Release Date: September 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dalata Hotel Group PLC (FRA:DHG, Financial) reported a 6% increase in revenues to EUR302 million and a 4% increase in adjusted EBITDA to EUR108 million for the first half of 2024.
- The company achieved a strong return on invested capital of 12.6% for the six-month period ended June 30, 2024.
- Dalata Hotel Group PLC (FRA:DHG) announced an increase in interim dividends to EUR0.041 and a share buyback of EUR30 million.
- The company opened four new hotels in the UK, adding 400 more rooms to its portfolio, demonstrating its growth strategy.
- Dalata Hotel Group PLC (FRA:DHG) has a low gearing ratio of 1.3 times net debt over EBITDA, providing capacity for further growth opportunities.
Negative Points
- The EBITDA margin decreased to 39.4% from 40.6% in H1 2023, indicating a slight decline in profitability.
- Free cash flow for the six-month period was EUR48 million, which is behind the level achieved for the first half of 2023.
- The company faced significant increases in labor costs, with national minimum wage and national living wage in the UK rising by approximately 20%.
- RevPAR for the group decreased by 1% on a like-for-like basis, reflecting softer trading conditions.
- Profit after tax declined by 15% to EUR35.8 million, primarily due to the impact of adjusting items and underlying performance.
Q & A Highlights
Dalata Hotel Group PLC (FRA:DHG) Earnings Call Highlights
Q: Can you elaborate on the short-term weakness in Dublin and the medium-term outlook?
A: Dermot Crowley, CEO: The Dublin market has seen some short-term softness due to increased supply and softer domestic demand. However, the medium-term outlook remains positive, driven by strong economic fundamentals, population growth, and robust corporate demand.
Q: What is the rationale behind the share buyback program?
A: Dermot Crowley, CEO: The share buyback reflects our strong free cash flow and disciplined capital allocation strategy. It does not indicate a reduction in growth ambitions. We continue to invest in new properties and maintain our return criteria.
Q: How are you managing cost inflation, and are there more efficiency projects planned?
A: Carol Phelan, CFO: We have implemented several efficiency projects that have already yielded savings. We continue to focus on innovation and efficiency to mitigate cost pressures, particularly in labor and energy.
Q: Can you provide more details on the impact of domestic consumer behavior on your performance?
A: Dermot Crowley, CEO: We have observed a softening in demand from domestic consumers across our markets, particularly in Ireland and the UK. However, international demand remains strong, and we continue to see good leisure demand.
Q: What are your plans for further growth in Continental Europe and the UK?
A: Shane Casserly, Deputy CEO: We aim to add over 6,500 rooms in the medium term, focusing on regional UK, London, and large European cities. We remain disciplined in our growth strategy, ensuring opportunities meet our strict investment criteria.
Q: How are smaller peers managing cost pressures, and what impact does this have on the market?
A: Carol Phelan, CFO: Smaller peers may struggle more with cost pressures, potentially leading them to push rates higher. This could benefit us as we continue to focus on efficiency and maintaining strong conversion rates.
Q: What is the current state of the leasing market for new hotels?
A: Shane Casserly, Deputy CEO: The leasing market is showing signs of reopening, with new entrants and improved terms compared to last year. We are seeing increased interest from institutional investors.
Q: How are the changes to your website and direct bookings benefiting the company?
A: Dermot Crowley, CEO: We have seen a 6% increase in direct bookings, which now account for 14.1% of total bookings. This reduces commission costs and enhances our direct relationship with customers.
Q: Can you provide more color on the impairment charge taken in H1?
A: Carol Phelan, CFO: The impairment charge is in line with our valuation policy and reflects adjustments based on current market conditions. There is no specific issue; it is part of our regular review process.
Q: What are your expectations for OpEx inflation in 2025?
A: Carol Phelan, CFO: We expect lower wage inflation compared to the past two years, with anticipated increases in the 6-7% range. Energy costs should also continue to decrease, supported by our hedging strategy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
