Ambitious Teams Delivering Growth at Dalata Hotel Group

Strong recovery with trade now exceeding 2019 levels

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 2022.

OPERATING PERFORMANCE AND CASH GENERATION SURPASSING 2019 LEVELS

• Surpassed business levels achieved in H1 2019 – Revenue of €220.2 million (+9%) and Adjusted EBITDA^[i] of €83.5 million (+14%)
• Group RevPAR^[i] up 5% on H1 2019 ‘LFL’
• Group RevPAR^[i] up 18% on May/June 2019 ‘LFL’
• €46.7 million profit after tax in H1 2022 (H1 2019: €32.7 million)
• Free Cashflow^[i] of €56.6 million in H1 2022 (H1 2019: €45.2 million)

DELIVERING GROWTH – ADDING 1,900+ ROOMS IN 2022 AND AT LEAST 1,125 ROOMS OPENING 2023 ONWARDS

• 1,600 rooms added in year to date (five hotels added H1 2021, further hotel opened in August)
• Entered lease for first hotel in continental Europe
• Opened Maldron Hotel Merrion Road, Dublin in August and our 50^th hotel, Clayton Hotel Glasgow City will follow in October
• Hotels currently under construction in Brighton, Liverpool, London and Manchester

WELL POSITIONED FOR CHALLENGES AND OPPORTUNITIES

Strong operating and development experience:

• Experienced hotel operators empowered by decentralised model running well-invested, modern portfolio
• Engaged, talented people – learning and development, career advancement opportunities, high scores in regular engagement surveys
• Track record of successfully launching new hotels – 2021/2022 new build hotels trading ahead of expectations, seamless integration of Hotel Nikko Düsseldorf, together contributed Adjusted EBITDA^[i] of €4.8 million in H1 2022

Robust financial position provides opportunity to grow:

• Asset-backed balance sheet – €1.3 billion in property, plant and equipment – H1 2022 valuation uplifts of €100.3 million
• Low gearing – Net Debt to EBITDA after rent^[i] of 1.9x at 30 June 2022 (2.8x at 31 December 2019) and Net Debt to Value^[i] of 17% (31 December 2021: 24%)
• Cash and undrawn committed debt facilities of €365.2 million (31 December 2021: €298.5 million)

CREATING LONG-TERM VALUE WITH GROWTH STRATEGY

• Owned assets of €1.3 billion which includes costs incurred in relation to two development assets at 30 June 2022 (Maldron Hotel Merrion Road, Dublin and Maldron Hotel Shoreditch, London)
• Portfolio of leased assets which historically contributed strong cash flow for reinvestment
• Six newly leased hotels and current leased pipeline of five hotels, all in prime locations, expected to contribute annual EBITDA (after rent)^[i] of approximately €25 million when fully operational
• Strong track record of identifying and securing opportunities
• Increasing footprint in Regional UK and London remains our primary focus but also looking at large European cities for growth opportunities

CONTINUED PROGRESS ON OUR SUSTAINABILITY JOURNEY

• Solid progress made on our near-term environmental targets:
• 100% of waste now diverted from landfill
• On track to reduce energy related emissions by 20% per room let by 2026
• Achieved a reduction in energy consumption per room sold of 17% in Q2 2022 versus Q2 2019
• We continue to progress along our journey towards establishing medium-term emissions reduction targets in line with the Science Based Targets initiative (SBTi) criteria
• This is a complex objective for a vertically integrated hotel business concerned with both operational and embedded carbon emissions, considering the role of construction activity in our growth model
• Established an understanding of decarbonisation pathways to achieve reductions to our Scope 1 and 2 carbon emissions aligned with SBTi
• We are assessing the investment models required for the Scope 1 emission reduction within a growing portfolio
• Tools such as CRREM (Carbon Risk Real Estate Monitor) will form a key part of our modelling
• Assessing the feasibility of addressing SBTi Scope 3 emissions targets through the supplier engagement option – expect to reach a conclusion by H2 2023
• Continuing to develop systems and processes that enable us to gather reliable data and to support better reporting, measurement and target setting, led by our finance teams to ensure accuracy and rigour

OUTLOOK

Trade continues to perform strongly with ‘like for like’ Group ARR^[i] of €151 and Group occupancy^[i] of 89% for July/August. ‘Like for like’ Group RevPAR^[i] is expected to be €134 in July/August, 25% ahead of 2019 levels. Dalata’s ‘like for like’ RevPAR^[i] for July/August is expected to be 21% ahead of 2019 levels in Dublin, 36% in Regional Ireland and 15% in the UK.

Bookings are driven by continued strong leisure demand and an active events calendar. As is normal for this time of year, corporate travel decreases during the summer months but we expect this to increase from September. We are cautiously optimistic on trade for the remainder of the year.

Supply in Ireland remains reduced as a result of rooms being utilised for government related business including the provision of emergency accommodation to refugees fleeing the war in Ukraine. At present, it is not known when these rooms will return to the market. Dalata has committed up to 5% of its rooms in the Republic of Ireland to be used as emergency accommodation until the end of 2022.

The trading environment remains challenging with global inflationary cost pressures around food supply, payroll and particularly energy. Although we have not seen any impact on demand to date, inflationary costs may impact consumer discretionary spending in the future. In the face of these challenges, Dalata continues to focus on its sales and dynamic pricing strategies to optimise revenue and apply its normal cost disciplines including driving new initiatives to reduce costs. The Group continues to see significant benefit from its previous investment in systems to manage labour costs, procurement and food and beverage sales and margins.

Post period end, the Group entered into forward agreements for gas and electricity. The Group has either purchased or locked in prices for approximately 75% of its consumption for electricity and 65% of its consumption for gas for the second half of 2022. Based on its expected consumption and price estimates as of mid-August, the Group expects to use 27 million kWh of electricity at c. 50 cents per kWh and 37 million kWh of gas at c. 20 cents per kWh in H2 2022, equating to an estimated increase in gas and electricity costs from €13 million for the first six-months of 2022 to €21 million for the second six-months of 2022. These prices reflect the commodity price and regulator/pass through charges which move moderately once a year.

We continue to progress our committed pipeline of 1,125 rooms that are expected to open between 2023 and 2025. We are actively looking at new opportunities across all our regions, including continental Europe.

Dermot Crowley, Dalata Hotel Group CEO, commented: “The first half of 2022 was a period of strong recovery after the lifting of Covid related restrictions at the end of January. The year to date has also been very busy on the development front with the addition of six hotels (1,600 rooms) across four cities. This includes our first exciting step into continental Europe as we entered the lease for Hotel Nikko Düsseldorf. Despite a challenging start to the year, we delivered revenues of €220.2 million for the period, exceeding the levels achieved in the first half of 2019.

Over the last two years, financial stability has been a key focus for our team. I am especially happy to report that our Balance Sheet has significantly strengthened since the start of the year which ensures we have the capability to exploit opportunities to expand the portfolio further.

As a company, we have taken a responsible approach to pricing during the strong market recovery. Our average room rate in Dublin during the four month period from May to August was strong but reasonable at €166 per night. We value greatly the long term relationships such as those we enjoy with our coach tour operators, corporate customers, sporting organisations, event organisers and airlines.

ESG remains a key business focus for our central office team and across each of our hotels. How we operate sustainably and the impact we have on the environment is fundamental to decisions made every day across the Group. I am delighted to report that we reduced our energy consumption per room sold by 17% in Q2 compared with 2019. This is driven by our recently opened Dalata built hotels which are more energy efficient along with our good operational practices and initiatives and is tangible evidence of our capability to meet the challenge of responding to climate-change issues.

We continue to explore innovative and new ways in which we operate our hotels for the benefit of all stakeholders and are conscious of the need to mitigate the impact of inflation on our cost base. While technology will play a crucial role in managing costs going forward, the interest rate on our term debt to October 2024 is fixed and 60% of our rent is fixed until 2026, which will support us in the period ahead.

I am personally delighted with the progress we have made since the start of 2022. The achievements are the result of the expertise and commitment of the teams that operate throughout Dalata. I want to personally thank the entire team of people within Dalata for delivering six additional hotels and an excellent trading recovery. Despite the macroeconomic challenges, we look forward with optimism and enthusiasm to the months and years ahead.”

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