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Hostelworld doles out dividends

Challenges in the sector hurt performance at the hostel-booking group, but a special dividend will entice investors
March 29, 2017

The effect of terrorist attacks understandably hit demand for travel in Europe through 2016, and certainly held back hostel-booking platform Hostelworld (HSW). Reflecting the impact on cash flows, the group - known for adverts featuring celebrities such as actor Charlie Sheen and rapper 50 Cent - took out an impairment charge of €8.2m (£7.1m) against the value of its Hostelbookers domain name. Underlying performance was positive, with adjusted cash profit growth of 7 per cent to €23.9m at constancy currencies.

IC TIP: Buy at 233p

There was better news on the dividend front. In addition to its policy of returning 70-80 per cent of underlying earnings to shareholders, the group announced a special payout of 10.5¢.

Elsewhere, the group's efforts to shift towards higher-margin bookings started to bear fruit. Its Elevate programme, which offers hostels higher prominence in search results in exchange for higher commission, accounted for 30 per cent of bookings in the year, up from 18 per cent in 2015. Bookings through not-paid-for channels also improved, while marketing spend fell as a percentage of revenue, from 45 per cent to 41 per cent.

Analysts at Numis are forecasting adjusted profit before tax of €21.8m, giving adjusted EPS of 20.5¢ in 2017 (up from €19.7m and 20¢ in 2016).

HOSTELWORLD (HSW)

ORD PRICE:233pMARKET VALUE:£222m
TOUCH:229-233.5p12-MONTH HIGH:304pLOW: 127p
DIVIDEND YIELD:5.7%PE RATIO:NA
NET ASSET VALUE:167¢*NET CASH:€25m

Year to 31 DecTurnover (€m)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)**
2012***52.0-16.2-8.1na
2013***57.2-29.6-12.3na
201479.3-77.0-24.0na
201583.580.54.52.75
201680.50.10.0115.3
% change-4-100-100+456

Ex-div: 27 Apr

Payment: 6 Jun

£1= €1.15 *Includes intangible assets of €140m, or 146¢ a share

**Does not include proposed special dividend of 10.5¢ ***Pre-IPO figures