BUILDING
FOR THE
FUTURE
PEOPLE &
PROPERTY
ANNUAL REPORT
& ACCOUNTS 2018
AT A GLANCE
CONTENTS
51
Hotels
42 Operating
9 Under development
—
€393.7m
2018
Revenue
—
€119.6m
2018
Adjusted
EBITDA
—
€1.2bn
Hotel
Assets
—
1,212
Pipeline Rooms
announced
in 2018
2
Strategic
Report
Purpose and Values 2
Chair’s Statement 4
Chief Executive’s Review 6
Recent Openings 8
Strategy and Business Model 10
› Dalata's Markets 10
› Business Model 12
› KPIs 14
› Strategic Priorities 16
Future Openings 26
Financial Review 28
Risk Management 40
Responsible Business Report 48
58
Corporate
Governance
Chair’s Overview 59
Our Board of Directors 60
Executive Management Team 62
Corporate Governance Report 64
Nomination Committee Report 72
Audit and Risk Committee Report 74
Remuneration Committee Report 80
Directors' Report 92
CLAYTON HOTEL
CHISWICK
RED BEAN ROASTERY
CLAYTON HOTEL
BALLSBRIDGE
95
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 171
Company Statement of Changes in Equity 172
Company Statement of Cash Flows 173
Notes to the Company Financial Statements 174
182
Additional
Information
Glossary and Supplementary Financial Information 182
Advisor and Shareholder Contacts 189
MALDRON HOTEL
KEVIN STREET
Theodora Laroche,
Front Office Manager
1,224
New Rooms
opened
in 2018
4,923
Employees:
Full-time
and part-time
—
4.7%
RevPar
Increase
Data as at 31 Dec 2018
—
8,746
Hotel
Rooms
PURPOSE
& VALUES
MALDRON HOTEL
BELFAST CITY
Adam Curley,
Head Chef
We Are
a People
Business
When Dalata was founded in 2007 it acquired
eight hotels and launched the Maldron Hotel
brand with a vision to develop a distinctive hotel
operating company with people at the heart of
the business.
We adopt a differentiated, decentralised approach
to managing our business and delivering on
customers' expectations. We trust our hotel
general managers and their teams to manage
and develop their business, manage customer
relationships and develop deep roots in the local
community. Our central team supports the hotels,
providing strategic oversight, leveraging our
strength as a Group and directing investment
to get the best return for shareholders.
In 2018, we opened five hotels with internally
recruited management teams. Many of these
team members are graduates of our development
programmes. Our continual investment in our
people and fostering of long-term relationships
with trusted development partners and suppliers
on both the capital and operational sides of the
business supports a sustainable business model.
We want to make our hotels the number one
choice for business and leisure travellers looking
for quality service in well located and well invested
hotels throughout Ireland and the UK.
This puts our people at the centre of Dalata.
Our strategic objective is to drive long-term
shareholder returns by becoming the leading four-
star hotel operator in Ireland and the UK. Our
culture has a relentless focus on success but it is
never about winning at all costs. We are committed
to doing business ethically and in accordance with our
values of people, fairness, service and individuality.
2
1
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.
3
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.
CLAYTON HOTEL
BALLSBRIDGE
MALDRON HOTEL
BELFAST INTERNATIONAL AIRPORT
4
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.
3
2
Tony McGuigan,
Head of Procurement,
with Helen Gees
from G's Jams
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 Purpose and Values
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance CHAIR’S
STATEMENT
Introduction
Welcome to the annual report of Dalata Hotel Group for
2018, and thank you for taking the time to read what we
have to say about the Group.
I am pleased to report that 2018 was another very
successful year for Dalata. During the year we added
five hotel properties to our portfolio and a sixth just
after year-end, marking a year of great achievement by
the development and operations teams. All of our newly
acquired and constructed properties are trading strongly,
and the Group continues to grow, with further new
openings in the pipeline.
Total revenues in the business increased from €352
million in 2017 to €394 million in 2018, and our Adjusted
EBITDA climbed to €119.6 million in 2018 from €104.9
million in the previous year. We ended the year with a
very strong balance sheet with non-current assets of
over €1.2 billion. We also put in place new borrowing
facilities during the year at attractive rates, and we
commenced paying dividends with an interim dividend
of 3 cent per share. Further details of our financial
performance can be found in the Financial Review
on pages 28 to 39.
Culture and People
Of course, financial performance is nothing more than
a consequence of actions and decisions taken every day
in the business. These actions and decisions are taken
by our people and are driven in large part by our culture.
In my view, the single biggest factor in the success of
Dalata is the culture that affects everything that we do.
What is this culture? It is hard to define, but it has
at least four vital characteristics: customer focus,
transparency, empowerment and support. First and
foremost, we are hotel operators, and our customers
are the lifeblood of our business. Ultimately, what we
do is driven by our desire to provide the best customer
experience that we can.
Dalata is an open organisation, and
communication is encouraged at all
levels within and outside the Group.
4
Dalata Hotel Group plc Annual Report and Accounts 2018
Chair's Statement
We continuously engage with employees and customers,
seeking feedback that will help us improve service and
employee engagement. We celebrate success and seek
to learn from challenging experiences. We encourage
people to speak up, and most important of all, we seek
to listen, openly, at all times.
Our business model seeks to empower our people
at all levels. Hotel general managers, supported by
their teams, are given full decision-making authority,
responsibility and accountability over their properties.
At the centre we also seek to empower our people by
communicating what is expected of them and letting
them get on with it. This is done within an atmosphere
of strong encouragement and support.
We recruit with great care, and we support the
development of our people through high quality training
and development courses. We have reached the stage
where most of the appointments to higher levels in the
organisation are now internal. This is a testament to the
success of our recruitment activities, and to the support
and training, on and off the job, that our people receive
as a normal part of their employment in Dalata.
I have observed the Dalata culture, described above,
in action many times in the last year. One occasion was
during the extreme weather we endured in Ireland in
early March 2018. As much of the country ground to
a halt, and flights were cancelled on a wholesale basis,
I watched as our properties made arrangements to
provide accommodation at very short notice to stranded
travellers; and to some of our staff who could not get
home. We pooled resources between properties, so that
necessary food and other supplies were available for
guests and staff alike; and our people worked tirelessly
to make it all seem effortless. This was a real-life
example of top-class customer service, transparency,
empowerment and support in action.
I applaud and thank our people
for their true dedication to
customer service – the key to
our continued success.
Board and Corporate Governance
The Dalata Board comprises four non-executive directors
and three executive directors, supported by Dalata’s
company secretarial team. Board members meet formally
at regular Board meetings and in Board committees,
and also less formally, to discuss issues affecting the
business of the Group. Several Board meetings each year
are held at different Group hotel properties, affording the
non-executive directors the opportunity to familiarise
themselves with the product that our customers enjoy
and to meet local management.
The non-executive directors also meet as a group,
separately from the executive directors, from time to time.
Formal and informal Board meetings also include
regular discussions of strategy, and relevant training
for Board members.
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
and the company secretarial team for their hard work
and commitment 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, 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
As I mentioned earlier, we commenced dividend payments
in 2018 with a 3 cent per share interim dividend in
October and the Board has recommended the payment
of a final dividend of 7 cent per share which, subject
to shareholder approval at the AGM, will be paid on
8 May 2019.
Brexit
As I write, the Brexit deadline of 29 March 2019 is fast
approaching and there is still a great deal of uncertainty
about the outcome. The sooner the uncertainty is
removed the better. Any effect on our business will be
an indirect one: how it affects our customers directly
and the economies of the UK and Ireland generally will
have a knock-on impact on Dalata. We are monitoring
developments closely and, notwithstanding the uncertainty
in the short-term, we remain confident of the long-term
success of the business and our UK expansion strategy.
Outlook
Ireland continued to enjoy strong economic growth
in 2018 and the UK economy continues to perform
reasonably well. These factors, together with the
expansion of our business, have helped Dalata to
achieve strong growth in revenues and profits.
In the short term, uncertainty surrounding Brexit and
issues in the wider global economy are matters that
we continue to monitor, with a view to anticipating
their likely effects on our business.
Looking forward, whilst rates of growth in RevPAR
are unlikely to be at the same levels in 2019 as in 2018,
we remain confident that Dalata will achieve further
profitable growth in the coming year.
John Hennessy
Non-executive Chair
5
Financial StatementsAdditional InformationStrategic ReportCorporate Governance
PAT'S
REVIEW
2018 just seemed to have started when it was finished.
We had so much going on in the company, every week
rolled into the next. Even though we were all very busy
it was a “good” busy.
There is an energy in the company
that continues to drive us forward.
While a lot has been achieved in the year, we still have a
way to go. In truth we will always have a way to go. We
can never be happy with the status quo. We continue to
see many opportunities both to grow the business but
also to improve the business be that through technology,
productivity, training, capital investment or a host of
other initiatives.
We started 2018 with just over 7,500 rooms in the
Group and following the opening of Clayton Hotel City
of London in January 2019 we have 9,046 rooms which
is a growth of circa 20%.
We have built and opened six new hotels and four major
extensions with a total of almost 1,500 new rooms. All
of these projects opened pretty much on time and on
budget. I would like to say thanks to our development
team led by Shane Casserly and our operations team
led by Stephen McNally for this fantastic achievement.
These new openings will drive earnings growth in Dalata
for 2019 and 2020. The six hotels are all managed
by internal Dalata teams. This is significant in that it
de-risks the model. When opening a new hotel there
is always an element of risk. However, having your
own team to manage the business reduces that risk
considerably. When you open a new hotel, it takes a
period of time for that hotel to find its rhythm. It’s like
putting together a football team in that each member
must know the strength and weakness of all the other
team members. I have visited all our new openings on a
number of occasions and I am delighted at how quickly
they are settling down. I am also delighted with the
quality and finish of the new hotels. If we can deliver
the same quality and finish of product in our eight
hotels in planning and construction, we will add great
value to Dalata.
6
Dalata Hotel Group plc Annual Report and Accounts 2018
Chief Executive's Review
Many of our people join Dalata because of the fantastic
training and development programmes we run.
While I am speaking about our people, it would be
remiss of me not to mention Joe Quinn. Joe decided
to retire from Dalata in December. Joe headed up our
Clayton Hotels in Ireland and did a wonderful job in the
integration of all the hotels we acquired. Joe and I have
been friends and colleagues since 1989. Joe was your
perfect Dalata man. He espoused everything that is
good about Dalata. He is gone to improve his already
low golf handicap and to work on his garden. I wish him
and Nuala, his wonderful wife, a happy retirement.
During the year we gave a lot of thought to our
broader impact on society and the environment.
Our commitment to conducting our affairs responsibly
is embedded in our business and risk management
strategies – not something separate. It is an important
area (dealt with in detail from page 48 of this report)
which I intend to return to in future reports.
Finally, despite all the “slings
and arrows of outrageous fortune”
I see 2019 as a year of strong
growth for Dalata.
As a business we are in great shape. Our balance
sheet is robust and our newly agreed debt facility
adds to this. I want to acknowledge Carol Phelan,
Head of Financial Reporting, Treasury and Tax for the
work she and her team did on the refinancing, it was
truly outstanding. We have a lot to do to achieve our
ambitious targets in 2019. The teams are up for it.
All we need to do is deliver the promise.
Pat McCann
Chief Executive
As we start 2019, our Capex Programme continues at
a pace. The investment in our existing hotels over the
past number of years is really paying off. Virtually all
of our hotels are in really good shape. The investment
planned for 2019 will further enhance the offering.
The outperformance in RevPAR and our customer
satisfaction ratings tell me we have made a lot of
good decisions in this area. I mentioned earlier our
development pipeline which is robust and exciting.
We have eight new hotels with 2,193 rooms coming
out of the ground. They are all in superb locations
and will add greatly to the business.
Looking at Dalata in two years’ time,
I see a business with well invested
hotels and some fantastic new hotels
that positions us well to continue to
grow earnings.
We have put together a group of young, well invested
hotels and new hotels in fantastic locations that will
provide superior growth well into the future.
As with everything in life nothing ever comes easy,
and in October 2018, the Irish government announced
that the VAT rate on tourism would increase from 9%
to its pre-2011 rate of 13.5%. This was a big blow to the
industry and will have a very negative effect on smaller
non-urban operators. Dalata will be fine and with careful
management we will be able to mitigate the effects of
the VAT increase. So far so good as we enter 2019. It
will take a number of months for things to settle and
we can assess the overall effects of the VAT change.
At this stage I am satisfied with the work done by the
Dalata team and nothing has changed in my outlook
for the business.
There is so much noise going on around Brexit, it is
impossible to plan for any outcome at this stage. Until
we have a better sense of a final outcome, we will
continue to monitor closely what’s going on. We are
very good at adapting our business model to suit any
circumstance that may confront us. Over the years
we have proved that we never waste a good crisis.
Our people development continues apace. Today
we have 259 of our people on senior development
programmes. It is fantastic to see all the young and
not so young people growing and evolving in Dalata.
Many of our people are building great careers in Dalata.
Their sense of achievement is palpable. The sense of
energy and enthusiasm across all our hotels is evident.
I need them now to “monetise” this enthusiasm. Because
of all the developments of people we are in a strong
position when it comes to recruitment.
7
Financial StatementsAdditional InformationStrategic ReportCorporate Governance BUILDING
FOR THE
FUTURE:
6 brand new hotels,
4 Maldron and 2 Clayton.
Designed and finished to
our exact specifications
and manged by our talented
teams give a glimpse of
Dalata's exciting future.
CLAYTON HOTEL CITY OF LONDON
John Devine, Lizzy Rodger,
Emma Dalton, James Feeney,
Ian Bulpin
MALDRON HOTEL KEVIN STREET
Head Chef Jennifer Donohoe and her team
MALDRON HOTEL SOUTH MALL
General Manager Robert McCarthy
and his team
JULY 6TH
DECEMBER 20TH
JANUARY 24TH
2018
MARCH 13TH
NOVEMBER 23RD
DECEMBER 4TH
2019
MALDRON HOTEL NEWCASTLE
Carl Davies, Jemma Cross, Anna
Wadcock, Amy Parkin, Danielle
Breen, Michael Edgoose
CLAYTON HOTEL CHARLEMONT
General Manager Lynn Cawley and her team
MALDRON HOTEL BELFAST CITY
General Manager Mike Gatt,
Councillor Nuala McAllister -
Lord Mayor of Belfast,
Non-executive Chair John Hennessy
8
Building for the Future
9
PEOPLE &PROPERTYRecent OpeningsDalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance DUBLIN
Dublin RevPAR (euro)
UK
UK5
150
UK RevPAR (sterling)
UK RevPAR (sterling)
80
120
Market conditions in the UK were more challenging.
The Bank of England estimates 2018 GDP growth of 1.3%
(2017: 1.8%). Against a backdrop of Brexit uncertainty,
consumer spending, wages, and growth in investment have
all weakened. Visitor numbers were down an estimated
5.3% with domestic overnight trips up 1%.
90
60
60
40
50
70
IRELAND
Regional Ireland RevPAR (euro)
IRELAND
DUBLIN
Regional Ireland RevPAR (euro)
Dublin RevPAR (euro)
DUBLIN
Dublin RevPAR (euro)
UK RevPAR (sterling)
UK RevPAR (sterling)
100
80
60
40
20
0
100
80
60
40
20
0
150
120
90
60
30
0
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
GDP Growth (percentage)
GDP Growth (percentage)
Republic of Ireland2
2018 was a record year for Irish tourism with estimated
international visitor growth of 6.8%. North America was up
13% and mainland Europe grew 10% whilst the UK was flat
and emerging markets grew by 5%. The domestic market
was also very strong, buoyed by estimated GDP growth of
7.5% and consumer spending up 3.0%.
30
25
20
15
10
5
0
150
120
90
60
30
0
14
15
16
17
18
IRELAND
Regional Ireland RevPAR (euro)
100
80
60
40
20
0
UK
80
70
60
50
40
30
20
10
0
UK
80
70
60
50
40
30
20
10
0
14
15
16
17
18
14
15
16
17
18
IRELAND
GDP Growth (percentage)
DUBLIN
GDP Growth (percentage)
Regional Ireland RevPAR (euro)
3.5
Republic of Ireland (continued)
Dublin RevPAR (euro)
3.5
3.0
150
3.0
100
The demand fundamentals remain positive heading into 2019,
2.5
and the industry is cautiously optimistic about the year ahead
notwithstanding the increase in VAT from 9% to 13.5% and
120
uncertainty regarding the outcome of Brexit.
90
80
2.0
1.5
60
2.0
2.5
1.5
1.0
1.0
40
0.5
20
0.0
0
60
14
15
16
17
30
18
14
17
GDP Growth (as a percentage)
18
16
16
14
15
15
0
0.5
0.0
17
18
+7.5%
Overnight visits by non-residents
(thousands)
GDP Growth (percentage)
Central Bank
Overnight visits by non-residents
Overnight visits by non-residents
(thousands)
30
DALATA'S
MARKETS
20
25
10
15
5
0
14
15
16
17
18
Global Overview1
6000
Overnight visits by non-residents
Global economic expansion is driving growth
(thousands)
in consumer spending, strong labour markets
and rising incomes, and consequently growth
10000
in the travel and hospitality industry (including
8000
the hotel sector). The increasing global traveller
pool has led to a doubling of the number of
international travel departures from c. 600
4000
million to 1.3 billion in the last two decades, with
growth of 6.6% in 2018. Continued competition
2000
between low-cost and international airlines,
strong corporate travel demand and the long-
term trend in shifting consumer preference for
experiential spending on recreation, travel and
dining out over spending on durable goods also
supports hotel sector growth.
18
16
14
15
17
0
IRELAND
Regional Ireland RevPAR (euro)
Global GDP growth is estimated at 3.0% for
2018 (2017: 3.1%) with USA growth of 2.9%
(2017: 2.2%) and Euro Area growth of 1.9%
(2017: 2.4%).
100
80
60
40
20
0
14
In 2017 global travel and tourism grew
by 4.6% and preliminary figures indicate that
2018 was another year of solid growth in a
sector which has outperformed the global
economy consistently for the past decade.
In 2018, hotel revenue per available room
(RevPAR) grew by 2.9% in USA and by
15
5.2% in Europe.
18
16
17
GDP Growth (percentage)
30
25
20
15
10
5
0
“In our annual analysis of the global
economic impact of Travel and Tourism,
the sector is shown to account for 10.4%
of global GDP and 313 million jobs, or 9.9%
of total employment, in 2017”
Gloria Guevara Manzo, President and CEO,
World Travel and Tourism Council.
14
15
16
17
18
Overnight visits by non-residents
(thousands)
1 Sources: World Travel and Tourism Council (WTTC):
Travel and Tourism Economic Impact 2018; World Bank:
Global Outlook January 2019; Deloitte: 2018 Travel and
Hospitality Industry Outlook; IATA: Air Passenger Market
Analysis December 2018, Airline Industry Outlook 2019,
STR Global.
Overnight visits by non-residents
10000
8000
10
6000
4000
2000
0
10M
8M
6M
4M
2M
0
14
15
16
17
18
Visitor Numbers (in millions)
Overnight visits by non-residents
(thousands)
Overnight visits by non-residents
+6.8%
CSO statistics and estimation for Q4
10000
10M
8000
8M
6000
6M
4000
4M
2000
2M
0
0
14
14
15
15
16
16
17
17
18
18
Dublin
DUBLIN
RevPar (€)
Dublin RevPAR (euro)
+7.4%
STR Global
150
120
90
60
30
0
14
15
16
17
18
Clayton Hotels
Maldron Hotels
Bespoke Brand Hotels
Overnight visits by non-residents
14
15
16
17
18
1
10M
8M
1
6M
2
4M
1
1
2M
2
7
7
1
1
1
1
2
0
2
14
15
16
17
18
GDP Growth (percentage)
30
25
20
15
10
5
0
14
15
16
17
18
Overnight visits by non-residents
(thousands)
IRELAND
UK
10000
Regional Ireland RevPAR (euro)
UK RevPAR (sterling)
8000
100
6000
80
4000
60
2000
40
0
20
0
1
4
1
1
3
Dublin
City
1
1
Ballsbridge
1
Liffey
Valley
1
1
Newlands
Cross
1
Tallaght
80
70
60
50
40
30
20
40000
35000
30000
25000
20000
15000
10000
5000
0
30
40000
25
35000
30000
20
25000
15
20000
10
15000
10000
5
5000
0
0
14
40M
35M
30M
25M
20M
15M
10M
5M
0
15
14
16
15
17
16
18
17
18
Regional Ireland
Overnight visits by non-residents
(thousands)
Overnight visits by non-residents
RevPar (€)
IRELAND
DUBLIN
10000
Regional Ireland RevPAR (euro)
+9.7%
Dublin RevPAR (euro)
10M
10M
8M
6M
4M
2M
0
8000
Trending.ie
100
6000
80
4000
60
2000
40
0
17
14
18
20
16
0
150
120
90
60
15
16
17
18
30
0
14
15
16
17
18
30
0
30
20
10
15
14
16
17
Visitor Numbers
Overnight visits by non-residents
18
-5.3%
Office of National Statistics
(+ Q4 estimate)
40M
35M
30M
25M
20M
15M
10M
5M
0
15
14
0
GDP Growth
(as a percentage)
18
16
17
+1.3%
GDP Growth (percentage)
Bank of England
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
8M
6M
4M
2M
0
14
15
16
17
18
DUBLIN
Dublin RevPAR (euro)
150
120
90
1
21
60
30
0
1
1
1
14
15
16
17
18
+2.5%
UK RevPAR (sterling)
40000
STR Global
35000
80
30000
70
25000
60
20000
50
15000
40
10000
30
5000
20
0
10
0
40M
35M
30M
25M
20M
15M
10M
5M
0
14
15
16
10
17
18
14
15
14
15
16
17
0
14
18
15
16
17
18
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
0
Leopardstown
GDP Growth (percentage)
GDP Growth (percentage)
GDP Growth (percentage)
30
25
20
15
10
5
0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
14
15
16
17
18
14
15
16
17
18
30
25
15
20
Commentary4
Regional Ireland RevPAR grew 9.7% in 2018, led by the major
cities, Cork (10.6%), Galway (7.6%) and Limerick (5.0%).
10
Generally, there is ample capacity with average occupancy of
75.2% throughout Regional Ireland although some new supply
will enter the Cork and Galway markets. Regional Ireland is
more vulnerable to the VAT rate increase and to weakness in
the UK market than Dublin.
18
16
14
15
17
0
5
1
2
GDP Growth (percentage)
3.5
3.0
2.5
2.0
Commentary6
Hotel performance across the UK was mixed. Birmingham
and London had strong performances, with RevPAR growing
by 5% and 3.1%, respectively. Moderate growth was seen in
Leeds (0.6%) and Cardiff (0.9%), while Manchester fell slightly
(0.3%). The performance of the city markets broadly reflected
the tourism performance of their region with Belfast (RevPAR
down 6.3%) feeling the effect of a significant increase in supply.
0.0
0.5
1.0
1.5
18
16
14
15
17
Commentary3
Dublin RevPAR grew 7.4% in 2018 with occupancy at 83.8%,
the highest amongst leading European cities, and Average
Daily Rate (ADR) reaching €145.20, placing 6th amongst
peer European cities. 1,000 new rooms were added in the
city in 2018, bringing the total market to approximately 20,500
rooms. 1,600 new rooms are in the piepline for 2019.
2 Irish Tourism Industry Confederation (ITIC): Year End Review 2018
and Outlook 2019; Central Bank of Ireland: Quarterly Bulletin Q1 2019
3 STR Global; Savills
Key Risks
See pages 42 to 45
Market Concentration
10000
5
8000
Strategy and Business Model
6000
4000
2000
0
40000
35000
30000
25000
20000
15000
10000
5000
0
18
10M
8M
6M
4M
2M
0
10000
Key Risks
40M
See pages 42 to 45
8000
35M
30M
6000
25M
20M
4000
15M
2000
10M
5M
0
0
16
10M
8M
6M
4M
2M
0
Human Resources
9 10
Key Risks
See pages 42 to 45
UK Expansion Strategy
6
11
40000
35000
30000
25000
20000
15000
10000
5000
0
40M
35M
30M
25M
20M
15M
10M
5M
0
14
15
16
17
18
GDP Growth (percentage)
14
15
16
17
18
UK RevPAR (sterling)
40000
14
15
16
17
18
UK
80
70
60
50
40
30
20
10
0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
UK
35000
30000
25000
20000
15000
10000
5000
0
80
70
60
50
40
30
20
10
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
40000
35000
30000
25000
20000
15000
10000
5000
0
40M
35M
30M
25M
20M
15M
10M
5M
0
40M
35M
30M
25M
20M
15M
10M
5M
0
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
GDP Growth (percentage)
14
15
14
16
15
17
16
18
17
18
14
15
16
17
18
14
15
16
17
18
Overnight visits by non-residents
Overnight visits by non-residents
Overnight visits by non-residents
Overnight visits by non-residents
(thousands)
RevPar (€)
UK
Overnight visits by non-residents
(thousands)
Overnight visits by non-residents
Overnight visits by non-residents
(thousands)
(thousands)
Overnight visits by non-residents
Overnight visits by non-residents
Overnight visits by non-residents
(thousands)
4 Trending.ie, Central Bank
Overnight visits by non-residents
5 Bank of England Inflation Report February 2019; Office of National
Statistics (ONS):Overseas Travel and Tourism Q3 2018
6 STR Global
Overnight visits by non-residents
(thousands)
Overnight visits by non-residents
(thousands)
Overnight visits by non-residents
Overnight visits by non-residents
14
15
16
17
18
14
15
16
17
18
14
15
16
17
14
15
16
17
18
14
15
14
17
14
15
18
15
16
17
18
16
17
18
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
BUSINESS
MODEL
Inputs
�1.2bn
In hotel assets
�76.2m
Spent on development of new build
and extensions to hotels in 2018
42
Operating hotels with 8,746 rooms
208
Average rooms per operating hotel
2
Leading Hotel Brands:
Clayton and Maldron
4,923
Full and part-time employees
Revenue
20%
60%
20%
Owned and leased rooms
53%
26%
21%
Dublin
Regional Ireland
UK
12
What do we do
Dalata is a hotel operating company. Since the Company
floated in 2014, we have grown to be the most successful
and largest hotel Group in Ireland. We own two hotel
brands – Maldron Hotels and Clayton Hotels and the
majority of our hotels operate under these brands.
There are 20 Clayton hotels, which are all four-star,
and 18 Maldron hotels which are comprised of four- and
three-star ratings. We own and manage a number of
other brands, which complement our main brands. These
include our Red Bean Roastery, Club Vitae and Grain
& Grill offerings. We run 42 hotels in cities across
Ireland and the UK. Of these, we own 29, hold a
leasehold interest in 10 and manage 3.
We operate in Ireland and the UK (see Dalata's Markets,
page 10). Dublin is our largest market with 18 hotels.
We also have a significant presence in the other main
cities in Ireland, including Cork, Galway and Limerick.
We have 11 hotels in the UK, in London, Belfast, Leeds,
Manchester, Cardiff and Newcastle.
In 2018, we opened 5 new hotels – 2 in Dublin and 1
each in Belfast, Cork and Newcastle. Our development
pipeline has a further 2,193 rooms, delivering expansion
into key UK cities including Glasgow, Manchester
Birmingham and Bristol, as well as two in Dublin.
How we do it – our key business drivers
We generate revenue through selling accommodation,
food and beverage, meeting rooms and conferences and
ancillary services to our customers. We have invested
in industry leading revenue management tools, including
local hotel revenue expertise, which drives our strategy
of revenue maximisation.
A wide range of customers use our hotels, from leisure
and tour guests to families, corporate guests and
conference providers. Our hotels and facilities are set
up to provide these services to targeted customer
segments in line with each hotel’s strategy.
We sell our products and services through different
channels, including our own Maldron and Clayton
websites, contracted business with tour operators and
our corporate customers. Guests can also book directly
with the hotel. The nature of our transactions means
that we are a highly cash generative business. We place
significant focus on costs and local hotel and Group
performance indicators, driving the conversion of
revenues earned into profitability.
In terms of direct controllable costs, we leverage the
Group’s size and specialised IT systems in all our hotels
to deliver quality products at an appropriate cost point
for the Group. We have centralised our main reporting
systems, thereby providing both hotel and Group
management with real-time accurate management
information.
Strategy and Business Model
How we generate value for our stakeholders
We generate value by providing quality offerings at
an appropriate price that our customers want.
We support and develop our employees so that they
can have the skills and tools to deliver service to our
guests. We invest in our employees and provide the ability
for our employees to build careers with us, rather than
simply have a job. We listen to what our customers tell us.
We seek out guest satisfaction and repeat business
and improve our brand/product awareness in the
hotel market.
We focus closely on the financials of running a hotel
business and maximising the return on investment.
We monitor key financial indicators and take decisive
corrective action should it be needed. Central
management expertise supports our hotels while
providing guidance and oversight on our performance.
We have a strategy of expansion into targeted UK cities,
as well as expanding in Ireland where suitable opportunity
exists. A considered and detailed approach is taken for
all developments.
We work with well-established construction and financial
partners to deliver hotels that both improve our financial
performance and increase our market presence.
The difference with Dalata
At Dalata we have a business model that differentiates
us from other operators. We own or have a long leasehold
interest on almost all of our hotels, and we own all of our
own brands. This means we control the overall direction
of the asset, its development and its performance. This
differentiates us from the market, where an owner/
franchise model is predominately adopted.
We operate a decentralised model whereby the hotel
general manager has ultimate responsibility for their
hotel. This enables quick local decision making in relation
to areas such as revenue and pricing, meeting customer
needs and product offerings. It also encourages our
managers to engage with their local communities and build
strong relationships. Hotel management is supported by
expert functional teams in Central Office, selected shared
services and an experienced senior management team.
We are able to implement common group-wide business
and IT systems, and deliver expertise in areas such as
procurement, finance, health and safety and marketing.
We have developed and implemented group-wide training
and development for our employees. We offer a range of
development options to all employees, complementing
our extensive training programmes. We are also able to
provide a career path for our employees as we grow and
add new hotels. We encourage our employees to move
throughout our hotel portfolio and actively support a
policy of filling vacancies from within wherever possible.
Outputs
3,972,090
Overnight guests
5,580,299
Meals served
14,000
Leisure club
members
�119.6m
Adjusted EBITDA
�86.6m
Free Cash Flow
�109m
Aggregate
Payroll Costs
Building for
the Future
Top 5 Cities
Includes rooms
under development
Dublin
5,040 Rooms
Manchester
972 Rooms
Glasgow
594 Rooms
London
591 Rooms
Cork
574 Rooms
13
Owned and leased roomsOwned and leased roomsDalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance Revenue
EBITDAR Margin %
EBITDAR Margin %
EBITDAR Margin %
EBITDAR Margin %
Margin
Earnings
Earnings
Earnings
Earnings
Earnings
Cash
Cash
Cash
Cash
Cash
Growth
Growth
Growth
People
People
People
Customer (%)
Customer (%)
Customer
14
14
15
15
16
16
17
17
18
18
14
14
15
15
16
16
17
17
18
18
14
14
15
15
16
16
17
17
18
18
14
14
15
15
16
16
17
17
18
18
KPI
KPI
Revenue
Revenue
400
400
350
350
300
300
250
250
200
200
9
3
2
3
,
3300
3300
2640
2640
1980
1980
1320
1320
660
660
4
9
1
0
0
EBITDAR Margin %
EBITDAR Margin %
Earnings
Earnings
Cash
Cash
50
50
40
40
30
30
20
20
150
150
100
100
NON-FINANCIAL
10
10
50
50
0
0
0
0
50
50
40
40
30
30
20
20
10
10
0
0
100
100
80
80
60
60
40
40
20
20
0
0
Internal
Promotions
305
350
350
300
300
250
250
200
200
150
150
100
100
50
50
0
2
6
,
1
7
7
4
4
2
2
,
1
14
14
17
15
14 15 16 17
16
16
15
17
Rooms
0
18
18
18
Internal Promotions
are recorded for the first
time in 2018 and adopted
0
as a KPI
17
16
15
14
18
18
16
14
15
17
100
100
80
80
60
60
40
40
20
20
0
0
1
0 8
8
2
8
3
8
4
8
Customer
Satisfaction
(%)
1.20%
18
18
18
14
16
14
17
14 15 16 17
16
15
15
17
KPIs
FINANCIAL
KPI
KPI
KPI
KPI
Revenue
Revenue
Revenue
Revenue
400
400
400
400
350
350
350
350
300
300
300
300
250
250
250
250
200
200
200
200
150
150
150
150
100
100
100
100
50
50
50
9
50
7
4
9
2 3
5
3
1
9
2
6
2
2
50
50
50
50
40
40
40
40
8
4
30
30
.
7
3
30
30
20
20
20
20
10
10
10
10
50
50
50
50
1
4
.
1
4
0
4
2
4
.
0
8
2
4
.
.
5
5
9
3
40
40
40
40
30
30
30
30
20
20
20
20
10
10
10
10
5
6
3
.
Segments
EBITDAR
Margin (%)
+40bps
18
18
0
8
2
4
.
0
3
8
3
.
0
8
6
2
.
.
2
2
0
2
100
100
100
100
80
80
80
80
60
60
60
60
.
6
6
8
7
.
1
7
.
3
9
5 5
8
4
.
40
40
40
40
20
20
Adjusted
EPS-Basic
20
20
(cents)
+11.75%
0
0
Free
Cash flows
(Millions)
+20.78%
18
18
18
a
/
n
14
17
15
14
17
18
15
18
14 15 16 17
15
16
15
16
16
17
16
17
0
0
14
14
Revenue
(Millions)
+11.78%
18
18
17
17
18
18
18
0
0
0
0
14
17
16
15
14
17
14 15 16 17
16
15
16
15
14
15
16
14
0
0
0
0
15
16
16
17
14
15
16
14
17
16
14 15 16 17
14
15
14
15
17
17
18
18
18
0
0
0
0
14
14
14
15
17
15
16
18
14
15
17
16
18
15
14 15 16 17
16
17
16
17
18
18
18
Total Revenue
Segments EBITDAR Margin
Adjusted EPS - Basic
Customer (%)
Customer (%)
Customer (%)
Customer (%)
Growth
Growth
Growth
Growth
People
People
People
People
Total Group 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.
Earnings before interest
and finance cost, tax,
deprecation, amortisation
and rent (EBITDAR) divided
by revenue. By excluding
rent costs, leased and
owned properties are
comparable with each other.
350
350
350
350
300
300
300
300
250
250
250
250
200
200
200
200
3300
3300
3300
3300
2640
2640
2640
2640
1980
1980
1980
1980
1320
1320
1320
1320
660
660
660
660
Link to Strategy
0
0
0
0
14
14
14
15
14
15
15
16
15
16
16
17
16
17
17
18
17
18
18
18
150
150
150
150
100
100
100
100
50
50
Link to Strategy
50
50
0
0
0
0
14
14
14
15
14
15
15
16
15
16
16
17
16
17
17
17
18
18
18
18
100
100
100
100
80
80
80
80
60
60
60
60
40
40
40
40
20
20
20
20
0
0
0
0
14
14
Profit for the year divided
by the number of ordinary
shares and adjusted for
the effect of items which
are not reflective of normal
trading activities or distort
comparability either 'year
on year' or with other
similar businesses.
Free Cash flow
Net cash from operating
activities less amounts
paid for interest, finance
costs and refurbishment
capital expenditure
and after adding back
cash paid in respect of
adjusting items to EBITDA.
New Rooms Added
Internal Promotions
Customer Satisfaction
Total number of new owned
and leased rooms added
through acquisitions or
development in the Group.
Number of Internal
Promotions in the Group
for the year.
A measure of the quality
of our product offering
and service collected
from customers.
Link to Strategy
Link to Strategy
Link to Strategy
Link to Strategy
Link to Strategy
14
15
14
15
15
16
15
16
16
17
16
17
17
17
18
18
18
18
Customers Growth Brands
Growth
Growth
Growth
Growth
People
Brands
Growth
People
Customers
People
Commentary
Commentary
Commentary
Commentary
Commentary
Commentary
Commentary
Key top-line measure
of the overall growth
and development of
the business.
EBITDAR is our key measure
of operational profitability.
Focus on the margin allows
us to monitor conversion
of incremental revenue
to profit.
Key measure of the effective
delivery of profitable growth
for our shareholders.
The Group is focused on
turning profit into cash
for re-investment and
dividend payments.
Total Revenue has
increased by €41.5 million
in 2018 due mainly to
strong trading performance
in our Dublin Hotels.
The Group has achieved an
EBITDAR Margin of 42.80%
in 2018, an increase of 40
basis points from 2017, driven
by an increase in revenue
and a reduction in costs.
Increase of 4.5 cent on 2017,
driven by strong underlying
operating performance.
We have achieved free
cash flows of €86.6 million
in 2018, an increase of
€14.9 million from 2017,
driven by an increase in
operating profit.
Developing and delivering
our pipeline is key to our
growth strategy.
Development of our 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 hotel openings.
We are driven to improve
customer experience
through continuous
investment to meet ever
rising expectations.
2018 has been another
successful year with 1,224
owned and leased rooms
added to current stock.
We have opened 5 new
hotels and completed
4 extensions.
2018 was a excellent
year for Learning and
Development with 305
internal promotions. We
recruited all of our new
hotel our management
teams internally.
Our Customer Satisfaction
score has increased by
1.2% year on year and is
in line with our values of
being dedicated to service
excellence and being a
people business.
p80
Link to remuneration
Rewards for the Executive
Directors (discussed in detail
on page 80) include annual
and long-term incentive plans.
70% of the annual incentive
is earnings based (EBIT)
and the balance is based on
personal objectives aligned
with strategic goals.
50% of the LTIP is based
on EPS performance and
50% is based on Total
Shareholder Return.
14
15
KPIs
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
STRATEGIC
PRIORITIES
Building for the Future
Our strategic objective is to drive long-term shareholder returns by
becoming the leading four-star hotel operator in Ireland and the UK
and, in the process, developing a sustainable business that respects
the interests of our wider stakeholders: our employees, customers,
suppliers and communities.
Customers
Growth
People
Brands
2018 Progress
2018 Progress
2018 Progress
2018 Progress
The introduction of both
“Click on Clayton” and “Make
it Maldron” direct booking
initiatives have facilitated
more bookings coming
through our business directly,
while also serving to solidify
the success of the two hotel
brands individually.
1,224 rooms added to the
owned and leased portfolio
through acquisition and
development activity in 2018
and 1,212 to the pipeline. We
completed the construction of
five new hotels on time and on
budget. Nine new development
projects are on target.
Our very successful Altitude
Programme is in its 4th year
and we have had excellent
achievements to date with
30% of our current general
managers having come
through the programme.
We opened 5 new hotels this
year; four Maldrons and one
Clayton. We also refurbished
830 rooms across the hotels
bringing to 3,100 the number
of rooms refurbished since
2015. We are continuously
improving our brand websites
to increase market share and
protect brand integrity.
2019 Focus
2019 Focus
2019 Focus
2019 Focus
In 2019 we will continue improving our customer
experience through improvements in our
facilities, improvements in technologies and our
focus on service excellence.
In 2019, we will continue our live development
projects, commence construction in Manchester,
Dublin and Glasgow and seek to secure a further
1,200 pipeline rooms targeting the UK market
and any potential opportunities that may arise
in Ireland.
Our key focus for 2019 will be to continue to
promote from within and further develop our
management programmes for our new hotels
opening in the coming years.
We will continue our refurbishment programme
in 2019 for hotels under both brands and focus
on bringing our new hotels up to speed with the
rest of the Group.
Strategy in Action
Read more about
Customers
Page
18
Strategy in Action
Read more about
Growth
Page
20
Strategy in Action
Read more about
People
Page
22
Strategy in Action
Read more about
Brands
Page
24
16
17
Strategy and Business Model
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance Our objective is to continuously
improve our customers'
experience at every stage of
their journey from the moment
they think about booking to
check out and departure.
We work to understand our customers and to gain a
better insight into their preferences and expectations
in all areas of our business. To this end we have recently
carried out market research into each segment of our
business from which we have developed pen portraits
and personas which represent each sector of our market.
We combine this with direct customer feedback to
paint a picture of our customers’ attitudes to our
brands and service and what we can do to improve this.
Across the Group we use an industry-leading online
reputation management tool to help us monitor and
measure customer feedback. In 2018, the customer
feedback response rate increased by 11.5% on 2017.
Not only has the response rate increased; our overall
satisfaction rating also went up by 1% in the year
to 84% overall. Key areas such as service, location,
reception and cleanliness were all highly commended –
this is encouraging, and also helps us understand areas
that can be improved.
Following user research there has been a renewed focus
on updating our websites in 2018. The more accessible
our online platforms are, the easier it is for customers
to book directly with us. The introduction of both “Click
on Clayton” and “Make it Maldron” direct booking
initiatives have facilitated more bookings coming
through our business directly, while also serving to
solidify the success of the two hotel brands individually.
We have seen our direct market share increasing in
the online booking space during 2018 as we respond
to customer feedback.
During 2018 we engaged with customers to find out
what aspects of our environmental, social and
governance programme (discussed further on
pages 48 - 57) they valued most. Their responses
re-affirmed our commitment to guest safety and
security, employees’ wellbeing, training and
development and our support for the local
communities we operate in.
STRATEGIC
PRIORITIES
CUSTOMERS
2018 Progress
134,000
Customer
reviews
—
84%
Customer
satisfaction
survey
—
88.5%
Dublin
occupancy
4.8% higher than market performance
Building for the Future
Investment in market research
is providing insight into our
customers' ever evolving
needs and is shaping our
product development.
Strategy in Action
Pen Portraits
Embodying our customer
care philosophy
—
Adrian Sherry, head of Market Development,
discusses pen portraits
This past year, we commissioned our brand development
agency to work with the central marketing team in
developing pen portraits of our key customers. A
number of workshops were held with customer facing
team members from our hotels including customer
service, front desk, restaurants and bar staff as well as
management from different areas. These stories have
enabled us to think about and understand what our
customers want, and additionally to build for their
future requirements. We identified several key
customer profiles - let's meet a couple of them.
Clayton pen portrait – meet the Hylands
Karen Hyland was tasked with organising a family
reunion last year, an event that was precious to her and
especially to her dad. Karen, having stayed at a Clayton
Hotel before, knew that it was the best option for her
particular needs – comfortable rooms, great food and
importantly, lots of parking!
Karen knew that when dealing with Clayton, she could
expect both a warm welcome and a can do approach
to any particular needs people may have – values that
Clayton Hotels hold dearly. Karen could relax in the
comforts provided by the hotel, and noted that she
looked forward to enjoying the occasion herself – not
to mention the brownie points earned in the eyes of
her relatives for selecting such a great hotel!
Maldron pen portrait – meet Martin
Martin works in sales and spends 70% of his working
week on the road either looking after current clients or
following up on leads for new ones. His days are long, and
often he needs his hotel room to double as a temporary
working space. Martin values comfort, a handy location,
good service and great value above all else. He also uses
a gym to help keep his body and mind sharp.
Maldron facilitates Martin in all of these things, and that
is why he keeps coming back. Great Wi-fi, a comfortable
bed and efficient room service can be found at any
Maldron; we are always seeking to meet customer
expectations and provide for their varying needs.
18
19
Dalata Hotel Group plc Annual Report and Accounts 2018
Strategy and Business Model
Financial StatementsAdditional InformationStrategic ReportCorporate Governance STRATEGIC
PRIORITIES
GROWTH
2018 Progress
1,224
New rooms
added
—
1,212
Number of
rooms added
to the pipeline
—
9
New hotels
in development
2018 was an extremely
challenging and rewarding
year for Dalata in terms of
new hotel bedrooms.
The Company opened five new-build hotels on schedule:
› Maldron Hotel Belfast
› Maldron Hotel Kevin Street, Dublin
› Maldron Hotel South Mall, Cork
› Maldron Hotel Newcastle and
› Clayton Hotel Charlemont, Dublin
We also completed extensions to Maldron Hotel Parnell
Square, Maldron Hotel Sandy Road Galway, Clayton Hotel
Ballsbridge, and Clayton Hotel Dublin Airport in 2018.
Dalata continues to focus on growing its portfolio, and
during 2018 the Company committed to 5 new build
opportunities which will deliver a further 1,212 bedrooms
to continue our strategic expansion in the UK and Ireland.
The successful execution of this pipeline is consistent
with our strategic development plans and will provide
a solid foundation to grow our pipeline further in 2019.
Included within this pipeline is the Clayton Hotel City of
London Hotel, which opened in January 2019 with 212 new
bedrooms. The remainder of the hotels will open through
2020 and 2021. We also continue to examine opportunities
for further expansion within our existing portfolio.
Pipeline
announced 2018
2019
Rooms
2020
Rooms
2021
Rooms
Clayton City of London
212
Maldron Birmingham
Maldron Merrion Road, Dublin
Clayton Bristol
Maldron Manchester
330
252
140
278
With a leading position established in Ireland, our central
focus is our strategic objective to drive shareholder returns
by becoming the leading four-star hotel operator in Ireland
and the UK, concentrating on 20 attractive UK city markets
we have identified. Naturally, we continue to remain alert
to other opportunities of value that may arise, especially in
London, as evidenced by the acquisition of the Clayton Hotel
City of London. We are also researching and examining other
potential markets and geographies, including Germany, which
we believe could be an attractive host for the Maldron and
Clayton brands. The focus for 2019 will be completing the live
development projects, overseeing the commencement
of construction at our new sites, and continuing to execute
and secure new opportunities that add shareholder value
and support our ambitious growth strategy.
Strategy in Action
Maldron Hotel South Mall
Complex development
on time and on budget
—
In June 2016, Dalata purchased a shell of a hotel building
on Beasley Street, Cork, that had lain idle for eight
years and had an expired planning permission for a
120 bedroom hotel. With the purchase, the Group also
secured the freehold of two adjacent office buildings
on the South Mall, Cork’s main business street.
Immediately setting to work with its advisors and
consultants, over the next 12 months the Group
transformed the opportunity. Vacant possession
was secured on the office buildings allowing the
hotel entrance to pivot onto the highly trafficked
South Mall. Planning permission was secured for a
163 bedroom full service Maldron Hotel, an increase
of over 40 bedrooms from the original planning
permission. In addition, planning permission was
secured for an Italian Kitchen restaurant on Parnell
Place and a Red Bean Roastery coffee shop facing
onto the South Mall.
After a construction tender process in the autumn of
2017, JJ Rhatigan & Co commenced works in January
2018. The hotel and coffee shop successfully opened
on December 20th 2018, with the Italian Kitchen due
for completion in mid-2019.
The Maldron Hotel South Mall project demonstrates a
number of Dalata’s strengths; an understanding of strong
central hotel locations and the related business models,
a focus on delivering a highly efficient scheme and
an ability to deliver quality development projects on
schedule and on budget.
It was extremely satisfying to take
a half built property that had lain
idle and neglected for so long, and
through partnering with the city,
deliver a brand new four-star hotel
in the very centre of the city.
A hotel that Dalata and Cork
can be proud of!
Shane Casserly,
Head of Strategy and Development
Building for the Future
We currently have a pipeline
of 2,193 new rooms and are
confident that we will meet
our goal of securing a further
1,200 rooms in 2019.
20
21
Dalata Hotel Group plc Annual Report and Accounts 2018
Strategy and Business Model
Financial StatementsAdditional InformationStrategic ReportCorporate Governance
The development and education
of our people in Dalata is critical
to ensure that we have the talent
pipeline needed to successfully
supply our new build hotels
and acquisitions from within
the Group.
In order to prepare future general managers for
our expansion, we run our very successful Altitude
Programme. The Irish Management Institute and senior
Dalata managers help deliver this programme. We
have had excellent success stories coming through to
date with 30% of our current general managers having
completed the programme which is now in its fourth year.
During 2018, we have led the way in chef development
through our collaboration with Tralee IT. The Certificate in
Culinary Management and Innovation is a great example
of how we continue to grow and develop great talent for
our hotels and our industry. 15 senior chefs graduated in
2018 and we will run this programme again in 2019. As a
major employer in the hospitality sector, we understand
the benefits to the Group and the industry at large of
partnering with an established third level institute.
We have also seen excellent levels of internal promotions
across the hotels. 45 employees who are currently on a
development programme have been promoted within the
Group in 2018.
We are proud of our diverse workforce and pay attention
to gender diversity. In 2018 61% of senior management
in the hotels are under 40 years of age and 60% of that
same team are female.
Our Ascend Graduate Programme 2018 has seen its
highest intake to date with 27 colleagues commencing
their journey with us in September 2018. In total we
have 54 Ascend graduates across our business. The
Group allows graduates from many different disciplines
join the programme and gain valuable experience in
the hospitality industry. We have expanded our Ascend
programme in 2018 to now include Hotel Operations,
Finance, Sales and Marketing, Human Resources and
Revenue Management which is invaluable in developing
graduates for key positions within the Group in the future.
Dalata was recognised at the 2018 HR Leadership
Awards of 2018, winning the “HR Team of the Year” and
also being shortlisted for “Best Organisation in Learning
and Development” by the Early Careers Awards. In 2019
our objectives are to continue to promote from within
and further develop our management programmes.
STRATEGIC
PRIORITIES
PEOPLE
2018 Progress
305
Internal
promotions
—
45
Management
promotions from
our development
programmes
—
2,600
Employees
participated in
training courses
or webinars
22
Dalata Hotel Group plc Annual Report and Accounts 2018
Strategy and Business Model
Strategy in Action
Clayton Hotel
Charlemont
A spotlight on succession
—
Our new 189 bedroom hotel – Clayton Hotel Charlemont
opened its doors on 23 November 2018 and has been
a showcase for the success of our people strategy.
From the outset of the recruitment process, this new
build hotel caught the imagination of the wider Dalata
employee population. It offered the career opportunities
that many were looking for and the attraction of a
new build.
Overall the team of 100 includes 30 employees who
were promoted or transferred from properties in Dublin
and as far away as Clayton Hotel Galway and Clayton
Hotel Chiswick.
CLAYTON HOTEL CHARLEMONT
OPEN DAY
These promotions and transfers created 30 further
opportunities for progression in our hotels, an excellent
illustration of our succession planning in action.
The pipeline of internal applicants
has been invaluable to us. The
Dalata culture and values were
already embedded in 30% of the
team. This provided a vital support
structure for our new employees.
With most of our management team
coming from internal promotions,
our new employees can see that
progression and opportunities are
available to them in Dalata. This
makes engagement easier for us,
this is reflected in our customer
feedback where our people are
without doubt our greatest asset
at Clayton Hotel Charlemont.
Lynn Cawley, General Manager
Clayton Hotel Charlemont
This high rate of internal promotion provides great
comfort and de-risks the business model because
the new team immediately embeds our processes
and procedures and, most importantly, our culture.
Of the management team, 69% have been promoted
from within the Group and eight have participated in
one of our development programmes.
This allows the culture of career development and
opportunity to be embedded in this new hotel and
ensures that our succession pipeline continues.
Building for the Future
Development of our own
people is a key strategic
objective and we are tailoring
this each year to cover all
functions of our hotels.
23
Financial StatementsAdditional InformationStrategic ReportCorporate Governance
A cornerstone of our strategy is
the development of our Clayton
and Maldron hotel brands, and
2018 was a landmark year for
both of them.
In November we opened the first new build Clayton Hotel
at Charlemont Street in Dublin City Centre, a significant
milestone for the brand’s development. 2018 also saw
the opening of four new build Maldron Hotel properties
in Belfast (March), Kevin Street, Dublin (July), Newcastle
(December) and South Mall Cork City (December).
During the last year, our central marketing team
worked to learn more about how our brands were
being received, and how they could be improved.
Research was carried out by our brand development
agency to facilitate these improvements.
The Clayton and Maldron hotel brands grew in strength
during the year and this was evident in the rate of
increase in direct online bookings. On the back of
research and work completed in 2018, we saw the
development of our other brands too, and are confident
that the trend will continue into 2019.
Our brand signatures have come on significantly in 2018;
as well as the opening of new hotels and extensions,
we refurbished 830 rooms across the portfolio bringing
to 3,100 the number of rooms refurbished since 2015.
Meeting rooms, lobbies and other signatures are now
much more uniform across the hotels. This facilitates
clear and accurate expectation of service for all
customers, whether they are in a corporate meeting,
staying overnight or enjoying a meal at one of our hotels.
Our coffee brand, the Red Bean Roastery has come on
tremendously in 2018. There are now more than 30 Red
Bean Roastery outlets across our hotels, ranging from
coffee docks to standalone sites. Our first standalone
site, at Clayton Hotel Leopardstown, celebrated its first
birthday in Q4 2018.
Our Grain and Grill restaurant brand has been rolled out
across Maldron Hotels and we have developed a sense of
individual food and beverage offerings at Clayton hotels
with the customer profile of each hotel in mind.
STRATEGIC
PRIORITIES
BRANDS
2018 Progress
€8.1m
Investment in
bedroom and
ground floor
refurbishments
—
830
Rooms
refurbished
—
15
Average age
of our hotels
(excluding hotels with leases remaining less than 5 years)
Strategy in Action
The Italian Kitchen
—
We developed the Italian Kitchen concept at Clayton
Hotel Dublin Airport to broaden the appeal of the food
and beverage offering at this bustling airport property.
It was so well received that we will open our second
Italian Kitchen restaurant at Maldron Hotel South Mall,
Cork in mid 2019.
When the hotel was being extended, it became clear
we would need an ancillary food and beverage outlet
to complement the already standing restaurant.
We considered all available options, even suggesting
franchising as an option at one stage. Ultimately, we
settled on The Italian Kitchen, where our commitment
to its core values has facilitated its resounding success.
The values we have rooted the brand in are:
› Passion – this is rooted in our knowledge of food –
where ingredients originate, the story behind each
dish, and a special welcome.
› Honest – we are honest because it is in our nature
to be. It instils confidence in our staff, and this
translates to the guest.
› Inspiring – we are not satisfied with good;
we are inspired by excellence.
We are delighted with the progress of the brand, and
with its future in Maldron Hotel South Mall. If the Airport
is anything to go by, its future will look after itself.
Building for the Future
We opened 4 Maldron hotels
and 1 Clayton hotel in 2018 and
added 5 more hotels to the
pipeline during 2018.
I am most proud about its ability to
stand on its own. Where traditionally
a hotel might attract business
and a restaurant benefit from that,
with The Italian Kitchen the trend
has been reversed – we now receive
conference business because they
want to eat at the restaurant! If that
doesn’t validate the work put into the
brand, I don’t know what else could.
Des McCann, Group General Manager
of Clayton Hotels and formerly of
Clayton Hotel Dublin Airport
24
25
Dalata Hotel Group plc Annual Report and Accounts 2018
Strategy and Business Model
Financial StatementsAdditional InformationStrategic ReportCorporate Governance
BUILDING
FOR THE
FUTURE:
CLAYTON HOTEL
BRISTOL
BROAD STREET
252 ROOMS
SPENCER PLACE
200 ROOMS
8 hotels in development.
3 Claytons, 4 Maldrons
and 1 bespoke.
CLAYTON HOTEL
GLASGOW
CLYDE STREET
294 ROOMS
2 in Dublin; 2 in
Manchester; 2 in
Glasgow; 1 in Bristol
and 1 in Birmingham.
MALDRON HOTEL
MERRION ROAD
140 ROOMS
2020
MALDRON HOTEL
GLASGOW
RENFREW STREET
300 ROOMS
Q4
Q4
Q2
Q2
2021
Q4
Q1
Q2
Q2
MALDRON HOTEL
BIRMINGHAM
SUFFOLK STREET
330 ROOMS
CLAYTON HOTEL
MANCHESTER
PORTLAND STREET
329 ROOMS
MALDRON HOTEL
MANCHESTER
CHARLES STREET
278 ROOMS
26
27
Building for the Future
PEOPLE &PROPERTYFuture OpeningsDalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance FINANCIAL
REVIEW
I keep on saying each year that we have had another
exciting year at Dalata. Running the risk of being
accused of repeating myself, 2018 was another very
exciting year at Dalata.
In 2016, we started to take the view that the asking
prices for hotels in Dublin had gone beyond levels that
we were willing to pay. Apart from the very attractive
opportunities to buy Clayton Hotel Cardiff Lane and
Clayton Hotel Liffey Valley on a piecemeal basis, we
have not been in the market to buy hotels in Dublin
since early 2016. In 2016 we focused on buying sites
to build new hotels and making use of opportunities
to build extensions at some of our existing hotels. We
secured a significant pipeline in 2016 and 2018 was
the year that we saw that pipeline come to fruition.
We completed the construction and
opening of five new hotels across
Dublin, Belfast, Cork and Newcastle
as well as completing and opening
extensions to three of our Dublin
hotels and to Maldron Hotel Sandy
Road in Galway. All projects were
completed on time and within budget
– this is not as easy as it sounds.
The development period and subsequent openings
were a clear demonstration of our ability to meet
our ambitious growth targets.
We continued to grow our pipeline
during 2018 and announced new
projects in Birmingham, Manchester,
Bristol and London.
Since the year end, we have opened our new Clayton
Hotel City of London which I am particularly excited
about. We have also announced an agreement to lease
a new hotel in Dublin. A busy year indeed for everyone
in Shane Casserly's development function.
28
Dalata Hotel Group plc Annual Report and Accounts 2018
Financial Review
People ask me all the time how we are preparing for Brexit.
As I write, there is still no clear indication of the final
outcome which makes planning very difficult. We have
reacted and planned as we best see fit. Firstly, on
entering into commitments to lease new hotels, we (i)
use conservative RevPAR projections, (ii) seek to attain a
high rental cover of at least 1.85x by Year 3 and (iii) only
accept prime city centre sites in the provincial UK cities
that we are targeting. Secondly, we brought forward a
full refinancing of our debt facilities at significantly
improved terms. The new package is larger at €525
million, has a maturity date of October 2023, has lower
margins and more flexibility. We wanted to avoid the
uncertainty of negotiating new facilities at the very time
Brexit was scheduled to happen. Carol Phelan and her
team completed the refinance with exceptional quality
and speed. We will continue to monitor Brexit and not
only look at the risks it poses but also the opportunities
it presents.
There is no point in building our portfolio unless we have
the operational excellence to deliver the returns that our
shareholders expect.
2018 was another year in which we
grew RevPAR at a stronger pace than
the market. We were particularly
happy with our performance in Dublin.
We converted the additional revenue to profit and we
continue to deliver very strong operating margins. Stephen
Clarke and his financial analysis teams have been busy all
year supporting the operations teams across the Group.
Group Revenue and EBITDA
€million
Revenue
Adjusted EBITDA
Group EBITDA
Profit before tax
Basic EPS
2018
2017
393.7
119.6
116.6
87.3
352.2
104.9
102.7
77.3
40.9 cents
37.2 cents
Group revenue increased by €41.5 million (11.8%) to
€393.7 million due to (i) continued strong growth in
RevPAR at our existing hotels, (ii) the full year contribution
from hotels acquired during 2017 and (iii) the revenue
generated at hotels we opened in 2018. We converted
the additional revenue strongly to the EBITDAR line.
Rent increased marginally due to increases in performance
related rents in some of our Dublin hotels and the full year
rent impact of our Clayton hotels in Cardiff and Birmingham
where we entered into new leases in mid-2017.
29
4.7%Group RevPAR increase—42.8%Segments EBITDAR margin —1,224New rooms opened from acquisition and development activities in 2018—2,193New rooms in our current pipeline —€1.2 billionHotel assets at 31 December 2018—42.8 centAdjusted Basic EPSFinancial StatementsAdditional InformationStrategic ReportCorporate Governance These increases were counterbalanced somewhat by
savings in rent at Croydon Park Hotel (sold mid-2017)
and the purchase of additional previously leased rooms
at Clayton Hotel Cardiff Lane, Dublin.
Adjusting items to EBITDA
We disclose Adjusted EBITDA to show the underlying
operating performance of the Group excluding items
which are not reflective of normal trading activities or
distort comparability either ‘year on year’ or with other
similar businesses. The adjusting items of €3.0 million
(net) for 2018 are explained below.
The Group adopts a revaluation policy for its hotel
property assets. In 2018, while the overall value of
our hotel assets has been revalued upwards by €99.8
million, we have had to write off €3.1 million of valuation
reductions to the profit or loss account. €2.3 million
relates to Clayton Hotel Silver Springs, Cork where we
have had to spend significant capital amounts on fire
safety works as well as further refurbishment works.
€1.0 million relates to Clayton Whites Hotel in Wexford
which has traded behind our expectations despite
capital investment.
We received €2.6 million from our insurers as a result
of a fire at a disused building on the site of Clayton
Hotel Silver Springs. The proceeds have been recorded
within other income in the profit or loss account. We
also include pre-opening expenses (operational costs
incurred prior to the opening of newly developed hotels)
within adjusting items. We incurred a high level of such
costs (€2.5 million) in 2018 due to the opening of five
new hotels and the preparations for the opening of
Clayton Hotel City of London.
Earnings Per Share (EPS)
Basic EPS has grown
by 9.9% to 40.9 cents.
This is primarily driven by the 13.5% increase in EBITDA.
Depreciation has increased by €4.0 million to €19.7
million due to charges related to the new hotels opened
during the year, the full year impact of assets purchased
in 2017 and the charges associated with the ongoing
refurbishment of the existing portfolio. Our finance
costs are in line with 2017.
The Group’s effective tax rate increased from 11.6% in
2017 to 13.8% in 2018 largely due to the non-recurring
benefit in 2017 of tax losses from previous acquisitions
to which no value had been initially attributed.
Group Snapshot of Owned
and Leased Portfolio at
31 December 2018
Hotels
16
10
13
Room Numbers
% of Revenue
4,460
2,233
1,797
20%
60%
20%
% of Segments EBITDAR
18%
69%
13%
% of Segments EBITDA
19%
65%
16%
Trading Review by Segment
In the following section I will analyse the results from the
Group’s portfolio of hotels in Dublin, Regional Ireland and
United Kingdom.
1. Dublin
€million
Room revenue
Food and beverage revenue
Other revenue
Total revenue
EBITDAR
Rent
EBITDA
EBITDAR margin %
2018
168.7
50.6
15.6
234.9
114.0
2017i
144.4
46.2
12.8
203.4
99.0
(27.6)
(26.4)
86.4
72.6
48.5%
48.7%
Performance statisticsii
2018
2017
Occupancy
88.1%
85.6%
Average room rate (€)
129.49
122.59
RevPAR (€)
114.07
104.89
RevPAR increase %
8.8%
Dublin owned and leased portfolio
2018
Hotels
Room numbers
2017
15
16
4,460
3,992
2018 was another excellent year for us in Dublin with
‘like for like’ RevPAR up 8.8% versus the STR growth
for the city of 7.2%. All hotels showed growth which
was an achievement given the extra capacity at three
of our hotels and the disruption caused by works at
these hotels. We converted 74.1% of our additional room
revenue to the rooms department profit line which is
very pleasing given that 30% of the growth in revenue
related to occupancy.
Food and beverage revenue was €4.4 million ahead of
last year, driven primarily by the additional capacity at
Clayton Hotel Dublin Airport, the full year impact of
Clayton Hotel Liffey Valley and the opening of Maldron
Hotel Kevin Street. Food and beverage department
profit margin was slightly behind last year at 30.3%.
EBITDAR margin before adjusting items was very
strong again this year at 48.5%.
30
31
Financial Review
Dublin
Regional Ireland
UK
i, ii endnotes page 39
4,460Dublin owned and leased rooms—8.8%RevPAR increase at our Dublin hotels (excluding Clayton Hotel Dublin Airport)—48.5%Dublin EBITDAR margin—410Rooms in our current Dublin pipelineDalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
2. Regional Ireland
€million
Room revenue
Food and beverage revenue
Other revenue
Total revenue
EBITDAR
Rent
EBITDA
2018
2017i
Local currency - £million
2018
2017i
3. United Kingdom (local currency)
45.2
26.4
8.0
79.6
22.7
(1.1)
21.6
42.0
26.5
7.9
76.4
21.5
(1.2)
20.3
Room revenue
Food and beverage revenue
Other revenue
Total revenue
EBITDAR
Rent
EBITDA
48.1
15.2
5.8
69.1
27.0
(3.7)
23.3
42.5
14.0
5.2
61.7
23.7
(2.9)
20.8
EBITDAR margin %
28.5%
28.1%
EBITDAR margin %
39.0%
38.4%
Performance statisticsii
2018
2017
Performance statisticsii
2018
2017
Occupancy
75.2%
75.5%
Occupancy
84.7%
82.9%
Average room rate (€)
RevPAR (€)
RevPAR increase %
Regional Ireland owned
and leased portfolio
Hotels
Room numbers
92.79
69.99
97.98
73.64
5.2%
2018
2017
13
12
1,797
1,643
RevPAR increased by 5.2% in our Regional Ireland
hotels. We were broadly in line with the market in
Cork and behind in Limerick and Galway. On an overall
basis, it was a good performance. Our Cork hotels
performed very well in a very strong market which
is encouraging given our significant investment in
Maldron Hotel South Mall which opened in December
2018. We converted 65.3% of the additional revenue
to the rooms department profit line which I am very
pleased with.
Food and beverage remains an area of opportunity
in our Regional Ireland hotels and we are focused on
increasing both revenue and profitability. Food and
beverage department profit margin for 2018 was
25.1% which was slightly behind last year.
EBITDAR margin came in above last year at 28.5%
and we will seek to further improve this in 2019.
Average room rate (£)
RevPAR (£)
RevPAR increase %
81.54
67.58
82.33
69.70
3.1%
UK owned and leased portfolio
2018
2017
Hotels
Room numbers
10
8
2,233
1,731
2018 was another good year for us in the UK where
RevPAR grew by 3.1%. We outperformed the market in
Cardiff, Manchester, Belfast and Derry. We effectively
matched the market in Leeds and were behind the
market in Birmingham. In London, Clayton Hotel
Chiswick significantly outperformed its local competitive
set with RevPAR growth of 3.7% while Clayton Crown
Hotel had a more challenging year due to a decrease
in demand in its local area and increased competition.
Rooms department profit margin in 2018 was 69.1%
which was marginally behind last year but in line with
our own expectations.
Meaningful year on year comparisons for our UK food
and beverage business are complex, as we had the full
year impact of Clayton Hotel Birmingham, the opening
of Maldron Hotel Belfast City and six months of Croydon
Park Hotel in 2017. When I look at our food and beverage
performance generally in the region, I am very happy
with the progress that we are making both in terms of
revenue and profitability.
Our EBITDAR margin grew to 39.0% and we see this
improving further due to the impact of Clayton Hotel
City of London in 2019 and the new hotels in our
pipeline for 2020 and beyond.
CLAYTON HOTEL
CHISWICK
32
33
i, ii endnotes page 39
i, ii endnotes page 39
Financial Review
1,797Regional Ireland owned and leased rooms—5.2%RevPAR increase at our Regional Ireland hotels—28.5%Regional Ireland EBITDAR margin2,233UK owned and leased rooms—3.1%RevPAR increase at our UK hotels—39.0%UK EBITDAR margin—1,783Rooms in our current UK pipelineDalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Central costs and share-based payments expense
€million
Central costs
Share-based payments expense
2018
13.3
2.8
2017
12.4
1.7
Central costs increased by 7.5%. We have further
increased the size of our central team to support the
growing size of the portfolio. The additional people
are based in both the UK and Ireland. Our share-based
payments expense increased from €1.7 million to €2.8
million as a result of a higher cost being attributed to
the 2017 and 2018 LTIP grants for accounting purposes.
This is due to the EPS related performance condition
attracting a higher fair value and additional employees
joining the LTIP and SAYE scheme.
Finance costs
€million
Interest expense on loans
Impact of interest rate swaps
Other finance costs
Net exchange (gain)/
loss on financing activities
2018
2017
7.8
1.0
2.8
(0.3)
7.3
1.4
2.3
0.2
Strong Operating Cash Flows
Re-invested in the Business
Our portfolio of hotels generated
strong operating cash flow during
the year with free cash flow of €86.6
million. We have re-invested the
bulk of this cash into the business
through the completion of the
development pipeline in 2018.
We also paid our first dividend
to shareholders in October 2018.
€million
Adjusted EBITDA
Add back: share-based payments
expense
Adjusted Cash EBITDA
Net cash from operating activities
Finance costs paid
2018
119.6
2017
104.9
2.8
1.7
122.4
115.8
(13.2)
106.6
95.2
(10.1)
(14.6)
1.3
71.8
Interest capitalised to property,
plant and equipment
(1.8)
(1.6)
Exclude adjusting items which
have a cash effect
Finance costs
9.5
9.6
Free cash flow
(0.1)
86.6
Refurbishment capital expenditure
(15.9)
Finance costs are in line with 2017 despite the write
off of a large element of the original facility unamortised
costs at the date of refinance (€0.9 million). The
weighted average interest rate for 2018 was 2.94%
(2017: 3.16%), of which 2.15% (2017: 2.42%) related
to margin.
Free cash flow conversion
70.8%
67.3%
Cash conversion was very strong in 2018 and increased
by 350 bps. Cash conversion is marginally higher
than a normalised 2017 due to the cash inflow from
working capital (including from newly opened hotels)
offset by the additional finance costs paid relating to
the refinance of debt facilities and the timing of rent
payments. There are a number of other different factors
impacting the movement year on year. The conversion
in 2017 was lower due to the non-cash release of €2.0
million of estimated accruals and liabilities relating to
the successful conclusion of negotiations on a number
of leased properties. The 2017 conversion would have
been 70.5% excluding the impact of these items.
Property, Plant and Equipment
€million
Property, plant and equipment
at end of the year
2018
2017
1,176.3
998.8
The value of our property, plant and
equipment at the end of 2018 was
just under €1.2 billion and exceeded
that level when we completed the
purchase of Clayton Hotel City of
London in early January 2019.
The increase of €177.5 million during 2018 was driven
by additions of €105.5 million, a net revaluation gain of
€99.8 million, capitalised borrowing costs of €1.8 million.
This was offset by the depreciation charge of €19.7
million, adverse foreign exchange movements which
decreased the value of the UK hotel assets by €1.8
million and €8.1 million which was reclassified to
contract fulfilment costs within non-current assets
representing the portion of the Merrion Road site which
will be developed into residential units.
Additions to property, plant and equipment
€million
2018
2017
Development capital expenditure:
Acquisitions through business combinations
-
57.5
Acquisition of freeholds or site purchases
9.2
71.5
Hotel extensions and renovations
31.9
16.8
Construction of four new build hotels
44.2
42.3
Other development expenditure
4.3
7.6
Total development capital expenditure
89.6
195.7
Total refurbishment capital expenditure
15.9
14.6
Additions to property, plant and equipment
105.5
210.3
We typically allocate 4% of revenue to refurbishment
capital expenditure. In 2018, we spent €6.1 million
refurbishing our bedrooms and a further €9.8 million
on public areas and completing health and safety works.
In 2018, our return on capital employed amounted to
11.2%. Excluding the impact of the five new hotels which
opened during 2018 and assets under construction at
year end, the normalised return on capital employed
was in line with 2017 at 12.6%.
34
35
Financial Review
€106 millionAdditions to property, plant and equipment—12.6%Normalised return on capital employed—830Rooms refurbishedDalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance Capital Structure
We are committed to carefully managing our capital
structure to ensure we have the right mix of equity,
debt and leases.
Equity
Supporting
our Growth
Debt
Leases
Dividends
In 2018, Dalata announced it had adopted a
progressive dividend policy with payment based on
a percentage of profit after tax. An interim dividend
for 2018 of 3.0 cent per share was paid on 12 October
2018 on the ordinary shares in Dalata Hotel Group
plc amounting to €5.5 million. On 25 February 2019,
the Board proposed a final dividend of 7.0 cent per
share. Subject to shareholders’ approval at the Annual
General Meeting on 2 May 2019, the payment date will
be 8 May 2019 for the final dividend to shareholders
registered on the record date 12 April 2019.
Case Study
Leases
IFRS 16 became effective on 1 January 2019 and
will result in almost all leases being 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 will be
recognised. Fixed rental expenses will be removed
from profit or loss and replaced with finance
costs on the lease liability and depreciation of the
right-of-use asset. We will apply IFRS 16 in our
2019 financial statements.
We are currently finalising the work on the
discount rates of individual leases. The discount
rate will be largely based upon the incremental
borrowing rate and, with the vast majority of
leasehold commitments guaranteed by Group,
this should be closely aligned with recently
refinanced bank borrowing rates as adjusted for
tenure and asset specific considerations. Based
on the work we have completed to date, we
expect the discount rate not to be considerably
different to the notional rate of 5% used for
illustrative purposes in our financial statements
and our November 2017 Capital Markets Day
presentation on IFRS 16.
Using an indicative discount rate of 5% would
result in the recognition of a lease liability of
circa €350 million and a corresponding right-of-
use asset of circa €350 million. Profit after tax
would decrease by circa €7 million. As Dalata has
entered into most of its leases relatively recently,
there are significant unexpired terms. This
together with the fact that they are guaranteed
by the Group means the impact of front loading
finance costs under IFRS 16 is more pronounced
compared to companies with a more mature
lease portfolio.
IFRS 16 will have no impact on strategy,
commercial negotiations on leases or calculation
of covenants which per the terms of the facility
agreements are based on GAAP calculated
without the application of IFRS 16.
As a significant portion of the drawn facilities
(approximately 65%) are denominated in sterling we
have maintained a natural hedge against the impact
of sterling rate fluctuations on the euro value of our
UK assets.
We have also continued to use hedging instruments
to mitigate the risk associated with interest rate
fluctuations. As at 31 December 2018, interest rate
swaps covered approximately 99% of our sterling
denominated borrowings. Please refer to note
21 (Interest-Bearing Loans and Borrowings) and
note 14 (Derivatives) to the financial statements
for additional information.
At 31 December 2018, we remain
lowly geared with Net Debt to
Adjusted EBITDA of 2.3x.
Post year end, we completed the acquisition of
Clayton Hotel City of London which increased
proforma Net Debt to Adjusted EBITDA to 3.0x.
This is still below our guided upper level of 3.5x
and is projected to fall again during 2019.
We also use a ratio, referred to as our ‘Debt and
Lease Service Cover’, to assess the Group’s ability
to meet interest, rent and capital repayment
commitments. It stood at 2.2x at the end of 2018.
As there are no capital repayments under the new
facility, this ratio is expected to rise in 2019. Please
refer to the ‘Glossary and Supplementary Financial
Information’ for a detailed calculation.
Case Study
Supporting Our Growth
With New Debt Facilities
During 2018 we successfully agreed a €525 million
debt facility, completing the refinance of our previous
debt facilities. Our new debt package will ensure we
have sufficient funding and flexibility to support our
growth strategy into the future.
Our existing debt facilities were due to expire in
February 2020. However, we made the decision to
refinance early to take advantage of lower interest
rates and to ensure the new facilities were agreed
in advance of any potential Brexit fallout in 2019.
A summary of our new and old facilities is outlined in
the table below:
2015 Facility
2018 Facility
› Term Loan facilities
of approximately
€300 million
› Aggregate Revolving
Credit facilities of
€190 million
› Term Loan facility
of £176.5 million
› Multi-currency
Revolving Credit Facility
of €325 million
› Maturing February 2020
› Maturing October 2023
I am pleased to report that our existing banking
partners, AIB Bank, Bank of Ireland, Barclays
Bank and Ulster Bank, have been joined by HSBC
Bank and Banco de Sabadell, demonstrating a
growing attraction of Dalata to international
lending institutions.
I spoke previously about the strength of the Dalata
covenant and how we continuously use our balance
sheet to add value. I am delighted to report that
the new terms reflect the increased strength of
the balance sheet since 2015. In 2018, our weighted
average interest rate was 2.94% (2017: 3.16%) of
which 2.15% (2017: 2.42%) related to margin.
36
37
Financial Review
7.0 centProposed final dividend per share—€525 millionNew debt facility—2.3xNet Debt to Adjusted EBITDADalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance Case Study
Investing in Technology to
Support Our Growing Business
We have made a significant investment in technology
to support our existing and new hotels. As Dalata
comprises primarily a portfolio of hotels acquired in
multiple separate transactions since mid-2014 we
had inherited different systems platforms at the
various locations.
Over the past two years we have looked to streamline
and consolidate processes, enhance controls and
deliver efficiencies.
We rolled out the Alkimii human resources
management system across the Group in 2016
which enables our hotel management teams to
effectively manage their rosters and payroll costs.
Throughout 2017 and 2018 we implemented a
new procurement system, Procure Wizard, which
manages the ordering process from start to finish
at the hotels. In 2018 we extended it to include all
capital expenditure.
We have established a shared service centre in
Cork to manage routine administration work in a
highly efficient manner. This also gives our people
on the ground in the hotels more time to focus on
serving our customers and analysing our businesses.
All our hotels are now using Opera as their property
management system. We have commenced the roll
out of Opera Cloud which gives us real time rates
and inventory integration to all main distribution
channels. We have implemented IDEAS Revenue
Management System at some of our larger hotels
to aid the Revenue Manager in decision-making
by providing powerful analytics.
Introduction of a
single accounting
platform Sage
200 across all units
Roll out of Alkimii
human resources
management system
Implementation
of a new
procurement system,
Procure Wizard
Driving
revenues and
efficiencies
Implementation of
IDEAS Revenue
Management System
at larger hotels
Shared service
centre in Cork
Roll out of
Opera Cloud
PMS to hotels
38
Financial Review
Growth Strategy
Conclusion
We significantly expanded our portfolio of properties
during 2018 with the opening of five new hotels and
four extensions. This growth has continued into 2019
with the opening of Clayton Hotel City of London.
We have a large pipeline of new hotels across Dublin
and the UK due to open in 2020 and 2021. This pipeline
will add over 2,190 rooms and bring our total number of
owned and leased rooms to almost 11,000.
Despite the uncertainty created around Brexit, we
remain convinced that there is a significant opportunity
for us in the UK. We will continue to look for opportunities
to operate additional rooms in London and the opening of
our third hotel in the city is helping raise our profile further
with agents, property developers and hotel owners.
Our London expansion will be opportunistic by nature.
The quality of the four-star offering
in our target twenty provincial UK
cities is very mixed. The market is
fragmented in terms of branding,
ownership and operators. Over 40%
of the rooms are over 40 years old.
The net result is an offering for the
consumer that is very inconsistent
and often very dated. We see an
opportunity for our Clayton and
Maldron brands to prosper in
modern buildings located in the
heart of those cities.
We have a very strong relationship with fixed income
investors such as Deka Immobilien, Aberdeen Standard
and M&G Real Estate who all own one or more of
our current hotels. We are developing relationships
with other interested institutions. These fixed income
investors value the strength of our balance sheet and
operating expertise. They are providing the finance
for the rollout of our leased portfolio in the UK.
The size of the Dublin hotel market continues to grow
in response to the very significant economic growth
in the city. While the main focus for growth will be in
the UK, we will seek to keep our market share at circa
20% in Dublin. Therefore, we will continue to seek out
opportunities to lease or develop new hotels in the city.
We are committed to adding 1,200 new rooms each
year to our development pipeline. We have already
secured a new hotel in Spencer Place, Dublin which
will deliver approximately 200 rooms. I am very
confident that we will secure more new hotels and
reach our target for 2019.
Although we are very focused on our growth strategy,
we are also very focused on maximising the returns
from our current portfolio.
We continue to invest in our people and I am very
encouraged to see the majority of the management
teams at the six hotels opened in the last twelve months
were the result of internal promotions. 19 employees
graduated from our Ascend Graduate Training Programme
in January 2019. They will take up positions across all
functions and regions and ultimately be our managers
of the future.
We are investing in technology right across the business.
This technology is helping us to both increase revenues
and deliver efficiencies at our hotels. It is also helping
us improve the quality of information throughout
the business.
We are continuing to invest 4% of revenues back into the
refurbishment of our hotels. This expenditure is focused
on improving the customer experience at our hotels.
We will continue to focus on
developing our people, growing
our brands, refreshing our physical
product and meeting the expectations
of our customers. This will ensure
that the financial returns for our
shareholders will follow.
I look forward to 2019 with the confidence of knowing
we have the team in place to face the challenges and
make use of the opportunities that arise during the year.
Dermot Crowley
Deputy Chief Executive
Business Development & Finance
i Revenue, cost of sales and the KPIs calculated thereon have been
restated for the year ended 31 December 2017 as a result of the
retrospective application of IFRS 15. The impact is limited to a
reclassification between revenue and cost of sales in profit or loss.
See note 1 in the financial statements for the year ending 31
December 2018 for further information.
ii Performance statistics reflect a full twelve-month performance of the
hotels in each portfolio for both years regardless of when acquired
and exclude the new hotels which opened during 2018 (Clayton Hotel
Charlemont and Maldron Hotel Kevin Street in Dublin, Maldron Hotel
South Mall in Regional Ireland and Maldron Hotel Belfast City and
Maldron Hotel Newcastle in the UK). In Dublin we have also excluded
the Tara Towers Hotel which closed in September 2018 and Clayton
Hotel Dublin Airport due to the significant extension completed during
2018 which distorts comparability.
39
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance RISK
MANAGEMENT
The Board is responsible for risk
management and has adopted a risk
management policy which is reviewed
annually. The Board sets the tone for
the business through its engagement
with management on key risk topics
at its regular meetings and through
the Board Committees, particularly
the Audit and Risk Committee.
In addition to its regular meetings, the Board devotes
one full day to strategy review and another full day as
a group to Board training with an emphasis on topical
areas of existing or emerging risk. More detail
on the 2018 training day is set out on page 67.
Risk management structure
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.
› There is a clear division of responsibilities
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 and Risk Committee
(whose work on risk management is described by
the Committee Chair in his report on page 74).
› 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.
We have established a formalised risk management
process whereby risks are identified, recorded on
the risk register, reviewed and considered. Our risk
management framework is best illustrated as follows:
Risk
Identification
Board
Oversight
Risk
Assessment
Oversight by
Audit and Risk
Committee
Assessment
of controls,
mitigations and
action plans
Internal
monitoring by
Executive Risk
Committee
Our Assurance Framework
First Line
of Defence
Second Line
of Defence
Third Line
of Defence
Hotel and
business
management
Financial Control
Internal Audit
Health and Safety
Management
Risk management in practice
Risk management is integrated in the management of
day to day activities and the CEO is incentivised through
the annual bonus plan to continually improve the Group's
risk management processes (see page 87).
The Company Secretary has oversight responsibility,
reporting to the CEO, for risk management and
compliance activities across the Group. This includes co-
ordinating the activity of the Executive Risk Committee,
on which the three executive directors sit. This
Committee receives input from across the Executive
team on the management of existing risks and the
identification of emerging risks and will devote more time
to topics that may receive relatively less attention from
the Board and / or the Audit and Risk Committee.
A number of Central Office supports operate to maintain
the focus on risk throughout the organisation. These
include the work of the Group Health and Safety
Manager, the Internal Audit department and the Group
Learning and Development department. External
specialists are brought in to support the work of this
group, or in some cases to provide an additional layer of
assurance, in relation to Health and Safety, Food Safety,
Cyber Security and Data Protection.
A key element of overall risk management is the
programme of in-depth reviews led by the executive
directors with the management teams at each hotel
twice yearly. These sessions are used to review business
plans, monitor progress against financial and non-
financial objectives and assess local management’s
capacity to manage existing and emerging risks across
all risk headings.
The Group has a strong culture and highly developed
processes for financial reporting and bottom up
forecasting that allows senior management to monitor
progress against monthly and full year targets at
individual hotel level and for the Group as a whole on
a weekly basis. As the business has grown in recent
years, targeted investment has been made in technology
to support these processes in order to maintain the
integrity of these key information flows as the Group
increases in scale.
Further and ongoing technology investment is improving
our financial and operating control systems, a number
of these initiatives are highlighted in the case study on
page 38; all the time there is an emphasis on ‘de-risking
the business’.
This emphasis is also carried through to the process
for the allocation of refurbishment capital expenditure
where, in addition to programmed refurbishment work,
adequate resources are made available to deal quickly
with capital works required to deal with any risk to the
health, safety or security of our customers and staff.
Key risk summary
The pervading theme in our assessment of key risks
this year is an increasing level of uncertainty associated
with a number of external factors. These include the
imminent, but as yet unknown, effects of the UK’s
decision to leave the EU. Additionally, we are conscious
of the battle for talent and possible threats to our
ability to attract and retain the people we need to drive
the business.
On the back of continuing investment in control systems
and other resources, we have excluded a number of
risk headings associated with financial control and
compliance from the key risk classification. These are
risks generally common to most businesses. Thus,
the emphasis in the risks discussed here is on those
company or industry specific risks that are likely to
have the greatest impact on our business in the
foreseeable future.
Category
Ref Risk
External
Strategic
Operational
1
2
3
4
5
6
7
8
9
10
11
12
13
Impact on
Strategic
Priorities
Growth
Growth
Cyclical
economic effect
Geopolitics –
including Brexit
International terrorism Growth
Exchange rate
fluctuation
Growth
Market concentration
Growth
UK expansion strategy Growth
Erosion of culture
and values
People,
Customer
Senior Management
succession
Growth,
People
Development and
retention of expertise
People,
Customer
Availability of
human resources
Building hotel
extensions
People,
Customer
Customer,
Brand,
Growth
New hotel openings
Growth
Reliance on third
party IT systems
Customer,
People
Customer,
Brand
Customer,
Brand
Reputational
14
Health and safety
15
Cyber-attack –
data loss
A detailed analysis of these risks is provided on pages
42 to 45.
40
41
Risk Management
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
RISK
MANAGEMENT
KEY RISK ANALYSIS
Risk Category
Risk
What the risk means to us
Potential Impact
Mitigation
2018 Movement
2019 Focus
External
Strategic
Strategic
Strategic
1
2
3
4
5
6
7
Cyclical
economic effect
Geopolitics –
including Brexit
International
terrorism
Exchange rate
fluctuation
Market
concentration
The hotel sector is vulnerable
to events that negatively impact
economic activity as a whole
or that have the effect of
reducing expenditure on
travel and leisure services.
› Short-term or more prolonged
mild to severe reduction in
revenues and/or disruption
to supplies.
Significant fluctuation can make
destinations more expensive or
cheaper to visit.
› Reduction in number of
UK visitors to Ireland.
The Group has 60% of its
turnover in Dublin making it
more vulnerable to changes in
market dynamics in the city.
› Exposure to a decline in business
in the event of either a decline in
demand in Dublin or a significant
increase in supply.
UK expansion strategy
The Group’s strategy is
to expand its activities in
the UK market, adopting a
predominately capital-light
leasing model.
› There is a risk that this strategy
will not deliver on expectations
resulting in financial losses or
lower than expected returns.
Erosion of culture
and values
Rapid expansion may lead
to a dilution of the culture
that has been a key to the
Group's success.
› Complacency in the ranks
of management within hotels
or at central office.
› Underperformance.
Strategic
8
Senior management
succession
Failure to manage succession
at the senior level may interrupt
corporate development.
› Loss of strategic direction;
faltering leadership.
42
Risk Management
› Actively maintaining preparations for adverse
› 2018 saw increasing levels
external events affecting the business as a whole.
› Maintaining flexibility in the cost base to allow
for timely reaction.
› Staying relatively lowly geared, including
operational leverage, with a key focus on cash.
› Maintenance of a critical incident plan.
› Development and maintenance of strong
relationships and good communication with
key customers and suppliers.
› Development of wide spread of markets.
of international
uncertainty. The key
near term risk for the
Group is Brexit.
› In 2018 UK visitor numbers
to Ireland were flat but
this was off-set by
growth in other markets.
› Monitoring and developing
our plan to respond to
Brexit bearing in mind the
need to manage business
as usual despite prevailing
lack of clarity about the
likely outcome.
› Further commentary
on Brexit in the Chair's
statement on page 5,
CEO's review on page 7
and Financial Review on
page 29
› Continued market
development.
› Primary focus of expansion plans away
› The Dublin market
› Continuing UK expansion.
from Dublin.
› As supply increases, invest to maintain
Group market share.
› Close monitoring of market trends.
› Maintaining strong relationships
with key customers.
continued to perform
well in 2018 with RevPAR
growth of 7.2%.
› Disciplined approach to return
on investment criteria.
› Secured four additional
UK locations in 2018.
› Detailed analysis of potential investment locations,
including Board scrutiny.
› Focus on resilient city locations.
› Management experience in UK hotel development.
› Work ongoing on two
new Dublin hotels in
key locations.
› Growth focused on
new rooms.
› Continued search for
quality locations in this
market; maintain discipline
of location and investment
criteria.
› Investment in training and development
› Opening of five new hotels
› Ongoing investment
programmes.
effectively managed.
› Emphasis on internal promotion and management
development.
› Communication of company values and culture.
› Senior management engagement with workforce.
to identify future leaders
to deliver 2020/21
expansion plan.
› Development of formal
Company code of conduct.
› Development of succession and contingency
› Board engagement with
› Continuity of development
plans by Nomination Committee.
senior team.
programmes.
› Training and development of senior leaders and
› Leadership development
emerging leaders in the business.
programmes.
Link to our
Strategy
Growth
Growth
Growth
People
Customers
Growth
People
43
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
KEY RISK ANALYSIS (CONTINUED)
Risk Category
Risk
What the risk means to us
Potential Impact
Mitigation
2018 Movement
2019 Focus
Operational
9
Development
and retention
of expertise
Inability to attract people
to work in the business and
to retain and develop future
leaders.
› Risk to successful execution
of the expansion programme.
› Upward pressure on costs.
10
Availability of
human resources
Operational
11
Building hotel extensions
The building of an extension
brings specific risks to the
customer experience and for
health and safety management
at the subject hotel.
› Noise disruption, unhappy
guests and a loss of revenue.
› Project overrun and consequent
loss of revenue.
› Accident resulting in
personal injury.
Operational
12
New hotel
openings
Completion on time, planning,
resourcing, attracting business
to the hotel.
› Failure to deliver the desired
customer experience, consequent
impact on business, return on
investment, reputation.
Operational
13
Reliance on third
party IT systems
Risk of failure of a key third
party system provider to provide
ongoing and continued access.
› Interruption of service; loss of
revenue; breakdown in payment
or other key business processes.
Reputational
14
Health and safety
Risk of material operational
health and safety related
event (e.g. fire, food safety
or public health).
› Injury or loss of life or
major property damage.
› Financial loss and damage
to reputation.
Reputational
15
Cyber-attack –
data loss
Information systems are subject
to an external or internal cyber
event with the potential for data
loss/theft.
› Denial of service.
› Data breach.
› Loss of revenue.
› Business disruption.
› Reputational damage.
44
Risk Management
› Development of Dalata employer brand to
become employer of choice in the sector.
› Investment in learning and development
programmes.
› Meaningful employee engagement responses.
› Maintaining attractive compensation
and benefits packages.
› Increasingly challenging
recruitment and retention
environment.
› New hotel openings
created attractive
opportunities for
ambitious young
managers.
› Roll out of online
training resources.
› Redevelopment of
corporate website,
improving direct
recruitment platform.
› Focus on high quality project management
and site management.
› Due diligence on third party contractors.
› Support from central office for hotel.
› A busy year with four
major extensions
completed successfully.
› A number of projects
in the planning stage;
in the short term,
this risk is reduced.
› Consolidation of learning
from 2018 projects.
› Project management and communication with
construction team.
› Successful execution of
five hotel openings.
› One hotel opened
in January 2019.
› Adequate planning for recruitment and training.
› Sales and revenue management planning.
› Due diligence on systems partners.
› Business continuity and disaster
recovery processes.
› Internal audit programme to test resilience.
› Focus on bedding in
six hotels opened
between March 2018
and January 2019.
› Continued consolidation
to reduce the number
of system versions and
suppliers.
› Further investment
planned to enhance
functionality and risk
management.
› Increasing trend towards
cloud computing.
› Investment in resource
to strengthen systems
monitoring.
Link to our
Strategy
People
Customers
Customers
Brand
Growth
Customers
People
› Health and safety training
focused on prevention.
› Incident management training
and reporting.
› Critical incident plan.
› Implementation of
› Review of loss
improved reporting
of obligatory health
and safety training
compliance to senior
management and Board.
management processes
for liability claims.
› Review of health and
safety audit process.
Customers
› Investment in safety management systems
and systems maintenance.
› Audit of compliance and Board reporting.
› Adequate cover for insurable risks and regular
review of the insurance programme.
Brand
› Established IT security systems,
› Implementation of
› Implementation of
procedures and controls.
› External support and monitoring
on cyber risks.
› IT security review programme.
GDPR and development
of compliance processes.
information security
management system.
› Increase delivery of IT
security training across
the Group.
Customers
Brand
45
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance RISK
MANAGEMENT
VIABILITY
STATEMENT
MALDRON HOTEL PEARSE STREET
Oscar Lecki, F&B Supervisor
46
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 cash
flows, liquidity position and borrowing facilities are
explained in the Financial Review on pages 28 to 39.
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 three year period.
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 2021
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;
› It 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 pages 42 to 45 and are linked to the overall
Group strategy.
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 and 3 (page 42): Risks relating to the general
economic backdrop to the business involving the
specific risks to the economic environment including
Brexit and geopolitical shocks.
› Risks 11 and 12 (page 44): Risks relating to delays
on significant capital developments including the
residential development at the site of the former
Tara Towers Hotel.
Risk Management
The key risks assessed are risks
relating to the general economic
backdrop to the business involving
the specific risks to the economic
environment including Brexit and
geopolitical shocks and 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, the potential impact of these other risks
are not believed to be as potentially material as
those tested in the above scenarios.
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 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 over 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 or geopolitical
shock and is in compliance with its banking covenants.
In the general economic downturn or geopolitical shock
scenario, RevPAR was 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 of the business.
Under the scenario modelled, the Group also delayed
the receipt of proceeds from the sale of the residential
development in 2020 by three months, whilst making
no adjustment to the capital expenditure committed.
In the key modelled scenario of
general economic downturn or
geopolitical shock, RevPAR
was reduced by 25% within six
months with a resultant impact
on all other sales.
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. In 2018, the Group
successfully completed the refinancing of its existing
debt facilities. The Group entered into a €525 million
multi-currency facility with a maturity date of 26
October 2023. As a result, the Group has reduced
refinancing risk, has additional flexibility and headroom
which reduces liquidity risk. Sufficient available funds
headroom was maintained in addition to being in
compliance with all debt covenants at each semi-annual
review date in the modelled scenarios.
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.
47
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
RESPONSIBLE
BUSINESS
REPORT
Dear Shareholder,
In Dalata we are committed to ethical behaviour in
business and to taking responsibility for our impact
on society and the environment.
This responsibility starts with the example set by the
Board and is, I hope, reflected in the decisions and
behaviours of colleagues throughout the Group whether
in one of our hotels or in central office.
The Board and senior management team sets the
objectives for the organisation and subscribes to a set of
values which puts people at the centre of the business.
Our business strategy is explained in detail in this Annual
Report and it is designed with our values: people,
fairness, service and individuality in mind (page 2).
Doing business responsibly is part of
the strategy and part of the culture of
the organisation, not a bolt-on extra
or ‘nice to have’. Our culture also has
a real competitive edge - a relentless
focus on success but it’s never about
winning at all costs.
During the year we carried out research involving
shareholders, employees, customers, suppliers and
community participants to find out what they expect
from us. For the most part it was no surprise to hear
that health and safety, customer and employee welfare
(including privacy), corporate governance and the
environment were top of the list.
connection exists and, in the course of 2019, we will
take steps to communicate our ethos more effectively
both internally and externally.
As a first step, we have adopted a structure to allow us
to think more clearly about our impact on society and
the environment that will serve as a guide for ourselves
and colleagues throughout the business. Starting with
governance, we will continue to develop and monitor
Group policies, alignment with global standards for
reporting, the development of KPIs and assurance.
Our priorities under the three elements of the structure,
people, culture and environment, are described in the
following pages.
We are in the process of rebuilding our corporate
website and implementing a content management plan,
in conjunction with our social media communications to
keep all interested parties up to date with what is going
on around the company.
My thanks to many colleagues all across the business
who live the values of the company every day through
their interactions with customers, workmates and
suppliers. We don’t make grandiose claims to perfection
but we aspire to be a company that people are proud to
be associated with.
As I said at the outset of my review of the year on
page 6 – while a lot has been achieved, we still have
a way to go!
From a shareholder perspective there was a desire to see
more connection between our priorities and our business
strategy and our risk management. We believe this
Pat McCann
Chief Executive
Our responsible business framework
reflects The Dalata Way of doing business
ethically with consideration for our impact
on society and the environment.
1
3
4
2
1. GOVERNANCE
› Reporting
› Governance
› Integration
2. OUR PEOPLE
› Training and Succession Planning
› Diversity and Inclusion
› Labour Standards and Human Rights
3. OUR CULTURE
› True Hospitality
› Safety and Security
› Employment and Employability
› Community Engagement
› Responsible Supply Chain
4. ENVIRONMENT
› Energy Management and Emissions
› Water
› Waste
During 2018 we carried out an extensive engagement with a variety of stakeholders to identify their
expectations of us as a responsible corporate citizen. This helped us design a responsible business
framework to call out and communicate the important priorities. In our design, we also had regard
to our strategic priorities (pages 16 to 25 ) and our risk profile as a business (pages 40 to 47). Our
responsible business framework is brought to life through a variety of initiatives. In the following pages
we give some more detail on our priorities and share some example of progress made during the year.
48
49
Responsible Business Report
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance RESPONSIBLE
BUSINESS
REPORT
GOVERNANCE
We have adopted a responsible business
framework to allow the business respond
in a structured and progressive way to our
responsibilities to society and our impact
on the environment.
The Board is responsible for policy development and
oversight, including risk management as set out in
the risk management report (pages 40 to 47). In the
exercise of oversight the Board prioritises those non-
financial matters that are essential to the growth and
development of a sustainable business and organisation.
Dalata aims to comply with the European Union
(Disclosure of Non-Financial and Diversity Information
by certain large undertakings and groups) Regulations
2017. In the table to the right, we set out the company’s
response to managing its non-financial priorities and
advise where further information on compliance may
be found in this report.
Dalata has grown rapidly through acquisition over
a five-year period and has operations in over 40
locations. In 2018 the Group commenced a process
of standardisation of policy across the business.
Our objective is to underpin the sustainability of
the business by developing a coherent Group-wide
understanding of our responsibilities and, using the
responsible business framework as a guide, achieve
a consistent level of compliance with priorities based
on risk assessment and strategic relevance.
In 2019 this process will continue with the development
of a Group code of conduct, supplier code of conduct
and improved internal communication through
investment in our HR systems and the roll out of an
online learning and development platform. We will also
use the re-launch our corporate website to enhance our
engagement with stakeholders outside the organisation.
Reporting
requirement
Policies and
standards
Further
information and
risk management
Environmental
matters
› Environmental
policy
Employee
matters
Social matters
› Employee
handbook
› Health and
safety policy
› Safe work
practices policy
› Bullying and
harassment –
dignity in the
workplace policy
› Equal
opportunities
policy
› Whistleblowing
› Statutory Training
› Food standards
and traceability
› Community
support
› Privacy policy
Human rights
› Modern slavery
statement
› Data
protection
policy
› Privacy policy
Anti-bribery
and corruption
Business model
Policies
followed, due
diligence and
outcome
Description of
principal risks
and impact
of business
activity
Non-
financial key
performance
indicators
› Responsible
Business:
Environment
(page 56)
› Strategic
Priorities:
People
(page 22)
› Responsible
Business:
People
(page 52)
› Responsible
Business:
Culture
(page 54)
› Responsible
Business:
People
(page 52)
› Responsible
Business:
People
(page 52)
› Responsible
Business:
People
(page 52)
› Business model
(page 12 and 13)
› Our assurance
framework
(page 40)
› Risk
management
in practice
(page 41)
› Key risk
summary
and analysis
(page 41 to 45)
› Non-financial
KPIs
(page 15)
Case Study
Health and Safety Training
We are obliged by law or regulation to provide training
to our employees, depending on their duties, in up to
twelve specific areas. These include general health and
safety within the hotel environment, manual handling,
fire safety, food safety, responsible service of alcohol
and cash handling.
All new employees complete a full day of induction
within their first month of employment. They will
receive a company welcome and partake in one full
day’s classroom training. Task specific manual handling,
tailored to the department in which an individual works is
completed on site upon commencement of employment.
Each employee also receives and acknowledges our
employee handbook which sets out in a comprehensive
but accessible format the company’s policy in a wide
range of areas, including health and safety.
Training is delivered within the hotel environment by
qualified personnel, usually from our Human Resources
team with the use of external specialists where this
is required. The overall programme is designed and
monitored by Group Learning and Development based
at our Central Office.
Monitoring is based on an extensive training matrix which
is completed monthly at each property detailing the list
of completed and required training for all employees,
renewal dates for refresher training and department
specific training. An overall compliance score is compiled
for each matrix and a league table is created centrally
to benchmark properties and create a culture where we
strive for excellence in all areas of compliance.
Training records are subject to review by internal audit
and the Company retains external experts to carry out
regular unannounced audits of food, fire and general
health and safety compliance. A part of each hotel
General Manager’s annual incentive is based on the
property’s health and safety compliance record.
The Board receives a copy of the overall compliance
score and hotel league table as part of the Deputy Chief
Executive’s report at each scheduled board meeting.
1 Based on a survey of 1,500 customers carried out in June 2018
2 December 2018 Group compliance training matrix
50
51
Responsible Business Report
#1Responsible business priority for customers1—92%Overall compliance score2—94%Heath and safety awareness training completion2—94%Fire safety awareness training completion2 Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance RESPONSIBLE
BUSINESS
REPORT
PEOPLE
We aspire to be the employer of choice
in the hospitality sector.
promoted in the business were female and there is
a 50/50 gender split amongst participants on our
development programmes.
There are three broad headings in the people segment
of our responsible business framework: training and
succession planning, diversity and inclusion, and labour
standards and human rights. Our actions are influenced
by the feedback we receive through our employee
engagement programme.
Training and succession planning
Our commitment to training and development of
our staff and management is a strategic priority and
details of progress in 2018 are set out on page 22
and illustrated in the case study on page 23. The
company has recognised the importance of training
and development by adopting the number of internal
promotions as a Group KPI (see page 15).
Diversity and inclusion
Dalata embraces diversity at all levels in the
organisation and has an Equal Opportunities Policy
which is communicated to all employees through the
Employee Handbook.
We are committed to providing a harmonious and fair
working environment with real and equal opportunities
for all in which no form of intimidation or discrimination
exists. We enjoy and take pride in the diversity in our
workplace. The Group HR department based in Central
Office, reporting to the Deputy CEO, is responsible for
the operation of this policy.
The workforce overall has a generally even gender
balance and the Company monitors the gender balance
of senior appointments. In 2018 56% of individuals
Details of our Board Diversity Policy are set out in the
Corporate Governance report on page 69. This policy is
reviewed annually and the outcome of the 2018 review
is reported on in the Nomination Committee report on
page 73.
Labour standards and human rights
The Board has adopted a Modern Slavery Policy and
the 2018 modern slavery statement is published on
the company website. The Company recognises the
engagement of agency staff as a primary risk area in this
regard and reserves, and exercises, the right to audit the
employment records of individuals contracted through
key agency partners. In 2019 the company will adopt a
supplier code of conduct applicable to all suppliers which
will include provisions designed to provide assurance
in relation to labour standards and respect for human
rights through the supply chain. Supplier compliance
procedures will be designed using a risk-based approach
to provide further assurance.
Listening to our people
Around 3,600 of our people responded to our engagement
survey in December 2018. The survey results showed an
overall engagement score of 77%, a steady improvement
on previous years. This score is however not an end in
itself and for 2018 the company changed its engagement
survey partner in order to derive a greater depth of
insight from across the workforce. Over 34,000 pieces of
qualitative feedback were received through the December
survey and our General Manager’s 2019 incentive plans
include specific objectives based on the feedback received
from employees.
Case Study
Fire Safety
In 2018 an important improvement to Health & Safety
has been the implementation of online fire safety
system monitoring across all of our hotels. Every
entry and exit point of the hotel has a tracker, and
three times a day that tracker must be tagged by
a Duty Manager. At the point of tagging, the Duty
Manager is asked two questions: Is the extinguisher
in the right place, accessible and hasn’t been
tampered with. Secondly, are the means of escape
clear – lighting working, no obstacles in the way.
The results are made available to our Group
Insurance, Risk and Health & Safety Manager, who
can see which hotels have posted at any given time.
This has led to a very high level of compliance and
much greater assurance.
Fire safety is not the only benefit of the new system;
the system naturally requires Duty Managers to keep
regular checks on the general physical environment,
which bring any immediate issue to light.
Overall, the system has been a great addition to our
risk management process and benefits management,
staff and guests alike.
The safety and security of our guests
and staff is our primary concern.
52
53
Responsible Business Report
CLAYTON HOTEL DUBLIN AIRPORT
THE ITALIAN KITCHEN
50/50Male / Female split of participants on development programmes —61%of hotel management teams under 40—56%of 2018 promotions were femaleDalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance RESPONSIBLE
BUSINESS
REPORT
CULTURE
Our culture is reflected in the way that we
engage with our customers, communities
and suppliers and through our values of
fairness, people, service and individuality.
Customers
True hospitality
We receive a wealth of feedback from customers which
is a constant focal point for management in our hotels.
We have compiled this feedback into one of the Group’s
KPIs which is disclosed on page 15 of this report.
Safety and security
Guest safety and security is a priority for our guests,
and for us, and the work we do in the background to
ensure their safety is illustrated in the case studies on
page 51 and 53. The Board approves the Group Health
and Safety Policy and this is reviewed annually. In 2018
we adopted a Data Protection Policy and updated our
Privacy Policy to take account of the General Data
Protection Regulation (GDPR) which came into effect in
May. We have an active programme in place to ensure we
are managing our customers data securely and plan to
implement additional measures to protect data in 2019.
Communities
Employment and employability
We discuss diversity and our Equal Opportunities
Policy on page 52 and this is relevant also for our
relationships with our local communities. Our hotels
welcome applicants from every background. And our
managers can tell success stories of employees who
joined us after a period of unemployment or for their
first job. Many of these individuals have flourished in
their jobs and, in time, have been promoted to take
on greater responsibility.
54
Community engagement
Dalata has a tradition of supporting local community
organisations and sponsors many small youth and local
sports clubs. We value these relationships which are good
for the business and our general managers are encouraged
to engage with their local communities. Community
engagement extends to our support and advocacy for
the industry at large with CEO Pat McCann and Deputy
CEO Stephen McNally both past Presidents of the Irish
Hotels Federation. In recent years we have been proud to
support CMRF Crumlin (see page 55), our charity partner
in the Republic of Ireland, this was something small that
has developed into an important part of our community
engagement with hundreds of colleagues participating in
fundraising events throughout the year.
Suppliers
Responsible supply chain
Over the last two years the company has invested in
technology to dramatically improve the management of
our supply chain (see case study page 38), starting with
food and beverage suppliers in 2017 and on a phased basis
reaching all suppliers for goods and services as we head
into 2019. Building on this consolidation of the supply base,
we will revise and extend the supplier standards which we
apply to high-risk purchases (food and beverages mainly)
across the supply base in the form of a broad supplier code
of conduct. This will put our commitment to sustainability
on a sounder footing as we go forward.
The Board has approved an Anti-Bribery and Corruption
Policy and an Anti-Money Laundering Policy. The report
on our Whistleblowing Policy is detailed on page 77.
Responsible Business Report
Case Study
Dalata Digs Deep
2018 marked the third year of our charity initiative
“Dalata Digs Deep”, and what a great year it was. The
Group has supported Great Ormond Street Hospital
in the UK, Cancer Focus in Northern Ireland as well
as CMRF Crumlin.
The success of our relationship with CMRF Crumlin
has been greater than we could ever have imagined.
This past year we set a new record for the amount of
donations received, with the Group combining to raise
over €350,000. Dalata Digs Deep has now raised over
€930,000 since its inception – while we are immensely
proud of that figure, it is equally important to us that
we enjoy such great engagement from our staff.
This year’s feat could not have been accomplished
without The Great Dalata Cycle – where four of our
Central Office team cycled around every Dalata hotel
in Ireland in the name of CMRF Crumlin. The cycle
generated donations that have helped fund two research
projects in Neuroblastoma at the Hospital, work that
helps doctors understand better this form of cancer.
Although the efforts of our cyclists grabbed the
headlines, colleagues across the group contributed
to the success of our partnership with CMRF Crumlin
through a variety of events running throughout the year.
Our Northern Ireland staff make similar efforts to
support Perinatal Trust Fund (NI) raising money for
essential equipment, training and research for the
Regional Neonatal Unit, Royal Maternity Hospital,
Belfast. Meanwhile colleagues in England and Wales
partnered with Great Ormond Street Hospital
Children's Charity to raise money for parent and family
accommodation to support families of children travelling
to London for hospital care.
" In my view, the single biggest
factor in the success of Dalata
is the culture that affects
everything that we do."
John Hennessy, Non-executive Chair,
Dalata Hotel Group plc
Annual Report 2018
James McNicholas, Maria Rooney, Michael
McCann, Niall Macklin and Joe Quinn visit
Limerick on the trail of the Great Dalata Cycle
55
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance We are a first-time
responder to CDP in 2018
and were encouraged to
receive a “C” grade.
Case Study
CHP Unit at Clayton Hotel
Cardiff Lane
A combined heat and power unit (CHP) generates
both electricity and hot water from a single source, in
our case natural gas. The natural gas is used to drive
an electricity generator and concurrently, hot water is
supplied from the heat in the engine.
At Cardiff Lane, the CHP unit has been a resounding
success. The electricity has been fantastic in enabling
the property to use less traditional electricity and make
use of a more environmentally sustainable resource.
On top of that, the excess hot water created by the
unit isn’t wasted – we use it to heat the on-site
swimming pool and central heating system.
The success of the CHP is not isolated to Clayton
Hotel Cardiff Lane. The system is also in place at Clayton
Hotel Cork City and units are also being installed at
Clayton Hotel Belfast and Clayton Hotel Sligo. There are
also plans for further units in Clayton Hotel Liffey Valley
and Clayton Hotel Silver Springs.
RESPONSIBLE
BUSINESS
REPORT
ENVIRONMENT
Dalata recognises the significance
of global climate change and is
committed to minimising its impact
on the 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.
Greenhouse Gas Emissions
Dalata recognises the importance of managing and
reducing our energy and Greenhouse Gas (GHG)
emissions across our businesses. To this end we have
an active program of measurement and reporting our
performance in these areas across all our properties.
Last year we took the decision to report our Climate
Change strategy and performance to the global best-
practice environmental reporting framework, CDP.
And as a first-time responder, we were encouraged
to receive a ‘C’ score for our performance.
We are actively looking at projects throughout the Group
to reduce our energy consumption including upgrading
our lighting systems in our hotels to use a more energy
efficient LED bulb, upgrading the building management
systems in our hotels (BMS) and adding solar panels.
Water
We have continued to engage in conservation projects
across our hotels, as well as establishing our practices
in newly opened hotels. We have introduced glass bottles
in all our meeting rooms, bars and restaurants to reduce
our plastic and water usage.
Waste
In 2018, we have increased our efforts to remove single
use plastics in our business by completely removing
plastic straws in our hotels and replacing them with
paper straws. The end goal is to remove all single use
plastics from our business.
We manage food waste in our Irish hotels through
a specialist food waste collection company, Food
Surplus Management. For 2018, they confirmed the
following data:
Total waste
1,155 tonne
Renewable energy produced
461.9 MWh
C02 emissions savings by
diverting from landfill
577.4 tonne
Amount of fertiliser digestate
230.9 tonne
2019
Green ambassadors and green teams promote
environmentally sustainable initiatives in our hotels.
In late 2018, a Group Environmental Team was formed
under the leadership of Conal O’Neill, Group General
Manager Maldron Hotels, to co-ordinate their efforts,
thoroughly review our environmental policy, agree KPI’s
and set meaningful medium-term targets to reduce our
impact on the environment.
56
57
Responsible Business Report
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
CORPORATE
GOVERNANCE
CHAIR'S
OVERVIEW
Dear Shareholder,
I am pleased to introduce the Board’s report on
corporate governance for 2018.
In the following pages we introduce the directors
(page 60) and the management team (page 62),
explain the corporate governance structure (page
64) and set out the Company’s corporate governance
disclosures from page 65 along with examples of our
governance in action.
The detailed report of the Board Committees follow on
page 72 Nomination Committee, page 74 Audit and Risk
Committee and page 80 Remuneration Committee.
I am pleased to report that the Group
has complied with all of the relevant
provisions of the 2016 UK Corporate
Governance Code ("the Code") and
the Irish Corporate Governance
Annex published by Euronext Dublin.
There have been no changes to the composition of the
Board or the Board Committees during 2018, however
Board structure and composition is a matter that we
keep under review on an ongoing basis. I am happy to
report also that the result of the Board’s self-evaluation
provided evidence of the effective performance of the
Board and provided feedback for improvements in 2019.
The Board closely monitored developments in corporate
governance during 2018, particularly the publication
of the revised Corporate Governance Code in July and
guidelines published by the Investment Association and
others. We are actively considering the adjustments we
may need make to our governance structures to address
the changes in the Code from the start of 2019.
We are grateful for the continued strong support we
receive from shareholders, reflected in the results of
the AGM where all resolutions were passed with high
votes in favour.
We also appreciated the input we received from several
of our large shareholders to our review of environmental,
social and governance priorities which greatly assisted
us with developing our responsible business framework
which is explained in detail from page 48 of this report.
Once again, I conclude by reaffirming
my commitment to continuing to
oversee high standards of corporate
governance at Dalata; the company
has grown and evolved over the past
five years and we are proud of what
we have achieved.
As always, however we guard against complacency
and our focus is on building on our success and creating
long-term value for all of our stakeholders. If any
shareholder wishes to contact me in relation to the
content of the annual report, please do so through
the Company Secretary at the company’s address.
John Hennessy
Non-executive Chair
OUR BOARD VISITING OUR NEW CLAYTON HOTEL CHARLEMONT IN FEBRUARY 2019
Sean McKeon (Company Secretary), John Hennessy (Non-executive Chair), Pat McCann (CEO),
Stephen McNally, Margaret Sweeney, Dermot Crowley, Robert Dix, Alf Smiddy.
Principal responsibilities include
Board meetings and attendance
↘ Establishing the Group’s strategy,
business objectives and long-term plans.
↘ Review and approval of acquisitions, capital
projects and group financing.
↘ Overseeing the business and affairs of the Group
in light of emerging risks and opportunities.
↘ Selecting and maintaining a succession plan
for the position of the Chief Executive Officer
and key members of management.
↘ Review and approval of the annual budget.
The Board held eight formal meetings in 2018 and also
met separately for a full day strategy review and a full
day of tailored training.
Member
No. of meetings
John Hennessy
Pat McCann
Dermot Crowley
Stephen McNally
Margaret Sweeney
Alf Smiddy
Robert Dix
10/10
10/10
10/10
10/10
10/10
10/10
10/10
58
59
Corporate Governance
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance LEADERSHIP
OUR BOARD OF DIRECTORS
Company Secretary
John Hennessy (62)
Non-executive Chair
Pat McCann (67)
Chief Executive
Stephen McNally (54)
Deputy Chief Executive
Dermot Crowley (51)
Deputy Chief Executive -
Business Development
and Finance
Robert Dix (66)
Non-executive Director
Alf Smiddy (56)
Non-executive Director
Senior Independent Director
Margaret Sweeney (58)
Non-executive Director
Sean McKeon (51)
Company Secretary,
Head of Risk and
Compliance
Nationality
Irish
Date of appointment
27th Feb 2014
Committee membership
> Remuneration
> Nomination
Expertise
John is a Chartered Director
and a practising barrister.
He is a fellow of Chartered
Accountants Ireland and of
the Chartered Institute of
Arbitrators. He is also an
accredited mediator.
Other directorships
Listed:
> Non-executive Chair
of CPL Resources.
Non-Listed:
> Non-executive Director
of H&K International Ltd.
Irish
Irish
Irish
28th Jan 2014
28th Jan 2014
28th Jan 2014
Pat began his career with
The Ryan Hotels plc. In 1989
he joined Jurys Hotel Group
plc as a general manager
and in 1994 was appointed
to the Board as Operations
Director. From 2000 - 2006
Pat was the Chief Executive
of Jurys Doyle Hotel Group
plc and in 2007 founded
Dalata Hotel Group.
Stephen started his career
with Ramada Hotels in the
UK and Germany. In 1989 he
joined Jurys Hotel Group plc
where he worked for 17 years.
He managed hotels in the UK
and Ireland before he was
appointed as head of Group
Operations. Stephen became
Deputy Chief Executive at
Dalata Hotel Group in 2007.
Dermot worked with PWC,
Procter & Gamble, Forte
Hotels and Renault before
joining Jurys Doyle Hotel
Group plc in 2000 as Head
of Development. He spent
six years with Ion Equity
before joining Dalata in 2012
as Deputy Chief Executive -
Business Development and
Finance. Dermot is a Fellow
of Chartered Accountants
Ireland.
Non-Listed:
> Non-executive Director
of a number of private
companies.
> Vice President of IBEC.
Non-Listed:
> Director of St Patrick's
Day Festival.
Nationality
Irish
Date of appointment
27th Feb 2014
Committee membership
> Remuneration
> Audit & Risk (Chair)
Expertise
Robert was a partner in
KPMG Ireland where he
headed up the Transaction
Services Division. Currently,
Robert owns his own company
Sopal Limited providing advice
to different 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
Listed:
> Non-executive Director of
Glenveagh Properties plc.
Non-Listed:
> Non-executive Chair of
Quinn Property Group.
> Non-executive Chair of
Roadbridge Holdings ltd.
> Non-executive Director of
Actavo Limited.
> Non-executive Director
and Chair of Audit
Committee at Allianz
Ireland.
Irish
Irish
Irish
27th Feb 2014
27th Feb 2014
28th Jan 2014
> Nomination (Chair)
> Audit & Risk
> Remuneration (Chair)
> Nomination
> Audit & Risk
Former Chair and Managing
Director of Beamish and
Crawford plc. Alf has over 25
years experience in the Irish
and international hospitality
and beverage sector. He
is a Fellow of Chartered
Accountants Ireland and the
Irish Marketing Institute. He
has a Diploma in Corporate
Direction and a Masters in
Executive Leadership.
Margaret is CEO of Ires Reit
plc and previously led DAA
plc and Postbank Ireland
Limited as CEO. Margaret
worked with KPMG for 15
years as Director in Audit
and Advisory Services. She
is a Fellow of Chartered
Accountants Ireland and
a Chartered Director.
Sean worked with Dunnes
Stores, Keelings and
Diageo plc before joining
Dalata in 2007. In 2017, he
was appointed Company
Secretary and Head of Risk
& Compliance for the Group.
Sean is a fellow of Chartered
Accountants Ireland and an
MBA graduate of the UCD
Michael Smurfit Graduate
Business School.
Listed:
> CEO and Executive Director
of Irish Residential
Properties REIT plc.
Non-Listed:
> Director HSBC Institutional
Trust Services (Ireland) DAC.
Non-Listed:
> Non-executive Director
and Chair of Marketing,
Brand and Customer
Committee of ESB
> Chair and Non-
executive Director of
a number of private
companies.
> Director of the
Government backed
Social Innovation Fund
Ireland.
60
61
Board of Directors
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
LEADERSHIP
EXECUTIVE MANAGEMENT TEAM
Development Team
Finance Team
Marketing Team
Operations Team
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 B.Comm graduate of University
College Cork.
Niall Macklin is
Acquisitions and
Development Manager.
He joined Dalata in July
2015 having previously
working in the KPMG
restructuring department for 9 years,
where he managed large scale insolvency
and restructuring assignments across
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.
Paul Maloney is Project
Manager Developments.
Prior to joining Dalata in
June 2016, Paul worked
as Construction and
Asset Manager in
commercial developments. 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.
Stephen Clarke is
Group Financial
Controller having
joined the group in
2008. He started his
career as a graduate
Patrice Lennon is
Head of Sales and
Marketing. She
previously held the role
of Sales and Marketing
Manager at the Clayton
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.
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.
Carol Phelan is Group
Head of Financial
Reporting, Treasury and
Tax. Carol 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 Masters of
Accounting from UCD Michael Smurfit
Graduate Business School.
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.
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
of 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.
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.
62
Executive Management Team
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.
Conal is a fellow of the Irish Hospitality
Institute and a BA graduate of the Hotel
School at Galway Mayo Institute of
Technology (GMIT).
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.
Des McCann was
appointed Group
General Manager
- Clayton Hotels Ireland
in December 2018. He
joined Dalata in 2009
and was General Manager at Clyde
Court Hotel, Ballsbridge Hotel and most
recently Clayton Hotel Dublin Airport.
He is a HR Management and Industrial
Relations graduate of The National
College of Ireland.
Tony McGuigan is Head
of Procurement. 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.
Dawn Wynne is the
Head of Human
Resources and has being
with Dalata since 2008.
She previously worked
internationally in the UK,
France and Italy in a regional capacity,
including with Jurys Doyle Hotel Group
plc where she held the position of
Deputy Manager with the Burlington
Hotel. Dawn is a graduate of Glasgow
University and Glasgow Caledonian
University and is CIPD qualified
Duncan Little is Group
Capital and Development
Manager and has been
with Dalata since 2008.
He previously held
positions at the
University of Bristol and Bank of Ireland.
His primary degree was in engineering
technology from UCD, followed by a
degree in veterinary medicine and
surgery from University of Glasgow.
Duncan also holds an MBA from the
UCD Michael Smurfit Graduate
Business School.
Internal Audit
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 UCD Michael Smurfit Graduate
Business School.
Anthony Murray is a
graduate in Hospitality
Management from DIT
Cathal Brugha St,
Anthony was employed
by Quality Hotels and
Comfort Inns in an IT capacity prior to
the acquisition by Dalata in 2007. A
career spent entirely in the hospitality
industry, he has held roles in various
Operational and Management positions.
Anthony has been involved in the
opening of more than thirty hotels and is
responsible for the strategy, development
and implementation of all IT decisions
and projects at the Group’s hotels and
Central Office.
Martha Mannion is
Head of Rooms Revenue
and Distribution. She
joined Dalata Hotel
Group Plc in 2008 having
previously worked with
Jurys Doyle Hotel Group plc in the UK
and Ireland in a number of locations
including London, Manchester,
Southampton and progressing to General
Manager of Jurys Inn Galway. Martha is
a graduate of Hotel Management and
Business from Galway Mayo Institute of
Technology and an MBA Graduate from
Heriot-Watt University.
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 Clayton
Hotel Cardiff Lane. Prior to this Caitriona
worked with Jurys Doyle Hotel Group.
Caitriona holds a BA in Social Science
from UCD.
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.
63
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
CORPORATE
GOVERNANCE
REPORT
Dalata Corporate Governance Framework
Board of Directors
Audit and Risk
Committee
Remuneration
Committee
Nomination
Committee
Chief Executive Officer
Executive Risk
Committee
Senior
Management
Disclosure
Committee
Chair and Chief Executive
As recommended by the Code, the roles of the Chair and
the Chief Executive Officer are separately held and the
division of their responsibilities is clearly established and
has been set out in writing and approved by the Board.
The Chair, John Hennessy, is responsible for leadership
of the Board and ensuring its effectiveness in all respects
including ensuring accurate, timely and clear information
for the Board. The Executive Directors, led by the Chief
Executive, Pat McCann, are responsible for the day to
day management of the Group’s operations and for the
implementation of the Group’s strategy and policies
agreed by the Board.
Senior Independent Director
Alf Smiddy is the Senior Independent Director. He
is responsible for conducting an annual performance
review of the Chair, facilitating the Board evaluation
process, providing advice and judgement to the Chair
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 Chair, Chief
Executive Officer or Deputy Chief Executive, Business
Development and Finance.
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.
Company Secretary
The Directors have access to the advice and services
of the Company Secretary, Sean McKeon, who is
responsible for ensuring that board procedures are
followed, assisting the Chair in relation to corporate
governance matters, and ensuring compliance by the
Group with its legal and regulatory requirements.
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 of any
changes to these conflicts.
Leadership
Board membership
There are seven members of the Board, which
comprises of a Non-executive Chair, three Non-
executive Directors and three Executive Directors.
The Directors are of the opinion that the composition
of the Board provides the necessary skills, knowledge
and experience, gained from a diverse range of industries
and backgrounds, required to manage the Group.
The experience of each Director is set out in their
biographies which are detailed on pages 60 to 61
and the Board considers that their biographies
reflect suitable breadth and depth of strategic
management experience.
Role of the Board
The Board is primarily responsible for
the long-term success of the Group,
for setting the strategy, for the
leadership and control of the Group
and to provide appropriate challenge
to ensure management remains
focused on achieving the strategic
objectives for delivering value to the
shareholders and other stakeholders.
There is a clear division of responsibilities within the
Group between the Board and executive management,
with the Board retaining control of strategic and other
major decisions under a formal schedule of matters
reserved to it 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;
› Review and consideration of 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.
64
65
Corporate Governance Report
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance Effectiveness
Meetings and attendance
The Board meets sufficiently regularly to ensure that all
its duties are discharged effectively. Board meetings are
intentionally held at Dalata hotels in different locations
to broaden the Board’s exposure to the markets in which
the Group operates and to provide opportunities to meet
frontline staff and other colleagues.
During 2018, the Board held eight formal Board meetings
and two full day meetings dealing with strategy and Board
training. There was full attendance by all members.
Board Committees
The principal Committees of the Board are the Audit
and Risk Committee, the Remuneration Committee
and the Nomination Committee. They support the
operation of the Board through their focus on specific
areas of governance. Reports on the activities of the
individual Committees are presented to the Board by
the respective Committee Chair.
Further details on the activities of each Committee
can be found in their respective reports on:
› Nomination Committee page 72
› Audit & Risk Committee page 74
› Remuneration Committee page 80
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 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.
Time 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 2018,
each Non-executive Director confirmed that they had
been able to allocate sufficient time to discharge their
responsibilities effectively during 2018.
CLAYTON HOTEL
CHISWICK
Governance in Action:
Board Training
Governance in Action:
Dividend Policy
Every year the Board comes together for a full day group
training seminar which is designed to address topics
of strategic importance to the company. Four to six
speakers are provided detailed briefings on the company
and each session is designed to be highly interactive so
that learning outcomes have a specific relevance for
Board members. This year’s session was held in Clayton
Hotel Chiswick in November and the Board received
presentations from the Chief Economist at EY Ireland on
the overall global outlook of the economy, the UK and
Ireland and the specific cities in which we operate, a very
thought-provoking piece around Employee Engagement
where valuable insights were gained about the Millennial
Generation and an expert view on buy-side insights and
investor relations best practices.
In our March 2014 Admission Document, we explained
to prospective shareholders that it was the Company’s
intention to commence the payment of dividends as
soon as practicable after the investment of the proceeds
of the share placing, following a progressive but prudent
dividend policy thereafter, subject to retaining the
financial resources required for the development of
the Group.
Between 2014 and 2018 there were many debates in
the boardroom about the timing of the first dividend
and at what level of pay-out. There were also many
conversations with shareholders in investor meetings
during this time which were considered in board
deliberations.
An interactive case study presented by Anthony
Fitzsimons, the Chair of Reputability, a leading
consultancy specialising in reputational risk and its
root causes highlighted to the Board examples of
corporate crises of recent years where Boards
overlooked the role of culture and conduct within
the business which led to the reputations of global
companies being forever damaged. The case study
provided the Board with an excellent opportunity
to consider the risks currently present in our own
organisation not only from a risk management
perspective but also from an organisational behaviour
perspective and how the Board can build greater
resiliance to any potential vulnerabilities.
The Board consulted with the Company’s brokers
and analysed the dividend policies of a range of peer
companies in both the Irish and international market.
Sensitivity testing was carried out over a range of
earnings and pay-out ratios which allowed the Board
strike the balance between providing a meaningful and
sustainable dividend return to shareholders while still
retaining the flexibility required to fund organic growth.
After four years of successful growth and expansion,
the Board agreed in early 2018 that the time was
approaching to commence dividend payments. It
revisited and refreshed its earlier analysis, and sought
further advice and listened to the views of shareholders.
The Audit and Risk Committee reviewed the proposed
policy, the supporting analysis and professional advice
received, and considered the adequacy of distributable
reserves and other technical matters.
On 27 February 2018, the Company announced its
intention to adopt a progressive dividend policy with the
pay-out based on a percentage of profit after tax in the
range of 20% to 30%. An interim dividend of 3 cent per
share was declared in September 2018 and was paid on
12 October 2018. A final dividend of 7 cent per share
has been recommended by the Board for shareholder
approval at the AGM on 2 May 2019. The total of 10
cent per share represents a return to shareholders of
25% of profit after tax.
66
67
Corporate Governance Report
Strategic Report
Corporate Governance
Financial Statements
Additional Information
Dalata Hotel Group plc Annual Report and Accounts 2018 BOARD ACTIVITY
2018 HIGHLIGHTS
Q1
Q2
January: Jameson Distillery
Audit and Risk Committee terms of reference
February: Central Office, Sandyford
Review
Financial statements 2017
Market announcement
Investor presentation
Annual Report
Approval
Commencement of Dividend payment policy and
strategy Clayton Hotel Bristol agreement for lease
April: Clayton Hotel Leeds
Approval
Spencer Place
Charles St. Manchester
Maldron Hotel Birmingham
LTIP Vesting 2015 resolutions
May: Clayton Hotel Dublin Airport
AGM
June: Churchtown House, Dundrum
Board Strategy Day
Review of Financial and Development Strategy
Review of Culture
Q3
July: The Gibson Hotel
Approval
Clayton Hotel City of London
Maldron Hotel Merrion Road re-development
Revised share dealing code
September: Clayton Hotel Ballsbridge
Half year financials and investor presentation
Interim Dividend
SAYE Approval
Q4
October: Maldron Hotel Sandy Road, Galway
Approval
Re-Financing and Group re-organisation
November: Clayton Hotel Chiswick
Board Training Day
December: Clayton Hotel Burlington Road
Approval of 2019 Budget
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 2018. 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.
Re-election of Directors
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 Code, the
Board has decided that all Directors should retire at
the 2019 Annual General Meeting and offer themselves
for re-election.
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 2018.
Ongoing Director training and development
The Board as a whole engages
in development through a series
of presentations with experts
on a range of topics including
risk management, corporate
governance and strategy.
Presentations are also made by Executive Directors
and senior management on various topics throughout
the year in relation to their areas of responsibility. In
November 2018, a Directors’ Training Day was facilitated
by the Company Secretary and was attended by both
Executive and Non-executive Directors. See Governance
in Action feature on page 67.
Each Director may obtain independent professional
advice at the Company’s expense in the furtherance
of their duties as a Director. Each Committee is
supported by the Company Secretary and his Deputy.
In addition, each Committee is able to seek independent
professional advice.
Information flow at meetings
Eight formal board meetings and two additional full
day meetings dealing with strategy and Board training
were held during 2018. 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 Chair 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 Chair and Chief Executive Officer also
maintain regular informal contact with all directors.
Board diversity
The Board has adopted a Board Diversity Policy which
is reviewed annually, most recently in December 2018.
The objective of the policy is to help achieve the
optimum board composition of skills and experience.
In accordance with the policy, all Board appointments are
made on merit, in the context of the skills, experience,
independence and knowledge which the Board as a
whole requires to be effective.
The policy statement also 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. These differences will be considered in
determining the optimum composition of the Board and
when possible will be balanced appropriately.
The Board Diversity Policy was considered as part of
the Board's self evaluation process in 2018 and although
there were no changes to the board composition during
the year it will remain an important concern during 2019.
Further detail is given in the Nomination Committee
Report on page 73.
68
69
Corporate Governance Report
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance Board evaluation
We recognise the importance of evaluating the
performance of the Board, its main Committees and all
Directors, in line with the Code. Following the externally
facilitated evaluation in 2017, Senior Independent
Director Alf Smiddy conducted an internal evaluation
at the end of 2018. The Chair also met with each
Director individually during the year to discuss Board
effectiveness and composition.
The 2018 evaluation was designed to follow the approach
and findings of the previous year's external review and
included a separate review of Committee effectiveness.
› A comprehensive questionnaire was completed by each
Director dealing with key areas of Board effectiveness.
› These included Board composition, risk, working
together, process and procedure, and ethics and
compliance.
› The individual responses were compiled by the
Company Secretary and a report was prepared
by the Senior Independent Director.
› The findings were presented to the Nomination
Committee and, following its review, to the Board.
› Action areas identified for 2019 included a review
of certain Board communications, along with the
approach to specific areas of risk management
and Board reporting.
The outcomes of the Board
evaluation process have been
positive, and have confirmed to
the Chair that the Board and
its Committees operate effectively
and that each Director contributes
to the overall effectiveness and
success of the Group.
Shareholder engagement
The Board recognises that, for the
Group to be successful over the long
term, it is important to build and
maintain successful relationships
with a wide range of stakeholders.
This is formalised within the ongoing comprehensive
investor relations programme conducted by the CEO
and /or Deputy Chief Executive Officer – Business
Development and Finance. Throughout the year
meetings are held with institutional investors and sell-
side analysts. These meetings allow us to discuss the
Company’s strategy, business model and the markets we
operate in. In addition, the Chair and Senior Independent
Director are available to meet with shareholders on
request, should they want to discuss any concerns they
may have. The Board is kept informed of the views of the
shareholders by receiving updates at Board meetings on
any engagement undertaken. Analyst research on the
Company is also shared with the Board.
The Group makes every effort to ascertain investor
perceptions and regular reports of investor and analyst
feedback are provided to the Board. During 2018, over
260 separate meetings and conference calls were held
with existing and prospective shareholders.
The annual report and accounts are sent to all
shareholders who wish to receive a copy and they are
also available in the investor section of the Group’s
website www.dalatahotelgroup.com.
Other stakeholders
During 2018, the Board commissioned workshops
and interviews with our employees, suppliers,
communities and investors to identify the key priorities
of each stakeholder. Further detail on the Company’s
stakeholders and examples of how the Company engages
with them is included in the Responsible Business Report
on pages 48 to 57.
Risk management
On page 40 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 42 to 45.
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.
AGM
The Annual General Meeting
will be held on 2 May 2019 at
the Clayton Hotel Ballsbridge,
Merrion Road, Dublin.
Formal notification will be sent to shareholders at
least 20 working days before the meeting in
accordance with the provisions of the 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
Code. The Annual General Meeting gives shareholders
an opportunity to hear about general development of
the business and to ask questions of the Chair 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.
Governance in Action
Investor Relations
Activity in 2018
February 2018
Events
• FY 2017 results
released - investor
conference call
Roadshows
• FY 2017 results
roadshow in Dublin,
UK, Europe and US
April 2018
Conferences attended
• Berenberg
UK Corporate
Conference 2018,
Watford, UK
June 2018
Conferences attended
• Davy 10th
Annual Transport
Conference, London
November 2018
Conferences attended
• Investec Best Ideas
Conference 2018
• Goodbody
Leadership Summit,
Boston
• Goodbody 11th
Annual Equity
Conference, Dublin
March 2018
Roadshows
• FY 2017 results
roadshow in Dublin,
UK, Europe and US
Conferences attended
• Davy Equities
Ideas Conference,
Frankfurt
• SGCIB European
Hotels, Leisure
and Transport
Conference, Paris
May 2018
Events
• AGM
Conferences attended
• Goldman Sachs:
European Small and
Mid Cap Symposium
2018, London
• Berenberg US
Conference 2018,
Tarrytown
• Goodbody
Roadshow, Paris
September 2018
Events
• HY 2018 results
released - investor
conference call
Roadshows
• HY 2018 results
roadshow in Dublin,
UK, Europe and US
Conferences attended
• Davy 11th Annual
Industrials
Conference,
New York
December2018
Events
• YE 2018 trading
update released
Conferences attended
• Berenberg European
Conference,
Pennyhill, London
70
71
Corporate Governance Report
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance NOMINATION
COMMITTEE
REPORT
Principal responsibilities
↘ 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.
Committee meetings and attendance
The Committee met three times during 2018.
Member
No. of meetings
John Hennessy
Alf Smiddy
Margaret Sweeney
3/3
3/3
2/3
All members of the Committee are considered by the
Board to be independent.
See the Committee’s
terms of reference on:
www.dalatahotelgroup.com
Dear Shareholder,
I am pleased to present the report of the Nomination
Committee for 2018. The Committee had a busy year
in 2018, meeting formally on three occasions during
the year.
Our meetings covered a range of topics, including
the following:
› Discussion and debate on Board size and composition
› Consideration of the process for the appointment of
new directors
› Succession planning at Board and senior
management level
› Guiding the training programme for Directors
› Carrying out an evaluation of the Board’s effectiveness
› Reviewing Board policies on diversity
› Director re-election
› Evaluation and considering the principles and
provisions of the revised Corporate Governance
Code which came into effect on 1 January 2019.
2018 Activities
Board size and composition
The Board is currently made up of seven directors:
a Non-executive Chair, three independent Non-executive
Directors and three Executive Directors. The Board size
and structure are reviewed on an ongoing basis and the
Committee has considered this year the make up of skills
and experience, in light of the ongoing development and
expansion of the Group in the UK.
The Committee has identified the key
attributes and skills for the future for
Executive Director and Non-executive
Director appointments.
Succession
The Committee receives updates from management
on succession planning activity through the business.
Indeed Non-executive Directors avail of opportunities
to engage regularly with members of the executive team
below director level. Senior managers regularly present
at Board, strategy and training meetings, and this
process has become more structured throughout 2018.
The Committee also promotes and provides input to the
training and development of the Executive Directors.
The Committee discussed and is aware of the Code
provisions concerning Board independence, composition
and succession. Succession planning is fully considered
by the Committee on an ongoing basis.
Director training
The Board is committed to training and development.
Individual directors are expected to take responsibility
for their own development needs, which they are
encouraged to identify as part of the annual Board
evaluation process, and the Board is regularly updated
on such training.
Policy review
The Committee reviewed Board policies on diversity,
Board evaluation and director re-election at its
December meeting. This review took account of the
changes to the Code published in July. Whilst the Code
revision did not result in material change to our existing
policies, nonetheless the review discussion provoked
further debate on the application of these policies in the
coming year.
The Group acknowledges the value of a diverse Board
and in planning for Board succession and rotation. The
Group considers candidates on merit against objective
criteria, having due regard to the benefits of diversity
of gender, skills, regional and industry experience,
background and race.
Changes to the code for 2019
The Committee considered the changes to the provisions
of the Code in July 2018. The provisions relating to Board
composition have been studied and, as mentioned earlier
will influence our approach to board succession planning.
The Company also carries out research to identify
suitable training opportunities and facilitates attendance
by individual directors.
A decision was made by the Board to appoint one of the
independent non-executive directors to lead the Board’s
engagement with the company’s workforce, and this
appointment will be made in the first half of 2019.
In November each year the Board dedicates a full day to
a collective training event, which allows all members to
consider topics of strategic importance to the business
with input from external experts. Last November’s
session focused on the:
› Economic risks facing the Company and how these
may impact strategy execution,
› Leading recent research on reputational risk
management,
› Insights on employee engagement from a large
employee owned organisation and
› The impact of changes in regulation on the operation
of capital markets and shareholder engagement.
Board evaluation
Following our first externally facilitated Board evaluation
carried out in 2017, the Committee facilitated the internal
review conducted at the end of 2018. We redesigned
the questionnaire used to collect inputs from Directors
to make sure we had continuity with the previous year’s
process. The evaluation provided eight to ten discussion
points and actions arising, which will further enhance
elements of Board communication, risk management
and Board reporting. Board evaluation takes place on an
annual basis with external facilitation every third year.
Priorities for 2019
This year the Committee will continue
the work commenced in 2018 on
succession planning.
We will be following up on actions arising from the
most recent board evaluation and continuing to work
with the Company Secretary on the Board training and
development programme.
Following the opening of six new-build hotels since
last March, the company has entered in earnest to a
new phase in its development, and I look forward to
working with the Chair and the other members of the
Board to ensure we have the right blend of skills and
experience at Board level to continue the development
of this exciting business.
I look forward also to meeting some of you at our
AGM in May.
Alf Smiddy
Chair, Nomination Committee
72
73
Nomination Committee Report
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance AUDIT & RISK
COMMITTEE
REPORT
Role of the Committee
↘ Monitor the integrity of the Group’s financial
statements, accounting policies and the key
judgments 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.
Committee meetings and attendance
The Committee met five times during 2018.
Member
Robert Dix
Alf Smiddy
Margaret Sweeney
No. of meetings
5/5
5/5
5/5
All members of the Committee are considered by the
Board to be independent. The Board considers that
the Committee Chair 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.
See the Committee’s
terms of reference on:
www.dalatahotelgroup.com
Dear Shareholder,
I am pleased to report on the work of the Audit and
Risk Committee for 2018. It has been another year
of growth and development for the Company and
the Committee has taken an active role in assessing
risks associated with a number of milestone events,
including the commencement of dividend payments
and the refinancing of the Group’s debt facilities.
The Committee pays close attention to the Group’s
accounting policies, especially those requiring a high
degree of judgement. The basis on which the key
judgements were made is explained in detail on pages 76
and 77 and the majority of them are connected with the
Group's acquisition and development activity. Land and
buildings are initially stated at cost and subsequently at
fair value (significant accounting policies 1.(xi), pages 113
and 114). This provides users of the financial statements
with a high degree of transparency. However this also
introduces a significant level of judgement and the
Company has engaged valuation specialists to assist
in this process. The valuation process and results are
subject to careful scrutiny by the external auditors and I
am happy to report that there has been no disagreement
with the judgement of the Company.
A description of the Committee’s process for oversight
of the relationship with the External Auditor is set out in
detail on page 78 and I am satisfied that we continue to
maintain a good working relationship with the audit team
at KPMG who are represented at all of the Committee
meetings. During the year, the Committee met with the
External Auditor without the presence of management
on two occasions to discuss matters relating to its remit
and any issues arising from their work. Sean O’Keefe
will step down as lead partner upon completion of the
2018 audit, having served for five years, and will be
replaced by Patricia Carroll who takes over lead partner
responsibility with immediate effect.
The Company commenced dividend payments in 2018
and the Committee invited management to present in
detail on the rationale for the proposed policy.
These deliberations provided additional assurance to
the Board that the decision was supported by thorough
analysis and that the necessary professional advice had
been obtained in relation to the adequacy of distributable
reserves and other technical matters.
The Committee reviewed the
structuring of the Group’s new
debt facilities announced in October
and received detailed presentations
from management and professional
advisors on the strategies employed
to manage the foreign exchange and
interest rate risks associated with
the new facilities.
This review also considered the tax treatment of interest
payable to ensure that the arrangements for Group
financing met the objectives of efficient tax planning
and full compliance in each jurisdiction where the
Group operates.
We continued to complement the work of the internal
audit team led by Macarten McGuigan with a number
of engagements carried out by EY into the operation of
the Group’s ICT infrastructure and business continuity
planning. Detailed internal audit reports are reviewed at
our quarterly meetings and we meet the Internal Auditor
regularly without management present.
The Committee monitors the management of health,
safety and operational risk and received detailed
presentations at its May meeting to get a full picture
on the management of these risks across the Group.
The presentations included a review presented by the
external specialist engaged to monitor compliance with
health and safety standards in our hotels, a presentation
from management on its health and safety management
programme, and an analysis of the performance of the
Group’s self-insurance programme from the Company
insurance brokers. The Committee also received a
briefing on the renewal of the Company’s insurance
programmes in December.
In December, the Committee also received a
presentation on non-financial reporting obligations in
the context of the implementation of the non-financial
reporting directive, feedback received from investors
and other stakeholders through direct engagement work
carried out during the year and in response to the revised
Corporate Governance Code published in July.
We were happy to recommend the adoption of priorities
reflected in the framework described in the Responsible
Business report (pages 48 to 57) and look forward to
overseeing the continued development of this important
aspect of our corporate reporting.
The discussion of the risk register is a standing
agenda item at each meeting of the Committee; a
long list of risks is considered with a focus on the key
risks, emerging risks and those where management
present a view that the level of risk has increased or
receded significantly.
The Committee sought and received presentations
from management to satisfy the Committee that
systems are in place and functioning adequately to
support the Director’s statement of compliance in
the Directors' report on page 93. A review was also
carried out of the draft Director’s statements on going
concern (page 94) and viability (pages 46 to 47) prior
to recommending both for approval by the Board. The
Committee also received a presentation in May from
an external expert engaged to oversee the Company’s
preparations for compliance with the General Data
Protection Regulation (GDPR).
2019 presents a new set of challenges and much to
look forward to. We have given careful consideration
over the past eighteen months to the implementation
of new accounting standards, particularly IFRS 16 which
will have a significant effect on the presentation of our
financial statements. We are committed to implementing
and communicating the changes in a way that helps the
reader understand them. Meanwhile, the management
team will continue to integrate the six new hotels opened
since last March and is overseeing the development of a
further eight scheduled to open between 2020 and 2021.
My thanks to the management team, internal audit
and the Company advisors for their support and co-
operation in helping the Committee in fulfilling its
oversight responsibilities. I look forward to leading the
Audit and Risk Committee in the year ahead, continuing
to focus on developing the Company’s risk management
processes and overseeing the continued success of
the Company.
Robert Dix
Chair, Audit and Risk Committee
74
75
Audit & Risk Committee Report
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance Significant Financial Judgements in 2018
Matter
Judgements
Matter
Judgements
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 during 2016.
The carrying value of other indefinite-lived intangible assets at 31 December 2018
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.
CGUs 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
2018 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 2018.
Accordingly, the Committee has concluded that the carrying value of intangible
assets is appropriately stated at 31 December 2018 and that the disclosures
included within note 10 of the Group consolidated financial statements
are adequate.
MALDRON HOTEL
NEWCASTLE
Property 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 2018 was €1.08 billion
(note 11, pages 137 to 142). 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.
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 2018. The Committee has discussed the valuation approach undertaken
with management.
Through discussion with management and considering the findings of the
External Auditor, the Committee is satisfied that the year end property valuations
are reasonable and that the revaluation movements have been appropriately
presented in the Group consolidated financial statements.
Depreciation of property, plant
and equipment
Depreciation is a key accounting estimate.
Depreciation requires judgement to be made in areas where there may be
subjectivity or measurement uncertainty such as useful estimated lives of assets,
the estimated residual values of buildings and the allocation of property values
between land and buildings.
The Committee reviewed in detail in 2017 the approach taken by management
in relation to useful estimated lives and is satisfied, through discussion with
management and considering the findings of the External Auditor that the
approach during 2018 is consistent and remains reasonable.
The Committee has discussed the allocation approach between land and buildings
and the determination of residual values with management. This included
discussion on the results of reports by external professional advisers engaged to
update the calculation of residual values.
Through discussion with management and considering the findings of the External
Auditor, the Committee is satisfied that these judgements are reasonable.
Accordingly, the Committee is satisfied that the depreciation of property, plant
and equipment is correctly stated in the Group consolidated financial statements.
Carrying value of goodwill
Goodwill amounted to €33.3 million at 31 December 2018 (2017: €33.4 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 certain CGUs were determined to be higher than their
carrying values at 31 December 2018, no impairment of goodwill was recognised.
Accordingly, the Committee has concluded that the carrying value of goodwill is
appropriately stated at 31 December 2018 and that the disclosures included within
note 10 of the Group consolidated financial statements are adequate.
76
77
Audit & Risk Committee Report
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
We have evaluated KPMG on their work completed
during 2018. 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
The assessment of the principal risks and risk
management for the Group appear on the agenda at
each Committee meeting. Of particular interest to us
are the emergence of new risks and changes in the
profile of particular risks or risk categories. Details on
the Group’s risk management framework are set out
on pages 40 to 47.
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. Following on from our improvements to the
internal control environment last year, we are expanding
our shared service centre to streamline more services
for our hotels, developing a new and improved income
audit process within the individual hotels and further
enhancing our procurement system. The Internal Audit
function also reviews the effectiveness of these controls
through its audit programme and internal audit reports
are considered at each of our meetings.
Whistleblowing
The Board has approved a Confidential Disclosure
Procedure (Whistleblowing Policy) which is reviewed
annually. The procedure allows for concerns to be raised
by employees and ensures that they are addressed
confidentially, promptly and thoroughly. No concerns
were raised by employees using the procedure during
the year. A summary of the Confidential Disclosure
Policy is included in the Employee Handbook to
ensure all employees have an understanding of the
whistleblowing process.
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 lead engagement
partner since 2014 is Sean O’Keefe. Sean will step
down as audit partner upon completion of the 2018
audit and will be replaced by Patricia Carroll. The
Group currently has no plans to tender for this service,
although cognisant of the EU Audit Regulation and
Directive requirements on auditor rotation, which are
monitored on an ongoing basis.
KPMG attend all of our Committee meetings and, in
October, they presented their audit plan 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. We also met with the External Auditor
privately on two occasions in 2018, prior to the
publication of our interim and final financial results.
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
has agreed a procedure with management for
Committee pre-approval of these services.
KPMG carried out tax advisory services in 2018
related to capital allowances, the redevelopment of
Tara Towers, the restructuring of a subsidiary company
and a number of other matters. Other non-audit services
included sustainability advisory services and a small
number of incidental matters. The fees paid to KPMG
for 2018 are set out on page 124. The ratio of non-audit
to audit fees was 1.07:1.
Internal Audit
The Committee is responsible for overseeing the
effectiveness, scope of work and operation of the
Internal Audit function. At each Committee meeting
we consider 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.
The Group Internal Auditor presented the planned
internal audit approach and main focus areas for the year
which were considered and approved by the Committee.
The internal audit plan was developed from this approach
and the Committee monitored progress against the plan.
During 2018, the scope of hotel audits has also widened
to include IT controls and in 2019 data protection testing
will be introduced to support compliance in this area. EY
provides technical expertise to support internal audit in
relation to IT, cyber security and data protection. The
Committee also received a presentation from the advisor
appointed by the Company to assist with implementing
procedures to comply with the GDPR at its May meeting.
At our December meeting we reviewed and updated the
internal audit terms of reference and the role description
of the Group Internal Auditor.
CLAYTON HOTEL
CHARLEMONT
78
79
Audit & Risk Committee Report
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance 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 Group
framework for the remuneration of the
Executive Directors.
↘ Within the terms of the agreed policy, determine
the total individual remuneration package of the
Chair 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 and
Chair is approved by the Board.
Committee meetings and attendance
The Committee met five times during 2018.
Member
No. of meetings
Margaret Sweeney
John Hennessy
Robert Dix
5/5
5/5
5/5
All members of the Committee are considered by the
Board to be independent. The Board considers that
the Committee Chair has sufficient recent and relevant
experience for the role and that there is sufficient
experience within the Committee as a whole.
See the Committee’s
terms of reference on:
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 2018, another year of exceptional progress
for the company.
The Committee has continued
to apply the remuneration policy
to ensure compensation is both
competitive and aligned with the
interests of shareholders and that
payouts reflect performance and
value generated.
2018 Performance
In 2018 the Group achieved or exceeded all of the
objectives set by the Board. Financial performance1
was 8% ahead of target, five new hotels were opened
and four major hotel extensions were completed. All
nine projects were delivered on time and within budget,
adding 1,240 rooms to the portfolio, with 30 of the 42
management positions at the new hotels filled through
internal promotion. In addition, five hotels with 1,210
rooms were added to the pipeline.
Incentive outcomes for 2018
The bonus outcome for 2018 reflects the strength of
the performance in the year with profit performance
exceeding the maximum target and excellent
performance achieved against the individual strategic
targets set for Executive Directors. This performance has
resulted in 100% of the maximum bonus being paid to the
1 Financial performance for annual bonus purposes is measured
using an adjusted measure of EBIT ‘Modified EBIT’ described
in detail in note (xiii) on page 186.
The Committee believes the performance targets set are
stretching yet fair taking into account the effect of new
hotel developments compared with hotel acquisitions in
the past, the short-term negative impact of pre-opening
costs and start-up operating losses where the seasonal
timing of the opening has an important bearing, and
the impact of the increase in VAT on hotel room sales
in Ireland announced in late 2018. Further details are
set out on page 85.
Shareholder engagement
2018 was a relatively quiet year in terms of shareholder
engagement for the Remuneration Committee and this
was reflected in the near unanimous (99.85%) approval
of last year’s remuneration report at the AGM.
We have, however been keeping a close eye on
developments in corporate governance, including the
new Code and publications issued by the Investment
Association and others. We already comply with a
number of the provisions set out in the new Code, for
example we have a post vesting holding period for our
LTIP and malus and clawback provisions apply. In the
coming year we will review our Remuneration Policy
for presentation to shareholders at the 2020 AGM to
ensure it remains aligned with strategy and the creation
of shareholder value. As part of this review we will
give considerations to changes that may be required
to comply with the Code. I look forward to engaging
with shareholders on this later in the year.
Conclusion
It has been a pleasure to report on another successful
year for Dalata and I am grateful for the continuing
support of our shareholders. It seems that 2019 will
be a year of greater global uncertainty but we look
forward to facing whatever challenges that come our
way with confidence.
Margaret Sweeney
Chair, Remuneration Committee
Executive Directors. A detailed analysis of performance
against the financial and strategic performance criteria
is set out on page 87. 20% of the bonus awarded will be
paid in the form of shares and will be held in a restricted
trust for a minimum period of three years.
Awards under the LTIP granted in early 2016 are due to
vest in March of this year based on performance (Total
Shareholder Return) over the three years from the date
of grant. During these three years the management
team has successfully executed the company’s growth
strategy and developed the organisation so that it is
well positioned for future growth. At the time of writing,
I expect vesting at around 50% of the maximum (final
performance will be confirmed in next year’s report).
Upon vesting, these awards will be subject to a minimum
additional holding period of two years bringing the total
vesting and holding period for awards to five years.
Further details are set out on page 88.
Remuneration in 2019
In preparation for 2019, and in light of the new Code,
the Committee received a detailed presentation from
the Group Head of HR, examining remuneration trends
throughout the group including the general workforce
and plans for wage and salary increases.
The Committee agreed a 2% base salary increase for
Executive Directors for 2019. This is in line with the
minimum increase applied for all employees across
the Group on 1 January of this year. Pension and other
benefits remain unchanged; the CEO does not receive
any pension contributions from the company, the other
executive directors receive a pension contribution of
15% of base salary.
The bonus plan for 2019 will operate on similar lines
to 2018 with a maximum benefit of 110% and 100% of
salary respectively for the CEO and the other executive
directors. Performance will be measured against
profitability targets (75%) and individual strategic
objective (25%), as in 2018. Details of these targets
will be disclosed retrospectively as in previous years.
During 2019 the CEO will be granted an award under
the 2017 Long-Term Incentive Plan equal to 150% of
salary and the other Executive Directors will be granted
an award equal to 125% of salary. There are no changes
in award levels from 2018. This is in line with the
remuneration policy and the ultimate vesting of these
awards in 2022 will be conditional on performance over
the next three years based equally on two measures:
Total Shareholder Return and Earnings per Share.
80
81
Remuneration Committee Report
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance 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
Pension
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.
Contributions into the Company’s
defined contribution pension scheme,
or an equivalent cash supplement.
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.
Benefits
To provide a market competitive
benefits package.
The level of benefits is set at
an appropriate market rate.
N/A
N/A
N/A
Notes to the policy table:
a) Dividend equivalents - 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) Malus and clawback - 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) Alignment with wider workforce pay and policies - 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) Performance measures - The choice of the performance measures applicable to the annual bonus 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.
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.
Shareholding
guidelines
Element
Purpose and operation
Maximum opportunity
Performance Metrics
The maximum opportunity is:
› CEO: 110% of salary
› Other executive directors:
100% of salary.
The maximum annual award
level is:
› CEO: 150% of salary
› Other executive directors:
125% of salary.
Payment is determined by
reference to performance
assessed over one financial
year, and will normally be
measured against a combination
of financial and individual
strategic 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.
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
Annual bonus
To drive and reward the delivery
of business objectives over the
financial year.
The bonus is discretionary and
any pay-out is determined by the
Committee based on performance.
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.
Long-Term
Incentive
Plan (LTIP)
To reward executive directors for the
delivery of long-term performance and
align their interests with shareholders.
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).
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.
82
83
Remuneration Committee Report
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
ANNUAL
REMUNERATION
REPORT
This report will be submitted as an advisory vote to
shareholders at the 2019 AGM.
Statement of Implementation
for 2019
This section summarises the remuneration packages
for the Directors for the 2019 financial year.
Base salaries
The following table shows the base salaries effective
1 January 2019 with comparative figures for 2018:
€’000
2019
2018
Increase
Pat McCann
598.2
586.5
Stephen McNally
348.5
Dermot Crowley
348.5
341.7
341.7
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 awarded for 2019, in line with pay increases for
the general workforce.
In recommending the 2019 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 in 2017 that, during the lifetime
of the 2017-2019 Policy, the rate of salary increase
awarded to Executive Directors would be similar to
that 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
The CEO will be eligible for a maximum bonus of 110%
of base salary with other directors eligible for a maximum
bonus of 100% of base salary. The bonus will be based
75% on a profitability measure and 25% on individual
strategic objectives as set out below:
84
CLAYTON HOTEL BRISTOL
OPENING Q4 2020
Maximum Annual Bonus
(as a % of salary)
CEO
Others
Profitability1
82.5%
Individual strategic objectives
27.5%
Total
110%
75%
25%
100%
1 Financial performance for annual bonus purposes is measured
using an adjusted measure of EBIT ‘Modified EBIT’ described
in detail in note (xiii) on page 186.
The Committee has determined that the specific targets
for 2019 are commercially sensitive and cannot be
disclosed at this time. To the extent that the targets for
2019 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.
Remuneration Committee Report
LTIP
The following awards will be made in 2019 in accordance
with rules of the 2017 LTIP. 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 a minimum 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
TSR performance against the Index
EPS achieved in the year ending 31 December 2021
TSR (50% of award)
EPS (50% of award)
Threshold vesting
(25% of maximum)
Maximum vesting
TSR equal to Index
TSR equal to 10% or more per annum
above Index
€0.45
€0.55
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 2019 to 31 December 2021).
d) Basic EPS may be adjusted to exclude items which are deemed one-off and thus not reflecting normal trading activities
or distorting comparability either period on period or with other similar businesses. For reference, the relevant adjustments
to EPS for 2017 and 2018 are set out in note 28 to the consolidated financial statements on pages 168 and 169. We want to
encourage vigorous pursuit of the opportunities and by excluding certain 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) When setting the EPS threshold and maximum targets the Committee had regard to: company forecasts and underlying
assumptions (including the negative impact, in the given current year, when hotels in development have opening dates later
in the year), the approach to target setting in previous years, comparison with base year performance (2018), consensus
forecasts for 2021, targets set in previous years and previous LTIP and bonus outcomes. The Committee also had regard to the
estimated negative impact that the increase in VAT on hotel room sales in Ireland announced in late 2018 would have on 2021
EPS forecasts. Taking into account all of these reference points the Committee considers that the EPS targets set for the 2019
award are as stretching as those set in previous years and if achieved will deliver value for shareholders.
f) 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 2019 following the biennial review of Non-executive Director
compensation for 2019/20 in accordance with the remuneration policy. The Board decided that it was appropriate to
increase fees taking into account market practice for a company of our size and complexity and the time commitment
required to fulfill the roles.
€’000
Board Chair
Basic Non-executive Director
Chair Audit and Risk Committee
Chair Remuneration Committee
Chair Nomination Committee
Senior Independent Director
2019
150
65
20
20
10
10
2018
125
60
15
15
7.5
7.5
85
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Outcomes in Respect of 2018
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 2018 financial year (with the 2017
prior year comparator also shown).
€’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
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
587
575
342
335
342
335
125
125
75
75
75
75
75
75
-
-
51
50
51
50
-
-
-
-
-
-
-
-
-
-
3
3
12
12
-
-
-
-
41
61
-
-
645
633
342
335
342
335
-
-
-
-
-
-
-
-
280
556
163
347
163
347
-
-
-
-
-
-
-
-
1,512
1,764
901
1,070
910
1,079
125
125
75
75
79
81
75
75
1 Expenses incurred in travelling to and from board meetings
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 2018 (and 2017) 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 for the relevant financial year.
20% of the bonus shown above will be deferred into Dalata shares for a minimum period of three years.
e) For the LTIP, the value shown for 2018 reflects the anticipated vesting of the LTIP award granted on 3 March 2016 with TSR to
be measured over the three-year performance period to 2 March 2019. Vesting of the 2016 award is based on TSR performance
against a group of eleven peer companies (see page 88 for further details). The values have been calculated using TSR data
as at 15 February 2019 (which gives an estimated vesting of 53% of maximum) and a three-month average share price to 31
December 2018 of €5.23 in accordance with the methodology set out in the UK reporting regulations. The final level of vesting
will be disclosed in the 2019 Directors' remuneration report. 10% of the value disclosed in respect of the 2016 LTIP relates to
the increase in share price from the date of the award.
f) The LTIP value for 2017 is restated to reflect the final outcome of the vesting of 100% which took place on 9 April 2018 and the
share price on the date of vesting of €6.26, compared to the estimated outcome. The adjusted LTIP outcomes are €556,000
for Pat McCann and €347,000 for Stephen McNally and Dermot Crowley compared to €504,000 and €315,000 respectively as
originally disclosed in the 2017 Annual Report.
Annual bonus plan outcome for 2018 (audited)
The maximum bonus for 2018 was 100% of salary for Stephen McNally and Dermot Crowley and 110% of salary for
CEO Pat McCann, in line with the Policy. This was based 75% on the achievement of a stretching profitability target
and 25% on individual strategic objectives aligned to the delivery of key strategic and operational objectives.
Profitability
Financial performance for annual bonus evaluation is measured using Modified EBIT for Bonus Calculation (Modified
EBIT). EBIT is thus modified to remove the effect of fluctuations between the annual and budgeted EUR/GBP
exchange rate and other items including, for 2018, the proceeds from an insurance claim, hotel pre-opening expenses
and net revaluation movements through profit or loss, which were considered, in the opinion of the Remuneration
86
Remuneration Committee Report
Committee, to fall outside of the framework of the budget target set for the year. Modified EBIT is described in
detail and reconciled to Profit Before Tax in note (xiii) on page 186.
Threshold
(40% payout)
Target
(50% payout)
Maximum
(100% payout)
Actual
Outcome
Modified
EBIT
€87.7m
€92.4m
€98.8m
€99.5m
Performance exceeded the maximum
target leading to a 100% (of maximum)
bonus pay-out.
Individual strategic objectives
The Committee considered performance against individual strategic objectives set, particularly noting the opening
of five new hotels and four major extensions on time and within budget, the RevPAR growth outperformance by our
hotels of the markets in which they operate, the addition of over 1,200 rooms to the development pipeline, and the
successful refinancing of the Group banking facilities. Accordingly, the Committee judged that all of these objectives
for each of the Directors has been achieved in full and therefore it was appropriate that this element of the bonus
should be paid in full.
Pat McCann
Risk: drive continuous improvement in risk management to mitigate the effects of new and increasing
risks (see Risk Management in Practice on page 41),
2018 maximum:
27.5% (base salary)
Strategy: develop and communicate Dalata’s differentiated operational strategy (see The Difference
with Dalata on page 13).
Succession: continued development of senior executive team (see Strategic Priorities: People on page 22).
Culture: continually nurture and communicate the Group’s values and culture which are essential
to the company’s strategic development (see Culture on page 54).
Technology: review ICT resources to maximise opportunity from developing technology and minimise
emerging risks (see Investing in Technology to Support our Growing Business on page 38).
2018 achieved:
27.5%
Stephen McNally
Management team: implement HR development plan to support expansion plan and leadership
development (see Strategic priorities - People on page 22).
2018 maximum:
25% (base salary)
Hotel openings: develop pre and post opening plans for five new hotels (see Recent Openings on
pages 8 and 9).
Hotel extensions: complete four hotel extensions and develop revised marketing and operations
strategies to secure their long-term sustainability.
RevPar: achieve agreed targets in each city in the UK.
Refurbishment Capex: execute agreed programme, securing maximum value for money with minimal
business disruption.
Purchasing: Develop Group purchasing power through effective use of technology.
Customer Relationship Management: Maintain and develop relationship with key revenue accounts,
conference and corporate agents and corporate partners.
Industry engagement: Develop relationships with and support tourism development agencies
and industry representative bodies (including Failte Ireland, Tourism Ireland, Northern Ireland Tourism
and Dublin Chamber of Commerce).
Investor relations: increase participation in investor relations management activities.
Dermot Crowley
Finance function development: personnel and communication; technology; shared services
centre development.
Investor relations: develop investor relations to mitigate the impact of MiFID2 (see Investor
Relations Activity on page 71).
Funding: manage funding within existing facility; deliver refinance of existing facilities; develop
institutional property investor relationships (see Supporting our Growth with New Debt Facilities
on page 37).
Acquisitions & Development: Secure 1,200 pipeline rooms; manage current pipeline on target /
budget to brand standards; execute development agreement for Tara Towers (Merrion Road, Dublin)
property (see Future Openings on pages 26 and 27).
Group Strategy: development of strategic planning process with five-year horizon.
Corporate social responsibility: leadership of relationship with corporate charity partners (see
Dalata Digs Deep on page 55).
2018 achieved:
25%
2018 maximum:
25% (base salary)
2018 achieved:
25%
87
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
LTIP – vesting outcome of the 2016 award (audited)
The LTIP award granted to Executive Directors on 3 March 2016 will vest after 2 March 2019 subject to the TSR
performance of Dalata compared to a comparator group of eleven listed peers measured over that three year period.
The performance period for this award was substantially complete by the end of the 2018 financial year and therefore
the vesting of this award is reported in this year’s report (in accordance with the UK reporting regulations) based on
the expected vesting level. As at the date of this report, it is anticipated that 53% of the award will vest based on the
current assessment of the TSR performance, as shown below.
LTIP Targets
Threshold
Maximum
Vesting outcome (% of maximum)
Required TSR performance vs group1
25%
100%
Median
Upper quartile
1 Comparator group companies: Whitbread plc, Accor plc, Intercontinental Hotels plc, Millennium & Copthorne plc, Tsogo Sun
Holdings, Melia Hotels International SA, CPL Resources plc, ICG, Total Produce plc, FBD plc, Independent News and Media.
Straight-line vesting between points.
Estimated Outcome
Outcome
Group Median
Group Upper quartile
Dalata
19.9%
32.1%
24.5%
TSR achieved1
Expected vesting outcome
Additional Disclosures
Directors’ and Company Secretary’s share interests
Shares
beneficially
owned as at
31 December
2017
Shares
beneficially
owned as at
31 December
2018
Option to
acquire
shares under
Sharesave
Scheme
2016 award
vesting in
2019
2017 award
vesting in
2020
2018 award
vesting in
2021
Total
conditional
awards
subject to the
achievement
of
performance
conditons
6,132
6,132
6,132
101,279
174,130
145,221
420,630
58,635
84,541
70,506
213,682
58,635
84,541
70,506
213,682
Pat McCann
1,121,014
1,274,515
Dermot Crowley
366,510
439,454
Stephen McNally
390,394
449,538
John Hennessy
100,000
100,000
Robert Dix
67,858
67,858
Alf Smiddy
66,646
66,646
Margaret Sweeney
46,787
46,787
Dalata’s TSR exceeds the Median; 53% of the award is expected to vest
Sean McKeon
119,023
77,938
6,132
32,623
34,069
28,413
95,105
1TSR calculated as at 15 February 2019.
Share incentive plan interests awarded during 2018 (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
Stephen McNally
LTIP
LTIP
LTIP
150% of salary
145,221
125% of salary
70,506
125% of salary
70,506
25%
25%
25%
1 Jan 2018 to 31 Dec 2020
1 Jan 2018 to 31 Dec 2020
1 Jan 2018 to 31 Dec 2020
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 Adjusted Basic EPS
achieved in FY20 with threshold vesting for EPS equal to €0.43 and maximum vesting if EPS is equal to or greater than €0.54.
b) The number of shares awarded was calculated using the volume weighted average share price on 6 March 2018 (€6.058), the
day prior to the date of grant.
a) Shares beneficially owned include those of connected persons and include shares held in trust which are subject to deferral
or holding periods.
b) LTIP awards to Executive Directors represent the maximum number of shares which may vest under the 2016, 2017 and 2018
LTIP awards based on the performance conditions as described elsewhere in this report.
As described above, 53% of the 2016 award is expected to vest in March 2019 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.
Shareholding guidelines
Executive Directors are required to build up and maintain a beneficial holding of at least 200% of base salary. Based
on the closing share price at 31 December 2018 of €4.74, the Executive Director’s beneficial holdings as a percentage
of base salary were as follows:
Pat McCann
Dermot Crowley
Stephen McNally
Beneficial shareholding % base salary
1,030%
610%
624%
88
89
Remuneration Committee Report
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
TSR performance summary and historic remuneration outcomes
The graph below compares the TSR (re-based to 100) over the period since listing to the Dow Jones European
STOXX Travel and Leisure Index.
Dalata Hotel Group
ISEQ
EUR STOXX Travel and Leisure
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
Mar
17
Jun
17
Sep
17
Dec
17
Mar
18
Jun
18
Sep
18
Dec
18
The following table shows the total remuneration for the CEO for each financial year over the same period.
Single figure (€’000)
Annual bonus outcome (% of maximum)
LTIP vesting (% of maximum)
20141
441
67%
N/A
2015
840
100%
N/A
2016
1,603
90%
100%
20172
1,764
100%
100%
2018
1,512
100%
53%
1 Includes remuneration prior to IPO
2 2017 single figure is restated to reflect the final vesting outcome of LTIP awards granted in 2015 which vested in April 2018.
Relative spend on pay
The following table shows the Group’s aggregate actual spend on pay (for all employees) and dividends
in respect of the current and previous financial year. There were no share buy backs in either year.
Dividend
Aggregate employee remuneration
2017
€0.0m
€86.5m
2018
€5.5m
€99.0m
Change
100%
14%
During 2018, the Committee continued to receive
independent advice from Deloitte LLP, based in London,
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. Deloitte Ireland also
provided unrelated corporate finance advisory services
during the year.
Deloitte LLP was appointed by the Committee. It
is the view of the Committee that the Deloitte LLP
engagement partner and team that provide remuneration
advice to the Committee do not have connections
with Dalata that may impair their independence.
The Committee reviewed the potential for conflicts
of interest and judged that there were appropriate
safeguards against such conflicts.
The Committee considers that the advice received from
the advisors is independent, straightforward, relevant
and appropriate and that it has an appropriate level of
access to them and has confidence in their advice.
Fees charged by Deloitte LLP during the year were
£15,300. These fees were charged on a time and
materials basis.
AGM voting
At last year’s Annual General Meeting, the following
votes were received on the resolution to receive and
consider the Director's Report on Remuneration for
the year ended 31 December 2017.
Votes For
Votes Against
Total Votes
Votes
%
131,605,764
99.85%
193,965
0.15%
131,799,729
100.00%
Votes Withheld
671,968
At the 2017 AGM, the following votes were received
on the resolution to approve the Directors
Remuneration Policy.
Votes For
Votes Against
Total Votes
Votes Withheld
Votes
134,056,854
1,197,842
%
99.11%
0.89%
135,254,696
100.00%
0
Remuneration Committee and advisors
In addition to the Remuneration Committee members,
Non-executive Director Alf Smiddy attended each
meeting at the invitation of the Chair. The Chief
Executive Officer and the Company Secretary attended
at the invitation of the Committee Chair (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.
The members of the Committee 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 London Stock Exchange or Euronext Dublin and
associated guidance and investor guidelines on executive
remuneration. The Committee received a detailed report
from the Group Head of HR in September detailing
remuneration trends throughout the group, including
the general workforce as a whole, benchmarked against
the market. The remuneration of the Non-executive
Directors is approved by the Board.
90
91
Remuneration Committee Report
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
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 2018.
Principal activities and business review
Dalata Hotel Group plc is the largest hotel operator in
the Republic of Ireland and operates eleven hotels in the
UK. Shareholders are referred to the Chair’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 2018, the outlook
for 2019 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
2018 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 €75,224,000 (2017: €68,308,000).
Dividends
An interim dividend of 3.0 cent per share, amounting to
€5.5 million, was paid to shareholders on 12 October
2018. The Directors recommend the payment of a final
dividend of 7.0 cent per share in respect of the year ended
31 December 2018. Subject to shareholders’ approval at
the Annual General Meetings on 2 May 2019, the payment
date for the final dividend is 8 May 2019 to shareholders
registered on the record date of 12 April 2019.
Future developments
A review of future developments of the business is
included in the Financial Review on pages 28 to 39.
Directors and Company Secretary
The names of the Directors and Company Secretary and
a biographical note on each appear on pages 60 to 61.
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
2019 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 page 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 74 to 79.
Share capital
The issued share capital of Dalata Hotel Group plc at
25 February 2019 consists of 184,349,666 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 Remuneration
Committee Report and in Note 7 to the consolidated
financial statements.
Substantial holdings
As at 25 February 2019, the Company has been notified of
the following interests of 3% or more in its share capital:
Holder
Number of
Ordinary Shares
% of Shares
in issue
Ameriprise Financial, Inc
FMR LLC
18,452,348
12,410,255
Pioneer Asset Management S.A.
7,936,156
Prudential plc*
I.G. International Limited
TimesSquare Capital
Management, LLC
7,340,000
6,867,668
5,913,290
Allianz Global Investors GmbH
5,755,071
Vanguard International
Explorer Fund
5,644,800
10.01%
6.73%
4.30%
3.98%
3.73%
3.21%
3.12%
3.06%
BlackRock, Inc.
5,530,988
3.00%
*M&G Investment Funds, an Open Ended Investment Company
(OEIC), has notified the Company that it is interested in 3.05%
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 3.98% 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 40 to 47. The Financial Risk Management
policies are set out in Note 23 to the consolidated
financial statements.
Non-financial reporting directive
Dalata aims to comply with the requirements of the Non-
Financial Reporting Directive (S.I 360/2017) and these
requirements are addressed throughout the Strategic
Report. Information pertaining to each of the matters
addressed by these regulations is set out on page 50.
Additionally, non-financial concerns are reflected in
our business model on pages 12 and 13 and in our risk
management report on pages 40 to 47. The Company
uses a number of non-financial metrics, several of
which are disclosed in this report, including in our key
performance indicators on page 15.
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 financial
statements and in the Remuneration Committee report
on pages 80 to 91 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 48 to
57, is deemed to be incorporated in this part of the
Directors' Report together with details of earnings
per share in note 28 to the consolidated financial
statements, employment details in note 6 and details
of financial instruments in note 23.
Corporate Governance regulations
As required by company law, the Directors have prepared
a Report on Corporate Governance which is set out on
pages 58 to 71, 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 18 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 External 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 External 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 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.
92
93
Directors' Report
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Going concern
The current activities of the Group and those factors
likely to affect its future development, together
with a description of its financial position, are
described in the Strategic Report. Principal risks
and uncertainties affecting the Group, and the steps
taken to mitigate these risks are described in the
Risk Management section of the Strategic Report
on pages 40 to 47. Critical accounting estimates
affecting the carrying values of assets and liabilities of
the Group are discussed in note 1 to the consolidated
financial statements.
After making appropriate enquiries, the Directors
have a reasonable expectation that the Company
and the Group have adequate resources to continue
in operational existence for three years (in line with
the Viability Statement on pages 46 to 47). In making
this assessment, the Directors considered the going
concern status for a period of at least 12 months from
the date of signing this Annual Report and Accounts.
For this reason, they continue to adopt the going
concern basis in preparing the financial statements.
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 27 to the consolidated financial statements.
Subsequent events
Details of subsequent events are set out in note 26
to the consolidated financial statements.
94
Approval of Financial Statements
The Financial Statements were approved by the Board
on 25 February 2019.
On behalf of the Board
FINANCIAL
STATEMENTS
John Hennessy
Chair
Pat McCann
Director
25 February 2019
95 - 181
Financial Statements
CLAYTON HOTEL
BALLSBRIDGE
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
1 Significant accounting policies 108
2 Operating segments 119
3 Statutory and other information 124
4 Other income 125
5 Finance costs 126
6 Personnel expenses 126
7 Share-based payments expense 127
8 Tax charge 130
9 Business combinations in prior year 131
10 Intangible assets and goodwill 133
11 Property, plant and equipment 137
Investment property 142
12
13 Contract fulfilment costs 143
14 Derivatives 144
15 Trade and other receivables 145
16 Inventories 147
17 Cash and cash equivalents 147
18 Capital and reserves 148
19 Trade and other payables 150
20 Provision for liabilities 150
21
22 Deferred tax 154
23 Financial instruments and risk management 155
24 Commitments 163
25 Related party transactions 166
26 Subsequent events 166
27 Subsidiary undertakings 167
28 Earnings per share 168
29 Approval of the financial statements 169
Interest-bearing loans and borrowings 151
Company Statement of Financial Position 171
Company Statement of Changes in Equity 172
Company Statement of Cash Flows 173
Notes to the Company Financial Statements 174
182-189
Additional
Information
Glossary and Supplementary Financial Information 182
Advisor and Shareholder Contacts 189
95
95
Directors' Report
Strategic Report
Corporate Governance
Financial Statements
Additional Information
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
FINANCIAL
STATEMENTS
Statement of Directors’ Responsibilities in respect of the
Annual Report and the Financial Statements
The Directors are responsible for
preparing the annual report and the
consolidated and Company financial
statements, in accordance with applicable
law and regulations.
– select suitable accounting policies and
then apply them consistently;
– make judgements and estimates that
are reasonable and prudent;
– state whether applicable accounting
Company law requires the Directors
to prepare consolidated and Company
financial statements for each financial
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 applicable law including Article 4 of
the IAS Regulation. The Directors have
elected to prepare the Company financial
statements in accordance with IFRS as
adopted by the European Union as applied
in accordance with the provisions of
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 Group’s profit or
loss for that year. In preparing each of
the consolidated and Company financial
statements, the Directors are required to:
standards have been followed,
subject to any material departures
disclosed and explained in the
financial statements;
– assess the Group’s and Company’s
ability to continue as a going concern,
disclosing, as applicable, matters
related to going concern; and
– use the going concern basis of
accounting unless they either intend to
liquidate the Group or Company or to
cease operations, or have no realistic
alternative but to do so.
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
and Article 4 of the IAS Regulation. They
are responsible for 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, and have
general responsibility for safeguarding the
assets of the Company and the Group,
and hence for taking reasonable steps
for the prevention and detection of fraud
and other irregularities. The Directors
are also responsible for preparing a
Directors’ Report that complies with the
requirements of the Companies Act 2014.
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 60 to
61 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 Companies Act 2014,
give a true and fair view of the assets,
liabilities, and financial position of the
Group and Company at 31 December
2018 and of the profit of the Group for
the year then ended;
– The Directors’ Report contained in the
Annual Report includes a fair review
of the development and performance
of the business and the position of the
Group and Company, together with a
description of the principal risks and
uncertainties that they face; and
– The Annual Report and financial
statements, taken as a whole, provides
the information necessary to assess
the Group’s 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
Chair
25 February 2019
Patrick McCann
Director
25 February 2019
96
97
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Independent Auditor’s Report
to the members of Dalata Hotel Group plc
Report on the audit of the financial statements
Opinion
We have audited the Group and Company financial
statements of Dalata Hotel Group plc (‘the Company’)
for the year ended 31 December 2018 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 related notes, including the summary of significant
accounting policies set out in note 1. 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 financial statements give a true and fair view of
the assets, liabilities and financial position of the Group
and Company as at 31 December 2018 and of the
Group’s profit for the year then ended;
– 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 three years ended 31 December 2018.
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
public interest entities. No non-audit services prohibited
by that standard were provided.
Key audit matters: our assessment of risks of
material misstatement
Key audit matters are those matters that, in our
professional judgment, 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 €1,077.2m (2017: €848.8m)
Refer to page 76 (Audit and Risk Committee Report),
pages 113 to 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
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 are inclusive of fixtures,
fittings and equipment, which the Group accounts
for under the cost model. Appropriate allocations of
hotel valuations must therefore be made between land
and buildings, and fixtures fittings and equipment for
accounting purposes.
Independent Auditor’s Report
to the members of Dalata Hotel Group plc (continued)
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
valuation 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 material 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 are appropriate. The disclosures in the
financial statements relating to property valuations are
adequate to provide an understanding of the basis of the
valuations.
Depreciation of property, plant and equipment -
€19.7m (2017: €15.7m)
Refer to page 76 (Audit and Risk Committee Report),
pages 113 to 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 highly material amounts of property, plant
and equipment. Determining the appropriate amount of
depreciation requires judgements to be made in relation
to areas where there may be subjectivity, for example, in
relation to useful lives or the allocation of property values
between land and buildings, and the estimation of residual
values of buildings.
How the matter was addressed in our audit
Our audit procedures in relation to depreciation
of buildings included, among others:
– evaluating the allocation of property values between
land and buildings, and assessing the assumptions
made in that regard;
– considering the process undertaken by management
in the determination of residual values of buildings,
examining reports by external professional advisers
engaged by management on the calculation of residual
values for a number of hotel buildings, assessing the
assumptions made and evaluating management’s
application of the results in those reports to their
estimation of residual values of other hotels;
– assessing whether there were any property-specific
matters which would indicate that the 50 year useful
life assumption applied to buildings was inappropriate;
– testing the commencement of depreciation from
the appropriate available for use date for new hotel
buildings in the year; and
– performing an analysis on the Group and other
companies in the hotel and leisure sector of the ratio
of building depreciation charges versus valuation (or
cost where relevant) of land and buildings.
Our audit procedures in relation to depreciation of
fixtures, fittings and equipment included, among others:
– for assets held at the beginning of the year, testing
the consistency of the application for depreciation
purposes of the useful lives of different categories of
fixtures, fittings and equipment; and
– for a sample of additions in 2018, evaluating whether
those assets were classified in the appropriate
category and whether the useful lives applied to those
assets for depreciation purposes were consistent with
the existing asset categories.
Our findings
Our audit procedures did not identify any material issues
with the depreciation charges calculated by the Group.
The Group’s approach to depreciation charges appeared
to be applied correctly and without any bias. Assumptions
in relation to the allocation of property values to land
and buildings, and the residual values of buildings, for
the purpose of determining the applicable depreciation
charge for buildings were reasonable. The depreciation of
fixtures, fittings and equipment was consistently applied
from year to year.
98
99
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance 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)
Our application of materiality and an overview
of the scope of our audit
Other information
The materiality for the consolidated financial statements
as a whole was set at €4.3m (2017: €3.9m). This has
been calculated with reference to a benchmark of
Group profit before taxation. 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 2018 amounted to €1,319.1m (2017:
€1,101.1m) and our materiality measure represents
0.33% of total assets (2017: 0.36%) 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 (2017:
€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.
The Directors are responsible for the other information
presented in the Annual Report together with the
financial statements. The other information comprises
the information included in the Directors’ Report, Chair’s
Statement, Chief Executive’s Review, Purpose and Values
section, Recent Openings section, Strategy and Business
Model section, Future Openings section, Financial
Review, Risk Management section, Responsible Business
Report, Chair’s Overview – 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 section.
The financial statements and our auditor’s report thereon
do not comprise part of the other 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.
Materiality for the Company financial statements as a
whole was set at €4.0m (2017: €3.9m), determined with
reference to a benchmark of total assets, of which it
represents 0.54% (2017: 0.5%).
Based solely on our work on the other information we
report that, in those parts of the Directors’ Report
specified for our review:
We have nothing to report on going concern
– we have not identified material misstatements in the
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 94 is materially inconsistent with our audit
knowledge.
Directors’ Report;
– 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;
We have nothing to report in these respects.
– the Directors’ confirmation within the Viability
Statement on pages 46 and 47 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
– 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; and
– the Directors' Report contains the information required
by the European Union (Disclosure of Non-Financial
and Diversity Information by certain large undertakings
and groups) Regulations 2017.
We also report that, based on work undertaken for our
audit, other information required by the Act is contained
in the Corporate Governance Statement.
We are required to address the following items and report
to you in the following circumstances:
Our opinions on other matters prescribed by the
Companies Act 2014 are unmodified
– 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; and
– 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 Statement on pages 58 to 71 and the
Directors' Report, 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/EC)
Regulations 2016 and specified for our consideration,
is consistent with the financial statements and has been
prepared in accordance with the Act;
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 Group
and Company were sufficient to permit the financial
statements to be readily and properly audited and the
financial statements are in agreement with the accounting
records.
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 Companies Act 2014 also requires us to report to
you if, in our opinion, the Company has not provided
the information required by section 5(2) to (7) of
the European Union (Disclosure of Non-Financial and
Diversity Information by certain large undertakings
and groups) Regulations 2017 for the year ended 31
December 2018 as required by the European Union
(Disclosure of Non-Financial and Diversity Information
by certain large undertakings and groups (Amendment))
Regulations 2018.
The Listing Rules of the Euronext Dublin and UK Listing
Authority require us to review:
– the Directors’ Statements, set out on pages
46, 47 and 94, in relation to going concern and
longer term viability;
100
101
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance 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
25 February 2019
Independent Auditor’s Report
to the members of Dalata Hotel Group plc (continued)
– the part of the Corporate Governance Statement on
pages 58 to 71 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.
Respective responsibilities and restrictions on use
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 they either intend to
liquidate the Group or the parent company or to cease
operations, or have no realistic alternative but to do so.
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 and 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
Consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 2018
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Other income
Operating profit
Finance costs
Profit before tax
Tax charge
2018
€’000
Restated*
2017
€’000
Note
2
393,736
352,172
(142,275)
(131,956)
251,461
220,216
(157,515)
(134,032)
2,869
739
96,815
(9,514)
86,923
(9,636)
87,301
77,287
4
5
8
(12,077)
(8,979)
Profit for the year attributable to owners of the Company
75,224
68,308
Other comprehensive income
Items that will not be reclassified to profit or loss
Revaluation of property
Related deferred tax
11
22
102,946
(9,634)
53,533
(5,498)
93,312
48,035
Items that are or may be reclassified subsequently to profit or loss
Exchange difference on translating foreign operations
(2,667)
(9,309)
Gain on net investment hedge
Fair value movement on cash flow hedges
Cash flow hedges – reclassified to profit or loss
Related deferred tax
14
14
22
1,625
(554)
1,026
(59)
7,127
269
1,348
(203)
(629)
(768)
Other comprehensive income for the year, net of tax
92,683
47,267
Total comprehensive income for the year attributable to
owners of the Company
167,907
115,575
Earnings per share
Basic earnings per share
Diluted earnings per share
28
40.9 cents
37.2 cents
28
40.4 cents
36.9 cents
* Revenue and cost of sales have been restated for the year ended 31 December 2017 as a result of the
retrospective application of IFRS 15. The impact is limited to a reclassification between revenue and cost of
sales in profit or loss (note 1).
102
103
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Consolidated statement of financial position
at 31 December 2018
Consolidated statement of changes in equity
for the year ended 31 December 2018
Assets
Non-current assets
Intangible assets and goodwill
Property, plant and equipment
Investment property
Deferred tax assets
Contract fulfilment costs
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
Provision for liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
On behalf of the Board:
Note
2018
€’000
2017
€’000
10
11
12
22
13
15
14
15
16
17
18
18
18
18
18
18
18
18
21
22
14
20
21
19
20
54,417
1,176,260
1,560
2,613
9,066
14,759
-
1,258,675
22,566
1,954
35,907
60,427
1,319,102
1,843
503,113
25,724
(10,337)
4,232
(1,279)
248,418
(13,198)
144,061
902,577
301,889
41,129
1,306
4,783
349,107
-
65,250
309
1,859
67,418
416,525
1,319,102
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
Attributable to owners of the Company
Share
capital
Share
premium
Capital
contribution
Merger
reserve
Share-
based
payment
reserve
Hedging
reserve
Revaluation
reserve
Translation
reserve
Retained
earnings
Total
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
1,837 503,113
25,724 (10,337)
2,753 (1,692)
155,106
(12,156)
73,045 737,393
-
-
-
-
-
-
-
-
-
6
-
6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(554)
1,026
(59)
-
-
-
102,946
-
-
(9,634)
-
75,224 75,224
(2,667)
1,625
-
-
-
-
- (2,667)
-
1,625
- 102,946
-
-
(554)
1,026
- (9,693)
413
93,312
(1,042)
75,224 167,907
2,800
(1,321)
-
1,479
-
-
-
-
-
-
-
-
-
-
-
-
-
2,800
1,321
6
(5,529) (5,529)
(4,208) (2,723)
1,843 503,113
25,724 (10,337)
4,232 (1,279)
248,418
(13,198) 144,061 902,577
At 1 January 2018
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)
Vesting of share awards
(note 7)
Dividends paid
(note 18)
Total transactions with
owners of the Company
At 31 December 2018
John Hennessy
Chair
Patrick McCann
Director
104
105
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Consolidated statement of changes in equity
for the year ended 31 December 2017
Consolidated statement of cash flows
for the year ended 31 December 2018
Attributable to owners of the Company
Share
capital
Share
premium
Capital
contribution
Merger
reserve
Share-
based
payment
reserve
Hedging
reserve
Revaluation
reserve
Translation
reserve
Retained
earnings
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
269
1,348
(203)
-
-
-
53,533
(460)
-
-
(5,498)
-
68,308 68,308
(9,309)
7,127
-
-
-
-
-
- (9,309)
-
7,127
- 53,533
460
-
-
-
269
1,348
- (5,701)
1,414
47,575
(2,182)
68,768 115,575
1,690
(1,063)
-
627
-
-
-
-
-
-
-
-
-
-
-
-
-
1,690
1,063
7
(261)
(261)
802
1,436
1,837 503,113
25,724 (10,337)
2,753 (1,692)
155,106 (12,156)
73,045 737,393
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 (note 7)
Additional costs of prior period
share issues
Total transactions with owners
of the Company
At 31 December 2017
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation of property, plant and equipment
Net revaluation movements through profit or loss
Share-based payments 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
(Increase)/decrease in inventories
Tax paid
Net cash from operating activities
Cash flows from investing activities
2018
€’000
2017
€’000
75,224
68,308
19,698
15,710
3,137
2,800
9,514
12,077
-
44
1,425
1,690
9,636
8,979
(469)
24
122,494
105,303
7,950
4,484
(2,414)
(5,253)
(191)
62
(12,085)
(9,389)
115,754
95,207
Acquisitions of undertakings through business combinations, net of cash acquired
-
(56,719)
Purchase of property, plant and equipment
Contract fulfilment cost payments
Costs paid on entering new leases and agreements for leases
Deposits and costs paid for future acquisitions
Proceeds from sale of properties resulting in operating leases
Net cash used in investing activities
Cash flows from financing activities
Interest and finance costs paid
Receipt of bank loans
Repayment of bank loans
Dividends paid
Proceeds from vesting of share awards
Net cash from/(used in) financing activities
(112,692)
(136,060)
(304)
(3,734)
(5,613)
-
-
-
-
57,985
(122,343)
(134,794)
(13,188)
(10,101)
137,902
36,680
(92,563)
(49,896)
(5,529)
6
-
7
26,628
(23,310)
Net increase/(decrease) in cash and cash equivalents
20,039
(62,897)
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
15,745
123
35,907
81,080
(2,438)
15,745
106
107
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
forming part of the consolidated financial statements
Notes to the consolidated financial statements
(continued)
1 Significant accounting policies
– Level 1: quoted prices (unadjusted) in active markets
1 Significant accounting policies (continued)
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 2018 include the Company and its subsidiaries
(together referred to as the ‘Group’). The financial
statements were authorised for issue by the Directors on
25 February 2019.
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.
The key judgements and estimates impacting these
consolidated financial statements are:
– Carrying value and depreciation of own-use property
measured at fair value (note 11); and
– Carrying value of goodwill and intangible assets
including assumptions underpinning the impairment
tests (note 10).
Measurement of fair values
A number of the Group’s accounting policies and
disclosures require the measurement of assets and
liabilities at fair value. When measuring the fair value
of an asset or liability, the Group uses observable market
data as far as possible, with non-financial assets being
measured on a highest and best-use basis. Fair values
are categorised into different levels in a fair value
hierarchy based on the inputs used in the valuation
techniques as follows:
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 23 – 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).
(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 page 10 to 27 of
the annual report. Note 23 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
2018 and their impact on the Group’s reported profit and/
or net assets in these consolidated financial statements
are discussed below.
– IFRS 15 Revenue from Contracts with Customers; and
– IFRS 9 Financial Instruments.
(ii) Statement of compliance (continued)
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers
replaced the previous guidance in IAS 18 Revenue.
The Group has undertaken an assessment of revenue
earned in respect of its customer agreements. The Group
previously accounted for revenue earned in connection
with certain customers, net of commissions.
Under IFRS 15, all such revenue is now 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.
The Group has applied IFRS 15 retrospectively. The effect
of applying IFRS 15 in the prior year would have resulted
in an increase in revenue of €3.7 million for the year
ended 31 December 2017, with a corresponding increase
in cost of sales of the same amount. These comparatives
have been restated in the current profit or loss. The
impact of this change on the financial statements for the
Group for the year ended 31 December 2018 is presented
hereafter.
As reported
in 31
December
2017
Financial
Statements
€’000
31
December
2017
Adjustments
€’000
31
December
2017
Restated
€’000
Continuing
operations
Revenue
Cost of sales
Gross profit
348,474
(128,258)
220,216
3,698
(3,698)
-
352,172
(131,956)
220,216
If the Group had applied the previous standard IAS 18
Revenue in accounting for revenue earned in connection
with certain customers, net of commissions, this would
have resulted in a decrease in reported revenue of
€4.7 million for the year ended 31 December 2018,
with a corresponding decrease in cost of sales of the
same amount.
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments replaced the previous
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 has assessed the impact from the
application of IFRS 9 on its consolidated financial
statements. The vast majority of financial assets held
are trade receivables and cash, which continue to
be accounted for at amortised cost. The derivatives
continue to be accounted for at fair value and as they
are effective hedges, any gains or losses are recorded in
other comprehensive income and equity. On this basis,
the classification and measurement changes have not
resulted in a material impact to the Group's consolidated
financial statements, and comparatives have not been
restated for the impact of IFRS 9.
Given historic loss rates, normal receivable ageing and
the significant portion of trade receivables that are within
agreed terms, the move from an incurred loss model to an
expected loss model has not had a material impact.
On 26 October 2018, the Group completed the refinance
of its debt facilities. This was accounted for in accordance
with the requirements of IFRS 9 Financial Instruments
(note 21).
The following standards and interpretations are not
yet endorsed by the EU. The potential impact of these
standards on the Group is under review.
– IFRS 17 Insurance Contracts, IASB effective date
1 January 2021.
– 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).
– Amendments to References to the Conceptual
Framework in IFRS Standards (issued on 29
March 2018).
– Amendment to IFRS 3 Business Combinations
(issued on 22 October 2018).
– Amendments to IAS 1 and IAS 8: Definition of Material
(issued on 31 October 2018).
108
109
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
– the Group will avail of exemptions for short-term
leases and low-value items in relation to a small
number of leases for equipment;
– the Group intends to avail of the practical expedient to
apply a single discount rate to a portfolio of leases for
multiple rooms within a single hotel property;
– the Group intends to exclude initial direct costs from
measuring the right-of-use asset at the date of initial
application for certain leases; and
– the Group does not intend to use practical expedients
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 2018 were €33.2 million (2017: €31.0
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 2018 was €7.5 million (2017:
€7.6 million).
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 (existing
alternative performance measures as defined in note
2), 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 costs versus the existing straight-line rent
expense under IAS 17 Leases.
1 Significant accounting policies (continued)
(ii) Statement of compliance (continued)
The following standard has been endorsed by the EU,
is available for early adoption and is effective from 1
January 2019 as indicated in the following section.
The Group has not adopted this standard early.
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 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.
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 profit or loss and will be replaced with finance costs
on the lease liability and depreciation on the right-of-use
asset. The only exemptions are short-term and low-value
leases. Variable lease payments which are dependent on
external factors such as hotel performance will continue
to be recognised directly in profit or loss.
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 has been assessed.
The following conclusions and decisions have been made
by the Group:
– the Group did not early adopt IFRS 16;
– the Group intends to use the 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 prepayments
and initial direct costs. This means that, generally,
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;
– the Group intends to use the practical expedient
whereby it will not reassess whether contracts in place
at the date of initial application are or contain leases;
110
1 Significant accounting policies (continued)
(ii) Statement of compliance (continued)
IFRS 16 Leases (continued)
Covenants as currently calculated under existing debt
arrangements will not be amended as their calculation
is in accordance with generally accepted accounting
principles, policies, standards and practices applicable
on the date of entry into the agreements. IFRS 16 is
not expected to have any impact on strategy or
commercial negotiation.
Consolidated statement of financial position
As 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
commitments 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 non-cancellable
commitments on all operating leases as at 31 December
2018 are €672.7 million (31 December 2017: €624.4
million) (note 24). The Group’s commitments at that date
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 Group has set out in note 24 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. Despite being
used primarily for illustrative purposes, based on the
work completed to date, we do not expect the weighted
average discount rate to be considerably different.
(iii) Functional and presentation currency
These consolidated financial statements are presented in
Euro, being the functional currency of the Company and
the majority of its subsidiaries. All financial information
presented in Euro has been rounded to the nearest
thousand or million and this is clearly set out in the
financial statements where applicable.
(iv) Basis of consolidation
The consolidated financial statements include the
financial statements of the Company and all of its
subsidiary undertakings.
Business combinations
The Group accounts for business combinations using the
acquisition method when control is transferred to the
Group. The consideration transferred in the acquisition
is generally measured at fair value, as are the identifiable
net assets acquired. Any goodwill that arises is tested
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.
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 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.
111
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
1 Significant accounting policies (continued)
(iv) Basis of consolidation (continued)
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
by the Group. 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. Car park revenue is recognised when the
service is provided.
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.
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 and receipts from commercial settlement of
an insurance claim.
Revenue in respect of contracts with customers for sale
of residential property is based on when the performance
obligations inherent in the contract are completed.
The contract for sale is assessed in line with IFRS 15
Revenue from Contracts with Customers and revenue is
recognised when the performance obligations inherent in
the contract are met.
(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.
112
1 Significant accounting policies (continued)
(ix) Tax
Tax charge comprises current and deferred tax.
Tax charge 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 or taxable profit at the date
of recognition.
Deferred tax is measured at the tax rates that are
expected to be applied to the temporary differences when
they reverse, based on the laws that have been enacted
or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same
tax authority on the same taxable entity, or on different
entities, but they intend to settle current tax liabilities and
assets on a net basis or their tax assets and liabilities will
be realised simultaneously. Deferred tax liabilities 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.
(x) Earnings per share (“EPS”)
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 and
potential 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 or non-market conditions of the awards are
met, as if the current period end were the end of the
vesting period. When calculating the dilutive effect, the
exercise price is adjusted by the value of future services
that have yet to be received related to the awards.
(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 significant
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:
Buildings
Fixtures, fittings and equipment
Land is not depreciated.
50 years
3 – 15 years
113
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
1 Significant accounting policies (continued)
(xi) Property, plant and equipment (continued)
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 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.
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 and IFRS 13.
(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 generate cash inflows from
continuing use that are largely independent of the cash
inflows of other assets or groups of assets (the ‘cash-
generating unit’).
The goodwill acquired in a business combination, for the
purpose of impairment testing, is allocated to cash-
generating units that are expected to benefit from the
synergies of the combination.
The recoverable amount of a cash-generating unit is
the greater of its 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.
1 Significant accounting policies (continued)
(xiii) Goodwill (continued)
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 are 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.
(xiv) Intangible assets other than goodwill
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.
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.
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.
Inventories represent assets that are sold in the normal
course of business by the Group and consumables.
(xvi) Contract fulfilment costs
Contract fulfilment costs are stated at the lower of
cost and recoverable amount. Contract fulfilment costs
represent assets that are to be sold by the Group but
do not form part of normal trading. Costs capitalised as
contract fulfilment costs include costs incurred in fulfilling
the specific contract. The costs must enhance the asset,
be used in order to satisfy the obligations inherent in
the contractual arrangement and should be recoverable.
Costs which are not recoverable are written off to the
profit or loss as incurred.
(xvii) Trade and other receivables
Trade and other receivables are stated initially at their
fair value and subsequently at amortised cost, less any
expected credit loss provision. The Group applies the
simplified approach to measuring expected credit losses
which uses a lifetime expected loss allowance for all trade
receivables. Bad debts are written off to profit or loss on
identification.
(xviii) 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.
(xix) 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.
In the consolidated 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.
114
115
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
1 Significant accounting policies (continued)
(xx) Finance costs
Finance costs comprise interest expense on borrowings
and related financial instruments, amortisation of
capitalised costs directly related to debt raises,
commitment fees and other costs relating to financing
of the Group.
Interest expense is recognised using the effective interest
method. The effective interest rate of a financial liability
is calculated on initial recognition of a financial liability. In
calculating interest expense, the effective interest rate is
applied to the amortised cost of the liability. The effective
interest rate is revised as a result of periodic re-estimation
of cash flows of floating rate instruments to reflect
movements in market rates of interest.
Finance costs incurred for qualifying assets, which take
a substantial period of time to construct, are added to
the cost of the asset during the period of time required
to complete and prepare the asset for its intended use
or sale. The Group uses two capitalisation rates being
the weighted average interest rate after the impact of
hedging instruments for Sterling borrowings which is
applied to 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.
(xxi) 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.
116
(xxii) Provisions and contingent liabilities
A provision is recognised in the statement of financial
position when the Group has a present legal or
constructive obligation as a result of a past event, and it
is probable that an outflow of economic benefits will be
required to settle the obligation. If the effect is material,
provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
The provision in respect of self-insured risks includes
projected settlements for known claims and incurred but
not reported claims.
Where it is not probable that an outflow of economic
benefits will be required, or the amount cannot be
estimated reliably, the obligation is disclosed as a
contingent liability, unless the probability of an outflow
of economic benefits is remote. Possible obligations,
whose existence will only be confirmed by the occurrence
or non-occurrence of one or more future events, are also
disclosed as contingent liabilities unless the probability
of an outflow of economic benefits is remote.
(xxiii) 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.
(xxiv) 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 an effective interest rate basis over the term
of the loans and borrowings. This amortisation charge
is recognised within finance costs. Commitment fees
incurred in connection with loans and borrowings are
expensed as incurred to profit or loss.
(xxv) Derecognition of financial liabilities
The Group removes a financial liability from its statement
of financial position when it is extinguished (when its
contractual obligations are discharged or cancelled,
or expire).
1 Significant accounting policies (continued)
(xxv) Derecognition of financial liabilities (continued)
The Group also derecognises a financial liability when
the terms and the cash flows of the modified liability
are substantially different. The terms are substantially
different if the discounted present value of the cash
flows under the new terms, discounted using the original
effective interest rate, including any fees paid net of any
fees received, is at least 10 per cent different from the
discounted present value of the remaining cash flows of
the original financial liability, the ‘10% test’.
If the financial liability is deemed substantially modified
(greater than 10 per cent different), a new financial
liability based on the modified terms is recognised at fair
value. The difference between the carrying amount of the
financial liability derecognised and consideration paid is
recognised in profit or loss.
If the financial liability is deemed non-substantially
modified (less than 10 per cent different), the amortised
cost of the liability is recalculated by discounting the
modified cash flows at the original effective interest
rate and the resulting gain or loss is recognised in profit
or loss. For floating-rate financial liabilities, the original
effective interest rate is adjusted to reflect the current
market terms at the time of the modification. Any costs
and fees directly attributable to the modified financial
liability are recognised as an adjustment to the carrying
amount of the modified financial liability and amortised
over its remaining term by re-computing the effective
interest rate on the instrument. Any unamortised
costs attributable to the original financial liability, with
the exception of unamortised arrangement fees, are
recognised as an adjustment to the carrying amount
of the modified financial liability and amortised over its
remaining term by re-computing the effective interest
rate on the instrument. Unamortised arrangement fees
relating to the original liability are expensed to profit or
loss on modification.
(xxvi) 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 a portion
of 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.
(xxvii) 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.
117
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
(xxix) Adjusting items
Consistent with how business performance is measured
and managed internally, the Group reports both statutory
measures prepared under IFRS and certain alternative
performance measures (‘APMs’) that are not required
under IFRS.
These APMs are sometimes referred to as ‘non GAAP’
measures and include, amongst others, Adjusted EBITDA,
Adjusted profit and Adjusted EPS.
The Group believes that the presentation of these APMs
provides useful supplemental information which, when
viewed in conjunction with the financial information
presented under IFRS, provides stakeholders with a more
meaningful understanding of the underlying financial and
operating performance of the Group.
Adjusted measures of profitability represent the
equivalent IFRS measures adjusted to show the
underlying operating performance of the Group and
exclude items which are not reflective of normal trading
activities or distort comparability either period on period
or with other similar businesses.
1 Significant accounting policies (continued)
(xxvii) Cash flow hedge accounting (continued)
The amount accumulated in equity is retained in other
comprehensive income and reclassified to profit or loss in
the same period or periods during which the hedged item
affects profit or loss.
Hedge accounting is discontinued when the hedging
instrument expires or is sold, terminated, exercised, or no
longer qualifies for hedge accounting or the designation is
revoked. At that point in time, any cumulative gain or loss
on the hedging instrument recognised in equity remains
in equity and is recognised when the forecast transaction
is ultimately recognised in profit or loss. However, if a
hedged transaction is no longer anticipated to occur,
the net cumulative gain or loss accumulated in equity is
reclassified to profit or loss.
(xxviii) Net investment hedges
Where relevant, the Group uses a net investment hedge,
whereby the foreign currency exposure arising from a
net investment in a foreign operation is hedged using
borrowings held by a Group entity that is denominated in
the functional currency of the foreign operation.
Foreign currency differences arising on the retranslation
of a financial liability designated as a hedge of a net
investment in a foreign operation are recognised directly
in other comprehensive income in the foreign currency
translation reserve, to the extent that the hedge is
effective. To the extent that the hedge is ineffective,
such differences are recognised in profit or loss. When
the hedged part of a net investment is disposed of, the
associated cumulative amount in equity is reclassified to
profit or loss.
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, Deputy
CEOs and the 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 2018,
the Group owns 27 hotels (31 December 2017: 24 hotels) and has effective ownership of one further hotel which
it operates (31 December 2017: 1 hotel). It also owns the majority of one of the other hotels which it operates (31
December 2017: 1 hotel). The Group also leases ten hotel buildings from property owners (31 December 2017: 9
hotels) and is entitled to the benefits and carries the risks associated with operating these hotels.
The Group’s revenue from leased and owned hotels is primarily derived from room sales and food and beverage sales
in restaurants, bars and banqueting. The main costs arising are payroll, cost of goods for resale, commissions paid 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
2018
€’000
Restated*
2017
€’000
234,907
203,402
79,554
78,107
1,168
76,367
70,417
1,986
393,736
352,172
*Revenue and cost of sales have been restated for the year ended 31 December 2017 as a result of the retrospective
application of IFRS 15. The impact is limited to a reclassification between revenue and cost of sales in profit or loss
(note 1).
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) Regional 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.
118
119
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
2 Operating segments (continued)
2 Operating segments (continued)
Segmental results - EBITDAR
Dublin
Regional Ireland
United Kingdom
Managed Hotels
2018
€’000
114,007
22,679
30,494
1,168
2017
€’000
99,006
21,450
27,036
1,986
EBITDAR for reportable segments
168,348
149,478
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
86,368
72,630
21,577
20,271
26,298
1,168
23,777
1,986
135,411
118,664
135,411
118,664
271
270
(13,299)
(12,371)
(2,800)
(1,690)
119,583
104,873
Net property revaluation movements through profit or loss
(3,137)
(1,425)
Proceeds from insurance claim
Hotel pre-opening expenses
Acquisition-related costs
Gains on disposal of property freehold interests and subsidiary
Group EBITDA
Depreciation of property, plant and equipment
Amortisation of intangible assets
Finance costs
Profit before tax
Tax charge
Profit for the year attributable to owners of the Company
2,598
(2,487)
-
-
-
-
(1,260)
469
116,557
102,657
(19,698)
(15,710)
(44)
(24)
(9,514)
(9,636)
87,301
77,287
(12,077)
(8,979)
75,224
68,308
Group EBITDA represents earnings before interest and finance costs, tax, depreciation and amortisation of
intangible assets.
Adjusted EBITDA is presented as an alternative performance measure to show the underlying operating performance of
the Group excluding items which are not reflective of normal trading activities or distort comparability either period on
period or with other similar businesses. Consequently, Adjusted EBITDA represents Group EBITDA before:
– Acquisition-related costs in 2017 (note 3);
– Net property revaluation movements through profit or loss (note 11);
– Gains on disposal of property freehold interests and subsidiary in 2017 (note 4);
– Proceeds from insurance claim (note 4); and
– Hotel pre-opening expenses (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
expense 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 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 €32.9 million in 2018 (2017: €30.8 million).
Disaggregated revenue information
Disaggregated revenue is reported in the same way as it is reviewed and analysed internally by the chief operating
decision makers, primarily the CEO, Deputy CEOs and the Board of Directors. The key components of revenue
reviewed by the chief operating decision makers are:
– Room revenue which relates to the rental of rooms in each hotel. Revenue is recognised when the hotel room is
occupied, and the service is provided;
– Food and beverage revenue which relates to sales of food and beverage at the hotel property. This revenue is
recognised at the point of sale;
– Other revenue includes revenue from leisure centres, car park revenues, meeting room hire and other revenue
sources at the hotels. Leisure centre revenue is recognised over the life of the membership while the other items are
recognised when the service is provided; and
– Revenue from 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 under the
terms of the contract. Management fee revenues are not disaggregated.
120
121
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
2 Operating segments (continued)
Disaggregated revenue information (continued)
Revenue review by segment – Dublin
Room revenue
Food and beverage revenue
Other revenue
Total revenue
Revenue review by segment – Regional Ireland
Room revenue
Food and beverage revenue
Other revenue
Total revenue
Revenue review by segment – United Kingdom
Room revenue
Food and beverage revenue
Other revenue
Total revenue
Other geographical information
2018
€’000
Restated*
2017
€’000
168,642
144,422
50,640
15,625
46,198
12,782
234,907
203,402
2018
€’000
45,167
26,441
7,946
79,554
2018
€’000
54,416
17,167
6,524
78,107
Restated*
2017
€’000
41,975
26,529
7,863
76,367
Restated*
2017
€’000
48,525
16,000
5,892
70,417
Revenue
Republic of
Ireland
2018
United
Kingdom
€’000
€’000
Restated 2017*
Total
€’000
Republic of
Ireland
United
Kingdom
€’000
€’000
Total
€’000
Leased and owned hotels
314,461
78,107
392,568
279,769
70,417
350,186
Managed hotels
Total revenue
747
421
1,168
1,728
258
1,986
315,208
78,528
393,736
281,497
70,675
352,172
* Revenue and cost of sales have been restated for the year ended 31 December 2017 as a result of the retrospective
application of IFRS 15. The impact is limited to a reclassification between revenue and cost of sales in profit or loss
(note 1).
2 Operating segments (continued)
Other geographical information (continued)
Assets and liabilities
At 31 December 2018
At 31 December 2017
Republic of
Ireland
United
Kingdom
€’000
€’000
Republic of
Ireland
United
Kingdom
€’000
€’000
Total
€’000
Total
€’000
Assets
Intangible assets and goodwill
41,588
12,829
54,417
41,588
12,974
54,562
Property, plant and equipment
930,676
245,584 1,176,260
758,192
240,620
998,812
Investment property
Other non-current assets
Current assets
Total assets excluding
derivatives and tax assets
Derivatives
Deferred tax assets
Total assets
Liabilities
1,560
12,725
44,016
-
11,100
16,411
1,560
23,825
60,427
1,585
3,231
29,708
-
1,112
8,506
1,585
4,343
38,214
1,030,565
285,924
1,316,489
834,304
263,212
1,097,516
-
2,613
1,319,102
1
3,571
1,101,088
Loans and borrowings
102,508
199,381
301,889
63,627
196,512
260,139
Trade and other payables
54,225
11,025
65,250
52,978
11,875
64,853
Total liabilities excluding
provisions, derivatives and
tax liabilities
Provisions
Derivatives
Current tax liabilities
Deferred tax liabilities
Total liabilities
156,733
210,406
367,139
116,605
208,387
324,992
6,642
1,306
309
41,129
416,525
4,716
1,778
351
31,858
363,695
Revaluation reserve
225,290
23,128
248,418
139,802
15,304
155,106
The above information on assets, liabilities and revaluation reserve is presented by country as it does not form part of
the segmental information routinely reviewed by the chief operating decision makers.
Loans and borrowings are categorised according to their underlying currency. Loans and borrowings denominated
in Sterling are classified as liabilities in the United Kingdom, €197.3 million (£176.5 million) of which acts as a
net investment hedge as at 31 December 2018 (2017: €196.5 million (£174.4 million)). Loans and borrowings
denominated in Euro are classified as liabilities in the Republic of Ireland.
122
123
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
3 Statutory and other information
Depreciation of property, plant and equipment
Hotel pre-opening expenses
Operating lease rentals: Land and buildings (including central office lease costs)
Acquisition-related costs
2018
€’000
19,698
2,487
33,171
-
2017
€’000
15,710
-
31,047
1,260
Hotel pre-opening expenses relate to costs incurred by the Group in 2018 in advance of six new hotels which opened in
2018 and 2019. These costs primarily relate to payroll expenses, sales and marketing costs and training costs of new staff.
Acquisition-related costs for the year ended 31 December 2017 included professional fees, stamp duty costs,
redundancy and other costs associated with the business combinations outlined in note 9.
Auditor’s remuneration
Audit of Group, Company and subsidiary financial statements
Other assurance services
Tax advisory and compliance services
Other non-audit services
2018
€’000
2017
€’000
301
20
262
39
622
278
20
195
78
571
Auditor’s remuneration for the audit of the Company financial statements was €10,000 (2017: €10,000).
Other assurance services relates to review of the interim condensed consolidated financial statements.
The majority of the fees for tax and other non-audit services in 2018 relate to taxation advice on the sale,
at completion, of the residential property which the Group is developing at the site of the Tara Towers hotel (note 13),
review of capital allowances and other miscellaneous tax projects.
The majority of the fees for tax and other non-audit services in 2017 related to the acquisition of new hotels including
the acquisition of Hotel la Tour, Birmingham in July 2017 and other one-off projects.
3 Statutory and other information (continued)
Directors’ remuneration
Salary and other emoluments
Gains on vesting of awards granted in 2014 under the 2014 Long-Term Incentive Plan
Gains on vesting of awards granted in 2015 under the 2014 Long-Term Incentive Plan
Fees
Pension costs – defined contribution
2018
€’000
2,617
-
1,250
350
103
4,320
2017
€’000
2,568
1,480
-
350
101
4,499
Gains associated with the shares which issued to the Directors on vesting of awards granted in 2014 and 2015 under
the 2014 Long-Term Incentive Plan (“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.
Details of the Directors’ remuneration and interests in conditional share awards are set out in the Remuneration
Committee report on pages 80 to 91.
4 Other income
Rental income
Proceeds from insurance claim
Gains on disposal of freehold interests and subsidiary
2018
€’000
271
2,598
-
2,869
2017
€’000
270
-
469
739
In October 2018, the Group received a commercial settlement amounting to €2.6 million from an insurance claim as
a result of a fire in December 2016 at Clayton Hotel Silver Springs, Cork in which a vacant building located on the
grounds, but separate to, and unused by the hotel, was destroyed.
In 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).
In 2017, the Group disposed of a subsidiary undertaking which held the leasehold interest in the Croydon Park Hotel,
UK for €0.1 million and recorded a gain on disposal of €0.2 million.
In 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.
124
125
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
5 Finance costs
Interest expense on bank loans and borrowings
Cash flow hedges – reclassified from other comprehensive income
Other finance costs
Net exchange (gain)/loss on financing activities
Interest capitalised to property, plant and equipment
2018
€’000
7,801
1,026
2,760
(325)
2017
€’000
7,346
1,348
2,327
204
(1,748)
(1,589)
9,514
9,636
The Group uses interest rate swaps to convert the interest rate on part of its debt from floating rate to fixed rate (note
14). This cash flow hedge net cash outflow is shown separately within finance costs and represents the additional
interest the Group paid under the interest rate swaps.
Other finance costs include the amortisation of capitalised debt costs, the write-off of unamortised arrangement
fees relating to the original loan facility on modification of €0.9 million (notes 23, 28), commitment fees and other
banking fees.
Exchange gain/loss on financing activities relates principally to loans which did not form part of the net investment
hedge (note 23).
Interest on loans and borrowings amounting to €1.7 million was capitalised to assets under construction on the basis
that this cost was directly attributable to the construction of qualifying assets (note 11) (2017: €1.6 million). The
capitalisation rates applied by the Group, which were reflective of the weighted average interest cost in respect of
Euro denominated borrowings and Sterling denominated borrowings for the year, were 2.03% (2017: 2.45%) and
3.43% (2017: 3.43%) respectively.
6 Personnel expenses
The average number of persons (full-time equivalents) employed by the Group (including Executive Directors),
analysed by category, was as follows:
Administration
Other
Full-time equivalents split by geographical region was as follows:
Dublin (including the Group’s central functions)
Regional Ireland
United Kingdom
2018
2017
510
2,869
3,379
417
2,627
3,044
2018
2017
1,845
1,596
950
584
905
543
3,379
3,044
6 Personnel expenses (continued)
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social welfare costs
Pension costs – defined contribution
Share-based payments expense
Severance costs
7 Share-based payments expense
2018
€’000
2017
€’000
95,077
84,001
9,925
1,087
2,800
35
8,542
688
1,690
149
108,924
95,070
The total share-based payment expense for the Group’s employee share schemes charged to the profit or loss during
the year was €2.8 million (2017: €1.7 million), analysed as follows:
Long-Term Incentive Plans
Save As You Earn Scheme
2018
€’000
2,374
426
2,800
2017
€’000
1,375
315
1,690
Details of the schemes operated by the Group are set out below:
Long-Term Incentive Plans
During the year ended 31 December 2018, the Board approved the conditional grant of 743,795 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 (89 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 2018 to 31 December 2020 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 Group’s 2020 audited consolidated financial
statements, of €0.43 with 100% vesting for adjusted basic EPS of €0.54 or greater. Awards will vest on a straight-
line basis for performance between these points. EPS targets may be amended in restricted circumstances if an event
occurs which causes the Remuneration Committee to determine an amended or substituted performance condition
would be more appropriate and not materially more or less difficult to satisfy. Further details of the plans are set out in
the Directors Remuneration Report on pages 80 to 91.
126
127
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
7 Share-based payments expense (continued)
Long-Term Incentive Plans (continued)
Movements in the number of share awards are as follows:
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at the end of the year
Grant date
March 2015
October 2015
March 2016
May 2017
March 2018
Outstanding at the end of the year
2018
Awards
2017
Awards
2,114,579
2,088,379
743,795
829,049
(30,415)
(88,551)
(668,550)
(714,298)
2,159,409
2,114,579
2018
Awards
2017
Awards
-
-
621,253
816,407
721,749
595,962
72,588
621,253
824,776
-
2,159,409
2,114,579
During the year ended 31 December 2018, the Company issued 668,550 shares on foot of the vesting of awards
granted in March 2015 and October 2015 under the terms of the 2014 LTIP. Over the course of the three year
performance period, 25,764 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 €6.14.
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
March
2018
May
2017
March
2016
October
2015
March
2015
€3.03
€6.06
€0.01
€2.14
€5.09
€0.01
€2.45
€4.69
€0.01
€2.43
€4.27
€0.01
€1.92
€3.55
€0.01
29.77% p.a.
25.89% p.a.
30.20% p.a.
26.40% p.a.
26.03% p.a.
1.5%
3 years
1.5%
3 years
1.5%
3 years
1.5%
3 years
1.5%
3 years
7 Share-based payments expense (continued)
Measurement of fair values (continued)
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 which 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, 2017
and 2018 awards and of a comparator group of companies for awards in prior periods.
Awards granted in 2017 and 2018 under the 2017 LTIP include 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, which equals the share price less exercise price. Instead, an estimate is made by the Group as to the
number of shares which are expected to vest based on satisfaction of the EPS-related performance condition, 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.
Save As You Earn Scheme
During the year ended 31 December 2018, 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. 379 employees availed of the 2018 Scheme (515 employees availed of the 2017 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 2017 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.
Movements in the number of share options and the related weighted average exercise price (“WAEP”) are as follows:
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at the end of the year
2018
2017
Options
WAEP
€ per share
Options
WAEP
€ per share
1,429,099
411,966
(202,794)
(152)
1,638,119
3.52
5.02
3.94
2.91
3.85
837,545
702,888
(111,334)
-
1,429,099
2.94
4.13
2.98
-
3.52
The weighted average remaining contractual life for the share options outstanding at 31 December 2018 is 1.7 years
(2017: 2.3 years).
128
129
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
8 Tax charge
Current tax
Irish corporation tax
UK corporation tax
Under/(over) provision in respect of prior periods
Deferred tax charge/(credit) (note 22)
2018
€’000
9,094
2,320
127
11,541
536
12,077
2017
€’000
8,517
1,615
(582)
9,550
(571)
8,979
9 Business combinations in prior year
There were no business combinations by the Group in the year ended 31 December 2018.
Prior year acquisitions – year ended 31 December 2017
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
31 August 2017
Fair value
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.
Profit before tax
2018
€’000
2017
€’000
87,301
77,287
Tax on profit at standard Irish corporation tax rate of 12.5%
10,913
9,661
Effects of:
Income taxed at a higher rate
Insurance proceeds non-taxable
Expenses not deductible for tax purposes
Impact of revaluation losses not deductible for tax purposes
Overseas income taxed at higher rate
Losses utilised at higher rate
Under/(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
445
(325)
481
392
770
(445)
127
53
(8)
(326)
12,077
738
-
598
-
585
(738)
(582)
174
(666)
(791)
8,979
The deferred tax assets and liabilities arising in the UK at 31 December 2018 have been calculated based on the rate of
17% (2017: 17%) substantively enacted at that date.
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
€’000
22,700
284
16
23,000
23,000
23,000
The acquisition method of accounting was used to consolidate the business acquired in the Group’s consolidated
financial statements. No goodwill was 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, now trading as
Clayton Hotel Liffey Valley
During 2017, in a separate transaction to the aforementioned business combination, the Group purchased the long
leasehold interest (freehold equivalent) of 46 suites in the Clayton Hotel Liffey Valley for €10.6 million plus capitalised
acquisition costs of €0.5 million. These acquisitions were treated as asset acquisitions and capitalised to property, plant
and equipment.
During 2018, the Group purchased the long leasehold interest (freehold equivalent) of 34 suites in the Clayton Hotel
Liffey Valley for €7.6 million plus capitalised acquisition costs of €0.7 million. These acquisitions were treated as asset
acquisitions and capitalised to property, plant and equipment (note 11).
130
131
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
9 Business combinations in prior year (continued)
10 Intangible assets and goodwill
Prior year acquisitions – year ended 31 December 2017 (continued)
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 was used to consolidate the business acquired in the Group’s consolidated
financial statements. No goodwill was 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.
Cost
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
Balance at 1 January 2018
Effect of movements in exchange rates
Balance at 31 December 2018
Accumulated amortisation and impairment losses
Balance at 1 January 2017
Amortisation of other intangible assets
Balance at 31 December 2017
Balance at 1 January 2018
Amortisation of other intangible assets
Balance at 31 December 2018
Carrying amounts
At 1 January 2017
Other indefinite-
lived intangible
assets
Other
intangible
assets
€’000
€’000
Goodwill
€’000
Total
€’000
79,483
20,500
-
99,983
-
(357)
79,126
79,126
(96)
79,030
(45,716)
-
(45,716)
(45,716)
-
(45,716)
-
-
20,500
20,500
-
20,500
-
-
-
-
-
-
682
(6)
676
676
(5)
671
682
(363)
100,302
100,302
(101)
100,201
-
(45,716)
(24)
(24)
(24)
(44)
(68)
(24)
(45,740)
(45,740)
(44)
(45,784)
33,767
20,500
-
54,267
At 31 December 2017
33,410
20,500
652
54,562
At 31 December 2018
33,314
20,500
603
54,417
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.
Based on our annual impairment review conducted at 31 December 2018, goodwill was not considered to be impaired
and accordingly, no impairment was recognised during 2018. 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.
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.
132
133
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
10 Intangible assets and goodwill (continued)
10 Intangible assets and goodwill (continued)
Goodwill (continued)
Included in the goodwill figure is €12.2 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 2018 resulted in a foreign exchange loss of €0.1 million and a corresponding decrease in goodwill. The
comparative translation at 31 December 2017 resulted in a foreign exchange loss of €0.4 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 2018
2018
€’000
24,491
1,956
6,867
33,314
2017
€’000
24,576
1,967
6,867
33,410
7
3
4
The above table represents the number of CGUs to which goodwill was allocated at 31 December 2018.
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 recorded as revaluation gains to the carrying
value of the property and consequently, elements of goodwill may be required to be written off if the carrying value of
the 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. Management have considered the
manner and potential impact of the United Kingdom’s departure from the European Union. Brexit may have a negative
impact on both the United Kingdom and Irish economies. The Group continues to monitor the ongoing uncertainty
surrounding Brexit but has seen no impact on trading and there is no indicator of impairment at 31 December 2018 as
a result of this.
(i) Moran Bewley Hotel Group and other single asset acquisitions
For the purposes of impairment testing, goodwill has been allocated to each of the hotels acquired as CGUs. As these
hotel properties are valued annually by independent external valuers, the recoverable amount of each CGU is based on
a fair value less costs of disposal estimate, or where this value is less than the carrying value of the asset, the 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 (2018: Ireland 8.46%, UK 6.8%; 2017: Ireland 8.46%, UK 6.8%). 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 2018, the recoverable amounts of the 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 prepared by management
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);
Annual goodwill testing (continued)
(i) Moran Bewley Hotel Group and other single asset acquisitions (continued)
– Revenue and EBITDA for the first year of the projections is based on budgeted figures for 2019 prepared by
management. Budgeted revenue and EBITDA are based on expectations of future outcomes taking into account
past experience, adjusted for anticipated revenue and cost growth;
– Cash flow projections 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 refurbishment 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
8.25% to 11.50% (Ireland: 9.50% to 11.25%; UK: 8.25% to 11.50%) (2017: 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 2018, the recoverable amount was determined to be 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 2018.
(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 at 31 December 2018
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 (2018: 8.46%, 2017: 8.46%). Purchasers costs are a key difference between
value in use and fair value less costs of disposal as prepared by external valuers.
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;
– Revenue and EBITDA for the first year of the projections is based on budgeted figures for 2019 prepared by
management. Budgeted revenue and EBITDA are based on expectations of future outcomes taking into account
past experience, adjusted for anticipated revenue and cost 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 refurbishment 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
134
135
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
10 Intangible assets and goodwill (continued)
10 Intangible assets and goodwill (continued)
Annual goodwill testing (continued)
(ii) 2007 Irish hotel operations acquired (continued)
– The cash flows are discounted using a risk adjusted discount rate specific to each property which ranged from
10.25% to 11.25% (2017: 10.75% to 11.50%). 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 2018, the recoverable amount was determined to be 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 2018.
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. The carrying value of this asset amounted to €20.5 million at 31 December 2017 and 31 December 2018 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
indefinite-lived intangible assets annually for impairment or more frequently if there are indicators it may be impaired.
At 31 December 2018, 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:
– Cash flow projections are based on current operating results and budgeted forecasts prepared by management
covering 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 2019 prepared 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;
– 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 11.00% (2017:
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 2018, the recoverable amount was determined to be significantly higher than the carrying amount of
the CGU. There is no reasonably foreseeable change in assumptions that would impact adversely on the carrying value.
136
Other indefinite-lived intangible assets (continued)
Acquired leasehold interests (continued)
The Directors concluded that the carrying value of other indefinite-lived intangible assets was not impaired at
31 December 2018.
Other intangible assets
Other intangible assets (€0.6 million) represent 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 (operating lease) of that hotel property in
2017. The lease term is 15 years and the intangible asset is being 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 assets’ recoverable amount is estimated.
At 31 December 2018, 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 2018.
11 Property, plant and equipment
At 31 December 2018
Valuation
Cost
Accumulated depreciation (and impairment charges) *
Net carrying amount
At 1 January 2018, net carrying amount
Additions through freehold or site purchases
Other additions through capital expenditure
Reclassification from assets under construction to land and
buildings and fixtures, fittings and equipment for assets that
have come into use
Transfer from land and buildings to asset under construction
for land which is being developed into a new hotel
Transfer from land and buildings to contract fulfilment costs
(note 13)
Capitalised borrowing costs (note 5)
Transfer of capitalised borrowing costs from assets under
construction to land and buildings for assets that have come
into use
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 2018, net carrying amount
Land and
buildings
€’000
Assets under
construction
€’000
Fixtures,
fittings and
equipment
€’000
Total
€’000
1,077,208
-
-
1,077,208
848,777
9,187
1,133
-
26,404
-
26,404
97,365
-
76,231
-
106,680
(34,032)
72,648
1,077,208
133,084
(34,032)
1,176,260
52,670
-
18,971
998,812
9,187
96,335
140,194
(152,047)
11,853
(6,615)
6,615
(8,085)
-
-
1,748
-
-
-
-
-
(8,085)
1,748
3,300
111,221
(8,275)
290
(3,402)
(8,927)
(1,590)
1,077,208
(3,300)
-
-
-
-
-
(208)
26,404
-
-
-
-
-
(10,771)
(75)
72,648
-
111,221
(8,275)
290
(3,402)
(19,698)
(1,873)
1,176,260
* Accumulated depreciation of buildings is stated after the elimination of depreciation, revaluation, disposals and
impairments.
137
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
11 Property, plant and equipment (continued)
The equivalent disclosure for the prior year is as follows:
At 31 December 2017
Valuation
Cost
Accumulated depreciation (and impairment charges) *
Land and
buildings
Assets under
construction
Fixtures,
fittings and
equipment
€’000
€’000
€’000
848,777
-
-
97,365
75,931
-
-
11 Property, plant and equipment (continued)
Included in land and buildings at 31 December 2018 is land at a carrying value of €412.7 million which is not depreciated.
Additions to land and buildings during the year ended 31 December 2018 include the following asset purchases:
– Purchase of the long leasehold interest (freehold equivalent) of 34 suites in the Clayton Hotel Liffey Valley for €7.6
million plus capitalised acquisition costs of €0.7 million; and
– Purchase of the long leasehold interest (freehold equivalent) of two suites in the Clayton Hotel, Cardiff Lane for
€0.8 million plus capitalised acquisition costs of €0.1 million.
Total
€’000
848,777
173,296
-
(23,261)
(23,261)
Additions to assets under construction during the year ended 31 December 2018 include the following:
Net carrying amount
848,777
97,365
52,670
998,812
At 1 January 2017, net carrying amount
744,611
42,865
34,968
822,444
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
At 31 December 2017, net carrying amount
57,265
71,478
381
(61,139)
-
-
59,064
-
284
-
21,799
(922)
57,549
71,478
81,244
(62,061)
(6,960)
495
6,465
5,967
(7,020)
1,053
-
(385)
-
55,176
(1,643)
1,295
(2,471)
(7,686)
(7,112)
848,777
585
-
1,589
-
-
-
-
-
(213)
97,365
-
-
-
-
-
-
(284)
(8,024)
(2,669)
52,670
-
-
585
(385)
1,589
55,176
(1,643)
1,295
(2,755)
(15,710)
(9,994)
998,812
* Accumulated depreciation of buildings is stated after the elimination of depreciation, revaluation, disposals and
impairments.
The carrying value of land and buildings (revalued at 31 December 2018) is €1,077.2 million. The value of these assets
under the cost model is €803.4 million. In 2018, unrealised revaluation gains of €111.2 million and unrealised losses
of €8.3 million have been reflected through other comprehensive income and in the revaluation reserve in equity. A
revaluation loss of €3.4 million and a reversal of prior period revaluation losses of €0.3 million have been reflected in
administrative expenses through profit or loss.
– Development expenditure incurred on new build hotels of €44.6 million;
– Development expenditure incurred on hotel extensions and renovations of €31.6 million; and
– Interest capitalised on loans and borrowings relating to qualifying assets of €1.7 million (note 5).
Property previously classified as assets under construction (€152.0 million) and interest capitalised on loans and
borrowings relating to qualifying assets previously classified as assets under construction (€3.3 million) has been
transferred to land and buildings and fixtures and fittings as a result of the assets coming into use during the year
ended 31 December 2018. This includes the following:
– The completed construction of Maldron Hotel Belfast City, Belfast with operations beginning 13 March 2018;
– The completed construction of Maldron Hotel Kevin Street, Dublin with operations beginning 6 July 2018;
– The completed construction of Clayton Hotel Charlemont, Dublin with operations beginning 23 November 2018;
– The substantially completed construction of Maldron Hotel South Mall, Cork with operations beginning
20 December 2018;
– Additional bedrooms at Clayton Hotel Dublin Airport;
– Additional bedrooms at Maldron Sandy Road, Galway;
– Additional bedrooms at Maldron Parnell Square, Dublin; and
– New restaurant, meeting rooms and additional bedrooms at Clayton Hotel Ballsbridge, Dublin.
Arising from a change in use by the Group of previously recognised property plant and equipment during the year there
has been a transfer to contract fulfilment costs (€8.1 million) relating to the element of the land on the site of the
former Tara Towers hotel which is to be used to build a residential development (note 13). The Group has a forward
sale agreement on this development with completion expected late 2020/early 2021.
Also, arising from a change of use of property previously recognised as land and buildings, there has been a transfer to
assets under construction (€6.6 million) relating to the element of the land on the site of the former Tara Towers hotel
which is to be used to build a new hotel which will be operated by the Group.
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.
The value of the Group’s property at 31 December 2018 reflects open market valuations carried out in December
2018 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 2018, properties included within land and buildings with a carrying amount of €895.9 million (2017:
€848.8 million) were pledged as security for loans and borrowings.
138
139
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
11 Property, plant and equipment (continued)
11 Property, plant and equipment (continued)
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 2018, 29 properties were revalued by independent external
valuers engaged by the Group (31 December 2017: 25).
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 the profile of actual capital
expenditure incurred by the Group. On specific assets, refurbishments are, by nature, periodic rather than annual.
Valuers’ expectations of EBITDA are based off their trading forecasts (benchmarked against competition, market
and actual performance). The expected net cash flows are discounted using risk adjusted discount rates. Among
other factors, the discount rate estimation considers the quality of the property and its location. The final valuation
also includes a deduction of full purchaser’s costs based on the valuers’ estimates at 8.46% for Republic of Ireland
domiciled assets (2017: 8.46%) and 6.8% for United Kingdom domiciled assets (2017: 6.8%).
The valuers use their professional judgement and experience to balance the interplay between the different
assumptions and valuation influences. For example, initial discounted cash flows based on individually reasonable
inputs may result in a valuation which challenges the price per key metrics 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.
Measurement of fair value (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 2018
Regional
Ireland
United
Kingdom
Number of hotel assets
2
3
5
10
4
6
10
2
2
7
11
7
4
1
12
2
10
12
9
2
-
11
5
2
-
7
2
5
7
5
1
1
7
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
140
* Price per key represents the valuation of a hotel divided by the number of rooms in that hotel.
Total
14
9
6
29
8
21
29
16
5
8
29
Total
12
8
5
25
5
20
25
16
3
6
25
141
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
11 Property, plant and equipment (continued)
12 Investment property (continued)
Measurement of fair value (continued)
The valuers also applied risk adjusted discount rates of 9.25% to 11.25% for Dublin assets (31 December 2017: 9.50%
to 11.75%), 9.50% to 12.00% for Regional Ireland assets (31 December 2017: 9.00% to 12.00%) and 8.25% to
12.00% for United Kingdom assets (31 December 2017: 8.50% to 12.50%).
The most significant factors which have impacted valuations this year are the uplifts on newly built hotels and extensions
which were built at a cost below fair value and reflection of continued improvements in trading performance across hotels.
The manner and potential impact of the United Kingdom’s departure from the European Union may have a negative
impact on both the United Kingdom and Irish economies. The Group continues to monitor the ongoing uncertainty
surrounding Brexit but has seen no impact on trading and there is no indicator of impairment at 31 December 2018 as a
result of this.
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.
– In the year to 31 December 2017, the Group completed the sale and operating leaseback of the Clayton Hotel Cardiff,
UK. 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 2018 reflect an open market valuation carried out in
December 2018 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 10.5% (2017: 6.75% to 10.75%).
12 Investment property
The estimated fair value under this valuation model would increase or decrease if:
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
Disposal on sale and operating leaseback of property
Transfer from property, plant and equipment (note 11)
Gain on revaluation recognised in profit or loss
Loss on revaluation recognised in profit or loss
At 31 December
2018
€’000
1,585
-
-
-
-
-
(25)
1,560
2017
€’000
3,245
(585)
(682)
(813)
385
35
-
1,585
Investment properties with a carrying value of €nil (2017: €1.6 million) was pledged as security for loans and
borrowings at 31 December 2018.
Investment property at 31 December 2018 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 12 and 8
years remaining at 31 December 2018.
– In 2017, 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 was transferred to investment
property from property, plant and equipment.
– In the year to 31 December 2017, transfers to property, plant and equipment 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
was transferred to property, plant and equipment (note 11).
– Rent was higher or lower than expected; and/or
– The yield used as the capitalisation rate was higher or lower.
13 Contract fulfilment costs
Non-current asset
At 1 January
Transfer from land and buildings to contract fulfilment costs (note 11)
Other costs incurred in fulfilling contract to date
At 31 December
2018
€’000
-
8,085
981
9,066
2017
€’000
-
-
-
-
Contract fulfilment costs, within non-current assets, relate to the Group’s contractual agreement with Irish Residential
Properties REIT PLC (“IRES”) entered into on 16 November 2018, for IRES to purchase a residential development the
Group is developing (comprising 69 residential units) on the site of the former Tara Towers hotel.
Revenue and the associated cost will be recognised on this contract in profit or loss when the performance obligation
in the contract has been met. Based on the terms of the contract this will be on legal completion of the contract which
will occur on practical completion of the development project which is expected to be late 2020/early 2021. As a
result, revenue will be recognised at a point in time in the future when the performance obligation is met, rather than
over time.
Arising from the change in use by the Group of previously recognised property, plant and equipment during the year,
following the closure of the former Tara Towers Hotel, there was a transfer to contract fulfilment costs within non-
current assets (€8.1 million) relating to the element of the land on the site of the former Tara Towers hotel (note 11)
which will be used for the residential development.
142
143
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
13 Contract fulfilment costs (continued)
Other costs incurred during the year in fulfilling the contract (€1.0 million) which relate directly to this contractual
arrangement with IRES are also included within non-current assets at 31 December 2018. These costs have enhanced
the asset which will be used for the residential development, have been used in order to satisfy the contract and the
costs are expected to be recovered. They primarily relate to legal costs, architectural and planning costs and other
professional fees incurred up to 31 December 2018 in fulfilling the contract.
The overall sale value of the transaction is expected to be up to €42.4 million (excluding VAT). The overall value of the
transaction will vary depending on how Part V obligations (Social and Affordable housing allocation) are settled with
Dublin City Council.
14 Derivatives (continued)
Fair value
Non-current asset
Interest rate cap asset
Total derivative asset
Non-current liabilities
Interest rate swap liabilities
Total derivative liabilities
14 Derivatives
Net derivative financial instrument position at year end
The Group have entered into interest rate swaps and a cap agreement with a number of financial institutions in order to
manage the interest rate risks arising from the Group’s borrowings (note 21).
Interest rate swaps are employed by the Group to partially convert the Group’s Sterling denominated borrowings from
floating to fixed interest rates. An interest rate cap is employed to limit the exposure to upward movements in floating
interest rates on Euro denominated borrowings.
On 26 October 2018, as a result of the refinancing (note 21), the Group decided to hedge the floating interest rate on all
the term borrowings for a five year term.
The terms of the derivatives are as follows:
– On refinancing the interest rate swaps with a maturity date of 3 February 2020 were retained which fix the LIBOR
benchmark rate to 1.5025% on a notional of £101.5 million Sterling denominated borrowings;
– On 26 October 2018, two new interest rate swaps were employed with an effective date of 3 February 2020 which
hedge the LIBOR benchmark rate on £101.5 million of the Sterling denominated borrowings for the period to the
maturity of the term borrowings on 26 October 2023. These swaps fix the LIBOR benchmark rate to 1.39%; and
– On 26 October 2018, two new interest rate swaps were employed with an effective date of 26 October 2018 and
a maturity date of 26 October 2023 to hedge the LIBOR benchmark rate on a total notional of £75 million of the
Group’s Sterling denominated borrowings. These swaps fix the LIBOR benchmark rate at 1.27% on a notional of £63
million and 1.28% on a notional of £12 million of Sterling denominated borrowings.
As at 31 December 2018, the interest rate swaps cover approximately 99% of the Group’s Sterling denominated borrowings.
The Group also retained the interest rate cap with a maturity date of 30 September 2019, covering approximately
8% of the Group’s Euro denominated borrowings at 31 December 2018. 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 IFRS 9.
144
2018
€’000
2017
€’000
-
-
1
1
(1,306)
(1,306)
(1,306)
(1,778)
(1,778)
(1,777)
2018
€’000
(553)
(1)
(554)
1,026
472
2017
€’000
275
(6)
269
1,348
1,617
Included in other comprehensive income
Fair value (losses)/gains on derivative instruments
Fair value (loss)/gain on interest rate swap liabilities
Fair value loss on interest rate cap asset
Reclassified to profit or loss (note 5)
The amount reclassified to profit or loss during the year represents the incremental interest expense arising under the
interest rate swaps because actual LIBOR rates were lower than the swap rates.
15 Trade and other receivables
Non-current assets
Other receivables
Deposit paid on acquisitions
Prepayments
Current assets
Trade receivables
Prepayments
Contract assets
Accrued income
Total
2018
€’000
900
5,086
8,773
14,759
9,300
8,943
2,614
1,709
2017
€’000
900
-
3,443
4,343
8,957
7,469
1,664
2,614
22,566
20,704
37,325
25,047
145
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
15 Trade and other receivables (continued)
15 Trade and other receivables (continued)
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.
Non-current assets include deposits paid of €5.1 million (£4.6 million) in relation to the acquisition of Hintergard
Limited, a company holding a developed hotel at Aldgate, London. This transaction completed on 3 January 2019 (note
26). Professional fees incurred to 31 December 2018 of €1.1 million (£1.0 million) associated with this transaction are
included in non-current prepayments. There was no comparable deposit on acquisitions at 31 December 2017.
Also included within non-current prepayments at 31 December 2018 is €6.8 million (31 December 2017: €2.8 million)
relating to costs associated with entering into leases which are being amortised over the life of the relevant leases as it
represents up-front costs associated with entering the leases. These include the following:
– An amount of €2.6 million (2017: €nil) relating to costs incurred by the Group as a result of entering into a new
lease at the hotel now trading as Maldron Hotel Newcastle. The costs are being amortised on a straight-line basis
over the 35 year life of the lease;
– An amount of €1.5 million (2017: €1.6 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 net costs are being amortised on a straight-line basis over the 25 year
life of the lease;
– An amount of €1.1 million (2017: €1.1 million) relating to the sale and operating leaseback of Hotel La Tour,
Birmingham on 11 August 2017. The costs are amortised over the 35 year life of the lease; and
– The remainder relates to costs associated with entering a number of other leases by the Group as well as
professional fees associated with future lease agreements for hotels currently being constructed or in planning.
When these leases are initiated, amortisation will occur on a straight-line basis over the life of the leases.
Also included within non-current prepayments at 31 December 2018 is an amount of €0.9 million (2017: €0.6 million)
relating to a prepayment made for IT services relating to 2020 and 2021.
Trade receivables are subject to the new expected credit loss model in IFRS 9 Financial Instruments. The Group
has therefore revised its impairment methodology. The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss allowance for all trade receivables.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics
and the number of days past due.
Aged analysis of trade receivables
Aged analysis of trade receivables (continued)
No changes to the impairment provisions were made on transition to IFRS 9. Management has not restated the
prior year for the effect of IFRS 9 Financial Instruments as the effect of this change was not considered material.
Impairment provisions in the prior year under the incurred loss model were not materially different to the expected
credit loss rates used in 2018.
Not past due
Past due < 30 days
Past due 30 - 60 days
Past due 60 - 90 days
Past due > 90 days
Gross
receivables
Impairment
provision
Net
receivables
2017
€’000
4,358
2,153
1,483
453
836
9,283
2017
€’000
(2)
-
-
-
(324)
(326)
2017
€’000
4,356
2,153
1,483
453
512
8,957
Management does not expect any significant losses from receivables that have not been provided for as shown above.
16 Inventories
Goods for resale
Consumable stores
2018
€’000
1,584
370
1,954
2017
€’000
1,419
346
1,765
Inventories recognised as cost of sales during the year amounted to €27.8 million (2017: €27.4 million).
Gross
receivables
Expected
credit loss
rate
Impairment
provision
Net
receivables
2018
€’000
4,607
2,313
1,011
320
1,569
9,820
2018
€’000
0.1%
0.4%
0.8%
3.8%
31.0%
2018
€’000
(5)
(9)
(8)
(12)
(486)
(520)
2018
€’000
4,602
2,304
1,003
308
1,083
9,300
17 Cash and cash equivalents
Cash at bank and in hand
Not past due
Past due < 30 days
Past due 30 - 60 days
Past due 60 - 90 days
Past due > 90 days
146
2018
€’000
2017
€’000
35,907
35,907
15,745
15,745
147
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
18 Capital and reserves
Share capital and share premium
At 31 December 2018
Authorised share capital
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
184,349,666
1,843
Share premium
503,113
At 31 December 2017
Authorised share capital
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
503,113
All ordinary shares rank equally with regard to the Company’s residual assets.
During the year ended 31 December 2018, the Company issued 668,550 shares of €0.01 per share on foot of the
vesting of awards granted in March 2015 and October 2015 under the 2014 LTIP (note 7). 152 shares relating to the
2016 SAYE scheme were issued during 2018 (note 7).
Dividends
The dividends paid in respect of ordinary share capital were as follows:
Interim dividend - paid 3.0 cent per Ordinary Share (2017: €nil)
2018
€’000
5,529
2017
€’000
-
An interim dividend for 2018 of 3.0 cent per share was paid on 12 October 2018 on the ordinary shares in Dalata Hotel
Group plc and amounted to €5.5 million (2017: €nil).
On 25 February 2019, the Board proposed a final dividend of 7.0 cent per share. This proposed dividend is subject to
approval by the shareholders at the Annual General Meeting. These consolidated financial statements do not reflect
this dividend.
18 Capital and reserves (continued)
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 €40.0 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 vested in the year, are
disclosed in note 7 and on pages 88 to 89 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.
(d) Revaluation reserve
The revaluation reserve relates to the revaluation of land and buildings in line with the Group’s policy to fair value these
assets at each reporting date (note 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 (note 23).
148
149
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
19 Trade and other payables
21 Interest-bearing loans and borrowings
Trade payables
Accruals
Contract liabilities
Value added tax
Payroll taxes
2018
€’000
18,490
34,072
9,421
775
2,492
2017
€’000
14,127
41,175
6,674
713
2,164
65,250
64,853
Repayable within one year
Bank borrowings
Less: unamortised debt costs
Repayable after one year
Bank borrowings
Less: unamortised debt costs
Accruals include capital expenditure accruals including work in progress at year end which has not yet been invoiced
(2018: €9.5 million, 2017: €16.0 million).
Total interest-bearing loans and borrowings
2018
€’000
2017
€’000
-
-
-
19,300
(1,094)
18,206
306,078
243,010
(4,189)
301,889
301,889
(1,077)
241,933
260,139
20 Provision for liabilities
Non-current liabilities
Insurance provision
Current liabilities
Insurance provision
2018
€’000
2017
€’000
4,783
4,716
1,859
6,642
-
4,716
The reconciliation of the movement in the provision for the year ended 31 December 2018 is as follows.
At 1 January
Provisions made during the year – charged to profit or loss
Utilised during the year
At 31 December
2018
€’000
4,716
2,784
(858)
6,642
2017
€’000
3,040
2,501
(825)
4,716
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. The Group expects
the majority of the insurance provision will be utilised within two to five years of the period end date however due to
the nature of the provision there is a level of uncertainty in the timing of settlement as the Group generally cannot
precisely determine the extent and duration of the claim process. The provision has been discounted to reflect the time
value of money though the effect is not significant.
On 26 October 2018, the Group successfully completed the refinancing of its existing debt facility with a banking club
of six lenders - four original lenders who had participated in the previous facility and two new lenders to the Group. A
new €525 million five year multicurrency facility was entered into consisting of a €200 million term loan facility and a
€325 million revolving credit facility. The new maturity date of the facility is 26 October 2023.
In line with IFRS 9 derecognition criteria, the Group assessed whether the terms and cash flows of the modified liability
were substantially different on refinancing.
Based on the ‘10% test’ referred to in note 1 (xxv) (derecognition of financial liabilities accounting policy), the loans
and borrowings which were repriced to current market-terms and which related to the original lenders were deemed
to be non-substantially modified. As they are floating-rate liabilities, the amortised cost of the loans and borrowings
relating to the original lenders was recalculated by discounting the modified cash flows at an effective interest rate
which reflected the current market terms of the refinanced liabilities on 26 October 2018, which resulted in no gain
or loss. The current market terms are the margin and applicable variable interest rates at that date. These loans and
borrowings are recognised at amortised cost with directly attributable costs costs of €3.5 million being amortised to
profit or loss on an effective interest rate basis over the five year term. Unamortised arrangement fees of €0.9 million
on the original loans that are not reflective of current market terms at the modification date are recognised immediately
in finance costs in profit or loss (note 5).
The loans and borrowings drawn with the two new lenders on 26 October 2018 are accounted for as new financial
liabilities and accounted for at fair value less directly attributable transaction costs on initial recognition and subsequently,
stated at amortised cost with directly attributable costs amortised to profit or loss on an effective interest rate basis over
the five year term. The directly attributable costs in relation to the two new lenders totalled €0.8 million.
As at 31 December 2018, the drawn facility is €306.1 million consisting of Sterling term borrowings of £176.5 million
(€197.3 million) and revolving credit facility borrowings of €108.8 million - €106.7 million in Euro and £1.9 million
(€2.1 million) in Sterling. Unamortised debt costs at that date total €4.2 million.
The undrawn loan facilities as at 31 December 2018 were €216.2 million. On 2 January 2019, £60 million and €30.5
million were drawn from the multicurrency revolving credit facility to fund the acquisition of Hintergard Limited (note 26).
The loans bear interest at variable rates based on 3 month Euribor/LIBOR plus applicable margins. The Group has
entered into certain derivative financial instruments to hedge interest rate exposure on a portion of these loans (see
note 14). The loans are secured by the Group’s assets. Under the terms of the loan facility agreement, an interest rate
floor is in place which prevents the Group from receiving the benefit of sub-zero benchmark LIBOR and Euribor rates.
150
151
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
21 Interest-bearing loans and borrowings (continued)
21 Interest-bearing loans and borrowings (continued)
Reconciliation of movements of liabilities to cash flows arising from financing activities
Reconciliation of movement in net debt
Liabilities
Trade and
other
payables
2018
Loans and
borrowings
2018
€’000
€’000
Balance as at 1 January 2018
260,139
64,853
Derivatives
2018
€’000
1,778
Share
capital
2018
€’000
1,837
Equity
Retained
earnings
2018
Total
2018
€’000
€’000
73,045
401,652
Changes from financing cash flows
Proceeds from vesting of share awards
-
-
-
Interest and finance costs paid
(3,693)
(8,469)
(1,026)
Receipt of bank loans
Repayment of bank loans
Dividends paid
Total changes from financing
cash flows
Liability-related other changes
The effect of changes in foreign
exchange rates
Changes in fair value
Interest expense on bank loans and
borrowings
Other finance costs - net amortisation
of debt costs
Other finance costs - other
Total liability-related other changes
Total equity-related other changes
137,902
(92,563)
-
-
-
-
-
-
-
6
-
-
-
-
-
-
-
-
6
(13,188)
137,902
(92,563)
(5,529)
(5,529)
41,646
(8,469)
(1,026)
6
(5,529)
26,628
(1,570)
-
-
1,674
-
104
-
-
-
7,801
-
1,065
8,866
-
-
554
-
-
-
554
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,570)
554
7,801
1,674
1,065
9,524
76,545
76,545
Balance as at 31 December 2018
301,889
65,250
1,306
1,843
144,061
514,349
Interest-bearing loans and borrowings
(excluding unamortised debt costs)
At 1 January 2018
Cash flows
Facilities drawn down
Loan repayments
Non-cash changes
Sterling
facility
Sterling
facility
£’000
€’000
Euro
facility
€’000
Total
€’000
174,352
196,512
65,797
262,309
43,251
48,726
89,176
137,902
(39,251)
(44,287)
(48,276)
(92,563)
Effect of foreign exchange movements
At 31 December 2018
-
(1,570)
-
178,352
199,381
106,697
(1,570)
306,078
Cash and cash equivalents
At 1 January 2018
Movement during the year
At 31 December 2018
Net debt at 31 December 2018
At 1 January 2017
Cash flows
Facilities drawn down
Loan repayments
Non-cash changes
15,745
20,162
35,907
270,171
174,352
203,639
80,097
283,736
30,000
34,180
2,500
36,680
(30,000)
(33,096)
(16,800)
(49,896)
Effect of foreign exchange movements
At 31 December 2017
-
174,352
(8,211)
196,512
-
65,797
(8,211)
262,309
Cash and cash equivalents
At 1 January 2017
Movement during the year
At 31 December 2017
Net debt at 31 December 2017
81,080
(65,335)
15,745
246,564
Net debt is calculated in line with the Group’s loan facility agreement. As a result, at 31 December 2018, it excludes unamortised
debt costs of €4.2 million (2017: €2.2 million) and interest rate swap liabilities of €1.3 million (2017: €1.8 million).
152
153
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
22 Deferred tax
Deferred tax assets
Deferred tax liabilities
Net liability
Movements in year
At 1 January - net liability
Acquisition through business combination – assets
Acquisition through business combination – liabilities
(Charge)/credit for year – to profit or loss (note 8)
Charge for year – to other comprehensive income
At 31 December – net liability
2018
€’000
2017
€’000
2,613
3,571
(41,129)
(31,858)
(38,516)
(28,287)
2018
€’000
2017
€’000
(28,287)
(23,157)
-
-
(536)
1,150
(1,150)
571
(9,693)
(5,701)
(38,516)
(28,287)
As at 31 December 2018, there are unrecognised tax losses available in Pillo Hotels Limited of €0.3 million (2017: €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.
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 (€9.2 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 (€6.8 million) arose. The Group opted to roll over this capital gain by
correspondingly reducing the future tax base cost of capital assets.
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 £2.2 million
(€2.5 million) of tax trading losses remain unrecognised. The tax effect of these losses is £0.4 million (€0.4 million).
22 Deferred tax (continued)
Deferred tax arises from temporary differences relating to:
Net balance at
1 January
2018
€’000
Recognised in
profit or loss
2018
€’000
Recognised
in OCI
2018
€’000
Acquired in business
combinations
2018
€’000
Net deferred
tax
2018
€’000
Deferred
tax assets
2018
€’000
Deferred
tax liability
2018
€’000
Balance as at 31 December 2018
Property, plant and equipment
(27,647)
(923)
(9,634)
Intangible assets
Tax losses carried forward
Other
(2,562)
1,682
240
-
387
-
-
-
(59)
Net deferred tax
(28,287)
(536)
(9,693)
-
-
-
-
-
(38,204)
363
(38,567)
(2,562)
-
(2,562)
2,069
2,069
181
181
-
-
(38,516)
2,613
(41,129)
Balance as at 31 December 2017
Net balance at
1 January
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
Property, plant and equipment
(21,886)
887
(5,498)
(1,150)
(27,647)
1,649
(29,296)
Intangible assets
Tax losses carried forward
Other
(2,562)
848
443
-
(316)
-
-
-
(203)
Net deferred tax
(23,157)
571
(5,701)
23 Financial instruments and risk management
-
(2,562)
-
(2,562)
1,150
1,682
1,682
240
240
-
-
(28,287)
3,571
(31,858)
-
-
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 Sterling denominated borrowings as a net investment hedge 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 2018. 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.
154
155
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
23 Financial instruments and risk management (continued)
23 Financial instruments and risk management (continued)
Risk exposures (continued)
Financial Assets
Trade and other receivables excluding
prepayments and deposits paid on
acquisitions (note 15)
Cash at bank and in hand (note 17)
Financial assets
measured at
fair value
2018
€’000
Financial
assets at
amortised cost
2018
€’000
Total
carrying
amount
2018
€’000
Level 1
2018
€’000
Level 2
2018
€’000
Level 3
2018
€’000
Total
2018
€’000
-
-
-
14,523
35,907
50,430
14,523
35,907
50,430
Financial
liabilities
measured at
fair value
2018
€’000
Financial
liabilities
measured at
amortised cost
2018
€’000
Total
carrying
amount
2018
€’000
Level 1
2018
€’000
Level 2
2018
€’000
Level 3
2018
€’000
Total
2018
€’000
Financial Liabilities
Bank loans (note 21)
Trade payables and accruals (note 19)
Derivatives (note 14) – hedging
instruments
-
-
(301,889)
(301,889)
(301,889)
(301,889)
(52,562)
(52,562)
(1,306)
-
(1,306)
(1,306)
(1,306)
(1,306)
(354,451)
(355,757)
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
Financial
assets at
amortised cost
2017
€’000
Total
carrying
amount
2017
€’000
Level 1
2017
€’000
Level 2
2017
€’000
Level 3
2017
€’000
Total
2017
€’000
Financial Assets
Derivatives (note 14) – hedging
instruments
Trade and other receivables excluding
prepayments and deposits paid on
acquisitions (note 15)
Cash at bank and in hand (note 17)
1
-
-
1
-
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
Level 1
2017
€’000
Level 2
2017
€’000
Level 3
2017
€’000
Total
2017
€’000
-
-
(1,778)
(1,778)
(260,139)
(260,139)
(260,139)
(260,139)
(55,302)
(55,302)
-
(1,778)
(1,778)
(1,778)
(315,441)
(317,219)
Financial Liabilities
Bank loans (note 21)
Trade payables and accruals (note 19)
Derivatives (note 14) – hedging
instruments
156
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); and
– 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 2018, 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.
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 any expected credit loss 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. There is no difference between margins available in the
market at the year end, and the margins that the Group were paying at the year end.
(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 due to the large number of customers.
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Outstanding
customer balances are regularly monitored and reviewed for indicators of impairment (evidence of financial difficulty of
the customer or payment default). The maximum exposure to credit risk is represented by the carrying amount of each
financial asset.
The ageing profile of trade receivables at 31 December 2018 is provided in note 15. Management does not expect any
significant losses from receivables that have not been provided for as shown in note 15.
157
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
23 Financial instruments and risk management (continued)
23 Financial instruments and risk management (continued)
(a) Credit risk (continued)
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and give rise to credit risk on the amounts held with
counterparties. The maximum credit risk is represented by the carrying value at the reporting date. The Group’s policy for
investing cash is to limit risk of principal loss and to ensure the ultimate recovery of invested funds by limiting credit risk.
The 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
Contract assets
Accrued income
Cash at bank and in hand
Carrying
amount
2018
€’000
Carrying
amount
2017
€’000
9,300
900
2,614
1,709
35,907
50,430
8,957
900
1,664
2,614
15,745
29,880
(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 26 October 2018, the Group improved its liquidity position by refinancing its existing debt facility. A €525.0 million
five year multicurrency facility was entered into with six banking partners. The facility consists of a €200.0 million term
facility and €325.0 million revolving credit facility. The maturity date of the facility is 26 October 2023 and the Group
has the option to extend the facility for an additional two years.
As at 31 December 2018, the entire term facility was drawn in Sterling equating to £176.5 million (€197.3 million) and
€108.8 million was drawn from the revolving credit facility - €106.7 million in Euro and £1.9 million (€2.1 million) in
Sterling. The undrawn loan facilities as at 31 December 2018 were €216.2 million. On 2 January 2019, £60.0 million
and €30.5 million were drawn from the multicurrency revolving credit facility to fund the acquisition of Hintergard
Limited (note 26).
The following are the contractual maturities of the Group’s financial liabilities at 31 December 2018, including
estimated interest payments. In the following table, bank loans are repaid on 26 October 2023, even though the Group
has the flexibility to repay and draw the revolving credit facility throughout the term of the facility which would improve
its liquidity position.
(b) Liquidity risk (continued)
Carrying
value
2018
€’000
Total
2018
€’000
6 months
or less
€’000
6 – 12
months
€’000
1 – 2
years
€’000
2 – 5
years
€’000
Bank loans
(301,889)
(341,809)
(3,844)
(3,909)
(7,665)
(326,391)
Trade payables and accruals
(52,562)
(52,562)
(52,562)
-
-
Interest rate swaps
(1,306)
(1,306)
(459)
(353)
(333)
-
(161)
(355,757)
(395,677)
(56,865)
(4,262)
(7,998)
(326,552)
The equivalent disclosure for the prior year is as follows.
Carrying
value
2017
€’000
Total
2017
€’000
Bank loans
(260,139)
(276,831)
Trade payables and accruals
(55,302)
(55,302)
Interest rate swaps
(1,778)
(1,778)
6 months
or less
€’000
(15,017)
(55,302)
(543)
6 – 12
months
€’000
1 – 2
years
€’000
2 – 5
years
€’000
(12,654)
(20,858)
(228,302)
-
(463)
-
(560)
-
(212)
(317,219)
(333,911)
(70,862)
(13,117)
(21,418)
(228,514)
(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 profit 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
(note 14) which hedge the variability in cash flows attributable to the interest rate risk.
The interest rate profile of the Group's interest-bearing financial liabilities as reported to the management of the Group
is as follows;
Variable rate instruments
Financial liabilities – borrowings
Effect of interest rate swaps
Effect of interest rate cap
Nominal amount
2018
€’000
2017
€’000
306,078
262,310
(197,310)
(114,401)
(8,212)
100,556
(19,413)
128,496
The weighted average interest rate for 2018 was 2.94% (2017: 3.16%), of which 2.15% (2017: 2.42%) related to margin.
158
159
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
23 Financial instruments and risk management (continued)
23 Financial instruments and risk management (continued)
(c) Market risk (continued)
(i) Interest rate risk (continued)
The interest expense for 2018 has been sensitised in the below table for a reasonably possible change in variable
interest rates. In relation to the downward sensitivity, the Group has 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 has reviewed seven years historical data for the 3 month Euribor and 3 month
LIBOR rates and 3 month Euribor and 3 month LIBOR forward curves for the term of the loan facility. Based on this
review, the Group believes that a reasonable change in the rates would be an uplift to the highest 3 month rate, which
is a rate of 1.4% for 3 month LIBOR based on forward curves and 1.1% for 3 month Euribor based on historical data
for 3 month Euribor.
At 31 December 2018, all Sterling term borrowings (£176.5 million) were hedged with interest rate swaps. As a result,
a change in the LIBOR rate would have a minimal impact. In January 2019, the Group drew down an additional £60
million in Sterling from the revolving credit facility (“RCF”) of which £25 million is hedged from 29 March 2019 to 31
December 2020. Given that Euribor is currently below zero, the Group have not hedged Euribor except for an interest
rate cap which hedges Euribor on €8.2 million of Euro denominated debt.
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
2018 actual weighted
average variable
benchmark rate
If rate
sensitised
upwards
If rate
sensitised
downwards
0%
1.19%
1.07%
1.45%
0%
0.96%
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 2018
(Increase)/decrease in interest on loans and borrowings
Decrease/(increase) in tax charge
(Decrease)/increase in profit
31 December 2017
(Increase)/decrease in interest on loans and borrowings
Decrease/(increase) in tax charge
(Decrease)/increase in profit
Effect on profit or loss
Increase
in rate*
Zero variable
rate*
€’000
€’000
(1,555)
194
(1,361)
(1,254)
157
(1,097)
419
(52)
367
287
(36)
251
* Only the interest on the unhedged portion of the loans has been sensitised. The sensitivity has no impact on the
hedged portion.
160
(c) Market risk (continued)
(i) Interest rate risk (continued)
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 2018.
Interest rate swaps
Liabilities
31 December 2018
Carrying
Amount
€’000
Total
€’000
12 months
or less
More than
1 year
€’000
€’000
(1,306)
(1,306)
(812)
(494)
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 2018
Carrying
Amount
€’000
Total
€’000
12 months
or less
More than
1 year
€’000
€’000
(1,306)
(1,306)
(812)
(494)
(ii) Foreign currency risk
As per the Risk Management section of the Annual Report on page 40 to 47, 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.
The Group’s policy is to manage foreign currency exposures commercially and through netting of exposures where
possible. The Group’s principal transactional exposure to foreign exchange risk relates to interest costs on its Sterling
borrowings. This risk is mitigated by the earnings from UK subsidiaries which are denominated in Sterling.
The Group’s gain or loss on retranslation of the net assets of foreign currency subsidiaries is taken directly to the
translation reserve.
The Group limits its exposure to foreign currency risk by using Sterling term debt to hedge part of the Group’s
investment in UK subsidiaries. The Group financed certain acquisitions and developments in the UK by obtaining
funding at Group level through external term borrowings denominated in Sterling. These borrowings amounted to
£176.5 million (€197.3 million) at 31 December 2018 (2017: £174.4 million (€196.5 million)) and are designated as
net investment hedges. The net investment hedge was fully effective during the year.
This enables gains and losses arising on retranslation of those foreign currency borrowings to be recognised in other
comprehensive income, providing a partial offset in reserves against the gains and losses arising on translation of the
net assets of those UK operations.
Sensitivity analysis on transactional risk
The Group have reviewed the historical average monthly Euro/Sterling foreign exchange rates for the previous twelve
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.
161
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
23 Financial instruments and risk management (continued)
(c) Market risk (continued)
(ii) Foreign currency risk (continued)
Sensitivity analysis on transactional risk (continued)
On the upward sensitivity, due to current volatility in the market and the unknown impact of Brexit, the Group have
used a 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 2018 was 0.88. The interest cost on
Sterling loans in 2018 was £6.14 million (€6.94 million).
Impact on interest costs of Sterling loans
Impact on tax charge
Increase/(decrease) in profit/equity
Profit
Equity
Strengthening
of Euro
Weakening of
Euro
Strengthening
of Euro
Weakening of
Euro
€’000
801
(100)
701
€’000
(2,324)
290
(2,034)
€’000
801
(100)
701
€’000
(2,324)
290
(2,034)
(d) Capital management
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to
sustain future development of the business. Management monitors the return on capital to ordinary shareholders.
The Board of Directors seeks to maintain a balance between the higher returns that might be possible with higher
levels of borrowings and the advantages and security afforded by a sound capital position. The Group’s target is to
achieve a pre-tax leveraged return on equity of at least 15% on investments.
The Group monitors capital using a ratio of Net Debt to Adjusted EBITDA (note 2) ratio and seeks to keep it below
3.50. The Net Debt to Adjusted EBITDA as at 31 December 2018 is 2.3.
Adjusted EBITDA (note 2)
Net debt (note 21)
Net Debt to Adjusted EBITDA as at 31 December
2018
€’000
2017
€’000
119,583
104,873
270,171
246,564
2.3
2.4
24 Commitments
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 2018
Less than
1 year*
1 - 2
years
€'000
€'000
2 - 5
years
€'000
5 - 15
years
€'000
15 -25
years
€'000
After 25
years
€'000
Total
€'000
Operating lease
26,576
24,106
73,587
226,560
200,273
121,606
672,708
Agreements for lease
2,585
9,947
55,660
181,086
192,114
240,088
681,480
29,161
34,053
129,247
407,646
392,387
361,694 1,354,188
At 31 December 2017
Less than
1 year
€'000
1 - 2
years*
€'000
2 - 5
years
€'000
5 - 15
years
€'000
15 -25
years
€'000
After 25
years
€'000
Total
€'000
Operating lease
24,827
21,859
66,065
205,313
192,771
113,569
624,404
Agreements for lease
448
1,792
22,850
94,527
100,979
133,117
353,713
25,275
23,651
88,915
299,840
293,750
246,686
978,117
*2019 financial year
The significant movement since the year ended 31 December 2017 is due principally to the following:
– The Group entered into a 35 year operating lease of a Maldron Hotel in Newcastle with an annual rent of £1.6 million
per annum which had previously been disclosed as a commitment under an agreement for lease;
– The Group has signed an agreement to lease a Maldron Hotel, to be built in Manchester. On completion of
construction, the Group will commence operations in the hotel through a 35 year operating lease;
– The Group has signed an agreement to lease a Clayton Hotel, to be built in Bristol. On completion of construction,
the Group will commence operations in the hotel through a 35 year operating lease;
– The Group has signed an agreement to lease a Maldron Hotel, to be built in Birmingham. On completion of
construction, the Group will commence operations in the hotel through a 35 year operating lease; and
– The Group has signed an agreement to lease a hotel, to be built in Dublin. On completion of construction, the Group
will commence operations in the hotel through a 35 year operating lease.
The weighted average lease life of future minimum rentals payable under leases is 30.3 years (2017: 30.7 years).
The operating lease charges during 2018 amounted to €33.2 million (2017: €31.0 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 2018 was €7.5 million (2017: €7.6 million).
162
163
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
24 Commitments (continued)
24 Commitments (continued)
Leases (continued)
IFRS 16 impact
Note 1 (ii) contains details of the impact of IFRS 16 Leases on the Group.
An illustrative disclosure of one potential quantitative impact of IFRS 16, using a notional discount rate of 5% is
included in the table below. While this rate is not a prediction of the discount rate as this rate was adopted merely
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, based on the work completed to date we expect the weighted
average discount rate will not be considerably different to this.
The Group is finalising work on the discount rates of individual leases and the opening adjustments by lease. It is
expected that the rate will be based largely upon the Group incremental borrowing rate as evidenced by the recent
refinancing and adjusted for tenor of leases, expected risk free rates over the relevant periods and asset specific
adjustments. The significant element of lease commitments benefit from a guarantee by the ultimate parent, Dalata
Hotel Group plc and consequently will be closely aligned with Group borrowing rates. This coupled with historic low
funding rates in both Euro and Sterling, the strength of the Group’s covenant, and the quality of the leased assets
having long remaining terms (weighted average lease life remaining of 30.3 years) means that the Group expects to
have a relatively low discount rate and consequently a significant lease liability.
Operating leases at 1 January 2019 have been incorporated into the illustrative IFRS 16 impact analysis below. The
actual impact of applying IFRS 16 on the 2019 financial statements will depend on the composition of the Group’s
lease portfolio throughout the year and is subject to change driven by any additional leases, lease modifications and/or
movements in the timing of opening new hotels.
Illustrative impact on consolidated statement of financial position at 1 January 2019 using 5% notional discount rate
Lease liability1
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 using 5% notional discount rate
Remove: Operating lease rentals2
Add: Depreciation of right-of-use asset
Add: Interest on lease liability
Impact on profit before taxation
Lease liability1 : operating lease rentals2
€’000
(355,951)
355,951
-
-
€’000
26,652
(17,807)
(17,234)
(8,389)
13.4x*
*This has been determined by dividing the opening lease liability by the fixed operating lease rental expense.
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 Eden Limited
- Galsay Limited
- DHG Fleming Limited
- 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
- DHG Dalton Limited
- Sparrowdale Limited
- Cavernford Designated Activity Company
- DHG Glover Limited
Capital commitments
The Group has the following commitments for future capital expenditure under its contractual arrangements.
Contracted but not provided for
2018
€’000
2017
€’000
26,701
98,282
This relates primarily to the development of the following new build hotels and extensions to currently operational
hotels which are now contractually committed:
– Completion works at hotel opened in 2018: Maldron South Mall, Cork.
– Extensions and renovations: Maldron Parnell Square and Clayton Hotel Burlington Road.
It also includes other capital expenditure committed 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 €60.6 million (31 December 2017: €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 2018 revenues.
164
165
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
25 Related party transactions
27 Subsidiary undertakings
Under IAS 24 Related Party Disclosures, the Group has a related party relationship with shareholders and Directors
of the Company.
Remuneration of key management
Key management is defined as the Directors of the Company and does not extend to any other members of the
Executive Management Team. The compensation of key management personnel is set out in the Remuneration
Committee report on pages 80 to 91. In addition, the share-based payments expense for key management in 2018
was €0.9 million (2017: €0.5 million).
26 Subsequent events
Acquisition of Hintergard Limited – Clayton Hotel City of London
On 2 January 2019, the Group drew down £60.0 million and €30.5 million from the multicurrency revolving credit
facility to fund the acquisition of Hintergard Limited (note 21).
On 3 January 2019, the Group completed the acquisition of the long leasehold (effective freehold) interest of a newly
built hotel, located in Aldgate, London for total consideration of £91 million through acquiring the entire issued share
capital of Hintergard Limited. The acquisition will be treated as an acquisition of property, plant and equipment in line
with IAS 16 Property, Plant and Equipment. The hotel opened on 24 January 2019 and has been branded Clayton
Hotel City of London.
On 9 January 2019, two interest rate swaps were entered into with an effective date of 29 March 2019 and a maturity
date of 31 December 2020 to hedge the LIBOR benchmark rate on a portion of the £60 million Sterling revolving credit
facility borrowings. The swaps hedge the LIBOR benchmark rate at 1.086%.
Acquisition of site adjacent to Clayton Hotel Cardiff Lane
On 8 January 2019, the Group acquired a site adjacent to Clayton Hotel Cardiff Lane, Dublin for €5.5 million. The Group
has plans to redevelop the area into circa 70 bedrooms and ancillary facilities.
Proposed dividend
On 25 February 2019, the Board proposed a final dividend of 7.0 cent per share. This proposed dividend is subject to
approval by the shareholders at the Annual General Meeting. These consolidated financial statements do not reflect
this dividend.
A list of all subsidiary undertakings at 31 December 2018 is set out below:
Country of
Incorporation
Subsidiary undertaking
DHG Glover Limited1
Ireland
DHG Fleming Limited1
Ireland
Cenan BV2
Netherlands
DHGL Limited1
Ireland
Dalata Limited1
Ireland
Hanford Commercial Limited1
Ireland
Anora Commercial Limited1
Ireland
Ogwell Limited1
Ireland
Caruso Limited1
Ireland
CI Hotels Limited1
Ireland
Dalata Management Services Limited1
Ireland
Tulane Business Management Limited1
Ireland
Dalata Support Services Limited1
Ireland
Fonteyn Property Holdings Limited1
Ireland
Fonteyn Property Holdings No. 2 Limited1 Ireland
Suvanne Management Limited1
Ireland
Carasco Management Limited1
Ireland
Amelin Commercial Limited1
Ireland
Lintal Commercial Limited1
Ireland
Bernara Commercial Limited1
Ireland
Pillo Hotels Limited1
Ireland
Loadbur Limited1
Ireland
Swintron Limited1
Ireland
Heartside Limited1
Ireland
Pondglen Limited1
Ireland
Candlevale Limited1
Ireland
Songdale Limited1
Ireland
Palaceglen Limited1
Ireland
Adelka Limited1
Ireland
Bayvan Limited1
Ireland
Leevlan Limited1
Ireland
DHG Arden Limited1
Ireland
DHG Barrington Limited1
Ireland
DHG Cordin Limited1
Ireland
DS Charlemont Limited1
Ireland
Cavernford DAC1
Ireland
Vizmol Limited1
Ireland
Sparrowdale Limited1
Ireland
Galsay Limited1
Ireland
Activity
Holding company
Financing company
Financing company
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
Property holding company
Hotel and catering
Hotel and catering
Hotel and catering
Property holding company
Hotel and catering
Intermediate holding company
Intermediate holding company
Intermediate holding company
Hotel and catering
Ownership
Direct
100%
100%
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%
1 The registered address of these companies is 4th Floor, Burton Court, Burton Hall Drive, Sandyford, Dublin 18.
2 The registered address of this company is Van Heuven Goedhartlaan 935A, 1181 LD Amstelveen, The Netherlands.
166
167
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
27 Subsidiary undertakings (continued)
28 Earnings per share (continued)
Subsidiary undertaking
Incorporation
Activity
Country of
Ownership
Direct
Indirect
Merzolt Limited1
DHG Burlington Road Limited1
DT Sussex Road Operations Limited1
DHG Eden Limited1
DHG Dalton Limited1
Williamsberg Property Limited1
Oak Lodge Management
Company Limited by Guarantee1
DHG Belfast Limited3
DHG Derry Limited3
DHG Derry Commercial Limited3
DHG Brunswick Limited3
Dalata UK Limited4
Dalata Cardiff Limited4
Trackdale Limited4
Islandvale Limited4
Crescentbrook Limited4
Hallowridge Limited4
Rush (Central) Limited4
Hotel La Tour, Birmingham Limited4
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
N Ireland
N Ireland
N Ireland
N Ireland
UK
UK
UK
UK
UK
UK
UK
UK
Hotel and catering
Hotel and catering
Dormant company
Hotel and catering
Property holding company
Property holding company
Management company
Hotel and catering
Hotel and catering
Property holding company
Hotel and catering
Holding company
Hotel and catering
Hotel and catering
Hotel and catering
Hotel and catering
Hotel and catering
Dormant company
Hotel and catering
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
3 The registered address of these companies is Butcher Street, Londonderry, County Derry, BT48 6HL, United Kingdom.
4 The registered address of these companies is St Mary Street, Cardiff, Wales, CF10 1GD, United Kingdom.
28 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 available to ordinary shareholders by the weighted average number of ordinary shares
outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares. The following table sets out the
computation for basic and diluted earnings per share for the years ended 31 December 2018 and 31 December 2017.
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
168
2018
2017
75,224
78,821
68,308
70,228
40.9 cents
37.2 cents
40.4 cents
36.9 cents
42.8 cents
38.3 cents
42.3 cents
37.9 cents
184,125,709 183,430,226
186,156,827 185,243,000
The difference between the basic and diluted weighted average shares outstanding for the year ended 31 December
2018 is due to the dilutive impact of the conditional share awards granted in 2015, 2016, 2017 and 2018 (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 items considered by management to not reflect normal
trading activities or distort comparability either period on period or with other similar businesses (note 2).
Reconciliation to adjusted profit for the year
Profit before tax
Finance costs
Profit before tax and finance costs
Adjusting items (note 2)
Proceeds from insurance claim
Hotel pre-opening expenses
Net revaluation movements through profit or loss
Acquisition-related costs
Gains on disposal of property freehold interests and subsidiary
Adjusted profit before tax and finance costs
Finance costs
Adjusting items in finance costs
Write off of unamortised arrangement fees on original loans (note 5)
Adjusted profit before tax
Tax charge
Tax adjustment for adjusting items
Adjusted profit for the year
29 Approval of the financial statements
The financial statements were approved by the Directors on 25 February 2019.
2018
€’000
87,301
9,514
96,815
(2,598)
2,487
3,137
-
-
99,841
(9,514)
946
91,273
(12,077)
(375)
78,821
2017
€’000
77,287
9,636
86,923
-
-
1,425
1,260
(469)
89,139
(9,636)
-
79,503
(8,979)
(296)
70,228
169
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
COMPANY
FINANCIAL
STATEMENTS
For the year ended
31 December 2018
Company statement of financial position
at 31 December 2018
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
Chair
Patrick McCann
Director
Note
2018
€’000
2017
€’000
2
3
4
5
6
9
9
8
3
8
7
46,704
42,519
-
-
1
240
46,704
42,760
36
116
744,203
730,234
676
744,915
791,619
849
731,199
773,959
1,843
503,113
4,232
-
263,113
772,301
-
-
-
-
19,318
19,318
19,318
791,619
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
170
Dalata Hotel Group plc Annual Report and Accounts 2018
171
Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Company statement of changes in equity
for the year ended 31 December 2018
Company statement of cash flows
for the year ended 31 December 2018
Attributable to equity holders of the Company
Share
capital
Share
premium
Share-
based
payment
reserve
Hedging
reserve
Retained
earnings
€’000
€’000
€’000
€’000
€’000
Total
€’000
1,837
503,113
2,753
(1,692)
(13,154)
492,857
-
-
-
-
6
-
6
-
-
-
-
-
-
-
-
-
-
-
280,475 280,475
1,692
-
1,692
1,692
280,475
282,167
2,800
(1,321)
-
1,479
4,232
-
-
-
-
-
-
2,800
1,321
6
(5,529)
(5,529)
(4,208)
(2,723)
263,113
772,301
At 1 January 2018
Comprehensive income:
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners of the Company:
Equity-settled share-based payments
Vesting of share awards
Dividends paid
Total transactions with owners of the Company
At 31 December 2018
1,843
503,113
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 year share issues
Total transactions with owners of the Company
1,830
503,113
2,126
(3,106)
(9,363)
494,600
-
-
-
-
7
-
7
-
-
-
-
-
-
-
-
-
-
-
(4,593)
(4,593)
1,414
-
1,414
1,414
(4,593)
(3,179)
1,690
(1,063)
-
627
-
-
-
-
-
1,690
1,063
(261)
802
7
(261)
1,436
At 31 December 2017
1,837
503,113
2,753
(1,692)
(13,154)
492,857
Cash flows from operating activities
Profit/(loss) for the year
Adjustments for:
Dividends from subsidiary undertakings
Finance costs
Foreign exchange gain on borrowings
Share-based payments expense
Distribution income
(Decrease)/increase in trade and other payables
Decrease/(increase) in trade and other receivables
Net cash from operating activities
Cash flows from investing activities
Cash movements on amounts due to/from subsidiaries
Distribution received
Net cash from/(used in) investing activities
Cash flows from financing activities
Interest and finance costs paid
Receipt of bank loans
Repayment of bank loans
Dividends paid
Proceeds from issue of share capital, net of expenses
Net cash used in financing activities
2018
€’000
2017
€’000
280,475
(4,593)
(88,259)
10,545
(56)
874
(200,000)
3,579
(521)
34
3,092
-
11,021
(7,247)
522
-
(297)
403
(91)
15
72,679
200,000
272,679
(18,356)
-
(18,356)
(8,146)
74,459
(10,023)
36,680
(336,937)
(49,896)
(5,529)
6
-
7
(276,147)
(23,232)
Net decrease in cash and cash equivalents
(376)
(41,573)
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
849
203
676
43,388
(966)
849
172
173
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the Company financial statements
Notes to the Company financial statements
(continued)
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.
Two new IFRS standards, IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments, are
effective for the first time in the financial year ended 31 December 2018. The application of both standards has not
had a material impact on the Company’s profit or net assets in these individual Company financial statements.
Significant accounting policies specifically applicable to these individual Company financial statements and which
are not reflected within the accounting policies of the Group's 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
Investment in subsidiaries
Movements in year
At beginning of year
Cost of share-based payments in respect of subsidiaries
Additions to investments
At end of year
2018
€’000
2017
€’000
46,704
42,519
2018
€’000
42,519
1,926
2,259
46,704
2017
€’000
41,350
1,169
-
42,519
On 25 October 2018, DHGL Limited paid a dividend in specie in favour of the Company of 2,000,100 ordinary £1
shares in Cenan BV (€2.3 million). This is the entire ordinary share capital of Cenan BV, and the Company is now the
sole shareholder of Cenan BV.
On 26 October 2018, DHG Glover Limited, a wholly owned subsidiary, acquired the Company’s investment in DHGL
Limited for €200.0 million. The Company retained control of DHGL Limited as a result of the transaction. Accordingly,
the €200.0 million proceeds are treated as distribution income by the Company in profit or loss. The €200.0 million
received was used to repay a portion of the outstanding debt facilities (note 8).
Details of subsidiary undertakings are included in note 27 of the consolidated financial statements.
3 Derivatives
Fair value
Non-current asset
Interest rate cap asset
Total derivative asset
Non-current liabilities
Interest rate swap liabilities
Total derivative liability
Net derivative financial instrument position at year end
2018
€’000
2017
€’000
-
-
-
-
-
1
1
(1,778)
(1,778)
(1,777)
On 26 October 2018, the Group successfully completed the refinancing of its existing debt facilities. On this date, the
Company repaid its outstanding external debt facilities to its banking club and DHG Glover Limited and DHG Fleming
Limited drew down the refinanced debt facilities. As a result, the Company novated its derivative arrangements to
subsidiary entities, DHG Glover Limited and DHG Fleming Limited, who hold the drawn external borrowings.
The three interest rate swaps which fix the LIBOR benchmark to 1.5025% were novated to DHG Glover Limited who
holds the Sterling term debt facilities. The interest rate cap which caps the maximum Euribor benchmark rate to 0.25%
was novated to DHG Fleming Limited who holds Euro borrowings.
The Company no longer designates these derivatives as hedging instruments for hedge accounting purposes. As a
result, the interest rate swaps were derecognised and the accumulated cost was released from the hedging reserve.
The accumulated cost relating to the interest rate cap in the hedging reserve was reclassified to profit or loss.
Interest rate swaps had been employed by the Company to partially convert the Company’s borrowings from floating
to fixed interest rates. The interest rate cap had been employed to limit the exposure to upward movements in floating
interest rates.
4 Trade and other receivables
Prepayments
Value added tax
2018
€’000
31
5
36
2017
€’000
108
8
116
174
175
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the Company financial statements
(continued)
Notes to the Company financial statements
(continued)
5 Amounts owed by subsidiaries
8 Interest-bearing loans and borrowings
Amounts owed by subsidiaries
2018
€’000
2017
€’000
744,203
744,203
730,234
730,234
Amounts owed by subsidiaries are non-interest bearing and are repayable on demand.
The amounts owed by subsidiaries have been reviewed and no credit losses are expected. As a result, no expected
credit loss provision has been recognised.
6 Cash and cash equivalents
Cash at bank and in hand
7 Trade and other payables
Trade payables
Accruals
Payroll taxes
Amounts due to subsidiary undertakings
Amounts due to subsidiaries are non-interest bearing and are repayable on demand.
2018
€’000
676
676
2018
€’000
7
1,720
216
17,375
19,318
2017
€’000
849
849
2017
€’000
82
2,154
218
16,731
19,185
Repayable within one year
Bank borrowings
Less: unamortised debt costs
Repayable after one year
Bank borrowings
Less: unamortised debt costs
Total interest-bearing loans and borrowings
2018
€’000
2017
€’000
-
-
-
-
-
-
-
19,300
(1,094)
18,206
243,010
(1,077)
241,933
260,139
On 26 October 2018, the Group successfully completed the refinancing of its existing debt facilities. On this date,
the Company repaid its outstanding external debt facilities to its banking partners and DHG Glover Limited and DHG
Fleming Limited drew down the refinanced debt facilities. The Company had outstanding borrowings of €302.8 million
on that date - £178.4 million (€201.1 million) in Sterling and €101.7 million in Euro.
On this date, the Company was repaid €103.8 million of the amounts owed by DHGL Limited who called on certain of
its subsidiaries to repay its intercompany loans. These subsidiaries borrowed from DHG Fleming Limited who had drawn
the refinanced borrowings in order to repay these loans to DHGL Limited.
On 26 October 2018, DHG Glover Limited acquired the Company’s investment in DHGL Limited for €200.0 million
(note 2). The Company used these funds to repay the remaining balance of its outstanding debt facilities.
Under the refinanced facility, the Company is a permitted borrower, however, as at 31 December 2018, the Company
had no drawn external loans and borrowings.
During the year ended 31 December 2018, the Company paid all interest and fees accruing to the Company up to 26
October 2018. The loans bore interest at variable rates based on 3 month Euribor/LIBOR plus applicable margins. The
Group novated its derivative financial instruments which hedged the Company’s interest rate exposure to subsidiary
entities as the Company no longer held external debt facilities (note 3).
176
177
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the Company financial statements
(continued)
Notes to the Company financial statements
(continued)
9 Share capital and premium
At 31 December 2018
Authorised share capital
Number
€’000
10 Dividends
The dividends paid in respect of ordinary share capital were as follows:
Ordinary shares of €0.01 each
10,000,000,000
100,000
Interim dividend- paid 3.0 cent per Ordinary Share (2017: €nil)
2018
€’000
5,529
2017
€’000
-
Allotted, called-up and fully paid shares
Number
€’000
Ordinary shares of €0.01 each
184,349,666
1,843
An interim dividend for 2018 of 3.0 cent per share was paid on 12 October 2018 on the ordinary shares in the
Company and amounted to €5.5 million (2017: €nil).
Share premium
At 31 December 2017
Authorised share capital
Number
€’000
503,113
On 25 February 2019, the Board proposed a final dividend of 7.0 cent per share. This proposed dividend is subject
to approval by the shareholders at the Annual General Meeting. These individual financial statements do not reflect
this dividend.
During the year ended 31 December 2018, the Company earned dividend income from its subsidiary undertakings
which has been included in profit or loss amounting to €88.3 million (2017: €nil), including a €2.3 million dividend
in specie from DHGL Limited (note 2).
Ordinary shares of €0.01 each
10,000,000,000
100,000
11 Financial instruments and risk management
Allotted, called-up and fully paid shares
Number
€’000
Ordinary shares of €0.01 each
183,680,964
1,837
Share premium
503,113
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 23 of
the consolidated financial statements.
All ordinary shares rank equally with regard to the Company’s residual assets.
12 Attributable profit or loss of the Company
During the year ended 31 December 2018, the Company issued 668,550 shares on foot of the vesting of awards
granted in March 2015 and October 2015 under the 2014 LTIP. 152 shares relating to 2016 SAYE scheme were issued
during 2018.
The profit attributable to shareholders dealt with in the financial statements of the Company for the year ended
31 December 2018 was €280.5 million (2017: loss of €4.6 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.
Profit for the year ended 31 December 2018 principally includes distribution income of €200.0 million (note 2) and
dividend income from subsidiary undertakings of €88.3 million (note 10).
13 Company related party disclosures
Under IAS 24 Related Party Disclosures, the Company has related party relationships with Directors of the Company,
and with its subsidiary undertakings (note 25 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 80 to 91 and note 25 of the consolidated financial statements.
Transactions with related parties
During the year ended 31 December 2018, the Company charged fees amounting to €3.6 million (2017: €3.7
million) to its subsidiary undertakings for services provided during the year. The Company also charged its subsidiary
undertakings for the use of Group interest relief amounting to €3.6 million (2017: €nil).
178
179
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Notes to the Company financial statements
(continued)
Notes to the Company financial statements
(continued)
14 Commitments
15 Post balance sheet events
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:
Proposed dividend
On 25 February 2019, the Board proposed a final dividend of 7.0 cent per share. This proposed dividend is subject to
approval by the shareholders at the Annual General Meeting. These financial statements do not reflect this dividend.
16 Approval of the financial statements
The financial statements were approved by the Directors on 25 February 2019.
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 Eden Limited
Galsay Limited
DHG Fleming Limited
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
DHG Dalton Limited
Sparrowdale Limited
Cavernford Designated Activity Company
DHG Glover Limited
Other guarantees
At 31 December 2018, 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
Maldron Hotel Newcastle
Agreement for Lease
Maldron Hotel Glasgow
Clayton Hotel Glasgow
Clayton Hotel Manchester
Clayton Hotel Bristol
Maldron Hotel Birmingham
Maldron Hotel Manchester
Loans and borrowings
DHG Fleming Limited
DHG Glover Limited
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
Dalata Cardiff Limited
Dalata Cardiff Limited
Dalata Cardiff Limited
DHG Fleming Limited
DHG Glover Limited
25
35
35
25
35
35
35
35
35
35
35
35
5
5
22.9
34.0
33.4
23.1
33.6
34.9
35.0
35.0
35.0
35.0
35.0
35.0
4.8
4.8
180
181
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
ADDITIONAL
INFORMATION
Glossary and Supplementary
Financial Information
Alternative Performance Measures (“APM”)
and other definitions
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 reporting these APMs provides
useful supplemental information which, when viewed in
conjunction with our IFRS financial information, provides
investors with a more meaningful understanding of the
underlying financial and operating performance of the
Group and its operating segments.
These APMs are primarily used for the following purposes:
– to evaluate the historical and planned underlying
results of our operations; and
– to discuss and explain the Group’s performance with
the investment analyst community.
The APMs can have limitations as analytical tools and
should not be considered in isolation or as a substitute
for an analysis of our results in the consolidated financial
statements which are prepared under IFRS. These
performance measures may not be calculated uniformly
by all companies and therefore may not be directly
comparable with similarly titled measures and disclosures
of other companies.
The definitions of and reconciliations for certain APMs are
contained within the consolidated financial statements.
A summary definition of these APMs together with the
reference to the relevant note in the consolidated financial
statements where they are reconciled is included below.
Also included below is information pertaining to certain
APMs which is not mentioned within the consolidated
financial statements but which are referred to in other
sections of this 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.
182
(i) EBITDAR and Segments EBITDAR
EBITDAR is a non-GAAP measure representing earnings
before rent, interest, finance costs, tax, depreciation
and amortisation of intangible assets. A reconciliation
is presented in note 2 to the consolidated financial
statements for the year ended 31 December 2018.
Segments EBITDAR is a non-GAAP measure representing
earnings before rent, interest, finance costs, tax,
depreciation and amortisation of intangible assets for
each of the reportable segments: Dublin, Regional Ireland,
United Kingdom and Managed Hotels. Refer to note 2 to
the consolidated financial statements for the year ended
31 December 2018 for the reconciliation.
(ii) EBITDA and Segments EBITDA
EBITDA is a non-GAAP measure representing earnings
before interest, finance costs, tax, depreciation and
amortisation of intangible assets. A reconciliation
is presented in note 2 to the consolidated financial
statements for the year ended 31 December 2018.
Segments EBITDA represents the EBITDA for the
Group’s reportable segments: Dublin, Regional Ireland,
United Kingdom and Managed Hotels. A reconciliation
is presented in note 2 to the consolidated financial
statements for year ended 31 December 2018.
(iii) Segments EBITDAR margin
Segments EBITDAR margin represents “Segments
EBITDAR” as a percentage of the total revenue for
the Group’s segments, Dublin, Regional Ireland and
United Kingdom.
(iv) Adjusted EBITDA
Adjusted EBITDA is a non-GAAP measure representing
earnings before interest, finance costs, tax, depreciation
and amortisation of intangible assets adjusted to show
the underlying operating performance of the Group and
excludes items which are not reflective of normal trading
activities or distort comparability either ‘year on year’
or with other similar businesses. The accounting policy
for adjusting items is presented in note 1 (xxix) and
a calculation is presented in note 2 to the consolidated
financial statements for the year ended 31 December 2018.
Glossary and Supplementary Financial Information
(continued)
(v) Adjusted basic earnings per share (EPS)
Adjusted Basic EPS is a non-GAAP measure representing EPS adjusted to show the underlying operating performance
of the Group excluding the tax adjusted effects of items which are not reflective of normal trading activities or distort
comparability either 'year on year' or with other similar businesses. The calculation is presented in note 28 to the
consolidated financial statements for the year ended 31 December 2018.
(vi) Net Debt to Adjusted EBITDA
Net Debt to Adjusted EBITDA represents loans and borrowings gross of unamortised debt costs less cash and cash
equivalents divided by the “Adjusted EBITDA” for the year. See note 23 to the consolidated financial statements for
the year ended 31 December 2018.
(vii) Effective tax rate
The Group’s 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 ended 31 December 2018.
Calculation - €’000
Tax charge
Profit before tax
Effective tax rate
Reference in Consolidated
Financial Statements
Statement of profit or loss and
other comprehensive Income
2018
2017
12,077
87,301
13.8%
8,979
77,287
11.6%
(viii) Free cash flow
Free cash flow is presented to show the cash available to fund acquisitions, development expenditure and dividends.
The Group calculates free cash flow as net cash from operating activities, less amounts paid for interest, finance costs
and refurbishment capital expenditure and after adding back cash paid in respect of adjusting items to EBITDA. The
adjusting items which have a cash effect are added back to show how much cash would be generated by the underlying
operating performance of the Group. The Group allocates approximately 4% of annual revenue to refurbishment capital
expenditure to ensure the portfolio remains fresh for its customers and adheres to brand standards.
Calculation - €’000
Net cash from operating activities
Less cash outflows:
Interest and finance costs
Refurbishment capital expenditure*
Reference in Consolidated
Financial Statements
Statement of cash flows
2018
2017
115,754
95,207
Statement of cash flows
(13,188)
(15,868)
(10,101)
(14,633)
Add back adjusting items to EBITDA which have a cash impact:
Hotel pre-opening costs
Proceeds from insurance claim
Acquisition-related costs
Free cash flow
Note 3
Note 4
Note 3
* Reconciliation of refurbishment capital expenditure:
2,487
(2,598)
-
86,587
-
-
1,260
71,733
Reference in Consolidated
Financial Statements
2018
2017
Calculation - €’000
Hotel extensions and renovations
Construction of new hotels
Other development expenditure
Refurbishment capital expenditure
Other additions through capital expenditure
Note 11
31,885
44,198
4,384
15,868
96,335
16,746
42,318
7,547
14,633
81,244
183
Financial StatementsAdditional InformationStrategic ReportCorporate GovernanceDalata Hotel Group plc Annual Report and Accounts 2018 Glossary and Supplementary Financial Information
(continued)
Glossary and Supplementary Financial Information
(continued)
(ix) Free cash flow conversion
Free cash flow conversion is presented to show the proportion of the Group’s Adjusted EBITDA, after adding back non-
cash adjusting items, that is converted to free cash flow. The accounting cost of the LTIP and SAYE are excluded from
Adjusted EBITDA as these items do not have an impact on cash.
Calculation - €’000
Reference in Consolidated
Financial Statements
2018
2017
Adjusted EBITDA
Note 2
119,583
104,873
Add back non-cash items:
Share-based payments expense
Note 7
Adjusted Cash EBITDA
Free cash flow - per above (viii)
Free cash flow conversion
2,800
122,383
86,587
70.8%
1,690
106,563
71,733
67.3%
(x) Return on capital employed (ROCE)
Return on capital employed represents Adjusted EBIT (see calculation at (xii) below) expressed as a percentage of the
Group’s average capital employed. The Group defines capital employed as total assets less total liabilities and excludes
the accumulated revaluation gains/losses included in property, plant and equipment, net debt, derivative financial
instruments and taxation related balances. The Group’s net assets are also adjusted to reflect the average level of
acquisition investment spend and the average level of working capital for the accounting period. The average capital
employed is the simple average of the opening and closing capital employed figures.
Adjusted EBIT represents the Group’s adjusted earnings before interest, finance costs and tax and excludes items
which are not reflective of normal trading activities or distort comparability either ‘year on year’ or with other
similar businesses.
Calculation - €’000
Reference in Consolidated
Financial Statements
2018
2017
Net assets at balance sheet date
Statement of Financial Position
902,577
737,393
Revaluation uplift in Property, Plant and Equipment*
(273,774)
(171,200)
Net deferred tax liabilities
Current tax liabilities
Derivatives
Net debt
Capital employed
Average capital employed
Adjusted EBIT - see below (xii)
Return on average capital employed
Note 22
Statement of Financial Position
Note 14
Note 21
38,516
309
1,306
270,171
939,105
891,139
99,841
11.2%
28,287
351
1,777
246,564
843,172
782,883
89,139
11.4%
* Includes the combined net revaluation uplift included in property, plant and equipment since the revaluation
policy was adopted in 2014 or in the case of hotel assets acquired after this date, since the date of acquisition. The
value of property plant and equipment at 31 December 2018 was €1,077.2 million (2017: €848.8 million) and the
corresponding value under the cost model as disclosed in note 11 to the consolidated financial statements was €803.4
million (2017: €677.6 million). Therefore, the revaluation uplift included in property plant and equipment is €273.8
million (2017: €171.2 million).
184
(xi) Normalised return on capital employed (ROCE)
Normalised return on capital employed is presented to show the Group’s return on capital excluding the impact of the
investment in future hotel openings or hotels which have not traded for a full twelve months.
Calculation - €’000
Reference in Consolidated
Financial Statements
2018
2017
Capital employed - see above (x)
Less assets under construction at year end
Assets recently completed in the year*
Normalised capital employed
Average normalised capital employed
Adjusted EBIT excluding results from recently completed hotels ** - see below (xii)
Normalised return on average capital employed
Note 11
939,105
(26,404)
(112,005)
800,696
773,252
97,760
12.6%
843,172
(97,365)
-
745,807
712,768
89,139
12.5%
* Assets recently completed in the year include the cost of constructing the five new hotels which opened during 2018:
Maldron Hotel Belfast City (March 2018), Maldron Hotel Kevin Street, Dublin (July 2018), Clayton Hotel Charlemont,
Dublin (November 2018), Maldron Hotel Newcastle (December 2018) and Maldron Hotel South Mall, Cork (December
2018) which completed during 2018 and therefore did not benefit from a full twelve months of trading
** Amount represents Adjusted EBIT of €99.8 million (2017: €89.1 million) as calculated in (xii) below and excludes
EBIT of €2.1 million from new build hotels recently completed during the year, Maldron Hotel Belfast City, Maldron
Hotel Kevin Street, Clayton Hotel Charlemont, Maldron Hotel Newcastle and Maldron Hotel South Mall which are
also excluded from “normalised capital employed” to ensure consistent comparability.
(xii) Adjusted earnings before interest and tax (Adjusted EBIT)
Adjusted EBIT comprises profit before tax as reported in the consolidated statement of profit or loss and other
comprehensive income, before interest and finance costs, and excludes items which are not reflective of normal
trading activities or distort comparability either 'year on year' or with similar businesses. The table below calculates
the Adjusted EBIT for the years ending 31 December 2018 and 31 December 2017 for use in the calculation of return
on capital employed in (x) and (xi) above. Note “Adjusted EBIT” is a separate APM to "Modified EBIT" calculated in
(xiii) below.
Calculation - €’000
Profit before tax
Reference in Consolidated
Financial Statements
Statement of profit or loss and
other comprehensive income
2018
2017
87,301
77,287
Note 5
Add back:
Finance costs
Adjusting items:
Note 3
Acquisition-related costs
Note 4
Gains on disposal
Note 4
Proceeds from insurance claim
Hotel pre-opening expenses
Note 3
Net revaluation movements through profit or loss Note 2
Adjusted EBIT
Adjusted EBIT from recently completed hotels
Adjusted EBIT excluding results from recently completed hotels
9,514
9,636
-
-
(2,598)
2,487
3,137
99,841
(2,081)
97,760
1,260
(469)
-
-
1,425
89,139
-
89,139
185
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance Glossary and Supplementary Financial Information
(continued)
Glossary and Supplementary Financial Information
(continued)
(xiii) Modified earnings before interest and tax (Modified EBIT)
For the purposes of the annual bonus evaluation, EBIT is modified to remove the effect of fluctuations between
the annual and budgeted EUR/GBP exchange rate and other items which are considered, at the discretion of the
Remuneration Committee, to fall outside of the framework of the budget target set for the year.
(xiv) Calculation of debt and lease service cover
Debt and lease service cover is presented to show the Group’s ability to meet its debt and lease commitments. It is
calculated as free cash flow calculated in (viii) above before rent, interest and finance costs divided by the total amount
paid for interest and finance costs, rent and committed loan repayments.
Calculation - €’000
Free cash flow - see (viii) above
Add back rent paid
Reference in Consolidated
Financial Statements
Add back interest and finance costs paid
Statement of cash flows
Free cash flow excluding rent, interest
and finance costs (A)
Rent paid
Interest and finance costs paid
Statement of cash flows
Total rent, interest and finance costs paid (B)
Debt and lease service cover excluding
term loan repayments (A/B)
Term loan repayments (C)
Total rent, interest and finance costs paid and term
loan repayments (D=B+C)
Debt and lease service cover (A/D)
2018
86,587
37,375
13,188
137,150
37,375
13,188
50,563
2.7x
12,600
63,163
2.2x
Calculation - €’000
Profit before tax
Add back:
Finance costs
Foreign exchange (gains)/losses*
(see note (xiii) below)
Adjusting items:
Acquisition-related costs
Proceeds from insurance claim
Hotel pre-opening expenses
Net revaluation movements through profit or loss
Modified EBIT
Reference in Consolidated
Financial Statements
Statement of profit or loss and
other comprehensive income
2018
2017
87,301
77,287
Note 5
Note 3
Note 4
Note 3
Note 2
9,514
(324)
9,636
609
-
1,260
(2,598)
2,487
3,137
99,517
-
-
1,425
90,217
* Foreign exchange gains and losses represent the difference on converting EBITDA from UK hotels at actual foreign
exchange rates during 2018 versus budgeted foreign exchange rates, after depreciation. In 2018 the budgeted EUR/
GBP exchange rate was 0.90 (2017: 0.85). A reconciliation is presented in the table below.
Calculation - €’000
Reference in Consolidated
Financial Statements
2018
2017
UK hotels’ EBITDA - GBP
UK hotels’ EBITDA at budgeted FX rate - Euro
UK hotels’ EBITDA at actual FX rates - Euro
Note 2
Foreign exchange (gains)/losses on EBITDA - Euro
Depreciation on UK assets - GBP
Depreciation on UK assets at budgeted
FX rate - Euro
Depreciation on UK assets at actual
FX rates - Euro
Foreign exchange losses/(gains) on depreciation - Euro
Foreign exchange (gains)/losses - Euro
23,290
25,878
26,298
(420)
5,041
5,601
20,856
24,536
(23,777)
759
4,119
4,846
5,697
4,696
96
(324)
(150)
609
186
187
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
Glossary and Supplementary Financial Information
(continued)
Advisor and Shareholder Contacts
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:
Revenue per available room (RevPAR)
Revenue per available room is calculated as total rooms
revenue divided by number of available rooms, which is
also equivalent to the occupancy rate multiplied by the
average daily room rate achieved.
Hotel assets
Hotel assets represents the value of property, plant and
equipment per the consolidated statement of financial
position at 31 December 2018.
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).
EPS
Earnings per share (see note 28 to the consolidated
financial statements for calculation)
GM
General Manager
ICT
Information and Communications Technology
IFRS
International Financial Reporting Standard
IPO
Initial Public Offering (Dalata Hotel Group plc 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
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
T: 00353 1 206 9400
F: 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
T: 00353 1 447 5566
F: 00353 1 447 5571
E: webqueries@computershare.co.uk
Principal Banks
Ulster Bank
Ulster Bank Group Centre
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 4
Ireland
Barclays Bank Ireland plc
Two Park Place
Hatch Street
Dublin 2
Ireland
HSBC Bank Plc
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
Bank De Sabadell S.A.
The Leadenhall Building
Level 37
122 Leadenhall Street
London
EC3V 4AB
United Kingdom
188
189
Dalata Hotel Group plc Annual Report and Accounts 2018Financial StatementsAdditional InformationStrategic ReportCorporate Governance
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
Design: www.reddog.ie