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RNS
Dalata Hotel Group PLC  -  DAL   

Half-year Report

Released 07:00 04-Sep-2018

RNS Number : 6376Z
Dalata Hotel Group PLC
04 September 2018
 

STRONG FIRST HALF PERFORMANCE AS PORTFOLIO GROWTH CONTINUES

ISE: DHG   LSE: DAL

 

Dublin and London | 4 September 2018: Dalata Hotel Group plc ("Dalata" or "the Group"), the largest hotel operator in Ireland with a growing presence in the United Kingdom, announces its results for the six months ended 30 June 2018.

Results Summary - €'million

H1 2018

H1 20171

Variance

Revenue

180.6

163.3

10.6%

Segments EBITDAR2

71.9

66.3

8.4%

Adjusted EBITDA2

50.3

44.9

12.0%

Profit before tax

35.4

32.7

8.3%

Basic EPS

16.6 cent

15.5 cent

1.1 cent

Adjusted diluted EPS2

17.2 cent

15.0 cent

2.2 cent

 

 

 

 

Key performance indicators (reflect hotel performance for the period owned by the Group)

Occupancy %

82.1%

80.2%

190 bps

Average room rate (€)

108.88

104.12

4.6%

RevPAR2 (€)

89.39

83.50

7.1%

STRONG OPERATING PERFORMANCE

·    Strong revenue growth of 10.6% to €180.6 million

·    Revenue per available room2 (RevPAR) up 7.1% to €89.39

·    Adjusted EBITDA2 up 12.0% to €50.3 million

·    Adjusted diluted EPS up 14.7% to 17.2 cent

STRONG BALANCE SHEET SUPPORTING FUTURE GROWTH 

·    Hotel assets2 over €1.1 billion

·    Net upward property revaluation gain of €58.5 million

·    Net Debt to Adjusted EBITDA2 of 2.5x

·    570 new rooms opened to date in Dublin, Belfast and Galway creating over 230 new jobs

·    Pipeline of over 2,800 rooms delivering between now and 2021

ANNOUNCING TODAY

·    The Board has declared an interim dividend of 3.0 cent per share payable on 12 October 2018

·    Signed an agreement to lease a new 276 room Maldron Hotel to be built in the centre of Manchester

STRATEGIC AND OPERATING HIGHLIGHTS

·    Over 1,500 new rooms opening throughout 2018:

o Successfully opened Maldron Hotel Belfast City in March 2018 and Maldron Hotel Kevin Street, Dublin in July 2018. Completed and opened extensions at Clayton Hotel Dublin Airport, Maldron Hotel Sandy Road, Galway and Clayton Hotel Ballsbridge, Dublin

o Clayton Hotel Aldgate, London with 212 rooms is scheduled to open in December 2018

o Three new hotels and one extension totalling 670 rooms on target to open in Dublin, Cork and Newcastle in Q4 2018, delivering a total of 250 new jobs across three cities
 

·    Additional 1,070 rooms added to pipeline in 2018 in London, Birmingham, Manchester and Bristol
 

·    €10.8 million was invested in capital refurbishment across all areas of the Group's hotels with 823 rooms refurbished in the first half of 2018

 

·    We have reached an agreement, subject to Board approval, to extend the Ballsbridge Hotel lease in Dublin until March 2020

 

·    The Group have signed an agreement with CEPF II, a fund administered by Catalyst Capital, to lease a new 4 star Maldron Hotel to be built in Manchester. The 276 room hotel is ideally located in the centre of the city. It is adjacent to the latest large scale mixed use development in Manchester, Circle Square due for completion by 2020. The construction of the hotel is subject to the receipt of planning permission from Manchester City Council. It is expected that the hotel will open in the first half of 2021

 

·     Demolition of the Tara Towers Hotel will commence in the final quarter of this year to make way for a new 140-bedroom hotel branded Maldron Hotel Merrion Road, 69 residential units and an underground car park. Dalata will manage the construction of the entire development, retain ownership of the hotel and are in exclusive negotiations to forward sell the residential units

 

·     As announced previously, the Board has adopted a progressive dividend policy with payment based on a percentage of profit after tax. The Board has declared an interim dividend of 3.0 cent per share payable on 12 October 2018 to all ordinary shareholders on the share register at the close of business on the record date of 14 September 2018

 

OUTLOOK

With continued expansion across our regions and strong market dynamics, the outlook for the Group remains positive.

The outlook for the Dublin market remains strong. While performance of our Dublin hotels has been robust in July and August, occupancy levels in the second half of 2017 were very high and this impacts our ability to grow RevPAR at the same pace in the second half of 2018 as that achieved in the first half of 2018.

The outlook for our Regional Ireland hotels remains positive. Trading has been marginally ahead of last year in July and August.

We remain very positive about the opportunity presented by the fragmented nature of the hotel market in our target UK regional cities. Trading across our UK hotels has been mixed but broadly in line with our expectations given the challenging market conditions in some cities. The balance of the year should be broadly similar to performance levels in the year to date.

As we continue to explore opportunities in the UK and Irish hotel markets, we remain very confident that we can further build an attractive pipeline of rooms.

The reduction in the VAT rate has been hugely positive for the hotel industry as a whole. However, should the rate increase in Ireland from 9% to 13.5%, we estimate this could reduce Group revenues by up to 2.0% for a full trading year.

Commenting on the results, Pat McCann, Dalata Group CEO, said:

"I am delighted to report that we have delivered another period of strong earnings growth. Our Dublin hotels continued to outperform the market achieving a RevPAR growth of 10.7% versus the city as a whole of 8.9%. Our hotels in Regional Ireland also performed well achieving a RevPAR growth of 8.1%. I am particularly pleased with our performance in the UK as our London hotels and regional UK hotels located in Cardiff, Manchester, Birmingham and Leeds all outperformed the market. As I have said before, this strong performance is attributable to Dalata's decentralised model and the bespoke strategies for revenue management at each hotel.

As I highlighted in February, our EBITDAR margin2 will decrease in 2018 due to the impact of pre-opening costs, some major hotel extension projects and new build hotels which will initially operate at a lower margin.

We are very focused on staying in tune with our customers and understanding their perceptions of our current offering.  In 2018 we have received over 72,000 reviews, 86% of which were positive. Our customers commend our great service, warm reception, cleanliness and the location of our hotels but we will never stop trying to increase that 86% further.

To complement our 'Click on Clayton', we launched 'Make it Maldron' in March which gives our customers the opportunity to sign up to our closed user group and receive discounts.

We are continuously investing in our physical product to ensure it meets and exceeds the expectations of our customers. In the first half of 2018 we invested €10.8 million refurbishing 823 rooms, public areas, meeting rooms and back of house areas.

I firmly believe that our culture at Dalata is paramount to our success and our ability to achieve our strategy. We are an organisation who strive to be fair and respectful. Our work ethic is intense and we recognise that there is always room for improvement. We are dedicated to offering our employees an opportunity to build a fulfilling career and our pipeline of new hotels will ensure that there are always new prospects available to our employees.

So far in 2018, we have opened two new hotels in Dublin and Belfast representing a total investment of €50 million. We also completed significant redevelopment projects incorporating 233 additional bedrooms, meeting facilities and upgraded food and beverage facilities across three hotels representing a combined investment of €34.9 million. Completing extensive refurbishment projects and extensions is not an easy task, especially with a busy hotel to run. I am delighted to say that our teams managed these projects excellently with minimal disruption to our customers. This is a fantastic achievement and demonstrates our people's hunger to deliver what is promised.

I am pleased to announce the development of another new Maldron Hotel in a great location in the centre of Manchester. This will be our third hotel in Manchester as we already successfully operate a Clayton Hotel at Manchester Airport and are developing a new Clayton Hotel at Portland Street.

We also announced last week that we have secured a new hotel in Aldgate, London. I am really excited about this opportunity as this hotel gives us a presence in a key central location within the city and is ideally located for both corporate customers and leisure guests who want to be close to the City of London. The hotel is projected to be earnings per share enhancing from its first year of operation.

We said in February that we were very encouraged by the reaction of developers and potential investors to the strength of our balance sheet covenant and operational expertise. Since that date, we have announced new hotel projects in London, Bristol, Manchester and Birmingham totalling 1,070 rooms. All of the new hotels will be located in key central locations within these cities. Our investment in a new hotel in London is particularly exciting as we are performing very well in this market but it has been a location within which it has been difficult to secure new opportunities. The hotel projects secured in our pipeline together with the strong performance of our existing regional UK hotels demonstrates our ability to deliver on our regional UK strategy of rolling out both our Maldron and Clayton brands across the major cities of the UK.

I am monitoring the ongoing speculation about the possibility of the VAT rate in Ireland for hospitality services increasing from 9% to 13.5%. I believe that the reduction in the VAT rate has been hugely positive for the tourism industry and has been a very significant factor in the additional 79,1003 jobs created in the sector since the lower rate was introduced in July 2011. I also note that annual VAT income to the exchequer from the tourism industry is expected to increase from €630 million in 2012 to €1.04 billion3 by the end of 2018.

2018 has been very positive to date for Dalata through a combination of strong earnings growth and the opening of a significant number of new hotel rooms. We are on track to meet our target of announcing an additional 1,200 rooms to our pipeline. I am looking forward to the remainder of 2018 when we will strive to ensure that the strong momentum of the first eight months continues as well as being fully prepared for 2019 and the years beyond".

 

ENDS
 

About Dalata

Dalata Hotel Group plc is Ireland's largest hotel operator with a growing presence in the United Kingdom. The Group's current portfolio consists of 39 hotels with over 8,200 rooms and approximately an additional 2,800 rooms are currently being developed. Dalata successfully operates Ireland's two largest hotel brands, Clayton Hotels and Maldron Hotels across Ireland and the UK, as well as managing a small portfolio of partner properties. 28 of the hotels are owned by Dalata, nine hotels are operated under lease agreements and two are operated under management agreements. For the six month period ended 30 June 2018, Dalata reported revenue of €180.6 million and a profit after tax of €30.5 million. Dalata is listed on the Main Market of the Euronext Dublin (DHG) and the London Stock Exchange (DAL).

For further information visit: www.dalatahotelgroup.com

Conference Call Details | Analysts & Institutional Investors

Management will host a conference call for analysts and institutional investors at 08:30 BST, today 4 September 2018, and this can be accessed using the contact details below.

From Ireland dial: +353 1 431 1252

From the UK dial: +44 3333 000 804

From the USA dial: +1 631 913 1422

From other locations dial: +353 1 431 1252

Participant PIN code: 89613855#

 

Contacts

Dalata Hotel Group plc

Tel +353 1 206 9400

Pat McCann, CEO

investorrelations@dalatahotelgroup.com

Dermot Crowley, Deputy CEO, Business Development & Finance

Sean McKeon, Company Secretary and Head of Risk and Compliance

 

Joint Company Brokers

 

Davy: Anthony Farrell

Tel +353 1 679 7788

Berenberg: Ben Wright

T: +44 20 3753 3069

 

 

Investor Relations and PR | FTI Consulting

Tel +353 1 765 0800

Melanie Farrell

dalata@fticonsulting.com

Note on forward-looking information

This Announcement contains forward-looking statements, which are subject to risks and uncertainties because they relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company or the industry in which it operates, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. The forward-looking statements referred to in this paragraph speak only as at the date of this Announcement. The Company will not undertake any obligation to release publicly any revision or updates to these forward-looking statements to reflect future events, circumstances, unanticipated events, new information or otherwise except as required by law or by any appropriate regulatory authority.
 

H1 2018 Financial Performance

 

H1 2018

H1 20171

 

€'million

€'million

Revenue

 

180.6

 

163.3

Segments EBITDAR2

 

71.9

 

66.3

Rent

 

(16.2)

 

(16.3)

Segments EBITDA2

 

55.7

 

50.0

Central overheads

 

(4.3)

 

(4.8)

Share-based payment expense

 

(1.2)

 

(0.7)

Other income / costs

 

0.1

 

0.4

Adjusted EBITDA2

 

50.3

 

44.9

Acquisition-related costs

 

-

 

(0.1)

Net revaluation movements through profit or loss

 

(1.6)

 

0.7

Group EBITDA2

 

48.7

 

45.5

Depreciation and amortisation charge

 

(9.3)

 

(7.6)

Operating profit

 

39.4

 

37.9

Finance costs

 

(4.0)

 

(5.2)

Profit before tax

 

35.4

 

32.7

Tax

 

(4.9)

 

(4.4)

Profit for the period

 

30.5

 

28.3

 

 

 

 

 

Basic earnings per share

 

16.6 cent

 

15.5 cent

Diluted earnings per share

 

16.4 cent

 

15.4 cent

Adjusted diluted earnings2 per share

 

17.2 cent

 

15.0 cent

Segments EBITDAR margin2

 

39.8%

 

40.6%

Hotel performance overview

The Group achieved revenue growth of 10.6% to €180.6 million and increased adjusted EBITDA by 12.0% to €50.3 million in the period.

Revenue increased by €17.3 million largely due to acquisition activity and the strong performance of the existing business. The full period impact of the 2017 acquisitions contributed an additional €10.0 million while the opening of Maldron Hotel Belfast City in March 2018 contributed €2.1 million. The Group also achieved a like for like increase in revenues of €10.1 million from the existing business. These increases were offset by the disposal of the leasehold interest in the Croydon Park Hotel and a reduction in the number of management contracts in line with expectations, resulting in a combined loss of revenue of €4.3 million. Adverse foreign exchange movements in the value of sterling also decreased revenue from the UK portfolio by €0.6 million versus the previous period.

EBITDAR margin decreased from 40.6% to 39.8% due to the impact of (i) the new build hotel at Maldron Hotel Belfast City which will initially operate at a lower margin (ii) pre-opening costs of €0.7 million and (iii) hotels undertaking major extensions during 2018. Excluding the results from Maldron Hotel Belfast City and the impact of pre-opening costs Segments EBITDAR margin is in line with H1 2017.

There is no significant change in the rent charge at €16.2 million for the period.  The full period impact of the purchase of long leasehold interests in Clayton Hotel Cardiff Lane during 2017, the purchase of the freehold interest of Maldron Hotel Portlaoise in May 2017 and the disposal of the leasehold interest in Croydon Park Hotel resulted in a combined saving of €2.8 million. These savings were offset by (i) increased performance related rents (ii) the sale and leaseback of Clayton Hotel Cardiff in June 2017 and (iii) the addition of the leased Clayton Hotel Birmingham.

The total number of rooms operated by the Group increased from 7,674 at 31 December 2017 to over 8,080 at period end, as a result of the opening of Maldron Hotel Belfast City and the completion of two large extensions at existing hotels in Ireland.

Geographical split at 30 June 2018

Dublin

Regional Ireland

UK

Managed Hotels

Hotel numbers

15

12

9

2

Room numbers

4,146

1,706

1,968

264

% of revenue

59%

20%

21%

-

% of segments EBITDAR

69%

12%

18%

1%

% of segments EBITDA

64%

15%

20%

1%

Central overheads

The Group continues to increase resources across all central functions to ensure the team can support the growing portfolio and seek out new opportunities to develop further. Central overheads have decreased by €0.5 million compared to the same period last year due to differences in the timing and type of projects. We expect that central overheads for the year will increase.

Adjusting items to EBITDA

Management disclose adjusted EBITDA to show the underlying operating performance of the Group excluding the effects of revaluation movements through profit or loss and items considered by management to be non-recurring or unusual in nature. The Group adopts a revaluation policy for its hotel property assets. For the first half of 2018 the Group recorded revaluation losses of €2.4 million and a reversal of prior year revaluation losses of €0.8 million through profit or loss. There were no acquisition costs in the period.

Depreciation

The depreciation charge increased by €1.7 million compared to first six months of 2017. In 2018 there is additional depreciation due to the opening of Maldron Hotel Belfast City, the acquisition of Clayton Hotel Liffey Valley and the acquisition of the freehold interest of certain elements of Clayton Hotel Cardiff Lane.

Finance Costs

 

H1 2018

H1 2017

 

€'million

€'million

Interest expense on loans

 

3.9

 

3.9

Impact of interest rate swaps and caps

 

0.5

 

0.7

Other finance costs

 

0.9

 

1.2

Net exchange (gain)/loss on loans, borrowings and cash

 

(0.1)

 

0.1

Interest capitalised to property, plant and equipment

 

(1.2)

 

(0.7)

Finance costs

 

4.0

 

5.2

Finance costs decreased by €1.2 million in the first half of 2018 largely due to an increase of €0.5 million in the amount of interest capitalised to property, plant and equipment. In line with accounting standards, the Group has capitalised interest on loans and borrowings which finance the construction of the new hotels in Ireland and the United Kingdom. Other finance costs, which include the amortisation of debt capitalised costs and commitment fees on loans and borrowings, decreased by €0.3 million as the impact from the amortisation of debt costs decreases over time under the effective interest method.

Tax charge

The Group's effective tax rate2 increased from 13.3% for the first half of 2017 to 13.9% for the first half of 2018. The effective tax rate was lower in H1 2017 due to the benefit of tax losses from previous acquisitions to which no value had been initially attributed. Furthermore, the rate in H1 2018 is higher as the net losses on revaluation are not an allowable deduction when calculating the corporation tax charge.

 

 

Adjusted EBITDA bridge

The table below highlights the growth in earnings due to acquisition activity and a strong performance increase in the existing business. The combination of lower revenue growth and cost increases across all regions have resulted in a lower conversion on a like for like basis than in previous periods.

 

Dublin

Regional Ireland

United Kingdom

 

 

 

€'million

30 June 2017

Full period

impact of

properties

acquired

in 20171

New builds2

 Impact of re-negotiated leases & rent review3

Like for Like

increase

Full period

impact of

freeholds

acquired

in 20174

Like for Like

increase

Full period

impact of

properties

acquired

in 20175

New builds6

Disposal of hotel7

Effect of FX

Like for Like

increase

Net reduction in income from management contracts

Movement in Group income and expenses8

30 June 2018

Revenue

163.3

6.2

-

-

7.2

-

1.6

3.8

2.1

(3.7)

(0.6)

1.3

(0.6)

-

180.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segments EBITDAR

66.3

2.1

(0.4)

-

3.5

-

0.6

1.0

0.2

 (1.0)

(0.3)

0.5

(0.6)

-

71.9

Rent

(16.3)

1.6

-

(0.4)

(0.6)

0.2

(0.1)

(1.5)

-

 1.0

-

(0.1)

-

-

(16.2)

Segments EBITDA

50.0

3.7

(0.4)

(0.4)

2.9

0.2

0.5

(0.5)

0.2

-

(0.3)

0.4

(0.6)

-

55.7

Rental income

0.4

-

-

-

-

-

-

-

-

-

-

-

-

(0.3)

0.1

Central costs

(4.8)

-

-

-

-

-

-

-

-

-

-

-

-

0.5

(4.3)

Share based payments expense

(0.7)

-

-

-

-

-

-

-

-

-

-

-

-

(0.5)

(1.2)

Adjusted EBITDA

44.9

3.7

(0.4)

(0.4)

2.9

0.2

0.5

(0.5)

0.2

-

(0.3)

0.4

(0.6)

(0.3)

50.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segments EBITDAR margin

40.6%

 

 

 

48.6%

 

37.5%

 

 

 

 

38.5%

 

 

39.8%

1. Includes the step acquisition of Clayton Hotel Liffey Valley beginning in August 2017 and the rent saving due to the acquisition of the freehold interest of certain elements of Clayton Hotel Cardiff Lane in various transactions

2. Includes the pre-opening costs relating to Maldron Hotel Kevin Street which opened in July 2018 and Clayton Hotel Charlemont due to open in November 2018

3. Includes the impact of the re-negotiated leases at two properties and the rent review for another property

4. Includes the acquisition of the Maldron Hotel Portlaoise freehold (May 2017)

5. Includes the acquisition and subsequent sale and leaseback of Clayton Hotel Birmingham (formerly Hotel La Tour, Birmingham) in August 2017 and the increased rent from the sale and leaseback of Clayton Hotel Cardiff in June 2017

6. Includes the results and pre-opening expenses relating to Maldron Hotel Belfast City which opened in March 2018

7. Includes the disposal of a non-core asset at Croydon Park Hotel in June 2017

8. Group income and expenses include rental income, central overheads and share-based payments expense

 

Performance Review - Segmental Analysis

The following section analyses the results from the Group's portfolio of hotels in Dublin, Regional Ireland and United Kingdom.

1. Dublin Hotel Portfolio - EBITDA up €5.8 million

€'million

6 months ended

30 June 2018

6 months ended

30 June 20171

Room revenue

 

76.7

 

65.6

Food and beverage revenue

 

23.2

 

22.0

Other revenue

 

7.3

 

6.2

Total revenue

 

107.2

 

93.8

EBITDAR

 

49.4

 

44.2

Rent

 

(13.6)

 

(14.2)

EBITDA

 

35.8

 

30.0

EBITDAR margin %

 

46.1%

 

47.1%

 

 

 

 

 

Performance statistics

6 months ended

30 June 2018

6 months ended

30 June 2017

Occupancy

 

86.2%

 

82.3%

Average room rate (€)

 

122.38

 

115.78

RevPAR (€)

 

105.47

 

95.30

RevPAR increase

 

10.7%

 

 

 

 

 

 

 

Performance statistics reflect full six-month performance of the hotels in this portfolio for both periods regardless of when acquired.

 

 

 

 

 

Dublin owned & leased portfolio

6 months ended

30 June 2018

6 months ended

30 June 2017

Hotels

 

15

 

14

Room numbers

 

4,146

 

3,699

The fifteen hotels in the Group's Dublin portfolio consists of six Maldron hotels, six Clayton hotels, the Ballsbridge Hotel, Tara Towers Hotel and The Gibson Hotel. Since 30 June 2017, Dalata have acquired the majority of Clayton Hotel Liffey Valley through multiple transactions and completed the extension at Clayton Hotel Dublin Airport.

The Dublin market performed strongly in the first half of 2018. Dalata's Dublin hotels recorded a RevPAR growth of 10.7% in H1 2018, outperforming Dublin market growth of 8.9%. In line with management's expectations the Group's Dublin hotels outperformed the market growth in occupancy but were slightly behind the market growth in average room rate. The Group's revenue strategy was focused on driving occupancy in the first quarter of 2018 and increasing the level of base business at the hotels with new extensions. Occupancy at Dalata's Dublin hotels increased by 390 basis points to 86.2% for the first half of 2018.

EBITDAR from the Dublin hotels increased by €5.2 million to €49.4 million for the first half of 2018. The full period impact of the acquisition of Clayton Hotel Liffey Valley in 2017, together with the additional suites acquired during 2018 contributed an additional EBITDAR of €2.1 million. The existing Dublin hotels achieved a like for like EBITDAR increase of €3.5 million, reflecting a 48.6% conversion of additional revenue.

EBITDAR margin for Dublin hotels decreased from 47.1% to 46.1% due to the impact of the newly acquired Clayton Hotel Liffey Valley which operates at a lower margin, hotels where major extensions were ongoing during 2018 and pre-opening costs. The results for Dublin include pre-opening costs of €0.4 million relating to the new Maldron Hotel Kevin Street and Clayton Hotel Charlemont. Additionally, we continue to invest time and funds implementing the Dalata procedures and structures at Clayton Hotel Liffey Valley and bringing the hotel to full operational capacity as we acquire additional rooms. Excluding Clayton Hotel Liffey Valley and the pre-opening costs the Dublin EBITDAR margin increased to 47.3% on a like for like basis.

Rent decreased by €0.6 million in the first half of 2018 due to a number of factors such as increases in performance related rents, the reduction in rent under an existing lease, rent review increases and the acquisition of certain elements of Clayton Hotel Cardiff Lane.

2. Regional Ireland Hotel Portfolio - Maintaining performance of existing business

€'million

6 months ended

30 June 2018

6 months ended

30 June 20171

Room revenue

 

19.8

 

18.2

Food and beverage revenue

 

12.0

 

12.0

Other revenue

 

4.0

 

4.0

Total revenue

 

35.8

 

34.2

EBITDAR

 

8.6

 

8.0

Rent

 

(0.5)

 

(0.6)

EBITDA

 

8.1

 

7.4

EBITDAR margin %

 

24.0%

 

23.4%

 

 

 

 

 

Performance statistics

6 months ended

30 June 2018

6 months ended

30 June 2017

Occupancy

 

72.1%

 

71.5%

Average room rate (€)

 

91.98

 

85.83

RevPAR (€)

 

66.30

 

61.31

RevPAR increase

 

8.1%

 

 

 

 

 

 

 

Performance statistics reflect full six-month performance of the hotels in this portfolio for both periods regardless of when acquired.

Regional Ireland owned & leased portfolio

6 months ended

30 June 2018

6 months ended

30 June 2017

Hotels

 

12

 

12

Room numbers

 

1,706

 

1,643

The twelve hotels in Regional Ireland comprise six Maldron hotels and six Clayton hotels. Since 30 June 2017 Dalata has opened the new extension comprising 63 rooms at Maldron Hotel Sandy Road in Galway.

The Group's hotels in Cork, Galway and Limerick generate 70% of revenue and 74% of EBITDAR in the Regional Ireland portfolio.

Dalata's hotels in Regional Ireland achieved a RevPAR growth of 8.1% on the first half of 2017. RevPAR in our Cork hotels grew by 13.7% versus market growth of 14.8%. Maldron Hotel Shandon Cork City and Clayton Hotel Silver Springs outperformed the market. However, RevPAR growth at Clayton Hotel Cork City was lower as this hotel already achieves a RevPAR at the higher end of the market leaving less scope for growth year on year.

RevPAR in our Galway hotels grew by 5.0% versus the market growth of 9.4%. Maldron Hotel Sandy Road was behind market growth due to the impact from the construction of the new extension and refurbishment of public areas.  Furthermore, the market RevPAR growth statistics are distorted by the re-opening of a high end hotel in Galway in 2018 that had not traded for 2017.

The Group's Limerick hotels grew RevPAR by 5.9% versus the market growth of 9.3%. Occupancy decreased at the Group's hotels in Limerick as a significant amount of project business did not reoccur in the first half of 2018.

EBITDAR increased by €0.6 million in the first six months of 2018 driven by the existing hotels in Regional Ireland. EBITDAR margin increased from 23.4% to 24.0% due to good conversion of additional room sales. However, the margin will always be lower in Regional Ireland hotels compared to Dublin due to lower average room rates and the higher mix of food and beverage revenue.

3. United Kingdom Hotel Portfolio - Growing the portfolio and outperforming the market

Local currency - £'million

6 months ended

30 June 2018

6 months ended

30 June 20171

Room revenue

 

22.5

 

20.3

Food and beverage revenue

 

7.2

 

6.8

Other revenue

 

2.8

 

2.4

Total revenue

 

32.5

 

29.5

EBITDAR

 

11.7

 

11.1

Rent

 

(1.8)

 

(1.3)

EBITDA

 

9.9

 

9.8

EBITDAR margin %

 

36.0%

 

37.6%

 

 

 

 

 

Performance statistics

6 months ended

30 June 2018

6 months ended

30 June 2017

Occupancy

 

83.1%

 

81.1%

Average room rate (£)

 

80.58

 

79.48

RevPAR (£)

 

66.93

 

64.45

RevPAR increase

 

3.8%

 

 

 

Performance statistics reflect full six-month performance of the hotels in this portfolio for both periods regardless of when acquired.

UK owned & leased portfolio

6 months ended

30 June 2018

6 months ended

30 June 2017

Hotels

 

9

 

7

Room numbers

 

1,968

 

1,557

 

The Group's UK hotel portfolio comprises seven Clayton hotels and two Maldron hotels with two hotels situated in London, four hotels in regional UK and three hotels in Northern Ireland. The increase in room numbers since 30 June 2017 is driven by the acquisition of the leasehold interest in Clayton Hotel Birmingham (174 rooms) in July 2017 and the new Maldron Hotel Belfast City (237 rooms) which opened in March 2018.

Altogether the Group's UK portfolio achieved a RevPAR growth of 3.8% for the six months ended 30 June 2018. While the London market saw a decline in RevPAR of 1.4%, Dalata's hotels only experienced a decrease of 1.0% due to the robust revenue strategies in place. London remains challenging predominately around the weekend periods where London is seeing a decline in leisure business leading to reduced rates being offered to attract customers.

Performance was mixed amongst the rest of the UK market. However, all of Dalata's hotels in regional UK outperformed the market in terms of RevPAR growth. The strong performance of our hotels in regional UK is attributable to Dalata's decentralised model and the bespoke revenue management strategies at each hotel. Dalata's continued strong performance in regional UK further supports our strategy to increase our presence in our top twenty cities in regional UK.

EBITDAR increased by £0.6 million to £11.7 million in the first half of 2018. This was predominately driven by (i) the significant cost savings at Clayton Hotel Birmingham as the Dalata structures and processes continue to be implemented and (ii) the disposal of Croydon Park Hotel in June 2017 which operated at a lower margin. The existing UK business continues to be impacted by cost pressures from increased pay rates. However, Dalata has maintained strong cost control given these challenging circumstances.

As anticipated, Dalata's ability to grow EBITDAR margin is constrained in the short term due to the impact of new hotels opening and pre-opening costs. It takes approximately two to three years for a new hotel to reach its peak operating performance. As a result, the Group's UK performance is constrained this period by the new hotels with lower EBITDAR margins and pre-opening costs which are approximately £0.4 million per new hotel. Excluding the results from the new Maldron Hotel Belfast City and pre-opening costs, the EBITDAR margin for the UK hotels would be in line with the first six months of 2017.

Rent has increased by £0.5 million due to the sale and leasebacks of Clayton Hotel Cardiff in June 2017 and Clayton Hotel Birmingham in August 2017. This was partially offset by the saving from the disposal of the previously leased Croydon Park Hotel in June 2017.

 

Strong operating cash flows re-invested in the business

The Group's portfolio of hotels generated strong operating cash flow during the period with free cash flow of €31.4 million. The Group re-invested this cash in the business through hotel refurbishment projects and further acquisitions.

 

6 months ended

30 June 2018

6 months ended

30 June 2017

Net debt to Adjusted EBITDA2

 

2.5x

 

1.9x

Free cash flow2 - €'million

 

31.4

 

26.2

Free cash flow conversion2

 

61.0%

 

57.5%

The Group defines free cashflow as net cash from operating activities including cash outflows for finance costs, refurbishment capital expenditure and excluding adjusting cash items. Adjusting cash items are added back to show how much cash would be generated on a normalised basis. The Group allocates approximately 4% of annual revenue to refurbishment capital expenditure to ensure the portfolio remains fresh for our customers and adheres to brand standards. Free cash flow conversion was lower at 57.5% for the first six months last year due to the impact of a rental prepayment for Clayton Hotel Burlington Road.

Net Debt to Adjusted EBITDA2 remained relatively low at 2.5x at 30 June 2018.

Dalata's strong balance sheet helps support future growth

 

30 June 2018

31 Dec 2017

 

€'million

€'million

Non current fixed assets

 

 

 

 

Property, plant and equipment

 

1,116.5

 

998.8

Goodwill and intangible assets

 

54.6

 

54.6

Other non-current assets

 

8.2

 

9.5

 

 

 

 

 

Current assets

 

 

 

 

Trade receivables, inventory and other

 

36.9

 

22.5

Cash

 

22.7

 

15.7

Total assets

 

1,238.9

 

1,101.1

 

 

 

 

 

Equity

 

822.8

 

737.4

Loans and borrowings

 

297.1

 

260.1

Trade and other payables

 

73.1

 

64.9

Other liabilities

 

45.9

 

38.7

Total equity and liabilities

 

1,238.9

 

1,101.1

 

 

 

 

 

Loan to value ratio2

 

26.8%

 

26.3%

Return on capital employed2

 

10.6%

 

11.4%

Return on adjusted capital employed2

 

12.4%

 

12.5%

The Group is committed to maintaining a strong balance sheet with an appropriate level of gearing to ensure it can withstand any unforeseen shocks to the business and that it retains a strong covenant to attract potential landlords and investors, vital for the Group's leasing strategy for expansion in the United Kingdom.

This period Dalata achieved an adjusted return on capital employed of 12.4%. This figure excludes the investment of €143.7 million in future openings and new hotels that came into use just before June 2018.

 

Property, plant and equipment

The value of the Group's property, plant and equipment exceeded €1.1 billion at 30 June 2018. Property, plant and equipment increased by €117.7 million primarily due to additions (€66.7 million), and a net gain on the revaluation of land and buildings (€58.5 million), offset by the depreciation charge of €9.3 million.

A detailed breakdown of the €66.7 million additions is outlined in the table below.

 

H1 2018

€'million

H1 2017

€'million

Hotel assets acquired

 

6.9

 

8.8

Expenditure on assets under construction

 

45.0

 

17.1

Refurbishment capital expenditure

 

10.8

 

8.6

Development capital expenditure

 

4.0

 

3.4

Additions to property, plant and equipment

 

66.7

 

37.9

During the period, the Group purchased a further 29 suites (39 rooms) at Clayton Hotel Liffey Valley, Dublin for a total cost of €6.9 million, including acquisition related costs of €0.6 million. Expenditure on assets under construction included €24.2 million on new hotel builds and €20.8 million on extensions to existing hotels. The Group also spent €10.8 million in refurbishment capital expenditure in the first half of 2018 which included €5.4 million spent on refurbishing 823 bedrooms and €5.4 million invested in on-going maintenance to refurbish public areas, upgrade technology and ensure the Group continues to adhere to health and safety standards. A further €4.0 million was spent bringing new hotels in line with brand standards.

Financial Structure

 

 

€'million

Loans and borrowings at 31 December 2017

 

 

 

260.1

New facilities drawn down

 

 

 

58.0

Capital repayment

 

 

 

(21.9)

Effect of foreign exchange movements

 

 

 

0.3

Amortisation of debt costs

 

 

 

0.6

Loans and borrowings at 30 June 2018

 

 

 

297.1

The Group had bank debt of €297.1 million at 30 June 2018, of which €196.8 million (£174.4 million) was denominated in sterling. As at 30 June 2018, the Group had drawn €47 million from the multicurrency revolving credit facility, leaving undrawn facilities of €55.2 million of which €33 million was in the form of a revolving credit facility and €22.2 million of a term loan facility.

On 24 August 2018, the Group entered into an additional £100 million revolving credit facility with the existing club of banks.

The current debt facilities are due to mature in early 2020. However, the Group is currently reviewing its refinancing options and strategies with banking partners and expects to have a new facility in place within the next six months.

 

Current pipeline of over 2,800 rooms including 1,070 rooms announced in 2018

 

Rooms

Planning granted

Construction started

Estimated

opening

Dublin Hotels and Extensions

 

 

 

 

Clayton Hotel Charlemont

189

x

x

Nov 2018

Extension at Maldron Hotel Parnell Square

53

x

x

Dec 2018

Maldron Hotel Merrion Road

140

x

 

Q3 2020

 

 

 

 

 

Regional Ireland Hotels

 

 

 

 

Maldron Hotel South Mall, Cork

163

x

x

Dec 2018

 

 

 

 

 

UK Hotels

 

 

 

 

Maldron Hotel, Newcastle

265

x

x

Dec 2018

Clayton Hotel Aldgate, London

212

x

x

Dec 2018

Clayton Hotel, Bristol

252

 

 

Q3 2020

Maldron Hotel, Glasgow

300

 

 

Q4 2020

Clayton Hotel, Glasgow

294

 

 

Q4 2020

Maldron Hotel, Birmingham

330

 

 

Q4 2020

Clayton Hotel, Manchester

329

x

 

Q1 2021

Maldron Hotel Manchester

276

 

 

Q1 2021

Total pipeline

2,803

 

 

 

Dalata completed and opened over 570 new rooms to date in 2018. The Group is committed to growing its portfolio of hotels with over 2,800 new rooms in its pipeline, of which 1,070 were announced during 2018.

The development of the hotels in Ireland and the UK remain on track and on budget. Clayton Hotel Charlemont in Dublin and Maldron Hotel South Mall in Cork are scheduled to open at the end of 2018. Maldron Hotel Newcastle will open earlier than originally expected in December 2018.

Construction of Clayton Hotel Aldgate, London is scheduled to be completed later this year. Planning has been approved for the new Clayton Hotel Manchester on Portland Street and construction is expected to commence within the next month. Formal planning applications have been submitted for our new hotels in Scotland, Clayton Hotel Glasgow with 294 rooms and Maldron Hotel Glasgow with 300 rooms.

The demolition of the Tara Towers Hotel in Dublin will begin in the final quarter of this year to make way for a new 140-bedroom hotel branded Maldron Hotel Merrion Road and 69 residential units. Dalata will manage the construction of the entire development, retain ownership of the hotel and are in negotiations to forward sell the residential units.

During 2018, Dalata also signed agreements to lease two new Maldron hotels in Birmingham and Manchester and a new Clayton hotel in Bristol. Preparations for the planning processes are currently underway.

1 Revenue and cost of sales have been restated for the period ending 30 June 2017 as a result of the retrospective application of IFRS 15. The impact is limited to a reclassification between revenue and cost of sales in profit or loss

2 See Supplementary Financial Information which contains definitions and reconciliations of Alternative Performance Measures ("APM") and other definitions

3 ITIC - Competitiveness and Investment: Preparing for Tourism's Future Budget 2019

 

IFRS 15 Revenue from Contracts with Customers

The Group applied IFRS 15, which was effective for the first time for the Group from 1 January 2018, in the condensed consolidated interim financial statements for the six months ended 30 June 2018. Under IFRS 15, all revenue from customer contracts must be recorded on a gross basis with commissions deducted separately as cost of sales. The impact is limited to a reclassification between revenue and cost of sales in profit or loss, with no overall effect on EBITDAR or profit.

As a result of the impact of IFRS 15, room revenue within total revenue includes an additional €2.2 million as it is presented on a gross basis and cost of sales has also increased by €2.2 million due to the inclusion of commissions. The Group has restated the comparative numbers for the period ended 30 June 2017 resulting in an increase to revenue of €1.5 million and an increase in cost of sales of €1.5 million.

IFRS 15 also affects a number of key performance metrics which are based on revenue. RevPAR for the group and individual hotels has increased as average room rates are now presented gross for all customer contracts. The EBITDAR margin for the Group and the reported segments has decreased as it is calculated as a percentage of a higher revenue number. All prior period comparatives have been restated to include the impact of IFRS 15.

Note two of the attached condensed consolidated interim financial statements contains further information.

IFRS 16 Leases

Under IFRS 16, which will become effective on 1 January 2019, the distinction between operating and finance leases is removed for lessees and almost all leases are reflected in the statement of financial position. As a result, an asset (the right-of-use of the leased item) and a financial liability to pay rental expenses are recognised. Fixed rental expenses will be removed from profit or loss and replaced with finance costs on the lease liability and depreciation on the right-of-use asset.

Despite the significant impact of the accounting change in the financial statements the Group foresees no impact on strategy and no impact on commercial negotiations for leases. The UK tax authorities announced in July that they will allow tax deductions in line with the revised accounting treatment. Given the front-loading impact of expenses under IFRS 16, this treatment means there will be a positive cash flow impact. The Irish tax authorities have not yet announced their approach.

Bank covenants as currently calculated under existing debt arrangements will not be impacted as their calculation is based on GAAP on date of entry into the agreements.

 

Principal Risks and Uncertainties

The Group's principal risks and uncertainties for the remainder of 2018 are:

·   Geo-political events could result in uncertainty and have an impact on general economic activity in the UK and Ireland and further afield which in turn could impact on the numbers of people looking to stay at hotels in both countries 

·     A significant reduction in the value of sterling would also make Ireland a more expensive destination for UK visitors which in turn could impact on the number of UK residents staying in Irish hotels. UK visitors are an important part of our business in Ireland but approximately 86% of our rooms in Dublin were sold to either domestic consumers or visitors from countries other than the UK in the first half of 2018. Approximately 7% of our rooms sold in our Regional Ireland hotels in the first half of the year were to UK customers 

·     A very significant proportion of EBITDA is generated by the Dublin hotel portfolio, and therefore any downturn in the Dublin market is likely to have a material impact on the Group's performance. There is also risk associated with an increase in supply of rooms in the Dublin market in the future. However, demand for hotel rooms in Dublin continues to grow and the Group believes the market can support increases in supply. Additionally, the UK expansion strategy will reduce the proportion of EBITDA produced out of Dublin over time 

·   The opening of the six new hotels and four hotel extensions in 2018 presents an operational risk that expected earnings may not materialise. The Group is minimising this risk by having teams in place and contracting business with corporates and tour operators well in advance of the hotels' opening dates. Senior management have considerable past experience and a strong track record of success at opening new hotels. The two hotels already completed are performing well and have opened successfully 

·   As Dalata expands there is a risk that the organisation's unique culture and values could be damaged or it fails to retain key expertise and develop talent within the Group. The rollout of the Dalata business model is dependent on the availability of key people to manage the hotels and the retention of its strong culture. The Group is actively managing these risks through the development of the "Dalata Way" values programme and a sustainable development strategy, together with strong communication and training to all employees 

·   There is ongoing speculation that the VAT rate on hospitality services in Ireland may increase from 9% to 13.5%. Management do not know at this point if such an increase will occur. If the rate were to increase, management estimate that, all other things remaining equal, Group revenue could fall by up to 2.0% in a full trading year

 

Supplementary Financial Information

Alternative Performance Measures ("APM") and other definitions

The Group reports certain alternative performance measures ('APMs') that are not required under International Financial Reporting Standards ('IFRS') which represent the generally accepted accounting principles ('GAAP') under which the Group reports. The Group believes that reporting these APMs provides useful supplemental information which, when viewed in conjunction with our IFRS financial information, provides investors with a more meaningful understanding of the underlying financial and operating performance of the Group and its operating segments.

These APMs are primarily used for the following purposes:

·     to evaluate the historical and planned underlying results of our operations; and

·     to discuss and explain the Group's performance with the investment analyst community.

 

None of the APMs should be considered as an alternative to financial measures derived in accordance with GAAP. The APMs can have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP. These performance measures may not be calculated uniformly by all companies and therefore may not be directly comparable with similarly titled measures and disclosures of other companies.

The principal APMs used by the Group, together with reconciliations where the non-GAAP measures are not readily identifiable from the financial statements, are as follows:         

(i) EBITDA

 

EBITDA is a non-GAAP measure representing earnings before interest, tax, depreciation and amortisation. A reconciliation is presented in note 4 to the condensed consolidated financial statements for the six months ended 30 June 2018.

 

(ii) Segments EBITDA

 

Segments EBITDA represents the EBITDA for the Group's reportable segments: Dublin, Regional Ireland, United Kingdom and Managed Hotels. A reconciliation is presented in note 4 to the condensed consolidated financial statements for the six months ended 30 June 2018.

 

(iii) Segments EBITDAR

 

Segments EBITDAR is a non-GAAP measure representing earnings before rent, interest, tax, depreciation and amortisation for each of the reportable segments: Dublin, Regional Ireland, United Kingdom and Managed Hotels. Refer to note 4 to the condensed consolidated financial statements for the six months ended 30 June 2018 for the reconciliation.

 

(iv) Segments EBITDAR margin

Segments EBITDAR margin represents "Segments EBITDAR" as a percentage of the total revenue for the Group's segments, Dublin, Regional Ireland and United Kingdom.

 

(v) Adjusted EBITDA

 

Adjusted EBITDA is a non-GAAP measure representing earnings before interest, tax, depreciation and amortisation adjusted for revaluation movements and other items considered by management to be non-recurring or unusual in nature. A calculation is presented in note 4 to the condensed consolidated financial statements for the six months ended 30 June 2018.

 

(vi) Adjusted diluted earnings per share (EPS)

 

Adjusted Diluted EPS is a non-GAAP measure representing the underlying operating performance of the Group excluding the tax adjusted effects of revaluation movements and other items considered by management to be non-recurring or unusual in nature. The calculation is presented in note 22 to the condensed consolidated financial statements for the six months ended 30 June 2018.

 

(vii) Net Debt to Adjusted EBITDA

 

Net Debt to Adjusted EBITDA represents loans and borrowings less cash and cash equivalents divided by the "Adjusted EBITDA" for a twelve month period. The calculation at 30 June 2018 is based on the Group's adjusted EBITDA for the period from 1 July 2017 to 30 June 2018.

Calculation - €'000

Reference in Financial Statements

30 June

 2018

31 December

2017

Loans and borrowings

Note 18

297,060

260,139

Add back:

 

 

 

Deferred issue costs repayable within 1 year

Note 18

1,046

1,094

Deferred issue costs repayable after 1 year

Note 18

566

1,077

Gross loans and borrowings

 

298,672

 262,310

Less: cash and cash equivalents

Statement of Financial Position

(22,657)

(15,745)

Net debt

 

276,015

246,565

 

 

 

 

Adjusted EBITDA:

 

 

 

For 12 months ended 31 December 2017

See below (xiii)

-

104,873

For 12 months ended 30 June 2018

See below (xiii)

110,259

-

Net debt to Adjusted EBITDA

 

2.5x

2.4x

 

(viii) Effective tax rate

The Group's effective tax rate represents the annual tax charge divided by the profit before tax presented in the condensed consolidated statement of profit or loss and other comprehensive income for the six months ended 30 June 2018.

 

Calculation - €'000

Reference in Financial Statements

6 months ended

30 June

 2018

6 months ended

30 June

2017

Tax charge

Statement of Comprehensive Income

4,924

4,360

Profit before tax

35,374

32,707

Effective tax rate

 

13.9%

13.3%

 

(ix) Free cash flow (after interest and tax payments)

 

Free cash flow is presented to show the cash available to fund acquisitions, development expenditure and loan repayments. The Group calculates free cash flow as net cash from operating activities, less amounts paid for interest, finance costs and refurbishment capital expenditure and after adding back cash paid in respect of adjusting items to EBITDA. Adjusting cash items in 2017 represent acquisition-related costs and are added back to show how much cash would be generated on a normalised basis. The Group allocates approximately 4% of annual revenue to refurbishment capital expenditure to ensure the portfolio remains fresh for its customers and adheres to brand standards.

 

Calculation - €'000

Reference in Financial Statements

6 months ended

30 June

 2018

6 months ended

30 June

2017

Net cash from operating activities

Cashflow Statement

43,268

37,460

Less cash outflows:

 

 

 

Interest and finance costs

Cashflow Statement

(4,646)

(4,829)

Refurbishment capital expenditure*

 

(7,223)

(6,472)

Add back adjusting cash items:

 

 

 

Acquisition-related costs

Note 5

-

71

Free cashflow

 

31,399

26,230

 

* For interim reporting refurbishment capital expenditure is calculated as 4% of total revenue for the six-month period

 

(x) Free cash flow conversion

Free cash flow conversion is presented to show the proportion of the Group's adjusted EBITDA, after adding back non-cash items, that is converted to free cash flow. The accounting cost of the LTIP and SAYE are excluded as they do not have an impact on cash.

 

Calculation - €'000

Reference in Financial Statements

6 months ended

30 June

 2018

6 months ended

30 June

2017

Adjusted EBITDA

Note 4

50,277

44,891

Add back non-cash items:

 

 

 

Share based payment expense

Note 4

1,195

728

Adjusted Cash EBITDA

 

51,472

45,619

Free cash flow

Per above (ix)

31,399

26,230

Free cash flow conversion

 

61.0%

57.5%

(xi) Return on capital employed (ROCE)

Return on capital employed represents adjusted EBIT (see (xiii) below) expressed as a percentage of the Group's average capital employed. Capital employed is defined as total assets less total liabilities and excludes the accumulated revaluation gains/losses included in property, plant and equipment, net debt, derivative financial instruments and taxation related balances. The Group's net assets are also adjusted to reflect the average level of acquisition investment spend and the average level of working capital for the accounting period. The average capital employed is the simple average of the opening and closing balance sheet figures.

Adjusted EBIT represents the Group's adjusted earnings before interest and tax excluding the effect of revaluation movements and items considered by management to be non-recurring or unusual in nature.

Calculation - €'000

Reference in

Financial Statements

12 months ended

30 June 2018

12 months ended

31 Dec 2017

Net assets at balance sheet date

Statement of Financial Position

 822,848

 737,393

Revaluation uplift in Property, Plant and Equipment*

 

(231,717)

(173,177)

Net deferred tax liabilities

Note 19

35,332

28,287

Current tax liabilities

Statement of Financial Position

1,561

351

Derivatives

Statement of Financial Position

1,072

1,777

Net debt

See above (vii)

276,015

246,565

Capital employed

 

905,111

841,196

Average capital employed

 

873,153

783,143

Adjusted EBIT

See below (xiii)

 92,831

 89,139

Return on average capital employed

10.6%

11.4%

* Includes the combined net revaluation uplift included in property, plant and equipment since the revaluation policy was adopted in 2014 or in the case of hotel assets acquired after this date, since the date of acquisition

(xii) Adjusted return on capital employed (ROCE)

Adjusted return on capital employed is presented to show the Group's return on capital excluding the impact of investment in future hotel openings.

Calculation - €'000

Reference in

Financial Statements

12 months ended

30 June 2018

12 months ended

31 Dec 2017

Capital employed

See above (xi)

905,111

841,196

Less assets under construction at period end

Note 11

 (94,134)

 (97,365)

Assets recently completed in the period*

Note 11

(49,530)  

-

Adjusted capital employed

 

761,447

743,831

Average adjusted capital employed

 

 752,639

713,028

Adjusted EBIT excluding pre-opening costs and results from recently completed hotels **

 

93,349

89,139

Adjusted return on average capital employed

12.4%

12.5%

* Assets recently completed in the period include Maldron Hotel Belfast City (March 2018), the extensions at Clayton Hotel Dublin Airport (June/July 2018) and Maldron Hotel Sandy Road, Galway (June 2018) and part of the extension at Clayton Hotel Ballsbridge, Dublin, which completed during 2018 and therefore did not benefit from a full twelve months of trading

** Amount represents Adjusted EBIT excluding the pre-opening costs of €0.7 million (2017: nil) and earnings from new build hotel recently completed in the period of €0.2 million (2017: nil) which are excluded in "adjusted capital employed" to ensure consistent comparability

 

(xiii) Calculation of adjusted EBITDA and adjusted earnings before interest and tax (adjusted EBIT) for a twelve month period ending 30 June 2018

The table below calculates the adjusted EBITDA and adjusted EBIT for a twelve month period ending 30 June 2018 for use in the calculation of Net Debt to Adjusted EBITDA in (vii) and return on capital employed in (xi) above.

Calculation - €'000

Reference in Financial Statements

Adjusted EBITDA

Depreciation and amortisation

Adjusted EBIT

Twelve months ended 31 December 2017 *

 

104,873

(15,734)

89,139

Six months ended 30 June 2017

Note 4

(44,891)

7,631

(37,260)

Six months ended 31 Dec 2017

 

59,982

(8,103)

51,879

Six months ended 30 June 2018

Note 4

50,277

(9,325)

40,952

Twelve months ended 30 June 2018

 

110,259

(17,428)

92,831

 

* Page 120 of the Annual report and accounts 2017

 (xiv) Loan to value ratio

Loan to value ratio is presented to show the Group's degree of leverage.

Calculation - €'000

Reference in Financial Statements

30 June

2018

31 Dec

2017

Property, plant & equipment

Note 11

1,116,481

 

998,812

Gross loans and borrowings

See above (vii)

298,672

 

262,310

Loan to value ratio

 

26.8%

 

26.3%

Other definitions:

(i) Revenue per available room (RevPAR)

Revenue per available room is calculated as total rooms revenue divided by number of available rooms, which is also equivalent to the occupancy rate multiplied by the average daily room rate achieved.

(ii) Hotel assets

Hotel assets represents the value of property, plant and equipment per the condensed consolidated statement of financial position at 30 June 2018.

 

Statement of directors' responsibilities

For the half year ended 30 June 2018

The Directors are responsible for preparing this interim management report in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU, the Transparency (Directive 2004/109/EC) Regulations 2007 ("Transparency Directive"), and the Transparency Rules of the Central Bank of Ireland.

In preparing the interim financial information, the directors are required to:

prepare and present the interim financial information in accordance with IAS 34 Interim Financial Reporting as adopted by the EU, the Transparency (Directive 2004/109/EC) Regulations 2007 ("Transparency Directive"), and the Transparency Rules of the Central Bank of Ireland;

ensure the interim financial information has adequate disclosures;

select and apply appropriate accounting policies; and

make accounting estimates that are reasonable in the circumstances.

The directors are responsible for designing, implementing and maintaining such internal controls as they determine is necessary to enable the preparation of the interim financial information that is free from material misstatement whether due to fraud or error.

We confirm that to the best of our knowledge:

(1)  the condensed set of financial statements in the half-yearly financial report of Dalata Hotel Group plc ("the Company") for the six months ended 30 June 2018 ("the interim financial information") which comprises the condensed consolidated statement of comprehensive income, condensed consolidated statement of financial position, condensed consolidated statement of changes in equity, condensed consolidated statement of cash flows and the related explanatory notes, have been presented and prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union.

 

(2)  The interim financial information presented, as required by the Transparency (Directive 2004/109/EC) Regulations 2007, includes:

a.    an indication of important events that have occurred during the first 6 months of the financial year, and their impact on the condensed set of financial statements;

b.    a description of the principal risks and uncertainties for the remaining 6 months of the financial year

c.     related party transactions that have taken place in the first 6 months of the current financial year and that have materially affected the financial position or the performance of the enterprise during that period; and

d.    any changes in the related party transactions described in the last annual report that could have a material effect on the financial position or performance of the enterprise in the first 6 months of the current financial year.

 

On behalf of the board

 

 

Director                                                                                                Director

 

 

 

 

 

 

 

 

 

 

Unaudited condensed consolidated

interim financial statements

 

for the six months ended 30 June 2018

 

Dalata Hotel Group plc

Unaudited condensed consolidated statement of comprehensive income

for the six months ended 30 June 2018

 

 

 

Restated*

 

 

6 months

   6 months

 

 

ended

ended

 

 

 30 June

30 June

 

 

2018

2017

 

Note

€'000

€'000

 

 

 

 

Continuing operations

 

 

 

Revenue

4

180,584

163,333

Cost of sales

 

(67,204)

(62,422)

 

 

              

                

 

 

 

 

Gross profit

 

113,380

100,911

Administrative expenses

5

(74,158)

(63,506)

Other income

6

140

484

 

 

              

                

 

 

 

 

Operating profit

 

39,362

37,889

Finance costs

7

(3,988)

(5,182)

 

 

              

                

 

 

 

 

Profit before tax

 

35,374

32,707

Tax charge

9

(4,924)

(4,360)

 

 

              

                

 

 

 

 

Profit for the period attributable to owners of the Company

 

30,450

28,347

 

 

              

                

Other comprehensive income

 

 

 

Items that will not be reclassified to profit or loss

 

 

Revaluation of property

11

60,130

5,266

Related deferred tax

 

(6,657)

(452)

 

 

              

                

 

 

53,473

4,814

Items that are or may be reclassified subsequently to profit or loss

 

 

 

Exchange difference on translating foreign operations

 

(24)

(7,366)

(Loss)/gain on net investment hedge

 

(262)

5,361

Fair value movement on cashflow hedges

12

196

249

Cashflow hedges - reclassified to profit or loss

12

509

668

Related deferred tax

 

(88)

(115)

 

 

              

                

 

 

331

(1,203)

 

 

              

                

Other comprehensive income for the period, net of tax

 

53,804

3,611

 

 

              

                

Total comprehensive income for the period attributable to owners of the Company

84,254

31,958

 

 

              

                

Earnings per share

 

 

 

Basic earnings per share

22

16.6 cent

15.5 cent

 

 

              

                

 

 

 

 

Diluted earnings per share

22

16.4 cent

15.4 cent

 

 

              

                

 

 

 

 

*Revenue and cost of sales have been restated for the period ending 30 June 2017 as a result of the retrospective application of IFRS 15. The impact is limited to a reclassification between revenue and cost of sales in profit or loss (note 2).

Dalata Hotel Group plc

Unaudited condensed consolidated statement of financial position

at 30 June 2018

 

Note

30 June

31 December

 

 

2018

2017

Assets

 

€'000

€'000

Non-current assets

 

 

 

Intangible assets and goodwill

10

54,557

54,562

Property, plant and equipment

11

1,116,481

998,812

Investment property

 

1,585

1,585

Deferred tax assets

19

2,330

3,571

Trade and other receivables

13

4,349

4,343

Derivatives

12

-

1

 

 

                  

                 

 

 

 

 

Total non-current assets

 

1,179,302

1,062,874

 

 

                  

                 

Current assets

 

 

 

Trade and other receivables

13

35,248

20,704

Inventories

 

1,671

1,765

Cash and cash equivalents

17

22,657

15,745

 

 

                  

                 

 

 

 

 

Total current assets

 

59,576

38,214

 

 

                  

                 

 

 

 

 

Total assets

 

1,238,878

1,101,088

 

 

                  

                 

Equity

 

 

 

Share capital

21

1,843

1,837

Share premium

21

503,113

503,113

Capital contribution

 

25,724

25,724

Merger reserve

 

(10,337)

(10,337)

Share-based payment reserve

 

2,805

2,753

Hedging reserve

 

(1,075)

(1,692)

Revaluation reserve

 

208,579

155,106

Translation reserve

 

(12,442)

(12,156)

Retained earnings

 

104,638

73,045

 

 

                  

                 

 

 

 

 

Total equity

 

822,848

737,393

 

 

                  

                 

Liabilities

 

 

 

Non-current liabilities

 

 

 

Loans and borrowings

18

281,306

241,933

Deferred tax liabilities

19

37,662

31,858

Derivatives

12

1,072

1,778

Provision for liabilities

15

3,925

4,716

 

 

                  

                 

 

 

 

 

Total non-current liabilities

 

323,965

280,285

 

 

                  

                 

Current liabilities

 

 

 

Loans and borrowings

18

15,754

18,206

Trade and other payables

14

73,114

64,853

Current tax liabilities

 

1,561

351

Provision for liabilities

15

1,636

-

 

 

                  

                 

 

 

 

 

Total current liabilities

 

92,065

83,410

 

 

                  

                 

 

 

 

 

Total liabilities

 

416,030

363,695

 

 

                  

                 

 

 

 

 

Total equity and liabilities

 

1,238,878

1,101,088

 

 

                  

                 

 

 

 

 

Dalata Hotel Group plc          

Unaudited condensed consolidated statement of changes in equity

for the six months ended 30 June 2018

 

Attributable to owners of the Company

 

 

 

 

 

Share-based

 

 

 

 

 

 

 

Share

Share

Capital

Merger

payment

Hedging

Revaluation

Translation

Retained

 

 

 

capital

premium

contribution

reserve

reserve

reserve

reserve

reserve

earnings

Total

 

 

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2018

1,837

503,113

25,724

(10,337)

2,753

(1,692)

155,106

(12,156)

73,045

737,393

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

-

-

-

30,450

30,450

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

Exchange difference on translating foreign operations

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(24)

 

-

 

(24)

 

Loss on net investment hedge

-

-

-

-

-

-

-

(262)

-

(262)

 

Revaluation of property

-

-

-

-

-

-

60,130

-

-

60,130

 

Fair value movement on cashflow hedges

-

-

-

-

-

196

-

-

-

196

 

Cashflow hedges - reclassified to profit or loss

-

-

-

-

-

509

-

-

-

509

 

Related deferred tax

-

-

-

-

-

(88)

(6,657)

-

-

(6,745)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

-

-

617

53,473

(286)

30,450

84,254

 

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners of the Company:

 

 

 

 

 

 

 

 

 

 

 

Equity-settled share-based payments

-

-

-

-

1,195

-

-

-

-

1,195

 

Vesting of share awards

6

-

-

-

(1,143)

-

-

-

1,143

6

 

 

 

 

 

 

 

 

 

 

 

 

 

Total transactions with owners of the Company

6

-

-

-

52

-

-

-

1,143

1,201

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2018

1,843

503,113

25,724

(10,337)

2,805

(1,075)

208,579

(12,442)

104,638

822,848

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dalata Hotel Group plc          

Unaudited condensed consolidated statement of changes in equity

for the six months ended 30 June 2017                    

 

 

Attributable to owners of the Company

 

 

 

 

 

 

     Share-based

 

Share

Share

Capital

Merger

 payment

Hedging

Revaluation

Translation

Retained

 

 

capital

premium

contribution

reserve

reserve

reserve

reserve

reserve

earnings

Total

 

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

At 1 January 2017

1,830

503,113

25,724

(10,337)

2,126

(3,106)

107,531

(9,974)

3,475

620,382

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

-

-

-

28,347

28,347

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

Exchange difference on translating foreign operations

-

-

-

-

-

-

-

(7,366)

-

(7,366)

Gain on net investment hedge

-

-

-

-

-

-

-

5,361

-

5,361

Revaluation of properties

-

-

-

-

-

-

5,266

-

-

5,266

Transfer of revaluation gains to retained earnings on sale of property

 

-

 

-

 

-

 

-

 

-

 

-

 

(460)

 

-

 

460

 

-

Fair value movement on cash flow hedges

-

-

-

-

-

249

-

-

-

249

Cash flow hedges - reclassified to profit or loss

-

-

-

-

-

668

-

-

-

668

Related deferred tax

-

-

-

-

-

(115)

(452)

-

-

(567)

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

-

-

802

4,354

(2,005)

28,807

31,958

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners of the Company:

 

 

 

 

 

 

 

 

 

 

Equity-settled share-based payments

-

-

-

-

728

-

-

-

-

728

Vesting of share awards

7

-

-

-

(1,063)

-

-

-

1,063

7

Additional costs of prior period share issues

-

-

-

-

-

-

-

-

(261)

(261)

 

 

 

 

 

 

 

 

 

 

 

Total transactions with owners of the Company

7

-

-

-

(335)

-

-

-

802

474

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2017

1,837

503,113

25,724

(10,337)

1,791

(2,304)

111,885

(11,979)

33,084

652,814

 

 

 

 

 

 

 

 

 

 

 

 

 

Dalata Hotel Group plc

Unaudited condensed consolidated statement of cash flows

for the six months ended 30 June 2018

 

 

 

 

6 months

6 months

 

 

ended

ended

 

 

30 June

30 June

 

 

2018

2017

 

 

€'000

€'000

Cash flows from operating activities

 

 

 

Profit for the period

 

30,450

28,347

Adjustments for:

 

 

 

Depreciation of property, plant and equipment

 

9,303

7,631

Amortisation of intangible asset

 

22

-

Net revaluation movements through profit or loss

 

1,590

(700)

Share-based payment expense

 

1,195

728

Finance costs

 

3,988

5,182

Tax charge

 

4,924

4,360

Gain on sale of property resulting in operating lease

 

-

(200)

Gain on disposal of subsidiary

 

-

(154)

 

 

                

                

 

 

 

 

 

 

51,472

45,194

 

 

 

 

Increase in trade and other payables

 

7,316

3,579

Increase in trade and other receivables

 

(12,180)

(8,642)

Decrease in inventories

 

94

268

Tax paid

 

(3,434)

(2,939)

 

 

                

                

 

 

 

 

Net cash from operating activities

 

43,268

37,460

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of property, plant and equipment

 

(67,537)

(34,262)

Deposits paid on acquisitions

 

-

(6,250)

Proceeds on sale of property resulting in operating lease

 

-

25,121

Proceeds on disposal of subsidiary

 

-

114

 

 

                 

                 

 

 

 

 

Net cash used in investing activities

 

(67,537)

(15,277)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from vesting of share awards

 

6

7

Interest and finance costs paid

 

(4,646)

(4,829)

Receipt of bank loans

 

58,009

-

Repayment of bank loans

 

(21,921)

(8,400)

 

 

                 

                 

 

 

 

 

Net cash from/ (used in) financing activities

 

31,448

(13,222)

 

 

                 

                 

 

 

 

 

Net increase in cash and cash equivalents

 

7,179

8,961

 

 

 

 

Cash and cash equivalents at beginning of period

 

15,745

81,080

Effect of movements in exchange rates

 

(267)

(1,109)

 

 

                 

                 

 

 

 

 

Cash and cash equivalents at end of period

 

22,657

88,932

 

 

                 

                 

 

 

 

 

 

 

 

Dalata Hotel Group plc

Notes to the unaudited condensed consolidated interim financial statements

 

1          General information and basis of preparation

 

Dalata Hotel Group plc ('the Company') is a company incorporated in the Republic of Ireland.  The unaudited condensed consolidated financial statements for the six months ended 30 June 2018 (the 'Interim Financial Statements') include the Company and its subsidiaries (together referred to as the 'Group'). The Interim Financial Statements were authorised for issue by the Directors on 3 September 2018. 

 

These unaudited Interim Financial Statements have been prepared by Dalata Hotel Group plc in accordance with IAS 34 Interim Financial Reporting ('IAS 34') as adopted by the European Union.  They do not include all of the information required for a complete set of financial statements prepared in accordance with IFRS as adopted by the European Union. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since 31 December 2017. They should be read in conjunction with the consolidated financial statements of Dalata Hotel Group plc, which were prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, as at and for the year ended 31 December 2017.

 

These Interim Financial Statements are presented in Euro, rounded to the nearest thousand, which is the functional currency of the parent company and also the presentation currency for the Group's financial reporting. 

 

The preparation of Interim Financial Statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results could differ materially from these estimates.  In preparing these Interim Financial Statements, the critical judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2017.

 

The Interim Financial Statements do not constitute statutory financial statements. The statutory financial statements for the year ended 31 December 2017, together with the independent auditor's report thereon, have been filed with the Companies Registration Office and are available on the Company's website www.dalatahotelgroup.com.  The auditor's report on those financial statements was not qualified and did not contain an emphasis of matter paragraph.

 

2          Significant accounting policies

 

The accounting policies applied in these Interim Financial Statements are consistent with those applied in the consolidated financial statements as at and for the year ended 31 December 2017 with the exception of the impact of two new IFRS accounting standards.

 

Two new IFRS standards, IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments, are effective for the first time in the financial year ending 31 December 2018 and their impact on the Group's reported profit or net assets in these Interim Financial Statements are discussed below.

 

None of the amendments to standards or interpretations, with the exception of IFRS 15 and IFRS 9, that are effective for the first time in the financial year ending 31 December 2018 have had an impact on the Group's reported profit or net assets in these Interim Financial Statements.

 

The Group has provided an update on IFRS 16 Leases which will be effective from 1 January 2019 in note 24, Standards issued but not yet effective.

          

IFRS 9 Financial Instruments

 

IFRS 9 Financial Instruments replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. The Group has assessed the impact from the application of IFRS 9 on its consolidated financial statements. The vast majority of financial assets held are trade receivables and cash, which are continuing to be accounted for at amortised cost. The derivative asset continues to be accounted for at fair value and as it is an effective hedge, any gains or losses are recorded in other comprehensive income and equity. On this basis, the classification and measurement changes have not caused a material impact on the Group's consolidated financial statements.

 

Given historic loss rates, normal receivable ageing and the significant portion of trade receivables that are within agreed terms, the move from an incurred loss model to an expected loss model has not had a material impact.

 

IFRS 15 Revenue from Contracts with Customers

 

IFRS 15 Revenue from Contracts with Customers replaces the existing guidance in IAS 18  Revenue. The Group has undertaken an assessment of revenue earned in respect of its customer agreements. The Group previously accounted for revenue earned in connection with certain customers, net of commissions.

 

Under IFRS 15, all such revenue is now recorded on a gross basis with commissions deducted separately as cost of sales. Accordingly, the impact is limited to a reclassification between revenue and cost of sales in profit or loss.

 

The Group has applied IFRS 15 retrospectively. If IFRS 15 had been effective from 1 January 2017, this would have resulted in an increase in revenue of €1.5 million for the period ended 30 June 2017, with a corresponding increase in cost of sales of the same amount. These comparatives have been restated in the current condensed consolidated statement of comprehensive income. The impact of this change on the financial statements for the Group for the period ended 30 June 2017 is presented below.

 

 

30 June 2017

 

 

 

As reported in

30 June

30 June

 

2017 Interim

2017

2017

 

Financial Statements

Adjustments

Restated

 

€'000

€'000

'000

Unaudited condensed consolidated statement of comprehensive income

 

 

Continuing operations

 

 

 

Revenue

161,801

1,532

163,333

Cost of sales

(60,890)

(1,532)

(62,422)

 

______

______

______

 

 

 

 

Gross profit

100,911

-

100,911

 

             

               

              

 

 

 

 

 

3          Seasonality

 

Hotel revenue and operating profit are driven by seasonal factors as July and August are typically the busiest months in the operating cycle.  The table below analyses revenue, operating profit and profit before tax for the first half and second half of the year ended 31 December 2017.

 

Restated

6 months ended
30 June
2017

Restated

6 months
ended
 31 December
2017

Restated

Total year
ended
31 December 2017

 

€'000

€'000

€'000

 

 

 

 

Revenue

163,333

188,839

352,172

 

             

               

               

 

 

 

 

Operating profit

37,889

49,034

86,923

 

             

               

               

 

 

 

 

Profit before tax

28,347

39,961

68,308

 

             

               

               

 

The above table is provided for explanatory purposes. The actual split of revenue, operating profit and profit before tax for financial year 2018 will differ from the results above.

 

4          Operating segments

 

The Group's segments are reported in accordance with IFRS 8 Operating Segments. The segment information is reported in the same way as it is reviewed and analysed internally by the chief operating decision makers, primarily the CEO and the Board of Directors.

 

The Group segments its leased and owned business by geographical region within which the hotels operate being Dublin, Regional Ireland and United Kingdom. These, together with Managed Hotels, comprise the Group's four reportable segments.

 

Dublin, Regional Ireland and United Kingdom segments:

These segments are concerned with operating hotels that are either owned or leased by the Group. As at 30 June 2018, the Group owns 25 hotels (31 December 2017: 24 hotels, 30 June 2017: 23 hotels) and has effective ownership of one further hotel which it operates (31 December 2017: one hotel, 30 June 2017: one hotel). It also owns the majority of one further hotel it operates (31 December 2017: one hotel, 30 June 2017: none). The Group also leases nine hotel buildings from property owners and is entitled to the benefits and carries the risks associated with operating these hotels (31 December 2017: nine hotels, 30 June 2017: nine hotels).

 

On 13 March 2018, the Group began operations in Maldron Hotel, Belfast City a hotel owned by the Group (note 11). On 6 July 2018, the Group completed construction on Maldron Hotel, Kevin Street with operations beginning on the same date. This hotel is not included in the above figures for owned hotels as it was not operational in the period to 30 June 2018.

 

The Group derives revenue from leased and owned hotels primarily from room revenue and food and beverage revenue in restaurants, bars and banqueting. The main costs arising are payroll, cost of goods for resale, commissions paid to online travel agents on room sales, other operating costs and, in the case of leased hotels, rent paid to lessors.

 

 

Managed Hotels:

Under management agreements, the Group provides management services to third party hotel proprietors.

 

Revenue

 

Restated

 

6 months

6 months

 

ended

ended

 

30 June

30 June

 

2018

2017

 

€'000

€'000

 

 

 

Dublin

107,217

93,774

Regional Ireland

35,805

34,192

United Kingdom

36,990

34,255

Managed Hotels

572

1,112

 

______

______

Total revenue

180,584

163,333

 

               

                           

 

 

 

 

Revenue for each of the geographical locations represents the operating revenue (room revenue, food and beverage revenue and other hotel revenue) from leased and owned hotels situated in (i) Dublin, (ii) Regional Ireland and (iii) the United Kingdom.

 

Revenue from managed hotels represents the fees and other income earned from services provided in relation to partner hotels which are not owned or leased by the Group.

 

 

 

 

6 months

6 months

 

ended

ended

 

30 June

30 June

 

2018

2017

 

€'000

€'000

Segmental results - EBITDAR

 

 

Dublin

49,437

44,256

Regional Ireland

8,623

8,048

United Kingdom

13,305

12,894

Managed Hotels

572

1,112

 

______

______

EBITDAR for reportable segments

71,937

66,310

 

               

               

Segmental results - EBITDA

 

 

Dublin

35,769

30,044

Regional Ireland

8,071

7,376

United Kingdom

11,273

11,436

Managed Hotels

572

1,112

 

______

______

EBITDA for reportable segments

55,685

49,968

 

               

               

Reconciliation to results for the period

 

 

Segments EBITDA

55,685

49,968

Other income

140

484

Central costs

(4,353)

(4,833)

Share-based payment expense

(1,195)

(728)

 

______

______

Adjusted EBITDA

50,277

44,891

 

 

 

Acquisition-related costs

-

(71)

Loss on revaluation of land and buildings

(2,400)

(541)

Reversal of previously recognised revaluation losses

810

1,241

 

______

______

Group EBITDA

48,687

45,520

 

 

 

Depreciation of property, plant and equipment

(9,303)

(7,631)

Amortisation of intangible assets 

(22)

-

Finance costs

(3,988)

(5,182)

 

______

______

Profit before tax

35,374

32,707

Tax

(4,924)

(4,360)

 

______

______

 

 

 

Profit for the period

30,450

28,347

 

                 

               

 

 

 

 

Group EBITDA represents earnings before interest, tax, depreciation and amortisation of intangible assets.

Adjusted EBITDA is presented as an alternative performance measure to show the underlying operating performance of the Group excluding the effect of revaluation movements and items considered by management to be non-recurring or unusual in nature. Acquisition costs have been excluded to give a more meaningful measure given they are non-recurring items in nature. Consequently, Adjusted EBITDA represents Group EBITDA before:

·   Acquisition-related costs (note 5); and

·   Net revaluation movements through profit or loss (note 11).

 

The line item 'Central costs' includes costs of the Group's central functions including operations support, technology, sales and marketing, human resources, finance, corporate services and business development. Share-based payment expense is presented separately.

'Segmental results - EBITDAR' for Dublin, Regional Ireland and United Kingdom represents 'Segmental results - EBITDA' before rent. For leased hotels, the rent charge from lessors amounted to €16.3 million for the first six months of 2018 (6 months to 30 June 2017: €16.3 million).

'Segmental results - EBITDA' for Dublin, Regional Ireland and United Kingdom represents the 'Adjusted EBITDA' for each geographical location before central costs, share-based payments expense and other income. It is the net operational contribution of leased and owned hotels in each geographical location.

'Segmental results - EBITDA and EBITDAR' for managed hotels represents fees earned from services provided in relation to partner hotels. All of this activity is managed through Group central office and specific individual costs are not allocated to this segment.

Other geographical information

 

Revenue

 

6 months ended 30 June 2018

 

Restated

6 months ended 30 June 2017

 

Republic of Ireland

United Kingdom

 

Total

 

Republic of Ireland

United Kingdom

 

Total

 

€'000

€'000

€'000

 

€'000

€'000

€'000

 

 

 

 

 

 

 

 

Leased and owned hotels

143,022

36,990

180,012

 

127,966

34,255

162,221

Managed hotels

423

149

572

 

1,026

86

1,112

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

143,445

37,139

180,584

 

128,992

34,341

163,333

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets and liabilities                                             At 30 June 2018

 

At 31 December 2017

 

Republic of Ireland

United Kingdom

 

Total

 

Republic of Ireland

United Kingdom

 

Total

 

€'000

€'000

€'000

 

€'000

€'000

€'000

Assets

 

 

 

 

 

 

 

Intangible assets and goodwill

41,588

12,969

54,557

 

41,588

12,974

54,562

Property, plant and equipment

870,882

245,599

1,116,481

 

758,192

240,620

998,812

Investment property

1,585

-

1,585

 

1,585

-

1,585

Other non-current assets

3,263

1,086

4,349

 

3,231

1,112

4,343

Current assets

44,862

13,812

58,674

 

29,708

8,506

38,214

 

 

 

 

 

 

 

 

Total assets excluding derivatives and tax assets

962,180

273,466

1,235,646

 

834,304

263,212

1,097,516

 

 

 

 

 

 

 

 

Derivatives

 

 

-

 

 

 

1

Deferred tax assets

 

 

2,330

 

 

 

3,571

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

1,237,976

 

 

 

1,101,088

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Loans and borrowings

100,286

196,774

297,060

 

63,627

196,512

260,139

Trade and other payables

59,910

12,302

72,212

 

52,978

11,875

64,853

 

 

 

 

 

 

 

 

Total liabilities excluding provisions, derivatives and tax liabilities

160,196

209,076

369,272

 

116,605

208,387

324,992

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions

 

 

5,561

 

 

 

4,716

Derivatives

 

 

1,072

 

 

 

1,778

Current tax liabilities

 

 

1,561

 

 

 

351

Deferred tax liabilities

 

 

37,662

 

 

 

31,858

 

 

 

 

 

 

 

 

Total liabilities

 

 

415,128

 

 

 

363,695

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revaluation reserve

189,811

18,768

208,579

 

139,802

15,304

155,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The above information on assets and liabilities and the revaluation reserve is presented by country as it does not form part of the segmental information routinely reviewed by the chief operating decision makers.

 

Loans and borrowings are categorised according to their underlying currency. Loans and borrowings denominated in Sterling, including the borrowings which act as a net investment hedge of €196.8 million (£174.4 million) at 30 June 2018 (€196.5 million (£174.4 million) at 31 December 2017) are classified as liabilities in the United Kingdom. Loans and borrowings denominated in Euro are classified as liabilities in the Republic of Ireland.

 

5          Administrative expenses

 

 

6 months

6 months

 

ended

ended

 

30 June

30 June

 

2018

2017

 

€'000

€'000

 

 

 

Other administrative expenses

46,991

40,139

Acquisition-related costs

-

71

Hotel rental expenses

16,252

16,342

Depreciation

9,303

7,631

Loss on revaluation of property, plant and equipment

2,400

541

Reversal of prior period losses on revaluation of property, plant and equipment

 

(810)

 

(1,241)

Amortisation of other intangible asset

22

-

Foreign exchange losses

-

23

 

_______

_______

 

 

 

 

74,158

63,506

 

_______

______

               

6          Other income

 

 

6 months

6 months

 

ended

ended

 

30 June

30 June

 

2018

2017

 

€'000

€'000

 

 

 

Rental income from investment property

140

130

Gain on disposal of property freehold interest and subsidiary

-

354

 

_______

_______

 

140

484

 

_______

______

       

 

In the prior period to 30 June 2017, the Group completed the sale and operating leaseback of the Clayton Hotel, Cardiff for €25.1 million, resulting in a gain on sale of €0.2 million (after transaction costs of €0.1 million).

 

In the prior period to 30 June 2017, the Group disposed of a subsidiary undertaking which held the leasehold interest in the Croydon Park Hotel, Croydon, UK for €0.1 million and recorded a gain on disposal of €0.2 million.

 

7         Finance costs

 

 

6 months

6 months

 

ended

ended

 

30 June

30 June

 

2018

2017

 

€'000

€'000

 

 

 

Interest expense on bank loans and borrowings

3,887

3,853

Cashflow hedges - reclassified from other comprehensive income

509

668

Net exchange (gain)/loss on loans, borrowings, cash and cash equivalents

(78)

136

Other finance costs

888

1,188

Interest capitalised to property, plant and equipment (note 11)

(1,218)

(663)

 

_______

_______

 

3,988

5,182

 

_______

_______

 

 

 

The Group uses interest rate swaps to convert the interest rate on part of its debt from floating rate to fixed rate (note 12). This cash flow hedge cost is shown separately within finance costs and represents the additional interest the Group paid under the interest rate swaps.

 

Other finance costs include the amortisation of debt capitalised costs, commitment fees and other banking fees.

 

During the period, interest on loans and borrowings amounting to €1.2 million was capitalised to assets under construction on the basis that this cost was deemed to be directly attributable to the construction of qualifying assets (2017: €0.7 million). The capitalisation rates applied by the Group for the period, which were reflective of the weighted average annualised interest cost in respect of Euro denominated borrowings and Sterling denominated borrowings, were 2.5% and 3.5% respectively (6 months to 30 June 2017: 2.5% (Euro denominated borrowings) and 3.5% (Sterling denominated borrowings)).

 

8       Long-term incentive plan

          Equity-settled share-based payment arrangements

 

During the six months ended 30 June 2018, the Board approved the further conditional grant of 743,795 ordinary shares ('the Award') pursuant to the terms and conditions of the Group's 2017 Long Term Incentive Plan ('the 2017 LTIP').  The Award was made to senior employees across the Group (89 in total). Vesting of the Award is based on two independently assessed performance targets, each one representing 50% of the Award. The first is based on earnings per share ('EPS') and the second on total shareholder return ('TSR'). The performance period for the award is 1 January 2018 to 31 December 2020 and 25% of the award will vest at threshold performance, provided service conditions attaching to the awards are met. Threshold performance for the TSR condition is performance in line with the Dow Jones European STOXX Travel and Leisure Index with 100% vesting for outperformance of the index by 10% per annum. Threshold performance for the EPS condition, which is a non-market based performance condition, is based on the achievement of adjusted basic EPS, as disclosed in the Group's 2020 audited financial statements, of €0.43 with 100% vesting for EPS of €0.54 or greater. Awards will vest on a straight-line basis for performance between these points.

 

The total expected cost of this award was estimated at €2.5 million over the three-year service period of which €0.2 million has been expensed to profit or loss for the period to 30 June 2018.  The remaining €2.3 million will be charged to profit or loss in equal instalments over the remainder of the three-year vesting period.

 

€0.74 million has been charged against profit for the period to 30 June 2018 for the awards made in 2015, 2016 and 2017.

 

During the six months ended 30 June 2018, the company issued 595,962 shares on foot of the vesting of awards granted under the March 2015 LTIP. Over the course of the three-year performance period, 11,556 share awards lapsed due to vesting conditions which were not satisfied. The weighted average share price at the date of exercise for awards exercised during the year was €6.26.

 

 

Number of share awards granted

 

Period to

30 June

2018

Year ended

31 December

2017

 

 

 

Outstanding share awards granted at beginning of period/year

2,114,579

2,088,379

Share awards granted during the period/year

748,489

829,049

Share awards forfeited during the period/year

(10,968)

(88,551)

Share awards exercised during the period/year

(595,962)

(714,298)

 

               

              

 

 

 

Outstanding share awards granted at end of period/year

2,256,138

2,114,579

 

                 

                

Measurement of fair values

 

The fair value, at the grant date, of the TSR-based conditional share awards was measured using a Monte Carlo simulation model. Non-market based performance conditions attached to the awards were not taken into account in measuring fair value at the grant date. The valuation and key assumptions used in the measurement of the fair values at the grant date were as follows:

 

March

2018

May

2017

March

2016

October

2015

Fair value at grant date

€3.03

€2.14

€2.45

€2.43

Share price at grant date

€6.22

€5.09

€4.69

€4.27

Exercise price

€0.01

€0.01

€0.01

€0.01

Expected volatility

29.77% pa.

25.89% pa.

30.20% pa.

26.40% pa.

Dividend yield

1.5%

1.5%

1.5%

1.5%

Performance period

3 years

3 years

3 years

3 years

 

 

For measurement purposes, the dividend yield is based upon adjusted non-zero yields as though the Group was a zero-dividend yield company at these dates that may not be reflective over the longer term. The percentage is not necessarily indicative of the expected dividend yield of the Group. This will be decided by the Board of Directors as appropriate.

 

Expected volatility has been based on the historical volatility of the Company's share price for the 2016, 2017 and 2018 awards and of a comparator group of companies for awards in prior periods.

 

The 2017 and 2018 LTIP includes EPS-based conditional share awards.  The EPS-related performance condition is a non-market performance condition and does not impact the fair value of the award at the grant date. Instead, an estimate is made by the Group as to the number of shares which are expected to vest based on satisfaction of the EPS-related performance condition, and this, together with the fair value of the award at grant date, determines the accounting charge to be spread over the vesting period. The estimate of the number of shares which are expected to vest is reviewed in each reporting period over the vesting period of the award and the accounting charge is adjusted accordingly.

 

Save As You Earn Scheme

 

The Board approved the grant of share options under a Save As You Earn ("SAYE") scheme for all eligible employees across the Group in 2016 and 2017. Each Scheme will last three years and employees may choose to purchase shares at the end of the three-year period at the fixed discounted price set at the start. The share price for the schemes has been set at a 25% discount for Republic of Ireland based employees and 20% for United Kingdom based employees in line with the maximum amount permitted under tax legislation in both jurisdictions.

 

€0.26 million has been charged against profit for the six months ended 30 June 2018 for the SAYE options granted in 2016 and 2017 (for period ended 30 June 2017: €0.12 million).

 

This charge, together with the expense in respect of the long-term incentive plan for the six months ended 30 June 2018 of €0.94 million (for period ended 30 June 2017: €0.61 million) is the total charge in respect of share-based payments for the period, with a corresponding increase in the share-based payment reserve.

 

 

Number of SAYE share options granted

 

Period to

30 June

2018

Year ended

31 December 2017

 

 

 

Outstanding share options granted at beginning of period/year

 

1,429,099

 

837,545

Share options granted during the period/year

-

702,888

Share options forfeited during the period/year

(90,405)

(111,334)

Share options exercised during the period/year

(152)

-

 

               

               

 

 

 

Outstanding share options granted at end of period/year

1,338,542

1,429,099

 

              

              

 

 

9        Tax charge

 

 

6 months

6 months

 

ended

ended

 

30 June

30 June

 

2018

2017

 

€'000

€'000

Current tax

 

 

Irish corporation tax

3,279

2,983

UK corporation tax

819

1,083

Deferred tax charge

826

294

 

              

                 

 

 

 

 

4,924

4,360

 

              

                 

 

 

 

 

10       Intangible assets and goodwill

 

 

Goodwill

Other indefinite-lived intangible assets

Other intangible assets

Total

 

€'000

€'000

€'000

€'000

 

 

 

 

 

Cost or valuation

 

 

 

 

Balance at 1 January 2018

79,126

20,500

676

100,302

Effect of movement in exchange rates

15

-

2

17

 

_______

_______

_______

_______

 

 

 

 

 

Balance at 30 June 2018

79,141

20,500

678

100,319

 

_______

_______

_______

_______

 

 

 

 

 

Accumulated amortisation and impairment losses

 

 

 

Balance at 1 January 2018

(45,716)

-

(24)

(45,740)

Amortisation of intangible assets

-

-

(22)

(22)

 

_______

_______

_______

_______

 

 

 

 

 

Balance at 30 June 2018

(45,716)

-

(46)

(45,762)

 

_______

_______

_______

_______

 

 

 

 

 

Carrying amounts

 

 

 

 

At 30 June 2018

33,425

20,500

632

54,557

 

_______

_______

_______

_______

 

 

 

 

 

At 31 December 2017

33,410

20,500

652

54,562

 

_______

_______

_______

_______

 

Goodwill is attributable to factors including expected profitability and revenue growth, increased market share, increased geographical presence, the opportunity to develop the Group's brands and the synergies expected to arise within the Group after acquisition. 

 

Included in the goodwill figure is €12.3 million (£10.9 million) which is attributable to goodwill arising on acquisition of foreign operations. Consequently, such goodwill is subsequently retranslated at the closing rate.

 

The Group tests goodwill annually for impairment or more frequently if there are indicators it may be impaired.

 

Other indefinite-lived intangible assets

 

Acquired leasehold interests

 

The carrying value of indefinite lived intangible assets of €20.5 million at 30 June 2018 (31 December 2017: €20.5 million) represents the Group's leasehold interest in The Gibson Hotel and is recognised as an asset with an indefinite life based upon the intentions of the Group for the long-term operation of the business of this hotel and the statutory renewal rights which exist in Ireland to the benefit of the lessee. The Group tests intangible assets annually for impairment or more frequently if there are indicators it may be impaired.

 

Other intangible assets

 

Other intangible assets (€0.6 million) represents the Group's interest in a sub-lease (as sub-lessor) retained in respect of part of the Clayton Hotel Cardiff, UK following the sale and leaseback (operating lease) of that hotel property. The remaining lease term is 14 years and this intangible asset will be amortised over that period.

 

The Group reviews the carrying amounts of other intangible assets annually to determine whether there is any indication of impairment. If any such indicators exist then the asset's recoverable amount is estimated.

 

11         Property, plant and equipment

 

 

Land and buildings

Assets under construction

Fixtures,

fittings and equipment

Total

 

 

€'000

€'000

€'000

€'000

 

At 30 June 2018

 

 

 

 

 

Valuation

955,129

-

-

955,129

 

Cost

-

94,134

95,519

189,653

 

Accumulated depreciation (and impairment charges)*

-

-

(28,301)

(28,301)

 

 

 

 

 

 

 

Net carrying amount

955,129

94,134

67,218

1,116,481

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2018, net carrying amount

848,777

97,365

52,670

998,812

 

 

 

 

 

 

 

Other additions through freehold or site purchases

6,921

-

-

6,921

 

Other additions through capital expenditure

-

45,047

14,687

59,734

 

Reclassification from assets under construction to land and buildings and fixtures, fittings and equipment for assets that have come into use

44,697

(49,530)

4,833

-

 

Capitalised borrowing costs

-

1,218

-

1,218

 

Revaluation gains through OCI

63,520

-

-

63,520

 

Revaluation losses through OCI

(3,390)

-

-

(3,390)

 

Reversal of revaluation losses through profit or loss

810

-

-

810

 

Revaluation losses through profit or loss

(2,400)

-

-

(2,400)

 

Depreciation charge for the period

(4,263)

-

(5,040)

(9,303)

 

Translation adjustment

457

34

68

559

 

 

 

 

 

 

 

At 30 June 2018, net carrying amount

955,129

94,134

67,218

1,116,481

 

*Accumulated depreciation of buildings is stated after the elimination of depreciation on revaluation, disposals and impairments.

 

The carrying value of land and buildings, revalued at 30 June 2018, is €955.1 million. The value of these assets under the cost model is €723.4 million.

 

In the period ended 30 June 2018, net unrealised revaluation gains arising of €60.1 million have been reflected through other comprehensive income and in the revaluation reserve in equity. This amount includes revaluation gains on revalued assets recognised in other comprehensive income of €63.5 million and revaluation losses on revalued assets recognised in other comprehensive income of €3.4 million.

 

A number of hotel valuations have increased as a result of strong trading performance and the benefit from the completion of extension works during the period.

 

At 30 June 2018, the revaluation reserve included €18.8 million (£15.7 million) of unrealised revaluation gains relating to UK properties.

 

In the period ended 30 June 2018 a net revaluation loss of €1.6 million has been reflected in administrative expenses through profit or loss, which includes revaluation losses recognised in profit or loss of €2.4 million and the reversal of previously recognised revaluation losses in profit or loss of €0.8 million.

 

Included in land and buildings at 30 June 2018 is land at a carrying value of €156.3 million which is not depreciated.

 

Other additions to land and buildings in the period ended 30 June 2018 include the following:

·    Purchase of the long leasehold interest (freehold equivalent) of 29 suites in the Clayton Hotel Liffey Valley for €6.3 million plus capitalised acquisition costs of €0.6 million;

 

Additions to assets under construction during the period ended 30 June 2018 include the following:

·    Development expenditure incurred on new hotel builds of €24.2 million;

·    Development expenditure incurred on hotel extensions of €20.8 million; and

·    Interest capitalised on loans and borrowings relating to qualifying assets of €1.2 million (note 7).

 

Property previously classified as assets under construction (€49.5 million) has been transferred to land and buildings and fixtures and fittings as a result of the assets coming into use in the period ended 30 June 2018. This includes the following:

·    The completed construction of Maldron Hotel, Belfast City with operations beginning 13 March 2018;

·    Additional bedrooms at Clayton Hotel Dublin Airport;

·    Additional bedrooms at Maldron Sandy Road, Galway; and,

·    New restaurant, meeting rooms and additional bedrooms at Clayton Hotel, Ballsbridge.

 

The value of the Group's property at 30 June 2018 reflects open market valuations carried out in June 2018 by independent external valuers having appropriate recognised professional qualifications and recent experience in the location and value of the property being valued. The external valuations performed were in accordance with the Valuation Standards of the Royal Institution of Chartered Surveyors.

 

Measurement of fair value

The fair value measurement of the Group's own-use property has been categorised as a Level 3 fair value based on the inputs to the valuation technique used.

 

The principal valuation technique used by the independent external valuers engaged by the Group was discounted cash flows. This valuation model considers the present value of net cash flows to be generated from the property over a ten-year period (with an assumed terminal value at the end of Year 10). Valuers' forecast cashflow included in these calculations represents the expectations of the valuers for EBITDA for the property and also takes account of the expectations of a prospective purchaser. It also includes their expectation for capital expenditure which the valuers', typically, assume as approximately 4% of revenue per annum whereas this does not always reflect actual capital expenditure incurred by the Group. On specific assets, refurbishments are by nature periodic rather than annual. Valuers expectations of EBITDA are based off their trading forecasts (benchmarked against competition, market and actual performance). The expected net cash flows are discounted using risk adjusted discount rates. Among other factors, the discount rate estimation considers the quality of the property and its location.

 

The significant unobservable inputs are:

·    Valuers' forecast cashflow;

·    Risk adjusted discount rates of 9.5% to 11.25% for Dublin assets (31 December 2017: 9.5% to 11.75%), 9.5% to 12.0% for Regional Ireland assets (31 December 2017: 9.0% to 12.0%), 8.5% to 12.5% for United Kingdom assets (31 December 2017: 8.5% to 12.5%); and

·    Terminal (Year 10) capitalisation rates of 7.5% to 9.25% for Dublin assets (31 December 2017: 7.50% to 9.75%), 7.5% to 10.0% for Regional Ireland assets (31 December 2017: 7.0% to 10.0%) and 6.0% to 10.0% for United Kingdom assets (31 December 2017: 6.0% to 10.0%).

 

The estimated fair value under this valuation model would increase or decrease if:

·    Valuers' forecast cashflow was higher or lower than expected; or

·    The risk adjusted discount rate and terminal capitalisation rate was higher or lower.

Valuations also had regard to relevant recent data on hotel sales activity metrics.

 

12        Derivatives

 

On 30 June 2015, the Group entered into interest rate swaps and a cap agreement in order to manage the interest rate risks arising from the Group's borrowings (note 18).  Interest rate swaps are employed by the Group to partially convert the Group's borrowings from floating to fixed interest rates.  An interest rate cap is employed to limit the exposure to upward movements in floating interest rates on certain borrowings.

 

The terms of the derivatives are as follows:

 

·  Interest rate swaps with a maturity date of 3 February 2020, covering approximately 58% of the Group's total Sterling denominated borrowings at 30 June 2018. These swaps fix the LIBOR benchmark rate to 1.5025%.

·  Interest rate cap with a maturity date of 30 September 2019, covering approximately 35% of the Group's total Euro denominated borrowings at 30 June 2018. The cap limits the Group's maximum EURIBOR benchmark rate to 0.25%.

 

All derivatives have been designated as hedging instruments for the purposes of IFRS 9.

 

 

30 June

31 December

 

Fair value

2018

2017

 

Non-current asset

€'000

€'000

 

Interest rate cap asset

-

1

 

 

_______

_______

 

 

 

 

 

Total derivative asset

-

1

 

Non-current liability

 

 

 

Interest rate swap liabilities

(1,072)

(1,778)

 

 

_______

_______

 

 

 

 

 

Total derivative liability

(1,072)

(1,778)

 

 

  _______

_______

 

 

 

 

 

Net derivative financial instrument position at end of period/year

(1,072)

(1,777)

 

            

            

       

 

Included in Other Comprehensive Income

 

 

 

30 June

30 June

 

2018

2017

Fair value movement on derivative instruments

€'000

€'000

Fair value gains on interest rate swap liabilities

197

252

Fair value loss on interest rate cap asset

(1)

(3)

 

_______

_______

 

 

 

 

196

249

Reclassified to profit or loss (note 7)

509

668

 

_______

_______

 

 

 

 

705

917

 

            

            

 

The amount reclassified to profit or loss during the period represents the incremental interest expense arising under the interest rate swaps with actual LIBOR rates lower than the swap rate.

 

13        Trade and other receivables

 

 

30 June

31 December

 

2018

2017

 

€'000

€'000

Non-current assets

 

 

Other receivables

900

900

Prepayments

3,449

3,443

 

_______

_______

 

 

 

 

4,349

4,343

 

_______

_______

Current assets

 

 

Trade receivables

16,063

8,957

Trade prepayments

15,650

7,469

Accrued income

3,535

4,278

 

_______

_______

 

 

 

 

35,248

20,704

 

_______

_______

 

 

 

Total

39,597

25,047

 

_______

_______

 

 

 

At 30 June 2018, other receivables include a non-current deposit required as part of a hotel property lease contract (€0.9 million). The deposit is interest-bearing and refundable at the end of the lease term.

 

Also included within non-current prepayments at 30 June 2018 is €2.6 million (31 December 2017: €2.6 million) relating to costs associated with entering into leases which are being amortised over the life of the relevant leases as it represents up-front costs associated with entering the leases.

 

Also included within non-current prepayments at 30 June 2018 is an amount of €0.7 million (31 December 2017: €0.6 million) relating to a prepayment made for IT services relating to 2019, 2020 and 2021.

 

14      Trade and other payables

 

 

30 June

31 December

 

2018

2017

 

€'000

€'000

 

 

 

Trade payables

19,797

14,127

Accruals

39,129

41,175

Deferred income

10,857

6,674

Value added tax

1,271

713

Payroll taxes

2,060

2,164

 

_______

_______

 

 

 

 

73,114

64,853

 

_______

_______

 

 

 

Accruals include capital expenditure accruals including work in progress which has not yet been invoiced (30 June 2018: €19.0 million) (31 December 2017: €16.0 million).

 

 

15       Provision for liabilities

 

 

30 June

31 December

 

2018

2017

 

€'000

€'000

 

 

 

Non-current liabilities

 

 

Insurance provision

3,925

4,716

 

_______

_______

 

 

 

Current liabilities

 

 

Insurance provision

1,636

-

 

_______

_______

 

 

 

Total provision at end of period/year

5,561

4,716

 

_______

_______

 

 

 

The reconciliation of the movement in the provision for the period/year is as follows:

 

 

Year ended

 

30 June

31 December

 

2018

2017

 

€'000

€'000

 

 

 

At 1 January

4,716

3,040

Provisions made during the period/year - charged to profit or loss

1,315

2,501

Utilised during the period/year

(470)

(825)

 

_______

_______

 

 

 

At end of period/year

5,561

4,716

 

_______

_______

 

 

 

This provision relates to actual and potential obligations arising from the Group's insurance arrangements where the Group is self-insured. The Group has third party insurance cover above specific limits for individual claims and has an overall maximum aggregate payable for all claims in any one year. The amount provided is principally based on projected settlements as determined by external loss adjusters. The provision also includes an estimate for claims incurred but not yet reported.

 

The utilisation of the provision is dependent on the timing of settlement of the outstanding claims. The Group expects the majority of the insurance provision will be utilised within two to five years of the period end date however due to the nature of the provision there is a level of uncertainty in the timing of settlement as the Group generally cannot precisely determine the extent and duration of the claim process. The provision has been discounted to reflect the time value of money though the effect is not significant.

 

16        Commitments

 

Leases

Non-cancellable operating lease rentals and other contractual obligations payable under operating lease and agreements for lease are set out below. These represent the minimum future lease payments in aggregate that the Group is required to make under existing lease arrangements. An agreement for lease is a binding agreement between external third parties and the Group to enter into a lease at a future date.

 

At 30 June 2018

 

 

 

 

 

 

 

Less than 1 year

1 - 2
years

2 - 5
years

5 - 15
years

15 -25
years

After 25
years

Total

 

€'000

€'000

€'000

€'000

€'000

€'000

€'000

Operating lease

23,052

22,106

67,209

206,140

184,845

106,789

610,141

Agreements for lease

1,802

6,274

40,598

148,412

157,776

205,400

560,262

 

 

 

 

 

 

 

 

 

24,854

28,380

107,807

354,552

342,621

312,189

1,170,403

 

 

 

 

 

 

 

 

At 31 December 2017

 

 

 

 

 

 

 

Less than 1 year

1 - 2
years

2 - 5
years

5 - 15
years

15 -25
years

After 25
years

Total

 

€'000

€'000

€'000

€'000

€'000

€'000

€'000

Operating lease

24,827

21,859

66,065

205,313

192,771

113,569

624,404

Agreements for lease

448

1,792

22,850

94,527

100,979

133,117

353,713

 

 

 

 

 

 

 

 

 

25,275

23,651

88,915

299,840

293,750

246,686

978,117

 

 

 

 

 

 

 

 

 

The significant movement since the year ended 31 December 2017 is due principally to the following:         

·    The Group has signed an agreement to lease a Clayton Hotel, to be built in Bristol. On completion of construction (expected completion Q3 2020), Dalata will commence operations in the hotel through a 35-year operating lease; and,

·    The Group has signed an agreement to lease a Maldron Hotel, to be built in Birmingham. On completion of construction (expected completion Q1 2021), Dalata will commence operations in the hotel through a 35-year operating lease.

 

The weighted average lease life of future minimum rentals payable under leases and agreement for leases is 32.6 years (31 December 2017: 32.3 years).

 

The operating lease charges during the six months ending 30 June 2018 amounted to €16.3 million (for period ended 30 June 2017: €16.3 million).

 

Under the terms of certain hotel operating leases, contingent rents are payable in excess of minimum lease payments based on the financial performance of the hotels. Contingent rent does not feature in the obligations in the table above. The amount of contingent rent expense charged to profit or loss in the six-month period ended 30 June 2018 was €3.6 million (for period ended 30 June 2017: €3.8 million).

 

Capital expenditure commitments

 

The Group has the following commitments for future capital expenditure under its contractual arrangements.

 

30 June

31 December

 

2018

2017

 

€'000

€'000

 

 

 

 Contracted but not provided for

26,052

98,282

 

_______

_______

 

This relates primarily to the development of the following new-build hotels and extensions to currently operational hotels which are now contractually committed:

·      New-build hotel developments: Clayton Hotel Charlemont, Dublin; and Maldron Hotel South Mall, Cork.

 

·      Extensions: Maldron Hotel Parnell Square, Dublin; and Clayton Hotel Ballsbridge, Dublin.

 

It also includes other capital expenditure committed at other hotels in the Group.

The Group also has other commitments in relation to fixtures, fittings and equipment in some of its leased hotels. Under certain lease agreements, the Group has committed to spending a percentage of turnover on capital expenditure in respect of fixtures, fittings and equipment in the leased hotels over the life of the lease. The Group has estimated the commitment in relation to these leases to be €59.0 million (31 December 2017: €55.3 million) spread over the life of the various leases which range in length from 25 years to 35 years. The turnover figures used in this estimate have been based on 2018 forecasted revenues at 30 June 2018.

 

17        Financial risk management

 

The Group is exposed to various financial risks arising in the normal course of business.  Its financial risk exposures are predominantly related to the creditworthiness of counterparties and risks relating to changes in interest rates and foreign currency.  The Group uses financial instruments to manage exposures arising from interest rate risk. The Group uses a net investment hedge with Sterling denominated borrowings to hedge the foreign exchange risk from investments in certain UK operations.

 

Fair value hierarchy

The Group measures the fair value of financial instruments based on the degree to which inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurements. Financial instruments are categorised by the type of valuation method used. The valuation methods are as follows:

·      Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

·      Level 2: Inputs other than quoted prices included within Level 1 that are observable for the financial instrument, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

·      Level 3: Inputs for the financial instrument that are not observable market data (unobservable inputs).

The Group's policy is to recognise any transfers between levels of the fair value hierarchy as of the end of the reporting period during which the transfer occurred. During the period ended 30 June 2018, there were no reclassifications of financial instruments and no transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments.

 

 

Estimation of fair values

The principal methods and assumptions used in estimating the fair values of financial assets and liabilities are explained below.

 

Cash at bank and in hand

For cash at bank and in hand, the carrying value is deemed to reflect a reasonable approximation of fair value. 

 

Derivatives

Discounted cash flow analyses have been used to determine the fair value of the interest rate swaps and interest rate cap, taking into account current market inputs and rates (Level 2).

 

Receivables/payables

For receivables and payables with a remaining term of less than one year or demand balances, the carrying value less impairment provision, where appropriate, is a reasonable approximation of fair value. The non-current receivables carrying value is a reasonable approximation of fair value.

 

Bank loans

For bank loans, the fair value was calculated based on the present value of the expected future principal and interest cash flows discounted at interest rates effective at the reporting date. The nominal value of floating rate borrowings is considered to be a reasonable approximation of fair value.

 

             (a) Credit risk

 

Exposure to credit risk 

 

Credit risk arises from granting credit to customers and from investing cash and cash equivalents with banks and financial institutions.

Trade and other receivables 

 

The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer.  There is no concentration of credit risk or dependence on individual customers. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.  The maximum exposure to credit risk is represented by the carrying amount of each financial asset.

 

Cash and cash equivalents

 

Cash and cash equivalents comprise cash at bank and in hand and give rise to credit risk on the amounts due from counterparties. The maximum credit risk is represented by the carrying value at the reporting date. The Group's policy for investing cash is to limit risk of principal loss and to ensure the ultimate recovery of invested funds by limiting credit risk.

 

The carrying amount of the following financial assets represents the Group's maximum credit exposure. The maximum exposure to credit risk at the end of the period/year was as follows:

 

 

30 June

31 December

 

2018

2017

 

€'000

€'000

 

 

 

Trade receivables

16,063

8,957

Other receivables

900

900

Accrued income

2,633

4,278

Cash at bank and in hand

22,657

15,745

 

_______

_______

 

 

 

 

42,253

29,880

 

              

              

 

(b) Liquidity risk

 

The Group's approach to managing liquidity risk is to ensure as far as possible that it will always have sufficient liquidity to:

·      fund its ongoing operations;

·      allow it to invest in hotels that may create value for shareholders; and

·      maintain sufficient financial resources to mitigate against risks and unforeseen events.

 

The Group had undrawn revolving credit facilities of €33 million and €22.2 million of other undrawn loan facilities at 30 June 2018.

Current loan facilities have a maturity date of 3 February 2020. The Group are reviewing its refinancing options and strategies with banking partners to ensure adequate financing will be in place in advance of the maturity date.

(c)  Market risk

 

Market risk is the risk that changes in market prices and indices, such as interest rates and foreign exchange rates, will affect the Group's income or the value of its holdings of financial instruments.

 

            Interest rate risk

 

The Group is exposed to floating interest rates on its debt obligations and uses hedging instruments to mitigate the risk associated with interest rate fluctuations. The Group has entered into interest rate swaps and an interest rate cap (note 12) which hedge the variability in cash flows attributable to the interest rate risk.

 

Foreign currency risk

 

The Group is exposed to risks arising from fluctuations in the Euro/Sterling exchange rate. The Group is exposed to transactional foreign currency risk on trading activities conducted by subsidiaries in currencies other than their functional currency and to translation foreign currency risk on the retranslation of foreign operations to Euro.

 

Group policy is to manage foreign currency exposures commercially and through netting of exposures where possible. The Group's principal transactional exposure to foreign exchange risk relates to interest costs on its Sterling borrowings. This risk is hedged by the earnings from UK subsidiaries which are denominated in Sterling.

 

The Group's gain or loss on retranslation of the net assets of foreign currency subsidiaries is taken directly to the translation reserve. 

 

The Group limits its exposure to translation foreign currency risk by using Sterling debt to hedge part of the Group's investment in UK subsidiaries. The Group financed certain operations in the UK by obtaining funding in prior periods at Group level through external borrowings denominated in Sterling. These borrowings amounted to £174.4 million (€196.8 million) at 30 June 2018 and are designated as net investment hedges.

 

This enables gains and losses arising on retranslation of those foreign currency borrowings to be recognised in other comprehensive income, providing a partial offset in reserves against the gains and losses arising on translation of the net assets of those UK operations.

 

(d) Capital management

 

The Group's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business.

 

The Board of Directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. The Group's target is to achieve a pre-tax leveraged return on equity of at least 15% on investments.

 

The Group monitors capital using a ratio of net debt to Adjusted EBITDA ratio (note 4) and seeks to keep it below 3.50. Net Debt to Adjusted EBITDA is calculated based on the prior 12 month period. The Net Debt to Adjusted EBITDA as at 30 June 2018 is 2.5x.

 

 

Fair values

 

The following tables show the carrying amount of Group financial assets and liabilities including their values in the fair value hierarchy at 30 June 2018.  The tables do not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

 

Financial assets

Loans and receivables

 

 

Fair value

 

 

measured at
fair value

at amortised

cost

Total

carrying amount

 

Level 1

 

Level 2

 

Level 3

 

Total

 

30 June

2018

30 June

2018

30 June

2018

30 June

2018

30 June

2018

30 June

2018

30 June

 2018

Financial assets

€'000

€'000

€'000

€'000

€'000

€'000

€'000

Trade and other receivables, excluding prepayments (note 13)

 

-

 

19,596

 

19,596

 

 

 

 

Cash at bank and in hand

-

22,657

22,657

 

 

 

 

 

_______

_______

_______

 

 

 

 

 

-

42,253

42,253

 

 

 

 

 

              

                 

                             

 

 

 

 

 

 

Financial liabilities measured at fair value

Financial liabilities measured at amortised cost

 

Total carrying amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

30 June

2018

30 June

2018

30 June

2018

30 June

2018

30 June

2018

30 June

2018

30 June

 2018

 

€'000

€'000

€'000

€'000

€'000

€'000

€'000

Financial liabilities

 

 

 

 

 

 

 

Secured bank loans (note 18)

-

(297,060)

(297,060)

 

(297,060)

 

(297,060)

Trade payables and accruals (note 14)

-

(58,926)

(58,926)

 

 

 

 

Derivatives (note 12)

(1,072)

-

(1,072)

 

(1,072)

 

(1,072)

 

_______

_______

 

 

 

 

 

(1,072)

(355,986)

(357,058)

 

 

 

 

 

              

                 

                              

 

 

 

 

 

Fair values

 

The following tables show the carrying amount of Group financial assets and liabilities including their values in the fair value hierarchy at 31 December 2017.  The tables do not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

Financial assets

Loans and receivables

 

 

Fair value

 

 

measured at
fair value

at amortised

cost

Total

carrying amount

 

Level 1

 

Level 2

 

Level 3

 

Total

 

31 December

2017

31 December

2017

31 December

2017

31 December

2017

31 December

 2017

31 December

2017

31 December

2017

Financial assets

€'000

€'000

€'000

€'000

€'000

€'000

€'000

 

 

 

 

 

 

 

 

Derivatives (note 12)

1

-

1

 

1

 

1

Trade and other receivables, excluding prepayments (note 13)

-

14,135

14,135

 

 

 

 

Cash at bank and in hand

-

15,745

15,745

 

 

 

 

 

_______

_______

_______

 

 

 

 

 

1

29,880

29,881

 

 

 

 

 

              

                

              

 

 

 

 

 

 

Financial liabilities measured at fair value

Financial liabilities measured at amortised cost

 

Total carrying amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

31 December

2017

31 December

2017

31 December

2017

31 December

2017

31 December

2017

31 December

2017

31 December

2017

Financial liabilities

€'000

€'000

€'000

€'000

€'000

€'000

€'000

Secured bank loans (note 18)

-

(260,139)

(260,139)

 

(260,139)

 

(260,139)

Trade payables and accruals (note 14)

-

(55,302)

(55,302)

 

 

 

 

Derivatives (note 12)

(1,778)

-

(1,778)

 

(1,778)

 

(1,778)

 

_______

_______

_______

 

 

 

 

 

(1,778)

(315,441)

(317,219)

 

 

 

 

 

              

              

              

 

 

 

 

 

18     Interest-bearing loans and borrowings

 

30 June

31 December

 

2018

2017

 

€'000

€'000

 

 

 

Repayable within one year

 

 

Bank borrowings

16,800

19,300

Less: deferred issue costs

(1,046)

(1,094)

 

_______

_______

 

 

 

 

15,754

18,206

Repayable after one year

 

 

Bank borrowings

281,872

243,010

Less: deferred issue costs

(566)

(1,077)

 

_______

_______

 

 

 

 

281,306

241,933

 

_______

_______

 

 

 

Total interest-bearing loans and borrowings

297,060

260,139

 

_______

_______

         

 

On 17 December 2014, the Group entered into a loan facility of €318 million (comprising of a €142 million Euro facility and a £132 million Sterling facility) with a club of financial institutions. On 3 February 2015, the Group drew down €282 million (comprising of a €106 million Euro facility and a £132 million Sterling facility) through five-year term loan facilities with a maturity of 3 February 2020. The total loan facility of €318 million included a €20 million revolving credit facility. It also included a standby facility of €16 million which was not drawn and has since expired.

 

On 6 May 2016, the Group entered into a new multi-currency loan facility of €80 million with a maturity date of 3 February 2020 and increased the revolving credit facility from €20 million to €30 million. On 9 June 2016 under this facility, the Group drew down £18 million (€22.9 million) and €7.7 million. On 24 October 2016, the Group drew down a further £24 million (€27 million). On 6 July 2017, the Group increased its revolving credit facility by €50 million to €80 million.

 

During the period the Group drew down funds from the revolving credit facility in line with requirements. €47 million was drawn from the revolving credit facility as at 30 June 2018.

 

The undrawn loan facilities as at 30 June 2018 were €55.2 million, including €33 million of the revolving credit facility and €22.2 million of the other loan facilities. The loans bear interest at variable rates based on 3-month EURIBOR/LIBOR plus applicable margins. The Group has entered into certain derivative financial instruments to hedge interest rate exposure on a portion of these loans (note 12). Under the terms of the loan facility agreement, an interest rate floor is in place which prevents the Group from receiving the benefit of sub-zero benchmark LIBOR and EURIBOR rates.

 

19      Deferred tax

 

30 June

31 December

 

2018

2017

 

€'000

€'000

 

 

 

Deferred tax assets

2,330

3,571

Deferred tax liabilities

(37,662)

(31,858)

 

_______

_______

 

 

 

Net deferred tax liability

(35,332)

(28,287)

 

_______

_______

 

 

 

 

 

20     Related party transactions

         

Under IAS 24 Related Party Disclosures, the Group has related party relationships with its fellow group undertakings, shareholders and directors of the Company. All transactions with subsidiaries eliminate on consolidation and are not disclosed.

 

There were no changes in related party transactions in the six months ended 30 June 2018 that materially affected the financial position or the performance of the Group during that period. 

 

 

21     Share capital and share premium

 

At 30 June 2018

 

Authorised share capital

Number

€'000

 

 

 

Ordinary shares of €0.01 each

10,000,000,000

100,000

 

____________

_______

 

 

 

Allotted, called-up and fully paid shares

Number

€'000

 

 

 

Ordinary shares of €0.01 each

184,277,078

1,843

 

____________

_______

 

 

 

Share premium

 

503,113

 

 

_______

 

At 31 December 2017

 

Authorised share capital

Number

€'000

 

 

 

Ordinary shares of €0.01 each

10,000,000,000

100,000

 

____________

_______

 

 

 

Allotted, called-up and fully paid shares

Number

€'000

 

 

 

Ordinary shares of €0.01 each

183,680,964

1,837

 

____________

_______

 

 

 

Share premium

 

503,113

 

 

_______

 

During the six months ended 30 June 2018, the shares awarded under the March 2015 Long Term Incentive Plan vested resulting in the issuance of 595,962 shares of €0.01 per share (note 8). 152 shares relating to the 2016 SAYE scheme were issued during 2018 (note 8).

 

22       Earnings per share

 

Basic earnings per share ('EPS') is computed by dividing the profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.  Diluted earnings per share is computed by dividing the profit attributable to ordinary shareholders for the period by the weighted average number of ordinary shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares. The following table sets out the computation for basic and diluted earnings per share for the periods ended 30 June 2018 and 30 June 2017:

 

 

6 months

ended

30 June 2018

6 months

ended

30 June 2017

Profit attributable to shareholders of the parent company (€'000) - basic and diluted

30,450

28,347

Adjusted profit attributable to shareholders of the parent (€'000) - basic and diluted

32,040

27,660

Earnings per share - Basic

16.6 cent

15.5 cent

Earnings per share - Diluted

16.4 cent

15.4 cent

Adjusted earnings per share - Basic

17.4 cent

15.1 cent

Adjusted earnings per share - Diluted

17.2 cent

15.0 cent

Weighted average shares outstanding - Basic

183,954,271

183,175,332

Weighted average shares outstanding - Diluted

186,057,744

184,011,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The difference between the basic and diluted weighted average shares outstanding for the period ended 30 June 2018 is due to the dilutive impact of the conditional share awards granted in 2015, 2016, 2017 and 2018 (note 8).  There have been no adjustments made to the number of weighted average shares outstanding in calculating adjusted basic or adjusted diluted earnings per share.

 

Adjusted basic and adjusted diluted earnings per share are presented as alternative performance measures to show the underlying operating performance of the Group excluding the tax adjusted effects of revaluation movements, goodwill impairments, gains on disposals of assets and items considered by management to be non-recurring or unusual in nature (note 4).

 

 

6 months

6 months

 

ended

ended

 

30 June 2018

30 June 2017

 

€'000

€'000

Reconciliation to adjusted profit for the period

 

 

Profit before tax

35,374

32,707

 

 

 

Adjusting items (note 4)

 

 

Acquisition-related costs (note 5)

-

71

Net revaluation movements through profit or loss (note 5)

1,590

(700)

 

______

______

 

 

 

Adjusted profit before tax for the period

36,964

32,078

Tax charge

(4,924)

(4,360)

Tax adjustment for adjusting items

-

(58)

 

______

______

 

 

 

Adjusted profit for the period

32,040

27,660

 

______

______

 

23        Events after the reporting date

 

On 6 July 2018, the Group completed construction on Maldron Hotel, Kevin Street with operations beginning on the same date.

 

On 24 August 2018, the Group entered into an additional £100 million revolving credit facility with the existing club of financial institutions.

 

On 28 August 2018, the Group exchanged contracts to acquire the long leasehold (effective freehold) interest of a hotel site under development, located in Aldgate, London for total consideration of £91 million through acquiring the entire issued share capital of Hintergard Limited. The transaction is conditional on the completion of the hotel to an agreed specification. The construction of the hotel, which will be branded Clayton Hotel Aldgate, London, is scheduled to be completed in the final quarter of this year and open in December 2018. The hotel will have 212 rooms, with a restaurant, bar and access to a fitness centre and car parking. The transaction will be funded by the additional £100 million revolving credit facility.

 

On 3 September 2018, the Board has proposed an interim dividend of 3.0 cent per share. The payment date for the interim dividend will be 12 October 2018 to shareholders registered on the record date 14 September 2018. These interim financial statements do not reflect this dividend.

 

Since 30 June 2018, the Group have reached an agreement to lease a new Maldron Hotel, to be built in Manchester, United Kingdom. The new Maldron will be a 4-star hotel with circa 276 air-conditioned bedrooms, a bar, a restaurant and meeting room facilities. On completion of construction (expected completion first half of 2021), Dalata will commence operations in the hotel through a 35-year operating lease. The construction of the hotel is subject to the receipt of planning permission from Manchester City Council.

 

24        Standards issued but not yet effective

 

IFRS 16: Leases was issued in January 2016 and replaces IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 Leases, which has an effective date of 1 January 2019, will have a significant effect on the Group's financial statements as the Group is a lessee in a number of material property operating leases.

 

Under the new standard, the distinction between operating and finance leases is removed for lessees and almost all leases are reflected in the statement of financial position. As a result, an asset (the right of use of the leased item) and a financial liability to pay rental expenses are recognised. Rental expenses will be removed from the statement of comprehensive income and replaced with finance costs on the lease liability and depreciation on the right of use asset. The only exemptions are short-term and low-value leases.

 

The standard introduces new estimates and judgemental thresholds that affect the identification, classification and measurement of lease transactions. More extensive disclosures, both qualitative and quantitative, are also required.

 

The adoption of the new standard will have a material impact on the Group's consolidated statement of comprehensive income and consolidated statement of financial position, as follows:

 

Consolidated statement of comprehensive income

Administrative expenses will decrease, as the Group currently recognises rental expenses therein. The Group's hotel rental expenses for the first half of 2018 were €16.3 million (for period ended 30 June 2017: €16.3 million) and are disclosed in note 5 of these condensed consolidated Interim Financial Statements. Under the terms of certain hotel operating leases, contingent rents are payable in excess of minimum lease payments, based on the financial performance of the hotels. The amount of contingent rent expense charged to profit or loss in the six-month period ended 30 June 2018 was €3.6 million (for period ended 30 June 2017: €3.8 million). Under IFRS 16, contingent rents will not form part of the liability measurement.

 

Depreciation and finance costs as currently reported in the Group's consolidated statement of comprehensive income will increase, as under the new standard a right-of-use asset will be capitalised and depreciated over the term of the lease with an associated finance cost applied annually to the lease liability.

 

Consolidated statement of financial position

At the transition date, the Group will calculate the lease commitments outstanding at that date and apply the appropriate discount rate to calculate the present value of the lease commitment which will be recognised as a liability and a right-of-use asset on the Group's statement of financial position. The Group's outstanding commitments on all operating leases as at 30 June 2018 are €610.1 million (31 December 2017: €624.4 million) (note 16). The Group's commitments as at 30 June 2018 provide an indication of the scale of leases held and how significant leases currently are to the Group's business. Agreements to lease are not included in the figures above (note 16). However, this figure is undiscounted and is not therefore an accurate measure of the impact of IFRS 16.

 

Further detailed disclosures, including an illustrative impact of IFRS 16, using a notional discount rate, were included in the consolidated financial statements of the Group as at and for the year ended 31 December 2017.

 

The Group is focused on determining the approach to calculating the appropriate discount rates to apply at transition.

 

25        Approval of financial statements

 

The Board of Directors approved the condensed consolidated interim financial statements for the six months ended 30 June 2018 on 3 September 2018.

 

 

 

 

 

Independent Review Report to Dalata Hotel Group plc

 

Introduction

 

We have been engaged by Dalata Hotel Group plc ("the company") to review the condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2018 which comprises the condensed consolidated statement of comprehensive income, condensed consolidated statement of financial position, condensed consolidated statement of changes in equity, condensed consolidated statement of cash flows and the related explanatory notes. Our review was conducted having regard to the Financial Reporting Council's ("FRCs") International Standard on Review Engagements ("ISRE") (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the half-yearly report for the six months ended 30 June 2018 is not prepared, in all material respects, in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU, the Transparency (Directive 2004/109/EC) Regulations 2007 ("Transparency Directive"), and the Transparency Rules of the Central Bank of Ireland.

 

Directors' responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Transparency Directive and the Transparency Rules of the Central Bank of Ireland. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for ensuring that the condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

 

Our responsibility

 

Our responsibility is to express to the company a conclusion on the condensed set of consolidated financial statements in the half-yearly financial report based on our review.

 

Scope of review 

 

We conducted our review having regard to the Financial Reporting Council's International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 

 

We read the other information contained in the half-yearly financial report to identify material inconsistencies with the information in the condensed set of consolidated financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the review. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

 

 

The purpose of our review work and to whom we owe our responsibilities

 

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Transparency Directive and the Transparency Rules of the Central Bank of Ireland. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

 

 

 

KPMG                                                                                                                                     3 September 2018

Chartered Accountants 

1 Stokes Place

St. Stephen's Green

Dublin 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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Half-year Report - RNS