Euro Disney Announces Wider Losses

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Euro Disney Losses Blamed on Tourist Numbers

By Phil Waller, PA City Staff

Parisian theme park and hotel operator Euro Disney today announced wider losses after visitor numbers failed to improve on last year.

The company said some 12.4 million people visited the Disneyland Resort Paris and Walt Disney Studios parks outside the French capital in 2004 – the same number as in 2003.

Higher operating costs and royalty payments to US parent company Walt Disney also contributed to net losses of 145 million euros (£101m) for the year to September 30, compared with a loss of 56 million euros (£39m) the previous year. Revenue was almost unchanged at 1.05 billion euros (£731m).

The results come two months after Euro Disney announced a massive debt restructuring deal with its banks to keep it afloat.

Chief executive Andre Lacroix said: “The company’s annual results reflect a flat attendance and revenue performance in another difficult year for the European travel and tourism industry.”

Average spending per visitor increased 5% to 42.7 euros (£29.74). In Euro Disney’s hotels, however, a decline in the average occupancy rate to 80.5% from 85.1% more than offset a 2% increase in spending per room.

The company swung to an operating loss of 24 million euros (£16.7m) from 32.1 million euros (£22.4m), excluding the effect of accounting changes.

Royalty payments to US parent company Walt Disney grew to 58 million euros (£40.4m) from eight million euros (£5.6m), Euro Disney said.

The lengthy negotiations that led to its September rescue deal drained a further 13 million euros (£9.06m) in fees and expenses.

Higher labour costs helped to swell Euro Disney’s direct operating costs to 665 million euros (£463.3m), up 1.5% excluding accounting changes.

Shortly after its rescue deal with creditors, Euro Disney announced the appointment of Karl Holz, a former Walt Disney executive, as its new president and chief operating officer.

Mr Lacroix and Mr Holz now face the challenge of breathing new life into the parks and boosting visitor numbers and steering the company toward a successful 250 million euros (£174.2m) capital increase in the next four months – one of the conditions of its bailout.

Euro Disney shares were one euro cent lower at 27 euro cents (35 US cents) in early afternoon Paris trading.

 

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UPDATE 2-Euro Disney losses deepen as royalties weigh
Tue Nov 9, 2004 04:07 AM ET
(Adds detail, background, shares)

By Caroline Brothers

PARIS, Nov 9 (Reuters) - French theme park operator Euro Disney (EDLP.PA: Quote, Profile, Research) , which announced a life-saving debt restructuring in September, fell deeper into loss in its fiscal full year due to royalty payments and increased operating costs.

The operator of Disneyland Paris, the most visited tourist attraction in Europe, said on Tuesday that a tough environment for the travel sector had compounded company-specific issues to hammer profit.

"The company's annual results reflect stable visitor numbers and turnover in another difficult year for the European travel and tourism industry," Chairman Andre Lacroix said.

"To that is added an increase in costs essentially linked to the reestablishment of licencing fees and payments to the owner, as well as to additional charges linked to the restructuring."

The company's volatile shares swung in and out of the red after the news, trading flat at 0.28 euro by 0905 GMT against a flat SBF120 index.

The European outpost of the Disney empire said in a statement it had turned a net loss of 145.2 million euros ($187 million) in the year to end-September after a 56-million loss a year earlier.

Euro Disney changed its accounting methods this time -- under the new method, its year-ago net loss totalled 58.3 million euros on a proforma basis.

It paid 12.6 million euros in fees linked to its financial restructuring, and 9.2 million for scrapping its "Visionarium" attraction that will be replaced by another in 2006.

The loss was also deepened by the resumption of royalty payments to 39 percent shareholder Walt Disney Co (DIS.N: Quote, Profile, Research) for use of the Mickey Mouse characters. Those payments, for which Euro Disney had obtained a waiver due to its financial difficulties, resumed over the last three quarters of 2003, costing it 57.7 million euros.

NO EXTRA VISITORS FOR MICKEY

2004 royalty payments, already provisioned for, will only be paid once the financial restructuring is complete, it said.

At operating level meanwhile, Euro Disney swung to a 23.9-million-euro loss from a profit of 132.4 million euros in the 2002-2003 fiscal year.On a proforma basis its year-ago operating profit was 32.1 million euros.

Turnover was virtually unchanged at 1.048 billion euros, and visitor numbers were flat at 12.4 million -- though spending per visitor at the theme parks rose 5 percent to 42.7 euros.

Occupancy rates at the Disney-themed hotels the group leases around the Disneyland Paris site dropped 4.6 percent over the year to 80.5 percent, though spending per hotel guest rose 2 percent to 186.6 euros.

Euro Disney faces the challenge of increasing visitor numbers to amortise a rise in operating costs linked to its opening of a second park, the Walt Disney Studios, beside the Magic Kingdom east of Paris. Those operating costs increased to 1.072 billion euros from 915 million a year ago.

The company ended a year of cliffhanger negotiations at the end of September with news that it had won an agreement with creditors over restructuring its debt, hauling it back from the verge of bankruptcy.

It said on Tuesday its net debt stood at 2.053 billion euros compared to shareholder capital at a negative 59.9 million.

As part of that debt restructuring, Euro Disney needs to carry out a 250 million euro capital increase by March 2005. If it is unable to do that, its restructuring protocols become void and it will have another 30 days to negotiate with its creditors or again face bankruptcy.

The restructuring also includes a 130 million euro credit line to be extended by Walt Disney Co. The company also plans to convert 290 million euros worth of assets leased from Walt Disney Co. into an equity stake in a new vehicle that both it and its parent will own.

Few analysts follow the stock which has acquired a speculative value, having lost a third of its value this year.