Transcript of Mark Stead’s Euro Disney AGM speech made on 31 March 2017.


Below is a transcript of the speech Mark Stead, the Chief Financial Officer of Euro Disney S.C.A made to shareholders last week at the Euro Disney Annual General Meeting



Euro Disney S.C.A. Annual General Meeting
March 31, 2017
Speech of Mark Stead, Chief Financial Officer, Euro Disney S.C.A.


Thank you, Catherine.

Ladies and gentlemen, good morning.

2016 was an unusual year for Disneyland Paris.

There are three main things to consider:

First, the economical and geopolitical context had a negative impact on our revenues, which decreased by 7% over the period.

Next, as a result of these very negative financial results,

We had to record a significant impairment charge on our assets, in our consolidated financial statements under international accounting standards and in our statutory accounts under
French accounting standards or IFRS.

Lastly, The Walt Disney Company announced a 2-year waiver on the payment of royalties and  management fees as well as its support of a recapitalization plan for up to €1.5 billion to give us needed liquidity.

Before this recapitalization plan, TWDC also gave shareholders the opportunity, if they should wish, to sell their shares at a considerable premium.

I will come back to these points.

First the results:

Theme park attendance was down 10%, reflecting the 4-day parks closure following the events in Paris. Average guest spending was stable at €54, which reflects the success of our continued investment efforts in improving the guest experience.

Our hotel room night volumes were down 4% versus last year, as were our revenues from our hotels and Disney Village. Average spending per room was down €3 to €235.

In this difficult context, however, it is important to highlight the success of our recent rehabilitation of the Disney’s Newport Bay Club hotel. The hotel had been partially closed for renovation since November 2013. It reopened at full capacity on December 2015 and gained its 4th star in March 2016. Guest Satisfaction increased by 30 percentage points after this rehabilitation. And this refurbishment and repositioning allowed us implement a doubledigit price increase.

This demonstrates that our investment strategy is the right one and that it has already proven successful.

In FY2016, we pursued this strategy, notably as we approach the 25th Anniversary.

We are investing in technology, for example in online pre-arrival planning tools and mobile apps.

We are investing in our people. It is our Cast Members that deliver the Disney Magic to our guests.

Our Cast is one of our greatest assets.

Lastly, following the attacks in Paris, Brussels, and Nice we increased our investments in  security.

As a result of these investments, our costs increased by 5% in FY2016.

 I would now like to address the asset impairment charge we recorded this year. Our results were much lower in 2016, as a result of the very difficult context. Our company was negatively affected by the events in Paris. As a result of the unfavorable conditions that negatively impacted performances across the Parisian tourism industry, as well as our own financial results, we adjusted our long-term business plan to reflect FY16’s poor performance, particularly the early years of our plan.

This change in our plan confirms our need for additional resources to be able to pursue our strategy in the medium-term.

The impairment is the accounting result of this fact.

The impairment charge represents €565M (in international accounting standards): It is a normal accounting rule applied to all companies. If there is any indicator of impairment, such as a decrease in revenue, any company is required to perform a test on its assets.

This impairment test consists of comparing the carrying value of the Group’s assets to their recoverable value. The recoverable value represents the expected future performance of the group’s assets. If the recoverable value of the assets is lower than their carrying value, the Group records the difference as impairment.

For example: Say an asset is recorded at €100 in our accounts. if the sum of the future estimated cash flows of this asset reaches €90, we have to record a €10 impairment charge in our accounts to align the recoverable value to the value recorded in our accounts.

Each year, we prepare financial statements under IFRS international norms, and our statutory accounts are prepared under French accounting standards.

Tests are carried out on the basis of the same discounted estimated future cash flows. In Euro Disney S.C.A.’s statutory financial statements, the primary asset is its investment in the equity of Euro Disney Associés SCA, the owner Company of the Group’s assets which were impaired.

As a result of this impairment charge, the accounting value of Euro Disney Associés significantly  decreased, and we recorded a charge in the Euro Disney S.C.A. statutory accounts to reflect this decrease in accounting value.

I would like to make it clear that the impairment charges had no impact on the cash position  nor the cash flows of the Group.

I would now like to address the cash position. On September 30th, liquidity amounted to  €113 million, a decrease from the €136 million on 30 September 2015.

In this degraded environment, to provide us with the liquidity necessary to implement our strategy, TWDC has definitively waived the payment of two years of royalties and management fees. These waivers will eliminate the cash outflow and will not impact our debt.

In 2016 the Group recorded a net loss of €858 million. As a result of this considerable net loss, the equity of the company is less than one-half of the share capital. In compliance with the French Commercial Code, the Company has a legal duty to consult its shareholders on the pursuit of the Company’s activities, and therefore, a resolution will be submitted to you today. The company will then have 2 years to restore its financial situation. This recapitalization is nevertheless necessary in the short term, given the company’s financial situation.

It is in this context that TWDC, our main shareholder, is committed to support a recapitalization of up to €1.5 billion.

This considerable capital increase will come after a tender offer, which followed TWDC’s purchase of the majority of Kingdom Holding’s Euro Disney shares.

The tender offer for all the remaining outstanding Euro Disney shares will be at a price of €2 per share and will allow you, if you wish, to benefit from the same price as obtained by Kingdom Holding.

You will have the choice between selling your shares at a premium of 67% versus the stock price preceding the announcement, or participating alongside TWDC in the financial restructuration necessary for Euro Disney.

If, at the end of the tender offer, TWDC holds at least 95% of the capital, TWDC will immediately proceed to a mandatory buyout at the same price as the tender offer, followed by a delisting of Euro Disney S.C.A. from Euronext Paris.

A word on the provisional timeline for the offer TWDC filed the draft note to the AMF yesterday, for review. Euro Disney has filed its draft reply note, which includes the report of the independent expert hired by the Supervisory Board to ensure the fairness of the offer price for all shareholders.

Axel Duroux, Chairman of the Supervisory Board, will share the Board’s recommendations  with you.

The indicative timetable provides a tender offer period from April 26 to May 23 and a publication of he results on May 29.

The delisting, if it takes place, would be launched in June.

A dedicated hotline will be put in place, when the time comes, to answer your technical  questions about the offer.

Finally, I would like to give you a quick update on FY17 Q1.

For the first quarter, we recorded a 5% increase in our revenue to €354 million, as expected.  This increase reflects a higher attendance both in our parks and in our hotels, as we have recaptured a portion of the attendance lost following last year’s events in Paris, including the attendance lost during last year’s 4-day parks closure.

While Q1 FY17 results are encouraging and confirm our capacity to drive guest volumes in 2017, we must remain cautious in this still uncertain environment.

Thank you very much. I will now give the floor back to our Présidente Catherine Powell.

Source: Euro Disney S.C.A.


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