INTRODUCTION TO MERLIN ENTERTAINMENTS OCTOBER 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 – 3 day destination venues increasingly with on-site accommodation Three Operating Groups 2 Midway Attractions (99 attractions, 42% of 2014 revenue) Resort Them e Parks LEGOLAND Parks (6 parks, 31% of revenue) Resort Theme Parks (6 parks, 27% of revenue) Supported by Merlin Magic Making, our unique creative and production resource 2 | 1 Based on number of visitors as reported by AECOM 2014 Theme Index 2 Number of attractions as at 17 September, 2015 1
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 locations 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 2014 Theme Index. LLW refers to LEGOLAND Windsor. LLP refers to LEGOLAND Parks Operating Group. See appendix for further definitions 2
ATTRACTI VE MARKET TRENDS Leisure spending CAGR of Growth in 6% over 2009-13 and I ncrease in I nternational Tourism 3 forecast to grow by c.5% Leisure Spending p.a. from 2013-18 1 Merlin present in 12 London of the top 30 Gateway cities 5 attractions 16.8m Income growth, increase Expansion in Paris New York vacation days, and greater 8.6% 1 attraction Leisure Time 2 attractions “spare time” Vienna 15.2m Income growth, increase 11.9m 1 attraction 4.6% vacation days, and greater 2.0% 5.2m Shanghai “spare time” 2 attractions 4.5% Expansion of the Number of Chinese middle 6.1m class households expected to Middle Class in (6.5)% increase from 47m in 2010 Los Angeles Emerging Economies to 472m in 2020 2 1 attraction 5.0m 1.1% I stanbul Growth in leisure time and Hong Kong Increase in 2 attractions expansion of middle classes 1 attraction 10.5m Amsterdam has driven increased International T ourism 25.6m international tourism 2 attractions 11.8% 7.6% 5.2m Las Vegas 1.2% 1 attraction Cultural and financial Growth in 6.0m Bangkok Singapore factors driving growth in (0.8)% Short Breaks 2 attractions 1 attraction short breaks 17.5m 22.5m 10.4% 5.4% # of Midway attractions International Arrivals Outside of the large Theme £10.2bn Market Park companies, the private 2013 Growth in International Arrivals £8.2bn visitor attractions market Fragmentation remains highly fragmented 1 Marketline “Global Hotels, Restaurants & Leisure” report, 2014 4 | 2 The Economist, 12 September, 2015 3 Euromonitor International Top City Destination Ranking, 2014 3
CLEAR COMPETI TI VE ADVANTAGES Technical and Scarcity Value and # 1 # 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: Worked on Few available spaces in highly attractive 39 major projects in markets (e.g. UK) 11 countries. Total value of projects over £230m. REINFORCING A SUSTAINABLE BUSINESS MODEL AND LEADING MARKET POSITIONS 5 | 4
STRATEGY SI NCE 1999 “TO CREATE A HIGH GROWTH, HIGH RETURN, FAMILY ENTERTAINMENT COMPANY BASED ON STRONG BRANDS AND A GLOBAL PORTFOLIO THAT IS NATURALLY BALANCED AGAINST THE IMPACT OF EXTERNAL FACTORS” Revenue by weather exposure 1 Revenue by Geography 1 Outdoor 57% of Asia Pacific 60% revenue from sites 13% open all year round Indoor 40% Visitors by Tourist / Domestic 2 UK 39% North Tourist 36% America 22% Not reliant upon ‘fly-in’ market Domestic Continental 64% Europe 26% Pre-booked revenue 3 Long term ambition of even split between Europe, Americas and Asia Pacific Same day Pre-booked Increasing levels of pre-booked 51% and Annual revenue leads to reduced site- Pass 49% level volatility. 1 Total revenue, 2014 6 | 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 |
2015 PROGRESS ON Capex cycle – ‘High Year’ investments, STRATEGI C GROWTH including: Gardaland; LEGOLAND Windsor; Madame Tussauds London and Berlin DRI VERS Synergies – Agreement announced with accesso to roll out a new ticketing and admissions solution Destination positioning – New accommodation at LEGOLAND Florida and Alton Towers Midway roll out – Seven new openings, including the new ‘Shrek’s Adventure!’ attraction in London LEGOLAND Parks Development – Continued progress on future parks: LEGOLAND Dubai (2016 under management contract), LEGOLAND Japan (2017), LEGOLAND Korea (2018) 9 | 9 |
FI NANCI AL DYNAMI CS Revenue Seasonality P&L Analysis (2014) Margin Cost flexibility Wk 27-36: 35% 1 2014 EBI TDA (181) 2014 Revenue 1,200 c20% of costs vary directly with revenue 85% H1 – 29% (574) H1 – 41% c30% of rents have a turnover element Wk 19-26: H2 – 71% H2 – 59% 1,000 17% 1 c40% of costs can be varied in the short / Wk 1-18: 24% 1 Wk 37-52: 24% 1 medium - term 1,249 800 1,068 600 40% (83) 33% (100) 400 25% 494 411 311 200 Revenue Cost of Gross Opex (ex EBITDAR Rent EBITDA D&A Operating J F M A M J J A S O N D sales profit Rent) Profit Revenue Analysis Spend and Margins …by Op. Group …by Type … by Tenure Revenue EBI TDAR EBI TDA Op. Profit Admissions/ per capita Margin Margin Margin Secondary 2 4% 8% 21% 27% Midway £13.35 80/20 50.9% 40.5% 31.5% 40% 42% 29% LLP £29.97 54/46 37.4% 36.9% 31.0% 59% 39% 31% RTP £22.75 60/40 33.9% 26.3% 18.2% Group £18.15 68/ 32 39.5% 32.9% 24.9% Adm. Sec. Freehold Long leasehold Midway LLP RTP Short leashold Accomm. Non-per cap Greater opportunity for F&B / Retail revenue in theme parks Margins impacted by tenure of property and mix of revenue type 1 % of 2014 FY revenue. September Trading Update reports up to and including week 36 which is the first week in September 10 | LLP royalty payments and higher retail spend (LEGO products) 2 2014 % split of ‘In-Park’ spend (Admission and Secondary) Note: All analysis based upon 2014 results
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