Annual Report for 2017 and Notice of 2018 AGM

 

 

 

 

LEI: 213800OC94PF2D675H41

30 April 2018

Hostelworld Group plc

("Hostelworld" or the "Company")

Publication of Annual Report for 2017 and Notice of 2018 Annual General Meeting

 

Annual Report and Accounts

Hostelworld, the world's leading hostel-focused online booking platform, is pleased to announce that its Annual Report 2017 is being made available to shareholders today.

Annual General Meeting

The Company confirms that its Annual General Meeting will be held at 12 noon on 11 June 2018 at the offices of the Company, Floor 2, One Central Park, Leopardstown, Dublin 18, Ireland.  A Circular containing the Chairman's Letter and Notice of 2018 Annual General Meeting and Form of Proxy will be posted or made available to shareholders tomorrow. 

Documents available for inspection

The Annual Report 2017 has been submitted to the UK Listing Authority via the National Storage Mechanism, and the Irish Stock Exchange (trading as Euronext Dublin), and will shortly be available for inspection at the following locations:

www.morningstar.co.uk/uk/NSM

and at:

Companies Announcements Office

Euronext Dublin

28 Anglesea Street

Dublin 2

 

The Annual Report 2017 is also available on the Company's website at www.hostelworldgroup.com.

The Circular containing the Chairman's Letter and Notice of 2018 Annual General Meeting and Form of Proxy will be submitted to the UK Listing Authority and the Irish Stock Exchange (trading as Euronext Dublin) tomorrow, and will be available for inspection at the locations detailed above.  They will also be available on the Company's website at www.hostelworldgroup.com.

 

Regulated Information

The information set out in the Appendix, which is extracted from the Annual Report 2017, is included for the purposes of complying with DTR 6.3.5 and its requirements on how to make public annual financial reports.  The information in the Appendix should be read in conjunction with the Company's preliminary results for the year ended 31 December 2017 released on 10 April 2018 which can be viewed at www.hostelworldgroup.com. Together, these constitute the material required by DTR 6.3.5 to be communicated in unedited full text through a Regulatory Information Service.

Contacts:

Hostelworld Group plc
Feargal Mooney, CEO
Paula Phelan, Company Secretary
Tel:  +353 (0) 1 498 0700

 

Appendix

Directors' responsibilities statement

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the parent company financial statements in accordance with FRS 101 Reduced Disclosure Framework ("Relevant Financial Reporting Framework") and applicable law. Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the parent Company's financial statements, the directors are required to:

·     Select suitable accounting policies and then apply them consistently;

·     Make judgments and accounting estimates that are reasonable and prudent; and

·     Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

In preparing the Group financial statements, International Accounting Standard 1 requires that directors:

·     Properly select and apply accounting policies;

·     Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

·     Provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

·     Make an assessment of the Company's ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility Statement

We confirm that to the best of our knowledge:

·     The financial statements, prepared in accordance with the Relevant Financial Reporting Framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

·     The strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

·     The annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

This responsibility statement was approved by the Board of directors on 9 April 2018 and is signed on its behalf by:

 

Paula Phelan

Company Secretary

9 April 2018

Principal Risks and Uncertainties

 

The Board takes overall responsibility for identifying the nature and extent of the risks to be managed by the Group to ensure that strategy can be successfully implemented. The Audit Committee monitors certain risk areas and the internal control system, as set out in the report on governance.

The nature of the principal risks and uncertainties faced by the Group is on the whole unchanged, although, external geopolitical factors, including Brexit, continue to impact the Group's risk profile in certain areas. The most significant of these factors is the volatility in exchange rates to the euro, in particular that of the US dollar and the continued incidence of terrorism.

The Group's risk register identifies key risks and monitors progress in managing and mitigating them and is reviewed at least annually by the Board. The most material risks facing the Group are set out below, together with comments on how they are addressed to minimise their potential impact. Individually or together, these risks could affect our ability to operate as planned, and could have a significant impact on revenue and shareholder returns. Additional risks and uncertainties, including those that have not been identified to date or are currently deemed immaterial, may also, individually or together, have a negative impact on our revenue, returns, or financial condition.

1.      Macroeconomic Conditions	Revenue is derived from the wider leisure travel sector. A decline in macroeconomic conditions could result in a reduction in leisure travel, and declining revenues.   Significant movements in FX rates can have a dramatic impact on travel volumes, revenues and travel patterns. Increased volatility in currency markets have heightened this risk.	Our business is a global one, with a dispersed population of users, and a geographically dispersed set of destinations. Whilst market conditions may decline in certain regions, the globally diversified nature of the business significantly mitigates this. Our continued expansion in Asia will further diversify our business and address this risk. FX movements may impact travel decisions and travel patterns by customers, but typically there is a degree of counterbalancing movement e.g. the weakening of the US dollar against the euro means fewer US travellers visiting the Eurozone, but decreased marketing costs from US denominated suppliers such as Google. FX translation risk is mitigated through matching foreign currency cash outflows and foreign currency cash inflows and by minimising holdings of excess non-Euro currency above anticipated outflow requirements.
2.      Impact of terrorism threat on leisure travel	The threat of terrorist attacks in key cities and on aircraft in flight may reduce the appetite of the leisure traveller to undertake trips particularly to certain geographies, resulting in declining revenues.   Increased incidence of terrorism impacts consumer confidence and can shift demand away from certain destinations.	Our target 18-34 year old population tend to be both flexible as to destination, and less concerned about risk-taking than other sectors in the leisure travel industry.   The dispersed nature of our business also acts as a mitigant, and this will be further addressed by our continued expansion in Asia.
3.      Competition	The business operates in an increasingly competitive marketplace and our relative scale and size could impact our ability to keep pace with changes in customer behaviour and technology change.   Increased competition from other online travel agents ("OTAs") or from the alternative accommodation sector via websites such as Airbnb, or a disruptive new entrant such as big hotel chains into the hostel segment or loss of key accommodation suppliers could impact revenue due to potential loss of traffic or could increase traffic acquisition costs. Demand for our services could suffer, reducing revenue and margins.	We continue to build on our strong market position and have increased our percentage of not-paid-for bookings. Our strength in not-paid-for channels means that a competitor would have to engage in significant marketing spend to attain market share. Furthermore, marketing the social nature of the hostelling experience is not easily replicated as an offering by more generalist OTAs. We continue to expand our global footprint, which meets emerging demand and also strengthens our overall market positioning. We undertake regular research to track performance in key markets and seek feedback from customers as to the relevancy and competitiveness of our proposition as well as propensity to recommend to others.
4.      Search Engine Algorithms	Traffic to our websites is primarily generated through internet search engines such as Google, from non-paid (organic) searches and through the purchase of travel-related keywords (paid search). We therefore rely significantly on practices such as Search Engine Optimisation ("SEO") to improve our visibility in relevant search results. Search engines, including Google, frequently update and change the logic that determines the placement and display of results of a user's search, which can negatively impact placement of our paid and organic results in search results. This could lead to a decrease in bookings and thus revenue. It could also result in having to replace free traffic with paid traffic, which would negatively impact margins.	The Group invests heavily in recruiting and retaining key personnel with the requisite skills and capabilities in SEO. This in-house expertise is supplemented by the deployment of leading technology tools. In addition, to mitigate the impact of reduced SEO exposure and bookings, the Group has continued its investment in brand.   The search marketing team works closely with Google to understand any changes in functionality to the adwords platform so that we can avail of any efficiencies in our search traffic. The Group participates in alpha and beta feature tests that give Hostelworld first mover advantage with new functionality that can help drive efficiency.
5.      Brand	Consumer trust in our brand is essential to ongoing revenue growth. Negative publicity around our products or services could negatively impact on traveller and accommodation provider confidence and result in loss of revenue.	We invest in brand awareness campaigns and proactively monitor our brand impact, including actively managing our brand profile through social media channels. Our customer service team strive to ensure that customers have a positive experience at all stages of interacting with us.
6.      Data Security	We capture personal data from our customers, including credit card details and retain this on our systems for a certain period. There is a risk of a cyber security related attack or disruption, including by criminals, hacktivists or foreign governments on our systems or those of third party suppliers.   Cybercrime including unauthorised access to confidential information and systems would have significant reputational impact and could result in financial or other penalties.	Systems and processes are in place to restrict access to personal and transactional data and detect misuse, and all credit card details are encrypted and deleted in line with our Retention Policy which itself is in line with best practice. Hostelworld continues to be fully compliant with the guidelines of the payment card industry (i.e. is "PCI compliant"). The Group is currently implementing a compliance program in relation to GDPR.
7.      Regulation	The global nature of our business means we are exposed to issues regarding competition, licensing of local accommodation, language usage, web-based trading, tax, intellectual property, trademarks, data security and commercial disputes in multiple jurisdictions.   In addition, as a listed company on the London and Irish Stock Exchanges, adherence to the Listing Rules is required.   Compliance with new regulations can mean incurring unforeseen costs, and non-compliance could result in penalties and reputational damage.   Uncertainty remains as to the impact of Brexit on UK and international laws and regulations including matters such as travel visas or work visas for our UK staff.	We monitor regulatory matters in locations in which we provide services with a particular focus on those areas where we have local operations.   Suitable experienced expertise has been engaged to ensure compliance with the Listing Rules.   We continue to work with local legislators and business interests in New York, a key destination, to advocate for changes to local licensing regulations for the hostel product.   Developments to international laws and regulations continue to be closely monitored as Brexit proceeds. The Group's multinational structure with Head Office in Dublin provides some natural mitigation to the potential impact.
8.      Tax	The taxation of e-commerce businesses is constantly being evaluated and developed by tax authorities around the world. The taxation of online transactions in the travel space remains unsettled in the United States in particular. Due to the global nature of our business, tax authorities in other jurisdictions may consider that taxes are due in their jurisdiction, for example because the customer is resident in that jurisdiction or the travel service is deemed to be supplied in such jurisdiction. If those tax authorities take a different view than the Group as to the basis on which the Group is subject to tax, it could result in the Group having to account for tax that it currently does not collect or pay, which could have a material adverse effect on the Group's financial condition and results of operation if it could not reclaim taxes already accounted for in the jurisdictions the Group considers relevant. The Group has historically had a low effective tax rate due to the Group's capital and corporate structure and the effect of carried forward tax losses. Changes to tax legislation or the interpretation of tax legislation or changes to tax laws based on recommendations made by the OECD in relation to its Action Plan on Base Erosion and Profits Shifting ("BEPS") or national governments may result in additional material tax being suffered by the Group or additional reporting and disclosure obligations.	In collaboration with our tax advisers, a Big 4 professional services firm, we assess possible tax impacts in the jurisdictions in which we operate to ensure our tax obligations are aligned to the operational nature of our business.
9.      Business Continuity	Failure in our IT systems or those on which we rely such as third party hosted services could disrupt availability of our booking engines and payments platforms, or availability of administrative services at our office locations, with a knock-on reduction in financial performance.	As an e-commerce organisation, the Group's business continuity plan focusses on the continued operation of the core front end websites to ensure that our e-commerce trading systems can continue to take bookings.   The Group has comprehensive business continuity and disaster recovery capabilities. Both the e-commerce trading systems as well as key corporate systems are covered.
10.   People	The Group is dependent on ability to attract, retain and develop creative, committed and skilled employees so as to achieve its strategic objectives.	The Group has put in place strong recruitment processes, effective HR policies and procedures and introduced a long-term incentive plan for key management. The Group also operates from six global offices, which provides flexibility for location of recruitment of key talent, thereby opening up a larger pool of talent for selection.