Delivering
Our Promise
Annual Report
& Accounts
2017
D
a
l
a
t
a
H
o
t
e
l
G
r
o
u
p
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
1
7
At a Glance
38
Operating 38 Hotels
�348.5m
2017 Revenue
�104.9m
2017 Adjusted EBITDA
No.1
Hotels Operator in Ireland
�1bn
in Hotel Assets
7,674
Hotel Rooms
10%
RevPar increase
4,326
Employees: Full-time & Casual
980
New Rooms expected
in 2018
Contents
2
Strategic Report
The Dalata Way 2
Chairman’s Statement 4
Chief Executive’s Review 6
Strategy and Business Model 10
- Dalata's Markets 10
- Business Model 12
- Strategic Priorities 14
- Our Brands 24
Financial Review 26
Risk Management 36
Responsible Business Report 44
55
Corporate Governance
Chairman’s Overview 55
Our Board of Directors 56
Executive Management Team 58
Corporate Governance Report 60
Nomination Committee Report 70
Audit and Risk Committee Report 72
Remuneration Committee Report 78
Directors' Report 90
96
Financial Statements
Statement of Directors’ Responsibilities
in respect of the Annual Report and
the Financial Statements 96
Independent Auditor’s Report 98
Consolidated Statement of Profit or Loss
and Other Comprehensive Income 103
Consolidated Statement of Financial Position 104
Consolidated Statement of Changes in Equity 105
Consolidated Statement of Cash Flows 107
Notes to the Consolidated Financial Statements 108
Company Statement of Financial Position 170
Company Statement of Changes in Equity 171
Company Statement of Cash Flows 172
Notes to the Company Financial Statements 173
178
Additional Information
Advisors 178
Shareholder information 179
Glossary and Supplementary Financial Information 180
2
Dalata Hotel Group plc
The Dalata Way
3
The Dalata Way
We are a people business!
We create a culture dedicated to service
excellence and fairness, where our
people can contribute their individual
talents to growing a sustainable
business that manages its social and
environmental impacts responsibly.
We continue to advance the wellbeing
of the people we engage with,
work with and serve.
Our People
Dalata is the place where you
can do great things - individually
and as a team. You will have the
opportunity to develop your talent,
be recognised and rewarded for
your commitment and pursue a
fulfilling career.
Our Fairness
We pride ourselves on creating
an objective, supportive and fair
working environment for our
employees, the people we deal
with and the communities we
work within.
Our Service
We ensure our service standards
are consistently high at every
opportunity. We strive for success,
are enthusiastic about what we do
and take responsibility for getting
things right.
Our Individuality
Our people are as individual
as our hotels. They bring their
own personality, character
and enthusiasm ensuring
the experience we provide
is always warm, welcoming,
genuine and friendly.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017 4
Dalata Hotel Group plc
Chairman's Statement
Chairman’s
Statement
5
OUTLOOK
The year 2017 was one of economic
growth and falling unemployment
in Ireland, together with continuing
uncertainty around the political
climates in the UK and the US,
two very important markets for
Irish tourism and for our business.
Demand for hotel rooms in most of
our markets, and especially in Dublin,
has continued to grow. We continue
to monitor and plan for events in our
markets, while focusing on the delivery
of excellent service to our guests
and on the growth of the business.
We remain confident that we will
deliver further profitable growth in our
business in the months ahead.
John Hennessy
Non-Executive Chairman
people, and we recruit, train, develop
and motivate them to care about our
guests, the communities in which
we operate and the environment in
which our properties are located. We
listen carefully to feedback from our
guests and our own people, obtained
informally and formally through market
and employee surveys, and we act on
that feedback. Our goal is continuously
to improve the experiences of our
guests and our people.
During 2017 an external evaluation
of the performance of the Board
was undertaken. The results were
very positive, and recommendations
arising have been incorporated into
the work of the Board. The Group
has continued to benefit from the
extensive experience, knowledge
and expertise of each member of
our Board, and I would like to thank
the Directors for their hard work and
dedication during the year.
At Dalata we are firmly committed to
maintaining the highest standards of
corporate governance. Dalata seeks
to comply with all requirements of
the UK Corporate Governance Code
2016, the Irish Corporate Governance
Annex and best practice generally in
respect of its corporate governance
practices. Details of our approach
are set out in the separate Corporate
Governance report.
DIVIDEND
We announced our intention to
commence the payment of a dividend
from 2018 onwards when we released
our preliminary results for 2017. The
Board will adopt a progressive dividend
policy with the payout based on a
percentage of profit after tax which
is expected to be in the range of 20%
to 30%. An interim dividend will be
declared with the interim results in
2018. This announcement delivers on
our promise to commence payment of
dividends when the time is right.
PEOPLE
In response to our culture and
values, our people continue to show
exceptional talent, commitment and
dedication, without which we would be
unable to deliver the levels of growth
and profitability we have achieved. At
the end of 2017 Dalata employed 4,326
full-time and casual employees, and
this figure continues to increase. Our
training and management development
programmes are designed to provide
all of our people with the opportunity
to grow with the organisation and to
build satisfying and rewarding careers.
On behalf of the Board, I would like
to say thank you to all of our people
for choosing to bring their skills and
energy to the Group and for their
consistent delivery of excellent service
to our guests and to the organisation.
BOARD AND CORPORATE
GOVERNANCE
Your Board comprises four non-
executive directors and three
executive directors, supported by
Dalata’s company secretarial team.
Board members meet formally in
Board committees and at Board
meetings, and also less formally, to
discuss issues affecting the business
of the Group. The non-executive
directors also meet as a group from
time to time.
These communications address
issues and transactions arising in
the business, with a significant focus
on the strategic direction of the
business and on planning beyond
the immediate future.
Our culture is people-centred,
with real decision-making power
devolved to those responsible for
the delivery of service to our guests.
Introduction
Thank you for taking the time to
read the annual report and accounts
of Dalata Hotel Group plc for the
12 months ended 31 December 2017.
It is my pleasure to report that 2017
was a year of further growth and
success for Dalata. During the year
we added 265 rooms to our portfolio
and continued our planned expansion
in the UK. We also progressed the
construction of new hotels on two
sites in Dublin, one in Belfast and one
in Cork. Meanwhile, assets acquired
in 2016, including the Clayton Hotel,
Burlington Road, have been integrated
very successfully into the Group.
Although continued expansion of the
Group, most immediately in the UK in
the short term, remains a key priority
for Dalata, we are first and foremost
hotel operators. The acquisition and
construction of hotel properties
enables us to bring to the market
our expertise and experience in
operating hotels. Our aim is to deliver
the best possible experience to all of
our guests, and we do this through a
combination of our culture and values,
the experience and commitment of
our people and the efficient use of
systems and structures to support
our business.
All of this has allowed us to deliver
excellent financial performance in
2017. Total revenues in the business
increased from €290.6 million in
2016 to €348.5 million in 2017, and
our EBITDA climbed to €102.7 million
in 2017 from €71.1 million in the
previous year.
We ended the year with a strong
balance sheet and with market
capitalisation in excess of €1 billion.
Further details of our financial
performance can be found in the
Financial Review on pages 26 to 35.
CULTURE AND VALUES
Dalata has grown quickly and
profitably from small beginnings.
This could only happen with the right
culture and values in place in the
organisation. Our culture is people-
centred, with real decision-making
power devolved to those responsible
for the delivery of service to our
guests. This allows our leaders to lead
from the front, supported by strong
and efficient services provided from
the centre. We care about our
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017 6
7
Pat's
Review
know we have so much more to do.
In 2017 we started the movement
from acquisition to development
and while we did complete some
acquisitions in 2017 (Clayton Hotel
Birmingham, Clayton Hotel Liffey
Valley and Clayton Hotel Cardiff Lane,
both in Dublin) we moved into a phase
of new build with both extensions to
existing hotels and new build hotels.
In Dalata we have the skillsets to do
both acquisitions and develop new
hotels and extensions. I am delighted
that all our live building projects are
on time and on budget. All of these
projects will complete and open for
business in 2018 with the exception
of Maldron Hotel Newcastle which
will open in early 2019 (there is a
possibility Newcastle may open in
2018 but I am not promising that).
We are very focused on driving
business in our existing portfolio of
hotels. When a company is doing a lot
of new development or acquisitions it
is easy to lose focus on your current
business. The way we are structured
in Dalata means there is always
someone “minding the shop”. We
are currently building five new hotels
and building four major extensions
to existing hotels. This will add 980
new bedrooms to Dalata in 2018. We
are also in planning for more hotels
which will add an additional 1,000 plus
bedrooms by 2020.
In Dalata we strongly believe in
building our own brands which we will
always remain in control of. We have
built the two largest hotel brands ever
to exist in Ireland with our Maldron
and Clayton Hotels. We will continue
to roll these out across key cities in
the UK. Clayton Hotels are already
performing well in the UK and we
are looking forward to the opening
of our new Maldron Hotel Newcastle.
Both of these brands are continuing
to build at pace.
We currently have:
› 20 Clayton Hotels with 5,100 rooms
› 13 Maldron Hotels with 1,757 rooms
By end of 2018 we will have:
› 21 Clayton Hotels with 5,425 rooms
› 17 Maldron Hotels with 2,552 rooms
We also have two Maldron Hotels
in planning with 390 rooms and
two Clayton Hotels in planning with
600 rooms. We are also developing
a number of other brands in the
company. There are three of these
in existence today:
› Grain and Grill
› Club Vitae
› Red Bean Roastery
Developing and controlling these
ancillary brands in-house is key to
maximising revenue and profitability
in our ground floor operations. Grain
and Grill is our food and beverage
offering in our Maldron Hotels. We
do not have a group branded food
and beverage offering in our Clayton
Hotels as each hotel has its own food
and beverage offering.
Club Vitae is our leisure club brand.
These clubs are attached to our
hotels and attract outside paid
membership but are free to hotel
guests. Each has a fully equipped
gym and swimming pool. We currently
have 14 clubs and a total of 13,000
external members.
Red Bean Roastery is our coffee
house brand. We have been rolling
these out in each of our hotels over
the past year. We currently have
sixteen coffee docks in our Maldron
and Clayton Hotels.
The roll out of another eighteen
coffee docks will continue this year
across existing hotels and will be in all
new build hotels. All of this is a very
clear strategy in Dalata to own and
operate our own brands.
13
Maldron Hotels
with 1,757 rooms
9
hotels in the pipeline
plus
4
extensions
with
2,234
rooms (including extensions)
5
hotels opening by Q1 2019
with
1,244
rooms (including extensions)
and
4
hotels opening in 2020
with
990
rooms
There is an old saying “that time flies
when you are having fun” – We must
be having great craic in Dalata because
time is just flying by. We celebrated our
tenth birthday in August of 2017 and are
starting our fifth year as a listed company.
Since flotation we have seen dramatic
changes in the company.
In 2014 we had revenues of €79
million and adjusted EBITDA of €9
million. In 2017 we had revenues of
€349 million and adjusted EBITDA
of €105 million.
Over the past few years we put
together a group of hotels that
are well located, modern and well
invested. We have developed two
hotel brands that have significant
traction particularly in the Irish
market and are growing in the
UK market. We have built really
strong relationships with our key
customers in all our locations. We
have developed partnerships with
our suppliers where they offer more
than just product delivery. The most
pleasing aspect of the last few years
is the growth of our people. It is
most rewarding to observe the large
number of people that are growing up
in Dalata. We now have foundations in
place to continue building a long term
sustainable business with excellent
growth prospects.
2017 has seen a continuation of
progress across all areas. There is
great momentum in the business. You
can sense the energy and the drive
to improve and get things done. We
know we have a long way to go and
we cannot allow ourselves to become
complacent in any way. It is so easy
to become intoxicated with success
and many organisations allow this to
happen. In Dalata we are not great at
celebrating success because we
20
Clayton Hotels with
5,100 rooms
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcChief Executive's ReviewAnnual Report and Accounts 2017 8
9
The result of these moves and others
means that over one hundred people
get promoted further enhancing the
"grow your own" strategy. We have
just completed our third employee
survey. Overall I am reasonably happy
with the results. However there are
a number of areas which need our
improvement. This will continue to
be our focus this year. The survey is
an excellent way of engaging with
our people and gives us very clear
guidance to the things we need to
improve in this critical area.
I mentioned earlier how we are
very focused on our customer
engagement. It is relatively simple
to engage with our large customers
and we do a lot in this space. As
always we need to do more. With
our individual customers it is more
difficult as in the new digital age you
are not as close to your customer as
you would like. We have, however,
developed a very robust system of
customer feedback and this allows
us to take corrective action in our
product and service. Part of the
General Managers bonus is based
on performance in this area. I am
comfortable with the progress we
are making here. We will continue our
efforts on constant improvement.
This year we will have seen the
introduction of MIFID II. This will
change the way we engage with our
shareholders. In Dalata we believe
in very open accessible engagement
with our shareholders. In November
2017, we had a very successful
Capital Markets Day in London. We
also encourage our shareholders
to visit our business and get to
understand what we are about. We
also believe that access to the CEO
and Deputy CEO’s is very important.
When I meet with investors, I talk
a lot about our people and growing
our own. I also said as we open new
hotels the senior teams will come
internally. So this is a flavour of
what’s happening:
› Mike Gatt moves from
GM of Maldron Hotel Derry to
open Maldron Hotel Belfast
City. He is replaced by Linda
Folan, Deputy GM of Clayton
Hotel Leopardstown.
› Lynn Cawley moves from
Maldron Hotel Dublin Airport
to open Clayton Hotel
Charlemont. She is replaced
by Dara McEneaney, Deputy
GM in Clayton Hotel Dublin
Airport.
› Ann Marie Traynor moves
from GM Maldron Hotel
Smithfield to open Maldron
Hotel Kevin Street, she is
replaced by Patrick Cass
Deputy GM Maldron Hotel
Parnell Square.
› Robert McCarthy moves
from GM Maldron Hotel
Shandon Cork, he is
replaced by Tracy Newman
Deputy GM Clayton Hotel
Silversprings Cork.
› Anna Wadcock moves
from GM Clayton Hotel
Birmingham to Maldron
Hotel Newcastle.
This page: Red Bean Roastery
Opposite: Grain & Grill Restaurant,
Maldron Hotel Portlaoise
10
We celebrated our
tenth birthday in 2017
While this is time consuming we
believe it is the correct way to ensure
our message gets out there. We visit
many shareholders and attend many
investment conferences each year.
For an organisation the size of Dalata
we believe we can cover a lot of
ground and this will not change.
My thanks to our Board and our
people for the outstanding efforts in
2017. It simply can’t be done without
you. I come to work every day with
the same energy and enthusiasm as
I’ve always had. The energy comes
from all the talented driven young and
not so young people in Dalata.
Each year that I have written the
piece for the annual report I say
that the coming year will be one
of great opportunities for Dalata,
well this year is no different. We are
looking forward to all our new hotel
openings and the opening of the hotel
extensions. I am also looking forward
to announcing more exciting projects
that are currently bubbling. Work
continues on the existing hotels with
refurbishment going at a pace.
Long may it last.
Pat McCann
Chief Executive
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcChief Executive's ReviewAnnual Report and Accounts 2017 10
d
n
a
l
e
r
I
K
U
“ For the first time
since the global
financial crisis, all major
regions of the world are
experiencing an uptick
in economic growth”
World Bank, Global Economic
Prospects, January 2018
Global Overview
A strong global economy is good for
the travel and tourism industry and
with it the hotel industry. Other key
growth drivers include a competitive
environment in the airline industry
with continued growth of low cost
carriers and prevailing low fuel
prices, healthy demand for corporate
travel driven by strong economies,
and a shift in spending patterns
Visitor Numbers
IRE GDP
from products to experiences with
consumers opting to spend more
on recreation, travel and eating out
compared with durable goods and
clothing. According to World Bank
figures international travel departures
across the globe have doubled from
approximately 600 million to 1.3 billion
in the past two decades.1
Global international tourist arrivals
were up 6.4% in the first half of 2017
(compared with 3.9% for the whole
of 2016). For Europe the figures
were 7.7% and 2.1% respectively and
indicators for the remainder of the
year were also positive.2 2017 was
a good year for hotels globally with
RevPAR up in all of the major regions;
in Europe RevPAR increased by
5.1%.3 The outlook continues to look
positive. In January 2018 the World
Bank forecast global real GDP growth
of around 3% per annum for the next
three years, marginally up on its June
2017 prediction. For the industry this is
encouraging, assuming there are
no major events that could disrupt
overall international tourism, whether
related to terrorism, health scares or
natural disasters.
1 Deloitte, 2018 Travel and Hospitality
Industry Outlook
2 World Travel and Tourism Council,
November 2017 Monthly Economic Impact
3 STR Global Hotel Review January 2018
Dublin
Reg Ire
UK
11
Visitor Numbers
RevPAR (€)
Commentary
the UK, 10% from mainland Europe
and 2% from other countries6.
The Irish Government’s decision
to maintain the 9% rate of VAT on
tourism services, in line with the
bulk of our European competitors,
helped to maintain competitiveness in
the industry. The outlook for the Irish
economy is generally positive in the
near term, according to commentators,
but Brexit creates uncertainty.
Visitor Numbers
17
16
15
14
13
n
i
l
b
u
D
0
2M
4M 6M
8M 10M
0
5
10
15
20
25
30
Source: Central Statistics
IRE GDP
Office Ireland
GDP Growth
4
Irish Tourism Industry Confederation
(ITIC) estimates
5 Central Statistics Office Ireland,
2M
8M 10M
4M 6M
January 2018
6 Crowe Horwath, Ireland Annual
Hotel Industry Survey 2017
0
5
10
15
20
25
30
Source: Central Bank of Ireland
Visitor Numbers
Dublin
120
100
80
60
40
20
0
13
14
15
UK GDP
17
16
d
n
a
l
e
r
I
l
a
n
o
g
e
R
i
17
16
15
14
13
17
16
15
14
13
10 STR Global
13
14
15
16
17
Reg Ire
RevPAR (€)
Commentary
20
10
0
UK
13
14
15
16
17
13
14
15
16
17
Direct Links to Key Risks
See pages 38 to 41
120
1
2
5
7
11
100
13
80
60
40
20
0
Direct Links to Key Risks
See pages 38 to 41
1
2
7
11
13
80
The Dublin market grew strongly in 2017
70
with RevPAR up 7.7% to €113.50, (83%
60
Occupancy) and Average Daily Rates
(ADR) up 6.9% to €136.80. Some new
supply will enter the market in 2018 and
40
RevPAR growth of 5% is forecast.10
50
30
100
120
2017 was a good year in regional Ireland; in
the key cities: Cork RevPAR was up 13.6% to
€77.40 (80% occupancy), with ADR up 11%
80
at €97.00; Galway RevPAR was up 7.6% to
€80.20 (77% Occupancy), with ADR up 5%
60
to €104.40. Limerick RevPAR was up 13.2%
40
to €54.80 (72.1% Occupancy), with ADR up
9.6% to €76.00. Conditions are conducive to
20
limited new supply in Cork and Galway but
0
not in the rest of the country.
14
15
16
13
17
Dalata's
Markets
Ireland’s economy is growing with
figures of close to 6% GDP growth
estimated for 2017, backed by strong
growth in investment, employment and
consumer confidence.
2017 was a record year for Irish tourism
with the industry worth an estimated
€8.7 billion annually4. Trips to Ireland
reached 9.9m5, up 3.6% on 2016. Trips
from Britain, fell by 5% but mainland
Europe was up 5% and the North
American and Rest of the World markets
enjoyed double digit growth. The impact
of Brexit on the EUR/GBP exchange
17
rate is to blame for the weak numbers
from Britain but increased North
16
American airline capacity and effective
15
selling of Ireland as a travel destination
14
in international markets offset the
damage. 65% of hotel business in
Ireland is sourced from the Irish market
0
(including Northern Ireland), 12%
comes from the United States, 11% from
13
40M
Dublin
Reg Ire
GDP growth in the UK is estimated at
1.7% in 2017 (1.8% in 2016)7. Following
initial buoyancy in the six months
following the decision to exit the EU in
June 2016, economic growth in 2017
did not benefit from stronger growth in
the global economy. Weaker consumer
spending growth, low wage growth and
weak investment growth are the factors
cited for the slowdown.
40M
35M
30M
120
The outcome of Brexit negotiations
is a source of uncertainty for
economic forecasters with the
Bank of England predicting 1.7%
GDP growth in 2018 and similar
levels in 2019.
25M
100
20M
80
15M
Visitor Numbers
7 Bank of England, February 2018
Inflation Report
8 Visitbritain.org
9 British Office for National Statistics
20
10M
60
5M
40
0
0
Visitor Numbers
17
16
15
14
13
UK GDP
0
5
10 15 20 25 30 35 40
Source: www.visitbritain.org
80
70
60
50
40
30
20
10
0
35M
The UK tourism industry is enjoying
30M
record numbers with an estimated 6%
17
increase in international visitors to 39.9
25M
million in 2017 and an 11.6% increase in
20M
expenditure to £25.1 billion8. 68% of visits
15
15M
to the UK are from mainland Europe,
10M
14
10% from the USA, 8% from the Republic
5M
13
of Ireland, 7% from Asia and 7% from
0
other markets9.
16
0
5
13
14
15
16
17
GDP Growth
17
16
15
14
13
10 15 20 25 30 35 40
0.0 0.5
1.0 1.5 2.0 2.5 3.0 3.5
Source: Office of National Statistics
17
16
15
14
13
0.0 0.5
1.0 1.5 2.0 2.5 3.0 3.5
3.5
13
14
15
3.0
16
17
K
U
2.5
2.0
1.5
1.0
0.5
0.0
13
14
15
16
17
Commentary
London RevPAR grew by 4.4% with early
strength waning towards the end of the year.
Direct Links to Key Risks
See pages 38 to 41
1
2
3
7
13
Regional UK saw 3.7% growth in RevPAR
with Belfast achieving a market leading 17%
growth, Edinburgh was up 12%, Cardiff up
8%, Liverpool up 6%, Birmingham up 2%
and Manchester saw marginal growth whilst
Leeds and Southampton were flat.
17
120
100
80
60
40
20
0
l
l
a
b
o
G
R
T
S
:
e
c
r
u
o
S
80
70
60
50
40
30
20
10
0
UK
120
100
80
60
40
20
0
13
14
15
16
17
3.5
3.0
RevPAR (£)
2.5
2.0
1.5
1.0
0.5
0.0
13
14
15
13
14
15
16
17
l
l
a
b
o
G
R
T
S
:
e
c
r
u
o
S
l
l
a
b
o
G
R
T
S
:
e
c
r
u
o
S
16
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcStrategy and Business ModelAnnual Report and Accounts 2017
12
13
Business
Model
Inputs
�1bn
In hotel assets
�129m
Spent on hotel acquisitions
in 2017
26
Owned hotels
with 5,247 rooms
9
Leased hotels
with 2,234 rooms
210
Average rooms per
owned and leased hotel
4,326
Full and part-time
employees
WHAT WE DO
Dalata is a hotel owner, operator and
brand owner. The Group operates 38
hotels, of which 26 are owned, nine
are leased and three are operated
under management contract. The
portfolio includes 20 Clayton Hotels,
13 Maldron Hotels and 5 individually
branded hotels. All Clayton Hotels
are four star rated and Maldron
Hotels has five four star and eight
three star properties. 67% of group
revenue is derived from the sale of
accommodation, 26% comes from
food and beverage sales and 7%
from other services (including leisure
centre membership and car parking).
The company owns property assets
valued at €1 billion including €129
million spent on hotel acquisitions
in 2017. The group employed 4,326
full and part-time employees at the
end of 2017. Our customer promise
is based on the quality and comfort
of our bedrooms and facilities, good
food and care for our guests by our
friendly, helpful staff. We depend
on many suppliers who are selected
by the central purchasing team to
support the hotels in service delivery.
As set out on pages 20 and 21 the
training and development of our staff
is a strategic priority for the group to
ensure we continue to develop and
deliver the distinctive experience
promised by our hotel brands.
In 2017 we had 3.6 million overnight
guests and served 5.3 million meals
to our customers.
WHERE WE OPERATE
15 Hotels, accounting for 58% of revenue
are located in Dublin, 12 hotels (22% of
revenue) are in Regional Ireland and 8 Hotels
(20% of revenue) are in the United Kingdom.
There are 7,674 rooms in the portfolio,
including our managed properties, and our
hotels are generally located in primary city-
centre locations or close to key amenities
(airports, central business districts, key
attractions, etc). In Dublin our 3,992 rooms
gives the group a 20% market share; Cork,
411 rooms (17% market share); Galway, 412
rooms (13%) and Limerick 300 rooms (16%).
These four cities account for 91% of the
group’s business in the Republic of Ireland.
Currently the group has UK hotels in Belfast,
Derry, Cardiff, Birmingham, Manchester,
Leeds and London.
Revenue
58% Dublin
22% Regional
Ireland
20% UK
Owned and leased rooms
54% Dublin
22% Regional
Ireland
24% UK
Key Cities
Dublin
Cork
Galway
Limerick
3,992
Rooms
411
Rooms
412
Rooms
300
Rooms
Belfast London Manchester
Birmingham Leeds Cardiff
HOW WE MAKE MONEY
We sell hotel accommodation, food
and beverage and ancillary services;
2017 revenue was €348m. Revenues
are sourced from direct bookings
(brand website and through our sales
teams) by key corporate accounts,
tour operators, conference organisers
and individual guests, and indirect
bookings through agents (online travel
agents, traditional travel agents, etc).
After deducting costs of €245m (of
which €95m, or 39% were payroll
costs), the group reported €103m of
EBITDA in 2017. Revenue recognition
is straightforward with the majority
of guest accounts settled on check-
out. We have a strong balance sheet
with total assets of €1.1bn including
€1bn of property assets and total
loans and borrowings of €260m.
The business is highly cash generative
with a negative investment in working
capital. Trade and other payables
exceeded trade and other receivable
by €44 million at the end of 2017.
Cash available after the payment of
tax and debt service may be applied
for maintenance capital expenditure,
reinvestment in new assets or to
provide a direct return to shareholders.
WHAT DIFFERENTIATES US
Dalata exclusively owns and
operates it own hotel brands. As the
exclusive owner/operator we have
invested in the resources to bring a
singular focus to the maximisation
of the return on investment in each
individual hotel. One voice, one goal
and full control.
allocations which are determined by
Central Office. Decisions are made
based on a number of criteria and
are strongly influenced by customer
feedback. Refurbishment projects
are assessed for their return on
investment and a reserve budget is
maintained to deal with contingencies
arising during the year.
In the hotel sector generally and
specifically in our target market
segments, brand ownership, business
ownership and hotel operations are
often fragmented across multiple
interested parties. As such, interests
may not be aligned and return on
investment may be compromised.
Our hotel General Managers are
encouraged to engage with their
local communities and build strong
relationships with their business
clients. In addition to earnings
targets, managers are incentivised
to reach measurable targets for
employee engagement, customer
satisfaction and health and safety
management.
This combination of incentives
supported by our culture and values
(pages 2 and 3) and our work ethic,
creates a level of intensity around the
business that drives the maximum
return at each property.
General Managers compete for
maintenance capital expenditure
Central Office provides strategic
direction and oversight through
its experienced management team
and functional specialists. Central
Office activities include group
purchasing through central supply
contracts, training and development
programme design and delivery,
and brand management. The group
invests in information technology
to provide common tools to help
General Managers get the best
from the business, manage
rooms pricing optimally and
input resources efficiently.
The systems infrastructure is also
designed to provide central office
with up to the minute information
on group operations and financial
performance.
The vertical integration of the
business combined with our
decentralised management structure
allows us to develop a distinctive
customer experience and brand
integrity in the fragmented market
segment in which we operate.
Outputs
3.6m
Overnight guests
5.4m
Meals served
13
Thousand Leisure
Club Members
�105m
Adjusted EBITDA
�95m
Net Cash from
operating activities
�95m
Aggregate Payroll Costs
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcStrategy and Business ModelAnnual Report and Accounts 2017
14
15
Strategic
Priorities
Our
Customers
Our strategic objective is
to develop a sustainable
business that creates
long term value for our
shareholders and respects
the interests of our
wider stakeholders, our
employees, customers,
suppliers and communities.
The Board is engaged in
the process of strategy
development and approves
the long term objectives
and strategy.
Our
Growth
Our
People
Our
Brands
2017 Progress
2018 Focus
Strategy in Action
Feedback from over 120,000
customer reviews drove service
improvement for customers and
influenced investment decisions.
We rolled out the Red Bean Roastery
at 16 hotels and Grain and Grill
restaurant at 13 Maldron Hotels
as well as developing the Italian
Kitchen restaurant concept at
Clayton Hotel Dublin Airport.
2017 Progress
265 rooms (net) added to the
owned and leased portfolio in
2017 and 850 to the pipeline as
we deepened our relationships
with key institutional development
partners. Nine development
projects (five new hotels and
four extensions) are on target.
In 2018 we will address
areas for improvement
in customer experience
through continued
investment in technology,
our amenities and in
service enhancement.
Read more about
Our Customers
on page
16
Strategy in Action
Read more about
Our Growth
on page
18
2018 Focus
In 2018 we will complete
our live development
projects, commence
construction in Manchester
and Glasgow and seek
to secure a further 1,200
pipeline rooms as our
focus shifts towards the
UK market.
2017 Progress
2018 Focus
Strategy in Action
Four graduates from our
structured development
programmes were promoted to
General Manager positions with
160 colleagues enrolled on these
programmes. The company was
recognised as Ireland’s Best
Organisation in Learning and
Development at the 2017 Early
Career Awards.
The key objective for
2018 is to recruit from
within to complete the
management teams at our
five new hotel openings.
Read more about
Our People
on page
20
2017 Progress
2018 Focus
Strategy in Action
We invested €14.6 million to
refurbish 889 hotel bedrooms to
brand standards and, based on
market research, updated key
brand positioning statements and
developed new creative platforms.
We also invested in our own brand
websites to increase market share
and protect brand integrity.
We will continue our
investment in our
hotel brands through
refurbishment and digital
technology to maximise
the investment in the
properties we have acquired.
Read more about
Our Brands
on page
22
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcStrategy and Business ModelAnnual Report and Accounts 2017 16
17
develop a high quality brand standard
for meetings and events at all
our hotels.
We strive to be easy to do business
with and maintain a number of
structures to achieve this goal.
Executives at central office provide
support for key customers in the travel
trade, the conference and banqueting
segment and large corporate accounts,
providing a swift response to enquiries
and co-ordinating communication
across multiple properties where
this is required. Members of our
senior management team meet
with representatives of the largest
clients across the group to stay in
touch with their evolving needs and
collect direct feedback.
In 2018 we will address areas for
improvement in customer experience
through continued investment in
technology, our amenities and in
service enhancement.
We are driven to improve
customer experience
through continuous
engagement and
investment to meet
ever rising expectations.
Strategic
Priority
Our
Customers
Our customer strategy is based on
putting customers at the centre of
our thinking as we develop the other
elements of our strategy for growth
and development as a group.
Through our market research we
have identified the profile of key
customers in each market segment
for both Maldron and Clayton Hotel
brands. We use this research along
with direct customer feedback to
inform our decision making at every
level in the organisation: from day
to day operational responses, to the
development of service offerings, to
local capital investment priorities, and
through to design considerations for
refurbishments and new builds.
We collect customer feedback from
reviews posted online and post-stay
follow up emails and in 2017 we
received and processed over 120,000
customer reviews. This provides
an extensive profile of each hotel’s
strengths and weaknesses and our
General Managers are incentivised to
continually improve their customer
sentiment scores. We continue to
prioritise the development of our food
and beverage offering which accounts
for 26% of group revenue. The
highlights in 2017 were the roll out of
the Red Bean Roastery coffee concept
to 16 hotels, including the opening of
the first standalone branded coffee
shop at Clayton Hotel Leopardstown,
the roll out of the Grain and Grill
restaurant concept at 13 Maldron
Hotels and extensive groundwork to
2017
Progress
120,000
Customer Reviews
16
Red Bean Roastery
coffee docks opened
13
Grain and Grill
restaurants opened
Strategy
in Action
Clayton Hotel
Leeds
Embodying
Our Customer
Care Philosophy
In 2017 Clayton Hotel Leeds grew its customer sentiment by three
percentage points to 87%, one of the leading scores in the group and one
of the most improved. Moreover the hotel led the group for employee
engagement and grew RevPAR by 7% in a year when the Leeds city
market was flat.
Hotel General Manager Roger
Clark-Coates explains:
We believe passionately in
the relationship between staff
experience and the quality of the
guest experience and I focus on
employee satisfaction just as much
as I do on customer sentiment.
The management team buys into
this philosophy so that we work
as an effective unit rather than
individual departments. In my early
days at Clayton Hotel Leeds, we
discovered we were at risk of losing
a training company client that gave
us regular conference and bedroom
business; they felt standards had
slipped. I arranged to meet the
client’s management to really
understand where we were failing
in what we needed to do.
The whole team responded – duty
managers, meeting and events
co-ordinators, receptionists and
porters – and we put a plan in place
to win back confidence. It has been
a great success and today we are
this client’s benchmark hotel, and
the account has grown significantly.
Every event is managed like it’s the
first one and we take care to build
relationships across the team with
the client. Last Christmas they even
sent in presents for our staff!
Above: Clayton Hotel Leeds
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcStrategy and Business ModelAnnual Report and Accounts 2017 18
19
Strategic
Priority
Our
Growth
2017
Progress
265
Net increase in owned
and leased rooms
850
Rooms added to the pipeline
20
UK provincial cities identified for
development potential
2017 was a year of continued growth
with a net increase of 265 owned and
leased rooms with the addition of
Clayton Hotel Birmingham, Clayton
Hotel Liffey Valley and the disposal of
Croydon Park Hotel, along with the
arrival of the first 35 rooms at the
Clayton Hotel Dublin Airport extension.
We also acquired the freehold
equivalent interest in 232 rooms at
Clayton Hotel Cardiff Lane and the
freehold at Maldron Hotel Portlaoise.
The pipeline grew by 850 rooms
with the announcement of Clayton
Hotel Manchester (Portland Street),
Clayton Hotel Glasgow (Clyde Street)
and Maldron Hotel Glasgow (Renfrew
Street), properties scheduled for
2020 openings.
Following three years of growth by
acquisition we turned our attention in
2017 to completing the development
of over 1,200 rooms announced
in 2016 and growing the portfolio
pipeline. Our live development
projects, including five new hotels and
four extensions are all on schedule;
eight will open in 2018 with Maldron
Newcastle following in Q1 2019.
We have seen an important evolution
of our growth model in the past
year as partnerships with Deka
Immobilien and M&G Real Estate
have allowed us to enter stable
long term leases at a number of key
properties including Clayton Hotel
Cardiff, the Gibson Hotel Dublin and
Clayton Hotel Birmingham. These
transactions have demonstrated the
group’s attractiveness to institutional
landlords and our ability to manage
the balance sheet efficiently, growing
the business through asset-light
leasing structures (for more, see the
case study opposite).
Having broadly attained our market
share objectives in Ireland through
acquisition, the development of three
new properties scheduled to open in
2018 and extensions at four hotels, we
have a targeted strategy to roll out the
Clayton and Maldron brands across
provincial UK.
Our research has identified 20
provincial cities where market
conditions in the fragmented three and
four star segment are attractive for
the development of new build Clayton
and Maldron Hotels. Our objective is to
become the leading three / four star
operator in these target city markets
over a five to seven year period.
The focus for 2018 will be on
completing our live development
projects, overseeing the
commencement of construction at the
sites in Manchester and Glasgow and
growing our rooms pipeline to meet
our ambitious expansion strategy.
We currently have a pipeline of over 2,200
new rooms and are seeking opportunities
to expand our portfolio in the UK. We are
confident that we will meet our goal of
securing a further 1,200 rooms in 2018.
Strategy
in Action
Clayton Hotel
Birmingham
Efficient deal
execution and
integration
Above: Clayton Hotel Birmingham
We acquired the 174 bed Clayton
Hotel Birmingham (formerly Hotel La
Tour) in an off-market transaction
in July 2017 and in August 2017
completed a sale and leaseback
of the hotel with Deka Immobilien,
valuing the property at £30m.
Under the terms of the lease, we will
operate the hotel for a 35 year term
with an initial annual rent of £1.6m
subject to five year rent reviews
linked to the retail price index.
The hotel was rebranded in October
2017 and fully integrated into the
group before year-end. A new
management team is in place
and we have restructured the
food and beverage offer based
on customer feedback.
This year we will re-configure the
room stock to increase the number
of twin rooms making the hotel more
attractive at weekends – increasing
occupancy and boosting revenue.
Clayton Hotel Birmingham exhibits
a number of Dalata’s strengths: a
decisive execution of the acquisition
and sale and leaseback transactions,
negotiation of sustainable long-term
lease terms (a demonstration of the
strength of the group’s covenant),
and an efficient integration of the
hotel, capitalising on opportunities
for product enhancement and
revenue growth.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcStrategy and Business ModelAnnual Report and Accounts 2017 20
21
Strategic
Priority
Our
People
Development of our own people is
critical to ensure we have a talent
pipeline for our new hotels and is a
key element of managing the risk
associated with new openings. We
have developed twelve bespoke
structured programmes to allow
employees at all levels to develop and
grow their careers with the group.
The Altitude programme, developed
in partnership with the Irish
Management Institute and involving
several of the senior management
team in its delivery, is designed for
prospective General Managers and
saw four graduates secure General
Manager appointments in 2017.
Specialist programmes for sales and
revenue management executives
prepare participants for promotion,
and our graduate programme exposes
new recruits to all aspects of hotel
management over an eighteen month
period. To attract new talent, we
have developed relationships with a
number of universities and other third
level institutions, promoting Dalata
as an employer of choice. We have
over twenty colleagues preparing for
professional accounting qualifications
throughout the business and in 2017
we joined with Institute of Technology
Tralee to create a Certificate in
Culinary Management and Innovation
as part of our chef development
programme. In 2017, our structured
programmes have prepared 160
managers for further growth within
our business.
We also have a suite of personal
and skills workshops and modules,
delivered face to face and by webinar.
During 2017 we delivered over 250
face to face workshops and more than
40 webinars with content ranging
from management, health and safety,
and recruitment to service delivery
skills, allowing over 2,600 colleagues
attend internal training courses during
the year.
A key focus for the business in 2017
was developing our food and beverage
offering, and we backed this initiative
with skills training and workshops
for our food and beverage managers.
Our customer service training is
based on our core values of service
and individuality and we measure our
progress and target resources based on
customer feedback.
Dalata was recognised as Ireland’s
‘Best Organisation in Learning and
Development’ at the 2017 Early Career
Awards and our near-term objective
is to promote from within to build the
management teams for our new hotel
openings in 2018.
Developing our
own people is a key
strategic objective
and we now have the
capacity to resource
the management
teams for our new
hotels from within
the group.
2017
Progress
160
Structured programme
participants in 2017
4
2017 Altitude Programme
promotions to General Manager
2,600
Workshop and webinar
participants in 2017
Strategy
in Action
Maldron Hotel
Belfast City
Spotlight on
Internal Talent
Development
Our 237 room Maldron Hotel in
Belfast city centre opens in March
2018. The management team was
assembled in the second half of
2017 and started working on the
pre-opening phase of the project.
Four of the six senior management
team came from our internal
development programmes.
Mike Gatt is the General Manager and
previously managed Maldron Hotel
Derry, Mike has worked with Dalata for
four years and completed our Pinnacle
Programme for General Managers
which focuses on leadership, our
culture and our core values.
Deputy General Manager Orlaith
McCann is a graduate of the Altitude
programme with a background in
revenue management.
Most recently Deputy General
Manager at Maldron Hotel Newlands
Cross, Orlaith is charged with getting
the team in place for opening day.
Sales & Marketing Manager
Francine O’Hagan is a graduate of
our Sales Development Programme
and was promoted to Business
Development Manager in Clayton
Hotel Liffey Valley.
Revenue Manager Christine
Beattie is making the short trip
from Clayton Hotel Belfast where
she was Reservations Supervisor.
Christine was a part of our Revenue
Development Programme in 2017
and brings an intimate understanding
of the Belfast market to this busy
rooms focused hotel.
Above: Maldron Hotel Belfast City management team
Left to right: Francine O'Hagan (Sales and Marketing Manager), Orlaith McCann (Deputy General Manager),
Mike Gatt (General Manager) Christine Beattie (Revenue Manager).
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcStrategy and Business ModelAnnual Report and Accounts 2017 22
23
Strategic
Priority
Our
Brands
Our brands are central to our business
model (see page 13). Exclusively
owning all of our brand assets
combined with our differentiated
operating model gives us total
autonomy to optimise the strategy,
and the return on investment at
each individual hotel according to
its location and characteristics.
We invested €14.6 million in
2017 refurbishing 889 rooms
and transforming the ground floor
experience at several of our hotels.
This brings to 2,270 the number
of rooms refurbished to our brand
standards over the last four years.
As well as this investment in our
physical assets, we engaged in
extensive market research to gauge
brand awareness for our brands,
the effectiveness of our advertising
campaigns and to benchmark the
booking journey for our customers
compared with leading competitors
and online travel agents.
The research showed a high level of
brand awareness and net promoter
scores for our brands. However we
learned that we needed to do more
to clarify the positioning of each
brand in the mind of the consumer
and that we needed to simplify our
online booking journey.
To address these findings, we went
back to basics, considering how our
hotels are changing and the markets
we have targeted for expansion in
the next five years. Working with
our brand agency, we updated the
positioning for our Maldron and
Clayton Hotel brands, our brand
promises and clarified our target
customers. For Autumn 2017 we
developed a new creative platform
for each brand inspired by the
refreshed positioning.
We redesigned the brand and
individual hotel websites and we
moved to a new booking engine
provider and digital marketing agency.
Our websites were transformed,
modernised and simplified, eliminating
several steps from the booking
process. We marked the change by
launching a number of initiatives to
increase market share through our
brand websites (see opposite).
In 2017 we also continued to invest
in the Gibson Hotel (a Clayton family
member) and our food and beverage
brands along with our leisure club
brand Club Vitae, working to develop
a clear identity for our offer across
the group.
In 2018 we will continue our
refurbishment programmes and
investment in our brands to attract
increasing numbers of customers
through our direct booking channels.
We have developed our own brands
and are continuously investing in the physical
product and digital technologies to support
these brands and maximise the return on
investment in the hotels we have acquired.
2017
Progress
€14.6m
Investment in bedroom and
ground floor refurbishments
889
Room refurbishments
30
New websites
Strategy
in Action
Growing our
share of online
bookings
" Customers
now receive
an instant best
price comparison
from across the
web right on our
own website."
Our customer research told us
we needed to change a few things
so we’ve upgraded our booking
engine software and taken some
steps to encourage customers to
book directly with us through our
brand websites.
We know that nobody beats our online
prices but we learned that customer
perception differs, and tracking
pricing across all online distributors
is a challenge, so we implemented
Triptease’s price check widget.
Customers now receive an instant best
price comparison from across the web
directly on our website. The software
also alerts our Revenue Management
team the moment a price disparity
is reported so we can act quickly to
resolve the issue and maintain the
integrity of our best price promise.
We have also created a closed user
group for loyal Clayton and Maldron
customers. As an incentive to
sign-up we offered a €10 or £10
saving per room per night. Launched
in October 2017, “Click on Clayton”
has attracted over 45,000 members
to date. The closed group for
Maldron Hotels, "Make It Maldron",
launched in February 2018.
These initiatives are helping us grow
our share of online bookings with a
significant uptick in the rate of year
on year sales growth in the second
half of 2017.
In 2018 we will continue to develop
our technology platform and
initiatives to cultivate a growing
group of loyal direct customers.
Join now & save €10/£10
per room per night
every time you book
at maldronhotels.com
Visit claytonhotels.com
SAVE €10 PER ROOM
PER NIGHT EVERY
TIME YOU STAY!
CLICK & SAVE €10
Dear John,
This is the e-mail introduction
that could go here.
Magnatur rerro omnim que nonsecab in con pos delectibus a
coremquaeri ommoditas autae dolendis exceperspel ipsant mod
etur, to cullamusa et odignimus am dolupic to verferuption natio
quamet eaquisin ne viducimust as del ipid qui noneste corehen
deliquiam, adis dolore eaquia exeres es maios doluptati quis adis
ipitati aspidellabo. Nempel mo que officienet fugitaes mossinv.
exerspel esci deleseq uasimus dessequi acerrov idellen danditam,
cones il ipienis conem numet des mil ipsumquam laboribusam eum
aboriatur re ne vellaceri aligendae di.
All the best,
The Clayton Team
CLICK & SAVE €10
Don’t forget when you book, always
CLICK ON CLAYTON at claytonhotels.com –
save €10 per room per night every time you stay.
© 2017 Clayton Hotels
Update your subscription preferences
View our privacy policy
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcStrategy and Business ModelAnnual Report and Accounts 2017 24
25
Our Brands We exclusively own and
operate all of our own brands.
This gives us the autonomy to optimise
the return on investment at each hotel.
Clayton & Maldron Hotels are Ireland's two
largest hotel brands with a growing presence
in the larger cities in the UK.
Club Vitae is the
largest leisure centre
brand in Ireland.
.
Red Bean Roastery coffee
brand has been rolled out
to 16 hotels across the
portfolio with another
18 hotels planned for 2018.
Grain & Grill restaurant
brand has now been
rolled out at almost all
of our Maldron Hotels.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcStrategy and Business ModelAnnual Report and Accounts 2017 26
27
Financial
Review
10.4%
Increase in Group RevPAR
42.9%
2017 Segments EBITDAR margin
€129m
Spent on hotel acquisitions in 2017
€1bn
Hotel assets at 31 December 2017
GROUP REVENUE & EBITDA
€’000
Revenue
Adjusted EBITDA
EBITDA
Profit Before Tax
Basic EPS
2016
Variance
2017
348,474
104,873
102,657
77,287
290,551
85,132
71,084
44,111
37.2 cents
19.1 cents
19.9%
23.2%
44.4%
75.2%
94.8%
I am very pleased with the financial
performance of the Group in 2017.
Our RevPAR growth outperformed
the market in each of the three
regions leading to an increase of
10.4% in Group RevPAR.
2017 was another very good year at
Dalata for four key reasons. Firstly,
the performance of our existing
hotels was again very strong.
Secondly, we had another year in
which we managed to execute some
very valuable acquisitions in Ireland
and the UK. Thirdly, our development
pipeline has proceeded on time and
within budget and lastly, we made
significant progress in defining and
executing our UK growth strategy.
I am very pleased with the financial
performance of the Group in 2017.
Our RevPAR growth outperformed
the market in each of our three
regions leading to an increase
of 10.4% in Group RevPAR. We
converted additional revenue strongly
to the EBITDAR line resulting in
Segments EBITDAR margin growing
from 41.4% to 42.9%.
We spent €129 million on acquisitions
(business combination and hotel
asset acquisitions) and €59 million
on the ongoing construction of our
new hotels and extensions. The first
of our new hotels opens in Belfast
in March 2018 while the 141-room
extension at Clayton Hotel Dublin
Airport will be completed by the end
of May 2018. We continue to secure
new hotel developments in the UK.
We have entered into a lease for
Clayton Hotel Birmingham and have
secured agreements to lease new
Clayton hotels in Manchester and
Glasgow as well as a new Maldron
hotel in Glasgow. As expanded on in
later paragraphs, we have continued
to invest in technology and property
refurbishment. This delivers benefits
to our customers while our focus
on our people has meant that our
employee satisfaction remains high.
I firmly believe that if you maintain
your product, exceed the expectations
of the customers who stay with you
and take care of the employees that
serve those customers, the financial
returns will follow for shareholders.
We have entered into
a lease for Clayton
Hotel Birmingham
and have secured
agreements to lease
new Clayton hotels
in Manchester and
Glasgow as well as
a new Maldron hotel
in Glasgow.
Group Revenue grew by €57.9 million
(19.9%) as a result of (i) the strong
RevPAR growth within the existing
portfolio, (ii) the full year contribution
from those hotels acquired or first
leased in 2016 and (iii) the revenue
generated at hotels purchased in
2017. The additional revenue was
converted strongly to the EBITDAR
line. I will focus in more depth on this
conversion within the commentary on
the individual segments.
Rent increased substantially in 2017.
There were a number of factors at play
here, the most significant of which
was the beginning of our leasehold
at the Clayton Hotel Burlington Road
Hotel in November 2016.
ADJUSTING ITEMS TO EBITDA
We isolate items that are not directly
related to trading and are non-
recurring in nature. In 2016, the
adjusting items included impairment
of goodwill, acquisition costs,
stock exchange listing costs and
net revaluation movements. The
impairment of goodwill was the most
significant at €10.3 million. There
was no such impairment in 2017. The
adjusting items in 2017 relate to a
lower level of acquisition costs and
net revaluation movements offset to
a degree by gains on the disposal of
properties and a subsidiary.
EARNINGS PER SHARE
Basic EPS has grown by a very
satisfying 94.8% from 19.1 cent to
37.2 cent. This is driven primarily
by the 44.4% increase in Group
EBITDA to €102.7 million. The non-
recurrence of the 2016 goodwill
impairment charge of €10.3 million
was a contributing factor to the €31.6
million increase in Group EBITDA.
Our finance costs were lower due
to the capitalisation of interest that
related to borrowings used to fund
our current development pipeline
of new hotels and extensions. Our
effective tax rate was also lower in
2017 at 11.6% (2016: 20.8%) due to
(i) the impairment of goodwill in 2016
not being a tax-deductible cost and
(ii) the benefit of tax losses from
previous acquisitions to which no
value had been initially attributed.
DIVIDENDS
In February 2018, the Board
announced its intention to commence
the payment of dividends during 2018.
Having reviewed carefully our cash
flow projections for the next three
years, we concluded that we have the
capacity to pay a dividend without
restricting our growth strategies.
In the same way as we pay interest to
our lenders and rent to our landlords,
we feel it is appropriate to pay
dividends to our shareholders. It is
intended that the dividend will be in
the range of 20% to 30% of profit
after tax.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcFinancial ReviewAnnual Report and Accounts 2017 28
29
15
Dublin hotels
11%
RevPAR increase at our Dublin
hotels (excluding Clayton Hotel
Burlington Road)
49.3%
2017 Dublin EBITDAR margin
TRADING REVIEW BY SEGMENT
Dublin
€’000
Room revenue
Food and beverage revenue
Other revenue
Total revenue
EBITDAR
Rent
EBITDA
2016
Variance
2017
141,725
46,198
12,782
200,705
99,006
107,370
35,392
9,183
151,945
72,992
(26,376)
(19,520)
72,630
53,472
34,355
10,806
3,599
48,760
26,014
(6,856)
19,158
EBITDAR margin %
49.3%
48.0%
130bps
Performance Statistics
(reflects full 12 months’ performance of the hotels in this portfolio for both years
regardless of when acquired – Clayton Hotel Burlington Road is excluded from
the RevPAR statistics because its performance in the transitional period since its
November 2016 acquisition has a disproportionate impact because of its size).
Occupancy
Average room rate
RevPAR
2017
86.4%
€114.52
€99.00
2016
85.1%
€104.79
€89.17
Variance
130bps
€9.73
€9.83
Dublin remains our key market with
3,992 rooms, it generated 57.6%
of Group revenue and 61.2% of the
Group’s Segment EBITDA in 2017.
Therefore, I am delighted to report
that we continued to outperform the
Dublin market as a whole in 2017 with
RevPAR growth (excluding Clayton
Hotel Burlington Road) of 11.0%
versus the market as a whole at 7.7%.
I believe that this outperformance
is a result of (i) our decentralised
revenue management model, (ii) the
benefits of our ongoing refurbishment
programme and (iii) our mix of
business being less reliant on the
transient segment where growth in
rates is currently more difficult to
achieve. Clayton Hotel Cardiff Lane,
Clayton Hotel Dublin Airport, Clayton
Hotel Leopardstown, Maldron Hotel
Dublin Airport, The Gibson Hotel and
the Tara Towers Hotel all performed
exceptionally well.
The full year impact of the Clayton
Hotel Burlington Road added €8.4
million to food and beverage revenue.
Growth in food and beverage revenue
in other hotels continues to be
more modest than growth in rooms
revenue. Helped by the introduction
of the Alkimii payroll management
system in mid-2016, I am very
pleased to see food and beverage
department profit margins grew
from 29.7% to 30.9%.
The existing Dublin hotels achieved
a ‘like for like’ EBITDAR increase of
€9.6 million, reflecting a very strong
75.0% conversion of additional
revenue to EBITDAR. We are very
focused on the conversion of
additional revenue to profit and I am
very pleased with the conversion
rate we achieved in Dublin. EBITDAR
margin came in at a very strong
49.3% for the year.
Rent increased by €6.9 million versus
2016 due to the full year impact of the
acquisition of the leasehold interest
at the Clayton Hotel Burlington Road
(November 2016) and The Gibson
Hotel (March 2016). There were
increases in performance related
rent payments in the Ballsbridge
Hotel and Maldron Hotel Dublin
Airport. The acquisition of certain
parts of the long leasehold interests
of the Clayton Hotel Cardiff Lane
resulted in a rent saving of €1.2
million in 2017. The purchase of a
property (€1.4 million) and a revised
lease for another property (€0.6
million) during 2017 resulted in a €2
million release of estimated accruals
and liabilities.
We added 35 new rooms in November
to our Clayton Hotel in Dublin Airport.
A further 106 rooms will be added in
May 2018. Our new Maldron Hotel in
Kevin Street, Dublin opens in June
2018 and there will be a new Clayton
Hotel in Charlemont, Dublin by
November 2018. We are also building
extensions at Maldron Hotel Parnell
Square and Clayton Hotel Ballsbridge
in Dublin.
TRADING REVIEW BY SEGMENT
Regional Ireland
€’000
Room revenue
Food and beverage revenue
Other revenue
Total revenue
EBITDAR
Rent
EBITDA contribution
2017
41,648
26,529
7,863
76,040
21,450
(1,179)
20,271
2016
Variance
36,100
25,174
7,193
68,467
18,170
(1,939)
16,231
5,548
1,355
670
7,573
3,280
760
4,040
EBITDAR margin
28.2%
26.5%
170bps
Performance Statistics
(reflects full 12 months’ performance of the hotels in this portfolio for both
years regardless of when acquired)
Occupancy
Average room rate
RevPAR
2017
75.5%
€92.03
€69.45
2016
Variance
74.0%
€86.16
€63.68
150bps
€5.87
€5.77
12
Regional Ireland hotels
9.1%
RevPAR increase at our
Regional Ireland hotels
28.2%
2017 Regional Ireland
EBITDAR margin
Our Regional Ireland portfolio
operates 1,643 rooms and
represented 21.8% of the Group’s
total revenue and 17.1% of the Group’s
Segments EBITDA in 2017. 70% of
revenues in our Regional Ireland
portfolio are generated in the cities
of Cork, Galway and Limerick.
Dalata’s hotels in Regional Ireland
achieved a RevPAR growth year on
year of 9.1%. RevPAR in our Cork
hotels grew by 8.7% versus the
market growth of 13.6%. Maldron
Hotel Shandon Cork City and Clayton
Hotel Silver Springs outperformed the
market. RevPAR growth at Clayton
Hotel Cork City was impacted by a
significant refurbishment project in
Q1 2017 and the changeover from the
Clarion Global Distribution System
(GDS). RevPAR in our Galway hotels
grew by 6.6% versus the market
growth of 7.6%. Clayton Hotel Galway
and Maldron Hotel Galway achieved
higher than market RevPAR growth
but Maldron Hotel Sandy Road was
behind market growth due to the
impact of (i) very strong trading
performance in 2016 where the hotel
benefitted from a very large demand
for rooms generated by a local
project and (ii) the beginning of the
redevelopment project at the hotel in
the final quarter. Our Limerick hotels
grew RevPAR by 18.4% versus the
market growth of 13.2%.
Food and Beverage revenue increased
by €1.4 million due to full year impact
of Clayton Hotel Cork City, Clayton
Hotel Limerick and Clayton Hotel
Sligo (€1.2 million) and €0.2 million
growth in other properties on a like
for like basis. Food and Beverage
profit margins grew slightly from
25.3% to 25.5% and this remains an
area of focus for us as we seek to
reap the full benefit of technology
introduced in the Group.
EBITDAR grew on a ‘like for like’
basis by €2.8 million reflecting
an excellent 71.8% conversion of
additional revenue to the EBITDAR
line. This was driven primarily by very
strong conversion of rooms revenue
to rooms department profit. EBITDAR
margin for the year came in at 28.2%.
Rent decreased by €0.4 million due
to the purchase of the freehold of
Maldron Hotel Portlaoise (May 2017)
and a further €0.4 million due to
the full year impact of the freehold
acquisition of Maldron Hotel Shandon
Cork City in September 2016 and
Clayton Hotel Limerick in June 2016.
Maldron Hotel South Mall Cork is
scheduled to open in December
2018. We are also adding 63 rooms to
Maldron Hotel Sandy Road in Galway
as part of a full redevelopment of
that hotel. Both are exciting new
developments within our Regional
Ireland portfolio.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcFinancial ReviewAnnual Report and Accounts 2017 30
31
TRADING REVIEW BY SEGMENT
United Kingdom (Local Currency)
£’000
Room revenue
Food and beverage revenue
Other revenue
Total revenue
EBITDAR
Rent
EBITDA contribution
2017
41,957
14,017
5,168
61,142
23,718
(2,862)
20,856
2016
37,866
13,440
4,176
55,482
21,883
(3,274)
18,609
Variance
4,091
577
992
5,660
1,835
412
2,247
EBITDAR margin
38.8%
39.4%
(60bps)
Performance Statistics
(reflects full 12 months’ performance of the hotels in this portfolio for both
years regardless of when acquired)
Occupancy
Average room rate
RevPAR
2017
83.0%
£80.31
£66.64
2016
80.3%
£75.67
£60.78
Variance
270bps
£4.64
£5.86
Our UK portfolio consists of 1,731
rooms and represented 20.0% of
the Group’s total translated revenue
and 20.0% of the Group’s translated
Segments EBITDA in 2017. Given
our current growth ambitions in
the UK, we look very closely at the
performance of our UK portfolio. For
that reason, I am delighted that we
managed to grow RevPAR by 9.6% in
2017. We performed particularly well
in Leeds, Manchester and Cardiff and
these are the types of regional cities
that we plan to locate new hotels
within. We also performed very well
in London where the extended and
refurbished Clayton Hotel Chiswick
performed strongly.
Food and Beverage revenue rose on
an overall basis by £0.6 million. The
impact of the sale of the Croydon
Park Hotel and the acquisition of the
Clayton Hotel Birmingham broadly
cancelled each other out in terms of
food and beverage revenue. Excluding
the disposed Croydon Park Hotel
and the acquired Clayton Hotel
Birmingham, Food and Beverage
profit margins fell marginally from
32.3% to 31.5% reflecting some
inflationary pressures on payroll and
food costs.
EBITDAR increased by £1.8 million in
2017. This was predominately driven
by the performance of the existing
UK hotels. As anticipated, the margin
achieved in Clayton Hotel Birmingham
in the second half of 2017 is lower
than the Group’s normal margins as it
takes time and expense to implement
Dalata’s operating model. Excluding
the results of Croydon Park Hotel and
Clayton Hotel Birmingham, EBITDAR
margin grew at our UK hotels from
40.2% to 40.5%.
Rent has decreased by £0.4 million
due to the disposal of Croydon Park
Hotel in June 2017 and the freehold
acquisition of Clayton Hotel Cardiff
in October 2016. These savings were
offset to a degree by the subsequent
sale and lease backs of Clayton Hotel
Cardiff in June 2017 and Clayton
Hotel Birmingham in August 2017.
Our new Maldron Hotel opens in
Belfast in March 2018. A new Maldron
is also currently under construction in
Newcastle while we announced three
very exciting new hotel developments
in Glasgow (2) and Manchester
during 2017. The full UK pipeline now
consists of over 1,300 rooms.
1,731
Rooms in our UK portfolio
8
UK hotels
9.6%
MANAGED HOTELS
€’000
Revenue and EBITDA
2017
2016
Variance
1,986
2,641
(655)
Income from management contracts
continues to decrease in line with
our strategy to focus on an owned
and leased portfolio. We are not
actively seeking any additional
hotels to manage.
RevPAR increase at our UK hotels
CENTRAL OVERHEADS & SHARE BASED PAYMENTS
38.8%
2017 UK EBITDAR margin
€’000
Central overhead
Share-based payment expense
Total
2017
2016
Variance
(12,371)
(9,146)
3,225
(1,690)
(1,214)
(14,061)
(10,360)
476
3,701
We have continued to invest in
our central office team. We have
increased resources across all our
main functions as we continue to
support our growing portfolio as well
as seeking out new opportunities to
grow further. During 2017, we started
building a small central UK team
which supports the hotels in the areas
of operations, revenue management,
sales and recruitment. This is a very
important step in the evolution of our
UK strategy as it provides a platform
to support our future growth in
the UK. We have also increased
our central marketing spend to
support the growth of our brands
across all three regions.
The increase in the share-based
payment expense reflects both the
cost of the Long-Term Incentive
Plan (LTIP) and the very strong
take-up in our Save As You Earn
(SAYE) scheme which is available
to all employees.
FINANCE COSTS
€’000
Interest expense on loans
Impact of interest rate swaps and caps
Other finance costs
2017
2016
Variance
7,346
7,535
(189)
1,348
1,206
2,327
1,778
142
549
Net exchange loss on loans and borrowings and cash
204
977
(773)
Interest capitalised to property, plant and equipment
(1,589)
-
(1,589)
Total finance costs
9,636
11,496
(1,860)
Finance costs decreased by €1.9
million in 2017 predominately due
to €1.6 million of interest being
capitalised to the hotels currently
under construction. Approximately
30% of our euro denominated
borrowings are subject to an interest
cap until September 2019. We
have taken out interest rate swaps
covering 58% of sterling denominated
borrowings up until February 2020.
As LIBOR was less than the rate we
fixed, we incurred a further interest
cost of €1.3 million on top of actual
interest paid.
Other finance costs include the
negative yield on cash held in money-
market funds, the amortisation
of debt capitalised costs and
commitment fees on loans and
borrowings. The increase in other
finance costs compared to 2016
is due to the amortisation of costs
which were capitalised on the
Group’s loans and borrowings.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcFinancial ReviewAnnual Report and Accounts 2017 32
33
OPERATING CASHFLOW
€’000
2017
2016 Variance
Net cash from operating activities
95,207
77,813
17,394
Amounts paid for refurbishment capital expenditure
(14,633)
(12,411)
(2,222)
Interest and finance costs paid
(10,101)
(9,983)
(118)
Adjusting cash items
Free cashflow
Key performance indicators
1,260
3,964
(2,704)
71,733
59,383
12,350
Conversion of adjusted EBITDA to cash
68.4%
69.8% (140 bps)
Net debt to Adjusted EBITDA
2.4
2.4
-
€71m
Free cashflow in 2017
2.4x
Net debt to Adjusted EBITDA
We define free cashflow as the net
cash generated to fund acquisitions,
development expenditure and
loan repayments. Our portfolio is
now generating high levels of free
cashflow for three primary reasons.
Firstly, our decentralised operating
model is delivering high returns from
our hotels. Secondly, it has been our
stated strategy to purchase modern
hotels that can be maintained to high
standards at a reasonable ongoing
cost. We allocate approximately
4% of revenue each year to
refurbishment capital expenditure
GROUP FINANCING
€’000
Loans and borrowings at start of the year
New facilities drawn down
Capital repayment
Effect of foreign exchange movements
Amortisation of debt costs
Loans and borrowings at end of the year
for this purpose. Finally, our low level
of gearing with a net debt to adjusted
EBITDA of 2.4x results in a relatively
low interest charge.
We generated over €71 million in
free cashflow in 2017 which together
with (i) the proceeds from sale
and leaseback transactions and
(ii) further drawdown of our loan
facilities, we were able to fund
scheduled loan repayments,
acquisitions and the construction
of our development pipeline.
2017
280,415
36,680
(49,896)
(8,211)
1,151
260,139
The Group's loans and borrowings
amounted to €260.1 million at
31 December 2017, of which
€196.5 million (£174.4 million)
was denominated in sterling. We
deliberately hold a greater share of
debt in sterling as it acts as a natural
hedge against the impact of sterling
exchange rate fluctuations on the
euro value of our UK assets. The
weakening in the value of sterling
during 2017 reduced the euro value of
those sterling loans in 2017.
On 6 July 2017, we increased the
revolving credit facility by €50 million
to €80 million. On 16 July 2017, we
drew down £30.0 million from the
multi-currency revolving credit facility
to fund the purchase of Hotel La Tour
in Birmingham. We subsequently
repaid that amount on 11 August 2017
after the sale and leaseback of the
same property. On 28 December
2017, €2.5 million was drawn from
the revolving credit facility to fund
working capital requirements.
At 31 December 2017 the Group had
undrawn facilities of €99.7 million.
Net debt to adjusted EBITDA was
unchanged at 2.4x. This is well
within our objective of keeping the
ratio at 3.5x or below when we are
fully invested.
PROPERTY, PLANT AND EQUIPMENT
The current debt facilities are due
to expire in early 2020. However, we
are engaging with banking partners
early to discuss refinancing options
and strategies.
€1bn
Hotel assets at
31 December 2017
€210m
Additions to property,
plant and equipment in 2017
889
Rooms refurbished
during 2017
€'000
Property, plant & equipment
2017
2016
998,812
822,444
The value of the Group’s property,
plant and equipment was almost €1
billion at 31 December 2017. This is
a significant milestone when you
consider the comparable amount
was only €23.9 million in June 2014.
Revaluation gains of €155.1 million
since 2014 reflect both the quality of
the assets we have bought and the
value at which we acquired them.
The total value of property, plant and
equipment increased by €176.4 million
in 2017 due to additions (€210.3
million), a net revaluation gain (€52.1
million) and capitalised borrowing
costs of €1.6 million. These increases
were offset by the sale and leaseback
transactions of two hotels (€62.1
million), the depreciation charge
(€15.7 million) and adverse foreign
exchange movements in the value of
sterling which decreased the value of
the UK hotel assets by €10.0 million.
Additions to property, plant and equipment
€’000
2017
2016 Variance
Hotel assets acquired (including development sites)
129,027
131,749
(2,722)
Expenditure on new pipeline (including extensions)
59,064
3,043
56,021
Refurbishment capex expenditure
14,633
12,411
2,222
Development capex expenditure
7,547
13,028
(5,481)
Additions to property, plant and equipment
210,271
160,231
50,040
The Group spent €129.0 million on
the acquisition of hotel assets during
2017. As part of the acquisition of
the trading businesses of Clarion
Hotel Liffey Valley (now trading as
Clayton Hotel Liffey Valley) in August
and Hotel La Tour, Birmingham (now
trading as Clayton Hotel Birmingham)
in July the Group acquired property
assets valued at €22.7 million and
€34.6 million respectively. Clayton
Hotel Birmingham was subsequently
sold and leased back through a
separate transaction.
totalling €10.6 million, bringing the
total owned room count to 257
bedrooms. Certain elements of the
long leasehold interest of Clayton
Hotel Cardiff Lane (232 rooms, the
public areas and a vacant conference
area) were acquired in two distinct
transactions totalling €48.2
million. The Group also purchased
the freehold interest of Maldron
Hotel Portlaoise for a cost of €8.5
million (the adjoining foodcourt was
simultaneously sold to a third party
for €1.7 million).
The Group purchased a further 104
rooms in the Clayton Hotel Liffey
Valley in two separate transactions
The construction of Maldron
Hotel Kevin Street, Clayton Hotel
Charlemont and Maldron Hotel
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcFinancial ReviewAnnual Report and Accounts 2017 34
35
Belfast City continued in 2017. We
commenced construction of Maldron
Hotel South Mall Cork in the final
quarter of 2017. We also commenced
construction of extensions at three
of our Dublin hotels and one of our
Galway hotels at various points during
the year. The total spend on these
hotel development projects was
€59.1 million during 2017.
In addition to the amount spent on
acquisitions the Group spent €22.2
million on other capital expenditure.
In total 889 rooms were refurbished
during 2017. €14.6 million was
invested in on-going maintenance
projects to refurbish rooms and
public areas, upgrade technology
and ensure the Group continues
to adhere to health and safety
standards. A further €7.6 million
was spent bringing newly acquired
hotels in line with brand standards.
GOODWILL AND INTANGIBLE ASSETS
€’000
Opening balance at start of the year
Acquisition of leasehold interest
Transferred from investment property
Impairment losses during the year
Amortisation of intangible assets
Movement in exchange rates
Closing balance at end of the year
2017
54,267
-
682
-
(24)
(363)
54,562
2016
46,803
20,500
-
(10,325)
(2,711)
54,267
› An intangible asset with an
indefinite life representing the
Group’s leasehold interest in
The Gibson Hotel, which
was acquired as part of the
Choice Hotel Group business
combination in March 2016
and has a carrying value of
€20.5 million
There were no significant movements
in the value of goodwill and other
intangible assets during the year
ended 31 December 2017. The
main components of the balance
at year end are:
› Goodwill of €33.4 million –
an impairment review of the
goodwill valuation was carried
out at 31 December 2017 and
it was concluded that the
carrying value of €33.4 million
was appropriate
NEW ACCOUNTING STANDARDS
IFRS 16 Leases
The new accounting standard
on leases comes into effect from
1 January 2019 onwards. We
outlined at our Capital Markets Day
in November 2017 the potential impact
of the standard on Dalata and this
presentation is available in the
Investor section of our website
www.dalatahotelgroup.com.
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.
As a result, an asset (the right-of-use
of the leased item) and a financial
liability to pay rental expenses are
recognised. Fixed rental expenses
will be removed from the profit
or loss account and replaced with
finance costs on the lease liability
and depreciation on the right-of-use
asset. Variable lease payments which
are dependent on external factors
such as hotel performance will be
recognised directly in profit or loss.
Despite the significant impact of the
accounting change on our financial
statements we do not see any material
impact on strategy or the commercial
negotiations of new leases. There will
be no impact on cashflow. Additionally,
bank covenants as currently calculated
under existing debt arrangements will
not be impacted as their calculation is
based on GAAP on date of entry into
the agreements.
The full impact of this standard
on the Group’s financial position
and performance continues to be
assessed. The Group does not intend
to early adopt IFRS 16 and prior
year financial information will not be
restated resulting in no impact on
retained earnings on transition.
An illustrative example of how the
standard could impact the Group is
presented in note 23 to the financial
statements for the year ended 31
December 2017 on page 163. As these
calculations use a notional discount
rate that is not indicative of what the
actual rate will be (as the rate cannot
yet be determined), the disclosure
in note 23 is purely for illustrative
purposes.
IFRS 15 Revenue from Contracts
with Customers
Under IFRS 15, all revenue from
customer contracts will be recorded
on a gross basis with commissions
deducted separately as cost of
sales. The impact is limited to a
reclassification between revenue
and cost of sales in profit or loss,
with no overall effect on profit. If IFRS
15 had been effective from 1 January
2017, this would have resulted in an
increase in revenue of €3.6 million
for the year ended 31 December 2017,
with a corresponding increase in cost
of sales of the same amount.
The Group will adopt IFRS 15 in the
consolidated financial statements for
the year ending 31 December 2018 and
will restate the comparative numbers
for the year ended 31 December 2017.
Accordingly, revenue will increase as
it is presented on a gross basis and
cost of sales will increase due to the
inclusion of commissions.
EVOLVING GROWTH STRATEGY
When we first floated Dalata in
2014, our focus was very much on
purchasing hotel assets at very
attractive prices in markets that we
believed were about to recover very
strongly. We continued that strategy
into 2015.
In 2016, when we felt that there was
less value available on the market, we
focused on purchasing sites where
we could develop new hotels as well
as identifying opportunities to extend
some of our existing hotels.
In 2016, we also exploited the strength
of our balance sheet covenant for
the first time in securing a long-term
leasehold interest at Clayton Hotel
Burlington Road in Dublin.
In 2017, we focused on constructing
those new hotels and extensions but
we also managed to execute some
very attractive acquisitions. We had
long sought to purchase the effective
freehold interests of Clayton Hotel
Cardiff Lane and in 2017, our patience
paid off when we acquired 232
rooms, the public areas and a vacant
conference area for €48.2 million in
two separate transactions. We also
managed to secure 257 rooms and
the public areas of the now rebranded
Clayton Hotel Liffey Valley for €33.6
million in three separate transactions.
In 2017, our UK strategy also
gathered momentum. We partnered
with M&G Real Estate to execute a
sale and leaseback of our Clayton
hotel in Cardiff. We teamed up with
Deka Immobilien to secure a leasehold
interest in the now rebranded Clayton
Hotel Birmingham. Our operational
expertise and the strength of our
balance sheet is attractive to these
partners and also helped us secure
agreements to lease new hotels
on completion in Glasgow (2)
and Manchester.
In 2018, we will be focused on
completing the projects that will
deliver an additional 980 rooms to
the Group. We will also be focused on
getting these hotels up and running
operationally as quickly as possible.
The senior management teams have
either been appointed or identified
for each of the new hotels. We will also
look to secure a further 1,200 rooms
for our development pipeline.
Our growth strategy has evolved over
the last four years and will continue to
evolve into the future.
CONCLUSION
As you can see from the previous
paragraph, we continue to be very
hungry for further growth. However,
we are equally focused on maximising
the returns from our current portfolio.
We are very focused on developing
our people to both ensure that the
existing hotels are operated to the
highest standards and new managers
are trained for the pipeline we are
building. We are constantly asking our
customers what they think of us and
acting on their feedback. We continue
to develop our brands and believe
that it is a significant advantage
when you are the sole operator of
your own brands.
We are investing in technology to
help us better serve our customers,
better manage our people, better
manage our revenue opportunities and
deliver operational efficiencies. The
key is to now ensure that we use that
technology effectively to deliver the
expected benefits.
If we focus on our people, our product,
our brands and our customers and
support that focus with smart use of
technology, financial returns to our
shareholders will follow strongly.
That is the focus for 2018.
I said last year that the journey had
only begun. It now continues and it
looks like a very exciting road ahead.
Dermot Crowley
Deputy Chief Executive
Business Development & Finance
If we focus on our people, our product, our
brands and our customers and support that
focus with smart use of technology, financial
returns to our shareholders will follow strongly.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcFinancial ReviewAnnual Report and Accounts 2017 36
37
Risk
Management
The Board recognises and accepts
its responsibility in relation to
risk management. The Board has
delegated responsibility for this
area to the Audit & Risk Committee.
Risk management and consideration
of the Group’s principal risks are a
standing agenda item for each Audit
& Risk Committee meeting. In 2017
the Company made a decision to
devote greater attention to strategic
risk management in a senior level
restructuring which saw the Company
Secretary take responsibility for
Group Risk Management and
Compliance. As a result, the frequency
and breadth of our review of key risks
has been increased with input and
engagement from a wider group of
executive management. In 2018 we
will continue the process of improving
our risk management processes
through the structures we have
in place throughout the organisation.
We manage our risks through
the adoption of the “three lines
of defence” risk management
model, adapted for our specific
circumstances. In particular:
→ All major decisions related to the
Group are made by the Board,
following a detailed analysis
process and the consideration
of associated risks.
As we grow our business and expand
our hotels we face risks. Some risks are
common to running a company of our
size and other risks are specific to the
environment in which we operate and with
the growth strategy we have adopted.
The Board and the Audit & Risk
Committee have reviewed the Group’s
principal risks and have considered,
in particular, the new risks introduced
for 2018 along with those that are no
longer considered as principal risks.
These risks remain on the Group’s risk
register and their status is reviewed
on an ongoing basis.
A summary of our principal risks,
along with their status and our overall
assessment of their impact and
likelihood, is shown here.
The risks are grouped by their
risk categories, which were
reviewed during the year.
We view these risks as being of most
importance considering the group's
current strategic planning horizon.
Additional detail on our risks is set
out on pages 38 to 41.
→ There is a clear division of
responsibilities in relation
to risk between the Board,
Group management and our
independent assurance. Executive
management interact closely with
our hotels, providing support to
line management.
→ The Group’s executive risk
committee provides executive
management consideration of the
Group’s principal risks and a forum
for considering emerging risks.
The matters considered then form
the basis for consideration by the
Audit & Risk Committee.
→ We have invested heavily in
our hotel risk management
programmes, including employee
training, specific risk management
systems, external reviews and
enabling a risk awareness culture.
We view all employees as being, in
effect, risk managers, irrespective
of their role and aim to provide
employees with the tools to
support this.
→ Effective risk management
depends on the provision of
quality information. During
2017 we invested significantly
in upgrading the Group’s
business systems and IT security
infrastructure. This will continue
in 2018. These enhanced systems
will provide us with better and
more timely information, enabling
us to better manage risks.
Our risk management framework is best illustrated as follows:
Risk
Identification
Oversight
by Audit &
Risk
Committee
and Board
Risk
Assessment
Monitor &
Review by
Executive
Risk
Committee
Assessment
of Controls,
Mitigations
& Action
Plans
Risk category
External
Risk
1 General Economic Risks
2 Brexit Risks
Internal: Strategic
3 Risks to UK Expansion Strategy
4 Risk to our Culture & Values
5 Market Concentration Risk
6 Senior Management Succession Planning
7 Development & Retention of Expertise
Internal: Reputational
8 Data Protection Compliance Risk
Internal: Financial Integrity
9 Capex Risk
Internal: Fraud
10 Financial Control Risk
Internal: Operational
11 Hotel New Extensions Risk
12 Health & Safety Risks
13 New Hotel Openings
Internal: Information
14 Cyber Attack - Data Loss
15 Business System Third Party System Provider Failure
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcRisk ManagementAnnual Report and Accounts 2017
38
39
Risk Management
Key to Strategic Priorities:
Our Customers
Our Growth
Our People
Our Brands
Our risk
category
Risk
What the risk
means to us
Our key controls
& mitigations
Our view
on the risk
Link
to our
Strategy
Our risk
category
Risk
What the risk
means to us
Our key controls
& mitigations
Our view
on the risk
Link
to our
Strategy
External
1
General
Economic
Risks
External
2
Brexit
Internal:
Strategic
3
UK Expansion
Strategy
Internal:
Strategic
4
4
Risks to
our Culture
& Values
This risk covers the
wide range of worldwide
macroeconomic
risks and also those
associated with business
financing.
There is a risk that
negative external
geopolitical and/or
economic events could
impact our financial
performance and
prospects.
The Group is exposed
to risks as a result of
United Kingdom’s
proposed exit from
the European Union,
particularly in relation to
a reduction in the value
of Sterling, the potential
impact on UK visitors to
Ireland and the impact
on general economic
activity.
The Group’s strategy
is to expand its
activities in the UK
market, adopting a
predominately capital-
light and leasing model.
There is a risk that
this strategy will not
deliver on expectations
resulting in financial
losses or lower than
expected returns.
As the Group develops
as a business there is a
risk that the concept of
“group think” could take
hold or complacency
could set in.
There is also a risk that
the Group’s established
values and how it
conducts itself could be
diluted by future actions.
› Board updates
› Financial forecasting
models
› Monitoring of
industry trends
› Agile management
structure to react to
material changes
The cyclical nature of the
business cycle was considered
as was the group’s sound
operating model as a buffer
against economic changes
and to promote long-term
sustainability. Our strategy is
to diversify and spread the risk
to lessen the impact should a
material worsening in economic
conditions materialise.
› Ongoing focus area
› Monitoring of
developments
› Industry and
government
information/awareness
› Amended UK
investment KPI’s to
reflect increased risk
We note that the decline in UK
visitors to Ireland has not had a
very negative impact on Dalata.
The focus in this area is to
concentrate on the “known”
Brexit impact areas, while
maintaining a watching brief on
developments over the coming
months and years.
› Ongoing Board
consideration
› Detailed analysis of
potential investment
locations
› Consideration of
financial and non-
financial indicators
› Liaison with
developers/partners in
terms of site selection
and financing
› Management
experience in UK
development
› Defined Group values
that are embedded
into the way that we,
as a company and
individuals, behave
› Focus on these
behaviours by
Executive management
The investment hurdles have
been amended to adopt more
conservative criteria, for
example, in relation to increased
rent cover. A more targeted
approach to sites/opportunities
is also in place to concentrate on
those opportunities with highest
potential yields.
As Dalata expands we see that
there is a risk that our culture
and values could be damaged.
It is important for us that we
reinforce our current values as
we grow.
Development of the “Dalata
Way” values programme and
a sustainable development
strategy is underway.
Communications to all
employees will form a key
part of this programme.
Internal:
Strategic
5
Market
Concentration
Internal:
Strategic
6
Senior
Management
Succession
Planning
Internal:
Strategic
7
Development
and Retention
of Expertise
Internal:
Reputational
8
Data
Protection
Compliance
Risk
Internal:
Financial
Integrity
9
Capex Risk
The Group’s activities
are more concentrated
in the Dublin hotel
market and, therefore,
any downturn in Dublin
is likely to have a
material impact on the
Group’s performance.
There is also risk
associated with
significantly increased
supply in the Dublin
market.
There is a risk
that proper senior
management succession
planning is not
conducted, which could
result in overstretched
resources, and a loss of
management continuity
and expertise to
the Group.
The Group’s business
model is built on our
ability to grow and
retain expertise.
There is a failure to
retain key risk
of expertise and
experience and develop
talent within the Group
to ensure its ongoing
and future success.
The General Data
Protection Regulation
(GDPR) comes into
force in May 2018. As a
holder and processor of
personal data, there is a
risk that the Group does
not comply with these
requirements.
Capital expenditure is
not properly evaluated,
approved, monitored
and/or accounted for,
resulting in material
overspend.
› Detailed business
plans for each hotel,
taking account of
their specific markets
and offerings
› Strategy of
diversification and
UK expansion
› Monitoring of Dublin
supply pipelines
We expect that our expansion
strategy should lessen the
impact of Dublin on the
Group’s performance. In
addition, the Dublin hotel
business plans provide a
buffer in terms of any material
downturn in this market.
› Consideration of
this matter by
Board committee
› Retention strategies
in place
The Board reviews on a regular
basis the Group’s management
structure, skills and expertise
and we continue to plan for a
range of future events.
› Investment by the
Group, including 5
hotel management &
graduate development
programmes, trainee
accountant and
revenue management
programmes
› Targeted experience
for next generation of
GM’s/Deputy GM’s
› Review of market
remuneration trends
› A GDPR Action
Group, led by senior
management and
supported by external
expertise has been
established to set out
the Group’s response to
the regulation
› An independent
assessment of our
GDPR readiness will be
completed in early 2018
› All Capex is approved,
monitored and
accounted for in Central
Office
› Use of Procure Wizard
system for capex
purchasing
› Executive capex project
update meetings
This risk area continues to be
key and is linked to our overall
strategy. The rollout of the Dalata
business model is dependent on
the availability of key people to
manage the hotels.
The rollout of Dalata online, our
e-learning platform, will continue
in 2018 as will the expansion of
our training programmes, which
are available to all employees.
As the deadline for the GDPR
is approaching, there is
additional focus on delivering
and maintaining compliance,
both by the May enforcement
date and beyond.
There are a number of
developments ongoing in this
area in 2018. An updated capital
procurement system is expected
to be implemented, along with
a new fixed asset accounting
module. These will provide
additional controls over this area.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcRisk ManagementAnnual Report and Accounts 2017
40
41
Our risk
category
Risk
What the risk
means to us
Our key controls
& mitigations
Our view
on the risk
Link
to our
Strategy
Our risk
category
Risk
What the risk
means to us
Our key controls
& mitigations
Our view
on the risk
Link
to our
Strategy
Key to Strategic Priorities:
Our Customers
Our Growth
Our People
Our Brands
Internal:
Fraud
10
Financial
Control Risk
There is a risk that
a material financial
controls failure, or
management over-ride
of controls, results in
either financial loss or
misstatement in the
financial statements.
Internal:
Operational
11
Hotel New
Extensions
Internal:
Operational
12
Health &
Safety Risks
The Group is currently
undertaking a number
of material hotel
extension projects.
Although all project
contracts are in
place and are being
monitored there are
risks associated with
these projects as they
are underway in a live
operating environment
where guests/patrons
are present.
A material operational
health & safety, food
safety or public health
event (for example,
resulting in loss of life,
injury or major property
damage) occurs at
a hotel and is not
properly managed.
› Group Finance
expertise
› External auditor review
of financial statements
and key financial
judgements
› Audit & Risk Committee
and Board review
› Clear division of
responsibilities in key
finance areas
› Specific Group
expertise for each
hotel project
› External supporting
Quantity Surveyor
expertise
› Detailed project plans
› Use of approved and
suitable contractors
› On-site health &
safety expertise
› Detailed site, site
access and handover
routines
› Group H&S function,
with hotel H&S
managers
› Group policies and
procedures
› Investment in hotel life,
fire and food safety
infrastructure
› External H&S and
HACCP audits
› Reviews by external
bodies
(Environmental Health
Officer, Fire Officers)
› Employee and
management training
The Group’s financial control
system is well established. We
implemented an updated group-
wide accounting platform in
2017, which enhances the control
environment. We also identify
and flag key areas of judgement
for discussion between our
external auditors, Group Finance
and Board. An example of this
was our revised depreciation
policy and the potential impact
of IFRS 16, both of which were
reviewed during 2017.
The hotel extensions at Clayton
Hotel Dublin Airport and Maldron
Hotel Sandy Road Galway are
well underway and have provided
valuable lessons and learning for
our other extension projects. As
we undertake more extensions
we are becoming better at
managing the associated risks.
As a hotel operator this remains
a key risk area and there is
continual focus on this matter
from Board level through to hotel
management.
Lessons are being learned
from incidents that arise (both
external and internal) and revised
policies then implemented, as
needed.
In 2018 we will continue the
rollout of a standardised incident
recording solution, and Fire
Cloud, which is an online tool for
recording hotel fire walks.
Internal:
Operational
13
New Hotel
Openings
The Group plans to open
a number of new hotels
in 2018 and subsequent
years. There are specific
risks associated with
new openings relating to
costs, timing, customer
service delivery and
financing.
› Pre-opening plan
established well in
advance of opening
date
› Appointment of hotel
senior management
team in advance
› Finalisation of hotel’s
business strategy and
plan
› Co-ordination of other
Group functions to
deliver the hotel and
operational systems
In 2018 we plan to open 5 new
hotels. The management team
has been appointed for Maldron
Hotel Belfast City, due to open
in March 2018.
Plans are well advanced for the
Maldron Hotel Kevin Street,
Clayton Hotel Charlemont,
Maldron Hotel South Mall and
Maldron Hotel Newcastle,
all due to open later in the year.
Our strategy and the
performance of these hotels
will be closely monitored.
Internal:
Information
14
Cyber Attack
– Data Loss
The Group’s information
systems are subject
to an external/internal
cyber event with the
potential for data loss/
theft, denial of service
or associated negative
impact.
› Established IT security
systems, procedures
and controls
› External support and
monitoring on cyber
risks
› IT security review
programme
Internal:
Information
15
Third-party
system
provider
failure
There is a risk that the
failure of a key third-
party system provider
to provide ongoing
and continued access
results in loss of system
availability and reduced
guest service.
This risk is increasing
given the strategy of
implementing Group-
wide and cloud based
business systems.
› Due diligence
undertaken for new
system providers with
selection based on
market presence and
expertise
› Contracts in place
› Backup/recovery
routines are in place
with additional
contingency plans
should the risk arise
Considerable focus has been
placed in this area during 2017.
Additional IT security tools have
been being implemented across
the network and supporting
policies and procedures are
being rolled out. The Group has
appointed external IT security
expertise to provide guidance
in this area. An external cyber
security review was also
completed in 2017 and the
findings have been reviewed by
the Audit & Risk Committee.
We plan to complete additional
work in this area in 2018.
During 2018 we invested
heavily in new or enhanced
business systems including
our property management
systems, accounting platform,
procurement and time
management systems, many of
which are now cloud-based and
Group-wide.
This has increased our risk
profile in this area as many of
these new systems are cloud-
based, international systems that
are operated on a single platform
across the Group.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcRisk ManagementAnnual Report and Accounts 2017 42
Dalata Hotel Group plc
Risk Management
Viability Statement
Below: Clayton Hotel Chiswick
In accordance with provision C.2.2
of the UK Corporate Governance
Code, the Directors have assessed
the long-term viability of the Group
by analysing the Group’s current
position, trading performance,
contracted capital expenditure and
future prospects, in severe but
plausible scenarios. The financial
position of the Group, its cashflows,
liquidity position and borrowing
facilities are explained in the Financial
Review on pages 26 to 35.
The Group considered the principal
risks and uncertainties facing the
Group and the impact of these
crystallising, individually and in
combination taking into account
the Board’s risk appetite and risk
management strategy.
The Directors have assessed the
prospects of the Group over a longer
period than 12 months as required
by the ‘Going Concern’ provision.
The Directors reviewed the viability
period and concluded that a three
year period remained suitable.
A three year period to December
2020 is considered appropriate as:
›
› It coincides with the Group’s
current strategic planning
horizon used for investment and
development projects which is
reviewed on an ongoing basis by
the Board of Directors;
› Aligns with the Group’s risk
assessment timeline of current
risks facing the Group;
› All current committed projects are
expected to be completed during
this period and in this way, the
risks associated with this phase of
development are fully considered;
and
› A longer period would lead to
less certainty around market
performance and expectations.
The Directors have carried out a
robust assessment of the principal
risks that could potentially threaten
the business model, future
performance, solvency or liquidity of
the Group within the viability period.
These risks are included in the risk
section on page 38 to 41 and are
linked to the overall Group strategy.
43
of the business. Under the scenario
modelled, the Group also delayed
the opening of new builds by three
months, whilst making no adjustment
to the capital expenditure committed.
In performing this analysis, the
Directors have assumed that the
Group will be able to refinance loan
facilities sufficiently in advance of
maturity of its current facilities in
February 2020.
The above scenarios were firstly
evaluated on a standalone basis,
and then collectively. Once mitigation
plans were applied to these scenarios,
there was no threat to the viability of
the Group. Sufficient available funds
headroom was maintained in addition
to being in compliance with all debt
covenants at each semi-annual
review date.
Taking into account the assessment
performed and risk management
controls in place, the Directors have
reasonable expectations that the
Group will continue in operation and
meet its liabilities as they fall due
for the three year period. It is
recognised that such future
assessments are subject to a level
of uncertainty that increases with
time and, therefore, future outcomes
cannot be guaranteed or predicted
with certainty.
For the purposes
of assessing the Group's
viability, the Directors
identified, that of these
risks, the following are
the most significant
to the assessment
of the viability
of the Group:
› Risks 1,2 (page 38):
Risks relating to the
general economic
backdrop to the business
involving the specific
risks to the economic
environment including
Brexit and geo-political
shocks.
› Risks 9 (page 39),
11 (page 40), 13 (page 41):
Risks relating to delays
on significant capital
developments
The other risks, are also deemed
very important. However, these risks
are difficult to model for sensitivity
analysis as the financial impact would
vary depending on the extremity
of the situation. However, it is not
believed that it would be as material
to the Group as the risks that have
been financially assessed and
mitigating actions would be more
easily taken to reduce the impact
insofar as possible.
All these risks are managed through
the adoption of the ‘three lines of
defence’ risk management model,
adapted for the Group’s specific
circumstances and are reviewed and
discussed at each Audit and Risk
Committee meeting.
Based on these risks, the Group has
chosen robust downside financial
scenarios which could affect the
viability of the Group. The Group
operates in an established sector
with strong cash flows and mature
patterns of demand and supply.
At present, trading conditions are
positive across the markets in which
the Group operates. However, the
Group carefully considers events
that may have a negative impact on
the hotel market in Ireland and the
UK and consequently demand for its
services. In order to assess its future
prospects, the Group has examined
the cyclical trading patterns in the
Irish and UK hotel sector over several
decades and considered the market
dynamics in each of these two
markets. During periods of slowdown,
normally associated with an economic
downturn, a significant negative
geopolitical event or a terrorist
attack, hotel revenues may decline
sharply as consumers reduce or alter
their travel plans.
The Group has stress-tested its
projections based on how the hotel
market has reacted to previous
economic and geopolitical shocks
and the impact of new hotel openings
being delayed by three months and
considered what mitigating actions in
terms of cost and cash management
would be taken to protect the Group.
The Group’s operations are spread
across close to forty locations,
therefore it has focused on risks that
would have a Group-wide impact as
these pose a greater risk to Group
viability. The Group also manages
its debt profile to ensure it has
adequate headroom to withstand a
severe downturn/geo-political shock
and is in compliance with existing
banking covenants. In the general
economic downturn/geo-political
shock scenario, RevPARS were
reduced by 25% within six months
with a resultant impact on all other
sales. If this was to occur, the Group
would seek to take all necessary
measures on a timely basis to ensure
the viability of the Group. This would
include adjusting strategic capital
management to preserve cash
including reducing, if necessary, any
non-essential capital expenditure in
addition to reducing the cost base
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017
44
Annual Report and Accounts 2017
45
Responsible
Business
Report
Dear Shareholder,
On pages 2 and 3 of this
annual report we present the
culture and values that spell
out what Dalata stands for.
There is nothing new here,
as a company and as
individuals we endeavour
to go about our business
in a responsible way.
Before we listed as a public company,
we were tested when, during the
years of the financial crisis, our focus
was on sustaining employment and
at the same time working with our
suppliers and shareholders to meet
our financial obligations. During that
time we continued to contribute
in our communities, making our
facilities available to support local
organisations and promoting
local employment.
Over the years we have not
formalised a responsible business or
sustainability strategy but we have
been strategic in our outlook and true
to our values, making strides each
year to have a positive impact across
a range of areas. Our focus has been
on our stakeholders, our people,
customers, suppliers, communities
and investors taking account of our
responsibility for health and safety
and our impact on the environment.
I am delighted to see our employee
engagement measures heading
steadily in the right direction and to
report that we are supporting and
promoting several smaller producers
of high quality food and beverage
products. The enthusiasm and
creativity of colleagues across the
business to raise funds (and have fun)
through our DalataDigsDeep charity
initiative has been inspiring and is
something to be truly proud of. We
have also made important progress
in energy and waste management,
and above all, we have continually
invested in our capacity to manage
our health and safety risks in a
responsible way.
In 2018 we plan to refine our approach
somewhat, it will be evolution rather
than revolution. We intend to broaden
our engagement with our stakeholder
groups to check-in and find out
what is most important to them in
terms of our environmental, social
and governance responsibilities. As
part of this process I look forward to
hearing what is on the minds of you,
our shareholders. We will prioritise
what is most important and clarify the
areas where we can have the most
impact. This will bring a little
more structure to what we do and
report on in these pages, maybe even
uncovering good work we’re already
doing that we’re not telling you about.
Whatever sustainable business
initiatives we undertake in the future
will continue to be aligned with our
culture and values and with our
business priorities, in other words,
they will be in and of themselves
sustainable.
I look forward to continued progress
and take this opportunity to thank all
of my colleagues who take the lead in
bringing our corporate values to life,
doing important small things that we
don’t measure.
Pat McCann
Chief Executive
We are strategic in our approach
to sustainability, making strides
each year to have a positive
impact across a range of areas.
Our Responsible
Business Approach
Our approach to
responsible business
is embedded in our
values as a Group.
We aim to do business
in an ethical way.
By embracing our values and engaging
with our stakeholders, we can achieve
our strategic objectives and create
shareholder value in a responsible and
sustainable way. In 2018 we have started
an internal review of our sustainability
programmes and will develop a
renewed strategy and vision. Through
this we can enhance the Company’s
resilience to external environmental and
social challenges while improving the
experience of our customers.
Below: The Gibson Hotel, Dublin
(A Clayton family member)
Employees
Page 46
Communities
Page 52
Customers
Page 48
Responsible business
at Dalata means doing
business in an ethical
way, taking into
account the interests
of all stakeholders
Suppliers
Page 50
Investors
Page 49
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
Dalata Hotel Group plcResponsible Business Report
46
47
Employees
We support the
development
and growth of
our employees
and aim to provide
a safe environment
for them to work in.
70%
of people feel there
is opportunity to grow
not just in their hotel but
in the wider company.
88%
believe the customer
is at the centre of
everything we do.
84%
of people feel their
manager trusts
them to do a good
job without looking
over their shoulder.
ENGAGING “OUR PEOPLE”
AS A KEY TO SUCCESS
One of Dalata’s core Key Business
Objectives is to “grow our own
people” in order to retain and support
succession throughout the group
and maintain the talent pipeline for
the success of the group. One of
the company values is that of “Our
People”. In order to achieve this, the
company focuses on a robust training
and development strategy along with
driving employee engagement.
“WHAT GETS MEASURED,
GETS DONE”
They say “silence is golden” but this
could not be further from our truth.
Just like that of our customers the
voice of our employees is golden.
A cornerstone of our engagement
strategy is our Employee Engagement
Survey. We work with an independent
provider to confidentially reach out to
each and every one of our employees.
Our employee feedback allows us to
reflect, review and improve on relevant
things at Dalata. Ensuring we gain
insight on retaining, motivating and
engaging our employees and becoming
an employer of choice in our industry
is key to our people strategy.
This year 82% of our people took the
time to give us their feedback, we have
maintained strong engagement results
year on year. We actively use this
feedback to plan and review during the
year with a commitment to ensuring
Dalata is a great place to work.
70%
of employees are
excited about the
future of their hotel
We love to celebrate the success of
Our People. In the last year alone,
18 of Our People were shortlisted at
the Irish Hospitality Institute Annual
Awards and Event Industry Awards
recognising the best in our sector.
Outside of the industry awards our
commitment to our people has been
recognised by the Chambers of
Ireland, HR & Leadership Awards,
Early Career Awards, Facilities
Management Awards, Accommodation
Services Awards, Sandyford Business
District Awards, and Caterer UK
Awards. All were for strategies
directly related to our people.
HEALTH & SAFETY
To ensure the Health & Safety of
our people, our training courses
have been expanded and developed
extensively. We also held Insurance
workshops with all General Managers
in the year to assist in dealing with
types of claims that are experienced
in the properties and help prevent
reoccurrence.
Save as you earn
The launch of our SAYE (Save as you
Earn) scheme is another significant
element of engaging “Our People”,
by giving employees the opportunity
to invest in their future with Dalata
and also allowing the company to
communicate our commitment to
the future of our employees while
supporting a strategic objective of
our retention strategy.
The SAYE scheme is open to
every employee with 3 months’
service regardless of their type
of contract. To date circa 20% of
eligible employees are participating
in the scheme which allows
participants to buy shares at the end
of the three-year savings period
at a price determined at the start
of the saving period.
Employees in the SAYE scheme stand
to make a good return on their savings,
which although not guaranteed,
comes with no downside risk.
The company is benefitting in two
ways: a higher rate of retention and
a greater sense of engagement from
colleagues with the overall success
of the company, as they have a
“sense of ownership”.
The list of approved SAYE schemes
in Ireland is dominated by UK listed
companies that establish schemes
in the UK and then extend them
into Ireland. We are so proud that
Dalata is a great example of an Irish
company that has expanded into
the UK and been able to establish
both an Irish and a UK SAYE scheme
simultaneously. Dalata did not wait
to see how an Irish SAYE launch
fared before going into the UK;
rather its commitment to employee
share ownership was group-wide and
it was committed to setting up both
schemes at the earliest opportunity
for all employees of the group.
Dalata sought to maximise
access and inclusiveness when
designing the SAYE schemes. For
example, it ensured that it would
be possible for SAYE purposes
to aggregate continuous service
across participating companies for
employees who may move between
hotel sites as part of the ongoing
training and promotion programme.
81%
of our people believe
their manager works
well with other managers
and leaders.
99%
of our central office
believe that management
is honest and ethical in its
business practices.
Our HR and Company Secretarial
Teams collecting the IPSA
Awards for Best New Share Plan
2017 and Employee Share Plan
Champion of the Year 2017.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcResponsible Business ReportAnnual Report and Accounts 2017
48
49
Investors
We aim to manage
our business in ways
that are in tune with
the sustainability
objectives of
our investors.
INVESTORS
Executive management meets
regularly with investors and potential
investors, and receives regular
input from brokers and advisors
which is shared with the Board.
We note increased concern about
how companies manage their
environmental, social and governance
responsibilities and are responding
to these concerns.
Responsible procurement
As detailed in our Supplier section,
Dalata works closely with all its
suppliers to ensure an effective and
transparent supply chain. Our goals
for our suppliers are for them to
supply quality goods from ethical
sources at competitive prices.
Waste-Environment
We aim to be a sustainable business,
where social and environmental
considerations are part of the culture
and integrated in the way we run our
hotels, infrastructure and processes,
how we buy our goods and services,
and how we support our guests.
Build Smart
Central to our core objective of
designing sustainable new hotels is
to create cost effective, durable, low
maintenance, energy efficient, low
carbon and sustainable installations.
Sustainable energy has two key
components: renewable energy
and energy efficiency. In the UK
we are targeting a high BREEAM
(Building Research Establishment
Environmental Assessment Method)
rating which incorporates not only
sustainable integrated design solutions
for the hotel but also integrates that
in an environmentally sustainable
way that our customers, suppliers
and staff interact with the operations
and use of the hotel ensuring the
maximum possible enjoyment for
customers as a result. As part of
our commitment to provide the best
integrated design solutions, our
design teams also work collaboratively
to target a LEED (Leadership in
Energy and Environmental Design)
rating of ‘Gold’. To achieve this
level of certification, we must
consider the most appropriate mix
of technologies suitable for each
site. Our design teams are therefore
working to produce the optimum
sustainable design solutions. These
include Combined Heat & Power
(CHP's) recovery technology and
solar photovoltaic technology as
our main renewable energy source.
We will compliment these various
technologies such as LED lighting,
lighting controls, etc. Furthermore, our
transport strategies, waste strategies
and water and conservation strategies
will be integrated to produce the
desired LEED/BREEAM rating to
produce a holistic environmentally
sustainable hotel commensurate with
its environment and with an excellent
customer experience.
Below: The Italian Kitchen,
Clayton Hotel Dublin Airport
Customers
The comfort, safety
and security of
our guests is our
primary concern.
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 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.
In 2017 we received and processed
over 120,000 customer reviews.
Our hotels achieved an overall
performance score of 82%,
with 74% of our hotels increasing
their score year on year. Out of
the 120,000 reviews, 85% of these
have been positive. We are always
responding to do things better.
HEALTH & SAFETY
Throughout 2017, there has been
a strong emphasis and drive to
continually develop and improve H&S
awareness, policies and procedures
within the Group.
Independent third-party Health
& Safety Audits were carried out
during the year in all properties, with
additional criteria added to the audits
during the year.
Firecloud365 is an app that was
introduced in 2016 and is now active
in all hotels. This gives us oversight
and ensures full compliance with fire
safety procedures in all our hotels on
a daily basis.
During 2017 we introduced a new
system to improve incident reporting
and tracking. This is a valuable tool
providing a central dashboard which
will help us improve focus on trends
and prevention of accidents.
A major program of PAT (Portable
Appliance Testing), fixed wire testing
and thermal imaging was rolled out in
all properties. This 5-year programme
ensures the hotels remain compliant
with legislation, while also ensuring
the safety of our guests and team
members.
ENVIRONMENT
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.
WATER CONSERVATION
Water is essential to the hotel
industry – for food preparation,
cleaning and hygiene, guest comfort
and recreation. We are conscious
that water is a critical and limited
resource and we continued our water
conservation programmes in our
hotels in 2017.
Case Study: Bord Gais Energy Initiative
In September 2017 Dalata contracted Bord
Gáis Energy to supply the group with electricity
sourced 100% from renewable electricity
sources across Ireland and Europe incorporating
technologies such as wind, solar and hydro.
Summary of Savings
from 2016 v 2017
› Reduced 1,859,956 kWh
YOY which is a 6% reduction
“Demonstrating a clear commitment
to sustainability, Dalata Group has
entered into a two year electricity
supply agreement for circa 64
GWh of renewable electricity and
is thereby contributing directly to
Ireland and Europe’s ambitious
green electricity targets.”
John Smyth, Key Account Manager, Bord Gais Energy
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcResponsible Business ReportAnnual Report and Accounts 2017 50
51
We also seek out and promote smaller
producers of high quality products
and provide them with distribution
access to the group through our
wholesale platform.
Here are some examples of our
approach to procurement in action.
product traceability procedures,
product recall procedures, country
of origin certification, third party
accreditations, temperature control
procedures and microbiological
testing regimes. We also make a
variety of other enquiries and, for
key suppliers, carry out our own
inspection of facilities.
We like to develop relationships with
our suppliers and gain assurance from
working with producers, processors
and manufacturers who demonstrate
a good fit with our culture and values.
Suppliers
We collaborate
with suppliers to
responsibly source
quality assured
products for
our hotels.
Our Approach to Supplier
Relationship Management
We have a central purchasing team
that works closely with our suppliers
to ensure that the quality of all of
our inputs is of the highest standard.
We develop our business through
wholesale partnerships to find the
best products to deliver on our
brand promises.
In order to attain a listing with Dalata,
food suppliers go through a detailed
due diligence review that allows us to
understand their compliance regime,
Kaymed
King Koil has been in Ireland under license since 1982 and is now part of the Kaymed group.
“ King Koil is proud to partner the Dalata Hotel Group in ensuring the most
comfortable night’s sleep for every guest. The Dalata Hotel Group was the
first to design and brand its own custom made bed collection in partnership
with King Koil. Each King Koil bed was carefully chosen by Dalata to meet
the needs of different hotel brands and guest bedroom experiences.
King Koil hotel beds are made by 300 skilled workers in Kilcullen, Co. Kildare
and are renowned for their proven comfort, durability and value. King Koil
is proud to work alongside Ireland’s leading hotel chain.”
Conor Stapleton, Kaymed
Le Patissier
Le Patissier was started in 2013
from the kitchen table in Skerries.
The concept was and still remains to
create desserts and patisserie from
basic ingredients, locally procured
and Irish wherever possible. All our
dairy is Irish including butter, milk,
cream and cream cheese along with
pasteurised free-range eggs from
Co Cavan.
Based in Dublin 15 we have a team
of 13 dedicated professionals with a
common goal of delivering high end
desserts and patisserie with passion
and creativity.
Working closely with Darina and
her team in Dalata we continue to
develop bespoke menus to include
various flavours, shapes and textures
to offer a one stop shop for the
hotels and corporate banquets alike.
Robert Bullock, Le Patissier
Riverview Eggs
In 1966 Margaret Kelleher, of Riverview
Eggs, with the help and support of her
late husband, Dan Joe, started producing
eggs on the home farm. In 2016, the
Kelleher family celebrated its Golden
Anniversary—50 years in business.
Providing employment for
approximately twenty-four people
in the local Watergrasshill area and
a further forty on a national level,
through its family operated production
farms. All Riverview eggs are produced
to the very high Bord Bia EQAS and
have achieved 'Grade A' status in the
Retail Consortium Global Food Standard
(BRC) accrediation. All production
farms are family owned and operated as
part of a family farm unit, which ensures
the strictest controls and more “hands
on” running of the farms.
Riverview have recently become the
first food production company in Ireland
to successfully complete a “GS1 Global
Traceability Conformance Audit.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcResponsible Business ReportAnnual Report and Accounts 2017 52
53
Communities
We support local
communities by
providing employment,
engaging with society
and taking care of
our impact on the
environment.
Supporting Local Economies
Supporting our employees and
developing them both professionally
and personally while working with
Dalata is a fundamental part of our
sustainability as an employer. In
saying that we also turn our focus
to the communities we work within
and strive to become an employer
of choice that provides future
career paths for those who live in
them. An excellent example of this
strategy in action is our Hospitality
Academy in Belfast which we set
up in partnership with Belfast City
Council and the Deptartment for the
Economy ahead of the opening in
2018 of our new build hotel – Maldron
Hotel Belfast City.
excellent opportunity to obtain real
jobs in the hotel.
Already we have seen strong interest
with over 200 people attending pre-
programme interviews with 75 people
currently approved to complete
the programme. The first offers of
employment were made at the time of
going to print. Many of the people we
have met did not think of hospitality
as a career or a job option but now
are very excited about what the
future holds for then.
The academy is a bespoke pre-
employment programme aimed at
those currently unemployed and
living in the communities surrounding
the hotel, with the objective of
introducing them to the world of
hospitality employment opportunities
while upskilling them to be in an
This is a great example of how we find
employees with the right attitude and
behaviours and upskill them in the
required department. This has been
an excellent success and we look
forward to replicating this academy
model with our other new build hotels
as we expand.
Case Study: Food Surplus Management
Waste Management
During 2016 we agreed a contract
with a specialist food waste
collection company to manage all
our food waste within our business
and to provide clean bin exchange
at each collection at each of our
hotels on the island of Ireland.
All food waste from our business is
now being used to create renewable
energy in an Anaerobic Digestion
Plant, which converts Biogas from
food waste to electricity.
In 2017 Food Surplus Management
confirmed the following:
“ Dalata Hotel Group are leading the way in
responsibly dealing with their food waste in the
most sustainable way possible. The commitment
by the management and staff to implement this
service was a breath of fresh air and the benefits
were immediately achieved. The key to good
recycling in a food or hospitality business is the
management of food waste. Good food waste
management ensures better recycling, and
greatly reduces the use of landfill which lowers the
environmental impact of waste as well as the costs.
Dalata have embraced this and continue to improve
recyclingacross the group”.
Niall J Lord, Managing Director Food Surplus Management Ltd
Material Details
Biodegradable Food Waste
EWC Code
02 02 03
Quantity (T)
643.6T
Waste recycled & Recovered for Renewable Electricity
Renewable Energy Production and Recycling Information
Total Waste
(Tons)
643.6T
Renewable
Energy Produced
257.4 MWh
CO2 emission on savings by
diverting from landfill
321.8TT
Amount of Fertiliser
Digestate
128.7T
Supporting Communities
Dalata Digs Deep
We have now completed two years
of our charity initiative “Dalata Digs
Deep”. We have continued to support
our three chosen charities in 2017
- Great Ormond Street Hospital
(GOSH) in the UK, Cancer Focus in
Northern Ireland and CMRF Crumlin,
in the Republic of Ireland.
We closed out 2017 with a fundraising
total across the group of over
€500,000. In less than two years this
is something we are extremely proud
of, not only because of the benefit of
this money to our chosen charities but
because of the engagement, drive and
involvement of our employees to get
behind these causes, reach out to their
communities and ensure that Dalata
Digs Deep continues to be a success
now and for the future.
" I would like to express sincere thanks
to Dalata Hotel Group for your wonderful
support of our work. Partnerships like
that with Dalata Hotel Group allows
CMRF Crumlin to make the greatest
impact for sick children, you are making
progress in children’s health possible.
Your support is allowing more tailored
treatments for Neuroblastoma which
means less risk and fewer side effects
for children affected by this cancer."
Lisa-Nicole Dunne
CEO, CMRF Crumlin
Our Charity Partners
Great Ormond St Hospital, UK
Our fundraising will pay for parental
housing to ensure that there is
accommodation near the hospital
for patients to say free of change
nearby. As a national hospital patients
and their families come from all over
the UK to the hospital. This ensures
that there is one less worry for them
when they want to stay near their ill
little ones. Having a national presence
in the UK we believe this is a very
relevant cause for our people and
their communities.
Cancer Focus, NI
Our fundraising will support the
salary of a cancer support nurse who
will support the community patients
and their family who are undergoing
ongoing treatments. This outreach
is one in which goes into the homes
of those in the community and
one is which is close to many of
our employees.
CMRF Crumlin
Due to the size of our presence in
Ireland we have quickly become the
largest corporate charity partner
for CMRF Crumlin.
The €157k raised by Dalata Digs
Deep in year one of the partnership
for CMRF was distributed to
commission a ground breaking
research programme looking into
new treatments for Neuroblastoma,
a paediatric cancer. Dalata Hotel
Group has committed to the
sponsorship of this three-year project.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcResponsible Business ReportAnnual Report and Accounts 2017 54
Dalata Hotel Group plc
Corporate Governance
55
Corporate
Governance
The Board is responsible
for the stewardship of the
Company, overseeing its
conduct and affairs to create
sustainable value for the
benefit of its shareholders.
Chairman's
Overview
Dear Shareholder,
2017 was another busy
year for the Board and in
the following pages we try
to give you a sense of the
work that the Board and
Committees have been doing
over the course of the past
year as well as describing the
governance structures and
processes that are in place
and providing you with the
information we are required
to disclose legally and in
accordance with applicable
corporate governance codes.
LEADERSHIP
There have been no changes in
the composition of the Board or
its Committees in 2017. The non-
executive directors continue to
retain their independence and have
a high level of engagement with
the business. Our meetings (which
were held at a variety of company
locations during the year and also
included building site inspections
at Belfast and Cork) provide an
opportunity for the non-executive
directors to challenge and give their
input to the strategic development
of the company in equal measure.
The annual strategy day in June was
one of the highlights of the year and
the full board attended our capital
markets event in London when our
UK growth strategy was presented in
detail to shareholders.
EFFECTIVENESS
The Board and Committees have
access to adequate information
and support to carry out their
functions and during 2017 our annual
performance evaluation was, for the
first time, externally facilitated. The
findings from this process were very
positive and are outlined on page
68. Board members, in additional
to individually dedicating time to
their professional development,
participated in a tailored roundtable
training day facilitated by the
Company Secretary. This year,
in accordance with our re-election
policy, all directors will be subject
to re-election at the AGM.
ACCOUNTABILITY
The Audit & Risk Committee held
seven meetings during 2017, with
dedicated meetings convened to
consider changes to accounting
for depreciation of fixtures, fittings
and equipment and to consider the
potential effect of the implementation
of IFRS 16 in 2019. The latter
topic was the subject of a detailed
presentation at the capital markets
day. We also took time to listen
to feedback on the quality of our
public reporting which resulted in
some changes in this year’s annual
report. During 2017 the company also
made changes to the management
structure to increase the focus on
risk management and compliance.
AGM and I am grateful for strong
shareholder support for both
initiatives which are designed to
ensure executive remuneration is fair
and that incentives are aligned with
the interests of shareholders.
RELATIONS WITH SHAREHOLDERS
In addition to the executive directors’
meetings with shareholders to
coincide with results announcements
and at other times throughout the
year, the non-executive directors
appreciated your input to the
remuneration policy and LTIP
development in the first quarter.
We enjoyed meeting many of you
at our capital markets day in London
in November. The Annual General
Meeting is also a very important
opportunity for the directors to meet
our shareholders and I look forward to
meeting many of you at our AGM in
May 2018.
I am proud to serve as Chairman
of Dalata and I am committed to
continuing the good work of our
Board in ensuring a well governed and
successful business, creating long-
term value for all of our stakeholders.
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.
REMUNERATION
We presented a new remuneration
policy and LTIP at last year’s
John Hennessy
Non-Executive Chairman
Our Board visiting our new Maldron
Hotel Belfast City build in May 2017.
There they met with McAleer &
Rushe, our development Contractors,
who brought the Board Members
around the site which was half way
through its build.
From left to right: Pat McCann,
Dermot Crowley, Séan McKeon,
Margaret Sweeney, Alf Smiddy,
Robert Dix, Stephen McNally
and John Hennessy.
Statement of compliance with the
UK Corporate Governance Code 2016
The provisions of the UK Corporate
Governance Code 2016 ("the 2016
Code") as issued by the Financial
Reporting Council, were applicable
to the financial year covered by this
Report and is the standard together
with the terms of the Irish Corporate
Governance Annex published by the
Irish Stock Exchange (together ‘the
Codes’) in respect of the Company’s
corporate governance practices.
The full text of the 2016 Code can
be found on 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, throughout the
year ended 31 December 2017,
complied with all relevant
provisions set out in the Codes.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017 56
Dalata Hotel Group plc
Board of Directors
57
Leadership
Our Board of Directors
John Hennessy (61)
Non-Executive Chairman
Pat McCann (66)
Chief Executive
Stephen McNally (53)
Deputy Chief Executive
Dermot Crowley (50)
Deputy Chief Executive -
Business Development
& Finance
Robert Dix (65)
Non-Executive Director
Alf Smiddy (55)
Non-Executive Director
Margaret Sweeney (57)
Non-Executive Director
Sean McKeon (50)
Company Secretary,
Head of Risk and Compliance
Nationality:
Irish
Date of Appointment:
27 Feb 2014
Committee Membership:
Remuneration
(Since February 2014)
Nomination
(Since February 2014)
Expertise
John 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.
Irish
Irish
Irish
28 Jan 20141
28 Jan 20141
28 Jan 20141
Pat has over 47 years’
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.
In 2000, he became Chief
Executive of Jurys Doyle Hotel
Group plc,a position he held
until 2006. Pat founded and
became Chief Executive of
Dalata in 2007.
Stephen began his hotel career
with Ramada Hotels in the UK
and Germany before joining
Jurys Hotel Group plc in 1989.
In his 17 years with Jurys he
managed hotels in the UK
and Ireland before heading
up operations for the entire
group including its properties
in the USA. In August 2007 he
was appointed Deputy Chief
Executive of Dalata Hotel Group.
He is past President of the
Irish Hotels Federation and is a
member of the Government's
Tourism Leadership Group.
Dermot is a fellow of
Chartered Accountants
Ireland. He previously worked
with PriceWaterhouse
Coopers, 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 with Ion Equity.
He joined Dalata in 2012 as
Deputy Chief Executive-
Business Development
and Finance.
Other Directorships:
Non - Executive Chairman
of CPL Resources
Non - Executive Director of a
number of private companies.
Non - Executive Director of
H& K International Ltd
1 Pat McCann and Stephen McNally were founder Directors of Dalata in August 2007. Seán McKeon joined the Group and was appointed Company
Secretary in November 2007 and Dermot Crowley joined in November 2012 and was appointed a Director in May 2013. Dalata Hotel Group plc was
registered in November 2013 and listed on the Irish and London Stock Exchanges in March 2014.
Nationality:
Irish
Date of Appointment:
27 Feb 2014
Committee Membership:
Remuneration
(Since February 2014)
Audit & Risk (Chairman)
(Since February 2014)
Expertise
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 Directorships:
Non-Executive Chairman
of Bank of Ireland, Private
Bank and of the Quinn
Property Group.
Director and Chairman of
the Audit Committee of
Allianz plc and Actavo plc.
Non- Executive Director of
Glenveagh Properties plc.
Irish
Irish
Irish
27 Feb 2014
27 Feb 2014
28 Jan 20141
Nomination (Chairman)
(Since February 2014)
Audit & Risk
(Since February 2014)
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
and Crawford plc. He is a Fellow
of Chartered Accountants
Ireland, a Fellow of the Irish
Marketing Institute, and has a
Diploma in Corporate Direction
from the Institute of Directors
in Ireland. He has a Masters in
Executive Leadership through
Boston College and the
University of Ulster.
Non-Executive Director,
member of Audit & Risk
Committee and Chairman
of Marketing and Customer
Committee of ESB.
Chairman and Non-Executive
Director of a number of
private companies.
Remuneration (Chairman)
(Since Feb 2014)
Audit & Risk (Since July 2016)
Nomination (Since Feb 2014)
Margaret has held a number
of senior positions including
CEO of DAA plc and Postbank
Ireland Limited. She was a
Director in Audit and Advisory
Services in KPMG and worked
in the firm for 15 years. She
is a Fellow of Chartered
Accountants Ireland and a
Chartered Director with the
Institute of Directors.
CEO and director of Irish
Residential Properties
REIT plc.
Director HSBC Institutional
Trust Services (Ireland) DAC.
Seán developed his career in
retail and FMCG distribution
with companies including
Dunnes Stores, Keelings and
Diageo plc. In 2017 he became
Company Secretary and Head
of Risk and Compliance for
the group. 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.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017 58
Dalata Hotel Group plc
Executive Management Team
59
Leadership
Executive Management Team
9. Martha Mannion
10. Michael McCann
11. Macarten McGuigan
12. Tony McGuigan
1. Shane Casserly
2. Stephen Clarke
3. Caitriona Conroy
4. Emma Dalton
13. Anthony Murray
14. Josephine Norton
15. Conal O’Neill
16. Carol Phelan
5. Patrice Lennon
6. Duncan Little
7. Niall Macklin
8. Paul Moloney
17. Joe Quinn
18. Keith Rynhart
19. Adrian Sherry
20. Dawn Wynne
1. Shane Casserly is Head of Strategy
and Development. He previously worked
at Jurys Doyle Hotel Group plc 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 of
University College Cork.
2. 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 Chartered Institute of
Management Accountants. Stephen holds a
B. Comm (International) from UCD and MBS
from the Michael Smurfit Graduate School of
Business.
3. 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 and Cardiff Lane.
Prior to this Caitriona worked with Jury’s
Doyle Hotel Group. Caitriona holds a BA in
Social Science from UCD.
4. Emma Dalton is UK Group General
Manager. She joined Dalata in October
2007 as General Manager of the Maldron
Hotel Limerick and opened the Clayton
Hotel Cardiff in 2011. She was appointed
UK Group General Manager in July 2017.
Emma previously worked with Jurys Doyle
Hotel Group and is a graduate of Galway
Mayo Institute of Technology.
5. Patrice Lennon is Head of Sales
and Marketing. She previously held the role
of Sales and Marketing Manager at the
Maldron Hotel Cardiff Lane from its opening
in 2005. Prior to this she worked with Jurys
Doyle Hotel Group plc and Radisson Hotels
Ireland, holding management positions within
Sales and Marketing. Patrice is a graduate of
Dublin Institute of Technology and University
College Dublin.
6. Duncan Little is Group Capital and
Project 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.
7. Niall Macklin is Acquisitions and
Development Manager. He joined Dalata in
July 2015 having previously worked in the
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.
8. Paul Maloney is Project Manager
Developments. Prior to joining Dalata in June
2016, Paul worked as an Asset Manager in Avid
Asset Management. He has a Master's degree
in Engineering from Trinity College Dublin and
has worked in various roles in both the public
and private sector, specialising in project and
resource management involving development
and construction in the commercial, industrial
and hotel sectors.
9. 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).
10. Michael McCann is Head of Ancillary
Revenue. He previously worked as a Fund
Accountant before joining Dalata’s Graduate
Management Programme in January
2014. He has a BA from University College
Dublin and an MSc in Finance and Financial
Regulation from Newcastle University.
11. 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.
12. Tony McGuigan is Head of Purchasing/
Food and Beverage. 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.
13. Anthony Murray is the Group IT Manager.
He has seventeen 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
and Catering Management. He also holds a
Bachelor of Science Degree in Management.
14. 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.
15. 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 plc where he spent 15 years
in a variety of senior roles including Group
General Manager in the UK.
16. Carol Phelan is Group Head of
Financial Reporting, Treasury and Tax and
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. Carol is a fellow of
Chartered Accountants Ireland and holds a
First Class Honours Master of Accounting
from UCD Michael Smurfit Graduate
Business School.
17. 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).
18. Keith Rynhart is Financial Planning and
Analysis Manager, having joined the Group in
2010. He previously held the role of Regional
Financial Controller, responsible for South
Dublin and London hotels as well as Financial
Controller roles at Clayton Hotel Cardiff
Lane, Ballsbridge and Clyde Court Hotels.
Prior to this, Keith worked with Edward
Hotels Group. He holds a BA in Business
Studies from the Dublin Institute
of Technology.
19. 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.
20. Dawn Wynne is the Head of Human
Resources 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 in Jurys Doyle hotel 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.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017 60
61
Corporate
Governance
Report
Corporate Governance Framework
BOARD
Chairman, Chief Executive Officer,
Deputy Chief Executive Business Development & Finance
Deputy Chief Executive, and three Non-Executive Directors
THE BOARD IS GOVERNED BY:
› A schedule of Matters reserved for the Board which sets matters that only can be decided by the Board
› Terms of Reference for Committees which set out matters the Board has authorised the Committees to deal with
› Terms of reference are available on the Group’s website at www.dalatahotelgroup.com
OUR COMMITTEES
Nomination Committee
Audit & Risk Committee
Remuneration Committee
› Three Independent Non-Executive
› Three Independent Non-Executive
› Three Independent
Directors
Directors
Non-Executive Directors
› Leads the process for Board
› Responsible for overseeing the
appointments and re-election,
succession planning of Directors
and the Chairman and Board
Performance Evaluation
Group’s financial reporting, internal
and external audit, internal control
and risk management system
› Committee Report on pages 72 to 77
› Committee Report on pages 70 to 71
› Responsible for advising the
Board on remuneration of
Executive Directors and setting
an overall policy for remunerating
the Group’s employees.
› Committee Report on pages
78 to 89
CHIEF EXECUTIVE OFFICER
Executive Risk Committee
Disclosure Committee
› Head of Risk and Compliance and
› Chief Executive Officer, Deputy Chief Executive
Group Senior Managers
› The Committee meets regularly during the
year to review and consider the Groups risk
management policy and risk register.
Business Development & Finance and
Company Secretary
› The Committee meets regularly during the year
to consider the Group’s disclosure obligations and
to review results announcements prior to release
Executive Management Team
Chief Executive Officer, Deputy Chief Executive Business Development & Finance,
Deputy Chief Executive
LEADERSHIP
Role of the Board
The key responsibilities of the
Board are to set strategy, to
monitor management and hold
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; and
› 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, knowledge and
experience, gained from a diverse
range of industries and backgrounds,
required to manage the Group.
Detailed biographies of current
Directors are set out on pages 56
to 57. The overall composition and
balance of the Board is kept under
review as detailed in the programme
of work undertaken by the Nomination
Committee, set out in its report
on pages 70 to 71. The Nomination
Committee has reviewed the
composition of the Board during 2017.
A Board size of seven directors is a size
which functions efficiently, comprises
the skills and expertise required
by Dalata and meets corporate
governance best practice guidelines on
independence. The Board will continue
to manage the orderly succession of
Non-Executive Directors.
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 the Group’s
operations and for the implementation
of the 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
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcCorporate Governance ReportAnnual Report and Accounts 2017 62
63
Attendance At Board Meetings
During The Year Ended
31 December 2017
During 2017, the Board held eight
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 Chairman and the Non-Executive
Directors met as a group without the
Executive Directors from time to time
throughout the year.
Number of Board Meetings
attended by Directors:
Member
John Hennessy
Patrick McCann
Dermot Crowley
Stephen McNally
Margaret Sweeney
Alf Smiddy
Robert Dix
No. of
meetings
8/8
8/8
8/8
8/8
8/8
8/8
8/8
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 56 and 57 and the Board
considers that their biographies
reflect suitable breadth and depth of
strategic management experience.
Senior Independent Director
Mr Alf Smiddy is the Senior
Independent Director. He is
responsible for conducting an
annual performance review of the
Chairman, facilitating the board
evaluation process, providing advice
and judgement to the Chairman as
necessary, serving as an intermediary
to the other directors when necessary,
and being available for shareholders
who have concerns that cannot
be addressed through the normal
channels of Chairman, Chief Executive
Officer or Deputy Chief Executive,
Business Development & Finance.
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 Company’s
Articles of Association and Schedule
of Matters reserved for the Board
provide that the appointment or
removal of the Company Secretary
is a matter for the full Board.
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, Company Secretary,
and Senior Managers. Detailed
biographies of the Executive
Management Team are set out
on pages 58 and 59.
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.
EFFECTIVENESS
Meetings
Board meetings are intentionally
held at Dalata hotels in different
locations to broaden the Board’s
exposure to the markets in which
the Group operate and to provide
opportunities to meet frontline
staff and other colleagues.
During the year the Board spent
significant time considering the
Company’s key strategic projects,
receiving deep dive management
presentations and comprehensive
updates. Projects included the Sale
and Leaseback of Clayton Hotel
Cardiff and Hotel La Tour, Birmingham
and also signing of agreements to
lease new hotels on completion in
Manchester and Glasgow.
In May the Board went to Belfast,
to visit the construction site of our
new Maldron Hotel opening in 2018.
They met with the new General
Manager of the Hotel and had a
tour around the site.
In June they held a strategy day,
where they spent the day considering
the Group’s strategy for the coming
years. The Board regularly have
discussions on strategy at the
majority of Board meetings.
Board Committees
The 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.
Following the introduction of the
Market Abuse Regulation in July 2016,
the Company established a Disclosure
Committee. This Committee
comprises of two executive Directors
and the Company Secretary and
has responsibility for, among other
things, considering and advising
on a timely basis the disclosure
treatment of material information
disclosed in public filings, determining
on a timely basis the disclosure
treatment of material information,
overseeing the preparation of
regulatory filings and assisting in the
design, implementation and periodic
evaluation of the adequacy and
effectiveness of disclosure controls
and procedures.
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 2016
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
and discussion. 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 2017.
Photo: Meeting Room,
Clayton Hotel Chiswick
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcCorporate Governance ReportAnnual Report and Accounts 2017 64
65
Our Board
During 2018
Board and Committee meetings are
held at different locations throughout
the year allowing non-executive
directors to engage with the business.
Meeting agendas are designed to
comprehensively cover oversight
responsibilities of the Board and the
duties of the Committees.
The Board reviews financial
results and receives updates from
operations, and acquisition and
developments at each regular
meeting. Here is a summary of
our activity and a selection of
highlights from 2017.
January
February
March
April
May
June
July
August
September
October
November
December
Clayton Hotel
Dublin Airport
Clayton Hotel
Ballsbridge
Clayton Hotel
Ballsbridge
Clayton Hotel
Silver Springs Cork
Clayton Hotel
Belfast
Churchtown
House, Dublin
Maldron Hotel
Limerick
Central Office
Dublin
Clayton Hotel
Burlington Road
Clayton Hotel
Birmingham
Clayton Hotel
Chiswick
Gibson Hotel
Dublin
Board
› Review planned
extension
with General
Manager
› Strategy scope
Board
Remuneration
Nomination
› Full year results
› 2017 LTIP
Central Office
Dublin
Gibson Hotel
Dublin
Audit and Risk
› Risk review
› Finance and
purchasing
systems
Audit and Risk
Remuneration
› Full year results
› Annual
Remuneration
Policy
Remuneration
› Vesting 2014
LTIP
No board meeting
in March.
› Post-results
Shareholder
engagement
Board
Remuneration
› Visits to three
hotels and South
Mall site
› Portlaoise,
Liffey Valley
and Cardiff Lane
acquisitions
› Cardiff sale and
leaseback
› Employee
engagement
Board
Remuneration
› New Maldron
Hotel site
inspection
› Market research
and customer
sentiment
Board
Strategy Day
› Five year
strategy
› UK market
analysis
Maldron Hotel
Pearse St, Dublin
Audit and Risk
› Health and
safety
› Self-Insurance
Board
Nomination
Audit and Risk
› Hotel La Tour
acquisition
› Depreciation
review
Audit and Risk
› Interim results
Board
› Interim results
› EY IT risk
review
› Liffey Valley
Suites
› Maintenance
capex update
› Electricity
tender
› SAYE offer
Board
Audit and Risk
› Development
projects detailed
review
› IFRS 16 analysis
Board Training
› MIFID2
› IT Strategy
› Sustainability
› Governance
Board
› Board
evaluation
› Budget 2018
Maldron Hotel
Dublin Airport
Audit and Risk
› Cybersecurity
› Tax
› External
Audit plan
Maldron Hotel
Pearse St, Dublin
Remuneration
› Companywide
Remuneration
› Market review
› 2018 proposals
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
2017. 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
November 2017, each Non- Executive
Director confirmed that they had
been able to allocate sufficient time
to discharge their responsibilities
effectively during 2017.
New Director Inductions
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 2017.
Ongoing Director 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. The Company
Secretary regularly updates the Board
on regulatory and legal matters,
or relevant changes, as part of
meetings, and circulates information
on relevant training courses and
resources available to Directors.
In November 2017, a Directors’
Training Day was facilitated by
the Company Secretary and was
attended by both Executive and
Non- Executive Directors. The
topics covered included an update
on MIFID 2 and developments in
sustainability, non-financial reporting
and governance.
Information Flow at
Board Meetings
Formal board meetings are held
approximately ten times per year.
Prior to each board meeting the
Directors receive their papers on
a fully encrypted electronic portal
system. Included in these papers
are detailed monthly accounts
together with reports from the Chief
Executive, Deputy Chief Executive
Officer, and Deputy Chief Executive –
Business Development and Finance.
The Chief Executive Officer and the
Deputy Chief Executive-Business
Development and Finance 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.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcCorporate Governance ReportAnnual Report and Accounts 2017 66
67
Re-election
The Company’s Articles of Association
provide that one third of the Directors
retire by rotation each year and that
each Director seeks re-election at the
Annual General Meeting every three
years. New Directors are subject to
election by shareholders at the next
Annual General Meeting following
their appointment. However, in
accordance with the provisions of the
2016 Code, the Board has decided
that all Directors should retire at the
2018 Annual General Meeting and
offer themselves for re-election.
ACCOUNTABILITY
Audit and Risk Committee
The report of the Audit and Risk
Committee on pages 72 to 77 sets out
in detail the work of the Committee
in providing assurance to the Board
in relation to the company's financial
reporting, risk management and
internal control environment.
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. Further detail is
set out in the Viability Statement on
pages 42 to 43.
Risk Management
On page 36 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.
Assessment of the Principal Risks
Facing the Group
The Board and Audit and Risk
Committee received and reviewed
reports from Group Internal Audit, 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 38 to 41.
Annual Assessment of the
Effectiveness of Risk Management,
Internal Control and Financial
Reporting Systems
The Board and Audit and Risk
Committee received and reviewed
reports from Group Internal Audit
and the Group’s External Auditor, to
help with their annual assessment of
the effectiveness of the Group’s risk
management, 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) in 2015 to ensure that any
concerns are addressed confidentially,
promptly and thoroughly.
No concerns were raised by
employees during the year. This was
reported by the Company Secretary
to the Audit and Risk Committee on
22 February 2018.
Summary of the Confidential
Disclosure Policy is included in the
Employee Handbook to ensure all
employees have an understanding
of the whistleblowing process.
Photo: Maldron Hotel Pearse Street, Dublin
Board Evaluation
In 2017 the Board evaluation was externally facilitated for the first time.
Stage 1
Stage 2
Stage 3
Briefing
Interviews
with each
Board
member
Results
Collated,
Reported &
Evaluated
Discussion
with
Chairman
Board
Discussion
Action
Plan
Agreed
Board Evaluation
The assessment of the Board
was conducted according to the
guidance in the 2016 Code and
was facilitated by Mr Geoffrey
Shepheard of ICSA Board Evaluation
(“the Evaluator”). Neither
Mr Shepheard nor ICSA Board
Evaluation has any other connection
with the Company aside from the
provision of the Board evaluation.
Stage 1
A comprehensive brief was given
to the Evaluator by the Chairman
and the Chair of the Nomination
Committee in October 2017.
In October, detailed one-to-one
interviews were conducted with each
Board member. All participants were
interviewed on the following topics
› Board Responsibilities
› Oversight
› Board Meetings
› Support for the Board
› Board Composition
› Working together
› Outcome and achievements
Stage 2
The report was compiled by the
Evaluator, based on the information
and views supplied at the
interviews. All recommendations in
the report subsequently were based
on best practice as described in
the 2016 Code and other corporate
governance guidelines.
Stage 3
Draft conclusions were discussed
initially with the chairman and
subsequently with the whole Board
at its meeting in December, with Mr
Shepheard present. The conclusion
of the discussion was recorded in
the minutes of the meeting.
Board Review Insights 2017
The broad message from the report
was that the Board and committees
work very well together and are
clearly aware of the need to build on
the Company’s success and to
avoid complacency.
The directors felt the re-
organisation of the Company
Secretary’s duties had been
successful and had produced
the desired results.
The following items were
recommended and will be on
the Board's agenda for 2018,
› instituting a formal process
for approval by the Board for
selecting new Board members.
› attention to the definition of the
company’s key values.
› the Chairman and Company
Secretary review the content
of each Board agenda to ensure
that papers are fit for purpose
and that only essential items
are included.
› establishing a formal induction
process for new directors in
readiness for new appointees.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcCorporate Governance ReportAnnual Report and Accounts 2017 68
69
REMUNERATION
Details of Directors’ Remuneration
are set out in the Remuneration
Committee Report on pages 78 to 89.
prohibited from dealing in Company
shares during designated prohibited
periods and at any time when the
individual is in possession of price-
sensitive information.
RELATIONS WITH
SHAREHOLDERS
Share Ownership and Dealing –
MAR
Details of each Directors’ interests
in Dalata shares are set out in the
Remuneration Report on page
87. The Company has a policy on
dealing in shares that applies to all
Directors and Management and was
comprehensively reviewed following
the introduction of the Market Abuse
Regulation (‘MAR’) in July 2016. Under
the policy and in accordance with
the provisions of MAR, Directors are
required to obtain clearance from the
Chairman before dealing in Company
shares. Directors and Management are
Shareholder Communication
The Board promotes open
communication with shareholders.
This is formalised within the
framework of an ongoing investors
relations programme conducted by the
CEO and/or Deputy Chief Executive
Officer – Business Development and
Finance. The programme includes the
presentation of preliminary and half-
year results, which can be accessed on
www.dalatahotelgroup.com and
a large number of meetings with
existing shareholders and potential
investors throughout the year. The
Company makes every effort to
ascertain investor perceptions and
regular reports of investor and analyst
feedback are provided to the Board.
During 2017, over 250 separate
meetings and conference calls were
held with existing and prospective
shareholders. The meetings focused
primarily on the Group’s trading
operations and the Group’s strategy.
The Chairman of the Remuneration
Committee engaged with shareholders
representing approximately 70% of
the share register during 2017 on the
Directors Remuneration Policy and
feedback received was considered by
the Remuneration Committee and the
Board. An Investor Day was held in
November 2017 at our Clayton Hotel
Chiswick London, which was attended
by all members of the Board. This
provided shareholders, fund managers
and analysts an opportunity to visit the
newly renovated Clayton hotel and to
talk to members of the Board.
The Company maintains regular
dialogue with key relationship banks
which includes semi-annual meetings
with presentations from the Executive
Finance Management Team.
All shareholders are entitled to attend
the AGM. Shareholders are given the
opportunity to lodge their votes by
way of proxy and/or to attend the
meeting in person where they have
the opportunity to ask questions of
the Board, including the chairs of the
Board Committees, vote by way of
a poll and meet informally with the
Directors to discuss any issues they
may wish to raise.
In line with the authority given at
its 2015 AGM, the Company uses
its website and email as the primary
means of communication with its
shareholders. This arrangement
provides significant benefits for
shareholders and the Company in
terms of timeliness of information and
reduced environmental impact and
cost. Shareholders may still opt to
receive their communication in a paper
format. The Company’s corporate
website (www.dalatahotelgroup.
com) contains information for
shareholders, including share
price information and regulatory
announcements.
Annual General Meeting
The Annual General Meeting will
be held on 3 May 2018 at the
Clayton Hotel Dublin Airport,
Stockhole Lane, Swords, County
Dublin. Formal notification will be
sent to shareholders at least 20
working days before the meeting
in accordance with the provisions
of the UK Corporate Governance
Code. Other general meetings may
also, be convened from time to time
upon at least 14 working days’ notice
or where certain requirements are
met, including prior approval by
shareholders by way of a special
resolution, upon 14 working days’
notice in accordance with the 2016
Code. 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
Chairs of the various Committees and
its Committee members.
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.
Globe Bar, Clayton Hotel Chiswick, London
Opposite:
Grain & Grill Restaurant,
Maldron Hotel Newlands Cross, Dublin
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcCorporate Governance ReportAnnual Report and Accounts 2017 70
71
Nomination
Committee
Report
Principal Responsibilities
Dear Shareholder,
› 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.
› 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
input required from Non-
Executive Directors.
A copy of the Committee’s terms
of reference can be found on
the Group’s website:
www.dalatahotegroup.com
I am pleased to present to you
the report of the Nomination
Committee for 2017.
The Committee has been very
active during 2017, meeting on three
occasions and covering a range of
topics including succession planning
and senior management development,
committee appointments, the role
of the Company Secretary, board
evaluation, training activities, and
policy review in the areas of evaluation,
diversity and board re-election.
Our board comprises the Chairman
(independent upon appointment),
three executives (CEO, and two
deputy CEOs) and three independent
non-executive directors. Each non-
executive director sits on more than
one committee and it is customary
for the committee chairman to invite
attendance by non-member, non-
executive directors to attend meetings.
This lends to good communication
across the non-executive cohort which
is particularly helpful. For my own
part, attendance at the Remuneration
Committee in 2017 has allowed me
to contribute to the development
of the remuneration policy and also
to gain insight to the management
structures within the organisation as
a whole from hearing the Group Head
of HR’s presentation on companywide
remuneration structures.
ACTIVITIES FOR 2017
Succession
The Board is committed to effectively
managing leadership succession and
proactively engages with the senior
management team to assess the
executive talent pool. The Committee
and the Board receives regular
contributions from individuals in the
wider executive group at meetings of
the Board and Committees throughout
the year. These contributions are
valuable for our decision making
and have helped the Non-Executive
Directors to develop a clear
understanding of the strength of
the management team.
The Committee is also active in
promoting personal leadership
development plans for the senior team,
monitoring progress throughout the
year. Succession planning is designed
to consider the planned process of
transition to new leadership over time
and also the potential for unforeseen
change over a shorter timeframe.
The Committee keeps in touch with
the talent development process
throughout the organisation,
conscious of the strategic importance
Committee meetings
The Committee comprises of three
independent, non-executive directors,
Alf Smiddy (Chairman), John
Hennessy and Margaret Sweeney.
Details of attendance at meetings in
2017 are outlined in the table below.
Member
Alf Smiddy
John Hennessy
Margaret Sweeney
No. of meetings
3/3
3/3
3/3
Robert Dix, non-executive director,
also attended each meeting during
2017.
PRIORITIES FOR 2018
The Committee will continue to focus
on succession planning and talent
development for both the Board and
the Executive Management Team in
2018. We also continue to monitor
board composition in light of the
group’s expansion and of the future
governance needs of the Company.
Finally, it was great to meet a number
of you at the AGM in May and our
capital markets event in London in
November, as the Company grows
and develops, I look forward to
participating in events which support
the board’s engagement with all of
our stakeholders.
Alf Smiddy
Chairman,
Nomination Committee
of promoting from within as far as
possible to support the Company’s
growth plans as set out in the
Strategic Report.
These presentations and discussions
provided valuable insights and
stimulated debate, adding appreciable
value to the work of the Board.
Diversity
The Committee reviews the Board
Diversity Policy annually and did so
most recently at its December 2017
meeting. The policy acknowledges
that an effective Board will include and
make good use of differences in the
skills, regional and industry experience,
background, race, gender and other
distinctions between Directors and
emphasises that in identifying suitable
candidates for appointment to the
Board, the Committee will consider
candidates on merit against objective
criteria, with due regard for the
benefits of diversity on the Board.
Role of the Company Secretary
In light of the growth of the business
and the increasing complexity of the
regulatory environment the Committee
considered that the Company had
reached the point where the Company
Secretariat merited dedicated
resource, independent of the finance
function. In May 2017, Company
Secretary Seán McKeon, who was also
responsible for financial management,
was appointed Company Secretary
and Head of Risk and Compliance,
reporting to the Chairman and CEO.
The change has been well received
and is a boost to the effectiveness of
the Company’s risk and compliance
management processes. This change
has also brought a greater focus to
environmental, social and governance
matters and provides a platform
for increased engagement with
shareholders in this area in the future.
Board and Committee Composition
Following changes in the composition
of both the Audit & Risk Committee
and Nomination Committee in 2016,
the Committee reviewed progress and
considered feedback gathered in the
2016 Board evaluation, concluding
that the committees were working
well. Accordingly, no changes in the
membership were recommended
for 2017.
Board Performance Evaluation
The Board, on the Committee’s
recommendation appointed the
Institute of Chartered Secretaries and
Administrators (ICSA) to facilitate the
2017 board evaluation. The findings
from this independent evaluation,
based on in-depth interviews with
each Director, were very positive and
provided a number of valuable insights
and recommendations which we will
follow up on in 2018. The process and
the outcomes are set out in more detail
in the Governance Report on page 66.
Board Training
In November the board held its second
annual training day at Clayton Hotel
Chiswick. The training day is an
important date in our calendar where
we invite subject matter experts
from outside the company (and some
internal) to present to the Board in an
informal roundtable setting on topics of
strategic importance to the Company
and the Board. This year we debated
with our guest speakers:
› the implications for MIFID 2 for
the Company
› the past present and future of ICT
development within Dalata
› our strategy and the market
environment in the UK
› what our annual report reveals
about our approach to corporate
governance
› our strategic approach to
sustainability
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plcNomination Committee Report
72
73
Audit & Risk
Committee
Report
Role of the Committee
Dear Shareholder,
› Monitor the integrity of the
Group’s financial statements,
accounting policies and the key
judgements made in the financial
statements.
› Assess whether the Annual
Report, taken as a whole, is fair,
balanced and understandable
and provides the information
necessary for shareholders to
assess the Company’s position
and performance, business
model and strategy.
› Oversee the Group’s relationship
with our External Auditor.
› Review the effectiveness of the
Group’s internal control systems.
› Monitor the Group’s risk
management systems and the
identification of our principal
risks.
› Monitor the effectiveness of the
Internal Audit function.
› Review the Group’s compliance
framework.
› Monitor health, safety and
operational risks and the Group’s
insurance programmes.
A copy of the Committee’s
terms of reference, which were
updated in January 2018 can be
found on the Group’s website:
www.dalatahotelgroup.com.
As Chairman of the Audit and Risk
Committee (the ‘Committee’) I am very
pleased to present the Committee’s report
for 2017. It has been a busy year for the
Committee, we have covered a wide range
of matters within our remit, and I outline
these in the following sections.
On the financial reporting front,
as outlined on pages 74 and 75
most of the significant accounting
judgements arise from the acquisition
activity of the Group, whether during
2017 or the valuation of assets
acquired in previous years. The
company seeks the advice of qualified
independent experts to determine the
value of property and also consults
with external accounting experts on
occasion to confirm its approach on
finer technical points. I am happy to
report that in making the important
judgement calls, the Committee’s
view in all cases was endorsed by
the External Auditor.
As the business grows the risks evolve
and the compliance environment
becomes more complex. During the
year the Company invested further
resources in risk management and the
Committee expects to see ongoing
improvement in the Company’s risk
management capacity in 2018.
We maintain a very good working
relationship with the External Auditor
who attends all of the Committee’s
meetings. The Committee also
meets the External Auditor without
management present following the
presentation of their report on both
the interim and full year financial
statements.
In 2017 we held two additional
meetings in order to deal in depth
with specific accounting matters.
In June we received a presentation
on the estimates of useful lives for
fixtures, fittings and equipment.
The evidence presented strongly
supported the adoption of a more
granular approach to depreciation
of guestroom fixtures, fittings and
equipment, in particular. In October
we reviewed, with the finance team,
the likely impact of IFRS 16 Leases,
which when adopted will have a
significant effect on our accounts.
We shared our findings with you
The Committee reviewed the
draft Going Concern and Viability
Statement prior to recommending
it for approval by the Board. The
Viability Statement is included in
the Risk Management Report on
pages 42 and 43.
Looking to 2018 I expect the
Committee to be no less busy as
the business proceeds with its
planned expansion. Cyber security
will stay on our agenda as well as the
implementation of the enforcement
provisions of the General Data
Protection Regulation (GDPR), in
addition to the day to day business.
You may be assured that the Audit
and Risk Committee will maintain its
proactive approach and engagement
with management to maintain high
standards of accountability across
the Group.
Robert Dix
Chairman,
Audit & Risk Committee
at our capital markets event in
November, which I attended, and
I believe our proactive work in this
area was well received by those who
analyse our financial data.
Our Internal Audit team led by
Macarten McGuigan continues to
provide assurance through detailed
reporting at each of our meetings.
The Committee proactively monitored
the design, project management
and installation of new financial and
procurement systems during the year.
These have been significant changes.
The Committee also receives updates
on the development of human
resources in the finance function
and regularly invites members of
the finance team to attend and
participate at Committee meetings.
We monitor carefully the
management of health and safety
and operational risk. The Group
operates a self-insurance programme
and the Committee invites the
Company’s insurance broker and
claims advisor to present annually
on the management of claims and
assessment of losses.
During the year the Company
received correspondence from
the Irish Auditing and Accounting
Supervisory Authority (IAASA) with
enquiries in relation to our 2016
accounts. We were happy to engage
with IAASA and I believe that the
presentation and disclosures in this
year’s financial statements
reflect a number of suggestions
made by the regulator.
The Committee considered the
requirements of the Irish Companies
Act 2014 in relation to the Directors’
Compliance Statement, and is
satisfied that appropriate steps have
been taken to ensure full compliance
by the Company with these
requirements.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcAudit and Risk Committee ReportAnnual Report and Accounts 2017
74
75
SIGNIFICANT FINANCIAL JUDGEMENTS FOR 2017
In considering the Group’s financial statements for 2017 the Committee
reviewed a number of key judgement areas. These were reviewed with
Group Finance, Executive Management and KPMG at our meetings.
These related to the following areas.
Matter
Judgements
Matter
Judgements
Accounting for
acquisitions
The Group completed
a number of business
combinations and
asset purchases
during the year.
During 2017, the Group completed the acquisition of two hotels, which were accounted for as business
combinations, Clarion Hotel, Liffey Valley and Hotel La Tour Birmingham. Details of both transactions
are set out in note 9 to the Group consolidated financial statements on page 130.
The Group completed a number of property transactions during the year including the purchase of long
leasehold interests and freehold interests in certain properties, the details of which are outlined
on page 138 in note 11 to the Group consolidated financial statements. These were accounted for
as asset purchases.
The Committee has evaluated the accounting treatment of the consideration paid and costs incurred
as presented by management for each of the aforementioned transactions. Management have reported
in detail to the Committee in relation to the accounting treatment applied to each transaction and
the treatment of associated transaction costs in each case. In addition, the Committee discussed
the transactions during the year with management and with the External Auditor. Accordingly,
the Committee is satisfied that the correct accounting method has been chosen for each of the
aforementioned transactions.
Where applicable, the Committee has considered the valuations which underpin the accounting and
which were performed by suitably qualified professional valuers, as reported to them by management.
Based on the above, the Committee is satisfied that the assumptions used and judgements made for
business combinations 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 Group
consolidated financial statements.
Sale and leaseback
transactions
The Group completed
two sale and leaseback
transactions during
the year.
The Group completed the sale and leaseback of Clayton Hotel Cardiff and Hotel La Tour, Birmingham
during 2017, the details of which are also set out in note 11 to the Group consolidated financial
statements on page 138. Both of the resulting leases were classified as operating leases.
Management have reported in detail to the Committee in relation to the key judgements underpinning
the classification of these leases as operating leases. In addition, the Committee discussed these
transactions during the year with management and with the External Auditor.
The Committee is satisfied that the assumptions used and judgements made in accounting for these
transactions are reasonable, that these leases have been correctly accounted for as operating leases
and that appropriate disclosures are included in the Group consolidated financial statements.
Building revaluations
In line with the Group’s
revaluation policy for land
and buildings, valuations
are carried out by suitably
qualified professional
valuers at each reporting
period end.
The net carrying value of land and buildings at 31 December 2017 was €848.8 million (note 11, page
138). The carrying value of land and buildings is determined using fair value. The calculation of fair
value and the allocation of fair value to land and buildings requires judgement. The determination of
residual values and the allocation of fair value to land and buildings also impacts depreciation.
Management has engaged appropriately qualified professional valuation specialists to determine the
value attributable to land and buildings.
Management have reported in detail to the Committee in relation to the valuation, as determined by
suitably qualified professional valuers, of land and buildings at 31 December 2017. The Committee has
discussed the valuation approach and allocation approach undertaken with management. Through
discussion with management and considering the findings of the External Auditor, the Committee is
satisfied that the year-end valuations are reasonable and that the revaluation movements have been
appropriately presented in the Group consolidated financial statements.
Depreciation and
estimated useful lives
of fixtures, fittings ad
equipment
The Group revised its
estimate of the useful lives
of fixtures, fittings and
equipment.
During 2017, the Group revised its estimate of the useful lives of its fixtures, fittings and equipment.
The details of this change in accounting estimate are outlined at the start of note 1 to the Group
consolidated financial statements on page 108.
Management have reported in detail to the Committee in relation to the determination of useful lives
of the Group's fixtures, fittings and equipment. The Committee has reviewed the key assumptions and
estimates used by management. Through discussion with management and considering the findings of
the External Auditor, the Committee is satisfied that they are reasonable and that the estimated useful
lives have been determined appropriately.
Accordingly, the Committee is satisfied that the depreciation of fixtures, fittings and equipment is
correctly stated in the Group consolidated financial statements.
Carrying value of goodwill
Goodwill amounted to €33.4 million at 31 December 2017 (2016: €33.8 million).
Detailed impairment reviews
are undertaken on an annual
basis to determine whether
the carrying value of
goodwill is impaired.
The carrying values of hotel cash-generating units (CGUs) to which goodwill has been allocated are
required to be tested annually for impairment. Management undertook detailed impairment reviews on
a hotel by hotel basis, taking account of the valuations prepared by the qualified professional valuation
specialists and other factors. The assumptions utilised by management in conducting these analyses
are disclosed in note 10 to the Group consolidated financial statements and include projected cash-
flows for future revenue and costs, terminal value multiples and discount rates.
The Committee has reviewed the approach taken by management, as outlined in management’s
report to the Committee, in conducting these impairment reviews and in particular, the assumptions
utilised by management. As part of their audit, the External Auditor assessed the Group’s impairment
calculations on a CGU by CGU basis.
Discussions were undertaken between management and the External Auditor as to the underlying
assumptions. Following discussions with management and with the External Auditor, the Committee is
satisfied that these are reasonable. As the recoverable amounts of the CGUs were determined to be
higher than their carrying values at 31 December 2017, no impairment of goodwill was recognised.
Accordingly, the Committee has concluded that the carrying value of goodwill is appropriately stated at
31 December 2017 and that the disclosures included within note 10 of the Group consolidated financial
statements are adequate.
The carrying value of other indefinite-lived intangible assets at 31 December 2017 amounted to €20.5
million, which represents the value of the Group’s leasehold interest in The Gibson Hotel, Dublin.
Management reviewed the useful life of this asset and concluded based on the existence of renewal
rights and the intention of the Group to exercise such rights in the future, that the indefinite useful life
remains appropriate. Following discussions with management and the External Auditor, the Committee
is satisfied that this is reasonable.
Cash-generating units containing indefinite-lived intangible assets are required to be assessed
annually for impairment. Management have undertaken a detailed impairment review which supports
the carrying value of this intangible asset at 31 December 2017 on a value-in-use basis. The External
Auditor has also reviewed the underlying assumptions and supporting calculations. Based on
discussions with management and considering the External Auditor’s findings, the Committee is
satisfied that management’s conclusions are reasonable i.e. that the carrying value of intangible assets
was not impaired at 31 December 2017.
Accordingly, the Committee has concluded that the carrying value of intangible assets is appropriately
stated at 31 December 2017 and that the disclosures included within nsote 10 of the Group
consolidated financial statements are adequate.
Carrying value of
other indefinite-lived
intangible assets
Other indefinite-lived
intangibles represent
the value of the Group’s
leasehold interest in
respect of The Gibson
Hotel, which was
acquired in 2016.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcAudit and Risk Committee ReportAnnual Report and Accounts 2017 76
77
EXTERNAL AUDIT
Our External Auditor, KPMG, was
appointed in 2014 and reappointed
in 2016, when the Company became
an EU Public Interest Entity (EU
PIE) following its admission to the
main markets of the Irish and London
Stock Exchanges. Our audit partner
since 2014 is Sean O’Keefe. The
Group has no current plans to tender
for this service, though the Group is
cognisant of the EU Audit Regulation
and Directive requirements on auditor
rotation, which are monitored on an
ongoing basis.
KPMG attend each of our Committee
meetings and, in October/November
of each year, present to us a detailed
document setting out their audit
scope, materiality and assessment
of key risk areas for the statutory
audit. We review this in detail prior
to the commencement of the audit
process. A similar document is also
prepared for the interim accounts
review, usually at our May/June
meeting. We meet with the External
Auditor privately on a regular
basis throughout the year, usually
coinciding with the publication of our
financial statements.
The Group also uses KPMG for the
provision of non-audit services,
usually relating to Group transactions
or one-off areas of technical advice.
The Committee monitors the
provision of these services and are
advised, in advance by management,
of the rationale behind their proposed
appointment and the business
reasons for the work.
Tax advisory assignments carried
out by KPMG in 2017 related to
assessment of capital allowances,
transfer pricing analysis, the
acquisition of the Clayton Hotel Cardiff
Lane and Clayton Hotel Liffey Valley,
review of corporation tax returns,
review of tax provisions, and various
smaller acquisition-related and ad-hoc
enquiries. Other non-audit services
included financial due diligence in
relation to the acquisition of Clayton
Hotel Birmingham (formerly Hotel
La Tour Birmingham), reporting
for landlords on turnover rents,
sustainability services and small
number of other incidental matters.
The fees paid to KPMG for 2017
are set out on page 123 of the report.
The ratio of non-audit to audit fees
was 0.94:1.
We have evaluated KPMG on their
work completed during 2017, based
on our assessment of their work,
feedback from management and
review of their documentation.
The Committee is satisfied with
their effectiveness, objectivity and
independence. The Committee also
considered the External Auditor’s
internal processes for monitoring
objectivity and independence,
including peer partner review. We are
satisfied that these processes have
operated effectively.
INTERNAL CONTROL AND
RISK MANAGEMENT
While the Board has ultimate
responsibility for risk management
it has delegated this task to the
Committee. The Committee has
responsibility for the oversight of the
Group’s system of internal control
along with the oversight of the
Internal Audit function.
Assessment of the risk management
framework and internal controls
Risk management and assessment
of the principal risks facing the
Group are a standing item for each
Committee meeting. We review the
Group’s risk register at each meeting
and consider reports from the Head of
Risk and Compliance and also senior
management’s opinion on the status
of these risks. Of particular interest
to us is the emergence of new risks or
where the profile of a particular risk
has changed. Details on the Group’s
risk management framework is set out
on pages 36 to 43.
We identified that the Group faced
increasing risks in relation to IT and
data, particularly given the external
environment and Group developments
in this area. To address this, and
following an assessment process by
management and Internal Audit, we
appointed an external partner, EY,
to provide additional internal audit
technical expertise in this area. A
detailed IT risk assessment was
completed and a programme of audits
has been agreed. Updates on this
area are provided to the Committee
and the audits are ongoing.
THE WORK OF THE COMMITTEE
IN 2017
The Committee met seven times
during 2017. Attendance at these
meetings was:
Member
No. of meetings
Robert Dix
Alf Smiddy
Margaret Sweeney
7/7
7/7
7/7
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.
The Group has an established internal
control environment which is in place
to assist in managing risks and to
maintain appropriate controls over
the Group‘s activities. During the
year we considered enhancements
to the internal control environment
with the implementation of an
upgraded accounting platform, the
development of a shared service
centre and our new procurement
system. This project will continue in
2018. The Internal Audit function also
reviews the effectiveness of these
controls through its audit programme
and we consider the internal audit
reports at each of our meetings.
INTERNAL AUDIT
The effectiveness, scope of work
and operation of the Internal Audit
function is a focus area for the
Committee. At each Committee
meeting we review the findings
arising from the Group Internal
Auditor’s reviews. In particular, we
consider any control weaknesses
identified and the remedial action to
be taken. Management’s opinion on
the matters raised is also considered.
We meet with the Group Internal
Auditor without management present
at each Committee meeting.
During the year we considered the
planned internal audit approach
and the main audit focus areas as
presented by the Group Internal
Auditor. This provided the basis
for developing the internal audit
plan, which was reviewed and
approved by the Committee. The
ongoing completion of this plan is
also reviewed regularly. At our June
meeting we reviewed and updated
the internal audit terms of reference
and the role description of the Group
Internal Auditor.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcAudit and Risk Committee ReportAnnual Report and Accounts 2017 78
79
Remuneration
Committee
Report
Role of the Committee
› Review the ongoing
appropriateness and relevance
of the remuneration policy,
having regard to the pay and
employment conditions across
the group.
› Consider and recommend
to the Board the framework
for the remuneration of the
Executive Directors and
Chairman.
› Within the terms of the agreed
policy, determine the total
individual remuneration package
of the Chairman and each
Executive Director, including
salary benefits, bonuses and
incentive payments.
› 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.
The remuneration of the Non-
Executive Directors is approved
by the Board.
A copy of the Committee’s
terms of reference can be
found on the company’s website:
www.dalatahotelgroup.com.
Dear Shareholder,
I am pleased to present the report of the
Remuneration Committee of Dalata Hotel
Group plc for the year ended 31 December
2017, another year of exceptional progress
for the company.
2017 was a very busy year for the
Remuneration Committee as we
developed and implemented a new
Remuneration Policy and a new
Long-Term Incentive Plan (LTIP).
The company has grown at a great
pace and these structures set out our
approach to executive remuneration
providing a sign of the growing
maturity of the organisation and its
corporate governance. I was delighted
to have the opportunity to speak
with many of you as we developed
the Policy, at the AGM in May and
again at the capital markets event in
November. As an Irish-incorporated
company, we are not subject to
the UK remuneration reporting
regulations. However, in keeping with
our longstanding commitment to high
standards of corporate governance,
the Committee decided to voluntarily
comply with these requirements,
which is why we sought shareholder
approval for the Policy.
We presented three resolutions for
your approval at the AGM and I am
grateful for your approval of each of
them. The new Remuneration Policy
and LTIP received 99% and 97%
backing respectively, illustrating the
extent of support for the structures
we had developed alongside our
investors. We noted that the
remuneration report received a
lower level of support (approximately
75%) and we understand, from our
engagement with you and your proxy
voting agencies in the lead up to the
AGM, that there were some who
had a concern with the percentage
increase, for 2017, in the executive
director’s salaries. The increases
at that time were a response to the
delivery of exceptional performance
against the expectations set when
the company listed in 2014 and part
of our strategy to establish a fair
remuneration framework reflecting
the increased scale and complexity
of business with an emphasis on
reward for performance. I set out in
detail the context and rationale for
the increase in my discussions during
the year with individual shareholders
(representing approximately 70% of
the register) and in our 2016 report.
The Committee has listened to the
concerns of those investors and
as a result has committed that no
increases would be made to executive
director’s salaries above those
awarded to the general workforce
during the lifetime of the current
remuneration policy and we are
happy to reiterate that commitment.
I believe the new structures align
the interests of management closely
with those of shareholders and I am
reassured by your strong support
for the new remuneration policy
and the LTIP.
I would like to take this opportunity
to thank all of you who took my calls
and for your input which continues to
inform the Committee’s deliberations.
PERFORMANCE AND INCENTIVE
OUTCOMES IN 2017
2017 was another year of exceptional
growth in revenue and earnings as
well as progress with the construction
of new hotel assets and hotel
extensions. Further strides were
made in building the development
pipeline to underpin Dalata’s growth
model and, as set out in this annual
report, continued development in
human resources and technology
systems to support business strategy.
The Committee determined that
100% of the annual bonus to
executive directors should be
awarded and further detail on the
underlying target is set out on page
85. A portion of this award will be
deferred into Dalata Shares.
The LTIP award made to the executive
directors in March 2015 is based on
the Group’s total shareholder return
(TSR) performance over the three
year period to 27 March 2018 against
a selected group of comparators.
While the performance period had
not ended at the date of this report,
the Group’s TSR performance to the
date of this report exceeds the upper
quartile TSR of the comparator group
and therefore the award is expected
to vest in full. Details of this award
have therefore been included in this
report on page 84.
DEFERRAL AND HOLDING
PERIODS
Our remuneration policy calls
for the delivery of 20% of bonus
payments in the form of Dalata
shares, deferred for a period of
three years. Conditional shares
granted under the 2014 LTIP have
a three year performance period
with a holding period of at least
two years. In 2017 the Committee
implemented an extended five year
deferral period for the 20% portion
of the 2016 bonus delivered in shares
and a five year holding period for the
net awards vesting under the LTIP.
Similar extended deferral and holding
periods will apply for bonus payments
delivered and share awards vesting
in 2018.
PROPOSED CHANGES FOR 2018
In preparation for its review of
executive remuneration for 2018, the
Remuneration Committee received
presentations from the Group Head
of Human Resources, which analysed
pay and reward conditions across the
employee population, and from our
independent remuneration advisors,
Deloitte LLP, dealing with the wider
market considerations for executive
remuneration and developments in
corporate governance and regulation.
The Committee determined that
basic pay for the executive directors
would be increased by 2% on January
2018. This increase was determined
having regard to the company’s
trading conditions and is in line with
pay increases for the wider employee
population. This is in keeping with
our commitment that no increase in
salary will be granted to executive
directors in the lifetime of the 2017 to
2019 remuneration policy above those
granted to the general workforce.
No pension contribution is paid for
the CEO and a defined contribution
pension payment of 15% of base
salary will remain unchanged for
the other executive directors.
The maximum annual bonus will
remain at 110% of salary for the
CEO and 100% of salary for the
other Executive Directors. The
bonus for 2018 will be subject to
stretching earnings before interest
and tax (EBIT) and personal
targets which will be disclosed
retrospectively.
LTIP awards of 150% of salary for
the CEO and 125% of salary for
the other executive directors will
be awarded. These are the same
award levels as last year, in line with
our Remuneration Policy. 50% of
the vesting will be based on EPS
achieved in 2020 - threshold vesting
(25% of the maximum) will occur for
2020 Basic EPS of €0.43, with the
maximum vesting for EPS of €0.54.
The remaining 50% will be based on
TSR against the Dow Jones European
STOXX Travel and Leisure index over
the three year performance period,
with threshhold vesting (25% of
maximum) for TSR equal to the index
and with maximum vesting for out-
performance of the index by
10% or more per annum.
Continuing our longstanding
commitment to the highest standards
of disclosure, this report has been
prepared in accordance with the
disclosure requirements of Schedule
8 of the UK Large and Medium-sized
Companies and Groups (Accounts
and Reports) Regulations 2008
(as amended).
We look forward to receiving
your continuing support.
Margaret Sweeney
Chairman,
Remuneration Committee
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcRemuneration Committee ReportAnnual Report and Accounts 2017
80
81
DIRECTORS’ REMUNERATION
POLICY 2017 – 2019
Dalata’s Remuneration Policy
was approved by shareholders
at the 2017 AGM. A summary of
the Remuneration Policy table for
executive directors is reproduced
below for information only.
The full Remuneration Policy is set
out on pages 80 to 85 of the 2016
Annual Report.
Policy Table for Executive Directors
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.
Element
Purpose and operation
Maximum opportunity
Performance Metrics
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, which may include the
size and scope of the role, the experience
and performance of the individual, and
appropriate market data.
Pension
Contributions into the Company’s defined
contribution pension scheme, or an
equivalent cash supplement.
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 place.
15% of base salary.
N/A
Benefits
To provide a market competitive benefits
package.
The level of benefits is set at an
appropriate market rate.
N/A
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.
Directors are eligible to participate in the
Company’s Sharesave Scheme on the same
basis as all other employees.
Participation in Sharesave
Scheme up to statutory limits.
Annual bonus To drive and reward the delivery of business
The maximum opportunity is:
› CEO: 110% of salary
› Other executive directors:
100% of salary.
objectives over the financial year.
The bonus is discretionary and any pay-out
is determined by the Committee based on
performance. Targets are set and assessed
by the Committee each year.
At least 20% of the bonus will be delivered in
the form of Dalata shares deferred
for a period of at least three years. The
remainder is payable in cash following the
year end. This deferral may be operated
under the terms of a restricted share trust.
Malus and clawback provisions apply.
Payment is determined by reference
to performance assessed over one
financial year, and will normally
be measured against a
combination of financial and
personal performance targets.
The Committee determines the
weightings of the performance
measures each year. The overall
framework will normally be weighted
towards financial measures of
performance. The Committee
will consider the Group’s overall
performance before determining
final bonus payment levels.
Element
Purpose and operation
Maximum opportunity
Performance Metrics
Long-term
Incentive
Plan (LTIP)
To reward executive directors for the
delivery of long-term performance and align
their interests with shareholders.
The maximum annual award
level is
› CEO: 150% of salary
› Other executive directors:
125% of salary.
Performance targets are measured
over a period of three financial years,
using performance measures aligned
to the strategy and shareholder
value. This may include measures
such as total shareholder return
(TSR) and earnings per share
(EPS). 25% vests for threshold
performance.
The Committee has discretion to use
different or additional performance
measures to ensure that LTIP awards
remain appropriately aligned to the
business strategy and objectives.
The Committee will consider the
Group’s overall performance before
determining the final vesting level.
N/A
N/A
Awards are made under, and subject to
the terms of, the 2017 LTIP approved by
shareholders at the 2017 AGM.
Awards are in the form of shares which vest
no earlier than the third anniversary of the
award grant date, subject to performance.
Vested shares are subject to an additional
holding period of at least two years. Shares
subject to a holding period may be placed in
a restricted share trust.
Malus / clawback and dividend equivalent
provisions apply (see notes to the table)
To increase long term alignment between
executives and shareholders. Executive
Directors are required to build up and
maintain a beneficial holding of at least
200% of base salary. Unvested deferred
bonus shares and vested LTIP shares within
a holding period will count towards the
guideline (on a net of tax basis).
Shareholding
Guidelines
Notes to the table:
a)
LTIP awards may incorporate the right to receive an amount equal to the value of dividends which would have been paid on the
shares under an award that vests up to the time of vesting (or where, the award is subject to a holding period, up to the time of
release).
b) The annual bonus and the LTIP contain malus and clawback provisions. The cash and share elements of the annual bonus may be
clawed back for a period of three years and awards under LTIP may be cancelled (prior to vesting), reduced or clawed back for a
period of two years post vesting, in the event of a material misstatement of results or serious misconduct.
c) The remuneration framework for other employees is based on broadly consistent principles used to determine the policy for
Executive Directors. All executives and senior managers are generally eligible to participate in an annual bonus plan. Participation
in the LTIP is extended to executives and senior managers, with LTIP performance conditions generally consistent across all levels.
Individual salary and pension levels and incentive award sizes vary according to the level of seniority and responsibility, in line with
market data.
d) The choice of the performance measures applicable to the annual bonus (currently adjusted EBIT and personal performance
measures) reflects the Committee’s belief that any incentives should be aligned to the Group’s financial and strategic objectives. In
the LTIP, the current measures provide a balance between incentivising long term profit growth from the execution of the strategy
and recognising performance delivered for shareholders via share price growth and dividend performance relative to sector
peers. For both the bonus and the LTIP, the Committee sets challenging targets taking into account the Board’s objectives for the
business and shareholder expectations. Performance conditions may be amended or substituted by the Committee if an event
occurs which causes the Committee to determine an amended or substituted performance condition would be more appropriate
and not materially more or less difficult to satisfy.
Service contracts/letters
of appointment
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. The service contracts
have a notice period of 24 weeks for
Pat McCann and Stephen McNally
and six months for Dermot Crowley.
Other than entitlement to notice and
a payment of salary and contractual
benefits in lieu of notice, the
Executive Directors are not entitled to
compensation on termination of their
respective contracts. These terms
would normally apply to a service
contract for a new executive director.
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
was for an initial term of three
years, and is extended annually for
further terms of one year, 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.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcRemuneration Committee ReportAnnual Report and Accounts 2017
82
83
ANNUAL REMUNERATION REPORT
This report will be submitted as
an advisory vote to shareholders
at the 2018 AGM.
Statement of implementation
for 2018
This section summarises the
remuneration packages for the
Directors for the 2018 financial year.
Base salaries
The following table shows the
base salaries effective 1 January
2018 with comparative figures
for 2017:
€’000
Pat McCann
Stephen McNally
Dermot Crowley
2018
586.5
341.7
341.7
2017
575.0
335.0
335.0
Increase
2%
2%
2%
Salaries for the Executive Directors
are set at a market competitive level
for the scope of the roles and the
size and complexity of the business.
A 2% increase was granted for
2018, in line with pay increases for
the wider employee population.
In recommending the 2018 salary
increase, the Committee took
account of the review of wages and
salaries across the group, trading
circumstances for the group, and
the personal performance of each
individual. This is consistent with our
Policy and the commitment made last
year that, in recognition that levels
of fixed pay had been increased in
consecutive years up to 2017, the
Committee has decided that during
the lifetime of this Policy, no future
increases in salary will be made to
Executive Directors above those
awarded to the general workforce.
Pension
The CEO does not receive a pension
contribution. Other Executive
Directors will receive a contribution
into the defined contribution pension
scheme, or an equivalent cash salary
supplement, of 15% of base salary,
in line with the Policy.
Annual bonus
Executive Directors will be eligible for
a maximum annual bonus as set out in
the Policy. The bonus will be based on
the following performance measures:
Maximum
Annual Bonus
(as a % of
salary)
Adjusted EBIT
Personal targets
CEO
Others
82.5%
27.5%
75%
25%
Total
110%
100%
The Committee has determined that
the specific targets for 2018 are
commercially sensitive and cannot
be disclosed at this time. To the
extent that the targets for 2018 are
no longer deemed to be commercially
sensitive, they will be disclosed in
next year’s report.
20% of any bonus earned will be
deferred into Dalata shares for a
period of at least three years in
line with the Policy.
LTIP
The following awards will be made
in 2018 in accordance with rules of
the 2017 LTIP approved at last year’s
AGM. Awards will vest after a three
year performance period based on
the TSR and EPS targets shown in
the table below. Vested shares will
be subject to an additional two
year post- vesting holding period.
The CEO will be awarded LTIP
awards of 150% of salary and
the other executive directors will
be awarded 125% of salary in line
with policy.
Definition
Threshold vesting
(25% of maximum)
Maximum vesting
TSR (50% of award) EPS (50% of award)
TSR performance
against the Index
EPS achieved in the year
ending 31 December 2020
TSR equal to Index
€0.43
TSR equal to 10%
or more per annum
above Index
€0.54
a) No vesting below threshold performance.
b) Straight-line vesting between points.
c) For TSR, the “Index” referred to in the schedule is the Dow Jones European STOXX
Travel and Leisure Index. TSR will be calculated using a 3 month average at start
and end of the performance period (1 January 2018 to 31 December 2020).
d) Basic EPS will exclude items which are deemed one-off. For reference, the relevant
adjustments to EPS for 2016 and 2017 are set out in note 27 to the consolidated
financial statements.
We want to encourage vigorous pursuit of the opportunities and by excluding these
one-off items, we drive the behaviours we seek from the executives and encourage
management to invest for the long-term interests of shareholders.
e) EPS targets may be amended if an event occurs which causes the Committee
to determine an amended or substituted performance condition would be more
appropriate and not materially more or less difficult to satisfy.
Non-executive director fees
The following table shows the fees effective 1 January 2018. There will be no
increase to fees for 2018.
€’000
Chairman fee
Basic NED fee
Committee chairmanship / SID fee
2018
125
60
15
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcRemuneration Committee ReportAnnual Report and Accounts 2017
84
85
OUTCOMES IN RESPECT OF 2017
Where indicated the disclosure has been audited in accordance with the UK reporting regulations.
Single total figure of remuneration (audited).
The following table summarises the remuneration received by the Directors for the 2017 financial year (with the 2016 prior
year comparator also shown).
Annual bonus plan outcome for 2017 (audited)
Under the 2017 annual bonus, the Executive Directors could receive up to a maximum of 100% of salary and in the case
of CEO 110% of salary, in line with the Policy. This was based 75% on the achievement of stretching adjusted EBIT
targets and 25% on personal objectives aligned to the delivery of key strategic and operational objectives. The adjusted
EBIT target was based on the budgeted EUR/GBP exchange rate which was set at £0.85 for 2017. The adjusted EBIT
target range and a summary of the personal objectives for the year are set out in the table below:
€’000
Year
Base Salary/Fees
Pension
Benefits
Bonus
LTIP
Total
Executive Directors
Pat McCann
Stephen McNally
Dermot Crowley
Non-Executive Directors
John Hennessy
Robert Dix
Alf Smiddy
Margaret Sweeney
1 Expenses incurred
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
575
475
335
275
335
275
125
100
75
60
75
60
75
60
0
0
50
41
50
41
0
0
0
0
0
0
0
0
0
0
3
3
12
12
0
0
0
0
61
0
0
0
633
470
335
254
335
254
0
0
0
0
0
0
0
0
504
658
315
411
315
411
0
0
0
0
0
0
0
0
1,712
1,603
1,038
984
1,047
993
125
100
75
60
81
60
75
60
a) Base salary / fees represent all amounts received in respect of the financial year.
b) Pension represents payments into the Company’s defined contribution pension plan.
For 2017 (and 2016) the CEO, Pat McCann, did not participate in the pension plan.
c) Benefits includes a company car and fuel, and benefits under the group risk benefit scheme which includes death in service cover
and disability benefit.
d) Bonus represents the value of the bonus receivable in respect of the Group’s annual bonus plan (see section below for further detail)
for the relevant financial year. 20% of the bonus shown above will be deferred into Dalata shares for a period of five years.
e)
For the LTIP, the value shown for 2017 reflects the anticipated vesting of the LTIP award granted on 27 March 2015 with TSR
to be measured over the three year performance period to 26 March 2018. The values have been calculated using TSR data as at
16 February 2018 and a three month average share price to 31 December 2017 in accordance with the methodology set out in the
UK reporting regulations.
e)
The LTIP value for 2016 is restated to reflect the final outcome of the vesting which took place on 22 May 2017.
Threshold
(25% payout)
Target
(50% payout)
Maximum
(100% payout)
Actual
Outcome
Adjusted
EBIT
€78.6m
€82.7m
€88.5m
€90.2m1
Adjusted EBIT was in excess of the maximum
target leading to a 100% (of maximum) bonus
payout for the CEO and the Deputy CEOs
1. For the purpose of the annual bonus evaluation, EBIT is adjusted to remove the effect of fluctuations between the actual and
budgeted EUR/GBP exchange rate and other one-off items considered, at the discretion of the Committee, to fall outside of
the framework of the budget target set for the year. A reconciliation of adjusted EBIT to Profit before tax is provided in the
Glossary and Supplemental Financial Information section on page 182.
The directors had a number of personal objectives aligned to the strategic and operational objectives of the business
for 2017.
Personal targets
Objectives aligned to strategic and operational goals, including:
Pat McCann
› Development and presentation of five year strategy
(described in Strategic Priority: Our Growth on page 18);
› Implementation of structures to support the business operating model and IT systems to support the
business strategy (described in the Business Model: What Differentiates Us on page 13);
› implementation of the management succession planning process
(described in Strategic Priority: Our People on page 20);
› implementation of enhanced strategic risk management process for the business
(reflected in the Risk Management report on page 36).
Stephen McNally
› Development of opening plans for properties launching in 2018
(see Strategy in Action case study Strategic Priority: Our People on page 21);
› Delivery of HR plan for new UK business; development of account relationships with key group B2B
customers (see Strategic Priority: Our Customers page 16);
› Maintain customer satisfaction levels and revenues at hotels undergoing extension work
(see Strategic Priorities: Our Customers on page 16 and Our Brands on page 22);
› Implementation of systems and structures to deliver strategic cost management objectives
(for example, see energy supply case study, Responsible Business Report page 48).
Dermot Crowley
› Development of finance function resources and structure
(referred to by Audit and Risk Committee Chairman on page 72);
› Delivery of the investor relations programme considering effect of MIFID 2
regulatory changes and effectively communicating long term strategy to
investors (described in the Governance Report on page 68);
› Secure debt funding and assess refinancing options
(see Note 20 to the Financial Statements on page 150);
› Secure specified acquisition and pipeline development targets (described in Pat’s Review on page 7);
› Support development of revenue management and rooms distribution change initiatives
(see Strategy in Action case study on page 23);
› Lead Dalata group community initiative to support CMRF at Crumlin Children’s Hospital,
Great Ormond Street and Cancer Focus Northern Ireland (see Responsible Business Report page 53).
2017 Personal
objectives at
maximum: 27.5%
(base salary)
2017 Full year
performance: 27.5%
2017 Personal
objectives at
maximum: 25%
(base salary)
2017 Full year
performance: 25%
2017 Personal
objectives at
maximum: 25%
(basic salary)
2017 Full year
performance: 25%
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcRemuneration Committee ReportAnnual Report and Accounts 2017 86
2,000
LTIP – vesting outcome of the 2015 award (audited)
The LTIP award granted to Executive Directors on 27 March 2015 will be eligible for vesting from 26 March 2018 subject
1,500
to the TSR performance of Dalata compared to a comparator group of 12 listed peers measured over that three year
period. The performance period for this award was substantially complete by the end of the 2017 financial year and
therefore the vesting of this award is reported in this year’s report (in accordance with the reporting regulations) based
on the expected vesting level. As at the date of this report, it is anticipated that the award will vest in full based on the
1,000
current assessment of the TSR performance, as shown below.
LTIP targets
500
Threshold
Maximum
Vesting outcome (% of maximum)
Required TSR performance vs group1
25%
100%
Median
Upper quartile
1. Comparator group companies are: Whitbread plc, Accor plc, Intercontinental Hotels plc, Millennium & Copthorne plc, Tsogo Sun
0
Holdings, Melia Hotels International SA, CPL Resources plc, ICG, Wireless Group plc, Total Produce plc, FBD plc, Independent
News and Media. Straight-line vesting between points
Maximum
Maximum
Minimum
Minimum
Target
Target
Outcome
Group Median
Group Upper quartile
Dalata
TSR achieved1
11%
84.3%
91.4%
1. TSR calculated as at 16 February 2018
Expected vesting outcome
Dalata’s TSR exceeds the upper quartile and the award is expected to vest in full.
Share incentive plan interests awarded during 2017 (audited)
The table below provides details of the LTIP awards made during the year to the Executive Directors.
Director
Type of
Award
Face value of
the award at grant
Number of
shares awarded
Vesting at
threshold (% of maximum)
Performance period
Pat McCann
Dermot Crowley
StephenMcNally
LTIP
LTIP
LTIP
150% of salary
125% of salary
125% of salary
174,130
84,541
84,541
25% 1 Jan 2017 to 31 Dec 2019
25% 1 Jan 2017 to 31 Dec 2019
25% 1 Jan 2017 to 31 Dec 2019
a) Vesting is based on two separate performance criteria: 50% of the award is based on TSR performance compared with the
Dow Jones European STOXX Travel and Leisure Index. Threshold vesting occurs for TSR equal to the index and maximum
vesting where TSR is equal to or greater than 10% per annum above the index. The remaining 50% is based on basic EPS
achieved in FY19 with threshold vesting for EPS equal to €0.37 and maximum vesting if EPS is equal to or greater than €0.46.
b) The number of shares awarded was calculated using the volume weighted average share price on 19 May 2017 (€4.95),
the day prior to the date of grant.
Directors’ and Company Secretary’s Share Interests
Shares
beneficially
owned as at
31 December
2016
Shares
beneficially
owned
as at 31
December
2017
2017
Option to
acquire
shares under
Sharesave
Scheme
Pat McCann
Dermot Crowley
Stephen McNally
John Hennessy
Robert Dix
Alf Smiddy
Margaret Sweeney
Sean McKeon
914,927
276,727
300,611
100,000
67,858
66,646
46,787
80,000
1,121,014
366,510
390,394
100,000
67,858
66,646
46,787
119,023
6,132
6,132
6,132
-
87
Interest in unvested LTIP awards
subject to performance conditions
2015
award
vesting
in 2018
2016
award
vesting
in 2019
2017
award
vesting
in 2020
Total
88,889
101,279
174,130
364,298
55,556
58,635
55,556
58,635
84,541
84,541
198,732
198,732
-
-
-
-
-
-
-
-
-
-
-
-
6,132
35,417
32,623
34,069
102,109
a) Shares beneficially owned include those of connected persons.
b)
LTIP awards to Executive Directors represent the maximum number of shares which may vest under the 2015,
2016 and 2017 LTIP awards based on the performance conditions as described elsewhere in this report.
As described above, the 2015 award is expected to vest in full in March 2018 based on the achievement
against the performance conditions.
c) There was no change in the beneficial interests of the Directors between the year-end and the date of this report.
TSR performance summary and historic remuneration outcomes
The graph below compares the TSR (re-based to 100) over the period since listing to the
performance of the ISEQ Index and the median of the current LTIP peer group.
300
250
200
150
100
50
Mar
14
Jun
14
Sep
14
Dec
14
Mar
15
Jun
15
Sep
15
Dec
15
Mar
16
Jun
16
Sep
16
Dec
16
Ma
17
Ju
17
Sep
17
Dec
17
Dalata Hotel Group ISEQ LTIP TSR group (median)
LTIP TSR group (median)
Dalata Hotel Group
ESM
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcRemuneration Committee ReportAnnual Report and Accounts 2017 88
89
The following table shows the remuneration for the CEO for each financial year
over the same period.
Single figure (€’000)
Annual bonus outcome (% of
maximum)
20141
441
67%
2015
840
100%
20162
1,603
2017
1,712
90%
100%
LTIP vesting (% of maximum)
N/A
N/A
100%
100%
1
2
Includes remuneration prior to IPO
2016 single figure is restated to reflect the final vesting outcome of LTIP awards
granted in 2014 which vested in May 2017
Percentage change in Chief Executive’s remuneration
The table below shows the percentage change in the remuneration of the
CEO from the prior year compared to the average percentage change in
remuneration for a comparator group of other employees.1
Total employee remuneration in the Company (including Executive Directors)
increased by 14% in 2017 (from €76.2 million in 2016 to €86.5 million in 2017).
Salary
Benefits
Bonus
CEO
21%
N/A3
35%
Comparator group
of employees1
9%
N/A
14%
1
2
The Group employs a large workforce of full-time, part-time and seasonal staff
making the basis for the calculation complex and unreliable. Accordingly,
a comparator group of management and specialist staff was selected.
A minimum 2% pay increase was applied for all staff on 1 January 2017, including
part-time and seasonal staff. Larger pay increases were awarded for employees
where it was merited on the basis of personal performance, increased responsibility,
specialist skills or market conditions.
3
The CEO does not receive any benefits from the Company.
Relative spend on pay
The following table shows the Company’s aggregate actual spend on pay (for all
employees) and dividends in respect of the current and previous financial year.
Dividend
2016
€0.0m
2017
€0.0m
Aggregate employee remuneration
€76.2m
€86.5m
Change
€0.0m
14%
AGM voting
At last year’s Annual General Meeting, the following votes were received
on resolutions dealing with executive remuneration:
2016
Directors Remuneration
Directors Remuneration Policy
2017 to 2019
2017
LTIP Rules
Votes
%
Votes
100,403,551
74.56%
134,056,854
34,258,162
25.44%
1,197,842
%
99.11%
0.89%
Votes
131,791,482
3,463,214
%
97.44%
2.56%
134,661,713
100.00%
135,254,696
100.00%
135,254,696
100.00%
Votes For
Votes Against
Total Votes
Votes Withheld
592,983
0
0
We noted that the remuneration
report received approximately 75%
support and we understand, from
our engagement with investors and
proxy voting agencies that there
were some who had a concern
with the percentage increase, for
2017, in the executive director’s
salaries. The increases at that time
were a response to the delivery of
exceptional performance against
the expectations set when the
company listed in 2014 and part
of our strategy to establish a fair
remuneration framework reflecting
the increased scale and complexity of
business with an emphasis on reward
for performance. The Committee
has listened to the concerns of
those investors and as a result has
committed that no increases would be
made to executive director’s salaries
above those awarded to the general
workforce during the lifetime of the
current remuneration policy.
Remuneration Committee
and advisors
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.
Details of Committee membership
and attendance at meetings in 2017
are outlined in the table below.
Member
No. of meetings
Margaret Sweeney
John Hennessy
Robert Dix
6/6
6/6
6/6
In addition to the Remuneration
Committee members, Non-Executive
Director Alf Smiddy attended each
meeting at the invitation of the
Chairman. The Chief Executive
Officer and the Company Secretary
attended at each meeting (but
were not present for discussions
on their own remuneration).
The Committee’s independent
advisor Deloitte LLP and the
Group HR Manager also attended
some meetings.
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 carrying out its duties, the
Committee considers any
relevant legal requirements,
the recommendations in the UK
Corporate Governance Code and
the Listing Rules of the LSE/ISE
and associated guidance and
investor guidelines on executive
remuneration. The Committee
considers annually remuneration
trends within the Group and
externally in the market with
particular attention to peer
companies and practice within
the hospitality sector. The
remuneration of the Non-Executive
Directors is approved by the Board.
During 2017, the Committee
continued to receive independent
advice from Deloitte LLP in respect of
the development of the Remuneration
Policy. Deloitte LLP is a member of
the Remuneration Consultants Group
and adheres to its code in relation to
executive remuneration consulting.
Fees charged by Deloitte LLP during
the year were £64,750.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSDalata Hotel Group plcRemuneration Committee ReportAnnual Report and Accounts 2017
90
Dalata Hotel Group plc
Directors' Report
91
Directors'
Report
The Directors present their 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 2017.
Directors and Company Secretary
The names of the Directors
and Company Secretary and a
biographical note on each appear
on pages 56 to 57.
In accordance with the provisions
contained in the UK Corporate
Governance Code, all directors will
voluntarily retire and be subject to
election by shareholders at the 2018
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 78 to 89.
Audit Committee
The Group has an established Audit
and Risk Committee comprising of
three independent non-executive
directors. Details of the Committee
and its activities are set out on pages
72 to 77.
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. Shareholders are referred
to the Chairman’s Statement, Chief
Executive Officer’s Review and the
Financial Review which contain a
review of operations and the financial
performance of the Group for 2017,
the outlook for 2018 and the key
performance indicators used to
assess the performance of the Group.
These are deemed to be incorporated
in the Directors' Report.
Results for the Year
The consolidated statement of profit
or loss and other comprehensive
income for the year ended 31
December 2017 and the consolidated
statement of financial position at that
date are set out on pages 103 and 104
respectively. The profit for the year
after tax amounted to €68,308,000
(2016: €34,923,000).
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 26 to 35.
Share Capital
The issued share capital of Dalata
Hotel Group plc at 26 February 2018
consists of 183,680,964 ordinary
shares. Each share has a nominal
value of €0.01. All shares have
equal voting and dividend rights.
The Group has in place a number of
employee share schemes, the details
of which are set out in the Report
of the Remuneration Committee
on Directors’ Remuneration and in
Note 7 to the consolidated financial
statements.
Substantial Holdings
As at 26 February 2018, the
Company has been notified of the
following interests of 3% or more
in its share capital:
Amerprise Financial, Inc
FMR LLC
Prudential plc1
Pioneer Asset Management S.A.
I.G. International Limited
Allianz Global Investors GmbH
Vanguard International Explorer Fund
Number of
Ordinary Shares
% of Shares
in issue
18,452,348
15,561,669
9,176,149
7,936,156
6,867,668
5,755,071
5,719,200
10.05%
8.47%
4.99%
4.32%
3.74%
3.13%
3.11%
1 M&G Investment Funds, an Open Ended Investment Company (OEIC), has notified
the Company that it is interested in 4.37% of the Company’s ordinary share capital
carrying voting rights, and that its voting rights have been delegated to M&G
Investment Management Limited (a wholly owned subsidiary of Prudential plc).
M&G Investment Management Limited’s holdings under management are reported
in aggregate by Prudential plc. Accordingly, M&G Investment Funds’ interests are
included in the 4.99% interest notified by Prudential plc.
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 36 to
43. The Financial Risk Management
policies are set out in Note 22 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 its registered office:
4th Floor, Burton Court, Burton Hall
Drive, Sandyford Industrial Estate,
Dublin 18.
Takeover Regulations 2006
For the purpose of Regulation 21
of Statutory Instrument 255/2006
‘European Communities (Takeover
Bids Directive (2004/25/EC))
Regulations 2006’, the information
given in Note 7 to the consolidated
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017 92
Dalata Hotel Group plc
Directors' Report
93
financial statements and in the
Remuneration Committee report on
pages 78 to 89 in relation to the
Long-Term Incentive Plan, employee
share schemes, directors service
contracts and appointment and
compensation for loss of office
of directors is deemed to be
incorporated in the Directors' Report.
Transparency Regulations 2007
For the purposes of information
required by Statutory Instrument
277/2007 ‘Transparency (Directive
2004/109/EC) Regulations 2007’
concerning the development and
performance of the Group, the
Responsible Business Report set
out on pages 44 to 53, is deemed
to be incorporated in this part of
the Directors' Report together with
details of earnings per share in Note
27 to the consolidated financial
statements, employment details
in Note 6 and details of financial
instruments in Note 22.
Corporate Governance Regulations
As required by company law, the
Directors have prepared a Report on
Corporate Governance which is set
out on pages 60 to 69, and which,
for the purposes of Section 1373 of
the Companies Act 2014, is deemed
to be incorporated in this part of
the Directors' Report. Details of the
capital structure and employee share
schemes are included in Notes 17
and 7 to the consolidated financial
statements respectively.
Relevant Audit Information
The Directors who held office at the
date of approval of this Directors'
Report confirm that, so far as, they
are each aware, there is no relevant
audit information of which the
Company’s auditor is unaware; and
each director has taken all the steps
that they ought to have taken as a
director to make themselves aware of
any relevant audit information and to
establish that the Company’s auditor
is aware of that information.
Compliance Statement
The Directors, in accordance with
Section 225(2) of the Companies
Act 2014, acknowledge that they
are responsible for securing the
Company’s compliance with certain
obligations specified in that section
arising from the Companies Act 2014,
the Market Abuse (Directive 2003/6/
EC) Regulations 2005, the Prospectus
(Directive 2003/71/ EC) Regulations
2005, the Transparency (Directive
2004/109EC) Regulations 2007, and
Tax laws (‘relevant obligations’).
The Directors confirm that:
› a compliance policy statement
has been drawn up setting out the
Company’s policies that in their
opinion are appropriate with regard
to such compliance;
› appropriate arrangements and
structures have been put in place
that, in their opinion, are designed
to provide reasonable assurance of
compliance in all material respects
with those relevant obligations; and
› a review has been conducted,
during the financial year, of those
arrangements and structures.
APPROVAL OF FINANCIAL
STATEMENTS
The Financial Statements were
approved by the Board on
26 February 2018.
On behalf of the Board
GOING CONCERN
The Directors’ statement on going
concern is set out in the Corporate
Governance Report on page 67.
POLITICAL CONTRIBUTIONS
There were no political contributions
which require disclosure under the
Electoral Act, 1997.
INDEPENDENT AUDITORS
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 26 to
the consolidated financial statements.
John Hennessy
Chairman
SUBSEQUENT EVENTS
There were no events subsequent
to 31 December 2017 which
would require an adjustment to,
or a disclosure thereon, in the
financial statements.
Patrick McCann
Director
26 February 2018
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017 94
Dalata Hotel Group plc
Financial Statements
CGI of Clayton Hotel Glasgow,
Custom House Dock, Glasgow.
Projected opening Q4 2020.
Annual Report and Accounts 2017
95
Financial
Statements
95 - 177
Statement of Directors’ Responsibilities in respect
of the Annual Report and the Financial Statements 96
Independent Auditor’s Report 98
Consolidated Statement of Profit or
Loss and Other Comprehensive Income 103
Consolidated Statement of Financial Position 104
Consolidated Statement of Changes in Equity 105
Consolidated Statement of Cash Flows 107
Notes to the Consolidated Financial Statements 108
Investment property 143
Long-term incentive plans 126
Significant accounting policies 108
Statutory and other information 123
1
2 Operating segments 119
3
4 Other income 124
5
Finance costs 124
6 Personnel expenses 125
7
8 Tax charge 129
Business combinations 130
9
Intangible assets and goodwill 133
10
11 Property, plant and equipment 138
12
13 Derivatives 144
14 Trade and other receivables 145
15
16 Cash and cash equivalents 147
17 Capital and reserves 147
18 Trade and other payables 149
19 Provision for liabilities 149
20
21 Deferred tax 152
22 Financial instruments and risk management 154
23 Commitments 162
24 Related party transactions 165
25 Subsequent events 165
26 Subsidiary undertakings 166
27 Earnings per share 167
28 Approval of the financial statements 168
Interest-bearing loans and borrowings 150
Inventories 147
Company Statement of Financial Position 170
Company Statement of Changes in Equity 171
Company Statement of Cash Flows 172
Notes to the Company Financial Statements 173
Additional
Information
Advisors 178
Shareholder Information 179
Glossary and Supplementary Financial Information 180
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
96
97
Statement of Directors’
Responsibilities in respect
of the Annual Report and
the Financial Statements.
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.
› 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.
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 assets, liabilities and financial
position 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
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.
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 Company
comply with the provisions of the
Companies Act 2014. The Directors
are also responsible for taking all
reasonable steps to ensure such
records are kept by the Company’s
subsidiaries which enable them to
ensure that the financial statements
of the Group comply with the
provisions of the Companies Act
2014. 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 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
26 February 2018
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 56
to 57 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 2017
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
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 98
99
Independent Auditor’s Report
to the members of Dalata Hotel Group plc
1. Opinion: our opinion
is unmodified
We have audited the financial
statements of Dalata Hotel Group
plc for the year ended 31 December
2017 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.
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 2017 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 2017;
› 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 consolidated financial
statements and company 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.
Basis for opinion
We conducted our audit in accordance
with International Standards on
Auditing (Ireland) (“ISAs (Ireland)”)
and applicable law. Our responsibilities
under those standards are
further described in the Auditor’s
Responsibilities section of our report.
We believe that the audit evidence
we have obtained is a sufficient and
appropriate basis for our opinion.
Our audit opinion is consistent
with our report to the Audit and
Risk Committee.
We were appointed as auditor by the
directors on 30 June 2016. The period
of total uninterrupted engagement is
the two years ended 31 December
2017. We have fulfilled our ethical
responsibilities under, and we
remained independent of the Group in
accordance with, ethical requirements
applicable in Ireland, including the
Ethical Standard issued by the Irish
Auditing and Accounting Supervisory
Authority (IAASA) as applied to listed
public interest entities. No non-audit
services prohibited by that standard
were provided.
2. Key audit matters: our
assessment of risks of
material misstatement
Key audit matters are those matters
that, in our professional judgement,
were of most significance in the audit
of the financial statements and include
the most significant assessed risks
of material misstatement (whether
or not due to fraud) identified by us,
including those which had the greatest
effect on: the overall audit strategy;
the allocation of resources in the
audit; and directing the efforts of the
engagement team. These matters
were addressed in the context of our
audit of the financial statements as
a whole, and in forming our opinion
thereon, and we do not provide a
separate opinion on these matters.
In arriving at our audit opinion above,
the key audit matters, in decreasing
order of audit significance, were
as follows:
Property valuations - carrying
value of land and buildings
€848.8m (2016: €744.6m)
Refer to page 74 (Audit and Risk
Committee Report), page 114
(accounting policy for property, plant
and equipment) and Note 11 to the
consolidated financial statements
(financial disclosures – property, plant
and equipment)
The key audit matter
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 periodic hotel revaluations,
which include fixtures, fittings and
equipment, which the Group accounts
for under the cost model. Appropriate
allocations of hotel valuations must
therefore be made between land and
buildings, and fixtures fittings and
equipment for accounting purposes.
How the matter was addressed
in our audit
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, including assessing
and challenging the key assumptions
applied in their discounted cash
flow calculations; considering the
allocation of hotel valuations to land
and buildings, and fixtures fittings
and equipment; testing the amounts
of individual property revaluation
movements and their presentation
either in other comprehensive income
or in profit or loss, as appropriate;
and evaluating the adequacy of the
Group’s disclosures in relation to
property valuations.
Our findings
Our audit procedures did not identify
any issues with the assumptions
adopted in the property valuations.
The allocation of valuations between
land and buildings and fixtures, fittings
and equipment and the inclusion
of revaluation movements in other
comprehensive income or in profit or
loss was appropriate. The disclosures
in the financial statements relating to
property valuations are adequate to
provide an understanding of the basis
of the valuations.
Acquisitions in the year
Refer to page 74 (Audit and
Risk Committee Report), page
112 (accounting policy for basis
of consolidation) and Note 9
to the consolidated financial
statements (financial disclosures –
business combinations)
The key audit matter
A number of significant transactions
were completed during the year
ended 31 December 2017, including
acquisitions of: (i) the Hotel La Tour
Birmingham; (ii) the main element
of the hotel and business of Clarion
Hotel Liffey Valley; (iii) further suites
in the Clarion Hotel Liffey Valley; and
(iv) the freehold or long leasehold
interests in properties of certain
hotels which were previously leased
by the Group. This gives rise to a risk
of material misstatement if these
acquisitions are not accounted for in
accordance with relevant accounting
standards. In particular for business
combinations the consideration paid,
the costs incurred, the fair value of the
assets and liabilities acquired and any
goodwill arising must all be identified,
measured and recorded appropriately.
How the matter was addressed
in our audit
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 based
on accounting papers prepared by
Group management.
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,
if any, arising on acquisition. We did
this 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.
Our findings
Comprehensive papers had been
prepared by management analysing
the Group’s accounting treatment
of these transactions and we found
that the analysis was supported by
underlying transaction documentation.
As such, we found that the
transactions identified in notes 9 and
11 to the financial statements had
been appropriately accounted for
as business combinations or asset
purchases as described.
Depreciation – change in useful lives
of fixtures, fittings and equipment
Refer to page 75 (Audit and Risk
Committee Report), page 108
(accounting policy disclosure of
revision of estimated useful lives of
property, plant and equipment, page
114 (accounting policy for property,
plant and equipment) and Note 11 to
the consolidated financial statements
(financial disclosures – property, plant
and equipment)
The key audit matter
During the year, the Group revised its
estimates of the useful lives of fixtures,
fittings and equipment with effect
from 1 January 2017. This resulted in
a material reduction of €4.0m in the
depreciation charge compared to the
estimation technique applied in previous
years. There is a risk of significant
misstatement if the depreciation charge
under the revised approach is not based
on appropriate assumptions.
How the matter was addressed
in our audit
Our audit procedures included,
among others: evaluating the
process undertaken by management
to assess the useful lives and
Independent Auditor’s Report to the members of Dalata Hotel Group plc (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 100
determining whether it involved
input from management with the
relevant knowledge and experience
combined with appropriate review
and approval procedures; assessing
whether appropriate consideration
had been given to potential alternative
treatments and whether there was
appropriate documentary support
of the rationale for the selected
treatment; testing whether the
revised useful lives were consistent for
similarly classified assets in each hotel;
recalculating depreciation charges on
the basis of the revised assumptions
made; comparing the revised useful
lives to similar information, where
available, for other relevant public
companies in the hotel and leisure
sector for any evidence that the
revised depreciation approach was
inappropriate; and evaluating the
adequacy of the Group’s disclosures
in relation to this material change
in estimate.
Our findings
The Group established a
comprehensive process to assess
the useful lives of individual sub-
categories of fixtures, fittings
and equipment. This produced a
much more granular analysis of the
relevant assets. The application
of the revised methodology to the
asset base appeared to be applied
correctly and without any bias.
The change in estimate has been
disclosed appropriately in note 1 to
the financial statements.
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 €3.9m (2016: €2.8m). This
has been calculated with reference to
a benchmark of group profit before
taxation, normalised to exclude this
year’s acquisition-related costs of
€1.3m as disclosed in Note 3 to the
consolidated financial statements.
Materiality represents approximately
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.
The Group has a significant asset
base which we also consider in
establishing materiality. Total assets
at 31 December 2017 amounted to
€1,101.1m (2016: €985.4m) and our
materiality measure represents 0.35%
of total assets (2016: 0.28%) which
is below the materiality measure of
0.5%-1.0% typically used for this
measure, where applicable, in public
company audits.
We report to the Audit and Risk
Committee all corrected and
uncorrected misstatements we
identified through our audit with
a value in excess of €0.2m (2016:
€0.2m), 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.
Materiality for the company financial
statements as a whole was set at
€3.9m (2016: €2.8m), determined
with reference to a benchmark of total
assets, of which it represents 0.5%
(2016: 0.36%).
4. We have nothing to
report on going concern
We are required to report to you if:
› we have anything material to add
or draw attention to in relation to
the directors’ statement in note 1
to the financial statements on the
use of the going concern basis
of accounting with no material
uncertainties that may cast
significant doubt over the Group’s
and Company’s use of that basis for
a period of at least twelve months
from the date of approval of the
financial statements; or
› if the related statement under the
Listing Rules set out on page 67
is materially inconsistent with our
audit knowledge.
We have nothing to report in
these respects.
5. We have nothing to report
in respect of the other
information in the annual report
The directors are responsible for the
other information presented in the
annual report. The other information
comprises the information included
in the annual report other than
the financial statements and our
auditor’s report thereon (Directors’
Report, Chairman’s Statement, Chief
Executive’s Review, Strategy and
Business Model section, Financial
Review, Risk Management section,
Responsible Business Report,
Chairman’s Overview – Corporate
Governance section, Board of
Directors section, Executive
Management Team section, Corporate
Governance Report, Nomination
Committee Report, Audit and Risk
Committee Report, Remuneration
Committee Report, and Additional
Information. Our opinion on the
financial statements does not cover
the other information and, accordingly,
we do not express an audit opinion or,
except as explicitly stated below, any
form of assurance conclusion thereon.
Our responsibility is to read the other
information and, in doing so, consider
whether, based on our financial
statements audit work, the information
therein is materially misstated or
inconsistent with the financial
statements or our audit knowledge.
Based solely on that work we have not
identified material misstatements in
the other information.
Based solely on that work, we
report that:
› we have not identified material
misstatements in the Directors’
Report or other accompanying
information;
› in our opinion, the information
given in the Directors’ Report
is consistent with the financial
statements;
› in our opinion, the Directors’ Report
has been prepared in accordance
with the Companies Act 2014.
Disclosures of principal risks and
longer-term viability
Based on the knowledge we acquired
during our financial statements audit,
we have nothing material to add or
draw attention to in relation to:
› the Principal Risks disclosures
describing these risks and
explaining how they are being
managed and mitigated;
› the directors’ confirmation within
the Viability Statement on pages 42
and 43 that they have carried out a
robust assessment of the principal
risks facing the Group, including
those that would threaten its
business model, future performance,
solvency and liquidity; and
› the directors’ explanation in the
Viability Statement of how they
have assessed the prospects of the
Group, over what period they have
done so and why they considered
that period to be appropriate, and
their statement as to whether they
have a reasonable expectation that
the Group will be able to continue in
operation and meet its liabilities as
they fall due over the period of their
assessment, including any related
disclosures drawing attention to
any necessary qualifications or
assumptions.
Other corporate
governance disclosures
We are required to address the
following items and report to you in
the following circumstances:
› Fair, balanced and understandable:
if we have identified material
inconsistencies between the
knowledge we acquired during
our financial statements audit
and the directors’ statement that
they consider that the annual
report and financial statements
taken as a whole is fair, balanced
and understandable and provides
the information necessary for
shareholders to assess the Group’s
position and performance, business
model and strategy;
› Report of the Audit and Risk
Committee: if the section of the
annual report describing the work
of the Audit and Risk Committee
does not appropriately address
matters communicated by us to the
Audit and Risk Committee;
› Statement of compliance with UK
Corporate Governance Code: if
the directors’ statement does not
properly disclose a departure from
provisions of the UK Corporate
Governance Code specified by the
Listing Rules for our review.
We have nothing to report in
these respects.
In addition as required by the
Companies Act 2014, we report, in
relation to information given in the
Corporate Governance Report on
pages 60 to 69, that:
› based on the work undertaken
for our audit, in our opinion, the
description of the main features
of internal control and risk
management systems in relation to
the financial reporting process, and
information relating to voting rights
and other matters required by the
European Communities (Takeover
Bids (Directive 2004/25/EC))
Regulations 2016 and specified for
our consideration, is consistent with
the financial statements and has
been prepared in accordance with
the Act; and
› based on our knowledge and
understanding of the company
and its environment obtained
in the course of our audit, we
have not identified any material
misstatements in that information.
We also report that, based on work
undertaken for our audit, other
information required by the Companies
Act 2014 is contained in the Corporate
Governance Report.
6. Our opinions on other matters
prescribed by the Companies
Act 2014 are unmodified
We have obtained all the information
and explanations which we consider
necessary for the purpose of our audit.
In our opinion the accounting records
of the company were sufficient to
permit the financial statements to
be readily and properly audited and
the company’s statement of financial
position is in agreement with the
accounting records.
101
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Independent Auditor’s Report to the members of Dalata Hotel Group plc (continued)Independent Auditor’s Report to the members of Dalata Hotel Group plc (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc
102
103
they either intend to liquidate the
Group or the parent company or to
cease operations, or have no realistic
alternative but to do so.
9. The purpose of our audit
work and to whom we owe
our responsibilities
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 our 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
26 February 2018
Auditor’s responsibilities
Our objectives are to obtain
reasonable assurance about whether
the financial statements as a whole
are free from material misstatement,
whether due to fraud or error, and to
issue our opinion in an auditor’s report.
Reasonable assurance is a high level
of assurance, but does not guarantee
that an audit conducted in accordance
with ISAs (Ireland) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud,
other irregularities or error and are
considered material if, individually or
in aggregate, they could reasonably be
expected to influence the economic
decisions of users taken on the
basis of the financial statements.
The risk of not detecting a material
misstatement resulting from fraud or
other irregularities is higher than for
one resulting from error, as they may
involve collusion, forgery, intentional
omissions, misrepresentations, or the
override of internal control and may
involve any area of law and regulation
not just those directly affecting the
financial statements.
A fuller description of our
responsibilities is provided on IAASA’s
website at https://www.iaasa.ie/
getmedia/b2389013-1cf6-458b-
9b8f-a98202dc9c3a/Description_of_
auditors_responsiblities_for_audit.pdf
7. We have nothing to report on
other matters on which we are
required to report by exception
The Companies Act 2014 requires us
to report to you if, in our opinion, the
disclosures of directors’ remuneration
and transactions required by sections
305 to 312 of the Act are not made.
The Listing Rules of the Irish Stock
Exchange and UK Listing Authority
require us to review:
– the Directors’ statements, set out
on pages 42, 43 and 67, in relation
to going concern and longer-term
viability;
– the part of the Corporate
Governance Report on pages 60
to 69 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.
8. Respective responsibilities
Directors’ responsibilities
As explained more fully in their
statement set out on pages 96 and 97,
the directors are responsible for: the
preparation of the financial statements
including being satisfied that they
give a true and fair view; such internal
control as they determine is necessary
to enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud
or error; assessing the Group and
parent company’s ability to continue
as a going concern, disclosing,
as applicable, matters related to
going concern; and using the going
concern basis of accounting unless
Consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 2017
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses, including goodwill impairment of €nil (2016: €10.325
million)
Other income
Operating profit
Finance costs
Profit before tax
Tax charge
Note
2017
€’000
2016
€’000
2
4
5
8
348,474
(128,258)
290,551
(109,864)
220,216
180,687
(134,032)
739
(125,717)
637
86,923
(9,636)
55,607
(11,496)
77,287
44,111
(8,979)
(9,188)
Profit for the year attributable to owners of the Company
68,308
34,923
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
Gain on net investment hedge
Fair value movement on cash flow hedges
Cash flow hedges – reclassified to profit or loss
Related deferred tax
11
21
53,533
(5,498)
66,403
(6,382)
48,035
60,021
(9,309)
7,127
269
1,348
(203)
(35,730)
24,876
(3,740)
1,206
316
(768)
(13,072)
21
Other comprehensive income for the year, net of tax
47,267
46,949
Total comprehensive income for the year attributable to owners of the
Company
115,575
81,872
Earnings per share
Basic earnings per share
Diluted earnings per share
27
37.2 cents
19.1 cents
27
36.9 cents
18.9 cents
Independent Auditor’s Report to the members of Dalata Hotel Group plc (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 104
105
Consolidated statement of financial position
at 31 December 2017
Consolidated statement of changes in equity
for the year ended 31 December 2017
Note
2017
€’000
10
11
12
21
14
13
14
15
16
17
17
17
17
17
17
17
17
20
21
13
19
20
18
54,562
998,812
1,585
3,571
4,343
1
1,062,874
20,704
1,765
15,745
38,214
1,101,088
1,837
503,113
25,724
(10,337)
2,753
(1,692)
155,106
(12,156)
73,045
737,393
241,933
31,858
1,778
4,716
280,285
18,206
64,853
351
83,410
363,695
1,101,088
2016
€’000
54,267
822,444
3,245
1,894
4,748
7
886,605
15,874
1,817
81,080
98,771
985,376
1,830
503,113
25,724
(10,337)
2,126
(3,106)
107,531
(9,974)
3,475
620,382
264,681
25,051
3,401
3,040
296,173
15,734
52,050
1,037
68,821
364,994
985,376
Assets
Non-current assets
Intangible assets and goodwill
Property, plant and equipment
Investment property
Deferred tax assets
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
Provision for liabilities
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
Attributable to owners of the Company
Share
capital
€’000
Share
premium
€’000
Capital
contribution
€’000
Merger
reserve
€’000
Share-
based
payment
reserve
€’000
Hedging
reserve
€’000
Revaluation
reserve
€’000
Translation
reserve
€’000
Retained
earnings
€’000
Total
€’000
1,830 503,113
25,724 (10,337) 2,126 (3,106) 107,531
(9,974) 3,475 620,382
-
-
-
-
-
-
-
-
-
-
7
-
7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 68,308
68,308
-
-
53,533
(9,309)
7,127
-
-
-
-
(9,309)
7,127
53,533
(460)
269
-
1,348
(203)
-
(5,498)
-
-
-
-
460
-
-
-
-
269
1,348
(5,701)
1,414
47,575
(2,182) 68,768 115,575
- 1,690
- (1,063)
-
-
-
627
-
-
-
-
-
-
-
-
-
-
-
-
-
1,063
1,690
7
(261)
(261)
802
1,436
At 1 January 2017
Comprehensive income:
Profit for the year
Other comprehensive income
Exchange difference on
translating foreign operations
Gain on net investment hedge
Revaluation of properties
Transfer of revaluation gains
to retained earnings on sale of
property
Fair value movement on cash
flow hedges
Cash flow hedges –
reclassified to profit or loss
Related deferred tax
Total comprehensive income
for the year
Transactions with owners of
the Company:
Equity-settled share-based
payments (note 7)
Vesting of share awards
Additional costs of prior
period share issues
Total transactions with
owners of the Company
At 31 December 2017
1,837 503,113
25,724 (10,337) 2,753 (1,692) 155,106 (12,156) 73,045 737,393
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc
106
107
Consolidated statement of changes in equity
for the year ended 31 December 2016
Consolidated statement of cash flows
for the year ended 31 December 2017
Attributable to owners of the Company
Share
capital
€’000
Share
premium
€’000
Capital
contribution
€’000
Merger
reserve
€’000
Share-
based
payment
reserve
€’000
Hedging
reserve
€’000
Revaluation
reserve
€’000
Translation
reserve
€’000
Retained
earnings
€’000
Total
€’000
1,830 503,113 25,724 (10,337)
912
(888) 47,510
880 (31,448) 537,296
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 34,923 34,923
-
-
-
-
-
-
-
-
-
-
-
- (35,730)
- 24,876
-
66,403
(3,740)
-
1,206
316
-
(6,382)
-
-
-
- (35,730)
- 24,876
- 66,403
-
-
-
(3,740)
1,206
(6,066)
- (2,218) 60,021 (10,854) 34,923 81,872
- 1,214
- 1,214
-
-
-
-
-
-
-
-
1,214
1,214
At 1 January 2016
Comprehensive income:
Profit for the year
Other comprehensive income
Exchange difference on
translating foreign operations
Gain on net investment hedge
Revaluation of properties
Fair value movement on cash
flow hedges
Cash flow hedges –
reclassified to profit or loss
Related deferred tax
Total comprehensive income
for the year
Transactions with owners of
the Company:
Equity-settled share-based
payments (note 7)
Total transactions with
owners of the Company
At 31 December 2016
1,830 503,113 25,724 (10,337) 2,126 (3,106) 107,531
(9,974) 3,475 620,382
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation of property, plant and equipment
Impairment of goodwill
Net revaluation movements through profit or loss
Share-based payment expense
Finance costs
Tax charge
Gains on disposal of property freehold interests and subsidiary
Amortisation of intangible asset
Increase in trade payables and provision for liabilities
Increase in current and non-current receivables
Decrease/(increase) in inventories
Tax paid
Net cash from operating activities
Cash flows from investing activities
Acquisitions of undertakings through business combinations, net of cash acquired
Purchase of property, plant and equipment
Proceeds from sale of properties resulting in operating leases
Deposits paid on acquisitions
Net cash used in investing activities
Cash flows from financing activities
Interest and finance costs paid
Receipt of bank loans
Repayment of bank loans
Proceeds from vesting of share awards
Net cash (used in)/from financing activities
Net decrease 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
2017
€’000
2016
€’000
68,308
34,923
15,710
-
1,425
1,690
9,636
8,979
(469)
24
105,303
4,484
(5,253)
62
(9,389)
95,207
15,477
10,325
(241)
1,214
11,496
9,188
-
-
82,382
3,092
(909)
(64)
(6,688)
77,813
(56,719)
(136,060)
57,985
-
(62,428)
(108,604)
-
(1,024)
(134,794)
(172,056)
(10,101)
36,680
(49,896)
7
(23,310)
(9,983)
57,607
(16,800)
-
30,824
(62,897)
(63,419)
81,080
(2,438)
15,745
149,155
(4,656)
81,080
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 108
109
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 2017 include the Company
and its subsidiaries (together referred
to as the ‘Group’). The financial
statements were authorised for issue
by the Directors on 26 February 2018.
The consolidated financial statements
have been prepared in accordance
with IFRS, as adopted by the
EU. In the preparation of these
consolidated financial statements
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.
Revision of estimated useful lives of
property, plant and equipment
The Group reviews the useful lives of
its property, plant and equipment at
least annually to determine whether
the existing estimated useful lives
remain appropriate. Arising from
the Group’s assessment during the
year ended 31 December 2017,
the Group has revised its estimate
of the useful lives of its fixtures,
fittings and equipment. Previously
the average estimated useful life was
5 to 10 years whereas, as a result of
the change in estimate, the average
estimated useful life is 3 to 15 years
depending on the categorisation
of asset. Were the previous useful
lives applied for the year ended 31
December 2017, this would have
resulted in a total depreciation charge
in respect of the Group’s property,
plant and equipment of €19.7 million,
which is €4.0 million higher than the
recognised depreciation charge of
€15.7 million in profit or loss for the
year. It is impracticable to disclose
the prospective impact of this change
beyond the end of 2017 on the basis
that this would require the Group to
further estimate the timing, quantum
and asset classification of future
capital expenditure.
The key judgements and estimates
impacting these financial
statements are:
– Accounting for acquisitions,
including allocation of consideration
to assets and liabilities acquired
and the treatment of acquisition
costs (note 9);
– Carrying value of goodwill and
intangible assets including
assumptions underpinning the
impairment tests (note 10); and
– Carrying value, depreciation and
estimated useful lives of own-
use property measured at fair
value (note 11).
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 observable market
data as far as possible, with non-
financial assets being measured on
a highest and best-use basis. Fair
values are categorised into different
levels in a fair value hierarchy based
on the inputs used in the valuation
techniques as follows.
Level 1: quoted prices (unadjusted)
in active markets for identical
assets or liabilities.
Level 2: inputs other than quoted
prices included in Level 1 that are
observable for the asset or liability,
either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability
that are not based on observable
market data (unobservable inputs).
Further information about the
assumptions made in measuring
fair values is included in note 22
– Financial instruments and risk
management (in relation to financial
assets and financial liabilities), note
11 – Property, plant and equipment
and note 12 – Investment property (in
relation to non-financial assets).
1 SIGNIFICANT ACCOUNTING
POLICIES (continued)
(i) Going concern
The Directors have assessed
the Group’s ability to continue
in operational existence for the
foreseeable future by preparing
detailed financial forecasts and
carrying out stress testing on
projections, with consideration of
the macro-economic backdrop. The
Directors also evaluated the strategy
of the Group as set out on pages 10
to 25 of the annual report. Note 22 to
the consolidated financial statements
includes: the Group’s objectives,
policies and processes for managing
its capital; details of its financial
instruments and hedging activities;
and its exposures to credit, currency
and liquidity risks.
Having assessed the business risks,
the cash flow forecasts and available
bank facilities, the Directors believe
that the Group is well placed to
manage these risks successfully, and
they 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.
(ii) Statement of compliance
The consolidated financial statements
have been prepared in accordance
with International Financial
Reporting Standards (‘IFRS’) and
their interpretations issued by the
International Accounting Standards
Board (‘IASB’) as adopted by the EU
and those parts of the Companies
Act 2014 applicable to companies
reporting under IFRS and Article 4 of
the IAS Regulation.
The following standards and
interpretations were effective for
the Group for the first time from 1
January 2017. These standards have
no material effect on the consolidated
results of the Group.
– Amendments to IAS 7 Statement of
Cash Flows.
– Amendments to IAS 12
Income Taxes.
The following standards and
interpretations are not yet endorsed
by the EU. The potential impact of
these standards on the Group is
under review.
The following standards have been
endorsed by the EU, are available for
early adoption and are effective from
1 January 2018 or 1 January 2019 as
indicated below. The Group has not
adopted these standards early, and
instead intends to apply them from
their effective dates as determined by
their dates of EU endorsement.
– IFRS 15 Revenue from contracts
with customers (May 2014)
including amendments to IFRS 15
(September 2015). Effective date
1 January 2018;
– IFRS 9 Financial Instruments (July
2014). Effective date 1 January
2018; and
– IFRS 17 Insurance Contracts, IASB
effective date 1 January 2021.
– IFRS 16 Leases (January 2016).
Effective date 1 January 2019.
IFRS 16 Leases
IFRS 16 Leases was issued in January
2016 and replaces IAS 17 Leases,
IFRIC 4 Determining Whether an
Arrangement Contains a Lease, SIC-
15 Operating Leases - Incentives and
SIC-27 Evaluating the Substance of
Transactions Involving the Legal Form
of a Lease. IFRS 16 Leases, which
has an effective date of 1 January
2019, will have a significant effect on
the Group’s financial statements as
the Group is a lessee in a number of
material property operating leases.
– IFRIC 22 Foreign Currency
Transactions and Advance
Consideration (issued on 8
December 2016).
– IFRIC 23 Uncertainty over Income
Tax Treatments (issued on 7
June 2017).
– Amendments to IFRS 2
Classification and Measurement of
Share-based Payment Transactions
(issued on 20 June 2016).
– Amendments to IAS 40 Transfers of
Investment Property (issued on 8
December 2016).
– Amendments to IFRS 9
Prepayment Features with
Negative Compensation (issued on
12 October 2017).
– Amendments to IAS 28 Long-
term Interests in Associates and
Joint Ventures (issued on 12
October 2017).
– Annual Improvements to IFRS
Standards 2015-2017 Cycle
(issued on 12 December 2017).
– Amendments to IAS 19 Plan
Amendment, Curtailment
or Settlement (issued on 7
February 2018).
Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 110
111
Depreciation and finance costs as
currently reported in the Group’s
consolidated statement of profit or
loss will increase, as under the new
standard a right-of-use asset will
be capitalised and depreciated over
the term of the lease and a finance
cost will be applied annually to the
lease liability.
Consequently, EBITDA and Adjusted
EBITDA (as defined in note 2), existing
alternative performance measures,
will be significantly impacted by the
implementation of IFRS 16 due to
the effective reclassification of non-
contingent rent (currently included in
EBITDA) to depreciation and interest
(not included in EBITDA). Total lease
expenses will increase in the early
years of implementation of IFRS 16
due to the front-loading effect of
finance charges versus the existing
straight-line rent expense under IAS
17 Leases.
Covenants as currently calculated
under existing debt arrangements will
not be amended as their calculation
is based on GAAP on date of entry
into the agreements. IFRS 16 is not
expected to have any impact on
strategy or commercial negotiation.
1 SIGNIFICANT ACCOUNTING
– the Group intends to use the
POLICIES (continued)
(ii) Statement of compliance
(continued)
IFRS 16 Leases (continued)
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. As
a result, an asset (the right-of-use of
the leased item) and a financial liability
to pay rental expenses are recognised.
Fixed rental expenses will be removed
from the statement of comprehensive
income and will be replaced with
finance costs on the lease liability and
depreciation on the right-of-use asset.
Variable lease payments which are
dependent on external factors such
as hotel performance will continue to
be recognised directly in profit or loss.
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
continues to be assessed. However, a
substantial element of work has been
completed which has resulted in the
following conclusions and decisions:
– the Group does not intend to early
adopt IFRS 16;
– the Group does not intend to
use a practical expedient for
lease definition (change in
standard has not resulted in any
material changes);
– the Group does not intend to avail
of exemptions in relation to short
term leases or low-value items;
modified retrospective approach
under which prior year financial
information will not be restated.
Upon transition, the lease liability
will be based on the present value
of remaining lease payments and
the right-of-use asset will be an
amount equal to the lease liability
adjusted for prepaid/accrued
payments. This means that largely
information only available at the
date of transition will be used to
apply IFRS 16 and there will be
no impact on retained earnings on
transition; and
– the Group does not intend to use
practical expedients to apply a
single discount rate to portfolios of
leases or to review for impairment.
The adoption of the new standard
will have a material impact on the
Group’s consolidated statement of
profit or loss and other comprehensive
income and consolidated statement of
financial position, as follows.
Consolidated statement of profit or
loss and other comprehensive income
Administrative expenses will decrease,
as the Group currently recognises
rental expenses therein. The Group’s
rental expenses for 2017 were
€31.0 million (2016: €25.7 million)
and are disclosed in note 3 to these
consolidated financial statements.
Under IFRS 16, contingent rents will
not form part of the lease liability
measurement and will remain in
administrative expenses. 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 2017
was €7.6 million (2016: €6.7 million).
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments replaces
the existing guidance in IAS 39
Financial Instruments: Recognition
and Measurement. IFRS 9 addresses
the classification, measurement and
derecognition of financial assets and
financial liabilities, introduces new
rules for hedge accounting and a new
impairment model for financial assets.
The Group is continuing to assess the
potential impact from the application
of IFRS 9 on its consolidated financial
statements from 1 January 2018. The
vast majority of financial assets held are
trade receivables and cash, which are
expected to continue to be accounted
for at amortised cost. The derivative
asset is expected to continue to be
accounted for at fair value through
profit or loss and as it is hedged, any
gains or losses are recorded in other
comprehensive income in equity.
On this basis, the classification
and measurement changes are
not expected to have a material
impact on the Group’s consolidated
financial statements.
The new hedging requirements of IFRS
9 will align hedge accounting more
closely to the Group’s risk management
policies. However, based on the nature
of the Group’s current effective
hedging arrangements at 31 December
2017, there will be no impact on the
consolidated financial statements.
1 SIGNIFICANT ACCOUNTING
POLICIES (continued)
(ii) Statement of compliance
(continued)
IFRS 16 Leases (continued)
Consolidated statement of
financial position
At the transition date, the Group will
calculate the lease commitments
outstanding and apply the appropriate
discount rate to calculate the present
value of the lease commitment which
will be recognised as a liability and
a right-of-use asset on the Group’s
statement of financial position. The
Group’s outstanding commitments
on all operating leases as at 31
December 2017 are €624.4 million
(31 December 2016: €546.8 million)
(note 23). The Group’s commitments
as at 31 December 2017 provide an
indication of the scale of leases held
and how significant leases currently
are to the Group’s business. However,
this figure is undiscounted and is not
therefore an accurate measure of the
impact of IFRS 16.
The remaining area of focus for the
Group is on establishing an approach
to setting the discount rate at the
transition date (which inherently
cannot be reliably determined until
date of implementation 1 January
2019 when using the modified
retrospective approach). However,
the Group has set out in note
23 - Commitments, an illustrative
impact of the application of IFRS 16
in 2019 using a notional discount
rate to enable users of the financial
statements to appreciate the
potential magnitude of the impact
on the financial statements at that
rate. Given that this is a notional
discount rate it is not indicative of
what the discount rate may be (as
it cannot yet be determined) and
the proforma disclosure is purely for
illustrative purposes.
IFRS 15 Revenue from Contracts
with Customers
IFRS 15 Revenue from Contracts with
Customers was issued in May 2014
and has an effective date of 1 January
2018. The Group has assessed the
impact that the initial application of
IFRS 15 will have on its consolidated
financial statements. This impact is
not considered to be material.
The Group has undertaken an
assessment of revenue earned in respect
of its customer agreements. The Group
currently accounts for revenue earned in
connection with certain customers, net
of commissions. Certain contracts with
other customers are accounted for on a
gross basis, where the related commission
is included in cost of sales.
Under IFRS 15, all such revenue will
be recorded on a gross basis with
commissions deducted separately as
cost of sales. Accordingly, the impact
is limited to a reclassification between
revenue and cost of sales in profit or loss.
If IFRS 15 had been effective from 1
January 2017, this would have resulted
in an increase in revenue of €3.6 million
for the year ended 31 December 2017,
with a corresponding increase in cost of
sales of the same amount.
The Group plans to adopt IFRS 15 using
the retrospective method with the
effect of initially applying this standard
recognised at the start of the earliest
period presented. Accordingly, in the
consolidated financial statements
for the year ended 31 December
2018, revenue associated with these
contracts for 2018 and 2017 will
be presented on a gross basis with
commissions deducted as cost of sales.
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 112
113
1 SIGNIFICANT ACCOUNTING
POLICIES (continued)
(iii) Functional and
presentation currency
These consolidated financial
statements are presented in Euro, being
the functional currency of the Company
and the majority of its subsidiaries.
All financial information presented
in Euro has been rounded to the
nearest thousand.
(iv) Basis of consolidation
The consolidated financial statements
include the financial statements
of the Company and all of its
subsidiary undertakings.
Business combinations
The Group accounts for business
combinations using the acquisition
method when control is transferred
to the Group. The consideration
transferred in the acquisition is
generally measured at fair value, as are
the identifiable net assets acquired. Any
goodwill that arises is tested 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
re-measured 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.
property, this is accounted for as an
asset purchase and not as a business
combination on the basis that the
asset(s) purchased do not constitute
a business. Asset purchases are
accounted for as additions to property,
plant and equipment.
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. All
identifiable intangible assets acquired
as part of a business combination are
recognised separately from goodwill
provided the criteria for recognition
are satisfied.
Judgement is required in the
assessment of 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 9 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. Where the Group solely
purchases the freehold interest in a
Subsidiaries
Subsidiaries are entities controlled
by the Group. The Group controls an
entity when it is exposed to, or has
rights to, variable returns from its
involvement with the entity and has the
ability to affect those returns through
its power over the entity. The financial
statements of subsidiaries are included
in the consolidated financial statements
from the date that control commences
until the date that control ceases.
Intra-group balances and transactions,
and any unrealised income and
expenses arising from intra-group
transactions, are eliminated.
(v) Revenue recognition
Revenue represents sales (excluding
VAT) of goods and services net of
discounts provided in the normal
course of business and is recognised
when services have been rendered.
Revenue is derived from hotel
operations and includes the rental
of rooms, food and beverage sales,
and leisure centre membership in
leased and owned 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.
1 SIGNIFICANT ACCOUNTING
POLICIES (continued)
(v) Revenue recognition (continued)
Rental income from investment
property is recognised on a straight-
line basis over the term of the lease
and is included within other income.
Also included within other income are
non-routine gains arising on disposals
or divestments.
(vi) Sales discounts and allowances
The Group recognises revenue on a
gross revenue basis and makes various
deductions to arrive at net revenue
as reported in profit or loss. These
adjustments are referred to as sales
discounts and allowances.
(vii) 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.
Initial direct costs associated with
entering into a new lease are recognised
as a prepayment and are amortised to
profit or loss on a straight-line basis
over the term of the lease.
(viii) Share-based payments
The grant-date fair value of equity-
settled share-based payment awards
incorporating the effect of market-
based conditions and the estimated
fair value of equity-settled share-
based payment awards issued with
non-market performance conditions,
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.
On vesting of the equity-settled share-
based payment awards, the cumulative
expense recognised in the share-based
payment reserve is transferred directly
to retained earnings. An increase in
ordinary share capital is recognised
reflecting the issuance of shares as a
result of the vesting of the awards.
The dilutive effect of outstanding
awards is reflected as additional share
dilution in calculating diluted earnings
per share.
(ix) 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 except for the initial
recognition of goodwill and other
assets that do not affect accounting
profit at the date of recognition.
Deferred tax is measured at the tax
rates that are expected to be applied
to the temporary differences when
they reverse, based on the laws that
have been enacted or substantively
enacted by the reporting date.
Deferred tax assets and liabilities are
offset if there is a legally enforceable
right to offset current tax liabilities
and assets, and they relate to income
taxes levied by the same tax authority
on the same taxable entity, or on
different entities, but they intend
to settle current tax liabilities and
assets on a net basis or their tax
assets and liabilities will be realised
simultaneously. Deferred tax liabilities
have been recognised where the
carrying value of land and buildings for
financial reporting purposes is greater
than their tax cost base.
Deferred tax assets are recognised for
unused tax losses, unused tax credits
and deductible temporary differences
to the extent that it is probable future
taxable profits will be available against
which the temporary difference can
be utilised.
Deferred tax assets are reviewed at
each reporting date and are reduced to
the extent that it is no longer probable
that the related tax benefit will be
realised. Such reductions are reversed
when the probability of future taxable
profits improves.
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 114
115
1 SIGNIFICANT ACCOUNTING
POLICIES (continued)
(x) 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.
(xi) Property, plant and equipment
Land and buildings are initially stated
at cost, including directly attributable
transaction costs, (or fair value
when acquired through business
combinations) and subsequently at
fair value.
Assets under construction include sites
where new hotels are currently being
developed and major development
projects at hotels which are currently
operational. These sites and the
capital investment made are recorded
at cost in the financial statements.
Borrowing costs incurred in the
construction of major assets which
take a substantial period of time to
complete are capitalised in the financial
period in which they are incurred. Once
construction is complete and the hotel is
operating, the assets will be transferred
to land and buildings at cost, and will
subsequently be measured at fair value.
Depreciation will commence when the
asset is available for use.
Fixtures, fittings and equipment are stated
at cost, less accumulated depreciation
and any impairment provision.
Cost includes expenditure that is
directly attributable to the acquisition
of property, plant and equipment unless
it is acquired as part of a business
combination under IFRS 3, where the
deemed cost is its acquisition date fair
value. In the application of the Group’s
accounting policy, judgement is exercised
by management in the determination of
fair value at each reporting date, residual
values and useful lives.
Depreciation is charged through profit
or loss on the cost or valuation less
residual value on a straight-line basis
over the estimated useful lives of the
assets which are as follows.
50 years
Buildings
Fixtures, fittings
and equipment
Land is not depreciated.
3 – 15 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 amounts, the assets or
cash-generating units are written
down to their recoverable amount.
Recoverable amount is the greater of
fair value less costs to sell and 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.
(xii) 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.
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.
1 SIGNIFICANT ACCOUNTING
POLICIES (continued)
(xii) Investment property
(continued)
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.
When the use of a property changes
from owner occupied to investment
property (as a result of a sub-lease
on the property), the property
is remeasured to fair value and
reclassified accordingly. Any gain on
this remeasurement is recognised
in profit or loss to the extent that it
reverses a previous impairment loss
on the specific property, with any
remaining gain recognised in other
comprehensive income and presented
in the revaluation reserve. Any loss 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.
(xiii) 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.
Impairment losses of goodwill are not
reversed once recognised.
The impairment testing process
requires management to make
significant judgements and estimates
regarding the future cash flows
expected to be generated by the
cash-generating unit. Management
evaluates and updates the judgements
and estimates which underpin this
process on an ongoing basis. The
impairment methodology and key
assumptions used by the Group for
testing goodwill for impairment is
outlined in note 10.
The assumptions and conditions for
determining impairment of goodwill
reflects management’s best estimates,
but these items involve significant
inherent uncertainties, many of
which are not under the control of
management. As a result, accounting
for such items could result in different
estimates or amounts if management
used different assumptions or if
different conditions occur in the future.
An intangible asset is only recognised
where the item lacks a physical
presence, is identifiable, non-
monetary, is controlled by the Group
and is expected to provide future
economic benefits to the Group.
(xiv) Intangible assets other
than goodwill
Intangible assets are measured at
cost (or fair value when acquired
through business combinations)
less accumulated amortisation and
impairment losses.
An intangible asset is determined to
have an indefinite useful life when,
based on the facts and circumstances,
there is no foreseeable limit to
the period over which the asset is
expected to generate future economic
benefits for the Group. Intangible
assets with indefinite lives are
reviewed for impairment on an annual
basis and are not amortised. The
useful life of an intangible asset that is
not subject to amortisation is reviewed
at least annually to determine
whether a change in the useful life
is appropriate.
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc
116
117
1 SIGNIFICANT ACCOUNTING
POLICIES (continued)
(xiv) Intangible assets other
than goodwill (continued)
Other intangible assets are amortised
over the period of their expected
useful lives by charging equal annual
instalments to profit or loss. The
useful life used to amortise finite
intangible assets relates to the
future performance of the asset and
management’s judgement as to the
period over which economic benefits
will be derived from the asset.
(xv) Inventories
Inventories are stated at the lower
of cost (using the first-in, first-out
(FIFO) basis) and net realisable value.
(xvi) 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. Bad
debts are written off to profit or loss
on identification.
(xvii) Trade and other payables
Trade and other payables are initially
recorded at fair value, which is usually
the original invoiced amount, and
subsequently carried at amortised
cost using the effective interest rate
method. Liabilities are derecognised
when the obligation under the liability
is discharged, cancelled or expires.
(xviii) Cash and cash equivalents
Cash and cash equivalents comprise
cash balances and call deposits with
maturities of three months or less,
which are carried at amortised cost,
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.
(xix) 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
rate method.
Finance costs comprise interest on
borrowings, and other costs relating
to financing of the Group.
Finance costs incurred for qualifying
assets, which take a substantial period
of time to construct, are added to the
cost of the asset during the period of
time required to complete and prepare
the asset for its intended use. The
Group uses two capitalisation rates
being the weighted average interest
rate including the cost of hedging for
Sterling borrowings which is applied to
United Kingdom qualifying assets and
the weighted average interest rate for
Euro borrowings which is applied to
Republic of Ireland qualifying assets.
Capitalisation commences on the
date on which the Group undertakes
activities that are necessary to
prepare the asset for its intended
use. Capitalisation of borrowing costs
ceases when the asset is ready for its
intended use.
(xx) 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.
(xxi) Provisions and
contingent liabilities
A provision is recognised in the
statement of financial position when
the Group has a present legal or
constructive obligation as a result of
a past event, and it is probable that
an outflow of economic benefits will
be required to settle the obligation.
If the effect is material, provisions
are determined by discounting the
expected future cash flows at a pre-
tax rate that reflects current market
assessments of the time value of
money and, where appropriate, the
risks specific to the liability.
The provision in respect of self-insured
risks includes projected settlements
for known claims and incurred but not
reported claims.
1 SIGNIFICANT ACCOUNTING
POLICIES (continued)
(xxi) Provisions and
contingent liabilities (continued)
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.
(xxii) 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.
(xxiii) Interest-bearing borrowings
Interest-bearing borrowings are
recognised initially at fair value of
consideration received, less directly
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.
Directly attributable transaction costs
are amortised to profit or loss on a
straight-line basis over the applicable
term of the loans and borrowings.
This amortisation charge is recognised
within finance costs. Commitment
fees incurred in connection with
loans and borrowings are expensed as
incurred to profit or loss.
(xxiv) 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.
Interest rate swaps partially convert
the Group’s Sterling denominated
borrowings from floating to fixed
interest rates. The interest rate cap
limits the exposure of the Group’s Euro
denominated borrowings to upward
movements in floating interest rates.
The Group does not use derivatives for
trading or speculative purposes.
Derivative financial instruments are
recognised at fair value on the date a
derivative contract is entered into plus
directly attributable transaction costs
and are subsequently re-measured at
fair value. Derivatives are carried as
assets when the fair value is positive
and as liabilities when the fair value
is negative.
The full fair value of a hedging
derivative is classified as a non-current
asset or non-current liability if the
remaining maturity of the 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.
(xxv) 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.
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 118
119
(xxvii) Adjusting items
Certain material items, by virtue
of their nature and amount, are
disclosed separately in segmental
reporting and adjusted earnings
per share calculations in order for
the user to obtain a more detailed
understanding of the financial
information. These items relate to
events or circumstances that are not
related to normal trading activities and
are disclosed in reconciling adjusted
EBITDA to Group EBITDA (note 2)
and adjusted profit for the year (note
27) to the Group profit as per the
consolidated statement of profit or
loss and other comprehensive income.
Adjusting items refer to items such as:
– Acquisition-related costs;
– Net property revaluation
movements through profit or loss;
– Gains or losses on disposal of
property freehold interests or
subsidiaries;
– Impairments to goodwill or other
intangible assets; and
– Stock exchange listing costs.
1 SIGNIFICANT ACCOUNTING
POLICIES (continued)
(xxv) Cash flow hedge accounting
(continued)
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.
(xxvi) 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.
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.
The Group segments its leased and owned business by geographical region within which the hotels operate –
Dublin, Regional Ireland and United Kingdom. These, together with managed hotels, comprise the Group’s four
reportable segments.
Dublin, Regional Ireland and United Kingdom segments
These segments are concerned with hotels that are either owned or leased by the Group. As at 31 December 2017, the
Group owns 24 hotels (31 December 2016: 23 hotels) and has effective ownership of one further hotel which it operates
(31 December 2016: one). It also owns the majority of one of the other hotels which it operates. The Group also leases
nine hotel buildings from property owners (31 December 2016: 10) and is entitled to the benefits and carries the risks
associated with operating these hotels.
The Group’s revenue from leased and owned hotels is primarily derived from room sales and food and beverage sales in
restaurants, bars and banqueting. The main costs arising are payroll, cost of goods for resale, commissions paid to online
travel agents on room sales, other operating costs and, in the case of leased hotels, rent paid to lessors.
Managed Hotels segment
Under management agreements, the Group provides management services for third party hotel proprietors.
Revenue
Dublin
Regional Ireland
United Kingdom
Managed Hotels
Total revenue
2017
€’000
2016
€’000
200,705
76,040
69,743
1,986
348,474
151,945
68,467
67,498
2,641
290,551
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.
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 120
121
2 OPERATING SEGMENTS (continued)
2 OPERATING SEGMENTS (continued)
Segmental results - EBITDAR
Dublin
Regional Ireland
United Kingdom
Managed Hotels
EBITDAR for reportable segments
Segmental results - EBITDA
Dublin
Regional Ireland
United Kingdom
Managed Hotels
EBITDA for reportable segments
Reconciliation to results for the year
Segmental results - EBITDA
Rental income
Central costs
Share-based payments expense
Adjusted EBITDA
Acquisition-related costs
Net property revaluation movements through profit or loss
Gains on disposal of property freehold interests and subsidiary
Impairment of goodwill
Stock exchange listing costs
Group EBITDA
Depreciation of property, plant and equipment
Amortisation of intangible assets
Finance costs
Profit before tax
Tax
Profit for the year attributable to owners of the Company
Group EBITDA represents earnings before interest, tax, depreciation and amortisation.
2017
€’000
99,006
21,450
27,036
1,986
2016
€’000
72,992
18,170
26,505
2,641
149,478
120,308
72,630
20,271
23,777
1,986
118,664
118,664
270
(12,371)
(1,690)
104,873
(1,260)
(1,425)
469
-
-
102,657
(15,710)
(24)
(9,636)
77,287
(8,979)
68,308
53,472
16,231
22,511
2,641
94,855
94,855
637
(9,146)
(1,214)
85,132
(2,671)
241
-
(10,325)
(1,293)
71,084
(15,477)
-
(11,496)
44,111
(9,188)
34,923
Adjusted EBITDA is presented as an alternative performance measure to show the underlying operating performance
of the Group excluding the effects of impairment of goodwill (2016), revaluation movements through profit or loss, and
items considered by management to be non-recurring or unusual in nature. Acquisition-related costs have been excluded
to give a more meaningful measure given the scale of acquisitions in 2016 and 2017 and the fluctuations in these costs in
different years. Consequently, Adjusted EBITDA represents Group EBITDA before:
– Acquisition-related costs (note 3);
– Net property revaluation movements through profit or loss (note 11);
– Gains on disposal of property freehold interests and subsidiary (note 4);
– Impairment of goodwill in 2016 (note 10); and
– Stock exchange listing costs in 2016 (note 3).
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. Share-based payments cost is
presented separately from Central costs as this expense relates to employees across the Group.
‘Segmental results – EBITDA’ for Dublin, Regional Ireland and United Kingdom represents the ‘Adjusted EBITDA’ for each
geographical location before central costs, share-based payments expense and excluding rental income. It is the net
operational contribution of leased and owned hotels in each geographical location.
‘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 through Group central office and specific individual costs are not allocated
to this segment.
‘Segmental results – EBITDAR’ for Dublin, Regional Ireland and United Kingdom represents ‘Segmental results – EBITDA’
before rent. For leased hotels, rent amounted to €30.8 million in 2017 (2016: €25.5 million).
Other geographical information
Revenue
Republic of
Ireland
€’000
2017
United
Kingdom
€’000
Total
€’000
Republic of
Ireland
€’000
Leased and owned hotels
Managed hotels
Total revenue
276,745
1,728
278,473
69,743
258
70,001
346,488
1,986
348,474
220,412
2,488
222,900
2016
United
Kingdom
€’000
67,498
153
67,651
Total
€’000
287,910
2,641
290,551
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 122
123
2 OPERATING SEGMENTS (continued)
3 STATUTORY AND OTHER INFORMATION
Assets and liabilities
Assets
Intangible assets and goodwill
Property, plant and equipment
Investment property
Other non-current assets
Current assets
Total assets excluding
derivatives and tax assets
Derivatives
Deferred tax assets
Total assets
Liabilities
Loans and borrowings
Trade and other payables
Total liabilities excluding
provisions, derivatives and
tax liabilities
Provisions
Derivatives
Current tax liabilities
Deferred tax liabilities
Total liabilities
At 31 December 2017
At 31 December 2016
Republic of
Ireland
€’000
United
Kingdom
€’000
Total
€’000
Republic of
Ireland
€’000
United
Kingdom
€’000
41,588
758,192
1,585
3,231
29,708
12,974
240,620
-
1,112
8,506
54,562
998,812
1,585
4,343
38,214
41,588
575,782
1,750
4,748
88,169
12,679
246,662
1,495
-
10,602
Total
€’000
54,267
822,444
3,245
4,748
98,771
834,304
263,212
1,097,516
712,037
271,438
983,475
1
3,571
1,101,088
7
1,894
985,376
63,627
52,978
196,512
11,875
260,139
64,853
76,776
42,760
203,639
9,290
280,415
52,050
116,605
208,387
324,992
119,536
212,929
332,465
4,716
1,778
351
31,858
363,695
3,040
3,401
1,037
25,051
364,994
Revaluation reserve
139,802
15,304
155,106
98,238
9,293
107,531
The above information on assets and liabilities and revaluation reserve is presented by country as it does not form part of
the segmental information routinely reviewed by the chief operating decision makers.
Loans and borrowings are categorised according to their underlying currency. Loans and borrowings denominated in
Sterling, which act as a net investment hedge, of €196.5 million (£174.4 million) at 31 December 2017 (2016: €203.6
million (£174.4 million)) are classified as liabilities in the United Kingdom. Loans and borrowings denominated in Euro are
classified as liabilities in the Republic of Ireland.
Depreciation of property, plant and equipment
Impairment of goodwill
Operating lease rentals:
Land and buildings (including central office lease costs)
Acquisition-related costs
Stock exchange listing costs
Auditor’s remuneration
Audit of Group, Company and subsidiary financial statements
Tax advisory and compliance services
Other non-audit services
Directors’ remuneration
Salary and other emoluments
Gains on vesting of 2014 LTIP
Fees
Pension contributions
2017
€’000
15,710
-
31,047
1,260
-
290
195
78
563
2,568
1,480
350
101
4,499
2016
€’000
15,477
10,325
25,694
2,671
1,293
290
420
266
976
2,018
-
280
82
2,380
Gains associated with the shares which issued to the Directors on vesting of the 2014 LTIP represent the difference
between the quoted share price per ordinary share and the exercise price of the award on the vesting date (note 7). These
shares are held in a restricted share trust and may not be sold or dealt with in any way for a period of five years and 30
days from the vesting date.
Acquisition-related costs for the year ended 31 December 2017 and 31 December 2016 include professional fees, stamp
duty costs, redundancy and other costs associated with the business combinations outlined in note 9. Main market listing
costs in 2016 relate to the step up to the main markets for listed securities in the Republic of Ireland and the United
Kingdom. Details of the acquisition-related costs charged to profit or loss in 2017 and 2016 are outlined below.
Stamp duty incurred on acquisitions
Professional fees incurred on acquisitions
Integration costs
Acquisition-related costs
2017
€’000
501
424
335
1,260
2016
€’000
1,336
292
1,043
2,671
Integration costs comprise severance costs and certain other non-recurring costs directly related to business combinations
including the acquisition of Hotel la Tour, Birmingham in July 2017 and the acquisition of the main element of the Clarion
Hotel, Liffey Valley in August 2017 (note 9).
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 124
125
3 STATUTORY AND OTHER INFORMATION (continued)
5 FINANCE COSTS (continued)
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 (2016: €10,000).
The majority of the fees for tax and other non-audit services in 2017 and 2016 relate to the acquisition of new hotels
including the acquisition of Hotel la Tour, Birmingham in July 2017 and acquisition of the Choice Hotel Group in March
2016 and other one-off projects.
Details of the Directors’ remuneration and interests in conditional share awards are set out in the Remuneration Committee
report on pages 78 to 89.
Other finance costs include the negative yield on cash held in money-market funds, the amortisation of capitalised debt
costs and commitment fees.
Exchange loss on loans and borrowings relates principally to loans which did not form part of the net investment hedge
(note 22).
During the year, interest on loans and borrowings amounting to €1.6 million was capitalised to assets under construction
on the basis that this cost was deemed to be directly attributable to the construction of qualifying assets (note 11) (2016:
€nil). The capitalisation rates applied by the Group, which were reflective of the weighted average interest cost in respect
of Euro denominated borrowings and Sterling denominated borrowings for the year, were 2.45% and 3.43% respectively.
4 OTHER INCOME
6 PERSONNEL EXPENSES
Rental income from investment property
Gains on disposal of property freehold interests and subsidiary
2017
€’000
270
469
739
2016
€’000
637
-
637
On 16 June 2017, the Group completed the sale and operating leaseback of the Clayton Hotel Cardiff for €25.1 million,
resulting in a gain on sale of €0.2 million (after transaction costs of €0.1 million).
On 30 June 2017, the Group disposed of a subsidiary undertaking which held the leasehold interest in the Croydon Park
Hotel, Croydon, UK for €0.1 million and recorded a gain on disposal of €0.2 million. The Croydon Park Hotel generated
revenue of €3.7 million and losses of €0.1 million for the six-month period ended 30 June 2017.
On 17 August 2017, the Group sold the freehold interest of a stand-alone residential property previously owned by the
Group, resulting in a gain on disposal of €0.1 million.
5 FINANCE COSTS
Interest expense on bank loans and borrowings
Cash flow hedges – reclassified from other comprehensive income
Other finance costs
Net exchange loss on loans and borrowings, cash and cash equivalents
Interest capitalised to property, plant and equipment
2017
€’000
7,346
1,348
2,327
204
(1,589)
9,636
2016
€’000
7,535
1,206
1,778
977
-
11,496
The Group uses interest rate swaps to convert the interest rate on part of its debt from floating rate to fixed rate (note
13). This cash flow hedge cost is shown separately within finance costs and represents the additional interest the Group
paid under the interest rate swaps.
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 split by geographical region was as follows.
Dublin (including the Group’s central functions)
Regional Ireland
United Kingdom
The aggregate payroll costs of these persons were as follows.
Wages and salaries
Social welfare costs
Pension costs – defined contribution
Share-based payment expense
Severance costs
2017
2016
417
2,627
3,044
358
2,344
2,702
2017
2016
1,596
905
543
3,044
2017
€’000
84,001
8,542
688
1,690
149
95,070
1,291
855
556
2,702
2016
€’000
74,084
7,021
686
1,214
208
83,213
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 126
127
7
LONG-TERM INCENTIVE PLANS
7
LONG-TERM INCENTIVE PLANS (continued)
Equity-settled share-based payment arrangements
During the year ended 31 December 2017, the Board approved the conditional grant of 829,049 ordinary shares (‘the
Award’) pursuant to the terms and conditions of the Group’s 2017 Long Term Incentive Plan (‘the 2017 LTIP’). The
Award was made to senior employees across the Group (79 in total). Vesting of the Award is based on two independently
assessed performance targets, each one representing 50% of the Award. The first is based on earnings per share (‘EPS’)
and the second on total shareholder return (‘TSR’). The performance period for the award is 1 January 2017 to 31
December 2019 and 25% of the award will vest at threshold performance, provided service conditions attaching to the
awards are met. Threshold performance for the TSR condition is performance in line with the Dow Jones European STOXX
Travel and Leisure Index with 100% vesting for outperformance of the index by 10% per annum. Threshold performance
for the EPS condition, which is a non-market based performance condition, is based on the achievement of adjusted basic
EPS, as disclosed in the Company’s 2019 audited financial statements, of €0.37 with 100% vesting for EPS of €0.46 or
greater. Awards will vest on a straight-line basis for performance between these points.
The total expected cost of this award was estimated at €1.86 million over the three-year service period of which €0.38
million has been expensed to profit or loss for the year ended 31 December 2017. The remaining €1.48 million will be
charged to profit or loss in equal instalments over the remainder of the three-year vesting period.
€1.0 million has been charged against profit for the year ended 31 December 2017 for the awards made in 2014, 2015
and 2016.
During the year ended 31 December 2017, the company issued 714,298 shares on foot of the vesting of awards granted
under the 2014 LTIP. Over the course of the three-year performance period, 39,856 share awards lapsed due to vesting
conditions which were not satisfied. The weighted average share price at the date of exercise for awards exercised during
the year was €5.01. No awards vested or were exercised during the year ended 31 December 2016.
Further details of the plans are set out in the Remuneration Committee Report on pages 78 to 89.
Summary of expense charged to profit or loss relating to awards granted at the below dates:
Total expected cost of award
Amount charged against profit for year ended:
31 December 2017
31 December 2016
31 December 2015
31 December 2014
Total amount charged against profit
Remaining amount
May
2017
€’million
1.86
March
2016
€’million
1.43
October
2015
€’million
0.20
March
2015
€’million
1.08
March
2014
€’million
1.06
Total
€’million
5.63
(0.38)
-
-
-
(0.38)
1.48
(0.48)
(0.40)
-
-
(0.88)
0.55
(0.06)
(0.06)
(0.02)
-
(0.14)
0.06
(0.37)
(0.35)
(0.27)
-
(0.99)
0.09
(0.09)
(0.35)
(0.35)
(0.27)
(1.06)
-
(1.38)
(1.16)
(0.64)
(0.27)
(3.45)
2.18
The remaining amount will be charged to profit or loss in equal instalments over the remainder of the three year vesting
period for each award.
Outstanding share awards granted at beginning of year
Share awards granted during the year
Share awards forfeited during the year
Share awards exercised during the year
Outstanding share awards granted at end of year
Number of
share awards granted
2017
2016
2,088,379
829,049
(88,551)
(714,298)
1,448,468
639,911
-
-
2,114,579
2,088,379
Measurement of fair values
The fair value, at the grant date, of the TSR-based conditional share awards was measured using a Monte Carlo simulation
model. Non-market based performance conditions attached to the awards were not taken into account in measuring fair
value at the grant date. The valuation and key assumptions used in the measurement of the fair values at the grant date
were as follows.
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility
Dividend yield
Performance period
May
2017
March
2016
October
2015
March
2015
€2.14
€5.09
€0.01
25.89% p.a.
1.5%
3 years
€2.45
€4.69
€0.01
30.20% p.a.
1.5%
3 years
€2.43
€4.27
€0.01
26.40% p.a.
1.5%
3 years
€1.92
€3.55
€0.01
26.03% p.a.
1.5%
3 years
For measurement purposes, the dividend yield is based upon adjusted non-zero yields as though the Group was a zero-
dividend yield company at these dates that may not be reflective over the longer term. This percentage is not in any
way indicative of the expected dividend yield of the Group. This will be decided by the Board of Directors as appropriate.
Expected volatility is based on the historical volatility of the Company’s share price for the 2016 and 2017 awards and of a
comparator group of companies for awards in prior periods.
The 2017 LTIP includes EPS-based conditional share awards. The EPS-related performance condition is a non-market
performance condition and does not impact the fair value of the award at the grant date. Instead, an estimate is made by
the Group as to the number of shares which are expected to vest based on satisfaction of the EPS-related performance
condition, and this, together with the fair value of the award at grant date, determines the accounting charge to be spread
over the vesting period. The estimate of the number of shares which are expected to vest is reviewed in each reporting
period over the vesting period of the award and the accounting charge is adjusted accordingly.
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 128
129
7
LONG-TERM INCENTIVE PLANS (continued)
8 TAX CHARGE
Save As You Earn Scheme
During the year ended 31 December 2017, the Remuneration Committee of the Board of Directors approved the granting
of share options under a Save As You Earn (‘SAYE’) Scheme (the ‘Scheme’) for all eligible employees across the Group.
515 employees availed of the 2017 Scheme (379 employees availed of the 2016 Scheme). The Scheme is for three years
and employees may choose to purchase shares at the end of the three year period at the fixed discounted price set at the
start. The share price for the Scheme (as per the 2016 scheme) has been set at a 25% discount for Republic of Ireland
based employees and 20% for United Kingdom based employees in line with the maximum amount permitted under tax
legislation in both jurisdictions.
The total expected cost of the 2017 SAYE scheme was estimated at €0.8 million over the three year service period of
which €0.08 million has been charged against profit for the year ended 31 December 2017.
Current tax
Irish corporation tax
UK corporation tax
Over provision in respect of prior periods
Deferred tax (credit)/charge (note 21)
2017
€’000
8,517
1,615
(582)
9,550
(571)
8,979
2016
€’000
5,155
1,727
(300)
6,582
2,606
9,188
€0.23 million has been charged against profit for the year ended 31 December 2017 for the SAYE awards made in 2016
(2016: €0.05 million).
The tax assessed for the year is higher than the standard rate of corporation tax in Ireland for the year. The differences are
explained below.
Summary of expense charged to profit or loss relating to awards granted at the below dates:
October
2017
€’million
October
2016
€’million
Total
€’million
Profit before tax
2017
€’000
2016
€’000
77,287
44,111
Total expected cost of award
0.82
0.71
1.53
Tax on profit at standard Irish corporation tax rate of 12.5%
9,661
5,514
Amount charged against profit for year ended:
31 December 2017
31 December 2016
Total cumulative amount charged against profit
Remaining amount
(0.08)
-
(0.08)
0.74
(0.23)
(0.05)
(0.28)
0.43
(0.31)
(0.05)
(0.36)
1.17
These charges, together with the expense in respect of the long-term incentive plan for the year of €1.38 million (2016:
€1.16 million) represent the share-based payments expense which has been recognised for the year, with a corresponding
increase in the share-based payment reserve.
The remaining €0.74 million in respect of the 2017 SAYE scheme will be charged against profit or loss in equal instalments
over the remainder of the three year vesting period.
Outstanding share options granted at beginning of year
Share options granted during the year
Share awards forfeited during the year
Outstanding share options granted at end of year
Number of SAYE share options granted
2016
2017
837,545
702,888
(111,334)
1,429,099
-
837,545
-
837,545
Effects of:
Income taxed at a higher rate
Expenses not deductible for tax purposes
Impairment of goodwill not deductible for tax purposes
Overseas income taxed at higher rate
Losses utilised at higher rate
Over provision in respect of current tax in prior periods
Under provision in respect of deferred tax in prior periods
Losses and similar deductions not previously recognised
Other differences
738
598
-
585
(738)
(582)
174
(666)
(791)
8,979
782
1,049
1,291
919
(795)
(300)
185
-
543
9,188
Reductions in the UK corporation tax rate to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020)
were enacted on 26 October 2015. Finance Bill 2016 further reduced the 18% rate to 17% from 1 April 2020, following
substantial enactment on 6 September 2016. Together this will reduce the Group’s future tax charges accordingly. The
deferred tax assets and liabilities arising in the UK at 31 December 2017 have been calculated based on the rate of 17%
(2016: 17%) substantively enacted at the balance sheet date.
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 130
131
9 BUSINESS COMBINATIONS
9 BUSINESS COMBINATIONS (continued)
Acquisition of Clarion Hotel, Liffey Valley
On 31 August 2017, the Group acquired full ownership of the main element of the hotel and business of the Clarion Hotel,
Liffey Valley, now trading as Clayton Hotel Liffey Valley, for total cash consideration of €23.0 million. Previously, the Group
had been managing this hotel, under a management contract, on behalf of a receiver since March 2016. The fair value of
the identifiable assets and liabilities acquired were as follows.
Recognised amounts of identifiable assets acquired and liabilities assumed
Non-current assets
Hotel property (land and buildings)
Fixtures and fittings
Current assets
Net working capital assets
Total identifiable net assets
Total consideration
Satisfied by:
Cash
31 August 2017
Fair value
€’000
22,700
284
16
23,000
23,000
23,000
The acquisition method of accounting has been used to consolidate the business acquired in the Group’s consolidated
financial statements. No goodwill has been recognised on acquisition as the fair value of the net assets acquired equated to
the consideration paid.
Acquisition-related costs of €0.8 million were charged to administrative expenses in profit or loss in respect of this
business combination.
Subsequent asset purchase transactions relating to Clarion Hotel, Liffey Valley
On 29 September 2017, in a separate transaction to the aforementioned business combination, the Group purchased the
long leasehold interest of 33 suites in Clarion Hotel, Liffey Valley for €8.6 million plus capitalised acquisition costs of €0.3
million (note 11).
On 18 December 2017, in a further transaction to the aforementioned business combination, the Group purchased the
long leasehold interest of 13 suites in Clarion Hotel, Liffey Valley for €2.0 million plus capitalised acquisition costs of €0.2
million (note 11).
These transactions have been accounted for as asset purchases and are included in additions to property, plant and
equipment during the year (note 11).
Acquisition of Hotel La Tour, Birmingham
On 21 July 2017, the Group acquired 100% of the share capital of Hotel La Tour (Birmingham) Limited, thereby acquiring
full ownership of the property and business of Hotel La Tour, Birmingham, now trading as Clayton Hotel Birmingham,
for cash consideration amounting to €34.2 million (£30.6 million). The fair value of the identifiable assets and liabilities
acquired were as follows.
Recognised amounts of identifiable assets acquired and liabilities assumed
Non-current assets
Hotel property (land, buildings and fixtures and fittings)
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Non-current liabilities
Deferred tax liability
Total identifiable net assets
Total consideration
Satisfied by:
Cash
21 July 2017
Fair value
€’000
34,565
1,150
44
595
447
(1,485)
(1,150)
34,166
34,166
34,166
The acquisition method of accounting has been used to consolidate the business acquired in the Group’s consolidated
financial statements. No goodwill has been recognised on acquisition as the fair value of the net assets acquired equated to
the consideration paid. Acquisition-related costs of €0.5 million (£0.4 million) were charged to administrative expenses in
profit or loss in respect of this business combination.
Subsequently on 11 August 2017, the Group completed the sale of the Hotel La Tour, Birmingham property and entered
into an operating lease in respect of the property (note 11).
Impact of new acquisitions on trading performance
The post-acquisition impact of acquisitions completed during 2017 on the Group’s profit for the financial year ended 31
December 2017 was as follows.
Revenue
Profit before tax and acquisition-related costs
Clarion Hotel,
Liffey Valley
€’million
2.4
0.6
Hotel la Tour,
Birmingham
€’million
3.4
-
2017
€’million
5.8
0.6
If the acquisitions had occurred on 1 January 2017, the acquisitions would have contributed the following to the
consolidated results of the Group.
Revenue
Profit before tax and acquisition-related costs
Clarion Hotel,
Liffey Valley
€’million
6.5
2.0
Hotel la Tour,
Birmingham
€’million
7.5
0.4
2017
€’million
14.0
2.4
These two transactions have added to the scale of the Group with the acquisition of Hotel La Tour, Birmingham increasing
the geographical spread of the Group in line with the Group’s strategy of expanding across larger UK cities.
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 132
133
9 BUSINESS COMBINATIONS (continued)
10 INTANGIBLE ASSETS AND GOODWILL
Prior year acquisitions
Acquisition of Choice Hotel Group
On 11 March 2016, the Group completed the acquisition of the leasehold interests in four hotels from the Choice Hotel
Group for a consideration of €38.9 million, as a result of which the Group directly operates the hotel businesses in these
properties. The transaction increased the scale of the Group and strengthened its position in these locations.
The hotel leasehold interests acquired were:
– The Gibson Hotel Dublin;
– The Clarion Hotel, Limerick, now trading as Clayton Hotel Limerick;
– The Clarion Hotel, Cork, now trading as Clayton Hotel Cork City; and
– The Croydon Park Hotel, Croydon, UK (the Group has subsequently disposed of this leasehold interest (note 4)).
During 2016, the Group also acquired full ownership of the property and business of the following hotels:
– Tara Towers Hotel, Dublin: acquired 15 January 2016; and
– Clarion Hotel, Sligo (now trading as Clayton Hotel Sligo): acquired 18 March 2016.
No goodwill was recognised on acquisitions in 2016 as the fair value of the net assets acquired equated to the
consideration paid.
Hotel property (land and buildings)
Fixtures and fittings
Intangible assets
Net working capital liabilities
Net deferred tax liabilities and provisions
Total identifiable net assets
Goodwill
Total consideration
Satisfied by:
Cash
Choice Hotel
Group
€’million
14.0
-
29.4
(1.6)
(2.9)
38.9
-
38.9
Tara
Towers
€’million
13.2
-
-
-
-
13.2
-
13.2
Clarion
Hotel, Sligo
€’million
12.9
0.2
-
(0.3)
-
12.8
-
12.8
38.9
13.2
12.8
Other indefinite-
lived intangible
assets
€’000
Other
intangible
assets
€’000
Goodwill
€’000
Cost
Balance at 1 January 2016
Acquisitions through business combinations (see note 9)
Transferred to property, plant and equipment (note 11)
Effect of movements in exchange rates
Balance at 31 December 2016
Balance at 1 January 2017
Transferred from investment property during the year (note 12)
Effect of movements in exchange rates
Balance at 31 December 2017
Accumulated amortisation and impairment losses
Balance at 1 January 2016
Impairment loss during the year
Balance at 31 December 2016
Balance at 1 January 2017
Impairment loss during the year
Amortisation of other intangible assets
Balance at 31 December 2017
Carrying amounts
At 1 January 2016
82,194
-
-
(2,711)
79,483
79,483
-
(357)
79,126
(35,391)
(10,325)
(45,716)
(45,716)
-
-
(45,716)
46,803
-
29,400
(8,900)
-
20,500
20,500
-
-
20,500
-
-
-
-
-
-
-
-
At 31 December 2016
33,767
20,500
Total
€’000
82,194
29,400
(8,900)
(2,711)
99,983
-
-
-
-
-
-
682
(6)
99,983
682
(363)
676
100,302
-
-
-
(35,391)
(10,325)
(45,716)
-
-
(24)
(45,716)
-
(24)
(24)
(45,740)
-
-
46,803
54,267
At 31 December 2017
33,410
20,500
652
54,562
Goodwill
Goodwill is attributable to factors including expected profitability and revenue growth, increased market share, increased
geographical presence, the opportunity to develop the Group’s brands and the synergies expected to arise within the
Group after acquisition.
Arising from an annual impairment review conducted at 31 December 2017, goodwill was not considered to be impaired
and accordingly, no impairment was recognised during 2017. During 2016, goodwill was impaired on eight of the Group’s
cash-generating units (CGUs) which resulted in a €10.3 million reduction in goodwill which was charged to profit or loss.
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 134
135
10 INTANGIBLE ASSETS AND GOODWILL (continued)
10 INTANGIBLE ASSETS AND GOODWILL (continued)
In 2007, the Group acquired a number of Irish hotel operations for consideration amounting to €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. That goodwill was subsequently impaired in 2009 and the carrying value of that
goodwill at the beginning and end of the year amounted to €6.9 million.
Included in the goodwill figure is €12.3 million (£10.9 million) which is attributable to goodwill arising on acquisition of
foreign operations. Consequently, such goodwill is subsequently retranslated at the closing rate. The retranslation at
31 December 2017 resulted in a foreign exchange loss of €0.4 million and a corresponding decrease in goodwill. The
comparative translation at 31 December 2016 resulted in a foreign exchange loss of €2.7 million.
Carrying amount of goodwill allocated
Moran Bewley Hotel Group (i)
Other acquisitions (i)
2007 Irish hotel operations acquired (ii)
Number of Cash-
Generating Units
at 31 December
2017
7
3
4
2017
€’000
24,576
1,967
6,867
33,410
2016
€’000
24,886
2,014
6,867
33,767
The above table represents the number of CGUs to which goodwill was allocated at 31 December 2017.
Annual goodwill testing
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be
impaired. Due to the Group’s policy of revaluation of land and buildings, and the allocation of goodwill to individual cash-
generating units, impairment of goodwill can occur as the Group realises the profit and revenue growth and synergies
which underpinned the goodwill. As these materialise, these are revaluation gains to the carrying value of the property
and consequently, elements of goodwill may be required to be written off if the carrying value of the cash-generating
unit (which includes revalued property and allocated goodwill) exceeds its recoverable amount on a value in use basis.
The impairment of goodwill is through profit or loss though the revaluation gains are taken to reserves through other
comprehensive income.
Future under-performance in any of the Group’s major cash-generating units may result in a material write-down of
goodwill which would have a substantial impact on the Group’s profit and equity.
(i) Moran Bewley Group and other single asset acquisitions
For the purposes of impairment testing, goodwill has been allocated to each of the hotels acquired as CGUs. As these hotel
properties are valued annually by independent external valuers, the recoverable amount of each CGU is based on a fair
value less costs of disposal estimate, or where this value is less than the carrying value of the asset, the value in use of the
CGU is assessed.
Costs of acquisition of a willing buyer which are factored in by external valuers when calculating the fair value price of the
asset are significant for these assets (2017: Ireland 8.46%, UK 6.8%, 2016: Ireland 4.46%, UK 6.8%). The increase in
purchasers costs versus 2016 was due to the increase in stamp duty relating to commercial property from 2% to 6% in the
Republic of Ireland as a result of Budget 2018. Purchasers costs are a key difference between value in use and fair value
less costs of disposal as prepared by external valuers.
At 31 December 2017, the recoverable amounts of ten CGUs were based on value in use, 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 covering a ten year period. This
period was chosen due to the nature of the hotel assets and is consistent with the valuation basis used by independent
external property valuers when performing their hotel valuations (note 11);
– Revenue and EBITDA for the first year of the projections is based on budgeted figures for 2018 provided by
management. Budgeted revenue and EBITDA are based on expectations of future outcomes taking into account past
experience, adjusted for anticipated revenue growth;
– Cash flow projections conservatively assume a long-term compound annual growth rate of 2% in EBITDA for assets in
the Republic of Ireland and 2.5% for assets in the United Kingdom;
– Cash flows include an average annual capital outlay on maintenance for the hotels dependent on the condition of the
hotel or typically 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% for Irish and 2.5%
for UK properties; and
– The cash flows are discounted using a risk adjusted discount rate specific to each property which ranged from 8.75% to
11.75% (Ireland: 9.50% to 11.75%; UK: 8.75% to 11.50%) (2016: Ireland: 9.50% to 11.75%, UK: 8.75% to 11.50%).
The discount rates were consistent with those used by the external property valuers.
The values applied to each of these key assumptions are derived from a combination of internal and external factors based
on historical experience of the valuers and of management and taking into account the stability of cash flows typically
associated with these factors.
At 31 December 2017, 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 this goodwill. The Directors concluded that the carrying value of this goodwill is not impaired at 31
December 2017.
(ii) 2007 Irish hotel operations acquired
For the purposes of impairment testing, goodwill has been allocated to each of the cash-generating units (CGUs)
representing the Irish hotel operations acquired in 2007. Eight hotels were acquired at that time but only four of these
hotels have goodwill associated with them. Three of these hotels which have since been purchased by the Group
are valued annually by independent external valuers, as the freehold interest in the property is owned by the Group.
One property is leased by the Group. Where hotel properties are valued annually by independent external valuers, the
recoverable amount of each CGU is based on a fair value less costs of disposal estimate, or where this value is less than
the carrying value of the asset, the value in use of the CGU is assessed. The recoverable amount of each of these four
CGUs which have associated goodwill was based on value in use. Value in use is determined by discounting the future cash
flows generated from the continuing use of these hotels.
Costs of acquisition of a willing buyer which are factored in by external valuers when calculating the fair value price of the
asset are significant for these assets (2017: 8.46%, 2016: 4.46%). The increase in purchasers costs versus 2016 was
due to the increase in stamp duty relating to commercial property from 2% to 6% in the Republic of Ireland as a result of
Budget 2018. Purchasers costs are a key difference between value in use and fair value less costs of disposal as prepared
by external valuers.
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 136
137
10 INTANGIBLE ASSETS AND GOODWILL (continued)
10 INTANGIBLE ASSETS AND GOODWILL (continued)
The assumptions underpinning these value in use calculations were as follows:
– Cash flow projections are based on current operating results and budgeted forecasts prepared by management covering
a ten-year period;
At 31 December 2017, the recoverable amount of the CGU (The Gibson Hotel) was based on value in use, determined by
discounting the future cash flows generated from the operation of this hotel by the Group. This value in use estimate was
based on the following key assumptions:
– Revenue and EBITDA for the first year of the projections is based on budgeted figures for 2018 provided by
– Cash flow projections are based on current operating results and budgeted forecasts prepared by management covering
management. Budgeted revenue and EBITDA are based on expectations of future outcomes taking into account past
experience, adjusted for anticipated revenue growth;
– Cash flow projections assume a long-term compound annual growth rate of 2% in EBITDA;
– Cash flows 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%; and
– The cash flows are discounted using a risk adjusted discount rate specific to each property which ranged from 10.75%
to 11.50% (2016: 10.50% to 11.00%). In the case of owned hotels, the discount rates were consistent with rates used
by the valuers. Discount rates applied to calculate value in use in respect of leased properties are comparable with rates
used by external property valuers in their valuations of similar hotels.
The values applied to each of these key assumptions are derived from a combination of internal and external factors based
on historical experience of the valuers and of management and taking into account the stability of cash flows typically
associated with these factors.
At 31 December 2017, 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 this goodwill. The Directors concluded that the carrying value of this goodwill is not impaired at 31
December 2017.
Key sources of estimation uncertainty
The key assumptions used in estimating the future cash flows in the impairment test are subjective and include projected
EBITDA (as defined in note 2), discount rates and the duration of the discounted cash flow model. Expected future cash
flows are inherently uncertain and therefore liable to change materially over time.
Other indefinite-lived intangible assets
Acquired leasehold interests
Other indefinite-lived intangible assets represent the intangible value of the Group’s leasehold interest in respect of The
Gibson Hotel, which was acquired as part of the Choice Hotel Group business combination which completed in March
2016 (note 9). The carrying value of this asset amounted to €20.5 million at 31 December 2016 and 31 December 2017
and is recognised as an asset with an indefinite life based upon the intentions of the Group for the long-term operation of
the business of this hotel and the statutory renewal rights which exist in Ireland to the benefit of the lessee. The Group
tests intangible assets annually for impairment or more frequently if there are indicators it may be impaired.
a ten-year period. This period was chosen as it corresponds to the valuation basis used by independent external
property valuers when performing their hotel valuations (note 11) for similar properties;
– Revenue and EBITDA for the first year of the projections is based on budgeted figures for 2018. Budgeted revenue and
EBITDA are based on expectations of future outcomes taking into account past experience, adjusted for anticipated
revenue growth;
– Cash flow projections conservatively assume a long-term compound annual growth rate of 2% in EBITDA;
– Cash flows include an average annual capital outlay of 4% of revenues but assume no enhancements to the property;
– The value in use calculation also includes a terminal value based on an industry earnings multiple model which
incorporates a long-term growth rate of 2%; and
– The cash flows are discounted using a risk adjusted discount rate specific to the property of 10.50%. This discount rate
was comparable with discount rates used by the external property valuers in valuing similar properties.
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 cash flows typically associated with these factors.
At 31 December 2017, the recoverable amount was determined to be higher than the carrying amount of the CGU. There
is no reasonably foreseeable change in assumptions that would impact adversely on the carrying value. The Directors
concluded that the carrying value of other indefinite-lived intangible assets is not impaired at 31 December 2017.
Other intangible assets
Additions to other intangible assets during the year (€0.7 million) represents the Group’s interest in a sub-lease (as
sub-lessor) retained in respect of part of the Clayton Hotel Cardiff, UK following the sale and leaseback (on an operating
lease) of that hotel property (note 11). The remaining lease term is 15 years and this intangible asset will be amortised
over that period.
The Group reviews the carrying amounts of other intangible assets annually to determine whether there is any indication of
impairment. If any such indicators exist then the asset’s recoverable amount is estimated.
At 31 December 2017, there were no indicators of impairment present and the Directors concluded that the carrying value
of other intangible assets was not impaired at 31 December 2017.
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 138
139
11 PROPERTY, PLANT AND EQUIPMENT
At 31 December 2017
Valuation
Cost
Accumulated depreciation (and impairment charges)*
Net carrying amount
At 1 January 2017, net carrying amount
Acquisitions through business combinations
Other additions through freehold or site purchases
Other additions through capital expenditure
Disposals of property, plant and equipment
Reclassification from land and buildings to assets under
construction and fixtures, fittings and equipment
Reclassification from assets under construction to land
and buildings and fixtures, fittings and equipment for
assets that have come into use
Transfer from investment properties (note 12)
Transfer to investment properties (note 12)
Capitalised borrowing costs (note 5)
Revaluation gains through OCI
Revaluation losses through OCI
Reversal of revaluation losses through profit or loss
Revaluation losses through profit or loss
Depreciation charge for the year
Translation adjustment
Land and
buildings
€’000
Assets under
construction
€’000
Fixtures,
fittings and
equipment
€’000
Total
€’000
848,777
-
-
848,777
744,611
57,265
71,478
381
(61,139)
-
97,365
-
97,365
42,865
-
-
59,064
-
-
75,931
(23,261)
848,777
173,296
(23,261)
52,670
998,812
34,968
284
-
21,799
(922)
822,444
57,549
71,478
81,244
(62,061)
(6,960)
495
6,465
-
5,967
-
(385)
-
55,176
(1,643)
1,295
(2,471)
(7,686)
(7,112)
(7,020)
585
-
1,589
-
-
-
-
-
(213)
1,053
-
-
-
-
-
-
(284)
(8,024)
(2,669)
-
585
(385)
1,589
55,176
(1,643)
1,295
(2,755)
(15,710)
(9,994)
At 31 December 2017, net carrying amount
848,777
97,365
52,670
998,812
11 PROPERTY, PLANT AND EQUIPMENT (continued)
The equivalent disclosure for the prior year is as follows.
At 31 December 2016
Valuation
Cost
Accumulated depreciation (and impairment charges)*
Net carrying amount
At 1 January 2016, net carrying amount
Acquisitions through business combinations
Other additions through freehold or site purchases
Transfer from intangible assets (note 10)
Other additions through capital expenditure
Transfer from investment properties (note 12)
Revaluation gains through OCI
Revaluation losses through OCI
Reversal of revaluation losses through profit or loss
Revaluation losses through profit or loss
Depreciation charge for the year
Translation adjustment
At 31 December 2016, net carrying amount
Land and
buildings
€’000
Assets under
construction
€’000
Fixtures,
fittings and
equipment
€’000
Total
€’000
744,611
-
-
744,611
585,101
38,195
42,715
8,900
7,228
36,032
67,901
(1,498)
988
(1,244)
(7,489)
(32,218)
744,611
-
42,865
-
42,865
-
-
39,868
-
3,043
-
-
-
-
-
-
(46)
42,865
-
50,205
(15,237)
744,611
93,070
(15,237)
34,968
822,444
23,691
2,071
-
-
18,211
-
-
-
-
-
(7,988)
(1,017)
608,792
40,266
82,583
8,900
28,482
36,032
67,901
(1,498)
988
(1,244)
(15,477)
(33,281)
34,968
822,444
*Accumulated depreciation of buildings is stated after the elimination of depreciation, revaluation, disposals and impairments.
The carrying value of land and buildings is stated after the elimination of depreciation on revaluation.
The carrying value of land and buildings (revalued at 31 December 2017) is €848.8 million. The value of these assets
under the cost model is €677.6 million. In 2017, unrealised revaluation gains of €55.2 million and unrealised losses
of €1.6 million have been reflected through other comprehensive income and in the revaluation reserve in equity.
A revaluation loss of €2.8 million and a reversal of prior period revaluation losses of €1.3 million have been reflected
in administrative expenses through profit or loss.
Included in land and buildings at 31 December 2017 is land at a carrying value of €150.8 million (2016: €124.7 million)
which is not depreciated.
Acquisitions through business combinations during the year ended 31 December 2017 include the following:
– Clarion Hotel Liffey Valley, now trading as Clayton Hotel Liffey Valley (note 9); and
– Hotel La Tour, Birmingham now trading as Clayton Hotel Birmingham (note 9).
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 140
141
11 PROPERTY, PLANT AND EQUIPMENT (continued)
11 PROPERTY, PLANT AND EQUIPMENT (continued)
Other additions to land and buildings during the year ended 31 December 2017 include the following asset purchases:
– Purchase of the long leasehold interest (freehold equivalent) in the ground and lower ground floors, 170 bedrooms and
vacant ground floor area of Clayton Hotel Cardiff Lane for €39.5 million plus capitalised acquisition costs of €1.1 million;
– Purchase of the long leasehold interest (freehold equivalent) of a further 24 suites (62 bedrooms) in the Clayton Hotel
Cardiff Lane for €8.7 million plus capitalised acquisition costs of €0.5 million;
– Purchase of the long leasehold interest (freehold equivalent) of 33 suites in the Clarion Hotel, Liffey Valley, now trading
as Clayton Hotel Liffey Valley, for €8.6 million plus capitalised acquisition costs of €0.3 million;
– Purchase of the long leasehold interest (freehold equivalent) of a further 13 suites in Clayton Hotel Liffey Valley for
€2.0 million plus capitalised acquisition costs of €0.2 million;
– Purchase of the freehold interest of Maldron Hotel Portlaoise, a hotel property previously operated under an operating
lease by the Group and the adjoining foodcourt, for €8.5 million. The adjoining foodcourt was simultaneously sold to a
third party for €1.7 million. The net cost of the transaction was €6.8 million plus capitalised acquisition costs of €0.4
million; and
– Purchase of the freehold interest of Steamboat Quay Carpark, Clayton Hotel Limerick for €1.6 million plus capitalised
acquisition costs of €0.1 million.
Additions to assets under construction during the year ended 31 December 2017 include the following:
– Development expenditure incurred on new builds of €42.3 million;
– Development expenditure incurred on hotel extensions of €16.8 million;
– Interest capitalised on loans and borrowings relating to qualifying assets of €1.6 million (note 5); and
– Arising from a change in use by the Group of a previously recognised investment property, €0.6 million has been
transferred to property, plant and equipment from investment property (note 12).
Property previously classified as assets under construction has been transferred to land and buildings and fixtures and
fittings as a result of the assets coming into use in 2017. This relates to additional bedrooms, a restaurant and staff
facilities at Clayton Hotel Dublin Airport costing €7.0 million.
Arising from a change in use by the Group of previously recognised property, plant and equipment during the year as a
result of securing a sub-lease in respect of the property, €0.4 million has been transferred to investment property from
property, plant and equipment (note 12).
On 16 June 2017, the Group completed the sale and operating leaseback of the Clayton Hotel Cardiff for €25.1 million
resulting in a gain on sale of €0.2 million. As part of this transaction the Group retained €2.4 million of fixtures and fittings
and an intangible asset with a value of €0.7 million (note 10), representing the Group’s interest in a sub-lease (as sub-
lessor) in respect of a self-contained restaurant within the hotel. The Group now operates this hotel under an operating
lease with a term of 35 years. Costs incurred in respect of this transaction amounting to €0.1 million have been included in
profit or loss as part of the net gain on the sale of €0.2 million, included within other income (note 4).
On 11 August 2017, the Group completed the sale and operating leaseback of Hotel La Tour, Birmingham for €33.1 million
(£30.0 million). Included within non-current prepayments is €1.1 million which represents the differential between the
proceeds received and the acquisition price and will be deferred and amortised over the lease term as it represents up-
front costs associated with entering the lease. The Group now operates this hotel under an operating lease with a term of
35 years.
During the year, the Group revised the estimated useful lives of its fixtures, fittings and equipment (note 1). Arising from
the Group’s assessment of the useful lives of its fixtures, fittings and equipment during the year, assets with a net book
value of €7.0 million were reclassified from land and buildings to assets under construction and fixtures, fittings and
equipment.
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.
The value of the Group’s property at 31 December 2017 reflects open market valuations carried out in December 2017
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.
At 31 December 2017, properties included within land and buildings with a carrying amount of €848.8 million were pledged
as security for loans and borrowings.
Measurement of fair value
The fair value measurement of the Group’s own-use property has been categorised as a Level 3 fair value based on the
inputs to the valuation technique used. At 31 December 2017, 25 properties were revalued by independent external
valuers engaged by the Group (31 December 2016: 23).
The principal valuation technique used by the independent external valuers engaged by the Group was discounted
cash flows. This valuation model considers the present value of net cash flows to be generated from the property over
a ten-year period (with an assumed terminal value at the end of Year 10). Valuers forecast cashflow included in these
calculations represents the expectations of the valuers for EBITDA (driven by revenue per available room (“RevPAR”)
calculated as total rooms revenue divided by rooms available) for the property and also takes account of the expectations
of a prospective purchaser. It also includes their expectation for capital expenditure which the valuers, typically, assume as
approximately 4% of revenue per annum. This does not always reflect actual capital expenditure incurred by the Group. On
specific assets, refurbishments are, by nature, periodic rather than annual. Valuers expectations of EBITDA are based off
their trading forecasts (benchmarked against competition, market and actual performance). The expected net cash flows
are discounted using risk adjusted discount rates. Among other factors, the discount rate estimation considers the quality
of the property and its location.
The valuers use their professional judgement and experience to balance the interplay between the different assumptions
and valuation influences. For example, initial discounted cash flows based on individually reasonable inputs may result in a
valuation which challenges the price per key metrics in recent transactions. This would then result in one or more of the
inputs being amended for preparation of a revised discounted cash flow. Consequently, the individual inputs may change
from the prior period or may look individually unusual and therefore must be considered as a whole and the individual
importance of any should not be over-estimated in the context of the overall valuation.
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 142
143
11 PROPERTY, PLANT AND EQUIPMENT (continued)
11 PROPERTY, PLANT AND EQUIPMENT (continued)
The significant unobservable inputs and drivers thereof are summarised in the following table.
Significant unobservable inputs
RevPAR
< €75/£75
€75-€100/£75-£100
> €100/£100
Terminal (Year 10) capitalisation rate
< 8%
8%-10%
Price per key*
< €150k/£150k
€150k-€250k/£150k-£250k
> €250k/£250k
RevPAR
< €75/£75
€75-€100/£75-£100
> €100/£100
Terminal (Year 10) capitalisation rate
< 8%
8%-10%
Price per key*
< €150k/£150k
€150k-€250k/£150k-£250k
> €250k/£250k
Dublin
31 December 2017
Regional
Ireland
United
Kingdom
Number of hotel assets
1
3
4
8
1
7
8
2
2
4
8
7
3
1
11
2
9
11
10
-
1
11
4
2
-
6
2
4
6
4
1
1
6
Dublin
31 December 2016
Regional
Ireland
United
Kingdom
Number of hotel assets
2
1
3
6
1
5
6
1
3
2
6
8
1
1
10
1
9
10
9
-
1
10
6
1
-
7
3
4
7
5
1
1
7
Total
12
8
5
25
5
20
25
16
3
6
25
Total
16
3
4
23
5
18
23
15
4
4
23
*Price per key represents the valuation of a hotel divided by the number of rooms in that hotel.
The valuers also applied risk adjusted discount rates of 9.50% to 11.75% for Dublin assets (31 December 2016: 9.50% to
11.75%), 9.00% to 12.00% for Regional Ireland assets (31 December 2016: 8.50% to 12.00%) and 8.50% to 12.50% for
United Kingdom assets (31 December 2016: 8.50% to 11.75%).
The most significant factors which have impacted valuations this year are the uplifts on hotels where freeholds or freehold
equivalents of previously leased buildings were acquired leading to crystallisation of a marriage value, and reflection of
continued improvements in trading performance across hotels which offset the impact of increased stamp duty rates
during 2017 on most hotel valuations.
The estimated fair value under this valuation model would increase or decrease if:
– Valuers forecast cashflow was higher or lower than expected; and/or
– The risk adjusted discount rate and terminal capitalisation rate was lower or higher.
Valuations also had regard to relevant price per key metrics from hotel sales activity.
12 INVESTMENT PROPERTY
Cost or valuation
At 1 January
Transfer to property, plant and equipment (note 11)
Transfer to intangible assets on sale and operating leaseback of property (note 10)
Disposal on sale and operating leaseback of property
Transfer from property, plant and equipment (note 11)
Acquisitions through business combinations
Gain on revaluation recognised in profit or loss
Translation adjustment
At 31 December
2017
€’000
3,245
(585)
(682)
(813)
385
-
35
-
1,585
2016
€’000
37,285
(36,032)
-
-
-
1,431
497
64
3,245
Investment properties with a carrying value of €1.6 million were pledged as security for loans and borrowings at 31
December 2017.
Investment property at 31 December 2017 reflects the following assets and movements during the year.
– 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 13 and 9
years remaining.
– Arising from a change in use by the Group of previously recognised property, plant and equipment in Clayton Whites
Hotel, Wexford from own-use to a sub leased property, €0.4 million has been transferred to investment property from
property, plant and equipment (note 12). The investment property is leased to a third party for a lease term of 10 years.
– Transfers to property, plant and equipment in the year to 31 December 2017 includes part of a hotel property owned
by the Group which was previously leased to a third party and which was recognised as investment property at 31
December 2016 (€0.6 million). Arising from a change in use by the Group of this property to own-use, this has been
transferred to property, plant and equipment (note 11).
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 144
12 INVESTMENT PROPERTY (continued)
13 DERIVATIVES (continued)
– On 16 June 2017, the Group completed the sale and operating leaseback of the Clayton Hotel Cardiff. The Group’s
freehold interest in a self-contained portion of the property, and which was classified as investment property at 31
December 2016 (€1.5 million), was disposed of in connection with this transaction. The Group’s retention of its interest
in the sub-lease of the property has been recognised as an intangible asset (note 10).
Changes in fair values are recognised in administrative expenses in profit or loss.
The value of the Group’s investment properties at 31 December 2017 reflect an open market valuation carried out in
December 2017 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 and comparable investment sales. The valuations use a yield specific to each property and
ranged from 6.75% to 10.75% (2016: 6.75% to 11.50%).
The estimated fair value under this valuation model would increase or decrease if:
– Rent was higher or lower than expected; and/or
– The yield used as the capitalisation rate was higher or lower.
13 DERIVATIVES
In June 2015, 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 58% of the Group’s Sterling
denominated borrowings at 31 December 2017. These swaps fix the LIBOR benchmark rate to 1.5025%.
– Interest rate cap with a maturity date of 30 September 2019, covering approximately 30% of the Group’s Euro
denominated borrowings at 31 December 2017. 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 gains/(losses) on derivative instruments
Fair value gain/(loss) on interest rate swap liabilities
Fair value loss on interest rate cap asset
Reclassified to profit or loss (note 5)
2017
€’000
2016
€’000
1
1
7
7
(1,778)
(1,778)
(1,777)
2017
€’000
275
(6)
269
1,348
1,617
(3,401)
(3,401)
(3,394)
2016
€’000
(3,723)
(17)
(3,740)
1,206
(2,534)
The amount reclassified to profit or loss during the year represents the incremental interest expense arising under the
interest rate swaps with actual LIBOR rates lower than the swap rate.
14 TRADE AND OTHER RECEIVABLES
Non-current assets
Other receivables
Deposits paid on acquisitions
Prepayments
Current assets
Trade receivables
Prepayments
Accrued income
Total
2017
€’000
900
-
3,443
4,343
8,957
7,469
4,278
2016
€’000
900
1,024
2,824
4,748
7,823
5,266
2,785
20,704
15,874
25,047
20,622
Other receivables includes a non-current deposit required as part of a hotel property lease contract (€0.9 million).
The deposit is interest-bearing and is refundable at the end of the lease term.
145
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc
146
147
14 TRADE AND OTHER RECEIVABLES (continued)
15 INVENTORIES
At 31 December 2016, non-current assets included deposits paid for potential acquisitions. There are no comparable
deposits on acquisitions at 31 December 2017.
Included within non-current prepayments at 31 December 2017 is an amount of €1.6 million (2016: €2.4 million) relating
to costs incurred by the Group net of assets acquired as a result of entering into a new lease at the former Double Tree by
Hilton Hotel, which is now trading as Clayton Hotel Burlington Road, on 22 November 2016. The Group incurred legal and
professional fees in addition to an up-front payment to secure the lease. The net costs are being amortised on a straight-
line basis over the 25 year life of the lease.
Included within non-current prepayments at 31 December 2017 is an amount of €1.1 million (2016: €nil) relating to the
sale and operating leaseback of Hotel La Tour, Birmingham on 11 August 2017. This represents the difference between the
proceeds received and the acquisition price and is deferred and amortised over the 35 year life of the lease in line with the
benefits from the lease as it represents up-front costs associated with entering the lease.
Also included within non-current prepayments at 31 December 2017 is an amount of €0.6 million (2016: €0.4 million)
relating to a prepayment made for IT services relating to 2019 and 2020.
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.
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
2017
€’000
Impairment
provision
2017
€’000
Net
receivables
2017
€’000
4,358
2,153
1,483
453
836
9,283
(2)
-
-
-
(324)
(326)
4,356
2,153
1,483
453
512
8,957
Gross
receivables
2016
€’000
Impairment
provision
2016
€’000
Net
receivables
2016
€’000
3,485
2,365
812
83
1,247
7,992
(5)
-
(4)
(18)
(142)
(169)
3,480
2,365
808
65
1,105
7,823
Management does not expect any significant losses from receivables that have not been provided for as shown above.
Goods for resale
Consumable stores
2017
€’000
1,419
346
1,765
2016
€’000
1,488
329
1,817
Inventories recognised as cost of sales during the year amounted to €27.4 million (2016: €23.8 million).
16 CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Money-market funds
17 CAPITAL AND RESERVES
Share capital and share premium
At 31 December 2017
Authorised share capital
2017
€’000
15,745
-
15,745
2016
€’000
49,601
31,479
81,080
Number
€’000
Ordinary shares of €0.01 each
10,000,000,000
100,000
Allotted, called-up and fully paid shares
Number
€’000
Ordinary shares of €0.01 each
183,680,964
1,837
Share premium
At 31 December 2016
Authorised share capital
503,113
Number
€’000
Ordinary shares of €0.01 each
10,000,000,000
100,000
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 148
149
17 CAPITAL AND RESERVES (continued)
17 CAPITAL AND RESERVES (continued)
Allotted, called-up and fully paid shares
Number
€’000
Ordinary shares of €0.01 each
182,966,666
1,830
Share premium
503,113
All ordinary shares rank equally with regard to the Company’s residual assets.
(d) Revaluation reserve
The revaluation reserve relates to the revaluation of land and buildings in line with the Group’s policy to fair value these
assets at each reporting date (see note 11), net of deferred tax.
(e) Translation reserve
The translation reserve comprises all foreign currency exchange differences arising from the translation of the financial
statements of foreign operations, as well as the effective portion of any foreign currency differences arising from hedges
of a net investment in a foreign operation (see note 22).
During the year ended 31 December 2017, the shares awarded under the 2014 Long Term Incentive Plan vested resulting
in the issuance of 714,298 shares of €0.01 per share (note 7).
18 TRADE AND OTHER PAYABLES
Nature and purpose of reserves
(a) Capital contribution and merger reserve
As part of a Group reorganisation in 2014, the Company became the ultimate parent entity of the then existing Group,
when it acquired 100% of the issued share capital of DHGL Limited in exchange for the issue of 9,500 ordinary shares of
€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 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.
(b) Share-based payment reserve
The share-based payment reserve comprises amounts equivalent to the cumulative cost of awards by the Group under
equity-settled share-based payment arrangements being the Group’s Long Term Incentive Plans and the Save As You Earn
schemes. On vesting, the cost of awards previously recognised in the share-based payments reserve is transferred to
retained earnings. Details of the share awards, in addition to awards which vest in the year, are disclosed in note 7 of the
financial statements and on pages 86 and 87 of the Remuneration Committee Report.
(c) Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments
used in cash flow hedges, net of deferred tax.
Trade payables
Accruals
Deferred income
Value added tax
Payroll taxes
2017
€’000
14,127
41,175
6,674
713
2,164
64,853
2016
€’000
13,266
28,785
6,954
1,422
1,623
52,050
Accruals include capital expenditure accruals including work in progress at year end which has not yet been invoiced
(2017: €16.0 million) (2016: €5.0 million).
19 PROVISION FOR LIABILITIES
Insurance claims:
Non-current
2017
€’000
4,716
4,716
The reconciliation of the movement in the provision for the year ended 31 December 2017 is as follows.
At 1 January
Provisions made during the year – charged to profit or loss
Assumed in a business combination
Utilised during the year
2017
€’000
3,040
2,501
-
(825)
4,716
2016
€’000
3,040
3,040
2016
€’000
890
2,040
300
(190)
3,040
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 150
151
19 PROVISION FOR LIABILITIES (continued)
20 INTEREST-BEARING LOANS AND BORROWINGS (continued)
This provision relates to actual and potential obligations arising from the Group’s insurance arrangements where the
Group is self-insured. The Group has third party insurance cover above specific limits for individual claims and has an
overall maximum aggregate payable for all claims in any one year. The amount provided is principally based on projected
settlements as determined by external loss adjusters. The provision also includes an estimate for claims incurred but not
yet reported.
The utilisation of the provision is dependent on the timing of settlement of the outstanding claims. However, based on
past experience, the Group expects that the claims which are provided for at 31 December 2017 will be paid over a
period greater than one year. The provision has been discounted to reflect the time value of money though the effect is
not significant.
20 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
2017
€’000
19,300
(1,094)
18,206
243,010
(1,077)
241,933
260,139
2016
€’000
16,800
(1,066)
15,734
266,936
(2,255)
264,681
280,415
Reconciliation of movement in net debt
Interest-bearing loans and borrowings
(excluding unamortised debt costs)
At 1 January 2017
Cash flows
New facilities drawn down
Capital repayment
Non-cash changes
Effect of foreign exchange movements
At 31 December 2017
Cash and cash equivalents
At 1 January 2017
Movement during the year
At 31 December 2017
Net debt at 31 December 2017
At 1 January 2016
Cash flows
New facilities drawn down
Capital repayment
Non-cash changes
Effect of foreign exchange movements
At 31 December 2016
Cash and cash equivalents
At 1 January 2016
Movement during the year
At 31 December 2016
Net debt at 31 December 2016
Sterling
facility
£’000
Sterling
facility
€’000
Euro
facility
€’000
Total
€’000
174,352
203,639
80,097
283,736
30,000
(30,000)
34,180
(33,096)
2,500
(16,800)
36,680
(49,896)
-
(8,211)
-
(8,211)
174,352
196,512
65,797
262,309
81,080
(65,335)
15,745
246,564
132,352
180,328
89,200
269,528
42,000
-
49,910
-
7,697
(16,800)
57,607
(16,800)
-
(26,599)
-
(26,599)
174,352
203,639
80,097
283,736
149,155
(68,075)
81,080
202,656
Net debt is calculated in line with the Group’s loan facility agreement. As a result, at 31 December 2017 it
excludes unamortised debt costs of €2.2 million (2016: €3.3 million) and interest rate swap liabilities of €1.8 million
(2016: €3.4 million).
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 152
153
20 INTEREST-BEARING LOANS AND BORROWINGS (continued)
21 DEFERRED TAX (continued)
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 total loan facility of €318 million included a €20 million revolving credit
facility. It also included a standby facility of €16 million which was not drawn and has since expired.
As outlined in note 9, the Group acquired Hotel La Tour (Birmingham) Limited in July 2017. At that time, the Company had
tax trading losses forward of £8.2 million (€9.25 million) which were not recognised as an asset in the statutory accounts
of that company. Hotel La Tour (Birmingham) Limited sold Hotel La Tour Birmingham in August 2017, at which time a
taxable capital gain of £6.0 million (€6.77 million) arose. The Group opted to roll over this capital gain by correspondingly
reducing the future tax base cost of capital assets.
On 6 May 2016, the Group entered into a new multi-currency loan facility of €80 million with a maturity date of 3 February
2020 and increased the revolving credit facility from €20 million to €30 million. On 9 June 2016 under this facility, the
Group drew down £18 million (€22.9 million) and €7.7 million. On 24 October 2016, the Group drew down a further £24
million (€27 million).
On 6 July 2017, the Group increased its revolving credit facility by €50 million to €80 million. On 16 July 2017, the Group
drew down £30 million from the multi-currency revolving credit facility, which was subsequently repaid on 11 August
2017. On 28 December 2017, €2.5 million was drawn from the revolving credit facility. This amount is included in current
liabilities. The undrawn loan facilities as at 31 December 2017 were €99.7 million, including €77.5 million of the revolving
credit facility and €22.2 million of the other loan facilities.
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 13). The
loans are secured on the Group’s hotel 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.
21 DEFERRED TAX
Deferred tax assets
Deferred tax liabilities
Net liability
Movements in year
At beginning of year – net liability
Acquisition through business combination – assets
Acquisition through business combination – liabilities
Credit/(charge) for year – to profit or loss (note 8)
Charge for year – to other comprehensive income
At end of year – net liability
2017
€’000
2016
€’000
3,571
(31,858)
(28,287)
1,894
(25,051)
(23,157)
2017
€’000
2016
€’000
(23,157)
1,150
(1,150)
571
(5,701)
(28,287)
(11,923)
-
(2,562)
(2,606)
(6,066)
(23,157)
As at 31 December 2017, there are unrecognised tax losses available in Pillo Hotels Limited of €0.3 million (2016: €0.3
million) which are not expected to be utilised against taxable profits of the company in future years. The tax effect of these
losses is €0.04 million.
The Group immediately recognised this deferred tax liability of £1.02 million (€1.15 million (note 9)), and recognised a
matching deferred tax asset relating to the trading losses to the extent of the capital gain arising. A further £2.20 million
(€2.47 million) of tax trading losses remain unrecognised. The tax effect of these losses is £0.37 million (€0.43 million).
Deferred tax arises from temporary differences relating to:
Net balance at
1 January 2017
2017
€’000
Recognised in
profit or loss
2017
€’000
Recognised
in OCI
2017
€’000
Acquired in business
combinations
2017
€’000
Net deferred
tax
2017
€’000
Deferred tax
assets
2017
€’000
Deferred tax
liability
2017
€’000
Balance as at 31 December 2017
Property, plant and equipment
Intangible assets
Tax losses carried forward
Other
Net deferred tax (liabilities)/assets
(21,886)
(2,562)
848
443
(23,157)
887
-
(316)
-
(5,498)
-
-
(203)
571
(5,701)
(1,150) (27,647)
(2,562)
1,682
240
-
1,150
-
1,649 (29,296)
(2,562)
-
-
-
1,682
240
-
(28,287)
3,571 (31,858)
Net balance at
1 January 2016
2016
€’000
Recognised in
profit or loss
2016
€’000
Recognised
in OCI
2016
€’000
Acquired in business
combinations
2016
€’000
Net deferred
tax
2016
€’000
Deferred tax
assets
2016
€’000
Deferred tax
liability
2016
€’000
Balance as at 31 December 2016
Property, plant and equipment
Intangible assets
Tax losses carried forward
Other
(14,570)
-
2,520
127
(934)
-
(1,672)
-
(6,382)
-
-
316
-
(2,562)
-
-
(21,886)
(2,562)
848
443
603 (22,489)
(2,562)
-
-
-
848
443
Net deferred tax (liabilities)/assets
(11,923)
(2,606)
(6,066)
(2,562) (23,157)
1,894 (25,051)
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 154
155
22 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
22 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
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 throughout its business: interest-bearing loans and cash and cash equivalents
are used to finance the Group’s operations; trade and other receivables, trade payables and accruals arise directly from
operations; and derivatives are used to manage interest rate risks and to achieve a desired profile of borrowings. The Group
uses a net investment hedge with Sterling denominated borrowings to hedge the foreign exchange risk from investments
in certain UK operations. The Group does not trade in financial instruments.
The following tables show the carrying amount of Group financial assets and liabilities including their values in the fair
value hierarchy for the year ended 31 December 2017. 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
measured at
fair value
2017
€’000
Loans and
receivables
at amortised
cost
2017
€’000
Total carrying
amount
2017
€’000
Level 1
2017
€’000
Level 2
2017
€’000
1
Level 3
2017
€’000
Total
2017
€’000
1
Financial Assets
Derivatives (note 13)
Trade and other receivables excluding
prepayments and deposits paid on
acquisitions (note 14)
Cash at bank and in hand (note 16)
Financial Liabilities
Secured bank loans (note 20)
Trade payables and accruals (note 18)
Derivatives (note 13)
1
-
-
1
-
1
14,135
15,745
29,880
14,135
15,745
29,881
Financial
liabilities
measured at
fair value
2017
€’000
Financial
liabilities
measured at
amortised
cost
2017
€’000
Total carrying
amount
2017
€’000
-
-
(1,778)
(260,139) (260,139)
(55,302)
(1,778)
(55,302)
-
(1,778) (315,441) (317,219)
Level 1
2017
€’000
Level 2
2017
€’000
Level 3
2017
€’000
Total
2017
€’000
(260,139)
(260,139)
(1,778)
(1,778)
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 2016. 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 13)
Trade and other receivables
excluding prepayments
and deposits paid on acquisitions
(note 14)
Cash at bank and in hand (note 16)
Money-market funds (note 16)
Financial
assets
measured at
fair value
2016
€’000
Loans and
receivables
at amortised
cost
2016
€’000
Total carrying
amount
2016
€’000
Level 1
2016
€’000
7
-
7
Level 3
2016
€’000
Level 2
2016
€’000
7
Total
2016
€’000
7
-
-
31,479
31,486
11,508
49,601
-
61,109
11,508
49,601
31,479
92,595
Financial
liabilities
measured at
fair value
2016
€’000
Financial
liabilities
measured at
amortised
cost
2016
€’000
Total carrying
amount
2016
€’000
31,479
31,479
Level 1
2016
€’000
Level 2
2016
€’000
Level 3
2016
€’000
Total
2016
€’000
Financial Liabilities
Secured bank loans (note 20)
Trade payables and accruals
(note 18)
Derivatives (note 13)
-
(280,415) (280,415)
(280,415)
(280,415)
-
(3,401)
(42,051)
-
(42,051)
(3,401)
(3,401) (322,466) (325,867)
(3,401)
(3,401)
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 based on 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 year ended 31 December 2017, 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.
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 156
157
22 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
22 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
Money-market funds
Money-market funds are measured at fair value through profit or loss. Changes in fair value are recognised in finance
costs (note 5). The fair value is based on quoted market prices. There were no amounts held in money-market funds at 31
December 2017.
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 equivalent to the fair value as there is no difference between current margins available in the market and
the margins the Group is paying.
(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. Outstanding customer balances are regularly monitored and
reviewed for indicators of impairment (evidence of financial difficulty of the customer or payment default). The maximum
exposure to credit risk is represented by the carrying amount of each financial asset.
The ageing profile of trade receivables at 31 December 2017 is provided in note 14. Management does not expect any
significant losses from receivables that have not been provided for as shown in note 14.
Cash and cash equivalents
In addition to cash at bank and in hand, the Group held significant cash balances in money-market funds with financial
institutions during the year. At year end there were no cash balances held in money-market funds. 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
Carrying
amount
2017
€’000
8,957
900
4,278
15,745
-
29,880
Carrying
amount
2016
€’000
7,823
900
2,785
49,601
31,479
92,588
(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.
The Group’s treasury function ensures that sufficient resources are available to meet its liabilities as they fall due through a
combination of cash and cash equivalents, cash flows and undrawn credit facilities.
On 6 July 2017, the Group improved its liquidity position by increasing its revolving credit facility by an additional €50
million (having a maturity date of 3 February 2020). On 16 July 2017, the Group drew down £30 million from the multi-
currency revolving credit facility, which was subsequently repaid on 11 August 2017. On 28 December 2017, €2.5 million
was drawn from the revolving credit facility.
€77.5 million of the revolving credit facility and €22.2 million of other loan facilities were undrawn at 31 December 2017.
The following are the contractual maturities of the Group’s financial liabilities at 31 December 2017, including estimated
interest payments.
Carrying
value
2017
€’000
Total
2017
€’000
6 months
or less
€’000
Secured bank loans
Trade payables and accruals
Interest rate swaps
(260,139)
(55,302)
(1,778)
(276,831)
(55,302)
(1,778)
(317,219)
(333,911)
(15,017)
(55,302)
(543)
(70,862)
6 – 12
months
€’000
(12,654)
-
(463)
(13,117)
1 – 2
years
€’000
2 – 5
years
€’000
(20,858)
-
(560)
(228,302)
-
(212)
(21,418)
(228,514)
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 158
159
22 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
22 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
(b) Liquidity risk (continued)
The equivalent disclosure for the prior year is as follows.
(c) Market risk (continued)
(i) Interest rate risk (continued)
Carrying
value
2016
€’000
Total
2016
€’000
6 months
or less
€’000
Secured bank loans
Trade payables and accruals
Interest rate swaps
(280,415)
(42,051)
(3,401)
(312,262)
(42,051)
(3,438)
(325,867)
(357,751)
(13,000)
(42,051)
(662)
(55,713)
6 – 12
months
€’000
(12,965)
-
(631)
(13,596)
1 – 2
years
€’000
2 – 5
years
€’000
(25,620)
-
(1,158)
(260,677)
-
(987)
(26,778)
(261,664)
(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 is exposed to floating interest rates on its debt obligations and uses hedging instruments to mitigate the risk
associated with interest rate fluctuations. This is achieved by entering into interest rate swaps and an interest rate cap (see
note 13) 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 swaps
Effect of interest rate cap
Nominal amount
2017
€’000
2016
€’000
260,139
(114,401)
(19,413)
280,415
(118,550)
(30,618)
126,325
131,247
The weighted average interest rate for 2017 was 3.16% (2016: 3.25%), of which 2.42% (2016: 2.43%) related to margin.
The interest expense for 2017 has been sensitised in the below table for a reasonably possible change in variable interest
rates. In relation to the downward sensitivity, the Group have used a zero benchmark interest rate as the lowest variable
interest rate due to floors embedded in the loan facilities and as a result, the Group does not benefit from any reduction in
benchmark rates below zero. For the upward sensitivity, the Group have reviewed six years historical data for the 3 month
Euribor and 3 month LIBOR rates. Based on this historical data, the Group believe that a reasonable change in the rates
would be an uplift in benchmark rates to the highest average rates for 3 month Euribor and 3 month LIBOR in that six year
period which would have been rates of 1.1% for each. Based on the forward curves received at year end, the rates are not
expected to reach this point. However, they have been used in this sensitivity to show the impact as a reasonably possible
scenario. The impact on profit or loss is shown below. This analysis assumes that all other variables, in particular foreign
currency exchange rates, remain constant.
Euribor
LIBOR
2017 actual
weighted
average variable
benchmark rate
If rate
sensitised
upwards
If rate
sensitised
downwards
0.00%
1.00%
0.80%
1.33%
0.00%
0.86%
The rates above are the weighted average interest rates including the impact of hedging on both the hedged and unhedged
portions of the underlying loans.
Cash flow sensitivity analysis for variable rate instruments
31 December 2017
(Increase)/decrease in interest on loans and borrowings
Decrease/(increase) in tax
(Decrease)/increase in profit
31 December 2016
(Increase)/decrease in interest on loans and borrowings
Decrease/(increase) in tax
(Decrease)/increase in profit
Effect on profit or loss
Zero variable
Increase
rate*
in rate
€’000
€’000
(1,254)
157
(1,097)
(971)
121
(850)
287
(36)
251
279
(35)
244
*Only the interest on the unhedged portion of the loans has been sensitised. The sensitivity has no impact on the hedged
portion.
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 2017.
Interest rate swaps
Liabilities
31 December 2017
Carrying
Amount
€’000
Total
€’000
12 months
or less
€’000
More than
1 year
€’000
1,778
1,778
1,006
772
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 160
161
22 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
(c) Market risk (continued)
(i) Interest rate risk (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
31 December 2017
Carrying
Amount
€’000
Total
€’000
12 months
or less
€’000
More than
1 year
€’000
1,778
1,778
1,006
772
(ii) Foreign currency risk
As per the Risk Management section of the Annual Report on pages 36 to 43, the Group is exposed to fluctuations in the
Euro/Sterling rate.
The Group is exposed to transactional foreign currency risk on trading activities conducted by subsidiaries in currencies other
than their functional currency and to translation foreign currency risk on the retranslation of foreign operations to Euro.
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. This
risk is mitigated by the earnings from UK subsidiaries which are denominated in Sterling.
The Group’s gain or loss on retranslation of the net assets of foreign currency subsidiaries is taken directly to the
translation reserve.
The Group limits its exposure to foreign currency risk by using Sterling debt to hedge part of the Group’s investment in UK
subsidiaries. The Group financed certain operations in the UK acquired in 2015 and in 2016 by obtaining funding at Group
level through external borrowings denominated in Sterling. These borrowings amounted to £174.4 million (€196.5 million)
at 31 December 2017 (2016: £174.4 million (€203.6 million)) 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 those UK operations.
Sensitivity analysis on transactional risk
The Group have reviewed the historical average monthly Euro/Sterling foreign exchange rates for the previous eleven
years. The lowest average foreign exchange rate of 0.66 has been used in calculating the impact of euro weakening against
Sterling as it is reflective of a period of market volatility due to strong economic growth. On the upward sensitivity, due
to current volatility in the market and the unknown impact of Brexit, the Group have decided to use Euro/Sterling foreign
exchange rate of 1 (parity) in the sensitivity. The aforementioned rates are broadly in line with market forecasts which
display a wide variation in foreign exchange rates. The actual weighted average foreign exchange rate for interest expense
in 2017 was 0.88. The interest cost on Sterling loans in 2017 was £6.03 million (€6.88 million).
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
22
(c) Market risk (continued)
(ii) Foreign currency risk (continued)
Sensitivity analysis on transactional risk (continued)
Impact on interest costs of Sterling loans
Impact of tax
Profit
Equity
Strengthening
of Euro
€’000
855
(107)
Weakening
of Euro
€’000
(2,203)
276
Strengthening
of Euro
€’000
855
(107)
Weakening
of Euro
€’000
(2,203)
276
Increase/(decrease) in profit/equity
748
(1,927)
748
(1,927)
(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. The step-up to main market listings on the Irish and London Stock Exchanges
during the year ended 31 December 2016 was a manifestation of this policy. Management monitors the return on capital
to ordinary shareholders.
The Board of Directors seeks to maintain a balance between the higher returns that might be possible with higher levels of
borrowings and the advantages and security afforded by a sound capital position. The Group’s target is to achieve a pre-tax
leveraged return on equity of at least 15% on investments.
The Group monitors capital using a ratio of net debt to adjusted EBITDA ratio (note 2) and seeks to keep it below 3.50.
Profit before tax
Add back/(deduct)
Finance costs (note 5)
Depreciation of property, plant and equipment (note 2)
Acquisition-related and integration costs (note 3)
Net property revaluation movements through profit or loss (note 2)
Gain on disposal of property freehold interests and subsidiary (note 2)
Amortisation of intangible asset (note 2)
Stock exchange listing costs (note 2)
Impairment of goodwill (note 2)
Adjusted EBITDA
Net debt (note 20)
Net Debt to Adjusted EBITDA as at 31 December
2017
€’000
2016
€’000
77,287
44,111
9,636
15,710
1,260
1,425
(469)
24
-
-
11,496
15,477
2,671
(241)
-
-
1,293
10,325
104,873
85,132
246,564
202,656
2.4
2.4
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 162
163
23 COMMITMENTS
23 COMMITMENTS (continued)
Leases
Non-cancellable operating lease rentals payable under operating lease and agreements for lease are set out below. These
represent the minimum future lease payments in aggregate that the Group is required to make under existing lease
arrangements. An agreement for lease is a binding agreement between prospective landlords and the Group to enter into
a lease at a future date.
At 31 December 2017
Operating lease
Agreements for lease
At 31 December 2016
Operating lease
Agreements for lease
*2019 financial year.
Less than
1 year
€’000
24,827
448
1 - 2
years*
€’000
21,859
1,792
2 - 5
years
€’000
66,065
22,850
5 - 15
years
€’000
205,313
94,527
15 -25
years
€’000
192,771
100,979
After 25
years
€’000
113,569
133,117
Total
€’000
624,404
353,713
25,275
23,651
88,915
299,840
293,750
246,686
978,117
Less than
1 year
€’000
27,537
-
1 - 2
years
€’000
25,399
806
2 - 5
years
€’000
74,265
4,835
5 - 15
years
€’000
232,797
16,651
15 -25
years
€’000
162,845
17,503
After 25
years
€’000
23,933
21,206
Total
€’000
546,776
61,001
27,537
26,205
79,100
249,448
180,348
45,139
607,777
The significant movement since the year ended 31 December 2016 is due principally to the following:
– New operating leases entered into for Clayton Hotel Birmingham and Clayton Hotel Cardiff following sale and operating
leasebacks (note 11);
– Cessation of the operating lease of Croydon Park Hotel, UK following disposal of the subsidiary (note 4);
– Cessation of the operating lease of Maldron Hotel Portlaoise following purchase of the freehold interest (note 11);
– Cessation of operating leases of components of Clayton Hotel Cardiff Lane following purchase of the long leasehold
interests (note 11);
– The Group has signed an agreement to lease a Clayton Hotel, to be built in Manchester. On completion of construction
(expected completion Q1 2021), Dalata will commence operations in the hotel through a 35 year operating lease with
an initial annual rent of circa £2.5 million, depending on the final size of the hotel after the end of the planning process;
– The Group has signed an agreement to lease a Clayton Hotel, to be built in Glasgow. On completion of construction
(expected completion Q4 2020), Dalata will commence operations in the hotel through a 35 year operating lease
with an initial annual rent of circa £2.4 million, depending on the final size of the hotel after the end of the planning
process; and
– The Group has signed an agreement to lease a Maldron Hotel, to be built in Glasgow. On completion of construction
(expected completion Q2 2020), Dalata will commence operations in the hotel through a 35 year operating lease with
an initial annual rent of circa £1.6 million, depending on the final size of the hotel after the end of the planning process.
Leases (continued)
In 2016, the Group signed an agreement to lease a Maldron Hotel, to be built in Newcastle. On completion of construction
(expected completion February 2019), Dalata will commence operations in the hotel through a 35 year operating lease
with an initial annual rent of £1.6 million.
The weighted average lease life of future minimum rentals payable under leases and agreement for leases is 32.3 years
(2016: 25.8 years).
The operating lease charges during 2017 amounted to €31.0 million (2016: €25.7 million).
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 2017 was €7.6 million (2016: €6.7 million).
IFRS 16 impact
Note 1 (ii) contains details of the impact of IFRS 16 Leases on the Group. Work on the most significant area of judgement and
estimation, setting of the discount rate, is ongoing and in any case cannot be set until the transition date of 1 January 2019.
An illustrative disclosure of one potential quantitative impact of IFRS 16, using a notional discount rate of 5% is included
in the table below. However this rate should not be considered to be a prediction of the discount rate as this rate was
randomly selected to enable users of the financial statements to appreciate the potential magnitude of the impact on the
financial statements at the date of implementation of IFRS 16 at only that selected discount rate.
Operating leases that are expected to be active at 1 January 2019 have been incorporated into the illustrative IFRS 16
impact analysis below. Obviously leases in existence in the future at the date of transition may be significantly different
depending on developments such as new leases, changes in timing of opening of new hotels to be capitalised under lease etc.
Illustrative impact on consolidated statement of financial position at 1 January 2019
Lease liability
Right-of-use asset
Retained earnings
Impact on net assets
Illustrative impact on consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 2019
Operating lease rentals
Depreciation of right-of-use asset
Interest on lease liability
Impact on profit before taxation
€’000
(350,093)
350,093
-
-
€’000
23,868
(14,746)
(16,843)
(7,721)
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 164
165
23 COMMITMENTS (continued)
24 RELATED PARTY TRANSACTIONS
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 and does not extend to any members of the Executive
Management Team. The compensation of key management personnel is set out in the Remuneration Committee
Report on pages 78 to 89. In addition, the share-based payment expense for key management in 2017 was €0.5 million
(2016: €0.4 million).
(b) Transactions with related parties
A number of the Executive Directors of the Group were also directors of Sanjay Limited and Citywest Resort Limited at 31
December 2017. The Group formerly operated a hotel management contract for Citywest Resort Limited (that company
has now ceased trading) and Sanjay Limited.
During 2016, the Group received fees of €18,304 from Sanjay Limited, and fees of €40,000 from Citywest Resort Limited
for management services provided to both companies. During 2017, the Group did not receive any fees and had no monies
owed at 31 December 2017.
During 2017, the Group paid fees to Professional Granite Consulting Limited of €100,212 (2016: €24,335) for sales and
marketing services received. A Non-Executive Director of the Group is also a director of Professional Granite Consulting
Limited. At 31 December 2017, €1,507 (2016: €21,166) was owed in the normal course of business by the Group to
this company.
25 SUBSEQUENT EVENTS
There were no events subsequent to 31 December 2017 which would require an adjustment to or a disclosure thereon in
these financial statements.
Section 357 Companies Act 2014
Dalata Hotel Group plc, as the parent company of the Group and for the purposes of filing exemptions referred to in
Section 357 of the Companies Act 2014, has entered into guarantees in relation to the liabilities of the Republic of Ireland
registered subsidiary companies which are listed below.
- Suvanne Management Limited
- Carasco Management Limited
- Heartside Limited
- Palaceglen Limited
- Songdale Limited
- Amelin Commercial Limited
- DHG Burlington Road Limited
- Dalata Support Services Limited
- Bernara Commercial Limited
- Adelka Limited
- DS Charlemont Limited
- DHG Barrington Limited
- Vizmol Limited
- Fonteyn Property Holdings No. 2 Limited
- DHG Dalton Limited
- Sparrowdale Limited
- Cavernford Designated Activity Company
- Candlevale Limited
- DHG Arden Limited
- Merzolt Limited
- Pondglen Limited
- Bayvan Limited
- Lintal Commercial Limited
- Dalata Management Services Limited
- Pillo Hotels Limited
- Loadbur Limited
- DHG Cordin Limited
- Leevlan Limited
- Swintron Limited
- Fonteyn Property Holdings Limited
- DT Sussex Road Operations Limited
- DHG Eden Limited
- Galsay Limited
Capital commitments
The Group has the following commitments for future capital expenditure under its contractual arrangements.
Contracted but not provided for
2017
€’000
2016
€’000
98,282
77,099
This relates primarily to the development of the following new-build hotels and extensions to currently operational hotels
which are now contractually committed:
– New-build Hotel Developments: Clayton Hotel Charlemont, Dublin; Maldron Hotel Kevin Street, Dublin; Maldron Hotel,
South Mall, Cork; and Maldron Hotel Brunswick Street, Belfast.
– Extensions: Maldron Hotel Sandy Road, Galway; Maldron Hotel Parnell Square, Dublin; Clayton Hotel Dublin Airport; and
Clayton Hotel Ballsbridge, Dublin.
It also includes other capital expenditure committed to at other hotels in the Group.
The Group also has other commitments in relation to fixtures, fittings and equipment in some of its leased hotels. Under
certain lease agreements, the Group has committed to spending a percentage of turnover on capital expenditure in respect
of fixtures, fittings and equipment in the leased hotels over the life of the lease. The Group has estimated the commitment
in relation to these leases to be €55.3 million spread over the life of the various leases which range in length from 25 years
to 35 years. The turnover figures used in this estimate have been based on 2017 revenues.
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 166
167
26 SUBSIDIARY UNDERTAKINGS
26 SUBSIDIARY UNDERTAKINGS (continued)
A list of all subsidiary undertakings at 31 December 2017 is set out below.
Subsidiary undertaking
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 Arden Limited1
DHG Barrington Limited1
DHG Cordin Limited1
DS Charlemont Limited1
Cavernford DAC1
Vizmol Limited1
Sparrowdale Limited1
Galsay Limited1
Merzolt Limited1
DHG Burlington Road Limited1
DT Sussex Road Operations Limited1
DHG Eden Limited1
DHG Dalton Limited1
Country of
Incorporation
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
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Activity
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
Property holding company
Holding company
Hotel and catering
Hotel and catering
Hotel and catering
Hotel and catering
Hotel and catering
Property holding company
Hotel and catering
Property holding company
Hotel and catering
Property holding company
Property holding company
Property holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Hotel and catering
Hotel and catering
Hotel and catering
Dormant company
Hotel and catering
Hotel and catering
Ownership
Direct
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Indirect
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%
100%
100%
100%
1The registered address of these companies is 4th Floor, Burton Court, Burton Hall Drive, Sandyford, Dublin 18.
Subsidiary undertaking
DHG Belfast Limited2
DHG Derry Limited2
DHG Derry Commercial Limited2
DHG Brunswick Limited2
Dalata UK Limited3
Dalata Cardiff Limited3
Trackdale Limited3
Islandvale Limited3
Crescentbrook Limited3
Hallowridge Limited3
Rush (Central) Limited3
Hotel La Tour (Birmingham) Limited3
Cenan BV4
Country of
Incorporation
N Ireland
N Ireland
N Ireland
N Ireland
UK
UK
UK
UK
UK
UK
UK
UK
Netherlands
Activity
Hotel and catering
Hotel and catering
Property holding company
Property holding company
Holding company
Hotel and catering
Hotel and catering
Hotel and catering
Hotel and catering
Hotel and catering
Dormant company
Hotel and catering
Financing company
Ownership
Direct
-
-
-
-
-
-
-
-
-
-
-
-
-
Indirect
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2The registered address of these companies is Butcher Street, Londonderry, County Derry BT48 6HL, United Kingdom.
3The registered address of these companies is St Mary Street, Cardiff, Wales, CF10 1GD, United Kingdom.
4The registered address of this company is Jachthavenweg 109H, 1081 KM Amsterdam, The Netherlands.
27 EARNINGS PER SHARE
Basic earnings per share 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 and, when dilutive, 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 2017 and 31 December 2016.
2017
2016
Profit attributable to shareholders of the parent (€’000) – basic and diluted
Adjusted profit attributable to shareholders of the parent (€’000) – basic and diluted
Earnings per share – Basic
Earnings per share – Diluted
Adjusted earnings per share – Basic
Adjusted earnings per share – Diluted
Weighted average shares outstanding – Basic
Weighted average shares outstanding – Diluted
68,308
70,228
37.2 cents
36.9 cents
38.3 cents
37.9 cents
183,430,226
185,243,000
34,923
49,040
19.1 cents
18.9 cents
26.8 cents
26.6 cents
182,966,666
184,499,060
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 168
Annual Report and Accounts 2017
169
Company
Financial
Statements
For the year ended
31 December 2017
27 EARNINGS PER SHARE (continued)
The difference between the basic and diluted weighted average shares outstanding for the year ended 31 December 2017
is due to the dilutive impact of the conditional share awards granted in 2015, 2016 and 2017 (note 7). There have been no
adjustments made to the number of weighted average shares outstanding in calculating adjusted basic earnings per share
and adjusted diluted earnings per share.
Adjusted diluted earnings per share is presented as an alternative performance measure to show the underlying
performance of the Group excluding the tax adjusted effects of revaluation movements, goodwill impairment, gains on
disposals of assets and items considered by management to be non-recurring or unusual in nature (see note 2). Acquisition
costs have been excluded to give a more meaningful measure given the scale of acquisitions in 2016 and 2017 and the
fluctuations in these costs in different years.
Reconciliation to adjusted profit for the year
Profit before tax
Adjusting items (see note 2)
Acquisition-related costs
Gains on disposal of property freehold interests and subsidiary
Net revaluation movements through profit or loss
Impairment of goodwill
Stock exchange listing costs
Adjusted profit before tax
Tax
Tax adjustment for adjusting items
Adjusted profit for the year
28 APPROVAL OF THE FINANCIAL STATEMENTS
The financial statements were approved by the Directors on 26 February 2018.
2017
€’000
2016
€’000
77,287
44,111
1,260
(469)
1,425
-
-
79,503
(8,979)
(296)
70,228
2,671
-
(241)
10,325
1,293
58,159
(9,188)
69
49,040
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Notes to the consolidated financial statements (continued)Dalata Hotel Group plc
170
171
Company statement of financial position
at 31 December 2017
Company statement of changes in equity
for the year ended 31 December 2017
Note
2017
€’000
2016
€’000
2
7
3
4
5
8
8
7
7
7
6
42,519
1
240
42,760
116
730,234
849
731,199
773,959
1,837
503,113
2,753
(1,692)
(13,154)
492,857
241,933
1,778
243,711
18,206
19,185
37,391
281,102
773,959
41,350
7
444
41,801
281
700,450
43,388
744,119
785,920
1,830
503,113
2,126
(3,106)
(9,363)
494,600
264,681
3,401
268,082
15,734
7,504
23,238
291,320
785,920
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
Total current liabilities
Total liabilities
Total equity and liabilities
On behalf of the Board:
John Hennessy
Chairman
Patrick McCann
Director
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
1,830 503,113
2,126
(3,106)
(9,363) 494,600
-
-
-
-
7
-
7
-
-
-
-
-
-
-
-
-
-
-
1,414
1,414
(4,593)
-
(4,593)
1,414
(4,593)
(3,179)
1,690
(1,063)
-
627
-
-
-
-
-
1,063
(261)
1,690
7
(261)
802
1,436
At 1 January 2017
Comprehensive income:
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Transactions with owners of the Company:
Equity-settled share-based payments
Vesting of share awards
Additional costs of prior period share issues
Total transactions with owners of the Company
At 31 December 2017
1,837 503,113
2,753
(1,692) (13,154) 492,857
At 1 January 2016
Comprehensive income:
Profit for the year
Other comprehensive loss
Total comprehensive income for the year
Transactions with owners of the Company:
Equity-settled share-based payments
Total transactions with owners of the Company
1,830 503,113
912
(888) (21,430) 483,537
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,218)
12,067
-
12,067
(2,218)
(2,218)
12,067
9,849
1,214
1,214
2,126
-
-
-
-
1,214
1,214
(3,106)
(9,363) 494,600
At 31 December 2016
1,830 503,113
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 2017 was €4.6 million (2016: profit of €12.1 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.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 172
173
Company statement of cash flows
for the year ended 31 December 2017
Cash flows from operating activities
(Loss)/profit for the year
Adjustments for:
Finance costs
Foreign exchange gain on borrowings
Share-based payment expense
Increase in trade and other payables
(Increase)/decrease in trade and other receivables
Net cash from operating activities
Cash flows from investing activities
Loans to subsidiaries
Loans from subsidiaries
Net cash used in investing activities
Cash flows from financing activities
Interest and finance costs paid
Receipt of bank loans
Repayment of bank loans
Proceeds from issue of share capital, net of expenses
Net cash (used in)/from financing activities
Net decrease 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
2017
€’000
2016
€’000
(4,593)
12,067
11,021
(7,247)
522
(297)
403
(91)
15
12,770
(26,599)
419
(1,343)
4,020
187
2,864
(29,864)
11,508
(118,398)
-
(18,356)
(118,398)
(10,023)
36,680
(49,896)
7
(23,232)
(9,983)
57,607
(16,800)
-
30,824
(41,573)
(84,710)
43,388
(966)
849
128,499
(401)
43,388
Notes to the Company financial statements
forming part of 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 consolidated financial statements are detailed below.
(i) 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.
(ii) 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
Details of subsidiary undertakings are included in note 26 of the consolidated financial statements.
3 TRADE AND OTHER RECEIVABLES
Prepayments
Value added tax
2017
€’000
40,000
2,519
42,519
2016
€’000
40,000
1,350
41,350
2017
€’000
108
8
116
2016
€’000
65
216
281
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 174
175
4 AMOUNTS OWED BY SUBSIDIARIES
8 SHARE CAPITAL AND PREMIUM
Amounts owed by subsidiaries
2017
€’000
2016
€’000
730,234
730,234
700,450
700,450
At 31 December 2017
Authorised share capital
Number
€’000
Ordinary shares of €0.01 each
10,000,000,000
100,000
Amounts owed by subsidiaries are non-interest bearing and are repayable on demand.
Allotted, called-up and fully paid shares
Number
€’000
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
2017
€’000
849
-
849
2017
€’000
82
2,154
218
16,731
19,185
2016
€’000
11,909
31,479
43,388
2016
€’000
8
2,210
63
5,223
7,504
Ordinary shares of €0.01 each
183,680,964
1,837
Share premium
At 31 December 2016
Authorised share capital
503,113
Number
€’000
Ordinary shares of €0.01 each
10,000,000,000
100,000
Allotted, called-up and fully paid shares
Number
€’000
Ordinary shares of €0.01 each
182,966,666
1,830
Share premium
503,113
All ordinary shares rank equally with regard to the Company’s residual assets.
During the year ended 31 December 2017, the shares awarded under the 2014 Long Term Incentive Plan vested resulting
in the issuance of 714,298 shares of €0.01 per share. Further details in relation to the vesting of these awards and the
long-term incentive plans operated by the Group are disclosed in note 7 of the consolidated financial statements.
Amounts due to subsidiaries are non-interest bearing and are repayable on demand.
9 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
7
LOANS AND BORROWINGS, AND DERIVATIVES
Money-market funds (note 5) are measured at fair value and are categorised as a Level 1 fair value.
Details of loans and borrowings, and derivative financial instruments, are given in notes 13, 20 and 22 of the consolidated
financial statements.
Profit or loss for the Company for the year ended 31 December 2017 includes foreign exchange gains of €7.2 million
(2016: €26.6 million) on loans and borrowings which are accounted for through other comprehensive income in the
consolidated financial statements.
The carrying value of the Company’s other financial assets and liabilities are a reasonable approximation of their fair value.
Relevant disclosures on the Group’s financial instruments and risk management policies are given in note 22 of the
consolidated financial statements.
Notes to the Company financial statements (continued)Notes to the Company financial statements (continued)STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAnnual Report and Accounts 2017Dalata Hotel Group plc 176
10 COMPANY RELATED PARTY DISCLOSURES
11
COMMITMENTS (continued)
Under IAS 24 Related Party Disclosures, the Company has related party relationships with Directors of the Company, and
with its subsidiary undertakings (see note 24 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 78 to 89 and note 24 of the consolidated financial statements.
Transactions with related parties
During the year ended 31 December 2017, the Company charged fees amounting to €3.7 million (2016: €2.9 million) to its
subsidiary undertakings for services provided during the year.
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 which are listed below.
- Suvanne Management Limited
- Carasco Management Limited
- Heartside Limited
- Palaceglen Limited
- Songdale Limited
- Amelin Commercial Limited
- DHG Burlington Road Limited
- Dalata Support Services Limited
- Bernara Commercial Limited
- Adelka Limited
- DS Charlemont Limited
- DHG Barrington Limited
- Vizmol Limited
- Fonteyn Property Holdings No. 2 Limited
- DHG Dalton Limited
- Sparrowdale Limited
- Cavernford Designated Activity Company
- Candlevale Limited
- DHG Arden Limited
- Merzolt Limited
- Pondglen Limited
- Bayvan Limited
- Lintal Commercial Limited
- Dalata Management Services Limited
- Pillo Hotels Limited
- Loadbur Limited
- DHG Cordin Limited
- Leevlan Limited
- Swintron Limited
- Fonteyn Property Holdings Limited
- DT Sussex Road Operations Limited
- DHG Eden Limited
- Galsay Limited
Rent guarantee
At 31 December 2017, the Company has undertaken to guarantee the obligations of its subsidiaries in relation to the
following.
Property
Subsidiary
Term
(years)
Term remaining
(years)
Lease
Clayton Hotel Burlington Road
The Gibson Hotel
Clayton Hotel Cardiff
Maldron Hotel Smithfield
Clayton Hotel Birmingham
Agreement for Lease
Maldron Hotel Newcastle
Maldron Hotel Glasgow
Clayton Hotel Glasgow
Clayton Hotel Manchester
DHG Burlington Road Limited
Galsay Limited
Dalata UK Limited
Anora Commercial Limited
Hotel La Tour (Birmingham) Limited
Dalata Cardiff Limited
Dalata Cardiff Limited
Dalata Cardiff Limited
Dalata Cardiff Limited
25
35
35
25
35
35
35
35
35
23.9
35.0
34.4
24.1
34.6
35.0
35.0
35.0
35.0
12 APPROVAL OF THE FINANCIAL STATEMENTS
The financial statements were approved by the Directors on 26 February 2018.
177
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Notes to the Company financial statements (continued)Notes to the Company financial statements (continued)Annual Report and Accounts 2017Dalata Hotel Group plc
178
Dalata Hotel Group plc
ADDITIONAL INFORMATION
ADDITIONAL INFORMATION
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
Advisors
Stockbrokers
Davy
Davy House
49 Dawson Street
Dublin 2
Ireland
Berenberg
60 Threadneedle Street
London
EC2R 8HP
United Kingdom
Solicitor
A&L Goodbody
IFSC
North Wall Quay
Dublin 1
Ireland
Auditor
KPMG
1 Stokes Place
St Stephen’s Green
Dublin 2
Ireland
Investor Relations and PR
FTI Consulting
The Academy Building
42 Pearse Street
Dublin 2
Ireland
Registrar
Computershare Investor
Services (Ireland) Limited
Heron House
Corrig Road
Sandyford Industrial Estate
Dublin 18
Ireland
Contact details:
T 00353 1 447 5566
F 00353 1 447 5571
E webqueries@computershare.co.uk
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
Barclays Bank Ireland plc
Two Park Place
Hatch Street
Dublin 2
Ireland
179
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
Annual Report and Accounts 2017
180
ADDITIONAL INFORMATION
ADDITIONAL INFORMATION
Glossary and Supplementary Financial Information
(continued)
Net Debt to Adjusted EBITDA
Definition
Net Debt to Adjusted EBITDA represents loans and borrowings less cash and cash equivalents divided by Adjusted
EBITDA. See note 2 and note 20 to the consolidated financial statements for calculations of adjusted EBITDA and
net debt.
Effective tax rate
Definition
Effective tax rate represents the annual tax charge divided by the profit before tax presented in the consolidated
statement of profit or loss and other comprehensive income for the year.
Reconciliation
€’millions
Reference to consolidated financial statements
2017
2016
Tax charge
Profit before tax
Effective tax rate
Statement of profit or loss and other comprehensive income
Statement of profit or loss and other comprehensive income
9.0
77.3
11.6%
9.2
44.1
20.9%
Conversion of adjusted EBITDA to cash
Definition
Conversion of adjusted EBITDA to cash represents the amount of ‘Adjusted EBITDA’ converted to cash available to
fund acquisitions, development expenditure and loan repayments. The cash figure is calculated as net cash from
operating activities, less amounts paid for interest and finance costs, refurbishment capital expenditure and after
adding back cash paid in respect of adjusting items to EBITDA.
Glossary and Supplementary
Financial Information
ALTERNATIVE PERFORMANCE
MEASURES
The Group reports certain alternative
performance measures (‘APMs’) that
are not required under International
Financial Reporting Standards
(‘IFRS’), which is the framework
under which the consolidated financial
statements are prepared. These are
sometimes referred to as ‘non-
GAAP’ measures.
The Group believes that the
presentation of these APMs provides
useful supplemental information
which, when viewed in conjunction
with the financial information
presented under IFRS, provides
investors with a more meaningful
understanding of the underlying
financial and operating performance
of the Group.
None of these APMs should be
considered as an alternative to
financial measures which are
included in the consolidated financial
statements and which are prepared
under IFRS. These APMs cannot be
assumed to be calculated in a uniform
way across comparator or peer
companies and therefore should not
be relied on in this context.
The definitions of and reconciliations
for certain APMs are contained within
the consolidated financial statements.
Included below is information
pertaining to certain APMs which is
not mentioned within the consolidated
financial statements but which are
referred to in other sections of the
2017 Annual Report. This information
includes a definition of the APM in
addition to a reconciliation of the APM
to the most directly reconcilable line
item presented in the consolidated
financial statements. References to
the consolidated financial statements
are included as applicable.
EBITDAR
Definition
Non-GAAP measure representing
earnings before rent, interest, tax,
depreciation and amortisation. See
note 2 to the consolidated financial
statements for a reconciliation of
EBITDAR to profit before tax.
EBITDA
Definition
Non-GAAP measure representing
earnings before interest, tax,
depreciation and amortisation. See
note 2 to the consolidated financial
statements for a reconciliation of
EBITDA to profit before tax.
Adjusted EBITDA
Definition
Non-GAAP measure representing
earnings before interest, tax,
depreciation and amortisation
adjusted for revaluation movements
and other items considered by
management to be non-recurring or
unusual in nature. See note 2 to the
consolidated financial statements for
a reconciliation of Adjusted EBITDA to
profit before tax.
Adjusted Diluted Earnings per Share
(‘Adjusted Diluted EPS’)
Definition
Non-GAAP measure representing
EPS adjusted for the net of tax
effects of revaluation movements
and other items considered by
management to be non-recurring or
unusual in nature. See note 27 to the
consolidated financial statements for
a reconciliation of adjusted profit for
the year to profit before tax. Adjusted
Diluted EPS is the adjusted profit
for the year divided by the weighted
average number of shares outstanding
for diluted EPS purposes.
Segments EBITDA
Definition
Segments EBITDA represents the
EBITDA for reportable segments. See
note 2 to the consolidated financial
statements for a reconciliation of
Segments EBITDA to profit before tax.
Segments EBITDAR
Definition
Segments EBITDAR represents the
‘Segments EBITDA’ before rent. See
note 2 to the consolidated financial
statements for a reconciliation of
Segments EBITDAR to profit
before tax.
Segments EBITDAR margin
Definition
Segments EBITDAR margin represents
Segments EBITDAR as a percentage
of total revenue. See note 2 to the
consolidated financial statements for
a reconciliation of Segments EBITDAR
to profit before tax.
181
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
Annual Report and Accounts 2017Dalata Hotel Group plc
182
ADDITIONAL INFORMATION
ADDITIONAL INFORMATION
Glossary and Supplementary Financial Information
(continued)
Glossary and Supplementary Financial Information
(continued)
Conversion of adjusted EBITDA to cash (continued)
Reconciliation
€’millions
Reference to consolidated
financial statements
2017
2016
UK hotels’ EBITDA at budgeted FX rate
UK hotels’ EBITDA at actual FX rates
Note 2
Note (i)
Reconciliation
Reference to consolidated financial statements
Foreign exchange losses on EBITDA
Depreciation on UK assets at budgeted FX rate
Depreciation on UK assets at actual FX rates
Foreign exchange gains on depreciation
Foreign exchange losses
Net cash from operating activities
Interest and finance costs paid
Amounts paid for refurbishment capital expenditure (note (i) below)
Statement of cash flows
Statement of cash flows
Add back adjusting cash items:
Acquisition-related costs
Stock exchange listing costs
Net cash generated to fund acquisitions,
development expenditure and loan repayments
Adjusted EBITDA
Note 2
Note 2
Note 2
95.2
(10.1)
(14.6)
1.3
-
71.8
104.9
77.8
(10.0)
(12.4)
2.7
1.3
59.4
85.1
Conversion of adjusted EBITDA to cash
68.4%
69.8%
(i) Calculation of “refurbishment capital expenditure”
Assets under construction
Development capital expenditure
Refurbishment capital expenditure
Note 11
Other additions through capital expenditure
Note 11
Adjusted earnings before interest and tax (‘Adjusted EBIT’)
59.1
7.5
14.6
81.2
3.1
13.0
12.4
28.5
Definition
Adjusted EBIT comprises profit before tax as reported in the consolidated statement of profit or loss and other
comprehensive income, adjusted for finance costs, acquisition-related costs, net revaluation movements through profit or
loss and the effects of foreign exchange.
Reconciliation
€’millions
Profit before tax
Reference to consolidated financial statements
2017
Statement of profit or loss and other comprehensive income
77.3
Adjusting items
Acquisition–related costs
Note 2
Net revaluation movements through profit or loss Note 2
Note 2
Finance costs
Foreign exchange losses* (see note (i) below)
Adjusted EBIT
1.3
1.4
9.6
0.6
90.2
*Foreign exchange losses represent the difference on converting EBITDA from UK hotels at actual foreign exchange rates
during 2017 versus budgeted foreign exchange rates, after depreciation. A reconciliation is included below.
183
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
2017
24.5
(23.8)
0.7
(4.8)
(4.7)
(0.1)
0.6
I
F
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
Annual Report and Accounts 2017Dalata Hotel Group plc
184
ADDITIONAL INFORMATION
Glossary and Supplementary Financial Information
(continued)
IPO
Initial Public Offering
(Dalata listed in March 2014)
LTIP
Long-Term Incentive Plan
(see note 7 to the consolidated
financial statements and the
Remuneration Committee Report)
MAR
Market Abuse Regulation
NED
Non-Executive Director
OTA
Online Travel Agents
SID
Senior Independent Director
STR
Global hotel industry market
research specialists
TSR
Total Shareholder Return
VAT
Value Added Tax (also known
as Goods and Services Tax)
OTHER DEFINITIONS
RevPAR
Revenue per available room
is calculated as total rooms
revenue divided by the number
of available rooms, which is also
equivalent to the occupancy rate
multiplied by the average daily
rate achieved.
AIM
Alternative Investment Market of
the London Stock Exchange (LSE)
ARR
Average Room Rate (also ADR –
Average Daily Rate)
CGU
Cash Generating Unit (in the context
of impairment testing, see note 10 to
the consolidated financial statements)
CGT
Capital Gains Tax
EPS
Earnings per share (see note 27 to
the consolidated financial statements
for calculation)
ESM
Emerging Securities Markets of the
Irish Stock Exchange (ISE)
FY17/FY18
Financial year ending 31 December
2017/financial year ending 31
December 2018
GM
General Manager
ICT
Information and Communications
Technology
IFRS
International Financial Reporting
Standards
Dalata Hotel Group plc e
i
.
g
o
d
d
e
r
.
w
w
w
i
:
n
g
s
e
D
D
a
l
a
t
a
H
o
t
e
l
G
r
o
u
p
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
1
7
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
W dalatahotelgroup.com
info@dalatahotelgroup.com