Genting initiates cost cutting measures

2020-09-12T07:50:06+00:00 September 12th, 2020|Finance|

Following an announcement that it was suspending certain payments to creditors, Genting Hong Kong has announced an EBITDA loss of $204.1 mill for the first half of this year, compared to a positive EBITDA of $76.9 mill in 1H19.

After depreciation and amortisation, the operating loss was $323.2 mill, compared to $38.3 mill in 1H19.

A 1H20 net loss of $742.6 mill, also included adjustments of $386.6 mill, which primarily consisted of expenses related to non-cash impairment losses on certain intangible assets, property, plant and equipment and other assets, share of associates results and losses on refinancing of debt for ‘Genting Dream’.

For the corresponding period in 2019, the net loss was $56.5 mill. Total revenue decreased to $226.2 mill in 1H20, compared to $729.2 mill in 2019, due to the suspension of all voyages since March this year as a result of port closure by various countries and no sail orders issued by the US in response to pandemic-control measures.

Genting’s shipyard subsidiary recorded an EBITDA loss of $36.2 mill, compared to EBITDA of $4.3 mill in the previous year.

This loss was primarily down to the suspension of three shipyards’ operations since March, 2020 after considering the restrictions in business operations and the health of employees.

Genting said that it had implemented various cost rationalisation initiatives to aggressively reduce non-essential operational expenses, including minimising all non-essential ship/shore costs, enacting pay freezes/reductions and reducing headcount, to conserve cash and to minimise the monthly cash burn rate.

All the ships except ‘Explorer Dream’, ‘SuperStar Aquarius’ and ‘SuperStar Gemini’ are being laid up. All non-essential capital expenditures except for maintenance to safeguard the safety and security of the ships and the health and safety of the guests and employees have been suspended.

The delivery of ‘Crystal Endeavor’ and ‘Global Dream’, currently under construction at MV Werften shipyards, has been rescheduled.

Genting’s debt maturity profile improved after securing a deferral of up to 12 months for some principal repayments, the company said.

The Group has also introduced various preventive measures to address the concerns of cruising arising from the risk and rapid spread of infectious disease on board.

In April, 2020, after completing stringent assessment checks covering various aspects including safe distancing practices, the ships’ ventilation systems and preventive and infection control measures, the Singapore authorities approved two of Genting Cruise Lines’ ships, ‘SuperStar Aquarius’ and ‘SuperStar Gemini’, as temporary accommodation vessels for foreign workers who have recovered from COVID-19.

Genting Cruise Lines has also been working with class society DNV GL to adopt the hospital ‘Certification in Infection Prevention (CIP) for the Marine industry (CIP-M)’ – which is claimed to be unique in that it builds on proven hospital standards tailored to passenger cruise ships, while incorporating national requirements to enable a robust immediate and long-term response.

As a result, on 7th July 2020, Dream Cruises’ ‘Explorer Dream’ became the first cruise ship in the world to receive the CIP-M certification.

These standards include stringent health screening processes and protocols prior to embarkation and disembarkation, as well as thorough sanitisation and disinfection and enhanced hygiene practices for guest cabins, various on board public areas and recreational activities, food and beverage safety and also the health of its crew members.

With the support from the relevant authorities in Taiwan, ‘Explorer Dream’ was given the approval to operate two, three and four night ‘Taiwan Island-Hopping’ cruises departing from Keelung to Kinmen, Penghu and Matsu islands –making Taiwan one of the earlier markets to reopen cruise travel.

The market response was very encouraging with the regulated first sailing on 26th July at an occupancy rate of 50%, rising progressively to 96% on the 23rd to 26th August, 2020 cruises.

Genting has also been informed by the Hainan Commercial Bureau that Dream Cruises is welcomed to commence domestic cruise operation from Sanya. It is also negotiating with other regional governments to start domestic cruises.

The group said that it expected that the COVID-19 pandemic will continue to impact its businesses, as the spread and development of the virus has created significant uncertainty over when the authorities in the relevant cruising markets will allow resumption of cruise travel.

As COVID-19 crisis continues to unravel, the Group said that it was unable to predict with certainty the ultimate impact it would have on its business, its financial condition and its short or long-term financial performance.

As a result, the Group expects to report a net loss for the year ending 31st December, 2020. If the temporary suspension of sailings protracts, the impact on the company’s liquidity and financial position is likely to continue.

In anticipation of an eventual cruise industry recovery with more countries progressively lifting entry bans, the company and the group will continue to monitor the evolution of the pandemic and adapt business strategies cautiously.

Genting has engaged PJT Partners and Linklaters to work with its financial partners to agree and implement a consensual solvent restructuring solution and an ‘Ad Hoc group’ of bankers has been formed to work with PJT Partners.