Statement of Directors’ Responsibilities

in respect of the Annual Report and the Financial Statements

The Directors are responsible for preparing the annual report and the consolidated and Company financial statements, in accordance with applicable law and regulations.

Company law requires the Directors to prepare consolidated and Company financial statements for each financial year. Under that law, the Directors are required to prepare the consolidated financial statements in accordance with IFRS as adopted by the European Union and applicable law including Article 4 of the IAS Regulation. The Directors have elected to prepare the Company financial statements in accordance with IFRS as adopted by the European Union as applied in accordance with the provisions of the Companies Act 2014.

Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the Group and Company and of the Group’s profit or loss for that year. In preparing the consolidated and Company financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
• assess the Group’s and Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
• use the going concern basis of accounting unless they either intend to liquidate the Group or Company or to cease operations, or have no realistic alternative but to do so.

The Directors are also required by the Transparency (Directive 2004/109/EC) Regulations 2007 and the Transparency Rules of the Central Bank of Ireland to include a management report containing a fair review of the business and a description of the principal risks and uncertainties facing the Group.

The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the assets, liabilities, financial position and profit or loss of the Company and which enable them to ensure that the financial statements of the Company comply with the provisions of the Companies Act 2014. The Directors are also responsible for taking all reasonable steps to ensure such records are kept by the Company’s subsidiaries which enable them to ensure that the financial statements of the Group comply with the provisions of the Companies Act 2014 and Article 4 of the IAS Regulation. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for safeguarding the assets of the Company and the Group, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are also responsible for preparing a Directors’ Report that complies with the requirements of the Companies Act 2014.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s and Company’s website www.dalatahotelgroup.com. Legislation in the Republic of Ireland concerning the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement as required by the Transparency Directive and UK Corporate Governance Code.

Each of the Directors, whose names and functions are listed in the Board of Directors section of this Annual Report, confirm that, to the best of each person’s knowledge and belief:

• The consolidated financial statements, prepared in accordance with IFRS as adopted by the European Union, and the Company financial statements, prepared in accordance with IFRS as adopted by the European Union as applied in accordance with the provisions of the Companies Act 2014, give a true and fair view of the assets, liabilities, and financial position of the Group and Company at 31 December 2023 and of the profit of the Group for the year then ended;
• The Directors’ Report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that they face; and
• The Annual Report and financial statements, taken as a whole, provides the information necessary to assess the Group’s performance, business model and strategy and is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.

On behalf of the Board

Consolidated statement of profit or loss and other comprehensive income

for the year ended 31 December 2023

Consolidated statement of financial position

at 31 December 2023

On behalf of the Board:

Consolidated statement of changes in equity

for the year ended 31 December 2023

Consolidated statement of changes in equity

for the year ended 31 December 2022

Consolidated statement of cash flows

for the year ended 31 December 2023

Notes to the consolidated financial statements

forming part of the consolidated financial statements

1 Material accounting policies

General information and basis of preparation

Dalata Hotel Group plc (the ‘Company’) is a Company domiciled in the Republic of Ireland. The Company’s registered office is Termini, 3 Arkle Road, Sandyford Business Park, Dublin 18. The consolidated financial statements of the Company for the year ended 31 December 2023 include the Company and its subsidiaries (together referred to as the ‘Group’). The financial statements were authorised for issue by the Directors on 28 February 2024.

The consolidated financial statements have been prepared in accordance with IFRS, as adopted by the EU. In the preparation of these consolidated financial statements the accounting policies set out below have been applied consistently by all Group companies.

The preparation of financial statements in accordance with IFRS as adopted by the EU requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting year. Such estimates and judgements are based on historical experience and other factors, including expectation of future events, that are believed to be reasonable under the circumstances and are subject to continued re-evaluation. Actual outcomes could differ from those estimates.

In preparing these consolidated financial statements, the key judgements and estimates impacting these consolidated financial statements were as follows:

Significant judgements

• Carrying value of property measured at fair value (note 15).

Key sources of estimation uncertainty

• Carrying value of property measured at fair value (note 15); and
• Carrying value of goodwill and right-of-use assets including assumptions underpinning value in use (‘VIU’) calculations in the impairment tests (notes 12, 14, 16).

Measurement of fair values

A number of the Group’s accounting policies and disclosures require the measurement of assets and liabilities at fair value. When measuring the fair value of an asset or liability, the Group uses observable market data as far as possible, with non-financial assets being measured on a highest and best-use basis. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Further information about the assumptions made in measuring fair values is included in note 27 – Financial instruments and risk management (in relation to financial assets and financial liabilities) and note 15 – Property, plant and equipment.

(i) Going concern

The year ended 31 December 2023 saw the Group trade strongly and continue the execution of its growth strategy. The strong trade, the full year impact of hotels added during 2022 and the addition of three hotels during 2023 has led to an increase in Group revenue from hotel operations from €515.7 million to €607.7 million, as well as net cash generated from operating activities in the year of €171.4 million (2022: €207.9 million).

The Group remains in a very strong financial position with significant financial headroom. The Group has cash and undrawn loan facilities of €283.5 million (2022: €455.7 million).

The Group is in full compliance with its covenants at 31 December 2023. In accordance with the amended and restated facility agreement entered into by the Group on 2 November 2021 with its banking club, the Group’s banking covenants have reverted to Net Debt to EBITDA and Interest Cover from 30 June 2023. This replaces the Net Debt to Value covenant and liquidity minimum covenants which were temporarily in place up to 30 June 2023. At 31 December 2023, the Net Debt to EBITDA covenant limit is 4.0x and the Interest Cover minimum is 4.0x. The Group’s Net Debt to EBITDA, as defined in the Group's bank facility agreement which is equivalent to Net Debt to EBITDA after rent, for the year ended 31 December 2023 is 1.3x (APM (xv)) and Interest Cover is 19.5x (APM (xvi)).

Current base projections show compliance with all covenants at all future testing dates and significant levels of headroom.

The Directors have considered the above, with all available information, and the current liquidity and financial position in assessing the going concern of the Group. On this basis, the Directors have prepared these consolidated financial statements on a going concern basis. Furthermore, they do not believe there is any material uncertainty related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.

(ii) Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) and their interpretations issued by the International Accounting Standards Board (‘IASB’) as adopted by the EU and those parts of the Companies Act 2014 applicable to companies reporting under IFRS and Article 4 of the IAS Regulation.

The following standards and interpretations were effective for the Group for the first time from 1 January 2023:

• Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on 12 February 2021).
• Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (issued on 12 February 2021).
• Amendments to IAS 12 Income taxes: International Tax Reform – Pillar Two Model Rules
• Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (issued on 7 May 2021).
• IFRS 17 Insurance Contracts (issued on 18 May 2017) including Amendments to IFRS 17 (issued on 25 June 2020).
• Amendments to IFRS 17 Insurance Contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information (issued on 9 December 2021).

With the exception of the above amendments to IAS 12 Income Taxes, the above standards, amendments and interpretations have no material impact on the consolidated financial statements of the Group.

Accounting policies

The accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements as at and for the year ended 31 December 2022, apart from the amendments to IAS 12.

Amendments to IAS 12, effective for reporting periods beginning on or after 1 January 2023, clarify that the initial recognition exemption of deferred tax assets and liabilities does not apply to transactions that give rise to equal and offsetting temporary differences. The amendments require separate presentation of deferred tax assets and liabilities arising on right-of-use assets and corresponding lease liabilities recognised under IFRS 16. The comparative gross deferred tax assets and deferred tax liabilities for 2022 have been restated in the deferred tax note in accordance with these amendments. The IAS 12 offsetting principle has been applied for deferred tax balances shown on the face of the Consolidated Statement of Financial Position. The changes to the deferred tax liabilities and deferred tax assets offset such that the net impact on the face of the Consolidated Statement of Financial Position at 31 December 2022 and the net impact on retained earnings was nil. (note 2).

Prior period restatement

Certain comparative amounts in the Consolidated Statement of Profit or Loss and Other Comprehensive Income have been re-presented as a result of a prior period restatement (note 2).

Standards issued but not yet effective

The following amendments to standards have been endorsed by the EU, are available for early adoption and are effective from 1 January 2024. The Group has not adopted these amendments to standards early, and instead intends to apply them from their effective date as determined by the date of EU endorsement. The potential impact of these amendments to standards on the Group is under review:

• Amendments to IAS 1 Classification of Liabilities as Current or Non-Current, and Non-current Liabilities with Covenants.
• Amendments to IFRS 16 Lease Liability in a Sale and Leaseback.

The following standards and interpretations are not yet endorsed by the EU. The potential impact of these standards on the Group is under review:

• Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Arrangements. IASB effective date 1 January 2024
• Amendments to IAS 21 Lack of exchangeability. IASB effective date 1 January 2025.
• Amendments to IFRS 10 Consolidated Financial Statements and IAS28 Investments in Associates and Joint Ventures for sale or contribution of Assets between an Investor and its Associate or Joint Venture. Effective date deferred indefinitely.

(iii) Functional and presentation currency

These consolidated financial statements are presented in Euro, being the functional currency of the Company and the majority of its subsidiaries. All financial information presented in Euro has been rounded to the nearest thousand or million and this is clearly set out in the financial statements where applicable.

(iv) Basis of consolidation

The consolidated financial statements include the financial statements of the Company and all of its subsidiary undertakings.

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 at least 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.

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. Where the Group solely purchases the freehold interest in a property, this is accounted for as an asset purchase and not as a business combination on the basis that the asset(s) purchased do not constitute a business. Asset purchases are accounted for as additions to property, plant and equipment.

Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated.

(v) Revenue recognition

Revenue represents sales (excluding VAT) of goods and services net of discounts provided in the normal course of business and is recognised when services have been rendered.

Revenue is derived from hotel operations and includes the rental of rooms, food and beverage sales, car park revenue and leisure centre membership in leased and owned hotels operated by the Group. Revenue is recognised when rooms are occupied and food and beverages are sold. Car park revenue is recognised when the service is provided. Leisure centre membership revenue is recognised over the life of the membership.

Management fees are earned from hotels managed by the Group. Management fees are normally a percentage of hotel revenue and/or profit and are recognised when earned and recoverable under the terms of the management agreement. Management fee income is included within other income.

Rental income from investment property is recognised on a straight-line basis over the term of the lease and is included within other income.

(vi) Sales discounts and allowances

The Group recognises revenue on a gross revenue basis and makes various deductions to arrive at net revenue as reported in profit or loss. These adjustments are referred to as sales discounts and allowances.

(vii) Income from residential development activities

Income in respect of a contract with a customer for the sale of residential property is recognised when the performance obligations inherent in the contract are completed. In 2022, the income related to the contract for the sale of the Merrion Road residential units which the Group developed as part of the overall development of the new Maldron Hotel Merrion Road on the site of the former Tara Towers hotel. Where there is variable consideration in the form of withheld retention receipts included in the transaction price, income is recognised for this variable consideration to the extent that it is highly probable it is receivable and is measured based on the most likely outcome.

Income from residential development activities has been presented within gross profit, separately from revenue from hotel operations (note 2).

(viii) Government grants and government assistance

Government grants represent the transfers of resources to the Group from the governments in Ireland and the UK in return for past or future compliance with certain conditions relating to the Group’s operating activities. Income-related government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises, as expenses, the related costs for which the grants are intended to compensate. The Group accounts for these government grants in profit or loss via offseting against the related expenditure.

Government assistance is action by a government which is designed to provide an economic benefit specific to the Group or subsidiaries who qualify under certain criteria. Government assistance received by the Group includes a waiver of commercial rates for certain hotel properties and also the deferral of payment of payroll taxes and VAT liabilities and has been disclosed in these consolidated financial statements.

(ix) Leases

At inception of a lease contract, the Group assesses whether a contract is, or contains, a lease. If the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration, it is recognised as a lease.

To assess the right to control, the Group assesses whether:

• the contract involves the use of an identified asset;
• the Group has the right to obtain substantially all of the economic benefits from the use of the asset; and
• the Group has the right to direct the use of the asset.

A lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. The Group uses its incremental borrowing rate as the discount rate, which is defined as the estimated rate of interest that the lessee would have to pay to borrow, over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The incremental borrowing rate is calculated for each individual lease.

The estimated incremental borrowing rate for each leased asset is derived from country-specific risk-free interest rates over the relevant lease term, adjusted for the finance margin attainable by each lessee and asset-specific adjustments designed to reflect the underlying asset’s location and condition.

Lease payments included in the measurement of the lease liability comprise the following:

• fixed payments (including in-substance fixed payments) less any lease incentives receivable;
• variable lease costs that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable under a residual value guarantee;
• the exercise price under a purchase option that the Group is reasonably certain to exercise; and
• penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

Variable lease costs linked to future performance or use of an underlying asset are excluded from the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in administrative expenses in profit or loss.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect lease payments.

The Group remeasures the lease liability where lease payments change due to changes in an index or rate, changes in expected lease term or where a lease contract is modified. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of any costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset, or a component thereof, or the end of the lease term. Right-of-use assets are reviewed on an annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Group applies IAS 36 Impairment of Assets to determine whether a cash-generating unit with a right-of-use asset is impaired and accounts for any identified impairments through profit or loss. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The Group also applies IAS 36 Impairment of Assets to any cash-generating units, which have right-of-use assets which were previously impaired, to assess whether previous impairments should be reversed. A reversal of a previous impairment charge is accounted for through profit or loss and only increases the carrying amount of the right-of-use asset to a maximum of what it would have been if the original impairment charges had not been recognised in the first place.

The Group applies the fair value model in IAS 40 Investment Property to right-of-use assets that meet the definition of investment property.

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of fixtures, fittings and equipment that have a lease term of 12 months or less and leases of low-value assets. Assets are considered low value if the value of the asset when new is less than €5,000. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(x) Share-based payments

The grant date fair value of equity-settled share-based payment awards and options granted to employees is recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards and options.

This incorporates the effect of market-based conditions, where applicable, and the estimated fair value of equity-settled share-based payment awards issued with non-market performance conditions.

The amount recognised as an expense is adjusted to reflect the number of awards and options for which the related service and any non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that met the related service and non-market performance conditions at the vesting date. The amount recognised as an expense is not adjusted for market conditions not being met.

On vesting of the equity-settled share-based payment awards and options, the cumulative expense recognised in the share-based payment reserve is transferred directly to retained earnings. An increase in ordinary share capital and share premium, in the case where the price paid per share is higher than the cost per share, is recognised reflecting the issuance of shares as a result of the vesting of the awards and options.

The dilutive effect of outstanding awards is reflected as additional share dilution in calculating diluted earnings per share.

(xi) Tax

Tax charge or credit comprises current and deferred tax. Tax charge or credit is recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in other comprehensive income or equity.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for taxation purposes except for the initial recognition of goodwill and other assets and liabilities that do not affect accounting profit or taxable profit at the date of recognition and at the time of the transaction, do not give rise to taxable and deductible temporary differences.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Deferred tax liabilities are recognised where the carrying value of land and buildings for financial reporting purposes is greater than their tax cost base.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable future taxable profits will be available against which the temporary difference can be utilised.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Such reductions are reversed when the probability of future taxable profits improves.

(xii) Earnings per share (‘EPS’)

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

Shares are only treated as dilutive if their dilution results in a decreased earnings per share or increased loss per share.

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 or non-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 that have yet to be received related to the awards.

(xiii) 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.

Assets under construction include sites where new hotels are currently being developed and significant development projects at hotels which are currently operational. These sites and the capital investment made are recorded at cost. Borrowing costs incurred in the construction of major assets or development projects which take a substantial period of time to complete are capitalised in the financial period in which they are incurred. Once construction is complete and the hotel is operating, the assets will be transferred to land and buildings and fixtures, fittings and equipment at cost. The land and buildings element will subsequently be measured at fair value. Depreciation will commence when the assets are available for use.

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 Business Combinations, where the deemed cost is its acquisition date fair value. In the application of the Group’s accounting policy, judgement is exercised by management in the determination of fair value of land and buildings at each reporting date, residual values and useful lives.

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 as follows:

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 and IFRS 13 Fair Value Measurement.

Surpluses on revaluation are recognised in other comprehensive income and accumulated in equity in the revaluation reserve, except to the extent that they reverse impairment losses previously charged to profit or loss, 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 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 amounts, the assets or cash-generating units are written down to their recoverable amount. Recoverable amount is the greater of fair value less costs to sell and VIU. VIU 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.

The Group also applies IAS 36 Impairment of Assets to any cash-generating units, with fixtures, fittings and equipment which were previously impaired and which are not revalued, to assess whether previous impairments should be reversed. A reversal of a previous impairment charge is accounted for through profit or loss and only increases the carrying amount of the fixtures, fittings and equipment to a maximum of what it would have been if the original impairment charges had not been recognised in the first place.

(xiv) Investment property

Investment property is held either to earn rental income, or for capital appreciation, 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 revalued 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.

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 and IFRS 13 Fair Value Measurement.

(xv) Goodwill

Goodwill represents the excess of the fair value of the consideration for an acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. Goodwill is the future economic benefits arising from other assets in a business combination that are not individually identified and separately recognised.

Goodwill is measured at its initial carrying amount less accumulated impairment losses. The carrying amount of goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. For the purposes of impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the ‘cash-generating unit’).

The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

The recoverable amount of a cash-generating unit is the greater of its VIU and its fair value less costs to sell. In assessing VIU, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects a current market assessment of the time value of money and the risks specific to the asset.

An impairment loss is recognised in profit or loss if the carrying amount of a cash-generating unit exceeds its estimated recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the units on a pro-rata basis. Impairment losses of goodwill are not reversed once recognised.

The impairment testing process requires management to make significant judgements and estimates regarding the future cash flows expected to be generated by the cash-generating unit. Management evaluates and updates the judgements and estimates which underpin this process on an ongoing basis.

The impairment methodology and key assumptions used by the Group for testing goodwill for impairment are outlined in notes 12 and 14.

The assumptions and conditions for determining impairment of goodwill reflect management’s best estimates and judgements, but these items involve significant inherent uncertainties, many of which are not under the control of management. As a result, accounting for such items could result in different estimates or amounts if management used different assumptions or if different conditions occur in the future.

(xvi) Intangible assets other than goodwill

An intangible asset is only recognised where the item lacks a physical presence, is identifiable, non-monetary, controlled by the Group and expected to provide future economic benefits to the Group.

Intangible assets are measured at cost (or fair value when acquired through business combinations), less accumulated amortisation and impairment losses.

Intangible assets are amortised over the period of their expected useful lives by charging equal annual instalments to profit or loss. The useful life used to amortise intangible assets relates to the future performance of the asset and management’s judgement as to the period over which economic benefits will be derived from the asset. The estimated total useful life of the Group’s intangible assets is 5 years.

(xvii) Inventories

Inventories are stated at the lower of cost (using the first-in, first-out (FIFO) basis) and net realisable value. Inventories represent assets that are sold in the normal course of business by the Group and consumables.

(xviii) Contract fulfilment costs

Contract fulfilment costs are stated at the lower of cost or recoverable amount. Contract fulfilment costs represent assets that are to be sold by the Group but do not form part of the primary trading activities. Costs capitalised as contract fulfilment costs include costs incurred in fulfilling the specific contract. The costs must enhance the asset, be used in order to satisfy the obligations inherent in the contractual arrangement and should be recoverable. Costs which are not recoverable are written off to profit or loss as incurred. Contract fulfilment costs are released to profit or loss on completion of the sale to which the contract relates.

(xix) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less, which are carried at amortised cost.

(xx) Trade and other receivables

Trade and other receivables are stated initially at their fair value and subsequently at amortised cost, less any expected credit loss provision. The Group applies the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. Bad debts are written off to profit or loss on identification.

(xxi) Trade and other payables

Trade and other payables are initially recorded at fair value, which is usually the original invoiced amount. Fair value for the initial recognition of payroll tax liabilities is the amount payable stated on the payroll submission filed with the tax authorities. Fair value for the initial recognition of VAT liabilities is the net amount of VAT payable to, and recoverable from, the tax authorities. Trade and other payables are subsequently carried at amortised cost using the effective interest method. Liabilities are derecognised when the obligation under the liability is discharged, cancelled or expired.

(xxii) Finance costs

Finance costs comprise interest expense on borrowings and related financial instruments, commitment fees and other costs relating to financing of the Group.

Interest expense on loans and borrowings is recognised using the effective interest method. The effective interest rate of a financial liability is calculated on initial recognition of a financial liability. In calculating interest expense, the effective interest rate is applied to the amortised cost of the liability.

If a financial liability is deemed to be non-substantially modified (less than 10 percent different) (see policy (xxvii)), the amortised cost of the liability is recalculated by discounting the modified cash flows at the original effective interest rate and the resulting modification gain or loss is recognised in finance costs in profit or loss. For floating-rate financial liabilities, the original effective interest rate is adjusted to reflect the current market terms at the time of the modification.

Finance costs incurred for qualifying assets, which take a substantial period of time to construct, are added to the cost of the asset during the period of time required to complete and prepare the asset for its intended use or sale. The Group uses two capitalisation rates being the weighted average interest rate after the impact of hedging instruments for Sterling borrowings which is applied to UK qualifying assets and the weighted average interest rate for Euro borrowings which is applied to Republic of Ireland qualifying assets. Capitalisation commences on the date on which the Group undertakes activities that are necessary to prepare the asset for its intended use. Capitalisation of borrowing costs ceases when the asset is ready for its intended use.

Finance costs also include interest on lease liabilities.

(xxiii) Foreign currency

Transactions in currencies other than the functional currency of a Group entity are recorded at the rate of exchange prevailing on the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated into the respective functional currency at the relevant rates of exchange ruling at the reporting date. Foreign exchange differences arising on translation are recognised in profit or loss.

The assets and liabilities of foreign operations are translated into Euro at the exchange rate ruling at the reporting date. The income and expenses of foreign operations are translated into Euro at rates approximating the exchange rates at the dates of the transactions.

Foreign exchange differences arising on the translation of foreign operations are recognised in other comprehensive income and are included in the translation reserve within equity.

(xxiv) Provisions and contingent liabilities

A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

The provision in respect of self-insured risks includes projected settlements for known claims and incurred but not reported claims.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of an outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of an outflow of economic benefits is remote.

(xxv) Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares are recognised as a deduction from equity, net of any tax effects. Merger relief is availed of by the Group where possible.

(xxvi) Loans and borrowings

Loans and borrowings are recognised initially at the fair value of the consideration received, less directly attributable transaction costs. Subsequent to initial recognition, loans and borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in profit or loss over the period of the borrowings on an effective interest rate basis. Directly attributable transaction costs are amortised to profit or loss on an effective interest rate basis over the term of the loans and borrowings. This amortisation charge is recognised within finance costs. Commitment fees incurred in connection with loans and borrowings are expensed as incurred to profit or loss.

(xxvii) Derecognition of financial liabilities

The Group removes a financial liability from its statement of financial position when it is extinguished (when its contractual obligations are discharged, cancelled, or expire).

The Group also derecognises a financial liability when the terms and the cash flows of a modified liability are substantially different. The terms are substantially different if the discounted present value of the cash flows under the new terms, discounted using the original effective interest rate, including any fees paid to lenders net of any fees received, is at least 10 percent different from the discounted present value of the remaining cash flows of the original financial liability, discounted at the original effective interest rate, (the ‘10% test’). In addition, a qualitative assessment is carried out of the new terms in the new facility agreement to determine whether there is a substantial modification.

If the financial liability is deemed substantially modified, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability derecognised and consideration paid is recognised in profit or loss.

If the financial liability is deemed non-substantially modified, the amortised cost of the liability is recalculated by discounting the modified cash flows at the original effective interest rate and the resulting modification gain or loss is recognised in profit or loss. Any costs and fees directly attributable to the modified financial liability are recognised as an adjustment to the carrying amount of the modified financial liability and amortised over its remaining term by re-computing the effective interest rate on the instrument.

(xxviii) Derivative financial instruments

The Group’s borrowings expose it to the financial risks of changes in interest rates. The Group uses derivative financial instruments such as interest rate swap agreements to hedge these exposures.

Interest rate swaps convert part of the Group’s Sterling denominated borrowings from floating to fixed interest rates. The Group does not use derivatives for trading or speculative purposes.

Derivative financial instruments are recognised at fair value on the date a derivative contract is entered into plus directly attributable transaction costs and are subsequently re-measured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

The full fair value of a hedging derivative is classified as a non-current asset or non-current liability if the remaining maturity of the hedging instrument is more than twelve months and as a current asset or current liability if the remaining maturity of the hedging instrument is less than twelve months.

The fair value of derivative instruments is determined by using valuation techniques. The Group uses its judgement to select the most appropriate valuation methods and makes assumptions that are mainly based on observable market conditions (Level 2 fair values) existing at the reporting date.

The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

(xxix) Cash flow hedge accounting

Cash flow hedge accounting is applied in accordance with IFRS 9 Financial Instruments. For those derivatives designated as cash flow hedges and for which hedge accounting is desired, the hedging relationship is documented at its inception. This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and its risk management objectives and strategy for undertaking the hedging transaction. The Group also documents its assessment, both at hedge inception and on a semi-annual basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, the effective part of any gain or loss on the derivative financial instrument is recognised in other comprehensive income and accumulated in equity in the hedging reserve. Any ineffective portion is recognised immediately in profit or loss as finance income or costs. The amount accumulated in equity is retained in other comprehensive income and reclassified to profit or loss in the same period or periods during which the hedged item affects profit or loss.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge accounting or the designation is revoked. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. However, if a hedged transaction is no longer anticipated to occur, the net cumulative gain or loss accumulated in equity is reclassified to profit or loss.

(xxx) Net investment hedges

Where relevant, the Group uses a net investment hedge, whereby the foreign currency exposure arising from a net investment in a foreign operation is hedged using borrowings held by a Group entity that is denominated in the functional currency of the foreign operation.

Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognised directly in other comprehensive income in the foreign currency translation reserve, to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognised in profit or loss. When the hedged part of a net investment is disposed of, the associated cumulative amount in equity is reclassified to profit or loss.

(xxxi) Adjusting items

Consistent with how business performance is measured and managed internally, the Group reports both statutory measures prepared under IFRS and certain alternative performance measures (‘APMs’) that are not required under IFRS. These APMs are sometimes referred to as ‘non-GAAP’ measures and include, amongst others, Adjusted EBITDA, Free Cashflow per Share, and Adjusted EPS.

The Group believes that the presentation of these APMs provides useful supplemental information which, when viewed in conjunction with the financial information presented under IFRS, provides stakeholders with a meaningful understanding of the underlying financial and operating performance of the Group.

Adjusted measures of profitability represent the equivalent IFRS measures adjusted to show the underlying operating performance of the Group and exclude items which are not reflective of normal trading activities or distort comparability either year on year or with other similar businesses.

2 Prior period restatements

Restatement of the Consolidated Statement of Profit or Loss and Other Comprehensive Income

During 2022, the Group completed the sale to Irish Residential Properties REIT (plc) (‘I-RES’) of the Merrion Road residential units which had been developed by the Group on the site of the former Tara Towers Hotel. Proceeds from the sale of these units were presented as revenue in the Consolidated Financial Statements for the year ended 31 December 2022. The related costs were presented as cost of sales.

The Financial Reporting Supervision Unit of IAASA subsequently reviewed the presentation and, in their judgement, determined that, whilst inextricably linked to the normal activity of hotel development, the residential unit development was not part of the Group’s ordinary activities and therefore should not be presented as Revenue as defined by IFRS 15 Revenue Recognition.

As there is no IFRS that covers this specific type of transaction (i.e. the transaction to build and sell residential units to a third party where they had been developed in conjunction with a hotel for own use) the Group had looked to the hierarchy in IAS 8.11 to select the most relevant and reliable accounting policy. IFRS 15 would be the standard typically used for the sale of inventories, therefore the Group determined that IFRS 15 would be the most appropriate standard to be used, by analogy, for the forward sale of the residential units and the ultimate completion of that sale.

The comparative figures as presented in the Consolidated Statement of Profit or Loss and Other Comprehensive Income have been amended for the following presentation corrections.

As this is a correction to the presentation of the above items within the Consolidated Statement of Profit or Loss and Other Comprehensive Income only, there are no corrections required to basic or diluted earnings per share nor are there any corrections to the Consolidated Statement of Financial Position at the beginning of the current or prior year.

Restatement of the deferred tax note

Amendments to IAS 12, effective for reporting periods beginning on or after 1 January 2023, clarify that the initial recognition exemption of deferred tax assets and liabilities does not apply to transactions that give rise to equal and offsetting temporary differences. The IAS 12 amendments require separate presentation of deferred tax assets and liabilities arising on right-of-use assets and corresponding lease liabilities recognised under IFRS 16, in the deferred tax note, with retroactive effect from 1 January 2022. These are offset on an individual entity basis and presented net in the statement of financial position.

The comparative gross deferred tax assets and deferred tax liabilities for 2022 have been restated in the deferred tax note in accordance with these amendments. The changes to the deferred tax liabilities and deferred tax assets offset such that the net impact on the face of the Consolidated Statement of Financial Position at 31 December 2022 and the net impact on retained earnings was nil (note 26).

3 Operating segments

The Group’s 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 Executive Directors.

In the 2022 financial statements, the results of Clayton Hotel Düsseldorf were disclosed as part of the Dublin segment due to their immateriality in the context of group results (less than 3% of total segmental revenue). Due to additions to the Group’s Continental Europe portfolio in 2023, the Continental Europe segment is now to be presented separately below. The 2022 results of Clayton Hotel Düsseldorf have been reflected in the Continental Europe segment below to improve comparability.

The Group segments its leased and owned business by geographical region within which the hotels operate being Dublin, Regional Ireland, the UK and Continental Europe. These comprise the Group’s four reportable segments.

Dublin, Regional Ireland, the UK and Continental Europe segments

These segments are concerned with hotels that are either owned or leased by the Group. As at 31 December 2023, the Group owns 28 hotels (31 December 2022: 27 hotels) and has effective ownership of two further hotels which it operates (31 December 2022: one hotel). It also owns the majority of one further hotel it operates (31 December 2022: one hotel). The Group also leases 19 hotel buildings from property owners (31 December 2022: 18 hotels) and is entitled to the benefits and carries the risks associated with operating these hotels.

The Group’s revenue from leased and owned hotels is primarily derived from room sales and food and beverage sales in restaurants, bars and banqueting. The main costs arising are payroll, cost of goods for resale, commissions paid on room sales, utilities, other operating costs, and, in the case of leased hotels, variable lease costs (where linked to turnover or profit) payable to lessors.

Segmental revenue for each of the geographical locations represents the operating revenue (room revenue, food and beverage revenue and other hotel revenue) from leased and owned hotels situated in the Group’s four reportable segments.

The year ended 31 December 2023 saw the Group trade strongly and continue the execution of its growth strategy. The strong trade, the full year impact of hotels added during 2022 and the addition of three hotels during 2023 has led to an increase in Group revenue from hotel operations from €515.7 million to €607.7 million.

Group EBITDA represents earnings before interest on lease liabilities, other interest and finance costs, tax, depreciation of property, plant and equipment and right-of-use assets and amortisation of intangible assets.

Adjusted EBITDA is presented as an alternative performance measure to show the underlying operating performance of the Group excluding items which are not reflective of normal trading activities or distort comparability either year on year or with other similar businesses. Consequently, Adjusted EBITDA represents Group EBITDA before:

• Net property revaluation movements through profit or loss (note 5);
• Net reversal of previous impairment charges of right-of-use assets (note 16);
• Net reversal of previous impairment charges of fixtures, fittings, and equipment (note 15);
• Income from sale of Merrion Road residential units (note 17);
• Release of costs capitalised for Merrion Road residential units (note 17);
• Gain on disposal of property, plant and equipment (note 6, 15);
• Hotel pre-opening expenses, which relate primarily to payroll expenses, sales and marketing costs and training costs of new staff, that are incurred by the Group in advance of new hotel openings (note 5); and
• Acquisition-related costs (note 5).

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. Also included in central costs is the unwinding of the discount on insurance provisions of €0.3 million (2022: €0.7 million) and the reversal of prior period insurance provisions of €0.9 million (2022: €Nil) (note 23). Share-based payments expense is presented separately from central costs as this expense relates to employees across the Group (note 9).

‘Segmental results – EBITDA’ for Dublin, Regional Ireland, the UK and Continental Europe represents the ‘Adjusted EBITDA’ for each geographical location before central costs, share-based payments expense and other income. It is the net operational contribution of leased and owned hotels in each geographical location.

‘Segmental results – EBITDAR’ for Dublin, Regional Ireland, the UK and Continental Europe represents ‘Segmental results – EBITDA’ before variable lease costs.

Disaggregated revenue information

Disaggregated segmental revenue is reported in the same way as it is reviewed and analysed internally by the chief operating decision makers, primarily, the Executive Directors. The key components of revenue reviewed by the chief operating decision makers are:

• Room revenue which relates to the rental of rooms in each hotel. Revenue is recognised when the hotel room is occupied, and the service is provided;
• Food and beverage revenue which relates to sales of food and beverages at the hotel property. Revenue is recognised at the point of sale; and
• Other revenue includes revenue from leisure centres, car parks, meeting room hire and other revenue sources at the hotels. Leisure centre revenue is recognised over the life of the membership while the other items are recognised when the service is provided.

Other geographical information

Assets and liabilities

The above information on assets, liabilities and revaluation reserve is presented by region as it does not form part of the segmental information routinely reviewed by the chief operating decision makers.

Loans and borrowings are categorised according to their underlying currency. The amortised cost of loans and borrowings was €254.4 million at 31 December 2023 (31 December 2022: €193.5 million). Drawn loans and borrowings consist of Euro Revolving Credit Facility (“RCF”) borrowings of €4.0 million (2022: €Nil) and Sterling denominated borrowings of £221.4 million (€254.7 million) which are classified as liabilities in the UK (31 December 2022: £176.5 million (€199.0 million)). All of the Sterling borrowings act as a net investment hedge as at 31 December 2023 (31 December 2022: £176.5 million (€199.0 million)) (note 24).

4 Statutory and other information

Hotel pre-opening expenses relate to costs incurred by the Group in advance of opening new hotels. In 2023, this related to Maldron Hotel Finsbury Park, London, a new hotel that opened during 2023. In 2022, this related to seven hotels, that opened throughout 2022. These costs primarily relate to payroll expenses, sales and marketing costs and training costs of new staff.

Variable lease costs relate to lease payments linked to performance which are excluded from the measurement of lease liabilities as they are not related to an index or rate or are not considered fixed payments in substance.

Auditor’s remuneration

Auditor’s remuneration for the audit of the Company financial statements was €20,000 (2022: €15,000). Other assurance services primarily relate to the review of the interim condensed consolidated financial statements.

Directors’ remuneration

Transactions with past directors in 2023 relate to gains associated with the shares issued on vesting of awards under the 2020 LTIP. This gain represents the difference between the quoted share price per ordinary share and the exercise price on the vesting date (note 9).

Retired director Stephen McNally received payment in lieu of annual leave upon cessation of employment on 28 February 2022, this sum is included in payments of €0.1 million to past directors reported in 2022.

Good leaver vesting of shares granted under Share Scheme 2020 for former directors in 2022 relates to 6,359 shares issued to two former directors. The weighted average share price at the date of exercise for the options exercised was €2.28

Details of the directors’ remuneration, interests in conditional share awards and compensation of former directors are set out in the Remuneration Committee report.

5 Administrative expenses

Other administrative expenses include costs related to payroll, marketing and general administration.

Commercial rates for the year ended 31 December 2023 are €14.9 million, net of a waiver of €0.3 million. As a result of the impact of Covid-19, commercial rates for the year ended 31 December 2022 of €12.0 million were net of a waiver of €3.0 million (note 10).

Net property revaluation movements through profit or loss relate to the net reversal of revaluation losses of €2.0 million through

profit or loss (note 15).

6 Other income

On 21 June 2022, the Group completed the sale of Clayton Crown Hotel, London, for net proceeds of £20.7 million (€24.1 million). As a result, the hotel property and related fixtures, fittings and equipment of £17.4 million (€20.2 million) were derecognised from the statement of financial position. A gain on disposal of £3.3 million (€3.9 million) was recognised in profit or loss for the year ended 31 December 2022 (note 15).

Income from managed hotels represents the fees and other income earned from services provided in relation to partner hotels which are not owned or leased by the Group.

Rental income from investment property relates to the following properties:

• Two commercial properties which are leased to third parties for lease terms of 25 and 30 years;
• A sub-lease of part of Clayton Hotel Cardiff, which is leased to a third party for a lease term of 20 years, with 9 years remaining at 31 December 2023; and
• A sub-lease of part of Clayton Hotel Düsseldorf, which is leased to a third party for a rolling lease term.

The fair value of the investment properties at 31 December 2023 is €2.0 million (2022: €2.0 million).

7 Finance costs

The Group uses interest rate swaps to convert the interest rate on part of its debt from floating rate to fixed rate (note 25). The cash flow hedge amount reclassified from other comprehensive income is shown separately within finance costs and primarily represents the additional interest received or paid by the Group as a result of the interest rate swaps. As at 31 December 2023, the Group has recognised derivative assets, in relation to these interest rate swaps, of €6.5 million (31 December 2022: €11.7 million). The derivative assets are due to the Group’s fixed interest rates being forecast to be lower than the variable interest rates forward curve applicable on sterling borrowings. Margins on the Group’s borrowings are set with reference to the Net Debt to EBITDA covenant levels and ratchet up or down accordingly.

Other finance costs include commitment fees and other banking and professional fees. Net foreign exchange gains or losses on financing activities relate principally to loans which did not form part of the net investment hedge (note 25).

Interest on loans and borrowings amounting to €2.0 million was capitalised to assets under construction on the basis that these costs were directly attributable to the construction of qualifying assets (note 15) (2022: €2.2 million). There was no interest on loans and borrowings capitalised for contract fulfilment costs in 2023 (2022: €0.4 million) (Note 17). The capitalisation rates applied by the Group, which were reflective of the weighted average interest cost in respect of Euro denominated borrowings and Sterling denominated borrowings for the relevant capitalisation period, were 4.2% (2022: 2.5%) and 3.2% (2022: 3.6%) respectively.

8 Personnel expenses

The average number of persons (full-time equivalents) employed by the Group (including Executive Directors), analysed by category, was as follows:

Full-time equivalents split by geographical region was as follows:

The aggregate payroll costs of these persons were as follows:

Payroll costs of €0.5 million (2022: €0.4 million) relating to the Group’s internal development employees were capitalised as these costs are directly related to development, lease and other construction work completed during the year ended 31 December 2023.

There were no wage subsidies received by the Group from the Irish and UK governments during the year ended 31 December 2023. During the year ended 31 December 2022, the Group availed of wage subsidies of €10.5 million from the Irish government (note 10).

9 Share-based payments expense

The total share-based payments expense for the Group’s employee share schemes charged to profit or loss during the year was €5.9 million (2022: €3.3 million), analysed as follows:

Details of the schemes operated by the Group are set out below:

Long Term Incentive Plans

During the year ended 31 December 2023, the Board approved the conditional grant of 1,552,080 ordinary shares (‘the Award’) pursuant to the terms and conditions of the Group’s 2017 Long Term Incentive Plan (‘the 2017 LTIP’). The Award was granted to senior employees across the Group (120 in total). Vesting of the Award is based on two independently assessed performance targets, 50% based on total shareholder return (‘TSR’) and 50% based on Free Cashflow Per Share (‘FCPS’). The performance period of this award is 1 January 2023 to 31 December 2025.

Threshold performance for the TSR condition, which is a market-based condition, is a performance measure against a bespoke comparator group of 21 listed peer companies in the travel and leisure sector, with threshold 25% vesting if the Group’s TSR over the performance period is ranked at the median compared to the TSR of the comparator group. If the Group’s TSR performance is at or above the upper quartile compared to the comparator group, the remaining 75% of the award will vest, with pro-rata vesting on a straight-line basis for performance in between these thresholds.

Threshold performance (25% vesting) for the FCPS condition, which is a non-market-based performance condition, is based on the achievement of FCPS of €0.498, as disclosed in the Group’s 2025 audited consolidated financial statements, with 100% vesting for FCPS of €0.608 or greater. The FCPS based awards will vest on a straight-line basis for performance between these points. FCPS targets may be amended in restricted circumstances if an event occurs which causes the Remuneration Committee to determine an amended or substituted performance condition would be more appropriate and not materially more or less difficult to satisfy. Participants are also entitled to receive a dividend equivalent amount in respect of their awards.

In addition to the above, the Board approved the conditional grant of 22,719 shares pursuant to the terms and conditions of the 2017 LTIP in May 2023. Performance criteria in relation to this additional award is the same as that originally set out for the awards granted on 2 March 2022.

Movements in the number of share awards are as follows:

Awards vested

During the year ended 31 December 2023, the Company issued 281,734 ordinary shares on foot of the vesting of awards granted in March 2020 under the terms of the 2017 LTIP. In order to ensure a like-for-like assessment with the basis on which the targets were set at the start of 2020, the Company assessed EPS performance a) excluding the number of shares issued as part of the placing in September 2020 and b) including the impact of the interest charge that would have accrued if the placing was excluded. Adjusted EPS performance was accordingly determined to be €0.458, resulting in a vesting outcome of 37.27% for the portion of the award based on adjusted performance (i.e. 18.64% of the overall award). This resulted in an additional charge of €0.9 million recognised in the year ended 31 December 2023.

The Company also considered shareholder guidance in relation to 'windfall gains'. The LTIP awards granted in 2020 were granted at a price of €2.4375, which compares to a price of €5.9775 for the 2019 awards. The Company did not make a reduction on the award to reflect this lower share price during the performance period but committed to reviewing the outcome at vesting.

The Company judged that it would be appropriate to exercise its discretion to reduce the level of vesting by 25% from 18.64% to 14%. This has been accounted for as a modification under IFRS 2 Share-based Payment. As a result, no adjustment has been made to the calculation of the share-based payment charge in relation to this reduced level of vesting and the Group continued to recognise the full cost of the related share-based payment charge in profit or loss.

In total, 281,734 ordinary shares were issued in relation to the vesting of the March 2020 awards. The weighted average share price at the date of exercise of these awards was €4.22.

During the year ended 31 December 2023, the Company issued 253,900 ordinary shares on foot of the vesting of awards granted in December 2021. This award was conditional on relevant employees being in employment at 31 March 2023. The weighted average share price at the date of exercise for these awards was €4.54.

Measurement of fair values

The fair value, at the grant date, of the TSR-based conditional share awards was measured using a Monte Carlo simulation model. Non-market-based performance conditions attached to the awards were not taken into account in measuring fair value at the grant date.

The valuation and key assumptions used in the measurement of the fair values of awards at the grant date were as follows:

Dividend equivalents accrue on awards that vest up to the time of vesting under the LTIP schemes, and therefore the dividend yield has been set to zero to reflect this. Such dividend equivalents will be released to participants in the form of additional shares on vesting subject to the satisfaction of performance criteria. In the absence of available market-implied and observable volatility, the expected volatility has been estimated based on the historic share price over a three-year period.

All active awards include FCPS-related performance conditions which are non-market-based performance conditions that do not impact the fair value of the award at the grant date, which equals the share price less exercise price. Instead, an estimate is made by the Group as to the number of shares which are expected to vest based on satisfaction of the FCPS-related performance condition, where applicable, and this, together with the fair value of the award at grant date, determines the accounting charge to be spread over the vesting period. The estimate of the number of shares which are expected to vest over the vesting period of the award is reviewed in each reporting period and the accounting charge is adjusted accordingly.

Share Save schemes

The Remuneration Committee of the Board of Directors approved the granting of share options under the UK and Ireland Share Save schemes (the ‘Schemes’) for all eligible employees across the Group from 2016 to 2022. Each Scheme is for three years and employees may choose to purchase shares over the six month period following the end of the three year period at the fixed discounted price set at the start of the three year period. The share price for the Schemes has been set at a 25% discount for Republic of Ireland based employees and 20% for UK based employees in line with the maximum amount permitted under tax legislation in both jurisdictions.

During the year ended 31 December 2023, 47,488 ordinary shares were issued on maturity of the share options granted as part of the Share Save scheme in 2019. The weighted average exercise price at the date of exercise for options exercised during the year ended 31 December 2023 was €3.57.

Movements in the number of share options and the related weighted average exercise price (‘WAEP’) are as follows:

The weighted average remaining contractual life for the share options outstanding at 31 December 2023 is 0.8 years (31 December 2022: 1.8 years).

10 Government grants and government assistance

Government grants

During the year ended 31 December 2023, the Group availed of the Temporary Business Energy Support Scheme (TBESS) for energy costs in the Republic of Ireland. These grants, which totalled €0.7 million, have been offset against the related costs in administrative expenses in profit or loss (2022: €1.2 million).

During the year ended 31 December 2022, the Group availed of payroll-related grants for EWSS (Employment Wage Subsidy Scheme) of €10.5 million and other grant schemes related to income (including the Covid Restrictions Support Schemes and the Failte Ireland Tourism Accommodation Providers Continuity Scheme) totalling €2.9 million. No such grants were available in 2023.

Government assistance

In the UK, the Group benefitted from a commercial rates waiver of £0.2 million (€0.3 million) for the year ended 31 December 2023 (2022: £1.0 million (€1.2 million)). Additionally, under the Energy Business Relief Scheme, the Group benefitted from discounted energy prices of £0.2 million (€0.2 million) for the year ended 31 December 2023 (2022: £0.7 million (€0.8 million)).

The Group did not avail of any commercial rates waiver in Ireland during the year ended 31 December 2023 (2022: €1.8 million).

Under the warehousing of tax liabilities legislation introduced by the Financial Provisions (Covid-19) (No. 2) Act 2020 and Finance Act 2020 (Act 26 of 2020) and amended by the Finance (Covid-19 and Miscellaneous Provisions) Act 2021, Irish VAT liabilities of €11.7 million and payroll tax liabilities of €23.2 million were deferred as at 31 December 2022. These liabilities were paid in full during the year ended 31 December 2023.

11 Tax charge

The tax assessed for the year differs from the standard rate of corporation tax in Ireland for the year. The differences are explained below.

The Group has recognised a tax charge of €15.3 million for the year ended 31 December 2023 (2022: €12.9 million). The tax charge primarily relates to current tax in respect of profits earned in Ireland during the year of €15.4 million (2022: €11.7 million).

The deferred tax charge for the year ended 31 December 2023 of €0.5 million (2022: €2.9 million) primarily relates to deferred tax arising on revaluations of land and buildings through profit and loss. The 2022 deferred tax charge primarily related to the reversal of impairments of the fair value of land and buildings and the carry back of losses incurred in 2020, in respect of which a deferred tax asset had previously been recognised at 31 December 2021, against prior periods, generating cash refunds.

During the year ended 31 December 2021, the UK government substantively enacted an increase in the corporation tax rate from 19% to 25%, with effect from 1 April 2023. The UK deferred tax assets and liabilities which were forecasted to reverse after 1 April 2023 were remeasured at the 25% corporation tax rate during 2021. As the 25% corporation tax rate came into effect during the year ended 31 December 2023, all UK deferred tax assets and liabilities are recognised at the 25% tax rate as at 31 December 2023.

12 Impairment

At 31 December 2023, as a result of the carrying amount of the net assets of the Group being more than its market capitalisation, the Group tested each cash generating unit (‘CGU’) for impairment as this was deemed to be a potential impairment indicator. Impairment arises where the carrying value of the CGU (which includes, where relevant, revalued properties and/or right-of-use assets, allocated goodwill, fixtures, fittings and equipment) exceeds its recoverable amount on a value in use (‘VIU’) basis.

At 31 December 2023, the market capitalisation of the Group (€1,032 million) was lower than the net assets of the Group (€1,393 million) (market capitalisation is calculated by multiplying the share price on that date by the number of shares in issue). Market capitalisation can be influenced by a number of different market factors and uncertainties. In addition, share prices reflect a discount due to lack of control rights. The Group as a whole is not considered to be a CGU for the purposes of impairment testing and instead each hotel operating unit is considered as a CGU as it is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

At 31 December 2023, the recoverable amounts of the Group’s CGUs were based on VIU, determined by discounting the estimated future cash flows generated from the continuing use of these hotels. VIU cash flow projections are prepared for each CGU and then compared against the carrying value of the assets, including goodwill, properties, fixtures, fittings and equipment and right-of-use assets, in that CGU. The Group has not yet committed to a decarbonisation pathway and therefore the impact on cashflows of any possible commitment is not included.

The VIU estimates were based on the following key assumptions:

• Cash flow projections are based on operating results and forecasts prepared by management covering a ten year period in the case of freehold properties. This period was chosen due to the nature of the hotel assets and is consistent with the valuation basis used by independent external property valuers when performing their hotel valuations (note 15). For CGUs with right-of-use assets, the lease term was used;
• Revenue and EBITDA for 2024 and future years are based on management’s best estimate projections as at 31 December 2023. Forecasted revenue and EBITDA are based on expectations of future outcomes taking into account the macro-environment, current earnings, past experience and adjusted for anticipated revenue and cost growth;
• Cash flow projections assume a long-term compound annual growth rate post 2028 of 2% (2022: 2%) in EBITDA for CGUs in the Republic of Ireland, 2% in the UK (2022: 2.5%) and 2% in Continental Europe (2022: 2%);
• Cash flows include an average annual capital outlay on maintenance for the hotels dependent on the condition of the hotel or typically 4% of revenues but assume no enhancements to any property;
• In the case of CGUs with freehold properties, the VIU calculations also include a terminal value based on terminal (year ten) capitalisation rates consistent with those used by the external property valuers which incorporates a long-term growth rate of 2% (2022: 2%) for Irish and 2% (2022: 2.5%) for UK properties;
• The cash flows are discounted using a risk adjusted discount rate specific to each property. Risk adjusted discount rates of 8.5% to 11.35% for Dublin assets (31 December 2022: 8.5% to 11.25%), 10% to 12.75% for Regional Ireland assets (31 December 2022: 9.75% to 12.5%), 7.4% to 11.5% for UK assets (31 December 2022: 7.5% to 13%), 7.5% to 8% for Continental Europe assets (31 December 2022: 8.25%) have been used; and
• The values applied to each of these key assumptions are derived from a combination of internal and external factors based on historical experience of the valuers and of management and taking into account the stability of cash flows typically associated with these factors.

Following the impairment assessments carried out on the Group’s CGUs at 31 December 2023, the recoverable amount was not deemed lower than the carrying amount for any of the Group’s CGUs. No impairment charge relating to right-of-use assets (note 16), allocated goodwill (note 14) and fixtures, fittings and equipment (note 15) has therefore been recognised in profit or loss for the year ended 31 December 2023.

At 31 December 2023, impairment reversal assessments were carried out on the Group’s CGUs where there had been a previous impairment of fixtures, fittings and equipment. Following this assessment, no impairment reversals of previous impairments were noted (2022: €4.1 million on right-of-use assets and €0.6 million on fixtures, fittings and equipment).

If the 2024 EBITDA forecasts used in cashflow in VIU estimates for impairment testing as at 31 December 2023 had been forecast 10% lower, there would still have been no impairment for the year ended 31 December 2023 for right-of-use assets and fixtures, fittings and equipment and allocated goodwill.

13 Business combinations

Acquisition of Clayton Hotel London Wall

On 3 July 2023, the Group acquired the long leasehold interest and trade of Apex Hotel London Wall, now trading as Clayton Hotel London Wall, for cash consideration of £53.4 million (€62.1 million).

The Group became party to a ground lease as part of the acquisition and recognised lease liabilities and right-of-use assets of £2.0 million (€2.3 million). The ground lease has a remaining life of 107 years. This exceeds the estimated useful life of the building as at the acquisition date and hence the building is accounted for as an owned hotel.

The fair value of the identifiable assets and liabilities acquired were as follows:

The acquisition method of accounting has been used to consolidate the business acquired in the Group’s consolidated financial statements. No goodwill has been recognised on acquisition as the fair value of the net assets acquired equated to the consideration paid.

Acquisition-related costs of £3.3 million (€3.8 million) were charged to administrative expenses in profit or loss in respect of this business combination.

Acquisition of Clayton Hotel Amsterdam American

On 3 October 2023, the Group acquired 100% of the share capital of American Hotel Exploitatie BV which holds the operational lease of the Hard Rock Hotel Amsterdam American, now trading as Clayton Hotel Amsterdam American, for cash consideration of €28.3 million and assumed net working capital liabilities of €1.2 million.

The remaining lease term is 18 years, with two 5-year tenant extension options. This resulted in the recognition of a lease liability of €41.0 million and a right-of-use asset of €41.0 million.

The fair value of the identifiable assets and liabilities acquired were as follows:

Goodwill of €23.4 million has been recognised due to the acquisition of Clayton Hotel Amsterdam American, as the consideration exceeded the fair value of the identifiable net assets acquired.

The goodwill acquired as part of this transaction comprises certain intangible assets that cannot be separately identified. This includes future trading and the future growth opportunities the business provides to the Group’s operations due to the geographical location of the hotel, access to the Amsterdam market, which restricts new hotel developments, and the skills and experience of an assembled workforce.

Acquisition-related costs of €0.6 million were charged to administrative expenses in profit or loss in respect of this business combination.

Impact of new acquisitions on trading performance

The post-acquisition impact of the acquisitions completed during 2023 on the Group’s profit for the financial year ended 31 December 2023 was as follows:

The Group has limited access to the pre-acquisition books and records of the acquired businesses, and as such it is impracticable to determine the impact to the Group if the acquisitions had occurred on 1 January 2023.

These two transactions have added to the scale of the Group with the acquisition of Clayton Hotel London Wall and Clayton Hotel Amsterdam American increasing the geographical spread of the Group in line with the Group’s strategy of expanding across larger UK cities and further entry into Continental Europe.

14 Intangible assets and goodwill

Goodwill

Goodwill is attributable to factors including expected profitability and revenue growth, increased market share, increased geographical presence, the opportunity to develop the Group’s brands and the synergies expected to arise within the Group after acquisition.

Additions to goodwill during 2023 include €23.4 million attributable to the acquisition of Clayton Hotel Amsterdam American (note 13) (2022: €Nil).

As at 31 December 2023, the goodwill cost figure includes €11.8 million (£10.3 million) which is attributable to goodwill arising on acquisition of foreign operations denominated in sterling. Consequently, such goodwill is subsequently retranslated at the closing rate. The retranslation at 31 December 2023 resulted in a foreign exchange gain of €0.2 million and a corresponding increase in goodwill. The comparative retranslation at 31 December 2022 resulted in a foreign exchange loss of €0.6 million.

The above table represents the number of CGUs to which goodwill was allocated at 31 December 2023.

Annual goodwill testing

The Group tests goodwill annually for impairment and more frequently if there are indications that goodwill might be impaired. Due to the Group’s policy of revaluation of land and buildings, and the allocation of goodwill to individual CGUs, impairment of goodwill can occur for CGUs where the Group owns the freehold as the Group realises the profit and revenue growth and synergies which underpinned the goodwill. As these materialise, they are recorded as revaluation gains to the carrying value of the property and consequently, elements of goodwill may be required to be written off if the carrying value of the CGU (which includes revalued property and allocated goodwill) exceeds its recoverable amount on a VIU basis. The impairment of goodwill is recorded through profit or loss though the revaluation gains on property are taken to reserves through other comprehensive income provided there were no previous impairment charges through profit or loss.

Following an impairment review of the CGUs containing goodwill at 31 December 2023, no goodwill was required to be impaired (2022: €Nil).

Future under-performance in any of the Group’s major CGUs may result in a material write-down of goodwill which would have a substantial impact on the Group’s results and equity.

(i) Moran Bewley Hotel Group and other single asset acquisitions

For the purposes of impairment testing, goodwill has been allocated to each of the hotels acquired as CGUs. The freehold interest in the property is owned by the Group and therefore these hotel properties are valued annually by independent external valuers. As such the recoverable amount of each CGU is based on a fair value less costs of disposal estimate, or where this value is less than the carrying value of the asset, the VIU of the CGU is assessed.

Costs of acquisition of a willing buyer which are factored in by external valuers when calculating the fair value price of the asset are significant for these assets (2023: Ireland 9.96%, UK 6.8%, 2022: Ireland 9.96%, UK 6.8%). Purchasers’ costs are a key difference between VIU and fair value less costs of disposal as prepared by external valuers.

At 31 December 2023, the recoverable amounts of the ten CGUs were based on VIU, determined by discounting the future cash flows generated from the continuing use of these hotels. Following the impairment assessment carried out at 31 December 2023, there was no impairment relating to the CGUs. Note 12 details the assumptions used in the VIU estimates for impairment testing.

(ii) 2007 Irish hotel operations acquired

For the purposes of impairment testing, goodwill has been allocated to each of the CGUs representing the Irish hotel operations acquired in 2007. Eight hotels were acquired at that time but only four of these hotels had goodwill associated with them. The goodwill related to one of these CGUs was fully impaired (€2.6 million) during the year ended 31 December 2020. The remaining three of these hotels are valued annually by independent external valuers, as the freehold interest in the property is now also owned by the Group. Where hotel properties are valued annually by independent external valuers, the recoverable amount of each CGU is based on a fair value less costs of disposal estimate, or where this value is less than the carrying value of the asset, the VIU of the CGU is assessed. The recoverable amount at 31 December 2023 of each of these CGUs which have associated goodwill is based on VIU. VIU is determined by discounting the future cash flows generated from the continuing use of these hotels. Following the impairment assessment carried out at 31 December 2023, there was no impairment of goodwill relating to these CGUs.

Costs of acquisition of a willing buyer which are factored in by external valuers when calculating the fair value price of the assets are significant for these assets (2023: 9.96%, 2022: 9.96%). Purchaser’s costs are a key difference between VIU and fair value less costs of disposal as prepared by external valuers. Note 12 details the assumptions used in the VIU estimates.

The key judgements and assumptions used in estimating the future cash flows in the impairment tests are subjective and include projected EBITDA (as defined in note 3), discount rates and the duration of the discounted cash flow model. Expected future cash flows are inherently uncertain and therefore liable to change materially over time (note 12).

(iii) Clayton Hotel Amsterdam American

Goodwill of €23.4 million has been recognised due to the acquisition of Clayton Hotel Amsterdam American, as the consideration exceeded the fair value of the identifiable net assets acquired.

The goodwill acquired as part of this transaction comprises certain intangible assets that cannot be separately identified. This includes future trading and the future growth opportunities the business provides to the Group’s operations due to the geographical location of the hotel, access to the Amsterdam market, which restricts new hotel developments, and the skills and experience of an assembled workforce.

For the purposes of impairment testing, goodwill has been allocated to the CGU, representing Clayton Hotel Amsterdam American’s operations, acquired in 2023. The recoverable amount at 31 December 2023 of this CGU is based on VIU. VIU is determined by discounting the estimated future cash flows generated from the continuing use of the hotel. Following the impairment assessment carried out at 31 December 2023, there was no impairment of goodwill relating to this CGU.

Other intangible assets

Other intangible assets of €0.3 million at 31 December 2023 (2022: €0.9 million) primarily represent a software licence agreement entered into by the Group in 2019. This software licence will run to 31 May 2024 and is being amortised on a straight-line basis over the life of the asset.

The Group reviews the carrying amounts of other intangible assets annually to determine whether there is any indication of impairment. If any such indicators exist, then the asset’s recoverable amount is estimated.

At 31 December 2023, there were no indicators of impairment present and the Directors concluded that the carrying value of other intangible assets was not impaired at 31 December 2023.