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Merlin shares hit by Legoland weakness, concern over cost pressures

Merlin shares hit by Legoland weakness, concern over cost pressures
FILE PHOTO: The LEGOLAND entrance is seen in Windsor, Britain May 10, 2018. REUTERS/Peter Nicholls/File Photo   -   Copyright  Peter Nicholls(Reuters)
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LONDON (Reuters) – Britain’s Merlin Entertainments <MERL.L> said on Tuesday the performance of its Legoland business over the summer had failed to meet its expectations and also highlighted costs pressures, sending its shares sharply lower.

Shares in the group, which operates tourist attractions including the Madame Tussauds waxworks and the London Eye, as well as theme parks such as Alton Towers in Britain, were down almost 8 percent at 0740 GMT.

Merlin forecast overall 2018 results in line with market expectations.

However its trading update for the 40 weeks to Oct. 6 showed contrasting fortunes in the group’s various divisions, with Legoland disappointing with a 0.3 percent fall in like-for-like sales.

That contrasted with like-for-like growth of 8.3 percent in Merlin’s theme parks division.

“While the headlines are ‘in line’, the shape is very different with very strong Resort Theme Parks offsetting disappointing performance within Legoland,” said analysts at Liberum.

Merlin also said the cost environment “remains challenging”, with tighter labour markets in many parts of the world adding to the pressures resulting from legislative changes such as the National Living Wage in Britain.

It said the impact of terror attacks which adversely affected performance from early 2017 had started to abate with early signs of recovery in the London tourism market over the summer.

About 70 percent of Merlin’s core annual earnings are typically generated in its second half.

Prior to Tuesday’s update analysts were on average forecasting 2018 earnings before interest, tax, depreciation and amortisation (EBITDA) of 486 million pounds, up from 474 million pounds made in 2017.

(Reporting by James Davey, Editing by Paul Sandle)

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