March 1, 2018 / 7:28 AM / 2 years ago

Madame Tussauds owner Merlin's outlook breaks bad spell for shares

LONDON (Reuters) - Madame Tussauds operator Merlin Entertainments (MERL.L) sparked a near 13 percent rebound in its battered shares on Thursday, saying it was “highly confident” on its long term prospects after meeting 2017 profit forecasts.

Tourists line up to buy tickets for Madame Tussauds beside a wax figure of soccer player C. Ronaldo in Hong Kong, China August 4, 2017. REUTERS/Bobby Yip

The world’s second-biggest visitor attractions group behind Walt Disney (DIS.N), which also runs Legoland, the London Eye, Sea Life and theme parks such as Alton Towers in Britain, said its quieter winter season was in line with expectations.

Merlin makes most of its profit outside Britain, operating more than 120 attractions, 15 hotels and six holiday villages in 25 countries across four continents.

Although Merlin, which warned on 2017 profit in October, cautioned that a stronger pound against the U.S. dollar could materially affect its 2018 results, it said its underlying expectations remained “positive and unchanged.”

In 2017 Merlin said a series of militant attacks in Britain had hit demand, while its results were also held back by poor to extreme weather throughout the summer season in Europe and before Thursday’s update its shares had fallen 31 percent over the last year.

But despite the 2017 setbacks, Merlin still recorded a 3.5 percent rise in global visitors to a record 66 million.

“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,” its Chief Executive Nick Varney said.


Merlin shares were up 11.3 percent at 378.9 pence at 1054 GMT, valuing the business at 3.9 billion pounds ($5.36 billion)

However, analysts at Liberum highlighted the recent adverse foreign exchange rate movements and increasing capital expenditure, maintaining their “hold” stance on the stock.

“Against this backdrop, it is hard to see a case for a sustained re-rating,” they said.

Merlin made 2017 earnings before interest, tax, depreciation and amortization (EBITDA) of 474 million pounds - in line with company guidance of 470-480 million pounds issued with October’s profit warning and 9.5 percent ahead of the 433 million pounds made in 2016.

Revenue rose 11.6 percent to 1.59 billion pounds, driven by growth in like-for-like revenue, new business development and favorable currency movements.

The Legoland business was a particularly strong performer with revenue up 18.2 percent, helped by the opening of Legoland Japan. Legoland New York is targeted to open in 2020.

Editing by Paul Sandle and Alexander Smith

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