Annual Report • Apr 6, 2022
Annual Report
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Hostelworld Group PLC 213800OC94PF2D675H41 2021-01-01 2021-12-31 213800OC94PF2D675H41 2020-01-01 2020-12-31 213800OC94PF2D675H41 2021-12-31 213800OC94PF2D675H41 2020-12-31 213800OC94PF2D675H41 2019-12-31 213800OC94PF2D675H41 2020-01-01 2020-12-31 ifrs-full:RetainedEarningsMember 213800OC94PF2D675H41 2020-01-01 2020-12-31 ifrs-full:OtherReservesMember 213800OC94PF2D675H41 2020-01-01 2020-12-31 ifrs-full:IssuedCapitalMember 213800OC94PF2D675H41 2020-01-01 2020-12-31 ifrs-full:SharePremiumMember 213800OC94PF2D675H41 2021-01-01 2021-12-31 ifrs-full:RetainedEarningsMember 213800OC94PF2D675H41 2021-01-01 2021-12-31 ifrs-full:OtherReservesMember 213800OC94PF2D675H41 2021-01-01 2021-12-31 ifrs-full:IssuedCapitalMember 213800OC94PF2D675H41 2021-01-01 2021-12-31 ifrs-full:SharePremiumMember 213800OC94PF2D675H41 2019-12-31 ifrs-full:IssuedCapitalMember 213800OC94PF2D675H41 2019-12-31 ifrs-full:RetainedEarningsMember 213800OC94PF2D675H41 2019-12-31 ifrs-full:OtherReservesMember 213800OC94PF2D675H41 2019-12-31 ifrs-full:SharePremiumMember 213800OC94PF2D675H41 2020-12-31 ifrs-full:IssuedCapitalMember 213800OC94PF2D675H41 2020-12-31 ifrs-full:SharePremiumMember 213800OC94PF2D675H41 2020-12-31 ifrs-full:RetainedEarningsMember 213800OC94PF2D675H41 2020-12-31 ifrs-full:OtherReservesMember 213800OC94PF2D675H41 2021-12-31 ifrs-full:IssuedCapitalMember 213800OC94PF2D675H41 2021-12-31 ifrs-full:SharePremiumMember 213800OC94PF2D675H41 2021-12-31 ifrs-full:RetainedEarningsMember 213800OC94PF2D675H41 2021-12-31 ifrs-full:OtherReservesMember iso4217:EUR iso4217:EUR xbrli:shares ® HOSTELWORLD Annual Report 2021 It’ s time to (again!) Annual Report 2021 Our Vision to shape people’ s liv es and attitudes through tra v el and build a better w orld Our Purpose inspiring adv entur ous minds through tra v el Our Mission is to enable tra v ellers to e xperience new places and meet new people in a fun, memorable and saf e wa y Three Little Pigs Hostel, Germany 1 About Hostelworld Group Hostelworld Group is a leading Online Travel Agent focused on the hostelling category, with a well-known trusted brand, 13.7 million reviews and a loyal customer base built up over 22 years. Our core business provides our customers with hostel accommodation options and hostel focused small group adventure tour products ( Roamies ) in over 180 countries worldwide via our website and native app platforms in 19 languages. In parallel with helping millions of hostel focused travellers Meet The World ® , we are also committed to building a better world in everything we do. In particular, we are increasing our focus on improving the sustainability of the hostelling industry, through our active involvement in the Global Tourism Plastics Initiative (GTPI), led by the UN Environment Programme and the World Tourism Organization (UNWTO); our membership of the Global Sustainable Tourism Council (GSTC); and our recent partnership with the South Pole to offset all our greenhouse gas emissions in 2021. 2 2021 Summary | Hostelworld Annual Report 2021 2021 Summary While 2021 was a challenging year both for Hostelworld and the global travel industry, I am pleased to say we saw a consistent recovery throughout the year in both bookings and revenue versus 2019 save for the last few weeks where we saw travel concerns over the Omicron variant. I am also pleased to report that we made solid progress on all elements of our strategy during the year whilst continuing to significantly reduce our operating expenses versus 2020 levels. Overall, I remain confident that our loyal customer base has more desire than ever to travel and meet other like-minded travellers once restrictions are eased. The improvements we continue to make to our platform and our differentiated growth strategy mean we are well-positioned to capitalise on those opportunities as demand continues to return. Gary Morrison, CEO 3 Financial Review Net Revenue €16.9m 2020: €15.4m Net Bookings 1.5m 2020: 1.5m Net Average Booking Value “ABV” * €12.11 2020: €9.33 Balance Sheet Net Asset Position €67.2m 2020: €97.9m Cash Cash and Cash Equivalents €25.3m 2020: €18.2m * The Group uses Alternativ e Performance Measures (‘ APMs’) which are non-IFRS measures t o monitor the per f ormance of its operations and of the Group as a whole. These APMs along with their definitions and reconciliations to IFRS measur es ar e pro vided in the APMs section on pages 208 to 209 . Profitability Adjusted EBITDA Loss * €17.3m 2020: €17.3m Loss for the Year €36.0m 2020: €48.9m Adjusted Loss after Tax * €25.7m 2020: €22.2m 4 2021 Summary | Hostelworld Annual Report 2021 Viajero Tayrona Hostel & Ecohabs, Colombia 5 Contents Overview 8 Our journey Strategic Report 17 Chairman’s Statement 21 Chief Executive’s Review 26 Financial Review 30 Principal Risks and Uncertainties 46 Viability Statement 48 Sustainability 49 Task Force on Climate-related Financial Disclosures 53 Our People 54 Corporate Social Responsibility 62 Section 172 – Statement of Compliance – S172 (1) of the Companies Act, 2006 Governance 74 Directors’ Biographies 78 Corporate Governance Report 134 Directors’ Report 142 Independent Auditor’s Report to the Members of Hostelworld Group PLC Financial Statements 158 Consolidated Income Statement 158 Consolidated Statement of Comprehensive Income 159 Consolidated Statement of Financial Position 160 Consolidated Statement of Changes in Equity 161 Consolidated Statement of Cash Flows 162 Notes to the Consolidated Financial Statements 200 Company Statement of Financial Position 201 Company Statement of Changes in Equity 202 Notes to the Company Financial Statements Additional Information 208 Appendix: Alternative performance measures 210 Shareholder Information 211 Advisors never@home, South Africa Overview Our journey 8 Overview | Ho st el wo rl d Annual Report 2021 Our journey Gr oup acquir ed by Hellman & F riedman LL C, a US privat e equity firm A cquir ed the Hostels.com business and brand Launched the Hostelworld websit e pr oviding an online booking platf orm and back -end pr oper ty management system Opened office in Shanghai 1999 2009 2003 2006 9 Released new suite of Hostelw orld booking apps f or iOS and Andr oid A cquir ed the Hostelbookers business, based in the UK 2013 2014 Listed on the London and Eur onext Dublin Stock Ex changes Rebr anding of Hostelw orld with ‘Meet The W orld ® ’ 2015 @nakedtigerhostel 10 Overview | Ho st el wo rl d Annual Report 2021 Our journey continued Opened technology de velopm ent centr e in Por to, Por tugal De v eloped the “Roadmap to Gr owth” pr ogramme Appointed new management team 2018 201 7 Celebr ated 20 y ears of Hostelw orld In v ested in Counter App Limited, a pr ovider of tailor ed management solutions f or the hostel industr y Announced strategic in v estment in Goki Pty Limited Inno v ativ e har dware and consumer app solution to fully automate check -in and door access contr ol 2019 11 Launched Roamies – a par tnership with G Adventur es Impr o v ed technology platf orm including migration to the cloud Completed a r edesign of websit e with ex citing new look and f eel T ested new social f eatur es confirming str ong desir e f or more A dded additional pa yment options f or tech-sa vvy customers Pr ogr essed our en vironmental, social and go vernance (‘ESG’) strategy Became a signatory of t he Global T ourism Plastics Initiativ e Switched to Pr ogr essiv e W eb Application – a websit e that feels just lik e our App Launched Beds 4 Backpack ers to help stranded tra v ellers during global pandemic 2020 2021 12 Overview | Ho st el wo rl d Annual Report 2021 Our mission is to help hostellers meet other travellers they want to hang out with while travelling, so partnering with G Adventures to offer a combination of hostelling and adventure travel made absolute sense. When young people travel, they want to do more than just see places – they want to make meaningful connections and have new experiences that positively change their perspective on themselves and the world Gary Morrison, CEO 13 We announced the launch of Roamies in December 2021. Roamies offer small-group tours for 18 to 35-year-olds travellers to have a backpacking experience, stay in sociable hostels and get to the heart of everywhere Hostelworld travel. Roamies mix the freedom of travelling solo with the peace of mind of going with an organised group. The collaboration launched with a collection of 38 trips in 15 countries staying across more than 50 hostels with departures starting from Q2 2022. The Roamies collection is the start of a longer-term partnership that will see more trips being added across further locations. Local Guides Our customers get to tra v el with a knowledgeable local expert who takes car e of the planning, t he transport, and the hostels. Sociable Hostels W e want to show our customers ho w welcoming, sociable, and trav el game- changing hostels can be. Budget Friendly W e hav e k ept costs as low as the y can go, while paying people f airly . Stayokay Amsterdam Oost, Netherlands Strategic Report 17 Chairman’s Statement 21 Chief Executive’s Revi ew 26 Financial Review 30 Principal Risks and Uncertainties 46 Viability Statement 48 Sustainability 49 Task Force on Climate-related Financial Disclosures 53 Our People 54 Corporate Social Responsibility 62 Section 172 – Statement of Compliance – S172 (1) of the Companies Act, 2006 16 Strategic Report | Ho st el wo rl d Annual Report 2021 Page title Begadang, Indonesia 17 Chairman’s Statement: Michael Cawley 2021 has been another year of unprecedented challenge for our business, our host el par tners and f or the wider trav el industry. Whilst the to hav e a material impact on the financial per formance of the business, 2021 was a year of solid progr ess in delivering against our Meet the W orld ® gro wth strategy . W e are very encouraged by the strong r eturn in demand in destinations where tra v el restrictions ha ve eased. The team, led by CEO Gary Morrison, continued to work on three k e y areas that are fundamental t o our strategy , ensuring the business is competitively placed when demand returns. This w ork f ocussed on competitive enhancement s to the core online tra vel agent (“O T A ”) business, broadening our customer offering and cor e platf orm enhancements. The on-going impro vement s the team continue to make in host el inv entory , marketing capabilities and end-user experience, all contribute t owar d the competitiveness of the core O T A business. F ollowing the successful testing of social featur es on our platform, w e look f orward to the launch of this element of the strategy in 2022. W e were pleased to announce our partnership wit h G Adventur es with the launch of Roamies , a new hostel focused adv entur e tour product. This partnership is a significant milestone in the ex ecution of our Meet The W orld ® gro wth strategy and broadens our customer offering be y ond hostel accommodation. Our underlying platform underw ent a complete modernisation earlier this year with the migration of our platform t o the cloud. This enabled the teams to replace the legacy back end platform r esulting in faster ex ecution times as well as generatin g cost savings f or the Group. This year was another difficult y ear for the tra vel sector with the industr y ha ving to adapt to changing Gov ernment guidelines, tra vel bans and continued trav el restrictions. Thr oughout this challenging time, our priority has been our employ ees, who ha ve continued to show dedication and r esilience in these unprecedented times. 2021 star ted with encouraging lev els of domestic demand, par ticularly in US and Australian mark ets. Throughout the year w e ha ve seen a str ong correlation between the easing of restrictions and demand reco very . This corr elation was par ticularly e vident in Central American market s where booking v olumes hav e steadily gr own and in the second half of the year surpassed 2019 lev els. Pandemic mitigation measures and the roll-out of the vaccine pr ogramme has helped to bolster consumer confidence. Se veral southern European destinations e xperienced strong gr owth follo wing the reopening of bor ders in late spring. This steady gro wth continued until the latter par t of Nov ember when the Omicron v ariant saw a resumption of restrictions acr oss many destinations. Despite the subdued per f ormance in market s outside of these geographies, the response we ha ve seen to-date in r eopened destinations demonstrates the strong desir e our customers ha ve to tra v el and to Meet The W orld ® . Dividends and capital structur e In order to conserv e our cash resour ces, t he B oa rd believ es the continued suspension of cash dividends remains in the best inter ests of the business for the for eseeable future. Throughout the year , management conserved cash and implemented measures t o reduce fix ed and variable costs. The business continued to access go vernment suppor ts wher e av ailable. A €30 million fiv e-year term loan facility was agr eed in F ebruary 2021 with cer tain inv estment funds and accounts of HPS In v estment Par tners LL C (or subsidiaries or affiliat es thereof) which fur ther materially strengthened our financial position. Boar d composition The composition of the Board is fully compliant with the 2018 UK Corporate Gov ernance Code. The Board has under tak en an appraisal of the Directors, as w ell as an ev aluation of the per formance of the Board and each sub-committee, which concluded that the Board is functioning effectiv ely . 18 Strategic Report | Ho st el wo rl d Annual Report 2021 Chairman’s Statement continued Climate change Reflecting our commitment to a sustainable futur e, and in keeping with our UK listing and financial disclosure r equirement s, the business adopted the requir ements of the T askfor ce f or Climate relat ed Financial Disclosures (“T CFD”). In adher ence with T CFD we will disclose inf ormation across the f our k ey areas of: Go vernan ce, Strategy , Risk Management, and Metrics and T argets which ar e co ver ed fur ther on pages 49 to 52. Envir onmental, Social and Go v ernance (“ESG”) The business has work ed ext ensively this year to advance its ESG str ategy . W e recognise the impor tance of ESG in our corporate culture and mor e br oadly , the role that we pla y in driving sustainability within the industry. W e wer e therefor e pleased to announce our membership of the Global Sustainable T ourism Council (“GST C”) and look forwar d to seeing the work the business will do with GSTC to driv e sustainable trav el initiativ es. The business per f ormed a detailed assessment inv olving k ey stak eholder groups, employ ees, customers and hostel partners in the dev elopment of its ESG strategy . The output of t his assessment was mapped to the United Nation’ s Sustainable Dev elopment Goals (“SDG”) which helped identify strategic f ocus areas and a vision f or sustainability within Hostelworld, mor e details of which can be found on page 48 . Colleagues, customers and shar eholders I wish to thank our management team and my Boar d colleagues who work ed tir elessly throughout another difficult year f or their enthusiasm and commitment. While the outlook remains uncer tain, we ha v e successfully put in place business impro vemen ts that allows us to be optimistic f or the future. Ther e is huge pent-up demand f or tra vel and the in vestment w e hav e made lea ves us w ell placed to capitalise on this, as and when conditions allow . Finally , I would lik e to thank y ou, our shareholders, for y our ongoing support. Michael Cawley Chairman 30 March 2022 19 The Upcycled Hostel, Peru 20 Strategic Report | Hostelworld Annual Report 2021 Stay Open Venice Beach, USA 21 Chief Executive’s Revi ew: Gary Morrison While 2021 was a challenging year both f or Hostelworld and the global trav el industry, I am pleased to say w e saw a consistent reco v ery throughout the year in both bookings and rev enue versus 2019 sa v e for the last few w eeks wher e we saw tra vel concerns o v er the Omicron v ariant. I am also pleased to re por t that we made solid progr ess on all elements of our strategy during the year whilst continuing to significantly reduce our operating e xpenses versus 2020 le v els. Overall, I r emain confident that our loy al customer base has more desir e than ev er to trav el and meet other like-minded tra vellers once r estrictions are eased. The impro vement s we continue to mak e to our platf orm and our differ entiated gr owth strategy mean w e are well-positioned to capitalise on those opportunities as demand continues to return. A ctions in the light of t he continued As the pandemic continued throughout 2021 , we ha v e remained f ocused on supporting our stakeholders, increasing our liquidity and pr ogressing our strat egy . In par ticular , we continued to support our hostel par tners through v arious communication channels including hosting 40 webinars with more than 1 ,000 hostels and show casing hostels acr oss our k ey marketing channels. W e hav e also carried out numerous f eedback surve ys on ke y topics, leading to changes to our r eview pr ocesses, our par tner facing platf orm, and significant enhancements in the automated r epor ting tools w e pro vide to hostels. During the year w e also continued with our hostel industry recognition programme, the HOSCARs, to celebrate the world’ s most extraor dinary hostels and the incredible impact they ha ve had supporting their local communities. Overall, w e hav e continued to inv est hea vily in suppor ting the Hostel industry throughout the pandemic, with our (Hostel) Net Promoter Scor e incr easing 4 points to +47 in 2021 . Similarly , we ha v e been suppor ting our emplo yees throughout the pandemic, and recently launched more pr ogrammes to facilitat e agile working policies, working fr om abroad policy and paid w ellness and parental lea ve da ys help to pr omote flexibility and work -life balance when w orking from home. In parallel with these activities, we also took fur ther steps to str engthen our liquidity position through a combination of ongoing operating cost reductions and the successful negotiation of a new five-y ear €30 million term loan facility which w e drew do wn in F ebruary 2021 . These actions ensure that as things currently stand, we ha v e sufficient cash in reserve ev en with a prolonged period of depr essed demand. Finally , I am also pleased with the progress w e hav e made with regards t o strengthening our core business competitiveness throughout the y ear , and in par ticular the progress w e ha ve made with regar ds to our Meet The W orld ® gro wth strategy . Throughout the pandemic we ha v e sought to proactiv ely engage with our shareholders giv en the fast-mo ving envir onment we find ourselv es operating in and I w ould like t o thank all of t hem f or their continued suppor t through these challenging times. K e y operational highlights and r esults Similar to the initial reco very in Q3 2020 , we saw swift increases in demand in those destinations where trav el restrictions ha v e eased. In par ticular , 2021 star ted with a strong r eco very in Central America, and domestic demand in the US and Australia. In May and June, sev eral southern European destinations opened their borders with strong gr owth ov er the summer months. During the second half of t he y ear Central America surpassed 2019 lev els, with southern of 2019 lev els, until the latter par t of No vember / December where the Omicron v ariant saw a resumption of r estrictions in many destinations. Overall, w e continue to see net bookings gr owth mirroring changes in individual mark ets both positiv ely and negatively . Outside of these geographies, demand continued to remain depr essed. As the recov ery progr essed we ha ve seen se v eral factors impact our trading economics v ersus 2019 . In par ticular , av erage net booking values ha v e steadily reco ver ed to 2019 le vels driv en b y a fa vourable geographic mix, a reco very of underlying bed prices and longer length of stay bookings; which has been par tially off set by higher cancellation rat es (in par t driven b y a higher proportion of free cancellation bookings), a reduction in blended commission rates (driv en by the remo v al of Elev ate adverse FX mo v ements. Mark eting costs per net booking how ev er ha ve r emained elev ated v ersus 2019 22 Strategic Report | Ho st el wo rl d Annual Report 2021 Chief Executive’s Review continued driven b y lo wer con version rat es in destinations where some lev el of restrictions persist, higher cancellation rates (in par t driv en by a higher pr oportion of free cancellation bookings) and higher av erage cost per clicks (“CPCs”) driven b y geographic mix. Consequently , direct mark eting costs as a per centage of net re v enue remain significantly higher than 2019 lev els, although we e xpect these to gradually normalise as historic trav el patterns r esume. On the supply side, despite the continuing depressed demand during 2021 we ha ve only see n a very modest platform compar ed to le vels at the end of 2020 , driv en by continual sign ups to our platform. In addition, I am also encouraged to see our customers ar e continuing to book dorms in the majority of cases, with a steady reco very to wards dorm v ersus privat e booking lev els versus 2019 . Despite our significantly reduced cost base, w e hav e continued to strengthen all ar eas of our business during 2021 . Thr oughout the year we deliv er ed a significant number of core business impr ov ements designed t o impro ve mark eting capabilities, user e xperience and inv entory competitiveness. These impr ov ements included rewriting our cor e iOS and Android Apps t o enable specific featur es of our Meet The W orld ® gro wth strategy , replacin g our legacy payments stack with Stripe, and migrating our ov erall platf orm to the cloud. W e also made significant progress on our Meet The W orld ® gro wth strategy with the launch of Roamies in par tnership with G Adventur es to br oaden our product range, together with several social f eatur e experiments that confirmed the strong desire f or these featur es from our customer base, which we e xpect to launch in 2022. In 2022 we will continue our platf orm modernisation program with our main f ocus on transitioning our legacy backend t o a new operating platform which will lev erage sev eral “off the shelf” services available fr om our selected cloud services pro vider . This will fur ther strengthen our Core business, enable f aster e xecution of our gro wth strategy and reduce cost o ver the medium term. Our strategy As outlined in our Interim results pr esentation in August 2021 , our long-term gr owth strategy is f ocused on three pillars; relating t o impro ving the competitiveness of our core O T A business, e x ecuting our Meet The W orld ® gro wth strategy , and continued inv estments in platform modernisation. Ov erall, I am v ery pleased wit h the progress w e ha ve made acr oss all three pillars during 2021 . 1 . Impro ving the competitiveness of our cor e O T A business Our first strategic pillar is f ocused on continuing to impro ve our in v entory competitiveness through user experience enhancements, impr o ved mark eting capabilities and strengthening our position in the hostel software mark et. This pillar essentially builds on the initial roadmap f or gro wth programme launched in late 2018 . I am confident that our core business is no w materially stronger than Q4 2019 when w e returned the business to gro wth. F ollo wing our strategic inv estments in Counter App Limited (“Counter”), a low-cost pr oper ty management system designed f or the hostel market, and Goki PTY Limited (“Goki”), an inno vativ e digital lock and smar tphone app based k ey system in 2019 , I am pleased to report we ha ve no w successfully transitioned more Hostelworld’ s legacy pr operty management system (“PMS”)) to Counter . Counter also continues to add more hostels t o its platf orm at an impressiv e rate. Goki has also seen increased inter est in their products, especially from the hotel sector , as trav el has r esumed and the demand for contactless solutions has gro wn. The Goki management team expect this tr end to continue, with hotels accounting for the majority of sales ov er the coming years. As this sits outside the scope of Hostelworld’ s business, w e ha ve r estructured our relationship with Goki; reducing our shar eholding fr om remaining shar es of the company w e do not own in 2023 . 2. Meet The W orld ® gro wth strategy Our second strategic pillar is f ocused on ex ecuting our Meet The W orld ® gro wth strategy . First outlined in our full year r esults pr esentation in March 2020 , t his strategy will deliver gr o wth by pro viding a br oader catalogue of rele vant e xperiences bey ond hostel accommodation to our core business cust omer base. The addition of pioneering social featur es enables our customers to explor e the world together with other likeminded tra v ellers. Consistent with our strategy , we announced the launch of Roamies in December 2021 . Roamies is a new hostel f ocused adventur e tour product de v eloped with G Adventures, the w orld’ s largest small gr oup adventur e tour pr ovider . This new collaboration 23 Hosho Paris Sud Porte D’Italie, France 24 Strategic Report | Ho st el wo rl d Annual Report 2021 Chief Executive’s Review continued launched with a collection of 38 tours across 50 hostels in 15 countries; with depar ture dat es star ting in May 2022. The pr oduct is unique in combining the spontaneous social experience pr ovided b y hostel accommodation and guided adventur e tours fulfilled by G Adv entures. Roamies will also benefit from a wide distribution strategy , with tours av ailable through Hostelworld and G Adv entur es online channels, and appro ximately 60 , 000 offline tra vel agent s worldwide. In parallel with broadening out our product catalogue, we also conducted se v eral social featur e experiment s during 2021 designed to help hostellers meet other trav ellers they want to hang out with while tra velling. Overall, w e are v ery pleased with t he r esults of these experiments, which confirmed our cust omer’ s strong desire f or these types of featur es which we e xpect to launch throughout 2022. 3. Platf orm modernisation Our third strategic pillar r elates to the ongoing modernisation of our underlying platform t o enable us to suppor t f aster ex ecution acr oss both our core Hostelworld platf orm and Meet The W orld ® gro wth strategies; as well as r educing o verall de velopment and technology costs in the medium term. T o that end, earlier this year w e embarked on an ambitious plan to migrate our entir e company to the cloud; and in the second half we started a second initiative to replace our legacy back end platf orm. I am pleased to report that we hav e substantially completed the cloud migration project and begun decommissioning our data centres. W e are also ex ecuting the new platform build plan to schedule and expect to start migrating our PW A, iOS and Andr oid Apps to the new platform in early Q3 ne xt year . Business model W e are a leading global OT A focused on the hostel market. Our cor e online platf orm pro vides the oppor tunity f or predominately host el owners, as w ell as other low-cost accommodation pro viders, to advertise their accommodation to independent trav ellers looking f or unique and social experiences. W e use data science and AI to effectively tar get our ke y customer segments. Our diff er entiated social featur es connect lik e-minded trav ellers, positioning us as the go to OT A for hostellers and our extended product off ering builds customer lo yalty b y enhancing their trav el experience. Most of our re venue is generat ed through taking a commission from bookings made through our technology platf orm, including the Hostelworld website, and via our Apps. This efficient business model has very fa vourable w orking capital attributes and strong cash con ver sion. In parallel with helping millions of hostel focused trav ellers find and book hostel accommodation, w e are also committed to building a better w orld in ev erything we do. W e are incr easing our focus on impr o ving the sustainability of the hosteling industry, and in January 2022, became a member of the Global Sustainable with South Pole a global climate solutions provider t o offset our 2021 gr eenhouse gas emissions. Inv esting in people Over the last 12 months we continued to tak e steps to strengthen our e xecution capability through the implementation of a simpler and more efficient gr owth orientated organisational structur e. In particular t his new structure or ganises the company’ s marketing, product, de velopment and analytics r esour ces into autonomous gro wth teams; who are r esponsible f or driving the most impor tant KPI’ s of the Company . Overall, I am v ery pleased with t he benefits that the new organisation model has deliv ered – including increased f ocus and impr ov ed speed of ex ecution on our gro wth strategy which I expect to continue during 2022 and bey ond. W e have also continued to w ork remot ely for the majority of the year in r esponse to gov ernment guidelines and increased our support for our emplo yees through the launch of a holistic employ ee well-being strategy during these very challenging times . In particula r , the program f ocuses on maintaining our employee’ s physical, mental, social, and financial w ell-be ing throu gh webinars with outside pr ofessionals, the extension of flexible and r emote working policies, the pr ovision of online social ev ents, and additional w ell-being leav e days and paid par ental leav e. W e also introduced a new which offers global support across all our locations. Overall, our team has w ork ed incredibly har d through an extended period of ongoing uncertainty, and I w ould like t o take this oppor tunity to thank all our emplo yees for their enduring commitment and lo yalty . 25 Dividends and capital allocation In light of the significant uncer tainty presented b y to suspend the final 2019 cash dividend, and in June 2020 we suspended cash dividends f or the for eseeable future. G iv en the continued lack of medium term visibility and the necessity to conserve our cash resour ces, the Board and I belie ve that the continued suspension of cash dividends is in the best interests of the business and our shareholders f or the for eseeable future. The Board and I continue to belie v e the appropriate allocation of capital resour ces is critical to ensuring the long-term gro wth of the business and optimisation of our shareholder r eturns. Outlook While the shor t to mid-term outlook for the tra vel industry remains challenging and uncer tain, w e continue to expect the pace of r ecov ery to be driven b y the easing of trav el restrictions in individual market s, which we hope to see accelerat ed with the continued rollout of v accination programs w orldwide. Whilst this recov ery is likely to pr ogr ess throughout 2022 the Board remains confident in the r esilience of our business model, and the growth potential of our Meet The W orld ® strategy as demand reco v ers. In the light of continued market uncertainty, the Gr oup will not pro vide full year guidan ce until such time as the overall The Board will continue to e valuat e internal and external oppor tunities that will deliver v alue f or shareholders, in par ticular the significant potential to enhance futur e gro wth through our Meet The W orld ® strategy . I remain confident that Hostelw orld will emerge fr om to seize mark et opportunities when normal travel patterns resume. Gary Morrison Chief Executiv e 30 March 2022 Cozybaze, Indonesia 26 Strategic Report | Hostelworld Annual Report 2021 Financial Review: Caroline Sherry Net bookings 1.5m 2020: 1.5m Marketing costs per net booking * €8.77 2020: €5.20 Loss for the year €36.0m 2020: €46.9m Adjusted EBITDA loss * €17.3m 2020: €17.3m Cash and cash equivalents €25.3m 2020: €18.2m Net revenue €16.9m 2020: €15.4m Operating expenses €49.4m 2020: €50.2m Basic loss per share 30.96c 2020: 45.68c Adjusted EBITDA margin * -102% 2020: -113% Net asset position €67.2m 2020: €97.9m Net average booking value “ABV” * €12.11 2020: €9.33 Operating loss for the year €33.1m 2020: €50.3m Adjusted loss per share * 22.12c 2020: 20.76c * The Group uses Alternativ e Performance Measures (‘ APMs’) which are non-IFRS measures t o monitor the per f ormance of its operations and of the Group as a whole. These APMs along with their definitions are pr ovided in the Appendix “ Alternate P er f ormance Measures” which f orm part of t he Annual Report. 27 Re venue and operating loss Rev enue f or the period was €16 .9m, an increase EBITD A loss of €17 .3m throughout the year r esulted in cur tailed bookings and re venue r eco very . W e are how ev er pleased to report a consistent reco very in booking demand in destinations when and where r estrictions eased. Net bookings at 31 December 2021 totalled 1 . 5m, booking volumes. Eur ope, ex cluding United Kingdom, recor ded a strong r eco very in the second half of 2021 strongest r ecov ering mark et on a full year basis wher e 2019 lev els in second half of 2021 . Cancellations, for bookings cancelled under the free cancellation policy , amounted to 0.2m (€3 . 6m) cancellation rate as a por tion of r ev enue r emains elev ated v ersus normalised lev els. A t 31 December 2021 , w e held €3 .0m of cust omer deposits r elating to bookings made under the free Net A verage Booking V alue (“ ABV”), the av erage value paid by a customer f or a net booking, incr eased by mix, as a higher proportion of bookings came from higher -value destinations such as Eur ope and Nort h America, and also from the reco v ery of underlying bed prices and longer length of stay bookings. These benefits w ere partially offset by higher cancellation rates, a reduction in blended commission rat es and for eign ex change mo vement s. The uncer tain tra vel landscape was the primary driver of weak er con version le vels acr oss all sour ce market s. In addition, costs ha ve also been impacted b y higher cancellation rates, a combination of a higher proportion of free cancellation bookings, incr eased cancellation rates and higher av erage cost per click (“CPC”) driv en by geographical mix. Ov erall, the cost per net booking that marketing costs will normalise as normal tra v el patterns resume. 2021 dir ect mark eting costs totalled Excluding the impact of dir ect marketing cost s, administration expenses ha ve r educed y ear on year The Group has a vailed of the Irish Re venue tax warehousing scheme and def err ed payment on all Irish employ er tax es since F ebruary 2020. W e continue to monitor and comply with the appropriate Re venue guidelines applicable to this scheme. W e a vailed of assistance under the Coronavirus Job R etention Scheme in the UK until May 2021 and continue to a vail of the Exceptional it ems Exceptional it ems are identified due to their natur e or materiality to help the reader f orm a better view of ov erall and adjusted trading. The Gr oup incurred relate t o staff costs incurred as part of a gro wth orientated organisational r edesign. The new structure or ganises the Company’ s marketing, product, de velopment and analytics emplo y ees into autonomous gro wth teams. The structure was initiated in the prior year . Shar e based payment In 2021 the Group recognised an e xpense of €2.2m payment transactions. During 2021 the Company granted a r estricted share award (“RSU”) to select ed employ ees, including the ex ecutive dir ectors and members of the management team. T otal cost amounted to €1 .4m. 28 Strategic Report | Ho st el wo rl d Annual Report 2021 Financial Review continued The balance relates t o the share-based payment char ge arising on the issuance of options in accordance with the Group’ s Long- T erm Incentive Plan (“L TIP”) and Sa ve As Y ou Earn (“SA YE”) plan. Loss per shar e Basic loss per share f or the Group was €30 .96 cent Adjusted loss per share was €22. 12 cent per share The weighted a v erage number of shares in the period shares issued at the balance sheet date was 116 . 3m Intangible asset Carrying value of intangible assets at 31 December 2021 totals €79 .4m, a decr ease of €6 .9m from the prior y ear . The Group capitalised de velopment cost s of €4 .4m in Group r ecorded an impairment char ge of €0 .4m in the current y ear for a specific pr oject f ollowing a management decision to cease ongoing in vestment. In 2020 the Group recor ded an impairment of €15 . 0m on its intangible assets associated with Hostelbook ers and Hostelworld.com. Deferr ed tax The Group is carrying a deferr ed tax asset of €8 .4m in the current y ear for capital allo wances not utilised and av ailable f or future off set. Deferr ed tax assets ar e recognised t o the extent that it is probable that future taxable pr ofits will be a vailable against which any unused tax losses and unused tax credit s can be utilised. F uture taxable pr ofits f or reco verability of the def erred tax asset ha v e been estimated using the Board appr ov ed five-y ear plan and management expect to utilise the def erred tax asset ov er a fiv e year period. Lease liability A t the balance sheet date, the carr ying v alue of the lease liability totalled €0 . 1m (2020 €4 . 3m). Curr ent year lease liability r elates to the Group’ s lease commitments f or office space in Por tugal and China. On 20 August 2021 the Group signed a lease assignment on its Dublin office exiting it s long-term commitment. On 1 August 2021 the Group exite d its existing lease commitment in London. The Gr oup entered agr eements f or smaller spaces in both locations as par t of its h ybrid w orking strategy . Net debt and financing A t the balance sheet date cash and cash equivalents Current y ear amount relat es to a €30m debt facility with cer tain inv estment funds and accounts of HPS Inv estment Partners LLC (or subsidiaries or affiliates thereof). An amount of €28 . 8m, net of original issue discount, was receiv ed on 23 F ebruary 2021 . The prior year amount r elated to a short-term in voice financing facility . The Gr oup also had a €7m re v olving credit f acility in place at 31 December 2020 which was undrawn. In January 2021 amounts owing on the shor t-term in v oice financing facility w ere r epaid in full and the Group signed a deed of release on the re volving cr edit facility . In January 2021 t he Gr oup agreed r evised co v enant terms with AIB on a rental guarantee f or the Central Park office, Dublin, the Group’ s headquar ters wher e financial cov enants and par ent company guarant ee wer e waived. In August 2021 as part of the lease assignment the Group agreed a r e vised rental guarantee on One Central Park with AIB, which is in turn guaranteed b y the US Parent company of the lease assignees. A t 31 December 2021 the Group was in compliance with all financial cov enants which applied at that date. 29 Corporation tax The Group r ecorded a corporation tax char ge of €0 . 1m charge r elates primarily to our UK and Portuguese operations where tax losses fr om our Irish operations cannot be utilised. Prior year trading losses arising in 2020 had been carried back to 2019 and set against taxable profit s arising in that year resulting in a r efund owing to the Gr oup in respect of tax paid in 2020 . Related party transactions Related party transactions are disclosed in note 22 to the Group financial statements. Dividend The Board does not e xpect to pay a cash dividen d under its curr ent policy in respect of the 2021 financial year . An y payment of cash dividends will be subject to the Group generating pr ofit after tax, the Group’ s cash position, any r estrictions in the Group’ s banking facilities and subject to compliance with Companies Act 2006 requir ements r egarding ensuring sufficiency of distributable reserves at the time of pa ying the dividend. Caroline Sherry Chief Financial Officer 30 March 2022 The Space, Nicaragua 30 Strategic Report | Hostelworld Annual Report 2021 Principal Risks and Uncertainties The Board tak es overall r esponsibility f or identifying the nature and e xtent of the risks to be managed by the Gr oup to ensur e the successful delivery of its strategic and business priorities. The Audit Committee monitors certain risk areas and the internal control system, as set out in the repor t on go vernance. The Gr oup’ s risk regist er identifies ke y risks including any emer ging risks and monitors pr ogr ess in managing and mitigating these risks and is re view ed regularly dur ing the year b y the Audit Committee and at least annually by the Board. Emer ging risks ar e identified fr om areas of uncertainty, which ma y not ha v e a significant impact on the business currently but may ha v e the potential to adv ersely aff ect the Group in the future. The Group’ s risk register pr ocess is based upon a standardised appr oach to risk identification, assessment and re view with a f ocus on mitigation. Each risk identified is subject to an assessment incorporating lik elihood of occurrence and pot ential impact on the Group. The Group’ s risk register is subject to r e view by the Ex ecutiv e Leadership T eam (‘EL T’) prior to r epor ting to the Audit Committee and Board. The Board has r e viewed the principal risks and uncer tainties against the on-going impact accordingly t o incorporate the adverse eff ect the pandemic has had on the business and result s of operations. The Board also r ecognises the continuing lev els of uncertainty and risk of fur ther pandemics and together wit h management continues to closely monit or and assess the Group’ s risks. In their re view the Board ha ve also tak en into account in flationary pressur es which contribute t o a rising cost base. The most material risks facin g the Group are set out in the f ollo wing table, together with comments on ho w they ar e managed to minimise their potential impact. While the follo wing table is not prioritised nor an exhaustiv e list of all risks that may impact the Gr oup, it is the Board’ s view of t he principal risks at this point in time. Individually or together , these risks could aff ect our ability to operate as planned and could ha v e a significant impact on re v enue and shar eholder returns. Additional risks and uncertainties, including t hose that hav e not been identified to dat e or are curr ently deemed immaterial, ma y also, individually or together , hav e a negativ e impact on our r ev enue, r eturns, or financial condition. The Board also consider ed its obligations in r elation to pr o viding both the annual viability and going concern statements and it s conclusions can be f ound on pages 137 and 138 and note 1 to the consolidated financial statements r espectiv ely . 31 No Category Description and Impact Management and Mitigation Direction of change 1 Macro- Economic Conditions Rev enue is derived fr om the wider leisure trav el sector . measures, including tra vel r estrictions, implemented by go ver nments around the has resulted in an unpr ecedented decline in consumer spending, trav el and related activities. This pandemic has adversely affected our business and the outlook for the future remains uncertain at present with the extent of the pandemic and the effect on our business still unknown. The impact is dependent on future de velopment s such impact of vaccines and the duration and sev erity of trav el bans, and lockdo wns put in place by go vernment s. It is not yet known when international tra v el will return to normal lev els. Our business has always been impacted significantly by perceiv ed or actual economic conditions outside of our direct contr ol including slowing or negativ e economic gro wth, rising inflation rates, rising unemployment rates, w eak ening currencies, higher taxes or tariff s which all can impair customer spending and adversely aff ect trav el demand. In addition, ev ents such as unusual or extr eme weather , travel r elated pandemic mentioned abov e or trav el-relat ed accidents can disrupt tra vel and r esult in declines in trav el demand. Because these ev ents or concerns ar e largely unpr edictable, influencing customer demand and behaviour , th ey c an adver sel y affect our business and results of operations. The abov e and other macroeconomic conditions can also cause significant volatility in f oreign e xchange rat es between the US dollar and the euro, the British pound sterling and other currencies. Such volatility can ha ve a material impact on trav el demand and trav el patterns therefor e impacting r ev enue. In circumstances wher e ev ents cause a material decline in consumer trav el behaviours and patterns on a global management will take necessary actions to conserve cash. There has been an incr eased and on-going focus b y the Group on liquidity management. New sources of debt financing w ere r eceived in F ebruary 2021 which provides additional flexibility to support the Group as it reco vers Our business is a global one, with a dispersed population of users, and a geographically dispersed set of destinations. Whilst market conditions may decline in certain regions, the globally diversified natur e of the business be both flexible as to destination and are less risk adverse. FX mov ements ma y impact trav el decisions and trav el patterns b y customers, but typically there is a degree of count erbalancing mov ement e.g. the weak ening of the US dollar against the euro means few er US tr a v el ler s visiting the eurozone, but decr eased mar ketin g costs from US dollar denominat ed suppliers such as Google. Rising inflation rates can impact customer discretionary spending and reduce their ability to tra vel. W e feel this is offset in the near future b y a pent -up demand from a lack of tra vel through 2020 and 2021. FX translation risk is mitigated through matching for eign currency cash outflo ws and f oreign currency cash inflo ws and by minimising holdings of ex cess non-euro curr ency abov e anticipated outflow r equirement s. 32 Strategic Report | Ho st el wo rl d Annual Report 2021 Principal Risks and Uncertainties continued No Category Description and Impact Management and Mitigation Direction of change 2 W orking Capital Inv estment and Going Concern on the travel sect or and a very significant impact on working capital r esources. Our ability to access liquidity is constrained envir onment and the availability of funding. With low re venue v olumes there is a risk that the Group does not hav e the financial resour ces to pay it s liabilities as they fall due. Liabilities hav e also increased due to rising inflation rates. This also directly impacts our ability to inv est and gro w which is constrained by our financial r esources. implemented a number of ke y controls t o address an y working capital concerns including rolling w eekly cash for ecasting and took measures to secur e additional debt and equity financing in 2020 . In F ebruary 2021 the Group receiv ed €28 .8m, net of original issue discount, on a €30m term loan facility . Ne vert heless, the extent of the business, results of operations, cash flo ws and gro wth prospects ar e uncer tain. Our term loan facility cr eates repa yment obligations and cov enants, r epor ting to the involv ed br okers and lenders and requir es constant monitoring of the Group’ s lev erage position and liquidity metrics. Without a return to gr owth it is not cer tain that the Group can meet the covenant s set out under the term loan facility agreement. assessment taken b y the Directors of principal risks facing the Group including those that threaten its business model, futur e per f ormance, solvency or liquidity . New funding was r eceived through an equity raise and debt financing. The Group has performed weekly f or ecasting of cash resour ces and monitored closely the cov enants and obligations caused b y the term loan facility agr eement in place. Monthly reporting has been put in place to ensure the terms of the term loan facility and r elated reporting requirements ar e adhered t o. K ey metrics and r eporting are review ed regularly in the Group’ s management accounts and at management meetings. Procedur es and monitoring controls ar e in place to ensure timely r eporting to involv ed brok ers and lenders regar ding compliance obligations. 33 No Category Description and Impact Management and Mitigation Direction of change 3 Data Security W e ar e an innov ative technology compan y dependent on sophisticated software applications and computing infrastructure. The security of the confidential business information w e generate when engaging in e-commerce and the personal data we capture fr om customers and employ ees is essential to maintaining consumer and trav el service provider confidence in our services. As an online platform, we ar e constantly exposed to cyber security- related threat s in the form of internal and external attacks or disruption on our systems or those of our third-par ty suppliers. changed the risk profile of data security and gives rise to ongoing data security challenges and a widening threat landscape. In par ticular , cyberattacks (including ransomware) on or ganisations hav e increased Return to W ork Protocol (Ireland) and W orking requir e us to capture fr om colleagues and office visitors, new categories of sensitiv e personal health data that we would not hav e obtained befor e. The General Data Protection Regulation (“GDPR”) places significant data security and regulatory compliance obligations on us when processing such data. The Group tak es the protection of our customer and employ ee personal data very seriously and has a series of controls and monitoring in place to ensure compliance. W e continue to maintain, policies and a gov ernance information se curity framework to comply with laws that apply to our business, meet ev olving stak eholder expectations, and support business innovation and gro wth. W e ha ve a r obust and comprehensiv e data privacy , security and pr otection compliance programme in place which includes a supplier onboarding pr ocess inv olving our infor mation security and data protection compliance teams. Our information security contr ols are aligned t o NIST Cyber Security Frameworks. W e are PCI compliant with the guidelines of t he pa yment card industry . W e w ork closely with internal audit functions, and external consultant s where r elevant, t o ensure that our system ar chitectures, w ork processes and policies ar e in place to pro vide as much protection as possible. W e ha ve a data pr otection compliance framework in place that is aligned to our on-going obligations under the GDPR, ePrivacy Directiv e and other applicable laws. W e hav e inv ested and continue to in vest in our o wn data protection compliance r esources t o monitor and ensure compliance including a bespok e data privacy management softwar e tool. Our Data Protection Officer (“DPO”) is r esponsible f or informing, advising and monit oring compliance on all matters relating t o the protection of personal data in the Group. Our DPO is suppor ted b y designated data prot ection champions through our core business unit s including information security , HR, customer services, marketing and product. W e regularly re view our employ ee information secur ity policy and we continue to in vest in inf ormation security training for all staff so that they r emain vigilant and aler t to the possibility of cybercrime 34 Strategic Report | Ho st el wo rl d Annual Report 2021 Principal Risks and Uncertainties continued No Category Description and Impact Management and Mitigation Direction of change 3 Data Security continued In 2021 , we migrat ed par ts of our e-commerce platf orm to the Cloud. Whilst risk is minimal, there still is risk that security gaps may manif est during the migration. Our IT platforms must be scalable, r obust and reliable. If our systems can’t k eep up with growing demand, this could aff ect our ability to deliver gr owth. W e r eview ed the impact on ser v ers of increased r emote access loads with teams working fr om home. W e issued guidance to personal data and data security implications of the pandemic and new remote w orking along with enhanced procedures f or accessing company data while w orking remotely . W e ha ve engaged with an expert solution pro vider in the architectur e and pro visioning of cloud services, as well as a cer tified security company f or independent vulnerability and security scanning. W e pr ovide data security training f or all staff . W e perform due diligence of our third-party suppliers who process our personal data including heightened inf ormation security due diligence. 4 Cyber The Group lik e other companies is susceptible to cyberattacks which could compromise the integrity of our systems and the security of our data. Cyberattacks by individuals, gr oups of hackers and state-sponsored or ganisations are increasing in fr equency and sophistication and are constantly ev olving. The Group expects these issues to become mor e difficult to manage as the tools and techniques used in such attacks become ev er more sophisticated. There is a risk that the Group’ s current technical, administrative and ph ysical IT security framework ma y not be successful in safeguar ding our inf ormation assets against cybersecurity attacks, past, present and in the future, which ma y result in bad actors stealing customer inf ormation or transaction data or other Group proprietary information. There is a risk that the Group’ s insurance policies will hav e cov erage limits and ma y not be adequate to reimburse us f or all losses caused by a cybersecurity br each. The Group e xpend significant resour ces to protect against cybersecurity br eaches, and regularly incr ease our security-related expenditur es to maintain or increase our systems’ security . The Group ha ve an arrangement in place with a specialist third party firm to monitor network activity and to detect, neutralise and r epor t any unusual activity to corporat e IT . IT policies, procedur es and cyber security initiatives ar e re viewed and updated r egularly to address the changing r egulatory environment, including data privacy r egulations and to mitigate the ev olving cyber security threat. Dedicated IT personnel with appropriate expertise and qualifications in information security are emplo yed b y the Group. 35 No Category Description and Impact Management and Mitigation Direction of change 5 Competition The risks posed by competition could adversely impact our mark et share and future gr owth of the business. While we f ace a number of ke y risks under competition, in each the competitor we ref erence is lik ely to ha ve mor e resour ces than we do to enable them to compete more eff ectively . Ke y areas ar e as follo ws: • Supply: competition from dir ect competitors, alternativ e accommodation operators and disruptive new entrants leading to a loss of k ey accommodation suppliers. • Customers: changes in customer behaviour leading to a loss in cust omer traffic and demand for our services and/ or incr ease in customer acquisition costs. Consumer pref erences could change as may be disadv antageous to our business and may benefit e xisting and new competitors. With global trav el restrictions, there may be a shift t owar ds domestic trav el and alternativ e accommodations. • There has been a rise in cancellations and vouchers issued in lieu of cash refunds f or the Group and with our competitors. This increases competition for the Group as it locks cust omers into those companies issuing the vouchers, thereby pot entially reducing the demand for the Group’ s offering. Our primary mitigation is the execution of our strategy and to capitalise on our unique market position. This in volv es: • T argeting new customer acquisition and gro wing the most profitable customer cohor ts (with f ocus on Customer Lif etime V alue / Customer Acquisition Cost) b y optimising ov erall marketing in v estment; • Strengthening the Group’ s core platf orm in order to impr ov e its fle xibility and the experience of our customers; • Upgrading our third-party platform connectivity in order to def end our competitive position; • F ocus on expanding our global f ootprint, meeting emerging demand while also strengthening our ov erall product off ering; • Lev eraging the capabilities of our par tnerships to ensur e we ar e delivering best in class and most advanced tech- based solutions for our cust omers and hostel partners; • Evaluating strategic opportunities to diversify awa y from e xclusiv e dependence on O T A business and dev elop a broader experiential based tra vel off ering to our customers; and • Roll out commercial agr eements to secur e competitive rates and in v entory across our property base. 36 Strategic Report | Ho st el wo rl d Annual Report 2021 Principal Risks and Uncertainties continued No Category Description and Impact Management and Mitigation Direction of change 6 People The Group is dependent on ability to attract, retain and de velop cr eative, committed and skilled employ ees so as to achiev e its strategic objectiv es. pandemic, the Group took actions to reduce headcount in 2020 . The Gr oup also under took se veral or ganisational change programmes in the last 12 months to ensure the organisation is designed t o optimally deliver our strategic priorities. In addition, the 2021 global increase in potential to furt her disrupt the business. All of this presents se veral significant risks, including increased attrition and difficulty retaining v aluable ke y employ ees, weak ening of our employ er brand and ability to attract high caliber talent, potential negative impact on emplo yee morale, productivity and o verall engagement, an adverse impact on our cultur e, and resour ce constraints; an y of which could adversely impact our business and reputation. W e ha ve a k ey dependency on attracting and retaining technical emplo yees in dev elopment, quality assurance, product management and engineering to facilitate delivery of project s and maintain site and infrastructure stability . Due to incr eased packages in the technology sector , t her e is a risk that attrition will continue to rise unless we continue to k eep pace with the market and ensur e our total rewar d off ering for new and e xisting hires is on-par with the industry standard. The Group is taking meaningful action to r etain employ ees and has implemented HR policies and people processes to enable r etention of ke y talent; namely the introduction of an agile working policy , a w orking from abr oad policy and paid wellness and par ental leav e days t o promote fle xibility and work -life blending. In Q4 2021 , the Group also br ought contractual annual leav e entitlements in line with market to remain competitiv e and to driv e engagement among the team. As the Group re-open offices, the lease on the Dublin premises in Leopar dstown has been relinquished, in f av our of a W e W ork co-working space in the city centre. A blended approach to r emote/office w orking has been established across all locations to allow f or furt her flexibility on an ongoing basis for emplo yees – t eams can decide what approach w orks best for them. The Group has further increased focus on understanding the drivers of emplo yee engagement, through regular engagement surveys and ar e committed to taking action to impro ve emplo y ee engagement lev els. W e ha ve r ecognised that an increased inv estment in career de velopment and training of our people is ke y to emplo yee engagement and in 2022 we will be r ecruiting a dedicated learning and dev elopment specialist within our HR team. Robust external benchmarking has ensur ed there is better understanding of the competitiveness of the rewar d off ering. Employ ees identified as ke y talent/critical skills wer e awarded v arious retention plans in a bid to retain k ey talen t. In H2 2021 , the Group br ought forward their planned 2022 compensation re view in response to attrition rat es and external market f actors. The Group curr ently operates from fiv e global offices, which pro vides flexibility f o r l oca tio n of ke y talent, thereb y opening up a l arger talent pool to select from. Our loc ation and resour cing strategy remains under re view on an ongoing basis to optimize the talent pool. A non-ex ecutive dir ector fulfils a workf or ce engagement role as set out in the 2018 UK Corporate Gov ernance Code. 37 No Category Description and Impact Management and Mitigation Direction of change 7 Search Engine Algorithms A large pr opor tion of traffic to our w ebsites is generated through internet sear ch engines such as Google, from non-paid ( organic) searches and through the purchase of trav el related k e ywor ds (paid search). W e theref ore r ely significantly on practices such as Search Engine Optimisation (“SEO”) and Search Engine Mark eting (“SEM”) to impro ve our visibility in r elev ant search results. Sear ch engines, including Google, frequently update and change the logic that determines the placement and display of results of a user’ s search, which can negatively impact placement of our paid and organic r esults in search r esults. Google algorithms have become v ery sophisticated and able to determine better quality driv en by machine learning capabilities. W e risk being significantly behind in our marketing strategy and unable to be competitiv e in the current envir onment. F urt hermor e, in respect of paid sear ch, our costs to impro ve or maintain our placement in search r esults can increase. This could result in a decr ease in bookings and thus re venue and an incr ease in costs. It could also result in ha ving to replace fr ee traffic with paid traffic, which would negatively impact margins. Continued inv estment is needed to remain competitiv e. The Group in vest s heavily in r ecruiting and retaining k ey personnel with the requisite skills and capabilities in paid and non-paid search. This in-house expertise is supplemented by the deployment of leading technology tools. The search mark eting team w orks closely with Google to understand any changes in functionality to the AdW ords p l at f o rm so tha t we can a vail of an y efficiencies in o ur se arc h traffic. The Group participates in alpha and beta featur e tests that give Host elworld first mov er advantage with new functionality that can help drive efficiency . W e continue to enhance our skillset s in house and capabilities by partnering with third party vendors to enhance our search engine optimisation. 38 Strategic Report | Ho st el wo rl d Annual Report 2021 Principal Risks and Uncertainties continued No Category Description and Impact Management and Mitigation Direction of change 8 Third P arty Reliance Supply: W e r ely on hostel accommodation pro viders to pro vide us with our inv entory. Any limitations put in place b y accommodation pro viders limit the inv entory that we sell. impact on trav el demand, the trav el industry and the economy, has incr eased the risk of insolvency or disruption to the ability of our trav el service provider par tners to pr ovide services. With our hostel partners in par ticular , there is increased risk of pr oper ties going out of business, no longer operating in the hostel category, or r emoving significant host el elements from their pr oper ties. Systems and service providers: W e rely on a number of ke y third-party providers. An y interruption in service from any of these pro viders may lead to a loss in r ev enue, loss in site and app functionality , increased input from customer services and engineer time and ultimately if we e xperience multiple failur es we risk r eputational and brand damage. failur es, a risk that would be exacerbated if there are further global travel r estrictions in response to new wa ves (such as the Delta The Group r elies on payment pr ocessors and payment car d schemes to ex ecute cer tain components of the pa yments process. W e generally pay these third par ties inter change fees and other processing and gatewa y f ees to help facilitate pa yments fr om customers to our trav el service provider partners. There is a risk that the Group ma y not maintain its relationships with these third par ties on f av ourable terms or that these transaction fees imposed b y these pro viders are incr eased. Supply: W e w ork closely with par tners and hostel associations to monitor de velopments in the market. Our curr ent focus is on measur es taken b y hostels f or managing social distancing and ensuring appropriate h ygien e measures are in place. W e continue to communicate actions we ar e taking to support any changes properties may be for ced to mak e. F or our systems and service pro viders we focussed on maintaining good r elationships with vendors and ensuring contractual obligations dictate minimum functionality and speedy resolution of issues. W e put aler ts in place to immediately capture an y do wntime and replicate as much functionality as possible in-house. W e w orked to ensur e there ar e tight service level agr eements in place and there is ov ersight of product r oadmaps. changes in workload can ha ve a negativ e impact on platform a vailability with third party suppliers but also that quick intervention can be taken to mitigat e any issues. The Group has made pr eparations in the event hostel partners and/or key service pro viders fail. The Gr oup closely monitors the financial health of key suppliers and taking st eps to mitigate risks. 39 No Category Description and Impact Management and Mitigation Direction of change 9 IT Platforms and technological innov ation Over r ecent years the ev er -incr easing pace of change of new technology , new infrastructure and new softwar e offerings hav e changed how customer’ s resear ch, purchase and e xperience trav el. Notable shift changes include mobile networks, mobile applications, meta-search pr oviders, display adv er tising and social communities. Unless we continue to sta y abreast of technology innov ation and change, we risk becoming irrele vant to the modern customer . T echnology evolv es rapidly , and updates can become quickly obsolete. W e f ocus on staying curr ent with new trends in technology dev elopment and customer behaviour . W e in vest a significant amount of our product and user e xperience functions on resear ch and dev elopment and interacting with similar companies both within and external to trav el. The Group has continued with the ongoing modernisation of our underlying platform t o enable us to support faster ex ecution across our core platf orm. W e also le verage the capabilities of partnerships to ensure w e are deliv ering best in class and most advanced tech-based s o lu t i on s f o r o u r customers and hostel partners. 10 Climate Change, Sustainability an d Corporate Social Responsibility Climate change and sustainability continue to be areas of incr eased focus f or the Group and ar e fur ther ev olving as areas of heightened concern with consumers and stakeholders. Physical climate change risks such as extr eme weather ev ents could aff ect our inv entory competitiveness and r esults of operations. In addition, transitional climate change risks such as changes in stakeholder e xpectations, trav el patterns, technologies, policy and regulation ma y affect the Gr oup and results of operations. There is a r equest for mor e accountability from our customers, emplo yees, other stakeholders as to what the Gr oup is doing to limit its dir ect and indirect impact on climate change. There is a risk that w e do not meet shareholder e xpectations regar ding our target setting and per f ormance against creating a mor e sustainable operating envir onment. Climate change issues may impact tra vel decisions and trav el patterns b y customers but is mitigated to the extent that our business is a global one, with a dispersed population of users, and a geographically dispersed set of destinations. As an ecommerce business based in fiv e office locations around the world and under 300 employ ees, whilst our carbon footprin t is relativ ely small, we r ecognise that the Group has a role to pla y in prot ecting our envir onment. F or this reason, we ha v e continued to make a concer ted eff ort to offset our carbon footprint thr ough various initiativ es across our business, including: (i ) reducing our r eliance on printing by promoting a paperless office en vironment; (ii ) encouraging third parties to do everything electronically , including in voicing and contracting (using DocuSign); (iii ) putting provisions in place t o promote recy cling across all our office locations; (iv) focusing on energy and natural r esource conservation e.g., our offices hav e stop taps for water consumption and controlled lighting and air conditioning; (v) encouraging employ ees to use more sustainable modes of public transpor t (including the LUAS and the Cycle2W ork Scheme); (vi ) becoming a signator y in 2020 of the Global T ourism Plastics Initiative led b y the UN Environment pr ogramme and the W orld T ourism Organisation; and (vii ) Joining t he Global Sustainable T ourism Council (‘GSTC’) whom w e will partner and collaborate with to drive sustainable trav el initiatives acr oss the trav el industry. 40 Strategic Report | Ho st el wo rl d Annual Report 2021 Principal Risks and Uncertainties continued No Category Description and Impact Management and Mitigation Direction of change 10 Climate Change, Sustainability an d Corporate Social Responsibility continued Customers demand and expect the humane treatment of animals and the respect f or animal welf are. As an industry leader , we hav e a responsibility to tak e the lead on ensuring that when we empow er our customers to Meet The W orld ® , that this experience is done with respect, humility and awareness f or the world’ s people, animals, communities and the envir onment. W e ar e opposed to any experience that promotes and in v olves intentional direct contact with wild animals in their natural habitat, including, petting, feeding, riding animals or similar practices. W e tak e our lead on animal welf are fr om the Five Fr eedoms of Animal W elfar e and are committed to ensuring that all our accommodation and experience partners work to ensur e the highest quality of life f or any animals in volv ed. Our goal is to encourage our hostel partners to sign up with the aim of reducing their single use plastics consumption. W e ha ve also tak en steps to reduce our plastic consumption as a reduce our plastic consumption through initiatives such as pur chasing reusable water bottles for the office, ordering fr esh fruit and other perishables from suppliers who use fully recy clable packaging. Our contracts with accommodation and experience partners contain contractual commitments (de veloped b y ref er ence to the Five Fr eedoms of Animal W elfare) on the par t of properties and experience pro viders to comply with all applicable animal welfar e laws and ensure that no animals shall be harmed as a result of an y experiences, activities or e vent s promoted, managed, arranged or or ganised by them. Any properties or experiences that are found to be in violation of these r equirements or that other wise dir ectly or indirectly threaten the welfar e and/or conservation of animals will be remo ved fr om our platform. video confer encing platform t echnology to help reduce the impact of working acr oss our various office locations. When the world went into lock do wn follo wing the outbreak of the pandemic, we inv ested further in our technologies to enable our emplo yees to continue communicating with each other and keep our business in operation during lock -down. 41 No Category Description and Impact Management and Mitigation Direction of change 11 Regulation Regulatory and legal requir ements and uncer tainties ar ound these could subject the Group to business constraints, incr eased regulatory and compliance costs and complexities or otherwise harm our business. Our business is global and highly regulated and is e xposed to issues regar ding competition, licensing of local accommodation and experiences, language usage, web-based trading, consumer compliance, tax, intellectual property, trademarks, data protection and inf ormation security and commercial disputes in multiple jurisdictions. consumer rights regulat ors on the online sales practices of tourism and trav el focused companies and ma y hav e an impact on the Group’ s brand if the Group’ s sales practices wer e inv estigated and assessed to be non-compliant. under employment and health and saf ety laws to protect the saf ety , health and welf are of colleagues in the workplace. The GDPR imposes par ticular compliance response measur es with risk of fines and other enforcement mechan isms being imposed by a data pr otection authority . Our position on customer refunds ma y give rise to customer complaints to consumer regulators such as the Irish Competition and Consumer Protection Commission or UK Competition and Market s Authority who hav e a range of enfor cement pow ers including fines. Payment Services Directiv e T wo (“PSD2”) is an EU Directiv e that applies to payment services in the EU. The deadline f or the Group to incorporate an d be compliant with this Directive was 31 December 2020 . PSD2 fur ther regulates the authentication process f or accepting credit car ds and which we e xpect to result in incr eased compliance costs and complexities, including those associated with the implementation of new or advanced internal controls. The Group is also subject to pa yment card association rules and obligations under our contracts with the card schemes and our payment car d processors, including the Payment Car d Industry Data Security Standard (“PCI DSS”). The Group has an internal legal team an d external legal advisors to advise the Gr oup on current and anticipated legal r equirement s. Our legal advisors monitor and advise on regulatory matters in locations in which w e pro vide services with a par ticular focus on those areas where w e hav e local operations. Suitable experienced r esources ha ve been engaged to ensure consumer compliance requir ements, compliance with the Listing Rules, the Financial Repor ting Council Corporate Gov ernance Code and the Market Abuse Regulations. A detailed analysis of the Group’ s approach to offering v ouchers to certain customers concluded that the Group’ s approach was aligned with the principles reflected in the EU Commission recommendations on v ouchers for cancelled package tra vel and transport services published on 13 May 2020 . In line with guidance from the Irish and UK gov ernments, w e hav e dev eloped a robust protocols ar ound returning colleagues back to the office environment. W e ha ve r olled out an effectiv e refund management and risk policy and procedur e to deal with individual consumer complaints and those from consumer regulator s. Our response to request s and complaints is inf ormed by a cross-departmental risk assessment. 42 Strategic Report | Ho st el wo rl d Annual Report 2021 Principal Risks and Uncertainties continued No Category Description and Impact Management and Mitigation Direction of change 11 Regulation continued The EU Package T ravel Directiv e (the “PTD”) sets out broad r equirement s such as local registration, certain mandatory financial guarantees, disclosure r equirement s and other rules regulating the pro vision of trav el packages and linked tra vel arrangement s. The PTD also creates additional liability f or a pro vider of trav el packages for per f ormance of the travel services within a packaged trip under cer tain cir cumstances. Conditions in the insurance market ar e difficult at present and, in line with general market tr ends, we ha ve seen an incr ease in insurance costs. Changes to the rules regardin g the use of “cookies” on our website and mobile applications hav e the potential to impact on our ability to serve our customers. Cookies are small te xt files that are stor ed on a user’ s computer or mobile device that are used to stor e or gather information (e.g., re member log-on details so a user does not hav e to re-ent er them when re visiting a website or opening an app ) and market to cust omers. Cookies are v aluable tools for the Gr oup that we use to enhance our customers’ experiences and incr ease conv ersion. The GDPR and ePrivacy Directiv e requir e “opt-in” consent bef ore cer tain cookies can be placed on a user’ s computer or mobile device. The Group is also subject to new sign-up regulations. Our Global Mark ets T eam (“GMT”) currently maintain a list of cities that require a hostel licence t o be pro vided befor e we add a pr operty to our site. The city list can change depending on the local in country regulations. Any addition of new licence or regulatory material that needs to be collated upon sign up, will slow do wn the operations of GMT and could impact the number of properties added to t he site each year . If there is a reclassification of what is a ‘hostel’ in any locality , t his could impact how w e choose to display pr operty categorisations on our site. Also, ev en if a licence is collated upon sign up, the laws within each city can change, resulting in a closure of pr oper ties and r emov al of beds from Hostelw orld. The Group ha ve been w orking with the Central Bank of Ireland to ensur e the Group is complaint with the PSD2 EU Directive. W e ha ve appointed e xternal insurance brok ers to help us ensure w e ha ve the appropriate Gr oup insurance in place on the best possible terms. W e ha ve e xpanded our ability to offer customers their pref erred method of payment in the most efficient manner on all our platforms. W e process more of our transactions on a merchant basis wher e we f acilitate payment s through the use of credit car ds and other alternative pa yment methods (such as PayPal, Alipay , ApplePay and Google Pay). 43 No Category Description and Impact Management and Mitigation Direction of change 12 Brand and Reputation Hostelworld is the w orld’ s leading OT A focused on the hostel mark et. W e r ely on the strength of our brand in the market to attract customers to our platf orm and to secure bookings. Consumer trust and confidence in our brand is theref ore essential to ongoing re venue stability and gro wth. Brand marketing spend was a cost measures. As tra vel r estrictions lift we must be competitive with our mark eting spend and focus on brand r ecognition with consumers as a ke y priority . differ ent strains, there is a risk of furt her global lockdo wns which could lead to a rise the uncer tainty around the ability of our customers to tra vel and operational issues connected with the restar t of global tra vel (including flight cancellations and hostel closures) could lead to us being o verwhelmed with customer service queries and complaints. W e ar e focused on in vesting in our cor e products, platf orm and technological capabilities to support our brand proposition and awareness as w ell as actively managing our brand por tf olio through social media channels. W e ha ve internal and e xternal PR advisors to support us to manage any PR incidents. Our customer service team strive to ensure that customers ha ve a positiv e experience at all stages of interacting with us. The Group has a Crisis Management Policy in place which includes appropriate escalation. to offer r efunds and credit s for cancellations effectiv e refund management and risk policy and procedur e to deal with individual consumer complaints and those from consumer r egulators. Our response to r equests and complaints is informed b y a cross-departmental risk assessment. W e ha ve continued this approach into 2021 . 13 Business Continuity Failure in our IT systems or those on which we r ely such as third party hosted ser vices could disrupt av ailability of our booking engines and payment s platforms, or av ailability of administrative services at our office locations. As an e-commerce or ganisation, the Group’ s business continuity plan (“BCP”) focusses on the continued operation of consumer facing products and r elated services to ensure our e-commerce trading systems can continue t o process bookings. The Gr oup has work ed with external advisors to pr oduce robust documented business continuity and disaster reco very capabilities. The ongoing modernisation programme of both Corporate IT and the website to cloud based services increases resilience to business interruption. W e updated our standar d supplier terms to pro vide more r obust and comprehensiv e contractual pro visions regar ding for ce majeure (co vering epidemics/ pandemics) and BCP (requiring suppliers to implement the pro visions of our BCP at any time). The Group’ s BCP and disaster recov ery plan was successfully implemented to support t he this plan and the suppor ting backup and failo ver f acilities are r egularly re viewed to ensure their continued validity . 44 Strategic Report | Ho st el wo rl d Annual Report 2021 Principal Risks and Uncertainties continued No Category Description and Impact Management and Mitigation Direction of change 14 T axation Due to the global nature of our business, tax authorities in other jurisdictions may consider that cer tain taxes ar e due in their jurisdiction. Such a scenario may arise f or example because the customer is resident in that jurisdiction or the travel service is deemed to be supplied in that jurisdiction. In other situations, a charge to tax ma y arise where the tax authorities consider an establishment to exist in that country by vir tue of some activity being carried on there. If those tax authorities take a differ ent view than the Group as to the basis on which the Group is subject to tax, it could result in the Group having t o account for tax that it currently does not collect or pay , which could hav e a material adverse eff ect on the Group’ s financial condition and results of operation if it could not reclaim tax es already accounted for in the jurisdictions the Group considers rele vant. F urt hermor e, the ev er -changing tax landscape (i.e. changes to tax legislation or the interpretation of tax legislation or changes to tax laws based on recommendations made b y the OECD in relation to it s Action Plan on Base Erosion gov ernments) ma y result in additional material tax being suffer ed b y the Group. Cer tain countries ha ve tak en steps to introduce a digital services tax to address the issue of multinational businesses carrying on business in their jurisdiction without a physical presence and ther efor e generally not subject to income tax in those jurisdictions. These digital services taxes are calculated as a per centage of re venue rather than income or profits. W e are currently monitoring the introduction of the digital services taxes, and its impact on our Group as trade and r ev enue (on which the tax is levied) continues to pick up. In collaboration with our tax advisors, a large prof essional services firm, we assess possible tax impacts in the jurisdictions in which we operate to ensure our tax obligations are aligned to the operational nature of our business. Our tax risk is managed by the employment of suitably qualified personnel and close engagement with big four tax advisors. W e r eceive briefings to Boar d by our tax advisors, where r equired, on tax risks and any changes in tax legislation which im pact s on current tax structur e of the Group. 15 Impact of terrorism threat on leisure tr av el The continued threat of terr orist attacks in ke y cities and on aircraft in flight ma y reduce the appetite of the leisure trav eller to under tak e trips par ticularly to certain geographies, resulting in declining r ev enues. Increased incidence of terr orism impacts consumer confidence and can shift demand away fr om cer tain destinations. to be both flexible as to destination and ar e less risk adverse. Selina Kalu Yala, Panama 45 46 Strategic Report | Hostelworld Annual Report 2021 Viability Statement The objective of the viability statement is f or the Direct ors to r epor t on their assessment of the prospects of the Gr oup meeting its liabilities o ver the assessment period, taking into account the Group’ s av ailable financing f acilities, principal risks and uncer tainties outlined abov e, r ecent financial per f ormance, outlook, and current financial position. The financial position of the Group, its cash flo ws, liquidity position and debt f acilities are outlined in the Financial Re view on pages 26 to 29 . scenario analysis. These f orecast s hav e evolv ed o v er time to r eflect booking reco v ery assumptions, project ed re v enue flo ws, cost cutting measures tak en and pr ojected net cash flows fr om operations. The f or ecasts included a v ailable sources of funding including a €30m five-y ear term loan f acility with cer tain inv estment funds and account s of HPS Inv estment Par tners LLC ( or subsidiaries or affiliates thereof). In December 2021 the Board appr ov ed a base and str ess case budget to the end of March 2023 and a fiv e-y ear outlook based on the best information a vailable at that time. The base assumptions of these budgets are conservativ e: bed prices ar e capped at 2019 prices and booking reco v ery is built on a regional destination basis fle x ed for timing of borders r eopening to Int ernational trav el as they w er e at the time. The budget did not assume any incr ease in commission rates and cancellation rates wer e f or ecast to be elev ated v ersus normal rates. In addition, no incr emental r ev enue was included f or an y existing or futur e par tnerships. The Board appr o v ed an additional scenario in January 2022 which modelled t he impact of a sustained period of muted trading. W e hav e utilised this worst -case trading scenario within our viability re view . T o make the assessment of viability additional scenarios ha v e been modelled, based upon a number of the Group’ s principal risks and uncer tainties which are document ed on pages 30 to 44 . These scenarios r epr esent sev er e but plausible cir cumstances that t he Gr oup could experience. In it s determination of viability , t he Dire ctors ha ve also r epor ted on the Group’ s ability to abide by the term loan f acility cov enants in place as disclosed within Note 1 to the financial statements. The Direct ors hav e determined that a fiv e-y ear period to 31 December 2026 is an appropriat e period ov er which to pr o vide its viability stat ement as this is t he period re view ed b y the Board in the budgeting and for ecasting pr ocess. 47 Link to Risk Macroeconomic risk Consequences direct mark eting costs but carrying the current lev el of operating costs f or a 12-month period. As this scenario is modelled off the worst-case trading scenario, the Group considers this to be an unlikely out come. In reality the impact of such a scenario would be managed through a combin ation of reduced dir ect marketing spend and further operational cost cutting measures. Nonetheless from re view of this scenario the Group continues to hav e sufficient cash reserv es to continue in operation. Scenario 2 GDPR fine, cyber security br each or other major one-off cost Link to Risk Data security , cyber , regulation Consequences There ar e two significant consequences f or a GDPR br each: turnov er , whichever is gr eater F or the Group, the max exposur e for a GDPR br each is €20m. The lik elihood of this event is r emote. The Group tak es data prot ection very seriously and has a designated Data Prot ection Officer and a series of controls and monitoring is in place t o ensure compliance. The Gr oup has considered the fine within its cashflows in 202 4 (assuming that an investigation f or a major br each would tak e appro ximately two y ears) and is comf or table that such a fine would not jeopar dise the viability of the Group ov er the next fiv e years. Scenario 3 Losing ke y talent Link to Risk People Consequences Our Group is v ery dependent on its people. The loss of a group of our committed and skilled w orkf orce would lik ely impact our re v enue projections, incr ease our marketing spend if w e lose talent with requisite skills and capabilities in paid search bidding, and also incr ease our ov erall operating expenses as w e cov er recruitment f ees f or additional resour ces. Our budget assumes an increased r ecruitment budget in 2022, as we look to gr o w resour ces in some ke y areas. T o address this risk fur ther we ha ve tripled our r ecruitment and training budget in 2022 and Group r emains viable ov er the next fiv e years. Having consider ed these stressed scenarios and based on their assessment of prospect s and viability abov e, the Board confirms that it has a reasonable e xpectation that t he Gr oup will be able to continue in operation and meet its liabilities as they f all due. In their assessment the Board also re viewed adher ence to financial co venants connected with the term loan facility . The Directors also consider it appr opriate to pr epare the financial statement s on the going concern basis, as explained in the Basis of Preparation paragraph in Not e 1 to the consolidated financial statements. 48 Strategic Report | Ho st el wo rl d Annual Report 2021 Sustainability Envir onmental, social and go v ernance (‘ESG’) principles ar e an integral par t of the Group’ s corporate philosoph y . W e are committ ed to conducting our business in the right way and driving meaningful change. With t he support and oversight of the Boar d, we significantly in the business and identifying rele vant en vir onment, social and go ve rnance issues that roadmap f or ESG implementation and repor ting: Completed a curr ent state assessment of existing sustainability policies, practices and pr ocedures within the Group through a desktop re view and assessment of the Group’ s per formance against the ISO 26000 Guidance on Social Responsibility Standard; Completed a stak eholder mapping ex ercise to en sure the identification of ke y internal and e xternal stakeholders t o inv olve and engage with on the Group’ s sustainability agenda; Conducted a materiality assessment to identify the most material topics of importance to the Group and its k ey stak eholders. Material topics w ere scor ed accor ding to agreed criter ia with appropriate weightings applied and rank ed accor ding to lev el of inter est and impor tance to both internal and external stak eholders; Identified strategic f ocus ar eas and a vision for sustainability within Hostelw orld. Our ESG strategy focusses on thr ee ke y areas, as identified thr ough the materiality assessment ex ercise: our customers, our people and our par tners; Mapped strategic f ocus ar eas and ke y topics of importance to UN Sustainable Dev elopment Goals (‘SDG’) to ensure alignment. F uture sustainability per f ormance, KPIs and future tar gets established b y the business will align with t hese SDGs wher e possible; Engagement of our Executiv e Leadership T eam (‘EL T’) and Board t o align and appro ve the Gr oup’ s ESG strategy; Established a roadmap f or the Group’ s ESG strategy implementation and reporting plan and gov ernance structur e. The ex ecution of this roadmap will be suppor ted b y a cr oss-functional ESG working gr oup; and Joined the Global Sustainable T ourism Council (‘GSTC’) whom w e will partner and collaborate wit h to drive sustainable tra v el initiatives acr oss the trav el industry. The next chapter on our sustainability journe y W e are committed to progr essing our ESG roadmap, implementing our ESG strat egy and establishing reporting mechanisms for suitable metrics and tar gets. W e will endeav our to communicate mor e transparency to our stakeholders as w e pr ogress our sustainability journe y . 49 Task Force on Climate-related Financial Disclosures Hostelworld Gr oup plc has complied with the requir ements of LR 9 . 8 . 6R by including climat e-related financial disclosures consistent with the T CFD recommendations with two e x ceptions. Firstly, within metrics and target s whilst we ha ve made significant progr ess in 2021 and hav e disclosed our Gr eenhouse with the EU Emissions T rading Scheme, we ha v e not included all metrics that the Group will ultimately use to assess climate-r elated risks and oppor tunities in accordance with its strategy and risk management process. Secondly , and related to this point, we ha ve not disclosed the specific targets that the Group will use to manage climate r elated risks. Our target s will be used to assess our per f ormance and progr ess. W e want to build upon our existing data and set meaningful metrics and target s for the Group that ar e suitable to assess and manage rele vant climate-r elated risks and oppor tunities. This is not an ex er cise we tak e lightly , and we will continue to engage with our customers, hostel par tners and other stak eholders during 2022, as we ultimately w ork to wards the EU tar get of net zer o emissions by 2050 , t he EU goal to r educe carbon of net zer o emissions by 2050 . W e are committed to publishing the related metrics and tar gets set f or the Group as soon as practicable. Inv estment in a carbon off set por tf olio: In 2022 we ar e delighted to r epor t that Hostelworld engaged with South Pole, a global climate solutions pro vider , to offset our 2021 gr eenhouse gas emissions from tra vel and offices. In t otal we ha ve off set 104 tCO 2 e. W e have in vest ed in a project f ocussed on c on s e rv in g the Southwestern Amazon fr om defor estation un de r a sustainable for est management plan (“SFMP”). Certified by the F or est Stewardship Council, the SFMP is a tool for conservation and f or est carbon stock maintenance to reduce def or estation rates. The project is r egister ed under the V erified Carbon Standar d which is the largest and most notable standard f or natur e-based solutions. In addition, the project is regist ered under the Social Carbon Standard which was de veloped b y the Ecológica Institute (Brazil) in 1998 to certify positive community and envir onmental impacts. T CFD Reporting framework: A re view was under tak en during the year of the T CFD reporting framework to assess our alignment with its disclosure r equirement s across the areas of go v ernance, strategy , risk management, and metrics and tar gets. W e identified actions from this re view to furt her integrate climate-relat ed matters into our business pr ocesses. The steps tak en to disclose and report in accordance with the TCFD recommendations and r ecommended disclosures ar e outlined below . Away with the fairies, South Africa 50 Strategic Report | Ho st el wo rl d Annual Report 2021 Task Force on Climate-related Financial Disclosures continued The Board’ s oversight The Board of Dir ectors is responsible f or the ov ersight of climate-related risks and opportunities impacting the Group. They in turn delegate some elements of their responsibility , as set out in the diagram below . Board of Dir ectors: Ther e has been an increased f ocus on climate-r elated matters at Board le vel as the landscape continues to ev olve with furt her r egulatory development s and changes in stakeholder e xpectations. The expertise of the Board on climate risk and ESG-related matt ers continues to be enhanced through regular interactions with management and through membership of Board members on boar ds of other large companies with significant internal ESG-related subject matt er expertise. In 2021 t he Boar d appro ved an amendment to it s T erms of Refer ence to specify that the review of the eff ectiveness of the risk management and controls processes in the Gr oup as they related t o climate change was a matter reserved t o the Board. In 2021 the Board also appr ov ed an amendment to its Boar d Char ter to specify that the Board will consider climate-change related risks when reviewin g and guiding strategy , major plans of action, risk management policies and business plans and when ov erseeing major capital expenditur e, acquisitions, and divestitur es. The Board and Audit Committee r eceived and consider ed updates on climate-r elated issues on two occasions during 2021 . The Audit Committee is responsible f or re viewing and appro ving the content of our TCFD disclosur es and for r eviewing the Group’ s Climate Risks and Oppor tunities Register twice y early . The Audit Committee is also responsible f or monitoring the dev elopment of metrics and achiev ement of target s that will be set by the Groupon an on-going basis. In 2021 the Audit Committee and the Board appro ved an update to the Audit Committee’ s T erms of Refer ence to specify the Audit Committee’ s responsibilities in respect of T CFD compliance. See Audit Committee report pages 96 to 102. The Nomination Committee is responsible f or Board appointments and succession planning. In 2021 , the Nomination Committee appro ved a dir ector skills matrix which included climate risk and sustainability experience and expertise as matters current non-ex ecutive Boar d members and prospectiv e non-ex ecutive Boar d candidates will be assessed on. The Nomination Committee and the Board appr ov ed an update to the Nomination Committee’ s T erms of Refer ence during 2021 to pr ovide that the Nomination Committee will, in identifying suitable Board candidat es, consider candidates with experience in the areas of risks and oppor tunities which ar e climate-change related. See Nomination Committee report pages 90 to 95. Management’ s r ole Management is responsible f or managing on a day-t o-day basis the climate-relat ed risks and oppor tunities faced b y the Group and f or delivering the r oadmap to achiev e the climate risk management strategy set by the Board. Our functions are r esponsible for supporting the business in achieving their climate risk and sustainability targets: • Public Relations is responsible f or external communications in regar d to our climate risk and sustainability strategy; and • Group Finance is r esponsible f or suppor ting the business to understand the financial impacts of climate risk plans and producing e xternal ESG metric reporting and disclosures. A T CFD steering gr oup comprised of repr esentatives from Gr oup Finance, Global Market s, Legal and Inv estor Relations o versees pr ogress against the TCFD r ecommendations and the publication of our annual disclosure, and r epor ts t o the Chief Financial Officer . The TCFD st eering group will also k eep up to da te with regulatory requir ements through access to external advisors and e xternal briefings. 51 2. Strat egy The Group’ s TCFD Steering Gr oup work ed with Ernst and Y oung Ireland Climate Change Sustainability Services and carried out extensive stak eholder interviews to facilitate a climate-r elated risk and oppor tunities assessment to understand wher e and how climate-r elated matters ma y aff ect our business The TCFD St eering Group performed scenario planning sessions with our global markets and analytics t eams, to re view potential risks o ver diff er ent time horizons. The analysis cov ered geographic ar eas/countries which wer e currently or lik ely to be most aff ected by climat e change based upon external published data and re viewed our 2019 booking numbers t o identify any material risk areas and pot ential financial implications. It was appropriate t o take a pr e-pandemic view as it is more r epresentativ e of r egular trading patterns. Our analysis incorporated acute and chr onic physical risks, including hurricanes, flooding, wildfires, rising sea lev els and heat wav es, as w ell as transition risks, such as changes in stakeholder e xpectations, tra vel patterns, policy and regulation. The result s and findings wer e presented t o the Audit Committee (which in turn updated the Board) and climate-relat ed matters wer e discussed, and priorities identified for T CFD alignment, which included implementation of the TCFD go ver nance structure and steering group, finalisation of the climate-r elated risk and oppor tunities r egister and identification of ke y areas f or furt her scenario analysis. W e identify, assess and manage climate-r elated risks through the inclusion of differ ent business functions in our process to ensur e all business activities ar e captured. The basis of our process is captur ed in our climate- related risk and opportunities register and the Group’ s Audit Committee re views the register twice y early . Climate-relat ed risks and oppor tunities aff ect our business model in a positive wa y . Such examples include resour ce efficiency which has led to cost sa vings and benefits to our w orkfor ce through a h ybrid working model, the ability to promote sustainable hostels through the annual HOSCAR awards and b y joining the Global Sustainable T ourism Council (‘GSTC’) whom we will par tner and collaborate with to driv e sustainable trav el initiativ es across the trav el industry . From a climate risk perspective, our initial assessment has not identified any immediate mat erial risks that could significantly impact our business model. @kolbilloyd 52 Strategic Report | Ho st el wo rl d Annual Report 2021 Task Force on Climate-related Financial Disclosures continued The Group’ s business model is resilient with regar ds to climate change in that our business is global, with a dispersed population of users, and a geographically dispersed set of destinations. W e also have the agility to change and/or target cust omer relationship management (‘CRM’) capabilities, marketing spend and ev olve our in v entory pipeline in line with current and emerging climate risk tr ends. With continued focus on climate-r elated matters, we plan to set out mor e in-depth climate scenario analysis for k e y territories going f orward and as w e continue to refine our understandin g of climate-related risks and oppor tunities, w e will consider the potential impacts and opportunities on our business, strategy and financial planning. 3. Risk management During the year , we assessed and e valuated our climate-relat ed risks and oppor tunities identified ov er the shor t, medium and long-term (including physical and transitional risks and opportunities). The Group’ s climate risk and oppor tunities register was presented t o and discussed by the Audit Committee. The identification and management of climate-relat ed risks follo w our existing r isk -management proce ss. In addition, as a principal risk, ‘climate change and sustainability ’ is monitor ed by the Boar d, Audit Committee and Ex ecutive Leadership T eam to ensure it is embedded within strategic decision-making. See ‘Principal Risks and Uncer tainties’ section pages 30 to 44 and ‘Corporate Responsibility’ section, pages 54 to 61 , f or management of climate-risks identified through waste and ener gy reduction initiativ es and minimising business trav el. The T CFD Steering Group will consider and incorporat e actions requir ed to comply with mandatory requirement s and reporting obligations will be monitored on an on-going basis. As ref er enced in the Governance section abov e, the TCFD St eering Group will k eep up to date with regulatory requir ements through access to e xternal advisors and external briefings and will complet e a regulatory re view annually . 4. Metrics and targets As outlined in the Corporate Social Responsibility section on pages 60 and 61 , the Greenhouse Gas (‘GHG’) Emission statement outlines our management of GHG emissions and energy consumption and discloses scope 1 , scope 2 and scope 3 emissions. W e have made progr ess during 2021 by mo ving to a W e W ork office and an agile way of w orking which has helped reduce our GHG emission and ener gy consumption. In 2022 Hostelworld engaged with South Pole, a global climate solutions pro vider , to off set our GHG emissions from tra vel and offices. W e will continue to re view and identify metrics and set meaningful target s that are suitable for the Gr oup to assess and monitor climate- related risks and opportunities. The Twizt Lifestyle Hostel, Cambodia Our people make everything possible In what has been, and remains a challenging time, our people have risen to the challenge with their exceptional knowledge, skills and talent. Our culture is one which supports our people in growing, developing, and performing at their best in a fast- paced and empowering environment. 53 Our People Employees per location Total 215 Dublin 126 Porto 46 London 21 Shanghai 15 Sydney 3 Germany 3 Italy 1 Average age 35 years Average Length of service 3 . 5 years No. of Nationalities 31 Non-Executive Directors: 4 54 Strategic Report | Ho st el wo rl d Annual Report 2021 Corporate Social Responsibility Br eakdo wn of gender split acr oss Ex ecutive Dir ectors, Non-Ex ecutiv e Dir ectors & Ex ecutive Leadership T eam (“EL T”) Number Male F emale T otal Male F emale Chairman and Executiv e Dir ectors (“EDs”) 2 1 3 Non-Executiv e Dir ectors (“NEDS”) 2 1 3 Executiv e Leadership T eam (Includes EDs) 5 2 7 Direct Reports of Executiv e Leadership T eam 29 19 48 Other Staff 78 82 160 on our people, our communities, our hostel partners and our business in 2021 . People Our people are fundamental to our success and the creation and de velopment of amazing pr oducts and services. T o ensure a “people first” approach we set specific organisational objectiv es and k ey r esults (‘OKRs’) around emplo yee en gagement and attrition in 2021 . Employ ee engagement Employ ee engagement is a k ey priority and an indicator of our future gr owth and performance. As par t of our ongoing listening strategy , w e continued to measure employ ee engagement throughout 2021 and conducted one full engagement survey and tw o pulse engagement engagement survey . W e saw positive impr ov ements across all f actors in the survey with the highest impro vement s achiev ed in action, compan y confidence and leadership. While strengths wer e identified in ar eas around r emote w orking, work and lif e blend, engagement management and teamwork and o wnership, there is oppor tunity to impr ov e our scor es on learning and dev elopment and this is likely to ha v e the highest positive impact on our o v erall engagement score. The result s of each survey w ere shar ed company-wide and then communicated in greater depth at functional and team lev el. Actions w ere tak en at a local and organisational le vel t o impro ve on lo w scoring ar eas. T o put a greater f ocus on learning and de velopment, our mid-year r eview pr ocess was centr ed around dev elo pment con v ersations and employ ees w ere encouraged to discuss their dev elopment needs and set de velop ment f ocused objectiv es as par t of their per f ormance dev elopment con versations. W e also completed a training needs analysis with each of our functions to better understand the dev elopment and training needs within each function and how best to address them. The need for mor e clarity ar ound career pr ogression was another area highlighted b y employ ees and the development of our beha vioural competency framework will act as the f oundation to creating career paths and career pr ogr ession frameworks. Throughout 2021 w e continued to enhance our o verall employ ee value pr oposition through our v arious people initiatives. Looking to 2022 we will continue t o take action t o positively impact emplo y ee engagement and fur ther strengthen our emplo yee v alue proposition. continued to pose in 2021 , it was important to us that we continued to enable people t o be at their best and fost er a suppor tiv e culture f or all. In line with public health guidelines, remote/home working r emained the norm in 2021 . Location dependent, and as and when restrictions allo wed, w e facilitat ed a working wher e this was the preferr ed approach b y our employ ees. F or the first time in eighteen months a small number of our people wer e able to attend the office in person. F or some of our new er team members this meant being able to meet their teammates in person for the first time, f or others it was an oppor tunity to properly r econnect with their teams and internal stakeholders aft er eighteen months. 55 A gile appr oach to working In 2021 we communicated our h ybrid appr oach to working longer term ( once local restrictions allo w). W e will remain remote as the default option fr om day to day . Howe ver , we believ e it’ s impor tant we spend time working together in person when w e need to. This means people will attend the office where they need to collaborate or wher e it makes sense t o see each other face to face e.g. f or strategic planning, t eam meetings/ev ents, pr oject work and mor e f ormalised employ ee/manager one to one meetings such as per f ormance dev elopment con versations. Our people can choose where they w ork f or the remainder of the time, with most opting for r emote/home working. Our hybrid appr oach to w orking fur ther strengthens our employ ee value pr oposition and giv es our people the flexibility they need to w ork at their best. G iven our plan to adopt a hybr id working appr oach, in 2021 we do wnsized both our Dublin and London offices to smaller premises which better suit our e v olving needs. W e maintained our agile approach to working in 2021 , whereb y our people could tak e a flexible appr oach to their working hours to get the right work -life blend. W e continued to encourage t he practice of “quiet W ednesdays” , allowing e veryone unint errupted time to focus on tasks without the distraction of internal meetings where possible. Under our working fr om abroad policy , some people av ailed of the oppor tunity to w ork from abr oad in 2021 . This policy was intr oduced in 2020 as par t of our agile working appr oach and gives our people the oppor tunity to work r emotely fr om another country for a small period of time, where it was possible to facilitate. Recognising the impor tance of an appropriat e home office setup, we continued to pr o vide our home office financial suppor t. This pr ovides an allo wance to wards kitting out a home office. W e also asked our people to complete a w orking from home er gonomic self - assessment to understand and alleviat e any risks. Health and well-being can pose to our people, their well-being and their family life, w e intr oduced additional leav e days in 2021 . Separate to their annual leav e entitlement, our people could av ail of five paid w ell-being da ys throughout the year f or times when they needed some headspace to disconnect, relax and r echarge themselv es. In addition, parent s wer e offer ed ten paid par ental leav e da ys to take thr oughout the year to help with childcare and home schooling in the midst of the pandemic. This initiative was v ery well r eceived b y our people with a total of 733 w ell-being da ys taken and a total of 327 paid parental lea ve da ys tak en throughout 2021 , highlighting this was an impor tant featur e within our employ ee value pr oposition. In 2021 we launched our new w ell-being strategy focusing on f our k ey pillars; ph ysical, mental and emotional, social, and financial health. Under the strategy , w e dev eloped a monthly well-being calendar pro viding regular advice, support, reading materials and vir tual e vents t o attend under each of the four pillars as well as cr eating awareness under each of the four pillars to support our people in maintaining their emotional and physical health and well-being. In 2021 we also intr oduced a new employ ee assistance programme (‘EAP’) partner which offers global support across all of our locations. Our EAP is a fr ee, confidential counselling and well-being support ser vice that is av ailable to our people, their par tner /spouse and dependent children o ver 16 still living at home. The EAP is av ailable 24/7 , 365 da ys per year . Communication Understanding the impor tance of maintaining enhanced communication during remote/home w orking, in 2021 we continued to host our virtual townhalls on a bi-weekly basis. This enables us to connect as a company on a r egular basis and ensures e v eryone is kept up t o date on business per f ormance, k ey priorities and progr ess made throughout each quarter . W e continued to use our townhalls to celebrate achiev ements and celebrate our f ormal r ecognition programme high fly er award winners. Our townhall also pro vides our people a chance to shar e what is on their minds and pose a question to our ex ecutive leadership team (‘EL T’) through our question f orum. 56 Strategic Report | Ho st el wo rl d Annual Report 2021 Corporate Social Responsibility continued W e also continued to issue our employee newslett er on a regular basis and our “Remot e Community Hub” channel through Microsoft T eams - a dedicated channel to connect with each other while we could not physically be together in our offices continued to play a k e y role in 2021 . Some key initiativ es of the Remote Community Hub in 2021 included virtual themed quizzes, monthly vir tual tearooms wher e all our people are in vited to join f or a friendly chat, a walking challenge and the launch of Hostelworld’ s book club. The Remote Community Hub continued to share tips and advice on w ork/lif e balance, keeping fit and looking after one’ s mental healt h. In 2021 we continued to host virtual fireside chats. Fireside chat s give our people insights int o the experiences and car eers of individuals from a v ariety of backgr ounds and industries. 2021 saw Evan Cohen and Carl G. Shepherd, tw o of our Non-Ex ecutive Directors each att ended a fireside chat along with subject matter experts across a range of industries. People manager eff ectiveness W e continued to deliver people manager effectiv eness webinars and w orkshops in 2021 as par t of our people manager framework which defines the attributes of a great people manager and encourages our people managers to bring the framework to lif e in their day-to-da y interactions with their teams. W e hosted a number of vir tual sessions on topics such as objectiv e setting, giving great f eedback and understanding the Group’ s employ ee value pr oposition when hiring. A ttracting and r etaining talent A ttracting amazing talent has been a k ey priority f or 2021 . T aking a strategic approach to where w e hir e our people, we e xplored the option of hiring future employ ees in countries outside of wher e the Group was located. T o suppor t us in hiring the best talent, we intr oduced psychometric and ability assessment s as par t of our hiring process. Using the data gathered, it helps us determine if a candidate is a suitable fit f or the role they are being consider ed f or and also identifies dev elopment areas that w e can assess fur ther at the interview stage. T o remain competitiv e in attracting and r etaining the best talent we continued to benchmark our t otal rewar d offering against the mark et. W e review ed and enhanced sev eral k ey policies to ensur e they ar e competitive ac r os s all our locations, furt her incr easing our employ ee value pr oposition. Our maternity lea ve po lic y wa s impro ved and all f emale emplo yees with one year’ s service are now entitled to Compan y maternity pa y during their maternity leav e (pre viously emplo yees needed to hav e tw o years’ service to be eligible f or Company matern ity pay). Our annual lea ve policy was standardised and lea ve entitlement was enhanced across all locations. Our sick lea ve policy was also enhanced and standardised acr oss all locations. Our people are no w eligible f or up to 26 weeks paid sick leav e within a rolling tw elve-month period, pr oviding them with peace of mind and additional suppor t should an unexpected illness occur . Performance and dev elopment In 2021 we r edesigned our per f ormance management approach putting mor e f ocus on employ ee dev elopment and high-quality feedback con v ersations. W e introduced 360 f eedback and stopped assigning ov erall performance ratings. The impro ved pr ocess is now mor e f ocused on ensuring that our people receiv e specific, rele vant and action able feedback around their per f ormance and de velopment ar eas and are supported in achieving their dev elopment goals. In 2021 we also de veloped our beha vioural competency framework which articulates the behaviours we v alue at Hostelworld. The framew ork allo ws us to be clear on what great looks lik e and wher e to focus our efforts. It gives guidance on ho w we can perform at our best, both as individuals and as a team. T o help define and co-create our beha viours, w e held a series of interviews and focus gr oups across the employ ee and management population, allowing us to bett er define a set of behaviours that w e believ e will enable us to successfully and collectively deliv er our strategy . In December 2021 we launched our fiv e beha viours as follo ws: 57 Own it Master it Collabor ate Adapt Deliver W e tak e ownership of our OKRs, our day-to-da y , and our progr ession too. W e’ re independent, accountable and comfortable receiving feedback. W e put our hands up for new project s and challenges, anything to help us and the business gro w W e ar e obsessed with our area of expertise and enjoy de veloping our skills. W e rar ely take things at face value; w e inv estigate, interrogat e and always look for ‘the wh y ’ , and where ver possible we use data to find the best solution W e ar e in it together; for the tough stuff and the celebrations too. T o achieve the best results, we need e xper tise from all ar eas of the organisation, and we wholeheartedly welcome div erse thinking. W e w ork fluidly , adapting to new information and the ev olving envir onment while staying committed to our goals. Innov ation and experimentation fuel our projects and we’ re ne ver afraid to pivot. Our focus is alwa ys on the end result; we v alue outcomes ov er activity . W e collaborate t o deliver w ork at speed without dropping an y of our other behaviours. Our behavioural competency framew ork sets out clear beha vioural indicators f or all le vels in the organisation, pr ovi ding g uidanc e f or man agers on ho w the beha viour s show up when leading people and clearly outlines what t hey are not. The beha viours will underpin our performance dev elopment processes, our r ecruitment process, en able our peop le to ide ntif y lea rnin g oppor tunities, set clear objectiv es and plan prof essional develop ment toget her wit h their manager . Bambuda Lodge, Panama 58 Strategic Report | Ho st el wo rl d Annual Report 2021 Corporate Social Responsibility continued Diversity and inclusion Our diversity and inclusion (‘D&I’) gr oup continued to ma k e gr eat progr ess in 2021 under the four pillars: • Internal change – ensure that Hostelw orld is repr esentative of the div erse society we liv e in and that our culture is inclusive an d pro vides equal oppor tunities f or all; • Education – create a cultur e of learning about differ ences and understanding the issues that minority groups f ace in society and the workplace; • Celebrate diff erences – ensur e Hostelworld is a workplace wher e our diff erences ar e celebrated and employ ees f eel comfortable sharing their unique perspectives; and • External change – where possible ensuring all Hostelworld’ s externally f ocused activities reflect the diverse society we live in. Acting on feedback r eceiv ed from an emplo yee D&I survey , our D&I group re viewed our anti-bullying and harassment and equal oppor tunities policies to ensur e they wer e inclusiv e, easily understood and that our people wer e aware of their exist ence. Our D&I group also dev eloped D&I recruitment guidelines t o ensure a fair pr ocess is follo w ed for all candidat es and to help maintain a culture and en vironment at Host elworld that is suppor tiv e of diversity , inclusion and encourages a sense belonging for all. Our D&I group or ganised two f antastic vir tual e vent s, one for Int ernational W omen’ s Da y and one f or Pride Month. The International W omen’ s Day ev ent saw our EL T par ticipate in a panel discussion about what gender equality means to them and sparked a con versation about how w e can creat e a more equal w orld. The Pride owners and intern ational trav ellers who shared stor ies of their personal experiences trav elling the world as by our people and cr eated an enhanced awar eness across the business on both topics. Our D&I newsletter continued to be issued monthly and cov ered topical issues as well as including thought pro v oking personal stories, known as the “In My Shoes” series which w ere submitted by our o wn emplo yees. Employ ee engagement f orum Éimear Moloney r emained as the designated Non- Executiv e Dir ector with responsibility f or understanding the views of the Group’ s employ ees and for managing effectiv e engagement betw een the Board and the Group’ s workf orce. Our colleague engagement f orum met with Éimear at various dates throughout the year to ensure that the Board and Hostelw orld emplo yees mutually understand each other ’ s views and that employ ee’ s views are considered as part of t he Boar d’ s decision-making processes. In late 2021 the f ormat of the meetings was amended to drive better engagement. In what remained a difficult y ear we saw our people embrace all challenges presented, r eco ver quickly from an y setbacks and continue to do great things to deliver our strate gic priorities. Our communities W e continued to suppor t our communities and charity par ties in 2021 . W e contributed to the St. Vincent de Paul F ood Appeal, supported Children’ s Health F oundation and encouraged our people to join A ware’ s Christmas 5k and raise funds to pro vide support ser vices to people impacted b y depression or bipolar disor der . Our hostel partners and our customers In addition to working closely with our hostel partners on the Global T ourism Plastics Initiative, w e completely re vamped our annual host el awards, the HOSCARs. From a practical point of view , we had to r ethink their ex ecution given the lo w number of customer re views in the eventual annual winn ers. T aking the feedback of our hostels on board, w e intr oduced completely new award categories t o reflect the outstanding w ork our hostel par tners had carried out in the midst of very challenging circumstances. This saw the introduction of award categories including community and social impact, sustainability , inclusivity and hostel her oes – those hostels who went abo ve and be y ond to suppor t their local communities as well as the wider trav el community or helped to inspire their customers and staff to adopt a more r esponsible and sustainable lifestyle. These awar ds w ere inf ormed by surv ey feedback fr om our hostel partners and were warmly receiv ed by both hostels and consumers alik e. W e plan to continue with this format f or the 2021 awards. 59 Global T ourism Plastics Initiative One of our core Compan y values is t o ‘Build a Better W orld’ to inspire our people to try to impro ve our w orld in all they do. One step w e’ve tak en towar ds creating a better world, is uniting t o protect our natural envir onment. Our resear ch has sho wn the growing demand by consumers f or mor e sustainable trav el consider themselves to be ‘gr een trav ellers’ . Ho we ver , trav ellers think trav el companies should be doing more to help customers tra vel sustainably . With this in mind, in July 2020 we became the first OT A led by the UN En vironment Pr ogramme and the W orld the Ellen MacAr thur F oundation. W e ar e lev eraging our position in the hostel industry to unite our hostel par tners to tackle the root causes of plastic pollution and help Build a Better W orld. Hostelworld Gr oup’ s commitments to the G TPI are as follo ws: • Contacting our global hostel par tners b y September 2020 to encourage them to sign up to the initiative. The objective is to encourage 500 host els to commit within the framework of the G TPI by 2025 , and to mak e their par ticipation visible on the Hostelworld w ebsite; • Acting as the facilitator to advise and guide hostels to better manage plastics in their operations. Hostelworld Gr oup will k eep those who sign up to the initiative inf ormed on the latest best practice guidance; • Communicating successes to our corporate par tners (inv estors), and consumer audience (tra vellers) when meaningful updates are a v ailable and when milestones are r eached. These updates will be published on our corporate websit e and shared on our database and blogs/social channels; and • Repor ting pr ogress of the implementation of our commitments to the G TPI publicly within our Annual Repor t each Mar ch, as well as at an y appropriate public f orum including conf erences and inv estor pr esentations. Currently , 18 of our hostel partners have signed up to the G TPI with a fur ther 30 halfway through the sign-up process. Their commitment s re volv e around remo ving unnecessary and problematic plastic items from their operations, introducing r eusable solutions and taking action to increase the amount of r ecycled content across all plastic packaging and it ems used by 2025 . Participating hostels now ha ve a link to their commitments visible on their Hostelworld micr osite, so eco-conscious trav ellers can read about their sustainability efforts when choosing which hostel to book. Throughout the year w e ha ve continued to send regular updates t o our hostel par tners via email and our corporate social channels, including new hostels that hav e signed up. In December 2021 , w e published an ar ticle on Link edIn ‘Tips to help reduce plastic – b y hostels, f or hostels’ with advice to help hostels to reduce their plastic consumption. W e gat hered these tips b y speaking to some of our hostel par tners and hearing dir ectly from them about actions they hav e taken. The article is very much ‘by hostels, f or hostels’ t o show other hostels that even some simple st eps can make a significant differ ence to the fight against plastic. W e shared the ar ticle with our hostel par tners to encourage as man y as possible to tak e any action, no matter ho w small, to reduce their plastic consumption. Global Sustainable T ourism Council (GST C)membership Hostelworld became a member of the GST C in January 2022. The GST C establishes and manages global sustainable standards that any t ourism business or destination should aspire to r each in or der to protect and sustain the world’ s natural and cultural resources while ensuring tourism meets its pot ential as a tool f or conservation and pov erty alleviation. GSTC is the global accr editation body for certification programs that cer tify hotels/ accommodations, tour operators, and destinations as having sustainable policies and practices in place. W e will collaborate wit h GST C to help us driv e our sustainable trav el initiativ es across the hostelling industry. 60 Strategic Report | Ho st el wo rl d Annual Report 2021 Corporate Social Responsibility continued Our shar eholders W e continue to foster long-term r elationships with our shareholders through transpar ent communication. Our Company Secr etary is available t o shareholders, and our Senior Independent Dir ector and Chairman ar e av ailable to shareholders thr ough the Company Secretary , if r equired. K e y policies Our people are e xpected to abide b y our general Code of Conduct, which outlines specific principles of behaviour ev eryone is expect ed to follo w , at all times, in t he k ey ar eas of integrity , confidentiality , lawful beha viou r an d di sc los ur e o f i nt e r es ts . W e a r e co mm it te d to ensuring and maintaining an en vironment that is free fr om bullying and/or harassment and where the dignity of each and ev ery person at work is r espected and upheld. W e have a Whistleblowing policy in place that sets out ho w a colleague can raise a concern, the way the Group will respond, and ho w the rights of colleagues who raise a concern, and those who are the subject of reports, are to be prot ected. W e have an independent whistleblowing hotline that all staff can access confidentially should they not f eel safe r epor ting a concern internally . The Mod ern Slavery Act 2015 (th e “ Act ”) requires large organisations operating in the United Kingdom to make a pub lic s tat eme nt ou tlini ng h ow the y k ee p thei r su pply chains free from sla very and human trafficking. W e published an updated statement on our w ebsite on 6 December 2021 outlining the steps taken b y the Group to ensur e that slav ery and human trafficking is not taking place within t he business or an y supply chain and we will continue t o monitor our obligations under the Act. Gr eenhouse Gas Emission statement Greenhouse Gas (“GHG”) emissions f or the financial year ended 31 December 2021 ha v e been measured as r equired under the Companies (Directors’ Report) and Limited Liability Par tnerships (Energy and Carbon R epor t) Regulations 2018 . W e have used the GHG Protocol Corporat e Accounting and Repor ting standar ds (re vised edition), data gathered to fulfil the requirement s under the CRC Energy Efficiency scheme, and emission fact ors from Defra, UK Go vernment by a supplier . W e believe our emissions ar e impacted by the siz e of the business, which is driven by our global headcount and office footprint. W e hav e theref ore chosen to use an in tensity ratio measured on emissions per €m of net r ev enue in order to put the GHG in conte xt for the siz e of the business. 61 W e are reporting on t he emissions of CO2 generated b y the business and the energy consumed by the business. The carbon gas emissions generated b y Hostelworld customers tra v elling to destinations is not included in this report. The below table shows the total tonnes of carbon emissions generat ed by Hostelw orld. 2021 2020 2019 Nil Nil Nil 78. 9 126 .7 134 .2 24.6 62. 1 7 8 1.6 T otal Intensity Ratio (tCO 2 e/€m) 6 .1 12.3 11 .4 The below table demonstrates the o verall ener gy consumed in K ilo watt-hours (kWh) b y the business and shows the por tion of this consumption that the UK corporate office has consumed on t he o verall t otal. This table is based on the energy consumed in the purchase of electricity and gas f or the corporate offices and does not include the consumption of energy used f or emplo yee tra vel. Energy Consumption: 2021 2020 2019 Energy usage – UK 36 ,296 192,434 177 ,365 Energy usage – Other locations 189 ,412 2 47 ,721 323 ,587 T otal energy usage 225 ,709 440, 155 500, 952 Proportion consumed in the UK Hostelworld Gr oup is an internet -based business which leases its pr emises and does not hav e a r etail footprint. The main GHG releasing activities o ver which the Gr oup has influence are use of pur chased electricity and business trav el. The Group has no o wned v ehicles. The energy consumption in the Group’ s Sydne y office has been estimated on a per person basis, based on the actual energy consumption in the Group’ s Dublin office, and is not considered material to the abo ve disclosur es. Our energy consumption has declined as a r esult of staff working fr om home since Mar ch 2020. Emission s generated from tra vel ha v e also substantially fallen. Additionally , during 2021, our emissions ha ve decreased as w e exited our long term lease commitments f or our Dublin office and mo ved to a service office from August 2021 . In 2022 we ar e delighted to r epor t that Hostelworld engaged with South Pole, a global climate solutions pr ovider , to off set our 2021 greenhouse gas emissions fr om trav el and offices. In total w e hav e off set 103 .5 tCO 2 e. F ur ther detail is included on page 49 . 62 Strategic Report | Ho st el wo rl d Annual Report 2021 Section 172 – Statement of Compliance – S172 (1) of the Companies Act, 2006 Building strong relationships with our stakeholders The Directors belie v e that t he y hav e acted to pr omote the suc cess of t he Co mpany f or t he b en e f it of i ts me m be r s a s a whole. In doing so the Board has considered the inter es ts o f a ra nge of st ak eh olde rs a nd ha s had r egar d (amongst other matters) to: • The likely consequences of an y decisions in the long-term; • The interest s of the Group’ s employees; • The need to f oster the Group’ s business relationships with suppliers, customers and others; • The impact of the Group’ s operations on t he community and en vironment; • The desirability of the Group maintaining a r eputation for h igh st and ards of bus ine ss con duc t; a nd • The need to act fairly betw een shareholde rs. Open and honest engagement The Directors appr eciate the impor tance of considering the views of stakeholders an d the impact of t he Gr oup’ s activities on them. W e aim to maintain open and honest con versations with our stak eholders, considering their in te res ts an d co mm un ic at ing w it h them on an ongoing basis t hr ough a number of channels. Our People Why w e engage The expertise and capability of our workfor ce (including contractors and temporary staff) will always be crucial t o our business. W e aim to build an open and inclusiv e culture wher e div ersity is held in high regar d and differ ent perspectives contribute to mor e informed decision making. W e want our people across all of our locations to be fully engaged and motivated to help the business achie ve it s strategic goals and we ar e committed to pr oviding a r esp ec tf u l w or k in g envir onment where car eer dev elopment and continuous learning is supported and encouraged. How w e engage • Employ ee engagement surve ys; • Meetings between emplo y ees and the non-executiv e dir ector responsible f or w orkfor ce engagement and other non-ex ecutive boar d members; • A consistent performance management approach; • Bi-weekly virtual townhalls f or all employ ees where the CEO and management team update on trading an d employ ee welf are initiativ es, and facilitate an open f orum question and answ er session on issues raised by emplo yees; • Recognition and r eward pr ogrammes; and • Inf ormative and up-to-date emplo y ee communication channels. • Inv estment in car eer dev elopment and training; • W ays of working, cultur e and fair compensation; • Diversity and inclusion; and • Hostelw orld being a successful company they ar e proud t o work f or . • T ailored survey conduct ed to assess employ ee pref er ences for ho w they wanted to w ork into the future which framed our approach to adopting a h ybrid w orking model; • Adoption of a new performance management programme and on-going de velopment of our Div ersity and Inclusion strategy; • Rollout of new flexible w ork pr ogramme and employ ee well-being policies; and • Acceleration of 2022 pay r e view to Q3 2021 to address pa y competitiv eness concerns and extended participation in the Group’ s equity benefits schemes to 7 6 employ ees (including Ex ecutive Leadership T eam members and the Executiv e Direct ors). How the Board engages with our people and considers their interest s in ke y Board decisions HR and people updates are a standing agenda it em at each scheduled Board meeting. Thr ough this medium, the results of the Group’ s employ ee engagement surveys ar e r eview ed, and the Chief HR Officer provides an updat e on people strategy . Éimear Moloney , in her capacity as designated dir ector f or workf or ce engagement, has continued to engage with a diverse repr esentative of emplo y ees. Our W orkf orce Engagement Statement is set out on page 84 . 63 Customers Why w e engage Customers are central t o ev eryt hing w e do. Decisions that the Board take need to ensur e Hostelw orld continues to deliver a competitiv ely priced high-quality off ering to our customers. Accordingly , it ’ s imperative that we engage with ou r customers to mak e sure w e are pr oviding the tra vel pr oducts and e xperiences they want. How w e engage • F ocus groups, in v estment in proactiv e and reactiv e social media and customer satisfaction surve ys sent to customers follo wing their trip; • Use of a number of digital tools that assesses customers online experience with Hostelw orld to ensure that no user interface or user experience issues adversely impact cust omers; • Monthly direct interviews with customer focus gr oups to dev elop insights into cust omer pref erences and concerns and how these can be addressed eff ectiv ely; • Dedicated customer support team; and • Joint hostel partner sur v ey with customers. • Hostelw orld having local pa yment methods available; • • Innov ativ e and engaging trav el product s; and • Customer support for when things go wrong. • Dev elopment of local pa yment methods in a number of key t erritories in our near -term technology strat egy roadmap; • Reinf orcement in customer communications of the fle xibility of our free cancellation booking pr oducts which allows customers, in most cases, to cancel up to 2 da ys prior to their arrival date; and • Increased T rust Pilot scores in 2021 through in v estment in the Group’ s Customer Suppor t. • Oversaw spend and appro v ed strategy ex ecution plans designed to ensur e that customer focused social f eatures w ere dev eloped and that customers trav el pref er ences could be met in an optimum manner by impr oving the competitiv eness of the Group’ s core O T A business; • Appro v ed a commercial partnership wit h G Adv entures to deliv er hostel f ocused adventur e tour pr oducts f or our customers; • Appro v ed a capital reduction transaction with the third-par ty shar eholders in Goki to ensure the Group’ s strategy and resour ce focus was on impr o ving core O T A competitiveness and delivering br oader tra vel e xperiences to customers; and • Oversaw incr eased in vestment in Customer Support. 64 Strategic Report | Ho st el wo rl d Annual Report 2021 Section 172 – Statement of Compliance – S172 (1) of the Companies Act, 2006 continued K ey Suppliers (including Hostel Partners) Why w e engage Maintaining a trusted relationship with our k ey suppliers and hostel partners is ke y to the success of Hostelworld and allows the Group t o pro vide high quality trav el product s and services to our customers. Through engagement with suppliers the Group aims to r educe risks in ke y areas such as priv acy compliance, ethics, services quality and ESG risks and ensure the smooth running of operations. Through engagement with hostel partners t he Gr oup suppor ts eme r ging needs and requir ements with a solution focused appr oach. How w e engage • Eff ective supplier r elationship management (regular performance re view and strategy alignment meetings); • Ex ecutive sponsorship of k ey supplier r elationships; • 40 webinars f or hostel partners hosted in 2021 with over 1 , 100 hostels repr esented; • Participation in World Host els Group and w orking with hostels in ke y territories to support lobbying efforts; and • Multiple hostel surve ys and direct meetings conducted t o establish hostel views on product enhancement s, ESG • Strategic alignment and gr owth oppor tunities; • Simplified contracts and f air payment terms; • Mutually beneficial partnerships wit h an emphasis on collaboration; • Reduced distribution costs and a mobile friendly pr operty management system for hostel partners; and • • Impro v ed alignment between the Group and it s ke y IT vendors on the Hostelw orld strategy r oadmap, vendor requir ements and KPI’ s; • Distribution costs f or hostel partners reduced by r emoving the Group’ s Elev ate commission featur e; • F eatur es added to the platform to enable hostel partners promote steps tak en at their properties to ensure • Ongoing inv estment and pr omotion of Counter as a hostel f ocused and mobile friendly property management system; and • Dev elopment of the Group’ s ESG strategy and roadmap • The Chief T echnology Officer and Chief Supply Officer provide the Board with updates in r elation to ke y suppliers and hostel par tners as part of their attendance at each scheduled Board meeting; • Board o v ersight and appro val of the Group’ s ESG roadmap and strategy to tak e account of hostel partners interests; • Oversaw spend and appr o ved strategy e xecution plans designed t o ensure the ongoing successful adoption of Counter as a hostel f ocused and mobile friendly property management system (“PMS”); • Board r eview and appr o val of managements host el par tner engagement proposals designed t o ensure the Group’ s par tnership-based appr oach to its r elationships with hostels was effectiv ely maintained; and • Board appr ov al of cash conservation measur es achiev ed through negotiating and agreeing r easonable amendments to existing pa yment terms in supplier contracts. 65 Shar eholders Why w e engage W e belie ve that shareholde rs having an inf ormed understanding of our strategy and financial performance helps ensure the y can assess the value of their inv estment and the inv estment oppor tunity that Hostelworld r epresent s. How w e engage • A ttendance b y the CEO and CFO at invest or confer ences and roadsho ws (held virtually); • but A GM and GM engagement channels wer e made av ailable to shar eholders); • Chairman and Remuneration Committee Chair / Senior Independent Director engaged directly with shareholders on ex ecutive r emuneration, as furt her described on pages 105 and 106; • • Publishing of trading updates and dir ect engagement between the CFO and our main shareholders on achie veme nt against the Group’ s strategic plans. • Liquidity , cash conservation and financial performance; • Eff ective and transpar ent engagement with the Group; • ESG and sustainability reporting; • Long term gr owth and per f ormance against strategic objectiv es; and • Succession planning. • Shareholder support at a General Meeting conv ened to appro ve an amendment to the borrowing limit specified in the Company’ s Ar ticles of Association; • Shareholder support at a General Meeting conv ened to appro ve amendments to the Company’ s Remuneration Policy; • Negotiation of a five-y ear €30 million term loan facility with certain investment funds and account s of HPS Inv estment Par tners LL C (or subsidiaries or affiliat es thereof), and continued reductions in monthly operating cash outflow; • Extensiv e engagement with shareholders throughout 2021 on the Group’ s liquidity, financial and strategic per f ormance, and ex ecutive compen sation; • Dev elopment of the Group’ s ESG strategy and implementation of TCFD r epor ting pr ocesses; and • On-going succession planning and dev elopment of a Non-Ex ecutive Dir ector skills matrix, as furt her described on pages 91 and 92. • The Board’ s main contact with shareholders is through the Chairman, the Senior Independent Director , CEO and CFO , who are in r egular contact with shareholders. The Chairman and other members of the Board are a vailable t o meet with shareholders as requir ed; • The Board is pr ovide d with invest or relations r epor ts as part of the CFO repor t which is present ed at each scheduled Board meeting; • Prior to recommending to shar eholders the appro val of an amendment to the borro wing limit specified in the Company’ s Ar ticles of Association, the Board was updated on shar eholders views expr essed in connection with a related consultation ex ercise conduct ed with t he Gr oup’ s major shareholders b y the CEO and CFO; • Prior to r ecommending to shareholders the appro v al of ex ecutive r emuneration related pr oposals, the Remuneration to explain the rationale f or the proposals and invit e comments; • F ollo wing the AGM and General Meetings held on 26 April 2021 , the Board consulted with the major shareholders • The Board appr ov ed the Group’ s ESG strategy roadmap and pro vided o versight on the programme of activities implemented to ensur e the Group’ s compliance with its TCFD r eporting requirements. (‘Chairman’ s Introduction – AGM and General Meeting V otes’). 66 Strategic Report | Ho st el wo rl d Annual Report 2021 Section 172 – Statement of Compliance – S172 (1) of the Companies Act, 2006 continued Society Why w e engage Our approach to social r esponsibility is to ensur e we mak e a positive contribution t o the communities we operate in and where our people liv e. By suppor ting div ersity and inclusion in our business, reducing our en vir onmental impact, and conducting our operations in a conscientious and compliant way , we can help build a more tolerant society , contribute to addressing climat e change risks and strengthen our business. How w e engage • Partnering wit h local charities; and • W e are engaging with a number of stakeholders as part of developing our ESG strategy , as furt her described on page 48. • That Hostelw orld acts in a responsible and compliant manner; • That we engage with our communities in a transpar ent way; and • Envir onment and sustainability . • Reduced our ph ysical footprint b y assigning our Leopardst own, Dublin lease to a thir d par ty and mo ving to a hybrid working model; • Continued our participation in t he Global T ourism Plastics Initiative and promoted GTPI par ticipation to our hostel par tners; and • Diversity and Inclusion further embedded into how we operat e as a business. • Envir onment and sustainability issues ha ve been a k ey f ocus ar ea for the Board o v er 2021 with the Board pro viding ov ersight and appro val of the Gr oup'’ s ESG roadmap and strategy and the adoption of procedur es to ensur e the Group complies with its T CFD r epor ting obligations; and • Board appr ov al of an updated Div ersity and Inclusion Policy and appro v al of the assignment of our Leopardstown , Dublin lease to a third party. 67 Palmar Beach Lodge, Panama 68 Strategic Report | Ho st el wo rl d Annual Report 2021 Section 172 – Statement of Compliance – S172 (1) of the Companies Act, 2006 continued Boar d Decisions addition to the annual cycle of matters the Boar d re views and describes how the Direct ors took stakeholders interest s into consideration. T erm loan facility Principal stakeholders: Shar eholders, staff and host el par tners Long term consequences, inter ests of emplo y ees and business relationship with hostel partners In F ebruary 2021 the Board appro ved the terms of a €30 million fiv e-year t erm loan facility with cer tain in vestment funds and accounts of HPS In vestment Partners LLC ( or subsidiaries or affiliates thereof), f or general corp orat e purposes and to strengthen the Group’ s liquidity position. The Company engaged with major shareholders who wer e suppor tiv e of the Group securing debt and the Board had r egard to the f eedback of the Group’ s staff regar ding their concerns about the long-term viability of Hostelworld and the security of their employment should decision to complete the loan transaction in the long-term and agreed that failing to secur e the loan facility w ould hav e increased the liquidity and solv ency risks of the Group to an unacceptable le vel in cir cumstances where the expected r eturn to normal tra vel and trading patt erns was materially uncer tain. The Boar d fur ther agreed that failing to secure the loan facility w ould ha ve compounded the concerns expr essed b y staff about the security of their employment in the long-term and was lik ely to contribute to staff departures. Such departures would, consequently , impact the ability of the Group to ex ecute against its k e y strategic objectives and impact on the ability of the business to be fully prepar ed f or when normal trav el and trading patterns r esumed. The Board also agr eed that securing the loan facility w ould demonstrate eff ective risk management b y the Group and ensur e confidence in the long-term viability of Hostelworld as a k e y strategic par tner of hostels was maintained. Casa Oro, Nicaragua 69 Goki capital r eduction Principal stakeholders: Shar eholders, host el par tners, customers Long term consequences, Gr oup’ s business relationship with suppliers, customers and others During the year the Board appr ov ed a capital r eduction in Goki PTY Limited, the digital lock and smar tphone app business which the Group in vested in, in 2019 . The rationale for amending the Group’ s relationship with t he third-party shareholders in Goki was the increasing demand fr om the hotel sector f or Goki’ s product off ering and the strategic decision of the Goki management team to focus on this commer cial oppor tunity . In making this decision the Board considered the f ollowing stak eholders: Hostel Par tners: The Boar d considered whether the decision would ha ve a negativ e impact on hostel partners and, reflecting on the issues which the Group’ s hostel par tners had confirmed to Hostelw orld wer e impor tant to them during 2021 , concluded that the proposed Goki strategy f ocus on commercial opportunities in the hotel sector would not ha ve a mat erial impact on hostels in circumstances wher e the Goki product off ering was still a vailable to hostels. Customers: The Board r eceiv ed assurances that the product featur es would r emain av ailable f or the Group’ s customers. Shareholders: The Boar d assessed the consequent cash savings which w ould be achiev ed and agreed that such benefits w ere in the interest s of shareholders who had confirmed t o the Group during the year that cash conservation and effectiv e management of liquidity risks w ere k ey shar eholder concerns. Remuner ation Principal stakeholders: Shar eholders, emplo y ees Long-term consequences In early 2021 the Remuneration Committee agreed that, in the interest s of cash conservation, no cash bonus scheme would operate f or 2021 , and t hat shar eholders would be ask ed to appr ov e an amendment to the Director s’ Remuneration Policy to permit the grant of an award of r estricted shar es (the “2021 Restricted Share A ward”) in place of the bonus. The purpose of the 2021 Restricted Share A ward was to ensur e the ongoing retention and motivation of a lar ge number of staff , including t he CEO and CFO . F ollowing an e xtensive consultation e x ercise conducted with shareholders and taking into account the views of staff on the need for f air compensation in the Group, the Company held a Gen eral Meeting in April 2021 to appro v e an amendment to the Directors’ Remuneration Policy to allo w the Executiv e Directors to participate in the 2021 Restricted Share A ward. F ollowing a successful shareholder v ote, the 2021 Restricted Shar e A ward was granted short ly afterwards. In making its assessment the Remuneration Committee noted the long-term risks to the business if concerns expr essed by the Group’ s staff about fair compensation w ere not car efully considered and appr opriate steps not taken t o manage the staff retention risks faced b y the Group. The Remuneration Committ ee also noted that the majority of Hostelworld’ s major shareholders, who the Remuneration Committee Chairperson and Chairman of the Board had consulted with dir ectly, underst ood and accepted the rationale for the compensation proposals and agreed to support the proposed awards. F urt her details in r espect of the rationale for the proposed awar ds are set out in the Chairman of the Remuneration Committee’ s Annual Statement (‘Executiv e Remuneration in 2021’). 70 Strategic Report | Ho st el wo rl d Annual Report 2021 Section 172 – Statement of Compliance – S172 (1) of the Companies Act, 2006 continued Capital allocation Stakeholders: Shar eholders Long term consequences One of the principal issues considered b y the Board ov er the year has been in r elation to r eturning value to shareholders and assessing the decision made by the Boar d in June 2020 to suspend cash dividends. Fr om feedback receiv ed ov er man y years fr om shareholder s, the Board is acutely aware of the importance of returning value to shareholders. The Boar d is, how e ver , also aware that there ar e various other factors which need t o be considered and balanced this against shareholder returns ( including the Group’ s liquidity position and need to conserve cash). F ollo wing its deliberation on this impor tant issue and after balancing the interest s and views of shareholders and other stakeholders with the need to protect the Group’ s liquidity position in the interests of ensuring the long-term viability of the business, the Board reaffirmed its position that the payment of cash dividends r emain suspended for the f oreseeable futur e. Strategy f ocus on social f eatur es and Meet The W orld ® gr owth strategy Principal stakeholders: Shar eholders, emplo y ees and customers Long term consequences, inter ests of emplo y ees, r elationship with customers The Board appr ov ed in vestment s and resour ce allocation to dev elop compelling social f eatures and e xe cute against the Group’ s Meet The World ® gro wth strategy . Aligned to this strategy , the Board appr ov ed the terms of a commercial par tnership with G Adventur es to launch Roamies , a hostel f ocused adventur e tour product. The Board was awar e from it s direct engagement s with major shareholders that the pace of t he Gr oup’ s strategy ex ecution and the dev elopment of featur es that differ entiated the Group fr om larger O T As was impor tant to ensure long-term business gro wth and deliver in vestment r eturns. Customer and emplo yee f eedback pr ovided during 2021 had established that compelling product f eatures w ere e xpected b y customers and inv estment in the Group’ s strategy would enhance emplo y ee engagement. The Board consider ed the interests and e xpectations of shareholders, customers and employ ees and concluded that the interests of each stak eholder w ould be positively serv ed by appro ving the inv estments and r esource allocation necessary to dev elop the social featur es and ex ecute against the Meet The W orld ® gro wth strategy . The ov erwhelmingly positive shar eholder , staff and media reaction to the launch of the Roamies collaboration demonstrated the value of Boar d decision making having r egard t o stakeholder inter ests. 71 Assignment of lease and mo v e to hybrid w orking model Stakeholders: Staff , community Long term consequences, inter ests of emplo y ees In June 2021 the Board appro v ed the assignment of the Group’ s lease to its Leopardst own, Dublin headquarters to a third par ty and the mov e to a h ybrid workin g model for Ir eland based staff . Having consulted ext ensively with employ ees regar ding futur e ways of w orking it was apparent that the majority of staff based in Ireland had a str ong pref erence t o working fr om home f or the majority of t he w orking week. The Boar d also r eflected on the feedback pro vided by other k ey stak eholders during the year on the issue of climate change and sustainability and agr eed that a reduction in the Group’ s physical f ootprint in Dublin was a positive st ep for the Group t o make in adopting measur es designed to reduce carbon emissions and pr omote a mor e sustainable working model. Hostel Terra Vista, Turkey The Secret Garden, Ecuador Governance 74 Directors’ Biographies 78 Corporate Governance Report 134 Directors’ Report 142 Independent Auditor’s Report to the Members of Hostelworld Group PLC 74 Governance | Ho st el wo rl d Annual Report 2021 Directors’ Biographies Michael Cawley Chair of the Board; Chair of the Nomination Committee; Member of the Remuneration Committee. Independent: Ye s * . T enure: 6 y ear 5 months Nationality: Irish. Qualifications: Michael has a Bachelor of Commer ce degree fr om University College Cork and is a f ello w of the Institute of Char ter ed Accountants in Ireland. Sector Experience: A irlines; motor; betting and gaming; construction. Current Ext ernal Appointments: Non-ex ecutive dir ector of Ryanair Holdings plc, dir ectorships in Flutter Enter tainment PL C, Kingspan Group plc, Winthrop Engineering and Contracting Limited, Mazine Limited, Prepa ypow er Holdings Limited, GMS Pr of essional Imaging Limited, Gowan Gr oup Limited, Link ed P2P Limited and Meadowbr ook Heights Unlimited. Pre vious Rele vant Experience: Positions of Deputy Chief Executiv e Officer , Chief Operating Officer and Commercial Dir ector of Ry anair at various stages in the period 1997 to 2014 . Gr oup Finance Director of Gowan Gr oup Limited. * Independent on appointment Gary Morrison Chief Executiv e Officer; Chair of the Disclosure Committee. Independent: No. T enure: 3 y ears 9 months Nationality: British. Qualifications: Gary has a Master’ s degree in engineering fr om Leeds Univ ersity UK and holds an MBA from INSEAD . Sector Experience: Online travel industry; technology; telecommunications. Current Ext ernal Appointments: None. Pre vious Rele vant Experience: Senior Vice President and Head of Retail f or Expedia, Director of Despegar Head of Global Sales Operations for Google’ s Online Sales Channel and Motorola as VP and Head of Product management f or Motor ola’ s Smar tphone division. Corporate dev elopment/M&A, consulting and engineering roles at General Electric, Booz Allen and Hamilton and Schlumberger F rance. 75 Car oline Sherry Chief Financial Officer; Member of the Disclosure Committee. Independent: No. T enure: 1 y ear 3 months Nationality: Irish. Qualifications: Car oline has a BSc (Hons) in F ood a fello w of the Institute of Char ter ed Accountants in Ireland. Sector Experience: FMCG; banking. Current Ext ernal Appointments: None. Pre vious Rele vant Experience: Director of Financial Planning and Analysis for Glanbia plc’ s Per f ormance Nutrition division, numerous strategic and commer cial finance roles at Ulster Bank Gr oup, a subsidiary of NatW est Group. Éimear Moloney Non-Executiv e Dir ector; Chair of the Audit Committee; Member of the Remuneration Committee; Member of the Nomination Committee. Independent: Y es. T enure: 4 y ears 4 months Nationality: Irish. Qualifications: Éimear has a B.A. Accounting and Finance and MSc. Inv estment and T reasury from Dublin City University . Éimear is also a fellow of the Institute of Char ter ed Accountants in Ireland. Sector Experience: Financial ser vices; real estat e, pharmaceutical. Current Ext ernal Appointments: Directorships with Chanelle Pharmaceutical Group and Non-Ex ecutiv e Director of Kingspan Group plc. Pre vious Rele vant Experience: Director of Y ew Grov e inv estment manager r oles in Zurich Life Assurance Management Lt d in Australia and also with Crow e Horwath, Char tered Accountants in Ir eland. 76 Governance | Ho st el wo rl d Annual Report 2021 Directors’ Biographies continued Evan Cohen Non-Executiv e Dir ector; Member of the Audit Committee; Member of the Remuneration Committee; Member of the Nomination Committee. Independent: Y es. T enure: 2 y ears 7 months Nationality: American. Qualifications: Ev an has a B.A. Social Studies from Harvard Univ ersity and holds an MBA, General Management from INSEAD . Sector Experience: T echnology; media. Current Ext ernal Appointments: Owner of EVCO Advisory Ser vices. Pre vious Rele vant Experience: Operational responsibility for L yft ’ s US East Coast business, Chief Operating Officer at F oursquare, sen ior strategic consulting and operational roles at Bebo, Jupiter and MTM. Carl G. Shepher d Non-Executiv e Dir ector; Chair of the Remuneration Committee; Member of the Audit Committee; Member of the Nomination Committee. Independent: Y es. T enure: 4 y ears 5 months Nationality: American. Qualifications: Carl has a M.A. in Business Administration from the Univ ersity of T exas. Sector Experience: Online travel industry . Current Ext ernal Appointments: Board member of Once There, Inc., RV share, LLC. and Edge R etreats. Pre vious Rele vant Experience: Co-founder , founding Chief Operating Officer and Chief Strategic and Dev elopment Officer of HomeA way Inc. Pr evious boar d member of T urnke y V acation Rentals, Inc., and previous Chief Operating Officer and Chief Dev elopment Officer of Hoov er’ s Online. Board t enure 1 to 4 years: 50% 4 to 7 years: 50% Board composition Executiv es: 2 (33%) Non-Executiv es: 4 (67%) 77 Ember Hostel, USA 78 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report Chairman’s Introduction It is m y pleasure t o present the corporate go v ernance r epor t f or the year ended 31 December 2021 . The repor t pr o vides a summar y of the leadership r ole play ed b y the Board in pr omoting the long-term sustainable success of Hostelwor ld f or the benefit of its shareholders, emplo yees and other ke y stak eholders. The Board continues t o be committed to pr omoting high standar ds of corporate go vernance in Host elw orld Group plc (the “Compan y ”) and its subsidiaries, (together the “Group”). Gov ernance Code I am pleased to report that t he Compan y has complied with the 2018 UK Corporate Governance Code (the 2018 Code”) throughout the reporting period, wit h tw o ex ceptions. Both ex ceptions applied for the duration of 2021 and are continuing. Firstly , the Remuneration Committee has not dev eloped a f ormal policy on post-emplo yment shareholdin g requir ements in accordance with Pro vision 36 of the 2018 Code. The Remuneration Committee continues to k eep under re view whether such requir ements should be introduced but consider that the current framew ork pro vides f or sufficient alignment between management and the long-term interest s of shareholders. This tak es into account the requir ement for the Ex ecutive Directors t o build a significant holding in Hostelworld shares during the period of their employment, and the two-y ear post-v esting holding period in the L TIP . applicable to the wider workf orce and r epresent s non-compliance with Pro vision 38 of the 2018 Code. The Chief Executiv e Officer’ s pension was agreed at the time of his recruitment in 2018 and remains in line with the level of pension pr ovision f or CEOs of companies similar in size to Host elworld. As part of t he shareholder consultation e xer cise conducted b y the Remuneration Committee in r espect of the proposed Directors’ R emuneration Policy f or which we intend to seek shareholder appr ov al at the A GM in May 2022, the Remuneration Committee has confirmed that the abov e matters will be r eview ed in two y ears’ time in advance of putting in place a new r emuneration policy with effect fr om January 2024 . In circumstances wher e the abov e matters will be specifically consulted on with shareholders at a future dat e, at this time it is not possible to pro vide a definite timeline f or compliance with the related 2018 Code pro visions. In keeping with prior y ears, details of our gov ernance practices are a vailable in this Corporate Go vernance Repor t and the Committee Reports which follo w . On-going Boar d Oversight of the Impact of Since the onset of the pandemic in early 2020 t he Board’ s focus has been on the well-being of our staff , ov erseeing the suppor t the Group has been pr oviding to our hostel partners and on securing our financial position. Like all other companies in the broader tra v el and tourism industry, the Boar d and its Committees and changing circumstances. Thr oughout the reporting period the Board has pro vided eff ective support and prudent ov ersight of the ex ecutive t eams on-going management of the impact of the pandemic. The Board was kept updat ed on employ ee well-being matt ers, operational and financial matters, and deliv ery on strategic objectives b y r eceiving regular r epor ts (both at and between meetings), with the majority of Board and Committee meetings being conducted b y video confer ence. I am pleased that the Board and Committee structures operated eff ectiv ely throughout the year in a way that ensur ed that effectiv e and informed decision-making and good gov ernance underpinned the Group’ s management of t he challenges present ed 79 Boar d Composition and Chairman Renewal Of the six Board members, two ar e f emale, four ar e resident in Eur ope and two ar e r esident in the United States of America. A t the date of publication, we ha v e members hav e tra vel/online e xecutiv e experience and the remaining members come from other industry sectors. In my opinion , we ha ve a div erse Board and an ex cellent mix of skills and styles which ensures both challenging and robust debate at boar droom lev el and well-inf ormed decision making. During the year the Nomination Committee recommended the renewal, f or a furt her three-y ear term, of my appointment as Chair man and non-ex ecutive director of the Compan y , Chairperson of the Nomination Committee and member of the Remuneration Committee. The Board accept ed the recommendation of the Nomination Committee and appro ved the renewal of my appointment f or a furt her three-y ear term. As a matter of course and pursuant to the Company’ s Conflicts of Inter est policy , I remo v ed myself fr om the Nomination Committee and Board pr ocesses which related t o the renewal of my appointment. Boar d Effectiv eness The Board undertook a thorough internal re view of its eff ectiveness during 2021 with the Board and it s Committees continuing to function eff ectively . Details of the evaluation pr ocess and its findings ar e included on pages 94 and 95 . Stakeholder Engagement The Board is fully supportive of the focus in the 2018 Code on boards demonstrating ho w the views of stakeholders ar e captured an d taken into account when making ke y decisions. W e are committed to ensuring meaningful engagement with our shareholders and other ke y stakeholders (which include our people, customers, hostel partners and our key suppliers) a nd ensuring that the Board has careful regard to th eir interest s when assessing issues and mak ing dec isio ns. How ev er , it is not practicable to mee t the expectations of all stakeholders all of the time and a ke y pa r t of the Board pr ocess is to carefully b ala n c e a n d c ons ide r sometimes conflicting expectations of o ur st ake ho l de rs to ensure each stak eholder is tr eated equally and fairly . Ho w we ha v e taken the inter ests of k ey stakeholders int o account when making ke y decisions on behalf of the Company is set out in our section A GM and Gener al Meeting V otes A t the General Meeting of the Company held on 4 F ebruary 2021 an ordinary resolution to change the borrowing limit f or the purposes of the Ar ticles of Association to a fix ed amount of €40 million was voted. W e are grateful f or the suppor t pr ovided b y shareholders at this General Meeting which facilitat ed the subsequent signing of a €30 million five-y ear term loan facility with cer tain in vestment funds and account s of HPS Inv estment Partners LLC (or subsidiaries or affiliates thereof). Athens Hawks Hostel, Greece 80 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued A t the Annual General Meeting and General Meeting of the Company held on 26 April 2021 all resolutions w er e passed with the requisite majority of votes. Ho w ev er , authority to allot ordinary shares; (b) the authority to make political donations; ( c) the amendments to the directors’ r emuneration policy; and (d) the amendments to the Company’ s Long- T erm Incentive Plan wer e cast against these resolutions. W e wrote to man y of those shareholders who v oted against these proposals to understand their reasons f or doing so, and carefully considered the reports issued by pr o xy advisers. W e assessed the points raised and, while we will alwa ys be by shar eholders are contrary to our r ecommendations, we r emain of the view that t he pr oposals wer e in the interest s of shareholders in general. Summary of t he Impact of Shar eholder F eedback (a) The authority to allot ordinary shar es – the Board continues to consider that the level of authority proposed and appr ov ed b y the majority of shareholders is appr opriate to maintain fle xibility for the Compan y and intends to seek a similar authority at the 2022 AGM. The Boar d notes that the authority requested from shar eholders was in accordance with current UK best practice guidance and will keep best practice in this ar ea under re view . (b) The authority to mak e political donations – the Board noted that t he v otes against this proposed r es ol ut io n r eflects certain personal shareholder views and reaffirms it s position that alt hough the Company has no int ention of making donations to political par ties (or an y other political donations), the purpose of the proposed resolution was to av oid inadv er tent infringement of pr ovisions within the Companies Act, 2006. Accor dingly , the Board intends to pr opose a similar resolution at the 2022 A GM to ensure the Compan y av oids inadv er tent non-compliance. (c) The amendments to the direct ors’ remuner ation policy and amendments to the Company’ s Long- T erm Incentiv e Plan – the Remuneration Committee considered the points raised b y shareholders and remains of the view that the amended Directors’ Remuneration Policy and the L TIP amendment wer e in the interests of shar eholders in general given the importance of t he proposals t o ensuring the retention of the Executiv e Dir ectors and other ke y members of the senior management team. The Remuneration Committee is particularly aware of shareholders’ views on companies not e xceeding dilution limits and will ensur e that t he Compan y remains within current shar eholder appr ov ed limits. Cultur e The Board is fully supportive of the strong emphasis in the 2018 Code on the impor tance of culture and welcomes it s responsibility to continuously assess and ensure that the Group’ s values and expected behaviours ar e aligned with its purpose. The k ey traits of a healthy culture ar e assessed on an on-going basis with each scheduled Board meeting including a detailed update and presentation fr om the Group’ s Chief HR Officer on target HR metrics. These include ke y emplo yee engagement and attrition metrics, furt her details of which are set out on page 54 . In 2021 t he Board appr ov ed a set of emplo yee v alues and behaviours which ar e set out on pages 56 and 57 , and also a recommendation of the Nomination Committee to appro v e a Diversity and Inclusion Policy aimed at firmly embedding a more inclusiv e culture within our business, fur ther details of which are set out on pages 92 and 93 . ESG, T CFD and Sustainability ESG considerations continue to be an incr easing area of f ocus f or many of the Group’ s stakeholders. During 2021 we commenced w ork on dev eloping an ESG strategy that will create a mor e resilient and sustainable business and retain the confidence of our ke y stak eholders and the communities in which we operate. Details of our ev olving ESG strategy ar e set out on page 48 . How w e hav e established substantial compliance with TCFD r elated r equirements ar e set out on pages 49 to 52. Our gov ernance framew ork at Board le vel and throughout the Group contributes significantly to our ability to achiev e our strategic goals f or the benefit of all our stakeholders. W e continuously keep under r eview dev elopments in corporate go v ernance best practice to ensure that our pr ocesses are aligned to the needs of the business, help us manage risk and pro vide assurance and accountability in a transparent wa y . Michael Cawley Chairman 30 March 2022 81 Strategic Objective Board’ s governance r ole Link to principal risk Suppor ting our people Gov ernance to ensur e our people wer e suppor ted People risks Oversight and appr ov al of the Group’ s employ ee well-being strat egy and enhanced Employ ee Assistance Programme which pr ovides support to all our people in all our locations. Inv esting in our people Consultation with shareholders and informed decision making to help ensure the on-going retention and motiv ation of a large number of our people People risks Agreed that, in the interests of cash conserv ation, no cash bonus scheme would operate f or 2021 , and that shareholders w ould be asked t o appro ve an amendment to the Directors’ Remuneration Policy to permit the grant of an award of r estricted shares in place of the bonus. Prot ecting our financial position Gov ernance to ensur e our financial stability Macro-economic conditions Oversight and appr ov al of a loan facility with cer tain inv estment funds and accounts of HPS In vestment Partners LLC (or subsidiaries or affiliates thereof) and ov ersight of cash conservation actions to ensure the financial stability of the Group. Platform modernisation and impro ving competitiveness Board assessment and appro val of in vestment s in platform modernisation programme and impr oving the competitiveness of our cor e business Competition risks Board consideration and appr ov al of inv estments in platf orm modernisation programme and tar geted expenditur e designed to impro v e the Group’ s core O T A business. Read more about the modernisation of our platform and competitive impr ov ements in our cor e O T A business on pages 22 to 24 . Meet the W orld ® gro wth strategy Board o versight and appr o val of inv estments in de veloping social featur es and the launch of Roamies in collaboration with G Adventures Competition risks Consideration and appro val of collaboration with G Adventures, and dev elopment of social featur es strategy . Read more about our collaboration with G Adventur es, and our ev olving social featur es strategy on pages 22 to 2 4 . 82 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued 1. Board Leadership and Company Purpose – Principles A-E of the 2018 Code W e set out below how the 2018 Code has been applied and complied with during the repor ting period. W e have pr ovided cr oss ref er ences in cer tain sections to r elev ant par ts of the Annual Report where we explain ho w we ha v e applied the principles of t he 2018 Code. Our aim is to r educe repetition, en sure transparency and demonstrate the integrated application of the 2018 Code. The 2018 Code is publicly av ailable at https:// www .frc.org Appr oach to Gov ernance The primary objective of the Board is to cr eate and deliver long term sustainable gr o wth, generate value f or our shareholders and contribute t o the wider community. W e set out on page 81 how gov ernance has suppor ted the delivery of our strategy during 2021 and how this is linked t o our principal risks. Long T erm Sustainable Success The Board is r esponsible f or the long-term success of the Group, is f ocused on long-term strategic plans and re views and assesses per f ormance against strategic goals at each scheduled Board meeting. The Board has a detailed pr ogramme that ensures financial per f ormance, strategy , risk, stak eholder engagement and gov ernance matters ar e discussed and assessed frequently . Effectiv e and Entr epr eneurial W e set out on pages 94 and 95 details of t he Board’ s effectiv eness and ho w our ev aluation process assists in ensuring that the strengths of t he Boar d are r ecognised and understood and areas that r equire impr ov ement ar e identified and actioned. The Nomination Committee we ha ve the right skills and e xperience on our Board. Biographies of the Directors ar e pro vided on pages 7 4 t o 7 6. (a) Direct ors’ induction and on-going training On appointment to the Board, each Dir ector tak es par t in a comprehensiv e induction programme. This induction is supplemented with on-going training throughout the year to en sure the Board is k ept up to date with k ey legal and regulatory requir ements and industry updates. During 2021 , on-going training included pr esentations (b) Conflicts of Int erest Our Board has a Conflict s of Interest policy and has put in place procedur es f or the disclosure and re view of any potential or actual conflicts. In accordance with this policy, Michael Cawle y did not take part in the Nomination Committee and Board pr ocesses which dealt with his re-appointment f or a fur ther three-y ear term. During 2021 no additional conflicts of interest ar ose. (c) Chairman and Non-Ex ecutive Dir ectors The Board considers Carl G. Shepher d, Éimear Moloney and Evan Cohen to be independent. Accor dingly , the Company meet s the requirement of the 2018 Code that at least half of the Board (e xcluding the Chairman) comprises independent Non-Executiv e Dir ectors. Michael Cawley , Chairman of t he Boar d, was also considered independent on his appointment to that r ole in December 2017 . Éimear Moloney and Michael Cawle y are each consider ed independent notwithstanding that they share a cr oss directorship on the boar d of directors of Kingspan Group plc. The Chairman and the Non-Executiv e Directors constructively challenge and help de velop pr oposals on strategy and bring strong, independent judgemen t, knowledge and e xperience to the Board’ s deliberations. During the year the Non-Executiv e Dir ectors are business of the Group. The terms and conditions of appointment of the Non-Executiv e Dir ectors are a vailable f or inspection at the Company’ s registered office and at the Annual General Meeting. 83 Company Beha viours and Purpose During the year the Board r eview ed and affirmed the Group’ s purpose and behaviours. Details of the behaviours ar e set out on pages 56 and 57 . Our behaviours ar e the guiding principles that we use across the Group to underpin decision making, shape our conduct and define our culture. Assessing and Monitoring Cultur e The Board’ s focus on cultur e is on-going. Oversight of risk management, establishing reporting mechanisms within the governance framew ork, direct engagement with our people, on-going ov ersight of employ ee retention statistics, appr o ving and ov erseeing the embedding a new set of employ ee values and behaviours, in v esting in our workf orce and ensurin g remuneration is aligned with culture ar e central to the Board’ s assessment and monitoring of t he Group’ s culture. Risk management The Group’ s approach to risk in the areas of IT security , data protection and r egulatory compliance is conservative and it dedicates significant r esour ces and focus t o manage and monitor risks with the assistance of its internal auditors and senior members of each division/function within the Group. The Board r eceives regular updates on risks and risk management and periodically re views the ke y risks and emerging risks in the business. The Board is committed to r especting the privacy rights of our customers and partners and is pro vided with updates from the Audit Committee on the results of annual priv acy audits undertaken by the Group’ s Data Protection Officer . Whistle Blowing and Anti Bribery The Board is committed t o promoting a cultur e that ensures emplo y ees can report suspicions of wrongdoing in confidence through both internal and external mechanisms. The Group pr eviously adopt ed an Anti-Bribery Policy and a Whistle Blowing Policy and maintains a confidential whistle-blowing helpline, operated by Na v ex Global, f or reporting such matters. No incidents w ere r epor ted to the helpline during 2021 . The Anti-Bribery Policy and Whistle Blowing Policy are re viewed annually t o ensure they ar e fit f or purpose. The Board has been appraised of the arrangements in place for the in vestigation and f ollo w up of any incident that may be r epor ted and is satisfied that these are adequate. Direct engagement Employ ee engagement is measured thr ough employ ee engagement surveys run b y a specialist partner on behalf of the Group and through a number of tar geted employ ee engagement mechanisms implemented b y the Group. Employ ee engagement mechanisms include the follo wing: • Colleague engagement forum established t o enable on-going dialogue between the Board and the Company’ s workf orce; • Seeking the views on ke y issues from senior ex ecutives who att end scheduled Board and Committee meetings on an on-going basis; • Meetings conducted between Non-Ex ecutiv e Directors and members of the w orkfor ce wher e the views of employ ees are sought on specific issues and general matters; and • Using a digital polling platform t o seek input from all members of the Group’ s workfor ce on issues that affect them. These forums allo w emplo yees to shar e their views on ke y topics which pr ovide v aluable insight in respect of engagement and culture. Fr om the ov erview of findings presented t o the Board, impro v ement areas ar e identified, and action plans are de veloped t o address priority issues. F ur ther details are set out in our W orkforce Engagement Statement belo w . Employ ee Retention The Board r eceives r egular updates on HR matters with a par ticular f ocus on reten tion statistics. Retaining our employ ees is a k ey element of our strategy and a str ong indicator of an engaged workf or ce and an inclusive culture in the Group. The rat e of attrition is an area of on-going focus f or the Board. Remuneration and cultur e W e set out on page 108 how we ha ve addr essed the issue of ensuring remuneration is aligned with cultur e. W e explain on page 122 the Group’ s approach to inv esting in and rewar ding its w orkf orce. 84 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Using Stakeholder Vie ws to shape Boar d Decision Making The Directors, when conducting Boar d business and taking decisions at the Board act in wa y that is most likely t o promote the success of the Company f or the benefit of its members as a whole, while ha ving due regar d and taking into account the factors set out in how eff ectiv e engagement with stakeholders was conducted during 2021 and how the Dir ectors hav e promoted the success of the Group in accor dance with 2006 are set out on pages 62 to 71 . W orkfor ce Engagement Statement The Board tak es a broad view of who the Gr oup’ s staff are and considers the workf or ce comprises those with formal contract s of employment (both permanent and fixed t erm) and atypical work ers such as those employ ed as independent contractors, agency wor kers and remote w ork ers (regar dless of geographical location). The Board is committed t o ensuring that it is aware of the opinions and concerns of the Group’ s workf orce and that it has regard t o their interests as part of the Board’ s decision-making process. Through f ormal and informal engagement channels the Boar d seeks to understand staff’ s views on what it’ s lik e to w ork in Hostelworld. The f eedback w e get from emplo y ees helps to dev elop our understanding of the culture and policies that are appropriat e for the business and ho w we continue to ensur e that Hostelworld is a gr eat place to work. Éimear Moloney is the designated Non-Ex ecutive Director with r esponsibility for understanding the views of the Group’ s employees and f or managing eff ective engagement between the Board and the Gr oup’ s employ ees. Éimear performs this role under a Board appro ved framew ork established in 2019 to ensur e meaningful and regular dialogue with the Group’ s workf or ce would be deliv ered. As par t of the programme of emplo yee en gagement activities conducted during 2021 , Éimear hosted a number of engagement forums with colleagues fr om differ ent departments and each of t he Gr oup’ s operating territories, pr ovided detailed updates on Boar d activities and sought the views of the forum members on a number of topics. The workf or ce engagement sessions held during 2021 are critical f ormal engagement channels that allow us to de velop insight s on employ ees’ views. The ke y themes emerging fr om these workf orce discussions are: • Dev eloping an established programme of sustainability initiatives which align with other stakeholders’ int erests and our r esponsibilities to the communities we operate in is important to enhance employ ee engagement lev els acr oss the Group; • That diversity and inclusion was w ell established in the business but there was an on-going need to embed these principles fur ther; • Strong support from staff for a mo v e to a hybr id working model but caution needed to be e x ercised on the correct balance with concerns about new joiners needing to be fully integrated into the business; • Employ ees f elt well supported by the Group’ s HR function in their mental and physical w ell-being and the introduction of a number of progr essiv e employ ee policies was w ell receiv ed; • Employ ees f elt that there was a positive le vel of engagement with the Executive Leadership T eam on company strat egy and trading per f ormance with bi-weekly to wnhalls chair ed by the CEO being par ticularly w elcomed; • A strong f ocus on car eer progr ession and learning and dev elopment oppor tunities was articulated by staff; and • The 2022 strategy f ocus on dev eloping social featur es and ex ecuting on the Company’ s Meet the W orld ® gro wth strategy was a source of optimism for staff . F eedback from these sessions was discussed at Boar d meetings during 2021 and the insights and feedback helped to inf orm broader Boar d and management decisions. How the views of our people ha ve been used to shape Board decisions during the y ear are set In the coming year Éimear will continue to hold these sessions with a par ticular focus on assessing pr ogr ess made on areas identified f or impr ov ement. The Board will also continue with its programme of r eceiving regular r epor ts on the r esults of emplo yee surve ys and arranging direct meetings betw een Non-Ex ecutive Directors and the Gr oup’ s staff to ensure the Board has an in-depth understanding of employ ees’ concerns and issues. 85 Annual General Meeting The A GM is an impor tant f orum f or shareholders to hear more about the general dev elopment of the business. The 2022 Annual General Meeting will be held on 11 May 2022. F ull information is contained in the Notice of Annual General Meeting, which will be sent to shareholders with this Annual Repor t at least 20 working da ys prior to the date of the meeting and is av ailable on the Company’ s website at www .hostelworldgr oup.com . Dir ectors’ Concerns During the year no Dir ector had concerns about the operation of the Board or the management of the Group that could not be resolved. Luk Hostel, Thailand 86 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued 2. Division of Responsibilities – Principles F-I of the 2018 Code The Chairman Responsibility Michael Cawley was appointed as Chairman of the Board of Dir ectors on 1 December 2017 and was considered independent on appointment. During 2021 the Board accepted the recommendation of the Nomination Committee and appro v ed the renewal of Michael’ s appointment as Chairman, non-ex ecutive director , Chair of t he Nomination Committee and member of the Remuneration Committee for a further three-y ear term. The Chairman is responsible f or the ov erall eff ectiveness of the Board and maintain ing a culture of openness and transpar ency at Board meetings. The Chairman is also responsible f or ensuring all Directors contribut e effectiv ely to Boar d discussions and pro vide constructiv e challenge on ke y issues under consideration. The Chairman’ s responsibilities ar e outlined in the table on page 87 . A Balanced Boar d Our Board comprises tw o Ex ecutive and f our Non- Executiv e Dir ectors. As requir ed b y the 2018 Code, at independent Non-Executiv e Dir ectors. The Nomination Committee regularly r e views Board composition, including the balance of skills and experience on the Board and conduct s succession planning for Non-Ex ecutiv e Direct ors and Executiv e Directors. Dir ector Performance F ollo wing a per f ormance ev aluation ex ercise conducted during 2021 , each Dir ector’ s per formance continues to be eff ective, and each Dir ector demonstrates commitment to the role. Non-Executiv e Dir ectors Our Non-Executiv e Dir ectors bring insight and experience to the Boar d. They ha ve r esponsibility f or constructively challenging the strategies pr oposed by the Executiv e Directors and car efully re viewing management’ s per formance in achie ving the Company’ s goals and objectives. The Non-Ex ecutive Directors also pla y a primary role in the effectiv e functioning of the Board’ s committees. The Board assessed and confirmed during the year that the Non-Executiv e Dir ectors hav e adequate time to meet their Board responsibilities (including during periods of corporate stress wher e additional demands on Non-Executiv e Dir ectors time may be made). Ext ernal appointments held b y our Non-Executiv e Dir ectors are set out on pages 7 4 to 76 . A t the date of publication of this Annual Repor t, no external appoin tments are held by our Ex ecutiv e Directors. Senior Independent Dir ector Carl G. Shepherd serves as the Boar d’ s Senior Independent Director . Carl provides a sounding boar d for the Chairman and acts as an int ermediary for the Non-Executiv e Dir ectors, where necessary , and is av ailable to shar eholders should they hav e concerns where communications through normal channels ha v e not been successful or where such channels ar e inappropriate. With significant public listed compan y experience and online tra vel e xpertise, t he Board is satisfied that Carl has the necessar y qualities and expertise for this role. Division of Responsibilities An ov erview of the division of responsibilities between the Board and the ex ecutive leadership of the Gr oup is pro vided in the table below . Company Secr etar y The Company Secr etary is responsible f or ensuring the Board has the time and necessary information requir ed to discharge it s duties and function effectiv ely and pr ovides the Board with briefings and guidance on gov ernance, legal and regulat ory matters. Both the appointment and remov al of the Company Secretary is a matter f or the Board. The remuneration of the Company Secretary is determined b y the Remuneration Committee. 87 Division of Responsibilities Chair • Leadership of the Board • Responsible f or ov erall eff ectiveness in directing the Group • Constructive r elationships betw een the Executiv e and Non-Ex ecutive Dir ectors • Eff ective contribution of all Non- Executiv e Direct ors • Direct ors receiv e accurate, timely , information • Meetings with Non-Executiv e Directors, without Executiv e Directors pr esent • Ensures Boar d is aware of the views of major shareholders Board (k e y matters) • Company’ s values and standards • Group’ s strategic aims and business plans • Annual and interim r esults • Annual report and accounts • Dividend policy • Internal contr ol and risk management • Major changes to the Group’ s corporate structure including but not limited t o major acquisitions/disposals • Capital purchases > €250k out side budget • Communication with shareholders • Changes in structure, siz e and composition of the Board • Material litigation • Remuneration Policy f or Direct ors and Senior Executiv es • Gov ernance structur e Senior Independent Direct or • Sounding board t o the Chair • Intermediary for the other Directors and shareholders • Annual meeting of Non-Ex ecutive Dir ectors to appraise Chair’ s per formance Non-Executiv e Direct ors • Constructive challenge, strat egic guidance and specialist advice • Scrutinise and hold to account the per f ormance of management and individual Executiv e Direct ors against agreed per f ormance objectives Company Secr etary • Compliance wit h all corporate gov ernance matters, monitors the Group’ s disclosure requir ements under the 2018 Code and UK Listing Rules • Ensure Boar d procedur es are f ollo wed • Compliance by the Compan y with its legal and regulatory responsibilities Executiv e leadership There is a clear division of r esponsibilities between the Board and our ex ecutive leadership. The Boar d entrusts the ongoing management of the Group’ s business to the Chief Exe c ut ive O ff ic e r . Th e Ch ie f Executiv e Officer brings f orward to the Board pr oposals for the de v el o p me n t a n d s t r at e g y o f t h e b u si n e ss . The Chief Executiv e Officer is responsible f or the ex ecution of agreed strat egy and implementation of the decisions of the Board. The Boar d of Dir ectors The Non-Executiv e Dir ectors delegate the day-to-da y management of the business to the Chief Executiv e Of fi ce r wi thi n de fi ne d go ve rn an ce p ar am et er s a nd ho l ds the Chief Executiv e Officer to account against tar gets an d s ta nd ar ds. Th e Bo ar d a pp r o v e s lo ng -t e rm c or po r at e and strategic plans after an assessment of business tr ends and risks. The formal schedule of matt ers reserved f or the Board’ s decision is available on the Gr oup’ s website, www .hostelworldgr oup.com . The schedule of matters r eserved to the Board and the T erms of Refer ence for each of its Comm itte es’ are s ubje ct to reg ular revie w . The Board also has a Delegation of Authority Policy that s ets out cle arl y t he p rim ary resp onsi bil itie s, c ont rols and aut horisation limits on matters aff ecting the Group’ s busine ss. This policy was re viewed and updat ed by the Board on two o ccasi ons d uring 202 1 . 88 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Boar d Meetings There w ere nine Boar d meetings held during the year , with additional Board conf erence calls held betw een Board meetings as and when cir cumstances requir ed it to meet at shor t notice. The Boar d also met frequently in the early par t of 2021 to consider and agree the entering into of a term loan f acility with cer tain in vestment funds and a c co u nt s of HP S Inv estment Partners LLC (or subsidiaries or af fi li at es thereof). Cer tain Boar d decisions are addr essed through written r esolutions signed by each member of the Board. Decisions tak en by the Board d ur ing the year ha v e included the following k e y matters: • Requested shar eholder appro val to amend the borrowing limit s of the Company’ s Ar ticles of Association; • Approv ed a 5-y ear €30 million term loan facility with cer tain in vestment funds and account s of HPS Inv estment Partners LLC (or subsidiaries or affiliates thereof) on terms communicated t o and appro ved b y the Company’ s shareholders; • F ollo wing the end of t he transition period on 31 December 2020 after the United K ingdom’ s depar tur e from the European Union, the elect ion of Ireland as the Compan y ’ s ‘Home Member State’ f or the purposes of the T ransparency Dir ective; • Agreed that, in the interest s of cash conservation, no cash bonus scheme would operate f or 2021 , and that shareholders would be ask ed to appr o ve an amendment to the Directors’ Remuneration P olicy to permit the grant of an award of r estricted shares in place of the bonus; • (including a reduction in the Group’ s share subscription obligations of USD$1 . 1m); • Appro ved a pr ogramme of activities to de velop the Company’ s ESG strategy and implement t he requir ements of T CFD; • Appro ved the establishment of an Emplo yee Benefit T rust for the purposes of facilitating the holding of shares in the capital of the Company f or the benefit of the Group’ s employees and certain former emplo y ees; • Appro ved the r enewal for a further t hr ee-year term of Michael Cawley as the Company’ s Chairman, Non-Executiv e Dir ector , Nomination Committee Chairperson and member of the Remuneration Committee (Michael Cawley was not in v olved in the process); • Appro ved the assignment of the Group’ s lease to its Dublin, Ireland headquarters to a third par ty and the transition to a hybr id working model; • Appro ved the on-going suspension of pa ying cash dividends to shareholders; • Appro val of a number of emplo y ee initiatives in the areas of emplo yee w ell-being and employ ee assistance; • Appro ved the statement of steps tak en to pr ev ent modern slav ery and human trafficking as contained in the Company’ s Modern Slavery Statement; • Review ed and appr ov ed the Group’ s strategy and inv estment and r esource allocation to de veloping social featur es and ex ecuting the Meet the W orld ® gro wth strategy; • Review ed and appr ov ed the annual budget; • Appro ved the pr eliminary results and interim r esults; • Reviewed and appr ov ed the 2020 Annual Repor t and accounts and notice of Annual General Meeting; • Review ed and appr ov ed the schedule of matters reserved f or the Board and the T erms of Refer ence of the Board Committees; and • Considered the Board, Boar d Committees and Director e valuation question naires. In addition to the abov e, at each Board meeting there are standing items, which include: • Review and appr o val of the pre vious minutes; • Board Committee updat es to the Board; • Status update on any matt ers outstanding fr om pre vious meetings; • Repor t fr om the Chief Executiv e Officer (including an update on strategy de velopment and deliv ery); • Repor t fr om the Chief Financial Officer (including an update on cash conservation actions tak en); and • Repor ts fr om the Chief Product Officer , Chief HR Officer , Chief Supply Officer and Chief T echnical Officer on depar tmental de velopment s and initiatives and progr ess against strategic objectiv es. 89 There ma y be circumstances which pr e vent a Dir ector from attending a Boar d or Committee meeting. In such a case the Director is expect ed to re view the meeting papers and pro vide comments to the Chairman, Committee Chair or Company Secr etary to ensure that they are raised at the meeting. The Directors’ att endance recor ds at the Board meetings held during the year ar e shown in the table below . A ttendance recor ds at Committee meetings ar e detailed in the respective Committ ee Repor ts. Dir ectors ar e pro vided with appropriate documentation appr oximat ely one week in adv ance of each Board or Committ ee meeting. F or each scheduled Board meeting the pap ers include a trading update, financial per f ormance and strategy ex ecution update. In addition, all Boar d and Committee members receiv e the minutes of meetings as a matter of course. Non-Executiv e Dir ectors are encouraged t o communicate directly with senior management between Boar d meetings. Members of the ex ecutive leadership team are in vited on an on-going basis to attend Board meetings t o present updates on the per f ormance of their specific area(s) of r esponsibility against Group objectiv es. Should any Dir ector judge it necessary to seek independent legal advice about the per formance of their duties with t he Compan y , they are entitled to do so at the Company’ s expense. Meetings between the Non-Ex ecutive Dir ectors, without the presence of the Executiv e Direct ors, are scheduled in the Board’ s annual programme. During the year , Non-Executiv e Dir ectors met on nine occasions without the presence of the Executiv e Directors. These meetings wer e conducted at the end of scheduled 2021 Board meeting and pro vided the Non-Executiv e Direct ors with a forum in which to shar e experiences and discuss wider business topics, f ostering debate in Boar d and Committee meetings and strengthening w orking relationships betw een the Non-Executiv e Direct ors. Boar d Meeting A ttendance Membership No. of scheduled meetings/total no. of scheduled meetings held when the Director was a member (1) A ttendance % Michael Cawley (Chair) 9/9 Carl G. Shepher d 9/9 Éimear Moloney 9/9 Evan Cohen 9/9 Gary Morrison 9/9 Caroline Sherry 7/9 Certain Board matters relating to the €30 million five-y ear term loan facility with certain investment funds and accounts of HPS In vestment Partners LLC (or subsidiaries or affiliates thereof) and the establishment of an Employ ee Benefit T rust for the purposes of facilitating the holding of shares in the capital of the Company for the benefit of the Group’ s employ ees and cer tain f ormer employ ees were conduct ed by specifically constituted Boar d sub-committees’ during 2021 . In addition to the nine Board meetings conducted during 2021 , there was a further five Board sub-committee meetings held during the year Michael Cawley’ s appointment as Chairman, Non-Ex ecutive Direct or , Nomination Committee Chairperson and member of the Remuneration Committee was conducted separately via written resolution . Caroline Sherry was absent from two Board meetings during 2021 due to unf oreseen personal cir cumstances. Disclosur e Committee The Board has also established a Disclosur e Committee whic h is respons ible f or ov erse eing the Co mp an y ’ s co m p l ia n c e w i th th e Ma r k et A bus e R e gu l a ti on and making decisions (wit h support of t he Group’ s capital m ark ets advisers) on when information must be disclosed t o the market. Membership of the Disclosure Committee is comprised of the CEO and CFO . 90 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued 3. Composition, succession and evaluation – Principles J-L of the 2018 Code Nomination Committee Members Membership No. of scheduled meetings/total no. of scheduled meetings held when the Director was a member (1) A ttendance % Michael Cawley (Chair) 3/3 Carl G. Shepher d 3/3 Éimear Moloney 3/3 Evan Cohen 3/3 The Nomination Committee separately recommended the r enewal of Michael Cawley’ s appointment as Chairman, Non-Executiv e Director , Nomination Committee Chairperson and member of the Remuneration Committee via written resolution. The Nomination Committee’ s composition complies wit h the requir ements of the 2018 Code. The Company Secr etary acts as Secr etary to t he Nomination Committee. Committee Role and r esponsibilities The role of the Nomination Committee is to: • Ensure that appropriat e procedur es are adopted and f ollo wed in the nomination, selection, training, e valuation and re-election of Dir ectors and f or succession planning, with regar d in all cases to the benefits of diversity on the Board, including gender; • Recommend an y proposed changes to the Board and when it is agr eed that an appointment to the Board will be made, lead a formal, rigor ous and transpar ent selection process; and • Reg ul arl y rev iew t he st ruc ture , s ize , c omp osi tio n, skills and experience of the Board and it s Committees against current and futur e requir ements of the Group. The T erms of Ref er ence of t he Nomination Committee, which w er e r e vi ew ed and upd at ed i n 20 21 , ar e a vail abl e on the Company’ s website at www .hostelworldgroup.com . Details of the changes to the T erms of Reference agr eed in Appointments to the Nomination Committee ar e for a period of up to thr ee years, which ma y be ext ended for tw o fur ther periods of up to three y ears, pro vided the majority of the Nomination Committee members remain independent and subject to re view of the Nomination Committee’ s composition by the Boar d. There is no age limit f or Direct ors. 91 Chair’s Review of 2021 K e y A ctivities of the Nomination Committee The Nomination Committee met on three occasions during 2021 . All r e-appointments of Non-Ex ecutive Directors ar e subject to a rigor ous re view after each three-y ear term and the Nomination Committee separately dealt with recommending the re-appointment, for a further t hr ee-year term, of me as Chairman, Non- Executiv e Dir ector , Chairperson of the Nomination Committee and member of the Remuneration Committee of the Company via a written r esolution. I did not par ticipate in the Nomination Committee pr ocess which dealt with my re-appointment. The principal activities of the Nomination Committee during the year ar e detailed below: • The Nomination Committee considered the Gr oup’ s policies and objectives in r espect of diversity and inclusion, its linkage to strategy , how it was implemented and progr ess to-date on achie ving its objectiv es. • The Nomination Committee led a rigorous process f or considering m y reappointment as Chairman, Non-Executiv e Dir ector , Chairperson of the Nomination Committee and member of the Remuneration Committee of the Company , resulting in the Board appro ving m y reappointment f or a fur ther three-year t erm. The process in volv ed an assessment of the provisions of the 2018 Code on the attributes requir ed of a Chairperson, consideration of the FRC’ s Guidance on Board Effectiv eness as it r elates to the requir ed skills of a Chairperson and also had regar d to the purpose and objectives of the Board Div ersity Policy which pro vides that all Board appointments ar e made on merit in the context of the skills, experience, independence and knowledge which the Board (as a whole) requir es to be eff ective. In assessing the time commitments requir ed of me as Chairman, Non-Executiv e Dir ector , Chairperson of the Nomination Committee and member of the Remuneration Committee of the Company , the Nomination Committee had par ticular regar d to my e xternal commitments as a non-e x ecutive director of Ry anair Holdings plc, Kingspan Group plc and Flutter Entertainment plc. The Nomination Committee recognised the views e xpressed b y some shareholders in this area and, noting that I had attended all Board and Committ ee meetings since my appointment as Chairman in 2017 , the Nomination Committee was satisfied that I continued to dev ote sufficient time to m y Board duties. • The Nomination Committee dev eloped a Non- Executiv e Dir ector skills matrix which each Non- Exeuctiv e Dir ector has completed and will complete on an annual basis going forwar d and considered Board composition and succession planning f or Executiv e Dir ectors and members of the Group’ s management team. • The Nomination Committee re view ed its T erms of Ref erence to ensur e it continued to be fit f or purpose. The Nomination Committee agreed t o amend its T erms of Ref erence such that the Nomination Committee, in identifying an y suitable candidate for appointment to the Board, will specifically consider especially on material envir onmental, social, and oppor tunities which ar e climate-change related. Boar d Composition and Succession During the repor ting period the Nomination Committee re viewed and assessed the structur e, size, composition and ov erall balance of the Board. As part of t he Nomination Committee’ s succession planning work during 2021 , the individual and collective skills, experience and kno wledge of the Non-Executiv e Directors was agr eed to be assessed b y ref er ence to a Non-Executiv e Dir ector skills matrix recommended b y the Nomination Committee and appro ved b y the Board. On an annual basis going forwar d, each Non-Executiv e Director will complet e a self-assessment of their perceiv ed skill lev el and experience against the skills matrix to produce a non-e x ecutive dir ector skills map. The Nomination Committee will then assess the skills and experience, personal attributes and Boar d leadership potential of continuing Non-Ex ecutive Directors t o highlight areas of str ength and identify gaps to be addressed thr ough either the appointment of new Non-Executiv e Dir ectors or suppor ted through continuing dev elopment of existing Non-Ex ecutiv e Directors. As part of the Board composition assessment conducted during 2021 , the Nomination Committee recommended to the Boar d that no additional non- ex ecutive appointment s to the Board w ere curr ently necessary. The on-going r eview and assessment of Board composition will continue to ha v e par ticular regar d to the objectives of the Board Div ersity Policy . 92 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued The Nomination Committee also f ocused on succession planning for the Ex ecutive Dir ectors and the Group’ s other senior ex ecutives to ensur e appropriat e management dev elopment and comprehensiv e succession planning for the e xecutiv e leadership team and other ke y ex ecutives was in place on both a contingency and long-term basis. This f ocus on succession planning will continue for the coming y ear to ensure the Gr oup has an adequate talent pool av ailable and ensure the risks to the business if k ey personnel left the Group are eff ectiv ely managed. Boar d and Committee Evaluation and Re-Election of Dir ectors The result s of the Board ev aluation and Direct or appraisal process ar e set out on pages 94 and 95 . The Nomination Committee recommended to the Boar d, after ev aluating the balance of skills, knowledge, independence and experience of each Dir ector , that all Directors seek r e-election at the Company’ s forthcoming AGM. The Nomination Committee’ s effectiveness was re viewed as part of the Board ev aluation ex ercise. The Nomination Committee and the Board consider ed the outcome of the evaluation and ar e satisfied that the Nomination Committee is per f orming effectiv ely . Diversity and Inclusion Diversity is fundamental to the futur e success and long-term prospect s of the Group. As at the date of the Group’ s Executive Leadership T eam are f emale. Diversity in terms of Boar d composition is consider ed in a broad sense and includes age, gender , cultural backgr ound, geographical div ersity and business backgr ound in line with the Company ’ s Board Diversity Policy , which was re view ed in December 2021 to ensure it remains fit f or purpose. The Boar d will always seek to appoint the most suitable and skilled candidates on merit against objective criter ia, gender and diversity . While we do not, as such, set an y particular diversity target s in respect of Boar d appointments, w e will continue to give car eful consideration to div ersity as par t of the process of Boar d refr eshment and renewal. The objectives of the Board Div ersity Policy ar e Company’ s success and achieving its strategic goals are optimised b y having a br oad range of perspectiv es for impr o ving the quality of decision making on the Board b y reducing the risk of ‘gr oup think’ . The provision s of the Diversity Policy r equire that its eff ectiveness is subject to annual re view b y the Nomination Committee. In addition, as par t of the annual per f ormance ev aluation of the effectiv eness of the Board, Board Committ ees and individual Directors, the Div ersity Policy requir es the Nomination Committee to specifically consider and assess the adequacy of the diversity repr esentation on the Board. This assessment was made b y the Nomination Committee who confirmed that the Board was sufficiently diverse. The policy statement included in the Diversity Policy pr ovides that an eff ective Boar d will include and make good use of diff er ences in the skills, regional and industry experience, back ground, race, gender and other distinctions between Dir ectors and emphasises that in identifying suitable candidates for appointment t o the Board, the Nomination Committee is requir ed to consider candidates on merit against objective criteria, with due r egard f or the benefits of div ersity on the Board. The Nomination Committee confirms that this policy was follow ed during the year in the decision to reappoint me as Chairman, Non-Executiv e Dir ector , Chairperson of the Nomination Committee and member of the Remuneration Committee of the Company . The Nomination Committee will continue its e xisting stated policy of using the services of recruitment consultants, wher e appropriate, who ha ve demonstrat ed a commitment to ensuring that hiring processes encourage diverse candidate r ecruitment. The Nomination Committee is firmly of the view that the Group’ s policy, practices and beha viours in the impor tant ar ea of diversity and inclusion ar e indicative of the status of the Group’ s ov erall culture and v alues and should be closely aligned. The Nomination Committee conducted an ext ensive r eview of the Group’ s practices in the area of diversity and inclusion and recommended to the Boar d the adoption of an updated Diversity and Inclusion policy . The adoption of an updated Diversity and Inclusion policy that emphasises the need for the Group to be r epr esentative of the diverse societies w e operate in, where diff erence is celebrated in the workplace and wher e education and training on the challenges that minority groups face in society and the workplace is pr omoted is fully aligned to Hostelw orld’ s Vision, Purpose and Behaviours. 93 Through this re view ex er cise we belie ve ther e are cer tain ar eas where w e are making meaningful progr ess and other areas wher e we need to impr ov e. The progr ess we ha v e made and continue to make in this area demonstrates a cultur e of openness and engagement between management and emplo y ees. The adoption of clear principles of diversity and inclusion on the Group’ s hiring and recruitment practices is par ticularly important as it sets the correct benchmark in terms of the Group’ s values and expected beha viours from new emplo y ees. The Nomination Committee considers that the use of an employee surve y to est ablis h employ ees’ views on the issue of diversity and inc lus ion was vital as insights fr om differ ent so urc es en su re the adoption of diversity and inclusion pr ac t ic es is b a se d on complete inf ormation and data. The impro vement s we continue t o make in this area will ensure a br oader div ersity of cand idates in terms of gender , age, disability, ethnicity , education and social backgr ound. Michael Cawley Chairman, Nomination Committee 30 March 2022 Summer House Cairns, Australia 94 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Boar d Effectiv eness and Ev aluation Progr ess against 2020 Boar d ev aluation actions Set out below is the progr ess made in 2021 against actions identified as part of t he 2020 Boar d effectiv eness re view: Action Progr ess Where practicable, Committee meetings t o be held prior to Board meetings to ensur e Board meetings had sufficient time to f ocus on strategy matters in an in-depth manner During the year the majority of Committee meetings wer e held (via video confer ence) in advance of Boar d meetings Committee updates to the Board to be allocat ed increased time to ensure compr ehensive updat es are pr ovided to the Board on Committee matt ers Additional time was allocated at scheduled Board meetings to Committee updates A two-da y in person Board strat egy session to be held during 2021 (subject to trav el guidelines allo wing) This did not take place during 2021 o wing to the ongoing uncer tainty in r espect of trav el guidelines Senior management par ticipation in Boar d meetings during 2020 had been par ticularly beneficial and should be continued during 2021 The Group’ s Chief HR Officer , Chief Product Officer , Chief Supply Officer and Chief T echnical Officer attend each scheduled Board meeting and pr ovide updat es on their depar tmental initiativ es and achiev ement of strategic objectives within their respectiv e areas Succession planning for senior e x ecutives was to r emain an area of k ey f ocus f or 2021 Succession planning was considered b y the Nomination Committee and Board during 2021 and will r emain a k ey focus ar ea f or 2022 A detailed assessment of training and dev elopment needs for Board members who did not ha v e ex ecutive e xperience in onli ne tra vel companies was to be completed and actioned in 2021 A skills matrix for Non-Ex ecutiv e Directors has been established and each Non-Executiv e Direct or will hav e a tailored de velopment plan f or gaps in experience and skills identified Internal Evaluation A formal int ernal ev aluation of the Board, its Committees and individual Directors was undertaken during the year . The evaluation included completion of a detailed questionnaire b y each of the Directors co v ering the follo wing: • The Board’ s role and operation; • Effectiv eness of the Board and it s Committees; • Managing the Group’ s management function; and • Finance, risk management and controls. The Board e valuation pr ocess continued its pr eviously adopted practice of requesting separat e feedback on the effectiv eness of the Board and its Committees fr om senior ex ecutiv es who had attended Board meetings, from the Group’ s internal audit par tner in PwC, the Group’ s audit par tner in Deloitte and from the Remuneration Committee’ s executiv e compensation consultants (K orn F err y). The ev aluation result s wer e assessed by the Compan y Secretary who prepar ed a report for the Chairman. The report was review ed by the Chairman and the principal findings wer e discussed with the Board. The Nomination Committee will hav e r egard on an on-going basis to the findings of the evaluation pr ocess as a means to assist its w ork in assessing the structure, composition and diversity of the Boar d and in its dev elopment of eff ective succession plans. The ev aluation established that the Directors wer e satisfied that they wer e kept w ell inf ormed of material matters occurring between meetings, that the Board had in place a sufficient system to pr ovide assurance to it on the effectiv eness of the Group’ s internal controls, that Board members had an appr opriate le vel of input into shaping the Group’ s strategy, and that Board members understood what was e xpected of them as board members in the context of their fiduciary duties. Accordingly , all Direct ors will seek 95 re-election at the Compan y ’ s for thcoming A GM on 11 May 2022. The specific r easons why each Dir ector’ s contribution is impor tant to the long-term sustainable success of the Company ar e set out in the Annual General Meeting documentation. Boar d Evaluation Pr ocess – Boar d Str engths Sufficient diversity on the Boar d in terms of gender , experience and Non-Ex ecutiv e Director /Executive Director balance and Boar d members str ongly consider themselves independent of management (and also ex ercise independent judgment and v oice their own opinions); • Board members consider there t o be the correct balance between challenging and supporting management; • Board members consider that the Chairman and CEO engage constructively with share holders and pro vide reports to the Board on the outcomes of these discussions; and • Board has in place a sufficient system t o pro vide assurance to it on the effectiv eness of the organisation’ s internal controls. Boar d Evaluation Pr ocess – Recommendations for impr oving Boar d Effectiv eness As par t of the ev aluation ex ercise, the f ollowing recommendations f or impr oving the eff ectiveness of the Board wer e made: • Continuing prof essional de velopment f or Board members ov er the course of 2022 would be beneficial (this issue was separately raised as par t of the 2021 Audit Committee and Remuneration Committee ev aluations); • Focus of Boar d meetings during 2021 was principally and more Boar d focus dur ing 2022 on longer term strategy /strategy ex ecution would be beneficial; • A ttendance of senior ex ecutiv es at Board meetings impro ves the quality of discussions and generally seen as beneficial; • An enhanced process f or e valuating the per f ormance of the CEO with input from all Non- Executiv e Dir ector’ s would be beneficial; and • More open communications and engagement between Boar d members and management would be beneficial. These recommendations and the separate recommendations f or impr oving Boar d effectiv eness pro vided by the senior e xecutiv es who had pr esented operational briefings to the Board during the year and the Group’ s internal and external audit par tners and ex ecutive r emuneration consultants will be put in place in 2022. The continuing prof essional de velopment requir ements f or Board members will be aligned t o the Non-Executiv e Dir ector skills matrix dev eloped b y the Nomination Committee in 2021 . The Chairman also conducted an appraisal of the per f ormance of each Director ( considering the views of the other Directors). He reported that each Director continues to per f orm eff ectively and demonstrates commitment to the role. As part of t he appraisal ex ercise the Chairman assessed the individual and collective depth and breadth of skills, e xperience and knowledge of the Non-Ex ecutive Dir ectors and the Board and its Committees t o discharge their respectiv e duties and responsibilities eff ectiv ely; and Board w ere curr ently necessary. An assessment of the Chairman’ s per formance was also carried out in 2021 by the Non-Ex ecutive Dir ectors, led by the Senior Independent Dir ector , who confirmed that the Chairman continues to per form eff ectiv ely in his role. External Evaluation A ssessment The Board consider ed the benefits of having a Boar d ev aluation facilitated b y an ext ernal third-par ty consultant but decided not to mak e use of the ser vices of an external consultant in cir cumstances where the ev aluation process pr oposed by the Compan y Secretary was well structur ed and comprehensiv e. The merits of having a boar d ev aluation conducted b y an external third-par ty consultant will be k ept under re view and assessed on an on-going basis. 96 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued 4. Audit, Risk and Internal Control – Principles M-O of the 2018 Code The function of the Audit Committee is to suppor t the Board in dischar ging its o versight r esponsibilities in relation to the Company’ s internal controls and management of risk, the per f ormance and effectiv eness of the audit process, systems and contr ols to ensur e compliance and re view of the financial reporting process. The T erms of Ref erence r equire the Audit Committee to maintain o v ersight of ke y business areas while f ocusing on emerging risks in addition to r eceiving updates on r emedial action steps to addr ess internal audit findings and recommendations r elating to impr ov ements in contr ols. Audit Committee Membership Membership No. of scheduled meetings/total no. of scheduled meetings held when the Director was a member Attendance % Éimear Moloney (Chair) 3/3 Carl G. Shepher d 3/3 Evan Cohen 3/3 The Audit Committee’ s composition complies wit h the requir ements of the 2018 Code. The Company Secr etary acts as Secr etary to t he Audit Committee. Éimear Molone y continues to chair the Audit Committee, who alo ng w it h ot he r m emb ers Car l G . Sh eph erd a nd E van Cohen are independent, Non-Ex ecutiv e Direct ors of the Co mpan y . Éimear is cons ider ed by the Board to hav e recent and r elev ant financial experience being a qualified accountant who has pr e viously held senior inv estment manager roles in Zurich Lif e Assurance (Ir eland) plc, and the Audit Committee as a whole has competence and broad e xperience rele vant t o the online travel sect or , facilitating robust and insightful contributions to the Audit Committee throughout FY2021 . Furt her detail in r elation to the backgr ound, knowledge and e xperience of the Audit Committee members is set out on pages 75 and 7 6 of this Annual Repor t. Meetings Audit Committee meetings are held t o coincide with key dates in the Co mpany ’ s fi nanc ial repor t ing and aud it cycles. In line with its T erms of Refer ence, the Audit Committee met three times in FY2021 and on one of these occasions, as a safeguar d, the Audit Committee had discussions with the external audit par tner fr om Deloitte Ireland LLP and senior r epresentativ es fr om the outsourced internal audit te am of PricewaterhouseCoopers (“PwC”), without ma nag em ent be ing pr es en t. D uri ng the r eporting pe rio d the Audit Committee r emained par ticularly focused on the financial and liquidity risks and business continuity challenges the Group was pr esented with, Both the Chief Financial Officer and t he Compan y Secretary attend Audit Committee meetings, and as r equired, at the request of the Audit Committee, other members of the senior management team, senior members of the Group’ s Finance depar tment, the Deloitte Ireland LLP audit partner and representativ es from PwC ar e also in vited to attend meetings. 97 Audit Committee Role and R esponsibilities During the financial year ended 31 December 2021 , in line with its T erms of Ref erence (full details of which are a vailable at www .hostelworldgr oup.com ), the Audit Committee: • Review ed the integrity of the financial statements of the Company , including underlying accounting assessments and judgements, the rationale r elating to the preparation of those documents and the information supporting the statements in relation to going concern and disclosure of inf ormation to the external auditor , as well as any f ormal announcements relating to the Compan y ’ s per formance; • Monitored application of accounting policies, methodology for accounting f or significant or unusual transactions where diff er ent approaches are possible, the clarity and completeness of disclosure in the Company an d Group’ s financial reports and the context in which statements ar e made, and all material inf ormation presented with the financial statements, such as the operating and financial re view and the corporate gov ernance statement insofar as it r elates to the audit and risk management; • Assessed whether t he Annual Report and Accounts, taken as a whole, is f air , balanced and understandable, facilitating shar eholders assessment of Group’ s position and per formance, business model and strategy; • Review ed the adequacy and effectiv eness of the Company’ s internal financial controls and the Company’ s statements on these matters; • Received presentations and assessed the Compan y ’ s compliance programme designed to ensur e compliance with the new T askforce on Climate-r elated Financial Disclosures r epor ting r equirement s; • Reviewed a GDPR Audit r epor t fr om the Group’ s DPO; • Assessed the Company’ s compliance wit h the requir ements of the 2018 Code; • Assessed the internal controls and risk management systems and pr ocedures within the Group; • Continued to r eview whether there was a r equirement to establish an internal audit function in light of sector and Group de velopment s; • Reviewed the Audit Committee’ s T erms of Refer ence and appro ved r elated amendment s to ensure the on-going ov ersight b y the Audit Committee of the Group’ s register of climate risks and opportunities (to be re view ed twice annually going forwar d), and requir e the appro val of Audit Committee to the content of disclosures r elated to the recommendations of the T askforce on Climate-related Financial Disclosures; and • Review ed the per formance of the e xternal auditor in the context of auditor eff ectiveness, in dependence and all appropriate guidelines. Onederz Hostel, Cambodia 98 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Chair’s Review of 2021 Fair , Balanced and Understandable T o ensure shar eholders hav e all r equisite inf ormation to assess the Company’ s per formance, at the request of the Board and prior to final appr ov al, the Audit Committee re viewed the content of the Annual Report to ensure it repr esented a fair , balanced and understandable assessment of t he Compan y ’ s position. In carrying out t his assessment, the Audit Committee had r egard to the f ollowing: • whether the content of t he Annual Report, in par ticular the strategic report and business review , provides both positive and negativ e aspects of performance and dev elopments in a clear and meaningful wa y; • whether the links between discussions of per f ormance, financial position and cash flows, including the use of appropriate performance measur es and the financial statements, are clear; • whether the information pro vided on the Company , t he en vironment in which it operates and the risks it faces are specific to the Gr oup and are not e xplained in general terms; • Removin g immaterial items; and • Explaining the links between inf ormation in the Annual Repor t, such as objectives, KPI s and risks. The Audit Committee, on completion of its r eview , considered this Annual Repor t and financial statements 2021 , tak en as a whole, and concluded that t he disclosur es, processes and contr ols wer e appr opriate and recommended to the Board that the Annual Report and financial statements 2021 is fair , balanced and understandable facilitating assessment of the Com pan y ’ s position and per f ormance. Significant Issues In respect of the y ear ended 31 December 2021 , the Audit Committee considered the belo w significant issues. The Audit Committee f ocused on areas of critical accounting judgment, with management and auditor pr oviding detailed information and e xplanations as to the adequacy and appropriateness of pr o visions in the areas detailed below: Significant Issue Description and resolution Going concern and viability statement The Audit Committee re viewed the Gr oup’ s assessment of going concern ov er a period of not less than 12 months from date of signing. Management presented f or ecasted cashflows to the Audit Committee detailing trading and expenditur e plans with associated potential impact of uncer tainties acr oss three scenarios. ow n mit igat ing actions on cost s and cashflows. The Audit Committee also consider ed the Group’ s financing facilities and future funding plans. F or the most stressed scenario the Audit Committee also re viewed an assessment of the principal risks and uncer tainties f acing the Group and the impact on the Group’ s financials should they occur . This included the Group’ s compliance with covenant s and the Group’ s liquidity ov er the assessment period. The Group’ s viability statement is included on pages 46 and 47 . F ollowing r eview and challenge of f or ecasts and risk fact ors the Audit Committee concluded that it was appropriate t o recommend the adoption of the going concern basis in preparing the financial statements and w er e satisfied that the Group remained viable under the stressed scenarios. 99 Significant Issue Description and resolution Carrying value of goodwill and intangible assets Goodwill and intangible asset impairment re views inv olv e a range of judgemental decisions large ly related t o the assumptions used to assess the value-in-use of the assets being tested. These assumptions typically include shor t and long-term business and macr oeconomic projections, cash flow f orecast s and associated discount rates. The Audit Committee re viewed v aluations prepar ed on the Group’ s goodwill and domain names carrying value. The Audit Committee re viewed the methodology applied including ensuring that the discount rates used wer e appropriate and assessing the output from the sensitivity analysis per f ormed at the 2021 year -end on k ey assumptions including the Gr oup’ s gro wth and discount rates. The Audit Committee w ere satisfied that the assumptions used were appr opriate. F ollowing these discussions, the Audit Committee is satisfied with the headroom included in the valuation models and the carrying value of goodwill and intangible assets at 31 December 2021 . Deferr ed tax asset recognition and reco ver ability of deferr ed tax assets Deferr ed tax assets ar e recognised to the e xtent that it is probable that taxable profits will be av ailable in future periods against which the re v ersal of temporary differen ces can be deducted. The extent to which it is pr obable that taxable profits will be a v ailable in future periods has been assessed by management based on the Board appr o ved fiv e-year f or ecasts which include a for ecasted r eturn to full reco very in 2023 . The Audit Committee hav e r eview ed the initial recognition and the group’ s ability to recov er deferr ed tax assets r ecognised ov er a five-y ear period. As a r esult of their review , the Audit Capitalisation of dev elopment costs The Group incurs significant internal cost s in respect of the ongoing dev elopment of its IT systems and core technology and pr oduct platf orms. The accounting for these costs as either dev elopment costs (which are capitalised as intangibles) or expensed as incurr ed inv olves judgement. wer e capitalised in accordance with the criteria as set out in IAS 38 Intangible Assets. Ov erall, capitalised dev elopment costs carried in the balance sheet amounted to €5 . 1m at 31 December The Audit Committee has re viewed management’ s application of the accounting policy adopted an d the assessment as to whether current project s meet the criteria required f or costs t o be capitalised (including feasibility of completion, int ention to complete, probable economic benefit s, av ailability of resour ces to complete, and ability to measur e expenditur e). The Audit Committee considers the approach tak en and the application of the policy to be appropriate. Exceptional items The Audit Committee considered the pr esentation of the Group’ s financial statements and, in par ticular , the appropriateness of the presentation of e xceptional items. The Audit Committ ee considered if e xceptional items w er e in line with the Group policy and also if the repor ted r esults repr esented a true and fair view of the underlying performance during the year . The Audit Committee are satisfied with the presentation of e xceptional items in the financial statements, and that there is sufficient detail to allo w users of the financial statements to understand the nature and exten t of the exceptional items and ho w they ar ose. Other matters The Audit Committee has also considered a number of other judgements which ha ve been made by management including those relatin g to corporate gov ernance, r ev enue recognition, r ecov erability of assets, transaction costs r elating to borr owings, accruals and estimates and considers the judgements which ha ve been made ar e reasonable. The Audit Committee considered the r ecommendations of the T askforce on Climate R elated Financial Disclosures (“T CFD”) on the Group’ s financial repor ting and financial statement s. The Audit Committee concluded that the disclosures on pages 49 to 52 made in response t o the requir ements of T CFD are appr opriate and r elev ant. The Audit Committee also ref er enced the Group risk f or climate change included on pages 39 and 40 . The Audit Committee duly noted appropriate disclosur e was made in this regar d. 100 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued External Auditors Deloitte Ireland LLP continued as the e xternal auditor for the FY2021 with Daniel Murray acting as audit par tner f or his fifth and final year prior to the mandatory rotation of audit partner . In accordance with mandatory applicable audit tendering requir ements r equiring auditor r otation ev ery ten years an d in light of Public Interest Entities r equiring rotation at least e very twenty y ears, transitional arrangements r equire the Company t o tender for external auditing services by June 2023 . The Audit Committee regularly r e views the role of the external auditor and the scope of its audit while considering its effectiv eness on an ongoing basis during the year . T o ensure there can be no r eason f or audit independence to be impacted, the Company has in place a policy on the provision of n on-audit services. Under t he policy , ex cept in ex ceptional cir cumstances, non-audit fees of the audit fee f or the current financial y ear . The Audit Committee ov ersees the process f or appro ving material non-audit w ork pro vided by e xternal auditors to saf eguard the objectivity and independence of the auditor and to ensure compliance with regulat ory and ethical guidance. Non-audit work with an expected cost in ex cess of €30 , 000 must be subject to competitive tender and appr o ved b y the Audit Committee. During 2021 , Deloitte Ir eland LLP w ere engaged to pro vide non-audit services to the Group will continue to monitor the type and lev el of non- aud it services pro vided by the e xternal auditor to prev ent a n y perceived or actual impact on the auditor independence. The Audit Committee assesses the ongoing effectiv eness and quality of the external auditor an d audit process through a number of methods: • Commencing with identification of appropriate risks by Deloitte Ir eland LLP as part of its detailed audit plan presented t o the Audit Committee at the star t of the audit cycle; • Interactions with Deloitte Ireland LLP during committee meetings; • Quality of reporting, presentations and approach to materiality; • T echnical insight in relation t o judgement and complex ar eas; • Understanding of the Group’ s business, industr y knowledge and it s ke y risks; and • F eedback from management on the audit pr ocess. In assessing independence and objectivity , the Audit Committee considers the lev el and nature of services pro vided by the e xternal auditor as w ell as the confirmation from the ext ernal auditor that it has remained independent within the meaning of the FRC’ s ethical standards f or Auditors. The Audit Committee’ s assessment of the external auditor’ s independence took into account the non-audit services provided during the year . The Audit Committee concluded that the nature and exten t of the non-audit fees did not compromise the independence of the auditor . The external auditor has open and unrestricted access to the Chairperson of the Audit Committee. F ollo wing a re view of the effectiv eness and quality of Deloitte Ireland LLP , in addition to assessing its independence, the Audit Committee was satisfied that Deloitte Ireland LLP has carried out it s duties properly and the Audit Committee recommended to the Board the re-appointment of Deloitt e Ireland LLP f or the FY2022. Internal Contr ols and Risk Management The Audit Committee in conjunction with the Board continually re view the effectiv eness of the Company’ s internal controls and risk management thr oughout FY2021 and carried out a detailed assessment of the principal risks faced b y the Company and r elev ant emerging risks in addition to r ele vant measur es to mitigate such risks. The Board and Audit Committ ee carried out its assessments in August 2021 and December 2021 . Ther e has been increased f ocus on emerging risks as part of t he risk assessment r eview and the Board is satisfied that there has been a thorough process carried out to identify emer ging risks and put in place action to manage or mitigate those risks. During FY2021 , each function of the Company was responsible f or identifying existing principal r isks impacting their area and emerging r isks in light of the Company’ s activity and relev ant economic and geopolitical factors. 101 The result s wer e discussed collectively b y the Executiv e Leadership T eam to identify any cr oss functional risks and to ensure each principal r isk and emerging risk was included in the Compan y ’ s Risk Register with explanations of ho w these risks are being managed or mitigated. The Principal Risks and emerging risks ar e set out on pages 30 to 44 . The focus and design of the Gr oup’ s internal control envir onment is to identify , e valuate, mitigat e and monitor the principal and emerging risks f aced by the business, and report to the Board in a timely manner acknowledging that elimination of all risk is not f easible. K ey element s of the Group’ s ongoing controls include: • An organisational structur e with clearly defined lines of responsibility , delegation of aut hority and a f ormal schedule of matters specifically reserv ed for decisions by the Board is maintained; • A comprehensiv e annual planning and budgeting process r epor ted f or all operational units, which ar e re viewed and appr o ved b y the Board; • Internal control syst ems and procedur es to implement and monitor the use of these delegated authorities and capital expenditure contr olled b y budgetary processes in line with authorisation levels; • Financial control, budgeting and for ecasting systems, with regular reporting, variance analysis and re views of ke y performance indicators; • Robust systems b y which the Group’ s financial statements ar e prepar ed, which included assessment of ke y financial r epor ting risks arising through complexity of transactions, changes t o the business, and changes in accounting standards; • An experienced and suitably qualified finance function that is fully conv ersant with the operations of the business; and • A Code of Conduct setting out behavioural and ethical standards, suppor ted b y clear anti-bribery and corruption guidelines, and a whistleblowing policy with an external independent hotline is well documented and understood. In the Board’ s view , the ongoing inf ormation it receiv es is sufficient to enable it to r eview the effectiv eness of the Group’ s system of internal control. The Direct ors confirm that they hav e re viewed the eff ectiveness of internal control and consider ed the significant risks affecting the business and the way in which these risks are managed as part of its responsibility to monitor the Company’ s risk management and internal control systems. The risks identified on pages 30 t o 44 are those that could hav e a material adv erse impact on the Group’ s prospect s, its financial condition and the results of its operations. The action s taken to mitigate the risks described in the Principal Risks and Uncer tainties cannot pr ovide assurance that other risks will not materialise and/or adv ersely affect the operating result s and financial position of the Group. As par t of the assessment of the Company’ s risks, emerging risks ar e identified and are k ept under close re view , managed and mitigated. The procedur es in place to identify emerging risks include a twice-y early re view of the Company’ s Risk Register by each member of the executiv e leadership team (who seek r elev ant input from their wider teams); a thorough in-depth re view by the collectiv e ex ecutive leadership t eam and in turn by the Audit Committee and the Board. The re views are based on the curr ent structure within each function including any significant changes fr om an operational, resour cing or strategic perspectiv e with consideration to ongoing or planned project s within each function which might give rise to new risks or challenges. T aking into account the Principal Risks and Uncer tainties set out on pages 30 to 44 , and the ongoing work of the Audit Committee in monitoring the risk management and internal control syst ems in conjunction with the Board, the Board: • Is satisfied that it carried out a robust assessment of the principal risks facing the company; and • Has re viewed the eff ectiveness of the risk management and internal control syst ems including all material financial, operational and compliance controls, it was concluded that through a combination of the work of the Board and the Audit Committee, there are appr opriate ongoing pr ocesses and procedur es to identify , e valuate and manage material risks. The Compan y ’ s risk management and internal controls w er e effectiv ely monitor ed throughout the year and that no material contr ol deficiencies wer e identified during the year . 102 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Internal Audit The Audit Committee is responsible f or monitoring and re viewing the independence, operation and effectiv eness of the internal audit function including its plans, activities and r esources. The internal audit function is outsour ced to PwC and the Audit Committee considers that PwC continue to be independent and effectiv e, and the Audit Committee is satisfied with the quality, e xperience and expertise of PwC as its internal auditor . As par t of the Board Ev aluation carried out during the year , the Board concluded that it was satisfied that the Group had in place a sufficient system to pro vide assurance to the Board on the eff ectiveness of the organisation’ s internal controls and the independence of PwC as the Group’ s internal auditor . A t the three Audit Committee meetings during 2021 , the Audit Committee assessed findings arising from PwC’ s internal auditor’ s reports or received updat es in connection with previous int ernal audit reports presented t o the Audit Committee. On an on-going basis the Audit Committee considers any contr ol weaknesses identified and the remedial action t o be taken. The 2021 internal audit plan, setting out areas of int ernal audit focus, was agr eed b y the Audit Committee with PwC follo wing ext ensive engagement betw een PwC and the Company’ s management. In 2021, the Audit Committee receiv ed three r epor ts fr om PwC co vering (a) Business continuity management follo w up r eview; (b) Thir d par ty engagement re view; and (c) Google cloud platform/IT General Contr ols r eview . The Audit Committee subsequently follo ws up to ensur e internal audit findings or recommendations ar e acted upon by management. The Audit Committee re view ed and agreed the internal audit plan for 2022 with PwC f ollowing consultation between PwC and the Compan y ’ s senior management which the Audit Committee believ es is appropriate to the scope and nature of the Group’ s activities. The 2022 internal audit plan is risk based and focusses on (a) Phishing r e view; (b) Re view of T CFD (“T ask F orce on Climat e-Related Financial Disclosures”) ; (c) IT General Contr ols re view; and (d) Findings f ollow up re view . Annual Evaluation of P er f ormance The per f ormance and effectiv eness of the Audit Committee was considered as part of the Board ev aluation process and r esults concluded that the Audit Committee continues to operate eff ectiv ely and that the role and remit of the Audit Committee remains appropriate in the curr ent economic and risk climate and the needs of the Company . I will ensure the Audit Committee ar eas highlighted f or impro vement and enhan cement are actioned and ar e on the Audit Committee agenda ov er the course of 2022. Éimear Moloney Chairperson, Audit Committee 30 March 2022 103 Stayokay Rotterdam Cube Hostel, Netherlands 104 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued 5. Remuneration – Principles P-R of the Code Chairman of the Remuneration Committee’s Annual Statement Dear Shareholder , As Chairman of the Remuneration Committee, I am pleased to present the Compan y ’ s Remuneration Repor t f or the year ended 31 December 2021 . Membership No. of meetings/total no. of meetings held when the Director was a member (1) A ttendance % Carl G. Shepher d (Chair) 6/6 Michael Cawley 6/6 Éimear Moloney 6/6 Evan Cohen 6/6 The Remuneration Committee separately appro ved the se verance arrangements f or a senior ex ecutive pursuant to a written r esolution signed by each Remuneration Committee member . The Remuneration Committee’ s composition complies wit h the requir ements of the 2018 Code. The Company Secretary acts as Secr etary to the Remuneration Committee. The Remuneration Committee held 6 meetings during 2021 and, among other things, under took the follo wing activities: • Finalised the 2020 Directors’ Remuneration Report; • Agreed that, in the interest s of cash conservation, no cash bonus scheme would operate f or 2021 , and that shareholders would be ask ed to appr o ve an amendment to the Directors’ Remuneration Policy to permit the grant of an award of r estricted shares (the “2021 Restricted Shar e A ward”) in place of the bonus; • Discussed and agreed the approach t o be taken to the Long- T erm Incentive Plan (“L TIP”) award granted in 2021 , including the quantum, metrics, target s and award population; • Consulted with major shareholders on the abov e matters and, having r eceiv ed a generally positive response, appr ov ed an amendment to the Direct ors’ Remuneration Policy which was subsequently appro ved b y shar eholders at a General Meeting in April 2021; • Considered and discussed the views of shareholders who had v oted against the resolutions proposed at the General Meeting in April 2021 as to why they had v oted against the proposals; • Reviewed in detail the Direct ors’ Remuneration Policy in advance of being r equired to seek appr o val f or a new Policy in 2022, considering in particular different alternatives f or long-term incentiv e pr ovision; • Considered the remuneration issues raised in Code and assessed the Company’ s compliance with the respective Code Pr ovisions; • Reviewed o verall w orkf orce r emuneration and relat ed policies and considered the alignment of Ex ecutive Director pa y with wider Company practices; • Engaged with the wider workf orce on matters r elating to ex ecutiv e remuneration; • Consulted again with major shareholders on the proposed appr oach f or 2022, in par ticular replacing L TIP awards in 2022 and 2023 with a fur ther grant of restricted shar es (the “2022 Restricted Shar e A ward”); and • Reviewed the salaries of the Executiv e Dir ectors and the Executiv e Leadership T eam for 2022. Subsequent to the financial year end, the Remuneration Committee met to f ormally assess the extent of v esting under the L TIP award granted in 2019 as well as appr o ve the contents of this Directors’ Remuneration R epor t. 105 A t the time of writing of my Annual Statement intr oducing last year’ s Directors’ R emuneration Repor t, Hostelw orld was continuing to face e xtraordinary challenges during a period of ongoing uncer tainty as activity in the trav el industry remained subdued. With a focus on cash conservation, the Remuneration Committee agreed that for the second y ear running there would be n o cash bonus scheme for the Ex ecutive Dir ectors or other employ ees. In its place, the Committee decided to make a special awar d of restr icted shares (the “2021 Restricted Shar e A ward”) to help ensur e the ongoing retention and motiv ation of a large n umber of staff , including the Executiv e Directors. The Boar d Chairman and I had a number of discussions with major Hostelworld shar eholders and w ere pleased that the majority of those consulted understood the rationale for our pr oposal and committed to supporting the award. As a result, the Company held a special Gene ral Meeting after the A GM in April 2021 to appro v e an amendment to the Directors’ Remuneration P olicy to allow the Executiv e Dir ectors to participate in t he 2021 Restricted Share A ward. W e w ere pleased t o receiv e the suppor t of a majority of shareholders f or the amendment, and the award was granted short ly afterwar ds. The 2021 Restricted Shar e A ward was granted at a le vel of two times each participant ’ s target annual cash bonus, reflecting the cancellation of the 2021 bonus scheme and the likely absence of such a scheme f or 2022. F or the Executiv e Directors, the tar get annual cash bonus vest in tw o equal tranches: the first tranche in F ebruary 2022, and the second in F ebruary 2023, in order to mirror the paymen t timeframe of the normal annual cash bonus. V esting is subject to continued employment and satisfactory personal per f ormance as determined through the annual per f ormance appraisal process. The Committee believ es that the 2021 Restricted Share A ward, although relativ ely unusual in the context of UK ex ecutive r emuneration, is a str ong retention t ool at a time when employ ees ha ve seen no v alue emerge fr om per f ormance-related incen tives. It benefits a lar ge number of employ ees (c. 7 0 members of staff receiv ed an award) and so aligns a significant pr opor tion of the population directly with shareholders. In F ebruar y 2022, the Committee formally appr ov ed the vesting of the first tranche of the award f or those employ ees who had met the underlying personal per formance t est. This included the Executiv e Directors. In addition to the 2021 Restricted Share A ward, we also appro ved a grant of performance shar es under the L TIP to t he Ex ecutiv e Directors and other k ey employ ees in April 2021 . For this award, w e used differ ent performance measures than those in place for prior awar ds. Performance is measured o v er the three-y ear period ending 31 December 2023. Half of the award is subject to challenging Adjusted EBITD A per f ormance target s; the other half is based on t he achiev ement of k ey strategic objectiv es. There ar e two element s to this. The first inv olves assessing the impro vement in n ew customer value compar ed to customer acquisition cost f or paid channels; the second is based on the successful adoption of Hostelworld’ s Counter technology b y a targeted number of host el accommodation par tners. W e have set specific quantifiable target s for both of these strategic measures. In the circular published ahead of the April 2021 General Meeting, we e xplained that the specific targets f or the Adjusted EBITD A and strategic measur es wer e considered commer cially confidential. This is still the case, although we again commit to publishing the Adjusted EBITD A target s once normal trading conditions resume and the Group is in a position t o pro vide general guidance to the market. The tar gets f or the strategic measures will be published in full in the 2023 Direct ors’ Remuneration Report at t he time w e report on t he extent of achie vement again st the targets and the consequent lev el of vesting. A t the April 2021 General Meeting, shareholder appr ov al was also receiv ed f or an amendment to the L TIP rules change was sought to give the Committee gr eater flexibility to manage potential dilution, r ecognising the relativ ely large number of participants receiving L TIP grants and the 2021 Restricted Shar e A ward. The Committee was very grateful f or the suppor t of shareholders f or the decisions we took early in 2021 . W e appreciated the fact that most large in vestors recognised the ex ceptional cir cumstances facing Hostelworld at the time and understood the impor tance of putting in place critical retention measur es. W e do, how ev er , note that a significant minority of shareholders opposed both the amendment to t he Dir ectors’ Remuneration Policy and the change to the L TIP rules. W e wrote to many of those who v oted against these proposals to understand their r easons for doing so, and also considered the reports issued by pr o xy advisers. The Committee considered the points raised and remains of the view that the proposals wer e in the 106 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued interest s of shareholders in general. As a r esult, no changes wer e made to the amended Remuneration Policy f ollowing this subsequent engagement. A New Dir ectors’ Remuner ation Policy The Directors’ R emuneration Policy was last appro v ed by shar eholders at the A GM in 2019 and, as a result, we ar e seeking appro v al for a new Policy at the A GM to be held on 11 May 2022. During 2021 , the Committee under took an e xtensiv e re view of the existing Policy with the suppor t of its external advisers. Among other things, we consider ed the ongoing challenges facing the trav el industry, the difficulties of forwar d-for ecasting, the recruitment market f or our k ey people, general tr ends in ex ecutiv e remuneration and the views of institutional in vestors. The Committee believ es that Hostelworld is in a par ticularly challenging position. The Gr oup has continued to be impacted b y pandemic-related international tra vel r estrictions, with trading levels remaining depr essed and with limited visibility ov er the precise shape of the post-pandemic r ecov ery. A t the same time, there is an ex ceptional lev el of demand for talent ed ex ecutives and e-commer ce/ technology prof essionals. Thr oughout the organisation, our reasonable f ocus on cash conservation has meant we ha ve not been able t o offer cash compensation at competitive le vels and ha v e suffer ed some attrition as a result. The need to r etain our k ey leaders r emains paramount if we ar e to successfully complete our turnaround strategy and maximise the gr owth oppor tunities a vailable to the business. With this in mind, t he Committee concluded that the most appropriate appr oach f or the near -term was to retain the Direct ors’ Remuneration Policy in its e xisting format and def er most material changes t o a time when there is great er visibility ov er the prospects f or the business. W e hope t hat this will come within t he ne xt two y ears. As a result, our int ention is to re v er t to shareholders with a new Policy in 202 4 , i.e. one year earlier than would normally be requir ed after appr ov al of our renew ed Policy in 2022. In retaining the existing P olicy in 2022, we ar e making only minor changes (as explained on pages 106 and lon g-te rm incentives. Setting appropriat e targets f or awar ds unde r the L TIP has been a challenge for the Committ ee sin ce the star t of the pandemic, made par ti cula rly d iffic ult given considerable forwar d-looking unc ertainty . T o lo ck in our k e y people (including the Executiv e Dir ectors), we det ermined the best approach f or the two-y ear Policy will be an awar d of restricted shar es (the “2022 Restricted Shar e A ward”). Subject to shareholder appr o val of the new Policy , w e will make one grant of r estricted shar es to cov er both 2022 and 2023 . These shares will v est after three years, subject to con tinued employment and an underpin mechanism being met which requir es the Committee to be satisfied with individual and Company performance o ver the v esting period. F or the Executiv e Directors, ther e will then be a two-year post-v esting holding period. The 2022 Restricted Shar e A ward will be made at a of salary which can be awarded under the L TIP. The basic salary. W e appreciate that these award le vels ar e higher than would apply if the L TIP grant size in 2021 was taken int o account. How ev er , we belie ve str ongly that the approach chosen is requir ed to secure the retention and motiv ation of the current team while also strongly aligning with the interest s of shareholders. A wards will also be made to c. 40 other employ ees. The 2022 Restricted Shar e A ward will be granted under the rules of the L TIP and we will r emain within I wrote t o major shareholders to e xplain our intended approach in late 2021 and was pleased t o receiv e a continued strong le vel of support. Most of our large inv estors r ecognise the position Hostelworld is in, the quality of our management team and the need to put in place effectiv e r emuneration packages. W e look f orward to fur ther productiv e engagement with shareholders when we come to r e view the Policy again ahead of the 2024 A GM. Implementation of the Policy in 2022 As explained abo ve, the k ey f eatur e of the new Policy is the 2022 Restricted Share A ward, which we intend to grant shor tly after the A GM. The Committee has re view ed the salaries of t he should be implemented f or the Chief Executiv e Officer with effect fr om 1 January 2022. This increase is consistent with current le vels of inflation in Ir eland and 107 wider workf or ce. The Committee fur ther agreed that a Financial Officer with effect fr om 1 January 2022. This was a result of the fur ther salary review that was highlighted in last ye ar’ s Remuneration Repor t and reflect s her significant contribution to the business and her per f ormance since her appointment at the end of 2020 . The increase brings her salary in line with market and is no w consistent with the salar y le vel of her predecessor . The Committee anticipates that increases in futur e years will be aligned with incr eases for the wider w orkfor ce. In light of ex ceptional recruitment and r etention pr essures throughout the organisation, the workf or ce salary review for 2022 ( ex cluding that for the Ex ecutive Dir ectors and other members of the Executive Leadership T eam) was brought f orward to Sept ember 2021 , at which time increases w ere applied thr oughout the Group. As noted of salaries was under tak en in F ebruary 2022 to pro vide merit increases f or those ex cluded from the r eview in September 2021 , to addr ess promotion s identified as par t of the year -end review pr ocess and in ex ceptional circumstances to r ealign salaries to the mark et where market mo v ement has occurred. The a verage incr ease inflationary pressures and the increases t o others within the organisation, the Committee believ es the increases f or the Directors ar e appropriat e. A t the time of writing, the Committee does not expect to be in a position to off er an annual cash bonus scheme for 2022 f or the Ex ecutive Dir ectors or an y other employ ee. Ho we ver , we intend to k eep this under review as the year pr ogresses and w e may , if circumstances permit, pro vide a bonus oppor tunity f or a portion of the year . Any bonus off ered will be consist ent with the terms of the Directors’ Remuneration P olicy and full details of the measures and specific target s will be included in next y ear’ s repor t. UK Corporate Go v ernance Code (“the Code”) As indicated in this Annual Statement and in the additional disclosures throughout the Dir ectors’ Remuneration Report, t he Committee has applied the principles set out in the Code. The Directors’ Remuneration Policy is designed to support strategy and promote the long-term sustainable success of the business. The Committee operates a formal and transparent pr ocedure f or setting the Policy and f or agreeing pa yments under the framework set out in the Policy . Discretion is applied wher e r elev ant, although the Committee did not do so in respect of 2021 pay outcomes. Hostelworld is compliant with the remuneration pro visions set out in the Code, with two ex ceptions. First, the Committee has not dev eloped a formal policy on post-emplo yment shar eholding requir ements. W e hav e continued to r eview whether such requir ements should be introduced but consider that the current framework pr ovides f or sufficient alignment betw een management and the long-term interest s of shareholders. This tak es into account the requir ement for the Ex ecutive Dir ectors to build a significant holding in Hostelworld shar es during the period of their employment, and the tw o-year post -v esting h olding period in the L TIP (which will also apply to t he 2022 pension contribution rate f or the Chief Executiv e workf or ce. The Chief Executiv e Officer’ s pension was agreed at the time of his recruitment in 2018 and, although not aligned with t he w orkfor ce a v er ag e, i s not considered e xcessiv e b y the Committee. As par t of the re view of the Directors’ Remuneration Policy during 2021 , the Committee consider ed these two matters in detail and concluded that no changes should be made to the current appr oach as the new Policy to be appr ov ed in 2022 is essentially a rollo v er of the 2019 Policy (with t he e xception of the appr oach to long-term incentiv es). When re viewing the Policy again ahead of the 2024 A GM, we will consider whether a differ ent appr oach to these matters is requir ed. The Committee believ es that this Annual Statement, the Directors’ R emuneration Policy and the Annual Repor t on Remuneration together present a clear summary of the approach tak en to rewar ding Ex ecutive Dir ectors at Hostelworld which is consist ent with the disclosure expectations set out in the Code and the expectations of the Company’ s major shareholders. The Committee is of the view that t he Dir ectors’ Remuneration Policy and its implementation is fully consistent with the factors set out in Pro vision 40 of the Code: • Clarity: The Policy and the way it is implemented is clearly disclosed in this Annual Statement and the suppor ting r epor ts, with full transparency of all el eme nt s of Dir ectors’ remuneration; 108 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued • Simplicity: W e have adopted a simple and straightforwar d Remuneration Policy which, f or 202 2 and 2023, is f ocused on a shareholder -aligned r et ent io n tool, the 2022 Restricted Share A ward. This inv olv es an award of shar es which will vest after three years. In two y ears’ time we will r eview whether a return to our pr e vious approach will be appr opriate, taking into account circumstances at the time; • Risk: The new Policy repr esents a balanced response to the curr ent business envir onment in which the Company operates. The use of r estricted shares ensur es that there is no risk of par ticipants being potentially incentivised in a manner which is inconsistent with Hostelworld’ s risk profile. The underpin mechanism in the 2022 Restricted Share A ward is designed to ensure that v esting lev els are consist ent with overall performance; the reputational risk fr om a perception of “e x cessive” pay outs is limited; • Predictability: The P olicy includes full details of the individual limits in place f or the pay schemes. A summary of potential reward out comes is included in the “scenario char ts” in the Policy . Any discr etion ex er cised by the Committee in implementing the Policy has been fully disclosed; • Proportionality: The link between the deliv ery of strategy , long-term performance and alignment and the remuneration of the Executiv e Direct ors is set out in this Annual Statement, the Directors’ Remuneration Policy and the Annual Report on Remuneration. The underpin to the 2022 Restricted Share A ward will ensure that poor per f ormance is not rewar ded; and • Alignment to cultur e: The approach to Dir ectors’ remuneration is consistent with k ey Gr oup cultural tenets of transpar ency , inclusion and per f ormance. While we cannot off er con ventional performance- related incentiv es at the current time, w e hav e closely aligned the pay structur es for Dir ectors with those in place elsewhere in the Company as w e seek to retain and motiv ate k ey talent at all le v els. Dialogue with shareholders on remuneration matt ers is impor tant to the Committee. As discussed abo ve, we pr oactively consult ed twice with major inve stors in 2021 , r eceiving useful feedback, and separat ely wrote to many of those shar eholders who voted again st the resolutions at the General Meeting in April. Consistent with the 2018 Code, we also engaged with employees on remuneration matters during the y ear as par t of the Board’ s broader engagement strategy with employ ees. Éimear Moloney , in her capacity as t he designated Non-Executiv e Dir ector with responsibility f or managing effectiv e engagement betw een the Board and the Group’ s employee s, conducted an employ ee engagement forum during the r epor ting period and, as par t of this ex ercise, e xplained in detail how e x ecutive pay aligns with wider compan y pay policy . Structur e of this Repor t This report has been prepared in accor dance with the rele vant UK r epor ting r egulations, the UKL A Listing Rules and the UK Corporate Gov ernance Code. The report is split into three par ts: • This Annual Statement; • The Directors’ R emuneration Policy , f or which shareholder appr ov al will be sought b y way of a binding resolution at the A GM on 11 Ma y 2022; and • The Annual Repor t on Remuneration, which set s out payment s made to the Directors and details the link between Compan y per f ormance and remuneration f or the 2021 financial year . The Annual Repor t on Remuneration t ogether with t his Annual Statement is subject to the usual advisory shareholder v ote at the A GM. I hope that you find the information in this Report helpful and informativ e and I look f orward to y our continued suppor t at the A GM. I am always happ y to hear fr om the Company’ s shareholders and y ou can contact me via the Company Secr etary if you ha ve an y questions on this report or more generally in relation t o remuneration at Hostelworld. On behalf of the Board Carl G. Shepher d Chairman, Remuneration Committ ee 30 March 2022 109 The Northshore Hostel, Hawaii 110 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Directors’ Remuneration Policy Intr oduction The Directors’ R emuneration Policy was appro v ed by shar eholders at the AGM held on 31 Ma y 2019 . An amendment to the Policy was appro ved b y shar eholders at a General Meeting held on 26 April 2021 . Set out belo w is the Policy which will apply with effect fr om the AGM on 11 Ma y 2022, subject to shar eholder appro val at the meeting. An y payment s to the Directors and an y payment s for loss of office can only be made if the y are consistent with the terms of the approv ed Policy . If t he Committee wishes to mak e a pa yment to Direct ors which is not consistent with the Policy , it will be requir ed to seek shar eholder appro val f or an amendment to the Policy at a General Meeting. The Policy has been prepar ed in line with the relev ant UK regulations. In designing the Policy , t he Remuneration Committee considered de v elopments since the Policy was appro ved in 2019 an d amended in 2021 , taking into account the business envir onment in which Hostelworld operat es, the specific retention and recruitment challenges facing the Company , t he opinion of internal stak eholders on the Policy and the views of major shareholders. The Executiv e Dir ectors pro vided input into this process but, t o av oid conflicts of inter est, no individual was present when the Committee agreed the final terms of the Policy or when his or her own r emuneration was discussed. The Chairman of the Remuneration Committee wrote t o major shareholders and the main pro xy advisory services to seek their views on the terms of t he new Policy . Many of those consulted recognised the ex ceptional circumstances within which the Company continues to operate and expr essed support for the Policy proposals. Accor dingly , the Committee agreed t o submit the Policy to a formal binding shar eholder vot e at the fort hcoming A GM. As explained in the Annual Statement fr om the Chairman of the Remuneration Committee, the Committee intends the Policy to apply for a period of tw o y ears from the date of appr ov al. Decisions around operating the Policy will be made by the Committee each y ear and explained in the rele v ant Directors’ Remuneration R epor t. Changes to the Policy With the exception of the approach to long-t erm incentives, the Remuneration Committee has decided not to mak e material changes to the Directors’ R emuneration Policy when compared with the Policy appro v ed in 2019 (and • Standard per f ormance-relat ed awards under the L TIP will be replaced with the 2022 Restricted Share A ward. The inv olv es the grant of a single award of restricted shar es in 2022 which will v est after three y ears (with the shares then subject to a two-y ear post-v esting holding period). This appr oach has been taken to ensur e r etention of the Executiv e Directors and other k ey individuals within Hostelw orld against the backdr op of the ongoing uncer tainty facing the tra vel industry and the competitive r ecruitment envir onment f or technology talent. • The standard L TIP has been retained within the Policy to ensure that the Committee has the ability to grant an L TIP during the Policy period in exceptional cir cumstances (e.g. in the e vent of appointment of a new Dir ector). T o give the Committee an appr opriate lev el of fle xibility in line with standard practice elsewhere, the Policy has been amended to remo v e the requirement f or the Committee to consult with major shareholders in the e vent of deciding to use diff erent performance conditions f or L TIP grants than those previously in place. • A pro vision has been included giving the Remuneration Committee the flexibility to settle any annual bonus payment in shar es. This change will ensure that the Committee has the ability to award bonuses in equity in a situation where a cash pa yment would not be consider ed appr opriate. • The 2021 Restricted Shar e A ward has been remo v ed from the Policy table giv en that this was a one-off arrangement specific to 2021 . The awar ds that wer e granted will vest or lapse depending on the satisfaction of the vesting conditions attached to the awards. • The section on good leav ers has been amended to clarify the Remuneration Committee’ s position t hat, in the ev ent of death, the post-vesting holding period f or L TIP awards (inclusive of the 2021 Restricted Shar e A ward and the 2022 Restricted Share A ward) will not apply . 111 In addition, a number of minor edits ha ve been made to the w ording of the Policy to ensur e that it is aligned with common market practice. Policy T able The follo wing table sets out each element of r emuneration and how it supports the Company’ s shor t and long term strategic objectives. Element and link to strategic objectiv es Operation Oppor tunity Performance metrics, weighting and assessment Base Salary Pro vides a base lev el of remuner ation to suppor t r ecruitment and ret ention of Executiv e Dir ectors with the necessar y experience and expertise to deliver the Company’ s strategy . Salaries are r eview ed annually and any changes are normally eff ective from 1 January in the financial year . When determining an appropriate le vel of salary, the Remuneration Committee considers: • remuneration practices within the Company; • the per f ormance of th e individual Executiv e Direct or; • the individual Executiv e Director’ s experience and responsibilities; • the general per f ormance of the Company; • salaries within the ranges paid by the companies in the comparator group used for r emuneration benchmarking; and • the economic envir onment. Base salaries will be set at an appropriate le vel within a comparator group of comparably sized listed companies and will normally increase in line with increases made to the wider employ ee workf or ce. Individuals who are recruited or pr omoted to the Board ma y , on occasion, hav e their salaries set below the targeted policy le vel until they become established in their role. In such cases subsequent increases in salary may be higher than the average until the target positioning is achiev ed. None 112 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Element and link to strategic objectiv es Operation Oppor tunity Performance metrics, weighting and assessment Benefits Pro vides a mark et competitive le vel of benefits to support recruitment and ret ention of Executiv e Direct ors with the necessary experience and expertise to deliver the Company’ s strategy . The Executiv e Direct ors receiv e benefits which include, but are not limited to, privat e medical insurance (family co ver), income protection and lif e assurance cov er (including tax if any). The Remuneration Committee recognises the need to maintain suitable flexibility in the determination of benefits that ensures it is able to suppor t the objective of attracting and retaining personnel. Accordingly , t he Remuneration Committee would e xpect to be able to adopt other benefits including (but not limited to) relocation e xpenses, tax equalisation and suppor t in meeting specific costs incurred b y Direct ors. The maximum will be set at the cost of providing the benefits described. None Pensions Pro vide r etirement benefits to support recruitment and ret ention of Executiv e Direct ors wi th the necessary experience and expertise to deliver the Company’ s strategy . The Remuneration Committee maintains the ability to pro vide pension funding in the form of a salary supplement, which would not f orm part of t he salary for the purposes of determining the extent of par ticipation in the Company’ s incentive arrangements. F or the current CEO , the maximum pension contribution as a percentage F or the current CFO and f or any new Ex ecutiv e Director , the maximum pension contribution will be in line with the contribution level pro vided to the majority of the workf orce . None 113 Element and link to strategic objectiv es Operation Oppor tunity Performance metrics, weighting and assessment Annual Bonus Plan The Annual Bonus Plan pro vides an incentive t o the Executiv e Directors linked t o achiev ement in delivering goals that are closely aligned with the Company’ s strat egy and the creation of value f or shareholders. In par ticular , the Plan supports the Company ’ s objectives allo wing the setting of annual tar gets based on the business’ strategic objectiv es at that time, meaning that a wide range of per f ormance metrics can be used. The Remuneration Comm itt ee will determine the bonus payable aft er the year end based on per f ormance against target s. Annual bonuses are normally paid in cash after the end of the financial year to which they r elate although the Remuneration Committee will hav e the flexibility to settle an y bonus in shares. On a change of control, the Remuneration Committee may pa y bonuses on a pro rata basis measured on per f ormance up to the date of change of control. Malus will apply up to the date of the bonus determination and clawback will apply for tw o years fr om the date of bonus determination. The maximum bonus Bonus pay outs ar e determined on the satisfaction of a range of ke y financial and non- financial objectives set b y the Remuneration Committee. In addition, the payment of any bonus will r equire the Remuneration Committee to determine that the Company has deliver ed an acceptable lev el of per f ormance during the year . The Remuneration Committee retains discr etion in ex ceptional circumstances to change per f ormance measures and targets an d the weightings attached to per f ormance measures part-way thr ough a per f ormance year if ther e is a significant and material ev ent which causes the Remuneration Committee to belie ve the original measures, w eightings and targets ar e no longer appropriate. Discr etion may also be ex ercised in cases where the Remuneration Committee believ es that the bonus outcome is not a fair and accurate reflection of business per f ormance. 114 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Element and link to strategic objectiv es Operation Oppor tunity Performance metrics, weighting and assessment Long T erm Incentive Plan (“L TIP”) Applicable to all L TIP A wards other than t he 2021 and 2022 Restricted Shar e A ward The Committee has no curr ent intention to grant L TIP awards t o the current Ex ecutive Dir ectors during the two-y ear period cov ered b y the Remuneration Policy A wards ar e designed to incentivise the Executiv e Direct ors to maximise returns t o shareholders by successfully delivering the Company’ s objectives ov er the long term. A wards are grant ed annually to Ex ecutive Directors under the L TIP . These vest at the end of a three-year period, normally subject to: • the Executiv e Director’ s continued employment at the date of vesting; and • satisfaction of the per f ormance conditions. The Remuneration Committee may awar d dividend equivalents on awards to the ext ent that they vest. A wards which vest aft er the end of the t hr ee-year per f ormance period will be subject to an additional two-y ear holding period. During this period the shares cannot be sold (other than as requir ed for tax purposes). The L TIP rules contain standard pr ovisions to satisfy awards/dividend equivalents in shar es. Malus will apply for the three-year period fr om grant to vesting with clawback applying for the two-y ear period post vesting. A wards may be made up If ex ceptional circumstances arise, including (but not limited to) the r ecruitment of an individual, the Remuneration Committee may grant awar ds outside this limit up to a maximum annual basic salary. award will v est for thr eshold the award will vest f or maximum per f ormance. L TIP awards will vest subject t o the achievement of challenging per f ormance conditions set by the Remuneration Committee prior to each grant. These will be determined by the Committee each year taking into account the specific strategic priorities of the business at the time. The Committee may change the balance of the measures, or use differ ent measures f or subsequent awards during the Policy period, as appropriat e. The Remuneration Committee retains discr etion in ex ceptional circumstances to change per f ormance measures and targets an d the weightings attached to per f ormance measures part way through a per f ormance period if an ev ent occurs which causes the Remuneration Committee to believ e the original measures, weightings and tar gets ar e no longer appropriate. Discretion ma y also be ex ercised in cases wher e the Remuneration Committee believ es that the vesting outcome is not a fair and accurate reflection of business per f ormance. 115 Element and link to strategic objectiv es Operation Oppor tunity Performance metrics, weighting and assessment Long T erm Incentive Plan (“L TIP”) Applicable to the 2022 Restricted Shar e A ward The 2022 Restricted Share A ward will operate as a r etention mechanism. The 2022 Restricted Shar e A ward will be granted foll owing shareholder app r o v al of the new Remuneration Policy under the L TIP rules. The award will vest three y ears after grant. V esting will be dependent on continued employment at the date of vesting and an underpin mechanism (see right). The 2022 Restricted Shar e A ward will be subject to an additional two-y ear holding period follo wing the end of the vesting period. During this period the shares cannot be sold (other than as requir ed for tax purposes). The Remuneration Committee may awar d dividend equivalents on awards to the ext ent that they vest. The L TIP rules contain standard pr ovisions to satisfy awards/dividend equivalents in shar es. Malus will apply for the three-year period fr om grant to vesting with clawback applying for the two-y ear period post vesting. The 2022 Restricted Shar e A ward will be granted at a base salary for the Chief of base salary for the Chief Financial Officer . V esting of the 2022 Restricted Share A ward is not subject to the satisfaction of headline per f ormance conditions. How ev er , the underpin mechanism requir es the Remuneration Committee to be satisfied with individual and Company performance ov er the vesting period. Sav e As Y ou Earn (“S A YE”) plan T o encourage shar e ownership among Hostelworld emplo yees and increase the alignment with shareholders. The plan permits emplo yees to purchase shar es at the end of a three-year period of the market v alue of the shares at grant. The maximum par ticipation limit is as set out in the rele vant legislation. None (as is the norm for appro ved all-emplo y ee plans). 116 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Element and link to strategic objectiv es Operation Oppor tunity Performance metrics, weighting and assessment Shar eholding Requir ement T o suppor t long term commitment to the Company and the alignment of Executiv e Direct or interest s with those of shareholders. The Remuneration Committee ha s ado pt ed formal shar eholding guidelines that will encourage the Executiv e Directors t o build up and then subsequently hold a shareholding equiv alent to Adherence to these gu id el in es is a condition of continued par ticipation in the equity incentive arrangements. None Non-Executiv e Dir ector F ees The Company pr o vides a lev el of fees t o suppor t recruitment and ret ention of Non- Executiv e Dir ectors with the necessar y experience to advise and assist with establishing and monitoring the Company’ s strategic objectiv es. The Board as a whole is responsible f or setting the remuneration of the Non-Executiv e Direct ors, other than t he Chairman whose remuneration is considered b y the Remuneration Co m mi tt e e and recommended to the Board. Non-Executiv e Direct ors are paid a base f ee and additional fees f or acting as Senior Independent Director and as Chairperson of Board committees ( or to reflect other additional responsibilities and/or additional/unfor eseen time commitments). Non-Executiv e Direct ors do not par ticipate in any of the Compan y ’ s incentive arrangement s. The base fees f or Non- Executiv e Direct ors are set at an appropriate rat e. In general, the level of f ee increase f or the Non- Executiv e Direct ors will be set taking account of any change in responsibility and will take int o account the general rise in salaries across the workf or ce. The Company will pa y reasonable v ouched expenses incurr ed by the Chairman and Non- Executiv e Direct ors, together with ot her benefits where con sidered necessary (and any relate d tax that may be pay able). None 117 Choice of Performance Measur es Each year , t he Remuneration Committee will choose the appr opriate per f ormance measures and tar gets to apply to the annual bonus plan and the L TIP. The measures will be closely aligned with Hostelw orld’ s strategy and business priorities at the time and will include targets which ar e challenging and yet r ealistic. F ull details of the measures and the targets will be included in the Annual Report on Remuneration for the rele vant y ear . In line with standard practice for r estricted shar es, the vesting of the 2022 Restricted Shar e A ward is not dependent on the achiev ement of per f ormance conditions (although an underpin mechanism applies, as set out in the Policy table abov e). G iv en the ongoing focus on cash conservation, there is curr ently no expectation that an annual bonus scheme will operate f or 2022 and theref ore no decisions ha ve been tak en r egarding performance conditions f or the plan. F ur thermore, as there is no int ention to mak e a standard L TIP grant to the Executive Dir ectors during the two-y ear period cov ered b y the Remuneration Policy , the Committee has not agr eed any performance conditions to apply for L TIP awards. Malus and Clawback Malus and clawback pro visions within the annual bonus scheme and t he L TIP apply in t he f ollowin g circumstances: • Material misstatement of r esults; • Gross misconduct; • Error in calculating the number of shares subject t o an award or the amount of cash paid; • Corporate failur e; or • Serious reputational damage. As stated in the Policy table abov e, f or the annual bonus plan, malus applies up the date of bonus determination Restricted Shar e A ward – malus will apply f or the three-year period fr om grant to vesting, with clawback applying for the tw o-year period post v esting. Discr etion The Remuneration Committee has discr etion in sev eral areas of policy as set out in this r epor t. The Remuneration Committee may also e x ercise operational and administrativ e discretions under r ele vant plan rules appr ov ed by shareholders as set out in those rules. These include (but are n ot limited to) the choice of par ticipant s, the size of awards in an y year (subject t o the limits set out in the Policy table abov e), the determination of good and bad leav ers and the treatment of outstanding awar ds in the ev ent of a change of control. In addition, the Remuneration Committee has the discretion to amend the Policy with regar d to minor or administrative matters where it w ould be, in the opinion of the Remuneration Committee, disproportionate to seek or await shareholder appr ov al. 118 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Recruitment Policy The approach when setting the remuneration of an y newly r ecruited Ex ecutive Dir ector will be assessed in line with the same principles for the Executiv e Dir ectors, as set out abov e. The Remuneration Committee’ s approach to recruitment r emuneration is to pa y no more than is necessary to attract candidates of the appropriate calibr e and experience needed f or the role fr om the market in which the Company competes. The R emuneration Committee is mindful that it wishes to av oid paying mor e than it considers necessary to secure the pref erred candidate and will hav e regar d to guidelines and shar eholder sentiment regar ding enhanced short term or long term incentive payment s made on recruitment and the appropriat eness of any performance measur es associated with an award. Subject to the paragraph below , t he incentiv e awards that can be receiv ed in an y one year will not e xceed the maximum individual limits as set out in the Policy T able. The Remuneration Committee w ould hav e the flexibility , if consider ed base salary. The le vel of an y such grant w ould take int o account the timing of appointment of t he Dir ector during the Remuneration Policy period. The Remuneration Committee’ s policy is not to provide sign-on compensation. In addition, the Committee’ s policy is not to pro vide buy outs as a matter of course. Ho we v er , should t he Committee determine that the individual circumstances of r ecruitment justified the pro vision of a buyout, the equivalent v alue of an y incentives that will be forfeited on cessation of the individual’ s previous emplo yment will be calculated. This will tak e into account, among other things, t he performance conditions attached to the vesting of these incentives, the lik elihood of vesting and the nature of the awards (cash or equity). The R emuneration Committee may then grant a buy out up to the same value as the lapsed value, wher e possible, under the Company’ s incentive plans. T o t he ext ent that it is not possible or practical to pro vide the buyout within the terms of the Company’ s existing incentive plans the Remuneration Committee may in e x ceptional circumstances consider it appr opriate to grant an awar d under a diff erent structur e to facilitate a buy out of outstanding awar ds held b y an individual on recruitment. Where an e xisting employ ee is pr omoted to the Board, the Remuneration Policy will apply fr om the date of promotion but there would be no r etr ospective application of the Policy in r elation to subsisting incentive awar ds or remuneration arrangement s. Accordingly , pr ev ailing elements of the remuneration package f or an e xisting employ ee would be honour ed and f orm par t of the ongoing remuneration of the person concerned. These would be disclosed to shareholders in the Annual Report on Remuneration for the rele vant financial y ear . The Company’ s policy when setting fees f or the appointment of new Non-Executiv e Directors is t o apply the policy which applies to current Non-Ex ecutiv e Direct ors. Legacy Arrangement s The Remuneration Committee has the authority to honour any commitments ent ered into with the existing Ex ecutive Directors prior t o the approv al of this Remuneration Policy . F or t he a voidance of doubt, this includes the 2021 Restricted Shar e A ward that does not form part of t his f orward-looking Policy . 119 Service Agr eements and Letters of Appointment Executiv e Dir ectors Each of the Executiv e Directors has ent ered into a service contract with the Company . Each Ex ecutive Dir ector is subject to re-election at the A GM. Name Position Date of service agreement Notice period by Company (months) Notice period by Director (months) Gary Morrison Chief Executiv e Officer 11 June 2018 12 12 Caroline Sherry Chief Financial Officer 1 December 2020 6 6 Non-Executiv e Dir ectors The Non-Executiv e Dir ectors hav e each enter ed into letters of appointment with the Company . Each independent Non-Executiv e Dir ector’ s term of office runs for an initial period of three y ears unless terminated earlier upon writt en notice or upon their resignations. Non-Ex ecutive Dir ectors ar e also subject to re-election at each A GM. The date of appointment of each Non-Ex ecutive Dir ector is set out belo w: Name Effectiv e date of appointment Notice period by Company (months) Notice period by Director (months) Michael Cawley 14 October 2015 1 1 Carl G. Shepher d 1 October 2017 1 1 Éimear Moloney 27 Nov ember 2017 1 1 Evan Cohen 14 August 2019 1 1 Pa yment f or Loss of Office The Remuneration Committee will honour Ex ecutive Dir ectors’ contractual entitlements. Service contracts do n ot co nta in l iq uid at ed d am age s cl aus es . If a co nt ra ct is to be terminated, the Remuneration Committee will det ermine such mitigation as it considers fair and r easonable in each case. There ar e no contractual arrangements that would guarantee a pension with limited or no abatement on sev erance or early r etirement. Ther e is no agreement betw een the Company and its Ex ecutiv e Directors or emplo y ees pro viding f or compensation for loss of office or emplo yment t ha t o cc ur s be cau se o f a take over b id . The Remuneration Committee reserves the right to make addi tio nal pay men ts wher e su ch pa ymen ts ar e m ade in good faith in discharge of an e xisting legal obligation ( or b y wa y o f d am ag es f or br eac h of s u ch a n o bl ig at io n ); or b y wa y of settlement or compromise of any claim arising in con nection with t he terminati on of an Executive Dir ector’ s office or employment; or in r elation to th e pro vision o f outplacem ent or similar services. When determining an y loss of office payment f or a depar ting individual the Remuneration Committee will alwa ys seek to minimise cost to the Compan y whilst seeking to address the cir cumstances at the time. 120 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Remuneration element T r eatment on exit Salary, Benefits and Pension Salary, benefit s and pension will be paid ov er the notice period. The Company has discr etion to mak e a lump sum pa yment on termination equal to the salary, v alue of benefits and value of company pension contributions pa yable during the notice period. In all cases the Company will seek to mitigate an y payments due. Annual Bonus Plan Good leav er reason – pr o-rated to time and performance f or year of cessation. Other reason – no bonus pay able f or year of cessation. L TIP Good leav er reason – Pr o-rated to time and performance (wher e applicable) in respect of each subsisting L TIP award. Other reason – Lapse of any un v ested L TIP award. The Remuneration Committee has the follo wing elements of discr etion: • to determine that an ex ecutiv e is a good leav er . It is the Committee’ s intention to only use this discretion in circumstances wher e there is an appr opriate business case which will be explained in full to shar eholders; • to measur e per f ormance (where applicable) o ver the original performance period or at the date of cessation. The Committee will mak e this determination depending on the type of good leav er reason r esulting in the cessation; • The Remuneration Committee’ s policy is generally to pro-rate to time from the date of grant to the date of cessation. It is the Remuneration Committee’ s intention to only use its discr etion to adopt a diff erent appr oach to pro-rating in cir cumstances where ther e is an appropriate business case which will be explained in full to shar eholders; and • to determine the extent t o which the post-vesting holding period will apply f or a good lea ver . The Committee has agreed that the holding period will not apply in the event of death. A good leav er reason ma y include cessation in the follo wing cir cumstances: • Death; • Ill-health; • Injury or disability; • Redundancy; • Retirement with agr eement of employ er; • Emplo ying compan y ceasing to be a Group compan y; • Employing compan y transf erred to a person who is not a Gr oup Member; or • A t the discretion of the Remuneration Committee (as described abo ve). Cessation of employment in cir cumstances other than t hose set out abo ve is cessation f or other reasons. 121 Change of Contr ol The Remuneration Committee’ s policy on t he v esting of incentives on a change of contr ol is summarised belo w: Name of Incentive Plan Change of contr ol Discretion Annual Bonus Plan Pro-rated t o time and per f ormance to the date of the change of control. The Remuneration Committee has discr etion to continue the operation of the Plan to t he end of the bonus year . L TIP The number of shares subject to subsisting L TIP awards vesting on a change of contr ol will be pro-rated t o time and per f ormance (where applicable). Options to the extent v ested may be ex ercised at an y time during the period of six months follo wing the change of control and if not so vested will lapse at the end of such period unless the Remuneration Committee determines that a longer period shall apply . The Remuneration Committee r etains absolute discretion r egarding the proportion vesting, taking into account time and performance (where applicable). There is a pr esumption that the Remuneration Committee will pro-rat e to time. The Remuneration Committee will only waiv e pro-rating in e xceptional cir cumstances where it views the change of control as an ev ent which has pro vided a material enhanced v alue to shareholders which will be fully e xplained to shareholders. In all cases the performance conditions (where applicable) must be satisfied. Illustrations of the Application of the Remuneration P olicy The char ts belo w illustrate the remuneration that w ould be paid to each of the Executiv e Directors, based on curr ent salaries, under three diff erent performance scenarios: (i) Minimum; (ii ) On-target; and (iii ) Maximum. The elements of remuneration ha ve been cat egorised into three components: (i) Fixed; (ii) Annual bonus; and (iii ) 2022 Restricted Share A ward, with the assumptions set out below: Element Minimum On- T ar get Maximum Salary, benefits and pension Included Included Included Annual bonus No bonus payment 2022 Restricted Share A ward No vesting As a result of the Remuneration Committee not being satisfied with individual and Company performance o ver the vesting period. 122 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Chief Executiv e Officer Maximum On target Fixed €523k 100% Annual bonus 2022 Restricted Share A ward 2022 RSA with 50% share price gro wth Fixed pa y €1 ,483k 35% 31% 18% 28% 47% 41% €1 ,688k € 2,0 37k Remuneration (’ 000s) Chief Financial Officer Maximum On target Fixed €326k 100% Annual bonus 2022 Restricted Share A ward 2022 RSA with 50% share price gro wth Fixed pa y €876k 44% 19% 37% 38% 30% 32% €1 ,010k €1 ,200k Remuneration (’ 000s) As noted in the Chairman of the Remuneration Committee’ s Annual Statement on page 104 , there is no curr ent intention to operate an annual bonus f or 2022 although the Committee may r eview this later in the year , depending on the circumstances at the time. Divide nd equi val ents hav e n ot been added t o the 2022 R estricted Share A ward. In line wit h UK reporting regulations, Restricted Shar e A ward shares which v est. Remuner ation in the Wider Hostelworld Gr oup The Remuneration Committee considers pa y and employment conditions acr oss the Group as a whole when r eviewing the Directors’ Remuneration Policy and the r emuneration of the Executiv e Directors and other senior emplo yees. Among other things, t he Committee considers r emuneration and recruitment tr ends acr oss the wider workfor ce, the salar y and incentiv e oppor tunities in place acr oss the Group and the range of base pay incr eases which hav e been agreed f or emplo yees. The Group’ s general approach is to pr ovide a r emuneration package for all emplo y ees that is market competitiv e, and th e sam e reward and p er forman ce philosophy operates throughout the business. A t a time when the Comp any has been unable to off er cash bonuses, it has sought to retain k e y staff through par ticipation in the 2021 Restricted Share A ward and the L TIP , with performance condi tions (wher e r elev ant) the same as those in place for the Ex ecutive Directors. The 2022 R estricted Share A ward will also be extended t o cer tain other employ ees in the business. A summary of remuneration practices across the Compan y is included in the Annual Repor t on Remuneration each year . Consideration of Shar eholder Views The Remuneration Committee tak es the views of shareholders seriously and these views are tak en into account in shaping the Remuneration Policy and its operation. During 2021 the Remuneration Committee consulted e xtensively with major shareholders on the terms of the amendment to the Remuneration Policy which was ultimately presented for shar eholder appr ov al at the General Meeting on 26 April 2021 . Later in the year the Committee held a furt her consultation ex ercise on the pr oposed Remuneration Policy set out in this report, ahead of it being presented f or formal shar eholder appr ov al at the fort hcoming A GM. Ther e was a strong le vel of support from man y major shareholders in both instances, which was central to the Committee’ s decisions to proceed with taking the proposals forwar d to f ormal shareholder v otes. The Remuneration Committee commits t o fur ther consultation and engagement prior to any significant changes t o the Remuneration Policy in the future. 123 Annual Report on Remuneration Single T otal Figure of R emuneration (Audited) Executiv e Dir ectors The table below set s out the single total figure of remuneration and br eak down f or each Ex ecutive Dir ector in r espect of the 2021 financial year . Comparative figur es for the 2020 financial y ear hav e also been pr ovided. Figur es pro vided hav e been calculated in accor dance with the relev ant UK reporting regulations. Director Salary T axable Benefits Bonus L TIP Pension Other T otal T otal Fixed T otal V ariable Gary Morrison 2021 443 .6 1 0.9 – – 44.4 496 . 8 995 .7 995 .7 – 2020 443 .6 10 .4 – – 44.4 – 498 .4 498.4 – Caroline Sherry 2021 271 . 3 4.0 – – 1 6.3 308. 0 5 99.6 5 9 9.6 – 2020 1 9 .1 0 .1 – – 1. 2 – 20 .4 20.4 – Benefits repr esent payments f or health insurance and life assurance policies. Represents the face value at grant of the 2021 Restricted Shar e A ward granted to the Executive Dir ectors on 27 April 2021 . F or furt her inf ormation regarding this awar d, please see page 105. Caroline Sherry was appointed to the Board on 1 December 2020. Figur es in the table above f or 2020 relate t o her period of service as a Director from this date to the end of the 2020 financial year . Non-Executiv e Dir ectors The table below set s out the single total figure of remuner ation and break down f or each Non-Ex ecutiv e Director . F ees T axable Benefits Other T otal T otal Fixed T otal V ariable Director 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Michael Cawley 145 . 0 145 . 0 – – – – 145 . 0 145. 0 145. 0 145. 0 – – Carl G. Shepherd 74. 0 74 . 0 – – – – 74. 0 74 . 0 74 .0 74. 0 – – Éimear Moloney 6 7. 0 6 7. 0 – – – – 6 7. 0 6 7. 0 6 7. 0 6 7. 0 – – Evan Cohen 6 0.0 6 0.0 – – – – 6 0.0 6 0.0 6 0.0 6 0.0 – – Chairman of the Board and Chair of the Nominations Committee. Chair of t he Remuneration Committee and Senior Independent Dir ector . Chair of t he Audit Committee. A dditional Information r egarding Single Figur e T able (Audited) Basic Salary and Fee Def err al As disclosed in last year’ s Directors’ R emuneration Repor t, during 2020 there was a pr ogramme of salary and fee All deferr ed salaries and f ees wer e paid to the Directors in January 2021 and the amounts def erred ar e included in the 2020 financial year disclosur es in the Single Figure T ables abov e. Annual Bonus In light of the ongoing uncer tainty caused by the pandemic and the need for continued cash conservation measur es, no annual cash bonus scheme operated f or 2021 . As a r esult, no cash bonuses wer e pay able to either Executiv e Director f or 2021 . 124 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Long T erm Incentives V esting Subject to Per f ormance Period ending in 2021 In 2019 , L TIP awards w ere granted to Gary Morrison and other members of senior management. V esting of t hese The per f ormance conditions f or the award wer e tested after the 2021 financial y ear end, leading to a nil vesting le v el, as set out below . Annual av erage Adjusted EPS gro wth V esting Outcome: Annualised TSR of the Company ov er the three-year period to 31 December 2021 V esting Outcome: The table below set s out the details of t he L TIP awards granted to Gary Morrison in 2019 . The awards w ere granted as nil-cost options. Director Date of grant V alue of award Face value of award Number of shares awarded Exer cise Price Percentage of award vesting at threshold performance Performance period end date W eighting Number of shares lapsing T otal value of vested awards Gary Morrison 3 Apr 2019 salary 538 .4 251, 135 Nil 31 December 2021 Adjusted EPS Absolute TSR 251 , 134 Nil The specific performance targets f or this award are set out abo ve. 247 ,594 shares wer e awarded on 3 April 2019 , calculated using the closing share price on 2 April 2019 , which was 187 .0p. As disclosed in last year’ s Directors’ Remuneration Report, the Remuneration Committee agreed to apply a technical adjustment to the number of shares comprising L TIP awards granted in 2019 to reflect the impact of the bonus issue which took place in September 2020. The purpose of this adjustment was to ensure that awar d holders were no better or worse off follo wing the bonus issue than t he y were bef orehand. The adjustment took place on 27 April 2021 , resulting in an increase in Gary Morri son’ s awar d fr om 247 ,594 to 251 , 135 shares. These awards are nil cost options and theref ore hav e a nil ex ercise price. The shar e value used to determine the face v alue of the awards is explained in the footnote abo ve. 125 F ollowin g appro val b y Hostelw orld shareholders of an amendment to the Dir ectors’ Remuneration Policy at a General Meeting held on 26 April 2021 , the Executiv e Dir ectors wer e each granted a Restricted Shar e A ward (the “2021 Restricted Shar e A ward”) in place of an annual cash bonus. The rationale f or this award was explained in the cir cular issued to shareholders ahead of the General Meeting, and also in the annual statement fr om the Chairman of t he Remuneration Committee on pages 104 to 108 of this report. basic salary, being tw o times their target annual cash bonus. This r eflected the cancellation of the cash bonus scheme for 2021 and the lik ely absence of such a scheme for 2022. Each 2021 Restricted Share A ward vest s in two tranches, subject in both cases to the par ticipant being emplo yed b y Hostelw orld as of the vesting date and 2022 follo wing completion of the 2021 per f ormance appraisal process. The Remuner ation Committee confirmed that the individual per formance of both of the Executiv e Directors thr oughout 2021 had been judged as ex cellent, and sufficient to warrant the full vesting of this tranche of the award. The second tranche (r epresenting the second at the latest. Details of the 2021 Restricted Share A ward are set out in the table below . Director Date of grant V alue of award Face value of award Number of shares awarded Exer cise Price V esting date Number of shares vesting T otal value of vested awards Gary Morrison 27 Apr 2021 salary 496 .8 430 , 398 n/a 28 F ebruary 2022 28 F ebruary 2023 215 , 199 193, 17 7 Caroline Sherry 27 Apr 2021 salary 308. 0 266, 815 n/a 28 F ebruary 2022 28 F ebruary 2023 133 ,407 119 ,7 55 The number of shares awar ded was calculated using the closing share price on 26 April 2021 , which was 100 .4p. The awards were granted as conditional shar e awards and do not ha ve an ex ercise price. Represents the number of tranche 1 shares v esting follo wing the Remuneration Committee’ s confirmation that each Director had demonstrated satisfactory personal performance during the vesting period. Represents the value of the vested shar es based on the share price on the vesting date, 28 F ebruary 2022. 126 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Scheme Inter ests A warded During the Financial Y ear (Audited) Long T erm Incentives A wards in 2021 The table below set s out the details of t he L TIP awards granted to the Executiv e Dir ectors in the 2021 financial year . All awards w ere grant ed as nil cost options. Director Date of grant V alue of award Face value of award Number of shares awarded Exer cise Price Percentage of award vesting at threshold performance Performance period end date W eighting Gary Morrison 27 Apr 2021 salary 554.5 480 , 354 Nil 31 December 2023 Adjusted EBITD A Strategic objectives Caroline Sherry 27 Apr 2021 salary 2 75.0 238 ,228 Nil 31 December 2023 Adjusted EBITD A Strategic objectives The number of shares awarded was calculat ed using the closing share price on 26 April 2021 , which was 100 .4p. Information on the specific per formance tar gets f or these awards is set out below . These awards are nil cost options and theref ore hav e a nil ex ercise price. The shar e value used to determine the face v alue of the awards is explained in the footnotes abo ve. T o the extent that awards v est, a dividend equivalent awar d will be made at the end of the vesting period. As explained in the circular issued t o shareholders ahead of the General Meeting on 26 April 2021 , v esting of the L TIP awards granted in 2021 is subject to achie v ement of an adjusted EBITD A per f ormance condition (applying to will be measured o ver the three y ears to 31 December 2023 . The specific Adjusted EBITD A target s are curr ently considered commer cially confidential by the Board giv en that the Group is not pr oviding f orward-looking guidance t o the market. Ho we ver , t he tar gets will be published once normal trading conditions resume and the Group is again in a position t o pro vide general guidance to the market. W e expect to publish the details befor e the per forman ce conditions are tested aft er the end of the 2023 financial year . F or the half of the award which will vest subject t o the achievement of critical strat egic objectives, tar gets ha ve been set based around tw o ke y ar eas of focus. The first ar ea inv olv es assessing the improv ement in new customer v alue compared to cust omer acquisition cost for paid channels ( on a constant currency basis). This is link ed to the Group’ s stated goal of optimising paid spend based on predict ed new customer value v ersus acquisition cost. The second area is based ar ound the successful adoption of Hostelworld’ s Counter technology by a tar geted number of our hostel accommodation par tners. This is in line with the longer -term gr owth strategy of incr easing adoption of the Group’ s hostel management software technology and integrating the Gr oup’ s technology into our core platf orm offering f or hostel partners. The precise details of the targets which ha v e been set for measuring these objectiv es are curr ently considered commer cially confidential but will be set out in full in the 2023 Directors’ Remuneration Repor t when the lev el of v esting of the award will be disclosed. 127 Long T erm Incentives A warded in 2020 The table below set s out the details of t he L TIP awards granted to the Executiv e Dir ectors in the 2020 financial year . All awards w ere grant ed as nil cost options. Director Date of grant V alue of award Face value of award Number of shares awarded Exer cise Price Percentage of award vesting at threshold performance Performance period end date W eighting Gary Morrison 2 May 2020 salary 665.4 782,938 Nil 31 December 1 May 2023 Adjusted EPS Absolute TSR Caroline Sherry 2 May 2020 salary 72.5 85, 303 Nil 31 December 1 May 2023 Adjusted EPS Absolute TSR The specific performance targets f or these awards are set out belo w . The number of shares originally awarded was calculated using the closing share price on 1 Ma y 2020, which was 7 5. 0p. As disclosed in last year’ s Directors’ Remuneration Report, the Remuneration Committee agreed to apply a technical adjustment to the number of shares comprising L TIP awards granted in 2020 to reflect the impact of the bonus issue which took place in September 2020. The purpose of this adjustment was to ensur e that awardholders wer e no better or worse off f ollowing the bonus issue than they wer e befor ehand. The adjustment took place on 27 April 2021 , resulting in an incr ease in Gary Morri son’ s awar d fr om 771,900 to 7 82,938 shares and in Car oline Sherry ’ s award from 84 , 100 to 85, 303 shares. This award was granted prior to Caroline Sherry’ s appointment to the Board and does not include a post -vesting holding period. These awards are nil cost options and theref ore hav e a nil ex ercise price. The shar e value used to determine the face v alue of the awards is explained in the footnotes abo ve. T o the extent that awards vest, a dividend equiv alent award will be made at the end of the vesting period. V esting of t he awards grant ed in 2020 is subject to achiev ement of an adjusted EPS performance condition (applying target s are set out belo w: Adjusted EPS for the financial y ear ending 31 December 2022 V esting Less than 0c 0c 8.8 7 c Between 0c and 8 . 87 c As disclosed in last year’ s Directors’ Remuneration Report, the Remuneration Committee agreed to apply a technical adjustment to the EPS performance conditions for this award to r eflect the impact of the bonus issue which took place in September 2020. This adjustment r esulted in the level of EPS being required f or full vesting being amended fr om 9c to 8 .87 c, to reflect the increase in the share capital follo wing the bonus issue. This adjustment maintains the same level of str etch in the per f ormance condition allowing f or the bonus issue and will not make the performance condition any easier to achiev e. Annualised TSR of the Company ov er the three-year period to 1 Ma y 2023 V esting Pa yments f or Loss of Office/P ayment s to Past Dir ectors (Audited) There w ere no pa yments f or loss of office or pa yments to past Dir ectors made during the 2021 financial year . 128 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Statement of Dir ectors’ Shar eholdings and Shar e Inter ests (Audit ed) The number of shares of the Compan y in which the Executiv e Directors had a beneficial inter est and details of long-term incentive inter ests as at 31 December 2021 ar e set out in the table below . Under t he Dir ectors’ Remuneration Policy , the Remuneration Committee has adopted f ormal shareholding guidelines that encourage the Executiv e Direct ors Director Beneficially owned shar es Shareholding requirement Shareholding Shareholding requirement met? Unv ested L TIP interests subject to performance conditions Unv ested Restricted Share A ward interests Gary Morrison 19 ,082 No 1 ,5 14 ,426 430, 398 Caroline Sherry – – No 323,530 266 ,815 Details of the interests held in shar es b y Non-Executiv e Direct ors as at 31 December 2021 are set out belo w . Non-Executiv e Dir ectors are not subject to a shar eholding r equirement. Director Beneficially owned shar es Michael Cawley 127 ,797 Carl G. Shepherd 20 ,285 Éimear Moloney 72, 376 Evan Cohen 15 ,214 Carl G. Shepherd pur chased 15 , 000 shares in the Compan y in January 2022. There hav e been no other changes to the Directors’ shar eholdings from 31 December 2021 t o the date of this repor t. Comparison of Over all Performance and P ay (TSR gr aph) The graph below sho ws the value of £100 in vested in the Compan y ’ s shares since listing compared to the FTSE SmallCap th e reinv estment of dividend income o ver the same period. The Remuneration Committee considers that the FTSE Sma llC ap inde x is an appropriat e index f or comparison as Hostelw orld is a member of this index and it includes other companies with a similar mark et capitalisation and scope of operations. The graph has been calculated in accordance theref ore only has a listed shar e price f or the period from 28 October 2015 to 31 December 2021 . T otal shareholder r eturn (£) £0 £20 £40 £60 £80 £100 £120 £140 £160 £180 £200 £220 £240 FTSE Small Cap Hostelworld Gr oup Dec 2021 Dec 2020 Dec 2019 Dec 2018 Dec 2017 Dec 2016 Dec 2015 129 Chief Executiv e Officer Historical R emuneration The table below set s out the total remuneration deliv ered to the Chief Ex ecutive Officer o v er the last eight years valued using the methodology applied to the single total figure of r emuneration. The Remuneration Committee does not believ e that the remuneration pay able in its mor e formativ e y ears as a private compan y bears an y comparative value to that paid in its later y ears and theref or e the Remuneration Committee has chosen to disclose remuneration only for the eight most r ecent financial years (r eflecting the disclosures made in pr evious r epor ts): 2014 2015 2016 2017 2018 2019 2020 2021 Chief Executiv e Officer F eargal Mooney F eargal Mooney F eargal Mooney F eargal Mooney F eargal Mooney Gary Morrison Gary Morrison Gary Morrison Gary Morrison 4 1 3 .1 395 . 0 1 ,298 .7 7 68.8 209.5 307 .2 485 . 8 498.4 995. 7 Annual bonus payment maximum oppor tunity) n/a n/a L TIP vesting le vel achie ved n/a n/a n/a n/a n/a n/a Change in Dir ectors’ Remuner ation Compar ed with Employ ees The follo wing table sets out the change in the remuneration paid to each of the Dir ectors since 2019 , compared with the average per centage change for emplo y ees, as requir ed by the r epor ting r egulations. F or the Directors, the percentage change in remuneration r eflects the disclosures in the Single T otal Figure table of remuneration. 2021 vs 2020 2020 vs 2019 Salary /F ees T axable benefits Bonus Salar y /Fees T axable benefits Bonus Executiv e Dir ectors Gary Morrison – – Caroline Sherry – – – – – – Non-Executiv e Dir ectors Michael Cawley – – – – Carl G. Shepherd – – – – Éimear Moloney – – – – Evan Cohen – – – – – Employ ee pa y A verage per emplo yee – parent compan y – – – – – – A verage per emplo yee – group – – Appointed to the Board on 1 December 2020 . Comparatives f or 2021 vs 2020 not shown as Car oline served for only one month of 2020 . Appointed to the Board on 14 August 2019. Comparativ es for 2020 vs 2019 not sho wn as Evan served for only four and a half months of 2019 . The only employees of the parent compan y are the Directors of the Compan y. Remuner ation Practices A cr oss the Company result is not r equired t o publish the ratio of t he Chief Ex ecutiv e Officer’ s remuneration to the pay of UK emplo yees. How ev er , the Remuneration Committee remains cognisant of the impor tance of the relationship betw een Ex ecutive Director r emuneration and the pay f or Hostelw orld employ ees mor e widely . In line with the provisions of the UK Corporate Go vernance Code, the Committee has r eview ed workf or ce remuneration and r elated policies and has dev eloped a full understanding of the cascade of remuneration throughout the organisation, including which employ ees participate in which incentive arrangements. 130 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Hostelworld has traditionally had a str ong emphasis on the principle of paying f or performance. While this remains central to the remuneration philosoph y throughout the organisation, it has been se ver ely tested giv en the impact of the pandemic on the ability of t he Gr oup to be able to pay cash bonuses and the lack of v esting of L TIP awards. Hostelworld’ s normal approach is that senior managers within the Company par ticipate in a bonus scheme which is structured in a similar manner to the standar d Executiv e Dir ector bonus scheme, albeit in some cases with an element also based on personal per f ormance. Separate incentiv e arrangements ar e in place for certain ke y roles (e.g. sales and customer support staff) and for other colleagues not otherwise in a bonus scheme. For 2020 and 2021 , ho we ver , in light of t he impact of the pandemic, it was agreed that other than quar terly incentive pr ogrammes for the sales and customer support roles, no bonus schemes would operat e and therefor e the vast majority of employ ees did not r eceive a bonus f or either year . Par ticipation in the L TIP has traditionally extended throughout the organisation do wn to the lev el of managers or other individual exper t contributors. In addition t o the Executive Directors, the 2021 L TIP grant was made to c. 30 other employ ees. The same per f ormance conditions apply to all par ticipants in the L TIP alt hough, as is the norm, the award le vels ar e higher f or Executiv e Dir ectors than for other par ticipants, r eflecting their seniority and responsibilities within the organisation. The two-y ear post-v esting holding period applies to the Ex ecutive Dir ectors only . The 2021 Restricted Shar e A ward granted in April 2021 to the Ex ecutive Dir ectors was ext ended to appro ximately c. 70 other employ ees in r ecognition of the critical need for r etention of a large gr oup of emplo yees who w ould not be able to par ticipate in a cash bonus scheme f or 2021 . The vesting of the 2021 Restricted Share A ward depends on the same conditions as for the Directors, namely contin ued employment and the individual’ s per f ormance being rated as satisfactory or abo ve. It is the Committee’ s intention that the proposed 2022 Restricted Share A ward will be extended t o c. 40 other employ ees in addition to the Executiv e Dir ectors. The vesting condition s for this award will be the same as f or the Executiv e Dir ectors, although the two-year post -v esting holding period applies to the Executiv e Directors only . Basic salary levels f or all emplo yees ar e re view ed annually against appropriate e xternal benchmarks and taking into account the wider employment en vironment. In light of e xtremely competitiv e recruitment mark ets in 2021 , the Company decided to brin g forwar d the Januar y 2022 salary re view for the or ganisation to September 2021 , wit h the Executiv e Dir ectors and the other members of t he Ex ecutive Leadership T eam ex cluded from this r eview . The a verage in F ebruary 2022 to pro vide merit increases f or those ex cluded from r e view in September 2021 , to addr ess promotions identified as par t of the year -end review pr ocess and in ex ceptional cir cumstances to re-align salaries to the mark et The Group mak es pension contributions on behalf of eligible emplo yees. F or t he majority of the workf or ce, the Group be appointed on a rate in line with the contribution lev el pro vided to the majority of the workf orce. This appr oach was taken with the appointment of the Chief Financial Officer in 2020. The Chief Ex ecutiv e Officer’ s contribution re viewed again at the time of the next Remuneration Policy r enewal ahead of the 2024 A GM. Other benefits are br oadly aligned across the Compan y . The SA YE scheme is open to all employ ees in Ir eland and the UK. Éimear Moloney , t he designated Non-Ex ecutiv e Director r esponsible f or engaging with t he w orkf orce, and a member of the Remuneration Committee, engaged directly with employ ees on ex ecutiv e remuneration matters in lat e 2021 and explained the basis on which ex ecutiv e remuneration aligns with broader Compan y pa y policy . This inv olv ed a discussion of the process f or setting the remuneration of the Executiv e Direct ors by the Committee and the Committee’ s approach in re viewing wider workf orce r emuneration policies and practices. In addition, there was a discussion of the way in which ex ecutiv e remuneration aligns with wider Gr oup policies, as summarised in the section abov e, co vering fix ed pa y as well as incentiv es. 131 Relativ e Impor tance of the Spend on Pa y The table below set s out the relative importance of spend on pay in the 2020 and 2021 financial years compar ed with other disbursements. All figures pro vided ar e taken fr om the rele vant Compan y Accounts. Director Disbursements from pr ofit in 2021 financial year (€m) Disbursements from pr ofit in 2020 financial year (€m) Profit distributed b y wa y of dividends/share buybacks – – Overall spend on pa y including Executiv e Dir ectors 1 7. 3 1 9 .1 Shar eholder V oting at General Meeting 26 April 2021 . Resolution Fo r Against Withheld Ordinary Resolution to Appr ov e the Directors’ Remuneration R epor t 76 ,257 ,90 7 17 ,981 ,537 307 ,498 Ordinary Resolution to Appr ov e an Amendment to the Directors’ R emuneration Policy (2021 General Meeting) 66 , 612,983 27 ,427 ,315 49 , 166 Ordinary Resolution to Appr ov e an Amendment to the L TIP Rules 66 ,7 63, 626 27 ,302, 038 23 ,800 The Remuneration Committee notes that the resolutions to appr ov e the amendment to the Directors’ Remuneration on the date of the General Meeting, t he Committee had, prior t o presenting these resolutions t o a shareholder v ote, and institutional inv estor r epresentativ e bodies) to explain the rationale f or the proposals and in vit e comm ents . The majority of those consulted engaged productiv ely with the Company , understood the specific circumst ances faced b y Hostelw orld and expr essed their suppor t for the proposals. F ollowin g the General Meeting, t he Compan y wrot e to a significant majority of those shareholders which had v oted against the proposals to understand their reasons f or doing so. The Remuneration Committee also consider ed the reports and voting r ecommendations issued by pr o xy advisers prior to the General Meeting. The Company understands that a ke y reason f or the votes against the amendment to the Directors’ R emuneration Policy was a concern around the absence of a TSR element in the incentive schemes. In addition, some shareholders v oted against the L TIP with their voting guidelines. The Remuneration Committee consider ed the points raised and remains of the view that the amended Directors’ Remuneration Policy and the L TIP amendment wer e in the interests of shar eholders in general given the importance of the proposals to ensuring the retention of the Ex ecutive Dir ectors and other k ey members of the senior management team. The Committee was pleased to ha ve the support of many of the Company’ s major shar eholders for it s decisions and the subsequent engagement with t hose who w ere not supportive did not result in an y change to the Committee’ s approach. As noted in the Annual Statement fr om the Chairman of the Remuneration Committee, later in 2021 the Committee under took a furt her detailed r eview of the Direct ors’ Remuneration Policy and de veloped a set of proposals f or the Policy period beginning in 2022. The Committee engaged again with major shareholders on the terms of the proposals and took into account f eedback receiv ed when finalising the Policy . 132 Governance | Ho st el wo rl d Annual Report 2021 Corporate Governance Report continued Implementation of Remuner ation Policy in Financial Y ear 2022 Shareholders will be ask ed to appr ov e a new Direct ors’ Remuneration Policy at the A GM to be held on 11 Ma y 2022. The Remuneration Committee pr oposes to implement the new Policy in 2022 as set out below: Basic salary implemented f or the Chief Executiv e Officer with effect from 1 January 2022. This incr ease is consistent with current lev els of inflation in Ireland and is lo w er than the average incr ease agreed f or the wider workf or ce. The Committee 1 January 2022. This was as a result of the fur ther salar y r eview that was highlighted in last y ear’ s Remuneration Repor t and r eflects her significant contribution to the business and her performance since her appointment at the end of 2020 . The increase brings her salary in line with market and is no w consistent with the salar y le vel of her predecessor . The Committee anticipates that increases in future y ears will be aligned with increases f or the wider workf or ce. The 2022 salary review f or the wider workf orce ( ex cluding the Executiv e Dir ectors and other members of the Executiv e Leadership T eam) was brought forward t o September 2021 as a ret ention measure in light of extr emely competitive r ecruitment mark ets. The salary levels f or the year will ther efor e be: Salary Director 2022 2021 Percentage change Gary Morrison 465 ,800 443, 600 Caroline Sherry 304 , 000 27 5, 000 Salary with effect from 1 F ebruary 2021. Pension Annual bonus A t the time of writing, the Committee does not expect to be in a position to off er an annual cash bonus scheme for 2022 f or the Ex ecutive Dir ectors or an y other employee. Ho w ev er , we intend to k eep this under re view as the year pr ogresses and w e ma y , if circumstances permit, pr ovide a bonus opportunity for a portion of t he y ear . Any bonus offer ed will be consistent with the terms of the Directors’ Remuneration Policy and full details of the measur es and specific target s will be included in next y ear’ s repor t. 2022 Restricted Shar e A ward Subject to shareholder appr o val of the new Direct ors’ Remuneration Policy at the A GM, the Executiv e Directors will receiv e a grant of restrict ed shares under the terms of the 2022 Restricted Shar e A ward. As set out in the Policy , practice for awar ds of this nature, there will be no headline performance conditions attached to this award. Ho w ev er , the underpin mechanism requires the Remuneration Committee t o be satisfied with individual and Company per f ormance ov er the vesting period. The 2022 Restricted Shar e A ward will be subject to a tw o-year post -v esting holding period. 133 Non-Executiv e Dir ectors’ F ees No changes are pr oposed to the current f ee components in place. F ees will t her efor e continue to be paid as set out belo w: Role Chairman 145 , 000 Non-Executiv e Dir ector (base fee) 60 , 000 Senior Independent Director 7 ,000 Chair of Audit Committee 7 ,000 Chair of Remuneration Committee 7 ,000 Composition and T erms of Refer ence of t he Remuner ation Committee The Board has delegated t o the Remuneration Committee, under agreed terms of r ef erence, r esponsibility for the remuneration policy and f or determining specific packages f or the Chairman, Executiv e Dir ectors and such other senior employ ees of the Group as the Board ma y determine fr om time to time. The terms of r efer ence f or the Remuneration Committee ar e av ailable on the Company’ s website, www .hostelworldgr oup.com , and fr om the Company Secr etary at the registered office. The Remuneration Committee is comprised of Carl G. Shepher d (Chairman of the Remuneration Committee since Michael Cawley (who was independent upon his appointment as Chairman of the Board). Carl G. Shepher d has served as a member of the Committee since October 2017 and, as result, the Compan y is compliant with Provision 32 of the UK Corporate Gov ernance Code which requir es the Chairman of the Committee to hav e served on a remuneration committee f or at least 12 months prior to appointment as chair . The Remuneration Committee r eceives assistance fr om the Chief Executiv e Officer , Chief Financial Officer , Chief HR Officer and Company Secr etary, who att end meetings by in vitation, ex cept when issues r elating to their own remuneration ar e being discussed. The Remuneration Committee met six times during 2021 . Meeting attendance is shown on page 104 of the Annual Report. A dvisors to the Remuneration Committ ee The Remuneration Committee’ s independent advisors are K orn F erry , who wer e appointed b y the Committee in 2017 . K orn F erry has advised the Remuneration Committee on all aspects of r emuneration policy for Ex ecutiv e Directors and members of the Executiv e team. The Remuneration Committee e xer cises appr opriate judgement and challenge when considering the work of its e xternal advisers and is satisfied that the advice received during the y ear under re view was objective and independent. K orn F erry is a member of t he Remuneration Consultant s Group and the voluntary code of conduct of that body is designed to ensure objectiv e and independent advice is given t o F ees wer e char ged on a cost incurred basis. No other services were pr o vided by K orn Ferry to the Company during the year and K orn F err y ha ve no other connection with the Company or the individual Directors of the Company . On behalf of the Board Carl G. Shepher d Chairman, Remuneration Committ ee 30 March 2022 134 Governance | Ho st el wo rl d Annual Report 2021 Directors’ Report The Direct ors ha ve pleasur e in submitting their Annual Repor t and the audited financial statements of Host elworld Gr oup plc and it s subsidiaries f or the financial y ear to 31 December 2021 . Statutory Information This section of the Annual Repor t includes additional information r equir ed to be disclosed under the Companies Act 2006 (the “Companies Act ”), the UK Corporate Go vernance Code, the Disclosure Guidance and T ransparency Rules (“D TRs”), the T ranspar ency Directiv e and the Listing Rules (“Listing Rules”) of the Financial Conduct Authority. Cer tain inf ormation requir ed to be included in the Directors’ R epor t can be f ound elsewhere in this Annual Repor t, as highlighted thr oughout this repor t and also including: • The Strategic Report, which can be found on pages 17 to 71 , which sets out the de velopment and per f ormance of the Group’ s business during t he financial year , t he position of the Group at the end of the year and a description of the principal risks and uncer tainties (including the financial risk management position); • The Corporate Gov ernance Statement on pages 7 8 to 133 , which sets out the Company’ s statement with regard t o its adoption of the UK Corporate Gov ernance Code. The Corporate Go vernance Statement f orms par t of this Directors’ Report and is incorporated into it b y ref er ence; • The Audit Committee R epor t on pages 96 to 102; and • The Directors’ R emuneration Repor t on pages 104 to 133 . This Directors’ R epor t, on pages 134 to 140 , together with the Strategic Repor t on pages 17 to 71 , f orm the Management Repor t f or the purposes of D TR 4 . 1. 5R. Disclosures under Listing Rule 9 .8 .4R The table below is included to comply with the disclosure r equirement s under LR 9 . 8.4R. The inf ormation r equired by the Listing Rules can be f ound in the Annual Repor t at the location stated below: Section T opic Location 1. Interest capitalised Not applicable 2. Publication of unaudited financial information Not applicable 3. Details of long-term incentive schemes Directors’ R emuneration Repor t, pages 104 to 133 4. W aiv er of future emoluments b y a Direct or Not applicable 5. Non-pre-emptive issues of equity f or cash Not applicable 6. Not applicable 7. Parent participation in a placing by a listed subsidiary Not applicable 8. Contracts of significance Not applicable 9. Provision of services b y a controlling shar eholder Not applicable 1 0. Shareholder waiv ers of dividends Not applicable 1 1. Shar eholder waivers of futur e dividends Not applicable 12. Agreements with controlling shar eholders Not applicable 135 Boar d of Dir ectors The appointment and replacement of Dir ectors of the Company is go v erned by the Ar ticles of Association. The Directors who serv ed on the Board throughout the year , up to and including t he date of this r epor t, are as follo ws: • Michael Cawley (Non-Ex ecutiv e Chairman); • Gary Morrison (Chief Executiv e Officer); • Caroline Sherry (Chief Financial Officer) • Éimear Moloney (Non-Ex ecutiv e Director) ; • Carl G. Shepherd (Non-Ex ecutiv e Director); and • Evan Cohen (Non-Ex ecutiv e Director). Biographical details of the current Direct ors together with details of the membership of t he var ious Committees are set out on pages 7 4 to 76 . Amendment of Ar ticles of A ssociation The Company’ s Ar ticles of Association may only be amended by wa y of shareholder appr o val at a general meeting of the shareholders. A t a general meeting of shareholders held on 4 F ebruar y 2021 , an ordinary resolution to change the borr owing limit specified in the Company’ s Articles of Association to a fixed amount of €40 million was passed. A t a general meeting of shareholders held on 26 April 2021 , ordinary resolutions to amend the Directors’ Remuneration P olicy to permit the grant of a restricted shar e award and amend the Company’ s Long- T erm Incentive Plan rules to r emov e No amendments ar e proposed to be made at the forthcoming Annual General Meeting. Incorporation, Share Capital and Structur e The Company was incorporat ed and register ed in England and W ales as a public limited company with registration number 98187 05 . The Company’ s issued share capital comprises or dinary shares of €0 . 01 each which are traded on the London Stock Ex change’ s main market f or listed securities and on Eur onext Dublin’ s main securities market. The liability of the members of the Company is limited. The Company is tax r esident in Ireland and it s principal place of business is at 3rd Floor , Charlemont Exchange, Charlemont Street, Dublin, D02 VN88 , Ir eland. The Company’ s registered office is at Floor 5 , The Cursitor Building, 38 Chancery Lane, London, WC2A 1EN, United K ingdom. As at 31 December 2021 , the Company’ s issued share capital comprised 116 ,321 , 185 ordinary shares of €0 . 01 . As at the date of this Directors’ Report, the Company’ s issued share capital comprises 117 ,505 , 396 ordinary shares of €0 . 01 . The ISIN of t he shar es is GB00BYYN4225 . F ur ther information on the Compan y ’ s share capital is pr ovided in not e 17 to the Group’ s financial statements contained on pages 188 and 189 . All the information detailed in note 17 on pages 188 and 189 forms part of this Directors’ Report and is incorporated into it b y ref ere nce. A t the Annual General Meeting of the Company to be held on 11 May 2022 , the Dir ectors will seek authority from shar eholders to allot shar es in the capital of t he Company (i) up to a maximum nominal amount of one-third of the Company’ s issued share capital and €0 . 01 each) where the allotment is in connection with a rights issue, being one-third of the Compan y ’ s issued share capital. The po wer will e xpire at the earlier of 11 August 2023 and the conclusion of the Annual General Meeting of the Company held in 2023 . The Directors ar e also seeking authority from shareholders to allot or dinary shares f or cash without first offering them to e xisting shareholders in pr opor tion to their existing shar eholdings. The resolution seeks Company’ s issued ordinary share capital. The pow er will expir e at the earlier of 11 May 2023 and the conclusion of the Annual General Meeting of the Company held in 2023 . The Directors int end to follo w the Pre-Emption Gr oup’ s Statement of Principles regar ding cumulativ e usage of authority within a rolling 3-year period. The principles ordinary share capital of the Compan y (ex cluding treasury shares) should not tak e place without prior consultation with shareholders. Authority to Purchase Own Shar es A t the Annual General Meeting held on 26 April 2021 , the Company’ s shareholders authorised it to purchase, in the market, up to 11 ,632, 118 ordinary shares of €0 . 01 each. The Company did not pur chase an y shares under this authority during t he y ear . The Directors will again seek authority from shareholders at the f or thcoming Annual General Meeting for the Compan y to purchase, in 136 Governance | Ho st el wo rl d Annual Report 2021 Directors’ Report continued shares either to be cancelled or r etained as treasury shares. The Dir ectors will only use this pow er after careful consideration, taking into account the financial resour ces of the Company , the Company’ s share price and future funding opportunities. The Directors will also take int o account the effects on earnings per share and the inter ests of shareholders generally . Rights A ttaching to Shar es All shares ha ve the same rights (including v oting and dividend rights and rights on a r eturn of capital) and restrictions as set out in the Articles, described below . Except in r elation to dividends which ha ve been declared and right s on a liquidation of the Company , the shareholders hav e no rights t o share in the profit s of the Company . The Company’ s shares are not r edeemable. How e ver , follo wing an y grant of authority from shareholders, the Company ma y purchase or contr act to purchase an y of the shares on or off mark et, subject to the Companies Act and the requirement s of the Listing Rules. No shareholder holds shar es in the Company which carry special rights with regar d to control of the Compan y . V oting Rights Each ordinary share entitles the holder to vot e at general meetings of the Company . A r esolution put to the vote of the meeting shall be decided on a show of hands unless a poll is demanded. On a show of hands, ev ery member who is present in person or b y pro xy at a general meeting of the Company shall ha ve one v ote. On a poll, ev ery member who is present in person or by pr o xy shall hav e one vot e for e very shar e of which they are a holder . The Ar ticles pro vide a deadline for submission of pro xy f orms of not less than 48 hours befor e the time appointed for the holding of t he meeting or adjourned meeting. No member shall be entitled to vote at an y general meeting either in person or by pr o xy , in respect of an y share held, unless all amounts pr esently payable in r espect of that share ha ve been paid. Sav e as noted, there ar e no restrictions on voting right s nor any agr eement that may r esult in such restrictions. Restrictions on T ransf er of Securities The Ar ticles do not contain an y restrictions on the transfer of or dinary shares in the Company other than the usual restrictions applicable where an y amount is unpaid on a share. Certain restrictions are also imposed by laws and r egulations (such as insider trading and market r equirement s relating t o close periods) and requir ements of the Market Abuse R egulation and the Company’ s Securities Dealing Code whereby Dir ectors and all employ ees of the Company r equire adv ance clearance to deal in the Company’ s securities. Change of Contr ol Sav e in respect of a pr o vision of the Company’ s shar e schemes which may cause options and awar ds granted to employ ees under such schemes to v est on takeo v er , there are no agr eements betw een the Company and its Dir ectors or employ ees pr oviding f or compensation for loss of office or emplo yment (whether through resignation, purported redundancy or otherwise) because of a takeo v er bid. On the occurrence of a change of control of the Company or the sale of all or substantially all of the business or assets of the Group to a thir d-par ty , the par ticular in vestment funds and account s of HPS Inv estment Partners LLC (or subsidiaries or affiliates thereof) who are dir ect lenders to the Group ma y cancel their loan commitments to the Group and, wher e this is the case, all amounts due and owing (including accrued interest) will be immediat ely due and pay able. 2022 Annual General Meeting The Annual General Meeting (“ A GM”) will be held at 12 noon on 11 May 2022 at Hostelw orld Gr oup plc, Charlemont Exchange, Charlemon t Street, Dublin 2, Ireland. The Notice of Meeting which sets out the resolutions to be proposed at the f or thcoming A GM specifies deadlines for e x ercising v oting rights and appointing a pro xy or pr oxies to v ote in r elation to r esolutions to be passed at the AGM. All pr o xy votes will be count ed and the numbers for , against or withheld in relation to each resolution will be announced at the A GM and published on the Company’ s w ebsite. Substantial Shar eholders A t 31 December 2021 , the Company had been notified, in accordance with chapter 5 of the Financial Conduct Authority ’ s Disclosure Guidance and T ransparency Rules (“D TR5 Notification”), of the follo wing significant inter ests: 137 Shareholder Number of ordinary shares/ voting rights notified Percentage of v oting rights ov er ordinary shares of €0 . 01 each and nature of holding Aber f or th Par tners LP 18 ,627 , 362 Charles Jobson 17 ,255, 148 Premier Miton Gr oup plc 13 , 149 , 810 Gresham House Asset Management Limited 6,7 38 , 653 Unicorn Asset Management Limited 5 ,410 , 000 Burgundy Asset Management Limited 4 ,430 , 860 Allianz Global Inv estors GmbH 4 , 046 ,400 The Diverse Income T rust plc 3 ,019 ,504 As at the date of this repor t fiv e fur ther D TR5 Notifications had been receiv ed from the f ollowing: • Unicorn Asset Management Limited notified the Company on 17 January 2022 of a decrease in their holding to 0 ordinary shares. • Aber f or th Par tners LLP notified the Company on 17 January 2022 of an increase in their holding to – indirect holding). • Premier Miton Gr oup plc notified the Company on 10 January 2022 of an increase in their holding to – indirect holding). • Lombard Odier Asset Management (Eur ope) Limited notified the Company on 1 Mar ch 2022 that t heir total voting right s attaching to shares in the Compan y via CFD instruments). • Inv estmentaktiengesellschaft für langfristige Inv estor en T GV notified the Company on 14 Mar ch 2022 that it held 3,531 ,346 or dinary shares T ransactions with Related P ar ties Please ref er to note 22 t o the Consolidated financial statements on pages 195 and 196 . Event s Post Y ear End There ar e no significant ev ents after the balance sheet date. F utur e Dev elopments The Group will continue to pursue new de v elopments to enhance shareholder v alue, through a combination of organic gr owth, pr oduct delivery and other development and inv estment opportunities. Furt her details are set out in the Strategic Repor t on pages 17 to 71 . Going Concern The Directors, aft er making enquiries, hav e a reasonable expectation that the Group and Compan y has adequate resour ces to continue operating as a going concern f or the for eseeable future. Group has maintained str ong discipline ov er its cost base and cash reserves, with trading and cash f orecast s being outlooks hav e been maintained: a base case scenario based on expected trading and a str ess case scenario, which is a fur ther deterioration of the base case scenario. These scenarios ev olv ed ov er time to tak e into account regional r eco very assumptions, projected re venue and mar gin flo ws, cost cutting measures tak en, projected net cash flo ws fr om operations and av ailable sources of funding including our €30m fiv e-y ear term loan facility with cer tain in vestment funds and account s of HPS Inv estment Partners LLC (or subsidiaries or affiliates thereof). Actions tak en by the Dir ectors to preserve the Group’ s cash position include the decision to suspend any cash dividends, the elimination of all non-essential operating costs including mark eting, recruitment, tra vel and other v ariable ov erheads, organisational r edesigns and associated headcount reductions, negotiation of cr edit terms with ke y Ireland and the UK, including the debt warehousing of Irish employ er and emplo yee tax es. 138 Governance | Ho st el wo rl d Annual Report 2021 Directors’ Report continued In December 2021 the Board appro v ed a base case budget and a stress case budget, both of which cov er ed the period to March 2023 , a period of twelv e-months from annual r epor t signing. In addition, a fiv e-year outlook was approv ed. The base assumptions of these budgets ar e conservative: bed prices ar e capped at 2019 prices and booking reco very is built on a r egional destination basis flex ed f or timing of borders r eopening to International tra vel as they w er e at the time. The budget did not assume any incr ease in commission rates and cancellation rates wer e f orecast to be ele v ated versus normal rat es. In addition, no incremental r ev enue was included for an y e xisting or future partnerships. Under both scenarios full reco very is not expected to happen until 2023 with the stress case scenario assuming more depr essed volumes v ersus base case scenario and assumes minimal reco v ery in 2022. Subsequent to our December Board meeting, the Boar d appro ved a further additional scenario. This additional scenario reflected the impact that the emergence of the Omicron variant was ha ving on tra vel demand. This scenario assumed that tougher trav el restrictions would be implemented, and demand w ould soften. Under this scenario 2022 trading lev els would be below the budget stress case scenario; this scenario is very unlikely but it demonstr ates a worst -case trading outlook. Neither t he str ess case scenario nor worst -case scenario include an y additional cost cutting measures; such cost cutting measur es would be implemented should trading deteriorate to these lev els f or a prolonged period. Under all three scenarios, the Group has sufficient cash reserves a vailable and r emains compliant with financial cov enants under the term loan f acility agreement. During January 2022 t he Gr oup’ s trading reco v ered, despite higher than normal cancellation rates in the first two w eeks of the month, and t he Gr oup’ s January trading result s closed in line with budgeted base case projections. F ebruar y 2022 trading r esults wer e also in line with our budgeted base case projections. The Directors ha v e taken st eps to ensure adequate liquidity is av ailable to the Group f or the likely duration of the crisis and the recov ery period. F ollowing the completion of a Placing, and the securing of a rev olving credit f acility in 2020 , on 19 F ebruary 2021 the Group signed a €30m five-y ear term loan f acility with cer tain inv estment funds and accounts of HPS In v estment Par tners LL C (or subsidiaries or affiliates ther eof). An amount of €28 .8m was r eceiv ed on 23 F ebruary 2021 . The ke y f eatures of the facility ar e as f ollows: • The facility is single draw down and bears int erest • lev erage (Hostelw orld has to ensure that total net debt is no more than 3 . 0 x adjusted EBITD A from 31 December 2023 to 30 September 202 4 , and no more than 2.5 x adjusted EBITD A from 31 December on the last business day of each month until it is testing the adjusted net lev erage ratios there is fr ee cash in members of the Group which hav e guaranteed repa yment of the facility of at least €6 . 0 million). • Security on the facility includes the share capital of the Group, the bank accounts of the Group and the Group’ s intellectual property. W e were in compliance with our minimum liquidity cov enants at 31 December 2021 . A t this point in time, the consequences of t he curr ent unrest in Eastern Eur ope is uncertain. The Group has no operations in either Russia or Ukraine and total for ecasted r ev enues f or 2022 in these regions are less will continue to closely monitor an y dev elopments in the conflict, and the impact to t he Gr oup. Having consider ed the Group’ s five year P &L out look, cash flow f or ecasts prepar ed f or 12 months from date of signing, current and anticipated trading v olumes, together with current and anticipated lev els of cash and debt, the Directors ar e satisfied that the Group and Company has sufficient r esources t o continue in operation for the f oreseeable futur e, a period of not less than 12 months from the date of this repor t, and accordingly , t hey con tinue to adopt the going concern basis in preparing the Group financial stat ements. Indemnities and Insurance The Company maintains appr opriate insurance to co v er Directors’ and Officers’ liability f or itself an d its subsidiaries. The Company also indemnifies the Directors under a qualifying indemnity f or the purposes of section 236 of the Companies Act 2006 and the Ar ticles of Association. Such indemnities contain pro visions that are permitted b y the director liability pro visions of the Companies Act and the Company ’ s Ar ticles of Association. 139 Resear ch and Dev elopment Innov ation, specifically in the proposition on the websites and mobile apps f or both customers and hostel par tners, is a critical element of the strategy and theref ore of the future success of the Group. Accordingly , t he majority of the Group’ s research and dev elopment expenditur e is predominantly r elated to this area. Disabilities The Group maintains an Equal Opportunities policy which ensures that emplo yees and job applicants ar e not discriminated against on the grounds of disability in respect of r ecruitment, promotion, training and general career de velopment. The Gr oup also maintains a griev ance procedur e and a whistleblowing service that enables complaints to be made in a confidential manner should any emplo y ee hav e concerns that any employ ee or job applicant has been discriminated against on the grounds of disability . Stakeholder Engagement During the repor ting period the Direct ors considered and agreed that the Company’ s shareholders, people, hostel par tners, customers and k e y suppliers wer e the Group’ s main stakeholders. How the Compan y engaged with these stakeholders during 2021 is set out in pages 62 to 66 . Ho w their interests w ere consider ed in Board decisions are set out on pages 68 to 71 . Further details of the resolutions which wer e passed with less than Gov ernance Report on page 80. Suppliers The Group’ s policy is to pay suppliers and cr editors sums due in accordance with the payment terms agr eed in the relev ant contract with each such supplier /creditor , pro vided the supplier has complied with its obligations. Envir onmental Information on the Gr oup’ s greenhouse gas emissions is set out in the Corporate Social Responsibility section on pages 60 and 61 and forms part of this repor t by r ef erence. Financial Instruments Details of the financial risk management objectives and policies of the Group, including exposur e of the entity to price risk, credit risk, liquidity risk and cash flow risk ar e given on pages 19 7 and 198 in note 2 4 to the Consolidated financial statements. Political Contributions During the year , no political donations wer e made. External Branches Hostelworld Gr oup plc is r egistered as a branch in Ireland with branch registration numbe r 908295. Hostelworld Services Limited, a U .K. subsidiary of the Company , is registered as a branch in Australia with Australian register ed body number 6130 76556 . Results and Dividends The Group’ s and Company ’ s audited financial statements for the y ear are set out on pages 158 to 205 . F or 2020 and 2021 cash dividends ha ve been suspended do not recommend the payment of a final dividen d for the year ended 31 December 2021 . Futur e cash dividend payment s will be subject to the Group generating adjusted profit aft er tax, the Group’ s cash position, any restrictions in the Group’ s banking facilities and subject to compliance with Companies Act 2006 requir ements regar ding ensuring sufficiency of distributable reserves at the time of pa ying the dividend. Independent Auditor Deloitte Ireland LLP has confirmed it s willingness to continue in office as Auditor of the Group. In accor dance with section 489 of the Companies Act 2006, separate resolutions f or the re-appointment of Deloitte Ir eland LLP as Auditor of the Group and f or the Audit Committee to determine the remuneration will be pr oposed at the forthcoming AGM of the Company . Disclosur e of Information t o Auditor Each of the Directors has confirmed that: • So far as the Director is aware, there is no r elev ant audit information of which the Compan y ’ s Auditor is unaware; and • The Director has tak en all the steps that he/she ought to hav e tak en as a Direct or to make him/her aware of an y rele vant audit inf ormation and to establish that the Company ’ s auditor is aware of that information. This confirmation is given and should be inte rpreted in accordance with the pro visions of Section 418 of the Companies Act 2006 . 140 Governance | Ho st el wo rl d Annual Report 2021 Directors’ Report continued Dir ectors’ Responsibilities Statement The Directors ar e r esponsible for pr eparing the Annual Repor t and the financial statements in accor dance with applicable law and regulations. Company law r equires the Dir ectors to prepar e financial statements f or each financial y ear . Under t hat law the Directors ar e r equired to pr epare the Gr oup financial statements in accor dance with UK -adopted international accounting standards and applicable law . The Directors hav e also elected to pr epare the Gr oup financial statements in accor dance with International Financial Repor ting Standar ds adopted pursuant to Regulation and to prepar e the parent Compan y financial statements in accordance with FRS 101 Reduced Disclosur e Framework (“R elev ant Financial Reporting Framework”) and applicable law . Under company law the Direct ors must not appro ve the financial statement s unless they are satisfied that they giv e a true and fair view of the assets, liabilities and financial position of the Group and Company and of the profit or loss of the Group for that period. In preparing the parent Compan y financial statement s, the Directors ar e requir ed to: • Select suitable accounting policies and then apply them consistently; • Make judgment s and accounting estimates that are reasonable and prudent; • State whether Financial Repor ting Standar d 101 Reduced Disclosures F ramework has been f ollo wed, subject to any mat erial depar tur es disclosed and explained in the financial statements; and • Prepar e the financial statements on the going concern basis unless it is inappropriate t o presume that the Company will continue in business. In preparing the Group financial stat ements, International Accounting Standard 1 r equires that Dir ectors: • Properly select and apply accounting policies; • Present inf ormation, including accounting policies, in a manner that pro vides rele vant, r eliable, comparable and understandable information ; • Pro vide additional disclosures when compliance with the specific requirements in IFRSs ar e insufficient to enable users to understand the impact of par ticular transactions, other ev ents and conditions on the Group’ s financial position and financial per f ormance; and • Make an assessment of the Compan y ’ s ability to continue as a going concern. The Directors ar e r esponsible for k eeping adequate accounting recor ds that are sufficient to sho w and explain the Company’ s transactions and disclose with reasonable accuracy at an y time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006 . They ar e also responsible f or saf eguarding the assets of the Company and hence f or taking r easonable steps f or the prev ention and detection of fraud and other irregularities. The Directors ar e r esponsible for the maintenance and integrity of the corporate and financial information included on the Company’ s website. Legislation in the United K ingdom gov erning the preparation and dissemination of financial statements ma y diff er from legislation in other jurisdictions. Responsibility Statement W e confirm t hat to the best of our knowledge: • The financial statements, pr epared in accor dance with the Relevant Financial Reporting Framework, give a true and f air view of the assets, liabilities, financial position and profit or loss of the Compan y and the under takings included in the consolidation taken as a whole; • The Strategic Report includes a fair re view of the dev elopment and per f ormance of the business and the position of the Company and the under takings included in the consolidation taken as a whole, together with a description of t he principal risks and uncer tainties that they face; and • The Annual Repor t and financial statement s, taken as a whole, are f air , balanced and understandable and pro vide the information necessary for shareholders to assess the Compan y ’ s position and per f ormance, business model and strategy . This responsibility statement was appr o ved b y the Board of Dir ectors on 30 Mar ch 2022 and is signed on its behalf b y: John Duggan Company Secr etary 30 March 2022 141 Zostel Jaisalmer, India 142 Governance | Ho st el wo rl d Annual Report 2021 Independent Auditor’s Report to the Members of Hostelworld Group PLC Report on the audit of the financial statements In our opinion: • the financial statements of Hostelw orld Group plc (the ‘parent compan y’) and its subsidiaries (the ‘group’) give a true and fair view of the state of the group’ s and of t he par ent company’ s affairs as at 31 December 2021 and of the group’ s loss for the year then ended; • the group financial statements ha v e been properly pr epared in accor dance with with United K ingdom adopted international accounting standards and Int ernational Financial Repor ting Standar ds (IFRSs) adopted pursuant to • the parent company financial stat ements ha ve been pr operly prepar ed in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework” ; and • the financial statements hav e been pr epared in ac cor dance with the r equ ir eme nt s o f th e C ompa nie s Act 2006 , and, as regar ds the group financial statements, Article 4 of the IAS Regulation. W e have audited the financial statements which comprise: The group financial statement s: • the consolidated income statement; • the consolidated statement of comprehensiv e income; • the consolidated statement of financial position; • the consolidated statement of changes in equity; • the consolidated statement of cash flows; The parent compan y financial statements: • the company statement of financial position; • the company statement of changes in equity; and; the related notes 1 to 34 , including a summar y of significant accounting policies as set out in notes 1 and 28 to the financial statements. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and United K ingdom adopted int ernational accounting standards and IFRS adopted pursuant t o been applied in the preparation of the parent compan y financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosur e Framew ork” . 143 2. Basis f or opinion Our responsibilities under those standards are further desc ribed i n the aud itor’ s res ponsi biliti es f or the audit of t he financial statements section of our r epor t. W e are independent of the group and the parent compan y in accordance with the ethical requirements th at a re r ele v ant to o ur au dit of the fin anci al st ate men ts in the UK, including the Financial Reporting Council’ s (the ‘FRC’ s’) Ethical Standard as applie d to listed public int erest entities, and w e hav e fulfilled our other ethical respons ibilities in accor dance with these re quire ments. The non-audit services provided to the gr oup and parent compan y f or the year ar e disclosed in note 4 to the financial statements. W e confirm that we hav e not pr ovi de d an y no n-a ud it se rvic es pr o hib it ed b y the F RC’ s Ethical Standard to the group or the par ent company . W e believe that the audit evidence we ha v e obtained is sufficient and appropriate t o pro vide a basis f or our opinion. 3. Summar y of our audit appr oach K ey audit matters The ke y audit matters that we identified in the current y ear w ere: • Going concern; • Carrying value of intangible assets; and • Capitalisation of dev elopment costs. Within this repor t, k ey audit matters ar e identified as follo ws: Newly identified Increased le vel of risk Similar lev el of risk Decreased le vel of risk Materiality The materiality that we used for the group financial stat ements was €680 , 000 which was determined on the basis of expenditure e xcluding depr eciation, amortisation, impairment and exceptional costs. Parent compan y materiality was determined to be €136 ,000 based on the value of net in vestment s Scoping The structure of the group’ s finance function is such that t he central gr oup finance team in Dublin pro vides suppor t to gr oup entities f or the accounting of the majority of transactions and balances. befor e tax was undertaken and per f ormed by an audit team based in Ir eland. Significant changes in our approach Information T echnology Specialists (“IT Specialists”) w ere engaged to assess the GIT Cs (General Information T echnology Controls) and the IT envir onment. Based on the testing per f ormed by the IT Specialists, it was concluded that a control r eliance approach be adopted f or the year -end audit of t he gr oup including the follo wing business cycles: • Re venue; and • Payr oll costs. 144 Governance | Ho st el wo rl d Annual Report 2021 Independent Auditor’s Report to the Members of Hostelworld Group PLC continued 4. Conclusions relating to going concern In auditing the financial statements, we ha v e concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appr opriate. Our ev aluation of the directors’ assessment of the group’ s and parent compan y ’ s ability to continue to adopt the going concern basis of accounting is discussed in section 5 . 1. Based on the work we ha v e per f ormed, we ha v e not identified any mater ial uncer tainties relating t o ev ents or conditions that, individually or collectively , ma y cast significant doubt on the group's and parent compan y’ s ability to continue as a going concern f or a period of at least twelv e months from when the financial statements ar e authorised for issue. In relation to the r epor ting on ho w the group has applied the UK Corporate Gov ernance Code, we ha v e nothing material to add or draw attention to in r elation to the direct ors’ statement in the financial statements about whether the directors considered it appr opriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the dir ectors with respect to going concern ar e described in the rele vant sections of this report. K ey audit matt ers are those matters that, in our prof essional judgement, w ere of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest eff ect on: the ov erall audit strategy , the allocation of resour ces in the audit; and directing the efforts of the engagement team. These matters wer e addr essed in the context of our audit of the financial statements as a whole, and in f orming our opinion thereon, and we do not pr o vide a separate opinion on these matters. 145 5. 1 Going concern K ey audit matt er description As stated in note 1 to the financial statements, the direct ors hav e formed the judgement that the going concern basis of accounting is appropriate in pr eparing the financial statements. This judgement is based on the steps taken to ensur e adequate liquidity is a vailable to the group an d parent compan y that it has had on the travel industry . new variants or strain s that could lead to fur ther country lockdowns and tra vel disruptions and the consequences this would hav e f or the group, we ha v e identified a ke y audit matter r elated to going concern. This is a ke y area of management estimat e. F uture cash flo w projections ar e based on ke y judgements including future r e venue generation, the pace of reco ve ry for the wider trav el and tourism sector and the ability to comply with debt cov enants. Deloitte also note the potential impact on the trav el industry of the ongoing conflict in Ukraine. Actions taken b y the Directors to pr eserve the group’ s cash position include t he decision to suspend any cash dividends, the elimination of all non-essential operating costs including mark eting, r ecruitment, trav el and other variable o verheads, or ganisational redesigns and associated headcount r eductions, the UK, including the debt warehousing of Irish employ er taxes. As stat ed in note 19 to the financial statements, the group enter ed into a €30m fiv e-year t erm loan facility with cer tain in vestment funds and accounts of HPS In vestment Partners LLC or subsidiaries or affiliates thereof during the year which raised funding of €28 . 8m net of issue costs and was drawn do wn on 23 F ebruary 2021 . The Audit Committee has included their assessment of this risk on page 98. How the scope of our audit responded to the ke y audit matter • W e obtained an understanding of the group’ s controls ov er the preparation of cash flo w for ecasts, appro val of the projections and assumptions used in the cash flow for ecasts to support the going concern assumption and assessed the design and determined the implementation of the key rele vant contr ols. • W e per formed an assessment of the historical accuracy of f orecasts pr epared b y management/ the directors. • W e tested the clerical accuracy of t he cash flo w for ecast model. • W e read and assessed the group’ s financing arrangements. W e r eview ed the nature of the facilities an d assessed whether management ha ve appr opriately considered the r epayment terms and financ ial covenant s in place and incorporated them into the cash flow for ecasts o ver the going concern period. • W e assessed any contradictory evidence as par t of our audit w ork and the impact on management’ s conclusion. • W e engaged our internal financial advisory specialists to assist in challenging the ke y assumptions, including the timing of future re ven ue generation, used in the cash flow for ecasts based on their industry knowledge, the envir onment the group is operating in, liquidity and working capital requir ements and financial co venant s. • W e per formed a sensitivity analysis on the cash flow f ore casts, including applying alternativ e reasonable do wnside scenarios, to assess the impact of a change in underlying assumptions on the group and parent compan y’ s ability to continue as a going concern. • W e assessed the result s of the group for the period after the reporting date, comparing to budget, in order to assess if ther e are an y early indicators that management hav e been too optimistic in their for ecasting for the current y ear or whether there are an y other indicators that the business may not be able to continue as a going concern. • W e e valuated the completeness and accuracy of the disclosures made in the financial statements by r efer ence to the understanding we had obtained of the gr oup’ s financial per forman ce during the year , our assessment of the directors’ cash flow f or ecasts and our reading of the gr oup’ s financing arrangements. Key observations W e ha ve concluded that the adoption of the going concern basis of accounting and the related disclosures ar e appropriate. Please r ef er to our conclusions in the going concern section of our report. 146 Governance | Ho st el wo rl d Annual Report 2021 Independent Auditor’s Report to the Members of Hostelworld Group PLC continued 5.2 Carrying value of intangible asset s K ey audit matt er description A t 31 December 2021 , intangible assets (including goodwill) had a carrying value of €7 9 ,390k Group management ha ve allocat ed goodwill to Cash Generating Units (CGUs) and ha ve de veloped a model to calculate the value in use of the assets and to r eview the carrying value of goodwill and other intangibles for impairment. There is a risk that certain incorrect inputs or inappropriate assumptions, in particular projected cash flows, gr owth rate and discount rate could be included in the impairment assessment model calculated by management leading t o an impairment charge that has not been included in the group’ s financial statements. Small variances in k ey assumptions ha v e the potential to reduce the value in use calculation and accordingly the headroom significantly . Ref er to notes 2 and 10 to the financial statements. The Audit Committee has included their assessment of this risk on page 99. How the scope of our audit responded to the ke y audit matter • W e evaluated the design and determined the implementation of the controls in place f or determining when an impairment re view is requir ed f or intangible assets. • W e obtained management ’ s impairment assessment for intangible asset s. W e challenged the underlying assumptions and obtained audit evidence to t est those assumptions used within the group’ s impairment model, including cash flow pr ojections and gro wth rates, which we compared to r elev ant industry data. • W e used our internal valuation specialists to determine an acceptable range of discount rat es and compared our range to that determined b y management. • W e per formed a sensitivity analysis on the underlying assumptions noted abo ve to determine if there are an y scenarios wher eby it is r easonably possible that the carr ying value could be further impaired be yond an y impairment charge r ecognised in the current y ear . In light of the continued assist in challenging the ke y assumptions used in the cash flow for ecasts based on their industry knowledge and the en vironment the group is operating in. • W e assessed whet her the disclosures in r elation to goodwill and intangibles are appr opriate and meet the requirement s of the financial reporting framework. Key observations W e ha ve no observations that impact on our audit in r espect of the carr ying v alue of intangible assets. 147 5. 3 Capitalisation of de v elopment costs K ey audit matt er description F or the year ended 31 December 2021 , additions to capitalised development costs amount ed to €4 , 397k. Dev elopment expenditur e in relation to int ernally generated intangible assets is capitalised when all of the criteria as set out in IAS 38 “Intangible Assets” are met. There is a risk that additions are made t o capitalised dev elopment costs bef ore all the requir ed capitalisation criteria are met. Expenditur e is capitalised from the date when the intangible asset first meets the recognition criteria and in det ermining the amount to be capitalised, directors mak e judgements regar ding expect ed future cash generation of the asset. Ref er to Notes 2 and 10 to the financial statements. The Audit Committee has included their assessment of this risk on page 99. How the scope of our audit responded to the ke y audit matter • W e obtained an understanding of t he pr ocess and related contr ols f or ensuring appropriate capitalisation of dev elopment costs. • W e evaluated the design and determined the implementation of the controls in place f or the capitalisation of dev elopment costs. • W e review ed the capitalised project register and complet ed procedur es to determine whether , on a sample basis, the expenditure was r ecorded accurat ely and whether it meets the required capitalisation criteria in accordance with IAS 38 . • W e agreed the amount of development cost s capitalised to underlying documentation detailing cost per project, including timesheet data. Key observations W e ha ve no observations that impact on our audit in r espect of the capitalisation of development cost s. 6 . Our application of materiality 6 . 1 Materiality W e define materiality as t he magnitude of misstatement in the financial statements that mak es it probable that the economic decisions of a reasonably kno wledgeable person would be changed or in fluenced. W e use materiality both in planning the scope of our audit work and in e valuating the result s of our work. Based on our prof essional judgement, w e determined materiality f or the financial statements as a whole as f ollows: Group financial statement s Parent compan y financial statements Materiality Basis for determining materiality depreciation, amortisation, impairment and ex ceptional costs. This is consistent with the approach tak en in the pre vious year . materiality . This is consistent with the approach taken in the pr evious y ear . Rationale for the benchmark applied W e belie ve that the benchmark as outlined abov e is an appropriat e benchmark as it is the ke y f ocus of users of the financial statements in line with the group’ s current objective of cash conservation measures to r educe variable and fixed cost s and minimise cash burn. W e ha ve used expenses less depr eciation, amor tisation and impairment as these are non-cash items and we ha ve det ermined the focus of users will be on cash expenses due to the f ocus on cash conservation. W e ha ve also e x cluded ex ceptional costs as these are once off expenses and ar e not expected to r eoccur . W e ha ve consider ed the value of in vestment s to be the appropriate benchmark f or determining materiality as the parent compan y is the group inv estment holding entity . 148 Governance | Ho st el wo rl d Annual Report 2021 Independent Auditor’s Report to the Members of Hostelworld Group PLC continued Expenses * Group materiality Group materiality €680k Component materiality range €136k to €544k Expenses €34 , 184k Audit Committee reporting threshold €34k * Expenses for the year e xcluding depr eciation, amortisation, impairment and exceptional costs. 6 .2 Performance materiality W e set per formance materiality at a le vel lo wer than materiality to r educe the probability that, in aggregat e, uncorrected and undet ected misstatements e xcee d the materiality for the financial statements as a whole. Group financial statement s Parent compan y financial statements Performance materiality Basis and rationale f or determining per f ormance materiality W e ha ve incorporat ed a number of factors in determining what le vel t o set per f ormance materiality at for the curr ent year . The nature of the business has remained consist ent to that of the prior year . Howe ver , t here r emains a significant element of uncer tainty in the market as a r esult of w orldwide trav el restrictions in place sev erely impact the future earn ing potential of the group and ability to generate cash. This could heavily impact the carrying value of intangible assets, the capitalisation of dev elopment costs and the ability of the group to continue as going concern giv en the inherent judgements these areas r equire. This uncer tainty will impact our ability to f orecast misstat ements. W e ha v e be en the gr ou p a nd par ent c omp an y auditors f or a number of years and thus ha ve f actored in our experience with and understanding of the group’ s control envir onment including entity-lev el controls and an y turnov er of k ey personnel. W e hav e also noted that there is a high degree of centralisation and common processes within the group’ s finance function. As a result of the points noted abo v e, we determined it was appr opriate to set performance materiality Error r eporting threshold W e agreed with t he Audit Committee that we w ould r epor t to the Committee all audit diff erences in e xcess of qualitative gr ounds. W e also repor t to the Audit Committee on disclosure matt ers that we identified when assessing the ov erall presentation of the financial statements. 149 7 . An overview of the scope of our audit 7 . 1 Identification and scoping of components The structure of the group’ s finance function is such that t he central gr oup finance team in Dublin pro vides support to group entities f or the accounting of the majority of transactions and balances. The audit work was undertaken W e determined t he scope of our gr oup audit on an entity lev el basis, assessing components against the risks of material misstatement at the group le vel. Based on this assessment, w e focused our w ork on three legal entities to a full scope audit, wer e Hostelw orld Group plc, Hostelw orld.com Limited and Hostelw orld Services Limited. W e also carried out specified audit pr ocedures on Host elworld Services Por tugal, Hostelw orld Business Consulting A t the group lev el, w e also tested the consolidation process and carried out r eview pr ocedur es to confirm our conclusion that there wer e no additional risks of material misstatement within the aggregated financial inf ormation of the remaining components not subject to a full scope audit or specified audit pr ocedur es. 0% F ull audit scope 100% Specified audit procedur es Rev enue 99% 1% F ull audit scope Specified audit procedur es Loss befor e tax 0% 100% F ull audit scope Specified audit procedur es Net assets The other information comprises the information included in the annual r epor t, other than the financial statements and our auditor’ s repor t thereon. The dir ectors ar e responsible f or the other information contained within the annual report. Our opinion on the financial statements does not co ver the other information and, e xcept t o the extent otherwise explicitly stated in our r epor t, we do not e xpress an y f orm of assurance conclusion thereon. Our responsibility is to r ead the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsist encies or apparent material misstatement s, we ar e requir ed to determine whether this gives rise to a material misstatement in the financial statement s themselves. If , based on the work we ha ve per f ormed, we conclude that there is a material misstat ement of this ot her inf ormation, w e are r equired to r eport that fact. W e have nothing to report in this regard. 150 Governance | Ho st el wo rl d Annual Report 2021 Independent Auditor’s Report to the Members of Hostelworld Group PLC continued As explained mor e fully in the directors’ r esponsibilities statement, the directors ar e responsible f or the preparation of the financial statements and f or being satisfied that t he y give a true and f air view , and for such internal control as the directors determine is necessary to enable the preparation of financial statement s that are free fr om material misstatement, whether due to fraud or error . In preparing the financial statements, the dir ectors are r esponsible f or assessing the group’ s and the parent co m pa ny ’ s ab i li ty t o c on ti nu e a s a g oi ng c on c er n, disclosing as applicable, matters related to going concern an d using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease oper ations, or hav e no realistic alt ernative but to do so. Our objectives ar e to obtain r easonable assurance about whether the financial statements as a whole are free fr om material misstatement, whether due to fraud or error , and to issue an auditor’ s repor t that includes our opinion. Reasonable assurance is a high lev el of assurance, but is not a guarantee that an audit conducted in accor dance and are consider ed material if , individually or in the aggregate, they could reasonably be e xpected to influence the economic decisions of users taken on the basis of these financial statements. scepticism throughout the audit. W e also: • Identify and assess the risks of material misstatement of th e c ons ol ida ted fi nan cia l sta tem ents , whe th er due to fraud or error , design and per form audit pr ocedures r esponsive to those risks, and obtain audit e vidence that is sufficient and appropriate t o pro vide a basis for our opin ion. The risk of not detecting a material misstatement resulting fr om fraud is higher than for one r esulting from err or , as fraud may in volv e collusion, f orgery , intentional omissions, misrepr esentations, or the ov erride of internal contr ol. W e include an e xplanation in our report of t he extent to which the audit was capable of detecting irr egularities, including fraud. • Obtain an understanding of internal contr ol rele vant to the audit in or der to design audit procedur es that are appropriate in the cir cumstances, but not for the purpose of expr essing an opinion on the effectiv eness of the group’ s internal control. • Evaluate the appr opriateness of accounting policies used and the reasonableness of accounting estimates and related disclosur es made b y the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncer tainty e xists relat ed to ev ents or conditions that may cast significant doubt on the group’ s ability to continue as a going concern. If we conclude that the use of t he going concern basis of accounting is appropriate and no mat erial uncer tainties ha ve been identified, w e report these conclusions in our report. If we conclude that a material uncer tainty exist s, we ar e requir ed to draw attention in our report to the related disclosures in the financial statements or , if such disclosures are inadequate, t o modify our opinion. Our conclusions are based on the audit e vidence obtained up to the date of our report. Howe ver , fut ure events or conditions ma y cause the group to cease to continue as a goi ng c once rn. • Evaluate the o verall pr esentation, structure and cont ent of the financial statements, including the disclosures, and whether the financial statements repr esent the underlying transactions and ev ents in a manner that achiev es fair pr esentation (i.e gives a true an d fair view). • Where w e are r equired t o report on consolidated financial statements, obtain sufficient appropriat e audit evid ence r egar ding the fina ncial inf ormat ion of the entities or business activities within the group to expr ess an opinion on the consolidated financial statements. As gr oup auditor we ar e responsible f or the direction, supervision and per f ormance of the group audit. As gr oup auditor we r emain solely responsible f or the audit opinion. 151 W e communicate wit h those charged with go vernance r egarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal contr ol that we identify during the audit. F or listed entities and public inter est entities, we also pro vide those charged with gov ernance with a statement that the auditor has complied wit h r elev ant ethical requir ements regar ding independence, incl uding the F RC’ s Ethical Sta ndar d, and c ommunic ate with them all relationships and other matters that may r easonably be thought to bear on our independence, and where applicable, r elated saf eguards. Where w e are r equired t o report on key audit matt ers, from the matters communicated with those charged with gov ernance, w e determine those matters that were of most significance in the audit of the financial statements of the current period and are ther efor e the ke y audit matters. W e describe t hese matters in our r eport unless law or regulation pr ecludes public disclosure about the matter or when, in e xtremely rar e circumstances, w e determine that a matter should not be communicated in our report because t he adv erse consequences of doing so would reasonably be e xpected to outw eigh the public interest benefits of such communication. F or public inter est entities, other listed entities, entities that are requir ed, and those that choose voluntarily , to report on how they ha v e applied the UK Corporate Gov ernance Code, and other entities subject to the gove rnance requir ements of The Companies (Miscellaneous Reporting) Regulations 2018, w e are r equir ed to include in our report an explanation of how w e ev aluated management's assessment of the entity's ability to continue as a going concern and, where r elev ant, k ey observations arising with respect t o that evaluation. Irregularities, including fraud, ar e instances of non-compliance with laws and regulations. W e design procedures in line with our responsibilities, outlined abov e, to detect material misstatement s in respect of irr egularities, including fraud. The extent to which our pr ocedur es are capable of detecting irr egularities, including fraud is detailed belo w . 11 . 1 Identifying and assessing potential risks r elated to irr egularities In identifying and assessing risks of material misstatement in r espect of irregularities, including fraud and non- compliance with laws and regulations, we consider ed the follo wing: • the nature of the industry and sector , contr ol envir onment and business performance including the design of the group’ s r emuneration policies, ke y driv ers for dir ectors’ r emuneration, bonus lev els and per f ormance target s; • result s of our enquiries of management, internal audit, others within t he entity and the audit committee about their own identification and assessment of the risks of irregularities; • any matters w e identified ha ving obtained and re viewed the gr oup’ s documentation of their policies and procedur es relating t o: – identifying, evaluating an d complying with laws and regulations and whether they wer e aware of an y instances of non-compliance; – detecting and r esponding to the risks of fraud and whether t he y hav e knowledge of an y actual, suspected or alleged fraud; – the internal controls established to mitigate risks of fr aud or non-compliance with laws and r egulations; • the matter s discu ssed amo ng the aud it enga gement t eam and relev ant internal specialists, including financial advisory, v aluations, transf er pricing and IT regar ding how and wher e fraud might occur in the financial statements and any potential in dicators of fraud. As a result of these procedur es, w e considered the oppor tunities and incentiv es that may exist within the organisation for fraud and identified the gr eatest potential f or fraud with respect to the completeness of re v enue. In common management ov erride. 152 Governance | Ho st el wo rl d Annual Report 2021 Independent Auditor’s Report to the Members of Hostelworld Group PLC continued W e also obtained an understanding of t he legal and r egulatory frameworks that the group operates in, f o cu s in g on pr ov i si on s o f th o se la ws an d r egu l at io n s th at had a direct eff ect on the determination of material amounts and disclosures in the financial statements. The k e y laws and regulations w e considered in this cont ex t incl uded the UK Com panies Act, L ondon Stock Exchange Listing Rules, the Eur onext Rule Book and tax legislation. In addition, we consider ed pro visions of other laws and regulations that do not ha ve a dir ect effect on the financial statements but compliance with which may be fundamental t o the group’ s ability to operate or to a voi d a ma te ri al 11 .2 Audit r esponse to risks identified As a r esult of performing the abo ve, we d id not ide ntify an y ke y audit matters related t o the potential risk of fraud or non-compliance with laws and regulations. Our procedur es to r espond to risks identified included the follo wing: • re viewing the financial statement disclosures and testing t o suppor ting documentation to assess compliance with provisions of r ele vant laws and r egulations described as having a dir ect eff ect on the financial statements; • en qui rin g of ma nag eme nt, th e a udi t co mmi tte e an d external legal counsel concerning actual and potential litigation and claims; • per f orming analytical procedur es to identify an y unusual or unexpected r elationships that may indicate risks of material misstatement due to fraud; • reading minutes of meetings of those char ged with gover nance, re viewing internal audit reports and re viewing correspondence with tax authorities; • in addr essin g the r isk of f rau d in re ven ue r ec ogn iti on, tracing booking rev enues and booking numbers to third par ty statements and assessing an y material r econciling items to ensure complet eness; and • in addressing the risk of fraud through management o verride of contr ols, testing the appropriat eness of journal entries and other adjustments; assessing whe ther the j udge ment s mad e in m aking acco untin g estimates are indicative of a potential bias; an d ev aluating the business rationale of any significant transactions that are unusual or outside the normal course of business. W e also communicated relev ant identified laws and regulations and potential fraud r isks to all engagement team members including internal specialists and r emained aler t to an y indications of fraud or non-compliance with laws and regulations throughout the audit. 153 Report on other legal and regulatory requirements In our opinion the par t of the directors’ r emuneration report to be audited has been properly pr epared in accor dance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: • the information giv en in the strategic report and t he direct ors’ report for the financial year f or which the financial statements ar e prepar ed is consistent with the financial statements; and • t he strategic r epor t and the directors’ r epor t ha ve been pr epared in accor dance with applicable legal requir ements. In the light of the knowledge and understanding of the group and the parent compan y and their environmen t obtained in the course of the audit, we hav e not identified any mat erial misstatements in the strategic report or the directors’ r epor t. The Listing Rules requir e us to r eview the directors' stat ement in relation to going concern, longer -term viability and that par t of the Corporate Gov ernance Statement r elating to the group’ s compliance wit h the pro visions of the UK Corporate Gov ernance Code specified f or our re view . Based on the work undertaken as par t of our audit, w e ha ve co nclu ded that each of the f ol lo win g el emen ts of the Corporate Gov ernance Statement is materially consist ent with the financial statements and our knowledge obtained during the audit: • the directors’ statement with regar ds to the appropriat eness of adopting the going concern basis of accounting and any material uncertainties identified set out on pages 137 and 138; • the directors’ e xplanation as to its assessment of the group’ s prospects, the period this assessment cov ers and why the period is appropriat e as set out in the going concern section on pages 137 and 138; • the directors' statement on f air , balanced and understandable set out on page 98; • the board’ s confirmation t hat it has carried out a robust assessmen t of the emerging and principal risks set out on pages 30 to 44 and on page 83; • the section of the annual repor t that describes the review of eff ectiv eness of risk management and internal control systems set out on pages 100 and 101; and • the section describing the work of the audit committee set out on pages 96 and 97 . 154 Governance | Ho st el wo rl d Annual Report 2021 Independent Auditor’s Report to the Members of Hostelworld Group PLC continued 14. 1 Adequacy of explanations r eceiv ed and accounting recor ds Under the Companies Act 2006 we are r equir ed to report to you if , in our opinion: • we ha ve not r eceiv ed all the information and e xplanations we r equire f or our audit; or • adequate accounting recor ds hav e not been k ept by the par ent company , or returns adequate for our audit ha v e not been receiv ed from branches not visit ed by us; or • the parent company financial statements are not in agr eement with the accounting records and r eturns. W e have nothing to report in respect of these matters. 14.2 Dir ectors’ r emuneration Unde r the Co mpani es Ac t 2006 we ar e als o r equir ed to r epor t if in our opinion cer tain disclosures of directors’ remuneration ha ve not been made or the par t of the directors’ remuneration r eport to be audited is not in agreement with the accounting records and r eturns. W e have nothing to report in respect of these matters. 15. 1 Auditor tenure F ollo wing the r ecommendation of the audit committ ee, we w er e appointed by the Board at it s annual general meeting in 2015 to audit the financial statements f or the year ending 31 December 2015 and subsequent financial periods. The period of total uninterrupted engagement including pr evious r enewals and r ea pp oi nt me nt s of th e fi rm i s 7 y ea rs , co v erin g the y ears ending 31 December 2015 t o 31 December 2021 . 15.2 Consist ency of the audit report wit h the additional r epor t to the audit committee Our audit opinion is consistent with the additional repor t to the audit committee w e are r equired to pr o vide in This report is made solely to the company ’ s members, as a body, in accor dance with Chapter 3 of Par t 16 of the Companies Act 2006 . Our audit work has been undertaken so that we might state t o the company’ s members those matters we ar e requir ed to state to them in an auditor’ s report and for no other purpose. T o the ful les t e x ten t per mit te d b y law , w e do no t a cce pt or assume responsibility to an y one other than t he compan y and the company’ s members as a body , for our audit work, f or this report, or for the opinions we ha ve f ormed. Daniel Murra y (Senior statutory auditor) F or and on behalf of Deloitte Ir eland LLP Char ter ed Accountants and Statut ory Auditors Deloitte & T ouche House, Earlsfort T errace, Dublin 2 30 March 2022 Bounce Noosa, Australia 155 Che Tulum Hostel & Bar, Mexico Financial Statements 158 Consolidated Income Statement 158 Consolidated Statement of Comprehensive Income 159 Consolidated Statement of Financial Position 160 Consolidated Statement of Changes in Equity 161 Consolidated Statement of Cash Flows 162 Notes to the Consolidated Financial Statements 200 Company Statement of Financial Position 201 Company Statement of Changes in Equity 202 Notes to the Company Financial Statements 158 Financial Statements | Hostelworld Annual Report 2021 Consolidated Income Statement for the year ended 31 December 2021 2021 2020 Notes €’ 000 €’000 Rev enue 3 16,901 15,364 Operating expenses bef ore impairment 4 (49,386) (50,251) Impairment of intangible assets 10 Share of r esults of associate 13 (367) (14,996) (225) (374) Operating loss (33,077) (50,257) Finance income – 8 Finance costs 7 (3,501) (246) Loss befor e taxation (36,578) (50,495) T axation credit 8 562 1,638 Loss for the year attributable t o the equity owners of the par ent Company (36,016) (48,857) Basic and diluted loss per share ( euro cent) 9 (30.96) (45.68) Consolidated Statement of Comprehensive Income for the year ended 31 December 2021 2021 2020 €’ 000 €’000 Loss for the year (36,016) (48,857) Items that may be r eclassified subsequently to profit or loss: Exchange diff er ences on translation of for eign operations 32 (7) T otal comprehensiv e income f or the year attributable to equity owners of the par ent Company (35,984) (48,864) 159 Consolidated Statement of Financial Position as at 31 December 2021 2021 2020 Notes €’ 000 €’000 Non-current asset s Intangible assets 10 79,390 86,252 Property, plant and equipment 11 293 4,480 Deferr ed tax assets 12 8,352 7,596 Inv estment in associate 13 1,186 2,349 89,221 100,677 Current asset s T rade and ot her r eceivables 15 2,002 1,681 Corporation tax 18 54 Cash and cash equivalent s 16 25,267 18,189 27,287 19,924 T otal assets 116,508 120,601 Issued capital and r eserves attributable to equity owners of the par ent Share capital 17 1,163 1,163 Share pr emium 17 14,328 14,328 Other reserves 17 6,475 1,218 Retained earnings 45,140 81,156 T otal equity attributable to equity holders of the parent Compan y 67,106 97,865 Non-current liabilities T rade and ot her pa yables 18 8,049 – Borro wings 19 28,209 – Lease liabilities 14 – 2,492 36,258 2,492 Current liabilities T rade and ot her pa yables 18 12,795 17,036 Borro wings 19 – 1,164 Lease liabilities 14 86 1,803 Corporation tax 263 241 13,144 20,244 T otal liabilities 49,402 22,736 T otal equity and liabilities 116,508 120,601 The financial statements w ere appr o ved b y the Board of Direct ors and authorised for issue on 30 Mar ch 2022 and signed on its behalf b y: Gary Morrison Caroline Sherry Chief Executiv e Officer Chief Financial Officer Hostelworld Group plc r egistration number 98187 05 (England and W ales) 160 Financial Statements | Hostelworld Annual Report 2021 Consolidated Statement of Changes in Equity for the year ended 31 December 2021 Share capital Share premium Retained earnings Other reserves T otal Notes €’ 000 €’000 €’000 €’000 €’000 Balance at 1 January 2020 956 – 130,013 803 131,772 T otal comprehensiv e income for the y ear – – (48,857) (7) Issue of ordinary shares f or cash 17 191 15,042 – – (48,864) 15,233 Share issue cost 17 – (698) – – (698) Bonus Issue shares 17 16 (16) – – Credit to equity f or equity settled share based pa yments – – – – 422 422 Balance at 31 December 2020 1,163 14,328 81,156 1,218 97,865 T otal comprehensiv e income for the y ear – – (36,016) 32 (35,984) Issue of warrants 19 – – – 3,073 3,073 Credit to equity f or equity settled share based pa yments – – – 2,152 2,152 Balance at 31 December 2021 1,163 14,328 45,140 6,475 67,106 161 Consolidated Statement of Cash Flows for the year ended 31 December 2021 2021 2020 Notes €’ 000 €’000 Cash flows fr om operating activities Loss befor e tax (36,578) (50,495) Amor tisation and depr eciation 12,411 14,132 Impairment of intangible assets 4 367 14,996 Share of r esults of associate 13 225 374 Net profit on disposal of leases 4 (793) – Net loss/(profit) on disposal pr operty, plant and equipment 4 492 (55) Finance income – (8) Finance expense 7 3,501 Employ ee equity settled share-based pa yment expense 21 2,162 246 428 Changes in working capital items: Increase in trade and other pa yables 5,074 5,586 (Increase)/decr ease in trade and other r eceivables (321) 3,299 Cash generated fr om operations (13,460) (11,497) Interest paid Interest r eceiv ed (155) (246) Income tax (paid)/refund (136) 698 Net cash used in operating activities (13,751) (11,037) Cash flows fr om in vesting activities Acquisition / dev elopment of intangible assets 10 (4,397) (3,802) Purchases of pr oper ty , plant and equipment 11 (75) (64) Net cash used in inv esting activities (4,472) (3,866) Cash flows fr om financing activities Deferr ed consideration Proceeds fr om issue of share capital 17 Issue costs paid 17 – (698) Proceeds fr om borro wings 19 28,800 3,454 T ransaction costs relating to borr owings 19 (862) – Repayment of bor ro wings 19 (1,164) (2,290) Repayment s of obligations under lease liabilities 14 (1,160) (1,462) Net cash from financing activities 25,269 13,734 Net increase/( decrease) in cash and cash equiv alents 7,046 (1,169) Cash and cash equivalent s at the beginning of the year 18,189 19,365 Effect of f or eign ex change rate changes 32 (7) Cash and cash equivalents at the end of the year 16 25,267 18,189 8 – (345) (503) 15,233 – 162 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 31 December 2021 General Inf ormation Hostelworld Gr oup plc, her einafter "the Company" , is a public limited Company incorporated in the United Kingdom on the 9 October 2015 under the Companies Act and is registered in England an d W ales. The r egistered office of the Company is Floor 5 , 38 Chancery Lane, The Cursitor , London, WC2A 1EN, United Kingdom. The Company and it s subsidiaries (together “the Group”) pro vide software and data pr ocessing services t hat f acilitate hostel, B&B, hotel and other accommodation bookings worldwide. The Company’ s shares are quoted on Eur one xt Dublin and the London Stock Exchange. The Company and consolidat ed financial statements w ere appr ov ed and authorised for issue b y the Board of Dir ectors on 30 March 2022. Going concern The Directors, aft er making enquiries, hav e a reasonable e xpectation that the Group and Company has adequate resour ces to continue operating as a going concern f or the for eseeable future. hav e been maintained: a base case scenario based on expect ed trading and a stress case scenario, which is a fur ther deterioration of the base case scenario. These scenarios ev olved o v er time to take int o account regional reco very assumptions, project ed re venue and mar gin flo ws, cost cutting measures tak en, project ed net cash flows from operations and a vailable sour ces of funding including our €30m fiv e-year term loan f acility with cer tain inv estment funds and accounts of HPS In v estment Par tners LL C (or subsidiaries or affiliates ther eof). Actions taken b y the Directors t o preserve the Group’ s cash position include the decision to suspend any cash dividends, th e elimination of all non-essential operating costs including mark eting, recruitment, tra v el and other variable o ve rhea ds, organisational r edesigns and associated headcount r eductions, negotiation of credit terms with k ey employ er and emplo yee tax es. In December 2021 the Board appro v ed a base case budget and a stress case budget, both of which co ver ed the period to March 2023 , a period of twelve-months from annual r epor t signing. In addition, a fiv e-year outlook was appro ved. The base assumptions of these budgets ar e conservativ e: bed prices are capped at 2019 prices and booking reco very is built on a r egional destination basis flex ed for timing of bor ders r eopening to International tra vel as they wer e at the time. The budget did not assume any incr ease in commission rates and cancellation rates w ere for ecast to be ele vated v ersus normal rates. In addition, no incr emental re v enue was included for an y existing or future partnerships. Under both scenarios full recov ery is not expected to happen until 2023 with the stress case scenario assuming more depr essed volumes v ersus base case scenario and assumes minimal r ecov ery in 2022. Subsequent to our December Board meeting, the Boar d appro ved a further additional scenario. This additional scenario reflected the impact that the emergence of the Omicron v ariant was having on tra v el demand. This scenario assumed that tougher trav el restrictions w ould be implemented, and demand w ould soften. Under this scenario 2022 trading lev els would be belo w the budget stress case scenario; this scenario is v ery unlikely but it demonstrates a worst -case trading outlook. Neither t he str ess case scenario nor worst -case scenario include an y additional cost cutting measures; such cost cutting measur es would be implement ed should trading deteriorate to these lev els f or a prolonged period. 163 Under all three scenarios, the Group has sufficient cash r eserves av ailable and remains complian t with financial cov enants under the term loan f acility agreement. During January 2022 the Group’ s trading reco v ered, despite higher than normal cancellation rates in the first two weeks of the month, and the Group’ s Januar y trading result s closed in line with budgeted base case projections. F ebruar y 2022 trading result s wer e also in line with our budgeted base case projections. The Directors ha v e taken st eps to ensure adequate liquidity is a v ailable to the Group f or the likely duration of the crisis and the reco very period. F ollowing the completion of a Placing, and the securing of a re v olving credit f acility in 2020 , on 19 F ebruary 2021 the Group signed a €30m five-y ear term loan f acility with cer tain inv estment funds and accounts of HPS In vestment Partners LLC ( or subsidiaries or affiliates thereof). An amount of €28 . 8m was receiv ed on 23 F ebruary 2021 . The k ey f eatures of the f acility are as f ollows: • • th an 3. 0 x adjusted EBITD A fr om 31 December 2 023 t o 3 0 Sep te mbe r 2024, an d no mor e than 2.5 x adj usted EBITD A on the last business day of each month until it is testing the adjusted net lev erage ratios there is fr ee cash in members of the Group which hav e guaranteed r epayment of the f acility of at least €6 . 0 million). • Security on the facility includes the share capital of the Group, the bank accounts of the Group and the Gr oup’ s intellectual property. W e were in compliance with our minimum liquidity cov enants at 31 December 2021 . A t this point in time, the consequences of t he curr ent unrest in Eastern Eur ope is uncertain. The Group has no of the Groups net re v enue. The Directors will continue to closely mon itor any de velopment s in the conflict, and the impact to the Group. Having consider ed the Group’ s five year P &L out look, cash flo w for ecasts pr epared f or 12 months from date of signing, current and anticipated trading v olumes, together with current and anticipated le vels of cash and debt, the Dir ectors are satisfied that the Group and Compan y has sufficient resour ces to continue in operation f or the for eseeable future, a period of not less than 12 months from the date of this repor t, and accordingly , t he y continue to adopt the going concern basis in preparing the Group financial stat ements. Basis of Preparation The financial statements ha ve been pr epar ed in conformity with the requir ements of the Companies Act 2006 and No 1606/2002 as it applies in the European Union. The consolidated financial statements also comply with Article 4 of t he EU IAS Regulation. Ref er ences to IFRS hereafter r ef er to UK adopted IFRS and IFRS adopted b y the EU . The consolidated financial statements ha v e been prepar ed under the historical cost basis. The inv estment in associate is accounted f or using the equity method. In the preparation of these consolidated financial statements the accounting policies set out below ha v e been applied consistently by all Gr oup companies. The consolidated financial statements ar e present ed in euro, which is the functional currency of all Gr oup companies. 164 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued Pre viously line items f or administrative e xpenses, and depreciation and amortisation were sho wn on the face of the income statement and the share of associate pr ofit / loss was shown aft er operating profit. This y ear administrative expenses and depr eciation and amor tisation ar e presented within one-line item f or operating expenses and shar e of associate profit / loss is no w tak en into account in arriving at operating pr ofit. Basis of consolidation Subsidiaries The consolidated financial statements incorporat e the financial statements of the Company and entities contr olled by the Compan y (its subsidiaries) all of which prepar e financial statements up t o 31 December . Control is achie ved when the Compan y has the power o v er the inv estee, is exposed, or has right s, to variable r eturn from it s inv estment with the investee an d has the ability to use its pow er to aff ect its r eturns. The financial statements of subsidiaries are included in the consolidated financial statement s from the date that control commences until the date that control ceases. All intragroup asset s and liabilities, equity , income, expenses and cash flo ws relating to transactions between the members of the Group ar e eliminated on consolidation. Unr ealised losses are also eliminated, ex cept wher e they pro vide e vidence of impairment. Associates Associates are entities o v er which the Group has significant influence but not control, generally accompan ying a financial and operating policy decisions of the inv estee but is not control o v er those policies. Inv estments in associates ar e accounted f or using the equity method of accounting and are initially recognised at cost. On acquisition of the inv estment in associate, any e x cess of the cost of the investment o ver the Gr oup’ s share of the net fair value of the identifiable assets and liabilities of the in vestee is r ecognised as goodwill, which is included within the carr ying value of the in vestment. The Group’ s share of its associates’ post -acquisition profit s or losses is recognised in ‘Shar e of result s of associate’ in the consolidated income statement, and its shar e of post-acquisition mo vement s in reserves is r ecognised in the consolidated statement of changes in equity . The cumulativ e post-acquisition mo v ements are adjust ed against the carrying amount of t he in vestment, less an y impairment in v alue. Where indicators of impairment arise, the carrying amount of the associate is tested f or impairment by comparing it s reco verable amount with its carrying amount. The requir ements of IAS 36 ar e applied to determine whether it is necessary to recognise an y impairment loss with respect to the Gr oup’ s inv estment in an associate. When necessary , the entire carrying amount of the investment (including goodwill) is tested f or impairment in accordance with IAS 36 as a single asset b y comparing its r ecov erable amount (higher of value in use and f air value less cost s of disposal) with its carrying amount. Any impairment loss recognised is not allocated t o any asset, including goodwill that f orms par t of the carrying amount of t he in vestment. Any r ev ersal of that impairment loss is recognised in accor dance with IAS 36 to the extent that the recov erable amount of the inv estment subsequently increases. Unrealised gains arising fr om transactions with associates are eliminated t o the extent of the Group’ s interest in the entity . Unrealised losses ar e eliminated to the ext ent that t he y do not pro vide eviden ce of impairment. When the Group’ s share of losses in an associate equals or ex ceeds its in terest in the associate, the Group does not r ecognise fur ther losses unless the Group has incurred obligations or made pa yments on behalf of the associate. The accounting policies of associates are amended wher e necessary to ensure consistency of accounting tr eatment at Group le v el. When the Group ceases to ha ve significant influence, an y retain ed interest in the entity is re-measur ed to its f air value at the date when significant influence is lost with t he change in carrying amount recognised in the consolidated income statement. The Group also r eclassifies an y mov ements pr eviously r ecognised in other comprehensiv e income to the consolidated income statement. continued 165 Business combinations Acquisitions of businesses are accounted f or using the acquisition method. The consideration transferr ed in a business combination is measured at f air value, which is calculated as the sum of the acquisition date fair v alues of the assets transferr ed b y the Group, liabilities incurred b y the Group to the f ormer owners of the acquiree and the equity interests issued b y the Group in e xchange f or contr ol of the acquiree. Acquisition related cost s are r ecognised in the consolidated income statement as incurred. A t the acquisition date, the identifiable assets acquired and the liabilities assumed are r ecognised at their fair value at the acquisition date, ex cept that: • Deferr ed tax assets or liabilities and liabilities or assets r elated to emplo yee benefit arr angements are r ecognised and measured in accor dance with IAS 12 Income T axes and IAS 19 Emplo yee Benefit s respectiv ely; • Liabilities or equity instruments r elated to share-based pa yment arrangement s of the acquiree or share-based payment arrangement s of the Group enter ed into to replace shar e-based pa yment arrangements of the acquiree are measur ed in accordance with IFRS 2 Shar e-based Payment at the acquisition date; and • Assets (or disposal groups) that ar e classified as held for sale in accor dance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations ar e measur ed in accordance with that standard. The fair v alue of the assets and liabilities are based on v aluations using assumptions deemed by management t o be appropriate. Pr of essional valuers ar e engaged when it is deemed appropriat e to do so. Goodwill repr esents the ex cess of the aggregate of the consideration transf erred and the amount of an y non-controlling interest in the acquir ed entity ov er the net identifiable assets acquired. Non-controlling inter ests Non-controlling inter ests r epresent the portion of t he equity of a subsidiary not attributable either directly or indirectly to the Group and ar e present ed separately in the consolidated income statement and within equity in the consolidated statement of financial position, distinguished from shar eholders’ equity attributable to the owners of the parent Compan y . The follo wing changes to IFRS became eff ectiv e for the Group during the y ear but did not result in material changes to the Group’ s consolidated financial statements: • • • New and amended standards and int erpretations not y et mandatorily eff ective The Group has not applied certain new standards, amendments and interpr etations to e xisting standards which are not y et mandatorily eff ective and ha v e not yet been endorsed b y the UK or by the EU , in some instances: • • • • • • 166 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued • • Amendments to IFRS 17 • • • – IFRS 1 First-time Adoption of Int ernational Financial Repor ting Standar ds – Subsidiary as a first-time adopter – IFRS 9 Financial Instruments – F ees in t he ‘10 per cent’ test for der ecognition of financial liabilities – IFRS 16 Leases – Lease incentiv es – IAS 41 Agricultur e – T axation in fair v alue measurements Rev enue r ecognition The Group generates substantially all of it s re venues fr om the technology and data processing f ees and service fees that it charges to accommodation pr oviders and the transaction service fees it char ges to consumers. The Group also generates re v enues from technology and data pr ocessing f ees that it charges to pr oviders of other trav el product s and associated transaction service fees, fr om cancellation protection f ees, pa yment protection f ees and from adv er tising services. Rev enue is r ecognised at the time the reservation is made in respect of non-r efundable commission on the basis that the Group has met its per f ormance obligations ha ving pro vided the technology and data processing service at the time the booking is made. In respect of the free cancellation product, which off ers the trav eller the oppor tunity to mak e a booking on a free cancellation basis and to r eceive a r efund of their deposit in cer tain cir cumstances, such related r ev enue is not r ecognised until the last cancellation date has passed as one par ty can withdraw from the contract until such a date has passed. Where the Group pr o vides an ancillary ser vice to allo w a flexible booking option which allo ws a booking to be cancelled for no char ge or a new booking to be made, such r ev enue is def erred, until such time as the relat ed check -in date has passed or f or a six -month period from the date of cancellation, at which time the credit expir es. Where cr edits ar e granted to customers f or utilisation on futur e bookings, a pro vision is recor ded against re v enue based on the probability that a credit off ering will be used by a cust omer . Ancillary adver tising r ev enues are r ecognised o ver the period when the service is per formed. Re venue is measur ed at the fair value of the consideration r eceived or r eceivable. Rev enue is stated net of r ebates, sales tax es and value added tax es. Leases The Group assesses whether a contract is or contains a lease, at inception of the contract. F or contracts wher e the Group is a lessee, a right -of -use asset is recognised, r epresenting the Gr oup’ s right to use the underlying asset and a lease liability is also recognised f or the Group’ s obligation to make lease pa yments during the lease term. The lease term of each contract is determined as the non-cancellable period of the lease, together with any periods cov ered by an option to e xtend the lease if it is reasonably certain to be ex ercised, or an y periods co ver ed by an option t o terminate the lease (break option), if it is r easonably cer tain not to e x ercise that option. F or short term leases (defined as leases with a lease term of 12 months or less) and leases of low v alue assets, the Group r ecognises the lease payments as an operating e xpense on a straight-line basis o v er the term of the lease. continued 167 The right-of -use asset is initially measur ed at cost and subsequently valued at cost less accumulated depr eciation and impairment losses. It is adjusted where a lease modification r esults in a r emeasurement of the lease liability . Right-of -use asset s are depr eciated ov er the shor ter period of lease term and useful lif e of the underlying asset. The depreciation starts at the commencement date of the lease. Whenev er the Group incurs an obligation to r estor e the underlying asset to the condition required b y the terms and conditions of the lease, a pro vision is recognised and measur ed under IAS 37 . T o the extent that the costs relate to a right-of -use asset, the costs ar e included in the related right -of -use asset. The carrying value of these assets are r eview ed at the end of each reporting period to determine whether t her e is any indication that the assets hav e suff ered an impairment loss. The Gr oup applies IAS 36 to determine whether a right-of -use asset is impair ed and accounts f or any identified impairment loss as described in the ‘Proper ty , Plant and Equipment’ policy. Lease liabilities are measur ed at the present v alue of the future lease payment s. The lease payment s are discounted using the implicit interest rate in the lease, or where this cannot r eadily be determined the Group use the Group’ s incremental borr owing rat e. The incremental borr owing rat e depends on the term, currency and start date of t he lease and is determined based on a series of inputs including: the risk -free rate based on gov ernment bond rates; a country-specific risk adjustment and a credit risk adjustment based on bond yields. Subsequently the lease liability is increased to r eflect inter est on the lease liability and reduced f or payment s made. The lease liability is remeasur ed for lease modifications or reassessments. Lease payment s included in the measurement of the lease liability comprise: (i ) Fixed lease pa yments less an y lease incentives r eceivable; (ii) V ariable lease pa yments that depend on an index or rate, initially measur ed using the index or rate at the commencement date; (iii ) The amount expect ed to be pay able b y the lessee under residual value guarantees; (iv) The ex er cise price of purchase options, if the lessee is reasonably certain to ex ercise the options; and (v) Payment s of penalties for t erminating the lease, if t he lease term r eflects the ex er cise of an option to terminate the lease. The lease liability is presented as a separat e line in the consolidated statement of financial position. The lease liability is subsequently measured by incr easing the carrying amount to reflect inter est on the lease liability (using the effectiv e interest method) and b y reducing the carrying amount to reflect the lease payment s made. The Group r e-measures the lease liability (and mak es a corresponding adjustment to the r elated right-of -use asset) whenev er: (i ) The lease term has changed or ther e is a significant ev ent or change in circumstances r esulting in a change in the assessment of ex ercise of a pur chase option, in which case the lease liability is re-measured b y discounting the revised lease pa yments using a r evised discount rat e. (ii ) The lease pa yments change due to changes in an index or rate or a change in e xpected pa yment under a guaranteed residual v alue, in which cases the lease liability is remeasur ed by discounting the r evised lease pa yments using an unchanged discount rate (iii) A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasur ed based on the lease term of the modified lease by discounting the re vised lease payment s using a re vised discount rate at the effectiv e date of the modification. Cash paid on the interest portion of a lease liability is included as par t of operating activities in the consolidated cash flow statement and cash pa yments f or the principal por tion of a lease liability ar e included as par t of financing activities. Exceptional it ems Exceptional it ems by their nature and siz e can mak e interpretation of the underlying tr ends in the business more difficult. Such items may include r estructuring, material mer ger and acquisition costs, pr ofit or loss on disposal or termination of operations, litigation settlements, legislative changes, mat erial acquisition integration costs and profit or loss on disposal of in vestmen ts. Judgement is used by the Gr oup in assessing the par ticular items which by virtue of their scale and nature should be disclosed as ex ceptional items. 168 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued T axation The tax expense r epresent s the sum of t he tax curr ently pay able and deferr ed tax. Current tax The tax currently pay able is based on taxable pr ofit for the period. T axable profit differs fr om net profit as r eported in the consolidated income statement because it ex cludes items of income or e xpense that are taxable or deductible in other years and it furt her ex cludes items that ar e nev er taxable or deductible. The Group’ s liability for curr ent tax is calculated using tax rates that hav e been enacted or substantiv ely enacted b y the repor ting date, and an y adjustment to tax pay able in r espect of pre vious years. A pro vision is recognised f or those matters f or which the tax determination is uncer tain, but it is considered pr obable that there will be a future outflo w of funds to a tax authority . The pro visions are measur ed at the best estimate of the amount expected to become pa yable. The assessment is based on the judgement of tax pr ofessionals within the Company supported by pr evious e xperience in respect of such activities and in certain cases based on specialist independent tax advice. Deferr ed tax Deferr ed tax is the tax expected to be pa y able or reco verable on diff er ences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted f or using the liability met hod. Def err ed tax liabilities are generally r ecognised for all taxable temporary differ ences and deferr ed tax assets ar e recognised f or unused tax losses, unused tax cr edits and deductible temporary differ ences to the extent that it is probable futur e taxable profit s will be av ailable against which the temporary difference can be utilised. Deferr ed tax liabilities ar e recognised f or taxable temporary differ ences arising on inv estments in subsidiaries and associates, ex cept wher e the Group is able to control the r ev ersal of the temporary difference and it is pr obable that the temporary difference will not r ev erse in the for eseeable future. Def err ed tax assets arising fr om deductible temporary differ ences associated with such inv estments and inter ests ar e only recognised to the ext ent that it is probable that there will be sufficient taxable pr ofits against which to utilise the benefits of the temporary differ ences and they are e xpected to r ev erse in the for eseeable future. The carrying amount of deferred tax asset s is re viewed at each r eporting date and reduced to the extent that it is no longer probable that sufficient taxable profit s will be av ailable to allo w all or par t of the asset to be reco v ered. Such reductions ar e re v ersed when the probability of future taxable pr ofits impr ov es. Deferr ed tax assets and liabilities ar e off set when there is a legally enfor ceable right to set off curr ent tax assets against current liabilities and when they r elate to income tax es le vied by the same taxation authority and the Group intends to settle its curr ent tax assets and liabilities on a net basis. Deferr ed tax is calculated at the tax rates that are e xpected to apply in the period when the liability is settled, or the asset is realised based on tax laws and rates that hav e been enacted or substantiv ely enacted at the balance sheet date. Def erred tax is char ged or credited in the consolidated income statement, e x cept when it relates t o items charged or cr edited dir ectly to equity , in which case the deferred tax is also dealt with in equity . F or eign currencies The individual financial statements of each Gr oup company ar e pr esented in the currency of the primary economic envir onment in which it operates (its functional curr ency). F or the purpose of the consolidated financial statements, the results and financial position of each Gr oup company ar e expr essed in eur o, which is the functional currency of the parent Compan y and the presentation currency f or the consolidated financial statements. continued 169 In preparing the financial statements of the individual companies, transactions in curr encies other than t he entity’ s functional currency (f or eign currencies) ar e recor ded at the rates of ex change pre vailing on the dates of the transactions. A t each reporting date, monetary assets and liabilities denominated in for eign currencies ar e retranslat ed at the rates pre vailing on the reporting date. Non-monetary items (including deferr ed re venue) carried at f air value that ar e denominated in f oreign curr encies are translated at the rates pr ev ailing at the date when the fair value was determin ed in accordance with IFRIC 22. Non-monetary items that are measured in terms of historical cost in a f or eign currency ar e not retran slated. Exchange diff er ences arising on the settlement of monetar y items, and on the retranslation of monetary items, ar e included in the consolidated income statement and consolidated statement of compr ehensive income f or the period. F or the purpose of presenting consolidated financial stat ements, the assets and liabilities of the Group’ s operations are translated at e x change rates pre vailing on the r epor ting date. Income and e xpense items are translat ed at the av erage ex change rates f or the period, unless ex change rates fluctuate significantly during that period, in which case the exchan ge rates at the date of transactions are used. Ex change diff erences arising, if an y , are classified as equity and transferr ed to the Group’ s for eign currency translation r eserve. Goodwill and fair v alue adjustments arising on the acquisition of a for eign entity ar e treated as asset s and liabilities of the for eign entity and translated at the closing rate. Exchange diff er ences arising are r ecognised in other comprehensiv e income. Retir ement benefits costs Contributions made in respect of emplo yees’ pen sion schemes are char ged through the consolidated income statement in the period they become pay able. The Group pa ys contributions to priv ately administered pension insurance plan s. The Group has no furt her pa yment obligations once the contributions hav e been paid. The contributions are r ecognised as employ ee benefit expense when the y are due. Pr epaid contributions are r ecognised as an asset to the extent that a cash refund or a reduction in the futur e payment s is av ailable. Property, plant and equipment Property, plant and equipment ar e stated at cost less accumulated depr eciation and any accumulat ed impairment losses. Depreciation is char ged so as to write off the cost of assets o ver their estimated useful liv es, using the straight-line method. The estimated useful lives, r esidual values and depr eciation method are r eview ed at each year end, with the effect of an y changes in estimate accounted f or on a prospectiv e basis. Right-of -use assets ar e depr eciated ov er the shor ter period of the lease term and the useful life of the underlying asset. Depreciation is pr ovided on the f ollowing basis: Leasehold property improv ements : Computer equipment: Fixtures and equipment : Leasehold impro vemen ts are impr o vements made t o buildings leased by the Group when it has the right to use these leasehold impro vement s ov er the term of the lease. The impro vement s will re vert to the lessor at t he e xpiration of the lease. 170 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued The cost of a leasehold impro vement is depr eciated o ver the shorter of: The remaining lease term, or 2. The estimated useful life of the impro v ement. An item of property, plant and equipment is der ecognised upon disposal or when no futur e economic benefits ar e expected to arise fr om the continued use of the asset. The gain or loss arising on the disposal of an asset is recognised in the consolidated income statement when the asset is derecognised. In accordance with IAS 36 ‘Impairment of Assets’ , t he carrying amounts of items of pr oper ty , plant and equipment are r eview ed at each reporting date to determine whether there is any indication of impairment. An impairment loss is recognised whene ver the carrying amount of an asset ex ceeds its r ecov erable amount. Impairment losses are r ecognised in the consolidated income statement. F ollo wing the recognition of an impairment loss, the depreciation charge applicable t o the asset is adjusted prospectiv ely in order to systematically allocat e the re vised carrying amount ov er the remaining useful life. Intangible assets (a) Goodwill Goodwill is initially measured as the ex cess of the cost of the business combination ov er the Group’ s interest in the net fair v alue of the identifiable assets, liabilities and contingent liabilities of the acquired subsidiary or associate. Identifiable intangible assets, meeting either the contractual-legal or separability criterion are r ecognised separately from goodwill. Goodwill on acquisition of subsidiaries is included within intangible assets. Goodwill associated with the acquisition of associates is included within the interest in associates under the equity method of accounting. F ollo wing initial recognition, goodwill is measur ed at cost less any accumulated impair ment losses. Goodwill is re viewed f or impairment annually or mor e frequently if ev ents or changes in cir cumstances indicated that the carr ying v alue may be impair ed. F or the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating unit s (“CGU”) that is expected to benefit fr om the synergies of the combination. If the recov erable amount of the cash-generating unit is less than its carrying amount, t he impairment loss is allocated first to reduce the carrying amount of any goodwill allocated t o the unit and t hen to the other assets of the unit on a pro-rata basis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is r ecognised directly in profit or loss in the consolidated income statement. An impairment loss r ecognised f or goodwill is not re versed in subsequent periods. On disposal of the relev ant cash-generating unit, the attributable amount of goodwill is included in the determination of the gain or loss on disposal. continued 171 (b) Other intangible assets The Group has f our classes of intangible asset: domain names, technology asset s, affiliate contracts and dev elopment costs. Other intangible are capitalised at their fair v alue and amor tised to t he c ons ol id ate d in co me st at em ent o n a st rai gh t- line basis ov er their estimated useful lives e x cept for the Hostelbook ers domain name which was amor tised on a Domain names T echnology assets 4 years Affiliate contracts 5 years Capitalised dev elopment costs 5 y ears The residual v alue associated with all intangible assets is deemed to be €nil. Expenditure on r esearch activities is r ecognised as an expense in the period in which it is incurr ed. Dev elopment expenditur e in relation t o internally-generated intangible assets is capitalised when all of the f ollowing hav e been demonstrated; the technical f easibility of completing the intangible asset so that it will be available f or use; the intention to complete the project to which the intangible asset relat es and to use it or sell it; the ability to use or sell the intangible asset, how the intangible asset will generate probable futur e economic benefits; the av ailability of adequate technical, financial and other resour ces to complete the dev elopment and to use the intangible asset; and the ability to measure r eliably the expenditure attributable to the intangible asset during its de v elopment. The amount initially capitalised for int ernally-generated intangible assets is the sum of the expenditure incurr ed fr om the date when the intangible asset first meets the recognition criteria listed abo ve. Wher e no internally-generated intangible asset can be recognised, de velopment e xpenditure is char ged to pr ofit or loss in the period in which it is incurred. An intangible asset is derecognised on disposal or when no futur e economic benefits ar e expected t o arise from the continued use or disposal of the asset. The gain or loss arising on t he disposal of an asset is r ecognised in the consolidated income statement when the asset is derecognised. Impairment of tangible and intangible assets other than goodwill A t the end of each reporting period, t he Direct ors re view the carrying amounts of t he Gr oup’ s tangible and intangible assets to determine whether there is an y indication that those assets hav e suffer ed an impairment loss. If an y such indication exists, the r ecov erable amount of the asset is estimated in order to det ermine the extent of the impairment loss (if any). Wher e it is not possible to estimate the reco v erable amount of an individual asset, the Directors estimate the recov erable amount of the cash-generating unit to which the asset belongs. Where a r easonable and consistent basis of allocation can be identified, corporate assets ar e also allocated to individual cash-generating units, or otherwise t he y are allocated t o the smallest Group of cash-generating units f or which a reasonable and consist ent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible asset s not yet a v ailable for use ar e tested f or impairment at least annually , and whenev er there is an indication that the asset may be impair ed. 172 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued Recov erable amount is the higher of fair v alue less costs of disposal and v alue in use. In assessing value in use, the estimated future cash flo ws ar e discounted to their present v alue using a pre-tax discount rate that r eflects current market assessment s of the time value of money and the risks specific to the asset. If the reco verable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of t he asset (or the cash-generating unit) is reduced to it s reco v erable amount. An impairment loss is recognised immediately in profit or loss, unless the rele vant asset is car ried at a re valued amount, in which case the impairment loss is treat ed as a re valuation decr ease. Where an impairment loss subsequently re v erses, the carr ying amount of the asset (or a cash-generating unit) is increased to the r evised estimate of it s reco verable amount. The incr eased carrying amount cannot ex ceed the carrying amount t hat w ould hav e been determined had no impairment loss been r ecognised f or the asset (or the cash-generating unit) in prior years. A r e versal of an impairment loss is r ecognised immediately in profit or loss, unless the relev ant asset is carried at a r ev alued amount, in which case the rev ersal of the impairment loss is treated as a r ev aluation incr ease. Financial instruments Financial assets and financial liabilities ar e recognised in the Group’ s consolidated statement of financial position when the Group becomes a par ty to the contractual pr ovisions of the instrument. Financial assets and liabilities ar e initially measured at f air value plus transaction costs, e x cept for those classified as fair v alue through profit or loss, which ar e initially measur ed at fair value. The f air value of fin ancial assets and liabilities denominated in a f oreign curr ency is determined in that for eign currency and translat ed at the spot rate at the end of the repor ting period. (a) Classification of financial assets T rade and ot her r eceivables T rade and ot her r eceivables ar e stated initially at their transaction price and subsequently at amor tised cost, less any e xpected credit loss pr o vision. The Group applies the simplified approach t o measuring expected cr edit losses which uses a lifetime e xpected cr edit loss allowance f or all trade r eceivables. (b) Expected credit loss of financial assets The Group alwa ys recognises lif etime e xpected credit losses (“ECLs”) f or trade r eceivables estimated using a pro vision matrix based on the Group’ s historical credit loss experience, adjusted f or f actors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the f orecast dir ection of conditions at the repor ting date, including time v alue of money wher e appr opriate. Lifetime ECLs r epresen ts the expected cr edit losses that will result from all possible def ault ev ents o ver the expect ed life of a financial instrument. ECLs ar e r epor ted in the consolidated income statement. (c) Classification of financial liabilities T rade and ot her pa yables T rade and ot her pa yables ar e initially recor ded at fair v alue, which is usually the original inv oiced amount, and subsequently carried at amor tised cost. Liabilities are der ecognised when the obligation under the liability is discharged, cancelled or e xpires. Loans and borro wings All loans and borro wings are initially r ecognised at fair v alue of the proceeds r eceived less an y dir ectly attributable transaction costs. T ransaction costs include fees and commission paid t o agents, advisers br okers and dealers. After initial recognition, int erest -bearing loans and borro wings ar e subsequently measured at amor tised cost using the effectiv e interest method being the amount at which the financial liability is measured at initial recognition minus any principal r epaymen ts, plus or minus the cumulative amortisation using t he eff ective int erest method of any differ ence betw een that initial amount and t he maturity amount. Borr owings ar e de-r ecognised when the Group’ s continued 173 obligations specified in the contracts expir e, are dischar ged or cancelled. Borro wings are classified as cur rent liabilities unless the Group has an unconditional right to def er settlement of the liability for at least 12 months after the financial position date. Other financial liabilities Financial liabilities are r ecognised initially at fair v alue and are subsequently stated at amortised cost using t he effectiv e inter est method. The effectiv e interest method is a method for calculating the amortised cost of a financial liability and of allocating interest e xpense o ver the rele vant period. The eff ectiv e inter est rate is the rate that exactly discounts estimated future cash pa yments thr ough the expected lif e of the financial liability to the amor tised cost of a financial liability . Financial liabilities are classified as curr ent liabilities unless the Group has an unconditional right to def er settlement of the liability for at least 12 months after the reporting date. The Directors determine the classification of the Group’ s financial liabilities at initial recognition. (d) Cash and cash equivalents Cash and cash equivalent s includes cash in hand, deposits held at call with banks and other shor t-term highly liquid inv estments with original maturities of three months or less. Restricted cash and cash equiv alent balances are those which meet the definition of cash and cash equivalents but ar e not av ailable f or use by the Group. Recognition of warrants W arrant reserve is recor ded at the fair value of warrant s issued. W arrant s hav e been recognised as equity instrument s as each warrant issued entitles the holder to a fixed number of ordinary shar es in ex change for a fix ed e xchange price of €0 . 01 per ordinary equity share. Dividends Final dividends are r ecorded in the Gr oup’ s financial statements in the period in which they are appr o ved b y the Company’ s shareholders. Interim dividends ar e recor ded in the period in which they are paid. Share based pa yments Equity settled share based payment s to emplo yees ar e measured at the fair v alue of the equity instruments at the grant date. The fair v alue ex cludes the effect of non-mark et -based vesting conditions. Details r egardin g the determination of the fair value of equity-settled share-based transactions are set out in note 21 . The fair v alue determined at the grant date of the equity-settled share-based payments is e xpensed on a straight - line basis o ver the v esting period, based on the Group’ s estimate of equity instruments that will ev entually v est. A t each reporting date, the Group re vises its estimate of the number of equity instruments e xpected to v est as a result of the eff ect of non-market -based v esting conditions. The impact of the revision of the original estimates, if any , is recognised in the consolidated income statement such that the cumulative expense r eflects the re vised estimate, with a corresponding adjustment to the share based pa yment r eserve. F or cash settled share based pa yments, a liability is r ecognised for the services acquired, measur ed initially at the fair v alue of the liability. A t each repor ting date until the liability is settled, and at the date of sett lement, the fair v alue of the liability is re-measured, with an y changes in fair v alue recognised in the consolidated income statement f or the year . Gov ernment Grants Gov ernment grants ar e not recognised until ther e is reasonable assurance that the Group will comply with the conditions attaching to them and that t he grants will be r eceiv ed. Gov ernment grants that are r eceiv able as compensation for e xpenses or losses already incurr ed or f or the purpose of giving immediate financial suppor t to the Group with no future r elated costs ar e r ecognised in profit or loss in the period in which they become r eceivable. Amounts ar e recognised as income o ver the periods necessary to match them with t he r elated costs and ar e deducted in reporting the related expense. 174 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued 2. Critical accounting judgements and k e y sour ces of estimation uncer tainty In the application of the Group’ s accounting policies, the Directors are r equir ed to make judgement s (other than those inv olving estimations) that have a significant impact on the amounts r ecognised and to mak e estimates and assumptions about the carr ying amount s of assets and liabilities that are not r eadily apparent fr om other sources. The estimates and associated assumptions ar e based on historical experience and other fact ors considered r elev ant. Actual result s may diff er from these estimates. The estimates and underlying assumptions are r e viewed on an ongoing basis. Re visions to accounting estimates ar e recognised in the year in which the estimate is revised if the r evision aff ects only that y ear , or in t he y ear of the re vision and future y ears if the re vision affect s both current and futur e years. (a) Critical judgements in applying the Group’ s accounting policies: The follo wing ar e the critical judgements, apar t from those in volving estimations (which ar e present ed separately below), that the directors ha ve made in the process of applying the Group’ s accounting policies and t hat ha ve the most significant effect on the amounts r ecognised in financial statements. Capitalisation of dev elopment costs Dev elopment costs ar e capitalised when the criteria set out in paragraph 57 of IAS 38 Intan gible assets hav e been demonstrated as disclosed in our accounting policy disclosed on page 171 . Determining t he amount to be capitalised requir es the Directors to mak e judgements about each asset t o ensure that they meet the requir ements. The most critical judgement is regar ding the expected futur e cash generation of the asset. Accounting f or ex ceptional items Exceptional it ems by their nature and siz e can mak e interpretation of the underlying tr ends in the business more difficult. Judgement is used in assessing the par ticular items which b y vir tue of their scale and nature should be disclosed as ex ceptional items. Cir cumstances that the Group believ e would giv e rise to ex ceptional items f or separate disclosure ar e outlined in the exceptional accounting policy on page 167 . (b) K ey sour ces of estimation uncer tainty: The ke y assumptions concerning the future, and other k ey sour ces of estimation uncer tainty at the reporting period that may ha ve a significant risk of causing a material adjustment t o the carr ying amounts of asset s and liabilities within the next financial year , are discussed belo w . Going concern The Directors ha v e a reasonable e xpectation that the Group has adequate resour ces to continue operating as a going concern for the f oreseeable futur e. Management estimation is requir ed in f orecasting cashflo w pr ojections actions are outlined in the going concern statement within note 1 . will hav e on trading v olumes. As outlined wit hin note 1 w e had three scenarios – a base case, a str ess case and a worst case which r eflected an Omicr on run rate at the end of December 2021 . W e have utilised the worst -case Omicr on trading scenario and we ha v e fur ther stressed the scenario. The Group has consider ed the impact to cash of operating for a 12-month period. Under this scenario the Group continues to ha ve sufficient cash r esources t o operate as a going concern. Deferr ed tax asset r ecognition and reco v erability of deferr ed tax assets Deferr ed tax assets ar e recognised to the e xtent that it is probable that taxable profits will be a vailable in futur e periods. The extent to which it is pr obable that taxable profits will be a v ailable in future periods is an estimate assessed based on the approv ed fiv e-year budget and long-term f or ecasts upon initial recognition and at each r eporting date. At 31 December 175 outlook there are sufficient taxable pr ofits to demonstrate the asset could be substantially utilised ov er a fiv e-year period includes an assumption regar ding return to pr ofit as w e assume a reco very of bookings and re venue with full trading r ecov ery included in 2023, and a modest gr o wth rate applied to profits fr om 2023 . A decline in taxable profit s from amounts included in our five-y ear budgeted pr ojections would impact the amount of the deferr ed tax asset which would be r ecov ered o v er Carrying value of goodwill and intangible assets The Directors assess annually whether goodwill has suff ered an y impairment, in accor dance with the relevant accounting policy and intangible assets ar e assessed for possible impairment wher e indicators of impairment e xist. The reco verable amount s of cash-generating units (“CGUs”) ar e determined based on the higher of fair v alue less costs of disposal or v alue in use calculations. Management estimation is requir ed in for ecasting futur e cash flows of the expected long-term gr owth rate of the applicable business and terminal values. The carrying amount of goodwill necessary in 2021 for goodwill or domain names. Curr ent year impairment char ge of €367k relates t o an impairment of a specific project f ollo wing a management decision to cease ongoing inv estment. In 2020 the Group r ecognised an impairment charge of €15 . 0m. F urt her details on the assumptions used and sensitivity analysis are set out in not e 10 . 3. Rev enue & segmental analysis The Group is managed as a single business unit which pr ovides softwar e and data pr ocessing services t hat f acilitate hostel, hotel and other accommodation worldwide, including ancillary on-line advertising rev enue. The Directors det ermine and present operating segment s based on the information that is pro vided internally to the Chief Executiv e Officer , who is the Company ’ s Chief Operating Decision Maker (“CODM”). When making r esource allocation decisions, the CODM evaluat es booking numbers and av erage booking value. The objectiv e in making resour ce allocation decisions is to maximise consolidated financial r esults. The CODM assesses the per formance of the business based on the consolidated adjusted loss after tax of the Group f or the year . This measure ex cludes the effects of certain income and expense items, which are unusual b y vir tue of their size and incidence, in the context of the Gr oup’ s ongoing core operations, such as the impairment of intangible assets and one-off items of e xpenditure. All re venue is deriv ed wholly fr om external customers and is generat ed from a lar ge number of customers, none of whom is individually significant. The Group’ s major rev enue-generating asset class comprises its softwar e and data processing services and is directly attributable to its r epor table segment operations. In addition, as the Group is managed as a single business unit, all other assets and liabilities hav e been allocated to the Group’ s single reportable segment. There ha ve been no changes t o the basis of segmentation or the measurement basis for the segment profit or loss. Rev enue split b y continent is presented as f ollo ws: 2021 2020 €’ 000 €’000 Europe 10 ,713 7 , 354 Americas 5 ,213 3,779 Asia, Africa and Oceania 975 4,231 T otal r ev enue 176 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued Disaggregation of r ev enue is pr esented as follo ws: 2021 2020 €’ 000 €’000 T echnology and data processing f ees 16 , 849 14 ,251 Advertising rev enue and ancillary services 52 1, 113 T otal r ev enue and data processing f ees that it charged to accommodation pr oviders. Rev enue is r ecognised at the time the reservation is made in respect of non-r efundable commission on the basis that the Group has met its per f ormance obligations at the time the booking is made. In respect of the free cancellation product, which off ers the trav eller the oppor tunity to mak e a booking on a free cancellation basis and to r eceiv e a refund of their deposit in certain circumstances, such related r ev enue is not recognised until the last cancellation date has passed as one par ty can withdraw from the contract until such a date has passed. Def err ed re venue is expected to be r ecognised within twelv e months of initial recognition. Advertising rev enue and r ev enue generated from other services are r ecognised ov er the period when the ser vice is per f ormed. The Group’ s non-current assets ar e located in Ireland, Australia, the United Kingdom, Por tugal, and China. Non- current asset s are disaggr egated as f ollows: 2021 2020 Notes €’ 000 €’000 T otal non-current asset s 89 ,221 100, 677 Brok en out as: Ireland 87 ,799 96 ,951 Australia 1 , 186 2,349 United K ingdom 32 922 Por tugal 165 430 China 39 25 3. Rev enue & segmental analysis continued 177 4. Operating expenses ex cluding impairment Loss for the y ear has been arrived at aft er charging/(cr editing) the follo wing operating costs: 2021 2020 Notes €’ 000 €’000 Marketing e xpenses 13,792 9,260 Staff costs 6 15,546 16,759 Credit car d processing f ees 573 571 Loss on disposal plant, property and equipment 492 12 Profit on disposal plant, pr oper ty and equipment – Net profit on disposal of leases – Mov ement in expect ed credit loss 15 129 18 Exceptional it ems 5 588 2,989 FX loss/(gain) 419 Other administrative costs 6 ,229 6,729 T otal administrativ e expenses Depreciation of tangible fix ed assets 11 1 ,519 2,458 Amor tisation of intangible fix ed assets 10 10, 892 11 ,67 4 T otal operating e xpenses excluding impairment under the Coronavir us Job Retention Scheme in the UK and subsidy receiv ed under the Employment W age Subsidy Scheme in Ireland. costs include r ent and rates, legal and prof essional, training and r ecruitment, information t echnology website and security , ecommerce and data analytics. Auditor’ s remuneration 2021 2020 €’ 000 €’000 F ees pa yable f or the statutory audit of t he Compan y and consolidated financial statements 42 42 F ees pa yable f or other services: – statutory audit of subsidiar y undertakings 96 135 – tax advisory ser vices – – – audit related assurance services 8 194 – corporate finance services – – – other non–audit ser vices 13 57 T otal 178 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued 2021 2020 €’ 000 €’000 Merger and acquisition cost s 1 , 332 Restructuring costs 715 1, 657 T otal due to a re vision of estimate. 2020 mer ger and acquisition costs r elates to prof essional f ees incurred. a simpler and more efficient gr owth orientated or ganisational structure. The new structur e organises the Compan y ’ s marketing, pr oduct, de velopment and analytics emplo yees int o autonomous gro wth teams. The structure was initiated in the prior year wher e costs wer e incurr ed relating to an initial internal r ealignment of our technology and pr oduct depar tments. In 2020 w e also incurred pr of essional fees incur red on r eview of funding options f or the Group. 6 . Staff costs The av erage monthly number of people employ ed (including Ex ecutive Dir ectors) was as f ollows: 2021 2020 A verage number of persons emplo y ed: Administration and sales 110 137 Dev elopment and inf ormation technology 116 152 T otal 226 The aggregate r emuneration costs of these emplo yees is analysed as f ollo ws: 2021 2020 Notes €’ 000 €’000 Staff costs comprise: W ages and salaries 12, 823 15, 550 Social security costs 1 , 367 1 ,935 Pensions costs 460 447 Other benefits 442 73 4 Share option char ge 21 2, 162 428 Capitalised dev elopment labour T otal In addition to staff costs disclosed abo ve t ermination benefits disclosed within note 5 ex ceptional items r estructuring 179 7 . Finance costs 2021 2020 Notes €’ 000 €’000 Interest on lease liabilities 14 102 182 Finance costs – HPS facility 19 3 ,344 – Finance costs – pr ompt pay f acility 55 64 T otal 246 2021 2020 Notes €’ 000 €’000 Corporation tax: Current y ear charge/( credit) 372 Adjustments in r espect of prior years T otal Origination and re versal of t emporary differences 12 T otal tax cr edit for the year jurisdictions is calculated at the rates pre vailing in the r espective jurisdictions. The corporation tax char ge relates primarily to our UK and Portuguese operations where tax losses from our Irish operations cannot be utilised. The charge f or the year can be r econciled to the consolidated income statement as f ollows: 2021 2020 €’ 000 €’000 Loss befor e tax on continuing operations Effect s of: T ax effect of e xpenses that are not deductible in determining taxable pr ofit 1 ,556 3,8 31 T ax effect of losses not utilised 3 ,1 7 3 2,789 T ax effect of losses carried back – T ax effect of income tax ed at diff erent rat es 50 Depreciation less than capital allowances Effect of diff er ent tax rates of subsidiaries operating in other jurisdictions 295 91 Recognition of def erred tax asset Adjustments in r espect of prior years T otal 180 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued arising. A deferr ed tax asset has not been r ecognised in respect of such losses as it is not consider ed probable that there will be future trading pr ofits a vailable against which the def erred tax asset can be unw ound, be yond those used to assess the reco verability of the existing def err ed tax asset at 31 December 2021 . All tax losses a vailable ma y be carried forwar d indefinitely . In addition, in the prior year the Gr oup had an unrecognised def erred tax asset of €1 ,871k as a result of an impairment of intellectual pr operty in 2020. The balance is still unrecognised in the curr ent year . loss relief under section 396D T CA 199 7 which pro vides f or a temporary acceleration of corporation tax loss relief preceding account period. The Gr oup av ailed of this measure with regar d to the period ended 31 December 2020 . An estimate of the corporation tax loss for the period ended 31 December 2020 was calculated and an amount of av ailable trading losses was used to partially offset trading profit s in the period ended 31 December 2019. As a result of this relief , t he Group was entitled to a r efund from the Irish tax authorities for corporation tax paid in 2019 . Basic loss per share is computed b y dividing the net loss for the y ear av ailable to or dinary shareholders by the weighted a v erage number of ordinary shares out standing during the year . 2021 2020 W eighted average number of shar es in issue (‘000s) 116 , 321 106 ,947 Loss for the y ear (€’ 000s) Basic loss per share ( euro cent) Diluted loss per share is comput ed by adjusting the weight ed av erage number of ordinary shares in issue t o assume share-based pa yment arrangements and warrant s are anti-dilutiv e due to the loss in the financial period meaning there is no diff erence betw een basic and diluted earnings per shar e. 2021 2020 W eighted average number of or dinary shares in issue (‘000s) 116 , 321 106 ,947 Effect of dilutiv e potential or dinary shares: Share options (‘000s) – – W eighted average number of or dinary shares f or the purpose of diluted earnings per share (‘000s) 116 , 321 106 ,947 Diluted loss per shar e (eur o cent) continued 181 The table below sho ws the mov ements in intangible assets f or the year: Goodwill Domain Names T echnology Affiliates Contracts Capitalised Dev elopment Costs T otal €’ 000 €’ 000 €’ 000 €’000 €’ 000 €’000 Cost Balance at 1 January 2020 47 ,27 4 214 ,7 08 14 , 068 5,500 14 , 372 295,922 Additions – – 153 – 3, 649 3,80 2 Disposals for the y ear – – – – 47 ,27 4 214 ,7 08 14, 100 5, 500 18, 021 299 , 603 Additions – – – – 4,3 9 7 4,3 97 Disposals for the y ear – – – – 47 ,27 4 Accumulat ed amor tisation and impairment Balance at 1 January 2020 Charge f or y ear – – Disposals for the y ear – – 121 – – 121 Impairment recognised – – – – Charge f or y ear – – Disposals for the y ear – – 52 – – 52 Impairment recognised – – – – Carrying amount A t 31 December 2020 17 ,848 64 ,220 178 – 4 , 006 86,252 – Capitalised dev elopment cost additions during the year comprised of internally generat ed additions of €1 ,7 08k been capitalised in accordance with IAS 38 Intangible Assets and ar e theref ore not tr eated, f or dividend purposes, as a realised loss. Hostelw orld continue to utilise affilia te contra cts to gen erate revenue and continu e to pay affiliate par tner commissions. Impairments Current y ear impairment charge of €367k r elates to an impairment of a specific pr oject f ollowing a management decision to cease ongoing inv estment. inv estment in Hostelw orld.com Limited by the Gr oup in 2009 . Goodwill, which has an indefinite useful lif e, is subject to annual impairment testing, or mor e frequent testing if ther e are indicators of impairment. F ollowing impairment testing based on the assumptions below , no impairment was recognised for goodwill in the curr ent or prior year . 182 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued impairment testing based on the assumptions below , no impairment was recognised for the Gr oup’ s intellectual property in 2021 . In 2020, as a r esult of a strategic r eview of the business b y the Directors, it was determined to cease actively mark eting our Hostelbook ers brand name. An impairment loss of €494k was r ecognised based on the carr ying v alue at 31 December 2020 . The reco ver able amount was €nil based on value in use calculations. Also, in 2 020 f ollo wi ng a r e view of CO VI D trading performance and booking performance, the Directors r eassessed the estimat ed cash flo ws asso ciated with the Hostelworld.com intellectual pr operty assets. This led to the recognition of an impairment charge of €14 ,502k in relation to the value of the Hostelw orld.com domain name. Cash generating units (“CGUs”) to which goodwill and intellectual pr operty have been allocated r epresent the low est lev el at which the assets ar e monitored f or internal r epor ting purposes. Goodwill has not been allocated across CGUs as it is not possible to identify separat e CGUs. The reco verable amount of goodwill and int ellectual property allocated to a CGU is determined based on a value in use computation. The k e y assumptions for calculating value in use of the CGUs are discount rat es, gro wth rates and cash flows. The y are described as f ollo ws: Discount rates 2021 2020 Pre-tax discount rate; Goodwill Pre-tax discount rate: Int ellectual Property The pre-tax discount rates ar e based on the Group’ s weighted a verage cost of capital, calculated using the Capital Asset Pricing Model adjusted f or the Group’ s specific beta coefficient together with a countr y risk pr emium to tak e account of the countries from where the CGU deriv es its cash flo ws. Cash flows The cash flow pr ojections are based on a fiv e-y ear budget formally appr o ved b y the Board of Dir ectors. In preparing the five -year budget, management ha ve based pr ojections on tra vel news at the time of preparing including gov ernment announcements on the r eopening and closure of bor ders and ke y assumptions on the return to gro wth of the market, consumer beha viours, competitor activity and dev eloping tr ends in the industr y in which the CGU operates. Management hav e also considered the Gr oup’ s history of earnings and core strategic initiativ es including impro ving the competitiveness of our core O T A business and platform modernisation. Management ha ve also consider ed capital expenditur e requir ements to maintain the CGU’ s per formance and pr ofitability . W orking capital requirements are f orecast t o mov e in line with activity . Gro wth rates gro wth rate does not ex ceed the long-term av erage gro wth rate f or the industr y in which each CGU operates. F or Sensitivity analysis The ke y assumptions underlying the impairment re views are set out abo v e. Sensitivity analysis has been conducted scenario no impairment was identified. continued 183 Sensitivity analysis has been completed on k ey assumptions in isolation and in combination, and the headroom included is significant. The ke y assumptions ar e discount factor , long term gro wth rates and gro wth rates f or each of the Board appro v ed five-y ear numbers. Sensitivities ha ve been applied on all of these assumptions. From our sensitivity analysis w e identified that Goodwill would need to ha v e nil terminal value gr owth and an incr ease property management considers that no reasonably possible changes in assumptions would r educe a CGU’ s headroom to nil. The table below sho ws the mov ements in pr oper ty , plant and equipment f or the year: Right-of -Use Assets Property) Leasehold Property Impro vements Fixtures & Equipment Computer Equipment T otal €’ 000 €’000 €’000 €’000 €’000 Cost Balance at 1 January 2020 4 ,333 1,8 7 7 823 3, 659 10, 692 Additions 1 , 681 23 – 41 1 , 74 5 Remeasurement 129 – – – 129 Disposals 5,3 7 4 1 ,566 654 3,486 11 ,080 Additions 116 – – 75 191 Disposals Accumulat ed depreciation Balance at 1 January 2020 Charge f or y ear Disposals 492 334 158 213 1 ,1 9 7 Charge f or y ear Disposals 2, 665 612 413 3 ,296 6 ,986 F oreign e x change 4 – – - 4 Carrying amount A t 31 December 2020 3 ,287 673 150 370 4,480 76 33 Right-of -use asset s relate to the Gr oup’ s lease commitments f or office space in Ireland, UK, Portugal and China. In August 2021 the Group exit ed their long term lease commitments for it s Dublin and London offices. F ur ther detail is included in note 14 . F or the remaining leases the av erage lease term of leases enter ed at 31 December 2021 is less than 1 year . The maturity analysis of lease liabilities is presented in not e 14 . 184 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued The follo wing ar e the major deferred taxation asset s recognised b y the Group and mo vement s thereon during the current and prior reporting year . Deferr ed tax assets primarily r elating to temporary differ ences betw een the carrying value of intangible and tangible assets and their tax base. The Group does not ha ve an y def erred tax 2021 2020 €’ 000 €’000 Opening balance 7 ,596 6 ,583 Credited t o the consolidated income statement 756 1 ,013 Closing balance asset created in the curr ent year f or capital allo wances not utilised and av ailable for futur e off set. Defer red tax is determined using tax rates and laws enacted or substantiv ely enacted b y the repor ting date. The t otal tax charge in future periods will be aff ected b y any changes t o the applicable tax rates in for ce in jurisdictions in which the Group operates and other r elev ant changes in tax legislation. Deferr ed tax assets ar e recognised t o the extent that it is probable that future taxable pr ofits will be a vailable against which any unused tax losses and unused tax cr edits can be utilised. F ur t her detail is included within note 2 to the financial statements. 2021 2020 €’ 000 €’000 Opening balance 2, 349 2,723 Share of r esults of associate Capital reduction – Closing balance The Group holds an in ve stment in Goki Pty Limited, an Australian resident compan y . Goki Pty Limited’ s principal activity is software de velopment and principal place of business is Australia. The in v estment in an associate is accounted f or using the equity method. When the initial inv estment was made the Group had significant influence but not control o v er the entity, due to the the total number of Directors to the Boar d. On 7 July 2021 the directors of Goki PTY Limited appr ov ed a r eduction in the investmen t held by Hostelw orld.com Hostelworld.com Limit ed retains one Boar d seat, out of four , and continues to ex er t significant influence o ver the company . Hostelworld.com Limited will continue to account f or Goki PTY Limited as an associate. The original purchase consideration f or the inv estment in Goki PTY Limited was USD 3 , 000k. F ollo wing the completion of the reduction in in vestment total pur chase consideration reduced t o USD 1 , 890k. Summarised financial information in r espect of Goki Pty Limited is set out belo w . This repr esents the amounts in Goki Pty Limited’ s financial statements prepared in accor dance with IFRSs. 185 2021 2020 €’ 000 €’000 Non-current asset s 7 9 Current asset s 354 1 ,829 Current liabilities Equity attributable to owners of the compan y 291 1 , 638 2021 2020 €’ 000 €’000 Rev enue 430 28 Loss after tax Other comprehensive income attr ibutable to the owners of the company – – T otal comprehensiv e loss Group shar e of result s of associate * Reconciliation of the abov e summarised financial inf ormation to the carr ying amount of the Group’ s interest in Goki Pty Limited recognised in the consolidated financial statement s: 2021 2020 €’ 000 €’000 Net assets of Goki Pty Limited 291 1 , 638 Proportion of t he Gr oup’ s ownership inter est in the associate Group shar e of net assets 92 803 Goodwill and transaction costs 1 ,930 2,868 Other adjustments Carrying amount of t he gr oup’ s inter est in associate Commitment to extend loan t o associate Under the terms of the original shareholder purchase agr eement, there was a USD 500k loan f acility option av ailable to Goki Pty Limited b y the Group until July 2022. The loan facility was not e xtended and on 7 July 2021 was not included as par t of the re vised shareholder’ s agreement. 186 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued Lease liabilities relate t o the Group’ s lease commitments f or office space in Ireland, Portugal, UK and China. The mov ement in the Group’ s right-of -use assets during the period is set out in note 11 . The mo vement in the Gr oup’ s lease liabilities during the period is as follo ws: 2021 2020 €’ 000 €’000 Opening lease liability 4 ,295 4 ,291 Additions 82 1 ,681 Modification 33 – Disposals Lease term remeasur ement – 129 Payment s Lease interest 102 182 F oreign e x change differ ences on lease pa yments 78 Closing lease liability The maturity analysis of these lease liabilities is as follo ws: 2021 2020 €’ 000 €’000 Maturity analysis Within one year 85 1 ,940 Between one and fiv e y ears – 2,660 Over 5 y ears – – Less unearned interest 1 T otal These liabilities are classified in the consolidated statement of financial position as: 2021 2020 €’ 000 €’000 Non-current lease liabilities – 2,492 Current lease liabilities 86 1 ,803 T otal The Group has used the f ollowing practical e xpedients permitted b y the standard on transition and at each r epor ting date – the use of a single discount rate to a por tf olio of leases with reasonably similar characteristics, the accounting for operating leases with a r emaining lease term of less than 12 months as at 1 Januar y 2020 as short-term leases and the use of hindsight in determining the lease term where the contract contains options to extend or t erminate the lease. The Group has elected not to r eassess whether a contract is or contains a lease at the date of initial application. Instead, f or contracts enter ed into bef ore the transition date the Group r elied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease. Lease payment s included in the consolidated statement of cashflows r elate to lease pa yments, lease inter est and for eign ex change diff erences on lease pa yments included in the table abo ve. 187 There is a clear pa yment schedule associated with our lease liabilities and based on our cash flow f or ecasts the Group does not face an y significant liquidity risk with regar ds to its lease liabilities. Amounts r ecognised in consolidated income statement: 2021 2020 €’ 000 €’000 Net profit on disposal of leases – Depreciation e xpense on right-of -use assets 958 1 ,518 Interest e xpense on lease liabilities 102 182 Expense relating to short term leases 429 52 T otal 2021 2020 €’ 000 €’000 Amounts falling due within one y ear T rade receivables 220 188 Prepa yments and other receiv ables 978 1 , 191 V alue added tax 804 302 T otal 2, 002 Due to their shor t term natur e, the carr ying v alue of trade and other receivables is deemed t o be their fair value. The Group alwa ys recognises lif etime e xpected credit losses (“ECLs”) f or trade r eceivables estimated using a pr o vision matrix based on the Group’ s historical credit loss experience, adjusted f or fact ors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the f orecast dir ection of conditions at the repor ting date, including time v alue of money wher e appr opriate. The historical loss rates ar e adjusted to reflect curr ent and forwar d economic factors if ther e is evidence to suggest these fact ors will affect the ability of Mov ement in the expected cr edit loss for tr ade receiv ables is as follo ws: 2021 2020 €’ 000 €’000 A t the beginning of the year 194 212 Decrease in loss allo wance recognised during the y ear A t the end of the year The net mov ement in the expected cr edit loss has been included in note 4 . 2021 2020 €’ 000 €’000 Cash and cash equivalent s 25 ,267 18, 189 T otal Included within cash and cash equivalents number is an amount not a vailable f or use b y the Group €750k shor t -term bank deposits only . 188 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued No of shares of €0. 01 each Ordinary shares Share premium T otal €’000 €’ 000 €’000 A t 1 January 2020 95 ,571 956 – 956 Share issue – 29 June 2020 19 , 114 191 14, 344 14,535 Bonus issue – 17 September 2020 1 , 636 16 – The Group has one class of or dinary shares which carries no right to fix ed income. The share capital of the Gr oup is repr esented b y the share capital of the parent Compan y , Hostelworld Gr oup plc. All the Company’ s shares are allotted, called up, fully paid and quoted on the London Stock Ex change and Eurone xt Dublin. On 29 June 2020 , the Company issued 19 , 114, 155 Ordinary Shares at €0 .7 9695 per share b y wa y of a Placing, raising gross pr oceeds of €15 ,233k. €698k of directly attributable shar e issue costs hav e been r ecognised as a deduction from shar e premium. On 17 September 2020 , the Company issued 1 ,636 ,252 bonus shar es to shareholders in lieu of a cash dividend at value €0 . 01 per shar e. On 19 F ebruary 2021 , the group agree d to issue warrants of 3 , 315 , 153 ordinary shares of €0 . 01 Each in the capital Reconciliation and mo vement in r eserves during the year as f ollows: F oreign currency translation reserve (a) Share based payment reserve (b) W arrant reserve (c) T otal ot her reserves Notes €’ 000 €’000 €’000 €’000 Balance at 1 January 2020 15 788 – 803 Exchange diff er ences on translation of for eign operations – – Credit to equity f or equity settled share based pa yments – 422 – 422 Balance at 31 December 2020 8 1 ,210 – 1 ,218 Exchange diff er ences on translation of for eign operations 32 – – 32 Issue of warrants 19 – – 3,0 73 3 ,073 Credit to equity f or equity settled share based pa yments – 2, 152 – 2, 152 40 3, 362 3,07 3 189 (a) F or eign currency translation r eserve The for eign currency r eserve r eflects the for eign ex change gains and losses arising fr om the translation of the Group’ s net investmen t in for eign operations. (b) Shar e-based payment r eserve The share-based pa yment reserve reflects the equity settled share-based pa yment plans in operation by the (c) W arrant reserve The warrant reserve r elates to the warrants e xer cisable with HPS Inv estment Partners LLC (or subsidiaries or 2021 2020 €’ 000 €’000 Non-current liabilities Payr oll taxes 8 ,049 – T otal – The Group has a vailed of the Irish Re venue tax war ehousing scheme and def erred pa yment on all Irish employ er included within current liabilities). The Group continues t o liaise with Irish Rev enue on the matter and comply with all appropriate guidelines applicable. A t 31 December 2021 amounts warehoused ar e recognised as non-curr ent reflecting the intention and unconditional right not to r epay balance within 12 months. 2021 2020 €’ 000 €’000 Current liabilities T rade payables 5,425 2,258 Accruals and other payables 6 , 113 9,0 0 3 Deferr ed re v enue 1 , 036 207 – 1 ,266 Payr oll taxes 221 4 , 302 T otal who hav e cancelled their free cancellation booking but ha ve not y et been r efunded. consider that the carr ying amount of trade and other pay ables is deemed to be to their fair v alue. 190 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued 2021 2020 €’ 000 €’000 Opening Balance 1 , 164 – Received on Draw do wn 28 ,800 3,454 Repayment s Loan issuance costs – issue of warrants – T ransaction costs relating to borr owings – Finance costs 3 ,344 – T otal A ‘Prompt Pa y ’ which was a short-term inv oice financing facility with Allied Irish Banks PL C. An amount of €3 ,454k was drawn down in 2020 . T erms attached to t he f acility was that Hostelworld.com Limited must ensur e it maintains a cash balance of no less than €8. 67m f or the period ending 30th September 2020, €5 .7 5m f or the period ending 31 December 2020 and €1 .42m f or the period ending 31 March 2021 . On 26 Januar y 2021 the amount owing on the facility was repaid in full and the facility is no longer a v ailable to the Group. 2. A three-y ear re volving cr edit facility f or €7m with the Gov ernor and Company of the Bank of Ir eland to assist with the investing and de v elopment needs of the business. No amounts wer e ev er drawn do wn on this facility . On 10 F ebrua ry 2021 the Group signed a deed of r elease exiting the undrawn f acility in place. Cov enants attached and the re v olving cr edit facility was r equired to r eturn to cr edit 20 days per annum. Host elworld.com Limited w ere also requir ed to maintain a minimum tangible net w or th of not less than €90m. 3. On 19 F ebruary 2021 the Group signed a €30m five-y ear term loan f acility with cer tain inv estment funds and accounts of HPS Inv estment Partners LLC (or subsidiaries or affiliates ther eof). The facility is single draw down and bears anniversary of draw down all inter est rolls up an d capitalises. Between the first and third anniv ersaries of drawdo wn, int er est d urin g that period (and all interest accruing aft er the third anniversary of drawdo wn) being cash pay . ensure that total net debt is no more than 3 . 0 x adjusted EBITD A from 31 December 2023 t o 30 September 2024 , has to e nsur e that at close of business on the last business day of each month until it is testing the adjusted net leverage rati os there is free cash in members of the Gr oup which hav e guaranteed r epayment of the facility of at least €6 . 0 million). The lenders hav e the right to requir e repa yment of the facility if Hostelw orld is subject to a change in contr ol and Hostelworld has the option to r epay the facility e arly . If the facility is repaid f or an y reason within the first four y ears 191 Hostelworld and it s principal trading subsidiaries will guarantee r epayment of the facility and amount s pay able under it and pro vide the lenders with a customar y security package o ver their assets. Cash dividends t o shareholders ar e permitted pro vided total net debt is belo w 2. 0 x adjusted EBITD A, no e vents of def ault are ongoing and the above stated minimum liquidity cov enant will be complied with after taking into account the proposed dividends. The Gr oup cashflow . Any acquisition b y the Group of the remaining shar eholdings in Goki PTY Limited and Counter App Limited is requir ed to be funded fr om cash on the balance sheet. An amount of €28 .8m was r eceiv ed on 23 F ebruary 2021 , net of original issue discount. Issue of warrants: In connection with the facility, Host elworld has agr eed to issue warrants o v er 3, 315, 153 ordinary shares of €0 . 01 each may be e xer cised at an y time during the term of the loan and for a twelv e-month period follo wing its scheduled termination at an ex er cise price of €0 . 01 per ordinary share. Shar es issued will be the same class and carry t he same rights as existing shar es. An amount of €3 , 07 3k was r ecorded f or the initial recognition of the warrants calculated on the basis of the market price of the shares on the date of the agreement 19 F ebruary 2021 of €3, 106,538 minus Borro wings are classified in the consolidated statement of financial position as: 2021 2020 €’ 000 €’000 Non-current borr owings 28 ,209 – Current borr owings – 1 , 164 T otal Change in liabilities arising from financing activities: Lease liabilities Borrowings Deferr ed consideration T otal net debt €’ 000 €’000 €’000 €’000 A t 1 January 2020 – Financing cashflows 1 ,462 503 801 Other non-cash mov ements – Financing cashflows 1 , 160 345 Other non-cash mov ements 3 ,049 921 4 ,483 – Other non-cash mov ements f or lease liabilities in 2021 and 2020 relate t o additions, disposals, a modification and a lease term remeasur ement as included in note 14 . Ot her non-cash mo vements in 2021 f or borr owings r elate to mov ements f or def erred consideration r elate to capital r eduction as detailed in note 13 and f oreign e xchange 20 . Contingencies In the normal course of business the Group may be subject to indir ect tax es on its services in cer tain f oreign jurisdictions. The Directors perform ongoing r eviews of potential indir ect tax es in these jurisdictions. Although t he outcome of these re views and any potential liability is uncertain, no pro vision has been made in relation to these taxes as the Dir ectors believ e that it is not probable that a material liability will arise. 192 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued transactions in the consolidated income statement during the year . scheme. All schemes are accounted f or as equity settled in the financial statements. Long T erm Incentive Plan (“L TIP”) scheme The Group operate a Long T erm Incentive Plan f or ex ecutiv e Direct ors and selected management. In 2021 , there was one in vitation made to e xecutiv e direct ors and selected mana gemen t to participat e in the Group’ s long-term incentive plan (“L TIP”). 2,336 , 885 nil cost options wer e granted, and th ese opt ions wi ll vest on 26 April 2024 subject to meeting performance conditions based on the Company's a djust ed EBITD A o ve r a three-year period, Counter App re venue generat ed based on a target in 2023 and customer acquisi tion valu e target s to be met in 2023 . F or the 2020 scheme vesting conditions ar e dependent on the Adjusted Earnings per Share (“EPS”) performance of the shares/options subject to an awar d will vest accor ding to the Group’ s adjusted EPS growth compar ed with to the Group’ s TSR per formance during the per f ormance period measured against the TSR performance indicators appro ved b y the Remuneration Committee. invitation will v est accor ding to the Group’ s TSR per formance during the per f ormance period measured against the TSR per f ormance indicators appro v ed by the Remuneration Committee. F or all schemes an awar d will lapse if a par ticipant ceases to be an emplo yee or an officer within the Group bef ore the vesting date and is not subject to good lea ver pro visions. In 2021 , €719k was expensed in the consolidated income statement in r elation to the Group’ s L TIP schemes Details of the share options outstanding during the y ear are as f ollows: 2021 2020 No. of share options No. of share options Outstanding at beginning of y ear 3 ,864 ,472 1 ,501 ,647 Adjustment factor applied 55 ,262 * – Revised balance out standing at beginning of period 3 ,919 ,734 1, 501 , 647 Granted during the year 2, 336 , 885 3 ,793 ,200 F orfeited during the year Exer cised during the year – – Expired during the y ear – – Outstanding at the end of the year Exer cisable at the end of the year – * On 17 September 2020 , the company issued 1 , 636 ,252 bonus shares to shareholders in lieu of a cash dividend at v alue €0 .01 per shar e. An adjustment was made to the L TIP schemes in 2021, when appr ov ed by the Remuneration Committee, to ensur e that award holders are no better or w orse off follo wing the bonus issue than they were bef orehand. 193 Included in the number of options forfeited in 2021 , are 7 45 , 199 of the 2019 awards which did not meet the vesting conditions based on per f ormance conditions from 1 January 2019 to 31 December 2021 . Included in t he number of options forfeited in 2020 , ar e 282,500 of the 2018 awards which did not meet the v esting conditions based on per f ormance conditions from 1 January 2018 to 31 December 2020 . If the conditions are met, the remaining awar ds will vest on the later of the 3rd anniv ersary of the grant and t he determination of the per f ormance condition and will then remain ex er cisable until the 7t h anniv ersary of the date of grant, pro vided the individual remains an emplo yee or officer of the Gr oup or is subject to good leav er pr ovisions. The measurement period f or the 2019 , 2020 and 2021 awards f or per f ormance conditions is o ver 3 y ears from 1 January 2019 to 31 December 2021 , fr om 2 May 2020 t o 1 May 2023 and fr om 27 April 2021 to 26 April 2024 r espectiv ely . Share options under the L TIP scheme hav e an ex er cise price of £nil. The fair v alue, at the grant date, of the TSR-based conditional awards was measur ed using a Monte Carlo simulation model. Fair value of options grant ed during the year: A t the grant date, the fair value per conditional awar d and the assumptions used in the calculationsare as follo ws: April 2021 May 2020 Nov ember 2019 August 2019 June 2019 April 2019 Y ear of potential v esting 2024 2023 2022 2022 2022 2022 Number of share options granted 2,336 , 885 3,7 93,200 69,422 187 ,842 76 ,204 933,995 Share price at grant date £1 .00 £ 0 . 74 £1. 32 £1. 50 £2.0 7 £1 .95 Exer cise price per share option £nil £nil £nil £nil £nil £nil Expected volatility of Company shar e price n/a Expected lif e 3 years 3 y ears 3 ye ars 3 years 3 years 3 years Expected dividend yield n/a Risk free inter est rate n/a W eighted average f air value at grant date £1 . 00 £0.49 £1 . 16 £1 .27 £ 1. 9 7 £1 .93 Remaining weight ed av erage lif e of options (years) 2.32 1.3 3 0.87 0.6 4 0.42 0.25 Expected volatility was det ermined based on the market performance of the Company o ver a period of 36 months prior to the date of grant for all the 2020 and 2019 awar ds. Market based v esting conditions, such as the TSR condition, hav e been tak en into account in establishing the fair value of equity instrument s granted. Non-market based performance conditions, such as the EPS conditions, wer e not taken int o account in establishing the fair value of equity instrument s granted, how e ver the number of equity instruments included in the measurement of the transaction is adjusted so that the amount recognised is based on the number of equity instruments that are expected t o vest. Restricted Shar e awards (“RSU”) scheme In lieu of a cash bonus in 2021 the Directors appr ov ed the grant of a restricted shar e award scheme. T otal cost in 2021 amounted to €1 ,392k (prior y ear: €nil). 194 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued During 2021 the Company granted a r estricted share awar d (“RSU”) to selected emplo y ees, including the ex ecutive directors and members of the management team. In total 2, 642,212 nil cost options were granted. Each award will Hostelworld as of the v esting date and satisfactory personal performance. 2021 2020 Outstanding at the beginning of the period – – Granted during the year 2, 642,212 – F orfeited – T otal – Sav e As Y ou Earn (“SA YE”) scheme During the year ended 31 December 2021 , t he Gr oup did not appro ve the granting of an y new SA YE scheme follo wing the withdrawal of Ulster Bank from the Irish market who w er e the only bank wit h an Irish banking licence that accepted new accounts f or Sav e As Y ou Earn schemes. Prior to 2021 , a scheme was appr ov ed in 2019 and 2020 . The schemes last three y ears and employ ees ma y choose to purchase shar es at the end of the three year period at the fixed discount ed price set at the star t. The share price under tax legislation in both jurisdictions. Number of SA YE share options granted 2021 2020 Outstanding at beginning of y ear 440 ,791 290 ,592 Adjustment factor applied 6 , 303 * – Revised balance out standing at beginning of period 447 ,094 – Granted during the year 11,541 358 , 305 F orfeited during the year Outstanding shar e options granted at end of y ear 277 , 624 * On 17 September 2020 , the Company issued 1 , 636 ,252 bonus shares to shareholders in lieu of a cash dividend at v alue €0 .01 per shar e. An adjustment was made to the Save As Y ou Earn schemes in 2021, when appro ved b y the Remuneration Committee, to ensure that award holders ar e no better or worse off f ollowing the bonus issue than they wer e beforehan d. continued 195 A t the grant date, the fair value per conditional awar d and the assumptions used in the calculations are as follo ws: Scheme UK office Irish office UK office Irish office Grant date August 2020 August 2020 October 2019 October 2019 Y ear of potential v esting 2023 2023 2022 2022 Share price at grant date £ 0.63 € 0.7 0 £1 . 30 €1 .52 Exer cise price per shar e option £0 .50 €0.56 £1 . 17 €1 . 30 Expected volatility of compan y shar e price Expected lif e 3 years 3 years 3 years 3 y ears Expected dividend yield Risk free inter est rate W eighted average f air value at grant date £0 .20 €0.22 £0.21 €0 .24 V aluation model Black Scholes Black Scholes Black Scholes Black Scholes Expected volatility was det ermined in line with market performance of the Company f or the 2020 and 2019 schemes. F or the 2018 schemes, expected v olatility was determined in line with market performance of the Company and comparator companies as there was insufficient historic data a vailable f or the Company at the grant date of the awards Cash settled share-based pa yments During 2018 , the Group issued to cer tain individuals shar e appreciation right s (“SARs”), in the form of Phantom Shar es that require the Gr oup to pay the intrinsic v alue of the SAR at t he date of e x ercise. The Gr oup has recor ded liabilities rele vant the fair v alue of these SARs was determined by using a Black Scholes model. 22. Related party transactions Balances and transactions between the Compan y and its subsidiaries, which are r elated parties, have been eliminat ed on consolidation and are not disclosed in this note. Direct ors’ remuneration 2021 2020 €’ 000 €’000 Salaries, fees, bonuses and benefit s in kind 1,0 76 1 , 101 Amounts r eceivable under long-term incentiv e schemes 257 102 T ermination benefits – – Other remuneration 402 – Pension contributions 61 62 T otal €402k relates t o share-based pa yment expense in r espect of the Restricted Share awar ds (“RSU”) scheme operated 196 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued K e y management personnel The Group’ s key managemen t comprise the Board of Directors and senior management ha ving authority and responsibility f or planning, dir ecting and controlling the activities of the Group. 2021 2020 €’ 000 €’000 Shor t term benefits 2, 608 2,899 Share based pa yments char ge 1 ,450 271 T ermination benefits 593 289 Post-emplo yment benefits 152 133 T otal 23. Subsidiaries and a s so c i at es Subsidiaries The follo wing is a list of the Company’ s current inv estments in subsidiaries, including the name, country of incorporation, and proportion of ownership interest: Company Holding Nature of Business Registered Office Hostelworld.com Limit ed 196 Ordinary shares @ €1 * T echnology trading company Floor 3 Charlemont Exchange Charlemont St Dublin D02 VN88 Ireland Hostelworld Services Portugal LDA 500 Ordinary shares @ €1 Marketing and r esearch and dev elopment services company Rua Antònio Nicolau D’ Almeid Opor to Por tugal Hostelworld Business Consulting ** Business information consulting and marketing planning Suite 304 Block 2 No.425 Y anping Road Jing’ an District Shanghai China 200042 延平路 425 号 2 幢 304 室 上海 , 中国 Hostelworld Services Limited 104123 Ordinary shar es @ £0. 001 * Marketing services and technology trading compan y Floor 5 38 Chancery Lane The Cursitor London W C2A 1EN United K ingdom Counter App Limited 51 Ordinary shares @ €1 T echnology company Floor 3 Charlemont Exchange Charlemont St Dublin D02 VN88 Ireland * held directly by the Company 22. Related party transactions continued 197 All subsidiaries hav e the same reporting date as the Company being 31 December . The company was a Jerse y regist ered compan y and the company was in volv ed in the transfer of funds fr om the equity raise to Hostelw orld Group PL C which raised gr oss proceeds of €15 .2m. The entity was subsequently liquidated on 10 July 2020 . On 4 June 2020 a new subsidiary was incorporated “Hostelworld Business Consulting (Shanghai) Co., Limited” and information consulting and mark eting planning. Associates The follo wing details the Company’ s current inv estment in associates, including the name, country of incorporation, and proportion of ownership interest: Company Holding Nature of Business Register ed Office Goki Pty Limited * T echnology company 477 Kent St Sydne y NSW 2000 Australia On 21 June 2020 , Hostelworld.com Limit ed signed an agreement to pur chase 7 , 645 ,554 shares in Goki Pty Limit ed, an Australian incorporated proprietary compan y limited by shar es. The purchase con sideration for this transaction was USD 3m. This transaction was completed on 22 July 2020 and on this date, an inv estment in associate was recognised in the consolidated financial statement s. On 7 July 2021 the directors of Goki PTY Limited appr ov ed a reduction in the in vestment held b y Hostelw orld.com Limited in the company . The shar eholding was reduced fr om 24 . Financial risk management The Directors manage the Gr oup’ s capital, consisting of both debt and equity, to ensur e that the Group will be able to continue as a going concern while also maximising the return to stak eholders. As part of t his pr ocess, the Directors re view financial risks such as liquidity risk, credit risk, f or eign ex change risk and inter est rate risk regularly . Liquidity risk Cash flow f or ecasting is monitored b y rolling f or ecasts of the Group’ s liquidity requirement s to ensure it has sufficient cash to meet operational needs while not breaching an y co venant s that the Group adheres to. Such f or ecasting takes int o consideration the Group’ s debt financing plans. The Group’ s policy is to ensure that it has sufficient long-term funding in place to meet its pa yment obligations and complies with cov enants. The risk is managed centrally b y the group and re viewed b y the Board on a r egular basis. 198 Financial Statements | Hostelworld Annual Report 2021 Notes to the Consolidated Financial Statements continued The table below analyses the Group’ s financial liabilities into rele vant maturity gr oupings based on the remaining period at the repor ting date t o the contractual maturity date. The Group had no deriv ative financial liabilities in the current or prior y ear . The amounts disclosed in the table are the contractual undiscounted cash flows. 2021 2020 €’ 000 €’000 Borro wings – 1 , 164 T rade and ot her pa yables 11 ,27 4 11,205 Borro wings 32,453 – – T otal 43, 760 Inter est rate risk The principal aim of managing interest rat e risk is to limit the adverse impact on cash flo ws of mov ements in inter est rates. Cash requir ements ar e managed centrally by the Gr oup. The Group only has one debt f acility in place with HPS wer e negative in 2021 and ther efor e there was no impact on the cashflows of the gr oup. increase in Euribor rates which w ould r esult in a €1 . 8m impact on the Income Statement, ov er the duration of the tenure, with r espect to the interest char ge on HPS debt facility . Credit risk and f or eign ex change risk The Directors monit or the credit risk associated with loans, trade receiv ables and cash and cash equivalent balances on an on-going basis. The majority of the Group’ s trade receivable balances ar e due for maturity within 5 days and lar gely comprise amounts due fr om the Group’ s payment processing agents. Accor dingly , the associated credit risk is determined t o be low . These trade receivable balances, which consist of eur o, US dollar and Sterling amounts, ar e settled wit hin a r elatively short period of time, which reduces an y potential for eign ex change exposur e risk. as assigned by internation al credit rating agencies. As a r esult, the credit risk on cash balances is limited. The carrying value of trade r eceivables, trade pa yables and cash and cash equiv alents is a r easonable appro ximation of their fair v alue. The Group does not enter int o or trade financial instruments, including deriv ative financial instruments, for speculativ e purposes. The Board considers capital to comprise of long-term debt as disclosed in not e 19 and equity as disclosed in note 17 . The Directors’ objectiv es when managing capital ar e to safeguar d the Group’ s ability to continue as a going concern in order to pr o vide returns f or shareholders an d benefits f or other stakeholders and to maintain an optimal capital structure to r educe the cost of capital. In order to maintain or adjust the capital structur e, the Directors ma y adjust the amount of dividends paid to shareholders, r eturn capital to shareholders, issue new shar es or sell assets. In 2020 The Group will ensur e it retains sufficient r eserves to manage it s day to da y cash requir ements, including capital expenditur e requir ements, whilst ensuring appr opriate dividends are distr ibuted to shareholders. 24 . Financial risk management continued 199 There ar e no cash dividends in 2020 or 2021 as the Board took the decision to suspend cash dividends in 2020 . F uture cash dividend pa yments will be subject to the Gr oup generating adjusted profit aft er tax, the Group’ s cash position, any r estrictions in the Group’ s banking facilities and subject to compliance with Companies Act 2006 requir ements r egarding ensuring sufficiency of distributable r eserves at the time of paying the dividend. 26 . P arent compan y e xemption The Company has tak en adv antage of the exemption pr o vided under section 408 of the Companies Act 2006 not to publish its individual income statement and r elated notes. 27 . Events after the balance sheet date There ar e no significant ev ents after the balance sheet date. 200 Financial Statements | Hostelworld Annual Report 2021 Company Statement of Financial Position as at 31 December 2021 2021 2020 Notes €’ 000 €’000 Non-current asset s Inv estments 31 48, 523 57 ,026 T rade and ot her r eceivables 32 112,202 112,984 160 ,725 170, 010 Current asset s T rade and ot her r eceivables 32 292 224 Cash and cash equivalent s 1 , 154 953 1 ,446 1 ,1 7 7 T otal assets Equity Share capital 17 1 , 163 1, 163 Share pr emium account 17 14 ,328 14, 328 Other reserves 6 ,449 1,227 Retained earnings 139, 166 153,258 T otal equity attributable to equity holders of the parent Current liabilities T rade and ot her pa yables 33 1 , 065 1 ,211 T otal liabilities T otal equity and liabilities The financial statements of Hostelw orld Group plc w er e appro ved b y the Board of Dir ectors and authorised for issue on 30 March 2022 and signed on it s behalf by: Gary Morrison Caroline Sherry Chief Executiv e Officer Chief Financial Officer 201 Company Statement of Changes in Equity for the year ended 31 December 2021 Share capital Share premium account Retained earnings Other reserves T otal Notes €’ 000 €’000 €’000 €’000 €’000 As at 1 January 2020 956 – 164, 726 795 166 ,477 T otal comprehensiv e income for the y ear – – – Issue of ordinary shares f or cash 17 191 15 , 042 – – 15 ,233 Share issue cost 17 – – – Bonus Issue shares 17 16 – – – Credit to equity f or equity settled share based pa yments – – – 432 432 As at 31 December 2020 1 , 163 14, 328 153,258 1,227 169,9 76 T otal comprehensiv e income for the y ear – – – Issue of warrants 19 – – – 3,0 73 3 ,073 Credit to equity f or equity settled share based pa yments – – – 2, 149 2, 149 202 Financial Statements | Hostelworld Annual Report 2021 Notes to the Company Financial Statements for the year ended 31 December 2021 The significant accounting policies adopted b y the Company are as f ollo ws: Basis of preparation The separate financial statements ar e present ed as requir ed by the Companies Act 2006 . The Compan y meets the Requirement s issued by the Financial Reporting Council. The financial statements hav e theref ore been pr epared in Financial Repor ting Council. As permitted by FRS 101 , the Company has taken adv antage of the disclosure e xemptions a vailable under that standard in relation to financial instrument s, fair v alue measurement s, capital management, presentation of comparativ e information in r espect of certain assets, presentation of a cash flow stat ement, standards not y et eff ective, financial risk management, impairment of assets, shar e based payment s, business combinations, related party transactions and where r equired, equiv alent disclosures ar e giv en in the consolidated financial statements. Significant accounting policies specifically applicable to these individual Company financial statement s and which are not r eflected within the accounting policies for the Group consolidated financial stat ements ar e detailed below . The financial statements ar e prepar ed on the historical cost basis. Inv estments in subsidiaries Inv estments in subsidiary under takings ar e stated at cost less any allo wance f or impairment. Financial instruments Financial assets and financial liabilities ar e recognised in the Company’ s statement of financial position when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities ar e initially measured at f air value plus transaction costs, e x cept for those classified as fair v alue through profit or loss, which ar e initially measur ed at fair value. The f air value of fin ancial assets and liabilities denominated in a f oreign curr ency is determined in that for eign currency and translat ed at the spot rate at the end of the repor ting period. Financial assets Amounts due fr om subsidiary under takings are stated initially at their fair v alue and subsequently at amor tised cost, less any e xpected credit loss. The Company r ecognises expected cr edit losses (“ECLs”) f or amounts due fr om subsidiary under takings estimated using a pro vision matrix based on the Company’ s historical credit loss experience, adjusted f or f actors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the for ecast dir ection of conditions at the repor ting date, including time v alue of money wher e appropriat e. If the credit risk on the financial instrument has not increased significantly since initial recognition, the Compan y measures the loss allowance f or that financial instrument at an amount equal to 12-month ECL. 12-month ECL repr esents the por tion of lif etime ECL that is expected to r esult from def ault ev ents on a financial instrument that are possible within 12 months after the repor ting date. Dividends Final dividends are r ecorded in the Gr oup’ s financial statements in the period in which they are appr o ved b y the Company’ s shareholders. Interim dividends ar e recor ded in the period in which they are paid. Details of interim and final dividends are disclosed in not e 24 to the consolidated financial statement s. 203 Critical accounting judgments and k ey sour ces of estimation uncertainty make judgement s (other than those involving estimations) that ha ve a significant impact on the amounts r ecognised and to mak e estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expense s. The estimates and associated assumptions are based on hist orical experience and v arious other factors that are belie ved to be r easonable under the circumstances, the result s of which form the basis of making judgements about carrying values of asset s and liabilities that are not readily appar ent from other sources. Actual r esults ma y diff er from these estimates. The estimates and underlying assumptions ar e re viewed on an ongoing basis. R evisions to accounting estimat es are r ecognised in the year in which the estimate is re vised if the re vision affect s only that year , or in the year of the revision and futur e y ears if the revision aff ects both current and future y ears. There w ere no critical judgement s applied in the preparation of the Company financial statement s apar t fr om those inv olving estimations. The ke y assumptions concerning the future, and other k ey sour ces of estimation uncer tainty at the reporting period that may hav e a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial y ear , are discussed belo w . Carrying value of inv estments in subsidiaries Inv estments in subsidiaries ar e held at cost less any allo wance f or impairment. The Company assesses in v estments for impairment whene v er ev ents or changes in cir cumstances indicate that the carr ying v alue of an inv estment may not be reco verable. An impairment re view was per f ormed in the current y ear follo wing re view of the Company requir ements of IAS 36 paragraph 12(d). As a r esult, the Company has r eview ed the reco verable a mount of its inv estment in subsidiaries. When the carrying amount of an investment e x ceeds its reco v erable amount, the in ves tment is conside red impaired and is written do wn to it s reco verable amount. A t 31 December 2021 t he Reco verability amount s due from subsidiary under takings Each year the Direct ors assess the credit risk of amounts due fr om subsidiary under takings and determine the quantum of the expected credit loss t o be recognised on these assets. In the current y ear the Directors r eview ed the related party ’ s historical credit loss e xperience, adjusted f or factors that are specific t o that company , general economic conditions and carried out an assessment of both the current as well as the for ecast direction of condition s at the repor ting date, including time value of mone y where appr opriate. The direct ors also took into account a re view of the Company balance sheet wher e of its in vestment in subsidiaries. A t 31 December 2021 the carrying value of the amounts due from subsidiary undertakings concluded that any expect ed credit loss allo wance requir ed would be immaterial. Sensitivity analysis has been performed subsidiary under taking would still be paid. As permitted by s408 of the Companies Act 2006 the Company has elect ed not to present it s own income statement or statement of comprehensiv e income f or the year . The loss attributable to the Company is disclosed in the footnot e to the Company’ s statement of financial position. The auditor’ s remuneration f or the audit and other ser vices is disclosed in note 4 to the consolidated financial statements. 204 Financial Statements | Hostelworld Annual Report 2021 Notes to the Company Financial Statements continued 30 . Staff costs The av erage monthly number of full time people employ ed by the Compan y (including Executiv e Dir ectors) during The aggregate r emuneration costs of these emplo yees is analysed as f ollo ws: 2021 2020 €’ 000 €’000 Staff costs comprise: W ages and salaries 798 938 Social security costs 83 111 Pensions costs 61 72 Other benefits 15 19 Share option char ge 667 121 T otal In addition to staff costs disclosed abo ve t ermination benefits disclosed within note 5 ex ceptional items The carrying value of the Company’ s subsidiaries at 31 December 2021 is as follows: 2021 2020 €’ 000 €’000 A t 1 January 57 ,026 44 , 187 Additions 4 ,555 14 , 875 Impairment The Company’ s subsidiaries directly owned b y the Company , ar e disclosed in note 22. In 2021 additions of €3 ,0 7 3k relate t o a capital contribution from Hostelw orld Group PL C to Hostelworld.com Limited during the period. The remaining additions (€1 ,482k) are capital contributions arising from the administration of the Group’ s share option schemes. In 2020 additions of €14 ,564k r elate to a capital contribution fr om Hostelworld Gr oup PL C to Hostelw orld.com Limited during the period. The remaining additions (€311k) are capital contributions arising from the administration of the Group’ s share option schemes. Limited f ollowing a r eview b y management. An impairment re view was performed in the current year f ollo wing re view of requir ements of IAS 36 paragraph 12(d). The r eco verable amount of the inv estment was assessed utilising value in use calculations which wer e prepar ed using cash flow pr ojections based on five-y ear budgets appr ov ed b y the directors, and into account k ey assumptions including historical trading performance, anticipated changes in futur e market conditions, industry and economic factors and business strategies. The pr e-tax discount rate which was applied in determining value 205 calculated using the Capital Asset Pricing Model adjusted for the business specific risk. The r esulting enterprise value was adjusted f or net debt of the company . As a result of the r eview an impairment char ge was recognised to r educe the carrying value of the inv estment to its r ecov erable amount €44 ,902k based on a value in use calculations. No impairment was deemed necessary by the Directors in 2021 f ollo wing a re view of the carr ying v alue of the inv estment b y Hostelworld Gr oup PL C in Hostelw orld Services Limited. In 2020 an impairment of €2,036k was recognised, as a r esult of a strategic r eview of the business by the Dir ectors, it was determined to cease activ ely marketing our Host elbookers brand name. 32. T rade and other r eceivables 2021 2020 €’ 000 €’000 Non-current asset s Amount due from subsidiary under takings 112,202 112,984 Current asset s Prepa yments 229 165 V alue Added T ax 30 36 Amount due from subsidiary under takings 33 23 T otal 224 The amount due from subsidiary under takings ar ose primarily as a result of a term loan issued betw een the Company and Hostelworld.com Limit ed as par t of the Group r eorganisation in Mar ch 2020 . This amount is carried at amor tised cost. The Directors assessed the cr edit risk of these amounts and determined that an expected cr edit loss on these assets w ould be immaterial. There is a r epayment plan in place un til 31 December 2030. The Dir ectors r eview ed the related party ’ s historical credit loss experience, adjust ed for f actors that are specific to that compan y , general economic conditions and carried out an assessment of both the current as well as the for ecast dir ection of conditions at the repor ting date, including time v alue of money wher e appr opriate. In 2020 the repayment t erm of the loan was extended to 31 December 2030 . In line with IFRS 9 derecognition crit eria, the Group assessed the guidance with respect to modification and potential der ecognition of a liability based on IFRS 9 the change was not deemed to be a substantial change and we r ecorded a modification loss in the income statement of €8 , 813k in 2020 . 33. T rade and other payables 2021 2020 €’ 000 €’000 Current liabilities T rade payables 665 444 Accruals 400 76 7 T otal 34. Events after the balance sheet date There ar e no significant ev ents after the balance sheet date. Banana’s Adventure, Peru Additional Information 208 Appendix: Alternative performance measures 210 Shareholder Information 211 Advisors 208 Additional Information | Hostelworld Annual Report 2021 Appendix: Alternative performance measures The Group uses the f ollowing alternativ e performance measures (‘ APMs’) which are non–IFRS measures to monit or the per formance of it s operations and of the Group as a whole: loss / earnings bef ore inter est, tax, depreciation and amor tisation, ex cluding e xceptional and non-cash it ems (“adjusted EBITD A ”), adjusted loss / profit after taxation; adjusted loss or earnings per share. In the prior year the group also pr esented adjusted fr ee cash flow and adjusted fr ee cash flo w conv ersion. In the current y ear the group ha ve f ocused on cash as a k ey performance indicator and ha ve mo v ed away fr om the related non-IFRS measures fr ee cash flow and adjust ed free cash flo w conv ersion to simplify the per f ormance indicators. A djusted EBITD A loss: The Group uses loss / earnings bef or e interest, tax, depr eciation and amor tisation, e xcluding e x ceptional and non-cash items (“ Adjusted EBITD A ”) as a key performance indicator when measuring the outcome in the business from one peri od t o the next, and against budget. Exceptional it ems by their nature and siz e can mak e interpretation of the underlying trends in the business mor e difficult. W e belie ve this alternativ e per f ormance measure r eflects the k ey drivers of pr ofitability f or the Group and remo v es those items which do not impact underlying trading per f ormance. Reconciliation between loss f or the year an d adjusted EBITD A loss: 2021 2020 €’ 000 €’000 Loss for the y ear T axation Net finance costs 3 ,501 238 Operating loss Depreciation 1 ,519 2,458 Amor tisation of de velopment cost s 2,963 2,424 Amor tisation of acquir ed intangible assets 7 ,929 9 ,250 Impairment of intangibles 367 14 ,996 Exceptional it ems 588 2,989 Share based pa yment expense 2, 162 428 Share of r esult of associate 225 3 74 Adjust ed EBITD A loss A djusted loss after taxation (“ Adjust ed P A T”): Adjusted profit aft er taxation is an alternative performance measur e that the Group uses to calculate the dividend pay-out f or the year , subject to Company Law requir ements r egarding distributable pr ofits and the dividend policy within the Group. It ex cludes ex ceptional items, amortisation of acquired domain and technology intangibles, net finance costs, shar e based payment e xpenses and deferr ed taxation which can ha ve lar ge impacts on the reported result f or the year , and which can make underlying trends difficult to int erpret. 209 Reconciliation between Adjust ed EBITD A loss and loss for the Y ear: 2021 2020 €’ 000 €’000 Adjust ed EBITD A loss Depreciation Amor tisation of de velopment cost s Net finance costs Share of r esult of associate Corporation tax 625 Adjust ed loss after taxation Exceptional it ems Amor tisation of acquir ed intangible assets Share based pa yment expense Impairment charges Deferr ed taxation 756 1 ,013 Loss for the year A djusted loss per shar e: Adjusted EPS is an alternativ e per f ormance measure that ex cludes e xceptional items, amortisation of acquired domain and technology intangibles, net finance costs, shar e based payment e xpenses and def erred taxation which can hav e large impact s on the reported result for the y ear , and which can make underlying tr ends difficult to interpret. 2021 2020 Adjust ed loss after taxation W eighted average shar es in issue (‘m) 116 . 3 106.9 Adjusted loss per share Net av er age booking value (“ ABV”): 2021 2020 Net re venue 16 ,901 15, 365 Booking engine – 82 Deferr ed r ev enue mov ement 821 Adjustments to r ev enue * 1 ,290 Advertising income V olume incentive rebates 94 500 Net general booking re venue 17 ,620 13, 544 * primarily relates to r ecognition of refunds, char gebacks and voucher pro visioning. 2021 2020 17 ,620 13 ,544 1 ,455 1 ,452 Net ABV generated 210 Additional Information | Hostelworld Annual Report 2021 Shareholder Information Financial Calendar AG M 11 Ma y 2022 Announcement of 2021 Interim result s 10 August 2022 Shar e Price During the year ended 31 December 2021 , t he range of the mark et prices of the Company’ s ordinary shares on the London Stock Exchange was: £ 0.69 Low est price during the year: £ 0.64 Highest price during the year: £1 . 15 Daily information on the Compan y ’ s share price can be obtained on our website: www .hostelworldgr oup.com . Shar eholder’ s Enquiries All administrative enquiries r elating to shar eholdings (for e xample, notification of change of address, loss of share certificates, dividend payments) should be addressed to the Compan y ’ s registrars: UK Registrar Computershare In v estor Services plc The Pavilions Bridgwater Road Bristol BS99 6ZZ United K ingdom Irish Registr ar Computershare In v estor Services (Ireland) L td 3100 Lake Driv e Citywest Business Campus Dublin 24 D24 AK82 Ireland Company Secr etary and Register ed Office Mr . John Duggan Hostelworld Gr oup plc Floor 5 38 Chancery Lane The Cursitor London W C2A 1EN United K ingdom Company R egistration Number 9818705 211 Advisors Solicitors McCann FitzGerald Riverside One Sir John Rogerson’ s Quay Dublin D02 X576 Ireland T ravers Smith LLP 10 Snow Hill London EC1A 2AL United K ingdom Financial Public Relations Pow erscourt 48 Upper Mount Street Dublin D02 YY23 Ireland Banking Allied Irish Banks plc Dublin D02 X342 Ireland NatW est Commercial Banking Floor 1 440 Strand London W CR2 OQS United K ingdom HSBC Bank plc 1 Grand Canal Square Grand Canal Harbour Dublin Docklands Dublin 2 Independent Auditors Deloitte Ireland LLP Char ter ed Accountants and Statutory Audit Firm 29 Earlsfort T errace Dublin D02 A Y28 Ireland Br okers Numis Securities Limited 45 Gresham Str eet London EC2V 7BF United K ingdom J&E Davy Davy House 49 Dawson Street Dublin D02 PY05 Ireland Hostelworld Annual Report 2021 212 CityHub Copenhagen, Denmark
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