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Belmond Ltd. Reports Fourth Quarter 2018 and Full-Year 2018 Results

March 1, 2019 Financial No Comments Email Email


Belmond Ltd. (NYSE: BEL) (the “Company”), owners, part-owners or managers of 46 luxury hotel, restaurant, train and river cruise properties, which operate in 24 countries, today announced its results for the fourth quarter and full year ended December 31, 2018.http://www.stevecafeandcuisine.com/

Roeland Vos, president and chief executive officer, remarked: “The strong growth momentum we generated throughout 2018 continued into the last three months of the year. Although the fourth quarter is seasonally small, adjusted EBITDA increased 41% in the period when compared to the prior year. We came in towards the top-end of our previously guided RevPAR range of 3-7% in constant currency terms, closing the quarter with a 6% rise over last year.

We also achieved several significant strategic objectives within the quarter. We announced in December the execution of an Agreement and Plan of Merger with LVMH, pursuant to which LVMH will acquire the Company for $25.00 per Class A share in cash. The announcement follows a comprehensive review by the board of the Company’s strategic alternatives and, subject to the satisfaction of conditions to closing, we believe the consummation of this deal will maximize value for our shareholders. We believe that this deal represents an exciting new chapter for our Company and we are pleased that the merger proposal was approved by the overwhelming majority of our shareholders at the special general meeting on February 14, 2019. We expect the transaction to close in the second quarter of this year.

Meanwhile, two strategically important properties reopened in December: Belmond La Samanna in St. Martin, and our defining asset in the Caribbean, Belmond Cap Juluca, in Anguilla. Our ongoing efforts to increase brand awareness resulted in Belmond being named ‘British Luxury Brand of the Year’ at the Walpole British Luxury awards in November. Additionally, full-year adjusted EBITDA climbed to $146.9 million, representing an 18% increase year-over-year. This performance put us towards the top-end of our guidance range and stands as one of the strongest in the Company’s history. Together, these strategic achievements and our operating results highlight the overall strength of the Company’s performance in 2018.

As we look ahead, we see positive indications across our existing portfolio for 2019. Belmond Cadogan Hotel, our newest and first hotel under a management agreement in the flagship city of London, will open tomorrow. We are working hard to accelerate several strategic initiatives that began to generate promising returns in 2018, as we seek to achieve our full-year growth projections again, this year and beyond. Today, Belmond is a growing business with an exceptional portfolio of iconic luxury properties, and incredibly talented employees. As a Company, we have taken great strides forward in recent years, and I am confident that Belmond’s ability to deliver timeless, one-of-a-kind luxury experiences will continue to reach new levels.”

Fourth Quarter 2018 Operating Results

Revenue for the fourth quarter of 2018 was $122.3 million, a $5.0 million increase in revenue from the fourth quarter of 2017. In constant currency, revenue for the fourth quarter of 2018 increased by $13.4 million from the fourth quarter of 2017 due to strong performances at Venice Simplon-Orient-Express; Belmond Charleston Place, South Carolina; Belmond Hotel das Cataratas, Iguassu Falls, Brazil; and Belmond Copacabana Palace Hotel, Rio de Janeiro, Brazil. Additionally, Belmond Cap Juluca, Anguilla, British West Indies, and Belmond La Samanna, St. Martin, French West Indies both reopened in December 2018 following Hurricanes Irma and Jose that hit both islands in September 2017. These increases were partially offset by declines at Belmond Road to Mandalay, Myanmar and Belmond Reid’s Palace, Madeira, Portugal.

Net losses attributable to Belmond Ltd. for the fourth quarter of 2018 were $24.6 million ($0.24 per common share), which compared to net losses attributable to Belmond Ltd. of $29.8 million ($0.29 per common share) for the fourth quarter of 2017. This improvement is largely due to the increase in revenue mentioned above and other operating income received of $2.7 million in relation to an insurance gain recorded at ’21’ Club, New York following water damage from burst pipes in January 2018.

Adjusted net losses from continuing operations for the fourth quarter of 2018 were $5.8 million ($0.06 per common share), compared to adjusted net losses from continuing operations of $6.3 million ($0.06 per common share) for the fourth quarter of 2017.

Same store RevPAR for owned hotels for the fourth quarter of 2018 decreased 2% from the prior-year quarter on a US dollar basis. On a constant currency basis same store RevPAR for owned hotels for the fourth quarter of 2018 increased 6%.

Adjusted EBITDA for the fourth quarter of 2018 was $22.6 million up 41%, compared to an adjusted EBITDA of $16.0 million for the fourth quarter of 2017. In constant currency, adjusted EBITDA for the fourth quarter of 2018 was up $8.7 million or 59% compared to the fourth quarter of 2017.

Full Year 2018 Operating Results

Revenue for the full year 2018 was $576.8 million, a $15.8 million increase from revenue for the full year 2017. In constant currency, revenue for the full year 2018 increased $14.8 million from the prior year.

Net losses attributable to Belmond Ltd. for the full year 2018 were $28.5 million ($0.28 per common share), compared to net losses of $45.0 million ($0.44 per common share) for the full year 2017. This improvement is due to the increase in revenue, $16.9 million other operating income relating to insurance gains recorded in 2018, and a charge of $29.3 million recorded in 2017 related to a non-cash impairment of fixed assets in the Company’s unconsolidated rail joint venture in Peru. This growth is offset by an increase of $8.1 million in the Company’s provision for income taxes, a charge of $13.9 million to restructure the Company’s labor force at Belmond La Samanna, and $8.5 million of expenses and fees for professional services related to the board’s review of strategic alternatives for the full year 2018.

Adjusted net earnings from continuing operations for the full year 2018 were $30.6 million ($0.30 per common share), a $18.5 million increase from $12.1 million ($0.12 per common share) for the full year 2017.

Same store RevPAR for owned hotels for the full year 2018 increased 5% from the prior year on both a constant currency and US dollar basis as a result of a 5% increase in average daily rate (“ADR”).

Adjusted EBITDA for the full year 2018 was $146.9 million, a $22.9 million or 18% increase from adjusted EBITDA for the full year 2017 of $124.0 million. In constant currency, adjusted EBITDA for the full year 2018 increased $22.3 million or 18% from the full year 2017.

Recent Company Highlights

  • Enters into Agreement and Plan of Merger with LVMH to acquire the Company for $25.00 per Class A share in cash – On December 13, 2018 Belmond Ltd. (the “Company”) entered into an Agreement and Plan of Merger with LVMH Moët Hennessy–Louis Vuitton SE, Palladio Overseas Holding Limited and Fenice Ltd. (collectively, “LVMH”) pursuant to which LVMH will acquire the Company. The merger proposal was approved at a Special General Meeting of Belmond’s shareholders on February 14, 2019. Subject to the satisfaction of the remaining closing conditions, this transaction is expected to close in the first half of 2019.
  • Named ‘British Luxury Brand of the Year’ at Walpole British Luxury Awards 2018 – On November 19, 2018 Belmond was named ‘British Brand of the Year’, the top accolade at the 17th annual British Luxury Awards hosted by Walpole,the official sector body for UK luxury. Previous winners have included Burberry, Rolls Royce and Jaguar. Belmond is the first travel and hospitality brand to receive this award, distinguishing it as a leading luxury brand as officially recognized by the industry.
  • Reopens two strategically significant properties in the Caribbean – On December 10 and December 15, 2018 respectively, Belmond reopened two properties in the Caribbean region: Belmond La Samanna on the island of St Martin, and Belmond Cap Juluca, on the island of Anguilla. Following a comprehensive operational restructure and complete redesign by award-winning Muza Lab London, Belmond La Samanna was reopened in time for the peak tourist season. Belmond Cap Juluca opened five days later and, through timeless and sophisticated art direction, the resort has been completely reimagined and fully restored to its legendary status and will support Belmond’s brand position for offering authentic escapes that connect guests with nature and celebrates local culture. Belmond partnered with British-born Hollywood actress Naomie Harris on the production of a film to promote the opening, positioned as the ‘ultimate barefoot luxury escape.’
  • Opening first hotel in flagship city of London under Belmond management – On February 28, 2019 Belmond’s first London property, Belmond Cadogan Hotel, will open under the Company’s management in what is a strategically important flagship European city. The property, originally built in 1887, will be a stylish retreat between the sought-after boroughs of Chelsea and Knightsbridge that embraces quiet luxury, literature, culture, and art. Design details rendered through expert craftsmanship pay homage to former patrons, including Oscar Wilde and Lillie Langtry, and celebrate the building’s quirky, rich history.

Fourth Quarter 2018 Business Unit Results

Owned hotels:

Europe:

For the fourth quarter of 2018, revenue from owned hotels for the region was $28.4 million, a decrease of $3.2 million or 10% from $31.6 million for the fourth quarter of 2017. In constant currency, revenue for the region for the fourth quarter of 2018 increased $1.1 million or 4% from the prior year quarter due to growth at Belmond Grand Hotel Timeo, Taormina, Sicily, which remained open for the full fourth quarter of 2018 for the first time to capitalize on a strong season that saw the benefits of a new rate strategy and increased exposure following the hosting of the G7 summit in May 2017.

In constant currency, same store RevPAR for owned hotels in the region decreased 3% from the prior-year quarter as a result of a 6% increase in ADR offset by a four percentage point decrease in occupancy.

Adjusted EBITDA for the region for the quarter was a loss of $0.8 million, down $3.0 million compared to adjusted EBITDA of $2.2 million for the fourth quarter of 2017. In constant currency, adjusted EBITDA for the region for the fourth quarter of 2018 decreased $1.2 million from the prior year quarter. This decrease is largely due to off-season losses of $0.5 million at Belmond Castello di Casole, Tuscany, Italy, that was acquired earlier this year, and a decline of $0.5 million at Belmond Reid’s Palace, which has been impacted by the return of markets in North Africa and Turkey.

North America:

Revenue from owned hotels for the fourth quarter of 2018 was $41.3 million, up $7.3 million or 21% from $34.0 million for the fourth quarter of 2017. In constant currency, revenue for the region for the fourth quarter of 2018 also increased $7.3 million from the prior-year quarter. The increase is largely attributable to Belmond La Samanna and Belmond Cap Juluca, which have both reopened in December 2018 after full refurbishment following the hurricanes that hit both properties in September 2017; and Belmond Charleston Place, which continues to benefit from the popularity of the destination and enhanced revenue management strategies.

In constant currency, same store RevPAR for owned hotels in the region increased 9% from the prior-year quarter due to a four percentage point increase in occupancy and a 2% increase in ADR.

Adjusted EBITDA for the region for the quarter was $12.9 million, an increase of $4.9 million or 61% from $8.0 million for the fourth quarter of 2017. In constant currency, adjusted EBITDA for the region for the fourth quarter of 2018 also increased $4.9 million due to improvements of $1.7 million at Belmond Charleston Place and $1.5 million at Belmond Cap Juluca. Operating losses of $1.4 million at Belmond La Samanna and $2.2 million at Belmond Cap Juluca have been added back to adjusted EBITDA while the properties were closed for renovation for the majority of the fourth quarter of 2018. During the fourth quarter, insurance proceeds of $4.1 million were received at ’21’ Club, relating to water damage suffered in January 2018, resulting in the recording of other income of $2.7 million and an adjusted EBITDA gain of $1.1 million.

Rest of world:

Revenue from owned hotels for the fourth quarter of 2018 was $36.7 million, an increase of $1.1 million or 3% from $35.6 million for the fourth quarter of 2017. In constant currency, revenue for the fourth quarter of 2018 increased $4.1 million or 12% from the prior year quarter, principally as a result of a $1.6 million increase in revenue at Belmond Hotel das Cataratas following positive media coverage of the destination and reduced visa restrictions in the country; a $1.5 million increase at Belmond Copacabana Palace, due to increased groups revenue and the strong performance of its recently renovated “Pérgula” restaurant; and a $1.1 million increase at the Belmond Safaris in Botswana as Belmond Savute Elephant Lodge, Chobe Reserve, was closed for the majority of the fourth quarter of 2017 for refurbishment.

In constant currency, same store RevPAR for owned hotels in the region increased 10% from the prior-year quarter as a result of a one percentage point increase in occupancy and an 8% increase in ADR.

Adjusted EBITDA for the region for the quarter was $10.3 million compared to $8.6 million for the prior-year quarter. In constant currency, adjusted EBITDA for the region increased by $2.2 million or 26% from the prior-year quarter as a result of a $1.0 million increase at Belmond Copacabana Palace, a $0.7 million increase at Belmond Hotel das Cataratas, and a $0.5 million increase at Belmond Safaris.

Owned trains & cruises:

Revenue for the fourth quarter of 2018 was $12.8 million, up $0.2 million or 2% from $12.6 million for the fourth quarter of 2017. In constant currency, revenue increased $1.3 million or 11%. The increase was driven by Venice Simplon-Orient-Express which has continued to deliver a strong performance this year as it benefits from recent capital improvements, enhanced revenue management activities and media exposure, offset by a decline at Belmond Road to Mandalay, which continues to suffer from reduced tourist arrivals in Myanmar.

Adjusted EBITDA for the quarter was $1.9 million, an increase of $2.8 million from the fourth quarter of 2017. In constant currency, adjusted EBITDA for the segment increased by $3.1 million with growth across the majority of the portfolio but primarily driven by growth from the Venice Simplon-Orient-Express.

Management fees:

Adjusted EBITDA from management fees for the fourth quarter of 2018 was $3.8 million, flat compared to the fourth quarter of 2017.

Share of pre-tax earnings from unconsolidated companies:

Adjusted share of pre-tax earnings from unconsolidated companies for the fourth quarter of 2018 was $4.6 million, an increase of $1.0 million compared to $3.6 million for the fourth quarter of 2017 due to an increase in passenger numbers and freight revenue at the Company’s PeruRail joint venture.

Central overheads:

For the fourth quarter of 2018, adjusted central overheads were $6.5 million compared to adjusted central overheads of $6.1 million in the prior-year quarter due to increased development and other corporate headcount to support the Company’s strategic growth plan.

Provision for income taxes:

For the fourth quarter of 2018, provision for income taxes was $8.1 million compared to a benefit of $11.0 million for the prior year quarter. The increase in tax provision is mainly as a result of a deferred tax benefit of $19.8 million in the prior year quarter following the reduction in the U.S. corporate tax rate from 35 to 21 per cent, effective January 1, 2018.

Investments

During the fourth quarter of 2018, the Company invested a total of $40.2 million in its portfolio, including $23.3 million on the refurbishment of Belmond Cap Juluca; $11.3 million on the refurbishment of Belmond La Samanna; $0.8 million for the refurbishment of ’21’ Club following water damage from burst pipes earlier in the year; and $0.7 million at Venice Simplon-Orient-Express for routine capital works.

Transaction costs

As described above, on December 13, 2018, the Company entered into a Merger Agreement with LVMH, Holding, and Merger Sub, pursuant to which LVMH will acquire the Company. During the year ended December 31, 2018, expenses and fees for professional services related to the board’s review of strategic alternatives of $8.5 million were recognized within selling, general and administrative expenses in the statements of consolidated operations. If the Merger is consummated, the Company expects to incur additional costs related to the board’s review of strategic alternatives which may be material. If the Merger Agreement is terminated under certain specified circumstances, Belmond may be required to pay to LVMH a termination fee equal to $92.3 million under the terms of the Merger Agreement.

Balance Sheet

At December 31, 2018, the Company had total debt of $759.9 million and cash balances of $111.8 million, resulting in net debt of $648.1 million and a ratio of net debt to trailing-twelve-month adjusted EBITDA of 4.4 times. This compared to net debt of $523.1 million and a ratio of net debt to trailing-twelve-month adjusted EBITDA of 4.2 times at December 31, 2017.

Outlook

In light of the impending transaction with LVMH described earlier in this release, the Company will not be providing any guidance about operating results and performance for future periods.



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