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Merlin Reducing Capex Spending 2018-2021

M

Maelstrom

TS Member
in today's financial announcement Merlin have said they are reducing planned capex at existing sites by £100m over 2018-2021. States reduction mainly comes from midway and resort theme parks. The report states this doesn't effect planned spend on H&S and maintance (not that they spend much on that anyway). The money is being used to accelerate hotel growth.

Looks like we will be getting even less new attractions and what they do add will prob be more cheaper rethemes or rides from cheaper manufactures.
 
I also love that whenever you read their reports there is always an external factor to blame for worse than expected attendance levels; it is never their fault.

They blame softer trading at Legoland Discovery Centres in North America on poor perfomance on the Lego group in general, yet Legoland parks are performing perfectly well and not reflecting this.

:)
 
Sorry for the double post but you can hear what Nick Varney has to say:



Basicially there is still money to invest but it will only be when they can be sure of a strong return on the investment. Got to love the Merlin philosophy of increased investment must surely equal less visitors!

Also not sure why Mr Varney thinks Merlin are leading the way in terms of themed accommodation at theme parks around the world. Quantity does not equate to quality.

:)
 
Maybe all this means is that Merlin will simply spend less on investments that are made so that they don't have another expensive flop so to speak a la DBGT. For example, they might spend £10-15m on major investments in future instead of £20-25m. In fact, this could be the logic behind SW8 being a less expensive ride than Thirteen and Smiler.
 
Matt N said:
Maybe all this means is that Merlin will simply spend less on investments that are made so that they don't have another expensive flop so to speak a la DBGT. For example, they might spend £10-15m on major investments in future instead of £20-25m. In fact, this could be the logic behind SW8 being a less expensive ride than Thirteen and Smiler.
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I would like to think this is where the money comes from but it will probably be reduced opening hours, less staff, scaled back tlc programme and there's an even smaller chance sub terra will ever reopen :(
 
Just listening to Nick Varney demonstrates than Merlin don't care about their individual attractions. At all.

They have well over 100 Midways now. Quantity over Quality.

That is Merlin Entertainments. I couldn't bare them 5 years ago and I cannot bare them now.
 
Matt N said:
Maybe all this means is that Merlin will simply spend less on investments that are made so that they don't have another expensive flop so to speak a la DBGT. For example, they might spend £10-15m on major investments in future instead of £20-25m. In fact, this could be the logic behind SW8 being a less expensive ride than Thirteen and Smiler.
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Yeah, I think you're right. DBGT was the last mega-investment we'll see in a while. But I don't think that's neccesarily a bad thing, as I'd rather have smaller, assured quality and solid investments in rides, ala, what we're currently seeing take form at Alton. None of this sounds particularly inspiring, though. And as others have said, surely this tactic can't work forever.
 
What a Dire situation.
Going into sky diving and model villages. Too many fingers in too many pies I think, they need to focus on doing one thing well and if that means dropping the theme parks (apart from Lego) and focusing on midways and Lego then i'd welcome it.
Are there any parch chains that could seriously be tempted to put in an offer for The UK and German parks?
 
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Everything said in that video encapsulates almost everything that is wrong with the British economy.

Not talking about any company or person in particular, but in layman's terns the story usually goes like this-

1. Company is tempted by low hanging fruit and makes "efficiency savings". Share price rises, investors get a good return and are hooked. The board pat each other on the back.
2. Investors with a taste for it expect more of that and so more meat is cut, CEO continues to tell the city all is well as business continues to trade well, share price rises, more investors are attracted.
3. Trade starts to flatline and stall a bit, this is hidden/offset by shoring up the bottom line with further meat cut away. CEO says all is still good, the city see strong returns and nobody worries.
4. Trade starts to decline. The excuse book is dusted off and scripted crackers such as - "squeezes on consumer spending", "the wrong kind of snow", "terrorist attacks" and "the strong/weak pound (delete as appropriate)", are spewed out. Further cuts are made to pretend all is well.
5. Most investment is diverted towards quick win "growth" areas of the business at the expense of the core. Maybe even a bit of cash is released from selling off a few assets. City pundits, newspaper commentators and short term investors think this is a great idea!
6. The core of the business starts to decline under the weight of cuts and lack of investment. Nobody notices as the "growth" areas of the business are temporarily offsetting this and further cuts are made to hide the decline, only now the meat has gone, muscle is now cut.
7. Seeing storm clouds on the horizon, the CEO and some other board members sell their shares when they're at their highest, take their bonuses they've earned by effectively stripping unsustainable amounts of money out of the company and everybody gives them a round of applause for "transforming" the business and delivering for all! Well done chaps!
8. New CEO and board members are in place and find themselves with no cash to play with and a declining core business operationally on its knees. Share price tanks, investors flee, job cuts and sale of businesses are announced, perhaps even a rights issue ensues or potential buyers circle like vultures eyeing up the assets.
9. Old board members take it in turns to go round TV studios tutting, shaking their heads and generally slagging off the incumbent board.
 
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Rob said:
Sorry for the double post but you can hear what Nick Varney has to say:



Basicially there is still money to invest but it will only be when they can be sure of a strong return on the investment. Got to love the Merlin philosophy of increased investment must surely equal less visitors!

Also not sure why Mr Varney thinks Merlin are leading the way in terms of themed accommodation at theme parks around the world. Quantity does not equate to quality.

:)
Click to expand...


My god he's completely deluded. Probably the rest of the Merlin board is too.

The strategy won't last. Apart from the fact Merlin accomodation at its so called "resorts" (seriously, do they even understand what a resort is?) is total crap, it's already falling apart anyway, as evidenced by the £100m of cuts needed.
 
Thinking of Varney's excuses, terrorism clearly has had an impact on some of their operations, in particular London midways. However he also claims for it to have impacted the theme parks (along with the god awful weather we didn't actually have). There is a Europe-wide terrorist threat and France is still in a state of emergency. I would be interested to know if Disneyland Paris have suffered a similar decline because of terrorism. I'm almost certain that their guests numbers are up this year actually!

Same goes for other theme parks in Europe. Let's see if this terrorist threat is only impacting Melrin parks or if it is all theme parks. I suggest Varney looks equally at his park's offerings as well as external factors that they cannot control.

:)
 
Rob said:
Thinking of Varney's excuses, terrorism clearly has had an impact on some of their operations, in particular London midways. However he also claims for it to have impacted the theme parks (along with the god awful weather we didn't actually have). There is a Europe-wide terrorist threat and France is still in a state of emergency. I would be interested to know if Disneyland Paris have suffered a similar decline because of terrorism. I'm almost certain that their guests numbers are up this year actually!

Same goes for other theme parks in Europe. Let's see if this terrorist threat is only impacting Melrin parks or if it is all theme parks. I suggest Varney looks equally at his park's offerings as well as external factors that they cannot control.

:)
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Good point. They are almost certainly excuses, but as I've seen so many times in so many other businesses, investors and even so called people in the "know" in the city will hang on every word. That's because the majority of them are speculators, traders and journalists wrapped up in a very closed bubble. They understand short term returns on investment (X amount investment in must mean a definitive and instantly measurable X amount out), speculative trading, dividends, share price fluctuations, debt and asset ratios etc etc. They often understand very little about actual business strategy and the markets most businesses operate in.

So the CEO normally has to speak to investors and the markets in a way they understand. If Varney had not used those excuses, the share price would have tanked far worse. What he's essentially said is "hang in there! If we invest X an amount in X amount of accommodation we can make X amount per extra room". That is measurable and I think he got away with it as for now, too few people are questioning what will happen to the core business the hotels are being built around them when the rug is ripped from underneath their feet.

The reason Thorpe Park's new investment has failed on paper is because it cost a ridiculous amount of money to build, costs a ridiculous amount of money to operate, is broken down all the time and nobody knows what it actually is immediately because it's inside and is closed so often few have had a chance to ride it. The reason the AT recovery has been so slow is because the place has been underinvested in for over a decade, the ride lineup has been noticeably butchered and the park closes at 4PM! But by the time anyone really realises this in the city, the really smart investors would have sold their shares long ago.
 
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