Euro Disney SCA reports positive Fiscal Year 2006

Thursday, 9th November 2006 at 19:20

Euro Disney S.C.A., operating group of Disneyland Resort Paris, yesterday announced its annual results for fiscal year 2006, reporting positive news across the board including increased revenues, increased attendance and reduced net loss, paving the way, they hope, for a similarly successful 15th Anniversary year in 2007.,

(Marne-la-Vallée, November 8, 2006) Euro Disney S.C.A. (the “Company”), parent company of Euro Disney Associés S.C.A., operator of Disneyland Resort Paris, reported today financial results for its consolidated group (the “Group”) for the fiscal year ended September 30, 2006.

Revenues increased 4.5% to € 1,087.7 million in fiscal year 2006 reflecting increases in theme parks attendance and hotel occupancy. Theme parks revenues increased 5.4% to € 579.2 million, following an increase of0.5 million in attendance, which reached 12.8 million in 2006. Hotels and Disney Village revenues increased 4.2% to € 412.2 million due to a higher occupancy rate of 83.5% compared to 80.7% for fiscal year 2005, as well as increased guest visitations at Disney Village.

Operating margin before depreciation and amortisation increased 29.6% to € 147.9 million from € 114.1 million as a result of growth in revenues combined with a slight increase in costs and expenses. Operating margin before depreciation and amortisation as a percentage of revenues increased 2.6 percentage points to 13.6%.

Costs and expenses for fiscal year 2006 grew 1.6% compared to the prior year reflecting management’s ongoing focus on cost containment. The Group’s operating margin improved € 29.5 million to a loss of € 2.4 million for fiscal year 2006, from a loss of € 31.9 million in the prior year. Other net financial charges increased over the period due to a higher effective interest rate on the Group’s debt.

For fiscal year 2006, net losses of the Group amounted to € 88.6 million. Excluding the non-recurring, non-cash gain in fiscal year 2005 that resulted from the Group’s 2005 legal and financial restructuring (the “2005 Restructuring”), net loss on a comparable basis attributable to equity holders of the parent decreased 20.5% from the prior year to € 73.1 million. Net loss on a comparable basis attributable to minority interests amounted to € 15.5 million.

Cash and cash equivalents increased by € 24.2 million from the prior year to € 266.4 million.

Commenting on the results, Karl L. Holz, Chairman and Chief Executive Officer of Euro Disney S.A.S., said:

“We are pleased with our year end results and we look forward to maintaining this momentum as we continually reinvigorate our Theme Parks. We believe that our growth strategy is delivering its benefits as we remain focused on improving our margins, while continuing to provide our guests with a unique experience. These efforts contributed to a 30% improvement in our operating margin before depreciation and amortisation.
This year, we benefited from several events, such as the launch of Buzz Lightyear Laser Blast®, and introduced various original offers that appealed to our visitors. Next year, we are hosting the most magical celebration in our history to commemorate our 15th-year anniversary. We are also developing thrilling new products, including a parade in the Disneyland Park and three attractions in Walt Disney Studios Park. All these things plus more combine to create the Disney dream holiday for every family.

Our encouraging results have been achieved thanks to the dedication and hard work of our cast members, who continue to make our theme parks the most popular tourist destination in Europe.”

Further Analysis
Theme parks revenues increased 5.4% to € 579.2 million from € 549.7 million in the prior year, primarily as a result of increased attendance and average spending per guest on admission. Increases in attendance levels are largely the result of new marketing and sales initiatives aimed at attracting the local French market, special offers and the opening of Buzz Lightyear Laser Blast®.

Hotels and Disney Village revenues increased 4.2% to € 412.2 million from € 395.4 million in the prior year reflecting higher hotel occupancy and guest visitation at Disney Village.

The increase of 0.5 million in theme parks attendance primarily reflects the solid performance during the second half of the year. Attendance by French visitors increased 12% over the prior year resulting in a French visitors’ share of total visits up from 39% to 42%. This was mostly as a result of special offers targeted at local markets, including a new ticket, the “Francilien”, marketed in the Ile-de-France region, as well as special offers made to certain workers councils (“Comités d’Entreprise”).

Hotel occupancy rates increased 2.8 percentage points, which translated into an additional 59,000 room nights compared to fiscal year 2005. This increase was mostly driven by higher attendance of Spanish visitors, who predominantly stayed on-site.

Theme parks spending per guest increased 1.1% driven by a moderate price increase in theme parks admissions, partially offset by special offers.

The 2005 Restructuring, Cash Flows and the Future

Based on existing cash positions, liquidity from the undrawn € 150.0 million line of credit from The Walt Disney Company (TWDC), and provisions for the unconditional and conditional deferral of certain royalties and management fees and interest charges pursuant to the 2005 Restructuring, management believes the Group has adequate cash and liquidity for the foreseeable future, subject to the Group’s compliance with its debt agreements as discussed below.

The Group has covenants under its debt agreements that limit its investments and financing activities. Beginning with fiscal year 2006, the Group must also meet financial performance covenants that necessitate improvements to its operating margin. Subject to final third-party review as provided in its debt agreements, the Group believes that it has complied with these covenants for fiscal year 2006. This compliance was achieved through revenue growth which outpaced the increase in the Group’s costs and expenses during the period.

For fiscal year 2007, if compliance with financial performance covenants could not be achieved through increased revenues, the Group would have to appropriately reduce operating costs, curtail a portion of planned capital expenditures (outside those contained in the Group’s multi-year investment program [Toon Studio, Tower of Terror]) and/or seek assistance from TWDC or other parties as permitted under the loan agreements.

Although no assurances can be given, the Group currently believes that it will meet its financial performance covenants in fiscal year 2007 through increased revenues and continuing cost containment, without the need for any of the additional measures referred to above.

You can read the full report from Euro Disney S.C.A. as a PDF here.

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