Madame Tussauds-owner Merlin warns on profit after attacks deter tourists

Angelo Anderson
October 18, 2017

"The worry is that the decision to reduce investment in standing assets risks hitting attendance levels in future years", said Steve Clayton, manager of Hargreaves Lansdown's Select UK Growth Shares fund, which holds Merlin.

The company, which operates themes parks and tourist attractions worldwide including Alton Towers, Legoland and Madame Tussauds, has signed two IP partnership agreements to develop new attractions.

However, like-for-like revenue was flat due to a "difficult summer trading" for Midway London and European theme parks following "the series of terror attacks and unfavourable weather".

"The spate of terror attacks witnessed in the United Kingdom marked an inflection point in Midway London and United Kingdom theme park trading", said Chief Executive Nick Varney.

Merlin also said that trading in recent weeks has been mixed and as a result expects 2017 earnings before interest, tax, depreciation and amortization to be in the range of GBP470 million to GBP480 million.

Merlin's total revenue growth was 12.4 percent at actual exchange rates and 5.9 percent at constant currency rates, driven by new business development, including the opening of LEGOLAND Japan, five new Midway attractions, and 381 new accommodation rooms. "Another busy year has seen us open five new Midway attractions to date, almost 400 accommodation rooms across four of our theme parks, and a new LEGOLAND park in Japan". One partnership in conjunction with survival expert Bear Grylls that will see for the opening of an attraction in Birmingham in 2018, and the other with Entertainment One to open Peppa Pig-themed attractions outside the United Kingdom.

The deal excludes the United Kingdom but gives Merlin exclusivity in all territories other than China. "We also continue to face significant cost pressures, largely brought about by employment legislation, particularly in the United Kingdom". Therefore, while likely to be volatile, I'm bullish on its long term prospects.

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