Sunday 22 January 2017

Hostelworld's profits slide as attacks take toll on tourism sector

Published 24/08/2016 | 02:30

Hostelworld chief financial officer Mari Hurley, its ceo, Fergal Mooney; Irish Stock Exchange ceo Deirdre Somers; and Hostelworld chief technology officer John O’Donnell at flotation last year
Hostelworld chief financial officer Mari Hurley, its ceo, Fergal Mooney; Irish Stock Exchange ceo Deirdre Somers; and Hostelworld chief technology officer John O’Donnell at flotation last year

Profits at Hostelworld slid during the first half of the year as challenging marketing conditions, including terrorist attacks, continued to take their toll on the tourism industry.

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Profits at the company fell to €7.7m during the six-month period, down €1.1m on the same period last year.

Revenue at the firm also fell to €40.2m, but earnings before interest tax depreciation and amortisation (EBITDA) improved to €10.1m.

Bookings at the company's main Hostelworld brand increased by 16pc with Asian markets reporting the fastest rate of growth.

Despite the fall in revenue, the hostel-booking site said it is still on-track to meet expectations for the full year.

Hostelworld chief executive Feargal Mooney said the company is looking toward more profitable channels with supporting brands representing 15pc of total bookings.

"We will continue to manage the risks to our business posed by the impact of terrorist attacks on travel demand and patterns and by macro-economic uncertainties and currency fluctuations surrounding Brexit and, based on performance for the year to date, our expectations for the full year are unchanged," he said.

The Hostelworld boss reported strong trading in its key months of July and August.

The firm's focus on the Hostelworld brand is clear from booking growth. Hostelworld is moving away from its supporting brands and channels to focus on more profitable areas of the business.

Bookings in supporting channels fell by 51pc to 500,000 during the first half of the year while total bookings dipped by 4pc to 3.6 million. Average booking value during the period is also down 4pc to €11.80.

The firm's reliance on mobile has grown with consumer activity on the platform now amounting to 45pc of overall bookings.

Hostelworld primarily deals with euro, but also has significant cash flows in both dollar and sterling.

Davy Stockbrokers said the company's decision not to change its outlook it likely to provide support to the firm.

"The company's full-year outlook is unchanged and we expect the market to react positively, particularly given the weak sentiment in the travel space in recent weeks," Davy said in a note.

Merrion equity analyst Dylan Simmonds was positive on the update given to shareholders but remained cautious over uncontrollable factors surrounding the industry.

"We view these remarks as extremely positive but are well aware of how quickly this could change due to any further terrorist attacks, macro-economic uncertainties or further currency fluctuations surrounding Brexit," Mr Simmonds said.

The business said it is committed to a significant dividends for its shareholders and is paid out €2.6m in its maiden dividend in May. The dividend was worth 2.75c per share.

Hostelworld floated on the stock exchange late last year, raising €180m in the process. However the firm's share price has through a turbulent time so far this year down 37.1pc in the year to date at €1.932.

Shares in the company fell by almost 30pc in a single day's trading back May after it announced a surprising drop off in bookings. Share price suffered again after Britain's decision to leave the European Union.

Irish Independent

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