After a slow summer impacted by recent terror attacks and bad weather, Management expects this trend to continue.
Companies: Merlin Entertainments
Merlin Entertainments (LON: MERL), the company behind attractions like Madame Tussauds and Legoland, has seen its share price crash this morning off the back of a concerning trading update.
The Group, who runs tourist attractions around the world, has said LFL revenue performance has been flat on 2016 due to poor summer trading impacted by the recent spate of terror attacks in the UK, bolstered by unfavourable weather in parts of Europe and the US.
Management went on to say...
"Whilst it is too early to predict the outlook for 2018, it is likely that the recent trends experienced in London will persist for the foreseeable future."
Shares in MERL dove 20% to 356p as a result of today's announcement.
The Group said it will now reduce Existing Estate capex expenditure by £100m and reallocate this capital to accelerate the opening of more accommodation and to fund its "Productivity Agenda".
Despite the diversity of its portfolio and 70% of Revenues coming from outside the UK, CEO Nick Varney remains cautious, saying:
"Our markets continue to be impacted by certain external shocks, not least terrorism which is currently at record levels of intensity in Europe. We also continue to face significant cost pressures, largely brought about by employment legislation, particularly in the UK."
The Group does, however, have several new sites in the pipeline including Legoland New York, and has signed two new IP agreements to develop Peppa Pig and Bear Grylls sites.
MERL shares had been rallying from a November '16 low of 429p to an all-time high of 529p in May. At the time of writing, shares were trading at c. 360p.
Panmure released a research note with their take on the Group's future, saying:
"FY17 EBITDA is expected to be £470m-£480m, a 3% downgrade at the mid-point to £491m consensus based on flat LFL sales growth vs. 3.2% cons/PGe... There is no quantified guidance for FY18 at this early stage expect to say soft London trends are expected to persist. We expect a similar level of downgrade to FY18 on base effects"
Before the dive, Merlin traded at a premium to the industry at a multiple of 18 and 14 respectively. In the five years to 2016 Net Profit YoY growth had been c. 25% while margins for the same period averaged 22%.