Madame Tussauds-owner warns on profit after attacks deter Britons
The stock fell up to 21%, wiping about £920m off the company’s market capitalisation
The owner of Madame Tussauds in London has seen its shares plunge by a fifth as peak summer trading woes after UK terror attacks took the shine off a worldwide Peppa Pig deal. Photograph: Yui Mok/PA Wire
Shares in Merlin Entertainments, operator of tourist attractions such as London’s Madame Tussauds waxworks, tumbled around 20 per cent on Tuesday after the company warned on profits after a series of militant attacks in Britain.
Merlin, which also runs the London Eye, Sea Life and theme parks such as Alton Towers in Britain, said it would not meet current market expectations for core earnings in 2017.
The stock fell up to 21 per cent, wiping about £920 million (€1.03 billion) off Merlin’s market capitalisation.
Britain has seen five attacks since March, described by police as terrorism, and security fears have had a particular impact on domestic visitor numbers.
“The spate of terror attacks witnessed in the UK marked an inflection point in Midway London (attractions) and UK theme park trading,” said chief executive Nick Varney.
Merlin forecast core earnings for 2017 of £470-480 million. That compares to analysts’ average forecast prior to the update of £490 million and £433 million made in 2016.
The company said trading in recent weeks had remained mixed and group like-for-like revenue growth for 2017 was now expected to be “approximately flat” on 2016.
The group said it would respond to a volatile market environment and underlying cost pressures, such as labour, by switching its investment around.
It would reduce spending on its existing attractions by £100 million over the 2018-21 period, redirecting the funds into adding more accommodation and on productivity initiatives, such as automated kiosks and back office IT systems.
“We will effectively batten down the hatches and re-direct capital to areas where we know we can grow this business successfully and get good returns on capital,” Varney said.
He said Merlin’s revised model would deliver 25 per cent of its growth from the existing estate and 75 per cent from new business development, rather than the traditional 50/50 split.
“The worry is that the decision to reduce investment in standing assets risks hitting attendance levels in future years,” said Steve Clayton, manager of Hargreaves Lansdown’s Select UK Growth Shares fund, which holds Merlin stock.
For the 40 weeks to October 7th, Merlin’s like-for-like revenue was up just 0.3 per cent. That reflected weaker trading at its London attractions and European theme parks, where like-for-like revenue fell 1.0 per cent and 2.1 per cent respectively.
Total revenue growth over the 40 weeks was 12.4 per cent at actual exchange rates, driven by new business, including the opening of Legoland Japan, five new Midway attractions, and 381 new accommodation rooms.