August 2, 2018 / 6:38 AM / 10 months ago

Madame Tussauds-owner Merlin feels effect of rising costs

LONDON (Reuters) - Madame Tussauds-owner Merlin Entertainments (MERL.L) said it faced significant cost pressures across its business and stuck to a cautious tone on its key London market following last year’s militant attacks.

FILE PHOTO: The London Eye is seen near the Houses of Parliament at dawn in central London October 21, 2013. REUTERS/Toby Melville/File Photo

The world’s second-biggest visitor attractions group behind Walt Disney (DIS.N) also runs the London Eye Ferris wheel, Sea Life, the London Dungeons and Shrek’s Adventure in the British capital.

Merlin said it continued to see “significant cost pressure” as a result of tighter labor markets, which one trader cited as knocking the share price in early trade.

Shares fell as much as 4.7 percent, but recovered to trade up 1.4 percent by 0741 GMT, with revenues in line with expectations and earnings slightly ahead of consensus..

“We continue to focus on cost efficiencies and productivity as we seek to offset ongoing cost pressures,” the company said in a statement.

The company also said that the London market remained challenging. In 2017 Merlin said a series of militant attacks in Britain had hit demand.

Britain suffered five attacks last year which were classified as terrorism by the authorities, four of which were blamed on Islamist militants and one on a far-right extremist.

Four of the attacks were in London. Britain remains on the second-highest threat level of “severe”, meaning an attack is considered highly likely.

“It is too early to judge if there are definitive signs of a recovery in London,” Chief Executive Nick Varney said in a statement. About 70 percent of Merlin’s earnings come in the second half of the year.

Merlin, which also runs theme parks such as Alton Towers as well as Legoland, said first-half trading had been roughly in line with expectations, with theme parks boosted by warm weather in Northern Europe, to the detriment of its indoor attractions.

It said organic revenue growth was up 4.5 percent, matching expectations, but added that reported results had suffered from the weakening of the dollar, causing an adverse translation effect on revenue earned in the United States.

Analysts at Barclays said that EBITDA (core earnings) had slightly beaten expectations, thanks to lower interest costs, but added that they did not expect changes to consensus full-year estimates following the results.

Reporting by Alistair Smout; additional reporting by Helen Reid; editing by Sarah Young/Keith Weir

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