Hostelworld Regulatory News (HSW)

Hostelworld Group plc

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

Interim Results 2023

Largest H1 revenue on record

10th August 2023: Hostelworld, a leading global Online Travel Agent (OTA) focused on the hostel market, is pleased to announce its interim results for the six-month period ended 30 June 2023

Strong financial delivery and strategic progress in H1 2023:

· Record first half Net GMV2 and generated revenue3, of €339.5m (+57% year on year) and €51.5m (+57% year on year) respectively

· Robust booking growth across all regions: Central America, South Asia and southern European countries ahead of pre COVID-19 levels

· Improved marketing efficiency powered by social strategy

· Increasing operating leverage through marketing efficiency and operating cost discipline

· Strong cash conversion driving growth in operating cashflows - Debt refinancing completed with materially lower interest rates

Well positioned for further profitable growth:

· Strong category growth, stronger HW growth with the resumption of cross border travel post Omicron and Social strategy driving share gains

· Continued investment in Social platform: richer profiles, messaging capabilities and launch of Linkups (hostel hosted events)

· Highly cash generative business model, continuing to deleverage

· Reiterating FY 2023 earnings guidance of adjusted EBITDA €16.5m - €17.0m

· Firmly on track to meet November 2022 Capital Market Day growth targets

Financial highlights:[1]

· Net GMV[2]of €339.5m (+57% year on year)

· Net Revenue of €45.8m, H1 2022 €28.0m (+64% year on year)

· Net bookings totalled 3.40m, H1 2022: 2.07m (+64% year on year)

· Net Average Booking Value ("ABV") of €15.15, H1 2022: €15.82, a 4% decrease driven by a greater proportion of Asian destination bookings, partially offset by continued bed price inflation

· Direct marketing costs as a percentage of revenue[3] amounted to 51%, H1 2022: 60% (-9%)

· Adjusted EBITDA of €5.1m, H1 2022: €5.2m loss

· Loss in the period of €7.5m, H1 2022: €14.3m

Balance sheet and cash flow:

· As at 30 June 2023 total cash and cash equivalents of €10.7m (31 December 2022: €19.0m) and total net debt[4] of €16.2m (31 December 2022: €21.6m)

· Completed refinancing of €30.0m legacy debt facility, replacing with a new €20.0m facility from AIB. New facility comprises a €10.0m term loan, a €7.5m RCF (reduced to €5.0m in July) and a €2.5m undrawn overdraft 

· In July 23 the interest rate on AIB debt facility reduced from 3.75% to 3.25% over EURIBOR, €2.5m reduction in RCF balance to €5.0m

· Net asset position of €45.7m (31 December 2022: €52.2m)

Gary Morrison, Chief Executive Officer, commented:  

I am delighted to report record generated revenues and improving adjusted EBITDA margins for the half year to date, driven by the continued execution of our Social strategy and operational cost discipline. This performance also translated directly into strong growth in operating cashflow year on year, which in turn enabled us to strengthen our balance sheet by refinancing our legacy COVID-19 era debt facility at significantly lower interest rates.  

In addition, I am very pleased to see the global hostelling category showing double digit bednight growth year on year for the first half of the year, and even stronger growth from Hostelworld with the resumption of cross border travel post Omicron in 2022. In particular, long-haul bookings have grown 70% year on year and "follow on" bookings after an initial flight[5] have grown 95% year on year. By geography, Europe has recorded strong year over year growth overall, with revenue growth outpacing net bookings growth through continued bed price inflation. Bookings into Southern Europe and other low-cost destinations such as Central America and South Asia have also been exceptionally strong, exceeding pre COVID-19 levels.

During the first half we also made progress on modernising our platform to enable us to support faster execution of our growth strategy. In particular, we made significant progress refactoring key parts of our core platform into a series of microservices, which enable us to access more of the native capabilities of our cloud provider and pay for the computing resources we use "on-demand". 

Finally, I am very proud of the progress we have made on our ESG strategy, and to see that progress recognised externally by being shortlisted for two "Sustainability Business Impact Awards" by Chambers Ireland and reaching Silver accreditation status by Investors in Diversity for building a flexible and inclusive workplace.  

Trading Update:

During the first six months of the year, we have seen strong year on year growth in our business as our customers booked their hostelling trips around the world again, driving growth in net bookings (3.4m, +64% year on year) and net revenue (€45.8m, +64% year on year).

As the year has progressed, we have seen several factors impact our trading economics versus 2022. In particular, ABVs[6] have contracted by -4% year on year (H1 2023: €15.15) driven by geographical mix with a greater proportion of Asian destination bookings, partially offset by continued bed price inflation. Direct marketing cost as a percentage of net revenue has also reduced versus 2022, primarily driven by our social strategy which drives new and existing customers to use our mobile native apps. Overall, we expect direct marketing costs as a percentage of net revenue will remain within our guidance range of 50-55% over 2023 as we continue to optimise marketing investments for long term growth in new customers and direct margin. 

On the supply side, we estimate global hostel sales measured in bednights increased by 14%[7] year on year, driven by modest increases in occupancy rates and category capacity. By geography, we recorded significant year over growth in bednights across South Asia, Oceania and the Middle East and Africa; with Central America remaining above pre-Covid levels. Similarly, we estimate that the bednight sales from hostels connected to our platform also grew by 14% over the same period, driven by the addition of new hostels to our platform throughout H1 2023. As outlined in our Capital Markets Day presentation in November 2022, we plan to grow our market coverage[8] over the coming years by adding more hostels to our platform in key markets around the world. 

Finally, we have seen a significant improvement in operating cash performance, with cash generation of €10.6m in H1 2023 compared to a cash reduction of €0.8m in H1 2022, enabled by the business's characteristic of strong cash conversion and tight operating cost management. We further strengthened our financial position through the voluntary early debt repayment of €10m in April 2023 and the successful refinancing of our legacy debt facility with a new 3-year facility, totalling €17.5m, with Allied Irish Bank plc ('AIB') in May 2023. This new facility, with materially lower interest costs, represents a strong endorsement of our post-pandemic performance, and consolidates the firm foundations upon which we will drive profitable growth and shareholder value. This has resulted in a reduction in our net debt from €21.6m as at 31 December 2022 to €16.2m as at 30 June 2023.

Outlook:

The Board remains confident in the long-term resilience of our business model and the potential of our differentiated growth strategy and reiterating earnings guidance of adjusted EBITDA in the range of €16.5 million to €17 million for the full year, absent any deterioration in the macro-economic climate, the re-introduction of travel restrictions or other air travel related disruptions.

Analyst Presentation

A presentation will be made to analysts today at 9.30am, a copy of which will be available on our Group website: http://www.hostelworldgroup.com. If you would like to dial into the presentation, please contact Powerscourt on the contact details provided below.

Webcast Link

https://stream.brrmedia.co.uk/broadcast/64c7a5d3a1eaa5d77603f6d1

Event: Hostelworld - Interim Results

Date: Thursday, August 10th, 2023

For further information please contact:

Hostelworld Group plc Corporate@hostelworld.com

Gary Morrison, Chief Executive Officer

Caroline Sherry, Chief Financial Officer

David Brady, Head of Commercial Finance

Powerscourt hostelworld@powerscourt-group.com

Eavan Gannon / Nick Dibden +44 (0) 20 7250 1446

About Hostelworld Group

Hostelworld Group Plc is a ground-breaking social network powered Online Travel Agent (OTA) focused on the hostelling category, with a clear mission to help travellers find people to hang out with. Our mission statement is founded on the insight that the vast majority of travellers go hostelling as a means to meet other people, which we facilitate through a series of social features on our platform that connect our travellers in hostels and cities based on their booking data. To date the strategy has been extraordinarily successful, generating significant word of mouth recommendations from our customers and strong endorsements from our Hostel partners.

Founded in 1999, Hostelworld is a well-known trusted brand with almost 250 employees across 11 countries; hostel partners in over 180 countries; and a strong commitment to building a better world in all that we do. In particular, our focus in the last few years has been on improving the sustainability of the hostelling industry, through our membership of the Global Sustainable Tourism Council (GSTC); our active involvement in the Global Tourism Plastics Initiative (GTPI); our partnerships with Bureau Veritas to establish emissions benchmarks for the hostelling industry; and our recent partnership with South Pole to be a Climate Neutral Group in 2021 and 2022.

Cautionary statements

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.

The information contained in this Announcement is subject to change without notice and except as required by applicable law or regulation (including to meet the requirements of the Listing Rules, the Euronext Dublin Listing Rules, MAR, the Financial Services and Markets Act 2000, Euronext Dublin and/or the Central Bank of Ireland), the Company expressly disclaims any obligation or undertaking to publish any updates or revisions to any forward-looking statements contained in this Announcement to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statements are based. Statements contained in this Announcement regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Announcement.

No statement in this Announcement is intended to be a profit forecast and no statement in this Announcement should be interpreted to mean that earnings per share of the Company for the current or future years would necessarily match or exceed the historical published earnings per share of the Company.

Interim Management Report

To the members of Hostelworld Group plc

Cautionary statement

This interim management report has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to Hostelworld Group plc and its subsidiary undertakings when viewed as a whole.

Chief Executive's Review

Throughout the first half of the year, we have continued to execute our growth strategy as outlined in our Capital Markets Day in November 2022. This strategy, together with a continued focus on costs has delivered record generated revenues and improved EBITDA margins. I am pleased to report we continued to make progress modernising our platform and advancing our sustainability and DE&I strategies, and particularly gratified to see these efforts recognised externally through accreditations and sustainability focused award nominations.

Executing our growth strategy  

During the first six months of the year, we continued to execute our differentiated growth strategy which focuses on helping our customers find people to hang out with through a series of social features embedded within our mobile native apps. This growth strategy was developed in 2021 and launched in Q2 2022, based on the insight that the vast majority of travellers go hostelling as a means to meet other people. To date the strategy has been extraordinarily successful, generating significant word of mouth recommendations from our customers, strong endorsements from our hostel partners and significant growth in bookings via our mobile native Apps relative to other higher cost channels. 

Over the first half of this year, we have continued to invest in our social platform by enabling richer user profiles which enable social members to upload their own profile photo, add more details on their travel related interests, where they have lived, and languages spoken. In parallel, we have also added more messaging functionality to our social platform, similar to what users would see with more mainstream instant messaging products. Collectively these enhancements have generated significant increases in customer engagement, with the volume of messages being sent over our platform increasing 2.4x in July relative to January this year. 

In parallel we also launched Hostel hosted LinkUps in London and Lisbon in February this year. This is a completely unique product in the travel landscape, which enables hostels to promote their own events ('LinkUps') to all of our social members who are staying in the destination via our mobile native apps. For our social member customers, this provides them with an even greater range of things to do when travelling to new destinations, and even more opportunities to meet people to hang out with while travelling.  

Since launching the product in February, we have expanded the range of cities month over month with a full global launch in July. So far, the product has exceeded all our expectations, with 54% of social members with a

booking now being able to see at least one LinkUp during their stay dates. Over the balance of the year, we will continue to increase LinkUps inventory and add more new features to this product.  

Investing in our platform 

During 2022, we migrated our entire technology stack to the cloud in the first half of the year, the first major milestone of our platform modernization program and exiting our on-premises data centres. During the second half of 2022 and into the first half of 2023, we have been upgrading our key legacy backend applications to make them "cloud native". 

Over the medium term, migrating from a cloud hosted stack to a series of cloud native applications will deliver many advantages, such as application level "on demand" scaling, a more flexible microservices based architecture, and more opportunities to use off the shelf services from our cloud services provider. This will include services such as artificial intelligence and machine learning optimisation engines, which are now powering some of our key services. Collectively, these technology benefits will flow through into faster execution of our growth strategy and reduced hosting costs.

Progressing our ESG agenda 

In parallel with helping millions of travellers in our category Meet The World®, we are also committed to building a better world in everything we do.  

We have made significant progress on the sustainability framework we developed in partnership with Bureau Veritas. This purpose-built framework enables hostels to assess, compare and communicate sustainability achievements to customers and other key stakeholders. The framework directly aligns with the Global Sustainability Tourism Council's (GSTC) sustainable tourism criteria focussed on four pillars: Sustainability Management, Socio-Economic, Cultural Impact and Environmental Impact. By specifically tailoring these pillars for independent hostels, we can account for the attributes unique to the hostel category, as compared to other accommodation types. Each criterion in our 'Staircase to Sustainability' framework aligns to one of the 17 UN Sustainability Development Goals. 

Details of the pillars have been published and communicated to our hostel partners, through our dedicated sustainability website and via a monthly B2B sustainability newsletter. The framework will be showcased at our upcoming hostel conferences in Bogota and Copenhagen, ahead of an official Q4 2023 launch. Early 2024 will see us publishing compliance to these criteria on our booking site, such that our customers can make more informed decisions as to the sustainability of the hostel they are booking.  

Outside of Hostelworld events, we continued to promote the inherent sustainability of hostels this year including participating in a first of its kind hostel focussed panel at GSTC's flagship event in May. We are also about to commence work on a second edition of last year's hostel focussed emission report with Bureau Veritas. Due in Q4, this report will further build on the findings from the 2022 edition which showed that hostels produce 75% less emissions than a relevant subset of their hotel counterparts. H1 2023 has very much focussed on the research and content creation required to promote the framework details to our hostel partners, well ahead of launch date. This pre-launch education and advocacy work is critical to the success of the framework once live. The framework has been shortlisted for a Sustainable Business Impact Award by Chambers Ireland. We plan to promote compliance with these criteria on our booking site, such that our customers can make more informed decisions in selecting a hostel.

Hostelworld is a Climate Neutral company, a status that is independently verified and awarded by emissions reduction specialists South Pole each year. Our ultimate goal however is to achieve Net Zero status, by 2040, absorbing more emissions than we emit to help limit global warming. We will do this through reporting on our Green House Gas emissions, eliminating carbon emissions in line with the 2015 Paris Agreement and by offsetting any remaining emissions through socially responsible projects. To this end, we are very proud to be a signatory of Global Optimism & Amazon's Climate Pledge initiative. The Climate Pledge brings the world's top companies together to accelerate joint action, cross-sector collaboration, and responsible change. 

Climate-conscious travellers want to know how to travel sustainably, and ensure they leave a positive mark on the communities they visit. Through our online series 'Sustainability Stories by Hostelworld' we are showcasing the inspiring work hostels are doing for their local communities and environment, offering hostellers the opportunity to volunteer, so they too can make a real difference. Hostelworld is committed to providing resources for travellers to educate themselves in ways to travel responsibly. Sustainability focussed 'link ups' are now available on our app, and our customers will soon have the option to offset the carbon of their hostel stay on our platform should they wish to do so.

Inclusivity is at the core of hostelling and of the Hostelworld culture. We were very proud to have recently been awarded the Silver Accreditation by the Irish Centre for Diversity, building on the Bronze Accreditation we received in 2022. This accreditation was awarded based on measuring people's sense of fairness, belonging and equity, collated through a detailed survey. Our diverse and inclusive culture has also been shortlisted for a Sustainable Business Impact Award by Chambers Ireland. 

Summary 

Overall, I am very pleased with the work we have completed and the progress we have made in the first six months of the year. I would like to take this opportunity to thank the Hostelworld team for their commitment to the success of our company, and to thank our shareholders for their continued support. 

As the year progresses, the Board will continue to evaluate internal and external opportunities that will deliver value for shareholders. In particular, the Board will evaluate opportunities to invest in our differentiated growth strategy which helps new and existing customers find people to hang out with while hostelling, and adds, to our platform, a broader catalogue of group focused travel products beyond hostel accommodation.

Gary Morrison

Chief Executive

10 August 2023

Interim Management Report

Financial Review

Highlights

· Group net bookings increase of 64% (H1 2022: 562% increase)

· Net average booking value of €15.15 (-4% year on year) driven by a greater proportion of Asian destination bookings, partially offset by continued bed price inflation

· Net revenue of €45.8m (H1 2022: €28.0m), an increase of 64%

· Marketing costs per net booking of €7.78, a decrease of €1.68 compared to H1 2022 cost €9.46

· Total operating expenses of €47.6m (H1 2022: €40.5m)

· Operating loss of €1.7m (H1 2022: €12.6m loss)

· Adjusted EBITDA of €5.1m (H1 2022: €5.2m loss)

· Loss for the six-month period to 30 June 2023 of €7.5m (H1 2022: €14.3m)

· Adjusted loss per share 1.9 € cent (H1 2022: adjusted loss per share 7.8 € cent)

· Basic loss per share of 6.23 € cent (H1 2022: basic loss per share 12.19 € cent)

· Total cash and cash equivalents as at 30 June 2023 of €10.7m (31 December 2022: €19.0m)

· Net asset position as at 30 June 2023 of €45.7m (31 December 2022: €52.2m)

Revenue and operating loss

The Group's net bookings totalled 3.4m, an increase of 64% compared to H1 2022 (H1 2022: 2.1m). Net revenue for the period was €45.8m (H1 2022: €28.0m), an increase of 64% driven by strong performances in key European, Asian and Oceania markets.

At 30 June 2023, the Group held €8.6m of customer deposits relating to bookings made under the free cancellation policy (31 December 2022: €3.0m). This balance will largely unwind in H2 2023.

Operating expenses totalled €47.6m (H1 2022: €40.5m). €7.1m increase year on year driven by an increase in direct marketing costs of €6.9m and a €0.5m increase in credit card fees, directly related to revenue increases. Direct marketing costs as a percentage of revenue was 51% (H1 2022: 60%). This was due to a combination of normal travel patterns resuming in primary markets and the app-centric social strategy driving marketing efficiencies. Credit card fees totalled €1.5m (H1 2022: €1.0m).

The group incurred a foreign exchange gain of €0.1m (H1 2022: loss €0.5m). Current year gain arose with the weakening of the US dollar against the Euro. Group operating loss amounted to €1.7m (H1 2022: €12.6m). Adjusted EBITDA €5.1m, an increase of €10.3m from an EBITDA loss of €5.2m in H1 2022. Year on year improvement driven by strong booking recovery.

Earnings per share

Basic and diluted loss per share for the Group was 6.23 € cent (H1 2022 basic loss per share: 12.19 € cent).

Adjusted loss per share was 1.9 € cent per share (H1 2022 loss per share: 7.8 € cent per share). On 20 February 2023 the company issued 1,027,655 shares to satisfy restricted share awards granted by the Company at a value of €0.01 per share. On 29 March 2023 3,315,153 shares were issued to HPS on issuance of warrants. On 16 May 2023 the company issued 1,645,994 shares to satisfy long term incentive plan awards. The weighted average number of shares in the period was 120.4m (H1 2022: 117.2m) and the total number of shares at the balance sheet date was 123.5m (H1 2022: 117.5m).

Net debt and financing

At the balance sheet date cash and cash equivalents totalled €10.7m (31 December 2022: €19.0m). The Group has borrowings of €17.4m (31 December 2022: €31.1m).

In May 2023 the Group completed a refinance of its legacy debt facility, which was drawn down in February 2021 during COVID-19 trading. A new 3-year facility was signed with Allied Irish Banks plc ('AIB'). This facility is comprised of a €10.0m term loan, a €7.5m revolving credit facility ('RCF') and an undrawn €2.5m overdraft. In July 2023 the RCF reduced to €5.0m. Altogether €17.4m was drawn down from AIB, net of arrangement fee, and utilised to repay the former debt facility held with HPS. Balance of repayment to HPS comprised of the Group's cash reserves.

The AIB term loan and RCF each had an initial interest rate payable of 3.75% over EURIBOR. In July 2023 this reduced to 3.25%, as the ratio of Net Debt to adjusted EBITDA was less than 2 times as at 30 June 2023. The interest rate will reduce to 2.65% over EURIBOR where the ratio of Net Debt to adjusted EBITDA is less than 1 times. 

The former debt facility was a €30.0m 5-year term loan facility with HPS. An amount of €28.8m, net of original issue discount, was drawn down on 23 February 2021. In April 2023 the Group made a voluntary early repayment of €10.0m of its €30.0m term loan facility with HPS, prior to its full prepayment in May 2023. The HPS debt facility bore interest at a margin of 9% per annum over EURIBOR. In total across April and May repayments totalled €34.1m, comprising of €30.0m principal and €4.1m PIK. 

Finance costs

The Group incurred €1.9m of finance costs in H1 2023 (H1 2022: €2.1m). Decrease year on year is due to a €10.0m repayment of the HPS facility in April 2023 and final repayment in May 2023.

Exceptional items

Exceptional items €3.6m (H1 2022: €0.5m) are identified due to their nature or materiality to help the reader form a better view of overall and adjusted trading. Current year exceptional items comprise of costs incurred in exiting the HPS facility, including €0.7m of an early repayment penalty interest, €2.8m accelerated interest costs which relate to transaction costs capitalised on drawdown of HPS facility in February 2021, which were expected to be amortised over a 5-year period to 2026 and €0.1m of transaction costs.

Prior year exceptional items related to a final settlement amount paid to the founder of Counter App Limited, in respect of their shareholders agreement and other contractual relationships with the group and associated legal costs.

Taxation

The Group corporation tax charge for the six-month period is forecast at €0.1m (H1 2022: €0.04m) and primarily relates to our international operations where tax losses from our Irish operations cannot be utilised. The Group has taken the forecasted full year earnings or loss for each group entity to calculate the effective tax rate for the six-month period ending to 30 June 2023.

The deferred tax amortisation charge for the six-month period totalled €0.3m (H1 2022: credit of €0.4m). Prior year deferred tax credit relating to a creation of a deferred tax asset 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.

The Group has availed of the Irish Revenue tax warehousing scheme and deferred payment of all Irish employer taxes from February 2021 to March 2022. Total amount warehoused at 30 June 2023 amounted to €9.5m (31 December 2022: €9.4m) as the Group has incurred an interest charge of 3% on the outstanding warehoused liability debt since 01 May 2023. The Group has agreed with the Irish Revenue Commissioners to not repay any balance due on the warehoused facility until April 2024. The Group continues to monitor and comply with the appropriate Revenue guidelines applicable to this scheme.

Share based payment

The share-based payment expense of €0.9m (H1 2022: €1.2m) reflects the share-based payment charge arising on the issuance of options in accordance with the Group's Restricted Share Award, Long-Term Incentive Plan ("LTIP") and Save as you Earn ("SAYE") plan.

On 20 February 2023 the company issued 1,027,655 shares to satisfy restricted share awards granted by the Company at a value €0.01 per share in relation to RSU 2021 which vested in equal tranches in February 2022 and February 2023, and on 16 May 2023 the company issued 1,645,994 shares to satisfy long term incentive plan awards in relation to LTIP 2020 which vested at 75%.

Dividend

The Board does not expect to pay a cash dividend under its current policy in respect of the 2023 financial year. Any payment of cash dividends 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.

Related parties

Related party transactions are disclosed in note 15 to the condensed group financial statements.

Principal risks and uncertainties

There are a number of potential risks and uncertainties which could have a material impact on future Group performance and could cause actual results to differ materially from expected and historical results. The Board considers the risks and uncertainties described in detail in the Annual Report and Financial Statements for the year ended 31 December 2022, published on 3 April 2023, to remain applicable. Any changes to this evaluation and a description of the risks and uncertainties are set out within the Appendix to this document on pages 29 to 32.

Caroline Sherry

Chief Financial Officer

10 August 2023

RESPONSIBILITY STATEMENT

Each of the Directors of Hostelworld Group plc (as listed on pages 90 and 91 of the Annual Report and Financial Statements for the year ended 31 December 2022, published on 3 April 2023) confirm that, to the best of each person's knowledge and belief:

1. The condensed set of Group financial statements has been prepared in accordance with United Kingdom adopted International Accounting Standard 34 'Interim Financial Reporting';

2. The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and 

3. The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the Board

Gary Morrison Caroline Sherry

Chief Executive Officer Chief Financial Officer

10 August 2023 10 August 2023

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2023

*Exceptional Costs for the period ended 30 June 2022 (€470k) and year ended 31 December 2022 (€835k) comprised of items included in operating expenses.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2023

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2023

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2023

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2023

NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS

1. GENERAL INFORMATION

Hostelworld Group plc, hereinafter "the Company", is a public limited company incorporated in the United Kingdom on the 9 October 2015. 

The registered office of the Company is One Chamberlain Square, Birmingham, B3 3AX.

The condensed Group financial statements of the Company for the six months ended 30 June 2023 comprise the Company and its subsidiaries (together referred to as "the Group"). The condensed Group financial statements for the period ended 30 June 2023 have neither been audited or reviewed.

The information for the year ended 31 December 2022 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts and their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

These condensed Group financial statements were authorised for issue by the Board of Directors of Hostelworld Group plc on 09 August 2023.

2. ACCOUNTING POLICIES

Basis of preparation

The annual financial statements of the Group will be prepared in accordance with United Kingdom adopted International Financial Reporting Standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with United Kingdom adopted International Accounting Standard 34 'Interim Financial Reporting'.

Going concern

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

Across H1 2023 we have seen strong month on month growth in new customers, new bookings and an increase in net revenue as the Group recovered from COVID-19. Revenue for H1 2023 totalled €45.8m (H1 2022: €28.0m). At 30 June 2023 the Group was in a net asset position of €45.7m (31 December 2022: €52.2m) and a net debt position of €16.2m (31 December 2022: €21.6m).

In May 2023, the Group refinanced its 5 year €30.0m legacy term loan facility entered into during COVID-19 with HPS Investment Partners LLC or subsidiaries or affiliates thereof ('HPS'). On 23 February 2021 an amount of €28.8m was drawn down on the facility. In May 2023 the Group fully refinanced this debt facility following agreeing a new 3‐year facility with Allied Irish Banks plc ('AIB'). This new facility comprised a €10.0m term loan, a €7.5m revolving credit facility ('RCF') and an undrawn €2.5m overdraft. The term loan and RCF each have an initial interest rate payable of 3.75% over EURIBOR, reducing to 3.25% where the ratio of Net Debt to adjusted EBITDA is less than 2 and, 2.65% where the ratio is less than 1. This new facility, will materially lower interest costs, significantly strengthen the Group's balance sheet and consolidates the firm foundations upon which the Group will drive profitable growth and create shareholder value.

Having considered the Group's cash flow forecasts, current and anticipated trading volumes, together with current and anticipated levels of cash, debt and the availability of committed borrowing facilities, the directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of signing of this report, and accordingly, they continue to adopt the going concern basis in preparing the condensed Group financial statements.

Changes in accounting policies

Since the last Annual Report there are a number of amendments to existing accounting standards that have been adopted. These did not have a material impact on the condensed Group financial statements. The same accounting policies and methods of computation are followed compared with the most recent annual Group financial statements.

Key judgements and sources of estimation uncertainty

In preparing these condensed Group financial statements, the directors have made judgements in applying the Group's accounting policies and there are key sources of estimation uncertainty which affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing the condensed Group financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 December 2022. The Annual Report was published on 3 April 2023.

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 bookings worldwide, including ancillary online 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 period. 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 exceptional 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.

Reportable segment information is presented as follows:

For the six-month period ended 30 June 2023, an amount of €5,613k was deferred to the balance sheet (30 June 2022: €5,429k).

Disaggregation of revenue is presented as follows:

In the six months ended 30 June 2023, the Group generated 99% (30 June 2022: 100%) of its revenues from the technology and data processing fees that it charged to accommodation providers.

4. OPERATING EXPENSES EXCLUDING IMPAIRMENT

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

Total administration expenses increased by €7,032k to €41,755k (30 June 2022: €34,723k), predominantly due to an increase in direct marketing costs of €6,837k to €26,456k (30 June 2022: €19,619k), as revenue increased.

Included in staff costs in the prior year are income related to government assistance totalling €376k for a subsidy received under the Employment Wage Subsidy Scheme in Ireland, no relief has been received in 2023.

Included within administration expenses in the current period is a total credit of €62k (H1 2022: €nil) in relation to an R&D tax credit claimed in respect of projects completed in 2022.

5. EXCEPTIONAL ITEMS

The exceptional items for the six months period amounted to €3,593k (30 June 2022: €470k). Current year exceptional items comprise of costs incurred in exiting the HPS facility, including €687k of an early repayment penalty interest, €2,827k accelerated interest costs which relate to transaction costs capitalised on drawdown of HPS facility in February 2021, which were expected to be amortised over a 5-year period to 2026 and €79k of transaction costs which do not meet the criteria for capitalisation. In the prior year, exceptional items relate to a final settlement amount paid to the founder of Counter App Limited, on their exit from the company and associated legal costs. 

6. TAXATION

The corporation tax charge for the six-month period is forecast at €100k (30 June 2022: €37k). 2023 and 2022 charge relate primarily to our overseas operations where tax losses from our Irish operations cannot be utilised.

Taxation charge represents the best estimate of the average annual effective tax rate expected for the full year applied to the pre-tax profit or loss of each group entity during the six-month period. In calculating the expected tax rate, the Group has taken the forecasted full year 2023 earnings or loss of each group entity.

7. LOSS PER SHARE

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

On 20 February 2023 the company issued 1,027,655 shares to satisfy restricted share awards granted by the Company at a value €0.01 per share, and on 16 May 2023 the company issued 1,645,994 shares to satisfy long term incentive plan awards.

In connection with the incumbent HPS facility set out in note 14, Hostelworld 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 current issued share capital at the time of issue of the warrants) to HPS. The warrants could 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. On 29 March 2023 3,315,153 shares were issued to HPS on issuance of warrants.

The weighted average number of shares in the period was 120.4m (H1 2022: 117.2m) and the total number of shares at the balance sheet date was 123.5m (H1 2022: 117.5m).

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 and share options and share awards (note 12) 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.

8. INTANGIBLE ASSETS

Additions during the period comprised of capitalised development costs of €1,520k (30 June 2022: €2,256k), software additions of €24k (30 June 2022: Nil) and an acquisition of a domain name of €Nil (30 June 2022: €71k). There were no disposals. Offsetting additions is a total amortisation charge of €5,445k for the period ended 30 June 2023 (30 June 2022: €5,305k).

9. PROPERTY, PLANT AND EQUIPMENT

The Group recognised additions during the six months ended 30 June 2023 totalling €61k (30 June 2022: €148k) for computer equipment and €40k (30 June 2022: €944k) for right-of-use lease additions. In addition, the Group recognised an increase of €737k in the carrying value of the right-of-use lease assets upon the modification of an existing lease pertaining to the Group's Dublin office space. There has been no disposal of assets during the period (30 June 2022: €Nil). Total depreciation charge is €526k for the period ended 30 June 2023 (30 June 2022: €428k).

10.  DEFERRED TAXATION

The deferred tax amortisation cost for the six-month period totalled €313k (30 June 2022: credit of €415k). Prior year credit relates to a deferred tax asset created for capital allowances not utilised and available for future offset.

At 30 June 2023 the carrying value of deferred tax assets amounted to €8,861k (31 December 2022: €9,174k). Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available in future periods. Recognition of deferred tax assets is reliant on detailed forecast information regarding the future performance of business. The Group does not have any binding fixed term contracts in place which guarantee profitability. The Group has been loss making since 2020 as a direct consequence of COVID-19. The Group is budgeted to return to a profit before tax driven by a recovery to normal trading, which forms the basis of the recoverability of the deferred tax asset. The recognition and recoverability of the deferred tax asset is based on the Group's ability to generate sufficient taxable profits in future financial years. As part of our recoverability analysis, the Group has performed a sensitivity analysis on taxable profits growth over the next five years. The Group's forecasted taxable profits would have to decline by over 10% over the next five years before there is a risk that the deferred tax asset is not fully recovered in that period.

11.  TRADE AND OTHER RECEIVABLES

12.  SHARE CAPITAL

The Group has one class of ordinary shares which carry 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.

Reconciliation and movement in other reserves during the period as follows:

13.  TRADE AND OTHER PAYABLES

The Group has availed of the Irish Revenue tax warehousing scheme and deferred payment of all Irish employer taxes from February 2021 to March 2022. Total amount warehoused at 30 June 2023 amounted to €9,486k (31 December 2022: €9,438k) including interest of €50k (31 December 2022: €Nil). The Group has agreed with the Irish Revenue Commissioners to not repay any amounts due on the warehoused facility until April 2024. An amount of €2,653k is included within current liabilities. The Group incurs an annual interest charge of 3% on the outstanding warehoused liability debt which commenced on 01 May 2023. The Group continues to monitor and comply with the appropriate Revenue guidelines applicable to this scheme.

*2023 amounts includes €2,653k of payroll taxes warehoused

At 30 June 2023, €8,618k of revenue was deferred relating to free cancellation bookings (31 December 2022: €3,005k) and €265k relates to featured listings (31 December 2022: €178k). Increase in provision directly driven by increase in bookings and revenue.

Included in accruals and other payables is a credit provision amounting to €150k (31 December 2022: €150k) for vouchers and incentives to customers for use on future bookings reflecting the expected value attached to vouchers. There is uncertainty on the value of the credit provision given it is based on the probability that a customer will use their voucher. The provision has not been discounted.

14. BORROWINGS

In 2021 the Group signed a €30.0m five-year term loan facility with certain investment funds and accounts of HPS Investment Partners LLC (or subsidiaries or affiliates thereof). On 05 April 2023 the Group repaid €10m of the HPS facility and on 09 May 2023 the amount owing on the facility was repaid in full. An early repayment penalty of 2% applied. Total repayment penalty costs of €686k are included within Note 5 Exceptional items.

The April and May repayments totalled €34,066k which comprise of €30,000k principal and €4,066k PIK interest.

Cash interest paid to 30 June 2023 totalled €1,519k (30 June 2022: €nil). Increase year on year driven by all interest in the first year of the HPS facility after drawdown being rolled up and capitalised as PIK interest. Between the first and third anniversaries of drawdown, Hostelworld elected to capitalise 4.0% per annum of the accruing interest with the balance of the interest during that period.

A new 3-year facility was signed with Allied Irish Banks plc ('AIB') on 9 May 2023. This facility is comprised of a €10,000k term loan, a €7,500k revolving credit facility ('RCF') and an undrawn €2,500k overdraft. An amount of €17,369k was drawn down, net of arrangement fee. Amount drawn down was utilised to repay the HPS facility.

The AIB term loan and RCF each had an initial interest rate payable of 3.75% over EURIBOR. In July 2023 this reduced to 3.25%, when the ratio of Net Debt to adjusted EBITDA was less than 2 times. The interest rate will reduce to 2.65% over EURIBOR where of Net Debt to adjusted EBITDA is less than 1 times. 

Financial covenants attached to the facility are set out as follows:

1. Maintaining a minimum cash balance on hand of €6m;

2. Ensuring an interest cover of not less than 3:1. Interest cover is defined as the ratio of Adjusted EBITDA to Gross Interest Paid in respect of any Relevant Period. Covenant is tested quarterly, based on the prior 12-month actuals; and

3. Ensuring the Groups adjusted leverage ratio does not exceed 3:1. Adjusted leverage is defined as the ratio of Net Debt on the last day of each quarter to Adjusted EBITDA in respect of the 12 months to the quarters reporting date.

The debt is guaranteed by the Group's principal trading entity Hostelworld.com Limited, who has provided the lenders with a customary security package over its assets.

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

15.  GROUP STRUCTURE AND RELATED PARTY TRANSACTIONS

There are no changes to the Group structure or related party transactions to highlight in respect of H1 2023 and no related party transactions to highlight.

16.  EVENTS AFTER THE REPORTING DATE

There have been no significant events, outside the ordinary course of business, affecting the Group since 30 June 2023.

APPENDIX 1: ALTERNATIVE PERFORMANCE MEASURES

The Group uses the following alternative performance measures ('APMs') which are non-IFRS measures to monitor the performance of its operations and of the Group as a whole: loss / earnings before interest, tax, depreciation, and amortisation, excluding exceptional and non-cash items ("adjusted EBITDA"), adjusted loss / profit after taxation; adjusted loss or earnings per share. An explanation of each APM and its purpose within the Group is set out from page 222 within the Annual Report and Financial Statements for the year ended 31 December 2022, published on 3 April 2023.

Adjusted EBITDA

Relates to loss / earnings before interest, tax, depreciation and amortisation, excluding exceptional and non-cash items ("Adjusted EBITDA"). Exceptional items by their nature and size can make interpretation of the underlying trends in the business more difficult. We believe this APM reflects the key drivers of profitability for the Group and removes those items which do not impact underlying trading performance.

Reconciliation between loss for the year and adjusted EBITDA:

Adjusted loss after taxation ("Adjusted PAT")

Adjusted profit/(loss) after taxation is an APM that the Group uses to calculate the dividend pay-out for the year, subject to Company Law requirements regarding distributable profits and the dividend policy within the Group. It excludes exceptional items, amortisation of acquired domain and technology intangibles, net finance costs, share based payment expenses and deferred taxation which can have large impacts on the reported result for the year, and which can make underlying trends difficult to interpret.

Reconciliation between adjusted EBITDA and loss for the year:

Adjusted loss per share

Adjusted EPS is an APM that excludes exceptional items, amortisation of acquired domain and technology intangibles, net finance costs, share based payment expenses and deferred taxation which can have large impacts on the reported result for the year, and which can make underlying trends difficult to interpret.

Adjusted free cash flow

Free cash flow adjusted for refinance cashflow movements and exceptional cost outflows. Free Cash Flow Conversion has been adjusted for capital expenditure, acquisition of intangible assets, net finance costs and excludes the effect of exceptional costs.

It is a key measure which shows the cash the Group is generating/ using as it excludes certain items which to not relate to the day-to-day activities of the Group.