Upturn in sight after bumpy ride for Merlin
++ the share hunter ++ nI C hO L ash Yett++harG re aV es LansDOWn++
LAST week’s results from Merlin Entertainments were not what the stock market wanted to see, with shares in the Alton Towers and Legoland owner plummeting 20 per cent on Tuesday.
That reaction might look odd at first glance, since overall revenues actually rose 5.9 per cent. However, most of that growth was from new openings.
Poor weather and the London terrorist attacks meant revenue growth at existing attractions was notably weaker, just 0.3 per cent above this time last year.
The Midway business – which includes smaller attractions such as Sea Life aquariums and Madame Tussauds – saw revenues fall 1 per cent, with Theme Parks down 2.1 per cent. Legoland is still doing very well, with established parks increasing revenues by 3.4 per cent and Legoland Japan delivering a strong opening, but it wasn’t enough to offset worries about the rest of the business.
The fear is that one-off weather events and terrorism are masking fundamental problems. Is Merlin losing its ability to get customers through the turnstiles?
It’s a reasonable concern, but seems a bit premature. All tourism businesses are subject to the weather, and we already knew terror attacks in one of the group’s key destinations were discouraging visitors. While news that London is set remain tough is very unwelcome, the group is more than just a UK business, with 62 per cent of profits coming from overseas.
Merlin is second only to Disney as an operator of themed visitor attractions, and long-term, while visitor numbers will wax and wane, advancing global incomes and population growth should see the pool of possible customers trend upwards.
Its attractions remain popular, but management aren’t being complacent. Merlin announced an increased focus on hotel rooms at its Theme Parks business, and partnerships with Bear Grylls and Peppa Pig to open attractions worldwide.
Whether the renewed focus on accommodation and intellectual property, which have served Merlin well in the past, delivers results remains to be seen.
But for those prepared to wait out the current downturn, the shares are expected to yield 2.3 per cent next year.