Market Overview

Belmond Ltd. Reports Third Quarter 2017 Results

Share:
  • Revenue of $183.0 million, down $0.7 million from the prior-year
    quarter; down $3.8 million or 2% on a constant currency basis; up $9.6
    million or 6% on a constant currency basis excluding Brazil
  • Net earnings attributable to Belmond Ltd. of $7.8 million compared
    with $22.9 million for the prior-year quarter
  • Adjusted EBITDA of $62.2 million, down $3.5 million or 5% from the
    prior-year quarter; down $4.5 million or 7% on a constant currency
    basis
  • Adjusted EBITDA excluding Brazil up $4.6 million or 8% from the
    prior-year-quarter on a constant currency basis
  • Adjusted net earnings from continuing operations of $15.5 million,
    compared with $23.3 million for the prior-year quarter
  • Same store revenue per available room ("RevPAR") down 1% from the
    prior-year quarter; down 3% on a constant currency basis; up 6% on a
    constant currency basis excluding Brazil
  • Launches new website and brand campaign "The Art of Belmond"

Belmond Ltd. (NYSE:BEL) (the "Company"), 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.

Recent Company Highlights

  • Unveils new Global Brand Campaign to drive brand awareness - On
    October 10, 2017, ‘The Art of Belmond' campaign launched globally with
    print and digital advertising supported by targeted social media and
    display marketing in key markets. Media events were held in core
    strategic cities: New York, London and Rio de Janeiro. Early results
    have been encouraging and the campaign will be unveiled in China later
    this month.
  • Launches new website bringing the brand's new visual identity to
    life online
    - On September 23, 2017, the Company's new
    cloud-hosted website went live with fully refreshed content,
    completing the first phase of this project. The Company launched the
    new brand campaign across the site in mid-October. The next phase will
    include an overhaul of the booking engine, which will unlock
    cross-selling and upselling opportunities for each of our assets. The
    booking engine is expected to be fully rolled out in the fourth
    quarter and the integration of customer profiles is also expected to
    complete before year end.
  • Continues to deliver projects in line with strategic reinvestment
    program
    - The full refurbishment of the Pergula restaurant at
    Belmond Copacabana Palace was completed in mid-October and included a
    renovation of the outdoor dining, bar and kitchen. The Company's
    long-term commitment to this strategically significant market remains
    unchanged and this investment underlines the Company's confidence in
    the future recovery of the asset. This iconic hotel is now well
    positioned to capitalise once the market recovers.
  • Further strengthens development team - On September 11, 2017,
    in line with its strategic growth plan, the Company expanded its
    development team in Asia with the appointment of Sandeep Jain,
    Director of Development, who joins the Company with deep experience in
    the Asian development market from his tenure with other leading luxury
    hotel operators. A further key appointment in the Americas region is
    expected to be made in due course and will complete the resource
    requirement for the Company's footprint expansion.
  • Iconic trains involved with two Hollywood Movies - On November
    3, 2017, ‘Murder on the Orient Express' was released. Belmond
    partnered with 20th Century Fox Productions on the film adaptation,
    with carriages from the Company's Venice-Simplon-Orient Express luxury
    train business part of the story's heritage. Additionally, the
    Belmond British Pullman features in Paddington Bear 2, to be released
    November 10, 2017.
  • Secures brand recognition at top industry Awards - On October
    30, 2017, Belmond was awarded the prize for 'Excellence in Luxury
    Leisure' at the 21st annual Luxury Briefing Awards. In the same month,
    Belmond Cipriani was voted as the best hotel in Italy in the Conde
    Nast Traveller Awards (US), and the Inn at Perry Cabin by Belmond was
    recognized as the Top Resort in New York and the Mid-Atlantic.

Third Quarter 2017 Business Unit Results

Owned hotels:

Europe:
For the third quarter of 2017, revenue from owned
hotels was $96.7 million, an increase of $4.4 million or 5% from $92.3
million for the third quarter of 2016. In constant currency, revenue for
the region for the third quarter of 2017 increased $2.6 million or 3%
from the prior year quarter primarily due to a $1.8 million or 3%
revenue increase for the Company's Italian hotels and a $0.9 million or
11% increase at Belmond La Residencia, Mallorca, Spain. Revenue growth
for the Company's Italian hotels was largely driven by the performances
of Belmond Hotel Cipriani, Venice, Italy, which benefited from the
Biennale Arts Festival that takes place every other year in Venice, and
Belmond Hotel Splendido, Portofino, Italy, which saw an increase in
rates year-over-year following the addition of balconies to twelve of
its rooms in March 2017. Growth in revenue at Belmond La Residencia was
primarily due to an increase in rates following the addition of six new
suites.

In constant currency, same store RevPAR for owned hotels in the region
increased 6% from the prior-year quarter as a result of an 8% increase
in ADR offset by a 2 percentage point fall in occupancy.

Adjusted EBITDA for the region for the quarter of $48.7 million
represented an increase of $3.1 million or 7% from $45.6 million for the
third quarter of 2016. In constant currency, revenue for the region for
the third quarter increased $2.8 million or 6% from the prior year
quarter mainly due to a $2.6 million or 7% increase in adjusted EBITDA
at the Company's Italian hotels and a $0.6 million or 14% increase in
adjusted EBITDA at Belmond La Residencia, Mallorca.

North America:
Revenue from owned hotels for the third
quarter of 2017 was $32.9 million, up $2.3 million or 8% from $30.6
million for the third quarter of 2016. In constant currency, revenue for
the region for the third quarter of 2017 increased $2.3 million or 8%
from the prior year quarter primarily due to revenue growth of $0.7
million or 4% at Belmond Charleston Place, Charleston, South Carolina,
and $1.5 million from the newly acquired Belmond Cap Juluca, Anguilla.
Belmond Charleston Place continued to benefit from group business and
also saw an increase in demand from leisure travelers attracted to the
solar eclipse in August. However, stronger year-over-year growth was
hindered by cancellations after the South Carolina Governor's
declaration of a state of emergency in advance of Hurricane Irma
reaching the state, resulting in $1.2 million in lost revenue.

In constant currency, same store RevPAR for owned hotels in the region
increased 2% from the prior-year quarter due to a 5% increase in ADR
offset by a 2 percentage point decrease in occupancy.

Adjusted EBITDA for the region for the quarter was $2.3 million, a
decrease of $0.9 million or 28% from $3.2 million for the third quarter
of 2016. In constant currency, adjusted EBITDA for the region for the
third quarter of 2017 decreased $1.0 million or 31% primarily as a
result of $0.7 million in losses at Belmond Cap Juluca that were
anticipated in its seasonal quiet period prior to closure for renovation
at the end of August 2017.

Rest of world:
Revenue from owned hotels for the third
quarter of 2017 was $26.8 million, a decrease of $10.2 million or 28%
from $37.0 million for the third quarter of 2016. In constant currency,
revenue for the third quarter of 2017 decreased $12.0 million or 32%
from the prior year quarter, principally as a result of decline in
revenue of $13.5 million or 56% at the Company's two Brazilian
properties. This resulted from a combination of exceptionally high
revenue in the third quarter of 2016 due to the Summer Olympics held in
Rio de Janeiro and the impact in the third quarter of 2017 of continued
political and economic instability in the country. This was partially
offset by an increase in revenue of $0.4 million or 13% at Belmond
Safaris, Botswana which benefited from refurbishment in 2016 and 2017
that has been well received by the media and guests. Additionally,
revenue at Belmond La Résidence d'Angkor, Siem Reap, Cambodia,
contributed a $0.6 million increase in revenue following a full
renovation of the property in 2016.

In constant currency, same store RevPAR for owned hotels decreased 31%
from the prior-year quarter as a result of a 5 percentage point decrease
in occupancy and 23% decrease in ADR.

Adjusted EBITDA for the region for the quarter of $3.5 million decreased
$7.8 million or 69% from adjusted EBITDA of $11.3 million for the
prior-year quarter. In constant currency, adjusted EBITDA for the region
decreased $8.5 million or 75% from the prior-year quarter largely as a
result of an adjusted EBITDA decrease of $9.1 million or 104% at the
Company's two Brazilian properties.

Owned trains & cruises:
Revenue
for the third quarter of 2017 was $23.7 million, up $4.5 million or 23%
from $19.2 million for the third quarter of 2016. In constant currency,
revenue increased $4.9 million or 26% primarily as a result of the
Belmond Grand Hibernian train in Ireland, which commenced its first full
year of operations in April 2017 and recorded $3.2 million of revenue
for the third quarter. Additionally, the Belmond Royal Scotsman train in
Scotland grew revenue by $1.1 million or 39% year-over-year following
high demand and the addition of a spa car and four new berths.

Adjusted EBITDA for the quarter was $5.4 million, a $2.2 million or 69%
increase from adjusted EBITDA of $3.2 million for the third quarter of
2016 largely due to adjusted EBITDA growth for Belmond Royal Scotsman
and Belmond Grand Hibernian of $1.0 million and $0.7 million,
respectively.

Management fees:
Adjusted
EBITDA from management fees for the third quarter of 2017 was $4.7
million, an increase of $0.1 million or 2% from $4.6 million for the
third quarter of 2016.

Share of pre-tax earnings from unconsolidated
companies
:
Adjusted share of pre-tax earnings from
unconsolidated companies for the third quarter of 2017 was $6.0 million,
a decrease of $0.7 million or 10% against $6.7 million for the third
quarter of 2016 due to an adjusted EBITDA decrease of $0.7 million or
13% for the Company's Peruvian train joint venture, PeruRail, as a
result of increases in fuel costs and other operating expenses.

Central overheads:
For
the third quarter of 2017, adjusted central overheads of $7.0 million
were $0.6 million or 9% higher than adjusted central overheads of $6.4
million for the prior-year quarter mainly due to increased development
and other corporate headcount to support the strategic growth plan.

Depreciation and amortization:
For
the third quarter of 2017, depreciation and amortization of $17.0
million was $3.9 million or 30% higher than depreciation and
amortization of $13.1 million for the prior-year quarter primarily as a
result of the recent completion of various capital projects and
accelerated depreciation expense to write-off assets that are expected
to be replaced.

Investments

The Company continued its strategy of disciplined re-investment in core
assets and projects with attractive forecasted returns. During the third
quarter of 2017, the Company invested a total of $15.6 million in its
portfolio, including $2.6 million on the full refurbishment of the
Pergula Restaurant at Belmond Copacabana Palace, Rio de Janeiro, Brazil;
$1.4 million at Belmond Casa de Sierra Nevada, Mexico for the renovation
of 37 rooms and the Andanza restaurant; $1.3 million at Belmond Villa
Sant' Andrea, Taormina Mare, Italy for the creation of three new suites
and a boardroom; $1.1 million at Belmond Mount Nelson Hotel, Cape Town,
South Africa largely for the refurbishment of the tea lounge, veranda
and terrace; and $1.4 million for corporate projects, which included the
Company's new enterprise resource planning system and website.

Balance Sheet

At September 30, 2017, the Company had total debt of $705.1 million and
cash balances of $212.5 million, resulting in total net debt of $492.6
million and a ratio of net debt to trailing-twelve-months adjusted
EBITDA of 4.0 times, which compared to net debt of $435.1 million and a
ratio of net debt to trailing-twelve-months adjusted EBITDA of 3.4 times
at December 31, 2016.

Outlook

The Company is providing the following RevPAR and other guidance for the
fourth quarter and full year 2017:

  Fourth Quarter 2017   Full Year 2017
 
Same store worldwide owned hotel RevPAR growth guidance (1)
 
On a constant currency basis 3% - 7% 0% - 2%
In U.S. dollars 10% - 14% 4% - 6%
 
Statement of operations guidance ($ millions)
 
Adjusted central overheads $6.9 - $7.9 $28.7 - $29.7
Adjusted share-based compensation $1.2 - $2.2
View Comments and Join the Discussion!
 
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com