Disembodied heads sing a chorus, phantasmagorical horses leap through the air, a certain masked obsessive prowls the darkened alleyways. Andrew Lloyd Webber is back on familiar territory, and yet things are different. It has been more than two decades since Phantom of the Opera opened at Her Majesty’s Theatre in London, still its current haunt, and from where it has become the world’s highest-grossing entertainment event. We have changed over the decades (through-sung musicals are no longer all the rage, for one thing), so has Lloyd Webber and so, as we discover through the course of this ghoulish and often thrilling sequel, have his characters.

We meet them here years after the murderous events at the Opera Populaire in Paris. The Phantom, crushed but not destroyed, has escaped Paris for a freak show at New York’s Coney Island amusement park. Aided and abetted by another survivor from Paris, the sinister ballet teacher Madame Giry, who harbours high hopes for her daughter Meg, the Phantom runs the show as the mysterious Mr Y.

How he lures Christine and her now-husband Raoul to the island I won’t give away. But once the trio are locked again in their danger-flecked love triangle, it is clear that Love Never Dies has cleverly allowed all three to develop. Raoul, presumably always suspecting that he does not enjoy Christine’s undivided attention, has turned hard, and hard-drinking (played with a nice sense of nobility gone to seed by Joseph Millson). Motherhood, meanwhile, has made Christine more knowing, in some ways wiser – and Sierra Boggess brings real complexity as well as a gorgeously floated soprano to the role. The Phantom seems somewhat diminished by his reduced circumstances, until Christine’s return and a revelation restore his charisma, and his unpredictability.

An endlessly haunting waltz opens proceedings occupied, in Jack O’Brien’s spectacular and mostly riveting production, by brilliantly atmospheric projections (Liz Robertson’s Mrs Danvers-like Madame Giry is caught in a vortex of swirling, nightmarish images, all the frights of the fair) – and immediately heralds Lloyd Webber’s finest score since Sunset Boulevard. Perfectly mirroring the plot, gone are Phantom’s stark gear-changes between grand guignol and high romance. Instead, the score is suffused with a more pervasive, insidious melancholy. Love and death, salvation and oblivion, hug the same minor key in a fatal embrace. Nothing demonstrates this more frighteningly than Christine’s son, humming morbidly beautiful songs as he awaits, surely, either misery or corruption.

There are mis-steps. A couple of the Phantom’s entrances are rendered less, not more, powerful by clouds of dry ice (does he carry the machine around with him?). Ramin Karimloo’s Phantom is concentrated and sometimes moving, but not overly magnetic and prone to the odd off-putting vocal mannerism. And one does wonder quite how sensible Christine can be when she is seriously considering sharing her life with (we remember from the earlier show) a mass murderer. Is this a plot-hole, or a fascinating comment on the abused-woman syndrome? I opted for the latter.

There are marvellous moments though, many of them. Karimloo’s Phantom seethes magnificently in his opening ballad ‘Til I Hear You Sing, while his nervously staccato duet with Rauol, Devil Take The Hindmost, is edge-of-the-seat stuff. Ben Elton and Frederick Forsyth muster a fine libretto despite the odd clunky couplet. Bob Crowley’s fantastical Coney Island sets, populated by a procession of weird creations (my favourite was the walking skeleton – a real woman’s legs, bones for the torso) create exactly the kind of funfair you would never, ever want to visit after dark.

This is in all a worthy successor to Phantom. It is, properly, a different beast. But where Phantom is a grand melodrama about purity versus carnality, about the choice between the safe and the wild, Love Never Dies casts all its characters in the shadows of ambiguity. Morality becomes fluid. So who are the true freaks in a world that is revealed as a grotesque hall of mirrors? This is Phantom’s last, terrifying riddle.