REG - Hostelworld Grp PLC - Preliminary results for the year ended 31 Dec 2023
21/03/2024 07:00
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RNS Number : 6710H Hostelworld Group PLC 21 March 2024
LEI:213800OC94PF2D675H41
Hostelworld Group plc ("Hostelworld" or the "Group" or the "Company")
preliminary results for the year ended 31 December 2023
A record year, with adjusted EBITDA exceeding market guidance
21 March 2024: Hostelworld, a leading global OTA focused on the hostel market,
is pleased to announce its preliminary results for the year ended 31 December
2023.
Significant developments
· Record full year net GMV and generated revenue
· Leader in Social Travel, with a highly differentiated business
model driving strong growth in App bookings and reduced marketing costs as a %
of revenue
· Robust bookings growth across all regions, a record year for Asia
· Operating costs continue to decline as a % of revenue
· Strong cash conversion driving deleveraging of balance sheet
· Returned the business to profitable earnings per share
· Continued progress of ESG agenda: launched 'Staircase to
Sustainability' framework, awarded 'Investors in Diversity' Silver
accreditation (building on 2022 Bronze) and published the 2nd edition of
'Understanding the carbon impact of hostels vs. hotels' in partnership with
Bureau Veritas validating hostels as more sustainable than hotels
· Strong start to 2024 with positive trends continuing
Financial highlights
· Full year net bookings totalled 6.5m, an increase of 37% year on
year (2022: 4.8m)
· Net GMV €618.7m, an increase of 32% year on year (2022:
€470.1m)
· Net revenue for the period was €93.3m an increase of 34% year
on year (2022: €69.7m)
· Net Average Booking Value ('ABV') of €14.36, a decrease of 4%
year on year (2022: €14.90), a combination of bed price inflation and a
greater proportion of Asian destination bookings
· Direct marketing as a percentage of revenue amounted to 50%
(2022: 58%)
· Operating costs (excluding paid marketing costs, exceptional
costs and share option charges) of €25.3m an increase of €0.4m year on
year, continue to reduce as a % of revenue, 27% (2022: 35%)
· Adjusted EBITDA of €18.4m (2022: €1.3m)
· Profit after tax of €5.1m (2022: €17.3m loss)
· Adjusted EPS 9.91 cent (2022: 5.97 cent loss)
Balance sheet and cash flow
· Total cash as at 31 December 2023 of €7.5m (2022: €19.0m) and
net debt €12.3m (2022: €21.6m)
· Adjusted free cashflow of €13.9m, 75% cash conversion (FY22:
-521% cash conversion), balance of €7.5m revolving credit facility fully
repaid in February 2024
Gary Morrison, Chief Executive Officer, commented:
"I am very pleased to report another strong year of strategic progress for
Hostelworld, which is reflected in our results. Over 2023 we grew market
share, delivered record revenues, and increased operating leverage through a
combination of reduced marketing spend (as a percentage of revenue) and
continued operating cost discipline to deliver €18.4m EBITDA, which exceeded
our guidance range of €17.5m - €18.0m.
This operational delivery coupled with the strong cash conversion
characteristics of our business model and a new €17.5m facility agreed with
Allied Irish Banks, plc in May 2023, enabled us to strengthen our balance
sheet and reduce our finance costs. As of February 2024, we have repaid in
full the €7.5m revolving credit facility drawn down with AIB. Interest on
the remaining term loan is charged at 2.65% over EURIBOR.
I am also proud to report that the Group continues to progress its ESG agenda
and in particular the recent launch of our 'Staircase to Sustainability'
framework with the Global Sustainable Tourism Council. This framework will
help our hostel partners to promote the inherent sustainability advantages of
their hostel accommodation."
Outlook
"With our record performance in 2023 and substantial progress in strengthening
our balance sheet, I believe we are strongly positioned to deliver against our
medium-term financial commitments published at our Capital Markets Day in
November 2022. We have started 2024 with strong momentum, and I feel confident
that we will continue our track record of profitable growth and value creation
for our shareholders."
Analyst Presentation
A presentation will be made to analysts today at 9.00am, a copy of which will
be available on our Group website: http://www.hostelworldgroup.com. If you
would like to dial into the presentation, please contact Powerscourt on the
contact details provided below, or join directly via webcast link provided
below.
Webcast Link
https://brrmedia.news/HSW_FY23 (https://brrmedia.news/HSW_FY23)
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 most travellers go hostelling 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. 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 and headquartered in Ireland, Hostelworld is a well-known
trusted brand with almost 230 employees, hostel partners in over 180
countries, and a long-standing commitment to building a better world. To that
end, our focus over the last few years has been on improving the
sustainability of the hostelling industry. In particular, over the last two
years we have commissioned independent research to validate the category's
sustainability credentials, and recently introduced a hostel specific
sustainability framework which encourages our hostel partners to move to even
more sustainable operations and also provides the data points for our
customers to make more informed decisions about where they stay. In addition,
our customers are now able to offset their trip's carbon emissions should they
wish to do so, and we have maintained our 'Funding Climate Action' label
awarded by South Pole.
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
Introduction
2023 was a year of improved financial performance and strategic development
for Hostelworld. Our differentiated strategy enabled us to achieve record
revenues, grow market share, and deliver adjusted EBITDA earnings ahead of
market guidance. Our mission, to 'help travellers find people to hang out
with', has resonated strongly with our customers, 61% of whom are young solo
travellers (2022 59%), with our innovative 'social' strategy enabling them to
make connections and build a community.
Demand was strong across all key markets and resulted in a year of record
revenue growth. Following a prolonged period of travel restrictions, 2023 was
a milestone year, particularly for Asia, with bookings into this region the
largest in the history of the business. European demand was also particularly
strong, with bookings up +14%, revenue up +21% and bed prices remaining high
throughout the year.
We continued to evolve and enhance our social network product offering during
the year. Initially launched in 2022, enhancements during 2023 focussed on the
customer experience, with improvements to the sign-up process, richer user
profiles, and messaging functionality. As a result, we saw increased
engagement through the app, with 68% of 2023 bookings made by social network
members (2022: 34%). Hostel hosted social events ('Linkups') were launched in
Q2 2023, providing customers with a range of opportunities to connect with
other like-minded travellers and share travel experiences.
We also continued to be disciplined and focussed on costs. I am particularly
pleased to report that operating costs (which exclude paid marketing,
exceptional items and share option charges) remain below 2019 levels (-10%)
and have declined as a % of revenue from 35% in 2019 to 27% in 2023.
Our People
Hostelworld is powered by its people, and we are fortunate to be able to
attract and retain talented and committed staff from a diversity of
backgrounds in all areas of the business. Each contributes to a vibrant
culture in Hostelworld which promotes equality and dignity at work and ensures
everyone feels they belong. The Group's strong performance and strategic
development during 2023 was achieved thanks to their focus, dedication and
innovation, and I would like to express the Board's gratitude for their
efforts.
Sustainability
Ensuring a sustainable future is of paramount importance to all our
stakeholders and is reflected in our company values.
The Group welcomes the second publication of a research report by leading
sustainability and compliance specialist, Bureau Veritas, which confirms that
hostels emit significantly less Scope 1 and Scope 2 emissions (tCO2e) compared
to a typical hotel chain, on a per bed-night basis. Further, the report also
confirms that the average emissions of hostels have reduced year-on-year,
whilst by contrast, hotel emissions have increased.
Hostelling clearly offers consumers a unique opportunity to travel responsibly
and this affords Hostelworld, as the only OTA exclusively promoting hostels, a
distinct competitive advantage. Given its leadership position in the industry,
Hostelworld has a responsibility to promote the inherent sustainable features
of the category and we are committed to fully supporting our hostel partners
journey in recognising and embracing the importance of sustainability. To
achieve this, we have partnered with the Global Sustainable Travel Council
("GSTC") to develop a sustainability measurement and management system unique
to the hostelling category, which went live in January 2024. This 'Staircase
to Sustainability' framework is the first of its kind and is aligned to the
GSTC's sustainability criteria. The framework will allow hostels to showcase
their sustainability credentials and will be of invaluable assistance to our
customers who are looking to minimise their carbon footprint.
Working with our emission reduction advisors South Pole, the Group have been
accredited with the 'Funding Climate Action' label for a third consecutive
year. The label recognises the Group's commitment to reducing and controlling
its own emissions. Hostelworld had minimal scope 1 and 2 emissions of 7 tCO2e
(well below the annual target set by the Group of 30 tCO2e) but is responsible
for increasing scope 3 emissions due to an increase in purchased consumables
relating to paid marketing costs and business travel linked to the growth in
the Group's booking volume.
Capital Structure and Dividend
Our principal objective is to deliver growth in long-term sustainable value
for our shareholders. In May 2023 the Group re-financed a 5-year term loan
facility drawn down with HPS Investment Partners LLC (or subsidiaries or
affiliates thereof) in February 2021 and replaced it with a new 3-year
facility with Allied Irish Banks, plc. This facility is comprised of a €10
million term loan, a €7.5 million revolving credit facility and an undrawn
€2.5 million overdraft. The term loan and RCF each had an initial interest
rate payable of 3.75% over EURIBOR, which subsequently reduced to 2.65% over
EURIBOR as the ratio of net debt to adjusted EBITDA reduced to less than 1
times. Since drawdown in May we have repaid the RCF in full, €5.5m during
2023 and a further €2.0m in February 2024, and we have repaid €2.5m of the
term loan, €1.7m in 2023 and a further €0.8m in 2024.
At 31 December 2023, the Group had warehoused payroll taxes owing to the Irish
Revenue Commissioners of €9.6m, inclusive of interest accruing at 3% per
annum. On 05 February 2024, the Irish Revenue Commissioners announced that the
applicable interest rate would reduce to 0%. The Group continues to work
closely with the Irish Revenue Commissioners to agree a schedule of
repayments. At year-end, the Group agreed to make a repayment of 15% of the
balance owed in May 2024, with monthly repayments of the remaining amounts due
being made for the subsequent three-year period.
The Board continues to believe that the payment of dividends would not be in
the best interests of the business for the foreseeable future.
Governance
I am pleased to report that the Board continues to effectively lead the
business in delivering our strategy, overseeing the culture of Hostelworld and
ensuring meaningful progress continues to be made in the important area of
diversity, equity and inclusion. Critical features of my role as Chair are
ensuring that the Board sets a clear tone from the top and that our governance
procedures are robust. In this regard, I am grateful to be ably supported by
Board colleagues with a wealth of skills and expertise who share a common aim
for the highest standards in corporate governance.
Outlook
Hostelworld is very well positioned with a product offering that resonates
with our customers and a business model underpinned by cost discipline and
operational excellence. We look forward to a year of further progress in 2024
and remain very confident in the Group's long-term ability to drive improved
profitability and create shareholder value.
Michael Cawley
Chairman
20 March 2024
Chief Executive's Review: Gary Morrison
"I am very pleased to report another strong year of strategic progress for
Hostelworld, which is reflected in our results. Going into 2024, we are
strongly positioned to deliver against our medium-term financial commitments.
We have started the new year with strong momentum and I feel very confident
that we will continue our track record of continued profitable growth and
value creation for our shareholders."
Over 2023 we grew market share, delivered record revenues, and increased
operating leverage through a combination of reduced marketing spend (as a
percentage of revenue) and continued operating cost discipline to deliver
€18.4m EBITDA, which exceeded our guidance range of €17.5m - €18.0m. In
particular, I am pleased to report our full year marketing costs as a
percentage of revenue fell from 51% in the first half of the year to 50% on a
full year basis, which demonstrates the ability of our unique app centric
social strategy to grow market share whilst reducing marketing costs.
In parallel we continued to invest in our marketing technology platform, which
enables us to allocate our 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 granular fashion. We also
made solid progress on modernising our platform enabling us to support faster
execution of our growth strategy.
Overall, these results coupled with the strong cash conversion characteristics
of our business model and a new facility agreed with Allied Irish Banks, plc
in May 2023, enabled us to strengthen our balance sheet and reduce our
interest costs. As of 31 December 2023, we have repaid €5.5m of the original
€7.5m revolving credit facility drawn down in May 2023, with interest on the
balance now charged at 2.65% over EURIBOR.
Finally, the Group continues to progress its ESG agenda by managing its low
carbon emissions and being awarded with a 'Funding Climate Action' label by
South Pole, and by collaborating with our hostel partners to promote the
inherent sustainability advantages of hostel accommodation.
Executing our Growth Strategy
During 2023, we continued to execute our highly differentiated social network
growth strategy, consistent with our Company Mission to 'help travellers find
people to hang out with'.
At its core, our social network leverages our customers' booking data to
create chat rooms/channels, accessible via our iOS and Android apps, that
comprise customers who have overlapping stay dates in hostels and host cities.
Hostel-based chat rooms comprise customers who will be staying in the same
hostel on the same dates. City-based chat rooms comprise customers who will be
staying in any hostel in the same city on the same dates, and are further
divided into themes, such as drinks and dancing, walking tours, food etc. This
in turn enables our customers to also find other hostellers to hang out with
who are visiting the same city on the same dates (and who have similar
interests). Collectively, these chat rooms/channels open up to customers who
have opted into the social platform 14 days before check in, and close 3 days
after check out.
Since launching this social network in Q2 2022 we have seen the number of
customers signing up to use the social network (Social Members) steadily
increase and surpass the 1 million mark in late 2023. Moreover, we have seen
that these Social Members are very valuable. On average Social Members make
circa twice the number of bookings and are three times more likely to use the
app over the first 91 days since acquisition compared to non-members.
Collectively, this growth strategy has not only driven market share gains, but
also powered strong growth in app bookings relative to other channels, which
in turn has served to reduce our marketing expenses as a percentage of revenue
over time. These trends have further accelerated in 2023 as we continued to
broaden and strengthen the appeal of our social network to our customers
through improvements to our social network's sign-up process, richer traveller
profiles, and enhanced chat room features.
In particular, during the year we improved our social network sign-up process
on our website to make it easier for customers who used our platform before
the launch of our social network to join the network on their next booking.
This served to increase the number of customers signing up to the network,
which in turn increased the proportion of bookings made by Social Members to
74% by Q4 2023, up from 54% in Q4 2022.
Throughout the year we invested in improving our traveller profiles so that
Social Members can share more about their interests, spoken languages, places
they know well, and other related information. This helps Social Members learn
more about others that they interact with in the chat rooms/channels.
Similarly, we also invested in our chat room functionality to make it easier
for users to track conversations via threads, share their reactions to posts
using emojis, and specifically mention other users using the familiar "@"
notation. Collectively these improvements served to increase engagement on the
platform, with the number of messages sent by social members during 2023 (as a
proxy), increasing by 6.9x year-on-year, versus the growth in the underlying
bookings made by Social Members of 2.8x year-on-year.
Finally, we launched a new platform ('Linkups') mid-year to enable our hostel
partners to publish their catalogue of events to all our customers staying in
the city. These events range from walking tours led by hostel staff members to
open air cinema nights, pub tours, and excursions to local attractions in the
neighbourhood. This is of particular importance to our hostel partners as it
enables them to market their events to a wider audience than they could
achieve alone, and to our customers as it expands the range of activities
while hostelling where they can meet other hostellers to hang out with. While
it is still early in respect of publishing participation figures to date,
especially as we continue to iterate on the platform, and how we present the
content to users in the app, we have been delighted to see strong growth in
the inventory loaded on to the platform by our hostel partners. In particular,
we can report that more than 63% of Social Members who made a booking in Q4
2023 were able to see at least 3 hostel events in their destination city that
they could attend.
Overall, the continued investments in our social strategy during 2023
continues to pay dividends in the form of continued market share growth, where
our bednights grew 30% year-on-year versus an estimated category growth rate
of 8%, and a reduction of marketing expenses as a percentage of revenue which
fell from 51% in H1 2023 to 50% on a full year basis.
This said, we are even more proud to see the tangible difference our social
network is making to our customers lives, when we help them find people to
hang out with, and they post about these experiences on social networks such
as Instagram, TikTok, X and so forth. Over the course of 2023 we've seen
thousands of these stories, videos, and posts, ranging from a single traveller
organising a karaoke bar event in Tokyo with 20 others she'd never met, to
another finding a group of solo travellers who went skydiving together in
Hawaii, and a love story too, with a British couple meeting up in Vietnam
using our platform… who've since moved in together in London. Indeed, we are
very privileged to be enabling these amazing experiences every day, and this
enviable word of mouth effect compounds all the other work that we do. We look
forward to reporting more stories throughout 2024!
Expanding our Inventory Coverage
Over the last 25 years, Hostelworld has taken great pride in providing not
only our customers with a wide selection of competitive hostels, but also
providing our hostel partners with the most profitable customers, at
market-leading competitive commission rates, and superior customer service.
During 2023, we continued to progress our long-term objectives of (i)
strengthening the relationships with our existing hostel partners and (ii)
making it easier for new hostel partners to join our platform.
With COVID-19 travel restrictions firmly in the rear-view mirror, our global
markets team once again went out in the market to meet with our partners
through dedicated Hostelworld conferences, market visits, attendance at
third-party events, and leveraging our privileged partnerships with local
hostel associations. These face-to-face meetings help us meet new hostel
partners, cement our commercial relationships with existing partners, and help
us provide guidance and information to all in getting the most out of our
platform.
Investing in our Platform
Over the course of the year we continued to migrate key services on our
platform to our cloud native architecture. The key services migrated this year
include our payments service, all the sub-systems that support our social
platform, and our customer-facing website. We also began migrating our core
inventory and pricing services to the new cloud native architecture and expect
to complete this work in 2024.
The cloud native approach delivers 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.
We also continue to make improvements in our underlying platform
infrastructure now we can take advantage of cloud-based hosting. This has
reduced the number of single points of failure, made problem
identification/resolution easier, and has improved the scalability and latency
of our services. The process for updating our systems is more automated,
simpler, less disruptive, and less likely to result in an outage. We have
already seen a significant improvement in uptime and manageability as a result
of this and will continue to invest in this area.
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, while making sustainability a
competitive advantage for Hostelworld over time.
As noted in my last letter to shareholders in 2023, we continue to see growth
in the importance of sustainability for all stakeholders in the travel
ecosystem. Within the hostelling category, similar to last year, over half of
our customers indicated that sustainability plays a role in both where and how
they travel. In 2023 however, we now see that 82% of our customers are
actively choosing hostels based on their belief that hostels are the most
sustainable accommodation type. Throughout the year we have also seen growing
demand from our hostel partners for a sustainable management system that
aligns to travel industry standards.
More broadly, we continue to see increasing demands for companies not only to
do more to address the risks of climate change, but also provide more granular
disclosures around their efforts for the same. In particular, we are seeing
the standards maintained and published by the United Nations World Tourism
Organisation and Global Sustainable Tourism Council continuing to evolve, and
increased disclosure requirements driven in large part by the Task Force on
Climate-Related Financial Disclosures.
Taken collectively, it's clear the importance of sustainability in travel is
increasing, and we expect that trend to continue over the coming years.
Consequently, last year we developed and executed our sustainability strategy
as a series of three linked initiatives, and I am confident that the progress
we've made (and will continue to make) will position us strongly as the
sustainability champion of the hostelling category over the years to come.
Our first initiative relates to maintaining a data-driven fact base to allow
us and our hostel partners to promote hostels as the most sustainable
accommodation option available. Once again, we collaborated with Bureau
Veritas to refresh the calculation of scope 1 and 2 emissions of a
representative group of hostels and compared these with the publicly available
emissions data from a representative group of hotel chains. The second edition
of this report (which was published in February 2024) once again indicated
that the hostelling category emits significantly less Scope 1 and Scope 2
emissions (tCO(2)e) on a per bednight basis compared to a one-night stay in a
typical hotel chain. In particular, the report indicates that the
sustainability gap between hostels and hotels has widened still further
year-over-year, with hostels reporting a year-on-year reduction in average
emissions whilst the year-on-year emissions from the hotels analysed shows an
increase. This report is invaluable for both ourselves and our hostel partners
in confirming to our collective target audiences that choosing to stay in
hostels is the most sustainable option.
The second initiative builds on the first by providing a common framework for
hostel partners to not only showcase their sustainability credentials on our
platform, but to also encourage progression towards even more sustainable
operations. Whilst over half of our larger hostels/hostel chains are already
using a sustainable management system, those that are indicate a lack of
standards in the hostelling category overall (making comparisons by travellers
difficult) and those that are not indicate existing systems are both time
consuming and costly. Throughout 2023 we worked closely with our hostel
partners, the GSTC, Bureau Veritas and other relevant bodies to build a set of
hostel-appropriate standards and a reporting platform for all hostels listed
on our platform. This strategy, branded "Staircase to Sustainability",
launched in January 2024 and delivers on three key objectives. Firstly, it
provides a uniform set of tiered standards, aligned to GSTC criteria, for
hostels to present their sustainability credentials. Secondly, it provides a
means for hostels to display adherence to these tiered standards on our
site/apps to our travellers (based on inputs provided by hostel partners) such
that our customers can make informed choices about where to stay. Thirdly, it
provides the impetus for hostels to improve their sustainability operations
over time, and progress through the tiers. We are incredibly excited about
this platform and how it will drive sustainability in our category in 2024 and
beyond.
Our final initiative relates to reducing our own emissions, and I am pleased
to report during 2023 we were awarded the 'Funding Climate Action' label, in
partnership with South Pole. Furthermore, I am pleased to report that in 2023
our scope 1 and 2 emissions totalled 7 tCO(2)e, which is substantially below
the threshold of 30 tCO(2)e/annum target set for 2023. As our business grows
we expect our scope 3 emissions will also grow primarily through increased
paid marketing costs, and employee travel as we come together as a company
(offsites) and travel to meet our hostel partners. In 2024 we plan to review
these scope 3 emissions and set a reduction target which goes beyond the
thresholds stipulated by the SBTi.
Investing in our Employees, Hostel Partners and Communities
Our employee mission is to foster a culture where everyone experiences
personal growth and helps others achieve it too. Similar to companies across
the world, we continue to adjust to the changes in where work is performed. We
believe nurturing our desired culture is key to supporting our approach to
agile working. Consequently, we revised our desired employee behaviours this
year to highlight the importance of Growing Others - building on our belief
that investing in growing others benefits everyone. I am pleased with our
investments in learning and development resources to support the team in
bringing this to life.
We're proud of our work building a highly inclusive workplace culture that
celebrates differences by giving a voice to everyone. Building on initiatives
over the past few years, this year we introduced new policies to support
Fertility Leave, Surrogacy Leave, and Menopause at Work. We saw our efforts
across many parts of this agenda recognised when awarded the Silver
Accreditation by Investors in Diversity. This accolade recognises our
commitment to diversity and inclusion practices. The accreditation is based on
feedback from our team members and their firsthand experiences of the culture
within Hostelworld.
Turning to our hostel partners, our regional hostel conferences provide an
unrivalled opportunity for in-person engagement and knowledge sharing. They
allow us to promote our strategy, share industry trends, and solicit feedback.
In 2023 we held two such events. The first, our Latin American conference,
took place in Bogota in September 2023, our first event in the region since
2019. We also took advantage of being in Colombia to arrange a number of
smaller events and market visits in Colombia and neighbouring markets. A month
later we held our European event in Copenhagen. Both conferences also
attracted prominent speakers from relevant tourism bodies in the regions. This
not only allowed us to celebrate the importance of the hostel sector to
tourism in the region, it allowed us to pave the way for similar future events
in other regions. In addition to these flagship events, we carried out
numerous market visits and city events in key markets across Europe and the
Asia-Pacific region. In parallel, we continued to run webinars covering market
updates, revenue management, product updates, and showcasing our ESG
developments. We continue to run our HOSCAR awards, this year celebrating five
categories including The People Person, The Community Champion, and The Eco
Warrior.
Finally, we're pleased to see people across the business using volunteering
days introduced last year. This leave helps our people to have an impact in
their local communities, whether through activities organised by teams or
individually. Together with our charity partnerships, through both events and
financial support, the variety of activities shows our people are passionate
about making a difference and building a better world.
Summary
Over the course of 2023, we have demonstrated the capacity of our social
network growth strategy to drive profitable growth in market share, and we
have continued to maintain a tight rein over costs. Taken together, this
enabled the Hostelworld team to deliver €18.4m in EBITDA which comfortably
exceeded our last published guidance of €17.5m - €18.0m. I'd therefore
like to take this opportunity to thank each and every one of our employees for
their commitment and hard work in delivering these exceptional results. As I
mentioned in our year-end town hall, I have the privilege of leading a team of
extraordinary people who do extraordinary things.
With our record performance in 2023 and substantial progress in strengthening
our balance sheet, I believe we are strongly positioned to deliver against our
medium-term financial commitments published at our Capital Markets Day in
November 2022. We have started 2024 with strong momentum, and I feel confident
that we'll continue our track record of profitable growth and value creation
for our shareholders.
Gary Morrison
Chief Executive Officer
20 March 2024
Financial Review: Caroline Sherry
2023 2022 2023 2022 2023 2022
Net Bookings 6.5m 4.8m Generated Revenue(1) €93.7m €71.2m Net Revenue(1) €93.3m €69.7m
Net Average Booking Value ("ABV")(2) €14.36 €14.90 Net Gross Merchandise Value ("GMV")(2) €618.7m €470.1m
Direct Marketing Costs as a % of Revenue(2) 50% 58% Operating Expenses €88.4m €83.1m
Operating Profit/(Loss) for the Year €5.0m (€13.6m) Profit/(Loss) for the Year €5.1m (€17.3m) Basic EPS 4.21 cent (14.71) cent
Adjusted EBITDA(2) €18.4m €1.3m Adjusted EBITDA Margin(2) 20% 2% Adjusted EPS(2) 9.91 cent (5.97) cent
Cash and Cash Equivalents €7.5m €19.0m Adjusted Free Cash Flow €13.9m (€6.9m) Cash Conversion 75% (521%)
Net Debt €12.3m €21.6m Net Asset Position €59.2m €52.2m
(1) Generated revenue is gross revenue less cancellations and excludes impact
of deferred revenue. Net revenue is revenue adjusted for deferred revenue,
ancillary revenue streams, vouchers, refunds and other accounting adjustments.
(2)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
which form part of the Annual Report.
"2023 was a record year for Hostelworld, with both net GMV and generated
revenue growing 32% compared to 2022 and net bookings growing 37%. This strong
volume growth, combined with increased operating leverage due to reduced
marketing spend (as a percentage of revenue) and operating cost discipline,
resulted in an adjusted EBITDA which exceeded the upper end of our guidance
range and a return to profit after tax."
Revenue and Operating Profit
Net GMV grew year-on-year to €618.7m (2022: €470.1m) and net bookings
totalled 6.5m, an increase of 37% compared to 2022 (2022: 4.8m) driven by
strong growth across all regions and in particular, Asia. Generated revenue
for the period was €93.7m (2022: €71.2m), an increase of 32%. Net ABV, the
average value paid by a customer for a net booking was €14.36 which
decreased by 4% from 2022 (2022: €14.90), driven by a combination of bed
price inflation and a greater proportion of Asian destination bookings.
Net revenue recognised for the period was €93.3m (2022: €69.7m) after
considering deferred revenue, ancillary revenue streams, vouchers, refunds and
other accounting adjustments. Featured listing advertising revenue, revenue
generated from hostels advertising on our platform, grew to €1.2m (2022:
€0.3m).
Deferred revenue cost of €0.4m (2022: €2.0m), a provision for bookings
made under the free cancellation policy, where a customer can cancel and
receive a refund. Year-on-year reduction driven by 2022, where the balance
sheet provision reflected the Group's recovery post COVID-19 and the return to
normalised levels of free cancellation bookings. The deferred revenue
provision at year end totalled €3.4m (31 December 2022: €3.0m), and
accounts for bookings where the cancellation date has not yet passed. This
provision balance will unwind in 2024.
Operating expenses totalled €88.4m (2022: €83.1m), an increase of €5.3m
year-on-year. The Group had an increase of €5.5m in direct marketing costs
to €46.9m (2022: €41.4m) in part, due to increased booking volume. Direct
marketing costs as a percentage of net revenue reduced to 50% (2022: 58%),
with the Hostelworld app-centric social strategy driving marketing
efficiencies. Credit card fees increased by €0.6m to €2.7m (2022:
€2.1m), directly driven by the increase in booking volumes.
Wage inflation and discretionary compensation primarily, drove an increase in
wages and salaries costs to €19.7m (2022: €17.9m). 2022 costs include the
benefit of €0.4m of COVID-19 subsidy support received from the Irish Revenue
Commissioners, no such subsidy was received in 2023. Offsetting increases in
direct marketing costs, credit card fees, and wages and salaries, was a
reduction of €2.6m in other operating cost lines to €19.1m (2022:
€21.7m).
Group operating profit amounted to €5.0m (2022: loss of €13.6m), a
year-on-year increase of €18.6m. Adjusted EBITDA of €18.4m (2022: €1.3m)
exceeded the upper end of market guidance and represented growth of €17.1m
compared to prior year.
Foreign Exchange
The Group incurred a foreign exchange loss of €0.2m (2022: €0.7m). Current
year loss arose with the strengthening of the US dollar against the Euro in
the second half of the year.
Exceptional Items
Exceptional items warrant separate disclosure due to their nature or
materiality. The Group incurred €3.8m (2022: €0.8m) of exceptional cost
items in 2023.
The Group incurred €3.6m of costs in refinancing the 5-year debt facility
provided by HPS Partners LLP in February 2021. As the facility was repaid
before the end of the 5-year agreement, the Group incurred €2.8m of
accelerated interest costs relating to transaction and warrant costs
capitalised on drawdown, €0.7m of early repayment penalty interest and
€0.1m of exit 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.
Share-Based Payment
The Group incurred a total share-based payment expense of €1.7m (2022:
€2.4m) arising on the issuance of options in accordance with the Group's
Restricted Share Award ("RSU"), Long-Term Incentive Plan ("LTIP") and Save as
you Earn ("SAYE") plan.
Two awards vested in 2023. 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. This grant was made during COVID-19 in lieu
of a cash bonus. On 16 May 2023 the Company issued 1,645,994 shares to satisfy
long-term incentive plan awards in relation to LTIP 2020. 75% of the
performance obligations were satisfied.
In 2024 one LTIP award is set to vest at 100%. The final number of awards that
will vest will be finalised in May 2024.
Earnings per Share
Basic earnings per share for the Group was 4.21 cent (2022: loss per share:
14.71 cent). Adjusted earnings per share was 9.91 cent per share (2022 loss
per share: 5.97 cent per share) with the return to profitability, of both
metrics, reflective of the business's strong recovery post COVID-19.
The weighted average number of shares in the period was 122.0m (2022: 117.3m)
and the total number of shares at the balance sheet date was 123.6m (2022:
117.5m). Increase year on year is due to the vesting of the RSU award (1.0m),
LTIP award (1.7m), SAYE award (0.1m) and warrants (3.3m), a condition of the
HPS debt facility agreement.
Net Finance Costs
The Group incurred €2.6m of finance costs in 2023 (2022: €4.3m), with
interest costs arising on the Group's debt facilities. The decrease in costs
year-on-year is attributable to the refinancing completed in May 2023.
The legacy €30.0m HPS facility was drawn down in February 2021 during
COVID-19 and had an interest rate of 9% per annum over EURIBOR. HPS interest
charges, excluding those classified as exceptional, amounted to €1.6m (2022:
€4.2m), of which cash interest paid totalled €1.1m (2022: €nil), prior
year interest costs were capitalised as PIK interest.
A new 3-year facility was signed with AIB in May 2023. This facility is
comprised of a €10.0m term loan, a €7.5m revolving credit facility ("RCF")
and an undrawn €2.5m overdraft. 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, and in October 2023 this further reduced to 2.65% as the
ratio of Net Debt to adjusted EBITDA was less than 1 times as at 30 September
2023. Total AIB interest charges amounted to €0.7m (2022: €nil), of which
cash interest paid totalled €0.6m (2022: €nil). The Group also incurred
interest charges of €0.2m (2022: €nil) on its debt warehoused with the
Irish Revenue Commissioners, at a rate of 3% since May 2023. On 05 February
2024 it was announced that this is reduced to 0% with the reduction in rate
applying to any interest amounts accrued to date.
The Group also incurred interest charges of €0.2m (2022: €nil) on its debt
warehoused with the Irish Revenue Commissioners, at a rate of 3% since May
2023. On 05 February 2024 it was announced that this is reduced to 0% with the
reduction in rate applying to any interest amounts accrued to date.
Current and Deferred Taxation
The Group corporation tax charge for 2023 is €0.2m (2022: €0.2m) and
primarily relates to our international operations where we have an office or
branch where tax losses from our Irish operations cannot be utilised.
During 2023 an additional deferred tax asset of €6.4m was recognised (2022:
€0.8m). At 31 December 2023 the carrying value of deferred tax assets
amounted to €15.5m (2022: €9.2m). 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. In
2023 the Group returned to an operating profit of €5.0m (2022: operating
loss of €13.6m). The Group has forecasted a growing profit in each of the
years from 2024 to 2028, driven by growth in bookings and revenue, maintaining
direct marketing cost as a % of revenue at current levels, continued cost
discipline and reduced interest charges.
Debt Warehoused
The Group availed of the Irish Revenue Commissioners tax warehousing scheme
and warehoused €9.4m by deferring payment of all Irish employer taxes from
February 2021 to March 2022. Total amount warehoused at 31 December 2023 was
€9.6m (2022: €9.4m), including an interest charge incurred of 3.0% on the
balance since 01 May 2023. The Group has agreed initial repayment terms with
the Irish Revenue Commissioners of a 15% downpayment in May 2024, followed by
regular monthly repayments thereafter over a 3-year period.
In February 2024 the Irish Revenue Commissioners announced that 0% interest
would apply to debt warehoused, with the reduction in rate applying to any
interest amounts accrued to date. The Group continues to monitor and comply
with the appropriate Revenue guidelines applicable to this scheme and will
formalise its repayment plan in May 2024.
Development Labour
Total development labour intangible asset additions amounted to €4.0m during
2023 (2022: €4.5m). This asset arose due to work completed delivering our
social strategy, modernising our platforms, and revamping our hostel
activations process. This balance includes internal development labour of
€2.9m (2022: €2.0m) relating to staff costs capitalised during the year,
and external development labour of €1.1m (2022: €2.5m) relating to
external contractors who have specialist skills. The year-on-year increase in
internal staff costs is driven by the nature of the work completed in 2023,
compared to 2022 where time was spent on migrating to the cloud and other
non-capitalisable work.
Net Debt and Financing
At the balance sheet date net debt totalled €12.3m (2022: €21.6m). Net
debt is comprised of cash of €7.5m (2022: €19.0m), and debt facilities
relating to bank borrowings of €10.2m (2022: €31.1m) comprising of an RCF
of €2.0m and a term loan of €8.2m, and warehoused taxes of €9.6m (2022:
€9.5m).
Reduction year-on-year in net debt driven by refinancing of the legacy
COVID-19 debt facility in May 2023 to a new 3-year facility with AIB.
Altogether €17.4m was drawn down from AIB, net of arrangement fee, and
utilised to repay the former debt facility held with HPS. In total HPS
repayments made across April and May totalled €34.5m, comprising of €30.0m
principal and €4.5m PIK. Balance of repayment to HPS comprised of the
Group's cash reserves. Since drawdown in May 2023 we have repaid the RCF in
full, €5.5m during 2023 and a further €2.0m in February 2024, and we have
repaid €2.5m of the term loan, €1.7m in 2023 and €0.8m in 2024. Our
adjusted free cash flow of 75% (2022: absorption of 521%) represents a return
to a more normalised cash generation ratio for the Group, as we recover from
COVID-19, and a deleverage of our borrowing facilities as set out above.
Impact of New Accounting Standards
New accounting standards and amendments to existing standards implemented in
2023 did not have a material impact on the Group.
Related Parties
Related party transactions are disclosed in note 24 of the Group's Annual
Report and Financial Statements.
Investor Relations
The Group has a proactive approach to investor relations. The release of our
annual and interim results, along with quarterly trading updates, provide
regular information regarding our performance and are accompanied by
presentations, webcasts and conference calls. In May 2023, an AGM was held
providing engagement channels for our shareholders to send advance questions
to the Board, with all details relating to the AGM published on the Company's
website.
We held a number of investor roadshows and attended industry conferences.
These engagements provided us an opportunity for the management team to meet
existing and/or potential investors and analysts in a concentrated set of
meetings. This direct feedback and input on the investor community's
perspective of the Company is reflected upon to ensure that our investor
relations communications remain meaningful and effective.
We also engage regularly with AIB, our debt partners, since the successful
refinancing facility was signed in May 2023.
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.
Caroline Sherry
Chief Financial Officer
20 March 2024
HOSTELWORLD GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2023 Exceptional (Note 5) 2023 Total 2022 2022 Exceptional (Note 5) 2022 Total
Pre-exceptional Pre-exceptional
Notes €'000 €'000 €'000 €'000 €'000 €'000
Revenue 3 93,264 - 93,264 69,690 - 69,690
Operating expenses 4 (88,178) (253) (88,431) (82,278) (835) (83,113)
Reversal of impairment of trade receivables 14 - 14 18 - 18
Share of results of associate 137 - 137 (206) - (206)
Operating profit/(loss) 5,237 (253) 4,984 (12,776) (835) (13,611)
Finance income 53 - 53 - - -
Finance costs 7 (2,581) (3,526) (6,107) (4,301) - (4,301)
Profit/(loss) before taxation 2,709 (3,779) (1,070) (17,077) (835) (17,912)
Taxation credit 8 6,206 - 6,206 649 - 649
Profit/(loss) for the year attributable to the equity owners of the parent 8,915 (3,779) 5,136 (16,428) (835) (17,263)
Company
Basic earnings/(loss) per share (euro cent) 4.21 (14.71)
Diluted earnings/(loss) per share (euro cent) 4.07 (14.71)
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2022
€'000 €'000
Profit/(loss) for the year 5,136 (17,263)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (24) (11)
Total comprehensive income for the year attributable to equity owners of the 5,112 (17,274)
parent Company
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
Notes 2023 2022
€'000 €'000
Non-current assets
Intangible assets 10 66,533 73,358
Property, plant and equipment 818 735
Deferred tax assets 11 15,530 9,174
Investment in associate 1,117 980
Cash and cash equivalents 12 750 750
84,748 84,997
Current assets
Trade and other receivables 3,275 3,246
Corporation tax 91 22
Cash and cash equivalents 12 6,714 18,212
10,080 21,480
Total assets 94,828 106,477
Issued capital and reserves attributable to equity owners of the parent
Share capital 13 1,236 1,175
Share premium 13 14,425 14,328
Other reserves 14 2,918 6,432
Retained earnings 40,599 30,308
Total equity attributable to equity holders of the parent Company 59,178 52,243
Non-current liabilities
Non-current debt
Debt warehoused 15 6,425 9,438
Borrowings 17 4,807 30,869
Lease liabilities 35 -
11,267 40,307
Current liabilities 15 3,204 -
Current debt 17 5,340 244
Debt warehoused
Borrowings
Trade and other payables
Trade payables 16 3,314 3,944
Deferred revenue 16 3,891 3,201
Accruals and other payables 16 7,859 5,718
Lease liabilities 545 547
Corporation tax 230 273
24,383 13,927
Total liabilities 35,650 54,234
Total equity and liabilities 94,828 106,477
The financial statements were approved by the Board of Directors and
authorised for issue on 20 March 2024 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 2023
Share capital Share premium Retained earnings Other reserves Total
Notes €'000 €'000 €'000 €'000 €'000
Balance at 01 January 2022 1,163 14,328 45,140 6,475 67,106
Issue of shares 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
Issue of shares 13 61 97 - - 158
Total comprehensive income for the year - - 5,136 (24) 5,112
Credit to equity for equity settled share- based payments 14 - - - 1,665 1,665
Transfer of exercise, vesting or expiry of warrants 14 - - 3,073 (3,073) -
Transfer of exercised and expired share-based awards 2,082 (2,082) -
Balance at 31 December 2023 1,236 14,425 40,599 2,918 59,178
HOSTELWORLD GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
Notes 2023 2022
€'000 €'000
Cash flows from operating activities
Profit/(loss) for the year 5,136 (17,263)
Taxation (6,206) (649)
Loss before tax (1,070) (17,912)
Amortisation and depreciation 4 11,774 11,597
Share of results of associate (137) 206
Net profit on disposal of leases 4 (3) (1)
Net loss on disposal of property, plant and equipment 4 - 1
Financial income (53) -
Finance expense 7 2,581 4,301
Finance expense (exceptional) 7 3,526 -
Employee equity settled share-based payment expense 1,682 2,396
Changes in working capital items:
Increase in trade and other payables 2,392 1,457
Increase in trade and other receivables (28) (1,244)
Cash generated from operations 20,664 801
Interest paid (including lease interest) (3,036) (1,370)
Interest received 59 -
Income tax paid (262) (180)
Net cash used in operating activities 17,425 (749)
Cash flows from investing activities
Acquisition / development of intangible assets 10 (3,986) (4,597)
Purchases of property, plant and equipment (101) (196)
Net cash used in investing activities (4,087) (4,793)
Cash flows from financing activities
Drawdown of borrowings 17 17,369 -
Transaction costs relating to borrowings 17 (170) -
Repayment of borrowings 17 (41,233) -
Proceeds received on issue of warrants 13 33 -
Proceeds received on issue of shares 13 98 -
Repayments of obligations under lease liabilities (909) (752)
Net cash (used in)/ from financing activities (24,812) (752)
Net decrease in cash and cash equivalents (11,474) (6,294)
Cash and cash equivalents at the beginning of the year 18,962 25,267
Effect of foreign exchange rate changes (24) (11)
Cash and cash equivalents at the end of the year 12 7,464 18,962
HOSTELWORLD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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 2023, which were approved by the Board of Directors on
20 March 2024. 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 2023 has been given by the auditors, KPMG. 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 02 May 2024.
New accounting standards and amendments to existing standards implemented in
2023 did not have a material impact on the Group.
2. Going Concern
Hostelworld's business activities, together with the main factors likely to
affect its future development and performance, are described in the Chief
Executive's Review. After due consideration and review, the Directors have a
reasonable expectation that the Group has adequate resources to continue in
operational existence for a period of at least 12 months from the date of
approval of the Financial Statements. The Group therefore continues to adopt
the going concern basis in preparing its Financial Statements.
3. Revenue and Segmental Analysis
The Group is managed as a single business unit which provides software and
data processing services that facilitate hostel, hotel and other accommodation
worldwide, including ancillary on-line advertising revenue.
The Directors determine, and present operating segments based on the
information that is provided internally to the Chief Executive Officer, who is
the Company's Chief Operating Decision Maker ("CODM"). When making resource
allocation decisions, the CODM evaluates booking numbers and average booking
value. The objective in making resource allocation decisions is to maximise
consolidated financial results.
The CODM assesses the performance of the business based on the consolidated
adjusted profit after tax of the Group throughout 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 of 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. No single country, year on year, contributes 10% or more of total
revenue. Our top five countries year on year account for 36% of overall
revenue (2022: 38%) relating to USA, Australia, and key European destinations.
Revenue split by continent is presented as follows:
2023 2022
€'000 €'000
Europe 56,400 45,936
Americas 17,311 15,719
Asia, Africa and Oceania 19,553 8,035
Total revenue 93,264 69,690
Revenue arising within Ireland, the country of domicile, amounted to €1,780k
(2022: €1,795k).
Disaggregation of revenue is presented as follows:
2023 2022
€'000 €'000
Technology and data processing fees 92,079 69,363
Advertising revenue and ancillary services 1,185 327
Total revenue 93,264 69,690
In the year ended 31 December 2023, the Group generated 99% (2022: 100%) of
its revenues from the technology and data processing fees that it charged to
accommodation providers.
As at 31 December 2023, €3,438k of revenue relating to free cancellation
bookings has been deferred (2022: €3,005k). Revenue is recognised at the
time the reservation is made in respect of non-refundable commission on the
basis that the Group has met its performance obligations at the time the
booking is made. In respect of the free cancellation product, which offers the
traveller the opportunity to make a booking on a free cancellation basis and
to receive a refund of their deposit in certain circumstances, such related
revenue is not recognised until the last cancellation date has passed as one
party can withdraw from the contract until such a date has passed. Deferred
revenue is expected to be recognised within twelve months of initial
recognition.
Advertising revenue and revenue generated from other services are recognised
over the period when the service is performed. The Group's non-current assets
are located in Ireland, Australia, Portugal, China, and the United Kingdom.
Non-current assets are disaggregated as follows:
2023 2022
€'000 €'000
Total non-current assets 84,748 84,997
Analysed as:
Ireland 83,552 83,825
Australia 1,117 980
United Kingdom 21 20
Portugal 49 156
China 9 16
4. Operating Expenses
Profit for the year has been arrived at after charging/(crediting) the
following operating costs:
2023 2022
Notes €'000 €'000
Marketing expenses 47,557 42,233
Staff costs 19,743 17,906
Credit card processing fees 2,672 2,047
Loss on disposal of plant, property and equipment - 1
Net profit on disposal of leases (3) (1)
Exceptional items 5 253 835
FX loss 156 714
Other administrative costs 6,279 7,781
Total administrative expenses 76,657 71,516
Depreciation of tangible fixed assets 963 968
Amortisation of intangible fixed assets 10 10,811 10,629
Total operating expenses 88,431 83,113
Other administrative costs are net of external contractor costs capitalised of
€829k (2022: €705k).
Included within marketing expenses are paid marketing costs of €46,881k
(2022: €41,393k). Remainder of marketing expenses relate to brand marketing
costs. Other administration costs include rent and rates, legal and
professional, training and recruitment, website maintenance and security and
data analytics.
Included within operating expenses is a total credit of €240k (2022:
€184k) in relation to a research and development ("R&D") tax credit
claimed in respect of projects completed in 2022 and 2021. Included in staff
costs are government grant amounts totalling €nil (2022: €376k) for a
subsidy received under the Employment Wage Subsidy Scheme in Ireland.
5. Exceptional Items
2023 2022
€'000 €'000
Litigation settlements - 519
Restructuring costs 3,779 316
Total 3,779 835
Included in exceptional items are operating costs of €253k (2022: €835k)
and finance costs of €3,526k (2022: €nil).
In the current year, exceptional items primarily relate to costs incurred on
refinancing of the HPS facility totalling €3.6m, broken down as €0.7m of
early repayment penalty interest, €0.1m of transaction costs relating to
exiting the old facility and €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, but unwound
in full on refinancing.
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.
6. Staff Costs
The average monthly number of people employed (including Executive Directors)
was as follows:
2023 2022
Average number of persons employed:
Administration and sales 123 130
Development and information technology 108 109
Total 231 239
The aggregate remuneration costs of these employees is analysed as follows:
2023 2022
Notes €'000 €'000
Staff costs comprise:
Wages and salaries 17,880 14,405
Termination benefits - exceptional items - 218
Social security costs 2,115 1,987
Pensions costs 462 432
Other benefits 538 687
Share option charge 1,682 2,396
22,677 20,125
Capitalised development labour 10 (2,934) (2,001)
Total 19,743 18,124
Capitalised development labour of €2,934k (2022: €2,001k) relates to
employee costs capitalised. Increase year on year relates to the nature of
projects completed in 2023, with 2022 work including non capitalisable work
such as migrating to the cloud and social experiments.
7. Finance Costs
Notes 2023 2022
€'000 €'000
Interest on lease liabilities 39 31
Finance costs - HPS facility 17 1,641 4,243
Finance costs - AIB facility 17 701 -
Finance costs - exceptional 5 3,526 -
Finance costs - warehoused debt and other 200 27
Total 6,107 4,301
Exceptional finance costs primarily relate to acceleration of interest charges
on HPS as a result of the refinancing of the HPS facility in May 2023.
Included in 'finance costs - warehoused debt and other' is €190k recognised
during 2023 (2022: €nil) on the balance of warehoused payroll tax
liabilities. Further detail is included in note 15. On 05 February 2024 the
Irish Revenue Commissioners announced that the applicable rate of interest on
these will reduce to 0%, with any amounts already paid being refunded or
accrued being written off.
8. Taxation
2023 2022
Notes €'000 €'000
Corporation tax:
Current year charge 130 183
Adjustments in respect of prior years 20 (10)
Total 150 173
Origination and reversal of temporary differences 11 (6,356) (822)
Total tax credit for the year (6,206) (649)
Corporation tax is calculated at 12.5% (2022: 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
international 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:
2023 2022
€'000 €'000
Loss before tax on continuing operations (1,070) (17,912)
Tax at the Irish corporation tax rate of 12.5% (2022: 12.5%) (134) (2,239)
Effects of:
Tax effect of expenses that are not deductible in determining taxable profit
1,169 867
Tax effect of losses not utilised - 480
Tax effect of losses utilised (421) (34)
Tax effect of income taxed at different rates 87 201
Depreciation and amortisation (less)/greater than capital allowances (654) 752
Effect of different tax rates of subsidiaries operating in other jurisdictions 83 156
Net recognition of deferred tax asset (note 11) (6,356) (822)
Adjustments in respect of prior years 20 (10)
Total (6,206) (649)
9. Earnings/(Loss) per Share
Basic earnings/(loss) per share is computed by dividing the profit/(loss) for
the year after tax available to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year.
2023 2022
Weighted average number of shares in issue ('000s) 121,990 117,338
Profit(loss) for the year (€'000s) 5,136 (17,263)
Basic earnings/(loss) per share (euro cent) 4.21 (14.71)
Diluted earnings/(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. Share options and share awards are the
Company's only potential dilutive ordinary shares. In the prior year ordinary
shares potentially issuable from share-based payment arrangements are
anti-dilutive due to the loss in the financial period meaning there is no
difference between basic and diluted earnings per share.
2023 2022
Weighted average number of ordinary shares in issue ('000s) 121,990 117,338
Effect of dilutive potential ordinary shares:
Share options ('000s) 4,366 -
Weighted average number of ordinary shares for the purpose of diluted earnings 126,356 117,338
per share ('000s)
Diluted earnings/(loss) per share (euro cent) 4.07 (14.71)
10. Intangible Assets
Additions during the period included capitalised development costs of
€3,953k (2022: €4,511k) of which internal development labour amounted to
€2,934k (2022: €2,001k) for staff costs capitalised during the year, and
external development labour of €1,019k (2022: €2,510k) relating to
external contractors who have specialist skills. Other additions to intangible
assets were software additions of €33k (2022: €15k) and an acquisition of
a domain name of €Nil (2022: €71k). There were no disposals. Offsetting
additions is a total amortisation charge of €10,811k for the period ended 31
December 2023 (31 December 2022: €10,629k).
11. Deferred Taxation
Intangible assets Property, plant and equipment Losses and interest relief Total
At 01 January 2022 8,225 127 - 8,352
Credit/(charge) to income statement 835 (13) - 822
At 01 January 2023 9,060 114 - 9,174
Credit/(charge) to income statement 995 (69) 5,430 6,356
At 31 December 2023 10,055 45 5,430 15,530
Deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available in future periods. Current year recognition
of deferred tax assets is reliant upon the Board approved 2024 budget and
four-year outlook which covers a period to 31 December 2028 which outlines the
Directors expectations on future profitability of the business. Whilst the
forecasts include inherent estimation uncertainty, the Group have determined
that there would be sufficient taxable income generated to realise the benefit
of the deferred tax assets. 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 25% over the next five years before there is a risk that the deferred tax
asset is not fully recovered in that period.
12. Cash and Cash Equivalents
2023 2022
€'000 €'000
Non-current assets
Cash and cash equivalents 750 750
Total 750 750
Non-current asset amount of €750k, relates to a rental guarantee in place
which has been classified in non-current assets as the guarantee is in place
for a period of longer than 12 months after the 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.
Current assets 6,714 18,212
Cash and cash equivalents
Total 6,714 18,212
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 31 December 2022 117,511 1,175 14,328 15,503
Share issue - Restricted share award 20 February 2023 1,028 10 - 10
Warrants issue to HPS, 29 March 2023 3,315 33 - 33
Share issue - LTIP, 16 May 2023 1,646 17 - 17
Share issue - SAYE 139 1 97 98
At 31 December 2023 123,639 1,236 14,425 15,661
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.
As part of legacy debt facility drawn down during COVID-19 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). On 29 March
2023 HPS exercised their warrants and 3,315,153 shares were issued.
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.
On 16 May 2023 the Company issued 1,645,994 shares to satisfy long term
incentive plan awards in relation to LTIP 2020 at a value €0.01 per share.
A number of shares were issued at €0.01 per share regarding the 2020 SAYE
scheme. On 09 October 2023, the Company issued 122,665 shares, on 20 October
2023 the Company issued 7,867 shares and on 04 December 2023 the Company
issued a further 7,868 shares.
14. Other Reserves
The analysis of movement in reserves is shown in the statement of changes in
equity.
Reconciliation and movement of amounts included in other reserves are set out
below:
Foreign currency translation reserve Share-based payment reserve Warrant reserve Total other reserves
€'000 €'000 €'000 €'000
Balance at 01 January 2022 40 3,362 3,073 6,475
Exchange differences on translation of foreign operations (11) - - (11)
Transfer of exercised and expired share-based awards - (2,431) - (2,431)
Credit to equity for equity settled share-based payments - 2,399 - 2,399
Balance at 31 December 2022 29 3,330 3,073 6,432
Exchange differences on translation of foreign operations (24) - - (24)
Transfer of exercised and expired share-based awards - (2,082) - (2,082)
Transfer on exercise, vesting or expiry of warrants - - (3,073) (3,073)
Credit to equity for equity settled share-based payments - 1,665 - 1,665
Balance at 31 December 2023 5 2,913 - 2,918
The warrant reserve related to the warrants exercisable with HPS Investment
Partners LLC (or subsidiaries or affiliates thereof). On 29 March 2023
3,315,153 shares were issued to HPS on issuance of warrants.
15. Warehoused Payroll Taxes
2023 2022
€'000 €'000
Non-current liabilities
Warehouse payroll taxes 6,425 9,438
Total 6,425 9,438
2023 2022
€'000 €'000
Current liabilities
Warehouse payroll taxes 3,204 -
Total 3,204 -
Total warehoused payroll taxes 9,629 9,438
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 warehoused liability as at 31 December 2023 was €9,629k (2022:
€9,438k), including an interest charge incurred of 3% on the outstanding
warehoused liability debt since 01 May 2023. On 05 February 2024 the Irish
Revenue Commissioners announced that the applicable rate of interest on these
will reduce to 0%, with any amounts already paid being refunded or accrued
being written off.
The Group has agreed initial repayment terms with the Irish Revenue
Commissioners of a 15% downpayment in May 2024, following by regular monthly
repayments thereafter over a 3-year period which is reflected in the
classification of the liability between current and non-current. The Group
continues to monitor and comply with the appropriate Revenue guidelines
applicable to this scheme.
16. Trade and Other Payables
2023 2022
€'000 €'000
Current liabilities
Trade payables 3,314 3,944
Accruals and other payables 7,272 5,136
Deferred revenue 3,891 3,201
Payroll taxes (non-warehoused) 587 582
Total 15,064 12,863
At 31 December 2023, €3,438k of revenue was deferred relating to free
cancellation bookings (2022: €3,005k), €434k was deferred relating to
featured listings (2022: €178k) and €19k was deferred relating to Roamies
(2022: €18k).
17. Borrowings
2023 2022
€'000 €'000
Opening Balance 31,113 28,209
Repayments (HPS) (34,066) -
Drawdown (AIB) 17,369 -
Repayments (AIB) (7,167) -
Transaction costs relating to borrowings (AIB) (170) -
Finance costs 2,342 4,243
Finance costs (exceptional items) 2,827 -
Finance interest paid (2,101) (1,339)
Total 10,147 31,113
On 09 May 2023, the Group refinanced its credit facilities with AIB plc. This
included cancelling and fully repaying its previous facilities held by
Hostelworld Group PLC of €30,000k with HPS Investment Partners LLC (or
subsidiaries or affiliates thereof). Hostelworld.com Limited entered into a
new facility of €20,000k comprising of a €2,500k undrawn overdraft, a
€7,500k RCF facility and a €10,000k term loan facility. An amount of
€17,369k was drawn down, net of arrangement fee.
The purpose of the facility is to meet the day-to-day working capital
requirements of the Group. 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 reduced further in October 2023 to 2.65% over EURIBOR as Net
Debt to adjusted EBITDA was less than 1 times. Relating to the facilities,
during the year the Group repaid €5,500k of its RCF facility and repaid
€1,666k of its term loan with AIB.
Financial covenants attached to the facility are set out as follows:
1. Maintaining a minimum cash balance on hand of €6,000k;
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 Group did not breach the covenants during the period.
The prior facility related to a €30,000k five-year term loan facility with
HPS drawn down in February 2021. On 05 April 2023 the Group repaid €10,000k
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 Exceptional items. The April and
May repayments totalled €34,066k which comprise of €30,000k principal and
€4,066k PIK interest capitalised as at 31 December 2023. Balance of PIK
relating to 2023 included in Finance interest paid. Between the first and
third anniversaries of drawdown of the HPS facility, Hostelworld elected to
capitalise 4.0% per annum of the accruing interest with the balance of the
interest during that period.
Finance interest paid during the year totalled €2,101k (2022: €1,339k),
comprised of HPS cash interest of €1,067k (2022: €1,339k), AIB cash
interest of €583k (2022: €nil), and HPS PIK €451k (2022: €nil).
Borrowings are classified in the consolidated statement of financial position
as:
2023 2022
€'000 €'000
Non-current borrowings 4,807 30,869
Current borrowings 5,340 244
Total 10,147 31,113
Issue of warrants:
In connection with the HPS facility, 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 were exercisable 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). On 29 March 2023 HPS exercised their
warrants and 3,315,153 shares were issued.
18. Events After the Balance Sheet Date
On 05 February 2024 the Irish Revenue Commissioners announced that the
applicable rate of interest on warehoused payroll tax balances outstanding
will reduce to 0%, with the reduction in rate applying to any interest amounts
accrued to date. This is a non-adjusting event.
There have been no other significant events after the balance sheet date.
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