Merlin investors spooked by update

Merlin has a vast leisure portfolio that includes the Edinburgh Dungeon.  Picture Ian Rutherford
Merlin has a vast leisure portfolio that includes the Edinburgh Dungeon. Picture Ian Rutherford
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Merlin Entertainments, the leisure giant behind Madame Tussauds, Alton Towers and the Edinburgh Dungeon, saw its shares slump as peak summer trading woes following the UK terror attacks took the shine off a worldwide Peppa Pig deal.

The group’s latest trading figures confirmed a “difficult” summer for its London attractions and UK theme parks after a spate of terrorist attacks, which saw group like-for-like revenue growth almost grind to a halt, edging up just 0.3 per cent in the 40 weeks to 7 October.

Poor late summer weather across the UK and Northern Europe and extreme weather in Italy and Florida were also to blame, according to Merlin.

The group said trading was set to remain under pressure for its London attractions for the “foreseeable future” and announced plans to redirect £100 million of investment. It came despite the firm unveiling a deal to roll out new Peppa Pig attractions worldwide.

Merlin Entertainments has struck an agreement with Entertainment One – which owns the rights to the popular children’s cartoon character – to develop new attractions and themed accommodation based on the pre-school favourite.

But the deal does not cover the UK, where there is already Peppa Pig World at Paultons Park in Hampshire under a long-standing agreement, and is also non-exclusive in China.

Nick Varney, chief executive of Merlin, said: “After strong early-season momentum across most of our businesses, we have experienced difficult trading over the summer period, as the spate of terror attacks witnessed in the UK marked an inflection point in Midway London and UK theme park trading.”

Its London attractions, which also include the Coca-Cola London Eye, saw a marked drop-off in visitor numbers after the recent spate of attacks, while the group’s theme parks also suffered in a “difficult” market after the UK’s threat level was raised.

Figures showed like-for-like revenues fell 2.1 per cent across its theme parks worldwide in the 40 weeks so far of its financial year, with sales down 1 per cent for Midway attractions, although Legoland parks notched up growth of 3.4 per cent.

Merlin said trading had also been “mixed” in recent weeks and predicted flat like-for-like revenue growth over the year ahead.

Steve Clayton, a fund manager at financial services outfit Hargreaves Lansdown, said: “Tourism businesses always have to contend with the weather, but terrorism is unfortunately becoming an increasing, additional headwind.

“Merlin have some issues of their own too, and their Midway brands are underperforming more broadly. But the group is still growing, reflecting the roll-out of new Legolands and more hotel room openings at their parks.”

He added: “The worry is that the decision to reduce investment in standing assets risks hitting attendance levels in future years. Overall, Merlin is something of a curate’s egg at the moment and the group will need to work hard to keep the numbers moving in the right direction.”

Merlin said 2017 earnings are set to grow to between £470m and £480m as it keeps a tight lid on costs. Shares were down 18 per cent in lunchtime trading.

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