2018 PRELIMINARY RESULTS PRESENTATION 28 FEBRUARY 2019 MERLIN ENTERTAINMENTS PLC
2018 HIGHLIGHTS Net Promoter Underlying Op. Free Cash Visitors Score EBITDA Flow 67m 57% £494m £345m 3% point 1.4% 6.2% 1 9.7% Record room LEGOLAND Launch of two openings pipeline new brands 1 Organic 2 MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS
FINANCIAL RESULTS Anne-Françoise Nesmes, Chief Financial Officer SEA LIFE Sydney Aquarium 3 MERLIN ENTERTAINMENTS PLC
SUMMARY FINANCIALS £ millions 2018 2017 Reported Organic Like for (unless stated) growth growth 1 like growth Revenue 1,653 1,594 3.7% 5.2% 1.8% Underlying EBITDA 494 474 4.3% 6.2% 0.4% Underlying operating profit 327 323 1.3% 3.4% Adjusted EPS 22.9p 20.5p 11.7% DPS 8.0p 7.4p 8.1% Operating free cash flow 2 345 315 9.7% ROCE 8.9% 9.1% (0.2) Revenue (as reported under IFRS 15) 1,688 1,594 5.9% EBITDA 490 474 3.4% Basic EPS 22.5p 20.5p 9.5% 1 Growth from like for like and New Business Development, at constant currency 2 Underlying EBITDA less Existing Estate Capex 4 MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS
REVENUE BRIDGE 2017-18 5.2% organic revenue growth from existing estate and NBD 1,688 35 2 11 44 1,653 (25) 27 £m 1,594 Organic revenue growth: 5.2% 2017 Revenue LFL Accommodation Midway roll out LEGOLAND FX 2 2018 Revenue IFRS 15 2018 Revenue Developments 1 (Excl. IFRS 15) Adjustment (Incl. IFRS 15) 1 Includes increased contribution from study agreements and LEGOLAND Japan 2 Detail of the FX impact is shown in the appendix 5 MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS
MIDWAY PERFORMANCE Trading improvement as London begins to recover REVENUE 1 (£m) • Organic revenue growth of 1.1% 1.3% 1.1% Organic growth ‒ LFL revenue growth of 0.1% 656 ‒ Improvement in London throughout the year 650 ‒ Continued growth in non-Gateway estate • Seven new attractions opened during 2018 • £11m revenue contribution from 13 attractions 2017 2018 opened since the beginning of 2017 2 EBITDA (£m) • Margin dilution from openings of new brands or in new markets 32.3% 33.5% Margin • 76% operating free cash flow conversion (2017: 220 77%) 210 2017 2018 1 Excludes IFRS 15 2 Includes SEA LIFE Japan whose revenue is included in LEGOLAND Parks 6 MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS
MIDWAY MARGIN Margin movement reflects investment in new brands and new markets New Business Development Existing estate 33.5% (0.6)% (0.1)% 32.3% (0.4)% (0.1)% 2017: SLC Chongqing LBC Berlin MT Delhi 2017: LDC Philadelphia 2018: MT Nashville LBC Beijing LDC Melbourne BGA Birmingham Shanghai 2018: Dungeon LDC Birmingham PPWoP Shanghai LDC Columbus 2017 New brands / new Core brands in LDC Shanghai and Trading / other 2018 markets developed markets 1 sales tax rebate 1 Core openings excluding SLC Japan which is included in LEGOLAND Parks financials 7 MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS
LEGOLAND PARKS PERFORMANCE NBD contribution and confidence in underlying trends • Organic revenue growth of 6.4% REVENUE 1 (£m) ‒ LFL revenue decline of (0.3%) Organic growth 18.2% 6.4% ‒ Lower ‘new news’ 636 • Full year benefit of Japan 609 ‒ Profitable in first year of trading • 644 accommodation rooms added in Japan, California and Germany 2017 2018 • Accommodation organic revenue growth of 39.7% EBITDA (£m) • Margin improvement due to Japan full year, 37.8% 38.2% Margin despite trading and cost pressures 242 • 81% operating free cash flow conversion 230 (2017: 80%) 2017 2018 1 Excludes IFRS 15 8 MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS
RESORT THEME PARKS PERFORMANCE Strong performance due to product investment and favourable weather • Organic revenue growth of 9.1% REVENUE 1 (£m) ‒ LFL revenue growth of 8.6% (0.4%) 9.1% Organic growth ‒ Successful product investment in Alton 360 Towers, Gardaland and Heide Park ‒ Favourable peak season weather in UK ‒ Continued success in Halloween product 329 • Accommodation organic revenue growth 2017 2018 of 7.3% EBITDA (£m) • Further margin progression 21.8% 24.5% Margin • 59% operating free cash flow conversion (2017: 39%) 88 72 2017 2018 1 Excludes IFRS 15 9 MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS
CAPITAL EXPENDITURE Step up in 2019 capex relates to LEGOLAND New York and Korea £332m c£470m T otal capex £336m Of which investment in £78m c£270m £102m LEGOLAND Korea future year openings c£40m 1 LEGOLAND New York c£130m 35 35 52 60 90 88 c£300m 159 149 2017 2018 2019 Guidance Existing Estate Accommodation Midway roll out LLP Development 1 Total of KRW80bn (£56m) m capex related to LEGOLAND Korea capex will be funded by the local Government and recognised as Grant receipts MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS 10
CASH FLOW £345m Operating free cash flow funds New Business Development Leverage remains stable £m ND/EBITDA 2017 Net Debt 1,160 2.4x 494 Cash inflow (18) FX 43 Other 5 2018 Net Debt 1,190 2.4x 6 345 (149) 14 261 (44) £78m investment (46) related to future year openings (76) (183) 2 18 Underlying EE capex Operating Working Net financing Tax Discretionary Grant NBD capex Dividend Other Net cash EBITDA Free cash Capital and costs free cash receipts paid flow flow other flow movements 11 MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS
OPERATING CASH FLOW CONVERSION Growth in free cash flow and cash conversion 2018 2017 £m 160 169 Midway Attractions Conversion 76% 77% £m 197 185 LEGOLAND Parks Conversion 81% 80% £m 52 28 Resort Theme Parks Conversion 59% 39% £m 345 315 Group Conversion 70% 66% 12 MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS
BALANCE SHEET Strong balance sheet within guided range for leverage; next maturity in 2022 3.5 1400 1200 3.0 1000 £m 800 Guidance range of 2-3x 2.5 Net Debt / EBITDA 600 400 2.0 200 x 1.5 0 2013 2014 2015 2016 2017 2018 Net Debt, RHS Net Debt / EBITDA (ex. LLJ lease), LHS Net Debt / EBITDA, LHS 1000 800 £600m RCF (£148m drawn) £m 600 $400m bond 400 € 700m bond 200 0 2019 2020 2021 2022 2023 2024 2025 2026 Leverage ratios exclude the impact of IFRS 16 13 MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS
PRODUCTIVITY AGENDA Strong historic performance on cost mitigation 2018 Cost Base • Longstanding strong focus on cost discipline across the Group Includes Repairs & Maintenance 259 • Legislative and market pressures and Utilities have necessitated significant savings over 2017-18 Marketing unaffected by savings 84 • <3% LFL cost growth since 2016 Limited opportunity to structurally 105 reduce rent charge • Savings have in large part been tactical and at the attraction level c50% fixed staff costs 448 2018 Staff cost Rent Marketing Other 14 MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS
PRODUCTIVITY AGENDA Up to £35m sustainable, annualised savings by 2022 Phasing 2019 2020 2021 2022 Cumulative annualised savings (£m) 10 20 30 35 Exceptional operating costs to (16) (11) (4) - achieve (£m) 1 2019 COST GROWTH c4% net LFL cost growth Type of saving Back office c.£20m Operational c.£15m Staff Rent Utilities Other Savings 1 c£4m exceptional charge in 2018. Excludes c£25m capital investment over 2019-21 related to Finance and HR systems, previously announced 15 MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS
PRODUCTIVITY AGENDA ‘Finance 21’ to deliver significant benefits • Global standardisation and EXAMPLE ‘Purchase to Pay’ simplification of finance systems Eliminating manual purchase • New cloud-based ERP 1 system order processes and delivering allows for better control and mobile platform oversight • Shared service centre to consolidate transactional activities INDICATIVE SPLIT OF ACTIVITY • Increased capacity for finance to serve as decision support and on- site business partner Decision support & Control Transaction processing c50% 1 Enterprise Resource Planning c15% Current Best practice 16 MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS
PRODUCTIVITY AGENDA Lean, continuous improvement principles in theme parks Granular analysis of ‘design days’ to determine optimum variable staffing levels ACTIONS Automated rostering • • Creation of Central Planning and Insight teams • Introduce multi-skilling • Recruitment strategy BENEFITS Reduced costs • • Improved guest satisfaction • Improved employee engagement MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS 17
PRODUCTIVITY AGENDA Comprehensive review of Midway processes allows us to standardise, stop or simplify tasks which don’t add value to the guest experience 1. STANDARDISE... 2. STOP… 3. SIMPLIFY... …the counting of low - …daily and weekly reports. …processes such as safe - value items such as pop counting and stock takes. badges. MERLIN ENTERTAINMENTS PLC 2018 PRELIMINARY RESULTS 18
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