Growth in cruise segment drives Genting’s higher revenue

2019-03-31T20:57:32+00:00 March 31st, 2019|Finance|

Genting Hong Kong Limited has reported total revenue of $1.6 bill in 2018, compared with $1.2 bill in the previous year, a growth of 34%.

This rise was mainly due to the inclusion of the first full year operation of two ‘Dream’class ships and the higher third party revenue recognised in the shipyard segment.

Cruise revenue was $1.35 bill in 2018, compared to $1.02 bill in 2017, a growth of 33% with fleet capacity days increasing by 18.5% and occupancy percentage improving to 91% from 77% in 2017. ‘World Dream’ replaced ‘Genting Dream’ in the dual Hong Kong and Guangzhou homeports in November, 2017 with the latter redeployed to the Singapore homeport.

With a full year of operation of two‘Dream’cruises ships, offset by the withdrawal of the ‘SuperStar Libra’ in July, 2018 to be an accommodation ship in the MV Werften Wismar Shipyard, fleet Capacity days increased by 18.5%. Fleet occupancy percentage of the three brands – Crystal Cruises, Dream Cruises and Star Cruises – grew to 91% in 2018 from 77% in 2017. Last year’sgross yield increased by 12% and net yield increased by 15% from 2017.

Net cruise costs increased 11% in 2018, mainly due to increase in capacity days but net cruise costs per capacity day was reduced by 6.5%, due to efficiencies of scale.

Shipyard, on a standalone basis, recorded an EBITDA of $3.6 mill in 2018 versus a loss of $82.5 mill in 2017, due to higher shipyard utilisation rate with 36% completion of the ‘Crystal Endeavor’ and 20% of the first Dream Cruises ‘Global’class ships in 2018.

However, as the shipyard is wholly owned by the Group, certain revenues and expenses relating to shipbuilding have to be eliminated during consolidation of accounts, resulting in a lower loss of $59.6 mill in 2018, compared with 2017 loss of $102.6 mill for the Shipyard segment.

The Group recorded an EBITDA of $72.3 mill in 2018, a significant improvement of $233.3 mill over the EBITDA loss of $161 mill in 2017. After depreciation and amortisation, operating loss was $141.5 mill in 2018, a significant improvement from an operating loss of $351.5 mill in 2017.

Genting also recorded a slight improvement with consolidated net loss of $213.3 mill in 2018, compared with a consolidated net loss of $244.3 mill in 2017, because of a significant one-time gain in the disposal of shares of Norwegian Cruise Line Holdings (NCLH) and The Star Entertainment Group Limited of $205 mill in 2017, compared with a lower net one-time gain of $15.5 mill in the disposal of the balance of NCLH shares in 2018.

For the second half of the year, revenue was $822.5 mill, compared with $657.9 mill in 2H17, a growth of 25%.

This increase was primarily attributed to the full six-month operation of the ‘World Dream’ in 2H18. Capacity days increased by 11.6% and improvement in net yield by 18%. Fleet occupancy percentage improved from 79% in 2H17 to 99% in 2H18.

Net cruise costs in 2H18 were higher due to increase in capacity days but net cruise costs per capacity day was reduced by 2.8%, due to efficiencies of scale. Start-up losses in MV Werften group of shipyards were reduced, mainly due to higher shipyard utilisation rate with keel laying of ‘Crystal Endeavor’ and the first Dream Cruises ‘Global’class ship during 2H18.

The Group recorded an EBITDA of $77.3 mill, a significant improvement of $146.6 mill over the EBITDA loss of $69.3 mill in 2H17. After depreciation and amortisation, operating loss was also reduced significantly to $23.7 mill from $173.6 mill in 2H17.

A consolidated net loss of $72 mill was recordedfor 2H18, compared with a consolidated net loss of $41.1 mill in 2H17, mainly due to a smaller net one-time gain of $10 mill in 2H18 in the disposal of the balance of the NCLH shares versus a larger one-time gain of $203.7 mill in the disposal of shares of NCLH and Star Entertainment in 2H17.

Looking forward, barring any unforeseen circumstances, Cruise segment results should continue to improve, due to the low penetration rate in Asia and reduction in cruise capacity in China in 2019. The Shipyard segment is expected to improve with 82% of the ‘Crystal Endeavor’ and 65% of the first ‘Global’class ship due to be completed by the end of 2019. With that, the Group results should continue to improve in 2019.

The Asian economy has experienced good economic growth since the launch of Dream Cruises brand in late 2016 and growing awareness and acceptance of cruising as another vacation option. There is a preference for new and large ships, as smaller and older ships are withdrawn from service in Asia.

Brands with newer and larger ships albeit lack of strong distribution network are also being re- deployed from Asia to other cruise regions where they can command better yields. The reduction of berth capacity in 2019 in China should bring better supply and demand balance, offset by slowing economic growth and demand in China.

This year, the Group will focus on fly-cruise in order to optimise occupancies and yields on its fleet.

“With the full year operation of two ships for Dream Cruises, we had a turnaround in the Cruise Segment with an EBITDA of $152 mill in 2018 from a loss of $43 mill in 2017. Cruise segment results are expected to grow further in 2019 with strong management focus on achieving acceptable investment returns for each brand,” said Tan Sri Lim Kok Thay, Chairman and CEO of Genting Hong Kong. “MV Werften, the Shipyard Segment, had improved results in 2018 with the keel laying of ‘Crystal Endeavor’ and the first Global class ship.

Further improvement in 2019 is expected with even higher percentages of completion of ‘Crystal Endeavor’ and the first Global class ship. MV Werften is instrumental in the early delivery of new ships for the Group’s fleet commencing in 2020 while global orderbook of other shipyards now stretching to 2027.” he added.