Dalata Hotel Group Plc (LON:DAL) is preparing to reward shareholder with their first dividends later this year as it completes a key phase of expansion.
The Irish hotel operator, which owns the Maldron and Clayton brands, this year intends to ‘open’ some 1,000 new rooms across its portfolio.
It will mark another notable growth catalyst for the company, which according to today’s financial results, is already on a strong upwards trajectory.
On Tuesday, Dalata reported a strong year of revenue and profit growth, and told investors that current trading is slightly ahead of expectations. Revenue increased by 19.9% to €348.5mln, up from €290.6mln in the previous year, while pre-tax profit jumped 75.3% to €77.3mln. Earnings per share, meanwhile, increased by 94.8% to 37.2 Euro cents.
Dalata improved occupancy rates to 83.1%, up 100 basis points from the preceding year, and the average room rate also increase to €106.48 from €97.60. The measure of revenue per available room (typically referred to as RevPAR) rose to €88.51, up from €80.20.
Significantly for shareholders, the company said it plans to start paying dividends from 2018 onwards and that it would adopt a ‘progressive’ dividend policy - with the expectation that it will pay out between 20% and 30% of profit after tax.
Dalata generating a lot of cash
“We’re producing a lot of cash at the moment, and that’s been going toward building this pipeline [of new rooms] that’s opening this year,” Dermot Crowley, Dalata deputy chief executive.
He added: “We think now is the right time for us to start paying dividends because we would be close to finishing the development pipeline, so we have the availability in the headroom to pay for it.”
“We’re setting out at a conservative level, we’re comfortable we can pay that and as things change and as opportunities change, we’ll keep on reassessing that.”
The company’s maiden dividend, which will be the interim payment for 2018, is expected to be declared in September’s half year results.
Pat McCann, Dalata chief executive, in Tuesday’s statement, said: “"2017 was another exciting time for Dalata and I am delighted with the progress we have made,” said Pat McCann, Dalata chief executive.
McCann added: “we invested in technology to support our processes and ensure we are able to deliver our long-term growth strategy.”
Expanding on both sides of Irish Sea
Dalata continued to expand its operation, with its current pipeline containing 2,200 new rooms - and around 1,000 of those are due to become available during 2018.
It has four new hotels opening this year (two in Dublin, one in Belfast and Cork), delivering a total of 727 new rooms and creating 500 new jobs on the island of Ireland. Additionally, hotels in Dublin and Galway are being extended to add 253 rooms later this year.
Construction is expected to start on the renovation of the Tara Towers project, which will comprise 140 new rooms and 69 residential units.
Next year, it is planning to open a 264-room Maldron hotel in Newcastle. The company also has agreements to lease new hotel developments in Glasgow and Manchester, for a total of 850 rooms.
During 2017, the company acquired the 174-room Hotel La Tour Birmingham for €34.2mln in July, and executed a sale and leaseback deal for the site.
On the outskirts of Dublin, the company acquired business and 257 rooms at Clayton Hotel Liffey Valley for €33.6mln.