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Merlin - Resilient trading despite challenging market conditions

Charles Huggins | 28 July 2016 | A A A
Merlin - Resilient trading despite challenging market conditions

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Merlin Entertainments plc Ord Shs GBP0.01

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Merlin Entertainments, the world's second-largest visitor attraction operator, has reported results for the 26 weeks ended 25 June 2016.

Overall revenue grew by 5.3%, driven by new attractions and accommodation, and a c. 3 percentage point benefit from currency movements. Adjusted earnings per share rose by 3.2% while the interim dividend was lifted by 4.8% to 2.2p per share. The shares fell by around 3% in early morning trading.

Visitor numbers grew by 1.1% in the period to 28.0 million, but like for like revenue was down 1.1%. This reflected a challenging landscape for Midway Attractions, particularly in London, and significantly lower visitor numbers at Alton Towers, following the rollercoaster accident in June 2015.

Midway Attractions grew revenues by 5.3% at constant exchange rates, with three new attractions opening in the period. LEGOLAND grew by 5.7%, with Resort Theme Parks (which includes Alton Towers) down 9.1%.

The group is making good progress towards its 2020 strategic milestones which targets 2,000 new room openings, and 40 new attractions.


Merlin expects further recovery in the Resort Theme Park estate and continued growth within LEGOLAND Parks. The Midway trading performance is expected to remain subdued with the London market anticipated to remain challenging in the near term.

With over 70% of profits generated outside of the UK, Merlin's reported results should benefit from a weaker sterling. Overall, Merlin is confident of delivering significant year on year profit growth, and full year earnings per share in line with current expectations.

Our View:

Merlin is second only to Disney, as an operator of themed visitor attractions. It owns the UK's leading theme parks, Alton Towers, Chessington and Thorpe Park, plus LEGOLANDs around the world, Sea Life Centres, Madame Tussauds and other attractions.

2015 was a difficult year for the group, after a terrible rollercoaster accident at Alton Towers. Visitor numbers at Alton Towers continue to be negatively impacted by the event, while lower city-centre tourism on the back of heightened security concerns is also serving to create a challenging near term backdrop.

However, the longer term prospects for the business look very good. With only a hundred and eleven attractions in the portfolio, there are plenty of opportunities to open new ones around the world. There are LEGOLANDS in the pipeline around Asia and existing theme parks are gaining hotels, to raise spend per head.

With around two thirds of sales coming from outside of the UK, Merlin will be a beneficiary of the current weakness in sterling, and with the ability to open and expand attractions, year in year out, Merlin looks like one of the more dependable growth stories in the UK market.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.

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