Hostelworld books in for €15m in share placing
Accommodation site acts to create ‘essential liquidity’ amid virus
GLOBAL accommodation booking platform Hostelworld has raised £13.8m (€15.2m) through a share placing and has secured a new credit line.
The group earlier this week warned it expects to report minimal bookings for the three months to June 30.
The equity will “materially strengthen” the Dublin-headquartered company’s position, improve its balance sheet and “provide essential liquidity” through this year and next, it said.
Companies such as Hostelworld operating in the hospitality industry are having to deal with collapsing revenues owing to the restrictions on movement of people aimed at limiting the spread of the coronavirus.
The group said it remains unable to provide guidance for the full financial year 2020.
However, Hostelworld has laid out two possible scenarios for the industry.
Under its “pessimistic scenario”, in which it allows for a second wave of Covid-19 leading to “significant disruption in global travel” in the first half of next year and a slower recovery in bookings this year, revenue for 2020 and 2021 will be around 20pc of the €80.7m reported last year.
Yesterday, shares in Hostelworld were down more than 10pc in London, trading at 68.30p.
So far this year, the group’s share price has fallen by more than 40pc.
Having started 2020 at 125p, the price has rebounded from a 52-week low of 36p on March 18 when the introduction of lockdowns across Europe began to accelerate.
In addition to raising funds through a share issue, the group, which had no existing debt facilities prior to Covid19, has agreed terms for a three-year revolving credit facility to provide up to €7m of additional liquidity.
The money is staggered in three tranches and the drawdown of each is subject to the achievement by Hostelworld of certain minimum revenue targets.
The company has also agreed terms for a short-term €3.5m financing facility which it intends to use to settle a small number of large partner invoices.
“2020 and 2021 will be transition years [for Hostelworld], but if management’s strategy and tech upgrades are successful, a return to 2019 earnings would be realistic after two years,” analysts at UK-based Numis Securities said.
The company, which has carried out a number of major cost-cutting measures – including reducing marketing costs, implementing redundancies and availing of government furlough schemes – had €15.2m of available cash at May 31.
Hostelworld expects to swing into an earnings before interest, taxation and depreciation (ebitda) loss of between €8m and €9m for the first half of this year.
This compares to a positive ebitda of €8.9m for the same period last year.
Numis Securities and Davy acted as the joint bookrunners in the share placing.
Founded by Ray Nolan, Hostelworld listed on the stock market in 2015.