Dalata Hotel Group has said that it expects revenue in the quarter ending March 2020 to be down approximately 16% compared to the same period in 2019, due to COVID-19.
Dalata said that while it expects its business to continue to be adversely impacted for as long as the current restrictions on movement and travel due to COVID-19 last, it has significant financial headroom with material cash resources of €80 million post disbursement of quarterly rent and interest scheduled to be paid over the next few days.
The group said that, in addition, it can avail of further undrawn committed debt facilities of approximately €65 million.
Dalata has proactively engaged with its banking club and, as a result of an amendment to the Group Facilities Agreement, it fully expects to be in compliance with covenants in June 2020. Covenants are measured at the end of June and December each year.
Dalata said that given the uncertainty surrounding the length of the current crisis, and other possible initiatives that may occur, it is too early to predict its financial position at the end of December 2020 at this time. However, the group believes that it is very well positioned with a supportive banking club and the extensive cost mitigation plans in place to withstand a significant decrease in its business during 2020 due to the COVID-19 pandemic.
Measures To Mitigate Financial Consequences
Dalata has already implemented several measures to mitigate the financial consequences of the impact of COVID-19 and to maintain the group's strong liquidity. It said that postponement of uncommitted development capital expenditure and non-essential maintenance capital expenditure for this year will free up additional cash resources of approximately €60 million, and total capital expenditure for the remainder of the year will be up to a maximum of €35 million. Dalata added that this could reduce further if development projects are delayed due to the impact of restrictions surrounding the COVID-19 outbreak.
Dalata also said that it has secured significant savings across all categories of expenditure over the last two weeks and that it will continue to do so in the coming weeks.
The group noted the revised guidelines issued by the Irish and UK governments regarding the purposes for which hotels can be operated. Acting in accordance with these guidelines, Dalata will temporarily close several of its hotels in Ireland and the UK over the coming days and significantly reduce operating capacity at its remaining hotels.
Other initiatives include a combination of reduced working hours for some employees as well as a progressive, temporary reduction of basic salary for those whose hours have not been reduced. Dalata's board has also taken reductions in basic pay and fees. These reductions will be in place for an initial two months and will be reviewed on a rolling basis.
Dalata has also had to temporarily lay off a large number of employees for whom it currently has no work. The group welcomed the income support initiatives announced by the Irish and UK governments in response to the COVID- 19 outbreak. Dalata said that it will seek to avail of these schemes and retain its link with the staff members that it has had to temporarily lay off, and that these staff members remain part of the Dalata team and the group looks forward to welcoming them back to work as soon as the group's business recovers.
Additionally, as a consequence of the uncertain outlook and in order to preserve the group's liquidity, Dalata's board has decided to withdraw the proposed final dividend of 7.25c per share.
"An Unprecedented Situation"
Dalata CEO Pat McCann commented, "This is an unprecedented situation, and we are working hard to mitigate the implications for our business. Our primary focus is on protecting our people, protecting our business and protecting our cash. We are looking to share the impact of the current crisis fairly between all stakeholders. The withdrawal of the proposed dividend and the recent fall in the share price is having a significant impact on our shareholders. Our banking club is supporting us through an Amended Facilities Agreement. All our people will suffer income loss through either layoffs, reduced working hours or salary cuts. Likewise, our board is cutting its remuneration. We will be working with our other stakeholders to examine ways in which we can further protect our financial position in a fair and equitable manner.
"Dalata is the strongest player in the Irish hotel market with a management team that has strong experience in managing through other major demand shocks and crises over the last 20 years. While we have never experienced something of the magnitude of the COVID-19 outbreak before, we are well positioned to manage our way through this crisis over the coming months.
"Our primary concern continues to be the health and well-being of our staff and our guests. Dalata continues to implement and follow the guidelines provided by the health services in Ireland and the UK as well as the World Health Organisation."
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