Online hostel-focused booking platform Hostelworld (HSW) has warned growth could stall if the hot weather continues following softer bookings in July and August.
Shares in the company continued their downward spiral following the news, plummeting 9% to 265.5p as the World Cup and intense competition in Europe also impacted bookings.
The company says the hot weather in particular put off many Europeans travelling within Europe.
SHARES DOWN 30% SINCE MAY
Since hitting a one-year high of 417.5p in May, over a third of Hostelworld’s market cap has been wiped off as the market worried about competition and foreign exchange headwinds.
The departure of chief executive Feargal Mooney earlier this year also spooked the market given how he had been one of the key driving forces behind the company’s growth, having served as chief operating officer, chief financial officer and then leading the business.
Gary Morrison, ex-Expedia head of retail operations, replaced Mooney as CEO and today’s results are his first chance to talk about the company’s performance.
In the six months to 30 June, bookings were up 2% to 4m and the average booking value rose 5% to €12.20 thanks to pricing initiatives.
Reported sales fell 9% to €42.6m as new accounting rules means it can no longer recognise income from advance bookings that feature a free cancellation option until the customer has completed their stay.
The latest results show €4.2m in deferred sales relating to free cancellation bookings.
EARNINGS DOWNGRADES
Davy Research analyst Ross Harvey expects the consensus EBITDA forecast to be cut by 11% to €21.1m for 2018 off the back of today’s results.
Looking ahead to next year, Harvey says he expects to reduce his EBITDA forecast for 2019 from €28.5m to between €23.5m and €24m.
He says Hostelworld made some significant progress with more 57% of bookings via the app, up from 50%, helping to improve engagement with customers and lower costs.
Numis analyst Tim Barrett is optimistic about Hostelworld’s outlook, saying the company boasts a leading position in a structurally growing market.
Barratt initially estimated 7% growth in annual bookings, but has downgraded his earnings per share estimates by approximately 7% to €0.17c.
