2019
2018
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750
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Growth
and
Resilience
ANNUAL REPORT &
ACCOUNTS 2019
2017
2016
2015
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0
1
9
OUR HOTEL ASSETS (€millions)
AT A GLANCE
OUR REVENUE
(€ million)
2015
2017
2019
FREE CASH FLOW
(€ million)
460
330
200
105
52.5
0
2015
2017
2019
OUR HOTEL ASSETS
(Hotel assets € million)
1500
1000
500
5000
2500
2015
2017
2019
OUR PEOPLE
(Full-time and part-time)
€
€429.2m
2019 Revenue
€
€162.2m
Adjusted EBITDA
post IFRS 16 - Leases
€100.6m
Free Cash Flow
€1.47bn
In hotel assets
8,952
Rooms
1,080
New rooms
secured in 2019
Dalata owns or
leases 41 hotels
and manages
3 hotels.
CONTENTS
Strategic Report
Purpose and Values
Chair’s Statement
Chief Executive’s Review
Strategy and Business Model
Dalata’s Markets
Business Model
KPIs
Strategic Priorities
Operations Review
Financial Review
Risk Management
Responsible Business Report
Corporate Governance
Chair’s Overview
Our Board of Directors
Executive Management Team
Corporate Governance Report
Nomination Committee Report
Audit and Risk Committee Report
Remuneration Committee Report
Directors’ Report
Financial Statements
Statement of Directors’ Responsibilities
in respect of the Annual Report and the
Financial Statements
Independent Auditor’s Report
Consolidated Statement of Profi t or Loss
and Other Comprehensive Income
Consolidated Statement
of Financial Position
Consolidated Statement
of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated
Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Equity
Company Statement of Cash Flows
Notes to the Company
Financial Statements
2
2
4
8
10
10
12
14
16
26
28
40
48
56
56
58
60
62
70
72
78
96
99
100
102
109
110
111
113
114
175
176
177
178
Supplementary Financial
Information
Alternative Performance Measures (“APM”)
Glossary
Advisor and Shareholder Contacts
183
183
188
189
0
2015
2017
2019
Data as at 31 Dec 2019
4,871
Employees
41
Operating hotels &
11 under development
(plus 3 Managed Hotels)
The Financial Statements refl ect the operations of the owned
and leased hotels, therefore the KPI's and other statistics refer
to the 41 owned and leased hotels.
Clayton Hotel
Charlemont
PURPOSE & VALUES
Maldron Hotel Belfast
When Dalata was founded in 2007 it
acquired eleven 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 and provides
strategic oversight, leveraging our
strength as a group. Our experienced
acquisitions and development team
sources and develops the asset pipeline
and adopts a clearly defined strategy
to create shareholder value in every
transaction. 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 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.
We Are
a People
Business
OUR PEOPLE
Dalata is the place where you
can do great things - individually
and as a team. You will have
the opportunity to develop
your talent, be recognised and
rewarded for your commitment
and pursue a fulfilling career.
OUR FAIRNESS
We pride ourselves on creating
an objective, supportive and fair
working environment for our
employees, the people we deal
with and the communities we
work within.
OUR 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.
OUR SERVICE
We ensure our service
standards are consistently
high at every opportunity.
We strive for success, are
enthusiastic about what we
do and take responsibility
for doing things right.
2
3
Purpose & ValuesDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION
CHAIR’S STATEMENT
Growth and
Resilience
Introduction
Welcome to the Annual Report of the
Dalata Hotel Group for 2019. I am grateful
to you for taking the time and trouble to
read what I and others have to say about
our business.
2019 was another busy and very
successful year for the Group. The
number of people in our organisation
continued to grow, as did the number of
hotels in the Group. As Ireland’s leading
hotel operator, with a growing presence
in the United Kingdom, we continue
to invest strongly in our people, our
properties and our brands, while taking
very seriously our responsibilities to the
environment and to the communities in
which we conduct our business.
In 2019 we delivered another strong
fi nancial performance. Total revenues
in the business increased by 9.3% to
€429.2m in 2019, and adjusted EBITDA
(excluding the impact of IFRS 16)
increased 12.8% to €134.8m in 2019
from €119.6m in the previous year. We
ended the year with a very strong balance
sheet. We continued our progressive
dividend policy with an interim dividend
of 3.5 cent per share, an increase of
17% on the prior year.
As of the date of this statement we
are operating 41 Owned and Leased
hotels, with a total of 8,952 rooms, and
our employee numbers are 4,871. We
maintain close contact with our guests,
our staff , our suppliers and our investors,
and we monitor carefully the feedback we
receive. The information we received in
2019, including the results of our extensive
surveys of staff and customers, indicates
that the way we operate, and the services
we deliver, are viewed very positively.
Culture and People
Our culture drives everything that we
do. This culture is very specifi c to
Dalata, and has been developed
over time under the outstanding
leadership of our CEO, Pat McCann.
Pat is supported by an executive team
with strength in depth across the
organisation, and our culture can be
detected wherever we do business.
Central to our culture are the
commitments we make to listen,
and to empower our people to deliver
outstanding service to our customers.
Our people are recruited with care,
and receive high-quality training,
development and support at all
levels of the organisation. They are
then encouraged to take personal
responsibility in their day-to-day
activities and to progress through the
organisation in accordance with their
desires and abilities. The growth of the
Group and the training we off er provide
opportunities for advancement to all
among our staff who wish to develop
their careers.
Our culture is made real by our
people, who make the diff erence in
our business, and make us all proud
to be part of the Dalata family. Having
travelled to many of our properties over
the course of 2019 and earlier years, I
can assure our shareholders that the
highest standards, infused with our
culture, can be experienced all across
the Group.
On behalf of the Board, I wish to thank
all our people for their tireless dedication
and commitment to excellence.
As Ireland’s
leading hotel
operator, with a
growing presence
in the United
Kingdom, we
continue to
invest strongly
in our people,
our properties
and our brands.
Strategic Priorities
People
page 18
Responsible Business Report
Our Culture
page 52
Environmental, Social
and Governance
During 2019 we decided to form a
new Board committee to exercise
leadership over environmental, social and
governance matters within the Group.
I am excited by this development as I
believe strongly that businesses, including
ours, have a duty to do everything they
reasonably can to respect and protect
those parts of the environment, society
and local communities that are aff ected
by their activities.
The Group has, of course, been
conscious of these issues for many
years, and several initiatives have been
taken to make real progress under these
headings. Elevating these matters to
a level where they receive the regular
attention of a Board committee
demonstrates the importance we attach
to them, and will allow us to ensure that
our eff orts in these areas continue to be
real and eff ective.
I also believe that our duty to society
extends to an obligation to observe
the highest standards of governance,
including 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.
Board
During 2019 it was my pleasure to
announce the appointment of two
new Directors to our Board. The
additions of Elizabeth McMeikan as a
Non-executive Director and Shane
Casserly (who was appointed in January
2020) as an Executive Director bring
signifi cant new skills, experience and
expertise to the Board.
Elizabeth is our fi rst UK-based Director,
recognising the growing signifi cance
of that market to Dalata, and she
brings a wealth of relevant experience
as a business person and as a Non-
executive Director, to the Board. Shane
has been an important member of the
executive team for several years. His
vast experience in sourcing, overseeing
the development team and evaluating
opportunities to expand our portfolio
of hotels, negotiating with vendors and
providers of fi nance will continue to be
of immense value to the Group. I am
delighted to welcome Elizabeth and
Shane to the Board.
4
Dalata Hotel Group plc Annual Report & Accounts 2019
Chair’s Statement
I wish to thank all
our people for their
tireless dedication
and commitment
to excellence.
The addition of Elizabeth and Shane to
the Board has allowed us to make some
changes to Board committees and to
permit additional roles to be taken on by
Board members. Alf Smiddy was given
responsibility for workforce engagement,
and he has spent time in 2019 meeting
with our staff in various locations and
developing this new role. I am confi dent
that this role will enable the Board to
develop a better understanding of issues
of importance to our people and will
provide an excellent communication
path between our staff and the Board.
Our new Environmental, Social and
Governance (ESG) Committee will be
chaired by Elizabeth McMeikan, and
Robert Dix and Stephen McNally have
also been appointed as members of
that Committee. I have taken over
the chairmanship of the Nomination
Committee from Alf Smiddy. The
Remuneration Committee will continue
to be chaired by Margaret Sweeney,
with Elizabeth McMeikan and myself
as members. The Audit and Risk
Committee, under Robert Dix’s
chairmanship, remains unchanged,
and Alf Smiddy continues to exercise
the role of Senior Independent Director.
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5
The Board itself continues to operate
eff ectively, with regular Board meetings
at diff erent Group properties, and
through the various Board committees.
Reports from each committee chair are
contained in this Annual Report.
In addition to regular meetings of the
Board and its committees, the Board
meets separately to discuss strategy
and to receive regular training. Directors
also meet informally from time to time,
and the Non-executive Directors also
meet as a group, separately from the
Executive Directors, on a number of
occasions each year.
The Group has continued to benefi t
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 dedication
and commitment during the year.
As Chairman of the Board and of
the Nomination Committee, it is
my responsibility to ensure that
the Company is served by strong,
competent and independent Non-
executive Directors, and I am satisfi ed
that the current Board continues to
meet those standards. I am also of the
view that the knowledge, experience
and expertise built up by the current
Non-executive Directors is of signifi cant
value to the Group, and that it would
not be in the interests of the Company
or its shareholders if that knowledge,
experience and expertise were to be lost
suddenly, or over a short period.
Four of the non-executive members
of the Board have served since they
were appointed to the Board together
in February 2014 prior to our IPO. As
the tenure of both individual Directors
and the overall Board increases, it is
appropriate that we give attention to
succession planning for this group.
There will be a need to introduce
fresh resources in the coming years.
However, it is important that we do so
in a manner and over a timescale that
will allow a transfer of knowledge, and
will avoid a sudden loss of experience,
while at all times preserving the
independence of the non-executive
members of the Board.
Therefore, it is my intention to oversee
a phased and orderly refreshment of
the non-executive membership of the
Board over the next fi ve years. Bringing
fresh thinking to the Board on a phased
basis over a period of years will allow
us to transfer the existing knowledge,
experience and understanding
of the business and its evolution,
while preserving the strength and
independence of the non-executive
group within the Board. This approach
to succession, in the particular
circumstances where four Non-
executive Directors were appointed
together, will, in my view, best serve
the interests of the Company and
its shareholders.
Of course, Board succession planning
is not confi ned to the Non-executive
Directors. The Nomination Committee
and the Board are cognisant of the need
to plan for succession among Executive
Directors, to promote the development
of a skilled and diverse pipeline of senior
management in the business and to
identify suitable candidates for Board
membership among executives when
the need arises.
Dividend
We made an interim dividend payment
of 3.5 cent per share in October and
the Board has recommended the
payment of a fi nal dividend of 7.25
cent per share which, subject to
shareholder approval at the AGM,
will be paid on 6th May 2020.
Outlook
In my report last year I dealt with
what was then the imminent Brexit
deadline of 29 March 2019. Events
since then have removed much of
the uncertainty that prevailed at that
time. Whilst it is still not entirely clear
how matters will progress following the
departure of the UK from the EU, we
remain confi dent that the Group will
continue to perform well in our principal
markets in the coming months. Market
conditions always pose challenges,
including increased supply of hotel
rooms in major cities in which we
operate. However, we expect our strong
business model to continue to deliver
profi table growth in 2020.
John Hennessy
Non-executive Chair
6
Dalata Hotel Group plc Annual Report & Accounts 2019
Chair’s Statement
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Maldron Hotel Cork
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PAT’S REVIEW
2019, as expected, turned out to be
diff erent from the past fi ve years. We
had become used to RevPAR growing
strongly from year to year. At some
point that had to come to an end. We
are now in what I call normal growth
territory. Team Dalata are well capable
of continuing to thrive in this type of
market. Despite some light headwinds
we were able to protect the bottom line
and meet the earnings expectations
of the market. We protected our very
strong margins without causing any
damage to the business. Two metrics
I look at are our customer satisfaction
scores and our employee engagement
scores, both well outperforming
last year. I know some of you think I
am overly optimistic at times. That
optimism is driven by me knowing
what my management colleagues are
capable of. We all have a clear mandate
from our Board to grow the earnings in
2020 and beyond.
Another key factor for me is our
development pipeline. Here we
are in fantastic shape with close to
3,000 rooms under, or about to start,
construction and more to come. This
will add 30% more rooms into the
business. Our existing portfolio is in
great shape as we continue to spend
4% of total turnover on refurbishing
our existing properties. Given how
young our portfolio is, this is more than
adequate to ensure our hotels remain
in top condition well into the future.
On our people, we are also making great
progress here. We are preparing the
teams that will manage our new hotels
as they open over the next two years.
We currently have 360 people on our
Senior Development Programmes.
It is a delight to see all the young and
not so young growing up in Dalata. Our
reputation in this space is so strong
that we have very few recruitment or
retention issues. This is an area closest
to my heart that I nurture and protect as
it is so vital to our future growth plans.
In 2019 we won a number of very
prestigious awards which I am
absolutely thrilled about. These awards
are a recognition of the entire Dalata
team and it gives them a great boost
when we win something.
> In May 2019, we won
the Irish Times Company
of the Year Award.
> In September 2019, our
Maldron Hotels Ireland
won the Irish Hotel Group
of the Year.
> In November 2019,
we won the overall award
at the Published
Accounts Awards.
> In December 2019, we
won the Business and
Finance Company of
the Year Award.
These are just some of the main awards.
Many of our people won individual awards
which is fantastic.
We have a lot to live up to in 2020.
ESG has become more of a prominent
issue and rightly so. In Dalata, we have a
new Board subcommittee which will be
chaired by Elizabeth McMeikan. This will
bring further focus to this vital area. In
Dalata, we have done lots of good things
in the ESG space. We have been poor
at telling the story of all the great things
that have happened. I should say we have
a long way to go but it is important to say
we are starting from a positive place.
Our culture is front and centre of
everything we do. It refl ects on the way
we do things. How we engage with our
customers, our people, our suppliers,
our investors, our banks is absolutely
consistent across all stakeholders.
Culture is a word that is tossed about and
can have little or no relevance. In Dalata
the behaviours and attitude came fi rst
before we decided this was our culture.
Our people now believe it is something
to be treasured and cultivated as it is
so unique. While our culture in Ireland,
one would imagine, is relatively easy to
maintain, it amazes me how well our
culture is embedded in the UK and this
applies to our new hotels as well as the
original properties.
Opening our new properties with
Dalata people is key to continuing
this and hence my obsession with
our development programmes.
As we start 2020, we do so with
confi dence. There is no doubt that
some things will conspire against
us but other things will move in our
favour. While RevPAR is an important
measure it is not the only measure in
our business.
We have sizeable other income
that needs to be taken into account.
Income like food, beverage, car
parks, leisure and fi tness clubs are all
important contributions to our overall
earnings. The outcome for 2019 shows
just how good we are at maintaining
the budgeted bottom line. We hit a
milestone in free cash fl ow, crossing
the €100 million mark for the fi rst time.
Our balance sheet is in great shape,
well supported by fantastic assets and
relatively low debt.
Sitting where I am sitting and knowing
what I know, I cannot be anything but
confi dent about the coming year.
We have a great team of people, well
invested hotel assets, a very strong
pipeline of new hotels coming out of
the ground and both cash and external
funding to continue growing. In any
business there are challenges and
Dalata is no diff erent. It is how you
respond to these challenges that sets
teams apart. Throughout its existence
Dalata has taken full advantage of
many of the crises we faced. Nothing
has changed in that we will continue
doing what we do well. I look forward
to 2020 with vigour and the confi dence
that we will once again deliver for all
our stakeholders.
Pat McCann
Chief Executive
Our
Culture
of Success
Our Culture is front and
centre of everything we do.
8
Dalata Hotel Group plc Annual Report & Accounts 2019
Pat’s Review
Strategic Priorities
People
page 18
Responsible Business Report
Our Culture
page 52
In Dalata the behaviours
and attitude came fi rst
before we decided this
was our culture.
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STRATEGY AND BUSINESS MODEL
Dalata’s Markets
Republic of Ireland1
Ireland was the fastest growing economy in
Europe in 2019. After a record year in 2018
for Irish tourism and a sustained growth
period of eight years, tourism growth in
2019 slowed slightly. Overseas visitors were
up 1.8%, marginally ahead of the 10.6m
recorded in 2018. Holiday visits grew by an
estimated 1% to 5.3m, while business and
corporate trips grew by 8% over the same
period. The domestic economy was strong
with an estimated GDP growth of 5% and
consumer spending up 2.5%.
The economy is projected to enjoy another
year of growth in 2020. The multinational
sector continues to drive employment
growth in the country. There will be increased
supply of hotel rooms in Dublin putting some
pressure on RevPar, but a growing economy
and strong calendar of events is encouraging.
1 Central Statistics Office: Overseas Travel
December 2019; Irish Tourism Industry
Confederation (ITIC): End of Year Review 2019 &
Outlook 2020; Central Bank of Ireland: Quarterly
Bulletin Q4 2019.
1
1
Liffey
Valley
Dublin Airport
1
4
1
1
3
Newlands
Cross
1
Tallaght
Dublin
City
1
1
Ballsbridge
1
Leopardstown
1
2
1
1
1
2
2
2
7
7
1
1
1
1
Clayton Hotels
Maldron Hotels
Bespoke Brand Hotels
UK4
Market conditions in the UK
were again challenging in 2019
due to the uncertainty around
Brexit. The Bank of England
estimated 2019 GDP growth
of 1% (2018: 1.3%). Household
spending increased by 1.1% to
Q3 2019 versus 2018. Visitor
numbers increased by 2.2% to
an estimated 38.7m on 2018.
4 Bank of England Monetary Policy
Report November 2019; Office of
National Statistics (ONS): Consumer
Trends Q3 2019; Office of National
Statistics (ONS): Overseas Travel
and Tourism Q3 2019.
Clayton Hotels
Maldron Hotels
Bespoke Brand Hotels
1
1
1
1
1
1
1
1
1
3
Overseas Visitors (in millions)
RevPar (€)
RevPar (€)
Visitor Numbers (in millions)
RevPar (£)
DUBLIN
REGIONAL IRELAND
Global
Overview6
A strong global economy is good
for the travel and tourism industry
and with it the hotel industry. The
continued rise in the number of
middle-class households and solid
growth in consumer spending has
led to the travel and tourism sector
outpacing the global economy
for the eighth-consecutive year.
Continued competition between
airlines, technological advances,
strong corporate travel demand
and consumers continuing to look
for experiences to enrich their lives,
supporting hotel sector growth.
2019 was another strong year
for global travel and tourism with
international tourist arrivals up
4%, although slightly behind the
exceptional rates of 2017 (+7%)
and 2018 (+6%). Uncertainty
surrounding Brexit and geopolitical
trade tensions weighed on growth.
Global GDP growth is estimated to
be 2.9% for 2019 (2018: 3.6%) with
USA growth of 2.3% (2018: 2.9%
and Euro area growth of 1.2% (2018:
1.9%). In Q3 2019, hotel revenue per
available room (RevPAR) grew 0.7%
year on year in USA and 1.7% year
on year in Europe.
Tourism is the world’s third
largest export category
after chemicals and fuels,
and ahead of automotive
products and food (2017)7
EXPORT EARNINGS BY PRODUCT CATEGORY7
Chemicals
Fuels
International Tourism
Automotive Products
Food
1,993
1,960
1,586
1,470
1,466
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40M
37.5M
35M
3%
1.5%
0%
75
62.5
+2.2%
Office of National
Statistics
(+Q4 estimate)
50
+0.4%
STR Global
2015
2019
2015
2019
GDP Growth (as a percentage)
+1.0%
Bank of England
2015
2019
Commentary5
Hotel performance in the UK was
mixed in 2019. Leeds, London and
Manchester all performed strongly
with RevPAR growths of 3.92%,
3.72% and 1.87% respectively.
All other regions experienced a
moderate drop in RevPARs. Belfast
was the city most affected with a
fall in RevPARs of 6.79% due to the
significant increase in supply into
that market.
5 STR Global
USD billion
1,000
1,500
2000
Key Risks
6
UK Expansion Strategy
page 43
6 World Tourism Organisation: World Tourism
Barometer; International Monetary Fund (IMF):
World Economic Outlook; STR Global.
7 World Tourism Organization (UNWTO) and
World Trade Organization (WTO), 2017.
Dalata’s Markets
125
100
75
+1.8%
CSO statistics
December 2019
85
70
55
-3.6%
STR Global
+1.5%
STR Global
2015
2019
2015
2019
2015
2019
GDP Growth (as a percentage)
+5%
Central Bank
2015
2019
Commentary2
Dublin RevPAR fell 3.57% to €116.73
in 2019 (82% occupancy) and
Average Daily Rates (ADR) were down
1.98% to €142.17. The Dublin market
was affected by the additional supply
into the city, the 4.5% increase in
VAT and a decrease in the number
of events in the city for 2019. 1,500
new rooms were added to the city
in 2019, bringing the total market
to approximately 22,030. 1,875 new
rooms are in the pipeline for 2020.
Commentary3
Regional Ireland RevPAR
increased by 1.5% in 2019.
Cork (-3.0%) and Galway
(-2.1%) experienced a reduction
in RevPARs for the year due to
new supply entering the market
while Limerick saw growth of
3.7%. Average occupancy for
the region was up 0.4%.
The region as a whole felt a
pronounced effect with the
increase in VAT during 2019.
2 STR Global; Savills; AMPM
3 Trending.ie
Key Risks
5
Market Concentration
page 43
11M
9.5M
8M
25%
12.5%
0%
10
Dalata Hotel Group plc Annual Report & Accounts 2019
STRATEGY AND BUSINESS MODEL
Business Model
INPUTS
WHAT WE DO
€1.47bn
In hotel assets
4,871
Employees
8,952
Rooms
41
Operating Hotels
Dalata is a hotel
owner and operator.
Since the Company fl oated
in 2014, we have grown to be
the most successful and largest
hotel Group in Ireland.
We operate in Ireland and the UK
Dalata's Markets, page 10
218
Average rooms
per operating hotel
€189.3m
Additions to Property,
Plant and Equipment
HOW WE DO IT
OUTPUTS
4.47m
14,000
Overnight guests
Leisure club members
€
6.5m
Meals served
€162.2m
Adjusted EBITDA
post IFRS 16 - Leases
€100.6m
Free
Cash Flow
€116.6m
Aggregate
Payroll Costs
12
Dalata Hotel Group plc Annual Report & Accounts 2019
Our key business drivers
We generate revenue through selling
accommodation, food and beverage,
meeting rooms, conferences and ancillary
services to our customers.
Growth led by people and properties
Strategic Priorities, page 16
Room pipeline expansion
Strategic Priorities - Properties, page 20
Shared Service Centre
Case study, page 37
HOW WE GENERATE VALUE
We generate value by providing quality off erings
at an appropriate price that our customers want.
We identify strategic investment opportunities
and develop quality hotels in prime city locations.
Employees Development
Strategic Priorities - People, page 18
Guest Satisfaction
Strategic Priorities - Customers, page 22
Focus on Financials
Case study, page 37
€
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The Diff erence
with Dalata
Asset Management
Dalata is a vertically integrated hotel owner and operator. We
control every aspect of asset management and the operation
of our properties. Our disciplined investment strategy is designed
to create shareholder value in every transaction. 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
diff erentiates us from the market, where an owner/franchise model
is predominately adopted.
Hotel Operation
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 off erings. 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 Offi ce, selected shared
services and an experienced senior management team.
Support Service Excellence
We are able to implement common group-wide business and
IT systems, and deliver expertise in areas such as procurement,
fi nance, health and safety and marketing. We have developed
and implemented group-wide training and development for
our employees. We off er 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
fi lling vacancies internally.
OUR BRANDS
2
Leading
Hotel Brands
17
Maldron Hotels
22
Clayton Hotels
Maldron Hotels and Clayton Hotels
are our principal hotel brands* and the
majority of our hotels operate under
these brands. There are 22 Clayton
hotels, which are all four-star, and 17
Maldron hotels which are comprised
of four- and three-star properties.
We own and manage a number of
ancillary brands, which complement our
hotel brands. These include Red Bean
Roastery, Club Vitae and Grain & Grill.
*We also own The Gibson Hotel and Samuel Hotel Brands
Business Model
Our business model
diff erentiates us
from our peers.
Our Purpose & Values, page 2
Our Strategic Priorities, page 16
Our Responsible Business Framework, page 48
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STRATEGY AND BUSINESS MODEL
KPIs - Financial
Revenue
Total Revenue (Millions)
Total Group Revenue represents sales
(excluding VAT) of goods and services net of
discounts provided in the normal course of
business and is recongnised when services
have been rendered.
+9.3%
Link to Strategy
9
2
4
3
9
3
2
5
3
1
9
2
6
2
2
15
16 17 18* 19
Commentary
Key top-line Measure of the
overall growth and development
of the business.
2019 Progress
Total Revenue increased by
€36.6 million in 2019 due mainly
to strong trading performance
in our UK hotels.
Margin
6
.
2
4
6
.
2
4
4
.
2
4
Segments EBITDAR Margin (%)
Earnings before interest and finance costs, tax,
depreciation, amortisation and rent (EBITDAR)
divided by revenue. By excluding rent costs,
leased and owned properties are comparable
with each other.
4
.
1
4
6
.
9
3
No change
15
16 17 18* 19
Commentary
EBITDAR is our key measure of
operational profitability. Focus on
the margin allows us to monitor
conversion of incremental revenue
to profit.
2019 Progress
The Group has achieved an EBITDAR
Margin of 42.6% in 2019, which was
the same as 2018.
Link to Strategy
0
.
6
4
8
.
2
4
0
.
2
4
3
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8
3
Commentary
Key measure of the effective
delivery of profitable growth for
our shareholders.
Link to Strategy
6
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2019 Progress
Adjusted EPS - basic (pre IFRS 16)
has seen an increase of 3.2c on
2018, a growth of 7.5% year on year.
Adjusted EPS - basic (post IFRS 16)
totalled 42c for the year.
15
16
17 18 19 19
Earnings
Adjusted EPS-Basic (%)
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.
2
.
0
2
8
.
6
2
+7.5%
Cash
Free Cash Flow (Millions)
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.
+16%
STRATEGY AND BUSINESS MODEL
KPIs - Non Financial
Growth
9
3
2
3
New Rooms Added
Total number of new owned and leased
rooms added through acquisition or
development in the group.
People
Internal Promotions
Number of Internal Promotions
in the Group.*
*Measurement commenced in 2018.
+24%
Customer
Satisfaction
Commentary
Developing and delivering
our pipeline is key to our
growth strategy.
Link to Strategy
0
2
6
1
4
2
2
1
7
7
4
2
6
4
15
16 17 18 19
2019 Progress
We have added 462 owned
and leased rooms to our hotel
stock in 2019. Clayton Hotel
City of London and Clayton
Hotel Cambridge were acquired
during the year.
Link to Strategy
9
7
3
5
0
3
18
19
Commentary
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.
2019 Progress
In line with our strategy of
developing our teams from within,
we have seen an increase of 24% in
Internal Promotions in 2019.
5
8
4
8
3
8
Commentary
We are driven to improve customer
experience through continuous
investment to meet ever rising
expectations.
Link to Strategy
Customer Satisfaction (%)
A measure of the quality of our product offering
and service collected from our customers.
2
8
1
8
+1.2%
15
16 17 18 19
2019 Progress
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.
6
.
0
0
1
6
.
6
8
Commentary
The Group is focused on turning
profit into cash for re-investment
and dividend payments.
Link to Strategy
7
.
1
7
5
.
8
4
3
.
9
5
15
16 17 18 19
2019 Progress
Free Cash Flow of €100.6m was
achieved in 2019. A 16% increase
from 2018, driven by effective cost
control throughout the year.
Strategic Priorities
People
page 18
Strategic Priorities
Properties
page 20
Strategic Priorities
Customers
page 22
Strategic Priorities
Brands
page 24
*Prior period revenue figures have been restated in the current period to reflect the reclassification of €1.1 million of income from managed hotels from revenue
to other income following the change in reportable segments during 2019.
14
KPIs
15
Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION
STRATEGY AND BUSINESS MODEL
Strategic Priorities
Growth led
by People &
Properties
Strategy in Action
Read more about People
page 18
Strategy in Action
Read more about Properties
page 20
Strategy in Action
Read more about Customers
page 22
Strategy in Action
Read more about Brands
page 24
16
Dalata Hotel Group plc Annual Report & Accounts 2019
Strategic Priorities
Clayton Hotel
Birmingham
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.
OUR STRATEGIC VISION
PROPERTIES
CUSTOMERS
GROWTH
BRANDS
PEOPLE
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STRATEGY IN ACTION
Learning and Development
We offer top class learning and development solutions to our
current and potential talent from all backgrounds. Employees
can continually learn and grow their career further, accessing
a range of online, face-to-face and accredited development
programmes, as well as gaining access to upskilling
hospitality training.
Development of our people is a strategic priority and over the years we
have developed a top class and engaging suite of learning and development
programmes and workshops from which we have yielded excellent results.
We offer 14 internal development programmes; our ‘Milestones’ training calendar
which offers over 40 personal development courses per quarter; Dalata Online
our learning management system which gives access to over 50 courses available
as online bite-sized courses across all our hotels, as well as hotel-specific daily
upskilling training. We are also excited to launch our new Mentoring Programme in
2020, as well as a structured approach to creating pathways to work for all through
development within the community, including work-experience placements,
internship opportunities and apprenticeships.
Ascend graduate programme, class of 2017. Graduation: March 2019
The success of our Dalata
Online training platform
was one of the highlights
of 2019. The quality of our
learning and development
programmes is central to
retaining and developing
the best people.
Dawn Wynne
Head of HR
STRATEGY AND BUSINESS MODEL
Strategic Priorities
Our
People
As the Company continues
to grow, we recognise that
our team members are
central to the success of the
Group and how we operate.
Developing internal talent has
continued to play an essential role in
2019 and will continue to be a priority
for our future success.
Continuous development of our
General Managers is one of our primary
focuses and our Pinnacle programme
provides further development with
masterclasses delivered by the Irish
Management Institute on the latest
business trends.
Our Altitude programme is aimed at
developing and upskilling our Deputy
General Managers to ensure we have
a pipeline of future General Managers
to support our ambitious growth plans.
Our focus is on their leadership and
people management expertise as
well as business strategy and growth.
We are incredibly proud of our Ascend
Graduate Programme, and we were
delighted to welcome a record 34
graduates into our Class of 2019.
The Ascend programme ensures the
development of talented graduates,
some of whom will become leaders
within our business. To date, we have
retained 72% of those who graduated
in 2017 & 2018. We currently have
62 Ascend graduates from different
disciplines gaining valuable experience
in the hospitality industry. More
recently we have added Sales &
Marketing, Human Resources and
Revenue Management streams to the
graduate programme. Our graduate
programme within our growing
employer brand has resulted in an
increase in the number and calibre of
applicants each year.
2019 saw the exciting launch of our
newest programme, Navigate. This
programme has been developed
with the objective of upskilling
our employees at the supervisory
level in our hotels to give them
the confidence, communication
and leadership skills required for
managing a team.
From our specialist stream, the Head
Chef Development programme has
been a phenomenal success for
the business and the people who
have attended. We have combined
with Tralee IT to develop a bespoke
blended Chef Development
Programme – Certificate in Culinary
Management & Innovation. This
programme is an excellent example
of how we continue to grow and
develop great talent for our hotels
and is in its second year. It is also an
example of how we can work with
a third-level institution to develop
the specialist skills required for
some categories of our people. We
have seen our first 15 Senior Chefs
graduate from this programme.
The return on investment of this
programme has been excellent with a
retention of 87% and an engagement
score of 97%.
In December 2018, we launched
our new online learning platform,
Dalata Online, which has been
well received and has enjoyed
excellent engagement across
the Group. We will retain our ‘face
to face’ delivery but supplement it
with a very efficient and effective
online platform.
These development programmes
ensure that we are developing the
talent necessary to continue to
manage our growing portfolio using
our decentralised management
approach. In 2018 and early 2019,
we opened six new-build hotels with
72% of the senior management
coming from within the Group.
This ensured that the Dalata culture,
model and brand was present from
the pre-opening stage. We have the
same robust plans in place for the
new openings in 2021 & 2022.
83%
of employees feel they
are growing professionally
367
employees enrolled on
structured programmes
36%
of current General
Managers developed
through our Pinnacle
programme
47,524
courses have been
completed in 2019
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Dalata Hotel Group plc Annual Report & Accounts 2019
Strategic Priorities
Strategic Priorities
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STRATEGIC REPORTCORPORATE GOVERNANCE
STRATEGY AND BUSINESS MODEL
Strategic Priorities
Our
Properties
A new hotel
pipeline rising to
30% of rooms
operated today.
11
Hotels
in pipeline
3,000
Circa 3,000
bedrooms in the
Development
Pipeline
2
New hotels added
in 2019, one in the
City of London and
one in Cambridge
2019 PROGRESS
Our pipeline has expanded to almost
3,000 rooms. Over 30% of our current
owned and leased room capacity.
2019 Highlights
I.
The company added two hotels
to the portfolio, with a combined
bedroom count of 367 keys.
Clayton Hotel City of London,
212 bedrooms – January 2019
Clayton Hotel Cambridge, 155
bedrooms – November 2019
II. We secured a development site
in Shoreditch, London which is on
schedule to deliver a 145-bedroom
Maldron in the first half of 2022.
III. With a continued focus on growth,
Dalata has also committed to 3
more new build, operating lease
opportunities, in both Dublin and
the UK.
The Samuel Hotel Dublin –
Q2 2021
Maldron Hotel Liverpool –
Mid 2022
Maldron Hotel Croke Park –
Q4 2023 (estimated)
IV. Within our existing portfolio, we
have identified opportunities for
expansion, including extensions
to Clayton Hotel Birmingham –
44 bedrooms and Clayton Hotel
Cardiff Lane – 88 bedrooms.
The company now has a pipeline
of 11 new properties in the UK and
Ireland, 7 of which have already
commenced construction. With
extensions this will result in over
2,000 new bedrooms in 2021 and
another circa 1,000 bedrooms
opening in subsequent years.
We are the leading hotel operator
in Ireland and our strategy is to
become the leading four star
operator in the 20 cities that we
are targeting for expansion in the
UK. We also wish to significantly
increase our presence in London.
Our flexibility has enabled us to
take advantage of opportunities
in target locations through a
variety of investment vehicles,
ranging from agreements for lease
through to freehold acquisition of
development sites.
2020 FOCUS
Our focus for 2020 will be to secure
further opportunities in excellent
locations across our target cities
whilst also exploring other potential
markets that could further support
the development of our pipeline.
We have undertaken, and will
continue to undertake, significant
research to identify the most
attractive geographical markets
that will support our ambitious
growth strategy and drive further
shareholder value.
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STRATEGY IN ACTION
Clayton Hotel Birmingham
Improving performance and delivering on shareholder value
In July 2017, Dalata initially acquired control of Hotel La Tour, a 4-star property in central
Birmingham. The following month, Dalata completed a sale and leaseback with Deka
Immobilien (Deka) for £30 million, with an initial rent of £1.6 million per annum for the
hotel. Completed in 2012 to a high four-star standard, the property boasts 174 bedrooms,
restaurant and bar facilities, as well as extensive conference and meeting facilities, all
boasting high quality finishes.
Shortly after acquisition the hotel was rebranded as the Clayton Hotel Birmingham and
the Dalata operations team commenced the implementation of the business plan for the
hotel. The property has enjoyed considerable success over the last couple of years and
the Dalata team, now led by Caitriona Delaney, have delivered the following improvements
across key performance metrics:
Increased EBITDAR by 66%*
Increased RevPar by 15.4%*
Increased overall Revenues by over 6.5%*
Increased EBITDAR Margin from 24% to 37%*
One of the largest cities in the UK, Birmingham was always high on Dalata’s list of target
markets. With the improved performance of the hotel and the Commonwealth Games
due to be hosted in the city during 2022, its appeal has only increased. During the initial
acquisition in 2017, the possibility of extending the existing hotel was an opportunity that
had been discussed with Deka and, in September 2018, we secured planning permission
for an additional 44 bedrooms, distributed across two new floors.
In 2019, we exchanged contracts for an extensive Development Agreement with Deka,
which will result in Deka investing £5.6 million in the property for the delivery of the
bedroom extension whilst Dalata will invest a further £1.37 million, primarily focused on
enhancing the ground floor offering for customers. Construction commenced in January
2020 and the project is on schedule to complete by the end of 2020.
Clayton Hotel Birmingham will enter 2021 reinvigorated and reinvested, perfectly placed to
continue to grow its business and enjoy further success. When finished the hotel will have
218 bedrooms and a refreshed ground floor, including a considerably improved bar and
restaurant. Furthermore, the additional 44 bedrooms will enter operation at a rent per key
that is approximately 25% less than the current rent per bedroom.
We have increased
earnings at Clayton Hotel
Birmingham by 66% in two
years. We identified an
under-performing hotel on
an under-utilised site, and
exploited the opportunity
through efficient deal
execution. Our hotel
management, and asset
and project management
expertise enabled us to
transform performance
and expand the hotel
from 174 to 218 rooms.
Shane Casserly
Corporate Development Director
Clayton Hotel
Birmingham
*Based on results for 2019 versus 2017,
when it was acquired by Dalata.
This project further demonstrates Dalata’s commitment to this dynamic city and our ability
to apply our strengths and skills to an existing property and drive performance and growth
so that it outpaces the market.
20
Dalata Hotel Group plc Annual Report & Accounts 2019
Strategic Priorities
21
CORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION
STRATEGY AND BUSINESS MODEL
Strategic Priorities
Our
Customers
Our customer is
at the centre of
everything we do
as a hospitality
company.
1.2%
Overall Customer
satisfaction up 1.2%
10%
Maldron Hotels
Breakfast Satisfaction
Increased by 10%
6%
Clayton Hotels
Breakfast Satisfaction
Increased by 6%
We carried out an overview of the
online customer journey for those
booking through our own websites.
It was conducted through heatmap
reports to see how users behave and
interact with our websites. The data
received enabled us to see which
elements of the page were attracting
users’ attention, how they fl ow
through diff erent pages of the site and
potential issues with content. After
taking account of a number of tests
that were completed, we redeveloped
and relaunched our websites. The
changes have contributed to an
increase in site performance and
content consumed by users.
2020 FOCUS
We will continue to drive bookings
through our websites, with our “Make
it Maldron” and “Click on Clayton”
campaigns. We will continue to seek
to encourage more customers to book
directly with us in 2020.
Customer data and privacy is
something we take very seriously in
Dalata. Over the past year, we have
reviewed our systems and policies to
ensure that we are GDPR compliant.
Additional focus will be placed on this
important and developing area in 2020.
We are focused on continually
improving the journey of our customers
as they experience our hotels and our
people who serve them. We always seek
to better understand our customers so
that we can better satisfy their needs
and meet their expectations.
2019 PROGRESS
Our focus for 2019 was to further
enhance our customer experience
through investments in our facilities,
advancements in our technologies and
focus on our service delivery.
Customer satisfaction is key to our
success, and so to keep our standards
high, we collect customer feedback from
an industry-leading online reputation
management tool to help us monitor and
measure satisfaction levels. In 2019 we
received and processed over 150,000
customer reviews. Our response rate
increased by 50% and the overall
satisfaction rating went up by 1.2% to
85% overall. We examine the customer
feedback results in detail and use those
results to inform our decision making
on areas such as capital investment,
employee training requirements and
service delivery standards.
Our customers book our services in
a multitude of diff erent ways. They
use tour group operators, global
distribution systems (GDS), our own
brand websites or just walk in off the
street for a coff ee. Each and every
customer is important to us.
Repositioning Dalata
Hotel Group within
the Global Distribution
System (GDS) will allow
us to increase sales in
this channel - maximising
revenue from existing
partnerships and
developing new ones.
Patrice Lennon
Group Head of Sales and Marketing
STRATEGY IN ACTION
GDS Private Label Switch
Global Distribution Systems [GDS] Chain Code Switch from generic
“UI” to private label “DA”
Global Distribution System (GDS) is a worldwide computerised
reservations network that enables automated transactions
between travel service providers for airlines, hotels and car
rental companies.
GDS Customers (corporate clients, travel management companies and consortia
partnerships) make reservations through phone, dedicated travel desks, online
booking tools or platforms, all sourced through native GDS.
Our connectivity provider, Pegasus, has distributed our rooms inventory to the
global distribution systems through their chain code of “UI” since Dalata Hotel
Group was established.
In 2019, after in-depth research, we decided to change our GDS code to our
private label code of DA. This gave us a unique identity while creating brand
awareness. It allowed us to create Dalata Hotel Group as a solid independent
hotel group which stands out and now provides us with prioritisation on booking
channels and the ability to develop new and maximise existing partnerships
through preferential status.
Since making the switch to our private label, Dalata Hotel Group has seen a 113%
growth in partnership numbers from 2019 to 2020, future proofi ng us within the
global corporate market to generate growth within existing hotels and facilitate
intelligence as we enter new markets.
Through preferred partners and GDS systems, we have developed a new marketing
plan with the objective of creating awareness of our chain code and brand
development across global markets. Applying a communications creative concept
for the identity allows us to associate all brands of Dalata, Clayton & Maldron Hotels.
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Dalata Hotel Group plc Annual Report & Accounts 2019
Strategic Priorities
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STRATEGY AND BUSINESS MODEL
Strategic Priorities
Our
Brands
Our brands are central
to our business model,
and the development
of these brands is
essential to our strategy.
Clayton and Maldron are the two
largest hotel brands in Ireland.
In today’s dynamic accommodation
market we believe that total
brand control, combined with our
de-centralised operations model,
allows us to maximise return on
investment at each individual
hotel according to its location
and characteristics.
2019 PROGRESS
2019 was another fantastic year for
our Clayton and Maldron hotel brands.
We invested over €7 million in 2019
refurbishing 699 rooms in our hotels,
bringing the total number of new or
refurbished rooms in our portfolio
to 5,773 since 2014. This means
that we deliver a consistently good
quality product at every location.
In 2019 we announced two future new
Maldron Hotels, one in Liverpool and
one in London, which will help grow
further the profi le of the brand in the
UK. We also opened our third Clayton
hotel in London – the Clayton City of
London. We took over the Tamburlaine
Hotel in Cambridge in November 2019
which will be rebranded as Clayton
Hotel Cambridge in February 2020.
We have maintained our disciplined
approach to developing or acquiring
new hotels in prime city-centre
locations.
We also had signifi cant growth in
our other brands. Our Red Bean
Roastery, which is our stand-alone
coff ee brand is now available at 36
locations across both hotel brands
in Ireland and the UK including two
standalone coff ee shops located in
Cork and Dublin.
Our 13 Club Vitae Leisure Centres
brand had over half a million capital
investment in 2019.
2020 FOCUS
We have just commenced an
extensive market research project
which will assess matters such as
awareness of our brands in Ireland
and the UK, the eff ectiveness of our
websites and consumer perception
of our brands. Empowered with
these insights, this research will
help us refi ne the marketing and
communications strategies of
each brand. It will act as a guiding
compass for us over the coming
years as we continue to invest and
develop our brands.
17
Operating
Maldron Hotels
7
Maldron Hotels
in the Pipeline
22
Operating
Clayton Hotels
3
Clayton Hotels
in the Pipeline
STRATEGY IN ACTION
From the Tamburlaine Hotel
to Clayton Hotel Cambridge
The perfect fi t to our Clayton family
In November 2019 the Group acquired the operating lease for
The Tamburlaine Hotel in Cambridge. A decision was made to
rebrand the hotel as Clayton Hotel Cambridge and this will be
completed in February 2020.
To understand why this rebranding made sense to us and why it enhances the strength
of the Clayton brand we considered a number of factors.
Cambridge as a location refl ects our brand criteria. It is a centre of learning, commerce
and research and is home to one of the most prestigious universities in the world. Many
of the world’s leading multinationals are also based in the city. We locate Clayton hotels at
the centre of key business and leisure cities in Ireland and the UK and the Clayton Hotel
Cambridge will enhance our brand profi le.
The hotel’s business mix is also suited to the Clayton brand, with a strong corporate
presence supported by a healthy leisure market. This supports the hotel’s outstanding
meetings and events, and food and beverage off erings.
The hotel opened in May 2017 and is fi tted out to a high specifi cation. Clayton hotels
are well-appointed and well-invested properties and The Tamburlaine fi ts our criteria
of off ering a high-quality guest experience.
Of huge importance to us is the relationship of our Clayton hotels with the local
community, and the hotel’s place in this community. The “Tamburlaine” name resonates
deeply with the local Cambridge community. Honoring 16th century playwright, and
Cambridge alumnus, Christopher Marlowe’s most famous play, “Tamburlaine the Great”,
we have renamed the bar and restaurant “The Tamberlaine” to retain the link with
the community.
Clayton Hotel Cambridge is a high quality addition to the Clayton brand. The hotel
strengthens the brand and the brand will lift revenue and earnings at the hotel.
Following the success
of Clayton Hotel
Birmingham (see page
21) we are excited to
announce Clayton
Hotel Cambridge,
launching February
2020. Another high
quality addition to
the brand portfolio.
Patrice Lennon
Group Head of Sales
and Marketing
Clayton Hotel
Cambridge
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Dalata Hotel Group plc Annual Report & Accounts 2019
Strategic Priorities
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OPERATIONS REVIEW
Dalata is, at its heart, a hotel operator, and
I’m delighted to report on another hugely
successful year for hotel operations in
the company. We integrated six new
hotels into our business, identifi ed several
future leaders within our emerging talent
pool, protected and grew our profi t
margin despite softening RevPAR in our
key Dublin market, improved customer
satisfaction across both the Clayton and
Maldron brands and saw a sharp increase
in our employee engagement scores.
Our brands and accommodation
product continues to benefi t from
our commitment to investment in
rooms refurbishment.
The operations team at Dalata also
plays a critical role in the new hotel
development process. There is a
continuous feedback loop between
operations and the acquisitions and
development team on due diligence,
design, planning, and during the critical
pre-opening phase as we take over the
project and begin to turn our investment
targets into reality. This relationship is an
essential part of the success of Dalata’s
business model.
People
The strategic importance of the
development of our people is explained
in detail on pages 18 and 19. We
recognise the need to take care of our
people as one of our primary social
responsibilities (pages 50 and 51), and
we underline the importance of people
development and retention in our key
risks on pages 44 and 45.
Our in-house development programmes
support all of our key departments:
operations, human resources, sales and
marketing, revenue management, food
and beverage and fi nance. Everybody has
an opportunity to excel in their career,
and I am delighted with the fi gure of 379
internal employee promotions alone
during 2019. We are building fantastic
teams to underpin our future growth,
both in Ireland and the UK.
Hotel General Managers and their teams
have full decision making responsibility
and accountability for each of their
respective businesses. The hotels are
deep relationships with group
customers in a variety of market
subsegments. One good example of
this is in the sports sector, where we
cultivate partnerships with several
leading organisations and clubs through
sponsorships and preferred partner
arrangements. These partnerships
include London GAA, the FAI emerging
talent programme, Munster Schools
rugby and several League of Ireland
football teams. These relationships also
help foster healthy relationships in our
local communities.
Sustainability
I am looking forward to working on the
ESG Committee chaired by Elizabeth
McMeikan. We view our responsibility
for our impact on society and the
environment as something we must
integrate into our day to day business.
In 2019 we took some progressive
steps; the Environmental Steering
Group led by Conal O’Neill (see page 55)
successfully established a sustainability
benchmark across all of our properties
in partnership with Green Tourism,
and we concluded a two-year supply
agreement Bord Gais for green-
certifi ed electricity for all our Irish hotels.
We look into 2020 with optimism.
There are several key events, including
football’s Euro 2020, and the return
of the Autumn series of rugby
internationals, which will boost visitor
numbers to Ireland and the UK. In
Dublin, we welcome the 50th World Irish
Dancing Championship in April and the
College Football Classic in August, two
events that attract big visitor numbers.
I am confi dent that we have a terrifi c
committed team in place to make
the most of the opportunities in the
marketplace and to overcome any
obstacles that we might meet in 2020.
ably supported by a strong, very
experienced and energetic Central
Offi ce team.
The improvement in employee
engagement is great to see and is a
result of us listening to concerns and
making sure our managers are rewarded
for taking an interest in employee
welfare. In 2019, we improved staff
facilities at several locations, introduced
an employee assistance programme,
more great training courses and
maintained excellent communication
through regular town hall meetings at
all hotels and in the central offi ce. I am
a fi rm believer that a happy workforce
is an essential component of excellent
customer service, and the combination
delivers our bottom-line targets.
Customer
There are several drivers of our
thriving customer relationships. We
are transparent across the business,
sharing our satisfaction ratings across
all the hotels, and driving a daily focus to
every customer experience.
Our accommodation off ering is the core
of the business, and we are committed
to providing a high standard of quality
and service. Over the past year, we
have also focused on the customer
experience on our ground fl oors. Food
and beverage performed very well, and
we continue to invest in our customer
off ering and consistency. Red Bean
Roastery coff ee is now a mainstay in all
our lobbies, and I was delighted when
Clayton Hotel Leopardstown’s cafe was
voted best coff ee shop in the bustling
Sandyford Business District in 2019.
This shows that we can produce high-
quality food and beverage experiences.
Improvements in our breakfast product
and service was another essential
part of the overall growth in customer
satisfaction scoring.
Our six 2018/19 hotel openings have
settled down very well and have, without
exception, been very well received by
customers. Each one has contributed to
our earnings growth in 2019.
As well as caring for individual
customers, we invest in developing
Stephen McNally
Deputy Chief Executive
Our People,
Powering
our Growth
26
Dalata Hotel Group plc Annual Report & Accounts 2019
Operations Review
Strategic Priorities
People
page 18
Strategic Priorities
Customers
page 22
Strategic Priorities
Brands
page 24
I am confi dent that
we have a terrifi c
committed team in
place to make the most
of the opportunities in
the marketplace and
to overcome any
obstacles that we
might meet in 2020.
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FINANCIAL REVIEW
Robust Performance
Delivering Strong
Cash Flow
€
Revenue
up 9.3% to
€429.2 million
€
€
Adjusted basic EPS1
(pre IFRS 16) up
7.5% to 46.0 cents
Basic EPS
(post IFRS 16) up
3.7% to 42.4 cents
Over €100 million
generated in
Free Cash Flow1
Property, plant
and equipment of
€1.5 billion at 31
December 2019
Very comfortable
gearing with Debt
and Lease Service
Cover1 of 3.2x
Generating over €100 million in Free
Cash Flow1 is truly a great achievement
by everyone in the Dalata team in 2019.
We significantly grew earnings again in
2019 despite RevPARs falling in the Irish
market for the first time since we floated
the company in 2014. Coupled with
that, the uncertainty surrounding the
outcome of Brexit hung over both the
UK and Irish economies for the entirety
of 2019. However, the investment in our
people, improving our processes and
systems, and understanding better the
needs of our customers served us very
well in 2019.
RevPAR1 is a key metric to assess
the health of hotel markets and the
operators within those markets.
However, it is not the only metric. Our
hotel teams work very hard every day
in driving sales through our food and
beverage outlets, attracting clients
into our excellent meeting and events
facilities, retaining existing and capturing
new members in our health and fitness
facilities as well as generating revenues
in any other way we can. Our Central
Office sales team are always looking
at expanding existing channels to
support our teams at the hotels as well
as exploring new channels to sell our
services through.
Our hotel teams are also focused on
delivering service to our customers in
the most efficient way possible. Our
decentralised model encourages them
to be innovative in finding efficiencies
that do not have a negative impact on
our customers. Meanwhile, our Central
Office team is delivering technology
that is increasing overall efficiency at
the Group. The Shared Service Centre
in Cork, as explained later, is a big part
1, 2 See endnotes page 39
of that effort. In addition, technology
and an ever-increasing focus on health
and safety is resulting in reduced claims
costs at a time of rising insurance costs
in Ireland.
The net result is that despite RevPAR
falling at our ‘like for like’ hotels in Dublin
and Regional Ireland, our EBITDAR
margins1 increased in both those regions.
That is a result that I am very proud of.
Group Revenue
and Earnings
€million
Revenue
Adjusted
EBITDA1
2019
Post
IFRS 16
2019
Pre
IFRS 16
20182
429.2
429.2
392.6
162.2
134.8
119.6
Group EBITDA1
163.8
136.4
116.6
Profit before tax
89.7
98.4
87.3
Basic EPS
42.4
cents
46.4
cents
40.9
cents
We delivered strong revenue growth of
€36.6 million (9.3%) to €429.2 million in
2019 driven by the full year contribution
from the six new hotels and four hotel
extensions which opened during 2018
and early 2019. Our existing UK hotel
portfolio performed very well, which
is particularly encouraging given our
expansion plans for this region. RevPARs
at our ‘like for like’ Republic of Ireland
hotels decreased due to the digestion
of newly added supply and the impact
of the VAT increase.
28
The additional revenue converted strongly
to the bottom line with Segments EBITDAR1
increasing by €15.6 million. Segments
EBITDAR margin1 for the Group is
unchanged at 42.6% despite a fall In RevPAR
in the Irish market and lower margins at
our six newly opened hotels which have yet
to reach full operating performance. This
demonstrates our excellent control of costs.
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 €1.6 million for
2019 relate to the net property revaluation
movements recorded in profit or loss. The
Group adopts a revaluation policy for its
hotel property assets. In 2019, the value of
our hotel assets were revalued upwards by
€122.3 million, of which €120.7 million was
recorded directly in equity.
Earnings Per Share (EPS)
Basic EPS has grown by 3.7% to 42.4 cents.
Our new and extended hotels have made
a significant contribution to earnings.
However, this is offset by the increase in
depreciation and finance costs due to the
application of IFRS 16 Leases.
Under IFRS 16, lease expenses are higher
in the early years of implementation due
to the front-loading effects of finance
costs compared to the straight-line rent
expense under IAS 17. Excluding the
impact of IFRS 16, basic EPS increased
by 13.4% to 46.4 cents.
The Group’s effective tax rate1 decreased
from 13.8% in 2018 to 12.8% in 2019
largely due to the reversal of prior year
valuation impairments which is not taxable
and the release of an over provision from
2018. Work completed by external advisors
on the level of capital allowances on the
2018 development capital expenditure
resulted in a higher qualifying amount than
originally estimated. In 2018, the non-
deductible impairments led to a higher
effective tax rate.
The current tax charge also includes a
capital gains tax charge of €0.9 million
on insurance proceeds received in 2018.
These became taxable as a result of the
Group’s decision in 2019 not to redevelop
the insured building which had been
destroyed by fire.
1 See endnotes page 39
Financial Review
The net result is that
despite RevPAR falling
at our ‘like for like’ hotels
in Dublin and Regional
Ireland, our EBITDAR
margins increased
in both those regions.
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Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORT
Transitioning for IFRS 16 Leases
Trading Review by Segment
At Dalata, we strive to be open, practical
and straightforward in everything we do.
I feel that this culture is very evident in
how we approached accounting for the
Group’s leasing activities under the new
standard, IFRS 16 Leases.
Under IFRS 16, almost all Dalata’s
leases are recorded on the balance
sheet in the form of right-of-use assets,
representing our right to use the leased
assets, and corresponding lease liabilities,
representing our obligation to pay rental
costs. At an early stage we identified that
IFRS 16 was going to have a significant
impact on our financial statements and
the KPI’s we report. As a result, it was
very important to us that we started the
process early to allow sufficient time for
review and reflection. Carol Phelan and
her team took the lead on this project
and confronted the issues head on.
We were one of the first groups to
address the impact of IFRS 16. Carol
Phelan presented in detail the likely
impact of the new IFRS at our capital
markets day back in November 2017.
We wanted to share this information
with our stakeholders as soon as possible.
The key area of judgement in IFRS
16 was estimating the discount rate
on transition. We adopted a ground-
up approach to addressing the main
expected components, the risk-free
rate, country risk premium, if applicable,
finance spread, and asset specific
adjustment. We then compared where
this sits to data points such as property
yields to ensure that the rates did not
look unreasonable.
As permitted under IFRS 16, we adopted
the modified retrospective approach
and therefore have not restated prior
period comparatives. Following the
implementation of IFRS 16, we spent a
lot of time exploring how best to present
and explain our results for 2019. We
decided that the clearest way to enable
our stakeholders to fully understand how
we have performed during the year was
to disclose 2019 numbers including and
excluding the impact of IFRS 16.
The following tables detail the significant
change as a result of the application
of IFRS 16 to Dalata’s profit or loss,
statement of financial position and cash
flow statement presentation for the year
ended 31 December 2019.
Impact on financial statements: Consolidated statement of comprehensive income
Leases
Element of IFRS 16 Leases
Impact on profit or loss for the year ended 31
December 2019
Fixed rental expenses are
excluded from profit or loss
and replaced with finance
costs on the lease liabilities
and depreciation of the
right-of-use assets.
Adjusted EBITDA has increased by €27.4 million
as fixed rental expenses are removed from profit
or loss. However, under IFRS 16 total expenses
are higher in the early years of the lease due to
the front-loading effects of finance costs versus
the straight-line rent expense under IAS 17. This
resulted in a €7.5 million decrease to profit after
tax and a 4.0 cents decrease to basic EPS for 2019.
Impact on financial statements: Consolidated statement of financial position (“SOFP”)
Leases
Element of IFRS 16 Leases
Impact on SOFP at 31 December 2019
Recognition of assets
reflecting the right-of-use
of leased assets.
Recognition of financial
liabilities to pay rental costs.
Right-of-use assets of €386.4 million at 31
December 2019.
Dalata’s liabilities have increased by €362.1
million at 31 December 2019 as the accounting
estimate of lease liabilities is brought on balance
sheet. This results in an increase in Net Debt to
Adjusted EBITDA1 from 2.8x pre IFRS 16 to 4.5x
post IFRS 16.
Impact on financial statements: Consolidated statement of cash flows
Leases
Element of IFRS 16 Leases
Impact on cash flows for the year ended 31
December 2019
The payment of fixed rental
costs is now presented
within cash flows from
financing activities.
Net cash flow from operating activities has
increased by €27.5 million as the payment
of fixed rental costs is now presented within
financing activities in the form of interest on
lease liabilities (€18.9 million) and repayment
of lease liabilities (€8.6 million). There is a minor
impact on cash flows due to the positive cash
benefit from the treatment of IFRS 16 by UK
Tax Authorities.
GROUP SNAPSHOT OF OWNED AND LEASED PORTFOLIO
AT 31 DECEMBER 2019
OWNED AND
LEASED HOTELS
SPLIT OF
REVENUE
SPLIT OF
EBITDAR
30
71%
69%
11
29%
31%
In the following section I will analyse the results from the Group’s
portfolio of hotels in Dublin, Regional Ireland and the United Kingdom.
Dublin
€million
Room revenue
Food and beverage revenue
Other revenue
Total revenue
EBITDAR
EBITDAR margin %
Performance statistics
(like for like)3
Occupancy
Average room rate (€)
RevPAR (€)
RevPAR change %
Dublin owned
& leased portfolio
Hotels
Room numbers
Dublin
RevPAR in the Dublin market declined
by 3.6%. There were a number
of factors which made it a more
challenging year for the Dublin hotel
industry. The increase in the VAT rate
from 9% to 13.5% was the biggest
single factor but the increase in the
supply of rooms, increased availability
of student accommodation on OTA
platforms during the summer and
fewer large events compared to
2018 were also factors in the RevPAR
decline. On the positive side, demand
for hotel rooms continues to grow
very strongly on the back of buoyant
economic growth in the city.
I am very happy with our performance
in Dublin where we grew revenues by
4.5%. The contribution of the rooms
we opened in 2018 was very strong.
We also outperformed the market
with our RevPAR at our ‘like for like’
hotels falling by 3.1% versus market
fall of 3.6%.
Food and beverage revenues grew by
€2.4m (4.7%) due to full year effect of
the two hotels opened in 2018 and the
very strong performance of several of
our other hotels.
EBITDAR margin before adjusting
items grew from 48.5% to 48.8%.
This is an excellent result given the
fall in RevPAR.
3 See endnotes page 39
2019
176.3
53.0
16.1
245.4
119.7
48.8%
2018
168.7
50.6
15.6
234.9
114.0
48.5%
2019
2018
86.5%
124.15
107.41
-3.1%
2019
16
4,482
88.2%
125.72
110.89
2018
16
4,460
4,482
2,600
16
12
57%
23%
66%
21%
ROOM
NUMBERS
HOTELS
% OF
REVENUE
% OF
SEGMENTS
EBITDAR
1,867
13
20%
13%
1 See endnotes page 39
• Owned Hotels • Leased Hotels
• Dublin • UK • Regional Ireland
30
Financial Review
31
Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION Regional Ireland
The Regional Ireland market was
negatively impacted by the increase
in the VAT rate. Our Cork hotels
were in line with the market with
RevPAR falling 3.2% at our ‘like for
like’ hotels. Our Limerick hotels were
up by 2.4% compared to a market
growth of 3.7%. One of our hotels was
disproportionately impacted by a loss
of airline crew when they discontinued
a Shannon Airport route. Our Galway
hotels had a strong year with RevPAR
up 0.7% in a city where the market
was down 2.1%.
Overall, revenue was up 6.8% with
Maldron Hotel South Mall, Cork having
a strong first year of trading. EBITDAR
Margin improved further at 28.9% as
we get closer to our target of 30%
for this region.
United Kingdom (local currency)
Despite the uncertainty created by
Brexit, we had an excellent year in the UK.
All our provincial UK hotels outperformed
their city market in terms of RevPAR
change. Our London hotels were behind
the city as a whole but performed well
within their own local markets. The
recently opened Clayton Hotel City of
London, Maldron Hotel Newcastle and
Maldron Hotel Belfast City contributed
to a very strong growth in revenue of
£17.6m (25.5%).
Despite the dampening impact of
three hotels being in a ramp up phase,
EBITDAR margin remained unchanged
at 39.0%. As our portfolio grows and
matures in the UK, we fully expect
EBITDAR margin to grow strongly.
Regional Ireland
€million
Room revenue
Food and beverage revenue
Other revenue
Total revenue
EBITDAR
2019
49.7
26.8
8.4
84.9
24.5
2018
45.2
26.4
8.0
79.6
22.7
EBITDAR margin %
28.9%
28.5%
Performance statistics
(like for like)4
Occupancy
Average room rate (€)
RevPAR (€)
RevPAR change %
Regional Ireland
owned & leased portfolio
Hotels
Room numbers
United Kingdom
£million
Room revenue
Food and beverage revenue
Other revenue
Total revenue
EBITDAR
2019
74.9%
97.32
72.87
-1.0%
2019
13
1,867
2019
62.8
17.8
6.1
86.7
33.8
2018
75.2%
97.87
73.57
2018
13
1,797
2018
48.1
15.2
5.8
69.1
27.0
EBITDAR margin %
39.0%
39.0%
Performance statistics
(like for like)5
Occupancy
Average room rate (£)
RevPAR (£)
RevPAR increase %
United Kingdom
owned & leased portfolio
Hotels
Room numbers
2019
85.2%
84.03
71.57
2.7%
2019
12
2,600
2018
84.7%
82.33
69.70
2018
10
2,233
4, 5 See endnotes page 39
32
Central Costs and Share-Based
Payments Expense
€million
Central costs
Share-based
payments expense
2019
2018
11.8
2.7
13.3
2.8
Central costs decreased by €1.5
million due to the release of insurance
provisions made in previous accounting
periods totalling €1.9 million following
the impact of better claims experience
on original estimates. Our improving
claims experience is driven by our
commitment to continually look at ways
to make our hotels safer each year for
our guests and employees – this is a
journey that never ends. Our improving
claims experience is also driven by an
investment in technology and a strong
focus on training, which has enhanced
our ability to record and track incidents,
defend claims when they do arise and
direct capital expenditure to prevent
instances occurring in the future. Wages
and salaries included within central
costs increased by €0.4 million following
the impact of new hires to support the
growing Group.
Depreciation
€million
Depreciation of
property, plant
and equipment
2019
2018
26.2
19.7
Depreciation of
right-of-use assets
17.1
-
Total depreciation
43.3
19.7
Depreciation of property, plant and
equipment increased by €6.5 million
to €26.2 million driven by growth in the
portfolio. €3.0 million of the increase
relates to the full year impact of the new
rooms added during 2018. €2.0 million
relates to Clayton Hotel City of London
which was acquired in January 2019.
The remaining increase relates to the
depreciation of refurbishment capital
expenditure which replaced items that
had already been fully depreciated in
previous accounting periods.
The application of IFRS 16 Leases, results
in a depreciation of right-of-use assets
amounting to €17.1 million in 2019.
Right-of-use assets are depreciated
on a straight-line basis from the
transition date of 1 January 2019 or
the commencement date of the lease,
whichever is later, typically to the end of
the lease term.
Finance Costs
€million
Interest expense
on bank loans and
borrowings
Impact of interest
rate swaps
Other finance costs
Net exchange loss/
(gain) on financing
activities
2019
2018
9.1
7.8
1.2
1.0
1.5
0.4
2.8
(0.3)
Capitalised interest
(0.5)
(1.8)
Finance costs
(pre IFRS 16)
Interest on
lease liabilities
Finance costs
(post IFRS 16)
11.7
9.5
18.9
-
30.6
9.5
The application of IFRS 16 Leases,
which results in the recognition
of an interest charge on the lease
liabilities, has increased finance costs
by €18.9 million in 2019. Capitalised
interest has reduced by €1.3 million
due to a decrease in the number of
development projects.
Interest on bank loans increased
by €1.3 million due to the additional
drawdowns from the multicurrency
revolving credit facility to fund the
acquisition of Clayton Hotel City of
London and a site in London for the
new Maldron Hotel Shoreditch. This
was offset by a decrease in interest
on bank loans under the improved
terms of the new facility agreement
secured in October 2018. The
weighted average interest rate for
2019 was 2.42% (2018: 2.94%), of
which 1.57% (2018: 2.15%) related
to margin.
The interest on the lease liabilities for
existing hotels is calculated using the
estimated incremental borrowing rate
applicable to each lease at the date
of transition, 1 January 2019, or the
date the hotel becomes operational if
opened afterwards. This rate is derived
from country specific risk-free interest
rates over the relevant lease term,
adjusted for the estimated finance
margin attainable by each lessee and
asset specific adjustments designed to
reflect the underlying asset’s location
and condition. The Group’s weighted
average estimated incremental
borrowing rate for IFRS 16 accounting
purposes was 6% for the year ended
31 December 2019.
Financial Review
33
Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION Over €100 million generated
in Free Cash Flow
Strong balance sheet
backed by €1.5bn
of prime assets.
Portfolio of young,
well maintained hotels
continues to deliver
strong cash flow.
€million
Net cash from operating activities
Fixed rent paid6
Finance costs paid
Refurbishment capital expenditure paid
Exclude adjusting items with a cash effect
Free Cash Flow
2019
155.0
(27.5)
(11.2)
(15.7)
-
100.6
2018
115.8
-
(13.2)
(15.9)
(0.1)
86.6
We typically allocate 4% of revenue to refurbishment capital expenditure. In 2019, we
allocated €6.2 million to refurbishing our bedrooms and a further €9.0 million on public
areas, back of house areas and completing health and safety works.
In 2019, Dalata achieved a Normalised Return on Invested Capital1 of 12.1% (2018:
12.7%). This figure excludes the capital cost and trading impact of the five new owned
hotels, which opened during 2019 or 2018 and assets under construction at year end.
In addition to this, the Group also adds value through the acquisition and development
of hotels. In 2019, the value of our property assets increased by a further €122.3
million. The total uplift in value to our property assets since 2014 is now €397 million
highlighting our excellent ability to acquire strategic assets and develop hotels in an
efficient manner.
Capital Structure
As I said earlier, I am delighted that we generated over €100 million in Free Cash Flow for
the first time in the history of the Group.
We are committed to carefully managing our capital structure to ensure we have the
right mix of leases, debt and equity.
Our portfolio of hotels continues to earn strong Free Cash Flow. The cash generated
allows us to fund acquisitions and developments whilst also paying dividends to our
shareholders. Dalata allocates approximately 4% of annual revenue to refurbishment
capital expenditure to ensure the portfolio remains fresh for our customers and
adheres to brand standards. Refurbishment capital expenditure is slightly lower,
compared to 4% of 2019 revenue, due to timing of projects ongoing at year end.
We exclude adjusting items to present normalised cash flows for the portfolio.
Property, Plant and Equipment
€million
Property, plant and equipment
at end of the year
2019
1,471.3
2018
1,176.3
The value of our property, plant and equipment increased by €295.1 million to just
under €1.5 billion at the end of 2019. The acquisition of Clayton Hotel City of London
amounted to €109.2 million (including acquisition related costs). There was a very
significant net revaluation gain of €122.4 million. This was driven by uplifts on newly
built hotels and extensions which were built at a cost below fair value and where trade
has outperformed assumptions underpinning initial external valuations. In addition,
hotel transactions in the wider market during 2019 have achieved improved valuation
metrics which has led to increased valuations for the properties owned by the Group.
Hotels either bought, developed or extended in the 12 months to January 2019
contributed €67.4 million of that gain, reflecting their strong financial performance.
Additions to Property, Plant and Equipment
Additions through acquisitions
and capital expenditure €million
Development capital expenditure:
Acquisition of freeholds or site purchases
Construction of new build hotels, hotel
extensions and renovations
Other development expenditure
Total development capital expenditure
Total refurbishment capital expenditure
6 See endnotes page 39
Additions to property, plant and equipment
2019
2018
156.2
12.5
5.4
174.1
15.2
189.3
9.2
76.1
4.3
89.6
15.9
105.5
EQUITY
SUPPORTING OUR
GROWTH WITH
THE APPROPRIATE
MIX OF FINANCE
DEBT
LEASES
Leases
The adoption of IFRS 16 Leases has brought an accounting estimate of lease liabilities
on to the balance sheet, increasing the Group’s liabilities at year end by €362.1 million.
We have always viewed leases as another form of debt. We look for a strong stabilised
rental cover of 1.85x for all new leases we commit to. Our Debt and Lease Service
Cover1 amounted to 3.2x at year end showing we are comfortably able to meet our
interest and rent commitments.
Debt
Excluding the impact of IFRS 16 Leases, the Group’s Net Debt to Adjusted EBITDA1
using traditional bank debt was 2.8x at year end (31 December 2018: 2.3x). Post IFRS
16, our Net Debt and Lease Liabilities to Adjusted EBITDA1 was 4.5x. The undrawn loan
facilities as at 31 December 2019 were €121.2 million (2018: €216.2 million).
Dividends
Dalata adopts a progressive dividend policy with the level of payment based on a
percentage of profit after tax. An interim dividend for 2019 of 3.5 cents per share was
paid on 4 October 2019 on the ordinary shares in Dalata Hotel Group plc amounting
to €6.5 million. On 24 February 2020, the Board proposed a final dividend of 7.25 cents
per share amounting to €13.4 million based on shares in issue at 31 December 2019.
Subject to shareholders’ approval at the Annual General Meeting on 29 April 2020, the
payment date will be 6 May 2020 for the final dividend to shareholders registered on
the record date 14 April 2020.
1 See endnotes page 39
34
Financial Review
35
Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION CASE STUDY
Shared Service Centre
Delivering efficiencies at our hotels.
Another strong attribute of our culture is that we are always striving to improve.
An example of this is how we enhanced our processes and procedures within the
finance function and achieved significant efficiencies and cost savings.
As a large number of our hotels were acquired in multiple separate transactions
since mid-2014, we had inherited a range of different systems that did not integrate
with one another. It was vital that we addressed this to ensure we could scale our
various functions for further growth. In 2017, Stephen Clarke and Edel Conran
led the project that set up a shared service centre (SSC) in Cork with the remit to
streamline processes across the Group, enhance controls and provide a platform
for future growth.
In its first year, the SSC introduced a single accounting platform across all hotels
and began implementing a new procurement system across the Group. This system
manages the ordering process from start to finish at the hotels and results in
significant efficiencies. For example, in 2016, there was circa 120k purchase orders
in the Group per annum. These had to be manually raised, manually approved and
the invoices were manually posted to the accounting system. Now, all purchase
ordering and invoice processing is automated and integrated with the accounting
system. Our procurement system ensures that our hotels only use nominated
suppliers and benefit from the prices negotiated by our central procurement team.
As a result, we have seen substantial savings in our food and beverage gross profit
costs. Our food gross profit margin has increased from 69.0% in 2016 to 71.5% in
2019, realising €1.6 million in savings for the Group in 2019. In the same period, our
beverage gross profit margin has increased from 68.1% to 70.3%, realising €0.6
million in savings in 2019.
In its second year, the SSC started preparing supplier reconciliations and payments.
Large suppliers now have one Dalata account as opposed to previously having one
account per hotel. This has enabled us to achieve a 90% reduction in the number of
payments. We also extended the procurement system to cover capital expenditure.
In 2019, the SSC introduced a new payroll system across the Group. We are in the
process of moving the administration and payment of payroll for the Group to
the team in SSC. In 2017, we processed and paid 4,300 employees in 26 different
locations. By the middle of 2020, we will pay all employees from just one location
in Cork.
All these examples are tasks that were previously done at a hotel level. The SSC
team now manages routine administration work in a highly efficient manner. This
in turn allows the hotels to focus on value adding activities such as serving our
customers and analysing the business. The SSC is now a centre of excellence which
provides support and training to the finance teams in the hotels. It is now much easier
and faster to bring a finance team up to date when we open or acquire a new hotel.
We will continue to realise the benefits of this investment in 2020 and beyond.
The SSC team now manages
routine administration work in
a highly efficient manner. This
in turn allows the hotels to focus
on value adding activities such
as serving our customers and
analysing the business.
Maldron Hotel South Mall Cork
Red Bean Roastery
ACHIEVEMENTS TO DATE
Universal
accounting
platform across
the Group
Increase in
automation
Provide training
and support to
the hotels
PROCESSES
ARE MORE
EFFICIENT AND
CONTROLLED
€
Most supplier
reconciliations
and payments
completed centrally
Implemented a
new procurement
system across
the Group
All payroll will
be administered
and paid centrally
36
Dalata Hotel Group plc Annual Report & Accounts 2019
Financial Review
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37
Growth Strategy
2019 was another exciting year in terms
of hotel openings and development.
Shane Casserly and his development
team continue to deliver new hotels for us
to operate. We completed the acquisition
of the Clayton Hotel City of London in
early January 2019 and successfully
opened it later that month. The hotel
has traded strongly in its fi rst year of
operation. We also secured a prime site
in Shoreditch, London with planning
permission for a hotel in August and we
expect to start construction later this
year. Our success in securing these two
projects has been a catalyst to us being
considered for other projects in London.
We now see this city as being a location
within which we have the fi nancial,
development and operational expertise
to expand further.
Our strong performance in our provincial
UK properties reaffi rms our belief that
there is a signifi cant opportunity for us
to expand in the larger provincial UK
cities. The quality of the four-star hotels
in those cities is very mixed. The market is
fragmented in terms of brands, operating
companies and owners. In addition, the
product is very tired due to its age. The
average age of our current UK portfolio
is nine years and this will fall to eight
years by the time the current pipeline of
rooms is in operation in 2022. This will
be of signifi cant advantage to us. The
addition of The Tamburlaine Hotel (to be
rebranded as Clayton Hotel Cambridge)
in November was a very positive addition
to the portfolio. We were also very
happy to secure an agreement to lease
a new Maldron hotel in the centre of
Liverpool. We are actively chasing other
opportunities in our target cities.
Although the focus of our growth
ambitions will be in the UK, we will still
exploit any attractive opportunities in
Dublin. I look forward to the opening
of Maldron Hotel Merrion Road and
The Samuel Hotel in the city in 2021. I
was delighted that we also secured an
agreement to lease a new Maldron hotel
adjacent to the iconic Croke Park Stadium.
We continue to have a very strong
relationship with fi xed income investors.
Deka Immobilien, Aberdeen Standard and
M&G Real Estate all own one or more of
our current hotels. We are delighted that
Aviva and Union Investment have also
contracted to buy three of our current
pipeline properties in the UK.
I am very confi dent that we will continue
to grow our pipeline in 2020.
Conclusion
2020 is a year in which we are
very focused on maximising the
performance of our existing portfolio.
However, we are also focused on
ensuring that we are ready to take
on the additional 1,800 rooms that
are scheduled to open next year.
To that end, we will continue to invest
in our people. Our people are key to
delivering returns from our existing
properties as well as providing the
internal expertise to open our new
hotels. We will continue to grow our
development programmes which in
turn allows us to continue our policy
of promoting from within. We are a
people centric organisation which is as
it should be for a hospitality company.
We will continue to invest in technology
and centralise more of the processing
tasks, leaving local hotel management
to focus on operating their hotels and
ensuring that our customers continue
to rate our services so highly. Happy
and motivated employees equate to
happy customers. Our decentralised
management approach is core to
our operating model.
2019 was a year that we proved we could
still deliver on the bottom line when
RevPARs were lower than expected.
Our teams rose to the challenges and
exploited any opportunities – we are all
excited about doing the same in 2020.
Dermot Crowley
Deputy Chief Executive
Business Development & Finance
Clayton Hotel
Charlemont, Dublin
1 See Supplementary Financial Information
which contains defi nitions and reconciliations
of Alternative Performance Measures (“APM”)
and other defi nitions.
2 Prior year comparatives and the KPI’s calculated
thereon have been restated to refl ect the
reclassifi cation of income from managed hotels
from revenue to other income in the year ended
31 December 2019. The comparatives also do not
include any adjustments for IFRS 16.
3 In Dublin, performance statistics exclude the
new hotels which opened during 2018 (Maldron
Hotel Kevin Street and Clayton Hotel Charlemont)
and the Tara Towers Hotel which closed in
September 2018. To achieve an accurate ‘like
for like’ comparison we have also excluded
hotels with a signifi cant increase in available
rooms year on year (> 10%): (i) Maldron Hotel
Parnell Square due to the signifi cant extension
completed during 2018 and (ii) Clayton Hotel
Liff ey Valley due to the signifi cant acquisition
of rooms during 2018 and 2019. We also
excluded Clayton Hotel Burlington Road due to
the redevelopment works ongoing in the hotel
which distorts comparability.
4 In Regional Ireland, performance statistics
exclude the new Maldron Hotel South Mall,
Cork which opened in December 2018 and
Maldron Hotel Sandy Road, Galway which had
a signifi cant extension added during 2018.
5 In the UK, performance statistics exclude
the new Maldron Hotel Belfast City, Maldron
Hotel Newcastle and Clayton Hotel City of
London which opened in March 2018,
December 2018 and January 2019 respectively
and Clayton Hotel Cambridge which was leased
from November 2019.
6 Fixed rent was included in net cash from
operating activities in 2018 in line with previous
applicable accounting standards. Under IFRS
16, in 2019 fi xed rent paid is represented by
lease repayments and interest.
S
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Our people are key to delivering
returns from our existing
properties as well as providing
the internal expertise to open
our new hotels.
S
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39
38
Dalata Hotel Group plc Annual Report & Accounts 2019
Financial Review
RISK MANAGEMENT
Identifying and managing risks is
a key part of running our business
successfully, and planning for our future
growth and development. We recognise
that risk management is an ongoing
process and is part of how we manage
our business on a day-to-day basis.
The Board is responsible for risk
management and a risk management
policy is in place, which is reviewed
annually. The Audit & Risk Committee
reviews the Group’s risks at each of its
meetings with a particular focus on
new and emerging risks and changes
to risk profiles.
We have a risk management framework
in place, which provides us with the
basis for managing our risks within the
business. The framework is designed
to be flexible and reactive. In practical
terms this means that emerging risks,
or those where the risk profile has
changed materially, can be discussed
and reviewed promptly and mitigations
designed and planned.
Risk Management Framework
We adopt the principles of the “three
lines of defence” risk management
model, with distinct yet integrated
structures that combine to provide us
with a sound framework to managing
risk. The key elements of this are:
Major strategic decisions concerning
the Group are made by the
Board. There is detailed analysis
and discussion on these and the
associated risks are also considered
by Board.
Executive management are
responsible for implementing Board
decisions and managing risk within
the business areas. There are clear
lines of responsibility within the
Group’s management structure.
There are specific management
functions assigned responsibility for
managing risks, either in full or as part
of their overall responsibilities. These
are clearly defined.
We have an Executive Risk Committee
structure in place, with meeting
agendas led by the Head of Risk &
Compliance. These meetings provide
a forum where detailed review and
discussion on risks occur, and are held
usually 5 times a year.
The Executive Directors and members
of the senior management team
attend these meetings. The output
of these meetings is then the basis
for the risk review undertaken by the
Audit & Risk Committee at each of its
meetings. This structure enables us to
keep abreast of developments in our
risk management environment and
enables ongoing focus on risks facing
the Group.
We operate over 40 hotels and
managing risks across diverse
locations and properties is a key
focus area. Over the past years
the Group has invested in property
refurbishments and also in IT, health &
safety and operational systems to help
us better manage our risks. We have
also invested in our people, providing
them with both the knowledge and
systems to manage risks in their
businesses. This investment will
continue and is regularly reviewed.
The process by which we consider and
document our risks is set out opposite.
This is an ongoing and “live” process.
OUR ASSURANCE FRAMEWORK
Risk
Identification
Risk
Assessment
Board
Oversight
Assessment of
controls, mitigations
and action plans
Oversight by
Audit and Risk
Committee
Internal monitoring
by Executive Risk
Committee
FIRST LINE
OF DEFENCE
Hotel and business
management
SECOND LINE
OF DEFENCE
Financial Control
Health and Safety
Management
THIRD LINE
OF DEFENCE
Internal Audit
How We Manage Our Risks
For us, risk management is not a
standalone or oversight function but
is an integrated element in the way
we manage our business. We see our
teams as being risk managers, even
though this specific term may not be
included in their role titles. Everyone
has a role in managing risks.
To embed this in the organisation we
have, what we believe is, a risk-focused
culture. We focus on risks every day.
We have embedded structures in all
our hotels relating to financial controls,
business forecasting, health & safety,
training, employee development and
target setting (both financial and non-
financial). This aim of this approach is
to manage risks from the bottom up,
identifying risks, dealing effectively with
them at a local level and ensuring that
more material risks are notified and
highlighted to Executive management.
It also supports a regular information
flow from our hotels to Executive
management and vice-versa.
Risks are also approached from a top-
down level. The Board determines the
Group’s strategic goals and assesses
the “big-picture” risks that could affect
the delivery of this strategy.
In Central Office, the Company
Secretary and Head of Risk & Compliance
has oversight responsibility for risk
management in the Group, reporting to
the Chief Executive. The Chief Executive
is incentivised to continually improve the
Group’s risk management processes.
The Audit & Risk Committee reviews
the risk register as a standing meeting
agenda item. This provides a challenge to
Executive management on how risks are
being mitigated and also sets the
tone from Board to management
on risk management matters.
The Group has specific internal
resources and expertise in relation
to risk management areas. This is
supplemented by external advisors,
notably in relation to food safety, health
& safety, property facilities, insurance
risks and cyber/privacy matters. Our
internal audit function plays a key
role , providing additional oversight
and reporting on how risks are being
managed to the Audit and Risk
Committee. This process of bottom-up
and top-down analysis and oversight
provides the basis for the monitoring
and assessment of risks, including the
identification of emerging risks.
Over the past number of years we
have invested heavily in our hotels.
The result of this investment is a
modern hotel infrastructure, which has
reduced our associated risk profiles.
From an information and IT system
perspective, we have invested in up-to-
date business systems, which provide
additional controls and information
to better manage risks. Our capital
expenditure processes are designed
to enable prompt investment should
a specific risk area be identified.
Our Principal Risks
Our assessment of the key risks likely
to have the greatest impact on our
business in the foreseeable future is
set out in the following pages. Where
we believe risks are inter-dependent,
we have grouped these together to
better set out these linkages.
In particular, we note the impact of
uncertainty around factors outside
the Group’s control, mainly relating
to economic conditions, geopolitical
factors and the UK’s future relationship
with the EU.
We continue to focus on the risks that
could affect our expansion strategy,
our people as key to this strategy,
the operational risks associated with
managing hotels and other business-
wide risks.
40
Risk Management
41
Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION RISK MANAGEMENT
Principal Risk Analysis
External
1. The economic cycle
Strategic
Priorities
2. Geopolitical events – including Brexit
3. International terrorism or the worldwide spread of disease
The hotel sector is vulnerable to a
variety of external events that may
negatively impact economic activity
as a whole or may have the effect of
reducing expenditure on travel and
leisure services.
Potential impact
A short-term or more prolonged,
mild or severe, reduction in revenues
or disruption to supplies, or both. At
present, on-going Brexit negotiations
and the international response to the
outbreak of the Coronavirus are of
near-term concern.
Mitigation
The Company relies on corporate
governance structures that require
management to monitor external
threats. This analysis supports strategy
development and investment decision
making. Management actively prepares
for adverse external events affecting
the business as a whole, maintaining
flexibility in the cost base to allow for a
timely reaction, maintenance of a critical
incident plan, and the development and
maintenance of strong relationships and
good communication with key customers
and suppliers.
Trend: Increased
2019 Commentary
2019 saw progress on the UK’s future
relationship with the EU, but much was
uncertain, and the international political
environment remains unsettled.
2020 Focus
We will closely watch the emerging
threat of the Coronavirus outbreak and
monitor developments in the trade
negotiations between the UK and the
EU and other events and maintain our
ongoing monitoring of travel demand
trends across our source markets.
Financial
4. Fluctuation in EUR/GBP exchange rate
Strategic
Priorities
Fluctuation in the EUR/GBP
exchange rate may adversely
affect customer behaviour.
Potential impact
Loss of revenue and earnings;
fluctuation of asset values in euro terms;
translation of GBP earnings.
Mitigation
There are a number of natural hedges in
the business with a trade-off between
visitors travelling between the UK and the
Eurozone. GBP asset values are hedged
by the value of the company’s borrowings
weighted towards GBP. Interest paid in
GBP partially offsets GBP earnings.
Trend: Unchanged
2019 Commentary
The exchange rate was more volatile
in 2019 than the previous years,
varying from 0.93 to 0.83 in the
course of the year.
2020 Focus
Continued agile marketing in
anticipation of continuing volatility.
Strategic Priorities
People
page 16
Strategic Priorities
Properties
page 18
Strategic Priorities
Customers
page 20
Strategic Priorities
Brands
page 22
Strategic
5. Market Concentration
66% of 2019 Group Segments
EBITDAR came from Dublin, making
it vulnerable to changes in market
dynamics in the city.
Potential impact
A decline in revenue and profitability
in the event of either a significant
decline in demand in Dublin or an
increase in supply.
Mitigation
Dublin is the key market for Dalata, and the
Group’s strategy is to maintain its market
share through carefully targeted new
property development and investment
in our existing properties to maintain
superior quality. Further growth focuses
on new markets, reducing dependence on
Dublin. As new supply enters the Dublin
market, we will focus on maintaining
strong relationships with key customers
and on new business development
activities as well as closely managing the
cost base to off-set any softening of sales.
Strategic
6. Growth and Expansion Strategy
Strategic
Priorities
Trend: Increased
2019 Commentary
Although the growth rate of
international arrivals to Dublin slowed,
demand remained steady; new room
supply, and the increase in the rate of
value-added tax combined to dampen
RevPAR growth.
2020 Focus
While delivering on our UK growth plan
and our own new Dublin capacity to
maintain our share, we will concentrate
on effective execution in the market
where we have well located and well-
invested hotels.
Strategic
Priorities
The pace of growth planned for the
next three years presents several risks,
presented collectively here: failure to
deliver returns (for either market or
operational reasons), overstretch of
management resources, erosion of
the culture and values of the Company.
Potential impact
The Company’s growth opportunity
also runs the risk of failure to achieve
financial objectives and return for
shareholders, and potentially other
management failures.
Financial
7. Level of Debt
The risk associated with ineffective
debt management and excessive
levels of debt.
Potential impact
Excessive debt levels expose the Group
to solvency risks in the event of a severe
downturn in business.
Mitigation
The Company adopts a disciplined and
broad-reaching due-diligence process
for all new projects with the development
team receiving key input from operations.
The Board scrutinises all new projects
before proceeding. Preparations for
new openings start early, the Company
maintains a consistent focus on talent
development, and management regularly
reviews the group structures and the
resources required to manage effectively
at both new and existing properties.
Trend: Increased
2019 Commentary
Two new hotels added. An increase
in the pipeline to almost 3,000
rooms, is an increase of 30% on
existing room capacity.
2020 Focus
Preparation for the 2021 openings:
identifying and appointing management
teams, backfilling the vacancies created,
continuing investment in learning and
development.
Mitigation
Dalata practises a disciplined and
consistent approach to financial risk
management, including investment
appraisal and financing, the level of
traditional bank and lease debt, and
interest rate exposures. The Company
discloses its maximum leverage targets
and regularly stress tests its resilience
to potential financial shocks. The
Group’s corporate governance
structure enables effective oversight
of financial risk management.
Strategic
Priorities
Trend: Unchanged
2019 Commentary
Following a re-finance of all bank debt
in 2018, the group exercised an option
to extend existing facilities during the
year to 2024 and secured a number
of new hotel development projects
through agreements to enter long-
term lease finance.
2020 Focus
Continued monitoring of market
developments, management of
banking covenants, and rigorous
stress testing of financial projections.
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Principal Risk Analysis (continued)
Strategic Priorities
People
page 18
Strategic Priorities
Properties
page 20
Strategic Priorities
Customers
page 22
Strategic Priorities
Brands
page 24
Operational
Strategic
8. Development and retention of expertise
Strategic
Priorities
11. Senior Management succession
Strategic
Priorities
Inability to attract people to work in
the business and to retain and develop
future leaders.
Potential impact
Risk to successful execution of the
expansion programme. Upward
pressure on costs.
Mitigation
The Company recognises, as a
strategic priority, the importance of the
development of its people. Its objective
is to become the employer of choice in
the sector, through its people-centred
culture and its commitment to learning
and development for all employees.
The Company carries out regular
employee engagement research
surveys and uses the results to improve
the employee experience.
Trend: Unchanged
2019 Commentary
Over 1,000 applications for the Dalata
graduate programme; 367 participants
on structured learning programmes
and the roll-out of Dalata Online, our
online training platform.
2020 Focus
Continued development of the Dalata
employer brand.
Reputational
9. Health and safety
Risk of material operational health and
safety related event (eg fire, food safety
or public health).
Potential impact
Injury or loss of life or major property
damage. Financial loss and damage
to reputation.
Reputational
10. Cyber-attack – data loss
Information systems are subject to an
external or internal cyber event with
the potential for data loss/theft.
Potential impact
Denial of service, data breach, loss
of revenue, business disruption,
reputational damage.
Strategic
Priorities
Trend: Unchanged
2019 Commentary
We saw a continuation of the 2018
trend of the reduced cost of claims
in our self-insurance programme.
2020 Focus
We will continue to prioritise health and
safety risk management and complete
a detailed review of the effectiveness of
our audit processes.
Strategic
Priorities
Trend: Increased
2019 Commentary
The journey towards fewer and more
centralised, cloud-based software
applications continued, and the
Privacy Committee was established
with a focus on risk management.
2020 Focus
Continuing to monitor risks and
evolve risk management processes
through the IT department, Privacy
Committee, and Internal Audit.
Mitigation
The development of a health and
safety culture is a Group priority, with
the promotion of health and safety
training focussed on prevention, incident
management, and reporting. We have
a critical incident management plan in
place and reserve a portion of the capital
expenditure budget to address identified
risks. We invest in safety management and
reporting systems, and the independent
audit of health and safety, and food safety
standards at all hotels. The Audit and Risk
Committee provides oversight.
Mitigation
In recent years, the Company has
upgraded IT systems across the business
with an emphasis on establishing
common platforms. The reduced
number of software vendors improves
the management of data and facilitates
greater standardisation of processes. The
Company retains third-party cybersecurity
experts to support the IT department
and has a Privacy Committee to monitor
compliance with data privacy regulations
and the Company’s policies. Internal Audit
is supported by external expertise to carry
out independent reviews of cybersecurity
risk management. The Audit and Risk
Committee provides oversight.
Failure to manage succession at
the senior level may stall corporate
development.
Potential impact
Loss of strategic direction, faltering
leadership, or both.
Mitigation
The Company emphasises the
development of people at all levels in the
organisation with a philosophy that there
should always be one or more potential
internal candidates qualified to fill any
vacancy that may arise in the Company.
Regarding senior management
positions, the succession process is
subject to the oversight of the Board
through the Nomination Committee.
Trend: Unchanged
2019 Commentary
At the end of 2019 Shane Casserly, an
internal candidate, was appointed to
the Board as Corporate Development
Director and several senior
executives participated in leadership
development programmes.
2020 Focus
Continuity of development
programmes for senior executives.
Reputational
12. Environmental and climate change
Failure to recognise and respond to
the impact of our business activities
on the environment.
Potential impact
Damage to corporate reputation,
loss of customer, employee, and
other stakeholder’s confidence.
Mitigation
Action to reduce the Group’s impact
on the environment focusing on
three areas: carbon footprint, waste
management, and water usage.
The Group Environmental Steering
Committee, formed in early 2019, is
tasked with developing the appropriate
strategies to manage the environmental
impact of our operations, target setting,
measurement, and communication
with stakeholders.
Strategic
Priorities
Trend: Increased
2019 Commentary
The environment and climate change
came into sharp focus in 2019 with
an increase in stakeholder concern
and expectations. The Company is
committed to addressing stakeholder
concerns and announced the
formation of a Board subcommittee
responsible for environmental, social
and governance oversight, effective
from 1 January 2020.
2020 Focus
Performance improvement across
all of our hotels.
Operational
13. Changing distribution environment for accommodation sales
Strategic
Priorities
New entrants to the accommodation
sector (e.g. short-term private lets)
and disruptive online sales channels.
Potential impact
Loss of market share, increased
intermediary commission, lower
revenue and profits.
Mitigation
Continuous education of our revenue
management and sales and marketing
professionals and our expert service
providers to meet the marketing
challenge of reaching and attracting
potential customers, and optimising
the use of competing online marketing
channels.
Trend: Increased
2019 Commentary
There was a notable increase
in the marketing of student
accommodation during the
summer months in the Irish market.
2020 Focus
Continuous focus on on-line
marketing innovation and
exploitation of the benefits of the
adoption of private label branding
in the Global Distribution System
(GDS) segment, see page 23.
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Viability Statement
The Board has a reasonable expectation
that the company will be able to continue
in operation and meet its liabilities as
they fall due over the three years to
December 2022. This assessment
is made based on an analysis of the
Group’s current position, trading
performance, contracted capital
expenditure and future prospects,
in severe but plausible scenarios.
The Directors assessed the prospects of
the Group over a three year period as in
previous years for the following reasons:
It aligns with the Group’s risk
assessment timeline of current
risks facing the Group;
All current committed projects
are expected to be substantially
completed during this period and 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.
The following risks 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 geopolitical
events (eg. Brexit) or shocks to the
system (eg. Terrorist attacks or
widespread outbreak of disease).
Risk 7 (page 43): Risks relating to
the level of bank borrowings, the
associated interest payments
and covenants.
Maldron Hotel Newcastle
to withstand a severe shock and is in
compliance with its banking covenants.
In our scenario analysis RevPar
was reduced by up to 25% within
six months of the onset of the
downturn with a resultant impact
on all other sales.
The receipt of proceeds from
the sale of the Merrion Road, Dublin
residential development in 2021 was
delayed by three months.
In mitigation
Non-essential and non-committed
capital expenditure was reduced.
Strategic cost reduction was
modelled.
The above scenarios were firstly
evaluated on a standalone basis, and
then collectively. Once the mitigation
plans were applied to these
scenarios, there was no threat to the
viability of the Group. The Group has
a €525 million multicurrency facility
and on 19 August 2019, it availed
of its option to extend the facility
by an additional year to 26 October
2024. As a result, the Group has
reduced refinancing risk, and 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.
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.
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 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. 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,
whatever the catalyst, 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
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
a number of locations and 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
The Board has a reasonable expectation that
the company will be able to continue in operation
and meet its liabilities as they fall due over the
three years to December 2022. This assessment
is made based on an analysis of the Group’s current
position, trading performance, contracted capital
expenditure and future prospects, in severe
but plausible scenarios.
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Dalata Hotel Group plc Annual Report & Accounts 2019
RESPONSIBLE
BUSINESS REPORT
Dear Shareholder,
Our commitment to operating our
business responsibly underpins our entire
strategy and the reputation of our hotels
and brands.
This responsibility starts with the
example set by the Board and is, I hope,
refl ected in the decisions and behaviours
of colleagues throughout the Group,
whether in one of our hotels or in
Central Offi ce.
In 2019 each of the three Executive
Directors had specifi c incentives targets
related to environmental and social
objectives (see page 89 and 90).
Given the importance of sustainability
to the Board, a new ESG Board
subcommittee was established in
January 2020. This Committee will work
with management in areas such as
emission targets, inclusion and diversity,
employee engagement, health and
safety and sustainability reporting.
As we embark on this next stage of our
journey, we do so from a solid base which
is refl ected in an AA score from ESG
rating agency MSCI.
We have an illustrated framework (see
below) to allow the business to respond
in a structured and progressive way to
our responsibilities to society and our
impact on the environment.
OUR RESPONSIBLE BUSINESS FRAMEWORK
In 2019 we developed a Supplier
Code of Conduct, updated our group
environmental policy and rolled out
our online learning and development
platform. We launched our new corporate
website to enhance our engagement with
stakeholders outside the organisation
and in 2020 we will fi nalise our Group
Code of Conduct.
I would like to thank all my colleagues for
their dedication in 2019 for making Dalata
the company it is today. We will continue
our dedication to our sustainability
initiatives in 2020 and will continue our
commitment to live the Dalata values
in everything we do.
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 opposite, we set out
the company’s response to managing its
non-fi nancial priorities and advise where
further information on compliance may
be found in this report.
Pat McCann
Chief Executive
GOVERNANCE
In January 2020,
the Board , formed
a subcommittee
to oversee
Environmental,
Social and
Governance (ESG)
performance.
Our Response To Managing Our Non-Financial Priorities.
Reporting requirement
Policies and standards
Environmental matters
Environmental policy
Supplier Code of Conduct
Employee matters
Employee handbook
Further information
and risk management
Health and safety policy
R
Safe work practices policy
Bullying and harassment –
dignity in the workplace policy
Equal opportunities policy
Whistleblowing
Statutory Training
Social matters
Food standards and traceability
Human rights
Community support
Privacy policy
Modern slavery statement
Data protection policy
Supplier Code of Conduct
Privacy policy
Anti-bribery and corruption
Anti-bribery & Corruption policy
Business model
Policies followed, due
diligence and outcome
Description of principal risks
and impact of business activity
Non-fi nancial key
performance indicators
Responsible Business
Environment
page 54
Strategic Priorities
People
page 18
Responsible Business
People
page 50
Responsible Business
Culture
page 52
Responsible Business
People
page 50
Responsible Business
People
page 50
Responsible Business
People
page 50
Business Model
page 12
Our Assurance
Framework
page 41
Risk Management
in Practice
page 41
Key Risk Summary
and Analysis
page 42
Non-Financial
KPIs
page 15
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See our Responsible Business
Framework policies on:
www.dalatahotelgroup.com
OUR PEOPLE
page 50
OUR CULTURE
page 52
ENVIRONMENT
page 54
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Responsible Business Report
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RESPONSIBLE BUSINESS REPORT
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The growth of our people
is an essential element of
the sustainable development
of our business.
As our business has grown, so
too have our people. We have
experienced rapid growth in employee
headcount and have invested
consistently to support individual
career development within Dalata.
The growth of our people is an
essential element of the sustainable
development of our business.
TRAINING & SUCCESSION
We invest in our talent and encourage
their growth by delivering an exciting
and forward-thinking workplace
for them to develop their skills and
knowledge within. We provide them
with opportunities to grow with our
business. Talent development and
succession planning is a strategic
priority (see page 18) and is at the
centre of our HR strategy in Dalata.
In 2019, internal promotions of our
people have increased by 24% year
on year from 305 to 379.
Dalata has a vital role to play in
introducing people to fi rst-time
employment to develop a career in
hospitality. In 2019 Dalata employed
1,152 new hires under the age of 30.
In December 2019, 83% of our people
reported that they feel they are
developing professionally in Dalata
and a further 86% say that their
manager encourages them to grow.
With 367 employees on structured
development programmes and 1,324
people attending training courses in
the last 12 months, our learning and
development programmes help our
employees to reach their potential
while delivering an exceptional
guest experience.
DIVERSITY
We communicate our Equal
Opportunities Policy to all employees,
and our senior management team
actively promotes our commitment
to diversity and inclusion as part of the
company culture. This commitment is
practised across recruitment, terms
and conditions of employment,
promotion, training and development,
discipline and grievance processes,
and termination of employment.
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
of our workplace.
Of our total workforce, 52% are female
and 48% are male; amongst the group
of the 100 most senior managers in
the organisation, 47% are female, and
53% are male, and participants in our
structured development programmes
are evenly balanced - 50% female and
50% male.
In our December 2019 employee
engagement survey, we found that 89%
of our people believe that people from all
backgrounds are treated fairly in Dalata.
As part of our commitment to equal
opportunities, we provide dignity at
work training for all managers across
the business.
Further training on equal opportunities
and fair recruitment practices is a focus
for 2020.
We are incredibly proud of the diversity
of our people with employees from 121
diff erent countries working in Dalata.
LABOUR STANDARDS
AND HUMAN RIGHTS
The Board has adopted a Modern
Slavery Policy and we have published
our 2019 modern slavery statement
on the company website. In 2019 the
company adopted a Supplier Code of
Conduct that applies to all suppliers
and includes provisions designed
to give assurance about labour
standards and respect for human
rights through the supply chain. In
2020 we will implement supplier
compliance procedures using
a risk-based approach to provide
further assurance.
LISTENING TO
OUR PEOPLE
We have measured employee
engagement since 2016, and it
continues to play an essential role
in the further development of the
Group by helping us understand the
employee experience.
Our participation rate remains
consistently high, with 3,929 employees
responding to our December 2019
employee engagement feedback
survey with 15,777 pieces of qualitative
feedback received from employees. We
actively encourage all of our managers
to listen to and act on this feedback to
improve the employee experience.
The overall engagement result of
83% grew from 77% in December
2018, which places Dalata 5% above
the our peer benchmark.
86% of people would recommend
Dalata’s products and services to
friends and family.
85% believe strongly in the Company
values and its strategic direction.
88% of team members feel that
they are empowered to do their job.
The overall satisfaction of our high-
potential employees, who are currently
completing structured development
programmes, is at 91%.
HEALTH AND WELLNESS
OF OUR PEOPLE
In 2020, Dalata is committed to actively
promoting and supporting wellbeing
for all employees and to have tools to
assist our staff in everyday life matters.
Developing a healthy and active mind is
part of our culture in Dalata.
Our newly launched wellness app, which
focuses on living a healthy and enjoyable
life, has been well received across the
organisation. To promote good mental
health, we have launched a helpline and
online chat function in which employees
can contact professionals for support
should they need to discuss any
personal concerns.
The Board and Senior Management
work to promote a culture of best
practice for health and safety at work,
and we work with all of our employees
to ensure that their wellbeing is to
the forefront of their employment
experience with us.
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CASE STUDY
Gerard’s Road to Success
Gerard Madden was introduced to Maldron
Hotel Dublin Airport in June 2015 through the
Momentum Programme, a back to work placement
scheme, for people unemployed for twelve months
or more, run by the Irish government agency Solas.
Gerard started in the maintenance department
and, having impressed with his positive attitude
and determination, was off ered a permanent full-
time position within the accommodation team.
He later moved from accommodation to food
& beverage, developing new skills at each stage
of his journey, and in 2018 was promoted to the
meeting and events department. Gerard has
received recognition as employee of the month
on numerous occasions and in 2018 was Maldron
Hotel Dublin Employee of the Year.
His career journey in hospitality continues.
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Dalata Hotel Group plc Annual Report & Accounts 2019
Responsible Business Report
RESPONSIBLE BUSINESS REPORT
For Dalata, a healthy business
culture is - fundamentally -
about doing the right thing.
Our Board is focused on promoting a
healthy and responsible culture across the
business. Our CEO and senior executives
are accountable for embedding our
unique culture into the business.
Our culture is refl ected 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 recognise that customer feedback
is the most eff ective way for us to
improve the experience at our hotels.
We have made customer feedback and
our actions from it key performance
indicators of the Group as a whole, and
we are committed to responding to
customer desires as best we can.
Safety & Security
The Board has approved numerous
policies aimed at promoting high
standards of safety and security in the
Group. These include the Group Health
& Safety Policy, Data Protection Policy
and Privacy Policy. We take the privacy of
our customers very seriously. In 2019 we
established a privacy committee, which
meets quarterly to ensure our systems
and policies and ongoing practices
refl ect customers expectations for
respect of their privacy.
The safety and security of our guests and
employees remain a priority at all times.
We have implemented an online fi re
safety monitoring system across all of
our hotels, and rigorous safety measures
are in place.
Access to hotel facilities and guest
rooms is strictly controlled, and additional
night-time measures are in place.
COMMUNITIES
Employment and employability
At Dalata, we are an Equal Opportunities
employer, and we encourage people from
all backgrounds to apply for positions
at the Group, from the hotels to central
offi ce. We discuss this further on page 50.
Community engagement
For us, it is important we work closely with
our neighbourhoods, and make positive
contributions to our local communities
and to the people who live there. We
encourage all our hotels to engage
actively in the community, by supporting
local organisations, sports clubs and
community events.
We are active in the business community
and in 2019 our CEO Pat McCann
became IBEC President. IBEC is Ireland’s
largest business representative and lobby
group which represents 70% of Ireland's
workforce. Several other managers
participate in hotel and tourism sector
representative organisations.
We have continued to support our three
chosen charities in 2019 - Great Ormond
Street Hospital in the UK, Cancer Focus
NI and CMRF Crumlin in the Republic of
Ireland. Read more about this on page 53.
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SUPPLIERS
Responsible Supply Chain
We have successfully implemented
a centralised purchasing and invoice
payment system across the Group which
all of our suppliers now use.
The system simplifi es the order and
delivery processes along with more
effi cient invoice clearing and supplier
payments. Along with better purchasing
information, this enhances the
management of our supply chain.
The Audit & Risk Committee approved
our supplier code of conduct in late
2019, and we are currently in the process
of implementing this with our supplier
base to ensure compliance with the
code’s requirements.
The code sets out, amongst other things,
the requirements and principles Dalata
has adopted to promote ethical conduct
in the workplace, safe working conditions
in our supply chain, the treatment of
persons with respect and dignity, and
environmentally responsible practices.
The Board has approved an Anti-Bribery
and Corruption policy, an Anti-Money
Laundering Policy, and Modern Slavery
Policy and statement. The report on
our Whistleblowing Policy is detailed on
page 76.
CASE STUDY
Dalata Digs Deep
The #dalatadigsdeep charity fundraising programme has developed as an internal brand in its own
right as the company has grown, and this is all driven by employee participation.
Our employees have taken the lead on many initiatives, making new connections with colleagues,
community, suppliers, and customers. In 2019 alone, we had over 2,000 volunteer hours and organised
160 fundraising events.
Four years ago, the idea was simply to raise money for good causes. Since then, through the
commitment and enthusiasm of our employees and management, it has grown into something
bigger. We adopted three charity partners, CMRF Crumlin, Cancer NI, and Great Ormond Street
Hospital Children’s Charity, and in the four years have raised €1.3 million.
So much of our employees’ impact will not only be felt today but long into the future as the research
they funded will benefi t the sick children and their families of generations to come.
The Dalata Team at the Cork City Marathon 2019
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RESPONSIBLE BUSINESS REPORT
CASE STUDY
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GREENHOUSE GAS
(GHG) EMISSIONS
The management of our energy use
has always been important to the
Group and we continue to make strides
in reducing the carbon footprint in
our hotels.
This progress is refl ected in the B- score
we achieved for our 2019 CDP response,
in our second year of participation. We
have scope for further improvement and
have set a target of reducing our carbon
emissions by 20% by 2022 from our
2018 baseline.
In 2019 Dalata contracted to buy
100% renewable electricity in Ireland
and the UK. Green electricity is
generated by using the power of wind
and is therefore completely renewable.
This commitment helps to achieve our
carbon emissions targets.
We are exploring ways to reduce carbon
emissions and improve energy effi ciency
across the Group by continuing to
upgrade our lighting systems in our hotels
to use more energy-effi cient LED bulbs,
upgrading the building management
systems in our hotels (BMS) and adding
solar panels. All hotels receive monthly
energy reports which allow us to receive
accurate updates on all our energy
consumption. This information provides
us with the ability to monitor peaks and
troughs in usage. The benefi ts of this
are not only commercial, but will also
allow us to explore ways to reduce our
carbon footprint.
WASTE
plastic bottles from all our meeting
rooms and in our bedrooms in all hotels.
In 2020, we will continue to look at ways
in which we can further reduce single-
use plastics in our business. See
our case study on the next page for
more information.
We continue to increase the amount
diverted away from landfi ll every year
in Ireland and the UK. We ensure our
waste is separated and sent to recycling
facilities and food waste is treated
by anaerobic digestion. In 2019 the
food waste in Ireland that was sent for
anaerobic digestion was as follows:
Total Food
waste ROI
Renewable
Energy produced
CO2 emissions
savings by diverting
from landfi ll
2019
2018
1,236
tonne
494.5
MWH
618.1
tonne
1,155
tonne
461.9
MWH
577.4
tonne
Amount of fertiliser
digestate
247.2
tonne
230.9
tonne
WATER
We have a strategy in place to minimise
consumption of water in our hotels. By
the end of 2020 all our hotels will have
tap or shower aerators. These water
saving devices will control the amount
of water that fl ows through the tap or
shower head without aff ecting the water
pressure as they mix the water with air,
thus reducing fl ow without aff ecting
guest satisfaction.
As part of our broader eff orts to reduce
plastic waste, we are committed to
reduce the consumption of single-
use plastics in our hotels. In 2018, we
eliminated over 500,000 plastic straws
from our hotels. We have eliminated
2020 FOCUS
For 2020 we have established a €1 million
Green Fund from our capital expenditure
budget. Hotels will submit projects for
consideration on a competitive basis.
Environment Steering Group
The Environment Steering Group was setup in 2019 with
the aim of responding in a more comprehensive manner
to the growing expectations among all our stakeholders on
the impacts our business has on the environment. The group is
led by Conal O’Neill (Group General Manager - Maldron Hotels)
and comprises of ten members from a range of functions,
locations and brands across the Group. The group acts as
an umbrella for all activities in this area, and picks up from
signifi cant works already done by the company that included
an extensive LED lamp exchange programme, CHP unit
installations and voltage optimisation works.
Looking ahead the group are focusing on the following
key areas:
Framework and culture
Utilities and energy consumption
Waste & recycling
Water consumption
Capital projects including new build hotels
Communication with stakeholders
On establishment, the priority of the group was to set about
building a framework for implementation and progress that
would also grow the necessary culture across all hotels. To
this end we partnered with Green Tourism, a hospitality
specialist accreditation partner. Green Tourism conducted
Stephen McNally and Stephen Clarke from Dalata
with Adrienne Volpe of Bord Gais Energy.
Everybody has to play their
part. We’re no diff erent to
anybody else. If we all play a
part in some way it will have
a signifi cant impact on the
environment that we all
need to live in.
Pat McCann
Chief Executive Offi cer
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“Energy & Sustainability Audits” in all our hotels during Q4 2019
with each hotel gaining accreditation as part of the process.
The audits in turn now provide a road map for our hotel based
“Environment Impact Teams” to drive the agenda and respond
to the expectations of our stakeholders in a meaningful way.
On the procurement front, we now buy all our electricity
from 100% renewable sources. The steering group also led
the introduction of improved measurement and reporting
processes around our consumption of utilities, with reporting
that gives our hotel teams the information they need to
make informed and quick decisions. We are engaging with
all our large suppliers on initiatives to reduce the volume of
packaging waste being taken into our hotels. We have made
great strides in the past year in our war on plastics with the
removal of most single use plastic products from our hotels.
This includes a commitment to remove all single use bath and
shower products from guest bedrooms. The steering group
will co-ordinate the allocation of a €1 million Green Fund that
hotels will compete for with green capital investment projects.
In tandem with these projects, our steering group also works
with our Development team to ensure we avail of the latest
technologies and building methods that will make our new
build hotels as effi cient as possible. Finally we are developing
a communications strategy to keep our team members and
customers abreast of our progress.
We are at the start of our journey but excited by the prospect
of the really positive impacts we can make.
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CHAIR’S OVERVIEW
Dear Shareholder,
I am pleased to present the Corporate
Governance Report of Dalata Hotel
Group plc for 2019. In this report, I
describe our Corporate Governance
framework and explain how the Board
works to ensure that this framework
remains appropriate and eff ective.
The following Corporate Governance
Report, including the Committee
Reports and the Directors’
Report, sets out how we apply our
governance standards in practice
and demonstrates our compliance
with the UK Corporate Governance
Code 2018.
Under my Chairmanship, I continue
to focus on ensuring that the Board
remains eff ective and leads by
example to demonstrate the desired
values and culture of the Company.
The Board recognises that strong
Corporate Governance is essential to
deliver the strategy, to drive success
and to create long term value for
its stakeholders. In 2019, the Board
was pleased to welcome Elizabeth
McMeikan, as an independent Non-
executive and in January 2020 Shane
Casserly as an Executive Director.
strategy is set and allows the Board
to assess risk and deliver sustainable
value for stakeholders.
We present a new three-year
Remuneration policy (set out on pages
80 to 85) this year which we will submit
voluntarily, to an advisory vote at our
AGM on the 29th April 2020. This policy
has been developed to ensure as far as
possible that the Group will continue to
attract and retain people necessary for
the delivery of long-term sustainable
growth for the Dalata group.
I am proud to serve as Chair of Dalata,
and we will continue to focus on building
on our success and creating long term
value for all our stakeholders. If any
shareholder wishes to contact me
about the content of the annual report,
please do so through the Company
Secretary at the company’s address.
John Hennessy
Non-executive Chair
The Company has complied in full during
2019 and to the date of this report with the
provisions of the UK Corporate Governance
Code published in 2018. The Code is publicly
available at the website of the Financial
Reporting Council at www.frc.org.uk.
See the UK Corporate
Governance Code on:
www.frc.org.uk
I continue to focus
on ensuring that
the Board remains
eff ective and leads
by example to
demonstrate the
desired values
and culture of
the Company.
Both Directors bring skills and expertise
that will strengthen the Board. Further
details of the appointment process for
the new Non-executive Director are
provided in the Nomination Committee
report on pages 70 to 71
The Board operates eff ectively, and
each Board member demonstrates the
correct balance of skills, experience,
independence, knowledge, and
the ability to commit suffi cient
time to undertake their duties and
responsibilities appropriately. This
year, in accordance with our re-election
policy, all Directors will be subject to
re-election at our AGM.
The Board is committed to the highest
standards of integrity and accountability.
It oversees a system of prudent and
eff ective risk management and internal
control systems and has a well-
established Audit and Risk Committee
to assist it in the undertaking of its duties.
The Board ensures ongoing
engagement with stakeholders
throughout the year and acknowledges
the clear responsibility it has to
promote the long-term success of
the Company for its stakeholders. This
long-term approach defi nes how the
Clayton Hotel
Charlemont Dublin
Corporate
Governance
BOARD OVERVIEW
Principal Responsibilities include
Board meetings and attendance
Establishing the Group strategy,
business objectives and long-
term plans.
Review and approval of
acquisitions, capital projects
and group fi nancing.
Overseeing the business and
aff airs of the Group in light of
emerging risks and opportunities.
Selecting and maintaining a
succession plan for the position
of the Chief Executive and key
members of management.
Review and approval of the
annual budget.
The Board held eight formal meetings in 2019 and also met on four separate occasions
for training and strategy days.
Member
John Hennessy
Pat McCann
Dermot Crowley
Stephen McNally
Margaret Sweeney
Alf Smiddy
Robert Dix
Elizabeth McMeikan
No. of meetings
8/8
8/8
8/8
8/8
8/8
8/8
8/8
2/2
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Corporate Governance
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LEADERSHIP
Board of Directors
John Hennessy
Non-Executive Chair
Pat McCann
Chief Executive
Stephen McNally
Deputy Chief Executive
Robert Dix
Non-Executive Director
Elizabeth McMeikan
Non-Executive Director
Margaret Sweeney
Non-Executive Director
Nationality: Irish
Nationality: Irish
Nationality: Irish
Nationality: Irish
Nationality: British
Nationality: Irish
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.
He is also Non- Executive Chair of CPL
Resources plc.
Principal Skills: International Business,
Business Leadership, Governance,
Finance, Legal.
Expertise: 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.
He is also a Non-executive Director of
Glenveagh Properties plc and is President
of IBEC.
Principal Skills: International Business,
Business Leadership, Governance,
Hotel Operations, Industry, Customer,
People Management.
Expertise: Stephen started his career with
Ramada Hotels in the UK and Germany.
In 1989 he joined Jurys Doyle 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.
Principal Skills: International Business,
Hotel Operations, Industry, Customer,
People Management.
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 diff erent 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.
He is also Non-executive Director of
Glenveagh Properties plc and Non-executive
Director of a number of privates companies.
Principal Skills: International Business, Risk
Management, Finance, Governance, M&A.
Expertise: Elizabeth is an experienced Non-
executive Director. Previously she was Senior
Independent Director at J.D. Wetherspoon
plc and Remuneration Committee Chair at
Flybe plc.
Elizabeth is currently the Senior Independent
Director at Unite Group plc; where she chairs
the Board’s Remuneration Committee and is
also Non-executive Director of McBride plc.
Elizabeth is also a Non-executive Director at
private company Fresca Group Ltd.
Principal Skills: International Business,
Business Leadership, Governance,
Customer, People Management.
Expertise: 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.
Principal Skills: International Business,
Business Leadership, Finance, Governance,
Risk Management, M&A.
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Dermot Crowley
Deputy Chief Executive -
Business Development and Finance
Shane Casserly
Corporate Development Director
Alf Smiddy
Non-Executive Director and
Senior Independent Director
Nationality: Irish
Nationality: Irish
Nationality: Irish
Expertise: 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. He is a
graduate of University College Cork.
Principal Skills: International Business,
Finance, Industry, M&A.
Appointed: 1 January 2020
Expertise: A graduate of University College
Cork and Chartered Accountant, Shane joined
Dalata in March 2014 as Head of Strategy
and Development and has been instrumental
in driving the Company’s growth through
acquisition and development activity in Ireland
and the UK. He previously worked as Head
of Development at Jurys Doyle Hotel Group
plc and held senior positions with Ion Equity,
Microsoft Europe and Musgrave Group.
Principal Skills: International Business,
Finance, Industry, M&A.
Expertise: 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.
He is a Non-executive Director and Chair of
Marketing Brand and Customer Committee
of ESB and Chair and Non-executive Director
of a number of private companies.
Principal Skills: International Business,
Business Leadership, Finance, Governance,
Customer, People Management.
BOARD MATRIX
Name
Age Director
Independent
John Hennessy
Pat McCann
Stephen McNally
Dermot Crowley
Robert Dix
Alf Smiddy
Margaret Sweeney
Elizabeth McMeikan
Shane Casserly
63
68
55
52
67
57
59
57
52
Since
2014
2014
2014
2014
2014
2014
2014
2019
2020
*Independent on appointment
PRINCIPAL SKILLS
International Business
Finance
Governance
Business Leadership
Industry
Customer
People Management
M&A
Risk Management
Hotel Operations
Legal
Committee memberships 2019
RemCo NomCo
ESG
A&R
N*
Member
Chair
N
N
N
Y
Y
Y
Y
N
Member
Member
Chair
Member
Member
Member
Chair Member
Member
Chair
Other current
listed boards
1
1
1
1
2
BOARD DIVERSITY IN FIGURES
2
2
3
TENURE
GENDER
AGE
4
4
7
7
•<1 year
• 6 years
•Female
•Male
2
•46-55•56-65•>65
Number of Board Members
0
3
6
9
Number of Board Members
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Sean McKeon
Company Secretary,
Head of Risk and Compliance
Expertise: Sean joined Dalata after several
years in senior Finance roles in retail and
FMCG including Dunnes Stores, Keelings,
Roches Stores (now Debenhams), Aer Rianta
International and Diageo.
Sean is a fellow of Chartered Accountants
Ireland and an MBA graduate of the UCD
Michael Smurfi t Graduate Business School.
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LEADERSHIP
Our Executive Management Team
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Success
Backed
by People
Dalata has a strong and diverse leadership team
with the skills and experience to eff ectively
manage our current business along with the
resources and capabilities to grow our portfolio.
Our leadership team are responsible for the long
term success of the Group, setting the strategy,
and providing appropriate challenges to ensure
management remains focused on achieving the
strategic objectives and for delivering value to
the shareholders and other stakeholders.
MEET THE TEAM
Top row from left to right: Eoin Manley,
Group Facilities Manager; Tony McGuigan,
Head of Procurement & F&B Projects;
Adrian Sherry, Head of Marketing Development;
Patrice Lennon, Head of Sales and Marketing;
Aine Doyle, Group Learning & Development
Manager; Karen Halpin, Group Marketing
Communications Manager; Paul Maloney,
Projects Development Manager;
Martha Mannion, Head of Rooms Revenue
and Distribution; Stephen McNally, Deputy
CEO; Pat McCann, CEO; Dermot Crowley,
Deputy CEO- Business Development and
Finance; Josephine Norton, Group Marketing
and E-Commerce Manager; Conal O’Neill,
Group General Manager- Maldron Hotels;
Anthony Murray, Group IT Manager; Shane
Casserly, Corporate Development Director;
Keith Rynhart, Financial Planning and Analysis
Manager; Duncan Little, Group Capital and
Development Manager; Stephen Clarke,
Group Financial Controller.
Caitriona Conroy, Group Insurance, Risk, Health
& Saftey Manager; Michael McCann, Head of
Ancillary Revenue; Des McCann, Group General
Manager- Clayton Hotels; Sean McKeon,
Company Secretary- Head of Risk & Compliance;
Carol Phelan, Group Head of Financial Reporting,
Treasury and Tax; Dawn Wynne, Head of Human
Resources; Macarten McGuigan, Group Internal
Auditor; Sinead O’Toole, Group HR Manager.
Bottom row from left to right: Niall Macklin,
Acquisitions and Development Manager;
Emma Dalton, UK Group General Manager;
See full bios of our Executive
Management Team on:
www.dalatahotelgroup.com
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The New UK Code
The Financial Reporting Council’s 2018
U.K. Corporate Governance Code (‘the
Code’) came into effect for Dalata from
1 January 2019. The Board welcomed
the shift in focus under the new Code,
which places emphasis on a company’s
purpose and its interaction with
stakeholders – areas where the company
has made significant strides. Throughout
2019 the Board, with support from senior
staff, took a number of steps to refine its
approach to reflect the altered focus of
the Code, which are:
Our Governance Framework
The Board oversees the Group’s
governance framework, reviews
and approves the strategy, monitors
management’s performance
against agreed targets and ensures
appropriate controls are in place and
operating effectively.
The Board ensures leadership through
effective oversight and review.
Executive decisions, and development
and implementation of strategy are
delegated to management.
Board Leadership and
Company Purpose
Division of Responsibilities
Composition, Succession
and Evaluation
Audit, Risk and Internal Control
Remuneration
The Board fulfills a number of its
responsibilities directly and others
through its committees.
See the list of matters reserved
to the Board on:
www.dalatahotelgroup.com
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Audit & Risk Committee
See Report on page 72
Group
Internal
Audit
Remuneration Committee
See Report on page 78
Nomination Committee
See Report on page 70
Environmental, Social & Governance Committee
Committee established 1.1.2020
Disclosure Committee
Executive Risk Committee
Privacy Committee
Environmental Steering Group
CORPORATE
GOVERNANCE
REPORT
OUR GOVERNANCE FRAMEWORK
BOARD
CHIEF
EXECUTIVE
OFFICER
SENIOR
MANAGEMENT
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.
Board membership
As of the date of this report, the Board
comprises nine members, a Non-
executive Chair, four Non-executive
Directors and four Executive Directors.
The Directors believe 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 58 to 59 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.
The Board defines the Company’s
purpose and then sets a strategy to
deliver it, underpinned by the values
and behaviours that shape our culture.
A sound understanding of how value
is created over time has been key in
steering strategies toward the level
of sustainable value creation we have
delivered. A cornerstone of safeguarding
our long-term ambitions has been
a commitment to high standards of
corporate governance, as well as a
Board of Directors with a depth of
experience and expertise. In making
and implementing actions, the Board
aims to manage the contrast between
short-term pressures and the long-term
impacts of decisions.
Division of Responsibility
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. The Chair leads the
Board and is responsible for its overall
effectiveness in directing the company.
One of the key roles for the Chair in
doing so is demonstrating objective
judgement throughout their tenure and
promoting a culture of openness and
debate. In addition, the Chair facilitates
constructive board relations and
the effective contribution of all Non-
executive Directors, and ensures that
Directors receive accurate,timely and
clear information.
The Board includes an appropriate
combination of Executive and
Non-executive (and, in particular,
Independent Non-executive) Directors,
such that no one individual or small
group of individuals dominates the
Board’s decision-making. There is
a clear division of responsibilities
between the leadership of the Board
and the executive leadership of the
Company’s business.
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 2019, each Non-executive
Director confirmed that they continue
to be able to allocate sufficient time
to discharge their responsibilities
effectively.
In addition, any potential appointment
to the Board of another company must
be approved by the Board.
The Board has delegated a number
of responsibilities to standing
committees of the Board as detailed
below and also to the executive
management team of the Group.
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. A summary of the formal roles
of the Board’s leadership is set out on
page 64.
Conflicts of interest
The Boards considers potential
conflicts of interest as a standing
agenda item at each Board meeting
and each Director is obliged to
notify the Company in advance of
any interest in any transaction to be
considered by the Board.
On 16 November 2018, the Company
announced the development of a new
hotel and adjoining residential complex
at Merrion Road in Dublin (on the
site of the former Tara Towers Hotel)
and that Irish Residential Properties
REIT plc had contracted to purchase
the entire residential development
on completion. The development
of the property has commenced
and is scheduled to be completed in
mid-2021. Non-executive Director
Margaret Sweeney is CEO and an
Executive Director of Irish Residential
Properties REIT plc.
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KEY ROLES IN OUR GOVERNANCE FRAMEWORK
CHAIR
CHIEF
EXECUTIVE
SENIOR
INDEPENDENT
DIRECTOR
NON-EXECUTIVE
DIRECTORS
COMPANY
SECRETARY
> Leads the Board, sets each meeting agenda and ensures the Board
receives accurate, timely and clear information to monitor, challenge and
guide and make sound decisions;
> Promotes a culture of open debate between executive and Non-executive
Directors and holds meetings with the Non-executive Directors, without
the Executive Directors present;
> Regularly meets with the Chief Executive and other senior management
to stay informed;
> Ensures effective communication with shareholders and other
stakeholders;
> Promotes high standards of corporate governance;
> Promotes and safeguards the interests and reputation of the Company.
> Provides coherent leadership of the Company, including representing the
Company to customers, suppliers, governments, shareholders, financial
institutions, employees, the media, the community and the public and
enhances the Group’s reputation;
> Leads the Executive Directors and senior management team in running
the Group’s business;
> Develops and implements Group objectives and strategy having regard to
shareholders and other stakeholders;
> Manages the Group’s risk profile and ensures appropriate internal controls
are in place;
> Ensures compliance with legal, regulatory, corporate governance, social,
ethical and environmental requirements.
> Working closely with the Chair, acts as a sounding board and
providing support;
> Responsible for conducting an annual performance review of the Chair;
> Provides advice and judgement to the Chair as necessary, serving as an
intermediary to the other Directors when necessary;
> Is 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.
> Review the performance of management;
> Review Group financial information and provide advice to management;
> Assist in strategy development, and ensure appropriate and effective
systems of internal control and risk management are in place.
> Ensures compliance with Board procedures and provides support to
the Chair, to ensure Board effectiveness;
> Ensures the Board has high-quality information, adequate time and
appropriate resources in order to function effectively and efficiently;
> Assists the Chair by organising induction and training programmes
and ensuring that all Directors have full and timely access to all
relevant information;
> Provides advice and keeps the Board updated on corporate governance
developments; and
> Facilitates the Directors’ induction programmes and assists with
professional development.
The Company appointed a firm of
reputable international property
agents and conducted a competitive
tender process for the sale of the
residential development. In advance
of each meeting of the Board at which
the proposed transaction was due
for consideration, Margaret Sweeney
declared her potential conflict of
interest. Accordingly, she did not
receive board papers prepared relating
to the proposed transaction and was
excused from board meetings when the
proposed transaction was discussed and
considered for approval.
This is a once-off, arm’s length
transaction and the Board has carefully
applied good governance procedures to
ensure the Director having a potential
conflict of interest played no part in the
decision-making process.
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 2019, the Board held eight
formal Board meetings and four other
full-day meetings dealing with strategy
and Board training and management
presentations. There was full attendance
by all members.
Board Committees
The principal committees of the Board in
2019 were the Audit and Risk Committee,
the Remuneration Committee and the
Nomination Committee. In January
2020 the Board established a new
Environmental Social and Governance
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 70
Audit & Risk Committee page 72
Remuneration Committee page 78
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, save for the Chair who was
independent on appointment, to be
independent within the meaning of
the term as defined in the Code.
Robert Dix is a Director of The Quinn
Property Group and of Glenveagh
Properties plc. boards on which Pat
McCann is also currently a Non-
executive Director. The Board has
concluded that notwithstanding
this relationship, Robert can
apply objective, unfettered and
independent judgement and act in
the best interests of the Company.
The Board also considered the
impact of Margaret Sweeney’s
position as CEO of IRES Reit on her
independence in view of the Merrion
Road transaction agreed between
Dalata and IRES Reit in 2018 (see page
63 Conflicts of Interest). The Board
is satisfied that there is no ongoing
conflict of interest that impairs the
ability of Margaret Sweeney to act
as an independent Non-executive
Director of the Company.
Appointments to Board
The Nomination Committee is
responsible for a formal, rigorous
and transparent procedure for the
appointment of new Directors. There
was one appointment to the Board
during 2019, Elizabeth McMeikan. 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 2020 Annual
General Meeting and offer themselves
for re-election.
New Director inductions
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. See Governance in
action on page 68.
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.
The Board received two full days
of presentations made by senior
management on various topics
through the year about their areas of
responsibility. In November 2019, a
Directors’ Training Day was facilitated
by the Company Secretary and was
attended by both Executive and Non-
executive Directors.
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.
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.
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Eight formal Board meetings and four
additional full day meetings dealing
with strategy and Board training were
held during 2019. 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, and Deputy
Chief Executive – Business Development
and Finance.
The Chief Executive 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, 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 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
2019. 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.
Further detail on the application of
the policy is set out in the Nomination
Committee Report on page 70.
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
2019. The Chair also met with each
Director individually during the year
to discuss Board effectiveness
and composition.
The Senior Independent Director met
with the other Directors to evaluate the
performance of the Chair. For further
details see the Nomination Committee
report on page 70.
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.
The Board has adopted
a Board Diversity Policy
which is reviewed
annually, most
recently in December
2019. The objective
of the policy is to help
achieve the optimum
Board composition of
skills and experience.
They can therefore only provide
reasonable and not absolute assurance
against material misstatement or loss.
Hotel, Point Square, North
Dock, Dublin.
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 29 April 2020 at The Gibson
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.
ENGAGEMENT WITH STAKEHOLDERS
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 Chief
Executive and/or Deputy Chief
Executive– 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 2019, over 280 separate
meetings and conference calls were
held with existing and prospective
shareholders: and the Board
commissioned an in-depth survey of
investor perception in September 2019.
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.
Also, as outlined in the Remuneration
Committee Chair’s introduction to
the Remuneration Committee report
on page 78, there was extensive
engagement with the Group’s
major shareholders in late 2019 on
the Remuneration Committee’s
proposals regarding the 2020 Directors
Remuneration policy.
The annual report and accounts
are also available on:
www.dalatahotelgroup.com
The Board’s engagement with
shareholders included:
Meeting with shareholders and
responding to any queries raised
at the 2019 AGM.
Investor Roadshows events in USA,
Dublin, Europe and UK.
Attendance at key institutional
investor conferences.
Seeking feedback via an investor
perception survey.
A programme of one to one meetings
with major institutional shareholders.
Stakeholder engagement during the year
As an Irish incorporated company, Dalata is not subject to the provisions of
the UK Companies Act 2006, however, the Board is cognisant of the principle
underpinning Provision 5 of the New UK Code, which asks Boards to have regard
for engagement mechanisms with stakeholders. The Board is fully aware of its
responsibilities in this area and other areas of this report set out clearly the long-
lasting partnerships we have developed with customers, employers, suppliers
and communities.
Specifically, during the year, the Board engaged with a number of key
stakeholders, including:
Meetings with the workforce and guests during various hotel visits.
Joining the annual general manager conference in Cork.
Meeting suppliers in Cork.
Extensive engagement by the Chair
of Remuneration Committee with
major shareholders during the year.
In addition, in April 2019 Alf Smiddy, Senior Independent Director, was appointed
as the Director with responsibility for workforce engagement. See page 68 for
further details of our governance in action.
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Board Engagement
with the Workforce
The Board welcomed the 2018 Code’s
emphasis on stakeholder engagement
and adopted a Board Policy for
Workforce Engagement..
The policy seeks to deepen Board engagement with
the workforce in several ways:
holding Board and subcommittee meetings at a wide
variety of company locations to promote access by
employees to the board on an informal basis;
the receipt of presentations from functional managers
in the business and hotel general managers to gain
deeper insights and reflect a more extensive diversity
of interested opinion in board discussions;
Executive Director participation in employee
engagement activities and delivery of content on our
learning and development programs, and;
by the designation of a Non-executive Director with
responsibility for workforce engagement.
The board designated responsibility for workforce
engagement to Senior Independent Director Alf Smiddy:
“Almost immediately upon the announcement
of the new role and appointment, I was being
asked to attend meetings almost every week.
There was just a huge level of interest among
management and staff, and I found it very
interesting as a board member to engage
with staff and give them comfort about our
willingness as a Board of Directors to listen
carefully to points raised and to provide
assurance that management and staff issues,
HR, training and development, succession
planning, and so on, are taken very seriously
at board level and are regularly discussed.”
Alf Smiddy
GOVERNANCE IN ACTION
New Director Induction
New Non-executive Director Elizabeth McMeikan,
appointed to the Board October 2019
OVERVIEW
The Chair, supported by the Company
Secretary, is responsible for ensuring
that new Directors have a thorough
and appropriate induction.
Each newly appointed Director has participated in a structured
induction programme and has received a comprehensive suite
of resources providing detailed information on the Group.
Each induction has been based on the individual Directors
requirements and included meetings with relevant Directors,
senior management and external advisors. This ensures that
each new Director understands the Company’s strategy and
governance structure.
OBJECTIVE
To provide our new Directors with the resources they need
in order to be able to maximise their effectiveness in the
shortest time practicable.
PROCESS
Resources
Provision of resources including papers and minutes
from previous Board meetings and key corporate
governance policies.
Meetings
Business briefings with the Executive Directors and
the Chair.
Meetings with members of the Executive Team and
senior management.
Meetings with external advisers, as appropriate to the role.
Meetings with General Managers of Maldron Hotels and
Clayton Hotels.
Meetings with Head of HR,Head of Revenue, and
Head of Sales & Marketing.
Specific Activities to help understand the business
Visits to our hotels and meeting our General Managers.
Future Plans
Meet with external advisors.
Opportunity to visit more of our hotels.
Meet with more members of the executive
management team.
Board Activities
WHAT THE BOARD DID IN 2019
BUSINESS
PERFORMANCE
AND STRATEGIC
DEVELOPMENTS
Business performance
> Received detailed management accounts and financial update from the management team
as each scheduled board meeting.
> Received detailed operations update from the management team at each scheduled board
meeting covering HR matters, revenue management, marketing, health and safety, employee
engagement and customer satisfaction, as well as more detailed reports on progress at recently
opened properties.
> Received detailed presentations from members of the management team including the group
general managers for Clayton Hotels Ireland, Maldron Hotels Ireland and our UK business, sales
and marketing, revenue management, HR, financial control and IT.
> Received and approved a detailed presentation on the budget for the forthcoming year.
Strategic development
> Received a detailed presentation from management on the activities of the acquisitions and
development team, at each scheduled board meeting, including the search for new pipeline
opportunities and progress updates on projects already secured.
> Approved several transactions during the year, including agreements to lease new properties in
Cambridge, Liverpool, and Croke Park, Dublin, and the acquisition of the Shoreditch, London site.
> Considered projections presented by management for the forthcoming three years and approved
the company’s long-term viability statement.
FINANCIAL
REPORTING
AND CONTROLS
> Reviewed and approved the half and full-year financial results, including the financial statements,
the results announcement, and the investor presentation.
> Reviewed and approved the group’s annual report.
> Considered the level of distributable reserves, approved the payment of the interim dividend
and recommendation to shareholders in respect of the final dividend.
> Approved the extension of the group’s bank borrowing facilities up to 2024.
GOVERNANCE
> Reviewed and approved the Notice of AGM and corporate governance disclosures.
> Considered the key provisions of the new UK Corporate Governance Code and the application
of it to the Company.
> Reviewed and approved the Matters Reserved for the Board and each of the Committees’
terms of reference.
> Discussed the findings of the internally facilitated Board evaluation and agreed actions for
the following year.
> Chair and Non-executive Directors met without the Executive Directors present.
> Reviewed the composition of board subcommittees.
> Reviewed a broad range of corporate policies including risk management, modern slavery,
bribery and corruption, and environmental.
> Received a detailed presentation on shareholder perception.
> Approved the appointment of new Non-executive Director Liz McMeikan and new Executive
Director Shane Casserly.
PEOPLE
AND CULTURE
> Reviewed and approved the Board Diversity Policy.
> Discussed talent and succession planning.
> Reviewed the results of the employee engagement surveys carried out in June and December.
> Reviewed updates regarding health and safety within the Group.
> Received a detailed presentation on monitoring corporate culture as part of its board
training activity.
> Adopted a policy for board engagement with the workforce and designated responsibility for
workforce engagement to Senior Independent Director Alf Smiddy.
> Approved the offer of share options to all group employees under the Sharesave Scheme.
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It was another
busy year for the
committee with
two new Director
appointments, the
first appointments
since our stock
market listing
in 2014.
NOMINATION
COMMITTEE REPORT
Dear Shareholder,
I am pleased to present the report of the
Nomination Committee for 2019. It was
another busy year for the committee with
two new Director appointments, the first
appointments since our stock market
listing in 2014.
The committee met on five occasions
during the year dealing with, in addition to
the appointments, many other matters,
including succession planning, the
appointment and designation of a Non-
executive Director with responsibility
for workforce engagement, board
evaluation, board training, and the
composition of board subcommittees.
Board Composition
We commenced 2019 with a board
composed of seven Directors; a Non-
executive Chair, three independent Non-
executive Directors and three Executive
Directors. The committee concluded,
following a review process commenced
in 2018, that the time was right, in light
of the group’s expansion into the UK and
the existing board composition, to recruit
one additional Non-executive Director.
The committee also fully reviewed the
executive representation on the board,
taking into account the structure of the
business, its growth strategy, and the
relative contribution of the individual
functional leaders within the executive
team to achieving our strategic objectives.
Non-executive Director appointment
We were delighted to recommend the
appointment of Elizabeth McMeikan to
the board as a Non-executive Director,
and she took up the position in October.
Her appointment came following a
thorough recruitment process. The
committee appointed specialist search
consultants Russell Reynolds Associates
to assist with the process (Russell
Reynolds Associates is an accredited firm
under the enhanced code for executive
search firms and has no other connection
with the company other than the provision
of recruitment services).
We completed the assignment in
several stages:
1. Engagement of the search consultancy.
2. A meeting of the committee and the
search consultants, with each member
of the board in attendance, to identify
the skills, attributes, and qualities to
be sought in prospective candidates.
3. Shortlisting of candidates by
the committee.
4. The interview of candidates by
the company Chair and Senior
Independent Director.
5. A recommendation to the Board
of the chosen candidate.
6. Appointment terms drafted and
agreed with the selected candidate.
Following her appointment, Elizabeth
received an induction programme
(see page 68 for details).
Executive Director appointment
In December, we announced the
appointment of Shane Casserly to
the board as Corporate Development
Director with effect from 1 January 2020.
Shane joined the Company in March 2014
as Head of Acquisitions and Development
at the time of the company’s stock market
listing. In the six years since then, Shane
has been instrumental in the execution
of multiple acquisition and development
projects each of which has created
significant shareholder value and which
collectively have transformed Dalata
from being a company with no asset base
COMMITTEE MEETINGS AND ATTENDANCE
The Committee met five times
during 2019.
Member
Alf Smiddy
John Hennessy
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 Company Chair
being independent on appointment).
See the Committee’s
terms of reference on:
www.dalatahotelgroup.com
to today having almost €1.5 billion in
property assets, a substantial leased
hotel portfolio and an exciting pipeline
of hotels under development.
We welcome Shane to the board
and look forward to his continuing
contribution to the Company’s growth,
and he too is participating in the Board
induction process.
Succession planning
The committee considers succession
planning on an ongoing basis. I am
very happy to report that the company
fosters a strong ethos of continuous
learning and development, and this is
visible throughout the organisation.
Board members have regular
opportunities to engage with members
of the executive management team
(presented on pages 60 and 61).
Accordingly, the committee is in a
position to evaluate internal succession
options in the event of a contingency as
well as for the medium and long-term.
The Nominations Committee will
continue to keep under review
succession and refreshment of the
board at both executive and non-
executive level, to also include board
committee make up. In this regard,
John Hennessy, in his Chair’s statement
on page 5, outlines the Company’s
planned approach to refreshing the
board in the coming years.
Designated Non-executive
Director with responsibility
for workforce engagement
The Board asked the Committee to
consider the Company’s response
to the Code’s call for boards to
establish an engagement mechanism
with the company’s workforce.
Following deliberation on the options
proposed in the Code, the committee
recommended that one of the Non-
executive Directors be designated
responsible for workforce engagement.
I was pleased to accept this role in
ROLE OF THE COMMITTEE
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
April on behalf of the Board and have
enjoyed meeting many members of staff
throughout our hotels and the central
office in Ireland in the UK in the past year
(see page 68 for more details).
Board Evaluation
In keeping with the requirements of
the Code, Dalata conducts an annual
evaluation of the Board and the Board
committees. This year the process
was facilitated by the Committee and
involved the completion of a detailed
online survey by each member of the
board, the preparation of a report by the
Committee and its presentation to the
Board with findings, setting out some
topics for discussion and follow-up,
including a comparison with summary
findings of the 2018 evaluation. In
addition, the Board Chair met individually
with each Director during the year, and
I, in my role as the Senior Independent
Director, completed an evaluation of the
Board Chair, meeting and consulting with
each of the other Directors individually.
In 2020 our board evaluation will be
externally facilitated.
Board training
The Board met at the Clayton Hotel, City
of London, in November for a full day of
training. This annual session has become
an integral part of the board calendar,
and this year we received stimulating
presentations on the following topics:
Leadership decision-making
Assessing, monitoring and
influencing culture
The role of the proxy adviser
ESG from the investor perspective
The outlook for European capital
market development post Brexit
are considered on merit against
objective criteria having due regard
to the benefits of the diversity of
gender, skills, regional and industry
experience, background, and race.
Last year we made some progress
with gender diversity following
Elizabeth’s appointment. The policy
does not set out a quota target for
female participation;however, the
Board acknowledges the benefit of
increasing the number of women
amongst its number, and this forms
part of the Committee’s mandate.
Composition of Board
subcommittees
Following Elizabeth McMeikan’s
appointment, the board took the
opportunity to make some changes
to the board committees and specific
other individual Non-executive
Director responsibilities. These
changes are set out in detail in the
Chair’s Statement on page 5 and
became effective on 1 January 2020.
As part of the changes, John Hennessy
becomes chair of the Nomination
Committee from January 2020 and
I will continue as a member of the
Committee, as designated Non-
executive Director with responsibility
for workforce engagement, and as the
Senior Independent Director.
It has been my pleasure to serve as
Chair of the Nomination Committee
for the past six years, and I look
forward to continuing my work
with the Board and the Committee
during 2020.
Diversity
The company acknowledges the value
of a diverse Board and has adopted a
Board Diversity Policy. Under this policy,
candidates for Board appointments
Alf Smiddy
Senior Independent Non-Executive
Director and Outgoing Chair,
Nomination Committee
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.
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AUDIT & RISK
COMMITTEE REPORT
Dear Shareholder,
As Chair of the Audit and Risk
Committee, I am pleased to present
this report setting out the work of the
Committee during 2019.
As the business continues to thrive
and grow, it was also a busy year
for the Committee. 2019 was the
first reporting year where IFRS 16
Leases became effective. As regards
the business itself, this accounting
standard change will not impact our
strategy or the role of leases in our
continued growth. However, it does
have a very significant impact on
how the Group’s results and financial
position are presented in our financial
statements. Given the scale of the
impact, the Committee has engaged
proactively with management and
external advisors in planning for,
communicating and applying the
provisions of the standard. As far
back as 2017, the Group set out the
expected impact of the standard on
the Group at our Capital Markets Day
having undertaken a wide-ranging
initial review.
During 2019, the Committee
received presentations on IFRS 16
from management. These included
the calculation of the transition and
ongoing impacts. They also covered
the approach to ensure that how we
implemented and communicated
the changes would provide the most
clarity and insight for users of our
financial statements. In particular, the
Committee reviewed the calculation
and approach to the setting of the
discount rate for the individual leases
under IFRS 16. This introduced a new
source of estimation uncertainty into
the financial statements due to the
relatively long length of our leases and
the lack of directly comparable rates.
From our review of both the interim
financial statements to 30 June
2019 and the 2019 full year financial
statements, along with our External
Auditor assessment of the application
of the standard , we are satisfied that
this accounting standard’s provisions
have been properly applied.
The Committee pays close attention
to the Group’s accounting policies and
areas of judgement. In advance of both
the interim and annual reporting cycles
management brief the Committee on
key accounting judgement areas. A
full review of these is then completed
by the Committee and the findings of
the External Auditors are considered
prior to the approval of the financial
statements. Details on the significant
financial judgements and sources of
estimation uncertainty in 2019 are set
out on page 74 and 75.
We oversee the company’s
relationship with our External Auditors,
KPMG, and details on our review of
their work and their independence is
set out on page 76.
During 2019, the Committee
reviewed and considered a wide
range of reports and presentations
from both management and also
external advisors. These enabled the
Committee to meet our oversight
responsibilities, while also providing
us with the ability to challenge
management and to also provide insight
on the financial, risk and compliance
matters affecting the Group.
The Committee pays
close attention to the
Group’s accounting
policies and areas of
judgement. In advance
of both the interim
and annual reporting
cycles management
brief the Committee
on key accounting
judgement areas.
During 2019, the
Committee reviewed
and considered a wide
range of reports and
presentations from
both management
and also external
advisors. These enabled
the Committee to
meet our oversight
responsibilities, while
also providing us with
the ability to challenge
management.
Directors’ compliance statement
for inclusion in the annual report and
supporting organisational structures
Update on Market Abuse Regulation
Governance and Reporting
Review and consideration of internal
controls and fraud management
structures within the Group
Consideration of policies relating
to modern slavery, Anti-bribery
and Corruption, and Anti-Money
Laundering
Consideration of the Group’s
supplier code of conduct
Internal Audit
We work closely with the Group’s internal
audit function and oversee the work that
it completes. The Group Internal Auditor
presents findings from his reviews to
us and we also consider management’s
responses to matters raised. EY provide
us with technical IT internal audit support
in relation to our IT infrastructure. The
Committee meets with the Group
Internal Auditor without management
present after each Committee meeting.
We have also separately met with EY
during 2019.
My thanks to the management team,
internal audit and the Group’s advisors
for their support and co-operation in
assisting the Committee in its work
during 2019. I look forward to our work
in 2020, where there will be undoubtedly
new challenges in the financial reporting,
risk and compliance areas.
Financial Reporting and External
Auditor-areas considered
and reviewed
Full year and interim financial
statements and related reports
Key accounting judgements,
estimates and disclosures
KPMG key findings reports from
review of interim financial statements
and audit of year end financial
statements
KPMG audit planning documentation,
information relating to audit and non-
audit fees and consideration
of independence
Revised accounting policy for
Adjusting Items and the Use of
Underlying Performance Measures
Update on Treasury Management
policies
Dividend Policy update
Review of Viability Statement
Risk and Compliance – areas
considered and reviewed
The Group’s risk register, key risks and
material changes to risk profiles, which
are considered at each Committee
meeting
Group risk management policy
The health and safety frameworks
in place across the Group, our incident
management recording/reporting and
Health and Safety initiatives for 2019
The self-insurance programme and an
update on the insurance market and
claims environment
The extent of data protection
compliance after the implementation
of GDPR in 2018, along with a review
of the Group’s data protection policy
Outcome of the insurance broker
tender process
Robert Dix
Chair, Audit and Risk Committee
COMMITTEE MEETINGS AND ATTENDANCE
The Committee met five times
during 2019.
All members of the Committee
are considered by the Board to
be independent .
Member
Robert Dix
Alf Smiddy
Margaret Sweeney
No. of meetings
5/5
5/5
5/5
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
ROLE OF THE COMMITTEE
Monitor the integrity of the Group’s
financial statements, accounting
policies and the key judgements
made in the financial statements.
Assess whether the Annual
Report, taken as a whole, is fair,
balanced and understandable
and provides the information
necessary for shareholders to
assess the Company’s position
and performance, business model
and strategy.
Monitor the effectiveness of
the Internal Audit function.
Oversee the Group’s relationship
Review the Group’s compliance
with our External Auditor.
framework.
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 health, safety and
operational risks and the Group’s
insurance programmes.
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Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION
Significant Financial Judgements and Key Sources
of Estimation Uncertainty in 2019
Matter
Significant financial judgements and key sources of estimation uncertainty
Matter
Significant financial judgements and key sources of estimation uncertainty
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.
DETERMINATION OF INCREMENTAL
BORROWING RATE
The application of IFRS 16
Leases introduces a new source
of estimation uncertainty when
setting the appropriate discount
rate for individual leases.
The net carrying value of land and buildings at 31 December 2019 was €1.32 billion
(note 10, pages 137 to 141). The carrying value of land and buildings is determined
using fair value. The calculation of fair value and the allocation of fair value to land
and buildings requires judgement.
The assumptions utilised by the valuation specialists 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.
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
approach, as determined by suitably qualified professionals, of land and buildings
at 31 December 2019. 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 property valuations at 31 December
2019 are reasonable and that the revaluation movements have been appropriately
presented in the Group consolidated financial statements.
On transition to IFRS 16 Leases, lease liabilities were measured at the present
value of the remaining lease payments. The Group has chosen the modified
retrospective approach and the discount rates applied to each lease on transition
were the applicable estimated incremental borrowing rates at 1 January 2019. The
relative length of our leases with a weighted average lease term of 30.3 years on
transition and the absence of bank lending for this tenor means that such rates
were not readily available.
Management adopted a ground up approach to identify the transition date rates
and additional data points which would provide a robust estimate and repeatable
process for future leases. The components of this rate for each lease included
the risk-free rate, a country-risk premium, if applicable, a finance spread with due
regard to the Group’s existing arrangements and discussion with our funding
partners, and asset specific adjustments. The discount rate established from this
process was then compared to secondary data points such as property yields to
ensure that the rates are not unreasonable. In most cases, the discount rate is
determined in the first year of the lease and will not change for the remainder of
the term unless an event such as a change in lease term or a modification of the
lease occurs.
The weighted-average incremental borrowing rate applied for leases at the
transition date was 6.03%. The lease liabilities are sensitive to movements in the
rate with a 1% increase in the discount rate resulting in a €28.2 million decrease in
the lease liabilities while a 1% decrease in the rate results in a €32.9 million increase
in lease liabilities at the date of transition.
Management have reported in detail to the Committee in relation to the
determination of the incremental borrowing rate. The Committee have discussed
the approach with management and the External Auditor and are satisfied
that the assumptions used are reasonable.
Accordingly, the Committee is satisfied that the lease liabilities are correctly stated
in the Group consolidated financial statements.
ACCOUNTING FOR ACQUISITIONS
The Group completed a number of
hotel acquisitions during the year.
During 2019, the Group acquired the Clayton Hotel City of London. In addition,
the Group entered a lease on the Tamburlaine Hotel (being rebranded as Clayton
Hotel Cambridge). Details of both transactions are set out in notes 10 and 12 to
the Group consolidated financial statements on page 137 to 141 and 146 to 149.
The Committee has evaluated the accounting treatment of the consideration
paid and costs incurred as presented by management for each of these
transactions. In addition, the Committee discussed the transactions during
the year with management and with the External Auditor. Accordingly, the
Committee is satisfied that the correct accounting method has been chosen
for each of the transactions.
CARRYING VALUE OF GOODWILL
Goodwill amounted to €33.9 million at 31 December 2019 (2018: €33.3 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 9 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 2019, no impairment of goodwill was recognised.
Accordingly, the Committee has concluded that the carrying value of goodwill is
appropriately stated at 31 December 2019 and that the disclosures included within
note 9 of the Group consolidated financial statements are adequate.
74
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75
Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION Maldron Hotel
Parnell Square
Whistleblowing
The Board has approved a Confi dential
Disclosure Policy (Whistleblowing
Policy) which is reviewed annually. The
Committee considers the matter of
Whistleblower reports at each of its
meetings. No concerns were raised by
employees using this procedure during
the year. A copy of the Confi dential
Disclosure Policy is included in the
Employee Handbook, which is provided
to all employees.
External Audit
Our External Auditor is KPMG, who were
appointed in 2014 and reappointed in
2016 when the company became an
EU Public Interest Entity (PIE) following
its admission to the main markets of
Euronext Dublin (formerly Irish Stock
Exchange) and the London Stock
Exchange. An important part of the
Committee’s remit is in relation to
overseeing the Group’s relationship
with KPMG, including safeguarding
independence, consideration of
non-audit fees and the continuing
appointment of KPMG.
During 2019, we evaluated KPMG
based on their work completed,
management feedback and our review
of the documentation provided to
the Committee. Based on these,
the Committee is satisfi ed with
their eff ectiveness, objectivity and
independence. The Committee also
reviewed KPMG’s internal process
for monitoring independence and
objectivity and we are satisfi ed that
this process has operated eff ectively.
The Company has adopted a policy in
relation to the employment of former
employees of the External Auditor.
In 2019, the Committee agreed,
following a detailed analysis, a revised
fee structure with KPMG in relation to
their audit services.
The Committee has an agreed process
in place over the pre-approval of non-
audit services by KPMG to the Group.
During 2019, KPMG provided non-audit
services, principally, in relation to two
specifi c business transactions and tax
depreciation services. KPMG fees for
2019 are set out on page 128. The
ratio of non-audit to audit fees for
2019 was 37%.
The External Auditor is subject to
mandatory rotation after ten years,
from the date that the Company
became an EU PIE. The Company
has no immediate plan to tender for
external audit services voluntarily.
KPMG attend all of the Committee’s
meetings and are provided with all
meeting documentation. During 2019,
the Committee met with KPMG twice
without the presence of management.
Internal Control
and Risk
Management
The Board has overall responsibility
for risk management and it has
delegated this task to the Committee.
A consideration of the Group’s risk
register, with particular emphasis on
key risks and changing risk profi les, is a
standing agenda item for each meeting.
The Committee reviews documentation
prepared by management in this regard.
Additional details on risk management
are set out on pages 40 to 46.
The Committee also has responsibility
for the oversight of the internal control
and fraud management structures.
These are reviewed on an ongoing
basis throughout the year through
the consideration of internal audit
reports and other relevant papers.
In December, the Committee also
considered a detailed analysis of the
Group’s internal control and fraud
management environment.
Internal Audit
The Committee is responsible for
overseeing the scope, work and
eff ectiveness of the Group’s internal
audit function. Internal Audit operates
to formal terms of reference. At each
meeting, the Committee considers
the fi ndings noted in the internal audit
reviews and management’s responses
to matters noted.
On an annual basis, the Group Internal
Auditor sets out the planned approach
and scope of work for the following
year for consideration by the
Committee. This plan is reviewed
on an ongoing basis and updated
at each Committee meeting.
The Committee meets with the Group
Internal Auditor after each Committee
meeting without management present.
76
Dalata Hotel Group plc Annual Report & Accounts 2019
Audit & Risk Committee Report
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77
REMUNERATION
COMMITTEE REPORT
Dear Shareholder,
I am pleased to present the report of
the Remuneration Committee of Dalata
Hotel Group plc for the year ended 31
December 2019.
Performance in 2019
2019 was another very successful year
of growth and development for the
company. Pre-IFRS 16 adjusted EBITDA
grew by 12.8%, driven by the positive
impact of the six new hotels opened
in 2018 and early 2019, Management
successfully integrated all of the new
hotels into our business operations, our
pipeline of hotels at prime city-centre
locations in the UK and Ireland has grown
to almost 3,000 rooms, and the Company
has generated free cash fl ow above €100
million for the fi rst time. Although demand
in the Irish market, particularly in Dublin,
remains strong, there were some notable
headwinds, including an increase from
9% to 13.5% in the VAT rate in Ireland, an
increased hotel bed capacity in our key
Dublin market, and Brexit uncertainty.
The strategy for growth for the Company
has now shifted more signifi cantly to
development of new hotels with attendant
risks and need for management focus.
Review of Directors
Remuneration Policy
During the year, the Committee reviewed
the Directors’ Remuneration Policy in
advance of submitting a revised Policy to
shareholders for an advisory vote at the
forthcoming AGM on 29 April 2020. The
Committee last submitted a Directors’
Remuneration Policy to the AGM in 2017.
Since this time, the business has changed
signifi cantly; Total Shareholder Return
(TSR) was 27.5% in the three years to
December 2019, revenue has increased
by 48%, profi t before tax has increased
by 103%, and basic EPS is up 122% (2019
performance compared to 2016). We have
been continuously adding hotel capacity
over this period in line with strategy, and we
continue to invest in driving future success
and shareholder value creation.
Against this backdrop of the accelerated
growth and evolving strategy for the
business, the Committee considered that
it was appropriate to review remuneration
arrangements for our Executive Directors
to ensure that they continue to promote
long-term value creation, and are aligned
with the business’s strategic objectives
and with the interests of shareholders
within an acceptable risk framework. The
Committee conducted the review with
careful regard for the provisions of the
revised UK Corporate Governance Code
(the Code) and the Investment Association
Principles of Remuneration (the Principles)
published in November 2018.
As an Irish-incorporated company, Dalata
is not formally required to comply with
the Directors’ Remuneration Reporting
Regulations. However, the company is
committed to maintaining a high standard
of governance in keeping with our UK
listing and voluntarily submits the Directors’
Remuneration Policy to an advisory vote.
The Committee believes that the current
remuneration structure and the incentive
framework, comprising annual bonus and
LTIP, is eff ective in focusing executives on
delivery of the business strategy and is
linked to and promotes sustainable long-
term value creation. It is proposed that
salary increases will continue in line with
those of the rest of the workforce. Taking
into account the increase in the size of
the Group and the complexity of the roles,
the Committee proposes to increase the
annual bonus opportunity to a maximum
of 125% of salary (currently 110% of
salary for the Chief Executive and 100% of
salary for other Executive Directors). The
Committee considers that this level of
COMMITTEE MEETINGS AND ATTENDANCE
The Committee met fi ve times
during 2019.
Member
No. of meetings
All members of the Committee
are considered by the Board to be
independent (the Company Chair
being independent on appointment).
Margaret Sweeney
John Hennessy
Robert Dix
5/5
5/5
5/5
The Board considers that the Committee
Chair has suffi cient recent and relevant
experience for the role and that there
is suffi cient and experience within the
Committee as a whole.
The strategy for growth
for the Company
has now shifted
more signifi cantly to
development of new
hotels with attendant
risks and need for
management focus.
See the Committee’s
terms of reference on:
www.dalatahotelgroup.com
annual bonus opportunity better refl ects
the current size and stage of growth
of the Company, and the increasing
complexity, risk and international reach
of the organisation.
Given the increase in bonus opportunity,
the proportion of the bonus deferred
for bonuses earned in respect of 2020
onwards will be increased to 30% of
the total bonus (currently 20%). This
enhances alignment with shareholders
and brings our approach to deferral
more closely in-line with market practice.
For the Chief Executive, this increase
in deferral means that under the new
structure, the cash bonus opportunity
remains the same as it is currently, with
only a small increase in cash opportunity
for the other Executive Directors.
A post-employment shareholding policy
is proposed to be introduced such that
individuals who step down as an Executive
Director after 1 January 2020 will normally
be expected to retain a shareholding in
the Company of half of their shareholding
requirement (or actual shareholding if
lower) for two years after leaving. This
guidance will normally apply to share
incentives that vest following the adoption
of this Policy.
No changes are proposed to LTIP
opportunities or the performance
measures for the annual bonus or LTIP.
50% of the LTIP performance condition
is earnings based, measured by EPS.
Bearing in mind the signifi cant impact
that the new accounting standard, IFRS
16, has on the early years of reported
earnings for new leased hotels, the EPS
performance targets for the 2020 LTIP
awards have been set based on the
outgoing lease accounting standard,
IAS 17, rather than IFRS 16. This
maintains consistency with previous
years and allows us some time to better
understand the implications of the
change. The Committee will further review
performance measures and targets in
advance of the grant of the 2021 LTIP
awards, having regard to the market’s
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.
adoption of the new standard, to ensure
that they remain appropriate.
The LTIP is subject to a two-year holding
period following vesting, and malus and
clawback provisions apply to incentive
awards. We therefore already comply
with the 2018 UK Corporate Governance
Code in these areas. The Committee
has taken steps to ensure that the Policy
and supporting documentation contains
suffi cient fl exibility to enable the use of
discretion should this be appropriate.
Shareholder engagement
The Committee undertook a detailed
consultation with our shareholders
concerning the proposed changes to the
remuneration policy. We contacted the
20 largest shareholders, representing
62% of the share register, with almost all
engaging with and providing feedback to
us. I also spoke with analysts from proxy
agencies ISS and Glass Lewis. This was a
very valuable exercise generating useful
feedback, which has been used to shape
the fi nal proposals and will inform our
discussions in the future. I am grateful
for the broad input and support from
shareholders for this remuneration policy
for the next three years.
Board changes
During the year, we welcomed
Elizabeth McMeikan as a new Non-
executive Director on our board, and,
in December, we announced the
executive appointment of Shane
Casserly as Corporate Development
Director with eff ect from 1 January
2020. His salary has been set at €325,000
per annum, and his annual bonus and
LTIP opportunities are aligned with those
of the Deputy Chief Executives - 125%
and 150% of salary respectively. The
Company’s contribution to Mr Casserly’s
pension is 5% of salary. This contribution
is aligned to the contribution rate
provided to the majority of pension
eligible staff in Ireland. Further details
of compensation arrangements for
the new Directors are contained in
this report.
Within the terms of the agreed
policy, determine the total individual
remuneration package of the
Chair and each Executive Director,
including salary benefi ts, bonuses
and incentive payments.
Salary review
The committee reviewed Executive
Director salaries for 2020 and granted a
2% increase with eff ect from 1 January
2020. This increase is in line with that
awarded to the majority of the workforce.
Incentive outcomes for 2019
Each of the Executive Directors received a
bonus payment for 2019 which was 62.5%
of the maximum amount; full details of the
bonus outcome are set out on pages 89
and 90.
LTIP awards granted in 2017, contingent
on performance achieved over the three
years up to the end of 2019, will vest at a
rate of 67% of the maximum; details are
set out on page 91.
In fi nalising the incentive outcomes,
the Committee considered whether
the outcomes were appropriate in the
context of the underlying performance
of the business and the experience of
shareholders and other stakeholders
over the performance periods as well as
considering whether there was any other
signifi cant negative event that would
warrant an adjustment. The committee
was satisfi ed that the incentive outcomes
were merited.
Gender Pay Gap
During the year, the Committee examined
the gender pay gap across the Group.
We observed a mean gender pay gap of
6% at the basic pay level. The company
is committed to achieving gender pay
equality in the coming years.
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 generally and concerning our
remuneration arrangements.
Margaret Sweeney
Chair, Remuneration Committee
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.
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Directors’
Remuneration
Policy 2020 – 2022
This Policy will be submitted as an
advisory vote to shareholders at the
2020 AGM and will apply to payments
made on or after 29 April 2020, subject
to shareholder approval of the Policy.
As an Irish-incorporated company,
Dalata does not have the benefit of the
statutory protections afforded by the
UK Companies Act 2006 concerning
the remuneration reporting regime.
Accordingly, if there is any inconsistency
between the Company’s Policy (as
approved by shareholders) and any
contractual entitlement or another
right of a Director, the Company may
be obliged to honour that existing
entitlement or right. On this basis, the
report is submitted to shareholders as
an advisory rather than a binding vote.
Summary of policy making process
In determining the new Remuneration
Policy, the Committee followed a robust
process that commenced in May 2019
and concluded following an engagement
process during which shareholders
representing 62% of the share register
were consulted. The Committee
considered input from the Chief
Executive and our independent advisors,
as well as considering best practice,
shareholder guidance, and the specific
feedback received from our consultation
with major shareholders.
In reaching its decisions on the new
Remuneration Policy, the Remuneration
Committee considered the following
principles as recommended in the
revised 2018 UK Corporate Governance
Code (the Code).
Clarity – The Remuneration Policy is
designed to allow our remuneration
arrangements to be structured such
that they support, in a sustainable
way, the financial objectives and the
strategic priorities of the Company.
The Remuneration Committee
remains committed to reporting on its
remuneration practices in a transparent,
balanced, and understandable way.
Simplicity – The policy consists of
three main elements: fixed pay (salary,
benefits, and pension), an annual bonus
award, and a long-term incentive award.
The annual bonus is based on one
key financial measure and individual
strategic objectives tied to our key
strategic objectives and risk framework.
The LTIP is based on two measures:
relative TSR and EPS, which provide a
clear link to the shareholder experience.
The Committee will keep under review
the measures used and may apply
different measures for future years
to ensure they continue to be aligned
with strategy.
Risk – Remuneration policies are in line
with our risk appetite. A robust malus
and clawback policy is in place, and the
Committee has the discretion to reduce
variable pay outcomes where these are
not considered to represent overall
company performance or the
shareholder experience. The new
post-employment shareholding policy
adopted this year further ensures
Executive Directors are motivated to
deliver sustainable performance that
extends beyond their departure from
the company.
Predictability – Annual bonus and LTIP
awards levels are capped as set out in
this policy. The Committee considers
the impact of various performance
outcomes on incentive levels when
determining pay levels. These can be
seen in the scenario charts on page 83.
Proportionality – A substantial portion of
the package comprises a performance-
based reward linked to the achievement
of solid company performance and the
delivery of strategy. The Committee
uses discretion where required to
ensure that performance outcomes
are appropriate.
Alignment to culture – In determining
executive remuneration policies
and practices, the Remuneration
Committee considers remuneration
structures and opportunities at other
companies of a similar size and
complexity as well as our approach
to remuneration internally to ensure
that remuneration is appropriate
compared to these reference points.
The Committee also considers
other wider workforce themes as
part of its review, including workforce
demographics, engagement levels,
and diversity to ensure executive
remuneration is appropriate from a
cultural perspective.
Policy Table for Executive Directors
The Group’s policy on Executive Directors’ remuneration is designed to ensure that employment and remuneration conditions
support the delivery of strategy and promote long-term sustainable success for all stakeholders. 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
Base
Salary
Purpose, link to strategy
and operation
Maximum opportunity
Performance Metrics
An appropriate level of fixed
remuneration to reflect the skills
and experience of the individual.
There is no prescribed maximum. Salary
increases are normally in line with those of
the wider workforce.
N/A
Salaries are normally 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.
Salary increases may be above this level in
certain circumstances, such as: an increase
in the size or complexity of the Group; an
increase in the size or responsibilities of
the role; or changes in the competitive
market place.
Where a new Executive Director has been
appointed to the Board at a lower than
typical market salary to allow for growth
in the role, then larger increases may be
awarded to move salary positioning closer
to typical market level as the Executive
Director gains experience.
Element
Pension
Purpose, link to strategy
and operation
Contributions into the Company’s
defined contribution pension
scheme, or an equivalent cash
supplement.
Benefits
To provide a market competitive
benefits package.
The benefits available currently
comprise a company car and fuel,
and benefits under the group risk
benefit scheme, which includes
death in service cover and disability
benefit. The Committee may
determine that other benefits
will apply where appropriate.
Directors are eligible to participate
in the Company’s Sharesave
Scheme on the same basis as all
other employees.
Directors may be reimbursed for
reasonable business expenses
(and any associated tax liabilities).
Where an Executive Director is
required to relocate to perform
their role, appropriate one-off
or on-going expatriate benefits
may be provided (e.g. housing,
schooling, etc.).
To drive and reward the delivery
of business objectives over the
financial year.
The bonus is discretionary, and the
Committee determines any pay-out
based on performance. Targets are
set and assessed by the Committee
each year.
At least 30% of the bonus will be
delivered in the form of Dalata
shares deferred for 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.
Annual
Bonus
Maximum opportunity
Performance Metrics
0% of base salary for the Chief Executive.
N/A
15% of base salary for the Deputy
Chief Executives.
5% of salary for the Corporate
Development Director.
For new Executive Directors appointed
to the Board pension will be set on
appointment, taking into account best
practice, the pension contributions or
allowances available to the wider pension
eligible workforce, and market practice at
similar-sized companies.
The value of benefits is not capped as it is
determined by the cost to the Company,
which may vary.
N/A
Participation in Sharesave Scheme up to
statutory limits.
The maximum opportunity is:
> Chief Executive: 125% 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 and may adjust
the bonus award if it considers that the
outcome does not reflect the underlying
financial or non-financial performance
of the participant or the Group over the
relevant period, or that such payout
level is not appropriate in the context of
circumstances that were unexpected or
unforeseen when the targets were set.
When making this judgment the Committee
may take into account such factors as the
Committee considers relevant.40% of
the maximum bonus typically pays out for
achieving threshold levels of performance
with 50% of maximum paying out for target
levels of performance. The Committee
retains the discretion to vary the level of
payout if appropriate.
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Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION Maximum opportunity
Performance Metrics
The maximum annual award level is
> Chief Executive: 150% of salary.
> Other Executive Directors:
125% of salary.
Performance targets are normally measured
over three financial years, using performance
measures aligned with the strategy and
shareholder value. This may include
measures such as total shareholder return
(TSR), earnings per share (EPS), or other
financial or strategic measures.
25% normally vests for threshold
performance.
The Committee has the 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 and may adjust the
vesting level if it considers that the outcome
does not reflect the underlying financial or
non-financial performance of the participant
or the Group over the relevant period, or
that such payout level is not appropriate
in the context of circumstances that were
unexpected or unforeseen when the targets
were set. When making this judgment the
Committee may take into account such
factors as the Committee considers relevant.
N/A
Element
Purpose, link to strategy
and operation
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 conditional
share awards or nil-cost options
(or in such other form that the
Committee determines has the
same economic effect) which vest as
soon as reasonably practicable after
the end of the performance period,
subject to performance conditions.
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).
Shareholding
Guidelines
To increase long term alignment
between executives and
shareholders.
N/A
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).
Notes to the 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 vest up to the time of vesting (or where the award is subject to a holding period, release).
b. Adjustment of LTIP -LTIP awards may be adjusted in the event of any variation of the Company’s share capital or any demerger, delisting, special dividend, or
other events that may affect the Company’s share price.
c. 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 during the three years following payment, and awards under LTIP may be cancelled (prior to vesting), reduced, or clawed back for two years post
vesting, in the event of a material misstatement of results or serious misconduct.
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. Bonus targets are not disclosed in advance as they are considered to be commercially sensitive. The Committee intends to disclose bonus
targets following the financial year to which they relate unless they remain commercially sensitive at that point. 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 less difficult to satisfy.
e. Other payments - The Committee reserves the right to make any remuneration payments and/or payments for loss of office (including exercising any
discretions available to it in connection with such payments) notwithstanding that they are not in line with the Policy set out above where the terms of the
payment were agreed (i) before the policy set out above came into effect, provided that the terms of the payment were consistent with any applicable
shareholder-approved Directors’ remuneration policy in force at the time they were agreed or where otherwise approved by shareholders; or (ii) at a time
when the relevant individual was not a Director of the Company ( or other persons to whom the Policy set out above applies) and, in the opinion of the
Committee, the payment was not in consideration for the individual becoming a Director of the Company. For these purposes “payments” includes the
Committee satisfying awards of variable remuneration and , in relation to an award over shares, the terms of the payment are “agreed” no later than the time
the award is granted. This policy applies equally to any individual who is required to be treated as a Director under the applicable regulations.
f. Key changes to this Policy - The key changes to this Policy compared to the 2017 - 2019 Policy are the increase in the annual bonus opportunity and the
corresponding increase in the annual bonus deferral as well as the revised approach to pension contribution for new hires and the introduction of a post-
employment shareholding requirement. Other minor changes have also been made to the wording of the policy to aid operation and to increase clarity.
Remuneration Policy for other
Group Employees
The Committee regularly reviews
workforce remuneration and broader
employment practices taking these
into account when determining
remuneration policy for Executive
Directors. 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 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. The Committee also
reviews analysis of the gender pay gap
periodically; the company is committed
to achieving gender pay equality.
Illustration of application of
Remuneration Policy 2020 - 2022
The chart below illustrates the
composition of the Executive Directors’
remuneration packages at different
levels of performance, both as a
percentage of total remuneration
opportunity and as a total value.
Any dividend equivalents payable
are not included in the below.
CHIEF EXECUTIVE
Base Salary, Pension and Benefits
Bonus
LTIP
Minimum
Target
Maximum
Maximum + 50%
share price growth
100%
€610,195
50%
27%
22%
31%
19%
€1,220,390
33%
28%
40%
€2,288,231
50%
€2,745,878
DEPUTY CHIEF EXECUTIVES
Minimum
100%
€420,831
Target
Maximum
Maximum + 50%
share price growth
56%
32%
27%
29%
15%
€754,117
34%
29%
34%
€1,309,593
44%
€1,531,784
CORPORATE DEVELOPMENT DIRECTOR
Minimum
100%
€341,250
Target
53%
31%
16%
€645,938
Maximum
Maximum + 50%
share price growth
30%
25%
35%
30%
35%
€1,153,750
45%
€1,356,875
Remuneration
(€’000)
0
Notes:
1,000
2,000
3,000
1. “Minimum” includes the value of fixed pay components only – annual base salary effective from 1 January, pension (zero for the Chief Executive, 15% of base
salary for Deputy Chief Executives and 5% for Corporate Development Director), and benefits (assumed for FY20).
2. “Target” includes fixed pay and “target” annual bonus (50% of the maximum) and threshold vesting of the maximum LTIP awards (25% of the maximum). No
share price growth is assumed.
3. “Maximum” includes fixed pay and maximum annual bonus (125% for all Executive Directors) and full vesting of LTIP awards (Chief Executive: 150% of salary,
Deputy Chief Executives and Corporate Development Director 125% of salary). No share price growth is assumed.
4. “Maximum with 50% share price growth” shows the “Maximum” scenario as described above but assuming 50% share price growth for the
LTIP awards.
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Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION Policy Table for Non-executive Directors
Element
Purpose, link to strategy and operation Opportunity
Chair and Non-executive
Director (“NED”) Fees
There is no prescribed maximum
annual increase or fee level.
Fee levels are normally reviewed every
two years, with reference to the time
commitment of the role and market
levels (for example, in companies of
comparable size and complexity).
Fees are next due for review in 2021.
To attract and retain Non-executive
Directors with the required qualities,
skills, and experience.
Fees for the Chair are determined by a
subcommittee of the Board comprising
the Chief Executive and the Non-executive
Directors but excluding the Chair.
Fees for Non-executive Directors, other
than the Chair, are determined by a
subcommittee of the Board comprising
the Chief Executive and the Chair.
The Chair receives a single fee. NED
fees include a base fee and may include
additional fees for other Board or
Committee duties.
The Chair and Non-executive Directors
do not participate in any incentive plan or
pension arrangement. Where appropriate,
benefits may be provided.
Non-executive Directors may be
reimbursed for business expenses (and
any associated tax liabilities) incurred
when travelling in the performance
of duties. Additional benefits may be
introduced if considered appropriate.
Service contracts/letters
of appointment
Pat McCann and Stephen McNally are
employed under service contracts
commencing on 9 August 2007, Dermot
Crowley is employed under a service
contract commencing on 3 December
2012 and Shane Casserly’s service
contract commenced on 3 March 2014.
Service contracts do not have a fixed
end date but can be terminated by
serving notice. The service contracts
have a notice period of 24 weeks for
Pat McCann and Stephen McNally and
six months for Dermot Crowley and
Shane Casserly. Other than entitlement
to notice and 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.
Non-executive Directors, Alf Smiddy,
Margaret Sweeney, Robert Dix, and
the Chair, John Hennessy, have been
appointed under the terms of letters
of appointment commencing on 27
February 2014. Elizabeth McMeikan was
appointed under the terms of a letter of
appointment commencing on 8 October
2019. The appointment is renewed
annually, and, under the Company’s
Director’s re-election policy, all Directors
are subject to annual re-election by
shareholders. Non-executive Director’s
appointment is terminable by either party
giving one month’s written notice.
Policy on payments for loss of office
In addition to a payment in lieu of notice
referred to above, a departing Executive
Director may be eligible for incentive
awards, which will be treated under the
rules of the relevant plan, as summarised
in the table below:
The Committee reserves the right to
make any other payments in connection
with a Director’s cessation of office
or employment where the payments
are made in good faith in discharge
of an existing legal obligation (or by
way of damages for breach of such an
obligation) or by way of settlement of
any claim arising in connection with
the cessation of a Director’s office or
employment. Any such payments may
include but are not limited to paying
Incentive plan
Annual bonus
Deferred bonus
LTIP
Summary of leaver provisions
Annual bonuses may be payable for
performance in the financial year
of cessation (pro-rated for time,
unless the Committee determines
otherwise). The Committee retains
the discretion to deliver any such
bonus solely in cash, without any
deferred share element.
Awards will normally continue to
vest on the original vesting date,
subject to the malus provisions,
unless the Committee determines
otherwise.
The default treatment is that
any unvested awards lapse on
cessation of employment.
Consideration of shareholder views
The Committee undertook a
consultation exercise with major
shareholders, representing 62% of
the share register, in respect of the
development of this Remuneration
Policy, and the feedback received
was taken into account in finalising
the proposals.
During each year, the Committee
considers shareholder feedback
received at the time of the AGM, plus
any additional feedback received
through other means of dialogue.
The Committee also regularly reviews
the policy in the context of published
shareholder guidelines.
appropriate and would normally
reflect the nature, time horizons, and
performance requirements attaching to
that remuneration. There is no limit on
the value of such compensatory awards,
but the Committee intends that the
value awarded would be no higher than
the value forfeited.
The maximum level of variable
remuneration which may be awarded
(excluding any “buyout” awards referred
to above) in respect of recruitment is
275% of salary, which is in line with the
maximum current limit receivable by the
Chief Executive under the annual bonus
and LTIP.
Where an Executive Director is required
to relocate from their home location to
take up their role, the Committee may
assist with relocation (either via one-off
or ongoing payments or benefits). Any
ongoing benefits would normally be
time-limited.
If an internal candidate is promoted to
the Board, legacy terms and conditions
would normally be honoured, including
any accrued pension entitlements and
any outstanding incentive awards. Future
pension provision will be aligned with our
policy set out above.
Consideration of conditions elsewhere
in the Company
When determining remuneration
arrangements for Executive Directors,
the Committee considers the pay and
conditions of employees throughout
the Group. In particular, the Committee
considers the general level of salary
increases and incentive award outcomes
within the wider population. While the
Committee does not directly consult
with employees as part of the process of
determining executive pay, the company
carries out detailed employee surveys,
and our designated employee Non-
executive Director regularly engages
with employees to understand their
views on a range of issues including pay
and employment conditions throughout
the Group. The Board takes such
feedback into account when reviewing
executive pay. To the extent that
employees are shareholders, they can
vote on remuneration resolutions at
the AGM.
any fees for outplacement assistance,
and the Director’s legal, or professional
advice fees in connection with his or her
cessation of office or employment.
Post-employment interest in shares
The Committee has a policy to promote
interests in share awards following
cessation of employment to enable
former Executive Directors to remain
aligned with the interest of shareholders
for an extended period after leaving
the Company.
Individuals who cease to be an Executive
Director from 1 January 2020 onwards
will normally be expected to retain
a shareholding in the Company for
two years after stepping down as an
Executive Director at the lower of half
of the shareholding requirement in
place before departure or the actual
shareholding on departure.
This requirement applies to shares
acquired from incentive plans that vest
after the introduction of the Policy
and will normally include the net value
of outstanding deferred bonus share
awards and LTIP awards subject only
to a holding period. The Committee
will have the discretion to operate
the Policy flexibility and may waive
part or all of the requirement where
considered appropriate, for example,
in compassionate circumstances.
Treatment in the event of a change
of control
The default treatment is that any
unvested LTIP awards vest in the event
of a change of control to the extent the
Committee determines, taking into
account the satisfaction of the relevant
performance conditions and, unless
the Committee determines otherwise,
the proportion of the performance
period served. Shares subject to deferral
or holding periods would normally be
released on a change of control.
Remuneration on recruitment
The remuneration package for a
new Executive Director would be set
under the terms of the Policy Table for
Executive Directors. Salaries would be
set at an appropriately competitive level
to reflect the skills and experience of the
individual, and the scope of the role.
Where an individual forfeits
remuneration with a previous employer
as a result of an appointment to the
Company, the Committee may offer
compensatory payments or awards
to facilitate recruitment. Any such
payments or awards would be in such
form as the Committee considers
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Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION ANNUAL
REMUNERATION
REPORT
This report will be submitted as
an advisory vote to shareholders
at the 2020 AGM on 29 April 2020.
Statement of Implementation for 2020
30% of the total bonus earned will be deferred for at least three years (increased from 20% for 2019). This deferral enhances
alignment with shareholders and brings our approach to deferral more closely in-line with market practice.
This section summarises the remuneration arrangements for the Directors for the 2020
financial year.
The Committee has determined that the specific targets for 2020 are commercially sensitive and cannot be disclosed at this time.
To the extent that the targets for 2020 are no longer deemed to be commercially sensitive, they will be disclosed in next year’s report.
Base salaries
The following table shows the base salaries effective 1 January 2020 with comparative
figures for 2019:
€’000
Pat McCann
Stephen McNally
Dermot Crowley
Shane Casserly
2020
610.2
355.5
355.5
325.0
2019
598.2
348.5
348.5
n/a
Increase
2%
2%
2%
n/a
Salaries for Executive Directors are set at a competitive market level for the scope of the
roles and the size and complexity of the business. A 2% increase was awarded for 2020,
in line with pay increases for the general workforce.
In recommending the 2020 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.
Shane Casserly was appointed to the Board on 1 January 2020 and his salary was set
at €325,000 from this date.
Pension
The Chief Executive does not receive a pension contribution. Deputy Chief Executives
will receive a contribution to the defined contribution pension scheme or an equivalent
cash salary supplement, of 15% of base salary, in line with the Policy.
The pension contribution for Shane Casserly has been set at 5% of base salary. This
contribution is aligned to the contribution rate provided to the majority of pension eligible
staff in Ireland. The Committee will keep the pension contribution for Shane Casserly
under the review in the context of any changes in pension provision across the Group.
For new Executive Directors, the Board will determine pension arrangements on
appointment to the board, taking into account best practice, the rate available to the
wider pension eligible workforce, and market practice at similar sized companies at the
time of appointment.
Annual bonus
Each of the Executive Directors will be eligible for a maximum bonus of 125% of salary
under the proposed policy. The performance measures for the Chief Executive and
Deputy Chief Executives are weighted 75/25 between profitability and individual strategic
objectives. The performance measure for the Corporate Development Director is
weighted 50/50 between profitability and individual strategic objectives. The Committee
considered carefully the weighting for the Corporate Development Director, whose
office is concerned with the sourcing and the delivery of the company’s new hotel
pipeline within a framework of defined investment criteria. The Corporate Development
Director’s individual strategic objectives include quantifiable targets for sourcing new and
completing existing pipeline projects and the committee is satisfied that the weighting
of his performance measures is better aligned with strategy and the interests of
shareholders than if it were the same as the other Executive Directors.
Maximum Annual Bonus
(as a % of salary)
Profitability1
Individual strategic objectives
Total
CEO and
Deputy CEOs
Corporate
Development Director
93.75%
31.25%
125%
62.5%
62.5%
125%
1 Financial performance for annual bonus purposes is measured using an adjusted measure of EBIT
‘Modified EBIT’ described in detail on page 187.
LTIP
Awards will be granted in 2020 of 150% of salary for the Chief Executive and 125% of salary for the other Executive Directors in line
with the proposed Policy. Awards will vest after a three-year performance period based 50% on TSR and 50% on EPS targets shown
in the table below. Vested shares will be subject to a minimum additional two-year post-vesting holding period.
€’000
Definition
Threshold vesting (25% of maximum)
Maximum vesting
a. No vesting below threshold performance.
b. Straight-line vesting between points.
TSR
(50% of award)
TSR performance
against the Index
TSR equal to Index
TSR equal to 10% or more
per annum above Index
EPS
(50% of award)
Basic EPS (calculated under IAS 17: Leases)
achieved in the year ending 31 December 2022
€0.44
€0.55
c. For TSR, the “Index” referred to in the table is the STOXX Europe 600 Travel and Leisure Index. TSR will be calculated using a three-month average at the start
and end of the performance period (1 January 2020 to 31 December 2022).
d. Basic EPS may be adjusted to exclude items that are deemed one-off and thus not reflecting normal trading activities or distorting comparability either period
on period or with other similar businesses. For reference, the relevant adjustments to EPS for 2018 and 2019 are set out in note 29 to the consolidated financial
statements on pages 172 and 173. We want to encourage the vigorous pursuit of 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, the approach to target
setting in previous years, comparison with base year performance (2019), consensus forecasts for 2022, targets set in previous years and previous LTIP and
bonus outcomes. Taking into account all of these reference points, the Committee considers that the EPS targets set for the 2020 award are as stretching
as those set in previous years and, if achieved, will deliver value for shareholders. The maximum EPS target does not represent an increase on that set for the
performance condition in 2019 (2021 EPS) with the threshold target being 1 cent lower. Readers are guided to consider that the Company has announced the
opening of ten new hotels in 2021 and 2022 which represents an increase of approximately 30% of the current owned and leased hotel portfolio. New hotels
do not normally reach their full profit potential until years three to five following opening, therefore, the EPS profile in 2021 and 2022 reflects this business-
building phase of the company’s development. The Committee is satisfied that the successful delivery of the planned new hotels will create long-term value for
shareholders and that EPS targets set for 2022 represents a stretching but achievable target at the threshold level.
f. The Committee considered, in detail, the impact on reported EPS of the adoption of the accounting standard IFRS 16 (from 1 January 2019) in place of IAS 17
for accounting for lease costs. IFRS 16 introduces additional complexity to accounting for leases and affects a pronounced weighting of costs towards the early
years of a lease contract compared with IAS 17 (which typically apportioned costs on a straight-line basis over the term of the lease). Market participants and
other interested parties continue to evaluate the impact of the new standard. Accordingly, the Committee determined that, for the 2020 awards performance
condition, it was preferable to continue to calculate EPS using IAS 17. The Committee is satisfied that this approach is fair for both shareholders and plan
participants. The Committee will further review this element of the performance condition for 2021.
g. EPS targets may be amended if an event occurs which causes the Committee to determine an amended or substituted performance condition that 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 2020. There will be no underlying increase in fees for 2020. However, some
amendments are made to reflect the change in Committee composition and individual Director responsibilities. Fees were last
reviewed and increased in 2019 following the biennial review of Non-executive Director compensation for 2019/20 under the Policy. On
1 January 2020, the Board formed a subcommittee with responsibility for Environmental Social and Governance, the Board estimates
that the workload of this committee chair will be equivalent to that of the Remuneration and Audit and Risk Committee chairs and
determined that compensation be similar for this role. The board also determined that additional compensation be paid to the Non-
executive Director with designated responsibility for workforce engagement by reference to the time commitment for this role.
€’000
Board Chair
Basic Non-executive Director
Chair Audit and Risk Committee
Chair Remuneration Committee
Chair Nomination Committee
Chair ESG Committee
Senior Independent Director
Non-executive Director with designated
responsibility for workforce engagement
2020
150
65
20
20
n/a
20
10
10
2019
150
65
20
20
10
n/a
10
n/a
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Where indicated the disclosure has been audited in accordance with the UK reporting regulations.
Directors’ remuneration in 2019 was awarded in line with the Remuneration Policy, which was approved by shareholders at the AGM
in May 2017.
Single total figure of remuneration (audited)
The following table summarises the remuneration received by the Directors for the 2019 financial year (with the 2018 prior year
comparator also shown).
€’000
EXECUTIVE DIRECTORS
Pat McCann
Stephen McNally
Dermot Crowley
NON-EXECUTIVE DIRECTORS
John Hennessy
Robert Dix
Alf Smiddy
Margaret Sweeney
Elizabeth McMeikan
Notes:
Year
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Base
Salary / Fees
Pension
Benefits
Bonus
LTIP
Total
598
587
349
342
349
342
150
125
85
75
85
75
85
75
15
n/a
-
-
52
51
52
51
-
-
-
-
-
-
-
-
-
-
411
645
218
342
218
342
-
-
-
-
-
-
-
-
-
-
624
279
303
162
303
162
-
-
-
-
-
-
-
-
-
-
1,633
1,511
925
900
934
909
150
125
85
75
85
75
85
75
15
n/a
-
3
3
12
12
-
-
-
-
-
-
-
-
-
-
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 2019 (and 2018) the Chief Executive, Pat McCann, did not
participate in the pension plan. Other Executive Directors received pension contributions of 15% of salary.
c. Benefits include 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 2019 reflects the final vesting outcome of the 2017 LTIP award with performance measured over the three-year
performance period from 1 January 2017 to 31 December 2019. Vesting of the 2017 award is based 50% on TSR performance compared to the STOXX
Europe 600 Travel & Leisure Index and 50% on EPS performance achieved in FY19 (see page 91 for further details). The values shown for 2019 have been
calculated using the three-month average share price to 31 December 2019 of €5.3475. 8% of the value disclosed in respect of the 2017 LTIP relates to the
increase in share price from the date of the award.
f. Concerning both the bonus and LTIP outturn for 2019, the Committee considered whether the outcomes were appropriate in the context of the underlying
performance of the business and the experience of shareholders and other stakeholders over the performance period(s) as well as considering whether there
was any other significant negative event that would warrant an adjustment. The Committee was satisfied that the incentive outcomes were merited, and no
discretion was exercised by the Committee to adjust either award.
g. The LTIP value for 2018 is restated to reflect the final vesting outcome of 46% (compared to the estimated vesting of 53%) for the LTIP award granted on 3
March 2016. The award vested on 2 March 2019 and the share price on the date of vesting was €6.00 compared to the share price used to estimate vesting,
which was €5.23. The restated LTIP outcomes are €279,000 for Pat McCann (€280,000 estimated), and €162,000 for Stephen McNally and Dermot Crowley
(€163,000 estimated). Readers will observe that the final vesting outcome is almost identical to the estimate owing to the off setting variances between the
final vesting percentage and the share price compared with the estimates.
h. Alf Smiddy received compensation of €6 k for expenses incurred in traveling to and from board meetings (2018 €4k). Robert Dix received similar compensation
of €1k (2018 €0k).
i. Elizabeth McMeikan was appointed Non- executive Director of the Board on 8 October 2019. Her fees for 2019 reflect her time in service during the year.
Annual bonus plan outcome for 2019 (audited)
The maximum bonus for 2019 was 110% of salary for CEO Pat McCann and 100% of salary for Stephen McNally and Dermot Crowley,
in line with the previous 2017-2019 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. Overall, the bonus outcome for 2019
was 62.5% of the maximum amount, for each Executive Director, based on performance as set out below.
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 2019, the effect of IFRS16, and the net revaluation movements through profit and loss, which were considered, by the
Remuneration 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 on page 187.
€’000
Threshold
(40% payout)
Target
(50% payout)
Maximum
(100% payout)
Actual
Outcome
Modified EBIT
€102.6m
€108.0m
€115.6m
€108.0m
Performance met 100%
of the target leading to
50% of maximum bonus
payout for this element
Individual strategic objectives
The Committee considered carefully each Directors’ performance against individual strategic objectives set and the outcomes.
The Committee also had regard to the progress made by the senior management team as a whole toward delivering the company’s
strategic objectives.
Objectives set
PAT MCCANN
Culture
Nurture, promote, and monitor the culture and
values of the business to ensure continuity of
the entrepreneurial spirit and capacity for future
growth and development within the Company.
Team Growth
Continue to develop the senior executive team
and each individual within it.
Risk
Development of the risk management process,
including the identification of new and emerging
risks. A review of insurable risk management.
Summary of performance achieved
2019 Outcomes
2019 maximum:
27.5% of base salary
2019 achieved:
27.5%
The continued strength in the company culture
was evidenced in the upward trend in customer
satisfaction scores, employee engagement
scores, a record number of applicants to our
graduate programmes, and public accolades
received by the Company in the business
community during the year.
The number of internal promotions and intra-
property transfers grew in 2019 despite the
absence of new hotel openings; increased
number of participants on structured
development programmes.
Maintained a downward trend in public liability
claims costs per room let and employers liability
claims costs to payroll ratio.
Accelerated the move towards centralised IT
platforms, revised business continuity plans
across all locations, and increased investment in
cyber risk management processes including the
establishment of the Group Privacy Committee.
Established environmental risk management
as a high priority focus for the business through
the formation of the Group Environmental
Steering Committee.
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Objectives set
STEPHEN MCNALLY
Complete integration of six newly opened
hotels to achieve investment targets and
resolve any build completion issues.
Identify future leaders for hotels opening
through 2021.
Summary of performance achieved
2019 outcomes
We have achieved overall financial and non-
financial targets for the new properties.
2019 maximum:
25% of base salary
75% of the potential General Managers
identified; development programmes in place
for high-potential employees identified for other
management roles at the new hotels.
2019 achieved:
25%
Strategic cost management to protect
margins in light of market headwinds.
Maintained and grew EBITDAR margins despite
the RevPAR drop in key markets.
Prepare pro-active Brexit action plan.
Improve Customer satisfaction scores.
Improve levels of employee engagement.
DERMOT CROWLEY
Finance function team development.
Engaged with the strategically important
suppliers to understand the potential implications
of a disruptive Brexit under various scenarios and
developed contingency plans; engaged with hotel
and leisure industry peers to communicate risks
and input to industry-wide risk management.
Stretch targets for customer satisfaction were
achieved for both Clayton and Maldron brands
The group-wide employee engagement score
improved from 78% to 85%, exceeding the
targets set for the year.
Achieved delegation of key management
responsibility objectives within the department,
including in investor relations, banking, and
management of the external audit process.
Achieved development objectives for the shared
services centre.
2019 maximum:
25% of base salary
2019 achieved:
25%
Maintain the reach and effectiveness of
the investor relations programme in light
of challenges encountered as a result of
regulatory changes arising from MIFID 2.
Shareholder sentiment survey conducted on
behalf of the company indicated very strong
levels of support for the investor relations
programme.
Maintain and develop strategic relationships
with funding partners including banking
syndicate and institutional property investors.
12-month extension to banking facilities agreed
and two additional institutional property
investment partners secured.
Secure additional 1,200 rooms for hotel
pipeline and effectively manage the
progress of hotels and hotel extensions
under development.
Group strategy development.
Rooms pipeline development objectives
achieved, all live projects proceeding to plan.
Completed agreed projects and presented
findings to the Board to increase the range of
strategic options for business development.
Shoreditch, London site acquisition was a
product of this activity.
LTIP – vesting outcome of the 2017 award (audited)
The 2017 LTIP award granted to Executive Directors on 22 May 2017 became eligible for vesting following the completion of the
Performance Period on 31 December 2019. Vesting of the award is subject to two performance criteria: 50% of the award is based
on TSR performance compared to the STOXX Europe 600 Travel and Leisure Index, and 50% is based on EPS performance for the
year ended 31 December 2019.
Previously, we reported that TSR performance would be compared with the Dow Jones European STOXX Travel and Leisure Index.
This index has been rebranded, and therefore, we will now be comparing TSR to the STOXX Europe 600 Travel and Leisure Index,
which represents the same sector, geographic focus, size, and complexity, and which is comprised of virtually the same companies
as the original Dow Jones Index. The same performance conditions apply. This change will impact the 2017 and 2018 awards.
The updated index is reflected in the vesting outcomes for the 2017 award, as set out below.
Overall, 67 % of the award will vest based on the assessment of the TSR and EPS performance, as shown below.
TSR1
EPS2
Weighting
Threshold
(25% vesting)
50% Equal to index
Maximum
(100% vesting)
Actual
Equal to or greater
than 10% per annum
above the index
1.2%
per annum
above the index
Vesting
outcome
34%
50%
37.0 cent
46.0 cent
46.0 cent
Overall
Vesting
100%
67% of
maximum
1 TSR vesting is relative to the STOXX Europe 600 Travel and Leisure Index. TSR was calculated using a 3-month average at the start and end of the
performance period (1 January 2017 to 31 December 2019).
2 The maximum EPS vesting target was achieved based on the calculation of Pre-IFRS 16 Adjusted Basic EPS (under the accounting treatment of leases per IAS
17). A detailed calculation of Pre-IFRS 16 Adjusted Basic EPS (in accordance with IAS17) is set out in note 29 to the financial statements on pages 172 and 173.
When considering the level of annual bonus payout and long-term incentive vesting, the Committee also considered the underlying
performance of the Group over the performance period, taking into account performance against key financial and non-financial
indicators as well as the share price performance and the experience of shareholders and other stakeholders. The Committee also
considered whether there had been a significant negative event (such as an ESG event), which would warrant an adjustment. The
Committee concluded the proposed pay-out outcomes detailed above to be appropriate. Overall, the Committee considers that the
Remuneration Policy has operated as it was intended during 2019.
Share incentive plan interests awarded during 2019 (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)
Pat McCann
LTIP
150% of salary
150,121
Dermot Crowley
LTIP
125% of salary
72,885
Stephen McNally
LTIP
125% of salary
72,885
25%
25%
25%
Performance
period
1 Jan 2019 to
31 Dec 2021
1 Jan 2019 to
31 Dec 2021
1 Jan 2019 to
31 Dec 2021
a. Vesting is based on two separate performance criteria: 50% of the award is based on TSR performance compared with the STOXX Europe 600 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 Pre-IFRS 16 Adjusted Basic EPS (calculated under the accounting treatment of Leases per IAS 17) achieved in FY21
with threshold vesting for EPS equal to €0.45 and maximum vesting if EPS is equal to or greater than €0.55.
b. The number of shares awarded was calculated using the volume-weighted average share price on 5 March 2019 (€5.9775), the day prior to the date of
the grant.
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Additional Disclosures
Directors’ and Company Secretary’s share interests
Shares
beneficially
owned
as at 31
December
2018
Shares
beneficially
owned
as at 31
December
2019
Option to
acquire
shares
under
Sharesave
Scheme
Conditional LTIP share awards subject
to performance conditions
2017 Award
(vesting after
31/12/19)
2018 Award
(vesting after
31/12/20)
2019 Award
(vesting after
31/12/21)
Total
Conditional
LTIP Awards
Pat McCann
1,274,515
1,406,860
Dermot Crowley
439,454
489,383
Stephen McNally
449,538
498,335
5,000
5,000
5,000
174,130
145,221
150,121
84,541
84,541
70,506
70,506
72,885
72,885
469,472
227,932
227,932
John Hennessy
100,000
120,000
Robert Dix
Alf Smiddy
Margaret Sweeney
Elizabeth McMeikan
67,858
66,646
46,787
n/a
67,858
66,646
46,787
2,100
Sean McKeon
77,938
98,460
5,000
34,069
28,413
29,372
91,854
a. Shares beneficially owned include those of connected persons and include shares held in trust which are subject to deferral or holding periods.
b. On 2 December 2019, each of the Executive Directors and the Company Secretary exercised options (granted on 2 December 2016) to acquire 6,132
shares each under the Irish Sharesave Scheme. On 2 October 2019 these four individuals were granted options to acquire 5,000 shares each under the Irish
Sharesave Scheme which may be exercised between 2 March 2023 and 2 September 2023.
c. Total conditional LTIP awards include LTIP awards to Executive Directors representing the maximum number of shares which may vest under 2017, 2018, and
2019 LTIP awards based on the performance conditions as described elsewhere in this report. As described on page 91, 67% of the 2017 award will vest as
soon as practicable after December 2019 based on the achievement against the performance conditions.
d. 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 on 31 December 2019 of €5.15, the Executive Director’s beneficial holdings as a percentage of 2019 base salary were as follows:
Pat McCann
Stephen McNally
Dermot Crowley
Beneficial shareholding % base salary
1211%
736%
723%
TSR performance summary and historic remuneration outcomes
The graph below compares the TSR (re-based to 100) over the period since listing to the performance of the ISEQ Index and the
median of the STOXX Europe 600 Travel and Leisure Index.
300
Dalata Hotel Group
ISEQ
STOXX Europe 600 Travel & Leisure Index
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
Mar
19
Jun
19
Sep
19
Dec
19
The following table shows the total remuneration for the Chief Executive for each financial year over the same period.
Single figure (€’000)
Annual bonus outcome
(% of maximum)
LTIP vesting
(% of maximum)
20141
441
67%
2015
840
100%
2016
1,603
90%
2017
1,764
100%
20182
1,511
2019
1,633
100%
62.5%
N/A
N/A
100%
100%
46%
67%
1 Includes remuneration prior to IPO.
2 2018 single figure is restated to reflect the final vesting outcome of LTIP awards granted in 2016 which vested in March 2019.
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
2018
€5.5m
€99.0m
2019
€ 19.4m
€ 106.1m
Change
253%
7.2%
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Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION
Payments to past Directors
There were no payments to past Directors during the year.
Payments for loss of offi ce
There were no payments for loss of offi ce during the year.
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 2018.
Votes For
Votes Against
Total Votes
Votes Withheld
Votes
139,005,024
508,254
139,513,278
1,010,415
%
99.64%
0.36%
100.00%
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 during 2019 at the invitation of the Chair. The Chief
Executive 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 fi nancial interest and no potential confl icts 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 Board approves the remuneration of the Non-executive Directors.
During 2019, 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 concerning executive remuneration consulting. Deloitte Ireland also provided
unrelated corporate fi nance advisory services during the year.
Clayton Hotel
City of London
The Committee appointed Deloitte LLP. It is the view of the Committee that
the Deloitte LLP engagement team that provide remuneration advice to the
Committee do not have connections with the Company or its Directors that may
impair their independence.
The Committee reviewed the potential for confl icts of interest and judged that there
were appropriate safeguards against such confl icts. 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 confi dence
in their advice.
Fees charged by Deloitte LLP during the year were £46,900. These fees were charged
on a time and materials basis.
On behalf of the Board
Margaret Sweeney
Chair, Remuneration Committee
24 February 2020
S
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Dalata Hotel Group plc Annual Report & Accounts 2019
Remuneration Committee Report
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95
DIRECTORS’ REPORT
The Directors present their report and
the consolidated fi nancial statements
of Dalata Hotel Group plc (“Dalata” or
the “Company”) and its subsidiaries
(the “Group”) for the year ended 31
December 2019.
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 2020
Annual General Meeting.
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 Offi cer’s
Review and the Financial Review which
contain a review of operations and the
fi nancial performance of the Group for
2019, the outlook for 2020 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 profi t or
loss and other comprehensive income
for the year ended 31 December 2019
and the consolidated statement of
fi nancial position at that date are set out
on pages 109 and 110 respectively.
Dividends
An interim dividend of 3.5 cent per
share, amounting to €6.5 million, was
paid to shareholders on 4 October
2019. The Directors recommend the
payment of a fi nal dividend of 7.25
cent per share in respect of the year
ended 31 December 2019. Subject to
shareholders’ approval at the Annual
General Meetings on 29 April 2020,
the payment date for the fi nal dividend
is 06 May 2020 to shareholders
registered on the record date of 14
April 2020.
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’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 92.
Audit Committee
The Group has an established Audit and
Risk Committee comprising of three
Independent Non-executive Directors.
Details of the Committee and its
activities are set out on pages 72 to 77.
Share capital
The issued share capital of Dalata Hotel
Group plc at 24 February 2020 consists
of 185,166,504 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 fi nancial statements.
Substantial holdings
As at 24 February 2020, the Company has
been notifi ed of the following interests of
3% or more in its share capital:
Holder
Ameriprise Financial, Inc
FMR LLC
Pioneer Asset Management S.A.
TimesSquare Capital Management, LLC
Directors and Company Secretary
The names of the Directors and
Company Secretary and a biographical
note on each appear on pages 58 to 59.
Blackrock, Inc
I.G. International Limited
Allianz Global Investors GmbH
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 24 to the
consolidated fi nancial statements.
Non-fi nancial 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 49.
Additionally, non-fi nancial concerns are
refl ected in our Strategy and Business
Model on pages 10 to 25 and in our risk
management report on pages 40 to 47.
The Company uses a number of non-
fi nancial 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 fi nancial function.
Number of
Ordinary Shares
% of Shares
in issue
16,739,432
9,148,450
7,936,156
7,601,901
7,466,529
6,867,668
5,755,071
9.04%
4.94%
4.29%
4.11%
4.03%
3.71%
3.11%
The accounting records of the Company
are maintained at its registered offi ce:
4th Floor, Burton Court, Burton Hall Drive,
Sandyford Industrial Estate, Dublin 18.
audit information and to establish
that the Company's External Auditor
is aware of that information.
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 fi nancial statements
and in the Remuneration Committee
report on pages 78 to 95 in relation
to the Long-Term Incentive Plan,
employee share schemes, Directors'
service contracts and appointment
and compensation for loss of offi ce 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 55, is deemed
to be incorporated in this part of the
Directors' Report together with details
of earnings per share in note 29 to
the consolidated fi nancial statements,
employment details in note 6 and details
of fi nancial instruments in note 24.
Corporate Governance regulations
As required by company law, the
Directors have prepared a Report on
Corporate Governance which is set
out on pages 56 to 95, 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 fi nancial
statements respectively.
Relevant audit information
The Directors who held offi ce at the
date of approval of this Directors'
Report confi rm 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
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
specifi ed 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 confi rm 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
fi nancial year, of those arrangements
and structures.
Going concern
The current activities of the Group
and those factors likely to aff ect its
future development, together with
a description of its fi nancial position,
are described in the Strategic Report.
Principal risks and uncertainties
aff ecting 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 aff ecting the carrying
values of assets and liabilities of the
Group are discussed in note 1 to the
consolidated fi nancial 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
fi nancial statements.
Political contributions
There were no political contributions
which require disclosure under the
Electoral Act, 1997.
Independent auditors
KPMG, Chartered Accountants, were
appointed statutory auditor in 2014
and reappointed on 30 June 2016
and pursuant to section 383(2) of
the Companies Act 2014 will continue
in offi ce.
Subsidiaries
Information on the Group’s subsidiaries
is set out in note 28 to the consolidated
fi nancial statements.
Subsequent events
Details of subsequent events are set
out in note 27 to the consolidated
fi nancial statements.
Approval of Financial Statements
The Financial Statements were
approved by the Board on 24
February 2020.
On behalf of the Board
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Chair
Pat McCann
Director
24 February 2020
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Dalata Hotel Group plc Annual Report & Accounts 2019
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Clayton Hotel Manchester Airport
Financial
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Financial Statements
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Statement of Directors’ Responsibilities in respect
of the Annual Report and the Financial Statements
Independent Auditor’s Report
Consolidated statement of profi t or loss
and other comprehensive income
Consolidated statement of fi nancial position
Consolidated statement of changes in equity
Consolidated statement of cash fl ows
Notes to the consolidated fi nancial statements
1 Signifi cant accounting policies
2 Operating segments
3 Statutory and other information
4 Other income
5
Finance costs
6 Personnel expenses
7 Share-based payments expense
8 Tax charge
9
Intangible assets and goodwill
10 Property, plant and equipment
11 Transition impact of IFRS 16 Leases
12 Leases
13
Investment property
14 Contract fulfi lment costs
15 Trade and other receivables
16
17 Cash and cash equivalents
18 Capital and reserves
19 Trade and other payables
20 Provision for liabilities
21 Loans and borrowings
22 Derivatives
23 Deferred tax
24 Financial instruments and risk management
25 Commitments
26 Related party transactions
27 Subsequent events
28 Subsidiary undertakings
29 Earnings per share
30 Approval of the fi nancial statements
Company statement of fi nancial position
Company statement of changes in equity
Company statement of cash fl ows
Notes to the Company fi nancial statements
Inventories
Supplementary Financial Information
Alternative Performance Measures (“APM”)
Glossary
Advisor and Shareholder Contacts
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Dalata Hotel Group plc Annual Report & Accounts 2019
Dalata Hotel Group plc Annual Report & Accounts 2019
Financial Statements
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99
FINANCIAL
STATEMENTS
Statement of Directors’ Responsibilities
in respect of the Annual Report and the
Financial Statements
The Directors are responsible for
preparing the annual report and the
consolidated and Company financial
statements, in accordance with
applicable law and regulations.
Company law requires the Directors
to prepare consolidated and Company
financial statements 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:
> select suitable accounting policies
and then apply them consistently;
> make judgements and estimates that
are reasonable and prudent;
> state whether applicable accounting
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.
On behalf of the Board
John Hennessy
Chair
Patrick McCann
Director
24 February 2020
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 58 to
59 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 2019 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.
100
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Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION
Independent Auditor’s Report
to the members of Dalata Hotel Group plc
Independent Auditor’s Report
to the members of Dalata Hotel Group plc (continued)
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.
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 2019. 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.
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 €1,324.5 million (2018: €1,077.2 million)
Refer to page 74 (Audit and Risk Committee Report), note 1(xi) to the consolidated financial statements (accounting policy for
property, plant and equipment), and note 10 to the consolidated financial statements (financial disclosures – property, plant
and equipment).
The key audit matter
How the matter was addressed in
our audit
Our findings
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 and fittings and equipment for
accounting purposes.
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 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.
Report on the audit of
the financial statements
Opinion
We have audited the financial
statements of Dalata Hotel Group plc
(‘the Company’) for the year ended 31
December 2019, 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
2019 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.
102
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Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 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)
IFRS 16 lease accounting – carrying value of right of use assets €386.4 million (2018: €nil) and lease liabilities of €362.1
million (2018: €nil)
Refer to page 74 (Audit and Risk Committee Report), note 1(vii) to the consolidated financial statements (accounting policy for
leases), note 11 to the consolidated financial statements (transition impact of IFRS 16 Leases), and note 12 to the consolidated
financial statements (financial disclosures – leases).
Accounting for hotel acquisitions
Refer to page 75 (Audit and Risk Committee Report), note 1((iv),(vii) and (xi)) to the consolidated financial statements
(accounting policies for business combinations, leases, and property plant and equipment), note 10 to the consolidated financial
statements (financial disclosures – property, plant and equipment) and note 12 to the consolidated financial statements
(financial disclosures – leases).
The key audit matter
How the matter was addressed in our
audit
Our findings
The key audit matter
How the matter was addressed in our
audit
Our findings
Our audit procedures did not
identify any material issues with
regard to the implementation
of IFRS 16 Leases. In our view,
the financial statements contain
appropriately detailed disclosures
in relation to the impact of IFRS 16
Leases, primarily in notes 11 and
12 to the consolidated financial
statements.
The first-time application of IFRS 16
Leases in 2019 has a highly material
impact on the Group’s financial
statements because the Group
operates a significant number of hotels
through lease arrangements.
Potential risks of material
misstatement associated with IFRS 16
Leases implementation are as follows:
» Accounting differences and impacts
relating to IFRS 16 adoption are not
completely identified;
» The accounting treatments applied
do not reflect the key terms of the
leases;
» Key judgements applied in IFRS
16 accounting (e.g. in relation to
discount rates) are not adequately
supported;
» Transition options and practical
expedients are not appropriately
applied;
» Transition date recognition and
measurement adjustments are not
accurately recorded;
» New leases, or changes to leases,
after the transition date are not
accounted for in accordance with
IFRS 16; and
» Required disclosures under IFRS 16
are omitted, incomplete, inaccurate
or not fairly presented.
Our audit procedures included among
others:
» Considering the appropriateness of
the selection of accounting policies
based on the requirements of IFRS
16;
» Determining whether the transition
approach applied was consistent
with the requirements of IFRS 16;
» Reviewing the design and
implementation of relevant controls
over IFRS 16 accounting;
» Evaluating the reasonableness of,
and support for, management’s key
judgements and estimates made
in the application of IFRS 16, and in
particular the discount rate applied;
» Evaluating the completeness,
accuracy and relevance of data used
in IFRS 16 calculations, including in
relation to lease length, payments
and other relevant factors;
» Independently recalculating lease
liabilities and right-of-use assets and
comparing them to management’s
calculations; and
» Evaluating the completeness,
accuracy and relevance of the
relevant disclosures in the financial
statements.
Our audit procedures did not
identify any material issues with
regard to the determination as
to whether the hotel acquisitions
in the year were business
combinations, asset purchases,
or leases, and the associated
accounting applied for same.
The following hotel acquisitions were
completed in the year: (i) the Clayton
Hotel City of London; and (ii) the
Tamburlaine Hotel, Cambridge.
Hotel acquisitions give rise to a risk
of material misstatement, if each
acquisition is not correctly identified
as (i) a business combination or (ii) an
asset purchase or (iii) another type of
transaction (e.g. lease), according to
the substance of the transactions, and
accounted for in accordance with the
relevant accounting standards.
In particular, for any business
combinations, the consideration paid,
the costs incurred, the fair value of the
assets and liabilities acquired and any
goodwill arising must all be identified,
measured and recorded appropriately.
Our audit procedures included among
others:
» Inspecting acquisition agreements
and related documentation;
» Examining the accounting papers
prepared by Group management
on the accounting treatment for
each transaction, and evaluating
the substance of the transactions;
» Independently considering whether
the acquisitions were business
combinations or asset purchases
or leases;
» Reviewing the accounting for the
amounts recorded in relation to
these transactions and evaluating
whether the relevant accounting
standards had been applied; and
» Considering the adequacy of the
Group’s disclosures in relation to
acquisitions in the year.
104
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Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 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
The materiality for the consolidated
financial statements as a whole was
set at €4.4 million (2018: €4.3 million).
This has been calculated with reference
to a benchmark of consolidated 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 2019
amounts to €1,984.0 million (2018:
€1,319.1 million) and our materiality
measure represents 0.22% of total
assets (2018: 0.33%) 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 €0.2 million (2018:
€0.2 million), in addition to other audit
misstatements below that threshold
that we believed warranted reporting on
qualitative grounds.
We subjected all of the Group’s
reporting components to audits for
group reporting purposes. The work on
all components was performed by the
Group audit team.
Materiality for the Company financial
statements as a whole was set at €4.0
million (2018: €4.0 million), determined
with reference to a benchmark of total
assets, of which it represents 0.52%
(2018: 0.51%).
We have nothing to report
on going concern
We are required to report to you if:
» we have anything material to add or
draw attention to in relation to the
Directors’ statement in note 1 to the
financial statements on the use of the
going concern basis of accounting
with no material uncertainties that
may cast significant doubt over the
Group’s and Company’s use of that
basis for a period of at least twelve
months from the date of approval of
the financial statements; or
» if the related statement under the
Listing Rules set out on page 97
is materially inconsistent with our
audit knowledge.
We have nothing to report in these
respects.
Other information
The Directors are responsible for the
preparation of 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,
Strategy and Business Model section,
Operations Review, Financial Review,
Risk Management section, Responsible
Business Report, Chair’s Overview
– Corporate Governance section,
Board of Directors section, Executive
Management Team section, Corporate
Governance Report, Nomination
Committee Report, Remuneration
Committee Report, Audit and Risk
Committee Report, and Supplementary
Financial 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.
Based solely on our work on the other
information we report that, in those
parts of the Directors’ Report specified
for our consideration:
» we have not identified
material misstatements in the
Directors’ Report;
» in our opinion, the information given
in the Directors’ Report is consistent
with the financial statements; and
» in our opinion, the Directors’ Report
has been prepared in accordance with
the Companies Act 2014.
Disclosures of principal risks and
longer-term viability
Based on the knowledge we acquired
during our financial statements audit,
we have nothing material to add or draw
attention to in relation to:
» the Principal Risks disclosures
describing these risks and explaining
how they are being managed and
mitigated;
» the Directors’ confirmation within
the Viability Statement on page 46
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.
The Listing Rules of Euronext Dublin
and the UK Listing Authority require us
to review:
» the Directors’ Statements, set out on
pages 46 and 97, in relation to going
concern and longer-term viability;
» the part of the Corporate Governance
Statement on pages 56 to 69 relating
to the Company’s compliance with
the provisions of the UK Corporate
Governance Code and the Irish
Corporate Governance Annex
specified for our review; and
» certain elements of disclosures
in the report to shareholders
by the Board of Directors’
Remuneration Committee.
Respective
responsibilities and
restrictions on use
Directors’ responsibilities
As explained more fully in their
statement set out on pages 100 and
101, 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.
Other corporate
governance disclosures
We are required to address the following
items and report to you in the following
circumstances:
» Fair, balanced and understandable:
if we have identified material
inconsistencies between the
knowledge we acquired during our
financial statements audit and the
Directors’ statement that they
consider that the Annual Report and
financial statements taken as a whole
is fair, balanced and understandable
and provides the information
necessary for shareholders to assess
the Group’s position and performance,
business model and strategy;
» Audit and Risk Committee Report:
if the section of the Annual Report
describing the work of the Audit
and Risk Committee does not
appropriately address matters
communicated by us to the Audit and
Risk Committee;
» Statement of compliance with UK
Corporate Governance Code: if the
Directors’ statement does not
properly disclose a departure from
provisions of the UK Corporate
Governance Code specified by the
Listing Rules of Euronext Dublin
and/or the UK Listing Authority 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 56 to
69, 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
2006 and specified for our
consideration, is consistent with the
financial statements and has been
prepared in accordance with the Act;
» 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, the information
required by the Act is contained in the
Corporate Governance Statement.
Our opinions on other matters
prescribed by the Companies Act
2014 are unmodified
We have obtained all the information
and explanations which we consider
necessary for the purpose of our audit.
In our opinion, the accounting records of
the 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 2019 as required by
the European Union (Disclosure of Non-
Financial and Diversity Information by
certain large undertakings and groups)
(amendment) Regulations 2018.
106
107
Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION Independent Auditor’s Report
to the members of Dalata Hotel Group plc (continued)
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
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.
Patricia Carroll
for and on behalf of
KPMG
Chartered Accountants,
Statutory Audit Firm
1 Stokes Place
St. Stephen’s Green
Dublin 2
24 February 2020
Consolidated statement of profit or loss
and other comprehensive income
for the year ended 31 December 2019
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Other income
Operating profit
Finance costs
Profit before tax
Tax charge
Profit for the year attributable to owners of the Company
Other comprehensive income
Items that will not be reclassified to profit or loss
Revaluation of property
Related deferred tax
Items that are or may be reclassified subsequently to profit or loss
Exchange difference on translating foreign operations
(Loss)/gain on net investment hedge
Fair value movement on cash flow hedges
Cash flow hedges – reclassified to profit or loss
Related deferred tax
Note
2
4
5
8
10
23
22
22
23
2019
€’000
429,184
(154,584)
274,600
(155,505)
1,206
120,301
(30,613)
89,688
(11,476)
78,212
120,723
(17,272)
103,451
23,592
(16,987)
(4,238)
1,177
382
3,926
Restated*
2018
€’000
392,568
(142,275)
250,293
(157,515)
4,037
96,815
(9,514)
87,301
(12,077)
75,224
102,946
(9,634)
93,312
(2,667)
1,625
(554)
1,026
(59)
(629)
Other comprehensive income for the year, net of tax
107,377
92,683
Total comprehensive income for the year attributable to owners of the Company
185,589
167,907
Earnings per share
Basic earnings per share
Diluted earnings per share
29
29
42.4 cents
40.9 cents
42.0 cents
40.4 cents
* Income from managed hotels has been reclassified from revenue to other income for the year ended 31 December 2019. The prior year figures have been restated for
this reclassification (note 1).
108
109
Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION Consolidated statement of financial position
at 31 December 2019
Consolidated statement of changes in equity
for the year ended 31 December 2019
Assets
Non-current assets
Intangible assets and goodwill
Property, plant and equipment
Right-of-use assets
Investment property
Deferred tax assets
Contract fulfilment costs
Other receivables
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
Lease liabilities
Deferred tax liabilities
Derivatives
Provision for liabilities
Total non-current liabilities
Current liabilities
Lease liabilities
Trade and other payables
Derivatives
Current tax liabilities
Provision for liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
On behalf of the Board:
At 1 January 2019
Comprehensive income:
Profit for the year
Other comprehensive income
Exchange difference on
translating foreign operations
Loss on net investment hedge
Revaluation of properties
(note 10)
Fair value movement on
cash flow hedges (note 22)
Cash flow hedges – reclassified
to profit or loss (note 22)
Related deferred tax (note 23)
Total comprehensive
income for the year
Transactions with owners of
the Company:
Equity-settled share-based
payments (note 7)
Vesting of share awards and
options (note 7)
Dividends paid (note 18)
Total transactions with
owners of the Company
At 31 December 2019
Note
2019
€’000
2018
€’000
9
10
12
13
23
14
15
15
16
17
18
18
18
18
18
18
18
18
21
12
23
22
20
12
19
22
20
36,133
1,471,315
386,407
2,149
3,527
13,346
6,760
1,919,637
21,802
1,927
40,586
64,315
1,983,952
1,851
504,488
25,724
(10,337)
4,900
(3,958)
351,869
(6,593)
204,897
1,072,841
411,739
331,544
59,358
4,434
4,804
811,879
30,557
66,163
89
664
1,759
99,232
911,111
1,983,952
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
Attributable to owners of the Company
Share
capital
€’000
Share
premium
€’000
Capital
contribution
€’000
Merger
reserve
€’000
Share-
based
payment
reserve
€’000
Hedging
reserve
€’000
Revaluation
reserve
€’000
Translation
reserve
€’000
Retained
earnings
€’000
Total
€’000
1,843
503,113
25,724 (10,337) 4,232 (1,279)
248,418
(13,198)
144,061
902,577
-
-
-
-
-
-
-
-
-
8
-
-
-
-
-
-
-
-
-
-
1,375
-
8
1,851
1,375
504,488
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120,723
(4,238)
-
1,177
382
-
(17,272)
-
78,212
78,212
23,592
(16,987)
-
-
-
-
-
-
-
-
-
-
23,592
(16,987)
120,723
(4,238)
1,177
(16,890)
(2,679)
103,451
6,605
78,212
185,589
2,679
(2,011)
-
-
-
-
-
-
-
-
-
-
-
2,679
2,011
(19,387)
1,383
(19,387)
-
-
25,724 (10,337) 4,900 (3,958)
668
-
-
351,869
-
(6,593)
(17,376)
(15,325)
204,897 1,072,841
John Hennessy
Chair
Patrick McCann
Director
110
111
Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION Consolidated statement of changes in equity
for the year ended 31 December 2018
Consolidated statement of cash flows
for the year ended 31 December 2019
Attributable to owners of the Company
Share
capital
€’000
Share
premium
€’000
Capital
contribution
€’000
Merger
reserve
€’000
Share-
based
payment
reserve
€’000
Hedging
reserve
€’000
Revaluation
reserve
€’000
Translation
reserve
€’000
Retained
earnings
€’000
Total
€’000
1,837
503,113
25,724 (10,337)
2,753
(1,692) 155,106
(12,156)
73,045 737,393
-
-
-
-
-
-
-
-
-
6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
102,946
(554)
-
1,026
(59)
-
(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)
-
-
-
-
-
-
-
-
-
-
-
2,800
1,321
(5,529)
6
(5,529)
6
1,843
-
503,113
-
-
25,724 (10,337)
1,479
4,232
-
-
(1,279) 248,418
-
(2,723)
(13,198) 144,061 902,577
(4,208)
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
(note 10)
Fair value movement on cash
flow hedges (note 22)
Cash flow hedges – reclassified
to profit or loss (note 22)
Related deferred tax (note 23)
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
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Net revaluation movements through profit or loss
Share-based payment expense
Interest on lease liabilities
Other interest and finance costs
Tax charge
Increase in trade and other payables and provision for liabilities
Increase in current and non-current receivables
Decrease/(increase) in inventories
Tax paid
Net cash from operating activities
Cash flows from investing activities
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
Purchase of intangible assets
Net cash used in investing activities
Cash flows from financing activities
Interest paid on lease liabilities
Other interest and finance costs paid
Receipt of bank loans
Repayment of bank loans
Repayment of lease liabilities
Dividends paid
Proceeds from vesting of share awards and options
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of movements in exchange rates
Cash and cash equivalents at the end of the year
2019
€’000
2018
€’000
78,212
75,224
26,183
17,127
195
(1,601)
2,679
18,945
11,668
11,476
164,884
1,569
(793)
85
(10,776)
154,969
(176,933)
(3,528)
(5,790)
-
(1,076)
(187,327)
(18,945)
(11,196)
134,437
(42,158)
(8,569)
(19,387)
1,383
35,565
3,207
35,907
1,472
40,586
19,698
-
44
3,137
2,800
-
9,514
12,077
122,494
7,950
(2,414)
(191)
(12,085)
115,754
(112,692)
(304)
(3,734)
(5,613)
-
(122,343)
-
(13,188)
137,902
(92,563)
-
(5,529)
6
26,628
20,039
15,745
123
35,907
112
113
Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION Notes to the consolidated financial statements
forming part of the consolidated financial statements
1
Significant accounting policies
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 2019 include the Company and its
subsidiaries (together referred to as the ‘Group’). The financial
statements were authorised for issue by the Directors on 24
February 2020.
Measurement of fair values
A number of the Group’s accounting policies and disclosures
require the measurement of assets and liabilities at fair value.
When measuring the fair value of an asset or liability, the Group
uses observable market data as far as possible, with non-
financial assets being measured on a highest and best-use
basis. Fair values are categorised into different levels in a fair
value hierarchy based on the inputs used in the valuation
techniques as follows:
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.
In preparing these financial statements, the critical judgements
made by Directors in applying the Group’s accounting policies
and the key sources of estimation uncertainty were the same
as those that applied to the consolidated financial statements
as at and for the year ended 31 December 2018 with the
exception of estimates surrounding the implementation
of IFRS 16 Leases, which is effective for the first time in the
financial year ended 31 December 2019. Estimates surrounding
the determination of the appropriate rate to discount
lease payments under IFRS 16 Leases is a new source of
estimation uncertainty.
The key judgements and estimates impacting these
consolidated financial statements are as follows:
Significant judgements
» Carrying value of own-use property measured at fair value
(note 10);
» Carrying value of goodwill including assumptions
underpinning the impairment tests (note 9); and
» Accounting for hotel acquisitions (notes 10,12).
Key source of estimation uncertainty
» Appropriate discount rate for lease payments with regard to
the implementation of IFRS 16 Leases (note 11).
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
Further information about the assumptions made in measuring
fair values is included in note 24 – Financial instruments and
risk management (in relation to financial assets and financial
liabilities) and note 10 – Property, plant and equipment.
(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 25 of the annual report. Note 24
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.
(ii) Statement of compliance (continued)
The following standards and interpretations were effective for
the Group for the first time from 1 January 2019:
» IFRS 16 Leases;
» Annual Improvements to IFRS Standards 2015-2017 Cycle;
» Amendments to IAS 19 Plan Amendment, Curtailment
or Settlement;
» Amendments to IAS 28 Long-term Interests in Associates and
Joint Ventures;
» IFRIC 23 Uncertainty over Income Tax Treatments;
» IFRIC 22 Foreign Currency Transactions and Advance
Consideration; and
» Amendments to IFRS 9 Prepayment Features with
Negative Compensation.
With the exception of IFRS 16 Leases, the above standards,
amendments and interpretations have no material impact
on the consolidated results of the Group. The IFRS 16
Leases impact on the consolidated results of the Group is
discussed hereafter.
Changes in accounting policies
Leases
The accounting policy for lease payments as included in the
2018 consolidated financial statements has been replaced
with the accounting policy as set out in (vii) Leases effective,
from the date of initial application of IFRS 16 Leases being 1
January 2019.
IFRS 16 Leases introduces an on-balance sheet accounting
model for lessees. As a result, the Group, as a lessee, has
recognised right-of-use assets representing its rights to use
the underlying assets and lease liabilities representing its
obligation to make lease payments in its statement of financial
position. The Group has applied IFRS 16 Leases using the
modified retrospective approach. Accordingly, the comparative
information for 2018 has not been restated.
The impact of IFRS 16 Leases is detailed in notes 11 and 12 to
the consolidated financial statements.
Change in reportable segments
During the year ended 31 December 2019, the Group changed
the composition of operating segments. This reflected the
decreasing importance of management fees as an element
of the business and reflects the way the information is now
reported and analysed internally by the chief operating
decision makers.
The change in the revenue recognition accounting policy is
isolated to a change in classification. In the year ended 31
December 2018, management fees, earned from hotels
managed by the Group were recognised within revenue. From
1 January 2019, the Group has included income earned from
managed hotels within other income as a consequence of the
change in reportable segments referred to hereafter.
The effect of the change on the prior year would have resulted
in a decrease in revenue of €1.2 million for the year ended 31
December 2018, with a corresponding increase in other income
of the same amount. These comparatives have been restated.
The impact of this change on the comparatives for the Group
for the year ended 31 December 2019 is presented hereafter.
As reported in
31 December
2018
Financial
Statements
€’000
31 December
2018
Adjustments
€’000
31 December
2018
Restated
€’000
Revenue
Other income
393,736
2,869
(1,168)
1,168
392,568
4,037
If the Group had applied the previous composition of operating
segments in the current year, this would have resulted in an
increase in reported revenue of €0.9 million for the year ended
31 December 2019, with a corresponding decrease in other
income of the same amount.
Standards issued but not yet effective
The following amendments to standards have been endorsed
by the EU, are available for early adoption and are effective from
1 January 2020 as indicated below. The Group has not adopted
these amendments to standards early, and instead intends to
apply from their effective date as determined by the date of EU
endorsement. The potential impact of these amendments to
standards on the Group is under review:
» Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate
Benchmark Reform (issued on 26 September 2019).
» Amendments to IAS 1 and IAS 8 Definition of Material (issued
on 31 October 2018).
» Amendments to References to the Conceptual Framework
in IFRS Standards (issued on 29 March 2018).
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 (issued on 18 May 2017), IASB
effective date 1 January 2021.
» Amendment to IFRS 3 Business Combinations (issued on 22
October 2018), IASB effective date 1 January 2020.
» Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current (issued on
23 January 2020). IASB effective date 1 January 2020.
(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.
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Significant accounting policies (continued)
1
Significant accounting policies (continued)
(iv) Basis of consolidation
The consolidated financial statements include the financial
statements of the Company and all of its subsidiary undertakings.
Rental income from investment property is recognised on a
straight-line basis over the term of the lease and is included
within other income.
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.
When an acquisition does not represent a business, it is accounted
for as a purchase of a group of assets and liabilities, not as a
business combination. The cost of the acquisition is allocated to
the assets and liabilities acquired based on their relative fair values,
and no goodwill is recognised. Where the Group solely purchases
the freehold interest in a property, this is accounted for as an asset
purchase and not as a business combination on the basis that the
asset(s) purchased do not constitute a business. Asset purchases
are accounted for as additions to property, plant and equipment.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability
to affect those returns through its power over the entity.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
commences until the date that control ceases. Intra-group
balances and transactions, and any unrealised income and
expenses arising from intra-group transactions, are eliminated.
(v) Revenue recognition
Revenue represents sales (excluding VAT) of goods and
services net of discounts provided in the normal course of
business and is recognised when services have been rendered.
Revenue is derived from hotel operations and includes the rental
of rooms, food and beverage sales, car park revenue and leisure
centre membership in leased and owned hotels operated by the
Group. Revenue is recognised when rooms are occupied and
food and beverages are sold. Car park revenue is recognised
when the service is provided. Leisure centre membership
revenue is recognised over the life of the membership.
Revenue in respect of 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.
Management fees are earned from hotels managed by the
Group. Management fees are normally a percentage of hotel
revenue and/or profit and are recognised when earned and
recoverable under the terms of the management agreement.
Management fee income is included within other income.
(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) Leases
Lease payments pre application of IFRS 16 Leases
Prior to 1 January 2019 and the application of IFRS 16 Leases
the following accounting policy was effective. As permitted
upon transition to IFRS 16 Leases and under the modified
retrospective approach selected by the Group, the comparative
2018 information has not been restated.
Payments made under operating leases were recognised in
profit or loss on a straight-line basis over the term of the lease.
Certain hotel operating lease agreements included minimum
rental payments with further contingent rent payable depending
on the financial performance of the hotel. Contingent rent was
recognised in profit or loss based on performance in the year.
Initial direct costs associated with entering into a new lease
were recognised as a prepayment and were amortised to profit
or loss on a straight-line basis over the term of the lease.
Lease payments post application of IFRS 16 Leases with effect
from 1 January 2019
At inception of a lease contract, the Group assesses whether a
contract is, or contains, a lease. If the contract conveys the right
to control the use of an identified asset for a period of time in
exchange for consideration, it is recognised as a lease.
To assess the right to control, the Group assesses whether:
» the contract involves the use of an identified asset;
» the Group has the right to obtain substantially all of the
economic benefits from the use of the asset; and
» the Group has the right to direct the use of the asset.
A lease liability is initially measured at the present value of the
lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that
rate cannot be readily determined, the Group’s incremental
borrowing rate. The Group uses its incremental borrowing rate
as the discount rate, which is defined as the estimated rate of
interest that the lessee would have to pay to borrow, over a
similar term and with a similar security, the funds necessary to
obtain an asset of a similar value to the right-of-use asset in
a similar economic environment. The estimated incremental
borrowing rate for each leased asset is derived from country
specific risk-free interest rates over the relevant lease term,
adjusted for the finance margin attainable by each lessee and
asset specific adjustments designed to reflect the underlying
asset’s location and condition.
(vii) Leases (continued)
Lease payments post application of IFRS 16 Leases with effect
from 1 January 2019 (continued)
Lease payments included in the measurement of the lease
liability comprise the following:
» fixed payments (including in-substance fixed payments) less
any lease incentives receivable;
» variable lease payments that depend on an index or a
rate, initially measured using the index or rate as at the
commencement date;
» amounts expected to be payable under a residual
value guarantee;
» the exercise price under a purchase option that the Group is
reasonably certain to exercise; and
» penalties for early termination of a lease unless the Group is
reasonably certain not to terminate early.
Variable lease payments linked to future performance or use of
an underlying asset are excluded from the measurement of the
lease liability and the right-of-use asset. The related payments
are recognised as an expense in the period in which the event or
condition that triggers those payments occurs and are included
in administrative expenses in profit or loss.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying
amount to reflect lease payments.
The Group remeasures the lease liability where lease payments
change due to changes in an index or rate, changes in expected
lease term or where a lease contract is modified. When the
lease liability is remeasured, a corresponding adjustment is
made to the carrying amount of the right-of-use asset or is
recorded in profit or loss if the carrying amount of the right-of-
use asset has been reduced to zero.
The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement
date, plus any initial direct costs incurred and an estimate of
costs to dismantle and remove the underlying asset or to
restore the underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using
the straight-line method from the commencement date to
the earlier of the end of the useful life of the right-of-use
asset or the end of the lease term. Right-of-use assets are
reviewed on an annual basis or whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. The Group applies IAS 36 Impairment of Assets to
determine whether a cash-generating unit with a right-of-use
asset is impaired and accounts for any identified impairments
through profit or loss. The right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability. The Group applies the fair
value model in IAS 40 Investment Property to right-of-use assets
that meet the definition of investment property.
The Group has elected not to recognise right-of-use assets
and lease liabilities for short-term leases of fixtures, fittings and
equipment that have a lease term of 12 months or less and
leases of low-value assets. Assets are considered low value if
the value of the asset when new is less than €5,000. The Group
recognises the lease payments associated with these leases as
an expense on a straight-line basis over the lease term.
(viii) Share-based payments
The grant date fair value of equity-settled share-based payment
awards and options granted to employees is recognised as
an expense, with a corresponding increase in equity, over the
vesting period of the awards and options. This incorporates the
effect of market-based conditions, where applicable, and the
estimated fair value of equity-settled share-based payment
awards issued with non-market performance conditions.
The amount recognised as an expense is adjusted to reflect
the number of awards and options for which the related service
and any non-market performance conditions are expected to
be met, such that the amount ultimately recognised is based
on the number of awards that 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
and options, the cumulative expense recognised in the share-
based payment reserve is transferred directly to retained
earnings. An increase in ordinary share capital and share
premium, in the case where the price paid per share is higher
than the cost per share, is recognised reflecting the issuance of
shares as a result of the vesting of the awards and options.
The dilutive effect of outstanding awards is reflected as
additional share dilution in calculating diluted earnings per share.
(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.
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Significant accounting policies (continued)
1
Significant accounting policies (continued)
(ix) Tax (continued)
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. Borrowing costs
incurred in the construction of major assets or development
projects which take a substantial period of time to complete
are capitalised in the financial period in which they are incurred.
Once construction is complete and the hotel is operating, the
assets will be transferred to land and buildings 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
Residual values and useful lives are reviewed and adjusted if
appropriate at each reporting date.
Land and buildings are revalued by qualified valuers on a
sufficiently regular basis using open market value (which
reflects a highest and best use basis) so that the carrying value
of an asset does not materially differ from its fair value at the
reporting date. External revaluations of the Group’s land and
buildings have been carried out in accordance with the Royal
Institution of Chartered Surveyors (RICS) Valuation Standards
and IFRS 13 Fair Value Measurement.
Surpluses on revaluation are recognised in other
comprehensive income and accumulated in equity in the
revaluation reserve, except to the extent that they reverse
impairment losses previously charged to profit or loss, in which
case the reversal is recorded in profit or loss. Decreases in
value are charged against other comprehensive income and
the revaluation reserve to the extent that a previous gain has
been recorded there, and thereafter are charged through profit
or loss.
Fixtures, fittings and equipment are reviewed for impairment
when events or changes in circumstances indicate that
the carrying value may not be recoverable. Assets that do
not generate independent cash flows are combined into
cash-generating units. If carrying values exceed estimated
recoverable amounts, the assets or cash-generating units are
written down to their recoverable amount. Recoverable amount
is the greater of fair value less costs to sell and 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 revalued by professional
external valuers at their respective fair values. The difference
between the fair value of an investment property at the
reporting date and its carrying value prior to the external
valuation is recognised in profit or loss.
The Group’s investment properties are valued by qualified
valuers on an open market value basis in accordance with
the Royal Institution of Chartered Surveyors (RICS) Valuation
Standards and IFRS 13 Fair Value Measurement.
(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.
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 purposes of impairment
testing, assets are grouped together into the smallest group
of assets that generate cash inflows from continuing use that
are largely independent of the cash inflows of other assets or
groups of assets (the ‘cash-generating unit’).
The goodwill acquired in a business combination, for the
purpose of impairment testing, is allocated to cash-generating
units that are expected to benefit from the synergies of
the combination.
The recoverable amount of a cash-generating unit is the
greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects a current market assessment of the time value of
money and the risks specific to the asset.
An impairment loss is recognised in profit or loss if the carrying
amount of a cash-generating unit exceeds its estimated
recoverable amount. Impairment losses recognised in respect
of cash-generating units are allocated first to reduce the
carrying amount of any goodwill allocated to the units and
then to reduce the carrying amount of the other assets in the
units on a pro-rata basis. Impairment losses of goodwill are not
reversed once recognised.
The impairment testing process requires management to make
significant judgements and estimates regarding the future
cash flows expected to be generated by the cash-generating
unit. Management evaluates and updates the judgements and
estimates which underpin this process on an ongoing basis.
The impairment methodology and key assumptions used by the
Group for testing goodwill for impairment are outlined in note 9.
The assumptions and conditions for determining impairment
of goodwill reflects management’s best estimates and
judgements, but these items involve significant inherent
uncertainties, many of which are not under the control of
management. As a result, accounting for such items could
result in different estimates or amounts if management
used different assumptions or if different conditions occur in
the future.
(xiv) Intangible assets other than goodwill
An intangible asset is only recognised where the item lacks a
physical presence, is identifiable, non-monetary, controlled by
the Group and expected to provide future economic benefits to
the Group.
Intangible assets are measured at cost (or fair value when
acquired through business combinations), less accumulated
amortisation and impairment losses.
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.
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Significant accounting policies (continued)
1
Significant accounting policies (continued)
(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 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) 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.
Finance costs also include interest on lease liabilities since the
date of initial application of IFRS 16 Leases.
(xx) Foreign currency
Transactions in currencies other than the functional currency of
a Group entity are recorded at the rate of exchange prevailing
on the date of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are
retranslated into the respective functional currency at the
relevant rates of exchange ruling at the reporting date. Foreign
exchange differences arising on translation are recognised in
profit or loss.
The assets and liabilities of foreign operations are translated
into Euro at the exchange rate ruling at the reporting date. The
income and expenses of foreign operations are translated into
Euro at rates approximating the exchange rates at the dates of
the transactions.
Foreign exchange differences arising on the translation of
foreign operations are recognised in other comprehensive
income, and are included in the translation reserve within equity.
(xxi) Provisions and contingent liabilities
A provision is recognised in the statement of financial position
when the Group has a present legal or constructive obligation
as a result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation. If
the effect is material, provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
The provision in respect of self-insured risks includes
projected settlements for known claims and incurred but not
reported claims.
Where it is not probable that an outflow of economic benefits
will be required, or the amount cannot be estimated reliably,
the obligation is disclosed as a contingent liability, unless the
probability of an outflow of economic benefits is remote.
Possible obligations, whose existence will only be confirmed
by the occurrence or non-occurrence of one or more future
events, are also disclosed as contingent liabilities unless the
probability of an outflow of economic benefits is remote.
(xxii) Ordinary shares
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issuance of ordinary shares are
recognised as a deduction from equity, net of any tax effects.
(xxiii) Loans and borrowings
Loans and borrowings are recognised initially at fair value of
consideration received, less directly attributable transaction
costs. Subsequent to initial recognition, loans and borrowings
are stated at amortised cost with any difference between cost
and redemption value being recognised in profit or loss over
the period of the borrowings on an effective interest rate basis.
Directly attributable transaction costs are amortised to profit or
loss on an effective interest rate basis over the term of the loans
and borrowings. This amortisation charge is recognised within
finance costs. Commitment fees incurred in connection with
loans and borrowings are expensed as incurred to profit or loss.
(xxiv) Derecognition of financial liabilities
The Group removes a financial liability from its statement of
financial position when it is extinguished (when its contractual
obligations are discharged, cancelled, or expire).
The Group also derecognises a financial liability when the
terms and the cash flows of a modified liability are substantially
different. The terms are substantially different if the discounted
present value of the cash flows under the new terms,
discounted using the original effective interest rate, including
any fees paid net of any fees received, is at least ten percent
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 ten percent 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 ten percent 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.
(xxv) 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 convert part of 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 hedging instrument is more than twelve months and as a
current asset or current liability if the remaining maturity of the
hedging instrument is less than twelve months.
The fair value of derivative instruments is determined by
using valuation techniques. The Group uses its judgement to
select the most appropriate valuation methods and makes
assumptions that are mainly based on observable market
conditions (Level 2 fair values) existing at the reporting date.
The method of recognising the resulting gain or loss depends
on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged.
(xxvi) 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 a semi-annual basis, of whether the derivatives that are
used in hedging transactions are highly effective in offsetting
changes in cash flows of hedged items.
Where a derivative financial instrument is designated as a hedge
of the variability in cash flows of a recognised asset or liability,
the effective part of any gain or loss on the derivative financial
instrument is recognised in other comprehensive income and
accumulated in equity in the hedging reserve. Any ineffective
portion is recognised immediately in profit or loss as finance
income/costs. The amount accumulated in equity is retained in
other comprehensive income and reclassified to profit or loss
in the same period or periods during which the hedged item
affects profit or loss.
Hedge accounting is discontinued when the hedging
instrument expires or is sold, terminated, exercised, or no
longer qualifies for hedge accounting or the designation is
revoked. At that point in time, any cumulative gain or loss on
the hedging instrument recognised in equity remains in equity
and is recognised when the forecast transaction is ultimately
recognised in profit or loss. However, if a hedged transaction is
no longer anticipated to occur, the net cumulative gain or loss
accumulated in equity is reclassified to profit or loss.
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Significant accounting policies (continued)
2 Operating segments
(xxix) Pre IFRS 16 alternative performance measures
As set out in note 11 and note 12, the adoption of IFRS 16
Leases has had a significant impact on the Group’s consolidated
financial statements. Additionally, in line with the transition
approach selected by the Group under the standard, the
modified retrospective approach, the 2018 comparative
information has not been restated.
Given the scale of the impact and the non-restatement of
the comparatives, the Group has elected to also disclose
2019 numbers as if IFRS 16 Leases had not applied. This is to
provide additional quality and depth to users’ understanding
of the performance and financial position of the business.
This is particularly important given key metrics, which users
have heretofore placed significant reliance on, have been
considerably impacted.
(xxvii) 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.
(xxviii) 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.
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 being Dublin, Regional
Ireland and United Kingdom. These comprise the Group’s three 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 2019, the Group owns
28 hotels (31 December 2018: 27 hotels) and has effective ownership of one further hotel which it operates (31 December 2018:
one hotel). It also owns the majority of one of the other hotels which it operates (31 December 2018: one hotel). The Group also
leases 11 hotel buildings from property owners (31 December 2018: ten 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 operating 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, variable rent payments (where linked to turnover or profit)
made to lessors. In 2019, fixed rental costs are no longer included in operating costs in accordance with IFRS 16 Leases which instead
reflects interest on lease liabilities and depreciation of right-of-use assets.
Revenue
Dublin
Regional Ireland
United Kingdom
Total revenue
2019
€’000
245,401
84,925
98,858
429,184
Restated*
2018
€’000
234,907
79,554
78,107
392,568
* Income from managed hotels has been reclassified from revenue to other income in the year ended 31 December 2019 following the change in reportable segments
during 2019, which is described in note 1. The prior year figures have been restated for this reclassification.
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Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 2 Operating segments (continued)
2 Operating segments (continued)
Segmental results - EBITDAR
Dublin
Regional Ireland
United Kingdom
EBITDAR for reportable segments
Segmental results - EBITDA
Dublin
Regional Ireland
United Kingdom
EBITDA for reportable segments
Reconciliation to results for the year
Segmental results - EBITDA
Other income
Central costs
Share-based payments expense
Adjusted EBITDA
Net property revaluation movements through profit or loss
Proceeds from insurance claim
Hotel pre-opening expenses
Group EBITDA
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Interest on lease liabilities
Other interest and finance costs
Profit before tax
Adjusted tax charge
Tax adjustment for adjusting items
Tax impact of proceeds from insurance claim
Profit for the year attributable to owners of the Company
2019
€’000
119,745
24,528
38,505
182,778
112,922
24,426
38,109
175,457
175,457
1,206
(11,770)
(2,679)
162,214
1,601
-
(9)
163,806
(26,183)
(17,127)
(195)
(18,945)
(11,668)
89,688
(10,561)
(58)
(857)
78,212
Restated*
2018
€’000
114,007
22,679
30,494
167,180
86,368
21,577
26,298
134,243
134,243
1,439
(13,299)
(2,800)
119,583
(3,137)
2,598
(2,487)
116,557
(19,698)
-
(44)
-
(9,514)
87,301
(12,452)
375
-
75,224
* Income from managed hotels has been reclassified from revenue to other income in the year ended 31 December 2019 following the change in reportable segments
during 2019, which is described in note 1. The prior year figures have been restated for this reclassification.
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 other income. It is the net operational contribution
of leased and owned hotels in each geographical location.
‘Segmental results – EBITDAR’ for Dublin, Regional Ireland and United Kingdom represents ‘Segmental results – EBITDA’ before rent
(fixed and variable).
Adjusted tax charge shows the tax charge excluding the tax effect of items which are not reflective of normal trading activities or
distort comparability either period on period or with other similar businesses.
Tax impact of proceeds from insurance claim reflects the capital gains tax which is now payable following the Group’s decision not to
reinstate the asset that was the subject of the insurance claim in 2018. The tax adjustment for adjusting items reflects the impact of
tax on other adjusting items. The adjusted tax charge excludes these two amounts.
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 beverages at the hotel property. Revenue is recognised at the point
of sale; and
» Other revenue includes revenue from leisure centres, car parks, 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.
Revenue review by segment – Dublin
Room revenue
Food and beverage revenue
Other revenue
Total revenue
2019
€’000
176,318
53,019
16,064
245,401
2019
€’000
49,695
26,767
8,463
84,925
2019
€’000
71,503
20,373
6,982
98,858
2018
€’000
168,642
50,640
15,625
234,907
2018
€’000
45,167
26,441
7,946
79,554
2018
€’000
54,416
17,167
6,524
78,107
Group EBITDA to 31 December 2019 represents earnings before interest on lease liabilities, other interest and finance costs, tax,
depreciation of property, plant and equipment and right-of-use assets, and amortisation of intangible assets.
Revenue review by segment – Regional Ireland
Group EBITDA to 31 December 2018 represents earnings before interest and finance costs, tax, depreciation of property, plant and
equipment and amortisation of intangible assets.
In 2018, Group EBITDA is calculated after deduction of fixed rent of €25.4 million and variable rent of €7.5 million under IAS 17 Leases.
From 1 January 2019, as a result of the application of IFRS 16, Group EBITDA has no comparative fixed rent deduction, however, Group
EBITDA continues to include a deduction for variable rent. Interest on lease liabilities and depreciation of right-of-use assets are now
recognised instead and appear below Group EBITDA. If the Group accounted for rent under IAS 17 to 31 December 2019, rental
expenses would include fixed rent of €27.4 million and EBITDA would decrease by the same amount.
Adjusted EBITDA is presented as an alternative performance measure to show the underlying operating performance of the Group
excluding items which are not reflective of normal trading activities or distort comparability either period on period or with other
similar businesses. Consequently, Adjusted EBITDA represents Group EBITDA before:
» Net property revaluation movements through profit or loss (note 10,13);
» Hotel pre-opening expenses (note 3); and
» Proceeds from insurance claim in 2018 (note 4).
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
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Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 2 Operating segments (continued)
Other geographical information
Revenue
Owned hotels
Leased hotels
Total revenue
EBITDAR
Owned hotels
Leased hotels
Total EBITDAR
Republic
of Ireland
€’000
2019
United
Kingdom
€’000
Restated*
2018
Total
€’000
Republic
of Ireland
€’000
United
Kingdom
€’000
Total
€’000
227,237
103,089
330,326
76,278
22,580
98,858
303,515
125,669
429,184
204,487
109,974
314,461
62,801
15,306
78,107
267,288
125,280
392,568
Republic
of Ireland
€’000
2019
United
Kingdom
€’000
Restated*
2018
Total
€’000
Republic
of Ireland
€’000
United
Kingdom
€’000
Total
€’000
96,268
48,005
144,273
30,362
8,143
38,505
126,630
56,148
182,778
84,398
52,288
136,686
24,894
5,600
30,494
109,292
57,888
167,180
* Income from managed hotels has been reclassified from revenue to other income in the year ended 31 December 2019 following the change in reportable segments
during 2019, which is described in note 1. The prior year figures have been restated for this reclassification.
Other information
Variable rent
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Interest on lease liabilities
Hotel fixed rental expense under IAS 17
Republic
of Ireland
€’000
2019
United
Kingdom
€’000
6,927
17,798
14,371
13,237
-
394
8,385
2,756
5,708
-
Total
€’000
7,321
26,183
17,127
18,945
-
2018
Republic
of Ireland
€’000
United
Kingdom
€’000
7,175
14,001
-
-
21,568
371
5,697
-
-
3,823
Total
€’000
7,546
19,698
-
-
25,391
2 Operating segments (continued)
Other geographical information (continued)
Assets and liabilities
At 31 December 2019
At 31 December 2018
Republic
of Ireland
€’000
United
Kingdom
€’000
Total
€’000
Republic
of Ireland
€’000
United
Kingdom
€’000
Total
€’000
Assets
Intangible assets and goodwill
Property, plant and equipment
Right-of-use assets
Contract fulfilment costs
Investment property
Other receivables
Current assets
23,309
1,052,442
250,179
13,346
1,560
1,959
38,851
12,824
418,873
136,228
-
589
4,801
25,464
36,133
1,471,315
386,407
13,346
2,149
6,760
64,315
41,588
930,676
-
9,066
1,560
3,659
44,016
12,829
54,417
245,584 1,176,260
-
9,066
1,560
14,759
60,427
-
-
-
11,100
16,411
Total assets excluding deferred tax assets
1,381,646
598,779
1,980,425
1,030,565
285,924 1,316,489
Deferred tax assets
Total assets
Liabilities
Loans and borrowings
Lease liabilities
Trade and other payables
3,527
1,983,952
2,613
1,319,102
98,505
231,808
50,886
313,234
130,293
15,277
411,739
362,101
66,163
102,508
-
54,225
199,381
-
11,025
301,889
-
65,250
Total liabilities excluding provision for liabilities,
derivatives and tax liabilities
381,199
458,804
840,003
156,733
210,406
367,139
Provision for liabilities
Derivatives
Current tax liabilities
Deferred tax liabilities
Total liabilities
6,563
4,523
664
59,358
911,111
6,642
1,306
309
41,129
416,525
Revaluation reserve
317,165
34,704
351,869
225,290
23,128
248,418
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
(£266.5 million (€313.2 million)) are classified as liabilities in the United Kingdom and act as a net investment hedge as at 31
December 2019 (2018: £176.5 million (€197.3 million)) (note 21). Loans and borrowings denominated in Euro are classified as
liabilities in the Republic of Ireland.
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Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 3 Statutory and other information
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Operating lease rentals: Land and buildings (including central office lease costs)
Hotel pre-opening expenses
2019
€’000
26,183
17,127
7,321
9
2018
€’000
19,698
-
33,171
2,487
Hotel pre-opening expenses relate to costs incurred by the Group in advance of the six new hotels which opened in 2018 (five) and
early 2019 (one). These costs primarily relate to payroll expenses, sales and marketing costs and training costs of new staff.
Auditor’s remuneration
Audit of Group, Company and subsidiary financial statements
Other assurance services
Tax services
Other non-audit services
2019
€’000
405
25
37
87
554
2018
€’000
321
20
262
39
642
Auditor’s remuneration for the audit of the Company financial statements was €15,000 (2018: €10,000).
Other assurance services primarily relate to review of the interim condensed consolidated financial statements.
The majority of the fees for tax and other non-audit services in 2019 relate to review of capital allowances, financial due diligence in
acquiring the lease of the Tamburlaine Hotel in Cambridge and other miscellaneous projects.
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 14), review of capital allowances and other
miscellaneous projects.
Directors’ remuneration
Salary and other emoluments
Gains on vesting of awards granted in 2015 under the 2014 LTIP
Gains on vesting of awards granted in 2016 under the 2014 LTIP
Gains on vesting of options granted under the Ireland Share Save scheme
Fees
Pension costs – defined contribution
2019
€’000
2,158
-
603
44
420
104
3,329
2018
€’000
2,617
1,250
-
-
350
103
4,320
Gains associated with the shares which issued to the Directors on vesting of awards granted in 2015 and 2016 under the 2014 Long
Term Incentive Plan (“LTIP”) and granted in 2016 under the Ireland Share Save scheme represent the difference between the quoted
share price per ordinary share and the exercise price on the vesting date (note 7). The shares granted under the LTIP schemes are
held in a restricted share trust and may not be sold or dealt in any way for a period of five years and 30 days from the vesting date.
Details of the Directors’ remuneration and interests in conditional share awards are set out in the Remuneration Committee Report
on pages 78 to 95.
4 Other income
Rental income from investment property (note 13)
Proceeds from insurance claim
Income from managed hotels
2019
€’000
351
-
855
1,206
Restated*
2018
€’000
271
2,598
1,168
4,037
* Income from managed hotels has been reclassified from revenue to other income in the year ended 31 December 2019 following the change in reportable segments
during 2019, which is described in note 1.
Income from managed hotels represents the fees and other income earned from services provided in relation to partner hotels
which are not owned or leased by the Group.
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.
5 Finance costs
Interest on lease liabilities (note 12)
Interest expense on bank loans and borrowings
Cash flow hedges – reclassified from other comprehensive income
Other finance costs
Net exchange loss/(gain) on financing activities
Interest capitalised to property, plant and equipment (note 10)
Interest capitalised to contract fulfilment costs (note 14)
2019
€’000
18,945
9,126
1,177
1,536
366
(400)
(137)
30,613
2018
€’000
-
7,801
1,026
2,760
(325)
(1,748)
-
9,514
The Group incurred interest amounting to €18.9 million on lease liabilities since the date of initial application of IFRS 16 Leases
(note 12).
The Group uses interest rate swaps to convert the interest rate on part of its debt from floating rate to fixed rate (note 22). The cash
flow hedge amount reclassified from other comprehensive income is shown separately within finance costs and primarily represents
the additional interest the Group paid as a result of the interest rate swaps.
Other finance costs include the amortisation of capitalised debt costs, commitment fees and other banking fees. As a result of
refinancing in 2018, the write-off of unamortised arrangement fees relating to the original loan facility on modification of €0.9 million
were also included in finance costs in 2018 (note 21).
Exchange gain/loss on financing activities relates principally to loans which did not form part of the net investment hedge (note 24).
Interest on loans and borrowings amounting to €0.4 million was capitalised to assets under construction on the basis that this cost
was directly attributable to the construction of qualifying assets (note 10) (2018: €1.7 million). Interest on loans and borrowings
amounting to €0.1 million was capitalised to contract fulfilment costs on the basis that this cost was directly attributable to the
construction of qualifying assets (note 14) (2018: €nil). The capitalisation rates applied by the Group, which were reflective of the
weighted average interest cost in respect of Euro denominated borrowings and Sterling denominated borrowings for the year, were
1.4% (2018: 2.03%) and 2.9% (2018: 3.43%) respectively.
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Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 6 Personnel expenses
7 Share-based payments expense
The average number of persons (full-time equivalents) employed by the Group (including Executive Directors), analysed by category,
was as follows:
The total share-based payments expense for the Group’s employee share schemes charged to profit or loss during the year was
€2.7 million (2018: €2.8 million), analysed as follows:
Administration
Other
Full-time equivalents split by geographical region was as follows:
Dublin (including the Group’s central functions)
Regional Ireland
United Kingdom
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social welfare costs
Pension costs – defined contribution
Share-based payments expense
Severance costs
2019
568
2,962
3,530
2019
1,892
976
662
3,530
2019
€’000
102,043
10,514
1,314
2,679
33
116,583
2018
510
2,869
3,379
2018
1,845
950
584
3,379
2018
€’000
95,077
9,925
1,087
2,800
35
108,924
€0.6 million of payroll costs relating to the Group’s internal development employees were capitalised to land and buildings as these
costs are directly related to development and other construction work completed in the year to 31 December 2019 (note 10).
Long Term Incentive Plans
Share Save schemes
2019
€’000
2,268
411
2,679
2018
€’000
2,374
426
2,800
Details of the schemes operated by the Group are set out below:
Long Term Incentive Plans
During the year ended 31 December 2019, the Board approved the conditional grant of 839,373 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 (96 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 2019 to 31 December 2021 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 pre IFRS 16, as disclosed in the Group’s 2021 audited consolidated financial
statements, of €0.45 with 100% vesting for Adjusted Basic EPS pre IFRS 16 of €0.55 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 Remuneration Committee Report on
pages 78 to 95.
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
Lapsed unvested during the year
Exercised during the year
Outstanding at the end of the year
Grant date
March 2016
May 2017
March 2018
March 2019
Outstanding at the end of the year
2019
Awards
2018
Awards
2,159,409
839,373
(15,763)
(335,444)
(285,809)
2,361,766
2019
Awards
-
804,976
717,417
839,373
2,361,766
2,114,579
743,795
(30,415)
-
(668,550)
2,159,409
2018
Awards
621,253
816,407
721,749
-
2,159,409
During the year ended 31 December 2019, the Company issued 285,809 shares on foot of the vesting of awards granted in March
2016 under the terms of the 2014 LTIP. Over the course of the three year performance period, 18,658 share awards lapsed due to
vesting conditions which were not satisfied. 335,444 shares lapsed unvested due to TSR performance below maximum target. The
weighted average share price at the date of exercise for awards exercised during the year was €6.00.
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Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 7 Share-based payments expense (continued)
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 2019
March 2018
May 2017
March 2016
€3.43
€5.98
€0.01
29.96% p.a.
1.5%
3 years
€3.03
€6.06
€0.01
29.77% p.a.
1.5%
3 years
€2.14
€5.09
€0.01
25.89% p.a.
1.5%
3 years
€2.45
€4.69
€0.01
30.20% p.a.
1.5%
3 years
For measurement purposes, a future dividend yield of 1.5% per annum has been assumed for the purpose of informing the projected
Company dividend in the LTIP fair value calculation model. 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.
Awards granted in 2017, 2018 and 2019 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.
Share Save schemes
The Remuneration Committee of the Board of Directors approved the granting of share options under the UK and Ireland Share
Save schemes (the ‘Schemes’) for all eligible employees across the Group in 2016, 2017, 2018 and 2019. 527 employees availed
of the Schemes granted in 2019 (379 employees availed of the Schemes granted in 2018). Each 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 of the
three year period. The share price for the Schemes has been set at a 25% discount for Republic of Ireland based employees and 20%
for United Kingdom based employees in line with the maximum amount permitted under tax legislation in both jurisdictions.
During the year ended 31 December 2019, the Company issued 465,145 shares on maturity of the share options granted as part of the
Scheme granted in 2016. The weighted average share price at the date of exercise for options exercised during the year was €5.23.
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
2019
2018
Options
WAEP
€ per share
Options
WAEP
€ per share
1,638,119
947,434
(336,286)
(465,145)
1,784,122
3.85
3.66
4.47
2.96
3.89
1,429,099
411,966
(202,794)
(152)
1,638,119
3.52
5.02
3.94
2.91
3.85
The weighted average remaining contractual life for the Schemes’ share options outstanding at 31 December 2019 is 2.5 years
(2018: 1.7 years).
8 Tax charge
Current tax
Irish corporation tax
UK corporation tax
(Over)/under provision in respect of prior periods
Deferred tax charge (note 23)
2019
€’000
10,148
1,673
(770)
11,051
425
11,476
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
Tax on profit at standard Irish corporation tax rate of 12.5%
Effects of:
Income taxed at a higher rate
Expenses not deductible for tax purposes
Impact of revaluation (gains)/losses not subject to tax
Insurance proceeds subject to capital gains tax
Insurance proceeds non-taxable
Overseas income taxed at higher rate
Losses utilised at higher rate
(Over)/under provision in respect of current tax in prior periods
(Over)/under provision in respect of deferred tax in prior periods
Losses and similar deductions not previously recognised
Other differences
2019
€’000
89,688
11,211
673
501
(144)
857
-
696
(673)
(770)
(176)
-
(699)
11,476
2018
€’000
9,094
2,320
127
11,541
536
12,077
2018
€’000
87,301
10,913
445
481
392
-
(325)
770
(445)
127
53
(8)
(326)
12,077
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. During the year, the Group elected not to proceed with the redevelopment of this site resulting
in a €0.9 million capital gains tax charge on the commercial settlement.
132
133
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 9
Intangible assets and goodwill
Cost
Balance at 1 January 2018
Effect of movements in exchange rates
Balance at 31 December 2018
Balance at 1 January 2019
Transfer to investment property (note 13)
Transfer to right-of-use assets (note 11)
Transfer from non-current prepayments (note 15)
Addition of software licence agreement
Effect of movements in exchange rates
Balance at 31 December 2019
Accumulated amortisation and impairment losses
Balance at 1 January 2018
Amortisation of intangible assets
Balance at 31 December 2018
Balance at 1 January 2019
Transfer to investment property (note 13)
Amortisation of intangible assets
Balance at 31 December 2019
Carrying amounts
At 31 December 2018
At 31 December 2019
Other
indefinite-lived
intangible
assets
€’000
Goodwill
€’000
Other
intangible
assets
€’000
79,126
(96)
79,030
79,030
-
-
-
-
598
79,628
(45,716)
-
(45,716)
(45,716)
-
-
(45,716)
20,500
-
20,500
20,500
-
(20,500)
-
-
-
-
-
-
-
-
-
-
-
676
(5)
671
671
(671)
-
1,200
1,216
-
2,416
(24)
(44)
(68)
(68)
68
(195)
(195)
Total
€’000
100,302
(101)
100,201
100,201
(671)
(20,500)
1,200
1,216
598
82,044
(45,740)
(44)
(45,784)
(45,784)
68
(195)
(45,911)
33,314
20,500
603
54,417
33,912
-
2,221
36,133
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 2019, goodwill was not considered to be impaired and
accordingly, no impairment was recognised during 2019. During 2016, following revaluation gains increasing the carrying value of
assets an element of goodwill was impaired on eight of the Group’s cash-generating units (CGUs), primarily relating to Moran Bewley
Hotel Group acquisitions 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.
Included in the goodwill figure is €12.8 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 2019
resulted in a foreign exchange gain of €0.6 million and a corresponding increase in goodwill. The comparative retranslation at 31
December 2018 resulted in a foreign exchange loss of €0.1 million.
9
Intangible assets and goodwill (continued)
Goodwill (continued)
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 2019
2019
€’000
7
3
4
25,023
2,022
6,867
33,912
2018
€’000
24,491
1,956
6,867
33,314
The above table represents the number of CGUs to which goodwill was allocated at 31 December 2019.
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 CGUs, 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 CGU (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 CGUs may result in a material write-down of goodwill which would have
a substantial impact on the Group’s profit and equity. The Group continues to monitor the ongoing uncertainty surrounding the
potential impact of the United Kingdom’s departure from the European Union but has seen no impact on trading and there is no
indicator of impairment at 31 December 2019 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 (2019: Ireland 9.96%, UK 6.8%, 2018: 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. The increase in purchasers’ costs in the
Republic of Ireland versus 2018 was due to the increase in stamp duty relating to commercial property from 6% to 7.5%.
At 31 December 2019, 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 10);
» Revenue and EBITDA for the first year of the projections is based on budgeted figures for 2020 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 maintenance for the hotels dependent on the condition of the hotel or
typically 4% of revenues but assume no enhancements to any property;
» The value in use calculations also include a terminal value based on terminal (year 10) capitalisation rates consistent with those
used by the external property valuers which incorporates a long-term growth rate of 2% for Irish and 2.5% for UK properties;
» The cash flows are discounted using a risk adjusted discount rate specific to each property which ranged from 8.25% to 11.25%
(Ireland: 8.50% to 10.75%; UK: 8.25% to 11.25%) (2018: 8.25% to 11.50% (Ireland: 9.50% to 11.25%; UK: 8.25% to 11.50%)). The
discount rates were consistent with those used by the external property valuers; and
» Following the application of IFRS 16 Leases, the right-of-use asset for a hotel with a land lease is included in the CGU. Cash flow
projections are forecast for the entire term of the lease and fixed rent is excluded from EBITDA. The discount rate is derived by
applying a comparative risk adjusted discount rate for a similar property to the equity portion of the CGU and the incremental
borrowing rate used in the calculation of the lease liability is applied to the debt portion. A weighted average discount rate is then
derived which is applied to the cash flow projections.
134
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Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 9
Intangible assets and goodwill (continued)
9
Intangible assets and goodwill (continued)
Annual goodwill testing (continued)
(i) Moran Bewley Hotel Group and other single asset acquisitions (continued)
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 2019, 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 2019.
(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 2019 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 (2019: 9.96%, 2018: 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 increase in purchasers’ costs in the Republic of Ireland versus 2018 was
due to the increase in stamp duty relating to commercial property from 6% to 7.5%.
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 2020 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 maintenance for the hotels of 4% of revenues but assume no
enhancements to any property;
» The value in use calculations also include a terminal value based on an industry earnings multiple model which incorporates a long-
term growth rate of 2%;
» The cash flows are discounted using a risk adjusted discount rate specific to each property which ranged from 6.75% to 9.5%
(2018: 10.25% to 11.25%). 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 comparative rates used by external property
valuers in their valuations of similar hotels; and
» Following the application of IFRS 16, the right-of-use asset for a leased hotel is included in the CGU. Cash flow projections are
forecast for the entire term of the lease and fixed rent is excluded from EBITDA. The discount rate is derived by applying a
comparative risk adjusted discount rate for a similar property to the equity portion of the CGU and the incremental borrowing rate
used in the calculation of the lease liability is applied to the debt portion. A weighted average discount rate is then derived which is
applied to the cash flow projections.
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 2019, 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 2019.
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
The indefinite-lived intangible asset amounting to €20.5 million at 31 December 2018, related to the Group’s acquired leasehold
interest in The Gibson Hotel, was transferred to right-of-use asset on 1 January 2019 in accordance with the transition provisions of
IFRS 16 (note 11).
Other intangible assets
Other intangible assets of €0.6 million at 31 December 2018 represented 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. The asset
was transferred to investment property on 1 January 2019 upon recognition of a right-of-use asset with respect to the head lease in
accordance with IFRS 16.
Additions to other intangible assets of €2.4 million represent the Group’s cost of entering into a software licence agreement during
2019. At the commencement date, there were €1.2 million of prepayments relating to the software licence which were transferred
to intangible assets. This software licence will run to 31 January 2024 and is being amortised on a straight line basis over the life of
the asset.
The Group reviews the carrying amounts of other intangible assets annually to determine whether there is any indication of
impairment. If any such indicators exist then the asset’s recoverable amount is estimated.
At 31 December 2019, 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 2019.
10 Property, plant and equipment
At 31 December 2019
Valuation
Cost
Accumulated depreciation (and impairment charges) *
Net carrying amount
Land and
buildings
€’000
Assets under
construction
€’000
Fixtures,
fittings and
equipment
€’000
Total
€’000
1,324,468
-
-
1,324,468
-
59,600
-
59,600
-
135,676
(48,429)
87,247
1,324,468
195,276
(48,429)
1,471,315
At 1 January 2019, net carrying amount
1,077,208
26,404
72,648
1,176,260
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
Capitalised labour costs (note 6)
Capitalised borrowing costs (note 5)
Reclassification from assets under construction to other receivables
for assets disposed of as part of a contractual arrangement (note 15)
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 2019, net carrying amount
105,543
2,643
15,848
550
-
-
124,962
(4,239)
1,967
(322)
(11,786)
12,094
1,324,468
45,539
9,756
(18,336)
-
400
(4,163)
-
-
-
-
-
-
59,600
5,117
20,741
156,199
33,140
2,488
-
-
-
-
-
-
-
(14,397)
650
87,247
-
550
400
(4,163)
124,962
(4,239)
1,967
(322)
(26,183)
12,744
1,471,315
* Accumulated depreciation of buildings is stated after the elimination of depreciation, revaluation, disposals and impairments.
136
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Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 10 Property, plant and equipment (continued)
The equivalent disclosure for the prior year is as follows:
At 31 December 2018
Valuation
Cost
Accumulated depreciation (and impairment charges) *
Net carrying amount
Land and
buildings
€’000
Assets under
construction
€’000
Fixtures,
fittings and
equipment
€’000
Total
€’000
1,077,208
-
-
1,077,208
-
26,404
-
26,404
-
106,680
(34,032)
72,648
1,077,208
133,084
(34,032)
1,176,260
At 1 January 2018, net carrying amount
848,777
97,365
52,670
998,812
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 14)
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
9,187
1,133
-
76,231
-
18,971
9,187
96,335
140,194
(152,047)
11,853
-
(6,615)
(8,085)
-
3,300
111,221
(8,275)
290
(3,402)
(8,927)
(1,590)
1,077,208
6,615
-
1,748
(3,300)
-
-
-
-
-
(208)
26,404
-
-
-
-
(8,085)
1,748
-
-
-
-
-
(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.
The carrying value of land and buildings (revalued at 31 December 2019) is €1,324.5 million (2018: €1,077.2 million). The value of
these assets under the cost model is €927.8 million (2018: €803.4 million). In 2019, unrealised revaluation gains of €125.0 million and
unrealised losses of €4.2 million have been reflected through other comprehensive income and in the revaluation reserve in equity.
A revaluation loss of €0.3 million and a reversal of prior period revaluation losses of €2.0 million have been reflected in administrative
expenses through profit or loss.
Included in land and buildings at 31 December 2019 is land at a carrying value of €499.8 million (2018: €412.7 million) which is
not depreciated.
Additions to land and buildings and fixtures, fittings and equipment during the year ended 31 December 2019 primarily include the
following asset purchase:
» 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 £91.0 million (€107.0 million) (through acquiring the entire issued share
capital of Hintergard Limited) plus acquisition related costs of £1.9 million (€2.2 million). The hotel opened on 24 January 2019
and has been branded Clayton Hotel City of London.
10 Property, plant and equipment (continued)
Additions to assets under construction during the year ended 31 December 2019 include the following:
» On 12 August 2019, the Group acquired a site with planning approval for a new hotel on Paul Street in Shoreditch, London for
£32.1 million (€37.7 million) plus acquisition related costs of £1.7 million (€2.0 million);
» On 8 January 2019, the Group acquired a site adjacent to Clayton Hotel Cardiff Lane, Dublin for €5.5 million plus capitalised
acquisition costs of €0.4 million. The Group has plans to redevelop the area into circa 88 bedrooms and ancillary facilities and it is
classified as assets under construction and not depreciated as the asset is not in use in its current form;
» Development expenditure incurred on new hotel builds of €5.6 million;
» Development expenditure incurred on hotel extensions and renovations of €4.2 million; and
» Interest capitalised on loans and borrowings relating to qualifying assets of €0.4 million (note 5).
Property previously classified as assets under construction (€18.3 million) has been transferred to land and buildings and fixtures,
fittings and equipment as a result of the assets coming into use during the year ended 31 December 2019. This includes
the following:
» Final completion works at Maldron Hotel South Mall, Cork;
» Final completion works at Maldron Hotel Parnell Square, Dublin; and
» Final completion works at Clayton Hotel Charlemont, Dublin.
Property previously classified as assets under construction (€4.2 million) relating to a renovation project ongoing at Clayton Hotel
Burlington Road, Dublin has been transferred to other receivables as a result of a contractual arrangement entered into in 2019,
whereby assets totalling €7.5 million are to be transferred to the landlord for €7.5 million (note 15).
Capitalised labour costs (€0.6 million) include labour costs relating to the Group’s internal development team which are directly
related to asset acquisitions and other construction work completed in relation to the Group’s land and buildings.
The Group operates the Maldron Hotel Limerick and, since the acquisition of Fonteyn Property Holdings Limited in 2013, holds a
secured loan over that property. The loan is not expected to be repaid. Accordingly, the Group has the risks and rewards of ownership
and accounts for the hotel as an owned property, reflecting the substance of the arrangement.
At 31 December 2019, properties included within land and buildings with a carrying amount of €1,101.8 million (2018: €895.9 million)
were pledged as security for loans and borrowings.
The value of the Group’s property at 31 December 2019 reflects open market valuations carried out in December 2019 by
independent external valuers having appropriate recognised professional qualifications and recent experience in the location and
value of the property being valued. The external valuations performed were in accordance with the Royal Institution of Chartered
Surveyors (RICS) Valuation Standards.
138
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Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 10 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 2019, 30 properties were revalued by independent external valuers engaged by the
Group (31 December 2018: 29).
The principal valuation technique used by the independent external valuers engaged by the Group was discounted cash flows. This
valuation model considers the present value of net cash flows to be generated from the property over a ten year period (with an
assumed terminal value at the end of year 10). Valuers’ forecast cash flow included in these calculations represents the expectations
of the valuers for EBITDA (driven by 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 9.96% for Republic of Ireland domiciled assets (2018: 8.46%) and 6.8% for United Kingdom
domiciled assets (2018: 6.8%). The increase in purchasers costs in the Republic of Ireland versus 2018 was due to the increase in
stamp duty relating to commercial property from 6% to 7.5%.
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 in the context of the overall valuation.
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
* Price per key represents the valuation of a hotel divided by the number of rooms in that hotel.
Dublin
31 December 2019
Regional
Ireland
United
Kingdom
Number of hotel assets
Total
1
3
6
10
9
1
10
1
1
8
10
7
4
1
12
8
4
12
10
1
1
12
5
2
1
8
6
2
8
6
-
2
8
13
9
8
30
23
7
30
17
2
11
30
10 Property, plant and equipment (continued)
Measurement of fair value (continued)
Significant unobservable inputs (continued)
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
Total
2
3
5
10
4
6
10
1
2
7
10
7
4
1
12
2
10
12
10
2
-
12
5
2
-
7
2
5
7
5
1
1
7
14
9
6
29
8
21
29
16
5
8
29
* Price per key represents the valuation of a hotel divided by the number of rooms in that hotel.
The valuers also applied risk adjusted discount rates of 7.25% to 10.75% for Dublin assets (31 December 2018: 9.25% to 11.25%),
6.75% to 11.00% for Regional Ireland assets (31 December 2018: 9.50% to 12.00%) and 7.25% to 11.25% for United Kingdom
assets (31 December 2018: 8.25% to 12.00%).
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 where trade has outperformed assumptions underpinning initial external valuations. Hotel
transactions in the wider market during the year have achieved improved valuation metrics which has led to increased valuations for
the properties owned by the Group.
The 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 the potential impact of Brexit
but has seen no impact on trading and there is no indicator of impairment at 31 December 2019 as a result of this.
The estimated fair value under this valuation model would increase or decrease if:
» Valuers’ forecast cash flow was higher or lower than expected; and/or
» The risk adjusted discount rate and terminal capitalisation rate was lower or higher.
Valuations also had regard to relevant price per key metrics from hotel sales activity.
140
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Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 11 Transition impact of IFRS 16 Leases
11 Transition impact of IFRS 16 Leases (continued)
IFRS 16 Leases was effective for the first time in the financial year commencing 1 January 2019. IFRS 16 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.
As a lessee (continued)
A reconciliation from the operating lease commitments at 31 December 2018 to the opening balance for the lease liabilities at
1 January 2019 is shown below:
IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to lessee
accounting by removing the distinction between operating and finance leases and requiring the recognition of right-of-use assets
and lease liabilities at the commencement of most leases. This has a significant impact on the Group’s financial statements as the
Group is a lessee in a number of material property leases, which were formerly accounted for as operating leases. The requirements
for lessor accounting remain largely unchanged.
The Group has applied IFRS 16 using the modified retrospective method. Lease liabilities were measured at the present value of
the remaining lease payments, discounted at the Group’s incremental borrowing rates as at 1 January 2019. Right-of-use assets
have been measured at an amount equal to the lease liabilities adjusted by the amounts of any lease prepayments and accruals and
reclassifications from intangible assets, where applicable. The comparative information has not been restated and is presented as
previously reported under IAS 17 and related interpretations. Details of the impact of the change in accounting policies as well as the
new accounting policies are disclosed hereafter.
Definition of a lease
Previously, the Group determined at contract inception whether an arrangement was or contained a lease under IFRIC 4. Under IFRS
16, a contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time. On
transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are
leases and applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases
under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was
applied only to contracts entered into or changed on/or after 1 January 2019.
As a lessee
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease
transferred substantially all of the risks and rewards incidental to ownership of the underlying asset to the Group. Under IFRS 16, the
Group recognises right-of-use assets and lease liabilities for most leases and these are no longer excluded from the statement of
financial position.
On transition, lease liabilities were measured at the present value of the remaining lease payments, discounted using the Group’s
incremental borrowing rates as at 1 January 2019. Determining the discount rate introduces a new source of estimation uncertainty
into the financial statements. The Group has calculated the incremental borrowing rate by adding country specific risk-free
government bonds to the Group finance spread to create a Group yield curve.
The Group finance spread was calculated by weighting the Group interest margin on loans and borrowings entered into in October
2018 (senior debt) and a hypothetical junior debt margin available to the Group using an appropriate loan-to-value ratio for the senior
debt. Each lease was matched against the Group yield curve and subsequently adjusted for lessee and asset specific factors to reflect
the underlying asset’s location and condition. In most cases, the discount rate is determined in the first year of the lease and does
not change for the remainder of the term unless an event such as a change in lease term or a modification of the lease occurs. The
weighted-average incremental borrowing rate applied on transition was 6.03% (Republic of Ireland: 5.86%, United Kingdom: 6.49%).
The sensitivity of the Group’s lease liabilities to a one percent (100bps) movement in the incremental borrowing rate is as follows:
At existing
rate
€’000
Sensitised upwards
by 100 bps
€’000
Sensitised downwards
by 100 bps
€’000
Lease liabilities at 1 January 2019
314,430
286,246
347,350
Operating lease commitments at 31 December 2018
Discounted using the incremental borrowing rates at 1 January 2019
Lease liabilities recognised at 1 January 2019 (note 12)
€’000
672,708
(358,278)
314,430
Right-of-use assets have been measured at an amount equal to the lease liabilities adjusted by the amounts of any lease
prepayments and accruals and reclassifications from intangible assets, where applicable. Fixed rental expenses under IAS 17 were
removed from profit or loss under IFRS 16 and replaced with finance costs on the lease liabilities and depreciation of the right-of-use
assets. Variable lease payments which are dependent on hotel performance continue to be recognised directly in profit or loss.
The Group used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under
IAS 17:
» Applied a single discount rate to a portfolio of leases with similar characteristics;
» Relied on its assessment of whether leases are onerous immediately before 1 January 2019 as an alternative to performing an
impairment review; and
» Applied the exemption not to recognise right-of-use assets and lease liabilities for leases with a remaining lease term of less than
12 months as at 1 January 2019.
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low value equipment. The Group did not
recognise any finance leases under IAS 17 prior to the date of initial application of IFRS 16.
Banking covenants as currently calculated under the existing debt facility agreement have not been amended as their calculation is in
accordance with generally accepted accounting principles, policies, standards and practices applicable on the date of entry into the
agreement which was prior to the adoption of IFRS 16.
As a lessor
Under IAS 17, the Group leased out its investment properties to lessees under operating leases. IFRS 16 does not substantially
change how a lessor accounts for leases as a lessor continues to classify leases as either finance or operating leases. The Group’s
lessor contracts continue to be classified as operating leases under IFRS 16. However, when the Group is an intermediate lessor the
sub-leases are classified with reference to the right-of-use asset arising from the head lease, not with reference to the underlying
asset. The Group sub-leases part of one of its properties and on transition to IFRS 16 the right-of-use asset recognised from the
head lease is presented in investment property and measured at fair value on transition to IFRS 16.
Sale and leaseback
Under IFRS 16, the Group continues to account for Clayton Hotel Cardiff (completed in June 2017) and Clayton Hotel Birmingham
(completed in August 2017) transactions as sale and leaseback transactions. As a result of IFRS 16, the Group has recognised right-
of-use assets and lease liabilities for these leases on 1 January 2019. €1.1 million arising from the sale and leaseback of Clayton Hotel
Birmingham, representing the difference between the proceeds received and the acquisition price, has been transferred from non-
current receivables to right-of-use asset on this date.
142
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Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 11 Transition impact of IFRS 16 Leases (continued)
Impact on financial statements
The tables below show the adjustment for each financial statement line item affected by the application of IFRS 16 for the year
ended 31 December 2019.
Excerpt from consolidated statement of profit or loss and other comprehensive income
*Only lines which are impacted are presented below
Administrative expenses
Operating profit
Finance costs
Profit before tax
Tax charge
Profit for the year
Earnings per share
Basic earnings per share
Diluted earnings per share
Excerpt from operating segments note (note 2)
*Only lines which are impacted are presented below
Segmental results - EBITDA
Dublin
Regional Ireland
United Kingdom
EBITDA for reportable segments
Central costs
Adjusted EBITDA
Net property revaluation movements through profit or loss
Group EBITDA
Depreciation of right-of-use assets
Amortisation of intangible assets
Interest on lease liabilities
Profit before tax
Tax charge
Profit for the year
*As if IAS 17
still applied
€’000
(165,762)
110,044
(11,668)
98,376
(12,711)
85,665
IFRS 16 impact
€’000
*As presented
€’000
10,257
(155,505)
10,257
(18,945)
(8,688)
1,235
(7,453)
120,301
(30,613)
89,688
(11,476)
78,212
46.4 cents
46.0 cents
(4.0) cents
(4.0) cents
42.4 cents
42.0 cents
*As if IAS 17
still applied
€’000
IFRS 16 impact
€’000
*As presented
€’000
92,761
23,429
32,126
148,316
(12,013)
134,830
1,645
136,466
-
(239)
-
98,376
(12,711)
85,665
20,161
997
5,983
27,141
243
27,384
(44)
27,340
(17,127)
44
(18,945)
(8,688)
1,235
(7,453)
112,922
24,426
38,109
175,457
(11,770)
162,214
1,601
163,806
(17,127)
(195)
(18,945)
89,688
(11,476)
78,212
The Group’s profit has decreased by €7.5 million and basic earnings per share by 4.0 cents for the year ended 31 December 2019
due to the implementation of IFRS 16. Under the standard, total lease expenses increase in the early years of implementation due to
the front-loading effect of finance costs versus the straight-line rent expense under IAS 17, resulting in a decrease in profit.
EBITDA for reportable segments and Adjusted EBITDA (existing alternative performance measures as defined in note 2), are
significantly impacted by the implementation of IFRS 16 and have increased by €27.1 million and €27.4 million respectively due to the
removal of fixed rent. Under IFRS 16, variable rents based on turnover or profit do not form part of the lease liability measurement
and remain in administrative expenses and EBITDA.
Depreciation and finance costs, as currently reported in the Group’s profit or loss, have increased, as under the new standard the
right-of-use assets are depreciated over the term of the lease and interest costs are applied to the lease liabilities.
11 Transition impact of IFRS 16 Leases (continued)
Impact on financial statements (continued)
Excerpt from consolidated statement of financial position
On implementation of IFRS 16 on 1 January 2019, the following line items in the consolidated statement of financial position
were affected:
As previously reported
at 31 December 2018
€’000
IFRS 16
impact
€’000
As presented at
1 January 2019
€’000
Non-current assets
Intangible assets and goodwill
Right-of-use assets
Other receivables
Investment property
Current assets
Trade and other receivables
Total impact on assets
Current liabilities
Trade and other payables
Lease liabilities
Non-current liabilities
Lease liabilities
Total impact on liabilities
Impact on net assets
54,417
-
14,759
1,560
(21,103)
343,713
(5,422)
603
33,314
343,713
9,337
2,163
22,566
(4,307)
18,259
313,484
(65,250)
-
946
(26,259)
(64,304)
(26,259)
-
(288,171)
(288,171)
(313,484)
-
On transition, the Group recognised lease liabilities amounting to €314.4 million and right-of-use assets of €343.7 million. The
measurement of the right-of-use assets includes the amount of the lease liabilities and a further €29.3 million of items that were
recognised elsewhere in the statement of financial position at 31 December 2018 as follows:
» Favourable terms relating to the Gibson hotel operating lease acquired as part of a business combination amounting to €20.5
million previously recognised in intangible assets;
» Lease prepayments amounting to €8.6 million previously recognised in non-current other receivables (€4.3 million) and current
trade and other receivables (€4.3 million);
» €1.1 million arising from the sale and leaseback of Clayton Hotel Birmingham previously recognised in non-current receivables; less
» Lease accruals amounting to €0.9 million previously recognised in trade and other payables.
Consolidated statement of cash flows
The adoption of IFRS 16 does not have any impact on Group leasing cash flows but the UK tax authorities have decided to follow
the accounting changes and allow deductions for interest on lease liabilities and depreciation of right-of-use assets in lieu of lease
payments which impact the tax cash flows. There are lower UK tax cash flows in the early years of the leases in line with the front-
loading of expenses. There is no cash flow impact in Ireland as the basis for tax deduction remains unchanged.
The presentation of cash flows in the consolidated statement of cash flows is also impacted. Under IFRS 16, lessees must present
short-term lease payments, payments for leases of low-value assets and variable lease payments not included in the measurement
of the lease liabilities as part of operating activities.
Lease liability payments are split into payments of interest and payments of principal and are presented separately in the
consolidated statement of cash flows. The Group has opted to include the element of cash flows recorded as interest as part of
financing activities as permitted by IAS 7 Statement of Cash Flows. Cash payments for the principal portion have also been presented
as part of financing activities.
Under IAS 17, all lease payments on operating leases were presented as part of cash flows from operating activities and
consequently, as a result of the implementation of IFRS 16, the net cash flow from financing activities has decreased by €27.5 million
while the net cash generated from operating activities has increased by the same amount.
144
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Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 12 Leases
Group as a lessee
The Group leases assets including land and buildings, vehicles, machinery and IT equipment. Information about leases for which the
Group is a lessee is presented below:
Right-of-use assets
Net book value at 1 January 2019 (note 11)
Additions
Depreciation charge for the year (note 3)
Remeasurement of lease liabilities
Translation adjustment
Net book value at 31 December 2019
Land and
buildings
€’000
343,562
45,656
(17,068)
9,239
4,869
386,258
Fixtures,
fittings and
equipment
€’000
151
56
(59)
-
1
149
Right-of-use assets comprise leased assets that do not meet the definition of investment property.
Lease liabilities
Current
Non-current
Lease liabilities at 1 January 2019 (note 11)
Additions
Interest on lease liabilities (note 5)
Lease payments
Remeasurement of lease liabilities
Translation adjustment
Lease liabilities at 31 December 2019
Current
Non-current
Lease liabilities at 31 December 2019
Total
€’000
343,713
45,712
(17,127)
9,239
4,870
386,407
€’000
26,259
288,171
314,430
42,391
18,945
(27,514)
9,239
4,610
362,101
30,557
331,544
362,101
The remeasurement of lease liabilities relates to the reassessment of the lease liabilities of two leases following completion of rent
reviews and extension of the lease term at a third hotel during the year ended 31 December 2019.
Additions principally relate to the Group entering into a 30 year lease in November 2019 of the Tamburlaine Hotel in Cambridge,
England which has resulted in a right-of-use asset and lease liability of €45.5 million (£38.9 million) and €42.4 million (£36.3 million)
respectively. The Group included €3.1 million (£2.6 million) of lease prepayments and initial direct costs in the measurement of the
right-of-use asset.
12 Leases (continued)
Group as a lessee (continued)
Non-cancellable undiscounted lease cash flows payable under lease contracts are set out below:
Year ended 31 December 2019
During the year 2020
During the year 2021
During the year 2022
During the year 2023
During the year 2024
During the year 2025
During the year 2026
During the years 2027 – 2036
During the years 2037 – 2046
From 2047 onwards
At 31 December 2019
At 31 December 2018
Republic
of Ireland
€’000
United
Kingdom
£’000
Republic
of Ireland
€’000
United
Kingdom
£’000
Total
€’000
-
22,112
22,256
19,442
19,308
17,155
16,843
16,921
166,401
101,182
27,878
429,498
-
7,159
7,090
7,217
7,295
7,363
7,437
7,437
78,997
87,055
60,565
277,615
-
30,526
30,590
27,925
27,882
25,809
25,584
25,662
259,251
203,504
99,064
755,797
20,876
18,717
18,815
19,152
19,033
16,680
16,568
16,646
166,103
101,432
27,878
441,900
5,098
4,821
4,821
4,969
5,048
5,075
5,075
5,075
54,191
59,653
52,639
206,465
Total
€’000
26,576
24,106
24,204
24,707
24,676
22,353
22,241
22,320
226,683
168,118
86,724
672,708
Sterling amounts have been converted using the closing foreign exchange rate of 0.8508 as at 31 December 2019 (0.89453 as at 31
December 2018).
The weighted average lease life of future minimum rentals payable under leases is 29.4 years (31 December 2018: 30.3 years). The
Group does not face a significant liquidity risk with regard to its lease liabilities which are expected to be capable of being paid from
operating cash flows over the life of the leases. Lease liabilities are monitored within the Group’s treasury function.
For the year ended 31 December 2019, the total fixed cash outflows amounted to €27.5 million for land and building leases and €0.3
million for leases of fixtures, fittings and equipment.
Proforma unwind of right-of-use assets and release of interest charge
The proforma unwinding of the right-of-use assets and the release of the interest on the lease liabilities through profit or loss over
the terms of the leases have been disclosed in the following table:
During the year 2020
During the year 2021
During the year 2022
During the year 2023
During the year 2024
During the year 2025
During the year 2026
During the years 2027 – 2036
During the years 2037 – 2046
From 2047 onwards
Depreciation of
right-of-use assets
Interest on
lease liabilities
Republic
of Ireland
€’000
United
Kingdom
£’000
Republic
of Ireland
€’000
United
Kingdom
£’000
Total
€’000
15,198
15,166
12,127
11,957
10,085
10,003
9,999
94,609
56,113
14,922
250,179
3,544
3,536
3,535
3,535
3,535
3,535
3,535
35,353
35,353
20,442
115,903
19,363
19,322
16,282
16,112
14,240
14,158
14,154
136,162
97,666
38,948
386,407
12,990
12,529
12,093
11,678
11,286
10,954
10,605
81,744
29,314
4,497
197,690
6,721
6,697
6,673
6,638
6,597
6,548
6,495
60,010
41,885
18,498
166,762
Total
€’000
20,890
20,400
19,936
19,480
19,040
18,650
18,239
152,278
78,544
26,239
393,696
Sterling amounts have been converted using the closing foreign exchange rate of 0.8508 as at 31 December 2019.
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Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 12 Leases (continued)
Group as a lessee (continued)
The actual depreciation and interest charge through profit or loss will depend on the composition of the Group’s lease portfolio in
future years and is subject to change, driven by:
» commencement of new leases;
» modifications of existing leases;
» reassessments of lease liabilities following periodic rent reviews; and
» impairments of right-of-use assets.
There are no events or changes in circumstances which indicate that the carrying value of the right-of-use assets may not
be recoverable.
Leases of land and buildings
The Group leases land and buildings for its hotel operations and office space. The leases of hotels typically run for a period of
between 25 and 35 years and leases of office space for ten years.
Some leases provide for additional rent payments that are based on a percentage of the revenue/EBITDAR that the Group
generates at the hotel in the period. The Group sub-leases part of one of its properties to a tenant under an operating lease.
Variable payments based on revenue/EBITDAR
These terms are common in hotel leases in the Republic of Ireland and the United Kingdom and link rental payments to hotel cash
flows and reduce fixed payments. Variable lease payments based on revenue/EBITDAR for the year ended 31 December 2019 are
as follows:
Estimated
impact on
variable rent of
5% increase
in revenue/
EBITDAR
€’000
Variable rent
element
€’000
Leases with lease payments based on revenue/EBITDAR
7,321
600
Extension options and termination options
The Group, as a hotel lessee, does not have any extension options. The Group holds a single termination option in an office space
lease. The Group assesses at lease commencement whether it is reasonably certain not to terminate the option and reassesses if
there is a significant event or change in circumstances within its control. The relative magnitude of optional lease payments to lease
payments is as follows:
Office building
Potential future
lease payments
not included in
lease liabilities
(discounted)
€’000
Lease liabilities
recognised
(discounted)
€’000
372
486
Leases not yet commenced to which the lessee is committed
The Group has multiple agreements for lease at 31 December 2019 and details of the non-cancellable lease rentals and other
contractual obligations payable under these agreements are set out hereafter. These represent the minimum future lease payments
(undiscounted) in aggregate that the Group is required to make under the agreements. An agreement for lease is a binding
agreement between external third parties and the Group to enter into a lease at a future date. The dates of commencement of
these leases may change based on the hotel operating dates. The amounts payable may also change slightly if there are any changes
in room numbers delivered through construction.
12 Leases (continued)
Group as a lessee (continued)
Leases of land and buildings (continued)
Agreements for lease
Less than one year
One to two years
Two to five years
Five to fifteen years
Fifteen to twenty five years
After twenty five years
Total future lease payments
At 31
December
2019
€’000
At 31
December
2018
€’000
1,910
17,314
66,656
236,011
249,344
307,763
878,998
2,585
9,947
55,660
181,086
192,114
240,088
681,480
The significant movement since the year ended 31 December 2018 is due principally to the following:
» The Group has signed an agreement to lease the Maldron Hotel Croke Park, to be built in Dublin. On completion of construction,
the Group will commence operations in the hotel through a 35 year lease; and
» The Group has signed an agreement to lease a Maldron Hotel, to be built in Liverpool. On completion of construction, the Group
will commence operations in the hotel through a 35 year lease.
Also, included in the above table are future lease payments for agreements for lease, with a lease term of 35 years, for Maldron
Hotel Glasgow, Clayton Hotel Glasgow, Clayton Hotel Bristol, Maldron Hotel Birmingham, Maldron Hotel Manchester, Clayton Hotel
Manchester City and The Samuel, Dublin.
Leases of fixtures, fittings and equipment
The Group leases a small number of vehicles, IT equipment and hotel equipment with lease terms of up to five years. The Group has
applied the short-term and low value exemptions available under IFRS 16 Leases where applicable and recognises lease payments
associated with short-term leases or leases for which the underlying asset is of low value as an expense on a straight-line basis over the
lease term. Where the exemptions were not available, right-of-use assets have been recognised with corresponding lease liabilities.
Expenses relating to short-term leases recognised in administrative expenses
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets recognised in
administrative expenses
Group as a lessor
Lease income from lease contracts in which the Group acts as lessor is outlined below:
Operating lease income (note 4)
2019
€’000
351
The Group leases its investment property and has classified these leases as operating leases because they do not transfer
substantially all of the risks and rewards incidental to ownership of these assets to the lessee. Operating lease income from
sub-leasing right-of-use assets for the year ended 31 December 2019 amounted to €0.1 million.
The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments receivable:
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Total undiscounted lease payments receivable
2019
€’000
313
283
249
238
238
1,488
2,809
2019
€’000
172
111
2018
€’000
271
2018
€’000
231
231
231
231
231
1,667
2,822
148
149
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 13 Investment property
Cost or valuation
At 1 January
Transfer from intangible assets on transition to IFRS 16 (note 9)
Effect of movements in exchange rates
Loss on revaluation recognised in profit or loss
At 31 December
2019
€’000
1,560
603
30
(44)
2,149
2018
€’000
1,585
-
-
(25)
1,560
Investment property at 31 December 2019 reflects the following assets and movements during the year:
» Two commercial properties which are leased to third parties for lease terms of 25 and 30 years, with 11 and 7 years remaining at
31 December 2019 (€1.2 million); and
» An intangible asset amounting to €0.6 million at 31 December 2018 was transferred to investment property on 1 January 2019
upon recognition of a right-of-use asset with respect to the head lease in accordance with IFRS 16 Leases. This asset represents
the Group’s interest in a sub-lease (as sub-lessor) retained in respect of part of the Clayton Hotel Cardiff, UK following the sale
and leaseback of that hotel property in 2017.
Also included in investment property is a sub-lease of part of Clayton Whites Hotel, Wexford which has a carrying value of €0.4 million
(2018: €0.4 million).
Changes in fair values are recognised in administrative expenses in profit or loss.
An investment property with a carrying value of €0.6 million (2018: €nil) was pledged as security for loans and borrowings at 31
December 2019.
14 Contract fulfilment costs
Non-current asset
At 1 January
Transfer from land and buildings to contract fulfilment costs (note 10)
Other costs incurred in fulfilling contract to date
Capitalised borrowing costs (note 5)
At 31 December
2019
€’000
9,066
-
4,143
137
13,346
2018
€’000
-
8,085
981
-
9,066
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 in 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 2018, 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 10) which will be used for the
residential development.
Other costs incurred in fulfilling the contract of €4.1 million (2018: €1.0 million), which relate directly to this contractual agreement
with IRES, are also included within non-current assets at 31 December 2019. 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 build costs, legal costs, architectural and planning costs and other professional fees incurred up to 31
December 2019 in fulfilling the contract.
Interest capitalised on loans and borrowings relating to this development (qualifying asset) was €0.1 million in the year to 31
December 2019 (2018: €nil) (note 5).
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.
Contract fulfilment costs paid have been included in investing activities in the consolidated statement of cash flows as they are not
primarily derived from the principal revenue-producing activities of the Group.
15 Trade and other receivables
Non-current assets
Other receivables
Deposit paid on acquisitions
Prepayments
Current assets
Trade receivables
Prepayments
Contract assets
Accrued income
Other receivables
Total
2019
€’000
1,400
-
5,360
6,760
7,920
6,135
2,456
1,886
3,405
21,802
28,562
2018
€’000
900
5,086
8,773
14,759
9,300
8,943
2,614
1,709
-
22,566
37,325
Non-current other receivables includes a non-current deposit required as part of a hotel property lease contract of €0.9 million
(2018: €0.9 million). The deposit is interest-bearing and is refundable at the end of the lease term.
At 31 December 2019, non-current other receivables and current other receivables include €0.5 million and €3.0 million (€3.4 million
including VAT) respectively relating to a renovation project at a leased hotel where the landlord will pay €7.5 million (excluding VAT) to
the Group in return for the transferring of assets worth €7.5 million to the landlord. This contractual arrangement was entered into
during 2019. Prior to signing the arrangement, €4.2 million of expenditure was incurred and capitalised as assets under construction
within property, plant and equipment in relation to this project. On signing of the contractual arrangement this €4.2 million was
transferred to other receivables from assets under construction (note 10). A further €3.3 million has been spent on the renovation
project from the date of signing of the contractual arrangement to 31 December 2019. As this expenditure is directly related to this
contractual arrangement, the Group has included these costs as receivables in line with the contractual arrangement. On 7 May
2019, the Group received a first instalment of €4 million in relation to the total agreed sum of €7.5 million. €3.0 million (€3.4 million
including VAT) of the remaining €3.5 million was requested for payment in December 2019. This has been received in January 2020.
The remaining €0.5 million will be received in January 2021 and is recognised as a non-current other receivable. No revenue or cost
will be recognised in profit or loss on this contractual arrangement as the Group is acting as an agent in this arrangement with no gain
or loss on the transfer of the assets as the Group is being reimbursed for the costs.
Included in non-current prepayments at 31 December 2019 is an amount of €5.2 million (31 December 2018: €1.4 million) of
professional fees directly related to future lease agreements for hotels currently being constructed or in planning. When these
leases are initiated, these costs will be reclassified to right-of-use assets.
At 31 December 2018, lease prepayments of €5.4 million were included in non-current prepayments and €4.3 million in current trade
and other receivables which have now been included in the measurement of right-of-use assets in accordance with IFRS 16 Leases
(note 11).
Included in non-current prepayments at 31 December 2018 was €0.9 million relating to a prepayment made for IT costs. The
Group entered into a software licence agreement in 2019 and these costs, together with other payments made in 2019 to the
commencement date totalled €1.2 million and were transferred to intangible assets (note 9).
Included in non-current assets at 31 December 2018 was a deposit paid of €5.1 million (£4.6 million) relating to the acquisition of
Hintergard Limited, which owns the hotel subsequently rebranded as Clayton Hotel City of London. This was reclassified to property,
plant and equipment after completing the transaction on 3 January 2019 (note 10). Professional fees included in non-current
prepayments at 31 December 2018 of €1.1 million (£1.0 million) associated with this transaction were also reclassified to property,
plant and equipment upon acquisition.
Trade receivables are subject to the expected credit loss model in IFRS 9 Financial Instruments. The Group applies the IFRS 9
simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the
number of days past due.
150
151
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 15 Trade and other receivables (continued)
Aged analysis of trade receivables
Not past due
Past due < 30 days
Past due 30 - 60 days
Past due 60 - 90 days
Past due > 90 days
Not past due
Past due < 30 days
Past due 30 - 60 days
Past due 60 - 90 days
Past due > 90 days
Gross
receivables
2019
€’000
1,719
2,905
2,016
543
1,045
8,228
Gross
receivables
2018
€’000
4,607
2,313
1,011
320
1,569
9,820
Expected
credit
loss rate
2019
0.1%
0.4%
0.8%
3.3%
25.0%
Expected
credit
loss rate
2018
0.1%
0.4%
0.8%
3.8%
31.0%
Impairment
provision
2019
€’000
Net
receivables
2019
€’000
(2)
(11)
(16)
(18)
(261)
(308)
1,717
2,894
2,000
525
784
7,920
Impairment
provision
2018
€’000
Net
receivables
2018
€’000
(5)
(9)
(8)
(12)
(486)
(520)
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
Inventories recognised as cost of sales during the year amounted to €29.2 million (2018: €27.8 million).
17 Cash and cash equivalents
Cash at bank and in hand
2019
€’000
1,542
385
1,927
2019
€’000
40,586
40,586
4,602
2,304
1,003
308
1,083
9,300
2018
€’000
1,584
370
1,954
2018
€’000
35,907
35,907
18 Capital and reserves
Share capital and share premium
At 31 December 2019
Authorised share capital
Ordinary shares of €0.01 each
Allotted, called-up and fully paid shares
Ordinary shares of €0.01 each
Share premium
At 31 December 2018
Authorised share capital
Ordinary shares of €0.01 each
Allotted, called-up and fully paid shares
Ordinary shares of €0.01 each
Share premium
Number
€’000
10,000,000,000
100,000
Number
185,100,620
€’000
1,851
504,488
Number
€’000
10,000,000,000
100,000
Number
184,349,666
€’000
1,843
503,113
All ordinary shares rank equally with regard to the Company’s residual assets.
During the year ended 31 December 2019, the Company issued 285,809 shares of €0.01 per share following the vesting of awards
granted in March 2016 under the 2014 LTIP (note 7). 465,145 shares were also issued during 2019 under the Share Save schemes
granted in 2016 which had a weighted average exercise price of €2.96 per share (note 7).
Dividends
The dividends paid in respect of ordinary share capital were as follows:
Final dividend paid 7.0 cents per Ordinary Share (2018: €nil)
Interim dividend paid 3.5 cents per Ordinary Share (2018: 3.0 cents)
2019
€’000
12,925
6,462
19,387
2018
€’000
-
5,529
5,529
A final dividend for 2018 of 7.0 cents per share was paid on 8 May 2019 on the ordinary shares in Dalata Hotel Group plc and
amounted to €12.9 million (2018: €nil).
An interim dividend for 2019 of 3.5 cents (2018: 3.0 cents) per share was paid on 4 October 2019 on the ordinary shares in Dalata
Hotel Group plc and amounted to €6.5 million (2018: €5.5 million).
On 24 February 2020, the Board proposed a final dividend for 2019 of 7.25 cents per share. This proposed final dividend is subject
to approval by the shareholders at the Annual General Meeting. The payment date for the final dividend will be 6 May 2020 to
shareholders registered on the record date 14 April 2020. These consolidated financial statements do not reflect this dividend.
Based on shares in issue at 31 December 2019, the amount of dividends proposed is €13.4 million.
152
153
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 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 Share Save 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 78 to 95 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 10), net of deferred tax.
(e) Translation reserve
The translation reserve comprises all foreign currency exchange differences arising from the translation of the financial statements
of foreign operations, as well as the effective portion of any foreign currency differences arising from hedges of a net investment in a
foreign operation (note 24).
19 Trade and other payables
Trade payables
Accruals
Contract liabilities
Value added tax
Payroll taxes
2019
€’000
15,598
32,135
10,348
5,278
2,804
66,163
2018
€’000
18,490
34,072
9,421
775
2,492
65,250
Accruals include capital expenditure accruals including work in progress at year end which has not yet been invoiced (2019: €7.5
million, 2018: €9.5 million).
Value added tax liability (‘VAT’) as at 31 December 2019 has increased since 2018 due to the reduced levels of input VAT on
construction costs relative to the prior year, as construction was completed at these newly completed hotel developments at the
end of 2018. Additionally, the VAT rate at which the Group makes the majority of its sales in Ireland has increased from 9% in 2018 to
13.5% in 2019.
20 Provision for liabilities
Non-current liabilities
Insurance provision
Current liabilities
Insurance provision
The reconciliation of the movement in the provision during the year is as follows:
At 1 January
Provisions made during the year – charged to profit or loss
Utilised during the year
Reversed to profit or loss during the year
At 31 December
2019
€’000
4,804
1,759
6,563
2019
€’000
6,642
2,500
(723)
(1,856)
6,563
2018
€’000
4,783
1,859
6,642
2018
€’000
4,716
2,784
(858)
-
6,642
This provision relates to actual and potential obligations arising from the Group’s insurance arrangements where the Group is
self-insured. The Group has third party insurance cover above specific limits for individual claims and has an overall maximum
aggregate payable for all claims in any one year. The amount provided is principally based on projected settlements as determined
by external loss adjusters. The provision also includes an estimate for claims incurred but not yet reported and incurred but not
enough reported.
The utilisation of the provision is dependent on the timing of settlement of the outstanding claims. The Group expects the majority
of the insurance provision will be utilised within five years of the period end date, however, due to the nature of the provision, there is
a level of uncertainty in the timing of settlement as the Group generally cannot precisely determine the extent and duration of the
claim process. The provision has been discounted to reflect the time value of money though the effect is not significant.
The self-insurance programme commenced in July 2015 and increasing levels of claims data is becoming available. Claim
provisions are assessed in light of claims experience and amended accordingly to ensure provisions reflect recent experience and
trends. This has resulted in a reversal of provisions made in prior periods of €1.9 million (2018: €nil) which has been credited within
administrative expenses.
154
155
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 21 Loans and borrowings
21 Loans and borrowings (continued)
Bank borrowings
Less: unamortised debt costs
Total loans and borrowings
2019
€’000
415,432
(3,693)
411,739
2018
€’000
306,078
(4,189)
301,889
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, with
a maturity date of 26 October 2023. On 19 August 2019, the Group availed of its option to extend the €525 million multicurrency
facility for an additional year to 26 October 2024.
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 (xxiv) (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 market terms of the refinanced
liabilities on 26 October 2018, which resulted in no gain or loss. These loans and borrowings are recognised at amortised cost
with directly attributable costs being amortised to profit or loss on an effective interest rate basis over the term. Unamortised
arrangement fees of €0.9 million on the original loans, which were not reflective of market terms at the refinancing date, were
recognised immediately in finance costs in profit or loss in 2018 (note 5).
The loans and borrowings drawn with the two new lenders on 26 October 2018 were 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.
As at 31 December 2019, the drawn loan facility is €415.4 million consisting of Sterling term borrowings of £176.5 million (€207.5
million) and revolving credit facility borrowings of €207.9 million - €102.1 million in Euro and £90 million (€105.8 million) in Sterling.
Unamortised debt costs at that date total €3.7 million.
During 2019, £60 million and €30.5 million were drawn to fund the acquisition of the effective freehold interest in Clayton Hotel City
of London (note 10) and £30 million was drawn to fund the purchase of a site on Paul Street in Shoreditch, London (note 10), from the
revolving credit facility. The undrawn loan facilities as at 31 December 2019 were €121.2 million (2018: €216.2 million).
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 (note 22). The loans are secured
on 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.
Reconciliation of movements of liabilities to cash flows arising from financing activities for the year ended 31 December
2019
Liabilities
Equity
Loans and
borrowings
€’000
Lease
liabilities
€’000
Trade
and other
payables Derivatives
€’000
€’000
Share
capital
€’000
Share
premium
€’000
Retained
earnings
€’000
Total
€’000
301,889
-
65,250
1,306
1,843
503,113
144,061 1,017,462
-
(300)
134,437
(42,158)
-
-
-
-
-
-
-
(8,569)
(18,945)
-
-
(9,875)
-
-
-
-
-
-
(1,021)
-
-
-
-
-
91,979
(27,514)
(9,875)
(1,021)
17,075
-
4,610
-
-
796
-
-
-
-
-
-
-
-
314,430
42,391
18,945
9,239
62
-
9,126
-
1,600
-
-
-
-
67
4,171
-
-
-
-
-
-
-
17,871
389,615
10,788
4,238
8
-
-
-
-
-
-
8
-
-
-
-
-
-
-
-
-
-
1,375
-
-
-
-
-
-
-
-
-
-
-
-
(19,387)
1,383
(11,196)
134,437
(42,158)
(8,569)
(18,945)
(19,387)
1,375
(19,387)
35,565
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,814
4,171
9,126
796
1,600
314,430
42,391
18,945
9,239
422,512
-
411,739
-
362,101
-
66,163
-
4,523
-
1,851
-
504,488
80,223
80,223
204,897 1,555,762
Balance as at 31 December 2018
Changes from financing cash
flows
Proceeds from vesting of share
awards
Borrowing costs
Receipt of bank loans
Repayment of bank loans
Repayment of lease liabilities
Interest on lease liabilities
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
Additions to lease liabilities at 1
January 2019
Additions to lease liabilities during
the year
Interest on lease liabilities
Other movements in lease
liabilities
Total liability-related
other changes
Total equity-related
other changes
Balance as at 31 December 2019
156
157
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 21 Loans and borrowings (continued)
21 Loans and borrowings (continued)
Reconciliation of movements of liabilities to cash flows arising from financing activities for the year ended 31 December
2018
Liabilities
Trade
and other
payables Derivatives
€’000
€’000
Loans and
borrowings
€’000
Equity
Share
capital
€’000
Retained
earnings
€’000
Total
€’000
Balance as at 31 December 2017
Changes from financing cash flows
Proceeds from vesting of share awards
Interest and finance costs paid
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
Balance as at 31 December 2018
260,139
64,853
1,778
1,837
73,045
401,652
-
(3,693)
137,902
(92,563)
-
41,646
(1,570)
-
-
1,674
-
104
-
301,889
-
(8,469)
-
-
-
(8,469)
-
-
7,801
-
1,065
8,866
-
65,250
-
(1,026)
-
-
-
(1,026)
-
554
-
-
-
554
-
1,306
6
-
-
-
-
6
-
-
-
-
(5,529)
(5,529)
6
(13,188)
137,902
(92,563)
(5,529)
26,628
-
-
-
-
-
-
-
1,843
-
-
-
-
-
-
76,545
144,061
(1,570)
554
7,801
1,674
1,065
9,524
76,545
514,349
158
Reconciliation of movement in net debt for the year ended 31 December 2019
Sterling
facility
£’000
Sterling
facility
€’000
Euro
facility
€’000
Total
€’000
Loans and borrowings (excluding unamortised debt costs)
At 1 January 2019
Cash flows
Facilities drawn down
Loan repayments
Non-cash changes
Effect of foreign exchange movements
At 31 December 2019
178,352
199,381
106,697
306,078
90,000
(1,852)
98,937
(2,158)
35,500
(40,000)
134,437
(42,158)
-
266,500
17,075
313,235
-
102,197
17,075
415,432
Cash and cash equivalents
At 1 January 2019
Movement during the year
At 31 December 2019
Net debt at 31 December 2019
Reconciliation of net debt and lease liabilities
Net debt at 31 December 2019
Lease liabilities as at 1 January 2019 (note 12)
Additions (note 12)
Interest on lease liabilities (note 12)
Lease payments (note 12)
Remeasurement of lease liabilities (note 12)
Translation adjustment (note 12)
Lease liabilities at 31 December 2019
Net debt and lease liabilities at 31 December 2019
35,907
4,679
40,586
374,846
374,846
314,430
42,391
18,945
(27,514)
9,239
4,610
362,101
736,947
Net debt is calculated in line with banking covenants and includes external loans and borrowings before deduction of amortised
debt costs less cash and cash equivalents. The above table also includes a reconciliation to net debt and lease liabilities. Interest rate
swaps of €4.5 million are not included in the above tables (2018: €1.3 million).
Reconciliation of movement in net debt for the year ended 31 December 2018
Loans and borrowings (excluding unamortised debt costs)
At 1 January 2018
Cash flows
Facilities drawn down
Loan repayments
Non-cash changes
Effect of foreign exchange movements
At 31 December 2018
Cash and cash equivalents
At 1 January 2018
Movement during the year
At 31 December 2018
Net debt at 31 December 2018
Sterling
facility
£’000
Sterling
facility
€’000
Euro
facility
€’000
Total
€’000
174,352
196,512
65,797
262,309
43,251
(39,251)
48,726
(44,287)
89,176
(48,276)
137,902
(92,563)
-
178,352
(1,570)
199,381
-
106,697
(1,570)
306,078
15,745
20,162
35,907
270,171
159
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 22 Derivatives
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 was employed to limit the exposure to upward movements in floating interest rates on Euro
denominated borrowings. The interest rate cap matured on 30 September 2019.
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%.
» 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 term 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.
During the year ended 31 December 2019, the Group entered into the following interest rate swaps which hedge the floating rate on
Sterling borrowings:
» 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 £25 million of the Sterling revolving credit facility borrowings. The swaps
hedge the LIBOR benchmark rate to 1.086%.
» As a result of the loan facility being extended for an additional year to 26 October 2024 (note 21), four new interest rate swaps
were employed with an effective date of 26 October 2023 and a maturity date of 26 October 2024 which hedge the LIBOR
benchmark rate on the Sterling term denominated borrowings. These swaps fix the LIBOR benchmark rate between 0.95% and
0.96%.
As at 31 December 2019, the interest rate swaps cover 100% of the Group’s Term Sterling denominated borrowings. As at 31
December 2019, the interest rate swaps cover 28% of the Group’s Sterling revolving credit facility borrowings.
All derivatives have been designated as hedging instruments for the purposes of IFRS 9.
22 Derivatives (continued)
Fair value
Current liabilities
Interest rate swap liabilities
Non-current liabilities
Interest rate swap liabilities
Total derivative liabilities
Included in other comprehensive income
Fair value losses on derivative instruments
Fair value loss on interest rate swap liabilities
Fair value loss on interest rate cap asset
Reclassified to profit or loss (note 5)
Other amounts reclassified to profit or loss (note 5)
2019
€’000
(89)
(4,434)
(4,523)
2019
€’000
(4,238)
-
(4,238)
1,021
156
(3,061)
2018
€’000
-
(1,306)
(1,306)
2018
€’000
(553)
(1)
(554)
1,026
-
472
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.
Other amounts reclassified to profit or loss relate to the release of the cap asset on maturity in September 2019.
23 Deferred tax
Deferred tax assets
Deferred tax liabilities
Net liability
Movements in year
At 1 January – net liability
Charge for year – to profit or loss (note 8)
Charge for year – to other comprehensive income
At 31 December – net liability
2019
€’000
3,527
(59,358)
(55,831)
2019
€’000
(38,516)
(425)
(16,890)
(55,831)
2018
€’000
2,613
(41,129)
(38,516)
2018
€’000
(28,287)
(536)
(9,693)
(38,516)
The majority of the deferred tax liabilities result from the Group’s policy of ongoing revaluation of land and buildings. Where the
carrying value of a property in the financial statements is greater than its tax base cost, the Group recognises a deferred tax liability.
This is calculated using applicable Irish and UK corporation tax rates. The use of these rates in line with the applicable accounting
standards reflects the intention of the Group to use these assets for ongoing trading purposes. Should the Group dispose of a
property, the actual tax liability would be calculated with reference to rates for capital gains on commercial property.
The Group acquired Hotel La Tour Birmingham Limited in July 2017. At that time, the company had tax trading losses forward of £8.2
million (€9.6 million) which were not recognised as an asset in the statutory accounts of that company. Hotel La Tour Birmingham
Limited sold Hotel La Tour Birmingham (now Clayton Hotel Birmingham) in August 2017, at which time a taxable capital gain of £6.0
million (€7.0 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 £1.0 million (€1.2 million) 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 (€2.6 million) of tax trading losses
remain unrecognised. The tax effect of these losses is £0.4 million (€0.4 million).
160
161
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 23 Deferred tax (continued)
Deferred tax arises from temporary differences relating to:
Net balance at
1 January
2019
€’000
Recognised in
profit or loss
2019
€’000
Recognised
in OCI
2019
€’000
Net deferred
tax
2019
€’000
Balance as at 31 December 2019
Deferred tax
liability
2019
€’000
Deferred tax
assets
2019
€’000
24 Financial instruments and risk management (continued)
Risk exposures (continued)
Financial
liabilities
measured at
fair value
2019
€’000
Financial
liabilities
measured at
amortised
cost
2019
€’000
Total
carrying
amount
2019
€’000
Level 1
2019
€’000
Level 2
2019
€’000
Level 3
2019
€’000
Total
2019
€’000
-
-
(4,523)
(4,523)
(411,739)
(47,733)
-
(459,472)
(411,739)
(47,733)
(4,523)
(463,995)
(411,739)
(411,739)
(4,523)
(4,523)
Property, plant and equipment
Intangible assets
Tax losses carried forward
Other
Net deferred tax
(38,204)
(2,562)
2,069
181
(38,516)
(811)
764
(378)
-
(425)
(17,272)
-
-
382
(16,890)
(56,287)
(1,798)
1,691
563
(55,831)
753
520
1,691
563
3,527
(57,040)
(2,318)
-
-
(59,358)
Financial Liabilities
Bank loans (note 21)
Trade payables and accruals (note 19)
Derivatives (note 22) – hedging instruments
Net balance at
1 January
2018
€’000
Recognised in
profit or loss
2018
€’000
Recognised
in OCI
2018
€’000
Net deferred
tax
2018
€’000
Balance as at 31 December 2018
Deferred tax
liability
2018
€’000
Deferred tax
assets
2018
€’000
Property, plant and equipment
Intangible assets
Tax losses carried forward
Other
Net deferred tax
(27,647)
(2,562)
1,682
240
(28,287)
(923)
-
387
-
(536)
(9,634)
-
-
(59)
(9,693)
(38,204)
(2,562)
2,069
181
(38,516)
363
-
2,069
181
2,613
(38,567)
(2,562)
-
-
(41,129)
24 Financial instruments and risk management
Risk exposures
The Group is exposed to various financial risks arising in the normal course of business. Its financial risk exposures are predominantly
related to the creditworthiness of counterparties and risks relating to changes in interest rates and foreign currency.
The Group uses financial instruments throughout its business: loans and borrowings and cash and cash equivalents are used to
finance the Group’s development and 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 2019. The tables do not include fair value information for financial assets and financial liabilities not
measured at fair value if the carrying amount is a reasonable approximation of fair value. A fair value disclosure for lease liabilities is
not required.
Financial Assets
Trade and other receivables excluding
prepayments (note 15)
Cash at bank and in hand (note 17)
Financial
assets
measured at
fair value
2019
€’000
Financial
assets at
amortised
cost
2019
€’000
Total
carrying
amount
2019
€’000
-
-
-
17,067
40,586
57,653
17,067
40,586
57,653
Level 1
2019
€’000
Level 2
2019
€’000
Level 3
2019
€’000
Total
2019
€’000
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.
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 22) – hedging instruments
-
-
(1,306)
(1,306)
(301,889)
(52,562)
-
(354,451)
(301,889)
(52,562)
(1,306)
(355,757)
(301,889)
(301,889)
(1,306)
(1,306)
Fair value hierarchy
The Group measures the fair value of financial instruments based on the degree to which inputs to the fair value measurements are
observable and the significance of the inputs to the fair value measurements. Financial instruments are categorised by the type of
valuation method used. The valuation methods are as follows:
» Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
» Level 2: Inputs other than quoted prices included within Level 1 that are observable for the financial instrument, either directly (i.e.
as prices) or indirectly (i.e. derived from prices).
» Level 3: Inputs for the financial instrument that are not based on observable market data (unobservable inputs).
The Group’s policy is to recognise any transfers between levels of the fair value hierarchy as of the end of the reporting period during
which the transfer occurred. During the year ended 31 December 2019, 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.
162
163
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION
24 Financial instruments and risk management (continued)
24 Financial instruments and risk management (continued)
Estimation of fair values
The principal methods and assumptions used in estimating the fair values of financial assets and liabilities are explained hereafter.
Cash at bank and in hand
For cash at bank and in hand, the carrying value is deemed to reflect a reasonable approximation of fair value.
Derivatives
Discounted cash flow analyses have been used to determine the fair value of the interest rate swaps 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 floating rate interest-bearing loans and borrowings
is considered to be a reasonable approximation of fair value. There is no difference between margins available in the market at year
end and the margins that the Group was paying at the year end.
(a) Credit risk
Exposure to credit risk
Credit risk is the risk of financial loss to the Group arising from granting credit to customers and from investing cash and cash
equivalents with banks and financial institutions.
Trade and other receivables
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 2019 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.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and give rise to credit risk on the amounts held with counterparties.
The maximum credit risk is represented by the carrying value at the reporting date. The Group’s policy for investing cash is to limit
risk of principal loss and to ensure the ultimate recovery of invested funds by limiting credit risk.
The Group review regularly the credit rating of each bank and if necessary, take appropriate action to ensure there is appropriate
cash and cash equivalents held with each bank based on their credit rating.
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
164
Carrying
amount
2019
€’000
7,920
4,805
2,456
1,886
40,586
57,653
Carrying
amount
2018
€’000
9,300
900
2,614
1,709
35,907
50,430
(b) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities. The
Group’s approach to managing liquidity risk 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 successfully completed the refinancing of its existing debt facility with a banking club of six lenders.
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 maturity date of this facility on completion of the refinancing was 26 October 2023, however on 19
August 2019, the Group availed of its option to extend the €525 million multicurrency facility for an additional year, to 26 October
2024. As at 31 December 2019, the entire term facility was drawn in Sterling equating to £176.5 million (€207.5 million) and €207.9
million was drawn from the revolving credit facility - €102.1 million in Euro and £90.0 million (€105.8 million) in Sterling. The Group had
undrawn revolving credit facilities of €121.2 million as at 31 December 2019.
The Group also monitors its Debt and Lease Service Cover, which is 3.2 times for the year ended 31 December 2019 (31 December
2018: 2.7 times) and seeks to ensure that if a significant temporary drop in revenues were to occur, there would be sufficient liquid
resources to meet ongoing requirements.
The following are the contractual maturities of the Group’s financial liabilities at 31 December 2019, including estimated interest
payments. In the below table, bank loans are repaid on 26 October 2024, 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.
Bank loans
Trade payables and accruals
Interest rate swaps
Carrying value
2019
€’000
(411,739)
(47,733)
(4,523)
(463,995)
Total
2019
€’000
(452,639)
(47,733)
(4,523)
(504,895)
6 months
or less
€’000
(5,126)
(47,733)
(572)
(53,431)
The equivalent disclosure for the prior year is as follows:
Bank loans
Trade payables and accruals
Interest rate swaps
Carrying value
2018
€’000
(301,889)
(52,562)
(1,306)
(355,757)
Total
2018
€’000
(341,809)
(52,562)
(1,306)
(395,677)
6 months
or less
€’000
(3,844)
(52,562)
(459)
(56,865)
6 – 12
months
€’000
(5,148)
-
(707)
(5,855)
6 – 12
months
€’000
(3,909)
-
(353)
(4,262)
1 – 2
years
€’000
(10,098)
-
(1,299)
(11,397)
2 – 5
years
€’000
(432,267)
-
(1,945)
(434,212)
1 – 2
years
€’000
(7,665)
-
(333)
(7,998)
2 – 5
years
€’000
(326,391)
-
(161)
(326,552)
165
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 24 Financial instruments and risk management (continued)
24 Financial instruments and risk management (continued)
(c) Market risk
(c) Market risk (continued)
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. The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while optimising the return.
(i) Interest rate risk (continued)
The impact on profit or loss is shown below. This analysis assumes that all other variables, in particular foreign currency exchange
rates, remain constant.
(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 (note 22) which hedge the variability in cash flows
attributable to the interest rate risk. All such transactions are carried out within the guidelines set by the Board. The Group seeks to
apply hedge accounting to manage volatility in profit or loss.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on
the reference interest rates, maturities and the notional amounts. The Group assesses whether the derivative designated in each
hedging relationship is expected to be effective in offsetting changes in cash flows of the hedged item using the hypothetical
derivative method.
A fundamental review and reform of major interest rate benchmarks is being undertaken globally. There is uncertainty as to the
timing and the methods of transition for replacing existing benchmark interbank offered rates (IBORs) with alternative rates. LIBOR
continues to be used as a reference rate in financial markets and is used in the valuation of instruments with maturities that exceed
the expected end date for LIBOR. The Group’s derivatives continue to hedge the LIBOR variable interest rate on Sterling borrowings.
As a result, the Group continues to apply hedge accounting as at 31 December 2019.
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
2019
€’000
415,432
(236,836)
-
178,596
2018
€’000
306,078
(197,310)
(8,212)
100,556
The weighted average interest rate for 2019 was 2.42% (2018: 2.94%), of which 1.57% (2018: 2.15%) related to margin.
The interest expense for 2019 has been sensitised in the following 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 have reviewed eight 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 believe that a
reasonable change in the rates would be 1.1% for both 3 month LIBOR and for 3 month Euribor based on historical data for each
benchmark interest rate.
At 31 December 2019, all Sterling term borrowings (£176.5 million) were hedged with interest rate swaps and £25 million of the
£90 million revolving credit facility borrowings was hedged with interest rate swaps. £65 million of Sterling borrowings are unhedged
and are affected by changes in variable interest rates. The Group does not currently hedge its variable interest rates on its
Euro borrowings.
Euribor
LIBOR
2019 actual weighted
average variable
benchmark rate
If rate sensitised
upwards
If rate sensitised
downwards
0%
1.25%
1.07%
1.31%
0%
1.08%
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
2019
(Increase)/decrease in interest on loans and borrowings
Decrease/(increase) in tax charge
(Decrease)/increase in profit
2018
(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*
€’000
Decrease
in rate*
€’000
(1,600)
200
(1,400)
(1,555)
194
(1,361)
486
(61)
425
419
(52)
367
* Only the interest on the unhedged portion of the loans has been sensitised. The sensitivity has no impact on the hedged portion.
Contracted maturities of estimated interest payments from swaps
The following table indicates the periods in which the cash flows associated with the interest rate swaps are expected to occur and
the carrying amounts of the related hedging instruments.
Interest rate swaps
Liabilities
31 December 2019
Carrying
Amount
€’000
Total
€’000
12 months
or less
€’000
More than
1 year
€’000
(4,523)
(4,523)
(1,279)
(3,244)
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 2019
Carrying
Amount
€’000
Total
€’000
12 months
or less
€’000
More than
1 year
€’000
(4,523)
(4,523)
(1,279)
(3,244)
166
167
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION
24 Financial instruments and risk management (continued)
24 Financial instruments and risk management (continued)
(c) Market risk (continued)
(ii) Foreign currency risk
As per the Risk Management section of the annual report on pages 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 foreign currency translation risk on the retranslation of foreign operations to Euro.
The Group’s policy is to manage foreign currency exposures commercially and through netting of exposures where possible. The
Group’s principal transactional exposure to foreign exchange risk relates to interest costs on its Sterling borrowings. This risk is
mitigated by the earnings from UK subsidiaries which are denominated in Sterling.
(d)
Capital management (continued)
Net Debt to Adjusted EBITDA (pre IFRS 16):
Adjusted EBITDA (note 2)
Deduct: fixed rent costs* (note 11)
Adjusted EBITDA pre IFRS 16
Net debt as at 31 December (note 21)
The Group’s gain or loss on retranslation of the net assets of foreign currency subsidiaries is taken directly to the translation reserve.
Net Debt to Adjusted EBITDA as at 31 December
The Group limits its exposure to foreign currency risk by using Sterling debt to hedge part of the Group’s investment in UK
subsidiaries. The Group financed certain acquisitions and developments in the UK by obtaining funding through external borrowings
denominated in Sterling. These borrowings amounted to £266.5 million (€313.2 million) at 31 December 2019 (2018: £176.5 million
(€197.3 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 thirteen years. The
lowest average foreign exchange rate of 0.66 has been used in calculating the impact of Euro weakening against Sterling as it is
reflective of a period of market volatility due to strong economic growth. On the upward sensitivity, due to current volatility in the
market and the unknown impact of Brexit, the Group have 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 2019 was 0.88 (2018: 0.88). The interest cost on Sterling loans
in 2019 was £7.3 million (€8.3 million).
Decrease/(increase) on interest costs of Sterling loans
Impact on tax charge
Increase/(decrease) in profit/equity
(d) Capital management
Profit
Equity
Strengthening
of Euro
€’000
1,022
(128)
894
Weakening
of Euro
€’000
(2,664)
333
(2,331)
Strengthening
of Euro
€’000
1,022
(128)
894
Weakening
of Euro
€’000
(2,664)
333
(2,331)
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain
future development of the business. Management monitors the return on capital to ordinary shareholders.
The Board of Directors seeks to maintain a balance between the higher returns that might be possible with higher levels of
borrowings and the advantages and security afforded by a sound capital position. The Group’s target is to achieve a pre-tax
leveraged return on equity of at least 15% on investments and a rent cover of at least 1.85 times in year three for new leased assets.
The Group monitors capital using a ratio of Net Debt to Adjusted EBITDA in line with its banking covenants.
The Net Debt to Adjusted EBITDA pre IFRS 16 as at 31 December 2019 is 2.8 (2018: 2.3).
2019
€’000
162,214
(27,384)
2018
€’000
119,583
-
134,830
119,583
374,846
270,171
2.8
2.3
2019
€’000
162,214
736,947
4.5
* No adjustment required to 2018 figures as prior year figures have not been restated for IFRS 16.
Net debt and lease liabilities to Adjusted EBITDA:
Adjusted EBITDA (note 2)
Net debt and lease liabilities as at 31 December (note 21)
Net debt and lease liabilities to Adjusted EBITDA
The comparative information is not shown above as it has not been restated for IFRS 16.
25 Commitments
Section 357 Companies Act 2014
Dalata Hotel Group plc, as the parent company of the Group and for the purposes of filing exemptions referred to in Section 357
of the Companies Act 2014, has entered into guarantees in relation to the liabilities of the Republic of Ireland registered subsidiary
companies which are listed below:
- Suvanne Management Limited
- 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
- DHG Indigo 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
- DHG Harton Limited
168
169
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 25 Commitments (continued)
Capital commitments
The Group has the following commitments for future capital expenditure under its contractual arrangements.
Contracted but not provided for
2019
€’000
2018
€’000
61,270
26,701
This relates primarily to the development of the following new-build hotels and extensions to currently operational hotels which are
now contractually committed:
» New build hotel development of Maldron Merrion Road;
» New build residential development (comprising 69 residential units) on the site of the former Tara Towers hotel (note 14); and
» Extensions and renovations of Clayton Hotel Cardiff Lane, Clayton Hotel Birmingham and Clayton Hotel Burlington Road.
It also includes committed capital expenditure at other hotels in the Group.
The Group has further commitments in relation to fixtures, fittings and equipment in some of its leased hotels. Under certain lease
agreements, the Group has committed to spending a percentage of turnover on capital expenditure in respect of fixtures, fittings
and equipment in the leased hotels over the life of the lease. The Group has estimated the commitment in relation to these leases to
be €58.3 million (31 December 2018: €60.6 million) spread over the life of the various leases with the majority ranging in length from
25 years to 35 years. The turnover figures used in this estimate have been based on 2019 revenues.
26 Related party transactions
Under IAS 24 Related Party Disclosures, the Group has related party relationships with shareholders and Directors of the Company.
Remuneration of key management
Key management is defined as the Directors of the Company and does not extend to any other members of the Executive
Management Team. The compensation of key management personnel is set out in the Remuneration Committee Report on pages
78 to 95. In addition, the share-based payments expense for key management in 2019 was €1.0 million (2018: €0.9 million).
27 Subsequent events
Proposed final dividend
On 24 February 2020, the Board proposed a final dividend of 7.25 cents per share. This proposed dividend is subject to approval
by the shareholders at the Annual General Meeting. The payment date for the final dividend will be 6 May 2020 to shareholders
registered on the record date 14 April 2020. These consolidated financial statements do not reflect this dividend. Based on shares in
issue at 31 December 2019, the amount of dividends proposed is €13.4 million.
Vesting of share options
On 2 January 2020, the Company issued 49,245 shares of €0.01 per share following the partial vesting of the Share Save schemes
granted in 2016.
On 3 February 2020, the Company issued 16,639 shares of €0.01 per share following the partial vesting of the Share Save schemes
granted in 2016.
28 Subsidiary undertakings
A list of all subsidiary undertakings at 31 December 2019 is set out below:
Subsidiary undertaking
Country of
Incorporation
Activity
Ownership
Direct
Indirect
DHG Glover Limited1
DHG Fleming Limited1
DHG Harton Limited1
Cenan BV2
DHGL Limited1
Dalata Limited1
Hanford Commercial Limited1
Anora Commercial Limited1
Ogwell Limited1
Caruso Limited1
CI Hotels Limited1
Dalata Management Services Limited1
Tulane Business Management Limited1
Dalata Support Services Limited1
Fonteyn Property Holdings Limited1
Fonteyn Property Holdings No. 2 Limited1
Suvanne Management Limited1
Carasco Management Limited1
Amelin Commercial Limited1
Lintal Commercial Limited1
Bernara Commercial Limited1
Pillo Hotels Limited1
Loadbur Limited1
Swintron Limited1
Heartside Limited1
Pondglen Limited1
Candlevale Limited1
Songdale Limited1
Palaceglen Limited1
Adelka Limited1
Bayvan Limited1
Leevlan Limited1
DHG Arden Limited1
DHG Barrington Limited1
DHG Cordin Limited1
DS Charlemont Limited1
Cavernford DAC1
Vizmol Limited1
Sparrowdale Limited1
Galsay Limited1
Merzolt Limited1
DHG Burlington Road Limited1
DT Sussex Road Operations Limited1 (In Liquidation)
DHG Eden Limited1
DHG Dalton Limited1
Williamsberg Property Limited1
Oak Lodge Management Company Limited by Guarantee1
DHG Indigo Limited1
Ireland
Ireland
Ireland
Netherlands
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
100%
Holding company
100%
Financing company
100%
Holding 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 management
-
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
-
Hotel and catering
-
Hotel and catering
-
Dormant company
-
Hotel and catering
-
Property holding company
-
Property holding company
-
Management company
-
Holding company
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.
-
-
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
170
171
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 28 Subsidiary undertakings (continued)
Subsidiary undertaking
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
SRD (Trading) Limited4
SRD (Management) Limited4
Hintergard Limited5
Country of
Incorporation
N Ireland
N Ireland
N Ireland
N Ireland
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Jersey
Activity
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
Property holding company
Hotel and catering
Hotel and catering
Hotel and catering
Property holding company
Ownership
Direct
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Indirect
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.
5 The registered address of this company is 12 Castle Street, St Helier Jersey, JE2 3RT.
29 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 2019 and 31 December 2018.
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
2019
2018
78,212
77,535
42.4 cents
42.0 cents
42.0 cents
41.6 cents
184,601,191
186,305,549
75,224
78,821
40.9 cents
40.4 cents
42.8 cents
42.3 cents
184,125,709
186,156,827
The difference between the basic and diluted weighted average shares outstanding for the year ended 31 December 2019 is due to
the dilutive impact of the conditional share awards granted in 2016 (for the period prior to exercise), 2017, 2018 and 2019 (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 earnings per share (basic and diluted) is presented as an alternative performance measure to show the underlying
performance of the Group excluding the tax adjusted effects of items considered by management to not reflect normal trading
activities or distort comparability either period on period or with other similar businesses (note 2).
29 Earnings per share (continued)
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
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
Adjusting items in tax charge (note 2)
Tax impact of proceeds from insurance claim
Tax adjustment for adjusting items
Adjusted profit for the year
2019
€’000
89,688
30,613
120,301
-
9
(1,601)
118,709
(30,613)
-
88,096
(11,476)
857
58
77,535
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
Earnings per share as restated to remove the impact of IFRS 16 Leases in 2019 is presented in the following table. There is no
comparative information for 2018 as IFRS 16 had not been applied in that year.
Pre IFRS 16 Earnings per share – Basic
Pre IFRS 16 Earnings per share – Diluted
Pre IFRS 16 Adjusted earnings per share – Basic
Pre IFRS 16 Adjusted earnings per share – Diluted
2019
46.4 cents
46.0 cents
46.0 cents
45.6 cents
There have been no adjustments made to the number of weighted average shares outstanding in calculating the pre IFRS 16
earnings per share. A reconciliation of profit for the year as reported in accordance with prevailing IFRS to pre IFRS 16 profit for the
year is included below.
As presented in accordance with prevailing IFRS
IFRS 16 impact on profit and adjusted profit for the year (note 11)
Loss on investment property (note 13)
Pre IFRS 16 profit and adjusted profit for the year
30 Approval of the financial statements
The financial statements were approved by the Directors on 24 February 2020.
Profit for
the year
€’000
78,212
7,453
-
85,665
Adjusted
profit for
the year
€’000
77,535
7,453
(44)
84,944
172
173
Notes to the consolidated financial statements (continued)Notes to the consolidated financial statements (continued)Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
Company statement of financial position
at 31 December 2019
Note
2
3
4
5
7
7
6
2019
€’000
48,408
48,408
49
725,697
167
725,913
774,321
1,851
504,488
4,900
259,682
770,921
3,400
3,400
3,400
774,321
2018
€’000
46,704
46,704
36
744,203
676
744,915
791,619
1,843
503,113
4,232
263,113
772,301
19,318
19,318
19,318
791,619
Assets
Non-current assets
Investments in subsidiaries
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
Retained earnings
Total equity
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
On behalf of the Board:
John Hennessy
Chair
Patrick McCann
Director
Maldron Hotel
South Mall Cork
174
Dalata Hotel Group plc Annual Report & Accounts 2019
175
Financial StatementsSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION Company statement of changes in equity
for the year ended 31 December 2019
Company statement of cash flows
for the year ended 31 December 2019
Attributable to equity holders of the Company
Share
capital
€’000
Share
premium
€’000
Share-based
payment
reserve
€’000
Hedging
reserve
€’000
Retained
earnings
€’000
Total
€’000
At 1 January 2019
Comprehensive income:
Profit for the year
Total comprehensive income for the year
Transactions with owners of the Company:
Equity-settled share-based payments
Vesting of share awards (note 7)
Dividends paid (note 8)
Total transactions with owners of the Company
At 31 December 2019
1,843
503,113
4,232
-
-
-
8
-
8
1,851
-
-
-
-
-
1,375
-
1,375
504,488
2,679
(2,011)
-
668
4,900
-
-
-
-
-
-
-
-
263,113
772,301
13,945
13,945
13,945
13,945
-
2,011
(19,387)
(17,376)
259,682
2,679
1,383
(19,387)
(15,325)
770,921
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 and options (note 7)
Dividends paid (note 8)
Total transactions with owners of the Company
At 31 December 2018
1,837
503,113
2,753
(1,692)
(13,154)
492,857
-
-
-
-
6
-
6
1,843
-
-
-
-
-
-
-
1,692
1,692
280,475
-
280,475
280,475
1,692
282,167
-
-
-
-
503,113
2,800
(1,321)
-
1,479
4,232
-
-
-
-
-
-
1,321
(5,529)
(4,208)
263,113
2,800
6
(5,529)
(2,723)
772,301
Cash flows from operating activities
Profit for the year
Adjustments for:
Dividends received from subsidiary undertakings
Finance costs
Foreign exchange loss/(gain) on borrowings
Share-based payment expense
Distribution income
Decrease in trade and other payables
(Increase)/decrease in trade and other receivables
Net cash (used in)/from operating activities
Cash flows from investing activities
Cash movements on amounts due from subsidiaries
Distribution received
Dividends received
Net cash from 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 cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of movements in exchange rates
Cash and cash equivalents at the end of the year
2019
€’000
2018
€’000
13,945
280,475
(15,310)
64
154
975
-
(172)
(784)
(13)
(969)
3,372
-
15,310
18,682
-
-
-
(19,387)
1,383
(18,004)
(291)
676
(218)
167
(88,259)
10,545
(56)
874
(200,000)
3,579
(521)
34
3,092
72,679
200,000
-
272,679
(8,146)
74,459
(336,937)
(5,529)
6
(276,147)
(376)
849
203
676
176
177
Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION Notes to the Company financial statements
forming part of the Company financial statements
1
Significant accounting policies
3 Trade and other receivables
The individual financial statements of the Company have been prepared in accordance with IFRS as adopted by the EU, and as
applied in accordance with the Companies Act 2014.
Significant accounting policies specifically applicable to these individual Company financial statements and which are not reflected
within the accounting policies for the Group consolidated financial statements are detailed below.
Prepayments
Value added tax
IFRS 16 Leases has no impact on the individual financial statements of the Company.
(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 1 January
Cost of share-based payments in respect of subsidiaries
Additions to investments
At 31 December
2019
€’000
2018
€’000
48,408
46,704
2019
€’000
46,704
1,704
-
48,408
2018
€’000
42,519
1,926
2,259
46,704
On 25 October 2018, DHGL Limited declared 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 was the sole shareholder in Cenan BV at
that date.
On 11 December 2019, the shares the Company held in Cenan BV were gifted to DHG Harton Limited, a wholly owned subsidiary
of the Company. As a result of this transaction, Cenan BV has become a direct subsidiary of DHG Harton Limited rather than the
Company. The Company has derecognised its investment in Cenan BV and recognised an investment in DHG Harton Limited of the
same value. As both Cenan BV and DHG Harton Limited are subsidiaries of the Company, there has been no impact on investments
in subsidiaries in the financial statements.
On 26 October 2018, DHG Glover Limited, a wholly owned subsidiary, acquired the Company’s investment in DHGL Limited for €200
million. The Company retained control of DHGL Limited as a result of the transaction. Accordingly, the €200 million proceeds were
treated as distribution income by the Company in profit or loss in 2018. The €200 million received was used to repay a portion of the
outstanding debt facilities in 2018.
Details of subsidiary undertakings are included in note 28 of the consolidated financial statements.
2019
€’000
45
4
49
2019
€’000
725,697
725,697
2018
€’000
31
5
36
2018
€’000
744,203
744,203
2018
€’000
676
676
2018
€’000
7
1,720
216
17,375
19,318
4 Amounts owed by subsidiaries
Amounts owed by subsidiaries
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 based on the financial position of
subsidiaries. As a result, no expected credit loss provision has been recognised.
5 Cash and cash equivalents
Cash at bank and in hand
6 Trade and other payables
Trade payables
Accruals
Payroll taxes
Amounts due to subsidiary undertakings
2019
€’000
167
167
2019
€’000
31
1,050
78
2,241
3,400
Amounts due to group undertakings at 31 December 2019 include an interest-bearing loan of €0.7 million (2018: €nil) which is
repayable on demand. The Company incurred interest on a loan from a group undertaking at an interest rate of 1.4%. Other amounts
due to subsidiaries are non-interest bearing and are repayable on demand.
7 Share capital and premium
At 31 December 2019
Authorised share capital
Ordinary shares of €0.01 each
Allotted, called-up and fully paid shares
Ordinary shares of €0.01 each
Share premium
Number
€’000
10,000,000,000
100,000
Number
185,100,620
€’000
1,851
504,488
178
179
Notes to the Company financial statements (continued) Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 7 Share capital and premium (continued)
10 Company related party disclosures
At 31 December 2018
Authorised share capital
Ordinary shares of €0.01 each
Allotted, called-up and fully paid shares
Ordinary shares of €0.01 each
Share premium
Number
€’000
10,000,000,000
100,000
Number
184,349,666
€’000
1,843
503,113
All ordinary shares rank equally with regard to the Company’s residual assets.
During the year ended 31 December 2019, the Company issued 285,809 shares of €0.01 per share following the vesting of awards
granted in March 2016 under the 2014 LTIP. 465,145 shares were also issued during 2019 under the Share Save schemes granted in
2016 which had a weighted average exercise price of €2.96 per share.
8 Dividends
The dividends paid and proposed in respect of ordinary share capital were as follows:
Final paid 7.0 cents per Ordinary Share (2018: €nil)
Interim paid 3.5 cents per Ordinary Share (2018: 3.0 cents)
2019
€’000
12,925
6,462
19,387
2018
€’000
-
5,529
5,529
A final dividend for 2018 of 7.0 cents per share was paid on 8 May 2019 on the ordinary shares in the Company and amounted to
€12.9 million (2018: €nil).
An interim dividend for 2019 of 3.5 cents (2018: 3.0 cents) per share was paid on 4 October 2019 on the ordinary shares in the
Company and amounted to €6.5 million (2018: €5.5 million).
On 24 February 2020, the Board proposed a final dividend for 2019 of 7.25 cents per share. This proposed final dividend is subject
to approval by the shareholders at the Annual General Meeting. The payment date for the final dividend will be 6 May 2020 to
shareholders registered on the record date 14 April 2020. These consolidated financial statements do not reflect this dividend.
Based on shares in issue at 31 December 2019, the amount of dividends proposed is €13.4 million.
During the year ended 31 December 2019, the Company received dividend income which has been included in profit or loss
amounting to €15.3 million (2018: €88.3 million) from its subsidiary undertakings.
9 Attributable profit or loss of the Company
The profit attributable to shareholders dealt with in the financial statements of the Company for the year ended 31 December 2019
was €13.9 million (2018: profit of €280.5 million). As permitted by Section 304 of the Companies Act 2014, the statement of profit or
loss and other comprehensive income for the Company has not been separately presented in these financial statements.
Profit for the year ended 31 December 2019 primarily includes dividend income from subsidiary undertakings of €15.3 million
(note 8).
Profit for the year ended 31 December 2018 principally included distribution income of €200 million (note 2) and dividend income
from subsidiary undertakings of €88.3 million (note 8).
Under IAS 24 Related Party Disclosures, the Company has related party relationships with Directors of the Company and with its
subsidiary undertakings (note 28 of the consolidated financial statements).
Remuneration of key management
Key management is defined as the Directors of the Company. The compensation of key management personnel is set out in the
Remuneration Committee Report on pages 78 to 95 and note 26 of the consolidated financial statements.
Transactions with related parties
During the year ended 31 December 2019, the Company charged fees amounting to €2.8 million (2018: €3.6 million) to its subsidiary
undertakings for services provided during the year.
In 2018, the Company repaid its external borrowings therefore the Company did not charge interest relief to its subsidiaries in 2019.
In 2018, the Company charged €3.6 million to its subsidiaries for use of interest relief.
11 Commitments
Section 357 Companies Act 2014
Dalata Hotel Group plc, as the as the parent company of the Group and for the purposes of filing exemptions referred to in Section
357 of the Companies Act 2014, has entered into guarantees in relation to the liabilities of Republic of Ireland registered subsidiary
companies which are listed below:
- Suvanne Management Limited
- Carasco Management Limited
- Heartside Limited
- Palaceglen Limited
- Songdale Limited
- Amelin Commercial Limited
- DHG Burlington Road Limited
- Dalata Support Services Limited
- Bernara Commercial Limited
- Adelka Limited
- DS Charlemont Limited
- DHG Barrington Limited
- Vizmol Limited
- Fonteyn Property Holdings No. 2 Limited
- DHG Eden Limited
- Galsay Limited
- DHG Fleming Limited
- DHG Indigo 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
- DHG Harton Limited
180
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Notes to the Company financial statements (continued) Notes to the Company financial statements (continued) Financial StatementsDalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATION 11 Commitments (continued)
Other guarantees
At 31 December 2019, 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
Clayton Hotel Cambridge
Agreement for Lease
Maldron Hotel, Glasgow
Clayton Hotel, Glasgow
Clayton Hotel, Bristol
Maldron Hotel, Birmingham
Maldron Hotel, Manchester
Clayton Hotel, Manchester City
Maldron Hotel Liverpool
Maldron Hotel Croke Park, Dublin
The Samuel, Dublin
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
SRD (Trading) Limited
Dalata Cardiff Limited
Dalata Cardiff Limited
Dalata Cardiff Limited
Dalata Cardiff Limited
Dalata Cardiff Limited
Dalata Cardiff Limited
Dalata Cardiff Limited
Tulane Business Management Limited
Tulane Business Management Limited
DHG Fleming Limited
DHG Glover Limited
25
35
35
25
35
35
30
35
35
35
35
35
35
35
35
35
6*
6*
21.9
33.0
32.4
22.1
32.6
33.9
29.9
35.0
35.0
35.0
35.0
35.0
35.0
35.0
35.0
35.0
4.8
4.8
* The initial term of the loan facility was five years which was entered into on 26 October 2018. In August 2019, the Group availed of its option to extend the
multicurrency facility for an additional year. The new maturity date of the facility is 26 October 2024.
12 Subsequent events
Proposed final dividend
On 24 February 2020, the Board proposed a final dividend for 2019 of 7.25 cents per share. This proposed final dividend is subject
to approval by the shareholders at the Annual General Meeting. The payment date for the final dividend will be 6 May 2020 to
shareholders registered on the record date 14 April 2020. These financial statements do not reflect this dividend. Based on shares in
issue at 31 December 2019, the amount of dividends proposed is €13.4 million.
Vesting of share options
On 2 January 2020, the Company issued 49,245 shares of €0.01 per share following the partial vesting of the Share Save schemes
granted in 2016.
On 3 February 2020, the Company issued 16,639 shares of €0.01 per share following the partial vesting of the Share Save schemes
granted in 2016.
13 Approval of the financial statements
The financial statements were approved by the Directors on 24 February 2020.
Supplementary
Financial Information
Alternative Performance Measures
(“APM”) and other definitions
The Group reports certain alternative performance measures
(‘APMs’) that are not defined under International Financial
Reporting Standards (‘IFRS’), which is the framework under which
the consolidated financial statements are prepared. These are
sometimes referred to as ‘non-GAAP’ measures.
The Group believes that reporting these APMs provides useful
supplemental information which, when viewed in conjunction
with our IFRS financial information, provides investors with a more
comprehensive understanding of the underlying financial and
operating performance of the Group and its operating segments.
These APMs are primarily used for the following purposes:
» to evaluate 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.
(i) Adjusted EBITDA
Adjusted EBITDA is an APM representing earnings before interest
on lease liabilities, other interest and finance costs, depreciation
of property, plant and equipment and right-of-use assets,
amortisation of intangible assets and tax, adjusted to show the
underlying operating performance of the Group and excludes
items which are not reflective of normal trading activities or distort
comparability either year on year or with other similar businesses.
Reconciliation: Note 2
(ii) EBITDA and Segments EBITDA
EBITDA is an APM representing earnings before interest on
lease liabilities, other interest and finance costs, depreciation
of property, plant and equipment and right-of-use assets,
amortisation of intangible assets and tax.
Reconciliation: Note 2
Segments EBITDA represents ‘Adjusted EBITDA’ before central
costs, share-based payments expense and other income for each
of the reportable segments: Dublin, Regional Ireland and United
Kingdom. It is presented to show the net operational contribution
of leased and owned hotels in each geographical location.
Reconciliation: Note 2
(iii) EBITDAR and Segments EBITDAR
EBITDAR is an APM representing earnings before rent (fixed and
variable), interest on lease liabilities, other interest and finance
costs, depreciation of property, plant and equipment and
right-of-use assets, amortisation of intangible assets and tax.
Reconciliation: Note 2
Segments EBITDAR represents Segments EBITDA before rent
(fixed and variable) for each of the reportable segments: Dublin,
Regional Ireland and United Kingdom.
Reconciliation: Note 2
(iv) Adjusted basic earnings per share (EPS)
Adjusted Basic EPS is presented as an APM to show the
underlying performance of the Group excluding the effects of
items considered by management to not reflect normal trading
activities or distort comparability either year on year or with
other similar businesses.
Reconciliation: Note 29
(v) Segments EBITDAR margin
Segments EBITDAR margin represents ‘Segments EBITDAR’
as a percentage of the total revenue for the following Group
segments: Dublin, Regional Ireland and United Kingdom. Also
referred to as Hotel EBITDAR margin.
(vi) Effective tax rate
The Group’s annual tax charge divided by the profit before tax
presented in the consolidated statement of profit or loss and
other comprehensive income.
Reconciliation: Refer below
(vii) Net Debt
Net Debt represents loans and borrowings (gross of unamortised
debt costs) less cash and cash equivalents at year end.
Reconciliation: Note 21
(viii) Net Debt and Lease Liabilities
Net Debt and lease liabilities recorded at year end.
Reconciliation: Note 21
(ix) Net Debt to Adjusted EBITDA
Net Debt divided by the ‘Adjusted EBITDA’ after deducting fixed
rent for the year. This APM is presented to show the Group’s
financial leverage before the application of IFRS 16 Leases.
Reconciliation: Note 24
(x) Net Debt and Lease Liabilities to Adjusted EBITDA
Net Debt and Lease Liabilities divided by the ‘Adjusted EBITDA’
for the year. This APM is presented to show the Group’s financial
leverage after including the accounting estimate of lease
liabilities following the application of IFRS 16 Leases.
Reconciliation: Note 24
182
183
Notes to the Company financial statements (continued) Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCESUPPLEMENTARY FINANCIAL INFORMATIONFINANCIAL STATEMENTSSupplementary Financial Information Supplementary Financial Information
(continued)
Supplementary Financial Information
(continued)
(xi) Free Cash Flow
Net cash from operating activities less amounts paid for interest,
finance costs, refurbishment capital expenditure and after
adding back cash paid in respect of adjusting items to EBITDA.
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. Following
the adoption of IFRS 16, fixed rent is also deducted. This APM
is presented to show the cash generated to fund acquisitions,
development expenditure, repayment of debt and dividends.
Reconciliation: Refer below
(xii) Debt and Lease Service Cover
Free Cash Flow before payments of rent, interest and finance
costs divided by the total amount paid for rent, interest and
finance costs. Debt and Lease Service Cover is presented to show
the Group’s ability to meet its debt and lease commitments.
Reconciliation: Refer below
(xiii) Normalised Return on Invested Capital
Adjusted EBIT for the year divided by the Group’s average
invested capital. The Group defines invested capital as total
assets less total liabilities at the year end and excludes the
accumulated revaluation gains/losses included in property,
plant and equipment, Net Debt, derivative financial instruments,
taxation related balances and is restated to remove the impact
of adopting IFRS 16 Leases, including removing the accounting
estimate for right-of-use assets and lease liabilities. The Group
also excludes the impact of the investment in the construction
of future assets or newly opened, owned assets in 2018 or 2019
which have not yet reached full operating performance.
The Group’s net assets are adjusted to reflect the average
level of acquisition investment spend and the average level
of working capital for the accounting period. The average
invested capital is the simple average of the opening and
closing invested capital figures.
Adjusted EBIT represents the Group’s Adjusted EBITDA after
deducting the depreciation of property, plant and equipment,
amortisation of intangible assets and is restated to remove the
impact of adopting IFRS 16 by deducting the rental expense
under IAS 17. The earnings from owned assets newly opened
in 2018 or 2019 are excluded as they have not yet reached full
operating performance.
The Group presents this APM to provide stakeholders with a
more meaningful understanding of the underlying financial and
operating performance of the Group. The Group excludes assets
which have not yet reached full operating performance and assets
under construction at year end and therefore did not generate a
return to show the underlying performance of the Group.
Reconciliation: Refer below
(xiv) Pre IFRS 16 numbers
Due to the significant impact from the adoption of IFRS 16
Leases on the consolidated financial statements, the Group has
also disclosed numbers for the year ended 31 December 2019
as if they had been prepared under the previous accounting
standard IAS 17 Leases. As the Group is not restating prior
year comparatives under the transition method selected,
these additional disclosures will provide the reader with more
information to assist in interpreting the underlying operating
performance of the Group. See note 11 to the consolidated
financial statements for the year ended 31 December 2019 for
more information on the transition to IFRS 16.
In particular, the Group refers to the following APMs to enable
comparison between years following the adoption of IFRS 16
Leases in the year.
Adjusted EBITDA pre IFRS 16
Earnings before adjusting items, interest and finance costs,
tax, depreciation, amortisation of intangible assets and
restated to remove the impact of adopting IFRS 16, replacing
IFRS 16 right of use asset depreciation and lease liability
interest with rental expenses under IAS 17. Earnings are
adjusted to show the underlying operating performance of the
Group and excludes items which are not reflective of normal
trading activities or distort comparability either year on year or
with other similar businesses.
Reconciliation: Note 11
Profit before tax pre IFRS 16
Profit before tax restated to remove the impact of adopting IFRS
16, replacing IFRS 16 right of use asset depreciation and lease
liability interest with rental expense under IAS 17.
Reconciliation: Note 11
Profit for the year pre IFRS 16
Profit for the year restated to remove the impact of adopting IFRS
16, including replacing IFRS 16 right of use asset depreciation and
lease liability interest with rental expense under IAS 17.
Reconciliation: Note 11
Basic earnings per share pre IFRS 16
Basic earnings per share restated to remove the impact of
adopting IFRS 16, including replacing IFRS 16 right of use asset
depreciation and lease liability interest with rental expense under
IAS 17.
Reconciliation: Note 11
Diluted earnings per share pre IFRS 16
Diluted earnings per share restated to remove the impact of
adopting IFRS 16, including replacing IFRS 16 right of use asset
depreciation and lease liability interest with rental expense under
IAS 17.
Reconciliation: Note 11
Adjusted basic earnings per share pre IFRS 16
Basic EPS before adjusting items and restated to remove the
impact of adopting IFRS 16, including replacing IFRS 16 right
of use asset depreciation and lease liability interest with rental
expense under IAS 17.
Reconciliation: Note 29
Reconciliation of pre IFRS 16 statement of financial position
A reconciliation of the reported consolidated statement of financial position at 31 December 2019 to what would have been
presented had IAS 17 still applied is shown in the table below.
Calculation - €’000
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill and intangible assets
Other non-current assets
Current assets
Trade and other receivables and inventories
Cash and cash equivalents
Total assets
Equity
Loans and borrowings
Lease liabilities (non-current & current)
Trade and other payables
Other liabilities
Total equity and liabilities
31 December
2019
Pre IFRS 16
1,471,315
-
57,191
33,044
IFRS 16
impact
-
386,407
(21,058)
(7,262)
31 December 2019
As Reported
Post IFRS 16
1,471,315
386,407
36,133
25,782
29,260
40,586
1,631,396
1,080,371
411,739
-
67,718
71,568
1,631,396
(5,531)
-
352,556
(7,530)
-
362,101
(1,555)
(460)
352,556
23,729
40,586
1,983,952
1,072,841
411,739
362,101
66,163
71,108
1,983,952
(xv) 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, the effect of IFRS16 and other items which are considered, by the Remuneration Committee, to
fall outside of the framework of the budget target set for the year.
Reconciliaton: Refer below
Calculation of Effective tax rate (APM definition vi)
€’000
Tax charge
Profit before tax
Effective tax rate
Reference in financial statements
Statement of profit or loss and
other comprehensive income
2019
11,476
89,688
12.8%
Calculation of Free Cash Flow (APM definition xi) and Debt and Lease Service Cover (APM definition xii)
€’000
Net cash from operating activities
Other interest and finance costs paid
Refurbishment capital expenditure paid
Exclude adjusting items with a cash effect
Fixed rent paid1:
Interest paid on lease liabilities
Repayment of lease liabilities
Free Cash Flow
Reference in financial statements
Statement of cash flows
Statement of cash flows
Statement of cash flows
Statement of cash flows
Add back total rent paid2
Add back interest and finance costs paid
Free Cash Flow before rent and finance costs (A)
Statement of cash flows
Total rent paid2
Interest and finance costs paid
Total rent, interest and finance costs paid (B)
Debt and Lease Service Cover (A/B)
Statement of cash flows
2019
154,969
(11,196)
(15,625)
9
(18,945)
(8,569)
100,643
34,982
11,196
146,821
34,982
11,196
46,178
3.2x
2018
12,077
87,301
13.8%
2018
115,754
(13,188)
(15,868)
(111)
-
-
86,587
37,375
13,188
137,150
37,375
13,188
50,563
2.7x
1 In the prior year fixed rent paid was included in net cash from operating activities in accordance with the applicable accounting standards.
Following the application of IFRS 16, fixed rent is now presented under net cash from financing activities.
2 Total rent paid relates to payments of fixed and variable rent during the year in accordance with the lease agreements if they relate to the year.
184
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Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCESUPPLEMENTARY FINANCIAL INFORMATIONFINANCIAL STATEMENTSSupplementary Financial Information Supplementary Financial Information
(continued)
Supplementary Financial Information
(continued)
Calculation of Normalised Return on Invested Capital (APM definition xiii)
Calculation of Modified earnings before interest and tax (Modified EBIT) – APM definition xv
€’000
Reference in financial statements
Adjusted EBITDA
Depreciation of property, plant and
equipment
Amortisation of intangible assets
Fixed rent
Adjusted EBIT from recently
opened owned hotels1
Adjusted EBIT pre IFRS 16 excluding results
from recently opened owned hotels (A)
Note 2/11
Note 2
Note 2/11
Note 11
€’000
Reference in financial statements
Statement of financial position
Statement of financial position
Statement of financial position
Net assets at balance sheet date
Revaluation uplift in Property,
Plant and Equipment3
Remove impact of IFRS 16:
Right-of-use assets
Lease liabilities
Intangible asset reclassed to RoU assets
under IFRS 16
Working capital adjustment
Capitalised lease costs that existed under
IAS 17
Net Debt
Net deferred tax liability
Current tax liabilities
Derivative liabilities
Less assets under construction
at year end
Less contract fulfilment costs
Less new owned assets4
Normalised invested capital
Average normalised invested capital (B)
Normalised Return on Average Invested Capital (A/B)
Note 21
Note 23
Statement of financial position
Note 22
Note 10
Statement of financial position
2019
As Reported
2019
Post IFRS 16 Pre IFRS 16
134,830
162,214
(26,183)
(195)
(27,384)
(26,183)
(239)
-
20182
119,583
(19,698)
(44)
-
(11,631)
(11,631)
(2,298)
96,821
96,777
97,543
31
31 December
December
2019
2019
As reported
Post IFRS 16 Pre IFRS 16
1,080,371
1,072,841
31
December
20182
902,577
(396,797)
(396,797)
(273,774)
(386,407)
362,101
20,500
3,976
7,993
374,846
55,831
664
4,523
-
-
-
-
-
-
-
-
-
-
374,846
56,004
1,124
4,523
270,171
38,516
309
1,306
(59,600)
(13,346)
(235,141)
811,984
802,570
12.1%
(59,600)
(13,346)
(235,141)
811,984
802,570
12.1%
(26,404)
(9,066)
(110,479)
793,156
769,482
12.7%
€’000
Profit before tax
Profit before tax as if IAS 17 still applied
Add back:
Finance costs
Finance costs as if IAS 17 still applied
Foreign exchange gains* (see note below)
Adjusting items:
Proceeds from insurance claim
Hotel pre-opening expenses
Net revaluation movements through
profit or loss
Net revaluation movements through profit or loss
as if IAS 17 still applied
Modified EBIT
Reference in Consolidated
Financial Statements
Statement of profit or loss and
other comprehensive income
Note 11
Note 5
Note 11
Note 2
Note 2
Note 2
Note 11
2019
2018
-
98,376
-
11,668
(457)
-
9
-
(1,645)
107,951
87,301
-
9,514
-
(324)
(2,598)
2,487
3,137
-
99,517
* Foreign exchange losses represent the difference on converting EBITDA as calculated as if IAS 17 still applied from UK hotels at
actual foreign exchange rates during 2019 versus budgeted foreign exchange rates, after depreciation. In 2019 the budgeted EUR/
GBP exchange rate was 0.90 (2018: 0.90). A reconciliation is presented in the table below.
€‘000
Reference in Consolidated
Financial Statements
Note 11
Note 2
UK hotels’ EBITDA - GBP
UK hotels’ EBITDA at budgeted FX rate - Euro
UK hotels’ EBITDA at actual FX rates as if IAS 17
still applied – Euro
UK hotels’ EBITDA at actual FX rates - Euro
Foreign exchange gains on EBITDA - Euro
Depreciation and amortisation on UK assets - GBP
Depreciation and amortisation on UK assets
at budgeted FX rate - Euro
Depreciation and amortisation on UK assets
at actual FX rates as if IAS 17 still applied - Euro
Depreciation and amortisation on UK assets
at actual FX rates - Euro
Foreign exchange losses on depreciation - Euro
Foreign exchange gains - Euro
2019
28,306
31,451
32,126
-
(675)
7,389
8,210
8,428
-
218
(457)
2018
23,290
25,878
-
26,298
(420)
5,041
5,601
-
5,697
96
(324)
1 The Adjusted EBIT from the five new, owned hotels which recently opened in 2018 or 2019 are excluded as these hotels have not
benefited from a full twelve months of trading or have yet to reach normalised operating levels.
2 The calculation was redefined during the period primarily to exclude contract fulfilment costs. This change does not have a material
impact on prior period comparatives. Under the previous calculation, the Group’s Normalised Return on Average Invested Capital
amounted to 12.6% for 2018.
3 Includes the combined net revaluation uplift included in property, plant and equipment since the revaluation policy was adopted in 2014
or in the case of hotel assets acquired after this date, since the date of acquisition. The carrying value of land and buildings, revalued at
31 December 2019, is €1,324.5 million (2018: €1,077.2 million). The value of these assets under the cost model is €927.8 million (2018:
€803.4 million). Therefore, the revaluation uplift included in property plant and equipment is €396.7 million (2018: €273.8 million). Refer
to note 10 to the financial statements.
4 The cost of constructing the five new owned, hotels which opened during 2018 or 2019 are excluded as these hotels have not benefited
from a full twelve months of trading or have yet to reach normalised operating levels.
186
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Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCESUPPLEMENTARY FINANCIAL INFORMATIONFINANCIAL STATEMENTSSupplementary Financial Information Glossary
Advisor and Shareholder Contacts
1. Revenue per available room (RevPAR)
Revenue per available room is calculated as total rooms
revenue divided by the number of available rooms, which is also
equivalent to the occupancy rate multiplied by the average daily
room rate achieved.
2. ‘Like for like’ RevPAR
‘Like for like’ RevPAR excludes the (i) hotels which were not in
operation for a full year in the current year and substantially
all of the preceding year, (ii) hotels with a significant change in
available rooms year on year, which the Group defines as greater
than 10% and (iii) hotels with significant renovations on-going in
either the current or preceding year which significantly impacts
the hotels ability to operate on a normal basis.
The Dublin portfolio excludes (i) Maldron Hotel Kevin Street
and Clayton Hotel Charlemont which opened during 2018,
(ii) Tara Towers Hotel which closed in September 2018, (iii)
Maldron Hotel Parnell Square due to the significant extension
completed during 2018, (iv) Clayton Hotel Liffey Valley due to
the acquisition of rooms over the past two years and (v) Clayton
Hotel Burlington Road due to the redevelopment works ongoing
at the hotel.
The Regional Ireland portfolio excludes the new Maldron Hotel
South Mall, Cork which opened in December 2018 and Maldron
Hotel Sandy Road, Galway which had a significant extension
added during 2018.
The UK portfolio excludes the new Maldron Hotel Belfast City,
Maldron Hotel Newcastle and Clayton Hotel City of London
which opened in March 2018, December 2018 and January 2019
respectively and also The Tamburlaine Hotel, Cambridge which
was leased from November 2019.
‘Like for like’ Group RevPAR is also stated on a constant currency
basis with the KPIs for the prior year restated at the foreign
currency rates applicable in the current year.
3. ARR
Average Room Rate (also ADR – Average Daily Rate)
4. Hotel assets
Hotel assets represents the value of property, plant and
equipment per the consolidated statement of financial position
at 31 December 2019.
5. Refurbishment capital expenditure
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.
6. Food and beverage gross profit margins
Food and beverage gross profit margins are calculated as total
food or beverage revenue less total food or beverage cost of
goods sold divided by total food or beverage revenue.
7. OTA
Online Travel Agents
8. GM
General Manager
9. IPO
Initial Public Offering (Dalata Hotel Group plc listed in March 2014)
10. LTIP
Long-Term Incentive Plan
11. MAR
Market Abuse Regulation
12. NED
Non-executive Director
13. SID
Senior Independent Director
14. STR
Global hotel industry market research specialists
15. TSR
Total Shareholder Return
16. VAT
Value Added Tax (also known as Goods and Services Tax)
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
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
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T: 00353 1 447 5566
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Shareholder Information
Company Secretary
and Registered Offi ce
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
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Dalata Hotel Group plc Annual Report & Accounts 2019STRATEGIC REPORTCORPORATE GOVERNANCESUPPLEMENTARY FINANCIAL INFORMATIONFINANCIAL STATEMENTSSupplementary Financial Information
Front cover: a graphic depiction
of the growth of our Hotel Assets
from €52 million in 2014 to €1.47
billion in 2019.
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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
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