Preliminary Financial Results for YE 31 Dec 2014

Dalata Hotel Group plc

Condensed consolidated statement of cash flows

for the year ended 31 December 2014

 

		2014	2013
		€'000	€'000
Cash flows from operating activities
Profit/(loss) for the year		3,523	(577)
Adjustments for:
Depreciation of property, plant and equipment		991	407
Amortisation of intangible assets		128	-
Share-based payments expense		273	-
Finance costs		1,191	4,860
Finance income		(409)	-
Tax charge		673	650
		6,370	5,340
Increase in trade and other payables		9,159	1,334
Increase in trade and other receivables		(3,732)	(2,922)
Increase in inventories		(58)	(101)
Tax paid		(821)	(917)
Net cash from operating activities		10,918	2,734
Cash flows from investing activities
Acquisitions of undertakings through business combinations		(20,063)	-
Purchase of property, plant and equipment		(21,105)	(3,759)
Deposits paid on acquisitions		(4,116)	-
Interest received		115	-
Net cash used in investing activities		(45,169)	(3,759)
Cash flows from financing activities Unsecured shareholder loan notes			31,497
Interest on bank loans		(152)	(341)
Repayment of bank loans		(9,000)	-
Receipt of bank loans		-	1,000
Repayment of shareholder loan notes		(40)	-
Issuance of shares in public listing, net of expenses		255,976	-
Proceeds of other share issues		40	-
Net cash from financing activities		246,824	659
Net increase/(decrease) in cash and cash equivalents		212,573	(366)
Cash and cash equivalents at the beginning of year		4,940	5,306
Effect of movements in exchange rates		294	-
Cash and cash equivalents at the end of the year		217,807	4,940

 

 

 

 

 

 

Dalata Hotel Group plc

Notes to the condensed consolidated financial statements

for the year ended 31 December 2014

1.      General information and basis of preparation

Dalata Hotel Group plc ('the Company') is a company incorporated in the Republic of Ireland.  The Company was incorporated on 4 November 2013 as Rockmellon plc. Rockmellon plc changed its name to Dalata Hotel Group plc on 16 January 2014.

 

In the period 1 January 2014 to 20 February 2014, the business of the Dalata group was conducted through DHGL Limited and its subsidiaries.  On 20 February 2014, pursuant to a reorganisation, Dalata Hotel Group plc acquired 100% of the issued share capital of DHGL Limited and indirectly acquired the 100% shareholdings previously held by DHGL Limited in each of its subsidiaries.

 

Following that reorganisation the Group comprises Dalata Hotel Group plc and its subsidiaries.  The condensed consolidated financial statements of Dalata Hotel Group plc are prepared on the basis that the Company is a continuation of DHGL Limited, reflecting the substance of the arrangement.  Dalata Hotel Group plc presents its condensed consolidated financial statements as if its acquisition of DHGL Limited had occurred before the start of the earliest period presented. 

 

On 19 March 2014, Dalata Hotel Group plc was admitted to trading on the Enterprise Securities Market (ESM) of the Irish Stock Exchange and the Alternative Investment Market (AIM) of the London Stock Exchange.            

 

The financial information presented here in these condensed financial statements does not comprise full statutory financial statements for 2014 or 2013 and therefore does not include all of the information required for full annual financial statements.   The consolidated financial statements of the Group for the year ended 31 December 2014 comprise the financial statements of the Company and its subsidiary undertakings and were authorised for issue by the Board of Directors on 9 March 2015.   Full statutory financial statements for the year ended 31 December 2014, prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the EU, together with an unqualified audit report thereon under Section 193 of the Companies Act 1990, will be annexed to the annual return and filed with the Registrar of Companies.  The equivalent full statutory financial statements for 2013 (of DHGL Limited) have already been filed with the Registrar of Companies with an unqualified audit report thereon.

 

These financial statements are presented in Euro, rounded to the nearest thousand, which is the functional currency of the parent company and also the presentation currency for the Group's financial reporting. 

 

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.  Actual results could differ materially from these estimates. 

 

         Key judgements and estimates impacting these financial statements are:

        

·      Accounting for acquisitions, including allocation of consideration to assets and liabilities acquired

·      Trade receivables impairment provisions and accrued income

·      Accounting for costs incurred in 2014 in relation to post year-end acquisitions and related fundraising

·      Carrying value of own-use property measured at fair value

 

 

 

 

2.      Significant accounting policies

The accounting policies applied in these financial statements are consistent with those applied in the consolidated financial statements as at and for the year ended 31 December 2013, except for the application for the first time of IAS 33: Earnings per share IFRS 2: Share-based payments, IFRS 3 Business Combinations, IAS 40 Investment Property and the adoption of a policy of revaluation of property.

 

None of the new IFRSs or interpretations that are effective for the financial year ending 31 December 2014, had an impact on the Group's reported profit or net assets.

 

Earnings per share

 

Basic earnings per share are calculated based on the profit for the year attributable to owners of the Company and the basic weighted average number of shares outstanding.  Diluted earnings per share are calculated based on the profit for the year attributable to owners of the Company and the diluted weighted average of shares outstanding.

 

Dilutive effects arise from share-based payments that are settled in shares.  Conditional share awards to employees have a dilutive effect when the average share price during the period exceeds the exercise price of the awards and the market conditions of the awards are met, as if the current period end were the end of the vesting period.  When calculating the dilutive effect, the exercise price is adjusted by the value of future services related to the awards.

 

Share-based payments

 

The grant-date fair value of equity-settled share-based payment awards granted to employees is recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards.  The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

 

Business combinations

 

The Group accounts for business combinations using the acquisition method when control is transferred to the Group.  The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired.  Any goodwill that arises is tested annually for impairment.   Any gain on a bargain purchase is recognised in profit or loss immediately.  Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

 

The consideration transferred does not include amounts related to the settlement of pre-existing relationships.  Such amounts are generally recognised in profit or loss.

 

Any contingent consideration is measured at fair value at the date of acquisition and then subsequently remeasured at fair value through profit or loss. 

 

2.      Significant accounting policies (continued)               

Business combinations (continued)

 

When acquiring a business, the Group is required to bring acquired assets and liabilities on to the consolidated statement of financial position at their fair value, the determination of which requires a significant degree of estimation and judgement.  

 

Acquisitions may also result in intangible benefits being brought into the Group, some of which may qualify for recognition as intangible assets while other such benefits do not meet the recognition requirements of IFRS and therefore form part of goodwill. 

 

Judgement is required in the assessment and valuation of any intangible assets, including assumptions on the timing and amount of future cash flows generated by the assets and the selection of an appropriate discount rate.  

 

Depending on the nature of the assets and liabilities acquired, determined provisional fair values may be associated with uncertainty and possibly adjusted subsequently as permitted by IFRS 3 "Business Combinations"

 

When an acquisition does not represent a business, it is accounted for as a purchase of a group of assets and liabilities, not as a business combination.  The cost of the acquisition is allocated to the assets and liabilities acquired based on their relative fair values, and no goodwill is recognised.

 

Change in accounting policy

 

In accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the Group changed its accounting policy on the treatment of property from the depreciated cost to the fair value model, as the directors believe it would provide more relevant information. 

 

The Group made this voluntary change due to the material value of property acquisitions made in 2014 and to date in 2015, and the impact that changes in the value of these assets would have on the Group's financial position in 2014 and future years.

 

There was no impact on the prior year from this change in accounting policy as the carrying value of owned property at 31 December 2013, which was all acquired in 2013, was approximately equal to its fair value.

 

The new policy is set out below.

 

         Property, plant and equipment

Land and buildings are initially stated at cost, including directly attributable transaction costs, (or fair value when acquired through business combinations) and subsequently at fair value.

 

Fixtures, fittings and equipment are stated at cost, less accumulated depreciation and any impairment provision. 

 

Cost includes expenditure that is directly attributable to the acquisition of property, plant and equipment unless it is acquired as part of a business combination under IFRS 3, where the deemed cost is its acquisition date fair value.

 

 

 

 

2.      Significant accounting policies (continued)               

         Property, plant and equipment (continued)

Depreciation is charged through profit or loss on the cost or valuation less residual value on a straight-line basis over the estimated useful lives of the assets which are:

 

Buildings                                               50 years

Fixtures, fittings and equipment       5 - 10 years

Land is not depreciated.

 

Residual values and useful lives are reviewed and adjusted if appropriate at each reporting date.

 

Land and buildings are revalued by qualified valuers on a sufficiently regular basis using open market value (which reflects a highest and best use basis) so that the carrying value of an asset does not materially differ from its fair value at the reporting date. External revaluations of the Group's land and buildings have been carried out in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation Standards.

 

Surpluses on revaluation are recognised in other comprehensive income and accumulated in equity in the revaluation reserve, except to the extent that they reverse previously charged impairment losses, in which case the reversal is recorded in profit or loss.  Decreases in value are charged against other comprehensive income and the revaluation reserve to the extent that a previous gain has been recorded there, and thereafter are charged as an impairment through profit or loss.

 

Fixtures, fittings and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.  Assets that do not generate independent cash flows are combined into cash generating units.  If carrying values exceed estimated recoverable amount, the assets or cash generating units are written down to their recoverable amount.  Recoverable amount is the greater of fair value less cost to sell and value in use.  Value in use is assessed based on estimated future cash flows discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset.

         Investment property

Investment property is held either to earn rental income, or for capital appreciation (including future re-development) or for both, but not for sale in the ordinary course of business. 

 

Investment property is initially measured at cost, including transaction costs, (or fair value when acquired through business combinations) and subsequently valued by professional external valuers at their respective fair values.  The difference between the fair value of an investment property at the reporting date and its carrying value prior to the external valuation is recognised in profit or loss.

 

Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.  

 

The Group's investment properties are valued by qualified valuers on an open market value basis in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation Standards.

 

  

3.      Operating segments

The segments are reported in accordance with IFRS 8 Operating Segments.  The segment information is reported in the same way as it is reviewed and analysed internally by the chief operating decision makers, primarily the CEO, and Board of Directors.

 

The group operates in two segments - "Leased & Owned" hotels and "Managed" hotels:

 

Leased & owned hotels:

The Group leases hotel buildings from property owners and is entitled to the benefits and carries the risks associated with operating these hotels.  As at 31 December 2014, the Group also fully owns three hotels and has effective ownership of one other of the hotels which it operates.  It also owns part of one of the other hotels which it operates.   The Group drives revenue for leased and owned hotels primarily from room sales and food and beverage sales in restaurants, bars and banqueting.  The main costs arising relate to rent paid to lessors and other operating costs. 

 

Managed hotels:

Under management agreements, the Group provides management services for third party hotel proprietors.

 

 

Revenue

	2014	2013
	€'000	€'000
Leased & Owned	73,626	55,447
Managed	5,447	5,170
	_______	_______
Total revenue	79,073	60,617
	_______	_______

 

The line item 'Leased & Owned' represents the operating revenue (Room revenue, Food and Beverage

Revenue and other hotel revenue) from leased and owned hotels.

 

The line item 'Managed' represents the fees and other income earned from services provided in relation to managed hotels.

 

 

3.      Operating segments (continued)

	2014	2013
	€'000	€'000
Segmental results - EBITDA
Leased & Owned - EBITDA	7,969	3,449
Managed - EBITDA	5,447	5,170
	_______	_______
EBITDA for reportable segments	13,416	8,619
	_____	_______
Reconciliation to results for the year
Segments EBITDA	13,416	8,619
Central costs	(4,498)	(3,279)
Acquisition-related costs	(2,821)	-
	_______	_______
Group EBITDA	6,097	5,340
Depreciation of property, plant and equipment	(991)	(407)
Amortisation of intangible assets	(128)	-
Finance income	409	-
Finance costs	(1,191)	(4,860)
	_______	_______
Profit before tax	4,196	73
Tax	(673)	(650)
	_______	_______
Profit/(loss) for the year	3,523	(577)
	_______	_______

 

EBITDA represents earnings before interest, tax, depreciation and amortisation.

 

The line item 'Leased & Owned' - EBITDA' represents the net operational contribution of leased and owned hotels less related costs.

 

The line item 'Managed - EBITDA' represents the fees and other income earned from services provided in relation to managed hotels.  All of this activity is managed corporately and specific individual costs are not allocated to this segment.

 

The line item 'Central costs' includes costs of the Group's central functions including operations support, technology, sales and marketing, human resources, finance, corporate services and business development.

 

  

3.      Operating segments (continued)

 

Geographical information	2014	2013
	€'000	€'000
Revenue
Republic of Ireland	72,669	55,756
United Kingdom	6,404	4,861
	_______	_______
	79,073	60,617
	_______	_______

 

	2014		2013
	€'000		€'000
Non-current assets (excluding deferred tax)
Republic of Ireland	59,408		12,247
United Kingdom	6,449		510
	_______		_______
	65,857		12,757

 

4.      Acquisition-related costs

Acquisition-related costs include professional fees and stamp duty costs charged to profit or loss in 2014 in relation to the 2014 and 2015 acquisitions outlined in Notes 7 and 20.  Details of the acquisition-related costs charged to profit or loss are outlined below.

 

 

	€'000
Professional fees incurred on acquisition of Moran Bewley Hotel Group
up to 31 December 2014 (Note 20)	1,864
Professional fees incurred on other acquisitions
up to 31 December 2014	409
Stamp duty and other costs incurred on acquisition of Maldron Pearse	548
Street and Maldron Derry hotels (Note 7)
	_______
Acquisition-related costs	2,821
	_______

 

 

5.      Long-term incentive plan

          Equity-settled share-based payment arrangements

During the year ended 31 December 2014, the Remuneration Committee of the Board of Directors made the first grant of conditional share awards of 754,154 ordinary shares pursuant to the terms and conditions of the Group's Long Term Incentive Plan.  The award was for eligible service employees across the Group (42 in total) and vests based on the employees staying in service for 3 years from the grant date (18 March 2014).  The number of awards which will ultimately vest will depend on the Group achieving targets relating to a Total Shareholder Return ("TSR") market condition as measured against a comparator peer group of companies over a 3 year performance period.

 

In relation to TSR performance, 25% of an award will vest for TSR performance equal to the median TSR return of the comparator peer group of companies over the performance period.  100% of an award shall vest for TSR performance equal to the 75^th percentile or greater TSR return of the comparator group.  For TSR performance between those thresholds, awards shall vest on a pro-rated basis.

 

The total expected cost of this award was estimated at €1.04 million of which €0.27 million has been charged against profit for the year ended 31 December 2014.  The remaining €0.77 million will be charged to profit or loss in equal instalments over the remainder of the 3 year vesting period.

           

          Measurement of fair values

The fair value of the conditional share awards was measured using Monte Carlo simulation.  Service conditions attached to the awards were not taken into account in measuring fair value.  The valuation and key assumptions used in the measurement of the fair values at grant date were as follows:

 

Fair value at grant date     €1.49

Share price at grant date   €2.50

Exercise price                       €0.01

Expected volatility              35.29% p.a.

Performance period            3 years

 

Expected volatility was based on the historical volatility of the share prices of the comparator group of companies.

 

6.      Tax charge

	2014	2013
	€'000	€'000
Current tax
Irish corporation tax	888	682
UK corporation tax	16	-
Under/(over) provision in respect of prior periods	7	(4)
	911	678
Deferred tax credit (note 18)	(238)	(28)
	673	650

 

The tax assessed for the year is higher than the standard rate of income tax in Ireland for the year. The differences are explained below:

 

 

6.      Tax charge (continued)

 

	2014	2013
	€'000	€'000
Profit before tax	4,196	73
Tax on profit at standard Irish income tax rate of 12.5%	525	9
Effects of:
Income taxed at a higher rate	26	-
Expenses not deductible for tax purposes	448	550
Recognition of prior year deferred tax asset	(330)	-
Income tax withheld	4	-
Overseas income taxed at higher rate	7	-
Losses (utilised)/carried forward	(14)	95
Under/(over) provision in respect of prior periods	7	(4)
	673	650

 

7.      Acquisitions

 

Acquisition of Pillo Hotels Limited

On 27 February 2014 the Group acquired a 100% interest in Pillo Hotels Limited, a company registered in Ireland.  The consideration paid was €1 and the carrying value of net liabilities assumed was €128,000.  As part of this transaction the Group received six management contracts operated by Pillo Hotels Limited.  The value of these intangible assets were €128,000 (see Note 9).  No goodwill arose on this acquisition.  The management contracts were amortised over 10 months up to 31 December 2014 as the contracts have short-term notice periods.   From the acquisition date to 31 December 2014, this acquisition contributed revenue of €0.5 million and profit of €0.4 million to the consolidated results of the Group. Had the acquisition occurred at 1 January 2014 it would have contributed revenue of €0.6 million and profit of €0.4 million to the consolidated results of the Group.

 

Acquisition of Holiday Inn, Pearse Street, Dublin

On 29 August 2014 the Group acquired full ownership of the property and business of Holiday Inn, Pearse Street, Dublin for a total cash consideration of €14.3 million.  The hotel has since been rebranded as a Maldron Hotel.   The fair value of the identifiable assets and liabilities acquired was: hotel property (land and buildings) €13.2 million, investment properties €1.2m and net working capital liabilities of €0.1 million.  No goodwill arose on this acquisition. From the acquisition date to 31 December 2014, this acquisition contributed revenue of €1 million and profit of € 0.2 million to the consolidated results of the Group.  Had the acquisition occurred at 1 January 2014 it would have contributed revenue of €2.6 million and profit of €0.1 million to the consolidated results of the Group.

 

 

 

7.      Acquisitions

 

Acquisition of Tower Hotel, Derry

On 1 October 2014 the Group acquired full ownership of the property and business of Tower Hotel, Derry for a total cash consideration of €5.8 million.  The hotel has since been rebranded as a Maldron Hotel.   The fair value of the land and buildings acquired was €5.6 million and working capital was not significant.   Goodwill of €0.2 million arose on this acquisition and is attributable to the expected profitability and revenue growth of the acquired business.    From the acquisition date to 31 December 2014, this acquisition contributed revenue of €0.5 million to the consolidated financial statements.  This acquisition achieved an approximate break-even position in the period from acquisition to 31 December 2014.  Had the acquisition occurred at 1 January 2014 it would have contributed revenue of €2.5 million and profit of €0.4 million to the consolidated results of the Group.

 

Transaction expenses related to the Pearse Street and Derry acquisitions of €0.55 million were charged to profit or loss within acquisition-related costs.

 

8.      Goodwill

	2014	2013
	€'000	€'000
Cost
At beginning of year	42,059	42,059
Additions	199	-
At end of year
	42,258	-

 

Impairment losses
At beginning of year	(35,192)	(35,192)
During the year	-	-
	(35,192)	(35,192)

 

Carrying amount
At end of year	7,066	6,867

 

At beginning of year	6,867	6,867

 

 

Additions to goodwill of €0.2 million in 2014 relate to the acquisition of Tower Hotel Derry. 

Other goodwill is detailed below.

  

 

8.      Goodwill (continued)

 

In 2007, the Group acquired a number of Irish hotel operations for consideration of €41.5 million.  The goodwill arising represented the excess of costs and consideration over the fair value of the identifiable assets less liabilities acquired and amounted to €42.1 million.  The goodwill was subsequently impaired in 2009 and the carrying value of this goodwill at the beginning and end of the year amounted to €6.867 million.

The group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.  For the purposes of impairment testing goodwill has been allocated to the group of cash generating units (CGUs) representing the Irish hotel operations acquired in 2007.  The recoverable amount of the group of CGUs is based on a value in use calculation.  Value in use is determined by discounting the future cash flows generated from the continuing use of these hotels.  The value in use was based on the following key assumptions:

-     Cash flow projections are based on current operating results and budgeted forecasts prepared by management covering a ten year period.

-     Revenue for the first year of the projections is based on budgeted figures for 2014.

-     Cash flow projections assume a long term compound annual growth rate of 3% in sales revenues.

-     Cashflows include an average annual capital outlay on maintenance for the hotels of 4% of revenues but assume no enhancements to any property.

-     The value in use calculations also include a terminal value based on an industry earnings multiple model which incorporates a long term growth rate of 2%.

-     The cash flows are discounted using a risk adjusted discount rate of 10%.  The discount rate was estimated based on past experience and the risk adjusted group weighted average cost of capital.

       The values applied to each of these key assumptions are derived from a combination of internal and external factors based on historical experience and taking into account the stability of cashflows typically associated with these factors.

       At 31 December 2014, the recoverable amount was determined to be significantly higher than the carrying amount of the group of CGUs.  The directors concluded that the carrying value of goodwill is not impaired at 31 December 2014. 

 

 

9.      Intangible assets

 

	Hotel
	management
Intangible assets	contracts
	€'000
Cost
At 1 January 2014	-
Acquisitions during the year	128
	_______
At 31 December 2014	128
	_______
Accumulated amortisation
At 1 January 2014	-
Charge for the year	128
	_______
At 31 December 2014	128
	_______
Net book value
At 31 December 2014	-
	_______
At 31 December 2013	-
	_______

 

The intangible asset resulted from the acquisition of Pillo Hotels Limited (Note 7).

 

 

   

10.    Property, plant and equipment

 

 

		Fixtures,
	Land and	fittings and
	buildings	equipment	Total
	€'000	€'000	€'000
Cost or valuation
At 1 January 2013
Cost	-	4,052	4,052
Additions	2,216	1,543	3,759
At 31 December 2013	2,216	5,595	7,811
At 1 January 2014
Cost	2,216	5,595	7,811
Acquisitions through business combinations	18,761	10	18,771
Other additions	17,578	3,527	21,105
Revaluation	8,161	-	8,161
Translation adjustment	(7)	39	32
At 31 December 2014
Valuation	46,709	-	46,709
Cost	-	9,171	9,171
	46,709	9,171	55,880
Accumulated depreciation
At 1 January 2013	-	2,414	2,414
Charge for the year	-	407	407
At 31 December 2013	-	2,821	2,821
At 1 January 2014	-	2,821	2,821
Charge for the year	229	762	991
Elimination of depreciation on revaluation	(229)	-	(229)
Translation adjustment	-	3	3
At 31 December 2014	-	3,586	3,586
Net book value
At 31 December 2014	46,709	5,585	52,294
At 31 December 2013	2,216	2,774	4,990

 

 Included in land and buildings at 31 December 2014 is land at a carrying value of €6.3 million, which is not depreciated.

 

 

 

 

 

 

 

 

 

10.    Property, plant and equipment (continued)

 

Acquisitions through business combinations in the year ended 31 December 2014 includes the following:

·     Holiday Inn Pearse Street, Dublin (renamed the Maldron Hotel Pearse Street Dublin)

·     Tower Hotel Derry (renamed the Maldron Hotel Derry)

 

Other additions to land and buildings in the year ended 31 December 2014 include the following properties, where the Group was already operating a hotel business:

·     Maldron Hotel Parnell Square, Dublin

·     20 rooms in Maldron Hotel Cardiff Lane, Dublin

 

The carrying value of land and buildings revalued at 31 December 2014 is €46.7 million.  The value of these assets under the cost model is €38.3 million.   The revaluation surplus is €8.4 million which has been reflected through other comprehensive income and in the revaluation reserve in equity.

There was no impact from the change in accounting policy for land and buildings on the prior year, because the carrying value of property at 31 December 2013 (Maldron Hotel, Limerick) was not significantly different from its fair value of €2.2 million as the hotel had been acquired in 2013.

The Group operates the Maldron Hotel Limerick and since the acquisition of Fonteyn Property Holdings Limited in 2013 holds a secured loan over that property. The loan is not expected to be repaid.   Accordingly the Group has the risks and rewards of ownership and accounts for the hotel as an owned property, reflecting the substance of the arrangement.   It is expected that the Group will obtain legal title to the property in 2015.

The value of the Group's property at 31 December 2014 reflects open market valuations carried out in December 2014 by independent external valuers having appropriate recognised professional qualifications and recent experience in the location and value of the property being valued.  The external valuations performed were in accordance with the Valuation Standards of the Royal Institution of Chartered Surveyors.

Measurement of fair value

The fair value measurement of the Group's own-use property has been categorised as a Level 3 fair value based on the inputs to the valuation technique used.

The principal valuation technique used in the independent external valuation was discounted cash flows.   This valuation model considers the present value of net cash flows to be generated from the property over a ten year period (with an assumed terminal value at the end of Year 10) taking into account expected EBITDA and capital expenditure.   The expected net cash flows are discounted using risk adjusted discount rates.   Among other factors, the discount rate estimation considers the quality of the property and its location.

The significant unobservable inputs are:

·      Forecast EBITDA

·      Risk adjusted discount rates of 10.5% - 13% (Years 1-10)

·      Terminal (Year 10) capitalisation rates of 8%- 9.25%

The estimated fair value under this valuation model would increase or decrease if:

·      EBITDA was higher or lower than expected

·      The risk adjusted discount rate and terminal capitalisation rate was higher or lower

 

11.    Investment properties

	€'000
Cost or valuation
At 1 January 2014	-
Acquisitions through business combinations	1,248
	_______
At 31 December 2014	1,248
	_______

 

 

Investment properties comprise two commercial properties which were acquired on 29 August 2014 as part of the Holiday Inn, Pearse Street acquisition (see Note 7).  The investment properties are leased to third parties for lease terms of 25 and 30 years, with 16 and 12 years remaining. 

 

Changes in fair values are recognised in profit or loss.  There was no change in the fair value between the acquisition date and the year end.  

 

The value of the Group's investment properties at 31 December 2014 reflect an open market valuation carried out in December 2014 by independent external valuers having appropriately recognised professional qualifications and recent experience in the location and category of property being valued.   The valuations performed were in accordance with the Valuation Standards of the Royal Institution of Chartered Surveyors.

The fair value measurement of the Group's investment property has been categorised as Level 3 fair value based on the inputs to the valuation technique used. 

The valuation technique used is consistent with that used for the Group's own-use property (see Note 10).  The significant unobservable inputs in the measurement of fair value of investment property were:

·   Expected EBITDA based on market rental growth

·   Risk adjusted discount rate of 11% (Years 1-10)

·   Terminal (Year 10) capitalisation rate (8%)

The estimated fair value under this valuation model would increase or decrease if:

·      EBITDA was higher or lower than expected

·      The risk adjusted discount rate and terminal capitalisation rate was higher or lower

 

 

  

12.    Trade and other receivables

	2014	2013
	€'000	€'000
Non-current assets
Other receivables	900	900
Deposits paid on acquisitions	4,116	-
Prepayments	233	-
	5,249	900

 

Current assets
Trade receivables	3,410	3,328
Prepayments	4,067	1,672
Accrued income	2,067	1,045
	9,544	6,045

 

Total	14,793	6,945

 

         Non-current assets includes deposits paid of €4.1 million in relation to the acquisitions of the Clayton Hotel Galway, Pillo Hotel Galway and Whites Hotel Wexford which completed in 2015 (see Note 20).

 

         Other, non-current, receivables consists of a deposit required as part of a hotel property lease contract.  The deposit is interest-bearing and refundable at the end of the lease term.

                                                                                                                     

Included in prepayments is an amount of €2.3 million related to debt funding and share issuance costs in respect of the fundraising related to the Moran Bewley Hotel Group acquisition (see Note 20).

 

13.   Group reorganisation and impact on reserves

 

As part of the Group reorganisation which is described in the Basis of Preparation in Note 1, the Company became the ultimate parent entity of the then existing group on 20 February 2014, when it acquired 100% of the issued share capital of DHGL Limited in exchange for the issue of 9,500 ordinary shares of €0.01 each.  By doing so, it also indirectly acquired the 100% shareholdings previously held by DHGL Limited in each of its subsidiaries.  As part of that reorganisation, the shareholder loan note obligations (including accrued interest) of DHGL Limited were assumed by the Company as part of the consideration paid for the equity shares in DHGL Limited.

 

The fair value of the Group (as then headed by DHGL Limited) at that date was estimated at €40 million.  The fair value of the shareholder loan note obligations assumed by the Company as part of the acquisition was €29.7 million and the fair value of the shares issued by the Company in the share exchange was €10.3 million.

 

The difference between the carrying value of the shareholder loan note obligations (€55.4 million) prior to the reorganisation and their fair value (€29.7 million) at that date represents a contribution from shareholders of €25.7 million which has been credited to a separate capital contribution reserve.

 

 

 

 

 

 

13.   Group reorganisation and impact on reserves (continued)

 

The insertion of Dalata Hotel Group plc as the new holding company of DHGL Limited did not meet the definition of a business combination under IFRS 3 "Business Combinations", and, as a consequence, the acquired assets and liabilities of DHGL Limited and its subsidiaries continued to be carried in the consolidated financial statements at their respective carrying values as at the date of the reorganisation.  The consolidated financial statements of Dalata Hotel Group plc are prepared on the basis that the Company is a continuation of DHGL Limited, reflecting the substance of the arrangement.

 

As a consequence, an additional merger reserve of €10.3 million arose in the consolidated statement of financial position.  This represents the difference between the consideration paid for DHGL Limited in the form of shares of the Company, and the issued share capital of DHGL Limited at the date of the reorganisation which was a nominal amount of €95.

 

14.   Share capital and premium

 

At 31 December 2014 - Dalata Hotel Group plc

         

Authorised Share Capital	Number	€'000
Ordinary shares of €0.01 each	10,000,000,000	100,000
	____________	_______
Allotted, called-up and fully paid shares	Number	€'000
Ordinary shares of €0.01 each	122,000,000	1,220
	____________	_______
Share premium		295,133
		_______

 

At 31 December 2013 - DHGL Limited

 

Authorised Share Capital	Number	€
Ordinary shares of €0.00001 each	75,000,000	750
A Ordinary shares of €0.00001 each	25,000,000	250
Ordinary redeemable shares @ €1 each	100	100
	_________	_______
Allotted, called-up and fully paid shares	Number	€
Ordinary Shares of €0.00001 each 2,000,000 A Ordinary Shares of €0.00001 each	7,499,999 20	75 20
A Ordinary shares of €0.00001 each	2,000,000	20
	_________	_______

 

On incorporation of Dalata Hotel Group plc in November 2013, the issued share capital was 7 ordinary shares of €1 each.  On 14 February 2014, the Company issued 39,898 ordinary shares of €1 each for cash at par.

 

On 20 February 2014, each of the issued and unissued shares of the Company were sub-divided into 100 ordinary shares of €0.01 each.

 

 

 

 

14.   Share capital and premium (continued)

 

On 20 February 2014, as part of the reorganisation of the Group (see Note 13) the Company issued 9,500 ordinary shares of €0.01 each to the shareholders of DHGL Limited in exchange for their shares in DHGL Limited.  The share premium on these shares was €10.3 million (see Note 13).

 

On 19 March 2014, Dalata Hotel Group plc was admitted to trading on the Enterprise Securities Market (ESM) of the Irish Stock Exchange and the Alternative Investment Market (AIM) of the London Stock Exchange. On Admission:

 

·      106,000,000 ordinary shares of €0.01 each were issued representing the new shares being placed by the Company at the time of admission for cash at an issue price of €2.50 per share, resulting in gross proceeds of €265 million (€256 million net of costs). Share premium of €254.9 million was recorded on these shares after deduction of Initial Public Offering costs of €9.0 million.

·      12,000,000 ordinary shares of €0.01 each were issued at €2.50 per share in settlement of all obligations arising from the shareholder loan notes (see Note 15) at an amount of €30 million.  The share premium on these shares was €29.9 million.

     

15.   Interest bearing loans and borrowings

	2014	2013
	€'000	€'000
Repayable within one year
Bank borrowings - variable rate	-	2,000

 

Repayable after one year
Unsecured shareholder loan notes - 9% fixed rate	-	31,497
Accrued interest on unsecured loan notes	-	23,228
Bank borrowings - variable rate	-	7,000
	-	61,725
Total interest-bearing loans and borrowings	-	63,725

 

Unsecured shareholder loan notes

 

On 14 February 2014, DHGL Limited repaid €0.04 million of shareholder loan notes.

 

On 21 February 2014 all remaining shareholder loan note obligations of DHGL Limited were novated to the Company.  All obligations in relation to the shareholder loan notes were settled in exchange for the issue of 12 million ordinary shares of the Company at a value of €30 million on 19 March 2014 (see Note 14).

 

Bank borrowings

At 31 December 2014, the total amount due in respect of bank borrowings amounted to €nil (31 December 2013: €9 million).  All bank loans were repaid in full on 2 April 2014. See Note 20 for details of bank loans drawn down subsequent to the year-end.

 

 

 

16.   Trade and other payables

 

 

	2014	2013
	€'000	€'000
Trade payables	6,155	4,316
Accruals	12,438	5,262
Deferred income	729	225
Value added tax	349	702
Payroll taxes	674	453
	20,345	10,958

 

Included in accruals is an amount of €4.0 million related to acquisition costs for the Moran Bewley Hotel Group acquisition, and debt funding and share issuance costs in respect of the related fundraising (see Note 20).