| Dalata Hotel Group PLC (DAL,DHG) Dalata: The Heart of Hospitality Record operating performance with Revenue up 18% and Adjusted EBITDA up 22% ISE: DHG LSE: DAL
Dublin and London | 29 February 2024: Dalata Hotel Group plc (‘Dalata’ or the ‘Group’), the largest hotel operator in Ireland, with a growing presence in the United Kingdom and Continental Europe, announces its results for the year ended 31 December 2023.
PROVEN BUSINESS MODEL DELIVERING RECORD OPERATING PERFORMANCE
ANNOUNCING TODAY
EXECUTING AMBITIOUS GROWTH STRATEGY – CURRENT PIPELINE OVER 1,500 ROOMS
CREATING LONG-TERM VALUE, BALANCED WITH MAINTAINING FINANCIAL DISCPLINE
PUTTING PEOPLE AT THE HEART OF WHAT WE DO
FULLY INTEGRATED SUSTAINABILITY STRATEGY
BRAND REFRESH
OUTLOOK The Group’s ‘like for like’ RevPAR1 was 4% behind 2023 for January / February. Corporate demand was ahead of 2023 levels. Our Regional Ireland and UK portfolio performed broadly in line with January / February 2023. RevPAR1 in our Dublin portfolio was 11% behind last year for the same period. In these traditionally quieter months (January and February represented approximately 11% of our room revenue in 2023), the Dublin market was impacted by the additional supply of approximately 1,800 rooms compared to the same period last year due to the opening of new hotels and some hotels returning from government use in Spring 2023. There was also a lower number of events compared to 2023 affecting the leisure transient segment. RevPAR1 performance for our Dublin portfolio was in line with the market for January. Notwithstanding this and the ongoing uncertainty in the macro-economic environment, the Group remains optimistic in its trading outlook for 2024 supported by future demand indicators across our markets, including growing air traffic forecasts and strong event calendars for the remainder of the year. External research and surveys indicate that travel remains a high priority for consumers while employment and consumer saving levels remain supportive of trading. We also look forward to the greater contribution from the 10 hotels recently added to the portfolio as they mature. We remain attentive to the macro-economic backdrop and geopolitical environment for events which could impact the business. As a priority, we are proactively addressing inflationary pressures, particularly payroll costs following recent minimum wage and living wage increases in Ireland and the UK. Dalata have given increases in pay rates ranging from 3.5%-10% in 2024. In 2023, we achieved ‘like for like’ Hotel EBITDAR margin1 in line with that achieved in 2019 despite a 15% increase in minimum wage in Ireland and a 27% increase in living wage in the UK since then along with elevated energy costs. We remain confident in our ability to continue to manage inflationary pressures on the business through our ability to innovate and drive efficiencies across our portfolio. The Group’s strong Free Cashflow1 generation, asset backed balance sheet with low gearing and proven decentralised business model ensures it is well positioned to respond to the challenges and benefit from the opportunities that may lie ahead. DIVIDENDS On 28 February 2024, the Board proposed a final dividend of 8.0 cents per share amounting to approximately €18 million. This proposed dividend is subject to approval by shareholders at the Annual General Meeting. The payment date for the final dividend will be 1 May 2024 to shareholders registered on the record date of 5 April 2024. DERMOT CROWLEY, DALATA HOTEL GROUP CEO, COMMENTED: “I am delighted to announce that the Group has delivered another excellent set of results, reflecting a year that has been highly successful in many ways. After exceeding revenue of €500 million in 2022, the Group has grown revenues further to over €600 million in 2023. Our established hotels continue to drive revenue and convert strongly to the bottom line underpinned by our decentralised model. We also added three hotels to the portfolio in London (x2) and Amsterdam – two of Europe’s most attractive capital cities. I would like to thank all my colleagues across our 53 hotels and at our central office for their hard work, dedication and professionalism – it is through their efforts that we are able to announce such a positive set of results today.
Hospitality is all about people and, in Dalata, we have great people. Our commitment to inclusion and diversity and our focus on well-being provides our employees with a rewarding and attractive place to work. Our wide breadth of development programmes, together with our exciting expansion plans, provides excellent opportunities for career development which in turn provides a pipeline of talent to open our new hotels and continue to deliver excellent returns for shareholders.
We recognise the power inherent in our brands, and through focus and efforts, we are unlocking that power. As we grow our scale and geographical footprint enhancing our brands becomes more important for maximising our commercial potential. During 2023, we engaged a global marketing communications agency supported by extensive customer research to refresh our brands. Today, we are launching the refreshed Dalata brand which reflects what Dalata is all about – engaged teams passionate about our hospitality and customer service. This is best summed up as “the heart of hospitality”. We will be launching the refresh of our Clayton and Maldron brands in the second quarter of this year.
We are also seeing the benefits of our ongoing commitment to respond innovatively to the challenges and opportunities facing our industry. We have achieved a notable increase in productivity by streamlining work practices within our accommodation and kitchens which is critical given the significant increase in minimum wage rates in Ireland and the UK. The productivity increases were achieved whilst also increasing employee satisfaction levels in those departments. We will continue to use innovation and technology to find smarter ways to deliver what our guests are looking for at our hotels. I am excited by the projects we are rolling out during 2024 and the continued benefits from those commenced in 2023.
Our investment in green plant and machinery and strong focus on sustainability from our management teams has delivered further utility consumption savings. The Group achieved a 27% reduction in our Scope 1 & 2 carbon emissions per room sold in 2023 compared to 2019 (versus a target of 20% reduction by 2026).
Dalata’s growth strategy remains compelling. We combine our hotel operator and developer expertise, supported by a strong financial position allowing us to be agile and capitalise on opportunities as they arise. 2024 will be another exciting year at Dalata. The UK remains our key strategic priority as we open four hotels across that market, which will be our most operationally sustainable new build hotels to date. I look forward to welcoming our first guests in Liverpool and Brighton as we continue to grow our presence across the UK to over 5,000 rooms by the end of 2024.
January and February in any year are two of the quieter months of the year – the impact of additional supply or reduced demand can have a larger than normal percentage impact on RevPAR. The combination of an additional 1,800 rooms in supply and a reduced number of events has led to a fall in RevPAR1 in the Dublin market. We are reporting a fall of 11% for the two-month period versus 2023. However, when I look forward at the strength of the calendar of events for the balance of the year (especially from May onwards), the strong flight schedule at Dublin Airport and the increase in corporate demand experienced in the year to date, I am optimistic as we look to the balance of the year.”
ENDS
ABOUT DALATA Dalata Hotel Group plc is a leading hotel operator backed by €1.7bn in freehold and long leasehold assets in Ireland and the UK. Established in 2007, Dalata has become Ireland’s largest hotel operator with an ambitious growth strategy to expand its portfolio further in excellent locations in select, large cities in the UK and Continental Europe. The Group’s portfolio comprises 53 primarily four-star hotels operating through its two main brands, Clayton and Maldron Hotels, with 11,413 rooms and a pipeline of over 1,500 rooms. For the year ended 31 December 2023, Dalata reported revenue of €607.7 million, basic earnings per share of 40.4 cent and Free Cashflow per Share of 59.7 cent. Dalata is listed on the Main Market of Euronext Dublin (DHG) and the London Stock Exchange (DAL). For further information visit: www.dalatahotelgroup.com
CONFERENCE CALL AND WEBCAST DETAILS Management will host a conference call and webcast for institutional investors and analysts at 08:30 today 29 February 2024.
Please allow sufficient time for registration. Contacts
NOTE ON FORWARD-LOOKING INFORMATION
This Announcement contains forward-looking statements, which are subject to risks and uncertainties because they relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Group or the industry in which it operates, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements referred to in this paragraph speak only as at the date of this Announcement. The Group will not undertake any obligation to release publicly any revision or updates to these forward-looking statements to reflect future events, circumstances, unanticipated events, new information or otherwise except as required by law or by any appropriate regulatory authority. 2023 FINANCIAL PERFORMANCE
Summary of hotel performance
The Group delivered strong Adjusted EBITDA1 of €223.1 million in 2023, up 22% from €183.4 million in 2022. Strong revenue conversion at existing hotels resulted in year-on-year growth of €38.6 million and hotel additions in 2022 and 20234 contributed a further €23.3 million of growth. Covid related government support totalling €15.2 million was included in 2022 Adjusted EBITDA1.
The Group achieved revenue of €607.7 million for the year, representing an increase of 18% compared to 2022. This increase was driven by strong underlying performance at the existing hotels (growth of €50.9 million) as well as recent additions to the portfolio. The ten hotels added to the portfolio during 2022 and 2023, together contributed a year-on-year increase of €45.7 million. This was partially offset by the disposal of Clayton Crown Hotel, London in June 2022, which generated revenue of €2.2 million in that year.
‘Like for like’ Group RevPAR1 for the year was €116.69, up from €105.17 (+11%) in 2022 as the existing portfolio returned to strong occupancy levels above 80% and achieved average room rate1 growth of 6%. The strong start to 2023, as the hotels benefitted from the recovery in Q1 2023 versus Q1 2022 (which had some Covid restrictions), was followed by ongoing recovery in corporate demand and pricing, together with sustained leisure demand in our markets. During 2023, the year-on-year growth rate moderated from ‘like for like’ RevPAR1 growth of 23% in H1 2023 to 2% in H2 2023 when compared to the equivalent period in 2022. In Ireland, the market was impacted by the increase in the VAT rate of an additional 4.5% from 1 September 2023, a lower number of stadium events in Dublin in Q4 2023 and lower demand around the Christmas period. Hotel room supply in Ireland remains constrained with a significant number of rooms being used for the provision of emergency accommodation.
On a ‘like for like’ basis1, food and beverage revenues grew by €8.4 million to €101.6 million (2022: €93.2 million). Food and beverage revenue stabilised during 2023 and the Group made significant gains in profitability supported by the rollout of the Dalata Signature Range.
The Group continues to proactively manage its cost base and respond to inflation. On a ‘like for like’ basis1, hotel operating costs, defined as revenue less Hotel EBITDA1, increased by €12.3 million (+5%) to €296.2 million in 2023. Costs were higher in the first half of 2023, with the comparative period in 2022 impacted by Covid restrictions, while costs in the second half of 2023 were lower than the equivalent period in 2022.
The Group’s ongoing commitment to reduce energy consumption (down by 12% year-on-year per room sold) and a reduction in gas and electricity pricing resulted in gas and electricity costs decreasing by €3.4 million to €23.4 million in 2023 versus 2022 on a ‘like for like’ basis1. The Group has either purchased or entered into fixed pricing contracts until June 2025 for approximately 90% of its projected gas and electricity consumption until December 2024 and 70% thereafter. Based on expected consumption levels, we estimate gas and electricity costs of approximately €26 million for 2024 (2023: €28 million).
The Group has made significant progress on innovation projects this year to protect or enhance profitability and customer and employee experience. Hotel payroll for the second half of 2023 was in line with the equivalent period in 2022 on a ‘like for like’ basis1 despite the significant increases in minimum wage rates in Ireland and living wage rates in the UK. On similar business levels, the Group has increased productivity, achieving a 10% decrease in hours worked in the accommodation and food and beverage departments of ‘like for like’ hotels1 in the second half of 2023. This was underpinned by the focus on innovation projects, notably the rooms accommodation efficiency project and the roll out of the Dalata Signature Range. Also, direct bookings through our brand websites are increasing and we are ambitious to improve this further supported by the refresh of our brands in 2024.
The Group remains focused on driving innovation and efficiencies across the business to offset the impact of rising costs, particularly in payroll following increases in minimum wage rates again in 2024 in Ireland and the UK. The rates increased by 15% and 27% respectively from 2019 to 2023. Despite this and significantly more elevated energy costs in recent years, the Group’s Hotel EBITDAR margin1 for 2023 was in line with 2019 levels on a ‘like for like’ basis1. The Group’s 'like for like’ Hotel EBITDAR margin1 of 42.3% in 2023 was 60 basis points ahead of 2022 levels (41.7%) and 380 basis points ahead excluding Covid-19 related government support. With minimum wage increases of 12% and 10% in Ireland and the UK in 2024 and payroll costs representing 41% of the Group’s operating costs in 2023, it will be an ongoing challenge to protect margin percentages. However, Dalata’s focus and successes to date mean we are well positioned to continue to respond.
PERFORMANCE REVIEW | SEGMENTAL ANALYSIS The following section analyses the results from the Group’s portfolio of hotels in Dublin, Regional Ireland, the UK and Continental Europe. In 2022, the operating performance of Clayton Hotel Düsseldorf was disclosed within the Dublin segment due to being a single asset and its immateriality in the context of the overall Group. Following the addition of Clayton Hotel Amsterdam American in October 2023, the Group’s Continental Europe portfolio is now material enough to be presented separately. As a result, the 2022 operating performance for Dublin has been amended to exclude Clayton Hotel Düsseldorf.
The Dublin portfolio consists of eight Maldron hotels, seven Clayton hotels, The Gibson Hotel and The Samuel Hotel. Ten hotels are owned and seven are operated under leases. The Group acquired two rooms at Clayton Hotel Liffey Valley during the year.
The Dublin portfolio delivered Hotel EBITDAR1 of €135.9 million for the year, representing growth of 15% compared to Hotel EBITDAR1 in the prior year of €118.5 million (which included Covid-19 related government support totalling €9.2 million). The two new hotels opened during 2022, The Samuel Hotel and Maldron Hotel Merrion Road, contributed an increase of €4.9 million. ‘Like for like’ Hotel EBITDAR margin1 was 47.6% in 2023, 360 basis points ahead of 2022 levels (excluding Covid-19 related government support).
Revenue for the Dublin portfolio totalled €286.1 million in 2023, up €35.5 million (14%) on the prior year. ‘Like for like’ hotels5 contributed €26.4 million of this increase, while the two new hotels opened during 2022 added a further €9.1 million.
‘Like for like’ Dublin RevPAR5 for the year was €132.89, up from €119.98 (+11%) in 2022. The ‘like for like’ Dublin hotels5 returned to high occupancy levels achieving 84% in 2023, supported by the recovery in the first quarter. Average room rate1 grew by 7% on a ‘like for like’ basis5. The Dublin hotels benefitted from a strong return of corporate demand with conference and corporate business exceeding 2019 levels on a ‘like for like’ basis5. There were also a number of events in the city which drove strong leisure demand such as the Champions Cup rugby final in May 2023 and the Aer Lingus College Football Classic in August 2023. Demand was softer in the final quarter due to the lack of the Autumn Rugby Internationals as a result of the 2023 Rugby World Cup. There was also a 4.5% increase in the VAT rate effective from 1 September 2023. Despite this, for the second half of 2023, ‘like for like’ RevPAR5 was in line with the 2022 equivalent levels.
During 2023, the Dublin market also benefitted from strong visitor numbers with the volume of passengers travelling through Dublin Airport broadly in line with 2019 levels and employment levels in the city remains high with a strong presence from foreign direct investment. Hotel room supply remains constrained with a significant number of rooms being used for the provision of emergency accommodation and external estimates suggest approximately 10% of the total room supply in Dublin is currently out of use.
On a ‘like for like’ basis5, food and beverage revenues grew by €4.6 million to €48.3 million (2022: €43.7 million), supported by recovery in the first quarter. We are increasing earnings from our food and beverage outlets through competitive pricing and driving efficiencies to enhance profitability. ‘Like for like’5 food and beverage departmental margin increased to 30% in 2023 (+710 bps on 2022).
2. Regional Ireland Hotel Portfolio
The Regional Ireland portfolio comprises seven Maldron hotels and six Clayton hotels primarily located in the cities of Cork, Galway and Limerick. 12 hotels are owned and one is operated under a lease.
The Regional Ireland portfolio generated Hotel EBITDAR1 of €37.0 million in 2023, which was an increase of €5.3 million compared to 2022. Hotel EBITDAR1 of €31.7 million in 2022 included Covid-19 related government support of €4.7 million. Hotel EBITDAR margin1 was 33.0% in 2023, 590 basis points ahead of 2022 levels (excluding Covid-19 related government support).
Revenue exceeded €100 million for the first time, growing by €12.5 million to €112.3 million in 2023 (2022: €99.8 million).
Room revenue growth of 15% benefitted from a continued increase in the number of international travellers visiting Ireland as airline capacity returns to pre-pandemic levels. Occupancy was strong at 79.5% in 2023, up from 74.6% in 2022, supported by a large growth in tour group and corporate business. The hotels continued to grow rates across all customer categories with average room rates1 increasing by 8% on 2022 levels. Domestic leisure demand also remained robust although travel patterns are normalising. Trade remained strong in the second half of 2023 with RevPAR1 growth of 7%, led by pricing. Similar to Dublin, the provision of emergency accommodation for refugees is reducing hotel room supply in Regional Ireland.
Food and beverage revenues grew by 8% from €28.1 million in 2022 to €30.3 million in 2023, supported by recovery in the first quarter. Strong focus on driving efficiencies resulted in food and beverage departmental margin increasing to 27% in 2023 (+700 bps on 2022).
3. UK Hotel Portfolio
The UK hotel portfolio comprises 12 Clayton hotels and six Maldron hotels with four hotels situated in London, 11 hotels in regional UK, focussed on the large cities of Manchester, Glasgow, Birmingham and Bristol, and three hotels in Northern Ireland. Seven hotels are owned, nine are operated under long-term leases and two hotels are effectively owned through a 99-year lease and 122-year lease. Clayton Hotel London Wall (89 rooms) and Maldron Hotel Finsbury Park (191 rooms) both commenced trading under Dalata ownership in July 2023.
The UK portfolio delivered Hotel EBITDAR1 of £62.2 million in 2023, growing £16.4 million (+36%) from £45.8 million in 2022 (which included Covid related government support of £1.1 million). This growth reflects an uplift of £10.7 million relating to the full year impact of the four hotels added to the portfolio during 2022 and two London hotels added during 20234. ‘Like for like’ Hotel EBITDAR margin1 was 39.4% for 2023, 260 basis points ahead of 2022 levels (excluding Covid-19 related government support).
The four hotels added to the portfolio during 2022 performed strongly, achieving a Rent Cover1 of 1.7x despite being only open for an average of 20 months at 31 December 2023.
Revenue for the UK portfolio totalled £161.8 million in 2023, up £31.5 million (24%) on the prior year. ‘Like for like’6 hotels contributed £10.4 million of this increase, while the six new hotels added during 2022/2023 added a further £23.0 million. These uplifts were partially offset by the sale of Clayton Crown Hotel in June 2022 which reduced revenues by £1.9 million.
‘Like for like’ occupancy6 was strong at 77.8% in 2023, up from 73.7% in 2022. Our London hotels, which had been slower to recover from the Covid-19 pandemic, rebounded strongly from the ongoing recovery in inbound leisure travel and corporate business during 2023 with RevPAR1 17% ahead of 2022 levels on a ‘like for like’ basis6. ‘Like for like’ RevPAR6 at our regional UK and Northern Ireland hotels was 9% ahead of 2022 levels driven by sustained domestic demand, particularly within the corporate category. Trade remained strong in the second half of 2023 with ‘like for like’ UK RevPAR6 growth of 3%.
‘Like for like’6 food and beverage revenue for the year grew by £1.6 million (9%) to £19.9 million (2022: £18.3 million), supported by recovery in the first quarter. ‘Like for like’6 food and beverage departmental margin increased to 28% in 2023 (+400 bps on 2022).
4. Continental Europe Hotel Portfolio
The Continental Europe hotel portfolio includes Clayton Hotel Düsseldorf (393 rooms) which was added to the portfolio in February 2022 and was disclosed within the Dublin portfolio in previous reporting periods due to its size in the context of the overall Group. In October 2023, the Group added the leasehold interest in the Hard Rock Hotel Amsterdam American (173 rooms) which was subsequently rebranded as Clayton Hotel Amsterdam American. Both hotels are operated under leases.
Clayton Hotel Düsseldorf performed well during the year, despite the challenging backdrop of the German economy. The Group continues to integrate the hotel into the Dalata portfolio and is already seeing tangible benefits of our revenue management approach and relationships as the hotel outperformed in RevPAR1 growth against its compset1. The Group is also pleased with the performance of Clayton Hotel Amsterdam American since its integration into the portfolio. Both hotels in this region were cash positive for the year or period of trading since being added to the portfolio.
Central costs and share-based payment expense
Central costs totalled €21.1 million during the year (2022: €16.5 million). This included the positive impact of an insurance provision write-back and discount unwind of €1.3 million (2022: €0.7 million). Excluding the impact of this, the increase of €5.2 million primarily relates to payroll costs due to additional headcount and pay increases post pandemic era restrictions to support the growth of the Group and increases in performance-related remuneration for executive directors. The Group also incurred additional costs in relation to strategic marketing projects to support the brand refresh and consolidation of digital marketing and will continue to invest in the refresh of its employer and consumer brands in 2024.
The Group’s share-based payment expense represents the accounting charge for the Group’s LTIP and SAYE share schemes and increased to €5.9 million in 2023 (2022: €3.3 million) primarily based on the Group’s assessment of non-market performance conditions of active LTIP award schemes. The Group also recognised an additional charge of €0.9 million during the year on foot of the vesting of awards granted in March 2020.
Adjusting items to EBITDA
The Group recorded a net revaluation gain of €94.1 million on the revaluation of its property assets at 31 December 2023 of which €2.0 million was recorded as the reversal of previous period revaluation losses through profit or loss (2022: €21.2 million). There were no revaluation losses through profit or loss in the year (2022: €nil). Further detail is provided in the ‘Property, plant and equipment’ section (note 15) of the financial statements.
On 3 July 2023, the Group acquired the long leasehold interest and trade of Apex Hotel London Wall, now trading as Clayton Hotel London Wall, for a total cash consideration of £53.4 million (€62.1 million). Acquisition-related costs, primarily stamp duty, of £3.3 million (€3.8 million) were charged to administrative expenses in profit or loss in respect of this business combination. Further detail is provided in the ‘Business combinations’ section (note 13) of the financial statements.
On 3 October 2023, the Group acquired 100% of the share capital of American Hotel Exploitatie BV which holds the operational lease of the Hard Rock Hotel Amsterdam American, now trading as Clayton Hotel Amsterdam American, for a total cash consideration of €28.3 million (net working capital liabilities of €1.2 million were also assumed on acquisition). Acquisition-related costs of €0.6 million were charged to administrative expenses in profit or loss in respect of this business combination. Further detail is provided in the ‘Business combinations’ section (note 13) of the financial statements.
The Group incurred €0.5 million of pre-opening expenses during the year (2022: €2.7 million). These expenses are related to the opening of Maldron Hotel Finsbury Park, London in July 2023.
In 2022, the Group completed the sale to Irish Residential Properties REIT (plc) (‘I-RES’) of the Merrion Road residential units which had been developed by the Group on the site of the former Tara Towers Hotel. Total sales proceeds of €42.6 million were recognised as income in profit or loss for the year ended 31 December 2022. The related capitalised contract fulfilment costs of €41.0 million were released from the statement of financial position to profit or loss and recognised within costs for the year ended 31 December 2022. Further detail is provided in the ‘Contract fulfilment costs’ section (note 17) of the financial statements.
Depreciation of right-of-use assets
Under IFRS 16, the right-of-use assets are depreciated on a straight-line basis to the end of their estimated useful life, typically the end of the lease term. The depreciation of right-of-use assets increased by €3.2 million to €30.7 million for the year ended 31 December 2023, primarily due to the full year impact of six leased hotels added to the portfolio during 20227, and the impact of the lease of Clayton Hotel Amsterdam American, which was added in October 2023.
Depreciation of property, plant and equipment and amortisation
Depreciation of property, plant and equipment and amortisation increased by €4.4 million to €33.4 million in 2023. The increase primarily relates to the acquisition of two London hotel assets during the year, fixtures and fittings acquired with the leasehold addition of Clayton Hotel Amsterdam American and the full year impact of the depreciation of Maldron Hotel Merrion Road, Dublin which opened in August 2022.
Finance Costs
Finance costs related to the Group’s loans and borrowings (before capitalised interest) amounted to €9.8 million in 2023, decreasing from €10.3 million in 2022. Lower banking margins on the Group’s term loan and RCF drawn amounts, which are set with reference to the Net Debt to EBITDA covenant levels, lower commitment fee charges, which are calculated as a percentage of margin, and lower average borrowings were mostly offset by the impact of IFRS 9 accounting adjustments recorded in 2022 which reduced finance costs in the prior year and a higher variable interest cost on RCF drawn amounts.
During the year, interest on loans and borrowings of €2.0 million was capitalised to assets under construction, relating to the construction of Maldron Hotel Shoreditch, London.
Interest on lease liabilities for the year increased from €38.1 million in 2022 to €42.8 million in 2023 primarily due to the full year impact of six leased hotels added to the portfolio during 20227, and the impact of the lease of Clayton Hotel Amsterdam American, which was added in October 2023.
Tax charge
The tax charge for the year ended 31 December 2023 of €15.3 million mainly relates to current tax in respect of profits earned in Ireland during the year. The deferred tax charge of €0.5 million primarily relates to deferred tax arising on revaluations of land and buildings through profit and loss. The Group’s effective tax rate increased from 11.8% in 2022 to 14.5% in 2023, mainly due to the impact of non-taxable gains, such as the reversal of previous periods revaluation losses through profit and loss, during the prior year that reduced the effective tax rate in that year. At 31 December 2023, the Group has deferred tax assets of €18.1 million in relation to cumulative tax losses and interest carried forward which can be utilised to reduce corporation tax payments in future periods.
Earnings per share (EPS)
The Group’s profit after tax of €90.2 million for the year (2022: €96.7 million) represents basic earnings per share of 40.4 cents (2022: 43.4 cents). The Group’s profit after tax decreased by 7% year on year, mainly due to the impact of net property revaluation movements through profit and loss recorded in 2022, which increased profits in that year. Excluding the impact of adjusting items1, adjusted basic earnings per share1 grew by 32% to 41.7 cents in 2023 (2022: 31.7 cents). Adjusting items1 in 2023 primarily related to acquisition costs of €4.4 million and the reversal of previous period revaluation losses through profit or loss of €2.0 million.
STRONG CASHFLOW GENERATION
The Group continues to generate strong Free Cashflow1 to fund future acquisitions, development expenditure and shareholder returns. In 2023, Free Cashflow1 totalled €133.4 million, up 5% on 2022 which benefitted from reduced levels of corporation tax and refurbishment capital expenditure payments. At 31 December 2023, the Group’s Debt and Lease Service Cover1 remains strong at 3.0x with cash and undrawn committed debt facilities of €283.5 million (31 December 2022: cash and undrawn debt facilities of €455.7 million).
During the year, the Group paid corporation tax totalling €23.8 million, compared to a corporation tax refund of €1.2 million received in 2022. This increase reflects both an increase in the Group’s taxable profit levels as well as the normalisation of the timing of payments. Preliminary corporation tax is typically paid in the year the charge arises however due to the pandemic impact on tax liabilities, the payment of the 2022 corporation tax liabilities of €10.5 million did not fall due until 2023 when the 2023 preliminary tax payment was also made.
In April 2023, the Group fully repaid the tax deferrals under the Irish government’s Debt Warehousing scheme of €34.9 million (2022: repaid Irish VAT and payroll tax liabilities totalling €2.5 million). Deferrals under the Debt Warehousing scheme ended in May 2022 and as such no further amounts were deferred during the year (2022: deferred Irish VAT and payroll tax liabilities totalling €11.0 million).
The Group made refurbishment capital expenditure payments totalling €26.1 million during the year (4.3% of 2023 revenues), compared to payments of €15.9 million in 2022 (3.1% of 2022 revenues). Completion of refurbishment projects was impacted by supply chain disruptions, which reduced the value of payments during 2022. The Group allocates approximately 4% of revenue to refurbishment capital expenditure projects.
At 31 December 2023, the Group has future capital expenditure commitments totalling €20.6 million, of which €9.6 million relates to the development of Maldron Hotel Shoreditch, London. The remaining balance of €11.0 million primarily relates to future capital expenditure commitments at our existing hotels.
BALANCE SHEET | STRONG ASSET BACKING PROVIDES SECURITY, FLEXIBILITY AND THE ENGINE FOR FUTURE GROWTH
The Group’s balance sheet position remains robust through financial discipline with property, plant and equipment of €1.7 billion in excellent locations and cash and undrawn debt facilities of €283.5 million, supported by a Net Debt to EBITDA after rent1 of 1.3x.
Property, plant and equipment
Property, plant and equipment amounted to €1,684.8 million at 31 December 2023. The increase of €257.4 million since 31 December 2022 is driven by additions of €118.3 million, acquisitions through business combinations of €68.2 million, revaluation movements on property assets of €94.1 million, a foreign exchange gain on the retranslation of Sterling-denominated assets of €7.3 million and capitalised borrowing and labour costs of €2.3 million, partially offset by a depreciation charge of €32.8 million for the year.
73% of the Group’s property, plant and equipment is located in Dublin and London. The Group revalues its property assets, at owned and effectively owned trading hotels, at each reporting date using independent external valuers. The principal valuation technique utilised is discounted cash flows which utilise asset-specific risk-adjusted discount rates and terminal capitalisation rates. The independent external valuation also has regard to relevant recent data on hotel sales activity metrics.
Revaluation uplifts of €94.1 million were recorded on our property assets in the year ended 31 December 2023. €92.1 million of the net gains are recorded as an uplift through the revaluation reserve. €2.0 million of the net revaluation uplifts are recorded through profit or loss reversing revaluation losses from prior periods.
Acquisitions and development capital expenditure during the year mainly related to the:
The Group incurred €23.4 million of refurbishment capital expenditure during the year which mainly related to the refurbishment of 565 bedrooms across the Group, enhancements to food and beverage infrastructure, health and safety upgrades and energy efficient plant upgrades. The Group allocates approximately 4% of revenue to refurbishment capital expenditure.
Right-of-use assets and lease liabilities
At 31 December 2023, the Group’s right-of-use assets amounted to €685.2 million and lease liabilities amounted to €698.6 million.
Right-of-use assets are recorded at cost less accumulated depreciation and impairment. The initial cost comprises the initial amount of the lease liability adjusted for lease prepayments and accruals at the commencement date, initial direct costs and, where applicable, reclassifications from intangible assets or accounting adjustments related to sale and leasebacks.
Lease liabilities are initially measured at the present value of the outstanding lease payments, discounted using the estimated incremental borrowing rate attributable to the lease. The lease liabilities are subsequently remeasured during the lease term following the completion of rent reviews, a reassessment of the lease term or where a lease contract is modified. The weighted average lease life of future minimum rentals payable under leases is 29.5 years (31 December 2022: 29.8 years). The Group acquired the following leases during the year:
During the year ended 31 December 2023, a lease amendment, which was not included in the original lease agreement was made to one of the Group’s leases. This has been treated as a modification of lease liabilities and resulted in an increase in lease liabilities and the carrying value of the right-of-use asset of €4.5 million. Following agreed rent reviews and rent adjustments, which formed part of the original lease agreements, certain of the Group’s leases were reassessed during the year. This resulted in an increase in lease liabilities and related right-of-use assets of €3.3 million.
Over 90% of lease contracts at currently leased hotels include rent review caps which limit CPI/RPI-related payment increases to between 3% - 4% per annum.
Further information on the Group’s leases including the unwind of right-of-use assets and release of interest charge is set out in note 16 to the financial statements.
Loans and borrowings
As at 31 December 2023, the Group had loans and borrowings at amortised cost of €254.4 million and undrawn committed debt facilities of €249.3 million. Loans and borrowings increased from 31 December 2022 (€193.5 million) mainly due to loan drawdowns during the year.
The Group’s debt facilities consist of a €200.0 million term loan facility and a €304.9 million revolving credit facility (‘RCF’), both with a maturity date of 26 October 2025. The Group’s other revolving credit facility of €59.5 million matured on 30 September 2023.
The Group’s covenants comprising Net Debt to EBITDA (as defined in the Group’s bank facility agreement which is equivalent to Net Debt to EBITDA after rent1) and Interest Cover1 were tested on 31 December 2023. At 31 December 2023, the Net Debt to EBITDA covenant limit is 4.0x and the Interest Cover minimum is 4.0x. The Group complied with its covenants as at 31 December 2023.
The Group limits its exposure to foreign currency by using Sterling debt to act as a natural hedge against the impact of Sterling rate fluctuations on the Euro value of the Group’s UK assets. The Group is also exposed to floating interest rates on its debt obligations and uses hedging instruments to mitigate the risk associated with interest rate fluctuations. This is achieved by entering into interest rate swaps which hedge the variability in cash flows attributable to the interest rate risk. The term debt interest is fully hedged until 26 October 2024 with interest rate swaps in place to fix the SONIA benchmark rate to c. 1.0% on Sterling-denominated borrowings. The variable interest rates on the Group’s revolving credit facilities were unhedged at 31 December 2023.
See Supplementary Financial Information which contains definitions and reconciliations of Alternative Performance Measures (‘APM’) and other definitions. 2 The 2022 comparative figures include presentation amendments with no impact to basic or diluted earnings per share. For further details, please refer to note 2 of the financial statements. 3 Adjusting items in 2023 include the net property revaluation gain of €2.0 million following the valuation of property assets (2022: net revaluation gain of €21.2 million) less acquisition costs of €4.4 million (2022: nil). Further detail on adjusting items is provided in the section titled ‘Adjusting items to EBITDA’. 4 The Group added ten hotels between January 2022 and October 2023. The Group added six hotels in the UK (Clayton Hotel Manchester City Centre, Maldron Hotel Manchester City Centre, Clayton Hotel Bristol City and Clayton Hotel Glasgow City in 2022 and Maldron Hotel Finsbury Park, London and Clayton Hotel London Wall in 2023), two hotels in Dublin (The Samuel Hotel and Maldron Hotel Merrion Road, Dublin in 2022) and two hotels in Continental Europe (Clayton Hotel Düsseldorf in 2022 and Clayton Hotel Amsterdam American in 2023). 5 The reference to ‘like for like’ hotels in Dublin for performance statistics comparing to 2022 excludes The Samuel Hotel which is newly opened since April 2022 and Maldron Hotel Merrion Road which is newly opened since August 2022. 6 The reference to ‘like for like’ hotels in the UK for performance statistics comparing to 2022 excludes Clayton Hotel Manchester City Centre, Maldron Hotel Manchester City Centre, Clayton Hotel Bristol City and Clayton Hotel Glasgow City as these only opened during 2022 and Maldron Hotel Finsbury Park and Clayton Hotel London Wall which began trading during 2023. Clayton Crown Hotel, London is also excluded as it was sold in June 2022. 7 The six leased hotels added to the portfolio during 2022 were Clayton Hotel Manchester City Centre, Maldron Hotel Manchester City Centre, Clayton Hotel Düsseldorf, Clayton Hotel Bristol City, The Samuel Hotel, Dublin and Clayton Hotel Glasgow City. 8 Other non-current assets comprise deferred tax assets, investment property, non-current derivative assets and other receivables (which include costs of €4.1 million associated with future lease agreements for hotels currently being constructed or in planning (31 December 2022: €1.1 million)). Other current assets comprise current derivative assets. 9 Other liabilities comprise deferred tax liabilities, provision for liabilities and current tax liabilities. PRINCIPAL RISKS AND UNCERTAINTIES Since the last report on principal risks in August 2023, there have been ongoing developments in our risk environment. The principal risks and uncertainties now facing the Group are: External, economic and geopolitical factors – Dalata operates in an open market, and its activities and performance are influenced by uncertainty resulting from broader geopolitical and economic factors outside the Group’s control. Nonetheless, these factors can directly or indirectly impact the Group’s strategy, future labour and direct cost base, performance, and the economic environments in which the Group operates. The Board and executive management team continuously focus on the impact of external factors on our business performance. The Group has an experienced management team with functional expertise in relevant areas, supported by modern and resilient information systems that provide up-to-date information to the Board. Health, safety and security - The Group operates multiple hotels in Ireland, the UK and Continental Europe. Given the nature of these operations, health, safety, and security concerns will always remain a key priority for the Board and executive management. There is a risk that a material operational health and safety-related event, for example, a fire, food safety event or public health event resulting in loss of life, injury or significant property damage, occurs at a hotel and is not adequately managed. We have a well-established health, safety and security framework in our hotels. There is ongoing capital investment in hotel life, fire and safety systems and servicing and identified risks are remediated promptly. External health and safety and food safety audits are conducted by statutory external bodies, new hotels are built to high health and safety standards, and all refurbishments include health and safety as a principal consideration. Innovation - The hospitality market has seen ongoing change and innovation in its structure and how it delivers on guest expectations. Technological advances in guest bookings, pricing and service delivery in hospitality will continue. There is a risk that the Group does not consider and act, where necessary, to respond to changes in our markets and customer behaviour and adapt to changes in the broader hospitality market. Innovation is a core objective for senior leadership, with ongoing executive management focus on developing hotel trends. The Group performs detailed research on customer wants and needs within our hotels, and reviews market trends with feedback from customers and teams on initiatives taken. The Group allocates resources to develop and implement business efficiencies and innovation and embraces enhanced use of business systems, new technologies and information to support innovation. Developing, recruiting and retaining our people – Our strategy is to develop our management and operational expertise, where possible, from within our existing teams. This expertise can be deployed throughout our business, particularly at management levels in our new hotels. We must also recruit and retain well-trained and motivated people to deliver our desired customer service levels at our hotels. There is a risk that we cannot implement our management development strategy as planned or recruit and retain sufficient resources to operate our business effectively. The Group invests in extensive development programmes, including hotel management and graduate development programmes across various business-related areas. These programmes are continually reviewed to reflect growing business needs and competencies. The Group is also focusing on the ongoing development of retention strategies (such as employee benefits, workplace culture, training, employee development programmes, progression opportunities and working conditions). Cyber security, data and privacy – In the current environment, all businesses face heightened information security risks associated with increasingly sophisticated cyber-attacks, ransomware attacks and those targeting data held by companies. There is an ongoing risk that the Group’s information systems are subject to a material cyber event that could have the potential for data loss or theft, denial of service or associated negative impact. The ongoing security of our information technology platforms is crucial to the Board. The Group has invested in a modern, standardised technology platform supported by trusted IT partners. Our Information Security Management System is based on ISO27001 and audited twice annually. An established data privacy and protection structure, including dedicated specialist resources, is operational across our business. Expansion and development strategy – The Group’s strategy is to expand its activities in the UK and European markets, adopting a predominately capital-light and long-term leasing model or by directly financing a project, enabled by the Group’s financial position. There is a risk that as the development programme continues, fewer viable opportunities could become available, or opportunities that do arise could have a higher risk profile. Changes in the cost of financing, yields and the availability of investment funds could also impact the strategy. The Group has extensive acquisitions and development expertise within its central office function to identify opportunities and leverage its relationships, funding flexibility and financial position as a preferred partner. The Board scrutinises all development projects before commencement and is regularly updated on the progress of the development programme. Agreed financial criteria and due diligence are completed for all projects, including specific site selection criteria, detailed city analysis and market intelligence. Our culture and values – The rollout of our business model is dependent on the retention and growth of our strong culture. There is a risk that the Group's continued expansion, in terms of the number of hotels and countries where we operate, may dilute the culture that has been a key to the Group’s success. We have defined Group values that are embedded in how we, as a Group and individuals, behave, which are set out in the Group’s Code of Conduct. These are supported by internal structures that support and oversee expected behaviours. We also use wide-ranging measures to assess and monitor our culture, which are reviewed with the Board and management teams. Climate change, ESG and decarbonisation strategy – The Board is keenly aware of the risks to society associated with climate change and environmental matters. We are also aware that being a socially responsible business supports our strategic objectives and benefits society and the communities in which we operate. There is a risk that we will not meet stakeholder expectations in this regard, particularly concerning target setting, environmental performance reporting and corporate performance. The ESG Committee actively supports the Board in overseeing the development and implementation of the Group’s strategy and targets in this area. A climate change and decarbonisation strategy is in place across our businesses, with published environmental targets.
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 the Companies Act 2014.
Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the Group and Company and of the Group’s profit or loss for that year. In preparing the consolidated and Company financial statements, the Directors are required to:
The Directors are also required by the Transparency (Directive 2004/109/EC) Regulations 2007 and the Transparency Rules of the Central Bank of Ireland to include a management report containing a fair review of the business and a description of the principal risks and uncertainties facing the Group.
The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the assets, liabilities, financial position and profit or loss of the Company and which enable them to ensure that the financial statements of the Company comply with the provisions of the Companies Act 2014. The Directors are also responsible for taking all reasonable steps to ensure such records are kept by the Company’s subsidiaries which enable them to ensure that the financial statements of the Group comply with the provisions of the Companies Act 2014 and Article 4 of the IAS Regulation. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for safeguarding the assets of the Company and the Group, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are also responsible for preparing a Directors’ Report that complies with the requirements of the Companies Act 2014.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s and Company’s website www.dalatahotelgroup.com. Legislation in the Republic of Ireland concerning the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement as required by the Transparency Directive and UK Corporate Governance Code. Each of the Directors, whose names and functions are listed in the Board of Directors section of this Annual Report, confirm that, to the best of each person’s knowledge and belief:
On behalf of the Board
Consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2023
Consolidated statement of financial position at 31 December 2023
On behalf of the Board:
Consolidated statement of changes in equity for the year ended 31 December 2023
Consolidated statement of changes in equity for the year ended 31 December 2022
Consolidated statement of cash flows for the year ended 31 December 2023
Notes to the consolidated financial statements forming part of the consolidated financial statements
1 Material accounting policies
General information and basis of preparation Dalata Hotel Group plc (the ‘Company’) is a Company domiciled in the Republic of Ireland. The Company’s registered office is Termini, 3 Arkle Road, Sandyford Business Park, Dublin 18. The consolidated financial statements of the Company for the year ended 31 December 2023 include the Company and its subsidiaries (together referred to as the ‘Group’). The financial statements were authorised for issue by the Directors on 28 February 2024.
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 consolidated financial statements, the key judgements and estimates impacting these consolidated financial statements were as follows:
Significant judgements
Key sources of estimation uncertainty
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:
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 27 – Financial instruments and risk management (in relation to financial assets and financial liabilities) and note 15 – Property, plant and equipment.
(i) Going concern The year ended 31 December 2023 saw the Group trade strongly and continue the execution of its growth strategy. The strong trade, the full year impact of hotels added during 2022 and the addition of three hotels during 2023 has led to an increase in Group revenue from hotel operations from €515.7 million to €607.7 million, as well as net cash generated from operating activities in the year of €171.4 million (2022: €207.9 million).
The Group remains in a very strong financial position with significant financial headroom. The Group has cash and undrawn loan facilities of €283.5 million (2022: €455.7 million).
The Group is in full compliance with its covenants at 31 December 2023. In accordance with the amended and restated facility agreement entered into by the Group on 2 November 2021 with its banking club, the Group’s banking covenants have reverted to Net Debt to EBITDA and Interest Cover from 30 June 2023. This replaces the Net Debt to Value covenant and liquidity minimum covenants which were temporarily in place up to 30 June 2023. At 31 December 2023, the Net Debt to EBITDA covenant limit is 4.0x and the Interest Cover minimum is 4.0x. The Group’s Net Debt to EBITDA, as defined in the Group's bank facility agreement which is equivalent to Net Debt to EBITDA after rent, for the year ended 31 December 2023 is 1.3x (APM (xv)) and Interest Cover is 19.5x (APM (xvi)).
Current base projections show compliance with all covenants at all future testing dates and significant levels of headroom.
The Directors have considered the above, with all available information, and the current liquidity and financial position in assessing the going concern of the Group. On this basis, the Directors have prepared these consolidated financial statements on a going concern basis. Furthermore, they do not believe there is any material uncertainty related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
(ii) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) and their interpretations issued by the International Accounting Standards Board (‘IASB’) as adopted by the EU and those parts of the Companies Act 2014 applicable to companies reporting under IFRS and Article 4 of the IAS Regulation.
The following standards and interpretations were effective for the Group for the first time from 1 January 2023:
With the exception of the above amendments to IAS 12 Income Taxes, the above standards, amendments and interpretations have no material impact on the consolidated financial statements of the Group.
Accounting policies The accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements as at and for the year ended 31 December 2022, apart from the amendments to IAS 12.
Amendments to IAS 12, effective for reporting periods beginning on or after 1 January 2023, clarify that the initial recognition exemption of deferred tax assets and liabilities does not apply to transactions that give rise to equal and offsetting temporary differences. The amendments require separate presentation of deferred tax assets and liabilities arising on right-of-use assets and corresponding lease liabilities recognised under IFRS 16. The comparative gross deferred tax assets and deferred tax liabilities for 2022 have been restated in the deferred tax note in accordance with these amendments. The IAS 12 offsetting principle has been applied for deferred tax balances shown on the face of the Consolidated Statement of Financial Position. The changes to the deferred tax liabilities and deferred tax assets offset such that the net impact on the face of the Consolidated Statement of Financial Position at 31 December 2022 and the net impact on retained earnings was nil. (note 2).
Prior period restatement Certain comparative amounts in the Consolidated Statement of Profit or Loss and Other Comprehensive Income have been re-presented as a result of a prior period restatement (note 2).
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 2024. The Group has not adopted these amendments to standards early, and instead intends to apply them 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:
The following standards and interpretations are not yet endorsed by the EU. The potential impact of these standards on the Group is under review:
(iii) Functional and presentation currency These consolidated financial statements are presented in Euro, being the functional currency of the Company and the majority of its subsidiaries. All financial information presented in Euro has been rounded to the nearest thousand or million and this is clearly set out in the financial statements where applicable.
(iv) Basis of consolidation The consolidated financial statements include the financial statements of the Company and all of its subsidiary undertakings.
Business combinations The Group accounts for business combinations using the acquisition method when control is transferred to the Group.
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested at least 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.
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.
Rental income from investment property is recognised on a straight-line basis over the term of the lease and 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) Income from residential development activities Income in respect of a contract with a customer for the sale of residential property is recognised when the performance obligations inherent in the contract are completed. In 2022, the income related to the contract for the sale of the Merrion Road residential units which the Group developed as part of the overall development of the new Maldron Hotel Merrion Road on the site of the former Tara Towers hotel. Where there is variable consideration in the form of withheld retention receipts included in the transaction price, income is recognised for this variable consideration to the extent that it is highly probable it is receivable and is measured based on the most likely outcome.
Income from residential development activities has been presented within gross profit, separately from revenue from hotel operations (note 2).
(viii) Government grants and government assistance Government grants represent the transfers of resources to the Group from the governments in Ireland and the UK in return for past or future compliance with certain conditions relating to the Group’s operating activities. Income-related government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises, as expenses, the related costs for which the grants are intended to compensate. The Group accounts for these government grants in profit or loss via offseting against the related expenditure.
Government assistance is action by a government which is designed to provide an economic benefit specific to the Group or subsidiaries who qualify under certain criteria. Government assistance received by the Group includes a waiver of commercial rates for certain hotel properties and also the deferral of payment of payroll taxes and VAT liabilities and has been disclosed in these consolidated financial statements.
(ix) Leases 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:
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 incremental borrowing rate is calculated for each individual lease.
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.
Lease payments included in the measurement of the lease liability comprise the following:
Variable lease costs 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 any 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 a component thereof, 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 also applies IAS 36 Impairment of Assets to any cash-generating units, which have right-of-use assets which were previously impaired, to assess whether previous impairments should be reversed. A reversal of a previous impairment charge is accounted for through profit or loss and only increases the carrying amount of the right-of-use asset to a maximum of what it would have been if the original impairment charges had not been recognised in the first place.
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.
(x) 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 met 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.
(xi) Tax Tax charge or credit comprises current and deferred tax. Tax charge or credit 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 or receivable on the taxable income or loss 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 and liabilities that do not affect accounting profit or taxable profit at the date of recognition and at the time of the transaction, do not give rise to taxable and deductible temporary differences.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
Deferred tax liabilities are 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.
(xii) Earnings per share (‘EPS’) Basic earnings per share is calculated based on the profit or loss for the year attributable to owners of the Company and the basic weighted average number of shares outstanding. Diluted earnings per share is calculated based on the profit or loss for the year attributable to owners of the Company and the diluted weighted average number of shares and potential shares outstanding.
Shares are only treated as dilutive if their dilution results in a decreased earnings per share or increased loss per share.
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.
(xiii) 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 and fixtures, fittings and equipment at cost. The land and buildings element will subsequently be measured at fair value. Depreciation will commence when the assets are 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 Business Combinations, 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 of land and buildings 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:
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 VIU. VIU 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.
The Group also applies IAS 36 Impairment of Assets to any cash-generating units, with fixtures, fittings and equipment which were previously impaired and which are not revalued, to assess whether previous impairments should be reversed. A reversal of a previous impairment charge is accounted for through profit or loss and only increases the carrying amount of the fixtures, fittings and equipment to a maximum of what it would have been if the original impairment charges had not been recognised in the first place.
(xiv) 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.
(xv) 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 tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. 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 VIU and its fair value less costs to sell. In assessing VIU, 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 notes 12 and 14.
The assumptions and conditions for determining impairment of goodwill reflect 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.
(xvi) 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.
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 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. The estimated total useful life of the Group’s intangible assets is 5 years.
(xvii) 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.
(xviii) Contract fulfilment costs Contract fulfilment costs are stated at the lower of cost or recoverable amount. Contract fulfilment costs represent assets that are to be sold by the Group but do not form part of the primary trading activities. 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. Contract fulfilment costs are released to profit or loss on completion of the sale to which the contract relates.
(xix) Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less, which are carried at amortised cost.
(xx) 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.
(xxi) Trade and other payables Trade and other payables are initially recorded at fair value, which is usually the original invoiced amount. Fair value for the initial recognition of payroll tax liabilities is the amount payable stated on the payroll submission filed with the tax authorities. Fair value for the initial recognition of VAT liabilities is the net amount of VAT payable to, and recoverable from, the tax authorities. Trade and other payables are subsequently carried at amortised cost using the effective interest method. Liabilities are derecognised when the obligation under the liability is discharged, cancelled or expired.
(xxii) Finance costs Finance costs comprise interest expense on borrowings and related financial instruments, commitment fees and other costs relating to financing of the Group.
Interest expense on loans and borrowings 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.
If a financial liability is deemed to be non-substantially modified (less than 10 percent different) (see policy (xxvii)), the amortised cost of the liability is recalculated by discounting the modified cash flows at the original effective interest rate and the resulting modification gain or loss is recognised in finance costs 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.
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 UK 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.
(xxiii) 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.
(xxiv) 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.
(xxv) 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. Merger relief is availed of by the Group where possible.
(xxvi) Loans and borrowings Loans and borrowings are recognised initially at the fair value of the 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.
(xxvii) 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 to lenders net of any fees received, is at least 10 percent different from the discounted present value of the remaining cash flows of the original financial liability, discounted at the original effective interest rate, (the ‘10% test’). In addition, a qualitative assessment is carried out of the new terms in the new facility agreement to determine whether there is a substantial modification.
If the financial liability is deemed substantially modified, 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, the amortised cost of the liability is recalculated by discounting the modified cash flows at the original effective interest rate and the resulting modification gain or loss is recognised in profit or loss. 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.
(xxviii) 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 to hedge these exposures.
Interest rate swaps convert part of the Group’s Sterling denominated borrowings from floating to fixed 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.
(xxix) Cash flow hedge accounting Cash flow hedge accounting is applied in accordance with IFRS 9 Financial Instruments. 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 or 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.
(xxx) 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.
(xxxi) 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, Free Cashflow per Share, 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 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 year on year or with other similar businesses.
2 Prior period restatements
Restatement of the Consolidated Statement of Profit or Loss and Other Comprehensive Income
During 2022, the Group completed the sale to Irish Residential Properties REIT (plc) (‘I-RES’) of the Merrion Road residential units which had been developed by the Group on the site of the former Tara Towers Hotel. Proceeds from the sale of these units were presented as revenue in the Consolidated Financial Statements for the year ended 31 December 2022. The related costs were presented as cost of sales.
The Financial Reporting Supervision Unit of IAASA subsequently reviewed the presentation and, in their judgement, determined that, whilst inextricably linked to the normal activity of hotel development, the residential unit development was not part of the Group’s ordinary activities and therefore should not be presented as Revenue as defined by IFRS 15 Revenue Recognition.
As there is no IFRS that covers this specific type of transaction (i.e. the transaction to build and sell residential units to a third party where they had been developed in conjunction with a hotel for own use) the Group had looked to the hierarchy in IAS 8.11 to select the most relevant and reliable accounting policy. IFRS 15 would be the standard typically used for the sale of inventories, therefore the Group determined that IFRS 15 would be the most appropriate standard to be used, by analogy, for the forward sale of the residential units and the ultimate completion of that sale.
The comparative figures as presented in the Consolidated Statement of Profit or Loss and Other Comprehensive Income have been amended for the following presentation corrections.
As this is a correction to the presentation of the above items within the Consolidated Statement of Profit or Loss and Other Comprehensive Income only, there are no corrections required to basic or diluted earnings per share nor are there any corrections to the Consolidated Statement of Financial Position at the beginning of the current or prior year.
Restatement of the deferred tax note
Amendments to IAS 12, effective for reporting periods beginning on or after 1 January 2023, clarify that the initial recognition exemption of deferred tax assets and liabilities does not apply to transactions that give rise to equal and offsetting temporary differences. The IAS 12 amendments require separate presentation of deferred tax assets and liabilities arising on right-of-use assets and corresponding lease liabilities recognised under IFRS 16, in the deferred tax note, with retroactive effect from 1 January 2022. These are offset on an individual entity basis and presented net in the statement of financial position.
The comparative gross deferred tax assets and deferred tax liabilities for 2022 have been restated in the deferred tax note in accordance with these amendments. The changes to the deferred tax liabilities and deferred tax assets offset such that the net impact on the face of the Consolidated Statement of Financial Position at 31 December 2022 and the net impact on retained earnings was nil (note 26).
3 Operating segments
The Group’s segments are reported in accordance with IFRS 8 Operating Segments. The segment information is reported in the same way as it is reviewed and analysed internally by the chief operating decision makers, primarily, the Executive Directors.
In the 2022 financial statements, the results of Clayton Hotel Düsseldorf were disclosed as part of the Dublin segment due to their immateriality in the context of group results (less than 3% of total segmental revenue). Due to additions to the Group’s Continental Europe portfolio in 2023, the Continental Europe segment is now to be presented separately below. The 2022 results of Clayton Hotel Düsseldorf have been reflected in the Continental Europe segment below to improve comparability.
The Group segments its leased and owned business by geographical region within which the hotels operate being Dublin, Regional Ireland, the UK and Continental Europe. These comprise the Group’s four reportable segments.
Dublin, Regional Ireland, the UK and Continental Europe segments These segments are concerned with hotels that are either owned or leased by the Group. As at 31 December 2023, the Group owns 28 hotels (31 December 2022: 27 hotels) and has effective ownership of two further hotels which it operates (31 December 2022: one hotel). It also owns the majority of one further hotel it operates (31 December 2022: one hotel). The Group also leases 19 hotel buildings from property owners (31 December 2022: 18 hotels) and is entitled to the benefits and carries the risks associated with operating these hotels.
The Group’s revenue from leased and owned hotels is primarily derived from room sales and food and beverage sales in restaurants, bars and banqueting. The main costs arising are payroll, cost of goods for resale, commissions paid on room sales, utilities, other operating costs, and, in the case of leased hotels, variable lease costs (where linked to turnover or profit) payable to lessors.
Segmental revenue for each of the geographical locations represents the operating revenue (room revenue, food and beverage revenue and other hotel revenue) from leased and owned hotels situated in the Group’s four reportable segments.
The year ended 31 December 2023 saw the Group trade strongly and continue the execution of its growth strategy. The strong trade, the full year impact of hotels added during 2022 and the addition of three hotels during 2023 has led to an increase in Group revenue from hotel operations from €515.7 million to €607.7 million.
Group EBITDA represents earnings before interest on lease liabilities, other interest and finance costs, tax, depreciation of property, plant and equipment and right-of-use assets and amortisation of intangible assets.
Adjusted EBITDA is presented as an alternative performance measure to show the underlying operating performance of the Group excluding items which are not reflective of normal trading activities or distort comparability either year on year or with other similar businesses. Consequently, Adjusted EBITDA represents Group EBITDA before:
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. Also included in central costs is the unwinding of the discount on insurance provisions of €0.3 million (2022: €0.7 million) and the reversal of prior period insurance provisions of €0.9 million (2022: €Nil) (note 23). Share-based payments expense is presented separately from central costs as this expense relates to employees across the Group (note 9).
‘Segmental results – EBITDA’ for Dublin, Regional Ireland, the UK and Continental Europe 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, the UK and Continental Europe represents ‘Segmental results – EBITDA’ before variable lease costs.
Disaggregated revenue information Disaggregated segmental revenue is reported in the same way as it is reviewed and analysed internally by the chief operating decision makers, primarily, the Executive Directors. The key components of revenue reviewed by the chief operating decision makers are:
Other geographical information
Assets and liabilities
The above information on assets, liabilities and revaluation reserve is presented by region 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. The amortised cost of loans and borrowings was €254.4 million at 31 December 2023 (31 December 2022: €193.5 million). Drawn loans and borrowings consist of Euro Revolving Credit Facility (“RCF”) borrowings of €4.0 million (2022: €Nil) and Sterling denominated borrowings of £221.4 million (€254.7 million) which are classified as liabilities in the UK (31 December 2022: £176.5 million (€199.0 million)). All of the Sterling borrowings act as a net investment hedge as at 31 December 2023 (31 December 2022: £176.5 million (€199.0 million)) (note 24).
4 Statutory and other information
Hotel pre-opening expenses relate to costs incurred by the Group in advance of opening new hotels. In 2023, this related to Maldron Hotel Finsbury Park, London, a new hotel that opened during 2023. In 2022, this related to seven hotels, that opened throughout 2022. These costs primarily relate to payroll expenses, sales and marketing costs and training costs of new staff.
Variable lease costs relate to lease payments linked to performance which are excluded from the measurement of lease liabilities as they are not related to an index or rate or are not considered fixed payments in substance.
Auditor’s remuneration
Auditor’s remuneration for the audit of the Company financial statements was €20,000 (2022: €15,000). Other assurance services primarily relate to the review of the interim condensed consolidated financial statements.
Directors’ remuneration
Transactions with past directors in 2023 relate to gains associated with the shares issued on vesting of awards under the 2020 LTIP. This gain represents the difference between the quoted share price per ordinary share and the exercise price on the vesting date (note 9).
Retired director Stephen McNally received payment in lieu of annual leave upon cessation of employment on 28 February 2022, this sum is included in payments of €0.1 million to past directors reported in 2022.
Good leaver vesting of shares granted under Share Scheme 2020 for former directors in 2022 relates to 6,359 shares issued to two former directors. The weighted average share price at the date of exercise for the options exercised was €2.28
Details of the directors’ remuneration, interests in conditional share awards and compensation of former directors are set out in the Remuneration Committee report.
5 Administrative expenses
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Shares Magazine
Source - DGAP Regulatory