DJ Dalata Hotel Group PLC: 2021 Preliminary Financial Results
Dalata Hotel Group PLC (DAL,DHG) Dalata Hotel Group PLC: 2021 Preliminary Financial Results 01-March-2022 / 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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A TIME TO LOOK FORWARD
BUSINESS IN RECOVERY WITH AMBITIOUS GROWTH OBJECTIVES
ISE: DHG LSE: DAL
Dublin and London | 1 March 2022: Dalata Hotel Group plc ('Dalata' or the 'Group'), the largest hotel operator in Ireland, with a growing presence in the United Kingdom and Continental Europe, announces its results for the year ended 31 December 2021.
EURmillion 2021 2020 2019 Variance to 2020 Revenue 192.0 136.8 429.2 40.3% Segments EBITDAR1 75.1 28.9 182.8 160.2% Adjusted EBITDA1 63.2 18.7 162.2 238.3% (Loss)/profit before tax (11.4) (111.5) 89.7 89.7% Basic (loss)/earnings per share (cents) (2.8) (50.9) 42.4 94.5% Adjusted basic (loss)/earnings per share1 (cents) (6.4) (27.2) 42.0 76.5% Free Cash Flow1 28.0 (40.8) 100.6 168.6% Free Cash Flow per share1 (cents) 12.6 (20.6) 54.5 161.2% Group key performance indicators (as reported) Occupancy % 39.7% 30.9% 82.6% Average room rate (EUR)1 100.71 88.77 113.14 13.5% RevPAR (EUR)1 40.02 27.45 93.43 45.8%
A TALE OF TWO HALVES: STRONG OPERATING PERFORMANCE AS PANDEMIC RECEDES
-- Revenue growth of 40% to EUR192.0 million, 45% of levels reported in 2019
-- Following the reopening of hotels at the end of Q2 2021, 'like for like' Group RevPAR1 increased from 19%of 2019 levels for the first six months of 2021 to 58% in July and 78% in November as events and domestic corporatebusiness returned
-- Adjusted EBITDA1 of EUR63.2 million and loss before tax of EUR11.4 million
-- Free Cash Flow1 of EUR28.0 million (2019: EUR100.6 million) after payments for interest, rent andrefurbishment capex1 (H2 2021: EUR49.0 million)
-- Maintaining our core management teams at the hotels and central office throughout the pandemic providedstability which enabled us to scale up quickly to meet higher demand and customer expectations as restrictions werereduced
CONTINUE TO FOCUS ON CREATING LONG-TERM VALUE
-- Well positioned for the recovery in demand and to meet the changing needs of our customers with ourstrong financial position, stable and experienced teams and continued focus on innovation
-- Initial growth will be primarily through further recovery of existing portfolio and new hotels fundedpredominantly by long term leases while cash flow generation returns to pre pandemic levels
-- Current pipeline of over 2,000 rooms in prime locations which will see UK footprint surpass Dublin by2025
-- Regional UK and London remains the primary focus but also looking at large European cities for growthopportunities
-- Post year end, announced entry into Continental Europe with operating leasehold interest in Hotel Nikko,Dusseldorf
-- Commitment to responsible operations and growth
ESTABLISHED RESPONSIBLE BUSINESS FRAMEWORK TO SUPPORT FURTHER IMPROVEMENTS
-- Established a framework following an extended materiality assessment with key stakeholders
-- Set near-term environmental targets to reduce energy emissions, food waste and water consumption
-- Committed to diverting 100% of waste from landfill by the end of 2022 and collecting carbon emissionsfrom suppliers to support Scope 3 measurement
-- Achieved gender balance on our Board
-- Developing systems and processes that enable us to gather reliable data and to support better reporting,measurement and target setting
-- Assessing various decarbonisation pathways in line with science-based target initiative criteria
ROBUST BALANCE SHEET PROVIDES OPPORTUNITY
-- Asset backed balance sheet with EUR1.2 billion in property, plant and equipment
-- Conservative gearing with Net Debt to Value1 of 24% (31 December 2020: 23%)
-- Cash and undrawn committed debt facilities of EUR298.5 million (31 December 2020: EUR298.1 million)
-- Debt facilities extended to October 2025 with covenant flexibly (Net Debt to EBITDA and Interest Covernot retested until June 2023)
2021 TRADING OVERVIEW
-- Trading markedly improved once restrictions eased allowing hotels to fully re-open in May (UK) and June(Ireland)
-- 'Like for like' Group occupancy1 increased from 20.8% for the first six months of 2021 to 63.9% in Q3 and59.3% in Q4
-- Trading in December was impacted by Covid-related restrictions as a result of the Omicron variant whichled to reduced occupancy levels and the cancellation of events, albeit to a lesser and shorter extent thanexperienced during previous waves of the pandemic
WELL-PLACED FOR CHALLENGES FACING HOSPITALITY INDUSTRY INCLUDING INFLATION
-- Excellent decentralised teams to optimise pricing and distribution
-- Stable, engaged workforce makes it easier to recruit and retain talent
-- Engagement with our people is a top priority - offer extensive training and development programmes,opportunities for career progression and flexibility
-- Continued focus on innovation and investment in technology - roll out of MICROS Simphony Food andBeverage system and Opera Cloud across our owned and leased portfolio is now complete
CURRENT PIPELINE OF OVER 2,000 ROOMS PROVIDES EXCITING BACKDROP FOR THE FUTURE
-- Following the recent opening, in early 2022, of two hotels in Manchester (607 rooms), we are opening fourmore hotels this year, comprising over 900 rooms in Bristol, Glasgow and Dublin (x2)
-- The construction of Maldron Hotel Shoreditch in London is progressing well and is expected to open in H22023. There are four more hotels due to open 2024 located in Dublin, Brighton, Liverpool and Manchester, three areat the pre-construction phase while the construction of Maldron Hotel Brighton commenced in early 2022
-- New hotels will be managed by existing Dalata teams who will ensure presence and application of theDalata culture and operating model
OUTLOOK
Trade at the start of 2022 was disrupted by restrictions following the emergence of the Omicron Covid-19 variant. However, January and February are traditionally our quietest months. Virtually all restrictions in Ireland and the UK were removed at the end of January which resulted in a rise in bookings, with 'like for like' Group occupancy1 increasing from 38% in January to 62% in February. 'Like for like' Group RevPAR1 for February expected to be 91% of the level achieved in 2019.
As we look forward, and in the absence of any further material Covid-19 restrictions, we remain optimistic about the ongoing recovery of the business. There has been significant pent-up demand for travel following the easing of restrictions, and due to a combination of a more benign evolution of the Covid-19 virus and high levels of vaccination, we expect this to continue. As more and more companies return to their physical offices, we expect this to be a catalyst for increased domestic corporate travel and the return of international corporate travel and conferences. The indication of the return of airline capacity and strong calendar of events is also promising.
We remain agile and continue to proactively manage the business in an uncertain environment with potential further Covid-19 variants and the current conflict in Ukraine and its potential wider global implications. We are also cognisant of the challenges currently facing the hospitality industry including staff shortages and inflation across payroll, electricity and gas, linen, and food and beverage purchases and will continue to manage these as we go through 2022. The Group has given payroll increases in line with minimum wage increases in both jurisdictions since 2019. In the UK, the Group brought forward the April 2022 national living wage increase to November 2021. We believe Dalata is well placed to respond to these challenges due to our investment in technology, excellent decentralised teams who will optimise pricing and distribution, our reputation as a great place to work and provide career development and our focus on innovation.
DERMOT CROWLEY, DALATA HOTEL GROUP CEO, COMMENTED:
"As I look back on 2021, I am extremely proud of the agility and commitment demonstrated by our teams in an environment that was constantly changing. We ended the year with revenue of EUR192 million, which is a sizeable achievement considering our hotels were not open to the public for much of the first half of the year. Experienced teams at our Central Office and in each of our hotels enabled us to manage rapid changes in demand levels. Our hotels in Regional Ireland, Regional UK and Northern Ireland benefitted from strong levels of staycation demand following the easing of restrictions in the summer, while the return of domestic corporates and project work later in the year commenced recovery in our Dublin and London markets. By November 2021, before the onset of Omicron, 'like for like' Group RevPAR1 had reached 78% of November 2019 levels.
Our business has been significantly challenged by Covid-19 over the last two years but we have always sought to behave in a fair and ethical manner. We have communicated openly with all our stakeholders and have always been focused on ensuring the health and safety of our guests, our people and our suppliers.
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I would like to take this opportunity to acknowledge the continued support from all our stakeholders. We agreed extended debt facilities with our banking partners in November which also provides additional flexibility. Our institutional landlords remain committed to our long-term partnerships and our shareholders supported us through the equity placing in September 2020 and are impacted by the continued suspension of dividends.
I would like to acknowledge the support of the Irish and UK governments in helping the hospitality sector navigate the difficulties caused by the Covid-19 pandemic and the related restrictions. The Employment Wage Subsidy Scheme (EWSS) in Ireland is particularly important as it allows us to keep people in employment. In September 2021, despite room revenue for our Irish portfolio being 50% behind what we achieved in September 2019 on a 'like for like' basis, the number of hours worked reached 85% of the levels for September 2019 showing the value of the EWSS to maintaining employment in one of Ireland's most important sectors.
I have spent the last number of months shaping my own team. Carol Phelan was appointed Chief Financial Officer, Des McCann took up the new position of Chief Operating Officer, while Shane Casserly's role was expanded to include responsibility for innovation and information technology. I have made other changes to the way in which the senior executive team works and communicates to ensure that we are best placed to face the challenges and avail of the opportunities ahead.
As we look forward, it is most definitely a busy and exciting time for Dalata. In the first two months of 2022 we opened two new hotels in Manchester City Centre and we took our first steps into Continental Europe through a new leasehold interest in Hotel Nikko, a 393-bedroom hotel in Dusseldorf which we now operate. On top of this, there are four more hotels opening over the coming four months. Whilst these new hotels provide an exciting backdrop for the year ahead, we remain focused on the recovery of earnings at our existing hotels as restrictions are eased.
Our current pipeline comprises over 2,000 rooms and our Acquisitions and Development Team continue to look for further opportunities. Regional UK and London remains our primary focus for growth at this time. However, we are also looking at large European cities that fit our model. Hotel Nikko, Dusseldorf was our first step into Continental Europe and in time we expect to see further opportunities, leveraging our asset backed balance sheet, strong reliable covenant and hotel operational expertise.
Given the uncertain environment with potential further Covid-19 variants and the current conflict in Ukraine and its potential wider global implication, we continue to remain agile and proactively manage the business as we always have. We remain vigilant in light of the current challenges facing the hospitality industry, particularly inflationary pressures and labour shortages. I am optimistic and truly confident in our abilities to respond to and grow in this emerging environment. We will continue to empower our people, always our greatest asset, through ongoing development and growth opportunities.
The culture of Dalata is ideally suited to ESG. Over the last year, we have worked hard in formalising and putting a structure in place to report our goals and achievements in how we treat our people, interact with our local communities, reduce our impact on the environment and practice good corporate governance. ESG is a journey, and we have plenty of road to travel. I have set an objective for the teams to achieve performance levels in ESG that makes us a preferred partner with our stakeholders - shareholders, real estate investors, banks, suppliers, customers, and employees. As the world emerges from the shadow of the pandemic, with the climate crisis becoming increasingly important, how people behave will inevitably change. This will impact how we attract, develop and retain our people. It will impact how our customers travel, most notably our corporate customers. We will need to be innovative to adapt to these changes, to respond to the challenges and find new ways to operate our hotels and interact with our customers. I am excited about the challenge and confident that we have the team to deliver a competitive strength in the new world.
Here at Dalata we see 2022 as a time to look forward. Covid-19 has changed the world in many ways, yet in Dalata we remain focused on sustainably delivering for all our stakeholders as we always have, and this will guide us in how we adapt to a changing world. Following the removal of restrictions in Ireland and the UK, trade at the hotels has markedly improved reaching 'like for like' occupancy1 of 62% in February. The domestic recovery in Q3 2021 demonstrated the strength of pent-up leisure demand. There is a strong calendar of events for 2022, and as flight capacity increases, I expect a strong return of international leisure travel. As more and more companies return to offices I believe this will provide a catalyst for the recovery of international corporate travel.
We are looking forward to capitalising from a position of strength as we continue to rebuild our existing hotels and focus on growth opportunities. Our strong financial position and ambitious teams provides us with a platform for growth as we now look forward beyond the pandemic and towards long term recovery and sustainable growth. We are ready for the challenges and opportunities that lie ahead and look forward with enthusiasm".
ENDS
About Dalata
Dalata Hotel Group plc was founded in August 2007 and listed as a plc in March 2014. Dalata is Ireland's largest hotel operator, with a growing presence in the UK and continental Europe. The Group's portfolio comprises 47 three and four-star hotels with 10,201 rooms and a pipeline of over 2,000 rooms. The Group currently has 29 owned hotels, 15 leased hotels and three management contracts. Dalata successfully operate Ireland's two largest hotel brands, the Clayton and the Maldron Hotels. For the year ended 31 December 2021, Dalata reported revenue of EUR192.0 million and a loss after tax of EUR6.3 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 and Webcast Details
Management will host a conference call and webcast for analysts and institutional investors at 08:30 GMT today 1 March 2021. This call can be accessed using the contact details below and the webcast will be available on the Dalata website.
From Ireland dial: +353 1 431 1252
From the UK dial: +44 333 3000 804
From the USA dial: +1 631 913 1422
From other locations dial: +353 1 431 1252
Participant PIN code: 84656497#
Contacts
Dalata Hotel Group plc investorrelations@dalatahotelgroup.com Dermot Crowley, CEO Tel +353 1 206 9400 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
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.
2021 Financial Performance
EURmillion 2021 2020 Revenue 192.0 136.8 Segments EBITDAR1 75.1 28.9 Hotel variable lease costs (0.1) (0.3) Segments EBITDA1 75.0 28.6 Other income 0.7 0.5 Central costs (10.3) (8.1) Share-based payments expense (2.2) (2.3) Adjusted EBITDA1 63.2 18.7 Adjusting items2 5.3 (44.4) Group EBITDA1 68.5 (25.7) Depreciation of PPE and amortisation (27.6) (27.1) Depreciation of right-of-use assets (19.5) (20.7) Operating profit/(loss) 21.4 (73.5) Interest on lease liabilities (24.4) (22.4) Other interest and finance costs (8.4) (15.6) Loss before tax (11.4) (111.5) Tax credit 5.1 10.8 Loss for the period (6.3) (100.7) Loss per share (cents) - basic (2.8) (50.9) Adjusted loss per share1 (cents) - basic (6.4) (27.2) Hotel EBITDAR margin1 39.1% 21.1%
Summary of hotel performance
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The business recovered strongly during the second half of 2021, driving full year revenue to EUR192.0 million (40.3% growth on 2020). For most of the first half of 2021, the Group's hotels were only open for essential business. Hotels were permitted to fully re-open for overnight leisure stays on 17 May in England and Wales, 24 May in Northern Ireland and 2 June in Ireland despite some government restrictions remaining in place at this point. In both Ireland and the UK, international travel was also restricted in the early part of the year and subject to varying degrees of restriction thereafter.
'Like for like' occupancies started to recover from 14.1% for H1 2021 reaching 63.9% on a Group level for Q3 2021 underpinned by strong levels of staycations and the return of domestic corporates and project work later in the period. Q4 2021 was impacted negatively by the emergence of the Omicron variant and the reintroduction of some Covid related restrictions in mid-December, particularly in the Republic of Ireland where an 8pm curfew on non-resident food and beverage hospitality was enforced along with a 50% capacity limit on indoor events. Furthermore, international travel and large conferences have yet to return to a meaningful level.
'Like for like' Group RevPAR increased from 19% of 2019 levels for the first six months of 2021 to 58% in July and 78% in November. H2 2021 'like for like' Group RevPAR1 increased to EUR65.85 (67% of H2 2019).
Segments EBITDAR increased by 160.2% to EUR75.1 million in 2021, albeit remaining 58.9% behind 2019 levels. Pro-active cost control and the continued utilisation of government grants and assistance helped mitigate the financial impact of reduced trading levels.
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 2021 2020 2019
Room revenue 52.1 43.5 176.3
Food and beverage revenue 17.2 16.0 53.0
Other revenue 5.7 5.7 16.1
Total revenue 75.0 65.2 245.4
EBITDAR 31.0 17.5 119.7
Hotel EBITDAR margin % 41.4% 26.8% 48.8%
Performance statistics ('like for like')2
Occupancy 37.8% 30.4% 87.7%
Average room rate (EUR) 92.29 90.76 124.79
RevPAR (EUR) 34.92 27.62 109.40
RevPAR % change on year ended 31 December 2020 26.4%
RevPAR % change on year ended 31 December 2019 (68.1%)
Dublin owned and leased portfolio3
Hotels 15 16 16
Room numbers 4,091 4,488 4,482
The Dublin hotel portfolio consists of seven Maldron hotels, seven Clayton hotels and The Gibson Hotel. Nine hotels are owned and six are operated under leases. The lease on the Ballsbridge Hotel matured on 31 December 2021, however, the hotel effectively has not traded since early 2020. An additional three suites were acquired at Clayton Hotel Liffey Valley in October 2021.
RevPAR increased by 26.4% to EUR34.92 but remained 68.1% behind 2019 levels. Following a challenging start to 2021 with demand limited to essential services, the Group's Dublin hotels were permitted to reopen to the general public on 2 June which led to increased occupancy and RevPAR recovery in the second half of the year, with H2 RevPAR of EUR55.18 representing 49% of 2019 levels. The city needs the return of international corporate travel as well as large events and conferences in order for occupancies and ARR to recover fully.
Occupancies increased from 19.1% for the first half of 2021 to 55.3% in Q3 2021 as the hotels targeted the return of domestic leisure. The continued relaxation of Covid-19 related restrictions brought an improvement in the calendar of events for the final quarter of year and the resumption of some domestic corporate and international leisure visitors. This resulted in increased occupancies across both October and November before the emergence of the Omicron variant and re-introduction of government restrictions, which negatively impacted performance in December. That said, Q4 2021 was the best performing period for the Dublin portfolio with occupancy of 57.2%, highlighting there is an appetite for people to return to the city. The hotels continue to maximise rate through dynamic pricing strategies. November 2021 was the strongest month for the portfolio when ARR reached 91% of the same month in 2019 on a 'like for like' basis.
Food and beverage revenue increased by 7.3% to EUR17.2 million compared to 2020, however, remained 67.6% behind 2019 levels with hotels closed to the public until 2 June. In the second half of the year Dublin hotels generated food and beverage revenue of EUR13.3 million, representing 48.5% of 2019 levels over the equivalent period.
Overall, total revenue increased by 15.1% to EUR75.0 million compared to 2020 which had normal trading levels up until the Covid-19 restrictions were implemented in March 2020. EBITDAR increased by 77.7% versus 2020 but remained 74.1% behind 2019 levels. The utilisation of government grants and assistance totalling EUR29.3 million for the year (2020: EUR12.9 million) and the continuation of the proactive cost reductions reduced the impact of lost revenue on EBITDAR.
'Like for like' occupancy2 - Dublin Q1 Q2 Q3 Q4 2021 14% 24% 55% 57% 2020 63% 13% 27% 19% 2019 80% 93% 94% 84% 'Like for like' ARR2 - Dublin 2021 EUR71 EUR77 EUR95 EUR101 2020 EUR103 EUR82 EUR79 EUR73 2019 EUR109 EUR133 EUR136 EUR117
2. Regional Ireland Hotel Portfolio
EURmillion 2021 2020 2019 Room revenue 34.0 21.6 49.7 Food and beverage revenue 15.1 11.1 26.8 Other revenue 4.3 3.6 8.4 Total revenue 53.4 36.3 84.9 EBITDAR 23.4 8.0 24.5 Hotel EBITDAR margin % 43.7% 22.0% 28.9% Performance statistics4 Occupancy 44.7% 36.4% 73.7% Average room rate (EUR) 111.69 87.04 98.90 RevPAR (EUR) 49.89 31.64 72.93 RevPAR % change on year ended 31 December 2020 57.7% RevPAR % change on year ended 31 December 2019 (31.6%) Regional Ireland owned and leased portfolio Hotels 13 13 13 Room numbers 1,867 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.
RevPAR increased by 57.7% to EUR49.89 but remained 31.6% behind 2019 levels. The Regional Ireland portfolio experienced challenging trading conditions in the first half of the year as hotels remained open for essential business only in line with government restrictions. Hotels were permitted to reopen to the general public on 2 June which led to increased occupancy and RevPAR recovery in the second half of the year, with H2 RevPAR of EUR77.77 representing 97% of 2019 levels.
Occupancy for the portfolio increased from 23.9% for the first six months of 2021 to 76.2% for Q3 2021. The portfolio benefitted strongly from the return of domestic tourism with people opting for staycations in light of international travel restrictions. The level of pent-up demand for staycations also provided opportunity to yield on rate with ARR surpassing 2019 levels at many of our hotels. Occupancy decreased to 54.0% in Q4 which is typically a lower demand period as the portfolio is driven by domestic demand. This, coupled with the emergence of the Omicron variant and associated government restrictions in December 2021, resulted in event and booking cancellations.
Food and beverage revenue increased by 36.5% to EUR15.1 million compared to 2020, however, remained 43.5% behind 2019 levels. In the second half of the year Regional Ireland hotels generated food and beverage revenue of EUR11.8 million, 81.1% of 2019 levels over the equivalent period, as hotels benefitted from pent-up staycation demand.
Overall, total revenue increased by 47.2% to EUR53.4 million compared to 2020 (which had normal trading levels up until the Covid-19 restrictions were implemented in March 2020) but remained 37.1% behind 2019. EBITDAR increased significantly compared to 2020 and reached 95% of 2019 levels. The utilisation of government grants and assistance amounting to EUR18.8 million (2020: EUR8.9 million) and the continuation of proactive cost reductions reduced the impact of lost revenue on EBITDAR.
'Like for like' occupancy4 - Regional Ireland Q1 Q2 Q3 Q4 2021 16% 32% 76% 54% 2020 50% 10% 60% 25% 2019 59% 81% 89% 66% 'Like for like' ARR4 - Regional Ireland 2021 EUR73 EUR100 EUR127 EUR109 2020 EUR87 EUR81 EUR93 EUR75 2019 EUR86 EUR99 EUR108 EUR98
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3. UK Hotel Portfolio
Local currency - GBPmillion 2021 2020 2019 Room revenue 40.3 21.7 62.8 Food and beverage revenue 10.9 6.9 17.8 Other revenue 3.1 2.4 6.1 Total revenue 54.3 31.0 86.7 EBITDAR 17.5 2.9 33.8 Hotel EBITDAR margin % 32.2% 9.4% 39.0% Performance statistics (like for like)5 Occupancy 44.5% 30.3% 80.7% Average room rate (GBP) 88.63 75.06 88.79 RevPAR (GBP) 39.48 22.72 71.66 RevPAR % change on year ended 31 December 2020 73.8% RevPAR % change on year ended 31 December 2019 (44.9%) UK owned and leased portfolio3 Hotels 13 12 12 Room numbers 2,949 2,644 2,600
The UK hotel portfolio comprises nine Clayton hotels and four Maldron hotels with three hotels situated in London, seven hotels in regional UK and three hotels in Northern Ireland. Seven hotels are owned, five are operated under long-term leases and one hotel is effectively owned through a 99-year lease. Maldron Hotel Glasgow City opened in August 2021 and the five-bedroom extension at Clayton Hotel Cambridge was completed in October 2021.
RevPAR increased by 73.8% to GBP39.48 but remained 44.9% behind 2019 levels. The Group's UK Hotels were closed to the general public from the start of the year before fully re-opening to the public during May as the vaccination rollout progressed throughout the UK. The UK government announced a mass lifting of Covid-19 related restrictions on 19 July 2021. This led to increased occupancy and RevPAR recovery in the second half of the year, with H2 RevPAR of GBP63.00 representing 82% of 2019 levels on a 'like for like' basis.
Regional UK and Northern Ireland experienced the benefit of reduced restrictions and pent-up staycation demand in the summer months, reaching occupancy of 71.1% in Q3 2021. Recovery in our London hotels was slower due to its reliance on international travel, however, gradual recovery over the second half of the year led to a high of 73.9% occupancy in October. Trading in December was impacted by growing concerns over the Omicron variant during that month, although these resided quickly.
UK food and beverage revenue increased by 58.0% to GBP10.9 million compared to 2020. However, in the second half of the year UK hotels generated food and beverage revenue of GBP8.7 million, representing 92.6% of 2019 levels over the equivalent period, as hotel bars and restaurants benefitted from the substantial easing of government restrictions from 19 July.
Overall, total UK revenue increased by 75.2% to GBP54.3 million compared to 2020 which had normal trading levels up until the Covid-19 restrictions were implemented in March 2020 but remained 37.4% behind 2019. EBITDAR increased to GBP17.5 million but remains 48.2% behind 2019.
The Group received government assistance in the form of grants amounting to GBP1.9 million (2020: GBP0.1 million) and rates waivers of GBP3.7 million during the year (2020: GBP3.3million). The Group also continued to utilise the Coronavirus Job Retention Scheme (furlough) amounting to GBP1.8 million (2020: GBP4.3 million) allowing it to retain and pay employees who were not working in the business, however, the number of employees on the scheme reduced significantly during the year and the scheme ceased from 30 September 2021.
'Like for like' occupancy5 - UK Q1 Q2 Q3 Q4 2021 13% 30% 69% 66% 2020 58% 8% 36% 19% 2019 71% 83% 88% 81% 'Like for like' ARR5 - UK 2021 GBP62 GBP78 GBP95 GBP91 2020 GBP80 GBP61 GBP73 GBP70 2019 GBP81 GBP91 GBP93 GBP89
Government grants and assistance
As a result of the continued impact from the Covid-19 pandemic, the Group availed of support schemes from the Irish and UK governments totalling EUR56.5 million during the period. The Group's EBITDA for the year ended 31 December 2021 reflects government grants of EUR44.9 million and assistance (by way of commercial rates waivers) of EUR11.6 million.
EURmillion 2021 2020 Employment Wage Subsidy Scheme (Ireland) 36.0 9.7 Temporary Wage Subsidy Scheme (Ireland) - 6.3 Coronavirus Job Retention Scheme (UK) 2.0 4.7 Other government grants related to income 6.9 1.5 Grants related to income 44.9 22.2 Capital government grants - 0.2 Total grants 44.9 22.4
The Group received wage subsidies from the Irish government amounting to EUR36.0 million in 2021 in the form of the Employment Wage Subsidy Scheme (EWSS), which replaced the Temporary Wage Subsidy Scheme (TWSS) on 1 September 2020. The EWSS is available to employers who suffered significant reductions in turnover as a result of the Covid-19 restrictions. In the UK, the Group received government grants in the form of the Coronavirus Job Retention Scheme amounting to GBP1.8 million (EUR2.0 million) in 2021, the number of employees on the scheme reduced throughout the year before the scheme ended on 30 September 2021.
The Group also availed of government grants totalling EUR6.9 million which were introduced to support businesses during the pandemic and contribute towards re-opening and other operating costs. These principally related in Ireland to the Covid Restrictions Support Scheme and the Failte Ireland Tourism Continuity Grant, and in Northern Ireland to the Large Tourism and Hospitality Business Support Scheme.
In addition, the Group received financial assistance by way of commercial rates waivers which were introduced from 27 March 2020 in Ireland and 1 April 2020 in the UK. In Ireland, Northern Ireland, Scotland and Wales, full rates waivers were in place throughout 2021 and will continue in full until March 2022. In England, full rates waivers were available from 1 January 2021 to 30 June 2021 with the rates relief decreasing to 66% for the period from 1 July 2021 to 31 March 2022. In 2021, this represented a saving of EUR7.3 million at the Group's Irish hotels (2020: EUR5.5 million) and GBP3.7 million (EUR4.3 million) at its UK hotels (2020: GBP3.3 million (EUR3.6 million)).
Under the warehousing of tax liabilities scheme introduced by the Irish government, Irish VAT liabilities of EUR3.6 million and payroll tax liabilities of EUR10.0 million have been deferred during 2021 and these have been added to amounts already warehoused during 2020. As at 31 December 2021, total warehoused tax liabilities of EUR26.3 million were expected to be payable during the year ending 31 December 2022. However, subsequently it was confirmed that EUR23.9 million of the total warehoused tax liabilities may be further deferred to 30 April 2023.
In the UK, VAT liabilities of GBP0.4 million (EUR0.5 million) and payroll tax liabilities of GBP0.3 million (EUR0.3 million) were deferred in 2020 and were paid by instalments during 2021. There were no further deferrals of UK VAT or payroll tax liabilities during 2021.
Central costs
Central costs amounted to EUR10.3 million in 2021, representing an increase of 26.4% on 2020 (EUR8.1 million). The increase was primarily driven by salaries and wages 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. This was partially offset by the EUR1.3 million reversal of insurance provisions made in previous accounting periods following the impact of better claims experience than original estimates.
Adjusting items to EBITDA
EURmillion 2021 2020 Net property revaluation movements through profit or loss 6.8 (30.8) Hotel pre-opening expenses (1.9) (0.1) Net reversal of previous impairment charges/(impairment charges) of right-of-use assets - (7.6) Remeasurement gain on right-of-use assets 0.3 - Net reversal of previous impairment charges/(impairment charges) of fixtures, fittings and equipment 0.1 (1.0) Impairment of goodwill - (3.2) Loss on sale and leaseback - (1.7) Adjusting items1 5.3 (44.4)
Adjusted EBITDA is presented as an alternative performance measure to show the underlying operating performance of the Group. Consequently, 'adjusting items', which are not reflective of normal trading activities or distort comparability either year on year or with other similar businesses, are excluded.
The Group recorded a net revaluation gain of EUR21.2 million on the revaluation of its property assets for 2021 of which EUR6.8 million was recorded through profit or loss. The reversal of previous revaluation losses recognised through profit or loss amounted to EUR9.4 million. This was offset by revaluation losses through profit or loss of EUR2.6 million. Further detail is provided in the 'Property, plant and equipment' section of the financial statements.
The Group also incurred EUR1.9 million of pre-opening expenses in 2021. This related to seven hotels, one of which opened in August 2021, another two opened in the first two months of 2022, with the remaining scheduled to open later in 2022.
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As a result of the impact of Covid-19, impairment tests were carried out on the Group's cash generating units ('CGUs') at 31 December 2021. Each hotel operating business is deemed to be a CGU as the cash flows generated are independent of other hotels in the Group. As a result of the impairment tests, right-of-use assets were impaired by EUR0.3 million at 31 December 2021 (31 December 2020: EUR7.6 million). Impairment reversal assessments were also carried out on the Group's CGUs where there had been a previous impairment of right-of-use assets and fixtures, fittings and equipment. Following the assessment at 31 December 2021, as a result of improved performance forecasts, a reversal of previous impairments relating to one of the Group's CGUs was recognised in profit or loss. This resulted in a reversal of the impairment on right-of-use assets of EUR0.4 million and fixtures, and fittings and equipment of EUR0.1 million.
During the year ended 31 December 2021, lease amendments, which were not included in the original lease agreements, were made to two of the Group's leases. These modifications of lease liabilities resulted in a decrease in lease liabilities of EUR1.6 million and a EUR1.3 million decrease to the carrying value of the right-of-use assets, as one of the right-of-use assets had been previously impaired. The resulting difference of EUR0.3 million has been recognised as a remeasurement gain on right-of-use assets in profit or loss.
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 EUR1.2 million to EUR19.5 million due principally to the impairment of right-of-use assets in 2020 and remeasurement of the Ballsbridge Hotel lease liability which subsequently matured at the end of 2021 , offset by the full year impact of Clayton Hotel Charlemont, Dublin which was leased from April 2020 and the impact of entering the lease for Maldron Hotel Glasgow City from July 2021.
Depreciation of property, plant and equipment
In 2021, depreciation of property, plant and equipment increased by EUR0.4 million to EUR27.0 million. The increase was driven by the additional charges on the new conference centre at Clayton Cardiff Lane, Dublin, and 44-bedroom extension at Clayton Hotel Birmingham and foreign exchange movements. These increases were offset by the full year impact of the decrease in depreciation arising from the sale and leaseback of Clayton Hotel Charlemont, Dublin in April 2020.
Finance Costs
EURmillion 2021 2020 Interest expense on bank loans and borrowings 8.9 9.1 Cash flow hedges - reclassified from other comprehensive income 2.6 2.0 Other finance costs 2.3 1.8 Modification (gain)/loss on amended debt facility (2.7) 4.3 Net exchange (gain)/loss on financing activities (0.1) 0.1 Capitalised interest (2.6) (1.7) Finance costs excluding the impact of IFRS 16 8.4 15.6 Interest on lease liabilities 24.4 22.4 Finance costs 32.8 38.0
Interest on lease liabilities increased by EUR2.0 million primarily due to the full year impact of the lease on Clayton Hotel Charlemont, Dublin from April 2020, entering the Maldron Hotel Glasgow City lease from July 2021 and the full year impact of the Clayton Hotel Birmingham extension from November 2020.
As a result of the extended and amended loan facility agreement executed on 2 November 2021, the Group recorded a modification gain of EUR2.7 million in profit or loss during the year ended 31 December 2021, principally due to the impact of the extension on the timing of cash flows.
The Group also incurred higher margins on loans as shown by the increase to the Group's weighted average interest rate of 3.55% (2020: 2.76%) of which 2.68% (2020: 1.94%) related to margin. These increases were largely offset by lower average borrowings held during 2021 compared to 2020 and additional capitalised interest on the site in Shoreditch, London and the new Maldron Hotel and residential units at Merrion Road in Dublin.
Tax charge
As the Group has incurred a loss before tax in 2021, the Group has recognised a tax credit of EUR5.1 million for the year ended 31 December 2021 primarily relating to the net value of tax losses which will be available to offset against future taxable profits and the remeasurement of UK deferred tax assets and liabilities which are forecasted to be realised at a corporation tax rate of 25%. During the year ended 31 December 2021, the UK government substantively enacted an increase in the corporation tax rate from 19% to 25%, with effect from 1 April 2023.
The increase in the effective tax rate1 for the year ended 31 December 2021 relative to the prior year relates mainly to this remeasurement of UK deferred tax assets and liabilities at the 25% rate. In addition, the impact of non-deductible impairment charges reduced the effective tax rate in the prior year, relative to the year ended 31 December 2021.
At 31 December 2021, the Group has deferred tax assets of EUR17.0 million in relation to tax losses to be utilised in future periods.
Loss per share (EPS)
The Group's earnings for the year continued to be impacted by the Covid-19 pandemic restrictions, although trade started to recover in the second half of 2021. The Group recorded a basic loss per share of 2.8 cents (2020: loss per share of 50.9 cents; 2019: earnings per share of 42.4 cents) and an adjusted basic loss1 per share of 6.4 cents (2020: loss per share of 27.2 cents; 2019: earnings per share of 42.0 cents).
Strong liquidity position and cash flow generation
The Group continues to maintain a strong liquidity position with significant financial resources. At the end of December 2021, the Group had cash resources of EUR41.1 million and undrawn committed debt facilities of EUR257.4 million (2020: cash and undrawn debt facilities of EUR298.1 million).
The Group's cash inflow of EUR5.9 million (excluding impact of net payment of loans and movement in exchange rates) for the year ended 31 December 2021 despite the challenging trading environment. Net operating cash inflow of EUR90.6 million includes continued support from government. This was offset by spend on committed and essential capital expenditure of EUR20.0 million, contract fulfilment cost payments of EUR12.9 million, costs paid on entering new leases and agreements for lease of EUR3.2 million, fixed lease payments of EUR33.3 million and other interest and finance cost payments of EUR15.3 million (which includes payment of debt facility fees of EUR1.2 million in relation to the amended and restated facility agreement).
Under the Debt Warehousing scheme by the Irish government the Group deferred VAT and payroll tax liabilities totalling EUR13.6 million during 2021. At 31 December 2021, EUR26.3 million in Irish deferred VAT and payroll liabilities, relating to 2020 and 2021, were payable during the year ending 31 December 2022. Subsequently, it was confirmed that EUR23.9 million of the total warehoused tax liabilities may be further deferred to 30 April 2023.
At 31 December 2021, the Group has capital expenditure commitments totalling EUR37.8 million which relates primarily to the new Maldron Hotel at Shoreditch, London (EUR24.1 million) and the Maldron Hotel and residential units at Merrion Road in Dublin (EUR9.5 million). The project at Merrion Road is expected to be completed in Q2 2022 at which point the Group will legally complete the agreed contract to sell the residential units to Irish Residential Properties REIT plc ('I-RES'). The overall sale value of the transaction is EUR42.4 million (excluding VAT). Maldron Hotel Shoreditch is expected to open in H2 2023.
Lease payments payable under current lease contracts as at 31 December 2021 are projected to be EUR38.7 million for the year ending 31 December 2022 and EUR37.1 million for the year ending 31 December 2023. In addition to this, the Group has committed to non-cancellable lease rentals and other contractual obligations payable under agreements for lease which have not yet commenced. These payments are projected to amount to EUR14.5 million for the year ending 31 December 2022 and EUR10.5 million for the year ending 31 December 2023. The timing and amounts payable are subject to change depending on the date of commencement of these leases and final bedroom numbers.
Balance Sheet | Strong asset backing provides security, flexibility and the engine for future growth
31 December
EURmillion 31 December 2020
2021
Non-current assets
Property, plant and equipment 1,243.9 1,202.7
Right-of-use assets 491.9 411.0
Intangible assets and goodwill 32.0 31.7
Contract fulfilment costs - 22.4
Other non-current assets6 29.4 23.5
Current assets
Trade and other receivables and inventories 15.4 10.5
Contract fulfilment costs 36.3 -
Cash and cash equivalents 41.1 50.2
Total assets 1,890.0 1,752.0
Equity 957.4 932.8
Loans and borrowings 313.5 314.1
Lease liabilities 481.9 399.6
Trade and other payables 84.7 48.7
Other liabilities7 52.5 56.8
Total equity and liabilities 1,890.0 1,752.0
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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 31 December 2021, the Group had cash and undrawn debt facilities of EUR298.5 million and conservative gearing with Net Debt to Value1 of 24% (31 December 2020: 23%). The Group's strong balance sheet ensures it is well positioned to benefit from opportunities in the future as well as withstand challenges.
Property, plant and equipment
Property, plant and equipment amounted to EUR1,243.9 million at 31 December 2021. The increase of EUR41.2 million in the 12 months is driven principally by revaluation movements on property assets of EUR21.2 million, a foreign exchange gain on the retranslation of Sterling denominated assets of EUR24.3 million and additions of EUR20.4 million, partially offset by the depreciation charge of EUR27.0 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.
Revaluation uplifts of EUR21.2 million were recorded on our property assets in 2021, following losses of EUR174.4 million in 2020. EUR14.4 million of the net gains are recorded as an uplift through the revaluation reserve (year ended 31 December 2020: net loss of EUR143.6 million). EUR212.6 million remains in the revaluation reserve as at 31 December 2021 relating to prior year unreversed revaluation gains. EUR6.8 million of the net revaluation uplifts for 2021 is recorded through profit or loss (2020: net loss of EUR30.8 million).
Additions through acquisitions and capital expenditure
2021 2020
EURmillion
Development capital expenditure:
Acquisition of freeholds or site purchases 0.3 0.7
Construction of new build hotels, hotel extensions and renovations 14.5 11.0
Other development expenditure 1.5 5.3
Total development capital expenditure 16.3 17.0
Total refurbishment capital expenditure 4.1 8.4
Additions to property, plant and equipment 20.4 25.4
The Group typically allocates 4% of revenue to refurbishment capital expenditure. However, 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. Furthermore, as a result of the pandemic, the Group temporarily suspended non-committed and non-essential capital expenditure for much of the year in order to preserve cash. The Group incurred EUR4.1 million of refurbishment capital during 2021 (EUR2.6 million relating to the second half of the year) which mainly related to essential works at the hotels.
During the period, the Group incurred EUR16.3 million on development capital expenditure including EUR8.0 million on the development of the new Maldron Hotel Merrion Road, Dublin and EUR4.8 million in relation to the new Maldron Hotel Shoreditch, London. During the year, the Group acquired three suites at Clayton Hotel Liffey Valley for EUR0.3 million.
Contract fulfilment costs
Contract fulfilment costs relate to the Group's contractual agreement with I-RES entered into on 16 November 2018, for I-RES 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 EUR13.2 million during the year (2020: EUR8.7 million).
The overall sale value of the transaction is EUR42.4 million (excluding VAT). As the amount is due to be received in Q2 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 31 December 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 13.2 Capitalised borrowing costs 0.7 Contract fulfilment costs at 31 December 2021 36.3
Right-of-use assets and lease liabilities
At 31 December 2021, the Group's right-of-use assets amounted to EUR491.9 million and lease liabilities amounted to EUR481.9 million.
Lease Right-of-use
EURmillion
liabilities assets
At 1 January 2021 399.6 411.0
Additions 81.2 90.3
Depreciation charge on right-of-use assets - (19.5)
Interest on lease liabilities 24.4 -
Impairment charge - (0.3)
Reversal of previous impairment charges - 0.4
Remeasurement of lease liabilities 0.5 0.8
Lease payments (33.3) -
Translation adjustment 9.5 9.2
At 31 December 2021 481.9 491.9
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 30.1 years (31 December 2020: 29.4 years).
Additions during the year arise from the Group entering into a 35-year lease for Maldron Hotel Glasgow City in July 2021 which resulted in a EUR32.1 million (GBP27.3 million) lease liability being recognised, and a lease agreement for Clayton Hotel Manchester City Centre in December 2021 which resulted in a lease liability of EUR49.1 million (GBP41.4 million). Additions to right-of-use assets includes EUR81.2 million (GBP68.7 million) of lease liabilities and EUR9.1 million (GBP7.7 million) relating to lease prepayments and initial direct costs.
The remeasurement of lease liabilities relates to the impact of lease amendments along with agreed rent reviews and rent adjustments with the respective landlords. As a result of these modifications and reassessments, lease liabilities have increased by EUR0.5 million with an increase of EUR0.8 million to the carrying value of the right-of-use assets, as the right-of-use assets had previously been impaired. The resulting difference has been recognised as a remeasurement gain on right-of-use assets in profit or loss.
Further information on the Group's leases including the unwind of right-of-use assets and release of interest charge is set out in note 13 to the financial statements.
Loans and borrowings
As at 31 December 2021, the Group had loans and borrowings of EUR313.5 million and undrawn committed debt facilities of EUR257.4 million. Loans and borrowings decreased from 31 December 2020 (EUR314.1 million) due to net loan repayments totalling EUR17.6 million and the impact of the accounting of the amended and restated facility agreement in November 2021 of EUR4.0 million, offset by foreign exchange movements which increased the translated value of the loans drawn in Sterling by EUR21.0 million.
Sterling borrowings Euro borrowings
At 31 December 2021 Total borrowings EURmillion
GBPmillion EURmillion
Term Loan 176.5 - 210.1
Revolving credit facility:
- Drawn in Sterling 90.0 - 107.1
- Drawn in Euro - - -
Impact of IFRS 9 accounting - - (3.7)
Loans and borrowings at 31 December 2021 266.5 - 313.5
On 2 November 2021, the Group availed of its option to extend the maturity of its debt facilities by 12 months with its banking club. The Group's debt facilities now consist of a EUR200 million term loan facility, with a maturity date of 26 October 2025 and a EUR364.4 million revolving credit facility ('RCF'): EUR304.9 million with a maturity date of 26 October 2025 and EUR59.5 million with a maturity date of 30 September 2023. As part of the extension of the loan facility agreement, the Group also agreed additional flexibility on covenants to support the Group following the continued impact of Covid-19.
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The Group announced in July 2020 that previous covenants comprising Net Debt to EBITDA and Interest Cover would not be tested again until June 2022. These two covenants were replaced, until that date, by a Net Debt to Value covenant and a minimum liquidity test, whereby the Group must have a minimum of EUR50 million available to it in cash and/or an unutilised amount of the RCF. Under the revised facilities agreement reached in November 2021, the previous covenants will now not be tested until June 2023. The Net Debt to Value covenant and the minimum liquidity test will remain in place until that date. At 30 June 2023, the Net Debt to EBITDA covenant maximum is 4.0x and Interest Cover minimum is 4.0x. The Group is in compliance with its covenants as at 31 December 2021.
In line with IFRS 9, a modification gain of EUR2.7 million was recognised in profit or loss in 2021 as a result of the amended and restated facility agreement. Costs of EUR1.2 million incurred in relation to the amendment were capitalised and will be amortised to profit or loss on an effective interest rate basis over the term of the loan facility.
Forecasting of near-term trading performance remains difficult in the current environment. Based on its risk assessment, the Group has modelled severe but plausible scenarios which could affect the viability of the Group taking into account varying assumptions around ongoing Covid-19 impacts on trading levels, structurally reduced levels of international corporate travel and elevated inflation with labour shortages. In all reasonable scenarios, the Group is forecast to have sufficient available funds and liquidity during the forecast period to December 2024 and show compliance with Net Debt to EBITDA and Interest Cover covenants when they are re-instated and tested as of 30 June 2023. In addition, there are various mitigating actions available to the Group should it deem them to be necessary as demonstrated during 2020 and 2021.
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. At 31 December 2021, the interest rate swaps cover 100% of the Group's term Sterling denominated borrowings of GBP176.5 million for the period to 26 October 2024. Until 26 October 2023, interest rate swaps fix the SONIA benchmark rate between 1.27% and 1.39% on the Sterling term denominated borrowings. From 26 October 2023 to 26 October 2024 interest rate swaps fix the SONIA benchmark rate between 0.95% and 0.96% on Sterling term denominated borrowings. The Group does not currently hedge its variable interest rates on its revolving credit facilities.
Principal Risks and Uncertainties
Since our last reporting on our principal risks in September 2021, there have been ongoing developments in our risk environment. The principal risks and uncertainties now facing the Group are: 1. Living with the pandemic - Throughout 2020 and 2021, the Group and society has adapted and reacted tochallenges arising from the pandemic. We understand that, despite government announcements in Ireland and the UKending virtually all Covid related restrictions on society, the emergence of new variants and cycle of governmentrestrictions could continue in our operating markets, impacting both the hospitality and international travelmarkets, which could hinder our business strategy and performance. We have also seen other related risks emerge asrestrictions started to ease from mid-2021, including supply chain and cost inflationary pressures.
We continue to be aware of the risks and emerging risks in the current environment. We now have extensive experience operating in this uncertain environment and we leverage our business information and technology advantages to forecast and identify our options. We have accounted for increased business costs in our forecasts and continue to monitor and closely manage business costs on an ongoing basis.
We remain confident that the Group can address any risks as we "live with the pandemic". Our central and hotel management structures are sound, and our key management remains in place. We have embedded any new or updated processes into our standard operational routines. We continue to focus on our people, our business and our financial strength going forward, as well as assessing opportunities that are arising in these times. 2. Geopolitical risks
At the time of writing, there are increased geopolitical risks outside of the Group's control. If tensions increase, or similar events arise, there is a risk that there could be material economic effects on our markets, along with increased uncertainty in international travel and tourism markets. The board remains focused on how developments could affect the Group's performance. We continue to monitor events closely and believe that our upgraded business systems, cost management strategies and structures will enable us to act effectively should any negative impact on our business become evident. 3. Recruitment, retention and development of resources - Dalata's business model is built on our ability togrow and retain expertise, developing our managers and future leaders from within. The effects of the pandemic andissues including the relocation of people, international travel restrictions and Brexit have resulted in changes tothe employment market in many industries, including hospitality. Like many other businesses, the Group is nowoperating in a challenging market to find and retain resources. As such, there is a risk that we are unable torecruit and retain the required level of expertise and experience within the Group to ensure that we havesufficient resources to implement our development strategy, effectively operate our business and continue todeliver the expected service to our guests. Throughout 2020 and 2021, the Group has seen the benefits of itsstrategy to retain the hotel management teams throughout the pandemic and continue investing in developmentprogrammes. In 2021, the Remuneration Committee approved a range of strategies to attract and retain resources andhighlight Dalata as our industry's employer of choice. This strategic investment will continue into 2022 as staffrecruitment and retention at all levels in the Group remains a strategic focus area. 4. Expansion and development strategy - As we continue to grow our business there is a risk that a smallernumber of viable and value-adding opportunities are available or that riskier options are taken. To mitigate this,all new hotel developments and potential expansion plans are rigorously assessed and approved by the Board beforetheir commencements, with regular progress updates provided thereafter. The Group also has a dedicated developmentteam in place with the relevant skills and expertise to identify and assess potential opportunities and associatedrisks. Senior management also have a proven track record of success in opening new hotels, most recently with theopening of Maldron Hotel Glasgow City in August 2021, Clayton Hotel Manchester City Centre in January 2022 andMaldron Hotel Manchester City Centre in February 2022. In February 2022, we announced that we had acquired a newoperating leasehold interest in the Hotel Nikko in Dusseldorf, Germany, our first hotel in Continental Europe. Webelieve our experience and our financial strength make us a preferred partner for new hotel developments and wecontinue to assess the risks associated with expanding the business in the UK and Europe. 5. Information Security and Data Protection - As is the case for all businesses, we recognise the threatsassociated with cyber-crime, information technology risks, and the need to protect the data we hold. The securityof our information technology platforms is therefore of crucial importance. A successful cyber event could causedisruption to our business operations and a loss of confidential or personal data could harm the Group's reputationand result in financial penalties. Our Information Security Management System is based on ISO27001, and audits,employee training and policies support this security framework. Additional controls, including systems monitoring,external security testing and business continuity routines, are in also in place. Assisting us in managing theserisks is the Group's investment in a modern, standardised technology platform, along with our trusted IT partners.A data protection and management structure is supported by policies and overseen by the privacy committee. 6. Our Culture and Values - As Dalata expands, there is a risk that our values and culture become diluted,and behaviours do not reflect our established norms. The rollout of our business model is dependent on theretention and growth of our strong culture, which we believe can be a competitive strength and supports us inachieving our business objectives. Culture remains a priority for the board and executive management and issupported by policies and procedures and investment in learning and development. We engage regularly with ouremployees and stakeholders and the ESG committee considers our culture, status and factors affecting our values andbehaviours. We employ a strategy of appointing senior hotel management from within the Group. 7. Climate change, sustainability and responsible business - The Group is keenly aware of the risks tosociety associated with climate change and environmental issues, and of our business responsibilities in thisregard. We understand that environmental and climate change are factors for our guests, customers, suppliers andshareholders when choosing to do business with us. There is a risk that our environmental sustainability andresponsible business programmes do not meet stakeholder expectations or that the opportunities these create are
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DJ Dalata Hotel Group PLC: 2021 Preliminary -8-
nottaken. The area of climate change, sustainability and responsible business is an area of strategic focus for theboard; a board sub-committee on ESG is in place as well as an environmental steering committee, tasked withdeveloping appropriate strategies. In 2021, the Group carried out a strategic review of its ESG priorities coveringenvironmental, social, and societal themes, and the board and executive management will continue with ourinitiatives in this area. 8. Health and safety - As a large hotel operator, there is a range of risks associated with life safety,fire safety, food safety and security risks. As a large employer, we also manage workplace related risks. There isa risk that we may not comply with these requirements in our business, resulting in injury, loss of life or hoteldamage. The effective management and mitigation of these risks remain high on our risk agenda, and we continue toinvest in maintaining the hotels' health and safety environments to a high standard. All preventative maintenance,life and fire system servicing, and management oversight of health and safety remains in place. In addition, westandardised the Covid-related hygiene requirements, re-started the external food safety audit programme in 2021and continued our Dalata Keep Safe Programme which is accredited by Bureau Veritas. Our new hotels are all built tohigh health and safety standards and all refurbishments include health and safety as a principal consideration. Wehave a well-established health, safety and security framework in our hotels and investment in our health and safetyprocesses remains a priority. 9. Changing hospitality market and customer behaviour - Broader impacts of the pandemic can be seen in thehospitality sector, international travel and guest expectations. We recognise that changes in behaviour areoccurring and that these changes, while providing opportunities for us, also carry risks. There is a risk that ourbusiness does not adapt to a changing market landscape or that we implement strategies that do not meet customerexpectations. In response, we have invested in modern and standardised technology platforms that support newcustomer initiatives and our decentralised management expertise allows the Group to identify local market andcustomer trends. A new position of Innovation Manager has been established to support our strategy in the changingmarket. The board and executive management remain focused on wider market dynamics and the changes that areoccurring.
See Supplementary Financial Information which contains definitions and reconciliations of Alternative Performance Measures ('APM') and other definitions
2 Dublin performance statistics reflect a full year performance of all hotels in this portfolio excluding the Ballsbridge Hotel as the hotel effectively has not traded since early 2020
3 Dublin owned and leased portfolio only includes hotels which are operational at year end, therefore excludes the Ballsbridge Hotel as the lease matured on 31 December 2021. UK owned and leased portfolio only includes hotels which are operational at year end, therefore excludes Clayton Hotel Manchester City Centre which was opened to the public in January 2022
4 Regional Ireland performance statistics reflect a full year performance of all hotels in this portfolio
5 UK performance statistics reflect a full year performance of all hotels in this portfolio excluding Maldron Hotel Glasgow City which opened in August 2021
6 Other non-current assets comprise investment property, deferred tax assets, derivative assets and other receivables (which include costs of EUR3.8 million associated with future lease agreements for hotels currently being constructed or in planning (31 December 2020: EUR6.3 million)).
7 Other liabilities comprise deferred tax liabilities, derivative liabilities, provision for liabilities and current tax liabilities
Consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 2021
2021 2020
Note
EUR'000 EUR'000
Continuing operations
Revenue 2 191,990 136,821
Cost of sales (61,285) (52,282)
Gross profit 130,705 84,539
Administrative expenses 3 (109,918) (158,542)
Other income 4 655 495
Operating profit/(loss) 21,442 (73,508)
Finance costs 5 (32,878) (37,953)
Loss before tax (11,436) (111,461)
Tax credit 9 5,107 10,783
Loss for the year attributable to owners of the Company (6,329) (100,678)
Other comprehensive income/(loss)
Items that will not be reclassified to profit or loss
Revaluation of property 12 14,382 (143,631)
Related deferred tax 23 (1,116) 21,337
13,266 (122,294)
Items that are or may be reclassified subsequently to profit or loss
Exchange difference on translating foreign operations 27,256 (23,313)
(Loss)/ gain on net investment hedge (20,726) 16,804
Fair value movement on cash flow hedges 22 6,208 (6,511)
Cash flow hedges - reclassified to profit or loss 22 2,637 1,992
Related deferred tax 23 - (565)
15,375 (11,593)
Other comprehensive income/(loss) for the year, net of tax 28,641 (133,887)
Total comprehensive income/(loss) for the year attributable to
22,312 (234,565)
owners of the Company
Earnings per share
Basic loss per share 29 (2.8) cents (50.9) cents
Diluted loss per share 29 (2.8) cents (50.9) cents
Consolidated statement of financial position
at 31 December 2021
2021 2020
Note
EUR'000 EUR'000
Assets
Non-current assets
Intangible assets and goodwill 11 31,994 31,733
Property, plant and equipment 12 1,243,902 1,202,743
Right-of-use assets 13 491,869 411,007
Investment property 2,078 2,089
Derivative assets 22 832 -
Deferred tax assets 23 20,161 12,344
Contract fulfilment costs 14 - 22,374
Other receivables 15 6,313 9,059
Total non-current assets 1,797,149 1,691,349
Current assets
Contract fulfilment costs 14 36,255 -
Trade and other receivables 15 13,774 9,231
Inventories 16 1,665 1,258
Cash and cash equivalents 17 41,112 50,197
Total current assets 92,806 60,686
Total assets 1,889,955 1,752,035
Equity
Share capital 18 2,229 2,227
Share premium 18 504,895 504,735
Capital contribution 18 25,724 25,724
Merger reserve 18 81,264 81,264
Share-based payment reserve 18 3,085 3,419
Hedging reserve 18 (197) (9,042)
Revaluation reserve 18 212,572 199,306
Translation reserve 18 (6,572) (13,102)
Retained earnings 134,413 138,249
Total equity 957,413 932,780
Liabilities
Non-current liabilities
Loans and borrowings 21 313,533 314,143
Lease liabilities 13 471,877 388,871
Deferred tax liabilities 23 42,896 39,404
Derivative liabilities 22 1,029 9,042
Provision for liabilities 20 6,454 6,747
Other payables 19 1,896 -
Total non-current liabilities 837,685 758,207
Current liabilities
Lease liabilities 13 10,049 10,761
Trade and other payables 19 82,792 48,668
Current tax liabilities 282 91
Provision for liabilities 20 1,734 1,528
Total current liabilities 94,857 61,048
Total liabilities 932,542 819,255
Total equity and liabilities 1,889,955 1,752,035
On behalf of the Board:
John Hennessy Dermot Crowley Chair Director
Consolidated statement of changes in equity
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DJ Dalata Hotel Group PLC: 2021 Preliminary -9-
for the year ended 31 December 2021
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
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
At 1 January 2021 2,227 504,735 25,724 81,264 3,419 (9,042) 199,306 (13,102) 138,249 932,780
Comprehensive
income:
Loss for the year - - - - - - - - (6,329) (6,329)
Other comprehensive
income
Exchange difference
on translating - - - - - - - 27,256 - 27,256
foreign operations
Loss on net - - - - - - - (20,726) - (20,726)
investment hedge
Revaluation of - - - - - - 14,382 - - 14,382
properties (note 12)
Fair value movement
on cash flow hedges - - - - - 6,208 - - - 6,208
(note 22)
Cash flow hedges -
reclassified to - - - - - 2,637 - - - 2,637
profit or loss (note
22)
Related deferred tax - - - - - - (1,116) - - (1,116)
(note 23)
Total comprehensive - - - - - 8,845 13,266 6,530 (6,329) 22,312
income for the year
Transactions with
owners of the
Company:
Equity-settled
share-based payments - - - - 2,159 - - - - 2,159
(note 7)
Vesting of share
awards and options 2 160 - - (2,493) - - - 2,493 162
(note 7)
Total transactions
with owners of the 2 160 - - (334) - - - 2,493 2,321
Company
At 31 December 2021 2,229 504,895 25,724 81,264 3,085 (197) 212,572 (6,572) 134,413 957,413
Consolidated statement of changes in equity
for the year ended 31 December 2020
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
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
At 1 January 2020 1,851 504,488 25,724 (10,337) 4,900 (3,958) 351,869 (6,593) 204,897 1,072,841
Comprehensive
income:
Loss for the year - - - - - - - - (100,678) (100,678)
Other
comprehensive
income
Exchange
difference on
translating - - - - - - - (23,313) - (23,313)
foreign
operations
Gain on net - - - - - - - 16,804 - 16,804
investment hedge
Revaluation of
properties (note - - - - - - (143,631) - - (143,631)
12)
Transfer of
revaluation gain
to retained - - - - - - (30,269) - 30,269 -
earnings on sale
of property (note
12)
Fair value
movement on cash - - - - - (6,511) - - - (6,511)
flow hedges (note
22)
Cash flow hedges
- reclassified to - - - - - 1,992 - - - 1,992
profit or loss
(note 22)
Related deferred - - - - - (565) 21,337 - - 20,772
tax (note 23)
Total
comprehensive - - - - - (5,084) (152,563) (6,509) (70,409) (234,565)
loss for the year
Transactions with
owners of the
Company:
Equity-settled
share-based - - - - 2,280 - - - - 2,280
payments (note 7)
Vesting of share
awards and 6 247 - - (3,761) - - - 3,761 253
options (note 7)
Equity share
placing issuance 370 - - 93,980 - - - - - 94,350
(note 18)
Costs of share - - - (2,379) - - - - - (2,379)
placing (note 18)
Total
transactions with 376 247 - 91,601 (1,481) - - - 3,761 94,504
owners of the
Company
At 31 December 2,227 504,735 25,724 81,264 3,419 (9,042) 199,306 (13,102) 138,249 932,780
2020
Consolidated statement of cash flows
for the year ended 31 December 2021
2021 2020
Cash flows from operating activities EUR'000 EUR'000
Loss for the year (6,329) (100,678)
Adjustments for:
Depreciation of property, plant and equipment 27,033 26,607
Depreciation of right-of-use assets 19,522 20,663
Amortisation of intangible assets 539 558
Net revaluation movements through profit or loss (6,790) 30,836
(Net reversal of previous impairment charges)/ impairment charges of right-of-use assets (39) 7,541
(Net reversal of previous impairment charges)/ impairment charges of fixtures, fittings and (120) 1,015
equipment
Impairment of goodwill - 3,226
Remeasurement gain on right-of-use assets (277) -
Loss on sale and leaseback - 1,673
Share-based payments expense 2,159 2,280
Interest on lease liabilities 24,409 22,405
Other interest and finance costs 8,469 15,548
Tax credit (5,107) (10,783)
63,469 20,891
Increase/(decrease) in trade and other payables and provision for liabilities 31,888 (13,620)
(Increase)/decrease in current and non-current receivables (4,223) 12,707
(Increase)/decrease in inventories (407) 650
Tax (paid)/refunded (148) 2,176
Net cash from operating activities 90,579 22,804
Cash flows from investing activities
Purchase of property, plant and equipment (19,973) (27,915)
Contract fulfilment cost payments (12,915) (8,065)
Receipt of capital grants - 150
Costs paid on entering new leases and agreements for leases (3,221) (7,178)
Proceeds from sale of Clayton Hotel Charlemont - 64,190
Purchase of intangible assets (47) (547)
Net cash (used in)/from investing activities (36,156) 20,635
Cash flows from financing activities
Interest paid on lease liabilities (24,409) (22,405)
Other interest and finance costs paid (15,285) (12,956)
Receipt of bank loans 13,000 61,486
Repayment of bank loans (30,575) (146,572)
Repayment of lease liabilities (8,930) (5,618)
Proceeds from vesting of share awards and options 162 253
Proceeds from share placing - 94,350
Costs of share placing paid - (2,379)
Net cash used in financing activities (66,037) (33,841)
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DJ Dalata Hotel Group PLC: 2021 Preliminary -10-
Net (decrease)/increase in cash and cash equivalents (11,614) 9,598 Cash and cash equivalents at the beginning of the year 50,197 40,586 Effect of movements in exchange rates 2,529 13 Cash and cash equivalents at the end of the year 41,112 50,197
Notes to the consolidated financial statements
forming part of the consolidated financial statements
1 Significant accounting policies
General information and basis of preparation
Dalata Hotel Group plc (the 'Company') is a Company domiciled in the Republic of Ireland. The Company's registered office is 4th Floor, Burton Court, Burton Hall Drive, Sandyford, Dublin 18.
The financial information presented herein does not comprise full statutory financial statements for 2021 or 2020 and therefore does not include all of the information required for full annual statutory financial statements. The consolidated financial statements for the year ended 31 December 2021 comprise the Company and its subsidiary undertakings (the 'Group') and were authorised for issue by the Board of Directors on 28 February 2022. Full statutory financial statements for the year ended 31 December 2021, prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the EU, under Section 391 of the Companies Act 2014, will be annexed to the annual return and filed with the Registrar of Companies.
This financial information has been prepared in accordance with IFRS, as adopted by the EU. In the preparation of this information, the accounting policies set out below have been applied consistently by all Group companies.
The preparation of financial statements in accordance with IFRS as adopted by the EU requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting year. Such estimates and judgements are based on historical experience and other factors, including expectation of future events, that are believed to be reasonable under the circumstances and are subject to continued re-evaluation. Actual outcomes could differ from those estimates.
In preparing this financial information, the key judgements and estimates impacting these financial statements were as follows:
Significant judgements
-- Carrying value of property measured at fair value (note 12).
Key sources of estimation uncertainty
-- Carrying value of property measured at fair value (note 12); and
-- Carrying value of goodwill and right-of-use assets including assumptions underpinning value in use('VIU') calculations in the impairment tests (notes 10, 11, 13).
The value of the Group's property at 31 December 2021 reflects open market valuations carried out as at 31 December 2021 by independent external valuers. As at the valuation date of 31 December 2021 property markets were mostly functioning again, with transaction volumes and other relevant evidence at levels where an adequate quantum of market evidence existed upon which to base opinions of value. Therefore, the valuations as at 31 December 2021 have not been reported by the valuers on the basis of 'material valuation uncertainty', as set out in VPS 3 and VPGA 10 of the RICS Valuation Global Standards. The valuations at 31 December 2020 were reported on the basis of 'material valuation uncertainty' due to the impact of Covid-19 pandemic at that time, when less weight could be attached to previous market evidence to fully inform opinions and value as at 31 December 2020.
Measurement of fair values
A number of the Group's accounting policies and disclosures require the measurement of assets and liabilities at fair value. When measuring the fair value of an asset or liability, the Group uses observable market data as far as possible, with non-financial assets being measured on a highest and best-use basis. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Further information about the assumptions made in measuring fair values is included in note 24 - Financial instruments and risk management (in relation to financial assets and financial liabilities) and note 12 - Property, plant and equipment.
(i) Going concern
2021 saw the Group commence its recovery in earnest from the impact of Covid-19. Government restrictions were in place to varying extents for most of the year, the most impactful of which were in H1 2021 when the Group's hotels were largely closed to all but essential services. However, the successful rollout, in both the UK and Ireland and more widely, of the vaccine programmes and the evolution of the virus itself has led to the lifting of most restrictions and a strong recovery in demand in the hospitality sector. Group revenue increased by EUR55.2 million to EUR192.0 million on 2020. Leisure demand has recovered most quickly with business travel, particularly international, recovering more slowly.
The impact of Covid-19 also impacted other areas of the business, however, to a lesser degree compared to 2020. These are further detailed in the Operating segments note 2, Impairment note 10, Property, plant and equipment note 12, and Financial risk management note 24.
The Group entered the Covid-19 pandemic in 2020 with a strong balance sheet and liquidity position and, despite the material impact of Covid-19 has had on the Group's financial performance, the Group remains in a strong position with significant financial headroom. As at 31 December 2021, the Group had property, plant and equipment of EUR1,243.9 million and cash and undrawn facilities of EUR298.5 million.
The Group continued to tightly manage its cash and liquidity in 2021 including, but not limited to, postponement of non-committed, non-essential capital expenditure, tight cost control measures and availing of government support schemes (note 8).
Furthermore, in November 2021, the Group took additional action to provide enhanced flexibility and liquidity of its debt facilities. Firstly, the Group extended the maturity of its debt facilities by 12 months. The Group also extended the period for which amendments applied that provided flexibility during the time of Covid-19 impacted trading. Therefore, the temporary suite of covenants including a Net Debt to Value covenant and a minimum liquidity restriction (whereby either cash, remaining available facilities or a combination of both must not fall below EUR50.0 million), will remain in place for an additional 12 month period, until 30 March 2023 (note 24). The Group's debt facilities now consist of a EUR200 million term loan facility, with a maturity date of 26 October 2025 and a EUR364.4 million revolving credit facility ('RCF'): EUR304.9 million with a maturity date of 26 October 2025 and EUR59.5 million with a maturity date of 30 September 2023.
The Group is in full compliance with its covenants as at 31 December 2021. The Group will revert to the previous covenants comprising Net Debt to EBITDA and Interest Cover covenants for testing at 30 June 2023. At 30 June 2023, the Net Debt to EBITDA covenant limit is 4.0x and the Interest Cover minimum is 4.0x.
In 2020, other liquidity strengthening actions were taken such as the cancellation of the 2019 final dividend originally recommended by the Board, the sale and leaseback of Clayton Hotel Charlemont for EUR64.2 million in April 2020 and an equity raise in September 2020 raising net proceeds of EUR92.0 million.
The Group has successfully navigated the unprecedented circumstances following Covid-19 and the resumption of recovery towards more normal levels of trade. The Group continues to monitor the evolving trade forecasts and pursue proactive and timely mitigating actions if necessary as it has since the start of the pandemic.
The Group has prepared base case projections which assumes a gradual recovery in revenues and earnings at the Group's hotels, with a return to more normalised levels of trade between 2023 and 2025 depending on location and business mix. The Group has also modelled severe but plausible scenarios taking into account varying assumptions around ongoing Covid-19 impacts on trading levels, structurally reduced levels of international travel and elevated inflation with labour shortages. These have been modelled individually and collectively. Based on these projections and in all of the scenarios, the Group is forecast to be in compliance with all covenants and have sufficient liquidity in the 12 month period from the signing of these consolidated financial statements and indeed longer than that. Cash and undrawn facilities is forecast to dip to EUR257.0 million at a minimum during this period.
The Group has also scenario tested Group asset values to test covenant levels and the Group is forecast to be in compliance with all covenants during this period. At current debt levels, valuations on each of the Group's hotels would need to decrease by in excess of 55% to breach covenant levels.
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DJ Dalata Hotel Group PLC: 2021 Preliminary -11-
The Group has also prepared a reverse stress test which assumes a full lockdown, like that experienced in the first quarter of 2021 where hotels were closed to the general public and only benefitted from demand from essential services. Despite such a severe stress test which the directors do not consider reasonably plausible, not least because of the success of the vaccination programme and the evolution of the virus, the Group would have sufficient liquidity to continue to the end of quarter two 2024. In such circumstances additional options may be available to the Group beyond what is set out above including: (i) more severe cost cutting and (ii) arrangements to defer or reduce rent payments to landlords (iii) sale of an asset.
The Directors have considered all of the above, with all available information and the current liquidity and capital position of the Group in assessing the going concern of the Group. The extension of the Group's facilities and deferral of EBITDA related covenant testing, places the Group in a strong position to be able to avoid possible breaches in covenants as a result of the delayed recovery from Covid-19. On the basis of these judgements, the Directors have prepared these consolidated financial statements on a going concern basis. Furthermore, they do not believe there is any material uncertainty related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern.
(ii) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') and their interpretations issued by the International Accounting Standards Board ('IASB') as adopted by the EU and those parts of the Companies Act 2014 applicable to companies reporting under IFRS and Article 4 of the IAS Regulation.
The following standards and interpretations were effective for the Group for the first time from 1 January 2021:
-- Interest Rate Benchmark Reform - Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
-- Amendments to IFRS 4 Insurance Contracts - deferral of effective date of IFRS 9
-- Amendments to IFRS 16 Leases: Covid-19- Related Rent Concessions beyond 30 June 2021
The above standards, amendments and interpretations had no material impact on the consolidated results of the Group.
While the Group had a limited number of rent concessions during the year ended 31 December 2021, the Group has chosen not to avail of the IFRS 16 Leases - Covid-19 Related Rent Concessions during the year ended 31 December 2021.
Additional accounting policies
The accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements as at and for the year ended 31 December 2020. Accounting policies for Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 were applied in the year ended 31 December 2021 as there were new amendments which were not effective in the year ended 31 December 2020 or previous periods.
Following a fundamental review and reform of major interest rate benchmarks undertaken globally, the Group replaced LIBOR, the Group's Sterling interest rate, with an alternative risk-free benchmark rate, SONIA 'Sterling Overnight Index Average' plus an agreed credit adjustment spread 'CAS spread' during the year ended 31 December 2021. The impact of the IBOR reform is limited to the Sterling variable interest rate on the Group's loans and borrowings and interest rate swaps.
There were two approaches available to determining the CAS spread applicable on transition to SONIA. The Group elected to use the ISDA (International Swaps and Derivatives Association) historical median approach as its preferred approach. The Group ensured that the CAS spread applicable on the loans and borrowings matched in so far as possible, the CAS spread on the Group's interest rate swaps.
In line with Phase 2 - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, the Group has availed of the practical expedient which allows the Group to update the effective interest rate for the transition to SONIA, without having to modify the loans and borrowings and therefore there was no resulting modification impact on profit or loss.
Under the amendments, hedge accounting is not discontinued solely because of the IBOR reform. The Group has updated its hedge documentation to reflect the changes to the hedged item, hedging instrument and hedged risk as a result of the IBOR reform. The Group continues to apply hedge accounting as at 31 December 2021 and all hedges continue to be hedge effective (notes 22, 24).
Standards issued but not yet effective
The following amendments to standards have been endorsed by the EU, are available for early adoption and are effective from 1 January 2022 as indicated below. The Group has not adopted these amendments to standards early, and instead intends to apply them from their effective date as determined by the date of EU endorsement. The potential impact of these amendments to standards on the Group is under review:
-- A number of narrow-scope amendments to IFRS 3, IAS 16 and some annual improvements on IFRS 1, IFRS 9, IAS41 and IFRS 16 (issued May 2020). EU effective date 1 January 2022.
-- IAS 37 onerous contracts, clarification on cost of fulfilling contracts. EU effective date 1 January2022.
The following standards and interpretations are not yet endorsed by the EU. The potential impact of these standards on the Group is under review:
-- Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure ofAccounting policies (issued on 12 February 2021). IASB effective date 1 January 2023.
-- Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current orNon-current (issued on 23 January 2020). IASB effective date 1 January 2023.
-- Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition ofAccounting Estimates (issued on 12 February 2021). IASB effective date 1 January 2023.
-- Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a SingleTransaction (issued on 7 May 2021). IASB effective date 1 January 2023.
-- Amendments to IFRS 17 Insurance Contracts: Initial Application of IFRS 17 and IFRS 9 - ComparativeInformation (issued on 9 December 2021). IASB effective date 1 January 2023.
(iii) Functional and presentation currency
These consolidated financial statements are presented in Euro, being the functional currency of the Company and the majority of
its subsidiaries. All financial information presented in Euro has been rounded to the nearest thousand or million and this is clearly set out in the financial statements where applicable.
(iv) Basis of consolidation
The consolidated financial statements include the financial statements of the Company and all of its subsidiary undertakings.
Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested at least annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
When an acquisition does not represent a business, it is accounted for as a purchase of a group of assets and liabilities, not as a business combination. The cost of the acquisition is allocated to the assets and liabilities acquired based on their relative fair values, and no goodwill is recognised. Where the Group solely purchases the freehold interest in a property, this is accounted for as an asset purchase and not as a business combination on the basis that the asset(s) purchased do not constitute a business. Asset purchases are accounted for as additions to property, plant and equipment.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated.
(v) Revenue recognition
Revenue represents sales (excluding VAT) of goods and services net of discounts provided in the normal course of business and is recognised when services have been rendered.
Revenue is derived from hotel operations and includes the rental of rooms, food and beverage sales, car park revenue and leisure centre membership in leased and owned hotels operated by the Group. Revenue is recognised when rooms are occupied and food and beverages are sold. Car park revenue is recognised when the service is provided. Leisure centre membership revenue is recognised over the life of the membership.
Revenue in respect of a contract with a customer for sale of residential property is based on when the performance obligations inherent in the contract are completed. This relates to the contract to sell a residential development which the Group is developing as part of the overall development of a new hotel on the site of the former Tara Towers hotel. The contract for sale is assessed in line with IFRS 15 Revenue from Contracts with Customers and revenue is recognised when the performance obligations inherent in the contract are met.
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DJ Dalata Hotel Group PLC: 2021 Preliminary -12-
Management fees are earned from hotels managed by the Group. Management fees are normally a percentage of hotel revenue and/or profit and are recognised when earned and recoverable under the terms of the management agreement. Management fee income is included within other income.
Rental income from investment property is recognised on a straight-line basis over the term of the lease and is included within other income.
(vi) Sales discounts and allowances
The Group recognises revenue on a gross revenue basis and makes various deductions to arrive at net revenue as reported in profit or loss. These adjustments are referred to as sales discounts and allowances.
(vii) Government grants and government assistance
Government grants and government assistance represent the transfers of resources to the Group from the governments in Ireland and in the UK in return for past or future compliance with certain conditions relating to the Group's operating activities. Income-related government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. The Group accounts for these government grants in profit or loss via offset against the related expenditure.
Capital-related government grants received by the Group related to assets are presented in the consolidated statement of financial position by deducting the grant in arriving at the carrying amount of the asset. The grant is recognised in profit or loss over the life of the depreciable asset as a reduced depreciation expense.
Government assistance is action by a government which is designed to provide an economic benefit specific to the Group or subsidiaries who qualify under certain criteria. Government assistance received by the Group includes a waiver of commercial rates for certain hotel properties and also the deferral of payment of payroll taxes and VAT liabilities and has been disclosed in these consolidated financial statements.
(viii) Leases
At inception of a lease 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.
A 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. The Group uses its incremental borrowing rate as the discount rate, which is defined as the estimated 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 calculated for each individual lease.
The estimated incremental borrowing rate for each leased asset 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 costs that depend on an index or a rate, initially measured using the index or rate as atthe 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 costs 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.
While the Group had a limited number of rent concessions during the year ended 31 December 2021 and 31 December 2020, the Group has chosen not to avail of the IFRS 16 - Covid-19 Related Rent Concessions during the year ended 31 December 2021 and 31 December 2020. Consequently, any adjustments to the terms of the impacted leases have been treated as a reassessment.
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 any costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
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 a component thereof, or the end of the lease term. Right-of-use assets are reviewed on an annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Group applies IAS 36 Impairment of Assets to determine whether a cash-generating unit with a right-of-use asset is impaired and accounts for any identified impairments 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 also applies IAS 36 Impairment of Assets to any cash-generating units, which have right-of-use assets which were previously impaired, to assess whether previous impairments should be reversed. A reversal of a previous impairment charge is accounted for through profit or loss and only increases the carrying amount of the right-of-use asset to a maximum of what it would have been if the original impairment charges had not been recognised in the first place.
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 EUR5,000. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
A sale and leaseback occurs where there is a transfer of an asset by the Group to a purchaser/lessor and the Group enters into an agreement with that purchaser/lessor to lease the asset. The Group applies the requirements of IFRS 15 Revenue from contracts with customers in assessing whether a sale has occurred by determining whether a performance obligation has been satisfied.
Where a sale and leaseback of an asset has occurred, the asset is derecognised and a lease liability and corresponding right-of-use asset is recognised. The Group measures the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right-of-use retained by the Group. Accordingly, the Group recognises only the amount of any gain or loss that relates to the rights transferred to the purchaser/lessor in profit or loss as calculated in accordance with IFRS 16.
(ix) Share-based payments
The grant date fair value of equity-settled share-based payment awards and options granted to employees is recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards and options.
This incorporates the effect of market-based conditions, where applicable, and the estimated fair value of equity-settled share-based payment awards issued with non-market performance conditions.
The amount recognised as an expense is adjusted to reflect the number of awards and options for which the related service and any non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that met the related service and non-market performance conditions at the vesting date. The amount recognised as an expense is not adjusted for market conditions not being met.
On vesting of the equity-settled share-based payment awards and options, the cumulative expense recognised in the share-based payment reserve is transferred directly to retained earnings. An increase in ordinary share capital and share premium, in the case where the price paid per share is higher than the cost per share, is recognised reflecting the issuance of shares as a result of the vesting of the awards and options.
The dilutive effect of outstanding awards is reflected as additional share dilution in calculating diluted earnings per share.
(x) Tax
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Tax charge/credit comprises current and deferred tax. Tax charge/credit is recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in other comprehensive income or equity.
Current tax is the expected tax payable/receivable on the taxable income/loss for the year using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for taxation purposes except for the initial recognition of goodwill and other assets that do not affect accounting profit or taxable profit at the date of recognition.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
Deferred tax liabilities are recognised where the carrying value of land and buildings for financial reporting purposes is greater than their tax cost base.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable future taxable profits will be available against which the temporary difference can be utilised.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Such reductions are reversed when the probability of future taxable profits improves.
(xi) Earnings per share ('EPS')
Basic earnings per share is calculated based on the profit/ loss for the year attributable to owners of the Company and the basic weighted average number of shares outstanding. Diluted earnings per share is calculated based on the profit/loss for the year attributable to owners of the Company and the diluted weighted average number of shares and potential shares outstanding.
Shares are only treated as dilutive if their dilution results in a decreased earnings per share or increased loss per share.
Dilutive effects arise from share-based payments that are settled in shares. Conditional share awards to employees have a dilutive effect when the average share price during the period exceeds the exercise price of the awards and the market or non-market conditions of the awards are met, as if the current period end were the end of the vesting period. When calculating the dilutive effect, the exercise price is adjusted by the value of future services that have yet to be received related to the awards.
(xii) Property, plant and equipment
Land and buildings are initially stated at cost, including directly attributable transaction costs, (or fair value when acquired through business combinations) and subsequently at fair value.
Assets under construction include sites where new hotels are currently being developed and significant development projects at hotels which are currently operational. These sites and the capital investment made are recorded at cost. Borrowing costs incurred in the construction of major assets or development projects which take a substantial period of time to complete are capitalised in the financial period in which they are incurred. Once construction is complete and the hotel is operating, the assets will be transferred to land and buildings and fixtures, fittings and equipment at cost, The land and buildings element will subsequently be measured at fair value. Depreciation will commence when the assets are available for use.
Fixtures, fittings and equipment are stated at cost, less accumulated depreciation and any impairment provision.
Cost includes expenditure that is directly attributable to the acquisition of property, plant and equipment unless it is acquired as part of a business combination under IFRS 3 Business Combinations, where the deemed cost is its acquisition date fair value. In the application of the Group's accounting policy, judgement is exercised by management in the determination of fair value of land and buildings at each reporting date, residual values and useful lives.
Depreciation is charged through profit or loss on the cost or valuation less residual value on a straight-line basis over the estimated useful lives of the assets which are as follows:
Buildings 50 years
Fixtures, fittings and equipment 3 - 15 years
Land is not depreciated.
Residual values and useful lives are reviewed and adjusted if appropriate at each reporting date.
Land and buildings are revalued by qualified valuers on a sufficiently regular basis using open market value (which reflects a highest and best use basis) so that the carrying value of an asset does not materially differ from its fair value at the reporting date. External revaluations of the Group's land and buildings have been carried out in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation Standards and IFRS 13 Fair Value Measurement.
Surpluses on revaluation are recognised in other comprehensive income and accumulated in equity in the revaluation reserve, except to the extent that they reverse impairment losses previously charged to profit or loss, in which case the reversal is recorded in profit or loss. Decreases in value are charged against other comprehensive income and the revaluation reserve to the extent that a previous gain has been recorded there, and thereafter are charged through profit or loss.
Fixtures, fittings and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Assets that do not generate independent cash flows are combined into cash-generating units. If carrying values exceed estimated recoverable amounts, the assets or cash-generating units are written down to their recoverable amount. Recoverable amount is the greater of fair value less costs to sell and VIU. VIU is assessed based on estimated future cash flows discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset.
The Group also applies IAS 36 Impairment of Assets to any cash-generating units, with fixtures, fittings and equipment which were previously impaired and which are not revalued, to assess whether previous impairments should be reversed. A reversal of a previous impairment charge is accounted for through profit or loss and only increases the carrying amount of the fixtures, fittings and equipment to a maximum of what it would have been if the original impairment charges had not been recognised in the first place.
(xiii) Investment property
Investment property is held either to earn rental income, or for capital appreciation, or for both, but not for sale in the ordinary course of business.
Investment property is initially measured at cost, including transaction costs, (or fair value when acquired through business combinations) and subsequently revalued by professional external valuers at their respective fair values. The difference between the fair value of an investment property at the reporting date and its carrying value prior to the external valuation is recognised in profit or loss.
The Group's investment properties are valued by qualified valuers on an open market value basis in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation Standards and IFRS 13 Fair Value Measurement.
(xiv) Goodwill
Goodwill represents the excess of the fair value of the consideration for an acquisition over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. Goodwill is the future economic benefits arising from other assets in a business combination that are not individually identified and separately recognised.
Goodwill is measured at its initial carrying amount less accumulated impairment losses. The carrying amount of goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. For the purposes of impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the 'cash-generating unit').
The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.
The recoverable amount of a cash-generating unit is the greater of its VIU and its fair value less costs to sell. In assessing VIU, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects a current market assessment of the time value of money and the risks specific to the asset.
An impairment loss is recognised in profit or loss if the carrying amount of a cash-generating unit exceeds its estimated recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the units on a pro-rata basis. Impairment losses of goodwill are not reversed once recognised.
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The impairment testing process requires management to make significant judgements and estimates regarding the future cash flows expected to be generated by the cash-generating unit. Management evaluates and updates the judgements and estimates which underpin this process on an ongoing basis.
The impairment methodology and key assumptions used by the Group for testing goodwill for impairment are outlined in notes 10 and 11.
The assumptions and conditions for determining impairment of goodwill reflects management's best estimates and judgements, but these items involve significant inherent uncertainties, many of which are not under the control of management. As a result, accounting for such items could result in different estimates or amounts if management used different assumptions or if different conditions occur in the future.
(xv) Intangible assets other than goodwill
An intangible asset is only recognised where the item lacks a physical presence, is identifiable, non-monetary, controlled by the Group and expected to provide future economic benefits to the Group.
Intangible assets are measured at cost (or fair value when acquired through business combinations), less accumulated amortisation and impairment losses.
Intangible assets are amortised over the period of their expected useful lives by charging equal annual instalments to profit or loss. The useful life used to amortise intangible assets relates to the future performance of the asset and management's judgement as to the period over which economic benefits will be derived from the asset. The estimated total useful life of the Group's intangible assets is 5 years.
(xvi) Inventories
Inventories are stated at the lower of cost (using the first-in, first-out (FIFO) basis) and net realisable value. Inventories represent assets that are sold in the normal course of business by the Group and consumables.
(xvii) Contract fulfilment costs
Contract fulfilment costs are stated at the lower of cost or recoverable amount. Contract fulfilment costs represent assets that are to be sold by the Group but do not form part of normal trading. Costs capitalised as contract fulfilment costs include costs incurred in fulfilling the specific contract. The costs must enhance the asset, be used in order to satisfy the obligations inherent in the contractual arrangement and should be recoverable. Costs which are not recoverable are written off to profit or loss as incurred.
(xviii) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less, which are carried at amortised cost.
(xix) Trade and other receivables
Trade and other receivables are stated initially at their fair value and subsequently at amortised cost, less any expected credit loss provision. The Group applies the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. Bad debts are written off to profit or loss on identification.
(xx) Trade and other payables
Trade and other payables are initially recorded at fair value, which is usually the original invoiced amount. Fair value for the initial recognition of payroll tax liabilities is the amount payable stated on the payroll submission filed with the tax authorities. Fair value for the initial recognition of VAT liabilities is the net amount of VAT payable to, and recoverable from, the tax authorities. Trade and other payables are subsequently carried at amortised cost using the effective interest method. Liabilities are derecognised when the obligation under the liability is discharged, cancelled or expired.
(xxi) Finance costs
Finance costs comprise interest expense on borrowings and related financial instruments, commitment fees and other costs relating to financing of the Group.
Interest expense on loans and borrowings is recognised using the effective interest method. The effective interest rate of a financial liability is calculated on initial recognition of a financial liability. In calculating interest expense, the effective interest rate is applied to the amortised cost of the liability.
If a financial liability is deemed to be non-substantially modified (less than 10 percent different) (see policy (xxvi)), the amortised cost of the liability is recalculated by discounting the modified cash flows at the original effective interest rate and the resulting modification gain or loss is recognised in finance costs in profit or loss. For floating-rate financial liabilities, the original effective interest rate is adjusted to reflect the current market terms at the time of the modification.
Finance costs incurred for qualifying assets, which take a substantial period of time to construct, are added to the cost of the asset during the period of time required to complete and prepare the asset for its intended use or sale. The Group uses two capitalisation rates being the weighted average interest rate after the impact of hedging instruments for Sterling borrowings which is applied to UK qualifying assets and the weighted average interest rate for Euro borrowings which is applied to Republic of Ireland qualifying assets. Capitalisation commences on the date on which the Group undertakes activities that are necessary to prepare the asset for its intended use. Capitalisation of borrowing costs ceases when the asset is ready for its intended use.
Finance costs also include interest on lease liabilities.
(xxii) Foreign currency
Transactions in currencies other than the functional currency of a Group entity are recorded at the rate of exchange prevailing on the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated into the respective functional currency at the relevant rates of exchange ruling at the reporting date. Foreign exchange differences arising on translation are recognised in profit or loss.
The assets and liabilities of foreign operations are translated into Euro at the exchange rate ruling at the reporting date. The income and expenses of foreign operations are translated into Euro at rates approximating the exchange rates at the dates of the transactions.
Foreign exchange differences arising on the translation of foreign operations are recognised in other comprehensive income, and are included in the translation reserve within equity.
(xxiii) Provisions and contingent liabilities
A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
The provision in respect of self-insured risks includes projected settlements for known claims and incurred but not reported claims.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of an outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of an outflow of economic benefits is remote.
(xxiv) Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares are recognised as a deduction from equity, net of any tax effects. Merger relief is availed of by the Group where possible.
(xxv) Loans and borrowings
Loans and borrowings are recognised initially at the fair value of the consideration received, less directly attributable transaction costs. Subsequent to initial recognition, loans and borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in profit or loss over the period of the borrowings on an effective interest rate basis. Directly attributable transaction costs are amortised to profit or loss on an effective interest rate basis over the term of the loans and borrowings. This amortisation charge is recognised within finance costs. Commitment fees incurred in connection with loans and borrowings are expensed as incurred to profit or loss.
(xxvi) Derecognition of financial liabilities
The Group removes a financial liability from its statement of financial position when it is extinguished (when its contractual obligations are discharged, cancelled, or expire).
The Group also derecognises a financial liability when the terms and the cash flows of a modified liability are substantially different. The terms are substantially different if the discounted present value of the cash flows under the new terms, discounted using the original effective interest rate, including any fees paid to lenders net of any fees received, is at least 10 percent different from the discounted present value of the remaining cash flows of the original financial liability, discounted at the original effective interest rate, the '10% test'. In addition, a qualitative assessment is carried out of the new terms in the new facility agreement to determine whether there is a substantial modification.
If the financial liability is deemed substantially modified, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability derecognised and consideration paid is recognised in profit or loss.
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If the financial liability is deemed non-substantially modified, the amortised cost of the liability is recalculated by discounting the modified cash flows at the original effective interest rate and the resulting modification gain or loss is recognised in profit or loss. Any costs and fees directly attributable to the modified financial liability are recognised as an adjustment to the carrying amount of the modified financial liability and amortised over its remaining term by re-computing the effective interest rate on the instrument.
(xxvii) Derivative financial instruments
The Group's borrowings expose it to the financial risks of changes in interest rates. The Group uses derivative financial instruments such as interest rate swap agreements to hedge these exposures.
Interest rate swaps convert part of the Group's Sterling denominated borrowings from floating to fixed interest rates. The Group does not use derivatives for trading or speculative purposes.
Derivative financial instruments are recognised at fair value on the date a derivative contract is entered into plus directly attributable transaction costs and are subsequently re-measured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
The full fair value of a hedging derivative is classified as a non-current asset or non-current liability if the remaining maturity of the hedging instrument is more than twelve months and as a current asset or current liability if the remaining maturity of the hedging instrument is less than twelve months.
The fair value of derivative instruments is determined by using valuation techniques. The Group uses its judgement to select the most appropriate valuation methods and makes assumptions that are mainly based on observable market conditions (Level 2 fair values) existing at the reporting date.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
(xxviii) Cash flow hedge accounting
Cash flow hedge accounting is applied in accordance with IFRS 9 Financial Instruments. For those derivatives designated as cash flow hedges and for which hedge accounting is desired, the hedging relationship is documented at its inception. This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and its risk management objectives and strategy for undertaking the hedging transaction. The Group also documents its assessment, both at hedge inception and on a semi-annual basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, the effective part of any gain or loss on the derivative financial instrument is recognised in other comprehensive income and accumulated in equity in the hedging reserve. Any ineffective portion is recognised immediately in profit or loss as finance income/costs. The amount accumulated in equity is retained in other comprehensive income and reclassified to profit or loss in the same period or periods during which the hedged item affects profit or loss.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge accounting or the designation is revoked. At that point in time, any cumulative gain or loss on
the hedging instrument recognised in equity remains in equity
and is recognised when the forecast transaction is ultimately
recognised in profit or loss. However, if a hedged transaction is
no longer anticipated to occur, the net cumulative gain or loss
accumulated in equity is reclassified to profit or loss.
(xxix) Net investment hedges
Where relevant, the Group uses a net investment hedge, whereby the foreign currency exposure arising from a net investment in a foreign operation is hedged using borrowings held by a Group entity that is denominated in the functional currency of the foreign operation.
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognised directly in other comprehensive income in the foreign currency translation reserve, to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognised in profit or loss. When the hedged part of a net investment is disposed of, the associated cumulative amount in equity is reclassified to profit or loss.
(xxx) Adjusting items
Consistent with how business performance is measured and managed internally, the Group reports both statutory measures prepared under IFRS and certain alternative performance measures ('APMs') that are not required under IFRS. These APMs are sometimes referred to as 'non-GAAP' measures and include, amongst others, Adjusted EBITDA, Adjusted Profit/ (Loss), Free Cash Flow per Share, and Adjusted EPS.
The Group believes that the presentation of these APMs provides useful supplemental information which, when viewed in conjunction with the financial information presented under IFRS, provides stakeholders with a more meaningful understanding of the underlying financial and operating performance of the Group.
Adjusted measures of profitability represent the equivalent IFRS measures adjusted to show the underlying operating performance of the Group and exclude items which are not reflective of normal trading activities or distort comparability either year on year or with other similar businesses.
2 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 Executive Directors.
The Group segments its leased and owned business by geographical region within which the hotels operate being Dublin, Regional Ireland and the UK. These comprise the Group's three reportable segments.
Dublin, Regional Ireland and UK segments
These segments are concerned with hotels that are either owned or leased by the Group. As at 31 December 2021, the Group owns 27 hotels (31 December 2020: 27 hotels) and has effective ownership of one further hotel which it operates (31 December 2020: one hotel). It also owns the majority of one further hotel it operates (31 December 2020: one hotel). The Group also leases 13 hotel buildings from property owners (31 December 2020: 12 hotels) and is entitled to the benefits and carries the risks associated with operating these hotels. Included in this figure is the Clayton Hotel Manchester City Centre lease which commenced in December 2021. This hotel opened to the public in January 2022. The Ballsbridge Hotel lease matured on 31 December 2021 and is not included in the number of leased hotels above at 31 December 2021.
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 operating costs arising are payroll, cost of goods for resale, commissions paid to online travel agents on room sales and other operating costs.
2021 2020
EUR'000 EUR'000
Revenue
Dublin 75,046 65,178
Regional Ireland 53,429 36,301
UK 63,515 35,342
Total 191,990 136,821
The Covid-19 pandemic has resulted in a material loss of revenue for the year ended 31 December 2021 and the year ended 31 December 2020, relative to the year ended 31 December 2019 which was unaffected by the pandemic. Varying global restrictions on travel and numerous public health initiatives resulted in significantly reduced demand in the wider hospitality industry.
In Ireland, all hotels except for one hotel remained open in a limited capacity to provide for essential services business between January 2021 and May 2021. On 2 June 2021, the hotels in Ireland re-opened to the public. All of the Group's UK hotels were open at limited capacity between January 2021 and May 2021. Hotels re-opened fully to the public in England and Wales on 17 May 2021 and in Northern Ireland on 24 May 2021. From May and June, there were varying restrictions in place for the hospitality sector, including capacity restrictions at indoor events, earlier closing times for restaurants and physical distancing requirements. These were steadily eased however, in December 2021, as a result of the spread of the Omicron variant, these and other stricter measures were gradually re-introduced to Ireland and parts of the UK. For certain periods in 2021, international travel was largely restricted to essential travel only and large events and public gatherings were also prohibited.
During the year ended 31 December 2020, the Group's hotels were subject to varying local and national government restrictions in Ireland and the UK from March 2020. This included the temporary closure of certain hotels between March and July 2020. In the second half of 2020, all hotels except for one hotel remained open, however, periodically were only open at a limited capacity to provide for essential services business.
2021 2020 Segmental results - EBITDAR EUR'000 EUR'000 Dublin 31,034 17,462 Regional Ireland 23,374 7,983 UK 20,739 3,431
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DJ Dalata Hotel Group PLC: 2021 Preliminary -16-
EBITDAR for reportable segments 75,147 28,876 Segmental results - EBITDA Dublin 31,034 17,250 Regional Ireland 23,321 7,956 UK 20,662 3,399 EBITDA for reportable segments 75,017 28,605 Reconciliation to results for the year Segmental results - EBITDA 75,017 28,605 Other income 655 495 Central costs (10,276) (8,128) Share-based payments expense (2,159) (2,280) Adjusted EBITDA 63,237 18,692 Adjusting items Net property revaluation movements through profit or loss 6,790 (30,836) Impairment of goodwill - (3,226) Net reversal of previous impairment charges/(impairment charges) of right-of-use assets 39 (7,541) Net reversal of previous impairment charges/(impairment charges) of fixtures, fittings and equipment 120 (1,015) Loss on sale and leaseback - (1,673) Remeasurement gain on right-of-use assets 277 - Hotel pre-opening expenses (1,927) (81) Group EBITDA 68,536 (25,680) Depreciation of property, plant and equipment (27,033) (26,607) Depreciation of right-of-use assets (19,522) (20,663) Amortisation of intangible assets (539) (558) Interest on lease liabilities (24,409) (22,405) Other interest and finance costs (8,469) (15,548) Loss before tax (11,436) (111,461) Tax credit 5,107 10,783 Loss for the year attributable to owners of the Company (6,329) (100,678)
Group EBITDA 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.
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 year on year or with other similar businesses. Consequently, Adjusted EBITDA represents Group EBITDA before:
-- Net property revaluation movements through profit or loss (note 12);
-- Hotel pre-opening expenses (note 3) which relate primarily to payroll expenses, sales and marketing costsand training costs of new staff, and are incurred by the Group in advance of new hotel openings;
-- Impairment of goodwill (notes 10,11);
-- Impairments and reversals of previous impairment charges of fixtures, fittings and equipment andright-of-use assets (notes 10,12,13);
-- The remeasurement gain on right-of-use assets (note 13); and
-- The accounting loss on the sale and leaseback (notes 12, 13).
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. Also included in central costs is the reversal of prior period insurance provisions of EUR1.3 million (note 20) (2020: EUR0.03 million). 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 the UK represents the 'Adjusted EBITDA' for each geographical location before central costs, share-based payments expense and other income. It is the net operational contribution of leased and owned hotels in each geographical location.
'Segmental results - EBITDAR' for Dublin, Regional Ireland and the UK represents 'Segmental results - EBITDA' before variable lease costs.
As a result of the amended and restated loan facility in November 2021, the Group recognised a modification gain of EUR2.7 million in finance costs in profit or loss (note 5) for the year ended 31 December 2021. Following the amended and restated loan facility in July 2020, a modification loss of EUR4.3 million was recognised in finance costs in profit or loss for the year ended 31 December 2020. As these are not reflective of normal trading activity, it is presented as an Adjusting item to arrive at Adjusted loss before tax and Adjusted loss after tax (note 29).
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 Executive 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 hotelroom is occupied, and the service is provided;
-- Food and beverage revenue which relates to sales of food and beverages at the hotel property. Revenue isrecognised at the point of sale; and
-- Other revenue includes revenue from leisure centres, car parks, meeting room hire and other revenuesources at the hotels. Leisure centre revenue is recognised over the life of the membership while the other itemsare recognised when the service is provided.
Revenue review by segment - Dublin 2021 2020
EUR'000 EUR'000
Room revenue 52,098 43,436
Food and beverage revenue 17,186 16,012
Other revenue 5,762 5,730
Total revenue 75,046 65,178
Revenue review by segment - Regional Ireland 2021 2020
EUR'000 EUR'000
Room revenue 33,998 21,620
Food and beverage revenue 15,131 11,084
Other revenue 4,300 3,597
Total revenue 53,429 36,301
Revenue review by segment - UK 2021 2020
EUR'000 EUR'000
Room revenue 47,191 24,699
Food and beverage revenue 12,716 7,922
Other revenue 3,608 2,721
Total revenue 63,515 35,342
Other geographical information
2021 2020
Republic
UK Republic of Ireland UK
of Ireland Total Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Revenue
Owned hotels 99,179 40,765 139,944 74,099 24,617 98,716
Leased hotels 29,296 22,750 52,046 27,380 10,725 38,105
Total revenue 128,475 63,515 191,990 101,479 35,342 136,821
2021 2020
Republic of Ireland UK Republic of Ireland UK
Total Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
EBITDAR
Owned hotels 44,335 13,562 57,897 20,528 2,491 23,019
Leased hotels 10,073 7,177 17,250 4,917 940 5,857
Total EBITDAR 54,408 20,739 75,147 25,445 3,431 28,876
2021 2020
Republic of Ireland UK Republic of Ireland UK
Total Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Other information
Variable lease costs 53 77 130 239 32 271
Depreciation of property, plant and equipment 17,987 9,046 27,033 18,078 8,529 26,607
Depreciation of right-of-use assets 14,288 5,234 19,522 15,769 4,894 20,663
Interest on lease liabilities 15,282 9,127 24,409 14,804 7,601 22,405
Assets and liabilities At 31 December 2021 At 31 December 2020
Republic of Republic of
Ireland UK Ireland UK
Total Total
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March 01, 2022 02:00 ET (07:00 GMT)
DJ Dalata Hotel Group PLC: 2021 Preliminary -17-
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Assets Intangible assets and goodwill 19,766 12,228 31,994 20,304 11,429 31,733 Property, plant and equipment 857,718 386,184 1,243,902 850,797 351,946 1,202,743 Right-of-use assets 269,681 222,188 491,869 284,759 126,248 411,007 Investment property 1,575 503 2,078 1,575 514 2,089 Other non-current receivables 3,356 2,957 6,313 3,305 5,754 9,059 Contract fulfilment costs 36,255 - 36,255 22,374 - 22,374 Other current assets 21,605 34,946 56,551 20,059 40,627 60,686 Total assets excluding derivatives and deferred tax 1,209,956 659,006 1,868,962 1,203,173 536,518 1,739,691 assets Derivative assets 832 - Deferred tax assets 20,161 12,344 Total assets 1,889,955 1,752,035 Liabilities Loans and borrowings - 313,533 313,533 14,376 299,767 314,143 Lease liabilities 261,993 219,933 481,926 271,549 128,083 399,632 Trade and other payables 67,040 17,648 84,688 40,650 8,018 48,668 Total liabilities excluding provision for 329,033 551,114 880,147 326,575 435,868 762,443 liabilities, derivatives and tax liabilities Provision for liabilities 8,188 8,275 Derivative liabilities 1,029 9,042 Current tax liabilities 282 91 Deferred tax liabilities 42,896 39,404 Total liabilities 932,542 819,255 Revaluation reserve 194,574 17,998 212,572 186,343 12,963 199,306
The above information on assets, liabilities and 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. The amortised cost of loans and borrowings was EUR313.5 million at 31 December 2021 (31 December 2020: EUR314.1 million). Drawn loans and borrowings denominated in Sterling of GBP266.5 million (EUR317.2 million) are classified as liabilities in the UK (31 December 2020: GBP269.5 million (EUR299.8 million). All of these Sterling borrowings act as a net investment hedge as at 31 December 2021 (31 December 2020: GBP266.5 million (EUR296.4 million)). As at 31 December 2020, loans and borrowings denominated in Euro are classified as liabilities in the Republic of Ireland (note 21). There were no Euro denominated borrowings at 31 December 2021.
Contract fulfilment costs are disclosed as current assets at 31 December 2021 as they are receivable within 12 months of this date and as non-current assets at 31 December 2020.
3 Statutory and other information
2021 2020
EUR'000 EUR'000
Depreciation of property, plant and equipment 27,033 26,607
Depreciation of right-of-use assets 19,522 20,663
Variable lease costs: Land and buildings 130 271
Hotel pre-opening expenses 1,927 81
Hotel pre-opening expenses relate to costs incurred by the Group in advance of opening new hotels. In 2021, this related to seven hotels (of which one opened in August 2021, one opened in January 2022, one opened in February 2022 and the remainder are scheduled to open later in 2022). In 2020, pre-opening expenses related to two new hotels, one of which opened in 2021, with the second due to open later in 2022. These costs primarily relate to payroll expenses, sales and marketing costs and training costs of new staff.
Variable lease costs relate to lease payments linked to performance which are excluded from the measurement of lease liabilities as they are not related to an index or rate or are not considered fixed payments in substance.
Administrative expenses
In 2021, administrative expenses of EUR109.9 million include depreciation of EUR46.6 million, as set out above, net reversal of property revaluations losses through profit or loss of EUR6.8 million (note 12), a reversal of prior period insurance provisions of EUR1.3 million (note 20), net reversal of previous impairment charges of right-of-use assets and fixtures, fittings and equipment of EUR0.2 million (notes 10, 12,13), and a remeasurement gain on right-of-use assets of EUR0.3 million (note 13).
In 2020, administrative expenses of EUR158.5 million included depreciation of EUR47.3 million, net property revaluation losses of EUR30.8 million, impairment of goodwill of EUR3.2 million, impairment of right-of-use assets of EUR7.5 million and of fixtures, fittings and equipment of EUR1.0 million, and loss on sale and leaseback of EUR1.7 million.
Auditor's remuneration 2021 2020
EUR'000 EUR'000
Audit of Group, Company and subsidiary financial statements 405 305
Other assurance services 23 24
Tax services - 8
428 337
Auditor's remuneration for the audit of the Company financial statements was EUR15,000 (2020: EUR15,000). Other assurance services primarily relate to the review of the interim condensed consolidated financial statements. For the year ended 31 December 2020, tax services primarily related to Irish VAT advice.
Directors' remuneration 2021 2020
EUR'000 EUR'000
Salary and other emoluments 1,623 1,525
Gains on vesting of awards granted in 2018 under the 2017 LTIP 3 -
Gains on vesting of awards granted in 2017 under the 2017 LTIP - 612
Fees 438 433
Pension costs - defined contribution 117 112
Compensation of former Director 102 -
2,283 2,682
Amounts disclosed are inclusive of remuneration of connected persons as defined by Companies Act 2014.
Gains associated with the shares which issued on vesting of awards granted in 2018 and 2017 under the 2017 Long Term Incentive Plan ('LTIP') represent the difference between the quoted share price per ordinary share and the exercise price on the vesting date (note 7). The shares granted to Directors in 2017 under the LTIP are held in a restricted share trust and may not be sold or dealt in any way for a period of five years and 30 days from the vesting date.
2021 2020
EUR'000 EUR'000
Rental income from investment property 355 279
Income from managed hotels 300 216
655 495
4 Other income
Rental income from investment property relates to the following properties:
-- Two commercial properties which are leased to third parties for lease terms of 25 and 30 years;
-- A sub-lease of part of Clayton Cardiff Hotel, UK which is leased to a third party for a lease term of 20years, with 11 years remaining at 31 December 2021; and
-- A sub-lease of part of Clayton Whites Hotel, Wexford which is leased to a third party for a lease term of10 years, which commenced in 2020.
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. The fair value of the investment properties at 31 December 2021 is EUR2.1 million (2020: EUR2.1 million).
5 Finance costs
2021 2020
EUR'000 EUR'000
Interest on lease liabilities (note 13) 24,409 22,405
9,097
Interest expense on bank loans and borrowings 8,908
7
Cash flow hedges - reclassified from other comprehensive income 2,637 1,992
Other finance costs 2,340 1,774
Modification (gain)/loss on amended debt facility (2,704) 4,272
Net foreign exchange (gain)/loss on financing activities (86) 96
Interest capitalised to property, plant and equipment (note 12) (1,942) (1,392)
Interest capitalised to contract fulfilment costs (note 14) (684) (291)
32,878 37,953
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The Group uses interest rate swaps to convert the interest rate on part of its debt from floating rate to fixed rate (note 22). The Sterling variable rate on the Group's borrowings transitioned from LIBOR to SONIA during the year ended 31 December 2021 (notes 1, 22, 24). The cash flow hedge amount reclassified from other comprehensive income is shown separately within finance costs and primarily represents the additional interest the Group paid as a result of the interest rate swaps.
As a result of the amendment and restatement of the loan facility agreement executed on 2 November 2021, the Group assessed whether the discounted cash flows under the amended facility agreement discounted at the old effective interest rate were substantially different from the discounted cash flows under the old facility agreement. The modified loans were deemed to be non-substantially modified which resulted in a modification gain of EUR2.7 million being recognised in profit or loss during the year ended 31 December 2021 (note 21). Following the amended and restated loan facility agreement in July 2020, a modification loss of EUR4.3 million was recognised in profit or loss for the year ended 31 December 2020 (note 21).
Other finance costs include commitment fees and other banking and professional fees. Net foreign exchange gains/ losses on financing activities relate principally to loans which did not form part of the net investment hedge (note 24).
Interest on loans and borrowings amounting to EUR1.9 million was capitalised to assets under construction on the basis that these costs were directly attributable to the construction of qualifying assets (note 12) (2020: EUR1.4 million). Interest on loans and borrowings amounting to EUR0.7 million was capitalised to contract fulfilment costs on the basis that these costs were directly attributable to the construction of qualifying assets (note 14) (2020: EUR0.3 million). The capitalisation rates applied by the Group, which were reflective of the weighted average interest cost in respect of Euro denominated borrowings and Sterling denominated borrowings for the year, were 2.4% (2020: 1.8%) and 3.6% (2020: 3.1%) respectively.
6 Personnel expenses
The average number of persons (full-time equivalents) employed by the Group (including Executive Directors), analysed by category, was as follows:
2021 2020
Administration 495 447
Other 2,010 1,487
2,505 1,934
Full-time equivalents split by geographical region was as follows:
2021 2020
Dublin (including the Group's central functions) 1,149 944
Regional Ireland 834 583
UK 522 407
2,505 1,934
The aggregate payroll costs of these persons were as follows:
2021 2020
EUR'000 EUR'000
Wages and salaries 48,159 45,540
Social welfare costs 2,973 4,242
Pension costs - defined contribution 1,348 1,260
Share-based payments expense 2,159 2,280
Severance costs 79 83
54,718 53,405
Wages and salaries and social welfare costs for the year ended 31 December 2020 have been amended in these financial statements. An amount of EUR1.4 million of a PRSI credit received relating to Employment Wage Subsidy Scheme has been reclassified from wages and salaries to social welfare costs.
EUR0.3 million (2020: EUR0.3 million) of payroll costs relating to the Group's internal development employees were capitalised as these costs are directly related to development, lease and other construction work completed during the year ended 31 December 2021.
For the year ended 31 December 2021, wages and salaries amounting to EUR48.2 million (2020: EUR45.5 million) are stated net of wage subsidies received by the Group from the Irish and UK governments. During 2021, the Group availed of wage subsidies of EUR36.0 million (2020: EUR16.0 million) from the Irish government and EUR2.0 million (GBP1.8 million) (2020: EUR4.8 million (GBP4.3 million)) from the UK government (note 8).
7 Share-based payments expense
The total share-based payments expense for the Group's employee share schemes charged to profit or loss during the year was EUR2.2 million (2020: EUR2.3 million), analysed as follows:
2021 2020
EUR'000 EUR'000
Long Term Incentive Plans 1,681 1,238
Share Save schemes 478 1,042
2,159 2,280
Details of the schemes operated by the Group are set out below:
Long Term Incentive Plans
Awards granted
During the year ended 31 December 2021, the Board approved two conditional grants of ordinary shares pursuant to the terms and conditions of the Group's 2017 Long Term Incentive Plan ('the 2017 LTIP'). In March 2021, the grant of 1,361,145 ordinary shares was made to senior employees across the Group (106 in total). On 31 August 2021, the Board, on the Remuneration Committee's recommendation, approved the performance terms and conditions for this award which includes 50% of the performance target being based on total shareholder return 'TSR' and 50% based on Free Cash Flow per Share 'FCFS' with varying thresholds. The performance period of this award is 1 January 2021 to 31 December 2023. Threshold performance for the TSR condition is a performance measure against a bespoke comparator group of 20 listed peer companies in the travel and leisure sector, with 25% vesting if the Group's TSR over the performance period is ranked at the median compared to the TSR of the comparator group, and if the Group's TSR performance is at or above the upper quartile compared to the comparator group, the remaining 75% of the award will vest. Threshold performance for the FCFS condition, which is a non-market-based performance condition, is based on the achievement of FCFS of EUR0.35, as disclosed in the Group's 2023 audited consolidated financial statements, with 100% vesting for FCFS of EUR0.47 or greater. These awards will vest on a straight-line basis for performance between these points. FCFS 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. Participants are also entitled to receive a dividend equivalent amount in respect of their awards.
On 23 December 2021, a conditional grant of 255,700 ordinary shares was made to senior employees of the Group (87 in total). This award is conditional on employees being in employment as at 31 March 2023. There are no other conditions attaching to this award. Participants are also entitled to receive a dividend equivalent amount in respect of their awards.
Awards vested
As a result of the impact of Covid-19 on the Group, the performance conditions, TSR and earnings per share ('EPS'), under the 2018 LTIP scheme, were not satisfied. In January 2021, the Board, on the Remuneration Committee's recommendation, as permitted under the deed of grant, modified the performance terms and conditions of the 2018 LTIP scheme, to recognise the ongoing commitment by certain senior employees of the Group. The modified conditions set out were that the employee must have been a beneficiary of the 2018 LTIP scheme, who was in employment on 25 January 2021 and was neither a Director nor Company Secretary. A discretionary award of 25% of the conditional awards under the 2018 LTIP scheme relating to these employees vested and the related expense of EUR0.3 million was fully accounted for in the year ended 31 December 2021 as it was in respect of employee service up to that date. The Group determined the fair value on the date of modification to be the publicly available share price on 25 January 2021 less the nominal value.
The Company issued 93,172 shares on foot of the vesting of this discretionary award. Over the course of the three year performance period, 39,316 share awards lapsed due to vesting conditions which were not satisfied relating to the Award granted in 2018. 628,524 shares lapsed unvested due to TSR and EPS performance conditions not satisfied. The weighted average share price at the date of exercise for awards exercised during the year was EUR4.22.
Movements in the number of share awards are as follows:
2021 2020
Awards Awards
Outstanding at the beginning of the year 3,842,928 2,361,766
Granted during the year 1,616,845 2,282,533
Dividend equivalents - 42,006
Forfeited during the year (393,596) (29,906)
Lapsed unvested during the year (628,524) (264,092)
Exercised during the year (93,172) (549,379)
Outstanding at the end of the year 4,344,481 3,842,928
2021 2020
Grant date Awards Awards
March 2018 - 728,288
March 2019 822,781 847,276
March 2020 2,081,588 2,267,364
March 2021 1,184,412 -
December 2021 255,700 -
Outstanding at the end of the year 4,344,481 3,842,928
Measurement of fair values
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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 2021 March 2020 Fair value at grant date EUR2.40 EUR0.62 Share price at grant date EUR3.84 EUR2.32 Exercise price EUR0.01 EUR0.01 Expected volatility 52.01% p.a. 31.83% p.a. Performance period 3 years 3 years
Dividend equivalents accrue on awards that vest up to the time of vesting under the LTIP schemes, and therefore the dividend yield has been set to zero to reflect this. Such dividend equivalents will be released to participants in the form of additional shares on vesting subject to the satisfaction of performance criteria. In the absence of available market-implied and observable volatility, the expected volatility has been estimated based on the historic share price over a three year period.
Awards granted from 2017 to 2020 include EPS performance conditions, whilst the March 2021 awards include FCFS-related performance conditions. Both of these performance conditions are non-market-based performance conditions and do not impact the fair value of the award at the grant date, which equals the share price less exercise price. 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 or FCFS-related performance condition, where applicable, 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.
Share Save schemes
The Remuneration Committee of the Board of Directors approved the granting of share options under the UK and Ireland Share Save schemes (the 'Schemes') for all eligible employees across the Group from 2016 to 2020. During the year ended 31 December 2021, there was no new Scheme granted (509 employees availed of the Schemes granted in 2020). Each Scheme is for three years and employees may choose to purchase shares over the six-month period following the end of the three year period at the fixed discounted price set at the start of the three year period. The share price for the Schemes has been set at a 25% discount for Republic of Ireland based employees and 20% for UK based employees in line with the maximum amount permitted under tax legislation in both jurisdictions.
During the year ended 31 December 2021, the Company issued 39,291 shares on maturity of the share options granted as part of the Scheme granted in 2017. The weighted average share price at the date of exercise for options exercised during the year was EUR4.53.
Movements in the number of share options and the related weighted average exercise price ('WAEP') are as follows:
2021 2020
WAEP WAEP
Options EUR per Options EUR per
share share
Outstanding at the beginning of the year 2,594,186 2.63 1,784,122 3.89
Granted during the year - - 2,104,301 2.31
Forfeited during the year (695,586) 3.36 (1,211,336) 3.88
Exercised during the year (39,291) 4.09 (82,901) 2.98
Outstanding at the end of the year 1,859,309 2.59 2,594,186 2.63
The weighted average remaining contractual life for the share options outstanding at 31 December 2021 is 2.5 years (31 December 2020: 3.2 years).
At 31 December 2021, 31,517 shares are exercisable relating to the Share Save schemes granted in 2018 which ended in September 2021 and employees have a six month period to exercise their option. The weighted average exercise price of these options is EUR5.12.
8 Government grants and government assistance
2021 2020
EUR'000 EUR'000
Employment Wage Subsidy Scheme (Ireland) 36,018 9,687
Temporary Wage Subsidy Scheme (Ireland) - 6,330
Coronavirus Job Retention Scheme (UK) 2,011 4,753
Other government grants related to income 6,917 1,492
Grants related to income 44,946 22,262
Capital government grants - 150
Total government grants 44,946 22,412
Payroll-related government grants
As a result of the impact of the Covid-19 pandemic on the Group, the Group availed of the Irish and UK government schemes in relation to wage subsidies. The Employment Wage Subsidy Scheme is available to employers in Ireland who suffered significant reductions in turnover as a result of Covid-19 restrictions. The Group availed of the Employment Wage Subsidy Scheme for the full year ended 31 December 2021 (2020: 1 September 2020 to 31 December 2020). The Group availed of the Temporary Wage Subsidy Scheme in Ireland from 26 March 2020 to 31 August 2020. The Coronavirus Job Retention Scheme was available for eligible employees for the hours the employees were on furlough. The Group availed of this scheme in the UK from 1 January 2021 to 30 September 2021, when the scheme ended (2020: from 1 March 2020 to 31 December 2020).
The Group was in compliance with all the conditions of the respective schemes during the year ended 31 December 2021 and 31 December 2020. The grant income received has been offset against the related costs in cost of sales and administrative expenses in profit or loss. No contingencies are attached to any of these schemes as at 31 December 2021. The Group continues to avail of the Employment Wage Subsidy Scheme in Ireland in 2022.
Other government grants
During the year ended 31 December 2021, the Group availed of a number of other grants schemes, including and not limited to the Covid Restrictions Support Scheme, Failte Ireland Tourism Continuity Grant in Ireland and Large Tourism and Hospitality Business Support Scheme in Northern Ireland, introduced by the Irish and UK governments to support businesses during the Covid-19 pandemic and contribute towards re-opening and other operating costs. These grants, which totalled EUR6.9 million, have been offset against the related costs of EUR6.9 million in administrative expenses in profit or loss (2020: EUR1.5 million).
Of the grants received during the year ended 31 December 2021, one of the grants received from the UK Government, ERF Sector Specific Support Fund, which is aimed to support business survival and safeguarding jobs, included a condition attached to it, that businesses are expected to safeguard the relevant jobs for a minimum of 12 months. Therefore, there is a contingent liability in this respect amounting to GBP0.05 million (EUR0.06 million) as at 31 December 2021 (2020: GBPNil).
There were no capital grants received during the year ended 31 December 2021. During the year ended 31 December 2020, the Group received a grant amounting to EUR0.2 million for capital costs incurred in adapting premises for new public health requirements arising from the pandemic. The grant was conditional on being utilised for eligible expenditure. The grant has been presented as a deduction in arriving at the carrying amount of the asset in the statement of financial position.
Government assistance
In addition, the Group received financial assistance by way of commercial rates waivers and deferrals of tax liabilities from the Irish and UK governments.
Full year commercial rates waivers for the year ended 31 December 2021 were available to the Group in the Republic of Ireland, Northern Ireland, Wales and Scotland. In England, the full rates waiver was available for the period from 1 January 2021 to 30 June 2021, and from 1 July 2021 to 31 December 2021, a 66% business rates relief was provided by the UK Government.
In Ireland, the Group benefitted from commercial rates waivers of EUR7.3 million for the year ended 31 December 2021 (for the period 27 March 2020 to 31 December 2020: EUR5.5 million). In the UK, the Group benefitted from commercial rates waivers of GBP3.7 million (EUR4.3 million) for the year ended 31 December 2021 (for the period 1 April 2020 to 31 December 2020: GBP3.3 million (EUR3.6 million)).
In the Republic of Ireland, Northern Ireland, Wales and Scotland rates waivers are in place until 31 March 2022 and in England 66% business rates relief is extended until 31 March 2022.
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DJ Dalata Hotel Group PLC: 2021 Preliminary -20-
Under the warehousing of tax liabilities legislation introduced by the Financial Provisions (Covid-19) (No. 2) Act 2020 and Finance Act 2020 (Act 26 of 2020) and amended by the Finance (Covid-19 and Miscellaneous Provisions) Act 2021, Irish VAT liabilities of EUR3.6 million and payroll tax liabilities of EUR10.0 million relating to the year ended 31 December 2021 have been deferred. During 2021, the payment of Irish VAT liabilities and payroll tax liabilities relating to 2020 were further deferred from 2021 to 2022. As at 31 December 2021, total Irish deferred VAT liabilities of EUR8.5 million and payroll tax liabilities of EUR17.8 million, relating to both 2020 and 2021, are payable during the year ending 31 December 2022.
On 21 December 2021, the Irish Government announced the extension of the Debt Warehousing Scheme in principle following the re-introduction of Covid-19 restrictions. Subsequent to the year-end it was confirmed that Irish VAT liabilities of EUR8.3 million and payroll tax liabilities of EUR15.6 million deferred at 31 December 2021 may be further deferred to 30 April 2023. Deferred Irish VAT liabilities of EUR0.2 million and payroll tax liabilities of EUR2.2 million do not qualify for the extension and remain payable during the year ended 31 December 2022.
In the UK, VAT liabilities of GBP0.4 million (EUR0.5 million) and payroll tax liabilities of GBP0.3 million (EUR0.3 million) were deferred in 2020 and were paid by instalments during 2021. There were no further deferrals of UK VAT or payroll tax liabilities during 2021.
9 Tax credit
2021 2020
EUR'000 EUR'000
Current tax
Irish corporation tax charge 278 -
Irish corporation tax - losses carried back to prior year - (1,535)
Foreign corporation tax charge 10 120
Foreign corporation tax - losses carried back to prior year - (808)
Under/(over) provision in respect of prior years 46 (563)
334 (2,786)
Deferred tax credit (note 23) (5,441) (7,997)
(5,107) (10,783)
The tax assessed for the year differs from the standard rate of corporation tax in Ireland for the year. The differences are explained below.
2021 2020
EUR'000 EUR'000
Loss before tax (11,436) (111,461)
Tax on loss at standard Irish corporation tax rate of 12.5% (1,430) (13,933)
Effects of:
Income taxed at a higher rate 63 417
Expenses not deductible for tax purposes 532 950
Impact of revaluation (gains)/losses not subject to tax (693) 3,914
Foreign income/(losses) taxed at higher rate 2 (1,001)
Losses utilised at higher rate (63) (417)
Under/(over) provision in respect of current tax in prior periods 46 (563)
(Over)/under provision in respect of deferred tax in prior periods (127) 56
Impact of change in rate of tax on opening deferred tax balances (1,327) 30
Impact of differing rates between current tax and deferred tax (1,921) (538)
Other differences (189) 302
(5,107) (10,783)
As the Group incurred a loss before tax in 2021, the Group has recognised a tax credit of EUR5.1 million for the year ended 31 December 2021.
The deferred tax credit for the year ended 31 December 2021 of EUR5.4 million primarily relates to the net value of tax losses which are available to utilise against future taxable profits and the remeasurement of UK deferred tax assets and liabilities which are forecasted to be realised at the corporation tax rate of 25%.
During the year ended 31 December 2021, the UK government substantively enacted an increase in the corporation tax rate from 19% to 25%, with effect from 1 April 2023. The UK deferred tax assets and liabilities which are forecasted to reverse after 1 April 2023 have been remeasured at the 25% corporation tax rate.
The current tax charge of EUR0.3 million relates to taxable profits earned by Group companies that were not sheltered by tax losses. For most Group companies, there were sufficient tax losses carried forward from earlier periods and generated in the current year, such that, no other current tax charges arose in the year ended 31 December 2021.
The current tax credit for the year ended 31 December 2020 of EUR2.8 million related primarily to the carry back of tax losses incurred in the year ended 31 December 2020 to the 2019 tax return period. This resulted in corporation tax refunds on submission of the 2019 tax returns during the year ended 31 December 2020. There is no scope to carry back any losses incurred during the year ended 31 December 2021 to earlier periods.
The Group is confident that the tax losses incurred during 2021 together with the amounts carried forward from earlier years will be fully utilised in future periods (note 23).
The increase in the effective income tax rate for the year ended 31 December 2021 relative to the prior year relates mainly to the remeasurement of UK deferred tax assets and liabilities at the 25% rate. In addition, the impact of revaluation losses not subject to tax reduced the effective income tax rate in the prior year, relative to the year ended 31 December 2021.
10 Impairment
At 31 December 2021, as a result of the impact of Covid-19 on expected trading, particularly on near term profitability, and the carrying amount of the net assets of the Group being more than its market capitalisation, the Group tested each cash generating unit ('CGU') for impairment as both were deemed to be potential impairment indicators. Impairment arises where the carrying value of the CGU (which includes, where relevant, revalued properties and/or right-of-use assets, allocated goodwill, fixtures, fittings and equipment) exceeds its recoverable amount on a value in use ('VIU') basis.
On 31 December 2021, the market capitalisation of the Group (EUR829.0 million) was lower than the net assets of the Group (market capitalisation is calculated by multiplying the share price on that date by the number of shares in issue). Market capitalisation can be influenced by a number of different market factors and uncertainties, most evidently the impact of Covid-19 in 2020 and 2021 and more specifically, the tightening of government restrictions during December 2021 as a result of the emergence of the Omicron variant. In addition, share prices reflect a discount due to lack of control rights. The Group as a whole is not considered to be a CGU for the purposes of impairment testing and instead each hotel operating unit is considered as a CGU as it is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
At 31 December 2021, the recoverable amounts of the Group's CGUs were based on VIU, determined by discounting the estimated future cash flows generated from the continuing use of these hotels. VIU cash flow projections are prepared for each CGU and then compared against the carrying value of the assets, including goodwill, properties, fixtures, fittings and equipment and right-of-use assets, in that CGU. The VIU assumptions are detailed below. The VIU cash flows take into account changes in market conditions as a result of Covid-19.
The VIU estimates were based on the following key assumptions:
-- Cash flow projections are based on operating results and forecasts prepared by management covering a tenyear period in the case of freehold properties. This period was chosen due to the nature of the hotel assets and isconsistent with the valuation basis used by independent external property valuers when performing their hotelvaluations (note 12). For CGUs with right-of-use assets, the lease term was used;
-- Revenue and EBITDA for 2022 and future years are based on management's best estimate projections as at 31December 2021. Forecasted revenue and EBITDA are based on expectations of future outcomes taking into account thecurrent earnings, impact of Covid-19, past experience and adjusted for anticipated revenue and cost growth;
-- Cash flow projections assume a long-term compound annual growth rate post 2024 of 2% (2020: 2%) in EBITDAfor CGUs in the Republic of Ireland and 2.5% (2020: 2%) in the UK;
-- Cash flows include an average annual capital outlay on maintenance for the hotels dependent on thecondition of the hotel or typically 4% of revenues but assume no enhancements to any property;
-- In the case of CGUs with freehold properties, the VIU calculations also include a terminal value based onterminal (year ten) capitalisation rates consistent with those used by the external property valuers whichincorporates a long-term growth rate of 2% (2020: 2%) for Irish and 2.5% (2020: 2%) for UK properties;
-- The cash flows are discounted using a risk adjusted discount rate specific to each property. Riskadjusted discount rates of 7.75% to 9.75% for Dublin assets (31 December 2020: 8.25% to 9.75%), 9.0% to 11.5% forRegional Ireland assets (31 December 2020: 9.0% to 11.25%), 7.5% to 11.75% for UK assets (31 December 2020: 7.0% to11.25%) have been used; and
-- The values applied to each of these key assumptions are derived from a combination of internal andexternal factors based on historical experience of the valuers and of management and taking into account thestability of cash flows typically associated with these factors.
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DJ Dalata Hotel Group PLC: 2021 Preliminary -21-
Following the impairment assessments carried out on the Group's CGUs at 31 December 2021, the recoverable amount was deemed lower than the carrying amount in one of the Group's UK CGUs which resulted in an impairment charge of EUR0.3 million (GBP0.3 million), relating to right-of-use assets (note 13) and fixtures, fittings and equipment (note 12).
At 31 December 2021, impairment reversal assessments were carried out on the Group's CGUs where there had been a previous impairment of right-of-use assets and fixtures, fittings and equipment. Following this assessment, reversals of previous impairments relating to one of the Group's Irish CGUs were recognised in profit or loss as a result of improved performance forecasts. This resulted in a reversal of previous impairment charges of EUR0.4 million on right-of-use assets (note 13) and EUR0.1 million on fixtures, fittings and equipment (note 12). At 31 December 2021, the recoverable amount of this CGU was EUR3.6 million (2020: EUR3.1 million).
Covid-19 continues to impact the Group's business and operations. As a result, the Group's projections are subject to a greater level of uncertainty than before the pandemic as governments worldwide continue to implement measures to protect public health, roll out vaccine programmes and support business and employment. Therefore, the estimation of cash flows which take into account the ongoing impacts of the pandemic, prepared to support the VIU estimates, is a key source of estimation uncertainty. Projections have been prepared taking into account all information reasonably available in the environment at 31 December 2021. Broadly, the cash flow projections assume that the successful vaccination roll out and the evolution of the virus has allowed recovery of the hospitality sector to commence with a return to more normalised levels of trade between 2023 and 2025 depending on location and business mix.
If the 2022 EBITDA forecasts used in cashflow in VIU estimates for impairment testing as at 31 December 2021 had been forecast 10% lower, there would have been no impairment for the year ended 31 December 2021 for right-of-use assets and fixtures, fittings and equipment and goodwill.
11 Intangible assets and goodwill
Other
Goodwill intangible Total
assets
EUR'000 EUR'000 EUR'000
Cost or valuation
Balance at 1 January 2021 78,963 2,470 81,433
Additions - 47 47
Effect of movements in exchange rates 753 - 753
Balance at 31 December 2021 79,716 2,517 82,233
Balance at 1 January 2020 79,628 2,416 82,044
Additions - 54 54
Effect of movements in exchange rates (665) - (665)
Balance at 31 December 2020 78,963 2,470 81,433
Accumulated amortisation and impairment losses
Balance at 1 January 2021 (48,947) (753) (49,700)
Amortisation of intangible assets - (539) (539)
Balance at 31 December 2021 (48,947) (1,292) (50,239)
Balance at 1 January 2020 (45,716) (195) (45,911)
Impairment loss during the year (3,226) - (3,226)
Amortisation of intangible assets - (558) (558)
Translation adjustment (5) - (5)
Balance at 31 December 2020 (48,947) (753) (49,700)
Carrying amounts
At 31 December 2021 30,769 1,225 31,994
At 31 December 2020 30,016 1,717 31,733
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.
As at 31 December 2021, the goodwill cost figure includes EUR12.2 million (GBP10.3 million) which is attributable to goodwill arising on acquisition of foreign operations. Consequently, such goodwill is subsequently retranslated at the closing rate. The retranslation at 31 December 2021 resulted in a foreign exchange gain of EUR0.8 million and a corresponding increase in goodwill. The comparative retranslation at 31 December 2020 resulted in a foreign exchange loss of EUR0.7 million.
Number of
Carrying amount of goodwill allocated
cash-generating units
2021 2020
At 31 December 2021
EUR'000 EUR'000
Moran Bewley Hotel Group (i) 7 25,074 24,366
Other acquisitions (i) 3 1,350 1,305
2007 Irish hotel operations acquired (ii) 3 4,345 4,345
13 30,769 30,016
The above table represents the number of CGUs to which goodwill was allocated at 31 December 2021.
Annual goodwill testing
The Group tests goodwill annually for impairment and more frequently if there are indications that goodwill might be impaired. Due to the Group's policy of revaluation of land and buildings, and the allocation of goodwill to individual CGUs, impairment of goodwill can occur as the Group realises the profit and revenue growth and synergies which underpinned the goodwill. As these materialise, they are recorded as revaluation gains to the carrying value of the property and consequently, elements of goodwill may be required to be written off if the carrying value of the CGU (which includes revalued property and allocated goodwill) exceeds its recoverable amount on a VIU basis. The impairment of goodwill is recorded through profit or loss though the revaluation gains on property are taken to reserves through other comprehensive income provided there were no previous impairment charges through profit or loss.
Following an impairment review of the CGUs containing goodwill at 31 December 2021, no goodwill was required to be impaired (2020: EUR2.6 million for a CGU relating to an Irish hotel and EUR0.6 million (GBP0.6 million) for a CGU relating to a UK hotel). The Group continues to monitor the impact of Covid-19 on the operating results of the Group and also the impact of the UK's departure from the European Union.
Future under-performance in any of the Group's major CGUs may result in a material write-down of goodwill which would have a substantial impact on the Group's results and equity.
(i) Moran Bewley Hotel Group and other single asset acquisitions
For the purposes of impairment testing, goodwill has been allocated to each of the hotels acquired as CGUs. As these hotel properties are valued annually by independent external valuers, the recoverable amount of each CGU is based on a fair value less costs of disposal estimate, or where this value is less than the carrying value of the asset, the VIU of the CGU is assessed.
Costs of acquisition of a willing buyer which are factored in by external valuers when calculating the fair value price of the asset are significant for these assets (2021: Ireland 9.96%, UK 6.8%, 2020: Ireland 9.92%, UK 6.8%). Purchasers' costs are a key difference between VIU and fair value less costs of disposal as prepared by external valuers.
At 31 December 2021, the recoverable amounts of the ten CGUs were based on VIU, determined by discounting the future cash flows generated from the continuing use of these hotels. Note 10 details the assumptions used in the VIU estimates for impairment testing.
(ii) 2007 Irish hotel operations acquired
For the purposes of impairment testing, goodwill has been allocated to each of the CGUs representing the Irish hotel operations acquired in 2007. Eight hotels were acquired at that time but only four of these hotels had goodwill associated with them. The goodwill related to one of these CGUs was fully impaired (EUR2.6 million) during the year ended 31 December 2020. The remaining three of these hotels are valued annually by independent external valuers, as the freehold interest in the property is owned by the Group. Where hotel properties are valued annually by independent external valuers, the recoverable amount of each CGU is based on a fair value less costs of disposal estimate, or where this value is less than the carrying value of the asset, the VIU of the CGU is assessed. The recoverable amount at 31 December 2021 of each of these CGUs which have associated goodwill is based on VIU. VIU is determined by discounting the future cash flows generated from the continuing use of these hotels. Following the impairment assessment carried out at 31 December 2021, there was no impairment of goodwill relating to these CGUs.
Costs of acquisition of a willing buyer which are factored in by external valuers when calculating the fair value price of the asset are significant for these assets (2021: 9.96%, 2020: 9.92%). Purchasers costs are a key difference between VIU and fair value less costs of disposal as prepared by external valuers. Note 10 details the assumptions used in the VIU estimates.
The key judgements and assumptions used in estimating the future cash flows in the impairment tests are subjective and include projected EBITDA (as defined in note 2), discount rates and the duration of the discounted cash flow model. Expected future cash flows are inherently uncertain and therefore liable to change materially over time (note 10).
Other intangible assets
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DJ Dalata Hotel Group PLC: 2021 Preliminary -22-
Other intangible assets of EUR1.2 million at 31 December 2021 represent a software licence agreement entered into by the Group in 2019. This software licence was extended during the year and will now run to 31 May 2024 and is being amortised on a straight-line basis over the life of the asset. Additional software licenses were entered into during the year ended 31 December 2021 of EUR0.05 million (2020: EUR0.05 million).
The Group reviews the carrying amounts of other intangible assets annually to determine whether there is any indication of impairment. If any such indicators exist then the asset's recoverable amount is estimated.
At 31 December 2021, there were no indicators of impairment present and the Directors concluded that the carrying value of other intangible assets was not impaired at 31 December 2021.
12 Property, plant and equipment
Fixtures,
Land and Assets under Total
buildings construction fittings and
equipment
EUR'000 EUR'000 EUR'000 EUR'000
At 31 December 2021
Valuation 1,088,847 - - 1,088,847
Cost - 79,094 147,714 226,808
Accumulated depreciation (and impairment charges) * - - (71,753) (71,753)
Net carrying amount 1,088,847 79,094 75,961 1,243,902
At 1 January 2021, net carrying amount 1,058,548 61,886 82,309 1,202,743
Additions/(reversal of additions) through capital expenditure (85) 12,870 7,597 20,382
Reclassification from assets under construction to land and buildings 323 (390) 67 -
and fixtures, fittings and equipment for assets that have come into use
Capitalised labour costs (note 6) 138 35 8 181
Capitalised borrowing costs (note 5) - 1,942 - 1,942
Revaluations gains through OCI 20,037 - - 20,037
Revaluation losses through OCI (5,655) - - (5,655)
Reversal of revaluation losses through profit or loss 9,404 - - 9,404
Revaluation losses through profit or loss (2,567) - - (2,567)
Impairment of fixtures, fittings and equipment - - (5) (5)
Reversal of previous impairment charges of fixtures, fittings and - - 125 125
equipment
Depreciation charge for the year (11,240) - (15,793) (27,033)
Translation adjustment 19,944 2,751 1,653 24,348
At 31 December 2021, net carrying amount 1,088,847 79,094 75,961 1,243,902
The equivalent disclosure for the prior year is as follows:
At 31 December 2020
Valuation 1,058,548 - - 1,058,548
Cost - 61,886 137,231 199,117
Accumulated depreciation (and impairment charges) * - - (54,922) (54,922)
Net carrying amount 1,058,548 61,886 82,309 1,202,743
At 1 January 2020, net carrying amount 1,324,468 59,600 87,247 1,471,315
Additions through capital expenditure 714 10,986 13,712 25,412
Reclassification from assets under construction to land and buildings 6,129 (7,489) 1,360 -
and fixtures, fittings and equipment for assets that have come into use
Capitalised labour costs (note 6) 30 69 66 165
Capitalised borrowing costs (note 5) - 1,392 - 1,392
Disposal of property, plant and equipment (68,902) (536) (2,462) (71,900)
Net revaluation losses through OCI (143,631) - - (143,631)
Net revaluation losses through profit or loss (30,807) - - (30,807)
Impairment of fixtures, fittings and equipment - - (1,015) (1,015)
Depreciation charge for the year (11,134) - (15,473) (26,607)
Translation adjustment (18,319) (2,136) (1,126) (21,581)
At 31 December 2020, net carrying amount 1,058,548 61,886 82,309 1,202,743
*Accumulated depreciation of buildings is stated after the elimination of depreciation, revaluation, disposals and
impairments.
The carrying value of land and buildings (revalued at 31 December 2021) is EUR1,088.8 million (2020: EUR1,058.5 million). The value of these assets under the cost model is EUR849.8 million (2020: EUR834.2 million). In 2021, unrealised revaluation gains of EUR20.0 million and unrealised losses of EUR5.7 million have been reflected through other comprehensive income and in the revaluation reserve in equity. Revaluation losses of EUR2.6 million and a reversal of prior period revaluation losses of EUR9.4 million have been reflected in administrative expenses through profit or loss.
Included in land and buildings at 31 December 2021 is land at a carrying value of EUR297.0 million (2020: EUR301.3 million) which is not depreciated. There are EUR6.1 million of fixtures, fittings and equipment which have been depreciated in full but are still in use at 31 December 2021 (31 December 2020: EUR4.8 million).
Additions to assets under construction during the year ended 31 December 2021 include the following:
-- Development expenditure incurred on new hotel builds of EUR12.9 million primarily relating to the newhotels being built at the former Tara Towers site in Dublin and at the site in Shoreditch in London; and
-- Interest capitalised on loans and borrowings relating to qualifying assets of EUR1.9 million (note 5).
Capitalised labour costs of EUR0.2 million (2020: EUR0.2 million) relate to the Group's internal development team and are directly related to asset acquisitions and other construction work completed in relation to the Group's property, plant and equipment.
Impairment assessments were carried out on the Group's CGUs at 31 December 2021. The recoverable amount was deemed lower than the carrying amount in one of the Group's UK CGUs which resulted in an impairment charge of EUR0.3 million (GBP0.3 million) (note 10), relating to right-of-use assets and fixtures, fittings and equipment.
At 31 December 2021, impairment reversal assessments were carried out on the Group's CGUs where there had been a previous impairment of right-of-use assets and fixtures, fittings and equipment. Following this assessment, reversals of previous impairments relating to one of the Group's Irish CGUs were recognised in profit or loss as a result of improved performance forecasts. This resulted in a reversal of previous impairment charges of EUR0.4 million on right-of-use assets and EUR0.1 million on fixtures, fittings and equipment (notes 10,13).
On 24 April 2020, the Group completed the sale and leaseback of the Clayton Hotel Charlemont for EUR64.2 million. The Group now operates this hotel under a lease with a term of 35 years. As part of the transaction, a further EUR0.8 million was receivable contingent on the addition of three bedrooms to the property and the cost of this development will be borne by the Group. At 31 December 2021, EUR0.5 million has been received, with the remaining balance due on completion of the project.
The sale resulted in the derecognition of the property asset with the previously recognised revaluation gains of EUR30.3 million in the revaluation reserve being transferred to retained earnings. Immediately prior to sale, the property was revalued by external valuers in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation Standards and the fair value restated accordingly. The valuation was based on the expected price that would be received to sell the asset outright in an orderly transaction between market participants at that date on the assumption that all future economic benefits for the asset are disposed of.
In a sale and subsequent leaseback, the vendor retains the economic benefit post rent of the asset for the period of the lease. Upon sale, the asset is derecognised entirely and, following the leaseback, under IFRS 16, is replaced with a right-of-use asset which corresponds to the value of the discounted lease liability and a portion of the difference between the fair value prior to sale and the sales proceeds received. The right of-use asset does not consequently recognise a significant element of the benefits which the Group continues to enjoy which was recognised in the fair value of the asset prior to sale and leaseback.
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DJ Dalata Hotel Group PLC: 2021 Preliminary -23-
Consequently, this resulted in a portion of the EUR7.7 million difference between the fair value prior to sale and the sales proceeds being treated as an accounting loss (EUR1.7 million) recognised in profit or loss in 2020 and EUR6.0 million being capitalised as part of the right-of-use asset.
The Group operates the Maldron Hotel Limerick and, since the acquisition of Fonteyn Property Holdings Limited in 2013, holds a secured loan over that property. The loan is not expected to be repaid. Accordingly, the Group has the risks and rewards of ownership and accounts for the hotel as an owned property, reflecting the substance of the arrangement.
At 31 December 2021, property, plant and equipment, including fixtures, fittings and equipment in leased properties, with a carrying amount of EUR1,080.0 million (2020: EUR1,055.1 million) were pledged as security for loans and borrowings.
Material valuation uncertainty basis in the prior year
The value of the Group's property at 31 December 2021 reflects open market valuations carried out as at 31 December 2021 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 Royal Institution of Chartered Surveyors (RICS) Valuation Standards. As a result of Covid-19 with effect from March 2020, similar to other real estate markets, the market for hotel assets had experienced significantly lower levels of transactional activity and liquidity. As at the valuation date of 31 December 2021, property markets were mostly functioning again, with transaction volumes and other relevant evidence at levels where an adequate quantum of market evidence existed upon which to base opinions of value, and therefore the valuations as at 31 December 2021 have not been reported by the valuers on the basis of 'material valuation uncertainty', as set out in VPS 3 and VPGA 10 of the RICS Valuation Global Standards. The valuations at 31 December 2020 were reported on the basis of 'material valuation uncertainty' due to the impact of the Covid-19 pandemic at that time when less weight could be attached to previous market evidence to fully inform opinions of value as at 31 December 2020.
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 31 December 2021, 29 properties were revalued by independent external valuers engaged by the Group (31 December 2020: 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 average room rate ('ARR') (calculated as total revenue divided by total rooms sold) and occupancy) 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 9.96% for assets located in the Republic of Ireland (31 December 2020: 9.92%) and 6.8% for assets located in the UK (31 December 2020: 6.8%).
The valuers use their professional judgement and experience to balance the interplay between the different assumptions and valuation influences. For example, initial discounted cash flows based on individually reasonable inputs may result in a valuation which challenges the price per key metrics (value of hotel divided by room numbers) in recent hotel transactions. This would then result in one or more of the inputs being amended for preparation of a revised discounted cash flow. Consequently, the individual inputs may change from the prior period or may look individually unusual and therefore must be considered as a whole in the context of the overall valuation.
The significant unobservable inputs and drivers thereof are summarised in the following table:
Significant unobservable inputs 31 December 2021
Regional
Dublin UK Total
Ireland
Number of hotel assets
Average Room Rate
< EUR75/GBP75 - - 1 1
EUR75-EUR100/GBP75-GBP100 7 2 6 15
> EUR100/GBP100 2 10 1 13
9 12 8 29
Terminal (Year 10) capitalisation rate
<8% 9 7 6 22
8%-10% - 5 2 7
9 12 8 29
Price per key*
< EUR150k/GBP150k 2 10 6 18
EUR150k-EUR250k/GBP150k-GBP250k 2 2 - 4
EUR250k-EUR350k/GBP250k-GBP350k 4 - 1 5
> EUR350k/GBP350k 1 - 1 2
9 12 8 29
31 December 2020
Regional
Dublin UK
Ireland Total
Number of hotel assets
Average Rooms Rate
< EUR75/GBP75 - 1 6 7
EUR75-EUR100/GBP75-GBP100 9 10 2 21
> EUR100/GBP100 - 1 - 1
9 12 8 29
Terminal (Year 10) capitalisation rate
<8% 9 4 6 19
8%-10% - 8 2 10
9 12 8 29
Price per key*
< EUR150k/GBP150k 2 10 6 18
EUR150k-EUR250k/GBP150k-GBP250k 2 2 - 4
EUR250k-EUR350k/GBP250k-GBP350k 4 - 1 5
> EUR350k/GBP350k 1 - 1 2
9 12 8 29
*Price per key represents the valuation of a hotel divided by the number of rooms in that hotel.
The significant unobservable inputs are:
-- Valuers' forecast cash flows.
-- Risk adjusted discount rates and terminal (Year 10) capitalisation rates are specific to each property;
-- Dublin assets:
-- Risk adjusted discount rates range between 7.75% and 9.75% (31 December 2020: 8.25% and 9.75%).
-- Weighted average risk adjusted discount rate is 8.72% (31 December 2020: 8.88%).
-- Terminal capitalisation rates range between 5.75% and 7.75% (31 December 2020: 6.25% and 7.75%).
-- Weighted average terminal capitalisation rate is 6.72% (31 December 2020: 6.88%).
-- Regional Ireland:
-- Risk adjusted discount rates range between 9.0% and 11.5% (31 December 2020: 9.0% and 11.25%).
-- Weighted average risk adjusted discount rate is 9.56% (31 December 2020: 9.69%).
-- Terminal capitalisation rates range between 7.00% and 9.50% (31 December 2020: 7.00% and 9.25%).
-- Weighted average terminal capitalisation rate is 7.56% (31 December 2020: 7.69%).
-- UK:
-- Risk adjusted discount rates range between 7.5% and 11.75% (31 December 2020: 7.0% and 11.25%).
-- Weighted average risk adjusted discount rate is 9.04% (31 December 2020: 8.52%).
-- Terminal capitalisation rates range between 5.00% and 9.25% (31 December 2020: 5.00% and 9.25%).
-- Weighted average terminal capitalisation rate is 6.54% (31 December 2020: 6.52%).
-- Valuers have broadly assumed a recovery from the impact of Covid-19 to normalised trading levels between2023 and 2025 depending on location and business mix which is a key valuation assumption. This is reflected inAverage Room Rate assumptions, shown in the table above, showing movements year on year, which were generally usedas the approximate base for 2022.
Revenue per available room metrics ('RevPAR') for 2020 and 2021 are heavily distorted by the impact of periods of government restrictions on occupancy when the hotels were largely closed to all except essential services. In order to present information which is more indicative of the unobservable inputs and drivers on which discounted cash flows are based, the Group considers it more appropriate to give an indication of Average Room Rates for the hotels.
The estimated fair value under this valuation model would increase or decrease if:
-- Valuers' forecast cash flow was higher or lower than expected; and/or
-- The risk adjusted discount rate and terminal capitalisation rate was lower or higher.
Valuations also had regard to relevant price per key metrics from hotel sales activity.
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DJ Dalata Hotel Group PLC: 2021 Preliminary -24-
The property revaluation exercise carried out by the Group's external valuers is a complex exercise, which not only takes into account the future earnings forecast for the hotels, but also a number of other factors, including and not limited to, market conditions, comparable hotel sale transactions, inflation and the underlying value of an asset. As a result, it is not possible, for the Group to perform a quantitative sensitivity for a change in the property values. A change in an individual quantitative variable would not necessarily lead to an equivalent change in the overall outcome and would require the application of judgement of the valuers in terms of how the variable change could potentially impact on overall valuations.
13 Leases
Group as a lessee
The Group leases property assets, which includes land and buildings and related fixtures and fittings, and other equipment, relating to vehicles, machinery and IT equipment. Information about leases for which the Group is a lessee is presented below:
Property Other
Right-of-use assets Total
assets equipment
EUR'000 EUR'000 EUR'000
Net book value at 1 January 2021 410,932 75 411,007
Additions 90,282 24 90,306
Depreciation charge for the year (19,460) (62) (19,522)
Remeasurement of lease liabilities 794 - 794
Impairment charge (315) - (315)
Reversal of previous impairment charges 354 - 354
Translation adjustment 9,245 - 9,245
Net book value at 31 December 2021 491,832 37 491,869
Net book value at 1 January 2020 386,258 149 386,407
Additions 61,670 - 61,670
Depreciation charge for the year (20,589) (74) (20,663)
Remeasurement of lease liabilities (1,578) - (1,578)
Impairment charge (7,541) - (7,541)
Translation adjustment (7,288) - (7,288)
Net book value at 31 December 2020 410,932 75 411,007
Right-of-use assets comprise leased assets that do not meet the definition of investment property.
Lease liabilities 2021 2020
EUR'000 EUR'000
Current 10,761 9,667
Non-current 388,871 352,434
Lease liabilities at 1 January 399,632 362,101
Additions 81,210 51,946
Interest on lease liabilities (note 5) 24,409 22,405
Lease payments (33,339) (28,023)
Remeasurement of lease liabilities 517 (1,578)
Translation adjustment 9,497 (7,219)
Lease liabilities at 31 December 481,926 399,632
Current 10,049 10,761
Non-current 471,877 388,871
Lease liabilities at 31 December 481,926 399,632
Additions during the year ended 31 December 2021 relate to:
-- In July 2021, the Group entered into a 35 year lease of Maldron Hotel Glasgow City. This resulted in therecognition of a right-of-use asset of EUR35.0 million (GBP29.8 million) and lease liability of EUR32.1 million (GBP27.3million). The Group included lease prepayments and initial direct costs of EUR2.9 million (GBP2.5 million) as part ofthe initial measurement of the right-of-use asset.
-- In December 2021, the Group entered into a 35 year lease of Clayton Hotel Manchester City Centre. Thisresulted in the recognition of a right-of-use asset of EUR55.3 million (GBP46.6 million), which includes EUR6.2 million(GBP5.2 million) of initial direct costs and a lease liability of EUR49.1 million (GBP41.4 million). The hotel opened tothe public in January 2022.
Additions in 2020 relate to the Group entering into a 35 year lease in April 2020 of the Clayton Hotel Charlemont in Dublin following a sale and leaseback transaction which resulted in the recognition of a right-of-use asset of EUR56.3 million and lease liability of EUR46.6 million. The Group included EUR3.6 million of lease prepayments and initial direct costs in the initial measurement of the right-of-use asset. In addition, as a result of the sale and subsequent leaseback, the Group retained the economic benefit post rent of the asset for the period of the lease. This resulted in a portion of the EUR7.7 million difference between the fair value prior to sale and the sale proceeds being capitalised as part of the right-of-use asset (EUR6.0 million) in accordance with IFRS 16.
In November 2020, the Group entered into a lease agreement to lease 44 newly built rooms at Clayton Hotel Birmingham for 32 years. This resulted in the recognition of a right-of-use asset of EUR5.4 million (GBP4.8 million), which includes EUR0.1 million of initial direct costs and a lease liability of EUR5.3 million (GBP4.7 million).
The weighted average incremental borrowing rate for new leases entered into during the year ended 31 December 2021 is 6.8% (2020: 5.59%).
The Group has chosen not to avail of the alternative accounting treatment set out in IFRS 16 - Covid-19 Related Rent Concessions during the year 31 December 2021 or the year ended 31 December 2020. Consequently, any adjustments to the terms of the impacted leases have been treated as a remeasurement.
During the year ended 31 December 2021, lease amendments, which were not included in the original lease agreements, were made to two of the Group's leases. Both of these have been treated as a modification of lease liabilities and resulted in a decrease in lease liabilities of EUR1.6 million and a EUR1.3 million decrease to the carrying value of the right-of-use assets. As the right-of-asset relating to one of these leases had been previously impaired, the resulting difference of EUR0.3 million has been recognised as a remeasurement gain on right-of-use assets in profit or loss (note 2). In addition, following agreed rent reviews and rent adjustments, which formed part of the original lease agreements, certain of the Group's leases were reassessed during the year. This resulted in an increase in lease liabilities and related right-of-use assets of EUR2.1 million.
Variable lease costs which are linked to an index, rate or are considered fixed payments in substance are included in the measurement of lease liabilities. These represent EUR44.4 million of lease liabilities at 31 December 2021 (31 December 2020: EUR33.9 million).
Non-cancellable undiscounted lease cash flows payable under lease contracts are set out below:
At 31 December 2021 At 31 December 2020
Republic of Ireland UK Total Republic of Ireland UK Total
EUR'000 GBP'000 EUR'000 EUR'000 GBP'000 EUR'000
Year ended 31 December 2021 - - - 25,515 7,486 33,842
During the year 2022 23,230 12,976 38,672 22,492 7,526 30,863
During the year 2023 22,376 12,355 37,079 22,358 7,605 30,817
During the year 2024 20,205 12,436 35,005 20,205 7,673 28,740
During the year 2025 19,965 12,508 34,851 19,965 7,753 28,589
During the year 2026 20,048 12,601 35,044 20,048 7,772 28,693
During the years 2027 - 2036 198,375 133,205 356,900 198,375 82,545 290,191
During the years 2037 - 2046 134,791 146,098 308,659 134,791 91,183 236,215
From 2047 onwards 59,953 118,790 201,323 56,181 63,051 126,313
498,943 460,969 1,047,533 519,930 282,594 834,263
Sterling amounts have been converted using the closing foreign exchange rate of 0.84028 as at 31 December 2021 (0.89903 as at 31 December 2020).
The weighted average lease life of future minimum rentals payable under leases is 30.1 years (31 December 2020: 29.4 years). Lease liabilities are monitored within the Group's treasury function.
For the year ended 31 December 2021, the total fixed cash outflows relating to property assets and other equipment amounted to EUR33.3 million (31 December 2020: EUR28.0 million).
Unwind of right-of-use assets and release of interest charge
The unwinding of the right-of-use assets as at 31 December 2021 and the release of the interest on the lease liabilities as at 31 December 2021 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 UK Total Republic of Ireland UK Total
EUR'000 GBP'000 EUR'000 EUR'000 GBP'000 EUR'000
During the year 2022 13,827 6,723 21,828 14,857 11,568 28,624
During the year 2023 13,538 6,676 21,483 14,423 11,518 28,130
During the year 2024 11,631 6,676 19,576 14,013 11,465 27,657
During the year 2025 11,549 6,676 19,494 13,662 11,404 27,234
During the year 2026 11,544 6,331 19,078 13,288 11,335 26,778
During the year 2027 11,240 6,111 18,513 12,886 11,251 26,276
During the years 2028-2037 107,259 56,367 174,340 101,427 104,505 225,796
During the years 2038-2047 64,376 56,011 131,034 43,666 74,594 132,439
From 2048 onwards 24,748 35,103 66,523 8,689 28,556 42,673
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DJ Dalata Hotel Group PLC: 2021 Preliminary -25-
269,712 186,674 491,869 236,911 276,196 565,607
Sterling amounts have been converted using the closing foreign exchange rate of 0.84028 as at 31 December 2021.
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 and reversals of previous impairment charges of right-of-use assets.
As a result of the impact of Covid-19, impairment tests were carried out on the Group's CGUs at 31 December 2021 (note 10). Each hotel operating business is deemed to be a CGU as the cash flows generated are independent of other hotels in the Group. As a result of the impairment tests, the right-of-use asset relating to one of the Group's CGUs was impaired by EUR0.3 million at 31 December 2021 (31 December 2020: EUR7.5 million relating to four CGUs).
Impairment reversal assessments were also carried out on the Group's CGUs where there had been a previous impairment of right-of-use assets and fixtures, fittings and equipment. Following the assessment at 31 December 2021, a reversal of previous impairment charges of EUR0.4 million relating to right-of-use assets and EUR0.1 million to fixtures, and fittings and equipment was recognised in profit or loss relating to one of the Group's Irish CGUs (notes 10, 12).
Leases of property assets
The Group leases properties 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 lease costs based on revenue/EBITDAR
These variable lease costs link rental payments to hotel cash flows and reduce fixed payments. Variable lease costs which are considered fixed in substance are included as part of lease liabilities and not in the following table.
Variable lease costs based on revenue/EBITDAR for the year ended 31 December 2021 are as follows:
Estimated impact on variable lease costs
of
Variable lease costs 5% increase in revenue/EBITDAR
element
EUR'000 EUR'000
Leases with lease payments based on revenue/ 130 28
EBITDAR
Variable lease costs based on revenue/EBITDAR for the year ended 31 December 2020 are as follows:
Estimated impact on
variable lease costs of
Variable lease costs element 5% increase in revenue/EBITDAR
EUR'000 EUR'000
Leases with lease payments based on revenue/EBITDAR 271 50
Extension options and termination options
As at 31 December 2021, 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 Potential future lease payments not included in lease liabilities
(discounted) (discounted)
EUR'000 EUR'000
Office 494 1,439
building
Leases not yet commenced to which the lessee is committed
The Group has multiple agreements for lease at 31 December 2021 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 the hotel opening dates. The amounts payable may also change slightly if there are any changes in room numbers delivered through construction.
At 31 December 2021 At 31 December 2020
Agreements for lease
EUR'000 EUR'000
Less than one year 14,528 5,165
One to two years 10,542 20,794
Two to three years 23,400 21,682
Three to five years 37,139 51,801
Five to fifteen years 192,804 262,042
Fifteen to twenty five years 203,837 274,672
After twenty five years 233,938 336,512
Total future lease payments 716,188 972,668
The significant movement since the year end 31 December 2020 is principally due to the following:
-- The 35 year leases for the Maldron Hotel Glasgow City and Clayton Hotel Manchester City Centre bothcommenced during 2021. This resulted in a right-of-use asset and lease liability being recognised for both leasesin the consolidated statement of financial position and their respective cashflows being removed from theagreements for lease table above; and
-- The agreement for lease for the Maldron Hotel in Birmingham, which was reflected in the amount as at 31December 2020, will no longer proceed.
Included in the above table are future lease payments for agreements for lease, with a lease term of 35 years with the expected opening dates as follows: Maldron Hotel Manchester City Centre (opened February 2022), Clayton Hotel Bristol City (Q1 2022), Clayton Hotel Glasgow City (Q2 2022), The Samuel Hotel, Dublin (Q2 2022), Maldron Hotel Victoria Manchester (H1 2024), Maldron Hotel Liverpool City (H1 2024), Maldron Hotel Brighton (H1 2024) and Maldron Hotel Croke Park, Dublin (H2 2024).
In February 2022, the Group commenced a new operating lease with Art-Invest Real Estate of Hotel Nikko in Düsseldorf, Germany. The lease term is 20 years, with two 5 year tenant extension options. The rent, with a guaranteed minimum, is determined by the revenue performance of the hotel. The hotel re-opened to the public under the Group's management from 15 February 2022.
Other leases
The Group has applied the short-term and low value exemptions 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.
2021 2020
EUR'000 EUR'000
Expenses relating to short-term leases recognised in administrative expenses 112 169
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets, 72 130
recognised in administrative expenses
184 299
For the year ended 31 December 2021, cash outflows relating to fixtures, fittings and equipment, for which the Group has availed of the IFRS 16 short term and low value exemptions, amounted to EUR0.2 million (31 December 2020: EUR0.3 million).
Group as a lessor
Lease income from lease contracts in which the Group acts as lessor is outlined below:
2021 2020
EUR'000 EUR'000
Operating lease income (note 4) 355 279
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 year ended 31 December 2021 amounted to EUR0.1 million (31 December 2020: EUR0.1 million).
The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments receivable:
2021 2020
EUR'000 EUR'000
Less than one year 285 310
One to two years 274 277
Two to three years 274 265
Three to four years 274 265
Four to five years 274 265
More than five years 1,159 1,371
Total undiscounted lease payments receivable 2,540 2,753
Sterling amounts have been converted using the closing foreign exchange rate of 0.84028 as at 31 December 2021 (31 December 2020: 0.89903).
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DJ Dalata Hotel Group PLC: 2021 Preliminary -26-
14 Contract fulfilment costs
Current asset Non-current asset
2021 2020
EUR'000 EUR'000
At 1 January 22,374 13,346
Costs incurred in fulfilling contract to date 13,197 8,737
Capitalised borrowing costs (note 5) 684 291
At 31 December 36,255 22,374
Contract fulfilment costs relate to the Group's contractual agreement with Irish Residential Properties REIT plc ('I-RES'), entered into on 16 November 2018, for I-RES 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 which is expected to be in quarter two 2022. 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.
Costs incurred in fulfilling the contract during the year of EUR13.2 million (2020: EUR8.7 million) relate directly to this contractual arrangement with I-RES. These costs, primarily build costs, have been used in order to satisfy the contract and are expected to be recovered. The Group has reclassified these contract fulfilment costs from non-current assets to current assets on the statement of financial position as at 31 December 2021, as the revenue will be receivable within 12 months of this date.
Interest capitalised on loans and borrowings relating to this development (qualifying asset) was EUR0.7 million during the year ended 31 December 2021 (2020: EUR0.3 million) (note 5).
The overall sale value of the transaction is EUR42.4 million (excluding VAT), which is due in quarter two 2022 (upon practical completion).
Contract fulfilment costs paid have been included in investing activities in the consolidated statement of cash flows as they are not primarily derived from the principal revenue-producing activities of the Group.
15 Trade and other receivables
2021 2020
EUR'000 EUR'000
Non-current assets
Other receivables 2,271 2,521
Prepayments 4,042 6,538
6,313 9,059
Current assets
Trade receivables 5,519 2,238
Prepayments 4,033 3,892
Contract assets 1,224 720
Accrued income 1,092 605
Other receivables 1,906 1,776
13,774 9,231
Total 20,087 18,290
Non-current assets
Included in non-current other receivables at 31 December 2021 and 31 December 2020, is a rent deposit of EUR1.4 million paid to the landlord on the sale and leaseback of Clayton Hotel Charlemont. This deposit is repayable to the Group at the end of the lease term. Also included is a deposit paid as part of another hotel property lease contract of EUR0.9 million (2020: EUR0.9 million) which is interest-bearing and refundable at the end of the lease term.
Included in non-current prepayments at 31 December 2021 are costs of EUR3.8 million (31 December 2020: EUR6.3 million) associated with future lease agreements for hotels which are currently being constructed or in planning. When these leases are signed, these costs will be reclassified to right-of-use assets. The non-current prepayments for Maldron Hotel Glasgow City and Clayton Hotel Manchester City Centre at 31 December 2020 have now been reclassified to the right-of-use assets at 31 December 2021.
Current assets
Other receivables at 31 December 2021 include EUR1.1 million (2020: EUR1.3 million) for government grants relating to wage subsidies. These amounts were received in January 2022.
Contingent asset
As part of the sale and leaseback of the Clayton Hotel Charlemont in 2020 (note 13), EUR0.8 million was receivable contingent on the addition of three bedrooms to the property. As at 31 December 2021, EUR0.5 million has been received with EUR0.3 million disclosed as a contingent asset as at 31 December 2021.
Trade receivables are subject to the expected credit loss model in IFRS 9 Financial Instruments. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the number of days past due.
Aged analysis of trade receivables
Gross Expected Impairment Net
receivables credit loss provision receivables
2021 2021 2021
rate
2021
EUR'000 EUR'000 EUR'000
Not past due 2,328 0.0% - 2,328
Past due < 30 days 1,159 0.0% - 1,159
Past due 30 - 60 days 944 2.9% (27) 917
Past due 60 - 90 days 207 10.8% (22) 185
Past due > 90 days 1,331 30.1% (401) 930
5,969 (450) 5,519
Gross Expected Impairment Net
receivables credit loss provision receivables
2020 Rate 2020 2020
EUR'000 2020 EUR'000 EUR'000
Not past due 802 0.0% - 802
Past due < 30 days 817 0.0% - 817
Past due 30 - 60 days 331 0.0% - 331
Past due 60 - 90 days 143 18.2% (26) 117
Past due > 90 days 527 67.6% (356) 171
2,620 (382) 2,238
Management does not expect any significant losses from trade receivables that have not been provided for as shown above, contract assets, accrued income or other receivables. Details are included in the credit risk section in note 24.
16 Inventories
2021 2020
EUR'000 EUR'000
Goods for resale 1,298 917
Consumable stores 367 341
1,665 1,258
Inventories recognised as cost of sales during the year amounted to EUR12.6 million (2020: EUR10.9 million).
17 Cash and cash equivalents
2021 2020
EUR'000 EUR'000
Cash at bank and in hand 41,112 50,197
41,112 50,197
18 Capital and reserves
Share capital and share premium
At 31 December 2021
Authorised share capital Number EUR'000 Ordinary shares of EUR0.01 each 10,000,000,000 100,000 Allotted, called-up and fully paid shares Number EUR'000 Ordinary shares of EUR0.01 each 222,865,363 2,229 Share premium 504,895
At 31 December 2020
Authorised share capital Number EUR'000 Ordinary shares of EUR0.01 each 10,000,000,000 100,000 Allotted, called-up and fully paid shares Number EUR'000 Ordinary shares of EUR0.01 each 222,732,900 2,227 Share premium 504,735
All ordinary shares rank equally with regard to the Company's residual assets.
During the year ended 31 December 2021, the Company issued 93,172 shares of EUR0.01 per share following the vesting of Awards granted in relation to the 2018 LTIP, under the 2017 LTIP plan (note 7). 39,291 shares were also issued during 2021 under the Share Save schemes granted in 2017. The weighted average share price at the date of exercise for options exercised during the year was EUR4.53 per share (note 7).
In September 2020, the Company issued 37,000,000 shares, as described further in note 18 (a) below.
Dividends
During the year ended 31 December 2021, the Group did not make any dividend payments (year ended 31 December 2020: EURNil).
Nature and purpose of reserves
(a) Capital contribution and merger reserve
As part of a Group reorganisation in 2014, the Company became the ultimate parent entity of the then existing Group, when it acquired 100% of the issued share capital of DHGL Limited in exchange for the issue of 9,500 ordinary shares of EUR0.01 each. By doing so, it also indirectly acquired the 100% shareholdings previously held by DHGL Limited in each of its subsidiaries. As part of that reorganisation, shareholder loan note obligations (including accrued interest) of DHGL Limited were assumed by the Company as part of the consideration paid for the equity shares in DHGL Limited.
The fair value of the Group (as then headed by DHGL Limited) at that date was estimated at EUR40.0 million. The fair value of the shareholder loan note obligations assumed by the Company as part of the acquisition was EUR29.7 million and the fair value of the shares issued by the Company in the share exchange was EUR10.3 million.
The difference between the carrying value of the shareholder loan note obligations (EUR55.4 million) prior to the reorganisation and their fair value (EUR29.7 million) at that date represents a contribution from shareholders of EUR25.7 million which has been credited to a separate capital contribution reserve. Subsequently, all shareholder loan note obligations were settled in 2014, in exchange for shares issued in the Company.
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DJ Dalata Hotel Group PLC: 2021 Preliminary -27-
The insertion of Dalata Hotel Group plc as the new holding company of DHGL Limited in 2014 did not meet the definition of a business combination under IFRS 3 Business Combinations, and, as a consequence, the acquired assets and liabilities of DHGL Limited and its subsidiaries continued to be carried in the consolidated financial statements at their respective carrying values as at the date of the reorganisation. The consolidated financial statements of Dalata Hotel Group plc were prepared on the basis that the Company is a continuation of DHGL Limited, reflecting the substance of the arrangement.
As a consequence, a merger reserve of EUR10.3 million (negative) arose in the consolidated statement of financial position. This represents the difference between the consideration paid for DHGL Limited in the form of shares of the Company, and the issued share capital of DHGL Limited at the date of the reorganisation which was a nominal amount of EUR95.
In September 2020, the Company completed the placing of new ordinary shares of EUR0.01 each in the share capital of the Company. 37.0 million ordinary shares were issued at EUR2.55 each which raised EUR92.0 million after costs of EUR2.4 million. The Group availed of merger relief to simplify future distributions and as a result, EUR91.6 million was recognised in the merger reserve being the difference between the nominal value of each share (EUR0.01 each) and the amount paid (EUR2.55 per share) after deducting costs of the share placing of EUR2.4 million.
(b) Share-based payment reserve
The share-based payment reserve comprises amounts equivalent to the cumulative cost of awards by the Group under equity-settled share-based payment arrangements being the Group's Long Term Incentive Plans and the Share Save schemes. On vesting, the cost of awards previously recognised in the share-based payments reserve is transferred to retained earnings.
(c) Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments used in cash flow hedges, net of deferred tax where applicable. There is no deferred tax asset recognised in the hedging reserve at 31 December 2021, due to uncertainty of obtaining a tax benefit for cash flow hedges in future periods.
(d) Revaluation reserve
The revaluation reserve relates to the revaluation of land and buildings in line with the Group's policy to fair value these assets at each reporting date (note 12), net of deferred tax.
(e) Translation reserve
The translation reserve comprises all foreign currency exchange differences arising from the translation of the financial statements of foreign operations, as well as the effective portion of any foreign currency differences arising from hedges of a net investment in a foreign operation (note 24).
19 Trade and other payables
2021 2020
EUR'000 EUR'000
Non-current liabilities
Other payables 1,896 -
1,896 -
Current liabilities
Trade payables 12,621 5,917
Accruals 30,810 19,610
Contract liabilities 10,514 9,044
Value added tax 9,205 4,834
Payroll taxes 19,642 9,263
82,792 48,668
Total 84,688 48,668
Non-current liabilities
Included in non-current other payables at 31 December 2021 are retention payments of EUR1.9 million relating to construction projects. The retention payments become due where certain conditions in the construction contracts are met, usually twelve months after practical completion of the projects.
Current liabilities
Accruals include capital expenditure accruals for work in progress at year end which have not yet been invoiced and accruals in relation to costs on entering new leases and agreements for lease which have not yet been invoiced (2021: EUR8.5 million, 2020: EUR6.5 million).
Value added tax and payroll taxes
Under the warehousing of tax liabilities legislation introduced by the Financial Provisions (Covid-19) (No. 2) Bill 2020 and Finance Act 2020 (Act 26 of 2020) and amended by the Finance (Covid-19 and Miscellaneous Provisions) Act 2021, Irish VAT liabilities of EUR3.6 million (2020: EUR4.9 million) relating to the year ended 31 December 2021 have been deferred. Other VAT liabilities at 31 December 2021 of EUR0.7 million relate to UK VAT liabilities incurred in quarter four 2021.
Irish payroll tax liabilities of EUR10.0 million (2020: EUR7.8 million) relating to the year ended 31 December 2021 have been deferred under the Debt Warehousing scheme. Other payroll tax liabilities at 31 December 2021 of EUR1.8 million relate to Irish and UK payroll tax liabilities incurred in December 2021.
In the UK, VAT liabilities of GBP0.4 million (EUR0.5 million) and payroll tax liabilities of GBP0.3 million (EUR0.3 million) were deferred in 2020 and were paid by instalments during 2021. There were no further deferrals of UK VAT or payroll tax liabilities during 2021.
As at 31 December 2021, the total Irish deferred VAT liabilities of EUR8.5 million and payroll tax liabilities of EUR17.8 million, relating to both 2020 and 2021, are payable during the year ending 31 December 2022.
On 21 December 2021, the Irish Government announced the extension of the Debt Warehousing Scheme in principle following the re-introduction of Covid-19 restrictions. Subsequent to the year-end, it was confirmed that Irish VAT liabilities of EUR8.3 million and payroll tax liabilities of EUR15.6 million deferred at 31 December 2021 may be further deferred to 30 April 2023. Deferred Irish VAT liabilities of EUR0.2 million and payroll tax liabilities of EUR2.2 million do not qualify for the extension and remain payable during the year ended 31 December 2022 (note 8).
20 Provision for liabilities 2021 2020
EUR'000 EUR'000
Non-current liabilities
Insurance provision 6,454 6,747
Current liabilities
Insurance provision 1,734 1,528
8,188 8,275
The reconciliation of the movement in the provision during the year is as follows:
2021 2020
EUR'000 EUR'000
At 1 January 8,275 6,563
Provisions made during the year - charged to profit or loss 2,000 2,500
Utilised during the year (837) (758)
Reversed to profit or loss during the year (1,250) (30)
At 31 December 8,188 8,275
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 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. Claim provisions are assessed in light of claims experience and amended accordingly to ensure provisions reflect recent experience and trends. There has been a reversal of provisions made in prior periods of EUR1.3 million (2020: EUR0.03 million) which has been credited within administrative expenses.
21 Loans and borrowings
Non-current liabilities 2021 2020
EUR'000 EUR'000
Bank borrowings 313,533 314,143
Total loans and borrowings 313,533 314,143
The amortised cost of loans and borrowings at 31 December 2021 is EUR313.5 million (31 December 2020: EUR314.1 million). The drawn loan facility as at 31 December 2021 is EUR317.2 million consisting of Sterling term borrowings of GBP176.5 million (EUR210.1 million) and revolving credit facility borrowings ('RCF') of GBP90 million (EUR107.1 million). The undrawn loan facilities as at 31 December 2021 were EUR257.4 million (2020: EUR247.9 million).
On 2 November 2021, 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 continued impact of Covid-19. The Group availed of its option to extend the maturity of its debt facilities by a period of 12 months. The Group's debt facilities now consist of a EUR200 million term loan facility, with a maturity date of 26 October 2025 and a EUR364.4 million RCF: EUR304.9 million with a maturity date of 26 October 2025 and EUR59.5 million with a maturity date of 30 September 2023.
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DJ Dalata Hotel Group PLC: 2021 Preliminary -28-
The Group had agreed in July 2020 that previous covenants comprising Net Debt to EBITDA and Interest Cover would not be tested again until June 2022 ('the Previous Covenants'). These two covenants were replaced, until that date, by a Net Debt to Value covenant 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. Under the revised loan facility agreement entered into in November 2021, the Previous Covenants will now not be tested until June 2023. The Net Debt to Value covenant and the minimum liquidity restriction will remain in place until that date. The Net Debt to Value must be equal to or less than 55% at each testing date until 31 December 2022. At 30 June 2023, the Net Debt to EBITDA covenant maximum is 4.0x and the Interest Cover minimum is 4.0x. The Group is in compliance with its covenants as at 31 December 2021.
In line with IFRS 9 derecognition criteria, the Group assessed whether the terms and cash flows of the modified liabilities were substantially different as a result of this amended and restated facility agreement. The Group performed the 10% test referred to in note 1 (xxvi) (derecognition of financial liabilities accounting policy) to assess whether the discounted present value of the cash flows under the new terms, discounted using the original effective interest rate, including any lender fees paid net of any fees received, was at least 10 percent different from the discounted present value of the remaining cash flows of the original financial liability. The Group also performed a qualitative assessment by comparing the amended terms with the original terms of the facility agreement. The changes were not deemed to be substantial with the majority of them already included in the quantitative test. As a result, the loans were deemed to be non-substantially modified which required the amortised cost of the loans to be remeasured at the date of modification and led to a modification gain of EUR2.7 million being immediately recognised in profit or loss in 2021 (note 5). Costs of EUR1.2 million incurred in relation to the amendment were capitalised and are amortised to profit or loss on an effective interest rate basis over the term of the loan facility.
In July 2020, the amendment and restatement of the loan facility, which included amended covenant margin ratchets as well as an extension to the testing of the Previous Covenants, resulted in the loans and borrowings being non-substantially modified. A modification loss of EUR4.3 million (note 5) was recognised in profit or loss in 2020 as a result. Costs of EUR0.6 million incurred in relation to this amendment were capitalised to loans and borrowings.
Following a fundamental review and reform of major interest rate benchmarks undertaken globally, the Group replaced LIBOR, as its Sterling variable interest rate, with an alternative risk-free benchmark rate, Sterling Overnight Index Average 'SONIA' plus an agreed credit adjustment spread 'CAS spread'. The transition was effective for all Sterling loans and borrowings on their next roll date, post 2 November 2021. All of the Group's borrowings and related interest rate swaps had transitioned to SONIA plus CAS spread by 31 December 2021.
SONIA is calculated using the cumulative compound method, compounded using a 5-day lag. There were two approaches available to determining the CAS spread applicable on transition to SONIA. The Group elected to use the ISDA (International Swaps and Derivatives Association) historical median approach as its preferred approach. The CAS spread methodology is based on the median difference (spread) between LIBOR and SONIA calculated over the previous five year period. The CAS spread has been agreed at 11.9 basis points for loans rolling quarterly and 3.3 basis points for loans rolling monthly.
The Group has adopted the Phase 2 amendments issued by the IASB in Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. The Group has availed of the practical expedient which allows the Group to update the effective interest rate for the transition to SONIA, without having to modify the loans and borrowings which could have resulted in a modification gain or loss in profit or loss.
The Group has certain derivative financial instruments which hedge interest rate exposure on a portion of these loans (note 22). The Sterling variable interest rate on these interest rate swaps transitioned to SONIA during the year ended 31 December 2021. The Group ensured that the CAS spread applicable on the loans and borrowings matched in so far as possible the CAS spread agreed on the interest rate swaps. 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 SONIA and Euribor rates.
At 31 December 2021, property, plant and equipment, including fixtures, fittings and equipment in leased properties, with a carrying amount of EUR1,080.0 million (2020: EUR1,055.1 million) were pledged as security for loans and borrowings.
Reconciliation of movements of liabilities to cash flows arising from financing activities for the year ended 31 December 2021
Liabilities Equity
Loans and Lease Trade and Derivatives Share Share Merger Total
borrowings liabilities other payables (net) capital premium reserve
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Balance as at 31 December 2020 314,143 399,632 48,668 9,042 2,227 504,735 81,264 1,359,711
Changes from financing cash
flows
Vesting of share awards and - - - - 2 160 - 162
options
Other interest and finance costs (10,162) - (2,486) (2,637) - - - (15,285)
paid
Receipt of bank loans 13,000 - - - - - - 13,000
Repayment of bank loans (30,575) - - - - - - (30,575)
Interest on lease liabilities - (24,409) - - - - - (24,409)
Repayment of lease liabilities - (8,930) - - - - - (8,930)
Total changes from financing (27,737) (33,339) (2,486) (2,637) 2 160 - (66,037)
cash flows
Liability-related other changes
The effect of changes in foreign 20,963 9,497 753 632 - - - 31,845
exchange rates
Changes in fair value - - - (6,840) - -- - (6,840)
Interest expense on bank loans 8,908 - - - - - - 8,908
and borrowings (note 5)
Other finance costs (2,744) - 2,244 - - - - (500)
Other movements in trade and - - 35,509 - - - - 35,509
other payables
Additions to lease liabilities - 81,210 - - - - - 81,210
during the year
Interest on lease liabilities - 24,409 - - - - - 24,409
Other movements in lease - 517 - - - - - 517
liabilities
Total liability-related other 27,127 115,633 38,506 (6,208) - - - 175,058
changes
Balance as at 31 December 2021 313,533 481,926 84,688 197 2,229 504,895 81,264 1,468,732
Reconciliation of movements of liabilities to cash flows arising from financing activities for the year ended 31 December 2020
Liabilities Equity
Loans and Lease Trade and Share Share Merger
borrowings liabilities other Derivatives capital premium reserve Total
payables
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Balance as at 31 December 2019 411,739 362,101 66,163 4,523 1,851 504,488 (10,337) 1,340,528
Changes from financing cash flows
Vesting of share awards and options - - - - 6 247 - 253
Equity share placing issuance - - - - 370 - 93,980 94,350
Costs of share placing - - - - - - (2,379) (2,379)
Other interest and finance costs paid (556) - (10,408) (1,992) - - - (12,956)
Receipt of bank loans 61,486 - - - - - - 61,486
Repayment of bank loans (146,572) - - - - - - (146,572)
Interest on lease liabilities - (22,405) - - - - - (22,405)
Repayment of lease liabilities - (5,618) - - - - - (5,618)
Total changes from financing cash (85,642) (28,023) (10,408) (1,992) 376 247 91,601 (33,841)
flows
Liability-related other changes
The effect of changes in foreign (16,578) (7,219) (644) (243) - - - (24,684)
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exchange rates Changes in fair value - - - 6,754 - - - 6,754 Interest expense on bank loans and - - 9,097 - - - - 9,097 borrowings Other finance costs 4,624 - 1,146 - - - - 5,770 Other movements in trade and other - - (16,686) - - - - (16,686) payables Additions to lease liabilities during - 51,946 - - - - - 51,946 the year Interest on lease liabilities - 22,405 - - - - - 22,405 Other movements in lease liabilities - (1,578) - - - - - (1,578) Total liability-related other changes (11,954) 65,554 (7,087) 6,511 - - - 53,024 Balance as at 31 December 2020 314,143 399,632 48,668 9,042 2,227 504,735 81,264 1,359,711
Net debt is calculated in line with banking covenants and includes external loans and borrowings drawn and owed to the banking club as at 31 December 2021 (rather than the amortised cost of the loans and borrowings) less cash and cash equivalents. The below table also includes a reconciliation to net debt and lease liabilities. Interest rate swap liabilities of EUR1.0 million are not included in the below table.
Reconciliation of movement in net debt for the year ended 31 December 2021
Sterling Sterling Euro
facility facility facility Total
Loans and borrowings GBP'000 EUR'000 EUR'000 EUR'000
At 1 January 2021 269,500 299,768 14,000 313,768
Cash flows
Facilities drawn down - - 13,000 13,000
Loan repayments (3,000) (3,575) (27,000) (30,575)
Non-cash changes
Effect of foreign exchange movements - 20,963 - 20,963
At 31 December 2021 266,500 317,156 - 317,156
Cash and cash equivalents
At 1 January 2021 50,197
Movement during the year (9,085)
At 31 December 2021 41,112
Net debt at 31 December 2021 276,044
Reconciliation of net debt and lease liabilities
Net debt at 31 December 2021 276,044
Lease liabilities as at 1 January 2021 399,632
Additions 81,210
Interest on lease liabilities 24,409
Lease payments (33,339)
Remeasurement of lease liabilities 517
Translation adjustment 9,497
Lease liabilities at 31 December 2021 (note 13) 481,926
Net debt and lease liabilities at 31 December 2021 757,970
Net debt is calculated in line with banking covenants and includes external loans and borrowings drawn and owed to the banking club as at 31 December 2020 (rather than the amortised cost of the loans and borrowings) less cash and cash equivalents. The below table also includes a reconciliation to net debt and lease liabilities. Interest rate swaps of EUR9.0 million are not included in the below tables.
Reconciliation of movement in net debt for the year ended 31 December 2020
Sterling Sterling Euro
facility facility facility Total
Loans and borrowings GBP'000 EUR'000 EUR'000 EUR'000
At 1 January 2020 266,500 313,235 102,197 415,432
Cash flows
Facilities drawn down 10,000 10,986 50,500 61,486
Loan repayments (7,000) (7,875) (138,697) (146,572)
Non-cash changes
Effect of foreign exchange movements - (16,578) - (16,578)
At 31 December 2020 269,500 299,768 14,000 313,768
Cash and cash equivalents
At 1 January 2020 40,586
Movement during the year 9,611
At 31 December 2020 50,197
Net debt at 31 December 2020 263,571
Reconciliation of net debt and lease liabilities
Net debt at 31 December 2020 263,571
Lease liabilities as at 1 January 2020 362,101
Additions 51,946
Interest on lease liabilities 22,405
Lease payments (28,023)
Remeasurement of lease liabilities (1,578)
Translation adjustment (7,219)
Lease liabilities at 31 December 2020 (note 13) 399,632
Net debt and lease liabilities at 31 December 2020 663,203
22 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. The Sterling interest rate applicable to the Group's interest rate swaps was LIBOR for the year ended 31 December 2021.
Following a fundamental review and reform of major interest rate benchmarks undertaken globally, the Group replaced LIBOR with an alternative risk-free benchmark rate, Sterling Overnight Index Average 'SONIA' plus an agreed credit adjustment spread 'CAS spread' during the year ended 31 December 2021. The Group had fully transitioned its sterling variable rate to SONIA plus CAS spread on all its derivatives and Sterling denominated loans and borrowings by 31 December 2021. The Group ensured that the CAS spread agreed on the Group's interest rate swaps matched in so far as possible, the CAS spread on the Group's borrowings. The weighted average quarterly CAS spread agreed for the Group's derivatives effective as at 31 December 2021 is 11.1 basis points and the quarterly CAS spread on the Group's loans and borrowings 11.9 basis points (note 21). The Group has updated its hedging documentation for SONIA. Although, the CAS spreads are slightly different on the hedged item and the hedging instrument, it is marginal and as a result, the hedge relationships continue to be fully hedge effective as at 31 December 2021 and hedge accounting continues to be applied (notes 21, 24).
The Group currently holds the following derivatives as at 31 December 2021:
-- Two interest rate swaps with an effective date of 3 February 2020 which hedge the SONIA benchmark rate onGBP101.5 million of the Sterling denominated borrowings for the period to the original maturity of the termborrowings on 26 October 2023. These swaps fix the SONIA benchmark rate to 1.39%.
-- Two interest rate swaps with an effective date of 26 October 2018 and a maturity date of 26 October 2023which hedge the SONIA benchmark rate on GBP75.0 million of the entirety of the Sterling denominated borrowings. Theseswaps fix the SONIA benchmark rate at 1.27% on a notional of GBP63.0 million and 1.28% on a notional of GBP12.0 millionof Sterling denominated borrowings.
-- Four interest rate swaps were employed with an effective date of 26 October 2023 and a maturity date of26 October 2024 which hedge the SONIA benchmark rate on the Sterling term denominated borrowings. These swaps fixthe SONIA benchmark rate between 0.95% and 0.96%.
As at 31 December 2021, the interest rate swaps cover 100% of the Group's term Sterling denominated borrowings of GBP176.5 million for the period to 26 October 2024. The extended year of the term debt, to 26 October 2025, is currently unhedged. All derivatives have been designated as hedging instruments for the purposes of IFRS 9.
Fair value 2021 2020
EUR'000 EUR'000
Non-current assets
Interest rate swap assets 832 -
Non-current liabilities
Interest rate swap liabilities (1,029) (9,042)
Net derivative liabilities (197) (9,042)
2021 2020
EUR'000 EUR'000
Included in other comprehensive income
Fair value gain/(loss) on interest rate swaps 6,208 (6,511)
Reclassified to profit or loss (note 5) 2,637 1,992
8,845 (4,519)
The amount reclassified to profit or loss represents the incremental interest expense arising under the interest rate swaps because actual LIBOR rates were lower than the swap rates.
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DJ Dalata Hotel Group PLC: 2021 Preliminary -30-
23 Deferred tax
2021 2020
EUR'000 EUR'000
Deferred tax assets 20,161 12,344
Deferred tax liabilities (42,896) (39,404)
Net deferred tax liabilities (22,735) (27,060)
2021 2020
Movements in year EUR'000 EUR'000
At 1 January - net liability (27,060) (55,831)
Credit for year - to profit or loss (note 9) 5,441 7,997
(Charge)/credit for year - to other comprehensive income (1,116) 20,774
At 31 December - net liability (22,735) (27,060)
The majority of the deferred tax liabilities result from the Group's policy of ongoing revaluation of land and buildings. Where the carrying value of a property in the financial statements is greater than its tax base cost, the Group recognises a deferred tax liability. This is calculated using applicable Irish and UK corporation tax rates. The use of these rates, in line with the applicable accounting standards, reflects the intention of the Group to use these assets for ongoing trading purposes. Should the Group dispose of a property, the actual tax liability would be calculated with reference to rates for capital gains on commercial property. The deferred tax liabilities have increased from EUR39.4 million at 31 December 2020 to EUR42.9 million at 31 December 2021. This relates primarily to an increase in taxable gains recognised on properties held through other comprehensive income and other temporary differences on assets through profit or loss during the year ended 31 December 2021, which incorporates the impact of the remeasurement of the UK liabilities at the 25% rate.
The majority of the deferred tax assets of EUR20.2 million recognised at 31 December 2021 relate to tax losses and interest carried forward by the Group. A deferred tax asset of EUR17.0 million (2020: EUR10.0 million) has been recognised in respect of cumulative tax losses and interest carried forward at 31 December 2021 of EUR80.1 million (31 December 2020: EUR64.0 million). As a result of the impact of Covid-19, the Group incurred corporation tax losses during the year ended 31 December 2021. These tax losses can be carried forward indefinitely for offset against future taxable profits. The losses incurred during 2021 cannot be carried back to earlier periods. The Group also has tax losses carried forward from earlier periods, EUR13.0 million of the 2020 losses will be carried back during 2022 and offset against profits generated in 2019, which should generate future corporation tax refunds of EUR1.6 million during 2022.
Included within the EUR80.1 million tax losses carried forward at 31 December 2021, is a balance of EUR19.9 million (31 December 2020: EUR11.2 million) relating to interest expenses carried forward in the UK. In the UK, there is a limit on corporation tax deductions for interest expense incurred. The unused interest expense carried forward by the UK Group companies at 31 December 2021 can be carried forward indefinitely and offset against future taxable profits.
The increase in the deferred tax asset recognised on tax losses and interest carried forward from EUR10.0 million at 31 December 2020 to EUR17.0 million at 31 December 2021, relates to the increase in tax losses and interest recognised during the year ended 31 December 2021 and the impact of the remeasurement of deferred tax recognised in respect of UK tax losses and interest at the 25% rate.
A deferred tax asset has been recognised in respect of Irish and UK tax losses and interest, on the basis that it is probable that, after the carry back of tax losses to earlier periods, there will be sufficient taxable profits in future periods to utilise the carried forward tax losses and interest.
In considering the available evidence to support the recognition of the deferred tax assets, the Group takes into consideration the impact of both positive and negative evidence including historical financial performance, projections of future taxable income and the enacted tax legislation.
In preparing forecasts to determine future taxable profits, there are a number of positive factors underpinning the recoverability of the deferred tax assets:
-- Prior to the Covid-19 pandemic, the Group displayed a history of profit growth every year. Once normaltrading resumes, the Group currently forecasts that this profit growth will recommence;
-- In line with economic and industry analysis, it is expected that the hospitality industry will recover inthe coming years;
-- The Group is confident that it is well positioned to take advantage of opportunities that will ariseduring 2022 and into the future, including the opening of a large pipeline of new hotels which will contributeparticularly to the utilisation of UK tax losses, which can be carried forward and utilised on a group basis. As at31 December 2021, the Group had 11 new hotels in the pipeline (eight in the UK, three in Ireland) which are due toopen from quarter 1 2022 onwards, which will contribute to future growth. There are also extensions planned to becarried out on three of the Group's existing hotels; and
-- The absence of expiry dates for carrying forward UK and Irish tax losses.
The Group also considered the relevant negative evidence in determining the recoverability of deferred tax assets:
-- The quantum of profits required to be earned to utilise the tax losses carried forward; and
-- Forecasts of future taxable profitability are subject to inherent uncertainty which is heightened due tothe ongoing impact of Covid-19 on the hospitality industry.
Based on the Group's financial projections, the deferred tax asset in respect of Irish tax losses carried forward of EUR24.4 million is estimated to be recovered in full by the year ending 31 December 2027, with the majority being recovered by the end of the year ending 31 December 2022. The deferred tax asset in respect of UK tax losses and interest expense carried forward of EUR55.7 million is estimated to be recovered in full in by the year ending 31 December 2030, with the majority being recovered by the end of the year ending 31 December 2026.
The Group acquired Hotel La Tour Birmingham Limited in July 2017. At that time, the company had tax trading losses forward of GBP8.2 million (EUR9.6 million) which were not recognised as an asset in the statutory accounts of that company. Hotel La Tour Birmingham Limited sold Hotel La Tour Birmingham (now Clayton Hotel Birmingham) in August 2017, at which time a taxable capital gain of GBP6.0 million (EUR7.0 million) arose. The Group opted to roll over this capital gain by reducing the future tax base cost of capital assets.
Due to uncertainty over the future utilisation of these tax losses, the remaining related deferred tax asset was derecognised during the year ended 31 December 2020. At 31 December 2021, there are unrecognised tax losses in respect of the Clayton Hotel Birmingham trade of GBP7.9 million (EUR9.4 million). The tax effect of these unrecognised tax losses at 31 December 2021 is GBP2.0 million (EUR2.4 million) if the losses were to be utilised at the 25% corporation tax rate that will be in effect from 1 April 2023.
There is no deferred tax asset recognised in the hedging reserve at 31 December 2021 due to uncertainty in obtaining a tax benefit for the cash flow hedges in future periods.
Deferred tax arises from temporary differences relating to:
Balance as at 31 December 2021
Net balance at 1 Recognised in Recognised Net Deferred tax Deferred tax
January 2021 profit or loss in OCI deferred assets liabilities
tax
2021 2021 2021 2021 2021 2021
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Property, plant and (35,830) (1,478) (1,116) (38,424) 1,064 (39,488)
equipment
Leases (1,272) (15) - (1,287) 2,121 (3,408)
Tax losses and interest 10,042 6,934 - 16,976 16,976 -
carried forward
Net deferred tax (27,060) 5,441 (1,116) (22,735) 20,161 (42,896)
(liabilities)/assets
Balance as at 31 December 2020
Net balance at 1 Recognised in Recognised Net Deferred tax Deferred tax
January 2020 profit or loss in OCI deferred assets liabilities
tax
2020 2020 2020 2020 2020 2020
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Property, plant and (56,287) (880) 21,337 (35,830) 722 (36,552)
equipment
Leases (1,798) 526 - (1,272) 1,580 (2,852)
Tax losses and interest 1,691 8,351 - 10,042 10,042 -
carried forward
Other 563 - (563) - - -
Net deferred tax (55,831) 7,997 20,774 (27,060) 12,344 (39,404)
(liabilities)/assets
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DJ Dalata Hotel Group PLC: 2021 Preliminary -31-
The Group has multiple legal entities across the UK and Ireland that will not settle current tax liabilities and assets on a net basis and their assets and liabilities will not be realised on a net basis. Therefore, deferred tax assets and liabilities are recognised on an individual entity basis and are not offset on a Group or jurisdictional basis.
24 Financial instruments and 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 is exposed to external economic risk associated with the continuing impacts from the Covid-19 pandemic which has severely impacted the business and operations of the Group during the year ended 31 December 2021 and 31 December 2020 (note 1).
The Group uses financial instruments throughout its business: loans and borrowings and cash and cash equivalents are used to
finance the Group's operations; trade and other receivables, trade and other 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.
The following tables show the carrying amount of Group financial assets and liabilities including their values in the fair value hierarchy for the year ended 31 December 2021. The tables do not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. A fair value disclosure for lease liabilities is not required.
Financial assets Financial assets Total
measured at measured at carrying
fair value amortised cost amount Level Level 2 Level Total
1 3
2021 2021 2021 2021 2021 2021 2021
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Financial assets
Derivatives (note 22)- hedging instruments 832 - 832 832 832
Trade and other receivables excluding - 12,012 12,012
prepayments (note 15)
Cash at bank and in hand (note 17) - 41,112 41,112
832 53,124 53,956
Financial Financial Total
liabilities liabilities
measured at measured at carrying
fair value amortised cost amount Level Level 2 Level Total
1 3
2021 2021 2021 2021 2021 2021 2021
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Financial liabilities
Bank loans (note 21) - (313,533) (313,533) (313,533) (313,533)
Trade and other payables and accruals (note - (45,327) (45,327)
19)
Derivatives (note 22)- hedging instruments (1,029) - (1,029) (1,029) (1,029)
(1,029) (358,860) (359,889)
The following tables show the carrying amount of Group financial assets and liabilities including their values in the fair value hierarchy for the year ended 31 December 2020. The tables do not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. A fair value disclosure for lease liabilities is not required.
Financial assets Financial assets Total
measured at measured at carrying
fair value at amortised amount Level Level 2 Level Total
cost 1 3
2020 2020 2020 2020 2020 2020 2020
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Financial assets
Trade and other receivables excluding - 7,860 7,860
prepayments (note 15)
Cash at bank and in hand (note 17)
- 50,197 50,197
- 58,057 58,057
Financial Financial Total
liabilities liabilities
measured at measured at carrying
fair value amortised cost amount Level Level 2 Level Total
1 3
2020 2020 2020 2020 2020 2020 2020
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Financial liabilities
Bank loans (note 21) - (314,143) (314,143) (314,143) (314,143)
Trade payables and accruals (note 19) - (25,527) (25,527)
Derivatives (note 22)- hedging instruments (9,042) - (9,042) (9,042) (9,042)
(9,042) (339,670) (348,712)
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 in Level 1 that are observable for the financialinstrument, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3: Inputs for the financial instrument that are not based on observable market data (unobservableinputs).
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 year ended 31 December 2021, 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 the receivables and payables with a remaining term of less than one year or on demand balances, the carrying value net of impairment provision, where appropriate, is a reasonable approximation of fair value. The non-current receivables and payables 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. There is no difference between margins available in the market at year end and the margins that the Group was paying at the year end. a. Credit risk
Exposure to credit risk
Credit risk is the risk of financial loss to the Group arising from granting credit to customers and from investing cash and cash equivalents with banks and financial institutions.
Trade and other receivables
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The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. Other receivables include amounts owed from the government in the form of wage subsidies totalling EUR1.1 million at 31 December 2021 (2020: EUR1.3 million), which were received in January 2022. The Group is also due EUR0.8 million (2020: EUR0.7 million) from a key institutional landlord under a contractual agreement where the landlord reimburses the Group for certain amounts spent on capital expenditure in that specific property. Non-current receivables include rent deposits of EUR2.3 million (2020: EUR2.3 million) owed by two landlords at the end of the lease term. Other than this, 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 (note 15).
The ageing profile of trade receivables at 31 December 2021 is provided in note 15. Management does not expect any significant losses from trade receivables that have not been provided for as shown in note 15, contract assets, accrued income or other receivables.
The Group has a contractual agreement with I-RES whereby I-RES will purchase a residential development that the Group is developing on the site of the former Tara Towers hotel. The overall sale value of the transaction is EUR42.4 million (excluding VAT) with costs of EUR36.3 million incurred as at 31 December 2021 (note 14). These contract fulfilment costs are not considered financial assets and are not covered by the credit risk disclosures, however, the Group continues to monitor the potential for any future credit risk. There is no evidence of such as at 31 December 2021.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and give rise to credit risk on the amounts held with 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 Group reviews regularly the credit rating of each bank and, if necessary, takes action to ensure there is appropriate cash and cash equivalents held with each bank based on their credit rating. During the year ended 31 December 2021, cash and cash equivalents were held in line within predetermined limits depending on the credit rating of the relevant bank/financial institution.
The carrying amount of the following financial assets represents the Group's maximum credit exposure. The maximum exposure to credit risk at year end was as follows:
Carrying Carrying
amount amount
2021 2020
EUR'000 EUR'000
Trade receivables 5,519 2,238
Other receivables 4,177 4,297
Contract assets 1,224 720
Accrued income 1,092 605
Cash at bank and in hand 41,112 50,197
53,124 58,057 b. Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities. In general, the Group's approach to managing liquidity risk is to ensure as far as possible that it will always have sufficient liquidity, through a combination of cash and cash equivalents, cash flows and undrawn credit facilities to:
-- Fund its ongoing activities;
-- 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 continued to tightly manage cash and liquidity in 2021. A number of strategies, similar to those in 2020, were executed to manage the impact of Covid-19 on the Group, including:
-- Availing of government wage subsidy schemes, other non-payroll related grants, and government assistancein the form of commercial rates waivers and warehousing of tax liabilities, where possible, in Ireland and the UK(note 8);
-- Cancellation/postponement of all non-essential non-committed capital expenditure; and
-- Proactive cost control and strict working capital management in all hotels and Central Office.
Furthermore, in November 2021, the Group took additional action to provide enhanced flexibility and liquidity of its debt facilities. Firstly, the Group extended the maturity of its debt facilities by 12 months. The Group also pushed out the testing of EBITDA-related covenants by an additional 12 months, to 30 June 2023, to prevent any potential breaches in covenants as a result of the delayed recovery from Covid-19 on trailing 12 month EBITDA. Therefore, the temporary suite of covenants including 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 EUR50.0 million), will remain in place for an additional 12 month period, until 30 March 2023. The Group's debt facilities now consist of a EUR200 million term loan facility, with a maturity date of 26 October 2025 and a EUR364.4 million revolving credit facility ('RCF') of EUR304.9 million with a maturity date of 26 October 2025 and EUR59.5 million with a maturity date of 30 September 2023.
In 2020, other liquidity strengthening actions were taken such as the cancellation of the 2019 final dividend originally recommended by the Board, the sale and leaseback of Clayton Hotel Charlemont for EUR64.2 million in April 2020 and an equity raise in September 2020 raising net proceeds of EUR92.0 million.
The Group monitors its Debt and Lease Service Cover, which is 1.6 times for the year ended 31 December 2021 (31 December 2020: 0.1 times), in order to monitor gearing and liquidity taking into account both bank and lease financing. The Group have prepared financial projections and subjected them to scenario testing which also supports ongoing liquidity risk assessment and management.
Despite the impact of Covid-19, the Group remains in a strong liquidity position with cash and undrawn facilities of EUR298.5 million at 31 December 2021. The Group was in full compliance with its covenants as at 31 December 2021.
The following are the contractual maturities of the Group's financial liabilities at 31 December 2021, including estimated undiscounted interest payments. In the below table, bank loans are repaid in line with their maturity dates, even though the Group has the flexibility to repay and draw the revolving credit facility throughout the term of the facilities which would improve its liquidity position. The non-cancellable undiscounted lease cashflows payable under lease contracts are set out in note 13. A positive cash flow in the below table indicates the variable rate for interest rate swaps, based on current forward curves, is forecast to be higher than fixed rates.
Contractual cashflows
Carrying value Total 6 months 6 - 12 1 - 2 2 - 5
2021 2021 or less months years years
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Bank loans (313,533) (354,267) (5,273) (5,593) (10,363) (333,038)
Trade and other payables and accruals (45,327) (45,327) (43,408) (23) (1,896) -
Interest rate swaps (1,029) (1,004) (786) (249) 31 -
(359,889) (400,598) (49,467) (5,865) (12,228) (333,038)
The equivalent disclosure for the prior year is as follows:
Contractual cashflows
Carrying value Total 6 months 6 - 12 1 - 2 2 - 5
2020 2020 or less months years years
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Bank loans (314,143) (339,289) (4,110) (4,353) (15,299) (315,527)
Trade payables and accruals (25,527) (25,527) (24,781) (746) - -
Interest rate swaps (9,042) (9,036) (1,293) (1,366) (2,634) (3,743)
(348,712) (373,852) (30,184) (6,465) (17,933) (319,270)
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. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
(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 22) which hedge the variability in cash flows attributable to interest rate risk. All such transactions are carried out within the guidelines set by the Board. The Group seeks to apply hedge accounting to manage volatility in profit or loss.
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DJ Dalata Hotel Group PLC: 2021 Preliminary -33-
Following a fundamental review and reform of major interest rate benchmarks undertaken globally, the Group replaced LIBOR, as its Sterling variable interest rate, to SONIA plus an agreed credit adjustment spread 'CAS spread' from 2 November 2021. The transition was effective for all Sterling loans and borrowings on their next rollover date, post 2 November 2021. All of the Group's borrowings and related interest rate swaps had transitioned to SONIA by 31 December 2021 (notes 21, 22). The impact of the IBOR reform is limited to the Sterling variable rates applicable for the Group's loans and borrowings and interest rate swaps. At 31 December 2021, the Group had GBP266.5 million (EUR317.2 million) of loans and borrowings that were impacted by the IBOR reform.
The Group has adopted the Phase 2 amendments issued by the IASB in Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. The Group has availed of the practical expedient which allows the Group to update the effective interest rate for the transition to SONIA, without having to modify the loans and borrowings which could have resulted in a modification gain or loss in profit or loss.
The Group has updated its hedge documentation and hedge relationships to reflect the changes to the hedged item, hedging instrument and hedged risk for the updated benchmark interest rate. The Group continues to determine the existence of an economic relationship between the hedging instrument and hedged item based on the reference interest rates, maturities and the notional amounts. The Group assesses whether the derivative designated in each hedging relationship is expected to be effective in offsetting changes in cash flows of the hedged item using the hypothetical derivative method. The Group ensured that the CAS spread applicable on the loans and borrowings matched in so far as possible, the agreed CAS spread on the interest rate swaps (notes 21, 22). Under the Phase 2 amendments, hedge accounting is not discontinued solely because of the IBOR reform. Therefore, even though the CAS spreads are slightly different on the hedged item and the hedging instrument as a result of the IBOR reform, it has a marginal impact and the hedging instruments continue to effectively hedge the interest rate risks on the hedged items. As a result, the hedge relationships continue to be fully hedge effective as at 31 December 2021 and hedge accounting continues to be applied.
As at 31 December 2021, the interest rate swaps cover 100% of the Group's term Sterling denominated borrowings of GBP176.5 million for the period to 26 October 2024. The extended year of the term debt, to 26 October 2025, is currently unhedged.
The interest rate profile of the Group's interest-bearing financial liabilities as reported to the management of the Group is as follows:
Nominal amount
2021 2020
EUR'000 EUR'000
Variable rate instruments
Financial liabilities - borrowings 317,156 313,768
Effect of interest rate swaps (210,049) (196,323)
107,107 117,445
These interest-bearing financial liabilities do not equate to amortised cost of loans and borrowings and instead represent the drawn amounts of loans and borrowings which are owed to external lenders.
The weighted average interest rate for 2021 was 3.55% (2020: 2.76%), of which 2.68% (2020: 1.94%) related to margin.
The interest expense for the year ended 31 December 2021 has been sensitised in the following tables for a reasonably possible change in variable interest rates. SONIA plus spread replaced LIBOR as the Group's Sterling variable rate for the latter part of 2021. As a result, the Group has considered what a likely change in both LIBOR/ SONIA could have been in 2021. The Group has reviewed and analysed both the forward curve statistics for the remaining loan tenor and the historical interest rates for a period of 10 years, which includes periods of interest rate volatility. A similar approach has been taken for EURIBOR, which is the variable rate on euro-denominated loans and borrowings.
In relation to the upward sensitivity, the Group believes that a reasonable change in the Sterling variable interest rate would be an uplift to 1.4%, being the highest 3 month SONIA rate plus spread, based on current forward curves. The Group believes approximately 1% is reasonable for the euro variable rate sensitivity which is the highest 3 month EURIBOR rate taking into account both historical information and forward curves for the periods reviewed.
In relation to the downward sensitivity, the Group has used an interest rate of zero as there is a floor embedded in the loan facilities, which prevents the Group from benefiting from any reduction in rates sub-zero, however, it results in an additional interest cost for the Group on hedged loans.
At 31 December 2021, all Sterling term borrowings (GBP176.5 million) up to 26 October 2024 were hedged with interest rate swaps. The Group does not currently hedge its variable interest rates on its Sterling RCF. There was no euro-denominated RCF as at 31 December 2021.
The following table shows the sensitised weighted average interest rates where the variable rate is sensitised upwards or downwards. The weighted average interest rate includes the impact of hedging on hedged portions of the underlying loans. Changes in LIBOR/SONIA rates have had a minimal impact due to the majority of Sterling borrowings being hedged (note 22). The impact on profit or loss is shown hereafter. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.
2021 actual weighted average variable Sensitised weighted average Sensitised weighted average
benchmark rate
as a result of upward as a result of downward
sensitivity sensitivity
Euro variable rate 0% 1.0% 0%
Sterling variable 0.9%
rate 1.3% 0.9%
%
Cash flow sensitivity analysis for variable rate instruments
Effect on profit or loss
Increase
Decrease in rate
in rate
EUR'000 EUR'000
2021
(Increase)/decrease in interest on loans and borrowings (1,586) 75
Decrease/(increase) in tax credit 198 (9)
(Increase)/decrease in loss (1,388) 66
2020
(Increase)/decrease in interest on loans and borrowings (1,494) 323
Decrease/(increase) in tax credit 187 (40)
(Increase)/decrease in loss (1,307) 283
Contracted maturities of estimated interest payments from swaps
The following table indicates the periods in which the cash flows associated with the interest rate swaps are expected to occur and the carrying amounts of the related hedging instruments for the year ended 31 December 2021. A positive cash flow in the below table indicates the variable rate for interest rate swaps, based on current forward curves, is forecast to be higher than fixed rates. The below amounts only refer to the undiscounted interest forecasted to be incurred under the interest rate swap liabilities:
31 December 2021
Carrying 12 months More than
Amount Total or less 1 year
EUR'000 EUR'000 EUR'000 EUR'000
Interest rate swaps
Liabilities (1,029) (1,004) (1,035) 31
The table overleaf indicates the periods in which the cash flows associated with cash flow hedges are expected to impact profit or loss and the carrying amounts of the related hedging instruments for the year ended 31 December 2021. A positive cash flow in the table overleaf indicates the variable rate for interest rate swaps, based on current forward curves, is forecast to be higher than fixed rates. The following amounts only refer to the undiscounted interest forecasted to be incurred under the interest rate swap liabilities.
31 December 2021
Carrying 12 months More than
Amount Total or less 1 year
EUR'000 EUR'000 EUR'000 EUR'000
Interest rate swaps
Liabilities (1,029) (1,004) (1,035) 31
The following table indicates the periods in which the cash flows associated with the interest rate swaps are expected to occur and the carrying amounts of the related hedging instruments for the year ended 31 December 2020:
31 December 2020
Carrying 12 months More than
Amount Total or less 1 year
EUR'000 EUR'000 EUR'000 EUR'000
Interest rate swaps
Liabilities (9,042) (9,036) (2,659) (6,377)
The following table indicates the periods in which the cash flows associated with cash flow hedges are expected to impact profit or loss and the carrying amounts of the related hedging instruments for the year ended 31 December 2020:
31 December 2020
Carrying 12 months More than
Amount Total or less 1 year
EUR'000 EUR'000 EUR'000 EUR'000
Interest rate swaps
Liabilities (9,042) (9,036) (2,659) (6,377)
(ii) Foreign currency risk
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DJ Dalata Hotel Group PLC: 2021 Preliminary -34-
The Group is exposed to 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 acquisitions and developments in the UK by obtaining funding through external borrowings denominated in Sterling. These borrowings amounted to GBP266.5 million (EUR317.2 million) at 31 December 2021 (2020: GBP266.5 million (EUR296.4 million)) and are designated as net investment hedges. The net investment hedge was fully effective during the year.
This enables gains and losses arising on retranslation of those foreign currency borrowings to be recognised in Other Comprehensive Income, providing a partial offset in reserves against the gains and losses arising on translation of the net assets of those UK operations.
Sensitivity analysis on transactional risk
The Group performed a sensitivity analysis on the impact on the Group's loss after tax and equity, had foreign exchange ('fx') rates been different. The Group reviewed the historical average monthly EUR:GBP fx rates over a period of 15 years which incorporates both periods of economic growth and economic recession. The Group have also reviewed the foreign exchange forwards curve for the loan tenor. Based on this data, the highest and lowest average EUR:GBP fx rates have been used for the purposes of the sensitivities, respectively, 0.92 and 0.71.
Loss Equity
Strengthening Weakening Strengthening Weakening
of Euro of Euro of Euro of Euro
EUR'000 EUR'000 EUR'000 EUR'000
Decrease/(increase) on interest costs on Sterling 741 (2,373) 741 (2,373)
loans
Impact on tax credit (71) 228 228
(71)
Decrease/(increase) in loss
670 (2,145) 670 (2,145)
(Decrease)/increase in equity 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. Management monitors the return on capital to ordinary shareholders.
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 typically to achieve a pre-tax leveraged return on equity of 15% on investments and a rent cover of 1.85 times in year three for leased assets.
Typically, the Group monitors capital using a ratio of Net Debt to Adjusted EBITDA after fixed rent which excludes the effects of IFRS 16, in line with its banking covenants. This is calculated based on the prior 12 month period. The Net Debt to Adjusted EBITDA before taking account of the accounting impact of IFRS 16 as at 31 December 2021 is 9.2x (31 December 2020: not relevant due to losses). Following the amendment and restatement of the facility agreement in November 2021, this covenant is not required to be tested until 30 June 2023, however, it continues to be monitored by the Group and serves to set margins on the Group's loans. The Group monitors Net Debt to Value, which is a temporary covenant under the Group's loan facility agreement, and is 24% at 31 December 2021 (31 December 2020: 23%). Under the facility agreement, Net Debt to Value must be 55% or lower. The Group also monitors Net Debt and Lease Liabilities to Adjusted EBITDA which, at 31 December 2021, is 12.0x (31 December 2020: not relevant due to losses).
The Group's approach to capital management has ensured that it continues to maintain a very strong financial position and an appropriate level of gearing despite the continuing impacts from the Covid-19 pandemic. The Group entered the Covid-19 pandemic in 2020 with a strong balance sheet, and despite the material impact that Covid-19 had on the Group's financial performance, the Group remains in a strong position with significant financial headroom. As at 31 December 2021, the Group had property, plant and equipment of EUR1,243.9 million.
The Group's asset backing provided it with the ability to realise funds from the sale and leaseback of Clayton Hotel Charlemont in 2020 whilst its level of gearing ensured the Group continues to be able to meet its funding costs of both interest and rent and retain the support of its banking club and institutional landlords. The Group completed a share placing in September 2020, raising EUR92.0 million after costs. The purpose of this was to materially strengthen the Group's financial position, provide additional headroom in the event of a more prolonged impact from Covid-19 and enable the commencement of the development of a hotel in Shoreditch, London, on a site owned by the Group. The Board reviews the Group's capital structure on an ongoing basis including as part of the normal strategic and financial planning processes. It ensures that it is appropriate for the hotel industry given its exposure to demand shocks and the normal economic cycles.
25 Commitments
Section 357 Companies Act 2014
Dalata Hotel Group plc, as the parent company of the Group and for the purposes of filing exemptions referred to in Section 357 of the Companies Act 2014, has entered into guarantees in relation to the liabilities of the Republic of Ireland registered subsidiary companies which are listed below:
- Suvanne Management Limited - Candlevale Limited - Carasco Management Limited - DHG Arden Limited - Heartside Limited - Merzolt Limited - Palaceglen Limited - Pondglen Limited - Songdale Limited - Bayvan Limited - Amelin Commercial Limited - Lintal Commercial Limited - DHG Burlington Road Limited - Pillo Hotels Limited - Dalata Support Services Limited - Loadbur Limited - Bernara Commercial Limited - DHG Cordin Limited - Adelka Limited - Leevlan Limited - DS Charlemont Limited - Fonteyn Property Holdings Limited - DHG Barrington Limited - DHG Dalton Limited - Fonteyn Property Holdings No. 2 Limited - DHG Glover Limited - DHG Eden Limited - DHG Harton Limited - Galsay Limited - DHG Indigo Limited - DHG Fleming Limited
Capital commitments
The Group has the following commitments for future capital expenditure under its contractual arrangements.
2021 2020
EUR'000 EUR'000
Contracted but not provided for 37,783 30,608
This relates primarily to the development of the new build hotel development of Maldron Merrion Road and the residential development (comprising 69 residential units) on the site of the former Tara Towers hotel (note 14) of EUR9.5 million and the construction of a new hotel in Shoreditch, London (EUR24.1 million) which are contractually committed. It also includes committed capital expenditure at other hotels in the Group.
The Group has further commitments in relation to fixtures, fittings and equipment in some of its leased hotels. Under certain lease agreements, the Group has committed to spending a percentage of turnover on capital expenditure in respect of fixtures, fittings and equipment in the leased hotels over the life of the lease. The Group has estimated this commitment to be EUR50.0 million (31 December 2020: EUR51.2 million) spread over the life of the various leases with the majority ranging in length from 20 years to 34 years. The turnover figures used in this estimate are based on 2019 revenues which reflects a more normal year of trading.
26 Related party transactions
Under IAS 24 Related Party Disclosures, the Group has related party relationships with shareholders and Directors of the Company.
Remuneration of key management
Key management is defined as the Directors of the Company and does not extend to any other members of the Executive Management Team. In addition, the share-based payments expense for key management in 2021 was EUR0.5 million (2020: EUR0.7 million).
There are no other related party transactions requiring disclosure in accordance with IAS 24 in these consolidated financial statements.
27 Subsequent events
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In February 2022, the Group commenced a new operating lease with Art-Invest Real Estate of Hotel Nikko in Düsseldorf, Germany. The hotel re-opened under the Group's new management from 15 February 2022. This hotel represents the Group's first hotel in Continental Europe and is in line with the Group's ambition to establish a presence in large commercially attractive European cities. The lease term is 20 years, with two 5 year tenant extension options. The rent, with a guaranteed minimum, is determined by the revenue performance of the hotel.
In January 2022, the Group opened its new Clayton Hotel Manchester City Centre, which it is leasing on a 35 year lease. In February 2022, the Group also opened its new Maldron Hotel Manchester City Centre, which it is leasing on a 35 year lease
There were no other subsequent events which would require an adjustment or a disclosure thereon in these consolidated financial statements.
28 Subsidiary undertakings
A list of all subsidiary undertakings at 31 December 2021 is set out below:
Country of Ownership
Subsidiary undertaking Incorporation Activity Direct Indirect
DHG Glover Limited1 Ireland Holding company 100% -
-
DHG Fleming Limited1 Ireland Financing company 100%
DHG Harton Limited1 Ireland Holding company 100% -
Cenan BV2 Netherlands Financing company - 100%
DHGL Limited1 Ireland Holding company - 100%
Dalata Limited1 Ireland Holding company - 100%
Hanford Commercial Limited1 Ireland Hotel and catering - 100%
Anora Commercial Limited1 Ireland Hotel and catering - 100%
Ogwell Limited1 Ireland Hotel and catering - 100%
Caruso Limited1 Ireland Hotel and catering - 100%
CI Hotels Limited1 Ireland Hotel and catering - 100%
Tulane Business Management Limited1 Ireland Hotel and catering - 100%
Dalata Support Services Limited1 Ireland Hotel management - 100%
Fonteyn Property Holdings Limited1 Ireland Hotel management - 100%
Fonteyn Property Holdings No. 2 Limited1 Ireland Asset management - 100%
Suvanne Management Limited1 Ireland Hotel and catering - 100%
Carasco Management Limited1 Ireland Hotel and catering - 100%
Amelin Commercial Limited1 Ireland Hotel and catering - 100%
Lintal Commercial Limited1 Ireland Hotel and catering - 100%
Bernara Commercial Limited1 Ireland Property investment - 100%
Pillo Hotels Limited1 Ireland Dormant company - 100%
Loadbur Limited1 Ireland Property holding company - 100%
Heartside Limited1 Ireland Hotel and catering - 100%
Pondglen Limited1 Ireland Hotel and catering - 100%
Candlevale Limited1 Ireland Hotel and catering - 100%
Songdale Limited1 Ireland Hotel and catering - 100%
Palaceglen Limited1 Ireland Hotel and catering - 100%
Adelka Limited1 Ireland Property holding company - 100%
Bayvan Limited1 Ireland Property holding company - 100%
Leevlan Limited1 Ireland Hotel and catering - 100%
DHG Arden Limited1 Ireland Hotel and catering - 100%
DHG Barrington Limited1 Ireland Hotel and catering - 100%
DHG Cordin Limited1 Ireland Property holding company - 100%
DS Charlemont Limited1 Ireland Hotel and catering - 100%
Galsay Limited1 Ireland Hotel and catering - 100%
Merzolt Limited1 Ireland Hotel and catering - 100%
DHG Burlington Road Limited1 Ireland Hotel and catering - 100%
DT Sussex Road Operations Limited1 (In Liquidation) Ireland Dormant company - 100%
DHG Eden Limited1 Ireland Hotel and catering - 100%
DHG Dalton Limited1 Ireland Property holding company - 100%
Williamsberg Property Limited1 Ireland Property holding company - 100%
Oak Lodge Management Company Limited by Guarantee1 Ireland Management company - 100%
DHG Indigo Limited1 Ireland Holding company - 100%
1 The registered address of these companies is 4th Floor, Burton Court, Burton Hall Drive, Sandyford, Dublin 18.
2 The registered address of this company is Van Heuven Goedhartlaan 935A, 1181 LD Amstelveen, The Netherlands.
Country of Ownership Subsidiary undertaking Incorporation Activity Direct Indirect DHG Belfast Limited3 N Ireland Hotel and catering - 100% DHG Derry Limited3 N Ireland Hotel and catering - 100% DHG Derry Commercial Limited3 N Ireland Property holding company - 100% DHG Brunswick Limited3 N Ireland Hotel and catering - 100% Dalata UK Limited4 UK Holding company - 100% Dalata Cardiff Limited4 UK Hotel and catering - 100% Trackdale Limited4 UK Hotel and catering - 100% Islandvale Limited4 UK Hotel and catering - 100% Crescentbrook Limited4 UK Hotel and catering - 100% Hallowridge Limited4 UK Hotel and catering - 100% Rush (Central) Limited4 UK Property holding company - 100% Hotel La Tour Birmingham Limited4 UK Hotel and catering - 100% SRD (Trading) Limited4 UK Hotel and catering - 100% SRD (Management) Limited4 UK Hotel and catering - 100% Hintergard Limited5 Jersey Property holding company - 100% Dalata Deutschland Holding GmbH6 Germany Holding company - 100% Dalata Deutschland Hotelbetriebs GmbH6 Germany Dormant company - 100%
3The registered address of these companies is Butcher Street, Londonderry, County Derry BT48 6HL, UK.
4The registered address of these companies is St Mary Street, Cardiff, Wales, CF10 1GD, UK.
5The registered address of this company is 12 Castle Street, St Helier Jersey, JE2 3RT.
6The registered address of this company is Thurn-und-Taxis-Platz 6, 60313 Frankfurt am Main, Germany.
During the year ended 31 December 2021, following a Group internal restructure, the following entities were merged into their parent entity, DHGL Limited, - Dalata Management Services Limited, Cavenford DAC, Vizmol Limited, Sparrowdale Limited and Swintron Limited. These entities were holding entities, with the exception of Dalata Management Services Limited, which was a management company.
29 Earnings per share
Basic earnings per share is computed by dividing the loss/profit for the year available to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is computed by dividing the loss/profit for the year available to ordinary shareholders 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 loss per share for the years ended 31 December 2021 and 31 December 2020.
2021 2020 Loss attributable to shareholders of the parent (EUR'000) - basic and diluted (6,329) (100,678) Adjusted loss attributable to shareholders of the parent (EUR'000) - basic and diluted (14,290) (53,864) Loss per share - Basic (2.8) cents (50.9) cents Loss per share - Diluted (2.8) cents (50.9) cents Adjusted loss per share - Basic (6.4) cents (27.2) cents Adjusted loss per share - Diluted (6.4) cents (27.2) cents Weighted average shares outstanding - Basic 222,831,030 197,751,585 Weighted average shares outstanding - Diluted 222,831,030 197,751,585
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There is no difference between basic and diluted loss per share for the year ended 31 December 2021 and 31 December 2020. Potential ordinary shares are only treated as dilutive if their dilution results in a decreased earnings per share or increased loss per share. There have been no adjustments made to the number of weighted average shares outstanding in calculating adjusted basic or adjusted diluted earnings per share in 2021 and 2020.
Adjusted earnings per share (basic and diluted) is presented as an alternative performance measure 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 distort comparability either year on year or with other similar businesses (note 2).
2021 2020 Reconciliation to adjusted loss for the year EUR'000 EUR'000 Loss before tax (11,436) (111,461) Finance costs 32,878 37,953 Profit/(loss) before tax and finance costs 21,442 (73,508) Adjusting items (note 2) Net property revaluation movements through profit or loss (6,790) 30,836 Impairment of goodwill - 3,226 (Net reversal of previous impairment charges)/ impairment charges of right-of-use assets (39) 7,541 Net reversal of previous impairment charges/ (impairment charges) of fixtures, fittings and (120) 1,015 equipment Loss on sale and leaseback - 1,673 Remeasurement gain on right-of-use assets (277) - Hotel pre-opening expenses 1,927 81 Adjusted profit/(loss) before tax and finance costs 16,143 (29,136) Finance costs (32,878) (37,953) Adjusting items in finance costs Modification (gain)/loss on amended debt facility (note 5) (2,704) 4,272 Adjusted loss before tax (19,439) (62,817) Tax credit 5,107 10,783 Adjusting items in tax credit Tax adjustment for adjusting items 42 (1,830) Adjusted loss for the year (14,290) (53,864)
30 Approval of the financial statements
The financial statements were approved by the Directors on 28 February 2022.
Supplementary Financial Information
Alternative Performance Measures ('APM') and other definitions
The Group reports certain alternative performance measures ('APMs') that are not defined under International Financial Reporting Standards ('IFRS'), which is the framework under which the consolidated financial statements are prepared. These are sometimes referred to as 'non-GAAP' measures.
The Group believes that reporting these APMs provides useful supplemental information which, when viewed in conjunction with the IFRS financial information, provides stakeholders with a more comprehensive understanding of the underlying financial and operating performance of the Group and its operating segments.
These APMs are primarily used for the following purposes:
-- to evaluate underlying results of the operations; and
-- to discuss and explain the Group's performance with the investment analyst community.
The APMs can have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of the results in the consolidated financial statements which are prepared under IFRS. These performance measures may not be calculated uniformly by all companies and therefore may not be directly comparable with similarly titled measures and disclosures of other companies.
The definitions of and reconciliations for certain APMs are contained within the consolidated financial statements. A summary definition of these APMs together with the reference to the relevant note in the consolidated financial statements where they are reconciled is included below. Also included below is information pertaining to certain APMs which are not mentioned within the consolidated financial statements but which are referred to in other sections of this report. This information includes a definition of the APM, in addition to a reconciliation of the APM to the most directly reconcilable line item presented in the consolidated financial statements. References to the consolidated financial statements are included as applicable. i. Adjusting items
Items which are not reflective of normal trading activities or distort comparability either year on year or with other similar businesses. The adjusting items are disclosed in note 2 and note 29 to the consolidated financial statements. Adjusting items with a cash impact are set out in APM xi below. ii. Adjusted EBITDA
Adjusted EBITDA is an APM representing 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, adjusted to show the underlying operating performance of the Group and excludes items which are not reflective of normal trading activities or distort comparability either year on year or with other similar businesses.
Reconciliation: Note 2 iii. EBITDA and Segments EBITDA
EBITDA is an APM representing 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.
Reconciliation: Note 2
Segments EBITDA represents 'Adjusted EBITDA' before central costs, share-based payments expense and other income for each of the reportable segments: Dublin, Regional Ireland and the UK. It is presented to show the net operational contribution of leased and owned hotels in each geographical location.
Reconciliation: Note 2 iv. EBITDAR and Segments EBITDAR
EBITDAR is an APM representing earnings before lease costs, 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.
Segments EBITDAR represents Segments EBITDA before variable lease costs for each of the reportable segments: Dublin, Regional Ireland and the UK.
Reconciliation: Note 2 v. Adjusted (loss)/earnings per share (EPS) (basic and diluted)
Adjusted EPS (basic and diluted) is presented as an alternative performance measure 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 distort comparability either year on year or with other similar businesses.
Reconciliation: Note 29 vi. Net Debt
Net debt is calculated in line with banking covenants and includes external loans and borrowings drawn and owed to the banking club as at year end (rather than the amortised cost of the loans and borrowings), less cash and cash equivalents.
Reconciliation: Note 21 vii. Net Debt and Lease Liabilities
Net Debt (see definition vi) and Lease Liabilities at year end.
Reconciliation: Note 21 viii. Net Debt to Adjusted EBITDA excluding the impact of IFRS 16
Net Debt (see definition vi) divided by the 'Adjusted EBITDA excluding the impact of IFRS 16' (see definition xvi) after deducting fixed lease costs (see glossary) for the year ended 31 December. This APM is presented to show the Group's financial leverage before the application of IFRS 16 Leases.
Reconciliation: Refer below ix. Net Debt and Lease Liabilities to Adjusted EBITDA
Net Debt and Lease Liabilities (see definition vii) divided by the 'Adjusted EBITDA' (see definition ii) for the year. This APM is presented to show the Group's financial leverage after including the accounting estimate of lease liabilities following the application of IFRS 16.
Reconciliation: Refer below x. Net Debt to Value
Net Debt (see definition vi) divided by the valuation of property assets as provided by external valuers at year end. This APM is presented to show the gearing level of the Group under banking covenants.
Reconciliation: Refer below
31 December 31 December
Reconciliation of Net Debt APMs - definitions (vi), (vii), Reference in financial 2021 2020
(viii), (ix), (x) statements
EUR'000 EUR'000
Loans and borrowings Statement of financial 313,533 314,143
position
Exclude accounting impact of IFRS 9 3,623 (375)
External loans and borrowings drawn Note 21 317,156 313,768
Less cash and cash equivalents Statement of financial (41,112) (50,197)
position
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Net Debt (APM vi) (A) Note 21 276,044 263,571
Lease Liabilities - current and non-current Statement of financial 481,926 399,632
position
Net Debt and Lease Liabilities (APM vii) (B) Note 21 757,970 663,203
Adjusted EBITDA (C) Note 2 63,237 18,692
Adjusted EBITDA excluding the impact of IFRS 16 (APM xvi) (D) 29,973 (11,949)
Net Debt to Adjusted EBITDA excluding the impact of IFRS 161 (A/ 9.2x n/a
(APM viii) D)
Net Debt and Lease Liabilities to Adjusted EBITDA (APM ix) (B/ 12.0x 35.5x
C)
Valuation of property assets as provided by external valuers (E) 1,146,274 1,124,256
2
Net Debt to Value (APM x) (A/ 24% 23%
E)
1 Net Debt to Adjusted EBITDA excluding the impact of IFRS 16 is not applicable in 2020 as Adjusted EBITDA excluding the impact of IFRS 16 was negative.
2 Property assets valued exclude assets under construction and fittings, fixtures and equipment in leased hotels. xi. Free Cash Flow
Net cash from operating activities less amounts paid for interest, finance costs, refurbishment capital expenditure, fixed lease payments and after adding back the cash paid in respect of items that are deemed one-off and thus not reflecting normal trading activities or distorting comparability either year on year or with other similar businesses (see definition i). This APM is presented to show the cash generated from operating activities to fund acquisitions, development expenditure, repayment of debt and dividends.
Reconciliation: Refer below xii. Free cash flow per share (FCFS)
Free Cash Flow (see definition xi) divided by the weighted average shares outstanding - basic. This APM forms the basis for the performance condition measure in respect of share awards made after 3 March 2021.
Historically, EPS for LTIP performance measure purposes has been adjusted to exclude the impact of items that are deemed one-off and thus not reflecting normal trading activities or distorting comparability either year on year or with other similar businesses. The Group intends to take a similar approach with FCFS to encourage the vigorous pursuit of opportunities, and by excluding certain one-off items, drive the behaviours we seek from the executives and encourage management to invest for the long-term interests of shareholders.
Reconciliation: Refer below xiii. Debt and Lease Service Cover
Free Cash Flow (see definition xi) before payment of lease costs, interest and finance costs divided by the total amount paid for lease costs, interest and finance costs. This APM is presented to show the Group's ability to meet its debt and lease commitments.
Reconciliation: Refer below
Reference in financial 2021 20203
Reconciliation of APMs (xi), (xii), (xiii) statements
EUR'000 EUR'000
Net cash from operating activities Statement of cash flows 90,579 22,804
Other interest and finance costs paid Statement of cash flows (15,285) (12,956)
Refurbishment capital expenditure paid (4,298) (9,751)
Fixed lease payments:
- Interest paid on lease liabilities Statement of cash flows (24,409) (22,405)
- Repayment of lease liabilities Statement of cash flows (8,930) (5,618)
37,657 (27,926)
Exclude adjusting items with a cash effect:
Net impact from tax deferrals from government Covid-19 Note 8 (12,776) (13,484)
support schemes1
Pre-opening costs Note 2 1,927 81
Debt facility fees Note 21 1,202 550
Free cash inflow/(outflow) (APM xi) A 28,010 (40,779)
Weighted average shares outstanding - basic B Note 29 222,831,030 197,751,585
Free Cash Flow per share (APM xii) - cents A/B 12.6 (20.6)
Total lease costs paid2 33,458 30,964
Other interest and finance costs paid Statement of cash flows 15,285 12,956
Total lease costs, interest and finance costs paid C 48,743 43,920
Free Cash Flow before lease and finance costs D= 76,753 3,141
A+C
Debt and Lease Service Cover (APM xiii) D/C 1.6x 0.1x
1 The Group has deferred VAT and payroll taxes under government support schemes. This non-recurring initiative was introduced by government Covid-19 support schemes and allows the temporary retention of an element of taxes collected during 2020 and 2021 on behalf of tax authorities. The Group deferred VAT and payroll taxes amounting to EUR13.6 million during 2021 (2020: EUR13.5 million) which are expected to be payable during 2022. This was offset by amounts totalling EUR0.8 million for UK VAT and payroll tax liabilities that were deferred during 2020 and paid in 2021. The impact of these deferrals have been excluded in the calculation of Free Cash Flow to show cash flows from trading for the year.
2 Total lease costs paid comprises payments of fixed and variable lease costs during the year
3 The 2020 comparative has been amended to exclude the impact of amend and restate facility fees paid during that year for consistency with the presentation in 2021. As a result, Free Cash Outflow for 2020 has decreased from (EUR41,329k) to (EUR40,779k). xiv. Normalised Return on Invested Capital
Adjusted EBIT divided by the Group's average invested capital. The Group defines invested capital as total assets less total liabilities at the year end and excludes the accumulated revaluation gains/losses included in property, plant and equipment, Net Debt, derivative financial instruments and taxation related balances. The Group also excludes the impact of deferred VAT and payroll tax liabilities payable at year end as these are quasi-debt in nature and the investment in the construction of future assets or newly opened, owned assets which have not yet reached full operating performance. The Group's net assets are adjusted to reflect the average level of acquisition investment spend and the average level of working capital for the accounting period. The average invested capital is the average of the invested capital for the year.
Adjusted EBIT represents the Group's operating loss for the year restated to remove the impact of adjusting items as defined in APM (i) and the impact of adopting IFRS 16 by replacing depreciation of right-of-use assets with fixed lease costs and amortisation of lease costs.
The Group presents this APM to provide stakeholders with a more meaningful understanding of the underlying financial and operating performance of the Group. The Group excludes assets which have not yet reached full operating performance and assets under construction at year end and therefore did not generate a return to show the underlying performance of the Group. Due to the significant impact of Covid-19 on the Group's financial performance, the return was negative for 2020 as the Group incurred losses in this year.
Reconciliation: Refer Below
2021 2020
Reconciliation of APM (xiv) Reference in financial statements
EUR'000 EUR'000
Operating profit/(loss) Statement of comprehensive income 21,442 (73,508)
Add back:
Total adjusting items as per the financial statements Note 2 (5,299) 44,372
Depreciation of right-of-use assets Note 2 19,522 20,663
Less:
Additional amortisation of intangible assets if IAS 17 still applied (45) (44)
Fixed lease costs (33,264) (30,641)
Amortisation of lease costs (328) (454)
Adjusted EBIT excluding IFRS 16 A 2,028 (39,612)
Net assets at balance sheets date Statement of financial position 957,413 932,780
Less revaluation uplift in property, plant and equipment1 (239,015) (224,348)
Add back Net Debt Note 21 276,044 263,571
Add back net deferred tax liability Statement of financial position 22,735 27,060
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Add back current tax liability Statement of financial position 282 91 Add back net derivative liabilities Statement of financial position 197 9,042 Add back deferred VAT and payroll tax liabilities Note 8 26,261 13,484 Less assets under construction at year end Note 12 (79,094) (61,886) Less contract fulfilment costs Statement of financial position (36,255) (22,374) Normalised invested capital 928,568 937,420 Average normalised invested capital B 932,994 874,702 Normalised Return on Average Invested Capital (APM xiv) A/B 0.2% n/a
1 Includes the combined net revaluation uplift included in property, plant and equipment since the revaluation policy was adopted in 2014 or in the case of hotel assets acquired after this date, since the date of acquisition. The carrying value of land and buildings, revalued at 31 December 2021, is EUR1,088.8 million (2020: EUR1,058.5 million). The value of these assets under the cost model is EUR849.8 million (2020: EUR834.2 million). Therefore, the revaluation uplift included in property, plant and equipment is EUR239.0 million (2020: EUR224.3 million). Refer to note 12 to the financial statements. xv. Modified EBIT
For the purposes of the annual bonus evaluation, EBIT is modified to remove the effect of fluctuations between the annual and budgeted EUR/GBP exchange rate and other items which are considered, by the Remuneration Committee, to fall outside of the framework of the budget target set for the year. Foreign exchange movements represent the difference on converting EBITDA from UK hotels at actual foreign exchange rates during 2021 versus budgeted foreign exchange rates, after depreciation. The budgeted EUR/GBP exchange rate was 0.90 in 2021 (2020: 0.90).
Reconciliation: Refer below
Reference in financial 2021 2020
Reconciliation of APM (xv) statements
EUR'000 EUR'000
Loss before tax Statement of (11,436) (111,461)
comprehensive income
Interest on lease liabilities Note 2 24,409 22,405
Other interest and finance costs Note 2 8,469 15,548
Remove impact of adjusting items Note 2 (5,299) 44,372
Foreign exchange movements2 (621) (2)
Modified EBIT - APM (xv) 15,522 (29,138)
2 Foreign exchange movements:
UK EBITDA - GBP 17,458 2,867
UK EBITDA translated at budgeted FX rates - Euro 19,398 3,186
UK EBITDA translated at actual FX rates - Euro Note 2 20,662 3,399
Impact of movements in foreign exchange (A) (1,264) (213)
Depreciation of property, plant and equipment, right-of-use assets and 12,413 12,010
amortisation on UK assets - GBP
Depreciation of property, plant and equipment, right-of-use assets and 13,793 13,344
amortisation on UK assets translated at budgeted FX rates - Euro
Depreciation of property, plant and equipment, right-of-use assets and 14,436 13,555
amortisation on UK assets translated at actual FX rates - Euro
Impact of movements in foreign exchange (B) 643 211
Foreign exchange movements (A+B) (621) (2)
Excluding IFRS 16 numbers
Due to the significant impact from the adoption of IFRS 16 on the Group's consolidated financial statements from 2019 onwards, additional APMs were included to provide the reader with more information to help explain the Group's underlying operating performance. The Group now believe a sufficient period of time has passed since IFRS 16 was first adopted and there are a number of periods available to enable comparison of performance following the adoption of IFRS 16. As a result, the Group is reducing the number of APMs that it presents excluding the impact of IFRS 16. As targets for the Group's existing share-based payment schemes and the banking facilities agreements and covenants under those agreements continue to be calculated excluding the impact of IFRS 16, the Group continues to present and reconcile the following APMs. xvi. Adjusted EBITDA excluding the impact of IFRS 16
Earnings before adjusting items, interest and finance costs, tax, depreciation, amortisation of intangible assets as defined above and restated to remove the impact of adopting IFRS 16, replacing IFRS 16 right-of-use asset depreciation and lease liability interest with lease costs as calculated under IAS 17.
Reconciliation: Refer Below
2021 2020
Reconciliation of APM (xvi) Reference in financial statements
EUR'000 EUR'000
Operating profit/(loss) Statement of comprehensive income 21,442 (73,508)
Add back:
Total adjusting items as per the financial statements Note 2 (5,299) 44,372
Depreciation of property, plant and equipment Note 2 27,033 26,607
Depreciation of right-of-use assets Note 2 19,522 20,663
Amortisation of intangible assets Note 2 539 558
Less fixed lease costs (33,264) (30,641)
Adjusted EBITDA excluding the impact of IFRS 16 (APM xvi) 29,973 (11,949) xvii. (Loss)/earnings per share excluding IFRS 16 (basic) and Adjusted loss per share excluding IFRS 16(basic)
Basic (loss)/earnings per share restated to remove the impact of adopting IFRS 16, including replacing IFRS 16 right of-use-asset depreciation, lease liability interest, net reversal of previous impairment charges/(impairment charges) of right-of-use assets and fixtures, fittings and equipment and the remeasurement gain on right of-use-assets with the lease costs as calculated under IAS 17. This APM forms the basis for the performance condition measure in respect of share awards made before 3 March 2021.
Historically, EPS for LTIP performance measure purposes has been adjusted to exclude items that are deemed one-off and thus not reflecting normal trading activities or distorting comparability either year on year or with other similar businesses. The Group wants to encourage the vigorous pursuit of opportunities, and by excluding certain one-off items, drive the behaviours we seek from the executives and encourage management to invest for the long-term interests of shareholders. Adjusted loss per share excluding IFRS 16 is defined as basic (loss)/earnings per share before adjusting items (see definition i) and restated to remove the impact of adopting IFRS 16, including replacing IFRS 16 right-of-use asset depreciation and lease liability interest with lease costs under IAS 17.
Reconciliation: Refer below
Reference in 2021 2020
Reconciliation of APM (xvii) financial
statements EUR'000 EUR'000
Statement of
Loss for the year comprehensive (6,329) (100,678)
income
Exclude adjusting items not
applicable under IAS 171:
Net reversal of previous impairment charges/(impairment
charges) of right-of-use assets and fixtures, fittings and Note 2 (159) 8,556
equipment
Remeasurement gain of Note 2 (277) -
right-of-use asset
Additional loss on sale and Note 12 - (5,977)
leaseback
Depreciation of right-of-use Note 2 19,522 20,663
assets
Interest on lease liabilities Note 2 24,409 22,405
Amortisation of lease costs (328) (454)
under IAS 17
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Less fixed lease costs (33,264) (30,641)
Tax impact of IFRS 16 (2,105) (3,096)
Profit/(Loss) for the year (A) 1,469 (89,222)
excluding the impact of IFRS 16
Remove impact of adjusting
items excluding IFRS 161:
Hotel pre-opening expenses Note 2 1,927 81
Net revaluation movements
through profit or loss as if (6,835) 30,792
IAS 17 still applied
Impairment of goodwill Note 2 - 3,226
Modification (gain)/loss on Note 5 (2,704) 4,272
amended debt facility
Loss on sale and leaseback of - 7,650
Clayton Hotel Charlemont2
Tax impact of adjusting items 275 (544)
Adjusted loss for the year
excluding the impact of IFRS 16 (B) (5,868) (43,745)
Weighted average shares (C) Note 29 222,831,030 197,751,585
outstanding - basic
Basic earnings/(loss) per share (45.1)
excluding the impact of IFRS 16 (A/C) 0.7 cents cents
(APM xvii)
Adjusted loss per share (22.1)
excluding the impact of IFRS 16 (B/C) (2.6) cents cents
- basic (APM xvii)
1 Right-of-use assets are not recognised under the previous accounting standard, IAS 17 Leases. Therefore, there would have been no impairment, impairment reversal of right-of-use assets or remeasurement gain on right-of-use assets. As the impairment of fixtures, fittings and equipment related to the impairment of right-of-use assets, this impairment is also excluded.
2 In the prior year, the accounting for the loss on the sale and leaseback of Clayton Hotel Charlemont differs under IFRS 16 compared to the previous accounting standard, IAS 17. Under IFRS 16, the property is derecognised upon sale of the asset and replaced with a right-of-use asset following the leaseback. A portion of the EUR7.7 million difference between the fair value prior to sale and the sales proceeds was capitalised as part of the right-of-use asset, with the remaining balance recorded in profit or loss. Under the previous accounting standard, the entire difference must be recorded immediately as a loss in profit or loss.
Glossary
Revenue per available room (RevPAR)
Revenue per available room is calculated as total rooms revenue divided by the number of available rooms, which is also equivalent to the occupancy rate multiplied by the average daily room rate achieved. This is a commonly used industry metric which facilitates comparison between companies.
Average Room Rate (ARR) - also Average Daily Rate (ADR)
ARR is calculated as rooms revenue divided by the number of rooms sold. This is a commonly used industry metric which facilitates comparison between companies.
'Like for Like' occupancy, ARR and RevPAR KPIs
'Like for Like' occupancy, ARR and RevPAR KPIs include a full year performance of all hotels regardless of when acquired. The Dublin portfolio excludes the Ballsbridge Hotel as the hotel effectively has not traded since March 2020. The UK portfolio excludes all new hotels which have not benefited from a full 12 months of trading. Therefore, Maldron Hotel Glasgow City is excluded as the hotel is newly opened since August 2021. Where applicable, the performance statistics disclosed for January and February 2022 also exclude Clayton Hotel Manchester City Centre and Maldron Hotel Manchester City Centre which opened in early 2022 and Hotel Nikko, Dusseldorf which was taken over in February 2022. This is a commonly used industry metric and provides an indication of the underlying revenue performance.
Segments EBITDAR margin
Segments EBITDAR margin represents 'Segments EBITDAR' as a percentage of the total revenue for the following Group segments: Dublin, Regional Ireland and the UK. Also referred to as Hotel EBITDAR margin.
Effective tax rate
The Group's tax credit for the year divided by the loss before tax presented in the consolidated statement of comprehensive income.
Fixed lease costs
Fixed costs incurred by the lessee for the right to use an underlying asset during the lease term as calculated under IAS 17 Leases.
Hotel assets
Hotel assets represents the value of property, plant and equipment per the consolidated statement of financial position at 31 December 2021.
Refurbishment capital expenditure
The Group typically allocates approximately 4% of annual revenue to refurbishment capital expenditure to ensure the portfolio remains fresh for its customers and adheres to brand standards. Due to the impact of the Covid-19 pandemic from March 2020, this ratio did not apply for 2021 and 2020.
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ISIN: IE00BJMZDW83, IE00BJMZDW83 Category Code: MSCH TIDM: DAL,DHG LEI Code: 635400L2CWET7ONOBJ04 OAM Categories: 1.1. Annual financial and audit reports Sequence No.: 145860 EQS News ID: 1290509 End of Announcement EQS News Service =------------------------------------------------------------------------------------
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