Assets held for sale and discontinued operations | 6 Months Ended |
Jun. 30, 2014 |
Discontinued Operations and Disposal Groups [Abstract] | ' |
Assets held for sale and discontinued operations | ' |
Assets held for sale and discontinued operations |
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At June 30, 2014, no properties were classified as held for sale, although there is one condominium relating to Porto Cupecoy which was excluded from the disposal of the Porto Cupecoy development in Sint Maarten as it was already under a separate sales contract at the time. During the six months ended June 30, 2014, Inn at Perry Cabin by Belmond, St Michaels, Maryland was sold. Due to Belmond's continuing involvement in managing the hotel, its results are presented within continuing operations. For the six months ended June 30, 2014, the results of operations of Ubud Hanging Gardens, Bali, Indonesia have been presented as discontinued operations, following the unannounced dispossession of Belmond from the hotel by the owner in November 2013. |
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During the six months ended June 30, 2013, Porto Cupecoy was sold. For the three and six months ended June 30, 2013, the results of operations of Porto Cupecoy have been presented as discontinued operations. |
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(a) Properties sold: Inn at Perry Cabin by Belmond and Porto Cupecoy |
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On March 21, 2014, Belmond completed the sale of the property and operations of Inn at Perry Cabin by Belmond for consideration of $39,700,000, of which $25,680,000 was paid in cash, $11,020,000 was settled directly with the lender to repay the debt facility secured by the property, and $3,000,000 was retained by the buyer as a key money contribution from Belmond to be used for agreed capital enhancements. Belmond will continue to manage the hotel for the new owner under a management agreement with a ten-year term that permits termination on the fifth anniversary of the agreement. The disposal resulted in a gain of $6,704,000, of which $3,704,000 was recognized on completion on March 21, 2014 and $3,000,000 has been deferred and will be recognized over the initial period of the management contract. The gain on sale of $3,704,000 recognized on March 21, 2014 and $153,000 recognized in the three months ended June 30, 2014 is reported within gain on disposal of property, plant and equipment in the statements of condensed consolidated operations. |
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On January 31, 2013, Belmond completed the sale of the property and operations of Porto Cupecoy for cash consideration of $19,000,000. The property was a part of Belmond’s former real estate segment. The disposal resulted in a gain of $439,000, which is reported within net earnings/(losses) from discontinued operations, net of tax. |
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The following is a summary of net assets sold and the gain recorded on sale for Inn at Perry Cabin by Belmond and Porto Cupecoy: |
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| | Inn at Perry Cabin by Belmond | | Porto Cupecoy | | | | | | |
| | March 21, | | January 31, | | | | | | |
2014 | 2013 | | | | | | |
| | $'000 | | $'000 | | | | | | |
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Property, plant and equipment | | 32,293 | | | 38 | | | | | | | |
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Real estate assets | | — | | | 18,512 | | | | | | | |
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Net working capital (deficit)/surplus | | (820 | ) | | — | | | | | | | |
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Net assets | | 31,473 | | | 18,550 | | | | | | | |
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Transfer of foreign currency translation loss/(gain) | | — | | | — | | | | | | | |
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| | 31,473 | | | 18,550 | | | | | | | |
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Consideration: | | | | | | | | | | |
Cash | | 25,680 | | | 19,000 | | | | | | | |
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Reduction in debt facility on sale of hotel | | 11,020 | | | — | | | | | | | |
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Key money retained by buyer | | 3,000 | | | — | | | | | | | |
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Less: Working capital adjustment | | (1,130 | ) | | (11 | ) | | | | | | |
Less: Costs to sell | | (393 | ) | | — | | | | | | | |
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| | 38,177 | | | 18,989 | | | | | | | |
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Gain on sale | | 6,704 | | | 439 | | | | | | | |
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(b) Results of discontinued operations |
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Belmond had been operating the hotel Ubud Hanging Gardens under a long-term lease arrangement with a third-party owner. The existing lease arrangement continues to 2030. Following an unannounced dispossession of Belmond from the hotel by the owner in November 2013, however, Belmond has been unable to continue to operate the hotel. Belmond believes that the owner's actions are unlawful and constitute a wrongful dispossession and is pursuing its legal remedies under the lease. As Belmond is unable to operate Ubud Hanging Gardens for the foreseeable future, the hotel has been presented as a discontinued operation for all periods shown. The assets and liabilities of the hotel have not been classified as held for sale, as the hotel has not been disposed of through a sale transaction. |
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Summarized operating results of the properties classified as discontinued operations for the three and six months ended June 30, 2014 and 2013 are as follows: |
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| | Three months ended June 30, 2014 | | | |
| | Ubud Hanging Gardens | | Porto Cupecoy | | Total | | | |
| | $'000 | | $'000 | | $'000 | | | |
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Revenue | | — | | | — | | | — | | | | |
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Losses before tax, gain on sale and impairment | | (241 | ) | | (226 | ) | | (467 | ) | | | |
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Losses before tax | | (241 | ) | | (226 | ) | | (467 | ) | | | |
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Net losses from discontinued operations | | (241 | ) | | (226 | ) | | (467 | ) | | | |
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| | Three months ended June 30, 2013 | | | |
| | Ubud Hanging Gardens | | Porto Cupecoy | | Total | | | |
| | $'000 | | $'000 | | $'000 | | | |
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Revenue | | 1,377 | | | 8 | | | 1,385 | | | | |
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Earnings before tax, gain on sale and impairment | | 402 | | | 90 | | | 492 | | | | |
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Earnings before tax | | 402 | | | 90 | | | 492 | | | | |
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Tax provision | | (90 | ) | | — | | | (90 | ) | | | |
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Net earnings from discontinued operations | | 312 | | | 90 | | | 402 | | | | |
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| | Six months ended June 30, 2014 | | | |
| | Ubud Hanging Gardens | | Porto Cupecoy | | Total | | | |
| | $'000 | | $'000 | | $'000 | | | |
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Revenue | | — | | | — | | | — | | | | |
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Losses before tax, gain on sale and impairment | | (918 | ) | | (284 | ) | | (1,202 | ) | | | |
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Losses before tax | | (918 | ) | | (284 | ) | | (1,202 | ) | | | |
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Net losses from discontinued operations | | (918 | ) | | (284 | ) | | (1,202 | ) | | | |
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| | Six months ended June 30, 2013 |
| | Ubud Hanging Gardens | | Porto Cupecoy | | The Westcliff | | Total |
| | $'000 | | $'000 | | $'000 | | $'000 |
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Revenue | | 2,613 | | | 843 | | | — | | | 3,456 | |
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Earnings/(losses) before tax, gain on sale and impairment | | 531 | | | (1,589 | ) | | — | | | (1,058 | ) |
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Impairment | | — | | | (77 | ) | | — | | | (77 | ) |
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Gain on sale | | — | | | 439 | | | — | | | 439 | |
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Earnings/(losses) before tax | | 531 | | | (1,227 | ) | | — | | | (696 | ) |
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Tax (provision)/benefit | | (126 | ) | | — | | | 422 | | | 296 | |
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Net earnings/(losses) from discontinued operations | | 405 | | | (1,227 | ) | | 422 | | | (400 | ) |
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The results of discontinued operations for the three and six months ended June 30, 2014 include legal fees of $241,000 and $918,000, respectively, in relation to Ubud Hanging Gardens, as Belmond is pursuing legal remedies following its wrongful dispossession by the owner in November 2013. See Note 16. |
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The results of discontinued operations for the six months ended June 30, 2013 include a tax credit of $422,000 in relation to The Westcliff, Johannesburg, South Africa, which was sold in December 2012. This tax credit arose following the submission of the 2012 tax return in 2013. |
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(c) Assets and liabilities held for sale |
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Assets and liabilities of the properties classified as held for sale at June 30, 2014 and December 31, 2013 consist of the following: |
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| | June 30, | | December 31, 2013 |
2014 |
| | Porto Cupecoy | | Inn at Perry Cabin by Belmond | | Porto Cupecoy | | Total |
| | $’000 | | $'000 | | $’000 | | $'000 |
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Current assets | | — | | | 1,503 | | | — | | | 1,503 | |
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Real estate assets | | 720 | | | — | | | 720 | | | 720 | |
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Property, plant and equipment | | — | | | 32,193 | | | — | | | 32,193 | |
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Total assets held for sale | | 720 | | | 33,696 | | | 720 | | | 34,416 | |
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Current liabilities | | — | | | (1,611 | ) | | — | | | (1,611 | ) |
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Total liabilities held for sale | | — | | | (1,611 | ) | | — | | | (1,611 | ) |
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Assets of Porto Cupecoy at June 30, 2014 comprise one condominium which was excluded from the disposal of the Porto Cupecoy development as it was already under a separate sales contract at the time. |