DAVY VIEW

Dalata reported FY23 results this morning. Although the headline financials had been pre-released, the underlying detail gives a good sense of how well the group performed in 2023. Revenue in 2023 was up 18% year-on-year (yoy); like-for-like (LFL) EBITDAR margins were very strong at 42.3%; and the group generated €133m of free cash flow (60c a share). As had been flagged in the STR data, year-to-date trading (Jan and Feb) is softer, with group LFL RevPAR -4% yoy, driven by Dublin at -11%. However, management notes that it remains optimistic in its trading outlook for 2024, supported by future demand indicators. It has further boosted the pipeline and announced an 8c final dividend (interim was 4c). Although trading in the early part of the year is down, we still expect yoy EBITDA growth in FY24 and likely upside to our €229m forecast. Given the valuation discount, continued growth prospects, an unlevered balance sheet and precedence of execution in both good and more challenging times, we retain Dalata as a top pick.