Dalata Hotel Group PLC: H1 2024 Results

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

• Revenue of €302.3 million, up 6%.
• Adjusted EBITDA1 of €107.6 million, up 4%.
• ‘Like for like’ RevPAR1 of €108.57, down 1% versus H1 2023.
• ‘Like for like’ Hotel EBITDAR margin1 down 120 bps to 39.4% (H1 2023: 40.6%) but excellent progress made reducing the impact of payroll inflation through innovation and efficiency projects, in addition to reduced energy pricing.
• Efficiency initiatives contributed approximately 60 bps saving to Hotel EBITDAR margin1 for the period.
• Profit after tax of €35.8 million, declined by €6.2 million (15%) 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.
• Free Cashflow1 generation remains significant; €48.1 million (21.5c) for the first six months of 2024 after refurbishment capex and finance costs.
• Maintaining strong employee engagement scores (H1 2024: 8.9, FY 2023: 8.9) and customer satisfaction scores (H1 2024: 85%, FY 2023: 84%).

Announcing today:

• The Board has declared an interim dividend of 4.1 cents per share, representing 2.5% growth on the 2023 interim dividend of 4.0 cents per share.
• Pleased to announce a €30 million share buy-back.

Delivering ambitious growth strategy – estimate further growth ambition of 6,500+ rooms over the medium-term

• UK footprint now exceeds 5,000 rooms (+20% since 31 December 2023) with four new UK Maldron hotels opened this summer:
  • Three leasehold hotels in Manchester (May, 188 rooms), Liverpool (July, 268 rooms) and Brighton (July, 225 rooms). Each hotel operates under a 35-year operating lease and are expected to achieve target Rent Cover1 of 1.85x by third year of trading;
  • Maldron Hotel Shoreditch (August, 157 rooms), a Dalata-developed freehold hotel in London. Total development spend of c. £73 million.
• Four projects in progress, primarily in the UK, representing an additional 700 rooms.
• Capex requirements for three previously announced development projects in Edinburgh, Manchester and Dublin (503 rooms) estimated to be in excess of €125 million over the next three to four years.
• Considerable financial firepower to fund plans for further expansion in the UK, large European cities as well as maintaining our market share in the larger Irish cities.
• Some signs the leasing market is starting to re-open.

Balanced capital allocation strategy focused on driving long-term returns with high quality portfolio

• Maintaining a strong asset base to drive performance and growth:
  • €1.7 billion Hotel assets1 at 30 June 2024, 72% of value is located in Dublin and London;
  • Well-invested portfolio with €11.8 million refurbishment expenditure in H1 2024, including 288 bedroom refurbishments;
  • High quality long-term leases - weighted average lease term of 29.4 years remaining with rent payments largely fixed until 2026.
• Disciplined investment strategy focused on acquisitions, development and leases that meet our return criteria.
• Continue to pay and grow dividend through a progressive policy.
• Net Debt to EBITDA after rent1 of 1.3x.
• Normalised Return on Invested Capital1 of 12.6% for the 12 months ended 30 June 2024 (year ended 31 December 2023: 13.8%).

€30 million share buy-back

• Disciplined growth, capital efficiency and financial strength remain the cornerstones of our capital allocation strategy.
• Announcing today a share buy-back of €30 million.
• The Board considers the launch of a share buy-back programme as appropriate in light of the Group’s cash generation and strong balance sheet.
• The Group continues to see exciting opportunities to deploy capital organically and via acquisitions. The Group has substantial headroom under its existing facilities even after taking into consideration the proposed share buy-back and the payment of dividends in line with its dividend policy, to fund its organic growth and acquisition strategy.

Executive director appointment and management update

• Dalata is pleased to announce the appointment of Corporate Development Director Shane Casserly as Deputy Chief Executive with immediate effect.
• Dalata is also pleased to announce that Chief Operating Officer Des McCann will be appointed to the Board with effect from 1st January 2025.
• Mr Casserly joined Dalata in March 2014 as Head of Strategy and Development and was appointed to the Board as Corporate Development Director in January 2020.
• Mr McCann joined the Group in 2011, and held General Manager positions at several hotels before he was appointed Group General Manager of Clayton Hotels in Ireland in November 2018. In January 2022, he was appointed Chief Operating Officer.

Continue to progress sustainability strategy

• Achieved 29% reduction in Scope 1 & 2 carbon emissions per room sold achieved in H1 2024 versus H1 2019 compared to a target of 20% reduction on 2019 full year levels by 2026 (27% reduction achieved in 2023).
• Maldron Hotel Shoreditch, London expected to receive BREEAM2 “excellent” rating.

Optimising brand proposition as we scale

• Launched major repositioning of our core brands in H1 2024 to more clearly define the customer proposition and positioning of our brands in addition to building awareness as we move into new markets.
• Introduced a new customer experience training programme and courses through the Dalata Academy to embed the new branding across our portfolio and ensure our people can confidently continue to deliver great guest experiences as they bring the Heart of Hospitality to life.
• Positive results to date, with 6% increase in ‘LFL’1 direct room bookings in H1 2024 vs H1 2023, supported also by the consolidation of hotel websites, digital marketing activities and management of social media activities.

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.

• For conference call details, please register here
• The webcast will be available here

Contacts