Euro Disney sales show record rise

Euro Disney, operator of the Disneyland Paris theme park, has shrugged aside French economic weakness and the Channel Tunnel fire to record a 12 per cent rise in first-quarter sales.

The news was well received by analysts and the shares rose 1.5p to 117.5p yesterday despite a reiteration by the company of November's warning that the current year would be difficult.

Philippe Bourguignon, chairman, described the sales increase from Fr1.01bn (pounds 110m) to Fr1.13bn in the three months to December as "a satisfying performance, demonstrating our ability to better exploit the potential of our low season".

But, he warned, 1997 remained a challenging year with no price increases and higher financial charges.

The decision to peg entry charges for the current year at last year's level may have a "temporary detrimental impact on margins", the company said, but was aimed at further consolidating and strengthening the position of Disneyland Paris. In April 1995, the theme park slashed entry prices by up to 22 per cent and was rewarded last year with a 9 per cent rise in visitors to a record 11.7 million, a trend that has continued into the first quarter.

The other problem facing the company this year is the gradual unwinding of a Fr13bn restructuring agreement which accompanied a Fr6bn rights issue backed by Prince Al-Waleed Bin Talal, the Saudi prince, in 1994. The ending of the standstill agreement with the group's banks had already seen lease and finance charges increase by Fr100m last year and the burden was set to grow by a further Fr200m or so in the current year, the company said. A further Fr100m will be added in the 1997-98 financial year.

Euro Disney said operating revenues for theme park and associated hotels rose 11.4 per cent to Fr1.12bn in the quarter. The growth was driven by higher attendances and a bigger individual spend in the park and an increase in occupancy rates in the hotels.

Nigel Reed, an analyst at brokers Paribas Capital Markets, said: "Such figures are encouraging. They are up by a bigger percentage increase than I was expecting for this time of year. But the first quarter is a seasonally low period, so any change has a big percentage effect."

He questioned, however, how much Euro Disney had had to spend to achieve these sales increases and suggested that the resulting Fr50m boost to net profits would be wiped out by the higher finance charges this year, assuming no other changes in costs.

Even so, he said he was now more likely to edge up his current estimate of Fr100m net profits for the group for this year. In November, Euro Disney reported a 77 per cent rise in net profits to Fr202m.

"On the face of it, this is encouraging news, but not enough to make the shares attractive." Earnings would still be just Fr0.1 or Fr0.2 a share, he said. "They have got to run to stand still and to stand still is not enough to support the current share price. They are still overvalued and I would be a seller." The shares peaked at nearly 763p in March 1992.

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