Alton Towers-owner Merlin Entertainments (MERL) has failed to thrill investors after revealing a softer performance in Florida, triggering a share price drop of 6.2% to 440.5p.

The company has warned of a softer performance in Legoland Florida due to various issues, including terrorism and the Zika virus.

Merlin has delivered 1.3% like-for-like growth in the 38 weeks to 17 September, driven by an emerging recovery in resort theme parks, although this was partially offset by difficult trading conditions in other markets.

Trading over the summer at Alton Towers is beginning to recover although overall visitor volumes are still below levels in 2014.

In the year to date, revenue rose 10.6% reflecting new accommodation and attractions, as well as the positive impact from non-sterling revenue.

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Merlin is piloting a new brand ‘Little Big City’ as a miniature world attraction format, with the first due to be launched next year in Berlin.

However, trading in the Midway Attractions operating group remains difficult as wider security concerns hit both domestic and international visitor levels.

Analysts at broker Panmure Gordon maintain a ‘buy’ recommendation on the stock despite the mixed trading update and on-going margin pressure. The latter is likely to lead to approximately 4% underlying earnings downgrades.

Langton Capital notes that London has been the most impacted by terrorism fears with little recovery yet.

The analyst says Merlin emphasised increased visits from ‘friends and family’ instead of spending by overseas tourists.

In China, the company says Madame Tussauds Shanghai experienced challenging trading as the opening of the Shanghai Disney Resort created disruption in the inbound tourism market.

On Tuesday (27 Sep), Merlin was fined £5m for breaching the Health and Safety at Work rules following the Smiler rollercoaster incident last year at Alton Towers.


Issue Date: 29 Sep 2016