INTRODUCTION TO MERLIN ENTERTAINMENTS MARCH 2015 1
WHAT I S MERLI N? M idw ay At t ract ions Global leader in location based entertainment with world class brands No. 1 in Europe and No. 2 only to Disney worldwide 1 Two products Midway: indoor, up to two hour dwell time, located in city centres or resorts LEGOLAND Parks Theme parks: outdoor, 1 – 2 day destination venues increasingly with on-site accommodation Three Operating Groups 2 Midway Attractions (92 attractions, 42% of 2014 revenue) Resort Them e Parks LEGOLAND Parks (6 parks, 31% of revenue) Resort Theme Parks (6 parks 3 , 27% of revenue) Supported by Merlin Magic Making, our unique creative and production resource 1 Based on number of visitors as reported by AECOM 2013 Theme Index 2 | 2 Number of attractions as at 27 December, 2014 1 3 Excluding Gardaland Water park in Milan
UNI QUE PORTFOLI O OF FAMI LY ENTERTAI NMENT BRANDS AND I CONI C ASSETS High quality, chainable international brands with global appeal Brands positioned across all key target demographics Portfolio provides substantial benefits “Amazing Discovery” “Playful Learning” “Famous Fun” Midway Natural hedge across geographic markets and target demographics Attractions Opportunities to create “clusters” Ability to leverage scale and synergies Significant roll out opportunity - “100+ potential sites identified” “Scary Fun” “Inspiring Perspective” Potential to expand portfolio with further brands “Playful Learning” Leading global brands (LEGO, LEGOLAND) Attractive target demographic (families with children 2 – 12) LEGOLAND High levels of repeat visitation Parks Mutually synergistic relationship with LEGO Substantial potential to develop new markets / parks National brands with high brand and customer awareness Leading market positions Resort 4 of Europe’s largest top 20 theme parks (6 including LLPs)¹ Theme “Fantastical Escapism” “Wild Adventure” “Big Fantasy Adventure” Leading theme parks in UK, Italy, and Northern Germany Parks 3 of the top 4 theme parks in the UK (4 including LLW)¹ arks Each theme park is pre-eminent in their market Positioned to appeal across various target demographics “Extraordinary Adventure” “Insane Fun” “Ultimate Castle” COMPELLING BRANDS AND DIVERSE BUSINESS WITH HIGH GROWTH AND RETURN CHARACTERISTICS 3 | 1 Based on number of number of visitors as reported by AECOM 2013 Theme Index. LLW refers to LEGOLAND Windsor. LLP refers to LEGOLAND Parks Operating Group. See appendix for further definitions 2
ATTRACTI VE MARKET TRENDS I ncrease in I nternational Tourism 3 Leisure spending CAGR of Growth in 6% over 2009-13 and forecast to grow by c.5% Leisure Spending Merlin present in 12 p.a. from 2013-18 1 of the top 30 Gateway London Paris New York cities 4 attractions 1 attraction 2 attractions Vienna 16.8m 15.2m 11.9m 1 attraction Income growth, increase 8.6% Expansion in 4.6% 2.0% Shanghai 5.2m vacation days, and greater 2 attractions Leisure Time 4.5% “spare time” Income growth, increase Los Angeles 6.1m vacation days, and greater 1 attraction (6.5)% “spare time” 5.0m I stanbul 1.1% Expansion of the Number of Chinese middle Amsterdam 1 attraction class households expected to Middle Class in 2 attractions Hong Kong Las Vegas 10.5m increase to 225m by 2022, 5.2m 1 attraction 1 attraction Emerging Economies an 18% CAGR from 2012 2 11.8% 25.6m 1.2% 6.0m (0.8)% 7.6% Bangkok Singapore Growth in leisure time and 2 attractions Increase in 1 attraction 17.5m expansion of middle classes 22.5m has driven increased International T ourism 10.4% # of Midway attractions 5.4% international tourism 2013 International Arrivals 2013 Growth in International Arrivals UK Domestic Short Breaks – share gain opportunity in a £8bn 4 , growing market Cultural and financial Growth in factors driving growth in Short Breaks UK Domestic short 12 short breaks break value 10 Merlin UK leisure hotel 8 and park spend 5 (£bn) Outside of the large Theme 6 £10.2bn Market Park companies, the private £8.2bn visitor attractions market 4 Fragmentation Merlin Share gain remains highly fragmented opportunity < 1% share 2 in a growing market 0 2014 2018 1 Marketline “Global Hotels, Restaurants & Leisure” report (2014) 2 Derived from McKinsey, “Mapping China’s Middle Class” (June 2013). “Middle class” defined as urban households with annual disposable income of $16,000 and above 3 Euromonitor International Top City Destination Ranking 4 | 4 Mintel 3 5 Represents UK hotel revenue from leisure guests, and their in-park spend. Excludes non-leisure spend, and day visit revenue.
CLEAR COMPETI TI VE ADVANTAGES # 1 Technical and Scarcity Value and # 2 # 3 Brands Creative Expertise Capital Requirements Significant initial capital requirements Identify new sites for new parks Lease negotiation Average new theme park requires minimum c.£200m in capital investment Funds also required to cover lengthy lead times New products (e.g. Regulatory and planning restrictions rides, hotels etc) Develop IP content creating significant lead times for new parks Potentially 3 – 4 years required to obtain all the necessary approvals New wax figures Overall lead times of 4 – 6 years to New LEGO models complete the process of designing, funding Marine displays and obtaining approvals Scarcity of sites for new parks 2014: Over £230m Few available spaces in highly attractive of projects across markets (e.g. UK) 12 countries REINFORCING A SUSTAINABLE BUSINESS MODEL AND LEADING MARKET POSITIONS 5 | 4
STRATEGY SI NCE 1999 Revenue by Geography 1 Revenue by Weather exposure 1 Asia Pacific Outdoor 13% 60% UK 39% 57% of Long term ambition revenue 1 from of even split between North sites open all Europe, Americas and America year round Asia Pacific 22% Indoor 40% Continental Europe 26% Pre-booked Revenue 3 Visitors by Tourist / Domestic 2 Tourist 36% Same day 51% I ncreasing levels of pre- booked revenue leads to Not reliant upon reduced site-level the ‘fly-in’ market Pre-booked volatility and Annual Domestic Pass 49% 64% Online bookings 21% On 21% of ad admissi ission on revenue “TO CREATE A HIGH GROWTH, HIGH RETURN, FAMILY ENTERTAINMENT COMPANY BASED ON STRONG BRANDS AND A GLOBAL PORTFOLIO THAT IS NATURALLY HEDGED AGAINST THE IMPACT OF EXTERNAL FACTORS” 6 | 1 Total revenue, 2014 2 Total 2014 visitors, based on touchscreen data 3 Total admissions revenue, 2014
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SI X STRATEGI C GROWTH DRI VERS 1 Existing estate growth via capex Mid-single digit Existing estate growth via capex 1 Like for Like Mid-single digit EBI TDA Like for Like Growth EBITDA Growth 2 Strategic synergies Strategic synergies 2 + + > 15% ROIC on Accommodation > 15% ROI C on Transformation of theme parks into short break destinations 3 Transformation of theme parks into short break destinations 3 Accommodation 4 Midway roll out Midway roll out 4 > 20% > 20% ROIC ROI C Developing new LEGOLAND parks 5 5 Developing new LEGOLAND parks Synergised Synergised Strategic acquisitions > 20% 6 6 Strategic acquisitions > 20% ROIC ROI C 8 |
2014 PROGRESS ON Capex cycle – successful new rides and STRATEGI C GROWTH attractions at Heide Park, Alton Towers and LEGOLAND California DRI VERS Synergies – Relaunch of UK MAP , progress on CRM and next-generation ticketing Destination positioning – New accommodation at Chessington, Thorpe Park, LEGOLAND Deutschland and LEGOLAND Billund Midway roll out – Six new openings and the announcement of the new ‘Shrek’s Adventure!’ attraction in London LEGOLAND Parks Development – Announcement of LEGOLAND Japan and LEGOLAND Korea to open in 2017 9 | 9 |
2015 STRATEGI C OUTLOOK ‘Star Wars’ coming to 1. Existing estate capex-led growth Madame Tussauds London and Berlin in New features at every attraction 2015 ‘Star Wars’ themed area and figures at MT London and Berlin ‘LEGO Friends’ at LEGOLAND Windsor, Florida and California ‘Oblivion – The Black Hole’ roller coaster at Gardaland 2. Strategic synergies Development of full CRM database in UK, Germany and USA Strong ongoing third party promotion 3. Theme park resort positioning 152 room LEGOLAND Florida hotel 4. Midway roll out 120 lodges and 5 premium tree houses at Alton Towers 7 new sites planned for 2015, 7 planned for 2016 Includes Dreamworks IP Shrek pilot in 2015 2016 includes 3-4 in Asia 5. LEGOLAND Parks Developments Dubai to open in 2016 (management contract) Japan to open in summer 2017 South Korea to open in 2017 Medium-term opportunities in: China (management contract) USA (operated and leased / owned) 6. Strategic Acquisitions 10 | Pursuing opportunities to acquire attractions and brands to New for 2015 ‘Oblivion – The Black Hole’ at Gardaland 9 support core drivers
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