EuroBusinessMedia (EBM): Compagnie des Alpes, Europe’s largest ski resort and theme park operator, just reported profit for its fiscal 2006/2007 year. Eric Guilpart welcome, you are the head of communications and investor relations at Compagnie des Alpes, what are your comments, in a few words, about CDA's performance for its fiscal 2006/7?
Eric Guilpart (EG): Well, for the fiscal year that ended at the end of September, we had to face very unfavourable climatic conditions and despite the fact that we had the hottest winter for the last 50 years -- the French ski market went down 15% -- we were close to the same performance as last year. The fiscal year was also affected by variations of perimeter. In 2006 we acquired 5 big parks, just at the beginning of the summer season, so it had a very positive impact on our results last year. If you look at the comparable basis, the total turnover of CDA is over 500 million euros, and is up 4.5%, and share-of-group net income is up 7.3%.
EBM: Today, as the 2008 winter season begins, what is your update on the bookings and the snow levels in your resorts?
EG: First, on the snow levels, we are very happy to announce that we have the highest level of snow for the last ten years and all of our ski resorts are open 100%, and we think that we’re at the beginning of a very, very good season. In terms of bookings, at December 1st, the bookings were up 6% versus last year, so we think that the ski season is going to be a great season.
EBM: The Serre Chevallier and Grand Massif ski resorts are performing under par in terms of daily revenues per skier. How do you plan to increase daily revenues per skier at these resorts?
EG: You’re right. First note that Grand Massif and Serre Chevallier are the latest French resorts acquired by the group. They were in lack of investment, so we work on all the facts to raise up the quality of service and to raise up the tariffs. So Grand Massif and Serre Chevallier showed a significant increase in their receipts per visitor, over the group’s performance, they are just now a little under 24 euros – which is the average receipt per visitor on average in the group -- Serre Chevallier and Grand Massif are around 20 euros, but we think that thanks to the work we do on the ski area in terms of investments, we can bring the average receipt per visitor at Grand Massif and Serre Chevallier back up to the average level of the group within the next five years.
EBM: In the longer term, what is the growth outlook for your ski resorts business, as the ski market is already quite mature and there are now few remaining opportunities for growth through acquisitions?
EG: Well, if you look at the ski market, you’re right, the ski market is mature in France and the growth is coming from foreign clients, mainly from countries with no mountains, such as the United Kingdom, Belgium, the Netherlands. The average increase in volume on the French market is, let’s say, between 1 and 2% a year, thanks to the foreign visitors. CDA had a growth policy based on external growth and we have reached a high level in the French market, around one third, so now we are now looking also to foreign countries. We are very present in Switzerland, since the year 2000, and we think that Switzerland is probably the country that gives the best opportunities for external growth at CDA. We are already present at Verbier and Saas Fee for example, and we are looking for foreign acquisitions in Switzerland. But, don’t forget also the fact that in some of our resorts we have minority positions, such as in Chamonix for example or now Avoriaz, and we have also opportunities for growth by raising our participations in Chamonix or Avoriaz, and it will provide CDA additional turnover on a significant basis.
EBM: Some analysts are concerned by your increase in capital expenditure these past couple of years, as well as the leverage on your balance sheet at a time when credit markets have become tighter. How do you respond to such expressions of concern, and how do you intend to increase cash generation at CDA?
EG: Well, first they are right, we invested a lot in the last five years, especially in the ski areas. The ski business is a highly capital intensive business and we must control the level of the CAPEX. We had between 2003 and 2006 some very exceptional items, such as the Vanoise Express, the link between les Arcs and la Plagne, or the Grand Massif Gondola. We consider that they were exceptional items. So we showed a level of investment on sales of about 22% in the ski business. We’re going to be back to more reasonable levels, between 18 and 20% on sales, depending on the resorts. Some of the resorts will need only 15% in investments, such as for example Tignes or Val d’Isère - they are very well equipped. Other resorts like Grand Massif or Serre Chevalier need more investments and in these resorts we will be up to one third on sales in level of investment for the next years. On average in the ski business it’s going to be around 20% or less. In the leisure business, it’s less important. Usually we invest between 12% and 15% on sales and this is the required level to maintain the attractiveness of all our parks. So we are looking, basically to increase our free cash flow. The free cash flow was at 20 million euro last year, it was at 25 million euro in 2007, and we intend to continue to raise the level of free cash flow.
EBM: And what about the issue of the leverage of the balance sheet?
EG: The business of CDA, both businesses of CDA, are capital intensive and we estimate that a gearing of 1 is something that is reasonable but we must not go higher, so the priority for the coming years will be to disengage and to lower the level of debt below a gearing of 1.
EBM: Certain private equity funds, which had invested in theme parks a few years ago, may now be looking to sell out, at a time when credit markets have become more difficult today. Are you in shape today, financially speaking, to be able to take advantage of acquisition opportunities which may present themselves in the coming years?
EG: Well, first let me remind you that the growth policy of CDA, historically, is based on external growth. 70% of our growth comes from external growth. So we are still looking at good opportunities for acquisitions in the ski business and in the leisure business. About the private equity funds, they’ve built up - for the last 3-5 years - big groups and we look at what they are going to do with their participation. I’ve heard about an IPO or maybe some selling. We’ll look at it. Historically, it has never been a question of financing, if we have good businesses, if the deals are reasonable, our shareholders will follow us. I think that for the next two or three years we are going to give the priority to the reconstitution of our purchase policy, so we will probably not buy something big -- we are more able to buy individual parks, but not big groups of parks, but if the opportunity is really good, if the deal is really good, our shareholders will not let someone else do it.
EBM: In your theme parks division, what is your short- and medium-term strategy to re-boost frequency of visitors at Parc Astérix?
EG: Parc Astérix is the flagship of CDA in the leisure business. On average it welcomes about 1.7 or 1.8 million visitors a year. Last year we suffered from very tough competition from Disney. It was their 15th anniversary and they had a very aggressive pricing policy. So we decided to react. First, we decided to open more than the previous years. We opened for the Halloween period, with an additional 60,000 visitors. For the first time of its history Parc Astérix will open for the Christmas period, and we think that we will surpass 100,000 visitors for this period. We are ready also to open the Parc Astérix for private events. This is the first way for us to increase the number of visitors. The second is to reinvest more than what we did before, and we are building a new attraction -- covered in order to protect our visitors from the rain the eventual rain in summer -- it will be operational for the opening in April, and we think that it will bring back visitors to the Parc Astérix. We also count on the fact that we now provide our visitors what we call ‘Paradis-Loisirs Pass’ -- it’s a pass that is valid, not only in Parc Astérix but also in three other parks in the Paris region. For 79 euros you can go for an unlimited one year period to Parc Astérix, France Miniature, Musée Grévin and Mer de Sable, and it had a very good success. So that’s all the things we do to bring back Parc Astérix to a level more close to 2 million visitors.
EBM: In conclusion, for investors listening today, how would you sum up the investment case for CDA?
EG: I want to say to the investors of CDA that CDA is a long-term value. When you look at our fundamentals, we have a very resistant model. When the ski market fell down 15% we resist. When we faced the most rainy summer we resisted, and not only resisted, but we went up. So CDA is probably a solid value in both of its businesses. Very well balanced in the summer and winter activities. The winter activities represent 55% of the business and the summer activity 45% of the business. It reduces the risk of having seasonal activities. Secondly, for the present Fiscal Year, 2007/2008, we add Val d’Isère -- which is probably the most well known French resort - in our portfolio, and it will provide at least 35 million euro in turnover and very, very good levels of margins.
We also count on the opening of Parc Astérix for Christmas and the repositioning of some of our other parks, so we think the year 2007/2008 will probably be a good year, because we have all the signs that are in the green.
EBM: Eric Guilpart, head of communications and investor relations at Compagnie des Alpes, thank you very much.
EG: thank you
