Merlin warns of profits hit after Alton Towers rollercoaster crash

Alton Towers in Staffordshire.

Alton Towers in Staffordshire. - Credit: PA

Alton Towers owner Merlin expects annual earnings for its theme parks business to drop by as much as £47million this year following last month’s rollercoaster crash.

The group said the crash has had “an adverse impact on trading at the start of the critical summer period” as well as for its financial performance for the full year, and could also hit results next year.

Underlying earnings for the theme park division are expected to fall from £87m in 2014 to between £40m and £50m this year, Merlin said.

Five people were seriously injured in the accident on June 2 which resulted in a four-day shutdown at Alton Towers. Merlin also suspended UK theme park marketing and temporarily closed rides at two other sites.

“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.

It added that it was taking action “to rebuild momentum and re-engage with our customers”. But the group said that, based on most recent trading and the “likely trajectory over the key summer trading period”, it was forecasting the fall in annual earnings compared with last year’s level.

Merlin 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.

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“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.”

However, the wider group, which also operates attractions such as Madame Tussauds and Legoland parks, is expected to see profit before tax “broadly in line” with last year at £249m after savings in financing and other costs.

Merlin added: “We have committed to support those injured as best we can and implemented additional safety protocols to be sure that a similar accident will never happen again.”

Merlin chief executive Nick Varney 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.”

The statement from Merlin came ahead of half-year results due to be released on Thursday, showing visitor numbers across the group up to 27.7m compared with 27.5m last year but pre-tax profits for the six-month period were 10% lower at £36m.

Total revenues grew to £544m as like-for-like sales rose 2.8% but the theme parks division saw a fall of 2%.

Legoland saw a strong performance driven by its two US parks while other attractions in Asia and Europe also performed well.

But London sites were hit by lower visitor numbers from Hong Kong, blamed on travel restrictions for tourists from China. They were also affected by the weakness of the euro making the capital a pricier destination relative to the Continent.

Mr Varney declined to spell out the fall in visitor numbers at Alton Towers but said it could take as long as 18 months for it to recover.

He said there had been “a substantial reduction in what the park was doing prior to the accident” while there had also been a lesser impact on Thorpe Park.

The chief executive said promotional efforts to regain momentum in visitor numbers had not been “moving the dial” enough but brushed off the question of whether Alton Towers might ever need to be sold off or closed down.

“I don’t think there is any danger of that whatsoever. Alton Towers is a highly successful business.

“The truth of the matter is that the biggest factor in this is the momentum.

“Just at the point when we should have been going at full throttle, effectively stopping the engine, and doing the things we have to do.”

He said there had understandably been safety concerns. But Mr Varney added: “At the end of the day we have had one accident in the history of this company. I think, hopefully, people believe we have been responsible in the way we have acted. In 12 to 18 months’ time I believe Alton Towers will be back where it was.”

Mr Varney said underlying earnings for the theme park division would normally be expected to increase by a “mid-single digit” percentage.

Growth of 5% would have meant underlying earnings of £91m for 2015, meaning its bottom range forecast of £40 million now would be 56% lower than might have been expected.