LEI:213800OC94PF2D675H41

Hostelworld Group plc ("Hostelworld" or the "Group" or the "Company")

Preliminary Results for the Year ended 31 December 2021

 

FY 2021 in line with expectations, solid progress on growth strategy and cost base positions the business well for the travel recovery

 

31st March 2022: Hostelworld, a leading global OTA focused on the hostel market, is pleased to announce its preliminary results for the year ended 31 December 2021.

 

Significant developments

·      Recovery picked up as travel restrictions eased and confidence returned

·      Growth accelerated in key destinations where borders reopened

·      Temporary Omicron setback seen in final six weeks of trading, experienced a strong start to 2022

·      Improved core business competitiveness through focused investments in marketing capabilities, user experience, inventory competitiveness and platform modernisation

·      €7m of operating costs removed[1] compared to 2019

 

Financial highlights

·      Full year net bookings totalled 1.5m (2020: 1.5m), which represents 21% of 2019 volumes

·      Net Revenue for the period of €16.9m, an increase of 10% year on year (2020: €15.4m)

·      Net Average Booking Value ("ABV") of €12.11, a 30% increase year on year (2020: €9.33), recovering steadily compared to 2019 levels, due to favourable geographical mix, recovery of underlying bed prices and longer length of stay bookings

·      Cancellations of 0.2m (€3.6m), a 43% decline year on year (2020: 0.3 (€6.2m)). Cancellation rate as a portion of revenue remains elevated versus normalised levels

·      Cost per net booking for the year was €8.77, a €3.57 increase over prior year (2020: €5.20)

·      Marketing as a percentage of revenue amounted to 72%, an increase of 22% year on year (2020: 59%)

·      Administrative expenses[2] fell by 15% to €24.2m (2020: €28.6m) due to tight management of our cost base

·      Adjusted EBITDA loss of €17.3m, flat year on year

 

Balance sheet and cash flow

·      Total cash as at 31 December 2021 of €25.3m (2020: €18.2m)

·      Secured a new €30m term loan facility in Feb 2021, with net proceeds received of €28.2m

·      Strong balance sheet and liquidity going into 2022, with available capital to invest to accelerate growth

 

Gary Morrison, Chief Executive Officer, commented:

"While 2021 was a challenging year both for Hostelworld and the global travel industry, I am pleased to say we saw a consistent recovery throughout the year in both bookings and revenue versus 2019, save for the last few weeks where we saw travel concerns over the Omicron variant.

 

I am also pleased to report that we made solid progress on all elements of our strategy during the year whilst continuing to significantly reduce our operating expenses versus 2020 levels.

 

Overall, I remain confident that our loyal customer base has more desire than ever to travel and meet other like-minded travellers once restrictions are eased. The improvements we continue to make to our platform and our differentiated growth strategy mean we are well-positioned to capitalise on those opportunities as demand continues to return."

 

Outlook

Over the last 12 weeks to 27th March, we have experienced a strong start to the year and a consistent recovery in weekly net bookings and revenues. In parallel, we have also seen a recovery in the direct margin (net revenue less direct marketing costs) as travel restrictions eased, confidence returned, and normal trading patterns resumed. Our business model is highly geared to travel recovery, and we anticipate seeing a continued recovery in bookings throughout the year.

Whilst our recent trading data would indicate that the impact of COVID-19 on the travel industry is starting to recede, we, like many other businesses and industry sectors, face new uncertainties related to the effects of the Russian invasion of Ukraine. Whilst it is difficult to predict what the mid to long term effects of these events might be in continental Europe or further afield, we are hopeful on a humanitarian level that there will be a swift and peaceful resolution of the conflict.

The Board remains confident in the long-term resilience of our business model and the growth potential of our Meet the World® strategy. The year has started strongly and confidence in the ability to travel freely is growing. The current trends are encouraging and suggest that net bookings will continue to recover towards 2019 levels, in the absence of any further escalation of the conflict in the Ukraine or other unforeseen events. As we approach the important second quarter it is too soon to give definitive guidance for the year."

 

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 attend or dial into the presentation, please find the webcast details provided below:

 

Webcast Link

https://webcasting.brrmedia.co.uk/broadcast/6225fcd5969a0548ac0c386d

 

Event Title:	Hostelworld Group PLC - Preliminary Results 2021
Confirmation Code:	5800558
Dial-in Phone Number:	+44 (0) 330 165 4012

 

For further information please contact:

 

Hostelworld Group plc

[email protected]

Gary Morrison, Chief Executive Officer

Caroline Sherry, Chief Financial Officer

 

Powerscourt	[email protected]
Eavan Gannon / Nick Dibden	+44 (0) 20 7250 1446

  

About Hostelworld Group

Hostelworld Group is a leading Online Travel Agent focused on the hostelling category, with a well-known trusted brand, 13.7 million reviews and a loyal customer base built up over 22 years. Our core business provides our customers with hostel accommodation options and hostel focused small group adventure tour products (Roamies) in over 180 countries worldwide via our website and native app platforms in 19 languages.

In parallel with helping millions of hostel focused travellers Meet The World®, we are also committed to building a better world in everything we do. In particular, we are increasing our focus on improving the sustainability of the hostelling industry, through our active involvement in the Global Tourism Plastics Initiative (GTPI), led by the UN Environment Programme and the World Tourism Organization (UNWTO); our membership of the Global Sustainable Tourism Council (GSTC); and our recent partnership with the South Pole to offset all our greenhouse gas emissions in 2021.

 

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

2021 has been another year of unprecedented challenge for our business, our hostel partners and for the wider travel industry. Whilst the COVID-19 pandemic continued to have a material impact on the financial performance of the business, 2021 was a year of solid progress in delivering against our Meet the World® growth strategy. We are very encouraged by the strong return in demand in destinations where travel restrictions have eased.

The team, led by CEO Gary Morrison, continued to work on three key areas that are fundamental to our strategy, ensuring the business is competitively placed when demand returns. This work focussed on competitive enhancements to the core online travel agent ("OTA") business, broadening our customer offering and core platform enhancements.

The on-going improvements the team continue to make in hostel inventory, marketing capabilities and end-user experience, all contribute toward the competitiveness of the core OTA business.  Following the successful testing of social features on our platform, we look forward to the launch of this element of the strategy in 2022.

We were pleased to announce our partnership with G Adventures with the launch of Roamies, a new hostel focused adventure tour product. This partnership is a significant milestone in the execution of our Meet The World® growth strategy and broadens our customer offering beyond hostel accommodation.

Our underlying platform underwent a complete modernisation earlier this year with the migration of our platform to the cloud. This enabled the teams to replace the legacy backend platform resulting in faster execution times as well as generating cost savings for the Group.

COVID-19 response

This year was another difficult year for the travel sector with the industry having to adapt to changing Government guidelines, travel bans and continued travel restrictions. Throughout this challenging time, our priority has been our employees, who have continued to show dedication and resilience in these unprecedented times.

2021 started with encouraging levels of domestic demand, particularly in US and Australian markets. Throughout the year we have seen a strong correlation between the easing of restrictions and demand recovery. This correlation was particularly evident in Central American markets where booking volumes have steadily grown and in the second half of the year surpassed 2019 levels. Pandemic mitigation measures and the roll-out of the vaccine programme has helped to bolster consumer confidence. Several southern European destinations experienced strong growth following the reopening of borders in late spring. This steady growth continued until the latter part of November when the Omicron variant saw a resumption of restrictions across many destinations.

Despite the subdued performance in markets outside of these geographies, the response we have seen to-date in reopened destinations demonstrates the strong desire our customers have to travel and to Meet The World®. 

Dividends and capital structure

In order to conserve our cash resources, the Board believes the continued suspension of cash dividends remains in the best interests of the business for the foreseeable future. Throughout the year, management conserved cash and implemented measures to reduce fixed and variable costs. The business continued to access government supports where available. A €30 million five-year term loan facility was agreed in February 2021 with certain investment funds and accounts of HPS Investment Partners LLC (or subsidiaries or affiliates thereof) which further materially strengthened our financial position.

Board composition

The composition of the Board is fully compliant with the 2018 UK Corporate Governance Code. The Board has undertaken an appraisal of the Directors, as well as an evaluation of the performance of the Board and each sub-committee, which concluded that the Board is functioning effectively.

Climate change

Reflecting our commitment to a sustainable future, and in keeping with our UK listing and financial disclosure requirements, the business adopted the requirements of the Taskforce for Climate related Financial Disclosures ("TCFD"). In adherence with TCFD we will disclose information across the four key areas of: Governance, Strategy, Risk Management, and Metrics and Targets which are covered further in the Annual Report.

Environmental, Social and Governance ("ESG")

The business has worked extensively this year to advance it's ESG strategy. We recognise the importance of ESG in our corporate culture and more broadly, the role that we play in driving sustainability within the industry. We were therefore pleased to announce our membership of the Global Sustainable Tourism Council ("GSTC") and look forward to seeing the work the business will do with GSTC to drive sustainable travel initiatives. The business performed a detailed assessment involving key stakeholder groups, employees, customers and hostel partners in the development of its ESG strategy. The output of this assessment was mapped to the United Nation's Sustainable Development Goals ("SDG") which helped identify strategic focus areas and a vision for sustainability within Hostelworld.

Colleagues, customers and shareholders

I wish to thank our management team and my Board colleagues who worked tirelessly throughout another difficult year for their enthusiasm and commitment.

While the outlook remains uncertain, we have successfully put in place business improvements that allows us to be optimistic for the future. There is huge pent-up demand for travel and the investment we have made leaves us well placed to capitalise on this, as and when conditions allow.

Finally, I would like to thank you, our shareholders, for your ongoing support.

Michael Cawley

Chairman

30 March 2022

 

Chief Executive Statement

While 2021 was a challenging year both for Hostelworld and the global travel industry, I am pleased to say we saw a consistent recovery throughout the year in both bookings and revenue versus 2019 save for the last few weeks where we saw travel concerns over the Omicron variant. I am also pleased to report that we made solid progress on all elements of our strategy during the year whilst continuing to significantly reduce our operating expenses versus 2020 levels. Overall, I remain confident that our loyal customer base has more desire than ever to travel and meet other like-minded travellers once restrictions are eased. The improvements we continue to make to our platform and our differentiated growth strategy mean we are well-positioned to capitalise on those opportunities as demand continues to return.

 

Actions in the light of the continued COVID-19 pandemic

As the pandemic continued throughout 2021, we have remained focused on supporting our stakeholders, increasing our liquidity and progressing our strategy.

In particular, we continued to support our hostel partners through various communication channels including hosting 40 webinars with more than 1,000 hostels and showcasing hostels across our key marketing channels. We have also carried out numerous feedback surveys on key topics, leading to changes to our review processes, our partner facing platform, and significant enhancements in the automated reporting tools we provide to hostels. During the year we also continued with our hostel industry recognition programme, the HOSCARs, to celebrate the world's most extraordinary hostels and the incredible impact they have had supporting their local communities. Overall, we have continued to invest heavily in supporting the Hostel industry throughout the pandemic, with our (Hostel) Net Promoter Score increasing 4 points to +47 in 2021.

Similarly, we have been supporting our employees throughout the pandemic, and recently launched more programmes to facilitate agile working policies, working from abroad policy and paid wellness and parental leave days help to promote flexibility and work-life balance when working from home.

In parallel with these activities, we also took further steps to strengthen our liquidity position through a combination of ongoing operating cost reductions and the successful negotiation of a new five-year €30 million term loan facility which we drew down in February 2021. These actions ensure that as things currently stand, we have sufficient cash in reserve even with a prolonged period of depressed demand.

Finally, I am also pleased with the progress we have made with regards to strengthening our core business competitiveness throughout the year, and in particular the progress we have made with regards to our Meet The World® growth strategy.

Throughout the pandemic we have sought to proactively engage with our shareholders given the fast-moving environment we find ourselves operating in and I would like to thank all of them for their continued support through these challenging times. 

 

Key operational highlights and results 

Similar to the initial recovery in Q3 2020, we saw swift increases in demand in those destinations where travel restrictions have eased. In particular, 2021 started with a strong recovery in Central America, and domestic demand in the US and Australia. In May and June, several southern European destinations opened their borders with strong growth over the summer months. During the second half of the year Central America surpassed 2019 levels, with southern European destinations continuing growth to 60-80% of 2019 levels, until the latter part of November/December where the Omicron variant saw a resumption of restrictions in many destinations. Overall, we continue to see net bookings growth mirroring changes in individual markets both positively and negatively. Outside of these geographies, demand continued to remain depressed.

As the recovery progressed we have seen several factors impact our trading economics versus 2019. In particular, average net booking values have steadily recovered to 2019 levels driven by a favourable geographic mix, a recovery of underlying bed prices and longer length of stay bookings; which has been partially offset by higher cancellation rates (in part driven by a higher proportion of free cancellation bookings), a reduction in blended commission rates (driven by the removal of Elevate in 2020) and slightly adverse FX movements. Marketing costs per net booking however have remained elevated versus 2019 driven by lower conversion rates in destinations where some level of restrictions persist, higher cancellation rates (in part driven by a higher proportion of free cancellation bookings) and higher average cost per clicks ("CPCs") driven by geographic mix. Consequently, direct marketing costs as a percentage of net revenue remain significantly higher than 2019 levels, although we expect these to gradually normalise as historic travel patterns resume.

On the supply side, despite the continuing depressed demand during 2021 we have only seen a very modest net reduction (3.5%) in the number of hostels on our platform compared to levels at the end of 2020, driven by continual sign ups to our platform. In addition, I am also encouraged to see our customers are continuing to book dorms in the majority of cases, with a steady recovery towards dorm versus private booking levels versus 2019.

Despite our significantly reduced cost base, we have continued to strengthen all areas of our business during 2021. Throughout the year we delivered a significant number of core business improvements designed to improve marketing capabilities, user experience and inventory competitiveness. These improvements included rewriting our core iOS and Android Apps to enable specific features of our Meet The World® growth strategy, replacing our legacy payments stack with Stripe, and migrating our overall platform to the cloud. We also made significant progress on our Meet The World® growth strategy with the launch of Roamies in partnership with G Adventures to broaden our product range, together with several social feature experiments that confirmed the strong desire for these features from our customer base, which we expect to launch in 2022.

In 2022 we will continue our platform modernisation program with our main focus on transitioning our legacy backend to a new operating platform which will leverage several "off the shelf" services available from our selected cloud services provider. This will further strengthen our Core business, enable faster execution of our growth strategy and reduce cost over the medium term.

 

Our strategy

As outlined in our Interim results presentation in August 2021, our long-term growth strategy is focused on three pillars; relating to improving the competitiveness of our core OTA business, executing our Meet The World® growth strategy, and continued investments in platform modernisation. Overall, I am very pleased with the progress we have made across all three pillars during 2021.

1.     Improving the competitiveness of our core OTA business

Our first strategic pillar is focused on continuing to improve our inventory competitiveness through user experience enhancements, improved marketing capabilities and strengthening our position in the hostel software market. This pillar essentially builds on the initial roadmap for growth programme launched in late 2018. I am confident that our core business is now materially stronger than Q4 2019 when we returned the business to growth.

Following our strategic investments in Counter App Limited ("Counter"), a low-cost property management system designed for the hostel market, and Goki PTY Limited ("Goki"), an innovative digital lock and smartphone app based key system in 2019, I am pleased to report we have now successfully transitioned more than 85% of all Backpack Online customers ("BPO", Hostelworld's legacy property management system ("PMS")) to Counter. Counter also continues to add more hostels to its platform at an impressive rate.

Goki has also seen increased interest in their products, especially from the hotel sector, as travel has resumed and the demand for contactless solutions has grown. The Goki management team expect this trend to continue, with hotels accounting for the majority of sales over the coming years. As this sits outside the scope of Hostelworld's business, we have restructured our relationship with Goki; reducing our shareholding from 49% to 31.5% and removing our right to acquire the remaining shares of the company we do not own in 2023.

2.     Meet The World® growth strategy

Our second strategic pillar is focused on executing our Meet The World® growth strategy. First outlined in our full year results presentation in March 2020, this strategy will deliver growth by providing a broader catalogue of relevant experiences beyond hostel accommodation to our core business customer base. The addition of pioneering social features enables our customers to explore the world together with other likeminded travellers.

Consistent with our strategy, we announced the launch of Roamies in December 2021. Roamies is a new hostel focused adventure tour product developed with G Adventures, the world's largest small group adventure tour provider. This new collaboration launched with a collection of 38 tours across 50 hostels in 15 countries; with departure dates starting in May 2022. The product is unique in combining the spontaneous social experience provided by hostel accommodation and guided adventure tours fulfilled by G Adventures. Roamies will also benefit from a wide distribution strategy, with tours available through Hostelworld and G Adventures online channels, and approximately 60,000 offline travel agents worldwide.

In parallel with broadening out our product catalogue, we also conducted several social feature experiments during 2021 designed to help hostellers meet other travellers they want to hang out with while travelling. Overall, we are very pleased with the results of these experiments, which confirmed our customer's strong desire for these types of features which we expect to launch throughout 2022.

3.     Platform modernisation

Our third strategic pillar relates to the ongoing modernisation of our underlying platform to enable us to support faster execution across both our core Hostelworld platform and Meet The World® growth strategies; as well as reducing overall development and technology costs in the medium term. To that end, earlier this year we embarked on an ambitious plan to migrate our entire company to the cloud; and in the second half we started a second initiative to replace our legacy backend platform.

I am pleased to report that we have substantially completed the cloud migration project and begun decommissioning our data centres. We are also executing the new platform build plan to schedule and expect to start migrating our PWA, iOS and Android Apps to the new platform in early Q3 next year.

 

Business model

We are a leading global OTA focused on the hostel market. Our core online platform provides the opportunity for predominately hostel owners, as well as other low-cost accommodation providers, to advertise their accommodation to independent travellers looking for unique and social experiences.

We use data science and AI to effectively target our key customer segments. Our differentiated social features connect like-minded travellers, positioning us as the go to OTA for hostellers and our extended product offering builds customer loyalty by enhancing their travel experience.

Most of our revenue is generated through taking a commission from bookings made through our technology platform, including the Hostelworld website, and via our Apps. This efficient business model has very favourable working capital attributes and strong cash conversion.

In parallel with helping millions of hostel focused travellers find and book hostel accommodation, we are also committed to building a better world in everything we do. We are increasing our focus on improving the sustainability of the hosteling industry, and in January 2022 became a member of the Global Sustainable Tourism Council (GSTC). In addition, we also partnered with South Pole a global climate solutions provider to offset our 2021 greenhouse gas emissions.  

 

Investing in people

Over the last 12 months we continued to take steps to strengthen our execution capability through the implementation of a simpler and more efficient growth orientated organisational structure. In particular this new structure organises the company's marketing, product, development and analytics resources into autonomous growth teams; who are responsible for driving the most important KPI's of the Company. Overall, I am very pleased with the benefits that the new organisation model has delivered - including increased focus and improved speed of execution on our growth strategy which I expect to continue during 2022 and beyond.

We have also continued to work remotely for the majority of the year in response to government guidelines and increased our support for our employees through the launch of a holistic employee wellbeing strategy during these very challenging times. In particular, the program focuses on maintaining our employee's physical, mental, social, and financial wellbeing through webinars with outside professionals, the extension of flexible and remote working policies, the provision of online social events, and additional wellbeing leave days and paid parental leave. We also introduced a new and enhanced Employee Assistance Programme (EAP) which offers global support across all our locations.

Overall, our team has worked incredibly hard through an extended period of ongoing uncertainty, and I would like to take this opportunity to thank all our employees for their enduring commitment and loyalty.

 

Dividends and capital allocation

In light of the significant uncertainty presented by COVID-19 the Board took the decision in March 2020 to suspend the final 2019 cash dividend, and in June 2020 we suspended cash dividends for the foreseeable future.

Given the continued lack of medium term visibility and the necessity to conserve our cash resources, the Board and I believe that the continued suspension of cash dividends is in the best interests of the business and our shareholders for the foreseeable future.

The Board and I continue to believe the appropriate allocation of capital resources is critical to ensuring the long-term growth of the business and optimisation of our shareholder returns.

 

Outlook

While the short to mid-term outlook for the travel industry remains challenging and uncertain, we continue to expect the pace of recovery to be driven by the easing of travel restrictions in individual markets, which we hope to see accelerated with the continued rollout of vaccination programs worldwide.

Whilst this recovery is likely to progress throughout 2022 the Board remains confident in the resilience of our business model, and the growth potential of our Meet The World® strategy as demand recovers. In the light of continued market uncertainty, the Group will not provide full year guidance until such time as the overall impact of COVID-19 on the Group becomes clearer.

The Board will continue to evaluate internal and external opportunities that will deliver value for shareholders, in particular the significant potential to enhance future growth through our Meet The World® strategy.

I remain confident that Hostelworld will emerge from the COVID-19 crisis stronger than before and be able to seize market opportunities when normal travel patterns resume.

Gary Morrison

Chief Executive

30 March 2022

 

Financial Review

	2021	2020		2021	2020
Net bookings	1.5m	1.5m	Net asset position	€67.2m	€97.9m
Net revenue	€16.9m	€15.4m	Cash and cash equivalents	€25.3m	€18.2m
Net average booking value "ABV"*	€12.11	€9.33
Marketing costs per net booking*	€8.77	€5.20
Operating expenses	€49.4m	€50.2m	Operating loss for the year	€33.1m	€50.3m
Adjusted EBITDA loss*	€17.3m	€17.3m	Adjusted loss per share*	22.12cent	20.76cent
Adjusted EBITDA margin*	-102%	-113%
Loss for the year	€36.0m	€46.9m	Basic loss per share	30.96cent	45.68cent

*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 Annual Report.

 

Revenue and operating loss

Revenue for the period was €16.9m, an increase of 10% compared to 2020 (2020: €15.4m). Adjusted EBITDA loss of €17.3m (2020: €17.3m) and an operating loss of €33.1m (2020: €50.3m).

The continuation of COVID-19 travel restrictions throughout the year resulted in curtailed bookings and revenue recovery. We are however pleased to report a consistent recovery in booking demand in destinations when and where restrictions eased. 

Net bookings at 31 December 2021 totalled 1.5m, consistent year on year and represents 21% of 2019 booking volumes. Europe, excluding United Kingdom, had the largest booking volume in 2021 (770k) and recorded a strong recovery in H2 2021 (47% of H2 2019 compared to 7% of H1 2019). Overall Central America was the strongest recovering market on a full year basis where bookings averaged 75% of 2019 volumes, exceeding 2019 levels in H2 2021.

Cancellations, for bookings cancelled under the free cancellation policy, amounted to 0.2m (€3.6m) (2020: cancellations of 0.3m (€6.2m)) representing a year on year decline of 43% in value. However, our cancellation rate as a portion of revenue remains elevated versus normalised levels.

At 31 December 2021, we held €3.0m of customer deposits relating to bookings made under the free cancellation policy (2020: €3.1m), of this €2.0m relates to bookings already cancelled (2020: €2.9m). Deferred revenue increased by €0.8m (2020: reduction of €2.6m).

Net Average Booking Value ("ABV"), the average value paid by a customer for a net booking, increased by 30% in 2021 (2020: 22% decline) to €12.11 (2020: €9.33). ABV benefited from favourable geographical mix, as a higher proportion of bookings came from higher-value destinations such as Europe and North America, and also from the recovery of underlying bed prices and longer length of stay bookings. These benefits were partially offset by higher cancellation rates, a reduction in blended commission rates and foreign exchange movements.

The uncertain travel landscape was the primary driver of weaker conversion levels across all source markets. In addition, costs have also been impacted by higher cancellation rates, a combination of a higher proportion of free cancellation bookings, increased cancellation rates and higher average cost per click ("CPC") driven by geographical mix. Overall, the cost per net booking for the year was €8.77 (+€3.57 over prior year cost €5.20). Marketing as a percentage of revenue amounted to 72% (2020: 59%). It is our expectation that marketing costs will normalise as normal travel patterns resume. 2021 direct marketing costs totalled €12.8m (2020: €7.6m).

Excluding the impact of direct marketing costs, administration expenses have reduced year on year by 15% compared to 2020 as we tightly manage our cost base (2021: €24.2m, 2020: €28.6m).

The Group has availed of the Irish Revenue tax warehousing scheme and deferred payment on all Irish employer taxes since February 2020. We continue to monitor and comply with the appropriate Revenue guidelines applicable to this scheme. We availed of assistance under the Coronavirus Job Retention Scheme in the UK until May 2021 and continue to avail of the temporary COVID-19 Wage Subsidy Scheme in Ireland.

 

Exceptional items               

Exceptional items are identified due to their nature or materiality to help the reader form a better view of overall and adjusted trading. The Group incurred €0.6m of exceptional cost items (2020: €3.0m),

Restructuring costs of €0.7m (2020: €1.7m) primarily relate to staff costs incurred as part of a growth orientated organisational redesign. The new structure organises the Company's marketing, product, development and analytics employees into autonomous growth teams. The structure was initiated in the prior year.

 

Share based payment

In 2021 the Group recognised an expense of €2.2m (2020: €0.4m) relating to equity settled share-based payment transactions.

During 2021 the Company granted a restricted share award ("RSU") to selected employees, including the executive directors and members of the management team. Total cost amounted to €1.4m.

The balance relates to the share-based payment charge arising on the issuance of options in accordance with the Group's Long-Term Incentive Plan ("LTIP") and Save As You Earn ("SAYE") plan. 

 

Loss per share

Basic loss per share for the Group was 30.96 € cent (2020 basic loss per share: 45.68 € cent). 

Adjusted loss per share was €22.12 cent per share (2020 loss per share: €20.76 cent per share). The weighted average number of shares in the period was 116.3m (2020: 106.9m) and the total number of shares issued at the balance sheet date was 116.3m (2020: 116.3m).

 

Intangible asset

Carrying value of intangible assets at 31 December 2021 totals €79.4m, a decrease of €6.9m from the prior year. The Group capitalised development costs of €4.4m in the year, (2020: €3.7m) and had an amortisation charge for the year of €10.9m (2020: €11.7m). The Group recorded an impairment charge of €0.4m in the current year for a specific project following a management decision to cease ongoing investment. In 2020 the Group recorded an impairment of €15.0m on its intangible assets associated with Hostelbookers and Hostelworld.com.

 

Deferred tax

The Group is carrying a deferred tax asset of €8.4m (2020: €7.6m). Current year deferred tax credit €756k (2020: €1,013k) relates to a deferred tax asset created in the current year for capital allowances not utilised and available for future offset.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which any unused tax losses and unused tax credits can be utilised. Future taxable profits for recoverability of the deferred tax asset have been estimated using the Board approved five-year plan and management expect to utilise the deferred tax asset over a five year period.

 

Lease liability

At the balance sheet date, the carrying value of the lease liability totalled €0.1m (2020 €4.3m). Current year lease liability relates to the Group's lease commitments for office space in Portugal and China.

On 20 August 2021 the Group signed a lease assignment on its Dublin office exiting its long-term commitment.  On 1 August 2021 the Group exited its existing lease commitment in London. The Group entered agreements for smaller spaces in both locations as part of its hybrid working strategy.

 

Net debt and financing

At the balance sheet date cash and cash equivalents totalled €25.3m (2020: €18.2m).

The Group has borrowings of €28.2m (2020: €1.2m). Current year amount relates to a €30m debt facility with certain investment funds and accounts of HPS Investment Partners LLC (or subsidiaries or affiliates thereof). An amount of €28.8m, net of original issue discount, was received on 23 February 2021.

The prior year amount related to a short-term invoice financing facility. The Group also had a €7m revolving credit facility in place at 31 December 2020 which was undrawn.  In January 2021 amounts owing on the short-term invoice financing facility were repaid in full and the Group signed a deed of release on the revolving credit facility.

In January 2021 the Group agreed revised covenant terms with AIB on a rental guarantee for the Central Park office, Dublin, the Group's headquarters where financial covenants and parent company guarantee were waived.  In August 2021 as part of the lease assignment the Group agreed a revised rental guarantee on One Central Park with AIB, which is in turn guaranteed by the US Parent company of the lease assignees.

At 31 December 2021 the Group was in compliance with all financial covenants which applied at that date.

 

Corporation tax

The Group recorded a corporation tax charge of €0.1m (2020: €0.6m credit). Current year corporation tax charge relates primarily to our UK and Portuguese operations where tax losses from our Irish operations cannot be utilised. Prior year trading losses arising in 2020 had been carried back to 2019 and set against taxable profits arising in that year resulting in a refund owing to the Group in respect of tax paid in 2020.

 

Related party transactions

Related party transactions are disclosed in note 22 to the Group financial statements.

 

Dividend

The Board does not expect to pay a cash dividend under its current policy in respect of the 2021 financial year. Any payment of cash dividends will be subject to the Group generating 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

30 March 2022

 

HOSTELWORLD GROUP PLC

 

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2021

 

 

			2021	2020
	Notes		€'000	€'000
Revenue	3		16,901	15,364
Operating expenses before impairment	4		(49,386)	(50,251)
Impairment of intangible assets	10		(367)	(14,996)
Share of results of associate	13		(225)	(374)
Operating loss			(33,077)	(50,257)
Finance income			-	8
Finance costs	7		(3,501)	(246)
Loss before taxation			(36,578)	(50,495)
Taxation credit	8		562	1,638
Loss for the year attributable to the equity owners of the parent Company			(36,016)	(48,857)
Basic and diluted loss per share (euro cent)	9		(30.96)	(45.68)

 

 

HOSTELWORLD GROUP PLC

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2021

 

 

	2021	2020
	€'000	€'000
Loss for the year	(36,016)	(48,857)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations	32	(7)
Total comprehensive income for the year attributable to equity owners of the parent Company	(35,984)	(48,864)

 

 

HOSTELWORLD GROUP PLC

 

 

 

			2021	2020
	Notes		€'000	€'000
Non-current assets
Intangible assets	10		79,390	86,252
Property, plant and equipment	11		293	4,480
Deferred tax assets	12		8,352	7,596
Investment in associate	13		1,186	2,349
			89,221	100,677
Current assets
Trade and other receivables	15		2,002	1,681
Corporation tax			18	54
Cash and cash equivalents	16		25,267	18,189
			27,287	19,924
Total assets			116,508	120,601
Issued capital and reserves attributable to equity owners of the parent
Share capital	17		1,163	1,163
Share premium	17		14,328	14,328
Other reserves	17		6,475	1,218
Retained earnings			45,140	81,156
Total equity attributable to equity holders of the parent Company			67,106	97,865
Non-current liabilities
Trade and other payables	18		8,049	-
Borrowings	19		28,209	-
Lease liabilities	14		-	2,492
			36,258	2,492
Current liabilities
Trade and other payables	18		12,795	17,036
Borrowings	19		-	1,164
Lease liabilities	14		86	1,803
Corporation tax			263	241
			13,144	20,244
Total liabilities			49,402	22,736
Total equity and liabilities			116,508	120,601

 

The financial statements were approved by the Board of Directors and authorised for issue on 30 March 2022 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

 

 

		Share capital		Share premium		Retained earnings		Other reserves		Total
	Notes	€'000		€'000		€'000		€'000		€'000
Balance at 1 January 2020		956		-		130,013		803		131,772
Total comprehensive income for the year		-		-		(48,857)		(7)		(48,864)
Issue of ordinary shares for cash	17	191		15,042		-		-		15,233
Share issue cost	17	-		(698)		-		-		(698)
Bonus Issue shares	17	16		(16)		-		-		-
Credit to equity for equity settled share-based payments		-		-		-		422		422
Balance at 31 December 2020		1,163		14,328		81,156		1,218		97,865
Total comprehensive income for the year		-		-		(36,016)		32		(35,984)
Issue of warrants	19	-		-		-		3,073		3,073
Credit to equity for equity settled share-based payments		-		-		-		2,152		2,152
Balance at 31 December 2021		1,163		14,328		45,140		6,475		67,106

 

 

HOSTELWORLD GROUP PLC

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2021

		Notes		2021		2020
				€'000		€'000
Cash flows from operating activities
Loss before tax				(36,578)		(50,495)
Amortisation and depreciation				12,411		14,132
Impairment of intangible assets		4		367		14,996
Share of results of associate		13		225		374
Net profit on disposal of leases		4		(793)		-
Net loss / (profit) on disposal property, plant and equipment		4		492		(55)
Finance income				-		(8)
Finance expense		7		3,501		246
Employee equity settled share-based payment expense		21		2,162		428
Changes in working capital items:
Increase in trade and other payables				5,074		5,586
(Increase) / decrease in trade and other receivables				(321)		3,299
Cash generated from operations				(13,460)		(11,497)
Interest paid				(155)		(246)
Interest received				-		8
Income tax (paid) / refund				(136)		698
Net cash used in operating activities				(13,751)		(11,037)
Cash flows from investing activities
Acquisition / development of intangible assets		10		(4,397)		(3,802)
Purchases of property, plant and equipment		11		(75)		(64)
Net cash used in investing activities				(4,472)		(3,866)
Cash flows from financing activities
Deferred consideration				(345)		(503)
Proceeds from issue of share capital		17		-		15,233
Issue costs paid		17		-		(698)
Proceeds from borrowings		19		28,800		3,454
Transaction costs relating to borrowings		19		(862)		-
Repayment of borrowings		19		(1,164)		(2,290)
Repayments of obligations under lease liabilities		14		(1,160)		(1,462)
Net cash from financing activities				25,269		13,734
Net increase/(decrease) in cash and cash equivalents				7,046		(1,169)
Cash and cash equivalents at the beginning of the year				18,189		19,365
Effect of foreign exchange rate changes				32		(7)
Cash and cash equivalents at the end of the year		16		25,267		18,189

 

 

 

HOSTELWORLD GROUP PLC

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021

 

1.            SIGNIFICANT ACCOUNTING POLICIES

 

               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 Floor 5, 38 Chancery Lane, The Cursitor, London, WC2A 1EN, 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 2021, which were approved by the Board of Directors on 20 March 2022. The financial information does not constitute statutory accounts within the meaning of sections 435(1) and (2) of the Companies Act 2006 or contain sufficient information to comply with the disclosure requirements of International Financial Reporting Standards ("IFRS").

 

An unqualified report on the consolidated financial statements for the year ended 31 December 2021 has been given by the auditors, Deloitte Ireland LLP. It did not include reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006. The consolidated financial statements will be filed with the Registrar of Companies, subject to their approval by the Company's shareholders at the Company's Annual General Meeting on 11 May 2022.

  

               Going concern

 

The Directors, after making enquiries, have a reasonable expectation that the Group and Company has adequate resources to continue operating as a going concern for the foreseeable future.

 

Since the beginning of the COVID-19 pandemic, the Group has maintained strong discipline over its cost base and cash reserves, with trading and cash forecasts being prepared on a weekly basis. Throughout COVID-19 two outlooks have been maintained: a base case scenario based on expected trading and a stress case scenario, which is a further deterioration of the base case scenario. These scenarios evolved over time to take into account regional recovery assumptions, projected revenue and margin flows, cost cutting measures taken, projected net cash flows from operations and available sources of funding including our €30m five-year term loan facility with certain investment funds and accounts of HPS Investment Partners LLC (or subsidiaries or affiliates thereof). Actions taken by the Directors to preserve the Group's cash position include the decision to suspend any cash dividends, the elimination of all non-essential operating costs including marketing, recruitment, travel and other variable overheads, organisational redesigns and associated headcount reductions, negotiation of credit terms with key vendors and Government COVID-19 supports in both Ireland and the UK, including the debt warehousing of Irish employer and employee taxes.

 

In December 2021 the Board approved a base case budget and a stress case budget, both of which covered the period to March 2023, a period of twelve-months from annual report signing. In addition, a five-year outlook was approved. The base assumptions of these budgets are conservative: bed prices are capped at 2019 prices and booking recovery is built on a regional destination basis flexed for timing of borders reopening to International travel as they were at the time. The budget did not assume any increase in commission rates and cancellation rates were forecast to be elevated versus normal rates. In addition, no incremental revenue was included for any existing or future partnerships. Under both scenarios full recovery is not expected to happen until 2023 with the stress case scenario assuming more depressed volumes versus base case scenario and assumes minimal recovery in 2022.

 

Subsequent to our December Board meeting, the Board approved a further additional scenario. This additional scenario reflected the impact that the emergence of the Omicron variant was having on travel demand. This scenario assumed that tougher travel restrictions would be implemented, and demand would soften. Under this scenario 2022 trading levels would be below the budget stress case scenario; this scenario is very unlikely, but it demonstrates a worst-case trading outlook. Neither the stress case scenario nor worst-case scenario includes any additional cost cutting measures; such cost cutting measures would be implemented should trading deteriorate to these levels for a prolonged period.

 

Under all three scenarios, the Group has sufficient cash reserves available and remains compliant with financial covenants under the term loan facility agreement. During January 2022 the Group's trading recovered, despite higher than normal cancellation rates in the first two weeks of the month, and the Group's January trading results closed in line with budgeted base case projections. February 2022 trading results were also in line with our budgeted base case projections. 

 

The Directors have taken steps to ensure adequate liquidity is available to the Group for the likely duration of the crisis and the recovery period. Following the completion of a Placing, and the securing of a revolving credit facility in 2020, on 19 February 2021 the Group signed a €30m five-year term loan facility with certain investment funds and accounts of HPS Investment Partners LLC (or subsidiaries or affiliates thereof). An amount of €28.8m was received on 23 February 2021. The key features of the facility are as follows:

 

·      The facility is single drawdown and bears interest at a margin of 9.0% per annum over EURIBOR (with a EURIBOR floor of 0.25% per annum).

·      Financial covenants as follows (1) adjusted net leverage (Hostelworld has to ensure that total net debt is no more than 3.0 x adjusted EBITDA from 31 December 2023 to 30 September 2024, and no more than 2.5 x adjusted EBITDA from 31 December 2024 onwards); and (2) minimum liquidity (Hostelworld has to ensure that at close of business on the last business day of each month until it is testing the adjusted net leverage ratios there is free cash in members of the Group which have guaranteed repayment of the facility of at least €6.0 million).

·      Security on the facility includes the share capital of the Group, the bank accounts of the Group and the Group's intellectual property.

 

We were in compliance with our minimum liquidity covenants at 31 December 2021.

 

At this point in time, the consequences of the current unrest in Eastern Europe is uncertain. The Group has no operations in either Russia or Ukraine and total forecasted revenues for 2022 in these regions are less than 0.01% of the Group's net revenue. The Directors will continue to closely monitor any developments in the conflict, and the impact to the Group.

 

Having considered the Group's five year P&L outlook, cash flow forecasts prepared for 12 months from date of signing, current and anticipated trading volumes, together with current and anticipated levels of cash and debt, the Directors are satisfied that the Group and Company has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report, and accordingly, they continue to adopt the going concern basis in preparing the Group financial statements.

 

Basis of Preparation

 

The financial statements have been prepared in conformity with the requirements of the Companies Act 2006 and UK adopted International Financial Reporting Standards ("IFRS") and IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

 

The consolidated financial statements also comply with Article 4 of the EU IAS Regulation. References to IFRS hereafter refer to UK adopted IFRS and IFRS adopted by the EU.  

 

The consolidated financial statements have been prepared under the historical cost basis. The investment in associate is accounted for using the equity method.

 

In the preparation of these consolidated financial statements the accounting policies set out below have been applied consistently by all Group companies. The consolidated financial statements are presented in euro, which is the functional currency of all Group companies.

 

Previously line items for administrative expenses, and depreciation and amortisation were shown on the face of the income statement and the share of associate profit / loss was shown after operating profit.  This year administrative expenses and depreciation and amortisation are presented within one-line item for operating expenses and share of associate profit / loss is now taken into account in arriving at operating profit.

Basis of consolidation

 

Subsidiaries

 

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) all of which prepare financial statements up to 31 December.

 

Control is achieved when the Company has the power over the investee, is exposed, or has rights, to variable return from its investment with the investee and has the ability to use its power to affect its returns. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.  All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are eliminated on consolidation. Unrealised losses are also eliminated, except where they provide evidence of impairment.

 

Associates

 

Associates are entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control over those policies.

 

Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. On acquisition of the investment in associate, any excess of the cost of the investment over the Group's share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying value of the investment.

 

The Group's share of its associates' post-acquisition profits or losses is recognised in 'Share of results of associate' in the consolidated income statement, and its share of post-acquisition movements in reserves is recognised in the consolidated statement of changes in equity. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment, less any impairment in value. Where indicators of impairment arise, the carrying amount of the associate is tested for impairment by comparing its recoverable amount with its carrying amount.

 

The requirements of IAS 36 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group's investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised is not allocated to any asset, including goodwill that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

 

Unrealised gains arising from transactions with associates are eliminated to the extent of the Group's interest in the entity. Unrealised losses are eliminated to the extent that they do not provide evidence of impairment. When the Group's share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses unless the Group has incurred obligations or made payments on behalf of the associate. The accounting policies of associates are amended where necessary to ensure consistency of accounting treatment at Group level.

 

When the Group ceases to have significant influence, any retained interest in the entity is re-measured to its fair value at the date when significant influence is lost with the change in carrying amount recognised in the consolidated income statement. The Group also reclassifies any movements previously recognised in other comprehensive income to the consolidated income statement.

Business combinations

 

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree.

 

Acquisition related costs are recognised in the consolidated income statement as incurred.

 

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that:

·   Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;

·    Liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and

·      Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.

 

The fair value of the assets and liabilities are based on valuations using assumptions deemed by management to be appropriate. Professional valuers are engaged when it is deemed appropriate to do so.

 

Goodwill represents the excess of the aggregate of the consideration transferred and the amount of any non-controlling interest in the acquired entity over the net identifiable assets acquired.

 

                Non-controlling interests

               

Non-controlling interests represent the portion of the equity of a subsidiary not attributable either directly or indirectly to the Group and are presented separately in the consolidated income statement and within equity in the consolidated statement of financial position, distinguished from shareholders' equity attributable to the owners of the parent Company.

 

New standards, amendments and interpretations issued and adopted by the group in 2021:

The following changes to IFRS became effective for the Group during the year but did not result in material changes to the Group's consolidated financial statements:   

·      Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

·      Leases COVID-19- Related Rent Concessions (Amendment to IFRS 16)

·      Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Amendments to IFRS 4)

 

New and amended standards and interpretations not yet mandatorily effective

The Group has not applied certain new standards, amendments and interpretations to existing standards which are not yet mandatorily effective and have not yet been endorsed by the UK or by the EU, in some instances:

·      Leases COVID-19- Related Rent Concessions beyond 30 June 2021 (Amendments to IFRS 16)

·      Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)

·      Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

·      Definition of Accounting Estimates (Amendments to IAS 8)

·      Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

·      Initial Application of IFRS 17 and IFRS 9 - Comparative Information (Amendment to IFRS 17)

·      Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)

·      Amendments to IFRS 17

·      Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)

·      Reference to the Conceptual Framework (Amendments to IFRS 3)

·      Annual Improvements 2018-2020 Cycle:

o  IFRS 1 First-time Adoption of International Financial Reporting Standards - Subsidiary as a first-time adopter

o  IFRS 9 Financial Instruments - Fees in the '10 per cent' test for derecognition of financial liabilities

o  IFRS 16 Leases - Lease incentives

o  IAS 41 Agriculture - Taxation in fair value measurements

 

Revenue recognition

 

The Group generates substantially all of its revenues from the technology and data processing fees and service fees that it charges to accommodation providers and the transaction service fees it charges to consumers. The Group also generates revenues from technology and data processing fees that it charges to providers of other travel products and associated transaction service fees, from cancellation protection fees, payment protection fees and from advertising services.

 

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 having provided the technology and data processing service 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.

 

Where the Group provides an ancillary service to allow a flexible booking option which allows a booking to be cancelled for no charge or a new booking to be made, such revenue is deferred, until such time as the related check-in date has passed or for a six-month period from the date of cancellation, at which time the credit expires.

 

Where credits are granted to customers for utilisation on future bookings, a provision is recorded against revenue based on the probability that a credit offering will be used by a customer.

 

Ancillary advertising revenues are recognised over the period when the service is performed. Revenue is measured at the fair value of the consideration received or receivable.

 

Revenue is stated net of rebates, sales taxes and value added taxes.

 

 

Leases

 

The Group assesses whether a contract is or contains a lease, at inception of the contract. For contracts where the Group is a lessee, a right-of-use asset is recognised, representing the Group's right to use the underlying asset and a lease liability is also recognised for the Group's obligation to make lease payments during the lease term. The lease term of each contract is determined as the non-cancellable period of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease (break option), if it is reasonably certain not to exercise that option.  For short term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.

 

The right-of-use asset is initially measured at cost and subsequently valued at cost less accumulated depreciation and impairment losses. It is adjusted where a lease modification results in a remeasurement of the lease liability.

 

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

 

Whenever the Group incurs an obligation to restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset.

 

The carrying value of these assets are reviewed at the end of each reporting period to determine whether there is any indication that the assets have suffered an impairment loss. The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the 'Property, Plant and Equipment' policy.

 

Lease liabilities are measured at the present value of the future lease payments. The lease payments are discounted using the implicit interest rate in the lease, or where this cannot readily be determined the Group use the Group's incremental borrowing rate. The incremental borrowing rate depends on the term, currency and start date of the lease and is determined based on a series of inputs including: the risk-free rate based on government bond rates; a country-specific risk adjustment and a credit risk adjustment based on bond yields. Subsequently the lease liability is increased to reflect interest on the lease liability and reduced for payments made. The lease liability is remeasured for lease modifications or reassessments.

 

Lease payments included in the measurement of the lease liability comprise: (i) Fixed lease payments less any lease incentives receivable; (ii) Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; (iii) The amount expected to be payable by the lessee under residual value guarantees; (iv) The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and (v) Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

 

The lease liability is presented as a separate line in the consolidated statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

 

The Group re-measures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever: (i) The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is re-measured by discounting the revised lease payments using a revised discount rate. (ii) The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (iii) A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

 

Cash paid on the interest portion of a lease liability is included as part of operating activities in the consolidated cash flow statement and cash payments for the principal portion of a lease liability are included as part of financing activities.

 

 

               Exceptional items

 

Exceptional items by their nature and size can make interpretation of the underlying trends in the business more difficult. Such items may include restructuring, material merger and acquisition costs, profit or loss on disposal or termination of operations, litigation settlements, legislative changes, material acquisition integration costs and profit or loss on disposal of investments. Judgement is used by the Group in assessing the particular items which by virtue of their scale and nature should be disclosed as exceptional items.

 

 

Taxation

 

The tax expense represents the sum of the tax currently payable and deferred tax.

 

Current tax

 

The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date, and any adjustment to tax payable in respect of previous years.

 

A provision is recognised for those matters for which the tax determination is uncertain, but it is considered probable that there will be a future outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected to become payable. The assessment is based on the judgement of tax professionals within the Company supported by previous experience in respect of such activities and in certain cases based on specialist independent tax advice.

 

Deferred tax

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable future taxable profits will be available against which the temporary difference can be utilised.

 

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

 

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Such reductions are reversed when the probability of future taxable profits improves.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

 

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the consolidated income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

 

 

Foreign currencies

 

The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in euro, which is the functional currency of the parent Company and the presentation currency for the consolidated financial statements.

 

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities denominated in foreign currencies are retranslated at the rates prevailing on the reporting date.

 

Non-monetary items (including deferred revenue) carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined in accordance with IFRIC 22. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

 

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the consolidated income statement and consolidated statement of comprehensive income for the period. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's operations are translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group's foreign currency translation reserve.

 

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income.

 

 

Retirement benefits costs

 

Contributions made in respect of employees' pension schemes are charged through the consolidated income statement in the period they become payable. The Group pays contributions to privately administered pension insurance plans.  The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

 

 

Property, plant and equipment

 

Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

 

               Depreciation is charged so as to write off the cost of assets over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.

 

               Right-of-use assets are depreciated over the shorter period of the lease term and the useful life of the underlying asset. 

 

               Depreciation is provided on the following basis:

 

Leasehold property improvements	:	5-10 years straight line
Computer equipment	:	3-5 years straight line
Fixtures and equipment	:	6-7 years straight line

 

Leasehold improvements are improvements made to buildings leased by the Group when it has the right to use these leasehold improvements over the term of the lease. The improvements will revert to the lessor at the expiration of the lease.

 

The cost of a leasehold improvement is depreciated over the shorter of:

1.     The remaining lease term, or

2.     The estimated useful life of the improvement.

 

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. The gain or loss arising on the disposal of an asset is recognised in the consolidated income statement when the asset is derecognised.

 

In accordance with IAS 36 'Impairment of Assets', the carrying amounts of items of property, plant and equipment are reviewed at each reporting date to determine whether there is any indication of impairment. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.

 

Impairment losses are recognised in the consolidated income statement. Following the recognition of an impairment loss, the depreciation charge applicable to the asset is adjusted prospectively in order to systematically allocate the revised carrying amount over the remaining useful life.

  

Intangible assets

 

Goodwill

 

Goodwill is initially measured as the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired subsidiary or associate. Identifiable intangible assets, meeting either the contractual-legal or separability criterion are recognised separately from goodwill.

 

Goodwill on acquisition of subsidiaries is included within intangible assets. Goodwill associated with the acquisition of associates is included within the interest in associates under the equity method of accounting.

 

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

 

Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicated that the carrying value may be impaired. 

 

For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units ("CGU") that is expected to benefit from the synergies of the combination.

 

If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro-rata basis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated income statement. An impairment loss recognised for goodwill is not reversed in subsequent periods.

 

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the gain or loss on disposal.

 

Other intangible assets

 

The Group has four classes of intangible asset: domain names, technology assets, affiliate contracts and development costs.

 

              Other intangible are capitalised at their fair value and amortised to the consolidated income statement on a straight-line basis over their estimated useful lives except for the Hostelbookers domain name which was amortised on a reducing balance basis until fully impaired at 31 December 2021 (see note 10):

 

 

Domain names	:	8-20 years
Technology assets	:	4 years
Affiliate contracts	:	5 years
Capitalised development costs	:	2-5 years

 

 

The residual value associated with all intangible assets is deemed to be €nil. 

 

               Expenditure on research activities is recognised as an expense in the period in which it is incurred.

 

Development expenditure in relation to internally-generated intangible assets is capitalised when all of the following have been demonstrated; the technical feasibility of completing the intangible asset so that it will be available for use; the intention to complete the project to which the intangible asset relates and to use it or sell it; the ability to use or sell the intangible asset, how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use the intangible asset; and the ability to measure reliably the expenditure attributable to the intangible asset during its development.

 

The amount initially capitalised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is charged to profit or loss in the period in which it is incurred.

 

An intangible asset is derecognised on disposal or when no future economic benefits are expected to arise from the continued use or disposal of the asset. The gain or loss arising on the disposal of an asset is recognised in the consolidated income statement when the asset is derecognised.

 

 

Impairment of tangible and intangible assets other than goodwill

 

At the end of each reporting period, the Directors review the carrying amounts of the Group's tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Directors estimate the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

 

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

 

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount. The increased carrying amount cannot exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or the cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

 

Financial instruments

 

Financial assets and financial liabilities are recognised in the Group's consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

 

Financial assets and liabilities are initially measured at fair value plus transaction costs, except for those classified as fair value through profit or loss, which are initially measured at fair value. The fair value of financial assets and liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period.

 

(a)    Classification of financial assets

  

Trade and other receivables

 

Trade and other receivables are stated initially at their transaction price and subsequently at amortised cost, less any expected credit loss provision. The Group applies the simplified approach to measuring expected credit losses which uses a lifetime expected credit loss allowance for all trade receivables.

 

(b)    Expected credit loss of financial assets

 

The Group always recognises lifetime expected credit losses ("ECLs") for trade receivables estimated using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate.

 

Lifetime ECLs represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. ECLs are reported in the consolidated income statement.

 

(c)    Classification of financial liabilities

 

Trade and other payables

 

Trade and other payables are initially recorded at fair value, which is usually the original invoiced amount, and subsequently carried at amortised cost. Liabilities are derecognised when the obligation under the liability is discharged, cancelled or expires.

 

Loans and borrowings

All loans and borrowings are initially recognised at fair value of the proceeds received less any directly attributable transaction costs. Transaction costs include fees and commission paid to agents, advisers brokers and dealers. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method being the amount at which the financial liability is measured at initial recognition minus any principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount. Borrowings are de-recognised when the Group's obligations specified in the contracts expire, are discharged or cancelled. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the financial position date.

Other financial liabilities

 

Financial liabilities are recognised initially at fair value and are subsequently stated at amortised cost using the effective interest method.  The effective interest method is a method for calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the amortised cost of a financial liability.

Financial liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. The Directors determine the classification of the Group's financial liabilities at initial recognition.

Cash and cash equivalents

 

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Restricted cash and cash equivalent balances are those which meet the definition of cash and cash equivalents but are not available for use by the Group.

  

Recognition of warrants

 

Warrant reserve is recorded at the fair value of warrants issued. Warrants have been recognised as equity instruments as each warrant issued entitles the holder to a fixed number of ordinary shares in exchange for a fixed exchange price of €0.01 per ordinary equity share.

 

 

Dividends

 

Final dividends are recorded in the Group's financial statements in the period in which they are approved by the Company's shareholders. Interim dividends are recorded in the period in which they are paid.

 

 

Share based payments

 

Equity settled share based payments to employees are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 21.

 

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the consolidated income statement such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the share based payment reserve.

 

For cash settled share based payments, a liability is recognised for the services acquired, measured initially at the fair value of the liability. At each reporting date until the liability is settled, and at the date of settlement, the fair value of the liability is re-measured, with any changes in fair value recognised in the consolidated income statement for the year.

 

 

Government Grants

 

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. Amounts are recognised as income over the periods necessary to match them with the related costs and are deducted in reporting the related expense.

 

 

2.            CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

 

In the application of the Group's accounting policies, the Directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors considered relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years.

  

(a) Critical judgements in applying the Group's accounting policies:

 

The following are the critical judgements, apart from those involving estimations (which are presented separately below), that the directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in financial statements.

 

               Capitalisation of development costs

 

Development costs are capitalised when the criteria set out in paragraph 57 of IAS 38 Intangible assets have been demonstrated as disclosed in our accounting policy disclosed in the annual report. Determining the amount to be capitalised requires the Directors to make judgements about each asset to ensure that they meet the requirements. The most critical judgement is regarding the expected future cash generation of the asset.

 

Accounting for exceptional items

 

Exceptional items by their nature and size can make interpretation of the underlying trends in the business more difficult. Judgement is used in assessing the particular items which by virtue of their scale and nature should be disclosed as exceptional items. Circumstances that the Group believe would give rise to exceptional items for separate disclosure are outlined in the exceptional accounting policy in the annual report.

  

(b) Key sources of estimation uncertainty:

 

The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

 

               Going concern

 

The Directors have a reasonable expectation that the Group has adequate resources to continue operating as a going concern for the foreseeable future. Management estimation is required in forecasting cashflow projections incorporating the impact of COVID-19. The details of the going concern scenarios, key assumptions and mitigating actions are outlined in the going concern statement within note 1.

 

The most significant factor impacting our projections for going concern relates to COVID-19 and what impact COVID-19 will have on trading volumes. As outlined within note 1 we had three scenarios - a base case, a stress case and a worst case which reflected an Omicron run rate at the end of December 2021. We have utilised the worst-case Omicron trading scenario and we have further stressed the scenario. The Group has considered the impact to cash of operating with a further 10% decline in revenue and direct marketing costs but carrying the current level of operating costs for a 12-month period. Under this scenario the Group continues to have sufficient cash resources to operate as a going concern.

 

Deferred tax asset recognition and recoverability of deferred tax assets

 

Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available in future periods. The extent to which it is probable that taxable profits will be available in future periods is an estimate assessed based on the approved five-year budget and long-term forecasts upon initial recognition and at each reporting date. At 31 December 2021 the carrying value of deferred tax assets amounted to €8.4m (2020: €7.6m). Based on the Board approved five-year outlook there are sufficient taxable profits to demonstrate the asset could be substantially utilised over a five-year period to 31 December 2026. The group has made a loss in 2020 and 2021 as a direct impact of COVID-19. The 5-year outlook includes an assumption regarding return to profit as we assume a recovery of bookings and revenue with full trading recovery included in 2023, and a modest growth rate applied to profits from 2023. A decline in taxable profits from amounts included in our five-year budgeted projections would impact the amount of the deferred tax asset which would be recovered over the next five years. Should taxable profits decline 5% over the next 5 years the deferred tax asset would still be recoverable.

 

Carrying value of goodwill and intangible assets

              

The Directors assess annually whether goodwill has suffered any impairment, in accordance with the relevant accounting policy and intangible assets are assessed for possible impairment where indicators of impairment exist. The recoverable amounts of cash-generating units ("CGUs") are determined based on the higher of fair value less costs of disposal or value in use calculations. Management estimation is required in forecasting future cash flows of cash-generating units including incorporating the impact of COVID-19, the discount rates applied to these cashflows, the expected long-term growth rate of the applicable business and terminal values. The carrying amount of goodwill at 31 December 2021 amounted to €17.8m (2020: €17.8m) and the carrying amount of domain names amounted to €56.4m (2020: €64.2m). Based on work performed and the headroom identified in the models no impairment was necessary in 2021 for goodwill or domain names. Current year impairment charge of €367k relates to an impairment of a specific project following a management decision to cease ongoing investment. In 2020 the Group recognised an impairment charge of €15.0m. Further details on the assumptions used and sensitivity analysis are set out in note 10.

 

 

3.            REVENUE & SEGMENTAL ANALYSIS

 

The Group is managed as a single business unit which provides software and data processing services that facilitate hostel, hotel and other accommodation worldwide, including ancillary on-line advertising revenue.

 

The Directors determine and present operating segments based on the information that is provided internally to the Chief Executive Officer, who is the Company's Chief Operating Decision Maker ("CODM"). When making resource allocation decisions, the CODM evaluates booking numbers and average booking value.  The objective in making resource allocation decisions is to maximise consolidated financial results.

 

The CODM assesses the performance of the business based on the consolidated adjusted loss after tax of the Group for the year. This measure excludes the effects of certain income and expense items, which are unusual by virtue of their size and incidence, in the context of the Group's ongoing core operations, such as the impairment of intangible assets and one-off items of expenditure.

 

All revenue is derived wholly from external customers and is generated from a large number of customers, none of whom is individually significant. 

 

The Group's major revenue-generating asset class comprises its software and data processing services and is directly attributable to its reportable segment operations. In addition, as the Group is managed as a single business unit, all other assets and liabilities have been allocated to the Group's single reportable segment.

 

There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss.

 

Revenue split by continent is presented as follows:

 

		2021	2020
		€'000	€'000
Europe		10,713	7,354
Americas		5,213	3,779
Asia, Africa and Oceania		975	4,231
Total revenue		16,901	15,364

 

Revenue arising within the country of domicile Ireland amounted to €492k (2020: €418k). As at 31 December 2021, €1,020k of revenue relating to free cancellation bookings has been deferred (2020: €197k).

 

Disaggregation of revenue is presented as follows:

 

	2021	2020
	€'000	€'000
Technology and data processing fees	16,849	14,251
Advertising revenue and ancillary services	52	1,113
Total revenue	16,901	15,364

 

 

In the year ended 31 December 2021, the Group generated 100% (2020: 93%) of its revenues from the technology and data processing fees that it charged to accommodation providers. 

 

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, the United Kingdom, Portugal, and China. Non-current assets are disaggregated as follows:

 

			2021	2020
	Notes		€'000	€'000
Total non-current assets			89,221	100,677
Broken out as:
Ireland			87,799	96,951
Australia			1,186	2,349
United Kingdom			32	922
Portugal			165	430
China			39	25

 

4.            OPERATING EXPENSES EXCLUDING IMPAIRMENT

 

Loss for the year has been arrived at after charging/(crediting) the following operating costs:

 

			2021	2020
	Notes		€'000	€'000
Marketing expenses			13,792	9,260
Staff costs	6		15,546	16,759
Credit card processing fees			573	571
Loss on disposal plant, property and equipment			492	12
Profit on disposal plant, property and equipment			-	(67)
Net profit on disposal of leases			(793)	-
Movement in expected credit loss	15		129	18
Exceptional items	5		588	2,989
FX loss / (gain)			419	(152)
Other administrative costs			6,229	6,729
Total administrative expenses			36,975	36,119
Depreciation of tangible fixed assets	11		1,519	2,458
Amortisation of intangible fixed assets	10		10,892	11,674
Total operating expenses excluding impairment			49,386	50,251

 

 

Included in staff costs are government assistance amounts totalling €1,771k (2020: €1,085k) for furloughed employees under the Coronavirus Job Retention Scheme in the UK and subsidy received under the Employment Wage Subsidy Scheme in Ireland.

Included within marketing expenses are direct marketing costs of €12,763k (2020: €7,551k). Other administration costs include rent and rates, legal and professional, training and recruitment, information technology website and security, ecommerce and data analytics.

Auditor's remuneration

During the year, the Group obtained the following services from its auditor - Deloitte Ireland LLP:

 

			2021	2020
			€'000	€'000
Fees payable for the statutory audit of the Company and consolidated financial statements			42	42
Fees payable for other services:
- statutory audit of subsidiary undertakings			96	135
- tax advisory services			-	-
- audit related assurance services			8	194
- corporate finance services			-	-
- other non-audit services			13	57
Total			159	428

 

 

5.            EXCEPTIONAL ITEMS          

 

			2021	2020
			€'000	€'000
Merger and acquisition costs			(127)	1,332
Restructuring costs			715	1,657
Total			588	2,989

               

               

Merger and acquisition credit of €127k (2020: costs of €1,332k) relates to a release of costs previously accrued for due to a revision of estimate. 2020 merger and acquisition costs relates to professional fees incurred.

 

Restructuring costs of €715k (2020: €1,657k) primarily relate to staff costs incurred as part of an implementation of a simpler and more efficient growth orientated organisational structure. The new structure organises the Company's marketing, product, development and analytics employees into autonomous growth teams. The structure was initiated in the prior year where costs were incurred relating to an initial internal realignment of our technology and product departments. In 2020 we also incurred professional fees incurred on review of funding options for the Group.

 

 

 

6.            STAFF COSTS

 

The average monthly number of people employed (including Executive Directors) was as follows:

 

		2021	2020
Average number of persons employed:
Administration and sales		110	137
Development and information technology		116	152
Total		226	289

 

The aggregate remuneration costs of these employees is analysed as follows:

 

			2021	2020
	Notes		€'000	€'000
Staff costs comprise:
Wages and salaries			12,823	15,550
Social security costs			1,367	1,935
Pensions costs			460	447
Other benefits			442	734
Share option charge	21		2,162	428
Capitalised development labour			(1,708)	(2,335)
Total			15,546	16,759

 

In addition to staff costs disclosed above termination benefits disclosed within note 5 exceptional items restructuring costs totalled €672k (2020: €935k).

 

 

7.            FINANCE COSTS

 

	Notes		2021	2020
			€'000	€'000
Interest on lease liabilities	14		102	182
Finance costs - HPS facility	19		3,344	-
Finance costs - prompt pay facility			55	64
Total			3,501	246

 

 

 

8.            TAXATION

 

			2021	2020
	Notes		€'000	€'000
Corporation tax:
Current year charge / (credit)			372	(395)
Adjustments in respect of prior years			(178)	(230)
Total			194	(625)
Origination and reversal of temporary differences	12		(756)	(1,013)
Total tax credit for the year			(562)	(1,638)

 

Corporation tax is calculated at 12.5% (2020: 12.5%) of the estimated taxable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.  The corporation tax charge relates primarily to our UK and Portuguese 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:

 

	2021	2020
	€'000	€'000
Loss before tax on continuing operations	(36,578)	(50,495)
Tax at the Irish corporation tax rate of 12.5% (2020: 12.5%)	(4,572)	(6,312)
Effects of:
Tax effect of expenses that are not deductible in determining taxable profit	1,556	3,831
Tax effect of losses not utilised	3,173	2,789
Tax effect of losses carried back	-	(578)
Tax effect of income taxed at different rates	50	(49)
Depreciation less than capital allowances	(130)	(167)
Effect of different tax rates of subsidiaries operating in other jurisdictions	295	91
Recognition of deferred tax asset	(756)	(1,013)
Adjustments in respect of prior years	(178)	(230)
Total	(562)	(1,638)

 

 

The Group has unused trading tax losses of €25,384k (2020: €17,689k) available for offset against future profits arising. A deferred tax asset has not been recognised in respect of such losses as it is not considered probable that there will be future trading profits available against which the deferred tax asset can be unwound, beyond those used to assess the recoverability of the existing deferred tax asset at 31 December 2021. All tax losses available may be carried forward indefinitely. In addition, in the prior year the Group had an unrecognised deferred tax asset of €1,871k as a result of an impairment of intellectual property in 2020. The balance is still unrecognised in the current year.

 

In 2020 as a result of the impact of COVID-19 Irish Revenue introduced a temporary acceleration of corporation tax loss relief under section 396D TCA 1997 which provides for a temporary acceleration of corporation tax loss relief for accounting periods affected by COVID-19. The measure allowed companies to estimate their trading losses for certain accounting periods and carry back up to 50% of those losses estimated against chargeable profits in the preceding account period. The Group availed of this measure with regard to the period ended 31 December 2020. An estimate of the corporation tax loss for the period ended 31 December 2020 was calculated and an amount of available trading losses was used to partially offset trading profits in the period ended 31 December 2019. As a result of this relief, the Group was entitled to a refund from the Irish tax authorities for corporation tax paid in 2019.

 

 

9.            LOSS PER SHARE

 

Basic loss per share is computed by dividing the net loss for the year available to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

 

		2021	2020
Weighted average number of shares in issue ('000s)		116,321	106,947
Loss for the year (€'000s)		(36,016)	(48,857)
Basic loss per share (euro cent)		(30.96)	(45.68)

 

 

Diluted loss per share is computed by adjusting the weighted average number of ordinary shares in issue to assume conversion of all potential dilutive ordinary shares. The issue of warrants (note 19) and share options and share awards (note 21) are the Company's only potential dilutive ordinary shares. Ordinary shares potentially issuable from share-based payment arrangements and warrants are anti-dilutive due to the loss in the financial period meaning there is no difference between basic and diluted earnings per share.

 

		2021	2020
Weighted average number of ordinary shares in issue ('000s)		116,321	106,947
Effect of dilutive potential ordinary shares:
Share options ('000s)		-	-
Weighted average number of ordinary shares for the purpose of diluted earnings per share ('000s)		116,321	106,947
Diluted loss per share (euro cent)		(30.96)	(45.68)

 

 

10.          INTANGIBLE ASSETS

 

The table below shows the movements in intangible assets for the year:

 

	Goodwill	Domain Names	Technology	Affiliates Contracts	Capitalised Development Costs	Total
	€'000	€'000	€'000	€'000	€'000	€'000
Cost
Balance at 1 January 2020	47,274	214,708	14,068	5,500	14,372	295,922
Additions	-	-	153	-	3,649	3,802
Disposals for the year	-	-	(121)	-	-	(121)
Balance at 31 December 2020	47,274	214,708	14,100	5,500	18,021	299,603
Additions	-	-	-	-	4,397	4,397
Disposals for the year	-	-	(52)	-	-	(52)
Balance at 31 December 2021	47,274	214,708	14,048	5,500	22,418	303,948
Accumulated amortisation and impairment
Balance at 1 January 2020	(29,426)	(126,374)	(13,911)	(5,500)	(11,591)	(186,802)
Charge for year	-	(9,118)	(132)	-	(2,424)	(11,674)
Disposals for the year	-	-	121	-	-	121
Impairment recognised	-	(14,996)	-	-	-	(14,996)
Balance at 31 December 2020	(29,426)	(150,488)	(13,922)	(5,500)	(14,015)	(213,351)
Charge for year	-	(7,810)	(119)	-	(2,963)	(10,892)
Disposals for the year	-	-	52	-	-	52
Impairment recognised	-	-	-	-	(367)	(367)
Balance at 31 December 2021	(29,426)	(158,298)	(13,989)	(5,500)	(17,345)	(224,558)
Carrying amount
At 31 December 2020	17,848	64,220	178	-	4,006	86,252
At 31 December 2021	17,848	56,410	59	-	5,073	79,390

 

Capitalised development cost additions during the year comprised of internally generated additions of €1,708k (2020: €2,335k) and other separately acquired additions of €2,689k (2020: €1,314k). Development costs have been capitalised in accordance with IAS 38 Intangible Assets and are therefore not treated, for dividend purposes, as a realised loss. Hostelworld continue to utilise affiliate contracts to generate revenue and continue to pay affiliate partner commissions.

Impairments

 

The carrying value of the capitalised development costs balance at 31 December 2021 is €5,073k (2020: €4,006k. Current year impairment charge of €367k relates to an impairment of a specific project following a management decision to cease ongoing investment.

 

The carrying value of the goodwill balance at 31 December 2021 is €17,848k (2020: €17,848k) and relates to an investment in Hostelworld.com Limited by the Group in 2009. Goodwill, which has an indefinite useful life, is subject to annual impairment testing, or more frequent testing if there are indicators of impairment.  Following impairment testing based on the assumptions below, no impairment was recognised for goodwill in the current or prior year.

 

The carrying value of the Group's intellectual property at 31 December 2021 is €56,410k (2020: €64,220). Following impairment testing based on the assumptions below, no impairment was recognised for the Group's intellectual property in 2021. In 2020, as a result of a strategic review of the business by the Directors, it was determined to cease actively marketing our Hostelbookers brand name. An impairment loss of €494k was recognised based on the carrying value at 31 December 2020. The recoverable amount was €nil based on value in use calculations. Also, in 2020 following a review of COVID trading performance and booking performance, the Directors reassessed the estimated cash flows associated with the Hostelworld.com intellectual property assets. This led to the recognition of an impairment charge of €14,502k in relation to the value of the Hostelworld.com domain name.

 

Cash generating units ("CGUs") to which goodwill and intellectual property have been allocated represent the lowest level at which the assets are monitored for internal reporting purposes. Goodwill has not been allocated across CGUs as it is not possible to identify separate CGUs. The recoverable amount of goodwill and intellectual property allocated to a CGU is determined based on a value in use computation. The key assumptions for calculating value in use of the CGUs are discount rates, growth rates and cash flows. They are described as follows:

 

Discount rates

 

			2021	2020
Pre-tax discount rate; Goodwill			14.9%	13.2%
Pre-tax discount rate: Intellectual Property			15.57%	14.69%

 

The pre-tax discount rates are based on the Group's weighted average cost of capital, calculated using the Capital Asset Pricing Model adjusted for the Group's specific beta coefficient together with a country risk premium to take account of the countries from where the CGU derives its cash flows.

 

Cash flows

 

The cash flow projections are based on a five-year budget formally approved by the Board of Directors.

 

In preparing the five-year budget, management have based projections on travel news at the time of preparing including government announcements on the reopening and closure of borders and key assumptions on the return to growth of the market, consumer behaviours, competitor activity and developing trends in the industry in which the CGU operates.

 

Management have also considered the Group's history of earnings and core strategic initiatives including improving the competitiveness of our core OTA business and platform modernisation. Management have also considered capital expenditure requirements to maintain the CGU's performance and profitability. Working capital requirements are forecast to move in line with activity.

 

Growth rates

 

Growth rates are assessed based on the Board approved five-year 2021 budget. For goodwill a terminal value of 2% (2020: 2%) growth into perpetuity was used to extrapolate cash flows beyond the five-year budget period. This growth rate does not exceed the long-term average growth rate for the industry in which each CGU operates.  For intellectual property growth rates included beyond the five-year budget period ranged from 6% to 3% (2020: 8% to 3%).

 

Sensitivity analysis

 

The key assumptions underlying the impairment reviews are set out above. Sensitivity analysis has been conducted in respect of each of the CGUs using the following sensitivity assumptions: a 2% increase in the discount rate; 10% decline in revenue in each of the Board approved five-year numbers and nil terminal value growth. Under each scenario no impairment was identified.

 

Sensitivity analysis has been completed on key assumptions in isolation and in combination, and the headroom included is significant. The key assumptions are discount factor, long term growth rates and growth rates for each of the Board approved five-year numbers. Sensitivities have been applied on all of these assumptions.

 

From our sensitivity analysis we identified that Goodwill would need to have nil terminal value growth and an increase in discount rate of 4% to be considered impaired. This is not a likely scenario. In addition, for our intellectual property management considers that no reasonably possible changes in assumptions would reduce a CGU's headroom to nil.

 

 

11.          PROPERTY, PLANT AND EQUIPMENT

 

The table below shows the movements in property, plant and equipment for the year:

 

	Right-of-Use Assets (Leasehold Property)	Leasehold Property Improvements	Fixtures & Equipment	Computer Equipment	Total
	€'000	€'000	€'000	€'000	€'000
Cost
Balance at 1 January 2020	4,333	1,877	823	3,659	10,692
Additions	1,681	23	-	41	1,745
Remeasurement	129	-	-	-	129
Disposals	(769)	(334)	(169)	(214)	(1,486)
Balance at 31 December 2020	5,374	1,566	654	3,486	11,080
Additions	116	-	-	75	191
Disposals	(5,036)	(1,034)	(470)	(3,309)	(9,849)
Balance at 31 December 2021	454	532	184	252	1,422
Accumulated depreciation
Balance at 1 January 2020	(1,061)	(969)	(560)	(2,749)	(5,339)
Charge for year	(1,518)	(258)	(102)	(580)	(2,458)
Disposals	492	334	158	213	1,197
Balance at 31 December 2020	(2,087)	(893)	(504)	(3,116)	(6,600)
Charge for year	(960)	(186)	(60)	(313)	(1,519)
Disposals	2,665	612	413	3,296	6,986
Foreign exchange	4	-	-	-	4
Balance at 31 December 2021	(378)	(467)	(151)	(133)	(1,129)
Carrying amount
At 31 December 2020	3,287	673	150	370	4,480
At 31 December 2021	76	65	33	119	293

 

Right-of-use assets relate to the Group's lease commitments for office space in Ireland, UK, Portugal and China. In August 2021 the Group exited their long-term lease commitments for its Dublin and London offices. Further detail is included in note 14.

 

For the remaining leases the average lease term of leases entered at 31 December 2021 is less than 1 year. The maturity analysis of lease liabilities is presented in note 14.

 

 

12.          DEFERRED TAXATION

 

The following are the major deferred taxation assets recognised by the Group and movements thereon during the current and prior reporting year. Deferred tax assets primarily relating to temporary differences between the carrying value of intangible and tangible assets and their tax base. The Group does not have any deferred tax liabilities (2020: €nil).

 

		2021	2020
		€'000	€'000
Opening balance		7,596	6,583
Credited to the consolidated income statement		756	1,013
Closing balance		8,352	7,596

 

The deferred tax credit for the year ended 31 December 2021 of €756k (2020: €1,013k) relates to a deferred tax asset created in the current year for capital allowances not utilised and available for future offset. Deferred tax is determined using tax rates and laws enacted or substantively enacted by the reporting date. The total tax charge in future periods will be affected by any changes to the applicable tax rates in force in jurisdictions in which the Group operates and other relevant changes in tax legislation.

 

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which any unused tax losses and unused tax credits can be utilised. Further detail is included within note 2 to the financial statements.

 

 

13.          INVESTMENT IN ASSOCIATE

 

		2021	2020
		€'000	€'000
Opening balance		2,349	2,723
Share of results of associate		(225)	(374)
Capital reduction		(938)	-
Closing balance		1,186	2,349

The Group holds an investment in Goki Pty Limited, an Australian resident company. Goki Pty Limited's principal activity is software development and principal place of business is Australia. The investment in an associate is accounted for using the equity method.

When the initial investment was made the Group had significant influence but not control over the entity, due to the nature of its voting rights. The Group controlled 49% of the voting rights and was entitled to appoint 50% or more of the total number of Directors to the Board.

On 7 July 2021 the directors of Goki PTY Limited approved a reduction in the investment held by Hostelworld.com Limited in the company. The shareholding was reduced from 49% to 31.5% through means of a capital reduction. Hostelworld.com Limited retains one Board seat, out of four, and continues to exert significant influence over the company. Hostelworld.com Limited will continue to account for Goki PTY Limited as an associate.

The original purchase consideration for the investment in Goki PTY Limited was USD 3,000k. Following the completion of the reduction in investment total purchase consideration reduced to USD 1,890k.

Deferred consideration of €nil (2020: €1,266k) exists at the balance sheet date.

Summarised financial information in respect of Goki Pty Limited is set out below. This represents the amounts in Goki Pty Limited's financial statements prepared in accordance with IFRSs.   

Statement of financial position of Goki Pty Limited as at 31 December 2021:

		2021	2020
		€'000	€'000
Non-current assets		7	9
Current assets		354	1,829
Current liabilities		(70)	(200)
Equity attributable to owners of the company		291	1,638

 

Income statement of Goki Pty Limited for the year ended 31 December 2021:

	2021	2020
	€'000	€'000
Revenue	430	28
Loss after tax	(502)	(764)
Other comprehensive income attributable to the owners of the company	-	-
Total comprehensive loss	(502)	(764)
Group share of results of associate	(225)	(374)

*Relates to group share of results of associate of 49% from 1 Jan until 7 July 2021 and 31.5% from 7 July 2021 to 31 December 2021.

Reconciliation of the above summarised financial information to the carrying amount of the Group's interest in Goki Pty Limited recognised in the consolidated financial statements:

	2021	2020
	€'000	€'000
Net assets of Goki Pty Limited	291	1,638
Proportion of the Group's ownership interest in the associate	31.5%	49%
Group share of net assets	92	803
Goodwill and transaction costs	1,930	2,868
Other adjustments	(836)	(1,322)
Carrying amount of the group's interest in associate	1,186	2,349

 

Other adjustments relate to the elimination of the Group's 31.5% (2020: 49%) equity investment within the net assets of Goki Pty Limited and amounts to 31.5% (2020: 49%) of the share capital of Goki PTY Limited.

Commitment to extend loan to associate

Under the terms of the original shareholder purchase agreement, there was a USD 500k loan facility option available to Goki Pty Limited by the Group until July 2022. The loan facility was not extended and on 7 July 2021 was not included as part of the revised shareholder's agreement.

 

14.          LEASE LIABILITIES

 

Lease liabilities relate to the Group's lease commitments for office space in Ireland, Portugal, UK and China.

The movement in the Group's right-of-use assets during the period is set out in note 11. The movement in the Group's lease liabilities during the period is as follows:

 

	2021	2020
	€'000	€'000
Opening lease liability	4,295	4,291
Additions	82	1,681
Modification	33	-
Disposals	(3,164)	(344)
Lease term remeasurement	-	129
Payments	(1,340)	(1,555)
Lease interest	102	182
Foreign exchange differences on lease payments	78	(89)
Closing lease liability	86	4,295

 

The maturity analysis of these lease liabilities is as follows:

 

	2021	2020
	€'000	€'000
Maturity analysis
Within one year	85	1,940
Between one and five years	-	2,660
Over 5 years	-	-
Less unearned interest	1	(305)
Total	86	4,295

              

These liabilities are classified in the consolidated statement of financial position as:

 

	2021	2020
	€'000	€'000
Non-current lease liabilities	-	2,492
Current lease liabilities	86	1,803
Total	86	4,295

 

                                                                                                                         

The Group has used the following practical expedients permitted by the standard on transition and at each reporting date - the use of a single discount rate to a portfolio of leases with reasonably similar characteristics, the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2020 as short-term leases and the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease. The Group has elected not to reassess whether a contract is or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.

 

Lease payments included in the consolidated statement of cashflows relate to lease payments, lease interest and foreign exchange differences on lease payments included in the table above.

 

At 31 December 2021, the Group is committed to €103k (2020: €19k) for short term leases. Including short term lease payments, the total cash outflow for leases amount to €1,889k during 2021 (2020: €1,607k).

 

There is a clear payment schedule associated with our lease liabilities and based on our cash flow forecasts the Group does not face any significant liquidity risk with regards to its lease liabilities.

 

                Amounts recognised in consolidated income statement:

 

			2021	2020
			€'000	€'000
Net profit on disposal of leases			(793)	-
Depreciation expense on right-of-use assets			958	1,518
Interest expense on lease liabilities			102	182
Expense relating to short term leases			429	52
Total			696	1,752

 

 

15.          TRADE AND OTHER RECEIVABLES

 

	2021	2020
	€'000	€'000
Amounts falling due within one year
Trade receivables	220	188
Prepayments and other receivables	978	1,191
Value added tax	804	302
Total	2,002	1,681

                                                                                                                                                                                      

Due to their short-term nature, the carrying value of trade and other receivables is deemed to be their fair value. Trade receivables are non-interest bearing and trade receivable days are 5 days (2020: 4 days).

 

The Group always recognises lifetime expected credit losses ("ECLs") for trade receivables estimated using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. The historical loss rates are adjusted to reflect current and forward economic factors if there is evidence to suggest these factors will affect the ability of the customer to settle receivables under COVID-19.

 

Movement in the expected credit loss for trade receivables is as follows:

 

	2021	2020
	€'000	€'000
At the beginning of the year	194	212
Decrease in loss allowance recognised during the year	(129)	(18)
At the end of the year	65	194

 

The net movement in the expected credit loss has been included in note 4.

 

 

16.          CASH AND CASH EQUIVALENTS

 

	2021	2020
	€'000	€'000
Cash and cash equivalents	25,267	18,189
Total	25,267	18,189

                                                                                                                                                                                      

Included within cash and cash equivalents number is an amount not available for use by the Group €750k (2020: €1,500k) relating to a rental guarantee in place. Balance of cash and cash equivalents comprise cash and short-term bank deposits only.

 

 

17.          SHARE CAPITAL AND RESERVES

 

	No of shares of €0.01 each	Ordinary shares	Share premium	Total
	(Thousands)	€'000	€'000	€'000
At 1 January 2020	95,571	956	-	956
Share issue - 29 June 2020	19,114	191	14,344	14,535
Bonus issue - 17 September 2020	1,636	16	(16)	-
At 31 December 2020 and 2021	116,321	1,163	14,328	15,491

 

 

The Group has one class of ordinary shares which carries no right to fixed income. The share capital of the Group is represented by the share capital of the parent Company, Hostelworld Group plc. All the Company's shares are allotted, called up, fully paid and quoted on the London Stock Exchange and Euronext Dublin.

 

On 29 June 2020, the Company issued 19,114,155 Ordinary Shares at €0.79695 per share by way of a Placing, raising gross proceeds of €15,233k. €698k of directly attributable share issue costs have been recognised as a deduction from share premium.

 

On 17 September 2020, the Company issued 1,636,252 bonus shares to shareholders in lieu of a cash dividend at value €0.01 per share.

 

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 current issued share capital). Detail is included within note 19.

 

 

 

Reconciliation and movement in reserves during the year as follows:

 

		Foreign currency translation reserve (a)	Share based payment reserve (b)	Warrant reserve (c)	Total other reserves
	Notes	€'000	€'000	€'000	€'000
Balance at 1 January 2020		15	788	-	803
Exchange differences on translation of foreign operations		(7)	-	-	(7)
Credit to equity for equity settled share based payments		-	422	-	422
Balance at 31 December 2020		8	1,210	-	1,218
Exchange differences on translation of foreign operations		32	-	-	32
Issue of warrants	19	-	-	3,073	3,073
Credit to equity for equity settled share based payments		-	2,152	-	2,152
Balance at 31 December 2021		40	3,362	3,073	6,475

 

(a) Foreign currency translation reserve

The foreign currency reserve reflects the foreign exchange gains and losses arising from the translation of the Group's net investment in foreign operations.

 

(b) Share-based payment reserve

The share-based payment reserve reflects the equity settled share-based payment plans in operation by the Group (note 21).

 

(c) Warrant reserve

The warrant reserve relates to the warrants exercisable with HPS Investment Partners LLC (or subsidiaries or affiliates thereof) (note 19).

 

18.          TRADE AND OTHER PAYABLES

 

	2021	2020
	€'000	€'000
Non-current liabilities
Payroll taxes	8,049	-
Total	8,049	-

 

 

The Group has availed of the Irish Revenue tax warehousing scheme and deferred payment on all Irish employer taxes from February 2021. Total amount warehoused at 31 December 2021 amounted to €8,049k (2020: €4,140k included within current liabilities). The Group continues to liaise with Irish Revenue on the matter and comply with all appropriate guidelines applicable. At 31 December 2021 amounts warehoused are recognised as non-current reflecting the intention and unconditional right not to repay balance within 12 months.

 

	2021	2020
	€'000	€'000
Current liabilities
Trade payables	5,425	2,258
Accruals and other payables	6,113	9,003
Deferred revenue	1,036	207
Deferred consideration (note 13)	-	1,266
Payroll taxes	221	4,302
Total	12,795	17,036

 

 

At 31 December 2021, €1,020k of revenue was deferred relating to free cancellation bookings (2020: €197k) and €16k was deferred relating to featured listings (2020: €10k).

 

Included in accruals and other payables is a credit provision amounting to €1,300k (2020: €1,528k) for vouchers and incentives to customers for use on future bookings, and an amount of €2,017k (2020: €2,889k) relating to customers who have cancelled their free cancellation booking but have not yet been refunded.

 

The average credit period for the Group in respect of trade payables is 54 days (2020: 23 days). The Directors consider that the carrying amount of trade and other payables is deemed to be to their fair value.

 

 

19.          BORROWINGS

 

	2021	2020
	€'000	€'000
Opening Balance	1,164	-
Received on Drawdown	28,800	3,454
Repayments	(1,164)	(2,290)
Loan issuance costs - issue of warrants	(3,073)	-
Transaction costs relating to borrowings	(862)	-
Finance costs	3,344	-
Total	28,209	1,164

 

 

The Group had the following borrowing facilities in place during 2021:

 

1. A 'Prompt Pay' which was a short-term invoice financing facility with Allied Irish Banks PLC. An amount of €3,454k was drawn down in 2020. Terms attached to the facility was that Hostelworld.com Limited must ensure it maintains a cash balance of no less than €8.67m for the period ending 30th September 2020, €5.75m for the period ending 31 December 2020 and €1.42m for the period ending 31 March 2021. On 26 January 2021 the amount owing on the facility was repaid in full and the facility is no longer available to the Group.

 

2. A three-year revolving credit facility for €7m with the Governor and Company of the Bank of Ireland to assist with the investing and development needs of the business. No amounts were ever drawn down on this facility. On 10 February 2021 the Group signed a deed of release exiting the undrawn facility in place. Covenants attached to the facility as follows: Hostelworld.com Limited was to retain minimum cash balances of 20% of drawn facilities and the revolving credit facility was required to return to credit 20 days per annum. Hostelworld.com Limited were also required to maintain a minimum tangible net worth of not less than €90m.

 

3. On 19 February 2021 the Group signed a €30m five-year term loan facility with certain investment funds and accounts of HPS Investment Partners LLC (or subsidiaries or affiliates thereof). The facility is single drawdown and bears interest at a margin of 9.0% per annum over EURIBOR (with a EURIBOR floor of 0.25% per annum). Until the first anniversary of drawdown all interest rolls up and capitalises. Between the first and third anniversaries of drawdown, Hostelworld has an option to capitalise up to 4.0% per annum of the accruing interest with the balance of the interest during that period (and all interest accruing after the third anniversary of drawdown) being cash pay.

 

The facility agreement includes the following financial covenants: (1) adjusted net leverage (Hostelworld has to ensure that total net debt is no more than 3.0 x adjusted EBITDA from 31 December 2023 to 30 September 2024, and no more than 2.5 x adjusted EBITDA from 31 December 2024 onwards); and (2) minimum liquidity (Hostelworld has to ensure that at close of business on the last business day of each month until it is testing the adjusted net leverage ratios there is free cash in members of the Group which have guaranteed repayment of the facility of at least €6.0 million).

 

The lenders have the right to require repayment of the facility if Hostelworld is subject to a change in control and Hostelworld has the option to repay the facility early. If the facility is repaid for any reason within the first four years of its term a prepayment fee is payable as follows: if repayment is made (1) in the first two years after drawdown then all interest from the date of repayment to the second anniversary of drawdown is due, plus a 2% fee of the amount repaid, (2) between the second and the third anniversary of drawdown the fee is 2% of the amount repaid and (3) between the third and fourth anniversary of drawdown the fee is 1% of the amount repaid.

 

Hostelworld and its principal trading subsidiaries will guarantee repayment of the facility and amounts payable under it and provide the lenders with a customary security package over their assets. Cash dividends to shareholders are permitted provided total net debt is below 2.0 x adjusted EBITDA, no events of default are ongoing and the above stated minimum liquidity covenant will be complied with after taking into account the proposed dividends. The Group is required to fund any new acquisitions through new equity and/or through a maximum of 50% of retained excess cashflow. Any acquisition by the Group of the remaining shareholdings in Goki PTY Limited and Counter App Limited is required to be funded from cash on the balance sheet.

 

An amount of €28.8m was received on 23 February 2021, net of original issue discount.

 

 

Issue of warrants:

 

In connection with the facility, Hostelworld has agreed to issue warrants over 3,315,153 ordinary shares of €0.01 each in the capital of Hostelworld (equivalent to 2.85% of Hostelworld's issued share capital) to the lender. The warrants may be exercised at any time during the term of the loan and for a twelve-month period following its scheduled termination at an exercise price of €0.01 per ordinary share. Shares issued will be the same class and carry the same rights as existing shares. An amount of €3,073k was recorded for the initial recognition of the warrants calculated on the basis of the market price of the shares on the date of the agreement 19 February 2021 of €3,106,538 minus the subscription price of €33,152 (3,315,153 X €0.01).

 

Borrowings are classified in the consolidated statement of financial position as:

 

	2021	2020
	€'000	€'000
Non-current borrowings	28,209	-
Current borrowings	-	1,164
Total	28,209	1,164

 

 

Change in liabilities arising from financing activities:

 

	Lease liabilities (note 14)	Borrowings	Deferred consideration (note 13)	Total net debt
	€'000	€'000	€'000	€'000
At 1 January 2020	(4,291)	-	(1,763)	(6,054)
Financing cash flows	1,462	(1,164)	503	801
Other non-cash movements	(1,466)	-	(6)	(1,472)
Balance at 31 December 2020	(4,295)	(1,164)	(1,266)	(6,725)
Financing cash flows	1,160	(26,774)	345	(26,053)
Other non-cash movements	3,049	(271)	921	4,483
Balance at 31 December 2021	(86)	(28,209)	-	(28,295)

 

Other non-cash movements for lease liabilities in 2021 and 2020 relate to additions, disposals, a modification and a lease term remeasurement as included in note 14. Other non-cash movements in 2021 for borrowings relate to net amount of non-cash finance costs incurred and the issuance costs for warrants (2020: €nil). Other non-cash movements for deferred consideration relate to capital reduction as detailed in note 13 and foreign exchange differences on revaluation of deferred consideration owing (2020: revaluation of deferred consideration).

 

20.          CONTINGENCIES

 

In the normal course of business, the Group may be subject to indirect taxes on its services in certain foreign jurisdictions. The Directors perform ongoing reviews of potential indirect taxes in these jurisdictions. Although the outcome of these reviews and any potential liability is uncertain, no provision has been made in relation to these taxes as the Directors believe that it is not probable that a material liability will arise.

 

 

21.          SHARE BASED PAYMENTS

 

Overall, the Group recognised an expense of €2,162k (2020: €428k) relating to equity settled share-based payment transactions in the consolidated income statement during the year.

 

€719k (2020: €356k) relates to Long Term Incentive Plan ("LTIP") scheme, €1,392k (2020: €nil) is in relation to the Group's Restricted Share awards ("RSU") scheme, and €51k (2020: €72k) in relation to the Save As You Earn ("SAYE") scheme. All schemes are accounted for as equity settled in the financial statements. 

 

 

Long Term Incentive Plan ("LTIP") scheme

 

The Group operate a Long Term Incentive Plan for executive Directors and selected management. 

 

In 2021, there was one invitation made to executive directors and selected management to participate in the Group's long-term incentive plan ("LTIP"). 2,336,885 nil cost options were granted, and these options will vest on 26 April 2024 subject to meeting performance conditions based on the Company's adjusted EBITDA over a three-year period, Counter App revenue generated based on a target in 2023 and customer acquisition value targets to be met in 2023.

 

For the 2020 scheme vesting conditions are dependent on the Adjusted Earnings per Share ("EPS") performance and Total Shareholder Return ("TSR") of the Group over a three year period ("the performance period"). Up to 25% of the shares/options subject to an award will vest according to the Group's adjusted EPS growth compared with target during the performance period. Up to 75% of the shares/options subject to an invitation will vest according to the Group's TSR performance during the performance period measured against the TSR performance indicators approved by the Remuneration Committee. 

 

For the 2019 scheme up to 70% of the shares/options subject to an award will vest according to the Group's adjusted EPS growth compared with target during the performance period. Up to 30% of the shares/options subject to an invitation will vest according to the Group's TSR performance during the performance period measured against the TSR performance indicators approved by the Remuneration Committee. 

 

For all schemes an award will lapse if a participant ceases to be an employee or an officer within the Group before the vesting date and is not subject to good leaver provisions.

 

In 2021, €719k was expensed in the consolidated income statement in relation to the Group's LTIP schemes (2020: €356k).

 

Details of the share options outstanding during the year are as follows:

 

	2021	2020
	€'000	€'000
Outstanding at beginning of year	3,864,472	1,501,647
Adjustment factor applied	55,262*	-
Revised balance outstanding at beginning of period	3,919,734	1,501,647
Granted during the year	2,336,885	3,793,200
Forfeited during the year	(1,515,144)	(1,430,375)
Exercised during the year	-	-
Expired during the year	-	-
Outstanding at the end of the year	4,741,475	3,864,472
Exercisable at the end of the year	-

*On 17 September 2020, the company issued 1,636,252 bonus shares to shareholders in lieu of a cash dividend at value €0.01 per share. An adjustment was made to the LTIP schemes in 2021, when approved by the Remuneration Committee, to ensure that award holders are no better or worse off following the bonus issue than they were beforehand.

 

Included in the number of options forfeited in 2021, are 745,199 of the 2019 awards which did not meet the vesting conditions based on performance conditions from 1 January 2019 to 31 December 2021. Included in the number of options forfeited in 2020, are 282,500 of the 2018 awards which did not meet the vesting conditions based on performance conditions from 1 January 2018 to 31 December 2020.

 

If the conditions are met, the remaining awards will vest on the later of the 3rd anniversary of the grant and the determination of the performance condition and will then remain exercisable until the 7th anniversary of the date of grant, provided the individual remains an employee or officer of the Group or is subject to good leaver provisions. The measurement period for the 2019, 2020 and 2021 awards for performance conditions is over 3 years from 1 January 2019 to 31 December 2021, from 2 May 2020 to 1 May 2023 and from 27 April 2021 to 26 April 2024 respectively.

 

Share options under the LTIP scheme have an exercise price of £nil. The fair value, at the grant date, of the TSR-based conditional awards was measured using a Monte Carlo simulation model.

 

Fair value of options granted during the year:

 

At the grant date, the fair value per conditional award and the assumptions used in the calculations

are as follows:

 

	April 2021	May 2020	November 2019	August 2019	June 2019	April 2019
Year of potential vesting	2024	2023	2022	2022	2022	2022
Number of share options granted	2,336,885	3,793,200	69,422	187,842	76,204	933,995
Share price at grant date	£1.00	£0.74	£1.32	£1.50	£2.07	£1.95
Exercise price per share option	£nil	£nil	£nil	£nil	£nil	£nil
Expected volatility of Company share price	n/a	51.86%	40.1%	40.0%	42.1%	46.1%
Expected life	3 years	3 years	3 years	3 years	3 years	3 years
Expected dividend yield	n/a	6.06%	6.0%	4.9%	4.9%	4.3%
Risk free interest rate	n/a	0.08%	0.51%	0.43%	0.56%	0.71%
Weighted average fair value at grant date	£1.00	£0.49	£1.16	£1.27	£1.97	£1.93
Remaining weighted average life of options (years)	2.32	1.33	0.87	0.64	0.42	0.25

 

 

Expected volatility was determined based on the market performance of the Company over a period of 36 months prior to the date of grant for all the 2020 and 2019 awards.

 

Market based vesting conditions, such as the TSR condition, have been taken into account in establishing the fair value of equity instruments granted. Non-market based performance conditions, such as the EPS conditions, were not taken into account in establishing the fair value of equity instruments granted, however the number of equity instruments included in the measurement of the transaction is adjusted so that the amount recognised is based on the number of equity instruments that are expected to vest.

 

Restricted Share awards ("RSU") scheme

 

In lieu of a cash bonus in 2021 the Directors approved the grant of a restricted share award scheme. Total cost in 2021 amounted to €1,392k (prior year: €nil).

 

During 2021 the Company granted a restricted share award ("RSU") to selected employees, including the executive directors and members of the management team. In total 2,642,212 nil cost options were granted. Each award will vest in two tranches on 28 February 2022 in respect of 50% of the plan shares and 28 February 2023 in respect of the remaining 50% of the plan shares. Vesting will be dependent upon the participant being employed by Hostelworld as of the vesting date and satisfactory personal performance.

 

 

 

	2021	2020
Outstanding at the beginning of the period	-	-
Granted during the year	2,642,212	-
Forfeited	(312,402)	-
Total	2,329,810	-

 

 

Save As You Earn ("SAYE") scheme

 

During the year ended 31 December 2021, the Group did not approve the granting of any new SAYE scheme following the withdrawal of Ulster Bank from the Irish market who were the only bank with an Irish banking licence that accepted new accounts for Save As You Earn schemes.

 

Prior to 2021, a scheme was approved in 2019 and 2020. The schemes last three years and employees may choose to purchase shares at the end of the three year period at the fixed discounted price set at the start. The share price for the scheme has been set at a 20% discount for Irish and UK based employees in line with amounts permitted under tax legislation in both jurisdictions.

 

 

	Number of SAYE share options granted
	2021	2020
Outstanding at beginning of year	440,791	290,592
Adjustment factor applied	6,303*	-
Revised balance outstanding at beginning of period	447,094	-
Granted during the year	11,541	358,305
Forfeited during the year	(181,011)	(208,106)
Outstanding share options granted at end of year	277,624	440,791

 

* On 17 September 2020, the Company issued 1,636,252 bonus shares to shareholders in lieu of a cash dividend at value €0.01 per share. An adjustment was made to the Save As You Earn schemes in 2021, when approved by the Remuneration Committee, to ensure that award holders are no better or worse off following the bonus issue than they were beforehand.

 

At the grant date, the fair value per conditional award and the assumptions used in the calculations

are as follows:

 

Scheme	UK office		Irish office	UK office		Irish office
Grant date	August 2020		August 2020	October 2019		October 2019
Year of potential vesting	2023		2023	2022		2022
Share price at grant date	£0.63		€0.70	£1.30		€1.52
Exercise price per share option	£0.50		€0.56	£1.17		€1.30
Expected volatility of company share price	54.2%		54.2%	39.5%		39.5%
Expected life	3 years		3 years	3 years		3 years
Expected dividend yield	6.13%		6.13%	9.3%		9.3%
Risk free interest rate	-0.03%		-0.03%	0.51%		0.51%
Weighted average fair value at grant date	£0.20		€0.22	£0.21		€0.24
Valuation model	Black Scholes		Black Scholes	Black Scholes		Black Scholes

 

 

Expected volatility was determined in line with market performance of the Company for the 2020 and 2019 schemes.  For the 2018 schemes, expected volatility was determined in line with market performance of the Company and comparator companies as there was insufficient historic data available for the Company at the grant date of the awards

 

Cash settled share-based payments

During 2018, the Group issued to certain individuals share appreciation rights ("SARs"), in the form of Phantom Shares that require the Group to pay the intrinsic value of the SAR at the date of exercise. The Group has recorded liabilities of €26k and a corresponding expense of €26k in relation to these SARs as at 31 December 2021 (2020: €7k). Where relevant the fair value of these SARs was determined by using a Black Scholes model.

 

 

22.          RELATED PARTY TRANSACTIONS

 

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

 

 

Directors' remuneration

		2021	2020
		€'000	€'000
Salaries, fees, bonuses and benefits in kind		1,076	1,101
Amounts receivable under long-term incentive schemes		257	102
Termination benefits		-	-
Other remuneration		402	-
Pension contributions		61	62
Total		1,796	1,265

 

Retirement benefit charges arise from pension payments relating to 2 Executive Directors (2020: 2). Other remuneration €402k relates to share-based payment expense in respect of the Restricted Share awards ("RSU") scheme operated in 2021 (2020: €nil).

 

Key management personnel

 

The Group's key management comprise the Board of Directors and senior management having authority and responsibility for planning, directing and controlling the activities of the Group.

 

	2021	2020
	€'000	€'000
Short term benefits	2,608	2,899
Share based payments charge	1,450	271
Termination benefits	593	289
Post-employment benefits	152	133
Total	4,803	3,592

 

 

23.          SUBSIDIARIES AND ASSOCIATES

 

 

SUBSIDIARIES

 

The following is a list of the Company's current investments in subsidiaries, including the name, country of incorporation, and proportion of ownership interest:

 

Company	Holding	Nature of Business	Registered Office
Hostelworld.com Limited 196 Ordinary shares @ €1	100%*	Technology trading company	Floor 3 Charlemont Exchange Charlemont St Dublin D02 VN88 Ireland
Hostelworld Services Portugal LDA 500 Ordinary shares @ €1	100%	Marketing and research and development services company	Rua Antònio Nicolau D'Almeid 45, 5th Floor 4100-320 Oporto Portugal
Hostelworld Business Consulting (Shanghai) Co., Limited**	100%	Business information consulting and marketing planning	Suite 304 Block 2 No.425 Yanping Road Jing'an District Shanghai China 200042 延平路425号2幢304室 上海 , 中国
Hostelworld Services Limited 104123 Ordinary shares @ £0.001	100%*	Marketing services and technology trading company	Floor 5 38 Chancery Lane The Cursitor London WC2A 1EN United Kingdom
Counter App Limited 51 Ordinary shares @ €1	51%	Technology company	Floor 3, Charlemont Exchange Charlemont St Dublin D02 VN88 Ireland

 

* held directly by the Company

** 3 Million RMB contributed by Hostelworld.com Limited for 100% ownership of subsidiary

 

All subsidiaries have the same reporting date as the Company being 31 December.

 

On 19 June 2020, "Project Hydra Funding Limited" was incorporated as a 100% subsidiary of Hostelworld Group plc. The company was a Jersey registered company and the company was involved in the transfer of funds from the equity raise to Hostelworld Group PLC which raised gross proceeds of €15.2m. The entity was subsequently liquidated on 10 July 2020.

 

On 4 June 2020 a new subsidiary was incorporated "Hostelworld Business Consulting (Shanghai) Co., Limited" and became a 100% owned subsidiary of Hostelworld.com Limited. The principal activity of this subsidiary is business information consulting and marketing planning.

                                                                                         

ASSOCIATES

 

The following details the Company's current investment in associates, including the name, country of incorporation, and proportion of ownership interest:

 

Company	Holding	Nature of Business	Registered Office
Goki Pty Limited	49% / 31.5%*	Technology company	477 Kent St, Sydney NSW 2000, Australia

 

* 49% up until 7 July 2021

 

On 21 June 2020, Hostelworld.com Limited signed an agreement to purchase 7,645,554 shares in Goki Pty Limited, an Australian incorporated proprietary company limited by shares. The purchase consideration for this transaction was USD 3m. This transaction was completed on 22 July 2020 and on this date, an investment in associate was recognised in the consolidated financial statements.  On 7 July 2021 the directors of Goki PTY Limited approved a reduction in the investment held by Hostelworld.com Limited in the company. The shareholding was reduced from 49% to 31.5% through means of a capital reduction.

 

 

24.          FINANCIAL RISK MANAGEMENT

 

24.1       Financial risk factors

 

The Directors manage the Group's capital, consisting of both debt and equity, to ensure that the Group will be able to continue as a going concern while also maximising the return to stakeholders. As part of this process, the Directors review financial risks such as liquidity risk, credit risk, foreign exchange risk and interest rate risk regularly.

 

Liquidity risk

 

Cash flow forecasting is monitored by rolling forecasts of the Group's liquidity requirements to ensure it has sufficient cash to meet operational needs while not breaching any covenants that the Group adheres to. Such forecasting takes into consideration the Group's debt financing plans.

 

The Group's policy is to ensure that it has sufficient long-term funding in place to meet its payment obligations and complies with covenants. The risk is managed centrally by the group and reviewed by the Board on a regular basis.

 

The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The Group had no derivative financial liabilities in the current or prior year. The amounts disclosed in the table are the contractual undiscounted cash flows.

 

Notes		2021	2020
		€'000	€'000
Up to 1 year
Borrowings		-	1,164
Trade and other payables		11,274	11,205
Total up to 1 year		11,274	12,369

 

 

	2021	2020
	€'000	€'000
Between 2 and 5 years
Borrowings	32,453	-
Total between 2 and 5 years	32,453	-
Total	43,760	12,369

 

 

Interest rate risk

 

The principal aim of managing interest rate risk is to limit the adverse impact on cash flows of movements in interest rates. Cash requirements are managed centrally by the Group. The Group only has one debt facility in place with HPS where the Group is charged 9.0% per annum over EURIBOR (with a EURIBOR floor of 0.25% per annum). EURIOR rates were negative in 2021 and therefore there was no impact on the cashflows of the group.

 

There is a floor on our facility EURIBOR 0.25% and therefore for our sensitivity analysis we have considered a 1% increase in Euribor rates which would result in a €1.8m impact on the Income Statement, over the duration of the tenure, with respect to the interest charge on HPS debt facility.

 

 

Credit risk and foreign exchange risk

 

The Directors monitor the credit risk associated with loans, trade receivables and cash and cash equivalent balances on an on-going basis.  The majority of the Group's trade receivable balances are due for maturity within 5 days and largely comprise amounts due from the Group's payment processing agents. Accordingly, the associated credit risk is determined to be low. These trade receivable balances, which consist of euro, US dollar and Sterling amounts, are settled within a relatively short period of time, which reduces any potential foreign exchange exposure risk.

 

At 31 December 2021 and 2020, all material cash balances are held with banks with a minimum credit rating of BBB-, as assigned by international credit rating agencies. As a result, the credit risk on cash balances is limited. The carrying value of trade receivables, trade payables and cash and cash equivalents is a reasonable approximation of their fair value. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

 

The Board considers capital to comprise of long-term debt as disclosed in note 19 and equity as disclosed in note 17. The Directors' objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Directors may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets. In 2020 and 2021 cash dividends were suspended due to COVID-19 uncertainty.

 

The Group will ensure it retains sufficient reserves to manage its day to day cash requirements, including capital expenditure requirements, whilst ensuring appropriate dividends are distributed to shareholders.

 

 

25.         DIVIDENDS

 

There are no cash dividends in 2020 or 2021 as the Board took the decision to suspend cash dividends in 2020.

 

Future cash dividend payments 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.

 

26.          PARENT COMPANY EXEMPTION

 

The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual income statement and related notes. 

 

 

27.         EVENTS AFTER THE BALANCE SHEET DATE

 

There are no significant events after the balance sheet date.