A warning by theme park operator Merlin Entertainments (MERL) that the high profile rollercoaster crash at Alton Towers could halve full-year earnings in its resort theme parks operating group sends it shares down 4.6% to 403.8p.

Five people were seriously injured in the accident on 2 June, which led to Alton Towers being closed for four days and ride closures at Thorpe Park and Chessington.

Merlin says these closures, which came at the start of the critical summer trading period, could reduce full-year EBITDA (earnings before interest, tax, depreciation and amortisation) in its theme park division from £87 million in 2014 to between £40 million and £50 million in 2015.

It had previously forecast mid-single digit EBITDA growth this year.

MERL - Comparison Line Chart (Rebased to first)

Merlin says the financial impact of the accident could last into 2016, although it adds that lower financing costs mean its 2015 pre-tax profit will be broadly in line with 2014 at £249 million.

The Smiler crash isn’t the only headwind facing Merlin. Its first-half results (to be published on 30 Jul) will show that while the Legoland division saw like-for-like revenue growth of 6%, the Midway division – which includes the London Eye, Madame Tussauds and Sea Life – saw growth of just 2.9% due to reduced customers at its London sites and a drop in visitors to Hong Kong as a result of travel restrictions from China.

Merlin says the persistent weakness in the euro has, and is likely to continue to, impact volumes at its London-based attractions.

Numis analyst Ivor Jones has lowered his pre-tax profit forecast for 2015 to £240 million from £265 million and his earnings per share forecast to 16.9p from 18.7p. Despite this, he has upgraded his recommendation from ‘reduce’ to ‘hold’ and retained a 400p price target, saying the business has ‘good long-term growth prospects and a management team with an excellent track record’.

‘While the shares are still on demanding valuation multiples we believe that forecasts have now reached a level from which they can recover, and that there is the potential for re-establishing momentum into FY2016,’ adds Jones.

Issue Date: 27 Jul 2015