2018 HALF YEAR RESULTS STRONG H1 PERFORMANCE AS PORTFOLIO GROWTH CONTINUES

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Lauren Skinner
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1 2018 HALF YEAR RESULTS STRONG H1 PERFORMANCE AS PORTFOLIO GROWTH CONTINUES

2 Contents KPIs & Market Background H Financial Performance Driving Portfolio Growth Dalata s Strategic Priorities Outlook Appendices slide 3 slide 7 slide 14 slide 20 slide 25 slide 27 DISCLAIMER The presentation contains forward looking statements. These statements have been made by the Directors in good 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 forward looking information, actual results may differ materially from those expressed or implied by these forward looking statements. The Directors undertake no obligation to update any forward looking statements contained in this presentation, whether as a result of new information, future events or otherwise. GLOSSARY H includes the six month period ended 30 June 2018 H includes the six month period ended 30 June 2017 Slide 2

3 New Maldron Hotel Belfast City KPIs & MARKET BACKGROUND Slide 3

4 Continuing Our Strong Performance H Revenue million H Adjusted EBITDA million H Profit after tax 30.5 million 10.6% 12.0% 7.8% H Adjusted diluted 2 EPS 17.2 cent ( ) 14.7% Net Debt to EBITDA June 2018: 2.5x December 2017: 2.4x First interim dividend at 3.0 cent per share H uplift H Excludes revaluation movements and items considered by management to be non-recurring or unusual in nature 2. Excludes the tax adjusted effects of revaluation movements and items considered by management to be nonrecurring or unusual in nature Slide 4

5 Group Snapshot H Dublin Regional Ireland United Kingdom Market Strong market dynamics with opportunities for Dalata to deliver more rooms Strong market dynamics Mixed market performance. London and some regional UK cities challenged. Exciting structural opportunities RevPAR growth % 10.7% 8.1% 3.8% EBITDAR margin 46.1% 24.0% 36.0% Dalata hotels Dalata rooms Share of revenue Share of EBITDA ,968 1,706 4,146 20% 21% 59% 15% 20% 65% Slide 5

6 Market Review Dublin Savills forecast net additional 4,950 rooms by 2020 STR Global forecast for Dublin 3,000 2,500 2,000 1,500 1, ,500 1,150 1, Dublin 2017 Actual 2018 Forecast 2019 Forecast 2020 Forecast Occupancy 83.1% 83.3% 80.5% 79.2% ARR RevPAR RevPAR % Variance 7.7% 5.7% -1.8% 0.8% Source: STR Global Total market size of circa 20,000 rooms Increase in supply expected to be matched by increase in demand from continued economic growth, increased visitor numbers and growing evidence of office relocations from London to Dublin Slide 6

7 New Maldron Hotel Kevin Street H Financial Performance Slide 7

8 Financial Highlights Key Financials million H H Revenue Segments EBITDAR Rent (16.2) (16.3) Segments EBITDA Central overheads (4.3) (4.8) Share-based payment expense (1.2) (0.7) Other income / costs (1.5) 1.0 Group EBITDA Depreciation (9.3) (7.6) Net finance costs (4.0) (5.2) Profit before tax Profit after tax Basic EPS (cent) Adjusted EBITDA Adjusted diluted EPS (cent) Group RevPAR increased 7.1% Strong revenue growth of 10.6% Central overheads decreased versus H due to timing difference on projects and some expenditure items Depreciation increased by 1.7 million due to newly acquired hotels, the opening of Maldron Belfast city and the completion of extensions Other income/costs includes rental income of 0.1 million (2017: 0.4 million) and net loss on revaluation of property assets 1.6 million (2017: gain of 0.6 million) Group KPIs H H Occupancy 82.1% 80.2% Average Room Rate ( ) RevPAR ( ) Slide 8

9 Dublin Half Year Performance RevPAR Growth H H Number of hotels Market 8.9% Number of rooms 4,146 3,699 Dalata Source: STR and company 10.7% The Dublin market continues to perform strongly with STR now forecasting a 5.7% increase in RevPAR for 2018 EBITDAR margin decreased from 47.1% to 46.1% due to Clayton Hotel Liffey Valley initially operating at a lower margin and impact of preopening costs for two new hotels All figures million H H Total revenue EBITDAR Rent (13.6) (14.2) EBITDA EBITDAR margin 46.1% 47.1% KPIs 1 H H Occupancy 86.2% 82.3% Average Room Rate ( ) RevPAR ( ) KPIs reflect a full six month performance of Dublin acquisitions regardless of when acquired. Slide 9

10 Regional Ireland Half Year Performance 14.8% 13.7% RevPAR Growth 9.4% 9.3% 5.0% 5.9% Cork Galway Limerick Dalata Market Source: Trending.ie and company Cork, Galway and Limerick markets continues to benefit from strong demand from domestic consumers and FDI companies Our regional hotels increased RevPAR by 8.1% EBITDAR margin increased to 24.0% due to good conversion of additional room sales H H Number of hotels Number of rooms 1,706 1,643 All figures million H H Total revenue EBITDAR Rent (0.5) (0.6) EBITDA EBITDAR margin 24.0% 23.4% KPIs 1 H H Occupancy 72.1% 71.5% Average Room Rate ( ) RevPAR ( ) KPIs reflect a full six month performance of Regional Ireland acquisitions regardless of when acquired. Slide 10

11 UK Half Year Performance 5.8% -1.0%-1.4% -1.1% RevPAR Growth 5.2% 4.7% 7.6% 3.4% 2.0% 0.8% Slow down in London market evident in H Mixed performance across provincial cities in UK Our UK hotels increased RevPAR by 3.8% 4.6% 3.1% London Manchester Birmingham Cardiff Leeds Belfast Dalata Market Source: STR and company Our ability to grow UK EBITDAR margin is constrained in the short term due to the impact of new hotels opening and pre-opening costs H H Number of hotels 9 7 Number of rooms 1,968 1,557 All figures million H H Total revenue EBITDAR Rent (1.8) (1.3) EBITDA EBITDAR margin 36.0% 37.6% KPIs 1 H H Occupancy 83.1% 81.1% Average Room Rate ( ) RevPAR ( ) KPIs reflect a full six month performance of United Kingdom acquisitions regardless of when acquired. New hotels opening during H are excluded from the statistics. Slide 11

12 Balance Sheet The Engine For Growth All figures million Non-current assets Property, plant and equipment 30 June Dec , Other non-current assets Current assets Trade receivables, inventory and other Cash Total assets 1, ,101.1 Equity Bank loans Trade and other payables Other liabilities Total equity and liabilities 1, ,101.1 Strong balance sheet with an attractive covenant to secure future leases Exceptionally well located hotel assets with market value of over 1 billion Low level of gearing with net debt to adjusted EBITDA of 2.5x Loans to Tangible Asset ratio of 26.8% Net upward property revaluation gain of 58.5 million million ( million) of loans held in sterling to provide a natural hedge against fluctuations in the value of sterling. The acquisition of Clayton Hotel Aldgate, London will increase Net Debt to EBITDA but will still remain below our guided upper level of 3.5x. Projected to fall again during Other non-current assets include goodwill, investment property, deferred tax assets and other non-current receivables mainly related to operating leases. Other liabilities include deferred tax liabilities, current tax liabilities, derivatives and the provision for self insurance. Slide 12

13 Strong Cash flow to Fund Pipeline and Further Growth All figures million H H Adjusted EBITDA Add back: non cash item (share based payment expense) Adjusted Cash EBITDA Net cash from operating activities Interest and finance costs paid (4.7) (4.8) Maintenance capital expenditure (7.2) (6.5) Free cash flow Free cash flow conversion 61.0% 57.5% For the first half of 2018 the Group generated 31.4 million which is being used to fund acquisitions, development activity and debt repayments Due to the effects of seasonality, cash conversion is lower in H1 compared to H2 Maintenance capital expenditure is calculated as 4% of revenue for the period Slide 13

14 Baskin Suite at Clayton Hotel Dublin Airport Driving Portfolio Growth Slide 14

15 Number of new rooms Growth Momentum Opening over 3,400 from 2018 to ,600 1,400 1,200 1, ,507 1, hotels in Ireland with 2 in in Dublin and 1 in Cork. 1 hotel in Belfast,1 hotel in Newcastle and 1 hotel in London. 4 hotel extensions in Ireland with 3 in Dublin and 1 in Galway UK hotels in Glasgow (2), Bristol, Birmingham and 1 Dublin hotel hotels in Manchester Dublin Regional Ireland UK Slide 15

16 Clayton Hotel Aldgate, London Acquired new Clayton hotel with 212 rooms for a total consideration of 91.0 million Key central location for both corporate customers and leisure guests due to proximity to the city. Hotel is located close to the new Liverpool Street and Whitechapel Crossrail stations, both of which are scheduled to open in Autumn 2019 Highly attractive strategic asset and available in a number of months Although RevPARs have fallen slightly in the city over the last 12 months, London remains a key gateway city in Europe that will continue to benefit from the growth in international travel We view this as a catalyst for further opportunities in the greater London area Hotel is projected to be EPS enhancing in 2019 Slide 16

17 Fragmented Regional UK Market offers Structural Opportunity We have identified 20 target cities in the UK which are suitable for Maldron and Clayton Large structural opportunity exists in the 3 & 4 star segments of these markets for a number of reasons: International brands are increasingly evolving to a franchise model leaving a shortage of operators with any scale Fragmented market in terms of: Brands largest brand is Holiday Inn at 8% market share Ownership 40% of rooms owned by operators with 4 hotels or less Operators largest operator is Accor at 6% market share The stock of 3 and 4 star hotels is considerably older than the age profile of the Budget sector with over 40% of the rooms over 40 years old Slide 17

18 Building our Regional UK city presence City Current room numbers Pipeline Total Dalata's secured market share Manchester* % Glasgow % Bristol % Birmingham % Leeds % Newcastle % Cardiff % Belfast % Total 1,131 2,046 3,177 * Clayton Hotel Manchester Airport is excluded from the analysis above Our objective is to roll out the Maldron and Clayton brands and become the leading 4 star operator in our target city markets Targeting circa 7.5% share of the total market in each city Translates to circa 5,800 rooms on top of current pipeline in 5 7 years Further opportunities exist in the Greater London area Slide 18

19 Regional UK projects announced in 2018 Maldron Manchester Development Asset Agreement for lease signed with CEPF II, a fund administered by Catalyst Capital Circa 276 bedroom new build 4 star hotel Ideally located adjacent to the latest large scale mixed use development in Manchester, Circle Square Within walking distance of the main shopping thoroughfares Target opening Q Maldron Birmingham Development Asset Agreement for lease contracts exchanged with ES Suffolk Birmingham Limited, a subsidiary of McAleer & Rushe Circa 330 bedroom new build 4 star hotel Centrally located on Suffolk Street Within walking distance from key attractions such as the Mailbox shopping centre complex, Bullring shopping centre and New Street train station Target opening Q Clayton Bristol Development Asset Agreement for lease contracts exchanged with Artisan Bristol City Wall Limited (a subsidiary of Artisan Real Estate Investors) Circa 252 bedroom new build Clayton Hotel with extensive conference facilities Ideally located in the centre of Bristol on Broad Street Close to Bristol s commercial centre and within walking distance of the main shopping areas Target opening Q Slide 19

20 Maldron Hotel, Belfast City Dalata s Strategic Priorities Slide 20

21 Strategic Priorities Difference with Dalata OUR CUSTOMERS Listening to their feedback Our People (decentralise responsibility) DRIVING SHAREHOLDER RETURNS OUR PEOPLE Decentralise responsibility Our customers (listening to their feedback) OUR BRANDS Independent & fresh OUR GROWTH Owned & Leased model Slide 21

Our Customers We want to know what our customers think Received and processed over 72,000 customer reviews Customer

our customers better We react to feedback Over 10.

YTD 2018 versus 84% YTD 2017 Highly commended in areas of service, location, reception and cleanliness Launch of

22 Our Customers We want to know what our customers think Received and processed over 72,000 customer reviews Customer response rate increased from 48% to 52% in H Developed pen portraits that allow us to understand and market our customers better We react to feedback Over 10.8 million invested in product refurbishment in H Over 3,000 rooms refurbished since % positive reviews YTD 2018 versus 84% YTD 2017 Highly commended in areas of service, location, reception and cleanliness Launch of new Clayton websites in September 2018 Strong take up of Click on Clayton and Make it Maldron Training courses and brand standards developed to drive meeting and events business Slide 22

Our Brands We own all our brands and are the sole operators to

are Ireland s two largest hotel brands with a growing presence

hotels planned for the remainder of 2018 Further standalone Red

Lane, Clayton Hotel Charlemont, Maldron Hotel South Mall Grain &

23 Our Brands We own all our brands and are the sole operators to ensure consistency and control of standards Clayton and Maldron are Ireland s two largest hotel brands with a growing presence in the larger cities in the UK Club Vitae is the largest leisure centre brand in Ireland Red Bean Roastery Coffee brand has been rolled out to 31 hotels across the portfolio with another 3 hotels planned for the remainder of 2018 Further standalone Red Bean Roastery coffee shops planned at Clayton Hotel Cardiff Lane, Clayton Hotel Charlemont, Maldron Hotel South Mall Grain & Grill restaurant brand has now been rolled out at all our Maldron hotels Slide 23

24 Our People We want to grow our own people to ensure we retain and support succession throughout the Group and maintain a strong pool of talent to ensure the success of Dalata Our culture We are open and fair in how we operate Our work ethic is intense We deliver on what we say we will do Employee Engagement 82% of employees completed our annual employee feedback survey with very positive results: 70% of our people feel there is opportunity to grow not just in their hotel but in the wider company 70% of employees are excited about the future of their hotel Training and development 251 employees on management development programmes in additional employees across our new hotels, Maldron Hotel Belfast City and Maldron Hotel Kevin Street, Dublin 49 direct promotions to date in 2018 as a result of the 5 new hotel openings Dalata Digs Deep Raised almost 0.6 million for our charity partners since 2016 Strong participation from employees with fundraisers such as The Great Dalata Cycle, Dalata Climb s Carrauntoohil for Crumlin challenge, Dalata Cork City Marathon Challenge, Great Ormond Street Hospital Dinner Dance and Yorkshire 3 Peaks Challenge Slide 24

25 Clayton Hotel Charlemont, Dublin (CGI) OUTLOOK Slide 25

26 Outlook Performance of our Dublin hotels has been strong in July and August. However, we do not anticipate that the strong RevPAR growth in Dublin seen in the first half of 2018 will continue for the remainder of the year. This is because there are limited opportunities for our hotels to grow occupancy in the second half of the year Trading at our Regional Ireland hotels has been marginally ahead of last year in July and August. The outlook for the balance of the year remains positive We remain very positive about the opportunity presented by the fragmented nature of the hotel market in our target UK regional cities. Trading across our UK hotels has been mixed but broadly in line with our expectations given the challenging market conditions in some cities. The balance of the year should be broadly similar to performance levels in the year to date Clayton Hotel Charlemont Dublin, Maldron Hotel South Mall Cork, Maldron Hotel Newcastle, Clayton Hotel Aldgate, London and the extension at Maldron Hotel Parnell Square are all scheduled to open before the end of the year, adding an additional 882 rooms We continue to explore opportunities in the UK and Irish hotel markets to expand our portfolio further and remain very confident that we can further build a very attractive pipeline of rooms The reduction in the VAT rate has been hugely positive for the hotel industry. However should the rate increase in Ireland from 9% to 13.5% we estimate that this could reduce Group revenues by up to 2.0% in a full trading year Slide 26

27 Red Bean Roastery Café at Clayton Hotel Leopardstown, Dublin APPENDICES Slide 27

28 Current Pipeline Over 2,800 new rooms Republic of Ireland 3 New Hotels 1 Extension 545 rooms Property New Extension Rooms Planning Granted Construction started Completion Clayton Hotel Charlemont, Dublin x 189 x x Nov 2018 Maldron Hotel Parnell Square, Dublin x 53 x x Dec 2018 Maldron Hotel South Mall, Cork x 163 x x Dec 2018 Maldron Hotel Merrion Road, Dublin x 140 x Q UK 7 New Leased Hotels 1 New Owned Hotel 2,258 Rooms Property New Extension Rooms *35 year operating lease Planning Granted Construction started Completion Maldron Hotel, Newcastle* x 265 x x Dec 2018 Clayton Hotel Aldgate, London x 212 x x Dec 2018 Clayton Hotel, Bristol* x 252 Q Maldron Hotel, Glasgow* x 300 Q Clayton Hotel, Glasgow* x 294 Q Maldron Hotel, Birmingham* x 330 Q Clayton Hotel, Manchester* x 329 x Q Maldron Hotel, Manchester* x 276 Q Slide 28

29 Owned & Leased Portfolio September 2018 Owned Hotels / Freehold Equivalent Hotel Rooms Clayton Hotel Dublin Airport 608 Clayton Hotel Manchester Airport 365 Clayton Hotel Leopardstown, Dublin 357 Clayton Hotel Ballsbridge, Dublin 335 Clayton Hotel Leeds 334 Clayton Hotel Liffey Valley, Dublin (1) 318 Clayton Hotel Cardiff Lane, Dublin (2) 304 Maldron Hotel Newlands Cross, Dublin 297 Maldron Hotel Belfast City 237 Clayton Hotel Chiswick, London 227 Clayton Hotel Cork City (3) 201 Clayton Hotel Galway 195 Clayton Hotel Belfast 170 Maldron Hotel Sandy Road, Galway 167 Clayton Hotel Sligo 162 Clayton Whites Hotel, Wexford 160 Clayton Hotel Limerick 158 Clayton Crown Hotel, London 152 Maldron Hotel Limerick 142 Maldron Hotel Kevin Street, Dublin 137 Maldron Hotel Parnell Square, Dublin 129 Maldron Hotel Pearse Street, Dublin 118 Clayton Hotel Silver Springs, Cork 109 Tara Towers Hotel, Dublin 109 Maldron Hotel Wexford 108 Maldron Hotel Shandon Cork City 101 Maldron Hotel Derry 93 Maldron Hotel Portlaoise 90 Total 5,883 Slide 29 Lease Agreements Hotel Rooms Clayton Hotel Burlington Road, Dublin 502 Ballsbridge Hotel, Dublin 400 The Gibson Hotel, Dublin 252 Maldron Hotel Dublin Airport 251 Clayton Hotel Cardiff, Wales 216 Clayton Hotel Birmingham 174 Maldron Hotel Tallaght, Dublin 119 Maldron Hotel Galway (Oranmore) 113 Maldron Hotel Smithfield, Dublin 92 Total 2,119 New pipeline Owned Rooms Clayton Hotel Aldgate, London 212 Clayton Hotel Charlemont, Dublin 189 Maldron Hotel South Mall, Cork 163 Maldron Hotel Merrion Road, Dublin 140 Extension Maldron Hotel Parnell Square, Dublin 53 Leased Maldron Hotel, Birmingham 330 Clayton Hotel, Manchester 329 Maldron Hotel, Glasgow 300 Clayton Hotel, Glasgow 294 Maldron Hotel, Manchester 276 Maldron Hotel, Newcastle 265 Clayton Hotel, Bristol 252 Total 2, owned hotels with 5,883 rooms 9 leased hotels with 2,119 rooms 11 new hotels in pipeline with 2,803 rooms (including extensions) 2 management agreements with 264 rooms (1) Remaining 43 rooms owned by third parties (2) Dalata own 264 rooms and lease 40 rooms (3) Dalata own 194 rooms and lease 7 apartments

Annual General Meeting May 3 rd FULL YEAR RESULTS DELIVERING OUR PROMISE

Annual General Meeting May 3 rd 2018 2017 FULL YEAR RESULTS DELIVERING OUR PROMISE Key Value Drivers By focusing on our customers, our people, our brands and our growth strategy: We continue to outperform