| Dalata Hotel Group PLC (DAL,DHG) This Announcement contains inside information within the meaning of the EU Market Abuse Regulation 596/2014 (EU MAR) and EU MAR as in force in the UK, including pursuant to the UK Market Abuse (Amendment) (EU Exit) Regulations 2019.
H1 2024 Results Solid H1 performance as efficiency gains and operational expertise limit impact of cost inflation Announcing €30 million share buy-back, Executive Director Appointment and Management Update ISE: DHG LSE: DAL Dublin and London | 04 September 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 six-month period ended 30 June 2024.
Throughout this release, all percentage variance comparisons are made comparing the performance for the six-month period ended 30 June 2024 (H1 2024) to the six-month period ended 30 June 2023 (H1 2023), unless otherwise stated.
Efficiency gains and operational expertise limit impact of cost inflation
Announcing today:
Delivering ambitious growth strategy – estimate further growth ambition of 6,500+ rooms over the medium-term
Balanced capital allocation strategy focused on driving long-term returns with high quality portfolio
€30 million share buy-back
Executive director appointment and management update
Continue to progress sustainability strategy
Optimising brand proposition as we scale
Outlook The Group’s ‘like for like’ RevPAR1 was 1% ahead of 2023 levels for July / August. Trade was lower than expected particularly in Regional Ireland and the UK as a result of more measured consumer spending. For the two-month period, RevPAR1 for the Dublin portfolio was in line with 2023 levels, however July was weaker followed by a stronger August. RevPAR1 for the Regional Ireland portfolio was also in line with 2023 levels. The UK portfolio achieved ‘LFL’ RevPAR1 growth of 3% including the ongoing positive momentum from hotels opened in 2022. Demand from corporate and international visitors remains strong but we are seeing a softening from more cost conscious domestic customers relative to last year. We continue to see periods of good leisure demand around events. As we look ahead to the balance of the year, we expect these recent trends to continue. The events calendar for the remainder of 2024 looks strong particularly in Dublin. In addition, the impact of the 4.5% Irish VAT rate increase will be fully absorbed from 1 September 2024. Dalata continues to proactively address inflationary pressures by rolling out new initiatives to drive efficiencies whilst enhancing our customer and employee experiences. We have demonstrated our ability to limit the impact of increasing costs on Hotel EBITDAR margin1, most notably payroll where minimum wage rates in Ireland and the national living wage rates in the UK have increased substantially since 2022. As we look forward, we remain confident in our ability to respond to inflationary pressures on the business over the medium term. Dermot Crowley, Dalata Hotel Group CEO, commented: “Today we report our H1 2024 results where we delivered revenue growth of 6% to €302 million and Adjusted EBITDA1 growth of 4% to €108 million. Trading has been softer than we expected of late and there is a return to a more measured domestic customer spending behaviour in Ireland and the UK.
I continue to view Dublin as a great city in which to operate hotels. Despite the digestion of approximately 2,500 (9%) additional rooms in the city since January 2023 and the 4.5% VAT rate increase introduced on September 1st 2023, RevPAR1 for the period January to July is only down 5.4% versus last year for the market. I am delighted that we outperformed the market with RevPAR1 for our portfolio down 4.6% for the same period. On the back of a strong events calendar, RevPAR1 for our Dublin hotels in August was 5% higher than last year. RevPAR1 for the period January to August was therefore 3% lower than last year. The outlook for the Dublin economy is very encouraging, supported by rising population numbers, a significant growth in employment and strong international visitor numbers.
The passenger cap at Dublin Airport is an important issue for our business, and we remain hopeful that it will be resolved in the short term. The ability of Dublin Airport to continue to increase passenger numbers is critical to support further growth in the Irish economy, particularly in the hospitality and tourism sectors which are a key source of employment for the island of Ireland.
The culture of innovation, which flourishes at Dalata, is delivering exciting initiatives which have enhanced productivity and are critical in limiting the impact of the significant increase in minimum wage rates in Ireland and national living wage rates in the UK of 20% over the last two years. Collectively, we estimate the initiatives we have rolled out to date contributed to a saving of c. 60 bps to Hotel EBITDAR margin1 for the period. Importantly, we have achieved productivity increases whilst also enhancing customer satisfaction levels and maintaining our very strong employee engagement scores - our people are our greatest asset and we will remain focused on providing an environment where they feel valued and can grow their careers.
At Dalata, we are focused on creating long-term value for our shareholders through careful evaluation and balancing of capital allocation considerations. With this foremost in our minds, we believe that now is the right time to buy back some of our shares. We continue to deliver on our ambitious growth strategy, having successfully opened four new hotels in the UK between May and August. I am very proud of the results we have achieved to date which evidence our ability to deliver growth in the UK market, having expanded our UK portfolio from 11 to 22 hotels within three years.
I would like to thank my colleagues in our hotels and central office for their continued hard work and dedication that have led to another strong set of results and the opening of four excellent new hotels over a ten week period. I am also very pleased to appoint Shane Casserly to the role of Deputy CEO. Shane was appointed to the Board in January 2020. I expanded Shane’s responsibility on taking over as CEO in November 2021 and the title of Deputy CEO more appropriately reflects his contribution across all elements of the business. I am delighted with the appointment of Des McCann to the Board effective 1 January 2025. I appointed Des as COO in January 2022. He has made an outstanding contribution in the intervening period and will be a great addition to the Board.
As I look ahead, I remain very confident on Dalata’s future growth prospects as we continue to deliver on our stated growth strategy, becoming a key four-star market player in targeted locations. While the quantum and timing of hotel investments vary from year to year, I am excited by the opportunities we are currently considering. Our ambition is to announce over 6,500 additional rooms over the medium-term across all of our markets as we look to continue to grow in Regional UK, expand our presence in London and the large European cities and maintain our market share in Ireland. Dalata’s strong financial position and our experienced team ensures we are well positioned to continue to deliver sustainable growth and returns for our shareholders”.
John Hennessy, Dalata Hotel Group Chairman, commented: “I am delighted to announce the appointment of Des McCann to the Board as an executive director with effect from 1 January 2025. Des is a leading member of the executive team and brings a wealth of operational experience to the Board. We look forward to working with Des as he continues his important contribution to the growth and development of the Group”.
ENDS MAR information This Announcement contains inside information for the purposes of the Market Abuse Regulation (Regulation (EU) No 596/2014) ("MAR") and EU MAR as in force in the UK, including pursuant to the UK Market Abuse (Amendment) (EU Exit) Regulations 2019. The person responsible for arranging release of this Announcement on behalf of Dalata is Sean McKeon, Company Secretary of Dalata.
Other information The Company confirms that there is no other information that is required to be disclosed in relation to Mr McCann in accordance with rule 6.1.66 (1) to (6) of the Euronext Dublin Listing Rules, and 6.4.8R (1) to (6) of the UK Listing Rules sourcebook (UKLR).
About Dalata Dalata Hotel Group plc is a leading hotel operator backed by €1.7bn in hotel assets primarily 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 a mix of owned and leased hotels with 57 primarily four-star hotels operating through its two main brands, Clayton and Maldron Hotels, with 12,258 rooms and a pipeline of over 700 rooms. For the six-month period ended 30 June 2024, Dalata reported revenue of €302 million, basic earnings per share of 16.0 cent and Free Cashflow per Share of 21.5 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 The senior management team will host a conference call and webcast for institutional investors and analysts at 08:30 am (BST) today, 04 September 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. Half Year 2024 financial performance
Summary of hotel performance
The Group delivered revenue of €302.3 million in the first six months of 2024, representing growth of 6% versus H1 2023. This converted to €107.6 million of Adjusted EBITDA1, a 4% increase on H1 2023 levels. Growth is driven by additions to the portfolio which contributed €5.8 million to Adjusted EBITDA1 in H1 2024, namely Maldron Hotel Finsbury Park, London; Clayton Hotel London Wall (both added July 2023); Clayton Hotel Amsterdam American (added October 2023) and to a lesser extent, Maldron Hotel Manchester Cathedral Quarter which opened to the public at the end of May 2024. Hotel EBITDA1 at ‘like for like’ hotels decreased with a reduction of €3.8 million to Adjusted EBITDA1 contribution, primarily driven by the Irish portfolio.
The trading environment in our markets has transitioned from the rapid post-pandemic recovery experienced in 2022 and first half of 2023 towards more normalised demand levels. In particular, Dublin was one of the fastest markets to recover in Europe, returning to 2019 RevPAR1 by 2022 and exceeding this by 28% in 2023.
Reported Group RevPAR1 of €110.77 for H1 2024 was 1% ahead of H1 2023, driven by portfolio additions in cities which typically achieve higher RevPARs, such as Amsterdam and London. Group ‘LFL’ RevPAR1 of €108.57 was 1% behind H1 2023 with a decline of 4% for the January – April period partially offset by 3% growth for May/June. The first six months of 2024 presented a mixture of market challenges for the Group. The Irish portfolio was impacted by the increased VAT rate introduced from September 2023 (up 4.5%). The Dublin market continues to digest additional supply both in the form of new entrants and the return of government use stock representing an increase of approximately 2,500 rooms since January 2023, in addition to being impacted by the timing and nature of events compared to 2023. Our UK portfolio achieved ‘LFL’ RevPAR1 growth of 3% in the first six months of the year, driven by Regional UK hotels added to the portfolio in 2021 and 2022. RevPAR1 at the ‘LFL’ London hotels performed broadly in line with 2023 levels. The Group is also pleased with the integration and performance of its hotels in Continental Europe as well as the new London hotels added to the portfolio in 2023. Corporate demand remained solid in H1 2024 across all regions. As explained further in the Outlook Section above, the Group’s ‘like for like’ RevPAR1 was in line with 2023 for the period January to August.
The Group achieved food and beverage (‘F&B’) revenue growth of 7% in H1 2024 to €58.8 million (H1 2023: €54.8 million), driven by portfolio growth. ‘Like for like’ F&B revenue increased by 1% and the Group has maintained profitability despite higher pay rates support by the rollout of the Dalata Signature Range and re-tendering of food contracts in Ireland.
Overall, the Group delivered Hotel EBITDAR1 of €117.9 million, representing 2% growth. On a ‘like for like’ basis Hotel EBITDAR decreased by €3.5 million (down 3%) to €112.1 million. In recent years, the hospitality industry has faced significant cost increases following increases to minimum wage rates in both Ireland and the UK. The National Minimum Wage increased by 12.4% in Ireland from January 2024 (January 2023 increase: 7.6%). and the National Living Wage increased by 9.8% in the UK from April 2024 (April 2023 increase: 9.7%). On a ‘like for like’ basis hotel payroll costs increased by €3.2 million (5%) as efficiency projects deployed within the accommodation and food and beverage departments limited the impact of further pay rate inflation (8% average increase in H1 2024). ‘Like for like’ gas and electricity costs3 decreased by €3.4 million (23%), net of energy supports totalling €0.7 million received from the Irish government during H1 2023, to €11.6m primarily due to improved unit pricing, in addition to further consumption savings. For the second half of 2024, the Group expects ‘like for like’ gas and electricity costs to be in line with the second half of 2023.
Dalata’s continued focus on innovation and efficiency projects, together with lower energy pricing in Ireland has limited the impact on the bottom line in H1 2024. The Group delivered ‘like for like’ Hotel EBITDAR margin1 of 39.4% in H1 2024, just 1% below the comparative for 2023 (40.6%), a strong result in the face of such significant cost increases. The Group’s decentralised model also allows for agile decision-making regarding rostering and yield management, enabling quick response to local market dynamics.
Through the accommodation efficiency and Dalata Signature Range projects, the Group has successfully reduced hours worked in the accommodation and food and beverage departments by 9% for the Irish portfolio from H1 2023 to H1 2024. The Group’s relentless focus on sustainability has also achieved a reduction in energy consumption per room sold of 4% versus H1 2023, and a total reduction of 24% versus 2019 levels. Collectively, the innovation and efficiency initiatives carried out by the Group resulted in a cost saving of €1.7 million in H1 2024, representing a saving of approximately 60 bps to ‘LFL’ Hotel EBITDAR margin1. The Group also achieved enhanced employee engagement scores in the accommodation and kitchen departments and improved customer satisfaction scores related to these areas.
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. When reporting the results for the first six months of 2023, the operating performance of Clayton Hotel Düsseldorf was disclosed within the Dublin segment due to it representing a single asset which was immaterial 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 H1 2023 operating performance for Dublin has been amended to exclude Clayton Hotel Düsseldorf.
The Dublin portfolio consists of eight Maldron hotels and seven Clayton hotels, The Gibson Hotel and The Samuel Hotel. Ten hotels are owned, and seven hotels are operated under leases. There has been a minor increase in room numbers in the portfolio primarily driven by the conversion of meeting space to bedrooms at one hotel.
RevPAR1 for the first six months of 2024 decreased by 4.5% versus the 2023 comparative, outperforming the 5.2% decline in the wider Dublin market as reported by STR (Smith Travel Research). It was a challenging start to the year for the Dublin market mainly due to the digestion of additional supply and the 4.5% increase in VAT from September 2023. Despite these headwinds, Dalata’s Dublin portfolio achieved occupancy above 80% for the first six months of the year with 38 compression nights where occupancy exceeded approximately 95%, versus 20 in the wider market, and limited ARR1 decline to 2%. June was a particularly strong month for high-profile events which drove substantial increases in ARR1 and RevPAR1. Revenue from corporate customers was broadly in line with H1 2023. The Dublin hotel market continues to be supported by a strong economy and international visitor numbers, rising population numbers and a significant growth in employment.
Total revenue for H1 2024 was €135.8 million, 3% behind H1 2023 levels, driven by lower RevPAR1. Food and beverage revenue of €25.1 million performed 1% ahead of H1 2023 levels (€24.8 million).
The Dublin portfolio delivered Hotel EBITDAR1 of €62.6 million for the six-month period ended 30 June 2024, representing a 4% decline versus H1 2023 driven by the softer trading environment at the start of the year along with a 12.4% increase in the National Minimum Wage from January 2024. The portfolio achieved Hotel EBITDAR margin1 of 46.0% for the first six months of 2024, just 80 bps lower than 2023 despite the significant increase in its largest cost, supported by the efficiency and innovation projects in addition to lower energy pricing.
2. Regional Ireland Hotel Portfolio
The Regional Ireland hotel portfolio comprises seven Maldron hotels and six Clayton hotels located in Cork (x4), Galway (x3), Limerick (x2), Wexford (x2), Portlaoise and Sligo. 12 hotels are owned and one is operated under a lease.
RevPAR1 for the first six months of 2024 decreased by 2% versus 2023 levels, having absorbed a 4.5% VAT increase since September 2023. Occupancy of 74.0% was 360 bps below H1 2023 as the Regional Ireland portfolio experienced slightly softer leisure demand, particularly in April when transient leisure was impacted by earlier Easter holidays and poor weather. Corporate demand remained strong throughout H1 2024. ARR1 increased by 3% to €132.00.
Total revenue for the six months ended 30 June 2024 was €51.2 million, €1.4 million (3%) behind H1 2023 levels, with lower food and beverage (‘F&B’) revenue on reduced occupancy levels.
The region delivered Hotel EBITDAR1 of €15.0 million for the six-month period ended 30 June 2024, representing a 5% decline on H1 2023. The portfolio achieved an EBITDAR margin1 of 29.4% for the first six months of 2024, just 80 bps lower than 2023 despite the significant increase in its largest cost following the National Minimum Wage increase of 12.4% in January 2024. The impact of innovation and efficiency projects, as discussed previously, have helped limit the impact on profitability, along with the benefits from lower energy pricing.
3. UK Hotel Portfolio
At 30 June 2024, the UK hotel portfolio comprised 12 Clayton hotels and seven Maldron hotels. Four hotels are situated in London, four in Manchester following the opening of Maldron Hotel Manchester Cathedral Quarter in May, eight in other large regional UK cities and three in Northern Ireland. Seven hotels are owned, ten are operated under long-term leases and two hotels are effectively owned through a 99-year lease and a 122-year lease. Post period end, the Group added an additional three hotels to the UK portfolio, namely Maldron Hotel Liverpool (268 rooms), Maldron Hotel Brighton (225 rooms) and Maldron Hotel Shoreditch, London (157 rooms).
‘LFL’ RevPAR1 for the UK portfolio increased by 3% for the first six months of 2024 versus 2023 levels, with increases across both occupancy (+160 bps) and average room rate (+1%). Regional UK drives the positive RevPAR1 performance, with robust domestic demand across most of our cities, particularly from corporates, and increased passenger numbers at regional airports supporting growth. The five hotels added in 2021 and 2022 continue to ramp up. RevPAR1 for the ‘LFL’ London hotels performed broadly in line with 2023 levels.
Overall, total revenue for the six months ended 30 June 2024 was £82.1 million, £9.6 million (13%) ahead of H1 2023 levels, with the ‘LFL’ hotels contributing £2.3 million of growth. Hotels added to the portfolio during 2023 and 2024 contributed the remaining £7.3 million of uplift, primarily through Maldron Hotel Finsbury Park, London and Clayton Hotel London Wall which both commenced trading under Dalata from July 2023 and to a less extent Maldron Hotel Manchester Cathedral Quarter which opened at the end of May 2024.
The UK portfolio delivered Hotel EBITDAR1 of £29.4 million, 9% ahead of H1 2023 levels. The uplift is primarily driven by hotels added to the portfolio during 2023.
Hotel EBITDAR margin1 decreased by 130 bps period on period, reflecting the increased cost environment, particularly the 9.8% increase in the National Living Wage from April 2024 which followed an April 2023 increase of 9.7%. While there is a higher degree of agency staff in departments such as accommodation in the UK, the Group is trialling bringing rooms cleaning in-house at two of its hotels to replicate the success of the efficiencies achieved from the Rooms Accommodation Project in the Irish portfolio. The results to date have been encouraging. Dalata is also exploring other hotels in the UK portfolio where this could work as well as the rollout of further efficiency initiatives, for example, self-check-in pods at reception.
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 Clayton Hotel Amsterdam American (173 rooms) which was added in October 2023.
Revenue and Hotel EBITDAR1 comparability is skewed period on period due to the addition of Clayton Hotel Amsterdam American during the last 12 months. Both hotels have integrated smoothly into the Dalata portfolio with benefits observed through Dalata’s revenue management approach and relationships, for example, hotels have generated good revenue production through the GDS booking platform since its integration.
Clayton Hotel Düsseldorf performed well during the period as the city benefitted from hosting three UEFA European Football Championship 2024 games in June (with a further two games taking place in July). We are also pleased with the continued progress of Clayton Hotel Amsterdam American, the Group’s first hotel in the Netherlands, which has secured high occupancies in the first six months of 2024. The hotels achieved a combined Rent Cover1 of 1.2x for the twelve-month period ended 30 June 2024.
Central costs and share-based payment expense
Central costs totalled €7.9 million for the six months ended 30 June 2024 (H1 2023: €7.4 million). The increase primarily relates to payroll costs due to additional headcount and pay increases for existing employees.
The Group’s share-based payment expense, which represents the accounting charge for the Group’s LTIP and SAYE share schemes, decreased to €1.6 million in H1 2024 (H1 2023: €3.6 million) primarily based on the Group’s assessment of non-market performance conditions of active LTIP award schemes, together with the additional charge of €0.9 million recognised in H1 2023 following the vesting of awards granted in March 2020.
Adjusting items to EBITDA
The Group incurred €1.3 million of pre-opening expenses during the period (H1 2023: €0.7 million). These expenses are related to the opening of four Maldron hotels in the UK between May and August, namely, Maldron Hotel Manchester Cathedral Quarter (opened May 2024), Maldron Hotel Liverpool (opened July 2024), Maldron Hotel Brighton (opened July 2024) and Maldron Hotel Shoreditch, London (opened August 2024).
In line with accounting standards, impairment tests and reversal assessments were carried out on the Group’s cash-generating units (‘CGUs’) at 30 June 2024. Each individual hotel is deemed to be a CGU for the purposes of impairment testing, as the cash flows generated are independent of other hotels in the Group. Testing resulted in an impairment of €3.2 million (£2.7 million) primarily relating to a UK right-of-use asset and a reversal of a previous impairment charge of €1.7 million (£1.4 million) primarily relating to a separate UK right-of-use asset being recognised in profit or loss during the period ended 30 June 2024 (H1 2023: no impairment and/or reversal of previous impairments). The Group’s property assets were revalued at 30 June 2024, resulting in unrealised revaluation gains of €11.5 million which were reflected in full through other comprehensive income and the revaluation reserve; there was no impact on the profit or loss (H1 2023: €2.0 million reversal of previous revaluation losses). Further detail is provided in the ‘Property, plant and equipment’ section (note 10) of the consolidated interim 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 €1.2 million to €16.1 million for the six-months ended 30 June 2024, primarily due to the inclusion of the Clayton Hotel Amsterdam American lease, which was added to the portfolio in October 2023.
Depreciation of property, plant and equipment and amortisation
Depreciation of property, plant and equipment and amortisation increased by €3.7 million to €19.1 million for the six-month period ended 30 June 2024. The increase primarily relates to the acquisition of two freehold assets which Dalata operated from July 2023 (Maldron Hotel Finsbury Park and Clayton Hotel London Wall), fixtures and fittings acquired with the leasehold addition of Clayton Hotel Amsterdam American and refurbishment projects.
Finance Costs
Finance costs related to the Group’s loans and borrowings (before capitalised interest) amounted to €6.0 million in H1 2024, increasing by €2.0 million from H1 2023 (€4.0 million). The increase is primarily driven by higher average borrowings due to sterling revolving credit facility (RCF) drawdowns during the period which were subject to variable interest rates, and the impact of IFRS 9 accounting adjustments, partially offset by lower rates available under interest rate swaps entered into with financial institutions, whereby the SONIA benchmark rate is fixed to c. 1.0% on sterling denominated term debt from 26 October 2023 to 26 October 2024 (H1 2023: between 1.3% and 1.4%). The final year of the term debt, to 26 October 2025, is currently unhedged.
During the period, interest on loans and borrowings of €1.6 million was capitalised to assets under construction, primarily relating to the construction of Maldron Hotel Shoreditch, London which was completed in August 2024.
Interest on lease liabilities for the six-month period increased by €2.4 million to €23.3 million in H1 2024 primarily due to the impact of the lease of Clayton Hotel Amsterdam American, which was added in October 2023.
Tax charge
The tax charge for the six-month period ended 30 June 2024 of €6.1 million mainly relates to current tax in respect of profits earned in Ireland during the period. The Group’s effective tax rate of 14.6% in H1 2024 was broadly in line with the full year 2023 rate of 14.5%.
At 30 June 2024, the Group has deferred tax assets of €23.9 million, of which €17.8 million relates to cumulative tax losses and interest expense 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 €35.8 million for H1 2024 (H1 2023: €42.0 million) represents basic earnings per share of 16.0 cents (H1 2023: 18.8 cents). The Group’s profit after tax declined by €6.2 million (15%) to €35.8 million due primarily to the impact of adjusting items3 in the period (€4.2 million) in addition to the underlying performance at ‘like for like’ hotels. Adjusting items3 in H1 2024 primarily related to net impairment charges and pre-opening expenses relating to the four UK additions which opened between May and August 2024 (see section above). Excluding the impact of adjusting items1, adjusted basic earnings per share1 decreased by 8% to 16.9 cents.
Strong cashflow generation
The Group generates strong Free Cashflow1 to fund future acquisitions, development expenditure and shareholder returns. Free Cashflow1 for the first six months of 2024 totalled €48.1 million, a reduction of €11.1 million from H1 2023, following the post-pandemic normalisation of maintenance capital expenditure and cash effects within working capital including timing of receipts which impacted the prior period.
At 30 June 2024, the Group’s Debt and Lease Service Cover1 remains strong at 2.7x (31 December 2023: 3.0x) with cash and undrawn committed debt facilities of €282.4 million (31 December 2023: cash and undrawn debt facilities of €283.5 million).
Net cash from operating activities in H1 2023 included the full repayment of tax deferrals under the Irish government’s Debt warehousing scheme of €34.9 million in April 2023. Deferrals under the Debt Warehousing scheme ended in May 2022 with no further amounts deferred and/or repaid. Excluding the impact of this non-recurring initiative, net cash from operating activities decreased by €5.4 million mainly driven by working capital movements.
The Group made fixed lease payments of €29.1 million in the first six months of 2024, a €3.0 million increase on H1 2023 (€26.1 million), driven primarily by the addition of Clayton Hotel Amsterdam American in October 2023 along with impacts from rent reviews. Lease payments payable under lease contracts as at 30 June 2024 are projected to be €30.3 million for the six months ending 31 December 2024 and €60.2 million for the year ending 31 December 2025. The Group has also committed to non-cancellable lease rentals and other contractual obligations payable under agreements for leases which have not yet commenced at 30 June 2024. Further detail is included in note 11 to the consolidated interim financial statements.
The Group made refurbishment capital expenditure payments totalling €10.8 million during the six months ended 30 June 2024 (3.6% of H1 2024 revenues), compared to payments of €8.8 million in H1 2023 (3.1% of H1 2023 revenues). Completion of refurbishment projects was impacted by post-pandemic disruptions during H1 2023, which limited the level of payments. On an annual basis, the Group allocates approximately 4% of revenue to refurbishment capital expenditure projects.
The Group spent €23.2 million on growth capital expenditure during the first six months of 2024, primarily relating to the construction of Maldron Hotel Shoreditch and costs paid on entering new leases and agreements for leases. At 30 June 2024, the Group has future capital expenditure commitments under its contractual agreements totalling €14.8 million, of which €3.8 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 existing hotels. Additionally, the Group has capex requirements to which it is not yet contractually committed to, estimated to be in excess of €125 million relating to three previously announced development projects located in Edinburgh, Manchester and Dublin (498 rooms). It is expected this will be incurred as the projects are completed over the next three to four years.
During the six-month period ended 30 June 2024, a final dividend for 2023 of 8.0 cents per share was paid on 1 May 2024 at a total cost of €18.0 million (year ended 31 December 2023: €8.9 million). On 3 September 2024, the Board declared an interim dividend of 4.1 cent per share. The payment date for the interim dividend will be 4 October 2024 to shareholders registered on the record date 13 September 2024.
During the period, an Employee Benefit Trust was established to periodically make market purchases of ordinary shares of the Group in order to satisfy future exercises of vested options granted pursuant to the Group’s share option scheme. During the six-month period ended 30 June 2024, 1.4 million shares were repurchased by the Trust for a cash consideration of €6.3 million.
Balance sheet | Robust asset-backing provides security, flexibility and a platform for future growth
The Group maintains a strong balance sheet position at 30 June 2024 with property, plant and equipment of €1.7 billion in excellent locations, cash and undrawn debt facilities of €282.4 million, and Net Debt to EBITDA after rent1 of 1.3x. This financial strength remains a cornerstone of our capital allocation policy as it provides a platform for further growth through strategic optionality for asset acquisition and by enabling access to lower cost of debt and lease funding.
Property, plant and equipment
Property, plant and equipment amounted to €1,720.7 million at 30 June 2024. The increase of €35.9 million since 31 December 2023 is driven by additions of €26.1 million, unrealised revaluation gains on property assets of €11.5 million, a foreign exchange gain on the retranslation of Sterling-denominated assets of €15.5 million and capitalised borrowing and labour costs of €1.6 million, partially offset by a depreciation charge of €18.8 million for the six-month period.
72% 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.
During the period, the Group incurred €14.3 million of development capital expenditure. €10.4 million (£8.8 million) related to the construction of Maldron Hotel Shoreditch, London which opened in August 2024. The Group also incurred development costs relating to planning and design on its site in Edinburgh and on the conversion of seven meeting rooms into bedrooms at one of its Dublin hotels.
The Group allocates approximately 4% of revenue to refurbishment capital expenditure. The Group incurred €11.8 million of refurbishment capital expenditure during the first half of the year which included the refurbishment of 288 bedrooms across the Group along with enhancements to food and beverage infrastructure, health and safety upgrades and energy efficient plant upgrades.
Right-of-use assets and lease liabilities
At 30 June 2024, the Group’s right-of-use assets amounted to €697.7 million and lease liabilities amounted to €719.1 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 29.4 years (31 December 2023: 29.5 years).
Additions during the period arose from the Group entering into a 35-year lease relating to the newly built Maldron Hotel Manchester Cathedral Quarter in May 2024 which resulted in the recognition of a €16.3 million (£13.9 million) lease liability, and a right-of-use asset of €20.3 million (£17.2 million), which includes initial direct costs of €4.0 million (£3.3 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 period. This resulted in an increase in lease liabilities and related right-of-use assets of €1.5 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 11 to the consolidated interim financial statements.
Loans and borrowings
As at 30 June 2024, the Group had loans and borrowings at amortised cost of €266.0 million and undrawn committed debt facilities of €241.5 million. Loans and borrowings increased from 31 December 2023 (€254.4 million) mainly due to net loan drawdowns and FX translation effects on sterling borrowings during the period.
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. A further revolving credit facility of €59.5 million which was included at 30 June 2023, 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 30 June 2024. The Group complied with its covenants as at 30 June 2024, with covenants stipulating that the Net Debt to EBITDA limit is 4.0x (30 June 2024: 1.3x) and the Interest Cover minimum is 4.0x (30 June 2024: 17.3x).
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 are unhedged at 30 June 2024. Sustainability strategy encompassing all aspects of the business
See Supplementary Financial Information which contains definitions and reconciliations of Alternative Performance Measures (‘APM’) and other definitions. 2 CRREM: Carbon Risk Real Estate Monitor, BREEAM: Building Research Establishment Environmental Assessment Method. 3 Adjusting items in H1 2024 include a net impairment charge of €1.5 million on right-of-use assets (H1 2023: nil) and pre-opening costs of €1.3 million (H1 2023: €0.7 million). Further detail on adjusting items is provided in the section titled ‘Adjusting items to EBITDA’. 4 The reference to ‘like for like’ hotels in the performance statistics comparing to H1 2023 for the UK segment excludes Maldron Hotel Finsbury Park, London and Clayton Hotel London Wall which began trading with Dalata in July 2023 and Maldron Hotel Manchester Cathedral Quarter, following its opening in May 2024. ‘Like for like’ performance statistics for the Group also exclude these hotels in addition to Clayton Hotel Amsterdam American which was added in October 2023. 5 Other non-current assets comprise deferred tax assets, investment property and other receivables. Other current assets comprise current derivative assets. 6 Other liabilities comprise deferred tax liabilities, provision for liabilities and current tax liabilities. Principal risks and uncertainties Since we published an assessment of the Group’s principal risks and uncertainties with our 2023 annual results announcement (and the 2023 Annual Report), we have considered our risk environment, emerging risks, and risk profiles. The principal risks and uncertainties currently facing the Group are: External, geopolitical and economic factors – Dalata operates in an open market, where its activities and performance are influenced by uncertainty from broader geopolitical, economic and government policy factors outside the Group’s direct control. Nonetheless, these factors can directly or indirectly impact the Group’s strategy, our 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, with its experienced management team and resilient information systems, is well-equipped to navigate the influence of external factors on our strategy and performance. Health, safety and security - The Group now operates 57 hotels in Ireland, the UK and Continental Europe. Health, safety, and hotel security concerns will always be a key priority for the Board and executive management. 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, with identified risks remediated promptly. External health and safety risk assessments and food safety audits are conducted across our hotel portfolio. Our new hotels are built to high health and safety standards, and all refurbishments include health and safety as a primary consideration. Innovation – We recognise the business imperative to innovate in our business, and innovation is a core objective for senior leadership. A number of initiatives have already been implemented across our hotels, improving productivity, customer service, and better meeting our customers’ needs. Executive management also continues to focus on trends across the hospitality market. The Group performs detailed customer research and reviews market trends with feedback from customers and teams on initiatives taken. We allocate resources to develop and implement business efficiencies and innovation and embrace enhanced use of business systems, new and emerging technologies, and information to support innovation. Developing, recruiting and retaining our people – Our people are a key asset to our business. Our strategy is to develop our management and operational expertise, where possible, from within our existing teams. This expertise can then be deployed throughout our business, particularly at management levels in our new hotels. We also recruit and retain well-trained and motivated people to deliver our desired customer service levels at our hotels. 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. We also implement a broad range 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 attacks targeting company data. 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 predominantly capital-light and long-term leasing model or directly financing a project, enabled by the Group’s financial position. 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 has an agreed development strategy, 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 depends on the retention and growth of our strong culture. We have defined Group values that are embedded in how we behave as a Group and as individuals, as 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. We risk not meeting stakeholder expectations in this regard, particularly concerning target setting, environmental performance, compliance 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 For the half-year ended 30 June 2024
The Directors are responsible for preparing the half-yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 (“Transparency Directive”), and the Transparency Rules of the Central Bank of Ireland.
In preparing the condensed set of consolidated financial statements included within the half-yearly financial report, the Directors are required to:
The Directors are responsible for designing, implementing and maintaining such internal controls as they determine are necessary to enable the preparation of the condensed set of consolidated financial statements that are free from material misstatement whether due to fraud or error.
We confirm that to the best of our knowledge:
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
On behalf of the Board
John Hennessy Dermot Crowley Director Director
Unaudited condensed consolidated interim financial statements
for the six months ended 30 June 2024
Dalata Hotel Group plc (‘the Company’) is a company registered in the Republic of Ireland. The unaudited condensed consolidated financial statements for the six month period ended 30 June 2024 (the ‘Interim Financial Statements’) include the Company and its subsidiaries (together referred to as the ‘Group’). The Interim Financial Statements were authorised for issue by the Directors on 3 September 2024.
These unaudited Interim Financial Statements have been prepared by Dalata Hotel Group plc in accordance with IAS 34 Interim Financial Reporting (‘IAS 34’) as adopted by the European Union (‘EU’). They do not include all of the information required for a complete set of financial statements prepared in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the EU. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group’s financial position and performance since 31 December 2023. They should be read in conjunction with the consolidated financial statements of Dalata Hotel Group plc, which were prepared in accordance with IFRS as adopted by the EU, as at and for the year ended 31 December 2023.
These Interim Financial Statements are presented in Euro, rounded to the nearest thousand, which is the functional currency of the parent company and the presentation currency for the Group’s financial reporting.
The preparation of Interim Financial Statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results could differ materially from these estimates. In preparing these Interim Financial Statements, the critical judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2023.
The Interim Financial Statements do not constitute statutory financial statements. The statutory financial statements for the year ended 31 December 2023, together with the independent auditor’s report thereon, have been filed with the Companies Registration Office and are available on the Company’s website www.dalatahotelgroup.com. The auditor’s report on those financial statements was not qualified and did not contain an emphasis of matter paragraph.
Going concern
The Directors have assessed the Group’s ability to continue in operational existence for the foreseeable future by preparing detailed financial forecasts and carrying out stress testing on projections. Current base and stress tested projections show compliance with all covenants at all future testing dates and significant levels of headroom. The Group remains in a very strong financial position.
Cashflow remains strong with net cash generated from operating activities in the period of €91.6 million (period ended 30 June 2023: €62.0 million). At 30 June 2024, cash and undrawn facilities are €282.4 million (31 December 2023: €283.5 million).
The Group is in full compliance with its covenants at 30 June 2024. 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 30 June 2024, 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 30 June 2024 is 1.3x (31 December 2023: 1.3x) (APM (xv)) and Interest Cover is 17.3x (31 December 2023: 19.5x) (APM (xvi)).
The Directors have considered the above, with all available information and the current liquidity and capital position, in assessing the going concern of the Group.
On the basis of these judgements, the Directors have prepared these Interim 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.
The accounting policies applied in these Interim Financial Statements are consistent with those applied in the consolidated financial statements as at and for the year ended 31 December 2023, apart from the below.
Repurchase and issue of ordinary shares (treasury shares)
When shares recognised as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the treasury shares reserve. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity and the resulting surplus or deficit on the transaction is presented within retained earnings.
Classification of Liabilities as Current or Non-Current
Borrowings are classified as current liabilities unless at the end of the reporting period, the group has a right to defer settlement of the liability for at least 12 months after the reporting period.
The following standards and amendments were effective for the Group for the first time from 1 January 2024:
The above standards and amendments had no material impact on the Interim Financial Statements.
Hotel revenue and operating profit are driven by seasonal factors as the shoulder months of January and February typically experience lower levels of demand when compared to November and December. Additionally, the busiest months of the operating cycle are usually between July and September. The table below analyses revenue, operating profit and profit before tax for the first half and second half of the year ended 31 December 2023.
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 2023 half year report, 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 4% of total segmental revenue). Due to an addition to the Group’s Continental Europe portfolio in the last six months of 2023, the Continental Europe segment is now presented separately below. Clayton Hotel Düsseldorf’s results for the first six months of 2023 have been reflected in the Continental Europe segment below to improve comparability.
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 30 June 2024, the Group owns 28 hotels which it operates (31 December 2023: 28 hotels, 30 June 2023: 27 hotels) and has effective ownership of two further hotels which it operates (31 December 2023: two hotels, 30 June 2023: one hotel). The Group also owns the majority of one further hotel which it operates (31 December 2023: one hotel, 30 June 2023: one hotel).
The Group also leases 20 hotel buildings from property owners (31 December 2023: 19 hotels, 30 June 2023: 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, 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. Revenue is recognised at a point in time when rooms are occupied and food and beverages are sold.
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 period on period or with other similar businesses. Consequently, Adjusted EBITDA represents Group EBITDA before:
The line item ‘central costs’ primarily includes costs of the Group’s central functions including operations support, technology, sales and marketing, human resources, finance, corporate services and business development. Share-based payments expense is presented separately from central costs as this expense relates to employees across the Group. ‘Segmental results – EBITDA’ for Dublin, Regional Ireland, the UK and Continental Europe represents the ‘Adjusted EBITDA’ for each region 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
Other geographical information
Other administrative expenses include costs related to payroll, marketing and general administration. The increase in other administrative expenses for the period ended 30 June 2024, relative to the same period in the prior year, is primarily due to wage rate increases and the impact of two new hotels which opened in the last six months in 2023 and one hotel which opened in the first six months of 2024.
During the period ended 30 June 2023, the Group availed of government grants totalling €0.7 million which were offset against the related costs of €0.7 million in administrative expenses in profit or loss. In 2023, these government grants related to the Temporary Business Energy Support Scheme (TBESS) in Ireland for the first quarter of 2023. No such government grants were availed of during the period ended 30 June 2024.
At 30 June 2024, as a result of the carrying amount of the net assets of the Group being more than its market capitalisation (market capitalisation is calculated by multiplying the share price on that date by the number of shares in issue), the Group tested each cash generating unit (‘CGU’) for impairment as this was deemed to be a potential impairment indicator. Market capitalisation can be influenced by a number of different market factors and uncertainties including wider market sentiment. In addition, share prices reflect a discount due to lack of control rights.
Impairment arises where the carrying value of the CGU (which includes, where relevant, revalued properties and/or right-of-use assets, allocated goodwill, fixtures, fittings and equipment) exceeds its recoverable amount on a value in use (‘VIU’) basis. Each individual hotel is considered to be a CGU for the purposes of impairment testing.
At 30 June 2024, the recoverable amounts of the Group’s CGUs were based on VIU, determined by discounting the estimated future cash flows generated from the continuing use of these hotels. VIU cash flow projections are prepared for each CGU and then compared against the carrying value of the assets, including goodwill, land and buildings, fixtures, fittings and equipment and right-of-use assets, in that CGU.
The VIU estimates were based on the following key assumptions:
At 30 June 2024, the recoverable amount was deemed lower than the carrying amount in one of the Group’s UK CGUs and resulted in an impairment charge of €3.2 million (£2.7 million), relating to a right-of-use asset (note 11) and fixtures, fittings and equipment (note 10), being recognised at 30 June 2024.
At 30 June 2024, the recoverable amount was deemed higher than the carrying amount in one of the Group’s UK CGUs, which had previously incurred impairment charges, and resulted in an impairment reversal of €1.7 million (£1.5 million), relating to a right-of-use asset (note 11) and fixtures, fittings and equipment (note 10), being recognised at 30 June 2024.
At 30 June 2024, the carrying value of the Group’s other CGUs did not exceed their recoverable amount and no impairment was required following assessment.
The Group uses interest rate swaps to convert the interest rate on part of its debt from floating rate to fixed rate (note 16). The cash flow hedge amount reclassified from other comprehensive income is shown separately within finance costs and primarily represents the additional interest received by the Group as a result of the interest rate swaps. As at 30 June 2024, the Group has recognised derivative assets, in relation to these interest rate swaps, of €2.9 million (31 December 2023: €6.5 million, 30 June 2023: €13.0 million). Interest margins on the Group’s borrowings are set with reference to the Net Debt to EBITDA covenant levels and ratchet up or down accordingly.
Other finance costs include commitment fees and other banking and professional fees. Net foreign exchange losses on financing activities relates principally to cash and cash equivalents and loans which did not form part of the net investment hedge (note 16).
Interest on loans and borrowings amounting to €1.6 million (period ended 30 June 2023: €0.8 million) was capitalised to assets under construction on the basis that this cost was directly attributable to the construction of qualifying assets (note 10). The capitalisation rates applied by the Group, which reflected the weighted average interest rates on Sterling denominated borrowings for the period, including the impact of hedges, were 3.3% (30 June 2023: 2.8%). 8 Share-based payments expense
The total share-based payments expense for the Group’s employee share schemes charged to profit or loss during the period was €1.6 million (six months ended 30 June 2023: €3.6 million), analysed as follows:
Details of the schemes operated by the Group are set out hereafter:
Long Term Incentive Plans
Awards granted During the period ended 30 June 2024, the Board approved the conditional grant of 1,634,668 ordinary shares ‘the Award’ pursuant to the terms and conditions of the Group’s 2017 Long Term Incentive Plan (‘the 2017 LTIP’). The Award was granted to senior employees across the Group (127 in total). Vesting of the Award is based on two independently assessed performance targets, 50% based on total shareholder return ‘TSR’ and 50% based on Free Cashflow Per Share ‘FCPS’. The performance period of this Award is 1 January 2024 to 31 December 2026.
Threshold performance for the TSR condition is a performance measure against a bespoke comparator group of 19 listed peer companies in the travel and leisure sector, with threshold 25% vesting if the Group’s TSR over the performance period is ranked at the median compared to the TSR of the comparator group. If the Group’s TSR performance is at or above the upper quartile compared to the comparator group, the remaining 75% of that portion of the Award will vest, with pro-rota vesting on a straight-line basis for performance in between these thresholds.
Threshold performance (25% vesting) for the FCPS condition, a non-market-based performance condition, is based on the achievement of FCPS of €0.631, as will be disclosed in the Group’s 2026 audited consolidated financial statements, with 100% vesting for FCPS of €0.771 or greater. The FCPS based portion of the Award will vest on a straight-line basis for performance between these thresholds. FCPS targets may be amended in restricted circumstances if an event occurs which causes the Remuneration Committee to determine an amended or substituted performance condition would be more appropriate and not materially more or less difficult to satisfy. Participants are also entitled to receive a dividend equivalent amount in respect of their awards.
Movements in the number of share awards are as follows:
Awards vested During the period ended 30 June 2024, participants of the March 2021 scheme exercised 1,092,261 options on foot of the vesting of awards granted under the terms of the 2017 LTIP.
The weighted average share price at the date of exercise for these awards was €4.32.
Measurement of fair values
The fair value, at the grant date, of the TSR-based conditional share awards was measured using a Monte Carlo simulation model. Non-market-based performance conditions attached to the awards were not taken into account in measuring fair value at the grant date. The valuation and key assumptions used in the measurement of the fair values at the grant date were as follows:
Dividend equivalents accrue on awards that vest up to the time of vesting under the LTIP schemes, and therefore the dividend yield has been set to zero to reflect this. Such dividend equivalents will be released to participants in the form of additional shares on vesting subject to the satisfaction of performance criteria. In the absence of available market-implied and observable volatility, the expected volatility has been estimated based on the historic share price over a three-year period.
Awards granted include FCPS-related performance conditions, a non-market-based performance condition, that do not impact the fair value of the award at the grant date, which equals the share price less exercise price. Instead, an estimate is made by the Group as to the number of shares which are expected to vest based on satisfaction of the FCPS-related performance condition, where applicable, and this, together with the fair value of the award at grant date, determines the accounting charge to be spread over the vesting period. The estimate of the number of shares which are expected to vest over the vesting period of the award is reviewed in each reporting period and the accounting charge is adjusted accordingly.
Share Save schemes
During the period ended 30 June 2024, 2,000 ordinary shares were exercised on maturity of the share options granted as part of the Share Save scheme in 2019. There were also 1,103,023 options exercised on maturity of the share options granted as part of the Share Save scheme in 2020. The weighted average share price at the date of exercise for options exercised during the period ended 30 June 2024 was €2.26.
During the period ended 30 June 2024, there were no new schemes granted (no new schemes granted during six months ended 30 June 2023). Each scheme is for three years and employees may choose to purchase shares over the six-month period following the end of the three-year period at the fixed discounted price set at the start of the three-year period. The share price for the schemes has been set at a 25% discount for Republic of Ireland based employees and 20% for UK based employees in line with the maximum amount permitted under tax legislation in both jurisdictions.
Movements in the number of share options and the related weighted average exercise price (‘WAEP’) are as follows:
The weighted average remaining contractual life for the share options outstanding at 30 June 2024 is 1.10 years (31 December 2023: 0.80 years)
The tax charge of €6.1 million for the period ended 30 June 2024 (six months ended 30 June 2023: €8.4 million) primarily relates to current tax in respect of profits earned in Ireland during the period.
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Shares Magazine
Source - DGAP Regulatory