Robust Performance Delivering Strong Cash Flow
Dalata Hotel Group plc (“Dalata” or “the Group”), the largest hotel operator in Ireland with a growing presence in the United Kingdom, announces its results for the year ended 31 December 2019.
STRONG OPERATING PERFORMANCE
· Strong revenue growth of 9.3% to €429.2 million
· Adjusted EBITDA pre IFRS 161 increased by 12.8% to €134.8 million
· Basic EPS of 42.4 cents (Adjusted basic EPS1 pre IFRS 16 up 7.5% to 46.0 cents)
· Resilient performance in maturing Irish market backdrop
· Very strong performance in the UK
STRONG BALANCE SHEET – LOWLY GEARED AND ASSET BACKED
· €1.5 billion of property, plant and equipment located in prime locations
· Further upward revaluation of properties of €122.3 million in 2019
· Net Debt to Adjusted EBITDA pre IFRS 161 of 2.8x at year end (post IFRS 16: 4.5x)
· Gearing remains at a very comfortable level with Debt and Lease Service Cover1 of 3.2x
DRIVING SHAREHOLDER VALUE THROUGH OPERATIONS AND DEVELOPMENT
· Generated Free Cash Flow1 over €100 million in 2019 funding progressive dividend policy and further portfolio growth
· 1,692 rooms added to portfolio over the last two years continue to perform very well and have been a significant driver of growth for 2019
· Exciting pipeline of circa 2,871 rooms in excellent locations on track to open between 2021 - 2023
· UK business expected to have a similar number of rooms to Dublin by 2022
· The Board has proposed a final dividend of 7.25 cents per share
STRATEGIC AND OPERATING HIGHLIGHTS
· Revenue increase of €36.6 million to €429.2 million driven by new additions to the portfolio. The 1,692 rooms which were added in the last two years in Dublin, Cork, Galway, Belfast, Newcastle, Cambridge and London are performing very well.
· Strong cost control ensured Dalata maintained earnings despite tougher market conditions in Ireland. Dalata outperformed the market RevPAR change in Dublin.
· Very strong RevPAR performance in the UK. Our Regional UK hotels significantly outperformed the market in all cities2 in which we operate – Birmingham, Leeds, Manchester, Cardiff and Belfast. Our London hotels were behind the city as a whole but performed well within their own local markets.
· Group hotel EBITDAR margin1 remained at 42.6% despite a 1.2% fall in Group ‘like for like’ RevPAR and the impact of six new hotels opened during 2018 and early 2019, which have not yet reached normal operating levels.
· The results for 2019 reflect the adoption of IFRS 16 Leases which has brought an accounting estimate of lease liabilities and corresponding right-of-use (“RoU”) assets on to the balance sheet. This has reduced reported profit after tax by €7.5 million and basic EPS by 4.0 cents. Net debt has increased by €362.1 million due to the recognition of an accounting estimate of lease liabilities resulting in Net Debt to Adjusted EBITDA1 increasing to 4.5x at year end (pre IFRS 16: 2.8x).
· 367 new rooms added to portfolio in London (212) and Cambridge (155) in 2019. Another 941 rooms added to the pipeline in Dublin, Liverpool, London and Birmingham.
· €15.2 million invested in capital refurbishment across all areas of the Group’s hotels with a further 699 rooms refurbished in 2019. Over 60% of room stock either built or refurbished in last 5 years.
Trading across our three regions is in line with our expectations for the first quarter of 2020. We note the combination of positive strong economic projections for Ireland and the projected increase in rooms supply for Dublin. Our modern, well located, well invested portfolio of Dublin hotels is strongly positioned to compete with new supply.
We are building a strong track record of operational outperformance in our UK business, reinforced by our decentralised model. We expect our existing pipeline to open within the timelines advised and our UK business is expected to have a similar number of rooms as our Dublin business by the end of 2022. We are very encouraged by the quality of new opportunities that we are pursuing in the UK and expect to announce further exciting new projects during the year.
We continue to monitor closely the evolving and unfortunate COVID-19 outbreak but to date we have seen no material impact on our business.
Pat McCann, Dalata Group CEO, commented:“I am pleased to report that 2019 has been another year of growth and development at Dalata. The business has performed strongly with revenue increasing by 9.3% to €429.2 million in the year. Excluding the impact of IFRS 16 (the new accounting standard on leasing), Adjusted EBITDA1 increased 12.8% to €134.8 million and Adjusted basic EPS1 increased by 7.5% to 46.0 cents.
I am delighted that we generated over €100 million in Free Cash Flow1 for the first time in the history of the Group. Our continued strong cash generation and our strong balance sheet allows us to fund acquisitions and development in a sustainable and disciplined manner. It also allows us to fund a progressive dividend policy.
The Irish hospitality market experienced tougher market conditions in 2019, primarily due to the impact of the 4.5% VAT increase and the additional supply of approximately 1,500 bedrooms in Dublin. Our Irish hotels were not immune to these events but we did outperform the market in most cities. On a ‘like for like’ basis, RevPAR at our Dublin portfolio declined by 3.1%, outperforming the market decline of 3.6%. ‘Like for like’ RevPAR at our Regional Ireland portfolio declined by 1.0%. I am very pleased with how we responded to the softer market conditions and increased our EBITDAR margins in both Dublin and Regional Ireland despite a fall in ‘like for like’ RevPAR through effective cost control and the growing impact of our investment in technology.
I am particularly happy with the performance of our UK hotels. RevPAR at all our existing hotels in Regional UK outperformed their local market and while our London hotels were behind the city as a whole, they performed well within their own local markets. We continue to convert revenue strongly with EBITDAR margin of 39.0%.
Our new hotels continue to make strong progress. The six hotels which opened in 2018 and early 2019 contributed €14.9 million in additional EBITDAR in 2019.
RevPAR performance is an important aspect of our business but it is not the only driver of strong performance. In 2017 and 2018 we invested in technology to help our people work more efficiently. 2019 was the year we saw the significant benefits of this investment through increases in food and beverage margins as a result of our investment in a new procurement system, payroll savings through the continued use of our human resources management system, Alkimii, and lower claims costs. In recent years we have successfully reduced claims through the use of technology and training.
We continue to grow our portfolio of hotels. We completed the acquisition of the Clayton Hotel City of London in early January 2019 and successfully opened it later that month. The hotel has traded strongly in its first year of operation. In August, we secured a prime site in Shoreditch, London and we expect to start construction later this year. Our success in securing these two projects has been a catalyst for us in being considered as an operator for other projects in London.
In November, we entered into a lease to take over the operation of The Tamburlaine Hotel in Cambridge, to be rebranded shortly to Clayton Hotel Cambridge. This hotel, which opened in 2017, is superbly located and a fantastic fit for our Clayton brand. We also announced that we have signed three new agreements for lease for The Samuel in Dublin, Maldron Hotel Liverpool and our most recent announcement, Maldron Hotel Croke Park in Dublin.
We remain disciplined in the way we grow our portfolio. Our Debt and Lease Service Cover1, which measures our ability to meet our interest and rent commitments, remained at a very comfortable 3.2x. Our strong balance sheet continues to grow with hotel assets of €1.5 billion at 31 December 2019. This makes us an attractive partner for fixed income investors allowing us to enter into agreements to lease superbly located hotels in our target cities at attractive yields. Dalata has an excellent reputation amongst property developers and fixed income investors and I am very excited about the opportunities we are currently looking at.
We also extract good value from our assets with Normalised Return on Invested Capital1 of 12.1% at 31 December 2019. In addition to this, the Group also adds value through the acquisition and development of hotels. In 2019, the value of our property assets increased by a further €122.3 million. The total uplift in value to our property assets since 2014 is now €397 million highlighting our excellent ability to acquire and develop strategic assets at good prices and enhance their value further after acquisition/opening.
As a hospitality company people are always to the forefront of our mind. We offer a UK and Ireland Share Save Scheme to all employees to enable them to participate in the long-term profitability of the Group. We carry out engagement surveys of all our employees twice a year and we put a strong focus on training and development to support career progression with 367 employees enrolled in development courses during 2019. As a result of our focus on talent development, we will be in a position to appoint from within when filling the teams that will manage our 11 new hotels as they open over the next few years.
We continue to listen to our customers and received approximately 160,000 reviews through the various feedback channels. Our customer satisfaction ratings grew again in 2019. We continue to focus on the areas in which our customers say we can improve.
We continue to invest in our brands. We are in the midst of a significant piece of consumer research into our brands. We are encouraged by the growing number of members in our ‘Click on Clayton’ and ‘Make it Maldron’ user groups and the resulting increase in those booking directly on our websites.
ESG (Environmental, Social and Governance) is a key focus for the Board and management. The creation of an ESG sub-committee to the Board is a clear demonstration of that commitment. We received an AA rating from MSCI and B- rating from CDP. We see these ratings as a starting point and we are very focused on the areas of governance, our interaction with all stakeholders and our impact on the environment.
We are mindful that Dalata is exposed to global headwinds that can impact the hospitality sector. We expect approximately another 1,900 hotel rooms will open in Dublin during 2020 and the digestion of this new supply will have an impact on the market. However, I remain encouraged by the strong forecasts for the Irish economy, further job creation by multinational companies and the continued demand for bedrooms. We showed our resilience in 2019 in the face of the impact of a 4.5% increase in the VAT rate in Ireland. We have an appropriate level of gearing within the context of a very strong asset backed balance sheet. Our decentralised model also ensures we can respond quickly to events with local knowledge.
We will continue to grow our portfolio, develop our people, exceed our customers’ expectations and maximise the return from our assets. We are very focused and ready for the challenges and opportunities that 2020 presents”.