HOSTELWORLD Annual Report 2020An Extraordinary JourneyAs the world evolves, so do we... CZEŚĆHEJCIAOZDRAVOHEI About Hostelworld Group
Hostelworld Group is the leading global Online Travel Agent
(OTA) focused on the hostel market, inspiring adventurous
minds to experience new places, meet new people and
come back with extraordinary stories to tell. Our customers
aren’t your average travellers; they are driven by the need
for unique experiences, social connections and empowering
adventures. Every year we help millions of hostel travellers
create long-lasting memories, by enabling real travel
experiences.
We have over 20 years’ experience, with more than 13 million
reviews across more than 17,000 hostels in 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.
In 2020 we became the first OTA signatory of the Global
Tourism Plastics Initiative (GTPI), led by the UN Environment
Programme and the World Tourism Organization (UNWTO),
in collaboration with the Ellen MacArthur Foundation. We are
leveraging our position in the hostel industry to unite our
hostel partners to tackle the root causes of plastic pollution
and help Build a Better World.
Think Customer Think customer first, we’re on their side in everything we do. We always aim to delight and surprise while 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.Our VisionTo shape people’s lives and attitudes through travel and build a better world.Our PurposeTo inspire adventurous minds through travel.Our MissionIs to enable travellers to experience new places and meet new people in a fun, memorable and safe way.Our Values 2020 Summary
“2020 has been an extremely challenging year for both
Hostelworld and the entire global travel industry. In light
of the unprecedented challenges presented by the
pandemic, our key priorities have been to (i) support our
employees, customers and hostel partners; (ii) increase
our liquidity, and (iii) accelerate the execution of our core
platform roadmap.
During the year we delivered significant improvements
in marketing capabilities, user experience and inventory
competitiveness. These improvements will have further
strengthened the competitiveness of our platform relative
to our capabilities in Q4’19, when we had returned to
bookings growth.
As vaccination programmes continue to be rolled out in
our key geographies across the world, I am confident our
loyal customer base has a strong desire to travel once
restrictions allow, even more so after a prolonged period
of confinement. Furthermore, I continue to see significant
opportunities to build a broader catalogue of relevant
experiential travel products and services beyond hostel
accommodation, and opportunities to connect like-
minded travellers with each other via social features on
our platform.
I remain confident that Hostelworld will emerge from the
pandemic stronger than before and able to seize market
opportunities when normal travel patterns resume”.
Gary Morrison | CEO
Financial Highlights (1)
Revenue
Net Bookings: HW Group
Net Bookings: HW Brand
Revenue
Net Revenue
Profitability
Adjusted EBITDA
Adjusted (Loss) / Profit after Tax
Balance Sheet
Net Asset Position
Cash
Cash and Cash Equivalents
Adjusted Free Cash (Absorption) / Flow
Normalised Adjusted Free Cash (Absorption) / Flow
2020
2019
1.5m
1.4m
6.8m
6.6m
€15.4m
€80.7m
€(17.3)m
€(22.2)m
€20.5m
€14.8m
€97.9m
€131.8m
€18.2m
€(12.3)m
€(12.3)m
€19.4m
€10.9m
€13.1m
(1) The Group uses Alternative Performance Measures (‘APMs’) which are non-IFRS measures to monitor the performance of its operations and of the
Group as a whole. These APMs along with their definitions and reconciliations to IFRS measures are provided in the APMs section on pages 196 to 198.
Overview
Our Journey........................................................................................................................ 6
Strategic Report
Chairman’s Statement ......................................................................................................10
Chief Executive’s Review .................................................................................................16
Financial Review .............................................................................................................. 22
Principal Risks and Uncertainties .................................................................................. 26
Viability Statement ..........................................................................................................36
Statement of Compliance – S 172 (1) of the Companies Act, 2006 ........................... 38
Corporate Social Responsibility ......................................................................................51
Governance
Directors’ Biographies ..................................................................................................... 62
Corporate Governance Statement .................................................................................64
Directors’ Report .............................................................................................................118
Independent Auditor’s Report ...................................................................................... 128
Financial Statements
Consolidated Income Statement ................................................................................. 144
Consolidated Statement of Comprehensive Income ................................................. 145
Consolidated Statement of Financial Position ............................................................ 146
Consolidated Statement of Changes in Equity ........................................................... 147
Consolidated Statement of Cash Flows ...................................................................... 148
Notes to the Consolidated Financial Statements ....................................................... 149
Company Statement of Financial Position .................................................................. 187
Company Statement of Changes in Equity ................................................................. 188
Notes to the Company Financial Statements ............................................................. 189
Additional Information
Alternate performance measures ................................................................................ 196
Shareholder Information ...............................................................................................200
Advisers .......................................................................................................................... 201
CONTENTCONTENTCONTENTCONTENTCONTENTCONTENTCONTENTCONTENTCONTENTCONTENT Overview
6
Our Journey
Viajero Salento Hostel, Colombia
1999Launch of the Hostelworld website, providing an online booking platform and back-end property management systemAcquired the Hostels.com business and brand2003Opened office in Shanghai2006Hellman & Friedman LLC, a US private equity firm, acquired the Group2009Acquired the Hostelbookers business, based in the UK2013Released new suite of Hostelworld booking apps for iOS and Android2014Hostelworld Annual Report 2020 Overview6Listed on the London and Euronext Dublin Stock Exchanges. Rebranding of Hostelworld with ‘Meet The World’2015Opened technology development centre in Porto, Portugal2017“Roadmap to Growth” programme. New management team appointed2018Celebrating 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 control2019Becoming a signatory of the Global Tourism Plastics Initiative (GTPI)Launched Beds 4 Backpackers to help stranded travellers during the COVID-19 global pandemicSwitch to Progressive Web Application – a website that feels just like our App2020 Strategic
Report
10 Chairman’s Statement
16 Chief Executive’s Review
22 Financial Review
26 Principal Risks and Uncertainties
36 Viability Statement
38
Statement of Compliance –
S 172 (1) of the Companies Act, 2006
51 Corporate Social Responsibility
Selina Playa Venao, Panama
10
Strategic Report
Hostelworld Annual Report 2020
Chairman’s Statement
Resilience
and purpose
We began 2020 in confident mood on the back of our return
to bookings growth in late 2019. While January and February
showed early promise it quickly became apparent that the
year’s trading would be massively affected by the travel
restrictions imposed to deal with the spread of COVID-19. As
demand plummeted our priority was to secure the viability
of the Group and I’m happy to report that we are now in a
strong financial position which will ensure we can participate
profitably in the expected return to normal levels of demand.
I can also report that in addition to the sterling work on
fund raising and cost reduction, the team, led by our CEO
Gary Morrison continues to make substantial progress on
our Roadmap for Growth strategy ensuring our customer
proposition is greatly enhanced and the Group is well placed
to capitalise on the market upturn.
COVID-19 ResponseAs COVID-19 expanded globally, leading to an effective shutdown of the global travel market, we reacted swiftly to protect the business and to enable us to navigate through this crisis. From the outset our focus has been the wellbeing of our employees, to support our hostel partners and customers and to strengthen the Group’s balance sheet.Given the challenges and liquidity constraints the Group faced as a result of the fallout from COVID-19, we undertook a number of actions to ensure the financial stability of the company. This included measures to reduce variable and fixed costs and conserve our cash. As part of the process we accessed government supports where available and the Board along with the executive leadership team deferred a portion of their salaries and fees for 2020.We took actions to protect the health and safety of our employees, and to support our hostel partners to capitalise on demand as restrictions eased and to ensure we continued to engage with our customer base. Detailed contingency plans were also drawn up to ensure business continuity in light of evolving government guidelines.Dividend and Capital StructureIn light of the ongoing uncertainty around COVID-19, the Board took the decision to cancel the proposed final dividend of 2.1c per share (representing a €2.0 million cash outflow), in respect of the 2019 financial year. In June the Board took the further decision to suspend a cash dividend in respect of the 2020 financial year. The Board recognises the importance of dividends to shareholders but believed that cancelling the cash dividend was the right course of action in these exceptional circumstances. Consequently, in August we declared the issue of new ordinary shares by way of a bonus issue to shareholders. Future cash dividends will be subject to the Group Michael Cawley | Chairmangenerating adjusted profit after tax, the Group’s cash position and any restrictions in the Group’s banking facilities.In June, we announced a non-pre-emptive placing and the issuing of new ordinary shares representing up to approximately 19.9% of the Company’s existing ordinary share capital and raised gross proceeds of approximately €15.2 million. Further liquidity was raised through a €7 million three-year revolving credit facility and a short-term €3.5 million invoice financing facility. In January 2021, in light of the agreement of a new €30 million term loan facility, we repaid the amount owing on the short-term financing facility and signed a deed of release on the revolving credit facility, which was undrawn. In February 2021 we drew down the €30 million term loan facility. Together these actions materially strengthened the Group’s capital base in an uncertain environment. Board Composition I would like to personally thank all the members of the Board for their commitment and diligence and hugely appreciate the dedication and teamwork they showed throughout the year as the entire world grappled with the consequences and challenges COVID-19 and the lockdowns presented. The composition of the Board is fully compliant with the 2018 UK Corporate Governance Code as applied to small companies. The Board has undertaken an appraisal of the Directors, as well as of the Board and each sub-committee, which concluded that the Board is functioning effectively. As disclosed to the market in September, TJ Kelly announced his plans to step down as Chief Financial Officer. We thank TJ for his contribution during his time at Hostelworld and wish him every success 11 12
Strategic Report
Hostelworld Annual Report 2020
Chairman’s Statement
(Continued)
for the future. Having made a significant contribution to the finance team at Hostelworld, I’m delighted
that Caroline Sherry has stepped into the role, following a transition period. Caroline has been a welcome
addition to the Hostelworld team since joining in November 2019 from Glanbia plc’s Performance Nutrition
division where she was Director of Financial Planning and Analysis. Prior to this, Caroline held a number of
strategic and commercial finance roles at Ulster Bank Group, a subsidiary of NatWest Group. Caroline is a
fellow of the Institute of Chartered Accountants in Ireland and completed her training in PwC.
There were no other changes to the Audit Committee, Remuneration Committee and Nomination
Committee during the year.
Climate Change
I welcome the introduction in 2020 of a new listing rule on climate-related disclosure requirements
for companies with a premium listing on a UK stock exchange. The new requirements, which apply to
accounting periods beginning on or after 1 January 2021 and which can be traced back to the historic
2015 Paris Agreement on Climate Change, are an appropriate response to the need to improve the
information made available by industry about climate change risk. The Board will look to ensure that
Hostelworld complies with its obligations in this area and will provide oversight and leadership on this
important issue.
Colleagues, Customer and Shareholders
On behalf of the Board, I would like to thank all members of the Hostelworld team for their unfailing
commitment, support and hard work throughout the year.
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 working together in 2021, as our unique
customer base return to travelling the world, in a safe and supportive environment.
Finally, thank you to our shareholders for their continued support and commitment. While this has without
question been a challenging year, and the near-term outlook remains uncertain, we look forward to
returning our business to growth once again and delivering value for all our shareholders.
Michael Cawley
Chairman
16 March 2021
Wake up! Bondi Beach, Australia
Summer House Cairns, Australia
‘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 availablePurely hostel-focused businessDedicated Property Management System solutionsLeveraging new technologiesGuest experience platformHigh quality booking platformRelevant and trusted brandTargeted customer acquisitionCustomer lifetime value managementDriving ancillary spendGlobal locationsHow we create valueGreat Experiences for the travellerGreat Tools and Travel know-howGreat Guests for the Hostel ProviderAbove infographic features the following hostel partners: Len Kyoto, Japan | Monita Hostels Buenos Aires, Argentina | Rhythm & Rumble Hostel, Indonesia | Surfers Den Ericeira, Portugal 16
Strategic Report
Hostelworld Annual Report 2020
Chief Executive Statement
Building for
the future
2020 has been an extremely challenging year for
both Hostelworld and the entire global travel industry.
While we began the year in a strong position following
a return to bookings growth in Q4’19, the COVID-19
outbreak started affecting the travel industry in March
and severely impacted demand for the remainder of
the year. As the outbreak started to spread, we took
swift action to reduce costs and conserve cash whilst
also prioritising our resources towards to strengthening
our core platform. I remain confident that our loyal
customer base will have more desire than ever to travel
and meet other like-minded travellers once restrictions
are lifted, and I further believe our business model and
the improvements to our platform will position us well to
capitalise on those opportunities when demand returns.
Gary Morrison | CEOCOVID-19 ResponseIn light of the unprecedented challenges presented by the pandemic, our key priorities have been to (i) support our employees, customers and hostel partners; (ii) increase our liquidity; and (iii) progress our Roadmap for Growth.Supporting our employees, customers and hostel partnersIn March, we established a Remote Community Hub to support our employees with the shift to remote working, providing wellbeing resources, social activities and a mentorship programme.We provided support to our hostel partners, including detailing COVID-19 policies on our site and hosting 170 hostel webinars with content specifically designed to help them navigate the challenges of operating and converting demand in the current environment. We also introduced a sanitation badge for Hostels to provide details of their compliance to locally applicable Covid-19 containment measures on our platform. We also launched ‘Hostel Heroes’ acknowledging the support hostels were providing to front line workers and continued our HOSCARS virtually, celebrating the best hostels on our site.Finally, to support our customers we launched a ‘Beds for Backpackers’ programme, which provided free accommodation in hostels for stranded travellers. We also introduced marketing initiatives to continue engagement with our loyal customer base, including experiences such as ‘Virtually a hostel’, as well as hosting virtual social events to bring together like-minded travellers during COVID-19. In 2020, we received an average customer service satisfaction score of 86%. Similarly, in a recent survey completed by our property partners we received a score of 4.2 out of 5 for the support we provided in 2020. Increasing our liquidity As the outbreak started to accelerate in March, we implemented a wide ranging programme of cost reductions and initiatives to conserve cash. This included a significant reduction in staff costs; reducing our variable marketing spend to match demand; and minimising discretionary operating costs. As cancellations started to rise to unprecedented levels, we offered customers a range of refund options, including credits in excess of the original value of the booking which could be redeemed for up to two years.In June 2020 we increased our liquidity through an equity placing raising gross proceeds of €15.2m. We also agreed terms for a three-year revolving credit facility to provide up to €7 million of additional liquidity, and a €3.5 million short-term invoice financing facility. In August 2020 the trading outlook deteriorated again as global lockdowns and travel restrictions came back into force. We looked to strengthen our balance sheet, and in February 2021 we drew down a new €30 million term loan facility. This facility ensures we can withstand a further prolonged period of depressed demand and emerge in a materially stronger position when normal demand patterns resume. As part of the new facility, we repaid the amount owing on the short term financing facility agreed in June 2020 and signed a deed of release on the unused revolving credit facility.Throughout the pandemic we have sought to proactively engage with our shareholders given the fast-moving environment we find ourselves operating in and I would like to thank all of them for their continued support through these challenging times. Progress on our Roadmap for GrowthDuring the year, we have taken the opportunity to deploy significant enhancements to strengthen our core platform, including some additional items originally planned for 2021. We expect these enhancements will result in strengthened marketing capabilities, 17 18
Strategic Report
Hostelworld Annual Report 2020
19
Chief Executive’s Review
(Continued)
an improved user experience and
increased inventory competitiveness
when normal travel patterns resume.
Key Operational Highlights and
Results
We entered the year in a strong position,
having successfully returned the business
to net bookings growth in Q4 2019. We
had also increased the number of hostels
listed on our platform to 17,700 by year
end 2019, up from 16,500 at the end of
2018.
However, in early March we saw a sharp
reduction in our trading performance as
the COVID-19 outbreak expanded from
China into Asia, and then into the US
and Europe. In late June we saw a very
modest recovery in domestic bookings,
followed by some recovery in short haul
bookings into Europe in July and early
August as travel restrictions were eased.
In late August, we saw a further marked
deterioration in bookings and bed prices
as travel restrictions tightened globally
again.
Throughout the pandemic we have
also seen an increase in the rate of
hostel closures compared to historical
rates, which we have partially offset by
increased new sign ups to our platform.
As of 31 December 2020, we had 17,200
Hostels listed on our platform, a decrease
of 2.8% compared to the prior years. We
also saw that many hostels remained open
during 2020, but at very low occupancy
levels.
As the pandemic progressed, we took
the opportunity to accelerate delivery of
the Roadmap for Growth items planned
for the balance of 2020, together with
some additional items we had planned for
2021. Throughout the year we delivered
a number of significant core platform
enhancements designed to improve our
marketing capabilities, user experience
and inventory competitiveness. These
improvements included: consolidating
our tracking, attribution and bidding
tools within Google’s product suite to
optimise our marketing spend; making
progress towards our goal of optimising
paid channel spend based on predicted
new customer value versus customer
acquisition cost; transitioning our
legacy website to a progressive web
app, enabling a significantly faster user
experience; deploying a new promotional
configuration platform for our hostel
partners, significantly increasing the
proportion of discounted rates available
to our customers; and launching PayNow,
which allows our customers to pay
upfront for non-refundable bookings at
participating hostels with an option to pay
via Google pay or Apple pay.
Going forward into 2021, we will continue
our platform modernisation programme,
with our main focus on transitioning our
technology stack into the Cloud and
continuing to refactor our legacy core
platform applications into microservices.
This will further strengthen our core
business, enable faster execution of our
growth strategy and reduce cost over the
medium term.
Our Strategy
In March 2020, I updated the market
on the progress of our core Roadmap
for Growth strategy and detailed our
future growth strategy for the next 3-5
years. This longer term strategy will
deliver growth by providing a broader
catalogue of experiences beyond hostel
accommodation to our customer base,
coupled with the addition of social
features to enable our customers to
explore the world together with other
like-minded travellers. I also announced
our intention to accelerate this strategy
via an increased focus on potential M&A
targets in addition to organic initiatives;
funded through a combination of existing
cash reserves, a modest level of debt and
a rebased dividend policy.
Shortly after delivering this update, the
COVID-19 outbreak sharply reduced
demand across the global travel industry.
This necessitated a swift change in
our short-term priorities away from
M&A targets towards reducing costs
and increasing liquidity. This was the
appropriate response to ensure the Group
could withstand a prolonged period of
depressed demand until normal travel
patterns resume, whereupon we could
continue our longer term growth strategy.
As vaccination programmes continue
to be rolled out in our key geographies
across the world, I remain confident that
our core customer base has a strong
desire to travel, even more so after a
prolonged period of confinement. I also
continue to see the same opportunities
to build a broader catalogue of relevant
experiential travel products beyond hostel
accommodation, and opportunities to
connect like-minded travellers with each
other via social features on our platform.
With the Group’s deep knowledge of
experiential travellers built up over 20
years, our trusted brand, and a loyal and
relevant customer base, I continue to
believe in our longer term growth strategy
and that we are uniquely positioned
to enable our customers to Meet the
World ® together with other like-minded
travellers.
In parallel with our longer term growth
strategy, we are continuing to integrate
Counter and Goki into our core platform
offering for our hostel partners. These
solutions have been designed for the
unique requirements of the hostel
industry, and I am pleased with the
progress the teams have made this
year, particularly given the challenging
COVID-19 backdrop and the pressures
the hostel industry has been facing.
Business Model
We are a global OTA focused on
the hostel market. Our core online
platform provides the opportunity for
predominately hostel owners, as well as
other low-cost accommodation providers
to advertise their accommodation to
independent travellers looking for unique
and social experiences. Most of our
revenue is generated through taking a
commission from bookings made through
our technology platform, including the
Hostelworld website, and via our Apps.
This efficient business model has very
favourable working capital attributes
and strong cash conversion.
Following the introduction of a free
cancellation booking option in 2018,
this year we have launched a number
of initiatives to provide our customers
with even more flexibility around their
bookings on our platform. This includes
the introduction of new flexible non-
refundable rates, allowing a booking
to be changed directly with the hostel;
aligning our free cancellation policies to
hostel’s cancellation policies; and finally
allowing credits to be used across the vast
majority of rate plan types. As referenced
previously, we have also introduced
PayNow, allowing travellers to pay 100%
upfront on non-refundable rates at
participating hostels and to do so through
Google Pay or Apple Pay.
Investing in People
Over the last two years we have
significantly strengthened our executive
team, across all areas of the business. I
am confident that the strength and depth
of our leadership team will enable us to
trade through the current challenging
trading environment and position the
Group for growth when we emerge from
the crisis.
During the year we launched several new
employee initiatives, with the objective
of enabling our talent to deliver for the
business. We built on our existing Diversity
and Inclusion (“D&I”) work, establishing
a D&I working group to develop our
strategy further. Having moved to remote
working in March, we communicated a
new agile working approach which post
COVID-19 will enable employees to ‘work
from anywhere’ in the country they are
employed, work abroad for up to 30 days
and increase flexible working. We also
established recognition programmes
and provided benefits to employees
to continue to show appreciation and
acknowledge the dedication of our teams.
I would like to take this opportunity
to thank all of our employees for their
continued hard work and commitment in
this sustained period of uncertainty.
20
Strategic Report
Hostelworld Annual Report 2020
Chief Executive’s Review
(Continued)
Dividends and Capital Allocation
In light of the significant uncertainty presented by COVID-19 the Board and I took the decision in March to
suspend the final 2019 cash dividend. In June we suspended cash dividends for the foreseeable future. In
September, in lieu of a cash dividend, we issued new ordinary shares by way of a bonus issue to shareholders.
The Board and I continue to believe the appropriate allocation of capital resources is critical to ensuring the
long-term growth of the business and optimisation of shareholder returns.
Outlook
While the short to mid-term outlook for the travel industry remains challenging and uncertain, we continue
to expect the pace of recovery to be driven by changes in travel guidance in individual markets, which we
hope to see accelerated with the start of vaccination programmes worldwide.
Whilst this recovery is likely to take some time and the consumer sentiment will continue to be uncertain,
the Board remains confident in the resilience and flexibility of our business model, and that we are well
positioned to execute on our strategy.
As demand recovers, the Board will continue to evaluate internal and external opportunities that will
deliver value for shareholders, in particular the significant potential to enhance future growth through
building out a broader catalogue of experiential travel products beyond hostel accommodation and
opportunities to connect like-minded travellers with each other via social features on our platform.
I remain confident that Hostelworld will emerge from the COVID-19 crisis stronger than before and be
able to seize market opportunities when normal travel patterns resume.
Gary Morrison
Chief Executive
16 March 2021
Lub d Koh Samui Chaweng Beach, Thailand
Financial Review
2020 Key Performance Indicators
Net Bookings –
Hostelworld Brand
1.44M
Net Revenue
€15.4M
Net Average
Booking Value (“ABV”)
€9.33
Adjusted EBITDA
-€17.3M
Adjusted EBITDA
Margin
-113%
Return on Capital
Employed
-78%
-18%
Adjusted Free
Cash Absorption
-81%
-71%
-219%
-12%
Adjusted Loss
per Share
-22%
-20.76 EURO CENT
-237%
-185%
-138%
• Hostelworld brand net bookings decline of 78% (2019: -5%); total Group net bookings
decline of 79% (2019: -6%)
• Net Average Booking Value (“ABV”) of €9.33, a 22% decline versus 2019 (€11.97)
• Net revenue of €15.4m, an 81% decline compared to 2019 (2019: -2%)
• Total marketing spend of €9.3m, a 72% reduction on 2019 (2019: €32.7m)
• Total administrative costs of €36.1m, a 43% reduction on 2019 (2019: €63.4m)
•
• Adjusted EBITDA loss of -€17.3m (2019: €20.5m profit)
• Adjusted free cash flow absorption of -71% (2019: 53%)
• Basic loss per share of -45.68 € cent (2019: basic earnings per share 8.64€ cent)
Exceptional items totaled €3.0m (2019: €3.1m)
The Group uses Alternative Performance Measures (‘APMs’) which are non-IFRS measures to monitor the
performance of its operations and of the Group as a whole. These APMs along with their definitions are provided in
the Appendix ”Alternate Performance Measures” which form part of the Annual Report.
Caroline Sherry | Chief Financial OfficerRevenue and operating (loss): Revenue for the period was €15.4m a decline of 81% compared to 2019 (2019: €80.7m), reflecting the detrimental impact COVID-19 has had on the business and the wider travel and leisure industry. Adjusted EBITDA loss of €17.3m, which was a decline of €37.8m from 2019. Adjusted EBITDA margin was -113% compared to +25% in 2019. Bookings and revenue Despite a positive start to the year, following a return to net bookings growth during Q4 2019, bookings significantly declined in late Q1 2020 as extensive travel restrictions were put in place in response to COVID-19. We experienced a small uptick in bookings during the summer season, but trading deteriorated significantly from the end of August onwards as global lockdowns and travel restrictions came into force. The Group’s net booking volumes declined by 79% in 2020 (2019: 6% decline). 2020 cancellations were €6.2m (32% of gross revenue) compared to 2019 €9.3m (10% of gross revenue), as customers who had booked under the free cancellation policy had their travel plans suspended. The global disruption of the travel industry caused by the COVID-19 pandemic, has resulted in a significantly increased cancellation rate as a portion of revenue. The profile of these cancellations is such that there is a higher proportion of longer lead time higher value bookings. Net Average Booking Value (“ABV”), the average value paid by a customer for a net booking, declined by 22% in 2020 (2019: 3% growth) primarily due to the increase in cancellations and the impact of reduced bed prices across all markets.At 31 December 2020, we held €3.1m of customer deposits relating to bookings made under the free cancellation policy (2019: €2.8m), of this €2.9m relates to bookings already cancelled. We recognised €2.6m of previously deferred revenue in 2020, (2019: (€0.1m). Revenues for the period, net of cancellations, of €15.4m represents an 81% decline versus the same time last year (2019: €80.7m).Throughout the pandemic the Group has proactively managed marketing costs, matching marketing spend to sales volumes. Total marketing spend was €9.3m in 2020 (2019: €32.7m). In addition, the Group also took significant and immediate action across all areas of spend, both fixed and variable. These measures resulted in a 43% reduction in total administrative expenses, from €63.4m in 2019 to €36.1m. The Group has availed of the Irish Revenue tax warehousing scheme and deferred payment on all Irish employer taxes since February 2020. We continue to monitor and comply with the appropriate Revenue guidelines applicable to this scheme. We also availed of assistance under the Coronavirus Job Retention Scheme in the UK and the temporary COVID-19 Wage Subsidy Scheme in Ireland. Exceptional items Exceptional items are identified due to their nature or materiality to help the reader form a better view of overall and adjusted trading. The Group incurred €3.0m of exceptional cost items 2020 (2019: €3.1m), €1.3m of which related to merger and acquisition costs (2019: €2.1m) and €1.7m of which was invested in the realignment of our Product and Technology teams (2019: €1.0m). Share based payment The share-based payment expense of €0.4m (2019: €0.2m) 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. The increase year on year is representative of the LTIP 2020 23
24
Strategic Report
Hostelworld Annual Report 2020
25
Financial Review
(Continued)
scheme which includes a wider pooling of
employees as the scheme was extended
to senior management.
Loss / Earnings per share
Basic loss per share for the Group was
45.68 € cent (2019 basic earnings per
share: 8.64 € cent). The 2019 earnings
per share figures have been restated
to incorporate the 1,636,252 new
Hostelworld Group ordinary shares that
were issued in September 2020. The
weighted average number of shares in
issue during the period was adjusted to
include these bonus shares as if they
were issued 1 January 2019.
The decline in EPS year on year was
driven by a €57.3m decrease in the
Group’s profits for the period. Adjusted
loss per share was 20.76 € cent per share
(2019 earnings per share: 15.2 € cent per
share). The weighted average number
of shares in the period was 107.0m and
the total number of shares issued at the
balance sheet date was 116.3m.
Intangible asset impairment
In 2020 the Group recorded an
impairment of €15.0m on its intangible
assets associated with Hostelbookers
and Hostelworld.com. Carrying value of
intangible assets at 31 December 2020
totals €86.3m, a decrease of €22.9m
from the prior year. The Group capitalised
development costs of €3.7m in the year,
(2019: €2.8m) and had an amortisation
charge for the year of €11.7m (2019:
€11.5m)
Deferred tax
The Group are carrying a deferred tax
asset of €7.6m (2019: €6.6m). Deferred
tax assets are recognised to the extent
that it is probable that future taxable
profits will be available against which any
unused tax losses and unused tax credits
can be utilised. Future taxable profits for
recoverability of the deferred tax asset
has been estimated using the Board
approved five-year plan.
Lease liability
Adjusted free cash (absorption) / flow
The decline in adjusted free cash (absorption) / flow conversion from 53% in 2019 to (71)% in 2020
reflects the impact of the losses made in 2020. The adjusted EBITDA loss made in the period has
resulted in a Free Cash outflow of €(12.3)m compared to an inflow of €10.9m in 2019, with the net
benefit of a €8.9m positive working capital. The positive working capital movement of €8.9m is due
to a €5.6m increase in creditors and a €3.3m decrease in debtors. The €5.6m increase in creditors
due to cash conservation measures taken including the warehousing of Irish employer taxes. The
decline in debtors is due to lower VAT receipts as revenues and operating costs declined and the
receipt of a debtor from the liquidation of a Group entity in 2019. Total cash at 31 December was
€18.2m (2019: €19.4m), of which €3.1m are customer deposits related to bookings made under the
free cancellation policy (2019: €2.8m) and €1.2m relating to a short-term invoice financing facility
(2019: €nil).
Dividend
As announced on 24 June 2020, the Board does not expect to pay a cash dividend under its current
policy in respect of the 2020 financial year. On 17 September 2020, the company issued 1,636,252
bonus shares to shareholders in lieu of a cash dividend at value €0.01 per share. Future payment of
cash dividends will be subject to the Group generating adjusted profit after tax, the Group’s cash
position and any restrictions in the Group’s debt facility.
Caroline Sherry
Chief Financial Officer
16 March 2021
At the balance sheet date, the carrying
value of the lease liability totalled €4.3m
(2019 €4.3m). These assets relate to the
Group’s lease commitments for office
space in Ireland, UK, Portugal and China.
Net debt and financing
As at balance sheet date the Group had
debt of €1.2m (2019: nil) relating to a
short-term invoice financing facility. The
Group also had a €7m revolving credit
facility which as at 31 December 2020
remained undrawn. In January 2021
amounts owing on the short-term invoice
financing facility were repaid in full and
the Group signed a deed of release on the
revolving credit facility.
In February 2021 the Group signed a
€30m five-year term loan facility with
certain investment funds and accounts
of HPS Investment Partners LLC or
subsidiaries or affiliates thereof. An
amount of €28.8m was drawn down on
23 February 2021.
In January 2021 the Group also agreed
revised covenant terms with AIB on a
rental guarantee for the Central Park
office, Dublin, the Group’s headquarters
where financial covenants and parent
company guarantee were waived.
At 31 December 2020 the Group was in
compliance with all financial covenants
in place.
Taxation
The Group recorded a corporation tax
credit of €0.6m (2019: €1.2m charge).
Trading losses arising in 2020 have been
carried back to 2019 and set against
taxable profits arising in that year
resulting in a refund owing to the Group in
respect of tax paid in 2020.
Related party transactions
Related party transactions are disclosed
in note 22 to the Group financial
statements.
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. Emerging risks
are identified from areas of uncertainty, which may not have a
significant impact on the business currently but does have the
potential to adversely affect the Group in the future.
The most material risks facing the Group are set out in the table
below, together with comments on how they are managed to
minimise their potential impact. While the table below is not
prioritised nor an exhaustive list of all risks that may impact
the Group, it is the Board’s view of the principal risks at this
point in time. Individually or together, these risks could affect
our ability to operate as planned and could have a significant
impact on revenue and shareholder returns. Additional risks and
uncertainties, including those that have not been identified to
date or are currently deemed immaterial, may also, individually
or together, have a negative impact on our revenue, returns, or
financial condition.
The Board also considered its obligations in relation to providing
both the annual viability and going concern statements and its
conclusions can be found on pages 123 and 124 and note 1 to the
Consolidated Financial Statements respectively.
27
Direction of change
Unchanged
Increased
Decreased
Material risks:
No. Category
Description and Impact
Management and Mitigation
Direction
of change
1. Macro Economic
Conditions
Revenue is derived from the wider leisure
travel sector.
The COVID-19 pandemic and the resulting
measures, including travel restrictions,
implemented by governments around the
world to reduce the spread of COVID-19
has resulted in an unprecedented decline
in consumer spending, travel and related
activities. This pandemic has adversely
affected our business and the outlook for the
future remains uncertain at present and it is
not yet known when international travel will
return to normal levels.
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 the COVID-19 pandemic
mentioned above 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
material impact on travel demand and travel
patterns therefore impacting revenue.
In circumstances where events cause a
material decline in consumer travel behaviours
and patterns on a global scale, such as the
recent COVID-19 pandemic, management will
take necessary actions to conserve cash.
There has been an increased and on-going
focus by the Group on liquidity management.
New sources of debt and equity financing
have been secured which provides additional
flexibility to support the Group as it recovers
from the impact of the COVID-19 pandemic.
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
helps to mitigate this.
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 USD denominated
suppliers such as Google.
FX translation risk is mitigated through
matching foreign currency cash outflows
and foreign currency cash inflows and
by minimising holdings of excess non-
euro currency above anticipated outflow
requirements.
2. Working Capital
Investment and
Going Concern
Resulting from the detrimental impact that
COVID-19 has had on the travel sector there
has been a significant impact on our working
capital resources, which creates a risk that
the Group will not be able to continue in
operation and meet its liabilities as they fall
due. The Group has prepared a five-year
budget which assumes a return to growth.
There is a risk that the travel sector will
not return to trading volumes in line with
expectations.
Our ability to invest and grow is further
constrained by our financial resources.
When COVID-19 began there was a robust
assessment taken by Directors of principal
risks facing the Group including those
that threaten its business model, future
performance, solvency or liquidity. New
funding was received through an equity raise
and debt financing.
The Group is focused on cash forecasting,
tight cost control and managing supplier and
customer relationships.
Key metrics and reporting reviewed regularly
in management accounts and at management
meetings.
28
Strategic Report
Hostelworld Annual Report 2020
Principal Risks and Uncertainties
(Continued)
No. Category
Description and Impact
Management and Mitigation
3. Capital
Structure
The Group has reviewed its capital structure
and strengthened its capital base with two
landmark transactions in June 2020:
The Group engaged with large firm corporate
finance advisers to review and discuss the
optimal capital structure.
Direction
of change
No. Category
Description and Impact
Management and Mitigation
5. Competition
The risks posed by competition could
adversely impact our market share and future
growth of the business, these include:
Execution of roadmap for growth and
capitalise on our unique market position, this
involves:
29
Direction
of change
•
•
Equity Placing
Debt Raising
Since the IPO in 2015, the Group had neither
placed equity nor raised debt. These two
transactions carry inherent risks. Equity placing
leads to higher scrutiny from shareholders both
participating and non-participating.
In 2021 the group entered a new term loan
facility for €30m. Debt, by creating repayment
obligations and covenants, requires constant
monitoring of the Group’s leverage and
liquidity.
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 Group has performed weekly forecasting
of cash resources and monitored closely the
covenants and obligations caused by any debt
agreements in place. Monthly reporting has
been put in place to ensure the terms of the
new term loan facility and related reporting
requirements are adhered to.
Our target 18-34-year-old population tend to
be both flexible as to destination, and are less
risk adverse.
4.
Impact of
terrorism threat
on leisure travel
•
•
•
•
•
Targeting new customer acquisition and
growing the most profitable customer
cohorts (with focus on CLV/CAC) by
optimising overall marketing investment.
Strengthening the Group’s core platform
in order to improve its flexibility and the
experience of our customers.
Upgrading our third-party platform
connectivity in order to defend our
competitive position.
Focus on expanding our global footprint,
meeting emerging demand while also
strengthening our overall product
offering.
Leveraging the capabilities of our
partnerships with Goki Pty Limited
and Counter App Limited to ensure we
are delivering best in class and most
advanced tech-based solutions for our
customers and hostel partners.
•
•
•
•
Supply: competition from direct
competitors, alternative accommodation
operators and disruptive new entrants
leading to a loss of key accommodation
suppliers.
Customers: changes in customer
behaviour leading to a loss in
customer traffic and demand for
our services and / or increase in
customer acquisition costs. Consumer
preferences could change as a result
of the COVID-19 pandemic which
may be disadvantageous to our
business and may benefit existing
and new competitors. With global
travel restrictions, there may be a shift
towards domestic travel and alternative
accommodations.
There has been a rise in cancellations
and vouchers issued in lieu of cash
refunds for the Group and with our
competitors. This increases competition
for the Group as it locks customers
into those companies issuing the credit
notes, thereby potentially reducing the
demand for the Group’s offering.
Technology and Product: Over recent
years the ever-increasing pace of
change of new technology, new
infrastructure and new software
offerings have changed how customer’s
research, purchase and experience
travel. Notable shift changes include
mobile networks, mobile applications,
meta-search providers, display
advertising, social communities etc.
Unless we continue to stay abreast of
technology innovation and change, we
risk becoming irrelevant to the modern
customer.
30
Strategic Report
Hostelworld Annual Report 2020
31
Principal Risks and Uncertainties
(Continued)
No. Category
Description and Impact
Management and Mitigation
Direction
of change
No. Category
Description and Impact
Management and Mitigation
Direction
of change
6.
Search Engine
Algorithms
A large proportion of traffic to our websites
is generated through internet search engines
such as Google, from non-paid (organic)
searches and through the purchase of travel-
related keywords (paid search).
We therefore rely significantly on practices
such as Search Engine Optimisation (“SEO”)
and Search Engine Marketing (“SEM”) to
improve our visibility in relevant search
results. Search engines, including Google,
frequently update and change the logic
that determines the placement and display
of results of a user’s search, which can
negatively impact placement of our paid
and organic results in search results. This
could result in a decrease in bookings and
thus revenue. It could also result in having
to replace free traffic with paid traffic, which
would negatively impact margins.
The Group invests heavily in recruiting and
retaining key personnel with the requisite
skills and capabilities in paid 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.
7.
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. Negative
publicity could impact brand perception and
consumer loyalty and ultimately revenue.
Our exceptional refund policy for COVID-19
refunds has the potential to adversely affect
our brand.
We are focused 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.
8. 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.
The shift to remote working during COVID-19
(beginning 12 March 2020) changed the risk
profile of certain data processing activities
and gives rise to ongoing data security
challenges and a widening threat landscape
more targeted at endpoint controls.
As we plan for a level of return of colleagues
to our offices, the COVID-19 Return to Work
Protocol (Ireland) and Working Safely During
Coronavirus Guidelines (UK) require us to
capture from colleagues and office visitors,
new categories of sensitive personal health
data that we would not have obtained before.
The General Data Protection Regulation
(“GDPR”) places significant data security and
regulatory compliance obligations on us when
processing such data.
Third party vendors that we engage with may
not have the appropriate Information Security
controls in place leading to a potential breach
of customer data.
For 2021, 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.
Hostelworld are Level 1 PCI compliance with
the guidelines of the payment card industry.
Through 2020 we performed a lot of work
to comply with certain aspects of Payment
Services Directive 2 (“PSD2”) in 2021 as it
relates to customer payment – customer
authentication security measures.
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.
We have a privacy compliance programme
to align with our on-going obligations under
GDPR and have invested in our own data
protection resources to monitor compliance
including the onboarding of bespoke privacy
management software in mid-2020. Our Data
Protection Officer (“DPO”) is responsible
for informing, advising and monitoring
compliance on all matters relating to the
protection of personal data in the Group. We
regularly review our employee information
security policy and we continue to invest
in information security training for all staff
so that they remain vigilant and alert to the
possibility of cybercrime.
We reviewed the impact on servers of
increased remote access loads with teams
working from home. We issued guidance to
all colleagues during COVID-19 regarding
the personal data and data security
implications of the pandemic and new remote
working along with enhanced procedures
for accessing company data while working
remotely.
We provide data security training for all staff.
We perform due diligence of our third-party
suppliers who process our personal data
including heightened information security due
diligence.
32
Strategic Report
Hostelworld Annual Report 2020
33
Principal Risks and Uncertainties
(Continued)
No. Category
Description and Impact
Management and Mitigation
Direction
of change
No. Category
Description and Impact
Management and Mitigation
Direction
of change
9.
Regulation
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.
A detailed analysis of the Group’s approach
to offering vouchers to certain customers
concluded that the Group’s approach was
aligned with the principles reflected in the EU
Commission recommendations on vouchers
for cancelled package travel and transport
services published on 13 May 2020.
In line with guidance from the Irish and UK
governments, we have developed a robust
COVID-19 Response Plan including adopting
protocols around returning colleagues back to
the office environment.
Rolled out an effective refund management
and risk policy and procedure to deal with
individual consumer complaints and those
from consumer regulators. Our response to
requests and complaints is informed by a
cross-departmental risk assessment.
The Group have been working with the
Central Bank of Ireland to ensure the group
are complaint with the PSD2 EU Directive.
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.
Compliance with new regulations can mean
incurring unforeseen costs, and non-
compliance could result in penalties and
reputational damage.
COVID-19 has led to increased focus by
consumer rights regulators on the online
sales practices of tourism and travel focused
companies and may have an impact on the
Group’s brand if the Group’s sales practices
were investigated and assessed to be non-
compliant.
COVID-19 has heightened our obligations
under employment and health and safety laws
to protect the safety, health and welfare of
colleagues in the workplace.
GDPR imposes particular compliance
obligations with respect to our COVID-19
response measures with risk of fines and
other enforcement mechanisms being
imposed by a data protection authority.
Our position on customer refunds may give
rise to customer complaints to consumer
regulators such as the Irish Competition and
Consumer Protection Commission or UK
Competition and Markets Authority who have
a range of enforcement powers including
fines.
PSD2 is a new EU Directive that applies to
payment services in the EU. The deadline for
the Group to incorporate and be compliant
with this Directive was 31 December 2020.
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.
Transactions and mergers and acquisitions
work are properly documented with support
from tax advisers. Transfer pricing is regularly
reviewed and updated to reflect Group
structure and most recent guidance.
10. Tax
The taxation of e-commerce businesses is
constantly being evaluated and developed
by tax authorities around the world. There
is a risk relating to the identification of and
evaluation of tax legislative changes and the
impact of these on the Group.
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.
We are currently monitoring the introduction
of the digital services taxes, and its impact on
our Group.
34
Strategic Report
Hostelworld Annual Report 2020
35
Principal Risks and Uncertainties
(Continued)
No. Category
Description and Impact
Management and Mitigation
Direction
of change
No. Category
Description and Impact
Management and Mitigation
Direction
of change
11. Business
Continuity
Failure in our IT systems or those on which we
rely such as third party hosted services could
disrupt availability of our booking engines
and payments platforms, or availability of
administrative services at our office locations,
with an adverse impact to our customer
service.
The outbreak of COVID-19 led to substantial
business and operational disruptions across
the Group and resulted in Hostelworld and our
third-party suppliers seeking to suspend or be
excused from certain contractual obligations.
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
Plan(“BCP”) to include our corporate offices.
Across 2021 we will carry out targeted
business continuity testing by business unit
to ensure our systems and processes are
effective as possible.
As part of COVID-19 BCP invocation all
employees have been working from home via
Hostelworld secured endpoint devices that
were configured and rolled out in 2020. All
teams had tested access and functionality
and only small adjustment was needed to
have all teams operational very quickly. All
laptops are encrypted and protected with
anti-virus and anti-malware software.
We updated our standard supplier terms
in early 2020 to provide more robust and
comprehensive contractual provisions
regarding force majeure (covering epidemics/
pandemics) and BCP (requiring suppliers to
implement the provisions of our BCP at any
time).
12. People
The Group is dependent on ability to attract,
retain and develop creative, committed
and skilled employees so as to achieve its
strategic objectives.
The Group has developed stronger
recruitment processes supported by effective
HR policies and people process to enable the
attraction and retention of key talent.
Due to the possibility of a long recovery
period for the travel industry resulting from
the COVID-19 pandemic and the redundancies
and restructurings which have taken place
within the company, employees may not view
employment with us as positively as they did
prior to the pandemic. This may adversely
affect our ability to attract and retain highly
skilled employees.
The Group has increased focus on
understanding the drivers of employee
engagement and are committed to taking
action to improve employee engagement
levels. Robust external benchmarking has
ensured there is understanding of the
competitiveness of the reward offering and
additional investment in 2019 and 2020 aims
to reduce voluntary attrition.
The Group operates from five global offices,
which provides flexibility for location of key
talent, thereby opening up a larger talent pool
to select from. A move to increased remote
working would further enhance this.
A non-executive director fulfils a workforce
engagement role as set out in the 2018 UK
Corporate Governance Code.
13. Brexit
14. Climate
Change and
Sustainability
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
2020, the UK as a destination represented 6%
of total Group bookings (2019: 6%) and 16%
of Group bookings were from UK nationals
(2019: 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.
On 1 January 2021, the UK became a third
country for the purposes of the GDPR and
any transfer of personal data to HW UK or
a supplier must now comply with the data
transfer rules in the GDPR. Failure to comply
can lead to fines from the regulator and a
negative impact on market reputation.
Climate change and sustainability came into
sharp focus in 2019 and has further evolved
as an area of heightened concern with
consumers and stakeholders in 2020.
There is a request for more accountability
from our customers, employees, other
stakeholders as to what the Group is doing to
limit its indirect impact on climate change.
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.
Hostelworld has in place with all Group
companies, an intra-group data transfer
agreement with EU Commission-approved
Model Clauses, one of the approved data
transfer mechanisms under the GDPR – HW
UK is a party to this agreement. Hostelworld
has also prepared GDPR compliant data
protection supplemental contract addendums
for UK suppliers which will provide appropriate
safeguards and mechanisms to ensure data
transfers to the UK are GDPR compliant.
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.
We aim to offset our carbon footprint
through a number of initiatives. In 2020, we
became a signatory on the Global Tourism
Plastics Initiative led by the UN Environment
programme and the World Tourism
Organisation. Our goal is to encourage
our hostel partners to sign up with the
aim of reducing their single use plastics
consumption. We have also taken steps to
reduce our plastic consumption as a Group.
Prior to COVID-19, we made efforts to reduce
our plastic consumption through initiatives
such as purchasing reusable water bottles
for the office, ordering fresh fruit and other
perishables from suppliers who use fully
recyclable packaging.
36
37
Viability Statement
The objective of the viability statement is for the Directors
to report on their assessment of the prospects of the Group
meeting its liabilities over the assessment period, taking into
account the Group’s available financing facilities which includes
the term loan facility which was drawn down in February 2021,
principal risks and uncertainties outlined above, recent financial
performance, outlook, and current financial position.
The financial position of the Group, its cash flows, liquidity
position and debt facilities are outlined in the Financial Review
on pages 22 to 25. The cashflow forecasts prepared by the
Group in its consideration for going concern are conservative
- within the outlook no upside was assumed from global mass
vaccination programmes, full recovery was not expected to
happen until FY-23, average booking value assumed to be lower
than historic not returning to FY-19 levels until FY-24 and cost per
booking is assumed to be elevated.
To make the assessment of viability additional scenarios have
been modelled, based upon a number of the Group’s principal
risks and uncertainties which are documented on pages 26 to 35.
These scenarios represent severe but plausible circumstances
that the Group could experience. In it’s determination of viability,
the Directors have also ensured that the Group have abided by
term loan facility covenants in place as disclosed within Note 26
to the Financial statements.
The Directors have determined that a five-year period to 31
December 2025 is an appropriate period over which to provide
its viability statement as this is the period reviewed by the Board
in the budgeting and forecasting process.
Scenario 1
Extended travel disruption as a result of COVID-19
Link to Risk
Macroeconomic risk
Consequences
The Group has considered the impact to cash of operating in a zero-revenue environment
but carrying the current level of operating costs for a 12 month period and carrying 25% of
the overall budgeted direct costs (pay per click marketing spend primarily that is directly
linked to revenue). The Group consider this is an improbable scenario given industry
outlook, vaccination news and bookings volumes received to date. In this very remote
stress case the Group have enough cash reserves to sustain the group over the next five
years.
The Group have also considered how long the group can operate with zero revenue. In
this scenario we have reduced our direct marketing costs spend to zero (intrinsic link to
revenue) and the group has sufficient reserves to May 2022 before exceeding covenant
agreements in place for term loan facility.
Scenario 2
GDPR fine, cyber security breach or other major one-off cost.
Link to Risk
Data Security, Regulation
Consequences
There are two significant consequences for a GDPR breach:
1. Tier 1 can attract a fine of €10m or 2% of global turnover, whichever is greater.
2. A tier 2 data breach is a serious GDPR breach and it can attract a fine of €20m or 4% of
turnover, whichever is greater.
For the Group, the max exposure for a GDPR breach is €20m. The likelihood of this event
is remote. The Group takes data protection very seriously and have a designated Data
Protection Officer and a series of controls and monitoring is in place to ensure compliance.
The Group has considered the fine within its cashflows in 2023 (assuming that an
investigation for a major breach would take approximately two years) and is comfortable
that such a fine would not jeopardise the viability of the Group over the next five years.
Scenario 3
Losing key talent
Link to Risk
People
Consequences
Our Group is very dependent on its people. The loss of a Group of our committed and
skilled workforce would likely impact our revenue projections, increase our marketing
spend if we lose talent with requisite skills and capabilities in paid search bidding, and
also increase our overall operating expenses as we cover recruitment fees for additional
resources.
From above we have assumed 10% reduction in revenue, 10% increase in direct marketing
costs and 2% increase in operating costs each year in 2021 and 2022. With these
projections the Group remains viable over the next five years, and operates within the
terms of the term loan facility covenants in place.
Having considered these stressed scenarios and 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 2025
while adhering to the financial covenants connected with the term loan facility.
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.
Statement of Compliance - S172 (1) of the Companies Act, 2006
The Directors consider that they have acted at all times to promote the success of the Group for the
benefit of its members as a whole, and in doing so have had regard (amongst other matters) to:
38
Principal Decisions
39
• 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.
Relevant stakeholders
During the reporting period the Directors considered and assessed who the Group’s relevant stakeholders
were for the purposes of complying with Section 172(1).
Shareholders
• A key objective for the Board is creating value for our shareholders by delivering long term sustainable
growth.
Our People
• The expertise and capability of our people will always be critical to delivering our strategic objectives.
Hostel Partners
• We rely on our hostel partners to deliver a great accommodation offering to our traveller customers at
competitive rates.
Customers
• Customers are at the heart of everything we do. Decisions that the Board take need to ensure
Hostelworld delivers value and quality to our customers.
Key Suppliers
• Having a collaborative and trusted relationship with our key suppliers is essential to the success
of Hostelworld and allows the Group to provide high quality products and services to our traveller
customers.
Understanding the views of stakeholders
We set out on pages 71 to 73 the methods used to ensure the Directors understand the views of the
Group’s key stakeholders.
The following decisions were the Board’s principal decisions for 2020 from a Section 172(1) perspective.
Further information about each of these is set out below:
• The decision to amend the Group’s dividend policy to a pay-out ratio of between 20% – 40% of
the Group’s adjusted profit after tax;
• The decision to cancel the recommendation of a proposed full year final dividend of 2.1c per
share for 2019;
• The decision to distribute bonus shares to shareholders rather than pay a cash dividend;
• Following the onset of the COVID-19 pandemic, deciding to implement a number of cost
saving and cash conservation measures and focus available expenditure on core platform
enhancements;
• The decision to secure additional banking facilities to mitigate the COVID-19 related liquidity risks
to the Group;
• The decision to increase the Group’s liquidity through an equity placing; and
•
In response to the COVID-19 pandemic, oversight and approval of a number of employee
initiatives in the areas of agile working, well-being and enhanced employee communication and
engagement.
Once Again Hostel, Thailand
40
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Hostelworld Annual Report 2020
41
Statement of Compliance - S172 (1) of the Companies Act, 2006
(Continued)
Section 172(1) Considerations
• Decision to amend the Group’s dividend policy to a pay-out ratio of between 20% – 40% of the Group’s
• Cancelling the recommendation of a proposed full year final dividend of 2.1c per share for 2019
adjusted profit after tax
(a) the likely
consequences of any
decision in the long term
The ability of the Group to accelerate growth and deliver on the Group’s
strategy was likely to be restricted by the constraints of the previous
dividend policy. Investing in the Group’s strategy would deliver improved
returns for shareholders over the long-term.
(a) the likely
consequences of any
decision in the long term
Noting the projected revenue impacts of the COVID-19 pandemic, the
cancellation of the decision to recommend a final year dividend was a
key cash conservation measure that was required to protect the Group’s
long-term future during a period of unprecedented uncertainty.
(b) the interests of the
Group’s employees
The ability of the Group to maintain an engaged and effective workforce in
circumstances where employee headcount was anticipated to be reduced
following the on-set of COVID-19 was considered to be inconsistent with
continuing to operate the previous dividend policy.
(b) the interests of the
Group’s employees
The ability of the Group to effectively protect its liquidity position was
considered important in retaining the confidence of the Group’s staff
in the long-term future of the Group during a period of acute trading
uncertainty.
(c) the need to foster
the Group’s business
relationships with
suppliers, customers
and others
The amending of the dividend policy would assist the Group in securing
the support of suppliers in connection with agreeing amended payment
terms as it would publicly confirm (through the publication of the dividend
amendment in a related RNS) the financial and trading difficulties being
experienced by the Group following the on-set of COVID-19.
(c) the need to foster
the Group’s business
relationships with
suppliers, customers
and others
The cancelling of the recommended dividend would assist the Group in
securing the support of suppliers in agreeing extended payment terms
as it would publicly confirm (through the publication of the dividend
cancellation in a related RNS) the trading difficulties being experienced
by the Group.
(d) the impact of the
Group’s operations on
the community and the
environment
(e) the desirability of
the Group maintaining
a reputation for high
standards of business
conduct
(f) the need to act fairly
as between members
of the Group.
The impact of the decision to amend the dividend policy was not considered
to be material in respect of the broader community and environment.
A more balanced capital allocation policy which took account of the long
term requirements of the Group and its shareholders was likely to assist in
maintaining the Group’s reputation for considered decision making.
(d) the impact of the
Group’s operations on
the community and the
environment
(e) the desirability of
the Group maintaining
a reputation for high
standards of business
conduct
The impact of the decision to cancel the recommendation of a proposed
full year final dividend for 2019 was not considered to be material in
respect of the broader community and environment.
The decision was considered an appropriate and prudent response to
the impact of the COVID-19 pandemic and would affirm the reputation
of the Group as an enterprise that took informed and immediate steps
to manage risks to the business.
The fact that the Group’s shareholders would be affected equally was noted
by the Board as being appropriate and fair in the circumstances.
(f) the need to act fairly
as between members
of the Group.
The fact that the Group was obliged to treat its shareholders equally
in connection with the decision was noted by the Board as being
appropriate and fair in the circumstances.
42
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Statement of Compliance - S172 (1) of the Companies Act, 2006
(Continued)
• The decision to distribute bonus shares to shareholders rather than pay a cash dividend
(a) the likely
consequences of any
decision in the long term
Noting the projected revenue impacts of the COVID-19 pandemic, the
cancellation of the decision to recommend a final year dividend was a key
cash conservation measure that was required to protect the Group’s long-
term future during a period of unprecedented uncertainty. However, the
Board recognised the need to ensure shareholders’ interests in having value
returned to them by the Group were properly considered. The Board agreed
that returning value to shareholders via bonus shares was an effective
means to meet shareholder interests.
(b) the interests of the
Group’s employees
The ability of the Group to effectively manage its relationship with its
shareholders was considered important in retaining the confidence of the
Group’s staff in the long-term future of the Group during a period of acute
trading uncertainty.
(c) the need to foster
the Group’s business
relationships with
suppliers, customers
and others
The distribution of bonus shares would maintain the confidence of the
Group’s suppliers, customers and others that the Group was effectively
managing its relationship with a key stakeholder and, accordingly, that the
interests of the Group’s stakeholders in general was something the Board
was conscious of during the reporting period.
(d) the impact of the
Group’s operations on
the community and the
environment
The impact of the decision to distribute bonus shares to shareholders during
the reporting period was not considered to be material in respect of the
broader community and environment.
(e) the desirability of
the Group maintaining
a reputation for high
standards of business
conduct
The decision was considered an appropriate and prudent response to the
cash challenges facing the business (which removed the ability of the Group
to make cash dividends) and would affirm the reputation of the Group as
an enterprise that took informed and meaningful steps to return value to its
shareholders through alternative means.
(f) the need to act fairly
as between members
of the Group.
The Board was aware through the Group’s engagement with shareholders
during the reporting period that shareholders had requested that the
Board consider a distribution of bonus shares in place of a cash dividend
as a means to return value to shareholders. The Board considered that the
decision and the value returned was an equitable and reasonable response
to shareholders requests.
The Millennials Shibuya, Japan43 44
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45
Statement of Compliance - S172 (1) of the Companies Act, 2006
(Continued)
• Deciding to implement cash conservation measures and focus available expenditure on core platform
enhancements
(a) the likely
consequences of any
decision in the long term
Failure to implement cash conservation measures would fail to address
the liquidity risks faced by the Group as a consequence of the COVID-19
pandemic and increase the risk profile of the Group during a period of
unprecedented uncertainty.
Failing to continue targeted investment in core business ‘Roadmap for
Growth’ initiatives would increase the risk of competitive gaps opening up
between the Groups service offering and those of its competitors, leaving
the Group at a competitive disadvantage when normal trading patterns
resumed.
(b) the interests of the
Group’s employees
Failure to implement cash conservation measures, would increase the levels
of concern around job security for all employees.
Employee feedback during the reporting period had established that
the Group’s staff were concerned about job security during COVID-19.
Accordingly, it was important to ensure that the Group’s staff retained
confidence that the Group was managing its cost base effectively, enabling
the Group to plan appropriately for a return to normal trading.
(c) the need to foster
the Group’s business
relationships with
suppliers, customers
and others
The Board was focused on ensuring that extending payment terms with
suppliers be achieved by negotiation and agreement and not by the Group
seeking to impose extended payment terms. The interests of suppliers in
having certainty of payment was considered by the Board who agreed it
was important for the Group to manage its cash conservation measures in a
manner which had regard to the legal obligations owed by the Group to its
suppliers.
Feedback from the Group’s technology suppliers and hostel partners during
the reporting period had indicated that Hostelworld, as a leading provider
of hostel accommodation, could assist in maintaining confidence in the
travel industry during COVID-19 by being seen to invest and plan for the
future. The platform enhancements delivered during 2020 were designed
to improve the Group’s marketing capabilities, customer experience and
inventory competitiveness. These enhancements helped to maintain
confidence with our key technology suppliers, hostel accommodation
partners and traveller customers that the Group was effectively planning for
a return to normal trading post COVID-19.
(d) the impact of the
Group’s operations on
the community and the
environment
The Board assessed that the implementation of cash conservation measures
was unlikely to have a material impact on the community and environment.
Continuing to make targeted technology investments was assessed as
improving confidence amongst all of the Group’s staff, suppliers and
partners in local communities that the Group was in a position to manage
the adverse trading impacts of COVID-19 and would remain a key provider
of online travel services on a long-term basis.
(e) the desirability of
the Group maintaining
a reputation for high
standards of business
conduct
The decision to manage cash conservation measures with suppliers through
negotiation and agreement was considered appropriate to ensure the
Group’s reputation as a conscientious and compliant commercial enterprise
was maintained.
(f) the need to act fairly
as between members
of the Group.
In making its decision, the Board had regard to the views delivered directly
by its shareholders that prudent and effective cash conservation measures
be implemented to address the Group’s liquidity risks and ensure the long-
term viability of the business.
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47
Statement of Compliance - S172 (1) of the Companies Act, 2006
(Continued)
• Deciding to secure additional banking facilities to mitigate the COVID-19 related liquidity risks to
• The decision to increase the Group’s liquidity through an equity placing
the Group
(a) the likely
consequences
of any decision in
the long term
Failing to secure additional credit facilities would have increased the
Group’s liquidity risks and impacted its solvency position should the
adverse trading impacts of COVID-19 continue for a prolonged period of
time.
(b) the interests
of the Group’s
employees
Employee feedback during the reporting period had established that
the Group’s staff were concerned about the on-going viability of the
Group in circumstances where the negative trading impact of COVID-19
became more pronounced in a short period of time. Accordingly, it was
important to ensure that all staff had confidence in the ability of the
Board and the Group’s management to plan effectively and address
liquidity and solvency risks should the impact of COVID-19 continue for
a period longer than expected.
(c) the need to
foster the Group’s
business relationships
with suppliers,
customers and others
Feedback from the Group’s accommodation partners during 2020
indicated that Hostelworld could assist in maintaining confidence in
the travel industry during COVID-19 by effectively planning for a future
when travel restrictions had been removed/ moderated. The Board
agreed that the decision to secure additional financing facilities (as
announced via RNS on 24 June 2020) would demonstrate effective
risk management which would, in turn, maintain the confidence of the
Group’s accommodation partners in the Group as a reliable partner in
the online travel sector.
(d) the impact
of the Group’s
operations on the
community and
the environment
Continuing to effectively manage risks and plan for a post COVID-19
future would improve confidence amongst all of the Group’s staff,
suppliers and partners in local communities that the Group was in a
position to manage the adverse trading impacts of COVID-19 and would
remain a key provider of online travel services on a long-term basis.
(e) the desirability
of the Group
maintaining a
reputation for
high standards of
business conduct
The decision was considered an appropriate risk management exercise
which would maintain the Group’s reputation as an enterprise that was
effectively and properly managing the financial and commercial risks
presented by the COVID-19 pandemic.
(f) the need to act fairly
as between members
of the Group.
The Board agreed that the decision to secure additional credit facilities
was an appropriate way to ensure that shareholders would not be
required to absorb all of the capital maintenance and other financial
risks presented by COVID-19.
(a) the likely
consequences of any
decision in the long
term
Failing to secure additional financing from an equity placing would have
negatively impacted on the Group’s ability to execute its long-term strategic
plans (including making targeted investments in the Group’s technology and
platform capabilities), making the Group less competitive, and would also
increase the liquidity risks faced by the Group.
(b) the interests of the
Group’s employees
The Board considered the additional financing would assist retaining the
confidence of staff in the long term future of the Group in circumstances
where COVID-19 continued for a prolonged period.
(c) the need to foster
the Group’s business
relationships with
suppliers, customers
and others
Feedback from the Group’s suppliers and accommodation partners during
2020 indicated that they were concerned that they would not be treated
fairly by commercial partners who they were dependent on for revenue and
payment, particularly as they attempted to deal with COVID-19. The Board
agreed that the equity placing would enable the Group to manage its payment
obligations to its suppliers, traveller customers and accommodation partners
in a fair manner and provide them with confidence regarding certainty of
payment.
(d) the impact of the
Group’s operations on
the community and the
environment
Continuing to effectively manage risks and plan for a post COVID-19 future
would improve confidence amongst all of the Group’s staff, suppliers and
partners in local communities that the company and would remain a key
provider of online travel services on a long-term basis.
(e) the desirability of
the Group maintaining
a reputation for high
standards of business
conduct
(f) the need to act fairly
as between members of
the Group.
The decision was considered an appropriate risk management exercise
which would, in conjunction with the Group securing credit facilities, maintain
the Group’s reputation as an enterprise that was effectively and properly
managing the financial risks presented by the COVID-19 pandemic.
The Board was conscious that the decision to issue 19.9% of the existing
share capital on a non pre-emptive basis via a cash box placing would mean
that smaller shareholders would not be able to participate. However, following
advice taken from our capital markets advisers, the Board agreed that the
cash-box structure was the most cost-effective and efficient structure to use
and was an appropriate risk management measure in the circumstances.
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Statement of Compliance - S172 (1) of the Companies Act, 2006
(Continued)
•
In response to the COVID-19 pandemic, oversight and approval of a number of employee initiatives in
the areas of agile working, well-being and enhanced employee communication and engagement
(a) the likely
consequences of any
decision in the long
term
The Group’s staff were acknowledged by the Board as being critical to its
success and integral to the Group’s strategic objectives. Mental health
issues impacting a material number of staff would significantly impact
the achievement of strategic objectives. Board oversight and approval of
initiatives designed to effectively manage the on-going impact of remote
working on employee’s mental health was a key means to manage this risk.
(b) the interests of the
Group’s employees
The mental health and well-being of the Group’s employees were paramount
in Board assessments and decision making in connection with measures
adopted by the Group to support employee’s well-being while working
remotely.
(c) the need to foster
the Group’s business
relationships with
suppliers, customers
and others
The decision was not considered material in respect of the Group’s business
relationship with suppliers, customers and others.
(d) the impact of the
Group’s operations on
the community and the
environment
The Board considered that the oversight and approval of measures designed
to support employee’s mental health was an important part of the Group’s
broader responsibilities to the community to act with empathy towards its
staff during a time of unprecedented uncertainty.
(e) the desirability of
the Group maintaining
a reputation for high
standards of business
conduct
The Board agreed that the precautionary and remedial steps overseen by
the Board to protect colleagues physical and mental well-being following the
COVID-19 outbreak were important in the context of ensuring the Group’s
reputation as a conscientious and compliant business was maintained.
(f) the need to act fairly
as between members of
the Group.
The Board considered that the steps overseen by the Board which were
designed to support colleague’s mental health will ensure a stable and
engaged workforce is maintained and that this will ultimately result in long
term value creation for the Group’s shareholders.
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 rigid 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 oversee a sustainable future for the Group.
The Farm Hostel, Indonesia
244Employees138 Dublin Employees27 London Employees57Porto Employees18Shanghai Employees4Sydney Employees25 Number of Nationalities4Non-Executive DirectorsAverage Age 34 YearsAverage Length of Service 3.5 YearsPeople Stats as of 31 December 2020At Hostelworld Group, our purpose is to inspire adventurous minds through travel. A year like no other, 2020 brought many unprecedented challenges to our people, our communities, our hostel partners and our business. We aim to support our key stakeholders in a way that creates a positive and lasting impact - this is evident in all that we accomplished in 2020.Corporate Social Responsibility 52
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Hostelworld Annual Report 2020
53
Corporate Social Responsibility
(Continued)
Chairman and Executive Directors
Chairman and Non-Executive Directors
Executive Leadership Team
Direct Reports of Executive Leadership Team
Other Staff
Number
%
Male
Female
Male
Female
2
3
6
17
106
1
1
3
24
88
66.7%
33.3%
75%
25%
66.7%
33.3%
41.5%
58.5%
54.6%
45.4%
Our People Vision is to build the best teams and enable our talent to deliver amazing business results.
In 2020 we brought our People Vision to life through our various people initiatives.
In response to the COVID-19 pandemic and following all public health guidelines we moved to complete
remote/home working in March 2020. This transition was embraced by our people who excelled
themselves in continuing to deliver on their objectives and priorities throughout the year despite the
upheaval. Recognising that working remotely is not without its challenges we launched several initiatives
to support our people during this time.
One initiative we decided to implement was moving our monthly townhalls to virtual weekly sessions
instead. This enhanced our ability to have constant communication and regular updates between different
business units and from our Executive Leadership Team (ELT). These weekly sessions included updates on
business performance, share key priorities, celebrate achievements and an opportunity to query the ELT
on various aspects of the business on the dedicated question forum.
We also increased our Employee Newsletter to issue bi-weekly instead of monthly as part of our enhanced
communication strategy. We established a “Remote Community Hub” channel through Microsoft Teams
(“MS Teams”) - a dedicated channel to connect with each other while we could not physically be together
in our offices. The Remote Community Hub is a casual space for our people to share a mix of positive
messages, join virtual activities such as bingo and remote quizzes, receive useful health and wellness
information and start company wide informal conversations to see what people are reading, watching and
getting up to in their spare time.
Being conscious of the impact 2020 had on our peoples’ physical and mental wellbeing was at the
forefront in 2020 and our “Employee Assistance Programme” details were shared regularly. We also
invited our people to join a number of lunch and learn sessions covering topical subjects such as nutrition,
wellness, managing mental health and resilience and parenting.
Eager to understand our people’s long-term working preferences we launched our “Future Ways of
Working” initiative. We circulated an agile working survey and the results indicated that the majority of
people would prefer a blended approach between remote and office working. Our “Agile Working Policy”
will become fully implemented post the COVID-19 Pandemic.
Other key features of our Agile Working Policy include the ability to work from anywhere within the country
a person is employed in, flexible daily working hours and the introduction of “Quiet Wednesdays” to allow
everyone uninterrupted time to focus on tasks and projects without the distraction of internal meetings
where possible. Our purpose is to inspire adventurous minds through travel and it was important that we
created this opportunity for our workforce. To facilitate this purpose we announced that all staff may work
from abroad for up to 30 working days per year where possible, giving them the opportunity to work while
travelling or visiting family abroad. This initiative has been praised throughout the company with many
individuals already partaking in the policy.
Recognising the importance of maintaining a highly engaged workforce during remote working, we
continued to gather employee feedback and to measure employee engagement. In 2020, employees
completed two pulse-check surveys. The results of each survey were shared at a companywide level
and then communicated in greater depth at a department level. Actions were taken to improve on low
scoring areas. We established an “Engagement Champions” group, made up of employees from across the
business. Engagement Champions act as agents of positive change within their functions, support in the
delivery of engagement results and the creation of action plans while motivating teammates to incorporate
these activities. To measure the effectiveness of the Engagement Champions’ work we circulated an
Action Effectiveness Survey which has let us gauge which areas have been successful and those which
still need attention. We will continue to take action to drive positive change in our engagement levels and
our overall Employee Value Proposition as we look to 2021.
Some feedback we gathered from the pulse-check surveys was in relation to how we recognise our
people and how we could improve this process in both an informal and formal way. In response to this we
launched our “Cheers for Peers” and our “High Flyer” Recognition Awards. Cheers for Peers encourages
colleagues to recognise each other informally and immediately after a job well done. Cheers for Peers
has a specific public channel on MS Teams and gives people the opportunity to give a quick thank you,
highlight great work or compliment a teammate’s helpfulness.
High Flyer Awards was introduced as a more formal approach for employee recognition. The awards are
scheduled on a bi-monthly basis and focus on recognising individuals or teams who deliver outstanding
business results and who consistently live by Hostelworld’s values. Employees can nominate a person
or team they believe to be deserving of a High Flyer Award and then the Recognition Committee, which
is made up of employees from across the business, reviews and assesses all nominations received
under each of our Hostelworld Values. The final proposal of winners is then presented to our ELT for
approval, and the winners are then announced at our Townhalls. A gift is then issued to the winner in
acknowledgement of their hard work.
To enable our people to continue to do amazing work we introduced Pluralsight (a technology focused
learning platform) specifically for our Hostech and Analytics and Insights functions. We continue to provide
access to LinkedIn Learning which offers our people access to online courses and training on hundreds
of topics such as digital marketing, web development and Google Analytics. As of 31 December 2020,
our people had an average learning time of 3 hours and 30 minutes on LinkedIn Learning and 4 hours 8
minutes on Pluralsight. To support personal development, we relaunched our mentoring programme with
an uptake of 22 internal mentorships across various teams, functions and levels of the business. We also
hosted a number of “Fireside Chats”- a series of talks with guest speakers from a variety of backgrounds
and industries to broaden perspectives across a number of topics. In 2020, to enable our people managers
to lead in a more consistent way, we developed our people manager effectiveness programme focusing
on great people conversations. We communicated our People Manager Framework which defines the
attributes of a great people manager and encourages our people managers to bring the framework to life
in their day to day interactions with their teams. We hosted a number of virtual sessions on topics such
as goal setting, feedback and coaching, development planning, pay planning and building relationships
and trust. Our people manager effectiveness programme has been well received by our people manager
community and we plan to continue developing and strengthening the programme in 2021.
In early 2020 we underwent a salary benchmarking exercise to assess our reward offering versus the
market. Having quality market data enables us to make informed decisions on hiring and ensure we
allocate pay budgets appropriately based on experience, competence, performance and position to
market.
Éimear Moloney is 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 met with Eimear at various dates throughout the year to
ensure that the Board and Hostelworld employees mutually understand each other’s views and remain
informed on topical issues such as diversity and inclusion, COVID-19 and its long-term impacts and
sustainability.
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55
Corporate Social Responsibility
(Continued)
In response to global events and recognising the importance of diversity and inclusion not only in the
workplace but in the world, we established a Diversity and Inclusion (“D&I”) working group made up of
a small number of our people passionate about making a positive change. Our D&I group conducted an
employee survey to assist them in their mission of shaping Hostelworld to be a more diverse, inclusive and
enriching place to work. From the findings of the survey our D&I group identified four pillars of focus for
2020:
1. Internal Change
Ensure that Hostelworld is representative of the diverse society we live in
and that our culture is inclusive and provides equal opportunities for all.
2. Education
Create a culture of learning about differences and understanding the
issues that minority groups face in society and the workplace.
3. Celebrate
Differences
Ensure Hostelworld is a workplace where our differences are celebrated,
and employees feel comfortable sharing their unique perspectives.
4. External
Change
Where possible ensuring all Hostelworld’s externally focused activities
reflect the diverse society we live in.
Our D&I group made great progress across each of the four pillars in 2020. They’ve brought awareness to
issues people aren’t familiar with as well as starting conversations around our own individual thinking and
perceptions in terms of diversity and inclusion such as the importance of understanding and eradicating
unconscious bias. Our D&I group also issue a monthly Diversity and Inclusion newsletter through which
we’ve seen some of our own people submitting honest and thought-provoking content, ultimately shaping,
encouraging and eradicating the boundaries on conversations typically classed as taboo or uncomfortable.
In 2021 our D&I group plan to initiate more challenging topics for discussion as well as continuing with their
mission to encourage and educate Hostelworld Group and our people to embrace diversity and inclusion in
all that we do.
Overall, 2020 highlighted that our people are resilient and thrive in the face of adversity.
Our Communities
Noting that 2020 was a challenging time for our communities and charity partners, we continued to
champion, advocate and support them where possible.
In 2020 we partnered with the Movember Foundation for the first time. Movember is the leading global
organisation committed to changing the face of men’s health. Movember aims to raise awareness around
mental health and suicide prevention, prostate cancer and testicular cancer. Some of our people took part
in the “Grow a Mo – Save a Bro” initiative, where they grew moustaches to raise awareness of Movember.
Overall our people raised €2,300 and ignited internal conversations about men’s health. For the sixth year
in a row, we partook in the Christmas Appeal with Team Hope as well as the St.Vincent de Paul Christmas
Food Appeal.
We also partnered with the Acorn Programme which offers students from socially- economic
disadvantaged areas meaningful experience in technology companies. We offered internships to two 5th
year students to experience life working across the different functions in a technology company. We also
gave virtual career talks and facilitated virtual mock interviews with 6th year students to develop their
interview skills and prepare them for their future outside of school.
Global Tourism Plastics Initiative
database and blogs/social channels.
One of our core company values is to
‘Build a Better World’ to inspire our people
to try to improve our world in all they do.
One step we’ve taken towards creating a
better world, is by uniting to protect our
natural environment. Our research has
shown the growing demand by consumers
for more sustainable travel options,
as nine in ten (92%) hostel travellers
now consider themselves to be ‘green
travellers’. However, the research also
revealed the majority (63%) of travellers
think travel companies should be doing
more to help customers travel sustainably.
With this in mind, in 2020 we became
a signatory to the Global Tourism
Plastics Initiative (GTPI) led by the UN
Environment Programme and the World
Tourism Organisation, in collaboration
with the Ellen MacArthur Foundation.
Our role is to unite the hostel industry
to address the root causes of plastic
pollution and we are encouraging our
hostels partners to sign up to GTPI with a
commitment to reducing their single use
plastic consumption.
Hostelworld Group’s commitments to the
GTPI are as follows:
• Contacting our global hostel partners
by September 2020 to encourage
them to sign up to the initiative. The
objective is to encourage 500 hostels
to commit within the framework
of the GTPI by 2025, and to make
their participation visible on the
Hostelworld website.
• Acting as the facilitator to advise
and guide hostels to better
manage plastics in their operations.
Hostelworld Group will keep those
who sign up to the initiative informed
on the latest best practice guidance.
• Communicating successes to our
corporate partners (investors), and
consumer audience (travellers) when
meaningful updates are available and
when milestones are reached. These
updates will be published on our
corporate website and shared on our
• Reporting progress of the
implementation of our commitments
to the GTPI publicly within our
Annual Report each March, as well
as at any appropriate public forum
including conferences and investor
presentations.
In 2020, we held webinars in English
and Spanish for our hostels partners to
introduce them to the GTPI and currently
eight hostel partners have joined us in
becoming signatories. We frequently
update our hostels partners via email,
webinars and via our corporate social
channels, sharing more information about
the GTPI and encouraging them to sign
up.
Prior to the COVID-19 outbreak, we made
efforts to reduce our plastic waste in our
offices. Some of the efforts we had made
included buying reusable Tupperware
for employees to avoid using single use
food containers, buying reusable water
bottles and ordering fresh fruit and bread
from suppliers that use fully recyclable
packaging. Since the COVID-19 outbreak,
we have implemented the introduction
of our Agile Working Policy. This enables
our people to work remotely and has
already had a great impact on the amount
of daily travel by all employees. It has
also reduced the amount of plastic
consumption we purchase, for example
office supplies, stationery and food and
beverage packaging.
Our Hostel Partners and our
Customers
In response to the COVID-19 Pandemic
we provided our hostel partners and
our customers with as much support as
possible.
Our annual hostel awards, better known
as the HOSCARs, is where we honour
the best hostels around the world. The
HOSCARs have been running since
2002, and the winners are based on the
millions of customer reviews we receive
every year. Our 2020 awards however
will be a little different. The COVID-19
57
Our Shareholders
We continue to foster 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.
Key Policies
Our people 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.
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
2020 have been measured as required
under the Companies (Directors’ Report)
and Limited Liability Partnerships (Energy
and Carbon Report) Regulations 2018.
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.
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.
In 2020 we are reporting on the emissions
of CO2 generated by the business and
the energy consumed by the business.
The carbon gas emissions generated
by Hostelworld customers travelling
to destinations is not included in this
report. The below table shows the total
tonnes of carbon emissions generated by
Hostelworld.
1. EXTRAordinary Sociable Experience2. EXTRAordinary Community and Social Impact3. EXTRAordinary Sustainable Hostel4. EXTRAordinary Inclusive Hostel5. EXTRAordinary New Hostel6. EXTRAordinary Innovation7. EXTRAordinary Hostel Heropandemic meant many travellers had to postpone or cancel their plans, so we had to think a little differently about the awards this year. We wanted to celebrate the outstanding hostels that made their mark on the world in extraordinary ways, despite all the difficulties they faced. We have defined seven categories to make up this year‘s EXTRAordinary HOSCARs, and our hostel partners can submit their entries to any of the categories which will be judged by an expert and independent judging panel in early 2021. The categories are:Throughout 2020, many of our hostel partners adapted and evolved, making travellers’ stays as safe as can be, with many going above and beyond to support their local communities, so it was important that they were given the accolades they deserved. In 2020, 36 hostel partners became our “Hostel Heroes” – those who made the world a better place throughout the pandemic. We saw our hostel partners turn their businesses into hubs that provided frontline medical staff with accommodation, supported their local communities impacted by the collapse in tourism by donating food supplies and offering a safe place to stay to stranded travellers. Our “Hostel Heroes” inspiring initiatives were shared with our property partners, our customers, our people, and across our social channels. In the midst of a global crisis, we saw our hostel partners do amazing things. It was important our hostel partners’ great work in 2020 was recognised, which ultimately led to the creation of the EXTRAordinary Hostel Hero award as part of our HOSCAR Awards. We took part in the “Adopt a Hostel” initiative to help the hostel industry survive the pandemic. Adopt a Hostel encourages travellers to purchase gift cards to use towards future hostel stays or make a donation to help our hostel partners survive this difficult time. With a large volume of customer cancellations in 2020, we cut down the refund wait times by offering Hostelworld credits in lieu of a refund to customers. We also launched our “Beds for Backpackers” initiative where we offered support to stranded travellers, by pairing them up with hostels offering free stays in over 70+ hostels in 30+ countries. Our customers were also given the option to give back to the hostels by volunteering their time to support with basic tasks during their stay if they desired. Hoscar Winner 2020 | Jollyboys Backpackers, Zambia Corporate Social Responsibility (Continued)Hostelworld Annual Report 2020 Strategic Report56 58
Strategic Report
Hostelworld Annual Report 2020
Corporate Social Responsibility
(Continued)
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
2020
tCO2e
Nil
126.7
62.1
188.8
12.3
2019
tCO2e
Nil
134.2
781.6
915.8
11.4
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
The below table demonstrates the overall energy consumed in Kilowatt-hours (kWh) by the business
and shows the portion of this consumption that the UK corporate office has consumed on the overall
total. This table is based on the energy consumed in the purchase of electricity and gas for the corporate
offices and does not include the consumption of energy used for employee travel.
Energy Consumption
Energy usage - UK
2020
kWh
2019
kWh
192,434
177,365
Energy usage - Other locations
247,721
323,587
Energy usage
Proportion consumed in the UK
440,155
500,952
44%
35%
Hostelworld Group is an internet-based business which leases it’s 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 energy consumption in the Group’s Sydney office 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. For the Shanghai office, we have estimated per person on the first four months of the year
and then included the actuals from May 2020 onward.
In 2020, there was a significant reduction in the emissions produced due to the COVID-19 pandemic.
Our energy consumption has declined as a result of staff working from home since March 2020.
Emissions generated from travel have substantially fallen. The majority of the travel emissions arose
in the first quarter of 2020.
Governance
62 Directors’ Biographies
64 Corporate Governance Statement
118 Directors’ Report
128 Independent Auditor’s Report
Kuna Bali, Indonesia
Role: Chair of the Board; Chair of the Nomination Committee; member of the Remuneration CommitteeAge: 66Nationality: IrishQualifications: 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 2015Independent: Yes*Sector Experience: Airlines; motor; betting and gaming; construction.Role: Chief Executive Officer; Chair of the Disclosure CommitteeAge: 53Nationality: BritishQualifications: Gary has a Masters in Engineering from Leeds University UK and holds an MBA from INSEAD. Joined Group: June 2018Independent: NoSector Experience: Online travel industry; technology; telecommunications.Role: Chief Financial Officer; member of the Disclosure CommitteeAge: 41Nationality: IrishQualifications: Caroline is a fellow of the Institute of Chartered Accountants in Ireland.Joined Group: November 2019Independent: NoSector Experience: FMCG; banking.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 Flutter Entertainment PLC (previously Paddy Power Betfair plc), Kingspan Group plc, Mazine Limited, Prepaypower Holdings Limited, GMS Professional Imaging Limited, Gowan Group Limited, Linked P2P Limited and Meadowbrook Heights Unlimited. Prior to joining Ryanair, Michael was Group Finance Director of Gowan Group Limited. 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 and Hamilton and Schlumberger France respectively.Other Board and Management Experience: Prior to joining the Group, Caroline was Director of Financial Planning and Analysis for Glanbia plc’s Performance Nutrition division and also held a number of strategic and commercial finance roles at Ulster Bank Group, a subsidiary of NatWest Group. Caroline is a fellow of the Institute of Chartered Accountants in Ireland and completed her training in PwC. She holds a BSc (Hons) in Food Science and an MBS (Hons) in eBusiness.*Independent on appointmentMichael CawleyGary MorrisonCaroline SherryDirectors’ BiographiesHostelworld Annual Report 2020 Governance62Role: Non-Executive Director; member of the Audit Committee; member of the Remuneration Committee; member of the Nomination CommitteeAge: 50Nationality: AmericanQualifications: Evan has a B.A. Social Studies from Harvard University and holds an MBA, General Management from INSEAD.Joined Group: August 2019Independent: YesSector Experience: Technology; media.Role: Non-Executive Director; Chair of the Audit Committee; member of the Remuneration Committee; member of the Nomination CommitteeAge: 50Nationality: IrishQualifications: 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 2017Independent: YesSector Experience: Financial services; real estate, pharmaceutical.Role: Non-Executive Director; Chair of the Remuneration Committee; member of the Audit Committee; member of the Nomination CommitteeAge: 68Nationality: AmericanQualifications: Carl has a M.A. in Business Administration from the University of Texas.Joined Group: October 2017Independent: YesSector Experience: Online travel industry.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.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, Chanelle Pharmaceutical Group and has been appointed as a non-executive director of Kingspan Group plc with effect from 30 April 2021.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.Carl G. ShepherdÉimear MoloneyEvan Cohen 64
Governance
Hostelworld Annual Report 2020
65
Corporate Governance Statement
Chair’s Introduction
Board Composition and Diversity
Now in its second year of application, the Board reiterates its
support for 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”).
Compliance with 2018 Corporate Governance Code
The Governance Report for 2020 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. Firstly, the Remuneration
Committee has not developed a formal policy on post-employment shareholding requirements. The
Remuneration Committee has continued to review whether such requirements should be introduced but
consider that the current framework provides for sufficient alignment between management and the
long-term interests of shareholders. This takes into account 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 in the LTIP. Secondly, the 10% of salary pension contribution rate for the Chief
Executive Officer is above the 6% rate applicable to the wider workforce. The Chief Executive Officer’s
pension was agreed at the time of his recruitment in 2018 and remains in line with the level of pension
provision for CEOs of similarly-sized companies to Hostelworld. The Remuneration Committee has no
immediate plans to change its approach on either of these matters although will review them again ahead
of seeking shareholder approval for a new Directors’ Remuneration Policy at the latest by the 2022 AGM.
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 38 to 48.
Changes to the Board during 2020
TJ Kelly stepped down as Chief Financial Officer and Executive Director with effect from 1 December
2020. In line with the Group’s succession planning, Caroline Sherry succeeded TJ and was appointed Chief
Financial Officer, Executive Director and member of the Company’s Disclosure Committee with effect from
1 December 2020. Caroline’s wealth of financial experience and expertise in consumer facing businesses
will be of significant benefit to the further development of the Group.
COVID-19
2020 was clearly an exceptionally challenging year for the Group and for the broader travel and tourism
industry. The Board acted immediately to oversee the management of the many COVID-19 related
financial, commercial and people challenges which the Group faced during the year. Managing the Group’s
risks in the face of the rapidly changing international travel landscape involved the convening of Board
calls and meetings on a frequent basis during the year to ensure effective and informed decision making
and good governance underpinned the Group’s response to the COVID-19 pandemic.
Of the six Board members, two are female, four are resident in Europe and two are resident in the United
States of America. At the time of publication, we have 33% 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-informed decisions.
Diversity in the Group continued to be a key consideration for the Board during 2020. Diversity is
embraced at Hostelworld and, during 2020, the Board provided oversight in connection with the
establishment by the Group of a diversity and inclusion working group and the development of a
comprehensive diversity and inclusion strategy. The Board provides oversight on an on-going basis to
ensure that a culture is maintained and fostered that values and respects diversity and inclusion. The
Group’s success in this area is demonstrated by the fact that the Group now has a dedicated diversity
and inclusion strategy focused on (a) developing employee diversity targets; (b) ensuring gender equality
is considered when recruiting for gender stereotyped roles; (c) implementing a programme designed to
ensure that employees with disabilities are effectively supported; and (d) setting targets to ensure the
Group has a diverse leadership. The Board is committed to providing leadership and oversight on this
important issue and will continue to assess achievement against diversity and inclusion objectives on an
on-going basis.
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 2020, a comprehensive
internal evaluation of the Board, its Committees and individual Directors was undertaken. The 2020
evaluation also included an analysis and assessment of the recommendations and proposed actions
arising in connection with the 2019 Board evaluation. The 2020 evaluation established that the Board is
sufficiently diverse and is operating effectively with members working well together to achieve objectives
and further established that the Board had effectively implemented the key recommendations and actions
arising in connection with the 2019 evaluation. A detailed overview of the evaluation process is included
on pages 82 to 84.
Stakeholder Engagement
The Board is fully supportive of the focus in the 2018 Code on boards demonstrating how the views of
stakeholders are captured and taken into account when making decisions. 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 people, customers, hostel partners and our
key suppliers) and that the Board has due regard to their interests when assessing issues and making
decisions. However, it is not practicable to meet the expectations of all stakeholders all of the time and a
key part of the Board process is to carefully balance and consider sometimes conflicting expectations of
our stakeholders to ensure each stakeholder is treated equally and fairly.
Purpose and Values and Employee Engagement
Our commitment to satisfying ourselves that the Group’s purpose and values are aligned to its culture
is demonstrated by engaging with the workforce through a number of different channels and receiving
presentations and considering proposals from Éimear Moloney (in her capacity as the designated Non-
Executive Director with responsibility for understanding the views of the Group’s employees), the Chief
Executive Officer and the Group’s Chief Human Resources Officer on issues that affect culture and
employee engagement. The profound impact of the COVID-19 pandemic on our workforce during 2020
has been a key area of focus for the Board. A description of the oversight and Board involvement on this
issue is included on page 48.
66
Governance
Hostelworld Annual Report 2020
67
Corporate Governance Statement
(Continued)
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 pages 114 to 115.
It is not possible to overemphasise the value of good corporate governance to long-term sustainable
success. We will keep under 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 our shareholders and other
stakeholders.
Michael Cawley
Chairman
16 March 2021
How governance supported our strategy during 2020
Strategic Objective Board’s governance role
Link to principal risk
2019 Board Activity
Supporting
our people
Governance to ensure our
people were supported
effectively during
COVID-19
People risks
(page 34)
Increasing
our liquidity
Governance to ensure our
financial stability
Macro-economic
conditions
(page 27)
Progress our
Roadmap for
Growth
Board assessment of
investments in platform
improvements to ensure
competitive risks were
managed effectively
Competition risks
(page 29)
Capital
structure
Board decision to issue
new ordinary shares in
connection with a non-
pre-emptive placing and
approve the establishment
of addition credit facilities.
Macro-economic
conditions
(page 27)
Oversight and approval of the
establishment of a diversity
and inclusion strategy, agile
working policies and engagement
programmes designed to support
the mental health of the Group’s
people following the move to
remove working during 2020.
Oversight and approval of a number
of meaningful cash conservation
actions to ensure the financial
stability of the Group.
Board consideration and approval
of targeted expenditure in
strengthening the Group’s core
platform to improve marketing
capabilities, user experience and
increase inventory competitiveness
to enable the Group take advantage
of commercial opportunities when
normal travel patterns resume. Read
more about improvements in our
core platform on pages 17 and 18.
Approval of a non-pre-emptive
share placing and establishment
of additional credit facilities to
ensure the Group’s capital base
was strengthened in an uncertain
environment.
Read more about improvements in
the Group’s management of liquidity
risks on pages 40 to 47.
Selina Red Frog, Panama
68
Governance
Hostelworld Annual Report 2020
69
1. Board Leadership and Company Purpose –
Principles A - E of the 2018 Code
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 publicly
available at:
https://www.frc.org.uk/
getattachment/88bd8c45-50ea-4841-95b0-
d2f4f48069a2/2018-UK-Corporate-Governance-
Code-FINAL.PDF
Approach to Governance
The main objective of the Board is to
create and deliver long term sustainable
success, generate value for our
shareholders and contribute to the
wider community. The principles set out
in the 2018 Code emphasise the value
of good corporate governance to the
long-term sustainable success of listed
companies. We set out on page 67 how
governance has supported the delivery
of our strategy during 2020 and how
this is linked to our principal risks.
Long Term Sustainable Success
The Board is focused 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, competitor activity and macro-
economic issues.
Effective and Entrepreneurial
We set out on pages 82 to 84 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 79
to 81) describes how we ensure we have
the right skills and experience on our
Board. Biographies of the Directors are
provided on pages 62 to 63.
(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) Market Abuse Regulation
compliance requirements; and (2)
compliance requirements specific to the
Company’s listed status. Caroline Sherry,
who joined the Board in December
2020 as Chief Financial Officer and
Executive Director, underwent a tailored
compliance induction programme
following her appointment with the
General Counsel and Company Secretary
and a partner representative of Travers
Smith, the Group’s capital markets
legal advisers. Caroline’s compliance
training included training on her 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.
(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 2020
no material conflicts of interest arose.
Two minor declarations of interest were
raised by directors during the reporting
period. Firstly, TJ Kelly, Gary Morrison and
Éimear Moloney declared their intention
to subscribe in their personal capacity for
shares as part of the non-pre-emptive
placing of new ordinary shares announced
and completed by the Company in June
2020 and subsequently participated
in the placing on the same terms as all
other shareholders. In accordance with
article 145 of the Company’s articles
of association, it was confirmed that
each participating director’s interests
in the placing was not material for the
purposes of article 145. Secondly, it was
noted that TJ Kelly and Gary Morrison
would be issued and allotted bonus issue
shares pursuant to the bonus share issue
completed in September 2020. The issue
and allotment to TJ and Gary in this regard
was automatic and technical in nature and
resulted in TJ and Gary being treated in
an equal manner to all other shareholders.
It was confirmed that article 145 of the
articles of association of the Company
permitted Gary and TJ to vote on the
decision to issue and allot bonus shares.
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
affirmed the Group’s purpose and values.
Details of the purpose and values are set
out within the introduction to the report
and on pages 52 and 53. 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 on-
going. Oversight of risk management,
establishing reporting mechanisms
within the governance framework,
direct engagement with our people, on-
going oversight of employee retention
statistics, investing in our workforce and
ensuring remuneration is aligned with the
organisation’s culture are central to the
Board’s assessment and monitoring of the
Group’s culture.
(c) Chairman and Non-Executive
Directors
Risk management
The Board considers each of its Non-
Executive Directors 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
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 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.
The Board is committed to respecting
the privacy rights of our customers and
partners and is provided with updates
from the Audit Committee on the results of
twice yearly privacy audits undertaken by
the Group’s Data Protection Officer.
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1. Board Leadership and Company Purpose –
Principles A - E of the 2018 Code (Continued)
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 Navex
Global, for reporting such matters.
No incidents were reported to the
helpline during 2020. 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 - our
colleague engagement forum
met with Éimear Moloney at
various dates throughout the
year to ensure that the Board and
Hostelworld employees mutually
understand each other’s views and
remain informed on topical issues
such as diversity and inclusion,
COVID-19 and its long-term
impacts and sustainability;
• 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.
Employee Retention
The Board receives regular updates
on HR matters with a particular focus
on retention statistics. Retaining our
employees is a key element of our
strategy and a strong indicator of an
engaged workforce and an inclusive
culture in the Group. The improved
voluntary attrition rate for 2020 was
18.3%, compared to 24.9% for 2019,
and is an area of on-going focus for
the Board.
Remuneration and culture
We set out on page 98 how we have
addressed the issue of ensuring
remuneration is aligned with culture.
We explain on pages 114 and 115 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 38 to 48.
Engaging with Stakeholders
We set out below how we ensure effective engagement with the Group’s stakeholders.
Customer Engagement
The Board recognises the importance 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 2020:
• The percentage of customer support chats answered within 30 seconds improved by 12% year over
year;
• Customer satisfaction score improved by 6% year over year; and
• Trustpilot consumer reviews score up from 2.9 to 3.2 between January 2020 and December 2020.
How we have used traveller customers’ views to shape Board decisions during the year are set out in the
Section 172(1) statement (pages 38 to 48).
Hostel Partner Engagement
Following the onset of the COVID-19 pandemic the Group immediately engaged with its hostel
accommodation partners and hosted 170 hostel webinars with content specifically designed to help our
hostel partners navigate the challenges of trading and converting demand in an extremely challenging
environment. The Group also used frequent surveys to better understand the nature of our hostel partners
business and the impacts of COVID-19 to ensure that the Group was able to provide effective support
during the pandemic. The Board received detailed briefings throughout the reporting period on the
support provided to the Group’s hostel accommodation partners. Action plans which reflected the results
of the engagement with hostel partners were 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 the
Section 172(1) statement (pages 38 to 48).
Key Supplier Engagement
The Board provided oversight and direction in respect of the Group’s commercial engagements with its
key suppliers following the onset of COVID-19. The Board was fully supportive of the Group’s strategy to
seek the agreement of certain key suppliers to amending payment terms to enable the Group effectively
manage its cash conservation and strengthen its liquidity profile. The Board noted the direct feedback
provided to the Group by its key suppliers and recognises the key commercial interest of suppliers is to
have certainty of payment of fees. In this context, the Board confirmed with the Executive Directors during
the year as follows:
• There were no material payment disputes with key suppliers during the reporting period with extended
payment terms being negotiated and commercially agreed with key suppliers and not something the
Group sought to impose unilaterally.
How we have used our supplier’s views to shape Board decisions during the year are set out in the Section
172(1) statement (pages 38 to 48).
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73
1. Board Leadership and Company Purpose –
Principles A - E of the 2018 Code (Continued)
Employee Engagement
The Board is committed to 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).
During 2019, the Board appointed
Éimear Moloney’s 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 connection with Éimear’s
2019 appointment, 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 programme of employee
engagement activities conducted
during 2020, Éimear hosted a number
of engagement forums with colleagues
from different departments and each
of the Group’s operating territories,
provided detailed updates on Board
activities and sought the views of the
forum members on a number of topics.
Key issues which forum members
consistently raised during the year with
Éimear were the need for the Group to
be more active in the area of diversity
and inclusion, gender equality and
for the Board and management to be
particularly aware of the mental health
challenges faced by staff following the
move to remote working imposed by
the COVID-19 pandemic.
In response to the issues raised with
the Board by colleagues in these forums
and through other direct engagement
channels referred to above, a number of
diversity and inclusion, gender equality
and remote working mental health
and staff well-being initiatives were
implemented with the oversight of the
Board during 2020.
How the views of our people have been
used to shape Board decisions during
the year are set out in the Section 172(1)
statement (pages 38 to 48).
To ensure that the Group’s executive
leadership team and the Board remained
focused on engaging with the workforce,
the Board directed that further employee
surveys were to be carried out in 2021.
The results of these surveys will be
shared with the Board during the year
and will be considered as part of relevant
Board decisions.
Shareholder Engagement
Senior management and the Head of
Investor Relations held regular meetings
with existing and potential institutional
investors and analysts during the
reporting period and investor feedback
was collated after each roadshow and
shared with the Board.
During 2020, management spoke to
almost 80% of our shareholder base
and the Head of Investor Relations, the
Company’s UK and Irish brokers and the
Executive Directors provide the Board
with regular feedback on shareholders’
views and key market issues. This
ensures the Board is aware of market
conditions and that shareholder
concerns are understood and
considered in Board decisions.
In response to direct shareholder
feedback during the year, the Board
approved the issuing of a number
of trading updates to ensure our
shareholders were kept up-to-date on
the Group’s financial position following
the onset of COVID-19, approved
the implementation of material cash
conservation measures and also
approved the issuing of bonus shares
to our shareholders in Septemeber
2020. The Board remains committed
to maintaining open channels of
communication with its shareholders
and to continue to strengthen dialogue
with its main stakeholders.
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 2021 Annual General Meeting
will be held on 26 April 2021. 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.
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.
Annual General Meeting
The AGM is an important forum for
shareholders, particularly private
shareholders, to hear more about the
general development of the business.
In light of the COVID-19 pandemic and
in response to the Irish Health Service
Executive’s current guidance regarding
social distancing and the prohibition of
public gatherings, the upcoming 2021
AGM will, in the interests of safety,
take place as a closed meeting and
shareholders will not be able to attend
in person. This is regrettable but a
prudent measure designed to protect
the health of our shareholders and
Board members.
However, the Executive Directors,
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 are keen to provide
shareholders with an opportunity to
ask questions, engage with members
of the Board and learn more about
the Company. In order to facilitate
this, should a shareholder wish to ask
a question on the work of the Board,
its Committees or on any matter
addressed in this Annual Report,
please email your question
to corporate@hostelworld.com.
The Chi Novel Hostel, Vietnam
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75
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. The Chairman is responsible for
effective leadership of the Board and
maintaining a culture of openness at
Board meetings.
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
2020, each Director’s performance
continues to be effective and each
Director demonstrates commitment to
the role.
Non-Executive Directors
Our Non-Executive Directors bring
insight and experience to the
Board. They have responsibility
for constructively challenging
the strategies proposed by the
Executive Directors and scrutinising
management’s performance in
achieving the Company’s objectives.
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 62 to 63. Following the end
of the reporting period but prior to
the publication of this Annual Report,
Carl G. Shepherd notified the Board
that he was considering accepting
one additional external appointment.
This proposed external appointment
was approved by the Board following
confirmation from Carl that the
proposed commitments involved would
not impact his ability to properly discharge
his Board duties. At the date of publication
of this Annual Report, no external
appointments are held by our Executive
Directors.
Senior Independent Director
Carl G. Shepherd serves as the Board’s
Senior Independent Director. Carl provides
a sounding board for the Chairman and acts
as an intermediary for the Non-Executive
Directors, where necessary, and is available
to shareholders should they have concerns
where communications through normal
channels have not been successful or
where such channels are inappropriate.
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.
Hostel Hero | INOUT Hostel, Spain
Division of Responsibilities
Chair
•
•
Leadership of the Board
• Directors receive accurate, timely,
Responsible for overall effectiveness in
directing the Group
• Constructive relationships between the
Executive and Non-Executive Directors
•
Effective contribution of all Non-Executive
Directors
information
• Meetings with Non-Executive Directors,
without Executive Directors present
•
Ensures Board is aware of the views of
major shareholders
Board
(key matters)
Annual and interim results
Annual report and accounts
• Company’s values and standards
• Group’s strategic aims and business plans
•
•
• Dividend policy
•
Internal control and risk management
• Major changes to the Group’s corporate
structure including but not limited to
major acquisitions/disposals
• Major capital expenditure
• Communication with shareholders
• Changes in structure, size and
composition of the Board
• Material litigation
•
Remuneration Policy for Directors and
Senior Executives
• Governance structure
Senior
Independent
Director
•
•
Sounding board to the Chair
Intermediary for the other Directors and
shareholders
Non-Executive
Directors
• Constructive challenge, strategic
guidance and specialist advice
•
•
Annual meeting of Non-Executive
Directors to appraise Chair’s performance
Scrutinise and hold to account the
performance of management and
individual Executive Directors against
agreed performance objectives
Company
Secretary
Executive
leadership
• Compliance with all corporate governance
•
Ensure Board procedures are followed
matters, monitors the Group’s disclosure
requirements under the 2018 Code and
UK Listing Rules
• 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 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 to account against targets and
standards. The Board approves long-term corporate and strategic plans after a comprehensive review and
assessment of business trends and risks.
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 2020.
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2. Division of Responsibilities -
Principles F - I of the 2018 Code (Continued)
Board Meetings
The Board holds regular board meetings. There were seven 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. Given that 2020 proved to be a uniquely
challenging year for the Group on account of COVID-19 and for the travel industry in general, the Board
also met frequently on short notice to consider and agree the implementation of actions that were
designed to mitigate the commercial, financial and people risks brought about by the COVID-19 pandemic.
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:
• Deciding to amend the Company’s dividend policy to a pay-out ratio of between 20% – 40% of the
Group’s adjusted profit after tax;
• Deciding to cancel the recommendation of a proposed full year 2.1c per share final dividend for 2019;
• Deciding to distribute bonus shares to shareholders rather than pay a cash dividend;
• Following the onset of the COVID-19 pandemic, deciding to implement a number of cost saving and
cash conservation measures and focus available expenditure on core platform enhancements;
• Agreeing to secure additional banking facilities to mitigate the COVID-19 related liquidity risks to the
Group;
• Agreeing to increase the Group’s liquidity through an equity placing;
• Approval of a number of employee initiatives in the areas of mental health and well-being and
enhanced employee communication and engagement;
• Approved the appointment of a new Chief Financial Officer and Executive Director;
• Approved the statement of steps taken to prevent modern slavery and human trafficking as contained
in the Company’s Modern Slavery Statement;
• Reviewed and approved the Group’s strategy;
• Reviewed and approved the interim and final dividend recommendations and the preliminary and
interim results announcements;
• Reviewed and approved the 2021 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; 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 (including an update on cash conservation and liquidity risk
management actions taken).
There may be 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 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 of their specific area(s) of responsibility against
Group objectives. During the year, presentations in relation to the Group’s product, marketing and
hostel accommodation supply strategies were provided to the Board by the Chief Product Officer, Chief
Marketing Officer and Chief Supply Officer, respectively.
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 seven
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. In addition to the scheduled Board meetings during 2020, the Board conducted 12 board calls
during the year.
Board Meeting Attendance
Membership
Michael Cawley (Chair)
Carl G. Shepherd
Éimear Moloney
Evan Cohen
Gary Morrison
TJ Kelly (1)
Caroline Sherry (2)
(1) Resigned 1 December 2020
(2) Appointed 1 December 2020
No. of scheduled meetings/
total no. of scheduled
meetings held when the
Director was a member
Attendance %
7/7
7/7
7/7
7/7
7/7
6/6
1/1
100%
100%
100%
100%
100%
100%
100%
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3. Composition, succession and evaluation -
Principles J - L of the 2018 Code Members
Chair’s Review 2020
Members
Key Activities of the Nomination Committee in 2020
Membership of the Nomination Committee consists of the following Non-Executive Directors:
Membership
Michael Cawley (Chair)
Carl G. Shepherd
Éimear Moloney
Evan Cohen
No. of meetings/total no.
of meetings held when the
Director was a member
Attendance %
4/4
4/4
4/4
4/4
100%
100%
100%
100%
The Company Secretary acts as Secretary to the Nomination Committee.
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 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 review the structure, size, composition, skills and experience of the Board and its
Committees against current and future requirements of the Group.
The Terms of Reference of the Nomination Committee, which were reviewed in 2020, 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.
The Nomination Committee met on four occasions during 2020 and separately dealt with recommending
the renewal, for a further three-year term, of Carl G. Shepherd and Éimear Moloney as Non-Executive
Directors 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 rigorous process for identifying a replacement for TJ Kelly as Chief
Financial Officer and Executive Director of the Company, resulting in the appointment of Caroline
Sherry as Chief Financial Officer and Executive Director with effect from 1 December 2020. The
process involved the completion of a comprehensive succession planning exercise conducted by
the Nomination Committee during 2020 to identify successors for the Company’s senior executives,
following which Caroline Sherry was identified as the natural successor for TJ on the basis of
her extensive experience in senior financial roles, technical expertise and clear leadership skills.
Following TJ Kelly’s resignation, in accordance with the Company’s succession plan and following an
interview process with Caroline led by me as Chairman of the Nomination Committee, Caroline was
recommended by the Nomination Committee for appointment as TJ’s successor as Chief Financial
Officer and Executive Director of the Company. As Caroline was identified as TJ’s successor as part of
the Group succession plan, no external recruitment consultants were involved in the selection process.
Caroline’s biography is set out on page 62 of the Annual Report.
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 Nomination Committee agreed that Caroline displayed a range of impressive personal attributes,
such as tact and an ability to listen and develop trust. As part of the Company’s process in relation to
appointments, the due diligence conducted prior to Caroline’s appointment confirmed that Caroline
did not have any conflicts of interest with the Group. Following recommendation by the Nomination
Committee, Caroline was unanimously appointed as Chief Financial Officer and Executive Director by
the Board.
• The Nomination Committee recommended to the Board the renewal of the three-year term
appointments of both Carl G. Shepherd and Éimear Moloney, respectively, as Non-Executive Directors
of the Company. Prior to making the recommendation, the Nomination Committee considered the
purpose and objectives of the Board Diversity Policy which provides that all Board appointments
are made on merit in the context of the skills, experience, independence and knowledge which
the Board (as a whole) requires to be effective. The Nomination Committee also had particular
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 such a diversity of personal
attributes. Noting the requisite skills, knowledge and experience required for the role, the Nomination
Committee unanimously agreed to recommend that both Carl and Éimear’s three-year term
appointments be renewed on the basis of their skills, personal attributes, and extensive executive
and board experience. Neither Carl or Éimear were personally involved in the Nomination Committee’s
decision to recommend the renewal of their appointments or in the Board’s decision to adopt the
recommendations of the Nomination Committee in this regard.
• The Nomination Committee also considered Board composition and succession planning on an
on-going basis. Further details are set out below.
• The Nomination Committee reviewed its Terms of Reference to ensure it continued to be fit for
purpose.
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81
Chair’s Review 2020
(Continued)
Board Composition and Succession
On an on-going 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 2020, the individual
and collective skills, experience and knowledge of the Non-Executive Directors was assessed and the
Nomination Committee recommended to the Board that no additional non-executive appointments to the
Board were currently necessary. The on-going review and assessment of Board composition will continue
to have particular regard to the objectives of the Board Diversity Policy (as set out below).
The Nomination Committee also focused on the succession pipeline for senior and middle management to
ensure appropriate management development and comprehensive succession planning for the executive
leadership team and other key executives was in place. Noting the risks to the business if key personnel
left the Group in the absence of adequate succession plans, succession planning included an emphasis on
contingency planning, medium-term planning and long-term planning.
Board and Committee Evaluation and Re-Election of Directors
The results of the Board evaluation and Director appraisal process are set out on pages 82 to 84. The
Nomination Committee recommended to the Board, after evaluating the balance of skills, knowledge,
independence and experience of each Director, that each Director will seek re-election at the Company’s
forthcoming AGM and that Caroline Sherry will seek election at the 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 strongly believes that diversity and providing an inclusive culture is a key
driver of business success and is committed to having a diverse and inclusive Board which provides
a range of perspectives, insights and critical challenge required to support effective decision making.
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 2020 to ensure it remains fit for purpose. While the Board will always seek to appoint the
most talented and skilled candidates on merit against objective criteria, gender and diversity will continue
to be given careful consideration as part of the process of Board refreshment and renewal. As at the date
of this Annual Report, 33% of the Board and 37.5% of the Group’s leadership team are female.
The stated aim of the Board 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 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 selection process for Caroline Sherry who replaced TJ Kelly as Chief Financial Officer and 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 the principle
of equal opportunity is a firm part of the culture of the Group.
Shareholder engagement / COVID -19 and impact on 2021 AGM
In light of the COVID-19 pandemic and in response to the Irish Health Service Executive’s current guidance
regarding social distancing and the prohibition of public gatherings, the upcoming AGM will, in the
interests of safety, take place as a closed meeting and shareholders will not be able to attend in person.
Accordingly, I will not be available at the upcoming AGM to directly answer questions that you as
a shareholder may have on the work of the Nomination Committee. This is regrettable but prudent in light
of the need to ensure the health and well being of you, our shareholders.
Despite these exceptional circumstances, I am keen to maintain engagement with our shareholders. In order to
facilitate this, if you are a shareholder and would like to ask me or any member of the Nomination Committee a
question on the work of the Nominaiton Commitee during 2020 or on any matter addressed in this section of
the Corporate Governance Statement, please email your question to corporate@hostelworld.com.
Michael Cawley
Chairman, Nomination Committee
16 March 2021
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Corporate Governance Statement
(Continued)
Board Effectiveness and Evaluation
Progress against 2019 Board evaluation actions
Set out below is the progress made in 2020 against actions identified as part of the 2019 Board
effectiveness review:
Action
Progress
Additional time allocated to allow
Non-Executive Directors and Executive
Directors collaborate on strategic issues
and business reviews
During the year the Board held a number of additional meetings to assess
the commercial, financial and people implications of COVID-19 and agreed
the adoption of measures to protect the short and long-term future of the
Group
Monthly KPIs on key operational issues
and financial performance should
be circulated to the Non-Executive
Directors between Board meetings
Trading and financial updates together with detailed KPIs on key
operational issues (delivery against product strategy and employee welfare
in the context of COVID-19) were provided to the Non-Executive Directors
on an on-going basis 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
During the year the Board agreed a summary CEO report structure which
included financial and non-financial performance measures in abridged
format to assist efficient and effective Board assessments concerning
management’s performance
Updates on the evolving competitor
landscape to be provided on an on-
going basis.
At regular intervals during 2020, the Chief Executive Officer provided
the Board with updates on competitor activities and their commercial
responses to COVID-19 to ensure the Board was able to effectively
consider management proposals for dealing with the impacts of COVID-19
Internal Evaluation
A formal internal evaluation of the Board, its Committees and individual Directors was undertaken during
the year. The evaluation included completion of a detailed questionnaire by each of the Directors covering
the following:
• The Board’s role and operation;
• Effectiveness of the Board and its Committees;
• Managing the Group’s management function; and
• Finance, risk management and controls.
Views were also sought on the Board’s input into strategy discussions, governance and compliance, risk
management and succession planning. The Board evaluation process continued its previously adopted
practice of requesting separate feedback on the effectiveness of the Board and its Committees from
senior executives who had presented operational briefings during the year, and from both the Group’s
internal audit partner from PwC and from the Remuneration Committee’s executive compensation
consultants (Korn Ferry).
The evaluation results were assessed 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 that the Directors were satisfied that they were kept well informed
of material matters occurring between meetings, that the Board had in place a sufficient system to
provide assurance to it on the effectiveness of the Group’s internal controls, that Board members had
an appropriate level of input into shaping the Group’s strategy, and that Board members understood
what was expected of them as board members in the context of their fiduciary duties. Accordingly, each
Director will seek re-election at the Company’s forthcoming AGM on 26 April 2021 and Caroline Sherry will
seek election at the AGM. 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
• Sufficient diversity on the Board in terms of gender, experience and Non-Executive Director/ Executive
Director balance and non-executive Board members strongly consider themselves independent of
management (and also exercise independent judgment and voice their own opinions);
• Board members consider that they have an appropriate level of input into shaping Company strategy;
• Board members were satisfied that they were kept informed of all material matters occurring between
meetings; and
• The Board has in place a sufficient system to provide assurance to it on the effectiveness of the
organisation’s internal controls.
The Yard Hostel, Thailand
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Corporate Governance Statement
(Continued)
4. Audit, Risk and Internal Control –
Principles M-O of the 2018 Code Membership
Board Evaluation Process - Recommendations for improving Board Effectiveness
Membership
As part of the evaluation exercise, the following recommendations for improving the effectiveness of the
Board were made:
• Where practicable, Committee meetings to be held prior to Board meetings to ensure Board meetings
had sufficient time to focus on strategy matters in an in-depth manner
• Committee updates to the Board to be allocated increased time to ensure comprehensive updates are
provided to the Board on Committee matters
• A two-day in person Board strategy session to be held during 2021 (subject to travel guidelines
permitting travel)
• Senior management participation in Board meetings during 2020 had been particularly beneficial and
should be continued during 2021
• Succession planning for senior executives was to remain an area of key focus for 2021
• A detailed assessment of training and development needs for Board members who did not have
executive experience in online travel companies was to be completed and actioned in 2021
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 internal audit partner and executive remuneration consultants will be put in place in 2021.
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
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. The Board agreed to keep the matter under on-going review and to
reassess the issue during 2021.
An assessment of the Chairman’s performance was also carried out in 2020 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 Board considered the benefits of having a Board evaluation facilitated by an external third-party
consultant. Noting the confirmation provided by the Company Secretary that the internal evaluation
process included each item set out by the Financial Reporting Council in its published guidance note,
‘Guidance on Board Effectiveness’, as areas that should be included in a board evaluation exercise, the
Board agreed that the 2020 evaluation process had been well structured and comprehensive in all material
aspects. The merits of having a board evaluation conducted by an external third-party consultant will be
kept under review and assessed on an on-going basis.
Membership of the Audit Committee consists of the following Non-Executive Directors:
Membership
Éimear Moloney
Carl G. Shepherd
Evan Cohen
No. of meetings/total no. of
meetings held when the Director
was a member
Attendance %
5/5
5/5
5/5
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 five occasions during 2020. The Audit Committee’s meetings and agenda are linked to
events in the Group’s financial calendar. During the reporting period the Audit Committee was particularly
focused on the financial risks and business continuity challenges the Group was presented with following
the on-set of COVID-19.
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 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
• 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;
• Assess 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 Group’s
position, performance, business model and strategy;
• 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.
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4. Audit, Risk and Internal Control –
Principles M-O of the 2018 Code Membership (Continued)
The full schedule of roles and responsibilities are contained in the Audit Committee’s Terms of Reference,
which were reviewed in December 2020, and which are available on the Company’s website www.
hostelworldgroup.com.
Chair’s Review 2020
Committee Competence
The Audit Committee is comprised of three independent Non-Executive Directors and is chaired by
Éimear Moloney. In accordance with the requirements of the 2018 Code, 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. and Evan
Cohen is a management and strategy consultant who 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-focused strategy which enabled them
to make robust and insightful 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 62 and 63 of this Annual Report.
Fair, Balanced and Understandable
One of the significant 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 assessing 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 if the information provided on the Company, the environment in which it operates and the
risks it faces are specific to the Group and are 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 126
and 127, rests with the Board of Directors.
Significant Issues
In reviewing the financial statements with management and the auditors, the Audit Committee has
discussed the critical accounting judgements and estimates. The significant issues considered by the
Audit Committee in respect of the 2020 Annual Report are as follows:
Significant Issue
Description and resolution
Going Concern
The Audit Committee reviewed the Group’s assessment of going concern over a period of not
less than 12 months from date of signing. The assessment is prepared based on cashflow
forecasts which are conservative in its assumptions and do not assume any upside from global
mass vaccination programmes, full recovery is not expected to happen until FY-23, average
booking value assumed to be lower than historic not returning to FY-19 levels until FY-24 and
cost per booking is assumed to be elevated.
In assessing going concern, the Audit Committee reviewed the steps taken by management
to ensure adequate liquidity is available to the Group in light of the considerable uncertainty
surrounding the ongoing impact of COVID-19 – primarily the securing of an additional €30m
term loan facility.
The Audit Committee concluded that it was appropriate to recommend the adoption of the
going concern basis in preparing the Financial Statements.
Carrying value
of Goodwill and
Intangible Assets
Goodwill and intangible asset impairment reviews involve a range of judgemental decisions
largely related to the assumptions used to assess the value-in-use of the assets being tested.
These assumptions typically include short and long-term business and macroeconomic
projections, cash flow forecasts and associated discount rates.
Given the decline in booking volumes for COVID-19 all intangibles were subject to an
impairment review. The Audit Committee received a number of detailed performance updates
on the Group intangible assets where for certain classes of assets the carrying value of the
asset was greater than the recoverable amount of the assets. The recoverable amount was
based on value in use calculations. The Audit Committee reviewed the methodology applied
including ensuring that the discount rates used were appropriate and considered the output
from the sensitivity analysis performed at 2020 year-end. The Audit Committee was satisfied
that the assumptions used were appropriate and, in particular the assumptions made with
regards to the impact of COVID-19 on the cashflows in the Group’s impairment models.
Following these discussions, the Audit Committee is satisfied with the impairment taken at
31 December 2020 of €15.0m. They are also satisfied that the controls over management’s
impairment review process are adequate.
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4. Audit, Risk and Internal Control –
Principles M-O of the 2018 Code Membership (Continued)
Significant Issue
Description and resolution
External Auditors
Deferred tax asset
recognition and
recoverability of
deferred tax assets
Deferred tax assets are recognised to the extent that it is probable that taxable profits will
be available in future periods against which the reversal of temporary differences can be
deducted. The extent to which it is probable that taxable profits will be available in future
periods has been assessed by management based on the Board approved five-year numbers.
The Audit Committee have reviewed the initial recognition and recoverability of deferred tax
assets and are satisfied with the carrying value at 31 December of €7.6m (2019: €6.6m).
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 2020 €2.3m (2019: €2.3m) of internally generated
development costs were capitalised in accordance with the criteria as set out in IAS 38
Intangible Assets. Overall, capitalised development costs carried in the balance sheet
amounted to €4.0m at 31 December 2020 (2019: €2.8m).
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.
Accounting for
Exceptional Items
The Audit Committee considered the presentation of the Group’s Financial Statements
and, in particular, the appropriateness of the presentation of exceptional items. The Audit
Committee considered if exceptional items were in line with the group policy and also if the
reported results represented a true and fair view of the underlying performance during the
year.
The Audit Committee are satisfied that the presentation of exceptional items in the financial
statements, and that there is sufficient detail to allow users of the Financial Statements to
understand the nature and extent of the exceptional items and how they arose.
Other Matters
The Audit Committee has also considered a number of other judgements which have
been made by management including those relating to corporate governance, revenue
recognition, recoverability of assets, accruals and estimates and considers that the
judgements which have been made are reasonable.
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 2020, his fourth 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 2020,
Deloitte Ireland LLP were engaged to provide non-audit services to the Group totalling €56.7k (2019:
€1.5k). The Audit Committee will continue to monitor the type and 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.
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 FRC current 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 open and 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.
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4. Audit, Risk and Internal Control –
Principles M-O of the 2018 Code Membership (Continued)
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.
The Audit Committee and the Board completed a number of robust assessments of the Company’s
principal and emerging risks during the reporting period. The Board carried out its assessments in April
2020 and June 2020 and the Audit Committee carried out its assessments in June 2020 and December
2020. 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 26 to 35.
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
• 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 26 to 35 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 and the Board. The reviews are based on the current structure
within each function including any significant changes from an operational, resourcing or 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 26 to 35, and the ongoing work
of the Audit Committee in monitoring the risk management and internal control systems in conjunction
with the Board, 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, it was 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 independence, operation and
effectiveness of the internal audit function including its plans, activities and resources. The internal audit
function is outsourced to PwC and the Audit Committee considers that PwC continue to be independent
and effective. 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 the Board on the
effectiveness of the organisation’s internal controls and the independence of PwC as the Group internal
auditors.
At four of the five meetings of the Audit Committee during 2020, the Audit Committee assessed findings
arising from PwC’s internal auditor’s reports or received updates in connection with previous internal audit
reports presented to the Audit Committee. On an on-going basis the Audit Committee considers any
control weaknesses identified and the remedial action to be taken.
The 2020 internal audit plan, setting out areas of internal audit focus, was agreed by the Audit Committee
with PwC following extensive engagement between PwC and the Company’s management. In 2020, the
Audit Committee received three reports from PwC covering a) Internal Audit Findings Follow-Up Review; b)
Cyber Risk Review; and c) 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 2021 was agreed with PwC following consultation between PwC and the
Company’s senior management and also between PwC and the Audit Committee. The 2021 internal
audit plan focusses on a) Cloud Risk Assessment; b) IT General Controls; c) New Payments Key Controls
Review; d) Business Continuity Follow-up Review and e) Internal Audit Findings Follow-up Review.
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4. Audit, Risk and Internal Control –
Principles M-O of the 2018 Code Membership (Continued)
Annual Evaluation of Performance
The Audit Committee’s effectiveness was reviewed as part of a questionnaire based internal evaluation
process during 2020. The findings were collated by the Company Secretary and reviewed by the Audit
Committee Chairperson. The Audit Committee and the Board considered the outcome of the evaluation
and the key findings are summarised as follows:
• Audit Committee members have sufficient experience, skills and time/resources to attend to Audit
Committee matters;
• The Audit Committee is focused on appropriate areas of governance and risk;
• The Audit Committee challenges the views of management and robust debate is encouraged at
committee meetings;
• The Audit Committee is satisfied that that culture of the Group encourages committee members to
discuss matters openly and candidly with management;
• Regulatory updates be provided to the US based Audit Committee members on UK listed company
matters on an on-going basis; and
• Committee meeting materials provided in advance of meetings by third party advisers should be
focused on key risk and financial matters relevant to the Group.
I will ensure the Audit Committee areas highlighted for improvement/enhancement are actioned and are on
the Audit Committee agenda over the course of 2021.
Éimear Moloney
Chairperson, Audit Committee
16 March 2021
Kuna Bali, Indonesia
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5. Remuneration – Principles P-R of the Code Chairman
of the Remuneration Committee’s Annual Statement
Dear Shareholder
Executive Remuneration in 2020
As Chairman of the Remuneration Committee, I am pleased to present the Company’s Remuneration
Report for the year to 31 December 2020.
Membership
Carl G. Shepherd (Chair)
Michael Cawley
Éimear Moloney
Evan Cohen
No. of meetings/total no.
of meetings held when the
Director was a member
Attendance %
8/8
8/8
8/8
8/8
100%
100%
100%
100%
The Company Secretary acts as Secretary to the Remuneration Committee.
Key Activities of the Remuneration Committee in 2020
The Remuneration Committee held eight meetings during 2020 and, among other things, undertook the
following activities:
• Finalised the 2019 Directors’ Remuneration Report;
• Determined the salary increases for the Executive Directors that applied for 2020, as reported last
year;
• Agreed the final outturn of the 2019 annual bonus scheme for the Executive Directors, as reported
last year;
• Approved salary deferrals for the Executive Directors and other members of the senior management
team as a response to the COVID-19 pandemic;
• Discussed and agreed the approach to be taken to Executive Directors’ incentives in 2020 following
the outbreak of the pandemic;
• Agreed the approach to the award made under the Company’s Long-Term Incentive Plan (“LTIP”) in
2020, including the quantum, metrics, targets and award population;
• Approved technical adjustments to outstanding LTIP and SAYE awards following the bonus issue
implemented by the Company during the year;
• Approved the remuneration package for the new Chief Financial Officer and the termination
arrangements for her predecessor;
• Considered again the remuneration issues raised in the UK Corporate Governance Code;
• Reviewed overall workforce remuneration and related policies, considered the alignment of Executive
Director pay with wider Company practices, and discussed alternative methods of incentivisation and
retention for colleagues across the business; and
• Started to consider the implementation of the Directors’ Remuneration Policy for 2021.
Subsequent to the financial year end, the Remuneration Committee met to review salaries for 2021 and
the extent of vesting under the LTIP award granted in 2018.
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 the business is 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.
The Directors’ Remuneration Policy as approved in 2019 continued to apply for the 2020 financial year.
2020 proved to be an exceptionally challenging year for Hostelworld and for the travel industry in general.
The impact of the pandemic on the business as a whole is set out in detail in this Annual Report. In short,
trading was well below 2019 levels and the Group was required to implement a number of mitigating
actions to protect the business and conserve cash. As part of this, the Group signed head of terms on a
€30m term loan facility in January 2021 and raised new capital from shareholders via a placing in June
2020.
In response to the crisis, the Board and the Remuneration Committee agreed to implement a programme
of salary deferrals for all employees earning above €75,000 (or local equivalent), which included Executive
Directors and other members of the senior management team, whereby the payment of 20% of the salary
earned above this amount would be deferred. This deferral was in place from April to November 2020. For
the Non-Executive Directors, 100% of the fees payable for April and May were deferred, with 20% of the
fees payable from June to November also deferred. The programme of deferral ended in November 2020
and all sums which had been deferred were paid to the affected individuals in January 2021.
At the time of preparation of the 2019 Directors’ Remuneration Report, the Remuneration Committee was
considering the appropriate metrics and targets for the annual bonus scheme to apply in 2020 in the light
of the outbreak of the pandemic. Given the impact on the Company, the Committee ultimately decided
that no annual bonus scheme would operate for 2020, and no targets for the year were set. As a result, no
bonuses were payable to any Executive Director (or any other employee) for 2020.
The Committee approved the grant of a new award under the LTIP at the start of May, reflecting our
strong desire to lock in key talent and incentivise performance through the pandemic and into the
recovery phase. We gave considerable thought to the appropriate performance metrics and targets for
this award, wishing to ensure both continuity with previous awards and the provision of an incentive which
was meaningful and realistic in exceptional circumstances. Our conclusion was to continue using both
Adjusted Earnings per Share (“Adjusted EPS”) and absolute Total Shareholder Return (“TSR”) performance
conditions, but to adjust the weighting in favour of TSR. This reflected the specific challenges of setting
Adjusted EPS with any degree of certainty as well as a desire to ensure management focus on restoring
shareholder value. The weighting for the award was therefore agreed as 25% Adjusted EPS and 75% TSR.
For the specific targets, the Committee agreed to assess Adjusted EPS on the basis of EPS to be achieved
in the financial year ending 31 December 2022, given the challenges of using the standard approach of
measuring percentage growth in Adjusted EPS from a 2019 base point. The target range for the award,
which is Adjusted EPS in 2022 of 0c for 25% vesting rising to 9c for 100% vesting, was established taking
into account best estimates of performance given a number of potential post-COVID-19 scenarios. The
Committee is aware that Adjusted EPS at these levels in 2022 would be below the Adjusted EPS outturn
in 2019; however, given the magnitude of events during 2020 these prior year comparatives are no longer
considered relevant as a starting point.
For TSR, the Committee agreed a performance range of 5% p.a. growth for 25% vesting, rising to 15%
p.a. growth for 100% vesting. Again, this range was determined taking into account expectations of
performance and the outlook for the travel industry over the vesting period. TSR will be measured over
a three-year period starting from the grant date. This is a change from the prior practice of measuring
TSR from the start of each financial year. We took this decision to ensure that the award has value as an
incentive: using the 2019 year-end TSR (even with standard averaging methodology) would have resulted
in an unrealistically high base point in light of the subsequent market downturn in early 2020.
As indicated above, the Committee was keen to ensure that the 2020 LTIP award operated as a
meaningful incentive as well as a powerful retention mechanism. As such, we granted the award at a level
of 150% of basic salary for the Chief Executive Officer and the then Chief Financial Officer, in line with the
maximum permissible limit for a “normal” award under the Directors’ Remuneration Policy. The Committee
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5. Remuneration – Principles P-R of the Code Chairman of the
Remuneration Committee’s Annual Statement (Continued)
is aware of the views of institutional shareholders and their representative bodies on award quantum,
particularly when share prices are low. In this very specific case, at a time of unprecedented turbulence for
Hostelworld and for the wider travel industry, the Committee believed that it was critical to attempt to lock
in key talent through awards at levels higher than those previously granted. This would help increase the
likelihood of material rewards in the event of a turnaround in the Company’s fortunes and the protection
and restoration of shareholder value over the three-year performance period. It should also be noted that,
with the cancellation of the 2020 annual bonus scheme, this was the sole incentive to operate for the
2020 financial year.
At the time performance for this award is assessed in 2023, the Remuneration Committee, in line with
the Directors’ Remuneration Policy, will need to satisfy itself that the vesting outcome represents a fair
and accurate reflection of business performance over the period covered by the award. In addition, as
prescribed under the Remuneration Policy, the LTIP awards to Executive Directors were granted with a
requirement that any shares which vest after the end of the three-year performance period must be held
for a further two years before they can be sold (subject to any sales required for tax purposes).
New Chief Financial Officer
The Board promoted Hostelworld’s Group Financial Controller Caroline Sherry to the position of Chief
Financial Officer in 2020, replacing TJ Kelly. Caroline’s initial salary was set at €230,000, subject to
Committee review following a short period of performance assessment. After the year end, the Committee
agreed to increase Caroline’s salary to €275,000 (with effect from 1 February 2021) to recognise the
exceptional contribution she has made to date in her new role at a critical time for the business. Even
following this increase, Caroline’s salary remains significantly below that of her predecessor, and the
Committee intends to conduct a further review of the salary at the end of 2021. This review will take into
account Caroline’s ongoing performance and contribution and any other relevant factors.
UK Corporate Governance Code (“the Code”)
As indicated in this Annual Statement and in the additional disclosures throughout the Directors’
Remuneration Report, the Committee has applied the principles set out in the Code. The Directors’
Remuneration Policy is designed to support strategy and promote the long-term sustainable success
of the business. The Committee operates a formal and transparent procedure for setting the Policy and
for agreeing payments under the framework set out in the Policy. Discretion is applied where relevant,
although the Committee did not do so in respect of 2020 pay outcomes.
Hostelworld is compliant with the remuneration provisions set out in the Code, with two minor exceptions.
First, the Committee has not developed a formal policy on post-employment shareholding requirements.
We have continued to review whether such requirements should be introduced but consider that the
current framework provides for sufficient alignment between management and the long-term interests
of shareholders. This takes into account 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 in the LTIP. Second, the 10% of salary pension contribution rate for the Chief Executive
Officer is above the 6% rate applicable to the wider workforce. The Chief Executive Officer’s pension was
agreed at the time of his recruitment in 2018 and remains in line with the level of pension provision for
CEOs of similarly-sized companies to Hostelworld. The Committee has no immediate plans to change
its approach on either of these matters although will review them again ahead of seeking shareholder
approval for a new Directors’ Remuneration Policy at the latest by the 2022 AGM.
The Committee 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 Code and the expectations of the Company’s major shareholders.
Caroline receives a pension contribution at a level of 6% of basic salary, in line with the wider workforce.
All other elements of her remuneration are consistent with the terms of the Directors’ Remuneration Policy.
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 Code:
TJ Kelly stepped down from the Board on 1 December 2020. He left the Company on 31 December 2020
at the expiry of his agreed notice period. He received salary, benefits and pension until the end of the
agreed notice period. The portion of his salary which had been deferred earlier in 2020 was paid to him in
December 2020. He received no payment in respect of annual bonus for 2020 and all of his outstanding
LTIP awards lapsed upon the cessation of his employment. He received no payment for loss of office.
Looking Ahead
The evolution of the pandemic during 2020 resulted in the Committee considering a number of
alternatives to ensure the maintenance of an appropriate link between performance and reward. We were
very conscious that remuneration for the Executive Directors and others within Hostelworld did not reflect
the levels of commitment to the business they demonstrated during an exceptionally challenging period. In
addition to the salary deferrals and the lack of a bonus scheme for 2020, it was clear that the LTIP awards
granted in 2018 and 2019 would be very unlikely to vest and therefore were not operating as an effective
retention tool. This was brought home to the Board and the Committee by the resignation of the Chief
Financial Officer in September.
Retaining, incentivising and motivating the current Executive Directors and the other members of the
senior management team are objectives which remain front of mind for the Committee as Hostelworld
continues to adapt to the ongoing pandemic. The Committee also continues to focus on ensuring that the
Directors’ Remuneration Policy is aligned to the short and long term strategic objectives of the business.
The Committee has developed a series of proposals for 2021 which, at the time of writing, it is in process
of discussing with major shareholders. We hope to be able to communicate more information on the
outcome of this process ahead of the AGM.
• 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. As noted above, in light of the exceptional circumstances of 2020, no bonus
scheme operated for the year;
• 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. Maximum targets 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.
Any discretion exercised by the Committee in implementing the Policy has been 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; and
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5. Remuneration – Principles P-R of the Code Chairman of the
Remuneration Committee’s Annual Statement (Continued)
Directors’ Remuneration Policy (Summary)
• Alignment to culture: The approach to Directors’ remuneration is consistent with key Group cultural
tenets of transparency, inclusion and performance. We believe that our incentive schemes help drive
appropriate behaviours which are aligned with the core purpose of the business and its evolving
strategic priorities. Although, as noted above, no annual bonus scheme was in operation for 2020,
the Committee granted an LTIP award during the year designed to address the immediate priority of
the Group: the motivation and retention of key talent with an award based on performance targets
designed to encourage the protection and restoration of shareholder value at a critical time for
the business. Performance targets for future incentives will continue to be set by reference to the
prevailing situation at the time.
Dialogue with shareholders on remuneration matters is important to the Committee although there was no
formal consultation exercise with major investors during 2020. As noted above, the Committee is currently
in the process of engaging with major shareholders with regards to executive remuneration for 2021.
Structure of this Report
This report has been prepared in accordance with the relevant UK reporting regulations, the UKLA Listing
Rules and the 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 2020 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
16 March 2021
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-focused 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.
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Directors’ Remuneration Policy (Summary)
(Continued)
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
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.
The maximum will
be set at the cost of
providing the benefits
described.
None
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.
•
•
•
•
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.
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.
Element and link to our
strategic objectives
Operation
Opportunity
Performance metrics, weighting and
assessment
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.
None
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.
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%
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 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.
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Directors’ Remuneration Policy (Summary)
(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
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
and 2020 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.
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
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.
Non-Executive Director Fees
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.
None
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.
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).
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Directors’ Remuneration Policy (Summary)
(Continued)
Choice of Performance Measures
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
Date of service
agreement
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
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.
Service Agreements and Letters of Appointment
Executive Directors
Each of the Executive Directors has entered into a service contract with the Company.
Name
Position
Date of service agreement
Notice period
by Company
(months)
Notice period
by Director
(months)
Gary Morrison
Chief Executive Officer
11 June 2018
Caroline Sherry
Chief Financial Officer
01 December 2020
12
6
12
6
Ecomama, Netherlands
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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 2020 financial year. Comparative figures for the 2019 financial year have also been
provided. Figures provided have been calculated in accordance with the relevant UK reporting regulations.
Salary
Benefits (1)
Bonus
LTIP
Pension
Total Fixed
Remuneration
Total Variable
Remuneration
(€’000)
(€’000)
(€’000)
(€’000)
(€’000)
(€’000)
(€’000)
Name
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Gary
Morrison 443.6 430.7
10.4
12.0
TJ Kelly
(2)
Caroline
Sherry(3)
278.5 295.0
3.0
3.6
19.1
-
0.1
-
-
-
-
-
-
-
-
-
-
- 44.4
43.1 498.4 485.8
-
-
16.7
17.7 298.2 316.3
1.2
- 20.4
-
-
-
-
-
-
-
(1) Benefits represent payments for health insurance and life assurance policies.
(2) TJ Kelly resigned from the Board with effect from 1 December 2020 and left the Company on 31 December 2020. Figures in the table above relate to his
period of service as a Director to 1 December 2020.
(3) Caroline Sherry was appointed to the Board on 1 December 2020. Figures in the table above relate to her period of service as a Director from this date.
Non-Executive Directors
The table below sets out the single total figure of remuneration and breakdown for each Non-Executive
Director.
Fees
Taxable
benefits
Other
payments
Total
Total Fixed
Remuneration
Total Variable
Remuneration
(€’000)
(€’000)
(€’000)
(€’000)
(€’000)
(€’000)
Name
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Michael Cawley(1)
145.0 145.0
Carl G. Shepherd(2)
74.0 68.2
Éimear Moloney(3)
67.0
67.0
Evan Cohen(4)
60.0
21.7
-
-
-
-
-
-
-
-
-
-
-
-
- 145.0 145.0 145.0 145.0
-
-
74.0 68.2
74.0 68.2
67.0
67.0
67.0
67.0
- 60.0
21.7 60.0
21.7
-
-
-
-
-
-
-
-
(1) Chairman of the Board and Chair of the Nominations Committee.
(2) Chair of the Remuneration Committee and Senior Independent Director.
(3) Chair of the Audit Committee.
(4) Appointed to the Board on 14 August 2019.
Additional Information regarding Single Figure Table
Basic Salary and Fee Deferral
During 2020, in response to the COVID-19 pandemic, the Board and the Remuneration Committee agreed
to implement a programme of salary deferrals across the business whereby the payment of 20% of the
salary earned above €75,000 (or local equivalent) would be deferred until a later date. This deferral was
in place from April to November 2020 and applied to the Executive Directors and other members of the
senior management team. All deferred salary was paid to the affected individuals in January 2021. The
basic salary disclosed for 2020 in the Single Figure Table for Executive Directors above includes amounts
that were deferred during the year but paid in January 2021.
The Non-Executive Directors agreed to the deferral of 100% of their fees for April and May 2020, and 20%
of their fees from June to November. All of the deferred fees were paid to the Non-Executive Directors
in January 2021. The fee levels disclosed for 2020 in the Single Figure Table for Non-Executive Directors
above includes amounts that were deferred during the year but paid in January 2021.
Annual Bonus
At the time of preparation of the 2019 Directors’ Remuneration Report, the Remuneration Committee was
considering the appropriate metrics and targets for the annual bonus scheme to apply in 2020 in the
light of the outbreak of the COVID-19 pandemic. Given the impact of the pandemic on the Company, the
Committee ultimately decided that no annual bonus scheme would operate for 2020, and no targets for
the year were set. As a result, no bonuses were payable to any Executive Director for 2020.
Long Term Incentives Vesting Subject to Performance Period ending in 2020
In 2018, LTIP awards were granted to 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).
The award to TJ Kelly lapsed on the cessation of his employment on 31 December 2020. For other
participants, the performance conditions for the award were tested after the financial year end, 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:
(194%)
0%
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109
Annual Report on Remuneration
(Continued)
Absolute TSR condition (30%)
Long Term Incentives Awarded in 2020
The table below sets out the details of the LTIP awards granted to the Executive Directors in 2018. All
awards were granted as nil cost options.
Gary
Morrison
2 May
2020
150% of
salary 665.4 771,900 (2)
Nil(7)
25%
Annualised TSR of the Company over the three-
year period to 31 December 2020
Less than 10.0% p.a.
10.0% p.a.
15.0% p.a. or above
Vesting
0%
25%
100%
Between 10.0% and 15.0% p.a.
Straight line vesting between 25% and 100%
Outcome:
(26.06%) p.a.
0%
Director
Date of
grant
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
Total
value of
vested
awards
(€)
Number
of shares
lapsing
Gary
Morrison
29 Jun
2018
150%
of
salary
175,723
(1)
627.3
TJ
Kelly
5 Dec
2018
75% of
salary
221.3
98,520
(2)
Nil
(5)
Nil
(5)
Adjusted
EPS
(70%)
Absolute
TSR
(30%) 175,723
Nil
31
December
2020
25%
n/a
n/a
n/a
98,250
(3)
Nil
(1) The number of shares awarded was calculated using the closing share price on 28 June 2018, which was 316.00p.
(2) The number of shares awarded was calculated using the closing share price on 4 December 2018, which was 200.00p.
(3) This award lapsed on 31 December 2020, the date of cessation of employment.
(4) The LTIP award granted to the former CEO, Feargal Mooney, in April 2018 was subject to a pro-rata reduction as set out in the 2018 Directors’ Remuneration
Report. The award remained subject to the performance conditions set at the time of grant, which were the same as those set out above for the other LTIP awards
granted in 2018. As the performance targets were not met, this pro-rated award lapsed in full. Feargal Mooney holds no outstanding LTIP awards.
(5) These awards are nil cost options and therefore have a nil exercise price. The share value used to determine the face value of the awards is explained in the
footnotes above.
The table below sets out the details of the LTIP awards granted to the Executive Directors in the 2020
financial year. All awards were granted as nil cost options.
Director
Date of
grant
Value of
award
Face
value of
award
(€’000)
Number
of shares
awarded (1)
Exercise
Price (€)
Percentage
of award
vesting at
threshold
performance
Performance period
end date
Weighting
31 December
2022 (EPS)
1 May 2023
(TSR)
31 December
2022 (EPS)
1 May 2023
(TSR)
Adjusted EPS
(25%)
Absolute TSR
(75%)
Adjusted EPS
(25%)
Absolute TSR
(75%)
Caroline
Sherry
2 May
2020
50% of
salary
72.5 84,100 (2) (3)
Nil(7)
25%
TJ
Kelly
2 May
2020
150% of
salary 455.8 528,700 (2)
Nil(7)
n/a
n/a
n/a
(1) The specific performance targets for these awards are set out below.
(2) The number of shares awarded was calculated using the closing share price on 1 May 2020, which was 75.0p.
(3) This award was granted prior to Caroline Sherry’s appointment to the Board and does not include a post-vesting holding period.
(4) This award lapsed following TJ Kelly’s cessation of employment on 31 December 2020.
(5) The Remuneration Committee has agreed that a technical adjustment will be applied to the number of shares comprising each outstanding award to reflect
the impact of the bonus issue which took place in September 2020, although at the time of writing the adjustment had not formally been implemented. This will
be announced to the market at the time the adjustment is formally applied, and full details of the amended awards will also be disclosed in the 2021 Directors’
Remuneration Report.
(6) To the extent that awards vest, a dividend equivalent award will be made at the end of the vesting period.
(7) These awards are nil cost options and therefore have a nil exercise price. The share value used to determine the face value of the awards is explained in the
footnotes above.
Vesting of the awards granted in 2020 is subject to achievement of an adjusted EPS performance condition
(applying to 25% of the awards) and an absolute TSR performance condition (applying to 75% of the awards).
The specific targets are set out below:
Absolute EPS condition (25%)
Adjusted EPS for the financial year ending 31
December 2022
Less than 0c
0c
9c or above
Vesting
0%
25%
100%
Between 0c and 9c
Straight line vesting between 25% and 100%
(1) The Remuneration Committee has agreed that a technical adjustment will be applied to the EPS performance conditions set out above to reflect the impact of the
bonus issue which took place in September 2020 although at the time of writing the adjustment had not formally been implemented. This will result in the level of
EPS required for full vesting being amended from 9c to 8.87c, to reflect the increase in the issued share capital following the bonus issue. This adjustment maintains
the same degree of stretch in the performance condition allowing for the bonus issue of shares and will not make the performance condition any easier to achieve.
Full details of the amended condition will be disclosed in the 2021 Directors’ Remuneration Report.
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111
Annual Report on Remuneration
(Continued)
Absolute TSR condition (75%)
Adjusted EPS condition (70%)
Annualised TSR of the Company over the three-
year period to 1 May 2023
Vesting
Less than 5.0% p.a.
5.0% p.a.
15.0% p.a. or above
0%
25%
100%
Annual average Adjusted EPS growth
Vesting
Less than 5.0% p.a.
5.0% p.a.
11.0% p.a. or above
0%
25%
100%
Between 5.0% and 15.0% p.a.
Straight line vesting between 25% and 100%
Between 5.0% and 11.0% p.a.
Straight line vesting between 25% and 100%
The rationale for the choice of the performance conditions for the 2020 award is set out in the Annual
Statement from the Chairman of the Remuneration Committee.
Absolute TSR condition (30%)
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. All awards were granted as nil cost options.
Director
Date of
grant
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
TJ
Kelly
3 Apr
2019
3 Apr
2019
125% of
salary 538.4
247,594 (2)
Nil(6)
25%
31 December
2021
Adjusted EPS
(70%)
Absolute TSR
(30%)
100% of
salary 295.0 135,668 (2)(3)
Nil(6)
n/a
n/a
n/a
(1) The specific performance targets for these awards are set out below.
(2) The number of shares awarded was calculated using the closing share price on 2 April 2019, which was 187.0p.
(3) This award lapsed following TJ Kelly’s cessation of employment on 31 December 2020.
(4) The Remuneration Committee has agreed that a technical adjustment will be applied to the number of shares comprising each outstanding award to reflect
the impact of the bonus issue which took place in September 2020. This will be announced to the market at the time the adjustment is formally applied and full
details of the amended awards will also be disclosed in the 2021 Directors’ Remuneration Report.
(5) To the extent that awards vest, a dividend equivalent award will be made at the end of the vesting period.
(6) These awards are nil cost options and therefore have a nil exercise price. The share value used to determine the face value of the awards is explained in the
footnotes above.
Vesting of Gary Morrison’s 2019 award is subject to achievement of an adjusted EPS performance
condition (applying to 70% of the award) and an absolute TSR performance condition (applying to 30% of
the award), as set out below.
Annualised TSR of the Company over the three-
year period to 31 December 2021
Vesting
Less than 10.0% p.a.
10% 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%
Payments for Loss of Office / Payments to Past Directors
TJ Kelly
TJ Kelly’s departure was announced on 23 September 2020. He stepped down from the Board and from
his position as Chief Financial Officer on 1 December 2020. He left the Company on 31 December 2020 at
the expiry of his agreed notice period.
He received salary, benefits and pension until the end of the agreed notice period. The portion of his
salary which had been deferred earlier in 2020 was paid to him in December 2020. He received no
payment in respect of annual bonus for 2020 and all of his outstanding LTIP awards lapsed upon the
cessation of his employment. He received no payment for loss of office.
Statement of Directors’ Shareholdings and Share Interests
The number of shares of the Company in which the Executive Directors had a beneficial interest and
details of long term incentive interests as at 31 December 2020 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.
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113
Annual Report on Remuneration
(Continued)
Director
Gary
Morrison
Caroline
Sherry
TJ
Kelly (2)
Beneficially owned
shares
Shareholding
requirement (% of
salary)
Shareholding
(% of salary) (1)
Shareholding
requirement met?
19,082
200%
-
-
200%
200%
4%
0%
0%
No
No
No
Unvested LTIP
interests subject
to performance
conditions
1,195,217
84,100
762,888
(1) Unvested LTIP awards do not count towards satisfaction of the shareholding guidelines.
(2) Shareholding position stated as at 1 December 2020, the date of retirement from the Board. All outstanding LTIP awards subsequently lapsed following
cessation of employment.
Details of the interests held in shares by Non-Executive Directors as at 31 December 2020 are set out
below. Non-Executive Directors are not subject to a shareholding requirement.
Name
Michael Cawley
Carl G. Shepherd
Éimear Moloney
Evan Cohen
Beneficially owned shares
127,797
20,285
72,376
15,214
No changes in the above Directors’ interests have taken place between 31 December 2020 and the date of
this report.
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 2020.
Total Shareholder Return (£)
240
220
200
180
160
140
120
100
80
60
40
20
0
Dec 2015
Dec 2016
Dec 2017
Dec 2018
Dec 2019
Dec 2020
Hostelworld Group
FTSE SmallCap
Chief Executive Officer Historical Remuneration
The table below sets out the total remuneration delivered to the Chief Executive Officer over the last
seven 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 seven most recent financial
years (reflecting the disclosures made in previous reports):
2014
2015
2016
2017
2018
2019
2020
Chief Executive Officer
Feargal
Mooney
Feargal
Mooney
Feargal
Mooney
Feargal
Mooney
Feargal
Mooney
Gary
Morrison
Gary
Morrison
Gary
Morrison
Total Single Figure (€’000)
413.1
395.0 1,298.7
768.8
209.5
307.2
485.8
498.4
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%
0%
n/a
n/a
n/a
n/a
0%
n/a
n/a
0%
It should be noted that the Company only introduced the LTIP on Admission.
Change in Directors’ Remuneration Compared with Employees
The following table sets out the change in the remuneration paid to each of the Directors from 2019
to 2020 compared with the average percentage change for employees, as required by the reporting
regulations.
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115
Annual Report on Remuneration
(Continued)
Salary/Fees
Taxable benefits
Bonus
2020
2019
2020
2019
2020
2019
(€’000)
(€’000)
% change
(€’000)
(€’000)
% change
(€’000)
(€’000)
% change
Executive Directors
Gary Morrison
443.6
430.7
3.0%
10.4
12.0 -13.3%
TJ Kelly (1)
278.5
295.0
-5.6%
Caroline Sherry (2)
19.1
-
-
Non-Executive Directors
Michael Cawley
145.0
145.0
0%
Carl G. Shepherd
74.0
68.2
8.5%
Éimear Moloney
67.0
67.0
0%
Evan Cohen (3)
60.0
21.7
176.5%
3.0
0.1
-
-
-
-
-
3.6 -16.6%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Employee pay
Average per
employee – parent
company (4)
Average per
employee - group
-
-
-
53.8
51.0
5.5%
2.5
1.3
93%
(1) Stepped down from the Board on 1 December 2020.
(2) Appointed to the Board on 1 December 2020.
(3) Appointed to the Board on 14 August 2019.
(4) The only employees of the parent company are the Directors of the company.
Remuneration Practices Across the Company
Hostelworld does not have more than 250 UK employees (the current number of UK employees is 27)
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 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. Hostelworld’s normal approach is that senior managers within
the Company participate in a bonus scheme which is structured in a similar manner to the Executive
Director bonus scheme, albeit in some cases with an element also based on personal performance.
Separate incentive arrangements are in place for certain key roles (e.g. sales and customer support staff)
and for other colleagues not otherwise in a bonus scheme. For 2020, however, in light of the impact of
the pandemic, it was agreed that other than quarterly incentive programmes for the sales and customer
support roles, no bonus schemes would operate and therefore the vast majority of employees did not
receive a bonus for the year under review.
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. 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. This approach was taken with the appointment of the new Chief Financial Officer
in late 2020. The Chief Executive Officer’s contribution rate of 10% was determined at the time of his
appointment in 2018 and is considered in line with the market for similarly-sized companies.
During 2020, as part of the response to COVID-19 it was agreed that a deferral of 20% of salary above
€75,000 (or local market equivalent) would be put in place for Executive Directors, members of the senior
management team and any employees earning above €75,000 (or local market equivalent) per annum.
This deferral operated from April to November 2020 and ensured that the direct impact on salary of the
pandemic was targeted at the higher earners within Hostelworld.
The Remuneration Committee did not engage directly with employees on executive remuneration matters
during 2020 as this exercise was undertaken late in the 2019 financial year (and reported on in the 2019
Directors’ Remuneration Report). The Committee will consider further dialogue with employees on these
matters later in 2021.
Relative Importance of the Spend on Pay
The table below sets out the relative importance of spend on pay in the 2019 and 2020 financial years
compared with other disbursements. All figures provided are taken from the relevant Company Accounts.
Profit distributed by way of dividend/share buybacks
Overall spend on pay including Executive Directors
Shareholder Voting at General Meeting
Disbursements
from profit in 2020
financial year (€m)
-
19.1
Disbursements from
profit in 2019 financial
year (€m) % change
12.6 (-100%)
19.7
(-3%)
The table below sets out the results of voting on the resolutions (1) to approve the Directors’ Remuneration
Policy at the AGM held on 31 May 2019 and (2) to approve the Directors’ Remuneration Report at the AGM
held on 27 April 2020.
Resolution
Ordinary Resolution to approve
the Directors’ Remuneration Policy (2019 AGM)
Ordinary Resolution to approve
the Directors’ Remuneration Report for the year
ended 31 December 2019 (2020 AGM)
For
Against
Withheld
62,810,003
(82.64%)
13,195,194
(17.36%)
750
68,891,234
(90.51%)
7,221,210
(9.49%)
2,500
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117
Annual Report on Remuneration
(Continued)
Implementation of Remuneration Policy in Financial Year 2021
Annual Bonus Plan and LTIP Award
The Remuneration Committee proposes to implement the remuneration policy in 2021 as set out below:
Salary
Executive Directors’ salaries have been reviewed and the Committee has agreed that no increase
will apply to the Chief Executive Officer for 2021. For the Chief Financial Officer, as explained in the
Annual Statement of the Chairman of the Remuneration Committee, her salary with effect from her
appointment was set at an initial level of €230,000, subject to Committee review following a short period
of performance assessment. The Committee has decided to increase the salary to €275,000 with effect
from 1 February 2021, in recognition of the exceptional contribution she has made to date in her new role
at a critical time for the business. Even following this increase, the Chief Financial Officer’s salary remains
significantly lower than that of her predecessor, and the Committee intends to conduct a further review of
the salary at the end of 2021. This review will take into account her ongoing performance and contribution
and any other relevant factors:
Name
Gary Morrison
Caroline Sherry
Salary (€)
2021
2020
Percentage
Change
443,600
443,600
0%
275,000(1) 230,000(2)
19.6%
(1) Salary with effect from 1 February 2021.
(2) Salary with effect from 1 December 2020, the date of Caroline Sherry’s appointment to the Board.
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 Caroline Sherry.
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:
Role
Chairman
Base Non-Executive Director
Senior Independent Director
Chair of Audit Committee
Chair of Remuneration Committee
Fees (€)
145,000
60,000
7,000
7,000
7,000
The Committee has developed a series of proposals for 2021 which are designed to ensure ongoing
retention and incentivisation of the Executive Directors and other key talent with the organisation.
As at the time of writing, the Committee is in the process of discussing these proposals with major
shareholders. It is expected that more information on these proposals and the outcome of the
engagement process will be available by the time of the AGM.
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 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 eight times during
2020. Meeting attendance is shown on page 94 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 €103,487 for their advice during the year (2019: €54,455). 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
16 March 2021
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Hostelworld Annual Report 2020
119
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 2020.
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 58, 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 64 to 117, 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 85 to 92;
• The Directors’ Remuneration Report on pages 94 to 117; and
• This Directors’ Report, on pages 118 to 127, together with the Strategic Report on pages 10 to 58,
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
Publication of unaudited
financial information
Details of long-term incentive
schemes
Waiver of emoluments by a
Director
Location
Not applicable
Not applicable
Directors’ Remuneration Report, pages 94 to 117
Directors’ Remuneration Report, pages 94 to 117
1.
2.
3.
4.
5.
Waiver of future emoluments
by a Director
Not applicable
Section
Topic
Location
6.
Non pre-emptive issues of
equity for cash
Placing and Subscription
On 25 June 2020 the Company announced the successful completion
of the non-pre-emptive placing of 17,664,155 new ordinary shares
of €0.01 each in the capital of the Company (“Ordinary Shares”)
(the “Placing Shares”) with existing and new institutional investors
at a price of 72.0 pence per Placing Share (the “Placing Price”) (the
“Placing”) and the conditional subscription by an existing shareholder
of 1,450,000 new Ordinary Shares (the “Subscription Shares”) at the
Placing Price (the “Subscription”). Together the Placing Shares and
the Subscription Shares represent 19,114,155 new Ordinary Shares
with an aggregate nominal value of €191,141.55 and raised gross
proceeds of approximately £13.8 million. Together the Placing Shares
and the Subscription Shares represented approximately 19.99 per
cent of the existing Ordinary Shares of the Company prior to the
Placing and the Subscription. The terms of the Placing were agreed on
25 June 2020 and the Placing Price represented a discount of 7.1 per
cent to the closing share price of 77.5 pence on 24 June 2020.
The Company consulted its major institutional shareholders before
announcing the Placing and the Placing structure was chosen as
it minimised cost, time to completion and management distraction
during an important and unprecedented time for the sector and the
Company.
The net proceeds of the Placing were to be used to (i) materially
strengthen the Group’s position in an uncertain environment, (ii)
strengthen the Group’s balance sheet giving greater flexibility and
resilience, (iii) provide essential liquidity through FY20 and FY21 in
both of the Group’s projected demand recovery situations (including
the “Pessimistic Case”) and (iv) enable the Group to emerge in a
materially stronger position as travel restrictions start to ease, and
accelerate growth in the “Base Case” as demand returns.
7.
8.
9.
10
11
12.
13
Item (7) 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
Shareholder waivers of
dividends
Not applicable
Not applicable
Shareholder waivers of future
dividends
Not applicable
Agreements with controlling
shareholders
Not applicable
120
Governance
Hostelworld Annual Report 2020
121
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 (former Chief Financial Officer, resigned as a director with effect from 1 December 2020);
• Caroline Sherry (Chief Financial Officer, appointed as a director with effect from 1 December 2020);
• Éimear Moloney (Non-Executive Director);
• Carl G. Shepherd (Non-Executive Director); and
• Evan Cohen (Non-Executive Director).
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.
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.
Biographical details of the current Directors together with membership of the various Committees are set
out on pages 62 to 63.
Rights Attaching to Shares
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 2020 and as at the date of this Directors’ Report, the Company’s issued share capital
comprises 116,321,185 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 17 to the Group’s Financial
Statements contained on pages 176 and 177. All the information detailed in note 17 on pages 176 and 177
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 26 April 2021, the Directors will seek
authority from shareholders to allot shares in the capital of the Company (i) up to a maximum nominal
amount of €387,737.28 (38,773, 728 shares of €0.01 each) being one-third of the Company’s issued
share capital and (ii) up to a further €387,737.28 (38,773,728 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 26 July 2022 and the conclusion of the Annual General Meeting of the Company
held in 2022.
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 26 July 2022 and the conclusion of the Annual General Meeting of the
Company held in 2022.
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.
122
Governance
Hostelworld Annual Report 2020
123
Directors’ Report
(Continued)
2021 Annual General Meeting
Events Post Year End
The Annual General Meeting (“AGM”) will be held at 12 noon on 26 April 2021 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.
Substantial Shareholders
At 31 December 2020, 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:
Number of ordinary shares /
voting rights notified
Percentage of voting rights over ordinary shares
of €0.01 each and nature of holding*
Shareholder
Aberforth Partners LP
Premier Miton Group plc
Charles Jobson
Gresham House Asset Management
(formerly Strategic Equity Capital plc)
18,255,131
13,284,425
10,966,941
6,738,653
Unicorn Asset Management Limited
5,410,000
FIL Limited
4,955,570
Burgundy Asset Management Limited
4,430,860
Allianz Global Investors GmbH
4,046,400
15.69% (indirect)
13.90% (indirect)
9.4% (direct)
7.05% (indirect)
5.66% (indirect)
5.18% (indirect)
4.64% (indirect)
4.23% (direct - 0.03%; indirect –
4.20%)
On 25 January 2021 the Group signed heads of terms on a €30 million term loan facility, and on 23
February 2021 the Group drew down €28.8 million, net of original issue discount. The facility is single
drawdown and bears interest at a margin of 9.0% per annum over EURIBOR (with a EURIBOR floor of 0.25%
per annum). The facility agreement includes the following financial covenants: (1) adjusted net leverage
(Hostelworld has to ensure that total net debt is no more than 3.0 x adjusted EBITDA from 31 December
2023 to 30 September 2024, and no more than 2.5 x adjusted EBITDA from 31 December 2024 onwards);
and (2) minimum liquidity (Hostelworld has to ensure that at close of business on the last business day of
each month until it is testing the adjusted net leverage ratios there is free cash in members of the Group
which have guaranteed repayment of the facility of at least €6.0 million). The lenders have the right to
require repayment of the facility if Hostelworld is subject to a change in control and Hostelworld has
the option to repay the facility early (subject to the prepayment fees referred to below). Security on the
facility includes the share capital of the Group, the bank accounts of the Group and the Group’s intellectual
property. In connection with the facility, Hostelworld has agreed to issue warrants over 3,315,153 ordinary
shares of €0.01 each in the capital of Hostelworld (equivalent to 2.85% of Hostelworld’s current issued
share capital) to the lender. The Warrants may be exercised at any time during the term of the loan and for
a twelve-month period following its scheduled termination at an exercise price of €0.01 per ordinary share.
Shares issued will be the same class and carry the same rights as existing shares.
On 26 January 2021 the Group repaid its short-term invoice financing facility in full. On 10 February 2021
the Group signed a deed of release on its three-year revolving credit facility which was not drawn down at
year end.
There have been no other significant events, outside the ordinary course of business, affecting the Group
since 31 December 2020.
Future Developments
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.
The Diverse Income Trust plc
3,019,504
3.16% (indirect)
Going Concern
As at the date of this report five further DTR5 Notifications had been received from the following:
FIL Limited notified the Company on 22 February 2021of a decrease in their holding to below 5% (indirect
holding) of the issued share capital of the Company.
FIL Limited notified the Company on 22 February 2021 of a decrease in their holding to 5,747,065 ordinary
shares representing 4.94% of the issued share capital of the Company (4.94% - indirect holding).
FIL Limited notified the Company on 23 February 2021 of a decrease in their holding to 3,848,518 ordinary
shares representing 3.30% of the issued share capital of the Company (3.30% - indirect holding).
FIL Limited notified the Company on 2 March 2021 of a decrease in their holding to below 3% (indirect
holding) of the issued share capital of the Company.
Legal and General Group PLC notified the Company on 12 March 2021 of an increase in their holding to
4.03% (direct holding) of the issued share capital of the Company.
* The percentage of voting rights relates to the issued share capital as at the date of receipt of the notification. Certain notifications were received prior to the
increases in the issued share capital of Company which occurred during 2020.
Transactions with Related Parties
Please refer to note 22 to the Consolidated Financial Statements on pages 182 to 184.
The Directors, after making enquiries, have a reasonable expectation that the Group and Company has
adequate resources to continue operating as a going concern for the foreseeable future.
While we entered 2020 with positive momentum, trading since late-January has been challenged by the
outbreak of the COVID-19 virus. From mid-March the group were severely impacted with high cancellation
rates and very low booking volumes. Global travel demand remained muted throughout 2020 with
ongoing travel restrictions continuing to severely impact the global travel industry. Revenue for the year
totalled €15.4m (2019: €80.7m) and the group incurred a loss before taxation of €50.5m (2019: profit
before taxation €3.0m). Losses have continued subsequent to the year end. At 31 December 2020 the
group was in a net asset position of €97.9m (2019: €131.8m).
In response to the breakout of COVID-19 immediate action was taken by the Directors to preserve the
Group’s cash position. Actions taken include the decision not to pay the final 2019 dividend, to suspend
any cash dividends in 2020, a group-wide scaled redundancy programme, reduced hours and deferred
pay for our employees and Directors, the renegotiation of credit terms with key vendors, availing of
debt warehousing of Irish employer taxes, the elimination of all non-essential operating costs including
marketing, recruitment, travel and other variable overheads, and availing of Government COVID-19
supports in both Ireland and the UK.
The Directors have taken steps to ensure adequate liquidity is available to the Group for the likely duration
of the crisis and the recovery period. The Group has retained its financial strength and at 31 December
2020 held a cash balance of €18.2 million (2019: €19.4 million) and held committed undrawn funds
124
Governance
Hostelworld Annual Report 2020
125
Directors’ Report
(Continued)
available of €7 million relating to a revolving credit facility that can be drawn down up to November 2023.
The group availed of a short-term invoice financing facility amounting to €3.5 million in June 2020, with
an amount owing of €1.2 million at 31 December 2020. On 29 June 2020, the Company issued Ordinary
Shares by way of a Placing, raising gross proceeds of €15.2m.
Throughout COVID-19 two forecasts were developed under a base case and stress-case scenario
analysis. Both scenarios included differing assumptions with regard to cost cutting measures, projected
revenue flows and return to recovery assumptions, projected net cash flows from operations and available
sources of funding. Whilst performance initially tracked in-line with our base case assumptions from
the end of August onwards trading outlook deteriorated significantly as global lockdowns and travel
restrictions came into force. As a result of this deterioration in trading, we revised downwards our base
outlook, reflecting the impact of the pandemic being deeper and longer than originally anticipated. A
5-year profit and loss (“Profit and Loss”) outlook was prepared which is conservative in its assumptions.
This outlook does not factor in any upside from global mass vaccination programmes, full recovery is not
expected to happen until FY-23 with average booking values assumed to be low and cost per booking
assumed to be elevated throughout the 5-year cycle. Our stress case scenario has not changed and
assumes depressed volumes throughout H1 2021 with minimal recovery in H2 2021. Operating expenses
would be further reduced in 2021 to reflect lower activity levels.
On the basis of the 5-year profit and loss outlook which identified a liquidity need and in light of the
considerable uncertainty on the duration and severity of the COVID-19 pandemic the Directors took
additional steps to strengthen the Group’s Balance sheet. The group entered a €30 million term loan
facility with HPS Investment Partners, LLC. On 23 February 2021 the Group drew down €28.8 million, net
of an original issue discount. The facility is single drawdown and bears interest at a margin of 9.0% per
annum over EURIBOR (with a EURIBOR floor of 0.25% per annum). The facility agreement includes the
following financial covenants: (1) adjusted net leverage (Hostelworld has to ensure that total net debt is
no more than 3.0 x adjusted EBITDA from 31 December 2023 to 30 September 2024, and no more than
2.5 x adjusted EBITDA from 31 December 2024 onwards); and (2) minimum liquidity (Hostelworld has to
ensure that at close of business on the last business day of each month until it is testing the adjusted
net leverage ratios there is free cash in members of the group which have guaranteed repayment of the
facility of at least €6.0 million). Security on the facility includes the share capital of the group, the bank
accounts of the group and the group’s intellectual property.
In January 2021 the group repaid the amount owing on the short-term invoice financing facility, and a
consent letter was signed by Hostelworld and AIB amending the loan agreement in place to permit the
taking of security, removal of the parent guarantee and the removal of the financial covenants. In February
2021 a deed of release was signed on the €7m revolving credit facility. Cash flow forecasts were updated
to reflect movements including early repayment of the short-term invoice financing facility and drawdown
of the HPS term loan facility.
Having considered the Group’s five year Profit and loss outlook, cash flow forecasts prepared for
12 months from date of signing, current and anticipated trading volumes, together with current and
anticipated levels of cash, debt and the availability of committed borrowing facilities, the Directors are
satisfied that the Group and Company has sufficient resources to continue in operation for the foreseeable
future, a period of not less than 12 months from the date of this report, and accordingly, they continue to
adopt the going concern basis in preparing the group financial statements.
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.
Disabilities
The Group maintains an Equal Opportunities policy which ensures that employees and job applicants
are not discriminated against on the grounds of disability in respect of recruitment, promotion, training
and general career development. The Group also maintains a grievance procedure and a whistleblowing
service that enables complaints to be made in a confidential manner should any employee have concerns
that any employee or job applicant has been discriminated against on the grounds of disability.
Stakeholder Engagement
During the reporting period the Directors considered and agreed that the Company’s shareholders, people,
hostel partners, customers and key suppliers were the Group’s main stakeholders. How the Company
engaged with these stakeholders during 2020 is set out in pages 71 to 73. How their interests were
considered in Board decisions are set out on pages 38 to 48.
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 57 and 58 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 184 and 185 in note 23
to the Consolidated Financial Statements.
Political Contributions
During the year, no political donations were made.
External Branches
Hostelworld Group plc is registered as a branch in Ireland with branch registration number 908295.
Hostelworld Services Limited, a U.K. subsidiary of the Company, is registered as a branch in Australia with
Australian registered body number 613076556.
126
Governance
Hostelworld Annual Report 2020
127
Directors’ Report
(Continued)
Results and Dividends
The Group’s and Company’s audited Financial Statements for the year are set out on pages 144 to 193.
In 2020 Cash dividends were suspended due to COVID-19 uncertainty. On 17 September 2020, the
company issued 1,636,252 bonus shares to shareholders in lieu of a cash dividend at value €0.01 per
share. The Directors do not recommend the payment of a final dividend for the year ended 31 December
2020. Future cash dividend payments will be subject to the Group generating adjusted profit after tax,
the Group’s cash position, any restrictions in the Group’s banking facilities and subject to compliance with
Companies Act 2006 requirements regarding ensuring sufficiency of distributable reserves at the time of
paying the dividend.
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.
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
accounting standards in conformity with the requirements of the Companies Act 2006 and International
Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union. The Directors 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 assets, liabilities and financial position 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.
The Section 172(1) Companies Act 2006, Statement is set out on pages 38 to 48.
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 16 March 2021 and is signed on
its behalf by:
John Duggan
Company Secretary
16 March 2021
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Hostelworld Annual Report 2020
129
Independent Auditor’s Report to the
Members of Hostelworld Group PLC
Report on the audit of the financial statements
3. Summary of our audit approach
1. 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 2020 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006 and
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.
We have audited the financial statements which 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 flow;
The Parent Company financial statements:
•
•
the Company statement of financial position;
the Company statement of changes in equity;
Key audit matters
The key audit matters that we identified in the current year were:
• Going concern
• Carrying value of intangible assets
• Capitalisation of development costs
Materiality
Scoping
The materiality that we used for the group financial statements was €668,300, which was
determined on the basis of expenditure excluding depreciation, amortisation, impairment and
exceptional costs. Parent company materiality was determined to be €133,700 based on the
value of investments capped at 20% of group materiality.
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 99% of the group’s revenues, profit before tax and net
assets was undertaken and performed by an audit team based in Dublin.
Significant
changes in our
approach
We have identified going concern as a new key audit matter in the current year due to the
increased judgement required in the current year regarding the use of the going concern
basis of accounting in the preparation of the financial statements. This is as a direct result
of the ongoing COVID-19 pandemic’s impact on the group’s and parent company’s trading
environment.
We have not identified tax provisions as a key audit matter in the current year. Tax provisions
were included as a key audit matter previously based on the level and quantum of cross-
border transactions however following the group reorganisation in the prior year, we no longer
deem this a significant area of judgement.
Materiality in the prior year was determined on the basis of adjusted profit before tax. Given
the current trading environment and the impact that COVID-19 has had on the travel industry,
we have determined expenditure excluding depreciation, amortisation, impairment and
exceptional costs to be a more relevant benchmark for the users of the financial statements in
the current year.
and; the related notes 1 to 33, including a summary of significant accounting policies as set out in notes 1
and 27 to the financial statements.
4. Conclusions relating to going concern
The financial reporting framework that has been applied in the preparation of the group financial
statements is applicable law and international accounting standards in conformity with the requirements
of the Companies Act 2006 and IFRSs as adopted by the European Union. The financial reporting
framework that has been applied in the preparation of the parent company financial statements is
applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure
Framework” (United Kingdom Generally Accepted Accounting Practice).
2. 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 confirm that the non-audit
services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to
adopt the going concern basis of accounting is discussed in section 5.
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the group’s and parent
company’s ability to continue as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In relation to the reporting on how the group has applied the UK Corporate Governance Code, we
have nothing material to add or draw attention to in relation to the directors’ statement in the financial
statements about whether the directors considered it appropriate to adopt the going concern basis of
accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in
the relevant sections of this report.
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131
Independent Auditor’s Report to the Members
of Hostelworld Group PLC (Continued)
5. 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.
We have identified going concern as a new key audit matter in the current year due to the increased
judgement required in the current year regarding the use of the going concern basis of accounting in the
preparation of the financial statements. This is as a direct result of the impact that the ongoing COVID-19
pandemic has on the group’s and parent company’s trading environment.
We have not identified tax provisions as a key audit matter in the current year. Tax provisions were
included as a key audit matter previously based on the level and quantum of cross-border transactions
however following the group reorganisation in the prior year we no longer deem this a significant area of
judgement.
Going Concern
Key audit matter
description
As stated in note 1 to the financial statements, the directors have formed the judgement that
the going concern basis of accounting is appropriate in preparing the financial statements.
This judgement is based on the steps taken to ensure adequate liquidity is available to the
group and parent company for the likely duration of the crisis and recovery period associated
with COVID-19 and the impact that it has had on the travel industry.
Given the inherent uncertainty associated with COVID-19, it is currently difficult to determine a
reasonable worst case scenario. As a result, there is a risk that the group and parent company
may not have sufficient funds to meet its ongoing liabilities as they fall due. As a result of the
uncertainty as to the impact of COVID-19 on the group and parent company, we identified
a key audit matter related to going concern due to the significant judgement required to
conclude that there is not a material uncertainty related to going concern.
As stated in note 26 to the financial statements, the group entered into a €30m term loan
facility post year end which raised funding of €28.8m net of issue costs, and was drawn down
on 23 February 2021. Future compliance with the financial covenants (which include minimum
liquidity) on the term loan facility, is dependent on the achievement of forecasts, based on
assumptions and significant judgements around uncertainties (which include the timing of
future revenue generation) incorporating the impact of COVID-19. As stated in note 1 to the
financial statements, full recovery is not expected to happen until FY23.
Further details on going concern are set out in note 1 to the financial statements.
How the scope
of our audit
responded to the
key audit matter
Our procedures included:
We obtained an understanding of the group’s controls over the preparation of cash flow
forecasts, approval of the projections and assumptions used in the cash flow forecasts
to support the going concern assumption and assessed the design and determined the
implementation of the relevant controls.
We performed an assessment of the historical accuracy of forecasts prepared by management.
We tested the clerical accuracy of the cash flow forecast model.
We read and assessed the group’s existing financing agreements, including the term loan
facility raised subsequent to the year-end. We reviewed the nature of the facilities and
assessed whether management had appropriately considered the repayment terms and
financial covenants in place and incorporated them into the cash flow forecasts over the going
concern period.
We assessed any contradictory evidence as part of our audit work and the impact on
management’s conclusion.
We engaged our internal financial advisory specialists to assist in challenging the key
assumptions, including the timing of future revenue generation, used in the cash flow forecasts
based on their industry knowledge, the environment the group is operating in, liquidity and
working capital requirements and financial covenants.
We performed sensitivity analysis on the cash flow forecasts, including applying alternative
reasonable downside scenarios, to assess the impact of a change in underlying assumptions
on the group and company’s ability to continue as a going concern.
We assessed the results of the group for the period after the reporting date, comparing to
budget, in order to assess if there are any early indicators that management have been too
optimistic in their forecasting for the current year or whether there are any other indicators
that the business may not be able to continue as a going concern.
We evaluated the completeness and accuracy of the disclosures made in the financial
statements by reference to the understanding we had obtained of the group’s financial
performance during the year, our assessment of the directors’ cash flow forecasts and our
reading of the group’s financing arrangements.
Key observations
We have concluded that the adoption of the going concern basis of accounting and the related
disclosures are appropriate. Please refer to our conclusions in the going concern section of our
report.
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Hostelworld Annual Report 2020
133
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 2020, intangible assets (including goodwill) had a carrying value of €86.25m
representing 72% of the group’s total assets.
Key audit matter
description
For the year ended 31 December 2020, additions to capitalised development costs amounted
to €3.6m. 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.
Group management have allocated goodwill to Cash Generating Units (CGUs) 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 rates and discount rates 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 87.
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.
For intangible assets with indefinite useful lives or where indicators of impairment existed, we
obtained management’s impairment assessment. We challenged the underlying assumptions
and obtained audit evidence to test those assumptions within the group’s impairment model,
including cash flow forecasts 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 it is reasonably possible that the carrying value could be
further impaired beyond the impairment charge recognised in the current year. In light of the
impact of COVID-19 on the group, we also engaged our internal financial advisory specialists
to assist in challenging the key assumptions used in the cash flow forecasts based on their
industry knowledge and the environment the company is operating in.
We assessed the adequacy of the disclosures in relation to goodwill and intangibles and
whether they meet the requirements of the financial reporting framework.
Key observations
We have no observations that impact on our audit in respect of the carrying value of intangible
assets.
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, directors make judgements regarding
expected future cash generation of the asset.
Refer to Notes 2 and 10 to the financial statements.
The Audit Committee has included their assessment of this risk on page 88.
How the scope
of our audit
responded to the
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
We have no observations that impact on our audit in respect of the capitalisation of
development costs.
134
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Hostelworld Annual Report 2020
Independent Auditor’s Report to the Members
of Hostelworld Group PLC (Continued)
6. Our application of materiality
6.1. 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.
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
€668,300 (2019: €799,000)
€133,700 (2019: €159,000)
Basis for determining
materiality
Approximately 2% of expenses for
the year excluding depreciation,
amortisation, impairment and
exceptional costs.
In the previous year, materiality was
set at 5% of adjusted profit before tax.
0.5% of investments
Parent company materiality
is based on 0.5% of value of
investments capped at 20%
of group materiality. This is
consistent with the approach
taken in the previous year.
Rationale for the
benchmark applied
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.
We believe that the benchmark as
outlined above is an appropriate
benchmark as it is the key focus of
users of the financial statements in line
with the group’s current objective of
cash conservation measures to reduce
variable and fixed costs and minimise
cash burn. We have used expenses
less depreciation, amortisation and
impairment as these are non-cash
items and we have determined
the focus of users will be on cash
expenses due to the focus on cash
conservation. We have also excluded
exceptional costs as these are once
off expenses and are not expected to
reoccur.
Given the loss making position in the
current year, it was determined, that
the benchmark applied in the prior year
would not be a suitable benchmark.
6.2 Performance materialityWe set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group financial statementsParent company financial statementsPerformance materiality70% of group materiality70% of parent company materiality Basis for determining materialityWe have incorporated a number of factors in determining what level to set performance materiality at for the current year.The nature of the business has remained consistent to that of the prior year. However, there is a significant element of uncertainty in the market as a result of worldwide travel restrictions in place due to COVID-19. This has significantly impacted the trading environment in which the group and parent company operates and also results in an increase in accounting issues that require significant judgement during the year. We have been the group and parent company auditors for a number of years and thus have factored in our experience with and understanding of the group’s control environment including entity-level controls and any turnover of key personnel. We have also noted that there is a high degree of centralisation and common processes within the group’s finance function.As a result of the points noted above, we determined it was appropriate to set performance materiality at a lower level than the previous year. The amount determined is 70% of materiality. 6.3 Error reporting thresholdWe agreed with the Audit Committee that we would report to the Committee all audit differences in excess of €33,400 (2019: €39,950), 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.Group materiality€668.3kComponent materiality range €133.7k to €534.6kAudit Committee reporting threshold €33.4kExpenses €33,130kGroup MaterialityExpenses135 136
Governance
Hostelworld Annual Report 2020
137
Independent Auditor’s Report to the Members
of Hostelworld Group PLC (Continued)
7. An overview of the scope of our audit
7.1 Identification and scoping of components
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 working remotely in the current year due to COVID-19
restrictions.
We determined the scope of our group audit on an entity level basis, assessing components against the
risks of material misstatement at the group level. Based on this assessment, we focused 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, Hostelworld Business
Consulting (Shanghai) Co. Limited and Goki Pty Limited. Hostelworld Business Consulting (Shanghai) Co.
Limited and Goki Pty Limited are newly in scope for specified audit procedures in the current year.
At the group level, we also tested the consolidation process and carried out review procedures to confirm
our conclusion that there were no additional risks of material misstatement within the aggregated financial
information of the remaining components not subject to a full scope audit or specified audit procedures.
1%
Revenue
1%
1%
Profit before
tax
Net assets
99%
99%
99%
Specified audit procedures
Full audit scope
8. Other information
The other information comprises the information included in the annual report, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information
contained within the annual report. 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.
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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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.
We have nothing to report in this regard.
9. 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.
10. 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 our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with 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.
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 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 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).
• Where the auditor is required to report on consolidated financial statements, obtain 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.
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Hostelworld Annual Report 2020
139
Independent Auditor’s Report to the Members
of Hostelworld Group PLC (Continued)
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 we identify 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 communicate 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, we determine 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.
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 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 frameworks that the group operates in,
focusing 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 ability to operate or to
avoid a material penalty. These include the EU General Data Protection Regulation (GDPR) and Payment
Services Directive (PSD2).
11.2. Audit response to risks identified
11. Extent to which the audit was considered capable of detecting irregularities,
including fraud
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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below.
11.1. 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:
•
•
•
the nature of the industry and sector, control environment and business performance including the
design of the group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and
performance targets;
results of our enquiries of management, internal audit, others within the entity 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;
the internal controls established to mitigate risks of fraud or non-compliance with laws and
regulations;
•
the matters discussed among the audit engagement team and relevant internal specialists, including
tax, valuations, and IT regarding how and where fraud might occur in the financial statements and any
potential indicators of fraud.
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;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate
•
•
•
risks of material misstatement due to fraud;
reading minutes of meetings of those charged with governance, reviewing internal audit reports and
reviewing correspondence with tax authorities;
in addressing the risk of fraud in revenue recognition through tracing booking revenues and
booking numbers to third party statements and assessing any material reconciling items to ensure
completeness; 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; 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.
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Hostelworld Annual Report 2020
141
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
14.2. Directors’ remuneration
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.
13. Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term
viability and that part of the Corporate Governance Statement relating to the group’s compliance with the
provisions of the UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following
elements of the Corporate Governance Statement is materially consistent with the financial statements
and our knowledge obtained during the audit:
•
•
•
•
•
•
the directors’ statement with regards the appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified set out on pages 123 and 124;
the directors’ explanation as to its assessment of the group’s prospects, the period this assessment
covers and why the period is appropriate set out on page 90;
the directors’ statement on fair, balanced and understandable set out on page 86 and 87;
the board’s confirmation that it has carried out a robust assessment of the emerging and principal
risks set out on pages 90 and 91;
the section of the annual report that describes the review of effectiveness of risk management and
internal control systems set out on pages 90 and 91; and
the section describing the work of the audit committee set out on pages 85 and 86;
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006, we are required to report to you if, in our opinion:
Under the Companies Act 2006 we are also required to report 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.
We have nothing to report in respect of these matters.
15. Other matters which we are required to address
15.1. Auditor tenure
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 6 years, covering the years ending 31 December 2015 to 31 December
2020.
15.2. Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are required to provide
in accordance with ISAs (UK).
16. 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 Accountants and Statutory Audit Firm
Deloitte & Touche House, Earlsfort Terrace, Dublin 2
• 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.
•
We have nothing to report in respect of these matters.
Financial
Statements
144 Consolidated Income Statement
145
Consolidated Statement of Comprehensive
Income
146 Consolidated Statement of Financial Position
147 Consolidated Statement of Changes in Equity
148 Consolidated Statement of Cash Flows
149 Notes to the Consolidated Financial Statements
187 Company Statement of Financial Position
188 Company Statement of Changes in Equity
189 Notes to the Company Financial Statements
@spindrifthostel_
144
Financial Statements
Hostelworld Annual Report 2020
145
Consolidated Income Statement for the year
ended 31 December 2020
Consolidated Statement of Comprehensive Income
for the year ended ended 31 December 2020
Revenue
Administrative expenses
Depreciation and amortisation
Impairment of intangible assets
Notes
2020
€’000
2019
€’000
3
4
4
4
15,364
80,672
(36,119)
(63,434)
(14,132)
(13,946)
(14,996)
-
(Loss) / profit for the year
2020
€’000
2019
€’000
(48,857)
8,394
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
(7)
(1)
Operating (loss) / profit
(49,883)
3,292
Total comprehensive (loss) / income for the year attributable
to equity owners of the parent Company
(48,864)
8,393
Financial income
Financial costs
Share of results of associate
8
(246)
(374)
7
13
59
(224)
(116)
(Loss) / profit before taxation
(50,495)
3,011
Taxation
8
1,638
5,383
(Loss) / profit for the year attributable to the equity
owners of the parent Company
(48,857)
8,394
Basic and diluted (loss) / earnings per share (euro cent)
9
(45.68)
8.64
Mayan Monkey Tulum, Mexico
146
Financial Statements
Hostelworld Annual Report 2020
147
Consolidated Statement of Financial Position
as at 31 December 2020
Consolidated Statement of Changes in Equity
for the year ended 31 December 2020
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Investment in associate
Current assets
Trade and other receivables
Corporation Tax
Cash and cash equivalents
Total assets
Issued capital and reserves attributable to equity owners of the
parent
Share capital
Share premium
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
Borrowings
Lease liabilities
Corporation tax
Total liabilities
Total equity and liabilities
Notes
2020
€’000
2019
€’000
10
11
12
13
15
16
17
17
12
14
18
19
14
86,252
109,120
4,480
7,596
2,349
5,353
6,727
2,723
100,677
123,923
1,681
54
18,189
19,924
4,980
-
19,365
24,345
120,601
148,268
1,163
14,328
8
1,210
81,156
97,865
-
-
2,492
2,492
956
-
15
788
130,013
131,772
144
873
3,422
4,439
17,036
11,074
1,164
1,803
241
20,244
22,736
-
869
114
12,057
16,496
120,601
148,268
The financial statements were approved by the Board of Directors and authorised for issue on 16 March
2021 and signed on its behalf by:
Gary Morrison
Chief Executive Officer
Caroline Sherry
Chief Financial Officer
Hostelworld Group plc registration number 9818705 (England and Wales)
Share
capital
Share
premium
Retained
earnings
Foreign
currency
translation
reserve
Share based
payment
reserve
Notes
€’000
€’000
€’000
€’000
€’000
Total
€’000
Balance at 1 January 2019
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
24
Credit to equity for equity
settled share based payments
-
956
-
-
-
Balance at 31 December 2019
956
-
-
-
-
-
-
(416)
-
-
(416)
134,234
8,394
(12,615)
-
16
(1)
-
-
630
135,836
-
-
8,393
(12,615)
158
158
130,013
15
788
131,772
-
-
(48,857)
(7)
Total comprehensive (loss)
for the year
Issue of ordinary shares
for cash
Share issue cost
Bonus issue shares
17
17
17
191
15,042
-
(698)
16
(16)
Credit to equity for equity
settled share based payments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(48,864)
15,233
(698)
-
422
422
Balance at 31 December 2020
1,163 14,328
81,156
8
1,210
97,865
148
Financial Statements
Hostelworld Annual Report 2020
149
Consolidated Statement of Cash Flows
for the year ended 31 December 2020
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020
Notes
2020
2019
€’000
€’000
1. SIGNIFICANT ACCOUNTING POLICIES
General Information
Cash flows from operating activities
(Loss) / Profit before tax
Depreciation of property, plant and equipment
Amortisation of intangible assets
Impairment of intangible assets
Share of results of associate
Net profit on disposal property, plant and equipment
Financial income
Financial expense
Employee equity settled share based payment expense
Changes in working capital items:
Increase / (decrease) in trade and other payables
Decrease / (increase) in trade and other receivables
Cash generated from operations
Interest paid
Interest received
Income tax refund / (paid)
Net cash (used in) / from operating activities
Cash flows from investing activities
Acquisition/development 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
Deferred consideration
Proceeds from issue of share capital
Issue costs paid
Proceeds from borrowings
Repayment of borrowings
Repayments of obligations under lease liabilities
Dividends paid
Net cash from / (used in) financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
4
4
4
13
4
7
21
10
11
13
13
17
17
19
19
14
24
(50,495)
2,458
11,674
14,996
374
(55)
(8)
246
428
3,011
2,425
11,521
-
116
-
(59)
224
156
5,586
3,299
(2,252)
(2,166)
(11,497)
12,976
(246)
8
698
(224)
59
(1,516)
(11,037)
11,295
(3,802)
(2,915)
(64)
-
(3,866)
(190)
(1,075)
(4,180)
(503)
15,233
(698)
3,454
(2,290)
(1,462)
-
-
-
-
-
(1,109)
-
(12,615)
13,734
(13,724)
(1,169)
19,365
(7)
(6,609)
25,974
-
Cash and cash equivalents at the end of the year
16
18,189
19,365
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 16 March 2021.
Going concern
The Directors, after making enquiries, have a reasonable expectation that the Group and Company has
adequate resources to continue operating as a going concern for the foreseeable future.
While we entered 2020 with positive momentum, trading since late-January has been challenged by the
outbreak of the COVID-19 virus. From mid-March the Group were severely impacted with high cancellation
rates and very low booking volumes. Global travel demand remained muted throughout 2020 with
ongoing travel restrictions continuing to severely impact the global travel industry. Revenue for the year
totalled €15.4m (2019: €80.7m) and the Group incurred a loss before taxation of €50.5m (2019: profit
before taxation €3.0m). Losses have continued subsequent to the year end. At 31 December 2020 the
Group was in a net asset position of €97.9m (2019: €131.8m).
In response to the breakout of COVID-19 immediate action was taken by the Directors to preserve the
Group’s cash position. Actions taken include the decision not to pay the final 2019 dividend, to suspend
any cash dividends in 2020, a Group-wide scaled redundancy programme, reduced hours and deferred
pay for our employees and Directors, the renegotiation of credit terms with key vendors, availing of
debt warehousing of Irish employer taxes, the elimination of all non-essential operating costs including
marketing, recruitment, travel and other variable overheads, and availing of Government COVID-19
supports in both Ireland and the UK.
The Directors have taken steps to ensure adequate liquidity is available to the Group for the likely duration
of the crisis and the recovery period. The Group has retained its financial strength and at 31 December
2020 held a cash balance of €18.2 million (2019: €19.4 million) and held committed undrawn funds
available of €7 million relating to a revolving credit facility that can be drawn down up to November 2023.
The Group availed of a short-term invoice financing facility amounting to €3.5 million in June 2020, with
an amount owing of €1.2 million at 31 December 2020. On 29 June 2020, the Company issued Ordinary
Shares by way of a Placing, raising gross proceeds of €15.2m.
Throughout COVID-19 two forecasts were developed under a base case and stress-case scenario
analysis. Both scenarios included differing assumptions with regard to cost cutting measures, projected
revenue flows and return to recovery assumptions, projected net cash flows from operations and available
sources of funding. Whilst performance initially tracked in-line with our base case assumptions from
the end of August onwards trading outlook deteriorated significantly as global lockdowns and travel
restrictions came into force. As a result of this deterioration in trading, we revised downwards our base
outlook, reflecting the impact of the pandemic being deeper and longer than originally anticipated. A five-
year profit and loss (“P&L”) outlook was prepared which is conservative in its assumptions. This outlook
does not factor in any upside from global mass vaccination programmemes, full recovery is not expected
to happen until FY-23 with average booking values assumed to be low and cost per booking assumed
to be elevated throughout the five-year cycle. Our stress case scenario has not changed and assumes
depressed volumes throughout H1 2021 with minimal recovery in H2 2021. Operating expenses would be
further reduced in 2021 to reflect lower activity levels.
150
Financial Statements
Hostelworld Annual Report 2020
151
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Going concern (Continued)
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.
On the basis of the five-year P&L outlook which identified a liquidity need and in light of the considerable
uncertainty on the duration and severity of the COVID-19 pandemic the Directors took additional steps
to strengthen the Group’s Balance sheet. The Group entered a €30 million term loan facility with HPS
Investment Partners, LLC. On 23 February 2021 the Group drew down €28.8 million, net of an original
issue discount. The facility is single drawdown and bears interest at a margin of 9.0% per annum over
EURIBOR (with a EURIBOR floor of 0.25% per annum). The facility agreement includes the following
financial covenants: (1) adjusted net leverage (Hostelworld has to ensure that total net debt is no more
than 3.0 x adjusted EBITDA from 31 December 2023 to 30 September 2024, and no more than 2.5 x
adjusted EBITDA from 31 December 2024 onwards); and (2) minimum liquidity (Hostelworld has to
ensure that at close of business on the last business day of each month until it is testing the adjusted
net leverage ratios there is free cash in members of the Group which have guaranteed repayment of the
facility of at least €6.0 million). Security on the facility includes the share capital of the group, the bank
accounts of the group and the Group’s intellectual property.
In January 2021 the Group repaid the amount owing on the short-term invoice financing facility, and a
consent letter was signed by Hostelworld and AIB amending the loan agreement in place to permit the
taking of security, removal of the parent guarantee and the removal of the financial covenants. In February
2021 a deed of release was signed on the €7m revolving credit facility. Cash flow forecasts were updated
to reflect movements including early repayment of the short-term invoice financing facility and drawdown
of the HPS term loan facility.
Having considered the Group’s five year P&L outlook, cash flow forecasts prepared for 12 months from
date of signing, current and anticipated trading volumes, together with current and anticipated levels of
cash, debt and the availability of committed borrowing facilities, the Directors are satisfied that the Group
and Company has sufficient resources to continue in operation for the foreseeable future, a period of
not less than 12 months from the date of this report, and accordingly, they continue to adopt the going
concern basis in preparing the Group financial statements.
Basis of Preparation
The financial statements have been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
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.
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.
152
Financial Statements
Hostelworld Annual Report 2020
153
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
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 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:
The following standards and interpretations were effective for the Group for the first time during the year
but did not result in material changes to the Group’s consolidated financial statements:
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform
1st January 2020
Amendments to IAS 1 and IAS 8: Definition of Material
Amendments to IFRS 3 Business Combinations
1st January 2020
1st January 2020
Amendments to References to the Conceptual Framework in IFRS Standards
1st January 2020
Amendment to IFRS 16 Leases COVID-19 Related Rent Concession
1st June 2020
At the date of authorisation of these financial statements, the following standards and interpretations
which have not been applied in these financial statements have been endorsed by the EU but not yet
effective:
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate
Benchmark Reform – Phase 2
1st January 2021
Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9
1st January 2021
At the date of authorisation of these financial statements, the following standards and interpretations are
not yet endorsed by the EU:
IFRS 17 Insurance Contracts
Amendments to IAS 1 Presentation of Financial Statements: Classification of
Liabilities as Current or Non-current
1st January 2023
1st January 2023
Amendments to IAS 16 Property, Plant and Equipment
1st January 2022
Amendments to Annual Improvements 2018-2020. Not yet endorsed
1st January 2022
There above standards and interpretations are not expected to have a material impact on the Group.
Revenue recognition
The Group generates substantially all of its revenues from the technology and data processing fees and
service fees that it charges to accommodation providers and the transaction service fees it charges to
consumers. The Group also generates revenues from technology and data processing fees that it charges
to providers of other travel products and associated transaction service fees, from cancellation protection
fees, payment protection fees and from advertising services.
Revenue is recognised at the time the reservation is made in respect of non-refundable commission on
the basis that the Group has met its performance obligations having provided the technology and data
processing service at the time the booking is made. In respect of the free cancellation product, which
offers the traveller the opportunity to make a booking on a free cancellation basis and to receive a refund
of their deposit in certain circumstances, such related revenue is not recognised until the last cancellation
date has passed as one party can withdraw from the contract until such a date has passed.
Where the Group provides an ancillary service to allow a flexible booking option which allows a booking to
be cancelled for no charge or a new booking to be made, such revenue is deferred, until such time as the
related check-in date has passed or for a six-month period from the date of cancellation, at which time the
credit expires.
Where credits are granted to customers for utilisation on future bookings, a provision is recorded against
revenue based on the probability that a credit offering will be used by a customer.
Ancillary advertising revenues are recognised over the period when the service is performed. Revenue is
measured at the fair value of the consideration received or receivable.
Revenue is stated net of rebates, sales taxes and value added taxes.
Leases
The Group assesses whether a contract is or contains a lease, at inception of the contract. For contracts
where the Group is a lessee, a right of use asset is recognised, representing the Group’s right to use the
underlying asset and a lease liability is also recognised for the Group’s obligation to make lease payments
during the lease term. The lease term of each contract is determined as the non-cancellable period of the
154
Financial Statements
Hostelworld Annual Report 2020
155
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leases (Continued)
lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be
exercised, or any periods covered by an option to terminate the lease (break option), if it is reasonably
certain not to exercise that option. For short term leases (defined as leases with a lease term of 12
months or less) and leases of low value assets, the Group recognises the lease payments as an operating
expense on a straight-line basis over the term of the lease.
The right of use asset is initially measured at cost and subsequently valued at cost less accumulated
depreciation and impairment losses. It is adjusted where a lease modification results in a remeasurement
of the lease liability.
Right of use assets are depreciated over the shorter period of lease term and useful life of the underlying
asset. The depreciation starts at the commencement date of the lease.
Whenever the Group incurs an obligation to restore the underlying asset to the condition required by the
terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that
the costs relate to a right of use asset, the costs are included in the related right of use asset.
The carrying value of these assets are reviewed at the end of each reporting period to determine whether
there is any indication that the assets have suffered an impairment loss. The Group applies IAS 36 to
determine whether a right of use asset is impaired and accounts for any identified impairment loss as
described in the ‘Property, Plant and Equipment’ policy.
Lease liabilities are measured at the present value of the future lease payments. The lease payments are
discounted using the average of 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.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit
as reported in the consolidated income statement because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively
enacted by the reporting date, and any adjustment to tax payable in respect of previous years.
A provision is recognised for those matters for which the tax determination is uncertain, but it is
considered probable that there will be a future outflow of funds to a tax authority. The provisions are
measured at the best estimate of the amount expected to become payable. The assessment is based on
the judgement of tax professionals within the Company supported by previous experience in respect of
such activities and in certain cases based on specialist independent tax advice.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the liability method. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred tax assets are recognised
for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is
probable future taxable profits will be available against which the temporary difference can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in
subsidiaries and associates, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments and
interests are only recognised to the extent that it is probable that there will be sufficient taxable profits
against which to utilise the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset
to be recovered. Such reductions are reversed when the probability of future taxable profits improves.
Notes to the Consolidated Financial Statements for
the year ended 31 December 2020 (Continued)
156
Financial Statements
Hostelworld Annual Report 2020
157
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property, plant and equipment
Deferred tax (continued)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is
settled or the asset is realised based on tax laws and rates that have been enacted or substantively
enacted at the balance sheet date. Deferred tax is charged or credited in the consolidated income
statement, except when it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
Foreign currencies
The individual financial statements of each Group Company are presented in the currency of the primary
economic environment in which it operates (its functional currency). For the purpose of the consolidated
financial statements, the results and financial position of each Group Company are expressed in euro,
which is the functional currency of the parent company and the presentation currency for the consolidated
financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the
entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the
dates of the transactions. At each reporting date, monetary assets and liabilities denominated in foreign
currencies are retranslated at the rates prevailing on the reporting date.
Non-monetary items (including deferred revenue) carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when the fair value was determined in
accordance with IFRIC 22. Non-monetary items that are measured in terms of historical cost in a foreign
currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary
items, are included in the consolidated income statement and consolidated statement of comprehensive
income for the period. For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group’s operations are translated at exchange rates prevailing on the reporting
date. Income and expense items are translated at the average exchange rates for the period, unless
exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the
Group’s foreign currency translation reserve.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are
recognised in other comprehensive income.
Retirement benefits costs
Contributions made in respect of employees’ pension schemes are charged through the consolidated
income statement in the period they become payable. The Group pays contributions to privately
administered pension insurance plans. The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as employee benefit expense when they
are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in
the future payments is available.
Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated
impairment losses.
Depreciation is charged so as to write off the cost of assets over their estimated useful lives, using the
straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at
each year end, with the effect of any changes in estimate accounted for on a prospective basis.
Right-of use-assets are depreciated over the shorter period of the lease term and the useful life of the
underlying asset.
Depreciation is provided on the following basis:
Leasehold property improvements:
5-10 years straight line
Computer equipment:
Fixtures and equipment:
3-5 years straight line
6-7 years straight line
Leasehold improvements are improvements made to buildings leased by the Group when it has the right to
use these leasehold improvements over the term of the lease. The improvements will revert to the lessor
at the expiration of the lease.
The cost of a leasehold improvement is depreciated over the shorter of:
1. The remaining lease term, or
2. The estimated useful life of the improvement.
An item of property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. The gain or loss arising on the disposal
of an asset is recognised in the consolidated income statement when the asset is derecognised.
In accordance with IAS 36 ‘Impairment of Assets’, the carrying amounts of items of property, plant and
equipment are reviewed at each reporting date to determine whether there is any indication of impairment.
An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable
amount.
Impairment losses are recognised in the consolidated income statement. Following the recognition of
an impairment loss, the depreciation charge applicable to the asset is adjusted prospectively in order to
systematically allocate the revised carrying amount over the remaining useful life.
Intangible assets
(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.
158
Financial Statements
Hostelworld Annual Report 2020
159
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Intangible assets (Continued)
(a) Goodwill (Continued)
Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances
indicated that the carrying value may be impaired.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units
(“CGU”) that is expected to benefit from the synergies of the combination.
If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment
loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit on a pro-rata basis based on the carrying amount of each asset in the unit. Any
impairment loss for goodwill is recognised directly in profit or loss in the consolidated income statement.
An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the
determination of the gain or loss on disposal.
(b) Other intangible assets
The Group has four classes of intangible asset: domain names, technology assets, affiliate contracts and
development costs.
Other intangible assets including domain names and computer software are capitalised at their fair value
and amortised to the consolidated income statement on a straight-line basis over their estimated useful
lives except for the Hostelbookers domain name which was amortised on a reducing balance basis until
fully impaired at 31 December 2020 (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.
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
profit or loss in the period in which it is incurred.
An intangible asset is derecognised on disposal or when no future economic benefits are expected to arise
from the continued use or disposal of the asset. The gain or loss arising on the disposal of an asset is
recognised in the consolidated income statement when the asset is derecognised.
Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Directors review the carrying amounts of the Group’s tangible
and intangible assets to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable
amount of an individual asset, the Directors estimate the recoverable amount of the cash-generating
unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified,
corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to
the smallest Group of cash-generating units for which a reasonable and consistent allocation basis can be
identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs 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 profit or loss, unless the relevant asset is carried
at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating
unit) is increased to the revised estimate of its recoverable amount. The increased carrying amount cannot
exceed the carrying amount that would have been determined had no impairment loss been recognised
for the asset (or the cash-generating unit) in prior years. A reversal of an impairment loss is recognised
immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation increase.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s consolidated statement of financial
position when the Group becomes a party to the contractual provisions of the instrument.
Financial assets and liabilities are initially measured at fair value plus transaction costs, except for those
classified as fair value through profit or loss, which are initially measured at fair value. The fair value of
financial assets and liabilities denominated in a foreign currency is determined in that foreign currency and
translated at the spot rate at the end of the reporting period.
(a) Classification of financial assets
Trade and other receivables
Trade and other receivables are stated initially at their transaction price and subsequently at amortised
cost, less any expected credit loss provision. The Group applies the simplified approach to measuring
expected credit losses which uses a lifetime expected 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.
Notes to the Consolidated Financial Statements for
the year ended 31 December 2020 (Continued)
160
Financial Statements
Hostelworld Annual Report 2020
161
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (Continued)
(b) Expected credit loss of financial assets (Continued)
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. Restricted cash and cash
equivalent balances are those which meet the definition of cash and cash equivalents but are not available
for use by the Group.
Dividends
eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments
expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the
revision of the original estimates, if any, is recognised in the consolidated income statement such that the
cumulative expense reflects the revised estimate, with a corresponding adjustment to the share based
payment reserve.
For cash settled share based payments, a liability is recognised for the services acquired, measured
initially at the fair value of the liability. At each reporting date until the liability is settled, and at the date of
settlement, the fair value of the liability is re-measured, with any changes in fair value recognised in the
consolidated income statement for the year.
Government Grants
Government grants are not recognised until there is reasonable assurance that the Group will comply
with the conditions attaching to them and that the grants will be received. Government grants that are
receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate
financial support to the Group with no future related costs are recognised in profit or loss in the period in
which they become receivable. Amounts are recognised as income over the periods necessary to match
them with the related costs and are deducted in reporting the related expense.
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.
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:
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.
Capitalisation of development costs
Shared based payments
Equity settled share based payments to employees are measured at the fair value of the equity
instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions.
Details regarding the determination of the fair value of equity-settled share-based transactions are set out
in note 21.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on
a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will
Development costs are capitalised in accordance with accounting policies in note 1. Determining the
amount to be capitalised requires the Directors to make judgements regarding expected future cash
generation of the asset.
Accounting for exceptional items
Exceptional items by their nature and size can make interpretation of the underlying trends in the business
more difficult. 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.
162
Financial Statements
Hostelworld Annual Report 2020
163
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
2. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
(CONTIINUED)
(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:
Going concern
The Directors have a reasonable expectation that the Group has adequate resources to continue operating
as a going concern for the foreseeable future. Management judgement and estimate is required in
forecasting cashflow projections incorporating the impact of COVID-19. At 31 December 2020 the Group
held a cash and cash equivalents balance of €18.2m (2019: €19.4m) and was in a net asset position of
€97.9m (2019: €131.8m). The Directors have taken steps to ensure adequate liquidity is available to the
Group throughout this period. The details of the going concern scenarios, key assumptions and mitigating
actions are outlined in the going concern statement within note 1. Based on these scenarios and the
resources available to the Group, the Directors believe the Group has sufficient liquidity to remain a going
concern 12 months from date of signing of the accounts.
The most significant factor impacting our projections for going concern relates to COVID-19 and what
impact COVID-19 will have on trading volumes. We considered the impact on the Group of operating in
a zero-revenue environment for 2021 but carrying the current level of operating costs for and carrying
25% of the overall budgeted direct costs (pay per click marketing spend primarily that is directly linked to
revenue). Under this scenario the Group continues to have sufficient cash resources to operate as a going
concern.
Deferred tax asset recognition and recoverability of deferred tax assets
Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available
in future periods 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 extent to which it is probable that taxable profits
will be available in future periods is an estimate assessed based on the approved five-year budget and
long-term forecasts upon initial recognition and at each reporting date. At 31 December 2020 the carrying
value of deferred tax assets amounted to €7.6m (2019: €6.7m). Based on the Board approved five-year
outlook there are sufficient taxable profits to demonstrate the asset could be substantially utilised by 31
December 2025. A decline in taxable profits from amounts included in our five-year budgeted projections
would impact the amount of the deferred tax asset which would be recovered over the next five years.
Carrying value of goodwill and intangible assets
The Directors assess annually whether goodwill has suffered any impairment, in accordance with the
relevant accounting policy and intangible assets are assessed for possible impairment where indicators of
impairment exist. The recoverable amounts of cash-generating units (“CGUs”) are determined based on
the higher of fair value or value-in-use calculations. Management judgement and estimation is required in
forecasting future cash flows of cash-generating units including incorporating the impact of COVID-19, the
discount rates applied to these cashflows, the expected long-term growth rate of the applicable business
and terminal values. The carrying amount of goodwill at 31 December 2020 amounted to €17.9m (2019:
€17.9m) and the carrying amount of domain names amounted to €64.2m (2019: €88.4m). In 2020 the
Group recognised an impairment charge of €15.0m (2019: €nil). Further details on the assumptions used
and sensitivity analysis are set out in note 10.
3. REVENUE & SEGMENTAL ANALYSIS
The Group is managed as a single business unit which provides software and data processing services
that facilitate hostel, hotel and other accommodation worldwide, including ancillary on-line advertising
revenue.
The Directors determine and present operating segments based on the information that is provided
internally to the Chief Executive Officer, who is the Company’s Chief Operating Decision Maker (“CODM”).
When making resource allocation decisions, the CODM evaluates booking numbers and average booking
value. The objective in making resource allocation decisions is to maximise consolidated financial results.
The CODM assesses the performance of the business based on the consolidated adjusted 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.
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
2020
€’000
7,354
3,779
4,231
2019
€’000
46,994
15,672
18,006
15,364
80,672
As at 31 December 2020, €197k of revenue relating to free cancellation bookings has been deferred (2019:
€2,777k).
Disaggregation of revenue is presented as follows:
Technology and data processing fees
Advertising revenue and ancillary services
Total revenue
2020
€’000
2019
€’000
14,251
78,571
1,113
2,101
15,364
80,672
164
Financial Statements
Hostelworld Annual Report 2020
165
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
3. REVENUE & SEGMENTAL ANALYSIS (Continued)
4. OPERATING EXPENSES
Revenue has declined by 81% in 2020 as booking volumes declined as COVID-19 impacted the business
(2019: 2% decline). In the year ended 31 December 2020, the Group generated 93% (2019: 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, Australia, the United Kingdom, Portugal, and China
and disaggregated as follows:
Total Non-Current Assets
Broken out as:
Ireland
Australia
United Kingdom
Portugal
China
Notes
2020
€’000
2019
€’000
100,677
123,923
96,951
119,770
2,349
2,723
922
430
25
947
483
-
(Loss)/profit for the year has been arrived at after charging/(crediting) the following operating costs:
Marketing expenses
Staff costs
Credit card processing fees
Loss on disposal PPE
Profit on disposal PPE
Exceptional items
FX (gain) / loss
Other administrative costs
Total administrative expenses
Impairment of intangible assets
Depreciation of tangible fixed assets
Amortisation of intangible fixed assets
Total operating expenses
Notes
2020
€’000
9,260
6
16,759
571
12
(67)
2,989
(152)
6,747
2019
€’000
32,712
16,881
2,515
-
-
3,066
72
8,188
36,119
63,434
14,996
2,458
11,674
-
2,425
11,521
65,247
77,380
5
10
11
10
Total administration expenses decreased by €27,315k compared to the prior financial year, driven by the
reduction of nonessential operating costs, as a result of COVID-19.
Included in staff costs are government assistance amounts totalling €1,085k (2019: €nil) for furloughed
employees under the Coronavirus Job Retention Scheme in the UK and subsidy received under the
temporary COVID-19 Wage Subsidy Scheme in Ireland.
Auditors’ remuneration
During the year, the Group obtained the following services from its auditor - Deloitte Ireland LLP:
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
- audit related assurance services
- corporate finance services
- other non-audit services
Total
2020
€’000
2019
€’000
42
42
135
-
194
-
57
428
181
-
10
-
-
233
166
Financial Statements
Hostelworld Annual Report 2020
167
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
5. EXCEPTIONAL ITEMS
7. FINANCIAL COSTS
Merger and acquisition costs
Restructuring costs
Total
2020
€’000
1,332
1,657
2,989
2019
€’000
2,115
951
3,066
Merger and acquisition costs of €1,332k (2019: €2,115k) relates to professional fees incurred in the year on
related activity.
Restructuring costs of €1,657k (2019: €951k) include costs relating to an internal realignment of our
technology and product departments and relating staff restructuring costs, and professional fees incurred
in current year on review of funding options for the Group.
6. STAFF COSTS
Interest on lease liabilities
Other finance costs
Total
8. TAXATION
Corporation tax:
Current year (credit) / charge
Adjustments in respect of prior years
The average monthly number of people employed (including Executive Directors) was as follows:
Total
Notes
14
Notes
2020
€’000
182
64
246
2020
€’000
(395)
(230)
(625)
2019
€’000
178
46
224
2019
€’000
1,184
38
1,222
(6,605)
(5,383)
Average number of persons employed
Administration and sales
Development and information technology
Total
The aggregate remuneration costs of these employees is analysed as follows:
2020
2019
137
152
289
189
125
314
Staff costs comprise:
Wages and salaries
Social security costs
Pensions costs
Other benefits
Long-term employee incentive costs
Capitalised development labour
Total
Notes
2020
€’000
2019
€’000
15,550
16,026
1,935
2,177
447
734
428
466
347
156
(2,335)
(2,291)
16,759
16,881
21
In addition to staff costs disclosed above termination benefits disclosed within note 5 exceptional items
restructuring costs totalled €935k (2019: €951k).
Increase year on year in capitalised development labour relates to work completed by the Group on the
Roadmap to Growth initiatives.
Origination and reversal of temporary differences
Total
12
(1,013)
(1,638)
Corporation tax is calculated at 12.5% (2019: 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:
(Loss) / profit before tax on continuing operations
Tax at the Irish corporation tax rate of 12.5% (2019: 12.5%)
Effects of :
Tax effect of expenses that are not deductible in determining taxable profit
Tax effect of losses not utilised
Tax effect of losses carried back
Tax effect of income taxed at different rates
Depreciation (less than) / in excess of capital allowances
Effect of different tax rates of subsidiaries operating in other jurisdictions
Recognition of deferred tax asset
Adjustments in respect of prior years
Total
2020
€’000
(50,495)
(6,312)
3,831
2,789
(578)
(49)
(167)
91
2019
€’000
3,011
376
371
-
-
-
123
261
(1,013)
(6,552)
(230)
38
(1,638)
(5,383)
Notes to the Consolidated Financial Statements for
the year ended 31 December 2020 (Continued)
168
Financial Statements
Hostelworld Annual Report 2020
169
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
8. TAXATION (CONTINUED)
10. INTANGIBLE ASSETS
As a result of the impact of COVID-19 Irish Revenue introduced a temporary acceleration of corporation
tax loss relief under section 396D TCA 1997 which provides for a temporary acceleration of corporation
tax loss relief for accounting periods affected by COVID-19. The measure allowed companies to estimate
their trading losses for certain accounting periods and carry back up to 50% of those losses estimated
against chargeable profits in the preceding account period. The Group availed of this measure with regard
to the period ended 31 December 2020. An estimate of the corporation tax loss for the period ended 31
December 2020 was calculated and an amount of available trading losses was used to partially offset
trading profits in the period ended 31 December 2019. As a result of this relief, the Group was entitled to a
refund from the Irish tax authorities for corporation tax paid in 2019. At 31 December 2020, the Group has
reassessed the position with regard to trading losses to ensure that the value of losses carried back to
the 2019 period were not in excess of available losses in 2020. On review of the position, it was concluded
that the losses carried back were calculated accurately and no adjustment was required.
The Group has an unrecognised deferred tax asset as at 31 December 2020 as a result of an impairment
of intellectual property in 2020 during the year totalling €1,871k (2019: €nil).
In addition, the Group has unused trading tax losses of €17,689k (2019: nil) available for offset against
future profits arising. A deferred tax asset has not been recognised in respect of such losses as it is not
considered probable that there will be future trading profits available against which the deferred tax asset
can be unwound, beyond those used to assess the recoverability of the existing deferred tax asset at 31
December 2020. All tax losses available may be carried forward indefinitely.
9. (LOSS) / EARNINGS PER SHARE
Basic (loss) / earnings per share is computed by dividing the net (loss) / 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)
(Loss) / profit for the year (€’000s)
Basic earnings per share (euro cent)
2020
2019
106,947
92,207*
(48,857)
(45.68)
8,394
8.64
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 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
Additions
Disposals for the period
-
-
-
-
153
(121)
-
-
3,649
-
3,802
(121)
Balance at 31 December 2020
47,274
214,708
14,100
5,500
18,021
299,603
Accumulated amortisation
and impairment
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)
Charge for year
Disposals for the period
Impairment recognised
-
-
-
(9,118)
(132)
-
(14,996)
121
-
-
-
-
(2,424)
(11,674)
-
-
121
(14,996)
Balance at 31 December 2020
(29,426)
(150,488)
(13,922)
(5,500)
(14,015)
(213,351)
*The 2019 earnings per share figures have been restated to incorporate the 1,636,252 new Hostelworld Group ordinary shares that were issued in September
2020. The weighted average number of shares in issue during the period was adjusted to include these bonus shares as if they were issued 1 January 2019.
Carrying amount
Diluted (loss) / earnings per share is computed by adjusting the weighted average number of ordinary
shares in issue to assume conversion of all potential dilutive ordinary shares. Share options and share
awards are the Company’s only potential dilutive ordinary shares. Ordinary shares potentially issuable from
share-based payment arrangements are anti-dilutive due to the loss in the financial year meaning there is
no difference between basic and diluted earnings per share.
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)
2020
2019
106,947
97,212
-
5
106,947
97,212
(45.68)
8.64
At 31 December 2019
17,848
88,334
At 31 December 2020
17,848
64,220
157
178
-
-
2,781
109,120
4,006
86,252
Capitalised development cost additions during the year comprised of internally generated additions of
€2,335k (2019: €2,291k) and other separately acquired additions of €1,314k (2019: €556k). Hostelworld
continue to utilise affiliate contracts to generate revenue and continue to pay affiliate partner commissions.
Impairments
The carrying value of the goodwill balance at 31 December 2020 is €17,848k (2019: €17,848k) and relates
to an investment in Hostelworld.com Limited by the Group in 2009. Goodwill, which has an indefinite useful
life, is subject to annual impairment testing, or more frequent testing if there are indicators of impairment.
Following impairment testing based on the assumptions below, no impairment was recognised for goodwill
in 2020.
Notes to the Consolidated Financial Statements for
the year ended 31 December 2020 (Continued)
170
Financial Statements
Hostelworld Annual Report 2020
171
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
10. INTANGIBLE ASSETS (CONTINUED)
Impairments (Continued)
In 2020, as a result of a strategic review of the business by the Directors, it was determined to cease
actively marketing our Hostelbookers brand name. An impairment loss of €494k was recognised based on
the carrying value at 31 December 2020. The recoverable amount was €nil.
In 2020 following a review of COVID trading performance and booking performance, the Directors
reassessed the estimated cash flows associated with the Hostelworld.com intellectual property assets.
This led to the recognition of an impairment charge of €14,502k in relation to the value of the Hostelworld.
com domain name. The recoverable amount of the related CGU was calculated at €64,220k.
Cash generating units (“CGUs”) to which goodwill and intellectual property have been allocated represent
the lowest level at which the assets are monitored for internal reporting purposes. The recoverable
amount of goodwill and intellectual property allocated to a CGU is determined based on a value in use
computation. The key assumptions for calculating value in use of the CGUs are discount rates, growth
rates and cash flows. They are described as follows:
Discount Rates
Pre-tax discount rate; Goodwill
Pre-tax discount rate: Intellectual Property
2020
€’000
2019
€’000
13.2%
12.2%
14.69%
11.93%
The pre-tax discount rates are based on the Group’s weighted average cost of capital, calculated using
the Capital Asset Pricing Model adjusted for the Group’s specific beta coefficient together with a country
risk premium to take account of the countries from where the CGU derives its cash flows.
Growth rates
Growth rates are assessed based on the Board approved five-year 2021 budget. As part of the budget
we have utilised 2019 as the base year in our reforecasts and we have measured our growth each year as
a percentage of 2019 volumes through COVID and the recovery of the Group from the impacts of COVID
until 2023, with a moderate uptick in growth rates in 2024 and 2025.
For goodwill a terminal value of 2% (2019: 2.8%) growth into perpetuity was used to extrapolate cash flows
beyond the five-year budget period. This growth rate does not exceed the long-term average growth rate
for the industry in which each CGU operates. For intellectual property growth rates included beyond the
five-year budget period ranged from 8% to 3%.
Cash flows
The cash flow projections are based on a five-year budget formally approved by the Board of Directors.
In preparing the 2021 budget and strategic plan, management considered industry market research and
analysis prepared on COVID-19 and the travel industry pertaining to estimated return to growth of the
market, customer and consumer behaviours, competitor activity and developing trends in the industry in
which the CGU operates in.
Management have also considered the Group’s history of earnings, internal focus on the roadmap to
growth through COVID-19 downtime, past experience and cash flow generation. 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.
Sensitivity analysis
The key assumptions underlying the impairment reviews are set out above. Sensitivity analysis has been
conducted in respect of each of the CGUs using the following sensitivity assumptions: a 1% increase
in the discount rate; 10% decline in revenue in each of the Board approved five-year numbers and nil
terminal value growth. Under each scenario no impairment was identified. From our sensitivity analysis we
identified that Goodwill would need to have nil terminal value growth and an increase in discount rate of
2.4% to be considered impaired.
11. PROPERTY, PLANT AND EQUIPMENT
The table below shows the movements in property, plant and equipment for the year:
Right of
Use Assets
(Leasehold
Property)
Leasehold
Property
Improvements
Fixtures &
Equipment
Computer
Equipment
€’000
€’000
€’000
€’000
Total
€’000
Cost
Balance at 1 January 2019
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
Additions
Remeasurement
Disposals
Balance at 31 December 2020
Accumulated depreciation
Balance at 1 January 2019
Charge for year
Disposals
1,681
129
(769)
5,374
23
-
(334)
1,566
-
-
(169)
654
41
-
1,745
129
(214)
(1,486)
3,486
11,080
-
(1,061)
-
(652)
(317)
-
(435)
(125)
-
(2,574)
(3,661)
(922)
(2,425)
747
747
Balance at 31 December 2019
(1,061)
(969)
(560)
(2,749)
(5,339)
Charge for year
Disposals
Balance at 31 December 2020
(1,518)
492
(2,087)
(258)
334
(893)
(102)
158
(580)
(2,458)
213
1,197
(504)
(3,116)
(6,600)
Carrying amount
At 31 December 2019
At 31 December 2020
3,272
3,287
908
673
263
150
910
370
5,353
4,480
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, Portugal and China. The average lease term of leases entered at 31 December 2020 is 3 years. The
maturity analysis of lease liabilities is presented in note 14.
172
Financial Statements
Hostelworld Annual Report 2020
173
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
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:
Summarised financial information in respect of Goki Pty Limited is set out below. This represents the
amounts in Goki Pty Limited’s financial statements prepared in accordance with IFRSs.
Statement of financial position of Goki Pty Limited as at 31 December 2020:
As at 1 January 2019
Credited to the income statement
Credited to retained earnings (IFRS 16)
As at 1 January 2020
Credited to the income statement
As at 31 December 2020
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)
2020
€’000
7,596
-
7,596
Accelerated
Taxation
Depreciation
€’000
(163)
6,605
141
6,583
1,013
7,596
2019
€’000
6,727
(144)
6,583
The deferred tax credit for the year ended 31 December 2020 of €1,013k (2019: €6,746k) relates to a
deferred tax asset created in the current year for capital allowances not utilised and available for future
offset. The 2019 credit relates to a timing difference which arose from a Group reorganisation that
completed on 12 March 2019 in which certain assets of a Group subsidiary were acquired by Hostelworld.
com Limited. Deferred tax is determined using tax rates and laws enacted or substantively enacted by the
reporting date. The total tax charge in future periods will be affected by any changes to the applicable tax
rates in force in jurisdictions in which the Group operates and other relevant changes in tax legislation.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be
available against which any unused tax losses and unused tax credits can be utilised. Future taxable
profits have been estimated using the Board approved five-year plan and adjusted for base case
COVID-19 assumptions. Within the five-year plan it is assumed that the Group is profitable from 2023, and
the deferred tax asset can be substantially utilised by 31 December 2025. The Directors have reviewed
the recoverability of the deferred tax asset at the reporting date and are satisfied that it is probable that
the deferred tax asset can be utilised.
13. INVESTMENT IN ASSOCIATE
The Group own 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 investment in an associate was accounted for using the equity method. 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.
Deferred consideration of €1,266k (2019: €1,763k) is due to be paid in full by July 2021.
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Equity attributable to owners of the company
Income statement of Goki Pty Limited for the year/period ended 31 December 2020:
Revenue
Loss after tax
Other comprehensive income attributable to the owners of the company
Total comprehensive loss
Group share of results of associate
2020
€’000
9
2019
€’000
7
1,829
2,441
-
(200)
1,638
-
(46)
2,402
2020
€’000
28
(764)
-
(764)
(374)
2019*
€’000
64
(236)
-
(236)
(116)
*2019 income statement from the period 22 July 2019 to 31 December 2019
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
2020
€’000
2019
€’000
1,638
2,402
49%
803
49%
1,177
2,868
2,868
(1,322)
(1,322)
2,349
2,723
Other adjustments relate to the elimination of the Group’s 49% equity investment within the net assets of
Goki Pty Limited and amounts to 49% of the share capital of Goki PTY Limited.
Notes to the Consolidated Financial Statements for
the year ended 31 December 2020 (Continued)
174
Financial Statements
Hostelworld Annual Report 2020
175
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
13. INVESTMENT IN ASSOCIATE (CONTINUED)
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 a 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.
14. LEASE LIABILITIES
Lease liabilities relate to the Group’s lease commitments for office space in Ireland, Portugal, UK and
China.
The movement in the Group’s right-of-use assets during the period is set out in note 11. The movement in
the Group’s lease liabilities during the period is as follows:
Opening lease liability
Recognition on transition to IFRS 16
Additions
Disposals
Lease term remeasurement
Payments
Lease interest
Foreign exchange differences on lease payments
Closing lease liability
2020
€’000
4,291
2019
€’000
-
-
5,361
1,681
(344)
129
31
-
8
(1,555)
(1,287)
182
(89)
178
-
4,295
4,291
Maturity analysis
Within one year
Between one and five years
Over 5 years
Less unearned interest
Total
2020
€’000
1,940
2,660
-
(305)
4,295
2019
€’000
999
3,475
243
(426)
4,291
These liabilities are classified in the consolidated statement of financial position as:
Non-current lease liabilities
Current lease liabilities
Total
2020
€’000
2,492
1,803
4,295
2019
€’000
3,422
869
4,291
The Group has used the following practical expedients permitted by the standard on transition and at
each reporting date - the use of a single discount rate to a portfolio of leases with reasonably similar
characteristics, the accounting for operating leases with a remaining lease term of less than 12 months as
at 1 January 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.
At 31 December 2020, the Group is committed to €19k (2019: €6k) for short term leases. The total cash
outflow for leases amount to €1,607k during 2020 (2019: €1,293k).
There is a clear payment schedule associated with our lease liabilities and based on our cash flow
forecasts the Group does not face any significant liquidity risk with regards to its lease liabilities.
Amounts recognised in consolidated income statement
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Expense relating to short term leases
Total
Amounts falling due within one year
Trade receivables
Prepayments and other receivables
Value added tax
Total
2020
€’000
1,518
182
52
2019
€’000
1,061
178
5
1,752
1,244
2020
€’000
188
1,191
302
1,681
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 (2019: 4 days).
In 2019, an amount of €1,214k was included in other receivables which relates to amounts due to the Group
on completion of the liquidation of WRI Nominees DAC which was received in H2 2020 (see note 22).
In line with our lease agreement on the Dublin office, a rent review was completed in Q2 2020 which
resulted in an increase in the lease liability and right of use asset of €129k.
15. TRADE AND OTHER RECEIVABLES
The maturity analysis of these lease liabilities is as follows:
Notes to the Consolidated Financial Statements for
the year ended 31 December 2020 (Continued)
176
Financial Statements
Hostelworld Annual Report 2020
177
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
15. TRADE AND OTHER RECEIVABLES (CONTINUED)
Reduction in trade receivables and value added tax year on year reflective of COVID-19 related decline in
booking volumes.
The Group always recognises lifetime expected credit losses (“ECLs”) for trade receivables estimated
using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that
are specific to the debtors, general economic conditions and an assessment of both the current as
well as the forecast direction of conditions at the reporting date, including time value of money where
appropriate. The historical loss rates are adjusted to reflect current and forward economic factors if there
is evidence to suggest these factors will affect the ability of the customer to settle receivables under
COVID.
Movement in the expected credit loss for trade receivables is as follows:
At the beginning of the year
(Decrease)/increase in loss allowance recognised during the year
At the end of the year
2020
€’000
212
(18)
194
2019
€’000
163
49
212
The net movement in the expected credit loss has been included in the income statement.
16. CASH AND CASH EQUIVALENTS
Trade receivables
Total
2020
€’000
18,189
18,189
2019
€’000
19,365
19,365
Included within cash and cash equivalents number is an amount not available for use by the Group €1,500k
(2019: €nil) relating to a rental guarantee in place on our Dublin office. In April 2021 the amount will reduce
to €750k in line with the underlying security agreement. Balance of cash and cash equivalents comprise
cash and short-term bank deposits only.
17. SHARE CAPITAL
At 31 December 2019
Share Issue – 29 June 2020
Bonus Issue – 17 September 2020
At 31 December 2020
No of shares
of €0.01 each
Ordinary
shares
Share
premium
(thousands)
€’000
€’000
95,571
19,114
1,636
956
191
16
-
14,344
14,535
(16)
-
116,321
1,163
14,328
15,491
Total
€’000
956
The Group has one class of ordinary shares which carry no right to fixed income. The share capital of
the Group is represented by the share capital of the parent company, Hostelworld Group plc. All the
Company’s shares are fully paid up and quoted on London Stock Exchange and Euronext Dublin.
On 29 June 2020, the Company issued 19,114,155 Ordinary Shares at €0.79695 per share by way of a
Placing, raising gross proceeds of €15,233k. €698k of directly attributable share issue costs have been
recognised as a deduction from share premium.
On 17 September 2020, the company issued 1,636,252 bonus shares to shareholders in lieu of a cash
dividend at value €0.01 per share.
18. 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
2020
€’000
2019
€’000
2,258
9,003
207
1,266
4,302
2,493
4,100*
2,981*
890
610
17,036
11,074
At 31 December 2020, €197k of revenue was deferred relating to free cancellation bookings (2019:
€2,777k) and €10k was deferred relating to featured listings (2019: €204k).
Included in accruals and other payables is a credit provision amounting to €1,528k (2019: €322k) for
vouchers and incentives to customers for use on future bookings, and an amount of €2,889k (2019: €48k)
relating to customers who have cancelled their free cancellation booking but have not been refunded.
Both increased compared to 2019 due to additional options recognised for customers whose travel was
disrupted by COVID-19. The Group has availed of the Irish Revenue tax warehousing scheme and deferred
payment on all Irish employer taxes from February 2020. Total amount warehoused at 31 December 2020
amounted to €4,140k (2019: €nil). The Group continues to liaise with Irish Revenue on the matter and
comply with all appropriate guidelines applicable.
The average credit period for the Group in respect of trade payables is 23 days (2019: 18 days). The
Directors consider that the carrying amount of trade payables approximates to their fair value.
*An amount of €322k has been restated in the prior year as a reclassification between deferred revenue and accruals and other payables to better reflect the
nature of the liability and to provide better information for comparability to the users of the accounts.
Notes to the Consolidated Financial Statements for
the year ended 31 December 2020 (Continued)
178
Financial Statements
Hostelworld Annual Report 2020
179
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
19. BORROWINGS
On 22 June 2020 the Group entered a ‘Prompt Pay’ which is a short term invoice financing facility with
Allied Irish Banks PLC. It is repayable in full by 23 April 2021. Total amount outstanding at 31 December
2020 amounted to €1,164k. A flat rate interest applies of 1.45% per annum. Hostelworld.com Limited must
ensure it maintains a cash balance of no less than €8.67m for the period ending 30th September 2020,
€5.75m for the period ending 31 December 2020 and €1.42m for the period ending 31 March 2021. The
facility was guaranteed by Hostelworld Group plc. On 26 January 2021 the amount owing on the facility
was repaid in full. Please see subsequent event note 26.
In the period the Group entered a three-year revolving credit facility for €7m with the Governor and
Company of the Bank of Ireland to assist with the investing and development needs of the business.
No amounts were drawn down at 31 December 2020. The facility was guaranteed by fixed and floating
debenture over the assets of Hostelworld.com Limited to include proprietary interest in any Hostelworld
booking platform, technology and intellectual property, group guarantees for the full amount of borrowings
and a subordination deed between Hostelworld.com Limited, Hostelworld Group Plc and the Bank
subordinating the repayment of all monies due by Hostelworld.com Limited to Hostelworld Group Plc in
accordance with the provisions contained therein. The facility bore interest at the bank cost of funds
+2.3% margin. Hostelworld.com Limited was to retain minimum cash balances of 20% of drawn facilities
and the revolving credit facility was required to return to credit 20 days per annum. Hostelworld.com
Limited were also required to maintain a minimum tangible net worth of not less than €90m. No amounts
were drawn down at 31 December 2020, in respect of the revolving credit facility. Amounts available to
the Group consist of three tranches of €2m to €2.5m each dependent on incremental revenue targets
achieved.
On 10 February 2021 the Group signed a deed of release exiting the undrawn facility in place. Please see
subsequent event note 26.
20. CONTINGENCIES
In the normal course of business the Group may be subject to indirect taxes on its services in certain
foreign jurisdictions. The Directors perform ongoing reviews of potential indirect taxes in these
jurisdictions. Although the outcome of these reviews and any potential liability is uncertain, no provision
has been made in relation to these taxes as the Directors believe that it is not probable that a material
liability will arise.
21. SHARE BASED PAYMENTS
Long Term Incentive Plan (“LTIP”) scheme
The Group operate 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”).
For the 2020 scheme up to 25% of the shares/options subject to an award will vest according to the
Group’s adjusted EPS growth compared with target during the performance period. Up to 75% of the
shares/options subject to an invitation will vest according to the Group’s TSR performance during the
performance period measured against the TSR performance indicators approved by the Remuneration
Committee. For schemes in 2018 and 2019 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 2020, the Remuneration Committee approved the grant of 3,793,200
share options pursuant to the terms and conditions of the Group’s LTIP Rules (2019: 1,267,463 options).
In 2020, €356k was expensed in the consolidated income statement in relation to the Group’s LTIP
schemes (2019: €77k).
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 end of year
Exercisable at the end of the year
2020
2019
No. of share
options
No. of share
options
1,501,647
875,957
3,793,200
1,267,463
(1,430,375)
(641,773)
-
-
-
-
3,864,472
1,501,647
-
-
Included in the number of options forfeited in 2020, are 282,500 of the 2018 awards which did not meet
the vesting conditions based on performance conditions from 1 January 2018 to 31 December 2020 (2019:
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).
If the conditions are met, the remaining awards will vest on the later of the 3rd anniversary of the
grant and the determination of the performance condition and will then remain exercisable until the 7th
anniversary of the date of grant, provided the individual remains an employee or officer of the Group
or is subject to good leaver provisions. The measurement period for the 2019 and 2020 awards for
performance conditions is over 3 years from 1 January 2019 to 31 December 2021 and from 2 May 2020
to 1 May 2023 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.
Notes to the Consolidated Financial Statements for
the year ended 31 December 2020 (Continued)
180
Financial Statements
Hostelworld Annual Report 2020
181
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
21. 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
April
2019
2022
June
2019
2022
August
2019
November
2019
2022
2022
May
2020
2023
Number of share options granted
933,995
76,204
187,842
69,422 3,793,200
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
£1.32
£nil
£0.74
£nil
40.0%
40.1%
51.86%
3 years
3 years
3 years
3 years
3 years
4.3%
0.71%
£1.93
4.9%
0.56%
£1.97
4.9%
0.43%
£1.27
6.0%
0.51%
£1.16
6.06%
0.08%
£.49
1.25
1.42
1.64
1.87
2.33
Year of potential vesting
Number of share options granted
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)
April
2018
2021
June
2018
2021
December
2018
2021
499,554
175,723
98,520
£3.86
£nil
46.0%
£3.15
£nil
47.0%
£1.99
£nil
41.5%
3 years
3 years
3 years
3.8%
0.88%
£3.35
0.27
4.8%
0.76%
£2.64
0.49
7.6%
0.75%
£1.48
0.93
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 2020 and 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.
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.
Save As You Earn (“SAYE”) scheme
During the year ended 31 December 2020, the Remuneration Committee approved the granting of share
options under a SAYE scheme for all eligible employees across the Group. 27 employees availed of the
scheme in 2020 (2019: 31 employees availed of the 2019 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 2020 SAYE scheme was estimated at €77k of which €10k has been
recognised in the consolidated income statement for the year ended 31 December 2020. The remaining
€67k 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 2019 SAYE scheme was estimated at €63k of which €59k (2019: €10k) has
been recognised in the consolidated income statement to date.
Number of share options granted
Outstanding at beginning of year
Granted during the year
Forfeited during the year
Outstanding share options granted at end of year
Fair value of options granted during the year:
2020
2019
290,592
165,162
358,305
258,757
(208,106)
(133,327)
440,791
290,592
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
UK office
Irish office
UK office
Irish office
Irish office
August
2020
2023
£0.63
£0.50
August
2020
2023
€0.70
€0.56
October
2019
October
2019
September
2018
2022
£1.30
£1.17
2022
€1.52
€1.30
2021
€2.40
€2.56
47.5%
54.2%
54.2%
39.5%
39.5%
Expected life
3 years
3 years
3 years
3 years
3 years
Expected dividend yield
Risk free interest rate
Weighted average fair value at
grant date
Valuation model
6.13%
6.13%
-0.03%
-0.03%
£0.20
€0.22
9.3%
0.51%
£0.21
9.3%
0.51%
6.9%
(0.40%)
€0.24
€0.45
Black
Scholes
Black
Scholes
Black
Scholes
Black
Scholes
Black
Scholes
182
Financial Statements
Hostelworld Annual Report 2020
183
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
21. SHARE BASED PAYMENTS (CONTINUED)
Expected volatility was determined in line with market performance of the Company for the 2020 and 2019
schemes. For the 2018 schemes, expected volatility was determined in line with market performance of
the Company and comparator companies as there was insufficient historic data available for the Company
at the grant date of the awards.
The charge of €72k (2018: €79k) in relation to the SAYE schemes, together with the charge in respect
of the long-term incentive plan for the year of €356k (2019: €77k) 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 €428k (2019: €156k) 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 2020 (2019: €7k). The fair value of these SARs was determined by using a Black Scholes
model.
22. RELATED PARTY TRANSACTIONS
Balances and transactions between the Company and its subsidiaries, which are related parties, have
been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and
its associates are disclosed below.
Subsidiaries
The following is a list of the Company’s current investments in subsidiaries, including the name, country of
incorporation, and proportion of ownership interest:
Company
Holding
Nature of Business
Registered Office
Hostelworld.com
Limited
196 Ordinary shares @ €1
Hostelworld Services
Portugal LDA
500 Ordinary shares @ €1
Hostelworld Business
Consulting (Shanghai)
Co., Limited**
Hostelworld Services
Limited
104123 Ordinary shares @
£0.001
100%*
Technology trading company
One Central Park, Leopardstown,
Dublin 18, Ireland
100%
Marketing and research and
development services company
100%
Business information consulting
and marketing planning
Rua Antònio Nicolau D’Almeida,
45, 5th Floor, 4100-320 Oporto,
Portugal
Suite 304, Block 2, No.425
Yanping Road, Jing’an District,
Shanghai China 200042
延平路425号2幢304室
上海 , 中国, 200042
100%* Marketing services and
technology trading company
Floor 2, 52 Bedford Row, London,
WC1R 4LR, United Kingdom
Unless otherwise stated, all subsidiaries have the same reporting date as the Company being 31
December.
On 19 June 2020, “Project Hydra Funding Limited” was incorporated as a 100% subsidiary of Hostelworld
Group plc. The company was a Jersey registered company and the company was involved in the transfer
of funds from the equity raise to Hostelworld Group PLC which raised gross proceeds of €15.2m. The
entity was subsequently liquidated on 10 July 2020.
On 4 June 2020 a new subsidiary was incorporated “Hostelworld Business Consulting (Shanghai) Co.,
Limited” and became a 100% owned subsidiary of Hostelworld.com Limited. The principal activity of this
subsidiary is business information consulting and marketing planning.
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. On 7
February 2020, Hostelworld Technology Solutions Limited changed its name to Counter App Limited.
On 12 March 2019, Hostelworld.com Limited acquired intangible assets from WRI Nominees DAC for
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.
ASSOCIATES
The following details the Company’s current investment in associates, including the name, country of
incorporation, and proportion of ownership interest:
Company
Holding Nature of Business
Registered Office
Goki Pty Limited
49%
Technology company
477 Kent St, Sydney NSW
2000, Australia
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
2020
€’000
1,101
102
-
62
2019
€’000
1,107
44
-
61
1,265
1,212
Counter App Limited
51%
Technology company
51 Ordinary shares @ €1
One Central Park, Leopardstown,
Dublin 18, Ireland
Retirement benefit charges of €62k (2019: €61k) arise from pension payments relating to 3 Executive
Directors (2019: 2).
* Held directly by the Company
** 3 Million RMB contributed by Hostelworld.com Limited for 100% ownership of subsidiary
184
Financial Statements
Hostelworld Annual Report 2020
185
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
22. RELATED PARTY TRANSACTIONS (CONTINUED)
Interest rate risk
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
Termination benefits
Post-employment benefits
Total
23. FINANCIAL RISK MANAGEMENT
23.1 Financial risk factors
2020
€’000
2019
€’000
2,899
2,607
271
289
133
72
854
118
3,592
3,651
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
2020
€’000
2019
€’000
18
11,205
11,205
10,142
10,142
-
-
890
890
11,205
11,032
The group monitors its exposure to interest rate risk based on interest rates at which companies in the
Group borrow at. During 2020 the Group was not materially exposed to interest rate risk. The Group had
one drawn down facility in place as detailed in note 19.
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 2020, 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.
The Directors’ objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure,
the Directors may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue
new shares or sell assets. In 2020 cash dividends were suspended due to COVID-19 uncertainty.
The Group will ensure it retains sufficient reserves to manage its day to day cash requirements, including
capital expenditure requirements, whilst ensuring appropriate dividends are distributed to shareholders.
24. 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)
2020
€’000
-
-
-
2019
€’000
8,601
4,014
12,615
The Group announced on 26 March 2020 that it was not proceeding with a final 2019 dividend as part of
its measures to protect balance sheet strength and liquidity during the COVID-19 pandemic.
On 24 June 2020 the Group announced that the Board does not expect to pay a cash dividend under its
current policy in respect of the 2020 financial year. The Board made this decision after assessing current
trading, the continued requirement for cash conservation and the on-going uncertainty of the full impact
of COVID-19. Future cash dividend payments will be subject to the Group generating adjusted profit after
tax, the Group’s cash position, any restrictions in the Group’s banking facilities and subject to compliance
with Companies Act 2006 requirements regarding ensuring sufficiency of distributable reserves at the
time of paying the dividend.
On 17 September 2020, the company issued 1,636,252 bonus shares to shareholders in lieu of a cash
dividend at value €0.01 per share. See note 17.
186
Financial Statements
Hostelworld Annual Report 2020
187
Notes to the Consolidated Financial Statements
for the year ended 31 December 2020 (Continued)
Company Statement of Financial Position
as at 31 December 2020
25. 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.
26. EVENTS AFTER THE BALANCE SHEET DATE
On 25 January 2021 the Group signed head of terms on a €30 million term loan facility, and on 23
February 2021 the Group drew down €28.8 million, net of original issue discount. The facility is single
drawdown and bears interest at a margin of 9.0% per annum over EURIBOR (with a EURIBOR floor of 0.25%
per annum). The facility agreement includes the following financial covenants: (1) adjusted net leverage
(Hostelworld has to ensure that total net debt is no more than 3.0 x adjusted EBITDA from 31 December
2023 to 30 September 2024, and no more than 2.5 x adjusted EBITDA from 31 December 2024 onwards);
and (2) minimum liquidity (Hostelworld has to ensure that at close of business on the last business day of
each month until it is testing the adjusted net leverage ratios there is free cash in members of the Group
which have guaranteed repayment of the facility of at least €6.0 million). The lenders have the right to
require repayment of the facility if Hostelworld is subject to a change in control and Hostelworld has
the option to repay the facility early (subject to the prepayment fees referred to below). Security on the
facility includes the share capital of the Group, the bank accounts of the Group and the Group’s intellectual
property. In connection with the facility, Hostelworld has agreed to issue warrants over 3,315,153 ordinary
shares of €0.01 each in the capital of Hostelworld (equivalent to 2.85% of Hostelworld’s current issued
share capital) to the lender. The Warrants may be exercised at any time during the term of the loan and for
a twelve-month period following its scheduled termination at an exercise price of €0.01 per ordinary share.
Shares issued will be the same class and carry the same rights as existing shares.
On 26 January 2021 the Group repaid its short-term invoice financing facility in full. On 10 February 2021
the Group signed a deed of release on its three-year revolving credit facility which was not drawn down at
year end.
There have been no other significant events, outside the ordinary course of business, affecting the Group
since 31 December 2020.
Non-current assets
Investments
Trade and other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Equity
Share capital
Share premium account
Share based payment reserve
Retained earnings
Notes
2020
€’000
2019
€’000
30
31
31
17
17
57,026
44,187
112,984
-
170,010
44,187
224
953
122,226
353
1,177
122,579
171,187
166,766
1,163
14,328
1,227
956
-
795
153,258
164,726
Total equity attributable to equity holders of the parent
169,976
166,477
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
32
1,211
289
1,211
1,211
289
289
171,187
166,766
The Company reported a loss for the financial year ended 31 December 2020 of €11,468k (2019: €8,678k
profit).
The financial statements of Hostelworld Group plc were approved by the Board of Directors and
authorised for issue on 16 March 2021 and signed on its behalf by:
Gary Morrison
Chief Executive Officer
Caroline Sherry
Chief Financial Officer
Hostelworld Group plc registration number 9818705 (England and Wales)
188
Financial Statements
Hostelworld Annual Report 2020
189
Company Statement of Changes in Equity
for the year ended 31 December 2020
Notes to the Company Financial Statements for
the year ended 31 December 2020
As at 1 January 2019
Total comprehensive income for
the year
Dividends
Credit to equity for equity settled
share based payments
As at 31 December 2019
Total comprehensive expense for
the year
Issue of ordinary shares for cash
Share issue cost
Bonus Issue shares
Credit to equity for equity
settledshare based payments
24
17
17
17
Notes Share Capital
Share
Premium
Retained
Earnings
Share Based
Payment
Reserve
€’000
€’000
€’000
Total
€’000
€’000
956
-
-
-
956
-
-
-
-
-
168,663
639
170,258
8,678
(12,615)
-
-
8,678
(12,615)
-
156
156
164,726
795
166,477
-
-
(11,468)
191
15,042
-
16
-
(698)
(16)
-
-
-
-
-
-
-
-
-
(11,468)
15,233
(698)
-
27. 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) Application
of Financial Reporting Requirements 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.
432
432
Investments in subsidiaries
As at 31 December 2020
1,163
14,328
153,258
1,227
169,976
Investments in subsidiary undertakings are stated at cost less any allowance for impairment.
Ember Hostel, USA
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.
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 24 to the consolidated financial statements.
190
Financial Statements
Hostelworld Annual Report 2020
191
Company Statement of Financial Position
as at 31 December 2020
Notes to the Company Financial Statements for
the year ended 31 December 2020 (Continued)
27. ACCOUNTING POLICIES (CONTINUED)
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
Investments in subsidiaries are held at cost. The Company assesses investments for impairment whenever
events or changes in circumstances indicate that the carrying value of an investment may not be
recoverable. If any such indication of impairment exists, the Company makes an estimate of its recoverable
amount. When the carrying amount of an investment exceeds its recoverable amount, the investment is
considered impaired and is written down to its recoverable amount. At 31 December 2020 the carrying
value of investment in subsidiaries amounted to €57.0m (2019: €44.2m). During 2020 an impairment of
€2.0m was recognised (2019: €0.8m). Further detail, including sensitivity analysis, is included in note 30 to
the financial statements.
Recoverability amounts due from subsidiary undertakings
Each year the Directors assess the credit risk of amounts due from subsidiary undertakings and determine
if there is evidence to recognise an expected credit loss on these assets. In the current year 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.
At 31 December 2020 the carrying value of the amounts due from subsidiary undetakings amounted to
€113.0m (2019: €120.9m). Given a repayment plan in place until 31 December 2030 the Directors do not
consider that an expected credit loss allowance is required.
28. (LOSS)/ PROFIT 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 (loss)/profit 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.
29. STAFF COSTS
The average monthly number of full time people employed by the Company (including Executive Directors)
during the year was 3 (2019: 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
Total
2020
€’000
938
111
72
19
121
2019
€’000
863
110
73
23
41
1,261
1,110
In addition to staff costs disclosed above termination benefits disclosed within note 5 exceptional items
restructuring costs totalled €289k (2019: €nil).
30. INVESTMENTS
The carrying value of the Company’s subsidiaries at 31 December 2020 are as follows:
At 1 January
Additions
Impairment
Disposals
At 31 December
2020
€’000
2019
€’000
44,187
205,630
14,875
40,437
(2,036)
(880)
-
(201,000)
57,026
44,187
The Company’s subsidiaries directly owned by the Company, are disclosed in note 22.
Additions of €14,564k relate to a capital contribution from Hostelworld Group PLC to Hostelworld.com
Limited during the period. The remaining additions (€311k) are capital contributions arising from the
administration of the Group’s share option schemes.
The additions in 2019 of €40,322k relate to an increase in the Company’s direct shareholding in
Hostelworld.com to 100%. 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.
An impairment of €2,036k (2019: €880k) was recognised for Hostelworld Group PLC’s investment in
Hostelworld Services Limited. In 2020, as a result of a strategic review of the business by the Directors, it
was determined to cease actively marketing our Hostelbookers brand name.
No impairment was recognised for the Group’s investment in Hostelword.com Limited. Given the existence
of indicators of impairment at the balance sheet date, namely market capitalisation, the Directors reviewed
the recoverability of the investment held. The recoverable amount of the investment was assessed
utilising value-in-use calculations which were prepared using cash flow projections based on five-year
budgets approved by the directors, and a terminal value was included with a long-term growth rate of 2%.
192
Financial Statements
Hostelworld Annual Report 2020
193
Notes to the Company Financial Statements for
the year ended 31 December 2020 (Continued)
30. INVESTMENTS (CONTINUED)
32. TRADE AND OTHER PAYABLES
Amounts falling due within one year
Trade payables
Accruals and other payables
Total
2020
€’000
444
767
1,211
2019
€’000
11
278
289
33. EVENTS AFTER THE BALANCE SHEET DATE
On 23 February 2021 the Group drew down €28.8 million, net of original issue discount, on a loan facility.
The facility includes warrants issued to the lender for 2.85% of the existing issued and outstanding share
capital of Hostelworld Group plc. Shares issued will be the same class and carry the same rights as
existing shares. Further detail is included in note 26.
Woodstock Beach Camp, Vietnam
The cash flow projections for the five-year period 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 12.88%.
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. The resulting enterprise
value was adjusted for net debt of the company. There was sufficient headroom noted and an impairment
charge was not recognised. A movement down in the long-term growth rate of more than .2% or an
increase in the discount rate of more than .3% would result in an impairment charge.
The disposal in 2019 relates to a subsidiary WRI Nominees DAC which was liquidated in 2019 (note 22).
31. TRADE AND OTHER RECEIVABLES
Amounts falling due greater than one year
Amount due from subsidiary undertakings
Total
Amounts falling due within one year
Prepayments
Value Added Tax
Amount due from subsidiary undertakings
Other debtors
Total
2020
€’000
2019
€’000
112,984
112,984
2020
€’000
165
36
23
-
-
-
2019
€’000
114
12
120,886
1,214
224
122,226
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
22). This amount is carried at amortised cost. In 2020 the repayment term of the loan was extended
to 31 December 2030. In line with IFRS 9 derecognition criteria, the Group assessed the guidance with
respect to modification and potential derecognition of a liability based on whether the modification is
deemed to be substantial or non-substantial. Based on ‘the 10% test” referred to in IFRS 9 the change was
not deemed to be a substantial change and we recorded a modification loss in the income statement of
€8,813k (2019: €nil). 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. Given a repayment plan
in place until 31 December 2030 the Directors do not consider that an expected credit loss allowance is
required.
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 in 2019 relates to amounts due to the Company on completion of
the liquidation of WRI Nominees DAC (referred to in note 22).
Arya Wellness Retreat, Indonesia
Additional
Information
196 Appendix: Alternative performance measures
200 Shareholder Information
201 Advisors
196
Additional Information
Hostelworld Annual Report 2020
197
Appendix: Alternative performance measures
The Group uses the following Alternative Performance Measures (‘APMs’) which are non–IFRS measures to
monitor the performance of its operations and of the Group as a whole: (Loss) / Earnings before Interest, Tax,
Depreciation and Amortisation, excluding exceptional and non-cash items (“Adjusted EBITDA”), Adjusted (Loss) /
Profit after Taxation; Adjusted (Loss) or Earnings Per Share, Adjusted Free Cash (Absorption) / Flow and Adjusted
Free Cash (Absorption) / Flow Conversion.
Adjusted EBITDA
The Group uses (Loss) / 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 from one period to the next, and against budget. 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.
Reconciliation between (Loss) / Profit for the year and Adjusted EBITDA:
2020
2019
€’m
(Loss) / profit for the year
Taxation
Net finance costs
Share of result of associate
(Loss) / profit for the year
Depreciation
Amortisation of development costs
Amortisation of acquired intangible assets
Impairment of intangibles
Exceptional items
Share based payment expense
Adjusted EBITDA
Adjusted (Loss) / Profit after Taxation
(48.9)
(1.6)
0.2
0.4
(49.9)
2.5
2.4
9.3
15.0
3.0
0.4
8.4
(5.4)
0.2
0.1
3.3
2.4
1.7
9.8
-
3.1
0.2
(17.3)
20.5
Reconciliation between Adjusted EBITDA and (Loss) / Profit for the Year:
2020
2019
€’m
Adjusted EBITDA
Depreciation
Amortisation of development costs
Net finance costs
Share of result of associate
Corporation tax
Adjusted (loss) / profit after Taxation
Exceptional items
Amortisation of acquired intangible assets
Share based payment expense
Impairment charges
Deferred taxation
(Loss) / profit for the year
Adjusted (Loss) / Earnings per share
(17.3)
(2.5)
(2.4)
(0.2)
(0.4)
0.6
(22.2)
(3.0)
(9.3)
(0.4)
(15.0)
1.0
(48.9)
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 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.
€’m
Adjusted (loss) / profit after Taxation
Weighted average shares in issue (‘m)
Adjusted EPS
2020
2019
(22.2)
106.9
(20.76)
14.8
97.2*
15.2
Adjusted (Loss) / Profit after Taxation is an alternative performance measure that the Group uses to calculate
the dividend pay-out for the year, subject to Company Law requirements regarding distributable profits and the
dividend policy within the group. It excludes exceptional items, amortisation of acquired domain and technology
intangibles, net finance costs, share based payment expenses and deferred taxation which can have large
impacts on the reported result for the year, and which can make underlying trends difficult to interpret.
*The 2019 earnings per share figures have been restated to incorporate the 1,636,252 new Hostelworld Group
ordinary shares that were issued in September 2020. The weighted average number of shares in issue during the
period was adjusted to include these bonus shares as if they were issued 1 January 2019.
Pipe House Playa Grande, Costa Rica
198
Additional Information
Hostelworld Annual Report 2020
Appendix: Alternative performance measures
(Continued)
Adjusted Free Cash (Absorption) / Flow
The Group uses adjusted Free Cash Flow to measure the amount of underlying cash generation and the
cash available for distribution and allocation. The Group calculates adjusted Free Cash Flow as the adjusted
EBITDA for the group before Capital Expenditure, capitalised development spend, acquisition and disposal of
undertakings and adjusting for interest, tax and movements in working capital.
2020
2019
€’m
Adjusted EBITDA
Intangible asset additions
Capital expenditure
Deferred Consideration / Acquisition of associate
Net Interest and tax paid
Net movement in working capital
Adjusted free cash (absorption) / flow
Adjusted free cash (absorption) / flow conversion
Adjusted free cash (absorption) / flow
Adjustments for outstanding VAT refund and amount due to
group on completion of liquidation of WRI Nominees DAC
Normalised Adjusted Free Cash (absorption) / flow
Normalised Adjusted Free Cash (absorption) / flow
(17.3)
(3.8)
(0.1)
(0.5)
0.5
8.9
(12.3)
(71%)
(12.3)
-
(12.3)
(71%)
20.5
(2.9)
(0.2)
(1.1)
(1.7)
(3.7)
10.9
53%
10.9
2.2
13.1
64%
SHAREHOLDER INFORMATION
ADVISERS
200
Additional Information
Hostelworld Annual Report 2020
201
Shareholer Information
Advisers
Shareholder’s Enquiries
Solicitors
Independent Auditors
26 April 2021
11 August 2021
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:
Financial Calendar
AGM
Announcement of 2021
Interim Results
Share Price
During the year ended 31 December 2020, the range of
the market prices of the Company’s ordinary shares on
the London Stock Exchange was:
Last price as at 31 December
2020
£0.79
Lowest price during the year
£0.36
Highest price during the year
£1.51
Daily information on the Company’s share price can be
obtained on our website: www.hostelworldgroup.com
UK Registrar
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Mr. John Duggan
Hostelworld Group plc
Floor 2
52 Bedford Row
London WC1R 4LR
United Kingdom
Company Registration Number
9818705
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