Theme Park blog: Merlin keeps on growing…

The Merlin Entertainment accounts came out on Wednesday and were somewhat lost in all the doom and gloom economic news.

However, for the amusement industry giant, the year has been a massive success: like for like visitor numbers were up by 3%, representing an increase of more than one million guests and total visitors now total over 47 million guests to their 94 attractions across four continents.

The midway section is the fastest growing and the most profitable section of the business ©Creative Commons; Image credit: Sowizo

With £946m revenue, it seems to be a matter of when, not if, Merlin revenues will exceed £1 billion and the Bournemouth based business will be delighted to see total profit before tax more than quadrupling from last year to £96m.

Driving the growth was the addition of 13 new “midway” attractions, of which only 3 were in the UK. These include the opening of attractions in Blackpool, as well as taking over attractions in Sydney and Dallas. Notably, Merlin are trying to “cluster” attractions, so that you’ll find a SEA LIFE Centre, Madame Tussauds and Dungeons all close together.

Interestingly, growth in ‘cluster’ cities has been higher than those with just one attraction – which could possibly spell the end for York dungeons over the next few years. Alternatively, it could mean that we might be able to expect a SEA LIFE centre or a Madame Tussauds!

However, for those of us who like visiting Theme Parks in the UK, they are becoming a smaller and smaller part of the business. It’s no surprise though; the midway attractions make over 50% more profit from very similar revenue.

However, Merlin’s efforts at making the theme parks short stay destinations and getting visitors into shops and restaurants seem to be working: although visitors to Merlin theme parks remained static from last year, revenue was up by over 5%, representing an increase of £18 million from last year – profits were also up by £7.9m (9%), highlighting that the profit in parks is made on what you sell to them in the parks, rather than their entry fee.

Legoland (which operates independently of the Theme Parks division) saw better growth than other Merlin theme parks, with like for like visitors up 4%, revenues up 8% and profits up 11%.

The opening of Legoland Florida has also been a hit, opening in October it received 600,000 guests in its first three months, generating £31m and making £10m profit. Both these figures significantly exceeded Merlin targets, and suggests that despite its somewhat remote location, visitors to Orlando are interested in visiting Legoland whilst they’re in the Sunshine State.

However, it’s not all good news for the world’s second largest amusement park operator who have debts of over £1 billion, which exceeds their revenue. They also see themselves in a position where their current liabilities are almost double their current assets. Whilst large fixed assets and intangibles give them a pretty net assets figure, it doesn’t hide the fact that Merlin had to pay £133m finance costs in the past year.

Much of the business’ activities are financed through debt, for example £102m of the recent purchase of the Sydney attractions was financed through a £96m bank loan. The company may be profitable at the moment whilst interest rates are at record lows, but if the interest rate were to double over the next couple of years, Merlin would quickly become an unprofitable business.

And that is the problem that faces a UK theme park market where four of its five biggest theme parks are owned by the same company. If Merlin were to go into administration, it’s highly unlikely that you’d find anyone wanting to buy all four parks at the same time (and don’t forget the seven theme parks Merlin owns abroad). Were the, admittedly still very unlikely, situation to arise one certainly has to question whether Chessington World of Adventures would ever open its doors again.

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