Dalata Hotel Group PLC
Central Office:
4th Floor, Burton Court,
Burton Hall Drive, Sandyford,
Dublin 18, Ireland
T +353 (0)1 206 9400
F +353 (0)1 206 9401
E info@dalatahotelgroup.com
www.dalatahotelgroup.com
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5
Strengthening Valued Partnerships
Annual Report and Accounts 2015
2
Strategic Report
Chairman’s Statement 2
Chief Executive’s Review 4
Strategy and Business Model 7
Financial Review 21
Risk Management 27
Corporate Responsibility 33
137
Additional Information
Executive Management Team 137
Advisors 140
Shareholder information 141
43
Governance
Chairman’s Overview 44
Director’s Biographies 45
Corporate Governance Statement 48
Audit and Risk Committee Report 58
Remuneration Committee Report 64
Nomination Committee Report 74
Directors’ Report 76
78
Financial Statements
Statement of Directors’
Responsibilities in respect
of the Annual Report and
the Financial Statements 78
Independent Auditor’s Report 80
Consolidated Statement of
Profit or Loss and Other
Comprehensive Income 85
Consolidated Statement of
Financial Position 86
Consolidated Statement of
Changes in Equity 87
Consolidated Statement of
Cash Flows 89
Notes to the Consolidated
Financial Statements 90
Company Statement of
Financial Position 130
Company Statement of
Changes in Equity 131
Company Statement of
Cash Flows 132
Notes to the Company
Financial Statements 133
At A Glance
Dalata operates 42 hotels*
under the Clayton Hotel
and Maldron Hotel brands
in Ireland and the UK.
Revenues
↑185% to €225.7 million
Adjusted EBITDA
Increased 7 times
to €62.6 million
Adjusted EBITDA
EBITDA
€62.6
million
€47.0
million
€8.9
million
€6.1
million
2014
2015
2014
2015
No. 1
Hotel Operator
in Ireland
7,717
Rooms*
€484.2
million
Raised €202.2 million (after costs) in equity,
€282 million in debt
↑21.4%
RevPAR increased
by 21.4%
>3,000
Employee
Volunteer
Hours
In local charities, sports clubs
and community activities
52
Nationalities
Employed throughout our hotels
Hotels that provide
a gateway to a
great experience.
Collection of distinctive hotels,
each with its own sense of
individuality and character.
* Includes hotel acquisitions subject to CCPC approval
2
A Word From Our Chairman
2015 was a year of very
considerable growth for
Dalata - a year in which
we continued to convert
significant potential
and opportunity into
successful reality.
Dalata Hotel Group PLC 3
We are fortunate to have
exceptional people at all levels
in the organisation. They have
embraced the challenges associated
with rapid growth in the business
and continue to demonstrate
extraordinary dedication and
commitment. On behalf of the Board
and our shareholders I would like to
express my appreciation for all the
efforts of our people during 2015,
and I look forward to their ongoing
contribution in the years ahead.
Future Strategy
We have a very clear strategy for
the Group’s future. We intend to
complete our acquisition programme
in Ireland by the end of 2016, and
to continue the programme in the
UK during 2016. We will continue to
integrate our newly acquired hotels
into the Dalata network in 2016. We
anticipate that economic recovery
will continue in our key Irish markets
in 2016, and we expect to deliver
further increases in revenues and
profits in the year ahead.
John Hennessy
Non-Executive Chairman
Introduction
I am pleased to present the annual
report and accounts of Dalata Hotel
Group plc (“Dalata”) for the 12
months ended 31 December 2015.
2015 was a year of very considerable
growth for Dalata - a year in which
we continued to convert significant
potential and opportunity into
successful reality. During the year
we raised €484.2 million (after
costs) in equity and debt funding,
and acquired 15 hotels for a total
consideration of €558.8 million,
including the transformational
acquisition of nine hotels in the
Moran Bewley Hotel Group for
€452.3 million. Since the start
of 2016 we have completed the
acquisition of one further hotel for
€13.2 million. These acquisitions
have consolidated our position as
the largest hotel operator in Ireland.
Although we have devoted
significant time and resources
to building our portfolio of hotel
properties, our core business is that
of hotel operators, and this business
continues to perform very well. In
2015 we sold approximately two
million rooms, and more than two
million breakfasts, to our guests.
Our EBITDA for the year was
€47.0 million, compared with €6.1
million in 2014. This performance
reflects the significant impact of
our acquisitions, improvements in
the marketplace and the hard work
of Dalata’s management and staff in
all our properties and at the Group’s
centre. Further details of our
performance are contained in our
Financial Review on pages 21 to 26.
Board
During the year, the Board devoted
considerable time to the Group’s
acquisition strategy and to our
strategic and operational plans for
the integration of new acquisitions
and for the operation of our hotels.
I would like to thank the Directors
for their hard work and commitment
during the year. Each member of
our Board continues to bring a
wealth of experience and knowledge,
and considerable commitment and
energy to the Group. I look forward
to continuing to work with them
for the benefit of the Group in
the years ahead.
Corporate Governance
At Dalata we are firmly committed
to maintaining the highest standards
of corporate governance. The
Company applies, on a voluntary
basis, the UK Corporate Governance
Code (September 2014) and the
Irish Corporate Governance Annex in
respect of its corporate governance
practices. Details of our approach
are set out in the separate Corporate
Governance report.
People and Culture
The culture of Dalata is one of
openness, inclusiveness and clear
communication. We attempt to
set clear goals for everyone, and
to encourage and support them in
their efforts to achieve those goals.
We are committed to providing
the training, infrastructure and
incentives to our people that
will enable them to deliver at the
highest level to our guests and
for all of our stakeholders.
Annual Report and Accounts 2015Strategic Report 4
Pat's Review
2015 has been a transformational
year for Dalata. The results for
2015 highlight the momentous
change that the Group has
undergone as a result of the
acquisition of 15 hotels. We now
have a strong operating platform
and management capacity from
which we will continue to grow and
create value for our stakeholders.
Dalata Hotel Group PLC 5
2015 has been a great year for
Dalata. As I look back on the plans
we had at the start of the year I am
delighted to tell you that we have
achieved much more than I planned
at the time.
While we continue to be very busy
on the acquisition front, we have
made fantastic progress on the
integration of all the new hotels into
the Group. This was one of the key
highlights for me during the year.
Bringing companies together is
fraught with difficulties. The culture
and method of operation are just
two of the areas where integration
comes unstuck. All of the hotels
behave like they have been in Dalata
for years. The hotel teams have
settled extremely well and are now
operating as a cohesive unit. A
business is a bit like a football team
in that it needs to find its rhythm.
It is also about having a winning
attitude. We are definitely getting
there on all fronts. This is not to
say that we do not have a lot more
work to complete to reach peak
performance. The teams are well
aware of what they need to achieve
in the coming year.
I am also thrilled with the
performance of the Pre IPO
Portfolio. It can only be described as
outstanding. Not alone did we have
the distraction of integration of the
new hotels, we were also very busy
on the acquisition side. It gives me
great encouragement that we have
a team of depth and quality that can
deliver great results.
Another area of great pride to me
is the area of people development.
We have a range of training and
development programmes in the
Group. These will ensure that we
have sufficiently skilled people
developing within the Group to
satisfy our future growth needs.
This does a number of things for us:
› We attract a higher quality
person in the first instance
because of the opportunity
to develop in Dalata.
›
It de-risks the process when we
buy or build new hotels as we
have an internal team to put into
that property.
In January 2016, we held our
second annual staff awards
ceremony. Over three hundred of
our colleagues gathered to celebrate
the achievements of many of our
people. It’s a wonderful event where
an invitation is coveted and an award
is treasured.
The most important element of
our business is our customers.
To ensure our hotels are of the
highest quality, we commenced our
capital refurbishment programme
across many of our hotels which
was mainly bedroom upgrades. We
introduced Trust You, a reputational
management tool which collates
customer feedback from all sources
across all our hotels. This allows us
to fine tune our product offering and
provides us with excellent feedback
from our customers.
Our suppliers are extremely important
to us, as we believe in a partnership
approach. We apply this principle
to all our suppliers. While there are
many initiatives in this area, the one
that delights me the most is where
a number of small local suppliers
have been given a route to market
by Dalata. This means we get great
quality products and these small
suppliers can grow their business.
There is more detail on this in the
corporate responsibility section of
the annual report, where three of our
suppliers are featured.
I almost forgot to mention the roll
out of our new Clayton brand (it
feels like it has been around forever).
I am delighted with the progress
here and I look forward to the
continued roll out in 2016. We have
great plans for our food philosophy,
our meeting room offering and many
other new initiatives. Clayton now
complements Maldron and both
brands have added greatly to the
development of Dalata.
I digress...
“During 2015 we successfully
integrated the 15 acquired
hotels into the Group. These
properties have performed
above our expectations
which is a testament to
the effectiveness of our
integration process.”
Dalata takes its responsibilities to
the wider community very seriously.
At a local level our hotels support
many worthwhile charitable causes,
and we encourage our hotel teams
to do this. Not only do we offer
financial assistance, our team
members also get involved in many
of these projects. At group level
we have chosen Crumlin Childrens’
Hospital as our primary charity
partner for 2016. This hospital will
benefit greatly from the efforts of
Dalata and its team members. We
also support many sporting activities
both at local and national level. We
believe that sport plays a huge role
in community development.
As I look back on our plans for Dalata
before the IPO, we have surpassed
our most optimistic projections
for the Group. We have created a
young vibrant business, bubbling
with enthusiasm. At this point we
are beginning to move beyond
“recovery” and are becoming an
earnings led business. In Ireland we
feel that Dublin is now getting back
to a more normalised environment.
Annual Report and Accounts 2015Strategic Report 6
Outside Dublin there is still a way
to go before we can say we are in
a normal environment.
As we move into 2016 our strategic
vision is taking shape. In terms
of timeliness we are ahead of our
plans. This current year will be
another vital year for Dalata. By the
end of 2016 we will be more or less
complete in our plans for Ireland. We
will continue to look for new build
projects as most of the acquisition
opportunities will be gone as we
predicted. Many of the remaining
hotels which will come to the market
for sale will not be of interest to
Dalata. Our key focus for 2016 will
be on maximising the returns on all
those hotels acquired both last year
and the new acquisitions this year.
Our focus of attention will start
to switch to new build leasehold
hotels in the UK where we see great
opportunity for our two brands.
I digress...
“We have now spent €113
million of the funds we
raised in October of last
year. We have circa €130
million remaining for further
acquisitions and are very
comfortable with the
pipeline of opportunities.”
Finally I would like to say thanks
to all my colleagues in Dalata.
Normally I am “giving out” or up on
my “high horse” about something
that I feel we are not doing well
enough and this will continue. But
I like to admit they have all done a
great job and helped me to start
building a wonderful company. I
promised myself that we would
have nice, genuine people in Dalata.
I am delighted to say this is the
case everywhere. I look forward
to building on this over the coming
years. Dalata is a company with
ethical standards and fairness seeps
through our veins, matched only by
a driven ambition.
Pat McCann
Chief Executive
€558.8
million
€44.9
million
€24.9
million
Invested €558.8 million in the
acquisition of 15 hotels throughout
Ireland and the UK in 2015.
Net revaluation gains on owned
properties at the end of 2015.
Invested €24.9 million in
development and refurbishment
projects during 2015.
Dalata Hotel Group PLC 7
Strategy and
Business Model
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Our Strategy
Our Business Model
Our Markets
We are the largest hotel operator in Ireland. We successfully operate the Maldron and Clayton brands
throughout Ireland and the UK, as well as managing partner hotels.
We currently own twenty hotels across a number of prime locations in Ireland and the UK. We lease ten
hotels in Dublin, Cork, Galway, Limerick, Portlaoise and Cardiff. We provide management solutions to eight
partner hotels.
We recently announced the acquisition of leasehold interests in four hotels in Dublin, Cork, Limerick and
London, and a management contract in Dublin. These acquisitions are subject to approval by the Competition
and Consumer Protection Commission (“CCPC”) and will be completed in the coming weeks.
Our Hotels
Owned hotels
Leased hotels
1
1
6
7
1
2
1
1
2
2
1
2
Hotel numbers include
acquisitions subject
to CCPC approval
↑ 4%
The Central Bank of Ireland is
forecasting growth of 4% in 2016.
↑ 2.2%
The Bank of England is forecasting
growth of 2.2% in 2016.
“ With the exception of
London, the cities within
which we operate all
performed very strongly in
2015. Given the continued
recovery in the economy
and the very limited
number of new hotels being
developed, the outlook for
the hotel market in Ireland
remains very positive.”
Dermot Crowley, Deputy CEO –
Business Development and Finance
1
1
1
1
2
Annual Report and Accounts 2015Strategic Report
8
Our Markets / Dublin
Dublin Airport
1
1
Smithfield
1
3
2
Dublin
City
1
Newlands Cross
1
Tallaght
1
1
Ballsbridge
1
Leopardstown
Hotel numbers include acquistions
subject to CCPC approval
Average Room Rate (€)
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↑ 13.7%
Visitor numbers grew by 13.7% in 2015, with growth of
12.1% and 14% from the UK and North American markets.
↑ 25 million
Passenger numbers at Dublin Airport increased by
15.4% in 2015 to 25 million passengers.
↑ 23.4%
Revenue per available room (“RevPAR”) increased by 23.4%.
Limited supply of new hotel rooms in Dublin in 2015
and 2016.
Our Hotels
Our Dublin City Centre Hotels
Owned hotels
Leased hotels
Maldron Hotel Pearse Street
Maldron Hotel Parnell Square
Clayton Hotel Cardiff Lane
Ballsbridge Hotel
The Gibson Hotel
15th
Dublin remains relatively
inexpensive compared to
other European capitals with
the city average room rate
(“ARR”) ranked 15th out of a
basket of 31 European cities.
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Dalata Hotel Group PLC
9
Dalata Hotel Group
Hilton Worldwide
Tetrarch Hospitality
Windward Management
Tifco Hotel Group
Others
Source: STR 2015
19.2%
Dalata operates 19.2%
of the hotel rooms in
Dublin including the hotel
acquisitions subject to
CCPC approval.
Dublin Market Share
300
250
200
150
RevPAR – Market Trends
100
City
50
Dublin (€)
Source: STR 2015
0
Occupancy %
2015
82.2%
ARR
2015
€112.29
RevPAR
2015
€92.26
Increase RevPAR v
2014
+23.4%
Occupancy Rates (%)
100
80
60
40
20
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Dublin has the joint highest
occupancy rate compared
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Our Dublin City Centre Hotels
Maldron Hotel Pearse Street
Maldron Hotel Parnell Square
Clayton Hotel Cardiff Lane
Ballsbridge Hotel
The Gibson Hotel
300
250
200
150
100
50
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100
80
60
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Annual Report and Accounts 2015Strategic Report
10
Our Markets / Republic of Ireland excluding Dublin
↑ 3%
Domestic consumption in Ireland increased by 3% in 2015.
Rest of Ireland is more reliant on domestic consumption.
↑ 13.7%
Visitor numbers grew by 13.7% in 2015.
Our Hotels
Owned hotels
Leased hotels
1
2
2
1
1
2
1
2
Hotel numbers include
acquisitions subject
to CCPC approval
Market Share
Cork
Market Share
Limerick
Market Share
Galway
Dalata Hotel Group
Dalata Hotel Group
Dalata Hotel Group
Carlson Rezidor
Fota Collection
Tifco Hotel Group
Others
Lalco Hotel Group
Byrne Hotel Group
McGettigan
Management Service
Carlson Rezidor
Others
Smorgs
Others
Source:
AMPM Hotel Database 2015
Source:
AMPM Hotel Database 2015
Source:
AMPM Hotel Database 2015
17%
Dalata operates 17% of the
hotel rooms in Cork including
the hotel acquisition subject
to CCPC approval.
16.3%
Dalata operates 16.3% of
the hotel rooms in Limerick
including the hotel acquisition
subject to CCPC approval.
13.3%
Dalata operates 13.3% of
the hotel rooms in Galway.
RevPAR – Market Trends
City
Cork (€)
Galway (€)
Limerick (€)
Source: Trending.ie
Occupancy %
2015
77.5%
75.7%
68.3%
ARR
2015
€78.20
€88.04
€60.00
RevPAR
2015
€60.60
€66.68
€40.98
Increase RevPAR v
2014
+9.6%
+13.3%
+23.4%
Dalata Hotel Group PLC Our Markets / UK/Northern Ireland
11
↑ 2.2%
The Bank of England is
forecasting growth of
2.2% in 2016.
↑ 12.1%
Visitor numbers increased
by 12.1% in 2015.
Increased supply of hotel
rooms in London impacting
RevPAR growth.
Our Hotels
Owned hotels
Leased hotels
1
1
Hotel numbers include an acquisition
subject to CCPC approval
RevPAR – Market Trends
City
Belfast (£)
London (£)
Manchester (£)
Leeds (£)
Cardiff (£)
Source: STR 2015
1
1
1
1
2
Occupancy %
2015
+78.5%
+82.2%
+79.8%
+78%
+78.2%
ARR
2015
£65.11
£143.92
£74.19
£66.36
£68.46
RevPAR
2015
£51.10
£118.24
£59.24
£51.75
£53.59
Increase RevPAR v
2014
+11.9%
+1.5%
+7.2%
+8%
+14.2%
Annual Report and Accounts 2015Strategic Report 12
Our Strategy
Strategic Objective
Our strategic objective is to be the leading 3 and 4 star hotel operator in the major
cities in Ireland and provincial UK, where we achieve excellence in customer
service, develop, reward and retain highly motivated people and deliver sustainable
growth to maximise shareholder returns.
Key Strategic Priorities
—
Acquisition
and
Development
Strategy
—
Asset
Management
Strategy
—
Brand
Strategy
—
People
Strategy
Deliver strategic hotel acquisitions and hotel
development sites
Deliver strategic capital investment programmes
Position Maldron Hotels and Clayton Hotels as the
leading leisure and corporate hospitality brands
Develop, reward and retain highly motivated
people to meet our growing business needs
Dalata Hotel Group PLC 13
Our Strategy / Acquisition and Development Strategy
Our acquisition and development strategy is to target 3 and 4 star hotels primarily in the main cities in Ireland
and the provincial cities in the UK.
The strategy has four elements:
› Acquisition of freehold and leasehold properties on island of Ireland
› Acquisition of freehold interest in leased assets within portfolio
› New hotel builds on island of Ireland
› Roll-out Clayton and Maldron brands in the UK through leases of new build hotels
Since 1 January 2015, the Group has announced and/or completed the following acquisitions:
Acquisitions announced and/or completed in 2015
Clayton Hotel, Galway
Maldron Hotel, Sandy Lane, Galway
(formerly Pillo Hotel, Galway)
Clayton Whites Hotel, Wexford
(formerly Whites of Wexford)
Clayton Hotel, Belfast
(formerly Holiday Inn, Belfast)
Clayton Hotel, Ballsbridge, Dublin
(formerly Bewleys Hotel, Ballsbridge, Dublin)
Clayton Crown Hotel, London
(formerly Crown Moran Hotel, London)
Clayton Hotel Chiswick, London
(formerly Chiswick Moran Hotel, London)
Maldron Hotel, Wexford
Tara Towers Hotel, Ballsbridge, Dublin
(January 2016)
Maldron Hotel, Wexford
Clayton Hotel, Dublin Airport
(formerly Bewleys Hotel, Dublin Airport)
Clarion Hotel, Cork
(freehold interest – November 2015)
Clayton Hotel, Leopardstown, Dublin
(formerly Bewleys Hotel, Leopardstown, Dublin)
Clarion Hotel, Sligo
(March 2016)
Maldron Hotel, Newlands Cross, Dublin
(formerly Bewleys Hotel, Newlands Cross, Dublin)
Clarion Hotel, Limerick
(subject to CCPC approval)
Clayton Hotel, Silver Springs, Cork
(formerly Silver Springs Moran Hotel, Cork)
Clarion Hotel, Liffey Valley, Dublin
(subject to CCPC approval)
Clayton Hotel, Manchester Airport
(formerly Bewleys Hotel, Manchester Airport)
The Gibson Hotel, Dublin
(subject to CCPC approval)
Clayton Hotel, Leeds
(formerly Bewleys Hotel, Leeds)
Croydon Park Hotel, London
(subject to CCPC approval)
We recently announced the acquisition of a development site in Charlemont Street, Dublin 2 which we intend to
develop into a Clayton Hotel.
“ We anticipated that there would be significant hotel disposals at the
time of the IPO in March 2014. We are very happy with the quality of
the portfolio we have acquired over the past two years and we expect
to complete our acquisition programme in Ireland by the end of 2016.”
Shane Casserly, Head of Development and Strategy
Annual Report and Accounts 2015Strategic Report
14
Our Strategy / Asset Management Strategy
Our asset base has changed over the past number of years, with a significant increase in the number
of owned hotels which aligns with our acquisition and development strategy. Dalata has 7,717 rooms in
42 hotels (including partner hotels) across Ireland and the UK as at 1 March 2016 (including the hotel
acquisitions subject to CCPC approval).
Number of rooms
Owned, Leased and Managed
March 2014
Number of rooms
Owned, Leased and Managed
March 2016
Since our IPO in March 2014, our
asset base has transformed from a
hotel operator with a managed and
leased portfolio to an owned and
leased portfolio in 2016.
Leased 37%
Managed 63%
Leased 31%
Managed 15%
Owned 54%
Includes rooms in hotel acquisitions
subject to CCPC approval.
Number of rooms
By Region
March 2014
Number of rooms
By Region
March 2016
The addition of four new hotels
in the UK in 2015 as part of
the Moran Bewley Hotel Group
acquisition has changed the
geographical concentration
of our hotel portfolio.
Dublin 45%
Rest of Ireland 50%
United Kingdom 5%
Dublin 47%
Rest of Ireland 34%
United Kingdom 19%
Includes rooms in hotel acquisitions
subject to CCPC approval.
Dalata Hotel Group PLC 15
Number of rooms
Maldron and Partner Hotels
March 2014
Number of rooms
Maldron, Clayton and
Partner Hotels
March 2016
We launched the Clayton Hotels
brand in 2015. We now have two
distinct brands which target the
leisure and corporate markets,
in addition to our partner hotels.
Maldron 34%
Partner 66%
Maldron 32%
Partner 9%
Clayton 59%
Excludes 577 rooms in Ballsbridge and
Clyde Court Hotels, Dublin
Excludes 399 rooms in Ballsbridge
Hotel, Dublin
Includes rooms in hotel acquisitions
subject to CCPC approval.
We are now focused on refurbishing the properties that we have acquired
and exploiting development opportunities to add bedrooms and other
revenue generating facilities to our portfolio.
We budget to spend 4% of our revenues on capital refurbishment. These
projects are managed centrally with the help of external consultants. In 2015,
we completed refurbishment programmes in Maldron Smithfield Dublin,
Maldron Derry, Clayton Cardiff Lane Dublin, Clayton Dublin Airport, Clayton
Leopardstown Dublin, Maldron Cork and Clayton Leeds to a value of €7 million.
In 2015, we completed significant development by building an additional
eight rooms in Maldron Pearse Street Dublin within the existing envelope
of the hotel and building a 92 room extension in Clayton Chiswick London
at a cost of €17.9 million.
“ Since our IPO in March 2014, our asset base has
transformed from a hotel operator with a managed and
leased portfolio to a hotel operator which now owns the
majority of its portfolio. We are committed to investing
in our properties to improve the customer experience,
enhance the value of our hotels and extract higher
returns for our shareholders.”
Stephen McNally, Deputy CEO
Annual Report and Accounts 2015Strategic Report
16
Our Strategy / Brand Strategy
What does the Maldron Hotels brand represent?
Maldron Hotels… a springboard for our hotel guests
to ‘go further’ and explore more.
Meet Gillian Pierce
Brand Manager, Maldron Hotels
Any guest that stays at a Maldron Hotel, whether
travelling alone on business, with a loved one
for a weekend break or with the kids for a family
escape, can each take advantage of our unrivalled
locations and explore many fantastic places
throughout Ireland. Our hotels are situated in a
diverse range of locations that are perfectly placed
for local attractions, events, theatre, sport and
much, much more. We offer a high standard of
hospitality with comfortable rooms, great food and
leisure facilities. Our friendly and engaging staff
create a warm and heartfelt welcome where rest
and relaxation are guaranteed.
What is the strategy of the Maldron
Hotels brand?
The aim is to have Maldron Hotels at the forefront
of the leisure travellers’ mind. We are continuously
growing in size, constantly investing in the physical
product of our hotels, always improving our
customer service and developing our teams
in-house. There’s so much more to come.
“ As brand manager for
Maldron Hotels I eat, live
and sleep the brand and I
guess that’s what it’s all
about. I love what I do and
I can’t wait to keep driving
the brand even further
to reach its full potential.
Maldron Hotels and I are
very similar in personality
so we make a good team!”
Dalata Hotel Group PLC 17
Meet Claudia Emmett
Brand Manager, Clayton Hotels
“I am really passionate
about Clayton Hotels and
I am very excited about
developing and growing
this new brand in the Irish
and UK markets. Clayton
Hotels is a brand with
big aspirations which is
constantly evolving. Lots of
new things are happening
which make every day in
this job so interesting.
A journey which I love
being part of!”
What does the Clayton Hotels brand represent?
Clayton Hotels offer our guests a home away
from home experience. We offer a people-focused
service with a ‘your stay, your way’ approach.
Clayton Hotels is a collection of distinctive
hotels, each with its own sense of individuality
and character. These hotels are situated in great
locations throughout Ireland and the UK and offer
a high level of comfort for our guests. Ideal for
business, these hotels have modern meeting and
events facilities backed by a team of passionate staff.
The hotels’ warm, comfortable tone and relaxed
ambience create a myriad of memorable experiences
for the leisure customer. Food and beverage is
honest and appealing with many distinctive local
touches and freshly sourced ingredients. Rooms are
comfortable with luxurious beds and great facilities
allowing our guests to relax their way.
What is the strategy of the Clayton
Hotels brand?
Clayton Hotels aims to differentiate from our
competitors by offering superior hospitality to
meet the ever changing needs of both our corporate
and leisure guests. From a simplified approach to our
meetings and events whilst offering the highest of
standards, to weddings that are bespoke to each
bride and groom.
Annual Report and Accounts 2015Strategic Report 18
Our Strategy / People Strategy
We continually attract and retain
talent to maintain our competitive
advantage in the industry
through the recruitment of highly
experienced people for key positions
and the development of our people
to enable internal promotions.
We acknowledge the importance
of our values: our people, our
fairness, our service and our
individuality which are embraced
by all our people and reflected in
our behaviours.
We actively engage with our people,
always consider their wellbeing and
recognise their success.
“ We pride ourselves
on offering real
opportunities to develop
and pursue a fulfilling
career while meeting
the growing business
needs. Our investment
in our employee training
programmes is paramount
to ensuring we have a
pipeline of excellent
people as we expand our
business into the future.”
Dawn Wynne, Group HR Manager
Our people are our core strength
and are central to our success. The
key elements of our defined people
strategy are:
› Development of our people
› Development of an employer
brand
› Attract and retain talent
› Embed our culture, values
and behaviours
› Engage our teams
As Dalata continues its expansion,
the development of our people is
a key part of our strategy. On-
the-job skills training, structured
development programmes and
personal development plans are in
place in the hotels to support our
people to advance their careers.
We recently launched our employer
brand Dalata – Your Journey,
which focuses on helping our
people progress, so that they
can constantly elevate their own
professional development and our
customers’ experience.
Dalata Hotel Group PLC 19
Business Model
M A X I M I S E S H AREHOLDER RETURN
People
Development
Cost
Control
Brand
Development
C
T
Revenue
Management
E
N
T R A L O FFICE SUPP
e d O perating S
centrali s
r a l Mana
e
G e n
t
g
e
r
r
e
D
O
R
u
c
t
u
r
e
Hotel
Integration
Management
Customer
Service and
Standards
Management
Information
Group
Purchasing
Our business model is based
on optimising the value from
our hotel portfolio.
They are fully responsible for
the operational and financial
performance of their properties.
standards, purchasing power,
IT support, health and safety
expertise, financial guidance and
group sales and marketing initiatives.
We operate a decentralised
approach where our General
Managers are expected to behave
like owners of their hotels.
Central Office provides support to
the General Managers and their
local teams through the provision of
training, brand standards, service
There are a number of key areas
that we look to drive value in the
properties that we operate.
Annual Report and Accounts 2015Strategic Report Management Information
Our business is always open and
we need constant information to
monitor it. Each hotel reviews sales
on a daily basis and costs on weekly
basis. Each week local management
teams update their forecast sales
and costs for the current month and
the following two months. These
forecasts are reviewed by Central
Office to enable us have a view on
the performance of the Group as a
whole but as importantly the weekly
information helps identify those hotels
who may need support at any point
in time. We continually invest in ICT
infrastructure to deliver efficiencies
and meet our business needs.
Integration Management
We are currently focused on
integrating the recently acquired
assets into the Dalata network.
We are implementing the Dalata
operating strategy in each of those
assets which will ensure that the
trading potential is delivered upon.
Brand Development
Our Group Sales and Marketing
department provide marketing
data and support to all our hotels.
Their focus is on developing brands
that deliver for our customers and
resonates with the wider public.
People Development
This is covered on page 18.
20
Cost Control
We have a standardised approach
to cost control. Hotels are asked to
forecast their costs on a weekly basis
and compare these to forecasted
sales. The largest cost in any hotel
is payroll and we put a strong focus
on monitoring and controlling it.
Cost ratios are benchmarked against
similar hotels in our portfolio and best
practice is replicated throughout the
Group. With the help of technology
we are developing new processes to
control our costs.
Revenue Management
This is a key area for every hotel. We
operate a decentralised model where
the local Revenue Manager and hotel
General Manager are responsible
for revenue management. Our
Central Office revenue management
provide guidance, macro market
information, training and assistance
with recruitment. We invest in our
revenue managers and empower
them to make decisions with the
hotel General Mangers on rate
setting and distribution channel mix.
Customer Service and Standards
We have invested in a very strong
Central Office operations team. They
continually strive to ensure that our
brand standards are delivered in a
safe and cost efficient environment.
Our customers are our primary focus
and everything we do is geared to
meeting their needs. We continue to
deliver new customer propositions
and enhance our customer offering.
Group Purchasing
Our Group Purchasing department
utilises our significant buying
power to ensure that each hotel
in our portfolio benefits from very
competitive pricing. We seek to buy
high quality produce at the most
competitive prices in the market. We
seek to partner with our suppliers
to ensure that the relationship is a
rewarding one for both parties.
Dalata Hotel Group PLC 21
Dermot's Financial Review
We have begun to demonstrate
our ability to generate returns
from our newly acquired
portfolio with Adjusted EBITDA
of €62.6 million in 2015.
Annual Report and Accounts 2015Strategic Report 22
2015 was another very successful year for the Group. We spent €558.8 million
on acquiring 15 hotels in Ireland and the UK and have now assembled a portfolio
with very exciting potential. We raised €202.2 million (after costs) in equity
and €282 million in debt to help fund our ongoing acquisition strategy. We have
begun to demonstrate our ability to generate returns from our newly acquired
portfolio with Adjusted EBITDA of €62.6 million. We have been very busy in the
short time since year end with the purchase of the Tara Towers Hotel in Dublin
and a prime site in the centre of Dublin for the construction of a new Clayton
Hotel. We have exchanged contracts to purchase the Clarion Hotel in Sligo. We
have also contracted to buy out the leasehold interests of the Clarion Hotel Cork
(the freehold of which we bought in November 2015), The Gibson Hotel Dublin,
the Clarion Hotel Limerick and the Croydon Park Hotel London. We are now well
positioned to benefit from the continued recovery of the Irish economy and have
also established a solid base from which to build a UK portfolio.
Group Revenue and EBITDA
€’000
Revenue
Adjusted EBITDA
EBITDA
Profit Before Tax
2015
225,673
62,626
46,996
28,457
2014
79,073
8,918
6,097
4,196
The very large increase in revenue and EBITDA between 2014 and 2015 reflects
the transformation of the Group due to the hotels acquired since August 2014.
In order to better explain the results, in the sections below, I have broken out
the performance of the hotels into three different portfolios to allow readers
understand the impact of the various acquisitions on our results in 2015
compared to 2014. I have shown figures separately for the Moran Bewley
portfolio given the size of that acquisition relative to the size of the overall
Group. I also separately below show the performance of the Pre IPO Portfolio
and the single hotel acquisitions.
Excluding the adjusting items outlined in the table below, EBITDA came in at
€62.6 million for 2015. This strong performance reflects both the strength of
the markets in which we are operating and our own very strong performance in
terms of both revenue growth and profit conversion.
Adjusting Items to EBITDA
€’000
Net impact of Ballsbridge site sale
Net impairment charges
Integration costs relating to acquired hotels
Professional fees incurred on acquisition of hotels
Stamp Duty incurred on acquisition of hotels
Pre IPO Portfolio
€’000
Revenue
Adjusted EBITDAR
Rent
Adjusted EBITDA
2015
1,947
(1,775)
(1,940)
2014
-
-
-
(2,764)
(2,273)
(11,098)
(548)
(15,630)
(2,821)
2015
2014
88,610
72,128
35,230
23,857
(18,320)
(16,221)
16,910
7,636
Dalata Hotel Group PLC 23
This portfolio comprises of the hotels that we owned or leased at the time
of the IPO in March 2014. There are 13 hotels in this portfolio with 1,480
rooms in Dublin, 554 rooms in Regional Ireland and 216 rooms in Cardiff, UK.
The portfolio has performed very strongly with revenue increasing by 22.8%
and Adjusted EBITDA increasing by 121%.
RevPAR in the Dublin hotels increased by 32.6% compared to the market as a
whole which was up 23.4%. The growth is somewhat exaggerated by the fact
that the Ballsbridge and Clyde Court hotels were undergoing significant fire
safety works in the first half of 2014. Excluding these two hotels, the RevPAR
growth was 25.5%. RevPAR in the regional Irish properties increased by
17.9% and we outperformed the market in each of the regional cities in which
we operate. Our hotel in Cardiff benefited greatly from an exceptional number
of events in the city and especially Rugby World Cup. RevPAR increased by
14.7% which was in line with the market overall.
Food and Beverage sales increased by 7.2% in the Irish properties primarily
due to increased occupancy at these hotels. Food and Beverage sales in
Cardiff grew by 3.6%.
We always focus on our ability to convert additional sales to the EBITDAR
line and I am pleased to report that our EBITDAR margin improved from 33.1%
to 39.8%.
Rent increased substantially due to both the Clyde Court and Ballsbridge
hotel leases containing a profit share element within their rental charges and
Maldron Dublin Airport rent being linked to turnover. The increased rent in
these three leases amounted to €3.1 million. This was offset by the rent saved
through the purchase of the freehold interests in Maldron Parnell Square,
Dublin (September 2014) and Maldron Wexford (April 2015).
Impact of Moran Bewley Portfolio since Acquisition
€’000
Revenue
Adjusted EBITDAR
Rent
Adjusted EBITDA
3 Feb – 31 Dec 2015
100,743
41,802
(847)
40,955
The former Moran Bewley hotels have performed very well since we acquired
them in February 2015. RevPAR at the five Irish hotels in 2015 increased on a
‘like for like’ basis by 21% on the back of a continued strong recovery in the
Irish hotel market. RevPAR in the four UK hotels increased by a more modest
3.1% but in line with our expectations. A strong performance in the Leeds
and Manchester hotels was counterbalanced by the two London hotels which
were impacted by a more challenging trading environment and in the case of
Chiswick, the additional impact of the construction of a significant extension
to the hotel.
Food and Beverage sales were down 1% in Ireland and 1.9% in the UK. We
expected food sales would decline as we are changing our mix of room sales
at these hotels as part of a revenue management strategy that is expected to
increase overall profitability.
Other sales were up 27% in the Irish hotels as we have sought to maximise
revenues from car parks and meeting rooms primarily. Other sales were up
3.5% in the UK.
Annual Report and Accounts 2015Strategic Report 24
The former Moran Bewley hotels delivered an EBITDAR margin of 41.5%. These
hotels can achieve higher margins due to their size and location in larger cities
with higher average room rates.
Impact of Single Hotel Acquisitions
€’000
Revenue
Adjusted EBITDAR/Adjusted EBITDA
2015
32,793
8,666
2014
1,498
333
The properties within this portfolio have been purchased in the period from
August 2014 to March 2015. It includes Maldron Pearse Street, Dublin (August
2014), Maldron Derry (October 2014), Clayton Galway (January 2015), Clayton
Whites, Wexford (February 2015), Maldron Sandy Road, Galway (February 2015)
and Clayton Belfast (March 2015). The numbers quoted in the paragraphs below
are comparing the performance of the hotels on a full year ‘like for like’ basis.
Clarion Hotel Cork has not been included in the analysis as this was an investment
property producing rental income in 2015.
RevPAR in the Irish hotels increased by 23.8% with Maldron Pearse Street,
Dublin having an exceptionally strong year despite the ongoing refurbishment
works. RevPAR in the two Northern Ireland properties increased by 6.2%. Food
and Beverage sales increased by 3.6% in the Irish hotels and fell by 2.2% in the
Northern Ireland hotels, primarily due to a fall in food sales in our Derry property.
The strength of sterling in 2015 was a challenge for our Derry and Belfast hotels as
they became substantially more expensive for visitors from the Republic of Ireland.
EBITDAR margin at 26.4% in these hotels is lower due to the relatively higher
mix of Food and Beverage sales and the lower average room rates in regional
locations. However, the margin is in line with what we had projected when we
acquired these properties.
Management Services
€’000
Revenue and EBITDA
2015
3,555
2014
5,447
We do not separately allocate overheads to our Management Services segment.
As anticipated, the number of hotels that we managed for receivers decreased
during 2015 as they continued to sell those properties. This trend has continued
in the early part of 2016 with our management contracts at the Hotel Ballina,
Clarion Hotel Sligo (which we have purchased) and Dundrum House having been
terminated. Pillo Hotel Ashbourne, which we manage for a receiver, is currently
on the market. The sale of Diamond Coast Hotel Enniscrone, has been agreed and
our management contract will be terminated in March. As part of the purchase of
the assets of the Choice Group in Ireland, we will take over the management of the
Clarion Hotel Liffey Valley Dublin for the receiver of that property. We continue to
manage six hotels directly for owners.
Central Overheads
€’000
Central Overheads
Integration costs relating to acquired hotels
2015
23,870
(1,940)
Professional fees incurred on acquisition of hotels
(2,764)
Stamp Duty incurred on acquisition of hotels
Adjusted Central Overheads
(11,098)
8,068
2014
7,319
-
(2,273)
(548)
4,498
Dalata Hotel Group PLC 25
As the size of the Group has grown we have continued to invest in our Central
Office team. A number of senior people were recruited throughout 2014 and
2015. We now have a much strengthened team that is well positioned to exploit
the potential of our newly acquired portfolio. We also more than doubled our
central marketing budget to just over €1 million to support the roll out of our
new Clayton brand. The accounting charge associated with the Long Term
Incentive Plan is also included within central overheads.
Other Income
We received an incentive fee relating to the sale by the landlord of the
Ballsbridge and Clyde Court hotels of €2.1 million. Rental income of €0.6
million arose from some of the acquisitions made in 2014 and 2015. The most
significant of these were Clarion Hotel Cork (€0.4 million) and the investment
properties adjacent to Maldron Pearse Street Hotel Dublin (€0.1 million).
Finance Income & Costs
We made a significant exchange gain on sterling deposits of €1.8 million at the
start of the year that we were retaining for the purchase of the Clayton Hotel
Belfast. We incurred interest expenses of €10.4 million relating to the facility
of €282 million that we raised to part fund the acquisition of the Moran Bewley
Hotel Group.
Impact and Funding of Acquisitions
We spent €523.7 million acquiring 14 hotel properties in the first half of
2015. This was funded through a combination of debt and equity. We raised
€282 million in debt and €48.6 million (after costs) in equity to part fund
the purchase of the Moran Bewley Hotel Group. We raised a further €153.6
million (after costs) in equity in October 2015 to fund further acquisitions and
developments. We completed the purchase of the freehold interest of the
Clarion Hotel Cork for €35.1 million in November 2015. Since year end, we
have completed the purchase of the Tara Towers Hotel Dublin (€13.2 million),
exchanged contracts to acquire the Clarion Hotel Sligo (€13.1 million) and
purchased a site in Dublin (€11.9 million) on which we will build a new Clayton
Hotel. We have entered into a contract to purchase the leasehold interests of
The Gibson Hotel Dublin, Clarion Hotel Cork, Clarion Hotel Limerick and the
Croydon Park Hotel London for €40 million. This acquisition is subject to the
approval of the Competition and Consumer Protection Commission.
Debt & Treasury Policy
When we drew down €282 million in debt in February 2015, €176 million
was drawn down in sterling (converted to £132.3 million) as a natural hedge
against the impact of sterling exchange rate fluctuations on the euro value of
our UK assets. Our treasury policy states that at least 66% of our total debt
should be hedged. Approximately 47% of our Euro denominated borrowings
are subject to an interest rate cap until September 2019. We have taken out
interest rate swaps covering 77% of our Sterling denominated borrowings up
until February 2020.
At year end, our gross bank debt amounted to €269.5 million. Given that we had
only spent €35.1 million of the additional equity raised in October 2015, we had
cash and cash equivalents of €149.1 million at year end. Therefore our net debt
was €120.4 million at the end of 2015. This translates to a Net Debt to EBITDA
of 2.56 times or Net Debt to Adjusted EBITDA of 1.92 times. We are currently
finalising discussions with our banking club to raise a further €90 million. We
will use our cash and additional debt to fund future and already announced
acquisitions in 2016. Our objective is to keep our Net Debt to EBITDA at 4 times
or below when we are fully invested.
Annual Report and Accounts 2015Strategic Report 26
Ordinary Share Capital
We issued 12.2 million shares at a price of €2.75 to the shareholders of the Moran
Bewley Hotel Group on 3 February 2015 to partly fund the purchase of nine hotels
within that group. Those shares were subsequently sold by those shareholders.
We placed 6.1 million shares at a price of €2.75 on the same date. After costs, this
raised an additional €48.6 million. On 6 October 2015, we issued a further 42.7
million shares at €3.75 which raised €153.6 million after costs. Following these
share issues, there are 182.97 million shares in issue.
Fixed Assets & Goodwill
We have invested €558.8 million in acquiring hotels during 2015. This is in addition
to €35 million invested in 2014. We are continually investing in our portfolio. We
invested €17.9 million on development projects in Clayton Hotel Chiswick London
and Maldron Pearse Street Dublin. I am very excited about the returns that these
two projects will deliver. We invested €7 million in our rolling property capital
refurbishment programme as we are committed to continually renewing
our product.
At the end of 2015, the carrying value of property, plant and equipment was
€608.8 million while the carrying value of goodwill was €46.8 million. A net gain
of €44.9 million arose on revaluation of our owned properties at the end of 2015.
Conclusion
I am very pleased with the performance of the Group in 2015. We have integrated
the acquired properties into the Group ahead of our planned timelines and these
properties have performed above our expectations. I am excited about the
opportunities presented by the properties that we have acquired since our equity
fundraising in October 2015.
I continue to see great opportunities to complete our acquisition programme in
Ireland during 2016 and we are very focused on securing properties that meet
our strategic and investment criteria. Beyond that, I see the UK as being an ideal
market to further grow our Maldron and Clayton brands. We are already looking for
opportunities to lease new build Clayton and Maldron hotels in the UK. We will work
with site owners, developers, contractors and investors in putting together deals
where we will be the tenant of these new hotels.
There is plenty of work left to maximise the returns from our acquired portfolio
of hotels. We continue to implement our decentralised revenue management
approach across all our properties. With the help of technology we are developing
new processes to control our costs. We continue to seek ways in which to
exploit economies of scale from our enlarged portfolio. We commenced a rolling
programme of bedroom refurbishment in 2015 and the pace of this will be increased
in 2016. We are in discussions with various planning authorities on extensions to our
Clayton Hotels in Ballsbridge and Dublin Airport and our Maldron Hotel in Sandy
Road, Galway.
It has been another very busy year at Dalata and I am very excited about the year
ahead and the opportunities that it offers.
Dermot Crowley
Deputy Chief Executive – Business Development and Finance
Dalata Hotel Group PLC 27
Risk Management
The Board of Dalata is responsible
for the Group’s risk management
and internal control systems, which
are designed to identify, manage and
mitigate potential material risks to the
achievement of the Group’s strategic
and business objectives and protect
our business, in particular:
› our brands and reputation across
key stakeholders;
› the delivery of our strategy and
commercial targets; and
› the safeguarding of physical
assets, people, systems and
processes.
any new and emerging risks that
are relevant to the Group’s activities
or structure.
During 2015, the Group enhanced
its risk management framework with
the establishment of an Executive
Risk Committee. Its responsibilities
are to identify the risks facing
the Group, to evaluate the risks,
to implement controls to mitigate
against these risks, and to consider
The Board approved a Risk
Management Policy which sets out
the delegated responsibilities and
procedures for the management of
risk across the Group.
The framework in place to achieve the
Group’s objectives is outlined below.
Risk Management Framework
The risk management framework uses a ‘three lines of defence’ model.
Board
Audit and Risk Committee
Executive Management Team
Hotel General
Managers
and
Hotel
Management
Teams
1st Line of
Defence
Owns and
Manages Risks
Central Office
Support Functions
Internal Audit
- Executive Risk
Committee
- Group Operations
- Health & Safety
- Company
Secretariat
- Group Finance
- Group Purchasing
- Group IT
- Group Human
Resources
2nd Line of
Defence
Oversees Risks
3rd Line of
Defence
Independent
Assurance
O
t
h
e
r
e
x
t
e
r
n
a
l
o
v
e
r
s
i
g
h
t
b
o
d
e
s
i
E
x
t
e
r
n
a
l
A
u
d
i
t
o
r
Annual Report and Accounts 2015Strategic Report
28
Roles and Responsibilities
The roles and responsibilities of the key elements of the framework are outlined below.
Board
› set strategic objectives
› agree the risk appetite
›
review and consider the risk
management policy
› continually review and monitor
key risks of the Group
› set delegation of authority
›
report on the effectiveness of
the risk management and internal
controls systems, the viability of
the Group in the annual report
Audit and Risk Committee
›
identify the key risks and ensure
they are appropriately managed
review the Group’s risk
management and internal
control systems and make
recommendations to the Board
review reports from Group
Internal Audit
›
›
Group Internal Audit
› monitor the risk management
framework
identify areas for improvement
›
› provide independent and
objective assurance on risk
matters to the Audit and
Risk Committee
Executive Management Team
› develop the risk management
and control environment
› monitor and co-ordinate the
implementation of agreed risk
mitigation and control strategies
Executive Risk Committee
(comprised of members of the
Executive Management Team)
›
review the Group’s risk register
in detail to identify changes
in risk profiles and update the
risk mitigations
review and consider emerging
or new risks and ensure the risk
register reflects the Group’s
principal risks
›
Hotel Management Teams
›
identify, assess, manage
and report local risks
implement key risk mitigation
plans
›
Viability Statement
The Group’s Viability Statement is developed through consideration of the principal risks identified by
the risk management process. The statement considers the impact of risks that could threaten the
Group’s future business model.
For the purposes of assessing the
further prospects of the Group, the
Directors have selected a three year
time frame. This period corresponds
with the Group’s current strategic
planning horizon.
The Group is in a phase of ongoing
significant investment, growth
and development and the Board
continuously monitors the impact of
investments on the Group’s medium
to long-term prospects. In order to
assess the Group’s medium term
viability, prospects over a three
year period have been examined
to assess the potential impact of
severe but plausible risks to the
long-term viability of the Group.
These scenarios are summarised
as follows:
› A decline in rooms revenue
of 25% from expected levels
associated with a geo-political
or economic event outside the
control of the Group, affecting
the hotel market at large
› A one year delay and 50%
increase in the development
cost of the Charlemont Street
Dublin project
The Directors confirm that they
have a reasonable expectation that
the Group will continue to operate
and meet its liabilities, as they fall
due for the next three years.
Dalata Hotel Group PLC 29
Ongoing Process for Risk Identification, Evaluation and Management
The Group maintains a risk register, which contains the key risks faced by the Group, including their likelihood
and impact, as well as the controls and procedures to mitigate these risks. A risk scoring matrix is used to
ensure a consistent approach is taken when completing the probability and impact assessments. The content
of the risk register is determined through discussions with the Executive Risk Committee. The Audit and Risk
Committee considers the risk register regularly and updates the Board on key risks. The Board considers the
key risks at least annually.
Risk appetite
The first matter for consideration in preparing
the risk register was the Group’s risk appetite.
This is the Group’s overall attitude to risk
and risk-taking and determines the extent of
mitigating controls and assurance required over
risks. The risk appetite is closely aligned to the
Group’s overall business strategy.
Risk identification
Risks are then identified. This process is
supported by industry-wide and general
economic risks, the use of expert publications
on risk and consideration of the specific risks
associated with operating a significant number
of hotels in the current economic and legal
environment.
Assessment of risk
Each risk is then considered and assessed in
terms of its inherent and residual risk along with
the potential likelihood of the risk materialising
and its potential impact should it occur. Detailed
criteria and scoring for Impact and Likelihood
are prepared.
Mitigating controls assessment
The existing mitigating controls for each risk
are identified and assessed in terms of their
effectiveness. These controls take a range of
different formats and include controls such
as separation of duties, reporting structures,
specific reports and reconciliations, third party
mitigation (e.g. insurance), organisational
structures and approval thresholds.
Key risk identification
Following the assessment
of the risk population the
key risks are identified.
These are the risks that are
considered to be of most
significance in terms of
achieving business strategy.
Risk action plans and
responsibility
Action plans are identified
to either address any
control weaknesses/gaps
or to improve the mitigating
controls. Action plans are
given an expected completion
date and assigned to the
relevant management.
Review and assessment
The risks are reviewed and
reassessed on a regular basis
by both management and the
Audit and Risk Committee.
This process considers the
risk management and also
new/emerging risks to the
business.
Annual Report and Accounts 2015Strategic Report 30
Key Risks
The principal risks and uncertainties facing the Group in the short to medium term are set out below,
together with the principal mitigation measures. The change in the significance of each risk is also shown.
No. Risk
Category
Risk Status
2015 v 2014
1
Economic
No change
2
Financial
No change
3
Financial
New/
Emerging
Risk
4
Financial
No change
Risk Outline
Rationale for Inclusion
Key Control &
Mitigation Activities
Negative external
geo-political and/
or economic events
impact financial
performance and
prospects.
Events that are outside
the control of the Group
occur that negatively
impact wider economic
activity and/or corporate/
leisure travel in key Group
operating markets.
There is ongoing close involvement
with industry bodies to determine
market sentiment. The Executive
Management Team and Group
Finance monitor the actual and
forecasted revenue and cost
base. The Group’s management
structure enables prompt response
to market conditions.
Material financial
controls failure, or
management over-
ride of controls,
results in either
financial loss or
misstatement in the
financial statements.
The Group conducts a
wide range of financial
transactions, many of which
are complex and across
different jurisdictions and
currencies. Given the
volume of transactions and
accounting requirements
there is a risk of a material
breach of the financial
control systems, which
could result in a material
loss to the business, both
in financial or reputational
terms.
There is a formalised organisation
structure which includes the Audit
and Risk Committee, supporting
reviews of financial activities,
financial policies and procedures.
Access to Group funds and
authorisation of payments is
strictly limited. Additional Group
Finance and oversight resources
have been put in place. At a local
hotel level, there is segregation
of duties and review structures in
place. Daily, weekly and monthly
financial KPIs are reported to
Group Finance.
The accounting
treatment for
acquisitions is
complex, subject
to significant
judgements and a
failure to reflect the
acquisitions properly
is likely to have a
material impact on
the Group’s financial
statements.
Adverse currency
fluctuation negatively
impacts financial
performance.
During 2015 the Group
completed a number of
material acquisitions and
this trend is expected
to continue in 2016.
Accounting for business
combinations is complex
and includes significant
judgements on areas such
as asset fair values and
deferred tax.
The Group is exposed to
Euro/Sterling fluctuations
in relation to the translation
of its UK/NI hotel portfolio
into Euro which is the
presentation currency
for the Group’s results.
A materially negative
fluctuation in currency rates
could impact the Group’s
financial performance.
Group Finance expertise;
Review by the external auditors
for the interim and year-end
financial statements; Audit and
Risk Committee review and
Board review.
The Group operates a natural
hedge whereby revenues and costs
are matched in so far as possible in
the relevant currency. The Group
has interest rate swaps in place
for its sterling-denominated loan.
There is a net investment hedge
in place which uses sterling debt
to hedge part of the Group’s
investment in its UK hotels. Group
Finance is adequately resourced
in this area and additional treasury
and foreign currency reporting
controls were put in place in 2015.
Dalata Hotel Group PLC 31
No. Risk
Category
Risk Status
2015 v 2014
5
Integration
No change
6
Market
No change
7
Financial
New/
Emerging
8
Market
New/
Emerging
9
Operational No change
Risk Outline
Rationale for Inclusion
Key Control &
Mitigation Activities
The financial and
operational benefits
expected from the
hotel acquisitions
do not materialise,
resulting in financial
performance that
does not meet
expectation.
The Group’s
activities are
concentrated in the
Dublin hotel market
and therefore, any
downturn in Dublin
is likely to have a
material impact
on the Group’s
performance.
Capital expenditure
is not properly
evaluated, approved,
monitored and/
or accounted
for, resulting in
material overspend
or finanical mis-
statement.
The Group has
committed to the
development of new
hotels builds and the
extension of existing
hotel assets.
There is a risk that the
benefits of the acquisitions
either fail to materialise,
are materially lower than
expected, take longer or
cost more to achieve, which
could lead to a material
impact on the business,
profitability and financial
condition of the Group.
There is a significant executive
and board focus on the
implementation of the business
plans for the acquired hotels.
A detailed financial model is in
place along with daily, weekly
and monthly monitoring of
financial performance. The Group
Operations Manager – Clayton
Hotels has been tasked with the
integration of these hotels.
The Group’s strategy in relation
to development and expansion
has been considered in detail;
Significant financial and
forecasting information on hotel
performance is undertaken;
Detailed market analysis is also
reviewed and considered.
The Group’s largest
hotels in terms of both
room numbers, revenue
generation and profitability
are located in the Dublin
region. While this market
is undergoing significant
growth, any reversal or
slowdown in business
levels could have a material
impact on the Group’s
performance.
There is a risk that the
capital refurbishment
programmes take longer or
cost more to achieve, which
could lead to a material
impact on the business,
profitability and financial
condition of the Group.
Group Finance have developed
processes and controls whereby
approval is required from the
Executive Management Team
and the Board before the
commencement of all projects.
Ongoing project management and
controls are also in place
There is a risk that
the developments and
extensions take longer or
cost more to achieve, which
could lead to a material
impact on the business,
profitability and financial
condition of the Group.
There is a significant executive
and board focus on the
development plans. External
advisors will provide the necessary
skills and expertise for these
projects.
The ICT systems and
strategy does not
support the Group’s
operations, advances
in technology and
emerging security
risks.
The Group’s IT systems are
not sufficiently developed
to reflect technological
advances, meet emerging
security risks and optimise
operational efficiencies.
The Group’s ICT systems operate
on a robust IT infrastructure.
Appropriate ICT security
structures are in place and
are monitored. This is also
complemented by external
support providers. We continually
invest in ICT infrastructure to
deliver efficiencies and meet our
business needs.
Annual Report and Accounts 2015Strategic Report 32
No. Risk
Category
Risk Status
2015 v 2014
10
Operational No change
11
Operational No change
Risk Outline
Rationale for Inclusion
Key Control &
Mitigation Activities
The Group’s ICT
applications are
not suited to
the expanded
Group portfolio,
the quantity of
transactions to
be processed and
the delivery of
timely and accurate
management
information.
A material
operational health
and safety related
event occurs at
a hotel and is not
properly managed.
The Group’s operational
ICT applications (relating
to Finance, Purchasing
and Timekeeping/HR) do
not support the Group’s
increased hotel portfolio,
require material manual
interventions and include
inherent inefficiencies.
The Group operates
extensive and complex
hotel and leisure centre
activities accessed by
employees/guests/general
public and has significant
legal health and safety
responsibilities arising from
these activities. A failure
to have proper health and
safety and food safety
systems and structures
could result in both
reputational damage and
financial loss to the Group.
The Group’s growth and
operational performance
is dependent both on the
continued retention of key
executives and business
management and the
ongoing development of
talent and expertise within
the Group.
The Group has implemented a
Group Finance consolidation
package and is also upgrading the
hotel and Group Finance Sage
environments. Focus will also be
given on the options for delivering
large transaction processing in
an efficient and timely manner,
though such projects, by their
nature, are not deliverable in a
short timeframe.
The Group has a Health and
Safety function and associated
policies in place. Local health
and safety responsibilities are
assigned to qualified staff and
support contracts are in place
with approved health and safety
providers. Regular reviews of
Health and Safety policies and
procedures are carried out by
the Audit and Risk Committee.
There are also external reviews of
relevant health and safety areas
completed.
The Board Remuneration
Committee considers executive
and staff remuneration and
performance criteria. External
advisors also provide guidance
in this area. Recruitment and
retention are key parts of the
Group’s HR strategy.
12
Strategic
No change
There is a failure to
retain key expertise
and experiences and
develop talent within
the Group to ensure
its ongoing and
future success.
Dalata Hotel Group PLC No. Risk
Category
Risk Status
2015 v 2014
10
Operational No change
Risk Outline
Rationale for Inclusion
Key Control &
Mitigation Activities
The Group’s ICT
applications are
not suited to
the expanded
Group portfolio,
the quantity of
transactions to
The Group’s operational
The Group has implemented a
ICT applications (relating
Group Finance consolidation
to Finance, Purchasing
package and is also upgrading the
and Timekeeping/HR) do
hotel and Group Finance Sage
not support the Group’s
environments. Focus will also be
increased hotel portfolio,
given on the options for delivering
require material manual
large transaction processing in
be processed and
interventions and include
an efficient and timely manner,
the delivery of
inherent inefficiencies.
though such projects, by their
nature, are not deliverable in a
short timeframe.
11
Operational No change
A material
timely and accurate
management
information.
operational health
and safety related
event occurs at
a hotel and is not
properly managed.
The Group operates
extensive and complex
hotel and leisure centre
activities accessed by
The Group has a Health and
Safety function and associated
policies in place. Local health
and safety responsibilities are
employees/guests/general
assigned to qualified staff and
public and has significant
support contracts are in place
legal health and safety
with approved health and safety
responsibilities arising from
providers. Regular reviews of
these activities. A failure
Health and Safety policies and
to have proper health and
procedures are carried out by
safety and food safety
systems and structures
could result in both
the Audit and Risk Committee.
There are also external reviews of
relevant health and safety areas
reputational damage and
completed.
financial loss to the Group.
12
Strategic
No change
There is a failure to
The Group’s growth and
The Board Remuneration
retain key expertise
operational performance
Committee considers executive
and experiences and
is dependent both on the
and staff remuneration and
develop talent within
continued retention of key
performance criteria. External
the Group to ensure
executives and business
advisors also provide guidance
its ongoing and
future success.
management and the
in this area. Recruitment and
ongoing development of
retention are key parts of the
talent and expertise within
Group’s HR strategy.
the Group.
33
Corporate
Responsibility
Dear Shareholder,
At Dalata we recognise that as our business continues to expand, we
have greater responsibility to operate in an environmentally and socially
responsible way. We strive to become one of the most responsible
businesses in the Irish and UK hospitality sector. Our strategy to achieve
this objective is to build and strengthen our partnerships with our
stakeholders, the communities in which we operate, and minimise our
impact on the environment.
In this report we outline the initiatives and partnerships we have developed
over the past number of years in the knowledge that we have just started
this journey.
Examples of initiatives introduced during 2015 included Dalata –
Your Journey our employer training and development brand, the roll
out of the Trust You reputational management tool, the development
of distribution channels for our suppliers and the announcement of our
sports sponsorships.
Our priorities for 2016 include the roll out of the employee satisfaction
survey to all our employees, the development of new customer
propositions, the setting of additional environmental targets,
together with fundraising and volunteering for our new partner charities.
I am proud of the work that we have done to date and I look forward
to continuing our corporate responsibility journey.
Pat McCann
Chief Executive Officer
Annual Report and Accounts 2015Strategic Report 34
Our Strategic Approach
Our approach to corporate responsibility is to engage with all stakeholders on a regular basis in order to build
solid relationships. While each of our stakeholder groups have different interests and issues, we recognise the
importance of them all helping us to build a sustainable business.
These engagements with our stakeholders help us to recognise risks associated with our business, and to identify
further opportunities to improve our business.
By embracing our values, engaging with our stakeholders, we can achieve our strategic objectives and create
shareholder value in a responsible and sustainable way.
Our Values
› Our People
› Our Service
› Our Fairness
› Our Individuality
Our Strategic Objectives
› Delivering strategic hotel
acquisitions and hotel
development sites
› Delivering strategic capital
investment programmes
› Positioning Maldron Hotels
and Clayton Hotels as the
leading leisure and corporate
hospitality brands
› Developing, rewarding
and retaining highly
motivated people
› Delivering sustainable growth
› Achieving excellence
in customer service
›
Identifying quality products
and empowering our suppliers
› Reducing our impact
on the environment
› Supporting community
initiatives
Our
People
Our
Communities
Our
Customers
The
Environment
Our
Suppliers
Create shareholder value in a responsible and sustainable way
Dalata Hotel Group PLC 35
Dalata's General Manager Development Programme participants 2015/2016
Developing and
Supporting our
People
At Dalata we recognise that our
people are central to our success.
By strengthening our employee skills,
communication and engagement,
and creating a safe and healthy
place to work we enable our people
to achieve their potential and deliver
our strategic objectives.
Development and Education
As we continue our expansion, the
development of our people and
their careers is a strategic focus for
the Group which allows us to build
a strong pool of talent to lead our
hotels. On-the-job skills training,
structured development programmes
and personal development plans are
in place in the hotels to support our
employees to advance their careers.
We also understand the importance
of succession planning, a process we
commenced in 2015. Succession plans
will be rolled out throughout the Group
in 2016 to help us identify our talented
people and their training needs.
We launched a new training and
development employer brand Dalata
– Your Journey. The employer
brand outlines the recruitment and
selection, training and development
programmes in the Group and
communicates opportunities
available to our employees. It is
about helping our people progress so
that they can continue to advance
their own professional development
and enhance our customers’
experience. The training and
development programmes in Dalata
– Your Journey are outlined below:
ECHELON
Senior Management
Leadership Journey
ALTITUDE
General Management
Development Journey
ELEVATE
Management
Development Journey
ASCEND
Graduate Journey
PLATFORM
Trainee Management
Journey
The General Manager Development
Programme (Altitude) for
future hotel General Managers
is partnered with the Irish
Management Institute. It provides
training on strategic management
and effective leadership.
“ I knew when I started
Dalata’s General Manager
Development Programme
that it would be a life
changing experience. This
programme has opened my
eyes and mind to the exciting
and challenging world of
being a hotel manager. It
is giving me the tools and
knowledge to handle all the
obstacles and opportunities
that this career presents.
I am thoroughly enjoying
this fantastic and unique
experience.”
Tracey Newman, Operations Manager,
Clayton Hotel Silver Springs
Annual Report and Accounts 2015Strategic Report 36
Employee Communication
and Engagement
We understand the importance
of employee communication and
engage with our people through a
variety of channels ensuring that
they are kept fully up to date about
the entire business. This allows us
to promote team building as well as
the ability of staff to anticipate and
deliver customer needs.
In October 2015 we conducted our
first Great Place to Work employee
engagement survey in 16 hotels. 81%
of the staff responded to the online
survey. This survey allowed us to
identify key areas of improvement
including enhancements to
employees’ working environment,
developing the customer experience
and improving communication within
the Group.
Recognising and rewarding our
people is a fundamental part of
our culture. We celebrate their
accomplishments through our
monthly and quarterly employee
awards and at the Group’s annual
awards ceremony. Accomplishments
are also communicated through our
bi-monthly newsletter – Dalata Way.
Health and Safety
The Group recognises the
importance of providing a safe and
secure environment for our guests,
employees, suppliers and those
working or visiting our hotels or
corporate offices. Effective health
and safety practices are encouraged
through detailed policies and
procedures, training, supervision and
regular communication. During 2015
independent third party audits were
performed in all owned and leased
hotels, business continuity plans and
safety statements were completed
for all our hotels, trained health and
safety officers were appointed to
the majority of our hotels.
KEY PRIORITIES FOR 2016
›
›
Implement an e-learning
platform to improve
communication, access and
consistency of training to all
employees.
Increase awareness of
Dalata – Your Journey training
programmes.
› Conduct a Group wide
Great Place to Work employee
engagement survey.
›
Implement the Fire
Cloud 365 app in our larger
hotels to oversee fire safety
procedures.
Serving our
Customers
At Dalata we recognise the value of
our guests and customers and strive
to develop and maintain positive
relationships with them. Our focus
on excellence in product quality,
value and service allows us to
exceed our customer expectations,
win repeat business and in doing so
increase our profitability and reward
our shareholders.
Guest Satisfaction
Our aim is to be the hotel of choice
in the markets in which we operate.
Working with our employees and
suppliers we identify, define and
develop initiatives to improve guest
satisfaction. We also recognise
the importance of guest feedback,
and listen to what our guests are
telling us to establish how we can do
better. Guest feedback is captured
through various channels; guest
satisfaction surveys, social media
and internet based applications.
During 2015 Trust You, a leading
reputational management tool, was
rolled out to our owned and leased
hotels to collate guest feedback
from social media, Trip Advisor and
various booking websites. According
to Trust You, our hotels achieved
an average satisfaction score of
83%. From 2016, the performance
bonus of our General Managers
will be linked to their hotels’ Trust
You, rating to encourage them to
implement initiatives that improve
the guest experience and their
hotel rating.
Repeat business is the best
testimony to guest satisfaction. We
have developed various initiatives
to secure repeat business and
reward repeat guests. Exclusive
Loyal Guest Benefits & Offers was
introduced to reward repeat guests
in both our Maldron and Clayton
hotels. Buy 10 Get One Free Stamp
Loyalty Card which rewards our food
and beverage customers was also
implemented in 2015. There is also
an online points based scheme to
reward our corporate bookers.
To enhance our guest experience,
even before they have arrived at our
hotels, and to allow us to operate
more efficiently and cost effectively
we implemented Book Direct
marketing campaigns in 2015. These
campaigns incentivise our guests to
book directly through our websites
or Central Reservations Office, and
avail of the best rate guarantee and
direct booking benefits.
Dalata Hotel Group PLC 37
KEY PRIORITIES FOR 2016
›
Improve Trust You
ratings in our hotels.
› Enhance Maldron and Clayton
hotels’ loyalty initiatives.
› Roll out the capital
refurbishment programmes.
› Develop meeting and events
propositions for our customers
– Meetings made Simple
› Develop and roll out the food
and beverage philosophy to all
Maldron and Clayton Hotels.
Capital Refurbishment
We recognise that our hotels are
more than just buildings. They
represent our brands and define not
only key aspects of our customer
and employees experience, but are
often beacons in our communities.
The way we design our hotels is an
important driver of our employees
and customer experience, and the
profitability of our operations.
We are committed to investing 4%
of our revenue in capital expenditure
on an annual basis. In 2015, we
invested almost €25 million in capital
development and refurbishment
programmes in our hotels, including
an extension at our Clayton Hotel,
Chiswick London. We also developed
executive and standard sample
bedrooms for the Clayton hotels,
and a standard sample bedroom
for the Maldron hotels. The
refurbishment programme for these
bedrooms has commenced and will
continue throughout 2016.
We have also upgraded public areas
in our hotels, in keeping with
today’s customers’ demands,
and are currently developing
our conference and banqueting
products and services.
Food and Beverage Philosophy
Given the international focus on
healthy, sustainable nutrition,
Dalata is developing a philosophy
that focuses on healthy, fresh,
natural and locally sourced food
and beverage options. Healthy
and sustainably sourced food
supports our commitment to
the health and well-being of our
customers, our employees and our
communities. Dalata’s commitment
to sourcing good quality food and
beverages from local suppliers
also makes a significant impact on
the local economies, reduces our
environmental footprint and allows
us to showcase our brands, as
brands that care about people and
also deliver on taste.
New extension at Clayton Hotel Chiswick, London
Vitality Breakfast
Annual Report and Accounts 2015Strategic Report 38
Collaborating
with our Suppliers
Expanding our business, gives us
an opportunity to leverage our
purchasing power and address
broader environmental, social
and economic issues. As we shift
towards more sustainable, local
produce, we not only deliver
excellence in product quality and
service to our customers, but
collaborate with our suppliers to
expand their product reach.
Responsible Sourcing
We have a central purchasing
function that works closely with
our food suppliers to ensure that
our requirements and standards are
met. The team ensures high ethical
standards in sourcing food products
and our customers expect high
standards of animal welfare.
Working with Local Suppliers
Our team identify high quality food
products that can be sourced locally
and form partnerships with these
suppliers and producers to collect
and distribute their products. The
collaboration we have developed
between Brakes (Wholesale
Distributor) and our small suppliers
and producers have allowed
them to expand their businesses,
create employment in their local
communities and ensure our guests
enjoy the best quality products at
all times.
“ Working with Dalata Hotel Group
in 2015, particularly with Tony
McGuigan has been a pleasure.
We have developed strong
sales channels for our products
resulting in a very successful year
for both of our companies.”
Helen Gee
Managing Director
G's Gourmet Jams
Abbeyleix, Co. Laois
“I am delighted to work with G’s
Gourmet Jams, O’Keeffe’s Bakery
and Prestige Foods, suppliers
of quality Irish products to our
hotels. I am extremely pleased
that we were in a position to
develop a distribution channel for
these valued suppliers through
Brakes, which has allowed them
to expand their businesses and
product range.”
Tony McGuigan
Group Head of Purchasing/
Food and Beverage Manager
Dalata Hotel Group
Dalata Hotel Group PLC 39
“ We at O’Keeffe’s Bakery,
a family run business established
in 1984, are delighted to be
associated with Dalata Hotel
Group. When producing our
premium handmade scones we
use kitchen cupboard ingredients
which offers customers a top
quality product enhancing the
overall Dalata offering.”
Stephen O’Keeffe
Business and Sales Development
Manager, O’Keeffe’s Bakery,
Ballincollig, Co. Cork
“ Prestige Foods has worked
closely with Dalata Hotel Group
over the past twelve months
supplying quality desserts using
the best of Irish ingredients. Our
R&D team have forged a special
relationship with Dalata’s food
and beverage team. Maintaining,
supporting and growing these
relationships is the key to our
future success.”
John O’Connor,
MD Prestige Foods,
Listowel, Co. Kerry
Annual Report and Accounts 2015Strategic Report 40
Creating an Environmentally Sustainable Business
We recognise that our operations affect the environment and are committed to minimising their impact,
not only because it is the right thing to do for our planet and our communities; it’s the right thing for our
business. Our approach to an environmentally sustainable business is as follows:
Use our Resources
with Care
› Reduce energy
› Conserve water
› Reduce waste
› Purchase sustainably
Our
Approach
Build Smart
› Design and build
more efficient,
environmentally
conscious hotel
Engaging our
People and
our Guests
› Engage our people
and guests
› Drive innovative
solutions
Using our Resources with Care
Energy Initiatives
Our aim is to improve our hotels
energy efficiency without sacrificing
the guest experience. During 2015,
we continued to improve our energy
efficiency through investments
in energy efficient lighting,
heating, refrigeration and
energy monitoring tools.
Water Conservation
We are conscious that water is a
critical and limited resource and we
continued our water conservation
programmes in our hotels in 2015.
Waste Management
The Group continued to develop
its waste management processes
in 2015 by reducing the amount
of waste the hotels generate. The
Group achieved the environmental
target of zero waste to landfill in
2015. Over 55% of the Group’s
waste was recycled, the remaining
45% was used for the generation
of green electricity through Attero
in Holland. We are currently
investigating options to convert our
food waste to green electricity.
Engaging our People
and our Guests
The success of environmental
sustainability efforts is dependent
on the passion of the people
leading the projects. To motivate
our staff we have appointed Green
Ambassadors to our hotels. The
Green Ambassadors identify
and implement hotel specific
environmental initiatives. Our
guests are also encouraged to
be environmentally friendly by
managing their towel and bed
linen usage.
Build Smart
The design and physical structure
of the hotel is an important driver
of a hotel’s environmental footprint
and its profitability. During 2015
Dalata completed a major extension
to its hotel in Chiswick, London.
This extension was completed to
sustainable design guidelines. This
included a high efficiency energy
system, motion-sensor lighting
controls, LED lighting and in-room
automated temperature controls.
A Combined Heat Power unit was
installed and a sedum - cool/green
roof was erected.
KEY PRIORITIES FOR 2016
› Develop energy consumption
metrics.
›
Increase our recycling rate
from 55% to 65%.
Dalata Hotel Group PLC
41
Sponsorships
Sponsorships play a key role in
enabling Dalata to support sport
throughout Ireland and the UK
and in doing so positively impact
on their communities. Many of
the local hotels work closely with
GAA, soccer and rugby clubs
through sponsorship of jerseys
and prizes, and hosting of events.
Examples include Maldron Hotel
Tallaght sponsorship of Shamrock
Rovers F.C. and Clarion Hotel Sligo
sponsorship of Sligo Rovers F.C.
In May 2015 Dalata announced
Clayton Hotels as the joint official
sponsor of London GAA Senior
Football and Hurling Teams to the
end of 2017. This sponsorship sees
Clayton Hotels provide discounted
hotel rates to London GAA teams’
members when travelling in Ireland.
In October 2015 Dalata announced
Clayton Hotels as the Official Hotel
Partner of Paralympics Ireland to
the end of 2016. This partnership
sees Clayton Hotels provide
support for Paralympics Ireland
through extensive provision of
accommodation, meeting and event
facilities. Dalata is also engaging staff
to participate in various initiatives in
support of Paralympics Ireland.
Positively Impacting
our Communities
€50,000 and volunteered over 3,000
hours for the benefit of their local
charities and sport clubs.
Dalata recognises that supporting
our local communities is an essential
part of building a responsible
business. We contribute positively to
our communities, by supporting local
economies, engaging in charitable
activites and through our various
sponsorships.
Supporting Local Economies
By virtue of the nature of our
business, we support local
economies in the role of employer.
As our business continues to expand,
we will create more jobs. In 2015, we
provided employment to over 2,000
full time equivalent employees which
represented an increase of 177%
from 2014.
Our commitment to supporting
government and enterprise led
schemes is shown through our
partnerships with JobBridge, Jobs
Centre Plus and Diageo Learning for
Life. The success of these schemes
to both Dalata and the participants
was evidenced at the recent
employee awards ceremony, where
David Dunne who joined Dalata
through the Diageo Learning for Life
scheme was named Student of the
Year 2015.
The Group also supports local
economies in its commitment to
sourcing quality food from local and
regional suppliers and the use of local
enterprises to supply services to the
hotels. A number of these suppliers
are profiled in the supplier section of
this corporate responsibility report.
Supporting Charities and
Communities
We encourage our hotels to be
involved in their local communities
and community projects. Our people
devote their time through fundraising
and volunteering and our hotels
provide facilities and resources.
During 2015 our staff raised over
In January 2016, we announced
Crumlin Medical Research
Foundation (CMRF) as our primary
charity partner. The CMRF was
established to raise funds for
ongoing capital projects and vital
medical research for Crumlin
Childrens’ Hospital. Dalata is proud
to be associated with CMRF and
is very committed to working with
them in 2016.
In November 2015, we established
an educational partnership with
Suas. In Dalata we are conscious
that interpersonal and literacy
skills are key to the development
of children. Suas runs literacy
support programmes in schools
around Ireland that are based
in disadvantaged communities.
This literacy support programme
allows our staff to not only support
children's reading and writing but to
become a role model in their lives. In
2016 staff across all our Irish hotels
will be participating in this literacy
support programme.
Other charities we supported during
the year include Make-a-Wish,
Jack & Jill Foundation, MS Ireland
and Penny Dinners.
Annual Report and Accounts 2015Strategic Report 42
In February 2016, Clayton Hotels
announced a partnership with
Munster Rugby until June 2018.
As part of this sponsorship Clayton
Hotels will be the Official Hotel
Partner to Munster Rugby and will
sponsor the Munster Schools Senior
and Junior Cups.
In addition to the sports
sponsorships, Dalata is also one of
the main sponsors of the Rose of
Tralee International Festival, for the
past two years. Dalata are proud
of their commitment to this long
running festival and welcome the
tourism benefit such a festival brings
to Tralee and Portlaoise.
Patrice Lennon, Head of Sales and Marketing of Dalata Hotel
Group plc at the announcement of Dalata's partnership with
Paralympics Ireland.
Stephen McNally, Deputy CEO of Dalata Hotel Group plc at the
announcement of Dalata's sponsorship of London GAA football
and hurling teams.
Dalata Hotel Group PLC 43
Governance
The Board of Dalata
is firmly committed
to business integrity,
high ethical values and
professionalism in all
of the Group’s activities
and operations.
Annual Report and Accounts 2015Governance 44
Chairman's
Overview
Dear Shareholder,
I am pleased to present the
Corporate Governance Report
of Dalata Hotel Group plc.
The Board of Dalata is firmly committed to business integrity, high ethical
values and professionalism in all of the Group’s activities and operations. We
promote excellence in governance practices across the business in order to
deliver effectively on the Group’s strategic objectives and create long-term
success for all our stakeholders.
My responsibility as Chairman is to ensure that our Board has the right
mix of skills, experience and knowledge so that it works effectively with
our executive management team to deliver the strategic objectives of the
Group. Dalata’s Board comprises a balanced, diverse and experienced team
that is committed to developing group strategy, supporting the Executive
Management Team in the implementation of that strategy and maintaining
the highest standards of corporate governance.
The Company voluntarily applies the UK Corporate Governance Code
(September 2014) published by the Financial Reporting Council in the UK and
the Irish Corporate Governance Annex published by the Irish Stock Exchange
(together the “Codes”) in respect of its corporate governance practices.
Our statement below explains how we have complied with the principles of
the Codes in 2015 and, where specific provisions may not appear to have been
met, we provide a detailed explanation outlining the reasons why.
During 2015, we completed the internal board evaluation, developed our
remuneration policy and implemented a Group Whistleblowing Policy.
The Nomination Committee commenced a succession plan for the Executive
Management Team in 2015 and have been tasked with the completion of this
plan in 2016.
I am proud to be the Chairman of Dalata and I am committed to continuing the
good work of our board in ensuring a well-governed and successful business
and creating long-term returns for our shareholders.
If any shareholder wishes to contact me in relation to any of the content
of the annual report, please do so through the Company Secretary at the
Company’s address.
John Hennessy
Non-Executive Chairman
Dalata Hotel Group PLC Directors’
Biographies
John Hennessy
Non-Executive Chairman
Member of Remuneration and
Nomination Committees
Age: 59
Joined Board: 27 February 2014
Experience: John Hennessy SC is a
practising barrister and a Chartered
Director. He is a fellow of Chartered
Accountants Ireland and of the
Chartered Institute of Arbitrators.
He is also an accredited mediator.
Other appointments: He is
non-executive Chairman of CPL
Resources plc and a non-executive
director of H&K International Limited.
He is also a member of the boards of
a number of voluntary and non-profit
making organisations.
45
Pat McCann
Chief Executive
Member of Nomination Committee
Age: 64
Joined Board: 28 January 2014
(previously a director of DHGL
Limited, the former parent company
of the Group)
Experience: Pat has over 45 years
of experience in the hotel industry
having started his career with Ryan
Hotels plc. He joined Jurys Hotel
Group plc as General Manager of its
flagship Dublin hotel in 1989. He was
appointed Operations Director, and
to the Board of Jurys Hotel Group plc
in 1994 and was responsible for the
integration of the Doyle Hotel Group
following its acquisition by Jurys
in 1999. In 2000, he became Chief
Executive of Jurys Doyle Hotel Group
plc, a position he held until 2006. Pat
worked as an independent consultant
and became Chief Executive Officer
of Dalata in August 2007.
Other appointments: He was non-
executive director of EBS Building
Society and Greencore Group plc.
He served as National President of
the Irish Hotels Federation, and was
a Member of the National Tourism
Council (Ireland) and the Irish
Tourism Review Group. He is a non-
executive director of a number of
private companies.
Annual Report and Accounts 2015Governance 46
Stephen McNally
Deputy Chief Executive
Age: 51
Joined Board: 28 January 2014
(previously a director of DHGL
Limited, the former parent company
of the Group)
Experience: Stephen completed
his hotel studies in Rockwell Hotel
and Catering School. Having worked
with Ramada Hotels in the UK
and Germany and completed the
Ramada management development
programme, he joined Jurys Hotel
Group plc in 1989. During his
seventeen years with Jurys, which
subsequently became Jurys Doyle
Hotel Group plc, he managed the
company’s hotels in the UK and
Ireland, and ultimately headed up
operations for the entire hotel group,
including its properties in the USA. In
August 2007 he became director and
Deputy Chief Executive of Dalata
where he has overall responsibility
for the Group’s hotel operations.
Other appointments: He is currently
a member of the Government led
Tourism Leadership Group. He served
as National President of the Irish
Hotels Federation from February
2014 to February 2016.
Dermot Crowley
Deputy Chief Executive –
Business Development and Finance
Age: 48
Joined Board: 28 January 2014
(previously a director of DHGL
Limited, the former parent company
of the Group)
Experience: Dermot joined
Dalata in 2012 where he has
overall responsibility for business
development and finance. He
led the acquisition of the Moran
Bewley Hotel Group in February
2015. He also played a leading
role in the IPO of the Company
in March 2014 and the equity
fundraising in September 2015. He
is a fellow of Chartered Accountants
Ireland. He previously worked
with PricewaterhouseCoopers,
Procter & Gamble, Forte Hotels and
Renault Ireland, before joining Jurys
Doyle Hotel Group plc as Head of
Development from 2000 to 2006.
From 2006 to 2012 he worked at Ion
Equity on a number of transactions
which included the establishment of
Pillo Hotels.
Robert Dix
Non-Executive Director
Chairman of Audit and
Risk Committee
Member of Remuneration Committee
Age: 63
Joined Board: 27 February 2014
Experience: Robert was a partner
in KPMG Ireland where he headed
up the Transaction Services division
until his retirement from the firm
in 2008. He operates his own
company Sopal Limited, where he
provides advice to organisations
on capital markets, corporate
governance and strategic planning
issues. He is a graduate of Trinity
College Dublin and is a fellow of
Chartered Accountants Ireland.
Other appointments: He is currently
a board director of a number of
companies, including a number of
companies within the Quinn Finance
Group, Allianz plc., Actavo, Blarney
Woollen Mills and Bank of Ireland
Private Bank and a number of other
private companies.
Dalata Hotel Group PLC 47
Alf Smiddy
Senior Independent Director
Chairman of Nomination Committee
Member of Audit and Risk
Committee
Margaret Sweeney
Non-Executive Director
Chairman of Remuneration
Committee
Member of Nomination Committee
Seán McKeon
Company Secretary
Chief Financial Officer
Age: 48
Appointed Company Secretary:
28 January 2014 (previously
Company Secretary of DHGL
Limited, the former parent
company of the Group)
Experience: Seán joined the
Group as Chief Financial Officer
and Company Secretary in 2007
having developed his career in
retail and FMCG distribution. He
played a central role in Dalata’s
2014 IPO and the equity fundraising
in September 2015. As Company
Secretary he plays a leading role in
the implementation of the corporate
governance practices determined
by the Board. He is a fellow of
Chartered Accountants Ireland
and an MBA graduate of the UCD
Michael Smurfit Graduate Business
School. He previously worked with
Roches Stores, Dunnes Stores,
Diageo plc, Keelings, Aer Rianta
International and CLC World
Resorts and Hotels.
Age: 53
Age: 55
Joined Board: 27 February 2014
Joined Board: 27 February 2014
Experience: Alf has over 25
years’ experience in the Irish
and international hospitality and
beverage sector, having held the
roles of Chairman and Managing
Director of Beamish & Crawford
plc. Prior to this he worked with
PricewaterhouseCoopers. He runs
his own company and works with
leadership teams and boards in the
private and public sectors in Ireland
on organisational strategy, marketing
and business development,
financial management and human
resource leadership. He is a fellow
of Chartered Accountants Ireland,
a Fellow of the Irish Marketing
Institute, and has a Masters in
Executive Leadership from Boston
College and the University of Ulster.
Other appointments: He previously
served as Chairman and Managing
Director of Beamish & Crawford plc
in Ireland, and on the Board of the
UK division of its parent company,
Scottish & Newcastle plc (a FTSE
100 company) until 2008. He also
served as a non-executive director at
T&S Taverns Limited between 2009
and 2013. He is a non-executive
director of a number of private
companies and was Chairman of
the CLGR in 2015.
Experience: Margaret qualified as a
Chartered Accountant with KPMG
in 1985 and worked with the firm
for 15 years. She has held a number
of senior positions including CEO
of Dublin Airport Authority plc and
Postbank Ireland Limited. She is a
fellow of Chartered Accountants
Ireland and holds a Diploma in
Company Direction from the Institute
of Directors.
Other appointments: She was
non-executive director of Aer
Rianta International plc, Flughafen
Dusseldorf GmbH, Birmingham
International Airport, Hamburg
Airport, Shannon College of Hotel
Management and Teagasc (Irish
Agriculture and Food Development
Authority). She also served as
President of Dublin Chamber of
Commerce from 2008 to 2009. She
is currently a non-executive director
on the Boards of a number of
companies in the financial services,
technology and health sectors and
sits on the Governing Body of Dublin
City University and the Council of
Chartered Accountants Ireland.
Annual Report and Accounts 2015Governance 48
Corporate
Governance
Statement
Statement of Compliance with the UK Corporate Governance Code
As an ESM/AIM listed company, the Company is not required to comply with the UK
Corporate Governance Code (“the Code”) as issued by the Financial Reporting Council
in September 2014. However, the Company has committed to comply on a voluntary
basis with the provisions of the UK Corporate Governance Code together with the
terms of the Irish Corporate Governance Annex published by the Irish Stock Exchange
(together the “Codes”) in respect of its corporate governance practices.
A copy of the UK Corporate Governance Code (September 2014) can be obtained from
the Financial Reporting Council’s website www.frc.org.uk. A copy of the Irish Corporate
Governance Annex can be obtained from the ISE’s website www.ise.ie.
The Board considers that the Company has complied with all relevant provisions of the
Codes throughout the year other than in respect of the areas set out below:
Board Diversity Policy
The Company adopted a Board Diversity Policy on 25 January 2016. A copy of the policy
is posted on the Company's website www.dalatahotelgroup.com.
Notice of the AGM
The notice for the 2015 AGM was sent to shareholders 21 days in advance of the
meeting in accordance with the Companies Act 1963 to 2013, which was not in
compliance with the 20 working days required by the Code.
Leadership
Corporate Governance Framework
The Board is responsible for setting and monitoring the Group’s governance framework.
Implementation of governance throughout the Group is the responsibility of the Executive
Management Team. Regular updates are provided to the Board and its committees by the
Chief Executive Officer and the Executive Management Team. The Board regularly meets
the Executive Management Team to establish how the business is progressing and to
ensure that the governance framework is fully embedded within the Group.
Board of Directors
Audit and Risk
Committee
Remuneration
Committee
Nomination
Committee
Chief Executive Officer
Executive Management Team
Dalata Hotel Group PLC 49
Role of the Board
The key responsibilities of the Board are to set strategy, to monitor
management, holding them accountable for performance against agreed
targets, and to provide appropriate challenge to ensure management remains
focused on achieving the strategic objectives for delivering value to the
shareholders and other stakeholders. Although not involved in the day-to-day
management activities, the Board does have a formal schedule of matters
reserved for its own consideration which includes:
› Group strategy, business objectives, long range plans and annual budgets
› Determining the nature and extent of the risks the Group is willing to
accept to achieve its strategic objectives
› Board membership and senior appointments within the Group
› Major changes to the Group’s capital, corporate or management structure
› Material acquisitions, disposals and contracts
› Annual and interim results
› Major changes to the Group’s internal controls, risk management or
financial reporting policies and procedures
› Treasury policy
The Board has delegated a number of these responsibilities to standing
committees of the Board as detailed below and also to the Executive
Management Team of the Group, having first approved the terms of reference
of those committees and the authority limits of management, and receives
regular reports in respect of all delegated authorities.
Board Composition
The Board comprises a Non-Executive Chairman, three Non-Executive
Directors and three Executive Directors (Chief Executive Officer, Deputy
Chief Executive and Deputy Chief Executive - Business Development
and Finance).
The Board considers that there is an appropriate balance between Executive
and Non-Executive Directors for governing the business effectively and
promoting shareholder interests. It also considers that both Executive and
Non-Executive Directors have the necessary skills, expertise and experience
to enable them to govern the business effectively.
Detailed biographies of current Directors are set out on pages 45 to 47.
Annual Report and Accounts 2015Governance 50
The composition of the Board is reviewed annually by the Nomination Committee
to ensure that there is an effective balance of skills, experience and knowledge.
Division of Responsibilities
The roles of the Chairman and the Chief Executive Officer are separately held and
the division of their responsibilities is clearly established.
Chairman
The Chairman’s primary responsibility is to lead the Board, to ensure it has a
common purpose, is effective as a group and at individual director level and
upholds and promotes high standards of integrity and corporate governance.
He is also responsible for ensuring that all directors have full and timely access
to the information necessary to enable them to discharge their duties. He
ensures that Board agendas cover the key strategic issues confronting the Group
and that the Board reviews and approves management’s plans for the Group.
He is responsible for overseeing the annual board evaluation.
The Chairman is the link between the Board and the Company. He is specifically
responsible for establishing and maintaining an effective working relationship
with the Chief Executive Officer, and promotes a culture of strong open dialogue
between the Executive and Non-Executive Directors. He has the responsibility to
ensure that there is ongoing and effective communication with shareholders and
to ensure that members of the Board develop and maintain an understanding of
the views of the shareholders.
Chief Executive Officer
The Chief Executive Officer is responsible for the day to day management of
Group’s operations and for the implementation of Group strategy and policies
agreed by the Board. The Chief Executive also has a key role in the process of
setting and reviewing strategy. The Chief Executive instils the Group’s culture
and standards which includes appropriate corporate governance throughout
the Group.
Non-Executive Directors
The Non-Executive Directors’ main responsibilities are to review the
performance of management and the Group’s financial information, assist in
strategy development, and ensure appropriate and effective systems of internal
control and risk management are in place. The Non-Executive Directors review
the relationship with external auditors through the Audit and Risk Committee,
monitor the remuneration structures and policy through the Remuneration
Committee and consider the Board composition and succession planning
through the Nomination Committee.
The Non-Executive Directors provide a valuable breadth of experience and
independent judgement to Board discussions. Details of the Non-Executive
Directors are set out on pages 45 to 47 and the Board considers that their
biographies reflect suitable breadth and depth of strategic management
experience.
Senior Independent Director
The Senior Independent Director is responsible for conducting an annual
performance review of the Chairman, facilitating the Board evaluation every
three years, providing advice and judgement to the Chairman as necessary,
to serve as an intermediary to the other directors when necessary, and being
available for shareholders who have concerns that cannot be addressed through
normal channels.
Dalata Hotel Group PLC 51
Company Secretary
The Directors have access to the advice and services of the Company
Secretary, who is responsible for ensuring that board procedures are followed,
assisting the Chairman in relation to corporate governance matters, and
ensuring compliance by the Group with its legal and regulatory requirements.
The Directors have access to independent professional advice, at the Group’s
expense, if and when required.
Executive Management Team
The Executive Management Team has collective responsibility for the day-
to-day running of the Group’s business. It is chaired by the Chief Executive
Officer and includes the Deputy Chief Executive, Deputy Chief Executive
- Business Development and Finance, Chief Financial Officer and Company
Secretary, and Senior Managers. Detailed biographies of the Executive
Management Team are set out on pages 137 to 139.
Conflicts of Interest
The Board reviews potential conflicts of interest as a standing agenda item
at each board meeting. Directors have continuing obligations to update the
Board on any changes to these conflicts.
D&O Insurance
The Company maintains Directors’ and Officers’ liability insurance cover,
the level of which is reviewed annually.
Board Attendance
During 2015, the Board held nine scheduled meetings. In addition to the
scheduled meetings, the Board also met on two occasions to address specific
matters. Individual attendance at these meetings is set out in the table below.
The main areas of focus during 2015 are detailed on page 52.
Board Attendance
Directors
John Hennessy
Patrick McCann
Dermot Crowley
Stephen McNally
Alf Smiddy
Robert Dix
Margaret Sweeney
Number of board meetings attended
11/11
11/11
11/11
11/11
11/11
11/11
11/11
The Chairman and the Non-Executive Directors met formally without the
Executive Directors on 24 February 2015 to discuss the performance of
the Executive Directors.
Annual Report and Accounts 2015Governance 52
The main areas of focus for the Board in 2015 were:
Strategy
Formalised the Group’s strategy in May.
Met the Executive Management Team in November to discuss progress on
strategy implementation and initiatives for the future.
Reviewed and discussed hotel acquisitions strategy and criteria for investments.
Approval of acquisitions and related documentation, data and analysis.
Received acquisition and development updates from Deputy Chief Executive Officer –
Business Development and Finance and Head of Development and Strategy.
Received regular industry updates from Deputy Chief Executive Officer.
Approval of the Group’s budget for 2016.
Approval of Group’s tax structure.
Approval of placing, firm placing and open offer (legal, financing, shareholder approval
and directors responsibilities).
Approval of the Clayton Hotel brand.
Review of the Group’s debt structure.
Performance
monitoring
Received regular updates from Chief Executive Officer regarding transactions.
Received operational and integration updates from Deputy Chief Executive Officer.
Reviewed monthly reports from Chief Financial Officer on performance versus budget and forecast.
Reviewed reports from Chief Financial Officer on the financial position of the Group including
treasury management.
Reviewed regular reports from chairmen of the Audit and Risk, Remuneration and Nomination
Committees.
Approval of full and half year results.
Approval of 2014 annual report and accounts.
Reviewed group governance documentation.
Regularly reviewed significant risks.
Governance
and risk
Received Health & Safety updates from Deputy Chief Executive Officer.
Approval of Group’s insurance strategy.
Discussed the Board evaluation process and findings.
People and
values
Conducted seven hotel site visits to meet with management and review operations.
Reviewed and considered management development programmes.
Discussed the values of the Clayton brand.
Shareholder
engagement
Received updates from Chief Executive Officer and Deputy Chief Executive Officer –
Business Development and Finance, on investor meetings and roadshows.
Received reports from stockbrokers on shareholder feedback from meetings with the Chief
Executive Officer and Deputy Chief Executive Officer – Business Development and Finance.
Received an update from stockbrokers and PR advisers on the market perception of Dalata.
Reviewed 2015 AGM proxy voting figures.
Strategy Review
The Board held two strategy days in May and November 2015. At the May 2015 strategy day, areas discussed were
the Group’s operating business model, hotels acquisition strategy, funding strategy and investor relations. At the
November 2015 strategy day, the Board received comprehensive presentations from each member of the Executive
Management Team on their current and projected performance, areas for development, upcoming opportunities and
initiatives for growth. The strategy presentations have provided the Board with a basis towards the development of
further strategic initiatives.
Dalata Hotel Group PLC 53
Remuneration
Details of Directors’ Remuneration are set out in the Remuneration
Committee Report on pages 64 to 73.
Effectiveness
Board Independence
The independence of each of the Non-Executive Directors is considered upon
appointment, and on an annual basis by the Board. The Board has determined
all of the Non-Executive Directors to be independent within the meaning of
the term as defined in the UK Corporate Governance Code.
The Board gave particular consideration to the independence of Robert Dix
given his directorship in The Quinn Property Group. Both Robert Dix and Pat
McCann are currently Non-Executive Directors in The Quinn Property Group.
The Board has concluded that notwithstanding this relationship, his breadth
of expertise, experience, knowledge and connections brings significant value
to the Board. The Board remain satisfied that he is able to apply objective,
unfettered and independent judgement and act in the best interests of the
Company regardless of this relationship.
The independence of the Non-Executive Directors is fundamental to the
Board’s decision making. Any director who has concerns about the running
of the Group or a proposed course of action is encouraged to express those
concerns which are then minuted. No such concerns were raised during 2015.
Appointments to Board
The Nomination Committee is responsible for a formal, rigorous and
transparent procedure for the appointment of new directors.
There were no board appointments during 2015. The terms and conditions
of the Non-Executive Directors are set out in their letters of appointment,
which are available for inspection at the Company’s registered office during
normal office hours and at the AGM of the Company.
Commitment
Under the terms of their appointment all directors agreed to the ‘Time
Commitment Schedule’ which requires them to allocate sufficient time to
discharge their responsibilities effectively. As part of the Board evaluation
process completed in December 2015, each Non-Executive Director
confirmed that they had been able to allocate sufficient time to discharge
their responsibilities effectively during 2015.
Induction
All new Non-Executive Directors joining the Board undertake an induction
programme which covers briefings on the operation and activities of the
Group, the Group’s principal risks and uncertainties, the role of the Board and
the matters reserved to it, the responsibilities of the Board Committees, and
the strategic challenges and opportunities facing the Group. There were no
board appointments during 2015.
Training and Development
In order to ensure that the Directors discharge their duties to the best extent
possible, the Chairman is responsible for ensuring that all directors receive
ongoing training and development. As part of the Board evaluation process
completed in December 2015, each director confirmed that they have kept
themselves properly briefed on and informed about current issues in 2015.
Annual Report and Accounts 2015Governance
54
Training and development needs for 2016 for individual directors and the Board were
identified through the Board evaluation process. These training and development
needs will be considered in greater detail at the May 2016 board meeting.
Information Flow at Board Meetings
Formal board meetings are held approximately 10 times per year. Prior to each
board meeting the directors receive an agenda item with supporting papers.
Included in these papers are detailed monthly accounts together with reports
from the Chief Executive Officer, Deputy Chief Executive, and Deputy Chief
Executive – Business Development and Finance.
The Board uses an electronic board paper system so that directors can access all
board papers quickly and securely.
The Chief Executive Officer and the Chief Financial Officer ensure that the Board
is kept fully aware on a timely basis of business issues and prospects throughout
the Group.
The structure of the Executive Management Team and the open communication
approach in the Group enables issues to be raised easily. Many of these key issues
are brought to the attention of the Board.
In consultation with the Chairman and Chief Executive Officer, the Company
Secretary manages the provision of information to the Board for their formal
board meetings and at other appropriate times. The Chairman and Chief
Executive Officer also maintain regular informal contact with all directors.
Board Evaluation
An evaluation of the performance of the Board, its committees and its directors
is carried out annually. The Board’s three year cycle for performance evaluation is
outlined in the chart below:
Dalata's Three Year Approach
↑
Year 1
—
Internal Board
Evaluation led by the
Senior Independent
Director
Year 2
—
External
Board
Evaluation
↑
Year 3
—
Internal Board
Evaluation led
by the Chairman
↑
Dalata Hotel Group PLC 55
In December 2015, the first performance evaluation of the Board and its
Committees commenced. This process was internally facilitated by the Senior
Independent Director and comprised of the following steps:
› A questionnaire covering key aspects of board effectiveness, including
composition of the Board, the running of the Board and Committee
meetings, corporate governance, risk, financial reporting and internal
controls, directors’ continuing education process and their individual
training needs and time commitment requirements was circulated and
completed by the Directors.
› The Senior Independent Director met with each director and the Company
Secretary in January 2016.
› The Senior Independent Director held a follow up session with the Chief
Executive Officer to discuss the results of the questionnaire.
› The results of the Board evaluation were presented by the Senior
Independent Director to the Nomination Committee and the Board on
25 January 2016.
› Focus areas were identified and agreed with the Board on 25 January 2016.
The outcomes of the Board evaluation process have been positive, and
have confirmed to the Chairman that the Board and its committees operate
effectively and that each director contributes to the overall effectiveness and
success of the Group.
Re-election
All directors wishing to continue will retire and offer themselves for re-election
by shareholders in line with the requirements of the Codes.
Accountability
Financial and Business Reporting
On pages 7 to 20 we provide an explanation of the basis on which the Group
generates value over the long-term and how we intend to deliver on our
strategic objectives.
Going Concern
After making enquiries, the Directors are satisfied that the Company, and
the Group as a whole, have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they have adopted the going
concern basis in preparing the financial statements.
Risk Management
On pages 27 to 32 to we explain how the Board oversees risk management.
Internal Controls
The Board has responsibility for maintaining sound risk management and
internal control systems, and at least annually reviewing the effectiveness of
these systems. These internal control systems are designed to manage rather
than eliminate the risk of failing to achieve a business objective. They can
therefore only provide reasonable and not absolute assurance against material
misstatement or loss.
Annual Report and Accounts 2015Governance 56
Annual Assessment of the Principal Risks Facing the Group
The Board and Audit and Risk Committee received and reviewed reports from
Group Internal Auditor, to help with their annual assessment of the principal risks
facing the Group, and the controls in place to mitigate these risks. The principal
risks and the mitigating factors are outlined on pages 30 to 32.
Annual Assessment of the Effectiveness of Internal Controls Systems
and Risk Management
The Board and Audit and Risk Committee received and reviewed reports
from Group Internal Audit and our External Auditor, to help with their annual
assessment of the effectiveness of the Group’s internal control and financial
reporting systems, and are satisfied that the systems have been operating
effectively throughout the year to the date of the report.
Whistleblowing
The Board adopted a Confidential Disclosure Procedure (Whistleblowing Policy)
on 9 March 2015 to ensure that any concerns are addressed confidentially,
promptly and thoroughly.
No concerns were raised by employees during the year to the date of the report.
This was reported by the Company Secretary to the Audit and Risk Committee
on 23 February 2016.
The Confidential Disclosure Policy is included in the Employee Handbook to
ensure all employees have an understanding of the whistleblowing process.
Relations with Shareholders
Share Ownership and Dealing
Details of each Directors’ interests in Dalata shares are set out in the
Remuneration Report on pages 64 to 73. The Company has a policy on dealing in
shares that applies to all Directors and Management. Under the policy, Directors
are required to obtain clearance from the Chairman before dealing in Company
shares. Directors and Management are prohibited from dealing in Company shares
during designated prohibited periods and at any time when the individual is in
possession of price-sensitive information.
Shareholder Communication
The Group recognises the importance of communication with all shareholders.
Presentations are made to both existing and prospective institutional shareholders,
principally after the release of the interim and annual results.
Significant matters relating to trading or development of the business are
disseminated to the market by way of Stock Exchange announcements which
appear on the Company’s website www.dalatahotelgroup.com. The website
also contains annual and interim reports and investor presentations.
The Board is kept informed of the views of shareholders through executive
directors’ attendance at investor and results presentations. Furthermore,
relevant feedback from such meetings, investor relations reports and brokers’
notes are provided to the Board on a regular basis.
In December 2015 the Board commissioned Davy Stockbrokers and FTI
Consulting to perform a review of the Company’s investor relations programme
for 2015 and to carry out a survey of investors. The Board received and
considered their findings in January 2016.
Dalata Hotel Group PLC 57
During 2015 over 110 separate meetings and conference calls were held with
existing and prospective shareholders. These meetings were attended by the
Chief Executive Officer and/or Deputy Chief Executive Officer – Business
Development and Finance. The meetings focused primarily on the Group’s
trading operations and strategy.
On 19 May 2016, the Group will hold an Investor Day for institutional investors
at the Clayton Hotel Ballsbridge, Dublin 4. It will involve detailed presentations
on the Group’s strategy and operations and will include site visits to a number
of hotels.
This event provides investors with an opportunity to meet a wider range of
the Executive Management Team and exchange information to improve their
understanding of the Group.
AGM
The Annual General Meeting will be held on 27 April 2016 at the The Gibson
Hotel, Point Village, Dublin 1. Formal notification will be sent to shareholders
at least 20 working days before the meeting. Other general meetings may also
be convened from time to time on at least 14 working days’ notice. The Annual
General Meeting gives shareholders an opportunity to hear about general
development of the business and to ask questions of the Chairman and through
him, the Chairmen of the various Committees and its Committee members.
Any shareholder attending the Annual General Meeting has the right to
ask questions. Any questions relating to the business will be dealt with at
the meeting, unless, for example, it is undesirable to do so, whether in the
interests of the company (such as disclosure of confidential information)
or for good order of the meeting. Shareholders attending the meeting are
informed of the number of proxy votes lodged for each resolution.
Details of the meeting and the resolutions to be proposed are sent out in the
shareholders Notice of Meeting.
Board Committees
The three principal committees of the Board are the Audit and Risk
Committee, the Remuneration Committee and the Nomination Committee.
These committees have been established with formally delegated duties and
responsibilities. Details of the committees and their activities are outlined on
pages 58 to 75.
Annual Report and Accounts 2015Governance 58
Audit and
Risk
Committee
Report
Dear Shareholder,
I am pleased to present to you
the report of the Audit and Risk
Committee for Dalata Hotel Group
plc for 2015.
The Committee is made up of two independent non-executive directors and
operates to formal terms of reference, which are available on the Company’s website
at www.dalatahotelgroup.com.
During 2015 we considered the internal audit programme, internal auditor’s reports on
the Group’s internal controls, and management’s responses to matters identified. In
addition, we reviewed the risk management structure, the Group’s risk register, principal
risks and mitigating controls.
A programme of presentations were made to the Committee during 2015. The topics
covered included the Group’s health and safety structures, insurance risk, the group
finance organisational structure and group financing structures.
As part of its role in providing assurance that the financial statements give a true and
fair view of the Group’s financial affairs, the Committee considered the significant
financial policies and judgements made during the year. It considered the accounting
for acquisitions, property valuations, residual values and depreciation, carrying value
of goodwill and hedging arrangements. The Committee concluded that the judgements
made in each of these areas were appropriate; more details can be found on pages
59 and 60.
There have been five Committee meetings during the year and details on the key
matters considered are set out on in more detail on page 62.
The Committee adopts an open approach to its meetings, with relevant executive
management, the Internal Auditor and the External Auditor, KPMG, also invited to
attend. Papers for the Committee meetings are circulated to the attendees in
advance to facilitate prior consideration of the agenda items.
Robert Dix
Chairman, Audit and Risk Committee
Dalata Hotel Group PLC
59
Significant Financial Judgements in 2015
Matters
Judgements
Accounting for
acquisitions
A number of
acquisitions were
completed during
the year.
The Group acquired 13 hotels in 2015 which were accounted for as business combinations;
details of these are set out in note 10 to the Group Financial Statements on pages 104 to 107.
Other property acquisitions were accounted for as asset purchases (see note 12, pages 110
to 112 and note 13, page 112).
The Committee has evaluated the accounting treatment of the consideration paid and costs
incurred as presented by management and is satisfied that the correct accounting method
has been chosen and that management has engaged suitably qualified professional valuers
to provide support for the determination of property values and, where required, values of
fixtures and fittings.
Based on its enquiries, the Committee is satisfied that the assumptions used and judgements
made in determining the fair values are reasonable and is satisfied that the fair value of the
acquired assets and liabilities has been correctly stated and appropriately disclosed in the
financial statements.
The net book value of land and buildings at the year-end date was €585.1 million (note
12, page 110). Values are stated at fair value and, as such, the valuation of property and
depreciation of buildings involve a significant level of judgement.
Management has engaged appropriately qualified professional valuers to determine the value
attributable to a) land b) buildings and c) residual property values.
The Committee has discussed the approach taken with management and considered
the analysis of the External Auditor on this matter. The Committee has evaluated the
assumptions made by management including, the allocation of hotel valuations to buildings,
the estimated residual values of buildings and their estimated useful lives. The Committee
agrees with the valuation methodology employed by management on the advice of property
valuation experts and is satisfied that the asset values are correctly stated and appropriately
disclosed. The Committee is satisfied that the method of depreciation and the depreciation
rates employed by management are appropriate and reflect the expected cost of the assets
over their useful lives on a systematic basis.
The carrying value of goodwill was €46.8 million at the year-end date (see note 11, pages 107
to 109). This value was tested for impairment at the year end by calculating the ‘Value in Use’
of the underlying assets. Value in use was arrived at by calculating the discounted future cash
flows for the assets. This calculation includes assumed values for future revenues and costs,
terminal value multiples and the discount rate.
The Committee has reviewed the assumptions used by management in the Value in Use
calculations and is satisfied that they are reasonable. Consequently the Committee has
concluded that the carrying value of goodwill is appropriately stated and that adequate
disclosures have been made in the financial statements.
Property
revaluations,
residual values and
depreciation
Review in light of
material investment
in land and buildings
during the year.
Carrying value
of goodwill
Significant
increase in value
of goodwill due to
the acquisitions
completed during
the year.
Annual Report and Accounts 2015Governance 60
Significant Financial Judgements in 2015 (continued)
Matters
Judgements
Hedging
arrangements –
derivatives
The Group entered
into hedging
arrangements with
the relevant financial
institutions to
mitigate interest
rate risk.
Hedging
arrangements –
net investment
hedge
The Group drew
down a sterling
loan of £132.4
million to finance
the acquisition of
the four UK former
MBHG hotels.
Details of the use of derivatives are set out in note 14 to the Group Financial Statements on
page 113.
The Committee examined the accounting treatment of derivatives. The Committee discussed
the inception documentation and the hedge effectiveness testing prepared by management.
External advice was also obtained from hedging specialists.
Having reviewed the information available, and considered the findings of the External
Auditors, the Committee is satisfied that management have complied with the relevant
requirements of accounting standards. Consequently the Committee is satisfied that the
hedging instruments were wholly effective in hedging the associated risks during the period.
The Committee is satisfied that the accounting treatment and disclosure of the derivatives is
appropriate in the financial statements.
The Group has established a net investment hedge between the value of assets held in
British Sterling and the value of loans drawn in British Sterling to finance the purchase of
those assets.
The Committee discussed the net investment hedge with management and external advice
was also obtained from hedging specialists.
Having evaluated the information available, including the findings of the External Auditors in
this area, the Committee is satisfied that the net investment hedge utilised in the financial
statements was properly documented and tested in accordance with accounting standards.
The Committee is satisfied that the hedge was effective at 31 December 2015 and therefore
that it was appropriate to recognise the foreign exchange loss on British Sterling loans taken
out to finance the UK business in Other Comprehensive Income.
Dalata Hotel Group PLC Hedging
Details of the use of derivatives are set out in note 14 to the Group Financial Statements on
arrangements –
page 113.
derivatives
The Group entered
the inception documentation and the hedge effectiveness testing prepared by management.
The Committee examined the accounting treatment of derivatives. The Committee discussed
into hedging
arrangements with
External advice was also obtained from hedging specialists.
the relevant financial
Having reviewed the information available, and considered the findings of the External
institutions to
Auditors, the Committee is satisfied that management have complied with the relevant
mitigate interest
requirements of accounting standards. Consequently the Committee is satisfied that the
rate risk.
hedging instruments were wholly effective in hedging the associated risks during the period.
Hedging
arrangements –
net investment
hedge
The Group drew
down a sterling
loan of £132.4
million to finance
the acquisition of
the four UK former
MBHG hotels.
The Committee is satisfied that the accounting treatment and disclosure of the derivatives is
appropriate in the financial statements.
The Group has established a net investment hedge between the value of assets held in
British Sterling and the value of loans drawn in British Sterling to finance the purchase of
those assets.
The Committee discussed the net investment hedge with management and external advice
was also obtained from hedging specialists.
Having evaluated the information available, including the findings of the External Auditors in
this area, the Committee is satisfied that the net investment hedge utilised in the financial
statements was properly documented and tested in accordance with accounting standards.
The Committee is satisfied that the hedge was effective at 31 December 2015 and therefore
that it was appropriate to recognise the foreign exchange loss on British Sterling loans taken
out to finance the UK business in Other Comprehensive Income.
61
The External Auditor
The Audit and Risk Committee engages throughout the year with the
External Auditor receiving and considering their audit plans and the findings
arising from their audit of the financial statements. The Audit and Risk
Committee pays particular attention to ensure that the audit work focuses on
matters it considers to be important, by virtue of their size, potential impact,
complexity and level of judgement.
It is the Company’s practice to employ KPMG on assignments additional
to their statutory audit duties where their expertise and experience with
the Company are important, principally tax, compliance and transaction
matters. During the year KPMG were retained to provide non-audit reporting
accountant services in relation to the Company’s €160 million Firm Placing
and Placing and Open Offer in October 2015 and the acquisition of the
Choice Hotel Group which is due to be completed in March 2016. KPMG were
also retained to carry out certain tax work. The Audit and Risk Committee
considered it appropriate and cost effective to use KPMG on tax and financial
due diligences because of their familiarity with the business. The total fees
paid to KPMG are set out in Note 3 to the financial statements. The Audit
and Risk Committee has reviewed the provision of non-audit services and
believes them to be cost effective and not an impediment to the External
Auditor’s objectivity and independence.
The Audit and Risk Committee has evaluated the External Auditor for their
work in the year ended 31 December 2015, taking into account the fees
paid to KPMG, and is satisfied with their effectiveness, objectivity and their
independence. The Audit and Risk Committee does not consider it necessary
to require the External Auditor to tender for the audit work at this time. This
matter will be reviewed on an annual basis by the Audit and Risk Committee.
Internal Control and Risk Management
The Committee is responsible for monitoring internal controls and risk
management on behalf of the Board. Considerable progress has been made in
developing the Group’s control and risk processes. The Group has continued
to develop its risk register. A Risk Management Policy was approved by the
Board in March 2016. The Committee receives updates from Internal Audit at
each meeting and has developed an agenda of action areas to be addressed
in 2016 including the continual assessment of risks arising from the
integration of acquisitions, health and safety and ICT reviews. The Chairman
of the Committee provides an update at each regular business meeting of
the Board on the activities of the Committee.
Annual Report and Accounts 2015Governance
62
The main areas the Audit and Risk Committee focused on in 2015 were:
Financial
Reporting
› Considered the key accounting judgements and key matters arising from the review
of the interim and full year financial statements.
› Reviewed and considered the year-end financial statements.
› Reviewed and considered the half-year financial statements.
› Reviewed half-year results announcement and the preliminary results announcement.
Narrative
Reporting
› Reviewed content of the 2014 annual report and financial statements and advised the
Board in relation to its compliance with the UK Corporate Governance Code and the Irish
Corporate Governance Annex.
Internal
Controls
and Risk
Management
Systems
› Reviewed and adopted the Risk Management Policy.
› Reviewed updates from the Internal Auditor on the Group’s principal risks.
› Reviewed and considered adoption of Group Confidential Disclosure Policy.
› Received an update from the Chief Financial Officer on the Group’s Confidential
Disclosure Policy.
› Reviewed the proposed changes on risk management and internal control to ensure
compliance with the 2014 UK Corporate Governance Code.
› Received an update on the Group's insurance programme and emerging key risks
from the Group's insurance broker.
Internal Audit
› Reviewed at each meeting, the Internal Audit reports and findings, including discussions
with management on internal control matters identified.
› Received regular updates on both internal audit work completed and proposed audits.
› Considered the internal audit annual review for 2015 and proposed audit approach and
structure for 2016.
› Met Head of Internal Audit in the absence of management.
External Audit
› Reviewed External Auditor's reports and findings on year-end and half-year financial
statements.
› Discussed External Auditor's plan, scope and fees for the 2015 audit.
› Met KPMG audit partner without management present.
› Assessed qualifications, expertise, resources and independence of KPMG.
Other
Relevant
Areas
› Reviewed and considered Group Finance resourcing and system developments given
the Group’s additional reporting and accounting complexities.
› Reviewed with management the level of professional fees incurred by the Group and
the process for approval of such fees.
› Considered and reviewed with management the Group’s health and safety structures,
monitoring tools and the use of external expertise in this area.
› Considered the updated Treasury Risk Management Policy.
Committee membership and attendance
Members
Robert Dix
Alf Smiddy
Number of meetings attended
5/5
5/5
Dalata Hotel Group PLC 63
All members of the Committee are considered by the Board to be independent.
The Board considers that the Committee Chairman has sufficient recent and
relevant financial experience for the role and that there is sufficient financial
and commercial experience within the Committee as a whole.
In addition to the Committee members, the Chief Executive Officer and
relevant members of the Executive Management Team, the Internal Auditor
and the External Auditor KPMG attend the Committee meetings by invitation.
Principal responsibilities
The principal responsibilities and duties of the Committee include:
Financial Reporting
› Monitoring the integrity of the financial statements of the Group and
Company, reviewing and reporting to the Board on significant financial
reporting issues and judgements included.
Narrative Reporting
› Reviewing the content of the annual report and financial statements and
advising the Board on whether it is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Group
and Company’s performance, business model and strategy.
Internal Controls and Risk Management Systems
› Reviewing the adequacy and effectiveness of the Group’s internal financial
controls, internal controls and risk management systems.
› Maintain and consider at meetings and regularly update a risk register
to include an assessment of all risks facing the Group and the effectiveness
of existing or proposed mitigating or corrective actions or controls in respect
of key risk areas.
Compliance, Whistleblowing and Fraud
› Reviewing the adequacy of the Group’s structures and arrangements
in relation to fraud detection, whistleblowing and compliance matters
including anti-money laundering and bribery prevention.
Internal Audit
› Monitoring and reviewing the effectiveness of the Internal
Audit function.
External Audit
› Considering and making recommendations in relation to the appointment
of the Company’s External Auditor.
› Overseeing the relationship with the External Auditor including the
approval of their remuneration and the quantum of fees for audit and
non-audit services.
Health Safety and Operational Risk
› Reviewing the health, safety and operational risk control environment
including health and safety policy, compliance with applicable legislation
and monitoring safety culture and performance.
Annual Report and Accounts 2015Governance 64
Remuneration
Committee
Report
Dear Shareholder,
I am pleased to present to you,
the report of the Remuneration
Committee of Dalata Hotel
Group plc for the year ended
31 December 2015.
The Remuneration Committee comprises three independent Non-Executive Directors
and operates in accordance with its terms of reference which are available on the
Company’s website www.dalatahotelgroup.com. There have been six Committee
meetings during the year and details on the key matters considered are set out on in
more detail on page 73.
Disclosure
The Group remains committed to the objective of meeting the requirements of the UK
Corporate Governance Code and the Irish Corporate Governance Annex in relation to
the structure and disclosure of directors’ remuneration. This year, we have continued
to incorporate many features of UK best practice remuneration reporting (such as
a policy table which explains the components of our framework and a “single figure
of remuneration” in respect of 2015). In this report, we have also disclosed details of
the performance targets which applied to the 2015 annual bonus plan, illustrating our
commitment to high standards of disclosure and transparency.
Activities and outcomes in 2015
In February 2015, the Committee appointed an independent advisor (Deloitte LLP)
to assist in reviewing and refining our remuneration policy to ensure it remains
appropriately aligned to the delivery of our strategy and shareholder value. During 2015,
the base salaries of our executive directors were increased to ensure they remained
appropriate for the size and scale of the business in the very competitive talent markets
in which we operate. Based on the strong financial and operational performance of the
business during 2015 (as described in detail on pages 21 to 26 of this annual report), the
Committee determined that the maximum annual bonus (100% of salary) should be paid.
Plans for 2016
For 2016, the Committee agreed further salary increases for the executive directors
to ensure they remain market competitive in the context of the significant increase
in the size of the business over the year. Based on research commissioned by the
Committee, base salary for the Executive Directors is in the bottom quartile of a group
of comparable quoted companies following these increases. For 2016, the Company
has introduced two provisions aimed at improving the alignment between executive
directors and shareholders in line with best practice. From 2016 onwards, 20% of the
bonus will be delivered in the form of Dalata shares deferred for a period of three years.
The remainder is payable in cash following the year end. From 2016, malus and clawback
provisions will also apply for incentive arrangements of the Executive Directors,
Company Secretary and certain members of the Executive Management Team. During
the year, the Committee intends to continue to develop and refine the framework.
Margaret Sweeney
Chairman, Remuneration Committee
Dalata Hotel Group PLC 65
Remuneration Committee Report
This report is divided into the following sections:
› Summary of the current executive remuneration framework (and how it will apply in 2016)
› Outcomes for 2015
› Additional disclosures
Summary of current executive remuneration framework
The Group’s policy on Executive Directors’ remuneration is designed to ensure that employment and remuneration
conditions reward, retain and motivate them to perform in the best interests of shareholders. The elements of the
remuneration package which may apply to Executive Directors are base salary, pension and benefits, annual
bonus, and the long term incentive plan. The table below summarises the framework which will apply during 2016.
Executive Remuneration Framework
Element
Purpose and operation
Maximum opportunity
Base
Salary
An appropriate level of fixed remuneration to
reflect the skills and experience of the individual.
Salaries are reviewed annually by the Committee,
taking into account all relevant factors.
Salaries as at 1 January 2016 are:
Pat McCann: €475,000
Dermot Crowley: €275,000
Stephen McNally: €275,000
Pension
Contributions into the Company’s defined
contribution pension scheme, or an equivalent
cash supplement.
Benefits
To provide a market competitive benefits package.
The benefits available currently comprise a
company car and fuel, and benefits under the
group risk benefit scheme which includes death
in service cover and disability benefit. The
Committee may determine that other benefits
will apply where appropriate.
Performance
Metrics
N/A
There is no prescribed
maximum. Salary increases
are normally in line
with those of the wider
workforce. Larger increases
may be awarded to reflect
circumstances such as an
increase in the size of the
Group or the responsibilities
of the role, or changes in the
competitive market data.
15% of base salary.
N/A
The level of benefits is set at
an appropriate market rate.
N/A
Chairman
and Non-
Executive
Director
Fees
To attract and retain Non-Executive Directors
with the required qualities, skills and experience.
There is no prescribed
maximum.
N/A
Fees include a base fee and may include
additional fees for other Board duties.
The Chairman and Non-Executive Directors
(“NEDs”) do not participate in any incentive plan
or pension arrangement. Where appropriate,
benefits may be provided (but are not currently).
Fees for the Chairman are set by the
Committee and fees for the NEDs are set
by the Board (excluding the NEDs).
Fees effective 1 January 2016 are:
Chairman fee: €100,000
Base NED fee: €60,000
Annual Report and Accounts 2015Governance 66
Executive Remuneration Framework
Element
Purpose and operation
Maximum opportunity
Performance Metrics
For 2016, the maximum
opportunity for the CEO
is 110% of salary and for
other executive directors
the maximum opportunity
is 100% of salary.
Targets are set and
assessed by the
Committee each year.
For 2016, the bonus will be
based on the achievement
of challenging adjusted
EBITDA targets and
on other specific non-
financial objectives in line
with risk policy and risk
framework.
The maximum annual award
level under the LTIP rules is
100% of salary.
Performance targets are
measured over a period of
three financial years.
No more than 5% of the
issued ordinary share
capital of the Company
may be issued or reserved
for issuance under the
LTIP and any other
executive or discretionary
share scheme operated
by the Company over
any ten year period.
For the 2016 LTIP awards,
vesting is based on relative
total shareholder return
(TSR) measured against
12 listed peers1
25% vests for median
performance rising on
a linear basis to 100%
vesting for upper quartile
performance.
The Committee may
adopt different or
vary the existing
performance conditions
without shareholder
approval where the new
performance conditions
will, in the reasonable
opinion of the Committee,
be no less challenging
having regard to the
circumstances prevailing
at the time, than the
performance conditions
described above.
Annual
bonus
To drive and reward the delivery of
business objectives over the financial year.
The bonus is discretionary and any
pay-out is determined by the Committee
based on performance.
From 2016 onwards, 20% of the bonus
will be delivered in the form of Dalata
shares deferred for a period of three
years. The remainder is payable in cash
following the year end.
From 2016 onwards, malus and
clawback provisions apply.
Long-term
incentive
plan (LTIP)
To reward executive directors and senior
management for the delivery of long
term performance and align their interests
with those of shareholders and other
stakeholders.
Awards are made under the LTIP
approved by shareholders on Admission.
Awards are in the form of conditional
shares which vest no earlier than the
third anniversary of the award grant date.
From 2016 onwards, malus and clawback
provisions apply.
Generally, an award will lapse immediately
on cessation of employment. However,
in certain circumstances*, the award will
vest, remaining subject to the original
performance conditions and, unless the
Committee decides it is inappropriate, will
be reduced pro-rata for time. Awards will
normally continue to the original vesting
date unless the Committee determines
they should vest on cessation.
On a change of control, awards will
vest subject to the achievement of the
performance conditions and, unless the
Committee decides it is inappropriate
in the particular circumstances, will be
reduced pro-rata for time.
* death, injury or disability, redundancy,
the employing company ceasing to be a
member of the Group, the transfer of the
undertaking outside the Group, cessation
of service in accordance with contractual
requirements, or any other circumstances
at the discretion of the Committee.
1 Whitbread plc, Accor plc, Intercontinental Hotels plc, Millennium & Copthorne plc, Tsogo Sun Holdings,
Melia Hotels International SA, CPL Resources, ICG, UTV Media plc, Total Produce plc, FBD plc, Independent News and Media.
Dalata Hotel Group PLC 67
During the salary review at the start of this year, the Committee determined
that increases were required to reflect the sustained growth in the size of the
business during 2015. The current salaries effective 1 January 2016 (as shown
in the table above) represent increases of 13% (for the CEO) and 10% (for
the Deputy CEOs) on the previous rates. In normal circumstances, the policy
on salary increases (as set out in the table above) is that they are in line with
those of the wider workforce. However, the policy also allows larger salary
increases to reflect increases in the size of the Group, strategic objectives
and competitive market data, as described. The Committee commissioned
research to identify base salary levels at quoted companies with a similar
market capitalisation to Dalata. Following the 2016 increases, base salaries
for the Executive Directors are in the bottom quartile of the sample of thirty
companies included in the survey.
The Committee notes that under the LTIP as approved by shareholders,
awards in the first three years of the plan (i.e. made in 2014, 2015 and
2016) will vest by reference to the TSR condition as summarised above. For
awards in subsequent years, the plan currently envisages that half of the
award will be subject to that TSR condition and half will be based on an EPS
performance condition (25% vests for annual EPS growth equal to CPI plus
3% per annum, rising on linear basis to 100% vesting for annual EPS growth
equal to CPI plus 7%). The Committee will review this approach during
2016 (and in future years, as appropriate) to ensure that the performance
conditions for awards appropriately reflect and align with the prevailing
environment and business strategy.
The Committee reviewed the terms of the annual bonus and LTIP framework
in light of the changes to the UK Corporate Governance Code introduced
in September 2014 on the use of malus/claw back provisions. For incentive
awards made in respect of financial years commencing on or after 1 January
2016, the Committee has determined that the cash and share elements of
the annual bonus may be clawed back for a period of three years and grants
of awards under LTIP may be cancelled (prior to vesting) or clawed back for
a period of two years post vesting, in the event of a material misstatement of
results or serious misconduct of the Executives. These provisions will apply
to Executive Directors, Company Secretary and certain members of the
Executive Management Team.
Service contracts/letters of appointment
All Executive Directors have service contracts with the Group with a notice
period not exceeding six months. The service contracts for Pat McCann
and Stephen McNally are dated 9 August 2007. The service contract for
Dermot Crowley is dated 24 October 2013. Other than entitlement to notice
and a payment in lieu of notice, the Executive Directors are not entitled to
compensation on termination of their respective contracts.
Each of the Non-Executive Directors has been appointed pursuant to the
terms of their Non-Executive Directors’ letters of appointment dated 27
February 2014. Appointment is for an initial term of three years, upon and
subject to the articles of association, and continuation of appointment is
contingent on satisfactory performance. Appointment is terminable by either
party giving one month’s written notice.
Annual Report and Accounts 2015Governance 68
Outcomes for 2015
The tables below have been prepared in accordance with the remuneration
reporting requirements set out in the Large and Medium-sized Companies and
Groups (Accounts and Reports) (Amendment) Regulations 2013.
Single total figure of remuneration
The following table summarises the remuneration received by the Directors for
the 2015 financial year.
€’000
Executive Directors
Pat McCann
Stephen McNally
Dermot Crowley
Non-Executive Directors
John Hennessy
Robert Dix
Alf Smiddy
Margaret Sweeney
Base
Salary/Fees
Pension Benefits Bonus
Total
420
250
250
920
100
60
60
60
280
-
38
38
76
-
-
-
-
-
-
3
12
15
-
-
-
-
-
420
250
250
920
-
-
-
-
-
840
541
550
1,931
100
60
60
60
280
› Base salary/fees represent all amounts received in respect of the financial year.
› Pension represents payments into the Company’s defined contribution pension
plan. Pat McCann does not currently participate in the pension plan.
› Benefits includes a company car and fuel, and benefits under the Group risk
benefit scheme which includes death in service cover and disability benefit.
› Bonus represents the value of the bonus receivable in respect of 2015 under
the Group’s annual bonus plan.
› No LTIP vested in respect of performance in 2015.
Dalata Hotel Group PLC 69
The following table summarises the remuneration received by the Directors
for the 2014 financial year.
€’000
Executive Directors
Pat McCann
Stephen McNally
Dermot Crowley
Non-Executive Directors
John Hennessy
Robert Dix
Alf Smiddy
Margaret Sweeney
Base
Salary/Fees
Pension Benefits Bonus Total
310
193
193
696
63
35
35
35
168
-
19
19
38
-
-
-
-
-
-
3
12
15
-
-
-
-
-
131
88
113
441
303
337
332
1,081
-
-
-
-
-
63
35
35
35
168
› Base salary/fees represent all amounts received in respect of the financial
year, including where applicable the period prior to Admission of the
Company’s shares to trading on AIM and ESM.
› Pension represents payments into the Company’s defined contribution
pension plan. Pat McCann does not currently participate in the pension plan.
› Benefits includes a company car and fuel, and benefits under the Group risk
benefit scheme which includes death in service cover and disability benefit.
› Bonus represents the value of the bonus receivable in respect of 2014 under
the Group’s annual bonus plan.
› No LTIP vested in respect of performance in 2014.
Annual bonus plan outcome for 2015
Under the 2015 annual bonus, the executive directors could receive up to
a maximum of 100% of salary. This was based 75% on the achievement of
stretching Adjusted EBITDA targets and 25% on personal objectives aligned
to the delivery of key strategic and operational objectives (for the CEO it was
based solely on the Adjusted EBITDA targets).
The achieved Adjusted EBITDA for the year was in excess of the target range
which represented a range of 95% - 115% around the target, with a scaled
payout from 20% up to the maximum. The Board believes the target range
is commercially sensitive and it would therefore be inappropriate to disclose
the actual targets. The personal objectives focused on the delivery of key
strategic and operational objectives in the year. The Committee assessed
performance and determined that the maximum amount should payout
for the personal objectives. As a result, the maximum bonus was earned
by all directors and is disclosed in the “single total figure of remuneration”
table above.
Annual Report and Accounts 2015Governance 70
Share incentive plan interests awarded during the year
The table below provides details of the LTIP awards made during the year to the
Executive Directors in accordance with the TSR performance condition described
in the table above.
Directors
Type of
Award
Face value
of the award
at grant
Number
of shares
awarded
Vesting at
threshold
(% of
maximum)*
Performance
period
Pat McCann
LTIP
Dermot Crowley
LTIP
Stephen McNally
LTIP
100%
of salary
100%
of salary
100%
of salary
88,889
55,556
55,556
25% - 100% 18 March 2015 –
18 March 2018
25% - 100% 18 March 2015 –
18 March 2018
25% - 100% 18 March 2015 –
18 March 2018
* For the 2015 LTIP awards, vesting is based on relative total shareholder return (TSR)
measured against 12 listed peers. 25% vests for median performance rising on a linear
basis to 100% vesting for upper quartile performance.
The number of shares awarded has been calculated using the face value and a
share price of €3.60 (being the closing share price on the day prior to the date of
grant). The exercise price is €0.01. The share price range in 2015 was from a low
of €2.80 to a high of €5.50.
The table below provides details of the LTIP awards made during the year ended
31 December 2014 to the Executive Directors in accordance with the TSR
performance condition described in the table above.
Directors
Type of
Award
Face value
of the
award
at grant
Number
of shares
awarded
Vesting at
threshold
(% of
maximum)*
Performance
period
Pat McCann
LTIP
Dermot Crowley
LTIP
Stephen McNally
LTIP
100%
of salary
100%
of salary
100%
of salary
128,000 25% - 100% 18 March 2014 –
18 March 2017
80,000 25% - 100% 18 March 2014 –
18 March 2017
80,000 25% - 100% 18 March 2014 –
18 March 2017
* For the 2014 LTIP awards, vesting is based on relative total shareholder return (TSR)
measured against 12 listed peers. 25% vests for median performance rising on a linear
basis to 100% vesting for upper quartile performance.
Dalata Hotel Group PLC 71
Directors’ and Company Secretary’s Share Interests
Shares
beneficially
owned
as at 31
December
2015
Interests in
unvested share
awards with
performance
conditions
(LTIP) –
Granted in
2014 and
Vesting in
2017
Interests in
unvested share
awards with
performance
conditions
(LTIP) –
Granted in
2015 and
Vesting in
2018
Total
interests
in
unvested
share
awards
Pat McCann
Dermot Crowley
Stephen McNally
John Hennessy
Robert Dix
Alf Smiddy
Margaret Sweeney
Sean McKeon
839,927
241,727
282,611
83,000
67,858
66,646
46,787
80,000
128,000
80,000
80,000
-
-
-
-
88,889
216,889
55,556
135,556
55,556
135,556
-
-
-
-
-
-
-
-
51,000
35,417
86,417
Shares beneficially owned include those of connected persons.
LTIP awards to Executive Directors represent the maximum number of shares
which may vest under the 2014 and 2015 LTIP awards based on the TSR
performance condition as described elsewhere in this report.
TSR performance summary
The graph below compares the TSR (re-based to 100) over the period since
listing to the performance of the ISE ESM Index and the median of the LTIP
peer group.
250
200
150
100
50
0
4
1
–
r
a
M
4
1
–
n
u
J
4
1
–
p
e
S
4
1
–
c
e
D
5
1
–
r
a
M
5
1
–
n
u
J
5
1
–
p
e
S
5
1
–
c
e
D
Dalata Hotel Group
ESM
LTIP TSR group (median)
Annual Report and Accounts 2015Governance
72
Remuneration Committee and Advisors
The Remuneration Committee is comprised of three non-executive directors.
Details of Committee membership and attendance at meetings in 2015 are
outlined in the table below:
Committee membership and attendance
Members
Margaret Sweeney
John Hennessy
Robert Dix
Number of meetings attended
6/6
6/6
6/6
All members of the Remuneration Committee are considered by the Board
to be independent. The Board considers the Remuneration Committee
Chairman to have relevant financial and commercial experience for the role
and that there is sufficient financial and commercial experience within the
Remuneration Committee as a whole. These Directors have no financial
interest and no potential conflicts of interest, other than as shareholders,
in the matters to be decided, and no day-to-day involvement in the running
of the business.
In addition to the Remuneration Committee members, the Chief Executive
Officer and the Company Secretary may attend the meetings by invitation.
No individual is present for discussions on their own remuneration.
Principal responsibilities
The principal responsibilities of the Remuneration Committee as outlined in its
Terms of Reference (which are available on the Company’s website) include:
› Review the ongoing appropriateness and relevance of the remuneration
policy.
› Consider and recommend to the Board the framework for the remuneration
of the Executive Directors, Chairman, Company Secretary and other senior
managers.
› Within the terms of the agreed policy, determine the total individual
remuneration package of the Chairman, each Executive Director, the
Company Secretary and other senior executives including bonuses,
incentive payments and share options or other share awards.
› Review the design of all incentive plans for approval by the Board and
Shareholders and, for each such plan, recommend whether awards are
made and, if so, the overall amount of such awards, the individual awards
to Executive Directors and the performance targets to be used.
In carrying out these duties, the Committee considers any relevant legal
requirements, the recommendations in the UK Corporate Governance
Code and the Listing Rules of the AIM/ESM and associated guidance. The
Committee considers annually remuneration trends within the Group and
externally in the market with particular attention on peer companies and
practice within the hospitality sector.
The remuneration of the Non-Executive Directors is approved by the Board.
Dalata Hotel Group PLC 73
During 2015, the Committee appointed Deloitte LLP following a competitive
tender process, to provide independent advice to the Committee. Deloitte is
a member of the Remuneration Consultants Group and adheres to its code in
relation to executive remuneration consulting. Fees charged by Deloitte for
material assistance to the Committee during the year were £27,000.
Key areas of focus during 2015 for the Remuneration Committee
› Considered in detail terms of reference and agreed near-term priorities.
› Reviewed and approved awards under the LTIP and the vesting and
performance conditions attaching to the grant of awards.
› Considered pay and benefits within the Group and comparable industry
benchmarks.
› Reviewed and approved senior management bonus provisions for 2015.
› Considered approach to determining remuneration policy and criteria
for bonus and incentive award schemes.
› Appointed specialist advisors to advise the Committee on the
performance of its duties and the design of senior management
remuneration structures.
› Reviewed and discussed the findings of the specialist advisors.
›
Implemented provisions applicable from 2016 onwards for bonus deferral
for Executive Directors and determined that for bonus awards and grants
of awards under the LTIP, malus and clawback conditions would apply
for awards made to Executive Directors, Company Secretary and certain
members of the Executive Management Team.
Annual Report and Accounts 2015Governance 74
Nomination
Committee
Report
Dear Shareholder,
I am pleased to present to you
the report of the Nomination
Committee for 2015.
The Committee held its first meeting in February 2015. It comprises
of three independent non-executive directors and operates to formal
terms of reference which are available on the Company’s website at
www.dalatahotelgroup.com.
Activities for 2015
Board Composition and Diversity
During the year the Committee assessed the effectiveness and composition of
the Board taking into account the breadth of experience and skills required. We
fully recognise the value of diversity and adopted the Board Diversity Policy in
January 2016.
Board Performance Evaluation
The Committee adopted the Board Evaluation Policy during the year. I led an
internal board evaluation during 2015, the outcome of which has been positive.
I can confirm that the Board and its committees operate effectively and that
each director contributes to the overall effectiveness and success of the Group.
The findings were presented to the Nomination Committee and the Board in
January 2016.
Priorities for 2016
The Committee will focus on succession planning and talent development for both
the Board and the Executive Management Team. We will also continue to review
the composition of the Board and ensure that the Board has the right capabilities
and competencies for the future. The Board will appoint an external facilitator to
perform the Board evaluation in the third quarter of 2016.
Finally, the Committee appointed me as Senior Independent Director for a period
of two years in February 2015. I am delighted that my fellow Non-Executive
Directors recommended me for this role and look forward to continuing serving
them in this role.
Alf Smiddy
Chairman, Nominations Committee
Dalata Hotel Group PLC 75
Key areas of focus during 2015 for the Nomination Committee
Terms of Reference
› Considered in detail the terms of reference of the Committee.
Senior Independent Director
› Outlined the functions of the role of Senior Independent Director.
› Appointed a Senior Independent Director.
Board Composition
› Assessed the effectiveness and performance of the Board and each
of its Committees.
› Considered the Board Diversity Policy.
Succession Planning
› Reviewed the development of the Executive Management Team
during 2015.
Board Performance Evaluation
› Adopted the Board Performance Evaluation Policy.
› Completed the Board Performance Evaluation process.
› Reaffirmed the time commitment of the Non-Executive Directors.
›
Identified the training requirements of the Board.
Committee membership and attendance
Members
Alf Smiddy
John Hennessy
Margaret Sweeney
Number of meetings attended
3/3
3/3
3/3
Principal responsibilities
The principal responsibilities and duties of the Committee include:
› Reviewing the structure, size and composition of the Board and making
recommendations to the Board with regard to any changes.
› Assessing the effectiveness and performance of the Board and each of its
Committees including consideration of the balance of skills, experience,
independence and knowledge of the Company on the Board, its diversity,
including gender, how the Board works together as a unit, and other factors
relevant to its effectiveness.
› Considering succession planning for directors and members of the
Executive Management Team.
› Responsibility for identifying and nominating new members to the Board.
› Reviewing the results of the Board performance evaluation process that
relate to the composition of the Board.
› Reviewing annually the time required from Non-Executive Directors.
Annual Report and Accounts 2015Governance 76
Directors’
Report
The Directors present the Directors’ report and the consolidated financial
statements of Dalata Hotel Group plc (“Dalata” or the “Company”) and its
subsidiaries (the “Group”) for the year ended 31 December 2015.
Principal Activities and Business Review
Dalata Hotel Group plc is the largest hotel operator in the Republic of Ireland,
and operates eight hotels in the UK. A detailed business review is included in the
CEO’s Review on pages 4 to 6 and in the Financial Review on pages 21 to 26.
Results for the Year
The consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 2015 and the consolidated statement of
financial position at that date are set out on pages 85 and 86 respectively.
The profit for the year after tax amounted to €21.6 million (2014: €3.5 million).
Dividends
There were no dividends paid or proposed by the Company during the year.
Future Developments
A review of future developments of the business is included in the Financial
Review on pages 21 to 26.
Directors and Company Secretary
The names of the Directors and Company Secretary and a short biographical
note on each appear on pages 45 to 47.
In accordance with the UK Corporate Governance Code, all directors will
voluntarily retire and be subject to election by shareholders at the Annual
General Meeting.
Directors’ and Company Secretary’s Interests
Details of the Directors’ and Company Secretary’s share interests and
interests in unvested share awards of the Company and Group companies are
set out in the Remuneration Committee Report on pages 64 to 73.
Substantial Holdings
The issued share capital of Dalata Hotel Group plc at 1 March 2016 consists
of 182,966,666 ordinary shares. Each share has a nominal value of €0.01. All
shares have equal voting and dividend rights. The shareholdings in excess of
3% of the issued share capital of the Company are included in the table below.
Number of
Ordinary Shares
% of shares
in issue
Franklin Templeton Institutional, LLC
FMR LLC
FIL Limited
Ameriprise Financial, Inc
Pioneer Asset Management S.A.
Schroders plc
I.G. International Limited
Zurich Life Assurance plc
Artmeis Fund Managers
Prudential plc
18,062,433
14,628,364
11,232,141
8,445,856
7,936,156
7,211,000
6,867,668
5,988,700
5,757,441
5,662,144
9.9%
8.0%
6.1%
4.6%
4.3%
3.9%
3.8%
3.3%
3.1%
3.1%
Dalata Hotel Group PLC 77
Except as disclosed above, the Company is not aware of and has not received
any notification from any institution or person confirming that such institution
or person is interested, directly or indirectly, in 3% or more of the issued share
capital of the Company, nor is it aware of any person who directly or indirectly,
jointly or severally, exercises or could exercise control over the Group.
Principal Risks and Uncertainties
Under Irish company law the Company is required to give a description of the
principal risks and uncertainties which the Group faces. These principal risks
and uncertainties form part of the Risk Management Report on pages 27
to 32. The Financial Risk Management policies are set out in Note 21 to the
consolidated financial statements.
Accounting Records
The Directors believe that they have complied with the requirements of
Sections 281 to 285 of the Companies Act 2014 with regard to adequate
accounting records by employing accounting personnel with appropriate
expertise and by providing adequate resources to the financial function.
The accounting records of the Company are maintained at the registered
office: 4th Floor, Burton Court, Burton Hall Drive, Sandyford, Dublin 18.
Corporate Governance
Statements by the Directors in relation to the Group’s application of Corporate
Governance principles, compliance with the provisions of the UK Corporate
Governance Code and the Irish Corporate Governance Annex, the Group’s
system of internal controls and the adoption of the going concern basis in the
preparation of the financial statements are set out on pages 48 to 57.
Details of directors’ remuneration are set out in the Remuneration Committee
Report on pages 64 to 73.
Political Donations
During the year, the Group and Company did not make any donations
disclosable under The Electoral Act, 1997.
Auditor
Pursuant to Section 383 (2) of the Companies Act 2014, the auditor, KPMG,
Chartered Accountants, will continue in office.
Subsidiaries
Information on the Group’s subsidiaries is set out in Note 27 to the
consolidated financial statements.
Subsequent events
Details of subsequent events are set out in Note 26 to the consolidated
financial statements.
On behalf of the Board
John Hennessy
Chairman
Patrick McCann
Director
1 March 2016
Annual Report and Accounts 2015Governance 78
Financial
Statements
Statement of Directors’ Responsibilities
in respect of the Annual Report and the
Financial Statements
The Directors are responsible for preparing the annual report and the
consolidated and company financial statements, in accordance with
applicable law and regulations.
Company law requires the Directors to prepare consolidated and company
financial statements each year. Under that law, the Directors are required to
prepare the consolidated financial statements in accordance with IFRS as
adopted by the European Union and have elected to prepare the company
financial statements in accordance with IFRS as adopted by the European
Union, as applied in accordance with the Companies Act 2014.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the profit and loss of the Group
for that year. In preparing each of the consolidated and company financial
statements, the directors are required to:
› select suitable accounting policies and then apply them consistently;
› make judgements and estimates that are reasonable and prudent;
› state that the financial statements comply with IFRS as adopted by the
European Union, and as regards the Company as applied in accordance
with the Companies Act 2014; and
› prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group and the Company will
continue in business.
The Directors are also required by the Transparency (Directive 2004/109/EC)
Regulations 2007 and the Transparency Rules of the Central Bank of Ireland to
include a management report containing a fair review of the business and
a description of the principal risks and uncertainties facing the Group.
Dalata Hotel Group PLC Financial Statements
79
The Directors are responsible for keeping adequate accounting records
which disclose with reasonable accuracy at any time the assets, liabilities,
financial position and profit or loss of the Company, and which enable
them to ensure that the financial statements of the Group are prepared in
accordance with applicable IFRS as adopted by the European Union and
comply with the provisions of the Companies Act 2014, and as regards to the
consolidated financial statements, Article 4 of the IAS Regulation. They are
also responsible for safeguarding the assets of the Company and the Group,
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Group’s and Company’s
website www.dalatahotelgroup.com. Legislation in the Republic of Ireland
concerning the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Responsibility Statement as required by the Transparency Directive
and UK Corporate Governance Code
Each of the Directors, whose names and functions are listed on pages
45 to 47 of this Annual Report, confirm that, to the best of each person’s
knowledge and belief:
› the consolidated financial statements, prepared in accordance with IFRS
as adopted by the European Union, and the company financial statements,
prepared in accordance with IFRS as adopted by the European Union as
applied in accordance with the provisions of the Companies Act 2014, give
a true and fair view of the assets, liabilities and financial position of the
Group and Company at 31 December 2015 and of the profit of the Group
for the year then ended;
› the Directors’ Report contained in the Annual Report includes a fair
review of the development and performance of the business and the
position of the Group and Company, together with a description of the
principal risks and uncertainties that they face; and
› the Annual Report and financial statements, taken as a whole,
provides the information necessary to assess the Group’s position and
performance, business model and strategy and is fair, balanced and
understandable and provides the information necessary for shareholders
to assess the Company’s position and performance, business model
and strategy.
On behalf of the Board
John Hennessy
Chairman
Patrick McCann
Director
1 March 2016
Annual Report and Accounts 2015 80
Independent
Auditor’s
Report to the
members of
Dalata Hotel
Group plc
Opinions and conclusions arising from our audit
1. Our opinion on the financial statements is unmodified
We have audited the financial statements of Dalata Hotel Group plc for the
year ended 31 December 2015 which comprise the consolidated statement
of profit or loss and other comprehensive income, the consolidated and
company statements of financial position, the consolidated and company
statements of changes in equity, the consolidated and company statements
of cash flows and the related notes. The financial reporting framework that
has been applied in their preparation is Irish law and International Financial
Reporting Standards (IFRS) as adopted by the European Union, and, as
regards the company financial statements, as applied in accordance with
the provisions of the Companies Act 2014. Our audit was conducted in
accordance with International Standards on Auditing (ISAs) (UK & Ireland).
In our opinion:
› the consolidated financial statements give a true and fair view of the
assets, liabilities and financial position of the Group as at 31 December
2015 and of its profit for the year then ended;
› the company statement of financial position gives a true and fair view of
the assets, liabilities and financial position of the Company as at 31
December 2015;
› the consolidated financial statements have been properly prepared in
accordance with IFRS as adopted by the European Union;
› the company financial statements have been properly prepared in
accordance with IFRS as adopted by the European Union as applied in
accordance with the provisions of the Companies Act 2014; and
› the company financial statements and consolidated financial statements
have been properly prepared in accordance with the requirements of
the Companies Act 2014 and, as regards the consolidated financial
statements, Article 4 of the IAS Regulation.
2. Our assessment of risks of material misstatement
The risks of material misstatement detailed in this section of this report
are those risks that we have deemed, in our professional judgement, to
have had the greatest effect on: the overall audit strategy; the allocation of
resources in our audit; and directing the efforts of the engagement team.
Our audit procedures relating to these risks were designed in the context of
our audit of the financial statements as a whole. Our opinion on the financial
statements is not modified with respect to any of these risks, and we do not
express an opinion on these individual risks.
In arriving at our audit opinion above on the consolidated financial statements
the risks of material misstatement that had the greatest effect on our group
audit were as follows:
Acquisitions in the year
Refer to page 59 (Audit and Risk Committee Report), pages 91 to 92
(accounting policy for basis of consolidation) and Note 10 to the consolidated
financial statements (financial disclosures – business combinations).
The risk – The scale of the Group has been transformed during 2015 due
to the acquisition of nine hotels from the Moran Bewley Hotel Group and
Dalata Hotel Group PLC Financial Statements
81
a number of other material hotel acquisitions in the year. This gives rise to
a risk of material misstatement if these acquisitions were not accounted
for in accordance with relevant accounting standards. In particular the
consideration paid, the costs incurred, the fair value of the assets and
liabilities acquired and goodwill arising must all be identified, measured and
recorded appropriately.
Our response – Our audit procedures included, among others, inspecting
acquisition agreements and related documentation, and considering whether
the acquisitions were business combinations or asset purchases and accordingly
whether the relevant accounting standards for each had been applied.
For business combinations, we evaluated the identification of, and allocation
of the purchase price to, the fair values of identifiable property and other
assets and liabilities acquired, and the measurement of goodwill arising on
acquisition, by considering the financial and other information pertaining
to the acquisition and related documents, and the Group’s plans for the
acquired businesses. We agreed the dates of commencement of control,
and therefore inclusion in the Group’s results, of the acquired businesses
to documentary evidence. We agreed the costs incurred in relation to such
acquisitions to relevant supporting documentation and assessed whether
they had been expensed. We have also considered the adequacy of the
Group’s disclosures in relation to acquisitions in the year.
Property valuations and depreciation
Refer to page 59 (Audit and Risk Committee Report), page 94 (accounting
policy for property, plant and equipment) and Note 12 to the consolidated
financial statements (financial disclosures – property, plant and equipment)
The risk – The Group has a large owned hotel property portfolio as a result
of acquisitions and under its accounting policies applies the revaluation model
to its land and buildings included within property, plant and equipment. This
gives rise to a risk of material misstatement if periodic revaluations are not
performed on an appropriate basis or are not accounted for in accordance
with relevant accounting standards. The Group engages independent
external experts to perform hotel valuations at acquisition and subsequent
periodic revaluations. The hotel valuations are performed inclusive of fixtures
fittings and equipment, which the Group accounts for under the cost model.
Appropriate allocations of hotel valuations must therefore be made between
land (which is not depreciated), buildings, and fixtures fittings and equipment
for accounting purposes.
Due to the size of the owned hotel property portfolio, depreciation of
buildings is a significant accounting estimate. There is a risk of significant
misstatement if the depreciation charge for buildings is not based on
appropriate assumptions including the allocation of hotel valuations to
buildings, the estimated residual values of buildings and their estimated
useful lives. The Group engaged independent external experts to assist it in
its determination of residual values.
Our response – Our audit procedures included, among others: evaluating the
approach and findings of the work performed by the independent external
experts engaged by the Group in relation to hotel valuations and residual
values; considering the allocation of hotel valuations to land, buildings,
and fixtures fittings and equipment; assessing the reasonableness of the
assumptions made on residual values of buildings with regard to supporting
Annual Report and Accounts 2015 82
documentation; recalculating the buildings depreciation charge on the basis
of the assumptions made; and testing the amounts of individual property
revaluation movements and their presentation either in other comprehensive
income or in profit or loss, as appropriate.
3. Our application of materiality and an overview of the scope
of our audit
The materiality for the consolidated financial statements as a whole was
set at €2.2m (2014: €0.4m). This has been calculated with reference
to a benchmark of group profit before taxation, normalised to exclude
this year’s acquisition-related costs of €15.8m as disclosed in Note 3 to
the consolidated financial statements. Materiality represents 5% of this
benchmark, which we consider to be one of the principal considerations
for members of the Company in assessing the financial performance of the
Group. We report to the Audit Committee all corrected and uncorrected
misstatements we identified through our audit with a value in excess of
€0.1m (2014: €0.02m), in addition to other audit misstatements below that
threshold that we believe warranted reporting on qualitative grounds.
We subjected all of the Group’s reporting components to audits for group
reporting purposes. The work on all components was performed by the
Group audit team.
4. We have nothing to report on the disclosures of principal risks
Based on the knowledge we acquired during our audit, we have nothing
material to add or draw attention to in relation to:
› the directors’ statements on Risk Management on pages 27 to 32 and
page 56, concerning the principal risks, their management, and, based
on that, the directors’ assessment and expectations of the Group’s
continuing in operation over the three years to 31 December 2018; or
› the disclosures in note 1 of the consolidated financial statements
concerning the use of the going concern basis of accounting.
5. We have nothing to report in respect of the matters
on which we are required to report by exception
ISAs (UK & Ireland) require that we report to you if, based on the knowledge
we acquired during our audit, we have identified information in the annual
report that contains a material inconsistency with either that knowledge
or the financial statements, a material misstatement of fact, or that is
otherwise misleading.
In particular, we are required to report to you if:
› we have identified any inconsistencies between the knowledge we
acquired during our audit and the directors’ statement that they
consider the annual report is fair, balanced and understandable and
provides information necessary for shareholders to assess the entity’s
performance, business model and strategy; or
› the Audit and Risk Committee Report does not appropriately disclose
those matters that we communicated to the Audit and Risk Committee.
Dalata Hotel Group PLC Financial Statements
83
The terms of our engagement require us to review :
› the directors’ statement, set out on page 55, in relation to going concern;
› the part of the Corporate Governance Statement on pages 48 to 57
relating to the Company’s compliance with the provisions of the UK
Corporate Governance Code and the Irish Corporate Governance Annex
specified for our review; and
› certain elements of disclosures in the report to shareholders by the Board
of Directors’ Remuneration Committee.
In addition, the Companies Act 2014 requires us to report to you if, in our
opinion, the disclosures of directors’ remuneration and transactions specified
by law are not made.
6. Our conclusions on other matters on which we are required
to report by the Companies Act 2014 are set out below
We have obtained all the information and explanations which we consider
necessary for the purposes of our audit.
The company statement of financial position is in agreement with the
accounting records and, in our opinion, adequate accounting records have
been kept by the Company.
In our opinion the information given in the Directors’ Report is consistent
with the financial statements and the description in the Corporate
Governance Statement of the main features of the internal control and
risk management systems in relation to the process for preparing the
consolidated financial statements is consistent with the consolidated
financial statements.
Basis of our report, responsibilities and restrictions
on use
As explained more fully in the Statement of Directors’ Responsibilities set
out on pages 78 and 79, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit and express an opinion on the consolidated
and company financial statements in accordance with applicable law and
International Standards on Auditing (ISAs) (UK & Ireland). Those standards
require us to comply with the Financial Reporting Council’s Ethical Standards
for Auditors.
An audit undertaken in accordance with ISAs (UK & Ireland) involves
obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud
or error. This includes an assessment of: whether the accounting policies are
appropriate to the Group’s circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant accounting
estimates made by the Directors; and the overall presentation of the
financial statements.
Annual Report and Accounts 2015 84
In addition, we read all the financial and non-financial information in the
Annual Report to identify material inconsistencies with the audited financial
statements and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge acquired
by us in the course of performing the audit. If we become aware of any
apparent material misstatements or inconsistencies we consider the
implications for our report.
Whilst an audit conducted in accordance with ISAs (UK & Ireland) is designed
to provide reasonable assurance of identifying material misstatements or
omissions it is not guaranteed to do so. Rather the auditor plans the audit
to determine the extent of testing needed to reduce to an appropriately
low level the probability that the aggregate of uncorrected and undetected
misstatements does not exceed materiality for the financial statements as a
whole. This testing requires us to conduct significant audit work on a broad
range of assets, liabilities, income and expense as well as devoting significant
time of the most experienced members of the audit team, in particular the
engagement partner responsible for the audit, to subjective areas of the
accounting and reporting.
Our report is made solely to the Company’s members, as a body, in
accordance with section 391 of the Companies Act 2014. Our audit work has
been undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the Company’s
members as a body, for our audit work, for this report, or for the opinions we
have formed.
Sean O’Keefe
for and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm
1 Stokes Place
St. Stephen’s Green
Dublin 2
1 March 2016
Dalata Hotel Group PLC
Consolidated statement of profit or loss
and other comprehensive income
for the year ended 31 December 2015
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses, including
acquisition-related costs of €15.802 million (2014: €2.821 million)
Other income
Operating profit
Finance income
Finance costs
Profit before tax
Tax charge
Profit for the year attributable to owners of the Company
Other comprehensive income
Items that will not be reclassified to profit or loss
Revaluation of property
Related deferred tax
Items that are or may be reclassified subsequently to profit or loss
Exchange difference on translating foreign operations
Loss on net investment hedge
Fair value movement on cashflow hedges
Cashflow hedges – reclassified to profit or loss
Related deferred tax
Other comprehensive income, net of tax
Total comprehensive income for the year
attributable to owners of the Company
Earnings per share
Basic earnings per share
Diluted earnings per share
85
Note
2015
€’000
2014
€’000
2
3
4
5
6
9
225,673
(86,907)
79,073
(29,379)
138,766
49,694
(104,554)
2,745
(44,716)
-
36,957
1,863
(10,363)
4,978
409
(1,191)
28,457
4,196
(6,831)
(673)
21,626
3,523
12
23
46,567
(6,398)
8,390
(1,049)
40,169
7,341
5,169
(4,329)
(1,670)
655
127
(48)
88
-
-
-
-
88
40,121
7,429
61,747
10,952
€0.1455
€0.0365
€0.1447
€0.0364
23
28
28
Annual Report and Accounts 2015Financial Statements 86
Consolidated statement of financial position
At 31 December 2015
Assets
Non-current assets
Goodwill
Property, plant and equipment
Investment property
Deferred tax assets
Trade and other receivables
Derivatives
Total non-current assets
Current assets
Trade and other receivables
Inventories
Cash and cash equivalents
Total current assets
Total assets
Equity
Share capital
Share premium
Capital contribution
Merger reserve
Share-based payment reserve
Hedging reserve
Revaluation reserve
Translation reserve
Retained earnings
Total equity
Liabilities
Non-current liabilities
Loans and borrowings
Deferred tax liabilities
Derivatives
Total non-current liabilities
Current liabilities
Loans and borrowings
Trade and other payables
Current tax liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
On behalf of the Board:
John Hennessy
Chairman
Patrick McCann
Director
Note
11
12
13
23
15
14
15
16
17
19
19
18
18
22
23
14
22
20
2015
€’000
46,803
608,792
37,285
3,936
2,216
26
699,058
11,774
1,349
149,155
162,278
861,336
1,830
503,113
25,724
(10,337)
912
(888)
47,510
880
(31,448)
537,296
250,168
15,859
885
266,912
15,970
40,180
978
57,128
324,040
861,336
2014
€’000
7,066
52,294
1,248
319
5,249
-
66,176
9,544
593
217,807
227,944
294,120
1,220
295,133
25,724
(10,337)
273
-
7,341
40
(46,681)
272,713
-
960
-
960
-
20,345
102
20,447
21,407
294,120
Dalata Hotel Group PLC 87
Consolidated statement of changes in equity
for the year ended 31 December 2015
Attributable to owners of the Company
Share
capital
€’000
Share
premium
€’000
Capital
contribution
€’000
Merger
reserve
€’000
Share-
based
payment
reserve
€’000
1,220 295,133
25,724 (10,337)
273
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
610 209,716
-
-
(1,736)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
610 207,980
1,830 503,113
-
25,724
-
(10,337)
-
-
-
-
-
-
-
-
-
-
639
639
912
At 1 January 2015
Comprehensive income:
Profit for the year
Other comprehensive
income
Exchange difference
on translating foreign
operations
Loss on net investment
hedge
Revaluation of property
Fair value movement on
cashflow hedges
Cashflow hedges –
reclassified to profit
or loss
Related deferred tax
Total comprehensive
income for the year
Transactions with
owners of the Company:
Issue of shares (Note 19)
Share issue costs
(Note 19)
Equity-settled share-
based payments
Total transactions with
owners of the Company
At 31 December 2015
-
-
-
-
-
Hedging
reserve
€’000
Translation
reserve
€’000
Revaluation
reserve
€’000
Retained
earnings
€’000
Total
€’000
40
7,341
(46,681) 272,713
-
-
21,626
21,626
5,169
-
(4,329)
-
- 46,567
(1,670)
655
127
-
-
-
-
-
(6,398)
-
-
-
-
-
-
5,169
(4,329)
46,567
(1,670)
655
(6,271)
(888)
840 40,169
21,626
61,747
-
-
-
-
-
-
-
-
-
- 210,326
(6,393)
(8,129)
-
639
-
(888)
-
-
880 47,510
(6,393) 202,836
(31,448) 537,296
Annual Report and Accounts 2015Financial Statements 88
Consolidated statement of changes in equity
for the year ended 31 December 2014
Attributable to owners of the Company
Share
capital
€’000
Share
premium
€’000
Capital
contribution
€’000
Merger
reserve
€’000
Share-
based
payment
reserve
€’000
Reverse
acquisition
reserve
€’000
Translation
reserve
€’000
Revaluation
reserve
€’000
Retained
earnings
€’000
Total
€’000
At 1 January 2014
Comprehensive
income:
Profit for the year
Other comprehensive
income
Exchange difference
on translating foreign
operations
Revaluation of property
Related deferred tax
Total comprehensive
income for the year
-
-
-
-
-
-
-
-
-
-
-
-
-
40
Transactions with
owners of the
Company:
Issue of shares prior to
reorganisation
Reorganisation – share
exchange and release of
shareholder loan note
obligations (Note 18)
Issue of shares in public
listing, net of issue costs 1,060 254,916
Issue of shares
on conversion of
shareholder loan notes
Equity-settled share-
based payments
Total transactions with
owners of the Company
At 31 December 2014
1,220 295,133
1,220 295,133
29,880
-
120
-
10,337
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,724
(10,337)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
273
4
-
-
-
-
-
-
(4)
-
-
-
(48)
-
(50,204) (50,248)
-
-
3,523
3,523
88
-
-
-
8,390
(1,049)
-
-
-
88
8,390
(1,049)
88
7,341
3,523
10,952
-
-
-
-
-
-
-
-
-
-
-
40
-
25,720
- 255,976
-
-
30,000
273
25,724
25,724
(10,337)
(10,337)
273
273
(4)
-
-
40
-
7,341
- 312,009
(46,681) 272,713
Dalata Hotel Group PLC Consolidated statement of cash flows
for the year ended 31 December 2015
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Impairment of goodwill
Impairment of property, plant and equipment
Decrease in fair value of investment property
Share-based payments expense
Finance costs
Finance income
Tax charge
Increase in trade and other payables
Decrease/(increase) in trade and other receivables
Increase in inventories
Tax paid
Net cash from operating activities
Cash flows from investing activities
Acquisitions of undertakings through business combinations
Purchase of property, plant and equipment
Purchase of investment property
Deposits paid on acquisitions
Interest received
Net cash used in investing activities
Cash flows from financing activities
Interest and finance costs paid on bank loans
Receipt of bank loans
Repayment of bank loans
Repayment of shareholder loan notes
Proceeds from issue of share capital, net of expenses
Payment for derivative asset
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of movements in exchange rates
Cash and cash equivalents at the end of the year
89
2015
€’000
2014
€’000
21,626
3,523
10,039
-
199
1,131
445
639
10,363
(1,863)
6,831
49,410
6,683
1,568
(317)
(2,941)
54,403
(479,087)
(28,551)
(35,897)
(1,316)
6
(544,845)
(13,753)
283,090
(17,890)
-
168,700
(156)
419,991
991
128
-
-
-
273
1,191
(409)
673
6,370
9,159
(3,732)
(58)
(821)
10,918
(20,063)
(21,105)
-
(4,116)
115
(45,169)
(152)
-
(9,000)
(40)
256,016
-
246,824
(70,451)
212,573
217,807
1,799
149,155
4,940
294
217,807
Annual Report and Accounts 2015Financial Statements 90
Notes to the consolidated financial statements
forming part of the consolidated financial statements
1 Significant accounting policies
General information and basis of preparation
Dalata Hotel Group plc (‘the Company’) is a company domiciled in the Republic of Ireland. The Company’s registered
office is 4th Floor, Burton Court, Burton Hall Drive, Sandyford, Dublin 18. The consolidated financial statements of the
Company for the year ended 31 December 2015 include the Company and its subsidiaries (together referred to as the
‘Group’). The financial statements were authorised for issue by the Directors on 1 March 2016.
The consolidated financial statements have been prepared in accordance with IFRS, as adopted by the EU.
The accounting policies set out below have been applied consistently by all group companies.
The preparation of financial statements in accordance with IFRS as adopted by the EU requires the directors to make
estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during
the reporting year. Such estimates and judgements are based on historical experience and other factors, including
expectation of future events that are believed to be reasonable under the circumstances and are subject to continued
re-evaluation. Actual outcomes could differ from those estimates.
Key judgements and estimates impacting these financial statements are:
- Accounting for acquisitions, including allocation of consideration to assets and liabilities acquired (Note 10)
- Carrying value and depreciation of own-use property measured at fair value (Note 12)
- Carrying value of investment property measured at fair value (Note 13)
- Carrying value of goodwill including assumptions underpinning the goodwill impairment test (Note 11)
- Hedging arrangements (Note 14 and Note 21) including mitigation of interest rate risk and mitigation of the effect
of fluctuation of the Euro/Sterling exchange rate on the value of the net investment in Sterling denominated
operations
- Trade receivables impairment provisions (Note 21) and accrued income (Note 15)
Measurement of fair values
A number of the Group’s accounting policies and disclosures require the measurement of assets and liabilities at fair
values. When measuring the fair value of an asset or liability the Group uses market observable data as far as possible,
with non-financial assets being measured on a highest and best-use basis. Fair values are categorised into different
levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Further information about the assumptions made in measuring fair values is included in Note 21 – Financial Instruments
and Risk Management in relation to financial assets and financial liabilities, with Note 12 – Property, Plant and
Equipment and Note 13 – Investment Property addressing non-financial assets.
(a) Going Concern
After making enquiries the Directors have a reasonable expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in
preparing its consolidated financial statements.
Dalata Hotel Group PLC 91
Notes (continued)
1 Significant accounting policies (continued)
(b) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) and their interpretations issued by the International Accounting Standards Board (IASB) as adopted
by the EU and those parts of the Companies Act 2014 applicable to companies reporting under IFRS and Article 4 of
the IAS Regulation.
The requirements of the Annual Improvements to IFRSs 2011-2013 Cycle became mandatory for the first time in
the year ended 31 December 2015, but did not have a significant impact on the Group’s results for the period or
financial position.
A number of new standards, amendments to standards and interpretations are effective for financial periods beginning
on various dates after 1 January 2015 and have not been applied in preparing these financial statements. The
Group does not plan to adopt these standards early, and instead intends to apply them from their effective dates as
determined by their dates of EU endorsement. With the exception of IFRS 16: Leases none of these standards are
expected to have a material impact on the financial statements.
IFRS 16: Leases, which has an effective date of 1 January 2019 (awaiting EU endorsement, no indicative endorsement
date available), will have a significant effect on the Group’s financial statements as the Group is a lessee in a number
of material property leases. Under the new standard the distinction between operating and finance leases is removed
for lessees and almost all leases are reflected in the statement of financial position. Under IFRS 16, an asset (the right
to use the leased item) and a financial liability to pay rentals are recognised. The only exemptions are short-term and
low-value leases. The standard introduces new estimates and judgemental thresholds that affect the identification,
classification and measurement of lease transactions. More extensive disclosures, both qualitative and quantitative,
are also required. The full impact of this standard on the Group’s financial position and performance is currently
being assessed.
The following standards and interpretations are not yet endorsed by the EU and are not available for early adoption.
The potential impact of these standards on the Group is under review.
IFRS 14 Regulatory Deferral Accounts. No indicative endorsement date available.
-
- Sale or contribution of assets between an investor and its associate or joint venture (September 2014)
(Amendments to IFRS 10 and IAS 28). Endorsement postponed awaiting IASB developments.
Investment Entities: Applying the consolidation exception (December 2014) (Amendments to IFRS 10, IFRS 12 and
IAS 28). Expected to be endorsed Q2 2016.
IFRS 15: Revenue from contracts with customers (May 2014) including amendments to IFRS 15. Expected to be
endorsed Q2 2016.
IFRS 9: Financial Instruments (July 2014). Expected to be endorsed H1 2016.
-
-
-
(c) Functional and presentation currency
These consolidated financial statements are presented in Euro, being the functional currency of the Company and the
majority of its subsidiaries. All financial information presented in Euro has been rounded to the nearest thousand.
(d) Basis of consolidation
The consolidated financial statements include the financial statements of the Company and all of its
subsidiary undertakings.
Annual Report and Accounts 2015Financial Statements 92
Notes (continued)
1 Significant accounting policies (continued)
(d) Basis of consolidation (continued)
Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group.
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets
acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit
or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such
amounts are generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the date of acquisition and then subsequently remeasured at
fair value through profit or loss.
When acquiring a business, the Group is required to bring acquired assets and liabilities on to the consolidated
statement of financial position at their fair value, the determination of which requires a significant degree of
estimation and judgement.
Acquisitions may also result in intangible benefits being brought into the Group, some of which may qualify for
recognition as intangible assets while other such benefits do not meet the recognition requirements of IFRS and
therefore form part of goodwill.
Judgement is required in the assessment and valuation of any intangible assets, including assumptions on the timing
and amount of future cash flows generated by the assets and the selection of an appropriate discount rate.
Depending on the nature of the assets and liabilities acquired, determined provisional fair values may be associated
with uncertainty and possibly adjusted subsequently as permitted by IFRS 3 “Business Combinations”.
Business combinations are disclosed in Note 10 to these consolidated financial statements.
When an acquisition does not represent a business, it is accounted for as a purchase of a group of assets and liabilities,
not as a business combination. The cost of the acquisition is allocated to the assets and liabilities acquired based on
their relative fair values, and no goodwill is recognised.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power over
the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date
that control commences until the date that control ceases. Intra-group balances and transactions, and any unrealised
income and expenses arising from intra-group transactions, are eliminated.
(e) Revenue recognition
Revenue represents sales (excluding VAT) of goods and services net of discounts provided in the normal course of
business and recognised when services have been rendered.
Revenue is derived from hotel operations and includes the rental of rooms, food and beverage sales, and leisure centre
sales and membership in leased and acquired hotels operated under the Group’s brand names. Revenue is recognised
when rooms are occupied and food and beverages are sold. Leisure centre membership revenue is recognised over the
life of the membership.
Management fees are earned from hotels managed by the Group under contracts with the hotel owners. Management
fees are normally a percentage of hotel revenue and/or profit and are recognised when earned and recoverable under
the terms of the contract.
Dalata Hotel Group PLC 93
Notes (continued)
1 Significant accounting policies (continued)
(e) Revenue recognition (continued)
Rental income from investment property is recognised on a straight-line basis over the term of the lease and is included
as other income.
(f) Sales discounts and allowances
The Group recognises revenue on a gross revenue basis and makes various deductions to arrive at net revenue as
reported in profit or loss. These adjustments are referred to as sales discounts and allowances.
(g) Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of
the lease.
Certain hotel operating lease agreements include minimum rental payments with further contingent rent payable
depending on the financial performance of the hotel. Contingent rent is recognised in profit or loss based on
performance in the period.
(h) Share based payments
The grant-date fair value of equity-settled share-based payment awards granted to employees is recognised as an
expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an
expense is adjusted to reflect the number of awards for which the related service and any non-market performance
conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that
meet the related service and non-market performance conditions at the vesting date. The amount recognised as an
expense is not adjusted for market conditions not being met.
(i) Tax
Tax expense comprises current and deferred tax. Tax expense is recognised in profit or loss except to the extent that it
relates to a business combination or items recognised directly in other comprehensive income or equity.
Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and amounts used for taxation purposes.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they
reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different
entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be
realised simultaneously.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences
to the extent that it is probable future taxable profits will be available against which the temporary difference can be
utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised. Such reductions are reversed when the probability of future
taxable profits improves.
Annual Report and Accounts 2015Financial Statements 94
Notes (continued)
1 Significant accounting policies (continued)
(j) Earnings per share
Basic earnings per share are calculated based on the profit for the year attributable to owners of the Company and the
basic weighted average number of shares outstanding. Diluted earnings per share are calculated based on the profit for
the year attributable to owners of the Company and the diluted weighted average number of shares outstanding.
Dilutive effects arise from share-based payments that are settled in shares. Conditional share awards to employees
have a dilutive effect when the average share price during the period exceeds the exercise price of the awards and
the market conditions of the awards are met, as if the current period end were the end of the vesting period. When
calculating the dilutive effect, the exercise price is adjusted by the value of future services that have yet to be received
related to the awards.
(k) Property, plant and equipment
Land and buildings are initially stated at cost, including directly attributable transaction costs, (or fair value when
acquired through business combinations) and subsequently at fair value.
Fixtures, fittings and equipment are stated at cost, less accumulated depreciation and any impairment provision.
Cost includes expenditure that is directly attributable to the acquisition of property, plant and equipment unless it is
acquired as part of a business combination under IFRS 3, where the deemed cost is its acquisition date fair value.
Depreciation is charged through profit or loss on the cost or valuation less residual value on a straight-line basis over
the estimated useful lives of the assets which are:
Buildings
Fixtures, fittings and equipment 5 – 10 years
Land is not depreciated.
50 years
Residual values and useful lives are reviewed and adjusted if appropriate at each reporting date.
Land and buildings are revalued by qualified valuers on a sufficiently regular basis using open market value (which
reflects a highest and best use basis) so that the carrying value of an asset does not materially differ from its fair value
at the reporting date. External revaluations of the Group’s land and buildings have been carried out in accordance with
the Royal Institution of Chartered Surveyors (RICS) Valuation Standards and IFRS 13.
Surpluses on revaluation are recognised in other comprehensive income and accumulated in equity in the revaluation
reserve, except to the extent that they reverse impairment losses previously charged to profit or loss, in which case
the reversal is recorded in profit or loss. Decreases in value are charged against other comprehensive income and the
revaluation reserve to the extent that a previous gain has been recorded there, and thereafter are charged through
profit or loss.
Fixtures, fittings and equipment are reviewed for impairment when events or changes in circumstances indicate that
the carrying value may not be recoverable. Assets that do not generate independent cash flows are combined into
cash generating units. If carrying values exceed estimated recoverable amount, the assets or cash generating units are
written down to their recoverable amount. Recoverable amount is the greater of fair value less cost to sell and value
in use. Value in use is assessed based on estimated future cash flows discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and risks specific to the asset.
(l) Investment property
Investment property is held either to earn rental income, or for capital appreciation (including future re-development)
or for both, but not for sale in the ordinary course of business.
Dalata Hotel Group PLC
95
Notes (continued)
1 Significant accounting policies (continued)
(l) Investment property (continued)
Investment property is initially measured at cost, including transaction costs, (or fair value when acquired through
business combinations) and subsequently valued by professional external valuers at their respective fair values. The
difference between the fair value of an investment property at the reporting date and its carrying value prior to the
external valuation is recognised in profit or loss.
Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from
disposal and the carrying amount of the item) is recognised in profit or loss.
The Group’s investment properties are valued by qualified valuers on an open market value basis in accordance with
the Royal Institution of Chartered Surveyors (RICS) Valuation Standards.
(m) Goodwill
Goodwill represents the excess of the fair value of the consideration for an acquisition over the Group’s interest in
the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. Goodwill is the future
economic benefits arising from other assets in a business combination that are not individually identified and separately
recognised. When the excess is negative (a bargain purchase gain), it is recognised immediately in profit or loss.
Goodwill is measured at its initial carrying amount less accumulated impairment losses.
The carrying amount of goodwill is reviewed at each reporting date to determine if there is an indication of impairment.
For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates
cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets
(the ‘cash-generating’ unit). The goodwill acquired in a business combination, for the purpose of impairment testing,
is allocated to cash-generating units that are expected to benefit from the synergies of the combination.
The recoverable amount of a cash-generating unit is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects a current market assessment of the time value of money and the risks specific to the asset.
An impairment loss is recognised in profit or loss if the carrying amount of a cash-generating unit exceeds its estimated
recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the
carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the
units on a pro-rata basis.
(n) Inventories
Inventories are stated at the lower of cost (using the FIFO basis) and net realisable value.
(o) Trade and other receivables
Trade and other receivables are stated initially at their fair value and subsequently at amortised cost, less any allowance
for doubtful amounts. An allowance is made when collection of the full amount is no longer considered probable.
(p) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less, which are
carried at amortised cost, and money-market funds. Money-market funds are short-term highly liquid investments that
are readily convertible to known amounts of cash and subject to insignificant risk of changes in value, and are measured
at fair value through profit or loss.
In the statement of cash flows, cash and cash equivalents are shown net of any short-term overdrafts which are
repayable on demand and form an integral part of the group’s cash management.
Annual Report and Accounts 2015Financial Statements 96
Notes (continued)
1 Significant accounting policies (continued)
(q) Finance income and costs
Finance income comprises interest income and foreign currency gains on funds invested. Interest income is recognised
as it accrues in profit or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings. All borrowing costs are recognised in profit or loss using the
effective interest method.
(r) Foreign currency
Transactions in currencies other than the functional currency of a group entity are recorded at the rate of exchange
prevailing on the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the
reporting date are retranslated into the respective functional currency at the relevant rates of exchange ruling at the
reporting date.
Foreign exchange differences arising on translation are recognised in profit or loss.
The assets and liabilities of foreign operations are translated into Euro at the exchange rate ruling at the reporting date.
The income and expenses of foreign operations are translated into Euro at rates approximating the exchange rates at
the dates of the transactions.
Foreign exchange differences arising on the translation of foreign operations are recognised in other comprehensive
income, and are included in the translation reserve within equity.
(s) Provisions and contingent liabilities
A provision is recognised in the statement of financial position when the group has a present legal or constructive
obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle
the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks
specific to the liability.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated
reliably, the obligation is disclosed as a contingent liability, unless the probability of an outflow of economic benefits is
remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or
more future events, are also disclosed as contingent liabilities unless the probability of an outflow of economic benefits
is remote.
Accrued liabilities in respect of self-insured risks include projected settlements for known and incurred but not
reported claims.
(t) Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are
recognised as a deduction from equity, net of any tax effects.
Ordinary dividends declared as final dividends are recognised as a liability in the period in which they are approved by
shareholders. Interim dividends are recognised when paid.
(u) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value, less attributable transaction costs. Subsequent to
initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and
redemption value being recognised in profit or loss over the period of the borrowings on an effective interest rate basis.
Dalata Hotel Group PLC 97
Notes (continued)
1 Significant accounting policies (continued)
(v) Derivative financial instruments
The Group’s borrowings expose it to the financial risks of changes in interest rates. The Group uses derivative financial
instruments such as interest rate swap agreements and interest rate cap agreements to hedge these exposures. The
Group does not use derivatives for trading or speculative purposes.
Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into
and are subsequently re-measured at fair value. Derivatives are carried as assets when the fair value is positive and as
liabilities when the fair value is negative.
The full fair value of a hedging derivative is classified as a non-current asset or non-current liability if the remaining
maturity of the hedged item is more than twelve months and as a current asset or current liability if the remaining
maturity of the hedged item is less than twelve months.
The fair value of derivative instruments is determined by using valuation techniques. The Group uses its judgement to
select the most appropriate valuation methods and makes assumptions that are mainly based on observable market
conditions (Level 2 fair values) existing at the reporting date.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged.
(w) Cash flow hedge accounting
For those derivatives designated as cash flow hedges and for which hedge accounting is desired, the hedging
relationship is documented at its inception. This documentation identifies the hedging instrument, the hedged item or
transaction, the nature of the risk being hedged and its risk management objectives and strategy for undertaking the
hedging transaction. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of
whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of
hedged items.
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised
asset or liability, the effective part of any gain or loss on the derivative financial instrument is recognised in other
comprehensive income and accumulated in equity in the hedging reserve. Any ineffective portion is recognised
immediately in profit or loss as finance income/costs.
The amount accumulated in equity is retained in other comprehensive income and reclassified to profit or loss in the
same period or periods during which the hedged item affects profit or loss.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, or no longer
qualifies for hedge accounting or the designation is revoked. At that point in time, any cumulative gain or loss on the
hedging instrument recognised in equity remains in equity and is recognised when the forecast transaction is ultimately
recognised in profit or loss. However, if a hedged transaction is no longer anticipated to occur, the net cumulative gain
or loss accumulated in equity is reclassified to profit or loss.
(x) Net investment hedges
Where relevant, the Group uses a net investment hedge, whereby the foreign currency exposure arising from a net
investment in a foreign operation is hedged using borrowings held by the parent company that are denominated in the
functional currency of the foreign operation.
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net
investment in a foreign operation are recognised directly in other comprehensive income in the foreign currency
translation reserve, to the extent that the hedge is effective. To the extent that the hedge is ineffective, such
differences are recognised in profit or loss. When the hedged part of a net investment is disposed of, the associated
cumulative amount in equity is reclassified to profit or loss.
Annual Report and Accounts 2015Financial Statements 98
Notes (continued)
2 Operating segments
The segments are reported in accordance with IFRS 8 Operating Segments. The segment information is reported in the
same way as it is reviewed and analysed internally by the chief operating decision makers, primarily the CEO, and Board
of Directors.
In 2015 the Group has grown rapidly in size through acquisition and become more focused on maximising the
returns from its portfolio of leased and owned hotels. As a result earnings from management agreements represent
a significantly lower proportion of the Group’s overall result. The segmental analysis has been amended in the 2015
financial statements to reflect this and is no longer segmented on the basis of results from ‘Leased and owned’ hotels
and ‘Managed’ hotels.
The group now segments its leased and owned business by geographical region within which the hotels operate
– Dublin, Ireland Regional and United Kingdom. These, together with Managed hotels, comprise the Group’s four
reportable segments. Prior year comparatives have been restated to reflect this change.
Dublin, Ireland Regional and United Kingdom segments:
These segments are concerned with hotels that are either owned or leased by the Group. The Group leases hotel
buildings from property owners and is entitled to the benefits and carries the risks associated with operating these
hotels. As at 31 December 2015, the Group also owns 16 hotels and has effective ownership of one further hotel which
it operates. It also owns part of one of the other hotels which it operates.
The Group also owns the newly acquired Clarion Cork but as of 31 December 2015 it did not operate the hotel and it
is classified as an investment property. On 28 January 2016, the Group announced that it would acquire the leasehold
interest of the Clarion Cork hotel as part of a wider acquisition (see Note 26) and become the operator of that hotel.
Consequently, this will be accounted for as property, plant and equipment in the 2016 financial statements.
The Group drives revenue from leased and owned hotels primarily from room sales and food and beverage sales in
restaurants, bars and banqueting. The main costs arising are payroll, cost of goods for resale, other operating costs
and, in the case of leased hotels rent paid to lessors.
Managed Hotels:
Under management agreements, the Group provides management services for third party hotel proprietors.
Revenue
Dublin
Ireland Regional
United Kingdom
Managed Hotels
Total revenue
2015
€’000
120,759
42,989
58,370
3,555
225,673
2014
€’000
51,862
15,491
6,273
5,447
79,073
Revenue for each of the geographical locations represents the operating revenue (room revenue, food and beverage
revenue and other hotel revenue) from leased and owned hotels situated in (i) Dublin, (ii) the rest of the Republic of
Ireland and (iii) the United Kingdom.
Revenue from managed hotels represents the fees and other income earned from services provided in relation to
partner hotels which are not owned or leased by the Group.
Dalata Hotel Group PLC Notes (continued)
2 Operating segments (continued)
Segmental results - EBITDAR
Dublin
Ireland Regional
United Kingdom
Managed Hotels
EBITDAR for reportable segments
Segmental results - EBITDA
Dublin
Ireland Regional
United Kingdom
Managed Hotels
EBITDA for reportable segments
Reconciliation to results for the year
Segments EBITDA
Rental income
Central costs
Adjusted EBITDA
Net impact of Ballsbridge site sale
Acquisition-related costs
Net impairment charge
Group EBITDA
Depreciation of property, plant and equipment
Amortisation of intangible assets
Finance income
Finance costs
Profit before tax
Tax
Profit for the year
99
2014
€’000
18,602
3,364
2,224
5,447
29,637
6,299
1,278
392
5,447
13,416
13,416
-
(4,498)
8,918
-
(2,821)
-
6,097
(991)
(128)
409
(1,191)
4,196
(673)
3,523
2015
€’000
53,754
9,695
22,249
3,555
89,253
39,262
7,734
19,535
3,555
70,086
70,086
608
(8,068)
62,626
1,947
(15,802)
(1,775)
46,996
(10,039)
-
1,863
(10,363)
28,457
(6,831)
21,626
Group EBITDA represents earnings before interest, tax, depreciation and amortisation.
Adjusted EBITDA represents Group EBITDA before acquisition related costs (Note 3), net impairment charges on
owned and investment property and goodwill and the net impact of the Ballsbridge site sale (see below).
The line item ‘Net impact of Ballsbridge site sale’ represents a sales incentive fee of €2.1 million (Note 4) receivable by
the Group following the sale by the landlord in 2015 of the Ballsbridge Hotel, Clyde Court Hotel and their respective
sites, less associated exit costs of €0.2 million.
The line item ‘Central costs’ includes costs of the Group’s central functions including operations support, technology,
sales and marketing, human resources, finance, corporate services and business development.
‘Segmental results – EBITDA’ for Dublin, Ireland Regional and United Kingdom represents the ‘Adjusted EBITDA’ before
central costs and excluding rental income for each geographical location. It is the net operational contribution of leased
and owned hotels in each geographical location.
Annual Report and Accounts 2015Financial Statements 100
Notes (continued)
2 Operating segments (continued)
‘Segmental results – EBITDA and EBITDAR’ for managed hotels represents fees earned from services provided in
relation to partner hotels. All of this activity is managed corporately and specific individual costs are not allocated to
this segment.
‘Segmental results – EBITDAR’ for Dublin, Ireland Regional and United Kingdom represents ‘Segmental results –
EBITDA’ before rent. For leased hotels rent paid to lessors amounted to €19.2 million in 2015 (2014: €16.2 million).
Other geographical information
Revenue
Republic of Ireland
United Kingdom
Non-current assets (excluding deferred tax and derivatives)
Republic of Ireland
United Kingdom
3 Statutory and other information
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating lease rentals
Acquisition-related costs
Auditor’s remuneration
Audit of Group, Company and subsidiary financial statements
Tax advisory services
Other non-audit services
Directors’ remuneration
Salary and other emoluments
Fees
Pension contributions
2015
€’000
167,075
58,598
225,673
433,574
261,522
695,096
2015
€’000
10,039
-
19,229
15,802
270
406
335
1,011
1,855
280
76
2,211
2014
€’000
72,669
6,404
79,073
59,408
6,449
65,857
2014
€’000
991
128
16,332
2,821
165
282
865
1,312
1,043
183
38
1,264
Acquisition-related costs for the year ended 31 December 2015 include professional fees, stamp duty costs, redundancy
and other costs associated with the 2015 business combinations outlined in Note 10 and 2016 business combinations
outlined in Note 26. Details of the acquisition-related costs charged to profit or loss in 2015 are outlined below.
Dalata Hotel Group PLC
Notes (continued)
3 Statutory and other information (continued)
Stamp duty incurred on acquisitions
Professional fees incurred on acquisitions
Integration costs
Acquisition-related costs
Integration costs include primarily severance costs and certain other non-recurring costs directly related to
business combinations.
Stamp duty incurred on acquisitions
Professional fees incurred on acquisitions
Acquisition-related costs
101
2015
€’000
11,098
2,764
1,940
15,802
2014
€’000
548
2,273
2,821
The audit of Group, Company and subsidiary financial statements fees are inclusive of the fees relating to the
reviews of interim condensed consolidated financial statements for the six month periods ended 30 June. Auditor’s
remuneration for the audit of the Company financial statements was €10,000 (2014: €10,000). The majority of the
fees for tax advisory and non-audit services in 2014 and 2015 relate to the acquisition of new hotels, including the
acquisition of Moran Bewley Hotel Group and the related fundraising, and the subsequent fundraising in October 2015.
Details of the directors’ remuneration and interests in conditional share awards are set out in the Remuneration
Committee Report on pages 64 to 73.
4 Other income
Rental income from investment property
Impact of Ballsbridge site sale (Note 2)
5 Finance income
Interest income on bank deposits
Exchange gain on cash and cash equivalents
2015
€’000
608
2,137
2,745
2015
€’000
6
1,857
1,863
2014
€’000
-
-
-
2014
€’000
115
294
409
Annual Report and Accounts 2015Financial Statements 102
Notes (continued)
6 Finance costs
Interest expense on bank loans and borrowings
Cashflow hedges – reclassified from other comprehensive income (Note 14)
Interest expense on unsecured shareholder loan notes
2015
€’000
9,708
655
-
10,363
2014
€’000
152
-
1,039
1,191
7 Personnel expenses
The average number of persons (full-time equivalents) employed by the Group (including executive directors), analysed
by category, was as follows:
Administration
Other
Full time equivalents spilt by geographical region was as follows:
Dublin (including Group’s central functions)
Ireland Regional
United Kingdom
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social welfare costs
Pension costs – defined contribution
Share-based payments expense
Severance costs
8 Long-term incentive plan
Equity-settled share-based payment arrangements
2015
Number
2014
Number
260
1,803
2,063
102
642
744
2015
Number
2014
Number
1,033
541
489
2,063
2015
€’000
58,778
5,477
528
639
1,281
66,703
505
195
44
744
2014
€’000
22,712
2,441
300
273
-
25,726
During the year ended 31 December 2015, the Remuneration Committee of the Board of Directors approved the
conditional grant of ordinary shares pursuant to the terms and conditions of the Group’s Long Term Incentive Plan.
The award was for eligible service employees across the Group.
In March 2015 607,518 ordinary shares were conditionally awarded to eligible service employees across the Group
(49 in total) and vest based on the employees staying in service for 3 years from the grant date (27 March 2015).
Dalata Hotel Group PLC 103
Notes (continued)
8 Long-term incentive plan (continued)
In October 2015 86,796 ordinary shares were conditionally awarded to eligible service employees across the Group
(15 in total) and vest based on the employees staying in service for 3 years from the grant date (7 October 2015).
The number of awards which will ultimately vest will depend on the Group achieving targets relating to a Total
Shareholder Return (“TSR”) market condition as measured against a comparator peer group of companies over a
3 year performance period.
In relation to TSR performance, 25% of an award will vest for TSR performance equal to the median TSR return of the
comparator peer group of companies over the performance period. 100% of an award shall vest for TSR performance
equal to the 75th percentile or greater TSR return of the comparator group. Awards shall vest on a pro-rated basis for
TSR performance falling between these thresholds.
The total expected cost of the award made in March 2015 was estimated at €1.1 million of which €0.27 million has been
charged against profit for the year ended 31 December 2015. The remaining €0.8 million will be charged to profit or loss
in equal instalments over the remainder of the three year vesting period.
The total expected cost of the award made in October 2015 was estimated at €0.2 million of which €0.02 million has
been charged against profit for the year ended 31 December 2015. The remaining €0.18 million will be charged to profit
or loss in equal instalments over the remainder of the three year vesting period.
The total expected cost in relation to the award made in 2014 was estimated at €1.0 million of which €0.35 million has
been charged against profit for the year ended 31 December 2015 and €0.3 million was charged against profit for the
year ended 31 December 2014. The remaining €0.3 million will be charged to profit or loss in equal instalments over the
remainder of the three year vesting period.
Outstanding share awards granted at beginning of period
Share awards granted during the period
Outstanding share awards granted at end of period
Measurement of fair values
Number of share awards granted
2014
2015
754,154
694,314
1,448,468
-
754,154
754,154
The fair value of the conditional share awards was measured using Monte Carlo simulation. Service conditions attached
to the awards were not taken into account in measuring fair value. The valuation and key assumptions used in the
measurement of the fair values at grant date were as follows:
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility
Dividend yield
Performance period
March 2015
€1.92
€3.55
€0.01
26.03% pa.
1.5%
3 years
October 2015
€2.43
€4.27
€0.01
26.40% pa
1.5%
3 years
2014
€1.49
€2.50
€0.01
35.29% pa.
1.5%
3 years
Expected volatility was based on the historical volatility of the share prices of the comparator group of companies.
Annual Report and Accounts 2015Financial Statements 104
Notes (continued)
9 Tax charge
Current tax
Irish corporation tax
UK corporation tax
(Over)/under provision in respect of prior periods
Deferred tax charge/(credit) (note 23)
2015
€’000
3,015
824
(70)
3,769
3,062
6,831
2014
€’000
888
16
7
911
(238)
673
The tax assessed for the year is higher than the standard rate of income tax in Ireland for the year. The differences are
explained below:
Profit before tax
Tax on profit at standard Irish income tax rate of 12.5%
Effects of:
Income taxed at a higher rate
Expenses not deductible for tax purposes
Recognition of prior year deferred tax asset
Income tax withheld
Overseas income taxed at higher rate
Losses utilised at higher rate
(Over)/under provision in respect of prior periods
Other differences
10 Business combinations
Acquisition of Moran Bewley Hotel Group
2015
€’000
28,457
3,557
543
1,985
-
-
753
(432)
(70)
495
6,831
2014
€’000
4,196
525
26
448
(330)
4
7
(14)
7
-
673
On 3 February 2015, the Group completed the acquisition of nine hotels from the Moran Bewley Hotel Group for a
consideration of €452.3 million. The transaction significantly increased the scale and geographical reach of the Group.
The nine hotels acquired were as follows:
- Bewley’s Hotel Ballsbridge, Dublin now trading as Clayton Hotel Ballsbridge
- Bewley’s Hotel Dublin Airport now trading as Clayton Hotel Dublin Airport
- Bewley’s Hotel, Leopardstown, Dublin now trading as Clayton Hotel Leopardstown
- Bewley’s Hotel, Newlands Cross, Dublin now trading as Maldron Hotel Newlands Cross
- Silver Springs Moran Hotel, Cork now trading as Clayton Hotel Silver Springs
- Bewley’s Hotel Manchester Airport now trading as Clayton Hotel Manchester Airport
- Bewley’s Hotel Leeds now trading as Clayton Hotel Leeds
- Crown Moran Hotel, London now trading as Clayton Crown Hotel
- Chiswick Moran Hotel London now trading as Clayton Hotel Chiswick
Dalata Hotel Group PLC Notes (continued)
10 Business combinations (continued)
Recognised amounts of identifiable assets acquired and liabilities assumed:
Non-current assets
Hotel property (land & buildings)
Fixtures, fittings & equipment
Motor vehicles
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash
Current liabilities
Trade and other payables
Non-current liabilities
Deferred tax liabilities
Total identifiable assets
Goodwill
Total consideration
Satisfied by:
Cash
Issue of 12,200,000 ordinary shares at €2.75 per share
105
3 February
2015
Fair Value
€’m
419.1
6.0
0.1
5.6
0.4
0.5
3.2
(7.2)
(7.6)
420.1
32.2
452.3
418.7
33.6
452.3
Included in the goodwill figure is €13.5 million which is deemed as attributable to goodwill arising on acquisition of
foreign operations. Consequently such goodwill is subsequently retranslated at the closing rate. The retranslation at
year end resulted in a foreign currency gain of €0.4m and a corresponding increase to goodwill (see Note 11).
The acquisition method of accounting has been used to consolidate the businesses acquired in the Group’s
financial statements.
The 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.
Acquisition-related costs of €12.4 million (2014: €1.9 million) were charged to administrative expenses in profit or loss.
From the acquisition date to 31 December 2015, this acquisition contributed revenue of €100.1 million and profit before
tax of €33.4 million (excluding acquisition-related costs) to the consolidated results of the Group. Had the acquisition
occurred at 1 January 2015 it would have contributed revenue of €105.4 million and profit before tax and acquisition
related costs of €34.3 million to the consolidated results of the Group.
Annual Report and Accounts 2015Financial Statements 106
Notes (continued)
10 Business combinations (continued)
Acquisition of Clayton Hotel, Galway
On 21 January 2015, the Group acquired full ownership of the property and business of Clayton Hotel, Galway for a
total cash consideration of €16.6 million. The fair value of the identifiable assets and liabilities acquired was: hotel
property (land and buildings) €16 million, fixtures, fittings and equipment €0.4 million and net working capital assets
of €0.1 million. Goodwill of €0.1 million arose on this acquisition. From the acquisition date to 31 December 2015, this
acquisition contributed revenue of €8.0 million and profit before tax of €1.5 million (excluding acquisition-related costs)
to the consolidated results of the Group. Had the acquisition occurred at 1 January 2015 it would have contributed
revenue of €8.2 million and profit before tax and acquisition related costs of €1.4 million to the consolidated results of
the Group.
Acquisition of Whites Hotel, Wexford
On 13 February 2015, the Group acquired full ownership of the property and business of Whites Hotel, Wexford (now
trading as Clayton Whites Hotel Wexford) for a total cash consideration of €15 million. The fair value of the identifiable
assets and liabilities acquired was: hotel property (land and buildings) €13.3 million, fixtures, fittings and equipment
€0.4 million and net working capital liabilities of €0.2 million. Goodwill of €1.5 million arose on this acquisition and
is attributable to expected profitability and revenue growth, increased market share, and the synergies expected to
arise within the Group after acquisition. From the acquisition date to 31 December 2015, this acquisition contributed
revenue of €7.8 million and profit before tax of €1.3 million to the consolidated results of the Group. Had the acquisition
occurred at 1 January 2015 it would have contributed revenue of €8.7 million and profit before tax of €1.2 million to the
consolidated results of the Group.
Acquisition of Pillo Hotel, Galway
On 13 February 2015, the Group acquired full ownership of the property and business of Pillo Hotel, Galway (now
trading as Maldron Hotel Sandy Road, Galway) for a total cash consideration of €10.5 million. The fair value of the
identifiable assets and liabilities acquired was: hotel property (land and buildings) €8 million, fixtures, fittings and
equipment €0.2 million, investment properties €0.6 million and net working capital liabilities of €0.1 million. Goodwill of
€1.8 million arose on this acquisition and is attributable to expected profitability and revenue growth, increased market
share, and the synergies expected to arise within the Group after acquisition. From the acquisition date to 31 December
2015, this acquisition contributed revenue of €3.9 million and profit before tax of €0.9 million to the consolidated
results of the Group. Had the acquisition occurred at 1 January 2015 it would have contributed revenue of €4.3 million
and profit before tax of €0.8 million to the consolidated results of the Group.
Acquisition of Holiday Inn, Belfast
On 24 March 2015, the Group acquired full ownership of the property and business of the Holiday Inn, Belfast (now
trading as Clayton Hotel Belfast) for a total cash consideration of €25.7 million (£18.7 million). The fair value of the
identifiable assets and liabilities acquired was: hotel property (land and buildings) €20.7 million (£15.0 million), fixtures,
fittings and equipment €0.4 million (£0.2 million) and net working capital assets of €0.6 million (£0.5 million). Goodwill
of €4.0 million (£3 million) arose on the date of this acquisition and is attributable to expected profitability and revenue
growth, increased market share, the opportunity to develop a brand and the synergies expected to arise within the
Group after acquisition. From the acquisition date to 31 December 2015, this acquisition contributed revenue of €5.9
million (£4.3 million) and profit before tax of €1.1 million (£0.8 million) to the consolidated results of the Group. Had the
acquisition occurred at 1 January 2015 it would have contributed revenue of €7.3 million (£5.3 million) and profit before
tax of €1.2 million (£0.9 million) to the consolidated results of the Group.
Dalata Hotel Group PLC 107
Notes (continued)
10 Business combinations (continued)
Prior year acquisitions
Acquisition of Holiday Inn, Pearse Street, Dublin
On 29 August 2014 the Group acquired full ownership of the property and business of Holiday Inn, Pearse Street,
Dublin for a total cash consideration of €14.3 million. The hotel has since been rebranded as a Maldron Hotel. The fair
value of the identifiable assets and liabilities acquired was: hotel property (land and buildings) €13.2 million, investment
properties €1.2m and net working capital liabilities of €0.1 million. No goodwill arose on this acquisition. From the
acquisition date to 31 December 2014, this acquisition contributed revenue of €1 million and profit of € 0.2 million
to the consolidated results of the Group. Had the acquisition occurred at 1 January 2014 it would have contributed
revenue of €2.6 million and profit of €0.1 million to the 2014 consolidated results of the Group.
Acquisition of Tower Hotel, Derry
On 1 October 2014 the Group acquired full ownership of the property and business of Tower Hotel, Derry for a total
cash consideration of €5.8 million. The hotel has since been rebranded as a Maldron Hotel. The fair value of the land
and buildings acquired was €5.6 million and working capital was not significant. Goodwill of €0.2 million arose on this
acquisition and is attributable to the expected profitability and revenue growth of the acquired business. From the
acquisition date to 31 December 2014, this acquisition contributed revenue of €0.5 million to the consolidated financial
statements. This acquisition achieved an approximate break-even position in the period from acquisition to 31 December
2014. Had the acquisition occurred at 1 January 2014 it would have contributed revenue of €2.5 million and profit of
€0.4 million to the 2014 consolidated results of the Group.
Transaction expenses related to the Pearse Street and Derry acquisitions of €0.55 million were charged to profit or
loss in 2014 within acquisition-related costs (see Note 3).
11 Goodwill
Cost
At beginning of year
Additions (see note 10)
Effect of movements in exchange rates
At end of year
Impairment losses
At beginning of year
During the year
Carrying amount
At end of year
At beginning of year
2015
€’000
42,258
39,557
379
82,194
2014
€’000
42,059
199
-
42,258
(35,192)
(199)
(35,391)
(35,192)
-
(35,192)
46,803
7,066
7,066
6,867
Additions to goodwill of €39.6 million in 2015 relate to the acquisition of the Moran Bewley Hotel Group (€32.2m),
Clayton Hotel Galway (€0.1m), Whites Hotel Wexford (€1.5m), Pillo Hotel Galway (€1.8m) and Holiday Inn Belfast
(€4.0m) (see Note 10).
Annual Report and Accounts 2015Financial Statements 108
Notes (continued)
11 Goodwill (continued)
In 2007, the Group acquired a number of Irish hotel operations for consideration of €41.5 million. The goodwill arising
represented the excess of costs and consideration over the fair value of the identifiable assets less liabilities acquired
and amounted to €42.1 million. The goodwill was subsequently impaired in 2009 and the carrying value of this goodwill
at the beginning and end of the year amounted to €6.867 million.
Carrying amount of goodwill allocated:
2007 Irish hotel operations acquired
Moran Bewley Hotel Group
Holiday Inn Belfast
Other acquisitions
2015
€’000
2014
€’000
6,867
6,867
32,563
4,088
3,285
46,803
-
-
199
7,066
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might
be impaired.
2007 Irish hotel operations acquired
For the purposes of impairment testing goodwill has been allocated to the group of cash generating units (CGUs)
representing the Irish hotel operations acquired in 2007. The recoverable amount of the group of CGUs is based on a
value in use calculation. Value in use is determined by discounting the future cash flows generated from the continuing
use of these hotels. The value in use was based on the following key assumptions:
- Cash flow projections are based on current operating results and budgeted forecasts prepared by management
covering a ten year period.
- Revenue for the first year of the projections is based on budgeted figures for 2016.
- Cash flow projections assume a long term compound annual growth rate of 2% in EBITDA.
- Cashflows include an average annual capital outlay on maintenance for the hotels of 4% of revenues but assume no
enhancements to any property.
- The value in use calculations also include a terminal value based on an industry earnings multiple model which
incorporates a long term growth rate of 2%.
- The cash flows are discounted using a risk adjusted discount rate of 8.5%. The discount rate was estimated based
on past experience and the risk adjusted Group weighted average cost of capital.
The values applied to each of these key assumptions are derived from a combination of internal and external factors
based on historical experience and taking into account the stability of cashflows typically associated with these factors.
At 31 December 2015, the recoverable amount was determined to be significantly higher than the carrying amount
of the group of CGUs. There is no reasonably foreseeable change in assumptions that would impact adversely on
the carrying value of goodwill. The directors concluded that the carrying value of this goodwill is not impaired at
31 December 2015.
Dalata Hotel Group PLC 109
Notes (continued)
11 Goodwill (continued)
2015 Moran Bewley group and other single hotel acquisitions
For the purposes of impairment testing goodwill has been allocated to each of the hotels acquired as CGUs. As these
hotel properties are valued annually by independent external valuers, the recoverable amount of the CGUs is based
on a fair value less costs of disposal estimate, or where this value is less than the acquisition value of the asset plus
its allocated goodwill, a value in use calculation is prepared. Value in use is determined by discounting the future cash
flows generated from the continuing use of these hotels. The value in use estimates were based on the following
key assumptions:
- Cash flow projections are based on current operating results and budgeted forecasts prepared by management
covering a ten year period.
- Revenue for the first year of the projections is based on budgeted figures for 2016.
- Cash flow projections conservatively assume a long term compound annual growth rate of 2% in EBITDA.
- Cashflows include an average annual capital outlay on maintenance for the hotels of 4% of revenues but assume no
enhancements to any property.
- The value in use calculations also include a terminal value based on terminal (Year 10) capitalisation rates consistent
with those used by the external property valuers which incorporates a long term growth rate of 2%.
- The cash flows are discounted using a risk adjusted discount rate of 8.5%. The discount rate was estimated based
on past experience and the risk adjusted group weighted average cost of capital.
The values applied to each of these key assumptions are derived from a combination of internal and external factors
based on historical experience and taking into account the stability of cashflows typically associated with these factors.
At 31 December 2015, the recoverable amount was determined to be significantly higher than the carrying amount
of the group of CGUs. There is no reasonably foreseeable change in assumptions that would adversely impact on
the carrying value of goodwill. The directors concluded that the carrying value of goodwill is not impaired at 31
December 2015.
Annual Report and Accounts 2015Financial Statements 110
Notes (continued)
12 Property, plant and equipment
Cost or valuation
At 1 January 2014
Cost
Acquisitions through business combinations
Other additions
Revaluation gain
Effect of movements in exchange rates
At 31 December 2014
At 1 January 2015
Valuation
Cost
Acquisitions through business combinations
Other additions
Disposals
Revaluation gain
Impairment
Effect of movements in exchange rates
At 31 December 2015
Valuation
Cost
Accumulated depreciation
At 1 January 2014
Charge for the year
Elimination of depreciation on revaluation
Effect of movements in exchange rates
At 31 December 2014
At 1 January 2015
Charge for the year
Elimination of depreciation on disposals
Elimination of depreciation on revaluation
Elimination of depreciation on impairment
Effect of movements in exchange rates
At 31 December 2015
Net book value
At 31 December 2015
At 31 December 2014
Land and
buildings
€’000
Fixtures,
fittings and
equipment
€’000
Motor
Vehicles
€’000
2,216
18,761
17,578
8,161
(7)
46,709
46,709
-
477,081
16,644
-
40,713
(1,195)
5,149
5,595
10
3,527
-
39
9,171
-
9,171
7,765
14,174
(232)
-
-
92
585,101
-
585,101
-
30,970
30,970
-
229
(229)
-
-
-
5,905
-
(5,854)
(64)
13
-
2,821
762
-
3
3,586
3,586
4,090
(232)
-
-
(5)
7,439
-
-
-
-
-
-
-
-
110
101
(8)
-
-
-
-
203
203
-
-
-
-
-
-
44
(1)
-
-
-
43
Total
€’000
7,811
18,771
21,105
8,161
32
55,880
46,709
9,171
484,956
30,919
(240)
40,713
(1,195)
5,241
585,101
31,173
616,274
2,821
991
(229)
3
3,586
3,586
10,039
(233)
(5,854)
(64)
8
7,482
585,101
23,531
160
608,792
46,709
5,585
-
52,294
Dalata Hotel Group PLC 111
Notes (continued)
12 Property, plant and equipment (continued)
The carrying value of land and buildings revalued at 31 December 2015 is €585.1 million. The value of these assets
under the cost model is €531.3 million. In 2015 the unrealised revaluation gains arising of €46.6 million have been
reflected through other comprehensive income and in the revaluation reserve in equity, and an impairment charge
of €1.2 million (together with a related goodwill impairment charge of €0.2 million - Note 11) have been reflected in
administrative expenses through profit or loss.
Included in land and buildings at 31 December 2015 is land at a carrying value of €101.6 million which is not depreciated.
Acquisitions through business combinations in the year ended 31 December 2015 includes the following:
- Moran Bewley Hotel Group of nine hotels (see Note 10)
- Whites Hotel Wexford
- Clayton Hotel Galway
- Pillo Hotel Galway
- Holiday Inn Belfast
Other additions to land and buildings in the year ended 31 December 2015, include extensions to certain properties and
the acquisition of the following properties where the Group was already operating a hotel business:
- Maldron Hotel, Wexford
- Ancillary buildings Maldron Hotel, Pearse Street, Dublin
- A suite at Clayton Hotel Cardiff Lane, Dublin
The Group operates the Maldron Hotel Limerick and, since the acquisition of Fonteyn Property Holdings Limited in
2013, holds a secured loan over that property. The loan is not expected to be repaid. Accordingly the Group has the
risks and rewards of ownership and accounts for the hotel as an owned property, reflecting the substance of the
arrangement. It is expected that the Group will obtain legal title to the property in 2016.
The value of the Group’s property at 31 December 2015 reflects open market valuations carried out in December 2015
by independent external valuers having appropriate recognised professional qualifications and recent experience in
the location and value of the property being valued. The external valuations performed were in accordance with the
Valuation Standards of the Royal Institution of Chartered Surveyors.
Measurement of fair value
The fair value measurement of the Group’s own-use property has been categorised as a Level 3 fair value based on the
inputs to the valuation technique used.
The principal valuation technique used in the independent external valuations 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) taking into account expected EBITDA and capital expenditure.
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 significant unobservable inputs are:
- Forecast EBITDA
- Risk adjusted discount rates of 6.9% to 14.5% (Years 1-10)
- Terminal (Year 10) capitalisation rates of 4.9% to 12.5%
Annual Report and Accounts 2015Financial Statements 112
Notes (continued)
12 Property, plant and equipment (continued)
The estimated fair value under this valuation model would increase or decrease if:
- EBITDA was higher or lower than expected
- The risk adjusted discount rate and terminal capitalisation rate was lower or higher
Valuations also had regard to relevant recent data on hotel sales activity metrics.
13 Investment property
Cost or valuation
At beginning of period
Acquisitions through business combinations
Other additions - cost
Capitalised transaction costs
Net loss from fair value adjustments
Investment property comprises:
2015
€’000
1,248
585
35,098
799
(445)
37,285
2014
€’000
-
1,248
-
-
-
1,248
- Two commercial properties which were acquired on 29 August 2014 as part of the Maldron Hotel Pearse Street
acquisition. The investment properties are leased to third parties for lease terms of 25 and 30 years, with 15 and 11
years remaining.
- Commercial properties which were acquired on 13 February 2015 as part of the Pillo Hotel Galway acquisition. The
investment properties are leased to third parties for lease terms of 20 years, with 16 years remaining and a break
clause in three years.
- The freehold interest in the Clarion Hotel Cork which was acquired in November 2015 for a total cash consideration
of €35.1m plus direct transaction costs of €0.8m. As at 31 December 2015, this investment property was leased to
a third party for a lease term of 35 years, with 24 years remaining. On 28 January 2016, the Group announced that
it would acquire the leasehold interest of the Clarion Cork hotel as part of a wider acquisition (see Note 26) and
become the operator of that hotel. Consequently, this will be accounted for as property, plant and equipment in the
2016 financial statements.
Changes in fair values are recognised in administrative expenses in profit or loss.
The value of the Group’s investment properties at 31 December 2015 reflect an open market valuation carried out in
December 2015 by independent external valuers having appropriately recognised professional qualifications and recent
experience in the location and category of property being valued. The valuations performed were in accordance with
the Valuation Standards of the Royal Institution of Chartered Surveyors.
The fair value measurement of the Group’s investment property has been categorised as Level 3 fair value based on the
inputs to the valuation technique used.
The valuation technique adopted is the investment method of valuation. This method is based on a review of the
current passing rent, open market rent, comparable investment sales and a yield of 6.5%.
The estimated fair value under this valuation model would increase or decrease if:
- Rent was higher or lower than expected
- The yield used as the capitalisation rate was higher or lower
Dalata Hotel Group PLC 113
Notes (continued)
14 Derivatives
During the year, the Group entered into interest rate swaps and a cap agreement with a syndicate of financial
institutions in order to manage the interest rate risks arising from the Group’s borrowings (see Note 22). Interest rate
swaps are employed by the Group to partially convert the Group’s borrowings from floating to fixed interest rates.
An interest rate cap is employed to limit the exposure to upward movements in floating interest rates.
The terms of the derivatives are as follows:
-
-
Interest rate swaps with a maturity date of 3 February 2020, covering approximately 77% of the Group’s sterling
denominated borrowings at 31 December 2015. These swaps fix the LIBOR benchmark rate to 1.5025%.
Interest rate cap with a maturity date of 30 September 2019, covering approximately 47% of the Group’s Euro
denominated borrowings at 31 December 2015. The cap limits the Group’s maximum EURIBOR benchmark rate
to 0.25%.
All derivatives have been designated as hedging instruments for the purposes of IAS 39.
Fair value
Non-current
Interest rate cap asset
Total derivative asset
Non-current
Interest rate swap liabilities
Total derivative liability
Net derivative financial instrument position at year-end
Included in Other Comprehensive Income
Fair value losses on derivative instruments
Fair value loss on interest rate swap liabilities
Fair value loss on interest rate cap asset
Reclassified to profit or loss (Note 6)
2015
€’000
26
26
(885)
(885)
(859)
(1,540)
(130)
(1,670)
655
(1,015)
2014
€’000
-
-
-
-
-
-
-
-
-
-
Annual Report and Accounts 2015Financial Statements
114
Notes (continued)
15 Trade and other receivables
Non-current assets
Other receivables
Deposits paid on acquisitions
Prepayments
Current assets
Trade receivables
Prepayments
Accrued income
Total
2015
€’000
900
1,316
-
2,216
6,001
3,315
2,458
11,774
2014
€’000
900
4,116
233
5,249
3,410
4,067
2,067
9,544
13,990
14,793
Non-current assets includes deposits paid of €1.3 million in relation to the acquisition of the Tara Towers Hotel Dublin
which completed on 15 January 2016 (see Note 26).
Other, non-current, receivables consists of a deposit required as part of a hotel property operating contract.
The deposit is interest-bearing and refundable at the end of the term.
16 Inventories
Goods for resale
Consumable stores
17 Cash and cash equivalents
Cash at bank and in hand
Money-market funds
2015
€’000
1,070
279
1,349
2014
€’000
456
137
593
2015
€’000
25,202
123,953
149,155
2014
€’000
39,259
178,548
217,807
Dalata Hotel Group PLC 115
Notes (continued)
18 2014 Group reorganisation and impact on reserves
As part of a Group reorganisation, the Company became the ultimate parent entity of the then existing group on 20
February 2014, when it acquired 100% of the issued share capital of DHGL Limited in exchange for the issue of 9,500
ordinary shares of €0.01 each. By doing so, it also indirectly acquired the 100% shareholdings previously held by DHGL
Limited in each of its subsidiaries. As part of that reorganisation, shareholder loan note obligations (including accrued
interest) of DHGL Limited were assumed by the Company as part of the consideration paid for the equity shares in
DHGL Limited.
The fair value of the Group (as then headed by DHGL Limited) at that date was estimated at €40 million. The fair value
of the shareholder loan note obligations assumed by the Company as part of the acquisition was €29.7 million and the
fair value of the shares issued by the Company in the share exchange was €10.3 million.
The difference between the carrying value of the shareholder loan note obligations (€55.4 million) prior to the
reorganisation and their fair value (€29.7 million) at that date represents a contribution from shareholders of €25.7
million which has been credited to a separate capital contribution reserve. Subsequently all shareholder loan note
obligations were settled in 2014, in exchange for shares issued in the Company.
The insertion of Dalata Hotel Group plc as the new holding company of DHGL Limited did not meet the definition of a
business combination under IFRS 3 “Business Combinations”, and, as a consequence, the acquired assets and liabilities
of DHGL Limited and its subsidiaries continued to be carried in the consolidated financial statements at their respective
carrying values as at the date of the reorganisation. The consolidated financial statements of Dalata Hotel Group
plc were prepared on the basis that the Company is a continuation of DHGL Limited, reflecting the substance of the
arrangement.
As a consequence, an additional merger reserve of €10.3 million arose in the 2014 consolidated statement of financial
position. This represents the difference between the consideration paid for DHGL Limited in the form of shares of the
Company, and the issued share capital of DHGL Limited at the date of the reorganisation which was a nominal amount
of €95.
19 Share capital and premium
At 31 December 2015
Authorised Share Capital
Number
€’000
Ordinary shares of €0.01 each
10,000,000,000
100,000
Allotted, called-up and fully paid shares
Ordinary shares of €0.01 each
Share premium
Number
182,966,666
€’000
1,830
503,113
Annual Report and Accounts 2015Financial Statements 116
Notes (continued)
19 Share capital and premium (continued)
At 31 December 2014
Authorised Share Capital
Number
€’000
Ordinary shares of €0.01 each
10,000,000,000
100,000
Allotted, called-up and fully paid shares
Ordinary shares of €0.01 each
Share premium
Number
122,000,000
€’000
1,220
295,133
On 3 February 2015, the Company issued 18.3 million ordinary shares at €2.75 each which raised €48.6 million after
costs of €1.7 million. 12.2 million of these shares with a value of €33.6 million were issued in a Vendor Placing,
as consideration for the acquisition of the nine hotels within the Moran Bewley Hotel Group (see Note 10).
On 6 October 2015, the Company issued 42.7 million ordinary shares for cash at €3.75 each which raised €153.6 million
after costs of €6.4 million. The purpose of the fundraising was to raise finance for further hotel acquisitions, capital
expenditure on existing hotels and potential new hotel developments.
Following changes arising from the application of Companies Act 2014, expenses in relation to shares issued after
1 June 2015 must be charged to retained earnings, which will have a subsequent restriction on distributable reserves.
Therefore the costs relating to the October 2015 issue of €6.4 million have been charged to retained earnings.
20 Trade and other payables
Trade payables
Accruals
Deferred income
Value added tax
Payroll taxes
2015
€’000
12,216
21,569
3,091
1,894
1,410
40,180
2014
€’000
6,155
12,438
729
349
674
20,345
Dalata Hotel Group PLC 117
Notes (continued)
21 Financial instruments and risk management
The following tables show the carrying amount of Group financial assets and liabilities including their values in the fair
value hierarchy for the year ended 31 December 2015. 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.
Financial Assets
Derivatives (Note 14)
Trade and other receivables excluding
prepayments and deposits paid on
acquisitions (Note 15)
Cash at bank and in hand (Note 17)
Money-market funds (Note 17)
Financial Liabilities
Secured bank loans (Note 22)
Trade payables and accruals (Note 20)
Derivatives (Note 14)
Financial
assets
measured at
fair value
2015
€’000
Loans and
receivables
2015
€’000
Total carrying
amount
2015
€’000
Level 1
2015
€’000
26
-
26
Level 3
2015
€’000
Level 2
2015
€’000
26
Total
2015
€’000
26
-
-
123,953
123,979
9,359
25,202
-
34,561
9,359
25,202
123,953
158,540
Financial
liabilities
measured at
fair value
2015
€’000
Financial
liabilities
measured at
amortised cost
2015
€’000
Total carrying
amount
2015
€’000
(266,138) (266,138)
-
(33,785)
(33,785)
-
(885)
(885)
-
(885) (299,923) (300,808)
123,953
123,953
Level 1
2015
€’000
Level 2
2015
€’000
Level 3
2015
€’000
Total
2015
€’000
(885)
(885)
The following tables show the carrying amount of Group financial assets and liabilities including their values in the fair
value hierarchy for the year ended 31 December 2014. 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.
Financial Assets
Trade and other receivables
excluding prepayments and
deposits paid on acquisitions
(Note 15)
Cash at bank and in hand (Note 17)
Money-market funds (Note 17)
Financial Liabilities
Trade payables and accruals (Note 20)
Financial assets
measured at
fair value
2014
€’000
Financial
liabilities
measured at
amortised cost
2014
€’000
Loans and
receivables
2014
€’000
Total
carrying
amount
2014
€’000
Level 1
2014
€’000
Level 2
2014
€’000
Level 3
2014
€’000
Total
2014
€’000
-
-
178,548
178,548
6,377
39,259
-
45,636
6,377
39,259
178,548
224,184
178,548
178,548
(18,593)
(18,593)
(18,593)
(18,593)
Annual Report and Accounts 2015Financial Statements 118
Notes (continued)
21 Financial instruments and risk management (continued)
Fair value hierarchy
The Group measures the fair value of financial instruments based on the degree to which inputs to the fair value
measurements are observable and the significance of the inputs to the fair value measurements. Financial instruments
are categorised by the type of valuation method used. The valuation methods are as follows:
- Level 1: Quoted prices (unadjusted in active markets for identical assets or liabilities).
- Level 2: Inputs other than quoted prices included within Level 1 that are observable for the financial instrument,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3: Inputs for the financial instrument that are not observable market data (unobservable inputs).
The Group’s policy is to recognise any transfers between levels of the fair value hierarchy as of the end of the reporting
period during which the transfer occurred. During the period ended 31 December 2015, 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 below.
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.
Money-market funds
Money-market funds are measured at fair value through profit or loss. The fair value is based on quoted market prices
at year-end.
Derivatives
Discounted cash-flow analyses have been used to determine the fair value of the interest rate swaps and interest rate
cap, taking into account current market inputs and rates (Level 2).
Receivables/payables
For the receivables and payables with a remaining term of less than one year or demand balances, the carrying value
less impairment provision, where appropriate, is a reasonable approximation of fair value. The non-current receivables
carrying value is a reasonable approximation of fair value.
Bank loans
For bank loans the fair value was calculated based on the present value of the expected future principal and interest
cash flows discounted at interest rates effective at the reporting date. The carrying value of variable rate interest
bearing loans and borrowings is a reasonable approximation of the fair value as the credit spread has not moved in the
period since drawdown.
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. The Group uses financial instruments to manage exposures arising from the interest rate risks.
The Group uses a net investment hedge with sterling denominated borrowings to hedge the translation risk from
investments in certain UK operations.
Dalata Hotel Group PLC 119
Notes (continued)
21 Financial instruments and risk management (continued)
(a) Credit risk
Exposure to credit risk
Credit risk arises from granting credit to customers and from investing cash and cash equivalents with banks and
financial institutions.
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. There is no
concentration of credit risk or dependence on individual customers. Management has a credit policy in place and the
exposure to credit risk is monitored on an ongoing basis. The maximum exposure to credit risk is represented by the
carrying amount of each financial asset.
Cash and cash equivalents
Cash and cash equivalents give rise to credit risk on the amounts due from counterparties. The maximum credit risk is
represented by the carrying value at the reporting date The Group’s policy for investing cash is to limit risk of principal
loss and to ensure the ultimate recovery of invested funds by limiting credit risk. The Group limits its exposure to credit
risk on money-market funds by only investing in liquid securities which are held by counterparties which have AAA
ratings from Standard & Poors or equivalent credit ratings from other established rating agencies.
The carrying amount of the following financial assets represents the Group’s maximum credit exposure. The maximum
exposure to credit risk at year end was as follows:
Trade receivables
Other receivables
Accrued income
Cash at bank and in hand
Money-market funds
Trade receivables
Carrying
amount
2015
€’000
6,001
900
2,458
25,202
123,953
158,514
Carrying
amount
2014
€’000
3,410
900
2,067
39,259
178,548
224,184
The Group has detailed procedures for monitoring and managing the credit risk related to trade receivables. Trade
receivables are monitored by review of aged debtor reports by management. The aged analysis of trade receivables
at the reporting date was as follows:
Annual Report and Accounts 2015Financial Statements 120
Notes (continued)
21 Financial instruments and risk management (continued)
Aged analysis of trade receivables
Not past due
Past due < 30 days
Past due 30 - 60 days
Past due 60 - 90 days
Past due > 90 days
Not past due
Past due < 30 days
Past due 30 - 60 days
Past due 60 - 90 days
Past due > 90 days
Gross
receivables
2015
€’000
Impairment
provision
2015
€’000
Net
receivables
2015
€’000
2,542
1,902
693
453
863
6,453
(87)
(4)
(4)
(18)
(339)
(452)
2,455
1,898
689
435
524
6,001
Gross
receivables
2014
€’000
Impairment
provision
2014
€’000
Net
receivables
2014
€’000
710
1,295
525
409
631
3,570
-
(7)
-
-
(153)
(160)
710
1,288
525
409
478
3,410
Management does not expect any significant losses from receivables that have not been provided for as shown above.
b) Liquidity risk
The Group’s approach to managing liquidity is to ensure as far as possible that it will always have sufficient liquidity 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.
During the period, the Group drew down a term loan of €282 million of which €16.8 million was repaid by 31 December
2015. The Group also has an undrawn revolving facility of €20 million available (Note 22).
The following are the contractual maturities of the Group financial liabilities at 31 December 2015, including estimated
interest payments.
Contractual cashflows
Carrying
Value
2015
€’000
Total
2015
€’000
6 months
or less
€’000
6 – 12
months
€’000
1 – 2
years
€’000
2 – 5
Years
€’000
More
than
5 years
€’000
Secured bank loans
Trade payables and accruals
266,138 (309,843)
(33,785)
33,785
(343,628)
299,923
(13,585)
(33,785)
(47,370)
(13,553)
-
(13,553)
(26,814) (255,891)
-
(26,814) (255,891)
-
-
-
-
Dalata Hotel Group PLC 121
Notes (continued)
21 Financial instruments and risk management (continued)
The only financial liabilities of the Group as at 31 December 2014 were trade payables and accruals which all had a
contractual maturity of six months or less.
c) Market risk
Market risk is the risk that changes in market prices and indices, such as interest rates and foreign exchange rates will
affect the Group’s income or the value of its holdings of financial instruments.
(i) Interest rate risk
The Group’s exposure relates primarily to floating interest rates on the Group’s debt obligations. The Group adopts a
policy of ensuring that at least 66.67% of its interest rate risk exposure is hedged in order to mitigate its exposure to
interest rate fluctuations. This is achieved by entering into interest rate swaps and an interest cap (see Note 14) which
hedge the variability in cash flows attributable to the interest rate risk.
The interest rate profile of the Group’s interest-bearing financial liabilities as reported to the management of the Group
is as follows:
Variable rate instruments
Financial liabilities – Borrowings
Effect of interest rate swap
Effect of interest rate cap
Nominal amount
2015
€’000
2014
€’000
266,138
(138,293)
(44,614)
83,231
-
-
-
-
A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased or
decreased profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular
foreign currency exchange rates, remain constant. There were no borrowings at 31 December 2014.
Cash flow sensitivity analysis for variable rate instruments
31 December 2015
Loans and borrowings
Cash flow sensitivity
Effect on Profit or Loss
100 bp
increase
€’000
100 bp
decrease
€’000
(1,624)
(1,624)
548
548
The following table indicates the periods in which the cash flows associated with the interest rate swaps are expected
to occur and the carrying amounts of the related hedging instruments. The interest rate cap asset was not material at
31 December 2015.
Interest rate swaps
Liabilities
Carrying
Amount
€’000
(885)
(885)
31 December 2015
Total
€’000
(888)
(888)
12 months
or less
€’000
More than
1 year
€’000
(1,080)
(1,080)
192
192
Annual Report and Accounts 2015Financial Statements 122
Notes (continued)
21 Financial instruments and risk management (continued)
The following table indicates the periods in which the cash flows associated with cash flow hedges are expected to
impact profit or loss and the carrying amounts of the related hedging instruments.
Interest rate swaps
Liabilities
(ii) Foreign currency risk
Carrying
Amount
€’000
(885)
(885)
31 December 2015
Total
€’000
(888)
(888)
12 months
or less
€’000
More than
1 year
€’000
(1,080)
(1,080)
192
192
The Group is exposed to transactional foreign currency risk on trading activities conducted by subsidiaries in currencies
other than the functional currency. Group 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 (see below).
The Group’s gain or loss on retranslation of the net assets of foreign currency subsidiaries is taken directly to the
translation reserve. The Group financed certain new operations in the UK (the four UK hotels formerly in the Moran
Bewley Hotel Group) by obtaining funding at Group level through external borrowings denominated in sterling. These
borrowings amounted to £132.4 million (€180.3 million) at 31 December 2015 and are designated as net investment
hedges. This enables gains and losses arising on retranslation of those foreign currency borrowings to be recognised in
Other Comprehensive Income, providing a partial offset in reserves against the gains and losses arising on translation
of the net assets of the associated operations.
Sensitivity analysis on transactional risk
A reasonably possible strengthening (weakening) of Euro against Sterling by 10% at 31 December 2015 would have
affected profit and equity by the amounts shown below. The analysis assumes that all other variables, in particular
interest rates, remain constant.
Profit
Equity
Strengthening
of Euro
€’000
593
Weakening
of Euro
€’000
(741)
Strengthening
of Euro
€’000
593
Weakening
of Euro
€’000
(741)
Impact on interest costs of Sterling loans
(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 15% on investments.
The Group monitors capital using a ratio of net debt to EBITDA and seeks to keep it below 4.00.
Dalata Hotel Group PLC Notes (continued)
22 Interest bearing loans and borrowings
Repayable within one year
Bank borrowings
Less: deferred issue costs
Repayable after one year
Bank borrowings
Less: deferred issue costs
Total interest-bearing loans and borrowings
123
2015
€’000
16,800
(830)
15,970
252,728
(2,560)
250,168
266,138
2014
€’000
-
-
-
-
-
-
-
On 17 December 2014, the Group entered into a loan facility of €318 million (comprising of a €142 million Euro facility
and a £132 million Sterling facility) with a syndicate of financial institutions. On 3 February 2015, the company drew
down €282 million (comprising of a €106 million Euro facility and a £132 million Sterling facility) through five year term
loan facilities with a maturity of 3 February 2020. The Group also has an undrawn revolving credit facility of €20 million
available as at 31 December 2015. The total loan facility of €318 million included a standby facility of €16 million which
was not drawn and has since expired.
The loans bear interest at variable rates based on 3 month EURIBOR/LIBOR plus applicable margins. The Group has
entered into certain derivative financial instruments to hedge interest rate exposure on a portion of these loans (see
Note 14). The loans are secured by a fixed and floating charge over all of the Group’s assets. Under the terms of the
loan facility agreement, an interest rate floor is in place which prevents the Group from receiving the benefit
of sub-zero benchmark LIBOR and EURIBOR rates.
23 Deferred tax
Deferred tax assets
Deferred tax liabilities
Net liability
Movements in year
At beginning of year – net (liability)/asset
Acquisition through business combination – assets
Acquisition through business combination – liabilities
(Charge)/credit for year – to profit or loss (Note 9)
Charge for year – to other comprehensive income
At end of year – net liability
2015
€’000
3,936
(15,859)
(11,923)
2015
€’000
(641)
5,630
(7,579)
(3,062)
(6,271)
(11,923)
2014
€’000
319
(960)
(641)
2014
€’000
170
-
-
238
(1,049)
(641)
Deferred tax assets have only been recognised for losses that are expected to be used in the foreseeable future. As at
31 December 2015 and 31 December 2014 there are no unrecognised deferred tax assets.
Annual Report and Accounts 2015Financial Statements 124
Notes (continued)
23 Deferred tax (continued)
Deferred tax arises from temporary differences relating to:
Balance as at 31 December 2015
Net balance at
1 January 2015
€’000
(1,050)
355
54
(641)
Recognised in
profit or loss
2015
€’000
(912)
(2,096)
(54)
(3,062)
Recognised
in OCI
2015
€’000
(6,398)
-
127
(6,271)
Acquired
in business
combinations
2015
€’000
(6,210)
4,261
-
(1,949)
Net deferred
tax
2015
€’000
(14,570)
2,520
127
(11,923)
Deferred tax
assets
2015
€’000
1,289
2,520
127
3,936
Deferred tax
liability
2015
€’000
(15,859)
-
-
(15,859)
Property plant and equipment
Tax losses carried forward
Other
Net deferred tax (liabilities)/assets
Balance as at 31 December 2014
Net balance at
1 January 2014
€’000
41
42
87
170
Recognised in
profit or loss
2014
€’000
(42)
313
(33)
238
Recognised
in OCI
2014
€’000
(1,049)
-
-
(1,049)
Acquired
in business
combinations
2014
€’000
-
-
-
-
Net deferred
tax
2014
€’000
(1,050)
355
54
(641)
Deferred tax
assets
2014
€’000
(90)
355
54
319
Deferred tax
liability
2014
€’000
(960)
-
-
(960)
Property plant and equipment
Tax losses carried forward
Other
Net deferred tax (liabilities)/assets
24 Commitments
Operating leases
Non-cancellable operating lease rentals payable are set out below. These represent the minimum future lease payments
in aggregate that the Group is required to make under existing lease arrangements.
Less than one year
Between one and five years
After five years
2015
€’000
14,182
49,192
212,986
276,360
2014
€’000
14,191
50,434
169,451
234,076
Under the terms of certain hotel operating leases, contingent rents are payable, in excess of minimum lease payments,
based on the financial performance of the hotels. The amount of contingent rent expense charged to profit or loss
in the year ended 31 December 2015 was €4.5 million (2014: €0.8 million). The expiry dates of operating leases with
contingent rental arrangements at 31 December 2015 ranged from April 2018 to July 2036.
Dalata Hotel Group PLC 125
Notes (continued)
24 Commitments (continued)
Section 357 Companies Act 2014
Dalata Hotel Group plc, as the parent company of the Group and for the purposes of filing exemptions referred to in
Section 357 of the Companies Act 2014, has entered into guarantees in relation to the liabilities of Republic of Ireland
registered subsidiary companies Dalata Management Services Limited and Dalata Support Services Limited for the
financial year ended 31 December 2015.
Contractual commitments for 2016 acquisitions
As at 31 December 2015 the Group had entered into an agreement to acquire Tara Towers Hotel, Dublin which was
completed in January 2016. The value of the commitment under contractual agreement, net of deposits of €1.3 million
paid in the period (Note 15), is approximately €11.8 million. Further information on this acquisition is provided in Note 26.
Capital expenditure commitments
The Group has the following commitments for future capital expenditure under its contractual arrangements.
Contracted but not provided
25 Related party transactions
2015
€’000
2,237
2014
€’000
4,191
Under IAS 24, Related Party Disclosures, the Group has a related party relationship with shareholders and directors
of the company.
(a) Remuneration of key management
Key management is defined as the directors of the Company. The compensation of key management personnel is set
out in the Remuneration Committee Report on pages 64 to 73. In addition, the share-based payment expense for key
management in 2015 was €0.242 million (2014: €0.113 million).
(b) Transactions with related parties
A number of the executive directors of the Group are also directors of Sanjay Limited and Citywest Resort Limited.
The Group operates a hotel management contract for Sanjay Limited. The Group formerly operated a hotel
management contract for Citywest Resort Limited (that company has now ceased trading).
During 2015 the Group received fees of €337,198 (2014: €274,037) from Sanjay Limited for services provided, and
fees of €130,000 (2014: €368,646) from Citywest Resort Limited for services provided. At 31 December 2015, the
following amounts were owed in the normal course of business to the Group by these parties: Sanjay Limited €198
(2014: €17,707); Citywest Resort Limited €110,700 (2014: €30,487).
Annual Report and Accounts 2015Financial Statements 126
Notes (continued)
26 Subsequent events
Clarion Group acquisition
On 28 January 2016, the Group announced that it has conditionally agreed to acquire the leasehold interest of the
following four hotels for an enterprise value of €40.0 million:
1. The Gibson Hotel Dublin
2. The Croydon Park Hotel Croydon, UK
3. The Clarion Hotel Cork
4. The Clarion Hotel Limerick
As part of the transaction, the Group will also take over the management of the Clarion Liffey Valley Hotel, Dublin
under a short term management contract. The Group previously purchased the freehold of the Clarion Hotel Cork in
November 2015 and this is accounted for as an investment property in the financial statements for the year end 31
December 2015.
The acquisition of the Clarion Group will be a 2016 business combination in accordance with IFRS 3. This acquisition is
subject to the approval of the Competition and Consumer Protection Commission (CCPC).
Other single asset hotel business acquisitions
Two other acquisitions, which are or will be business combinations, were announced in January 2016.
On 15 January 2016, the Group completed the acquisition of Tara Towers Hotel, Dublin for a total cash consideration of
€13.2 million, including the deposit paid in the period (see Note 15). The fair value of the assets acquired are currently
under review and will be determined in 2016.
On 19 January 2016, the Group announced that it has entered into an agreement to acquire Clarion Hotel, Sligo for a
total cash consideration of €13.1 million. The Group has been managing the property on behalf of the Receiver since
April 2013. The fair value of the assets to be acquired have yet to be established.
Acquisition of development site
On 12 February 2016, the Group announced that it has acquired DS Charlemont Limited, which owns the former
Charlemont Clinic Site, in Dublin 2 for a total cash consideration of €11.9 million. The site will be developed into a new
hotel with construction expected to be completed in the first half of 2018. Dublin City Council has granted permission,
subject to conditions, for the development of a 4 star 181 bedroom hotel, 3 residential apartments and basement
car parking.
Dalata Hotel Group PLC 127
Notes (continued)
27 Subsidiary undertakings
A list of all subsidiary undertakings at 31 December 2015 is set out below:
Country of
Incorporation
Activity
Ownership
Direct
Indirect
DHGL Limited1
Dalata Limited1
Hanford Commercial Limited1
Anora Commercial Limited1
Ogwell Limited1
Caruso Limited1
CI Hotels Limited1
Dalata Management Services Limited1
Tulane Business Management Limited1
Dalata Support Services Limited1
Fonteyn Property Holdings Limited1
Fonteyn Property Holdings No.2 Limited1
Suvanne Management Limited1
Carasco Management Limited1
Amelin Commercial Limited1
Lintal Commercial Limited1
Bernara Commercial Limited1
Pillo Hotels Limited1
Loadbur Limited1
Swintron Limited1
Heartside Limited1
Pondglen Limited1
Candlevale Limited1
Songdale Limited1
Palaceglen Limited1
Adelka Limited1
Bayvan Limited1
Leevlan Limited1
DHG Belfast Limited2
DHG Derry Limited2
DHG Derry Commercial Limited2
Dalata UK Limited3
Dalata Cardiff Limited3
Trackdale Limited3
Islandvale Limited3
Crescentbrook Limited3
Hallowridge Limited3
Cenan BV4
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
N Ireland
N Ireland
N Ireland
UK
UK
UK
UK
UK
UK
Netherlands
100% -
Holding company
-
Holding company
-
Hotel and catering
-
Hotel and catering
-
Hotel and catering
-
Hotel and catering
-
Hotel and catering
-
Hotel management
Hotel and catering
-
Hotel and hotel management -
Hotel and hotel management -
-
Asset management
-
Hotel and catering
-
Hotel and catering
-
Hotel and catering
-
Hotel and catering
-
Property investment
-
Management company
-
Asset management
-
Holding company
-
Hotel and catering
-
Hotel and catering
-
Hotel and catering
-
Hotel and catering
-
Hotel and catering
-
Property holding company
-
Not yet commenced trading
-
Not yet commenced trading
-
Hotel and catering
-
Hotel and catering
-
Asset management
-
Holding company
-
Hotel and catering
-
Hotel and catering
-
Hotel and catering
-
Hotel and catering
-
Hotel and catering
-
Financing company
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
1 The registered address of these companies is 4th Floor, Burton Court, Burton Hall Drive, Sandyford, Dublin 18.
2 The registered address of these companies is Butcher Street, Londonderry, County Derry BT48 6HL, United Kingdom.
3 The registered address of these companies is St Mary Street, Cardiff, Wales, CF10 1GD, United Kingdom.
4 The registered address of this company is Jachthavenweg 109H, 1081 KM Amsterdam, The Netherlands.
Annual Report and Accounts 2015Financial Statements 128
Notes (continued)
28 Earnings per share
Basic earnings per share (EPS) is computed by dividing the profit for the year available to ordinary shareholders by
the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is computed
by dividing the profit for the year by the weighted average number of ordinary shares outstanding adjusted for the
effect of all potentially dilutive shares. The following table sets out the computation for basic and diluted earnings per
share for the years ended 31 December 2015 and 31 December 2014:
Profit attributable to shareholders of the parent (€’000) – basic and diluted
Earnings per share – Basic
Earnings per share – Diluted
Weighted average shares outstanding – Basic
Weighted average shares outstanding – Diluted
2015
€’000
2014
€’000
21,626
14.55 cents
14.47 cents
148,648,310
149,427,201
3,523
3.65 cents
3.64 cents
96,625,887
96,913,563
The difference between the basic and diluted weighted average shares outstanding for the year ended 31 December
2015 is due to the dilutive impact of the conditional share awards granted in 2014 and 2015 (see Note 8).
29 Approval of the financial statements
The financial statements were approved by the directors on 1 March 2016.
Dalata Hotel Group PLC 129
Company financial
statements
for the year ended
31 December 2015
Annual Report and Accounts 2015Financial Statements 130
Company statement of financial position
at 31 December 2015
Assets
Non-current assets
Investment in subsidiaries
Derivatives
Deferred tax asset
Total non-current assets
Current assets
Trade and other receivables
Amounts owed by subsidiaries
Cash and cash equivalents
Total current assets
Total assets
Equity
Share capital
Share premium
Share-based payment reserve
Hedging reserve
Retained earnings
Total equity
Liabilities
Non-current liabilities
Loans and borrowings
Derivatives
Total non-current liabilities
Current liabilities
Loans and borrowings
Trade and other payables
Current taxation payable
Total current liabilities
Total liabilities
Total equity and liabilities
On behalf of the Board:
John Hennessy
Chairman
Patrick McCann
Director
Note
2
7
3
4
5
8
8
7
7
7
6
2015
€’000
40,557
26
127
40,710
2014
€’000
40,160
-
36
40,196
468
584,367
128,499
713,334
2,533
50,290
206,422
259,245
754,044
299,441
1,830
503,113
912
(888)
(21,430)
483,537
250,168
885
251,053
15,970
3,484
-
19,454
270,507
754,044
1,220
295,133
273
-
(1,509)
295,117
-
-
-
-
4,320
4
4,324
4,324
299,441
Dalata Hotel Group PLC 131
Company statement of changes in equity
for the year ended 31 December 2015
Attributable to equity holders of the Company
Share
capital
€’000
Share
premium
€’000
Share-
based
payment
reserve
€’000
Hedging
reserve
€’000
Retained
earnings
€’000
Total
€’000
At date of incorporation – 4 November 2013
Comprehensive income:
Loss for the period
Total comprehensive income/(loss)
Transactions with owners of the Company:
Issue of shares prior to reorganisation
Re-organisation – share exchange and release of
shareholder loan note obligations
Issue of shares in public listing net of issue costs
Issue of shares on conversion of shareholder loan notes
Equity-settled share-based payments
Total transactions with owners of the Company
-
-
40
-
1,060
120
-
1,220
-
-
-
10,337
254,916
29,880
-
295,133
At 31 December 2014
1,220 295,133
Loss for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Transactions with owners of the Company:
Issue of shares
Share issue costs
Equity-settled share-based payments
Total transactions with owners of the Company
At 31 December 2015
-
-
-
-
-
-
610
-
-
209,716
(1,736)
-
610 207,980
503,113
1,830
-
-
-
-
-
-
273
273
273
-
-
-
-
-
639
639
912
-
-
-
-
-
-
-
-
-
(1,509)
(1,509)
(1,509)
(1,509)
-
40
-
10,337
- 255,976
30,000
-
273
-
- 296,626
(1,509) 295,117
-
(888)
(13,528) (13,528)
(888)
-
(888) (13,528)
(14,416)
-
-
-
-
- 210,326
(8,129)
639
(6,393) 202,836
(888) (21,430) 483,537
(6,393)
-
Attributable profit or loss of the Company
The loss attributable to shareholders dealt with in the financial statements of the Company for the year ended
31 December 2015 was €13.5 million. As permitted by Section 304 of the Companies Act 2014, the statement
of profit or loss and other comprehensive income for the Company has not been separately presented in these
financial statements.
Annual Report and Accounts 2015Financial Statements 132
Company statement of cash flows
for the year ended 31 December 2015
Cash flows from operating activities
Loss for the year/period
Adjustments for:
Finance income
Finance costs
Share-based payments expense
Tax credit
(Decrease)/increase in trade and other payables
Decrease/(increase) in trade and other receivables
Increase in other amounts owed by subsidiaries
Tax refunded
Net cash used in operating activities
Net cash flows from investing activities
Loans to subsidiaries
Interest received
Net cash used in investing activities
Cash flows from financing activities
Interest on bank loans and finance costs
Receipt of bank loans
Repayment of bank loans
Payment for derivative asset
Proceeds from issue of share capital, net of expenses
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year/period
Effect of movements in exchange rates
Cash and cash equivalents at the end of the year/period
For the period from
4 November 2013 to
31 December
2014
€’000
(1,509)
(409)
337
113
(32)
(1,500)
4,320
(2,533)
(1,514)
-
(1,227)
(48,776)
115
(48,661)
-
-
-
-
256,016
256,016
206,128
-
294
206,422
2015
€’000
(13,528)
(1,863)
14,768
242
-
(381)
(810)
2,065
(2,375)
4
(1,497)
(498,152)
6
(498,146)
(13,753)
282,000
(16,800)
(156)
168,700
419,991
(79,652)
206,422
1,729
128,499
Dalata Hotel Group PLC 133
Notes to the company financial statements
1. Significant accounting policies
The individual financial statements of the Company have been prepared in accordance with IFRS as adopted by the EU,
and as applied in accordance with the Companies Act 2014.
Significant accounting policies specifically applicable to these individual company financial statements and which are
not reflected within the accounting policies for the Group financial statements are detailed below.
(a) Investments in subsidiaries
Investments in subsidiaries are accounted for in these individual company financial statements on the basis of the
direct equity interest, rather than on the basis of the reported results and net assets of investees. Investments in
subsidiaries are carried at cost less impairment.
Share-based payments in respect of employees in subsidiaries are accounted for as an increase in the cost of
investments in subsidiaries.
(b) Intra-group guarantees
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of companies within the
Group, the Company considers these to be insurance arrangements and accounts for them as such. The Company
treats the guarantee contract as a contingent liability until such time as it becomes probable that it will be required to
make a payment under the guarantee.
2.
Investments in subsidiaries
Investments in subsidiaries at initial fair value
Accumulated cost of share-based payments in respect of subsidiaries
2015
€’000
40,000
557
40,557
2014
€’000
40,000
160
40,160
Details of subsidiary undertakings are included in Note 27 of the consolidated financial statements.
3. Trade and other receivables
Prepayments
Value added tax
2015
€’000
-
468
468
2014
€’000
2,320
213
2,533
Annual Report and Accounts 2015Financial Statements 134
Notes (continued)
4. Amounts owed by subsidiaries
Loans to subsidiaries
Other amounts owed by subsidiaries
Loans to subsidiaries are non-interest bearing and are repayable on demand.
5. Cash and cash equivalents
Cash at bank and in hand
Money-market funds
6. Trade and other payables
Trade payables
Accruals
Payroll taxes
Amounts due to subsidiary undertakings
2015
€’000
580,478
3,889
584,367
2014
€’000
48,776
1,514
50,290
2015
€’000
4,546
123,953
128,499
2014
€’000
27,874
178,548
206,422
2015
€’000
319
1,397
58
1,710
3,484
2014
€’000
-
4,272
42
6
4,320
7. Loans and borrowings, and derivatives
Details of loans and borrowings, and derivative financial instruments, are given in Notes 14, 21 and 22 of the
consolidated financial statements.
Finance costs in the Company include the foreign exchange loss of €4.3 million on the loans and borrowings which is
accounted for through other comprehensive income in the consolidated financial statements.
Dalata Hotel Group PLC Notes (continued)
8. Share capital and premium
Authorised Share Capital
135
Number
2015
€’000
2014
€’000
Ordinary shares of €0.01 each
10,000,000,000
100,000
100,000
Allotted, called-up and fully paid shares
Number
€’000
€’000
Ordinary shares of €0.01 each
Share premium
182,966,666
(2014: 122,000,000)
1,830
1,220
503,113
295,133
Movements in share capital and premium are detailed in Note 19 of the consolidated financial statements.
9. Financial instruments and risk management
Money-market funds (see Note 5) are measured at fair value and are categorised as a Level 1 fair value.
The carrying value of the Company’s other financial assets and liabilities are a reasonable approximation of their fair value.
Relevant disclosures on Group financial instruments and risk management are given in Note 21 of the consolidated
financial statements.
10. Company related party disclosures
Under IAS 24, Related Party Disclosures, the Company has related party relationships with directors of the Company,
and with its subsidiary undertakings (see Note 27 of the Consolidated Financial Statements).
Remuneration of key management
Key management is defined as the directors of the Company. The compensation of key management personnel is set
out in the Remuneration Committee Report on pages 64 to 73 and Note 25 of the consolidated financial statements.
Transactions with related parties
During the period ended 31 December 2015 the Company charged fees of €2,374,926 (2014: €1,514,000) to its
subsidiary undertakings for services provided.
Annual Report and Accounts 2015Financial Statements 136
Notes (continued)
11. Commitments
Section 357 Companies Act 2014
Dalata Hotel Group plc, as the parent company of the Group and for the purposes of filing exemptions referred to in
Section 357 of the Companies Act 2014, has entered into guarantees in relation to the liabilities of Republic of Ireland
registered subsidiary companies Dalata Management Services Limited and Dalata Support Services Limited for the
financial year ended 31 December 2015.
Rent guarantee
The Company has undertaken to guarantee the obligations of its subsidiary Dalata Cardiff Limited in relation to the
lease of the Maldron Hotel Cardiff for a period of 35 years of which there are 30 years, 5 months remaining.
12. Approval of the financial statements
The financial statements were approved by the directors on 1 March 2016.
Dalata Hotel Group PLC 137
Additional
Information
Executive Management Team
The Executive Management Team comprises the Executive
Directors, Chief Financial Officer and Company Secretary,
see pages 45 to 47 and the Senior Managers below.
L - R
Shane Casserly
Stephen Clarke
Caitriona Conroy
Patrice Lennon
Duncan Little
Niall Macklin
Martha Mannion
Macarten McGuigan
Tony McGuigan
Anthony Murray
Josephine Norton
Conal O’Neill
Carol Phelan
Joe Quinn
Adrian Sherry
Dawn Wynne
Annual Report and Accounts 2015Additional Information 138
Shane Casserly is Head of
Development and Strategy. He
previously worked at Jurys Doyle
Hotel Group as Head of Development
and held senior positions at Ion
Equity, Microsoft Europe and
Supervalu/Centra. Shane is a fellow
of Chartered Accountants Ireland
and a graduate from University
College Cork.
Stephen Clarke is Group Financial
Controller having joined the Group
in 2008. He started his career
as a graduate trainee in AIB and
progressed to senior finance roles
in Roches Stores and Campus Oil.
He is a member of the Institute
of Chartered Management
Accountants. Stephen holds a B.
Comm (International) from UCD
and MBS from the Michael Smurfit
Graduate School of Business.
Caitriona Conroy is Group
Insurance, Risk, Health and Safety
Manager. She previously held the
role of General Manager of Maldron
Hotel Portlaoise as well as fulfilling
Deputy Manager and HR roles in
Maldron Hotel Smithfield & Cardiff
Lane. Prior to this Caitriona worked
with Jury’s Doyle Hotel Group.
Caitriona holds a BA in Social
Science from UCD.
Patrice Lennon is Head of Sales
and Marketing. She previously held
the role of Sales and Marketing
Manager at the Maldron Hotel
Cardiff Lane since its opening in
2005. Prior to this she worked
with Jurys Doyle Hotel Group &
Radisson Hotels Ireland, holding
management positions within Sales
& Marketing. Patrice is a graduate
of Dublin Institute of Technology and
University College Dublin.
Duncan Little is Group Capital and
Development Manager and has
been with Dalata since 2008. He
previously held positions at Bank
of Ireland and the University of
Bristol. His primary degree was in
engineering technology from UCD,
followed by a degree in veterinary
science from Glasgow University.
Duncan also holds an MBA from
the UCD Michael Smurfit Graduate
Business School.
Niall Macklin is Acquisitions and
Development Executive. He joined
Dalata in July 2015 having previously
worked in KPMG Restructuring
department for 9 years, where he
managed large scale insolvency and
restructuring assignments across a
wide range of industries, specialising
in the hotel and leisure sector. Niall is
a member of Chartered Accountants
Ireland and a graduate of Dublin
City University.
Martha Mannion is Head of Rooms
Revenue and Distribution. She
worked with Jurys Doyle Hotel Group
plc in the UK and Ireland, progressing
to Deputy General Manager of Jurys
Inn Manchester and subsequently
General Manager of Jurys Inn
Galway. Martha is a graduate
of Galway Mayo Institute of
Technology (GMIT).
Macarten McGuigan is Group
Internal Auditor. Prior to joining the
Group he was Head of Internal Audit
at The Doyle Collection Hotel Group
and also at Dublin Airport Authority
plc. Macarten is a fellow of the
Association of Chartered Certified
Accountants and also holds an MBA
from the UCD Michael Smurfit
Graduate Business School.
Tony McGuigan is Group Head of
Purchasing/Food and Beverage
Manager. Tony started his career as
a chef and obtained his qualifications
with City and Guilds London. He has
previously held executive chef and
food and beverage management
positions with Forte Hotels in London
and senior management roles with
Choice Hotels in Ireland.
Anthony Murray is the Group IT
Manager. He has fifteen years
of experience in the hospitality
industry having previously worked
with both national and international
hotel groups in Ireland and abroad,
including Rezidor Hotel Group,
Quality Hotels and Comfort Inns
in Ireland. Anthony is an Honours
Graduate of Dublin Institute of
Technology Cathal Brugha Street
with a Higher Diploma in Hotel &
Catering Management. He also
holds a Bachelor of Science Degree
in Management.
Dalata Hotel Group PLC Josephine Norton is Group
Marketing and E-Commerce
Manager with responsibility for
creating and implementing the
strategic marketing direction of the
brands. Josephine joined Dalata from
Carlson Rezidor Hotel Group where
she worked as Regional Marketing
Manager in Ireland and the UK. She
is a Marketing graduate of Dublin
Business School and holds a diploma
in Tourism Management from
Inchicore VEC.
Conal O’Neill is Group General
Manager – Maldron Hotels. He joined
Dalata from Pillo Hotels where he
was Managing Director. Prior to this
he was employed at Jurys Doyle
Hotel Group where he spent 15 years
in a variety of senior roles including
Group General Manager in the UK.
Carol Phelan is Group Finance
Manager who joined Dalata in
November 2014. She has extensive
experience in corporate finance,
strategy development, financial
reporting and controls from previous
senior roles in Ion Equity and KPMG,
and is a member of Chartered
Accountants Ireland and holds a First
Class Honours Master of Accounting.
139
Joe Quinn is Group General
Manager – Clayton Hotels. He
previously worked at Jurys Inns as
Chief Operations Officer and also
held various senior positions in the
Jurys Doyle Hotel Group plc. He
also worked for Ramada Hotels,
InterContinental Hotels and Hilton.
He is a graduate of Galway Mayo
Institute of Technology (GMIT) and
Ashridge Business School (UK).
Adrian Sherry is Head of Market
Development. He joined Dalata in
February 2015 from Moran Bewley
Hotel Group where he was Marketing
Director. He previously held the role
of Sales and Marketing Director
at Choice Hotels Ireland and held
senior marketing positions at CIE
Tours International, Abbey Travel and
Failte Ireland. Adrian is a marketing
graduate of Galway Mayo Institute
of Technology (GMIT) and holds an
MSc in Tourism Management from
Dublin Institute of Technology.
Dawn Wynne is the Group Human
Resource Manager having joined
the Group in 2008 following a
number of HR Management
appointments within the Group.
She previously worked internationally
in the UK, France and Italy in a
regional capacity, including the Jurys
Doyle Group plc where she held the
position of Deputy Manager of
the Burlington Hotel. Dawn is a
graduate of Glasgow University
and Glasgow Caledonian University
and is CIPD qualified.
Annual Report and Accounts 2015Additional Information 140
Advisors
Nominated Adviser,
ESM Adviser and Broker
Davy
Davy House
49 Dawson Street
Dublin 2
Ireland
Solicitors
A&L Goodbody
IFSC
North Wall Quay
Dublin 1
Ireland
Auditor
KPMG
1 Stokes Place
St Stephen’s Green
Dublin 2
Ireland
Registrar
Computershare Investor Services (Ireland) Limited
Heron House
Corrig Road
Sandyford Industrial Estate
Dublin 18
Ireland
Contact details:
Tel: 00353 1 447 5566
Fax: 00353 1 447 5572
Email: webqueries@computershare.ie
Principal Banks
Ulster Bank
George’s Quay
Dublin 2
Ireland
Allied Irish Bank plc
Bankcentre
Ballsbridge
Dublin 4
Ireland
Bank of Ireland plc
2 Burlington Plaza
Burlington Road
Dublin 2
Ireland
Dalata Hotel Group PLC 141
Shareholder information
Company Secretary and Registered Office
Seán McKeon
Dalata Hotel Group plc
4th Floor, Burton Court
Burton Hall Drive
Sandyford
Dublin 18
Registered Number
534888
Contact Details:
Tel: 00353 1 206 9400
Fax: 00353 1 206 9401
Company Website
www.dalatahotelgroup.com
Annual Report and Accounts 2015Additional Information 142
Dalata Hotel Group PLC 143
Annual Report and Accounts 2015Financial Statements 144
Dalata Hotel Group PLC 2
Strategic Report
Chairman’s Statement 2
Chief Executive’s Review 4
Strategy and Business Model 7
Financial Review 21
Risk Management 27
Corporate Responsibility 33
137
Additional Information
Executive Management Team 137
Advisors 140
Shareholder information 141
43
Governance
Chairman’s Overview 44
Director’s Biographies 45
Corporate Governance Statement 48
Audit and Risk Committee Report 58
Remuneration Committee Report 64
Nomination Committee Report 74
Directors’ Report 76
78
Financial Statements
Statement of Directors’
Responsibilities in respect
of the Annual Report and
the Financial Statements 78
Independent Auditor’s Report 80
Consolidated Statement of
Profit or Loss and Other
Comprehensive Income 85
Consolidated Statement of
Financial Position 86
Consolidated Statement of
Changes in Equity 87
Consolidated Statement of
Cash Flows 89
Notes to the Consolidated
Financial Statements 90
Company Statement of
Financial Position 130
Company Statement of
Changes in Equity 131
Company Statement of
Cash Flows 132
Notes to the Company
Financial Statements 133
Dalata Hotel Group PLC
Central Office:
4th Floor, Burton Court,
Burton Hall Drive, Sandyford,
Dublin 18, Ireland
T +353 (0)1 206 9400
F +353 (0)1 206 9401
E info@dalatahotelgroup.com
www.dalatahotelgroup.com
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Strengthening Valued Partnerships
Annual Report and Accounts 2015