Shares in online hostel booking site Hostelworld (HSW) fell 2% to 61.5p after it proposed a bonus issue instead of a cash dividend.
Citing its focus on cash conservation and uncertainty over the full impact of the coronavirus pandemic, the company has suspended cash dividends for 2020 with the board proposing to issue new shares in lieu of a payout, subject to shareholder approval.
The number of shares a shareholder will need to hold to qualify for each new bonus share will be calculated by dividing the prevailing average share price (in € cent) prior to the publication of the shareholder circular by 1.0 € cent. The record date for the bonus issue will be set out in the shareholder circular.
BOOKINGS, REVENUE, EARNINGS PLUNGE
The move comes as the company reported a 69% drop in revenue to €12 million for the six months to 30 June, and swung to an adjusted EBITDA loss of €8.3 million compared to an €8.9 million profit in the first half of 2019.
Trading volumes were significantly impacted in the first half following unprecedented, widespread travel bans which resulted in net bookings declining from 3.5 million to 1.1 million.
The net average booking value also fell from €12.40 a year ago to €9.45 in the first half of 2020, reflecting a higher number of cancellations and longer lead times.
During the half, Hostelworld focused on cutting marketing spend and operating expenses, which should deliver annual savings of €21 million and reduce its monthly cash burn to €1.9 million during the second half of the year.
‘HOSTEL MARKET IS ADAPTABLE’
Despite the sharp fall in revenue and profit, analysts at Shore Capital said the hostel market is ‘adaptable’ and note that ‘often owners can face several periods of low/no trade but still return robust on the other side.’
Hostelworld reported it had seen an increase in demand in recent weeks in line with travel restriction being eased, and is now trading slightly ahead of the base-case scenario outlined in its June trading update. Last month saw good progress in domestic and short European bookings, although the Americas, Asia and Oceania continue to remain weak.
The Shore Capital analysts continued, ‘Going forward, we expect the booking trends to continue to mirror green light countries and wider travel patterns.
‘Many challenges lie ahead and COVID-19 still presents a high level of uncertainty for H2 FY20 forecasts (so) despite a likely improvement in Q3 and in Q4, net bookings will be well below FY19 levels.’
