ANNUAL REPORT 2019
Ready to meet the world?
Let’s go!
* About the Evolution of the Hostel Traveller consumer research: Hostelworld
worked with Censuswide to survey over 5,000 people aged 16 and over across
the USA, UK, Australia, France, Germany, India and Brazil.
1
ABOUT
HOSTELWORLD
GROUP
Hostelworld Group, the global hostel-focussed
online booking platform, inspires passionate
travellers to Meet The World, and come back with
life-changing stories to tell. Our customers are
not your average tourists; they crave cultural
connection and unique experiences that we make
possible by providing an unbeatable selection of
hostels in unmissable locations – all in the palm of
their hand.
It is the social nature and community feel of hostels
and their environment, that enable travellers to
embrace journeys of discovery, adventure and
meaning. We have more than 13 million reviews
across more than 17,700 hostels in more than 179
countries, making our brand the leading online hub
for social travel. Our website operates in 19 different
languages and our mobile app in 13 languages.
2019 was a milestone year for Hostelworld, marking
two decades since our very first booking! We
celebrated in August by throwing our community
The World’s Biggest Hostel Party across 20 hostels,
in 20 countries, for 20 consecutive days.
OUR VISION
To shape people’s lives and attitudes through
travel and build a better world.
OUR PURPOSE
To inspire adventurous minds through travel.
OUR MISSION
To enable travellers to experience new
places and meet new people in a fun,
memorable and safe way.
OUR VALUES
THINK
CUSTOMER
BE BOLD,
BE BRAVE,
BE ADVENTUROUS
BUILDING
A BETTER
WORLD
KEEP
IT SIMPLE
COMMUNITY
SPIRIT
2
Hostelworld Annual Report 2019
3
2019 SUMMARY
LET’S GO!
Net bookings1
Net bookings1
6.78m
6.78m
Other Brands
Other Brands
Hostelworld
Hostelworld
Net Revenue
Net Revenue
€80.7m
€80.7m
Adjusted EBITDA
Adjusted EBITDA
€20.5m
€20.5m
Adjusted Profit After Tax
Adjusted Profit After Tax
€14.8m
€14.8m
Adjusted Free Cash Flow
Adjusted Free Cash Flow
€10.9m
€10.9m
Normalised Adjusted
Normalised Adjusted
Free Cash Flow
Free Cash Flow
€13.1m
€13.1m
19
19
18
18
19
19
18
18
19
19
18
18
19
19
18
18
19
19
18
18
19
19
18
18
6.78m
6.78m
7.24m
7.24m
€80.7m
€80.7m
€82.1m
€82.1m
€20.5m
€20.5m
€22.5m*
€22.5m*
€14.8m
€14.8m
€17.4m*
€17.4m*
€10.9m
€10.9m
53%
53%
€22.8m*
€22.8m*
101%
101%
€13.1m
€13.1m
64%
64%
€22.8m*
€22.8m*
90%
90%
* For comparative purposes metrics for prior year have been restated to reflect the impact of adopting IFRS 16, in order to give a true and fair
comparative of underlying performance.
Note
1. The Group reports booking volume net of cancellations (“Net bookings”) as a key performance indicator as the free cancellation booking
option has been in place for the full financial year. Cancelled bookings increased to 0.5m bookings in 2019 (2018: 0.3m) driven by the timing of
full global rollout of the product from July 2018.
2. The impact of deferred revenue from our free cancellation booking option is not considered significant in the current year and has not been
included in this summary page.
Definitions
Adjusted Profit after Tax - Profit after tax excluding exceptional costs, amortisation of acquired domain and technology intangibles,
impairment charges, net finance costs, share based payment expenses and deferred taxation.
Adjusted EBITDA - Earnings before Interest, Tax, Depreciation and Amortisation, excluding exceptional and non-cash items.
Adjusted Free Cash Flow - Free Cash flow adjusted for capital expenditure, acquisition of intangible assets, net finance costs and net
movement in working capital excluding the effect of exceptional costs.
Normalised Adjusted Free Cash Flow – Adjusted Free Cash Flow excludes the impact of the deferral of the revenue related to free cancellation
bookings and the impact of the timing of specific one off cash receipts.
OVERVIEW
Our Journey ........................................................................................................................... 6
At a Glance ............................................................................................................................. 8
STRATEGIC REPORT
Chairman’s Statement ....................................................................................................... 12
Chief Executive’s Review .................................................................................................... 18
Financial Review .................................................................................................................. 24
Principal Risks and Uncertainties ...................................................................................... 32
Statement of Compliance – S 172 (1) of the Companies Act, 2006 ............................... 39
Corporate Social Responsibility ........................................................................................ 43
GOVERNANCE
Directors’ Biographies ....................................................................................................... 52
Corporate Governance Statement .................................................................................... 54
Directors’ Report................................................................................................................. 95
Independent Auditor’s Report ........................................................................................ 101
FINANCIAL STATEMENTS
Consolidated Income Statement .................................................................................... 114
Consolidated Statement of Comprehensive Income ................................................... 115
Consolidated Statement of Financial Position .............................................................. 116
Consolidated Statement of Changes in Equity .............................................................. 117
Consolidated Statement of Cash Flows .......................................................................... 118
Notes to the Consolidated Financial Statements .......................................................... 119
Company Statement of Financial Position ..................................................................... 154
Company Statement of Changes in Equity .................................................................... 155
Notes to the Company Financial Statements ................................................................ 156
ADDITIONAL INFORMATION
Shareholder Information ................................................................................................. 162
Advisers .............................................................................................................................. 163
Along with activities, tomorrow’s travellers are focussed on capturing priceless moments. For future backpackers, 40% rank getting to see the prettiest landscapes as the most memorable and positive travel experience.*DISCOVERNEW TERRITORIESTHINK CUSTOMERThink customer first, we’re on their side in everything we do. We always aim to delight and surprise, anticipating and fulfilling their needs, deepening our engagement at every opportunity.4LIVE NEW ADVENTURESOVERVIEW6 Our Journey8 At a Glance5 6
Overview
Hostelworld Annual Report 2019
OUR JOURNEY
2006
2003
2009
1999
2013
Acquired the Hostels.com
business and brand
Opened office in
Shanghai
Hellman & Friedman LLC,
a US private equity firm,
acquired the Group
Acquired the
Hostelbookers business,
based in the UK
Launch of the
Hostelworld website,
providing an online
booking platform and
back-end property
management system
Over the last 20 years
we have built our
industry expertise by
partnering with hostels
worldwide, enabling
them to manage and
distribute their inventory
to our highly engaged
and valuable global
customer base.
2014Released new suite of Hostelworld booking apps for iOS and Android2015Listed on the London and Euronext Dublin Stock Exchanges Rebranding of Hostelworld with ‘Meet The World’2017Opened technology development centre in Porto, Portugal2018“Roadmap to Growth” programmeNew management team appointed2019Celebrating 20 years of Hostelworld Investment in Counter App Limited, a provider of tailored management solutions for the hostel industryHostelworld announces strategic investment in Goki Pty LimitedInnovative hardware and consumer app solution to fully automate check-in and door access controlYEARS OFHOSTELWORLD 7 AT A GLANCETHE GLOBAL HOSTEL-FOCUSSED ONLINE BOOKING PLATFORM327 EmployeesPropertiesin 179 CountriesOver 13m reviewsAvailable globally in 19 languages (13 on app)Over 17,700 hostelsOver 87m visits to websiteOver3.0m social media followersHostelworld Annual Report 2019 Overview8HOSTELWORLD PROPERTIES IN 179 COUNTRIES9 Over 28% of backpackers rate trying local food as one of the most memorable experiences of their trip. Today’s female travellers are serious foodies, with a 10% increase in the importance of liking the local cuisine, from past female travellers.*EXPERIENCENEW CULTURESBE BOLD, BE BRAVE, BE ADVENTUROUSAllow our passion to drive our ambition. Be fearless to embrace change as a path to success and adventurous in our thinking.10SAVOURNEW EXPERIENCESSTRATEGIC REPORT12Chairman’s Statement18Chief Executive’s Review24Financial Review32Principal Risks and Uncertainties39Statement of Compliance – S 172 (1) of the Companies Act, 200643Corporate Social Responsibility THE YELLOW ROME11 12
Strategic Report
Hostelworld Annual Report 2019
CHAIRMAN’S
STATEMENT
A YEAR OF
SIGNIFICANT
ACTIVITY AND
CHANGE
2019 was a milestone year for the Hostelworld
Group, where we marked 20 years since the
formation of the business.
Gary Morrison, CEO, completed a detailed strategic review of the business during the latter part of 2018, which identified a number of areas of underinvestment in the business as well as a “Roadmap for Growth” programme to capitalise on the significant opportunities for the business. The progress achieved is covered in more detail in the Chief Executive’s Review, but the programme is designed to strengthen our core business, to close the competitive and technological deficits and to enhance our customers’ experience. At the time we announced the “Roadmap for Growth” programme we said that the benefits of these initiatives would be seen through a return to growth during 2020. I am pleased to report that the business saw a return to growth during the latter part of 2019. Despite experiencing weaker consumer sentiment during the peak summer months, a return to year-on-year net bookings growth started in September and continued to build momentum during the final quarter of the year. We are encouraged by this strong endorsement of the Hostelworld brand and the vindication of our strategy. In addition, we believe that the business will be well-placed with a solid foundation to capitalise on exciting growth opportunities and to provide our customers with an enhanced product offering through an expanding portfolio.Dividend and Capital StructureGiven the growth opportunities the Board wishes to pursue, and the resources and investment required to deliver against our “Roadmap for Growth” strategy, the Board have determined that a change to capital allocation policy is required. The Hostelworld Group will require flexibility on the best use of shareholders’ funds to optimise shareholder return and to deliver against the long-term interests of the business and shareholders.As a consequence, the Board have taken the decision to reduce the level of annual dividend to a range of 20% to 40% of the Group’s Adjusted Profit After Tax. The Board is recommending a full year final dividend of 2.1 euro cent per share which together with the interim dividend of 4.2 euro cent per share brings the total dividend for 2019 to 6.3 euro cent per share. This equates to a distribution of 41% of the Adjusted Profit After Taxation in respect of 2019 and €62.7m having been returned to shareholders since IPO in November 2015.Board CompositionThe composition of the Board is fully compliant with the 2018 UK Corporate Governance Code as applied to small companies. In 2019, an evaluation of the Board, its Committees and individual Directors was undertaken which concluded that the Board is operating effectively.In May, Andy McCue informed the Board of his intention to step down at the 2019 AGM after over three years on the Board. We thank Andy for his contribution during that time. In August, we were delighted to announce the appointment of Evan Cohen as an Independent Non-Executive Director. Michael Cawley | Chairman“ WE BELIEVE THAT THE BUSINESS WILL BE WELL-PLACED WITH A SOLID FOUNDATION TO CAPITALISE ON EXCITING GROWTH OPPORTUNITIES AND TO PROVIDE OUR CUSTOMERS WITH AN ENHANCED PRODUCT OFFERING THROUGH AN EXPANDING PORTFOLIO.”13 With a background in management and strategy consultancy, Evan brings a wealth of experience in the technology sector having held senior positions in several well-known global technology companies, including Lyft and Foursquare. Evan has joined the Audit, Remuneration and Nomination Committees following the resignation of Andy McCue. There were no other changes to the Audit Committee, Remuneration Committee and Nomination Committee during the year.Colleagues, Customers and ShareholdersFollowing the completion of his strategic review, Gary Morrison further strengthened the executive team with senior external hires in the following areas: Marketing, Supply, Product and Human Resources. With a refreshed and greatly strengthened management team now in place, the Group is well positioned to capitalise on the growth opportunities. On behalf of the Board, I would like to thank all members of the Hostelworld team for their commitment and hard work during the year. I would like to particularly acknowledge the dedication of our product and technology development teams based in Dublin and Porto who have been critical to our plans to return the business to growth. I would also like to thank our customers and hostel partners, whom we continue to place at the heart of our business, for their loyalty and support. We look forward to building on the positive momentum of Q4 2019 and continuing to create value for our shareholders.Michael CawleyChairman3 March 2020 NOMADS HOTEL HOSTEL CANCUN“I WOULD LIKE TO THANK ALL MEMBERS OF THE HOSTELWORLD TEAM FOR THEIR COMMITMENT AND HARD WORK DURING THE YEAR.”CHAIRMAN’S STATEMENT (CONTINUED)Hostelworld Annual Report 2019 Strategic Report14 LUK HOSTEL BANGKOK15 Data-driven bespoke recommendations for travellersAnalytics and Insights Native App Development teamHOW WE CREATE VALUEGREAT EXPERIENCES FOR THE TRAVELLER‘Best’ inventory of hostelsImproved search experience – right hotel, right customer, right timeHigh quality booking experienceBest in class appFlexible and convenient platformIncreased number of payment options availableGREAT TOOLS & TRAVEL KNOW-HOWPurely hostel-focussed businessDedicated Property Management System solutionsLeveraging new technologiesGuest experience platformHigh quality booking platformGREAT GUESTS FOR THE HOSTEL PROVIDERRelevant and trusted brandTargeted customer acquisitionCustomer lifetime value managementDriving ancillary spendGlobal locationsCOMMISSION BASED REVENUEIn operating a global hostel-focussed online booking platform, we offer a simple and comprehensive online mechanism that gives providers of hostels and other budget accommodation a shop window to show their accommodation to young and independent travellers.We provide the technology solution to facilitate bookings between the hostel and traveller, offering a high quality booking experience that provides us with commission based revenue.Hostelworld Annual Report 2019 Strategic Report16 SOMOS ANTIGUAGREAT GUESTS FOR THE HOSTEL PROVIDERRelevant and trusted brandTargeted customer acquisitionCustomer lifetime value managementDriving ancillary spendGlobal locationsIntrepid explorers are back: 33% decrease in tomorrow’s travellers taking the tried and tested routes compared to past generations.*17 18
Strategic Report
Hostelworld Annual Report 2019
CHIEF EXECUTIVE’S
REVIEW
IMPLEMENTING
OUR ROADMAP
FOR GROWTH
2019 was a very significant milestone in
Hostelworld Group’s history, marking 20 years
since the company was formed. Since the
company’s inception in 1999, Hostelworld has
grown into a global business with more than
13 million traveller reviews and a very relevant
brand which is trusted by a loyal and engaged
customer base. We are focussed on facilitating
a social experience for young independent
travellers through showcasing our hostel owner
partners’ inventory. We have always understood
that our customers are not just average
tourists; they are seeking a sense of adventure,
community and interaction with other like-
minded people.
After joining the Group in mid 2018, I announced the results of my strategic review in late November 2018 and outlined a “Roadmap for Growth” for the next 3 years. At that time, I described how growth in EBITDA had been mainly achieved through an increase in commission rates and an increase in the proportion of bookings through Hostelworld App, rather than booking volumes growing. I also described how prolonged underinvestment in technology had led to competitive gaps in the core platform, and that increased “category” based advertising had failed to deliver a satisfactory return. Consequently, I outlined a “Roadmap for Growth” program to address these issues and to reposition the business for a return to growth in 2020 and beyond.During 2019 our focus has been on implementing the key elements of the programme with delivery expected throughout 2019 and into 2020. This involved capping our commission rates at competitive levels and redeploying our non-productive marketing expenditure into closing out the core competitive gaps that we had previously identified. At the time we anticipated that the benefits of these actions would result in a return to growth in 2020, aligned with our roadmap delivery expectations. It is therefore particularly pleasing that this has been achieved during the final quarter of 2019.Key Operational Highlights and Results 2019 was a challenging and competitive year, with customer sentiment softening over key summer months. As a result, net Hostelworld brand bookings declined 5% year-on-year, impacted by the full year roll-out of our free cancellation booking option. Although the macro-environment remained largely unchanged during the remainder of 2019, performance strengthened in the second half of the year, with a return to growth in September, that continued for the remainder of the year, ahead of expectation. The profile of cancelled bookings has performed in line with our expectation.In addition to competition for customers, there was a marked increase in cost-per-click inflation, throughout 2019. This rising cost base was managed through a reduction in brand marketing spend and disciplined control of operating expenses. During 2019, we started to implement several initiatives outlined in our “Roadmap for Growth”. We have rebuilt the core sort order ranking algorithm from a largely static ranking to a more dynamic, granular ranking algorithm that takes into account more variables such as differing search characteristics observed on desktop versus mobile web demand. Overall, we are pleased with the improvements to date, and will continue to optimise our core search algorithms into 2020. We have also added many features to enable our hostel partners to load their inventory with more flexible rate configurations than ever before, with the net result that more hostels are now offering their lowest non-refundable rate plans to our customers alongside their standard and free-cancellation options. This has led to growth in non-refundable rate plan bookings throughout the year, and we will continue to invest in this area during 2020. During 2019 we also commenced work on migrating our legacy payments platform to a specialist 3rd party payments provider, and re-platforming our website to a progressive web app. These are significant work items that will launch in H1 2020, and will provide our customers with more settlement currencies, more payment options and a much faster and richer user experience on mobile web.Finally, we also made investments in two companies, Australia-based Goki Pty Limited (“Goki”) and Counter App Limited (“Counter”) who provide respectively tailored guest management and property management and payments solutions for the hostel industry. Through our work with Gary Morrison | CEO19 20
Strategic Report
Hostelworld Annual Report 2019
CHIEF EXECUTIVE’S REVIEW (CONTINUED)
the hostel industry over the years we have
developed an understanding of the unique
operational needs of the hostel industry,
and we are excited to partner with these
two companies to develop and deploy their
solutions to hostel owners worldwide.
Our Strategy
Today, our core business is focussed on
serving travellers who want to stay in hostel
accommodation for the social experience and
the ability to meet people at an affordable
price point. The hostel market itself is
expected to remain highly fragmented
with a growing supply base of high-quality
accommodation, particularly in Europe and
Asia. Overall, the underlying annual global
growth rate for the category is expected to
be around 5% through to 2022+. Within this
market, online distribution will remain key
for hostel owners; with the share of bookings
made through OTAs such as Hostelworld
expected to grow and account for 68%* of all
bookings by the end of 2020.
During 2019, we have started to implement
our “Roadmap for Growth” to strengthen
our core business. Overall, we are pleased
with our progress to date, and we remain
committed to rolling out the remaining
elements of our “Roadmap for Growth”
during 2020. As we look forward to 2020
and beyond, we now see additional
opportunities to grow faster than the core
hostel OTA market by providing our existing
customers and hostel owners with a more
comprehensive product offering.
As noted earlier, we invested in Goki and
Counter respectively to provide solutions
to help hostel owners drive up ancillary
revenues, reduce operating costs and
improve the guest experience. In particular,
Goki provides a unique hostel focussed
guest management solution to hostels to
allow their customers to check in online
and use their smartphone as a digital key to
their room via the Goki smart lock and App
solution. The solution connects to a wide
range of third party property management
systems and removes the need for plastic key
cards and paper based check in processes.
The same platform also provides hostels with
the ability to create a bookable catalogue
of activities that are published within the App,
and the ability to broadcast messages to/from
groups or individual customers.
Counter is a new, flexible “all in one” workspace
for smaller chains and independent hostel
owners. This product has been designed from
the ground up for the unique requirements of
the hostel industry; covering the functions of a
typical property management system with an
integrated payments solution. This product will
also enable Hostelworld to offer a free upgrade
path to a much stronger product for our
Backpacker Online customers and opportunity
for Extranet only customers to upgrade to a
modern PMS/payments management platform
at minimal cost. Over time, we expect to launch
additional hostel focussed products and services
over the Counter platform.
Taken together, Goki and Counter will help
Hostelworld re-establish itself not only as an
OTA/distributor with hostels, but also as a
leading provider of low cost hostel focussed
technology solutions to the hostel industry.
We see these investments as supporting the
evolution of the hostel industry’s transition
to technology enabled operations and guest
management, and strengthening our overall
business relationship with hostel owners.
Just as we see opportunities to expand our
product portfolio to hostel owners, we also see
significant opportunities to build a broader
catalogue of experiential travel products
beyond hostel accommodation. These types
of experiences may include opportunities to
study, work or volunteer abroad, with hostel
stays featuring as part of an extended itinerary.
Our research would also suggest that this
market is very fragmented, with many different
marketplaces and business models. With
the Group’s deep knowledge of experiential
travellers built up over 20 years, our trusted
brand, and a loyal and relevant customer
base, we believe we are uniquely positioned
to help both our existing customers and
new experiential travellers Meet the World®
together with other like-minded travellers. To
execute this strategy, the Group has increased
its focus on potential M&A opportunities in the
past six months and built an extensive pipeline
of potential targets to further accelerate our
growth.
+ Source: Phocuswright’s The Global Hostel Marketplace Third Edition. Draft. Unpublished.
KLOEM HOSTEL BANGKOKDécor domination: The importance of a hostel’s décor has risen by 44% for today’s travellers when choosing where to book.*21 22
Strategic Report
Hostelworld Annual Report 2019
CHIEF EXECUTIVE’S REVIEW (CONTINUED)
Business Model
We are a well-established global OTA
focussed on the hostel market. We provide an
online platform that allows hostel owners and
to a lesser extent low-cost accommodation
providers the ability to showcase their
facilities to young and independent
travellers. Most of our revenue is generated
through facilitating bookings between these
accommodation providers and travellers
online via our website or, increasingly, via our
App. This efficient business model has very
favourable working capital attributes and
strong cash conversion.
Since 2018, we have offered our customers
a free cancellation option, provided that the
booking lead time is greater than 7 days
and that the booking is cancelled within
the specified time period. Revenues from
free cancellation bookings that have been
collected from customers are deferred and
only recognised in future periods when the
cancellation date has passed.
Investing in People
In the last 18 months we have taken a
number of significant steps to strengthen our
executive team, which will help to address the
challenges and opportunities that have been
identified for the business.
During 2019 we made several significant
external hires in key areas. In April, Fabrizio
Giulio joined as Chief Supply Officer. Fabrizio
has a wealth of experience in the industry,
having worked for over a decade with one of
our competitors. In August, Yale Varty joined
as Chief Marketing Officer, having previously
led the marketing organisation at the online
retailer ASOS. Jody Jordan joined us in
November as Chief Human Resources Officer,
having held similar positions at Kerry Group
and Paddy Power. In February 2020, Johnny
Quach joined us as Chief Product Officer from
AirHelp.
With these important roles now filled, I
believe that Hostelworld has a world-class
management team to build on the positive
momentum that is being generated across
our business.
Free hostel
experiences:
almost one in five (19%)
backpackers say they’re
attracted to hostels
offering free activities,
over those that don’t.*
Backpackers planning a trip in the next three
years preferred options for reserving a hostel bed*
Mobile app
22%
PC
46%
ONLY 13%
of future
backpackers
plan to walk-in
Smartphone
32%
VIAJERO CARTAGENA HOSTEL CARTAGENABackpackers planning a trip in the next three years preferred options for reserving a hostel bed* PC 46%ONLY 13% of futurebackpackersplan to walk-inMobile app 22%Smartphone32%Dividends and Capital Allocation2019 was a year of investment for Hostelworld, with both organic and inorganic growth drivers, funded from existing cash resources. The appropriate allocation of our capital resources is critical to ensuring the long-term growth of the business and optimisation of our shareholder return. The board and I have therefore decided that the annual dividend will be reduced to a range of 20% to 40% of the Group’s Adjusted Profit After Taxation. This change in dividend policy will enable the Group to target complimentary acquisitions, to expand our portfolio and to offer our customers a unique proposition.OutlookI am pleased with the progress of our roadmap for growth strategy to date, and the steps we have taken to strengthen our management team. During 2020 we will continue to implement the remaining elements of our roadmap for growth strategy and build a broader catalogue of experiences beyond providing hostel accommodation to enable our target customer base to explore more of the world together with other like-minded travellers.Consistent with our strategy, I am therefore pleased to announce we have a very active pipeline of potential acquisition opportunities, some of which are at advanced stages. The nature and scale of any potential acquisitions is such that they would likely be part funded through our existing cash reserves and bank debt.The susceptibility of the travel industry to a broad range of macro-economic factors, coupled with highly competitive environment we operate in can make the prediction of future operations difficult. Gary Morrison Chief Executive3 March 202023 24
Strategic Report
Hostelworld Annual Report 2019
FINANCIAL REVIEW
CONTINUED
INVESTMENT
IN OUR CORE
PLATFORM
Introduction*
• Hostelworld brand net bookings decline of 5% reflecting an improved
performance in the second half of the year (H1 2019: -8%; H2 2019: -1%);
total Group net bookings decline of 6%;
• Net Average Booking Value (“ABV”) of €11.97, 3% growth versus 2018;
• Revenue decreased by 2% due to a contraction in booking volumes and an
increase in cancelled bookings with positive net revenue growth of 6% in
the second half of the year (H1 19: -9%; H2 19: +6%);
• Marketing expenses represented 41% of net revenue excluding deferred
revenue (2018: 37%);
• Adjusted EBITDA decreased by 9%; this decline increased to 11% on a
constant currency basis;
• Adjusted EBITDA margin 25% (2018: 27%);
• 53% Cash conversion and final proposed dividend of 2.1 euro cent per
share (2018: 9.0 euro cent per share); adjusting for impact of timing items,
underlying cash conversion was 64%; and
• A deferred tax asset of €6.9m was recognised due to a temporary
difference between the carrying value and the tax base of intangible
assets which were transferred as part of a group reorganisation.
* 2018 metrics have been adjusted for the impact of the Group adopting IFRS16.
2019 Key Performance IndicatorsGROWTHNet Bookings – Hostelworld Brand6.63M5% Net Revenue €80.7M2% Net Average Booking Value (“ABV”) €11.973% Adjusted EBTIDA(1)€20.5M9% Adjusted EBITDA Margin(1)25%2% 2019, the 20th anniversary of the business, was a year of substantial change for the Group. Our customers’ experience became our principle focus and we addressed previous technology and experiential deficiencies by prioritising investment in our core platform, focussing on our inventory, search algorithms, booking and payment experiences. In addition, we invested in two complementary businesses Goki Pty Limited and Counter App Limited, both of which will provide our customers and hostel-owners with high quality unique tools, facilitating bookings and enhancing the experience between hostel and traveller. TJ Kelly | Chief Financial OfficerRETURNReturn on Capital Employed11%2% Adjusted Free Cash Flow Conversion(1)53%48% Adjusted EPS(1)15.5 EURO CENT15% Total Dividend per share6.3 EURO CENT54% Dividend payout ratio41%35% (1) 2018 Adjusted EBITDA has been adjusted for the impact of the Group adopting IFRS 16 Leases. Refer to Note 1 to the Consolidated Financial Statements for further details.25 26
Strategic Report
Hostelworld Annual Report 2019
27
FINANCIAL REVIEW (CONTINUED)
Despite a challenging first half to the year,
where Group net bookings were down
10% versus H1 18; the business saw a
turn-around in performance in H2 19, with
net bookings down -2% versus H2 18. Net
bookings returned to growth in September
and throughout the final quarter of 2019. This
growth resulted in our full year 2019 results
delivering in-line with our market guidance.
EBITDA margins remain strong at 25% (2018:
27%) despite significant direct cost inflation
and we are pleased to report adjusted EPS
of 15.5 euro cent per share (2018: 18.2 euro
cent per share). Cash conversion of 53%
(2018: 101%) is impacted by timing of cash
receipts and increased strategic investments,
excluding the impact of the deferral of
revenue related to free cancellation bookings
and one off timing impacts, underlying
cash conversion was 64%. Return on Capital
Employed (“ROCE”) also remains strong at
11% (2018: 13%). The decrease was primarily
driven by the effect of the reduction in net
bookings during 2019.
Bookings and Revenue
The Group’s net booking volumes declined
by 6% in 2019 (2018: 4% decline) which was
driven by a decline in performance in our
core Hostelworld brand in the period which
fell by 5% compared to the same period last
year (2018: 1% decline).
Net Average Booking Value (“ABV”) is the
average value paid by a customer for a net
booking. ABV increased by 3% during the
year (2018: 1%). The average commission
rate in 2019 increased to 16.0% (2018: 15.4%),
primarily driven by the effects of base
commission increases in February 2018 and
January 2019. These commission increases
and the positive impact of exchange rates
were partially offset by the continued decline
in the number of bed nights per booking with
the continued shift to mobile bookings.
In 2018 in response to customer demand,
the Group rolled out a free cancellation
booking option, to further broaden our
product offering. This led to a deferral of
revenue recognition, which has had a positive
impact of €0.1m on reported earnings in
2019 (2018: €2.9m negative impact), however
this has not had an impact on cash receipts.
At 31 December 2019, €2.8m represents
the total deferred revenue balance (2018:
€2.9m) from free cancellation bookings
that has been collected from customers
and will be recognised in future periods,
net of any future cancellations, in 2020
when the last cancellation date has passed.
Any cancellations that were processed by
customers up to and including 31 December
2019 have been refunded and are not
included in this deferred revenue balance.
The introduction of the free cancellation
booking option has resulted in a portion of
gross bookings being cancelled and refunded
to customers. Total Group bookings, net of
any cancellations processed by 31 December
2019, have declined by 6% in 2019 (2018:
4% decline), with Hostelworld brand net
bookings declining by 5% (2018: 1% decline).
Underlying cancellation rates continue to
perform in line with our expectations.
Group revenue decreased by 2% during
the year to €80.7m (2018: €82.1m), which
corresponds to a 4% decrease on a constant
currency basis. This is partially as a result of
the impact of the free cancellation booking
option with cancelled bookings increasing to
0.5m bookings (2018: 0.3m bookings). The
increase in cancellation numbers is driven
by the timing of the full global rollout which
was in July 2018. All of the marketing costs
in relation to these bookings have been
recognised in the year.
The Group continues to actively manage its
marketing mix with marketing investment
as a percentage of net revenue excluding
deferred revenue of 41% in 2019 (2018:
37%). This increase is driven by higher than
anticipated cost inflation in performance
marketing channels, increased cancellations
in 2019 relative to 2018 due to the phased
launch of the free cancellation product in
2018 and partly offset by a planned reduction
in category advertising.
Adjusted EBITDA
The Group uses Earnings before Interest,
Tax, Depreciation and Amortisation,
excluding exceptional and non-cash items
(“Adjusted EBITDA”) as a key performance
indicator when measuring the outcome
in the business. Exceptional items by their
nature and size can make interpretation
of the underlying trends in the business
more difficult. We believe this alternative
performance measure reflects the key drivers
of profitability for the Group and removes
those items which do not impact underlying
trading performance.
The Group has adopted IFRS 16 Leases from
1 January 2019, as disclosed in note 1 to
the consolidated financial statements. The
Group has applied the modified retrospective
approach, and as a result it has not restated
prior periods on adoption in its financial
statements. For comparative purposes
Adjusted EBITDA for prior periods has been
restated to reflect the impact of adopting
IFRS 16, in order to give a true and fair
comparative of underlying performance.
Restated Comparatives (€m)
Adjusted EBITDA- as previously reported
Impact of IFRS 16 Leases if applied retrospectively(2)
Adjusted EBITDA - including the impact of IFRS 16 Leases
(2) Refer to Note 1 to the Consolidated Financial Statements for further details.
2018
21.4
1.1
22.5
Excluding the impact of the level of
development labour capitalised in accordance
with IFRS standards (2019: €2.3m; 2018:
€1.7m), share based payment expense and
the impact of a bonus accrual, staff costs
increased by 4% on a constant currency basis.
Staff costs decreased from €17.2m to €16.9m.
The average number of persons employed
increased by 7% from 294 in 2018 to 314 in
2019, as the Group continues to invest in a
technology development centre in Portugal
which will further increase the development
capacity of the Group.
Adjusted EBITDA of €20.5m (2018: €22.5m)
has decreased by €2.0m (9%) in the year
and by 11% on a constant currency basis.
Adjusted EBITDA as a percentage of revenue
declined to 25% (2018: 27%). Adjusted EBITDA
has been impacted by the reduction in
bookings during the period and by the rollout
of the free cancellation product, which has
resulted in increased cancellation numbers in
2019.
Administration expenses, excluding the
impact of exceptionals and IFRS16, were
flat to PY 2018 (€60.4m, 2018: €60.3m). This
was primarily as a result of an increase in
marketing costs offset by a reduction in staff
and other administration costs. There was
a marked increase in cost per click inflation
throughout 2019 and this rising cost base
was managed through a reduction in brand
marketing spend and disciplined control of
operating expenses.
28
Strategic Report
Hostelworld Annual Report 2019
29
FINANCIAL REVIEW (CONTINUED)
Reconciliation between Operating Profit and Adjusted EBITDA:
€m
Operating profit
Depreciation
Amortisation of development costs
Amortisation of acquired intangible assets
Exceptional items
Share based payment expense / (credit)
Adjusted EBITDA
2019
3.3
2.4
1.7
9.8
3.1
0.2
20.5
Adjusted
2018 (3)
Reported
2018
6.8
2.3
1.9
10.3
1.6
(0.3)
22.5
6.7
1.2
1.9
10.3
1.6
(0.3)
21.4
(3) 2018 Operating Profit and Adjusted EBITDA have been adjusted for the impact of the Group adopting IFRS 16. Refer to Note 1 to the
Consolidated Financial Statements for further details.
The exceptional costs for the year of €3.1m were primarily restructuring and merger and
acquisition related costs (2018: €1.6m).
The share based payment expense of €0.2m (2018: €0.3m credit) reflects the share based
payment charge arising on the issuance of options in accordance with the Group’s Long Term
Incentive Plan (“LTIP”) and Save as you Earn (“SAYE”) plan offset by the release of previously
recognised expenses relating to options which have been forfeited during the year.
Adjusted Profit after Taxation
Reconciliation between Adjusted EBITDA and Profit for the Year:
€m
Adjusted EBITDA
Depreciation
Amortisation of development costs
Net finance costs
Share of results of associate
Corporation tax
Adjusted Profit after Taxation
Exceptional items
Amortisation of acquired intangibles
Share based payment expense / (credit)
Deferred taxation
Profit for the period
2019
20.5
(2.4)
(1.7)
(0.2)
(0.1)
(1.2)
14.8
(3.1)
(9.8)
(0.2)
6.6
8.4
Adjusted
2018 (4)
Reported
2018
22.5
(2.3)
(1.9)
(0.2)
-
(0.8)
17.4
(1.6)
21.4
(1.2)
(1.9)
-
-
(0.8)
17.5
(1.5)
(10.3)
(10.3)
0.3
(0.2)
5.6
0.3
(0.2)
5.7
Adjusted Profit after Taxation (“Adjusted
PAT”) is an alternative performance measure
that the Group uses to calculate the dividend
payout for the year, subject to Company Law
requirements regarding distributable profits.
It excludes exceptional costs, amortisation of
acquired domain and technology intangibles,
impairment charges, net finance costs (apart
from interest on lease liabilities), 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 PAT decreased by 15% from €17.4m
to €14.8m (2018: 19% decrease) and 18%
on a constant currency basis reflecting the
marginal impact of the reduction in Net
Bookings during the period.
Based on the weighted average number
of shares in issue during 2019, reported
Earnings per Share (“EPS”), as set out in
Note 9 to the financial statements, is 8.78
euro cent per share for the financial year
(2018: earnings per share 5.84 euro cent).
Using Adjusted PAT as the measure of
earnings would result in an adjusted EPS of
15.46 euro cent per share for the year. The
corresponding EPS for 2018 calculated on
the same basis, using the weighted average
number of shares in issue as at 31 December
2018 and adjusting for the impact of IFRS 16
is 18.21 euro cent per share. Adjusted EPS
is an alternative performance measure 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.
Given that the capital nature of the Group
post IPO is fully equity funded, there is
minimal net finance costs in 2019 apart from
finance charges for leased assets (€0.2m)
which arise due to the impact of IFRS16 (2018:
€0.2m).
Taxation
The Group corporation tax charge of €1.2m
(2018: €0.8m) results in an effective tax rate
(corporation tax as a percentage of Adjusted
EBITDA) of 6.0% (2018: 3.4%) and 40.6% of
reported profit before taxation, which is after
amortisation of acquired intangible assets of
€9.8m and exceptional costs of €3.1m (2018:
11.8% of reported profit before taxation of
€6.5m, which is adjusted for the impact of
IFRS 16).
The Group’s deferred tax credit for the year
ended 31 December 2019 of €6.6m (2018:
€0.2m charge) primarily relates to a group
reorganisation that is referred to in note 12
and note 20 to the consolidated financial
statements.
Adjusted Free Cash Flow Conversion
€m
Adjusted EBITDA
Capitalised development spend
Capital expenditure
Acquisition of associate
Interest and tax paid
Net movement in working capital (6)
Adjusted Free Cash flow
Adjusted Free Cash flow conversion
2019
20.5
(2.9)
(0.2)
(1.1)
(1.7)
(3.7)
10.9
53%
Adjusted
2018 (5)
Reported
2018
22.5
(1.8)
(0.7)
-
(0.8)
3.6
22.8
101%
21.4
(1.8)
(0.7)
-
(0.8)
2.6
20.7
97%
(4) 2018 Adjusted EBITDA and Adjusted Profit after Taxation have been adjusted for the impact of the Group adopting IFRS 16. Refer to Note 1
to the Consolidated Financial Statements for further details.
(5) 2018 Adjusted EBITDA and Adjusted Free Cash Flow have been adjusted for the impact of the Group adopting IFRS 16. Refer to Note 1 to
the Consolidated Financial Statements for further details.
(6) Changes in working capital excludes the effects of exceptional costs and cash outflow relating to investments.
The Group has a business model which produces strong free cash flow conversion, with a negative working capital cycle on operational cash flows. The movement in working capital in 2019 was at a lower level than 2018 and includes the impact of a debtor related to a group reorganisation in 2019. Adjusted free cash flow conversion of 53% in 2019 (2018: 101%) includes the impact of €2.8m (2018: €2.9m) of revenue related to free cancellation bookings that was received but deferred, increased investment and restructuring activity related costs. Excluding the impact of the deferral of revenue related to free cancellation bookings and the timing of specific one off cash receipts, adjusted free cash flow conversion would have been a normalised 64% (2018: 90%).Total cash at 31 December 2019 was €19.4m (2018: €26.0m) of which €nil is restricted (2018: €nil). There were no borrowings at 31 December 2019 (2018: €nil).Foreign Exchange RiskThe Group’s primary operating currency is euro. The Group also has significant sterling and US dollar cash flows. In 2019 the average US dollar to euro exchange rate strengthened by 5% and the average sterling to euro exchange rate strengthened by 1% in comparison to 2018. Restated on a constant currency basis, ABV has increased by 2%, revenue has decreased by 4% (€3.6m) and Adjusted EBITDA has decreased by 11% (€2.6m) in 2019. Constant currency is calculated by applying the average exchange rates for the year ended 31 December 2019 to the financial results for the year ended 31 December 2018 on a month by month basis. The Group’s principal policy is to match cash flows of like currencies, with excess sterling and US dollar revenues being settled into euros on a timely basis. DividendThe Directors are pleased to recommend a full year final dividend payout of €2.0m equating to 2.1 euro cent per share. This is in addition to the interim dividend of €4.0m or 4.2 euro cent per share paid in September 2019. This payout of €6.0m or 6.3 euro cent per share (2018: 13.8 euro cent per share) reflects a distribution of 41% of the Adjusted PAT for the year ended 31 December 2019 and is in line with the updated dividend policy. The Board continually reviews its approach to returning capital to shareholders in order to ensure that the Group maintains an efficient and prudent capital structure. The Board reviewed the Group’s divided policy and have approved a revision of the payout range, from 70% to 80%, to 20% to 40% of the Group’s Adjusted Profit After Tax. This change in capital allocation will provide the Group with the flexibility needed for capital and other investment growth opportunities, both organic and inorganic, to optimise shareholder return.The final dividend of 2.1 euro cent per share is to be approved by shareholders at the 2020 AGM on 27 April 2020. If approved, the dividend will be paid on 8 May 2020 to members appearing on the register at close of business on 17 April 2020. After payment of the proposed final dividend for 2019 the Group will have returned €62.7m to shareholders in dividends since IPO in November 2015. TJ KellyChief Financial Officer3 March 2020FINANCIAL REVIEW (CONTINUED)Hostelworld Annual Report 2019 Strategic Report30 JUCY SNOOZE CHRISTCHURCHSlow Travel is a thing: Backpackers are choosing toexplore fewer countries in a single trip to get more outof each destination. Down from an average of 3-4 in thepast to just 1-2 countries per trip in the future.*31 32
Strategic Report
Hostelworld Annual Report 2019
33
PRINCIPAL RISKS AND UNCERTAINTIES
The Board takes overall responsibility for
identifying the nature and extent of the
risks to be managed by the Group to ensure
the successful delivery of its strategic and
business priorities. The Audit Committee
monitors certain risk areas and the internal
control system, as set out in the report on
governance.
The Group’s risk register identifies key risks
including any emerging risks and monitors
progress in managing and mitigating these
risks and is reviewed regularly during the
year by the Audit Committee and at least
annually by the Board. There was significant
focus on emerging risks as part of the risk
assessment review and the Board is satisfied
that there has been a thorough process
carried out to identify emerging risks and
put in place remedial actions to manage or
mitigate those risks. The most material risks
facing the Group including any emerging
risks 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
and emerging 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
it conclusions can be found on page 37
and note 1 to the Consolidated Financial
Statements respectively.
Direction
of change
Unchanged
Increased
Decreased
1.
Macroeconomic
conditions
Revenue is derived from the wider leisure travel
sector. Perceived or actual economic conditions,
including slowing or negative economic
growth, rising unemployment rates, weakening
currencies, higher taxes or tariffs could impair
customer spending and adversely affect travel
demand. In addition, events beyond our control
such as unusual or extreme weather, travel
related health concerns including pandemics and
epidemics or travel-related accidents can disrupt
travel and result in declines in travel demand.
Because these events or concerns are largely
unpredictable, influencing customer demand and
behaviour, they can adversely affect our business
and results of operations.
Significant movements in FX rates can have a
dramatic impact on travel volumes, revenues and
travel patterns.
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 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.
Material risks:
4.
Search Engine
Algorithms
No. Category
Description and Impact
Management and Mitigation
Direction
of change
No. Category
Description and Impact
Management and Mitigation
Direction
of change
2.
Impact of
terrorism
threat on
leisure travel
3.
Competition
The continued threat of terrorist attacks in key
cities and on aircraft in flight may reduce the
appetite of the leisure traveller to undertake trips
particularly to certain geographies, resulting in
declining revenues.
Increased incidence of terrorism impacts
consumer confidence and can shift demand away
from certain destinations.
The business operates in a highly 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 via websites, 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 and/or
could increase traffic and therefore customer
acquisition costs. Demand for our services could
suffer, reducing revenue and margins.
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
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 rest of world.
We continue to execute on our roadmap for
growth and capitalise on our unique market
position, this involves:
• Investing in leveraging the Group’s unique
data assets allowing it to target and grow
the most profitable customer segments by
optimising its overall marketing investment;
• Continue to strengthen the Group’s 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;
and
• Continue to focus on expanding our global
footprint, meeting emerging demand and also
strengthening our overall product offering.
The Group invests heavily in recruiting and
retaining key personnel with the requisite skills
and capabilities in paid and non paid search.
This in-house expertise is supplemented by the
deployment of leading technology tools.
The search marketing team works closely
with Google to understand any changes in
functionality to the adwords platform so that
we can avail of any efficiencies in our search
traffic. The Group participates in alpha and beta
feature tests that give Hostelworld first mover
advantage with new functionality that can help
drive efficiency.
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 Management Policy in
place which includes appropriate escalation.
34
Strategic Report
Hostelworld Annual Report 2019
PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
No. Category
Description and Impact
Management and Mitigation
Direction
of change
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 and/or other penalties.
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, consumer compliance,
tax, intellectual property, trademarks, data
security and commercial disputes in multiple
jurisdictions.
The recent investigation by UK Competition and
Markets Authority (CMA) into clarity, accuracy
and presentation of information on OTA sites
could impact revenue.
In addition, as a listed company on the London
and Euronext 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.
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 implemented a comprehensive privacy
compliance programme to align with our
on-going obligations under GPDR and have
invested in our own data protection resources
to monitor compliance. Our Data Protection
Officer is responsible for informing, advising and
monitoring compliance on all matters relating to
the protection of personal data in the Company.
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.
For 2020, Hostelworld plan to migrate parts of the
e-commerce platform to the Cloud. Whilst risk is
minimal, there still is risk that security gaps may
manifest during the migration.
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 resources have been
engaged to ensure consumer compliance
requirements, 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.
A detailed analysis of the Group’s practices by a
number of senior executives in the Company’s
Legal, Marketing and Product departments
concluded that a limited number of amendments
to the Group’s online sales practices was required
in order to achieve substantial compliance with
the CMA’s written guidelines.
35
Direction
of change
No. Category
Description and Impact
Management and Mitigation
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 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.
Due to the global nature of our business, tax
authorities in other jurisdictions may consider
that taxes are due in their jurisdiction, for
example because the customer is resident in
that jurisdiction or the travel service is deemed
to be supplied in such jurisdiction. If those tax
authorities take a different view than the Group
as to the basis on which the Group is subject to
tax, it could result in the Group having to account
for tax that it currently does not collect or pay,
which could have a material adverse effect on
the Group’s financial condition and results of
operation if it could not reclaim taxes already
accounted for in the jurisdictions the Group
considers relevant.
Changes to tax legislation or the interpretation
of tax legislation or changes to tax laws based on
recommendations made by the OECD in relation
to its Action Plan on Base Erosion and Profits
Shifting (“BEPS”) or national governments may
result in additional material tax being suffered by
the Group or additional reporting and disclosure
obligations.
Failure in our IT systems or those on which we
rely such as third party hosted services could
disrupt availability of our booking engines
and payments platforms, or availability of
administrative services at our office locations,
with an adverse impact to our customer service.
9.
Business
Continuity
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.
As an e-commerce organisation, the Group’s
business continuity plan focusses on the
continued operation of consumer facing products
and related services to ensure our e-commerce
trading systems can continue to process
bookings. Our fully distributed and redundant
architecture across two data centres based in
two different countries supports this approach.
The Group has worked with external advisers to
produce robust documented business continuity
and disaster recovery capabilities. We have also
extended our eCommerce Business Continuity
Plans (“BCP”) to include our corporate offices.
The Group has developed stronger recruitment
processes supported by effective HR policies and
procedures. The Group has an increased focused
on understanding the drivers of employee
engagement, this has informed the development
of its Employee Value Proposition, aimed at
attracting the right calibre of talent, driving
levels of motivation, retention and 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.
A non-executive director has been designated to
fulfil the workforce engagement role as set out in
the 2018 UK Corporate Governance Code.
36
Strategic Report
Hostelworld Annual Report 2019
37
PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
No. Category
Description and Impact
Management and Mitigation
Direction
of change
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 and from UK nationals which could
impact on Group revenue. In the year ended
31 December 2019, the UK as a destination
represented 6% of total Group bookings (2018:
6%) and 14% of Group bookings were from UK
nationals (2018: 14%).
Overall a decline in macroeconomic conditions
in the UK could negatively impact consumer
confidence and reduce spending in all areas
including the wider leisure travel sector.
The Group is a global business and continues
to grow its international footprint and presence
across its key markets. Through continued
international expansion and diversification the
Group will seek to naturally mitigate the impacts
of Brexit. However, the Group will continue to
assess the impacts of Brexit and implement
any necessary remediation steps to mitigate its
impact on the Group.
Emerging risks:
No. Category
Description and Impact
Management and Mitigation
1.
Payment
Processor
Reliance on single payments processor
(Worldpay) for the Group and exposure to their
downtime, service etc.
Payments is a part of the product roadmap. The
Group is investing in a payment team to enhance
the functionality in this space.
Direction
of change
2.
Climate Change
Changing consumer demand as a result of
increased awareness of issues related to
climate change adversely impacting financial
performance.
3.
Mergers and
Acquisition
Anticipated benefits of mergers and acquisitions
may not materialise due to inaccurate evaluation
of business targets, over estimation of synergies
or poor management and or integration of
acquisition target.
Climate change issues may impact travel
decisions and travel patterns by customers, but
is mitigated to the extent that our business is
a global one, with a dispersed population of
users, and a geographically dispersed set of
destinations
Suitable experienced resources have been
engaged internally and external professional
advisers are engaged to ensure expertise in
identifying, evaluating and conducting due
diligence and subsequent transaction execution
and integration. In addition Board approval is
required for all transactions and regular updates
are presented to the Board on potential targets,
including strategic evaluations of any proposed
significant investments.
The scenarios tested on principal risks
included:
• Macroeconomic/Terrorism/Brand damage:
A shortfall in the number of bookings
forecasted;
• Macroeconomic Shock/FX/ Brand Damage
to Hostels as Accommodation Category: A
continual decline in the average booking
value (“ABV”); and
• Increased Competition or Change in
Search Engine Algorithms: An increase
in the cost per paid booking and number
of cancellations and execution risks in
developing and rolling out strategic
initiatives.
The mitigating actions that were modelled
included a reduction in variable overheads
and a reduced reliance on certain channels
to market. The results of this stress testing
showed that, due to the stability of the core
business, the responsive business model and
the strong cash balance on the balance sheet,
the Group would be able to withstand the
impact of these scenarios occurring over the
period of the financial forecasts by making
adjustments to its operating plans within the
normal course of business.
Based on their assessment of prospects and
viability above, the Board confirm that they
have a reasonable expectation that the Group
will be able to continue in operation and meet
its liabilities as they fall due over the five year
period ended 31 December 2024.
The Directors also consider it appropriate
to prepare the financial statements on the
going concern basis, as explained in the Basis
of Preparation paragraph in Note 1 to the
consolidated financial statements.
Viability Statement
In accordance with provision 31 of the UK
Corporate Governance Code 2018, the
Directors have assessed the viability of the
Group over a five-year period, taking into
account the Group’s current position and the
potential impact of the principal risks and
uncertainties outlined above. The financial
position of the Group, its cash flows, liquidity
position and borrowing facilities are outlined
in the Financial Review on pages 24 to 30.
The Directors have determined that a five
year period to 31 December 2024 is an
appropriate period over which to provide
its viability statement as this is the period
reviewed by the Board in our budgeting
and forecasting process. In making this
statement, the Board carried out a robust
assessment of the principal risks facing the
Group, including those that would threaten
its business model, future performance,
solvency or liquidity.
The Board considers annually a bottom up
forecast. The output of this forecast is used
to perform KPI analysis, which includes a
review of sensitivity to ‘business as usual’
risks, such as profit growth and severe but
plausible events. It also considers the ability
of the Group to convert earnings into cash.
The results take into account the availability
and likely effectiveness of the mitigating
actions that could be taken to avoid or reduce
the impact or occurrence of the identified
underlying risks.
Although the forecast reflects the Directors’
best estimate of the future prospects of
the business, they have also tested the
potential impact on the Group of a number of
scenarios over and above those included in
the plan, by quantifying their financial impact
and overlaying this on the detailed financial
forecasts in the plan. These scenarios, which
are based on aspects of the principal risks as
outlined on pages 32 to 36 represent severe
but plausible circumstances that the Group
could experience.
38
39
STATEMENT OF COMPLIANCE – S172(1)
OF THE COMPANIES ACT, 2006
The Directors are aware that they are each
required to act in a way that they consider, in
good faith, would be most likely to promote
the success of Hostelworld for the benefit of
its members as a whole, and in doing so have
regard (amongst other matters) to:
• The likely consequences of any decisions in
the long-term;
• The interests of the Group’s employees;
• The need to foster the Group’s business
relationships with suppliers, customers and
others;
• The impact of the Group’s operations on
the community and environment;
• The desirability of the Group maintaining a
reputation for high standards of business
conduct; and
• The need to act fairly between
shareholders.
Compliance briefing on directors’ duties
under section 172(1)/ Directors induction
training
During the year, the Directors were provided
with a detailed compliance briefing on
their obligations under section 172(1) of
the Companies Act, 2006 (“Section 172(1)”)
and the Company Secretary was instructed
to ensure that the induction training for
any new directors appointed to the Board
emphasised directors duties under Section
172(1). As part of his induction, Evan Cohen,
who joined the Board as a Non-Executive
Director in August 2019, was provided with
tailored training on his duties in connection
with complying with Section 172(1).
Relevant stakeholders
As part of the compliance briefing, the
Directors considered and assessed who the
Group’s relevant stakeholders were for the
purposes of complying with Section 172(1).
The Directors agreed that the Group’s
shareholders, workforce, traveller customers,
hostel partners and strategic suppliers were
its key stakeholders on the basis that a
positive and engaged relationship between
the Group and each of these stakeholders
was required in order for the Group to deliver
its strategy effectively and contribute to the
wider economy. Information about how the
Group has engaged with its key stakeholders
is set out below.
Understanding the views of stakeholders
We set out on pages 59 to 61 the methods used to
ensure the Directors understand the views of the
Group’s key stakeholders.
Principal Decisions
The following decisions were the Board’s
principal decisions for 2019 from a Section 172(1)
perspective. Further information about each of
these is set out below:
• The acquisition of 49% of the share capital in
Goki Pty Limited;
• The investment into a commercial partnership,
Counter App Limited “Counter”; and
• The establishment of a new payment processing
partnership.
Section 172(1) Considerations
(a) The likely consequences of any decision in
the long term
During the year, the Directors provided oversight
and approved the acquisition of 49% of the
share capital in Goki Pty Limited. The details
of this transaction are set out in note 13 to the
consolidated financial statements on pages 142
and 143. As part of their oversight and assessment
of the investment decision, the Directors had
particular regard to the fact that the making of
the investment (and execution of the commercial
strategy underpinning the investment decision)
was a key element of the Group’s long-term
strategy to differentiate Hostelworld from its OTA
competitors.
In connection with the Directors’ oversight and
approval of the strategic investment made to
establish “Counter” (a commercial partnership
with a property management software developer)
during 2019, the Directors agreed that failing to
establish the commercial partnership would leave
the Group reliant on legacy technology which
would require substantial investment and diminish
the Group’s product offering to its hostel partners.
This would, in turn, limit the Group’s commercial
appeal to its hostel partners in the long-term. The
details of the launch of Counter, the new Property
Management System (PMS) for the Group’s hostel
partners are set out on page 20 (Chief Executive’s
Review).
MASAYA SANTA MARTA
40
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41
STATEMENT OF COMPLIANCE – S172(1)
OF THE COMPANIES ACT, 2006 (CONTINUED)
In 2019, the Directors provided oversight
and approved the establishment of a new
payment processing partnership with a
key supplier which would supplement
the Group’s existing partnership with a
separate payments partner. In approving the
transaction, the Directors had specific regard
to the negative long-term commercial impact
if the Group did not have an additional
payments partner with a technology roadmap
which was aligned to the long-term payments
strategy of the Group and to the need to
effectively manage the risk of the Group
being reliant on a single payments partner.
(b) The interests of the Group’s employees
In approving the investment decision in
Goki Pty Limited and the approval of the
commercial partnership established in
connection with launching Counter, the
Directors had regard to the positive impact
on employee engagement of announcing
the transactions internally in the Group on
the basis that the transactions demonstrated
the ability of the Group’s management to
delivery against the Group’s strategy.
As part of the Directors’ assessment and
approval of the new payment processing
partnership with a key supplier, the Directors
had regard to the engagement that had taken
place with representatives of the Group’s
Technology and Product departments who
had provided detailed input into the partner
selection process. To ensure meaningful
engagement took place between the Board
and the Group’s employees involved in the
partner selection process, the Directors
ensured that the representatives who had
inputted into the process were informed
that their requirements and preferences
were taken account of by the Directors in the
context of their approval of the transaction.
The Board recognises the importance of a
highly engaged workforce which it considers
to be crucial in ensuring the Group is
appropriately resourced for the purposes
of delivering its key strategic goals. During
2019, the Directors considered the feedback
provided by employees through a number
of employee engagement mechanisms and
approved the implementation of a number
of employee initiatives. These initiatives
were designed to address issues raised by
the employees, ensure that the Group rewards its
employees in a fair and competitive manner, and
provide employees with opportunities to continue
to develop successful careers with the Group.
Details of the key initiatives implemented are as
follows:
• Access to digital e-learning tools for all members
of the workforce;
• Salary and benefits benchmarking project
implemented;
• Career break policy implemented;
• Remote working policy implemented;
• Employer pension contributions increased; and
• Increased availability of life insurance benefits.
The Directors considered their obligations under
part (b) of Section 172(1) in the context of their
review of the decisions and proposals made by
the Nomination Committee in connection with
succession planning. The Directors agreed that
effective succession planning was required both
to ensure the Group’s employees were supported
in their career development goals and to manage
short-term and long-term resourcing risks to the
Group’s ability to deliver its strategy. Accordingly,
the Directors approved the decision of the
Nomination Committee to re-examine the scope
and comprehensiveness of the Group’s succession
plans for senior and middle management to
ensure they remained ‘fit for purpose’.
(c) The need to foster the Company’s business
relationships with suppliers, customers and
others
In connection with the Directors’ oversight
and approval of the commercial partnership
established in connection with launching Counter
during 2019, the Directors considered part (c) of
Section 172(1). In this regard, the Directors agreed
that the commercial execution of the business
plan which underpinned the collaboration and the
making available by the Group of hostel focussed
technology solutions would enable the Group’s
hostel partners to run their businesses more
efficiently and assist the Group in maintaining its
strong collaborative partnership with its hostel
partners.
As part of the Directors’ assessment and approval
of the new payment processing partnership, the
Directors further considered part (c) of Section
172(1) and agreed that the proposed partnership
in connection with the use of customer data and
credit card information.
The Directors considered part (e) of Section
172(1) in the context of the Directors review
of the Group’s GDPR compliance framework.
The Directors noted that the Group applied
considerable resources and focus to privacy
compliance issues and agreed that this was both
correct and consistent with the requirement
that the Group maintain a reputation for high
standards of business conduct.
(f) The need to act fairly as between members
of the Company
The Directors considered their obligations
under part (f) of Section 172(1) in the context
of the Remuneration Committee Chairman
corresponding with the limited number of
shareholders who voted against the Directors’
Remuneration Policy resolution proposed at the
Company’s Annual General Meeting held on 31
May 2019. The Directors agreed that seeking the
views of the shareholders who had voted against
the Directors’ Remuneration Policy resolution
was appropriate in the context of the Directors
ensuring that they acted fairly between members
of the Company.
Effect of Section 172(1) on Board decisions
The Board welcomes the requirement for each
Director to have regard to a number of matters
which are beyond strict financial performance
considerations when they are assessing Board
matters. The Board considers the requirements
of Section 172(1) will ensure that each Director
will continue to develop their appreciation of how
both financial and intangible value in the Group
is created over time and enable each individual
Director and the Board to be well positioned to
oversee a sustainable future for the Group.
would also enhance the Group’s commercial
relationship with its hostel partners by
broadening the range of products that could
be made available to hostels and assist them
in growing their businesses and competing
successfully in the hostel market.
(d) The impact of the Company’s
operations on the community and the
environment
In connection with the Directors’ review and
revision of the Group’s purpose and values
during 2019, the Directors considered part
(d) of Section 172(1) and were provided
with an update on the charitable work
undertaken by the Group during the year.
The Board agreed that the charitable work
undertaken by the Group during the year
evidenced strong engagement by the Group
with local communities and further agreed
that maintaining charitable partnerships
in the community going forward was
important in the context of the Group’s role
in contributing to wider society.
As part of the Directors’ assessment of
the greenhouse gas emissions resulting
from employee travel during the year, the
Directors considered part (d) of Section
172(1) and agreed that the increased level
of emissions (substantially attributable to
an employee conference held in Barcelona
and attended by the majority of the Group’s
employees) was a cause of concern in
the context of the Group’s impact on the
environment and would be monitored closely
going forward.
(e) The desirability of the Company
maintaining a reputation for high
standards of business conduct
As part of the Directors’ assessment
and approval of a payment processing
partnership with a key supplier, the Directors
considered part (e) of Section 172(1). The
Directors agreed that the selection of an
appropriately licensed and well established
payments partner was required to ensure
the Group maintained its reputation for
high compliance standards and business
conduct and would assist in maintaining
customer confidence in the Group’s focus
on information security and data compliance
42
43
CORPORATE SOCIAL
RESPONSIBILITY
At Hostelworld Group, we place great importance
on managing our business in an ethical and
conscientious way worldwide. The way we interact
with our people, our suppliers, our customers, our
shareholders and the global communities in which
we operate demonstrates this.
In 2019 having reviewed our key priorities, we
launched our Vision, Mission, Purpose and Values.
Our Vision is to shape people’s lives and attitudes
through travel and build a better world.
Our Mission is to enable travellers to experience
new places and meet new people in a fun,
memorable and safe way.
Our Purpose is to inspire adventurous minds
through travel.
Our Company values are:
Think Customer - Think customer first, we’re on their side in everything we do. We
always aim to delight and surprise anticipating and fulfilling their needs, deepening
our engagement at every opportunity.
Be Bold, Be Brave, Be Adventurous - Allow our passion to drive our ambition. Be
fearless to embrace change as a path to success and adventurous in our thinking.
Building a Better World - We use our collective energy every day to promote
understanding in our world by enabling individual journeys of discovery, adventure
and meaning. We value and promote equality, respect and diversity to help inspire a
better world.
Keep it Simple - Use simplicity and smart thinking to be agile and improve
everything we do. Let’s make complexity our enemy and simplicity our mantra.
Community Spirit - We bring people together from all over the globe, inspiring
energy, passion and curiosity. Our unique community spirit empowers us to help
build collaboration, openness and honesty.
SELINA SECRET GARDEN LISBON
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CORPORATE SOCIAL RESPONSIBILITY (CONTINUED)
Our People
Our diverse workforce is located across
five offices globally; Dublin, London, Porto,
Shanghai and Sydney.
In 2019 colleagues from around the world
came together in Barcelona for our first
Hostelworld Employee Conference. This was
a great opportunity to engage colleagues
around our Strategy and to bring to life our
new Vision, Mission, Purpose and Values.
We believe that having a diverse team is
essential in our role as a promoter and
facilitator of global travel. We strongly believe
that recruitment, selection and promotion
should be based on merit, and should not be
impacted by age, gender, sexual orientation,
civil status, family status, disability, race,
religious belief or political opinion. The
importance we place on “Community
Spirit” is demonstrated by the fact that
our 327 colleagues come from a variety
of backgrounds, cultures and age groups,
and represent 30 nationalities. Our unique
“Community Spirit” empowers us to help
build collaboration, openness and honesty
with one another.
Recognising the importance of establishing
and maintaining a highly engaged workforce,
we continued to gather employee feedback
and to measure employee engagement. In
2019, colleagues completed two pulse-check
surveys focused on topics such as work life
balance, collaboration and communication,
innovation, learning and development and
alignment and involvement. We continue
to see improvements in our scores and will
continue to take action to drive positive
change in our engagement levels and the
overall Employee Value Proposition. The
results of each survey were shared at a
companywide level, department level and
individual team level.
In 2019 the Board appointed Éimear Moloney
as the designated Non-Executive Director
with responsibility for understanding the
views of the Group’s employees and for
managing effective engagement between
the Board and the Group’s workforce. Our
Colleague Engagement Forum was then
established and is made up of a small
number of employees from across the
business. These employees meet with Éimear
at various dates throughout each year to
ensure that the Board and Hostelworld
employees mutually understand each other’s
views and remain informed on topical issues.
Éimear will then represent the views and
voice of Hostelworld employees at Board
Meetings.
Learning and Development was a particular
area of improvement identified in 2019.
In order to provide our people with
opportunities to develop both personally
and professionally we rolled out LinkedIn
Learning across the business. LinkedIn
Learning provides access to high quality,
written and visual content with over 15,000
online courses. Introducing LinkedIn
Learning was positively received by our
people thus strengthening our Employee
Value Proposition. As of 31 December 2019
our people have an average learning time of
six hours each.
We reviewed our Compensation and Benefits
offering to ensure that we are competitive
versus market and are providing our people
with fair rewards for their commitment and
achievements as well attracting new talent.
In line with feedback received through
the engagement surveys we undertook a
benchmarking exercise, increased both our
employer pension contributions and the life
assurance offering.
In 2019 we launched a third Save as You
Earn (“SAYE”) scheme for employees in
Dublin and London. Our SAYE plan provides
employees with the chance to share in the
future success of our business and align to
shareholder interest. Participation in the
scheme is voluntary with employees saving
between €12 and €500 per month on a three-
year savings contract with a pre-approved
bank. Once the savings period is complete,
employees can decide if they want to exercise
their option to buy shares at a discounted
price, set at the start of the savings period.
If employees decide not to exercise their
option, their savings will be returned to them.
In 2019 we also launched a Colleague
Bonus Plan. Colleagues are now eligible
to participate in a bonus plan, subject to
a threshold level of profit being achieved.
Amounts payable are based on both personal
performance and Company performance.
The wellbeing of our people is significantly
important. Recognising that many people
no longer follow a strict daily routine and
the importance of work life balance, we
continue to build a better world by offering
flexible working hours and the option to
work from home or a hostel. Recognising the
importance of rest, relaxation and fun, we
offer in-office massages and regular social
events. We have an Employee Assistance
Programme should our people need support
with issues at work, relationships, worries,
family pressures or financial stresses. This
service is available 365 days a year. Our
people also have access to an onsite dental
service once a quarter in Dublin, giving them
a more flexible approach to their work-life
balance.
All colleagues are expected to abide by our
general Code of Conduct, which outlines specific
principles of behaviour everyone is expected to
follow, at all times, in the key areas of integrity,
confidentiality, lawful behaviour and disclosure
of interests. We are committed to ensuring
and maintaining an environment that is free
from bullying and/ or harassment and where
the dignity of each and every person at work is
respected and upheld.
We have a Whistleblowing Policy in place that
sets out how a colleague can raise a concern,
the way the Group will respond, and how
the rights of colleagues who raise a concern,
and those who are the subject of reports, are
to be protected. We have an independent
whistleblowing hotline that all staff can access
confidentially should they not feel safe reporting
a concern internally.
Gender
A breakdown of our Board, Executive Leadership Team and all employees by gender as at 31
December 2019 is set out below:
Number
%
Male
Female
Male
Female
Chairman and Executive Directors (1)
Non-Executive Directors
Executive Leadership Team (1)
Direct reports of Executive Leadership Team
3
2
6
19
Other staff
1. Executive Directors are included in each of Directors and Executive Leadership Team
142
0
1
2
18
136
100%
0%
66.7%
33.3%
75.0%
25.0%
51.4%
48.6%
51.1%
48.9%
Age
Age
25 or Less
26-34
35-44
45+
Employees
38
153
109
27
Age Profile
45+
8%
25 or Less
12%
35-44
33%
26-34
47%
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47
CORPORATE SOCIAL RESPONSIBILITY (CONTINUED)
Our Customers
“Think Customer” is at the forefront of
our minds during planning and projects.
We continue to anticipate their needs by
providing 24/7 global customer service.
We offer a booking guarantee, whereby
if a customer’s booking details cannot
be found at check-in, we refund their full
booking deposit and credit their account with
$50, which can be used on future booking
deposits.
Ensuring we “Keep it Simple” we offer our
24/7 Customer Service in 19 languages via
Live Chat, email, phone and the Hostelworld
Help Centre – helping our customers to Meet
the World with ease.
Our mission is to enable travellers to
experience new places and meet new people
in a fun, memorable and safe way. Thinking
customer, we understand that there may
be times our customers have to cancel their
bookings in advance, we offer our Free
Cancellation option. This allows customers to
cancel their bookings free of charge online
through their Hostelworld account and have
their deposit refunded in line with each
hostel’s cancellation policy.
“ ENSURING WE “KEEP IT SIMPLE”
WE OFFER OUR 24/7 CUSTOMER
SERVICE IN 19 LANGUAGES VIA
LIVE CHAT, EMAIL, PHONE AND
THE HOSTELWORLD HELP CENTRE –
HELPING OUR CUSTOMERS TO
MEET THE WORLD WITH EASE.”
Our Hostel Partners
In 2019 we rolled out a series of product
enhancements to our hostel partners. One of
these enhancements was to create our Stop
Sell feature which allows our hostel partners
to stop selling rooms on individual rate plans
for a time of the property’s choosing.
Another enhancement is our offering of
Minimum/Maximum Length of Stay. This
allows our hostel partners to set up minimum
and maximum length of stays for guests.
We also launched our App-Only Rates, which
allows our hostel partners to opt-in to display
a 10% discount on all rooms and rates which
is displayed exclusively on the Hostelworld
App to our customers as these customers
tend to be more engaged, loyal and have a
higher booking value.
Bringing to life our value of “Keep it Simple”,
we also have an online Hostel Knowledge
Base which our hostel partners can access to
view content and training guides specifically
created for them. The Knowledge Base
provides our hostel partners with information
on promotional tools and services, reviews
and ratings, pricing and availability, bookings,
payment details and also has an FAQ section.
Inspiring “Community Spirit”, this year
we hosted four conferences for our hostel
partners to attend depending on their
location. Understanding that it can be difficult
for our hostel partners to attend conferences
depending on their geographic location and
busy seasons we held conferences in Dublin,
Santiago, Chicago and Bali, encouraging our
hostel partners to attend to meet our people,
gain valuable insights into the industry and
understand our focus for the year ahead.
Thinking customer, the safety of our
customers is of paramount importance
and we have a strict sign-up process when
on boarding new hostel partners including
thorough verification checks in order to
deliver the best quality accommodation and
experience to our customers.
Focussing on “Think Customer” we also
launched our App-Only Rates, which
provides our customers with a 10% discount
on all rooms and rates which is displayed
exclusively on the Hostelworld App once the
hostel has opted in.
Our Shareholders
We are committed to fostering long-term
relationships with our shareholders through
transparent communication. Our Company
Secretary is available to shareholders,
and our Senior Independent Director and
Chairman are available to shareholders
through the Company Secretary, if required.
Our Communities
With our passion for “Building a Better
World”, we want to inspire our people to
help improve our world in all they do. We
encourage our people to engage with the
communities we both work in, and travel to.
In 2019, Hostelworld again participated in the
Techies4TempleStreet Irish charity event for
the fifth year in a row which brings together
the technology community based in Ireland
to fundraise over €250,000 for Temple Street
Children’s Hospital, Dublin.
Other charitable initiatives during 2019
for “Building a Better World” included the
Christmas Shoebox Appeal with Team Hope,
partaking in the St. Vincent de Paul Christmas
Food Appeal, and a charity coffee morning
in aid of Harold’s Cross Hospice, Dublin. Our
office in Shanghai also aided an orphanage
in Indonesia by providing clothing, toys and
schoolbags to each of the children residing
there. We also continue to encourage
employees to become regular blood donors
by arranging local donation clinics.
This year in order to build a better world
we also liaised with a number of our lunch
providers to ask that they use compostable
or recyclable packaging when providing us
lunch.
While at our hostel conference in Bali some of
our people volunteered to clean the local beach
and attended a recycling workshop, highlighting
how “Building a Better World” is at the forefront
of our people’s thoughts, even when travelling.
Modern Slavery Act 2015
The Modern Slavery Act 2015 (the “Act”)
requires large organisations operating in the
United Kingdom to make a public statement
outlining how they keep their supply chains
free from slavery and human trafficking.
We published an updated statement on our
website on 29 March 2019 outlining the steps
taken by the Group to ensure that slavery and
human trafficking is not taking place within
the business or any supply chain and we will
continue to monitor our obligations under the
Act.
Greenhouse Gas Emission statement
Greenhouse Gas (“GHG”) emissions for the
financial year ended 31 December 2019 have
been measured as required under the Large and
Medium-sized Companies and Groups (Account
and Reports) Regulations 2008 as amended in
2013.
We have used the GHG Protocol Corporate
Accounting and Reporting standards (revised
edition), data gathered to fulfil the requirements
under the CRC Energy Efficiency scheme, and
emission factors from Defra, UK Government
conversion factors for Company Reporting
(2018) to calculate the disclosures, where they
are not separately disclosed by a supplier. In
2019, Radiative forcing (RF) has been included
for air travel emissions to capture the maximum
climate change impact. The 2018 data has been
restated to include the effect of radiative forcing
also.
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CORPORATE SOCIAL RESPONSIBILITY (CONTINUED)
MAD MONKEY GILI TRAWANGAN
We believe our emissions are impacted by the size of the business, which is driven by our
global headcount and office footprint. We have therefore chosen to use an intensity ratio
measured on emissions per €m of net revenue in order to put the GHG in context for the size
of the business.
Scope 1 – Emissions from operations
Scope 2 – Emissions from energy usage
Scope 3 – Emissions from employee travel
Total
Intensity Ratio (tCO2e/€m)
Scope 1 - All direct GHG emissions
2019
tCO2e
Nil
134.2
781.6
915.8
11.4
2018
tCO2e
Nil
161.0
297.4
458.4
5.6
Scope 2 - All indirect emissions due to consumption of purchased electricity
Scope 3 - Voluntary disclosure of other indirect emissions where Hostelworld Group has the ability to influence them
Hostelworld Group is an internet-based
business which leases its premises and does
not have a retail footprint. The main GHG
releasing activities over which the Group has
influence are use of purchased electricity and
business travel. The Group has no owned
vehicles. The emissions caused by customers
travelling to hostel destinations booked
through Hostelworld are not included in
these figures.
The energy consumption in the Group’s
Sydney and Shanghai offices has been
estimated on a per person basis, based on
the actual energy consumption in the Group’s
Dublin office, and is not considered material
to the above disclosures.
The Group is committed to monitoring
and reviewing its carbon emissions, and in
particular its employee business travel, which
accounts for 85% of its total carbon emissions
in 2019 (2018: 65%). This increase is primarily
driven by additional flights in 2019 to enable
our colleagues from around the world to
travel to Barcelona for our first Hostelworld
Employee Conference.
“ THE GROUP IS COMMITTED TO
MONITORING AND REVIEWING
ITS CARBON EMISSIONS, AND IN
PARTICULAR ITS EMPLOYEE
BUSINESS TRAVEL ”
Rather than taking the path well-travelled, Gen Z explorers are looking to make their mark by venturing further into the unknown. For those planning trips in the next three years, taking the ‘tried and tested routes’ has declined by 33% over previous generations.*MEET NEWPEOPLEBUILDING A BETTER WORLDWe use our collective energy everyday to promote understanding in our world by enabling individual journeys of discovery, adventure and meaning. We value and promote equality, respect and diversity to help inspire a better world.50CREATE NEW MEMORIESGOVERNANCE52Directors’ Biographies54Corporate Governance Statement95Directors’ Report101Independent Auditor’s Report51 52
Governance
Hostelworld Annual Report 2019
53
DIRECTORS’ BIOGRAPHIES
Michael Cawley
Gary Morrison
Role: Chair of the Board; Chair of the
Nomination Committee; member of the
Remuneration Committee
Age: 65
Nationality: Irish
Qualifications: Michael has a Bachelor of
Commerce degree from University College
Cork and is a fellow of the Institute of
Chartered Accountants in Ireland.
Joined Group: October 2015
Independent: N/A*
Sector Experience: Airlines; motor; betting
and gaming; construction.
Role: Chief Executive Officer; Chair of the
Disclosure Committee
Age: 52
Nationality: British
Qualifications: Gary has a Masters in
Engineering from Leeds University UK and
holds an MBA from INSEAD.
Joined Group: June 2018
Independent: N/A
Sector Experience: Online travel industry;
technology; telecommunications.
Other Board and Management Experience:
Michael is also a non-executive director of
Ryanair Holdings plc, having joined the Board
in August 2014. Michael had previously served
as Deputy Chief Executive Officer and Chief
Operating Officer of Ryanair from 2003 to
March 2014 and before that as Ryanair’s Chief
Financial Officer and Commercial Director
from 1997. Michael also holds directorships
in Paddy Power Betfair plc, Kingspan Group
plc, Mazine Limited, Prepaypower Holdings
Limited, GMS Professional Imaging Limited,
Gowan Group Limited, Flybondi Limited,
Linked P2P Limited and Meadowbrook Heights
Unlimited. Prior to joining Ryanair, Michael
was Group Finance Director of Gowan Group
Limited. Michael is also Chairman of Fáilte
Ireland Authority.
Other Board and Management Experience:
Prior to joining the Group, Gary was Senior
Vice President and Head of Retail for Expedia
brand worldwide. He also was a director of
Despegar (NYSE DESP), AirAsiaExpedia and
Voyages SNCF. Previously, Gary held senior
management positions at Google as Head of
Global Sales Operations for Google’s Online
Sales Channel and Motorola as VP and Head
of Product management for Motorola’s
Smartphone division. Gary also worked in
corporate development/M&A, consulting and
engineering roles at General Electric, Booz
Allen & Hamilton and Schlumberger France
respectively.
Role: Chief Financial Officer; member of the
Disclosure Committee
Age: 45
Nationality: Irish
Qualifications: TJ is a fellow of the Institute of
Chartered Accountants in Ireland.
Joined Group: November 2018
Independent: N/A
Sector Experience: Nutrition; technology;
financial services; telecommunications.
Other Board and Management Experience:
Prior to joining the Group, TJ was Chief
Financial Officer of Glanbia plc’s Performance
Nutrition division primarily based in Chicago.
During this time TJ also had oversight
responsibility for Glanbia plc’s Group
Procurement function. Prior to this TJ was
Group Financial Controller at Glanbia plc with
responsibility for investor relations. Previously
TJ held senior financial roles at Microsoft, GE
Capital and Eir. TJ trained and qualified as a
chartered accountant with PwC.
Role: Non-Executive Director; member
of the Audit Committee; member of the
Remuneration Committee; member of the
Nomination Committee
Age: 49
Nationality: American
Qualifications: Evan has a B.A. Social Studies
from Harvard University and holds an MBA,
General Management from INSEAD.
Joined Group: August 2019
Independent: Yes
Other Board and Management Experience:
Evan is a management and strategy
consultant. He is owner of his own strategic
consulting business, EVCO Advisory Services.
Previously he had operational responsibility
for Lyft’s US East Coast business. He was Chief
Operating Officer at Foursquare from 2010
until 2014. Evan also held senior strategic
consulting and operational roles at Bebo,
Jupiter and MTM.
Evan Cohen
Sector Experience: Technology; media.
Éimear Moloney
Role: Non-Executive Director; Chair of
the Audit Committee; member of the
Remuneration Committee; member of the
Nomination Committee
Age: 49
Nationality: Irish
Qualifications: Éimear has a B.A. Accounting
and Finance and MSc. Investment and
Treasury from Dublin City University. Éimear
is also a fellow of the Institute of Chartered
Accountants in Ireland.
Joined Group: November 2017
Independent: Yes
Sector Experience: Financial services;
pharmaceutical.
Other Board and Management Experience:
Éimear has held senior investment manager
roles in Zurich Life Assurance (Ireland) plc,
for 17 years up to December 2017, with
responsibility for all major markets including
the Irish, US and UK equity portfolios,
sector, stock analysis and selection. Éimear
previously worked with Bankers Trust Funds
Management Ltd in Australia and also with
Crowe Horwath, Chartered Accountants
in Ireland. Éimear also holds directorships
with Yew Grove REIT plc and Chanelle
Pharmaceutical Group.
Role: Non-Executive Director; Chair of the
Remuneration Committee; member of the
Audit Committee; member of the Nomination
Committee
Age: 67
Nationality: American
Qualifications: Carl has a M.A. in Business
Administration from the University of Texas.
Joined Group: October 2017
Independent: Yes
Sector Experience: Online travel industry.
Other Board and Management Experience:
Carl was co-founder of HomeAway Inc. where
he served on the board of directors and was
the company’s founding Chief Operating
Officer and Chief Strategic and Development
Officer until its sale to Expedia in 2015. Carl
is currently on the board of Turnkey Vacation
Rentals, Inc., OnceThere, Inc. and RVshare,
LLC. Carl’s previous roles include Chief
Operating Officer and Chief Development
Officer of Hoover’s Online.
TJ Kelly
Carl G. Shepherd
*Independent on appointment
54
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Hostelworld Annual Report 2019
55
CORPORATE GOVERNANCE
STATEMENT
CHAIRMAN’S
INTRODUCTION
The Board welcomes the
publication of the shorter,
sharper 2018 Corporate
Governance Code (the “2018
Code”), its reinforcement of
the importance of long-term
thinking and the elevation
of stakeholder engagement.
The Board continues to be
committed to promoting
high standards of corporate
governance in Hostelworld
Group plc (the “Company”)
and its subsidiaries (together
the “Group”). The Board
continues to ensure that the
governance structures of the
Group evolve as necessary
and remain appropriate for a
Group of our size.
Compliance with 2018 Corporate Governance Code
The Governance Report for 2019 sets out how
the Company has applied the principles of good
governance. I am pleased to report that the
Company has complied with the 2018 UK Corporate
Governance Code throughout the accounting period,
with two minor exceptions. (1) The Remuneration
Committee has at this stage decided not to develop
a formal policy for post-employment shareholding
requirements, and the reason for this is explained
on page 77. (2) For engagement with the workforce
prior to the appointment in May 2019 of Éimear
Moloney as the designated non-executive director
with responsibility for understanding the views of the
Group’s employees’, the Board adopted the alternative
arrangements which are explained on page 60.
Section 172
The Directors have performed their duty under section
172(1) of the Companies Act, 2006 (duty to promote
the success of the Company). The details of how this
was achieved are set out in the Strategic Report on
pages 39 to 41.
Changes to the Board during the Year
Andy McCue stepped down as a Non-Executive
Director, Senior Independent Director and Chairman
of the Remuneration Committee at the conclusion of
the Annual General Meeting on 31 May 2019. Carl G.
Shepherd was appointed Senior Independent Director
and Chairman of the Remuneration Committee
on the same day. Evan Cohen was appointed as a
Non-Executive Director and member of the Audit,
Remuneration and Nomination Committees with effect
from 14 August 2019. Evan’s wealth of experience in
the technology sector and expertise in growing and
developing online businesses will be of significant
benefit to the further development of the Group.
Board Composition and Diversity
Of the six board members, one is female, four are
resident in Europe and two are resident in the United
States of America. At the time of publication we have
17% female representation on our Board. Three Board
members have travel/online executive experience and
the remaining members come from other industry
sectors. In my opinion, we have a diverse Board and
an excellent mix of skills and styles which ensures
challenging and robust debate at boardroom level and
well considered decisions.
aligned to its culture is demonstrated by engaging with
the workforce through a number of different channels
and receiving presentations and considering proposals
from the Chief Executive Officer and the Group’s Chief
Human Resources Officer on issues that affect culture
and employee engagement.
On 31 May 2019, the Board appointed Éimear
Moloney as the designated Non-Executive Director
with responsibility for understanding the views of
the Group’s employees and for managing effective
engagement between the Board and the Group’s
workforce. Éimear provides detailed reports to the
Board on this key issue on an on-going basis.
Workforce Remuneration and Executive Director
Compensation
The 2018 Code emphasises that the Remuneration
Committee should consider workforce remuneration
and related policies when setting Executive Director
remuneration. How the Remuneration Committee
addressed this requirement is set out on page 91.
We will keep under constant review developments in
corporate governance best practice to ensure that our
processes continue to be aligned to the needs of the
business, help us manage risk and provide assurance
and accountability in a transparent way for the benefit
of all our shareholders and stakeholders.
I look forward to reporting to you next year as to how
our governance arrangements continue to develop and
support the delivery of our strategy.
Michael Cawley
Chairman
3 March 2020
Diversity in the Group continued to be an important
consideration for the Board during 2019. Diversity
is embraced at Hostelworld and the Group operates
and implements a dignity at work policy that seeks to
ensure that the working environment is free from any
type of bullying or harassment. The Board provides
oversight to ensure that a culture is maintained
and fostered that values and respects diversity and
inclusion, not only gender and age diversity but also
diversity of educational and professional background.
The Group’s success in this area is demonstrated by the
fact that our workforce come from a variety of different
cultures, age groups, educational and professional
backgrounds and represent approximately 30 different
nationalities. The Board is committed to ensuring
that recruitment, selection and promotion should be
based on merit and should not be impacted by age,
gender, sexual orientation, civil status, family status,
disability, membership of the travelling community,
race, religious beliefs or political opinions. The Group’s
success in the area of ensuring gender equality in
the Group is demonstrated by the fact that the male/
female ratio of employees’ as of 31 December 2019 was
51.7% male and 48.3% female.
Board Evaluation
We recognise that an evaluation of the Board, its
Committees and individual Directors significantly
enhances board effectiveness, maximises strengths
and tackles weaknesses. In 2019, an evaluation of the
Board, its Committees and individual Directors was
undertaken. The evaluation established that the Board
is sufficiently diverse and is operating effectively with
members working well together to achieve objectives.
A detailed overview of the evaluation process is
included on pages 68 and 69.
Stakeholder Engagement
We are committed to ensuring effective engagement
with all our stakeholders to ensure that the Group
meets its responsibilities to our shareholders and
other key stakeholders (which include our workforce,
customers, hostel partners and our key suppliers) and
that the Board has due regard to their interests when
assessing issues and making decisions.
Purpose and Values and Employee Engagement
During 2019 we reviewed and revised the Group’s
purpose and values. Our commitment to satisfying
ourselves that the Group’s purpose and values are
56
Governance
Hostelworld Annual Report 2019
57
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
How governance supported our strategy during 2019
Strategic Objective
Board’s governance role
Link to principal risk
2019 Board Activity
Growth
Opportunities
Board oversight of
strategic investment in
Goki Pty Limited
Competition risks
(page 33)
Board oversight of
strategic investment in
Counter App Limited
Competition risks
(page 33)
Platform
Investment
Improved
Booking
experience
Investing in
people
Governance to ensure
our payment processing
options for customers’
and hostel partners is
reliable and developed to
meet our customers’ and
hostel partners increased
expectations.
Board assessment
of investments and
implementation of
strategy to present the
right hostels to the right
customers and increase
the web speed of our
web platform in key
areas such as the home,
landing and search
pages.
Board assessment and
oversight of decision to
relocate London office
to alternate London
location in early 2020.
Brand risks
(page 33)
Competition risks
(page 33)
People risks
(page 35)
Oversight and approval of the
acquisition of 49% of the share
capital in Goki Pty Limited -
ensuring value obtained and
investment aligned with strategy.
Read more about strategic
investments on page 20
Oversight and approval of a
strategic investment made in
Counter App Limited – ensuring
investment aligned with strategy
Read more about strategic
investments on page 20
Oversight to ensure a new
commercial contract with a
key strategic partner delivers
payments services that supports
multiple payment methods
On-going Board oversight of Chief
Executive Officer performance
against KPI’s for improved
booking experience.
Read more about improvements
in booking experience on page 19
Oversight and approval of a
property lease with a serviced
property vendor that provides
(a) a serviced office environment
with sufficient capacity to sustain
reasonable future employee
growth; and (b) an upgrade in
facilities and working environment
in response to employee feedback.
We set out below how the 2018 Code has been
applied and complied with during the reporting
period. We have provided cross references in
certain sections to direct readers to relevant parts
of the Annual Report where we explain how we
have applied some of the principles and provisions
of the 2018 Code. Our aim is to reduce repetition
and demonstrate the integrated application of the
2018 Code. The 2018 Code is publically available at
https://www.frc.org.uk/UK-Corporate-Governance-
Code-FINAL.pdf.
1. BOARD LEADERSHIP AND COMPANY PURPOSE
– PRINCIPLES A - E OF THE 2018 CODE
Approach to Governance
Our governance framework, underpinned by the 2018
Code, continues to support our strategy and ensure
our long-term success. We set out on page 56 how
governance has supported the delivery of our strategy
during 2019 and how this is linked to our principal risks.
Long Term Sustainable Success
The Board is focussed on long-term strategic plans and
reviews and assesses performance against strategic
goals at each scheduled Board meeting. As part of
this assessment the Board considers and approves
(where appropriate) revisions to aspects of the Group’s
strategy to ensure that the Group’s strategy addresses
risks presented by changes in market forces and
competitor activity.
Effective and Entrepreneurial
We set out on pages 68 and 69 details of the Board’s
effectiveness and how our evaluation process
assists in ensuring that the strengths of the Board
are recognised and understood and areas that
require improvement are identified and actioned.
The details set out in (a), (b) and (c) below describe
how our governance framework further ensures the
effectiveness of the Board. The Nomination Committee
report (pages 66 and 67) describes how we ensure
we have the right skills and experience on our Board.
Biographies of the Directors are provided on pages 52
and 53.
(a) Directors induction and on-going training
On appointment to the Board, each Director takes
part in a comprehensive induction programme. This
induction is supplemented with on-going training
throughout the year to ensure the Board is kept up to
date with key legal and regulatory requirements and
industry updates. During the year, on-going training
included presentations and updates on (1) 2018
Code legal and governance requirements; (2) Market
Abuse Regulation compliance requirements; and (3)
compliance requirements specific to the Company’s
listed status. Evan Cohen, who joined the Board in 2019,
underwent a tailored induction programme following
his appointment and met with the Group’s Chief
Executive Officer, Chief Financial Officer, other Group
executives and the General Counsel and Company
Secretary. In addition, Evan held meetings with the
statutory auditors and internal auditors and the
Remuneration Committee’s remuneration consultants.
Evan’s induction also included training on his duty as
a Director to promote the success of the Company
under section 172(1) of the Companies Act, 2006 and
on the Board’s obligation to understand the views of
the Company’s key stakeholders and consider their
interests in Board discussions and decision making.
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
(b) Conflicts of Interest
Our Board has a Conflicts of Interest Policy and has
put in place procedures for the disclosure and review
of any potential or actual conflicts. During 2019, no
conflicts of interest were raised by a Director.
of its internal auditors and senior members of each
division/function within the Group. The Board receives
regular updates on risks and risk management and
regularly reviews the key risks and emerging risks in
the business.
(c) Chairman and Non-Executive Directors
The Board considers each of its Non-Executive
Directors (excluding the Chairman) to be independent.
Accordingly, the Company meets the requirement
of the 2018 Code that at least half of the Board
(excluding the Chairman) is made-up of independent
Non-Executive Directors. Michael Cawley, Chairman
of the Board, was considered independent on his
appointment to that role.
The Chairman and the Non-Executive Directors
constructively challenge and help develop proposals
on strategy and bring strong, independent
judgement, knowledge and experience to the Board’s
deliberations. Non-Executive Directors are expected to
commit approximately 15 - 20 days per annum to the
business of the Group.
The terms and conditions of appointment of the Non-
Executive Directors are available for inspection at the
Company’s registered office and at the Annual General
Meeting.
Company Values and Purpose
During the year the Board reviewed and revised the
Group’s purpose and values. Details of the revised
purpose and values are set out on page 43. Our values
are the guiding principles that we use across the Group
to underpin decision making, shape our conduct and
define our culture.
Assessing and Monitoring Culture
The Board’s focus on culture is continuous. The
refreshing of our values was designed to create
a culture which clearly aligns our values with our
strategy. Oversight of risk management, establishing
reporting mechanisms within the governance
framework, direct engagement, investing in our
workforce and ensuring remuneration is aligned
with culture are key to the Board’s assessment and
monitoring of the Group’s culture.
Risk management
The Group’s approach to risk in the areas of IT
security, data protection and regulatory compliance is
conservative and it dedicates significant resources and
focus to manage and monitor risks with the assistance
Whistle Blowing and Anti Bribery
The Board is committed to promoting a culture that
ensures employees can report incidents of wrongdoing
in confidence through both internal and external
mechanisms. The Group previously adopted an
Anti-Bribery Policy and a Whistle Blowing Policy and
maintains a confidential whistle-blowing helpline,
operated by Expolink, for reporting such matters. No
incidents were reported to the helpline during 2019.
The Anti-Bribery Policy and Whistle Blowing Policy are
reviewed annually to ensure they are fit for purpose.
The Board has been appraised of the arrangements in
place for the investigation and follow up of any incident
that may be reported and is satisfied that these are
adequate.
Direct engagement
Employee engagement is measured through a number
of employee engagement surveys run by a specialist
partner on behalf of the Group and through a number
of targeted employee engagement mechanisms
implemented by the Group.
Employee engagement mechanisms include the
following:
• Colleague engagement forum established to enable
on-going dialogue between the Board and the
Company’s workforce;
• Seeking the views on key issues from senior
executives who attend scheduled Board and
Committee meetings on an on-going basis;
• Meetings conducted between Non-Executive
Directors and members of the workforce where the
views of employees are sought on specific issues and
general matters; and
• Using a digital polling platform to seek input from
all members of the Group’s workforce on issues that
affect them
These mechanisms allow employees to share their
views on key topics which provide valuable insight in
respect of engagement and culture. From the overview
of findings presented to the Board, improvement
areas are identified and action plans are developed to
address priority issues. With the appointment of Éimear
Moloney as the designated Non-Executive Director
who will report to the Board on an on-going basis on
workforce engagement matters , the Board will have
the benefit of further employee engagement feedback.
Further details of how we engage with employees are
set out below.
Remuneration and culture
We set out on page 78 how we have addressed the
issue of ensuring remuneration is aligned with culture.
We explain on page 91 the Group’s approach to
investing in and rewarding its workforce.
Using Stakeholder Views to shape Board Decision
Making
The Directors, when conducting Board business and
taking decisions at the Board act in way that is most
likely to promote the success of the Company for the
benefit of its members as a whole, but having due
regard and taking into account the factors set out
in section 172(1) of the Companies Act, 2006. Details
of how the Directors have discharged their duty to
promote the success of the Group in accordance with
the requirements of section 172(1) of the Companies
Act, 2006 are set out on pages 39 to 41.
Engaging with Stakeholders
We set out below how we ensure effective engagement
with the Group’s stakeholders.
Customer Engagement
The Board recognises the critical value of its traveller
customers and receives on-going updates on the
results of the Group’s engagement with its traveller
customers through its marketing, online customer
forum and customer support channels and was pleased
to note the following improvements during 2019:
• The percentage of customer support chats answered
within 30 seconds – improved by 27% year over year;
• Turnaround Time (all customer support channels)
reduced by 71% year over year;
• First reply time (all customer support channels)
reduced by 18% year over year; and
• Customer support satisfaction score improved by
15% year over year.
How we have used traveller customers’ views to shape
Board decisions during the year are set out in section
(a) of the Section 172(1) statement (page 39).
Hostel Partner Engagement
During the year the Group hosted four hostel
conferences in Dublin, Santiago, Chicago and Bali with
Michael Cawley, the Chairman, attending the two-
day hostel conference in Dublin. The Group also uses
frequent surveys and on-site visits to hostel partners
to better understand the nature of our hostel partners
business and ensure that the product strategy of the
Group and its overall commercial strategy is properly
aligned with the requirements of the hostel industry.
The Board receives detailed briefings on the hostel
conferences and is updated regularly by the Executive
Directors and other senior executives on the results
of surveys and on-site visits to hostel partners. Action
plans and Group strategy refinements to reflect the
results of the direct engagement with hostel partners
are considered and approved by the Board on an on-
going basis.
How we have used hostel partners’ views to shape
Board decisions during the year are set out in section
(c) of the Section 172(1) statement (pages 40 and 41).
Key Supplier Engagement
The Group’s selection and engagement with its key
suppliers is acknowledged by the Board as being
central to its ability to deliver the Group’s strategy
and facilitates the Group contributing to the wider
economy. The Board recognises the key commercial
interest of suppliers is to have certainty of payment of
fees in a timely manner from the Group and confirmed
with the Executive Directors during the year as follows:
• The Group’s standard payment terms for suppliers
compared favourably with market standards in the
territories in which the Group operates;
• There were no material payment disputes with key
suppliers during the reporting period; and
• The average time it takes for the Group to pay
a supplier was less than the Group’s standard
payments terms.
Employee Engagement
The Board remains fully focussed on ensuring that
it is aware of the views and concerns of the Group’s
employees’ and that it has regard to their interests
as part of the Board’s decision-making process. The
Board assessed and considered the various categories
of individuals employed by the Group and agreed
that the workforce comprised those with formal
contracts of employment (both permanent and fixed
term) and atypical workers such as those employed as
independent contractors, agency workers and remote
workers (regardless of geographical location).
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
The Board has historically maintained a strong interest
in ensuring it is aware of and considers the views of
the Group’s employees. In 2018 the Group conducted
a global employee survey to capture feedback from
employees and to ensure that there was an open
and transparent dialogue between the Group and its
employees about their experience of working for the
Group. Employees gave detailed feedback on their
engagement with Hostelworld, their understanding
of the Group’s strategy and their views on senior
leadership and manager capability. Survey results
and action plans were presented to the Board in late
2018 and the Board assessed and approved a series of
positive employee initiatives that were implemented
during 2019. These initiatives were designed to address
key issues and concerns highlighted by employees
in the survey responses, improve the working
culture in the Group and increase levels of employee
engagement. Details of the employee initiatives
implemented during 2019 are set out in section (b) of
the Section 172(1) statement (page 40).
To ensure that the Group’s executive leadership
team and the Board remained focussed on engaging
with the workforce, the Board directed that further
employee surveys were to be carried out in 2019. The
results of these surveys were shared with the Board
during the year.
In May 2019 the Board appointed Éimear Moloney
as the designated Non-Executive Director with
responsibility for understanding the views of the
Group’s employees’ and for managing effective
engagement between the Board and the Group’s
employees’. In order to support Éimear’s work in this
key area, a Board approved framework was established
to ensure that meaningful and regular dialogue with
the Group’s workforce would be delivered.
As part of the initial programme of employee
engagement activities conducted by Éimear during
the year, the results of 2019 employee surveys were
assessed by Éimear who also reviewed the details of
the Board approved employee initiatives implemented
by the Group in response to previous employee
feedback. The Board was pleased to note that the
employees had responded positively to the employee
initiatives implemented during the year and that
the results of the 2019 employee surveys showed an
improvement on the results of the 2018 employee
survey.
How we have further used employees’ views to shape
Board decisions during the year is set out in section (b)
of the Section 172(1) statement (page 40).
In addition, during the year we launched our
‘Colleague Engagement Forum’ with eleven employee
representatives from all departments and levels in
the organisation participating in an open discussion
with Éimear. Following feedback from the employee
representatives at this meeting, the issues of gender
balance and cultural diversity in the Group and
management of career progression will be assessed by
the Board in early 2020.
While our plans for employee engagement are
evolving and continue to develop, we are committed
to ensuring that the views of employees’ are properly
understood and that the Board has due regard in
its decision-making process to employees’ interests.
A comprehensive schedule of communications and
employee engagement activities involving Éimear
has been established and shared with the employee
representatives who participate on the ‘Colleague
Engagement Forum’ and Éimear reports to the Board
on an on-going basis on this issue. The effectiveness
of the Board’s employee engagement activities will be
kept under constant review and will form part of the
Board evaluation exercise in 2020.
Alternative arrangements for engaging with the
workforce prior to Éimear Moloney’s appointment
As noted above, the Board has historically taken a
strong interest in ensuring that it was aware of the
views of the Group’s employees and considers that the
combination of the below activities prior to Éimear’s
appointment in May 2019 (as the designated Non-
Executive Director with responsibility for understanding
the views of the Group’s employees’ and for managing
effective engagement between the Board and the
Group’s employees’) established and maintained
meaningful engagement between the Board and
members of the Group’s workforce from the start
of the reporting period until the date of Éimear’s
appointment:
• Assessing feedback provided by employees’ in
response to employee surveys;
• Oversight of employee initiatives implemented in
response to employee feedback to ensure employee
concerns were meaningfully addressed;
• Availability of the Non-Executive Directors to
meet with the Group’s employees’ following the
Company’s 2019 AGM;
• Board involvement and oversight of the development
of the Group’s revised purpose and values; and
• Product development and strategy workshops held
between Carl G. Shepherd and members of the
Group’s technology and product departments.
resolution proposed at the Company’s Annual General
Meeting held on 31 May 2019. While a clear majority
of shareholders were supportive of the resolution
proposed, the Board fully acknowledges that it needs
to understand the views of all shareholders and take
account of their concerns as part of its decision-
making process. The Board will continue to engage
with shareholders and consider shareholder and proxy
voting guidelines on an on-going basis.
Annual General Meeting
The AGM is an important forum for shareholders,
particularly private shareholders, to hear more
about the general development of the business. The
Chairman (in both his capacity as Chairman of the
Board and Chairman of the Nomination Committee)
and the Chairs of the Audit and Remuneration
Committees were present at the 2019 Annual General
Meeting providing shareholders with an opportunity to
ask questions, engage with members of the Board and
learn more about the Company.
The 2020 Annual General Meeting will be held on
27 April 2020. Full information is contained in the
Notice of Annual General Meeting, which will be
sent to shareholders with this Annual Report at least
20 working days prior to the date of the meeting,
and is available on the Company’s website at www.
hostelworldgroup.com.
Directors Concerns
During the year no Director had concerns about the
operation of the Board or the management of the
Group that could not be resolved.
Shareholder Engagement
The Board is committed to maintaining open channels
of communication with its shareholders and to
continue to strengthen further dialogue with its
main stakeholders. It is important that shareholders
understand the Company strategy and objectives, and
for the Company to receive shareholders feedback and
consider the issues and questions raised.
Communication with shareholders, investors and
analysts was an ongoing process throughout the year.
This included regular scheduled investor relations
events, results presentations and investor roadshows,
one-to-one and group meetings with Executive
Directors, as well as regular updates to the market.
Results and other news releases are published via the
London Stock Exchange and Euronext Dublin Stock
Exchange RNS and on the Company’s website at www.
hostelworldgroup.com.
The Executive Directors engaged with shareholders
and prospective shareholders on a regular basis.
Non-Executive Directors are also available to meet
shareholders if they wish to raise issues without the
Executive Directors present.
During 2019 the Executive Directors held meetings
in Ireland, the UK and USA with both existing and
potential institutional shareholders providing insight
into the development of the business and its progress
against its strategic plan.
Our annual shareholder communication strategy
ensures that we maintain an open and regular dialogue
with our shareholders to help them understand how
we plan to grow the business and execute our strategy.
The Board receives regular updates on the views of our
shareholders and analysts through briefings from the
Chief Executive Officer, the Chief Financial Officer and
the Company brokers, which include:
• Share price performance monitoring;
• Review of shareholder performance and sector
analysis;
• Composition of the shareholder register;
• Peer group comparison; and
• Professional and external adviser feedback.
Carl G. Shepherd, the Remuneration Committee
Chairman and Senior Independent Director, proactively
engaged with the limited number of shareholders
who voted against the Directors Remuneration Policy
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
2. DIVISION OF RESPONSIBILITIES
- PRINCIPLES F - I OF THE 2018 CODE
The Chairman
Responsibility
Michael Cawley was appointed as Chairman of the
Board of Directors on 1 December 2017 and was
considered independent on appointment. Michael’s
responsibilities are outlined in the table below.
A Balanced Board
Our Board comprises two Executive and four Non-
Executive Directors, which ensures that no one person
or group of individuals dominates the Board’s decision-
making.
Performance
The Chairman confirms that, following a Director
performance evaluation during 2019, each Director’s
performance continues to be effective and each
Director demonstrates commitment to the role.
Non-Executive Directors
Our Non-Executive Directors provide independent
challenge and review, bringing wide experience,
specific expertise and a fresh objective perspective. The
Board assessed and confirmed during the year that the
Non-Executive Directors have adequate time to meet
their Board responsibilities. External appointments
held by our Non-Executive Directors are set out
on pages 52 to 53. Éimear Moloney accepted one
additional external appointment during 2019 and
this appointment received the prior approval of the
Board. At the date of publication of this Annual Report,
no external appointments are held by our Executive
Directors.
Senior Independent Director
Following Andy McCue’s resignation on 31 May
2019, Carl G. Shepherd was appointed as the Board’s
Senior Independent Director (effective 31 May 2019).
With significant board experience and online travel
expertise, the Board is satisfied that Carl has the
necessary qualities and expertise for this role.
Division of Responsibilities
An overview of the division of responsibilities between
the Board and the executive leadership of the Group is
provided in the table below.
Company Secretary
Both the appointment and removal of the Company
Secretary is a matter for the whole Board. The
remuneration of the Company Secretary is determined
by the Remuneration Committee.
Division of Responsibilities
Chair
• Leadership of the Board
• Directors receive accurate, timely,
• Responsible for overall effectiveness in
information
directing the Group
• Constructive relationships between the
Executive and Non-Executive Directors
• Meetings with Non-Executive Directors,
without Executive Directors present
• Ensures Board is aware of the views of
• Effective contribution of all Non-Executive
major shareholders
Directors
Board
(key matters)
• Company’s values and standards
• Major capital expenditure
• Group’s strategic aims and business plans
• Communication with shareholders
• Annual and interim results
• Annual report and accounts
• Dividend policy
• Internal control and risk management
• Major changes to the Group’s corporate
structure including but not limited to
major acquisitions/disposals
• Changes in structure, size and
composition of the Board
• Material litigation
• Remuneration Policy for Directors and
Senior Executives
• Governance structure
Division of Responsibilities
Senior
Independent
Director
Non-Executive
Directors
Company
Secretary
Executive
leadership
• Sounding board to the Chair
• Annual meeting of Non-Executive
• Intermediary for the other Directors and
Directors to appraise Chair’s performance
shareholders
• Constructive challenge, strategic guidance
and specialist advice
• Scrutinise and hold to account the
performance of management and
individual Executive Directors against
agreed performance objectives
• Compliance with all corporate governance
matters, monitors the Group’s disclosure
requirements under the 2018 Code and
UK Listing Rules
• Ensure Board procedures are followed
• Compliance by the Company of its legal
and regulatory matters
There is a clear division of responsibilities between the Board and our executive leadership.
The Board entrusts the ongoing management of the Group’s business to the Chief
Executive Officer. The Chief Executive Officer brings forward to the Board proposals for the
development and strategy of the business. The Chief Executive Officer is responsible for the
execution of agreed strategy and implementation of the decisions of the Board.
The Board of Directors
The Non-Executive Directors delegate the day-to-day
management of the business to the Chief Executive
Officer within defined governance parameters and
holds the Chief Executive Officer accountable against
targets and standards. The Board approves long-term
corporate and strategic plans after a full review and
assessment of competitive forces and business trends
and risks. Having a management team that can execute
the strategic plans of the Group is a key on-going focus
for the Board.
The formal schedule of matters reserved for the
Board’s decision is available on the Group’s website,
www.hostelworldgroup.com. The schedule of matters
reserved to the Board and the Terms of Reference for
each of its Committees are subject to regular review.
The Board also has a Delegation of Authority Policy that
sets out clearly the primary responsibilities, controls
and authorisation limits on matters affecting the
Group’s business. This was reviewed and updated by
the Board on two occasions during the year.
Board Meetings
The Board has regular meetings. There were six
scheduled Board meetings during the year, with
additional Board meetings and conference calls held
between the scheduled Board meetings as and when
circumstances required it to meet at short notice.
Certain Board decisions are addressed through written
resolutions signed by each member of the Board.
Consideration and decisions taken by the Board during
the year have included the following key matters:
• Approved the appointment of a new Non-Executive
Director, a new Senior Independent Director and a
new Chair of the Remuneration Committee;
• Approved the statement of steps taken to prevent
modern slavery and human trafficking as contained
in the Company’s Modern Slavery Statement;
• Appointed Éimear Moloney as the designated Non-
Executive Director with responsibility for engaging
with the workforce;
• Reviewed and approved the Company’s purpose and
revised values;
• Reviewed and approved the Group’s strategy;
• Reviewed and approved the equity investment
in Goki Pty Limited and the establishment
of a commercial partnership with a property
management software partner;
• Reviewed and approved the interim and final
dividend recommendations and the preliminary and
interim results announcements;
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
• Reviewed and approved the 2020 budget;
• Approved the preliminary results and interim results
roadshow presentation;
• Reviewed and approved the 2019 Annual Report and
accounts and notice of Annual General Meeting;
• Reviewed and approved the schedule of matters
reserved for the Board and the Terms of Reference of
the Board Committees;
• Considered and provided oversight on several
contracts and transactions which were material
under the schedule of matters reserved to the Board;
and
• Considered the Board, Board Committee’s and
Director evaluation questionnaires.
In addition to the above, at each Board meeting there
are standing items, which include:
• Review and approval of the previous minutes;
• Board Committee updates to the Board;
• Status update on any matters outstanding from
previous meetings;
• Report from the Chief Executive Officer (including an
update on strategy development and delivery); and
• Report from the Chief Financial Officer.
There may be unforeseen circumstances which prevent
a Director from attending a Board or Committee
meeting. In such a case the Director is expected to
review the meeting papers and provide comments to
the Chairman, Committee Chair or Company Secretary
to ensure that they are raised at the meeting.
The Directors’ attendance records at the Board
meetings held during the year are shown in the table
below. Attendance records at Committee meetings
are detailed in the respective Committee Reports.
Directors are provided with appropriate documentation
approximately one week in advance of each Board
or Committee meeting. For each scheduled Board
meeting the papers include a trading update, financial
performance and strategy execution update. In
addition, all Board and Committee members receive
the minutes of meetings as a matter of course.
Non-Executive Directors are also encouraged to
communicate directly with senior management
between Board meetings. Members of the executive
leadership team are invited on an on-going basis to
attend Board meetings to present updates on the
performance and forward focus of their specific area(s)
of responsibility. During the year, presentations in
relation to the Group’s product strategy were provided
to the Board by the Chief Product Officer and Chief
Technology Officer. In addition, the Chief Analytics
Officer provided the Board with a presentation on
the use of data and analytics as part of the Group’s
marketing strategy.
Should any Director judge it necessary to seek
independent legal advice about the performance of
their duties with the Company, they are entitled to do
so at the Company’s expense.
Meetings between the Non-Executive Directors,
without the presence of the Executive Directors, are
scheduled in the Board’s annual programme. During
the year, Non-Executive Directors met on six occasions
without the presence of the Executive Directors. These
meetings provide the Non-Executive Directors with
a forum in which to share experiences and discuss
wider business topics, fostering debate in Board and
Committee meetings and strengthening working
relationships between the Non-Executive Directors.
Board Meeting Attendance
No. of meetings/
total no. of
meetings held
when the Director
was a member
Attendance
%
6/6
6/6
6/6
3/3
3/3
6/6
6/6
100%
100%
100%
100%
100%
100%
100%
Membership
Michael Cawley (Chair)
Carl G. Shepherd
Éimear Moloney
Andy McCue (i)
Evan Cohen (ii)
Gary Morrison
TJ Kelly
(i) Resigned 31 May 2019
(ii) Appointed 14 August 2019
3. COMPOSITION, SUCCESSION AND EVALUATION
- PRINCIPLES J - L OF THE 2018 CODE
The Terms of Reference of the Nomination Committee,
which were reviewed in 2019, are available on the
Company’s website at www.hostelworldgroup.com.
Appointments to the Nomination Committee are for
a period of up to three years, which may be extended
for two further periods of up to three years, provided
the majority of the Nomination Committee members
remain independent and subject to review of the
Nomination Committee’s composition by the Board.
There is no age limit for Directors.
The Company Secretary acts as Secretary to the
Nomination Committee, and other executives may be
invited to attend when deemed appropriate.
Members
Membership of the Nomination Committee consists
entirely of the following Non-Executive Directors:
No. of meetings/
total no. of
meetings held
when the Director
was a member
Attendance
%
3/3
3/3
3/3
1/1
2/2
100%
100%
100%
100%
100%
Membership
Michael Cawley (Chair)
Carl G. Shepherd
Éimear Moloney
Andy McCue (i)
Evan Cohen (ii)
(i) Resigned 31 May 2019
(ii) Appointed 14 August 2019
Committee Role and responsibilities
The role of the Nomination Committee is to:
• Ensure that appropriate procedures are adopted
and followed in the nomination, selection, training,
evaluation and re-election of Directors and for
succession planning, with due regard in all cases
to the benefits of diversity on the Board, including
gender;
• Recommend any proposed changes to the Board and
when it is agreed that an appointment to the Board
be made, lead a formal, rigorous and transparent
selection process; and
• Regularly reviewing the structure, size, composition,
skills and experience of the Board and its Committees
against current and future requirements of the
Group.
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
CHAIR’S REVIEW OF 2019
Key Activities of the Nomination Committee in 2019
The Nomination Committee met on three occasions
during 2019 and separately dealt with recommending
the appointment of Evan Cohen as a new independent
Non-Executive Director of the Company through
a written resolution. The principal activities of the
Nomination Committee during the year are detailed
below:
• The Nomination Committee led a formal, rigorous and
transparent recruitment process for a Non-Executive
Director resulting in the appointment of Evan Cohen
as a Non-Executive Director of the Company (effective
from 14 August 2019). The Up Group, an independent
external search agency, assisted with this process. It
was noted by the Nomination Committee that The Up
Group is committed to present, where practicable,
a minimum of 33% women during each search
process and partners with its clients to ensure that
clients hiring processes encourage diverse candidate
recruitment.
A search process was conducted by The Up Group
who conducted an extensive market mapping exercise
focussed on digital community and social businesses.
In order to identify a shortlist for this role, the areas
of focus were digital experience, particularly two-
sided marketplaces, operational, commercial, retail
experience and improving Board diversity. Evan’s
biography is set out on page 53 of the Annual Report.
In the interests of diversity, consideration was given
to international candidates with the ability to commit
to the time and location requirements of the non-
executive director role.
Furthermore, having regard to the provisions of
the 2018 Code on the importance of diversity of
personal attributes and the need to ensure the Board
is comprised of individuals who display a range of
softer skills, the Committee also agreed that Evan
displayed a range of impressive personal attributes
at the interview process such as tact and an ability
to listen and forge relationships. As part of the
Company’s process in relation to appointments, the
due diligence conducted prior to Evan’s appointment
confirmed that Evan did not have any conflicts of
interest with the Group and was deemed independent
in accordance with the 2018 Code. Following
recommendation by the Nomination Committee, Evan
was unanimously appointed by the Board.
During the year the Up Group separately provided
recruitment services to the Group in connection with
two executive hires.
• The Nomination Committee considered Board
composition and succession planning on an on-going
basis. Further details are set out below.
• The Nomination Committee recommended to the
Board the appointment of Carl G. Shepherd to
succeed Andy McCue as Senior Independent Director
and Chairman of the Remuneration Committee. The
Nomination Committee considered the requisite skills,
knowledge and experience required to be the Board’s
Senior Independent Director and agreed that Carl
was the most suitable candidate based on his skills,
personal attributes and extensive executive and board
experience.
• The Nomination Committee reviewed its Terms of
Reference to ensure it continued to be fit for purpose.
Board Composition and Succession
Board composition and succession has been an
important consideration during 2019. On an ongoing
basis, the Nomination Committee reviews and
assesses the structure, size, composition and overall
balance of the Board and makes recommendations
to the Board regarding succession planning. As part
of the Nomination Committee’s succession planning
work during 2019, the individual and collective skills,
experience and knowledge of the Non-Executive
Directors was assessed in detail and the Nomination
Committee recommended to the Board that no
additional non-executive appointments to the Board
were currently necessary (with the matter to be kept
under on-going review and reassessed in 2020). The
on-going review and assessment of Board composition
will have particular regard to the objectives of the
Board Diversity Policy (as set out below).
The Nomination Committee also assessed the
internal employee capabilities in the Group to
ensure appropriate management development and
comprehensive succession planning for the executive
leadership team and other key executives was in
place. A number of succession planning reviews were
conducted by the Nomination Committee during the
year covering Executive Directors, senior management
and middle management to assess capabilities and
competencies and development needs for future
potential successors to various executive and
management roles in the Group. Noting the risks to the
business if key personnel left the Group in the absence
adequacy of the diversity representation on the
Board. This assessment was made by the Nomination
Committee who confirmed that the Board was
sufficiently diverse. The policy statement included in
the Diversity Policy provides that an effective Board will
include and make good use of differences in the skills,
regional and industry experience, background, race,
gender and other distinctions between Directors and
emphasises that in identifying suitable candidates for
appointment to the Board, the Nomination Committee
are required to consider candidates on merit against
objective criteria, with due regard for the benefits of
diversity on the Board. The Nomination Committee
confirms that this policy was followed during the year
in the recruitment process for a Non-Executive Director,
led by the Nomination Committee, which resulted in
the appointment of Evan Cohen as a Non-Executive
Director of the Company.
The Nomination Committee is committed to ensuring
that its approach to succession planning for Board
appointments supports developing a diverse pipeline
of candidates and will, in this regard, (1) ensure that
the aims and objectives of the Board Diversity Policy
are fully reflected in its approach to Board succession
planning; and (2) , where the use of search consultants
is appropriate, continue to use the services of search
consultants who have demonstrated a commitment
to ensuring that clients hiring processes encourage
diverse candidate recruitment. The Nomination
Committee will continue to monitor diversity both on
the Board, its Committees and across the business to
ensure diversity and equal opportunities.
Available at the 2020 AGM
I will be available at the upcoming AGM to answer any
questions that shareholders may have on the work of
the Nomination Committee.
Michael Cawley
Chairman, Nomination Committee
3 March 2020
of adequate succession plans, succession planning
included an emphasis on contingency planning,
medium-term planning and long-term planning.
This process of succession planning will continue
throughout 2020 and onwards and will take account of
the Company’s strategic priorities and the main trends
and factors affecting the long-term success and future
viability of the Company.
Board and Committee Evaluation and Re-Election of
Directors
The results of the Board evaluation and Director
appraisal process are set out on pages 68 and 69. The
Nomination Committee recommended to the Board,
after evaluating the balance of skills, knowledge,
independence and experience of each Director, that
all Directors will seek re-election at the Company’s
forthcoming AGM.
The Nomination Committee’s effectiveness was
reviewed as part of the Board evaluation exercise. The
Nomination Committee and the Board considered the
outcome of the evaluation and is satisfied that the
Nomination Committee is performing effectively.
Board Diversity
The Nomination Committee aims to have a Board
that is well-balanced and has the appropriate skills,
knowledge, experience and diversity for the needs of
the business. Diversity is considered in its broadest
sense and includes age, gender, cultural background,
geographical diversity and business background in line
with the Company’s Board Diversity Policy, which was
reviewed in December 2019 to ensure it remains fit for
purpose.
The stated aim of the Diversity Policy is for the
Company to have a balanced Board that has the
appropriate skills, knowledge, experience and diversity
for the needs of the business. The stated objectives
of the Diversity Policy are (1) to ensure that the
possibilities for maximising the Company’s success and
achieving its strategic goals are optimised by having a
broad range of perspectives on the Board; and (2) that
diversity provides the basis for improving the quality
of decision making on the Board by reducing the risk
of ‘group think’. The provisions of the Diversity Policy
require that its effectiveness is subject to annual review
by the Nomination Committee. In addition, as part of
the annual performance evaluation of the effectiveness
of the Board, Board Committees and individual
Directors, the Diversity Policy requires the Nomination
Committee to specifically consider and assess the
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Board Effectiveness and Evaluation
An internal evaluation of the Board, its Committees and
individual Directors was undertaken during the year.
This included completion of a detailed questionnaire by
each of the Directors covering the following:
• The Board’s role and the Board members knowledge
and skills;
• Effectiveness of the Board and its Committees;
• Board composition, diversity and succession
planning;
• Risk management; and
• Key Board relationships and relations with
shareholders.
Views were also sought on the Board’s input into
strategy discussions, governance and compliance,
risk management, succession planning and induction
of new directors. The Board specifically requested
separate feedback on the effectiveness of the Board
from senior executives who had presented operational
briefings to the Board during the year and from the
Group’s audit partner.
The evaluation results were analysed by the Company
Secretary who prepared a report for the Chairman.
The report was reviewed by the Chairman and the
principal findings were discussed with the Board. The
Nomination Committee will have regard on an on-
going basis to the findings of the evaluation process as
a means to assist its work in assessing the structure,
composition and diversity of the Board and in its
development of effective succession plans.
The evaluation established that the Directors had
worked well together, the Board and its Committees
were sufficiently diverse, were operating effectively
and efficiently with good leadership and accountability,
that the Board has the appropriate depth and breadth
of skills and experience to be effective and are able
to devote sufficient time to their duties. Accordingly,
all Directors will seek re-election at the Company’s
forthcoming AGM on 27 April 2020. The specific reasons
why each Director’s contribution is important to the
long-term sustainable success of the Company are set
out in the Annual General Meeting documentation.
Board Evaluation Process - Board Strengths
• The Board was viewed as having contributed actively
and constructively to the development of the Group;
• There was diversity on the Board in terms of
experience and Non-Executive and Executive
Director balance with Non-Executive Board
members considering themselves independent of
management, exercising independent judgment and
voicing their own opinions;
• Board members understand what is expected of
them as members of the Board in terms of their
fiduciary duties and have a clear understanding of
the Group’s business and the commercial challenges;
• The Board is satisfied that it can deal with
appropriate matters in private sessions without the
Executive Director present; and
• The Board believes it has in place a system to
provide assurance to it on the effectiveness of the
organisation’s internal controls.
Board Evaluation Process - Recommendations for
improving Board Effectiveness
As part of the evaluation exercise, the following
recommendations for improving the effectiveness of
the Board were made:
• There should be additional time allocated to allow
Non-Executive Directors and Executive Directors to
collaborate on strategic issues and business reviews;
• Updates/brief commentary/monthly KPIs on key
operational issues and financial performance should
be circulated to the Non-Executive Directors between
Board meetings;
• The existing range of financial and non-financial
performance measures to assist the Board’s
monitoring of management’s performance should
be improved and there should be continued focus on
evolving the quality of materials sent to the Board;
and
• Updates on the evolving competitor landscape
needed to be provided on an on-going basis.
board evaluation conducted by an external third-party
consultant will be kept under review and assessed on
an on-going basis.
Adopting the recommendations of the 2018 Board
Evaluation
As part of the Board evaluation exercise in 2018, several
items designed to improve the effectiveness of the
Board were included on the Board’s agenda for 2019.
These items were addressed in 2019 and included the
following:
• Updates and presentations to the Non-Executive
Directors on developments and competitive
challenges in the online travel industry;
• The Chief Executive Officer and Chairman arranged
more direct engagement between the Non-Executive
Directors and the Group’s workforce; and
• Presentations and updates on the Group’s strategy
and execution against strategy were provided to the
Board on an on-going basis by senior executives.
These recommendations and the separate
recommendations for improving Board effectiveness
provided by the senior executives who had presented
operational briefings to the Board during the year and
the Group’s audit partner will be put in place in 2020.
The Chairman also conducted an appraisal of the
performance of each Director (considering the views
of the other Directors). He reported that each Director
continues to perform effectively and demonstrates
strong commitment to the role. As part of the appraisal
exercise the Chairman assessed the individual and
collective depth and breadth of skills, experience
and knowledge of the Non-Executive Directors and
concluded that (1) these were adequate to enable the
Board and its Committees to discharge their respective
duties and responsibilities effectively; and (2) no
additional non-executive appointments to the Board
were currently necessary (with the matter being kept
under on-going review and to be reassessed during
2020).
An assessment of the Chairman’s performance was
also carried out in 2019 by the Non-Executive Directors,
led by the Senior Independent Director, who provided
feedback to the Chairman individually that concluded
that he performed his role effectively.
External Evaluation Assessment
The Chairman assessed and sought the views of the
other Board members on the benefits of having an
evaluation of the Board facilitated by an external
third-party consultant. Having considered the matter
and noting the confirmation provided by the Company
Secretary that the Company’s internal evaluation
process was thorough and addressed each item
included by the Financial Reporting Council in its
published ‘Guidance on Board Effectiveness’ as areas
that should be included in a board evaluation exercise,
the Board unanimously agreed that the process for
conducting the internal evaluation was rigorous and
adequate in all material aspects. The merits of having a
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71
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
4. AUDIT, RISK AND INTERNAL CONTROL
– PRINCIPLES M-O OF THE 2018 CODE
Membership
Membership
Éimear Moloney
Carl G. Shepherd
Andy McCue (i)
Evan Cohen (ii)
(i) Resigned 31 May 2019
(ii) Appointed 14 August 2019
No. of meetings/
total no. of
meetings held
when the Director
was a member
Attendance
%
3/3
3/3
1/1
2/2
100%
100%
100%
100%
The Company Secretary acts as Secretary to the Audit
Committee.
Meetings
Under its Terms of Reference, the Audit Committee
is required to meet at least twice a year. The Audit
Committee met on three occasions during 2019. The
Audit Committee’s meetings and agenda are linked to
events in the Group’s financial calendar.
Meetings are attended by the Audit Committee
members, the Chief Financial Officer, senior members
of the Group’s Finance department who attend by
invitation and the Company Secretary (or his delegate).
Members of the Group’s executive leadership team
and other senior executives are invited to attend as
necessary to provide further insight and expertise in
certain areas related to the Group’s principal risks.
The Deloitte Ireland LLP audit partner and senior
representatives from PricewaterhouseCoopers (“PwC”),
as the outsourced internal audit provider, are invited
to attend certain meetings. During the year the Audit
Committee met privately with the Deloitte Ireland LLP
audit partner and with senior representatives from
PwC.
Committee Role and Responsibilities
The role and primary responsibilities of the Audit
Committee are summarised below:
• Monitor the integrity of the financial statements of
the Company and any formal announcement relating
to its financial performance, including reviewing
significant financial reporting issues and estimates
and judgements they contain;
• Review and challenge where necessary the use of or
changes to accounting policies, the methods used
to account for significant or unusual transactions
where different approaches are possible, the clarity
and completeness of disclosure in the Company and
Group’s financial reports and the context in which
statements are made, and all material information
presented with the financial statements, such as the
operating and financial review and the corporate
governance statement insofar as it relates to the
audit and risk management;
• Ensure that there are appropriate procedures in
place to monitor and evaluate the general business
risks facing the Group (the Board has delegated
the management of certain risk areas to the
Audit Committee with the Board retaining overall
responsibility);
• Review the adequacy and effectiveness of the
Company’s internal financial controls and the
Company’s statements on these matters;
• Perform an annual assessment of the Company’s
compliance with the requirements of the 2018 Code;
• Review the Company’s procedures for detecting
fraud;
• Review the Company’s systems and controls for the
prevention of bribery and receive and review reports
on non-compliance;
• Consider annually whether there is a need for an
internal audit function; and
• Oversee the relationship with the external auditor,
including selection, appointment, removal, terms of
engagement, approval of remuneration, assessing
independence and objectivity, assessing effectiveness
of the audit process, and setting policy on the use of
non-audit services.
The full schedule of roles and responsibilities
are contained in the Audit Committee’s Terms of
Reference, which were reviewed in December 2019, and
which are available on the Company’s website www.
hostelworldgroup.com.
The Chairperson of the Audit Committee reports to
the Board as necessary on the activities of the Audit
Committee and attends the Annual General Meeting
to answer questions on the report of the Audit
Committee’s activities and matters within the scope of
the Audit Committee’s responsibilities.
CHAIR’S REVIEW OF 2019
Committee Competence
The Audit Committee is comprised of three
independent Non-Executive Directors and is chaired
by Éimear Moloney. The Chairman of the Board is
not a member of the Audit Committee. The 2018
Code requires that the Board is satisfied that at least
one member of the Audit Committee has recent and
relevant financial experience. The Disclosure Guidance
and Transparency Rules (DTRs) require that at least
one member of the Audit Committee has competence
in accounting and/or auditing. The Board is satisfied
that the Chairperson of the Audit Committee meets
these requirements, being a qualified accountant who
has previously held senior investment manager roles in
Zurich Life Assurance (Ireland) plc.
The Board considers that the Audit Committee has
the necessary competence and broad experience
relevant to the sector in which the Group operates,
as required by the 2018 Code. Carl G. Shepherd is a
former Chief Operating Officer and Chief Strategic
and Development Officer with HomeAway, Inc., Evan
Cohen is a management and strategy consultant
and formerly had operational responsibility for Lyft’s
US East Coast business and was Chief Operating
Officer at Foursquare. Carl and Evan each have a clear
understanding of the challenges presented by the
Group’s customer-focussed strategy which enabled
them to make robust contributions to the Audit
Committee’s activities during the year. Further details
of the background, knowledge and experience of the
Chairperson of the Audit Committee and each of the
Audit Committee members can be found on pages 52
and 53 of this report.
Fair, Balanced and Understandable
One of the key governance requirements is to consider
whether the Annual Report and accounts, taken as
a whole, is fair, balanced and understandable and
provides the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy.
At the request of the Board, the Audit Committee
has undertaken the detailed work in making this
assessment, including the work undertaken by
management in the preparation of the accounts and
the Annual Report, the analysis performed of changes
to applicable standards and reporting requirements,
and the arrangements for review and verification of the
information contained in the Annual Report.
The Audit Committee reviewed a draft of the Annual
Report at a meeting in advance of giving their final
opinion and ahead of final approval by the Board.
The Audit Committee was provided with all relevant
information and, in particular, with detailed briefings
from management on how specific issues are managed
and challenged management as required. The review
by the Audit Committee in considering whether the
Annual Report and Accounts, taken as a whole, is
fair, balanced and understandable and provides the
information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy included:
• Considering whether the content of the Annual
Report, in particular the Strategic Report and
business review, provides both positive and negative
aspects of performance and developments in a clear
and meaningful way;
• Ensuring that the links between discussions of
performance, financial position and cash flows,
including the use of appropriate performance
measures and the financial statements are clear;
• Considering that the information provided on the
Company, the environment in which it operates and
the risks it faces are specific to the Group and not
explained in general terms;
• Removing immaterial items; and
• Explaining the links between information in the
Annual Report, such as objectives, KPIs and risks.
Having conducted its review, the Audit Committee is
satisfied that the Annual Report and accounts, taken
as a whole, is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the Company’s position and
performance, business model and strategy. Following
recommendation by the Audit Committee, the Board
confirmed that the Annual Report and accounts, taken
as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy. The ultimate
responsibility for the preparation of accounts giving
a true and fair view and an Annual Report that is
fair balanced and understandable as set out in the
Directors’ Responsibility Statement on page 100, rests
with the Board of Directors.
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Significant Issues
In reviewing the financial statements with management and the auditors, the Audit Committee has discussed the
critical accounting judgements. The significant issues considered by the Audit Committee in respect of the 2019
Annual Report are as follows:
Significant Issue
Description and Resolution
Carrying value of
Goodwill and
Intangible Assets
The largest asset on the Group statement of financial position relates to the
goodwill and intangible assets reflecting the underlying value of the brands and
technology acquired, with a carrying value at 31 December 2019 of €109.1m. This
represented 74% of the Group’s total assets. Under IFRS goodwill is not amortised
but is subject to an annual impairment review. An impairment review is required
to be performed for other intangible assets where there is an indicator of
impairment. Goodwill is allocated to Cash Generating Units (“CGUs”) and a model
has been developed to calculate the value in use of the assets and to review the
carrying value of goodwill and other intangibles for impairment.
Management have performed impairment reviews at year end on the Group’s
carrying value of goodwill, all of which relates to the Hostelworld brand. The
cashflow forecasts were based on the budgets approved by the Board. The Audit
Committee has reviewed the assumptions around growth rates and discount
rates. The Audit Committee also reviewed the carrying value of other intangibles
and is satisfied that there was no indication of impairment at 31 December 2019.
Following these discussions, the Audit Committee is satisfied that there was no
impairment of goodwill and other intangibles as at 31 December 2019, and that
the controls over management’s impairment review process are adequate.
Capitalisation of
Development Costs
The Group incurs significant internal costs in respect of the ongoing development
of its IT systems and core technology and product platforms. The accounting for
these costs as either development costs (which are capitalised as intangibles) or
expensed as incurred involves judgement.
In the year ended 31 December 2019 €2.5m (2018: €1.7m) of internally generated
development costs were capitalised in accordance with the criteria as set out
in IAS 38. Overall, capitalised development costs carried in the balance sheet
amounted to €2.8m at 31 December 2019 (2018: €1.7m).
The Audit Committee has reviewed management’s application of the accounting
policy adopted and the assessment as to whether current projects meet the
criteria required for costs to be capitalised (including feasibility of completion,
intention to complete, probable economic benefits, availability of resources to
complete, and ability to measure expenditure).
The Audit Committee considers the approach taken and the application of the
policy to be appropriate.
Significant Issue
Description and Resolution
Transfer Pricing and
International Taxation
Environment
The Group as a global business operates in an increasingly complex international
corporate tax environment. It is subject to taxation in a number of jurisdictions
and cross–border transactions can be challenged by tax authorities. The Group
has a number of intercompany agreements within its Group structure including
management services, marketing services, research and development and
intellectual property licence agreements.
The Group seeks regular updates from its tax advisors, on any new developments
in the international tax environment, particularly the policy efforts being led by
the OECD around the Base Erosion and Profit Shifting initiative (“BEPS”).
The Audit Committee considers that the tax provisions and related disclosures
which have been made are reasonable.
The Group is required to comply with the provisions of the 2018 UK Corporate
Governance Code or explain reasons for non-compliance. The more significant
of the disclosure requirements include those in relation to principal risks and
uncertainties, the fair, balanced and understandable statement and the viability
statement.
The Audit Committee has reviewed the disclosures in the Annual Report, and,
having discussed them with management, is satisfied that the additional
reporting and disclosure requirements have been met.
The Audit Committee has also considered a number of other judgements which
have been made by management including those relating to revenue recognition,
exceptional items, deferred tax, accruals and estimates and considers that the
judgements which have been made are reasonable.
Corporate Governance
Other Matters
External Auditors
On behalf of the Board, the Audit Committee has
primary responsibility for overseeing the relationship
and assessing the performance of the external auditor.
Deloitte Ireland LLP were first appointed auditor to the
Hostelworld Group in 2004. However, the first year that
they were appointed as external auditor to Hostelworld
Group plc as a listed plc entity was in relation to the
audit for the financial year ended 31 December 2015.
In the UK, mandatory audit tendering is required every
ten years with mandatory rotation of auditors of Public
Interest Entities (“PIEs”) required at least every twenty
years. Transitional arrangements require Hostelworld
to put its audit out to tender by 17 June 2023. This is on
the basis of Deloitte Ireland LLP, the existing auditor,
being in place for a period of between 11 and 20
years. Accordingly, the Group will need to run a tender
process by 17 June 2023.
The Audit Committee will continue to review the
relationship with the external auditor and may re-
tender its audit contract prior to this date if it considers
this necessary.
The external auditor is required to rotate the audit
partner responsible for the Group audit every five
years. In this regard, Daniel Murray acted as audit
partner for the year ended 31 December 2019, his third
year as audit partner.
To ensure there can be no reason for audit
independence to be impacted, the Company has in
place a policy on the provision of non-audit services.
Under the policy, except in exceptional circumstances,
non-audit fees to the audit firm should not exceed 70%
of the amount of the audit fee for the current financial
year.
All requirements to engage the external auditors
for material non-audit services must be notified to
the Chairperson of the Audit Committee in advance,
and non-audit work with an expected cost in excess
of €30,000 must be subject to competitive tender
and approved by the Audit Committee. During 2019,
Deloitte Ireland LLP were engaged to provide non-audit
services to the Group totalling €10.0k (2018: €1.5k). The
Audit Committee will continue to monitor the type and
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Hostelworld Annual Report 2019
75
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
level of non-audit services provided by the external
auditors to prevent any perceived or actual impact on
the auditors’ independence.
The Audit Committee assesses the independence of the
external auditor and the effectiveness of the external
audit process before making recommendations to the
Board in respect of their appointment or re-appointment.
In assessing the effectiveness of the external auditor,
the Audit Committee considered the quality and
scope of the Audit Plan, in particular, its focus on the
Group’s significant risks and other areas of significant
judgement and its approach to materiality. In addition,
the Audit Committee assessed the expertise and industry
knowledge of the audit partner and team and their
response to dealing with areas of risk, as well as receiving
feedback from executive management on the audit
process. As part of the Board Evaluation process the
external auditors were requested to provide feedback on
their interactions with the Audit Committee and in their
feedback highlighted the strong level of understanding
and challenge from the Audit Committee during the year
which demonstrated the Committee’s understanding of
the Group’s business and associated risks.
In assessing independence and objectivity, the
Audit Committee considers the level and nature of
services provided by the external auditor as well as
the confirmation from the external auditor that it has
remained independent within the meaning of the APB
Ethical Standards for Auditors. The Audit Committee’s
assessment of the external auditor’s independence took
into account the non-audit services provided during the
year. The Audit Committee concluded that the nature
and extent of the non-audit fees did not compromise the
independence of the auditor.
The external auditors have unrestricted access to the
Chairperson of the Audit Committee.
Having reviewed the auditor’s independence and
performance, the Audit Committee recommends that
Deloitte Ireland LLP be re-appointed as the Company’s
auditor at the next Annual General Meeting.
Internal Controls and Risk Management
The Directors recognise that the monitoring and
assessment of the internal controls environment is a
necessary step to ensure the Board can place reliance
on the reported financial position and prospects of the
Group.
2019. There has been increased focus on emerging risks
as part of the risk assessment review and the Board
is satisfied that there has been a thorough process
carried out to identify emerging risks and put in place
action to manage or mitigate those risks. This process
involved periodic meetings with members of the Group’s
executive leadership team on an individual and collective
basis. These meetings were carried out following a
functional review of the principal and emerging risks
by each executive leadership team member with their
teams. Each function/business unit was given guidance
and specific questions to consider in order to ensure
the process of identifying emerging risks was thorough.
Business units were also directed to consider the
underlying drivers or causes of emerging risks including
market trends, customer behaviours and examples of
external fraudulent activity. The results were discussed
collectively by the Executive Leadership Team to identify
any cross functional risks and to ensure each principal
risk and emerging risk was included in the Company’s
Risk Register with explanations of how these risks are
being managed or mitigated. The Principal Risks and
emerging risks are set out on pages 32 to 36.
The Group’s executive leadership note that risks cannot
necessarily be eliminated. Accordingly, the Group’s
internal control environment is designed to identify,
evaluate, mitigate and monitor the risks and emerging
risks faced by the business, and report to the Board in a
timely manner. To assist in managing risk, the Group has:
• A clear organisational structure with appropriate lines
of responsibility;
• A comprehensive annual planning and budgeting
process;
• Clear delegations of authority for the Board for
relevant matters, and a comprehensive schedule of
matters reserved for the Board;
• Internal control systems and procedures to implement
and monitor the use of these delegated authorities;
• Financial control, budgeting and forecasting systems,
with regular reporting, variance analysis and reviews of
key performance indicators;
• Robust systems by which the Group’s financial
statements are prepared, which included assessment
of key financial reporting risks arising through
complexity of transactions, changes to the business,
and changes in accounting standards;
• An experienced and suitably qualified finance function
that is fully conversant with the operations of the
business; and
The Audit Committee and in turn the Board have
completed a robust assessment of the Company’s
principal and emerging risks on three occasions during
the reporting period, in March, August and December
• A code of conduct setting out behavioural and ethical
standards, supported by clear anti-bribery and
corruption guidelines, and a whistleblowing policy with
an external independent hotline.
In the Board’s view, the ongoing information it receives
is sufficient to enable it to review the effectiveness of the
Group’s system of internal control. The Directors confirm
that they have reviewed the effectiveness of internal
control and considered the significant risks affecting the
business and the way in which these risks are managed
as part of its responsibility to monitor the Company’s
risk management and internal control systems. The risks
identified on pages 32 to 36 are those that could have
a material adverse impact on the Group’s prospects,
its financial condition and the results of its operations.
The actions taken to mitigate the risks described in
the Principal Risks and Uncertainties cannot provide
assurance that other risks will not materialise and/
or adversely affect the operating results and financial
position of the Group.
As part of the assessment of the Company’s risks,
emerging risks are identified and are kept under close
review, managed and mitigated. The procedures in place
to identify emerging risks include a twice yearly review
of the Company’s Risk Register by each member of the
executive leadership team (who seek relevant input from
their wider teams); a thorough in depth review by the
collective executive leadership team and in turn by the
Audit Committee. The reviews are based on the current
structure within each function including any significant
changes from an operational, resourcing, strategic
perspective with consideration to ongoing or planned
projects within each function which might give rise to
new risks or challenges.
Taking into account the Principal Risks and
Uncertainties set out on pages 32 to 36, and the
ongoing work of the Audit Committee in monitoring
the risk management and internal control systems
on behalf of the Board (and to whom the Committee
provides regular updates) the Board:
• Is satisfied that it carried out a robust assessment of
the principal risks facing the Company; and
• Has reviewed the effectiveness of the risk management
and internal control systems including all material
financial, operational and compliance controls and
concluded that through a combination of the work of
the Board and the Audit Committee, the Company’s
risk management and internal controls were effectively
monitored throughout the year.
Internal Audit
The Audit Committee is responsible for monitoring
and reviewing the operation and effectiveness of the
internal audit function including its plans, activities
and resources. The internal audit function continues
to be outsourced to PwC as given the nature and size
of the Group, the Audit Committee and the Board each
concluded that the internal auditor continues to be
effective and continues to provide access to a significant
level of expertise covering a broad range of risks. In
addition, as part of the Board Evaluation carried out
during the year the Board concluded that it was satisfied
that the Group had in place a sufficient system to provide
assurance to it on the effectiveness of the organisation’s
internal controls and recognised that PwC as providers of
the internal audit function continued to play a significant
role in providing these assurances.
At each scheduled meeting the Audit Committee
assesses the findings arising from PwC’s internal
auditor’s reports. In particular, the Audit Committee
considers any control weaknesses identified and the
remedial action to be taken.
The 2019 internal audit plan, setting out areas of internal
audit focus, was agreed by the Audit Committee with
PwC. In 2019, the Audit Committee received four reports
from PwC covering a) Internal Audit Findings Follow Up
Review; b) Product Development Governance Review;
c) Porto Office Operations Review and d) Business
Continuity Management Review. The Audit Committee
subsequently follows up to ensure internal audit findings
or recommendations are acted upon by management.
The internal audit plan for 2020 was agreed with PwC
following consultation with the Audit Committee. The
2020 internal audit plan focusses on a) New Payments
Key Controls Review; b) Cloud Computing Risk
Assessment Framework Review; c) Data Governance; d)
Porto Office Operations Review – Phase 2; e) Third Party
Engagement Review and f) Internal Audit Findings Follow
up Review.
Annual Evaluation of Performance
The Audit Committee’s effectiveness was reviewed as
part of an internal evaluation process during 2019. The
Audit Committee and the Board considered the outcome
of the evaluation and is satisfied that it is performing
effectively.
Éimear Moloney
Chairperson, Audit Committee
3 March 2020
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77
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
REMUNERATION – PRINCIPLES P-R OF THE 2018 CODE
CHAIRMAN OF THE REMUNERATION COMMITTEE’S
ANNUAL STATEMENT
Dear Shareholder
As Chairman of the Remuneration Committee, I am
pleased to present the Company’s Remuneration
Report for the year to 31 December 2019.
Membership
Membership
No. of meetings/
total no. of
meetings held
when the Director
was a member
Attendance
%
Carl G. Shepherd (Chair)
4/4
Michael Cawley
Éimear Moloney
Andy McCue (i)
Evan Cohen (ii)
(i) Resigned 31 May 2019
(ii) Appointed 14 August 2019
4/4
4/4
2/2
2/2
100%
100%
100%
100%
100%
Key Activities of the Remuneration Committee in
2019
The Remuneration Committee held four scheduled
meetings and one unscheduled meeting during 2019
to grant an award in accordance with the rules of the
Company’s Long Term Incentive Plan, and among
other things, undertook the following activities:
• Completed a review of the Directors’ Remuneration
Policy, which was presented to shareholders for their
approval at the AGM in May 2019;
• Finalised the 2018 Remuneration Report;
• Determined the salary increases for the Executive
Directors that applied for 2019, as reported last year;
• Agreed the final outturn of the 2018 annual bonus
scheme for the Executive Directors, as reported last
year;
• Agreed the structure of the 2019 annual bonus
scheme for the Executive Directors, including bonus
opportunity, metrics and specific targets to be
employed;
• Agreed the approach to the award made under the
Company’s Long Term Incentive Plan (“LTIP”) in
2019, including the quantum, metrics, targets and
award population;
• Contacted those shareholders which voted against
the Directors’ Remuneration Policy at the AGM in May
2019;
• Continued to develop the new issues raised in the 2018
UK Corporate Governance Code;
• Reviewed overall workforce remuneration and related
policies, and considered the alignment of Executive
Director pay with wider Company practices; and
• Started to consider the implementation of the
Directors’ Remuneration Policy for 2020.
Subsequent to the financial year end, the Remuneration
Committee met to review salaries for 2020, the final
outturn of the 2019 annual bonus scheme and to
determine the extent of vesting under the LTIP award
granted in 2017.
The Remuneration Policy
The Directors’ Remuneration Policy is designed to
support the Group’s culture and strategic objectives
while offering competitive remuneration to enable the
business to attract, retain and motivate the high-calibre
talent needed to help ensure we are successful, aligning
all stakeholders’ interests. This is achieved by the strong
focus on performance-related compensation and the use
of appropriate performance conditions. The approach to
Directors’ remuneration is transparently disclosed in this
report.
The Policy was subject to significant review by the
Committee (supported by its external advisers) during
2018 and early 2019, with the Committee conducting a
consultation exercise with major shareholders before
presenting the Policy for formal approval at the AGM in
May 2019. Following such approval, the Policy applied
for the 2019 financial year and will continue to apply for
2020.
Remuneration Outcomes for 2019
In light of the Group’s performance over the financial
year, there were no payments to Executive Directors or
senior management under the annual bonus scheme
set up at the start of 2019. The minimum target for
Adjusted Profit Before Tax (“Adjusted PBT”) was not
met. Although the threshold level of performance for the
separate Bednights measure was achieved, a payment
under this element was subject to the PBT threshold
being met. As a result no bonus was payable under any
of the 2019 bonus plans.
The three-year performance period for the 2017 LTIP
award ended in 2019. Following an assessment of the
Adjusted Earnings per Share (“Adjusted EPS”) and
absolute Total Shareholder Return (“TSR”) performance
conditions attached to this award, it was determined
that none of the vesting conditions were met. As a
result, none of these awards will vest.
The Committee recognises the importance of ensuring
that reward outcomes are consistent with financial
and market performance. The Committee continues
to focus on ensuring that the Remuneration Policy is
aligned to the short and long term strategic objectives
of the business. As such the LTIP metrics for 2020 are
being reviewed (see below) to ensure alignment with
our evolving business model while also taking into
account current market uncertainty. This exercise will
help ensure that there is a clear alignment between
Hostelworld’s strategic priorities and incentive
structures, which we hope will help drive growth in
shareholder value over the coming years.
How We Will Apply the Remuneration Policy in 2020
The Remuneration Committee reviewed the salaries
of the Executive Directors and determined that an
increase of 3% with effect from 1 January 2020 was
warranted. This was lower than the average increase
across the organisation as a whole.
The Committee has reviewed the operation of
the bonus scheme for 2020. The maximum bonus
opportunity will remain at 100% of basic salary for
both Executive Directors. The current intention is that
bonuses will be payable based on performance against
targets linked to net bookings (30% weighting), EBITDA
(35% weighting) and a number of strategic objectives
(35% weighting). Net bookings is an important measure
of Hostelworld’s operational performance, and EBITDA
remains a core financial key performance indicator for
the business. For the strategic objectives element, the
Committee has selected a number of targets which are
critically important for the future long-term growth of
the business.
At the time of writing, the Committee is currently
considering the metrics and targets in the light of the
market volatility caused by the coronavirus outbreak,
and reserves the right to take a different approach to
that set out above. Appropriate levels of disclosure
will be provided in next year’s Annual Report on
Remuneration of the chosen metrics and targets.
The Committee intends to make awards under
the LTIP during 2020. At the time of writing, the
Committee is continuing to review the appropriate
metrics and targets in line with Hostelworld’s
strategic development and plans for growth for the
coming years, and to help ensure that the continued
commitment and contributions of the management
team are appropriately rewarded. Major shareholders
will be consulted in the event that the Committee
makes material changes to the performance
conditions used for prior year awards. The specific
performance targets which are chosen will be disclosed
in the required regulatory announcement when the
grants are made later this year, and full details will
also be included in next year’s Annual Report on
Remuneration.
As prescribed under the Remuneration Policy, the
2020 awards will be granted with a requirement that
any shares which vest after the end of the three-year
performance period be held for a further two years
before they can be sold (subject to any sales required
for tax purposes).
2018 UK Corporate Governance Code
During 2019 the Remuneration Committee continued
to review the extent of compliance with the
remuneration principles and provisions of the 2018
UK Corporate Governance Code. As indicated in this
Annual Statement and in the additional disclosures,
the Committee has applied the principles set out in
the 2018 Code. In particular, the current performance-
based approach supports and promotes the long-term
sustainable success of the business. The Committee
operates a formal and transparent procedure for
setting the Directors’ Remuneration Policy and for
agreeing payments under the framework set out in the
Policy. Discretion is applied where relevant, although
the Committee has not done so in respect of 2019 pay
outcomes.
Hostelworld is compliant with the remuneration
provisions set out in the 2018 Code, with the
exception of the recommendation that Remuneration
Committees develop a formal policy for post-
employment shareholding requirements. The
Remuneration Committee has continued to review
whether such requirements should be introduced, but
considers that the remuneration policy as it stands
contains sufficient alignment between management
and the long-term interests of shareholders. This
includes the requirement for the Executive Directors to
build a significant holding in Hostelworld shares during
the period of their employment, and the two-year post-
vesting holding period introduced last year into the
LTIP. The Committee will, however, continue to keep
this matter under review.
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
The Committee also believes that this Annual Statement,
the Directors’ Remuneration Policy (as summarised) and
the Annual Report on Remuneration together present
a clear summary of the approach taken to rewarding
Executive Directors at Hostelworld which is consistent
with the disclosure expectations set out in the 2018
Code and the expectations of the Company’s major
shareholders.
The Committee is of the view that the Remuneration
Policy and its implementation is fully consistent with the
factors set out in Provision 40 of the 2018 Code:
• Clarity: The Policy and the way it is implemented
is clearly disclosed in this Annual Statement and
the supporting reports, with full transparency of all
elements of Directors’ remuneration;
• Simplicity: We have adopted a simple and
straightforward Remuneration Policy, based on a mix
of fixed and variable pay. The annual bonus and LTIP
are conventional, easily understood incentive schemes
which include performance conditions aligned to
key strategic objectives and drivers of Hostelworld’s
growth;
• Risk: The Committee believes that the performance
targets in place for the incentive schemes provide
appropriate rewards for stretching levels of
performance without driving behaviour which is
inconsistent with Hostelworld’s risk profile. For
example, the maximum targets in the bonus scheme
and the LTIP are not set at levels which are considered
unattainable and which would risk incentivising
inappropriate behaviour. Potential reward is aligned
with market levels for companies of a similar size and
the reputational risk from a perception of “excessive”
payouts is limited;
• Predictability: The Policy includes full details of the
individual limits in place for the incentive schemes
as well as “scenario charts” which set out potential
payouts in the event of different levels of performance,
based on a number of reasonable assumptions (see
page 83). Any discretion exercised by the Committee
in implementing the Policy will be fully disclosed;
• Proportionality: The link between the delivery
of strategy, long-term performance and the
remuneration of the Executive Directors is set out in
this Annual Statement, the summary of the Directors’
Remuneration Policy and the Annual Report on
Remuneration. For example, the incentive outcomes
for 2019 reflect a difficult year for Hostelworld in a
challenging external environment; and
• Alignment to culture: The approach to Directors’
remuneration is consistent with key Group cultural
tenets of transparency, inclusion and performance.
Taking into account the changes to the metrics for
the 2020 annual bonus scheme, and our review of
the LTIP measures (as discussed above), we believe
that our incentive schemes will help drive appropriate
behaviours which are aligned with the core purpose of
the business and its evolving strategic priorities.
Dialogue with shareholders on remuneration matters is
particularly important to the Committee and during 2019
the Committee engaged with a number of investors
to discuss aspects of the Remuneration Policy and the
incentive arrangements in place for the Directors. This
engagement has provided the Committee with useful
input into its decisions regarding the operation of the
Policy and the most appropriate approach to take in
2020 and beyond. Furthermore, and consistent with the
2018 Code, in late 2019 the Board’s designated Non-
Executive Director for employee engagement, Éimear
Moloney, who is also a member of the Committee, met
with a number of Hostelworld employees. Part of this
engagement involved an explanation of how executive
remuneration aligns with wider company pay policy.
Structure of this Report
This report has been prepared in accordance with
The Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations
2013, the UKLA Listing Rules and the 2018 UK Corporate
Governance Code. The report is split into three parts:
• This Annual Statement;
• A summary of the Directors’ Remuneration Policy, as
approved by shareholders at the AGM in 2019; and
• The Annual Report on Remuneration, which sets out
payments made to the Directors and details the link
between Company performance and remuneration
for the 2019 financial year. The Annual Report on
Remuneration together with this statement is subject
to an advisory shareholder vote at the AGM.
I hope that you find the information in this Report
helpful and informative and I look forward to your
continued support at the AGM.
I am always happy to hear from the Company’s
shareholders and you can contact me via the Company
Secretary if you have any questions on this report
or more generally in relation to remuneration at
Hostelworld.
Carl G. Shepherd
Chairman, Remuneration Committee
3 March 2020
DIRECTORS’ REMUNERATION POLICY (SUMMARY)
Introduction
The current Directors’ Remuneration Policy was
approved by shareholders at the Annual General
Meeting on 31 May 2019 and applies for the period of
three years from the date of approval. Included below
is a summary of the key provisions of the Remuneration
Policy. The full Policy, and an explanation of how the
Policy differs from that previously in place, is set out in
the 2018 Annual Report.
Policy Summary
The Remuneration Committee has designed the policy
around the following key principles:
• Shareholder alignment – Ensure alignment of
the interests of the Executive Directors, senior
management and employees to the long term
interests of shareholders;
• Competitive remuneration – Maintain a competitive
package against businesses of a comparable size and
nature in order to attract, retain and motivate high-
calibre talent to help ensure the Company performs
successfully;
• Strategic and cultural alignment – Provide a package
with an appropriate balance between short and
longer term performance targets linked to the
delivery of the Company’s business plan and is
aligned to and reflective of the Company’s culture;
• Performance-focussed compensation – Encourage
and support a high-performance culture; and
• Set appropriate performance conditions in line with
the agreed risk profile of the business.
The Remuneration Committee reviews annually the
remuneration arrangements for the Executive Directors
and key senior management, taking into consideration:
• Business strategy over the period;
• Overall corporate performance;
• Market conditions affecting the Company;
• Changing practice in the markets where the
Company competes for talent;
• Pay structure and levels in the Company as a whole;
and
• Changing views of institutional shareholders and
their representative bodies.
The following table sets out each element of
remuneration and how it supports the Company’s
short and long term strategic objectives.
Element and link to
our strategic objectives
Operation
Opportunity
Performance metrics, weighting
and assessment
Base Salary
Provides a base level
of remuneration to
support recruitment and
retention of Executive
Directors with the
necessary experience
and expertise to deliver
the Company’s strategy.
Salaries are reviewed annually and
any changes are effective from 1
January in the financial year.
When determining an appropriate
level of salary, the Remuneration
Committee considers:
• remuneration practices within the
Company;
• the performance of the individual
Executive Director;
• the individual Executive Director’s
experience and responsibilities;
• the general performance of the
Company;
• salaries within the ranges paid by
the companies in the comparator
group used for remuneration
benchmarking; and the economic
environment.
None
Base salaries will be set at
an appropriate level within
a comparator group of
comparably sized listed
companies and will normally
increase in line with increases
made to the wider employee
workforce.
Individuals who are recruited or
promoted to the Board may, on
occasion, have their salaries set
below the targeted policy level
until they become established
in their role. In such cases
subsequent increases in salary
may be higher than the average
until the target positioning is
achieved.
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Element and link to
our strategic objectives
Operation
Opportunity
Performance metrics, weighting
and assessment
Element and link to
our strategic objectives
Operation
Opportunity
Performance metrics, weighting
and assessment
Benefits
Provides a market
competitive level of
benefits to support
recruitment and
retention of Executive
Directors with the
necessary experience
and expertise to deliver
the Company’s strategy.
Pensions
Provide market
competitive retirement
benefits to support
recruitment and
retention of Executive
Directors with the
necessary experience
and expertise to deliver
the Company’s strategy.
Annual Bonus Plan
The Annual Bonus Plan
provides an incentive to
the Executive Directors
linked to achievement in
delivering goals that are
closely aligned with the
Company’s strategy and
the creation of value for
shareholders.
In particular, the Plan
supports the Company’s
objectives allowing the
setting of annual targets
based on the business’
strategic objectives
at that time, meaning
that a wide range of
performance metrics
can be used.
The maximum will be set at the
cost of providing the benefits
described.
None
The Executive Directors receive
benefits which include, but are not
limited to, family private health cover
and life assurance cover (including
tax if any).
The Remuneration Committee
recognises the need to maintain
suitable flexibility in the
determination of benefits that ensure
it is able to support the objective of
attracting and retaining personnel.
Accordingly, the Remuneration
Committee would expect to be able
to adopt other benefits including (but
not limited to) relocation expenses,
tax equalisation and support in
meeting specific costs incurred by
Directors.
The Remuneration Committee
maintains the ability to provide
pension funding in the form of a
salary supplement, which would
not form part of the salary for the
purposes of determining the extent
of participation in the Company’s
incentive arrangements.
None
For existing Executive Directors,
the maximum pension
contribution as a percentage of
basic salary is 10%.
For new Executive Directors
appointed after approval of this
policy, the maximum pension
contribution will be in line with
the contribution level provided
to the majority of the workforce.
The maximum bonus
opportunity as a % of base
salary is 100%
The Remuneration Committee will
determine the bonus payable after
the year end based on performance
against targets.
Annual bonuses are paid in cash after
the end of the financial year to which
they relate.
On change of control, the
Remuneration Committee may
pay bonuses on a pro rata basis
measured on performance up to the
date of change of control.
Malus will apply up to the date of the
bonus determination and clawback
will apply for two years from the date
of bonus determination.
Bonus payouts are determined on the
satisfaction of a range of key financial
and non-financial objectives set annually
by the Remuneration Committee.
In addition, the payment of any
bonus will require the Remuneration
Committee determining that the
Company has delivered an acceptable
level of performance during the year.
The Remuneration Committee retains
discretion in exceptional circumstances
to change performance measures and
targets and the weightings attached
to performance measures part-way
through a performance year if there
is a significant and material event
which causes the Remuneration
Committee to believe the original
measures, weightings and targets are
no longer appropriate. Discretion may
also be exercised in cases where the
Remuneration Committee believes
that the bonus outcome is not a fair
and accurate reflection of business
performance.
Long Term Incentive Plan (“LTIP”)
Awards are designed to
incentivise the Executive
Directors to maximise
returns to shareholders
by successfully
delivering the
Company’s objectives
over the long term.
Awards may be made up to
150% of base salary.
If exceptional circumstances
arise, including (but not limited
to) the recruitment of an
individual, the Remuneration
Committee may grant
awards outside this limit up
to a maximum of 200% of a
participant’s annual basic salary.
No more than 25% of the
award will vest for threshold
performance. 100% of the
award will vest for maximum
performance.
Awards are granted annually to
Executive Directors under the LTIP.
These vest at the end of a three-year
period, normally subject to:
the Executive Director’s continued
employment at the date of vesting;
and
satisfaction of the performance
conditions.
The Remuneration Committee may
award dividend equivalents on
awards to the extent that they vest.
Awards granted from 2019 onwards
which vest after the end of the
three-year performance period will
be subject to an additional two-year
holding period. During this period
the shares cannot be sold (other than
as required for tax purposes).
The LTIP rules contain standard
provisions to satisfy awards/dividend
equivalents in shares.
Malus will apply for the three-year
period from grant to vesting with
clawback applying for the two-year
period post vesting.
LTIP awards vest subject to the
achievement of challenging
performance conditions set by the
Remuneration Committee prior to
each grant. Awards granted in 2019
were subject to performance measures
based on Adjusted EPS and absolute
TSR performance.
The Remuneration Committee may
change the balance of the measures, or
use different measures for subsequent
awards during the policy period, as
appropriate. No material change will
be made to the type of performance
conditions without prior shareholder
consultation.
The Remuneration Committee retains
discretion in exceptional circumstances
to change performance measures and
targets and the weightings attached
to performance measures part way
through a performance period if
there is a significant and material
event which causes the Remuneration
Committee to believe the original
measures, weightings and targets are
no longer appropriate.
Discretion may also be exercised
in cases where the Remuneration
Committee believes that the vesting
outcome is not a fair and accurate
reflection of business performance.
Save As You Earn (“SAYE”) plan
To encourage share
ownership among
Hostelworld employees
and increase the
alignment with
shareholders.
The plan permits employees to
purchase shares at the end of a
three-year period at a discount of
up to 20% of the market value of the
shares at grant.
Shareholding Requirement
To support long term
commitment to the
Company and the
alignment of Executive
Director interests with
those of shareholders.
The Remuneration Committee
has adopted formal shareholding
guidelines that will encourage
the Executive Directors to build
up and then subsequently hold a
shareholding equivalent to 200% of
their base salary. Adherence to these
guidelines is a condition of continued
participation in the equity incentive
arrangements.
The maximum participation
limit is as set out in the relevant
legislation.
None (as is the norm for approved all-
employee plans).
200% of salary
None
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Element and link to
our strategic objectives
Operation
Non-Executive Director Fees
Opportunity
Performance metrics, weighting
and assessment
Service Agreements and Letters of Appointment
Executive Directors
Each of the Executive Directors has entered into a service contract with the Company.
The Company provides
a level of fees to
support recruitment
and retention of Non-
Executive Directors
with the necessary
experience to advise and
assist with establishing
and monitoring the
Company’s strategic
objectives.
The Board as a whole is responsible
for setting the remuneration of the
Non-Executive Directors, other than
the Chairman whose remuneration
is considered by the Remuneration
Committee and recommended to the
Board.
Non-Executive Directors are paid
a base fee and additional fees
for acting as Senior Independent
Director and as Chairperson of
Board committees (or to reflect
other additional responsibilities
and/or additional/unforeseen time
commitments).
Non-Executive Directors do not
participate in any of the Company’s
incentive arrangements.
The base fees for Non-
Executive Directors are set at an
appropriate rate.
None
In general, the level of fee
increase for the Non-Executive
Directors will be set taking
account of any change in
responsibility and will take into
account the general rise in
salaries across the workforce.
The Company will pay
reasonable vouched expenses
incurred by the Chairman
and Non-Executive Directors,
together with other benefits
where considered necessary
(and any related tax that may be
payable).
Choice of Performance Measures
Each year, the Remuneration Committee will choose
the appropriate performance measures and targets
to apply to the annual bonus scheme and LTIP. The
measures will be closely aligned with Hostelworld’s
strategy and business priorities at the time.
Malus and clawback
Malus and clawback provisions within the annual
bonus scheme and the LTIP apply in the following
circumstances:
• Material misstatement of results;
• Gross misconduct;
• Error in calculating the number of shares subject to
an award or the amount of cash paid;
• Corporate failure; or
• Serious reputational damage.
Discretion
The Remuneration Committee has discretion in
several areas of policy as set out in this report.
The Remuneration Committee may also exercise
operational and administrative discretions under
relevant plan rules approved by shareholders as set
out in those rules. In addition, the Remuneration
Committee has the discretion to amend the policy
with regard to minor or administrative matters where
it would be, in the opinion of the Remuneration
Committee, disproportionate to seek or await
shareholder approval.
Name
Position
Date of service
agreement
Notice period by
Company (months)
Notice period by
Director (months)
Gary Morrison
TJ Kelly
Chief Executive
Officer
Chief Financial
Officer
11 June 2018
12
21 November 2018
6
12
6
Non-Executive Directors
The Non-Executive Directors have each entered into letters of appointment with the Company. Each independent
Non-Executive Director’s term of office runs for an initial period of three years unless terminated earlier upon
written notice or upon their resignations. Non-Executive Directors are also subject to re-election at each AGM.
The dates of appointment of each Non-Executive Director is set out below:
Name
Effective Date of appointment
Notice period by
Company (months)
Notice period by
Director (months)
Michael Cawley
14 October 2015
Carl G. Shepherd
1 October 2017
Éimear Moloney
27 November 2017
Evan Cohen
14 August 2019
1
1
1
1
1
1
1
1
Illustrations of the Application of the Remuneration Policy
The charts below illustrate the remuneration that would be paid to each of the Executive Directors, based on
salaries with effect from 1 January 2020, under three different performance scenarios: (i) Minimum; (ii) On-target;
and (iii) Maximum. The elements of remuneration have been categorised into three components: (i) Fixed; (ii)
Annual Bonus; and (iii) LTIP, with the assumptions set out below:
Element
Salary, benefits and
pension
Annual bonus
Minimum
Included
On-Target
Included
Maximum
Included
CEO: 6.9% of salary
CFO: 6.9% of salary
CEO: 56% of salary
CFO: 56% of salary
CEO: 100% of salary
CFO: 100% of salary
LTIP
No LTIP vesting
*Illustration based on the level of LTIP awards for 2019.
CEO: 62.5% of maximum
opportunity
CFO: 62.5% of maximum
opportunity
CEO: 125% of salary*
CFO: 100% of salary*
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
The level of annual bonus payment for on-target
performance reflects (i) the stretching nature of the
performance targets (i.e. on-target performance
should not be viewed as the level of reward for
“average” performance), (ii) the relatively modest
annual bonus opportunity of 100% of salary and (iii)
the fact that total target remuneration of the Executive
Directors is around median at this level of potential
bonus outturn for on-target performance
Dividend equivalents have not been added to LTIP
share awards. In line with the new UK reporting
regulations, the maximum column has been extended
to reflect the potential impact of 50% share price
appreciation on the shares which vest.
CEO
CEO
CFO
CFO
€1,775k
€1,775k
€1,498k
€1,498k
37%
37%
30%
30%
33%
33%
€1,095k
€1,095k
32%
32%
23%
23%
46%
46%
€500k
€500k
100%
100%
€1,085k
€1,085k
€993k
€993k
33%
33%
33%
33%
35%
35%
€686k
€686k
29%
29%
25%
25%
47%
47%
€326k
€326k
100%
100%
Fixed
Fixed
On target
On target
Maximum
Maximum
Fixed
Fixed
On target
On target
Maximum
Maximum
Fixed Pay
Fixed Pay
Annual Bonus
Annual Bonus
LTIP
LTIP
LTIP value with 50% share price growth
LTIP value with 50% share price growth
ANNUAL REPORT ON REMUNERATION
Single Total Figure of Remuneration
Executive Directors
The table below sets out the single total figure of remuneration and breakdown for each Executive Director
in respect of the 2019 financial year. Comparative figures for the 2018 financial year have also been provided.
Figures provided have been calculated in accordance with The Large and Medium-Sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013 (Schedule 8 to the Regulations).
Salary
(€’000)
Benefits (1)
(€’000)
Bonus
(€’000)
LTIP
(€’000)
Pension
(€’000)
Total
(€’000)
Name
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Gary Morrison(2)
430.7 233.2
12.0
TJ Kelly(3)
295.0
33.6
3.6
5.7
0.4
-
-
45
-
-
-
-
-
43.1
23.3 485.8 307.2
17.7
2.0 316.3
36.0
(1) Benefits represent payments for health insurance and life assurance policies.
(2) Gary Morrison was appointed to the Board on 11 June 2018.
(3) TJ Kelly was appointed to the Board on 21 November 2018.
Non-Executive Directors
The table below sets out the single total figure of remuneration and breakdown for each Non-Executive Director.
Name
Michael Cawley(1)
Carl G. Shepherd(2)
Éimear Moloney(3)
Evan Cohen(4)
Former Director
Andy McCue(5)
2019 (€’000)
Taxable
benefits
Other
payments
-
-
-
-
-
-
-
-
-
-
Fees
145.0
68.2
67.0
21.7
30.8
Total
Fees
145.0
145.0
68.2
67.0
21.7
60.0
67.0
-
30.8
74.0
2018(€’000)
Taxable
benefits
Other
payments
-
-
-
-
-
-
-
-
-
-
Total
145.0
60.0
67.0
-
74.0
(1) Chairman of the Board and Chair of the Nominations Committee.
(2) Chair of Remuneration Committee and Senior Independent Director from 31 May 2019.
(3) Chair of the Audit Committee.
(4) Appointed to the Board on 14 August 2019.
(5) Stepped down from the Board on 31 May 2019.
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Additional Information regarding Single Figure Table
Annual Bonus
The Executive Directors were entitled to consideration for an annual bonus for 2019 of up to a maximum of
100% of basic salary subject to the satisfaction of performance targets based on Adjusted PBT (for 70% of the
award) and total bednights (for 30% of the award). The targets were set at the start of 2019 taking into account
the business environment at the time and internal expectations of Hostelworld’s performance over the year.
The table below sets out the details of the performance targets that were used to determine the annual bonus
outcome.
Performance metric
Weighting
Adjusted PBT(1)
Total Bednights
70%
30%
Threshold
performance
level
% of max
payout of
relevant
element at
threshold
Maximum
performance
level
% of max
payout of
relevant
element at
max
Actual
performance
Resulting
payout (% of
award) (2)
€19.6m
4.9%
€23.0m
100%
€15.5m
25.2m
2.0%
27.9m
100%
25.9m
0%
0%
(1) Adjusted PBT is calculated before any bonus payments for the 2019 financial year.
(2) For the 2019 financial year, any annual bonus payout was contingent on the Remuneration Committee being satisfied that the Company has delivered an acceptable
level of performance, taking into account underlying financial performance (including Adjusted PBT), performance against other KPIs and progress against the
achievement of strategic goals. In addition, the payment of a bonus against the total bednights target depended on the satisfaction of the threshold performance
condition against the adjusted PBT measure.
Taking into account performance against the targets set at the start of the year, as set out in the table and
footnotes above, the Committee determined that no bonuses would be payable to the Executive Directors for
2019.
Long Term Incentives Vesting Subject to Performance Period ending in 2019
In March 2017, LTIP awards were granted to the then Executive Directors and other members of senior
management.
Vesting of these awards was subject to achievement of an Adjusted EPS performance condition (applying to 70%
of the awards) and an absolute TSR performance condition (applying to 30% of the awards). Subsequent to the
year end, the performance conditions for the award were tested, leading to a nil vesting level, as set out below.
Adjusted EPS condition (70%)
Annual average Adjusted EPS growth
Vesting
Less than 6.6% p.a.
6.6% p.a.
14.0% p.a. or above
0%
25%
100%
Between 6.6% p.a. and 14.0% p.a.
Straight line vesting between 25% and 100%
Outcome:
(8.6%)
0%
Absolute TSR condition (30%)
Annualised TSR of the Company over the three- year
period to 31 December 2019
Vesting
Less than 10.0% p.a.
10.0% p.a.
15.0% p.a. or above
0%
25%
100%
Between 10.0% and 15.0% p.a.
Straight line vesting between 25% and 100%
Outcome:
(11.7%)
0%
The table below sets out the details of the 2017 LTIP award granted to the former Chief Executive Officer, Feargal
Mooney, who stepped down from the Board in June 2018. As disclosed in last year’s remuneration report, as part
of Feargal’s termination arrangements it was agreed that his subsisting LTIP awards would continue until the
normal time of vesting, at which time they would vest subject to performance against the relevant targets. In light
of the performance assessment as set out above, Feargal’s 2017 LTIP award lapsed in full.
Face
value of
award
(€’000)
Number
of shares
awarded
(1)
Number
of shares
following
pro-rata
reduction
(2)
Percentage
of award
vesting at
threshold
performance
Exercise
Price (€)
512.5 194,121 140,198
Nil
25%
Performance
period end
date Weighting
Total
value of
vested
awards
(€)
Number
of shares
lapsing
31
December
2019
Adjusted
EPS (70%)
Absolute
TSR (30%) 140,198
Nil
Director
LTIP
Value of
award
Feargal
Mooney
LTIP –
nil cost
option
125% of
salary
(1) The number of shares awarded was calculated using the closing share price on 28 March 2017, which was 228.25p.
(2) This reflects the number of shares capable of vesting following a pro-rata reduction in light of Feargal’s departure.
Long Term Incentives Awarded in 2019
The table below sets out the details of the LTIP awards granted to the Executive Directors in the 2019 financial
year.
Director
LTIP
Value of
award
Face value of
award (€’000)
Number
of shares
awarded
Exercise Price
(€)
Percentage of
award vesting
at threshold
performance
Performance
period end
date Weighting (1)
Gary
Morrison
LTIP – nil
cost option
125% of
salary
538.4
247,594 (2)
Nil
25%
TJ Kelly
LTIP – nil
cost option
100% of
salary
295.0
135,668 (2)
Nil
25%
31
December
2021
31
December
2021
Adjusted
EPS (70%)
Absolute
TSR (30%)
Adjusted
EPS (70%)
Absolute
TSR (30%)
(1) The specific performance targets for these awards are set out below.
(2) This award was granted on 3 April 2019. The number of shares awarded was calculated using the closing share price on 2 April 2019, which was 187.0p.
(3) To the extent any of the above awards vest, a dividend equivalent award will be made at the end of the vesting period.
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Similar to the previous LTIP awards, vesting of the 2019 awards is subject to achievement of an Adjusted EPS
performance condition (applying to 70% of the awards) and an absolute TSR performance condition (applying to
30% of the awards).
Adjusted EPS condition (70%)
Annual average Adjusted EPS growth
Less than 5.0% p.a.
5.0% p.a.
11.0% p.a. or above
Vesting
0%
25%
100%
Between 5.0% p.a. and 11.0% p.a.
Straight line vesting between 25% and 100%
Absolute TSR condition (30%)
Annualised TSR of the Company over the three- year period to 31
December 2021
Vesting
Less than 10.0% p.a.
10.0% p.a.
15.0% p.a. or above
0%
25%
100%
Between 10.0% and 15.0% p.a.
Straight line vesting between 25% and 100%
Long Term Incentives Awarded in 2018
The table below sets out the details of the LTIP awards granted to the current Executive Directors in the 2018
financial year.
Director
LTIP
Value of
award
Face value of
award (€’000)
Number
of shares
awarded
Exercise Price
(€)
Percentage of
award vesting
at threshold
performance
Performance
period end
date Weighting (1)
Gary
Morrison
LTIP – nil
cost option
150% of
salary
627.3
175,723 (2)
Nil
25%
TJ Kelly
LTIP – nil
cost option
75% of
salary
221.3
98,520 (3)
Nil
25%
31
December
2020
31
December
2020
Adjusted
EPS (70%)
Absolute
TSR (30%)
Adjusted
EPS (70%)
Absolute
TSR (30%)
(1) The performance targets for these awards are the same as those applying to the award granted in 2017, as set out on pages 86 and 87.
(2) This award was granted on 29 June 2018. The number of shares awarded was calculated using the closing share price on 28 June 2018, which was 316.00p.
(3) This award was granted on 5 December 2018. The number of shares awarded was calculated using the closing share price on 4 December 2018, which was 200.00p.
(4) To the extent any of the above awards vest, a dividend equivalent award will be made at the end of the vesting period.
Payments to Past Directors
Feargal Mooney
Feargal Mooney stepped down as Chief Executive Officer and as a Director with effect from 11 June 2018. He
remained employed by the Company until the expiry of his 12-month notice period on 11 June 2019. Full details of
the remuneration arrangements for Feargal in light of his departure were disclosed in last year’s remuneration
report.
In addition to the payments disclosed last year, and in line with Feargal’s contractual entitlements, an amount of
€33,000 was paid in 2019 in relation to holiday pay accrued during his employment.
As disclosed last year, the Remuneration Committee determined that Feargal’s LTIP awards which were
outstanding at the time of his departure will continue until the normal time of vesting, at which point they will
vest subject to performance against the relevant targets. As disclosed on page 87, the award granted to Feargal
in 2017 will lapse in full due to the performance conditions not being met. The extent to which the LTIP award
granted to him in 2018 will vest will be disclosed in next year’s remuneration report.
Statement of Directors’ Shareholdings and Share Interests
The number of shares of the Company in which the current Executive Directors had a beneficial interest and
details of long term incentive interests as at 31 December 2019 are set out in the table below. Under the Directors’
remuneration policy, the Remuneration Committee has adopted formal shareholding guidelines that encourage
the Executive Directors to build up and hold a shareholding equivalent to 200% of basic salary.
Director
Gary Morrison
TJ Kelly
Beneficially owned
shares
Shareholding
requirement (% of
salary)
Current shareholding
(% of salary) (1)
Shareholding
requirement met?
-
-
200%
200%
0%
0%
No
No
(1) Unvested LTIP awards do not count towards satisfaction of the shareholding guidelines.
Unvested LTIP
interests subject
to performance
conditions
423,317
234,188
Details of the interests held in shares by Non-Executive Directors as at 31 December 2019 are set out below. Non-
Executive Directors are not subject to a shareholding requirement.
Director
Michael Cawley
Carl G. Shepherd
Éimear Moloney
Evan Cohen
Beneficially
owned shares
81,000
-
-
-
No changes in the above Directors’ interests have taken place between 31 December 2019 and the date of this
report.
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Comparison of Overall Performance and Pay (TSR graph)
The graph below shows the value of £100 invested in the Company’s shares since listing compared to the FTSE
SmallCap index. The graph shows the Total Shareholder Return generated by both the movement in share value
and the reinvestment of dividend income over the same period. The Remuneration Committee considers that the
FTSE SmallCap index is the appropriate index given the current magnitude and nature of operations and market
capitalisation. This graph has been calculated in accordance with the Regulations. It should be noted that the
Company listed on 28 October 2015 (with grey market trading until 2 November 2015) and therefore only has a
listed share price for the period from 28 October 2015 to 31 December 2019.
Total Shareholder Return (£)
220
200
180
160
140
120
100
80
Dec 2015
Dec 2016
Dec 2017
Dec 2018
Dec 2019
Hostelworld Group
FTSE Small Cap
Chief Executive Officer Historical Remuneration
The table below sets out the total remuneration delivered to the Chief Executive Officer over the last six years
valued using the methodology applied to the single total figure of remuneration. The Remuneration Committee
does not believe that the remuneration payable in its more formative years as a private company bears any
comparative value to that paid in its later years and therefore the Remuneration Committee has chosen to
disclose remuneration only for the six most recent financial years (reflecting the disclosures made in previous
reports):
Chief Executive Officer
2014
2015
2016
2017
2018
2019
Feargal
Mooney
Feargal
Mooney
Feargal
Mooney
Feargal
Mooney
Feargal
Mooney
Gary
Morrison
Gary
Morrison
Total Single Figure (€’000)
413.1
395.0
1,298.7
768.8
209.5
307.2
485.8
Annual bonus payment level achieved
(% of maximum opportunity)
LTIP vesting level achieved
(% of maximum opportunity)
14.9%
0%
0%
73.4%
0%
19.3%
0%
n/a
n/a
n/a
n/a
0%
n/a
n/a
It should be noted that the Company only introduced the LTIP on Admission.
Change in Chief Executive Officer’s Remuneration Compared with Employees
The following table sets out the change in the remuneration paid to the Chief Executive Officer from 2018 to 2019
compared with the average percentage change for all employees, as required by the reporting regulations.
Salary
Taxable benefits
Bonus
2019
2018
2019
2018
2019
2018
(€’000)
(€’000)
% change
(€’000)
(€’000)
% change
(€’000)
(€’000)
% change
Chief Executive
Officer
430.7
418.2
3.0%
12.0
10.2
17.6%
Total pay
16,026
15,373
4.2%
419.2
362.9
15.5%
-
-
80.4
(100%)
311.3
(100%)
Average number of
employees
Average per
employee
314
294
6.8%
314
294
6.8%
314
294
6.8%
51.0
52.3
(2.5%)
1.3
1.2
8.3%
-
1.1
(100%)
The Chief Executive Officer’s remuneration disclosed in the table above has been calculated to take into account
base salary, taxable benefits and annual bonus. To reflect the relevant regulations, the employee pay figures
(on which the average percentage change is based) is calculated using the increase in the earnings of all Group
employees (i.e. those based in Ireland, the UK and other jurisdictions) from calendar years 2018 and 2019 which,
for base salary, gives a reduction of 2.5%.
Remuneration Practices Across the Company
Hostelworld does not have more than 250 UK employees (the current number of UK employees is 38) and
as a result is not required to publish the ratio of the Chief Executive Officer’s remuneration to the pay of UK
employees. However, the Remuneration Committee remains cognisant of the importance of the relationship
between Executive Director remuneration and the pay for Hostelworld employees more widely. In line with the
provisions of the 2018 UK Corporate Governance Code, the Committee has reviewed workforce remuneration
and related policies and has developed a full understanding of the cascade of remuneration throughout the
organisation, including which employees are members of which incentive arrangements. A particularly important
feature of the current approach is that the principle of paying for performance is enshrined throughout the whole
company.
Senior managers within Hostelworld participate in a bonus scheme which is structured in a similar manner to the
Executive Director bonus scheme, albeit (for 2019) with an element also payable based on personal performance.
A separate quarterly incentive scheme is in place for certain key roles (e.g. sales and customer support staff),
and during 2019 we rolled out a Colleague Bonus Pool for the benefit of all colleagues not otherwise in a bonus
scheme. This bonus pool is generated when a threshold level of profit is met, and then individual payments are
determined based on factors including individual performance during the year.
Participation in the LTIP extends through the organisation down to the level of managers or other individual
expert contributors. The same performance conditions apply to all participants in the LTIP although, as is the
norm, the award levels are higher for Executive Directors than for other participants, reflecting their seniority and
responsibilities within the organisation. In addition, the SAYE scheme is open to all employees in Ireland and the
UK.
The Group makes pension contributions on behalf of eligible employees. For the majority of the workforce,
the Group contribution rate is 6% of salary. The arrangements for the Chief Financial Officer are aligned with
this contribution, and it is stated in the Directors’ Remuneration Policy that any new Executive Director will
be appointed on a rate in line with the contribution level provided to the majority of the workforce. The Chief
Executive Officer’s contribution rate of 10% was determined at the time of his appointment in 2018 and is
considered low in comparison with the market.
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Governance
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93
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
In line with Hostelworld’s culture of transparency and involvement, Éimear Moloney, a member of the
Remuneration Committee who is also the Board’s designated Non-Executive Director for employee engagement,
met with an established colleague engagement forum during December 2019. The forum represents employees
across all locations and functions in the business. As recommended by the 2018 Code, part of this engagement
involved an explanation of how executive remuneration aligns with wider company pay policy. In addition, the
Board’s designated Non-Executive Director provided an overview of the responsibilities of the Board and its
subcommittees, agreed ways of working and potential topics for discussion for future forum meetings.
Pension
Pension contributions for the Executive Directors will continue at the rate of 10% of basic salary for Gary Morrison
and 6% of basic salary for TJ Kelly.
Changes to Non-Executive Directors’ Fees
No changes are proposed to the current fee components in place. The breakdown of fee components will remain
as follows:
Relative Importance of the Spend on Pay
The table below sets out the relative importance of spend on pay in the 2018 and 2019 financial years compared
with other disbursements. All figures provided are taken from the relevant Company Accounts.
Role
Chairman
Disbursements from
profit in 2019 financial
year (€m)
Disbursements from
profit in 2018 financial
year (€m)
% change
Profit distributed by way of dividend/share buybacks
Overall spend on pay including Executive Directors
12.6
19.7
16.1
(21.7%)
18.3
7.7%
Shareholder Voting at General Meeting
The table below sets out the results of voting on the resolutions to approve the Directors’ Remuneration Policy
and the Directors’ Remuneration Report at the AGM held on 31 May 2019:
Resolution
Ordinary Resolution to approve
the Directors’ Remuneration Policy
Ordinary Resolution to approve
the Directors’ Remuneration Report for the year
ended 31 December 2018
For
Against
Withheld
62,810,003
(82.64%)
13,195,194
(17.36%)
750
70,326,483
(94.01%)
4,478,884
(5.99%)
1,200,580
Given the voting outcome on the Remuneration Policy, the Chairman of the Remuneration Committee wrote to
those shareholders which voted against the resolution to understand their particular concerns and to offer a
meeting or a call to discuss further. A number of responses were received although none of the shareholders
requested a meeting or a call with the Committee Chairman.
Implementation of Remuneration Policy in Financial Year 2020
The Remuneration Committee proposes to implement the remuneration policy in 2020 as set out below:
Salary
Executive Directors’ salaries have been reviewed and the following increases agreed, with effect from 1 January
2020:
Name
Gary Morrison
TJ Kelly
Salary (€)
2020
2019
Percentage
Change
443,600
430,700
303,850
295,000
3%
3%
The salary increases for the Executive Directors are lower than the average increase across the organisation as a
whole.
Fees (€)
145,000
60,000
7,000
7,000
7,000
Base Non-Executive Director
Senior Independent Director
Chair of Audit Committee
Chair of Remuneration Committee
Annual Bonus Plan
The Remuneration Committee has reviewed the operation of the bonus scheme for 2020 and the current intention
is that the following performance metrics will apply:
• Net bookings (30% weighting);
• EBITDA (35% weighting); and
• Strategic objectives (35% weighting)
Net bookings is an important measure of Hostelworld’s operational performance, and EBITDA remains a core
financial key performance indicator for the business. For the strategic objectives element, the Committee has
selected a number of targets which are critically important for the future long-term growth of the business.
At the time of writing, the Committee is currently considering the metrics and targets in the light of the market
volatility caused by the coronavirus outbreak, and reserves the right to take a different approach to that set out
above. Appropriate levels of disclosure of the chosen metrics and targets will be provided on a retrospective
basis in next year’s remuneration report alongside an explanation of performance achieved and bonus payments
made.
The maximum bonus opportunity will remain at 100% of basic salary for both Executive Directors.
LTIP award
The Remuneration Committee intends to make awards under the LTIP during 2020. The Committee is continuing
to review the appropriate metrics and targets for these awards in line with Hostelworld’s strategic development
and plans for growth for the coming years, and to help ensure that the continued commitment and contributions
of the management team are appropriately rewarded. Major shareholders will be consulted in the event
that the Committee makes material changes to the performance conditions used for prior year awards. The
specific performance targets which are chosen will be disclosed in the required regulatory announcement
when the grants are made later this year, and full details will also be included in next year’s Annual Report on
Remuneration.
The 2020 awards will be granted with a requirement that any shares which vest after the end of the three-year
performance period are required to be held for a further two years before they can be sold (subject to any sales
required for tax purposes).
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Hostelworld Annual Report 2019
95
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Composition and Terms of Reference of the Remuneration Committee
The Board has delegated to the Remuneration Committee, under agreed terms of reference, responsibility for
the remuneration policy and for determining specific packages for the Chairman, Executive Directors and such
other senior employees of the Group as the Board may determine from time to time. The terms of reference for
the Remuneration Committee are available on the Company’s website, www.hostelworldgroup.com, and from the
Company Secretary at the registered office.
The Remuneration Committee is comprised of Carl G. Shepherd (Chairman of the Remuneration Committee
since 31 May 2019), Éimear Moloney and Evan Cohen (all of whom are independent Non-Executive Directors) and
Michael Cawley (who was independent upon his appointment as Chairman of the Board). Carl G. Shepherd has
served as a member of the Committee since October 2017 and, as result, the Company is compliant with Provision
32 of the 2018 UK Corporate Governance Code which requires the Chairman of the Committee to have served on
a remuneration committee for at least 12 months prior to appointment as chair.
The Remuneration Committee receives assistance from the Chief Executive Officer, Chief Financial Officer, Chief
HR Officer and Company Secretary, who attend meetings by invitation, except when issues relating to their
own remuneration are being discussed. The Remuneration Committee met four times during 2019. Meeting
attendance is shown on page 76 of the Annual Report.
Advisors to the Remuneration Committee
The Remuneration Committee’s independent advisors are Korn Ferry, who were appointed by the Committee in
2017. Korn Ferry has advised the Remuneration Committee on all aspects of remuneration policy for Executive
Directors and members of the Executive team. The Remuneration Committee exercises appropriate judgement
and challenge when considering the work of its external advisers and is satisfied that the advice received during
the year under review was objective and independent. Korn Ferry is a member of the Remuneration Consultants
Group and the voluntary code of conduct of that body is designed to ensure objective and independent advice
is given to remuneration committees. Korn Ferry received fees of €54,455 for their advice during the year (2018:
€81,214). Fees were charged on a cost incurred basis. No other services were provided by Korn Ferry to the
Company during the year and Korn Ferry have no other connection with the Company or the individual directors
of the Company.
On behalf of the Board
Carl G. Shepherd
Chairman, Remuneration Committee
3 March 2020
DIRECTORS’ REPORT
The Directors have pleasure in
submitting their Annual Report
and the audited Financial
Statements of Hostelworld Group
plc and its subsidiaries for the
financial year to 31 December
2019.
Statutory Information
This section of the Annual Report includes additional
information required to be disclosed under the
Companies Act 2006 (the “Companies Act”), the UK
Corporate Governance Code, the Disclosure and
Transparency Rules (“DTRs”) and the Listing Rules
(“Listing Rules”) of the Financial Conduct Authority.
Certain information required to be included in the
Directors’ Report can be found elsewhere in this
Annual Report, as highlighted throughout this report
and also including:
• The Strategic Report, which can be found on
pages 10 to 48, which sets out the development
and performance of the Group’s business during
the financial year, the position of the Group at the
end of the year and a description of the principal
risks and uncertainties (including the financial risk
management position);
• The Corporate Governance Statement on pages
54 to 94, which sets out the Company’s statement
with regard to its adoption of the UK Corporate
Governance Code. The Corporate Governance
Statement forms part of this Directors’ Report and is
incorporated into it by reference;
• The Audit Committee Report on pages 70 to 75;
• The Directors’ Remuneration Report on pages 76 to
94; and
• This Directors’ Report, on pages 95 to 100, together
with the Strategic Report on pages 10 to 48, form the
Management Report for the purposes of DTR 4.1.5R.
Disclosures under Listing Rule 9.8.4R
The table below is included to comply with the disclosure requirements under LR 9.8.4R. The information required
by the Listing Rules can be found in the Annual Report at the location stated below:
Section
Topic
Interest capitalised
Location
Not applicable
1.
2.
3.
4.
5.
6.
7.
8.
9.
10
11
12.
13
Publication of unaudited financial information
Not applicable
Details of long-term incentive schemes
Directors’ Remuneration Report, pages 76
to 94
Waiver of emoluments by a Director
Not applicable
Waiver of future emoluments by a Director
Not applicable
Non pre-emptive issues of equity for cash
Not applicable
Item (6) in relation to major subsidiary undertakings
Not applicable
Parent participation in a placing by a listed subsidiary Not applicable
Contracts of significance
Not applicable
Provision of services by a controlling shareholder
Not applicable
Shareholder waivers of dividends
Shareholder waivers of future dividends
Agreements with controlling shareholders
Not applicable
Not applicable
Not applicable
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97
DIRECTORS’ REPORT (CONTINUED)
Board of Directors
The appointment and replacement of Directors of the
Company is governed by the Articles of Association.
The Directors who served on the Board throughout the
year, except as noted, were as follows:
• Michael Cawley (Non-Executive Chairman);
• Gary Morrison (Chief Executive Officer);
• TJ Kelly (Chief Financial Officer);
• Éimear Moloney (Non-Executive Director);
• Carl G. Shepherd (Non-Executive Director);
• Evan Cohen (Non-Executive Director appointed on 14
August 2019); and
• Andy McCue (former Non-Executive Senior
Independent Director resigned on 31 May 2019).
Biographical details of the current Directors together
with membership of the various Committees are set
out on pages 52 and 53.
Amendment of Articles of Association
The Company’s Articles of Association may only be
amended by way of a special resolution at a general
meeting of the shareholders. No amendments are
proposed to be made at the forthcoming Annual
General Meeting.
Incorporation, Share Capital and Structure
The Company was incorporated and registered in
England and Wales as a public limited company with
registration number 9818705. The Company’s issued
share capital comprises ordinary shares of €0.01 each
which are traded on the London Stock Exchange’s main
market for listed securities and on Euronext Dublin’s
main securities market.
The liability of the members of the Company is limited.
The Company is tax resident in Ireland and its principal
place of business is at 2nd Floor, One Central Park,
Leopardstown, Dublin 18, Ireland. The Company’s
registered office is at Floor 2, 52 Bedford Row, London
WC1R 4LR, United Kingdom.
As at 31 December 2019 and as at the date of this
Directors’ Report, the Company’s issued share
capital comprises 95,570,778 ordinary shares of €0.01
(“shares”). The ISIN of the shares is GB00BYYN4225.
Further information on the Company’s share capital is
provided in note 16 to the Group’s Financial Statements
contained on page 145. All the information detailed
in note 16 on page 145 forms part of this Directors’
Report and is incorporated into it by reference.
At the Annual General Meeting of the Company to be
held on 27 April 2020, the Directors will seek authority
from shareholders to allot shares in the capital of the
Company (i) up to a maximum nominal amount of
€318,569.26 (31,856,926 shares of €0.01 each) being
one-third of the Company’s issued share capital and (ii)
up to a further €318,569.26 (31,856,926 shares of €0.01
each) where the allotment is in connection with a rights
issue, being one-third of the Company’s issued share
capital. The power will expire at the earlier of 27 July
2021 and the conclusion of the Annual General Meeting
of the Company held in 2021.
The Directors are also seeking authority from
shareholders to allot ordinary shares for cash
without first offering them to existing shareholders
in proportion to their existing shareholdings. The
resolution seeks authority to disapply pre-emption
rights over 5% of the Company’s issued ordinary share
capital. The power will expire at the earlier of 27 July
2021 and the conclusion of the Annual General Meeting
of the Company held in 2021.
The Directors intend to follow the Pre-Emption Group’s
Statement of Principles regarding cumulative usage of
authority within a rolling 3-year period. The principles
provide that usage in excess of 7.5% of issued
ordinary share capital of the Company (excluding
treasury shares) should not take place without prior
consultation with shareholders. The power will expire
at the earlier of 27 July 2021 and the conclusion of the
Annual General Meeting of the Company held in 2021.
Authority to Purchase Own Shares
The Directors will seek authority from shareholders
at the forthcoming Annual General Meeting for the
Company to purchase, in the market, up to a maximum
of 10% of its own ordinary shares either to be cancelled
or retained as treasury shares. The Directors will only
use this power after careful consideration, taking
into account the financial resources of the Company,
the Company’s share price and future funding
opportunities. The Directors will also take into account
the effects on earnings per share and the interests of
shareholders generally.
Rights Attaching to Shares
All shares have the same rights (including voting
and dividend rights and rights on a return of capital)
and restrictions as set out in the Articles, described
below. Except in relation to dividends which have been
declared and rights on a liquidation of the Company,
the shareholders have no rights to share in the profits
of the Company.
The Company’s shares are not redeemable. However,
following any grant of authority from shareholders, the
Company may purchase or contract to purchase any of
the shares on or off market, subject to the Companies
Act and the requirements of the Listing Rules.
No shareholder holds shares in the Company which
carry special rights with regard to control of the
Company.
Voting Rights
Each ordinary share entitles the holder to vote at
general meetings of the Company. A resolution put to
the vote of the meeting shall be decided on a show of
hands unless a poll is demanded. On a show of hands,
every member who is present in person or by proxy at
a general meeting of the Company shall have one vote.
On a poll, every member who is present in person or
by proxy shall have one vote for every share of which
they are a holder. The Articles provide a deadline for
submission of proxy forms of not less than 48 hours
before the time appointed for the holding of the
meeting or adjourned meeting. No member shall be
entitled to vote at any general meeting either in person
or by proxy, in respect of any share held, unless all
amounts presently payable in respect of that share
have been paid. Save as noted, there are no restrictions
on voting rights nor any agreement that may result in
such restrictions.
Restrictions on Transfer of Securities
The Articles do not contain any restrictions on the
transfer of ordinary shares in the Company other
than the usual restrictions applicable where any
amount is unpaid on a share. Certain restrictions
are also imposed by laws and regulations (such as
insider trading and market requirements relating to
close periods) and requirements of the Market Abuse
Regulation and the Company’s Securities Dealing Code
whereby Directors and all employees of the Company
require advance clearance to deal in the Company’s
securities.
Change of Control
Save in respect of a provision of the Company’s share
schemes which may cause options and awards granted
to employees under such schemes to vest on takeover,
there are no agreements between the Company and
its Directors or employees providing for compensation
for loss of office or employment (whether through
resignation, purported redundancy or otherwise)
because of a takeover bid.
2020 Annual General Meeting
The Annual General Meeting (“AGM”) will be held at
12 noon on 27 April 2020 at Hostelworld Group plc,
2nd Floor, One Central Park, Leopardstown, Dublin 18,
Ireland.
The Notice of Meeting which sets out the resolutions
to be proposed at the forthcoming AGM specifies
deadlines for exercising voting rights and appointing a
proxy or proxies to vote in relation to resolutions to be
passed at the AGM. All proxy votes will be counted and
the numbers for, against or withheld in relation to each
resolution will be announced at the AGM and published
on the Company’s website.
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99
DIRECTORS’ REPORT (CONTINUED)
Substantial Shareholders
At 31 December 2019, the Company had been notified, in accordance with chapter 5 of the Financial Conduct
Authority’s Disclosure and Transparency Rules (“DTR5 Notification”), of the following significant interests:
from the date when Financial Statements are signed)
on both base case and sensitised forecasts.
External Branches
Hostelworld Group plc is registered as a branch in
Ireland with branch registration number 908295.
Number of ordinary shares /
voting rights notified
Percentage of voting rights over ordinary shares of
€0.01 each and nature of holding
Shareholder
Premier Miton Group plc
LHC Capital
13,284,425
7,215,813
Unicorn Asset Management Limited
5,410,000
FIL Limited
Strategic Equity Capital plc
Aberforth Partners LLP
4,955,570
4,430,000
4,927,940
Burgundy Asset Management Limited
4,430,860
Allianz Global Investors GmbH
The Diverse Income Trust plc
4,046,400
3,019,504
13.90% (indirect)
7.55% (indirect)
5.66% (indirect)
5.18% (indirect)
5.18% (direct)
5.16% (indirect)
4.64% (indirect)
4.23% (direct - 0.03%; indirect – 4.20%)
3.16% (indirect)
As at the date of this report three further DTR5 Notifications had been received from the following:
LHC Capital notified the Company on 20 January 2020 of a decrease in their holding to 6,490,813 ordinary shares representing 6.79% of the issued share capital of the
Company (6.79% - indirect holding)
Premier Miton Group plc notified the Company on 29 January 2020 of an increase in their holding to 13,384,425 ordinary shares representing 14% of the issued share
capital of the Company (14% - indirect holding).
Premier Miton Group plc notified the Company on 3 February 2020 of a decrease in their holding to 12,425,326 ordinary shares representing 13.03% of the issued share
capital of the Company (13.03% - indirect holding)
Transactions with Related Parties
Please refer to note 20 to the Consolidated Financial
Statements on pages 114 to 159.
Events Post Year End
No significant events have occurred between 31
December 2019 and the date of the signing of this
Directors’ Report.
Future Developments
In August, we announced a strategically important
investment in an innovative hostel-focussed technology
business, Goki Pty Limited (“Goki”) based in Australia.
More details about Goki are included in the Chief
Executive’s Review, a business that provides a unique
and innovative guest management system for both
hostel owners and their guests. The Group has invested
with Goki in its ambitious growth plans over the next
three years and their unique technology solutions
will provide a significantly enhanced customer and
hostel experience. More recently we have announced
an investment in Counter App Limited (“Counter”), a
provider of tailored property management solutions
for the hostel industry. This product has been designed
from ground-up providing flexible “all-in-one”
workspaces for small chains and independent hostels.
Both Goki and Counter solutions allow Hostelworld
to position itself in a more active and central role
in the hostel ecosystem, thereby strengthening our
competitive position as the partner of choice for
hostel owners. The investments in Goki and Counter
are consistent with our previously stated strategy to
appraise complementary acquisitions and partnerships
that can accelerate our growth or enhance our product
offering to our customers or hostel partners.
The Group will continue to pursue new developments
to enhance shareholder value, through a combination
of organic growth, product delivery and other
development and investment opportunities.
Going Concern
The Directors have prepared cash flow forecasts that
include key assumptions in respect of the trading
subsidiary’s booking numbers, booking profiles,
commission rates and marketing costs. In making their
assessment, management have performed sensitivity
analysis on the forecasts. After making appropriate
enquiries, the Directors have a reasonable expectation
that the Company and the Group as a whole have
adequate resources to continue in operational
existence for the foreseeable future (at least one year
Accordingly, the Financial Statements have been
prepared on a going concern basis.
Indemnities and Insurance
The Company maintains appropriate insurance to
cover Directors’ and Officers’ liability for itself and
its subsidiaries. The Company also indemnifies
the Directors under a qualifying indemnity for the
purposes of section 236 of the Companies Act 2006 and
the Articles of Association. Such indemnities contain
provisions that are permitted by the director liability
provisions of the Companies Act and the Company’s
Articles of Association.
Research and Development
Innovation, specifically in the proposition on the
websites and mobile apps for both customers and
hostel partners, is a critical element of the strategy
and therefore of the future success of the Group.
Accordingly the majority of the Group’s research and
development expenditure is predominantly related to
this area.
Suppliers
The Group’s policy is to pay suppliers and creditors
sums due in accordance with the payment terms
agreed in the relevant contract with each such
supplier/creditor, provided the supplier has complied
with its obligations.
Environmental
Information on the Group’s greenhouse gas emissions
is set out in the Corporate Social Responsibility section
on pages 47 and 48 and forms part of this report by
reference.
Financial Instruments
Details of the financial risk management objectives and
policies of the Group, including exposure of the entity
to price risk, credit risk, liquidity risk and cash flow
risk are given on pages 152 and 153 in note 21 to the
Consolidated Financial Statements.
Political Contributions
During the year, no political donations were made.
Hostelworld Services Limited, a UK subsidiary of the
Company, is registered as a branch in Australia with
Australian registered body number 613076556.
Results and Dividends
The Group’s and Company’s audited Financial
Statements for the year are set out on pages 114 to
159. In accordance with the Group’s updated dividend
policy, the Directors recommend the payment of a final
dividend for the year ended 31 December 2019 of 2.1
euro cent per share amounting to €2.0m, to members
appearing on the register at close of business on 17
April 2020. This is to be approved by the shareholders
at the 2020 AGM. The recommended full year dividend
of 2.1 euro cent per share together with the interim
dividend of 4.2 euro cent per share paid in September
2019 brings the total dividend for the year ended 31
December 2019 to 6.3 euro cent per share.
Independent Auditor
Deloitte Ireland LLP has confirmed its willingness
to continue in office as Auditor of the Group. In
accordance with section 489 of the Companies Act 2006,
separate resolutions for the re-appointment of Deloitte
Ireland LLP as Auditors of the Group and for the Audit
Committee to determine the remuneration will be
proposed at the forthcoming AGM of the Company.
Disclosure of Information to Auditor
Each of the Directors has confirmed that:
• So far as the Director is aware, there is no relevant
audit information of which the Company’s Auditor is
unaware; and
• The Director has taken all the steps that he/she
ought to have taken as a Director to make him/
her aware of any relevant audit information and to
establish that the Company’s auditor is aware of that
information.
This confirmation is given and should be interpreted
in accordance with the provisions of Section 418 of the
Companies Act 2006.
The Section 172(1) Companies Act 2006, Statement is
set out on pages 39 to 41.
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Hostelworld Annual Report 2019
101
DIRECTORS’ REPORT (CONTINUED)
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 3 March 2020 and is signed on its
behalf by:
John Duggan
Company Secretary
3 March 2020
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF HOSTELWORLD GROUP PLC
Report on the audit of the financial statements
Opinion
In our opinion:
• The financial statements of Hostelworld Group plc
(the “Parent Company”) and its subsidiaries (the
“Group”) give a true and fair view of the state of the
Group’s and of the Parent Company’s affairs as at 31
December 2019 and of the Group’s profit for the year
then ended;
• The Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the
European Union;
• The Parent Company financial statements have
been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice,
including Financial Reporting Standard 101 “Reduced
Disclosure Framework”; and
• The financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
The financial statements we have audited comprise:
The Group financial statements:
• The Consolidated Income Statement;
• The Consolidated Statement of Comprehensive
Income;
• The Consolidated Statement of Financial Position;
• The Consolidated Statement of Changes in Equity;
• The Consolidated Statement of Cash Flows;
The Parent Company financial statements:
• The Company Statement of Financial Position;
• The Company Statement of Changes in Equity; and
The related notes 1 to 31, including a summary of
significant accounting policies as set out in note 1 to
the financial statements.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those
standards are further described in the “Auditor’s
responsibilities for the audit of the financial statements”
section of our report.
We are independent of the Group and the Parent
Company in accordance with the ethical requirements
that are relevant to our audit of the financial
statements in the UK, including the Financial Reporting
Council’s (the ‘FRC’s’) Ethical Standard as applied to
listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
opinion.
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INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF HOSTELWORLD GROUP PLC (CONTINUED)
Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
Carrying value of intangible assets;
Capitalisation of development costs; and
Taxation provisions
There have been no significant changes to the key audit matters since the prior
financial year report.
Materiality
The materiality that we used for the Group financial statements was €799,000
which was determined on the basis of the adjusted profit before tax (“Adjusted
PBT”).
Scoping
The structure of the Group’s finance function is such that the central Group
finance team in Dublin provides support to Group entities for the accounting
of the majority of transactions and balances. The audit work covering all of the
Group’s revenues and 99% of its net assets is undertaken and performed by an
audit team based in Dublin.
Significant changes in
our approach
There are no significant changes to our approach. This is consistent with the fact
that the operations of the Group are largely unchanged from the previous year.
Conclusions relating to principal risks, going
concern and viability statement
We have nothing to report in respect of the following
information in the annual report, in relation to which
ISAs (UK) or the Listing Rules require us to report to
you whether we have anything material to add or draw
attention to:
• The disclosures on pages 32 to 36 that describe the
principal risks, procedures to identify emerging risks
and an explanation of how these are being managed
or mitigated;
• The directors’ confirmation on page 37 that they
have carried out a robust assessment of the principal
and emerging risks facing the Group, including
those that would threaten its business model, future
performance, solvency or liquidity;
• The directors’ statement in note 1 to the financial
statements about whether the directors considered
it appropriate to adopt the going concern basis of
accounting in preparing the financial statements and
directors’ identification of any material uncertainties
to the Group and Parent Company’s ability to
continue to do so over a period of at least twelve
months from the date of approval of the financial
statements. This included considering the nature
of the Group, its business model and related risks
including where relevant the impact of Brexit, the
requirements of the applicable financial reporting
framework and the system of internal control. We
evaluated the directors’ assessment of the Group’s
ability to continue as a going concern, including
challenging the underlying data and key assumptions
used to make the assessment, and evaluated the
directors’ plans for future actions in relation to their
going concern assessment;
• Whether the directors’ statement relating to
the prospects of the Group required by Listing
Rule 9.8.6R(3) is materially inconsistent with our
knowledge obtained in the audit; or
• The directors’ explanation on page 37 as to how they
have assessed the prospects of the Group and Parent
Company, over what period they have done so and
why they consider that period to be appropriate,
and their statement as to whether they have a
reasonable expectation that the Group and Parent
Company will be able to continue in operation and
meet its liabilities as they fall due over the period of
their assessment, including any related disclosures
drawing attention to any necessary qualifications or
assumptions.
Key audit matters
Key audit matters are those matters that, in our
professional judgement, were of most significance in
our audit of the financial statements of the current
period and include the most significant assessed risks
of material misstatement (whether or not due to fraud)
that we identified. These matters included those which
had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing
the efforts of the engagement team.
These matters were addressed in the context of our
audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a
separate opinion on these matters.
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105
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF HOSTELWORLD GROUP PLC (CONTINUED)
Carrying Value of Intangible Assets
Capitalisation of Development Costs
Key audit matter
description
At 31 December 2019, intangible assets (including goodwill) had a carrying value of
€109.1m representing 74% of the Group’s total assets.
Key audit matter
description
Group management have allocated goodwill to Cash Generating Units (“CGU”s)
and have developed a model to calculate the value in use of the assets and to
review the carrying value of goodwill and other intangibles for impairment.
There is a risk that certain incorrect inputs or inappropriate assumptions, in
particular projected cash flows, growth rate and discount rate could be included
in the impairment assessment model calculated by management leading to an
impairment charge that has not been included in the Group’s financial statements.
Small variances in key assumptions have the potential to reduce the value in use
calculation and accordingly the headroom significantly.
Refer to Notes 2 and 10 to the financial statements.
The Audit Committee has included their assessment of this risk on page 72.
How the scope of our
audit responded to the
key audit matter
We evaluated the design and determined the implementation of the relevant
controls in place for determining when an impairment review is required for
intangible assets.
Where an impairment review was required, we challenged the underlying
assumptions and obtained audit evidence to test those assumptions within the
Group’s impairment model, including cash flow projections and growth rates,
which we compared to relevant industry data. We used our internal valuation
specialists to determine an acceptable range of discount rates and compared our
range to that determined by management. We performed a sensitivity analysis on
the underlying assumptions noted above to determine if there were any scenarios
whereby a reasonably possible expectation of impairment could be present.
We considered the adequacy of the disclosures in relation to goodwill and
intangibles and whether they meet the requirements of the relevant accounting
standards.
Key observations
We have no observations that impact on our audit in respect of the carrying value
of intangible assets.
At 31 December 2019, internally generated capitalised development costs
amounted to €2.5m. Development expenditure in relation to internally generated
intangible assets is capitalised when all of the criteria as set out in IAS 38
“Intangible Assets” are met.
There is a risk that additions are made to capitalised development costs before all
the required capitalisation criteria are met.
Expenditure is capitalised from the date when the intangible asset first meets
the recognition criteria and in determining the amount to be capitalised,
management make judgements regarding expected future cash generation of the
asset.
Refer to Notes 3 and 10 to the financial statements.
The Audit Committee has included their assessment of this risk on page 72.
How the scope of our
audit responded to the
key audit matter
In response to this key audit matter, we obtained an understanding of the process
and related controls for ensuring appropriate capitalisation of development
costs. We evaluated the design and determined the implementation of the
relevant controls in place to separately identify when development activities meet
recognition criteria.
We reviewed the capitalised project register and completed procedures to
determine whether the expenditure was recorded accurately and whether it met
the required capitalisation criteria in accordance with IAS 38.
We agreed the amount of development costs capitalised to underlying
documentation detailing cost per project, including timesheet data.
Key observations
No significant matters that impact on our audit arose from our work.
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107
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF HOSTELWORLD GROUP PLC (CONTINUED)
Taxation Provision
Key audit matter
description
The global nature of the Group’s business means it is subject to taxation in
numerous jurisdictions and cross-border transactions can be challenged by
taxation authorities resulting in tax exposures.
As a result of the interaction of tax laws in different jurisdictions, there is
significant complexity in determining the most appropriate transfer pricing rates
and thus the appropriate tax liabilities in each jurisdiction.
There is a risk that tax authorities could have different interpretations to those of
the management resulting in potential misstatement of taxation provisions.
Refer to Note 2 and 8 to the financial statements.
The Audit Committee has included their assessment of this risk on page 73.
How the scope of our
audit responded to the
key audit matter
We obtained an understanding of the Group’s tax strategy and management’s
process for determining the appropriate transfer pricing rates applicable to cross-
border transactions.
Assisted by our transfer pricing tax specialists, who are part of the audit team, we
reviewed material cross-border intergroup agreements and transactions and the
underlying data used in determining applicable royalty and mark-up rates and
assessed the appropriateness of the royalties and mark-up rates being used.
We challenged and evaluated management’s assumptions and critical estimates
and judgements in respect of tax exposures, based on the royalty and mark-up
rates utilised and their interpretation of the relevant tax laws in jurisdictions
where the Group has significant operations.
Based on our professional judgement, we determined materiality for the financial statements as a whole as
follows:
Group financial statements
Parent company financial statements
Materiality
€799,000 (2018: €975,000)
€159,000 (2018: €195,000)
0.5% of investments
Parent Company materiality is based
on 0.5% of value of investments capped
at 20% of Group materiality.
We have considered the value of
investments to be the appropriate
benchmark for determining materiality
as the Parent Company is the Group
investment holding entity.
Basis for determining
materiality
Rationale for the
benchmark applied
5% of adjusted profit before tax
The pre-tax profit was adjusted to
account for the exceptional costs that
are incurred, as well as the net finance
costs, the share options costs and the
amortisation of the intangible assets
(“Adjusted PBT”).
We have considered the Adjusted PBT
to be the appropriate benchmark for
determining materiality because it is
the most important measure for users
of the Group’s financial statements.
It is also a key measure used by the
Group in reporting results to allow a
better understanding of the adjusted
trading of the Group. We have
considered quantitative and qualitative
factors such as understanding the
entity and its environment, history
of misstatements, complexity of the
Group and reliability of the control
environment.
Key observations
We have no observations that impact on our audit in respect of the amounts and
disclosures related to the taxation provisions.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable
that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use
materiality both in planning the scope of our audit work and in evaluating the results of our work.
PBT
Adjusted PBT
€15,996k
Group materiality
Group materiality
€799k
Component
materiality range
€710k to €79k
Audit Committee
reporting threshold
€39.95k
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess
of €39,950 (2018: €48,750), as well as differences below that threshold that, in our view, warranted reporting
on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.
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109
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF HOSTELWORLD GROUP PLC (CONTINUED)
An overview of the scope of our audit
The structure of the Group’s finance function is such
that the central Group finance team in Dublin provides
support to Group entities for the accounting of the
majority of transactions and balances. The audit work
was undertaken and performed by an audit team
based in Dublin.
We determined the scope of our Group audit on an
entity level basis, assessing components against the
risk of material misstatement at the Group level. Based
on this assessment, we focussed our work on three
legal entities covering 100% of revenue and 99% of net
assets. These legal entities, which were subject to a full
scope audit, were Hostelworld Group plc, Hostelworld.
com Limited and Hostelworld Services Limited. We also
carried out specified audit procedures on Hostelworld
Services Portugal and WRI Nominees DAC.
At the Parent Company level, we also tested the
consolidation process and carried out review
procedures to confirm our conclusion that there were
no significant risks of material misstatement of the
aggregated financial information of the remaining
components not subject to a full scope audit or
specified audit procedures.
Other information
The directors are responsible for the other information.
The other information comprises the information
included in the Annual Report, other than the financial
statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the
other information and, except to the extent otherwise
explicitly stated in our report, we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial
statements, our responsibility is to read the other
information and, in doing so, consider whether the
other information is materially inconsistent with
the financial statements or our knowledge obtained
in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required
to determine whether there is a material misstatement
in the financial statements or a material misstatement
of the other information. If, based on the work we
have performed, we conclude that there is a material
misstatement of this other information, we are
required to report that fact.
In this context, matters that we are specifically required
to report to you as uncorrected material misstatements
of the other information include where we conclude
that:
• Fair, balanced and understandable – the statement
given by the directors that they consider the annual
report and financial statements taken as a whole is
fair, balanced and understandable and provides the
information necessary for shareholders to assess the
Group’s position and performance, business model
and strategy, is materially inconsistent with our
knowledge obtained in the audit; or
• Audit committee reporting – the section
describing the work of the audit committee does not
appropriately address matters communicated by us
to the audit committee; or
• Directors’ statement of compliance with the UK
Corporate Governance Code – the parts of the
directors’ statement required under the Listing Rules
relating to the company’s compliance with the UK
Corporate Governance Code containing provisions
specified for review by the auditor in accordance
with Listing Rule 9.8.10R (2) do not properly disclose
a departure from a relevant provision of the UK
Corporate Governance Code.
We have nothing to report in respect of these matters.
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement, the directors are responsible for the
preparation of the financial statements and for being
satisfied that they give a true and fair view, and for
such internal control as the directors determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors
are responsible for assessing the Group’s and the
Parent Company’s ability to continue as a going
concern, disclosing as applicable, matters related to
going concern and using the going concern basis
of accounting unless the directors either intend to
liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole are
free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes
the auditor’s opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit
conducted in accordance with International Standards
on Auditing (UK) (ISAs (UK)) will always detect a
material misstatement when it exists. Misstatements
can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
Details of the extent to which the audit was considered
capable of detecting irregularities, including fraud and
non-compliance with laws and regulations are set out
below.
As part of an audit in accordance with ISAs (UK),
we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
• Identify and assess the risks of material
misstatement of the consolidated financial
statements, whether due to fraud or error, design
and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the
override of internal control;
• Obtain an understanding of internal control relevant
to the audit in order to design audit procedures
that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the
effectiveness of the Group’s and Parent Company’s
internal control;
• Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting
estimates and related disclosures made by the
directors;
• Conclude on the appropriateness of the directors’
use of the going concern basis of accounting and,
based on the audit evidence obtained, whether
a material uncertainty exists related to events or
conditions that may cast significant doubt on the
Group’s and Parent Company’s ability to continue
as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention
in the auditor’s report to the related disclosures in
the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the
date of the auditor’s report. However, future events
or conditions may cause the Group and Parent
Company to cease to continue as a going concern;
• Evaluate the overall presentation, structure and
content of the financial statements, including the
disclosures, and whether the financial statements
represent the underlying transactions and events in
a manner that achieves fair presentation (i.e gives a
true and fair view); and
• Where the auditor is required to report on
consolidated financial statements, obtains sufficient
appropriate audit evidence regarding the financial
information of the entities or business activities
within the Group to express an opinion on the
consolidated financial statements. The Group auditor
is responsible for the direction, supervision and
performance of the Group audit. The Group auditor
remains solely responsible for the audit opinion.
We communicate with those charged with governance
regarding, among other matters, the planned scope
and timing of the audit and significant audit findings,
including any significant deficiencies in internal control
that the auditor identifies during the audit.
For listed entities and public interest entities, we
also provide those charged with governance with a
statement that we have complied with relevant ethical
requirements regarding independence, including the
FRC’s Ethical Standard, and communicates with them
all relationships and other matters that may reasonably
be thought to bear on our independence, and where
applicable, related safeguards.
Where we are required to report on key audit matters,
from the matters communicated with those charged
with governance, we determine those matters that
were of most significance in the audit of the financial
statements of the current period and are therefore
the key audit matters. We describe these matters in
the auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in
extremely rare circumstances, the auditor determines
that a matter should not be communicated in the
auditor’s report because the adverse consequences of
doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
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111
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF HOSTELWORLD GROUP PLC (CONTINUED)
Extent to which the audit was considered capable of
detecting irregularities, including fraud
We identify and assess the risks of material
misstatement of the financial statements, whether
due to fraud or error, and then design and perform
audit procedures responsive to those risks, including
obtaining audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
Identifying and assessing potential risks related to
irregularities
In identifying and assessing risks of material
misstatement in respect of irregularities, including
fraud and non-compliance with laws and regulations,
we considered the following:
• Results of our enquiries of management, internal
audit and the audit committee about their own
identification and assessment of the risks of
irregularities;
• Any matters we identified having obtained and
reviewed the Group’s documentation of their policies
and procedures relating to:
• Identifying, evaluating and complying with laws
and regulations and whether they were aware of
any instances of non-compliance;
• Detecting and responding to the risks of fraud
and whether they have knowledge of any actual,
suspected or alleged fraud; and
• The internal controls established to mitigate risks
related to fraud or non-compliance with laws and
regulations;
• The matters discussed among the audit engagement
team and involving relevant internal specialists,
including tax and valuations specialists regarding
how and where fraud might occur in the financial
statements and any potential indicators of fraud.
As a result of these procedures, we considered the
opportunities and incentives that may exist within
the organisation for fraud and identified the greatest
potential for fraud in the following areas: management
override of controls and revenue recognition. In
common with all audits under ISAs (UK), we are also
required to perform specific procedures to respond to
the risk of management override.
We also obtained an understanding of the legal and
regulatory framework that the Group and Parent
Company operates in, focussing on provisions of those
laws and regulations that had a direct effect on the
determination of material amounts and disclosures in
the financial statements. The key laws and regulations
we considered in this context included the UK
Companies Act, London Stock Exchange Listing Rules
and tax legislation.
In addition, we considered provisions of other laws
and regulations that do not have a direct effect on the
financial statements but compliance with which may
be fundamental to the Group’s and Parent Company’s
ability to operate or to avoid a material penalty.
Audit response to risks identified
As a result of performing the above, we did not identify
any key audit matters related to the potential risk of
fraud or non-compliance with laws and regulations.
In addition to the above, our procedures to respond to
risks identified included the following:
• Reviewing the financial statement disclosures and
testing to supporting documentation to assess
compliance with provisions of relevant laws and
regulations described as having a direct effect on the
financial statements;
• Enquiring of management, the audit committee
and external legal counsel concerning actual and
potential litigation and claims;
• Reading minutes of meetings of those charged with
governance and reviewing internal audit reports; and
• In addressing the risk of fraud through management
override of controls, testing the appropriateness of
journal entries and other adjustments; assessing
whether the judgements made in making accounting
estimates are indicative of a potential bias; and
evaluating the business rationale of any significant
transactions that are unusual or outside the normal
course of business
We also communicated relevant identified laws and
regulations and potential fraud risks to all engagement
team members including internal specialists, and
remained alert to any indications of fraud or non-
compliance with laws and regulations throughout the
audit.
We have nothing to report in respect of the provisions
in the Companies Act 2006 which require us to report to
you if, in our opinion, certain disclosures of directors’
remuneration have not been made or the part of the
directors’ remuneration report to be audited is not in
agreement with the accounting records and returns.
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion the part of the directors’ remuneration
report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the
course of the audit:
• The information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and
• The strategic report and the directors’ report have
been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the
Group and the Parent Company and their environment
obtained in the course of the audit, we have not
identified any material misstatements in the strategic
report or the directors’ report.
Matters on which we are required to report by
exception
We have nothing to report in respect of the provisions
in the Companies Act 2006 which require us to report to
you if, in our opinion:
• We have not received all the information and
explanations we require for our audit; or
• Adequate accounting records have not been kept
by the Parent Company, or returns adequate for
our audit have not been received from branches not
visited by us; or
• The Parent Company financial statements are not in
agreement with the accounting records and returns.
Other matters that we are required to address
Following the recommendation of the audit committee,
we were appointed by the Board at its annual general
meeting in 2015 to audit the financial statements for
the year ending 31 December 2015 and subsequent
financial periods. The period of total uninterrupted
engagement including previous renewals and
reappointments of the firm is 5 years, covering the
years ending 31 December 2015 to 31 December 2019.
We confirm that the non-audit services prohibited by
the FRC’s Ethical Standard were not provided to the
Group or the Parent Company.
Our audit opinion is consistent with the additional
report to the audit committee we are required to
provide in accordance with ISAs (UK).
Use of our report
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s
members those matters we are required to state to
them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the
company and the company’s members as a body, for
our audit work, for this report, or for the opinions we
have formed.
Daniel Murray (senior statutory auditor)
For and on behalf of Deloitte Ireland LLP
Chartered Accountant and Statutory Audit Firm
Dublin, Ireland
3 March 2020
With a 27% increase compared to past generations, people who’ve recently travelled find themselves regaling others back home with their volunteering experiences. 1 in 4 of our Generation Z customers participate in volunteering activity during their trips.*SEEK NEW THRILLSKEEP IT SIMPLEUse simplicity and smart thinking to be agile and improve everything we do. Let’s make complexity our enemy and simplicity our mantra.112SHARE NEW STORIESFINANCIAL STATEMENTS114Consolidated Income Statement115Consolidated Statement of Comprehensive Income116Consolidated Statement of Financial Position117Consolidated Statement of Changes in Equity118Consolidated Statement of Cash Flows119Notes to the Consolidated Financial Statements154Company Statement of Financial Position155Company Statement of Changes in Equity156Notes to the Company Financial Statements113 114
Financial Statements
Hostelworld Annual Report 2019
115
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
Profit for the year
2019
€’000
8,394
2018
€’000
5,691
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
(1)
(2)
Total comprehensive income for the year attributable
to equity owners of the parent company
8,393
5,689
Revenue
Administrative expenses
Depreciation and amortisation
Operating profit
Financial income
Financial costs
Share of results of associate
Notes
3
4
4
2019
€’000
2018
€’000
80,672
82,087
(63,434)
(61,939)
(13,946)
(13,453)
3,292
6,695
59
(224)
(116)
20
(63)
-
7
13
Profit before taxation
3,011
6,652
Taxation
8
5,383
(961)
Profit for the year attributable to the equity
owners of the parent company
Basic earnings per share (euro cent)
Diluted earnings per share (euro cent)
8,394
5,691
9
9
8.78
8.78
5.95
5.95
116
Financial Statements
Hostelworld Annual Report 2019
117
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Notes
Share capital
€’000
956
Foreign
currency
translation
reserve
€’000
18
Share based
payment
reserve
€’000
960
Retained
earnings
€’000
145,015
Total
€’000
146,949
Balance at 1 January 2018
Total comprehensive income for
the year
Dividends
22
Debit to equity for equity settled
share based payments
-
-
-
5,691
(16,056)
-
(2)
-
-
-
-
5,689
(16,056)
(330)
(330)
Balance at 31 December 2018
956
134,650
16
630
136,252
Effect of initial application of
IFRS 16
Balance at 1 January 2019 – as
restated
Total comprehensive income for
the year
Dividends
22
Credit to equity for equity settled
share based payments
1
-
(416)
-
-
(416)
956
134,234
-
-
-
8,394
(12,615)
-
16
(1)
-
-
630
135,836
-
-
8,393
(12,615)
158
158
Balance at 31 December 2019
956
130,013
15
788
131,772
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Investment in associate
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Issued capital and reserves attributable to equity owners of the
parent
Share capital
Foreign currency translation reserve
Share based payment reserve
Retained earnings
Total equity attributable to equity holders of the parent company
Non-current liabilities
Deferred tax liabilities
Deferred consideration
Lease liabilities
Current liabilities
Trade and other payables
Lease liabilities
Corporation tax
Total liabilities
Total equity and liabilities
Notes
2019
€’000
2018
€’000
10
11
12
13
15
16
12
13
14
17
14
109,120
117,726
5,353
6,727
2,723
3,256
99
-
123,923
121,081
4,980
19,365
24,345
2,814
25,974
28,788
148,268
149,869
956
15
788
956
16
630
130,013
131,772
134,650
136,252
144
873
3,422
4,439
262
-
-
262
11,074
12,946
869
114
12,057
16,496
-
409
13,355
13,617
148,268
149,869
The financial statements were approved by the Board of Directors and authorised for issue on 3 March 2020 and
signed on its behalf by:
Gary Morrison
Chief Executive Officer
TJ Kelly
Chief Financial Officer
Hostelworld Group plc registration number 9818705 (England and Wales)
118
Financial Statements
Hostelworld Annual Report 2019
119
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
Cash flows from operating activities
Profit before tax
Depreciation of property, plant and equipment
Amortisation of intangible assets
Share of results of associate
Financial income
Financial expense
Employee equity settled share based payment expense/ (credit)
Changes in working capital items:
(Decrease)/ increase in trade and other payables
(Increase)/ decrease in trade and other receivables
Cash generated from operations
Interest paid
Interest received
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Acquisition/capitalisation of intangible assets
Purchases of property, plant and equipment
Acquisition of investment in associate
Net cash used in investing activities
Cash flows from financing activities
Repayments of obligations under lease liabilities
Dividends paid
Net cash used in financing activities
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the year
Cash and cash equivalents comprise cash and short term bank deposits only.
Notes
4
4
13
7
19
10
11
13
2019
€’000
3,011
2,425
2018
€’000
6,652
1,232
11,521
12,221
116
(59)
224
156
-
(20)
63
(346)
(2,252)
(2,166)
3,129
1,152
12,976
24,083
(224)
59
(1,516)
(63)
20
(749)
11,295
23,291
(2,915)
(1,839)
(190)
(1,075)
(4,180)
(714)
-
(2,553)
(1,109)
-
22
(12,615)
(16,056)
(13,724)
(16,056)
(6,609)
25,974
4,682
21,294
-
(2)
19,365
25,974
1. SIGNIFICANT ACCOUNTING POLICIES
General Information
Hostelworld Group plc, hereinafter “the Company”, is a public limited company incorporated in the United
Kingdom on the 9 October 2015. The registered office of the Company is Floor 2, 52 Bedford Row, London, WC1R
4LR, United Kingdom.
The Company and its subsidiaries (together “the Group”) provide software and data processing services that
facilitate hostel, B&B, hotel and other accommodation bookings worldwide.
The Company’s shares are quoted on the Euronext Dublin and London Stock Exchange.
The Company and consolidated financial statements were approved and authorised for issue by the Board of
Directors on 3 March 2020.
Basis of Preparation
The consolidated financial statements have been prepared in accordance with the European Union (“the EU”)
adopted International Financial Reporting Standards (“IFRS”), International Financial Reporting Interpretations
Committee (“IFRIC”) interpretations and those parts of the Companies Act 2006, applicable to companies
reporting under IFRS.
IFRS as adopted by the European Union (“the EU”) comprise standards and interpretations approved by the
International Accounting Standards Board (“IASB”). The consolidated financial statements comply with Article 4 of
the EU IAS Regulation. IFRS adopted by the EU differs in certain respects from IFRS issued by the IASB. References
to IFRS hereafter refer to IFRS adopted by the EU.
The consolidated financial statements have been prepared under the historical cost basis. The investment in
associate is accounted for using the equity method.
In the preparation of these consolidated financial statements the accounting policies set out below have been
applied consistently by all Group companies. The consolidated financial statements are presented in euro, which
is the functional currency of all Group companies.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the Group’s
accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions
and estimates are significant to the consolidated financial statements are disclosed in note 2.
The directors have assessed the ability of the Company and Group to continue as a going concern and are
satisfied that it is appropriate to prepare the financial statements on a going concern basis of accounting. In
doing so, the directors have assessed that there are no material uncertainties to the Company’s and Group’s
ability to continue as a going concern for the foreseeable future, being a period of at least 12 months from the
date of approval of the financial statements.
120
Financial Statements
Hostelworld Annual Report 2019
121
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company (its subsidiaries) all of which prepare financial statements up to 31 December.
Control is achieved when the Company has the power over the investee, is exposed, or has rights, to variable
return from its investment with the investee and has the ability to use its power to affect its returns. The financial
statements of subsidiaries are included in the consolidated financial statements from the date
that control commences until the date that control ceases. All intragroup assets and liabilities, equity, income,
expenses and cash flows relating to transactions between the members of the Group are eliminated on
consolidation.
Associates
Associates are entities over which the Group has significant influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but is not control over those policies.
Investments in associates are accounted for using the equity method of accounting and are initially recognised
at cost. On acquisition of the investment in associate, any excess of the cost of the investment over the Group’s
share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which
is included within the carrying value of the investment.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in ‘Share of results of
associate’ in the consolidated income statement, and its share of post-acquisition movements in reserves is
recognised in the consolidated statement of changes in equity. The cumulative post-acquisition movements
are adjusted against the carrying amount of the investment, less any impairment in value. Where indicators of
impairment arise, the carrying amount of the associate is tested for impairment by comparing its recoverable
amount with its carrying amount.
The requirements of IAS 36 are applied to determine whether it is necessary to recognise any impairment loss
with respect to the Group’s investment in an associate. When necessary, the entire carrying amount of the
investment (including goodwill) is tested for impairment in accordance with IAS 36 as a single asset by comparing
its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount.
Any impairment loss recognised is not allocated to any asset, including goodwill that forms part of the carrying
amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the
extent that the recoverable amount of the investment subsequently increases.
Unrealised gains arising from transactions with associates are eliminated to the extent of the Group’s interest in
the entity. Unrealised losses are eliminated to the extent that they do not provide evidence of impairment. When
the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not
recognise further losses unless the Group has incurred obligations or made payments on behalf of the associate.
The accounting policies of associates are amended where necessary to ensure consistency of accounting
treatment at Group level.
When the Group ceases to have significant influence, any retained interest in the entity is re-measured to its
fair value at the date when significant influence is lost with the change in carrying amount recognised in the
consolidated income statement. The Group also reclassifies any movements previously recognised in other
comprehensive income to the consolidated income statement.
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of consolidation (Continued)
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a
business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values
of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and
the equity interests issued by the Group in exchange for control of the acquiree. Acquisition related costs are
generally recognised in the consolidated income statement as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair
value at the acquisition date, except that:
• Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are
recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
• Liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based
payment arrangements of the Group entered into to replace share-based payment arrangements of the
acquiree are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and
• Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held
for Sale and Discontinued Operations are measured in accordance with that standard.
The fair value of the assets and liabilities are based on valuations using assumptions deemed by management to
be appropriate. Professional valuers are engaged when it is deemed appropriate to do so.
Goodwill represents the excess of the aggregate of the consideration transferred and the amount of any non-
controlling interest in the acquired entity over the net identifiable assets acquired.
Non-controlling interests
Non-controlling interests represent the portion of the equity of a subsidiary not attributable either directly or
indirectly to the Group and are presented separately in the consolidated income statement and within equity
in the consolidated statement of financial position, distinguished from shareholders’ equity attributable to the
owners of the parent Company.
New standards, amendments and interpretations issued, but not yet effective
At the date of authorisation of these financial statements, the following standards and interpretations which have
not been applied in these financial statements were in issue but not yet effective:
Amendments to IFRS 3 Business Combinations
Q1 2020
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform
1 January 2020
IFRS 17 Insurance Contracts
Amendments to IAS 1 and IAS 8 Definition of Material
Amendments to IAS 1 Presentation of Financial Statements: Classification of
Liabilities as Current or Non-current
Not yet endorsed
1 January 2020
Not yet endorsed
Amendments to References to the Conceptual Framework in IFRS Standards
1 January 2020
122
Financial Statements
Hostelworld Annual Report 2019
123
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Changes in accounting policies
IFRS 16
In the current year, the Group has applied IFRS 16 Leases which replaced IAS 17 Leases and related
interpretations. IFRS 16 provides guidance on the classification, recognition and measurement of leases. The
standard has primarily affected the accounting for the Group’s operating leases relating to office premises. The
Group has applied IFRS 16 from its effective date, 1 January 2019.
Under the new standard, the distinction between operating and finance leases is removed for lessees and almost
all leases are reflected in the statement of financial position. As a result, an asset (the right of use of the leased
item) and a financial liability to pay rental expenses are recognised. Fixed rental expenses are removed from the
consolidated income statement and are replaced with finance costs on the lease liability and depreciation on
the right of use asset. The only exemptions are short-term and low-value leases. The standard introduces new
estimates and judgemental thresholds that affect the identification, classification and measurement of lease
transactions. More extensive disclosures, both qualitative and quantitative, are also required.
The Group adopted the new standard by applying the modified retrospective approach and availed of the
recognition exemption for short-term leases. Payments associated with short-term leases are recognised on a
straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or
less.
The Group has not restated the prior period on adoption, as permitted under the specific transitional provisions
in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore
recognised in the opening balance sheet on 1 January 2019.
On transition, the lease liability was based on the present value of remaining lease payments and the right of use
asset was an amount equal to the lease liability adjusted for prepaid/accrued payments. The lease payments have
been discounted using the Group’s incremental borrowing rate of 3.3% which was applied to the lease liabilities
on 1 January 2019.
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the
standard - the use of a single discount rate to a portfolio of leases with reasonably similar characteristics, the
accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as
short-term leases and the use of hindsight in determining the lease term where the contract contains options to
extend or terminate the lease. The Group has elected not to reassess whether a contract is, or contains a lease at
the date of initial application. Instead, for contracts entered into before the transition date the group relied on its
assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.
The following reconciliation shows the difference between the operating lease commitments as disclosed in the
2018 Annual Report (under IAS 17) and the lease liability recognised in the consolidated statement of financial
position on 1 January 2019, date of initial application of IFRS 16:
Operating lease commitments disclosed as at 31 December 2018
Adjustments as a result of different treatment to extension/ termination options
Discounted using the Group’s incremental borrowing rate
Lease liability recognised as at 1 January 2019
€’000
4,502
1,470
(611)
5,361
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Changes in accounting policies (Continued)
IFRS 16 (Continued)
The adoption of the new standard had the following impact on the Group’s consolidated financial statements
from 1 January 2019 to 31 December 2019:
Consolidated Income Statement - Administrative expenses decreased by €1,135k as the Group previously
recognised rental expenses therein. Depreciation and finance costs increased by €1,061k and €178k respectively,
as a result of the requirement to capitalise a right of use asset and depreciate over the term of the lease, and the
resulting finance cost which is applied annually to the lease liability. As a result, operating profit, Adjusted EBITDA
and Adjusted PAT (existing alternative performance measures as defined in the Financial Review) are impacted by
the implementation of IFRS 16.
Total lease expenses will increase in the early years of implementation of IFRS 16 due to the front-loading effect of
finance charges versus the straight-line rent expense under IAS 17 Leases.
Consolidated Statement of Financial Position - At 1 January 2019, the Group calculated the lease commitments
outstanding and applied the appropriate discount rate to calculate the present value of the lease commitment
which are recognised as a liability and a right of use asset on the Group’s statement of financial position.
The change in accounting policy had the following impact on the statement of financial position as at 1 January
2019 and 31 December 2019:
Property, plant and equipment
Lease liabilities
31 December
2019
01 January
2019
€’000
3,272
4,291
€’000
4,294
5,361
Lease incentives of €510k previously recognised with respect to operating leases have been derecognised and the
amount was factored into the measurement of the right of use assets and lease liabilities.
The net impact on opening retained earnings of the Group on adoption of IFRS 16 was a decrease of €416k as
detailed below:
Retained earnings as at 31 December 2018
Initial application of IFRS 16
Lease incentives no longer recognised
Recognition of deferred tax asset on initial application of IFRS 16
Opening retained earnings as at 1 January 2019
€’000
134,650
(1,067)
510
141
134,234
124
Financial Statements
Hostelworld Annual Report 2019
125
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Changes in accounting policies (Continued)
IFRS 16 (Continued)
Consolidated Statement of Cash Flows – Under IFRS 16, lessees must present (i) short term lease payments,
payments for leases of low value assets and variable lease payments not included in the measurement of the
lease liability as part of operating activities; (ii) cash paid on the interest portion of a lease liability as either
operating activities or financing activities, as permitted by IAS 7 (the Group has opted to include interest paid
as part of operating activities); and (iii) cash payments for the principal portion for a lease liability, as part of
financing activities. Under IAS 17, all lease payments on operating activities were presented as part of cash flows
from operating activities.
Consequently, the net cash generated by operating activities has increased by €1,109k, being the lease payments,
and net cash used in financing activities has increased by the same amount. The adoption of IFRS 16 did not have
an impact on net cash flows.
The impact of the application of IFRS 16 on basic and diluted earnings per share is disclosed in note 9.
Aside from the adoption of IFRS 16, since the last Annual Report there are a number of amendments to existing
accounting standards and interpretations that have been adopted. These had no material impact on the
disclosures or on the amounts reported in these consolidated financial statements.
IFRIC 23 Uncertainty over Income Tax Treatments is effective for the financial year beginning on 1 January
2019. IFRIC 23 sets out how to determine the accounting tax position when there is uncertainty over income
tax treatments. The directors have assessed that the Group’s accounting tax position is consistent with the tax
treatment used in its income tax filings.
Revenue recognition
The Group generates substantially all of its revenues from the technology and data processing fees and service
fees that it charges to accommodation providers and the transaction service fees it charges to consumers. The
Group also generates revenues from technology and data processing fees that it charges to providers of other
travel products and associated transaction service fees, from cancellation protection fees, payment protection
fees and from advertising services. Revenue is recognised at the time the reservation is made in respect of non-
refundable commission on the basis that the Group has met its performance obligations at the time the booking
is made. In respect of the free cancellation product, which offers the traveller the opportunity to make a booking
on a free cancellation basis and to receive a refund of their deposit in certain circumstances, such related revenue
is not recognised until the last cancellation date has passed as one party can withdraw from the contract until
such a date has passed.
Where the Group provides an ancillary service to allow a flexible booking option which allows a booking to be
cancelled for no charge or a new booking to be made, a portion of such revenue is deferred, until such time as
the related cancellation date has passed or for a six month period from the date of cancellation, at which time
the credit expires. Advertising revenue and revenue from other services are recognised over the period when the
service is performed. Revenue is measured at the fair value of the consideration received or receivable.
Revenue is stated net of discount, sales taxes and value added taxes.
Leases
The Group assesses whether a contract is or contains a lease, at inception of the contract. For contracts where
the Group is a lessee, a right of use asset is recognised, representing the Group’s right to use the underlying
asset and a lease liability is also recognised for the Group’s obligation to make lease payments during the lease
term. The lease term of each contract is determined as the non-cancellable period of the lease, together with any
periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered
by an option to terminate the lease (break option), if it is reasonably certain not to exercise that option. For short
term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets, the Group
recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leases (Continued)
The right of use asset is initially measured at cost and subsequently valued at cost less accumulated depreciation
and impairment losses. It is adjusted where a lease modification results in a remeasurement of the lease liability.
Right of use assets are depreciated over the shorter period of lease term and useful life of the underlying asset.
The depreciation starts at the commencement date of the lease.
Whenever the Group incurs an obligation to restore the underlying asset to the condition required by the terms
and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs
relate to a right of use asset, the costs are included in the related right of use asset.
The carrying value of these assets are reviewed at the end of each reporting period to determine whether there is
any indication that the assets have suffered an impairment loss. The Group applies IAS 36 to determine whether a
right of use asset is impaired and accounts for any identified impairment loss as described in the ‘Property, Plant
and Equipment’ policy.
Lease liabilities are measured at the present value of the future lease payments. The lease payments are
discounted using the Group’s incremental borrowing rate. Subsequently the lease liability is increased to
reflect interest on the lease liability and reduced for payments made. The lease liability is remeasured for lease
modifications or reassessments.
Lease payments included in the measurement of the lease liability comprise: (i) Fixed lease payments less any
lease incentives receivable; (ii) Variable lease payments that depend on an index or rate, initially measured
using the index or rate at the commencement date; (iii) The amount expected to be payable by the lessee under
residual value guarantees; (iv) The exercise price of purchase options, if the lessee is reasonably certain to
exercise the options; and (v) Payments of penalties for terminating the lease, if the lease term reflects the exercise
of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated statement of financial position. The lease
liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group re-measures the lease liability (and makes a corresponding adjustment to the related right of use
asset) whenever: (i) The lease term has changed or there is a significant event or change in circumstances
resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is
re-measured by discounting the revised lease payments using a revised discount rate. (ii) The lease payments
change due to changes in an index or rate or a change in expected payment under a guaranteed residual value,
in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged
discount rate (iii) A lease contract is modified and the lease modification is not accounted for as a separate lease,
in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the
revised lease payments using a revised discount rate at the effective date of the modification.
Cash paid on the interest portion of a lease liability is included as part of operating activities in the consolidated
cash flow statement cash payments for the principal portion of a lease liability are included as part of financing
activities.
Exceptional items
Exceptional items by their nature and size can make interpretation of the underlying trends in the business more
difficult. Such items may include restructuring, material merger and acquisition costs, profit or loss on disposal or
termination of operations, litigation settlements, legislative changes, material acquisition integration costs and
profit or loss on disposal of investments. Judgement is used by the Group in assessing the particular items which
by virtue of their scale and nature should be disclosed as exceptional items.
126
Financial Statements
Hostelworld Annual Report 2019
127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported
in the consolidated income statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability
for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date,
and any adjustment to tax payable in respect of previous years.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax bases used in the computation of
taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognised for
all taxable temporary differences and deferred tax assets are recognised for unused tax losses, unused tax credits
and deductible temporary differences to the extent that it is probable future taxable profits will be available
against which the temporary difference can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries
and associates, except where the Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising
from deductible temporary differences associated with such investments and interests are only recognised to
the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the
temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Such reductions are reversed when the probability of future taxable profits improves.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or
the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the reporting
date. Deferred tax is charged or credited in the consolidated income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Foreign currencies
The individual financial statements of each Group company are presented in the currency of the primary
economic environment in which it operates (its functional currency). For the purpose of the consolidated
financial statements, the results and financial position of each Group company are expressed in euro, which
is the functional currency of the parent company and the presentation currency for the consolidated financial
statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the
entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of
the transactions. At each reporting date, monetary assets and liabilities denominated in foreign currencies are
retranslated at the rates prevailing on the reporting date.
Non-monetary items (including deferred revenue) carried at fair value that are denominated in foreign currencies
are translated at the rates prevailing at the date when the fair value was determined in accordance with IFRIC 22.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign currencies (Continued)
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items,
are included in the consolidated income statement in the year in which they arise. For the purpose of presenting
consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated
at exchange rates prevailing on the reporting date. Income and expense items are translated at the average
exchange rates for the period. Exchange differences arising, if any, are recognised in other comprehensive
income and accumulated in a foreign currency translation reserve.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in
other comprehensive income.
Retirement benefits costs
Contributions made in respect of employees’ pension schemes are charged through the consolidated income
statement in the period they become payable. The Group pays contributions to privately administered pension
insurance plans. The Group has no further payment obligations once the contributions have been paid. The
contributions are recognised as employee benefit expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment
losses.
Depreciation is recognised so as to write off the cost of assets over their estimated useful lives, using the straight-
line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end,
with the effect of any changes in estimate accounted for on a prospective basis.
Right of use assets are depreciated over the shorter period of the lease term and the useful life of the underlying
asset.
Depreciation is provided on the following basis:
Leasehold property improvements:
5-10 years straight line
Computer equipment:
Fixtures and equipment:
3-5 years straight line
6-7 years straight line
In 2019, the estimated useful life of asset types within the computer equipment category was reduced from
5 years to 3 years. The change in useful life was made following a review of the useful lives of plant, property
and equipment and reflects the speed of technological advances and usage of these assets. The additional
depreciation in the current year due to the change in estimated useful life amounted to €181k. In future periods
the depreciation charge will also be higher reflecting the change in useful life.
Leasehold improvements are improvements made to buildings leased by the Group when it has the right to
use these leasehold improvements over the term of the lease. The improvements will revert to the lessor at the
expiration of the lease.
The cost of a leasehold improvement is depreciated over the shorter of:
• The remaining lease term, or
• The estimated useful life of the improvement.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. The gain or loss arising on the disposal of an asset is
recognised in the consolidated income statement when the asset is derecognised.
128
Financial Statements
Hostelworld Annual Report 2019
129
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property, plant and equipment (Continued)
In accordance with IAS 36 ‘Impairment of Assets’, the carrying amounts of items of property, plant and equipment
are reviewed at each reporting date to determine whether there is any indication of impairment. An impairment
loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.
Impairment losses are recognised in the consolidated income statement. Following the recognition of
an impairment loss, the depreciation charge applicable to the asset is adjusted prospectively in order to
systematically allocate the revised carrying amount over the remaining useful life.
Intangible assets
(a) Goodwill
Goodwill is initially measured as the excess of the cost of the business combination over the Group’s interest
in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired subsidiary
or associate. Identifiable intangible assets, meeting either the contractual legal or separability criterion are
recognised separately from goodwill.
Goodwill on acquisition of subsidiaries is included within intangible assets. Goodwill associated with the
acquisition of associates is included within the interest in associates under the equity method of accounting.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicated
that the carrying value may be impaired.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units
(“CGU”) that is expected to benefit from the synergies of the combination.
If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets
of the unit on a pro-rata basis based on the carrying amount of each asset in the unit. Any impairment loss for
goodwill is recognised directly in the consolidated income statement. An impairment loss recognised for goodwill
is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the
determination of the gain or loss on disposal.
(b) Other intangible assets
The Group has four classes of intangible asset: domain names, technology assets, affiliate contracts and
capitalised development costs.
Other intangible assets including domain names and computer software are capitalised at their cost and
amortised to the consolidated income statement, generally on a straight line basis over their estimated useful
lives except for the Hostelbookers domain name which is amortised on a reducing balance basis (see note 10):
Domain names
Technology assets
Affiliate contracts
Capitalised development costs
8-20 years
4 years
5 years
2-3 years
The residual value associated with all intangible assets is deemed to be €nil.
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Intangible assets (Continued)
(b) Other intangible assets (Continued)
Expenditure on research activities is recognised as an expense in the period in which it is incurred. Development
expenditure in relation to internally-generated intangible assets is capitalised when all of the following have been
demonstrated; the technical feasibility of completing the intangible asset so that it will be available for use; the
intention to complete the project to which the intangible asset relates and use it; how the intangible asset will
generate probable future economic benefits; the availability of adequate technical, financial and other resources
to complete the development and to use the intangible asset; and the ability to measure reliably the expenditure
attributable to the intangible asset during its development.
The amount initially capitalised for internally-generated intangible assets is the sum of the expenditure incurred
from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-
generated intangible asset can be recognised, development expenditure is charged through the consolidated
income statement in the period in which it is incurred.
An intangible asset is derecognised on disposal or when no future economic benefits are expected to arise from
the continued use or disposal of the asset. The gain or loss arising on the disposal of an asset is recognised in the
consolidated income statement when the asset is derecognised.
Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the directors review the carrying amounts of the Group’s tangible and
intangible assets to determine whether there is any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of
the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset,
the directors estimate the recoverable amount of the cash-generating unit to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual
cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a
reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. If the recoverable
amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised immediately in the consolidated income statement, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit)
is increased to the revised estimate of its recoverable amount. The increased carrying amount cannot exceed
the carrying amount that would have been determined had no impairment loss been recognised for the asset
(or the cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the
consolidated income statement, unless the relevant asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation increase.
130
Financial Statements
Hostelworld Annual Report 2019
131
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s consolidated statement of financial position
when the Group becomes a party to the contractual provisions of the instrument.
Financial assets and liabilities are initially measured at fair value plus transaction costs, except for those classified
as fair value through profit or loss, which are initially measured at fair value. The fair value of financial assets and
liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate
at the end of the reporting period.
(a) Classification of financial assets
Trade and other receivables
Trade and other receivables are stated initially at their fair value and subsequently at amortised cost, less any
expected credit loss provision. The Group applies the simplified approach to measuring expected credit losses
which uses a lifetime expected loss allowance for all trade receivables.
(b) Expected credit loss of financial assets
The Group always recognises lifetime expected credit losses (“ECLs”) for trade receivables estimated using a
provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the
debtors, general economic conditions and an assessment of both the current as well as the forecast direction of
conditions at the reporting date, including time value of money where appropriate.
Lifetime ECLs represents the expected credit losses that will result from all possible default events over the
expected life of a financial instrument. ECLs are reported in the consolidated income statement.
The directors assess the expected credit loss of the commitment to extend a loan to an associate based on the
associate’s historical credit loss experience, if any, adjusted for factors that are specific to the associate.
(c) Classification of financial liabilities
Trade and other payables
Trade and other payables are initially recorded at fair value, which is usually the original invoiced amount, and
subsequently carried at amortised cost. Liabilities are derecognised when the obligation under the liability is
discharged, cancelled or expires.
Other financial liabilities
Financial liabilities are recognised initially at fair value and are subsequently stated at amortised cost using
the effective interest method. The effective interest method is a method for calculating the amortised cost of a
financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash payments through the expected life of the financial liability to the
amortised cost of a financial liability.
Financial liabilities are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the reporting date. The directors determine the classification
of the Group’s financial liabilities at initial recognition.
(d) Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly
liquid investments with original maturities of three months or less.
Dividends
Final dividends are recorded in the Group’s accounts in the period in which they are approved by the Company’s
shareholders. Interim dividends are recorded in the period in which they are paid.
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Share based payments
Equity settled share based payments to employees are measured at the fair value of the equity instruments at
the grant date. The fair value excludes the effect of non-market-based vesting conditions. Details regarding the
determination of the fair value of equity settled share based transactions are set out in note 19.
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight-
line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest.
At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a
result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates,
if any, is recognised in the consolidated income statement such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to the share based payment reserve.
For cash settled share based payments, a liability is recognised for the services acquired, measured initially at
the fair value of the liability. At each reporting date until the liability is settled, and at the date of settlement, the
fair value of the liability is re-measured, with any changes in fair value recognised in the consolidated income
statement for the year.
2. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, the directors are required to make judgements, estimates
and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical experience and other factors
considered relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year
of the revision and future years if the revision affects both current and future years. In particular, information
about significant areas of estimation that have the most significant effect on the amounts recognised in the
consolidated financial statements are described below and in the respective notes to the consolidated financial
statements.
(a) The critical judgements that have been made that have the most significant effect on the amounts recognised in the
consolidated financial statements are set out below:
Capitalisation of development costs
Development costs are capitalised in accordance with accounting policies in note 1. Determining the amount to be
capitalised requires the directors to make assumptions regarding expected future cash generation of the asset.
Tax provisioning
The Group, as a global business, is subject to both international and local transfer pricing legislation. The directors
review the transfer pricing position to ensure any potential exposure is adequately assessed.
Lease term of contracts with extension or break options
The lease term is determined as the non-cancellable term of the lease, together with any periods covered by
an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to
terminate the lease (break option), if it is reasonably certain not to be exercised. The Group has a number of
leases which contain break options and applies judgement in evaluating whether it is reasonably certain not
to exercise the option. On commencement of a lease the directors consider all relevant factors that create an
incentive for it to exercise the option. After the commencement date, the directors reassess the lease term if there
is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not
to exercise) the option.
132
Financial Statements
Hostelworld Annual Report 2019
133
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
2. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)
Deferred tax asset recognition
Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available in future
periods against which the reversal of temporary differences can be deducted. Recognition, therefore, involves
judgement regarding the future financial performance of the particular legal entity or tax group in which the
deferred tax asset exists. The directors have assessed that it is probable that the deferred tax asset will be utilised
based on the approved five year budget and long term forecasts.
Exceptional items
Exceptional items by their nature and size can make interpretation of the underlying trends in the business more
difficult. Such items may include restructuring, material merger and acquisition costs, profit or loss on disposal or
termination of operations, litigation settlements, legislative changes, material acquisition integration costs and
profit or loss on disposal of investments. Judgement is used in assessing the particular items which by virtue of
their scale and nature should be disclosed as exceptional items.
(b) The key sources of estimation uncertainty that have been made that have the most significant effect on the amounts
recognised in the consolidated financial statements are set out below:
Useful lives for amortisation of intangible assets
Intangible assets are disclosed in note 10. The amortisation charge is dependent on the estimated useful lives of
the assets. The directors regularly review estimated useful lives of each type of intangible asset and change them
as necessary to reflect its current assessment of remaining lives and the expected pattern of future economic
benefit embodied in the asset. Changes in asset lives can have a significant impact on the amortisation charges
for that year.
Impairment of goodwill and intangible assets
The directors assess annually whether goodwill has suffered any impairment, in accordance with the relevant
accounting policy and intangible assets are assessed for possible impairment where indicators of impairment
exist. The recoverable amounts of cash-generating units (“CGUs”) are determined based on value-in-use
calculations. These calculations are prepared using cash flow projections based on five year budgets approved by
the directors and are discounted to net present value using an appropriate discount rate. The tests are dependent
on estimates in particular in relation to the forecasting of future cash flows, the discount rates applied to these
cash flows, the expected long term growth rate of the applicable business and terminal values. Such estimates are
subject to change as a result of changing economic conditions.
Further details on the assumptions used are set out in note 10.
3. REVENUE & SEGMENTAL ANALYSIS
The Group is managed as a single business unit which provides software and data processing services that
facilitate hostel, hotel and other accommodation worldwide, including ancillary on-line advertising revenue.
The directors determine and present operating segments based on the information that is provided internally
to the Chief Executive Officer, who is the Company’s Chief Operating Decision Maker (“CODM”). When making
resource allocation decisions, the CODM evaluates booking numbers and average booking value. The objective in
making resource allocation decisions is to maximise consolidated financial results.
The CODM assesses the performance of the business based on the consolidated adjusted profit/ (loss) after tax
of the Group for the year. This measure excludes the effects of certain income and expense items, which are
unusual by virtue of their size and incidence, in the context of the Group’s ongoing core operations, such as the
impairment of intangible assets and one-off items of expenditure.
All revenue is derived wholly from external customers and is generated from a large number of customers, none
of whom is individually significant.
3. REVENUE & SEGMENTAL ANALYSIS (CONTINUED)
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:
Europe
Americas
Asia, Africa and Oceania
Total revenue
2019
€’000
46,994
15,672
18,006
80,672
2018
€’000
49,060
15,149
17,878
82,087
As at 31 December 2019, €2,777k of revenue relating to free cancellation bookings has been deferred (2018:
€2,892k).
Disaggregation of revenue is presented as follows:
Technology and data processing fees
Advertising revenue and ancillary services
Total revenue
2019
€’000
78,571
2,101
80,672
2018
€’000
79,696
2,391
82,087
In the year ended 31 December 2019, the Group generated 97% (2018: 97%) of its revenues from the technology
and data processing fees that it charged to accommodation providers.
Revenue is recognised at the time the reservation is made in respect of non-refundable commission on the
basis that the Group has met its performance obligations at the time the booking is made. In respect of the free
cancellation product, which offers the traveller the opportunity to make a booking on a free cancellation basis and
to receive a refund of their deposit in certain circumstances, such related revenue is not recognised until the last
cancellation date has passed as one party can withdraw from the contract until such a date has passed. Deferred
revenue is expected to be recognised within twelve months of initial recognition.
Advertising revenue and revenue generated from other services are recognised over the period when the service
is performed.
The Group’s non-current assets are located in Ireland, the UK, Portugal and Australia. Out of the total non-current
assets in the Group of €123,923k (2018: €121,081k), the non-current assets of the Group located in the UK are
€947k (2018: €1,654k), in Portugal €483k (2018: €623k) and in Australia €2,723k (2018:€Nil).
134
Financial Statements
Hostelworld Annual Report 2019
135
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
4. OPERATING EXPENSES
Profit for the year has been arrived at after charging the following operating costs:
Marketing expenses
Staff costs
Credit card processing fees
Exceptional items
FX loss
Other administrative costs
Total administrative expenses
Depreciation of tangible fixed assets
Amortisation of intangible fixed assets
Total depreciation and amortisation
Total operating expenses
Auditors’ remuneration
During the year, the Group obtained the following services from its auditors:
Fees payable for the statutory audit of the Company and consolidated financial
statements
Fees payable for other services:
- statutory audit of subsidiary undertakings
- tax advisory services
- other assurance services
- corporate finance services
- other services
Total
Notes
6
5
11
10
2019
€’000
32,712
16,881
2,515
3,066
72
8,188
63,434
2,425
11,521
13,946
77,380
2018
€’000
31,203
17,179
2,379
1,590
64
9,524
61,939
1,232
12,221
13,453
75,392
2019
€’000
2018
€’000
42
181
-
10
-
-
41
96
-
-
-
2
233
139
5. EXCEPTIONAL ITEMS
Merger and acquisition costs
Restructuring costs
Total
2019
€’000
2,115
951
3,066
2018
€’000
-
1,590
1,590
Merger and acquisition costs of €2,115k relates to professional fees incurred in the year on related activity.
Restructuring costs of €951k (2018: €1,590k) include costs relating to the restructure of the senior management
team and an internal reorganisation of the Group’s non-current assets (see note 20).
6. STAFF COSTS
The average monthly number of people employed (including executive directors) was as follows:
Average number of persons employed
Administration and sales
Development and information technology
Total
The aggregate remuneration costs of these employees is analysed as follows:
2019
2018
189
125
314
188
106
294
Notes
2019
€’000
2018
€’000
Staff costs comprise:
Wages and salaries
Social security costs
Pensions costs
Other benefits
Long-term employee incentive costs/ (credit)
19
Capitalised development labour
Total
16,026
2,177
466
347
156
16,194
1,889
389
711
(346)
(2,291)
(1,658)
16,881
17,179
136
Financial Statements
Hostelworld Annual Report 2019
137
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
7. FINANCIAL COSTS
Interest on lease liabilities
Other finance costs
Total
8. TAXATION
Corporation tax:
Current year
11
Notes
Adjustments in respect of prior years
Total
Origination and reversal of temporary differences
12
Total
2019
€’000
178
46
224
2019
€’000
1,184
38
1,222
(6,605)
(5,383)
2018
€’000
-
63
63
2018
€’000
776
(1)
775
186
961
Corporation tax is calculated at 12.5% (2018: 12.5%) of the estimated taxable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The charge for the year can be
reconciled to the consolidated income statement as follows:
Profit before tax on continuing operations
Tax at the Irish corporation tax rate of 12.5% (2018: 12.5%)
Effects of :
Tax effect of expenses that are not deductible in determining taxable profit
Tax effect of utilisation of tax losses not previously recognised
Depreciation in excess of/ (less than) capital allowances
Effect of different tax rates of subsidiaries operating in other jurisdictions
Reversal of deferred tax asset on tax losses
Recognition of deferred tax asset due to group reorganisation
Adjustments in respect of prior years
Total
2019
€’000
3,011
376
371
-
123
261
-
(6,552)
38
(5,383)
2018
€’000
6,652
832
622
(827)
(283)
201
417
-
(1)
961
The tax losses utilised in 2018 arise primarily from the previous capital structure of the Group.
The Group has no unrecognised deferred tax asset as at 31 December 2019 as a result of the liquidation of WRI
Nominees DAC during the year (31 December 2018: €3,476k).
9. EARNINGS PER SHARE
Basic earnings per share is computed by dividing the net profit for the year available to ordinary shareholders by
the weighted average number of ordinary shares outstanding during the year.
Weighted average number of shares in issue (‘000s)
Profit for the year (€’000s)
Basic earnings per share (euro cent)
2019
2018
95,571
95,571
8,394
8.78
5,691
5.95
Diluted earnings per share is computed by dividing the net profit for the year by the weighted average number of
ordinary shares outstanding and, when dilutive, adjusted for the effect of all potentially ordinary shares.
Weighted average number of ordinary shares in issue (‘000s)
Effect of dilutive potential ordinary shares:
Share options (‘000s)
Weighted average number of ordinary shares for the purpose of diluted earnings per
share (‘000s)
Diluted earnings per share (euro cent)
2019
2018
95,571
95,571
5
11
95,576
95,582
8.78
5.95
Actual earnings per share, calculated by dividing the net profit attributable to ordinary shareholders by the actual
number of ordinary shares in issue at 31 December 2019, is 8.78 euro cent (2018: 5.95 euro cent).
IFRS 16 Adoption
As a result of adopting IFRS 16 on 1 Jan 2019, the profit for the year was reduced by €104k to €8,394k in
comparison to if IAS 17 had been effective. This impact of this new standard on basic earnings per share was a
reduction from 8.89 euro cent to 8.78 euro cent. Diluted earnings per share reduced from 8.89 euro cent to 8.78
euro cent also.
138
Financial Statements
Hostelworld Annual Report 2019
139
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
10. INTANGIBLE ASSETS
The table below shows the movements in intangible assets for the year:
Goodwill
Domain
Names
Technology
Affiliates
Contracts
Capitalised
Development
Costs
€’000
€’000
€’000
€’000
€’000
Total
€’000
Cost
Balance at 1 January 2018
47,274
214,640
13,887
5,500
Additions
-
-
181
-
9,867
1,658
291,168
1,839
Balance at 31 December 2018
47,274
214,640
14,068
5,500
11,525
293,007
Balance at 1 January 2019
47,274
214,640
14,068
5,500
11,525
293,007
Additions
-
68
-
-
2,847
2,915
Balance at 31 December 2019
47,274
214,708
14,068
5,500
14,372
295,922
Accumulated amortisation and
impairment
Balance at 1 January 2018
(29,426)
(106,453)
(13,702)
(5,500)
(7,979)
(163,060)
Charge for year
-
(10,247)
(106)
-
(1,868)
(12,221)
Balance at 31 December 2018
(29,426)
(116,700)
(13,808)
(5,500)
(9,847)
(175,281)
Balance at 1 January 2019
(29,426)
(116,700)
(13,808)
(5,500)
(9,847)
(175,281)
Charge for year
-
(9,674)
(103)
-
(1,744)
(11,521)
Balance at 31 December 2019
(29,426)
(126,374)
(13,911)
(5,500)
(11,591)
(186,802)
Carrying amount
At 31 December 2018
At 31 December 2019
17,848
17,848
97,940
88,334
260
157
-
-
1,678
2,781
117,726
109,120
10. INTANGIBLE ASSETS (CONTINUED)
Goodwill
The carrying value of the goodwill balance at 31 December 2019 is €17,848k (2018: €17,848k) and relates to an
investment in Hostelworld.com Limited in 2009.
Goodwill, which has an indefinite useful life, is subject to annual impairment testing, or more frequent testing
if there are indicators of impairment. The recoverable amounts of the cash generating units (“CGUs”) are
determined from value in use calculations. The cash flow projections are initially based on five year budgets
approved by the directors and include future profitability, capital expenditure requirements and working
capital investment. The cash flow projections also take into account historical trading performance, anticipated
changes in future market conditions, industry and economic factors and business strategies. Capital expenditure
requirements to maintain the CGUs performance and profitability assume that historic investment patterns will
be maintained. Working capital requirements are forecast to move in line with activity.
The pre-tax discount rate which has been applied in determining value in use is 12.2% (2018: 10.8%). The pre-tax
discount rate is based on the Group weighted average cost of capital, calculated using the Capital Asset Pricing
Model adjusted for the business specific risk of the CGU. Growth rates are assessed based on the approved five
year 2020 budget and they range from 3% to 10%. Cash flows beyond the 5 year period are extrapolated using
the estimated long- term growth rate of 2.8% (2018: 2.8%). This long term growth rate was calculated using global
rates by a third party professional advisor.
There are no reasonably possible or material changes to the assumptions presented above that would result in
any further impairment recorded in each of the years presented in these financial statements.
Following impairment testing, no impairment was recognised for goodwill in 2019.
Other Intangible Assets
Additions during the year comprised of internally generated additions of €2,532k (2018: €1,658k) and other
separately acquired additions of €383k (2018: €181k).
There were no indicators to require an impairment test of intangible assets in the current year.
In 2018, as a result of a strategic review of the business by the directors, the estimated useful life of the
Hostels.com domain name was reduced to a period of 12 months from 1 July 2018, to be amortised on a straight
line basis. This had a result of increasing the amortisation charge relating to Hostels.com by €305k in 2018 and
similarly increasing this amortisation charge by the same amount in 2019. Management considers that this
change in relation to Hostels.com domain name does not have implications on goodwill.
140
Financial Statements
Hostelworld Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
11. PROPERTY, PLANT AND EQUIPMENT
The table below shows the movements in property, plant and equipment for the year:
11. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Amounts recognised in consolidated income statement
Cost
Balance at 1 January 2018
Additions
Disposals
Balance at 31 December 2018
Right of
Use Assets
(Leasehold
Property)
Leasehold
Property
Improvements
Fixtures &
Equipment
Computer
Equipment
€’000
€’000
€’000
€’000
Total
€’000
-
-
-
-
1,753
102
-
1,855
787
36
-
823
3,746
6,286
576
(83)
714
(83)
4,239
6,917
Balance at 1 January 2019 – as restated
4,294
1,855
823
4,239
11,211
Additions
Disposals
39
-
22
-
-
-
168
(748)
229
(748)
Balance at 31 December 2019
4,333
1,877
823
3,659
10,692
Accumulated depreciation
Balance at 1 January 2018
Charge for year
Disposals
Balance at 31 December 2018
Balance at 1 January 2019 – as restated
Charge for year
Disposals
-
-
-
-
-
(1,061)
-
(380)
(272)
-
(315)
(120)
-
(1,817)
(840)
83
(2,512)
(1,232)
83
(652)
(435)
(2,574)
(3,661)
(652)
(317)
-
(435)
(125)
-
(2,574)
(922)
747
(3,661)
(2,425)
747
Balance at 31 December 2019
(1,061)
(969)
(560)
(2,749)
(5,339)
Carrying amount
At 31 December 2018
At 31 December 2019
-
3,272
1,203
908
388
263
1,665
910
3,256
5,353
The adoption of IFRS 16 on 1 January 2019, resulted in the Group recognising right of use assets of €4,294k on that
date. These assets relate to the Group’s lease commitments for office space in Ireland, UK and Portugal (see note
1). The average lease term is 7 years. The maturity analysis of lease liabilities is presented in note 14.
141
2019
€’000
1,061
178
5
1,244
Total
€’000
23
(186)
(163)
141
6,605
6,583
2018
€’000
99
(262)
(163)
Depreciation expense on right of use assets
Interest expense on lease liabilities
Expense relating to short term leases
Total
At 31 December 2019, the Group is committed to €6k (2018: €11k) for short term leases. The total cash outflow for
leases amount to €1,293k during 2019.
On 3 October 2019, Hostelworld Services Limited entered into a 2 year lease to rent property, which had not
commenced by the year end and as a result, a lease liability and right of use asset has not been recognised at 31
December 2019. The aggregate future cash outflows to which the Group is exposed in respect of this contract is
fixed payments of €596k in 2020, €926k in 2021 and €81k in 2022.
12. DEFERRED TAXATION
The following are the major deferred taxation liabilities and assets recognised by the Group and movements
thereon during the current and prior reporting year:
As at 1 January 2018
Credited/ (charged) to the income statement
As at 1 January 2019
Credited to retained earnings (IFRS 16 adoption)
Credited to the income statement
As at 31 December 2019
Accelerated
Taxation
Depreciation
€’000
(394)
231
(163)
141
6,605
6,583
The following is the analysis of the deferred taxation balances for financial reporting purposes:
Deferred taxation assets
Deferred taxation liabilities
Net deferred taxation assets/ (liabilities)
Taxation
Losses
€’000
417
(417)
-
-
-
-
2019
€’000
6,727
(144)
6,583
142
Financial Statements
Hostelworld Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
12. DEFERRED TAXATION (CONTINUED)
On 12 March 2019, a deferred tax asset of €6,862k was recognised due to a temporary difference between the
carrying value and the tax base of intangible assets which were transferred as part of a group reorganisation (see
note 20). The deferred tax credit of €6,605k primarily relates to this temporary difference.
The 2018 credit of €186k relates to the movement in deferred tax assets offset by the movement in deferred tax
liabilities.
The Irish standard rate of corporation tax continued to be 12.5% through the year and comparative years. The tax
rate ruling in the UK is 19%, and will reduce to 17% on 1 April 2020. The Portuguese standard rate of corporation
tax continued to be 21% through the year and comparative years.
13. INVESTMENT IN ASSOCIATE
In July 2019, the Group purchased 7,645,554 shares (49% of the share capital) of Goki Pty Limited, an Australian
resident company. Goki Pty Limited’s principal activity is software development and principal place of business is
Australia. The purchase consideration for the transaction was USD 3,000k (€2,653k) and the directly attributable
costs €185k.
Subsequently, this investment in an associate was accounted for using the equity method as described in note 1
to the consolidated financial statements. The Group has significant influence but not control over the entity, due
to the nature of its voting rights. The Group controls 49% of the voting rights and is not entitled to appoint 50% or
more of the total number of directors to the Board.
The purchase consideration is to be paid in three equal instalments. The first was paid in July 2019 and the two
subsequent payments will be made on the 1st and 2nd anniversary of this date. The present value of the amount
due in 2021 (€873k) is recognised in non-current liabilities in the consolidated statement of financial position.
This financial liability was recognised initially at fair value and subsequently stated at amortised cost using the
effective interest method. The amount due in 2020 (€890k) is recognised in current liabilities (note 17).
13. INVESTMENT IN ASSOCIATE (CONTINUED)
Income statement of Goki Pty Limited for the period from 22 July 2019 – 31 December 2019 (100%)
Revenue
Loss after tax
Other comprehensive income attributable to the owners of the company
Total comprehensive loss
Group share of results of associate
143
2019
€’000
64
(236)
-
(236)
(116)
Reconciliation of the above summarised financial information to the carrying amount of the Group’s interest in
Goki Pty Limited recognised in the consolidated financial statements:
Net assets of Goki Pty Limited
Proportion of the Group’s ownership interest in the associate
Group share of net assets
Goodwill and transaction costs
Other adjustments
Carrying amount of the Group’s interest in associate
2019
€’000
2,402
49%
1,177
2,868
(1,322)
2,723
Summarised financial information in respect of Goki Pty Limited is set out below. This represents the amounts in
Goki Pty Limited’s financial statements prepared in accordance with IFRSs.
Other adjustments relate to the elimination of the Group’s 49% equity investment within the net assets of Goki
Pty Limited.
Statement of financial position of Goki Pty Limited as at 31 December 2019
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Equity attributable to owners of the company
2019
€’000
7
2,441
-
(46)
2,402
Commitment to extend loan to associate
Under the terms of the shareholder purchase agreement, there is a USD 500k loan facility option available to Goki
Pty Limited by the Group until July 2022. This loan is interest bearing and if drawn, repayable in full in July 2022.
The Group treats this facility as a commitment to extend loan to associate until such time as it becomes probable
that it will be required.
The directors assessed the credit risk of this commitment and determined there was no evidence to recognise an
expected credit loss on it.
144
Financial Statements
Hostelworld Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
14. LEASE LIABILITIES
The adoption of IFRS 16 on 1 January 2019, resulted in the Group recognising right of use assets of €4,294k and
corresponding lease liabilities of €5,361k on that date. These leases relate to the Group’s lease commitments for
office space in Ireland, UK and Portugal (see note 1). The maturity analysis of these lease liabilities is as follows:
16. SHARE CAPITAL
Maturity analysis
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
Less effect of discounting
Total
These liabilities are classified in the consolidated statement of financial position as:
Non-current lease liabilities
Current lease liabilities
Total
The Group does not face a significant liquidity risk with regard to its lease liabilities.
15. TRADE AND OTHER RECEIVABLES
Amounts falling due within one year
Trade receivables
Prepayments and other receivables
Value added tax
Total
2019
€’000
999
916
883
838
838
243
4,717
426
4,291
3,422
869
4,291
2018
€’000
1,067
804
943
2,814
2019
€’000
873
2,291
1,816
4,980
The carrying value of trade and other receivables also represents their fair value. Trade receivables are non-
interest bearing and trade receivable days are 4 days (2018: 5 days). Given the nature of the business, allowance
for impairment of receivables is not material.
The Group always recognises lifetime expected credit losses (“ECLs”) for trade receivables estimated using a
provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the
debtors, general economic conditions and an assessment of both the current as well as the forecast direction of
conditions at the reporting date, including time value of money where appropriate. There has been no change in
the estimation techniques or significant assumptions made during the current year.
In 2019, an amount of €1,214k is included in other receivables which relates to amounts due to the Group on
completion of the liquidation of WRI Nominees DAC (referred to in note 20).
145
2018
€’000
956
956
2019
€’000
956
956
Allotted, Called-up and fully paid
95,570,778 ordinary shares of €0.01 each (2018: 95,570,778 ordinary shares of €0.01
each)
Total
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. This company was incorporated
on 9 October 2015 to act as the holding company of the Group, and as a management services company.
17. TRADE AND OTHER PAYABLES
Amounts falling due within one year
Trade payables
Accruals and other payables
Deferred revenue
Deferred consideration (note 13)
Payroll taxes
Total
2019
€’000
2,493
3,778
3,303
890
610
2018
€’000
2,361
5,937
4,095
-
553
11,074
12,946
At 31 December 2019, €2,777k deferred revenue related to free cancellation bookings is included in deferred
revenue (2018: €2,892k).
The average credit period for the Group in respect of trade payables is 18 days (2018: 21 days). The directors
consider that the carrying amount of trade payables approximates to their fair value.
18. CONTINGENCIES
In the normal course of business the Group may be subject to indirect taxes on its services in certain foreign
jurisdictions. The directors perform ongoing reviews of potential indirect taxes in these jurisdictions. Although the
outcome of these reviews and any potential liability is uncertain, no provision has been made in relation to these
taxes as the directors believe that it is not probable that a material liability will arise.
146
Financial Statements
Hostelworld Annual Report 2019
147
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
19. SHARE-BASED PAYMENTS
Long Term Incentive Plan (“LTIP”) scheme
In April 2016, the Group introduced a Long Term Incentive Plan for executive directors and selected management.
The proportion of each award which vests, will depend on the Adjusted Earnings per Share (“EPS”) performance
and Total Shareholder Return (“TSR”) of the Group over a three year period (“the performance period”).
Up to 70% of the shares/options subject to an award will vest according to the Group’s adjusted EPS growth
compared with target during the performance period. Up to 30% of the shares/options subject to an invitation
will vest according to the Group’s TSR performance during the performance period measured against the TSR
performance indicators approved by the Remuneration Committee. An award will lapse if a participant ceases
to be an employee or an officer within the Group before the vesting date and is not subject to good leaver
provisions.
During the year ended 31 December 2019, the Remuneration Committee approved the grant of 1,267,463 share
options pursuant to the terms and conditions of the Group’s LTIP Rules (2018: 773,797 options). These were
granted in four separate offerings.
In 2019, €77k was expensed in the consolidated income statement in relation to the Group’s LTIP schemes
(2018: €467k credit). During the year, there was a change in the estimate of shares that will vest under the EPS
component of the 2018 and 2019 awards.
Details of the share options outstanding during the year are as follows:
Outstanding at beginning of year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
2019
2018
No. of share
options
No. of share
options
875,957
1,324,039
1,267,463
773,797
(641,773)
(1,221,879)
-
-
-
-
1,501,647
875,957
-
-
Included in the number of options forfeited in 2019, are 373,210 options of the 2017 awards which did not meet
the vesting conditions based on performance conditions from 1 January 2017 to 31 December 2019. (2018: 562,626
options of the 2016 awards were forfeited as they did not meet their required vesting conditions).
If the conditions are met, the remaining awards will vest on the later of the 3rd anniversary of the grant and the
determination of the performance condition, and will then remain exercisable until the 7th anniversary of the
date of grant, provided the individual remains an employee or officer of the Group or is subject to good leaver
provisions. The measurement period for the 2018 and 2019 awards for performance conditions is over 3 years
from 1 January 2018 to 31 December 2020 and from 1 January 2019 to 31 December 2021 respectively.
Share options under the LTIP scheme have an exercise price of £nil. The fair value, at the grant date, of the TSR-
based conditional awards was measured using a Monte Carlo simulation model.
19. SHARE-BASED PAYMENTS (CONTINUED)
Fair value of options granted during the year:
At the grant date, the fair value per conditional award and the assumptions used in the calculations are as follows:
Year of potential vesting
2022
2022
2022
2022
Number of share options granted
933,995
76,204
187,842
69,422
April 2019
June 2019
August 2019 November 2019
Share price at grant date
Exercise price per share option
Expected volatility of Company share price
Expected life
Expected dividend yield
Risk free interest rate
Weighted average fair value at grant date
Remaining weighted average life of options (years)
£1.95
£nil
46.1%
£2.07
£nil
42.1%
£1.50
£nil
40.0%
£1.32
£nil
40.1%
3 years
3 years
3 years
3 years
4.3%
0.71%
£1.93
2.26
4.9%
0.56%
£1.97
2.42
4.9%
0.43%
£1.27
2.64
6.0%
0.51%
£1.16
2.88
Year of potential vesting
2020
2021
2021
2021
Number of share options granted
847,663
499,554
175,723
98,520
March 2017
April 2018
June 2018 December 2018
Share price at grant date
Exercise price per share option
Expected volatility of Company share price
Expected life
Expected dividend yield
Risk free interest rate
Weighted average fair value at grant date
Remaining weighted average life of options (years)
£2.33
£nil
46.0%
£3.86
£nil
46.0%
£3.15
£nil
47.0%
£1.99
£nil
41.5%
3 years
3 years
3 years
3 years
5.7%
0.21%
£1.92
0.24
3.8%
0.88%
£3.35
1.28
4.8%
0.76%
£2.64
1.50
7.6%
0.75%
£1.48
1.93
Expected volatility was determined based on the market performance of the Company over a period of 36 months
prior to the date of grant for all the 2019 awards.
For all awards up to and including the June 2018 awards, expected volatility was determined in line with market
performance of the Company and comparator companies as there was insufficient historic data available for the
Company at the grant date of the awards. For the December 2018 awards, expected volatility was determined
based on the market performance of the Company over 2.07 years, corresponding to the remaining time left of
the measurement period.
Market based vesting conditions, such as the TSR condition, have been taken into account in establishing the fair
value of equity instruments granted. Non-market based performance conditions, such as the EPS conditions, were
not taken into account in establishing the fair value of equity instruments granted, however the number of equity
instruments included in the measurement of the transaction is adjusted so that the amount recognised is based
on the number of equity instruments that eventually vest.
148
Financial Statements
Hostelworld Annual Report 2019
149
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
19. SHARE-BASED PAYMENTS (CONTINUED)
Save As You Earn (“SAYE”) scheme
During the year ended 31 December 2019, the Remuneration Committee approved the granting of share options
under a SAYE scheme for all eligible employees across the Group. 31 employees availed of the scheme in 2019
(2018: 24 employees availed of the 2018 scheme). The scheme will last three years and employees may choose to
purchase shares at the end of the three year period at the fixed discounted price set at the start. The share price
for the scheme has been set at a 20% discount for Irish and UK based employees in line with amounts permitted
under tax legislation in both jurisdictions.
The total expected cost of the 2019 SAYE scheme was estimated at €63k of which €11k has been recognised in
the consolidated income statement for the year ended 31 December 2019. The remaining €52k will be charged
against profit or loss in equal instalments over the remainder of the three year vesting period.
The total expected cost of the 2018 SAYE scheme was estimated at €41k of which €34k (2018: €7k) has been
recognised in the consolidated income statement to date.
Outstanding at beginning of year
Granted during the year
Forfeited during the year
Outstanding share options granted at end of year
Number of SAYE share options
granted
2019
2018
165,162
258,757
171,333
90,819
(133,327)
(96,990)
290,592
165,162
Fair value of options granted during the year:
At the grant date, the fair value per conditional award and the assumptions used in the calculations are as follows:
Scheme
Grant date
Year of potential vesting
Share price at grant date
Exercise price per share option
Expected volatility of company share price
Expected life
Expected dividend yield
Risk free interest rate
Weighted average fair value at grant date
Valuation model
UK office
Irish office
October 2019
October 2019
2022
£1.30
£1.17
39.5%
2022
€1.52
€1.30
39.5%
3 years
3 years
9.3%
0.51%
£0.21
9.3%
0.51%
€0.24
Black Scholes Black Scholes
19. SHARE-BASED PAYMENTS (CONTINUED)
Save As You Earn (“SAYE”) scheme (Continued)
Scheme
Grant date
Year of potential vesting
Share price at grant date
Exercise price per share option
Expected volatility of company share price
Expected life
Expected dividend yield
Risk free interest rate
Weighted average fair value at grant date
UK office
Irish office
Irish office
July 2017
July 2017 September 2018
2020
£3.37
£2.78
45.0%
2020
€4.00
€3.24
44.6%
2021
€2.40
€2.56
47.5%
3 years
3 years
3 years
4.0%
0.38%
£0.99
4.0%
0.38%
€1.10
6.9%
(0.40%)
€0.45
Valuation model
Black Scholes Black Scholes Black Scholes
Expected volatility was determined in line with market performance of the Company for the 2019 schemes. For
the 2017 and 2018 schemes, expected volatility was determined in line with market performance of the Company
and comparator companies as there was insufficient historic data available for the Company at the grant date of
the awards
The charge of €79k (2018: €121k) in relation to the SAYE schemes, together with the charge in respect of the
long-term incentive plan for the year of €77k (2018: €467k credit) is the total charge in respect of share-based
payments. The LTIP and SAYE schemes are accounted for as equity-settled in the financial statements.
Overall, the Group recognised an expense of €156k (2018: €346k credit) relating to equity-settled share-based
payment transactions in the consolidated income statement during the year.
Cash settled share-based payments
During 2018, the Group issued to certain individuals share appreciation rights (“SARs”), in the form of Phantom
Shares that require the Group to pay the intrinsic value of the SAR at the date of exercise. The Group has recorded
liabilities of €7k and a corresponding expense of €7k in relation to these SARs as at 31 December 2019 (2018: €3k).
The fair value of these SARs was determined by using a Black Scholes model.
150
Financial Statements
Hostelworld Annual Report 2019
151
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
20. RELATED PARTY TRANSACTIONS
Balances and transactions between the Company and its subsidiaries, which are related parties, have been
eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its associates
are disclosed below.
20. RELATED PARTY TRANSACTIONS (CONTINUED)
ASSOCIATES
The following details the Company’s current investment in associates, including the name, country of
incorporation, and proportion of ownership interest:
SUBSIDIARIES
The following is a list of the Company’s current investments in subsidiaries, including the name, country of
incorporation, and proportion of ownership interest:
Company
Holding
Nature of Business
Registered Office
Goki Pty Limited
49%
Technology company
477 Kent St, Sydney NSW 2000,
Australia
Company
Holding
Nature of Business
Registered Office
Hostelworld.com Limited
100%*
Technology trading company
196 Ordinary shares @ €1
Hostelworld Services
Portugal LDA
500 Ordinary shares @ €1
Hostelworld Services
Limited
104123 Ordinary shares @ £0.001
100%
Marketing and research and
development services company
100%* Marketing services and technology
trading company
Counter App Limited
51%
Technology company
51 Ordinary shares @ €1
* held directly by the Company
Floor 2, One Central Park,
Leopardstown, Dublin 18, Ireland
Rua Antònio Nicolau D’Almeida,
45, 5th Floor, 4100-320 Oporto,
Portugal
Floor 2, 52 Bedford Row, London,
WC1R 4LR, United Kingdom
Floor 2, One Central Park,
Leopardstown, Dublin 18, Ireland
All subsidiaries have the same reporting date as the Company being 31 December.
On 12 March 2019, Hostelworld.com Limited acquired intangible assets from WRI Nominees DAC for a
consideration of €151m. Both of these companies are 100% owned subsidiaries of Hostelworld Group plc. While
this transaction had no impact on our underlying trade, the reorganisation resulted in the recognition of a
deferred tax asset of €6.9m. On the same date, WRI Nominees DAC was liquidated by way of members’ voluntary
winding up.
On 1 August 2019, Hostelworld Technology Solutions Limited was incorporated in Ireland and became a 100%
owned subsidiary of Hostelworld.com Limited. On 8 November 2019, following a share subscription, Hostelworld
Technology Solutions became a 51% owned subsidiary of Hostelworld.com Limited. There has been no trading
activity in this entity to date. On 7 February 2020, Hostelworld Technology Solutions Limited changed its name to
Counter App Limited.
On 30 November 2018, Hostelworld Korea Limited was placed into voluntary liquidation.
On 21 June 2019, Hostelworld.com Limited signed an agreement to purchase 7,645,554 shares in an Australian
incorporated proprietary company limited by shares. The purchase consideration for this transaction was USD
3m. This transaction was completed on 22 July 2019 and on this date, an investment in associate was recognised
in the consolidated financial statements.
Under the terms of the shareholder purchase agreement, there is a USD 500k loan facility option available to Goki
Pty Limited by the Group until July 2022 (see note 13).
Directors’ remuneration
Salaries, fees, bonuses and benefits in kind
Amounts receivable under long-term incentive schemes
Termination benefits
Pension contributions
Total
2019
€’000
1,107
44
-
61
2018
€’000
1,004
44
467
52
1,212
1,567
Retirement benefit charges of €61k (2018: €52k) arise from pension payments relating to 2 executive directors
(2018: 4).
Key management personnel
The Group’s key management comprise the Board of Directors and senior management having authority and
responsibility for planning, directing and controlling the activities of the Group.
Short term benefits
Share based payments charge/ (credit)
Termination benefits
Post employment benefits
Total
2019
€’000
2,607
72
854
118
3,651
2018
€’000
2,892
(253)
1,121
123
3,883
152
Financial Statements
Hostelworld Annual Report 2019
153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
21. FINANCIAL RISK MANAGEMENT
21.1 Financial risk factors
The directors manage the Group’s capital, consisting of both debt and equity, to ensure that the Group will be
able to continue as a going concern while also maximising the return to stakeholders. As part of this process,
the directors review financial risks such as liquidity risk, credit risk, foreign exchange risk and interest rate risk
regularly.
Liquidity risk
Cash flow forecasting is monitored by rolling forecasts of the Group’s liquidity requirements to ensure it has
sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed
borrowing facilities at all times so that the Group does not breach covenants on any of its facilities. Such
forecasting takes into consideration the Group’s debt financing plans.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining
period at the reporting date to the contractual maturity date. The Group had no derivative financial liabilities in
the current or prior year. The amounts disclosed in the table are the contractual undiscounted cash flows.
Up to 1 year
Trade and other payables
Total up to 1 year
Between 1 and 2 years
Deferred consideration
Total between 1 and 2 years
Total
Notes
17
2019
€’000
9,938
9,938
2019
€’000
890
890
2018
€’000
11,190
11,190
2018
€’000
-
-
21. FINANCIAL RISK MANAGEMENT (CONTINUED)
In order to maintain or adjust the capital structure, the directors may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets.
The directors believe the Group’s capital requirement will be met from retained earnings.
The Group is not subject to any externally imposed capital requirements.
The Group will ensure it retains sufficient reserves to manage its day to day cash requirements, including capital
expenditure requirements, whilst ensuring appropriate dividends are distributed to shareholders.
22. DIVIDENDS
Amounts recognised as distributions to equity holders in the financial year:
Final 2018 dividend of €0.09 per share (paid 5 June 2019)
Interim 2019 dividend of €0.042 per share (paid 20 September 2019)
Final 2017 dividend of €0.12 per share (paid 14 June 2018)
Interim 2018 dividend of €0.048 per share (paid 21 September 2018)
Proposed final dividend for the year ended 31 December 2019 of
€0.021 per share (2018: €0.09 per share)
2019
€’000
8,601
4,014
12,615
2018
€’000
11,468
4,588
16,056
2,007
8,601
In accordance with the updated Group’s dividend policy, the directors recommend the payment of a final dividend
for 2019 of €0.021 per share amounting to €2.0m (2018: €0.09 per share amounting to €8.6m).
10,828
11,190
The proposed dividends are to be approved by the shareholders at the 2020 AGM on 27 April 2020.
Interest rate risk
The Group is not materially exposed to interest rate risk.
Credit risk and foreign exchange risk
The directors monitor the credit rate risks associated with loans, trade receivables and cash and cash equivalent
balances on an on-going basis. The majority of the Group’s trade receivable balances are due for maturity
within 5 days and largely comprise amounts due from the Group’s payment processing agents. Accordingly,
the associated credit risk is determined to be low. These trade receivable balances, which consist of euro, US
dollar and Sterling amounts, are settled within a relatively short period of time, which reduces any potential
foreign exchange exposure risk. At 31 December 2019, all material cash balances are held with banks with a
minimal credit rating of BBB-, as assigned by international credit rating agencies. As a result, the credit risk on
cash balances is limited. The carrying value of trade receivables, trade payables and cash and cash equivalents
is a reasonable approximation of their fair value. The Group does not enter into or trade financial instruments,
including derivative financial instruments, for speculative purposes.
21.2 Capital management
The directors’ objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
23. PARENT COMPANY EXEMPTION
The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not
to publish its individual income statement and related notes.
24. EVENTS AFTER THE BALANCE SHEET DATE
The directors have recommended a final dividend of 2.1 euro cent per share to be paid on 8 May 2020
(see note 22).
There have been no other significant events, outside the ordinary course of business, affecting the Group since
31 December 2019.
154
Financial Statements
Hostelworld Annual Report 2019
155
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Non-current assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Equity
Share capital
Share based payment reserve
Retained earnings
Notes
28
2019
€’000
2018
€’000
44,187
44,187
205,630
205,630
29
122,226
353
122,579
225
19
244
166,766
205,874
16
956
795
956
639
164,726
168,663
As at 1 January 2018
Total comprehensive expense for the year
Dividends
Debit to equity for equity-settled
share based payments
As at 31 December 2018
Total comprehensive income for the year
Dividends
Credit to equity for equity-settled
share based payments
As at 31 December 2019
Share Capital
€’000
956
-
-
-
Retained
Earnings
€’000
186,566
(1,847)
(16,056)
Share Based
Payment
Reserve
€’000
985
-
-
Total
€’000
188,507
(1,847)
(16,056)
-
(346)
(346)
956
168,663
639
170,258
-
-
-
8,678
(12,615)
-
956
164,726
-
-
156
795
8,678
(12,615)
156
166,477
Total equity attributable to equity holders of the parent
166,477
170,258
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
30
289
35,616
289
289
35,616
35,616
166,766
205,874
The Company reported a profit for the financial year ended 31 December 2019 of €8,678k (2018: €1,847k loss).
The financial statements of Hostelworld Group plc were approved by the Board of Directors and authorised for
issue on 3 March 2020 and signed on its behalf by:
Gary Morrison
Chief Executive Officer
TJ Kelly
Chief Financial Officer
Hostelworld Group plc registration number 9818705 (England and Wales)
156
Financial Statements
Hostelworld Annual Report 2019
157
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
25. ACCOUNTING POLICIES
The significant accounting policies adopted by the Company are as follows:
Basis of preparation
The separate financial statements are presented as required by the Companies Act 2006. The Company meets the
definition of a qualifying entity under FRS 100 (Financial Reporting Standard 100) issued by the Financial Reporting
Council. The financial statements have therefore been prepared in accordance with FRS 101 (Financial Reporting
Standard 101) ‘Reduced Disclosure Framework’ as issued by the Financial Reporting Council.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that
standard in relation to financial instruments, fair value measurements, capital management, presentation of
comparative information in respect of certain assets, presentation of a cash flow statement, standards not yet
effective, financial risk management, impairment of assets, related party transactions and where required,
equivalent disclosures are given in the consolidated financial statements. Significant accounting policies
specifically applicable to these individual Company financial statements and which are not reflected within the
accounting policies for the Group consolidated financial statements are detailed below.
The financial statements are prepared on the historical cost basis.
Investments in subsidiaries
Investments in subsidiary undertakings are stated at cost less any allowance for impairment.
Dividends
Final dividends are recorded in the Group’s accounts in the period in which they are approved by the Company’s
shareholders. Interim dividends are recorded in the period in which they are paid.
Details of interim and final dividends are disclosed in note 22 to the consolidated financial statements.
Accounting estimates and judgements
The preparation of financial statements in conformity with FRS 101 (as issued by the FRC) requires management
to make judgements, estimates and assumptions that affect the application of accounting policies and reported
amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based
on historical experience and various other factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making judgements about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. There were no significant judgements applied in the
preparation of the Company financial statements.
Key sources of estimation that have been made that have the most significant effect on the amounts recognised
in the financial statements are set out below:
Carrying value of investments in subsidiaries
The directors assess annually whether the carrying value of the investments in subsidiaries has suffered any
impairment, in accordance with the relevant accounting policy and the recoverable amounts of cash generating
units (“CGUs”) are determined based on value-in-use calculations that require the use of estimates.
The value-in-use calculations are prepared using cash flow projections based on a five year budget approved
by the directors. The cash flow projections take into account key assumptions including historical trading
performance, anticipated changes in future market conditions, industry and economic factors and business
strategies.
If the recoverable amount of the asset is estimated to be less than its carrying amount, the carrying amount of
the asset is reduced to its recoverable amount and an impairment loss is recognised immediately in the income
statement.
25. ACCOUNTING POLICIES (Continued)
Financial instruments
Financial assets and financial liabilities are recognised in the Company’s statement of financial position when the
Company becomes a party to the contractual provisions of the instrument.
Financial assets and liabilities are initially measured at fair value plus transaction costs, except for those classified
as fair value through profit or loss, which are initially measured at fair value. The fair value of financial assets and
liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate
at the end of the reporting period.
Financial assets
Amounts due from subsidiary undertakings are stated initially at their fair value and subsequently at amortised
cost, less any expected credit loss provision. The Company recognises expected credit losses (“ECLs”) for amounts
due from subsidiary undertakings estimated using a provision matrix based on the Company’s historical credit
loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an
assessment of both the current as well as the forecast direction of conditions at the reporting date, including time
value of money where appropriate.
If the credit risk on the financial instrument has not increased significantly since initial recognition, the Company
measures the loss allowance for that financial instrument at an amount equal to 12 month ECL. 12 month ECL
represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that
are possible within 12 months after the reporting date.
26. PROFIT/ (LOSS) FOR THE YEAR
As permitted by s408 of the Companies Act 2006 the Company has elected not to present its own income
statement or statement of comprehensive income for the year. The profit/ loss attributable to the Company is
disclosed in the footnote to the Company’s statement of financial position.
The auditor’s remuneration for the audit and other services is disclosed in note 4 to the consolidated financial
statements.
27. STAFF COSTS
The average monthly number of full time people employed by the Company (including executive directors) during
the year was 3 (2018: 3).
The aggregate remuneration costs of these employees is analysed as follows:
Staff costs comprise:
Wages and salaries
Social security costs
Pensions costs
Other benefits
Long-term employee incentive costs/ (credit)
Total
2019
€’000
863
110
73
23
41
1,110
2018
€’000
820
98
69
21
(189)
819
158
Financial Statements
Hostelworld Annual Report 2019
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
28. INVESTMENTS
The carrying value of the Company’s subsidiaries at 31 December 2019 are as follows:
At 1 January
Additions
Impairment
Disposals
At 31 December
2019
€’000
2018
€’000
205,630
206,306
40,437
(880)
(201,000)
-
(520)
(156)
44,187
205,630
29. TRADE AND OTHER RECEIVABLES
Amounts falling due within one year
Prepayments
Value Added Tax
Amount due from subsidiary undertakings
Other debtors
Total
159
2018
€’000
135
9
81
-
225
2019
€’000
114
12
120,886
1,214
122,226
The Company’s subsidiaries directly owned by the Company, are disclosed in note 20.
Additions of €40,322k relate to an increase in the Company’s direct shareholding in Hostelworld.com to 100%
(2018: 51%). The Company purchased these shares from WRI Nominees DAC, a 100% subsidiary of the Company.
The remaining additions (€115k) are capital contributions arising from the administration of the Group’s share
option schemes relate to capital contributions arising from the administration of the Group’s share option
schemes.
The disposal in 2019 relates to a subsidiary WRI Nominees DAC which was liquidated during the year. The 2018
disposal relates to the previously recognised capital contribution for the 2016 LTIP awards which did not meet the
vesting conditions and to the change in vesting estimate in relation to the 2017 LTIP awards (note 19).
In 2019, following a review of Hostelworld Services Limited’s trading performance and the changes in its senior
management, the directors reassessed the estimated cash flows associated with its investment in the company.
The recoverable amounts of cash generating units (“CGUs”) are determined based on value-in-use calculations
that require the use of estimates. The value-in-use calculations are prepared using cash flow projections based
on five year budgets approved by the directors. The cash flow projections take into account key assumptions
including historical trading performance, anticipated changes in future market conditions, industry and economic
factors and business strategies.
The pre-tax discount rate which was applied in determining value in use was 15.81% (2018: 10.8%). The pre-tax
discount rate is based on the Group weighted average cost of capital, calculated using the Capital Asset Pricing
Model adjusted for the business specific risk of the CGU.
Following impairment testing, an impairment charge of €880k was recognised in relation to the Company’s
investment in Hostelworld Services Limited (2018: €520k). This impairment charge was recognised in the
Company’s income statement as an impairment loss. There were no indicators to require an impairment test of
other investments in 2019.
The amount due from subsidiary undertakings arose primarily as a result of a term loan issued between the
Company and Hostelworld.com Limited as part of the group reorganisation in March 2019 (see note 20). This
amount is carried at amortised cost. The directors assessed the credit risk of these amounts and determined
there was no evidence to recognise an expected credit loss on these assets. The directors reviewed the related
party’s historical credit loss experience, adjusted for factors that are specific to that company, general economic
conditions and carried out an assessment of both the current as well as the forecast direction of conditions at the
reporting date, including time value of money where appropriate. There has been no change in the estimation
techniques or significant assumptions made during the current year.
The carrying value of trade and other receivables also represents their fair value. Trade receivables are non-
interest bearing and there is no expected credit loss recognised in relation to these balances.
The amount included in other debtors relates to amounts due to the Company on completion of the liquidation of
WRI Nominees DAC (referred to in note 20).
30. TRADE AND OTHER PAYABLES
Amounts falling due within one year
Trade payables
Accruals and other payables
Amount due to subsidiary undertakings
Total
2019
€’000
11
278
-
289
2018
€’000
58
423
35,135
35,616
The amounts due to subsidiary undertakings are unsecured loans that are repayable on demand.
31. EVENTS AFTER THE BALANCE SHEET DATE
There were no significant events after the balance sheet date.
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Additional Information
Hostelworld Annual Report 2019
163
SHAREHOLDER INFORMATION
Financial Calendar
AGM
27 April 2020
Payment of 2019 Final Dividend
8 May 2020
Announcement of 2020
Interim Results
18 August
2020
Share Price
During the year ended 31 December 2019, the range of
the market prices of the Company’s ordinary shares on
the London Stock Exchange was:
Last price as at 31 December 2019
£1.25
Lowest price during the year
Highest price during the year
£1.09
£2.50
Daily information on the Company’s share price can be
obtained on our website: www.hostelworldgroup.com
Shareholder’s Enquiries
All administrative enquiries relating to shareholdings
(for example, notification of change of address, loss
of share certificates, dividend payments) should be
addressed to the Company’s registrars:
UK Registrar
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
United Kingdom
Irish Registrar
Computershare Investor Services (Ireland) Ltd
3100 Lake Drive
Citywest Business Campus
Dublin 24
D24 AK82
Ireland
Company Secretary and Registered Office
Mr. John Duggan
Hostelworld Group plc
Floor 2
52 Bedford Row
London WC1R 4LR
United Kingdom
Company Registration Number
9818705
ADVISERS
Solicitors
McCann FitzGerald
Riverside One
Sir John Rogerson’s Quay
Dublin D02 X576
Ireland
Travers Smith LLP
10 Snow Hill
London EC1A 2AL
United Kingdom
Financial Public Relations
Powerscourt
25 Lower Leeson Street
Dublin D02 XD77
Ireland
Banking
Allied Irish Banks plc
1-4 Lower Baggot Street
Dublin D02 X342
Ireland
Independent Auditors
Deloitte Ireland LLP
Chartered Accountants and Statutory Audit Firm
Deloitte House
29 Earlsfort Terrace
Dublin D02 AY28
Ireland
Brokers
Numis Securities Limited
10 Paternoster Square
London EC4M 7LT
United Kingdom
J&E Davy
Davy House
49 Dawson Street
Dublin D02 PY05
Ireland
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