Cirque du Soleil is in a better financial position, assures the company
The return of spectators to the marquee allowed it to return to profitability.
Cirque du Soleil is in a much better financial position thanks to the relaunch of its shows. In March, this Quebec company succeeded in reducing its debt by US$100 million and refinancing it at lower rates, despite monetary tightening by central banks.
The total debt of this Quebec company now stands at US$550 million, the equivalent of just over C$750 million. This is the lowest level of debt in recent years, underlines its chief financial officer, Emmanuelle Leclerc-Granger, in an interview.
This refinancing will be translate into savings in interest charges which are still substantial, but it will improve Cirque du Soleil Entertainment Group's financial situation.
Prior to the pandemic, Cirque du Soleil had accumulated nearly US$1 billion in debt to fund its growth plans. The pandemic, which forced the industry to lower the curtain, had pushed the company into bankruptcy.
In November 2020, Catalyst Capital Group injected 375 million $US to replenish the coffers of the company, but it will have been necessary to wait until the summer of 2021 before the easing of sanitary measures allows the resumption of shows.
Hard hit by the pandemic, the entertainment industry has finally resumed its activities. This more favorable context allowed Cirque du Soleil to obtain a better rate by refinancing its debt. This represents savings of more than US$30 million annually, explains Ms. Leclerc-Granger.
The terms of the refinancing include a US$100 million credit facility. The company does not intend to use this available credit, but it provides flexibility, if needed.
The chief financial officer points out that the rating agencies have recognized the improvement in Cirque du Soleil's balance sheet. Standard & Poor's raised the company's rating three times.
At B+, Cirque's debt is still considered speculative, but the improvement gradual improvement in its rating demonstrates that its financial situation is on the right trajectory.
The pandemic eclipse did not overshadow the popularity of Cirque du Soleil. The return of spectators to the tents enabled it to return to profitability. The company has been raking in more cash than it has been spending for the past five consecutive quarters, Leclerc-Granger said.
Cash rates occupancy are still a little below pre-pandemic thresholds, as sanitary measures have not yet been completely lifted in all the markets where Cirque is present, explains the leader.
Strong demand, however, has allowed the group to increase ticket prices by almost 15%, on average. The ticket price is so strong that, for us, profitability is increased versus pre-pandemic levels.
Even if the rise in interest rates raises questions about the household behaviors, demand for Cirque du Soleil performances remains strong at the moment, said Leclerc-Granger.
“We haven't seen the signs of a recession in our ticket sales yet.
— Emmanuelle Leclerc-Granger, Chief Financial Officer
Presales of tickets suggest that the intentions of Cirque fans have not changed. We continue to see ticket pre-sales that remain strong in all of our markets. Of course, from a financial governance perspective, we remain cautious in this macroeconomic context.
The recovery will have enabled Cirque du Soleil to replenish its workforce at its head office international, located in Montreal. The confinement had forced the company to lay off the majority of its employees.
The head office, which welcomed 1,558 workers in December 2019, only employed 200 people at the height of the pandemic.
As activities resumed, this number gradually increased. There are now 945 workers at the company's head office in Montreal.