HolidayCheck Group AG reports modest improvement in revenue over third quarter as cost-saving measures start taking effect

Munich, 9 November 2020 - The global spread of COVID-19, the stringent travel restrictions imposed by many countries in response to the pandemic and the worldwide travel warning maintained by Germany's Federal Foreign Office up to mid-June triggered a massive downturn in demand for holidays in the first nine months of 2020. As a result, many bookings made in 2019 and in the first nine months of this year for holidays in 2020 had to be cancelled. This had a significant impact on the revenue and earnings figures of HolidayCheck Group AG in the first nine months of the current financial year. After the travel warning was lifted for several European countries in mid-June, the third quarter saw a marked but temporary recovery in demand, mainly for hotels (with independent travel arrangements) but also for package holidays. Even so, bookings remained well below pre-crisis levels, especially for package holidays.

Over the past months, driven by the need to protect its liquidity position, HolidayCheck Group AG responded by introducing a series of comprehensive cost-saving measures in every area. These are gradually taking effect. Back in August 2020, we announced plans to reduce the workforce by around 90. These cuts have now been implemented. The sale of our Dutch subsidiaries generated around EUR 14.9 million. As a result of this move, the HolidayCheck Group no longer has a presence in the Netherlands. The consolidated net profit/(loss) of these discontinued operations is shown explicitly in the financial statements. As such, the key indicators given below relate only to the Group's continuing operations.

Due to the varied impacts of COVID-19 on our business, the company decided to adjust its financial results for the first nine months of 2020 to exclude significant out-of-period items. An adjustment has been made for deferred revenues from 2019 and directly related costs in respect of holidays planned for the current year that were either cancelled or are likely to be cancelled. In the first quarter and first half of 2020, adjustments were made for depreciation and amortisation on goodwill, brands, software developed in-house and the corresponding deferred taxes. These now apply entirely to the Group's discontinued operations. Accordingly, no corresponding adjustment was made to the consolidated net profit/(loss) of these discontinued operations.

In this market environment, the HolidayCheck Group's revenue for the first nine months of 2020 was EUR 11.2 million compared with EUR 103.7 million over the same period in 2019. Adjusted revenue for the first nine months of 2020 was EUR 26.4 million.
The company generated revenue of EUR 13.0 million in the third quarter of 2020, compared with EUR 34.7 million in the same quarter of the previous year.

Gross margin for the first nine months of 2020 was EUR 6.0 million compared with EUR 103.2 million over the same period in 2019. Adjusted gross margin for the first nine months of 2020 was EUR 21.3 million.
Gross margin for the third quarter of 2020 was EUR 9.5 million compared with EUR 34.2 million over the same period in 2019.

Gross margin is defined as sales revenue less cost of goods sold (COGS), i.e. advance purchases of holiday services (e.g. expenditure for hotels, flights and transfer services) by the Group's in-house tour operator HC Touristik.

Marketing expenses in the first nine months of 2020 came to EUR 8.8 million, down from EUR 53.7 million in the first nine months of the previous year. The Group's adjusted marketing expenses for the first nine months of 2020 were EUR 13.7 million.
Third-quarter marketing expenses fell to EUR 0.7 million compared with EUR 17.2 million in 2019.

Personnel expenditure for the first nine months of 2020 declined from EUR 26.5 million in 2019 to EUR 22.5 million in the current year.
Third-quarter personnel expenditure was EUR 6.4 million in 2020 compared with EUR 8.7 million in 2019.
In the third quarter of 2020, personnel expenditure was kept down by a number of factors, above all government short-time working subsidies, although restructuring costs associated with the redundancy of around 90 employees pushed the overall figure back up.

At EUR 17.8 million, other expenses in the first nine months of the current year were down from EUR 18.0 million in 2019.
Other expenses for the third quarter of 2020 amounted to EUR 7.2 million compared with EUR 6.7 million over the same period in 2019.

EBITDA (earnings before interest, tax, depreciation and amortisation) for the 2020 nine-month period stood at minus EUR 33.0 million compared with the figure of EUR 4.4 million for the same period of 2019. Adjusted EBITDA for the first nine months of 2020 was minus EUR 23.1 million.
The company recorded EBITDA of minus EUR 0.7 million for the third quarter of 2020 compared with minus EUR 0.4 million in the same quarter of the previous year.

Operating EBITDA (operating earnings before interest, tax, depreciation and amortisation) for the first nine months of 2020 was minus EUR 31.0 million compared with the figure of EUR 4.8 million in the same period of 2019. Adjusted operating EBITDA for the first three quarters of 2020 was minus EUR 21.1 million.
Operating EBITDA for the third quarter rose from minus EUR 0.4 million in 2019 to EUR 0.8 million in the current year.

EBIT (earnings before interest and tax) for the first nine months of 2020 was minus EUR 38.8 million compared with minus EUR 1.8 million over the same period in 2019. Adjusted EBIT for the first nine months of 2020 was minus EUR 28.9 million.
The company recorded EBIT of minus EUR 2.6 million for the third quarter of 2020 compared with minus EUR 2.5 million in the same quarter of the previous year.

EBT (earnings before taxes) for the first nine months of 2020 stood at minus EUR 39.0 million in 2020 compared with minus EUR 2.0 million over the same period of 2019. Adjusted EBT for the first nine months of 2020 was minus EUR 29.1 million.
The company recorded EBT of minus EUR 2.7 million for the third quarter of 2020 compared with minus EUR 2.5 million in the same quarter of the previous year.

Consolidated net profit/(loss) from continuing operations was minus EUR 34.7 million over the first nine months of 2020. The corresponding figure in 2019 was minus EUR 2.8 million. Adjusted consolidated net profit/(loss) for the first nine months of 2020 was minus EUR 24.8 million.
Consolidated net profit/(loss) from continuing operations in the third quarter of 2020 rose to EUR 1.3 million from minus EUR 2.5 million in the same quarter of 2019. This increase was mainly due to the formation of deferred tax assets on loss carryforwards at HolidayCheck AG.

Consolidated net profit/(loss) from discontinued operations was minus EUR 31.6 million over the first nine months of 2020. The corresponding figure in 2019 was minus EUR 0.6 million.
Consolidated net profit/(loss) from discontinued operations in the third quarter of 2020 was minus EUR 0.8 million compared with minus EUR 0.3 million in the same quarter of 2019.

Basic and diluted earnings per share from continuing operations stood at minus EUR 0.60 in the first nine months of 2020 as against minus EUR 0.05 in the same period of 2019. Adjusted basic and diluted earnings per share from continuing operations were minus EUR 0.43 for the first nine months of 2020.
Basic and diluted earnings per share from continuing operations for the third quarter of 2020 were EUR 0.02 compared with minus EUR 0.04 for the third quarter of 2019.

As at 30 September 2020, the company had cash and cash equivalents of EUR 44.6 million compared with EUR 27.5 million as at 31 December 2019. The increase was mainly due to a draw-down of around EUR 14.8 million under existing credit lines in the first quarter of this year and COVID+ credits totalling EUR 13.3 million in Switzerland in the third quarter of 2020. The Group's cash position was further boosted by income of EUR 14.4 million from the sale of its Dutch operations. HolidayCheck Group AG is also exploring additional, longer-term financing options.

Outlook
In response to the global resurgence of COVID-19, governments have again issued comprehensive travel warnings, and hotels in Germany are currently closed to holidaymakers. The Management Board therefore assumes that demand for holiday travel, in particular for packages, will remain very subdued for the rest of the year. Equally, further regional outbreaks of COVID-19 in our holiday destinations are possible and could affect booking levels. The Management Board also anticipates that the trend towards 'last-minute' booking will continue and that the ongoing process of industry consolidation will lead to the exit of some competitors, especially among high-street travel agencies, potentially benefiting the remaining providers in the medium and long term.
Demand is not expected to pick up to a much more significant level until a vaccine is available, although a steady, gradual recovery is possible up to a certain point. In the long term, the Management Board believes that the holiday market remains extremely attractive and offers good prospects for growth.

In preparation for this scenario, HolidayCheck Group AG is implementing a wide range of measures to permanently reduce its costs and therefore ease the pressure on its liquidity.
As previously described, one of those measures involves reducing the overall workforce by around 90, which has already been implemented. In addition, all costs have been carefully reviewed to identify further potential for permanent savings. Marketing costs will be managed flexibly in response to current demand.

Given the current uncertainty affecting the travel market, we are not in a position to issue an updated forecast for revenue and earnings. In our March 2020 guidance, we anticipated a substantial year-on-year downturn in gross margin (sales revenue less COGS/advance purchases of holiday services) after adjusting for acquisitions and disposals, with operating EBITDA in clearly negative territory. Due to ongoing absence of reliable facts and information, it is not currently possible to offer a reliable estimate of the scale of this anticipated downturn.

Note
The German version of the interim statement for the first nine months of 2020 will be published during the course of the day on the company's website at www.holidaycheckgroup.com under the heading 'Investor Relations'.

About HolidayCheck Group AG:
HolidayCheck Group AG (ISIN DE005495329), Munich, Germany, is one of Europe's leading digital firms for recreational holiday. With a total workforce of around 300, HolidayCheck Group AG comprises HolidayCheck AG (which operates hotel review and travel booking portals by the same name), HC Touristik GmbH (which operates the tour operator HolidayCheck Reisen), and Driveboo AG (which operates the car rental portals MietwagenCheck and Driveboo). HolidayCheck Group's vision is to become the world's most holidaymaker-friendly company in the world.

Media and Investor Relations contact:
HolidayCheck Group AG
Neumarkter Strasse 61
81673 München
Germany

Armin Blohmann
phone: +49 (0)89 357 680 901
fax: +49 (0)89 357 680 999
Email: [email protected]

Sabine Wodarz
phone: +49 (0)89 357 680 915
fax: +49 (0)89 357 680 999
Email: [email protected]

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