Segment information

6 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Segment information

Segment information

Segment performance is evaluated by the chief operating decision maker based upon adjusted earnings before interest, tax, depreciation and amortization (“adjusted EBITDA”).

For reporting periods prior to the quarter ended March 31, 2017, the Company disclosed certain disaggregated segment profitability information in its periodic reports in accordance with applicable U.S. GAAP accounting principles, ASC 280 Segment Reporting, in the form of earnings before gains/(losses) on disposal, impairments, central costs, interest income, interest expense, foreign currency, tax (including tax on earnings from unconsolidated companies), depreciation and amortization, share-based compensation and gains/(losses) on extinguishment of debt (“segment profit/(loss)”). This is a measure of unadjusted EBITDA and, consistent with ASC 280, has represented the way management traditionally have evaluated the operating performance of each of the Company’s reportable segments. The format of the segment performance information provided to the chief operating decision maker for these purposes has evolved over time to focus primarily on adjusted EBITDA as the key measure of segment profitability. Adjusted EBITDA excludes gains/(losses) on disposal, impairments, restructuring and other special items, interest income, interest expense, foreign currency, tax (including tax on earnings from unconsolidated companies), depreciation and amortization and gains/(losses) on extinguishment of debt. In order to better reflect management’s internal evaluation of segment performance under ASC 280, as of the quarterly reporting period ended March 31, 2017, Belmond has disclosed adjusted EBITDA in place of segment profit/(loss) as the primary metric used by the chief operating decision maker to evaluate segment performance. In management’s view, adjusted EBITDA allows the Company’s segment performance to be evaluated more effectively and on a consistent basis by removing the impact of certain items that management believes do not reflect the underlying operations. Belmond notes that adjusted EBITDA is not a term defined under GAAP. As a result, Belmond provides reconciliations to the GAAP number immediately following tables using this non-GAAP term.

Belmond's operating segments are aggregated into six reportable segments primarily around the type of service being provided—hotels, trains and cruises, and management business/part ownership interests—and are secondarily organized by geography for the hotels, as follows:

• Owned hotels in each of Europe, North America and Rest of world which derive earnings from the hotels that Belmond owns including its one stand-alone restaurant;

• Owned trains and cruises which derive earnings from the train and cruise businesses that Belmond owns;

• Part-owned/managed hotels which derive earnings from hotels that Belmond jointly owns or manages; and

• Part-owned/managed trains which derive earnings from the train businesses that Belmond jointly owns or manages.

The following tables present information regarding these reportable segments.

Revenue from external customers by segment:

	Three months ended		Six months ended
	June 30, 2017	June 30, 2016	June 30, 2017	June 30, 2016
	$’000	$’000	$’000	$’000
Owned hotels:
Europe	72,099	67,083	84,114	80,508
North America	42,397	38,056	82,283	77,658
Rest of world	25,875	24,265	61,838	59,533
Total owned hotels	140,371	129,404	228,235	217,699
Owned trains and cruises	21,769	21,463	26,909	27,902
Part-owned/managed hotels	733	1,124	773	1,798
Part-owned/managed trains	2,992	2,499	4,815	4,493
Total management fees	3,725	3,623	5,588	6,291
Revenue	165,865	154,490	260,732	251,892

Reconciliation of consolidated (losses)/earnings from continuing operations to adjusted EBITDA:

	Three months ended				Six months ended
	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
	$’000		$’000		$’000		$’000
Adjusted EBITDA
Owned hotels:
Europe	30,913		26,302		22,793		20,685
North America	9,650		8,505		19,545		18,568
Rest of world	2,409		2,080		12,355		13,591
Total owned hotels	42,972		36,887		54,693		52,844
Owned trains and cruises	4,180		3,614		(53	)	795
Part-owned/managed hotels	2,505		1,652		2,764		2,320
Part-owned/managed trains	7,205		5,588		9,934		9,308
Total adjusted share of earnings from unconsolidated companies and management fees	9,710		7,240		12,698		11,628
Unallocated corporate:
Central costs	(8,511	)	(7,600	)	(17,911	)	(15,490	)
Share-based compensation	(2,019	)	(2,034	)	(3,554	)	(3,776	)
Adjusted EBITDA	46,332		38,107		45,873		46,001
Reconciliation from (losses)/earnings from continuing operations to adjusted EBITDA:
(Losses)/earnings from continuing operations	(5,064	)	8,152		(23,076	)	6,784
Depreciation and amortization	15,082		13,331		28,810		26,398
Gain on extinguishment of debt	—		(1,200	)	—		(1,200	)
Interest income	(196	)	(177	)	(342	)	(293	)
Interest expense	7,867		7,676		15,543		15,186
Foreign currency, net	1,007		(4,871	)	1,241		(7,729	)
Provision for income taxes	2,142		14,335		(3,124	)	4,739
Share of provision for income taxes of unconsolidated companies	1,807		1,355		2,053		2,231
	22,645		38,601		21,105		46,116
Gain on disposal of property, plant and equipment	(150	)	(150	)	(300	)	(300	)
Impairment of property, plant and equipment	8,216		—		8,216		—
Restructuring and other special items (1)	2,410		(344	)	3,099		185
Acquisition-related costs (2)	13,211		—		13,753		—
Adjusted EBITDA	46,332		38,107		45,873		46,001
(1) Represents adjustments for restructuring, severance and redundancy costs, pre-opening costs and other items, net.
(2) Represents professional fees incurred in preliminary design and planning, structuring, assessment of financing opportunities, legal, tax, accounting and engineering due diligence and the negotiation of the purchase and sale agreements, and other ancillary documents, with the principal owner and leaseholder, together with three owners of villas and separate subleases, as well as a memorandum of understanding and ground lease with the Government of Anguilla.

Earnings from unconsolidated companies, net of tax:

	Three months ended		Six months ended
	June 30, 2017	June 30, 2016	June 30, 2017	June 30, 2016
	$’000	$’000	$’000	$’000
Part-owned/managed hotels	683	315	466	228
Part-owned/managed trains	2,791	1,944	3,384	2,866
Total earnings from unconsolidated companies, net of tax	3,474	2,259	3,850	3,094

Reconciliation of capital expenditure to acquire property, plant and equipment by segment:

	Three months ended		Six months ended
	June 30, 2017	June 30, 2016	June 30, 2017	June 30, 2016
	$’000	$’000	$’000	$’000
Owned hotels:
Europe	6,544	4,126	12,774	7,204
North America	1,850	2,222	2,947	4,391
Rest of world	3,105	4,812	4,806	6,697
Total owned hotels	11,499	11,160	20,527	18,292
Owned trains and cruises	2,950	4,814	5,487	8,163
Unallocated corporate	971	89	1,401	621
Total capital expenditure to acquire property, plant and equipment	15,420	16,063	27,415	27,076

Revenue from external customers in Belmond’s country of domicile and significant countries (based on the location of the property):

	Three months ended		Six months ended
	June 30, 2017	June 30, 2016	June 30, 2017	June 30, 2016
	$’000	$’000	$’000	$’000
Bermuda	—	—	—	—
Italy	48,251	45,939	49,618	48,182
United Kingdom	18,396	20,820	24,483	27,618
United States	32,219	30,188	58,282	54,283
Brazil	11,753	13,764	29,916	32,207
All other countries	55,246	43,779	98,433	89,602
Total revenue	165,865	154,490	260,732	251,892