Merlin Entertainments profits rollercoaster turns flat in first half
Merlin Entertainments, the operator of Legoland and Madame Tussauds, reported 19% growth in sales but flat profits for the first half of the year, which is traditionally represents just under a third of its full year.
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Despite seeing a more subdued London market, the FTSE 100 group enjoyed a 6.2% rise in visitor numbers to 29.7m in the six months to 1 July that, along with strong currency tailwinds, helped lift revenue to £685m - up 19.4% year on year or 9.6% on a constant currency basis and 3.7% on a like-for-like basis.
Legoland parks increased revenue 34.6% or 20.8% at constant currencies and 8.0% LFL, while the Midway brands, which include visitor attractions such as Madame Tussauds, London Dungeons, Blackpool Tower and Sealife centres, delivered 11.3% revenue growth or 2.3% on a constant currency basis.
Profit before tax of £50m was flat due to timing of the opening of Legoland Japan, which was ahead of target and made good revenues so far as it welcomed over half a million visitors, the phasing of the rollout and softer trading from its Midway brands.
While the effects of these timing events will normalise in the second half of 2017, the company remained cautious on the near term outlook for our UK attractions ahead of the peak trading period due to recent terror attacks, but said it was "making good progress across most of our businesses".
Five new Midway attractions opened in the period, including our new brand 'Little Big City' in Berlin, while 305 new accommodation rooms were opened across four theme parks during the period, taking the total to 381.
Chief executive Nick Varney said the revenue growth reflects growth in both the existing estate and the contribution of the new business development programme, in particular, the opening in Japan.
"We continue to be excited by the long term underlying growth prospects in our market and have the strategy in place to exploit these.
"We remain on track to meet our 2020 milestone targets, supported not only by the attractions and accommodation opened to date, but also by the progress we have made on the pipeline, in particular the ongoing development of new brands which will underpin the longer term roll out."
Despite some trading uncertainty, the board anticipate delivering full year profits in line with current expectations, with confidence bolstered by the increasing diversification of the portfolio, the ongoing roll out of new attractions and accommodation, and the continued focus on productivity and efficiencies.
Merlin plan to release a summer trading statement on 5 October.
Merlin shares rose 2% to just above 471p in early trade on Friday.
Broker Shore Capital said overall the results were around 3% behind its forecasts at the EBITDA level and 6% behind at the EBIT level.
"However we consider this to be a good performance in the face of the continued impact of terrorism on visitor numbers, particularly at Midway attractions in London."
"However, investors should bare in mind that only circa 30% of annual divisional EBITDA is generated in H1 and that the group is now heading into its peak trading period. Therefore the full year impact on the group, particularly from the potential drop in overseas visitation to London given short lead time bookings and walk up sales, will become clearer in around 6-8 weeks time."