Euro Disney posts big loss

Euro Disneyland posted a substantial loss for the fiscal year ended Sept. 30 and predicted that more red ink will flow in 1993.

The giant theme park, hit by everything from a worldwide economic recession to negative press coverage and a blockade of its gates by angry French farmers, said it lost $ 35 million on operating revenue of $ 707 million.

Despite the disappointing results, company exex put on a brave face yesterday , saying the decision to pay a dividend of 1 franc (about 18 cents) per share next February underlined their confidence in the park’s long-term success.

On the Paris stock market, Euro Disney shares continued to fall below the 72 -franc ($ 13.40) initial offering price. At the close of trading yesterday, Euro Disney stock had dropped 5 francs to close at 68 ($ 12.66).

The results, a far cry from the $ 37.9 million profit predicted by Euro Disney when it first sold stock on the London and Paris markets in 1989, were nevertheless better than the $ 55.8 million loss that analysts had expected.

That’s largely because Euro Disney has managed to persuade Walt Disney Co. to defer its management fee for fiscal 1992 and 1993.

Under the terms of Euro Disney’s operating charter, Walt Disney Co. takes a management fee of 3% of total revenue, in addition to earning royalties for the use of its rides and characters. That means Euro Disney should have paid about $ 21 million to Disney for 1992. Repayment will now be deferred at least to fiscal 1994 and will be pushed back further if the park has failed to turn a profit by then.

The management fee and other payments to the U.S. parent raised eyebrows among some financial analysts, who point out that Disney makes money out of Euro Disney even if the French park itself is unprofitable.

Earlier this week, a hard-hitting analyst report from the influential French bank Paribas cited the management fee as one of the reasons that Euro Disney stock continues to look unattractive. The report, titled “Euro Disney: A Sell Story,” advised investors to part with their stock.

Looking ahead to 1993, Euro Disney president Philippe Bourguignon said the company expects to report losses in the first and second quarters but should make a profit in the third and fourth. “However, we do not anticipate that we will achieve profitability for the entire year,” he said. No figures for expected 1993 losses were given.

Commenting on the 1992 figures, Euro Disney’s senior VP of finance John Forsgren noted that the cause of the operating loss was not poor attendance but lower than expected spending by visitors.

Since the park opened its gates in April, attendance has hit 6.8 million, leading most observers to believe that the first year’s target of 11 million visits will not be met.

Of particular concern is that the French, who are key to the vital repeat business, only accounted for 29% of visits. Euro Disney had hoped that the French would make up at least 40% of visitors and have now launched a major ad campaign to draw Gallic trippers into the park.

Also, Euro Disney chairman Robert Fitzpatrick opined that while the park’s hotel occupancy rate of 74% was highly satisfactory, it was still lower than anticipated.

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