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RNS
Dalata Hotel Group PLC   -  DAL   

Half-year Report

Released 07:00 03-Sep-2019

RNS Number : 9742K
Dalata Hotel Group PLC
03 September 2019
 

Delivering Performance and Growth

ISE: DHG   LSE: DAL

 

Dublin and London | 3 September 2019: 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 month period ended 30 June 2019.

 

Results Summary

Post IFRS 16 (as reported)

Pre IFRS 161

€million

H1 2019

Variance on H1 2018

H1 2019

Variance on H1 2018

Revenue

201.9

+12.2%

201.9

+12.2%

Segments EBITDAR1

81.5

+13.1%

81.5

+13.1%

Adjusted EBITDA1

73.4

+43.9%

60.3

+18.1%

Profit before tax

37.8

+6.7%

42.2

+19.3%

Basic EPS (cent)

17.7

+6.6%

19.8

+19.3%

Adjusted basic EPS1 (cent)

17.2

-3.4%

19.3

+8.4%

Dividend per share (cent)

3.5

+16.7%

 

 

 

Key performance indicators

H1 2019

H1 2018

H1 2019

H1 2018

 

As reported

Like for Like2

Occupancy %

80.2%

82.1%

81.3%

81.0%

Average room rate (€)

110.30

108.88

107.82

107.39

RevPAR1 (€)

88.48

89.39

87.62

87.00

           

STRONG OPERATING PERFORMANCE

·    Strong revenue growth of 12.2% to €201.9 million

·    Like for like2 revenue per available room1 (RevPAR) increased 0.7% to €87.62

·    Adjusted EBITDA pre IFRS 16 increased by 18.1% to €60.3 million 

·    Basic EPS of 17.7 cent (Adjusted basic EPS1 pre IFRS 16 up 8.4% to 19.3 cent)

·    Cash generated for investment, debt repayments and dividends1 of €45.1 million

STRONG BALANCE SHEET - LOWLY GEARED AND ASSET BACKED 

·    €1.3 billion of prime hotel assets1 located in large cities

·    Further upward property revaluation of €46.3 million

·    Net Debt to Adjusted EBITDA1 pre IFRS 16 of 2.8x (post IFRS 16: 4.3x)

·    Debt and Lease Service Cover1 of 3.1x

DRIVING SHAREHOLDER VALUE

·    Over 1,400 new rooms opened in the last 18 months which continue to perform very well and have been a significant driver of growth for H1 2019 and will be for the second half

·    Exciting pipeline of circa 2,400 rooms in excellent locations to be delivered between 2020 and 2022

 

ANNOUNCING TODAY

·    The Board has proposed an interim dividend of 3.5 cent per share

·    Acquisition of a site with planning permission for a new Maldron hotel in Shoreditch, London

STRATEGIC AND OPERATING HIGHLIGHTS

·    Revenue increased by €21.9 million driven by strong operational performance and growth from the new and extended hotels. The 1,400 new rooms which opened in the last 18 months in Dublin, Cork, Galway, Belfast, Newcastle and London are performing very well.

 

·    Continued to outperform market RevPAR change in Dublin. Strong performance versus market in Regional Ireland.

 

·    Very strong RevPAR performance in the UK. Significantly outperformed market in four of the six3 cities in which we operate - Manchester, Birmingham, Leeds and Belfast.

 

·    We continue to invest in our product to ensure our hotels remain best-in-class for our customers. We spent €8.8 million on capital refurbishment across all areas of the Group's hotels with 578 rooms refurbished in the first half of 2019.

 

·    Group EBITDAR margin1 increased from 40.0% to 40.4% underpinned by our operating intensity and strong focus on cost control. Overall, there has also been no margin dilution despite the ramp up costs of the opening of six new hotels during 2018 and early 2019.

 

·    The results for the first six months of 2019 reflect the adoption of IFRS 16 for the first time which has brought an accounting estimate of lease liabilities and corresponding right-of-use ("RoU") assets on balance sheet. This has reduced reported profit after tax by €3.8 million and basic EPS by 2.1 cent. Net debt has increased by €399 million primarily due to the recognition of lease liabilities of €314 million resulting in Net Debt to Adjusted EBITDA1 increasing to 4.3x (pre IFRS 16: 2.8x).

 

·    Post 30 June 2019, the Group availed of the option to extend the €525 million debt facility by a further year - now maturing in October 2024.

 

·    We continue to build an attractive pipeline of rooms located in large cities such as Dublin, Bristol, Manchester, Glasgow, Birmingham and London. Announced today that we have acquired a site in London with planning approval for a new hotel. The new Maldron hotel will have between 130 to 140 rooms and is expected to open in early 2022. The total cost of developing the hotel will be approximately £60 million, including the site cost of £32.05 million.

 

·    We have signed an agreement to extend the Ballsbridge Hotel lease in Dublin by 21 months now expiring on 31 December 2021.

 

·    The Board has proposed an interim dividend of 3.5 cent per share payable on 4 October 2019 to all ordinary shareholders on the share register at the close of business on the record date of 13 September 2019. This represents an increase of 16.7% on the interim dividend for 2018.

 

OUTLOOK

We remain positive about our ability to exploit the opportunity that exists for us in the UK. Trade at our UK hotels was very strong in both July and August and ahead of our expectations. Despite the ongoing uncertainty surrounding the timing and nature of Brexit, the outlook for the balance of the year looks positive.

 

RevPAR at our Dublin hotels in July and August was behind last year due to a number of factors, primarily a weaker calendar of events compared to 2018 and the ongoing impact of the VAT increase.

 

Trading in Regional Ireland was also behind last year in July and August primarily due to the more significant impact of the VAT increase on domestic leisure demand.

 

The outlook for the balance of the year looks positive in both Dublin and Regional Ireland with a stronger calendar of events and the return of corporate guests after the summer period. Some of our Dublin hotels are forecasting September to deliver the highest ever monthly room revenue for their properties.

 

We continue to be very happy with the performance of the hotels opened and extensions completed in 2018 and early 2019. They will continue to make a very significant contribution to earnings growth in the second half of the year.

 

We continue to work closely with developers and fixed income investors on opportunities to further increase our very attractive pipeline in Ireland and the UK and expect to make further announcements in 2019.

 

Pat McCann, Dalata Group CEO, commented:

"I am pleased to report another strong set of results with revenue growth of 12.2% to €201.9 million in the period. Excluding the impact of IFRS 16, Adjusted EBITDA1 increased 18.1% to €60.3 million and Adjusted basic EPS1 increased by 8.4% to 19.3 cent.

We have demonstrated our excellent operating performance and ability to control costs through the growth of our EBITDAR margin1 from 40.0% to 40.4% despite opening six new hotels and four hotel extensions in the past 18 months. This is an example of the intensity and commitment I often speak of in Dalata where we continue to drive performance of our existing portfolio while building our future pipeline of hotels. Our hotels in all regions are performing well and I am particularly happy with the performance of our UK hotels given our exciting growth plans for the region.

Dalata has grown at considerable pace since our IPO in March 2014. We were a small Irish company with big goals and a lot of ambition at the time. Our results for the first six months of 2014 delivered revenue of €35 million, Group EBITDA of €2.4 million and hotel assets of €23.9 million. Five years on, the Group has been transformed, with revenue of €201.9 million and Group EBITDA of €74.2 million for the first six months of 2019. The value of our hotel assets now exceeds €1.3 billion and we are far from finished on our journey. It is extraordinary how fast we have grown in a little over five years and I am pleased with the sustainable and disciplined way in which we have delivered this growth. We have built a portfolio of young, well maintained assets in prime locations across Ireland and the UK. We have also built a great team of people who enable us to grow our portfolio while continuing to be excellent hotel operators.

Dalata remains very ambitious and will continue to grow in 2019 and beyond. Our pipeline of circa 2,400 rooms will open at various stages from 2020 to 2022. Our UK growth strategy continues at pace. The development of the six new hotels located in the centre of Bristol, Birmingham, Glasgow (x2) and Manchester (x2) is progressing well.

Today, we announced that we have acquired a fantastic site in Shoreditch, London for £32.05 million with planning approval for a new hotel. London's first Maldron hotel will have between 130 to 140 rooms and is expected to open in early 2022. The total cost of developing the hotel, including the acquisition of the site, will be approximately £60 million. We have funded the site purchase using debt and will fund the development cost from operating cash flow. The strong performance of our Clayton Hotel City of London which opened in January 2019 reinforces our belief that there is great value in owning and operating a hotel in the centre of the city. Our existing hotel portfolio is generating very strong cash flows and this allows us to take advantage of such great opportunities while keeping our gearing at very comfortable levels.

We continue to invest in our people and our systems to support our growing portfolio. The new Dalata website was launched in August, complementing the Clayton and Maldron websites that went live in 2018 and 2017 respectively. The development of our people continues to be at the top of our agenda. Each of our six new hotels, opened over the last 18 months, are run by internally developed management teams and we are developing the next wave of managers who will go on to operate the hotels in our pipeline. We have 332 people on graduate programmes. We had over 1,100 applicants to our graduate programmes this year which demonstrates that Dalata is becoming the employer of choice in the hospitality industry.

Dalata is committed to remaining lowly geared. Having successfully agreed a new €525 million debt facility on improved terms and with greater flexibility in October 2018, we have since decided to extend this facility by a further year. Our debt package now matures in October 2024. Dalata's strong balance sheet makes us an attractive partner for fixed income investors allowing us to secure superb leased hotels at relatively low yields. We continue to extract good value from our assets with Normalised Return on Invested Capital1 of 12.6% at 30 June 2019.

Our confidence in the prospects for the business is reflected in our interim dividend of 3.5 cent per share, an increase of 16.7% on the 2018 interim dividend.

Despite the challenges of a significant increase in the VAT rate in Ireland and the ongoing uncertainty surrounding the timing and nature of Brexit, 2019 to date, as a whole has been another very successful year. The outlook for the balance of the year looks very positive. We are currently looking at a number of exciting opportunities in the UK and Ireland and we expect to announce further additions before the end of the year.

We continue to grow our portfolio, develop our great people, increase our customer satisfaction and further grow our earnings. We are looking forward to the balance of 2019 with optimism and enthusiasm".

ENDS
 

Principal Risks and Uncertainties

The Group's principal risks and uncertainties for the remainder of 2019 are:

 

·    The manner and impact of the UK's departure from the European Union remains uncertain. Brexit may have a negative impact on both the UK and Irish economies. This, in turn, could impact on demand for hotel rooms in both countries.

 

·    Other 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 the number of people looking to stay at hotels in both countries.

 

·    Significant fluctuations in exchange rates can make destinations more expensive or cheaper for potential customers to visit. The current uncertainty around Brexit has caused notable fluctuations in the value of sterling versus other currencies. A significant reduction in the value of sterling would make Ireland a more expensive destination for UK visitors, which in turn could impact on the number of UK residents staying in Irish hotels. While UK visitors are an important part of our business in Ireland, 86% of our rooms in Dublin are sold to either domestic consumers or visitors from countries other than the UK. Only 9% of our rooms sold in our Regional Ireland hotels are to UK customers. Additionally, the reduction in UK visitors to Ireland is currently being more than offset by the growth in visitors from other markets such as North America and Europe.

 

·    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 the 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, our UK expansion strategy will reduce the proportion of EBITDA produced out of Dublin over time.

 

·    The opening of new hotels 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 in opening new hotels. The new hotels opened in 2018 and 2019 are all performing well.

 

·    As Dalata expands there is a risk that the organisation's unique culture and values could be damaged. The rollout of the Dalata business model is dependent on the retention of its strong culture. The Group is actively managing this risk by focusing on the behaviours of executive management and through its employee engagement programme.

 

·    Dalata's business model is built on the ability to grow and retain expertise. There is a risk to the Group's ongoing and future success if it fails to retain key people and develop new talent within the Group. To minimise this risk the Group invests in training and development programmes and reviews market remuneration trends.

 

About Dalata

Dalata Hotel Group plc was founded in August 2007 and listed as a plc in March 2014. Dalata has a strategy of owning or leasing its hotels and also has a small number of management contracts. The Group's portfolio consists of 30 owned hotels, ten leased hotels and three management contracts with a total of 9,046 bedrooms. In addition to this, the Group is currently developing nine new hotels with approximately 2,400 bedrooms and these will open over the next three years. This will bring the total number of bedrooms in Dalata to over 11,000. Dalata now has close to 5,000 employees. For the first six months of 2019, Dalata reported revenue of €201.9 million and a profit after tax of €32.7 million. Dalata is listed on the Main Market of 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 3 September 2019, 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: 12767841#

 

Contacts

 

 Dalata Hotel Group plc     

investorrelations@dalatahotelgroup.com

Pat McCann, CEO

Tel +353 1 206 9400

Dermot Crowley, Deputy CEO, Business Development & Finance

Sean McKeon, Company Secretary and Head of Risk and Compliance

Niamh Carr, Investor Relations Manager

 

 Joint Company Brokers

 

Davy: Anthony Farrell

Tel +353 1 679 6363

Berenberg: Ben Wright

Tel +44 20 3753 3069

 

 

 Investor Relations and PR | FTI Consulting

Tel +353 86 401 5250

 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.
 

Half Year 2019 Financial Performance

 

IFRS 16

 

Dalata have accounted for the Group's leasing activities under the new standard, IFRS 16 Leases, for the first time in the current set of results. Under IFRS 16 almost all of Dalata's leases are recorded on the balance sheet in the form of right-of-use assets, representing our right to use the leased assets, and corresponding lease liabilities, representing our obligation to pay rental expenses.

 

The lease liability is calculated by discounting the future minimum rental cashflows using the estimated applicable incremental borrowing rate on a lease by lease basis. Total lease liabilities amounted to €314.4 million on 1 January 2019. The weighted average incremental borrowing rate for the Group at 1 January 2019 for IFRS 16 discount rate purposes was 6.03% which is marginally higher than the discount rate of 5% previously estimated as referred to in the 2018 annual report.

 

The right-of-use asset is equal to the lease liability at the date of initial application adjusted for any lease prepayments and accruals at that date. Total right-of-use assets amounted to €343.7 million on 1 January 2019. This amount includes €20.5 million which was part of the consideration paid for the Choice Hotel Group leases in March 2016 which was previously recorded as an intangible asset.

Over the lease term, the lease liability is increased by the interest charge and decreased by the cash flows for fixed rent payments under the lease agreement. The right-of-use asset is depreciated on a straight-line basis over the lease term.

The lease liability will be remeasured during the lease term following the completion of any rent reviews, a reassessment of the lease term or where a lease contract is modified. This will result in a change to the interest charge and the corresponding adjustment made to the right-of-use asset will result in a modification to the depreciation of the right-of-use asset.

The adoption of IFRS 16 for the first time results in a significant change to the profit or loss, cash flow statement presentation and balance sheet for the six months ended 30 June 2019. This impact is discussed in more detail in the tables below.

 

Impact on financial statements: Consolidated statement of comprehensive income

 

Element of IFRS 16

Impact on profit or loss for the period ended 30 June 2019

Fixed rental expenses are excluded from profit or loss and replaced with finance costs on the lease liabilities and depreciation of the right-of-use assets.

Adjusted EBITDA1 has increased by €13.1 million as fixed rental expenses are removed from profit or loss. However, under IFRS 16 total lease expenses are higher in the early years of implementation due to the front-loading effects of finance costs versus the straight-line rent expense under IAS 17. This resulted in a €3.8 million decrease to profit after tax and 2.1 cent decrease to basic EPS for the first six months of 2019.

As permitted under IFRS 16, Dalata have adopted the modified retrospective approach and therefore have not restated prior period comparatives. A summary of the impact of IFRS 16 on profit or loss for the six month period ended 30 June 2019 is outlined in the table hereafter, together with the results excluding the impact of IFRS 16, ("the pre IFRS 16 results") to aid comparability.

 

 

 

Remove IFRS 16 Impact

 

 

€million

6 months ended

30 June 2019

Add back

fixed rent

Exclude depreciation of RoU assets and interest on lease liabilities

Taxation impact

6 months ended

30 June 2019

6 months ended

30 June

20184

 

Post IFRS 16

As Reported

 

 

 

Pre IFRS 161

 

Revenue

201.9

-

-

-

201.9

180.0

Segments EBITDAR1

81.5

 

 

 

81.5

72.1

Rent

(3.6)

(13.0)

-

-

(16.6)

(16.2)

Other income

0.6

-

-

-

0.6

0.7

Central costs

(3.7)

(0.1)

-

-

(3.8)

(4.4)

Share-based payments expense

(1.4)

-

-

-

(1.4)

(1.2)

Adjusted EBITDA1

73.4

(13.1)

-

-

60.3

51.0

Adjusting items to EBITDA

0.8

-

-

-

0.8

(2.3)

Group EBITDA1

74.2

(13.1)

-

-

61.1

48.7

Depreciation and amortisation

(21.1)

-

8.2

-

(12.9)

(9.3)

Net finance costs

(15.3)

-

9.3

-

(6.0)

(4.0)

Profit before tax

37.8

(13.1)

17.5

-

42.2

35.4

Tax

(5.1)

-

-

(0.6)

(5.7)

(4.9)

Profit after tax

32.7

(13.1)

17.5

(0.6)

36.5

30.5

 

Impact on financial statements: Consolidated statement of financial position

 

Element of IFRS 16

Impact on balance sheet for the period ended 30 June 2019

Recognition of assets reflecting the right-of-use of leased assets

Right-of-use assets of €338.8 million at 30 June 2019

 

Recognition of financial liabilities to pay rental expenses

Dalata's liabilities have increased by €314.1 million at 30 June 2019 as the accounting estimate of lease liabilities is brought on balance sheet. This results in an increase in Net Debt to Adjusted EBITDA1 from 2.8x pre IFRS 16 to 4.3x post IFRS 16.

Impact on financial statements: Consolidated statement of cash flows

 

Element of IFRS 16

Impact on cash flow for the period ended 30 June 2019

The payment of fixed rental expenses is now presented within cash flows from financing activities

There will be a minor impact on cash flows due to the positive cash benefit from the treatment of IFRS 16 by UK Tax Authorities which amounted to £0.2m for the first six months of 2019. Net cash flow from operating activities has increased by €12.8 million as the payment of fixed rental expenses is now presented within financing activities in the form of repayment of lease liabilities (€3.5 million) and interest on lease liabilities (€9.3 million).

 

Financial Results

 

€million

Six months

ended

30 June 2019

Six months ended

30 June

2019

Six months

ended 30 June

20184

 

Post IFRS 16

Pre IFRS 161

 

Revenue

 201.9

201.9

180.0

Segments EBITDAR1

 81.5

81.5

72.1

Rent

(3.6)

(16.6)

(16.2)

Segments EBITDA1

77.9

64.9

55.9

Central costs

(3.7)

(3.8)

(4.4)

Share-based payments expense

(1.4)

(1.4)

(1.2)

Other income

0.6

0.6

0.7

Adjusted EBITDA1

73.4

60.3

51.0

Adjusting items to EBITDA

0.8

0.8

(2.3)

Group EBITDA1

74.2

61.1

48.7

Depreciation of PPE

(12.9)

(12.9)

(9.3)

Depreciation of RoU assets

(8.2)

-

-

Operating profit

53.1

48.2

39.4

Finance costs

(6.0)

(6.0)

(4.0)

Interest on lease liabilities

(9.3)

-

-

Profit before tax

37.8

42.2

35.4

Tax

(5.1)

(5.7)

(4.9)

Profit for the period

32.7

36.5

30.5

 

 

 

 

Basic earnings per share

17.7 cent

19.8 cent

16.6 cent

Adjusted basic earnings1 per share

17.2 cent

19.3 cent

17.8 cent

Segments EBITDAR margin1

40.4%

40.4%

40.0%

Summary of hotel performance

Dalata delivered strong revenue growth of 12.2% to €201.9 million for the first six months of 2019. The opening of six new hotels in 2018 and early 2019 contributed €18.1 million to revenue growth. The four hotels in which we opened new extensions during 2018 and the additional rooms acquired at Clayton Hotel Liffey Valley added €6.4 million. 'Like for like' revenue growth at our existing UK hotel portfolio added €1.1 million, which is particularly encouraging given our expansion plans for this country. Revenue at our Republic of Ireland hotels decreased by €0.6 million on a 'like for like' basis due to challenging market conditions and the impact of the VAT increase in Ireland. There were also reductions in revenue of €1.8 million due to the closure of Tara Towers Hotel in September 2018 and €1.6 million due to the extensive renovations ongoing at Clayton Hotel Burlington Road which has decreased its available rooms by circa 10% and impacted its ability to accept conference business.

 

The additional revenue converted strongly to the bottom line with Segments EBITDAR increasing by €9.4 million. Segments EBITDAR margin for the Group increased from 40.0% to 40.4% demonstrating our excellent control of costs and no margin dilution despite the opening of six new hotels which have yet to reach full operating performance.

 

Post adoption of IFRS 16, Segments EBITDA has increased as fixed rental expenses are now removed from profit or loss and replaced with finance costs on the lease liabilities and depreciation of the right-of-use assets. Excluding the impact of IFRS 16, Segments EBITDA increased by €9.0 million driven by the new rooms added during 2018/early 2019.

 

Adjusted EBITDA bridge

 

The table below shows by region how Adjusted EBITDA has grown by €9.3 million to €60.3 million (pre IFRS 16) for the first six months of 2019.

 

 

 

Dublin

Regional Ireland

UK

 

€million

H1 20181

New hotels opened in 20182

Additional rooms at existing hotels3

Closure of Tara Towers

Hotel with large renovation ongoing4

Like for like
performance

 

New hotel opened in 20185

Hotel with
extension added in 20186

Like for like
performance

 

New hotels opened in 2018 &

20197

Effect of
FX

Like for like
performance

Movement in group income and expenses8

H1 2019 Pre IFRS 16

IFRS 16 impact9

H1 2019 Post IFRS 16

Revenue

180.0

8.2

6.0

(1.8)

(1.6)

(0.3)

2.6

0.4

(0.3)

7.3

0.3

1.1

-

201.9

-

201.9

Segments EBITDAR

72.1

3.6

3.6

(0.6)

(1.1)

0.3

0.7

0.3

(0.2)

2.1

0.1

0.6

-

81.5

-

81.5

Rent

(16.2)

-

-

-

-

0.6

-

-

-

(1.0)

-

-

-

(16.6)

13.0

(3.6)

Segments EBITDA

55.9

3.6

3.6

(0.6)

(1.1)

0.9

0.7

0.3

(0.2)

1.1

0.1

0.6

-

64.9

13.0

77.9

Other income

0.7

-

-

-

-

-

-

-

-

-

-

-

(0.1)

0.6

-

0.6

Central costs

(4.4)

-

-

-

-

-

-

-

-

-

-

-

0.6

(3.8)

0.1

(3.7)

Share-based payments expense

(1.2)

-

-

-

-

-

-

-

-

-

-

-

(0.2)

(1.4)

-

(1.4)

Adjusted EBITDA

51.0

3.6

3.6

(0.6)

(1.1)

0.9

0.7

0.3

(0.2)

1.1

0.1

0.6

0.3

60.3

13.1

73.4

Segments EBITDAR margin

40.0%

 

 

 

 

 

 

 

 

 

 

 

 

40.4%

 

40.4%

1. Prior period comparatives have been restated to reflect (i) the reclassification of pre-opening costs from Segments EBITDAR to 'Adjusting items to EBITDA' following the decision made in December 2018 to show pre-opening costs as an adjusting item as they distort comparability 'period on period' and with similar businesses and (ii) the reclassification of income from managed hotels from revenue to other income in the period ended 30 June 2019. Prior period KPIs for the period ended 30 June 2018 have been restated for these reclassifications. See note 2 in the condensed interim financial statements for the six month period ended 30 June 2019 for further information

2. Includes Maldron Hotel Kevin Street which opened in July 2018 and Clayton Hotel Charlemont which opened in November 2018

3. Includes Clayton Hotel Dublin Airport, Clayton Hotel Ballsbridge and Maldron Hotel Parnell Square where we completed extensions during 2018 and Clayton Hotel Liffey Valley where we acquired 70 rooms since 30 June 2018

4. Clayton Hotel Burlington Road is currently undergoing extensive renovation works

5. Maldron Hotel South Mall, Cork opened in December 2018

6. Maldron Hotel Sandy Road, Galway completed its extension in June 2018

7. Includes Maldron Hotel Belfast City which opened in March 2018, Maldron Hotel Newcastle which opened in December 2018 and Clayton Hotel City of London which opened in January 2019

8. Group income and expenses includes income from management contracts, rental income, central costs and the share-based payments expense

9. Includes the impact of IFRS 16 where fixed rental expenses are now excluded from profit or loss and replaced with finance costs on the lease liabilities and depreciation of the right-of-use assets

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 | Strong Growth in Revenue and Margins

 

€million

Six months ended

30 June 2019

Six months ended

30 June 20184

Room revenue

 

84.2

 

76.7

Food and beverage revenue

 

25.5

 

23.2

Other revenue

 

8.0

 

7.3

Total revenue

 

117.7

 

107.2

EBITDAR

 

55.6

 

49.8

EBITDAR margin %

 

47.2%

 

46.5%

 

 

 

 

 

Performance statistics (like for like)2

 

 

 

Occupancy

 

85.5%

 

85.4%

Average room rate (€)

 

124.71

 

125.49

RevPAR (€)

 

106.57

 

107.13

RevPAR % change

 

-0.5%

 

 

 

 

 

 

 

Dublin owned & leased portfolio

 

 

Hotels

 

16

 

15

Room numbers

 

4,478

 

4,146

Our sixteen hotels in the Group's Dublin portfolio consists of seven Maldron hotels, seven Clayton hotels, the Ballsbridge Hotel and The Gibson Hotel. Since June 2018, we have opened the Clayton Hotel Charlemont (187 rooms), Maldron Hotel Kevin Street (137 rooms) and completed two extensions at Clayton Hotel Ballsbridge and Maldron Hotel Parnell Square. The Tara Towers closed in September 2018 resulting in a loss of 109 rooms to allow the building of the new Maldron Hotel Merrion Road to commence.

Our Dublin hotels outperformed the market RevPAR decline of 1.4% for the first six months. Dublin revenue increased by €10.5 million driven by the growth in the portfolio during 2018. The two new hotels which opened in 2018 contributed €8.2 million. The three extensions and additional rooms acquired at Clayton Hotel Liffey Valley, which opened during 2018, added a further €6.0 million. The ongoing renovations at Clayton Hotel Burlington Road have temporarily impacted the performance of that hotel resulting in a decrease in revenue of €1.6 million. The renovations have reduced room numbers by approximately 10% and limited the hotel's ability to take on conference business as a result of disruptions caused by the construction work.

 

Dublin EBITDAR increased by €5.8 million to €55.6 million primarily driven by the additional rooms added to the portfolio. The existing Dublin hotels had a more difficult six months with revenue declining by €0.3 million due to challenging market conditions and reduction in the number of events in the city. However, these hotels were able to mitigate the impact of the reduction in revenue through excellent cost control and delivered an EBITDAR increase of €0.3 million compared to the first six months of 2018.

 

2. Regional Ireland Hotel Portfolio | Revenue and Margins Growing

 

€million

Six months ended

30 June 2019

Six months ended

30 June 20184

Room revenue

 

22.1

 

19.8

Food and beverage revenue

 

12.2

 

12.0

Other revenue

 

4.2

 

4.0

Total revenue

 

38.5

 

35.8

EBITDAR

 

9.4

 

8.6

EBITDAR margin %

 

24.5%

 

24.1%

 

 

 

 

 

Performance statistics2

 

 

Occupancy

 

71.8%

 

71.7%

Average room rate (€)

 

92.41

 

92.31

RevPAR (€)

 

66.32

 

66.15

RevPAR increase %

 

0.3%

 

 

 

 

 

 

 

Regional Ireland owned & leased portfolio

 

 

Hotels

 

13

 

12

Room numbers

 

1,867

 

1,706

Our thirteen hotels in the Regional Ireland portfolio comprise seven Maldron hotels and six Clayton hotels located in Cork (x4), Galway (x3), Limerick (x2), Wexford (x2), Portlaoise and Sligo.

Dalata's hotels in Cork, Galway and Limerick account for 72% of the rooms, generate 72% of revenue and 76% of EBITDAR in the Regional Ireland portfolio.

Total revenue in Regional Ireland increased by 7.5% driven by the additional rooms added with the opening of Maldron Hotel South Mall, Cork in December 2018 and the extension at Maldron Hotel Sandy Road, Galway in June 2018 which together contributed €3.0 million. Revenue from the existing hotel portfolio decreased by €0.3 million on the prior period due to challenging market dynamics. In general, the VAT increase of 4.5% has had a negative impact on the Regional Ireland market. However, Dalata did outperform the market RevPAR change in both Cork and Galway.

EBITDAR margin increased by 40 bps to 24.5% with no dilution by the additional rooms added in 2018. This result demonstrates our excellent control of costs despite the decrease in revenue from the existing portfolio.

 

3. UK Hotel Portfolio | Proving our UK Model

 

Local currency - £million

Six months ended

30 June 2019

Six months ended

30 June 20184

Room revenue

 

28.5

 

22.5

Food and beverage revenue

 

8.4

 

7.2

Other revenue

 

3.0

 

2.8

Total revenue

 

39.9

 

32.5

EBITDAR

 

14.4

 

12.0

EBITDAR margin %

 

36.2%

 

36.8%

 

 

 

 

 

Performance statistics2

 

 

Occupancy

 

83.6%

 

83.1%

Average room rate (£)

 

82.45

 

80.38

RevPAR (£)

 

68.92

 

66.76

RevPAR increase %

 

3.2%

 

 

 

UK owned & leased portfolio

 

 

Hotels

 

11

 

9

Room numbers

 

2,445

 

1,968

 

Our UK hotel portfolio comprises eight Clayton hotels and three Maldron hotels with three hotels situated in London, five hotels in regional UK and three hotels in Northern Ireland. Since June 2018 Dalata have opened two new hotels with Maldron Hotel Newcastle (265 rooms) opened in December 2018 and Clayton Hotel City of London (212 rooms) opened in January 2019.

 

Dalata's UK hotels performed strongly in the first six months of 2019, achieving a RevPAR increase of 3.2%. We had a very strong performance in Manchester (+7.6%), Birmingham (+8.2%), Leeds (+4.5%) and Belfast (-6.5%), where we significantly outperformed the market. This strong performance is a testament to the quality and location of our hotels within large UK cities and reinforces our UK growth strategy.

 

UK EBITDAR increased by 20.0% to £14.4 million for the first six months of 2019. The additional revenue was converted strongly by our existing UK portfolio. The decrease in EBITDAR margin from 36.8% to 36.2% is driven by the three new hotels which opened in 2018 and early 2019. Excluding the impact of Maldron Hotel Newcastle, Maldron Hotel Belfast City and Clayton Hotel City of London, which will initially operate at lower margins, the 'like for like' EBITDAR margin increased from 37.6% to 38.4%.

 

Central costs and share-based payments expense

 

For the first six months, central costs decreased by €0.7 million to €3.7 million. Wages and salaries included within central costs increased by €0.9 million following new hires to support the growing Group. This was offset by a release of €1.5 million of insurance provisions made in previous accounting periods following the impact of better claims experience on original estimates. Excluding the impact of this provision release, the Group expects that central overheads for the full year will increase due to increased resources and sales and marketing spend.

The share-based payments expense increased marginally by €0.2 million.

 

Other income

Other income comprises rental income of €0.2 million and income from management contracts of €0.4 million. During the six months ended 30 June 2019, the Group changed the composition of operating segments with income from management contracts no longer presented as a separate segment. This change reflected the decreasing importance of management fees as an element of the business and represents the way the information is now reported and analysed internally by senior management. The income from managed hotels has been reclassified from revenue to other income in the period ended 30 June 2019. Prior period comparatives and the KPIs calculated thereon for the period ended 30 June 2018 have also been restated for this reclassification.

 

Adjusting items to EBITDA

 

€million

Six months ended

30 June 2019

Six months ended

30 June 20184

Hotel pre-opening expenses

 

(0.1)

 

(0.7)

Net revaluation movements through profit or loss

 

0.9

 

(1.6)

Adjusting items to EBITDA

 

0.8

 

(2.3)

Adjusted EBITDA is presented as an alternative performance measure to show the underlying operating performance of the Group. Consequently, items which are not reflective of normal trading activities or distort comparability either 'period on period' or with other similar businesses are excluded.

 

In the first six months of 2019, the Group incurred pre-opening expenses amounting to €0.1 million relating to the launch of Clayton Hotel City of London which opened in early 2019. Pre-opening expenses typically include staff training costs, wages and salaries of the core hotel management team prior to opening and sales and marketing expenses. They are incurred in advance of a newly built hotel becoming operational.

 

The decision to show pre-opening costs as an adjusting item due to the manner in which they distort comparability 'period on period' and with other similar businesses was made in December 2018. In the current financial period, the prior period comparatives have been restated in line with this decision. Accordingly, pre-opening costs of €0.7 million associated with the opening of Maldron Hotel Belfast City and Maldron Hotel Kevin Street incurred in the six months ended 30 June 2018 were reclassified from 'Segments EBITDAR' to 'Adjusting items to EBITDA'.

 

Depreciation of property, plant and equipment

 

Depreciation increased by €3.6 million to €12.9 million driven by growth in the portfolio. €3.0 million of the increase relates to the completion of four new "owned" hotels and four extensions to existing properties since June 2018 and the full period impact of the depreciation of Maldron Belfast City which opened in March 2018. The remaining increase relates to the depreciation of refurbishment capital expenditure which replaced items that had already been fully depreciated in previous accounting periods.

 

Depreciation of right-of-use assets

 

Under IFRS 16, the right-of-use assets are depreciated on a straight-line basis from the commencement date of the lease typically to the end of the lease term. The depreciation of right-of-use assets amounted to €8.2 million for the first six months of 2019.

 

Finance Costs

 

€million

Six months ended

30 June 2019

Six months ended

30 June 2018

Interest expense on loans

 

4.4

 

3.9

Impact of interest rate swaps

 

0.5

 

0.5

Other finance costs

 

0.8

 

0.9

Net exchange loss/(gain) on financing activities

 

0.4

 

(0.1)

Capitalised interest

 

(0.1)

 

(1.2)

Finance costs (pre IFRS 16)

 

6.0

 

4.0

Interest on lease liabilities

 

9.3

 

-

Finance costs (post IFRS 16)

 

15.3

 

4.0

           

Finance costs have increased primarily due to the application of IFRS 16, which results in the recognition of an interest charge on the lease liabilities totalling €9.3 million. Capitalised interest has reduced by €1.1 million due to a decrease in the number of development projects.

The interest on the lease liabilities is calculated using the estimated incremental borrowing rate at 1 January 2019 applicable to each lease, which is derived from country specific risk-free interest rates over the relevant lease term, adjusted for the estimated finance margin attainable by each lessee and asset specific adjustments designed to reflect the underlying asset's location and condition. The Group's weighted average estimated incremental borrowing rate for IFRS 16 accounting purposes is 6.03%.

Interest on bank loans increased by €0.5 million due to the additional draw down of £60 million and €30.5 million from the multicurrency revolving credit facility to fund the acquisition of Clayton Hotel City of London, offset by a decrease in interest on bank loans under the improved terms of the new facility agreement secured in October 2018.

 

Tax charge

 

The Group's effective tax rate1 decreased from 13.9% in the first six months of 2018 to 13.5% in the first six months of 2019 largely due a reduction in non-deductible financing costs and professional fees for tax purposes.

 

Earnings per share

 

Cent (€)

Six months

ended

30 June 2019

Six months ended

30 June 2019

Six months ended

30 June 2018

 

Post IFRS 16

Pre IFRS 16

 

Basic earnings per share

17.7

19.8

16.6

Diluted earnings per share

17.6

19.6

16.4

Adjusted basic earnings per share1

17.2

19.3

17.8

Excluding the impact of IFRS 16, the Group's strong operating performance has translated into an increase in basic earnings per share and adjusted basic earnings per share of 19.3% and 8.4% respectively. The adoption of IFRS 16 has decreased basic earnings per share and adjusted basic earnings per share for the six months ended 30 June 2019 by 2.1 cent and decreased diluted earnings per share by 2.0 cent.

Dividends

In 2018, Dalata announced that it has adopted a progressive dividend policy with the level of payment based on a percentage of profit after tax. The Board has proposed an interim dividend of 3.5 cent per share payable on 4 October 2019 to all ordinary shareholders on the share register at the close of business on the record date of 13 September 2019.

 

Strong operating cash flows re-invested in the business

 

€million

Six months ended

30 June 2019

Six months ended

30 June 2018

Net cash from operating activities (excluding tax)

 

76.1

 

46.7

Fixed rent paid

 

(12.8)

 

-

Tax paid

 

(4.9)

 

(3.4)

Finance costs paid

 

(5.2)

 

(4.7)

Refurbishment capital expenditure

 

(8.1)

 

(7.2)

Cash generated for investment, debt repayments

and dividends1

 

45.1

 

31.4

 

Our portfolio of hotels continues to earn a strong free cash flow. This cash generated allows us to fund acquisitions and developments whilst also paying dividends to our shareholders. Dalata allocates approximately 4% of annual revenue to refurbishment capital expenditure to ensure the portfolio remains fresh for our customers and adheres to brand standards.

 

Balance Sheet | Lowly Geared and Asset Backed

 

€million

30 June

 2019

30 June

 2019

31 December

2018

Non-current assets

Post IFRS 16

Pre IFRS 16

 

Property, plant and equipment

1,334.5

1,334.5

1,176.3

Right-of-use assets

338.8

-

-

Goodwill and intangible assets

33.3

54.4

54.4

Other non-current assets

19.3

23.8

28.0

Current assets

 

 

 

Trade and other receivables and inventory

33.7

38.4

24.5

Cash

45.9

45.9

35.9

Total assets

1,805.5

1,497.0

1,319.1

Equity

957.7

961.5

902.6

Loans and borrowings

397.2

397.2

301.9

Lease liabilities

314.1

-

-

Trade and other payables

75.6

77.2

65.2

Other liabilities

60.9

61.1

49.4

Total equity and liabilities

1,805.5

1,497.0

1,319.1

Dalata's strong balance sheet is vital as it will help support future growth. Maintaining a strong covenant with well-located property assets and low levels of gearing allows Dalata to attract and partner with strong fixed income investors and enter into leases at relatively low yields. This is critical for the Group's strategy of expanding in the UK using the leasing model.

Dalata is committed to actively managing its balance sheet to ensure it has an appropriate level and mix of debt. The adoption of IFRS 16 has brought an accounting estimate of lease liabilities on to the balance sheet, increasing the Group's liabilities by €314.1 million. This has resulted in an increase to our Net Debt to Adjusted EBITDA1 to 4.3x. Excluding the impact of IFRS 16 the Group's Net Debt to Adjusted EBITDA1 was 2.8x (31 December 2018: 2.3x).

Dalata also monitor a ratio, referred to as our 'Debt and Lease Service Cover1', to assess the Group's ability to meet interest and rent commitments. At the end of June 2019, this ratio amounted to a very strong 3.1x.

For the first six months of 2019, Dalata achieved a Return on Invested Capital1 of 10.8% (2018: 11.2%). Excluding the capital cost and trading impact of the six new hotels, which opened in the past 18 months and assets under construction at period end, the Normalised Return on Invested Capital1 was 12.6%.

 

Property, plant and equipment

Property, plant and equipment was €1,334.5 million at 30 June 2019. The increase of €158.3 million in six months is driven by additions of €129.2 million, a net revaluation gain of €46.4 million offset by the depreciation charge of €12.9 million and adverse foreign exchange movements which decreased the value of the UK hotel assets by €0.4 million. €4.1 million of assets relating to a renovation project ongoing at Clayton Hotel Burlington Road, Dublin were transferred to other receivables as a result of a contractual arrangement entered into in 2019 whereby assets totalling €7.5 million will be transferred at cost to the landlord.

 

Additions through acquisitions and capital expenditure

€million

30 June

2019

30 June

2018

Development capital expenditure:

 

 

 

 

Acquisition of freeholds or site purchases

 

110.4

 

6.9

Construction of new build hotels, hotel extensions and renovations

 

5.5

 

45.0

Other development expenditure

 

4.5

 

4.0

Total development capital expenditure

 

120.4

 

55.9

Total refurbishment capital expenditure

 

8.8

 

10.8

Additions to property plant & equipment

 

129.2

 

66.7

 

The Group typically allocates 4% of revenue to refurbishment capital expenditure. In the first six months of 2019, €4.6 million was spent refurbishing bedrooms and a further €4.2 million was spent on public areas and completing health and safety works.

 

During the period, the Group completed the acquisition of the effective freehold interest of a newly built hotel in Aldgate, London for a total consideration of £92.9 million (€103.6 million) including acquisition related costs. The Group also acquired a site adjacent to the Clayton Hotel Cardiff Lane, Dublin for €5.9 million which the Group plans to redevelop into circa 93 bedrooms and ancillary facilities, including a conference centre.

 

Right-of-use assets

 

Right-of-use assets are recorded at cost less accumulated depreciation. The initial cost at 1 January 2019 comprises the initial amount of the lease liability adjusted for lease prepayments and accruals at the commencement date, and reclassifications from intangible assets where applicable. At 30 June 2019, right-of-use assets amounted to €338.8 million.

 

€million

 

 

Right-of-use assets at 1 January 2019

 

 

 

343.7

Depreciation charge for the period

 

 

 

(8.2)

Remeasurement of lease liabilities

 

 

 

3.4

Additions

 

 

 

0.1

Translation adjustment

 

 

 

(0.2)

Right-of-use assets at 30 June 2019

 

 

 

338.8

Loans and borrowings

 

Dalata refinanced its debt facilities with a new €525 million debt facility on improved terms in October 2018. The multicurrency facility agreement consists of a €200 million term loan facility and €325 million revolving credit facility (RCF). Post 30 June 2019, the Group availed of the option to extend the term of the facility by one additional year so it is now maturing in October 2024.

 

As at 30 June 2019, the drawn loan facility amounted to €401.0 million consisting of sterling term borrowings of £176.5 million (€196.9 million) and revolving credit facility borrowings of €204.1 million consisting of €137.2 million drawn in euro and £60 million (€66.9 million) drawn in sterling. The undrawn loan facilities as at 30 June 2019 amounted to €120.9 million.

 

During the period, the Group drew down £60.0 million (€66.9 million) and €30.5 million from the multicurrency revolving credit facility to fund the acquisition of a company which owned the Clayton Hotel City of London. Post 30 June 2019, the Group drew down a further £30.0 million to fund the acquisition of a site in Shoreditch, London.

The Group limits its exposure to foreign currency by using sterling term debt to act as a natural hedge against the impact of sterling rate fluctuations on the euro value of the Group's UK assets. These borrowings amounted to £236.5 million (€263.8 million) at 30 June 2019 (31 December 2018: £176.5 million; €197.3 million) and are designated as net investment hedges.

 

The Group is also exposed to floating interest rates on its debt obligations and uses hedging instruments to mitigate the risk associated with interest rate fluctuations. This is achieved by entering into interest rate swaps and an interest rate cap which hedge the variability in cash flows attributable to the interest rate risk. As at 30 June 2019, the interest rate risk on approximately 85% of our sterling denominated borrowings was hedged by interest rate swaps.

 

Lease liabilities

Lease liabilities are initially measured at the present value of the outstanding lease payments, discounted using the estimated incremental borrowing rate attributable to the lease. The lease liabilities are subsequently remeasured during the lease term following the completion of rent reviews, a reassessment of the lease term or where a lease contract is modified.

 

€million

 

 

Lease liabilities at 1 January 2019

 

 

 

314.4

Interest on lease liabilities

 

 

 

9.3

Lease payments

 

 

 

(12.8)

Remeasurement of lease liabilities

 

 

 

3.4

Translation adjustment

 

 

 

(0.2)

Lease liabilities at 30 June 2019

 

 

 

314.1

The remeasurement of lease liabilities of €3.4 million relates to the reassessment of the lease liability of two hotel leases following the completion of rent reviews.

 

[1] See Supplementary Financial Information which contains definitions and reconciliations of Alternative Performance Measures ("APM") and other definitions.

 

2 Like for like' KPIs exclude the hotels which opened during 2018/early 2019 and hotels where there is a significant change in room numbers compared to the prior period. Prior period comparatives have been restated on a constant currency basis.

 

In Dublin, performance statistics exclude the new hotels which opened during 2018 (Maldron Hotel Kevin Street and Clayton Hotel Charlemont) and the Tara Towers Hotel which closed in September 2018. To achieve an accurate like for like comparison we have also excluded (i) Clayton Hotel Dublin Airport and Maldron Hotel Parnell Square due to the significant extensions completed during 2018 which distorts comparability, (ii) Clayton Hotel Burlington Road due to the redevelopment works ongoing in the hotel and (iii) Clayton Hotel Liffey Valley due to the significant acquisition of rooms during the period July 2018 - June 2019.

 

In Regional Ireland, performance statistics exclude the new Maldron Hotel South Mall, Cork which opened in December 2018 and Maldron Hotel Sandy Road, Galway which had a significant extension added during 2018.

 

In UK, performance statistics exclude the new Maldron Hotel Belfast City, Maldron Hotel Newcastle and Clayton Hotel City of London which opened in March 2018, December 2018 and January 2019 respectively.

 

3 The reference to six cities excludes Newcastle as the hotel in this city only opened in December 2018 and therefore its performance is not included in our RevPAR statistics.

 

4 Prior period comparatives have been restated to reflect (i) the reclassification of hotel pre-opening costs from Segments EBITDAR to 'Adjusting items to EBITDA' following the decision made in December 2018 to show pre-opening costs as an adjusting item as they distort comparability 'period on period' and with similar businesses and (ii) the reclassification of income from managed hotels from revenue to other income in the period ended 30 June 2019. Prior period KPIs for the period ended 30 June 2018 have been restated for these reclassifications.

 

 

 

 

 

 

 

 

Unaudited condensed consolidated

interim financial statements

 

for the six months ended 30 June 2019

 

 

Dalata Hotel Group plc

Unaudited condensed consolidated statement of comprehensive income

for the six months ended 30 June 2019

 

 

 

Restated*

 

 

6 months

   6 months

 

 

ended

ended

 

 

 30 June

30 June

 

 

2019

2018

 

Note

€'000

€'000

 

 

 

 

Continuing operations

 

 

 

Revenue

4

201,901

180,012

Cost of sales

 

(74,308)

(67,204)

 

 

              

                

 

 

 

 

Gross profit

 

127,593

112,808

Administrative expenses

5

(75,146)

(74,158)

Other income

6

639

712

 

 

              

                

 

 

 

 

Operating profit

 

53,086

39,362

Finance costs

7

(15,329)

(3,988)

 

 

              

                

 

 

 

 

Profit before tax

 

37,757

35,374

Tax charge

9

(5,095)

(4,924)

 

 

              

                

 

 

 

 

Profit for the period attributable to owners of the Company

 

32,662

30,450

 

 

              

                

Other comprehensive income

 

 

 

Items that will not be reclassified to profit or loss

 

 

Revaluation of property

11

45,382

60,130

Related deferred tax

 

(8,672)

(6,657)

 

 

              

                

 

 

36,710

53,473

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

 

 

 

Exchange difference on translating foreign operations

 

(48)

(24)

Gain/(loss) on net investment hedge

 

254

(262)

Fair value movement on cash flow hedges

23

(3,876)

196

Cash flow hedges - reclassified to profit or loss

23

535

509

Related deferred tax

 

418

(88)

 

 

              

                

 

 

(2,717)

331

 

 

              

                

Other comprehensive income for the period, net of tax

 

33,993

53,804

 

 

              

                

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

66,655

84,254

 

 

              

                

Earnings per share

 

 

 

Basic earnings per share

26

17.7 cents

16.6 cents

 

 

              

                

 

 

 

 

Diluted earnings per share

26

17.6 cents

16.4 cents

 

 

              

                

 

 

 

 

 *Revenue from managed hotels has been reclassified to other income in the period ended 30 June 2019. The prior period figures have been restated for this reclassification (note 2).

 

Dalata Hotel Group plc

Unaudited condensed consolidated statement of financial position

   at 30 June 2019

 

 

30 June

31 December

 

 

2019

2018

Assets

Note

€'000

€'000

Non-current assets

 

 

 

Intangible assets and goodwill

10

33,300

54,417

Property, plant and equipment

11

1,334,519

1,176,260

Right-of-use assets

13

338,760

-

Investment property

14

2,140

1,560

Contract fulfilment costs

15

11,006

9,066

Other receivables

16

3,265

14,759

Deferred tax assets

22

2,918

2,613

 

 

                  

                  

 

 

 

 

Total non-current assets

 

1,725,908

1,258,675

 

 

                  

                  

Current assets

 

 

 

Trade and other receivables

16

32,060

22,566

Inventories

 

1,650

1,954

Cash and cash equivalents

 

45,876

35,907

 

 

                  

                  

 

 

 

 

Total current assets

 

79,586

60,427

 

 

                  

                  

 

 

 

 

Total assets

 

1,805,494

1,319,102

 

 

                  

                  

Equity

 

 

 

Share capital

25

1,846

1,843

Share premium

25

503,129

503,113

Capital contribution

 

25,724

25,724

Merger reserve

 

(10,337)

(10,337)

Share-based payment reserve

 

4,125

4,232

Hedging reserve

 

(4,202)

(1,279)

Revaluation reserve

 

285,128

248,418

Translation reserve

 

(12,992)

(13,198)

Retained earnings

 

165,325

144,061

 

 

                  

                  

 

 

 

 

Total equity

 

957,746

902,577

 

 

                  

                  

Liabilities

 

 

 

Non-current liabilities

 

 

 

Loans and borrowings

21

397,184

301,889

Lease liabilities

13

288,095

-

Deferred tax liabilities

22

49,799

41,129

Derivatives

23

4,647

1,306

Provision for liabilities

18

4,433

4,783

 

 

                  

                  

 

 

 

 

Total non-current liabilities

 

744,158

349,107

 

 

                  

                  

Current liabilities

 

 

 

Lease liabilities

13

25,973

-

Trade and other payables

17

75,614

65,250

Current tax liabilities

 

404

309

Provision for liabilities

18

1,599

1,859

 

 

                  

                 

 

 

 

 

Total current liabilities

 

103,590

67,418

 

 

                  

                 

 

 

 

 

Total liabilities

 

847,748

416,525

 

 

                  

                 

 

 

 

 

Total equity and liabilities

 

1,805,494

1,319,102

 

 

                  

                 

 

 

 

 

                   

 

Dalata Hotel Group plc          

Unaudited condensed consolidated statement of changes in equity

for the six months ended 30 June 2019

 

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 2019

1,843

503,113

25,724

(10,337)

4,232

(1,279)

248,418

(13,198)

144,061

902,577

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

-

-

-

32,662

32,662

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

Exchange difference on translating foreign operations

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(48)

 

-

 

(48)

 

Gain on net investment hedge

-

-

-

-

-

-

-

254

-

254

 

Revaluation of property

-

-

-

-

-

-

45,382

-

-

45,382

 

Fair value movement on cash flow hedges

-

-

-

-

-

(3,876)

-

-

-

(3,876)

 

Cash flow hedges - reclassified to profit or loss

-

-

-

-

-

535

-

-

-

535

 

Related deferred tax

-

-

-

-

-

418

(8,672)

-

-

(8,254)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

-

-

(2,923)

36,710

206

32,662

66,655

 

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners of the Company:

 

 

 

 

 

 

 

 

 

 

 

Equity-settled share-based payments (note 8)

-

-

-

-

1,420

-

-

-

-

1,420

 

Vesting of share awards (note 8)

3

-

-

-

(1,522)

-

-

-

1,522

3

 

Dividends paid (note 25)

-

-

-

-

-

-

-

-

(12,925)

(12,925)

 

Save As You Earn options exercised (note 8)

-

16

-

-

(5)

-

-

-

5

16

 

 

 

 

 

 

 

 

 

 

 

 

 

Total transactions with owners of the Company

3

16

-

-

(107)

-

-

-

(11,398)

(11,486)

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2019

1,846

503,129

25,724

(10,337)

4,125

(4,202)

285,128

(12,992)

165,325

957,746

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 cash flow hedges

-

-

-

-

-

196

-

-

-

196

 

Cash flow 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 cash flows

for the six months ended 30 June 2019

 

 

6 months

6 months

 

 

ended

ended

 

 

30 June

30 June

 

 

2019

2018

 

 

€'000

€'000

Cash flows from operating activities

 

 

 

Profit for the period

 

32,662

30,450

Adjustments for:

 

 

 

Depreciation of property, plant and equipment

 

12,900

9,303

Depreciation of right-of-use assets

 

8,227

-

Amortisation of intangible assets

 

-

22

Net property revaluation movements through profit or loss

 

(966)

1,590

Share-based payments expense

 

1,420

1,195

Interest on lease liabilities

 

9,327

-

Other interest and finance costs

 

6,002

3,988

Tax charge

 

5,095

4,924

 

 

                    

                 

 

 

 

 

 

 

74,667

51,472

 

 

 

 

Increase in trade and other payables and provision for liabilities

 

10,592

7,316

Increase in current and non-current trade and other receivables

 

(9,452)

(12,180)

Decrease in inventories

 

303

94

Tax paid

 

(4,858)

(3,434)

 

 

                    

                

 

 

 

 

Net cash from operating activities

 

71,252

43,268

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of property, plant and equipment

 

(122,631)

(67,537)

Contract fulfilment cost payments

 

(1,601)

-

Costs paid on entering new leases and agreements for lease

 

(312)

-

 

 

                    

                

 

 

 

 

Net cash used in investing activities

 

(124,544)

(67,537)

 

 

 

 

Cash flows from financing activities

 

 

 

Net receipt of revolving credit facility loans

 

94,887

44,488

Capital repayments of other bank loans

 

-

(8,400)

Repayment of lease liabilities

 

(3,511)

-

Interest paid on lease liabilities

 

(9,327)

-

Other interest and finance costs paid

 

(5,225)

(4,646)

Dividends paid

 

(12,925)

-

Proceeds from vesting of share awards

 

19

6

 

 

                    

                

 

 

 

 

Net cash from financing activities

 

63,918

31,448

 

 

                    

                

 

 

 

 

Net increase in cash and cash equivalents

 

10,626

7,179

 

 

 

 

Cash and cash equivalents at beginning of period

 

35,907

15,745

Effect of movements in exchange rates

 

(657)

(267)

 

 

                    

                

 

 

 

 

Cash and cash equivalents at end of period

 

45,876

22,657

 

 

                                                        

                

 

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 2019 (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 2 September 2019. 

 

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 International Financial Reporting Standards ('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 2018. They should be read in conjunction with the consolidated financial statements of Dalata Hotel Group plc, which were prepared in accordance with IFRS as adopted by the European Union, as at and for the year ended 31 December 2018.

 

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 2018 with the exception of estimates surrounding the implementation of IFRS 16 Leases, which is effective for the first time in the financial year ending 31 December 2019. Estimates surrounding the determination of the appropriate rate to discount lease payments is a new source of estimation uncertainty since the consolidated financial statements as at and for the year ended 31 December 2018.

 

The Interim Financial Statements do not constitute statutory financial statements. The statutory financial statements for the year ended 31 December 2018, 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 2018 with the exception of the lease payments accounting policy as a result of the adoption of a new IFRS accounting standard, IFRS 16 Leases and the revenue recognition accounting policy as a result of a change in the composition of operating segments.

 

IFRS 16 Leases is effective for the first time in the financial year ending 31 December 2019. Its transition impact is disclosed in note 12 and its impact on the Group's reported profit and net assets in these Interim Financial Statements is discussed in further detail in note 13. The accounting policies applicable from 1 January 2019 have been disclosed hereafter.

 

The change in the revenue recognition accounting policy is isolated to a change in classification. In the year ended 31 December 2018, management fees which were earned from hotels managed by the Group under contracts with the hotel owners were recognised within revenue. From 1 January 2019, the Group has included income earned from managed hotels within other income as a consequence of the change in reportable segments referred to hereafter.     

 

Change in reportable segments

 

             During the first six months ended 30 June 2019, the Group changed the composition of operating segments. This reflected the decreasing importance of management fees as an element of the business and reflects the way the information is now reported and analysed internally by the chief operating decision makers. Income 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, and has been previously reported as a separate operating segment.

 

The effect of the change in the prior period would have resulted in a decrease in revenue of €0.6 million for the period ended 30 June 2018, with a corresponding increase in other income of the same amount. These comparatives have been restated. The impact of this change on the comparatives for the Group for the period ended 30 June 2019 is presented hereafter.

 

 

As reported in 30

 

 

 

June 2018 interim

     30 June 2018

       30 June 2018

 

financial statements

Adjustments

Restated

 

€'000

€'000

€'000

 

 

 

 

Revenue

180,584

(572)

180,012

Other income

140

572

712

 

 

 

 

 

If the Group had applied the previous composition of operating segments in the current period, this would have resulted in an increase in reported revenue of €0.4 million for the period ended 30 June 2019, with a corresponding decrease in other income of the same amount.

 

Change in accounting policy

 

The accounting policy for lease payments as included in the 2018 annual report has been replaced with the following accounting policy effective from the date of initial application of IFRS 16 Leases being 1 January 2019.

 

IFRS 16 introduces a simple, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognised right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments in its statement of financial position. Lessor accounting remains similar to the previous accounting policy. The Group has applied IFRS 16 using the modified retrospective approach. Accordingly, the comparable information for 2018 has not been restated.

 

Leases

 

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. If the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration it is recognised as a lease.

 

To assess the right to control, the Group assesses whether:

·      the contract involves the use of an identified asset;

·      the Group has the right to obtain substantially all of the economic benefits from the use of the asset; and

·      the Group has the right to direct the use of the asset.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate, which is defined as the rate of interest that the lessee would have to pay to borrow, over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The incremental borrowing rate is derived from country specific risk-free interest rates over the relevant lease term, adjusted for the finance margin attainable by each lessee and asset specific adjustments designed to reflect the underlying asset's location and condition.

 

Lease payments included in the measurement of the lease liability comprise the following:

·    fixed payments (including in-substance fixed payments) less any lease incentives receivable;

·    variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

·    amounts expected to be payable under a residual value guarantee;

·    the exercise price under a purchase option that the Group is reasonably certain to exercise; and

·    penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

 

Variable lease payments linked to future performance or use of an underlying asset are excluded from the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in administrative expenses in profit or loss.

 

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect lease payments.

 

The Group remeasures the lease liability where lease payments change due to changes in an index or rate, changes in expected lease term or where a lease contract is modified. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

 

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. Right-of-use assets are reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. IAS 36 Impairment of Assets is applied to determine whether a right-of-use asset is impaired and any identified impairments are accounted for through profit or loss. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

 

The Group applies the fair value model in IAS 40 Investment property to right-of-use assets that meet the definition of investment property.

 

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of fixtures, fittings and equipment that have a lease term of 12 months or less and leases of low-value assets. Assets are considered low value if the value of the asset when new is less than €5,000. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

 

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 2018.

 

Restated*

6 months

ended
30 June
2018

Restated*

6 months
ended
 31 December
2018

Restated* year
ended
31 December 2018

 

              €'000

                     €'000

€'000

 

 

 

 

Revenue

180,012

212,556

392,568

 

             

               

             

 

 

 

 

Operating profit

39,362

57,453

96,815

 

             

               

             

 

 

 

 

Profit before tax

35,374

51,927

87,301

 

             

               

             

*Income from managed hotels has been reclassified from revenue to other income in the period ended 30 June 2019. The prior period figures have been restated for this reclassification (note 2).

 

The above table is provided for explanatory purposes. The actual relative split of revenue, operating profit and profit before tax for the financial year 2019 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, Deputy CEOs 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 comprise the Group's three reportable segments.

 

Previously, the income earned from managed hotels was included in revenue and reported as a separate operating segment. During the period ended 30 June 2019, there was a change in reporting segments and this income is now included within other income (note 2). Comparatives for the prior period have been restated on a consistent basis.

 

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 2019, the Group owns 28 hotels (31 December 2018: 27 hotels, 30 June 2018: 25 hotels) and has effective ownership of one further hotel which it operates (31 December 2018: one hotel, 30 June 2018: one hotel). It also owns the majority of one further hotel it operates (31 December 2018: one hotel, 30 June 2018: one hotel). The Group also leases ten hotel buildings from property owners (31 December 2018: ten hotels, 30 June 2018: nine hotels) and is entitled to the benefits and carries the risks associated with operating these hotels.

 

The Group's revenue from leased and owned hotels is primarily derived from room sales and food and beverage sales 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, variable rent payments (where linked to turnover or profit) made to lessors. In 2019, fixed rental costs are no longer included in operating costs in accordance with IFRS 16 but in interest on lease liabilities and depreciation of right-of-use assets.

 

Revenue

 

Restated*

 

6 months

6 months

 

ended

ended

 

30 June

30 June

 

2019

2018

 

€'000

€'000

 

 

 

Dublin

117,743

107,217

Regional Ireland

38,487

35,805

United Kingdom

45,671

36,990

 

______

______

Total revenue

201,901

180,012

 

______

______

 

 

 

*Income from managed hotels has been reclassified from revenue to other income in the period ended 30 June 2019. The prior period figures have been restated for this reclassification (note 2).

 

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.

 

 

 

 Restated*

 

6 months

6 months

 

ended

ended

 

30 June

30 June

 

2019

2018

 

€'000

€'000

Segmental results - EBITDAR

 

 

Dublin

55,551

49,838

Regional Ireland

9,439

8,645

United Kingdom

16,528

13,602

 

______

______

EBITDAR for reportable segments

81,518

72,085

 

______

______

Segmental results - EBITDA

 

 

Dublin

52,163

36,170

Regional Ireland

9,390

8,093

United Kingdom

16,338

11,570

 

______

______

EBITDA for reportable segments

77,891

55,833

 

______

______

Reconciliation to results for the period

 

 

Segments EBITDA

77,891

55,833

Other income

639

712

Central costs

(3,738)

(4,353)

Share-based payments expense

(1,420)

(1,195)

 

______

______

Adjusted EBITDA

73,372

50,997

 

 

 

Hotel pre-opening expenses

(125)

(720)

Net property revaluation movements through profit or loss

966

(1,590)

 

______

______

Group EBITDA

74,213

48,687

 

 

 

Depreciation of property, plant and equipment

(12,900)

(9,303)

Depreciation of right-of-use assets

(8,227)

-

Amortisation of intangible assets 

-

(22)

Interest on lease liabilities

(9,327)

-

Other interest and finance costs

(6,002)

(3,988)

 

______

______

Profit before tax

37,757

35,374

Tax

(5,095)

(4,924)

 

______

______

 

 

 

Profit for the period

32,662

30,450

 

______

______

 

 

 

*Income from managed hotels has been reclassified from revenue to other income in the period ended 30 June 2019. The prior period figures have been restated for this reclassification (note 2).

Hotel pre-opening expenses have been reclassified to adjusting items for the six month period to 30 June 2018 in order to be consistent with the classification of adjusting items applied in the 2018 consolidated financial statements.

 

Group EBITDA to 30 June 2019 represents earnings before interest on lease liabilities, other interest and finance costs, tax, depreciation of property, plant and equipment and right-of-use assets, and amortisation of intangible assets.

 

Group EBITDA to 30 June 2018 represents earnings before interest and finance costs, tax, depreciation of property, plant and equipment and amortisation of intangible assets.

 

In 2018, Group EBITDA included fixed rent of €12.7 million and variable rent which is linked to revenue/EBITDAR of €3.6 million under IAS 17 Leases. In 2019, Group EBITDA includes only variable rent of €3.6 million. From 1 January 2019, as a result of the application of IFRS 16 Leases, fixed rental costs have been excluded from Group EBITDA. Interest on lease liabilities and depreciation of right-of-use assets are now recognised and appear below Group EBITDA. If the Group accounted for rent under IAS 17 Leases for the first six months to 30 June 2019, rental expenses would include fixed rent of €13.1 million and EBITDA would decrease by the same amount (note 12).

 

Adjusted EBITDA is presented as an alternative performance measure to show the underlying operating performance of the Group excluding items which are not reflective of normal trading activities or distort comparability either period on period or with other similar businesses. Consequently, Adjusted EBITDA represents Group EBITDA before:

·    Net property revaluation movements through profit or loss (note 11); and

·    Hotel pre-opening expenses, which relate primarily to payroll expenses, sales and marketing costs and training costs of new staff, that are incurred by the Group in advance of new hotel openings.

 

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 payments expense is presented separately from Central costs as this expense relates to employees across the Group.

 

'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, hotel pre-opening expenses, managed hotels income and rental income. It is the net operational contribution of leased and owned hotels in each geographical location.

 

'Segmental results - EBITDAR' for Dublin, Regional Ireland and United Kingdom represents 'Segmental results - EBITDA' before rent.

 

   Disaggregated revenue information

 

Disaggregated revenue is reported in the same way as it is reviewed and analysed internally by the chief operating decision makers, primarily the CEO, Deputy CEOs and the Board of Directors. The key components of revenue reviewed by the chief operating decision makers are:

·    Room revenue which relates to the rental of rooms in each hotel. Revenue is recognised when the hotel room is occupied, and the service is provided;

·    Food and beverage revenue which relates to sales of food and beverages at the hotel property. This revenue is recognised at the point of sale; and

·    Other revenue includes revenue from leisure centres, car parks, meeting room hire and other revenue sources at the hotels. Leisure centre revenue is recognised over the life of the membership while the other items are recognised when the service is provided.

 

 

6 months

6 months

 

ended

ended

 

30 June

30 June

 

2019

2018

 

€'000

€'000

Revenue review by segment - Dublin

 

 

 

 

 

Room revenue

84,182

76,668

Food and beverage revenue

25,511

23,218

Other revenue

8,050

7,331

 

______

______

Total revenue

117,743

107,217

 

______

______

 

Revenue review by segment - Regional Ireland

 

 

 

 

 

Room revenue

22,140

19,843

Food and beverage revenue

12,162

11,976

Other revenue

4,185

3,986

 

______

______

Total revenue

38,487

35,805

 

______

______

 

Revenue review by segment - United Kingdom

 

 

 

 

 

Room revenue

32,665

25,589

Food and beverage revenue

9,636

8,197

Other revenue

3,370

3,204

 

_____

______

Total revenue

45,671

36,990

 

______

______

 

Other geographical information

 

Revenue

 

 

Restated*

 

6 months ended 30 June 2019

 

6 months ended 30 June 2018

 

Republic of Ireland

United Kingdom

 

Total

 

Republic of Ireland

United Kingdom

 

Total

 

€'000

€'000

€'000

 

€'000

€'000

€'000

 

 

 

 

 

 

 

 

Owned hotels

106,695

35,689

142,384

 

91,711

29,632

121,343

Leased hotels

49,535

9,982

59,517

 

51,311

7,358

58,669

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

156,230

45,671

201,901

 

143,022

36,990

180,012

 

 

 

 

 

 

 

 

 

*Income from managed hotels has been reclassified from revenue to other income in the period ended 30 June 2019. The prior year figures for the period ended 30 June 2018 have been restated for this reclassification (note 2).

 

 

EBITDAR

 

6 months ended 30 June 2019

 

Restated*

6 months ended 30 June 2018

 

Republic of Ireland

United Kingdom

 

Total

 

Republic of Ireland

United Kingdom

 

Total

 

€'000

€'000

€'000

 

€'000

€'000

€'000

 

 

 

 

 

 

 

 

Owned hotels

42,843

13,076

55,919

 

35,118

10,887

46,005

Leased hotels

22,147

3,452

25,599

 

23,365

2,715

26,080

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total EBITDAR

64,990

16,528

81,518

 

58,483

13,602

72,085

 

 

 

 

 

 

 

 

 

 

6 months ended 30 June 2019

 

6 months ended 30 June 2018

 

Republic of Ireland

United Kingdom

 

Total

 

Republic of Ireland

United Kingdom

 

Total

 

€'000

€'000

€'000

 

€'000

€'000

€'000

 

 

 

 

 

 

 

 

Variable rent

3,436

191

3,627

 

3,424

167

3,591

Depreciation of property, plant   and equipment

 

8,776

 

4,124

 

12,900

 

 

6,566

 

2,737

 

9,303

Depreciation of right-of-use assets

6,943

1,284

8,227

 

-

-

-

Interest on lease liabilities

6,613

2,714

9,327

 

-

-

-

Hotel fixed rental expense under IAS 17    

 

-

 

-

 

-

 

 

10,796

 

1,865

 

12,661

 

 

 

 

 

 

 

 

 

 

Assets and liabilities                                             At 30 June 2019

 

At 31 December 2018

 

Republic of Ireland

United Kingdom

 

Total

 

Republic of Ireland

United Kingdom

 

Total

 

€'000

€'000

€'000

 

€'000

€'000

€'000

Assets

 

 

 

 

 

 

 

Intangible assets and goodwill

21,191

12,109

33,300

 

41,588

12,829

54,417

Property, plant and equipment

979,009

355,510

1,334,519

 

930,676

245,584

1,176,260

Right-of-use assets

251,581

87,179

338,760

 

-

-

-

Investment property

1,560

580

2,140

 

1,560

-

1,560

Other non-current assets

13,087

1,184

14,271

 

12,725

11,100

23,825

Current assets

55,568

24,018

79,586

 

44,016

16,411

60,427

 

 

 

 

 

 

 

 

Total assets excluding deferred tax assets

1,321,996

480,580

1,802,576

 

1,030,565

285,924

1,316,489

 

 

 

 

 

 

 

 

Deferred tax assets

 

 

2,918

 

 

 

2,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

1,805,494

 

 

 

1,319,102

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Loans and borrowings

133,395

263,789

397,184

 

102,508

199,381

301,889

Lease liabilities

230,324

83,744

314,068

 

-

-

-

Trade and other payables

59,075

16,539

75,614

 

54,225

11,025

65,250

 

 

 

 

 

 

 

 

Total liabilities excluding provisions, derivatives and tax liabilities

422,794

364,072

786,866

 

156,733

210,406

367,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for liabilities

 

 

6,032

 

 

 

6,642

Derivatives

 

 

4,647

 

 

 

1,306

Current tax liabilities

 

 

404

 

 

 

309

Deferred tax liabilities

 

 

49,799

 

 

 

41,129

 

 

 

 

 

 

 

 

Total liabilities

 

 

847,748

 

 

 

416,525

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revaluation reserve

255,341

29,787

285,128

 

225,290

23,128

248,418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 €263.8 million (£236.5 million) at 30 June 2019 (€197.3 million (£176.5 million) at 31 December 2018) 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

 

2019

2018

 

€'000

€'000

 

 

 

Other administrative expenses

51,358

46,991

Hotel rental expenses

3,627

16,252

Depreciation of property, plant and equipment

12,900

9,303

Depreciation of right-of-use assets

8,227

-

Net property revaluation movements through profit or loss

(966)

1,590

Amortisation of other intangible assets

-

22

 

_______

______

 

 

 

 

75,146

74,158

 

_______

______

               

In 2018, hotel rental expenses included fixed rent of €12.7 million and variable rent of €3.6 million under IAS 17 Leases. In 2019, hotel rental expenses include only variable rent of €3.6 million. From 1 January 2019, fixed rental costs have been accounted for under IFRS 16 Leases and replaced with interest on lease liabilities and depreciation of right-of-use assets. If the Group accounted for rent under IAS 17 for the six months to 30 June 2019, the hotel rental expenses would include fixed rent of €13.0 million (note 12).

 

6          Other income

 

 

 

Restated*

 

6 months

6 months

 

ended

ended

 

30 June

30 June

 

2019

2018

 

€'000

€'000

 

 

 

Rental income from investment property (note 14)

195

140

Income from managed hotels

444

572

 

_______

______

 

639

712

 

_______

______

 

*Income from managed hotels has been reclassified from revenue to other income in the period ended 30 June 2019. The prior period figures have been restated for this reclassification (note 2).

 

Income 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.

 

7         Finance costs

 

 

6 months

6 months

 

ended

ended

 

30 June

30 June

 

2019

2018

 

€'000

€'000

 

 

 

Interest on lease liabilities (note 13)

9,327

-

Interest expense on bank loans and borrowings

4,412

3,887

Cash flow hedges - reclassified from other comprehensive income (note 23)

535

509

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

364

(78)

Other finance costs

806

888

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

(51)

(1,218)

Interest capitalised to contract fulfilment costs (note 15)

(64)

-

 

_______

_______

 

15,329

3,988

 

_______

_______

 

 

 

 

The Group uses interest rate swaps to convert the interest rate on part of its debt from floating rate to fixed rate (note 23). This cash flow hedge net cash outflow 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 capitalised debt costs, commitment fees and other banking fees.

 

Exchange gain/loss on financing activities relates principally to loans which did not form part of the net investment hedge (note 20).

 

€0.1 million of interest on loans and borrowings, which was directly attributable to the construction of qualifying assets, was capitalised to assets under construction and contract fulfilment costs during the period ended 30 June 2019 (note 11, 15) (six months ended 30 June 2018: €1.2 million). The capitalisation rate applied by the Group, which was reflective of the weighted average interest cost in respect of these Euro denominated borrowings, was 1.4% (30 June 2018: 2.5%). There was no interest capitalised during the period which related to Sterling denominated borrowings (30 June 2018: capitalisation rate of 3.5%).

 

The Group incurred interest amounting to €9.3 million on lease liabilities since the date of initial application of IFRS 16 Leases (note 13).

 

8       Share-based payments expense

 

The total share-based payments expense for the Group's employee share schemes charged to profit or loss during the period was €1.4 million (six months ended 30 June 2018: €1.2 million), analysed as follows:

 

 

6 months

6 months

 

ended

ended

 

30 June

30 June

 

2019

2018

 

€'000

€'000

 

 

 

Long Term Incentive Plans

1,172

942

Save As You Earn Scheme

248

253

 

 ______

 ______

 

 

 

 

1,420

1,195

 

______

______

         

          Details of the schemes operated by the Group are set out hereafter:

 

          Long Term Incentive Plans

 

During the period ended 30 June 2019, the Board approved the conditional grant of 839,373 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 (96 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 2019 to 31 December 2021 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 2021 audited consolidated financial statements, of €0.45 with 100% vesting for adjusted basic EPS of €0.55 or greater. Awards will vest on a straight-line basis for performance between these points. EPS targets may be amended in restricted circumstances if an event occurs which causes the Remuneration Committee to determine an amended or substituted performance condition would be more appropriate and not materially more or less difficult to satisfy.

 

Movements in the number of share awards are as follows:

 

6 months

6 months

 

ended

ended

 

30 June

   30 June

 

2019

2018

 

Awards

Awards

 

 

 

Outstanding at the beginning of the period/year

2,159,409

2,114,579

Granted during the period/year

839,373

743,795

Forfeited during the period/year

(15,763)

(30,415)

Lapsed unvested during the period/year

(335,444)

-

Exercised during the period/year

(285,809)

(668,550)

 

                             

                      

 

 

 

Outstanding at the end of the period/year

2,361,766

2,159,409

 

                             

                      

 

 

Grant date

30 June

31 December

 

2019

2019

2018

Awards

Awards

 

 

 

March 2016

-

621,253

May 2017

804,976

816,407

March 2018

717,417

721,749

March 2019

839,373

-

 

                             

                      

 

 

 

Outstanding at the end of the period/year

2,361,766

2,159,409

 

                             

                      

 

During the period ended 30 June 2019, the Company issued 285,809 shares on foot of the vesting of awards granted in March 2016 under the terms of the 2014 LTIP. Over the course of the three year performance period, 18,658 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 period was €6.00.

 

          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 2019

March 2018

May 2017

March 2016

Fair value at grant date

€3.43

€3.03

€2.14

€2.45

Share price at grant date

€5.98

€6.06

€5.09

€4.69

Exercise price

€0.01

€0.01

€0.01

€0.01

Expected volatility

29.96% p.a.

29.77% p.a.

25.89% p.a.

30.20% p.a.

Dividend yield

1.5%

1.5%

1.5%

1.5%

Performance period

3 years

3 years

3 years

3 years

 

For measurement purposes, a future dividend yield of 1.5% per annum has been assumed for the purpose of informing the projected Company dividend in the LTIP fair value calculation model. This percentage is not in any way indicative of the expected dividend yield of the Group. This will be decided by the Board of Directors as appropriate. Expected volatility is based on the historical volatility of the Company's share price.

 

Awards granted in 2017, 2018 and 2019 under the 2017 LTIP include 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 over the vesting period of the award is reviewed in each reporting period and the accounting charge is adjusted accordingly.

 

          Save As You Earn Scheme

 

The Remuneration Committee of the Board of Directors approved the granting of share options under Save As You Earn ('SAYE') schemes for all eligible employees across the Group in 2016, 2017 and 2018. Each scheme is for 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.

 

Movements in the number of share options and the related weighted average exercise price ("WAEP") are as follows:

 

Period to

30 June 2019

Year ended

31 December 2018

 

 

Options

WAEP

€ per share

 

Options

WAEP

€ per share

 

 

 

 

 

Outstanding at the beginning of the period/year

1,638,119

3.85

1,429,099

3.52

Granted during the period/year

-

-

411,966

5.02

Forfeited during the period/year

(136,249)

4.27

(202,794)

3.94

Exercised during the period/year

(5,264)

2.95

(152)

2.91

 

               

 

              

 

Outstanding at the end of the period/year

1,496,606

3.81

1,638,119

3.85

 

               

 

               

 

 

The weighted average remaining contractual life for the share options outstanding at 30 June 2019 is 1.1 years (31 December 2018: 1.7 years).

 

9        Tax charge

 

 

6 months

6 months

 

ended

ended

 

30 June

30 June

 

2019

2018

 

€'000

€'000

Current tax

 

 

Irish corporation tax

4,170

3,279

UK corporation tax

814

819

Deferred tax charge

111

826

 

               

                 

 

 

 

 

5,095

4,924

 

               

                 

 

 

 

 

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 2019

79,030

20,500

671

100,201

Effect of movement in exchange rates

(14)

-

-

(14)

Transfer to right-of-use assets

-

(20,500)

-

(20,500)

Transfer to investment property

-

-

(671)

(671)

 

_______

_______

_______

_______

 

 

 

 

 

Balance at 30 June 2019

79,016

-

-

79,016

 

_______

_______

_______

_______

 

 

 

 

 

Accumulated amortisation and impairment losses

 

 

 

Balance at 1 January 2019

(45,716)

-

(68)

(45,784)

Transfer to investment property

-

-

68

68

 

_______

_______

_______

_______

 

 

 

 

 

Balance at 30 June 2019

(45,716)

-

-

(45,716)

 

_______

_______

_______

_______

 

 

 

 

 

Carrying amounts

 

 

 

 

At 30 June 2019

33,300

-

-

33,300

 

_______

_______

_______

_______

 

 

 

 

 

At 31 December 2018

33,314

20,500

603

54,417

 

_______

_______

_______

_______

 

Goodwill

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 €12.1 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

The indefinite lived intangible asset amounting to €20.5 million at 31 December 2018, related to the Group's acquired leasehold interest in The Gibson Hotel, was included in the measurement of the right-of-use asset at 1 January 2019 in accordance with the transition provisions of IFRS 16 Leases (note 12).

 

Other intangible assets

Other intangible assets of €0.6 million at 31 December 2018 represented 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 asset was transferred to investment property on 1 January 2019 upon recognition of a right-of-use asset with respect to the head lease in accordance with IFRS 16 Leases.

 

11        Property, plant and equipment

 

 

Land and buildings

Assets under construction

Fixtures,

fittings and equipment

Total

 

 

€'000

€'000

€'000

€'000

 

At 30 June 2019

 

 

 

 

 

Valuation

1,238,092

-

-

1,238,092

 

Cost

-

16,644

120,542

137,186

 

Accumulated depreciation (and impairment charges)*

-

-

(40,759)

(40,759)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net carrying amount

1,238,092

16,644

79,783

1,334,519

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2019, net carrying amount

1,077,208

26,404

72,648

1,176,260

 

 

 

 

 

 

 

Other additions through freehold or site purchases

104,575

5,865

-

110,440

 

Other additions through capital expenditure

877

6,549

11,369

18,795

 

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

15,600

(18,089)

2,489

-

 

Reclassification from assets under construction to other receivables for assets disposed of as part of a contractual arrangement (note 16)

-

(4,136)

-

(4,136)

 

Capitalised borrowing costs

-

51

-

51

 

Revaluation gains through OCI

47,839

-

-

47,839

 

Revaluation losses through OCI

(2,457)

-

-

(2,457)

 

Reversal of revaluation losses through profit or loss

1,087

-

-

1,087

 

Revaluation losses through profit or loss

(99)

-

-

(99)

 

Depreciation charge for the period

(6,173)

-

(6,727)

(12,900)

 

Translation adjustment

(365)

-

4

(361)

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2019, net carrying amount

1,238,092

16,644

79,783

1,334,519

 

 

 

 

 

 

 

*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 2019, is €1,238.1 million. The value of these assets under the cost model is €919.1 million.

 

In the period ended 30 June 2019, net unrealised revaluation gains arising of €45.4 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 €47.8 million and revaluation losses on revalued assets recognised in other comprehensive income of €2.5 million.

 

In the period ended 30 June 2019, a net revaluation gain of €1.0 million has been reflected in administrative expenses through profit or loss, which is the reversal of previously recognised revaluation losses in profit or loss of €1.1 million and revaluation losses recognised in profit or loss of €0.1 million.

 

The most significant factors, which have impacted valuations in this period, are the uplifts on newly built hotels and extensions, which were built at a cost below fair value, and reflection of continued improvements in trading performance across hotels.

 

At 30 June 2019, the revaluation reserve included €29.8 million (£25.6 million) of unrealised revaluation gains relating to UK properties.

 

Included in land and buildings at 30 June 2019 is land at a carrying value of €431.2 million which is not depreciated (31 December 2018: €412.7 million).

 

Other additions through freehold or site purchases (€110.4 million) in the period ended 30 June 2019 include the following:

·    On 3 January 2019, the Group completed the acquisition of the long leasehold (effective freehold) interest of a newly built hotel, located in Aldgate, London for total consideration of £91.0 million (€101.5 million) (through acquiring the entire issued share capital of Hintergard Limited) plus acquisition related costs of £1.9 million (€2.1 million). The hotel opened on 24 January 2019 and has been branded Clayton Hotel City of London.

·    On 8 January 2019, the Group acquired a site adjacent to Clayton Hotel Cardiff Lane, Dublin for €5.5 million plus capitalised acquisition costs of €0.4 million. The Group has plans to redevelop the area into circa 93 bedrooms and ancillary facilities and it is classified as assets under construction and not depreciated as the asset is not in use in its current form.

 

Additions to assets under construction during the period ended 30 June 2019 include the following:

·    Development expenditure incurred on new hotel builds of €3.6 million;

·    Development expenditure incurred on hotel extensions of €2.9 million; and

·    Interest capitalised on loans and borrowings relating to qualifying assets of €0.1 million (note 7).

 

Property previously classified as assets under construction (€18.1 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 2019. This includes the following:

·    Final completion works at Maldron Hotel South Mall, Cork;

·    Final completion works at Maldron Hotel Parnell Square, Dublin; and

·    Final completion works at Clayton Hotel Charlemont, Dublin.

 

Property previously classified as assets under construction (€4.1 million) relating to a renovation project ongoing at Clayton Hotel Burlington Road, Dublin has been transferred to other receivables as a result of a contractual arrangement entered into in 2019, whereby assets totalling €7.5 million are to be transferred to the landlord for €7.5 million (note 16).

 

The value of the Group's property at 30 June 2019 reflects open market valuations carried out in June 2019 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. At 30 June 2019, 30 properties were revalued by independent external valuers engaged by the Group (31 December 2018: 29).

 

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 cash flow included in these calculations represents the expectations of the valuers for EBITDA (driven by revenue per available room ("RevPAR") calculated as total rooms revenue divided by rooms available) 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. This does not always reflect the profile of 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 final valuation also includes a deduction of full purchaser's costs based on the valuers' estimates at 8.46% for Republic of Ireland domiciled assets (31 December 2018: 8.46%) and 6.8% for United Kingdom domiciled assets (31 December 2018: 6.8%).

 

The significant unobservable inputs are:

·    Valuers' forecast cash flow;

·    Risk adjusted discount rates of 8.25% to 11.25% for Dublin assets (31 December 2018: 9.25% to 11.25%), 9.5% to 11.75% for Regional Ireland assets (31 December 2018: 9.50% to 12.0%), 8.25% to 12.5% for United Kingdom assets (31 December 2018: 8.25% to 12.5%); and

·    Terminal (Year 10) capitalisation rates of 6.25% to 9.25% for Dublin assets (31 December 2018: 7.25% to 9.25%), 7.5% to 9.75% for Regional Ireland assets (31 December 2018: 7.5% to 10.0%) and 5.75% to 10.0% for United Kingdom assets (31 December 2018: 5.75% to 10.0%).

 

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

·    Valuers' forecast cash flow 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        Transition impact of IFRS 16 Leases

 

IFRS 16 Leases is effective for the first time in the financial year commencing 1 January 2019. IFRS 16 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 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to lessee accounting by removing the distinction between operating and finance leases and requiring the recognition of right-of-use assets and lease liabilities at the commencement of most leases. This has a significant impact on the Group's financial statements as the Group is a lessee in a number of material property leases, which were formerly accounted for as operating leases. The requirements for lessor accounting remain largely unchanged.

 

The Group has applied IFRS 16 using the modified retrospective method. Lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group's incremental borrowing rate as at 1 January 2019. Right-of-use assets have been measured at an amount equal to the lease liability adjusted by the amounts of any lease prepayments and accruals and reclassifications from intangible assets, where applicable. The comparative information has not been restated and is presented as previously reported under IAS 17 and related interpretations. Details of the impact of the change in accounting policies as well as the new accounting policies are disclosed hereafter.

 

Definition of a lease

 

Previously, the Group determined at contract inception whether an arrangement was or contained a lease under IFRIC 4. Under IFRS 16, a contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time. On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases and applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 January 2019.

 

As a lessee

 

As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards incidental to ownership of the underlying asset to the Group. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most leases and these are no longer excluded from the statement of financial position.

 

On transition, lease liabilities were measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rates as at 1 January 2019. Determining the incremental discount rate introduces a new source of estimation uncertainty into the financial statements. The Group has calculated the incremental borrowing rate by adding country specific risk-free government bonds to the Group finance spread to create a Group yield curve. The Group finance spread was calculated by weighting the Group interest margin on loans and borrowings entered into in October 2018 (senior debt) and a hypothetical junior debt margin available to the Group using an appropriate loan-to-value ratio for the senior debt. Each lease was matched against the Group yield curve and subsequently adjusted for lessee and asset specific factors to reflect the underlying asset's location and condition. In most cases, the discount rate is determined in the first year of the lease and does not change for the remainder of the term unless an event such as a change in lease term or a variation of the lease occurs. The weighted-average incremental borrowing rate applied was 6.03% (Republic of Ireland: 5.86%, United Kingdom: 6.49%).

 

The sensitivity of the Group's lease liability to a one percent movement in the incremental borrowing rate is as follows:

 

 

At existing rate

Sensitised upwards by 100 bps

Sensitised downwards by 100 bps

 

€'000

€'000

€'000

 

 

 

 

Lease liabilities at 1 January 2019

314,430

286,246

347,350

 

A reconciliation from the operating lease commitments at 31 December 2018 to the opening balance for the lease liabilities at 1 January 2019 is shown below:

 

 

€'000

 

 

Operating lease commitment at 31 December 2018

672,708

 

 

Discounted using the incremental borrowing rates at 1 January 2019

(358,278)

 

_______

 

 

Lease liabilities recognised at 1 January 2019 (note 13)

314,430

 

_______

 

Right-of-use assets have been measured at an amount equal to the lease liabilities adjusted by the amounts of any lease prepayments and accruals and reclassifications from intangible assets, where applicable. Fixed rental expenses under IAS 17 were removed from profit or loss under IFRS 16 and replaced with finance costs on the lease liabilities and depreciation of the right-of-use assets. Variable lease payments which are dependent on hotel performance continue to be recognised directly in profit or loss.

 

The Group used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

·      Applied a single discount rate to a portfolio of leases with similar characteristics;

·      Relied on its assessment of whether leases are onerous immediately before 1 January 2019 as an alternative to performing an impairment review; and

·      Applied the exemption not to recognise right-of-use assets and lease liabilities for leases with a remaining lease term of less than 12 months as at 1 January 2019.

 

The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low value equipment. The Group did not recognise any finance leases under IAS 17 prior to the date of initial application.

 

Banking covenants as currently calculated under existing debt arrangements will not be amended as their calculation is in accordance with generally accepted accounting principles, policies, standards and practices applicable on the date of entry into the agreements.

 

As a lessor

Under IAS 17, the Group leased out its investment properties to lessees under operating leases. IFRS 16 does not substantially change how a lessor accounts for leases as a lessor continues to classify leases as either finance or operating leases. The Group's lessor contracts continue to be classified as operating leases under IFRS 16. However, when the Group is an intermediate lessor the sub-leases are classified with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. The Group sub-leases part of one of its properties and on transition to IFRS 16 the right-of-use asset recognised from the head lease is presented in investment property and measured at fair value on transition to IFRS 16.

 

Sale and leaseback

Under IFRS 16, the Group continues to account for the sale and leaseback transactions of Clayton Hotel Cardiff (completed in June 2017) and Clayton Hotel Birmingham (completed in August 2017) as sale and leaseback transactions. The Group recognised a right-of-use asset and a lease liability for the leases on 1 January 2019, measured in the same manner as other assets and lease liabilities at that date. €1.1 million arising from the sale and leaseback of Clayton Hotel Birmingham, which was previously recognised in non-current receivables, was included in the measurement of the right-of-use asset.

 

Impact on financial statements

 

The tables below show the adjustment for each financial statement line item affected by the application of IFRS 16 for the six month period ended 30 June 2019.

 

Excerpt from consolidated statement of comprehensive income

*Only lines which are impacted are presented below

*As if IAS 17 still applied

IFRS 16 impact

*As presented

 

€'000

€'000

€'000

 

 

 

 

Administrative expenses

(80,040)

4,894

(75,146)

 

 

_______

 

Operating profit

48,192

4,894

53,086

Finance costs

(6,002)

(9,327)

(15,329)

 

 

_______

 

Profit before tax

42,190

(4,433)

37,757

Tax charge

(5,728)

633

(5,095)

 

 

_______

 

Profit for the period

36,462

(3,800)

32,662

 

 

_______

 

Earnings per share

 

 

 

Basic earnings per share

 19.8 cent

(2.1) cent

 17.7 cent

Diluted earnings per share

 19.6 cent

(2.0) cent

 17.6 cent

 

Excerpt from operating segment note

*Only lines which are impacted are presented below

*As if IAS 17 still applied

IFRS 16 impact

*As presented

 

€'000

€'000

€'000

Segmental results - EBITDA

 

 

 

Dublin

42,481

9,682

52,163

Regional Ireland

8,892

498

9,390

United Kingdom

13,517

2,821

16,338

 

 

_______

 

EBITDA for reportable segments

64,890

13,001

77,891

Central costs

(3,858)

120

(3,738)

 

 

_______

 

Adjusted EBITDA

60,251

13,121

73,372

Net property revaluation movements through profit or loss

988

(22)

966

 

 

_______

 

Group EBITDA

61,114

13,099

74,213

Depreciation of right-of-use assets

-

(8,227)

(8,227)

Amortisation of intangible asset

(22)

22

-

Interest on lease liabilities

-

(9,327)

(9,327)

 

 

_______

 

Profit before tax

42,190

(4,433)

37,757

Tax charge

(5,728)

633

(5,095)

 

 

_______

 

Profit for the period

36,462

(3,800)

32,662

 

 

_______

 

Group profit has decreased by €3.8 million and basic earnings per share by 2.1 cent for the six month period ended 30 June 2019 due to the implementation of IFRS 16. Under the standard, total lease expenses increase in the early years of implementation due to the front-loading effect of finance costs versus the existing straight-line rent expense under IAS 17, resulting in a decrease in profit.

 

EBITDA for reportable segments and Adjusted EBITDA (existing alternative performance measures as defined in note 2), are significantly impacted by the implementation of IFRS 16 and have increased by €13.0 million and €13.1 million respectively due to the removal of fixed rent. Under IFRS 16, variable rents do not form part of the lease liability measurement and remain in administrative expenses and EBITDA.

 

Depreciation and finance costs, as currently reported in the Group's profit or loss, have increased, as under the new standard the right-of-use assets are depreciated over the term of the lease and interest costs are applied to the lease liabilities.

 

Excerpt from consolidated statement of financial position

 

On implementation of IFRS 16 on 1 January 2019, the following line items in the consolidated statement of financial position were affected:

 

As previously reported at 31 December 2018

IFRS 16 impact

As presented at 1 January 2019

 

€'000

€'000

€'000

Non-current assets

 

 

 

Intangible assets and goodwill

54,417

(21,103)

33,314

Right-of-use assets

-

343,713

343,713

Other receivables

14,759

(5,422)

9,337

Investment property

1,560

603

2,163

 

 

 

 

Current assets

 

 

 

Trade and other receivables

22,566

(4,307)

18,259

 

 

_______

 

 

 

 

 

Total impact on assets

 

313,484

 

 

 

_______

 

Current liabilities

 

 

 

Trade and other payables

(65,250)

946

(64,304)

Lease liabilities

-

(26,259)

(26,259)

 

 

 

 

Non-current liabilities

 

 

 

Lease liabilities

-

(288,171)

(288,171)

 

 

_______

 

 

 

 

 

Total impact on liabilities

 

(313,484)

 

 

 

_______

 

 

 

 

 

Impact on net assets

 

-

 

 

 

_______

 

 

On transition, the Group recognised lease liabilities amounting to €314.4 million and right-of-use assets of €343.7 million. The measurement of the right-of-use assets includes the amount of the lease liabilities and a further €29.3 million of items that were recognised elsewhere in the statement of financial position at 31 December 2018 as follows:

·    Favourable terms of an operating lease acquired as part of a business combination amounting to €20.5 million previously recognised in intangible assets;

·    Lease prepayments amounting to €8.6 million previously recognised in non-current other receivables (€4.3 million) and current trade and other receivables (€4.3 million);

·    €1.1 million arising from the sale and leaseback of Clayton Hotel Birmingham previously recognised in non-current receivables; less

·    Lease accruals amounting to €0.9 million previously recognised in trade and other payables.

 

Consolidated statement of cash flows

 

The adoption of IFRS 16 does not have any impact on Group leasing cash flows but the UK tax authorities have decided to follow the accounting changes and allow deductions for interest on lease liabilities and depreciation of right-of-use assets in lieu of lease payments which will impact the tax cash flows. There will be lower UK tax cash flows in the early years of the leases in line with the front-loading of expenses. There is no cash flow impact in Ireland as the basis for tax deduction remains unchanged. The presentation of cash flows in the consolidated statement of cash flows is also impacted.

 

Under IFRS 16, lessees must present short-term lease payments, payments for leases of low-value assets and variable lease payments not included in the measurement of the lease liabilities as part of operating activities.

 

Lease liability payments are split into payments of interest and payments of principal and are presented separately in the consolidated statement of cash flows. The Group has opted to include the element of cash flows recorded as interest as part of financing activities as permitted by IAS 7. Cash payments for the principal portion have also been presented as part of financing activities.

 

Under IAS 17, all lease payments on operating leases were presented as part of cash flows from operating activities and consequently, as a result of the implementation of IFRS 16, the net cash flow from financing activities has decreased by €12.8 million while the net cash generated from operating activities has increased by the same amount.

 

13        Leases

Group as a lessee

 

The Group leases assets including land and buildings, vehicles, machinery and IT equipment. Information

about leases for which the Group is a lessee is presented below:

 

 

Right-of-use assets

Land and buildings

Fixtures, fittings and equipment

 

Total

 

€'000

€'000

€'000

 

 

 

 

Net book value at 1 January 2019 (note 12)

343,562

151

343,713

 

 

 

 

Additions

94

-

94

Depreciation charge for the period

(8,205)

(22)

(8,227)

Remeasurement of lease liabilities

3,348

-

3,348

Translation adjustment

(168)

-

(168)

 

_______

_______

_______

Net book value at 30 June 2019

338,631

129

338,760

 

_______

_______

_______

 

Right-of-use assets comprise leased assets that do not meet the definition of investment property.

 

Lease liabilities

€'000

 

 

Current

26,259

Non-current 

288,171

 

_______

 

 

Lease liabilities at 1 January 2019 (note 12)

314,430

 

_______

 

 

Interest on lease liabilities

9,327

Lease payments

(12,838)

Remeasurement of lease liabilities

3,348

Translation adjustment

(199)

 

_______

 

 

Lease liabilities at 30 June 2019

314,068

 

_______

 

 

Current

25,973

Non-current

288,095

 

_______

 

 

Lease liabilities at 30 June 2019

314,068

 

_______

 

The remeasurement of lease liabilities relates to reassessment of the lease liability of two hotel leases following completion of rent reviews during the period ended 30 June 2019.

 

Non-cancellable undiscounted lease cash flows payable under lease contracts are set out below:

 

At 30 June 2019

At 31 December 2018

 

Republic of Ireland

United Kingdom

Total

Republic of Ireland

United Kingdom

Total

 

€'000

£'000

€'000

€'000

£'000

€'000

 

 

 

 

 

 

 

6 months ended 30 June 2019

-

-

-

9,974

2,688

12,979

6 months ending 31 December 2019

11,062

2,417

13,758

10,902

2,410

13,597

During the year 2020

19,051

4,949

24,571

18,717

4,821

24,106

During the year 2021

19,123

4,822

24,501

18,815

4,821

24,204

During the year 2022

19,429

4,969

24,971

19,152

4,969

24,707

During the year 2023

19,308

5,048

24,938

19,033

5,048

24,676

During the year 2024

17,155

5,075

22,816

16,680

5,075

22,353

During the year 2025

16,843

5,075

22,504

16,568

5,075

22,241

During the year 2026

16,921

5,075

22,582

16,646

5,075

22,320

During the years 2027 - 2036

166,401

54,191

226,845

166,103

54,191

226,683

During the years 2037 - 2046

101,182

59,653

167,718

101,432

59,653

168,118

From 2047 onwards

27,878

52,639

86,588

27,878

52,639

86,724

 

_______

_______

______

_______

_______

_______

 

 

 

 

 

 

 

 

434,353

203,913

661,792

441,900

206,465

672,708

 

_______

_______

______

_______

_______

_______

 

Sterling amounts have been converted using the closing foreign exchange rate of 0.89655 as at 30 June 2019 (0.89453 as at 31 December 2018).

 

The weighted average lease life of future minimum rentals payable under leases is 29.8 years (31 December 2018: 30.3 years). The Group does not face a significant liquidity risk with regard to its lease liabilities which are expected to be capable of being paid from operating cash flows over the life of the leases. Lease liabilities are monitored within the Group's treasury function.

 

For the period ended 30 June 2019, the total fixed cash outflows amounted to €12.8 million for the property leases and €0.2 million for other leases.

 

 

Proforma unwind of right-of-use assets and release of interest charge

 

The unwinding of the right-of-use assets and the release of the interest on the lease liabilities through profit or loss over the terms of the leases have been disclosed in the following table:

 

 

Depreciation of right-of-use assets

Interest on lease liabilities

 

Republic of Ireland

United Kingdom

Total

Republic of Ireland

United Kingdom

Total

 

€'000

£'000

€'000

€'000

£'000

€'000

 

 

 

 

 

 

 

6 months ending 31 December 2019

7,025

1,124

8,279

6,552

2,372

9,198

During the year 2020

12,616

2,243

15,118

12,829

4,740

18,116

During the year 2021

12,137

2,236

14,631

12,478

4,734

17,758

During the year 2022

12,115

2,235

14,608

12,093

4,727

17,365

During the year 2023

11,957

2,235

14,450

11,678

4,708

16,929

During the year 2024

10,085

2,235

12,578

11,286

4,686

16,513

During the year 2025

10,003

2,235

12,496

10,954

4,661

16,153

During the year 2026

9,999

2,235

12,492

10,605

4,634

15,774

During the years 2027 - 2036

94,609

22,347

119,535

81,744

43,470

130,230

During the years 2037 - 2046

56,113

22,347

81,039

29,314

32,223

65,255

From 2047 onwards

14,922

16,688

33,534

4,496

17,877

24,433

 

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

 

251,581

78,160

338,760

204,029

128,832

347,724

 

_______

_______

_______

_______

_______

_______

 

Sterling amounts have been converted using the closing foreign exchange rate of 0.89655 as at 30 June 2019.

 

The actual depreciation and interest charge through profit or loss will depend on the composition of the Group's lease portfolio in future years and is subject to change, driven by:

·      commencement of new leases;

·      modifications of existing leases;

·      reassessments of lease liabilities following periodic rent reviews; and

·      impairments of right-of-use assets.

 

Leases of land and buildings

 

The Group leases land and buildings for its hotel operations and office space. The leases of hotels typically run for a period of between 25 and 35 years and leases of office space for 10 years.

 

Some leases provide for additional rent payments that are based on a percentage of the revenue/EBITDAR that the Group generates at the hotel in the period. The Group sub-leases part of one of its properties to a tenant under an operating lease.

 

Variable payments based on revenue/EBITDAR

 

These terms are common in hotel leases in the Republic of Ireland and the United Kingdom and link rental payments to hotel cash flows and reduce fixed costs. Variable lease payments based on revenue/EBITDAR for the period ended 30 June 2019 are as follows:

 

 

 

Variable rent element

Estimated impact on variable rent of

5% increase in revenue/EBITDAR

 

€'000

€'000

 

 

 

Leases with lease payments based on revenue/EBITDAR

3,627

254

 

 

 

 

 

 

 

Extension options and termination options

 

The Group, as a hotel lessee, does not have any extension options. The Group holds a single termination option in an office space lease. The Group assesses at lease commencement whether it is reasonably certain not to terminate the option and reassesses if there is a significant event or change in circumstances within its control. The relative magnitude of optional lease payments to lease payments is as follows:

 

 

Lease liabilities recognised (discounted)

Potential future lease payments not included in lease liabilities (discounted)

 

€'000

€'000

 

 

 

Office building

425

476

 

Leases not yet commenced to which the lessee is committed

 

The Group has multiple agreements for lease at 30 June 2019 and details of the non-cancellable lease rentals and other contractual obligations payable under these agreements are set out hereafter. These represent the minimum future lease payments (undiscounted) in aggregate that the Group is required to make under the agreements. An agreement for lease is a binding agreement between external third parties and the Group to enter into a lease at a future date. The dates of commencement of these leases may change based on hotel opening dates.

 

Agreements to lease

At 30 June 2019

At 31 December 2018

 

€'000

€'000

 

 

 

Less than 1 year

3,969

2,585

1 - 2 years

8,791

9,947

2 - 5 years

56,548

55,660

5 - 15 years

180,388

181,086

15 - 25 years

191,381

192,114

After 25 years

238,223

240,088

 

_______

_______

 

 

 

Total future lease payments

679,300

681,480

 

_______

_______

      

Leases of fixtures, fittings and equipment

 

The Group leases a small number of vehicles, IT equipment and hotel equipment with lease terms of up to five years. The Group has applied the short-term and low value exemption available under IFRS 16 where applicable and recognises lease payments associated with short-term leases or leases for which the underlying asset is of low value as an expense on a straight-line basis over the lease term. Where the exemptions were not available, right-of-use assets have been recognised with corresponding lease liabilities.

 

 

6 months ended 30 June 2019

 

€'000

 

 

Expenses relating to short-term leases recognised in administrative expenses

88

Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets recognised in administrative expenses

 

54

 

 

 

Group as a lessor

 

Lease income from lease contracts in which the Group acts as lessor is outlined below:

 

 

6 months ended 30 June 2019

6 months ended 30 June 2018

 

€'000

€'000

 

 

 

Operating lease income (note 6)

195

140

 

 

The Group leases its investment property and has classified these leases as operating leases because they do not transfer substantially all of the risks and rewards incidental to ownership of these assets to the lessee. Operating lease income from sub-leasing right-of-use assets for the six month period ended 30 June 2019 amounted to €0.1 million.

 

The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments

receivable:

 

 

30 June 2019

31 December 2018

 

€'000

€'000

 

 

 

Less than one year

312

231

One to two years

288

231

Two to three years

265

231

Three to four years

231

231

Four to five years

231

231

More than five years

1,549

1,667

 

_______

_______

 

 

 

Total undiscounted lease payments receivable

2,876

2,822

 

_______

_______

 

14       Investment property

 

 

30 June 2019

31 December 2018

 

€'000

€'000

 

 

 

At 1 January

1,560

1,585

Transfer from intangible assets (note 10)

603

-

Effect of movement in exchange rates

(1)

-

Loss on revaluation recognised in profit or loss

(22)

(25)

 

_______

_______

 

 

 

At end of period/year

2,140

1,560

 

_______

_______

 

An intangible asset amounting to €0.6 million at 31 December 2018 was transferred to investment property on 1 January 2019 upon recognition of a right-of-use asset with respect to the head lease in accordance with IFRS 16 Leases. The asset 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 of that hotel property in 2017.

 

15       Contract fulfilment costs

 

 

30 June

31 December

 

2019

2018

 

€'000

€'000

 

 

 

At 1 January

9,066

-

 

 

 

Transfer from land and buildings to contract fulfilment costs

-

8,085

Other costs incurred in fulfilling contract to date

1,876

981

Capitalised borrowing costs

64

-

 

_______

_______

 

 

 

At end of period/year

11,006

9,066

 

_______              

_______

 

Contract fulfilment costs, within non-current assets, relate to the Group's contractual agreement with Irish Residential Properties REIT plc ("IRES") entered into on 16 November 2018, for IRES to purchase a residential development the Group is developing (comprising 69 residential units) on the site of the former Tara Towers hotel.

 

Revenue and the associated cost will be recognised on this contract in profit or loss when the performance obligation in the contract has been met. Based on the terms of the contract, this will be on legal completion of the contract which will occur on practical completion of the development project. As a result, revenue will be recognised at a point in time in the future when the performance obligation is met, rather than over time.

 

Additions to contract fulfilment costs for the above contract during the period ended 30 June 2019 include the following:

 

·    Development costs incurred in fulfilling the contract of €1.9 million; and

·    Interest capitalised on loans and borrowings relating to qualifying assets of €0.1 million (note 7).

 

The overall sale value of the transaction is expected to be up to €42.4 million (excluding VAT). The overall value of the transaction will vary depending on how Part V obligations (Social and Affordable housing allocation) are settled with Dublin City Council.

 

16     Trade and other receivables

 

 

30 June

31 December

 

2019

2018

 

€'000

€'000

Non-current assets

 

 

Other receivables

900

900

Deposits paid on acquisitions

-

5,086

Prepayments

2,365

8,773

 

_______

_______

 

 

 

 

3,265

14,759

 

_______

_______

Current assets

 

 

Trade receivables

13,900

9,300

Prepayments

10,316

8,943

Contract assets

3,523

2,614

Other receivables

2,761

-

Accrued income

1,560

1,709

 

_______

_______

 

 

 

 

32,060

22,566

 

_______

_______

 

 

 

Total

35,325

37,325

 

_______

_______

 

 

 

 

Non-current assets

 

At 30 June 2019, 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.

 

Included within non-current prepayments at 30 June 2019 is an amount of €1.1 million (31 December 2018: €0.9 million) relating to a prepayment made for IT services relating to the years 2020 to 2022.

 

Also included in non-current prepayments at 30 June 2019 is an amount of €1.3 million (31 December 2018: €1.4 million) relating to professional fees associated with future lease agreements for hotels currently being constructed or in planning. When these leases are initiated, these costs will be reclassified to right-of-use assets.

 

Included in non-current prepayments at 31 December 2018 was €5.4 million of lease prepayments which have been included in the measurement of right-of-use assets in accordance with IFRS 16 Leases (note 12).

 

Included in non-current assets was a deposit paid at 31 December 2018 of €5.1 million (£4.6 million) relating to the acquisition of Hintergard Limited, which owns the hotel subsequently rebranded as Clayton Hotel City of London. This was reclassified to property, plant and equipment after completing the transaction on 3 January 2019 (note 11). Professional fees included in non-current prepayments at 31 December 2018 of €1.1 million (£1.0 million) associated with this transaction also were reclassified to property, plant and equipment upon acquisition.

 

Current assets

 

At 30 June 2019, other receivables include €2.8 million relating to a contractual arrangement to transfer assets totalling a cost of €7.5 million relating to a renovation project in progress at Clayton Hotel Burlington Road, Dublin to the landlord of that property. In return for the assets, the landlord will pay a total of €7.5 million to the Group. This contractual arrangement was entered into during the period. Prior to signing the arrangement, €4.1 million of expenditure was incurred and capitalised as assets under construction within property, plant and equipment in relation to this project. On signing of the contractual arrangement this €4.1 million was transferred to other receivables from assets under construction (note 11). A further €2.7 million has been spent on the renovation project from the date of signing to 30 June 2019. As this expenditure is directly related to this contractual arrangement, the Group has included these costs as receivables in line with the contractual arrangement. On 7 May 2019, the Group received a first instalment of €4 million in relation to the total agreed of €7.5 million. The remaining €3.5 million will be received on a phased basis. No revenue or cost will be recognised in profit or loss on this contractual arrangement as the Group is acting as an agent in this arrangement with no gain or loss on the transfer of the assets as the Group is being reimbursed for the costs.

 

                                                                                                                                                                

17      Trade and other payables

 

 

30 June

31 December

 

2019

2018

 

€'000

€'000

 

 

 

Trade payables

22,609

18,490

Accruals

30,888

34,072

Contract liabilities

11,770

9,421

Value added tax

7,923

775

Payroll taxes

2,424

2,492

 

_______

_______

 

 

 

 

75,614

65,250

 

_______

_______

 

 

 

 

Accruals include €8.7 million of capital expenditure accruals including work in progress which has not yet been invoiced (31 December 2018: €9.5 million).

 

Included in accruals at 31 December 2018 was €0.9 million of lease accruals which have been included in the measurement of right-of-use assets in accordance with IFRS 16 Leases on transition (note 12).

 

18      Provision for liabilities

 

 

30 June

31 December

 

2019

2018

 

€'000

€'000

Non-current liabilities

 

 

Insurance provision

4,433

4,783

 

_______

_______

Current liabilities

 

 

Insurance provision

1,599

1,859

 

_______

_______

 

 

 

Total provision at end of period/year

6,032

6,642

 

_______

_______

 

 

 

 

 

 

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

 

 

 

 

Period ended

Year ended

 

30 June

31 December

 

2019

2018

 

€'000

€'000

 

 

 

At 1 January

6,642

4,716

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

1,250

2,784

Utilised during the period/year

(338)

(858)

Reversed to profit or loss during the period

(1,522)

-

 

_______

_______

 

 

 

At end of period/year

6,032

6,642

 

_______

_______

 

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 and incurred but not enough 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.

 

The self-insurance programme commenced in July 2015 and increasing levels of claims data is becoming available. Claims provisions are assessed in light of claims experience and amended accordingly to ensure provisions reflect recent experience and trends. This has resulted in a reversal of €1.5 million (period ended 30 June 2018: €nil).

 

19        Commitments

 

Capital expenditure commitments

 

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

 

30 June

31 December

 

2019

2018

 

€'000

€'000

 

 

 

 Contracted but not provided for

57,677

26,701

 

_______

_______

 

At 30 June 2019, the commitment relates primarily to the following:

 

·    New-build hotel development of Maldron Hotel Merrion Road, Dublin;

·    Residential development (comprising 69 residential units) on the site of the former Tara Towers hotel (note 15); and

·    Renovations in Clayton Hotel Burlington Road.

 

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 revenue 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 €60.8 million as at 30 June 2019 (31 December 2018: €60.6 million) spread over the life of the various leases which range in length from 25 years to 35 years. The revenue figures used in the estimate of the commitment at 30 June 2019 have been based on 2019 forecasted revenues at that date. The actual commitment will be higher or lower dependent on the actual revenue earned in each of the lease years.

 

20        Financial risk management

 

Risk exposures

 

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 exchange rates. 

 

The Group uses financial instruments throughout its business: interest-bearing loans and cash and cash equivalents are used to finance the Group's operations; trade and other receivables, trade payables and accruals arise directly from operations; and derivatives are used to manage interest rate risks and to achieve a desired profile of borrowings. The Group uses a net investment hedge with Sterling denominated borrowings to hedge the foreign exchange risk from investments in certain UK operations. The Group does not trade in financial instruments.

 

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); and

·    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 2019, 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 hereafter.

 

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, 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 net of 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 carrying value of floating rate interest-bearing loans and 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 due to the large number of customers. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Outstanding customer balances are regularly monitored and reviewed for indicators of impairment (evidence of financial difficulty of the customer or payment default). 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

 

2019

2018

 

€'000

€'000

 

 

 

Trade receivables

13,900

9,300

Current other receivables

2,761

-

Non-current other receivables

900

900

Contract assets

3,523

2,614

Accrued income

1,560

1,709

Cash at bank and in hand

45,876

35,907

 

_______

_______

 

 

 

 

68,520

50,430

 

               

                 

 

(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's treasury function ensures that sufficient resources are available to meet its liabilities as they fall due through a combination of cash and cash equivalents and undrawn credit facilities.

 

On 26 October 2018, the Group successfully completed the refinancing of its existing debt facility with a banking club of six lenders. A new €525 million five year multicurrency facility was entered into consisting of a €200 million term loan facility and a €325 million revolving credit facility. The maturity date of this facility on completion of the refinancing was 26 October 2023, however on 19 August 2019, the Group availed of its option to extend the €525 million multicurrency facility for an additional year, to 26 October 2024. The Group had undrawn revolving credit facilities of €120.9 million as at 30 June 2019. On 12 August 2019, the Group drew down £30 million from the multicurrency revolving credit facility to fund the purchase of a site with planning approval for a new hotel on Paul Street in Shoreditch, London (note 27).

 

The Group also monitors its Debt and Lease service cover, which is 3.1x for the 12 month period ended 30 June 2019 (31 December 2018: 2.7x) and seeks to ensure that if a significant temporary drop in revenues were to occur, there would be sufficient liquid resources to meet ongoing requirements.

 

(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.

 

            (i) 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 (note 23) which hedge the variability in cash flows attributable to the interest rate risk.

 

(ii) 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 foreign currency translation risk on the retranslation of foreign operations to Euro.

 

The Group's 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 mitigated 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 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 through external borrowings denominated in Sterling. These borrowings amounted to £236.5 million (€263.8 million) at 30 June 2019 (31 December 2018: £176.5 million (€197.3 million)) 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 retranslation 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 and a rent cover of at least 1.85x in year three for new leased assets.

 

The Group monitors capital using a ratio of net debt to Adjusted EBITDA ratio (note 4). Net Debt to Adjusted EBITDA is calculated based on the prior 12 month period. The Net Debt to Adjusted EBITDA as at 30 June 2019 is 4.3x (pre IFRS 16: 2.8x).

 

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 2019. The tables do not include fair value information for financial assets and current financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

 

Financial assets

Financial assets

 

 

Fair value

 

 

measured at
fair value

at amortised

cost

Total

carrying amount

 

Level 1

 

Level 2

 

Level 3

 

Total

 

30 June

2019

30 June

2019

30 June

2019

30 June

2019

30 June

2019

30 June

2019

30 June

 2019

Financial assets

€'000

€'000

€'000

€'000

€'000

€'000

€'000

Trade and other receivables, excluding prepayments (note 16)

-

22,644

22,644

 

 

 

 

Cash at bank and in hand

-

45,876

45,876

 

 

 

 

 

_______

_______

_______

 

 

 

 

 

-

68,520

68,520

 

 

 

 

 

                

                

                            

 

 

 

 

 

 

Financial liabilities measured at fair value

Financial liabilities measured at amortised cost

 

Total carrying amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

30 June

2019

30 June

2019

30 June

2019

30 June

2019

30 June

2019

30 June

2019

30 June

 2019

Financial liabilities

€'000

€'000

€'000

€'000

€'000

€'000

€'000

Bank loans (note 21)

-

(397,184)

(397,184)

 

(397,184)

 

(397,184)

Trade payables and accruals (note 17)

-

(53,497)

(53,497)

 

 

 

 

Derivatives (note 23) - hedging instruments

(4,647)

-

(4,647)

 

(4,647)

 

(4,647)

 

_______

_______

_______

 

 

 

 

 

(4,647)

(450,681)

(455,328)

 

 

 

 

 

                

                

              

 

 

 

 

 

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 2018.  The tables do not include fair value information for financial assets and current financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

Financial assets

Financial assets

 

 

Fair value

 

 

measured at
fair value

at amortised

cost

Total

carrying amount

 

Level 1

 

Level 2

 

Level 3

 

Total

 

31 December

2018

31 December

2018

31 December

2018

31 December

2018

31 December

2018

31 December

2018

31 December

2018

Financial assets

€'000

€'000

€'000

€'000

€'000

€'000

€'000

Trade and other receivables, excluding prepayments and deposits paid on acquisitions (note 16)

-

14,523

14,523

 

 

 

 

Cash at bank and in hand

-

35,907

35,907

 

 

 

 

 

_______

_______

_______

 

 

 

-

50,430

50,430

 

 

 

 

 

              

              

              

 

 

 

 

 

 

Financial liabilities measured at fair value

Financial liabilities measured at amortised cost

 

Total carrying amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

31 December

2018

31 December

2018

31 December

2018

31 December

2018

31 December

2018

31 December

2018

31 December

2018

Financial liabilities

€'000

€'000

€'000

€'000

€'000

€'000

€'000

Bank loans (note 21)

-

(301,889)

(301,889)

 

(301,889)

 

(301,889)

Trade payables and accruals (note 17)

-

(52,562)

(52,562)

 

 

 

 

Derivatives (note 23) - hedging instruments

(1,306)

-

(1,306)

 

(1,306)

 

(1,306)

 

_______

_______

_______

 

 

 

 

 

(1,306)

(354,451)

(355,757)

 

 

 

 

 

              

              

              

 

 

 

 

 

21     Loans and borrowings

 

 

30 June

31 December

 

2019

2018

 

€'000

€'000

Repayable after one year

 

 

Bank borrowings

400,986

306,078

Less: unamortised debt costs

(3,802)

(4,189)

 

_______

_______

 

 

 

Total loans and borrowings

397,184

301,889

 

_______

_______

 

As at 30 June 2019, the drawn loan facility was €401.0 million consisting of Sterling term borrowings of £176.5 million (€196.9 million) and revolving credit facility borrowings of €204.1 million - €137.2 million in Euro and £60 million (€66.9 million) in Sterling. Unamortised debt costs at that date were €3.8 million. The undrawn loan facilities as at 30 June 2019 were €120.9 million.

 

During the period, the Group drew down funds from the revolving credit facility in line with cash flow requirements. The Group drew down £60.0 million (€66.9 million) and €30.5 million from the multicurrency revolving credit facility to fund the acquisition of the effective freehold interest in the newly built hotel in Aldgate, London, now branded as Clayton Hotel City of London (note 11).

 

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 23). The loans are secured by the Group's assets. 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.

 

22     Deferred tax

 

 

30 June

31 December

 

2019

2018

 

€'000

€'000

 

 

 

Deferred tax assets

2,918

2,613

Deferred tax liabilities

(49,799)

(41,129)

 

_______

_______

 

 

 

Net deferred tax liability

(46,881)

(38,516)

 

_______

_______

 

 

 

 

23        Derivatives

 

The Group has entered into interest rate swaps with a number of financial institutions in order to manage the interest rate risks arising from the Group's borrowings (note 21). 

 

Interest rate swaps are employed by the Group to partially convert the Group's Sterling denominated 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 a portion of the Euro denominated borrowings. 

 

On 26 October 2018, during the refinancing, the Group decided to hedge the floating interest rate on all the term borrowings for a five year term. The terms of the derivatives are as follows:

 

·    The existing interest rate swaps entered into on 30 June 2015 with a maturity date of 3 February 2020 were retained which fix the LIBOR benchmark rate to 1.5025% on a notional of £101.5 million Sterling denominated borrowings;

·    On 26 October 2018, two new interest rate swaps were employed with an effective date of 3 February 2020 which hedge the LIBOR benchmark rate on £101.5 million of the Sterling denominated borrowings for the period to 26 October 2023. These swaps fix the LIBOR benchmark rate to 1.39%; and

·    On 26 October 2018, two new interest rate swaps were employed with an effective date of 26 October 2018 and a maturity date of 26 October 2023 to hedge the LIBOR benchmark rate on a total notional of £75 million of the Group's term Sterling denominated borrowings. These swaps fix the LIBOR benchmark rate at 1.27% on a notional of £63 million and 1.28% on a notional of £12 million of Sterling denominated borrowings.

 

On 9 January 2019, two interest rate swaps were entered into with an effective date of 29 March 2019 and a maturity date of 31 December 2020 to hedge the LIBOR benchmark rate on £25 million of the £60 million Sterling revolving credit facility borrowings which were drawn during the period. The swaps hedge the LIBOR benchmark rate at 1.086%.

 

As at 30 June 2019, the interest rate swaps cover approximately 85% of the Group's Sterling denominated borrowings.

 

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

 

 

30 June

31 December

 

 

2019

2018

 

 

€'000

€'000

 

 

 

 

 

Interest rate swap liabilities

4,647

1,306

 

 

               

               

 

 

 

           

 

The Group also holds a derivative cap asset which hedges the Euribor benchmark on a portion of the Euro borrowings. At 30 June 2019, the cap asset was valued at €nil (31 December 2018: €nil) and is due to mature in September 2019.

 

Included in other comprehensive income

 

 

 

30 June

30 June

 

2019

2018

Fair value movement on derivative instruments

€'000

€'000

Fair value (loss)/gain on interest rate swap liabilities

(3,876)

197

Fair value loss on interest rate cap asset

-

(1)

 

_______

_______

 

 

 

 

(3,876)

196

Reclassified to profit or loss (note 7)

535

509

 

_______

_______

 

 

 

 

(3,341)

705

 

               

               

 

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

 

24        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 2019 that materially affected the financial position or the performance of the Group during that period. 

 

25       Share capital and share premium

 

  At 30 June 2019

 

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

184,640,739

1,846

 

____________

_______

 

 

 

Share premium

 

503,129

 

 

_______

 

 At 31 December 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

184,349,666

1,843

 

____________

_______

 

 

 

Share premium

 

503,113

 

 

_______

 

During the six months ended 30 June 2019, the Company issued 285,809 shares of €0.01 per share following the vesting of awards granted in March 2016 under the 2014 LTIP (note 8).

 

5,264 shares relating to the 2016 SAYE scheme were issued during the six month period ended 30 June 2019 (note 8).

 

Dividends

The dividends paid in respect of ordinary share capital were as follows:

 

6 months ended

 Year ended

 

30 June

31 December

 

2019

2018

 

€'000

€'000

 

 

 

Dividend paid 7.0 cent per Ordinary Share (2018: 3.0 cent)

12,925

5,529

 

               

               

  

On 2 September 2019, the Board proposed an interim dividend of 3.5 cent per share. The payment date for the interim dividend will be 4 October 2019 to shareholders registered on the record date 13 September 2019. These Interim Financial Statements do not reflect this dividend. Based on the shares in issue at 30 June 2019, the amount of dividends proposed is €6.5 million.

 

26     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 2019 and 30 June 2018:

 

 

 

6 months

ended

30 June 2019

Restated*

6 months

ended

30 June 2018

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

32,662

30,450

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

31,795

32,651

Earnings per share - Basic

17.7 cent

16.6 cent

Earnings per share - Diluted

17.6 cent

16.4 cent

Adjusted earnings per share - Basic

17.2 cent

17.8 cent

Adjusted earnings per share - Diluted

17.1 cent

17.6 cent

Weighted average shares outstanding - Basic

184,487,102

183,954,271

Weighted average shares outstanding - Diluted

185,975,151

186,057,744

 

* Hotel pre-opening expenses have been reclassified to adjusting items for the six month period to 30 June 2018 in order to be consistent with the classification of adjusting items applied in the 2018 consolidated financial statements.

 

The difference between the basic and diluted weighted average shares outstanding for the period ended 30 June 2019 is due to the dilutive impact of the conditional share awards granted in 2016 (for the period prior to exercise), 2017, 2018 and 2019 (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 performance of the Group excluding the tax adjusted effects of items considered by management to not reflect normal trading activities or which distort comparability either period on period or with other similar businesses (note 4).

 

 

 

Restated*

 

6 months

6 months

 

ended

ended

 

30 June 2019

30 June 2018

 

€'000

€'000

Reconciliation to adjusted profit for the period

 

 

Profit before tax

37,757

35,374

 

 

 

Adjusting items

 

 

Hotel pre-opening expenses (note 4)

125

720

Net property revaluation movements through profit or loss (note 4)

(966)

1,590

 

______

______

 

 

 

Adjusted profit before tax for the period

36,916

37,684

Tax charge

(5,095)

(4,924)

Tax adjustment for adjusting items

(26)

(109)

 

______

______

 

 

 

Adjusted profit for the period

31,795

32,651

 

______

______

* Hotel pre-opening expenses have been reclassified to adjusting items for the six month period to 30 June 2018 in order to be consistent with the classification of adjusting items applied in the 2018 consolidated financial statements.

 

27     Events after the reporting date

 

Proposed dividend

On 2 September 2019, the Board proposed an interim dividend of 3.5 cent per share. The payment date for the interim dividend will be 4 October 2019 to shareholders registered on the record date 13 September 2019. These Interim Financial Statements do not reflect this dividend. Based on the shares in issue at 30 June 2019, the amount of dividends proposed is €6.5 million.

 

Acquisition of site with planning approval for a new hotel on Paul Street in Shoreditch, London

On 12 August 2019, the Group acquired a site with planning approval for a new hotel on Paul Street in Shoreditch, London for £32.05 million. The Group has plans to build a 130 to 140 bedroom hotel with a restaurant and bar on the site at a total expected cost of £60 million including site cost. The hotel will operate as a Maldron and is expected to open in early 2022. The Group drew down £30 million from the multicurrency revolving credit facility to fund the purchase of the site.

 

Debt facility extension

On 19 August 2019, the Group availed of its option to extend the €525 million multicurrency facility for an additional year, to 26 October 2024.

 

Ballsbridge Hotel lease extension

In August 2019, the Group signed an agreement to extend the Ballsbridge Hotel lease in Dublin by 21 months, now expiring on 31 December 2021.

 

Receipt of planning permission to re-develop the site adjacent to Clayton Hotel Cardiff Lane

On 8 August 2019, the Group received planning permission to re-develop the site adjacent to Clayton Hotel Cardiff Lane, Dublin with 88 new bedrooms (and five new bedrooms on top of the existing hotel) and ancillary facilities.

 

28     Approval of financial statements

 

The Board of Directors approved the Interim Financial Statements for the six months ended 30 June 2019 on 2 September 2019.

 

 

 

Statement of Directors responsibilities

For the half year ended 30 June 2019

The Directors are responsible for preparing the half-yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 ("Transparency Directive"), and the Transparency Rules of the Central Bank of Ireland.

In preparing the condensed set of financial statements included within the half-yearly financial report, the directors are required to:

prepare and present the condensed set of financial statements in accordance with IAS 34 Interim Financial Reporting as adopted by the EU, the Transparency Directive and the Transparency Rules of the Central Bank of Ireland;

ensure the condensed set of financial statements 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 condensed set of financial statements 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 consolidated financial statements included within the half-yearly financial report of Dalata Hotel Group plc ("the Company") for the six months ended 30 June 2019 ("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 IAS 34 Interim Financial Reporting, as adopted by the EU, the Transparency Directive and Transparency Rules of the Central Bank of Ireland.

 

(2)  The interim financial information presented, as required by the Transparency Directive, includes:

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

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

c.     related parties' transactions that have taken place in the first six 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 parties' 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 six months of the current financial year.

On behalf of the board

 

John Hennessy                                                             &