Merlin Entertainments plc
('Merlin' or the 'Company')
Availability of 2018 Annual Report and Accounts
The 2018 Annual Report and Accounts for the Company is now available to view at www.merlinentertainments.biz
The following documents are scheduled to be mailed to those registered shareholders of the Company who have elected to receive paper communications on or about 28 March 2019:
· 2018 Annual Report and Accounts
· Notice of the 2019 Annual General Meeting; and
· Proxy Form for the 2019 Annual General Meeting.
In accordance with Listing Rule 9.6.1 a copy of each of these documents will be submitted to the National Storage Mechanism and will be available for public inspection.
The information included in the unaudited preliminary results announcement released on 28 February 2019, together with the information in the Appendices to this announcement which is extracted from the 2018 Annual Report and Accounts, constitute the materials required by Disclosure Guidance and Transparency Rule 6.3.5R. This announcement is not a substitute for reading the 2018 Annual Report and Accounts in full. Page and note references in the Appendices below refer to page and note references in the 2018 Annual Report and Accounts.
Matthew Jowett
General Counsel and Company Secretary
19 March 2019
For further information, please contact:
Merlin Entertainments plc
Matthew Jowett, General Counsel and Company Secretary +44 (0) 1202 634955
Simon Whittington, Investor Relations +44 (0) 1202 493011
James Crampton, Corporate Affairs Director +44 (0) 1202 493014
Brunswick Group
Fiona Micallef-Eynaud / Imran Jina +44 (0) 20 7404 5959
About Merlin Entertainments plc
Merlin Entertainments plc is a global leader in location-based, family entertainment. As Europe's Number 1 and the world's second-largest visitor attraction operator, Merlin now operates over 120 attractions, 18 hotels and 6 holiday villages in 25 countries and across 4 continents. Merlin's purpose is to deliver memorable experiences to 67 million guests around the world, through its iconic brands and multiple attraction formats, and the commitment and passion of its c.28,000 employees (peak season).
See Merlin Backstage (www.merlinentertainments.biz/backstage or www.facebook.com/merlinbackstage) or visit www.merlinentertainments.biz for more information.
Appendix A - Principal Risks and Uncertainties
Management has identified the principal risks as set out below:
|
| Risk | Description | How risks are managed |
| 1. | Safety
| Serious incidents leading to guests, staff members or contractors being harmed as a result of: · a failure to follow safety management systems when operating rides; · inadequate maintenance and management of buildings, infrastructure and vegetation; or · substandard build quality, asset degradation, fire, flood, storm or utility failure. | · Regular performance reviews. · Proactive ownership of HSS risks by line management. · Competent operational and engineering staff monitor and inspect facilities in accordance with a planned programme, backed up by professional HSS teams. · Annual risk register and action planning processes by each attraction. · Regular internal and independent external auditing and review regimes. · Contractor selection, approval and monitoring by in-house qualified project managers. · Board Committee established with specific mandate for this risk area. |
| 2. | Security
| Reduction in guest confidence to visit the Group's attractions as a result of sabotage or a terrorist attack on a ride or attraction leading to a guest or staff member or animal in our care being harmed. | · Detailed security protocols before guests or employees access an attraction (e.g. bag searches). · Regular infrastructure reviews to reduce the opportunity for physical threats to guests, staff or animals. · Extensive use of CCTV. · Regularly tested major incident management plans. · Current events vigilantly monitored to identify emerging risks · Co-operation with local and national security forces. · Appropriate insurance cover. · Board Committee established with specific mandate for this risk area. |
| 3. | Innovation, brand development and customer satisfaction
| Our growth potential could be impacted if guests: · consider our offerings are outdated, no longer relevant or enjoyable; or · provide negative social media comments that adversely influence the likelihood of a customer to visit an attraction. | · Customer feedback collected at every location and analysed against challenging satisfaction targets. Actions then taken accordingly. · Ongoing investment in our attractions to continually refresh the customer experience. · Engagement with the public and on social media to take any requisite action. |
| 4. | People availability and expertise
| The increasing cost and challenge of attracting and retaining appropriately experienced and well-motivated customer service orientated staff could impact: · guest satisfaction; or · the successful delivery of planned future expansion. | · Driving greater productivity to ensure more motivated, better rewarded employees. · Personal development plans across the business to encourage long term employment stability. · Proactively managed succession planning processes embedded across the Group. · Annual employee survey to monitor employee engagement and identify opportunities to develop HR policies and processes. |
| 5. | Competition and Intellectual Property (IP)
| · Competition - for leisure time; from new or existing providers of location based entertainment; and for IP around which compelling propositions are created. · Withdrawal of permission to use third party IP content where contractual obligations are not met or partner relationships are not managed effectively. | · Diversification of the portfolio. · Ongoing investment to ensure continued appeal to visitors. · Competitor research and monitoring. · Dedicated in-house creative team to deliver new and innovative compelling propositions and IP. · Proactive management of IP partnerships. |
| 6. | Commercial impact of external threats to city centres leading to displacement of tourists
| · Personal security concerns that flow from terrorist activity result in falling visitation to a location in which the Group operates, with displacement of both international and domestic tourists. · Exchange rate volatility can have a positive or adverse impact on inbound tourism. If exchange rates work against a country in which the Group generates significant revenue this can adversely impact visitation. | · Increased geographical hedging as a result of further global diversification. · Ability to direct marketing and promotional activity towards domestic or international audiences depending on tourism trends. · Ability to promote access to a wide portfolio of attractions using annual pass or cluster ticketing. |
| 7. | Availability and delivery of new sites and attractions
| The ability of the Group to grow in line with strategic objectives could be inhibited by the lack of: · economically viable sites to locate Midway attractions and LEGOLAND parks; and · timely approval of planning consent required for building new rides and attractions. | · Experienced site search and business development teams, working several years in advance to maintain a strong pipeline of opportunities. · Sites regularly update development masterplans and work closely on fostering links with local communities and planning authorities. · The New Openings team provides dedicated resources to support the Group's roll out strategy. |
| 8. | Animal welfare
| Incidents or staff behaviours leading to animals in our care being harmed as a result of: · a failure to follow prescribed welfare protocols; or · inadequate maintenance and management of buildings, infrastructure and vegetation | · External zoo licence audits. · An internal ethics committee and the SEA LIFE Conservation, Welfare and Engagement team monitor the treatment of animals. · A comprehensive range of policies, standards, procedures and guidelines. · Training programmes for all staff who interact with animals. · Planned preventative maintenance programmes to ensure buildings, infrastructure and vegetation remain suitable for displaying the animals in our care. |
| 9. | IT robustness, technological developments, cyber security including GDPR
| The Group operates various IT systems and applications, the obsolescence or failure of which could impede trading or the ability to operate an attraction.
Without the technical developments necessary to meet consumer or business expectations the Group may fail to deliver the growth required by the business strategy.
Failure to put in place adequate preventative measures, if attacked, could lead to data loss or inability to use the IT systems for a prolonged period or loss of personal data resulting in a GDPR compliance investigation. | · Strategic focus to ensure the long term stability of operating systems and data security, whilst keeping pace with changing consumer IT expectations. · Increasing resilience and stability of IT infrastructure and security through an expanded use of secured hosting partners and penetration testing regimes. · Further security measures to mitigate the increasing threat of cyber security risk. · A number of data protection policies are in place to protect the privacy rights of individuals in accordance with relevant data protection legislation. · Independent assessment of compliance arrangements |
| 10. | Anti-bribery and corruption
| While Merlin's business model is lower risk as the majority of transactions are of low value and typically from individual customers, a number of the territories in which Merlin is operating and proposing to enter have a greater historic propensity for incidents of bribery and corruption.
Any such incident could lead to criminal or civil prosecution, fines and cause reputational damage to the Group. | · A well embedded corporate culture in which fraud and bribery at any level are not tolerated. · Global fraud and bribery training programmes and a fraud policy sign off for all staff. · Effective financial and contractual controls with regard to procurement activities. · Internal audit monitors purchasing processes on a rotational basis. · A separate profit protection team monitors for theft or other criminal activity across the Group and ensures best practice for protection is shared between sites. · A whistleblowing policy is in place together with an independently operated employee hotline. |
| 11. | Liquidity/cash flow risk
| A lack of liquidity could inhibit the ability of the Group to grow in line with the strategic objectives if: · insufficient cash is generated during peak trading periods to cover fixed costs, interest and tax payments and capital investments (including strategic acquisitions, the roll out of Midway attractions, the development of new LEGOLAND parks and new accommodation offerings); and · changes in the global credit market impact the Group's long term ability to meet current growth targets. | · A committed £600 million multi-currency revolving credit facility assists with liquidity and seasonal cash flow requirements. · Review of weekly cash flow forecasts covering a period of 12 weeks assists planning for short term liquidity. · Strategic plans cover at least four future years and are reviewed regularly to ensure sufficient financial headroom exists and to meet the covenant tests set out in the Group's banking facilities. · Merlin maintains strong relationships with a number of lenders and keeps the debt markets under review in order to ensure that funding can be obtained at the right time and at the right price to ensure the availability of funds to meet strategic growth plans. |
| 12. | Foreign exchange translation risk
| Merlin generates its main profits in Sterling, Euros and US Dollars and has long term debt in Euros and US Dollars.
Merlin reports its results in Sterling and is therefore subject to translation risk from exchange rate fluctuations when reporting its consolidated results. | · The Group presents constant currency figures where appropriate to show underlying results excluding the impact of translation differences. · Treasury policies in place and reviewed annually with regular reviews of currency exposures. · Broad match of borrowings in the currencies of underlying profits. · Currency exposures hedged where appropriate. |
Appendix B - Related Party Transactions
Please see details in note 5.1 of the announcement on 28 February 2019. Details can also be found in note 5.3 of the financial statements in the 2018 Annual Report and Accounts.
Appendix C - Directors' Responsibilities Statement
The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have elected to prepare the parent Company financial statements in accordance with UK accounting standards including FRS 101 'Reduced Disclosure Framework'.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to:
· Select suitable accounting policies and then apply them consistently.
· Make judgements and estimates that are reasonable, relevant, reliable and prudent.
· For the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU.
· For the parent Company financial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the parent Company financial statements.
· Assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern.
· Use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed on pages 60 and 61 of the 2018 Annual Report and Accounts, confirm that, to the best of their knowledge:
· The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole.
· The Directors' Report and the other sections of this report referred to therein include a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
· The Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.
Appendix D - Final Dividend
Please see the details announced on 28 February 2019. Details can also be found on pages 91 and 133 of the 2018 Annual Report and Accounts.