No magic for Merlin as LEGO sales slide

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Legoland – Merlin Entertainment

Merlin Entertainment, the company that operates Legoland, Alton Towers and Madame Tussauds, has seen the success of the Lego brand wain in the last year, as “disappointing” sales have affected the year’s turnover.

The company stated that “limited momentum” from The Lego Movie 2 and poor weather in the first half of the year impacted results.

The Lego Movie 2: The Second Part was released in February this year and has so far taken £158m at the box office – compared to £388m from the prequel.

Overall, pre-tax profits at Merlin Entertainment fell to £34m from £43m.

In total, Merlin Entertainment operates 127 attractions, 19 hotels and seven holiday villages across 27 countries.

Merlin reported a 14.2% drop in operating profits across the business, as higher revenues failed to offset staff cost pressures and higher depreciation charges.

These results are said to be “broadly in line” with board expectations.

Nick Varney, Chief Executive Officer of Merlin Entertainment, said: “Group performance year to date has been broadly in line with our expectations in the seasonally quieter first half of the year, with 6.5% organic revenue growth driven by a combination of like for like growth, continued contribution from new openings and the benefit of a diversified portfolio.

“After a number of years of headwinds, it is pleasing to see both Midway and Resort Theme Parks (RTP) returning to better levels of like for like revenue growth, with improved cash generation. In Midway, we have seen an improvement in London trading and a generally solid performance elsewhere driving 4.5% like for like revenue growth, whilst RTP has delivered like for like growth of 3.0% despite difficult comparatives. Trading in Legoland Parks has however been more disappointing.

“Although we enjoyed a strong Easter and Spring Break performance, trading since then has been affected by poor weather in May and June, difficult market conditions in a number of countries and limited momentum from ‘The Lego Movie 2’. With eight new Midway attractions opened in the period, 372 new accommodation rooms, and the ongoing development of new Legoland parks, we continue to build on our position as a unique, multi-format international operator of strongly branded and IP-led location based entertainment.”

Industry reaction

Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown

After the first LEGO Movie rallied visitor numbers at Merlin’s Legoland parks, it would have been hoping for more of the same following the release of the second film. Sadly, that wasn’t to be the case, with repeat business at these family-friendly sites actually dwindling overall during the first half of the year. There’s better news coming from London though, where visitation continues to recover at tourist hotspots, including Madame Tussauds, following 2017’s terrorist attacks.

Of course, most attention will be on Merlin’s impending acquisition by the Danish family that controls the Lego toy firm. The £4.8bn offer made in June has been recommended by Merlin’s board, and would see the group taken into private ownership. The family ownership means there would be a vested interest in the Lego brand’s success, and that means at least Legoland parks are unlikely to be squeezed for every drop of juice.

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