REG - Hostelworld Grp PLC - Preliminary results for the year ended 31 Dec 2022
22/03/2023 07:15
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RNS Number : 7806T Hostelworld Group PLC 22 March 2023
HOSTELWORLD GROUP PLC
PRELIMINARY RESULTS FOR FOR THE YEAR ENDED 31 DECEMBER 2022
LEI:213800OC94PF2D675H41
Hostelworld Group plc ("Hostelworld" or the "Group" or the "Company")
preliminary results for the year ended 31 December 2022
Return to profitable growth in line with guidance
22 March 2023: Hostelworld, a leading global OTA focused on the hostel market,
is pleased to announce its preliminary results for the year ended 31 December
2022.
Significant developments
· Returned the business to profitable adjusted EBITDA
· Strong recovery in demand as Omicron impact receded and travel
resumed
· Successful launch of our innovative and differentiated 'Social'
strategy supporting increase in bookings through Apps and reduced marketing
cost
· Operating costs below FY 2019 levels facilitated by platform
modernisation
· Continued progress of ESG agenda; accredited Carbon Neutral label
and independent research validating "hostels as a more sustainable travel
option to hotels"
· Strong start to 2023 with positive trends continuing
Financial highlights
· Full year net bookings totalled 4.8m, an increase of 228% year on
year (2021: 1.5m), driven by recovery in Europe, and in
particular, Asia and Oceania in H2 2022
· Net GMV €470.1m, an increase of 303% year on year (2021:
€116.7m)
· Net Revenue for the period of €69.7m, an increase of 312% year
on year (2021: €16.9m)
· Net Average Booking Value ("ABV") of €14.90, a 23% increase
year on year (2021: €12.11), due primarily to bed price inflation
· Direct marketing as a percentage of net revenue amounted to 59%
(2021: 76%), reducing from 70% in H1 2022 to 52% in H2 2022, supported by the
launch of our app centric 'Social' strategy
· Operating costs (excluding paid marketing, exceptional items and
share option charges) are below 2019 levels (-13.4%)
· Adjusted EBITDA profit of €1.3m (2021: loss of €17.3m)
· Operating loss €13.6m (2021: €33.1m)
Balance sheet and cash flow
· Total cash as at 31 December 2022 of €19.0m (2021: €25.3m)
· Refinance process underway for €30m term loan facility,
expected to complete in 2023, which will result in lower finance costs
Gary Morrison, Chief Executive Officer, commented:
"2022 was the year in which Hostelworld demonstrated the resilience of its
business model and the capacity to capitalise on market demand as it returned.
Most significantly, through a combination of operational progress, disciplined
cost control and the launch of our innovative 'Social' strategy, we returned
the business to profitable growth.
After a slow start to the year driven by Omicron, booking demand recovered
quickly towards 2019 levels into Europe (our largest destination); with many
of our top markets in Southern Europe exceeding 2019 levels over the summer.
Easing of travel restrictions enabled Oceania and Asia to show strong recovery
through the year, improving from approximately 6% of 2019 levels before
reaching 79% of 2019 levels in December. Central America continued to perform
strongly throughout the year, at approximately 150% of 2019 levels. Similarly,
we also saw the resumption of long haul travel throughout the year, which is
especially significant given that it is a lead indicator of customers booking
multi destination trips. More specifically, long haul bookings recovered from
27% of 2019 levels to 76% by year end, and in particular, booking demand from
North America into Europe remained above 2019 levels for much of the post
Omicron period in the year.
In addition, I am pleased to report on the successful launch of our
differentiated social network growth strategy in 2022 which capitalises on the
unique needs and attributes of the hostelling category. Since launching these
social features on our Apps in Q2, we have seen strong growth in the number of
bookings being made by social members (customers who have opted into the
social Network) with 50% of our bookings being made by social members at year
end, and a significant increase in the volume of bookings through our Apps.
This, along with strong net booking and average booking value (ABV) growth,
has translated into increased revenues, lower marketing costs and improved
margins.
Overall, I am encouraged by the trends we have seen since the start of the
year despite limited visibility of our key bookings period, and I believe we
are well positioned and firmly on track to meet the growth targets outlined in
our Capital Markets Day presentation in November."
Trading Update
Throughout 2022, 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, we achieved 4.8 million net bookings in FY 2022, which
represents 70% of FY 2019 levels (up from 21% in FY 2021), and net revenue of
€69.7m, which represents 86% of FY 2019 levels (up from 21% in FY 2021),
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.
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 costs as a percentage of net revenue were elevated in the
first half of the year versus 2019 by a number of factors. Our focus on new
customer growth, underpinned by our ability to predict the lifetime value of
these new customers versus their acquisition cost; higher CPCs in paid
marketing channels (driven by higher average booking values); lower conversion
rates in those destinations where some level of restrictions persisted and
finally higher cancellation rates (in part driven by a higher proportion of
free cancellation bookings).
During the second half of the year, direct marketing cost as a percentage of
net revenue reduced at a faster rate (ahead of our expectations) driven by our
App based social strategy. This unique and highly differentiated strategy
reduces direct marketing costs as a percentage of net revenue by driving new
and existing customers to use our iOS and Android Apps, thereby increasing the
proportion of bookings through lower cost channels. As a consequence, we now
expect direct marketing as a percentage of revenue to fall from 59% in 2022 to
50-55% in 2023 as outlined in our Capital Markets Day presentation in
November.
The improvement in direct margins coupled with tight cost control has also
driven a significant improvement in operating cash performance. As at 31
December 2022, cash totalled €19.0m, down €6.3m as compared to cash as at
31 December 2021. We will continue to maintain our cost discipline on an
on-going basis and will look to refinance our current debt facility in 2023.
On the supply side our market position remains strong, with the hostels
connected to our platform accounting for approximately 77% of the bed nights
sold in December 2022, compared to 77% in 2019. This has been driven by
continuous additions to our platform, offsetting losses from the category
driven mainly by hostel closures due to COVID-19. For clarity, our market
coverage metric does not include hostels removed temporarily from our platform
in Belarus and Russia, due to the ongoing conflict in the region.
Outlook
The medium-term financial targets released to the market at our Capital
Markets Day last November demonstrate the Board's confidence in our growth
strategy and business model to deliver profitable growth over the next three
years. In 2023 we will continue to develop and progress the opportunities
enabled by our social network strategy, while remaining committed to
delivering high levels of operating performance and cost discipline.
Hostelworld operates in a resilient and growing category with a loyal customer
base that has a strong desire to travel and meet other people despite the
uncertainties the economic cycle may present. We are encouraged by the trends
we have seen since the start of the year and believe that the business is
firmly on track to deliver the targets for FY 2023 presented at our Capital
Markets Day in November 2022.
Analyst Presentation
A presentation will be made to analysts today at 2.00pm, 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://brrmedia.news/Hostelworld_fy_results
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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
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.
Disclaimer
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.
Chairman's Statement: Michael Cawley
Despite the challenges which Omicron and travel restrictions presented, 2022
has been a year of recovery and growth for Hostelworld. It was a notable year
for the business, marked by a renewal of booking demand, revenue growth and
the delivery of a positive adjusted EBITDA in line with market guidance. Our
innovative and differentiated 'social' strategy has enabled the Group to
capitalise on the welcome return of travel demand. Since the launch in April
2022 of the social network features on our iOS and Android platforms we have
seen a significant increase in the volume of bookings through our Apps. Our
mission, to 'enable travellers find people to hang out with', has resonated
strongly with our customers and our social network features has helped begin
the journey of building a community of like-minded travellers. This strategy
is helping to drive increased revenues, lower direct marketing costs as a
percentage of revenue and will deliver improved profitability.
Throughout the year we have seen a good recovery and growth in net bookings
and net revenue as the impact of the Omicron variant receded and governments
lifted restrictions on international travel. Some regions recovered earlier
than others. Asia, in particular was weak but by year end after the easing of
restrictions in China it too was firing on all cylinders. Such was the
strength of demand that activity levels in some countries exceeded 2019 levels
throughout 2022. This has given us confidence both in the continuing
popularity of hostelling and in Hostelworld's ability to grow its share in the
sector.
This revival in demand has been achieved while maintaining excellent cost
discipline. I am pleased to report that operating costs (excluding paid
marketing, exceptional items and share option charges) are below 2019 levels
(-13.4%), reflecting both cost management measures implemented in recent years
to reduce fixed costs and operational efficiencies facilitated by our platform
modernisation. We believe there is no conflict between our goal to be the
leading OTA for hostellers while being exceptionally disciplined on cost.
Sustainability
Reflecting our commitment to a sustainable future, and in keeping with our UK
listing and financial disclosure requirements, the business focussed on its
compliance with the requirements of the Taskforce for Climate related
Financial Disclosures ("TCFD"). Complying with the TCFD recommendations, we
have disclosed information across the following key areas: Governance,
Strategy, Risk Management, and Metrics and Targets (further details are
provided within the sustainability section to the annual report).
I am pleased with the significant progress we have made in executing our ESG
strategy in 2022. The Group welcomed the publication of a report by leading
sustainability and compliance specialist Bureau Veritas, which confirmed that
hostels are approximately three-quarters less carbon intensive than hotels,
with hostels producing 75% less Scope 1 and Scope 2 carbon emissions than
hotels on a per-bed basis. Given the age profile of our customer cohort and
the importance it justifiably attaches to sustainability we believe hostelling
offers them the most sustainable option for their accommodation needs.
Consequently, this affords Hostelworld, as the only OTA exclusively promoting
hostels, a unique opportunity to create a distinct competitive advantage among
sustainability conscious travellers.
As part of our commitment to focus hostels on the importance of
sustainability, we partnered with Bureau Veritas to develop a bespoke
sustainability measurement and management system for hostels. This framework,
'Staircase to Sustainability', is the first of its kind and is based on the
Global Sustainable Travel Council's (GSTC's) sustainability criteria. This
innovative programme, tailored to the hostelling industry, will enable hostels
to showcase their sustainability credentials, thereby advancing the category's
inherent competitive advantage.
In partnership with emission reduction experts South Pole, the Group made
further progress on executing its ESG strategy by achieving climate neutral
status in respect of 2021 and 2022.
Furthermore, the Group also remains committed to reducing its own carbon
emissions and complies with the requirements of the Science Based Targets
initiative. In 2022 the Group reduced our absolute Scope 1 and 2 emissions by
over 42%, over base year 2021.
Capital structure and dividend
Our principal objective is to deliver growth that drives long-term sustainable
value creation for our shareholders. Overseen by the Board, the Group
continues to work on a number of key capital allocation priorities to maximise
shareholder returns: (1) re-financing the existing €30m term loan drawn down
in February 2021 to reduce leverage and interest costs (current outstanding
debt €34.3m 1 (#_ftn1) ); (2) working with the Irish Revenue Commissioners
to agree a schedule of repayments in respect of €9.4m warehoused payroll
tax which was extended to companies by the Irish government as a COVID-19
financial support 2 (#_ftn2) ; and (3) continued investment in the business
to deliver long term growth.
The Board continues to believe that the payment of dividends would not be in
the best interests of the business for the foreseeable future.
Your Board contributing effectively
As Chairman I am pleased to report that your Board continues to operate
effectively in its ongoing assessment of strategy and business performance,
overseeing the culture of Hostelworld and ensuring meaningful progress
continues to be made in the important area of diversity and inclusion.
Long-term succession planning for senior executive roles and Board members
continued to be a core focus area in 2022. Details of the Board's work in this
important area is set out in the Corporate Governance Statement within the
annual report. The composition of the Board is fully compliant with the 2018
UK Corporate Governance Code. The Board has undertaken an appraisal of the
Directors, as well as an evaluation of the performance of the Board and each
sub-committee, both of which concluded that the Board is functioning
effectively.
Colleagues, customers and shareholders
I wish to thank my Board colleagues and the management team for their
commitment, energy, and strategic insight in guiding the business back to
profitable growth despite a very challenging operating environment. I also
want to pay tribute to our excellent staff for the resilience, determination
and creativity they have demonstrated throughout this most difficult time.
Together with the management team, they have re-built the business on very
strong foundations. Despite some macro-economic uncertainties, I am very
confident that 2023 will be another year of strong growth for the business.
Furthermore, I am encouraged by the Group's long-term opportunities and
prospects and believe that Hostelworld is well positioned to capitalise on
strong demand for travel.
Finally, I would like to express my sincere thanks to our shareholders for
your continued support.
Michael Cawley
Chairman
21 March 2023
Chief Executive's Review: Gary Morrison
I am pleased to report we made solid progress on all elements of our strategy
in 2022.
In particular we launched our App centric social strategy in April 2022,
driven by the insight that the vast majority of travellers in our category
choose to go hostelling as a means to meet other people, which we facilitate
through our social features that connect our travellers in hostels and cities
based on their booking data 14 days before their arrival date. To date, the
strategy has been very successful, generating significant growth in App
bookings, word of mouth recommendations by our customers, and strong
endorsements from our hostel partners.
In parallel, we also continued to invest in our marketing technology platform,
which enables us to allocate marketing spend to maximise new customer
acquisition, underpinned by our ability to predict the lifetime value of these
new customers versus their acquisition cost in a very granular fashion. We
also made solid progress on modernising our platform to enable us to support
faster execution of our growth strategy. This included migrating our entire
company to the cloud and exiting our on-premise data centres.
Finally, the Group continues to progress its Environmental, Social and
Governance agenda; and in particular our partnership with South Pole on
climate neutral accreditation and with our hostel partners to promote the
inherent sustainability advantages of hostel accommodation.
Executing our growth strategy
During 2022 we continued to execute our highly differentiated growth strategy,
which capitalises on the unique needs of the hostelling category. In
particular, our growth strategy seeks to capitalise on three unique attributes
of our customers and their needs as a category, relative to the mainstream
leisure travel category.
· Helping our customers find people to hang out with while
travelling
One of the key differentiating features of our category is that the vast
majority of our customers, 60% of which are travelling solo, choose to stay in
hostels as means to meet other people in person (not because they are cheap).
We also know from looking at reviews on our platform and posts by our
customers on third party social networks that when our customers meet people
to hang out with, the experience is magical.
Driven by this insight, we launched a series of social features in our iOS and
Android apps in April and June 2022 respectively, using the data from our
platform to help our travellers find people to hang out with. In essence,
these features help our travellers understand what kinds of travellers will be
staying at a hostel on the dates they are shopping for, and other chat
room-based features that help them meet other travellers in both the hostel
and the destination based on their shared interests.
Overall, I am very pleased with the take up of these features to date. By year
end, 50% of our bookings were being made by customers who had opted in to the
social network (social members); and more than 80% of our social members were
using the features while travelling. Moreover, we observed that these social
features were attracting more profitable customers. In the first six weeks
post-acquisition (new customers acquired April - September 2022) social
members were 4x more likely to be recruited via the App; make 1.6x the number
of bookings; and twice as likely to make these bookings via the App.
Over the next 18 months, we plan to build more value into the social network
through richer user profiles, richer messaging capabilities and
recommendations type features to help our travellers find more people to hang
out with, and more fun things to do together. Over time, I expect that these
features will encourage more travellers in the hostelling 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.
· Leveraging our customer's booking patterns to optimise marketing
allocation
A second differentiating feature of our category is the nature of hosteller
booking patterns compared to mainstream leisure travellers. The vast 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,
coupled with the characteristics of the bookings themselves has enabled us to
build accurate customer booking models for our category that predict the
future revenue of new customer cohorts 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.
Following the launch of our social strategy we now have additional valuable
data points from our social network to power our new customer acquisition
activities, given that new customers who sign up to the social network (social
members) are significantly more profitable than non-social members. This
distinction allows us to refine our new customer acquisition activities using
the common attributes of more valuable social members as a targeting mechanic
in addition to broad based targeting of the hostel traveller category.
· Providing additional relevant travel products to our customer
base
The third differentiating feature of our category is in the nature of the
additional travel products purchased compared to mainstream leisure customers.
In general, mainstream leisure customers will 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 much more interested in other group
orientated travel products which provide additional opportunities to find
people to hang out with. These products would include opportunities to meet
other hostellers staying in the same destination for walks, bike rides, eating
out and pub crawls; and events that hostels create and operate themselves for
their guests.
To that end, in August 2022 we launched Linkups in two pilot destinations on
our social network which enables our customers to set up their own group
events for others to join in that destination. We then publish these Linkups
(group events) to all of our customers who will be in the same destination at
the same time as the group event date. Similar to our hostel product, we also
show our customers who else has signed up for each event, so that they can get
an idea as to what kind of other travellers they will meet at the event. So
far, the pilot results have been encouraging, and we plan to release a variant
in 2023 that will enable Hostels to load their own group event catalogues in
the same way onto our network.
Investing in our platform
Over the course of the year, we also made solid progress on modernising our
platform. This included migrating our entire technology stack to the cloud in
the first half of the year and exiting our on-premise data centres. During the
second half of the year, we started the process of upgrading our key legacy
backend applications to make them "cloud native".
Over the midterm, 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 features from our cloud services
provider, such as artificial intelligence and machine learning optimisation
engines. Collectively, these technology benefits will flow through into
reduced hosting costs and enable faster execution of our growth strategy.
In parallel, we also completed the acquisition of the remaining shares in
Counter App Limited in March 2022 and completed bringing the platform in house
in early May 2022. Hostelworld first invested in Counter App Limited in
November 2019 to create a next generation hostel Property Management System
(PMS) platform to replace our legacy PMS platform Back Pack Online (BPO). At
that time, we chose to partner with Counter's founders based on our belief in
their vision of a mobile centric platform built specifically for the needs of
the hostel industry. Over the last two plus years, the Counter team has made
good progress towards their vision with Counter.app recently ranked 21st best
PMS product out of 195 by Hotel Tech Report (a leading property technology
review site).
As part of the original shareholders' agreement, 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 thus 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®, we are also committed to building a better world in everything we do.
· Making sustainability a competitive advantage over time
Over the last 12 months, we have continued to see growing evidence of the
importance of sustainability in travel across all stakeholders in the travel
ecosystem. Within the hostelling category itself, more than half of our
customers now report that "Sustainability plays a role in where I stay" and
more than half of our hostel partners report that they are actively working on
sustainability initiatives.
More broadly, we are continuing to see the evolution and broad adoption of
sustainable travel "standards" maintained by third party bodies such as the
UNWTO, GSTC and Travalyst; and the emergence of sustainability related
disclosure filing requirements, driven by TCFD. All these developments point
towards one outcome - companies operating in the travel industry will be
expected to do more, and disclose more fully, their programmes to reduce the
impact of travel on the environment. With this rapidly evolving context, we
have organised our approach to Sustainability as three linked initiatives
The first initiative relates to developing a data driven fact base that we,
and our hostel partners can use to promote hostelling as the most sustainable
accommodation option available. To that end, earlier this year, we
collaborated with Bureau Veritas to calculate the Scope 1 & 2 emissions of
a representative group of hostels and compared these with the publicly
available emissions data from a representative group of hotel chains. In
September 2022, Bureau Veritas published its findings, indicating that the
hostelling category emits approximately a third of the Scope 1 and Scope 2
emissions (tCO2e) on a per bednight basis compared to a one-night stay in a
typical hotel chain 3 (#_ftn3) . This type of data is invaluable for
ourselves and our hostel partners to inform and educate young travellers that
staying in Hostels is the most sustainable form of accommodation.
The second initiative takes the first initiative one step further, by
investing in providing a common framework for our hostel partners to not only
showcase their sustainability credentials on our platform, but also make
progress to more sustainable operations. To that end, we have been working
closely with our hostel partners, the Global Sustainable Tourism Council
(GSTC) and a number of other relevant bodies to build out a set of relevant
sustainability criteria based on GSTC standards; and exploring ways to capture
a hostel's compliance with these criteria in a standardised low-cost way,
appropriate to the size and means of the small businesses in our category.
Eventually in Q4 2023 / Q1 2024, we plan to surface compliance to these
criteria on our site, such that our customers can make more informed decisions
as to where to stay.
Finally, our third initiative relates to reducing our own emissions, and I am
pleased to report during 2022 we were awarded climate neutral status in
partnership with South Pole, through our investment in various climate offset
projects to fully offset our own emissions 4 (#_ftn4) . Furthermore, we are
also complying with the requirements of the Science Based Targets initiative
and in 2022 reduced our Scope 1 & 2 emissions by over 42%, over base year
2021.
· Investing in our employees and hostel partners and communities
This year saw us further enhance our agile approach to working, introducing a
host of new policies and initiatives to support our employees. We launched the
Hostelworld Mental Health Champions programme, to raise awareness on the
importance of mental health, and offering our teams peer support across our
global locations. In addition, Diversity, Equity and Inclusion became a key
focus throughout the year, with 100% of our People Managers receiving
Inclusive Leadership Training, and a variety of thought provoking and
motivating events being hosted, celebrating periods such as International
Women's Day, Pride Month, and Black History Month. We are also proud to have
become supporters of the 30% Club Ireland in May of this year and having been
awarded the Investors in Diversity Bronze Accreditation by the Irish Centre
for Diversity.
More generally, the reduction in travel restrictions at the beginning of the
year also paved the way for us to restart our regional hostel conferences and
local hostel events. In April 2022 we held our first in person hostel
conference since 2019 in Copenhagen, and hosted smaller events in Rome, Porto
and Lisbon. These events provide a unique opportunity for us to promote our
strategy, share industry trends and solicit feedback from our hostel partners.
In parallel with these in person events, we continued to run webinars across
all our geographies, and ran our Extraordinary HOSCARS once again this year
introducing new categories such as The Eco Warrior and The Digital Nomad.
Finally, as we seek to Build a Better World and positively impact the
communities we work and live within, we introduced volunteering days to enable
our team to give back, while offering matched charity donations when our
employees choose to give back by donating recognition awards or referral
bonuses through company led charity initiatives.
· Continuing to enhance our approach to corporate governance
During 2022, we continued to enhance our governance procedures to ensure sound
and informed decision making in the business and at board level to ensure
compliance with the recommendations of the TCFD framework. Following
amendments made to the Board Charter in 2021 which established climate risk
and sustainability issues as matters requiring on-going board oversight, an
ESG Steering Committee led by the CFO met monthly and provided updates to the
board at each scheduled board meeting during the year. The board reviews
progress against the various elements of our ESG strategy and provides the
right blend of oversight and leadership in making sure that the business is
run in a socially responsible way.
Summary
Over the course of 2022, we have demonstrated the capacity of our business to
capitalise on market demand as it returned, and through a combination of
operational progress, disciplined cost control and the launch of our
innovative 'social' strategy, we have returned the business to profitable
growth. This is a significant milestone for our business, and I would like to
thank each and every one of our employees for their commitment and hard work
towards laying these strong foundations for a successful future. I also want
to thank our shareholders for their continued support.
As I look to 2023, I am pleased to see that our social network growth strategy
is continuing to gain traction with our customers and delivering as
anticipated and will become even more valuable for customers and hostel
partners as more members join the network. As outlined in our Capital Markets
Day we expect continued growth of our social network to drive growth in
revenue, margins and EBITDA, which coupled with an asset light operating model
will drive increased operating leverage and strong cash conversion.
Overall, I continue to believe that our business is well positioned and firmly
on track to deliver the medium-term targets set presented at our Capital
Markets Day in November 2022.
Gary Morrison
Chief Executive Officer
21 March 2023
Financial Review: Caroline Sherry
2022 2021 2022 2021
Net bookings 4.8m 1.5m Basic loss per share (14.71) cent (30.96) cent
Net revenue €69.7m €16.9m Adjusted EBITDA profit/(loss)* €1.3m (€17.3m)
Net average booking value (ABV)* €14.90 €12.11 Adjusted EBITDA margin* 2% -102%
Gross merchandise value (GMV)* €470.1m €116.7m Adjusted loss per share* (5.97) cent (22.12) cent
Direct marketing costs per net booking* €8.63 €8.53 Cash and cash equivalents €19.0m €25.3m
Direct marketing costs as a % of net revenue* 59% 76% Adjusted free cash flow absorption* (521)% (131)%
Operating expenses €83.1m €49.5m Net asset position €52.2m €67.1m
Operating loss for the year €13.6m €33.1m
Loss for the year €17.3m €36.0m
*The Group uses Alternative Performance Measures (APMs) which are non-IFRS
measures to monitor the performance of its operations and of the Group as a
whole. These APMs along with their definitions are provided in the Appendix 1
of the Annual Report.
Revenue
Revenue for the period was €69.7m, an increase of 312% compared to 2021
(2021: €16.9m) driven by strong booking demand as key markets recovered and
travel restrictions eased.
The Group's net bookings totalled 4.8m (2021: 1.5m). Net Average Booking Value
(ABV), the average value paid by a customer for a net booking, increased by
23% in 2022 (2021: 30% increase) to €14.90 (2021: €12.11), driven
predominantly 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 and longer length of stay
bookings.
Net GMV, which is the gross transaction value of bookings on our platform less
cancellations, totalled €470.1m in 2022 (2021: €116.7m).
The deferred revenue provision at year end totalled €3.0m (2021: €1.0m),
and accounts for bookings with a free cancellation option, where the
cancellation date has not yet passed. Cancellation rates have normalised post
COVID-19 and we have noted a higher portion of customers opting for the
flexibility of a free cancellation booking option, post COVID-19.
Operating expenses
Operating expenses before impairment totalled €83.1m (2021: €49.5m), with
€28.6m of the €33.6m yearly increase driven by an increase in direct
marketing spend, as a result of recovering booking demand. Total marketing
spend was €42.2m in 2022 (2021: €13.8m) with direct marketing costs
totalling €41.4m (2021: €12.8m). Direct marketing costs as a percentage of
net revenue improved to 59% (2021: 76%) due to a decline in cancellation rates
and an increase in conversion. H1 2022 marketing spend was elevated driven by
Omicron where we experienced lower conversion rates in destinations where some
level of restrictions persisted and higher cancellation rates. Marketing costs
normalised in H2 2022 at circa 50-55%. This was due to a combination of normal
travel patterns resuming in primary markets and the app-centric social
strategy driving marketing efficiencies, with more customers booking in iOS
and Android applications.
The Group's operating loss amounted to €13.6m (2021: €33.1m), a year on
year decrease of €19.5m. This was primarily driven by a combination of an
increase in net revenue of €52.8m, offset by an increase in direct marketing
costs of €28.6m and in staff costs of €2.9m (excluding the impact of
capitalised development labour). The remaining cost base remains largely
consistent year on year as the Group continues its focus of maintaining our
operating cost base and eliminating unnecessary spend.
The Group also incurred a foreign exchange loss of €0.7m (2021: loss
€0.4m) which arose due to the strengthening of the US dollar against the
Euro.
Adjusted EBITDA profit of €1.3m (2021: loss of €17.3m) was driven by
strong booking recovery.
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 €0.8m of exceptional cost items in 2022. €0.5m related to a final
settlement paid to the founder of Counter App Limited, in respect of an exit
from their shareholders' agreement, and €0.3m in relation to settlement
costs for the final stage of a group-wide reorganisation (2021: €0.6m). The
new structure organises the Group's marketing, product, development and
analytics employees into autonomous growth teams.
Share based payment
The Group has incurred a total share-based payment expense of €2.4m (2021:
€2.2m) relating to equity settled share-based payment transactions.
€0.7m (2021: €0.7m) relates to costs incurred for the Group's Long-Term
Incentive Plan ("LTIP") schemes. The 2019 LTIP grant which was due to vest in
2022, did not vest.
€1.7m (2021: €1.4m) has been recognised in relation to the Group's
Restricted Share awards ("RSU") scheme. In February 2022 50% of the RSU share
award granted in 2021, in lieu of a cash bonus, vested and the remaining 50%
vested in February 2023 (February 2023: 1,027,653 shares vested, February
2022: 1,184,211 shares vested).
During 2022 the Company granted a new RSU award to selected employees,
including the Executive Directors and members of the management team. A total
of 3,339,084 nil cost awards were granted. These awards will vest after three
years dependent upon the participant being employed by Hostelworld as of the
vesting date and satisfactory personal performance.
The balance of the award expense is in relation to the Save As You Earn
("SAYE") scheme.
€2.4m (2021: €nil) was transferred from the share-based payment reserve to
retained earnings for expired and exercised share-based awards.
Earnings per share
Basic loss per share for the Group was 14.71 cent (2021: 30.96 cent).
Adjusted loss per share was 5.97 cent per share (2021 loss per share: 22.12
cent per share). During 2022, the company issued 1.2m shares to satisfy SAYE
and restricted share awards granted by the Company at a value €0.01 per
share. The weighted average number of shares in the period was 117.3m (2021:
116.3m) and the total number of shares at the balance sheet date was 117.5m
(2021: 116.3m).
Finance costs
The Group incurred €4.3m of finance costs in 2022 (2021: €3.5m). Cash
interest of €1.3m (2021: €nil) was paid to HPS Investment Partners LLC (or
subsidiaries or affiliates thereof). Under the terms of the agreement the
Group elected to capitalise all interest into the loan balance in year 1 of
the facility. In year 2 the Group has elected to capitalise 4% and pay cash
interest of a margin of 5% plus Euribor.
Taxation
The Group corporation tax charge for 2022 is €0.2m (2021: €0.2m) and
primarily relates to our UK, Spanish and Portuguese operations where tax
losses from our Irish operations cannot be utilised.
The Group is carrying a deferred tax asset of €9.2m (2021: €8.4m). The
current year deferred tax credit of €0.8m (2021: €0.8m) relates to a
deferred tax asset recognised in the current year 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. Future taxable profits allowing recoverability of the deferred tax
asset have been estimated using the Board approved 2023 budget and further
four-year outlook. 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 Group has availed of the Irish Revenue tax warehousing scheme and deferred
payment of all Irish employer taxes from February 2021 to March 2022. The
total amount warehoused at 31 December 2022 was €9.4m (2021: €8.0m). The
Group has agreed with the Irish Revenue Commissioners to not repay any balance
due on the warehoused facility until April 2024. The Group will incur an
interest charge of 3% from 01 May 2023 on the outstanding warehoused
liability. The Group continues to monitor and comply with the appropriate
Revenue guidelines applicable to this scheme.
Development labour
Total intangible asset additions amount to €4.5m (2021: €4.3m) relating to
work performed on our social strategy, platform modernisation and a new app
2.0 rolled out in 2022. This balance includes €2.1m (2021: €1.7m) of staff
costs capitalised during the year. The year on year increase is due to the
volume of time spent in 2021 on experimentation and other non capitalisable
work, such as migrating to the cloud.
Liquidity and financing
At the balance sheet date cash and cash equivalents totalled €19.0m (2021:
€25.3m), including €750k (2021: €750k) of restricted cash relating to a
rental guarantee in place. The Group has maintained strong discipline over its
costs, and during peak trading in spring and summer 2022 the Group generated
cash.
The Group has borrowings of €31.1m (2021: €28.2m). In February 2021 the
Group signed a €30m 5-year term loan facility with certain investment funds
and accounts of HPS Investment Partners LLC (or subsidiaries or affiliates
thereof). An amount of €28.8m, net of original issue discount, was drawn
down on 23 February 2021. The facility bears interest at a margin of 9% per
annum over EURIBOR. The Group will look to refinance the facility in 2023 to
obtain lower margin interest rate costs.
Related parties
Related party transactions are disclosed in note 23 of the Group's Annual
Report and Financial Statements.
Dividend
The Board will not 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.
Caroline Sherry
Chief Financial Officer
21 March 2023
HOSTELWORLD GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
Notes €'000 €'000
Revenue 3 69,690 16,901
Operating expenses before impairment 4 (83,113) (49,515)
Impairment of intangible assets 10 - (367)
Reversal of impairment of trade receivables 18 129
Share of results of associate (206) (225)
Operating loss (13,611) (33,077)
Finance costs 7 (4,301) (3,501)
Loss before taxation (17,912) (36,578)
Taxation credit 8 649 562
Loss for the year attributable to the equity owners of the parent Company
(17,263) (36,016)
Basic and diluted loss per share (euro cent) 9 (14.71) (30.96)
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
€'000 €'000
Loss for the year (17,263) (36,016)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (11) 32
Total comprehensive income for the year attributable (17,274) (35,984)
to equity owners of the parent Company
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
2022 2021
Notes €'000 €'000
Non-current assets
Intangible assets 10 73,358 79,390
Property, plant and equipment 735 293
Deferred tax assets 11 9,174 8,352
Investment in associate 980 1,186
Cash and cash equivalents 12 750 750
84,997 89,971
Current assets
Trade and other receivables 3,246 2,002
Corporation tax 22 18
Cash and cash equivalents 12 18,212 24,517
21,480 26,537
Total assets 106,477 116,508
Issued capital and reserves attributable to equity owners of the parent
Share capital 13 1,175 1,163
Share premium 13 14,328 14,328
Other reserves 6,432 6,475
Retained earnings 30,308 45,140
Total equity attributable to equity holders of the parent Company 52,243 67,106
Non-current liabilities
Trade and other payables 14 9,438 8,049
Borrowings 15 30,869 28,209
40,307 36,258
Current liabilities
Trade and other payables 14 12,863 12,795
Lease liabilities 547 86
Borrowings 15 244 -
Corporation tax 273 263
13,927 13,144
Total liabilities 54,234 49,402
Total equity and liabilities 106,477 116,508
The financial statements were approved by the Board of Directors and
authorised for issue on 21 March 2023 and signed on its behalf by:
Gary
Morrison
Caroline Sherry
Chief Executive
Officer
Chief Financial Officer
Hostelworld Group plc registration number 9818705 (England and Wales)
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Share capital Share premium Retained earnings Other reserves Total
Notes €'000 €'000 €'000 €'000 €'000
Balance at 1 January 2021 1,163 14,328 81,156 1,218 97,865
Total comprehensive income for the year - - (36,016) 32 (35,984)
Issue of warrants 15 - - - 3,073 3,073
Credit to equity for equity settled share-based payments - - - 2,152 2,152
Balance at 31 December 2021 1,163 14,328 45,140 6,475 67,106
Issue of shares 13 12 - - - 12
Total comprehensive income for the year - - (17,263) (11) (17,274)
Credit to equity for equity settled share-based payments - - - 2,399 2,399
Transfer of exercised and expired share-based awards - - 2,431 (2,431) -
Balance at 31 December 2022 1,175 14,328 30,308 6,432 52,243
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
Notes 2022 2021
€'000 €'000
Cash flows from operating activities
Loss before tax (17,912) (36,578)
Amortisation and depreciation 11,597 12,411
Impairment of intangible assets 10 - 367
Share of results of associate 206 225
Net profit on disposal of leases (1) (793)
Net loss on disposal property, plant and equipment 1 492
Finance expense 7 4,301 3,501
Employee equity settled share-based payment expense 2,396 2,162
Changes in working capital items:
Increase in trade and other payables 1,457 5,074
Increase in trade and other receivables (1,244) (321)
Cash generated from/ (used by) operations 801 (13,460)
Interest paid (including lease interest) (1,370) (155)
Income tax paid (180) (136)
Net cash used in operating activities (749) (13,751)
Cash flows from investing activities
Acquisition / development of intangible assets 10 (4,597) (4,397)
Purchases of property, plant and equipment (196) (75)
Net cash used in investing activities (4,793) (4,472)
Cash flows from financing activities
Deferred consideration - (345)
Proceeds from borrowings 15 - 28,800
Transaction costs relating to borrowings 15 - (862)
Repayment of borrowings 15 - (1,164)
Repayments of obligations under lease liabilities (752) (1,160)
Net cash (used in)/ from financing activities (752) 25,269
Net (decrease)/increase in cash and cash equivalents (6,294) 7,046
Cash and cash equivalents at the beginning of the year 25,267 18,189
Effect of foreign exchange rate changes (11) 32
Cash and cash equivalents at the end of the year 12 18,962 25,267
HOSTELWORLD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. General Information
Hostelworld Group plc, hereinafter "the Company", is a public limited Company
incorporated in the United Kingdom on the 9 October 2015 under the Companies
Act and is registered in England and Wales. The registered office of the
Company is One Chamberlain Square, Birmingham, B3 3AX, United Kingdom.
The Company and its subsidiaries (together "the Group") provide software and
data processing services that facilitate hostel, B&B, hotel and other
accommodation bookings worldwide.
The Company's shares are quoted on Euronext Dublin and the London Stock
Exchange.
The financial information, comprising of the consolidated income statement,
consolidated statement of comprehensive income, consolidated statement of
financial position, consolidated statement of changes in equity, consolidated
statement of cash flows and related notes, has been taken from the
consolidated financial statements of Hostelworld Group plc ("Company") for the
year ended 31 December 2022, which were approved by the Board of Directors on
21 March 2023. The financial information does not constitute statutory
accounts within the meaning of sections 435(1) and (2) of the Companies Act
2006 or contain sufficient information to comply with the disclosure
requirements of International Financial Reporting Standards ("IFRS").
An unqualified report on the consolidated financial statements for the year
ended 31 December 2021 has been given by the auditors, Deloitte Ireland LLP.
It did not include reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and did not
contain any statement under section 498 (2) or (3) of the Companies Act 2006.
The consolidated financial statements will be filed with the Registrar of
Companies, subject to their approval by the Company's shareholders at the
Company's Annual General Meeting on 09 May 2023.
2. Going Concern
The Directors, after making enquiries, have a reasonable expectation that the
Group and Company has adequate resources to continue operating as a going
concern for the foreseeable future.
Since the beginning of the COVID-19 pandemic, the Group has maintained strong
discipline over its cost base and cash reserves, with trading and cash
forecasts being prepared on a weekly basis. Actions taken in the current
period by the Directors to preserve the Group's cash position include the
non-payment of cash dividends, the elimination of all non-essential operating
costs including marketing, recruitment, travel and other variable overheads,
the employment of a procurement manager to closely monitor and challenge
contract spend in place, the non-payment of cash bonuses and the issuance of a
restricted stock option in lieu of a cash bonus to employees, exiting our long
term lease commitment facilities in favour of smaller office spaces across our
locations, organisational redesigns and associated headcount reductions, and
Government COVID-19 supports in Ireland which were availed of until February
2022, as well as warehousing of Irish employer and employee taxes incurred to
March 2022.
The 2023 budget has been prepared on a 12-month calendar basis, with the Board
also approving a further four-year outlook, which has also been considered
within going concern to capture a period of one year from date of signing.
Revenue and marketing cost projections within Budget 2023 have been developed
by triangulating three different models, where each model output has helped to
validate the others.
1. Regional level forecasting reflecting an easing of the remaining
travel restrictions in place. From 2020 through 2022 we can evidence a
correlated increase in revenue when borders reopen. We have assumed a full
recovery to pre-pandemic booking levels in 2023 in our largest markets, with
other markets taking longer. Forecasting at a regional level allows us to
forecast specific bed prices, booking models, geographic mix and seasonality
effectively in our modelling;
2. Channel mix between free and paid customers where assumptions are
made based on volume of new customer acquisitions, cost of customer
acquisitions and anticipated bookings based on marketing spend;
3. Modelling new and returning customers by using statistical models
built using over 15 years of customer data. This rich customer cohort data set
enables us to model recurring revenue streams, with a high degree of
predictability. We layer in additional knowledge on new customer acquisition
costs and expected economics between free and paid customers.
Forecasting at this regional and channel level also allows us to adjust for
bed price inflation and cost of living pressures. These risks are somewhat
mitigated as our target 18-34 year old population typically have the means and
the flexibility to travel, tending to view it as a 'rite of passage' rather
than purely discretionary spend. Hostels are a cost-effective means to travel
and our strategy focusses on customers connecting on a free platform that we
provide.
We have assumed in Budget 2023 a modest contraction in our ABV year on year,
provisioning for unit bed price deflation versus 2022 and increased volume
from Asian markets, where bed prices are lower. We have modelled modest price
inflation in our operating costs. We have not assumed any revenue from
partnerships such as Roamies, Goki and Counter in our financial modelling.
Climate related risks can impact our business as a customer may not want to
travel, a hostel may be forced to close, or an area is not accessible. The
budgeting process has incorporated all operating costs relating to our
sustainability roadmap, as well as the cost of future emission reductions and
offsets. Following an assessment completed by the Group, the budget does not
contain any other liabilities, provisions or contingent liabilities relating
to climate change. Revenue cashflows included in the budgeting process have
captured for example the impacts of adverse weather conditions experienced by
the Group in 2022 as we model based on historic run rates at a country and
seasonal level.
In addition to our base budget for 2023, we have prepared three additional
scenarios that depict different recovery levels and trading volumes. An upside
scenario tracks an increase in revenue and operating expenses. A downside
scenario includes reduced revenue while maintaining the same level of
operating spend. A worst-case includes further reduced revenue with a
reduction in operating cost spend to mitigate. Under all scenarios, the Group
has sufficient cash reserves available and remains compliant with financial
covenants under its current term loan facility agreement with HPS Investment
Partners LLC (or subsidiaries or affiliates thereof). The Group has also set
out in its viability statement within the annual report additional scenarios
considered by the Group in its assessment of going concern.
The directors took steps to ensure adequate liquidity is available to the
Group for the duration of the pandemic and recovery period. On 19 February
2021 the Group signed a €30m five-year term loan facility with certain
investment funds and accounts of HPS Investment Partners LLC (or subsidiaries
or affiliates thereof). An amount of €28.8m was received on 23 February
2021. The key features of the facility are as follows:
· 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).
· Financial covenants comprise (1) adjusted net leverage
(Hostelworld has to ensure that total net debt is no more than 3.0 x adjusted
EBITDA from 31 December 2023 to 30 September 2024, and no more than 2.5 x
adjusted EBITDA from 31 December 2024 onwards); and (2) minimum liquidity
(Hostelworld has to ensure that at close of business on the last business day
of each month until it is testing the adjusted net leverage ratios there is
free cash in members of the Group which have guaranteed repayment of the
facility of at least €6.0 million).
· Security on the facility includes the share capital of the Group,
the bank accounts of the Group and the Group's intellectual property.
We were in compliance with our minimum liquidity covenants at 31 December
2022.
At this point in time, the consequences of the current unrest in Ukraine are
uncertain. We have not experienced a significant impact to our revenue during
2022, and we continue to monitor any development in the conflict, and the
impact to the Group closely. The Group has no operations in either Russia or
Ukraine and total forecasted revenues for 2022 in these regions was less than
0.01% of the Group's net revenue. No revenue has been budgeted for these
countries in 2023.
Having considered the Group's Board approved 2023 budget, cash flow forecasts
prepared for 12 months from 21 March 2023, current and anticipated trading
volumes, current and anticipated levels of cash and debt, together with
mitigating actions available, the Directors are satisfied that the Group and
Company has sufficient resources to continue in operation for the foreseeable
future, a period of not less than 12 months from the date of this report.
Accordingly, they continue to adopt the going concern basis in preparing the
Group financial statements.
3. Revenue & Segmental analysis
The Group is managed as a single business unit which provides software and
data processing services that facilitate hostel, hotel and other accommodation
worldwide, including ancillary on-line advertising revenue.
The Directors determine, and present operating segments based on the
information that is provided internally to the Chief Executive Officer, who is
the Company's Chief Operating Decision Maker ("CODM"). When making resource
allocation decisions, the CODM evaluates booking numbers and average booking
value. The objective in making resource allocation decisions is to maximise
consolidated financial results.
The CODM assesses the performance of the business based on the consolidated
adjusted loss after tax of the Group for the year. This measure excludes the
effects of certain income and expense items, which are unusual by virtue of
their size and incidence, in the context of the Group's ongoing core
operations, such as the impairment of intangible assets and one-off items of
expenditure.
All revenue is derived wholly from external customers and is generated from a
large number of customers, none of whom is individually significant.
The Group's major revenue-generating asset class comprises its software and
data processing services and is directly attributable to its reportable
segment operations. In addition, as the Group is managed as a single business
unit, all other assets and liabilities have been allocated to the Group's
single reportable segment. There have been no changes to the basis of
segmentation or the measurement basis for the segment profit or loss.
Revenue split by country, is dependent on the location of the hostel or
property. Hostelworld has completed its software and data processing services
with. No single country, year on year, contributes 10% or more of total
revenue. Our top five countries year on year account for 38% of overall
revenue (2021: 43%) relating to USA and key European destinations. Revenue
split by continent is presented as follows:
2022 2021
€'000 €'000
Europe 45,936 10,713
Americas 15,719 5,213
Asia, Africa and Oceania 8,035 975
Total revenue 69,690 16,901
Revenue arising within Ireland, the country of domicile, amounted to €1,795k
(2021: €492k). Disaggregation of revenue is presented as follows:
2022 2021
€'000 €'000
Technology and data processing fees 69,363 16,849
Advertising revenue and ancillary services 327 52
Total revenue 69,690 16,901
In the year ended 31 December 2022, the Group generated 100% (2021: 100%) of
its revenues from the technology and data processing fees that it charged to
accommodation providers.
As at 31 December 2022, €3,005k of revenue relating to free cancellation
bookings has been deferred (2021: €1,020k).
Revenue is recognised at the time the reservation is made in respect of
non-refundable commission on the basis that the Group has met its performance
obligations at the time the booking is made. In respect of the free
cancellation product, which offers the traveller the opportunity to make a
booking on a free cancellation basis and to receive a refund of their deposit
in certain circumstances, such related revenue is not recognised until the
last cancellation date has passed as one party can withdraw from the contract
until such a date has passed. Deferred revenue is expected to be recognised
within twelve months of initial recognition.
The Group's non-current assets are located in Ireland, Australia, the United
Kingdom, Portugal, and China. Non-current assets are disaggregated as follows:
2022 2021
€'000 €'000
Total non-current assets 84,997 89,221
Analysed as:
Ireland 83,825 87,799
Australia 980 1,186
United Kingdom 20 32
Portugal 156 165
China 16 39
4. Operating Expenses excluding Impairment
Loss for the year has been arrived at after charging/(crediting) the following
operating costs:
2022 2021
Notes €'000 €'000
Marketing expenses 42,233 13,792
Staff costs 18,078 15,101*
Credit card processing fees 2,047 573
Loss on disposal plant, property and equipment 1 492
Net profit on disposal of leases 14 (1) (793)
Exceptional items 5 835 588
FX loss 714 419
Other administrative costs 7,609 6,932*
Total administrative expenses 71,516 37,104
Depreciation of tangible fixed assets 11 968 1,519
Amortisation of intangible fixed assets 10 10,629 10,892
Total operating expenses excluding impairment 83,113 49,515
*An amount of €445k has been re-presented in the prior year between staff
costs and other administrative costs relating to third party contractors
engaged by the Group to assist on development labour projects for a period of
time.
Included in staff costs are government assistance amounts totalling €376k
(2021: €1,771k) for a subsidy received under the Employment Wage Subsidy
Scheme in Ireland. Prior year amounts also include €15.9k received for
furloughed employees under the Coronavirus Job Retention Scheme in the UK.
Included within marketing expenses are direct marketing costs of €41,393k
(2021: €12,763k). Other administration costs include rent and rates, legal
and professional, training and recruitment, website maintenance and security,
ecommerce and data analytics.
Included within operating expenses is a total credit of €184k (2021: €nil)
in relation to an R&D tax credit claimed in respect of projects completed
in 2021.
5. Exceptional Items
2022 2021
€'000 €'000
Merger and acquisition costs - (127)
Litigation settlements 519 -
Restructuring costs 316 715
Total 835 588
In the current 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. Current and prior year restructuring costs primarily
relate to staff costs incurred as part of a restructure to a simpler and more
efficient growth orientated organisational structure. The new structure
organises the Group's marketing, product, development and analytics employees
into autonomous growth teams. The restructure concluded in 2022. Prior year
merger and acquisition credit of €127k relates to a release of costs
previously accrued for due to a revision of estimate for professional fees
incurred on related service.
6. Staff Costs
The average monthly number of people employed (including Executive Directors)
was as follows:
2022 2021
Average number of persons employed:
Administration and sales 130 110
Development and information technology 109 116
Total 239 226
The aggregate remuneration costs of these employees is analysed as follows:
2022 2021
Notes €'000 €'000
Staff costs comprise:
Wages and salaries 14,638 12,378
Termination benefits - exceptional items 218 672
Social security costs 1,987 1,367
Pensions costs 432 460
Other benefits 687 442
Share option charge 2,396 2,162
20,358 17,481
Capitalised development 10 (2,062) (1,708)
labour
Total 18,296 15,773
7. Finance Costs
2022 2021
Notes €'000 €'000
Interest on lease liabilities 31 102
Finance costs - HPS facility 15 4,243 3,344
Finance costs - other 27 55
Total 4,301 3,501
8. Taxation
2022 2021
Notes €'000 €'000
Corporation tax:
Current year charge 183 372
Adjustments in respect of prior years (10) (178)
Total 173 194
Origination and reversal of temporary differences 11 (822) (756)
Total tax credit for the year (649) (562)
Corporation tax is calculated at 12.5% (2021: 12.5%) of the estimated taxable
profit for the year. The Irish 12.5% corporation tax rate has been used as
this is the rate at which most of the Group's profits will be taxed. Taxation
for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions. The corporation tax charge relates primarily to
our UK, Portuguese and Spanish operations where tax losses from our Irish
operations cannot be utilised. The charge for the year can be reconciled to
the consolidated income statement as follows:
2022 2021
€'000 €'000
Loss before tax on continuing operations (17,912) (36,578)
Tax at the Irish corporation tax rate of 12.5% (2021: 12.5%) (2,239) (4,572)
Effects of:
Tax effect of expenses that are not deductible in determining taxable profit 1,672 1,556
Tax effect of losses not utilised 480 3,173
Tax effect of losses utilised (34) -
Tax effect of income taxed at different rates 201 50
Depreciation less than capital allowances (53) (130)
Effect of different tax rates of subsidiaries operating in other jurisdictions 156 295
Recognition of deferred tax asset (822) (756)
Adjustments in respect of prior years (10) (178)
Total (649) (562)
In 2022 the Group had an unrecognised deferred tax asset of €4,607k (2021:
€4,127k). No deferred tax asset was recognised in the current or prior year
for unused trading tax losses as it was not considered probable that the Group
will be able to utilise the deferred tax asset for these losses over a
five-year period based on the profit or loss set out within the Group's 2023
budget and further four-year outlook. Unrecognised deferred tax assets relate
to Irish trading losses and have no expiry date.
9. Loss per Share
Basic loss per share is computed by dividing the loss for the year after tax
available to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the year.
2022 2021
Weighted average number of shares in issue ('000s) 117,338 116,321
Loss for the year (€'000s) (17,263) (36,016)
Basic loss per share (euro cent) (14.71) (30.96)
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 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.
2022 2021
Weighted average number of ordinary shares in issue ('000s) 117,338 116,321
Effect of dilutive potential ordinary shares:
Share options ('000s) - -
Weighted average number of ordinary shares for the purpose of diluted earnings 117,338 116,321
per share ('000s)
Diluted loss per share (euro cent) (14.71) (30.96)
10. Intangible Assets
The table below shows the movements in intangible assets for the year:
Goodwill Domain Technology Affiliates Contracts Capitalised Development Total
Names
€'000 €'000 €'000 €'000 €'000 €'000
Cost
Balance at 1 January 2021 47,274 214,708 14,100 5,500 18,021 299,603
Additions - - - - 4,397 4,397
Disposals for the year - - (52) - - (52)
Balance at 31 December 2021 47,274 214,708 14,048 5,500 22,418 303,948
Additions - 71 15 - 4,511 4,597
Balance at 31 December 2022 47,274 214,779 14,063 5,500 26,929 308,545
Accumulated amortisation and impairment
Balance at 1 January 2021 (29,426) (150,488) (13,922) (5,500) (14,015) (213,351)
Charge for year - (7,810) (119) - (2,963) (10,892)
Disposals for the year - - 52 - - 52
Impairment recognised - - - - (367) (367)
Balance at 31 December 2021 (29,426) (158,298) (13,989) (5,500) (17,345) (224,558)
Charge for year - (7,813) (32) - (2,784) (10,629)
Balance at 31 December 2022 (29,426) (166,111) (14,021) (5,500) (20,129) 235,187
Carrying amount
At 31 December 2021 17,848 56,410 59 - 5,073 79,390
At 31 December 2022 17,848 48,668 42 - 6,800 73,358
Capitalised development cost additions during the year comprised of internal
staff costs of €2,062k (2021: €1,708k) and other internally generated
additions of €2,449k (2021: €2,689k). Development costs have been
capitalised in accordance with IAS 38 Intangible Assets and are therefore not
treated, for dividend purposes, as a realised loss. Hostelworld continue to
utilise affiliate contracts to generate revenue and continue to pay affiliate
partner commissions.
Impairment review
The carrying value of the capitalised development costs balance at 31 December
2022 is €6,800k (2021: €5,073k). Prior year impairment charge of €367k
relates to an impairment of a specific project following a management decision
to cease ongoing investment.
The carrying value of the goodwill balance at 31 December 2022 is €17,848k
(2021: €17,848k) and relates to an investment in Hostelworld.com Limited by
the Group in 2009. Goodwill, which has an indefinite useful life, is subject
to annual impairment testing, or more frequent testing if there are indicators
of impairment. Following impairment testing based on the assumptions below,
no impairment was recognised for goodwill in the current or prior year.
The carrying value of the Group's domain names and certain technology assets,
referred to henceforth as 'intellectual property' at 31 December 2022 is
€48,668k (2021: €56,410k). Following impairment testing based on the
assumptions below, no impairment was recognised for the Group's intellectual
property in the current or prior year.
11. Deferred Taxation
Deferred tax assets primarily relating to temporary differences between the
carrying value of intangible assets and their tax base.
2022 2021
€'000 €'000
Opening balance 8,352 7,596
Credited to the consolidated income statement 822 756
Closing balance 9,174 8,352
The deferred tax credit for the year ended 31 December 2022 of €822k (2021:
€756k) relates to a deferred tax asset created in the current year for
capital allowances not utilised and available for future offset. Deferred tax
is determined using tax rates and laws enacted or substantively enacted by the
reporting date. The total tax charge in future periods will be affected by any
changes to the applicable tax rates in force in jurisdictions in which the
Group operates and other relevant changes in tax legislation. Deferred tax
assets are recognised to the extent that it is probable that future taxable
profits will be available against which any unused tax losses and unused tax
credits can be utilised.
12. . Cash and Cash equivalents
2022 2021
€'000 €'000
Non-current assets
Cash and cash equivalents 750 750*
Total 750 750
Current assets
Cash and cash equivalents 18,212 24,517*
Total 18,212 24,517
*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)" the Group has changed the presentation of cash and
cash equivalents which are not available for use for the period ended 31
December 2022. The amount of €750k, which relates to a rental guarantee in
place, has been classified in non-current assets as the guarantee is in place
for a period of longer than 12 months after balance sheet date. As the amount
is held in a bank account which can be accessed by the Group the amount has
been disclosed as a cash and cash equivalent.
Balance of cash and cash equivalents comprise cash and short-term bank
deposits only.
13. Share capital
No of shares of €0.01 each Ordinary shares Share premium Total
(Thousands) €'000 €'000 €'000
At 1 January 2021 and 31 December 2021 116,321 1,163 14,328 15,491
Share issue - 22 February 2022 1,184 12 - 12
Share issue - 30 September 2022 6 - - -
At 31 December 2022 117,511 1,175 14,328 15,503
The Group has one class of ordinary shares which carries 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 €0.01 each in the capital of Hostelworld (equivalent to 2.85% of
Hostelworld's issued share capital at the time of warrants issue). As at 31
December 2022 no warrants had been exercised. Further detail is included
within note 15.
On 22 February 2022, the company issued 1,184,211 shares to satisfy restricted
share awards granted by the Company at a value €0.01 per share.
On 30 September 2022, the company issued 6,070 shares in relation to the 2019
SAYE at a value of €0.01 per share.
14. Trade and other payables
2022 2021
€'000 €'000
Non-current liabilities
Payroll taxes 9,438 8,049
Total 9,438 8,049
The Group has availed of the Irish Revenue tax warehousing scheme and deferred
payment on all Irish employer taxes arising during the period from February
2021 to March 2022. Total amount warehoused at 31 December 2022 amounted to
€9,438k (2021: €8,049k). The Group continues to liaise with Irish Revenue
on the matter and comply with all appropriate guidelines applicable. At 31
December 2022 amounts warehoused are recognised as non-current reflecting the
intention and unconditional right not to repay balance within 12 months. The
Group have agreed with the Irish Revenue to commence a repayment plan in April
2024.
2022 2021
€'000 €'000
Current liabilities
Trade payables 3,944 5,425
Accruals and other payables 5,136 6,113
Deferred revenue 3,201 1,036
Payroll taxes 582 221
Total 12,863 12,795
At 31 December 2022, €3,005k of revenue was deferred relating to free
cancellation bookings (2021: €1,020k), €178k was deferred relating to
featured listings (2021: €16k) and €18k was deferred relating to Roamies
(2021: €nil).
Included in accruals and other payables is a credit provision amounting to
€150k (2021: €1,300k) for vouchers and incentives to customers for use on
future bookings reflecting the expected value attached to vouchers. Reduction
year on year relates to utilisation rates which materialised during 2022 where
a reduced cohort of customers used their vouchers than what the Group have
historically experienced and takes account of a large volume of vouchers
expiring in Q1 2023 for customers who obtained a voucher instead of a refund
during COVID-19. Also included in accruals and other payables is an amount of
€1,778k (2021: €2,017k) relating to customers who have cancelled their
free cancellation booking but have not yet been refunded.
15. Borrowings
2022 2021
€'000 €'000
Opening Balance 28,209 1,164
Received on Drawdown - 28,800
Repayments - (1,164)
Loan issuance costs - issue of warrants - (3,073)
Transaction costs relating to borrowings - (862)
Finance costs 4,243 3,344
Finance interest paid (1,339) -
Total 31,113 28,209
On 19 February 2021 the Group signed a €30m 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 was
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.
The facility agreement includes the following financial covenants: (1)
adjusted net leverage (Hostelworld has to ensure that total net debt is no
more than 3.0 x adjusted EBITDA from 31 December 2023 to 30 September 2024,
and no more than 2.5 x adjusted EBITDA from 31 December 2024 onwards); and (2)
minimum liquidity (Hostelworld has to ensure that at close of business on the
last business day of each month until it is testing the adjusted net leverage
ratios there is free cash in members of the Group which have guaranteed
repayment of the facility of at least €6.0 million).
The lenders have the right to require repayment of the facility if Hostelworld
is subject to a change in control and Hostelworld has the option to repay the
facility early. If the facility is repaid for any reason within the first four
years of its term a prepayment fee is payable as follows: if repayment is made
(1) in the first two years after drawdown then all interest from the date of
repayment to the second anniversary of drawdown is due, plus a 2% fee of the
amount repaid, (2) between the second and the third anniversary of drawdown
the fee is 2% of the amount repaid and (3) between the third and fourth
anniversary of drawdown the fee is 1% of the amount repaid.
Hostelworld and its principal trading subsidiaries will guarantee repayment of
the facility and amounts payable under it and provide the lenders with a
customary security package over their assets. Cash dividends to shareholders
are permitted provided total net debt is below 2.0 x adjusted EBITDA, no
events of default are ongoing and the above stated minimum liquidity covenant
will be complied with after taking into account the proposed dividends. The
Group is required to fund any new acquisitions through new equity and/or
through a maximum of 50% of retained excess cashflow. Any acquisition by the
Group of the remaining shareholdings in Goki PTY Limited and Counter App
Limited is required to be funded from cash on the balance sheet.
An amount of €28.8m was received on 23 February 2021, net of original issue
discount.
Issue of warrants:
In connection with the facility, Hostelworld has 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 the lender. The warrants may be exercised at any
time during the term of the loan and for a twelve-month period following its
scheduled termination at an exercise price of €0.01 per ordinary share.
Shares issued will be the same class and carry the same rights as existing
shares. An amount of €3,073k was recorded for the initial recognition of the
warrants calculated on the basis of the market price of the shares on the date
of the agreement 19 February 2021 of €3,106,538 minus the subscription price
of €33,152 (3,315,153 X €0.01). No warrants have been exercised as at 31
December 2022.
1 (#_ftnref1) PIK interest due €3.4m
2 (#_ftnref2) No balance is due on the facility until April 2024, when the
Group will finalise a repayment schedule with the Revenue Commissioners
( 3 (#_ftnref3) ) The data was compiled by independent laboratory testing,
inspection and certification services provider, Bureau Veritas, including
hostels with 27,509 beds across Europe and was benchmarked against a sample of
the average emissions per bed in representative European hotel chains. Bureau
Veritas examined data in 2019, 2020 and 2021, with 2019 figures represented as
the benchmark given capacity constraints during ongoing periods of Covid-19
travel restrictions in 2020 and 2021. Findings show that average carbon
emissions per bed in hotels averages at 1.18 tCO2e, compared with 0.30 tCO2e
in the hostels surveyed as part of the study. tCO2e measures in metric tons
the carbon dioxide equivalent of Scope 1 and Scope 2 emissions of the hostels
and hotels studied. Study source:
www.bureauveritas.co.uk/hostelworld-carbon-impact-analysis
( 4 (#_ftnref4) ) We have offset the cost of all Scope 1, Scope 2 and Scope 3
emissions made by the group. This includes all Scope 3 emissions which are
purchased consumables offset already the companies that we partner with. South
Pole have independently verified our emissions.
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