Hostelworld plans to return to paying dividends this year for the first time since before the Covid-19 pandemic, as the hostel-booking group also eyes “selective” deals to broaden its business.
The Dublin-listed company said in a strategy update on Tuesday that it aims to return to a progressive dividend policy of 20-40 per cent of net profits, starting with an interim payment in the second half of this year.
Hostelworld will also introduce a share buy-back programme, subject to market conditions and taking into account other investment opportunities, it said.
The return to dividends comes as Hostelworld, which targets millennial and Gen-Z backpackers, continues to recover from the effects of the pandemic, which forced it to rely on high-cost borrowings and the Government’s tax warehousing facility as global travel ground to a halt.
The Gary Morrison-led group reached an important milestone in 2023 when it repaid €28.8 million of high-cost loans drawn down from US specialist lender HPS Investments three years ahead of schedule with the help of €17.4 million of much cheaper loans from AIB, all of which has since been paid back ahead of schedule.
The company also agreed with Revenue early last year to repay €9.6 million of warehoused taxes, racked up during the Covid-19 pandemic, over the next three years.
Adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) rose 19 per cent last year to €21.8 million, even as travellers shifted bookings towards low-cost destination in Asia and Central America. The company also ended the year with a net cash position of €2 million.
Hostelworld said on Tuesday it plans to expand its horizons by supplementing hostel inventory with additional budget accommodation options to increase customer growth. It also plans to boost its travel product range to include additional products that are “highly relevant to youth travellers”.
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The company said that it will explore “complementary acquisitions aligned with our strategic objectives that can accelerate growth, extend our capabilities and help drive incremental shareholder returns”.
It is targeting low double-digit revenue growth between 2026 and 2027, before acquisitions are taken into account. It plans to maintain marketing spend with the range of 45-50 per cent of revenue and is aiming for an Ebitda margin of more than 20 per cent.
On current trading, it said: “The group continues to deliver a resilient performance, despite the recent weakening of the US dollar and a persistent shift in traveller preferences towards lower-cost destinations; both of which are leading to a less favourable booking mix and average booking value.”
“While it is still early in the year and the summer booking season hasn’t yet reached its peak, if current trends persist, we anticipate achieving mid-single-digit revenue growth for the full year.”
