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Annual Report for 2018 and Notice of 2019 AGM

29 Apr 2019 07:00

RNS Number : 3647X
Hostelworld Group PLC
29 April 2019
 

 

 

 

LEI: 213800OC94PF2D675H41

 

29 April 2019

 

Hostelworld Group plc

("Hostelworld" or the "Company")

Publication of Annual Report for 2018 and Notice of 2019 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 2018 has been posted or is being made available to shareholders today.

 

Annual General Meeting

The Company confirms that its Annual General Meeting will be held at 12 noon on 31 May 2019 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 2019 Annual General Meeting and Form of Proxy has also been posted or is being made available to shareholders today.

 

Documents available for inspection

The following documents:

· Annual Report 2018;

· Circular containing the Chairman's Letter and Notice of 2019 Annual General Meeting;

· Form of Proxy;

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

www.morningstar.co.uk/uk/NSM

and at:

Companies Announcements Office

Euronext Dublin

28 Anglesea Street

Dublin 2

 

The Annual Report 2018, the Circular containing the Chairman's Letter and Notice of the 2019 Annual General Meeting and the Form of Proxy are also 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 2018, 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 2018 released on 2 April 2019 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 plcTJ Kelly, Chief Financial OfficerJohn Duggan, Company SecretaryTel: +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 Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period.

In preparing the parent Company Financial Statements, the Directors are required to:

> Select suitable accounting policies and then apply them consistently;

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

>State whether financial reporting standard 101 reduced disclosures framework has been followed, subject to any material departures disclosed and explained in the financial statements; and

> Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

In preparing the Group Financial Statements, International Accounting Standard 1 requires that Directors:

> Properly select and apply accounting policies;

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

 

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

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

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

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

 

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 1 April 2019 and is signed on its behalf by:

 

John Duggan

Company Secretary

1 April 2019

 

 

Principal Risks and Uncertainties

 

The Board takes overall responsibility for identifying the nature and extent of the risks to be managed by the Group to ensure the successful delivery of its strategic and business priorities. The Audit Committee monitors certain risk areas and the internal control system, as set out in the report on governance.

The nature of the principal risks and uncertainties faced by the Group is on the whole unchanged, although, external geopolitical factors, including a hard 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 sterling 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 in the table below, together with comments on how they are managed to minimise their potential impact. While the table below is not prioritised nor an exhaustive list of all risks that may impact the Group, it is the Board's view of the principal risks at this point in time. Individually or together, these risks could affect our ability to operate as planned, and could have a significant impact on revenue and shareholder returns. Additional risks and uncertainties, including those that have not been identified to date or are currently deemed immaterial, may also, individually or together, have a negative impact on our revenue, returns, or financial condition.

The Board also considered its obligations in relation to providing both the annual viability and going concern statements and its conclusions can be found on page 35 and in note 1 to the Consolidated Financial Statements, respectively.

 

 

 

 

Risk

Description and Impact

Management and Mitigation

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, with c.50% of destination markets in Europe and c.50% in the rest of world.

 

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, with c.50% of destination markets in Europe and c.50% in the rest of world.

 

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. Failure to continue to innovate on our product offering and to compete effectively in our marketplace could have an adverse effect on our market share and the future growth of the business.

Increased competition from other online travel agents ("OTAs") or from the alternative accommodation sector or a disruptive new entrant such as large 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 our app bookings have grown by 22% in 2018.

The Group continues to invest in leveraging its unique data assets allowing it to target and grow the most profitable customer segments by optimising its overall marketing investment.

The Group continues to strengthen its core platform in order to improve its flexibility and the experience of our customers while also upgrading our third-party platform connectivity in order to defend our competitive position.

The market we operate in remains highly fragmented with a high proportion of independent and small chains. We continue to focus on expanding our global footprint, meeting emerging demand and also strengthening our overall market position.

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

A large proportion of traffic to our websites is generated through internet search engines such as Google, from non-paid (organic) searches and through the purchase of travel-related keywords (paid search). We therefore rely significantly on practices such as Search Engine Optimisation ("SEO") and Search Engine Marketing ("SEM") to improve our visibility in relevant search results. Search engines, including Google, frequently update and change the logic that determines the placement and display of results of a user's search, which can negatively impact placement of our paid and organic results in search results. This could result in a decrease in bookings and thus revenue. It could also result in having to replace free traffic with paid traffic, which would negatively impact margins.

 

The Group invests heavily in recruiting and retaining key personnel with the requisite skills and capabilities in paid & non-paid searches. This in-house expertise is supplemented by the deployment of leading technology tools and where required the engagement of specific deep functional third party expertise.

 

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 are focussed on investing in our core products, platform and technological capabilities to support our brand proposition as well as actively managing our brand portfolio through social media channels.

Our customer service team strive to ensure that customers have a positive experience at all stages of interacting with us.

The Group has a Crisis Communications Document in place which sets out in detail how various incidents are managed including appropriate escalation processes.

6. Data Security

We capture personal data from our customers, including credit card details and retain this on our systems. There is always a risk of a cyber security related attack or disruption, including by criminals, hacktivists or foreign governments on our systems or those of third party suppliers.

Cybercrime including unauthorised access to confidential information and systems would have significant reputational impact and could result in financial or other penalties.

 

Hostelworld works closely with internal and external audit functions to ensure that our system architectures, work processes and policies are in place to provide as much protection as possible.

 

Hostelworld continues to be fully compliant with the guidelines of the payment card industry (i.e. is "Level 1 PCI compliant") and is in the process of implementing its compliance obligations in connection with certain aspects of Payment Services Directive 2 ("PSD2") as it relates to customer payment authorisation requirements. Specifically, the Group will be required to facilitate the implementation of certain customer authentication security measures by its payment processor, issuing banks and card schemes.

 

 

We have adopted all the requirements of GDPR and will continue to monitor compliance. We regularly review our employee information security policy and we continue to invest in security training for all staff so that they remain vigilant and alert to the possibility of cybercrime.

We conduct regular independent penetration testing of our software. We proactively address vulnerabilities with a continual vulnerability assessment program. We have also implemented Web Application Protector from Akamai to migrate threats in real-time.

7. Regulation

The global nature of our business means we are exposed to regulatory issues regarding competition, licensing of local accommodation, language usage, web-based trading, consumer compliance, tax, intellectual property, trademarks, data security and commercial disputes in multiple jurisdictions.

Compliance with new regulations can mean incurring unforeseen costs, and non-compliance could result in penalties and reputational damage.

In addition, as a listed company on the London and Euronext Dublin Stock Exchanges, adherence to the Listing Rules is required.

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 expertise has been engaged to ensure compliance with the Group's regulatory obligations. In addition the Group has engaged appropriately qualified support to ensure compliance with the Listing Rules, the FRC Corporate Governance Code and the Market Abuse Regulations.

 

 

 

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.

The taxation of e-commerce is also under active review by both the OECD and European Commission.

 

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 large professional services firm, we assess possible tax impacts in the jurisdictions in which we operate to ensure our tax obligations are aligned to the operational nature of our business.

 

 

 

 

 

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 consumer facing products and related services to ensure our e-commerce trading systems can continue to process bookings. Our fully distributed and redundant architecture across two data centres based in two different countries supports this approach. The Group has worked with external advisers to produce robust documented business continuity and disaster recovery capabilities. We have also extended our eCommerce BCP plans to include our corporate office.

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 developed strong recruitment processes supported by effective HR policies and procedures. The Group has an increased focus on understanding the drivers of employee engagement, this has informed the development of its Employee Value Proposition aimed at driving levels of motivation, alignment and commitment to the Group's strategic goals. The Group also operates from five global offices, which provides flexibility for location of recruitment of key talent, thereby opening up a larger pool of talent for selection.

 

11. Brexit

The Group is exposed to Brexit-related risks and uncertainties in relation to its continued impact on global markets and currency exchange rate fluctuations. The uncertainties in relation to the movement of people may result in the reduction of bookings particularly into and from the UK travel market which could impact on Group revenue. In the twelve months ended 31 December 2018, the UK as a destination represented 6% of total Group bookings (2017: 7%) and 14% of Group bookings were from UK nationals (2017: 14%).

 Overall a decline in macroeconomic conditions and the warning from the Bank of England of a Brexit related recession in the UK could negatively impact consumer confidence and reduce spending in all areas including the wider leisure travel sector.

 

 

 

 

 

 

 

 

 

The Group is a global business and continues to grow its international footprint and presence across its key markets. Through continued international expansion and diversification the Group will seek to naturally mitigate the impacts of Brexit. However, the Group will continue to assess Brexit and implement any necessary remediation steps to mitigate its impact on the Group.

 

 

 

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
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