Alton Towers accident wipes tens of millions off Merlin’s profits

MERLIN Entertainments, which owns attractions including Alton Towers, says the accident at the North Staffordshire theme park in June is likely to wipe between £37m and £47m off its profits.

The accident on the Smiler ride left four people seriously injured. One young woman had to have a leg amputated.

In a trading update issued this morning, Merlin said that while first half results are expected to be in line with analyst estimates, the serious accident at Alton Towers on 2 June has had an adverse impact on trading at the start of the critical summer period and on the board’s expectations for the financial performance of the group for the full year.
 
The accident at the Alton Towers Resort resulted in the temporary closure of the park, the suspension of UK theme park marketing and temporary ride closures at two of Merlin’s other UK theme parks.

The combination of these factors has significantly reduced volumes at Alton Towers Resort and, to a lesser extent, the UK Resort Theme Parks estate, Merlin said.
 
“Action is being taken to rebuild momentum and re-engage with our customers.  However, based on most recent trading and our assessment of the likely trajectory over the key summer trading period, the 2015 EBITDA for the Resort Theme Parks Operating Group is now expected to be in the range £40m to £50m (2014: £87m),” it said.

“The magnitude of the financial impact is the result of both a significant reduction in revenue and the requirement to maintain an appropriate investment in customer service and marketing through peak season.
 
“Although difficult to assess at this stage, we believe that there may be some continued adverse impact on the Resort Theme Parks Operating Group profitability in 2016.”
 
The lower expectations for the Resort Theme Parks Operating Group in 2015 will be partially offset by better than expected financing costs, now expected to be between £40m and £45m, central cost savings and trading in the wider group.

Therefore, Merlin expect 2015 underlying profit before tax to be broadly in line with the previous year (2014: £249m).
 
Nick Varney, chief executive officer, said: “The accident at Alton Towers in June was a devastating event, for which we have accepted responsibility and are deeply sorry. We have been humbled by the grace and fortitude of those who were injured, and their families, and will continue to do whatever we can to support them. 
 
“As a result of the accident, we took the immediate decision to close the park and temporarily suspend a number of rides across the UK Resort Theme Parks estate.  We firmly believe that this was the right course of action reflecting the seriousness of the incident, the impact on our staff, and to allow the team to focus on supporting all those affected and on the implementation of the new safety protocols, where necessary. 

“In addition, we felt it appropriate to significantly reduce UK theme park marketing activity, in what is a critical period in the run up to the peak summer season. Alton Towers Resort was reopened on 8 June 2015, but as a result of the material loss of momentum, trading at the park and, to a lesser extent, the broader UK Resort Theme Parks estate has been adversely impacted.
 
“Elsewhere in the estate, there have been strong performances from new attractions and accommodation, and the LEGOLAND Parks Operating Group has maintained its strong momentum.” 

Merlin also owns the Sea Life Centre in Birmingham.