DJ Dalata Hotel Group PLC: 2020 Preliminary Financial Results
Dalata Hotel Group PLC (DAL,DHG)
Dalata Hotel Group PLC: 2020 Preliminary Financial Results
02-March-2021 / 07:00 GMT/BST
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Unbowed and Unbroken
ISE: DHG LSE: DAL
Dublin and London | 2 March 2021: 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 year ended 31 December 2020.
Results Summary
2020 2019 Variance on 2019
EURmillion
Revenue 136.8 429.2 (68.1%)
Segments EBITDAR1 28.9 182.8 (84.2%)
Adjusted EBITDA1 18.7 162.2 (88.5%)
(Loss)/profit before tax (111.5) 89.7 (224.3%)
(Loss)/profit after tax (100.7) 78.2 (228.7%)
Basic (loss)/earnings per share (cents) (50.9) 42.4 (220.0%)
Adjusted basic (loss)/earnings per share1 (cents) (27.2) 42.0 (164.8%)
Key performance indicators1 2020 2019 Variance on 2019
Occupancy % 30.9% 82.6%
Average room rate (EUR) 88.77 113.14 (21.5%)
RevPAR (EUR) 27.45 93.43 (70.6%)
OUR PEOPLE ARE UNBOWED AND OUR BALANCE SHEET IS UNBROKEN - Unprecedented year of challenge for the industry - 68% reduction in revenue leading to loss after tax of EUR101
million - Proactive cost reductions and government support schemes protected employment and cash during periods of low
occupancies - Implementation of Dalata Keep Safe Programme with accreditation from Bureau Veritas
INCREASED LIQUIDITY DUE TO SPEEDY AND PROACTIVE RESPONSE - Sale and leaseback of Clayton Hotel Charlemont, Dublin in April for EUR65 million - Agreed amended debt facility in July with additional EUR39 million facility and revised suite of covenants - Equity placing in September raised net proceeds of EUR92 million to further enhance balance sheet - Increased liquidity with cash of EUR50 million and undrawn committed debt facilities of EUR248 million at the end of
December
ROBUST BALANCE SHEET PROVIDES SECURITY AND OPPORTUNITY - Asset backed balance sheet with hotel assets of EUR1.2 billion - Conservative gearing with Net Debt to Value1 of 23%
READY FOR THE RECOVERY - Management teams at hotels and central office in place to manage the recovery - Hotels are primarily located in large cities or at major airports - Modern well-maintained portfolio of hotels - average age of hotels is 17 years - Exciting pipeline of close to 3,300 rooms in excellent locations
STRATEGIC AND OPERATING HIGHLIGHTS - We have maintained a strong focus on retaining our core teams and providing opportunities for learning and
development, ensuring that our teams are well prepared as the hospitality industry gradually reopens. - All of our hotels operate under the Dalata Keep Safe Programme. Our health and safety protocols have been
accredited by Bureau Veritas, a world leader in Health and Safety testing, inspection and certification. - We have used our time wisely during the crisis to implement initiatives that will add long term value. We have
accelerated the rollout of new technologies across the Group including OPERA Cloud (Property Management System) and
MICROS Simphony POS system for the hotels' food and beverage outlets. We also completed the project to centralise
payroll across the Group. The processing of wages for all employees in our 41 hotels is now done from the Shared
Service Centre in Cork. These initiatives will allow the teams at our hotels to spend less time processing data and
more time serving the needs of our customers. - Despite the disruption caused by the pandemic, Dalata continued to progress its growth strategy with three new
agreements for lease secured in 2020. In November 2020, we also opened the new 44 bedroom extension at Clayton
Hotel Birmingham and the new Meeting & Events Centre at Clayton Hotel Cardiff Lane in Dublin. - The Group continues to progress its development pipeline of almost 3,300 rooms across Ireland and the UK. Dalata's
pipeline of seven hotels already under construction includes two in Ireland and five in the UK; all of these
properties are scheduled to open between Q3 2021 and Q2 2022. Eight development projects including extensions are
currently at the pre-construction phase. When all projects are completed, the Group will have almost doubled its
rooms in the UK. - The Group's financial position remains strong with the Group's amended suite of covenants providing flexibility as
business recovers. The Group has cash and undrawn committed debt facilities of EUR290 million at the end of February
2021. - We protected our cash during 2020 through proactive cost reductions, diligent working capital management,
cancellation of dividends, the postponement of uncommitted capital expenditure and utilisation of governments'
support. - We improved our liquidity through 2020 by leveraging our strong relationships with our banking partners and
institutional landlords as evidenced by the sale and leaseback of Clayton Hotel Charlemont, Dublin in April for EUR65
million and the increase in our bank facilities of EUR39 million in July. We also raised equity from new and existing
shareholders resulting in net proceeds of EUR92 million. - Our asset backed balance sheet remains robust with EUR1.2 billion in hotel assets. This is despite total revaluation
losses of EUR174.4 million in 2020 (H2 2020: loss of EUR13.4 million), arising from independent asset valuations in
2020, representing a circa 13% decrease on valuations versus December 2019. - The sale and leaseback of Clayton Hotel Charlemont highlights our continued ability to create value and our core
strengths of selecting prime sites, developing hotels and our ability to leverage our strong relationships with
fixed income investors. We acquired the site in the centre of Dublin city for EUR11.9 million in February 2016. We
built the 187 room Clayton hotel for EUR29.7 million. In April 2020, we sold the hotel to Deka Immobilien for EUR65
million at an annual lease cost of EUR3.05 million, achieving an exceptional yield despite the Covid-19 pandemic. - We have enhanced our reputation as a strong reliable covenant by meeting our rental obligations with institutional
landlords through the course of the pandemic. We are confident that this will assist us greatly in securing
opportunities to continue to build our pipeline in 2021 and beyond.
OUTLOOK
The hospitality industry in Ireland and the UK continues to be impacted by restrictions to curb the spread of Covid-19. Since the start of 2021, all of our hotels remain operational providing accommodation to front line workers, essential workers and those requiring quarantine but are closed to the general public. The easing of restrictions and reopening of the hospitality industry will be determined by the Irish and UK governments.
Occupancy as expected has remained muted in January 12% and February 15% with an Adjusted EBITDA loss expected to be approximately EUR2.5 million for the first two months.
The outlook for the near term remains uncertain at present and it is not yet known when international travel will return to more normal levels. However, we remain ready and primed to get back to full operating levels once restrictions are lifted. The rollout of vaccines across Europe and globally is very encouraging, with the speed of rollout increasing as we move towards Q2.
As lockdowns and travel restrictions are gradually eased, the Group anticipates domestic demand will return in the first instance, as seen in July and August 2020 when restrictions were relaxed in Ireland and the UK, followed by international leisure and business travel. Our teams look forward to welcoming back those customers who have not been able to visit us over the last year.
The Group will continue the measures implemented to combat the impact of Covid-19 on the business. In addition, we are assessing distressed opportunities as they arise. Our reputation as a strong reliable covenant has been enhanced through the course of the pandemic and we are confident that this will assist us greatly in securing further opportunities.
Our cash and undrawn debt facilities of EUR290 million at the end of February 2021 leave us in a great position to withstand any further impact of Covid-19 restrictions in 2021 and participate in the recovery of global tourism. The hospitality sector has historically shown tremendous resilience to recover from other demand shocks and crises. As a result, the Board remain convinced that Dalata is well placed to benefit with its strong balance sheet, young, well invested portfolio and experienced teams at hotels and central office.
Pat McCann, Dalata Hotel Group CEO, commented:
"2020 has been an extraordinary year, unlike any other I have encountered during my 50-year career in the hospitality industry. The impact of the Covid-19 pandemic has been extremely challenging for our industry, our people and our communities.
When I reflect on our performance in 2020, I am extremely proud of what we accomplished together. We have ended a very difficult year in a strong financial position with our core teams intact, morale running high and we are ready for the challenges and opportunities ahead. Quite simply, we are unbowed and unbroken. We achieved this by holding firm to the values and beliefs that define us including being fair, transparent, consistent and balanced.
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Our financial position remains robust. We have always managed the business with a strong understanding and awareness of the inevitable ups and downs facing our industry, including shocks, and yet position it for ongoing growth and opportunity. We therefore entered the crisis in a very strong financial position. Our strategy of maintaining an asset backed balance sheet and comfortable gearing ensured Dalata was well placed to confront the challenges which followed.
Through our proactive response to the pandemic and the tremendous efforts and collaboration by our people and our key stakeholders, we protected our financial position. I would like to take this opportunity to thank all of our people and our stakeholders for their invaluable hard work and support over the last 12 months.
We have very strong relationships with our banking partners. The amended debt facility agreed in July 2020 with a temporary revised suite of covenants will provide flexibility and support as business recovers. Our institutional landlords also continue to actively support Dalata and remain committed to our long-term partnerships. Our shareholders strongly supported us through the equity placing which raised net proceeds of EUR92 million in September. These strong relationships with our stakeholders will be fundamental as we move through the recovery and continue to create long term value into the future.
In addition to our strong financial position, I am very pleased that we have retained our key people. We made a decision early in the pandemic to keep the core management teams in place at our hotels and central office. This approach, together with our decentralised operating model, was absolutely critical to our success during 2020 as it enabled us to react quickly as the level of restrictions in Ireland and the UK changed. It will also be beneficial that our regular guests are greeted by familiar faces when they return.
When I talk to our teams at the hotels, I am heartened by their optimism in spite of what has been a very challenging year for them. Like myself, our people enjoy the buzz of a busy hotel and are eagerly looking forward to welcoming guests back to our hotels in the year ahead.
We maintained engagement with our people including those we could not bring into work through our employee app and offering learning and development courses through our newly branded Dalata Academy. Over 92,000 courses were completed during 2020. I am proud to see the strong motivation of our people to continue upskilling and developing. They are the heart and soul of our business and I am delighted that they too are unbowed and looking to the future.
We are thankful for the support provided by the Irish and UK governments over the last 12 months. Given the scale of our business in Ireland, the Irish support packages are particularly important. The Employment Wage Subsidy Scheme and the commercial rates waiver in Ireland remain in place until 30 June 2021. The on-going support is critical as the industry navigates through this crisis and positions for recovery. The "Experience Economy" which includes the hospitality sector, employs over 330,0002 people in Ireland and is particularly important to the regional economy. I am now calling on the Irish government to continue their commitment to support this vital part of our economy as it starts to recover. One of the key supports after the financial crisis was the reduction in the VAT rate. I am asking the Irish government to commit to a minimum of five years to a VAT rate of 9%. The big beneficiary of this will be to the exchequer itself and it will support getting people back to work.
ESG (Environmental, Social and Governance) is a key focus for the Board and Management and we continue to advance our sustainability initiatives. In January of 2020, we established a new ESG Board committee which is comprised of a majority of Non-Executive directors. We improved our CDP3 score from our initial C rating in 2018 to a B rating in 2020. We also continued to invest in training and development to support our people, particularly those who we cannot employ at present by offering tailored development programmes.
We continue to make good progress on our growth strategy with a pipeline of close to 3,300 rooms. We are excited about other opportunities we are currently looking at. While we remain focused on delivering our growth strategy in our top target cities in Regional UK, we are also seeing opportunities in London.
The outlook for the near-term remains uncertain at present. The roll out of vaccines both here in Ireland and abroad continues and I remain positive on the medium-term prospects for the Group.
I believe that Dalata's key strengths will differentiate us as business recovers. Our core teams of excellent hotel operators are ready and excited to welcome customers back to our hotels when they re-open. The Group's robust financial position with an asset backed balance sheet, strong liquidity and comfortable gearing ensures Dalata is well placed as we head into 2021. Finally, our experienced management team and our record of identifying and securing opportunities in a crisis will help us position the business for a successful recovery and to look for growth opportunities that may arise out of the crisis.
We are all ready for the challenges and opportunities that 2021 may bring and look forward to the year ahead with energy and enthusiasm. Dalata is unbowed and unbroken."
ENDS
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 now consists of 29 owned hotels, 12 leased hotels and three management contracts with a total of 9,261 bedrooms. In addition to this, the Group is currently developing 13 new hotels and has plans to extend four of its existing hotels, adding close to 3,300 bedrooms in total. This will bring the total number of bedrooms in Dalata to over 12,500. For the full year 2020, Dalata reported revenue of EUR136.8 million and a loss after tax of EUR100.7 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 GMT (03:30 ET) today 2 March 2021, and this can be accessed using the contact details below.
From Ireland dial: (01) 4311252
From the UK dial: (0044) 333 300 0804
From the USA dial: (001) 631 913 1422
From other locations dial: +353 1 431 1252
Participant PIN code: 87595008#
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 Group 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 Group 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 Group 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.
Full Year 2020 Financial Performance
EURmillion 2020 2019 Revenue 136.8 429.2 Segments EBITDAR1 28.9 182.8 Hotel variable lease costs (0.3) (7.3) Segments EBITDA1 28.6 175.5 Other income 0.5 1.2 Central costs (8.1) (11.8) Share-based payments expense (2.3) (2.7) Adjusted EBITDA1 18.7 162.2 Adjusting items4 (44.4) 1.6 EBITDA1 (25.7) 163.8 Depreciation of PPE & amortisation (27.1) (26.4) Depreciation of right-of-use assets (20.7) (17.1) Operating (loss)/profit (73.5) 120.3 Interest on lease liabilities (22.4) (18.9) Other interest and finance costs (15.6) (11.7) (Loss)/profit before tax (111.5) 89.7 Tax credit/(charge) 10.8 (11.5) (Loss)/profit for the period (100.7) 78.2
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Adjusted EBITDA excluding IFRS 161 (11.9) 134.8 (Loss)/earnings per share (cents) - basic (50.9) 42.4 Adjusted (loss)/earnings per share1 (cents) - basic (27.2) 42.0 Adjusted (loss)/earnings per share excluding IFRS 161 (cents) - basic (22.1) 46.0 Hotel EBITDAR margin1 21.1% 42.6%
Summary of hotel performance
The impact of Covid-19 on the Group's business was significant with revenues decreasing by 68% to EUR136.8 million in 2020. From March, the Group's financial performance was severely impacted by the Covid-19 pandemic and changing government lockdowns and travel restrictions across its markets for the remainder of the year and into 2021.
Occupancy Q1 2020 Q2 2020 Q3 2020 Q4 2020 Dublin 61.7% 12.3% 25.9% 17.0% Regional Ireland 49.7% 10.4% 60.2% 25.0% UK 58.2% 7.9% 35.7% 19.4% Group 58.2% 10.6% 35.9% 19.4%
All hotels were temporarily closed to the public for the majority of Q2 in line with guidelines issued by the Irish and UK governments. Occupancy for the Group amounted to 10.6% in this period, underpinned by demand from essential services. In Q3, occupancy increased to 35.9%. Our Regional Ireland and Regional UK hotels witnessed increased demand in the months of July and August as a result of staycations while Dublin and London were negatively impacted by on-going restrictions on international travel. Increased government restrictions from September hampered performance for the remainder of the year with business largely limited to local leisure guests resulting in occupancy of 19.4% for Q4. Following an increase in Covid-19 cases, the Irish government implemented the highest level of restrictions, necessitating the closure of hotels to the general public from 22 October for a period of six weeks.
The UK government implemented similar restrictions for the month of November. However, most manufacturing and construction services remained open for business compared to the previous lockdown in Q2, generating some limited demand for hotel rooms. Our Dublin and Regional Ireland hotels saw an improvement in early-mid December as a result of the easing of restrictions whilst restrictions stayed in place for most of the UK in December.
Adjusted EBITDA decreased by 88.5% to EUR18.7 million in 2020. The Group mitigated the financial impact of the reduction in occupancy through pro-active cost reductions since the onset of the Covid-19 pandemic. Dalata secured significant savings across all categories of expenditure. As the hotels were closed for substantial periods during the year, variable costs such as the cost of food and beverage purchases, consumables for bedrooms and OTA commissions decreased significantly. The Group introduced a combination of reduced working hours and progressive reduction of basic salary for employees and Directors.
The utilisation of government grants and assistance was also of significant benefit to the Group. Government wage supports in the form of the Irish Wage Subsidy Schemes and the UK Coronavirus Job Retention Scheme of EUR20.8 million were received to support incomes of employees in Ireland and the UK. The Group also received financial assistance by way of a commercial rates waiver from the Irish and UK governments, amounting to a saving of EUR9.1 million for the year. Other government grants received, including the Covid Restrictions Support Scheme (CRSS) in Ireland, amounted to EUR1.6 million. These supports were critical in our efforts to protect employment within the Group.
Performance Review | Segmental Analysis
The following section analyses the results from the Group's portfolio of hotels in Dublin, Regional Ireland and the UK.
1. Dublin Hotel Portfolio
EURmillion 2020 2019 Room revenue 43.5 176.3 Food and beverage revenue 16.0 53.0 Other revenue 5.7 16.1 Total revenue 65.2 245.4 EBITDAR 17.5 119.7 Hotel EBITDAR margin % 26.8% 48.8% Performance statistics (like for like)5 Occupancy 30.4% 87.7% Average room rate (EUR) 90.76 124.79 RevPAR (EUR) 27.62 109.40 RevPAR % change (74.8%) Dublin owned & leased portfolio Hotels 16 16 Room numbers 4,488 4,482
Our Dublin hotel portfolio consists of seven Maldron hotels, seven Clayton hotels, the Ballsbridge Hotel and The Gibson Hotel. Nine hotels are owned and seven are operated under leases.
From March, the Dublin market was impacted by the sudden onset of the Covid-19 pandemic which affected the region for the course of 2020. The impact on the Dublin market was particularly acute due to its reliance on international travel and events resulting in revenue decreasing by 73.4% to EUR65.2 million and EBITDAR decreasing by 85.4% to EUR17.5 million in 2020.
Our Dublin hotels had a promising start to 2020 earning revenue of EUR30.8 million in the first two months of the year. In March, business began to be impacted by corporate travel bans and the cancellation of events as a result of the Covid-19 pandemic. Occupancy for the period from January to March amounted to 61.7%.
Full lockdown restrictions were imposed in Ireland at the end of March which necessitated the closure of all hotels to the general public. Occupancy reduced to 12.3% during the period from April to June underpinned by contracted business for essential services.
The period July to September remained challenging for our Dublin hotels, with occupancy coming in at 25.9%. This was largely driven by leisure business and weekend demand. Although our Dublin hotels were open for the majority of this period, additional restrictions were introduced on 18 September which restricted travel between counties in Ireland before moving to Level 5 restrictions (which necessitated the closure of all hotels to the general public) on 22 October for a period of 6 weeks.
Occupancy reduced to 17.0% during the period October to December as a result of varying travel restrictions in Ireland limiting corporate business, leisure stays, and a lack of events in the city. There was however some respite in December with the easing of restrictions for a period resulting in improved occupancy for this month, particularly at weekends, proving that people will travel (even locally) and partake in leisure activities once permitted.
Dublin revenue amounted to EUR20.3 million and EBITDAR was EUR4.1 million in the second half of 2020, reflecting the challenging environment. However, the utilisation of government grants and assistance totalling EUR12.9 million for the year and proactive cost reductions reduced the impact of the lost revenue on EBITDAR.
2. Regional Ireland Hotel Portfolio
EURmillion 2020 2019 Room revenue 21.6 49.7 Food and beverage revenue 11.1 26.8 Other revenue 3.6 8.4 Total revenue 36.3 84.9 EBITDAR 8.0 24.5 Hotel EBITDAR margin % 22.0% 28.9% Performance statistics6 Occupancy 36.4% 73.7% Average room rate (EUR) 87.04 98.90 RevPAR (EUR) 31.64 72.93 RevPAR % change (56.6%) Regional Ireland owned & leased portfolio Hotels 13 13 Room numbers 1,867 1,867
Our Regional Ireland hotel portfolio comprises seven Maldron hotels and six Clayton hotels located in Cork (x4), Galway (x3), Limerick (x2), Wexford (x2), Portlaoise and Sligo. Twelve hotels are owned and one is operated under a lease.
Due to the onset of the Covid-19 pandemic from March, revenue decreased by 57.3% to EUR36.3 million and EBITDAR decreased by 67.5% to EUR8.0 million in 2020. Our Regional Ireland hotels had a strong start to 2020, earning revenue of EUR10.9 million during January and February with occupancy of 49.7% for the first quarter.
In line with the Irish government restrictions, all of our hotels in Regional Ireland were closed to the general public from the end of March to the end of June, resulting in occupancy of 10.4% for Q2. Our Regional Ireland hotels enjoyed a more positive period from July to September, with the resurgence of domestic tourism resulting in an occupancy of 60.2% for the period. Staycations were strong particularly during July and August.
Level 5 restrictions (which necessitated the closure of all hotels to the general public) were then imposed on 22 October for a period of 6 weeks resulting in a reduction in occupancy to 25.0% during the period October to December.
Overall, the performance of our Regional Ireland hotels was stronger in second half of the year, delivering revenue of EUR20.7 million and EBITDAR of EUR8.3 million. The utilisation of government grants and assistance amounted to EUR8.9 million for the year which together with proactive cost reductions assisted EBITDAR performance.
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