TIDMHSW
RNS Number : 9817Q
Hostelworld Group PLC
24 June 2020
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS
RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN
WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE
UNITED STATES, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND OR THE
REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH
RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.
THE INFORMATION COMMUNICATED IN THIS ANNOUNCEMENT CONTAINS
INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION
596/2014 (" MAR ").
Hostelworld Group plc
("Hostelworld", the "Company" or the "Group")
Trading and Financing Update
Hostelworld, a leading global OTA focused on the hostel market,
today provides the following update on trading and financing in
light of the continued disruption generated by the COVID-19
outbreak.
Trading update
On 27 April 2020, the Group confirmed that Q1 2020 EBITDA
decreased by c. EUR4.8 million when compared to the same period for
2019.
COVID-19 has driven a sharp reduction in trading volumes in H1
2020. Management has taken swift and decisive action to reduce
costs and minimise cash burn. As a result of the Group's programme
of cost reductions and cash conservation initiatives, and
anticipating minimal booking volumes to the end of Q2 2020, the
Group expects an H1 2020 EBITDA loss in the range of EUR8 million
to EUR9 million (H1 2019 EBITDA: EUR8.9 million).
Given the continued uncertainty caused by COVID-19 (in
particular the difficulty in anticipating the timing of recovery),
the Group is unable to provide guidance on its results for the
financial year ending 31 December 2020.
Based on the Group's customer survey data and internal data
provided by its affiliate hostels showing that the vast majority of
hostels expect to be open by the end of July 2020, the directors
expect that pent-up demand will lead to a quick recovery as travel
restrictions ease. The hostel industry is adapting to operating
with COVID-19 measures in the short term (such as a potential
reduction in dormitory capacity, a potential reduction in pricing
due to increased competition with budget hotels in certain markets
and growing demand for online or contactless operations solutions,
such as Goki's contactless check in and guest communication
system), while the directors expect the industry to deliver long
term growth over time.
Financing update
Cash conservation
The Group's net cash position remains strong, with c. EUR15.2
million of immediately available cash on hand as at 31 May 2020 (31
December 2019: EUR19.4 million).
As announced on 26 March 2020, the Group has implemented several
cash conservation measures to reduce variable and fixed costs.
Given the limited demand experienced since mid-March, marketing
costs have been reduced to match near term revenue and all 'brand'
marketing spend has been cut. The Group has also taken significant
and immediate actions to reduce its operating and staff costs
(including via the use of government furlough schemes,
redundancies, reduced working hours, and cutting all discretionary
spend). These measures are expected to result in a c. EUR21 million
annualised reduction in marketing costs (by the end of FY2020,
compared to Q1 2020 levels), and have resulted in a EUR9 million
annualised reduction in operating expenses [1] compared to a 31
March 2020 baseline level. Compared to the 31 March 2020 baseline
level, the reduction in wage and salary costs is equal to c. 23%
and the reduction in other operating costs is equal to c. 29%. The
Group has also deferred certain payroll taxes in Ireland, a
proportion of the Board and Executive Management salaries and is
converting a portion of the Group's free cancellation cash
liability arising in respect of customer refunds due in FY2020 into
credits (amounting to an estimated EUR0.8 million). The impact of
these 2020 cash deferrals until H1 2021 is estimated at c. EUR9
million in aggregate.
The combined net effect of these measures is that the Group's
estimated monthly cash costs in H2 2020 are expected to reduce to
c. EUR1.9 million.
These cost reduction and cash conservation measures have been
achieved whilst focusing on the delivery of the Group's "Roadmap
for Growth" initiatives, which has been accelerated over the past 3
months. The Group has delivered a number of core platform
enhancements in this period relating to improved marketing
capabilities, user experience and inventory competitiveness.
As at 31 May 2020, total customer deposits related to bookings
made under the free cancellation policy amounted to EUR3.6 million,
of which EUR2.9 million relate to bookings already cancelled.
Banking facilities
The Group had no existing debt facilities before the COVID-19
crisis. However, the Group is pleased to announce it has now agreed
terms for a three-year revolving credit facility to provide up to
EUR7 million of additional liquidity. The availability of the
facility is staggered in three tranches (of EUR2.5 million, EUR2
million and EUR2.5 million) and drawdown of each tranche is subject
to the achievement by the Group of certain minimum revenue targets
in the previous three month period.
The Group is also pleased to announce that it has agreed terms
for a short-term EUR3.5m financing facility which it intends to use
for the purposes of discharging a limited number of large partner
invoices.
Proposed Placing
Hostelworld is separately announcing today its intention to
conduct a non-pre-emptive placing of new ordinary shares (the
"Placing"). The Company intends to issue new ordinary shares
representing up to approximately 19.9% of the Company's existing
ordinary share capital.
Together with the proposed new banking facilities, the Placing
will materially strengthen the Group's position in an uncertain
environment. The Board has concluded that the Placing is in the
best interests of shareholders and will promote the long-term
success of Hostelworld.
Dividend policy
The Board recognises the importance to shareholders of dividends
and whilst it believes that cancelling the final dividend in
respect of 2019 was the right course of action in these exceptional
circumstances, the Board remains committed to the dividend policy
announced on 4 March 2020 with a pay-out ratio of between 20-40% of
the Group's adjusted profit after tax. However, given current
trading and the Group's current focus on cash conservation, and
given the full effects of COVID-19 remain uncertain, the Board does
not expect to pay a cash dividend under its current policy in
respect of the 2020 financial year. Thereafter payment of cash
dividends will be subject to the Group generating adjusted profit
after tax, the Group's cash position and any restrictions in the
Group's banking facilities. In the interim, the Board is
considering a proposal to issue new ordinary shares by way of bonus
issues to shareholders in lieu of a cash dividend. If implemented,
the bonus issues will be subject to shareholder approvals and the
number of new ordinary shares to be issued will be determined by
the Board at the time taking into account market conditions.
Summary
Hostelworld's Board and Management believe that the measures
taken since March 2020, combined with the net proceeds proposed to
be raised from the Placing, together with the proposed new banking
facilities, will materially strengthen the Group's position in an
uncertain trading environment. The Group expects to have greater
flexibility and resilience to operate through an extended period of
disruption, whilst potentially having the ability to invest (by
increasing spend on customer acquisition and increasing organic
investment) and react quickly to commercial opportunities when they
arise.
MAR information
This announcement contains inside information for the purposes
of Article 7 of MAR. For the purposes of MAR and Article 2 of
Commission Implementing Regulation (EU) 2016/1055, this
announcement is being made on behalf of the Company by TJ Kelly,
Chief Financial Officer.
For further information please contact:
Hostelworld Group plc
Gary Morrison Chief Executive Officer
TJ Kelly Chief Financial Officer
Rudolf O'Kane Head of Commercial Finance
Tel: +353 (0) 1 498 0700
Powerscourt
Lisa Kavanagh
Eavan Gannon
Jack Shelley
Tel: +44 (0) 20 7250 1446
Email: hostelworld@powerscourt-group.com
About Hostelworld Group
Hostelworld Group, the global hostel-focussed online booking
platform, inspires passionate travellers to Meet The World, and
come back with life-changing stories to tell. Our customers are not
your average tourists; they crave cultural connection and unique
experiences that we make possible by providing an unbeatable
selection of hostels in unmissable locations - all in the palm of
their hand.
It is the social nature and community feel of hostels and their
environment that enable travellers to embrace journeys of
discovery, adventure and meaning. We have more than 13 million
reviews across more than 17,700 hostels in more than 179 countries,
making our brand the leading online hub for social travel. Our
website operates in 19 different languages and our mobile app in 13
languages.
Important notices
Neither this Announcement, nor any copy of it, may be taken or
transmitted, published or distributed, directly or indirectly, in
or into the United States, Australia, Canada, Japan, New Zealand or
the Republic of South Africa or to any persons in any of those
jurisdictions or any other jurisdiction where to do so would
constitute a violation of the relevant securities laws of such
jurisdiction. This Announcement is for information purposes only
and does not constitute an offer to sell or issue, or the
solicitation of an offer to buy, acquire or subscribe for any
shares in the capital of the Company in any jurisdiction. Any
failure to comply with these restrictions may constitute a
violation of securities laws of such jurisdictions.
The ordinary shares to be issued in connection with the Placing
have not been, and will not be, registered under the US Securities
Act of 1933, as amended (the "US Securities Act"), or under any
securities laws of any state or other jurisdiction of the United
States and may not be offered, sold, resold, transferred or
delivered, directly or indirectly, in or into the United States
except pursuant to an applicable exemption from, or transactions
not subject to, the registration requirements of the US Securities
Act and in compliance with the securities laws of any state or
other jurisdiction of the United States. There will be no public
offering of any securities referred to herein in the United States
or elsewhere.
Cautionary statements
This Announcement may contain, and the Company may make verbal
statements containing, "forward-looking statements" with respect to
certain of the Company's plans and its current goals and
expectations relating to its future financial condition,
performance, strategic initiatives, objectives and results.
Forward-looking statements sometimes use words such as "aim",
"anticipate", "target", "expect", "estimate", "intend", "plan",
"goal", "believe", "seek", "may", "could", "outlook" or other words
of similar meaning. By their nature, all forward-looking statements
involve risk and uncertainty because they relate to future events
and circumstances which are beyond the control of the Company. As a
result, the actual future financial condition, performance and
results of the Company may differ materially from the plans, goals
and expectations set forth in any forward-looking statements. Any
forward-looking statements made in this Announcement by or on
behalf of the Company speak only as of the date they are made.
The information contained in this Announcement is subject to
change without notice and except as required by applicable law or
regulation (including to meet the requirements of the Listing
Rules, the Euronext Dublin Listing Rules, MAR, the Financial
Services and Markets Act 2000, Euronext Dublin and/or the Central
Bank of Ireland), the Company expressly disclaims any obligation or
undertaking to publish any updates or revisions to any
forward-looking statements contained in this Announcement to
reflect any changes in the Company's expectations with regard
thereto or any changes in events, conditions or circumstances on
which any such statements are based. Statements contained in this
Announcement regarding past trends or activities should not be
taken as representation that such trends or activities will
continue in the future. You should not place undue reliance on
forward-looking statements, which speak only as of the date of this
Announcement.
No statement in this Announcement is intended to be a profit
forecast and no statement in this Announcement should be
interpreted to mean that earnings per share of the Company for the
current or future years would necessarily match or exceed the
historical published earnings per share of the Company.
[1] Measured by comparing the annualised figure as at 31(st)
March 2020 and the annualised figure as at 31(st) May 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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