Thursday 17 October 2019

Hostelworld on alert over Brexit threat

Feargal Mooney. Credit: David Parry
Feargal Mooney. Credit: David Parry
John Mulligan

John Mulligan

Brexit, currency volatility and terrorism are some of the biggest potential threats to Hostelworld, the Dublin-based online-booking platform.

The warning in its annual report published yesterday came as it confirmed that it had notched up 7.5 million bookings last year, with its net revenue rising 8pc to €86.7m. Stock market-listed Hostelworld posted adjusted profit after tax of €21.7m in 2017, which was 12pc higher than in 2016.

The company, headed by chief executive Feargal Mooney, said that bookings from the main Hostelworld brand, which contribute 93pc of group bookings, rose 13pc in 2017.

However, newly-appointed chairman Michael Cawley, Ryanair's former chief operating officer, said that the industry "continues to be impacted by Brexit uncertainty and terrorist attacks, which particularly affect our key European destinations". Mr Cawley is also the chairman of Fáilte Ireland.

The company's annual report added that market conditions, particularly in Europe, remain uncertain, but that booking volumes in the first quarter of 2018 are in line with expectations.

"Weaker exchange rates, particularly for the US dollar, remain a significant headwind," it noted.

But Hostelworld remains strongly cash generative. When users book an accommodation stay, they pay a deposit, which represents Hostelworld's entire share of the total booking cost.

Mr Cawley noted in the report that Hostelworld had free cash flow - a key measure of a company's financial performance - of €21.5m last year, giving the group a €21.3m cash balance at the end of the year, despite dividends of €24.8m going to shareholders.

The company is planning to pay a full-year final dividend of 12 cent a share, which will represent a 75pc of its adjusted profit after tax being split amongst shareholders.

"The board continues to review its approach to returning capital to shareholders, providing returns to shareholders whilst retaining flexibility for capital and other investment opportunities," noted Mr Cawley.

Mr Mooney pointed out that Hostelworld has been investing heavily in its technology platform and opened a software development office in the Portuguese city of Porto. At the end of last December, it employed 24 people.

"Based on its initial success, we plan to substantially expand this new software delivery centre during 2018, as we expect it to play a significant role in Hostelworld's future success," said Mr Mooney.

The annual report also shows that Mr Mooney was paid a total of just under €769,000 in 2017, down from almost €1.3m in 2018.

However, his base salary last year rose to €410,000 from €400,000, and the 2016 figure also included a €850,000 one-off payment from Hostelworld's former majority shareholder, US private equity firm Hellman and Friedman.

That discretionary payment was agreed as part of Hostelworld's stock market flotation in 2015.

Mr Mooney received a €309,000 bonus last year.

The annual report also notes that outgoing chief financial officer Mari Hurley, whom the group announced in December planned to leave the group in the first half of this year, was not paid a bonus in respect of 2017, with Hostelworld's remuneration committee deciding that she should not be entitled to one.

Shares provisionally awarded to her under the group's long-term incentive plan will also lapse upon her resignation date.

Irish Independent

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