DJ Dalata Hotel Group PLC: 2023 Half Year Report
Dalata Hotel Group PLC (DAL,DHG)
Dalata Hotel Group PLC: 2023 Half Year Report
29-Aug-2023 / 07:00 GMT/BST
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Delivering Growth
Adjusted EBITDA1 up 24% to EUR103 million in H1 2023
ISE: DHG LSE: DAL
Dublin and London | 29 August 2023: 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 six-month
period ended 30 June 2023.
H1 2023
EURmillion H1 2023 H1 2022
vs H1 2022
Hotel revenue1 284.8 220.2 +29%
Hotel EBITDAR1 115.6 90.3 +28%
Adjusted EBITDA1 103.4 83.5 +24%
Profit before tax 50.4 52.0 -3%
Basic earnings per share (cents) 18.8 21.0 -10%
Adjusted basic earnings per share1 (cents) 18.4 13.1 +40%
Free Cashflow1 59.2 56.6 +5%
Free Cashflow per Share1 (cents) 26.5 25.4 +4%
Group key performance indicators (as reported)
RevPAR (EUR)1 109.41 88.61 +23%
Average room rate (ARR) (EUR)1 139.50 126.89 +10%
Occupancy % 78.4% 69.8%
Group key performance indicators ('Like for like' or 'LFL')
'Like for like' or 'LFL' RevPAR (EUR)1 112.09 91.28
as a percentage of 2022 equivalent levels 123%
CONTINUING EXCELLENT OPERATING PERFORMANCE
-- Adjusted EBITDA1 up 24% to EUR103.4 million in H1 2023
-- Hotel revenue1 growth of 29% to EUR284.8 million in H1 2023
-- 'LFL' H1 2023 RevPAR1 of EUR112.09 up 23% on H1 2022
-- 'LFL' H1 2023 Hotel EBITDAR margin1 of 41.4% up 1.0% on H1 2019 (40.4%)
-- H1 2023 Profit before tax of EUR50.4 million
-- H1 2023 Free Cashflow1 of EUR59.2 million (+5% on H1 2022)
-- Announcing today, the Board has declared an interim dividend of 4.0 cent per share, representing dividendpayment of c. EUR8.9 million
CONTINUING TO DELIVER ON OUR AMBITIOUS GROWTH STRATEGY
-- Growing asset portfolio - PPE now EUR1.6 billion, 11% increase since 31 December 2022 (EUR1.4 billion), 5% ofwhich relates to revaluation uplift on existing properties
-- Secured two London owned hotels YTD (one in February, one in July), adding 280 rooms to our UK portfoliofor consideration of GBP97.7 million (EUR112.3 million). Both hotels commenced trading under Dalata in July 2023,growing London room portfolio by 64%
-- Maldron Hotel Shoreditch, London (157 rooms) to be completed in Q2 2024, bringing London room portfolioto 876
-- Three further leased hotels (677 rooms) under construction in key UK cities - Liverpool, Brighton, andManchester, expected to open in Q2 2024
-- Experienced and skilled Acquisitions and Development team with a track record of securing opportunitiesin competitive markets, targeting prime city locations with strong mix of corporate and leisure businessprincipally in the UK and continental Europe
CREATING LONG-TERM SHAREHOLDER VALUE WHILE MAINTAINING FINANCIAL DISCIPLINE
-- EUR0.5 billion of property value growth since IPO
-- Low gearing position provides balance sheet strength and ability to drive growth, enabling opportunisticacquisitions
-- 11% Net Debt to Value1 (of owned hotel portfolio), with cash and undrawn facilities of EUR413.9 million
-- High quality leased hotel portfolio delivered H1 2023 EBITDA (after rent)1 of EUR17.5 million at 1.7x rentcover1
-- Balance Sheet NAV per share1 of EUR6.26 at 30 June 2023 (+11% on 31 December 2022: EUR5.63)
-- Normalised Return on Invested Capital1 of 13.3% in the twelve months ended 30 June 2023 (year ended 31December 2022: 11.6%)
-- Well positioned and fully hedged on term loan (GBP176.5 million), with interest rate swaps in place fixingSONIA benchmark rate between c. 1.3% and 1.4% until 26 October 2023, reducing to c. 1.0% from then on until 26October 2024
INVESTING IN OUR PEOPLE, OUR GREATEST ASSET
-- 519 employees currently on award-winning graduate and development courses, 59,375 Dalata Online coursescompleted in H1 2023
-- 285 internal promotions in H1 2023, growing portfolio creates excellent opportunities for future leadersof the business
-- Dalata Employer Brand launched earlier this year to position Dalata as clear employer of choice in eachof its markets
-- Awarded 'Investors in Diversity' Silver accreditation, having received Bronze last year
RELENTLESS FOCUS ON SUSTAINABILITY
-- Completed detailed assessment on how we may commit to Science Based Targets initiative (SBTi) undercurrent draft guidance and identified a pathway to deliver on near-term targets (2029 - 2033)
-- Aspire to commit to SBTi Building Sector targets, subject to the receipt and form of final guidanceexpected in Q4 2023 (the direct purchase of new green energy would need to be recognised as an applicable targetreduction, as accepted within other sector guidance). Actively engaged in the SBTi draft guidance consultationprocess
-- ESG Risk Rating ranked in top 10% in industry by Sustainalytics (July 2022: 37th percentile) and 'AA'rated by MSCI
-- 24% reduction in Scope 1 & 2 carbon emissions per room sold achieved in H1 2023 versus H1 2019 (target of20% reduction on 2019 full year levels by 2026) due to increased sustainability focus and management
OUTLOOK
Following a very successful start to 2023, the Group is optimistic for the remainder of the year and its future growth prospects.
Dalata's 'like for like' Group RevPAR1 is expected to be EUR140 for the July/August period, an increase of 5% compared to the same period in 2022. 'Like for like' RevPAR1 in July/August is expected to be 5% ahead of 2022 levels in Dublin, 8% in Regional Ireland and 5% in the UK. Recent hotel portfolio additions continue to perform well, with Clayton Hotel London Wall and Maldron Hotel Finsbury Park, London opening under Dalata brands in July.
The Group has entered into fixed pricing contracts for approximately 80% of its projected gas and electricity consumption until December 2024. Gas and electricity costs (net of energy supports received) for the first six months of 2023 amounted to approximately EUR15 million, based on expected consumption levels we expect a reduction in these costs to approximately EUR14 million for the second half of 2023 given improved pricing.
Recovery of international travel, including resurgent UK Airport traffic statistics and record numbers at Dublin Airport, provides a positive backdrop for the markets in which we operate. While we continue to monitor potential slowdowns in demand as a result of high inflation levels, we are not seeing any such indicators.
As announced previously, the Board has adopted a progressive dividend policy with payment based on a percentage of profit after tax. The Board has declared an interim dividend of 4.0 cent per share payable on 6 October 2023 to all ordinary shareholders on the share register at close of business on the record date of 15 September 2023.
DERMOT CROWLEY, DALATA HOTEL GROUP CEO, COMMENTED:
"Our performance year to date has been exceptional, thanks to all of our teams throughout the business, whose commitment and dedication are evident in the results announced today and in the continuous delivery of our ambitious growth strategy.
We have continued to expand our asset portfolio with the two recent high-quality acquisitions in London which are both performing well. This speaks to the strength of our balance sheet and our development team's ability to identify and deliver additional rooms in times of market volatility and uncertainty. Since IPO, we have delivered EUR0.5 billion in property value growth on our developments and acquisitions. In addition, we have our growing leased portfolio which is currently delivering EUR17.5 million EBITDA (after rent)1 in H1 2023 equating to a very strong 1.7x rent cover1. As we open our current pipeline and secure new opportunities, I am confident that we will continue to create further value through the combined strength of our development and operating teams supported by our investment capacity. Our firepower potential provides scope to grow our property assets by EUR750 million in the medium term beyond our currently announced pipeline.
The Group has delivered a record set of financial results and reported excellent customer and employee satisfaction scores. We have responded effectively to the challenge of rising costs through cost and revenue management initiatives, a focus on reducing utility consumption and adopting innovation across all areas of the business. Our ongoing investment in consumer research ensures that customer insights are continuously used to inform and guide decisions, from hotel designs to the food and beverage offerings we serve our customers. As a result of these efforts, we achieved a 'like for like' hotel EBITDAR margin1 of 41.4% in H1 2023, exceeding the equivalent H1 2019 margin by 1.0%. As a company, we have taken a reasonable approach to pricing; our average room rate1 in Dublin during the four-month period from May to August was EUR177. We remain mindful that the current cost environment is highly dynamic, and our innovation and cost management measures will need to keep pace.
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I am delighted to report that Dalata has recently been awarded the 'Investors in Diversity' Silver mark, which is one of many areas of focus in our continued efforts to deliver on our commitments to grow responsibly. Sustainability continues to be central to our strategy, and we achieved a 24% reduction on our Scope 1 & 2 carbon emissions per room sold in H1 2023 versus H1 2019, remaining on-track to exceed our short-term target of a 20% reduction on 2019 full year levels by 2026.
I look forward to the remainder of the year with confidence in our ability to continue to create opportunities, to grow and to create value for our shareholders whilst ensuring that our hotels continue to provide an excellent customer experience and a great place to work."
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 52 three and four-star hotels with 11,239 rooms and a pipeline of over 1,100 rooms. The Group currently has 31 owned hotels, 18 leased hotels and three management contracts. Dalata successfully operates Ireland's two largest hotel brands, the Clayton and the Maldron Hotels. For the six-month period ended 30 June 2023, Dalata reported revenue of EUR284.8 million and a profit after tax of EUR42.0 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 BST today 29 August 2023.
-- For conference call details, please register here
-- The webcast will be available here
Please allow sufficient time for registration.
Contacts
Dalata Hotel Group plc investorrelations@dalatahotelgroup.com Dermot Crowley, CEO Tel +353 1 206 9400 Carol Phelan, CFO Graham White, Head of Investor Relations 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.
HALF YEAR 2023 FINANCIAL PERFORMANCE
EURmillion Six months ended 30 June Six months ended 30 June
2023 2022
Hotel revenue1 284.8 220.2
Hotel EBITDAR1 115.6 90.3
Hotel variable lease costs (1.8) (1.3)
Hotel EBITDA1 113.8 89.0
Other income (excluding gain on disposal of property, plant and 0.6 0.6
equipment)
Central costs (7.4) (4.9)
Share-based payments expense (3.6) (1.2)
Adjusted EBITDA1 103.4 83.5
Adjusting items2 1.4 17.9
Group EBITDA1 104.8 101.4
Depreciation of property, plant and equipment and amortisation (15.4) (14.2)
Depreciation of right-of-use assets (14.9) (13.0)
Operating profit 74.5 74.2
Interest on lease liabilities (20.9) (17.9)
Other interest and finance costs (3.2) (4.3)
Profit before tax 50.4 52.0
Tax charge (8.4) (5.3)
Profit for the period 42.0 46.7
Earnings per share (cents) - basic 18.8 21.0
Adjusted earnings per share1 (cents) - basic 18.4 13.1
Hotel EBITDAR margin1 40.6% 41.0%
Relative to H1 2019 Hotel EBITDAR margin +20bps +60 bps
Group KPIs (as reported) Six months ended 30 June 2023 Six months ended 30 June 2022
RevPAR (EUR) 109.41 88.61
Occupancy 78.4% 69.8%
Average room rate (ARR) (EUR) 139.50 126.89
'Like for like' Group KPIs1
RevPAR (EUR) 112.09 91.28
RevPAR as a percentage of equivalent 2022 levels 123%
Occupancy 79.7% 71.3%
Average room rate (ARR) (EUR) 140.66 127.98
Quarterly 'like for like' Group KPIs1 Q1 2023 Q2 2023
RevPAR (EUR) 89.60 134.34
RevPAR as a percentage of equivalent 2022 levels 144% 112%
Occupancy 72.2% 87.1%
Average room rate (ARR) (EUR) 124.07 154.26
Summary of hotel performance
For the six-month period ended 30 June 2023, the Group generated hotel revenue1 of EUR284.8 million, representing an increase of 29% compared to the same period in 2022. This increase is driven by strong performance at existing hotels, growing hotel revenue1 by EUR44.5 million in H1 2023 which reflected both the Q1 2023 recovery versus Q1 2022 (which had some Covid restrictions) in addition to ongoing room rate growth. The seven hotels added to the portfolio during 2022, together contributed a period-on-period increase of EUR24.6 million as they ramped up or delivered a full period of trading. This was partially offset by the disposal of Clayton Crown Hotel, London in June 2022, resulting in reduced hotel revenue1 of EUR2.2 million.
'Like for like' Group RevPAR1 for the six months ended 30 June 2023 was EUR112.09, up from EUR91.28 (+23%) for the same period in 2022. RevPAR growth has been driven by sustained demand across domestic customer segments along with a strong return of international visitors.
The Group's decentralised model has been highly successful in managing the challenging inflationary environment through the use of dynamic pricing, innovation, cost management and an increase in sustainability initiatives delivering a reduction in utility consumption per room sold. Hotel EBITDAR margin1 for the first half of 2023 was 1.0% ahead of margins achieved for the same period in 2019 on a 'like for like'1 basis.
EURmillion Hotel revenue1 Adjusted EBITDA1 Six months ended 30 June 2022 220.2 83.5 Hotels added during 2022 24.6 12.0 Hotel exits (2.2) 0.3 Movement at 'like for like' hotels1 44.5 27.9 Effect of FX (2.3) (0.7) Covid- 19 government support - (15.0) Movement in other income and group expenses - (4.6) Six months ended 30 June 2023 284.8 103.4
PERFORMANCE REVIEW | SEGMENTAL ANALYSIS
The following section analyses the results from the Group's portfolio of hotels in Dublin, Regional Ireland and the UK. As a single property, Clayton Hotel D'sseldorf has been included in the Dublin region. 1. Dublin Portfolio3
EURmillion Six months ended 30 June 2023 Six months ended 30 June 2022
Room revenue 112.7 82.7
Food and beverage revenue 26.6 20.6
Other revenue 10.1 7.4
Hotel revenue1 149.4 110.7
Hotel EBITDAR1 68.9 54.3
Hotel EBITDAR margin %1 46.1% 49.1%
Performance statistics ('like for like')4 Six months ended 30 June 2023 Six months ended 30 June 2022
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RevPAR (EUR) 131.04 104.49
Occupancy 83.2% 75.0%
Average room rate (ARR) (EUR) 157.47 139.32
Quarterly performance statistics ('like for like')4 Q1 2023 Q2 2023
RevPAR (EUR) 102.42 159.36
RevPAR as percentage of equivalent 2022 levels 158% 111%
Dublin owned and leased portfolio 30 June 2023 30 June 2022
Hotels at period end 18 17
Room numbers at period end 4,831 4,690
The Dublin portfolio consists of eight Maldron hotels, seven Clayton hotels, The Gibson Hotel, The Samuel Hotel and Clayton Hotel Düsseldorf3. Ten hotels are owned and eight are operated under leases. Maldron Hotel Merrion Road (140 rooms) opened in August 2022.
The Dublin region delivered hotel EBITDAR1 of EUR68.9 million for the six-month period ended 30 June 2023, growing 27% from EUR54.3 million in the first half of 2022 which included Covid-19 related government supports of EUR9.0 million. On a 'like for like'4 level, hotel EBITDAR margin1 for the six-month period ended 30 June 2023 of 46.9% was close to equivalent 2019 levels of 47.3%, despite the impact of increased gas and electricity costs.
Clayton Hotel Düsseldorf continues to perform well, achieving rent cover1 of 1.4x for the first six months of 2023.
For the six-month period ended 30 June 2023, hotel revenue1 for the Dublin portfolio was EUR149.4 million, up EUR38.8 million (+35%) on the same period in 2022. 'Like for like'4 hotels contributed EUR25.1 million of this uplift, while additions to the portfolio during 2022 added further revenues of EUR13.7 million.
The continued normalisation of international trade levels in conjunction with ongoing domestic leisure demand in Dublin, resulted in strong hotel performance across the city. 'Like for like'4 Occupancy in Q2 2023 was 90.6%, marginally above occupancy levels for the equivalent period in 2022. The average room rate1 in Q2 2023 was 11% higher than Q2 2022 on a 'like for like'4 basis, benefiting from strong events in the period such as the US Presidential visit and the Champions Cup rugby final. The Dublin market had 17 compression nights (occupancy greater than 95%) in Q2 2023, while our Dublin portfolio had 32 equivalent nights, showcasing strong demand in the city. In addition, hotel room supply in Dublin continues to be constrained with an estimated 10% of rooms being used for the provision of emergency accommodation for refugees.
Food and beverage revenue reached EUR26.6 million for the first half of 2023 and was 20% ahead of the first half of 2022 on a 'like for like'4 basis due to higher occupancies.
2. Regional Ireland Hotel Portfolio
EURmillion Six months ended 30 June 2023 Six months ended 30 June 2022
Room revenue 33.7 26.9
Food and beverage revenue 14.3 12.1
Other revenue 4.6 3.9
Hotel revenue1 52.6 42.9
Hotel EBITDAR1 15.9 14.8
Hotel EBITDAR margin %1 30.2% 34.5%
Performance statistics ('like for like') Six months ended 30 June 2023 Six months ended 30 June 2022
RevPAR (EUR) 99.74 79.57
Occupancy 77.6% 68.0%
Average room rate (ARR) (EUR) 128.59 117.09
Quarterly performance statistics ('like for like') Q1 2023 Q2 2023
RevPAR (EUR) 78.53 120.72
RevPAR as percentage of equivalent 2022 levels 146% 115%
Regional Ireland owned and leased portfolio 30 June 2023 30 June 2022
Hotels at period end 13 13
Room numbers at period end 1,867 1,867
The Regional Ireland hotel portfolio comprises seven Maldron hotels and six Clayton hotels located in Cork (x4), Galway (x3), Limerick (x2), Wexford (x2), Portlaoise and Sligo. 12 hotels are owned and one is operated under a lease.
The Regional Ireland portfolio performed very strongly, generating hotel EBITDAR1 of EUR15.9 million in H1 2023 (+8% on H1 2022, which included Covid-19 related government support of EUR4.7 million). Hotel EBITDAR margin1 of 30.2% for the six-month period ended 30 June 2023 was 5.7% ahead of the hotel EBITDAR margin1 the first six-month period of 2019 of 24.5%, representing strong conversion of RevPAR growth and management of rising costs.
Hotel revenue1 for the six-month period ended 30 June 2023 was EUR52.6 million, which is an increase of EUR9.7 million (+23%) on H1 2022. Demand from the domestic market remains strong, while an increase in the number of overseas visitors, particularly from North America, has resulted in higher guest volumes. Occupancy in Q2 2023 was 87.8%, representing 105% of Q2 2022 occupancy levels. The average room rate1 of EUR137.52 in Q2 2023 reflects a 10% increase on the same period in 2022. Like Dublin, a significant number of rooms are currently being used for the provision of emergency accommodation for refugees.
Food and beverage revenue was EUR2.1 million (+18%) higher for the first six months of 2023, reflecting increased occupancy levels.
3. UK Hotel Portfolio
Local currency - GBPmillion Six months ended 30 June 2023 Six months ended 30 June 2022
Room revenue 56.5 42.9
Food and beverage revenue 12.2 10.3
Other revenue 3.8 3.1
Hotel revenue1 72.5 56.3
Hotel EBITDAR1 26.9 18.0
Hotel EBITDAR margin %1 37.1% 32.0%
Performance statistics ('like for like')5 Six months ended 30 June 2023 Six months ended 30 June 2022
RevPAR (GBP) 81.02 67.33
Occupancy 75.9% 68.2%
Average room rate (ARR) (GBP) 106.68 98.72
Quarterly performance statistics ('like for like')5 Q1 2023 Q2 2023
RevPAR (GBP) 69.07 92.84
RevPAR as percentage of equivalent 2022 levels 130% 114%
UK owned and leased portfolio 30 June 2023 30 June 2022
Hotels at period end 16 15
Room numbers at period end 3,962 3,659
The UK hotel portfolio comprises 11 Clayton hotels and five Maldron hotels with two hotels situated in London, 11 hotels in regional UK and three hotels in Northern Ireland. Six hotels are owned, nine are operated under long-term leases and one hotel is effectively owned through a 99-year lease. Clayton Hotel Glasgow City (303 rooms) opened in October 2022. Post-period end, Clayton Hotel London Wall (89 rooms) and Maldron Hotel Finsbury Park (191 rooms) both commenced trading for Dalata in July 2023.
The UK portfolio performed very well in the six-month period ended 30 June 2023 with hotel EBITDAR1 growth of 50% to GBP26.9 million (H1 2022: GBP18.0 million which included Covid related government supports of GBP1.1 million). Hotel EBITDAR margin1 also improved from 32.0% in H1 2022 to 37.1% in H1 2023, driven by the continued maturation of the portfolio, in particular, the four UK hotels added during the prior year (three in H1 2022, one in H2 2022) which achieved a higher margin as they ramped up.
The UK portfolio reached hotel revenue1 of GBP72.5 million for the six-month period ended 30 June 2023, up GBP16.2 million (+29%) on the same period in 2022. The four hotels added since January 2022 resulted in hotel revenue1 uplifts of GBP9.6 million, while the 'like for like'5 UK portfolio added further hotel revenue1 growth of GBP8.5 million. These uplifts were offset by the sale of Clayton Crown Hotel in June 2022 which reduced revenues by GBP1.9 million.
'Like for like' RevPAR5 growth of 20% for the first six months of 2023 was driven by our London hotels which had been slower to recover from the impact of Covid due to a larger corporate and international travel segment when compared to our Regional UK and Northern Ireland hotels. 'Like for like' RevPAR5 in Q2 2023 at our London hotels was 123% of equivalent levels in 2022, outperforming in both occupancy and average room rate1. Meanwhile, 'like for like' RevPAR5 in Q2 2023 at our Regional UK and Northern Ireland hotels was 112% of the same period in 2022.
For the six-month period ended 2023, food and beverage revenue exceeded equivalent 2022 levels by GBP1.2 million (+14%) on a 'like for like'5 basis.
Central costs
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Central costs amounted to EUR7.4 million during the period (H1 2022: EUR4.9 million). The increase was primarily driven by employee headcount increases related to the ongoing growth of the Group, increases for existing employees and greater marketing spending for several new strategic initiatives, including the launch of our Employer Brand campaign in January 2023 and enhanced customer research.
Adjusting items to EBITDA1
EURmillion Six months ended 30 June Six months ended 30 June
2023 2022
Net property revaluation movements through profit or loss 2.0 17.9
Gain on disposal of Clayton Crown Hotel, London - 3.9
Hotel pre-opening expenses (0.7) (1.9)
Net reversal of previous impairment charges of fixtures, fittings - 0.4
and equipment
Net impairment of right-of-use assets - (2.4)
Adjusting items1 1.3 17.9
The Group recorded a net revaluation gain of EUR78.8 million on the revaluation of its property assets at 30 June 2023 of which EUR2.0 million was recorded as the reversal of previous period revaluation losses through profit or loss (H1 2022: EUR17.9 million). There were no revaluation losses through profit or loss in the period (H1 2022: EURnil). Further detail is provided in the 'Property, plant and equipment' section (note 11) of the interim financial statements.
The Group also incurred EUR0.7 million of pre-opening expenses in the period (H1 2022: EUR1.9 million). These expenses are related to the opening of Maldron Hotel Finsbury Park, London in July 2023.
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 increased by EUR1.8 million to EUR14.9 million for the six-month period ended 30 June 2023, primarily due to the full period impact of five6 leased hotels added to the portfolio during the first half of 2022, and the impact of the lease of Clayton Hotel Glasgow City, which opened in October 2022.
Depreciation of property, plant and equipment and amortisation
Depreciation of property, plant and equipment and amortisation increased by EUR1.2 million to EUR15.4 million for the six-month period ended 30 June 2023. The increase primarily relates to the full period impact of the depreciation of Maldron Hotel Merrion Road, Dublin which opened in August 2022 and room refurbishment projects at three hotels. These increases were partially offset by the disposal of Clayton Crown Hotel, London in June 2022.
Finance Costs
EURmillion Six months ended 30 June Six months ended 30 June
2023 2022
Interest expense on bank loans and borrowings 5.9 3.9
Impact of interest rate swaps (2.8) 0.6
Other finance costs 0.9 1.4
Capitalised interest (0.8) (1.6)
Finance costs excluding lease interest 3.2 4.3
Interest on lease liabilities 20.9 17.9
Finance costs 24.1 22.2
Weighted average interest cost, including the impact of
hedges
- Sterling denominated borrowings 2.8% 3.9%
- Euro denominated borrowings 4.1% 2.5%
Finance costs related to the Group's loans and borrowings (before capitalised interest) amounted to EUR4.0 million in H1 2023, decreasing from EUR5.9 million in H1 2022 due to lower average borrowings as well as benefitting from a lower interest margin which is set with reference to the Net Debt to EBITDA1 covenant levels. Interest on lease liabilities for the period increased from EUR17.9 million to EUR20.9 million primarily due to the full period impact of five6 leased hotels added to the portfolio during the first half of 2022, and the impact of the lease of Clayton Hotel Glasgow City, which opened in October 2022.
Tax charge
The tax charge for the six-month period ended 30 June 2023 of EUR8.4 million primarily relates to current tax of EUR7.1 million in respect of profits earned in Ireland during the period. The deferred tax charge of EUR1.4 million mainly relates to the utilisation of losses carried forward from earlier periods, primarily in the UK. The Group's effective tax rate increased from 11.9% in 2022 to 16.7% in H1 2023, mainly due to a higher proportion of income being subject to tax at higher rates during the period. In addition, the impact of the non-taxable gain on disposal of the Clayton Crown Hotel, London during the prior year reduced the effective tax rate in that year. At 30 June 2023, the Group has deferred tax assets of EUR16.6 million in relation to tax losses and interest expenses which can be utilised in future periods.
Earnings per share (EPS)
The Group's profit after tax of EUR42.0 million for the six-month period ended 30 June 2023 (H1 2022: EUR46.7 million) represents basic earnings per share of 18.8 cents (H1 2022: basic earnings per share of 21.0 cents) and adjusted basic earnings per share1 of 18.4 cents (H1 2022: adjusted basic earnings per share of 13.1 cents).
STRONG CASHFLOW GENERATION
The Group continues to deliver strong cashflow with significant liquidity to support the ongoing growth strategy. The Group generated Free Cashflow1 of EUR59.2 million for the six-month period ended 30 June 2023 (H1 2022: EUR56.6 million). At 30 June 2023, the Group had cash and undrawn committed debt facilities of EUR413.9 million (31 December 2022: cash and undrawn debt facilities of EUR455.7 million).
Free Cashflow1 Six months ended 30 June Six months ended 30 June
2023 2022
Net cash from operating activities 62.0 100.4
Other interest and finance costs paid (3.5) (7.5)
Refurbishment capital expenditure paid (8.8) (4.4)
Fixed lease payments (26.1) (23.0)
Add back pre-opening costs 0.7 1.9
Exclude impact from net tax deferrals under Debt Warehousing 34.9 (10.8)
scheme
Free Cashflow1 59.2 56.6
During the six-month period ended 30 June 2023, the Group paid corporation tax of EUR6.2 million, compared to a corporation tax refund of EUR0.6 million for the same period in 2022. This increase reflects a return to higher profitability levels and the normalisation of the timing of payments. In addition, the remaining 2022 Irish corporation tax liability of EUR11.5 million is payable in H2 2023.
In April 2023, the Group fully repaid the net tax deferrals under the Irish government's Debt Warehousing scheme of EUR34.9 million (H1 2022: repaid Irish VAT liabilities totalling EUR0.2 million). The Debt Warehousing scheme ended in May 2022 and as such no further amounts were deferred during the period (H1 2022: deferred Irish VAT and payroll tax liabilities totalling EUR11.0 million).
During the period, the Group paid GBP43.7 million (EUR49.4 million) on acquiring Maldron Hotel Finsbury Park, London with a further retention amount of GBP0.6 million (EUR0.7 million) becoming due within the next twelve months from 30 June 2023. The Group also paid a deposit of EUR3.1 million for the acquisition of the newly rebranded Clayton Hotel London Wall which was completed in early July.
At 30 June 2023, the Group has future capital expenditure commitments totalling EUR15.2 million, of which EUR8.1 million relates to the new Maldron Hotel at Shoreditch, London, EUR1.7 million relates to other developments in the committed pipeline at 30 June 2023 and the remaining EUR5.4 million relates to future capital expenditure commitments at our existing hotels.
BALANCE SHEET | STRONG ASSET BACKING PROVIDES SECURITY, FLEXIBILITY AND THE ENGINE FOR FUTURE GROWTH
EURmillion 30 June 2023 31 December 2022 Non-current assets Property, plant and equipment 1,581.8 1,427.4 Right-of-use assets 653.3 658.1 Intangible assets and goodwill 31.1 31.1 Other non-current assets7 38.5 33.5 Current assets Trade and other receivables and inventories 41.8 32.6 Other current assets7 2.7 4.9 Cash and cash equivalents 114.4 91.3 Total assets 2,463.6 2,278.9 Equity 1,347.0 1,222.8 Loans and borrowings at amortised cost 265.2 193.5 Lease liabilities 656.7 651.8 Trade and other payables 91.5 118.8 Other liabilities8 103.2 92.0 Total equity and liabilities 2,463.6 2,278.9
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The Group's balance sheet position remains strong through financial discipline with property, plant and equipment of EUR1.6 billion in prime locations and cash and undrawn debt facilities of EUR413.9 million, supported by a Net Debt to Value1 of 11% (31 December 2022: 8%).
Property, plant and equipment
Property, plant and equipment amounted to EUR1,581.8 million at 30 June 2023. The increase of EUR154.3 million since 31 December 2022 is primarily driven by revaluation movements on property assets of EUR78.8 million, additions of EUR76.5 million and a foreign exchange gain on the retranslation of Sterling-denominated assets of EUR13.2 million, partially offset by a depreciation charge of EUR15.1 million for the period.
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. The independent external valuation also incorporates relevant recent data on hotel sales activity metrics.
Revaluation uplifts of EUR78.8 million were recorded on our property assets in the six-month period ended 30 June 2023. EUR76.8 million of the net gains are recorded as an uplift through the revaluation reserve. EUR2.0 million of the net revaluation uplifts for the six-month period ended 30 June 2023 are recorded through profit or loss reversing revaluation losses from prior periods.
Additions through acquisitions and capital expenditure Six months ended 30 June Six months ended 30 June
2023 2022
EURmillion
Acquisition of freehold 53.0 -
Construction of new build hotels, hotel extensions and 11.1 14.5
renovations
Other development expenditure 2.9 0.2
Total development capital expenditure 67.0 14.7
Total refurbishment capital expenditure 9.5 5.6
Additions to property, plant and equipment 76.5 20.3
On 16 February 2023, the Group acquired the freehold interest of Maldron Hotel Finsbury Park, London for a cost of GBP45.4 million (EUR53.0 million).
A deposit of EUR3.1 million was paid during the period for the post-period end acquisition of the newly rebranded Clayton Hotel London Wall. This amount is held within non-current other receivables at 30 June 2023.
The Group incurred EUR11.1 million on development capital expenditure including EUR9.0 million on the development of the new Maldron Hotel Shoreditch, London and EUR2.1 million in relation to further investment into Maldron Hotel Finsbury Park, London prior to opening in July 2023. Other development expenditure of EUR2.9 million primarily relates to the fitout of the Group's new central office location in Dublin.
The Group incurred EUR9.5 million of refurbishment capital expenditure during the period which mainly related to the refurbishment of 381 bedrooms, health and safety upgrades, energy efficient plant upgrades and IT fit-out of guest relations technology. The Group allocates approximately 4% of hotel revenue1 to refurbishment capital expenditure.
Right-of-use assets and lease liabilities
At 30 June 2023, the Group's right-of-use assets amounted to EUR653.3 million and lease liabilities amounted to EUR656.7 million.
Lease Right-of-use
EURmillion
liabilities assets
At 31 December 2022 651.8 658.1
Depreciation charge on right-of-use assets - (14.9)
Interest on lease liabilities 20.9 -
Lease payments (26.1) -
Translation adjustment 10.1 10.1
At 30 June 2023 656.7 653.3
Right-of-use assets are recorded at cost less accumulated depreciation and impairment. The initial cost comprises the initial amount of the lease liability adjusted for lease prepayments and accruals at the commencement date, initial direct costs and, where applicable, reclassifications from intangible assets or accounting adjustments related to sale and leasebacks.
Lease liabilities are initially measured at the present value of the outstanding lease payments, discounted using the estimated incremental borrowing rate attributable to the lease. The lease liabilities are subsequently remeasured during the lease term following the completion of rent reviews, a reassessment of the lease term or where a lease contract is modified. The weighted average lease life of future minimum rentals payable under leases is 29.5 years (31 December 2022: 29.8 years).
No rent reviews or rent adjustments, which formed part of the original lease agreements, were agreed during the six-month period ended 30 June 2023. Over 90% of lease contracts at currently leased hotels include rent review caps which limit CPI/RPI-related payment increases to 3.5% - 4% per annum.
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 12 to the interim financial statements.
Loans and borrowings
As at 30 June 2023, the Group had loans and borrowings at amortised cost of EUR265.2 million and undrawn committed debt facilities of EUR299.5 million. Loans and borrowings increased from 31 December 2022 (EUR193.5 million) mainly due to net loan drawdowns totalling EUR65.2 million and foreign exchange movements which increased the translated value of the loans drawn in Sterling by EUR6.5 million.
Sterling borrowings Euro borrowings
At 30 June 2023 Total borrowings EURmillion
GBPmillion EURmillion
Term Loan 176.5 - 205.6
Revolving credit facility:
- Drawn in Sterling 53.4 - 62.2
- Drawn in Euro - 3.0 3.0
External loans and borrowings drawn at 30 June 2023 229.9 3.0 270.8
Accounting adjustment to bring to amortised cost (5.6)
Loans and borrowings at amortised cost at 30 June 2023 265.2
The Group's debt facilities now consist of a EUR200.0 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's covenants comprising Net Debt to EBITDA (as defined in the Group's bank facility agreement which is equivalent to Net Debt to EBITDA after rent1) and Interest Cover1 were tested on 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. The Group complies with its covenants at 30 June 2023.
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. The term debt interest is fully hedged until October 2024. Until 26 October 2023, interest rate swaps fix the SONIA benchmark rate between c. 1.3% and 1.4% on Sterling-denominated term borrowings. From 26 October 2023 to 26 October 2024 interest rate swaps fix the SONIA benchmark rate to c. 1.0% on Sterling-denominated borrowings. The variable interest rates on the Group's revolving credit facilities were unhedged at 30 June 2023.
PRINCIPAL RISKS AND UNCERTAINTIES
Since the last report on principal risks in March 2023, there have been ongoing developments in our risk environment. The principal risks and uncertainties now facing the Group are:
External factors - Dalata operates in an open market, and its activities and performance are influenced by broader geopolitical and economic factors outside the Group's control. Many of these factors are interlinked and impact the Group's strategy, performance, and the economic environment in which the Group operates. There continues to be uncertainty concerning external factors and our markets.
The Board and executive management team continuously focus on the impact of external factors on our business performance. The Group has an experienced management team with functional expertise in relevant areas, supported by modern information systems that provide up-to-date information to the Board.
Inflation - We recognise the broader effect of inflation on our cost base, including labour costs, and its effect on discretionary consumer spending. Innovation in our guest offerings and services and business efficiencies support our operating margins while retaining high levels of guest service and employee satisfaction.
Climate change and ESG - Climate change and the drive for a sustainable and responsible business create risks and opportunities for the Group. The Board is keenly aware of its responsibilities and commitments to our stakeholders and the wider community under the ESG umbrella, which are reflected in the initiatives implemented by our management and employee teams.
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We have disclosed the Group's strategies and emission reduction targets and are committed to transparent measurement and reporting on ESG. The ESG Committee provides board oversight of strategy development, implementation, and target setting.
We recognise that reporting on ESG and climate metrics is an area that is subject to increased regulation and disclosure requirements. This year, the Group initiated an extensive Group-wide project to properly prepare for meeting these requirements and provide assurance on our climate and ESG initiatives.
Our culture and values - Protecting and promoting our culture is a key differentiator for us and a source of competitive advantage. The rollout of our business model depends on the retention and growth of our strong culture. There is a risk that, as the Group expands, our values and culture become diluted, and behaviours do not reflect our established norms.
Culture remains a constant priority for the Board and executive management. We have defined values and behaviours that we continue to embed in our Group, senior management, and teams. These are supported by internal structures that support and oversee expected behaviours. We also use wide-ranging measures to assess and monitor our culture, which are reviewed with the Board and management teams.
Expansion and development strategy - Our strategy is to grow our business through targeted developments and acquisitions. This strategy carries risk, particularly in the current construction cost and financing environment, but also provides us with development opportunities. The Board scrutinises all potential opportunities before commitment and is regularly updated on the progress of the development programme.
Internal acquisitions and development expertise is in place to assess potential opportunities, costs and risks. Our financial position, funding flexibility and position as a preferred development partner assist us in managing this risk.
Developing our people and resourcing our business - Our strategy is to develop our expertise, where possible, from within our existing teams. This expertise can be deployed throughout our business, particularly in our new hotels. We need well-trained and motivated teams to deliver our desired customer service levels at our hotels. There is a risk that we cannot implement our management development strategy as planned or recruit and retain sufficient resources to operate our business effectively.
The Group launched its employer brand campaign and continues to invest significantly in its unique and industry-focused career development programmes. We have identified and supported our next generation of senior hotel management. We provide role-related and development training to all our teams through our Dalata Academy platform. Strategies are in place to attract and retain people at all levels in the Group, including an enhanced benefits programme.
Health, safety and security - As a large hotel operator, we manage a wide range of life safety, fire safety, food safety and security risks. As a large employer, we also manage workplace-related risks. There is a risk that we may not comply with these requirements in our business, resulting in injury, loss of life or hotel damage.
We have a well-established health, safety and security framework in our hotels. Central support is provided to all hotels, and local dedicated H&S resources are in place, supported by information management systems. In addition, a portion of the Group's capital budget is reserved for health and safety, and identified risks are remediated promptly.
Bureau Veritas supports us through independent health and safety assessments across all our hotels. This programme, which commenced in 2022, has continued in 2023 with strong results. The audit and risk committee has also met with Bureau Veritas to discuss the programme, scope and hotel outcomes.
Information security and data protection - In common with other businesses, we recognise the threats associated with cybercrime, information technology risks, and the ongoing need to protect our data. The security of our information technology platforms is crucial to the Board. Our Information Security Management System is based on ISO27001 and audited twice annually by a leading cybersecurity consultancy firm. Enhanced data protection and privacy structures are in place, and training and awareness programmes continue. The Group has continued its investment to enhance its technology and infrastructure, and we assess and monitor these risks on an ongoing basis.
Demand volatility and disruptive technology - We maintain an ongoing focus on our markets, customer behaviour across multiple market segments and trends in the wider hospitality market. This includes the impact of emerging technology on rooms distribution.
1. See Supplementary Financial Information which contains definitions and reconciliations of Alternative Performance Measures ('APM') and other definitions.
2. Adjusting items include the net property revaluation gain of EUR2.0 million following the valuation of property assets (H1 2022: net revaluation gain of EUR17.9 million) less pre-opening costs of EUR0.7 million. Further detail on adjusting items is provided in the section titled 'Adjusting items to EBITDA'.
3. Dublin portfolio includes the operating performance of Clayton Hotel Düsseldorf which was leased from February 2022 due to its single asset scale.
4. The reference to 'like for like' hotels in Dublin for performance statistics comparing to H1 2022 (occupancy, ARR and RevPAR) excludes Clayton Hotel Düsseldorf which was leased from February 2022, The Samuel Hotel which is newly opened since April 2022 and Maldron Hotel Merrion Road which is newly opened since August 2022.
5. The reference to 'like for like' hotels in the UK for performance statistics comparing to H1 2022 (occupancy, ARR and RevPAR) excludes Clayton Hotel Manchester City Centre, Maldron Hotel Manchester City Centre, Clayton Hotel Bristol City and Clayton Hotel Glasgow City as these only opened during 2022. Clayton Crown Hotel, London is also excluded as it was sold in June 2022.
6. Includes the lease for Clayton Hotel Manchester City Centre, Maldron Hotel Manchester City Centre, Clayton Hotel Düsseldorf, Clayton Hotel Bristol City and The Samuel Hotel, Dublin.
7. Other non-current assets comprise investment property, deferred tax assets, non-current derivative assets and other receivables (which include costs of EUR1.2 million associated with future lease agreements for hotels currently being constructed or in planning (31 December 2022: EUR0.9 million)). Other current assets comprise current derivative assets.
8. Other liabilities comprise deferred tax liabilities, provision for liabilities, current tax liabilities and accruals.
Dalata Hotel Group plc
Unaudited condensed consolidated statement of comprehensive income
for the six months ended 30 June 2023
6 months 6 months
ended ended
30 June 30 June
2023 2022
Note EUR'000 EUR'000
Continuing operations
Revenue 4 284,829 220,248
Cost of sales (100,325) (76,163)
______ ______
Gross profit 184,504 144,085
Administrative expenses 5 (110,678) (74,398)
Other income 669 4,474
______ ______
Operating profit 74,495 74,161
Finance costs 7 (24,107) (22,154)
______ ______
Profit before tax 50,388 52,007
Tax charge 9 (8,429) (5,262)
______ ______
Profit for the period attributable to owners of the Company 41,959 46,745
______ ______
Other comprehensive income
Items that will not be reclassified to profit or loss
Revaluation of property 11 76,754 82,400
Related deferred tax (8,120) (9,189)
______ ______
68,634 73,211
Items that are or may be reclassified subsequently to profit or loss
Exchange gain/(loss) on translating foreign operations 15,521 (8,654)
(Loss)/gain on net investment hedge (6,543) 6,943
Fair value gain on cash flow hedges 4,083 6,689
Cash flow hedges - reclassified to profit or loss (2,831) 652
Related deferred tax (313) -
______ ______
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9,917 5,630
______ ______
Other comprehensive income for the period, net of tax 78,551 78,841
______ ______
Total comprehensive income for the period attributable to owners of the Company 120,510 125,586
______ ______
Earnings per share
Basic earnings per share 22 18.8 cents 21.0 cents
______ ______
Diluted earnings per share 22 18.6 cents 20.9 cents
______ ______
Unaudited condensed consolidated statement of financial position
at 30 June 2023
31 December
30 June
2022
2023
(Audited)
Assets Note EUR'000 EUR'000
Non-current assets
Intangible assets and goodwill 10 31,096 31,054
Property, plant and equipment 11 1,581,776 1,427,447
Right-of-use assets 12 653,295 658,101
Investment property 1,999 2,007
Derivative assets 7 10,264 6,825
Deferred tax assets 19 20,311 21,271
Other receivables 13 5,970 3,387
______ ______
Total non-current assets 2,304,711 2,150,092
______ ______
Current assets
Derivative assets 7 2,705 4,892
Trade and other receivables 13 39,686 30,263
Inventories 2,107 2,342
Cash and cash equivalents 114,360 91,320
______ ______
Total current assets 158,858 128,817
______ ______
Total assets 2,463,569 2,278,909
______ ______
Equity
Share capital 21 2,234 2,229
Share premium 21 505,004 504,910
Capital contribution 25,724 25,724
Merger reserve 81,264 81,264
Share-based payment reserve 6,123 5,011
Hedging reserve 9,727 8,788
Revaluation reserve 448,168 379,534
Translation reserve (8,257) (17,235)
Retained earnings 276,997 232,541
______ ______
Total equity 1,346,984 1,222,766
______ ______
Liabilities
Non-current liabilities
Loans and borrowings 18 265,227 193,488
Lease liabilities 12 646,802 641,444
Deferred tax liabilities 19 80,788 71,022
Provision for liabilities 15 7,547 7,165
Accruals 14 469 239
______ ______
Total non-current liabilities 1,000,833 913,358
______ ______
Current liabilities
Lease liabilities 12 9,905 10,347
Trade and other payables 14 91,494 118,818
Current tax liabilities 12,496 11,606
Provision for liabilities 15 1,857 2,014
______ ______
Total current liabilities 115,752 142,785
______ ______
Total liabilities 1,116,585 1,056,143
______ ______
Total equity and liabilities 2,463,569 2,278,909
______ ______
Unaudited condensed consolidated statement of changes in equity
for the six months ended 30 June 2023
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 2023 2,229 504,910 25,724 81,264 5,011 8,788 379,534 (17,235) 232,541 1,222,766
Comprehensive
income:
Profit for the - - - - - - - - 41,959 41,959
period
Other
comprehensive
income
Exchange
difference on
translating - - - - - - - 15,521 - 15,521
foreign
operations
Loss on net - - - - - - - (6,543) (6,543)
investment hedge
Revaluation of - - - - - - 76,754 - - 76,754
property
Fair value
movement on cash - - - - - 4,083 - - - 4,083
flow hedges
Cash flow hedges
- reclassified to - - - - - (2,831) - - - (2,831)
profit or loss
Related deferred - - - - - (313) (8,120) - - (8,433)
tax
Total
comprehensive - - - - - 939 68,634 8,978 41,959 120,510
income for the
period
Transactions with
owners of the
Company:
Equity-settled
share-based - - - - 3,609 - - - - 3,609
payments
Transfer from
share-based
payment reserve - - - - (2,497) - - - 2,497 -
to retained
earnings
Vesting of share
awards and 5 94 - - - - - - - 99
options
Total
transactions with 5 94 - - 1,112 - - - 2,497 3,708
owners of the
Company
At 30 June 2023 2,234 505,004 25,724 81,264 6,123 9,727 448,168 (8,257) 276,997 1,346,984
Unaudited condensed consolidated statement of changes in equity
for the six months ended 30 June 2022
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 2,229 504,895 25,724 81,264 3,085 (197) 212,572 (6,572) 134,413 957,413
2022
Comprehensive
income:
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Profit for the - - - - - - - - 46,745 46,745
period
Other
comprehensive
income
Exchange
difference on
translating - - - - - - - (8,654) - (8,654)
foreign
operations
Gain on net
investment - - - - - - - 6,943 - 6,943
hedge
Revaluation of - - - - - - 82,400 - - 82,400
property
Fair value
movement on - - - - - 6,689 - - - 6,689
cash flow
hedges
Cash flow
hedges -
reclassified - - - - - 652 - - - 652
to profit or
loss
Related - - - - - - (9,189) - - (9,189)
deferred tax
Total
comprehensive - - - - - 7,341 73,211 (1,711) 46,745 125,586
income for the
period
Transactions
with owners of
the Company:
Equity-settled
share-based - - - - 1,186 - - - - 1,186
payments
Transfer from
share-based
payment - - - - (1,563) - - - -
reserve to 1,563
retained
earnings
Total
transactions - - - - (377) - - - 1,563 1,186
with owners of
the Company
At 30 June 2,229 504,895 25,724 81,264 2,708 7,144 285,783 (8,283) 182,721 1,084,185
2022
Unaudited condensed consolidated statement of cash flows
for the six months ended 30 June 2023
6 months 6 months
ended ended
30 June 30 June
2023 2022
EUR'000 EUR'000
Cash flows from operating activities
Profit for the period 41,959 46,745
Adjustments for:
Depreciation of property, plant and equipment 15,086 13,910
Depreciation of right-of-use assets 14,875 13,038
Amortisation of intangible assets 327 274
Net property revaluation movements through profit or loss (1,998) (17,907)
Net impairment charge of right-of-use assets - 2,395
Net reversal of previous impairment charges of fixtures, fittings and equipment - (370)
Gain on disposal of property, plant and equipment - (3,877)
Share-based payments expense 3,609 1,186
Interest on lease liabilities 20,915 17,816
Other interest and finance costs 3,192 4,338
Tax charge 8,429 5,262
______ ______
106,394 82,810
(Decrease)/increase in trade and other payables and provision for liabilities (29,845) 42,023
Increase in current and non-current trade and other receivables (8,581) (24,650)
Decrease/(increase) in inventories 235 (427)
Tax (paid)/refunded (6,189) 599
______ ______
Net cash from operating activities 62,014 100,355
Cash flows from investing activities
Purchase of property, plant and equipment (71,044) (16,592)
Deposit paid on acquisition (3,093) -
Contract fulfilment cost payments (1,285) (2,921)
Costs paid on entering new leases and agreements for lease (275) (9,634)
Proceeds from disposal of property, plant and equipment - 24,258
Purchase of intangible assets - (202)
______ ______
Net cash used in investing activities (75,697) (5,091)
Cash flows from financing activities
Receipt of bank loans 94,196 11,973
Repayment of bank loans (29,000) (40,783)
Repayment of lease liabilities (5,162) (5,182)
Interest paid on lease liabilities (20,915) (17,816)
Other interest and finance costs paid (3,444) (7,447)
Proceeds from vesting of share awards and options 99 -
______ ______
Net cash from/(used in) financing activities 35,774 (59,255)
______ ______
Net increase in cash and cash equivalents 22,091 36,009
Cash and cash equivalents at beginning of period 91,320 41,112
Effect of movements in exchange rates 949 (1,052)
______ ______
Cash and cash equivalents at end of period 114,360 76,069
______ ______
Notes to the unaudited condensed consolidated interim financial statements 1. General information and basis of preparation
Dalata Hotel Group plc ('the Company') is a company registered in the Republic of Ireland. The unaudited condensed consolidated financial statements for the six month period ended 30 June 2023 (the 'Interim Financial Statements') include the Company and its subsidiaries (together referred to as the 'Group'). The Interim Financial Statements were authorised for issue by the Directors on 28 August 2023.
These unaudited Interim Financial Statements have been prepared by Dalata Hotel Group plc in accordance with IAS 34 Interim Financial Reporting ('IAS 34') as adopted by the European Union ('EU'). They do not include all of the information required for a complete set of financial statements prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the EU. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since 31 December 2022. They should be read in conjunction with the consolidated financial statements of Dalata Hotel Group plc, which were prepared in accordance with IFRS as adopted by the EU, as at and for the year ended 31 December 2022.
These Interim Financial Statements are presented in Euro, rounded to the nearest thousand, which is the functional currency of the parent company and the presentation currency for the Group's financial reporting.
The preparation of Interim Financial Statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results could differ materially from these estimates. In preparing these Interim Financial Statements, the critical judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2022.
The Interim Financial Statements do not constitute statutory financial statements. The statutory financial statements for the year ended 31 December 2022, together with the independent auditor's report thereon, have been filed with the Companies Registration Office and are available on the Company's website www.dalatahotelgroup.com. The auditor's report on those financial statements was not qualified and did not contain an emphasis of matter paragraph.
Going concern
The Directors have assessed the Group's ability to continue in operational existence for the foreseeable future by preparing detailed financial forecasts and carrying out stress testing on projections. Current base and stress tested projections show compliance with all covenants at all future testing dates and significant levels of headroom. The Group remains in a very strong financial position with significant financial headroom. The six month period ended 30 June 2023 saw the Group continue its execution of its growth strategy.
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Cashflow remains strong with net cash generated from operating activities in the period of EUR62.0 million (period ended 30 June 2022: EUR100.4 million). EUR34.8 million of warehoused tax liabilities which were deferred, under the warehousing of tax liabilities legislation during the Covid-19 pandemic, were paid during the period. Excluding this amount, net cash generated from operating activities is EUR96.8 million. At 30 June 2023, cash and undrawn facilities are EUR413.9 million (31 December 2022: EUR455.7 million).
The Group is in full compliance with its covenants at 30 June 2023. The key covenants relate to Net Debt to EBITDA (as defined in the Group's bank facility agreement which is equivalent to Net Debt to EBITDA after rent) (APM (viii)) and Interest Cover (APM (xix)). At 30 June 2023, the Net Debt to EBITDA covenant limit is 4.0x and the Interest Cover minimum is 4.0x and will remain at these levels under the current facility agreements until the facility expires in October 2025. The Net Debt to EBITDA after rent for the Group at 30 June 2023 is 1.0x (31 December 2022: 0.8x) and interest cover is 18.3x (31 December 2022: 11.3x). The Group also monitors its Debt and Lease Service cover (APM (xv)), which is 3.1x for the twelve month period ended 30 June 2023 (31 December 2022: 3.1x).
The Directors have considered the above, with all available information and the current liquidity and capital position, in assessing the going concern of the Group. On the basis of these judgements, the Directors have prepared these Interim 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. 2. Significant accounting policies
The accounting policies applied in these Interim Financial Statements are consistent with those applied in the consolidated financial statements as at and for the year ended 31 December 2022.
The following standards and amendments were effective for the Group for the first time from 1 January 2023:
-- IFRS 17 Insurance Contracts
-- Amendments to IAS 1 - Classification of Liabilities as Current or Non - Current
-- Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies
-- Amendments to IAS 8 - Definition of Accounting Estimate
-- Amendments to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction
The above standards and amendments had no material impact on the Interim Financial Statements. 3. Seasonality
In a typical year, hotel revenue and operating profit are driven by seasonal factors such as July and August being typically the busiest months in the operating cycle. Due to the impact of Covid-19 restrictions and related government grants on the Group, typical patterns of seasonality were slightly disrupted during the period ended 30 June 2022, however, the Group has returned to a more normalised basis of trading for the period ended 30 June 2023. 4. Operating segments
The Group's segments are reported in accordance with IFRS 8 Operating Segments. The segment information is reported in the same way as it is reviewed and analysed internally by the chief operating decision makers, primarily the 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. Given its scale and immateriality in the context of the other regions, Clayton Hotel Düsseldorf, which is the Group's first hotel outside of the Republic of Ireland and the UK, has been included within the Dublin region for the purpose of these Interim Financial Statements.
Dublin, Regional Ireland and UK segments
These segments are concerned with hotels that are either owned or leased by the Group. As at 30 June 2023, the Group owns 27 hotels which it operates (31 December 2022: 27 hotels, 30 June 2022: 26 hotels) and has effective ownership of one further hotel which it operates (31 December 2022: one hotel, 30 June 2022: one hotel). As at 30 June 2023, the Group also owns Maldron Hotel Finsbury Park which was acquired during the period and was under construction at that date, this hotel became available for use in July 2023. The Group also owns the majority of one further hotel it operates (31 December 2022: one hotel, 30 June 2022: one hotel).
The Group also leases 18 hotel buildings from property owners (31 December 2022: 18 hotels, 30 June 2022: 17 hotels) and is entitled to the benefits and carries the risks associated with operating these hotels.
The Group's revenue from leased and owned hotels is primarily derived from room sales and food and beverage sales in restaurants, bars and banqueting. The main costs arising are payroll, cost of goods for resale, commissions paid on room sales, other operating costs, and, in the case of leased hotels, variable lease costs (where linked to turnover or profit) payable to lessors.
Revenue
6 months 6 months
ended ended
30 June 30 June
2023 2022
EUR'000 EUR'000
Dublin 149,424 110,659
Regional Ireland 52,567 42,861
UK 82,838 66,728
______ ______
Total revenue 284,829 220,248
______ ______
Revenue for each of the geographical locations represents the operating revenue (room revenue, food and beverage revenue and other hotel revenue) from leased and owned hotels situated in (i) Dublin (including Clayton Hotel Düsseldorf), (ii) Regional Ireland and (iii) the UK.
6 months 6 months
ended ended
30 June 30 June
2023 2022
EUR'000 EUR'000
Segmental results - EBITDAR
Dublin 68,911 54,313
Regional Ireland 15,901 14,773
UK 30,787 21,258
______ ______
EBITDAR for reportable segments 115,599 90,344
______ ______
Segmental results - EBITDA
Dublin 67,401 53,256
Regional Ireland 15,838 14,724
UK 30,513 20,991
______ ______
EBITDA for reportable segments 113,752 88,971
______ ______
Reconciliation to results for the period
Segments EBITDA 113,752 88,971
Other income (excluding gain on disposal of property, plant
669 597
and equipment)
Central costs (7,367) (4,886)
Share-based payments expense (3,609) (1,186)
______ ______
Adjusted EBITDA 103,445 83,496
Net property revaluation movements through profit
1,998 17,907
or loss
Net impairment charge of right-of-use assets - (2,395)
Net reversal of previous impairment charges of fixtures,
- 370
fittings and equipment
Gain on disposal of property, plant and equipment - 3,877
Hotel pre-opening expenses (660) (1,872)
______ ______
Group EBITDA 104,783 101,383
Depreciation of property, plant and equipment (15,086) (13,910)
Depreciation of right-of-use assets (14,875) (13,038)
Amortisation of intangible assets (327) (274)
Interest on lease liabilities (20,915) (17,816)
Other interest and finance costs (3,192) (4,338)
______ ______
Profit before tax 50,388 52,007
Tax charge (8,429) (5,262)
______ ______
Profit for the period 41,959 46,745
______ ______
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 period on period or with other similar businesses. Consequently, Adjusted EBITDA represents Group EBITDA before:
-- Net property revaluation movements through profit or loss (note 5);
-- Net impairment charge of right-of-use assets;
-- Net reversal of previous impairment charges of fixtures, fittings, and equipment;
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-- Gain on disposal of property, plant and equipment. This relates to the gain on the sale of the ClaytonCrown Hotel in June 2022; and
-- Hotel pre-opening expenses, which relate primarily to payroll expenses, sales and marketing costs andtraining costs of new staff, that are incurred by the Group in advance of new hotel openings.
The line item 'central costs' primarily includes costs of the Group's central functions including operations support, technology, sales and marketing, human resources, finance, corporate services and business development. Share-based payments expense is presented separately from central costs as this expense relates to employees across the Group.
'Segmental results - EBITDA' for Dublin, Regional Ireland and UK represents the 'Adjusted EBITDA' for each region 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 UK represents 'Segmental results - EBITDA' before variable lease costs.
Given its scale and immateriality (less than 4% of total Group Revenue) in the context of the other regions, Clayton Hotel Düsseldorf, which is the Group's first hotel outside of the Republic of Ireland and the UK, has been included within the Dublin region for the purpose of these Interim Financial Statements.
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. Thisrevenue is recognised 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.
6 months 6 months
ended ended
30 June 30 June
2023 2022
EUR'000 EUR'000
Revenue review by segment - Dublin
Room revenue 112,702 82,701
Food and beverage revenue 26,640 20,578
Other revenue 10,082 7,380
______ ______
Total revenue 149,424 110,659
______ ______
Revenue review by segment - Regional Ireland
Room revenue 33,683 26,889
Food and beverage revenue 14,253 12,116
Other revenue 4,631 3,856
______ ______
Total revenue 52,567 42,861
______ ______
Revenue review by segment - UK
Room revenue 64,589 50,867
Food and beverage revenue 13,892 12,181
Other revenue 4,357 3,680
_____ _____
Total revenue 82,838 66,728
_____ ______
Other geographical information
Clayton Hotel Düsseldorf, which is the Group's first hotel outside of the Republic of Ireland and the UK, has been included within the Republic of Ireland due to its immateriality (less than 4% of total Group Revenue).
Revenue 6 months ended 30 June 2023 6 months ended 30 June 2022
Republic of Ireland UK Republic of Ireland UK
Total Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Owned hotels 132,461 40,554 173,015 103,094 37,391 140,485
Leased hotels 69,530 42,284 111,814 50,426 29,337 79,763
Total revenue 201,991 82,838 284,829 153,520 66,728 220,248
Segments EBITDAR 6 months ended 30 June 2023 6 months ended 30 June 2022
Republic of Ireland UK Republic of Ireland UK
Total Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Owned hotels 54,952 16,444 71,396 47,120 12,923 60,043
Leased hotels 29,860 14,343 44,203 21,966 8,335 30,301
Total Segments EBITDAR 84,812 30,787 115,599 69,086 21,258 90,344
6 months ended 30 June 2023 6 months ended 30 June 2022
Republic of Ireland UK Republic of Ireland UK
Total Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Variable lease costs 1,573 274 1,847 1,106 267 1,373
Depreciation of property,
10,282 4,804 15,086 9,015 4,895 13,910
plant and equipment
Depreciation of right-of-use assets 9,311 5,564 14,875 8,278 4,760 13,038
Interest on lease liabilities 10,518 10,397 20,915 9,371 8,445 17,816
5. Administrative expenses
6 months 6 months
ended ended
30 June 30 June
2023 2022
EUR'000 EUR'000
Other administrative expenses 64,695 50,155
Government grants (723) (3,224)
Net property revaluation movements through profit or loss* (1,998) (17,907)
Depreciation of property, plant and equipment (note 11) 15,086 13,910
Depreciation of right-of-use assets (note 12) 14,875 13,038
Net impairment charges of right-of-use assets - 2,395
Net reversal of previous impairment charges of fixtures, fittings and equipment - (370)
Hotel pre-opening expenses (note 4) 660 1,872
Variable lease costs 1,847 1,373
Amortisation of intangible assets (note 10) 327 274
Utilities - electricity and gas 15,909 12,882
_______ _______
110,678 74,398
_______ ______
Other administrative expenses include costs related to payroll, marketing and general administration. The increase in other administrative expenses for the period ended 30 June 2023, relative to the same period in the prior year, is primarily due to improved trade and the impact of the new hotels opened in 2022.
During the period ended 30 June 2023, the Group availed of government grants totalling EUR0.7 million which have been offset against the related costs of EUR0.7 million in administrative expenses in profit of loss (30 June 2022: EUR3.2 million).
In 2023, these government grants relate to the Temporary Business Energy Support Scheme (TBESS) in Ireland for the first quarter of 2023.
During the period ended 30 June 2022, the Group received wage subsidies from the Irish government amounting to EUR10.5 million in the form of the Employment Wage Subsidy Scheme (EWSS). The EWSS was available to employers who suffered significant reductions in turnover as a result of the Covid-19 restrictions. The Group availed of the EWSS scheme from 1 January 2022 to 22 May 2022, at which point the scheme ended. EUR8.8m of this was offset against cost of sales, with EUR1.7m offset against administrative expenses. The Group also availed of other government grant schemes totalling EUR1.5 million, including but not limited to the Covid Restrictions Support Scheme and the Failte Ireland Tourism Accommodation Providers Continuity Scheme, which have also been offset against administrative expenses.
*Net property revaluation movements through profit or loss relate to the net reversal of revaluation losses on land and buildings of EUR2.02 million (30 June 2022: EUR17.93 million) through profit or loss (note 11) offset by a EUR0.02 million (30 June 2022: EUR0.02 million) fair value loss on investment property. 6. Impairment
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At 30 June 2023, as a result of the carrying amount of the net assets of the Group being more than its market capitalisation (market capitalisation is calculated by multiplying the share price on that date by the number of shares in issue), the Group tested each cash generating unit ('CGU') for impairment as this was deemed to be a potential impairment indicator. Market capitalisation can be influenced by a number of different market factors and uncertainties including wider market sentiment. In addition, share prices reflect a discount due to lack of control rights.
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. Each individual hotel is considered to be a CGU for the purposes of impairment testing.
At 30 June 2023, 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, land and buildings, fixtures, fittings and equipment and right-of-use assets, in that CGU.
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 11). For CGUs with right-of-use assets, the lease term was used;
-- Revenue and EBITDA projections are based on management's best estimate projections as at 30 June 2023.Forecasted revenue and EBITDA are based on expectations of future outcomes taking into account themacro-environment, current earnings, past experience and adjusted for anticipated revenue and cost growth;
-- Cash flow projections assume a long-term compound annual growth rate of 2% (31 December 2022: 2%) inEBITDA for CGUs in the Republic of Ireland and 2.5% (31 December 2022: 2.5%) 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 10) capitalisation rates consistent with those used by the external property valuers whichincorporates a long-term growth rate of 2% (31 December 2022: 2%) for Irish and 2.5% for UK properties (31 December2022: 2.5%);
-- The cash flows are discounted using a risk adjusted discount rate specific to each property. Riskadjusted discount rates of 8.5% to 11.5% for Dublin assets (31 December 2022: 8.5% to 11.25%), 10% to 12.75% forRegional Ireland assets (31 December 2022: 9.75% to 12.5%), 7.5% to 13% for UK assets (31 December 2022: 7.5% to13%) 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.
At 30 June 2023, the carrying value of the Group's CGUs did not exceed their recoverable amount and no impairment was required following assessment. No impairment reversals relating to right-of-use assets (note 12) and fixtures, fittings and equipment (note 11), were recognised at 30 June 2023. 7. Finance costs
6 months 6 months
ended ended
30 June 30 June
2023 2022
EUR'000 EUR'000
Interest on lease liabilities (note 12) 20,915 17,816
Interest expense on bank loans and borrowings 5,948 3,947
Cash flow hedges - reclassified from other comprehensive income (2,831) 652
Net foreign exchange loss on financing activities 154 202
Other finance costs 763 1,153
Interest capitalised to property, plant and equipment (note 11) (842) (1,259)
Interest capitalised to contract fulfilment costs - (357)
_______ _______
24,107 22,154
_______ _______
The Group uses interest rate swaps to convert the interest rate on part of its debt from floating rate to fixed rate (note 17). The cash flow hedge amount reclassified from other comprehensive income is shown separately within finance costs and primarily represents the additional interest received or paid by the Group as a result of the interest rate swaps. As at 30 June 2023, the Group has recognised derivative assets, in relation to these interest rate swaps, of EUR13.0 million (31 December 2022: EUR11.7 million, 30 June 2022: EUR7.1 million) as a result of the Group's fixed interest rates being forecast to be lower than the variable interest rates forward curve applicable on sterling borrowings. Interest margins on the Group's borrowings are set with reference to the Net Debt to EBITDA covenant levels and ratchet up or down accordingly.
Other finance costs include commitment fees and other banking and professional fees. Net foreign exchange losses on financing activities relates principally to cash and cash equivalents and loans which did not form part of the net investment hedge (note 17).
Interest on loans and borrowings amounting to EUR0.8 million (period ended 30 June 2022: EUR1.3 million) was capitalised to assets under construction on the basis that this cost was directly attributable to the construction of qualifying assets (note 11). The capitalisation rates applied by the Group, which reflected the weighted average interest rates on Sterling denominated borrowings for the period, including the impact of hedges, were 2.8% (30 June 2022: 3.9%).
8 Share-based payments expense
The total share-based payments expense for the Group's employee share schemes charged to profit or loss during the period was EUR3.6 million (six months ended 30 June 2022: EUR1.2 million), analysed as follows:
6 months 6 months
ended ended
30 June 30 June
2023 2022
EUR'000 EUR'000
Long Term Incentive Plans 3,336 1,020
Share Save schemes 273 166
______ ______
3,609 1,186
______ ______
Details of the schemes operated by the Group are set out hereafter:
Long Term Incentive Plans
Awards granted
During the period ended 30 June 2023, the Board approved the conditional grant of 1,552,080 ordinary shares 'the Award' pursuant to the terms and conditions of the Group's 2017 Long Term Incentive Plan ('the 2017 LTIP'). The Award was granted to senior employees across the Group (120 in total). Vesting of the Award is based on two independently assessed performance targets, 50% based on total shareholder return 'TSR' and 50% based on Free Cashflow Per Share 'FCPS'. The performance period of this Award is 1 January 2023 to 31 December 2025.
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 threshold 25% vesting if the Group's TSR over the performance period is ranked at the median compared to the TSR of the comparator group. If the Group's TSR performance is at or above the upper quartile compared to the comparator group, the remaining 75% of that portion of the award will vest, with pro-rota vesting on a straight-line basis for performance in between these thresholds.
Threshold performance (25% vesting) for the FCPS condition, which is a non-market-based performance condition, is based on the achievement of FCPS of EUR0.498, as disclosed in the Group's 2025 audited consolidated financial statements, with 100% vesting for FCPS of EUR0.608 or greater. The FCPS based portion of the Award will vest on a straight-line basis for performance between these thresholds. FCPS 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.
In addition to the above, the Board approved the conditional grant of 22,719 shares pursuant to the terms and conditions of the 2017 LTIP in May 2023. Performance criteria in relation to this additional award is the same as that originally set out for the awards granted on 2 March 2022.
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Movements in the number of share awards are as follows:
6 months ended Year ended
30 June 31 December
2023 2022
Number of awards Number of awards
Outstanding at the beginning of the period/year 4,837,170 4,344,481
Granted during the period/year 1,574,799 1,443,764
Forfeited during the period/year (52,910) (128,294)
Lapsed unvested during the period/year (1,733,533) (822,781)
Exercised during the period/year (535,634) -
________ _________
Outstanding at the end of the period/year 4,089,892 4,837,170
________ _________
6 months ended Year ended
30 June 31 December
2023 2022
Grant date Number of awards Number of awards
March 2020 - 2,022,523
March 2021 1,099,661 1,115,183
December 2021 - 255,700
March 2022 1,427,175 1,443,764
March 2023 1,540,337 -
May 2023 22,719 -
________ _________
Outstanding at the end of the period/year 4,089,892 4,837,170
________ _________
Awards vested
During the period ended 30 June 2023, the Company issued 281,734 ordinary shares on foot of the vesting of awards granted in March 2020 under the terms of the 2017 LTIP. In order to ensure a like-for-like assessment with the basis on which the targets were set at the start of 2020, the Company assessed EPS performance a) excluding the number of shares issued as part of the placing in September 2020 and b) including the impact of the interest charge that would have accrued if the placing was excluded. Adjusted EPS performance was accordingly determined to be EUR0.458, resulting in a vesting outcome of 37.27% for the portion of the award based on adjusted performance (i.e. 18.64% of the overall award). This resulted in an additional charge of EUR0.9 million recognised in the period ended 30 June 2023.
The Company also considered shareholder guidance in relation to 'windfall gains'. The LTIP awards granted in 2020 were granted at a price of EUR2.4375, which compares to a price of EUR5.9775 for the 2019 awards. The Company did not make a reduction on the award to reflect this lower share price during the performance period but committed to reviewing the outcome at vesting.
The Company carefully considered its approach taking into account the exceptional performance of management in protecting the business while operations were closed during the Covid-19 pandemic, the acceleration of the recovery performance during 2022 and the continued execution of the strategy to build capacity and deliver shareholder value.
The Company believes that the recovery in the share price largely reflects the actions of management rather than a market rebound. However, the Company recognises shareholder views in this area and taking into account the lower grant share price and shareholder guidance in this area, the Company judged that it would be appropriate to exercise its discretion to reduce the level of vesting by 25% from 18.64% to 14%. This has been accounted for as a modification under IFRS 2 Share-based-Payment. As a result, no adjustment has been made to the calculation of the share-based payment charge in relation to this reduced level of vesting and the Group continued to recognise the full cost of the related share-based payment charge in the statement of comprehensive income.
In total, 281,734 ordinary shares were issued in relation to the vesting of the March 2020 awards. The weighted average share price at the date of exercise of these awards was EUR4.19.
During the period ended 30 June 2023, the Company issued 253,900 ordinary shares on foot of the vesting of awards granted in December 2021. This award was conditional on relevant employees being in employment at 31 March 2023. The weighted average share price at the date of exercise for these awards was EUR4.56.
Measurement of fair values
The fair value, at the grant date, of the TSR-based conditional share awards was measured using a Monte Carlo simulation model. Non-market-based performance conditions attached to the awards were not taken into account in measuring fair value at the grant date. The valuation and key assumptions used in the measurement of the fair values at the grant date were as follows:
March 2023 March 2022 Fair value at grant date for TSR- based awards EUR2.93 EUR2.60 Share price at grant date EUR4.30 EUR3.90 Exercise price EUR0.01 EUR0.01 Expected volatility 54.8% p.a 53.0% p.a. Performance period 3 years 3 years Risk- free rates 2.78% -0.31%
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 in 2020 included EPS performance conditions, whilst the March 2021, March 2022, March/May 2023 awards include FCPS-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 FCPS-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
During the period ended 30 June 2023, 26,612 ordinary shares were issued on maturity of the share options granted as part of the Share Save scheme in 2019. The weighted average share price at the date of exercise for options exercised during the period ended 30 June 2023 was EUR4.30.
9 Tax charge
6 months 6 months
ended ended
30 June 30 June
2023 2022
EUR'000 EUR'000
Current tax
Irish corporation tax 7,057 5,572
Foreign corporation tax - 8
Deferred tax charge/(credit) 1,372 (318)
________ _______
Tax charge 8,429 5,262
________ _______
The tax charge for the period ended 30 June 2023 of EUR8.4 million primarily relates to current tax in respect of profits earned in Ireland during the period and deferred tax in respect of the utilisation of losses carried forward from earlier periods, primarily in the UK.
The UK corporation tax rate increased from 19% to 25% on 1 April 2023. This increase in the UK corporation tax rate had been substantively enacted during the year ended 31 December 2021. The majority of UK deferred tax assets and liabilities were remeasured at the 25% rate in prior periods.
The increase in the effective tax rate from 10.1% to 16.7% for the period ended 30 June 2023 relative to the prior period, mainly relates to a higher proportion of income being subject to tax at higher rates during the period ended 30 June 2023. In addition, the impact of the non-taxable gain on the disposal of the Clayton Crown Hotel during the period ended 30 June 2022 reduced the effective income tax rate in that period.
10 Intangible assets and goodwill
Goodwill Other intangible assets Total
EUR'000 EUR'000 EUR'000
Cost
Balance at 1 January 2023 79,106 2,797 81,903
Effect of movement in exchange rates 369 - 369
_______ _______ _______
Balance at 30 June 2023 79,475 2,797 82,272
_______ _______ _______
Accumulated amortisation and impairment losses
Balance at 1 January 2023 (48,947) (1,902) (50,849)
Amortisation of intangible assets - (327) (327)
_______ _______ _______
Balance at 30 June 2023 (48,947) (2,229) (51,176)
_______ _______ _______
Carrying amounts
At 30 June 2023 30,528 568 31,096
_______ _______ _______
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At 31 December 2022 30,159 895 31,054
_______ _______ _______
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.
At 30 June 2023, goodwill cost figure includes EUR12.0 million (GBP10.3 million) which is attributable to goodwill arising on acquisition of foreign operations. Consequently, such goodwill is subsequently retranslated at the closing foreign exchange rate.
The Group tests goodwill annually for impairment or more frequently if there are indicators it may be impaired. The carrying amount of the net assets of the Group being more than its market capitalisation is an indicator of potential impairment and as a result, the Group performed an impairment test of the Group's CGUs as at 30 June 2023 (note 6). As a result of the impairment tests, the Directors concluded that the carrying value of goodwill was not impaired as at 30 June 2023 (31 December 2022: no impairment). 11 Property, plant and equipment
Fixtures,
Land and Assets under Total
buildings construction fittings and
equipment
EUR'000 EUR'000 EUR'000 EUR'000
At 30 June 2023
Valuation 1,365,271 - - 1,365,271
Cost - 131,530 166,605 298,135
Accumulated depreciation (and impairment charges)* - - (81,630) (81,630)
Net carrying amount 1,365,271 131,530 84,975 1,581,776
At 1 January 2023, net carrying amount 1,281,344 64,556 81,547 1,427,447
Additions 98 64,294 12,066 76,458
Revaluation gains through OCI 76,754 - - 76,754
Reversal of previous revaluation losses through 2,020 - - 2,020
profit or loss
Capitalised labour costs 88 45 53 186
Capitalised borrowing costs (note 7) - 842 - 842
Depreciation charge for the period (5,662) - (9,424) (15,086)
Translation adjustment 10,629 1,793 733 13,155
At 30 June 2023, net carrying amount 1,365,271 131,530 84,975 1,581,776
*Accumulated depreciation of buildings is stated after the elimination of depreciation on revaluation, disposals and impairments.
The carrying value of land and buildings, revalued at 30 June 2023, is EUR1,365.3 million (31 December 2022: EUR1,281.3 million). The value of these assets under the cost model is EUR861.0 million (31 December 2022: EUR855.4 million).
During the period ended 30 June 2023, unrealised revaluation gains of EUR76.8 million (year ended 31 December 2022: net unrealised revaluation gains of EUR188.2 million) have been reflected through other comprehensive income and in the revaluation reserve in equity. Reversals of previously recognised revaluation losses in profit or loss of EUR2.0 million have been reflected in administrative expenses through profit or loss in the period ended 30 June 2023 (year ended 31 December 2022: net reversal of previously recognised revaluation losses in profit or loss of EUR21.2 million).
Included in land and buildings at 30 June 2023 is land at a carrying value of EUR539.8 million which is not depreciated (31 December 2022: EUR463.7 million).
Additions to assets under construction during the period ended 30 June 2023 primarily relate to the acquisition and further investment in Maldron Hotel Finsbury Park required to bring the property into use (EUR55.1 million) and the development expenditure incurred on the construction of Maldron Hotel Shoreditch, London.
The Group subsequently opened Maldron Hotel Finsbury Park on 11 July 2023 (note 23) and reclassified the related costs from assets under construction to land and buildings and fixtures, fittings and equipment, once the hotel became available for use.
Measurement of fair value
The value of the Group's property at 30 June 2023 reflects open market valuations carried out as at 30 June 2023 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.
The fair value measurement of the Group's own-use property has been categorised as a Level 3 fair value based on the inputs to the valuation technique used. At 30 June 2023, 29 properties were revalued by independent external valuers engaged by the Group (31 December 2022: 29 properties). Maldron Hotel Finsbury Park was an asset under construction and consequently was not revalued at 30 June 2023.
The principal valuation technique used by the independent external valuers engaged by the Group was discounted cash flows. This valuation model considers the present value of net cash flows to be generated from the property over a ten year period (with an assumed terminal value at the end of year 10). Valuers' forecast cash flow included in these calculations represents the expectations of the valuers for EBITDA (driven by revenue per available room ('RevPAR') calculated as total rooms revenue divided by rooms available) for the property and also takes account of the expectations of a prospective purchaser. It also includes their expectation for capital expenditure which the valuers, typically, assume as approximately 4% of revenue per annum. This does not always reflect the profile of actual capital expenditure incurred by the Group. On specific assets, refurbishments are, by nature, periodic rather than annual. Valuers' expectations of EBITDA are based on 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 2022: 9.96%) and 6.8% for assets located in the UK (31 December 2022: 6.8%).
The significant unobservable inputs are:
-- Valuers' forecast cash flow;
-- Risk adjusted discount rates and terminal (year 10) capitalisation rates which are specific to eachproperty.
-- Dublin:
-- Risk adjusted discount rates range between 8.50% and 11.50% (31 December 2022: 8.50% and 11.25%).
-- Weighted average risk adjusted discount rate is 9.55% (31 December 2022: 9.56%).
-- Terminal capitalisation rates range between 6.50% and 9.50% (31 December 2022: 6.50% and 9.25%).
-- Regional Ireland:
-- Risk adjusted discount rates range between 10.00% and 12.75% (31 December 2022: 9.75% and 12.50%).
-- Weighted average risk adjusted discount rate is 11.10% (31 December 2022: 10.75%).
-- Terminal capitalisation rates range between 8.00% and 10.75% (31 December 2022: 7.75% and 10.50%).
-- UK:
-- Risk adjusted discount rates range between 7.50% and 13.00% (31 December 2022: 7.50% and 13.00%).
-- Weighted average risk adjusted discount rate is 9.62% (31 December 2022: 9.47%).
-- Terminal capitalisation rates range between 5.00% and 10.50% (31 December 2022: 5.00% and 10.50%).
The estimated fair value under this valuation model may 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 higher or lower.
Valuations also had regard to relevant price per key metrics from hotel sales activity.
The property revaluation exercise carried out by the Group's external valuers is a complex exercise, which not only takes into account their future earnings estimate 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. 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. 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. 12 Leases
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DJ Dalata Hotel Group PLC: 2023 Half Year Report -14-
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:
Period ended Year ended
Right-of-use assets 30 June 2023 31 December 2022
EUR'000 EUR'000
Net book value at start of period/year 658,101 491,869
Additions - 195,497
Depreciation charge for the period/year (14,875) (27,503)
Remeasurement of lease liabilities - 10,441
Reversal of previous impairment charges - 4,101
Translation adjustment 10,069 (16,304)
_______ _______
Net book value at end of period/year 653,295 658,101
_______ _______
Right-of-use assets comprise of leased assets that do not meet the definition of investment property. Right-of-use assets primarily reflect leased property assets. The carrying value of right-of-use assets related to other equipment at 30 June 2023 reflected in the above total is EUR0.3 million (31 December 2022: EUR0.3 million).
As a result of the impairment assessments carried out as at 30 June 2023 (note 6), the recoverable amount of all CGUs was deemed higher than the carrying value, therefore, no impairments of right-of-use assets were required.
Period ended Year ended
Lease liabilities 30 June 2023 31 December 2022
EUR'000 EUR'000
Current 10,347 10,049
Non-current 641,444 471,877
_______ _______
Lease liabilities at start of period/year 651,791 481,926
_______ _______
Additions - 185,061
Interest on lease liabilities (note 7) 20,915 38,101
Lease payments (26,077) (47,425)
Remeasurement of lease liabilities - 10,427
Translation adjustment 10,078 (16,299)
_______ _______
Lease liabilities at end of period/year 656,707 651,791
_______ _______
Current 9,905 10,347
Non-current 646,802 641,444
_______ _______
Lease liabilities at end of period/year 656,707 651,791
_______ _______
Subsequent to the period end, in July 2023, the Group acquired the long leasehold interest of the Apex Hotel London Wall, which was subsequently re-branded Clayton Hotel London Wall, with 107 years remaining on the lease (note 23).
The lease of Maldron Hotel Dublin Airport is due to mature in quarter one 2024.
Additions during the year ended 31 December 2022 related to the Group entering leases for three hotels in the United Kingdom (Maldron Hotel Manchester City Centre, Clayton Hotel Bristol City, and Clayton Hotel Glasgow), one hotel in Dublin (The Samuel Hotel), one hotel in Germany (Clayton Hotel Düsseldorf) and a lease for the new central office location in Dublin. These additions resulted in the recognition of total lease liabilities of EUR185.1 million and total right-of-use assets of EUR195.5 million.
During the year ended 31 December 2022, lease amendments, which were not included in the original lease agreements were made to three of the Group's leases. These were treated as a modification of lease liabilities and resulted in a decrease of EUR2.8 million to lease liabilities and right-of-use assets. 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 ended 31 December 2022. This resulted in an increase in lease liabilities and related right-of-use assets of EUR13.4 million. The termination of one of the Group's leases also resulted in a decrease in lease liabilities and related right-of-use assets of EUR0.2 million.
Non-cancellable undiscounted lease cash flows payable under lease contracts are set out below:
At 30 June 2023 At 31 December 2022
Republic of Ireland and UK Total Republic of Ireland and UK Total
Other Other
EUR'000 GBP'000 EUR'000 EUR'000 GBP'000 EUR'000
6 months/year ended 31 December 15,165 9,570 26,315 30,054 19,267 51,777
2023
During the year 2024 28,477 19,208 50,857 28,482 19,208 50,139
During the year 2025 28,405 19,280 50,868 28,419 19,280 50,157
During the year 2026 28,517 19,373 51,089 28,522 19,373 50,365
During the year 2027 28,789 19,831 51,895 28,802 19,831 51,161
During the year 2028 28,882 19,945 52,120 28,900 19,945 51,388
During the years 2029 - 2038 280,139 207,880 522,344 280,139 207,880 514,519
During the years 2039 - 2048 160,669 226,213 424,235 160,671 226,213 415,723
From 2049 onwards 71,432 152,399 248,995 71,432 152,399 243,260
_______ ______ ______ _______ _______ _______
670,475 693,699 1,478,718 685,421 703,396 1,478,489
_______ _______ ______ _______ _______ _______
Clayton Hotel Düsseldorf has been included within the Republic of Ireland and Other region for the period ended 30 June 2023 and 31 December 2022.
Sterling amounts have been converted using the closing foreign exchange rate of 0.85828 as at 30 June 2023 (0.88693 as at 31 December 2022).
The weighted average lease life of future minimum rentals payable under leases is 29.5 years (31 December 2022: 29.8 years). Lease liabilities are monitored within the Group's treasury function.
The actual cash flows 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; and
-- reassessments of lease liabilities following periodic rent reviews.
It excludes leases on hotels for which an agreement for lease has been signed. Unwind of right-of-use assets and release of interest charge
The unwinding of the right-of-use assets and the release of the interest on the lease liabilities through profit or loss over the terms of the leases have been disclosed in the following table:
Depreciation of right-of-use assets Interest on lease liabilities
Republic of Ireland and UK Total Republic of Ireland and UK Total
Other Other
EUR'000 GBP'000 EUR'000 EUR'000 GBP'000 EUR'000
6 months ending 31 December 9,188 4,933 14,935 10,400 9,098 21,000
2023
During the year 2024 16,478 9,754 27,843 20,434 18,155 41,587
During the year 2025 16,385 9,754 27,750 19,954 18,086 41,026
During the year 2026 16,374 9,409 27,336 19,441 18,011 40,426
During the year 2027 16,107 9,189 26,813 18,881 17,914 39,753
During the year 2028 15,947 9,035 26,474 18,273 17,784 38,994
During the years 2029 - 2038 145,011 82,071 240,634 142,046 166,287 335,790
During the years 2039 - 2048 77,400 81,884 172,805 61,058 120,880 201,898
From 2049 onwards 30,024 50,365 88,705 12,958 41,694 61,537
_______ _______ _______ _______ _______ _______
342,914 266,394 653,295 323,445 427,909 822,011
_______ _______ _______ _______ _______ _______
Clayton Hotel Düsseldorf has been included within the Republic of Ireland and Other region for the period ended 30 June 2023.
Sterling amounts have been converted using the closing foreign exchange rate of 0.85828 as at 30 June 2023.
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 reversal of previous impairment charges of right-of-use assets.
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DJ Dalata Hotel Group PLC: 2023 Half Year Report -15-
It excludes leases on hotels for which an agreement for lease has been signed.
Extension options and termination options
As at 30 June 2023, the Group, as a hotel lessee, has two five-year extension options for one hotel. The Group assesses at lease commencement whether it is reasonably certain to exercise the option and reassesses if there is a significant event or change in circumstances within its control. At 30 June 2023, it is not reasonably certain that the first five year extension option will be exercised. 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
Hotel lease 47,258 6,709
The Group holds a termination option in an office space lease. The Group assesses at lease commencement whether it is reasonably certain not to exercise the option and reassesses if there is a significant event or change in circumstances within its control. At 30 June 2023, it is not reasonably certain that the option will not be exercised. 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 lease 3,466 1,323
Leases not yet commenced to which the lessee is committed
The Group has a number of agreements for lease at 30 June 2023 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) and other contractual payments, 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.
30 June
Agreements for lease 31 December 2022
2023
EUR'000 EUR'000
Less than one year 7,065 -
One to two years 5,817 10,178
Two to three years 7,071 5,629
Three to five years 15,934 15,737
Five to fifteen years 83,560 81,307
Fifteen to twenty five years 89,918 87,473
After twenty five years 107,811 109,229
_______ _______
Total future lease payments 317,176 309,553
_______ _______
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 Brighton (Q2 2024), Maldron Hotel Cathedral Quarter Manchester (Q2 2024), Maldron Hotel Liverpool City (Q2 2024), and Maldron Hotel Croke Park, Dublin (H1 2026). 13 Trade and other receivables
30 June 31 December
2023 2022
EUR'000 EUR'000
Non-current assets
Other receivables 1,414 2,314
Prepayments 1,444 1,073
Deposit paid on acquisition 3,112 -
_______ _______
5,970 3,387
_______ _______
Current assets
Trade receivables 16,033 13,816
Prepayments 14,611 8,003
Contract assets 4,541 4,465
Accrued income 2,378 2,309
Other receivables 2,123 1,670
_______ _______
39,686 30,263
_______ _______
Total 45,656 33,650
_______ _______
Non-current assets
Non-current other receivables comprise of a rent deposit of EUR1.4 million (31 December 2022: EUR1.4 million) paid to the landlord in 2020 on the sale and leaseback of Clayton Hotel Charlemont, Dublin. This deposit is repayable to the Group at the end of the lease term.
Included in non-current prepayments are costs of EUR1.2 million (31 December 2022: EUR0.9 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.
Deposit paid on acquisition at 30 June 2023 of EUR3.1 million relates to the deposit paid for the acquisition of Apex Hotel London Wall which was completed subsequent to the period end, on 3 July 2023 (note 23).
Current assets
Current other receivables primarily includes a deposit paid as part of a hotel property lease contract of EUR0.9 million (31 December 2022: EUR0.9 million in Non-current other receivables) and EUR0.7 million of government grants (31 December 2022: EUR1.2 million). 14 Trade and other payables
30 June 31 December
2023 2022
EUR'000 EUR'000
Non-current liabilities
Accruals 469 239
_______ _______
469 239
_______ _______
Current liabilities
Trade payables 23,812 17,645
Accruals 40,197 45,821
Contract liabilities 17,780 14,265
Value added tax 6,723 15,040
Payroll taxes 2,982 26,047
_______ _______
91,494 118,818
_______ _______
Total
91,963 119,057
_______ _______
Accruals at 30 June 2023 include EUR9.8 million of accruals related to amounts which have not yet been invoiced for capital expenditure and for costs incurred on entering new leases and agreements for lease (31 December 2022: EUR9.1 million).
Value added tax and payroll taxes
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 EUR11.7 million and payroll tax liabilities of EUR23.1 million were deferred as at 31 December 2022. These liabilities were paid in full during the period ended 30 June 2023. 15 Provision for liabilities
30 June 31 December
2023 2022
EUR'000 EUR'000
Non-current liabilities
Insurance provision 7,547 7,165
Current liabilities
Insurance provision 1,857 2,014
_______ _______
Total provision at end of period/year 9,404 9,179
_______ _______
The reconciliation of the movement in the provision for the period/year is as follows:
Period ended Year ended
30 June 31 December
2023 2022
EUR'000 EUR'000
At 1 January 9,179 8,188
Provisions made during the period/year - charged to profit or loss 1,250 2,500
Utilised during the period/year (968) (859)
Discounting effect charged to profit or loss (57) (650)
_______ _______
At end of period/year 9,404 9,179
_______ _______
The 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. 16 Commitments
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DJ Dalata Hotel Group PLC: 2023 Half Year Report -16-
The Group has the following commitments for future capital expenditure under its contractual arrangements.
30 June 31 December
2023 2022
EUR'000 EUR'000
Contracted but not provided for 15,221 24,875
_______ _______
At 30 June 2023, the commitments relate primarily to the new-build hotel development of Maldron Hotel Shoreditch, London. It also includes committed capital expenditure at other hotels in the Group.
The Group also 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 revenue on capital expenditure in respect of fixtures, fittings and equipment in the leased hotels over the life of the lease. The Group has estimated the commitment in relation to these leases to be EUR66.3 million (31 December 2022: EUR71.2 million) spread over the life of the various leases which primarily range in length from 19 years to 35 years. The revenue figures used in the estimate of the commitment at 30 June 2023 have been based on 2023 forecasted revenues at that date. The actual commitment will be higher or lower dependent on the actual revenue earned in each of the lease years.
17 Financial risk management
Risk exposures
The Group is exposed to various financial risks arising in the normal course of business. Its financial risk exposures are predominantly related to the creditworthiness of counterparties and risks relating to changes in interest rates and foreign currency exchange rates.
The Group uses financial instruments throughout its business: 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.
Fair values
The following tables show the carrying amount of Group financial assets and liabilities including their values in the fair value hierarchy at 30 June 2023. 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.
Fair value
Financial assets Financial
assets Total
measured at measured at carrying amount Level Level 2 Level
1 3
fair value amortised cost
30 June 30 June 30 June 30 30 June 30
June June
2023 2023 2023 2023
2023 2023
Financial assets EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Derivatives - hedging instruments 12,969 - 12,969 12,969
Trade and other receivables, excluding
prepayments and deposit paid on acquisition - 26,489 26,489
(note 13)
Cash at bank and in hand - 114,360 114,360
_______ _______ _______
12,969 140,849 153,818
Financial
liabilities
Financial
liabilities measured at Total carrying
measured at amount Level Level
amortised 1 Level 2 3
fair value cost
30 June 30 June 30 June 30 30 June 30
June June
2023 2023 2023 2023
2023 2023
Financial liabilities EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Bank loans (note 18) - (265,227) (265,227) (265,227)
Trade payables and accruals (note 14) - (64,478) (64,478)
_______ _______ _______
- (329,705) (329,705)
_______ _______ _______
The following tables show the carrying amount of Group financial assets and liabilities including their values in the fair value hierarchy at 31 December 2022. 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.
Fair value
Financial assets Financial assets Total
measured at measured at
carrying Level 1 Level 2 Level 3
fair value amortised cost amount
31 December 31 December 31 December 31 31 31
December December December
2022 2022 2022
2022 2022 2022
Financial assets EUR'000 EUR'000 EUR'000 EUR'000
EUR'000 EUR'000
Derivatives - hedging instruments 11,717 - 11,717 11,717
Trade and other receivables, - 24,574 24,574
excluding prepayments (note 13)
Cash at bank and in hand - 91,320 91,320
_______ _______ _______
11,717 115,894 127,611
_______ _______ _______
Financial Financial
liabilities measured liabilities measured
at at Total
carrying
fair value amortised cost amount Level 1 Level 2 Level 3
31 December 31 December 31 December 31 31 31
December December December
2022 2022 2022
2022 2022 2022
Financial liabilities EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Bank loans (note 18) - (193,488) (193,488) (193,488)
Trade payables and accruals (note - (63,705) (63,705)
14)
_______ _______ _______
- (257,193) (257,193)
_______ _______ _______
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.
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-- Level 2: Inputs other than quoted prices included within 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 period ended 30 June 2023, there were no reclassifications of financial instruments and no transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments.
Estimation of fair values
The principal methods and assumptions used in estimating the fair values of financial assets and liabilities are explained hereafter.
Cash at bank and in hand
For cash at bank and in hand, the carrying value is deemed to reflect a reasonable approximation of fair value.
Derivatives
Discounted cash flow analyses have been used to determine the fair value of the interest rate swaps, taking into account current market inputs and rates (Level 2).
Receivables/payables
For receivables and payables with a remaining term of less than one year or demand balances, the carrying value net of impairment provision, where appropriate, is a reasonable approximation of fair value. The non-current receivables and payables carrying value is a reasonable approximation of fair value.
Bank loans
For bank loans, the fair value is 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 loans and borrowings is considered to be a reasonable approximation of fair value. There is no difference between margins available in the market at 30 June 2023 and the margins the Group was paying at period 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
The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. 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.
Other receivables primarily relate to amounts owed from the government and deposits due from landlords at the end of the lease term, as well as other contractual amounts due from landlords.
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. Management does not expect any significant losses from receivables that have not been provided for as at 30 June 2023.
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 the 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 period ended 30 June 2023, cash and cash equivalents were held in line with 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 the end of the period/year was as follows:
30 June 31 December
2023 2022
EUR'000 EUR'000
Trade receivables 16,033 13,816
Other receivables 3,537 3,984
Contract assets 4,541 4,465
Accrued income 2,378 2,309
Cash at bank and in hand 114,360 91,320
Derivative assets 12,969 11,717
_______ _______
153,818 127,611
_______ _______
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 Cashflow remains strong with net cash generated from operating activities in the period of EUR62.0 million (period ended 30 June 2022: EUR100.4 million). EUR34.8 million of warehoused tax liabilities which were deferred, under the warehousing of tax liabilities legislation during the Covid-19 pandemic, were paid during the period. Excluding this amount, net cash generated from operating activities is EUR96.8 million. At 30 June 2023, cash and undrawn facilities are EUR413.9 million (31 December 2022: EUR455.7 million).
The Group's banking covenants have reverted to Net Debt to EBITDA (as defined in the Group's bank facility agreement which is equivalent to Net Debt to EBITDA after rent) and Interest Cover at 30 June 2023. This replaces the Net Debt to Value covenant and liquidity minimum covenants which were temporarily in place. At 30 June 2023, the Net Debt to EBITDA covenant limit is 4.0x and the Interest Cover minimum is 4.0x. The Group's Net Debt to EBITDA after rent for the 12 month period to 30 June 2023 is 1.0x (APM (viii)) and Interest Cover is 18.3x (APM (xix)).
The Group also monitors its Debt and Lease Service cover (APM (xv)), which is 3.1x for the twelve month period ended 30 June 2023, in order to monitor gearing and liquidity taking into account both bank and lease financing.
(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 which hedge the variability in cash flows attributable to the 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.
The Group determines the existence of an economic relationship between the hedging instrument and the hedged item based on the reference interest rates, maturities and 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.
As at 30 June 2023, interest rate swaps cover 100% (31 December 2022: 100%) of the Group's term Sterling denominated borrowings of GBP176.5 million for the period to 26 October 2024. The final year of the term debt, to 26 October 2025, is currently unhedged.
At 30 June 2023, euro revolving credit facility borrowings totalling EUR3.0 million were unhedged, and were subsequently repaid in early July 2023. The Group also drew down GBP53.4 million (EUR62.2 million) of sterling revolving credit facility borrowings on 30 June 2023 to fund the post period end acquisition of the Apex Hotel London Wall (note 23) and the interest rate on these borrowings is unhedged at 30 June 2023.
The weighted average interest cost, including the impact of hedges, in respect of Sterling and Euro denominated borrowings for the period was 2.8% and 4.1% respectively.
(ii) Foreign currency risk
The Group is exposed to risks arising from fluctuations in the Euro/Sterling exchange rate. The Group is exposed to transactional foreign currency risk on trading activities conducted by subsidiaries in currencies other than their functional currency and to foreign currency translation risk on the retranslation of foreign operations to Euro.
The Group's policy is to manage foreign currency exposures commercially and through netting of exposures where possible. The Group's principal transactional exposure to foreign exchange risk relates to interest costs on its Sterling borrowings. This risk is mitigated by the earnings from UK subsidiaries which are denominated in Sterling. The Group's gain or loss on retranslation of the net assets of foreign currency subsidiaries is taken directly to the translation reserve.
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The Group limits its exposure to foreign currency risk by using Sterling debt to hedge part of the Group's investment in UK subsidiaries. The Group financed certain operations in the UK by obtaining funding through external borrowings denominated in Sterling. These borrowings amounted to GBP176.5 million (EUR205.6 million) at 30 June 2023 (31 December 2022: GBP176.5 million (EUR199.0 million)) and are designated as net investment hedges. The net investment hedge was fully effective during the period.
This enables gains and losses arising on retranslation of those foreign currency borrowings to be recognised in other comprehensive income, providing a partial offset in reserves against the gains and losses arising on retranslation of the net assets of those UK operations.
(d) Capital management
The Group's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. 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 to achieve a pre-tax leveraged return on equity of at least 15% on investments and typically, a rent cover of 1.85x in year three for leased assets.
The Group monitors capital using a ratio of Net Debt to EBITDA after rent which excludes the effects of IFRS 16 in line with its banking covenants. This is calculated based on the prior 12 month period. As at 30 June 2023, the Net Debt to EBITDA after rent is 1.0x (31 December 2022: 0.8x).
The Board reviews the Group's capital structure on an ongoing basis as part of the normal strategic and financial planning process. It ensures that it is appropriate for the hotel industry given its exposure to demand shocks and the normal economic cycles.
18 Loans and Borrowings
30 June 31 December
2023 2022
EUR'000 EUR'000
Bank borrowings 265,227 193,488
_______ _______
Total loans and borrowings 265,227 193,488
_______ _______
The amortised cost of loans and borrowings at 30 June 2023 was EUR265.2 million (31 December 2022: EUR193.5 million). The drawn loans and borrowings, being the amount owed to the lenders, was EUR270.8 million at 30 June 2023 (31 December 2022: EUR199.0 million). This consisted of: i. Sterling term borrowings of GBP176.5 million (EUR205.6 million) which remained unchanged during the period; ii. Sterling revolving credit facility borrowings of GBP53.4 million (EUR62.2 million), which were drawn down on30 June 2023 to fund the post period end acquisition of the Apex Hotel London Wall (note 23); and iii. Euro revolving credit facility borrowings of EUR3.0 million following a drawdown of EUR32.0 million andsubsequent repayment of EUR29.0 million during the period ended 30 June 2023.
The undrawn loan facilities as at 30 June 2023 were EUR299.5 million (31 December 2022: EUR364.4 million).
The Group has a multicurrency loan facility consisting of a GBP176.5 million term loan facility, with a maturity date of 26 October 2025, and EUR364.4 million revolving credit facility - EUR304.9 million with a maturity date of 26 October 2025 and EUR59.5 million with a maturity date of 30 September 2023.
19 Deferred tax
30 June 31 December
2023 2022
EUR'000 EUR'000
Deferred tax assets 20,311 21,271
Deferred tax liabilities (80,788) (71,022)
_______ _______
Net deferred tax liabilities (60,477) (49,751)
_______ _______
At 30 June 2023, deferred tax assets of EUR20.3 million (31 December 2022: EUR21.3 million) have been recognised. The majority of the deferred tax assets relate to corporation tax losses and interest expense carried forward of EUR16.6 million (31 December 2022: EUR17.7 million). A deferred tax asset has been recognised in respect of tax losses carried forward where it is probable that there will be sufficient taxable profits in future periods to utilise these tax losses. During the period ended 30 June 2023, a portion of the tax losses carried forward as at 31 December 2022 were offset against taxable profits arising in the current period, thereby reducing the related deferred tax assets as at 30 June 2023.
The Group has considered all relevant evidence to determine whether it is probable there will be sufficient taxable profits in future periods, in order to recognise the deferred tax assets as at 30 June 2023. The Group has prepared forecasted taxable profits for future periods to schedule the reversal of the deferred tax assets recognised in respect of the corporation tax losses and interest expense carried forward.
Based on the supporting forecasts and evidence, it is probable that the deferred tax assets recognised in respect of corporation tax losses and interest expense carried forward at 30 June 2023 will be fully utilised by the year ending 31 December 2030 with the majority being utilised by the year ending 31 December 2025.
The Group has also considered the relevant negative evidence in preparing forecasts to determine whether there will be sufficient future taxable profits to utilise the tax losses carried forward. The forecasts of future taxable profits are subject to uncertainty. The Group considered these relevant factors in forecasting the future taxable profits for the purposes of the recognition of deferred tax assets as at 30 June 2023.
The deferred tax liabilities have increased from EUR71.0 million at 31 December 2022 to EUR80.8 million at 30 June 2023. 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. The increase in the deferred tax liabilities relates mainly to an increase in the deferred tax liabilities recognised in respect of property revaluation gains and reversals of previous impairment charges during the period ended 30 June 2023.
20 Related party transactions
Under IAS 24 Related Party Disclosures, the Group has related party relationships with its shareholders and Directors of the Company.
There were no changes in related party transactions in the six month period ended 30 June 2023 that materially affected the financial position or the performance of the Group during that period.
21 Share capital and share premium
At 30 June 2023
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 223,433,968 2,234
____________ _______
Share premium 505,004
_______
At 31 December 2022
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 222,871,722 2,229
____________ _______
Share premium 504,910
_______
During the six month period ended 30 June 2023, the Company issued 253,900 ordinary shares following the vesting of awards granted in December 2021 under the Group's 2017 Long Term Incentive Plan (note 8). The Company issued a further 281,734 ordinary shares following the vesting of awards granted in March 2020 under the Group's 2017 Long Term Incentive Plan (note 8).
26,612 ordinary shares were issued during the six month period ended 30 June 2023 (note 8) under the Share Save schemes granted in 2019, which led to an increase in share premium of EUR0.1 million in the consolidated statement of changes in equity.
Dividends
On 28 August 2023, the Board declared an interim dividend of 4 cent per share. The payment date for the interim dividend will be 6 October 2023 to shareholders registered on the record date 15 September 2023. These Interim Financial Statements do not reflect this dividend. Based on the shares in issue at 30 June 2023, the amount of dividends declared is EUR8.9 million.
22 Earnings per share
Basic earnings per share ('EPS') is computed by dividing the profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is computed by dividing the profit attributable to ordinary shareholders for the period by the weighted average number of ordinary shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares. The following table sets out the computation for basic and diluted EPS for the periods ended 30 June 2023 and 30 June 2022:
6 months 6 months
ended ended
30 June 2023 30 June 2022
Profit attributable to shareholders of the parent (EUR'000) - basic and diluted 41,959 46,745
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Adjusted profit attributable to shareholders of the parent (EUR'000) - basic and diluted 41,162 29,286 Earnings per share - Basic 18.8 cents 21.0 cents Earnings per share - Diluted 18.6 cents 20.9 cents Adjusted earnings per share - Basic 18.4 cents 13.1 cents Adjusted earnings per share - Diluted 18.3 cents 13.1 cents Weighted average shares outstanding - Basic 223,116,240 222,865,363 Weighted average shares outstanding - Diluted 225,507,598 223,822,895
The difference between the basic and diluted weighted average shares outstanding for the period ended 30 June 2023 is due to the dilutive impact of the conditional share awards granted for the relevant Share Save schemes and LTIP schemes between the periods 2019 and 2023.
Adjusted basic and adjusted diluted earnings per share are presented as alternative performance measures to show the underlying performance of the Group excluding the tax adjusted effects of items considered by management to not reflect normal trading activities or which distort comparability either period on period or with other similar businesses (note 4).
6 months 6 months
ended ended
30 June 2023 30 June 2022
EUR'000 EUR'000
Reconciliation to adjusted profit for the period
Profit before tax 50,388 52,007
Adjusting items (note 4)
Net property revaluation movements through profit or loss (1,998) (17,907)
Net impairment charge of right-of-use assets - 2,395
Net reversal of previous impairment charges of fixtures, fittings and equipment - (370)
Gain on disposal of property, plant and equipment - (3,877)
Hotel pre-opening expenses 660 1,872
______ ______
Adjusted profit before tax for the period 49,050 34,120
Tax charge (8,429) (5,262)
Tax adjustment for adjusting items 541 428
______ ______
Adjusted profit for the period 41,162 29,286
______ ______
23 Events after the reporting date
On 3 July 2023, the Group acquired the long leasehold interest, with 107 years remaining on the lease, of the Apex Hotel London Wall for total consideration, including costs, of approximately GBP56.5 million (EUR65.7 million). The 89-bedroom hotel was subsequently rebranded to Clayton Hotel London Wall.
On 11 July 2023, the Group opened its recently acquired newly built hotel, Maldron Hotel Finsbury Park, London. As a result, the Group reclassified the property and related costs from assets under construction to land and buildings and fixtures, fittings and equipment (note 11) when it became available for use.
On 28 August 2023, the Board declared an interim dividend of 4 cent per share. The payment date for the interim dividend will be 6 October 2023 to shareholders registered on the record date 15 September 2023. These Interim Financial Statements do not reflect this dividend. Based on the shares in issue at 30 June 2023, the amount of dividends declared is EUR8.9 million.
There were no other events after the reporting date which would require an adjustment, or a disclosure thereon, in these condensed consolidated interim financial statements.
24 Approval of financial statements
The Board of Directors approved the Interim Financial Statements for the six months ended 30 June 2023 on 28 August 2023.
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 condensed consolidated interim 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 condensed consolidated interim 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 condensed consolidated interim financial statements. A summary definition of these APMs together with the reference to the relevant note in the condensed consolidated interim financial statements where they are reconciled is included below. Also included below is information pertaining to certain APMs which are not mentioned within the condensed consolidated interim 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 condensed consolidated interim financial statements. References to the condensed consolidated interim financial statements are included as applicable. i. Adjusting items
Items which are not reflective of normal trading activities or distort comparability either period on period or with other similar businesses. The adjusting items are disclosed in note 4 and note 22 to the condensed consolidated interim financial statements. Adjusting items with a cash impact are set out in APM xiii 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 which distort comparability either period on period or with other similar businesses.
Reconciliation: Note 4 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 4
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. Also referred to as hotel EBITDA.
Reconciliation: Note 4 iv. EBITDAR and Segments EBITDAR
EBITDAR 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, amortisation of intangible assets and variable lease costs.
Segments EBITDAR represents Segments EBITDA before variable lease costs 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, before lease costs. Also referred to as hotel EBITDAR.
Reconciliation: Note 4 v. Adjusted 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 which distort comparability either period on period or with other similar businesses.
Reconciliation: Note 22 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 period end (rather than the amortised cost of the loans and borrowings), less cash and cash equivalents.
Reconciliation: Refer below vii. Net Debt and Lease Liabilities
Net Debt (see definition vi) plus Lease Liabilities at period end.
Reconciliation: Refer below viii. Net Debt to EBITDA after rent
Net Debt (see definition vi) divided by 'EBITDA after rent' (see definition xviii) for the period. This APM is presented to show the Group's financial leverage before the application of IFRS 16 Leases, in line with banking covenants.
Reconciliation: Refer below ix. Net Debt and Lease Liabilities to Adjusted EBITDA
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Net Debt and Lease Liabilities (see definition vii) divided by the 'Adjusted EBITDA' (see definition ii) for the period. 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 Leases.
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 period end. This APM is presented to show the gearing level of the Group.
Reconciliation: Refer below xi. Lease Modified Net Debt
Net Debt (see definition vi) plus Modified Lease Debt at period end. Modified Lease Debt is defined as eight times the Group's lease cash flow commitment under existing lease contracts for a 12 month period. The Group's non-cancellable undiscounted lease cash flows payable under existing lease contracts for the next financial year as presented in note 12 is used for this purpose.
This APM is presented to show the Group's financial leverage including lease cash flows payable under its lease contracts. The multiple of 8x is in line with external credit rating agency assessments of the travel and leisure industry.
Reconciliation: Refer below xii. Lease Modified Net Debt to Adjusted EBITDA
Lease Modified Net Debt (see definition xi) divided by the 'Adjusted EBITDA' (see definition ii) for the period. This APM is presented to show the Group's financial leverage including lease cash flows payable under its lease contracts.
Reconciliation: Refer below
30 June 31 Dec
Reconciliation of Net Debt APMs - definitions (vi), Reference in condensed interim 2023 2022
(vii), (viii), (ix), (x) financial statements
EUR'000 EUR'000
Loans and borrowings at amortised cost Statement of financial position 265,227 193,488
Accounting adjustment to bring to amortised cost 5,613 5,513
External loans and borrowings drawn Note 18 270,840 199,001
Less cash and cash equivalents Statement of financial position (114,360) (91,320)
Net Debt (APM vi) (A) 156,480 107,681
Lease Liabilities - current and non-current Statement of financial position 656,707 651,791
Net Debt and Lease Liabilities (APM vii) (B) 813,187 759,472
Adjusted EBITDA (APM ii)1 (C) 203,379 183,430
EBITDA after rent (APM xviii) (D) 157,003 137,763
Net Debt to EBITDA after rent (APM viii) (A/ 1.0x 0.8x
D)
Net Debt and Lease Liabilities to Adjusted EBITDA (APM (B/ 4.0x 4.1x
ix) C)
Valuation of property assets as provided by external (E) 1,420,133 1,337,088
valuers2
Net Debt to Value (APM x) (A/ 11.0% 8.1%
E)
1 Adjusted EBITDA of EUR203,379k for the 12 months ended 30 June 2023 is calculated as follows;
-- Adjusted EBITDA of EUR103,445k for the six months ended 30 June 2023 (Note 4); and
-- Adjusted EBITDA of EUR183,430k for the 12 months ended 31 December 2022 less Adjusted EBITDA of EUR83,496kfor the six months ended 30 June 2022 (as previously reported).
2 Property assets valued exclude assets under construction and fixtures, fittings and equipment in leased hotels.
30 June 31 Dec
Reconciliation of Lease Modified Net Debt APMs - definitions Reference in condensed interim 2023 2022
(xi), (xii) financial statements
EUR'000 EUR'000
Non-cancellable undiscounted lease cash flows payable under (A) Note 12 50,857 51,777
lease contracts in the next financial year
Modified Lease Debt (B= 406,856 414,216
A*8)
Net Debt (APM vi) (C) 156,480 107,681
Lease Modified Net Debt (APM xi) (D= 563,336 521,897
B+C)
Adjusted EBITDA (APM ii) E 203,379 183,430
Lease Modified Net Debt to Adjusted EBITDA (APM xii) (D/ 2.8x 2.8x
E) xiii. Free Cashflow
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 period on period 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 xiv. Free Cashflow per Share (FCPS)
Free Cashflow (see definition xiii) 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 period on period or with other similar businesses. The Group takes a similar approach with FCPS 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
6 months ended 30 6 months ended 30
Reconciliation of Free Cashflow APMs (xiii), Reference in condensed interim June 2023 June 2022
(xiv) financial statements
EUR'000 EUR'000
Net cash from operating activities Statement of cash flows 62,014 100,355
Other interest and finance costs paid Statement of cash flows (3,444) (7,447)
Refurbishment capital expenditure paid (8,833) (4,363)
Fixed lease payments:
- Interest paid on lease liabilities Statement of cash flows (20,915) (17,816)
- Repayment of lease liabilities Statement of cash flows (5,162) (5,182)
23,660 65,547
Exclude adjusting items with a cash effect:
Net impact from tax deferrals from government Note 14 34,917 (10,832)
Covid-19 support schemes1
Pre-opening costs Note 4 660 1,872
Free Cashflow (APM xiii) A 59,237 56,587
Weighted average shares outstanding - basic B Note 22 223,116,240 222,865,363
Free Cashflow per Share (APM xiv) - cents A/ 26.5 25.4
B
1 During the period, the Group paid deferred VAT and payroll tax liabilities totalling EUR34.9 million under the Debt Warehousing scheme in the Republic of Ireland. This non-recurring initiative was introduced under Irish government Covid-19 support schemes and allowed the temporary retention of an element of taxes collected between March 2020 and May 2022 to assist businesses who experienced cashflow and trading difficulties during the pandemic. xv. Debt and Lease Service Cover
Free Cashflow (see definition xiii) 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.
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Reconciliation: Refer below
12 months 6 months 6 months 6 months 12 months
Reconciliation of Debt Reference in condensed ended 30 ended 30 ended 31 Dec ended 30 ended 31 Dec
and Lease Service Cover interim financial June 2023 June 2023 2022 June 2022 2022
APM (xv) statements
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
D=E+F E F=G-H H G
Free Cashflow (APM xiii) (A) 129,151 59,237 69,914 56,587 126,501
Add back:
Total lease costs paid1 54,741 29,354 25,387 23,150 48,537
Total interest and Statement of cash flows 8,230 3,444 4,786 7,447 12,233
finance costs paid
Total lease and finance (B) 62,971 32,798 30,173 30,597 60,770
costs paid
Free Cashflow before (C=
lease and finance costs A+B) 192,122 92,035 100,087 87,184 187,271
paid
Debt and Lease Service (C/ 3.1x 3.1x
Cover (APM xv) B)
1 Total lease costs paid comprises payments of fixed and variable lease costs during the period. xvi. Normalised Return on Invested Capital
Adjusted EBIT after rent divided by the Group's average normalised invested capital. The Group defines normalised invested capital as total assets less total liabilities at the period 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 which were payable at prior period end as these were quasi-debt in nature, and the investment in the construction of future assets. 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 normalised invested capital is the average of the opening and closing normalised invested capital for the 12 month period.
Adjusted EBIT after rent represents the Group's operating profit for the period restated to remove the impact of adjusting items (see definition 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.
Reconciliation: Refer Below
12 months 6 months 6 months 6 months 12 months
Reconciliation of Normalised Reference in condensed ended 30 ended 30 ended 31 ended 30 ended 31 Dec
Return on Invested Capital interim financial June 2023 June 2023 Dec 2022 June 2022 2022
APM (xvi) statements
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
C=D+E D E=F-G G F
Operating profit Statement of 155,861 74,495 81,366 74,161 155,527
comprehensive income
Add back:
Adjusting items Note 4 (12,087) (1,338) (10,749) (17,887) (28,636)
Depreciation of right-of-use Note 4 29,340 14,875 14,465 13,038 27,503
assets
Less:
Fixed lease costs (50,674) (26,171) (24,503) (21,827) (46,330)
Amortisation of lease costs (840) (403) (437) (320) (757)
Additional amortisation of
intangible assets if IAS 17 (45) (22) (23) (23) (46)
still applied
Adjusted EBIT after rent (A) 121,555 61,436 60,119 47,142 107,261
30 June 31 Dec
Reference in condensed interim financial 2023 2022
statements
EUR'000 EUR'000
Net assets at balance sheet date Statement of financial position 1,346,984 1,222,766
Add back:
Loans and borrowings Statement of financial position 265,227 193,488
Deferred tax liabilities Statement of financial position 80,788 71,022
Current tax liabilities Statement of financial position 12,496 11,606
Deferred VAT and payroll tax liabilities Note 14 - 34,790
Less:
Revaluation uplift in property, plant and Note 11 (504,347) (425,974)
equipment1
Assets under construction at period end Note 11 (131,530) (64,556)
Cash and cash equivalents Statement of financial position (114,360) (91,320)
Deferred tax assets Statement of financial position (20,311) (21,271)
Derivative assets Statement of financial position (12,969) (11,717)
Normalised invested capital 921,978 918,834
Average normalised invested capital B 911,649 921,890
Normalised Return on Invested Capital (APM A/B 13.3% 11.6%
xvi)
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 30 June 2023 is EUR1,365.3 million (31 December 2022: EUR1,281.3 million). The value of these assets under the cost model is EUR861.0 million (31 December 2022: EUR855.4 million). Therefore, the revaluation uplift included in property, plant and equipment is EUR504.3 million (31 December 2022: EUR426.0 million). Refer to note 11 to the financial statements. xvii. Balance Sheet Net Asset Value (NAV) and Balance Sheet NAV per Share
The Group defines Balance Sheet Net Asset Value (NAV) as total assets less total liabilities at the period end and excludes lease liabilities and right-of-use assets, derivative financial instruments and deferred taxation. The Group also presents Balance Sheet NAV excluding the impact of purchaser's costs included in the independent external valuers' final valuation which reflects the gross value of own-use properties (refer to note 11 to the financial statements). Balance Sheet NAV per Share represents Balance Sheet NAV at period end divided by the number of ordinary shares outstanding at period end.
This APM is presented to show the NAV attributable to the Group's owned hotel portfolio at period end.
Reconciliation: Refer below
Reference in condensed 30 June 31 Dec 2022
Reconciliation of Balance Sheet NAV APM (xvii) interim financial 2023
statements EUR'000
EUR'000
Net assets at balance sheet date Statement of financial 1,346,984 1,222,766
position
Add back:
Lease liabilities Statement of financial 656,707 651,791
position
Deferred tax liabilities Statement of financial 80,788 71,022
position
Less:
Right-of-use assets Statement of financial (653,295) (658,101)
position
Deferred tax assets Statement of financial (20,311) (21,271)
position
Derivative assets Statement of financial (12,969) (11,717)
position
Balance Sheet NAV (APM xvii) A 1,397,904 1,254,490
Purchaser's costs deducted from own-use properties1 B 129,923 122,526
Balance Sheet NAV excluding the impact of purchaser's costs C=
included in the independent external valuers' final valuation (APM A+B 1,527,827 1,377,016
xvii)
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DJ Dalata Hotel Group PLC: 2023 Half Year Report -22-
Number of shares outstanding at period end - basic D Note 21 223,433,968 222,871,722 Balance Sheet NAV per Share (EUR) (APM xvii) A/D EUR6.26 EUR5.63 Balance Sheet NAV per Share (EUR) excluding the impact of purchaser's costs included in the independent external valuers' C/D EUR6.84 EUR6.18 final valuation (APM xvii)
1 The Group's own-use properties valuations provided by the independent valuers are stated net of full purchaser's costs based on the independent valuer's estimates at 9.96% for assets located in the Republic of Ireland (31 December 2022: 9.96%) and 6.8% for assets located in the UK (31 December 2022: 6.8%) (Refer to note 11 to the financial statements). The gross valuation of own-use properties (which is the value prior to any deduction of purchaser's costs) is also presented to reflect the value of net assets held on a long-term basis. xviii. EBITDA after rent (banking covenant)
Adjusted EBITDA (see definition ii) less fixed lease costs (see definition in glossary). The calculation also includes the impact of pre-opening expenses and excludes share-based payment expense in line with banking covenants. As the Group's 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 this APM.
Reconciliation: Refer Below xix. Interest Cover (banking covenant)
EBITDA after rent (see definition xviii) divided by interest and other finance costs paid or payable during the period. The calculation excludes professional fees paid or payable during the period in line with banking covenants.
Reconciliation: Refer Below
12 months 6 months 6 months 6 months 12 months
Reconciliation of APMs Reference in condensed ended 30 June ended 30 ended 31 Dec ended 30 ended 31 Dec
(xviii), (xix) interim financial 2023 June 2023 2022 June 2022 2022
statements
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
A=B+C B C=D-E E D
Adjusted EBITDA Note 4 203,379 103,445 99,934 83,496 183,430
Add back:
Share-based payment Note 4 5,752 3,609 2,143 1,186 3,329
expense
Less:
Fixed lease costs (50,674) (26,171) (24,503) (21,827) (46,330)
Pre-opening costs Note 4 (1,454) (660) (794) (1,872) (2,666)
EBITDA after rent (APM F 157,003 80,223 76,780 60,983 137,763
xviii)
Interest and other Statement of cashflows 8,230 3,444 4,786 7,447 12,233
finance costs paid
Interest and other 353 353 - - -
finance costs payable
Interest and other
finance costs per banking G 8,583 3,797 4,786 7,447 12,233
covenants
F
Interest Cover (APM xix) / 18.3x 11.3x
G xx. EBITDA (after rent)
'Segments EBITDAR' (see definition ii) from leased hotels less the sum of variable lease costs and fixed lease costs relating to leased hotels. This excludes variable lease costs and fixed lease costs relating to effectively, or majority owned hotels.
Reconciliation: Refer Below xxi. Rent cover
'Segments EBITDAR' (see definition iv) from leased hotels divided by the sum of variable lease costs and fixed lease costs relating to leased hotels. This excludes variable lease costs and fixed lease costs relating to effectively, or majority owned hotels.
Reconciliation: Refer Below
6 months ended 30 6 months ended 30
Reconciliation of APMs (xx), (xxi) Reference in condensed interim June 2023 June 2022
financial statements
EUR'000 EUR'000
'Segments EBITDAR' from leased A Note 4 44,203 30,301
hotels
Variable lease costs:
- Leased hotels B (1,510) (1,057)
- Owned hotels (337) (316)
Total variable lease costs Note 4 (1,847) (1,373)
Fixed lease costs:
- Leased hotels C (25,209) (21,072)
- Owned hotels (595) (612)
- Other (367) (143)
Total fixed lease costs (26,171) (21,827)
Variable and fixed lease costs from D=B+C (26,719) (22,129)
leased hotels
EBITDA (after rent) (APM xx) (A-D) 17,484 8,172
Rent cover (APM xxi) A/D 1.7x 1.4x
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' hotels
'Like for like' analysis excludes hotels that newly opened or ceased trading under Dalata during the comparative periods. For newly acquired, previously operating hotels, where pre-acquisition RevPAR data is available, these hotels are included on a 'like for like' basis for RevPAR analysis. 'Like for like' metrics are commonly used industry metrics and provide an indication of the underlying performance.
Hotel revenue
Hotel revenue represents the operating revenue (room revenue, food and beverage revenue and other hotel revenue) for the following Group segments: Dublin, Regional Ireland and the UK and excludes revenue from development contract fulfilment, if any. Also referred to as 'Revenue from hotel operations' or 'Segmental revenue'.
Segments EBITDAR margin
Segments EBITDAR margin represents 'Segments EBITDAR' as a percentage of hotel 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 charge for the period divided by the profit 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 30 June 2023.
Refurbishment capital expenditure
The Group typically allocates approximately 4% of hotel revenue to refurbishment capital expenditure to ensure the portfolio remains fresh for its customers and adheres to brand standards.
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