Publication of Annual Report and Notice of AGM
23 March 2021
Hostelworld Group plc
("Hostelworld" or the "Company")
Publication of Annual Report for 2020 and Notice of 2021 Annual General Meeting
Annual Report and Accounts
Hostelworld, the world's leading hostel-focused online booking platform, is pleased to announce that its Annual Report 2020 has been posted or is being made available to shareholders today.
Annual General Meeting
The Company confirms that its Annual General Meeting will be held at 12 noon on 26 April 2021 at the offices of the Company, Floor 2, One Central Park, Leopardstown, Dublin 18, Ireland. A Circular containing the Chairman's Letter and Notice of 2021 Annual General Meeting and Form of Proxy has also been posted or is being made available to shareholders today.
Whilst the AGM will be held at 12 noon on 26 April 2021 at the Company's head office: Floor 2, One Central Park, Leopardstown, Dublin 18, Ireland, please note that in light of the COVID-19 pandemic and in anticipation of social distancing measures remaining in force, it is intended that the meeting will be run as a closed meeting and shareholders must not attend in person. Shareholders are therefore strongly encouraged to submit a proxy vote in advance of the AGM, in accordance with the explanatory notes set out in the notice of AGM.
Documents available for inspection
The following documents:
· Annual Report 2020;
· Circular containing the Chairman's Letter and Notice of 2021 Annual General Meeting;
· Form of Proxy;
have been submitted to the UK Listing Authority via the National Storage Mechanism, and the Irish Stock Exchange (trading as Euronext Dublin), and will shortly be available for inspection at the following location:
Companies Announcements Office
28 Anglesea Street,
The Annual Report 2020 has also been filed with the Central Bank of Ireland.
The Annual Report 2020, the Circular containing the Chairman's Letter and Notice of the 2021 Annual General Meeting and the Form of Proxy are available on the Company's website at www.hostelworldgroup.com.
The information set out in the Appendix, which is extracted from the Annual Report 2020, is included for the purposes of complying with DTR 6.3.5 and its requirements on how to make public annual financial reports. The information in the Appendix should be read in conjunction with the Company's preliminary results for the year ended 31 December 2020 released on 17 March 2021 which can be viewed at www.hostelworldgroup.com. Together, these constitute the material required by DTR 6.3.5 to be communicated in unedited full text through a Regulatory Information Service.
Hostelworld Group plc
Caroline Sherry, Chief Financial Officer
John Duggan, General Counsel & Company Secretary
Tel: +353 (0) 1 498 0700
Directors' Responsibilities Statement
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors are required to prepare the Group Financial Statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The Directors have elected to prepare the parent Company Financial Statements in accordance with FRS 101 Reduced Disclosure Framework ("Relevant Financial Reporting Framework") and applicable law. Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the Group and Company and of the profit or loss of the Group for that period.
In preparing the parent Company Financial Statements, the Directors are required to:
· Select suitable accounting policies and then apply them consistently;
· Make judgments and accounting estimates that are reasonable and prudent;
· State whether Financial Reporting Standard 101 Reduced Disclosures Framework has been followed, subject to any material departures disclosed and explained in the financial statements; and
· Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
In preparing the Group Financial Statements, International Accounting Standard 1 requires that Directors:
· Properly select and apply accounting policies;
· Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
· Provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance; and
· Make an assessment of the Company's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
• The Financial Statements, prepared in accordance with the Relevant Financial Reporting Framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
• The Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
• The Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 16 March 2021 and is signed on its behalf by:
16 March 2021
Principal risks and Uncertainties
The Board takes overall responsibility for identifying the nature and extent of the risks to be managed by the Group to ensure the successful delivery of its strategic and business priorities. The Audit Committee monitors certain risk areas and the internal control system, as set out in the report on governance. The Group's risk register identifies key risks including any emerging risks and monitors progress in managing and mitigating these risks and is reviewed regularly during the year by the Audit Committee and at least annually by the Board. Emerging risks are identified from areas of uncertainty, which may not have a significant impact on the business currently but does have the potential to adversely affect the Group in the future.
The most material risks facing the Group are set out in the table below, together with comments on how they are managed to minimise their potential impact. While the table below is not prioritised nor an exhaustive list of all risks that may impact the Group, it is the Board's view of the principal risks at this point in time. Individually or together, these risks could affect our ability to operate as planned and could have a significant impact on revenue and shareholder returns. Additional risks and uncertainties, including those that have not been identified to date or are currently deemed immaterial, may also, individually or together, have a negative impact on our revenue, returns, or financial condition.
Description and Impact
Management and Mitigation
Revenue is derived from the wider leisure travel sector.
The COVID-19 pandemic and the resulting measures, including travel restrictions, implemented by governments around the world to reduce the spread of COVID-19 has resulted in an unprecedented decline in consumer spending, travel and related activities. This pandemic has adversely affected our business and the outlook for the future remains uncertain at present and it is not yet known when international travel will return to normal levels.
Perceived or actual economic conditions, including slowing or negative economic growth, rising unemployment rates,
weakening currencies, higher taxes or tariffs could impair customer spending and adversely affect travel demand. In addition, events beyond our control such as unusual or extreme weather, travel related health concerns including the COVID-19 pandemic mentioned above or travel-related accidents
can disrupt travel and result in declines in travel demand. Because these events or concerns are largely unpredictable, influencing customer demand and behaviour, they can adversely affect our business and results of operations.
Significant movements in FX rates can have a material impact on travel demand and travel patterns therefore impacting revenue.
In circumstances where events cause a material decline in consumer travel behaviours and patterns on a global scale, such as the recent COVID-19 pandemic, management will take necessary actions to conserve cash.
There has been an increased and on-going focus by the Group on liquidity management.
New sources of debt and equity financing have been secured which provides additional flexibility to support the Group as it recovers from the impact of the COVID-19 pandemic.
Our business is a global one, with a dispersed population of users, and a geographically dispersed set of destinations. Whilst market conditions may decline in certain regions, the globally diversified nature of the business helps to mitigate this.
FX movements may impact travel decisions and travel patterns by customers, but typically there is a degree of counterbalancing movement e.g. the weakening of the US dollar against the euro means fewer US travellers visiting the Eurozone, but decreased marketing costs from USD denominated suppliers such as Google. FX translation risk is mitigated through matching foreign currency cash outflows and foreign currency cash inflows and by minimising holdings of excess noneuro currency above anticipated outflow requirements.
Resulting from the detrimental impact that COVID-19 has had on the travel sector there
has been a significant impact on our working capital resources, which creates a risk that
the Group will not be able to continue in operation and meet its liabilities as they fall due. The Group has prepared a five-year budget which assumes a return to growth.
There is a risk that the travel sector will not return to trading volumes in line with expectations.
Our ability to invest and grow is further constrained by our financial resources.
When COVID-19 began there was a robust assessment taken by Directors of principal risks facing the Group including those that threaten its business model, future
performance, solvency or liquidity. New funding was received through an equity raise and debt financing.
The Group is focused on cash forecasting, tight cost control and managing supplier and customer relationships.
Key metrics and reporting reviewed regularly in management accounts and at management meetings.
The Group has reviewed its capital structure and strengthened its capital base with two landmark transactions in June 2020:
• Equity Placing
• Debt Raising
Since the IPO in 2015, the Group had neither placed equity nor raised debt. These two transactions carry inherent risks. Equity placing leads to higher scrutiny from shareholders both participating and non-participating.
In 2021 the group entered a new term loan facility for €30m. Debt, by creating repayment obligations and covenants, requires constant monitoring of the Group's leverage and
The Group engaged with large firm corporate finance advisers to review and discuss the
optimal capital structure.
The Group has performed weekly forecasting of cash resources and monitored closely the covenants and obligations caused by any debt
agreements in place. Monthly reporting has been put in place to ensure the terms of the new term loan facility and related reporting requirements are adhered to.
on leisure travel
The continued threat of terrorist attacks in key cities and on aircraft in flight may reduce the
appetite of the leisure traveller to undertake trips particularly to certain geographies, resulting in declining revenues.
Increased incidence of terrorism impacts consumer confidence and can shift demand away from certain destinations.
Our target 18-34-year-old population tend to be both flexible as to destination, and are less risk adverse.
The risks posed by competition could adversely impact our market share and future growth of the business, these include:
• Supply: competition from direct competitors, alternative accommodation operators and disruptive new entrants leading to a loss of key accommodation
• Customers: changes in customer behaviour leading to a loss in customer traffic and demand for our services and / or increase in customer acquisition costs. Consumer preferences could change as a result
of the COVID-19 pandemic which may be disadvantageous to our business and may benefit existing and new competitors. With global travel restrictions, there may be a shift towards domestic travel and alternative
• There has been a rise in cancellations and vouchers issued in lieu of cash refunds for the Group and with our competitors. This increases competition for the Group as it locks customers into those companies issuing the credit notes, thereby potentially reducing the demand for the Group's offering.
• Technology and Product: Over recent years the ever-increasing pace of change of new technology, new infrastructure and new software offerings have changed how customer's research, purchase and experience
travel. Notable shift changes include mobile networks, mobile applications, meta-search providers, display advertising, social communities etc.
Unless we continue to stay abreast of technology innovation and change, we
risk becoming irrelevant to the modern customer.
Execution of roadmap for growth and capitalise on our unique market position, this
• Targeting new customer acquisition and growing the most profitable customer cohorts (with focus on CLV/CAC) by optimising overall marketing investment.
• Strengthening the Group's core platform in order to improve its flexibility and the experience of our customers.
• Upgrading our third-party platform connectivity in order to defend our competitive position.
• Focus on expanding our global footprint, meeting emerging demand while also strengthening our overall product offering.
• Leveraging the capabilities of our partnerships with Goki Pty Limited and Counter App Limited to ensure we are delivering best in class and most advanced tech-based solutions for our customers and hostel partners.
A large proportion of traffic to our websites is generated through internet search engines
such as Google, from non-paid (organic) searches and through the purchase of travel related
keywords (paid search).
We therefore rely significantly on practices such as Search Engine Optimisation ("SEO")
and Search Engine Marketing ("SEM") to improve our visibility in relevant search results. Search engines, including Google, frequently update and change the logic that determines the placement and display of results of a user's search, which can negatively impact placement of our paid and organic results in search results. This could result in a decrease in bookings and
thus revenue. It could also result in having to replace free traffic with paid traffic, which would negatively impact margins.
The Group invests heavily in recruiting and retaining key personnel with the requisite skills and capabilities in paid and nonpaid search. This in-house expertise is supplemented by the deployment of leading
technology tools. The search marketing team works closely with Google to understand
any changes in functionality to the AdWords platform so that we can avail of any efficiencies in our search traffic. The Group participates in alpha and beta feature tests that give Hostelworld first mover advantage with new functionality that can help drive efficiency.
Consumer trust in our brand is essential to ongoing revenue growth. Negative publicity around our products or services could negatively impact on traveller and accommodation provider confidence and result in loss of revenue. Negative publicity could impact brand perception and consumer loyalty and ultimately revenue.
Our exceptional refund policy for COVID-19 refunds has the potential to adversely affect our brand.
We are focused on investing in our core products, platform and technological capabilities to support our brand proposition as well as actively managing our brand
portfolio through social media channels. Our customer service team strive to ensure that customers have a positive experience at all
stages of interacting with us. The Group has a Crisis Management Policy in place which includes appropriate escalation.
We capture personal data from our customers, including credit card details and retain this
on our systems. There is always a risk of a cyber security related attack or disruption, including by criminals, hacktivists or foreign
governments on our systems or those of third-party suppliers. Cybercrime including unauthorised access to confidential information and systems would have significant reputational impact and could result in financial and/or other penalties.
The shift to remote working during COVID-19 (beginning 12 March 2020) changed the risk
profile of certain data processing activities and gives rise to ongoing data security
challenges and a widening threat landscape more targeted at endpoint controls.
As we plan for a level of return of colleagues to our offices, the COVID-19 Return to Work
Protocol (Ireland) and Working Safely During Coronavirus Guidelines (UK) require us to capture from colleagues and office visitors, new categories of sensitive personal health data that we would not have obtained before.
The General Data Protection Regulation ("GDPR") places significant data security and
regulatory compliance obligations on us when
processing such data.
Third party vendors that we engage with may not have the appropriate Information Security controls in place leading to a potential breach of customer data.
For 2021, Hostelworld plan to migrate parts of the e-commerce platform to the Cloud. Whilst risk is minimal, there still is risk that security
gaps may manifest during the migration.
Hostelworld are Level 1 PCI compliance with the guidelines of the payment card industry.
Through 2020 we performed a lot of work to comply with certain aspects of Payment
Services Directive 2 ("PSD2") in 2021 as it relates to customer payment - customer authentication security measures.
Hostelworld works closely with internal and external audit functions to ensure that our system architectures, work processes and policies are in place to provide as much protection as possible.
We have a privacy compliance programme to align with our on-going obligations under GDPR and have invested in our own data protection resources to monitor compliance including the onboarding of bespoke privacy management software in mid-2020. Our Data Protection Officer ("DPO") is responsible for informing, advising and monitoring compliance on all matters relating to the
protection of personal data in the Group. We regularly review our employee information
security policy and we continue to invest in information security training for all staff so that they remain vigilant and alert to the possibility of cybercrime.
We reviewed the impact on servers of increased remote access loads with teams working from home. We issued guidance to
all colleagues during COVID-19 regarding
the personal data and data security implications of the pandemic and new remote
working along with enhanced procedures
for accessing company data while working
We provide data security training for all staff.
We perform due diligence of our third-party suppliers who process our personal data including heightened information security due
The global nature of our business means we are exposed to issues regarding competition, licensing of local accommodation, language
usage, web-based trading, consumer compliance, tax, intellectual property, trademarks, data security and commercial disputes in multiple jurisdictions.
Compliance with new regulations can mean incurring unforeseen costs, and noncompliance could result in penalties and reputational damage.
COVID-19 has led to increased focus by consumer rights regulators on the online sales practices of tourism and travel focused companies and may have an impact on the Group's brand if the Group's sales practices were investigated and assessed to be noncompliant.
COVID-19 has heightened our obligations under employment and health and safety laws to protect the safety, health and welfare of colleagues in the workplace.
GDPR imposes particular compliance obligations with respect to our COVID-19
response measures with risk of fines and other enforcement mechanisms being imposed by a data protection authority.
Our position on customer refunds may give rise to customer complaints to consumer regulators such as the Irish Competition and Consumer Protection Commission or UK Competition and Markets Authority who have a range of enforcement powers including fines.
PSD2 is a new EU Directive that applies to payment services in the EU. The deadline for the Group to incorporate and be compliant with this Directive was 31 December 2020.
Monitor regulatory matters in locations in which we provide services with a particular
focus on those areas where we have local operations.
Suitable experienced resources have been engaged to ensure consumer compliance
requirements, compliance with the Listing Rules, the FRC Corporate Governance Code and the Market Abuse Regulations.
A detailed analysis of the Group's approach to offering vouchers to certain customers
concluded that the Group's approach was aligned with the principles reflected in the EU
Commission recommendations on vouchers for cancelled package travel and transport services published on 13 May 2020.
In line with guidance from the Irish and UK governments, we have developed a robust
COVID-19 Response Plan including adopting protocols around returning colleagues back to the office environment.
Rolled out an effective refund management and risk policy and procedure to deal with individual consumer complaints and those from consumer regulators. Our response to requests and complaints is informed by a cross-departmental risk assessment.
The Group have been working with the Central Bank of Ireland to ensure the group are complaint with the PSD2 EU Directive.
The taxation of e-commerce businesses is constantly being evaluated and developed by tax authorities around the world. There is a risk relating to the identification of and evaluation of tax legislative changes and the
impact of these on the Group.
Due to the global nature of our business, tax authorities in other jurisdictions may consider that taxes are due in their jurisdiction, for example because the customer is resident in that jurisdiction or the travel service is
deemed to be supplied in such jurisdiction.
If those tax authorities take a different view than the Group as to the basis on which the Group is subject to tax, it could result in the Group having to account for tax that it currently does not collect or pay, which could have a material adverse effect on the Group's financial condition and results of operation if it could not reclaim taxes already accounted for in the jurisdictions the Group considers relevant. Changes to tax legislation or the interpretation of tax legislation or changes to tax laws based on recommendations made by the OECD in relation to its Action Plan on Base Erosion and Profits Shifting ("BEPS") or national governments may result in additional material tax being suffered by the Group.
We are currently monitoring the introduction of the digital services taxes, and its impact on our Group.
In collaboration with our tax advisers, a large professional services firm, we assess possible tax impacts in the jurisdictions in which we operate to ensure our tax obligations are aligned to the operational nature of our business.
Transactions and mergers and acquisitions work are properly documented with support from tax advisers. Transfer pricing is regularly reviewed and updated to reflect Group structure and most recent guidance.
Failure in our IT systems or those on which we rely such as third party hosted services could disrupt availability of our booking engines and payments platforms, or availability of administrative services at our office locations, with an adverse impact to our customer service.
The outbreak of COVID-19 led to substantial business and operational disruptions across
the Group and resulted in Hostelworld and our third-party suppliers seeking to suspend or be excused from certain contractual obligations.
As an e-commerce organisation, the Group's
business continuity plan focusses on the continued operation of consumer facing products and related services to ensure our e-commerce trading systems can continue
to process bookings. Our fully distributed and redundant architecture across two data centres based in two different countries supports this approach. The Group has
worked with external advisers to produce robust documented business continuity and disaster recovery capabilities. We have also extended our eCommerce Business Continuity Plan("BCP") to include our corporate offices.
Across 2021 we will carry out targeted business continuity testing by business unit to ensure our systems and processes are effective as possible.
As part of COVID-19 BCP invocation all employees have been working from home via Hostelworld secured endpoint devices that were configured and rolled out in 2020. All
teams had tested access and functionality and only small adjustment was needed to have all teams operational very quickly. All laptops are encrypted and protected with
anti-virus and anti-malware software.
We updated our standard supplier terms in early 2020 to provide more robust and comprehensive contractual provisions regarding force majeure (covering epidemics/
pandemics) and BCP (requiring suppliers to implement the provisions of our BCP at any time).
The Group is dependent on ability to attract, retain and develop creative, committed and skilled employees so as to achieve its strategic objectives.
Due to the possibility of a long recovery period for the travel industry resulting from the COVID-19 pandemic and the redundancies and restructurings which have taken place within the company, employees may not view employment with us as positively as they did
prior to the pandemic. This may adversely affect our ability to attract and retain highly skilled employees.
The Group has developed stronger recruitment processes supported by effective HR policies and people process to enable the attraction and retention of key talent.
The Group has increased focus on understanding the drivers of employee engagement and are committed to taking action to improve employee engagement levels. Robust external benchmarking has ensured there is understanding of the competitiveness of the reward offering and
additional investment in 2019 and 2020 aims to reduce voluntary attrition.
The Group operates from five global offices, which provides flexibility for location of key talent, thereby opening up a larger talent pool to select from. A move to increased remote working would further enhance this.
A non-executive director fulfils a workforce engagement role as set out in the 2018 UK Corporate Governance Code.
The Group is exposed to Brexit-related risks and uncertainties in relation to its continued impact on global markets and currency exchange rate fluctuations. The uncertainties in relation to the movement of people may result in the reduction of bookings particularly into and from the UK travel market and from UK nationals which could impact on Group revenue. In the year ended 31 December 2020, the UK as a destination represented 6% of total Group bookings (2019: 6%) and 16% of Group bookings were from UK nationals (2019: 14%).
Overall a decline in macroeconomic conditions
in the UK could negatively impact consumer confidence and reduce spending in all areas
including the wider leisure travel sector.
On 1 January 2021, the UK became a third country for the purposes of the GDPR and any transfer of personal data to HW UK or a supplier must now comply with the data transfer rules in the GDPR. Failure to comply can lead to fines from the regulator and a negative impact on market reputation.
The Group is a global business and continues to grow its international footprint and
presence across its key markets. Through continued international expansion and
diversification, the Group will seek to naturally mitigate the impacts of Brexit. However, the Group will continue to assess the impacts of Brexit and implement any necessary remediation steps to mitigate its impact on the Group.
Hostelworld has in place with all Group companies, an intra-group data transfer agreement with EU Commission-approved
Model Clauses, one of the approved data transfer mechanisms under the GDPR - HW UK is a party to this agreement. Hostelworld has also prepared GDPR compliant data protection supplemental contract addendums for UK suppliers which will provide appropriate safeguards and mechanisms to ensure data transfers to the UK are GDPR compliant.
Climate change and sustainability came into
sharp focus in 2019 and has further evolved as an area of heightened concern with consumers and stakeholders in 2020.
There is a request for more accountability from our customers, employees, other stakeholders as to what the Group is doing to
limit its indirect impact on climate change.
Climate change issues may impact travel decisions and travel patterns by customers but is mitigated to the extent that our business is a global one, with a dispersed population of users, and a geographically dispersed set of destinations.
We aim to offset our carbon footprint through a number of initiatives. In 2020, we became a signatory on the Global Tourism Plastics Initiative led by the UN Environment programme and the World Tourism Organisation. Our goal is to encourage our hostel partners to sign up with the aim of reducing their single use plastics consumption. We have also taken steps to reduce our plastic consumption as a Group.
Prior to COVID-19, we made efforts to reduce our plastic consumption through initiatives such as purchasing reusable water bottles for the office, ordering fresh fruit and other perishables from suppliers who use fully