Euro Disney S.C.A. Reports Fiscal Year 2014 Results

Below are the highlights of the results of Euro Disney S.C.A. (the “Company”), parent company of Euro Disney Associés S.C.A. (“EDA”), operator of Disneyland Paris and its consolidated group (the “Group”) for the fiscal year 2014 which ended September 30, 2014.  The full report can be downloaded here.

EURO DISNEY S.C.A.

Reports Fiscal Year 2014 Results

  • In a prolonged challenging economic environment, particularly in France, total revenues decreased 2% to €.3 billion, reflecting lower Resort volumes, partially offset by higher guest spending and higher real estate activity

  • Record guest spending in the Parks reflects the Group’s continued focus on improving its offerings and guest satisfaction

  • The Group was able to limit the increase in its costs and expenses to less than 1%, while continuing to invest in the guest experience

  •  Net loss increased by €5 million to €14 million

Commenting on the results, Tom Wolber, Président of Euro Disney S.A.S., said:

“Results for the year were impacted by the continued economic softness, notably in France. Volume declines reflected the economic context, an increased focus on growing more contributive guest segments and an approximately 10% reduction in our room inventory with the rehabilitation of the Newport Bay Club hotel.

Despite the challenging economy, we continued to invest in the guest experience with this summer’s successful opening of the new attraction Ratatouille: L’Aventure Totalement Toquée de Rémy, driving increased guest satisfaction and spending, along with the continuation of the hotel rehabilitation program at the Newport Bay Club hotel.

If implemented, the recently announced €1 billion recapitalization proposal, backed by The Walt Disney Company, is designed to improve our financial position and enable us to continue investing in the guest experience. Together with our talented team of Cast Members, we are fully committed to ensure the future success of Disneyland Paris.”

Resort operating segment revenues decreased by €37.8 million to €1,251.2 million from €1,289.0 million in the prior year.

Theme parks revenues decreased 2% to €721.7 million from €737.6 million in the prior year due to a 5% decrease in attendance to 14.2 million and lower special event activity than in the prior year, partly offset by a 5% increase in average spending per guest to €50.66. The decrease in attendance was mainly due to fewer guests visiting from France, partially offset by more guests visiting from Spain. The increase in average spending per guest resulted from higher spending on admissions and merchandise.

Hotels and Disney Village® revenues decreased 4% to €490.4 million from €510.2 million in the prior year due to a 3.9 percentage point decrease in hotel occupancy to 75.4% and a 1% decrease in average spending per room to €232.26. The decrease in hotel occupancy resulted from 81,000 fewer room nights sold compared to the prior year, mainly due to fewer guests visiting from France, the Netherlands and Belgium, as well as lower business group activity, partially offset by more guests visiting from Spain. These results also reflected a temporary reduction in hotel room inventory related to the hotel renovation program, with approximately 500 rooms closed since November 2013 that correspond to 200,000 room nights not available for sale.

Other revenues decreased by €2.1 million to €39.1 million from €41.2 million in the prior year, due to lower sponsorship revenues.

Direct operating costs remained flat compared to the prior year. The costs of new guest offerings and rehabilitations, as well as labor rate inflation were offset by reduced costs associated with lower resort volumes, special event activities and a higher tax credit recorded as a reduction of labour costs (Crédit d’Impôt pour la Compétitivité et l’Emploi).

Marketing and sales expenses increased slightly compared to the prior year driven by higher labor costs and spending on new digital projects, partially offset by cost reductions from adjustments in the implementation of the media plan.

General and administrative expenses increased 4% compared to the prior year due to higher labor costs, as well as increased company-wide human resources and communication initiatives

Net financial charges decreased by €0.6 million mainly due to foreign currency hedging contracts.

Net Loss

For the Fiscal Year, the Group’s net loss amounted to €113.6 million, compared to a net loss of €78.2 million for the prior year. Net loss attributable to owners of the parent and non-controlling interests amounted to €93.4 million and €20.2 million, respectively.

Cash Flows

Cash and cash equivalents as of September 30, 2014 were €49.3 million, down €28.7 million compared to September 30, 2013.

Free cash flow used for the Fiscal Year was €66.7 million compared to €31.1 million used in the prior year.

Cash generated by operating activities for the Fiscal Year totalled €78.2 million compared to €96.0 million generated in the prior year. This decrease resulted from lower operating performance during the Fiscal Year partially offset by lower working capital requirements.

Cash used in investing activities for the Fiscal Year totalled €144.9 million, compared to €127.1 million used in the prior year. This increase reflected investments related to the on-going hotel renovation program.

Cash generated by financing activities for the Fiscal Year totalled €38.0 million, compared to €5.2 million used in the prior year. During the Fiscal Year, the Group drew an amount of €100.0 million from the €250.0 million standby revolving credit facility granted by the Walt Disney Company (“TWDC”)1, of which €50.0 million has been repaid during the Fiscal Year. The Group also repaid €11.4 million of loans due to TWDC during the Fiscal Year.  Under the financial agreements signed during the Group’s 2012 refinancing, it was initially agreed that this standby revolving credit facility would be reduced to €150.0 million from October 1, 2014. However, on October 5, 2014, TWDC agreed to maintain this standby revolving credit facility at €250 million until September 30, 2015. Please refer to note 12.1.”TWDC Debt” of the Group’s 2013 consolidated financial statements, included in the Group’s 2013 Reference Document.

UPDATE ON RECENT AND UPCOMING EVENTS

Tom Wolber assumed role as Président of Euro Disney S.A.S.

Tom Wolber started in his role as Président of Euro Disney S.A.S., the Gérant of the Company and EDA on September 15, 2014, replacing Philippe Gas. For further information, please refer to the press release issued on August 1, 2014 and available on the Group’s website.

Proposed recapitalization plan backed by TWDC for approximately €1 billion.

On October 6, 2014, the Company announced a comprehensive proposal backed by TWDC to improve the financial position of the Group and enable it to continue investing in the quality of the guest experience. The proposed recapitalization plan totals approximately €1 billion. This proposal, if implemented, would improve the cash position of the Group by approximately €250 million, reduce the Group’s indebtedness by €750 million and improve the Group’s liquidity through interest savings and deferral of amortization of borrowings.

Implementation of the transactions comprising the proposal is subject to the approval by the Company’s shareholders, the completion of the prior information and consultation process with the Workers’ Council and the satisfaction of certain other conditions. Provided that these conditions are satisfied, the transactions contemplated by the proposal are expected to be completed in the first semester of calendar 2015.

For more information, please refer to the press release issued on October 6, 2014 and available on the Group’s website.

Impairment charge recorded in the Company’s statutory financial statements under French accounting principles regarding the Company’s investment in EDA

As of September 30, 2014, the Company reviewed the value in use of its investment in EDA, as required by French accounting principles. In a continued challenging economic environment that impacted the Group’s operating performance, this value in use, in accordance with the economics of the proposed recapitalization plan, was lower than the gross value. Therefore, the Company recorded a “statutory” impairment for the difference, amounting to €470.5 million. This impairment charge is recorded in the Company’s statutory financial statements only and has no impact on its cash balance or on the Group’s consolidated financial statements prepared under IFRS.

DEFINITIONS

EBITDA corresponds to earnings before interest, taxes, depreciation and amortization. EBITDA is not a measure of financial performance defined under IFRS, and should not be viewed as a substitute for operating margin, net profit / (loss) or operating cash flows in evaluating the Group’s financial results. However, management believes that EBITDA is a useful tool for evaluating the Group’s performance.

Free cash flow is cash generated by operating activities less cash used in investing activities. Free cash flow is not a measure of financial performance defined under IFRS, and should not be viewed as a substitute for operating margin, net profit / (loss) or operating cash flows in evaluating the Group’s financial results. However, management believes that free cash flow is a useful tool for evaluating the Group’s performance.

Theme Parks attendance corresponds to the attendance recorded on a “first click” basis, meaning that a person visiting both parks in a single day is counted as only one visitor.

Average spending per guest is the average daily admission price and spending on food, beverage, merchandise and other services sold in the parks, excluding value added tax.

Hotel occupancy rate is the average daily rooms occupied as a percentage of total room inventory (total room inventory is approximately 5,800 rooms).

Average spending per room is the average daily room price and spending on food, beverage, merchandise and other services sold in hotels, excluding value added tax.

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