Nustay A/S (below referred to as “Nustay” or the “Company”) hereby updates the market on the Company’s current performance with regards to the current escalating outbreak of COVID-19. Like all operators in the travel industry, Nustay continuously evaluates the developments of COVID-19.
The developments in Europe, and globally, during the recent days have led to Nustay’s operations being affected. Nustay has experienced a substantial decrease in sales during the last couple of days in relation to the handled revenue during January and February 2020, but the sales are still generating a positive return when looking at marketing costs vs profit on each booking, where profit daily in average is 20% higher than the marketing costs. Although, these sales are offset by a large number of refunds and chargebacks. These are happening due to country borders and hotels closing down. This affects Nustay’s financial situation and thereby its communicated objectives. The Company has immediately taken measures to secure operations in short- and long-term and will prepare the Company to be ready to return to its normal operation when the immediate crisis has passed. At the same time Nustay has started to see substantial increased searches for hotel bookings in Asian markets such as Japa
Analysis of Nustay’s performance and risks
As communicated in a press release on March 9th, 2020, the Board of Directors and Management are closely following the Company’s performance. Approximately 90 percent of all bookings made through Nustay’s website are non-refundable. Even so, the situation in the travel industry in both Europe and globally has resulted in a large number of cancellations of bookings, even non-refundable, due to countries closing their borders and as a result, hotels closing their operations. These cancellations have currently been paid out to the customers, affecting Nustay’s liquidity significantly.
Simultaneously Nustay’s hotel suppliers are suffering from the situation, also having an impact on Nustay. Nustay’s liquidity is therefore presently under pressure, and the Company is investigating all options to mitigate this. Through the ongoing pre-emptive rights issue of shares and warrants, which is fully secured through pre-subscription commitments and underwriting commitments, the financial pressure will be reduced but not eliminated if the current crisis lasts several months. At this point in time it is not possible to state in more detail what the full financial effects will be for Nustay since the situation of the pandemic is on-going and there is no current estimate of when, for example, the European travel-industry calms down and turns into a more positive trend. The Company is now taking immediate action to secure operations both short- and long-term through reduced costs. The cost reductions are attributable to Nustay terminating employment and reduced salaries on remaining employees for two to three months. In total, the Board of Directors foresees a reduction of fixed costs by approximately 50 percent with an impact already start of April 2020. This means that the development pace will slow down for a period of time. Nustay will as of this moment not cut down on marketing activities, but the Company’s marketing costs will be related to the level of activity, meaning that the total costs will be reduced also in this area. Nustay’s measures in this situation will, as the market situation improves, mean that the Company is in a phase where operations can be quickly adjusted and thus return to normal within a short period of time.
As stipulated in the prospectus attributable to the ongoing pre-emptive rights issue, Nustay has communicated several objectives, such as achieve positive cash flow during the third quarter of 2020 and subsequently become NET profitable (EBITDA profitable) during the fourth quarter of 2020. As a result of the current circumstances affecting the travel industry, the Board of Directors assesses that the objectives will be postponed for at least one quarter. The Board of Directors and management will continue to closely monitor the situation and update the market when possible.
At the same time as the circumstances has changed rapidly on especially the European market, Nustay has since March 19th, 2020 seen substantial increased searches for hotel bookings in Asian markets such as Japan, where Nustay is present with a local website and marketing. According to the Board of Directors this might serve as an indication of that the crisis might not last as long as first anticipated.
Comment from Nustay CEO Mathias Lundoe Nielsen
“The situation right now is, as everybody is aware of, extreme and it is of course of utmost importance that we do everything we can to constantly evaluate the current situation and implement powerful measures, which we believe in the long run will have a positive impact on Nustay and its business. The situation that has been building up over the past couple of months, has quickly accelerated during the week with Europe, Australia and other countries closing down – closing borders, closing hotels and airlines shutting down the majority of their routes. This has a tremendous adverse impact on our industry. We, nor anybody else, can know how long this situation will last, and even though specific new guidance for 2020 is not possible to make at present circumstances, we truly believe that in the long term, we will be strengthened out of the situation.“