Haichang Ocean Park results: Growth but COVID-19 going concern uncertainty

Haichang Ocean Park Holdings has released its annual report and accounts for 2019. The auditors note “material uncertainty” around the Group as a going concern due to the coronavirus pandemic.

Haichang Ocean Park Holdings has released its financial results for 2019 showing a 60.5% increase in revenue as well as a going concern statement from its auditors.

2019 performance

Revenue generated from Haichang Ocean Park Holdings’ theme park operations segment increased by approximately 60.5% to RMB2,802m (£322m, $402m) in 2019, due largely to the inclusion of the first full fiscal year of operation for the Shanghai Project. The Group’s overall gross profit increased by 47.1% to RMB1,285m (£148m, $185m).

Haichang Ocean Park Holdings recently opened two new parks. Shanghai Haichang Ocean Park was opened in November 2018 and the Sanya Haichang Fantasy Town opened in January 2019.

By improving the quality of operations and products in its theme parks, the Group saw revisit rates increase in 2019.

The Haichang Cultural Tourism platform was created in 2019, and this enabled the company to secure new service contracts and develop its business even further.

COVID-19 impact

All operations on Haichang Ocean Park Holdings’ projects were suspended on 24 January. The company applied for policy support, tax deductions and exemptions, and aid from government agencies and financial institutions.

Administration and operating costs have been reduced while still allowing for the normal operations of the Group.

The pre-sale of online tickets and annual passes was launched on 21 February.

The company is offering all national medical personnel a free visit to all the parks in 2020 to thank them for their hard work during this difficult time.

Going concern

In the financial report and accounts, the auditors, EY, note a “material uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern” due to the coronavirus pandemic. This is a standard financial accounting term which would have been unusual last year, but will be seen increasingly in accounts during the pandemic.

Merlin Entertainments included a similar statement in their 2019 accounts, and we would expect to see many more this year with current uncertainties as to when theme parks can reopen and return to capacity.

As at 31 December 2019, the Group had net current liabilities of RMB1,081m (£207m, $259m).

Haichang Ocean Park Holdings has taken various measures to ensure liquidity including arranging extended credit and loan terms, new credit facilities, RMB428m (£49m, $61m) of new bank loans and a government subsidy for an amount of RMB100m (£11m, $14m).

The directors consider that the Group has “sufficient working capital to finance its operations and meet its financial obligations as and when they fall due in the foreseeable future”.

Strategy going forward

Four of the Group’s theme parks have reopened, two are expected to reopen soon after the regular seasonal closure. Four theme parks are still closed for safety reasons.

The Haichang Ocean Park Holdings expresses optimism that this is a time for the tourism industry to develop and innovate to improve the quality of its enterprises and new opportunities.

Going forward, the Group will form and implement a new five-year strategic plan. This will involve continuing the construction of the Zhengzhou Project to establish it as a regional flagship ocean park.

Upgrades of infrastructure within existing projects will occur so to maintain sustainable growth.

The Group also plans on developing small to medium-sized urban leisure and entertainment projects with a marine theme.