Alton Towers 2011 Profits - sharp fall

[TheMan]

That doesn't explain these figures though dude?

75% drop in profits.

10% drop in gate figures?

I might be missing something obvious here, but 300,000 people less, equates to 3 million less profit?

Yet they maintain 90% attendance, over a year with no attraction or expenses for said attraction lol?

Either payments are spread out, or deferred - oh I cannot go down this track, it's way to complex and been too long since I did this kinda stuff.

16 million pound ride, only 300k thousand more visitors = 75% more profit?

The figures suggest juggling around, something businesses have to do anyway so it's to be expected, but I in talking simply of a profit fall - a far smaller real term one, yes that's expected anyway - but 75% down, only 300k visitors less, and minus a 16 million pound outlay?

There is no way they are real world year on year figures based on business performance alone. It's a huge, multinational complex business, it wouldn't make the slightest bit of sense to operate like that.

 

[Scott]

The 16m ride construction cost won't be factored into the parks year end profit. The funding for the rides and so on is secured by Merlin centrally as far as I am aware. In terms of last year, for all we know the park may have had more expenses than in 2010 and with less visitors they would also see less profit. One example would be the 'all time greats' campaign which involved television adverts all summer long.

It would be naive of me to say that there hasn't been some fiddling here and there by Merlin - but that isn't what is solely responsible for a drop in profits. A loss of visitor satisfaction and falling numbers has caused this.

 

[Tom]

I wasn't trying to explain the figure, I was stating the significance of it. However in reality it isn't hard to explain it roughly.

Say the park's operating cost is £40m and something like 2.5m guests would generate that, then a few hundred thousand more could easily generate £1m or so and a few hundred thousand more than that would generate £4m or so...but I'm not going to try and explain the drop precisely as it'd be am impossible exercise to try.

I think most people can accept the reality that their profits would have been hit in 2011, a year of no new attractions. We all saw how quiet the park was, even during summer. I believe it is that huge downturn that led to 6pm closures in the height of summer this year.

 

[TheMan]

We aren't going to agree for a change Mr Brightside lol!!

That does not equate 75% against 10%.

What I do agree with you on though, is that last comment about satisfaction and numbers dropping affecting profit.

Like I say, gates for 09 and 11 I would like to see. They're where a true comparison can be made, and of course a new attraction is not meant to just be a one season wonder. A drop off should be expected, but to make it a success it should still have increased upon 09 numbers.

'10 is a non year in terms of gauging real performance. Check the '09 vs '11 figures - that's where you will find a more testing performance level, and get a clearer indicator of SW6s performance.

I do think Merlin were utterly blinkered this year though. With SW7 coming, if they had really focused on customer satisfaction and retention this year, and thrown sw7 on top - next year could have been far better than it likely will be, no matter how much of a success the ride is.

Can you imagine, a great service, and a new fantastic service - would have been top of everyone's to do list IMHO.

 

[TheMan]

Well Tom it was also 299,999 visitor levels down in 2011, if you do not count me.

I went multiple times in 2010, but nothing pulled me back for the money it cost to go in 2011, this year was different, after a bit of a break from the park I went back once, I could not believe the difference.

People are choosing their days out more carefully, you cannot keep doing what Merlin are doing an expect people to just keep on taking it. They have to change their attitude next year, or SW7 will once more be a one off year of higher visitors.

I think these are things we're all agreed on, even if we differ slightly on the figures etc.

 

[Tom]

2008: 2.57m
2009: 2.66m
2010: 3.01m
2011: 2.73m

 

[Tom]

What strikes me the most is how much busier the park seems this year compared to last year....but no hang on a minute, what's really happening here?

The car parks are no fuller than last year, but ride queues etc seem longer. This is a deliberate pushing of Fastrack and/or reduction in ride capacity to rake back money.

I'd be interested to see the attendance figures for this season, but with no major planning application due, I don' believe we will see accurate figures as per my above post.

 

[haydn!]

I don't have the full figures for 2011, however this is the top level summary of the resorts 2010 financial results. It shows where all the money goes.


Turnover: £92,971,000
Cost of sales:-£11,186,000 (includes cost of goods on sale, so food/drink wholesale costs)
Administration Costs: -£69,703,000 (includes marketing, staff, utilities etc)

Operating Profit: +£12,082,000

Interest Received: +£43,000 (Relates to money held in the bank)
Interest Paid: -£7,231,000 (This is money to debtors, including banks and the Merlin group)

Pre-Tax profit: +£4,894,000

The drop in visitor numbers is all relative. It would have a big impact on revenue (effectively down to £83m), but the outgoing costs would have been relatively static meaning your operating profit and then pre-tax profits suffer to an extent which would be out of proportion to the drop in visit numbers.

 

[DannyJames]

What strikes me the most is how much busier the park seems this year compared to last year....but no hang on a minute, what's really happening here?

The car parks are no fuller than last year, but ride queues etc seem longer. This is a deliberate pushing of Fastrack and/or reduction in ride capacity to rake back money.

I'd be interested to see the attendance figures for this season, but with no major planning application due, I don' believe we will see accurate figures as per my above post.

I've not queued at all on days this year, except in Scarefest. It's so much quieter this year

 

[TheMan]

2008: 2.57m
2009: 2.66m
2010: 3.01m
2011: 2.73m

I don't buy this one bit.

Just look at those gate figures. They tell it all. Steady growth bar one expected busier year, next year will have a similar one no doubt.

Interest Paid: -£7,231,000 (This is money to debtors, including banks and the Merlin group)

Let me be clear, I'm not accusing Merlin of wrong doing of any description, but that's good accounting rather than serious profit drop. The signs are all there. Could I be wrong? No question. I only base it on what I see though, no preconceived notions.

I see, 10% drop in gate, BUT an increase on the last non attraction year(!), 75% drop in profits, nondescript debts to Merlin (due to not having figures to view), new reporting methods.

Come on seriously, you cannot really buy that profit drop as real world?

OK let me ask this another way, who else, with significant accounting/business experience would suggest that is a true real world reflection, and tell me your experience that lead you to summise that, and I will most certainly listen with interest!

So far, one person on another thread gave a slightly more detailed prose of why this kind of thing might be happening, based on their experience, my experience tells me similar. Is there someone (genuinely asking, not being sarcastic or what not - forums don't always convey meanings well) with expertise here that can give their opinions and why?

 

[thefatone]

£7 serving debt from a place which splashes £15m every 3yrs (and god knows what inbetween) on a new product sounds extremely realistic.

Yes, they do sound realistic figures. Anyone who knows or deals with business and their figures know that this is perfectly sound and reasonable. Don't just presume merlin have charged the park £6m for nothing, and that it's done purely as a tax reason or whatever.

Just to add: It has been well known that towers is a loss leader for a while now - the only part which makes a profit is the hotels. With slowly growing yearly trend of visitors, the small profit sounds about right.

 

[TheMan]

There are some points in there that make overall sense, but still doesn't explain those figures for me, goes a little way to explaining some of that deficit but not all for me.

Be interested to know what your experience is in dealing with big figures like this to draw this conclusion dude?

This still goes against my own. I am always willing to be proven wrong, as I'm kind of at the point in this discussion where it's going round in a circle, and I want someone to stand up and give me a reason to take their point of view more seriously.

Anyone who knows or deals with business and their figures know that this is perfectly sound and reasonable.

I have done, that's why I draw my conclusions as I do. What I want to know, is why others are drawing different ones. I'm not an expert, so won't pretend to be, but figures in millions etc - yes I've dealt with those. So someone tell me how these figures makes sense.

I'm very interested in this, but in a more rigorous and deductive manner.

 

[Tom]

I think you need to ask yourself why they would fabricate a drop in profits.

As I've said, it's a like-for-like comparison to last year, so however the figure is determined, the loss is real.

 

[haydn!]

After reviewing the 2011 financial report in a little more detail, it is clear that as of the start of the financial year (31 Dec 2010) part of the resorts operations were transferred to Merlin Entertainments Group.

For the 2011 financial year, Alton Towers resort limited were operating as an 'agent' of Merlin, and were responsible for the operation of the theme park, and admin costs associated with staff employed directly by Alton Towers resort limited only.

The cost of sales, other admin costs, investment repayments and wider resort operations revenue were covered by the parent group, Merlin, as of 31 Dec 2010 and therefore are no longer accounted for by ATR Ltd.

However, figures from the 2011 report are:

Turnover: £42,278,000
Cost of Sales: £0
Admin Costs: - £39,299,000
Operating profit: £2,979,000
Interest Paid: - £1,844,000
Profit: £1,135,000 (before tax)

As the resorts financial liabilities were split during the 2011 year between Merlin and Alton Towers Resort Ltd, an exact like for like comparison between 2010 and 2011 is not possible.

It is likely profit from resort exceed £1,135m once the hotels are factored in but I would still have expected a 25-50% drop due to the 10% drop in gate figures because a large portion of the parks costs are fixed regardless of how many people come through the gate.

 

[TheMan]

I think you need to ask yourself why they would fabricate a drop in profits.

As I've said, it's a like-for-like comparison to last year, so however the figure is determined, the loss is real.

Very easy, to avoid paying tax on a profit making park, when there are less profitable (some loss making even?) parks. Nothing wrong with it, it's called balancing the books lol!

You cannot either take a major investment year as norm, explained why clearly before. Cameron did this by saying we were out of the recessions because figures were up due to the olympics. Why do you think capital investors want more than one year figures. Not even debating this point as it is one I'm absolutely 100% certain about.

Capital investors would say "why such a big one off year" - not "why such a big drop". And yes they do, before anyone debates it lol, just go and ask one.

 

[TheMan]

As the resorts financial liabilities were split during the 2011 year between Merlin and Alton Towers Resort Ltd, an exact like for like comparison between 2010 and 2011 is not possible.

It is likely profit from resort exceed £1,135m once the hotels are factored in but I would still have expected a 25-50% drop due to the 10% drop in gate figures because a large portion of the parks costs are fixed regardless of how many people come through the gate.

Complex accounting, but as Merlin grow it will get harder to get a real feel for how the resort is doing. 25%, that could account as you say because of fixed operational cost, 50 is pushing it for me. 75% no way. Not a chance, regardless of how people want to argue it - not possible, figures are way out of whack.

The only people that know the true real world figures are behind the desks in Merlin's finance department now.

And to those who still think these are real, do you seriously think Merlin are that daft? Come on. Common sense time. One thing Merlin know how to do, is squeeze profit out of a stone, and identify every premium product available, for little to no extra investment.

I do however feel they've lost a grip on present reality and climate that's for sure. This could be there downfall. They're expanding too rapidly in my opinion.

Remember guys, Blackstone bought the combined Merlin/Tussauds etc group out for just over £100m, all they have to do, is buy parks on the cheap, throw in generic attractions, build the business up to be more than they've invested, squeeze the pips out of the parks to fund it, and they'll be gone.

For those who have their heads in the sand on this one, it's called an exit strategy, and every good sized business investor has one.

Get in, build it up, make a fat profit, flog it, move on to your next project. Keeping on top of accounting practices across a large organisation, ensuring you're as profitable as possible, is sensible business.

Blackstone could sell up now, and easily double their money.

 

[Scott]

Merlin will be floated on the stock exchange soon enough. Then it'll have to answer to shareholders. Who knows if that will improve Towers or make it worse...


Sent from my iPhone using Tapatalk.

 

[haydn!]

Complex accounting, but as Merlin grow it will get harder to get a real feel for how the resort is doing. 25%, that could account as you say because of fixed operational cost, 50 is pushing it for me. 75% no way. Not a chance, regardless of how people want to argue it - not possible, figures are way out of whack.

Seriously, I just don't get why it's so hard to accept/understand. The drop is accounted for because a portion of approximately 50%-60% of the parks revenue and costs are now accounted for by Merlin Group and not the park directly.

The very fact the two years results are completely non-comparable make the reported 75% drop in profit non-news. Just as the tiny £526,000 pre-tax profit in 2009 and the staggering pre-tax profit loss of £2.8million on 2008 is completely non-news.

Investors won't care because they'll understand it....

 

[TheMan]

Unless we buy all the shares Mr B....

Well, you aren't just serving the profits of a boardroom - you have dividends to meet across the board.

I worked in Stock Broking. Performance, AGM's, EGMs Dividends etc, certainly are not based or focused on how well those rides run, that's for sure.

It is an insane industry, I enjoyed it don't get me wrong, it can also work very well in raising investment for developing a business and what not. But, when you already have big capital investment/investors - why do you need to float?

One reason alone. Profit.

 

[TheMan]

Investors won't care because they'll understand it....

My post wasn't aimed at you mate, I know what you're saying. I was just pointing out that now things are moving more into a centralised accounting format - Merlin, it will be harder in general to get a true comprehension of what the actual figures are. Hence I was saying, the drop makes no sense as being a drop that dramatic. My point from the off has been that there will be underlying reasons, and it will not be a true reflection of the actual accounts.

As you say, investors will understand this, they'll be given annual reports that spell it out that we won't have access to.

I believe we're in agreement. I was saying to others, don't believe that 75% decrease, or even 50% is a true reflection of actual park accounts. It cannot be anything like that, it's just the way its reported and dealt with as a company wide structure.

Even so, even if they were completely unique single park results (which they quite clearly aren't), over a £1m pre-tax profit for ONE PARK lol, in the deepest recession since the 2nd world war, in a non-investment cycle year, & some still think even at that level it is bad lol!!

They're doing very well for this climate!