Morning Mumble: Profitability (MERL).

Good Morning,

For regular readers, Merlin Entertainment (MERL) trading update after the accident at Alton Towers in June. MERL belatedly update the market on the trading environment as a result. In full below, (EMC: MERL 2 June 2015), 

It was surprising that Merlin Entertainment (MERL) have not updated the market on the casualties at Alton Towers yesterday, with 4 serious casualties in an incident around 2pm yesterday. One wishes them a speedy recovery, but with suggestions about the health of rides and how the company has dealt with concerns, could this have further ramifications for MERL's theme parks per se. (BBC) One certainly to watch as the HSE will become involved if they haven't already. 

(Item's in bold are addition today). 

Research in one key area, showing it pays to go the extra mile rather than balance sheet analysis and assumption. MERL will also likely suffer as a result of a weaker Euro, not only from us natives going abroad, but more so less visitors to their themes.' 

Over to Merlin Entertainments to cover the impact, 

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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 £40 to £50 million (2014: £87 million). 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.

MERL go as far to suggest that 2016 profitability will be impacted as well, which is wise but a completely unknown variable with current media trends suggesting people will remember the event. MERL state, "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 financial impact couldn't have happened at a worse time, this was the build up to peak season. Unfortunate for those employed locally reliant on the incomes of the visitors. There could be other issues as a result of the HSE investigation, with recommendations that could be costly to implement across the estate, not just Alton Towers. 

Whether the management were right to suspend marketing etc...is another matter. Quite what the justification was/is may have further implications. Theme parks on the whole generally have a good safety record, certainly in Europe. 

The question is, do we have another PLUS 500 type scenario of a suitor seeing a potential opportunity on MERL? Taking the cash today on the news when the market digests the results. 

Will be back later!

Atb Fraser