DXB Entertainments board proposes using rides and rights issue proceeds earmarked for Six Flags Dubai on existing parks
The owner of the Dubai Parks and Resorts theme parks has written down the value of its assets by more than 1.54 billion ($419.3 million), newly-filed accounts show.
DXB Entertainments declared a 991 million-dirhams impairment in the value of the Dubai Parks and Resorts complex of theme parks, comprising the Bollywood Parks Dubai, Motiongate Dubai and Legoland Dubai theme parks, among other assets, which it attributed to a “delayed ramp-up of international visitation”.
Dubai Parks and Resorts attracted almost 2.8 million visitors last year, which was a 22 percent year-on-year increase. However, its initial target for visitor numbers for 2018 was 6.6 million visits.
The much lower-than-anticipated visitor numbers also led to the company announcing in February that it would no longer proceed with plans for a Six Flags Dubai park, which was due to be built next to Dubai Parks and Resorts. The company said in its announcement that funders' concerns "specifically in relation to the revised projections" for the project and a formal notification from Six Flags, meant a syndicated loan for the project was no longer available.
The company has added a further impairment provision of 551 million dirhams on the value of this project.
DXB Entertainments had sunk some of the proceeds of a 1.68 billion dirham rights issue it embarked upon in May 2016 towards commissioning rides for the new park, and in an announcement accompanying its full-year accounts on Thursday, the company said it planned to “repurpose” the remaining proceeds of the rights issue to add “a select portfolio of the available rides to further enhance the consumer experience” at the Motiongate and Bollywood Parks attractions.
The company later told investors on a conference call that it plans to add 10-12 rides to the existing parks, which was likely to require capital expenditure of around 250 million dirhams.
“Remaining rides will be stored and installed as part of ongoing annual enhancement capex, ensuring that the consumer offering is protected into the future,” it added.
The impairments meant the company declared a 2.52 billion dirham loss for 2018 (2017: 1.1 billion dirham loss) as revenue declined by 2 percent to 540.5 million dirhams. Since its IPO in 2014, the company’s accumulated losses have increased to more than 4.3 million dirhams, which is more than 50 percent of its share capital. As a result, it will hold a general meeting next month at which shareholders will be asked to approve the company continuing as a going concern.
Shareholders will also be asked to approve proposals to repurpose the rights issue proceeds to add rides to the existing parks. In a press release accompanying the financial statements, DXB Entertainments' CEO and managing director, Mohamed Almulla, said that in 2019 it would "continue to focus our efforts on increasing international visitation to the parks, while sustaining domestic visits and maintaining a tight grip on operational costs as we work towards our target of EBITDA (earnings before interest, tax, depreciation and amortization) breakeven during H2 2020”.
Ayub Ansari, a senior analyst with SICO Bahrain, said that in order to achieve its EBITDA breakeven target, park visitor numbers will most likely have to increase to around 4-4.5 million per year.
“So they need a major jump in park visitation numbers to just achieve EBITDA breakeven,” he said via a telephone interview on Thursday.
“How they are going to achieve meaningful growth in visitor numbers remains to be seen because the overall environment remains tough. Dubai tourist arrival growth has plateaued, while domestic macros remain unsupportive. So 2019 is again looking to be a very challenging year for the company,” he added.
Tourist numbers to Dubai grew at less than 1 percent in 2018, with the emirate recording 15.92 million overnight visitors during the year - up from 15.79 million in the prior year.
The company’s shares finished the day down 5.1 percent, closing at 0.29 fils per share, but are up 3.86 percent so far this year following a decline of more than 63 percent in 2018.
0 comments