Yahoo Finance Merlin pushes into hotel rooms as shares plunge on back of terror hit to attractions
Madame Tussauds and Alton Towers owner Merlin will plough more cash into accommodation after it cut its profit expectations on the back of tough trading caused by terror attacks in the UK.
Shares in the company tumbled 20pc to 361p in morning trade after it revealed that like-for-like sales growth in the 40 weeks to October 7 rose just 0.3pc.
Besides the terror attacks at Westminster and Borough Market in London putting visitors off, poor weather across the UK and Northern Europe and extreme weather in Italy and Florida were also to blame, according to Merlin.
Chief executive Nick Varney said his decision to redirect capital expenditure from 2018 to 2021 away from existing plans towards building more accommodation was a sensible reaction to the tough market conditions.
He argued that continuing to pump money into its Midway attractions, such as SeaLife, would mean “to a degree advertising to empty seats”.
“It makes sense to take some of that money and put it in areas we know we can get a better return on capital,” Mr Varney said.
“I think in the fullness of time people will see that and the share price won’t be down 20pc.”
Mr Varney said the focus on accommodation would help turn more of its attractions into short-break destinations rather than places for day trips.
But investors clearly needed convincing after the steep drop in the share price on the back of estimates by the company that earnings before interest, taxes, depreciation and amortisation would now be between £470m-£480m compared to the £489m that analysts expect.
Mr Varney said this still represented healthy growth compared to the £433m number from the previous financial year.
He added Merlin was also spending £30m on updating various things including its IT infrastructure, which it said would cut costs for the business and protect profitability.
Merlin is not retrenching entirely, having unveiled a deal to roll out new Peppa Pig attractions worldwide. The agreement with Entertainment One - which owns the rights to the popular children's cartoon character - is to develop new attractions and themed accommodation.
The deal does not cover the UK, where there is already Peppa Pig World at Paultons Park in Hampshire under a long-standing agreement, and will be on a non-exclusive basis in China.
Merlin is also launching a new adventure-based attraction with TV survival expert Bear Grylls, with the first attraction opening in Birmingham next year.
Mr Varney said that he had been “very frustrated” at reports that had linked his company to a potential deal with parts of US rival Sea World and acknowledged it was “unhelpful” to have this results update so soon after.
Roughly 70pc of Merlin’s sales now come from outside the UK as the company looks to expand further overseas. It opened Legoland Japan in April and has plans to launch sites in New York and South Korea soon.
Legoland was the only division to notch up like-for-like sales growth in these numbers, with its 3.4pc rise rescuing the group overall. Comparable sales fell in its theme parks division and in its Midway attractions business, which includes SeaLife and Madame Tussauds.
