Merlin Entertainments Plc Record 67 million visitors welcomed in 2018

Merlin Entertainments Plc (LON:MERL), Europe’s leading and the world’s second-largest visitor attraction operator, reported results for the year ended 29 December 2018.

Key trading highlights

Merlin’s reported 2018 results include the adoption of IFRS 15, the new accounting standard for revenue accounting which became effective in 2018, with no adjustment to previously reported 2017 numbers and negligible impact on EBITDA. To aid comparability, growth rates within these results refer to movements excluding the impact of IFRS 15 unless otherwise stated.

Summary

• A record 67 million visitors welcomed in 2018, up 1.4% on 2017, with continued strong guest KPI scores;

• Group organic revenue, before the impact of IFRS 15, grew by 5.2%, with like for like revenue growth of 1.8%;

o Resort Theme Parks organic revenue grew by 9.1% driven by successful product investment, favourable weather and another strong Halloween period;

o LEGOLAND Parks organic revenue increased by 6.4% due to the opening of a record 644 accommodation rooms, offsetting a broadly flat like for like performance;

o Midway Attractions organic revenue growth of 1.1%, with a continued recovery in London trading;

• Accommodation revenue grew by 28% on a constant currency basis to now represent 21% of combined LEGOLAND Parks and Resort Theme Parks revenue (2017: 17%);

• Growth in operating free cash flow, up 9.7% on 2017, to £345 million;

• Adjusted earnings per share growth of 11.7% to 22.9p reflecting the growth in underlying EBITDA and lower effective tax rate and net finance costs;

• Further good strategic progress, with ongoing investment providing a platform for continued growth:

o Launch of two new Midway brands – Peppa Pig World of Play and The Bear Grylls Adventure;

o Continued progress towards the construction of LEGOLAND New York, targeted to open in 2020;

o Agreement to open LEGOLAND Korea by 2022;

o Productivity Agenda underway which is expected to yield up to £35 million of annualised savings by 2022;

o Disposal of non-core Ski Resorts following the year end, to Vail Resorts for A$174 million.

Nick Varney, Chief Executive Officer, said:

“We have reported further growth in 2018, with underlying EBITDA increasing by 6.2%, as we welcomed a record 67 million visitors and continued to deliver strong levels of guest satisfaction.

2018 saw improved momentum across most of our businesses reflecting the strength of our diversified portfolio and geographic spread. Resort Theme Parks benefited from successful product investment such as ‘Wicker Man’ at Alton Towers; LEGOLAND Parks growth was driven by record levels of accommodation openings; and, in addition to the contribution of seven new attractions, Midway saw improving trends in London.

We continue to seek to mitigate ongoing external cost pressures and expect to deliver up to £35 million of annualised savings by 2022 through a number of initiatives. Not only will this help underpin our financial outlook, it will better enable our people to deliver what matters most to our guests: fantastic memorable experiences.

Around the world, leisure spend continues to grow as disposable incomes rise and ever greater value is placed on good quality, shared experiences with friends and family. Our continued investment, new market opportunities and our evolving position as a unique, multi-format international operator of strongly branded and IP-led location based entertainment, give us the confidence that we are well placed to deliver long term growth and returns.”

Delivering on the strategy

The Group has made good progress against its six strategic growth drivers in 2018, and has further expanded and diversified its portfolio:

Planned investment cycles in the existing estate

· Compelling new propositions opened across the estate, including:

o Midway Attractions – New ‘Justice League’ feature at Madame Tussauds Orlando and Sydney leveraging the enduring popularity of DC Comics superheroes. New innovation included immersive ‘build and play’ features in our LEGOLAND Discovery Centres and Madame Tussauds first ‘intelligent’ wax figure in Shanghai

o LEGOLAND Parks – ‘LEGO City: Deep Sea Adventure’ opened at LEGOLAND California in July

o Resort Theme Parks – ‘Wicker Man’ at Alton Towers and ‘Peppa Pig Land’ at both Heide Park and Gardaland

· Major 2019 investments to include: ‘ LEGO Movie World’ at LEGOLAND Florida, the launch of the ‘Colossos’ roller coaster at Heide Park, and ‘Day and Night on the Reef’ at SEA LIFE Sydney Aquarium.

Exploiting strategic synergies

· Roll out of accesso ticketing platform substantially complete

· Launch of new Merlin Annual Pass membership programme in early 2019

· Productivity Agenda expected to deliver up to £35 million savings by 2022.

Developing our theme parks into destination resorts

· Total of 644 opened in 2018 comprising:

o 252 room hotel at LEGOLAND Japan, developing the park into a resort

o 250 room LEGOLAND California Castle Hotel, doubling the capacity of on-site accommodation

o 142 room Pirate Island Hotel at LEGOLAND Deutschland, complementing the existing 319 rooms.

· 372 rooms expected to open in 2019, including the Magic Hotel at Gardaland and Stargazing Pods at Alton Towers.

Opening new Midway attractions

· Seven new openings in 2018 comprising: LEGOLAND Discovery Centres in Birmingham, UK and Columbus, Ohio, SEA LIFE in Nagoya, Little BIG City in Beijing, Dungeon in Shanghai, and the launch of two new brands – The Bear Grylls Adventure in Birmingham, UK, and Peppa Pig World of Play in Shanghai

· Ten attractions scheduled to open in 2019 including further LEGOLAND Discovery Centres and Peppa Pig World of Play.

Opening new LEGOLAND parks

· Full period benefit of LEGOLAND Japan following its opening in April 2017

· LEGOLAND New York construction underway with targeted opening in 2020

· Agreement to open LEGOLAND Korea, scheduled to open by 2022

· Discussions ongoing regarding development agreements in China.

Strategic acquisitions

· Continue to consider opportunities consistent with our long term growth strategy.

Current trading and outlook

Trading at this seasonally quiet point in the year has been in line with expectations. Our 2019 outlook is positive and unchanged.