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Hostelworld Q1 to take hit from coronavirus outbreak
4th Mar 2020 14:31
(Sharecast News) - Hostelworld shares slumped on Wednesday as it warned that the coronavirus outbreak would dent first-quarter earnings.
In its preliminary results for the year to the end of December, the company said that while it kicked off 2020 with "positive momentum", trading since late January has been hit by the coronavirus outbreak, which is having a significant impact on global travel demand, within Asian markets and more recently in Europe.
"As the Coronavirus has spread from region to region, we have observed a material reduction in bookings and an increase in marketing cost as a percentage of net revenue," it said. "This has been driven by a significant reduction of bookings from free channels, an increase in longer lead time cancellations across all channels and an increase in investment in paid channels to partially offset the bookings decline in free channels."
With the potential depth and duration of the outbreak currently "impossible to forecast", Hostelworld said that if near-term trends persist to the end of March, first-quarter earnings before interest, tax, depreciation and amortisation could take a €3m to €4m hit.
The warning came as the group posted a drop in full-year pre-tax profit to €3m from €6.7m in 2018 and a 2% decline in revenue to €80.7m.
At 1440 GMT, the shares were down 8.3% at 96.30p.
In its preliminary results for the year to the end of December, the company said that while it kicked off 2020 with "positive momentum", trading since late January has been hit by the coronavirus outbreak, which is having a significant impact on global travel demand, within Asian markets and more recently in Europe.
"As the Coronavirus has spread from region to region, we have observed a material reduction in bookings and an increase in marketing cost as a percentage of net revenue," it said. "This has been driven by a significant reduction of bookings from free channels, an increase in longer lead time cancellations across all channels and an increase in investment in paid channels to partially offset the bookings decline in free channels."
With the potential depth and duration of the outbreak currently "impossible to forecast", Hostelworld said that if near-term trends persist to the end of March, first-quarter earnings before interest, tax, depreciation and amortisation could take a €3m to €4m hit.
The warning came as the group posted a drop in full-year pre-tax profit to €3m from €6.7m in 2018 and a 2% decline in revenue to €80.7m.
At 1440 GMT, the shares were down 8.3% at 96.30p.