Liquidation a possibility for Legoland Florida’s owner amid COVID-19 shutdown

The latest annual accounts report from Merlin Entertainments, the U.K.-based owner of Legoland Florida, contains a stark warning about the health of its business amid the COVID-19 pandemic, saying “there is material uncertainty on our ability to continue as a going concern.”

Merlin is the second-largest amusement park operator in the world in terms of annual attendance, surpassed only by Disney. Nearly all of the 130 attractions it runs worldwide are currently closed. As the report warns, even when reopening is possible, a combination of social distancing, reduced consumer spending and limited travel will impede any quick return to pre-pandemic sales and operations.

The report outlines what it calls a “more severe downside scenario,” with the coronavirus pandemic keeping Merlin parks closed until mid-July 2020 and then taking another five months before revenue returns to 90 percent of its pre-pandemic levels.

Under this scenario, Merlin says it would run out of cash during the third quarter of this year unless it received loans or cash injections from its investors.

“There are no comparable recent events that provide us with guidance, and so we cannot currently estimate this with any certainty nor can we provide any assurance that COVID-19 will not continue to have a material adverse effect on our business, financial condition and results of operations,” the report states.

Like other theme park companies, Merlin has cut costs during the shutdown by furloughing 80 percent of its staff and virtually eliminating its marketing and advertising expenditures. Its cash outflow, however, still amounts to more than $60 million per month thanks to operating costs that can’t be avoided.

Merlin also has debt service payments related to its recent change from a public to a private company, as it is now owned by a consortium that includes Kristiansen family, the wealthy Danes behind the Lego Group.

While the report does state that shareholders “remain highly supportive of our business and optimistic about its long-term prospects,” it also discusses a more grim possibility: liquidation.

“It is currently very difficult to assess how the COVID-19 situation will evolve,” the report says. “If one or more of our assumptions in making our assessment to report as a going concern are found to be incorrect, we may be unable to continue as a going concern. If we are unable to continue as such, we would have to liquidate our assets and may receive less than the value at which those assets are carried on our audited consolidated financial statements.”

Share this:

Like this: