18 Dec 2019

Dalata: Expects in-line EBITDA this year

Dalata this morning issued a trading statement in which it reported that EBITDA for FY19 will be in line with market expectations.

This positive outcome is set against a challenging hotel market in Dublin that has seen RevPAR fall by 3.2% in the first 11 months of the year. RevPAR for Dalata declined by the same amount on a like-for-like basis, which is a deteriorating trend compared with the 0.5% decline in H1. It puts this down to the VAT increase, the additional supply of hotel rooms and a reduction in the number of events in October and November. In Regional Ireland, Dalata’s RevPAR declined by 0.7% in the first 11 months. The group’s UK hotels performed markedly better over the period, posting a LFL increase of 3.0%, with its UK regional hotels outperforming their city markets in terms of RevPAR change.

On the development front, Dalata has signed an agreement to lease a new 260-room Maldron hotel to be built in Liverpool, adjacent to the Liverpool One retail and leisure complex in the city centre. The property is expected to open in mid-2022. Elsewhere, the expected opening date for Maldron Hotel Birmingham has been delayed until Q4 2022 as the developer is looking to expand the wider scheme development, while a 93-room extension at Clayton Hotel Cardiff Lane is expected to open in Q4 2022.

In its outlook, the group notes the positive impact of the seven hotels opened or acquired in the past 18 months and that its Irish hotels have managed to “protect their margins”. These positives set against the “tougher than anticipated” trading conditions in Dublin result in the group being able to reiterate full-year EBITDA guidance.  

Glenveagh Properties: EGM approves capital reshuffle

Glenveagh’s shareholders yesterday approved the proposal to increase the distributable reserves of the Company by up to €700m by way of a reduction to the share premium account.

This transfer is to allow the group the flexibility to put in place a long-term capital returns policy – something which we expect to hear more of at a CMD in January. We expect the group to turn cash flow positive in FY21, with dividends to commence at that point. The proposal, although approved by 100% of votes at yesterday’s EGM, still requires the confirmation of the High Court.

Sterling slump continues

Monday’s news that UK PM, Boris Johnson, is planning to legally enshrine the “do or die” date of Jan 31st 2020 for the UK to exit their transition period with the EU, irrelevant of whether or not a trade deal is done ensured that the pound suffered its worst daily performance in just over 12 months. The benchmark EUR/GBP rate surged almost 2% from Monday’s close of £0.8350 to last night’s close of in/around £0.8500. 

Some good news for the UK came in the shape of some credit rating adjustments. Standard & Poor’s (AA/A-1+) and Fitch (AA) both adjusted their warning levels over the UK outlook yesterday, after the election outcome. S&P raised the UK’s outlook to stable from negative while Fitch took the UK’s rating off its watch negative list. It did though keep its broader outlook at negative. Note here that whilst the Conservative majority means the Brexit divorce deal will pass Parliament easily, in all likelihood, the outlook is subject to uncertainties still. Not least, as noted above, PM Johnson is legislating to ensure that the UK does not extend the transition period beyond end-2020, raising the risk of a cliff edge at that point.

UK inflation data due

UK CPI inflation eased from 1.7% (y/y) to a near three-year low of 1.5% in October. This was driven entirely by the biannual adjustment of the Ofgem energy price cap, which (on average) was reduced by £75 to £1179. Resultantly, this lowered electricity and gas prices by a collective 4.4% over the month which in-turn subtracted around 0.2pp from inflation. Other influences on the CPI basket offset one-another, leaving the ‘core’ measure (which excludes food, energy, alcohol and tobacco prices) steady at 1.7%. 

However, we expect that CPI inflation will slip even further in November. For one, the absence of a Budget this year means that last November’s rise in tobacco duty will not be repeated. We also look for a downward correction in clothing and footwear prices following a sharp rise in October. Based on these factors, we look for the targeted CPI rate to drop to 1.4% and for the ‘core’ measure to ease to 1.6% in November. Nevertheless, the risks to our forecasts lie to the downside and so we would not discount the possibility of even lower outturns for both inflation metrics.

Economic Releases

UK 09.30 CPI

EU 10.00 HICP