Annual report dismantles the mystery of 4 consecutive years of erosion in Ocean Park! An expenditure determines life and death

Political situation

Written by: Zheng Baosheng

2020-05-16 18:38

Ocean Park has suffered losses for four consecutive years, and the government plans to apply for 5.4 billion yuan for "salvation" to avoid the closure of Ocean Park in June.

There are comments that the problems with Ocean Park are that it is no longer attractive, Hong Kong people's consumption is declining, and mainland tourists are not coming to Hong Kong. However, looking at the park's annual report for the past 10 years or so, it can be seen that Ocean Park has fallen into today's situation because of poor management.

The latest annual report of Ocean Park, the annual report for 2019, is from July 2018 to June 2019. At that time, no serious anti-amendment disputes had occurred. However, until the 2019 annual report, Ocean Park has been eclipsed for 4 years. There are views that the increase in mainland tourists in the early years has made Hong Kong people's desire to visit the Ocean Park diminished. In recent years, the transformation of mainland tourists and the aging facilities have made Ocean Park less attractive than before.

Ocean Park has suffered losses for the fourth consecutive year, but in fact revenue has increased in the past three years. (Profile picture)

Less attractive than before? Revenue has increased in the past 3 years

However, in the annual reports of the past few years, we can see that this is not the case. The chairman of the board of directors, Kong Lingcheng, took office in the 2015 year (from July 2014 to June 2015) for a total of 5 years. The first year's revenue was 1.968 billion yuan. However, in the second year, 2016, the revenue fell by 17.9% to 1.615 billion yuan. However, revenues have increased in all three years from 2016 to 2019, increasing by 0.03%, 4% and 2.9% year-on-year respectively.

Under the growth of income, the operating surplus of income minus labor and other operating costs has not been synchronized, and it has dropped by 43.3% year-on-year to 191 million yuan in 2019. After calculating taxes, interest, depreciation and amortization, it recorded a loss for the fourth consecutive year, further expanding from an eclipse of 237 million yuan in 2018 to an eclipse of 557 million yuan.

The depreciation expenditure of the Ocean Park machine is large, but it is not new, but the operating characteristics of the theme park. (Profile picture)

Sheng Zhiwen had to bear similar interest and depreciation expenses but still make money

There are comments that the depreciation of the machines at Ocean Park is too expensive. In addition, the expansion plan of the former chairman of the board of directors, Sheng Zhiwen, borrowed a large sum of money to repay interest. Therefore, Ocean Park has been heavily burdened in recent years.

The large depreciation and interest burden is one of the reasons, but it is definitely not the main cause of the current marine park dilemma. In fact, Sheng Zhiwen had to bear huge depreciation and interest expenses. In his last year in office, in 2014, depreciation and interest expenses reached 569 million yuan, compared with only an increase of 42 million yuan in 2019, far from The drag on the park changed from a profit of 96 million yuan in 2014 to a loss of 557 million yuan in 2019.

In fact, the biggest difference between the era of Sheng Zhiwen and the era of Kong Lingcheng was the surge in labor costs. In the past few years, the income has decreased, but the labor cost has not decreased but increased, causing the park to change from profit to loss.

Sheng Zhiwen launched a new development plan of 5.55 billion yuan in the Ocean Park in 2005, greatly increased the number of attractions, introduced a variety of national treasure animals, and held Halloween "Hello Feed", successfully pushing the admission number to a new high, and he also received the "Mickey Mouse Killer" Reputation. But at the same time, the development plan also increased the profit expenditure. In 2012, the interest expenditure exceeded 100 million yuan, and in 2013 it rose to 191 million yuan. After that, the annual interest expenditure is similar.

Sheng Zhiwen's loan development in the era, but Ocean Park still maintains profitability. (Profile picture)

Sheng Zhiwen's successful loan development lies in strict control of labor expenditure

Facing the increase in the expenses of the Ocean Park development plan, Sheng Zhiwen strictly controlled other expenses during his tenure, especially labor expenses. From 2012 to 2014, labor expenses accounted for less than 35% of revenue, respectively 34%, 33% and 33%. This level is similar to the labor-based income level of the restaurant chains of listed companies in Hong Kong. For example, in the year ended March 2019, Café de Coral (0341), the labor-to-income ratio was 31.4%.

Kong Lingcheng's artificial growth is faster than income growth after taking office

However, after Kong Lingcheng came to power, in the face of a decrease in income and a slow recovery environment, he still increased labor costs from 680 million yuan in 2015 to 772 million yuan in 2019. As mentioned above, revenues have increased in all three years from 2016 to 2019, increasing by 0.03%, 4% and 2.9% year-on-year respectively. However, in recent years, the annual labor expenditure has actually increased by 0.03%, 6.86% and 10.1%, which is significantly higher than the income growth.

The percentage of labor as a percentage of income has gradually increased from less than 35% in the later period of Sheng Zhiwen, increasing to 41% in 2016 and further increasing to 44% in 2019.

As for whether the manpower in Ocean Park is too high, the annual report does not have detailed data. However, according to the information on the external recruitment website, in 2019, Ocean Park recruited senior first-aiders with salaries ranging from 17,000 to 20,000 yuan. Compared with the LCSD lifeguards who also need to carry out emergency operations, the monthly salary is from 17,700 to 21,300 yuan. The price of Ocean Park is not too high. It can be seen that the salary level of the middle and low levels should not be "off the ground". The large increase in labor costs may be caused by a large increase in manpower or a rise in the salary of middle and high levels.

It can be seen that under the management of the board of directors led by Kong Lingcheng, artificial growth has been higher than income growth for a long time, which is the main reason why Ocean Park has fallen into a four-year continuous erosion.

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