DJ Dalata Hotel Group PLC: 2021 Half Year Report
Dalata Hotel Group PLC (DAL,DHG) Dalata Hotel Group PLC: 2021 Half Year Report 01-Sep-2021 / 07:00 GMT/BST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
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Emerging Strong as Recovery Commences
Occupancy levels improving month on month
Dermot Crowley to assume role of CEO on 31 October
ISE: DHG LSE: DAL
Dublin and London | 1 September 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 six month period ended 30 June 2021.
Results Summary
H1 2021 H1 2020 Variance
EURmillion
Revenue 39.6 80.8 (51.0%)
Segments EBITDAR1 6.7 15.6 (57.1%)
Adjusted EBITDA1 1.4 10.1 (85.8%)
Loss before tax (37.8) (70.9) 46.6%
Basic loss per share (cents) (13.6) (34.0) 60.0%
Adjusted basic loss per share1 (cents) (14.5) (13.1) (10.7%)
Group key performance indicators H1 2021 H1 2020 Variance
Occupancy % 19.9% 34.3%
Average room rate1 (EUR) 81.99 95.28 (13.9%)
RevPAR1 (EUR) 16.28 32.69 (50.2%)
PROTECTING OUR PEOPLE, CASH AND BUSINESS
-- Hotels now fully re-opened having remained operational for essential services throughout the period inline with government restrictions
-- Positive Adjusted EBITDA of EUR1.4 million driven by strong operational management
-- Cash outflow2 of EUR24 million for the first six months
-- Proactive working capital management and government support schemes allowed us to protect employmentwithin the Group and preserve cash during periods of low occupancies
-- Maintained engagement with our employees enabling the business to effectively ramp up with an engagedworkforce as economies re-open
WELL-POSITIONED FOR THE RECOVERY
-- Increasing demand for staycations since hotels fully re-opened for leisure in May (UK) and June (ROI)
-- Group occupancy3 of 44% in June 2021 - increasing to 58% in July and 68% in August
-- Strong customer satisfaction scores since re-opening
STRONG BALANCE SHEET PROVIDES SECURITY, FLEXIBILITY AND THE ENGINE FOR FUTURE GROWTH
-- Robust balance sheet backed by EUR1.2 billion in property, plant and equipment (no significant change toproperty valuations since 31 December 2020)
-- Liquidity remains strong with cash and undrawn committed debt facilities of EUR270 million at 30 June 2021
-- Gearing remains conservative with Net Debt to Value1 of 27% (31 December 2020: 23%)
REMAINING FOCUSED ON LONG-TERM GROWTH
-- Current pipeline of over 2,600 rooms in prime locations which will see UK footprint surpass Dublin by2025
-- Opening of new Maldron Hotel Glasgow City in August 2021; further six hotels on track to open by May 2022
-- Reputation with current and prospective landlords has been enhanced
STRATEGIC AND OPERATING HIGHLIGHTS
RE-OPENING DELIVERS STRONG RECOVERY
-- Dalata hotels have fully re-opened with trading improving markedly during the summer period. Our strategyto retain our core teams throughout the pandemic ensured a swift and smooth re-opening.
-- The Group earned positive Adjusted EBITDA despite hotels only open for essential services for themajority of the period. The impact of reduced trading was mitigated through pro-active cost control measures andthe utilisation of government supports.
-- Really encouraging occupancy for the Group of 44% in June, 58% in July and 68% in August as the recoverystarts to take hold across all our markets. Occupancies at our Dublin and London hotels will remain lower until thereturn of international travel and large events, but this has been partially offset by staycations.
RETENTION OF CORE TEAMS CRITICAL TO BUSINESS SUCCESS
-- We continued to stay in constant contact with our people through our employee app and providing learningand development opportunities with over 44,000 courses completed on Dalata Online during the first six months of2021. This ensured our people were well prepared and motivated when returning to work. This in turn allows uscontinue to provide our guests with the excellent Dalata experience they are accustomed to. Our hotels areachieving strong customer satisfaction scores since re-opening.
-- We have renewed the accreditation of our Dalata Keep Safe Programme with Bureau Veritas, a world leaderin Health and Safety testing, inspection and certification. This gives our guests, employees and suppliers thecomfort that we are operating our hotels safely in line with best practice health and safety protocols.
MAINTAINING STRONG CULTURE AND VALUES
-- The Board has appointed Dermot Crowley to succeed Pat McCann as CEO on 31 October 2021 following arigorous selection process. Dermot has played a key role in the development of the business since 2012 and iscommitted to continuing to grow the business and protecting and enhancing the Dalata culture.
-- Following Dermot's appointment as CEO, Carol Phelan was promoted to CFO. Since joining the business in2014, Carol has been key member of the management team developing the finance and treasury function post IPO.
-- The Board, through the Nomination committee, is continuing to address the question of Board composition.It is expected that a new non-executive director will be appointed before the end of 2021.
-- ESG performance remains a top priority for management. We have accelerated our ESG initiatives despitethe challenges from Covid-19 and are currently developing a 3-year ESG Strategy plan that will be launched by Q12022. Dalata achieved 36 gold and 8 silver awards with Green Tourism in 2021, representing significant progress onour 2019 scores.
GROWTH STRATEGY REMAINS COMPELLING
-- We opened our first hotel in Scotland, the 300-room Maldron Hotel Glasgow City in August. The hotelmanagement team is made up of existing Dalata employees who will ensure that the Dalata culture and operating modelare adopted from the outset.
-- We are excited to open a further six hotels in Bristol, Manchester, Glasgow and Dublin between Decemberthis year and May 2022, totalling over 1,500 rooms. We have started the construction of Maldron Hotel Shoreditch inLondon. The remaining pipeline of four hotels, including one hotel in Ireland and three in the UK, are at thepre-construction phase. Our Acquisitions and Development team are continuously looking at opportunities to add tothis pipeline.
-- Dalata's robust balance sheet, backed by EUR1.2 billion of hotel assets, and strong financial position withcash and undrawn committed debt facilities of EUR293 million at the end of August, ensures the Group iswell-positioned to avail of future opportunities for leases.
-- We remain confident that our enhanced reputation as a strong reliable covenant will provide us with anadvantage in securing new opportunities as we expand our pipeline in the future.
UpdatED LTIP performance condition
In line with guidance from the Investment Association, the Group deferred the finalisation of the performance condition target ranges in respect of the 2021 share awards granted on 3 March 2021, in light of the uncertainty concerning future market conditions due to the impact of Covid-19. The Group confirms that the performance condition measures and targets in respect of the 2021 share awards made on 3 March 2021 are as set out below:
Threshold Maximum
Performance condition Weighting
(25% vesting) (100% vesting)
TSRA 50% Median Upper quartile
Free cash flow per share (FCPS)B 50% EUR0.35 EUR0.47
A Total shareholder return (TSR) is measured against a bespoke comparator group of 20 listed peer companies in the travel and leisure sector. For performance between the median and upper quartile, vesting is determined by assessing between which two ranked companies Dalata's TSR falls and calculating vesting on a linear basis between the two companies.
B Basic free cash flow per share (FCPS)1 achieved in the year ending 31 December 2023. The adoption of FCPS instead of EPS (as initially set out in the annual report) follows careful consideration of the needs of the business as it recovers from the disruption of the pandemic and continues the execution of its growth strategy. We intend to consult with shareholders on this and other matters concerning the implementation of remuneration policy later this year.
OUTLOOK
Following the full re-opening of the hospitality industry in May in the UK and June in Ireland, Covid-19 restrictions continue to be relaxed as the rollout of vaccines in both countries reaches an advanced stage with more than 60% of the entire population fully vaccinated in both countries. The UK has lifted many of the legal restrictions introduced to curb the spread of Covid-19. In Ireland non-essential international travel was permitted from 19 July but restrictions on large events remain in place. The Irish Government has published a road map on the easing of the remaining Covid-19 restrictions with most restrictions expected to be lifted by 22 October.
As expected, there was strong domestic demand for hotel stays once restrictions were lifted with occupancies improving month on month and hitting 68% in August. It is expected the improved trading environment will deliver an increase in earnings with Adjusted EBITDA for July and August projected to be approximately EUR24 million. In addition, the Group had combined cash resources and undrawn debt facilities of EUR293 million at the end of August 2021.
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DJ Dalata Hotel Group PLC: 2021 Half Year Report -2-
While the emergence of new variants remains a threat, the progress being made on the rollout of vaccines across Europe and globally is very encouraging. The outlook for the near term remains uncertain at present. A strong recovery in domestic leisure is underway and we expect domestic corporate business to further recover this month given the progressive easing of restrictions. The timing of the recovery of international leisure and corporate travel is somewhat uncertain but the ongoing global rollout of vaccines is a very positive influencing factor. The recovery of international travel is important for our Dublin and London hotels.
The Group will continue to implement measures to combat the impact of Covid-19 on the business. In addition, our Acquisitions and Development team 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 place Dalata in a stronger position to secure further growth opportunities.
The Group's asset backing and strong liquidity ensure it is well-positioned to withstand any remaining 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 confident that Dalata is well placed to benefit with its strong balance sheet, young, well-invested portfolio and experienced and motivated teams at hotels and central office.
Pat McCann, Dalata Hotel Group CEO, commented:
"I am pleased to report our hotels have successfully re-opened to all guests in recent months. As a sense of normality returns to society, the demand for domestic leisure has increased across Ireland and the UK. Our people have skilfully managed the re-opening and are once again providing our guests with an exceptional experience.
As I reflect on my time at Dalata, I am incredibly proud of what we have achieved as a Group. Through good times and bad, the dedication and resilience shown by our teams has been admirable. This has never been tested to such a great degree as during the course of the last 18 months. Our values and beliefs have shone a light to guide us through this difficult time and we will come out the other side more confident than ever in our abilities and in how we operate our business. Our skilled and wonderful people will drive the business to new heights in the future.
It gives me great pleasure to be handing over the reins of the business to Dermot Crowley on 31 October 2021. Dermot has been instrumental in the development of the business and execution of our strategy since he joined in 2012 and has been selected by the Board to succeed me as CEO. I have known Dermot for over twenty years, and I am confident he will lead Dalata through the next phase of growth while maintaining the wonderful culture and people focus that we have built together at Dalata.
As I prepare to step aside from my time at Dalata, I will be watching its progress with great enthusiasm. The Group has all the attributes to be a great success into the future, with superb people at its core. We are entering a period of great opportunity in the hotel industry. Dalata has a wonderful reputation with stakeholders across all areas of the business and is strongly positioned to take advantage of future opportunities in new and existing markets. I have full confidence in the Dalata team as it embarks on this pursuit".
Dermot Crowley, Dalata Hotel Group CEO Designate, commented:
"I am honoured to have been chosen by the Board to succeed Pat as CEO. I have known Pat for over 20 years, during which he has given me great guidance and support which I hugely appreciate. I plan to continue to uphold the strong culture and values we have built together at Dalata.
The roll out of vaccines in both Ireland, the UK and globally has been very encouraging to date. International travel in Ireland returned on 19 July and restrictions were relaxed in the UK earlier in the summer. This is an important development as our hotels in Dublin and London require the return of international travel for occupancies to recover more substantially.
The Irish and UK governments have provided tremendous supports to the hospitality industry over the last 18 months which have greatly helped us in weathering this crisis and protecting employment. As the hospitality industry begins to recover and these supports unwind, it is important to bear in mind that it will take some time for the industry to fully recover. One key support has been the reduced VAT rate of 9% in Ireland which should be extended further to support the industry and the large number of jobs that depend on it.
Our HR team have been instrumental in building a strong framework around how we recruit, retain and develop our people. Our Dalata Academy and the wealth of training opportunities available within the organisation allows our people to constantly grow and develop, making Dalata a great place to work in the hospitality industry in both Ireland and the UK. I am delighted to reveal that 2021 will see our largest ever graduate intake.
ESG considerations continue to be front and centre of everything we do at Dalata and we have made further progress in this area in the last six months. We believe that embedding sustainability across all areas of the business will give us a competitive advantage in the future. Following a rigorous tendering process, we have partnered with a leading ESG Advisory firm to support the development of our 3-year ESG Strategy plan which will be launched by Q1 2022. Our ESG strategy plan will be aligned with best practice and will bring together and complement our current actions and objectives. We are also committed to setting climate targets that align with TCFD (Task Force on Climate-Related Financial Disclosures). I am delighted that our hotels received 36 gold and 8 silver awards with Green Tourism in 2021 representing significant progress on our previous results. This provides us with a solid platform across all hotels from which we can build and improve.
Our financial position remains very strong and we have protected our cash through strong operational management, cutting non-essential costs and availing of government supports. Our asset backed balance sheet has continued to serve us well and will give us great flexibility and security as we look at opportunities that begin to arise.
I am delighted that we have opened our first hotel in Scotland with the Maldron Hotel Glasgow City on 3 August. This 300-room hotel is ideally located on Renfrew Street in the city centre. The project was successfully managed by our Acquisitions and Development team in conjunction with our development partners, before handing over to the management team at the hotel. As is the case with all our new hotels, the senior management team was promoted from within the Group, highlighting our ability to provide our people with opportunities to grow and develop within Dalata while de-risking the execution of our growth plans.
We will add a further six hotels to the Dalata portfolio between December 2021 and May 2022. This includes our first ever hotel in Bristol, two hotels in Manchester city centre, a Clayton Hotel in Glasgow to complement our existing Maldron hotel in the city and two hotels in Dublin. These new openings along with the future openings planned for 2023 and 2024 are transforming our portfolio. Our teams will continue to work on sourcing and securing additional projects to add to our pipeline in the future".
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, 13 leased hotels and three management contracts with a total of 9,561 bedrooms. In addition to this, the Group is currently developing 11 new hotels and has plans to extend four of its existing hotels, adding over 2,600 bedrooms in total. For the first six months of 2021, Dalata reported revenue of EUR39.6 million and a loss after tax of EUR30.4 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 and Institutional Investors
Management will host a conference call for analysts and institutional investors at 08:30 BST (03:30 ET) today 1 September 2021, 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: 16039997#
Contacts
Dalata Hotel Group plc investorrelations@dalatahotelgroup.com Pat McCann, CEO Tel +353 1 206 9400 Dermot Crowley, CEO Designate Carol Phelan, CFO Niamh Carr, Group Head of Investor Relations and Strategic Forecasting 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
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DJ Dalata Hotel Group PLC: 2021 Half Year Report -3-
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.
Half Year 2021 Financial Performance
EURmillion Six months ended 30 June Six months ended 30 June
2021 2020
Revenue 39.6 80.8
Segments EBITDAR1 6.7 15.6
Hotel variable lease costs - (0.3)
Segments EBITDA1 6.7 15.3
Other income 0.2 0.2
Central costs (4.4) (4.3)
Share-based payments expense (1.1) (1.1)
Adjusted EBITDA1 1.4 10.1
Adjusting items4 2.1 (40.6)
EBITDA1 3.5 (30.5)
Depreciation of PPE and amortisation (13.7) (13.8)
Depreciation of right-of-use assets (9.8) (10.6)
Operating loss (20.0) (54.9)
Interest on lease liabilities (11.8) (10.9)
Other interest and finance costs (6.0) (5.1)
Loss before tax (37.8) (70.9)
Tax credit 7.4 7.8
Loss for the period (30.4) (63.1)
Adjusted EBITDA excluding the impact of IFRS 161 (16.0) (5.3)
Loss per share (cents) - basic (13.6) (34.0)
Adjusted loss per share1 (cents) - basic (14.5) (13.1)
Adjusted loss per share excluding the impact of IFRS 161 (cents) (13.1) (10.4)
- basic
Hotel EBITDAR margin1 16.9% 19.3%
Summary of hotel performance
The Group's business continued to be significantly impacted by Covid-19 during the first six months of 2021 with revenue decreasing by 51.0% on H1 2020 (80.4% on H1 2019) to EUR39.6 million. For most of the period, the Group's hotels were only open for essential business. Hotels in the UK were permitted to re-open for outdoor dining during April. The Group's hotels fully re-opened for overnight leisure stays on 17 May in England and Wales, 24 May in Northern Ireland and 2 June in Ireland. However, some government restrictions remained in place at this point including restrictions on international travel, certain large events and public gatherings with limited numbers at weddings.
Six months ended
Like for Like occupancy1 Six months ended 30 June 2020
30 June 2021
Dublin 19.1% 38.0%
Regional Ireland 23.9% 30.1%
UK 21.2% 33.0%
Occupancy for the Group amounted to 14%5 in Q1 2021 underpinned by demand for essential services only. Trading was higher in the same quarter last year where the Group experienced normal trading conditions in January and February 2020 before it was severely impacted by the Covid-19 pandemic from March 2020 onwards. Trade increased into Q2 2021 as hotels re-opened with occupancy for the Group reaching 44%5 in June driven by domestic leisure demand. However, Dublin and London hotels continue to be significantly impacted by restrictions on international travel and a lack of events which are required before occupancies in these regions can recover more substantially.
Segments EBITDAR decreased by 57.1% to EUR6.7 million for the six month period. Pro-active cost control and the continued utilisation of government grants and assistance helped mitigate the financial impact of reduced trading levels. The Group continued to maintain significant savings across all categories of expenditure. This included variable costs such as the cost of food and beverage purchases, consumables for bedrooms and commissions which decreased substantially during the period when the hotels were closed.
The Group continued to benefit from the utilisation of government supports during the first six months of the year (EUR29.1 million). The Group received wage subsidies of EUR17.2 million to support the incomes of employees and government grants amounting to EUR5.8 million which were introduced to support businesses during the pandemic and contribute towards re-opening and other operating costs. The Group has also received financial assistance by way of commercial rates waivers from the Irish and UK governments for the first six months of 2021 (EUR6.1 million).
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 Six months ended 30 June 2021 Six months ended 30 June 2020 Room revenue 10.6 29.9 Food and beverage revenue 3.8 10.9 Other revenue 1.7 4.0 Total revenue 16.1 44.8 EBITDAR 2.1 13.4 Hotel EBITDAR margin % 13.3% 29.9% Performance statistics (like for like)5 Occupancy 19.1% 38.0% Average room rate (EUR) 74.92 99.48 RevPAR (EUR) 14.31 37.82 RevPAR % change on six months ended 30 June 2020 (62.2%) RevPAR % change on six months ended 30 June 2019 (86.4%) Dublin owned and leased portfolio Hotels 16 16 Room numbers 4,488 4,488
The 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.
The Group's Dublin hotels continued to be impacted by the Covid-19 pandemic restrictions with demand limited to essential services for the majority of the period leading to a reduction in both occupancy and average room rate with RevPAR down 62.2% on H1 2020 and 86.4% on H1 2019.
The Group's Dublin hotels were permitted to reopen to the general public on 2 June with our hotels targeting the return of domestic leisure. However, the city requires the return of international and corporate travel and large events before occupancies and room rates can recover to more normal trading levels.
Revenue decreased by 64.1% to EUR16.1 million compared to the first six months of 2020 which had normal trading levels up until the Covid-19 restrictions were implemented in March 2020. Since re-opening, occupancies lifted strongly reaching 37% in June 2021 with total revenues of EUR6.4 million. The utilisation of government grants and assistance totalling EUR13.3 million for the period (H1 2020: EUR2.5 million) and the continuation of the proactive cost reductions reduced the impact of lost revenue on EBITDAR.
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2. Regional Ireland Hotel Portfolio
EURmillion Six months ended 30 June 2021 Six months ended 30 June 2020 Room revenue 7.3 8.8 Food and beverage revenue 3.3 4.9 Other revenue 1.0 1.9 Total revenue 11.6 15.6 EBITDAR 3.2 (0.3) Hotel EBITDAR margin % 27.2% (2.0%) Performance statistics6 Occupancy 23.9% 30.1% Average room rate (EUR) 90.55 86.27 RevPAR (EUR) 21.65 25.93 RevPAR % change on six months ended 30 June 2020 (16.5%) RevPAR % change on six months ended 30 June 2019 (67.0%) Regional Ireland owned and leased portfolio Hotels 13 13 Room numbers 1,867 1,867
The 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. 12 hotels are owned and one is operated under a lease.
The Group's Regional Ireland hotels experienced challenging trading conditions as the hotels only remained open for essential business for most of the period in line with government restrictions, which resulted in reduced occupancies. RevPAR declined by 16.5% to EUR21.65 from H1 2020 and 67.0% from H1 2019. As restrictions on trade were eased in June, the Regional Ireland portfolio benefited from the return of domestic tourism with people opting for staycations in light of international travel restrictions.
Revenue decreased by 25.3% to EUR11.6 million compared to the first six months of 2020 which had normal trading levels up until the Covid-19 restrictions were implemented in March 2020. From re-opening, occupancies lifted strongly reaching 60% in June 2021 with total revenues of EUR6.1 million. Proactive cost reductions and the utilisation of government grants and assistance amounting to EUR9.2 million (H1 2020: EUR1.4 million) mitigated the impact on EBITDAR.
3. UK Hotel Portfolio
Local currency - GBPmillion Six months ended 30 June 2021 Six months ended 30 June 2020 Room revenue 7.4 12.2 Food and beverage revenue 2.2 3.8 Other revenue 0.6 1.5 Total revenue 10.2 17.5 EBITDAR 1.2 2.1 Hotel EBITDAR margin % 11.8% 12.0% Performance statistics (like for like)7 Occupancy 21.2% 33.0% Average room rate (GBP) 73.45 78.07 RevPAR (GBP) 15.54 25.79 RevPAR % change on six months ended 30 June 2020 (39.7%) RevPAR % change on six months ended 30 June 2019 (76.7%) UK owned and leased portfolio Hotels 12 12 Room numbers 2,644 2,600
The UK hotel portfolio comprises nine Clayton hotels and three Maldron hotels with three hotels situated in London, six hotels in regional UK and three hotels in Northern Ireland. Seven hotels are owned, four are operated under long-term leases and one hotel is effectively owned through a 99-year lease. The 44-bedroom extension at the Clayton Hotel Birmingham was completed in November 2020. Maldron Hotel Glasgow City opened after the period end in August 2021.
The Group's UK Hotels were closed to the general public from the start of the year before gradually reopening to the public from mid-April as the vaccination rollout progressed throughout the UK. Trading was curtailed by government restrictions leading to a reduction in both occupancy and average room rate with RevPAR down 39.7% to GBP15.54 from H1 2020 and 76.7% from H1 2019.
Hotels in England and Wales fully re-opened to the general public on 17 May followed by Northern Ireland on 24 May. The UK portfolio saw a steady increase in demand with occupancy reaching 29% in May and 44% in June, underpinned by staycations in regional UK and Northern Ireland. The occupancy for June has already exceeded the level achieved in July and August 2020. However, recovery in London during June was slower than regional UK due to its reliance on international travel.
Revenue decreased by 41.7% to GBP10.2 million compared to the first six months of 2020 which had normal trading levels up until the Covid-19 restrictions were implemented in March 2020. As occupancies had lifted strongly from re-opening, total revenues reached GBP4.1 million in June 2021. Proactive cost reductions and government supports mitigated the impact of the lost revenue to the bottom line. The Group received government assistance in the form of grants amounting to GBP1.9 million and rates waivers of GBP2.1 million during the first six months of the year (H1 2020: GBP1.1 million). The Group also continued to utilise the Coronavirus Job Retention Scheme (furlough) amounting to GBP1.7 million allowing it to retain and pay employees who were not working in the business using government support.
Government grants and assistance
The Group continued to avail of support schemes from the Irish and UK governments totalling EUR29.1 million during the period. The Group's EBITDA for the six months ended 30 June 2021 reflects government grants of EUR23.0 million and assistance (by way of commercial rates waivers) of EUR6.1 million.
EURmillion Six months ended 30 June 2021 Six months ended 30 June 2020 Temporary Wage Subsidy Scheme (Ireland) - 2.5 Employment Wage Subsidy Scheme (Ireland) 15.3 - Coronavirus Job Retention Scheme (UK) 1.9 2.7 Other government grants related to income 5.8 - Total grants 23.0 5.2
For the first six months of 2021, the Group received wage subsidies for employees working in the business from the Irish government amounting to EUR15.3 million in the form of the Employment Wage Subsidy Scheme (EWSS), which replaced the Temporary Wage Subsidy Scheme (TWSS) on 1 September 2020. In the UK, the Group received government grants in the form of the Coronavirus Job Retention Scheme amounting to GBP1.7 million (EUR1.9 million) for the same period.
The Group also availed of government grants amounting to EUR5.8 million which were introduced to support businesses during the pandemic and contribute towards re-opening and other operating costs, including and not limited to the Covid Restrictions Support Schemes in Ireland, and The Large Tourism and Hospitality Business Support Scheme in Northern Ireland. These grants were not in effect in the prior period.
The Group also received financial assistance by way of commercial rates waivers for the full six month period to 30 June 2021 in both Ireland and the UK. This represented a saving of EUR3.6 million at the Group's Irish hotels (H1 2020: EUR1.8 million) and GBP2.1 million (EUR2.5 million) at its UK hotels (H1 2020: GBP1.1/EUR1.3 million). The movement compared to the prior period is due to the waivers only being introduced from 27 March 2020 in Ireland and 1 April 2020 in the UK. The rates waivers in Ireland are currently set to continue until 30 September 2021. The full rates waivers in Wales and Northern Ireland has been extended until 31 March 2022. In England, the full rates waivers were in effect until 30 June 2021 with 66% waived thereafter until 31 March 2022.
Under the warehousing of tax liabilities scheme introduced by the Irish government, Irish VAT liabilities of EUR4.9 million and payroll tax liabilities of EUR11.2 million have been deferred as at 30 June 2021. As at 30 June 2021, these liabilities are expected to be payable during 2022. In line with the scheme, EUR3.4 million of payroll tax liabilities were warehoused during 2021 and this was added to the amounts already warehoused during 2020.
In the UK, VAT liabilities relating to the year ended 31 December 2020 are being paid by instalments (as agreed with the UK tax authorities), under the VAT payment deferral scheme. The outstanding deferred VAT liabilities at 30 June 2021 are GBP0.3 million (EUR0.4 million). These deferred liabilities are payable by 31 December 2021. No additional UK VAT liabilities were warehoused during 2021.
Central costs
Central costs amounted to EUR4.4 million for the first six months of 2021, broadly in line with the same period last year. Savings in overheads and sales and marketing spend were offset by additional employee costs as cuts to pay and hours (in place from 1 April 2020) were reversed for staff from 1 January 2021. Director pay cuts were not reversed until 1 April 2021.
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DJ Dalata Hotel Group PLC: 2021 Half Year Report -5-
Adjusting items to EBITDA
EURmillion Six months ended 30 June Six months ended 30 June 2020
2021
Net property revaluation movements through profit or loss 2.5 (27.3)
Remeasurement gain on right-of-use assets 0.3 -
Hotel pre-opening expenses (0.4) -
Impairment of fixtures, fittings and equipment at leased hotels - (1.1)
Impairment of right-of-use assets (0.3) (7.4)
Impairment of goodwill - (3.2)
Accounting loss on sale and leaseback of Clayton Hotel Charlemont - (1.6)
Adjusting items1 2.1 (40.6)
Adjusted EBITDA is presented as an alternative performance measure to show the underlying operating performance of the Group. Consequently, 'adjusting items' items which are not reflective of normal trading activities or distort comparability either period on period or with other similar businesses are excluded.
The Group recorded a net revaluation gain through profit or loss of EUR2.5 million on the revaluation of its property assets for the first six months of 2021 which represents revaluation losses through profit or loss of EUR1.1 million and the reversal of previous revaluation losses recognised through profit or loss of EUR3.6 million. Further detail is provided in the 'Property, plant and equipment' section.
In the period ended 30 June 2021, the Group agreed a rent amendment with the landlord for one of its hotels resulting in a remeasurement of the lease liability. As a result of this modification, the lease liability has decreased by EUR1.1 million. As the right-of-use asset had previously been impaired, the modification resulted in the right-of-use asset being reduced by EUR0.8 million to EURnil. The difference has been recognised as a remeasurement gain on right-of-use assets in profit or loss.
The Group also incurred EUR0.4 million of pre-opening expenses, primarily in relation to Maldron Hotel Glasgow City which opened in August and The Samuel Hotel, Dublin which is expected to open in Q1 2022.
As a result of the ongoing impact of Covid-19 on expected trading, particularly on near term profitability, assets related primarily to our leased properties including goodwill, fixtures, fittings and equipment and right-of-use assets were assessed for impairment based on their discounted cash flows. The impact on near term cash flows has led to an impairment through profit or loss totalling EUR0.3 million on the right-of-use asset of one leased hotel.
Depreciation of right-of-use assets
Under IFRS 16, the right-of-use assets are depreciated on a straight-line basis to the end of their estimated useful life, most typically the end of the lease term. The depreciation of right-of-use assets decreased by EUR0.8 million to EUR9.8 million due principally to the impairments of the right-of-use assets recorded during 2020 which have reduced the depreciation charge accordingly, offset by the full period impact of Clayton Hotel Charlemont, Dublin which was leased from April 2020.
Depreciation of property, plant and equipment
The depreciation of property, plant and equipment remained in line with the prior period at EUR13.4 million for the first six months of 2021. The decrease in depreciation arising from the sale and leaseback of Clayton Hotel Charlemont, Dublin in April 2020 was offset by the additional charge on the new conference centre at Clayton Hotel Cardiff Lane, Dublin and the Group's element of the renovation works at Clayton Hotel Burlington Road, Dublin, both of which were completed after 30 June 2020.
Finance Costs
EURmillion Six months ended 30 June 2021 Six months ended 30 June 2020 Interest expense on bank loans and borrowings 4.9 4.2 Impact of interest rate swaps 1.3 0.9 Other finance costs 1.0 0.7 Net exchange gain on financing activities - (0.1) Capitalised interest (1.2) (0.6) Finance costs excluding the impact of IFRS 16 6.0 5.1 Interest on lease liabilities 11.8 10.9 Finance costs 17.8 16.0
Interest on lease liabilities increased by EUR0.9 million primarily due to the full period impact of the lease on Clayton Hotel Charlemont, Dublin from April 2020.
The Group also incurred higher margins on loans as shown by the increase to the Group's weighted average interest cost in respect of Euro denominated borrowings and Sterling denominated borrowings for the year, which were 2.4% (2020: 1.4%) and 3.6% (2020: 2.9%) respectively. These increases were partially offset by additional capitalised interest on the site in Shoreditch, London (acquired in August 2019) and the new Maldron Hotel and residential units at Merrion Road in Dublin.
Tax charge
As the Group incurred a loss before tax in the first six months of 2021, the Group has recognised a tax credit of EUR7.4 million in the six month period ended 30 June 2021 primarily relating to the net value of tax losses which will be available to offset against future taxable profits. The value of the tax losses incurred in the current period is EUR5.8 million. The Group also recognised a tax credit of EUR1.9 million in the current period relating to the remeasurement of UK deferred tax assets and liabilities, which are forecast to be realised at the corporation tax rate of 25%. During the current period, the UK government substantively enacted an increase in the corporation tax rate from 19% to 25%, with effect from 1 April 2023.
Loss per share (EPS)
The Group's loss per share for the first six months of 2021 continued to be impacted by the Covid-19 pandemic restrictions. This resulted in a basic loss per share of 13.6 cents and an adjusted basic loss per share of 14.5 cents for the six months ended 30 June 2021.
Cents (EUR) Six months ended 30 June 2021 Six months ended 30 June 2020 Loss per share - basic (13.6) (34.0) Loss per share - diluted (13.6) (34.0) Adjusted loss per share - basic1 (14.5) (13.1)
Proactive cash flow management leaves the Group well positioned
The Group continues to maintain a strong liquidity position with significant financial resources. At the end of June 2021, the Group had cash resources of EUR40.9 million and undrawn committed debt facilities of EUR229.0 million.
The Group's proactive approach to cash flow management limited the cash outflow to EUR24 million (as defined above) for the first six months ended 30 June 2021. This principally comprises committed and essential capital expenditure of EUR3.6 million, contract fulfilment cost payments of EUR3.0m, costs paid on entering new leases and agreements for lease of EUR0.6 million, fixed rent payments of EUR15.7 million and interest and finance cost payments of EUR7.0 million offset by an inflow from net operating cash of EUR5.6 million from trade and working capital.
The Group has continued the measures adopted during 2020 to mitigate the impact of Covid-19 on cash including proactive working capital management and a rolling review of costs across all areas of the Group. The Group continues to benefit from government support initiatives in both Ireland and the UK. These have taken the form of government grants and assistance and the deferral of VAT and payroll tax liabilities.
At 30 June 2021, the Group has capital expenditure commitments totalling EUR29.6 million which relates primarily to the new Maldron Hotel and residential units at Merrion Road in Dublin. This project is expected to be completed in 2022 at which point the Group will legally complete the agreed contract to sell the residential units for up to EUR42.4 million to Irish Residential Properties REIT plc ("IRES"), the overall value depending on how Part V obligations (Social and Affordable housing allocation) are settled with Dublin City Council. Those funds will then be received. Following the period end, the Group signed a new agreement on 2 July 2021 in relation to the new-build hotel development of the Maldron Hotel Shoreditch, London. The estimated cost of the project is GBP25.0 million (EUR29.1 million).
Projected lease payments payable under current lease contracts as at 30 June 2021 are EUR17.5 million for the six months ending 31 December 2021 and EUR31.2 million for the year ending 31 December 2022. In addition to this, the Group has committed to non-cancellable lease rentals and other contractual obligations payable under the agreements for lease which have not yet commenced. These payments are projected to amount to EUR7.6 million for the six months ending 31 December 2021 and EUR18.0 million for the year ending 31 December 2022. The timing and amounts payable are subject to change depending on the date of commencement of these leases and final bedroom numbers.
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Balance Sheet | Strong asset backing provides security, flexibility and the engine for future growth
EURmillion 30 June 2021 31 December 2020 Non-current assets Property, plant and equipment 1,212.3 1,202.7 Right-of-use assets 406.1 411.0 Intangible assets and goodwill 32.0 31.7 Contract fulfilment costs - 22.4 Other non-current assets8 32.9 23.5 Current assets Trade and other receivables and inventories 14.1 10.5 Contract fulfilment costs 27.2 - Cash and cash equivalents 40.9 50.2 Total assets 1,765.5 1,752.0 Equity 910.8 932.8 Loans and borrowings 342.0 314.1 Lease liabilities 400.8 399.6 Trade and other payables 57.5 48.7 Other liabilities9 54.4 56.8 Total equity and liabilities 1,765.5 1,752.0
Despite the continued challenges from Covid-19, the Group's balance sheet remains robust with property, plant and equipment of EUR1.2 billion in prime locations across Ireland and the UK. At 30 June 2021, the Group had cash and undrawn debt facilities of EUR269.9 million and conservative gearing with Net Debt to Value1 of 27% (31 December 2020: 23%). The Group's strong balance sheet ensures it is well positioned to withstand challenges and benefit from opportunities in the future.
Property, plant and equipment
Property, plant and equipment amounted to EUR1.2 billion at 30 June 2021. The increase of EUR9.6 million in the six month period is driven principally by foreign exchange movements which increased the value of the UK hotel assets by EUR16.6 million and additions of EUR4.9 million, partially offset by the depreciation charge of EUR13.4 million.
The Group revalues its property assets at each reporting date using independent external valuers. The principal valuation technique utilised is discounted cash flows which utilise asset specific risk adjusted discount rates and terminal capitalisation rates. They also have regard to relevant recent data on hotel sales activity metrics.
Overall, the valuations of the Group's property assets have not changed significantly since 31 December 2020 with the Group recording a net revaluation gain of EUR0.6 million at 30 June 2021 (year ended 31 December 2020: net revaluation loss of EUR174.4 million). At June 2021, the net valuation increase of EUR2.5 million recorded through profit or loss was partially offset by a EUR1.9 million reduction recorded through the revaluation reserve. EUR198.2 million remains in the revaluation reserve as at 30 June 2021 relating to prior period revaluation gains.
Additions through acquisitions and capital expenditure
30 June 2021 30 June 2020
EURmillion
Development capital expenditure:
Acquisition of freeholds or site purchases - 0.3
Construction of new build hotels, hotel extensions and renovations 2.7 6.2
Other development expenditure 0.7 3.9
Total development capital expenditure 3.4 10.4
Total refurbishment capital expenditure 1.5 7.1
Additions to property, plant and equipment 4.9 17.5
The Group typically allocates 4% of revenue to refurbishment capital expenditure. However, as a result of the pandemic, the Group has temporarily suspended non-committed and non-essential capital expenditure in order to preserve cash. Furthermore, government restrictions in Ireland necessitated the closure of most construction sites during the Covid-19 lockdown in the first quarter of 2021 which slowed contracted spend.
During the period, the Group incurred EUR3.4 million on previously committed development capital expenditure including EUR1.6 million on the development of the new Maldron Hotel Merrion Road, Dublin and EUR1.0 million in relation to the new Maldron Hotel proposed for a site in Shoreditch, London. In the first six months of 2021, the Group incurred EUR1.5 million in refurbishment capital expenditure which mainly covered essential works at the hotels.
Contract fulfilment costs
Contract fulfilment costs relate to the Group's contractual agreement with 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. Dalata incurred development costs in fulfilling the contract of EUR4.5 million during the period.
The overall sale value of the transaction is expected to be up to EUR42.4 million (excluding VAT). As the amount is due to be received in March 2022 (upon practical completion), the Group has reclassified these contract fulfilment costs from non-current assets to current assets on the statement of financial position as at 30 June 2021, as the amount is receivable within 12 months of this date.
EURmillion Contract fulfilment costs at 1 January 2021 22.4 Other costs incurred in fulfilling contract to date 4.5 Capitalised borrowing costs 0.3 Contract fulfilment costs at 30 June 2021 27.2
Right-of-use assets and lease liabilities
At 30 June 2021, the Group's right-of-use assets amounted to EUR406.1 million and lease liabilities amounted to EUR400.8 million.
Lease Right-of-use
EURmillion
liabilities assets
Net book value at 1 January 2021 399.6 411.0
Depreciation charge on right-of-use assets - (9.8)
Interest on lease liabilities 11.8 -
Impairment of right-of-use asset - (0.3)
Remeasurement of lease liabilities (1.1) (0.8)
Lease payments (15.7) -
Translation adjustment 6.2 6.0
Net book value at 30 June 2021 400.8 406.1
Right-of-use assets are recorded at cost less accumulated depreciation and impairment. The initial cost comprises the initial amount of the lease liability adjusted for lease prepayments and accruals at the commencement date, initial direct costs and, where applicable, reclassifications from intangible assets or accounting adjustments related to sale and leasebacks.
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. The weighted average lease life of future minimum rentals payable under leases is 29.1 years (31 December 2020: 29.4 years).
The remeasurement of lease liabilities in the period ended 30 June 2021 relates to the remeasurement of lease liabilities for one hotel following an agreed rent amendment with the landlord. As a result of this modification, the lease liability has decreased by EUR1.1 million with a decrease of EUR0.8 million to the carrying value of the right-of-use asset, as this right-of-use asset had been previously impaired. The resulting difference has been recognised as a remeasurement gain on right-of-use assets in profit or loss.
Loans and borrowings
As at 30 June 2021, the Group had loans and borrowings of EUR342.0 million and undrawn committed debt facilities of EUR229.0 million. Loans and borrowings increased during the six month period due to net loan drawdowns totalling EUR13.0 million and foreign exchange movements which increased the translated value of the loans drawn in Sterling by EUR14.3 million.
Sterling borrowings Euro borrowings
At 30 June 2021 Total borrowings EURmillion
GBPmillion EURmillion
Term Loan 176.5 - 205.7
Revolving credit facility:
- Drawn in Sterling 93.0 - 108.4
- Drawn in Euro - 27.0 27.0
Impact of IFRS 9 accounting - - 0.9
Loans and borrowings at 30 June 2021 269.5 27.0 342.0
The Group refinanced its debt facility in 2018 with a new EUR525 million multicurrency debt facility consisting of a EUR200 million term loan facility and a EUR325 million revolving credit facility ("RCF"). In August 2019, the Group availed of its option to extend this facility for an additional year so it now expires on 26 October 2024.
On 9 July 2020, the Group entered into an amended and restated facility agreement with its banking club to provide additional flexibility and liquidity to support the Group following the impact of Covid-19. The Group raised an additional EUR39.4 million in revolving credit facilities with a maturity date of 30 September 2022 and the maturity of EUR20.1 million of revolving credit facilities was shortened to 30 September 2022 from 26 October 2024. The Group also agreed a new temporary suite of covenants with its banking club. The revised covenants in this agreement include Net Debt to Value covenants and a minimum liquidity restriction whereby either cash, remaining available facilities or a combination of both must not fall below EUR50 million at any point to 30 March 2022. The Group is in compliance with all covenants at 30 June 2021.
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The Group will revert to the previous covenants comprising Net Debt to EBITDA and Interest Cover covenants for testing at 30 June 2022. At 30 June 2022, the Net Debt to EBITDA covenant limit is 6.0x and the Interest Cover limit is 4.0x. The Net Debt to EBITDA covenant moves to 4.0x at 31 December 2022.
Forecasting of near-term trade performance remains difficult in the current environment. To address this, multiple reasonable scenarios have been prepared by the Group with key assumptions varying around the timing of the return to more normal levels of international travel and the ongoing nature and extent of government supports. In all reasonable scenarios, the Group is forecast to have sufficient available funds and liquidity during the forecast period to December 2024. However, some of the scenarios show a potential temporary breach of Net Debt to EBITDA and Interest Cover covenants when they are re-instated and tested as of 30 June 2022. All scenarios show compliance at the following testing period, 31 December 2022 and thereafter. As demonstrated during 2020, there are various mitigating actions available to the Group should it deem them to be necessary. However, at this point the Group does not feel any of these actions are necessary and is focused on maximising trading opportunities and operational performance given the lifting of restrictions.
The Group limits its exposure to foreign currency by using Sterling debt to act as a natural hedge against the impact of Sterling rate fluctuations on the Euro value of the Group's UK assets. 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 which hedge the variability in cash flows attributable to the interest rate risk.
Principal Risks and Uncertainties
Since our last reporting on our principal risks in March 2021, there have been ongoing developments in our risk environment and a small number of reported principal risks. These developments relate to easing government restrictions in Ireland and the UK this year, enabling us to reopen all our hotels. In addition, some risks associated explicitly with the pandemic, such as enhanced hygiene requirements, are now embedded in our standard operating procedures. The principal risks and uncertainties facing the Group are: 1. Living with Covid-19 - As the Group and societies emerge from the effects of the pandemic, several risksare becoming evident that will shape the Group's response over the coming months. These relate to internal risksaround embedding updated operational processes into our business and continuing to protect our guests and employeeswhile providing expected service levels. There are also other risks around changing government regulations thataffect how we operate our business and in areas such as the return of international travel and supply chain risks.
We continue to be aware of the risks and emerging risks in the current environment. Our actions are driven by our experiences from reopening our hotels in mid-2020 and the hygiene, operational, financial, training and employee support structures we successfully implemented.
We remain confident that the Group can address any risks in these "living with Covid-19" times. Our central and hotel management structures are sound, and the key management teams remain in place at our hotels. We have embedded any new or updated processes into our standard operational routines. We maintain close contact with government and industry bodies to help shape revised regulations and other stakeholders on short-term matters affecting our business. 2. Debt and Cash/Liquidity Positions - The level of bank borrowings, the associated interest payments andrelated covenants impact the Group's operating and financial flexibility and increase the potential of defaultrisk. The Group remains disciplined in not overleveraging and ensuring that it can withstand substantial demandshocks. The Group also mitigates this risk by preparing detailed financial forecasting and analysis and monitoringdebt covenants. In response to the difficulties in forecasting near-term trade performance in the currentenvironment, the Group prepared multiple reasonable scenarios which showed it has sufficient available funds andliquidity during the forecast period to December 2024. However, some of the scenarios show a potential temporarybreach of covenants when they are re-instated and tested as of 30 June 2022 due to the recovery only now commencingin the trailing 12-month period underpinning the calculation of EBITDA for those covenants. As demonstrated during2020, there are various mitigating actions available to the Group should it deem them to be necessary. However, atthis point the Group does not feel any of these actions are necessary and is focused on maximising tradingopportunities and operational performance given the lifting of restrictions. Furthermore, the Group would beconfident of the ongoing support of its banking club given the strong relationships it has with the club and thevalue of its assets upon which the banking club has security with a Net Debt to Value ratio of 27% at 30 June 2021. 3. Expansion Strategy and Risks Associated with Growth - The opening of new hotels presents an operationalrisk that expected earnings may not materialise, particularly as some of the hotels are scheduled to open against avery uncertain market backdrop. All new hotel developments and potential expansion plans are rigorously assessed bythe Board before their commencements. The Group has structured plans to prepare the Group for expansion, includingthe development of internal human resources, standardisation of processes and promotion of our culture. Seniormanagement also have considerable past experience and a strong track record of success in opening new hotels. 4. New Hotel Openings - The Group has an active schedule in 2021 and 2022 for new hotel openings. However,there are specific risks associated with these openings relating to costs, timing, customer service delivery andfinancial returns. Detailed hotel opening plans are in place and are a focus area for management. The opening ofMaldron Hotel Glasgow City in August 2021 was a success, with additional insights noted that will support our sixnew openings over the course of the next nine months. 5. Culture and Values - As Dalata expands there is a risk that the organisation's unique culture and valuescould be damaged. The rollout of the Dalata business model is dependent on the retention of its strong culture. TheGroup is actively managing this risk by focusing on the behaviours of executive management, investing in trainingand development programmes and through its employee engagement programme. These values were reflected in thedecision-making process throughout the pandemic. 6. Concentration in the Dublin Market - The Group's activities are currently concentrated in the Dublinhotel market. Therefore, any downturn in Dublin is likely to have a material impact on performance. There ispotential exposure to a decline in business in the event of reduced demand in Dublin or a significant increase insupply. This will be an ongoing risk for the Group, offset by the UK development programme and any potentialexpansion in other markets. We opened our Maldron Hotel Glasgow City in August 2021 and new UK hotel openings arescheduled for the remainder of this year and early 2022. 7. Preparing for the Changing Face of the Hospitality and Hotel Markets - The pandemic impacted the hoteland hospitality industry as never before, as well as its lasting effects on wider society. This was a new risk areaintroduced as part of our 2020 reporting. As a response to this risk, we developed and implemented severalinitiatives around guest technologies, enhanced hygiene levels and guest service delivery as part of our 2020 hotelreopening programme. Many of these are now embedded in our business. We continue to look forward to how hotelscould operate, and we would expect to adapt to any emerging stakeholder requirements. The Group will continue toidentify and embrace such changes, giving us a potential advantage in our markets. 8. Environment and Climate Change - The Group is keenly aware of the risks to society associated withclimate change and environmental issues. We take our responsibilities in this area seriously and recognise ourstakeholders' concerns and expectations. There is a risk that Dalata could suffer reputational damage and a loss incustomer, employee or other stakeholder confidence if it does not appropriately recognise and respond to the impactof our business activities on the environment. The Group is committed to addressing stakeholder concerns through arange of initiatives. These include the launch of the Living Green Programme including 'Green Tourism'Certification across the Group. The Group have also engaged a leading ESG Advisory firm to support the developmentof a 3-year ESG Strategy plan which will be launched by Q1 2022. 9. Development of Expertise and Availability of Resources - Dalata's business model is built on our abilityto grow and retain expertise. There could be a failure to retain key expertise and experiences and develop talentwithin the Group to ensure its ongoing and future success. Throughout 2020 and 2021, our strategy remainedunchanged in this area. As the pandemic restrictions have eased, the Group is now seeing the benefits of itsstrategy to retain the hotel management teams and continue investing in development programmes.
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