Earnings fall at Hostelworld on the back of deferred income

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Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) at Hostelworld have fallen 18pc year-on-year in constant currency to €9.8m in the six months to 30 June.

Earnings have been impacted by the change in booking options, with the group offering customers free cancellation bookings.

This has resulted in a deferral of €4.2m in revenue from the period, according to a trading update from the group.

The €4.2m in deferred revenue will be reported in future periods, Hostelworld said.

Excluding the impact of the deferral of this revenue, adjusted EBITDA would have increased by €1.1m (18pc in constant currency) during the period.

Revenue at the group decreased by 3pc year-on-year in constant to €42.6m as a result of the impact of deferred revenue, while adjusted profit after tax decreased to €7.6m from €10.3m in the same period last year, also due in part to the impact of €4.2m revenue related to free cancellation bookings that was received but deferred in the period.

Overall and there was a 2pc increase in total bookings, while average booking values were flat, despite currency headwinds.

However Hostelworld said that the World Cup and the unusually hot weather this summer had led to a softness in bookings in the peak summer months of July and August.

Gary Morrison, who was appointed chief executive of the group earlier this year, described the results as “in line with expectations”.

“As previously reported, the market, particularly in Europe, is increasingly competitive,” Mr Morrison said.

“In addition the World Cup and the unusually hot weather in Europe have also led to a softness in bookings in the peak summer months of July and August. If these trends continue like for like, growth in group bookings is likely to be flat for the full year given the expected declines in our supporting brands.”

“In response to these circumstances, we are continuing our program of rigorous cost control and our average booking value continues to benefit from the increase in the base rate commission implemented in February.”

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