertainties faced by the Group are reported annually
within the Annual Report and Financial Statements for the year ended 31
December 2022, published on 3 April 2023.
A review was performed of the risk register during H1 2023. The risks included
have not materially changed from those reported within the Annual Report.
Strategic & external risk Technological, Cyber & Data risk Financial risk Operational & Regulatory risk
Unchanged level of risk - Macroeconomic conditions - Data security - Taxation - Third party reliance
- Competition - Cyber - Financial - Climate change and sustainability
- IT platforms and technological innovation - Regulation
- Search engine algorithms - Business continuity
- Brand and reputation
Decreasing level of risk - Impact of uncontrollable events on our business and the leisure - People
travel industry Pandemic
The following changes were made:
1. The risk profile of the following risks has decreased in 2023 in
regard to the probability of the occurrence of the risk on the Group or the
impact it would have in terms of reputation or cost.
· People related risk has decreased as while the recruitment environment
remains highly competitive, attrition levels are not as high as during 2022.
Additionally, headcount levels are expected to remain consistent with the
Group.
· The risk related to the impact of uncontrollable events on our
business and the leisure travel industry has decreased reflecting the lowering
of the specific COVID-19 related risk when considering pandemic related risk.
Trading has largely returned to normal.
2. Our risks have evolved in some areas to take into account two key
themes - impact of artificial intelligence on our business and the impact of
our growing social platform, including Linkups, o how we manage our
regulations, data and cyber security.
We have not identified any emerging risks. The principal risks and
uncertainties which are applicable for the second half of the year are
summarised below.
Material risks
· Macroeconomic conditions
· The Group's financial performance is largely dependent on the wide
availability of, and demand for travel services. The demand for travel
services is influenced by a range of macroeconomic circumstances and their
impact on consumers discretionary spending levels. Economic activity,
employment levels, inflation, interest rates, foreign exchange movements and
access to credit are among the factors that can impact travel demand.
· Data security
· The security of the confidential business information we generate
when engaging in e-commerce and the personal data we capture from customers
and employees is essential to maintaining confidence in our services. As an
online platform, we are constantly exposed to threats in the form of internal
and external attacks or disruption to our systems or those of our third-party
suppliers.
· Cyber security
· The Group like other companies is susceptible to cyberattacks
which could compromise the integrity of our systems and the security of our
data. Cyberattacks by individuals, groups of hackers and state-sponsored
organisations are increasing in frequency. The tools and techniques used in
such attacks continue to evolve in sophistication.
· People
· The Group is dependent on its ability to attract, retain and develop
creative, committed and skilled employees in order to achieve its strategic
objectives. While attrition rates in the latter half of 2022 into 2023 have
reduced, the recruitment environment remains intense. People risk has
decreased in 2023 but may increase in future if the Group does not keep pace
with market developments.
· Financial risk
· The Group's activities expose it to a variety of financial risks;
market risk (particularly exchange rates), credit risk and liquidity risk. The
Group proactively manages financial risk by seeking to minimise potential
adverse effects on its financial performance.
· Competition
· The risks posed by competition where we compete for supply of hostel
inventory and customers could adversely impact our market share and future
growth of the business. Our competition may have more resources than we do,
enabling them to compete more effectively.
· IT platforms and technological innovation
· The ever-increasing pace of change of new technology, infrastructure
and software offerings change how customers research, purchase, and experience
travel. We must stay abreast of technological innovation and change, both in
our product offerings and supporting infrastructure, or risk becoming
irrelevant to the modern customer. We invest a significant amount in product
and user experience functions.
· Third party reliance
· We rely on hostel accommodation providers to provide us with our
inventory. Any limitations on such will directly impact our business and
results of operations.
· We rely on a number of key third-party providers within our
technology environment for our cloud storage and databases. Any interruption
in service from any of these providers may lead to a loss in revenue, loss in
site and app functionality, increased input from customer services and
engineer time, and ultimately if we experience multiple failures we risk
reputational and brand damage.
· The Group relies on payment processors and payment card schemes to
execute certain components of the payments process. There is a risk that the
Group may not maintain its relationships with these third parties on favorable
terms or that the transaction fees imposed by these providers are increased.
· Search engine algorithms and managing our marketing channels
· We rely significantly on practices such as Search Engine Optimisation
and Search Engine Marketing to improve our visibility in relevant search
results. Search engines frequently update and change the logic that determines
the placement and display of results. As these algorithms evolve, our
marketing strategy is at risk of falling behind and not remaining competitive.
Our costs to improve or maintain our placement in search results can increase
which directly impacts our results and margins.
· Climate change and sustainability
· Climate change and sustainability continue to be areas of increased
focus for the Group and are further evolving as areas of heightened concern
with consumers and stakeholders. There is a request for more accountability
from our customers, employees, and other stakeholders as to the Group's
actions to limit its direct and indirect impact on climate change.
· Impact of uncontrollable events on our business and the leisure
travel industry
· The threat of a global pandemic (similar to COVID-19), terrorist
attacks in key cities and aircrafts in flight, geopolitical conflicts, climate
change, natural disasters or other adverse events outside of the control of
the Group may reduce demand for or prevent the ability to travel to affected
regions. This may result in risk to the health of our employees and customers
and may have consequential negative impact on economic activity.
· Regulation
· The Group's business is global and highly regulated, and is
exposed to issues such as competition, licensing of local accommodation and
experiences, language usage, web-based trading, consumer compliance, taxation,
intellectual property, trademarks, data protection and information security
and commercial disputes in multiple jurisdictions. Regulatory and legal
requirements and uncertainties around these issues could subject the Group to
business constraints, increased regulatory and compliance costs, and other
complexities which may otherwise harm our business.
· Business continuity
· Failure in our IT systems or third party hosted services on which we
rely could disrupt availability of our booking engines and payments platforms,
or availability of administrative services.
· Brand and reputation
· Hostelworld is a world leading OTA focused on the hostel market.
We rely on the strength of our brand in the market to attract customers to our
platform and to secure bookings. Consumer trust and confidence in our brand is
therefore essential to ongoing revenue stability and growth. Negative
publicity could impact brand perception, consumer loyalty and ultimately
revenues.
· Taxation
· Due to the global nature of our business, tax authorities in
other jurisdictions may consider certain taxes as due in their jurisdiction.
If those tax authorities take a different view than the Group as to the basis
on which the Group is subject to tax, it could result in the Group having to
account for tax that it currently does not collect or pay. Additional employee
locations in a remote working environment also could give rise to potential
tax implications.
1 (#_ftnref1) The Group uses Alternative Performance Measures ('APMs') which
are non-IFRS measures to monitor the performance of its operations and of the
Group as a whole. These APMs along with their definitions and reconciliations
to IFRS measures are provided in the APMs section on pages 26 to 29.
2 (#_ftnref2) Net GMV is gross transaction value of the bookings less
cancellations.
3 (#_ftnref3) Generated revenue is gross revenue less cancellations and
excludes impact of deferred revenue.
4 (#_ftnref4) Net debt is cash less outstanding debt, including term loan,
revolving credit facility and warehoused payroll taxes.
5 (#_ftnref5) Follow on bookings post a flight are bookings made by
customers where the customer's nationality is different from the country where
the booking was made.
(#_ftnref6) 6 ABVs are calculated using generated revenues less
cancellations divided by net bookings.
(#_ftnref7) 7 At the end of March 2022 all online travel agents delisted
accomodation, including hostels located in Russia and Belarus from their
platforms, including HW. Including this reduction in capacity reduces the
global hostel sales growth in bednights to approximately 12% year on year.
(#_ftnref8) 8 Market coverage is calculated by estimating the total number
of bednights sold via hostels connected to our platform divided
by the estimated total number of bednights sold across all hostels in the
category.
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