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Dalata Hotel Group – April 2017 ISE: DHG LSE: DAL
Dalata Hotel Group – April 2017 ISE: DHG LSE: DAL
Disclaimer
The presentation contains forward looking statements. These statements have been made by the Directors ingood faith based on the information available to them up to the time of their approval of this presentation.
Due to inherent uncertainties, including both economic and business risk factors underlying such forwardlooking information, actual results may differ materially from those expressed or implied by these forwardlooking statements. The Directors undertake no obligation to update any forward looking statementscontained in this presentation, whether as a result of new information, future events or otherwise.
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Contents
Overview
2016 Financial Performance
Business Review
Growth Strategy
Appendices
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Key Messages
Very strong operational performance in 2016 Outperformed competition in terms of RevPAR growth Converted additional sales very strongly to the bottom line
Strong performance is delivered by the Dalata business model Decentralised approach Importance of developing our own people Targeted refurbishment programme
Significant pipeline of over 1,200 rooms on target to open in 2018
Very exciting growth opportunity in the UK supported by a strong balance sheet
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Dalata | 3 Core Business Segments
Dublin14 Hotels 3,699 Rooms2016 RevPar: € 91.83(+20%)
52%Group Revenue
56%Segment EBITDA
48%EBITDAR Margin
Regional Ireland12 Hotels 1,637 Rooms2016 RevPar: € 63.68(+12%)
24%Group Revenue
17%Segment EBITDA
26%EBITDAR Margin
UK 8 Hotels 1,768 Rooms2016 RevPar: £ 59.70(+4%)
23%Group Revenue
24%Segment EBITDA
39%EBITDAR Margin
Management Fees 1%Group Revenue
3%Segment EBITDA
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2016 Financial Performance ISE: DHG LSE: DAL
Dalata | Driving Sustained Strong Performance in 2016
60
70
80
90
100
2015 2016
RevPAR Adjusted EBITDA Adjusted Diluted EPS€m €
40
50
60
70
80
90
100
110
120
2015 2016
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
EPS2015 2016
+15% +36% +7%
Revenue€m
200
220
240
260
280
300
320
340
2015 2016
+29%
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Dalata | Adjusted EBITDA Bridge
62.6
11.5 2.53.8
11.8 2.61.3 2.3 0.9 85.1
0
10
20
30
40
50
60
70
80
90
100
€m
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Strong conversion of additional revenue on a ‘like for like’ basis to EBITDAR across all three regions:Dublin 78.2%Regional Ireland 73.3%UK 73.8%
Overall Segment EBITDAR % increases from 39.5% to 41.4% as a result
Dalata | RevPAR Outperformance in 2016
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19.9%
11.2%
19.1%
13.3%
5.8%
8.7% 9.1%
-3.1%
16.1%
10.7%
16.4%
13.3%
3.7%
5.7%
-1.1% -0.9%
Dublin Galway Limerick Cork Leeds Manchester Cardiff London
Dalata MarketStrong performance versus market in Dublin, Galway, Limerick and Regional UK citiesIn line with market in Cork because of impact of significant refurbishment works at Clayton Hotel SilverSpringsLondon negatively impacted by refurbishment in first half of year at Clayton Hotel Chiswick
Dalata | Strong Balance Sheet providing covenant for growth
Increase in tangible assets reflects:─ €133.2m in acquisitions during the year─ €66.6m net revaluation gain─ €28.5m capex on existing hotels and new developments─ Counterbalanced by €15.5m depreciation and €33.3m
translation adjustment due to fall in sterling
Goodwill and intangibles up by €7.5m followingacquisition of the Gibson Hotel leasehold (€20.5m) offsetby goodwill impairment (€10.3m) following revaluationuplifts and translation adjustments of €2.7m
£174.4m (€203.6m) of borrowings in sterling as a naturalhedge against value of sterling assets and sterlingdenominated earnings. Undrawn facilities of €52.2m atyear end
Increase in Net Debt to Adjusted EBITDA to 2.40x from1.63x due to development and acquisition activity. Willincrease until mid-2018 when development pipeline iscompleted. Target to remain at 3.5x or below
Objective is to maintain a strong balance sheet withappropriate level of gearing, leading to a strong covenantfor potential landlords/investors
€M 31 Dec 2016
31 Dec2015
Non-current assets
Tangible fixed assets 825.7 646.1
Goodwill and intangibles
54.3 46.8
Other 6.6 6.2
Current assets
Trade receivables, inventory and other
17.7 13.1
Cash 81.1 149.1
Total assets 985.4 861.3
Equity 620.4 537.3
Bank loans 280.4 266.1
Trade and other payables 53.1 41.2
Non current liabilities 31.5 16.7
Total equity and liabilities 985.4 861.3
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Overview of Hotel Markets ISE: DHG LSE: DAL
Dalata | Market Review – Dublin
180
1,500
2,000
0
500
1000
1500
2000
2500
2017 2018 2019
Savills forecast net additional 3,680 rooms by 2019
Dublin 2015Actual
2016 Actual
2017F’cast
2018F’cast
Occupancy 82.1% 82.5% 83.0% 83.8%
ARR 111.96 129.27 138.1 147.1
RevPAR 91.88 106.63 114.70 123.2
RevPAR % Variance 22.9% 16.1% 7.6% 7.4%
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Total market size of circa 19,000 rooms
Significant number of rooms expected to open towards the end of 2018
New rooms predicted for 2019 subject to doubt due to two primary reasons – planning and funding
Demand remains strong due to continued economic growth and increased visitor numbers
6.5% RevPAR growth in Q1 2017
Sources: 2015 & 2016 Actuals per STR Global; 2017 & 2018 PwC Econometric Forecasts
Dalata | Market Review – Regional Ireland and UK
RevPar Growth 2015 2016 Q1 2017
Cork 9.6% 13.3% 8.4%
Galway 13.3% 10.7% 3.7%
Limerick 23.4% 16.4% 11.6%
Continuing strong demand from FTIs, domestic corporate and domestic leisure customersNo increases in supply and very little supply pipeline Strong start to 2017 for all three cities – Galway impacted by timing of Easter
Source: STR Global
Source: Trending.ie
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RevPar Growth 2015 2016 Q1 2017
London 1.2% -0.9% 11.3%
Manchester 7.5% 5.7% 2.1%
Cardiff 14.2% -1.1% 4.2%
Leeds 8.1% 3.7% 1.8%
Belfast 11.9% 9.0% 24.5%
London had very difficult first half 2016 due tocombination of impact of European terrorist attacks andincreased supply. City ended 2016 stronger and alsovery strong start to 2017Belfast had very strong second half, helped by re-opening of Waterfront Conference Centre. That hascarried into Q1 2017Cardiff impacted by having Rugby World Cup in 2015Manchester and Leeds continue to perform strongly
Business Review
Building a Leading Hotel Owner/ Operator
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Leading hotel owner and operator in Ireland & UK with 34 leased/owned hotels
24 owned, 10 leased and 7 managed hotels under two core brands
Proven, experienced management team with a strong decentralised structure
New platform with best-in-class operating systems and processes
Strong balance sheet covenant established for next phase of growth
Number Owned & Leased Rooms and Hotels
12
15
27
34
0
5
10
15
20
25
30
35
40
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2013 2014 2015 2016
Room numbers Number of hotels
Dalata | “The Difference with Dalata”
Our decentralised operational approach
Dalata’s decentralised structure is core to our management philosophyHotel General Managers are critical players – we continually develop themA strong multi-functional team at the centre setting direction, seeking growth opportunities,supporting the hotels, and reporting to our stakeholdersWe grow our own – training and development a major focus as there is a need to have a strong pipelineof key people coming throughHaving people we know taking up key roles de-risks our business
We focus on what we are good at
Operating 3 star and 4 star modern well-maintained hotels in cities with strong mix of corporate andleisure demandExecuting transactions to grow our owned and leased portfolioIdentifying strong locations and developing new hotels on themDecentralised revenue management -our revenue managers are informed by systems but always makethe decisions themselvesInvesting in systems to support our approach to cost control
Owner/Operator ModelControl of our brand standardsSecurity of tenure allows us to build a central team to effectively support and scale our decentralisedstructure
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Difference with Dalata at Clayton Dublin Airport
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KPIs 2014 2016
Occupancy 82.7% 87.7%
Average Room Rate (€) 69.71 97.52
RevPAR (€) 57.67 85.51
Total Revenue 16,524 22,636
EBITDAR 6,829 11,270
EBITDAR % 41.3% 49.8%
Currently 469 rooms
Installed Dalata General Manager who in turn built up a new team
Refurbishment of 160 rooms
Rebranded to Clayton, reclassified to 4 star
Introduced Dalata revenue management approach
Increased level of ‘owned’ business from 14% to 32% in 3 yearsRenegotiated price levels on unprofitable ‘Tour Group’ business.Brought an intensity to maximizing revenue every day
Introduction of Alkimii Team system has helped control payroll cost – payroll cost % down from 26.3% in 2014 to 22.4% in 2016
Revenue has increased by 37% in 2 years
EBITDAR up 65% in same period
Customer satisfaction ratings continue to improve
Construction commences in May on a 140 bedroom extension at cost of €15m which is projected to deliver additional €2m in EBITDAR
Drive Portfolio Growth | Over 1,200 new rooms by end 2018
Dublin2 New Hotels3 Extensions543 rooms
Regional Ireland1 New Hotel1 Extension197 Rooms
UK 1 New Hotel1 New leased Hotel501 Rooms
Property New Extension Rooms Planning Construction Completion
Lodged Granted StartedClayton Hotel Charlemont x 180 x x Q3 2018Maldron Hotel Kevin Street x 138 x x Mid 2018Clayton Hotel Ballsbridge x 30 x Mid 2018Clayton Hotel Dublin Airport x 140 x Q2 2018Maldron Hotel Parnell Square x 55 x Q4 2018
Property New Extension Rooms Planning Construction Completion
Lodged Granted StartedMaldron Hotel Beasley Street, Cork x 150 x Q4 2018
Maldron Hotel Sandy Road, Galway x 47 x x Mid 2018
Property New Extension Rooms Planning Construction Completion
Lodged Granted StartedMaldron Hotel BrunswickStreet, Belfast x 237 x x Q2 2018
Maldron Hotel, Newcastle* x 264 x x Q4 2018
*35 year operating lease
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Growth Strategy
Evolving Strategy
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Building a portfolio within the Ireland recovery story
Maturing into a large hotel company focused on exploiting new growth
opportunities
2014 - 2016 2017+
Identified and exploited cyclical opportunity to acquire hotel assets under replacement cost
Invested over €1Bn in acquiring almost 7,000 rooms across Ireland and UK
Significant capital refurbishment programme commenced from mid 2014
Built out central management function
Operational excellence through revenuemaximisation and driving cost efficiencies
+1,200 new bedrooms by end 2018
Maintain Net Debt/EBITDA at or below3.5x
Seek to buy out remaining freeholds ofleased assets with open market rentreviews
Infill acquisitions in Ireland and targetedleasehold growth in the UK
Consolidation phase largely completed Already well underway
Become one of the largest hotel operators in the UK through leases and ownership
Senior team has extensive experience of rolling out a new brand (Jurys Inn) in the UK: Acquisitions team sourced, financed and developed over 15 new hotels Operations team opened and operated over 20 hotels
Opportunity exists in the upper 3 star and 4 star markets in large provincial UK cities: Market is fragmented - only Hilton and Holiday Inn have any significant presence Major brands have moved away from owned/leased to managed and increasingly franchise
model – can lead to dilution of brand standards Dalata is one of the few hotel operators in the 3 and 4 star markets that has a significant central
office management structure to operate a large portfolio of hotels We believe space exists for a fresh new offering
Carefully assess opportunities to grow Maldron and Clayton brands Focus on strong locations in the larger cities Strength of location is more important than speed of rollout
Drive Portfolio Growth | UK Strategy
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Ireland: Portfolio Objectives
Complete existing development pipeline of 740 roomsReach the optimum market share in each of the key urban centres including Dublin, Cork, Limerickand GalwaySeek to purchase freehold interests of leased assets with open market review clausesContinue to review existing hotels in portfolio to assess long term suitability
Drive Portfolio Growth | Ireland
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Appendix ISE: DHG LSE: DAL
Dalata | Strong Full Year Performance
Increase in ARR drives 14.9% RevPAR growthStrong conversion of incremental sales leads to segmentsEBITDAR margin increasing from 39.5% to 41.4%Rent increased due to new leasehold assets andincreases in performance rents. Counterbalanced byclosure of Clyde Court and purchase of freeholds ofpreviously leased hotelsContinued investment in central team reflected in centraloverheadsOther costs include acquisitions related costs & goodwillimpairment of €10.3m following upward revaluation ofassetsSignificant increase in depreciation due to acquisition ofnew hotels and capital refurbishment programmeNet finance costs includes exchange losses on sterlingbalances
KPIs 2016 2015
Occupancy 82.1% 80.2%
Average Room Rate (€) 97.6 87.0
RevPAR (€) 80.2 69.8
Key Financials €’000 2016 2015
Revenue 290,551 225,673
Segments EBITDAR 120,308 89,253
Rent (25,453) (19,167)
Segments EBITDA 94,855 70,086
Central overheads (10,360) (8,068)
Other income / costs (13,411) (15,022)
EBITDA 71,084 46,996
Depreciation (15,477) (10,039)
Net finance costs (11,496) (8,500)
Profit before tax 44,111 28,457
Profit after tax 34,923 21,626
EPS (€) 0.19 0.14
Adjusted EBITDA 85,132 62,626
Adjusted diluted EPS (€) 0.27 0.25
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Dublin | Full Year Performance
Another very strong year for Dublin hotel market withRevPAR up 16.1%. Very limited new supply until late2018. Demand driven by increased corporate demandand continued strength in leisure sector
Net 680 rooms added in 2016 through Tara Towers(Jan), Gibson (Mar) and Clayton Hotel BurlingtonRoad (Nov), and Clyde Court closed down end 2015
Outperformed market with RevPAR up 19.9%
Food and beverage sales up 1% for the year on a ‘likefor like’ basis (excluding Clyde Court and hotelsacquired during 2016)
Rent up as a result of addition of Gibson and ClaytonBurlington Rd hotels and increased performance rentsat Ballsbridge and Maldron Dublin Airport hotels,counterbalanced by closure of Clyde Court Hotel
EBITDAR margin up to 48% due to 78.2 % conversionof additional sales to EBITDAR on a ‘like for like’ basis
KPIs 2016 2015
Occupancy 85.7% 83.1%
Average Room Rate (€) 107.09 92.18
RevPAR (€) 91.83 76.57
All figures €’000 2016 2015
Revenue
Rooms 107,370 82,611
Food and beverage 35,392 30,391
Other 9,183 7,757
Total revenue 151,945 120,759
EBITDAR 72,992 53,754
Rent (19,520) (14,492)
EBITDA 53,472 39,262
EBITDAR % 48.0% 44.5%
KPIs include performance of all acquisitions (except Clayton Hotel Burlington Road) for entire of 2016 and 2015
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Regional Ireland| Full Year Performance
Continuing strong demand from FDIs, domestic corporate and domestic leisure customers with no increases in supply and very little supply pipeline
518 rooms added to portfolio through Clayton HotelCork City, Clayton Hotel Limerick and Clayton HotelSligo in March
RevPAR up 11.7%
Food and beverage up 3% for the year on a ‘like-for-like’ basis (excluding hotels acquired during the year)
Significant increase in EBITDAR margin to 26.5% dueto 73.3% conversion of incremental revenue on ‘likefor like’ basis and addition of Clayton Cork City whichhas higher margins on back of very strong RevPAR KPIs 2016 2015
Occupancy 74.0% 72.2%
Average Room Rate (€) 86.16 78.94
RevPAR (€) 63.68 57.03
All figures €’000 2016 2015
Revenue
Rooms 36,100 20,753
Food and beverage 25,174 17,694
Other 7,193 4,542
Total revenue 68,467 42,989
EBITDAR 18,170 9,695
Rent (1,939) (1,961)
EBITDA 16,231 7,734
EBITDAR % 26.5% 22.6%
KPIs include full year performance of all Regional Ireland hotels regardless of when acquired.
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UK Full Year Performance
London had very difficult first half due tocombination of impact of European terrorist attacksand increased supply. City ended 2016 stronger andalso strong start to 2017
Belfast had very strong second half, helped by re-opening of Waterfront Conference Centre. Cardiffimpacted by having Rugby World Cup in 2015 whileManchester and Leeds continue to perform well
Croydon Park leasehold was acquired in March 2016leading to an increase in rent
RevPAR increased by 4.4% across the 8 hotels
Food and beverage sales increased by 2.7%(excluding Croydon Park Hotel)
Converted 73.8% of additional sales to EBITDAR lineon a ‘like for like’ basis
KPIs 2016 2015
Occupancy 81.4% 81.3%
Average Room Rate (£) 73.35 70.35
RevPAR (£) 59.70 57.18
All figures £’000 2016 2015
Revenue
Rooms 37,866 28,931
Food and beverage 13,440 10,412
Other 4,176 2,813
Total revenue 55,482 42,156
EBITDAR 21,883 16,068
Rent (3,274) (1,967)
EBITDA 18,609 14,101
EBITDAR % 39.4% 38.1%
KPIs include full year performance of all UK hotels regardless of when acquired.
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Dalata| Strong Cashflow to Fund Pipeline & Further Growth
Illustration of what the business cangenerate in cash to fund debt repayment,acquisitions, development activity etc.
Maintenance capex averages 4% of turnover
Development capital expenditure is excludedas it either relates to new build hotels,extensions, redevelopment or itemsidentified on acquisition required to bringhotels to brand standard
Cash conversion is higher in 2015 due toreduction in working capital resulting frommore significant acquisition activity in 2015compared to 2016
All figures €’000 2016 2015
Adjusted EBITDA 85.1 62.6
Net cash from operating activities 77.8 54.4
Adjusting cash items 1 4.0 13.9
Interest on bank loans (excluding fees) (8.7) (9.3)
Maintenance Capital Expenditure (11.6) (9.0)
Cash generated to fund debtrepayment, acquisitions anddevelopment activity
61.5 50.0
Cash conversion 72% 80%
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1 Stock exchange listing costs of €1.3m, acquisition costs of €2.7m (2015: €15.8m), Ballsbridge site sale €1.9m in 2015
Dalata | FX Effects
Sterling exchange rate has significant impact on earnings
Average exchange rate for 2016 was 0.8266
Average exchange rate for 2015 was 0.7219
2016 EBITDA would been have €3.3m higher if 2015 average exchange rate had applied however, interest and depreciation would have been higher by €0.8m and €0.7m respectively
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Drive Performance of Existing Assets
Revenue maximisation priorities
Growing the strength of our brands
Continuous focus on improving revenue management
Develop food and beverage offering with rollout of Grain & Grill in Maldron hotels and Red Bean Roastery coffee offering in larger hotels
Maximise other revenue including rebranding of all leisure clubs to ‘club vitae’ and installation of new technology to manage all larger car parks
Enhance hotel websites and book direct offerings
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Cost efficiency initiatives
Target 75% conversion of incremental ARR to bottom line
Use of Alkimii (bespoke system) to gain staffingefficiencies across the Group
Upskilling of chefs on food margin management
Implementation of central purchasing system in2017 to drive economies of scale
Focus on reduction of energy and maintenancecosts across the Group
Driving Performance of Existing Assets | Investment
Over €14.75 million invested in 1,380 room refurbishments in 2015 and 2016 (nearly 20% of totalrooms in two years)Forecast €7.9 million in room refurbishments expected in 2017Standardised room templates for Clayton and Maldron brands driving investment efficienciesImproved product contributing to higher ARR
Rooms Refurbished 2015 2016 2017 Total
373 138 167 678
260 610 770 1,640
2,318
2016 FY ResultsPage 31
Strong, Complementary Brand Proposition
Brand Proposition
Hotels that provide a gateway to a great experience. Situated in unrivalled urban and rural locations perfect
for visiting local attractions, attending an event, seeing a show. Service delivered with a smile and a fun attitude
Go further at a Maldron Hotel
Collection of distinctive hotels each with its own sense of individuality and character providing a home away from home experience. Service delivered by staff who
are warm, engaging, inquisitive and empathetic
Your Stay, Your Way
Bedrooms Generally standard rooms, with family and executive rooms in some locations Standard, superior and executive rooms
Food & Beverage
Integrated bar and restaurant in some locations. Simplemenus made from fresh quality produce
Modern bar, restaurant and coffee dock. Food and beverage offering based on local influences and freshly
sourced premium ingredients
Conference Facilities
Meeting room facilities Extensive choice of modern meeting rooms and events facilities
Target Customers
Both leisure and corporate with main focus on leisure guests and family
Focus on corporate and conference midweek. Leisure, functions and weddings at weekend
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Dalata | Portfolio
Owned Hotels / Freehold EquivalentHotel RoomsClayton Hotel Dublin Airport 469Clayton Hotel Ballsbridge, Dublin 304Clayton Hotel Leopardstown, Dublin 354Clayton Hotel Cardiff, Wales 216Clayton Hotel Galway 195Clayton Whites Hotel, Wexford 157Clayton Hotel Silver Springs, Cork 109Clayton Hotel Chiswick, London 227Clayton Crown Hotel, London 152Clayton Hotel Leeds 334Clayton Hotel Belfast 170Clayton Hotel Manchester Airport 365Clayton Hotel Cork City (1) 198Clayton Hotel Limerick 158Clayton Hotel Sligo 162Maldron Hotel Parnell Square, Dublin 129Maldron Hotel Pearse Street, Dublin 115Maldron Hotel Newlands Cross, Dublin 297Maldron Hotel Cork 101Maldron Hotel Limerick 142Maldron Hotel Sandy Road, Galway 104Maldron Hotel Wexford 108Maldron Hotel Derry 93Tara Towers Hotel, Dublin 111
Total 4,770
Lease AgreementsHotel RoomsClayton Hotel Burlington Road, Dublin 502Clayton Hotel Cardiff Lane , Dublin (2) 304The Gibson Hotel, Dublin 252Croydon Park Hotel, London 211Maldron Hotel Smithfield, Dublin 92Maldron Hotel Tallaght, Dublin 119Maldron Hotel Galway (Oranmore) 113Maldron Hotel Portlaoise 90Maldron Hotel Dublin Airport 251Ballsbridge Hotel, Dublin 400Total 2,334
Management ContractsHotel RoomsWith Receivers 352Clarion Liffey Valley Hotel 352Directly with Owners 557Cavan Crystal Hotel, Co. Cavan 85Maldron Hotel Belfast 103The Belvedere Hotel, Dublin 101Fitzwilton Hotel, Co. Waterford 90Aghadoe Heights Hotel & Spa, Co Kerry 74Shearwater Hotel, Ballinasloe, Co. Galway 104Total 909
Summary by Hotel Category Hotels Rooms
Owned 24 4,770Leased 10 2,334Mgmt Agreement – Receivers 1 352Mgmt Agreement – Owners 6 557Total 41 8,013
(1) Dalata own 191 rooms & lease 7 apartments(2) Dalata lease 281 rooms & own 23 rooms
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