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Belmond Ltd. Reports Second Quarter 2018 Results; Reaffirms Full-Year 2018 Adjusted EBITDA Guidance

August 8, 2018

HAMILTON, Bermuda--(BUSINESS WIRE)--Aug 8, 2018--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 second quarter ended June 30, 2018.

Roeland Vos, president and chief executive officer, remarked: “We delivered another solid operating performance in the second quarter of 2018. While constant currency RevPAR came in at the low end of the range we had targeted, adjusted EBITDA grew 6% versus the prior-year period, or 11% on a reported basis.

We successfully commenced the start of the peak summer season in Europe, delivering strong year-over-year growth at our Italian portfolio, and driving notable gains at our North American properties. Our owned trains have continued to perform well, and as a result of capital reinvestment and improved commercial management, we achieved exceptional revenue and EBITDA growth in the second quarter at our Venice Simplon-Orient-Express train.

Excluding the three properties that were closed for part or all of the period and the acquisition of Castello di Casole, we grew portfolio revenue by 7% in US dollar terms and 2% in constant currency. We expect this rate of growth to accelerate further, propelled by our targeted marketing initiatives focused on driving online bookings.

Overall, I am pleased with our results in the second quarter. The underlying performance of our global business has proven to be strong, despite headwinds in certain local markets, and today’s results leave us well positioned as we turn into the seasonally significant third quarter.

We will keep building upon the momentum we have generated. We are focused on maximizing the returns from the building blocks we have put in place as part of our strategic plan, and we are increasingly confident that these efforts will come together towards a successful third quarter. I am particularly encouraged by the performance of Belmond Castello di Casole since we took over management responsibility in May, and we will continue to drive further operational advancements now that it is under the Belmond umbrella.

Looking ahead, we expect to achieve growth consistent with our previous guidance range for full-year 2018 same store, constant currency RevPAR of 2% to 6%, with additional revenue upside in our trains and cruises businesses, and adjusted EBITDA of between $140 million and $150 million, representing 13% to 21% growth over last year.”

Second Quarter 2018 Operating Results

Revenue for the second quarter of 2018 was $171.6 million, a $5.7 million increase from revenue for the second quarter of 2017. In constant currency, revenue for the second quarter of 2018 decreased by $1.3 million from the second quarter of 2017 due to declines at Belmond La Samanna, St. Martin, French West Indies, and Belmond Cap Juluca, Anguilla, British West Indies, which were both closed in the second quarter of 2018 and ’21′ Club, New York, which was also closed for part of the second quarter of 2018. Together these properties contributed a revenue decline of $8.9 million in the second quarter of 2018. These drops were offset by year-over-year increases at Venice Simplon-Orient-Express, which has continued to have a very strong year as it benefits from recent capital improvements and the introduction of dynamic pricing; the addition of Belmond Castello di Casole, Tuscany, Italy, in the first quarter; and other Italian properties that have seen significant rate growth as a result of enhanced revenue management initiatives and have also benefited from recent capital investment and the addition of new keys. Excluding the impact of the three closed properties and the acquisition of Belmond Castello di Casole, revenue across the rest of the portfolio increased by $3.4 million or 2% over the second quarter of 2017.

Net losses attributable to Belmond Ltd. for the second quarter of 2018 were $1.5 million ($0.02 per common share), which compared to net losses attributable to Belmond Ltd. of $4.9 million ($0.05 per common share) for the second quarter of 2017. The increase is due to an improvement in underlying performance and an insurance gain of $11.9 million recorded in the second quarter of 2018 offset by a non-cash impairment charge of $7.1 million at the Company’s businesses in Myanmar and a cost of $15.0 million to restructure the Company’s labor force at Belmond La Samanna.

Adjusted net earnings from continuing operations for the second quarter of 2018 were $19.4 million ($0.19 per common share), compared to adjusted net earnings from continuing operations of $19.7 million ($0.19 per common share) for the second quarter of 2017.

Same store RevPAR for owned hotels for the second quarter of 2018 increased 5% from the prior-year quarter. On a constant currency basis, same store RevPAR for owned hotels was flat to the prior-year quarter as a result of a two percentage point decrease in occupancy offset by a 4% increase in average daily rate (“ADR”).

Adjusted EBITDA for the second quarter of 2018 was $51.4 million up 11%, compared to an adjusted EBITDA of $46.3 million for the second quarter of 2017. In constant currency, adjusted EBITDA for the second quarter of 2018 was up $2.8 million compared to the second quarter of 2017.

Recent Company Highlights

Assumes management of Belmond Castello di Casole - On May 14, 2018, the Company assumed management control of the Belmond Castello di Casole resort and estate in Tuscany, Italy, having acquired the emblematic resort in February for approximately €39 million ($48 million), as part of its strategic footprint expansion plan. The property is the latest addition to Belmond’s family of ‘Italian Icons’, which includes Belmond Hotel Cipriani, in Venice, and Belmond Hotel Splendido, in Portofino and consolidates the Company’s position as the leader in luxury travel experiences in Italy’s most exceptional locations. Starting in 2018, the Company expects to invest €7.3 million ($9.0 million) in a phased refurbishment of the hotel, including the addition of two new villas, over four years, bringing the resort’s total key count to 41. Over that same time period the Company intends to sell 14 remaining land plots on the estate for approximately $25 million, to reduce its net investment in the hotel property. Launches two new barges to expand Belmond Afloat in France fleet - In June, the Company introduced two new luxury boats joining the fleet of luxury barges, Belmond Afloat in France. Having been established on France’s picturesque canals for more than 20 years, demand for Belmond’s existing ‘Afloat in France’ fleet has steadily increased. The four to twelve-berth boats stand apart for their design quality, on-board service, and exclusive tours. In time for the 2018 Summer season, Belmond Lilas (launching August 2018) and Belmond Pivoine (launched May 2018) will take guests to two highly sought-after new regions, Alsace and Champagne. Six-night itineraries feature private visits to family-owned vineyards and breweries and spectacular Châteaux. Refinanced debt secured on Belmond Charleston Place, South Carolina - On June 22, 2018, the Company refinanced a $112.0 million loan secured on Belmond Charleston Place. The loan was increased to $160.0 million and the maturity was extended to June 2021. The lenders and other terms of the loan were unchanged. Proceeds from the additional borrowing were used to repay the outstanding balance on the revolving credit facility in July, providing additional liquidity to support future growth plans. Termination of purchase rights - As previously disclosed, Mr. James B. Sherwood, the founder, Chairman Emeritus and a former director of the Company held certain purchase rights in respect of the Belmond Hotel Cipriani, including a right of first refusal in the case of a sale of the hotel and a purchase option for the hotel in the event of a change in control of the Company. On July 6, 2018, the Company entered into an agreement with Mr. Sherwood to terminate these purchase rights in exchange for a cash payment of $3.0 million, payable over a period of two years in three instalments. Moreover, in the event of a sale of the hotel or a change in control of the Company within a ten year period following execution of the agreement, the Company would pay to Mr. Sherwood $10.0 million if such an event happens within a year of the agreement, stepping down by $1.0 million a year to zero after 10 years. The agreement further provides that Mr. Sherwood would receive a payment of $25 million, less any payments already made under the agreement, and no additional payments would be due to him under the agreement, in the event of either (i) a public offer for the Company being made within six months after the execution of the agreement and a change of control completing within six months of the offer being made or (ii) a sale of the hotel within one year after the execution of the agreement.

Second Quarter 2018 Business Unit Results

Owned hotels :

Europe:

For the second quarter of 2018, revenue from owned hotels for the region was $84.6 million, an increase of $12.5 million or 17% from $72.1 million for the second quarter of 2017. In constant currency, revenue for the region for the second quarter of 2018 increased $6.2 million or 8% from the prior year quarter due to growth across the majority of the portfolio with the exception of Belmond Hotel Cipriani, which is in a non-Biennale year. The growth included revenue of $4.2 million at Belmond Castello di Casole, which was acquired in the first quarter, and was opened under a Belmond flag in May.

In constant currency, same store RevPAR for owned hotels in the region increased 2% from the prior-year quarter as a result of an 8% increase in ADR offset by a 4 percentage point decrease in occupancy.

Adjusted EBITDA for the region for the quarter was $35.1 million, up 14% compared to $30.9 million for the second quarter of 2017. In constant currency, adjusted EBITDA for the region for the second quarter of 2018 increased $1.1 million or 3% from the prior year quarter led by the Italian properties with the exception of Belmond Hotel Cipriani in a non-Biennale year.

North America:

Revenue from owned hotels for the second quarter of 2018 was $34.3 million, down $8.1 million or 19% from $42.4 million for the second quarter of 2017. In constant currency, revenue for the region for the second quarter of 2018 also decreased $8.1 million from the prior-year quarter. The decrease is attributable to a $5.0 million fall in revenue at Belmond La Samanna, and a $0.9 million fall at Belmond Cap Juluca, which were both closed for the entire quarter following damage sustained from the 2017 hurricanes that hit the region, and a fall of $3.0 million at ’21′ Club, which was closed for part of the quarter following water damage from burst pipes in January. This decline was offset by improvements against the prior-year period of $1.0 million at Belmond Charleston Place, as the property continues to benefit from recent capital investment and the ongoing popularity of the city; and a $0.6 million improvement at Belmond El Encanto, Santa Barbara, which faced reduced competition as two competitor hotels remained closed after the 2017 mudslides that occurred in the area.

In constant currency, same store RevPAR for owned hotels in the region increased 2% from the prior-year quarter due to occupancy that was flat year-over-year and a 2% increase in ADR.

Adjusted EBITDA for the region for the quarter was $10.4 million, an increase of $0.7 million or 7% from $9.7 million for the second quarter of 2017. In constant currency, adjusted EBITDA for the region for the second quarter of 2018 also increased $0.7 million or 7% due to increases of $0.6 million at Belmond Charleston Place and $0.3m at Belmond El Encanto for the reasons described above, offset by a decline of $0.7 million at Belmond Maroma Resort & Spa, Riviera Maya, Mexico. Operating losses of $2.4 million at Belmond La Samanna and $1.3 million at Belmond Cap Juluca have been added back to adjusted EBITDA for the second quarter of 2018 while the properties are closed for renovation. Also recorded in the second quarter of 2018 at Belmond La Samanna and excluded from the calculation of adjusted EBITDA are an insurance gain of $11.2 million following settlements of the claim for property damage and business interruption following the hurricanes that hit the Caribbean in September 2017 and a charge of $15.0 million for the restructuring of the labor force at that hotel.

Rest of world:

Revenue from owned hotels for the second quarter of 2018 was $22.3 million, a decrease of $3.6 million or 14% from $25.9 million for the second quarter of 2017. In constant currency, revenue for the second quarter of 2018 decreased $2.2 million or 9% from the prior year quarter, principally as a result of a $1.9 million decrease in revenue at Belmond Mount Nelson, Cape Town, South Africa, and $1.0 million decrease at Belmond’s three safari camps in Botswana, both of which have been impacted by the negative press around the potential water crisis in Cape Town. This was offset by an increase in revenue of $1.3 million at Belmond Hotel das Cataratas, Iguassu Falls, Brazil, which saw a 10 percentage point increase in occupancy following positive media coverage of the destination and a weaker Brazilian real that also made the destination more attractive.

In constant currency, same store RevPAR for owned hotels in the region decreased 10% from the prior-year quarter as a result of a two percentage point decrease in occupancy and 5% decrease in ADR.

Adjusted EBITDA for the region for the quarter was $0.2 million compared to $2.4 million for the prior-year quarter. In constant currency, adjusted EBITDA for the region decreased by $2.1 million from the prior-year quarter as a result of a $1.6 million decrease at Belmond Mount Nelson due to the coverage of the potential water crisis during the important second quarter booking window and a $0.5 million decrease at Belmond Copacabana Palace, Rio de Janeiro, Brazil, where the city has continued to experience reduced demand, along with a $0.4 million decrease in revenue across our Asian portfolio. These declines are offset by a $0.4 million increase in adjusted EBITDA at Belmond Hotel das Cataratas.

Owned trains & cruises :

Revenue for the second quarter of 2018 was $26.9 million, up $5.1 million or 23% from $21.8 million for the second quarter of 2017. In constant currency, revenue increased $3.1 million or 13%. Excluding Northern Belle that was sold last year, revenue was up $4.7 million or 21% over the second quarter of 2017. The increase is driven by Venice Simplon-Orient-Express which has continued a very strong year as it benefits from recent capital improvements and the introduction of dynamic pricing.

Adjusted EBITDA for the quarter was $7.4 million, an increase of $3.2 million or 76% from the second quarter of 2017. In constant currency, adjusted EBITDA for the segment increased by $2.6 million or 55% primarily driven by growth from the Venice Simplon-Orient-Express and the cessation of the Company’s loss making Orcaella lease in the prior year.

Management fees :

Adjusted EBITDA from management fees for the second quarter of 2018 was $4.3 million, a decrease of $0.1 million or 2% from $4.4 million for the second quarter of 2017.

Share of pre-tax earnings from unconsolidated companies:

Adjusted share of pre-tax earnings from unconsolidated companies for the second quarter of 2018 was $5.5 million, an increase of $0.2 million compared to $5.3 million for the second quarter of 2017 due to an improved operating performance at the Peruvian hotel joint venture.

Central overheads :

For the second quarter of 2018, adjusted central overheads of $8.1 million were $0.9 million higher than adjusted central overheads of $7.2 million in the prior-year quarter, mainly due to increased development and other corporate headcount to support the Company’s strategic growth plan.

Impairment of goodwill, property, plant and equipment and other assets

In the second quarter of 2018, the Company recorded impairment charges totaling $7.1 million across its two businesses in Myanmar. The impairment was triggered by the financial performance of the businesses following reduced visitor arrivals to the country.

Investments

During the second quarter of 2018, the Company invested a total of $52.3 million in its portfolio, including $31.6 million on the refurbishment of Belmond Cap Juluca; $4.4 million on the refurbishment of Belmond La Samanna; $2.7 million on the refurbishment and addition of new suites at Belmond Hotel Splendido; $1.9 million at Belmond Grand Hotel Europe, St. Petersburg, Russia primarily for renovation of its deluxe rooms; $1.4 million at Belmond Hotel Caruso, Amalfi Coast, Italy for the renovation of and conversion of the stand-alone, Villa Margarita, into two one-bedroom suites; $1.1 million at each of Belmond Villa San Michele, Florence, Italy for refurbishment of rooms and public areas; and $1.1 million on the full refurbishment of Belmond Savute Elephant Lodge, Chobe Reserve, Botswana.

Balance Sheet

Following the refinancing of our Charleston Place facility, at June 30, 2018, the Company had total debt of $784.5 million and cash balances of $169.3 million, resulting in net debt of $615.2 million and a ratio of net debt to trailing-twelve-month adjusted EBITDA of 4.8 times. This compared to net debt of $610.5 million and a ratio of net debt to trailing-twelve-month adjusted EBITDA of 5.0 times at March 31, 2018.

Outlook

The Company is providing the following guidance for the third quarter and full year 2018:

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