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Belmond Ltd. Reports Third Quarter 2017 Results

Column: industry Tag: Belmond,third quarter Published: 2017-11-08 11:29 Source: Author:

Belmond Ltd. (NYSE: BEL), owners, part-owners or managers of 47 luxury hotel, restaurant, train and river cruise properties, including one scheduled for a 2018 opening in London, which operate in 24 countries, today announced its results for the third quarter ended September 30, 2017.

Roeland Vos, president and chief executive officer, remarked: “Our underlying operational performance continued to advance through the third quarter of 2017. Notable year-over-year growth was again recorded in our European hotels, with good demand for our properties in Italy, Spain and Russia continuing from the first half of the year. We have been particularly pleased with the ongoing strength of our safaris and portfolio of trains and cruises worldwide, including Belmond Grand Hibernian, which we launched in the same period last year.

"Challenging conditions in Brazil this year, coupled with the Olympics taking place in the third quarter of last year, resulted in a significant fall in EBITDA from that country, albeit mitigated by a number of cost reduction initiatives. Economic data point to a gradual improvement in the Brazilian economy, and we expect to see a moderate improvement in results from next year. Elsewhere, we are heartened that enhanced revenue-driving initiatives coupled with healthy demand has seen EBITDA for the portfolio increase, with adjusted EBITDA excluding Brazil up 8%.

"A number of key projects were delivered in the third quarter and serve as examples of our continued progress against our strategic growth plan. Our new website went live, as scheduled, and we continued to make good progress with our CRM program. Our exciting new brand campaign 'The Art of Belmond' launched as planned, supported by global media and marketing activities to drive even greater brand awareness. We look forward to the benefit of all these initiatives as we move into next year.

"Looking ahead, as we factor in the increased headwinds we have been experiencing in Brazil we expect to come in at the low end of our previously guided range for constant currency RevPAR growth and now expect to finish the year with growth of between 0% and 2%."

Third Quarter 2017 Operating Results

Revenue for the third quarter of 2017 was $183.0 million, a $0.7 million decrease from revenue for the third quarter of 2016. In constant currency, revenue for the third quarter of 2017 decreased $3.8 million or 2% from the third quarter of 2016. The year-over-year decrease comes principally from the Company's two hotels in Brazil which have been impacted by the political and economic instability in the country coupled with a comparison period when both hotels recorded exceptionally high revenue as a result of Rio de Janeiro hosting the Summer Olympics. Excluding Brazil, revenue for the third quarter of 2017 increased $9.6 million or 6% on a constant currency basis from the third quarter of 2016.

Same store RevPAR for owned hotels for the third quarter of 2017 decreased 1% from the prior-year quarter. On a constant currency basis, same store RevPAR for owned hotels decreased 3% from the prior-year quarter as a result of a 2 percentage point decrease in occupancy offset by a 2% increase in average daily rate ("ADR").

Net earnings attributable to Belmond Ltd. for the third quarter of 2017 were $7.8 million ($0.08 per common share), which compared to net earnings attributable to Belmond Ltd. of $22.9 million ($0.23 per common share) for the third quarter of 2016.

Adjusted EBITDA for the third quarter of 2017 was $62.2 million, a $3.5 million or 5% decrease from adjusted EBITDA of $65.7 million for the third quarter of 2016. In constant currency, adjusted EBITDA for the third quarter of 2017 decreased $4.5 million or 7% from the third quarter of 2016. Excluding Brazil, adjusted EBITDA for the third quarter of 2017 on a constant currency basis increased $4.6 million or 8% from the third quarter of 2016.

Adjusted net earnings from continuing operations for the third quarter of 2017 were $15.5 million ($0.15 per common share), a $7.8 million decrease from adjusted net earnings from continuing operations of $23.3 million ($0.23 per common share) for the third quarter of 2016.

In September the islands of Anguilla and St Martin were hit by Hurricanes Irma and Jose when both Belmond La Samanna on St Martin and Belmond Cap Juluca on Anguilla were closed for the season. While there is still great uncertainty associated with St Martin and the speed of its recovery, based on our preliminary assessment, we anticipate that Belmond La Samanna will re-open in the fourth quarter of 2018. Belmond Cap Juluca is undergoing planned renovations and we also currently expect to re-open the resort in the fourth quarter of 2018.

Both properties are included in Belmond's global insurance program which provides a combined property damage and twelve month business interruption cover of $30.0 million. In addition, Belmond La Samanna has a separate property damage insurance policy of Euro 4.9 million ($5.8 million) covering the eight villas at the resort.

We have made preliminary assessments regarding the nature and extent of the damage sustained and we are preparing the insurance claim. Based on our preliminary estimate at this time, we anticipate that the property damage elements of the claim alone could absorb the available cover, which therefore would not be sufficient to cover business interruption claims of approximately $8.0 million to $10.0 million over the next 12 months. A deductible of $1.3 million has been expensed in the third quarter.

The Company also believes this situation presents an opportunity to re-examine proposed capital expenditures for Belmond Cap Juluca and Belmond La Samanna, potentially increasing the scope of the projects but also increasing the impact of the ultimate build-outs. This re-evaluation, which will continue to be updated, is subject to a number of uncertainties, such as the speed of the recovery of St Martin and Anguilla and the impact of the hurricane on fuel, transportation and labor prices over the coming year.

During the quarter, the Company agreed to sell its shares in Northern Belle Limited, which owns the Belmond Northern Belle rolling stock, for ￡2.5 million ($3.4 million) to a joint venture that operates other rail charter operations in the UK. This business was operating at a break-even level of EBITDA and was considered non-core to our trains and cruises segment. This sale closed on November 2, 2017 and no gain or loss is expected to be recorded upon completion.

In October 2017, the Company provided notice of termination to the owner of Belmond Orcaella in respect of its charter agreement that is to be effective by early November. This business was operating at a loss and in the nine months to September 30, 2017 had contributed an adjusted EBITDA loss of $0.8 million. The Company continues to own its Road to Mandalay vessel and to operate that cruise business in Myanmar.

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