TIDMMERL
RNS Number : 3045G
Merlin Entertainments plc
01 March 2018
Merlin Entertainments plc - 2017 Preliminary Results
2017 results in line with guidance
Continued strategic progress throughout 2017
Positive outlook with structural growth opportunities
1 March 2018
Merlin Entertainments, Europe's leading and the world's
second--largest visitor attraction operator, reports preliminary
results for the year ended 30 December 2017.
Financial Summary
Like
52 weeks 52 weeks Reported Organic for like
ended ended growth growth(3) growth(4)
30 December 24 December (actual (constant (constant
2017 2016 currency) currency) currency)
------------------------- ------------- ------------- ----------- ----------- -----------
Visitors(1) (m) 66.0 63.8 3.5%
------------------------- ------------- ------------- ----------- ----------- -----------
Revenue (GBPm) 1,594 1,428 11.6% 6.6% 0.7%
------------------------- ------------- ------------- ----------- ----------- -----------
EBITDA (GBPm) 474 433 9.5% 3.5% 1.0%
------------------------- ------------- ------------- ----------- ----------- -----------
Operating profit (GBPm) 323 302 6.8% 0.0%
------------------------- ------------- ------------- ----------- ----------- -----------
Profit before tax
(GBPm) 271 259 4.8%
------------------------- ------------- ------------- ----------- ----------- -----------
Profit for the year
(GBPm) 209 197 6.0%
------------------------- ------------- ------------- ----------- ----------- -----------
Adjusted earnings
per share(2) (p) 20.5 19.5 5.5%
------------------------- ------------- ------------- ----------- ----------- -----------
Dividend per share
(p) 7.4 7.1 4.2%
------------------------- ------------- ------------- ----------- ----------- -----------
Operating free cash
flow(5) 315 292 7.8%
------------------------- ------------- ------------- ----------- ----------- -----------
ROCE(6) 9.1% 9.6%
------------------------- ------------- ------------- ----------- ----------- -----------
(See footnotes on page 4)
Summary
-- A record 66 million visitors welcomed in 2017, up 3.5% on 2016.
-- Total revenue growth of 11.6% driven by growth in like for
like revenue, New Business Development and the benefit of
favourable foreign exchange movements:
o 18.2% organic revenue growth (constant currency) in LEGOLAND
Parks revenue due to the opening of LEGOLAND Japan and continued
strong like for like performance;
o Midway Attractions organic revenue growth of 1.3% reflecting
the roll out of new attractions offsetting a decline in like for
like revenue due primarily to London trading;
o Resort Theme Parks organic revenue decline of 0.4% reflecting
adverse weather conditions in Europe.
-- 2017 EBITDA in line with guidance, representing growth of
9.5% on 2016 (3.5% at constant currency).
-- Continued strong cash flow generation, with operating free
cash flow of GBP315 million, up 7.8% from 2016.
-- Good strategic progress throughout 2017, including:
o Six new Midway attractions opened, with nine scheduled for
2018
o 383 accommodation rooms opened, with 644 expected in 2018
o LEGOLAND Japan opened on 1 April, with LEGOLAND New York
announced during the year and targeted to open in 2020 as
previously stated.
Nick Varney, Merlin Entertainments Chief Executive Officer,
said:
"A year that started well with positive momentum in almost every
part of the Group was ultimately defined by the unprecedented spate
of terror attacks in the UK and poor to extreme weather throughout
the summer season in Europe. Despite this, thanks to the efforts of
our extraordinary team, we have reported overall growth in revenue,
profit and cash flow, welcoming 66 million visitors - our highest
on record.
Against a difficult trading backdrop, we continued to make good
strategic progress. We opened 383 new accommodation rooms, six new
Midway attractions, including the launch of a new brand - 'Little
BIG City' - in Berlin, as well as a new LEGOLAND park in Japan. We
also announced in October plans to open a LEGOLAND park in New York
State in 2020, and the launch of two new IP based attraction
formats - 'The Bear Grylls Adventure' and 'Peppa Pig'.
Furthermore, we were motivated throughout 2017 to review our
approach to capital allocation and reflect upon recent performance
which has fallen short of our expectations in some areas. This has
resulted in a number of medium term adjustments - most notably the
reduction in Midway and Resort Theme Parks existing estate capex
which will be reallocated towards our highly successful
accommodation roll out and increased focus on the Productivity
Agenda.
Merlin continues to evolve and, with attractive market
fundamentals and the right strategy in place, we remain highly
confident in the long term prospects for the business."
Delivering on the strategy
The Group has made good progress against its strategic growth
drivers in 2017 and has further expanded and diversified its
portfolio:
Growing the existing estate through planned investment
cycles
-- Compelling new propositions opened across the estate, including:
o Midway Attractions - new product including 'Ocean Invaders' at
SEA LIFE London Aquarium and 'Fashion Week Experience' at Madame
Tussauds Sydney.
o LEGOLAND Parks - 'NINJAGO World' now open at six of our
parks.
o Resort Theme Parks - 'The Gruffalo River Ride Adventure' at
Chessington World of Adventures and 'Ghostbusters: 5D' at Heide
Park.
-- Major 2018 investments to include 'LEGO City: Deep Sea
Adventure' at LEGOLAND California, 'Wicker Man' at Alton Towers and
'Justice League' features at Madame Tussauds Sydney and
Orlando.
Exploiting strategic synergies
-- Accesso(R) e-commerce platform now rolled out to the majority of the estate.
-- Future e-commerce to focus upon short breaks, annual passes and cluster sales.
Transforming our theme parks into destination resorts
-- Total of 383 rooms opened in 2017, comprising:
o 80 room expansion of the holiday village in LEGOLAND
Billund;
o 166 room holiday village at LEGOLAND Florida;
o 61 room Castle Hotel at LEGOLAND Windsor;
o 76 room CBeebies Land Hotel at Alton Towers.
-- 644 rooms expected to open in 2018.
-- Expect average annual capex to be in the range of GBP70
million to GBP80 million in the medium term.
Rolling out new Midway attractions
-- Six new openings in 2017, comprising LEGOLAND Discovery
Centres in Melbourne and Philadelphia, Madame Tussauds in Nashville
and Delhi, SEA LIFE in Chongqing and Little BIG City in Berlin.
-- Nine attractions scheduled to open in 2018, weighted towards
the second half of the year, including the launch of 'The Bear
Grylls Adventure' and 'Peppa Pig'.
-- Expect average annual capex to be in the range of GBP60
million to GBP70 million in the medium term.
New LEGOLAND parks
-- LEGOLAND Japan successfully opened in April 2017.
-- LEGOLAND New York targeted to open in 2020.
-- Discussions ongoing regarding partner funding of LEGOLAND Korea.
-- Study agreements in place regarding a number of opportunities 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.
Whilst recent foreign exchange movements could materially affect
our 2018 reported results, our underlying expectations remain
positive and unchanged.
Results Webcast
An audio webcast for analysts will be held this morning at 08.30
and can be accessed via Merlin's corporate website,
www.merlinentertainments.biz.
Participant Dial in:
UK : +44 (0) 2071 928000
Participant Pin Code: 2089059
Contact details:
For further information please contact:
Investors
Simon Whittington +44 (0)7968 552 473
Media
James Crampton +44 (0)1202 493 014
Brunswick
Fiona Micallef-Eynaud
/ Imran Jina +44 (0)20 7404 5959
Footnotes:
(1) Visitors represents all individual visits to Merlin owned or
operated attractions.
(2) Basic earnings per share is 20.5p (2016: 20.8p).
(3) Like for like growth and contribution from New Business
Development on a constant currency basis, using 2017 exchange
rates.
(4) Like for like growth refers to the growth between 2016 and
2017 on a constant currency basis using 2017 exchange rates and
includes all businesses owned and operated before the start of
2016.
(5) Defined as EBITDA less existing estate capex
(6) As defined on page 17.
Last year's financial statements were prepared on a 53 week
basis to 31 December 2016. Reported figures were revenue GBP1,457
million, underlying operating profit GBP320 million, profit before
tax GBP277 million, profit after tax GBP211 million and basic EPS
20.8 pence.
Notes to Editors :
MERLIN ENTERTAINMENTS plc is the leading name in location based,
family entertainment. As Europe's Number 1 and the world's
second-largest visitor attraction operator, Merlin operates over
120 attractions, 15 hotels and 6 holiday villages in 25 countries
and across 4 continents. The Company aims to deliver memorable
experiences to its nearly 70 million visitors worldwide, through
its iconic global and local brands, and the commitment and passion
of its circa 29,000 employees (peak season).
Since the formation of Merlin in 1999, the company's Strategic
Statement has been "to create a high growth, high return, family
entertainment company based on strong brands and a global portfolio
that is naturally balanced against the impact of external
factors".
To achieve this, Merlin has six Strategic Growth Drivers:
1. Growing the existing estate through planned investment cycles
2. Exploiting strategic synergies
3. Transforming our theme parks into destination resorts
4. Rolling out new Midway attractions
5. New LEGOLAND park developments
6. Strategic acquisitions
About our attractions:
Merlin operates two distinct products, managed in three
Operating Groups.
Midway
'Midway' attractions are high quality, branded, indoor
attractions, with a typical 1-2 hour dwell time, located in city
centres or resorts. There are over 100 Midway attractions across 22
countries, with five established brands: SEA LIFE, Madame Tussauds,
The Eye (observation attractions), The Dungeons and LEGOLAND
Discovery Centres. Midway also incorporates our newest brand
'Little BIG City'.
In October 2017, Merlin announced global, exclusive partnership
agreements to roll out location based entertainment based on two
market-leading Intellectual Properties - Bear Grylls and Peppa Pig.
The first attractions are scheduled to open in 2018.
Theme Parks
Merlin's theme parks are larger multi-day outdoor destination
venues, incorporating on-site themed accommodation. These are
organised into two specific Operating Groups.
-- LEGOLAND Parks - Eight LEGO themed interactive theme parks
appealing to younger families with children aged 2-12. The LEGOLAND
Parks estate spans seven countries across three continents, with
plans already announced for further parks in New York and South
Korea, having most recently opened LEGOLAND Japan in April
2017.
-- Resort Theme Parks - Six nationally recognised destination
theme parks arranged around a central theme. Parks include Alton
Towers, THORPE PARK, Chessington World of Adventures, Warwick
Castle, Gardaland (Italy) and Heide Park (Northern Germany).
See Merlin Backstage (www.merlinentertainments.biz/backstage or
www.facebook.com/merlinbackstage) for an insight into how Merlin
delivers memorable experiences to its many millions of visitors to
its attractions.
Visit http://www.merlinentertainments.biz for more
information.
Attraction Numbers
Movement in attraction numbers between 31 December 2016 and 30
December 2017:
UK Cont. Europe Americas Asia Pacific Total
31 Mov't 30 31 30 31 30 31 30 31 30
Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec
2016 2017 2016 Mov't 2017 2016 Mov't 2017 2016 Mov't 2017 2016 Mov't 2017
SEA
LIFE 13 - 13 18 - 18 8 - 8 8 1 9 47 1 48
MT(1) 2 - 2 4 - 4 6 1 7 9 1 10 21 2 23
Dungeons 5 - 5 3 - 3 1 - 1 - - - 9 - 9
LDC(2) 1 - 1 3 - 3 9 1 10 3 1 4 16 2 18
Eye 2 - 2 - - - 1 - 1 1 - 1 4 - 4
Other 1 - 1 - 1 1 - - - 6 - 6 7 1 8
Midway(3) 24 - 24 28 1 29 25 2 27 27 3 30 104 6 110
LLP(4) 1 - 1 2 - 2 2 - 2 2 1 3 7 1 8
RTP(5) 4 - 4 2 - 2 - - - - - - 6 - 6
Group 29 - 29 32 1 33 27 2 29 29 4 33 117 7 124
------------ ----- ------- ----- ----- ------- ------ ----- ------- ------ ----- ------- ------ ----- ------- --------
Note:
(1) Madame Tussauds
(2) LEGOLAND Discovery Centre
(3) Midway Attractions Operating Group
(4) LEGOLAND Parks Operating Group
(5) Resort Theme Parks Operating Group
Attractions opened in 2017 comprise: Madame Tussauds Nashville,
LEGOLAND Discovery Centre Philadelphia, LEGOLAND Discovery Centre
Melbourne, SEA LIFE Centre Chongqing, Little BIG City Berlin,
Madame Tussauds Delhi and LEGOLAND Japan.
Number of rooms
Movement in the number of accommodation rooms between 31
December 2016 and 30 December 2017:
31 Dec Rooms opened Other 30 Dec
2016 movements 2017
----------------------- ------- ------------- ----------- -------
Billund (Denmark) 356 80 - 436
Windsor (UK) 150 61 (2) 209
California 250 - - 250
Deutschland 319 - - 319
Florida 152 166 - 318
Malaysia 249 - 9 258
Dubai - - - -
Japan - - - -
LEGOLAND Parks 1,476 307 7 1,790
Alton Towers (UK) 516 76 - 592
Chessington World
of Adventures (UK) 254 - - 254
Gardaland (Italy) 347 - - 347
Heide Park (Germany) 329 - - 329
THORPE PARK (UK) 90 - - 90
Warwick Castle
(UK) 71 - (4) 67
Resort Theme Parks 1,607 76 (4) 1,679
Group 3,083 383 3 3,469
------------------------ ------- ------------- ----------- -------
Note:
Excludes campsite pitches at LEGOLAND Deutschland and LEGOLAND
Billund.
Information regarding the proposed final dividend
The timetable for the final dividend of payment of 5.0 pence per
share is as follows:
Ex-dividend 12 April
Date 2018
------------ ---------
Record 13 April
Date 2018
------------ ---------
Payment 17 May
Date 2018
------------ ---------
The Company will also provide a Dividend Re-Investment Plan
(DRIP). The last day for electing for the DRIP will be 25 April
2018.
References to dividend per share are quoted gross of tax.
Chief Executive Officer's review
2017 overview
A year that started well with positive momentum in almost every
part of the Group was ultimately offset by the unprecedented spate
of terror attacks in the UK and poor to extreme weather throughout
the summer season in Europe. Nonetheless Merlin, due to its
increasingly diversified portfolio, was still able to deliver total
revenue growth of 11.6% (6.6% organic growth) and EBITDA of GBP474
million versus GBP433 million in 2016, welcoming a record 66
million visitors. Our extraordinary team worked hard and recorded
significant achievements across the year but, frustratingly, due to
these external events, this result was short of expectations and
our budget.
During the year, we made good progress against our exciting New
Business Development (NBD) programme which continues to offer
significant structural growth opportunities. We rolled out further
themed, on-site accommodation, opening 383 rooms in the year at
four of our theme parks. Our Midway roll out included our first
investment in India, Madame Tussauds Delhi, as well as the launch
of a new brand - 'Little BIG City' - in Berlin. We opened a new
LEGOLAND park in Japan in April, and in October announced our plans
to open a park in New York State in 2020. Finally, we announced the
launch of two new IP-based global partnerships - 'The Bear Grylls
Adventure' and 'Peppa Pig' - and are on track to open our pilot
attractions under these brands in 2018.
Merlin remains highly focused upon capital discipline, so it is
disappointing that the challenging trading environment of recent
years has resulted in returns in some parts of the business,
particularly in Midway London, being below our expectations.
As a result, in addition to the cost control measures already in
place, we announced in October 2017 our intention to make some
medium term adjustments to our long-standing approach to capital
allocation. While current volatile conditions endure, we will
reduce our existing estate investment in Midway Attractions and
Resort Theme Parks, reallocating this towards 'backing the winners'
- principally our accommodation strategy where we continue to see
strong returns, and to a Productivity Agenda.
Overall, thanks to the flexibility in our strategic model and
long term structural growth in our markets, we therefore continue
to target broadly similar levels of organic growth, for similar
levels of investment, with a greater focus upon New Business
Development.
Within our long-standing Midway roll out model we are also
recognising a differentiated approach. Where we are opening core
Midway brands in developed markets, we continue to expect EBITDA
ROIC in the range of 15% to 25%. Recent openings such as LDC
Melbourne and LDC Philadelphia are good examples of this. In
emerging markets, and with new brands, we believe a longer term
perspective to be more appropriate and therefore target a
risk-adjusted Internal Rate of Return (IRR) of 14%.
Market overview
Merlin operates in a fundamentally attractive marketplace,
benefiting from a number of structural growth drivers.
We believe that the long term trend for overall international
tourism remains strong, which should lead to increased visitation
and spend, particularly in key gateway cities. The emerging middle
classes around the world want to travel and seek new experiences in
their own and foreign countries. Combined with more affordable air
travel and improved transportation, this has resulted in strong
growth in international travel, with 1.8 billion international
tourist arrivals expected in 2030 - a nearly threefold increase on
the 2000 level. In recent years we have seen a number of 'shocks'
to international tourism, ranging from the visa restrictions
affecting travel from the People's Republic of China to Hong Kong,
to the spate of terror attacks across Europe, driving visitors away
from city centres and other high profile public places. Our view
however is that, much like the impact of foreign exchange rates on
international tourism flows, these have resulted in a temporary
displacement of tourism, rather than a permanent reduction in the
attractiveness of these markets. It is with this in mind that we
continue to roll out new Midway attractions in markets which, in
the short term, may be more volatile.
Furthermore, developed markets have seen a substantial decline
in the traditional two week summer holiday in favour of shorter,
more frequent breaks. This market dynamic benefits our theme parks
which are predominantly domestic-focused and increasingly targeting
the short break market with themed accommodation, as well as our
Midway attractions located in city centres.
Finally, we also see broader trends benefiting our theme parks
and Midway attractions located outside of gateway cities. Growth in
overall wealth in both developed and emerging markets results in
increased income available for leisure activities, and in many
parts of the world, consumers are increasingly looking to spend
this income on experiences, rather than goods. We believe that this
is further accentuated as the world becomes more 'digital',
increasing the value many consumers place on high-quality time
shared with friends and family, away from smartphones and
screens.
Strategy update
Against these attractive market dynamics, Merlin's strategy
since 1999 has been to create a high growth, high return, family
entertainment business naturally balanced against external factors.
Specifically, it is our aim to continue to diversify our portfolio,
by geography, brand and customer, ensuring a balance of indoor and
outdoor attractions and international and domestic visitation.
To achieve this, Merlin has six strategic growth drivers.
Progress against these in 2017 has been as follows:
1. Existing estate capex - investment in the existing estate
allows us to grow visitation to the attraction, provides us with
something new to market, and provides a degree of pricing power. In
2017 each of our attractions invested in new products and features,
with notable investments including 'Ocean Invaders' at SEA LIFE
London Aquarium, 'NINJAGO World' at our LEGOLAND parks, and 'The
Gruffalo River Ride Adventure' at Chessington World of Adventures.
In October 2017, we announced that we would be reallocating
approximately GBP100 million of capital away from the existing
estate over the period 2018 to 2021, as we seek to maintain our
capital discipline in the face of a difficult external environment,
focusing upon higher returning projects.
2. Strategic synergies - we continue to leverage the growing
scale of the Group through better procurement, promotional activity
and technology. Across Merlin annual passes and Group promotions,
we generate more than GBP100 million in annual revenue. We have now
rolled the accesso(R) e-commerce platform out across the majority
of our estate, whilst the future focus of e-commerce will turn to
opportunities in short breaks, annual passes and cluster sales.
3. Short break positioning - the rationale for investment in
on-site themed accommodation and developing our theme parks into
short break resorts remains compelling. We continue to enjoy strong
financial returns, improved levels of guest satisfaction and
increases in advanced bookings. In 2017 we opened 383 rooms across
a range of accommodation, and anticipate opening 644 in 2018. We
expect annual average capex to be in the range of GBP70 to GBP80
million in the medium term though this will vary depending upon
timing and mix of openings.
4. Midway roll out - we seek to balance our Midway openings
between core brands in developed markets where we target a 15% to
25% EBITDA ROIC, and new brands or emerging markets where we target
a 14% risk-adjusted IRR. We opened six new Midway attractions in
2017 including MT Delhi - our first investment in India, and
launched our new brand - 'Little BIG City' - in Berlin. We have
nine attractions scheduled to open in the second half of 2018,
which will include pilots of the recently announced brands - 'The
Bear Grylls Adventure' and 'Peppa Pig'. We expect average annual
capex to be in the range of GBP60 to GBP70 million in the medium
term though this will vary depending upon timing and mix of
openings.
5. New LEGOLAND parks - in April, we successfully opened
LEGOLAND Japan on capital budget and ahead of schedule.
Furthermore, we announced in October our plans to open the fully
owned and operated LEGOLAND New York Resort, including a 250 room
four star hotel, in 2020. This will see us invest approximately
GBP250 million in the site over the period 2017 to 2021. We remain
confident in the long term opportunity for the new LEGOLAND
parks.
6. Strategic acquisitions - reflecting the strict criteria we
apply in assessing investments, we made no acquisitions during
2017. We do however continue to assess opportunities which may
provide a platform for further expansion, as well as smaller,
single site Midway assets.
Productivity Agenda
Merlin continues to face a number of external cost headwinds.
This is most notable in employment costs, which represent
approximately half of our operating costs, where we see significant
pressures on wages; in Asia from market forces, and Europe and the
USA where legislation is driving increases well above the rate of
broader inflation. Other fixed costs, including property taxes in
the UK, insurance and utilities, are similarly increasing at rates
ahead of broader inflation.
Against this backdrop, we have been successful throughout 2017
in limiting the effect of softer trading through a combination of
short term cost savings such as variable labour costs. The
self-service ticketing terminals installed in our London cluster,
which will be rolled out more broadly, have been a good example of
this, allowing for a more efficient operation, and also crucially
resulting in positive guest feedback.
As announced in October, we will further evolve the way we work
over the coming years as we seek more permanent, structural
savings. During 2018, we will begin the process of increased
investment in back office systems and infrastructure, allowing us
ultimately to better leverage the growth of the Group. These
actions seek to maintain Group margins at current levels despite
the continued challenging cost environment, and market
volatility.
Health and safety
We seek to be an industry leader, driving best in class health,
safety and security standards. Throughout 2017 we have built upon
the strong foundations of governance, operating standards and
practices, and I am pleased that we have seen a continued
improvement in the health and safety key performance indicator
measuring medical treatment cases of guests. The safety and
security of our guests and employees remains our number one
priority and we will continue to invest in retaining our high
standards.
Guest satisfaction
We maintain our relentless focus on delivering memorable
experiences to our guests. Guest feedback is monitored on a daily
basis by both local and central product excellence teams, and is
shared across all levels of the organisation. In 2017 we delivered
an average guest satisfaction score across the Group of 96%, whilst
our average 'Net Promoter' score across our attractions remains
very strong at over 50%.
Employee engagement
Our annual employee survey - 'The Wizard Wants to Know' - allows
our employees to tell us what they think about Merlin. I am very
pleased that this has again shown very high scores, with a 95%
response rate, and 94% saying that they enjoy working at Merlin.
We're not complacent however, and we continue to invest in our
teams in order to create an engaged, motivated and diverse
workforce.
In what turned out to be a difficult year, I would like to thank
our exceptional employees for their continued hard work and
commitment in delivering fun, safe, memorable experiences to all
our guests.
Midway Attractions
52 weeks 52 weeks Reported Organic Like
ended ended growth growth for
30 December 24 December (actual (constant like
2017 2016 currency) currency) growth
------------------ ------------- ------------- ----------- ----------- --------
Revenue 656 621 5.7% 1.3% (1.2)%
------------------ ------------- ------------- ----------- ----------- --------
EBITDA 220 224 (1.8)% (5.9)%
------------------ ------------- ------------- ----------- ----------- --------
Operating profit 152 160 (5.0)% (9.3)%
------------------ ------------- ------------- ----------- ----------- --------
Organic revenue grew by 1.3% in the Midway Attractions Operating
Group. This was driven by the continued roll out of new attractions
offsetting a like for like decline of 1.2%.
2017 saw the opening of six new Midway attractions, comprising
LEGOLAND Discovery Centres in Philadelphia and Melbourne, a Madame
Tussauds in Nashville, a SEA LIFE Centre in Chongqing, the first of
our new brand 'Little BIG City' in Berlin and Madame Tussauds Delhi
- our first attraction in India. Including the full year benefit of
the five attractions opened in 2016, the Midway roll out
contributed an additional GBP16 million of revenue in 2017.
After a strong start to the year, Midway like for like revenue
growth slowed following the spate of terror attacks in the UK which
particularly impacted trading in London. The attacks led to a
significant and immediate decline in domestic visitation, with
international visitation falling from the summer onwards. This
resulted in an estimated 17% drop in the London visitor attraction
market over the key trading period. London is the largest and most
profitable of Midway's five regional Divisions and therefore
represented the greatest factor in trading performance in 2017.
Trading in North America was affected by lower levels of LEGO
sales in our LEGOLAND Discovery Centres as well as reduced
international visitation to New York.
Outside of London and North America, our three remaining
regional Divisions enjoyed good growth.
Organic EBITDA declined by 5.9% reflecting the reduction in
margin from 36.1% to 33.5%. A key contributor to this was the
significant decline in visitation to London given its higher levels
of profitability. The margin was further impacted by continued
underlying cost pressures which were only partly offset by
management action, as well as the effect of the new openings which
typically have lower margins than the existing estate. Furthermore,
a GBP2 million credit related to a sales tax rebate was recognised
in 2017, compared to GBP5 million in 2016.
Higher depreciation driven by continued investment in the estate
resulted in operating profit declining by 9.3% at constant
currency.
Reflecting the capital efficiency of the Midway model, Midway
operating free cash flow conversion was 77%. This is expected to
increase in the medium term as existing estate capex is
reduced.
LEGOLAND Parks
52 weeks 52 weeks Reported Organic Like
ended ended growth growth for
30 December 24 December (actual (constant like
2017 2016 currency) currency) growth
------------------ ------------- ------------- ----------- ----------- --------
Revenue 609 486 25.1% 18.2% 4.7%
------------------ ------------- ------------- ----------- ----------- --------
EBITDA 230 188 22.0% 15.0%
------------------ ------------- ------------- ----------- ----------- --------
Operating profit 191 160 19.0% 12.1%
------------------ ------------- ------------- ----------- ----------- --------
Organic revenue grew by 18.2% in the LEGOLAND Parks Operating
Group, driven by the opening of LEGOLAND Japan, the continued
accommodation roll out and like for like revenue growth of
4.7%.
The opening of LEGOLAND Japan in April, and the full year
benefit of LEGOLAND Dubai, contributed an additional GBP59 million
of revenue in 2017. LEGOLAND Japan opened on capital budget and
ahead of schedule, delivering a small EBITDA contribution which
reflected pre-opening costs and the part year opening. The resort
will be extended in 2018 with the addition of a SEA LIFE Centre and
252 bedroom hotel.
A total of 307 rooms were opened in 2017, comprising an 80 room
expansion of the holiday village in LEGOLAND Billund, a 166 room
holiday village at LEGOLAND Florida and the 61 room Castle Hotel at
LEGOLAND Windsor.
Like for like revenue growth of 4.7% was driven by continued
product investment and, in particular, the success of 'NINJAGO
World' which is now open at six of our parks, and which benefited
from the launch of 'The LEGO NINJAGO Movie' towards the end of the
year.
Organic EBITDA grew by 15.0%. The reduction in margin from 38.7%
to 37.8% was primarily the result of the pre-opening costs and
lease charges associated with LEGOLAND Japan.
Operating profit growth of 12.1% was slightly lower than that of
EBITDA as a result of increased depreciation following the opening
of LEGOLAND Japan.
Resort Theme Parks
52 weeks 52 weeks Reported Organic Like
ended ended growth growth for
30 December 24 December (actual (constant like
2017 2016 currency) currency) growth
------------------ ------------- ------------- ----------- ----------- --------
Revenue 329 319 3.2% (0.4)% (1.9)%
------------------ ------------- ------------- ----------- ----------- --------
EBITDA 72 69 4.8% (0.9)%
------------------ ------------- ------------- ----------- ----------- --------
Operating profit 36 37 (1.3)% (8.8)%
------------------ ------------- ------------- ----------- ----------- --------
Organic revenue declined by 0.4% in the Resort Theme Parks
Operating Group, as the continuing accommodation roll out partly
offset a like for like revenue decline of 1.9%.
Accommodation investment in Resort Theme Parks in 2017
represented the 76 room CBeebies Land Hotel at Alton Towers which
opened in July, whilst we also benefited from the full year effect
of the 163 rooms opened in 2016.
After a strong start to the year, the UK theme park market
slowed in the key summer period following the series of terror
attacks and the Government's subsequent raising of the threat
level. The parks enjoyed positive momentum during Halloween however
which, combined with the ongoing recovery of Alton Towers, resulted
in good growth for the UK parks overall. In Continental Europe,
exceptionally poor weather in Italy led to significant shortfalls
in visitation to Gardaland - the largest and most profitable of our
six theme parks, whilst unfavourable weather in Northern Germany
also impacted trading at Heide Park.
Organic EBITDA decreased by 0.9%. As a result of cost saving
measures introduced throughout 2016 and 2017, the EBITDA margin
increased from 21.5% to 21.8%.
Operating profit decreased by 8.8% as a result of the decline in
EBITDA, on a constant currency basis.
Geographic performance
Merlin has the longer term aim of sourcing revenues equally from
the Europe, the Americas and Asia Pacific regions. 2017 performance
against this is as follows:
Europe (55% of revenue, 2016: 59%) saw organic revenue growth of
0.4%, driven by the opening of 217 accommodation rooms and one new
Midway attraction. In the existing estate, significant declines in
Gardaland and Midway London more than offset growth elsewhere in
the region.
The Americas (27% of revenue, 2016: 27%) saw organic revenue
growth of 5.2% driven by new accommodation at LEGOLAND Florida,
with strong like for like growth in the two LEGOLAND parks
offsetting a softer Midway performance.
Asia Pacific (18% of revenue, 2016: 14%) grew 35.7% on an
organic basis. This is predominantly due to the opening of LEGOLAND
Japan and, to a lesser extent, the continued focus of our Midway
roll out in this region. The region also enjoyed strong like for
like revenue growth.
Chief Financial Officer's review
52 weeks 52 weeks 53 weeks
ended ended ended 52 week Organic
30 December 24 December 31 December growth growth
2017 2016 2016 (actual (constant
GBPm GBPm GBPm currency) currency)
--------------------- ------------- ------------- ------------- ----------- -----------
Revenue 1,594 1,428 1,457 11.6% 6.6%
--------------------- ------------- ------------- ------------- ----------- -----------
EBITDA 474 433 451 9.5% 3.5%
--------------------- ------------- ------------- ------------- ----------- -----------
Depreciation and
amortisation (151) (131) (131) (15.5)% (11.6)%
--------------------- ------------- ------------- ------------- ----------- -----------
Operating profit 323 302 320 6.8% 0.0%
--------------------- ------------- ------------- ------------- ----------- -----------
Net finance costs (52) (43) (43) (18.7)%
--------------------- ------------- ------------- ------------- ----------- -----------
Profit before tax 271 259 277 4.8%
--------------------- ------------- ------------- ------------- ----------- -----------
Taxation (62) (62) (66) (1.0)%
--------------------- ------------- ------------- ------------- ----------- -----------
Profit for the year 209 197 211 6.0%
--------------------- ------------- ------------- ------------- ----------- -----------
Adjusted earnings
per share 20.5p 19.5p 20.8p 5.5%
--------------------- ------------- ------------- ------------- ----------- -----------
ROCE 9.1% 9.6% 10.2%
--------------------- ------------- ------------- ------------- ----------- -----------
Operating free cash
flow 315 292 310 7.8%
--------------------- ------------- ------------- ------------- ----------- -----------
Leverage on net
debt to underlying
EBITDA 2.4x - 2.3x
--------------------- ------------- ------------- ------------- ----------- -----------
To aid comparability, the trading commentary which follows is on
a 52 week basis. Unless otherwise stated, all growth rates are
presented on a constant currency basis, that is, as if the 2016
results were re-translated at 2017 average rates.
Revenue
Reported revenue for the 52 weeks to 30 December 2017 increased
to GBP1,594 million. On a 52 week basis, organic revenue grew by
6.6%.
On a like for like basis, revenues grew by 0.7%, reflecting
increased revenue per capita, offset by lower visitor volumes.
We made good progress with our new business development. We
opened six new Midway attractions, which together with the full
year benefit of 2016 openings, contributed GBP16 million to revenue
growth. Similarly LEGOLAND Japan and LEGOLAND Dubai contributed
GBP59 million, whilst new accommodation added a further GBP15
million.
EBITDA
Reported EBITDA for the 52 weeks to 30 December 2017 increased
to GBP474 million, albeit held back by the significant decline in
trading in London and Gardaland, the largest divisions in Midway
Attractions and Resort Theme Parks, respectively. On a 52 week
basis organic EBITDA increased by 3.5% as underlying cost increases
in our existing estate and additional pre-opening costs in our new
attractions offset revenue growth.
Group EBITDA margin fell slightly to 29.7% from 30.3%, primarily
as a result of a decline in the Midway Attractions margin. In
addition, the LEGOLAND Parks margin was affected by pre-opening
costs and lease charges at LEGOLAND Japan. Central net costs of
GBP48 million were flat on 2016, mainly from savings in variable
remuneration.
The cost base at each of our attractions is relatively fixed so
revenue increases and decreases are expected to flow through to its
operating result. If revenue is anticipated to fall short of our
expectations, we will implement focused cost management initiatives
to protect profitability as far as possible.
Operating margins are also impacted by underlying uncontrollable
external cost pressures, such as those arising from wage
legislation or property taxes. In this case we look to offset any
longer term trend with more structural productivity
initiatives.
Operating Group margins are affected by the source and mix of
revenue in the existing estate and the dilutive effect of new
attractions and accommodation, which typically have lower margins
than the existing estate and incur costs in the pre-opening period.
The Group result is influenced by central costs, which whilst
relatively fixed in nature, may rise over time to support the
increasing breadth and scale of the business.
Foreign exchange
Merlin is exposed to fluctuations in foreign currency exchange
rates on transactions and the translation of our non Sterling
earnings. Retranslating 2016 performance at 2017 rates would result
in a GBP67 million benefit to revenue and a GBP25 million benefit
to EBITDA.
%age %age
2016 2017 movement 2016 2017 movement
average average in Revenue average average in EBITDA
FX FX FX impact FX FX FX impact
Currency rates rates rates GBPm Currency rates rates rates GBPm
---------- --------- --------- ---------- -------- ---------- --------- --------- ---------- --------
USD 1.37 1.29 6.1% 25 USD 1.37 1.28 6.8% 11
---------- --------- --------- ---------- -------- ---------- --------- --------- ---------- --------
EUR 1.23 1.14 7.3% 22 EUR 1.21 1.13 7.0% 7
---------- --------- --------- ---------- -------- ---------- --------- --------- ---------- --------
AUD 1.83 1.68 8.1% 8 AUD 1.81 1.67 8.4% 2
---------- --------- --------- ---------- -------- ---------- --------- --------- ---------- --------
Other 12 Other 5
---------- --------- --------- ---------- -------- ---------- --------- --------- ---------- --------
Increase in 2016 Increase in 2016
revenues at 2017 EBITDA at 2017 FX
FX rates 67 rates 25
-------------------------------------------- -------- -------------------------------------------- ----------
Operating profit
Depreciation and amortisation grew by 11.6% to GBP151 million.
This primarily reflects the roll out of attractions and
accommodation, as well as continued investment in assets, such as
IT, that have shorter useful economic lives.
On a constant currency basis, underlying operating profit
remained flat at GBP323 million.
Interest
Net finance costs of GBP52 million were incurred in 2017 (2016:
GBP43 million), reflecting increased borrowings following the
issuance of further senior notes in March 2017 (net of bank debt
repayments), new finance lease liabilities at LEGOLAND Japan, the
accounting impact of reassessing the refinancing date of our
existing bank facilities, and the impact of movements in exchange
rates.
We anticipate an interest charge of approximately GBP50 million
in 2018.
Taxation
The tax charge of GBP62 million represents an effective tax rate
of 22.9%, falling from 23.8% in 2016, primarily due to the impact
of changes in tax legislation in the USA. We currently anticipate
an effective tax rate in 2018 in the range of 22 to 24%.
Significant factors which may impact the Group's future
effective tax rate include the USA tax reforms, the ability to
continue with our current financing arrangements and changes to
local or international tax laws.
Dividend
The Company's policy is to pay a dividend with a target range of
35-40% of underlying profit after tax, so as to maintain an
appropriate level of dividend cover whilst retaining sufficient
capital in the Group to fund continued re-investment in the
business.
In September 2017 we paid an interim dividend of 2.4 pence per
share and the Board is recommending a final dividend of 5.0 pence
per share. This equates to a full year dividend of 7.4 pence per
share and represents growth of 4.2% from 2016.
When making proposals for the payment of dividends, the
Directors consider the resources available to the Company and its
subsidiaries. Specifically, they have taken account of the
Company's significant distributable profits, as well as the
liquidity of the Group.
Cash flow
2017 2016
52 53
weeks weeks
GBPm GBPm
------------------------------------------------ -------- --------
EBITDA 474 451
------------------------------------------------ -------- --------
Working capital and other movements 3 32
------------------------------------------------ -------- --------
Tax paid (64) (50)
------------------------------------------------ -------- --------
Net cash inflow from operating activities 413 433
------------------------------------------------ -------- --------
Capital expenditure - existing estate (159) (141)
------------------------------------------------ -------- --------
Capital expenditure - new business development (177) (118)
------------------------------------------------ -------- --------
Other investing activities (12) (33)
------------------------------------------------ -------- --------
Proceeds from share capital 8 2
------------------------------------------------ -------- --------
Interest paid, net of interest received (45) (40)
------------------------------------------------ -------- --------
Dividends paid (74) (67)
------------------------------------------------ -------- --------
Other 4 4
------------------------------------------------ -------- --------
Net cash (outflow)/inflow before refinancing
and repayment of borrowings (42) 40
------------------------------------------------ -------- --------
Refinancing and repayment of borrowings (net) 132 -
------------------------------------------------ -------- --------
Net cash inflow for the year 90 40
------------------------------------------------ -------- --------
Merlin continues to be highly cash generative, delivering
operating free cash flow (being EBITDA less existing estate capital
expenditure) of GBP315 million in 2017 (2016 53 weeks: GBP310
million). Net cash flow from operating activities for the 52 weeks
to 30 December 2017 was GBP413 million (2016 53 weeks: GBP433
million).
A total of GBP336 million was incurred on capital expenditure in
2017, comprising GBP159 million invested in the existing estate and
GBP177 million on new business development (NBD). All major capital
projects are appraised with clear project return targets based
principally upon Internal Rate of Return and EBITDA ROIC.
NBD investment represented GBP90 million in developing new
accommodation across our theme park estate and GBP52 million in new
Midway attractions. Capital expenditure of GBP35 million was
incurred in respect of the new LEGOLAND parks.
Capital expenditure is expected to increase in 2018 due
primarily to the acceleration of our New Business Development,
including the significant investment in LEGOLAND New York.
Other investing activities of GBP12 million reflects Merlin's
share of funding for a hotel currently being constructed at
LEGOLAND Dubai and in which Merlin has a 40% interest.
In March, we increased the issuance of our existing notes by
EUR200 million at 103.5% of their nominal value (GBP178 million),
using EUR50 million (GBP43 million) of the proceeds to repay bank
facilities. We will continue to seek opportunities to further
diversify our sources of funding away from the bank markets.
Leverage on net debt at the year end equates to 2.4x underlying
EBITDA (2016: 2.3x).
Net assets
2017 2016
GBPm GBPm
----------------------------------------------- -------- --------
Property, plant and equipment 2,092 1,841
----------------------------------------------- -------- --------
Goodwill and intangible assets 1,018 1,017
----------------------------------------------- -------- --------
Investments and other non-current receivables 70 62
----------------------------------------------- -------- --------
Working capital (169) (178)
----------------------------------------------- -------- --------
Net debt (1,160) (1,025)
----------------------------------------------- -------- --------
Corporate and deferred tax (175) (180)
----------------------------------------------- -------- --------
Employee benefits (6) (11)
----------------------------------------------- -------- --------
Other liabilities (103) (98)
----------------------------------------------- -------- --------
Net assets 1,567 1,428
----------------------------------------------- -------- --------
Property, plant and equipment increased by GBP251 million,
primarily reflecting the capital additions referred to previously
and finance leases entered into at LEGOLAND Japan (see note 4.1),
offset by depreciation charges, together with the retranslation of
those assets at different foreign exchange rates.
The increase in investments reflects the LEGOLAND Dubai
investment related to the hotel noted above.
The increase in reported net debt is due to the impact of
foreign exchange movements on non Sterling borrowings and GBP111
million in respect of finance lease liabilities recognised for
LEGOLAND Japan, developed under our 'operated and leased' model,
partially offset by cash generated in the year.
Loan facilities
Merlin's current loan facilities are detailed in note 4.1 to the
financial statements.
In addition to the Group's term debt of GBP1,271 million, a
multi-currency revolving facility of GBP300 million (2016: GBP300
million) is available until March 2020 when the facilities mature.
At 30 December 2017 none was drawn down (2016: GBPnil).
This facility, in conjunction with the Group's cash balance of
GBP309 million (2016: GBP215 million), is available to finance
working capital requirements and capital investment. All covenant
requirements were satisfied throughout the year with significant
headroom, even when taking account of the Group's seasonal trading
and cash generation cycles.
We will continue to seek opportunities to further diversify our
sources of funding away from the bank markets. We anticipate a
refinancing within the next 18 months.
Return on capital employed (ROCE)
Reflecting Merlin's disciplined approach to the use of capital,
the Board considers ROCE to be an important metric for appraising
financial performance and uses it, along with EPS, in the
remuneration of senior executives. The return measure used in
calculating ROCE is based on underlying operating profit after tax.
The capital employed element of the calculation is based on average
net operating assets which include all net assets other than
deferred tax, derivative financial assets and liabilities, and net
debt.
ROCE in 2017 was 9.1% (2016 53 weeks: 10.2%, 52 weeks: 9.6%). On
a 52 week basis this reflects a combination of our increased
capital investment as well as the inclusion of finance leased
assets related to LEGOLAND Japan.
Productivity Agenda
Under the Productivity Agenda already announced, the way we work
will continue to evolve to deliver more permanent structural
savings, as we build on the successes enjoyed to date through
benchmarking and automation. 2018 will be a year of transition as
we increase our investment in back office systems and
infrastructure, supporting our drive for efficiencies that will
enable better support of the growth of the Group. One project I am
particularly excited about is 'Finance 21', which looks to optimise
the Group's finance organisation, underpinned by the roll out of a
cloud based software.
The benefits of these initiatives will begin to come through in
2019, augmenting our constant focus on financial discipline and
capital allocation.
CONSOLIDATED INCOME STATEMENT
For the 52 weeks ended 30 December 2017 (2016: 53 weeks ended 31
December 2016)
2017 2016
Note GBPm GBPm
-------------------------------- ----- ------ ------
Revenue 2.1 1,594 1,457
-------------------------------- ----- ------ ------
Cost of sales (255) (227)
-------------------------------- ----- ------ ------
Gross profit 1,339 1,230
-------------------------------- ----- ------ ------
Staff expenses 2.1 (420) (382)
-------------------------------- ----- ------ ------
Marketing (85) (75)
-------------------------------- ----- ------ ------
Rent (104) (93)
-------------------------------- ----- ------ ------
Other operating expenses (256) (229)
-------------------------------- ----- ------ ------
EBITDA (1) 2.1 474 451
-------------------------------- ----- ------ ------
3.1,
Depreciation and amortisation 3.2 (151) (131)
-------------------------------- ----- ------ ------
Operating profit 323 320
-------------------------------- ----- ------ ------
Finance income 2.2 3 3
-------------------------------- ----- ------ ------
Finance costs 2.2 (55) (46)
-------------------------------- ----- ------ ------
Profit before tax 271 277
-------------------------------- ----- ------ ------
Taxation 2.3 (62) (66)
-------------------------------- ----- ------ ------
Profit for the year (2) 209 211
-------------------------------- ----- ------ ------
Earnings per share
-------------------------------- ----- ------ ------
Basic earnings per share (p) 2.4 20.5 20.8
-------------------------------- ----- ------ ------
Diluted earnings per share (p) 2.4 20.5 20.7
-------------------------------- ----- ------ ------
Dividend per share (3) (p) 4.2 7.4 7.1
-------------------------------- ----- ------ ------
(1) EBITDA - this is defined as profit before finance
income and costs, taxation, depreciation and amortisation
and is after taking account of attributable profit
after tax of joint ventures.
(2) Profit for the year for 2017 and 2016 is wholly
attributable to the owners of the Company.
(3) Dividend per share represents the interim paid and
final proposed dividend for the year.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 52 weeks ended 30 December 2017 (2016: 53 weeks ended 31
December 2016)
2017 2016
Note GBPm GBPm
-------------------------------------------- ------ ----- -----
Profit for the year 209 211
---------------------------------------------------- ----- -----
Other comprehensive income
-------------------------------------------- ------ ----- -----
Items that cannot be reclassified to
the consolidated income statement
-------------------------------------------- ------ ----- -----
Defined benefit plan remeasurement gains
and losses 2 (6)
---------------------------------------------------- ----- -----
Income tax on items relating to components
of other comprehensive income - 1
---------------------------------------------------- ----- -----
2 (5)
--------------------------------------------------- ----- -----
Items that may be reclassified to the
consolidated income statement
-------------------------------------------- ------ ----- -----
Exchange differences on the retranslation
of net assets of foreign operations 3 176
---------------------------------------------------- ----- -----
Exchange differences relating to the
net investment in foreign operations (15) (45)
---------------------------------------------------- ----- -----
Cash flow hedges - effective portion
of changes in fair value 4 (3)
---------------------------------------------------- ----- -----
Income tax on items relating to components
of other comprehensive income (1) (1)
(9) 127
--------------------------------------------------- ----- -----
Other comprehensive income for the year
net of income tax (7) 122
---------------------------------------------------- ----- -----
Total comprehensive income for the year
(1) 202 333
---------------------------------------------------- ----- -----
(1) Total comprehensive income for 2017 and 2016 is
wholly attributable to the owners of the Company.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 December 2017 (2016: 31 December 2016)
2017 2016
Note GBPm GBPm
------------------------------------------ ----- ------ ------
Non-current assets
------------------------------------------ ----- ------ ------
Property, plant and equipment 3.1 2,092 1,841
------------------------------------------ ----- ------ ------
Goodwill and intangible assets 3.2 1,018 1,017
------------------------------------------ ----- ------ ------
Investments 5.1 59 49
------------------------------------------ ----- ------ ------
Other receivables 11 13
------------------------------------------ ----- ------ ------
Deferred tax assets 33 38
------------------------------------------ ----- ------ ------
3,213 2,958
------------------------------------------ ----- ------ ------
Current assets
------------------------------------------ ----- ------ ------
Inventories 37 36
------------------------------------------ ----- ------ ------
Trade and other receivables 100 86
------------------------------------------ ----- ------ ------
Derivative financial assets 5 3
------------------------------------------ ----- ------ ------
Cash and cash equivalents 4.1 309 215
------------------------------------------ ----- ------ ------
451 340
------------------------------------------ ----- ------ ------
Total assets 3,664 3,298
------------------------------------------ ----- ------ ------
Current liabilities
------------------------------------------ ----- ------ ------
Interest-bearing loans and borrowings 4.1 7 5
------------------------------------------ ----- ------ ------
Finance leases 1 -
------------------------------------------ ----- ------ ------
Derivative financial liabilities 3 5
------------------------------------------ ----- ------ ------
Trade and other payables 306 300
------------------------------------------ ----- ------ ------
Tax payable 37 39
------------------------------------------ ----- ------ ------
Provisions 5 3
------------------------------------------ ----- ------ ------
359 352
------------------------------------------ ----- ------ ------
Non-current liabilities
------------------------------------------ ----- ------ ------
Interest-bearing loans and borrowings 4.1 1,271 1,147
------------------------------------------ ----- ------ ------
Finance leases 4.1 190 88
------------------------------------------ ----- ------ ------
Other payables 28 28
------------------------------------------ ----- ------ ------
Provisions 72 65
------------------------------------------ ----- ------ ------
Employee benefits 6 11
------------------------------------------ ----- ------ ------
Deferred tax liabilities 171 179
------------------------------------------ ----- ------ ------
1,738 1,518
------------------------------------------ ----- ------ ------
Total liabilities 2,097 1,870
------------------------------------------ ----- ------ ------
Net assets 1,567 1,428
------------------------------------------ ----- ------ ------
Issued capital and reserves attributable
to owners of the Company 1,563 1,424
------------------------------------------ ----- ------ ------
Non-controlling interest 4 4
------------------------------------------ ----- ------ ------
Total equity 1,567 1,428
------------------------------------------ ----- ------ ------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 52 weeks ended 30 December 2017 (2016: 53 weeks ended 31
December 2016)
Total Non-
Share Share Translation Hedging Retained parent controlling Total
capital premium reserve reserve earnings equity interest equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- ----- -------- -------- ------------ -------- --------- ------- ------------ -------
At 27 December
2015 10 - (135) - 1,270 1,145 4 1,149
--------------------- ----- -------- -------- ------------ -------- --------- ------- ------------ -------
Profit for
the year - - - - 211 211 - 211
--------------------- ----- -------- -------- ------------ -------- --------- ------- ------------ -------
Other comprehensive
income for
the year net
of income tax - - 130 (3) (5) 122 - 122
Total comprehensive
income for
the year - - 130 (3) 206 333 - 333
--------------------- ----- -------- -------- ------------ -------- --------- ------- ------------ -------
Shares issued - 2 - - - 2 - 2
--------------------- ----- -------- -------- ------------ -------- --------- ------- ------------ -------
Equity dividends 4.2 - - - - (67) (67) - (67)
--------------------- ----- -------- -------- ------------ -------- --------- ------- ------------ -------
Equity-settled
share-based
payments - - - - 11 11 - 11
--------------------- ----- -------- -------- ------------ -------- --------- ------- ------------ -------
At 31 December
2016 10 2 (5) (3) 1,420 1,424 4 1,428
--------------------- ----- -------- -------- ------------ -------- --------- ------- ------------ -------
Profit for
the year - - - - 209 209 - 209
--------------------- ----- -------- -------- ------------ -------- --------- ------- ------------ -------
Other comprehensive
income for
the year net
of income tax - - (13) 4 2 (7) - (7)
Total comprehensive
income for
the year - - (13) 4 211 202 - 202
--------------------- ----- -------- -------- ------------ -------- --------- ------- ------------ -------
Shares issued - 8 - - - 8 - 8
--------------------- ----- -------- -------- ------------ -------- --------- ------- ------------ -------
Equity dividends 4.2 - - - - (74) (74) - (74)
--------------------- ----- -------- -------- ------------ -------- --------- ------- ------------ -------
Equity-settled
share-based
payments - - - - 3 3 - 3
--------------------- ----- -------- -------- ------------ -------- --------- ------- ------------ -------
At 30 December
2017 10 10 (18) 1 1,560 1,563 4 1,567
--------------------- ----- -------- -------- ------------ -------- --------- ------- ------------ -------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 52 weeks ended 30 December 2017 (2016: 53 weeks ended 31
December 2016)
2017 2016
Note GBPm GBPm
--------------------------------------------- ----- ------ ------
Cash flows from operating activities
--------------------------------------------- ----- ------ ------
Profit for the year 209 211
--------------------------------------------- ----- ------ ------
Adjustments for:
--------------------------------------------- ----- ------ ------
3.1,
Depreciation and amortisation 3.2 151 131
--------------------------------------------- ----- ------ ------
Finance income 2.2 (3) (3)
--------------------------------------------- ----- ------ ------
Finance costs 2.2 55 46
--------------------------------------------- ----- ------ ------
Taxation 2.3 62 66
--------------------------------------------- ----- ------ ------
474 451
--------------------------------------------- ----- ------ ------
Profit on sale of property, plant and
equipment (3) (1)
--------------------------------------------- ----- ------ ------
Working capital changes 1 23
--------------------------------------------- ----- ------ ------
Changes in provisions and other non-current
liabilities 5 10
--------------------------------------------- ----- ------ ------
477 483
--------------------------------------------- ----- ------ ------
Tax paid (64) (50)
--------------------------------------------- ----- ------ ------
Net cash inflow from operating activities 413 433
--------------------------------------------- ----- ------ ------
Cash flows from investing activities
--------------------------------------------- ----- ------ ------
Interest received 1 1
--------------------------------------------- ----- ------ ------
Acquisition of remaining share of joint
venture - (1)
--------------------------------------------- ----- ------ ------
Acquisition of investments 5.1 (12) (32)
--------------------------------------------- ----- ------ ------
Purchase of property, plant and equipment (336) (259)
--------------------------------------------- ----- ------ ------
Disposal of property, plant and equipment 4 4
--------------------------------------------- ----- ------ ------
Net cash outflow from investing activities (343) (287)
--------------------------------------------- ----- ------ ------
Cash flows from financing activities
--------------------------------------------- ----- ------ ------
Proceeds from issue of share capital 8 2
--------------------------------------------- ----- ------ ------
Equity dividends paid 4.2 (74) (67)
--------------------------------------------- ----- ------ ------
Proceeds from borrowings 178 -
--------------------------------------------- ----- ------ ------
Repayment of borrowings (43) -
--------------------------------------------- ----- ------ ------
Capital repayment of finance leases (1) -
--------------------------------------------- ----- ------ ------
Interest paid (46) (41)
--------------------------------------------- ----- ------ ------
Financing costs (2) -
--------------------------------------------- ----- ------ ------
Net cash inflow/(outflow) from financing
activities 20 (106)
--------------------------------------------- ----- ------ ------
Net increase in cash and cash equivalents 90 40
--------------------------------------------- ----- ------ ------
Cash and cash equivalents at beginning
of year 4.1 215 152
--------------------------------------------- ----- ------ ------
Effect of movements in foreign exchange 4 23
--------------------------------------------- ----- ------ ------
Cash and cash equivalents at end of
year 4.1 309 215
--------------------------------------------- ----- ------ ------
SECTION 1 BASIS OF PREPARATION
52 weeks ended 30 December 2017 (53 weeks ended 31 December
2016)
1.1 Basis of preparation
Merlin Entertainments plc (the Company) is a public company
limited by shares which is incorporated in the United Kingdom and
its registered office is Link House, 25 West Street, Poole, Dorset,
BH15 1LD.
The consolidated financial statements for the 52 weeks ended 30
December 2017 have been prepared in accordance with International
Financial Reporting Standards as adopted by the EU (Adopted IFRS)
and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS. They were approved by the Directors
on 28 February 2018 along with this preliminary announcement.
The accounting policies have, unless otherwise stated, been
applied consistently to all periods presented in these consolidated
financial statements and have been applied consistently by all
subsidiaries and joint ventures.
The Group prepares its annual consolidated financial statements
on a 52 or 53 week basis. These consolidated financial statements
have been prepared for the 52 weeks ended 30 December 2017 (2016:
53 weeks ended 31 December 2016). The consolidated financial
statements are prepared on the historical cost basis except for
derivative financial instruments and certain investments which are
measured at their fair value.
The consolidated financial statements are presented in
Sterling.
All values are stated in GBP million (GBPm) except where
otherwise indicated.
The financial information included in this preliminary statement
of results does not constitute statutory accounts within the
meaning of Section 435 of the Companies Act 2006 (the 'Act'). The
financial information for the 52 weeks ended 30 December 2017 has
been extracted from the statutory accounts on which an unqualified
audit opinion has been issued. Statutory accounts for the 52 weeks
ended 30 December 2017 will be delivered to the Registrar of
Companies following the Company's Annual General Meeting.
The auditors have consented to the publication of the
preliminary announcement as required by Listing Rule 9.7a having
completed their procedures under APB bulletin 2008/2.
Going concern
The Group reported a profit for the year of GBP209 million
(2016: GBP211 million) and generated operating cash inflows of
GBP413 million (2016: GBP433 million). The Group is funded by
senior unsecured bank facilities due for repayment in 2020 and
senior unsecured notes due for repayment in 2022. During the year
an additional EUR200 million of the Group's notes were issued at
103.5% of their nominal value (GBP178 million) with the proceeds
partly used to repay EUR50 million (GBP43 million) of the term
debt. It is likely in the next 18 months that the Group will look
to refinance the bank facilities due for repayment in 2020. The
Group's forecasts show that it is expected to be able to operate
within the terms of these facilities. Further details of these
facilities are provided in note 4.1.
After reviewing the Group's and Company's statement of financial
position, available facilities, cash flow forecasts and trading
budgets, including various downside sensitivities, the Directors
believe the Group to be operationally and financially sound and
have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the next twelve months.
Accordingly, the Group continues to adopt the going concern basis
in preparing its consolidated financial statements.
Significant accounting policies
The preparation of financial statements requires management to
exercise judgement in applying the Group's accounting policies. It
also requires the use of estimates and assumptions that affect the
reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Judgements
Management consider the following areas to be the judgements
that have the most significant effect on the amounts recognised in
the financial statements. They are explained in more detail in the
related notes:
-- Useful life of brands (note 3.2) - where a brand has been
recognised as part of an acquisition they have been assessed as
having indefinite useful lives.
-- Goodwill impairment reviews (note 3.3) - the level at which
goodwill is initially allocated and thereafter monitored.
Estimates
Management consider the following area to involve a significant
degree of estimation uncertainty:
-- Valuation of Resort Theme Parks Operating Group (RTP) assets
and impairment (note 3.3) - estimation of discounted cash flows
when calculating the value in use of assets.
SECTION 2 RESULTS FOR THE YEAR
52 weeks ended 30 December 2017 (53 weeks ended 31 December
2016)
2.1 Profit before tax
Segmental information
An operating segment, as defined by IFRS 8 'Operating segments',
is a component of the Group that engages in business activities
from which it may earn revenues and incur expenses. The Group is
managed through its three Operating Groups, which form the
operating segments on which the information shown below is
prepared. The Group determines and presents operating segments
based on the information that is provided internally to the Chief
Executive Officer (CEO), who is the Group's chief operating
decision maker, and the Board. An operating segment's operating
results are reviewed regularly by the CEO to make decisions about
resources to be allocated to the segment and assess its
performance. Performance is measured based on segment EBITDA, as
included in internal management reports. Segment operating profit
is included below for information purposes.
Resort
Midway LEGOLAND Theme Segment Other
items
Attractions Parks Parks results (1) Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------------ --------- ------- -------- ------ ------
2017
----------------------- ------------ --------- ------- -------- ------ ------
Segment revenue 656 609 329 1,594 - 1,594
----------------------- ------------ --------- ------- -------- ------ ------
Segment profit,
being segment EBITDA 220 230 72 522 (48) 474
----------------------- ------------ --------- ------- -------- ------ ------
Segment depreciation
and amortisation (68) (39) (36) (143) (8) (151)
----------------------- ------------ --------- ------- -------- ------ ------
Segment operating
profit 152 191 36 379 (56) 323
----------------------- ------------ --------- ------- -------- ------ ------
2016
----------------------- ------------ --------- ------- -------- ------ ------
Segment revenue 638 495 322 1,455 2 1,457
----------------------- ------------ --------- ------- -------- ------ ------
Segment profit,
being segment EBITDA 236 193 70 499 (48) 451
----------------------- ------------ --------- ------- -------- ------ ------
Segment depreciation
and amortisation (64) (28) (32) (124) (7) (131)
----------------------- ------------ --------- ------- -------- ------ ------
Segment operating
profit 172 165 38 375 (55) 320
----------------------- ------------ --------- ------- -------- ------ ------
(1) Other items include Merlin Magic Making, head office
costs and various other costs, which cannot be directly
attributable to the reportable segments.
Geographical areas
While each Operating Group is managed on a worldwide basis, part
of our strategy is to diversify geographically across the four
regions shown below. The information presented is based on the
geographical locations of the visitor attractions concerned.
Geographical information
Non- Non-
current current
Revenues assets Revenues assets
2017 2017 2016 2016
GBPm GBPm GBPm GBPm
-------------------- --------- -------- --------- --------
United Kingdom 486 921 486 881
--------------------- --------- -------- --------- --------
Continental Europe 389 986 367 919
--------------------- --------- -------- --------- --------
North America 438 620 404 628
--------------------- --------- -------- --------- --------
Asia Pacific 281 594 200 443
--------------------- --------- -------- --------- --------
1,594 3,121 1,457 2,871
-------------------- --------- -------- --------- --------
Deferred tax 33 38
--------------------- --------- -------- --------- --------
Investments 59 49
3,213 2,958
-------------------- --------- -------- --------- --------
SECTION 2 RESULTS FOR THE YEAR (continued)
52 weeks ended 30 December 2017 (53 weeks ended 31 December
2016)
2.1 Profit before tax (continued)
Operating expenses
Staff numbers and costs
The average number of persons employed by the Group (including
Directors) during the year, analysed by category, was as
follows:
2017 2016
Operations 17,834 17,422
---------------------------------------------------- ------- -------
Attractions management and central administration 2,037 2,067
---------------------------------------------------- ------- -------
19,871 19,489
--------------------------------------------------- ------- -------
The aggregate payroll costs of these persons were as
follows:
2017 2016
GBPm GBPm
----------------------- ----- -----
Wages and salaries 360 321
------------------------ ----- -----
Share-based payments 3 11
------------------------ ----- -----
Social security costs 44 39
------------------------ ----- -----
Other pension costs 13 11
------------------------ ----- -----
420 382
----------------------- ----- -----
2.2 Finance income and costs
Finance income
2017 2016
GBPm GBPm
--------------------------------------- ----- -----
In respect of assets not held at fair
value
--------------------------------------- ----- -----
Interest income 3 2
---------------------------------------- ----- -----
Other
--------------------------------------- ----- -----
Net foreign exchange gain - 1
---------------------------------------- ----- -----
3 3
--------------------------------------- ----- -----
Finance costs
2017 2016
GBPm GBPm
------------------------------------------- ----- -----
In respect of liabilities not held at
fair value
------------------------------------------- ----- -----
Interest expense on financial liabilities
measured at amortised cost 47 43
-------------------------------------------- ----- -----
Re-measurement financial liabilities
measured at amortised cost 4 -
------------------------------------------- ----- -----
Other interest expense 2 3
-------------------------------------------- ----- -----
Other
------------------------------------------- ----- -----
Net foreign exchange loss 2 -
------------------------------------------- ----- -----
55 46
------------------------------------------- ----- -----
SECTION 2 RESULTS FOR THE YEAR (continued)
52 weeks ended 30 December 2017 (53 weeks ended 31 December
2016)
2.3 Taxation
Recognised in the income statement
2017 2016
GBPm GBPm
--------------------------------------- ----- -----
Current tax expense
--------------------------------------- ----- -----
Current year 65 63
Adjustment for prior periods (3) 2
Total current income tax 62 65
---------------------------------------- ----- -----
Deferred tax expense
--------------------------------------- ----- -----
Origination and reversal of temporary
differences 24 7
---------------------------------------- ----- -----
Changes in tax rate (25) (5)
---------------------------------------- ----- -----
Adjustment for prior periods 1 (1)
---------------------------------------- ----- -----
Total deferred tax - 1
---------------------------------------- ----- -----
Total tax expense in income statement 62 66
---------------------------------------- ----- -----
Reconciliation of effective tax rate
2017 2017 2016 2016
% GBPm % GBPm
------------------------------------- ------ ----- ------ -----
Profit before tax 271 277
-------------------------------------- ------ ----- ------ -----
Income tax using the UK domestic
corporation tax rate 19.3% 52 20.0% 56
Non-deductible expenses 8 9
Income not subject to tax (14) (12)
Effect of tax rates in foreign
jurisdictions 22 19
Effect of changes in tax rate - (5)
Unrecognised temporary differences 4 (1)
Effect of recognising deferred
tax assets previously unrecognised (1) (1)
Effect of USA tax reform (7) -
Adjustment for prior periods (2) 1
Total tax expense in income
statement 22.9% 62 23.8% 66
-------------------------------------- ------ ----- ------ -----
The effective tax rate (ETR) reflects updates to the headline UK
rate, including the effect on the measurement of deferred tax.
The difference between the reported ETR of 22.9% and the UK
standard tax rate of 19.3% is largely attributable to the Group's
geographic mix of profits and reflects higher rates in certain
jurisdictions, particularly the USA, in relation to the current and
prior year. In addition, the reported rate is increased by
non-deductible expenses which primarily arise as a result of
depreciation on capital expenditure from continued investment in
our attractions. These factors are offset by the Group's internal
financing arrangements, which have been put in place to support
development and ongoing funding needs in overseas territories, and
the impact of the package of measures enacted in the Tax Cuts and
Jobs Act (USA tax reform) in the USA on 22 December 2017.
The Group's ETR has fallen from 23.8% to 22.9%. This is driven
by the USA tax reform. The net GBP7 million (2.4%) reduction in
current year ETR comprises:
(i) the effect of changes in tax rates (GBP25 million) as
deferred tax liabilities have been revalued due to the federal tax
rate reducing from 35% to 21% effective 1 January 2018; offset
by
(ii) an increase in unrecognised temporary differences (GBP9
million) resulting from new restrictions on interest deductibility;
and
(iii) other tax charges and deductions (GBP9 million)
originating from revisions to the USA taxation of foreign
investments.
SECTION 2 RESULTS FOR THE YEAR (continued)
52 weeks ended 30 December 2017 (53 weeks ended 31 December
2016)
2.3 Taxation (continued)
Significant factors impacting on the Group's future ETR include
the USA tax reform, the ability to continue current financing
arrangements and changes to local or international tax laws. With
regard to the latter, the European Commission's preliminary
findings relating to the UK's Controlled Foreign Company rules are
further detailed in note 5.3.
Otherwise, the Group's future ETR will primarily be affected by
the geographic mix of profits.
2.4 Earnings per share
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
2017 2016
GBPm GBPm
---------------------------------------------- ----- -----
Profit attributable to ordinary shareholders 209 211
----------------------------------------------- ----- -----
2017 2016
----------------------------------------- -------------- --------------
Basic weighted average number of shares 1,018,610,976 1,014,358,232
------------------------------------------ -------------- --------------
Dilutive potential ordinary shares 2,083,168 3,785,770
------------------------------------------ -------------- --------------
Diluted weighted average number of
shares 1,020,694,144 1,018,144,002
------------------------------------------ -------------- --------------
Share incentive plans are treated as dilutive to earnings per
share when, at the reporting date, the awards are both 'in the
money' and would be issuable had the performance period ended at
that date.
In 2017 and 2016, the Group's Performance Share Plan has a
marginal dilutive effect as the performance measures have been
partially achieved. The Deferred Bonus Plan, Company Share Option
Plan and All Employee Sharesave Plan are marginally dilutive as
certain option tranches are 'in the money', after accounting for
the value of services rendered in addition to the option price.
Earnings per share
2017 2016
Pence Pence
-------------------------------------- ------ ------
Basic earnings per share on profit
for the year (1) 20.5 20.8
--------------------------------------- ------ ------
Diluted earnings per share on profit
for the year (1) 20.5 20.7
--------------------------------------- ------ ------
(1) Earnings per share is calculated based on figures
before rounding and is then rounded to one decimal
place.
SECTION 3 OPERATING ASSETS AND LIABILITIES
52 weeks ended 30 December 2017 (53 weeks ended 31 December
2016)
3.1 Property, plant and equipment
Land Plant
and and Under
buildings equipment construction Total
GBPm GBPm GBPm GBPm
-------------------------------- ----------- ----------- -------------- ------
Balance at 1 January 2017 905 746 190 1,841
-------------------------------- ----------- ----------- -------------- ------
Additions - owned assets 10 41 278 329
-------------------------------- ----------- ----------- -------------- ------
Additions - leased assets 98 13 - 111
-------------------------------- ----------- ----------- -------------- ------
Movements in asset retirement
provisions 2 1 - 3
-------------------------------- ----------- ----------- -------------- ------
Disposals (1) - - (1)
-------------------------------- ----------- ----------- -------------- ------
Transfers 70 188 (258) -
-------------------------------- ----------- ----------- -------------- ------
Depreciation for the year -
owned assets (36) (105) - (141)
-------------------------------- ----------- ----------- -------------- ------
Depreciation for the year -
leased assets (4) (4) - (8)
-------------------------------- ----------- ----------- -------------- ------
Effect of movements in foreign
exchange (20) (17) (5) (42)
-------------------------------- ----------- ----------- -------------- ------
Balance at 30 December 2017 1,024 863 205 2,092
-------------------------------- ----------- ----------- -------------- ------
Additions
Additions of leased assets in the year of GBP111 million are in
respect of the LEGOLAND Japan finance lease entered into on the
opening of the park in April 2017 (note 4.1).
Capital commitments
At the year end the Group has a number of outstanding capital
commitments in respect of capital expenditure at its existing
attractions, including accommodation, and for Midway attractions
that are under construction. These are expected to be settled
within two financial years of the reporting date. These amount to
GBP104 million (2016: GBP82 million) for which no provision has
been made.
At year end foreign exchange rates, the Group is expecting to
invest a further GBP39 million (2016: GBP62 million) in the
LEGOLAND Japan Resort in relation to the hotel and SEA LIFE Centre
due to open in 2018. In addition, at year end foreign exchange
rates, the Group is intending to invest GBP73 million (2016: GBP72
million) in LEGOLAND Korea and GBP250 million in LEGOLAND New
York.
3.2 Goodwill and intangible assets
Intangible
assets
-------------------------------- --------- --------------- ------
Goodwill Brands Other Total
GBPm GBPm GBPm GBPm
-------------------------------- --------- ------- ------ ------
Balance at 1 January 2017 816 183 18 1,017
-------------------------------- --------- ------- ------ ------
Additions - - 3 3
-------------------------------- --------- ------- ------ ------
Amortisation for the year - - (2) (2)
-------------------------------- --------- ------- ------ ------
Effect of movements in foreign
exchange (2) 2 - -
-------------------------------- --------- ------- ------ ------
Balance at 30 December 2017 814 185 19 1,018
-------------------------------- --------- ------- ------ ------
SECTION 3 OPERATING ASSETS AND LIABILITIES (continued)
52 weeks ended 30 December 2017 (53 weeks ended 31 December
2016)
3.3 Impairment testing
The carrying amounts of the Group's goodwill, intangible assets
and property, plant and equipment were tested for impairment in
accordance with the Group's accounting policy. As a result of these
tests, no impairment losses were recorded in 2017 or 2016.
Impairment reviews are often sensitive to changes in key
assumptions. Sensitivity analysis has therefore been performed on
the calculated recoverable amounts considering incremental changes
in the key assumptions.
When reviewing the outputs of the impairment testing and
performing sensitivity analysis, particular focus is given to
material amounts where headroom is more limited. As in prior years,
this solely relates to goodwill attributed to the Resort Theme
Parks Operating Group (RTP) where the headroom is GBP32 million
(2016: GBP26 million). The Midway Attractions and LEGOLAND Parks
Operating Groups, as well as individual brands, show considerable
headroom and are not sensitive to even significant changes in any
of the key assumptions.
In undertaking sensitivity analysis for RTP, consideration has
been given to movements in forecast EBITDA, increases in discount
rates and reductions in long term growth rates.
Where recoverable amount was based upon value in use, testing
was performed by reference to the forward looking consolidated
guidance communicated externally in October 2017, as well as
subsequent scenario planning. This guidance was based on the
Group's internally approved five year business plan, being the
current year and four future years, adjusted to reflect the
potential for a continuation in the near term of the unforeseeable
and uncontrollable events experienced in 2017, such as global
terrorism continuing to impact our largest locations and extreme
weather during peak trading periods.
Whilst it is possible that similar events may occur in the
future, these events are such that their nature, timing and extent
cannot be precisely forecast, nor can management reliably estimate
which site or Operating Group they may affect.
In preparing the impairment calculations for RTP, where headroom
is most limited, management have therefore reviewed the growth
expectations for each of the parks, forming their best estimate
based on a balanced assessment of what risks might crystallise for
each site in the short to medium term; key to this was the pace of
recovery of RTP in the UK, the potential for disruptive terrorist
activities and the historical weather patterns in Southern Europe.
Reference was also made to current trading information, such as
sales of annual passes and pre-booked accommodation.
On the basis of these forecasts no impairment has been
indicated.
SECTION 4 CAPITAL STRUCTURE AND FINANCING
52 weeks ended 30 December 2017 (53 weeks ended 31 December
2016)
4.1 Net debt
Net debt is the total amount of cash and cash equivalents less
interest-bearing loans and borrowings and finance lease
liabilities. Cash and cash equivalents comprise cash balances, call
deposits and other short term liquid investments such as money
market funds which are subject to an insignificant risk of a change
in value.
Interest Assets
charge Effect
and acquired of
1 amortisation under movements 30
Net
January cash of finance finance in foreign December
2017 flows(1) costs(2) lease exchange 2017
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- -------- --------- ------------- --------- ----------- ---------
Cash and cash equivalents 215 90 - - 4 309
--------------------------- -------- --------- ------------- --------- ----------- ---------
Interest-bearing loans
and borrowings (1,152) (98) (42) - 14 (1,278)
--------------------------- -------- --------- ------------- --------- ----------- ---------
(937) (8) (42) - 18 (969)
--------------------------- -------- --------- ------------- --------- ----------- ---------
Finance leases (88) 9 (8) (111) 7 (191)
--------------------------- -------- --------- ------------- --------- ----------- ---------
Net debt (1,025) 1 (50) (111) 25 (1,160)
--------------------------- -------- --------- ------------- --------- ----------- ---------
(1) Net cash flows include the net drawdown of loans
and borrowings and cash interest paid relating to
loans and borrowings; and exclude cash interest paid
relating to interest rate swaps of GBP3 million.
(2) Interest charge and amortisation of finance costs
include the finance costs relating to loans and borrowings
from the income statement; and exclude the finance
costs relating to interest rate swaps of GBP3 million.
The Group's facilities at the year end were:
-- Bank facilities comprising GBP250 million and $540 million
floating rate term debt to mature in March 2020. The relevant
floating interest rates are LIBOR and the USD benchmark rate, which
were 0.51% (2016: 0.37%), and 1.61% (2016: 0.99%) respectively at
30 December 2017. The margin on the bank facilities is dependent on
the Group's adjusted leverage ratio and at 30 December 2017 was
2.0% (2016: 2.0%).
-- A GBP300 million multi-currency revolving credit facility of
which GBPnil had been drawn down at 30 December 2017 (2016:
GBPnil). The margin on this facility is also dependent on the
Group's adjusted leverage ratio and at 30 December 2017 was at a
margin of 1.75% (2016: 1.75%) over the same floating interest rates
when drawn.
-- EUR700 million (2016: EUR500 million) notes with a coupon
rate of 2.75% to mature in March 2022.
The Group has estimated that a refinancing of the bank
facilities and multi-currency revolving credit facility is likely
within the next 18 months, which is earlier than that previously
assumed for accounting purposes. As a result the Group has
accelerated the amortisation of financing costs in respect of these
facilities and the resulting adjustment has been recognised as a
loss on re-measurement and presented in the income statement as a
charge of GBP4 million (see note 2.2). The fees related to the
fixed rate notes are being amortised to the maturity of the notes
as the notes are currently expected to be held to their full term.
The borrowings (including the revolving credit facility) and the
EUR700 million notes are unsecured but guaranteed by the Company
and certain of its subsidiaries.
The Group is required to comply with certain financial and
non-financial covenants in the bank facilities, including a
requirement to maintain certain ratios of EBITDA to both net
finance costs and net debt. It is also required to comply with
certain non-financial covenants in the EUR700 million notes. All
covenant requirements were satisfied throughout the year.
Finance leases
Finance lease movements substantially relate to LEGOLAND Japan,
which opened in the year. This park was developed under the Group's
'operated and leased' model whereby the Group's local operating
company leases the site and park infrastructure from a development
partner. The development partners are related parties, being KIRKBI
Invest A/S and LLJ Investco K.K, a subsidiary of KIRKBI A/S; with
KIRKBI A/S being a shareholder of the Group and a related party
(note 5.2).
The lease is for a period of 50 years and is accounted for
partly as a finance lease and partly as an operating lease
depending on the nature of the underlying assets concerned. Land
and longer life assets, for example core elements of the park's
infrastructure, are accounted for as operating leases. Finance
lease assets are those elements that will be substantially or
entirely consumed over the lease term. This accounting judgement is
underpinned by a review of the cost of construction by asset type
together with estimates of the lives of the assets concerned.
SECTION 4 CAPITAL STRUCTURE AND FINANCING
52 weeks ended 30 December 2017 (53 weeks ended 31 December
2016)
4.2 Dividends
2017 2016
GBPm GBPm
------------------------------------------ ----- -----
Final dividend for the 52 weeks ended
26 December 2015 of 4.4 pence per share - 45
------------------------------------------- ----- -----
Interim dividend for the 53 weeks ended
31 December 2016 of 2.2 pence per share - 22
------------------------------------------- ----- -----
Final dividend for the 53 weeks ended
31 December 2016 of 4.9 pence per share 50 -
------------------------------------------ ----- -----
Interim dividend for the 52 weeks ended
30 December 2017 of 2.4 pence per share 24 -
------------------------------------------ ----- -----
Total dividends paid 74 67
------------------------------------------- ----- -----
The Directors of the Company propose a final dividend of 5.0
pence per share for the year ended 30 December 2017 (2016: 4.9
pence per share), amounting to GBP51 million (2016: GBP50 million).
The total dividend for the current year, subject to approval of the
final dividend, will be 7.4 pence per share (2016: 7.1 pence per
share).
SECTION 5 OTHER NOTES
52 weeks ended 30 December 2017 (53 weeks ended 31 December
2016)
5.1 Investments
On 14 February 2017 the Group invested GBP12 million in LL Dubai
Hotel LLC, which is the company developing the hotel at LEGOLAND
Dubai. The Group holds a 40% equity interest.
5.2 Related party transactions
Identity of related parties
The Group has related party relationships with a major
shareholder, key management personnel, joint ventures and IDR
Resorts Sdn. Bhd. All dealings with related parties are conducted
on an arm's length basis.
Transactions with shareholders
During the year the Group entered into transactions with a major
shareholder, KIRKBI Invest A/S; the LEGO Group, a related party of
KIRKBI Invest A/S; and LLJ Investco K.K, a subsidiary of KIRKBI
A/S.
Transactions entered into, including the purchase and sale of
goods, payment of fees, royalties and rent, and trading balances
outstanding at 30 December 2017 and 31 December 2016, were as
follows:
Goods and services
------------------- -----------------------------------------------
Amounts Amounts
owed Purchases owed
by related and to related
Sales party royalties party
GBPm GBPm GBPm GBPm
------------------- ------ ------------ ----------- ------------
2017
------------------- ------ ------------ ----------- ------------
KIRKBI Invest A/S - - 12 3
------------------- ------ ------------ ----------- ------------
LEGO Group 1 1 61 2
------------------- ------ ------------ ----------- ------------
LLJ Investco K.K. - 4 10 -
------------------- ------ ------------ ----------- ------------
1 5 83 5
------------------- ------ ------------ ----------- ------------
2016
------------------- ------ ------------ ----------- ------------
KIRKBI Invest A/S 1 2 11 5
------------------- ------ ------------ ----------- ------------
LEGO Group 1 1 51 3
------------------- ------ ------------ ----------- ------------
LLJ Investco K.K. - - - -
------------------- ------ ------------ ----------- ------------
2 3 62 8
------------------- ------ ------------ ----------- ------------
The Group has entered into a 50 year lease with LLJ Investco
K.K. The Group's obligations come in the form of fixed rental
payments of GBP6 million per year in addition to turnover rent and
ongoing repair obligations under the terms of the lease. The amount
in the table above represents the rental payment incurred during
the period.
During the year the Group entered into an agreement with KIRKBI
Invest A/S to exchange small parcels of land in Billund, Denmark.
This was conducted on an arm's length basis. The value of the land
sold to KIRKBI was GBP2 million and the cost of the land purchased
was GBP4 million.
SECTION 5 OTHER NOTES
52 weeks ended 30 December 2017 (53 weeks ended 31 December
2016)
5.2 Related party transactions (continued)
Transactions with other related parties
As part of the agreement for the development and operation of
LEGOLAND Malaysia, the Group has subscribed for share capital in
IDR Resorts Sdn. Bhd. (IDR) which together with its subsidiaries
owns the park. On this basis, IDR and its subsidiaries are deemed
to be related parties.
Transactions entered into, including the purchase and sale of
goods, payment of fees and trading balances outstanding at 30
December 2017 and 31 December 2016, are as follows:
2017 2016
GBPm GBPm
------------------------------- ----- -----
Sales to related party 5 6
-------------------------------- ----- -----
Amounts owed by related party 3 2
-------------------------------- ----- -----
5.3 Contingent liabilities
The European Commission ('EC') published its preliminary
decision in November 2017 finding that certain elements of the UK's
Controlled Foreign Company rules amount to unlawful State Aid. The
impact of a negative decision could result in a significant
increase in the Group's future effective tax rate. A final decision
from the EC is expected in late 2018 but is subject to possible
appeal.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR TPMPTMBTTBPP
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March 01, 2018 02:00 ET (07:00 GMT)
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