Welcome to merlin entertainments
Our company
merlin entertainments is europe’s leading and the world’s
second-largest visitor attraction operator. as at the end of
December 2011, merlin ran 77 attractions in 17 countries across
four continents and has added a further ten attractions and two
countries since then. our aim is to deliver unique, memorable and
rewarding experiences to millions of visitors across our growing
estate. We believe that we achieve this objective largely thanks to
the commitment and passion of our team and the strength of our
brands, which will never fail to be distinctive, challenging and
innovative. together they deliver some of the best financial
returns in the sector and demonstrate a record of growth in
market share that is unrivalled. in every respect and to every
group of stakeholders, merlin will always be an exciting company
to be involved with.
Our passion
We are first and foremost an entertainment company. our passion
is putting smiles (or screams) on people’s faces and giving our
customers memorable experiences. through creativity and a
relentless drive for excellence we aim to immerse our visitors in
our brands, constantly delighting them and enriching their understanding
through fun learning. in simple terms, we love what we do!
Our vision
our vision is to become the worldwide leader in branded,
location based entertainment.
Our strategy
our strategy is to create a high growth, high return, family
entertainment company based on strong brands and a portfolio
that is naturally balanced against the impact of external factors.
Our history
¬ merlin’s origins date back to 1979 when the first sea liFe
centre was opened in oban, scotland.
¬ in 1999 merlin entertainments was formed via a buyout of
Vardon attractions from Vardon plc. merlin has been under
the ownership of Blackstone and KirKBi since 2005, with funds
advised by cVc joining during 2010.
¬ From 2000 to 2011 the Group has delivered an average annual
growth rate of more than 10% in underlying eBitDa from its
core businesses, excluding the impact of acquisitions, and has
achieved or beaten budget every single year.
¬ acquisitions of leGolanD Parks (2005), Gardaland (2006)
and the tussauds Group (2007), increased the scale of our
business more than tenfold in the three year period to 2007.
¬ 2010 saw the acquisition of cypress Gardens theme Park and
Botanical Gardens in Florida, which was subsequently
relaunched as leGolanD Florida in 2011.
¬ 2011 started with the acquisition of the sydney attractions
Group (saG) which added businesses in australia and new
Zealand and concluded with the announcement of the offer to
buy living and leisure australia (lla), which operates ten
leisure attractions in the asia Pacific region.
¬ With over 46 million visitors in 2011 and a further five million
now added through the lla acquisition, merlin continues to
be the clear market leader in europe and second only to
Disney worldwide in terms of visitor admissions.
Our business model
merlin entertainments delivers two different types of visitor
experiences through its portfolio of theme parks and midway
attractions.
¬ our theme parks portfolio consists of ‘resort theme Parks’
which are stand-alone national brands generally aimed at
families and/or teenagers/young adults; and ‘leGolanD Parks’
which are aimed at families with younger children and which
have the leGo product as their central theme.
¬ midway sites are predominantly indoor attractions located
in city centres or resorts providing visits of shorter duration
(typically up to two hours). they are marketed primarily
under five global brand names: sea liFe, madame tussauds,
Dungeons, leGolanD Discovery centre and the eye.
the management of the merlin business is aligned directly to
these two attraction types and organised into three operating
Groups, being resort theme Parks, leGolanD Parks and
midway attractions.
the merlin business is driven forward by six highly
complementary growth drivers:
¬ Growing the existing estate through planned capex cycles
appropriate to each operating Group and broadly in line
with depreciation overall.
¬ Rolling out midway attractions with an increasing
focus on establishing clusters of our brands in the same
city/resort location.
¬ Transforming our theme parks into destination resorts
via the addition of themed accommodation and additional
attractions.
¬ Exploiting strategic synergies, which leverage Group
marketing and buying strengths.
¬ Developing new LEGOLAND parks, where we hold the
global, exclusive licence.
¬ Strategic acquisitions, where they advance our strategic
objectives in key regions and markets.
2
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 Our financial performance
Visitors millions
Revenue £m
35.1
38.5
41.0
662.3
769.0
800.8
46.4
928.4
2008
2009
2010
2011
2008
2009
2010
2011
Visitors represents all visitors to merlin operated attractions.
2011 is adjusted to be based on 52 weeks to 24/12/11.
revenue as reported in the consolidated income statement.
2011 is adjusted to be based on 52 weeks to 24/12/11 (note 1).
Underlying EBITDA £m
Underlying Operating Profit £m
235.7
255.8
202.6
296.6
176.7
198.0
222.5
150.3
2008
2009
2010
2011
2008
2009
2010
2011
eBitDa represents ‘Underlying trading eBitDa’ as reported in the
consolidated income statement. 2011 is adjusted to be based on 52
weeks to 24/12/11 (note 1).
operating profit represents ‘Underlying trading operating Profit’ as
reported in the consolidated income statement. 2011 is adjusted to be
based on 52 weeks to 24/12/11 (note 1).
Revenue by Operating Group
Revenue by Geography
Midway Attractions, 38%
Resort Theme Parks, 35%
LEGOLAND Parks, 27%
UK, 43%
Continental Europe, 34%
North America, 16%
Asia Pacific, 7%
Our KPIs
Like for like growth (Note 1 & 2)
Visitors
Revenue
EBITDA
Operating Profit
Non-Financial KPIs
Customer Satisfaction*
Staff Engagement**
Target
90%+
80%+
*source - customer satisfaction surveys
**source - annual employee surveys
1.2%
6.4%
8.6%
7.2%
2011
✔
✔
Visitors by
Operating Group
Midway Attractions
LEGOLAND Parks
Resort Theme Parks
2011
2010
Growth %
26.8m
7.8m
11.8m
22.0m
7.2m
11.8m
21.8%
8.3%
-
Total
46.4m
41.0m
13.2%
Sites by
Operating Group
December
2010
New
2011
December
2011
Midway Attractions
LEGOLAND Parks
Resort Theme Parks
Total
52
4
7
63
13
1
-
14
65
5
7
77
notes
(1) Figures presented are based on underlying trading figures compiled on a 52 week basis for ease of comparison.
statutory accounts for 2011 on a 53 week basis show underlying revenue of £945.7m, a growth of 18.1%, underlying
eBitDa of £305.5m, growth of 19.4% and underlying operating profit of £231.4m, growth of 16.9%.
(2) like for like growth is based on the 52 week figures of 2011 and includes businesses
owned and opened before January 2010.
3
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 contents
Part 1
WELCOME TO MERLIN ENTERTAINMENTS
merlin BranDs
merlin maP
BUSINESS REVIEW
chairman’s statement
BUsiness reVieW – chieF execUtiVe’s rePort
BUsiness reVieW – miDWay attractions
BUsiness reVieW – leGolanD ParKs
BUsiness reVieW – resort theme ParKs
FocUs on merlin maGic maKinG
merlin PeoPle
corPorate social resPonsiBility
GroUP Financial reVieW
PrinciPal risKs anD Uncertainties
2
6
8
10
12
14
18
22
26
30
32
36
40
4
Part 2
GOVERNANCE
merlin’s manaGement team
corPorate GoVernance
manaGers’ rePort
42
46
50
FINANCIAL STATEMENTS
52
inDePenDent aUDitor’s rePort
53
taBle oF contents
consoliDateD income statement
54
consoliDateD statement oF comPrehensiVe income 55
56
consoliDateD statement oF Financial Position
57
consoliDateD statement oF chanGes in eqUity
58
consoliDateD statement oF cash FloWs
59
notes to the accoUnts
5
merlin
BranDs
merlin entertainments has a UniqUe PortFolio comPrisinG Both iconic
GloBal anD national BranDs.
sea liFe is the world’s biggest aquarium brand. there are 37 centres in all across the UK,
continental europe, north america and australia, all of which are built around the notion of
“Amazing Discoveries”. they are home to a variety of creatures from shrimps and starfish to
seahorses, rays, sharks and seals. sea liFe campaigns tirelessly on a variety of marine conservation
issues from shark-finning and whaling to sea turtle protection.
madame tussauds operates twelve attractions around the globe with five in europe, four in the
Usa and three in asia. in 2011 the brand celebrated 250 years since the birth of madame tussaud
and represents “Famous Fun”, through the breathtaking artistry of the wax figures and the
interactive experiences that together feed the ever popular fascination with fame.
the Dungeons are a unique mix of dark, historical horror and irreverent humour delivered
through set piece shows, rides, spine chillingly themed sets and professional actors. “Scary Fun”
is the goal, delivered daily in seven Dungeons across europe to our market of families, teenagers
and young adults.
there are currently five leGolanD Discovery centres (lDcs) across europe and the Usa, in
manchester, Berlin, Duisburg, chicago and Dallas, with three more centres due to open in 2012.
as with all leGolanD attractions, “Playful Learning” is at the heart of the experience. targeted
at families with young children, lDcs delight leGo fans of all ages with a two to three hour,
indoor, interactive and immersive experience.
there are currently three eye attractions around the world: two in the UK being the iconic
london eye and Blackpool tower eye and one in australia - the sydney tower eye. each attraction
offers “Inspiring Perspectives” of its town or city with unparalleled 360 degree views of its
landscape and landmarks.
6
merlin BranDs
our five leGolanD resorts across europe and the Usa offer a unique leGo themed
experience for families with children aged two to twelve years, based on interactivity, imagination,
family fun and quality. “Playful Learning” is at the heart of the experience with all family members
playing their part for a whole day or longer, with leGo themed hotels and overnight
accommodation at most sites.
alton towers resort is the UK’s number one theme park. set in 500 acres of beautiful
staffordshire countryside and boasting two themed hotels and an indoor water park, it invites
families, teenagers and young adults alike into a world of “Fantastical Escapism”.
“Wild Adventure” is at the heart of chessington World of adventures, with exotic themed lands
and rides mixed with amazing creatures from around the world. Guests can stay in the heart of
the adventure at our african themed resort hotel.
Gardaland resort is italy’s leading theme park. located on the edge of lake Garda between
milan and Venice, it boasts rides for all ages set in a beautifully landscaped and themed world.
“Big Fantasy Adventure” is all around, including at the Gardaland hotel and adjacent sea liFe.
heide Park is Germany’s third biggest theme park with rides and attractions appealing to
all ages, set in four lands of “Legendary Adventure”. the resort attracts visitors from all over
Germany and beyond, who can stay in the Port royale pirate themed hotel or adjacent
holiday Village.
“Insane fun” is on offer at thorpe Park, the UK’s second biggest theme park and acknowledged
thrill capital for teenagers/young adults and older families.
Warwick is in every way the “Ultimate Castle” experience. Jousting, Knights, Princesses, the merlin
Dragon’s tower, falconry, ‘tableaux’ by madame tussauds and a Dungeon all combine to make this
an amazing day out for UK families and foreign tourists alike.
7
WorlD oF
attractions
8
UK attractions
tM
tM
Birmingham
Blackpool
Brighton
Great Yarmouth
Loch Lomond
London
Scarborough
Weymouth
Hunstanton
Gweek
Oban
London
Blackpool
®
Blackpool
London
Blackpool
Edinburgh
London
Warwick
York
Alton
Chessington
Warwick
Windsor
Manchester
Chertsey
nortH aMErica attractions
tM
Arizona
California
Dallas
Minnesota
Hollywood
Las Vegas
New York
Washington DC
California
Florida
Chicago
Dallas
EUroPE attractions
tM
Benalmadena
Berlin
Blankenberge
Bray
Gardaland
Hannover
Helsinki
Jesolo
Königswinter
Konstanz
München
Oberhausen
Paris
Porto
Scheveningen
Speyer
Timmendorfer
Strand
Amsterdam
Berlin
Vienna
Soltau
®
Billund
Günzburg
Amsterdam
Hamburg
Lake Garda
Berlin
Duisburg
asia attractions
Bangkok
Hong Kong
Shanghai
aUstralia / nEW ZEaland
attractions
Sydney
tM
Sydney
Whitsunday Islands
Milan
Oostende
Sydney
Sydney
Auckland
World of
attractions
at dEcEMBEr 2011
chairman’s
statement
i am PleaseD to rePort another year oF stronG ProFit GroWth, caPital
inVestment, oVerseas exPansion anD JoB creation. the GroUP’s excellent
PerFormance in the tWelVe months to DecemBer 2011 is testimony to the
strenGth oF oUr BranDs, strateGy anD manaGement team.
Sir John Sunderland
Non-Executive Chairman
trading across the Group has seen progress in all three of our
operating Groups and across all our geographies, with significant
contributions from like for like growth as well as from new
openings and acquisitions. this demonstrates the value of our
balanced approach to investing in our portfolio of businesses.
the management committee’s primary focus continues to be on
merlin’s strategic development and 2011saw significant progress in
each of our growth drivers. the most notable developments were
the acquisition and integration of the six major attractions
in the sydney attractions Group of companies across australia
and new Zealand, and the opening of leGolanD Florida on
the former cypress Gardens site in Winterhaven, Florida, Usa.
the management committee visited the leGolanD Florida
site at opening and we were very impressed with the team’s
achievements in creating a superb new theme park on time and
to budget in a very compressed time period. it is a stunning site
and compelling attraction, a view endorsed by many visitors and
evidenced by the very strong start to trading there and the
excellent customer satisfaction scores we are experiencing.
the management committee is also responsible for risk
management through the health, safety & security and audit
committees, both of which i also chair. the health and safety
committee scrutinizes the work of the operational teams
and makes recommendations for improvements to policies,
procedures and structures. the audit committee oversees
the relationship with the external auditors and monitors the
environment for internal financial controls through oversight
of the internal audit function.
10
chairman’s statement
as a management committee, we are particularly conscious of
our corporate social responsibilities. our oversight at Group level
covers three areas, namely: our own charity, merlin’s magic Wand,
which enables disadvantaged children and their families
to enjoy a merlin experience; our work on animal and marine
conservation and welfare; and our initiatives in reducing the
environmental impact of our business. i am delighted with the
progress in each of these areas during 2011and heartened by
the vigour and dedication with which the merlin team approach
and deliver on them.
my thanks once again go to all our employees for their relentless
focus on customer satisfaction and health and safety, which
together produce safe and memorable experiences for all our
guests. the fact that visitor numbers continue to grow despite an
adverse external environment is testimony to the passion of the
entire merlin team, who have delivered another successful year
for the company.
2012 outlook
trading to date in 2012 is in line with expectations, although most
of our locations are not yet into peak trading periods. We expect
2012 to present us with external challenges once again, particularly
the impact of developments in the eurozone. on the other hand,
we have a strong programme of capital investments delivering
new rides and attractions across our existing estate as well as new
business openings. this year we have seven new midway attractions
planned alongside the opening of our sixth leGolanD Park, due
to launch in malaysia later in the year. and to complement our
organic growth we recently announced the acquisition of living
and leisure australia, which brings nine new attractions across
our asia Pacific region as well as a management contract to
operate the Dubai aquarium. all of these investments, along with
strong marketing and promotional strategies, give us confidence in
the continued growth of merlin in 2012.
Sir John Sunderland
Non-Executive Chairman
Merlin Entertainments
20 March 2012
Build-a-raft river at the Water Park, leGolanD california
11
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 chieF
execUtiVe’s
rePort
Visitors (m)
Revenue (£m)
EBITDA (£m)
2011*
46.4
928.4
296.6
2010
41.0
800.8
255.8
Growth %
Like for like** %
13.2%
15.9%
15.9%
1.2%
6.4%
8.6%
* Figures presented are underlying trading compiled on a 52 week basis for ease of comparison with the 52 weeks of 2010
** like for like figures include businesses owned and opened before January 2010
i am DeliGhteD to rePort that 2011 has Been another
GooD year For merlin. in the 52 WeeK PerioD oF 2011, We
haVe WelcomeD FiVe million more Visitors to oUr resorts
anD attractions than in the eqUiValent PerioD in 2010,
haVe imProVeD oUr alreaDy inDUstry leaDinG cUstomer
satisFaction scores, DeliVereD on all oF oUr health anD
saFety tarGets anD achieVeD some trUly oUtstanDinG
staFF enGaGement scores.
Nick Varney
Chief Executive Officer
Strategic developments
merlin has six strategic growth drivers that we follow in pursuing
our vision and i am delighted with the pace of progress against all
of them during 2011.
¬ Growing the existing estate through planned capex cycles
yet again our existing estate of attractions has delivered strong
like for like growth (8.6%) across the Group. all projects
including major new rides such as those at Gardaland (see
case study on page 25), heide Park and leGolanD Windsor,
were delivered on time and on budget.
¬ Rolling out new midway attractions
2011 saw merlin entertainments open seven new attractions
across all five midway brands. of particular note were the
Blackpool projects in the UK (eye, Dungeon and madame
tussauds), delivered with council funding but developed and
operated by merlin (see case study on page 28).
Furthermore, we have pursued each of our six strategic growth
drivers relentlessly throughout 2011and have made significant
steps forward in every single one of them. Particularly pleasing, is
that we have done this all against a backdrop of continuing
uncertain economic conditions in many of the markets in which
we operate.
total visitor numbers for 2011were 47.3m for the full (53 week)
year, being 46.4m on a 52 week basis, a rise of 13.2% on the
comparative period of 2010. this came from a combination of
growth in our like for like businesses, our new site openings and
our new acquisitions at the start of the year in australia and new
Zealand. our revenue growth over the same 52 week period was
15.9%, outstripping our volume growth, through our focus on
driving yield opportunities whilst at the same time delivering value
to our customers through well targeted promotions and pricing.
Despite some unavoidable increases in the costs of our leasehold
rents (many of which are linked to rPi at 5%) and pre-opening
costs of £3.5m in our new leGolanD park in Florida (opened
in october 2011), our constant focus on cost control and making
every £ count meant that we converted this revenue growth into
eBitDa growth of 15.9%. Whilst our new site openings and
acquisitions accounted for almost half of this profit growth, of
particular note is the eBitDa growth of 8.6% from our like for
like businesses.
12
BUsiness reVieW - chieF execUtiVe’s rePort
We have welcomed
five million more
visitors to our resorts
and attractions.
leGolanD Florida
“the most beautiful
theme Park in
the World”
¬ Transforming our theme parks into destination resorts
Despite challenging economic conditions we have continued
to drive up leisure occupancy in our hotels and holiday villages
and consequently multi-day visits to our parks. in 2011 we
expanded the holiday Village at leGolanD Deutschland by
50% (achieving near 100% occupancy through peak season)
and began construction of a new 150 bedroom themed hotel
at leGolanD Windsor, for opening in 2012.
¬ Exploiting strategic synergies
2011 saw further expansion of our merlin annual Pass in the
UK and Germany to over 270,000 (including the launch of a
new Premium Pass). in addition full implementation of ‘Zeus’,
a group-wide e-commerce platform, has significantly expanded
our capacity for driving pre-booked business and yield
enhancement, with 10% of revenue now taken via our websites.
¬ Developing new LEGOLAND parks
the major achievement for 2011 was the highly successful,
on time and on budget launch of leGolanD Florida into
the world’s largest family tourism market (see case study on
page 20). With leGolanD malaysia funded by the malaysian
Government to follow in 2012 and possible future projects
in asia, we continue to see significant long term potential in
this area.
¬ Strategic acquisitions
We completed the acquisition of the sydney attractions
Group and have moved quickly to integrate this business and
its team into merlin (see case study on page 16). this gave us
the perfect platform for the subsequent acquisition of living
and leisure australia, comprising of ten further attractions in
the asia Pacific region which was announced in December
2011 and completed in February 2012.
Our number one priority
our aim is to deliver a memorable experience for every single
guest every time they come, within an environment of the highest
health and safety standards. We measure our success against this
through both customer satisfaction scores taken at on-site survey
points, as well as through a comprehensive, independent mystery
Visit programme delivered via an external partner. We encourage
competitiveness so that all our locations are constantly vying
to be top of the various league tables, which further drives our
excellent performance in this area. We exceeded both our
satisfaction and mystery Visit targets in 2011 and have set equally
ambitious ones for 2012. Furthermore, we believe that dealing
effectively with complaints is of paramount importance and our
aim is to turn every complainant into an ambassador.
in 2011 we surveyed guests who had previously complained
and found that 78% had returned or intend to do so in the
next twelve months.
Health and safety
our focus on continuous improvement ensured that we
maintained our high standards on h&s in 2011. indeed, we
improved upon two of our key measures, with a further reduction
in overall incident rates and a rise in the already positive scores
for h&s awareness in our staff survey.
Our winning team
merlin entertainments is a company with a very special team.
how special can be seen from the extraordinary achievements
in 2011 which have driven another year of strong growth and
financial returns. across merlin the team is united by a common
passion for the business and our unique approach and values
which we call ‘the merlin Way’. this is reflected not only in what
they deliver but also in low staff turnover rates and industry
leading engagement scores. in 2011 we surveyed all our
employees during peak season. 94% completed the survey and
of those 95% said they “enjoyed working here”. Going forward
we aim to further harness this passion by engaging the whole
team in demonstrating even greater creativity and innovation in
every facet of their work.
it is also worth noting that in 2011 we employed more than
17,000 employees at peak season across 17 countries. this
represented a growth of over 1,000 against the previous year,
with many of the posts being taken by young people in the hard
pressed 16 – 24 age group. this also stimulated economic activity
in all the locations in which we operate, contributing more than
£150 million directly through income, payroll and other direct and
indirect taxes.
merlin entertainments is a company with a clear vision and a
winning strategy which we continue to drive forward. throughout
2011 our passion for delivering memorable and rewarding
experiences for our visitors, coupled with a total focus on our six
strategic growth drivers, has resulted in growth and profitable
performances in all three operating Groups (see pages 14 to 25).
We have achieved this whilst at the same time delivering value to
our customers, maintaining industry leading customer satisfaction
scores and creating value for our shareholders. every one of our
employees should feel proud of their part in this success.
the magic continues in 2012…
Nick Varney
Chief Executive Officer
Merlin Entertainments
20 March 2012
13
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 miDWay
attractions
14
BUsiness reVieW – miDWay attractions
Visitors (m)
Revenue (£m)
EBITDA (£m)
2011*
26.8
351.1
140.0
2010
22.0
273.5
115.8
Growth %
Like for like** %
21.8%
28.4%
20.9%
0.9%
5.5%
6.2%
* Figures presented are underlying trading compiled on a 52 week basis for ease of comparison with the 52 weeks of 2010
** like for like figures include businesses owned and opened before January 2010
2011 Was a sUccessFUl year For the
miDWay attractions oPeratinG GroUP,
With stronG GroWth in the existinG
estate DriVen By eFFectiVe PeaK year
caPital exPenDitUre; an accelerateD
miDWay roll-oUt strateGy; anD the
acqUisition anD inteGration oF the
syDney attractions GroUP.
all 44 Us Presidents - madame tussauds Washington
the existing estate saw pleasing growth around the globe with
particularly strong performances in china and the Usa. towards
the latter part of the year the eurozone crisis had an impact on
both our european midway performance and european visitation
to important inbound markets such as london and sydney.
however, our overall volume remains strong in london and
sydney due to compensatory strong inbound growth from
emerging asian markets. our planned capex cycle was particularly
effective in 2011 with very good performances being achieved
from high year capex investments including: madame tussauds in
Washington Dc launched an exhibition of all 44 Usa Presidents;
madame tussauds new york opened ‘spirit of new york’; sea
liFe london aquarium introduced Gentoo penguins in an arctic
adventure; london Dungeon introduced a new concept ride/4D
cinema attraction called ‘Vengeance’; and the minnesota aquarium
was transformed and rebranded to sea liFe.
the new midway launches in 2011, combined with the acquisition
of a cluster of attractions in sydney have ensured we have
accelerated our midway cluster strategy by developing three new
cluster cities in Blackpool, Dallas and sydney. in these locations we
realise significant economies of scale in our costs by operating
with one management team and shared back-office functions,
whilst at the same time enjoying a high level of ‘cross selling’
between the different attractions, offering customers the
opportunity to purchase tickets to more than one attraction
through a clear, strong promotional strategy. these two factors
lead to our enjoying a growth rate in cluster cities which is
significantly higher than that of non-cluster locations. at the end
of 2011, we now benefit from cluster cities across all our major
geographies, in london, Berlin, amsterdam, Dallas, Blackpool and
sydney. clustering midway attractions will continue to be central
to midway’s future roll-out strategy.
in addition to our high year capex investments, we also launched a
number of new mobile features across our sea liFe centres,
including ‘Jelly Disco’ and ‘claws’, whilst the madame tussauds
estate witnessed the simultaneous launch of nine lady Gaga
wax figures across the globe.
Underpinning the success of the midway attractions operating
Group is the emphasis we place on the customer experience.
2011 saw further growth in overall customer satisfaction within
midway, with some particularly pleasing performances from our
new openings, as we continue to develop our product offering to
enhance the customer experience.
2011 was also a significant year for our midway roll-out programme,
which we increased to seven new launches this year (2010: three)
and opened attractions across all of our five roll-out brands for
the first time in a calendar year. We successfully launched both
a leGolanD Discovery centre and sea liFe in Dallas, Usa,
whilst in continental europe we opened both a sea liFe in
Jesolo, italy, and a madame tussauds in Vienna, austria. in the UK
we created a new cluster when we took over the management
of the iconic Blackpool tower and added to our existing sea liFe
attraction the Blackpool tower eye, Blackpool Dungeon and
madame tussauds Blackpool, the first UK madame tussauds
attraction outside london. the capital investment in Blackpool is
provided by Blackpool council, funded through the profit share
arrangements in place as part of the operating agreements we
signed with them in 2010.
Merlin Midway
Sites
December
2010
New
2011
December
2011
UK
Continental Europe
North America
Asia Pacific
Total
18
23
8
3
52
3
2
2
6
13
21
25
10
9
65
15
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 BUsiness reVieW – miDWay attractions
SYDNEY ATTRACTIONS GROUP
6 neW attractions across 2 neW coUntries
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What DiD We Do?
We made our first entry into the Australian
and New Zealand markets by acquiring the
Sydney Attractions Group(SAG). This added
six new attractions to the Midway Operating
Group, including the Sydney Aquarium, the
Sydney Tower and Kelly Tarlton’s Underwater
World in Auckland. Together the SAG
businesses contributed £41.9 million to
Merlin revenues for 2011.
hoW DiD We Do it?
We formed a team of experienced attraction
operators to integrate each function of
SAG into Merlin. Running a number of
simultaneous work streams, project managers
from Merlin Magic Making visited each site
to determine the compelling propositions we
could introduce into each attraction to
integrate them into our existing brands and
drive future revenues.
What Was the resUlt?
We have quickly and successfully integrated the
management team and have re-launched Sydney
Wildlife World as WILD LIFE Sydney, which is an
improved experience but in a smaller footprint.
In the space created we will launch Madame Tussauds
Sydney during 2012. Sydney Tower has been
re-launched as Sydney Tower Eye and now includes
a tailored 4D cinema pre-show, in the same way as
The London Eye and Blackpool Tower Eye, and the
whole attraction has been rebranded with a more
contemporary look and feel. During 2012 Sydney
Aquarium, Oceanworld Manly and Kelly Tarlton’s
will be relaunched as SEA LIFE attractions via
significant capital expenditure which will
transform the visitor experience. Across the
attractions overall, EBITDA performance in 2011
exceeded our acquisition case by 13%.
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Merlin Entertainments S.à r.l. Annual Report and Accounts 2011
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Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 leGolanD
ParKs
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BUsiness reVieW – leGolanD ParKs
Visitors (m)
Revenue (£m)
EBITDA (£m)
2011*
7.8
246.4
83.6
2010
7.2
215.0
73.7
Growth %
Like for like** %
8.3%
14.6%
13.4%
4.2%
8.3%
11.1%
* Figures presented are underlying trading compiled on a 52 week basis for ease of comparison with the 52 weeks of 2010
** like for like figures include businesses owned and opened before January 2010
the leGolanD ParKs oPeratinG GroUP
haD a Very GooD year in 2011 With all
FoUr oF the existinG ParKs DeliVerinG
their Best resUlts eVer in reVenUe anD
eBitDa. By Far the most siGniFicant
eVent hoWeVer Was the laUnch
oF oUr FiFth leGolanD in FloriDa
in octoBer.
leGolanD Florida was greeted with excellent media reviews
and customer feedback and has traded strongly since opening.
alongside the commercial performance it is also pleasing to report
another year of progress across all parks in driving up our already
high customer satisfaction scores.
at the heart of our existing estate strategy is the continued
application of our planned capital expenditure cycles allied with
innovative product development. in 2011 the highlight of this was
the introduction of new star Wars clusters in the mini-land
areas of our parks in Denmark, Germany and california.
these new additions, developed in conjunction with leGo and
lucasfilm proved instantly popular and we plan to add similar
clusters in the UK and Florida parks in 2012. another major
innovation in a high capex year was leGolanD Windsor’s
atlantis submarine Voyage. this unique combination of a ride and
sea liFe ocean tank takes families on an amazing underwater
adventure and has rapidly established itself as one of the iconic
leGolanD experiences.
new themed chalets at leGolanD
Deutschland holiday Village
successful leGo star Wars attraction
at leGolanD Billund, Denmark
the transformation of the leGolanD parks into multi-day
destination resorts is also progressing very well. During 2011 we
expanded our holiday Village at leGolanD Deutschland by 50%
and added additional facilities to enhance the evening experience.
the result has been very high occupancy levels in excess of our
expectations, and more visitors expanding their stay to two days
or more. We are certain that there is a very high demand from
families to ‘stay over’ in the heart of the leGolanD experience
and as such new themed hotels will open in Windsor (2012) and
california (2013) alongside a continued drive to ‘trade up’ to
multi-day tickets.
Finally leGolanD malaysia will become the sixth leGolanD
Park when it opens in september 2012. it is a significant project in
that it is predominantly funded by the malaysian Government with
merlin as operator holding a minority stake. it will also be our first
leGolanD park in asia, a region where we anticipate further
exciting growth opportunities in the future.
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Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 BUsiness reVieW – leGolanD ParKs
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LEGOLAND
FloriDa
What DiD We Do?
We acquired Cypress Gardens in Central Florida with its existing
grounds, infrastructure and the beautiful historical botanical
gardens for $25m in 2010. We then developed the park into LEGOLAND
Florida for around half the cost of a green field site and opened to
the public on time in October 2011.
hoW DiD We Do it?
The experienced LEGOLAND Development team, together with Merlin Magic
Making, developed a creative solution for how best to integrate the
LEGOLAND park into the existing landscape and infrastructure. Along
with support from teams across all four existing LEGOLAND parks,
we provided a project not just within budget but also successfully
opened on time within about half the time it would have taken if we
had started from scratch.
What Was the resUlt?
With the lush and mature landscape on the side of Lake Eloise, we
have created what we believe is one of the most beautiful theme parks
in the world. The reception from guests has been outstanding with
satisfaction scores already above our 90% target. From the first three
months of operation we have seen the park consistently exceeding our
visitors and revenue budgets by 20% and 59% respectively. This trend
has continued in 2012 where the addition of a Water Park will add
further momentum.
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Merlin Entertainments S.à r.l. Annual Report and Accounts 2011
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Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 resort
theme ParKs
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BUsiness reVieW – resort theme ParKs
Visitors (m)
Revenue (£m)
EBITDA (£m)
2011*
11.8
328.1
96.9
2010
11.8
310.5
89.0
Growth %
Like for like** %
-
5.7%
8.9%
-
5.7%
8.9%
* Figures presented are underlying trading compiled on a 52 week basis for ease of comparison with the 52 weeks of 2010
** like for like figures include businesses owned and opened before January 2010
2011 Was a year oF siGniFicant ProGress For resort theme ParKs (rtP) Both in
terms oF Financial PerFormance anD in DeVeloPinG a PlatForm For
consistent lonG term GroWth. a Key stranD oF the rtP GroWth strateGy is
to DeliVer hiGhly comPellinG neW attractions on a three year caPex cycle
across the existinG estate, With hiGh caPex years in 2011 in GarDalanD resort
With ‘raPtor’ anD heiDe ParK resort in Germany, Which saW the laUnch oF
‘KraKe’, Germany’s First ‘DiVe’ coaster.
2011 also saw the early stages of our strategy to work with
recognised and relevant intellectual Property (iP) partners to
enhance our new attractions and drive customer awareness.
Warwick castle teamed up with the BBc and Freemantle
Productions to deliver a new attraction called ‘merlin: the Dragon
tower’, based on the successful merlin tV show. Use of the tV
characters and actors for launch events as well as promotional
activity around the tV series and DVD launch helped to drive
visitation and awareness of Warwick castle as Britain’s Ultimate
castle. Further partnerships with film-based iP holders were
developed during the year for introduction in 2012, such as Fox
‘ice age’ which will feature in both alton towers and Gardaland.
the ongoing strategy of developing our theme parks into
destination resorts continued apace with all four rtP hotels
growing leisure based business in 2011 and delivering budget-
beating performance and extremely strong customer satisfaction
scores. the introduction of new themed restaurants, Zafari
(chessington hotel) and the emperor Grill (alton towers hotel),
as well as new themed rooms at Gardaland and chessington
hotels, also helped to increase secondary spends and deliver
improved average room rates. as a result of this focus we saw
double digit growth in multi-day visits across our resorts. Further
development work continued in 2011 for potential extensions to
existing hotels and the introduction of new accommodation types
such as themed camp sites and holiday villages at each resort, and
plans continue to be developed for the introduction of a hotel at
thorpe Park.
heide Park’s ‘Krake’ Wing coaster drove record returns
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Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 BUsiness reVieW – resort theme ParKs
chessington’s african themed hotel
Delivering bookings through our websites is a key part of our
strategy to increase pre-booked business, reducing volatility and
providing a hedge against poor weather. Further advances were
made during 2011 in the development of our e-commerce
platform with significant increases in booking tickets through our
branded websites and through mobile phone technology. the
strong growth in visitors to our websites, combined with our
increasing conversion rates, resulted in another record year in
terms of the proportion of our visitors who purchased tickets
through digital channels, something we expect to continue over
the coming years. During 2011, we successfully trialled technology
which would allow us to introduce variable pricing onto our
websites, including increased discounts for early booking. this will
be introduced to all resort websites during 2012. Further web
activity was driven by strong social network initiatives particularly
for brands such as thorpe Park, where the age profile of our
guests is a perfect fit.
economic conditions in both the UK and europe had an impact
on consumer confidence and provided a challenging trading
environment. Value for money and customer satisfaction become
even more critical in these circumstances. all our resorts place
heavy emphasis on customer KPis through continued direct
dialogue with our customers via touch screen surveys and
feedback. across rtP, performances improved across all these key
measures during 2011 with particularly strong performances at
Gardaland and alton towers.
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Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 BUsiness reVieW – resort theme ParKs
GARDALAND
What DiD We Do?
The introduction of ‘Raptor’ a world-first wing coaster into Gardaland
resort was the first major investment since 1998 that targeted the
teenager/young adult market in Italy.
hoW DiD We Do it?
In a collaboration between a trusted ride manufacturer (who also
supplied ‘Krake’ in Heide Park) and Merlin Magic Making, we
redeveloped an area of the park and introduced the new coaster into
a highly themed land. The new attraction was supported by a highly
effective marketing, advertising and PR plan to drive awareness of
both the ride and Gardaland Resort.
What Was the resUlt?
Record visitor number growth in the target teenager/young adult market of
c.20%, customers delighted by the thrilling ride experience and high awareness
of ‘Raptor’ across Italy and beyond.
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Merlin Entertainments S.à r.l. Annual Report and Accounts 2011
merlin
maGic maKinG
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FocUs on merlin maGic maKinG
merlin maGic maKinG is a critical
comPonent oF merlin’s central
resoUrce team. it Was estaBlisheD in
aUGUst 2011, heaDeD UP By a chieF
DeVeloPment oFFicer, to FocUs on
raisinG the Bar in terms oF innoVation
anD creatiVity; to KeeP merlin Well
aheaD oF the comPetition.
Previously known as our Property and Development Group,
this team has responsibility for:
¬ creating the magic – through innovation and creativity.
¬ Finding the magic – new site search.
¬ Producing the magic – wax figures, leGo models,
aquarium displays development, attraction theming.
¬ Delivering the magic – project management and development.
Creating the Magic – through innovation and creativity
We have a strong heritage of being very successful in our delivery
of new and compelling propositions both to the existing merlin
businesses and to our new openings. a core creative team deliver
across the business from initial design all the way through to the
finished product.
notable developments in 2011 include ‘raptor’ in Gardaland,
italy, ‘atlantis’ in leGolanD Windsor, as well our new midway
roll-out projects.
the team was further strengthened at the end of 2011 with the
appointment of a new Group creative Director, allowing us to
step up to the future with confidence and tasked to encourage
an innovative and creative approach at every level and location
within the organisation.
Producing the Magic – wax figures, LEGO models,
aquarium displays development, attraction theming
one of the unique aspects of merlin is our in-house expertise
in delivering the content of our attractions. there are production
facilities at eight locations in five different countries around the
world. We produce wax figures, leGo models and attraction
theming, as well as supporting our sea liFe estate through
central fish husbandry expertise. the highlight of 2011 was the
delivery of all the models for the new leGolanD Park in
Florida, closely followed by the successful launch of two new
madame tussauds attractions.
Finding the Magic – new site search
the site search team spreads to all corners of the planet and
is responsible for finding and delivering the sites for the organic
roll-out of the merlin businesses. With a network of contacts
throughout the world, it is ideally placed to ensure that we are
in a position to deliver a pipeline of new business openings each
year. Particular highlights in 2011 include signing up our first two
sites in Japan (opening 2012 and 2013); two lDc sites in the Us;
and two new sea liFe opportunities. From our extensive
research and analysis we continue to track over 100 potential
locations for midway roll-out worldwide.
Delivering the Magic - project management
and development
We believe that we can build anything, anywhere in the world,
on time, on budget and to the required specification. a long
and distinguished track record of delivery is one that the project
management and development team are very proud of. 2011 has
seen the delivery of 25 major projects (a record!), including: three
major rides, seven midway launches and the planning and
development of the new leGolanD Windsor hotel, as well
as setting up a successful project management base in australia.
merlin magic making is absolutely committed to driving a philosophy
of innovative thinking throughout the business to ensure that we
both stay one step ahead of our competitors and continue to
produce compelling reasons for our customers to come and
spend memorable time with us.
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Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 FocUs on merlin maGic maKinG
BLACKPOOL CLUSTER
What DiD We Do?
We entered a long term partnership with the local authorities to help
rejuvenate the town of Blackpool, UK. We developed a plan to take
over the management and development of the town’s most iconic
building, the Blackpool Tower, to introduce a number of Merlin’s
world-class brands to the town and then operate them as one of the
most comprehensive Merlin clusters anywhere in the world.
hoW DiD We Do it?
The council provided the funding and we did the rest! We utilised our
in-house expertise, getting our creative teams to develop very unique
‘Blackpool experiences’, for our major midway brands. We then got our
production teams to create the content, while the project management
team planned and executed the build. It was all done in record time,
on budget and to market leading quality.
What Was the resUlt?
Happy customers, happy local authority and a happy Blackpool
community. Blackpool is now home to a starry-eyed Madame Tussauds,
a heart-stopping Dungeon, a world-class SEA LIFE aquarium and one
of the best observation experiences on the planet, the Blackpool
Tower Eye, complete with a 4D cinema pre-show which brings a tear
to the eye!
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Merlin Entertainments S.à r.l. Annual Report and Accounts 2011
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Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 merlin PeoPlemerlin
merlin
PeoPle
PeoPle
merlin’s sUccess is achieVeD throUGh a Fantastic team oF hiGhly talenteD,
motiVateD anD Well-traineD inDiViDUals, UnDerPinneD By oUr ValUes anD
core comPetencies, Which We reFer to as ‘the merlin Way’. anD the more We
exPanD, the more DeDicateD We are to recrUitinG, DeVeloPinG anD nUrtUrinG
the talent PiPeline We neeD For the FUtUre. We haVe re-FocUseD oUr traininG
anD DeVeloPment Plans toWarDs more strateGic thinKinG, creatiVity anD
innoVation, Whilst at the same time increasinG the nUmBer oF ProGrammes
aVailaBle anD the GeoGraPhic sPreaD.
We have introduced new internal reward and recognition
schemes to celebrate outstanding performance and recognise our
star employees, wherever they may be within our organisation.
We have also greatly expanded our Graduate Programme, in
order to support our growth plans and to deliver the merlin
leaders of the future.
the overall success of our people strategy is evidenced by the
excellent staff engagement scores we obtained from our annual
staff climate survey in 2011. the externally managed survey is run
in august so as to include as many of our seasonal employees as
possible. 94% of staff took the time to complete the survey, which
we were very pleased with, and the overall engagement score,
which is derived from the responses to a number of key questions,
beat our 80% target by quite a distance.
The Merlin Way
to support our unique approach in 2011 we launched the merlin
Way Film competition. employees were encouraged to show
us how they live and breathe the merlin Way and what it means
to them. the response was fabulous with over 100 team entries
received from attractions and central teams across the globe.
as a result of this a new celebration film has been produced that
shows how our employees live the merlin Way on a daily basis.
Recruitment
to achieve our objectives of delivering memorable experiences to
guests around the globe, we need to have the best talent on board.
our recruitment strategy ’’serious about fun” delivers recruitment
campaigns and processes which help us achieve this. in 2011 we
introduced a variety of selection materials, from creative assessment
centres to online ability testing for some of our more senior roles.
in addition, as we continue to grow and with the increasing use of
online systems and social media, our recruitment strategy has
evolved to not only meet the pace of the business but also the
expectations of our candidates.
XLR8
the merlin Way was launched to the business as a way of
encapsulating the values and core competencies we live by
in order to deliver memorable experiences to our customers
and have lots of fun along the way.
one of the ways we attract fresh new talent is through our ‘xlr8’
fast track graduate programme, which is open to graduates from
across the world. it was first introduced in 2006, with the goal of
providing a pipeline of merlin leaders of the future. the programme
has continued and expanded each year, increasing the number of
30
merlin PeoPle
graduates recruited as well as the diversity of backgrounds (the
2011intake included graduates from six countries), thus supporting
our business strategy.
We believe that it is critical to recognise and reward our
employees for their efforts, and have done so through the
introduction of two global recognition schemes – star and
the ceo award Plan.
STAR
star gives our employees the voice to celebrate success
instantly, by nominating colleagues online, in a very interactive way.
Between april and December 2011 over 35,000 stars were
sent to employees worldwide.
it is proving its success with the appointment this year of a
number of graduates to senior management positions, including
the first two to have been promoted to General manager and
who are now leading their own attractions.
Development
merlin’s growth strategy means that we are constantly creating
career and progression opportunities and we need to prepare
people to take on these roles. For this reason, it is a key priority
to have in place development programmes to support these
future leaders at the right time and in the right way.
in 2011 we launched the Development Pyramid. this is a
transparent framework for all merlin employees so they can see
what development opportunities we offer them at Group level
as they progress in the organisation. We have both refined and
increased our management courses, including in 2011 the
introduction of a five day management programme, which
has been piloted successfully in both the UK and the Us.
CEO Award Plan
announced in 2010, the ceo award Plan annually recognises and
rewards employees, granting company shares for long service,
and/or outstanding performance. approximately 1,000 employees
have already been awarded ceo award Plan shares, aimed at
extending equity participation to as many employees as possible.
Wizard Wants to Know
‘the Wizard Wants to Know’ is the name that we give to our
annual staff survey and it is an essential mechanism we use for
obtaining feedback from our employees globally. We consistently
achieve market leading response rates, including the 94% obtained
in 2011 as previously noted. as a result, the survey gives us
invaluable data on which we always act, to ensure that we deal
with the issues that really matter to our employees.
Nurturing Talent
at peak season, merlin now employs more than 17,000 employees
globally and it is our aim to nurture their talent so that they go on
delivering memorable experiences to our visitors and growth to
our business. We do this through:
¬ compensation and benefits.
¬ Performance Development Plans (PDPs).
¬ Global recognition schemes.
¬ Wizard Wants to Know – staff survey and action plan.
in 2011 we also rolled out our online PDP process to ensure that
each employee understands how their role contributes to the
success of the company, as well as focusing them on their potential
and career aspirations. For merlin, the PDP supports our talent
process, allowing the business to identify future leaders, putting
them on development programmes or into roles which will assist
them to achieve their full potential.
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Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 corcorPorate
social resPonsiBility
as one oF the leaDinG entertainment comPanies in the WorlD, merlin DeFines
its ValUes not JUst By the Passionate Way We Do BUsiness; BUt also By the Way
We treat oUr Visitors, oUr PeoPle, oUr creatUres, oUr sUPPliers anD the
commUnities in Which We oPerate. We BelieVe that one oF the Keys to oUr
BUsiness sUccess is the Fact that oUr enVironmental anD social PerFormance
is manaGeD alonGsiDe oUr Financial PerFormance.
Animal and marine conservation and welfare
merlin has an excellent record and reputation for the ethical and
responsible care, preservation and conservation of animals and
the marine environment; a reputation acknowledged by expert
organisations around the world. the company is proud of the
campaigns and breeding programmes of which it is a part. We are
also very aware of our responsibilities towards the welfare of the
animals in our care and employ the highest possible standards of
animal husbandry on every site.
Breeding success
our breeding programmes recorded a number of notable
successes in 2011, with some of the highlights listed below:
¬ the zoo at chessington World of adventures reared the only
condor chick, a male, in the whole of europe, along with six
capybaras and a solitary bleeding heart dove, a species that
features on the iUcn red list of critically endangered species.
chessington also patiently hand reared 150 fen raft spiders,
one of only two protected British species, and released them
back into the wild in suffolk.
¬ the aquarium Displays Development team in Weymouth
enjoyed a rare triumph with cephalopods when it bred and
successfully reared dozens of mud octopuses, many of which
have subsequently been moved to public displays at sea liFe
centres across the estate. the husbandry techniques employed
have also been relayed to others in the industry via key
international conferences.
¬ many sea liFe centres bred undulate rays in 2011, notable as
this species is now protected in the wild, whilst sea liFe
california also successfully bred tropical cuttlefish.
¬ our newly acquired attractions in australia and new Zealand
have also joined in. Perhaps the most exciting event has been
the rearing of 21 spiny sea dragons born at Kelly tarlton’s, a
world first for this species. memorable births at sydney
aquarium included a trio of ‘little penguins’, while no fewer
than twelve eagle rays were born at oceanworld manly. WilD
liFe sydney reared four new baby koalas, five spotted-tailed
quolls and three broods of rose-crowned fruit doves.
Conservation
conservation action has been a feature across the estate
throughout 2011, with a few examples as follows:
¬ chessington World of adventures raised over £50,000 in
donations for third-party conservation charities. its efforts
have helped save an area of ecuadorian rainforest the size
of chessington World of adventures itself.
¬ sea liFe in europe ran a very successful campaign in
conjunction with the Whale & Dolphin conservation society
targeting icelandic whalers.
¬ sea lFe Weymouth volunteers helped conduct a strandline
audit of the local coastline to aid a Wildlife trust bid to have
the important tidal zone included within a new marine
protected area.
¬ Fundraising efforts continued apace to establish a sea turtle
rescue and information centre on Zakynthos, Greece, and
support nGo group earth, sea & sky’s efforts to monitor and
protect loggerhead turtle nest beaches. the sea liFe estate
also ran very well received turtle and shark conservation
weeks during 2011.
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corPorate social resPonsiBility
¬ sydney aquarium supported important satellite tagging
projects with green turtles and great white sharks. in addition,
it has sponsored research into the health of wild dugongs,
shark intelligence and the effects of climate change on sea
anemones.
¬ sea liFe arizona has been involved in the breeding and
reintroduction of some native freshwater species.
Rescue, rehabilitation and release
rescue and rehabilitation has become an even more significant
activity for the Group with the acquisitions in the antipodes. Kelly
tarlton’s in new Zealand has been preparing five rescued green
turtles and two critically endangered hawksbill turtles for return
to the wild. in europe, more than 100 common and grey seals,
mainly abandoned or injured pups, were rescued and returned
to the wild by our sanctuaries and the sea liFe centres in
Blankenberge, Belgium and scarborough, UK. and currently, sea
liFe scheveningen in holland is caring for a rescued Kemp’s ridley
turtle, pending a probable release mission to the Us during 2012.
Environmental impact of the business
merlin meets all of its legal obligations on waste and energy
management. this includes the carbon reduction commitment
(crc) energy efficiency scheme which has been introduced in
the UK. Following publication of the crc scheme league table
in the autumn, our focus is on implementing further cost-effective
measures that will reduce our energy consumption, including
simple ‘quick fix’ good house-keeping measures and installing
more leD and sensor-activated lighting. During 2011 we funded
a number of pilot capital expenditure energy saving schemes at
a variety of locations around the Group, the results of which will
assist us in identifying other opportunities to further reduce our
energy consumption.
in order to monitor and hence manage our consumption more
effectively, automated meter readers were installed in 2011 to
all gas and non ‘half-hour’ electricity meters (half-hour electricity
meters have always been read remotely). a group-wide energy
forum was then held with all UK sites, so that our energy brokers
could demonstrate how to access and then act on the
information from these meters. at the same time, our lighting
manufacturers and suppliers demonstrated the range of leD
lighting available in the market that will not only reduce energy
consumption but in most cases enhance the guest experience.
one of our values is ‘making every £, $, €… count’ and most of
our sites now have active ‘Green team’ or equivalent initiatives in
place helping to deliver on this value, whilst also having a very
positive effect on our environmental impact.
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Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 corPorate social resPonsiBility
Merlin in the Community
our corporate responsibility programme ‘Merlin in the
Community’ works alongside the important and valuable work
that we do in the areas of Animal and Marine Conservation and
Welfare, and on our overall Environmental Impact. at a
Group-wide level we focus on our own charity, ‘Merlin’s Magic
Wand’, and in addition, this is supplemented at individual site level
with local initiatives focused on the communities around our sites.
Merlin’s Magic Wand children’s charity
merlin’s magic Wand (mmW) was launched in may 2008 and
enables children who are disadvantaged through ill health,
disability, abuse or poverty to have a memorable experience at
one of our many attractions around the world. the Group
donates funds to the charity directly and continues to support the
day to day running of the charity by subsidising the employment
costs of the charity’s manager and support staff, providing office
accommodation and facilities at no cost and, most importantly,
providing free tickets to our theme parks and attractions.
During 2011we have made good progress with merlin’s magic
Wand, expanding our reach and impact:
¬ We provided more than 34,000 visits to our attractions
for disadvantaged children including associated travel grants
when necessary.
¬ We accepted 5,189 applications from individual families and
organisations which is 2,110 more than in 2010 and nearly
5,000 more than when we started in 2008.
¬ We have further developed the role of the mmW champion
at each attraction, whose primary focus is to ensure that
employees and guests are aware of what the charity does and
how they can get involved.
¬ We developed our fundraising activities throughout the year,
including a fantastic cricket event in the summer (it was
pouring down but, despite this, we raised over £12,000 from
that one event).
¬ in total we raised some £140,000 from fundraising events
across the estate. this cash supported, amongst other things,
our second outreach project, which is a bespoke merlin Play
area in the children’s ward at the hospital in Kolding, near
leGolanD Billund, Denmark. We develop these projects for
the benefit of children who, due to serious illness or disability,
are unable to visit one of our attractions in person.
Other charity and community activities
the nominated merlin magic Wand champions at each site are
also responsible for identifying and supporting suitable local and
national good causes, as well as developing strong relations with
their local communities.
as a result of these other charity and community activities, merlin
attractions have worked in support of many local and charitable
initiatives. examples of just a few of these initiatives include: cancer
and heart disease charities and patients; adoption and fostering
organisations; local police, ambulance and fire service charities;
support to local schools; sponsorship of youth organisations;
working with local wildlife and environmental trusts and projects;
local children’s homes and hospices; christmas gifts and
collections for homeless and deprived children.
34
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 corPorate social resPonsiBility
Other corporate responsibility initiatives
at merlin we treat all our employees with respect and in
accordance with our values as expressed in ‘the merlin Way’.
this applies equally to employees who are disabled or who
become disabled during their employment with us. Furthermore,
we make any reasonable adjustments necessary to assist
employees with disabilities to continue to perform their role.
Where this is not possible, we work with them to seek re-training
and other options of deployment elsewhere within the business.
We continually assess all our locations as part of our ongoing
commitment to health and safety to ensure that they are as
accessible as possible to all.
on the broader responsibility front, we insist that all of our retail
suppliers sign our ethical terms & conditions before we place any
orders with them. We have an independent Far east audit
company in place that audits our suppliers’ factories in the areas
of child labour, working conditions and environmental impact.
as far as payment of suppliers is concerned, it is our policy to
agree payment terms with suppliers and these normally provide
for payment within 30 days of the invoice date, except where
other arrangements have been negotiated. We commit to abide
by the agreed payment terms provided that the supplier performs
according to the terms of the contract.
merlin's magic Wand - enabling children to have a great
experience at a merlin attraction
the merlin Play area, Kolding hospital, Billund, Denmark
35
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 GroUP
Financial reVieW
Financial highlights
During the year to 31 December 2011merlin delivered strong
growth in the face of continued global economic uncertainty, with
increased profits in all three of our operating Groups, from both
new site openings as well as our existing estate attractions.
2011was a 53 week reporting period. in order to make a
comparison with last year, the underlying operating results in the
Group financial review are stated on a 52 week basis consistent
with those within the business review sections of this document.
Andrew Carr
Chief Financial Officer
Profit before tax
2011
£m
(53
weeks)
2011
£m
(52
weeks)
2010
£m
(52
weeks)
Growth
+/- £m
(52
weeks)
Revenue
945.7 928.4
800.8
127.6
Underlying EBITDA(1)
305.5 296.6
255.8
40.8
Underlying operating profit(2) 231.4 222.5
198.0
24.5
Total operating profit(2)
229.7 220.8
158.4
62.4
Net finance costs
(133.3)
(132.4)
(0.9)
Underlying profit before tax
109.4
53.9
55.5
Total profit before tax
96.4
26.0
70.4
(1) Underlying eBitDa is defined as eBitDa before exceptional and
non-trading items.
(2) operating profit is defined as eBitDa less depreciation, amortisation
and impairment. the latter are considered as annual costs and
accordingly are the same on a 53 or 52 week basis.
36
GroUP Financial reVieW
Group revenue growth of £127.6 million and 15.9% includes
£50.9 million (6.4% growth) from like for like businesses (sites
owned and opened before January 2010) with the balance of
£76.7 million coming from sites opened or acquired since that
time. like for like revenue growth was driven by increased
visitation as well as growth in revenue per capita, as a result of
effective yield management and targeted promotional activity.
new business growth came predominantly from leGolanD
Florida and the newly acquired businesses in australia and new
Zealand. 2011saw revenue growth across all three business
segments and all four geographies in which we operate. Further
details are provided in note 2.1 to the consolidated financial
statements.
Group underlying EBITDA growth of £40.8 million and 15.9%
includes £22.0 million (8.6% growth) from like for like businesses
whilst new sites delivered £18.8 million of incremental underlying
eBitDa.
Group operational gearing, which measures the growth rate in
underlying eBitDa compared to revenue, was impacted this year
by the pre-opening costs associated with leGolanD Florida.
like for like operational gearing was 1.34x, evidencing our strong
cost controls in spite of cost increases outside our control
particularly in respect of rents, many of which are linked to
rPi at 5%.
Group underlying operating profit growth of £24.5 million
and 12.4% is driven by the growth in underlying eBitDa, with
tightly controlled capex being reflected through the depreciation
charge. there were no impairment charges incurred in 2011
(2010: £3.7 million).
total operating profit is stated after exceptional and non-trading
items of £1.7 million (53 weeks) in relation to business
combinations. Further details are provided in note 2.2.
net finance costs of £133.3 million (53 weeks) include net
exceptional and non-trading items of £11.3 million as outlined in
note 2.2. on an underlying basis, net finance costs have reduced
by £22.1 million and 15.3% as a result of both the refinancing
during 2010 and the facility amendments in 2011.
Cash flow
53 weeks
Underlying EBITDA
Decrease in cash tied up in working capital
Other operating cash flows
2011
£m
2010
£m
305.5
255.8
3.9
1.6
6.0
3.8
Exceptional and non-trading items
(1.7)
(35.9)
Cash-settled share-based transactions
-
(33.9)
Net operating cash flow before tax
309.3
195.8
Tax paid
(17.4)
(12.5)
Net cash inflow from operating activities 291.9
183.3
Capital expenditure
Acquisition of Sydney Attractions
Group (2010: Cypress Gardens)
(174.1) (103.8)
(102.1)
(15.6)
Proceeds from bank loans, net of financing costs
99.6
-
2010 shareholder transactions and
re-financing, net of financing costs
-
28.3
Interest paid, net of interest received
(115.3) (108.6)
Dividends paid to non-controlling interest
(0.8)
-
Other
Net cash flow for the year
(3.5)
(2.0)
(4.3)
(18.4)
Merlin remains highly cash-generative. During 2011 the Group
generated a net operating cash flow before tax of £309.3 million.
tax paid of £17.4 million in 2011 relates to direct corporation
tax only.
37
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 GroUP Financial reVieW
Capital expenditure of £174.1million was incurred in order to
invest in both the like for like businesses (£75.6 million) and new
site openings (£98.5 million). the capex programme is targeted
to deliver new attractions across existing businesses in accordance
with the capex cycles laid down for each of the operating
Groups, as well as to deliver a pipeline of new businesses for the
midway roll-out programme. the increase in capital expenditure
in 2011 was driven predominantly by the development of
leGolanD Florida. all proposed capital projects are appraised
both operationally and financially and merlin sets clear project
return targets to assist in assessing the viability and prioritisation
of capex projects.
Net debt
Cash net of bank overdrafts
2011
£m
59.9
2010
£m
67.1
Bank loans and borrowings
(1,182.8)
(1,073.1)
Net bank debt
(1,122.9)
(1,006.0)
Finance lease obligations
(86.0)
(88.1)
Net debt
(1,208.9)
(1,094.1)
The acquisition of the Sydney Attractions Group was £102.1
million including the purchase of assets net of cash acquired and
repayment of borrowings. this was mainly funded from the £99.6
million net proceeds of bank loans. Further details are provided in
note 3.1.
Leverage on net bank debt
to underlying EBITDA
Maturity of bank borrowing
facilities
3.7
3.9
July 2017
July 2015
Net interest paid increased in 2011 as a result of the increase in
net debt arising from the saG acquisition, as well as due to the
timing of payments at the year end. as noted below, the facility
amendments put in place during 2011 reduced the interest rate
on our borrowings.
Cash net of bank overdrafts at the year end was £59.9 million
(2010: £67.1 million).
Loan facilities amended to lower the margin on the interest rate
and extend the term to July 2017.
merlin’s bank loans and borrowings are available under a Facilities
agreement which was put in place in July 2010 and amended in
may 2011. Further details are provided in note 5.2.
The Facilities Agreement requires Merlin to comply with certain
financial and non-financial covenants.
the financial covenants include annual limitations on capital
expenditure and require the maintenance of certain minimum
ratios of eBitDa to both net interest payable and net debt. in
addition, there is a requirement that the net operating cash flows
generated are not less than merlin’s cash cost of funding the bank
debt. the Facilities agreement is secured by a fixed and floating
charge over the Group’s assets. the Facilities agreement also
requires the Group to enter into interest rate swaps in respect of
certain bank borrowings.
38
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 GroUP Financial reVieW
Merlin has a revolving facility of £138.0 million (2010: £125.0
million). this facility is in addition to the term debt and is available
to finance working capital requirements and for general corporate
purposes. as at 31 December 2011, £nil had been drawn down
from the revolving facility (2010: £nil).
Leverage on net bank debt at the year end equates to 3.7x
underlying eBitDa (2010: 3.9x), recognising the growth in
eBitDa during the year.
Net assets
The net assets of the Group increased in 2011 from £504.5
million to £554.5 million, as a result of £67.9 million profit for
the year, net of £14.9 million exchange differences arising on the
retranslation of subsidiaries, and other movements in relation to
hedge accounted items (£0.2 million) and the defined benefit
pension scheme (£1.7 million).
the strength of trading, the robust balance sheet position,
together with the bank loan facilities in place and secured until
2017, give merlin a secure basis on which to pursue our growth
strategy and continue our international expansion programme.
Andrew Carr
Chief Financial Officer
Merlin Entertainments
20 March 2012
39
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 PrinciPal risKs anD Uncertainties
merlin aDoPts a ProactiVe aPProach to the manaGement oF Potential risKs
anD Uncertainties Which coUlD haVe a material imPact on merlin’s
PerFormance anD execUtion oF its GroWth strateGy. the GroUP’s execUtiVe
BoarD memBers manaGe sUch risKs anD are actiVely inVolVeD in the GroUP’s
corPorate risK manaGement committee, Which meets FoUr times a year to
oVersee the GroUP risK manaGement Process. corPorate risK rePorts are
circUlateD monthly to the execUtiVe BoarD anD qUarterly to the
manaGement committee.
Market risk factors
¬ General economic environment
the disposable income of customers and their leisure activity
preferences are affected by changes in the general economic
environment. the Group regularly reviews its product offering
and engages with its customers to ensure it provides value for
money and meets its customers’ needs. the Group’s spread of
businesses across different locations and economies reduces its
exposure to the economy of any one country.
¬ Competition
merlin’s brands are well known and valued in their markets but
compete for consumer time and expenditure with other offers
in the attractions sector and also with other leisure and
recreational activities. the strength of the brands and the
Group’s significant marketing leverage help to mitigate this
risk. in addition, the Group undertakes regular and thorough
market research across each of its businesses, to provide
insight and understanding of its customers’ expectations and
whether their needs are being met.
¬ Seasonality and weather
many of merlin’s businesses are seasonal and extreme weather
conditions at peak trading times could have an impact on
business performance. merlin seeks to maintain a balance in
its portfolio between activities which are broadly indoor and
outdoor and also has a good and increasing geographical
spread of businesses particularly across north america and
europe and, more recently, the asia Pacific region, thus
reducing the potential impact of this risk. Furthermore, merlin
continues to grow its pre-booked business which provides a
hedge against impulse visits, which are more inclined to be
influenced by adverse weather.
the Board, the management committee and the executive Board
believe appropriate processes are in place to monitor and mitigate
these risks and their potential adverse consequences to merlin.
these risks include:
Operational risk factors
¬ Key personnel
merlin is a ‘people business’ and the Group’s performance
depends largely on recruiting and retaining its employees and
senior managers. merlin mitigates this risk through innovative
recruitment, training and personal development programmes,
proactively managed succession planning and through incentive
schemes, including share ownership, to attract, develop,
motivate and retain employees and senior managers.
¬ Brands and offerings
merlin has a wide range of brands and offerings which have
been built upon a reputation for quality and excellence in
delivery. revenues may be adversely affected by serious
incident, accident or similar occurrence. the high profile
nature of a number of the Group’s sites means there is also a
risk of being targeted by activists. merlin mitigates these risks
by maintaining industry leading standards of training, safety and
security systems, intelligence and procedures.
¬ New site and attraction developments
the Group’s ability to grow its business is dependent on
securing new sites in the right locations at the right price and
on obtaining the necessary planning permissions. merlin has a
proactive new business development and site search team
who are continuously identifying and evaluating options for
new site locations and who work closely with developers and
planners in key cities and other locations around the world.
¬ Property and the environment
the Group operates from some leasehold sites and is subject
to local environmental laws and regulations at the various
locations from which it operates. its ability to continue in
business at its leasehold sites is dependent on securing lease
renewals from time to time and on its ability to ensure that it
meets all material environmental laws and regulations
applicable to its locations. the Group’s spread of businesses
across different locations and jurisdictions reduces its exposure
to any one site or jurisdiction and merlin works proactively to
manage property and environmental matters.
40
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 PrinciPal risKs anD Uncertainties
Financial risk
merlin’s financial risks are managed by the Group’s finance teams
in accordance with documented internal control procedures.
all significant financing transactions are authorised by the
management committee. the four key financial risks affecting
the Group are:
¬ Interest rate risk
merlin primarily finances its operations through bank
borrowings. merlin’s bank borrowings are borrowed at floating
interest rates, and merlin utilises interest rate swaps wherever
appropriate to mitigate the risk of increases in the interest rate
applicable to its borrowing.
¬ Credit risk
counterparty credit ratings are regularly monitored, and there
is no significant concentration of credit risk with any single
counterparty.
¬ Liquidity risk
cash forecasts identifying the liquidity requirements of the
Group are produced frequently and are regularly reviewed to
ensure that sufficient financial headroom exists for at least a
twelve month period.
¬ Foreign currency risk
merlin’s borrowings are predominantly denominated in
sterling, euros, Us Dollars and australian Dollars to broadly
match the currencies of the underlying business revenues.
merlin keeps its currency exposure under review and mitigates
this with hedging where it considers this to be appropriate.
41
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 merlin’s
manaGement team
the comPany is manaGeD in lUxemBoUrG By its BoarD oF manaGers (the
BoarD), Which comPrises rePresentatiVes oF its PrinciPal shareholDers. the
BoarD is the comPany’s Decision-maKinG BoDy. the BoarD is aDViseD on Key
strateGic Decisions By a manaGement committee maDe UP oF Key memBers
oF the execUtiVe BoarD anD rePresentatiVes oF shareholDers. Day to Day
oPerational oVersiGht oF merlin’s BUsiness is the resPonsiBility oF its
execUtiVe BoarD Which ProViDes recommenDations on oPerational matters
to the oPeratinG comPanies in the GroUP.
Claus Andersen served throughout 2011and remains a member
of the Board as at the date of this report. mr andersen joined the
leGo Group in 2007 and is legal counsel and a member of the
Board of a number of the leGo Group and KirKBi a/s
subsidiaries. Prior to joining leGo/KirKBi, mr andersen worked
in copenhagen at the law firm Dla Piper.
Lars Boné served throughout 2011and remains a member of the
Board as at the date of this report. he is Vice President, Portfolio
management, and Group treasurer at KirKBi a/s. Prior to joining
KirKBi a/s, he was with Danfoss a/s, sydbank a/s and has also
worked as a treasurer in leGo system a/s.
Emanuela Brero served throughout 2011and remains a member
of the Board as at the date of this report. ms Brero joined cVc
capital Partners in 2005 and is a Director of corporate
administration in luxembourg. Prior to joining cVc ms Brero
worked in the corporate Department of société européenne de
Banque (luxembourg), where she was involved in the structuring
and implementation of a wide range of Private equity transactions.
ms Brero holds a Degree in Business administration from
Università Bocconi, italy.
Stef Oostvogels was appointed on 31st January 2012 and
remains a member of the Board as at the date of this report.
mr oostvogels is an independent lawyer and represents cVc on
the merlin Board of managers. mr oostvogels has over 20 years
of professional experience, covering mergers and acquisitions,
private equity, banking and finance, corporate law, international
taxation, and general business law. mr oostvogels has been a
Board of Managers
members of the Board of managers during the year and at the
date of this report are as follows:
Robert L. Friedman served throughout 2011and remains a
member of the Board as at the date of this report. mr Friedman
is a senior managing Director of Blackstone based in new york.
on joining Blackstone in 1999, mr Friedman worked primarily in
Blackstone’s Private equity group. he was chief legal officer
from January 2003 to august 2010 and was chief administrative
officer during most of that time.
Before joining Blackstone, mr Friedman had been a partner with
simpson thacher & Bartlett for 25 years, where he was a senior
member of that law firm’s mergers and acquisitions practice. at
simpson thacher, mr Friedman advised the Blackstone Group
since its foundation in 1985.
mr Friedman graduated from columbia college and received a
JD from the University of Pennsylvania law school. he currently
serves as a Director of axis capital holdings limited, FGic
corporation, orbitz Worldwide inc., yrc Worldwide inc. and
trW automotive holdings corp. mr Friedman is a member of
the Board of advisors of the institute for law and economics of
the University of Pennsylvania, a member of the Board of Visitors
of columbia college, a member of the Board of Directors of
United Way of new york city, a trustee of the nantucket land
council, and a trustee of chess-in-the-schools and new
alternatives for children, two charitable organisations with
programmes for disadvantaged youth in new york city.
John Sutherland served throughout 2011and remains a member
of the Board as at the date of this report. mr sutherland is an
independent Director who also sits on the Board of numerous
other external luxembourg companies. he was previously
managing Director of a company operating in the luxembourg
financial services sector for ten years and has 20 years experience
working in the financial services industry.
42
merlin’s manaGement team
member of the luxembourg Bar since 1990 and a member of the
Brussels Bar since 1987. mr oostvogels was a founding partner of
the luxembourg business law firm, oostvogels Pfister Feyten and
also served as managing partner within the firm for ten years
during the period 1999-2009.
Bénédicte Moens-Colleaux served throughout 2011and resigned
from the Board with effect from 31st January 2012.
The Management Committee
the chairman and members of the management committee
during the year and at the date of this report are as follows:
Sir John Sunderland
Chairman
sir John sunderland served throughout 2011as chairman of the
management committee and non-executive chairman of merlin
entertainments and continues in these roles as at the date of
this report.
Previously, sir John was chairman of cadbury schweppes from
2003 to 2008 and chief executive officer from 1996 to 2003.
sir John was also President of the cBi from 2004 to 2006,
President of the chartered management institute from 2006 to
2007, President of the Food and Drink Federation from 2002 to
2004, President of the incorporated society of British advertisers
from 2002 to 2005 and a non-executive Director of the rank
Group from 1998 to 2006. sir John is a non-executive Director
of Barclays Bank plc, chancellor of aston University and a
member of the council of reading University.
Nick Varney
Chief Executive Officer
nick Varney served throughout 2011and remains a member of
the management committee as at the date of this report. he has
over 20 years’ experience in the visitor attractions industry and
was appointed chief executive officer in 1999. Prior to that, nick
was managing Director of Vardon attractions and a main board
director of Vardon plc. in 1999, nick led the management buyout
of Vardon attractions to form merlin entertainments and, in
2005, initiated the process which led to its acquisition by Blackstone.
Before joining Vardon attractions, nick Varney had senior positions
within the tussauds Group, including marketing Director of alton
towers and head of Group marketing.
Andrew Carr
Chief Financial Officer
andrew carr served throughout 2011and remains a member of
the management committee as at the date of this report. he is a
qualified chartered accountant and was appointed chief Financial
officer in 1999. Prior to that, andrew was Financial Director of
Vardon attractions and played a key role in the management
buyout of Vardon attractions to form merlin entertainments in
1999 and in the subsequent business, including the two follow-on
buyouts and the acquisitions of leGolanD, Gardaland and the
tussauds Group.
Before joining Vardon attractions, andrew carr trained, and was
subsequently head of a regional corporate Finance Department,
at KPmG.
Soren Sorensen
Member and representative of KIRKBI A/S
soren sorensen served throughout 2011and remains a member
of the management committee as at the date of this report. he
is the ceo of KirKBi a/s, following his appointment in march
2010 and is the chairman and member of the Boards of a number
of KirKBi a/s subsidiaries. Prior to joining the Group, he was
managing Partner of KPmG Denmark and cFo of a.P. moller-
maersk. soren is a qualified chartered accountant and holds an
msc from the copenhagen Business school.
Thomas Lau Schleicher
Member and representative of KIRKBI A/S
thomas lau schleicher was appointed on 14th February 2012
and remains a member of the management committee as at the
date of this report. he was previously a Director at eqt Partners
from 2001-2010. thomas holds an msc in Finance and accounting.
Jørgen Vig Knudstorp
Member and representative of KIRKBI A/S
Jørgen Vig Knudstorp served throughout 2011and resigned on
14th February 2012.
43
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 merlin’s manaGement team
Joseph Baratta
Member and representative of Blackstone Group International
Joseph Baratta served throughout 2011and remains a member of
the management committee as at the date of this report. he is a
senior managing Director in Blackstone’s Private equity business
and is based in london. he is head of european Private equity
and a member of Blackstone’s executive committee. since joining
Blackstone in 1998, Joe has been involved in the execution of
Blackstone’s investments in Universal orlando, nycomed
Pharmaceuticals, houghton mifflin, spirit Group and the original
investment in the merlin Group. in addition to merlin, Joe is
responsible for Blackstone’s investments in seaworld Parks and
entertainment, center Parcs, tragus Group, southern cross and
ics Group. Joe Baratta serves as a Director of seaworld Parks
and entertainment, center Parcs plc and tragus Group plc. Prior
to joining Blackstone, Joe Baratta worked at tinicum incorporated,
mccown De leeuw & company and at morgan stanley in its
m&a Department.
Gerry Murphy
Member and representative of Blackstone Group International
Dr Gerry murphy was appointed to the management committee
on 29th april 2011and remains a member of the management
committee as at the date of this report. he is a senior managing
Director in Blackstone’s corporate Private equity group based in
london. Gerry serves as chairman of the firm’s european holding
company and is a director of United Biscuits, Kloeckner Pentaplast,
michaels stores and Jack Wolfskin. Before joining Blackstone in
2008, Dr murphy spent five years as ceo of Kingfisher plc, a
Ftse 100 company and the leading home improvement retailer in
europe and asia. he has previously been the ceo of carlton
communications plc, exel plc and Greencore Group plc and has
also served on the boards of reckitt Benckiser Group plc, abbey
national plc and novar plc. Gerry is a non-executive director of
British american tobacco plc and is a member of the council of
the British Venture capital and Private equity association and the
advisory Board of the UK india Business council.
Rob Lucas
Member and representative of CVC Capital Partners
rob lucas served throughout 2011and remains a member of the
management committee as at the date of this report. rob is a
managing Partner and head of UK investments at cVc capital
Partners and is a member of the european investment
committee. rob lucas holds a Degree in electrical engineering
from imperial college, london.
Pev Hooper
Member and representative of CVC Capital Partners
Pev hooper served throughout 2011and remains a member of
the management committee as at the date of this report. he is
a senior managing Director of cVc UK and, in addition to merlin,
is responsible for cVc’s investments in the aa / saga and Virgin
active. Prior to joining cVc, he worked at citigroup and
schroders, in m&a. Pev hooper holds an ma degree from
oxford University.
44
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 merlin’s manaGement team
The Executive Board
the executive Board comprises senior executives of the business. as at the date of this
report the members of the executive Board are:
Nick Varney
Chief Executive Officer and Member of the Management Committee, as noted above.
Andrew Carr
Chief Financial Officer and Member of the Management Committee, as noted above.
Colin Armstrong
Group Legal Director
Company Secretary
David Bridgford
Strategy Director
Tea Colaianni
Group HR Director
Andy Davies
Commercial Services Director
Glenn Earlam
Managing Director
Midway Attractions
Mark Fisher
Chief Development Officer
John Jakobsen
Managing Director
LEGOLAND Parks
Nick Mackenzie
Managing Director
Resort Theme Parks
Grant Stenhouse
Project Development Director
45
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 CORPORATE GOVERNANCE
MERLIN PEOPLECORPORATE
GOVERNANCE
MERLIN BELIEVES THAT EFFECTIVE CORPORATE GOVERNANCE IS A FUNDAMENTAL ASPECT
OF A WELL RUN COMPANY AND IS COMMITTED TO MAINTAINING HIGH STANDARDS OF
CORPORATE GOVERNANCE ACROSS ITS GROUP. THE PARAGRAPHS BELOW SET OUT THE
KEY GOVERNANCE STRUCTURES AND INTERNAL CONTROLS. ALTHOUGH NONE OF THE
SHARES OF ANY COMPANY IN THE MERLIN ENTERTAINMENTS GROUP ARE LISTED ON A
STOCK EXCHANGE, MERLIN SEEKS, SO FAR AS APPROPRIATE, TO COMPLY WITH THE UK
CORPORATE GOVERNANCE CODE.
Through the processes that are in place the Board, Management
Committee and Executive Board believe that Merlin complies
with the spirit of the Code in a manner that is appropriate to its
ownership structure.
Management
The Company is managed in Luxembourg by the Board which
comprises representatives of the principal shareholders. The
Board is the Company’s decision-making body.
Co-ordination of Merlin’s operating subsidiaries is conducted
by a UK company, Merlin Entertainments Group Limited, which
provides central services to Merlin, covering development activities,
brand management, and operational and administrative support.
Day to day operational oversight of Merlin’s business is the
responsibility of the Executive Board which provides
recommendations on operational matters to the operating
companies in the Group. The Board is advised on key strategic
decisions by the Management Committee. The Management
Committee’s role is to make recommendations to companies in
the Merlin Group on strategic and key non-operational matters.
The recommendations of the Executive Board (on operational
matters) and the Management Committee (on strategic and key
non-operational matters) are not binding on any member of the
Merlin Group and individual Group company decisions are taken
by the boards of directors of each Group company.
Board constitution and procedures
The Board is responsible for overseeing Merlin, focusing, as its
ultimate holding company, primarily on the Group’s funding and
capital structure. Other than these areas and where required
for the Company to exercise its rights as the ultimate holding
company of Merlin, the Board does not involve itself in operational
matters or the decisions of other companies in the Group.
The Management Committee is the body responsible for
considering and providing recommendations to Group
companies in relation to:
¬ the development of strategy and major policies.
¬ the review of management performance.
¬ the approval of the annual operating plan, Managers’ Reports
and Financial Statements and major acquisitions and disposals.
¬ the system of internal control.
¬ corporate governance.
The Chairman is responsible for the effective running of the
Management Committee and for communications with all
board and committee members and shareholders. He ensures
that the Management Committee receives sufficient information
on financial trading and corporate issues prior to Management
Committee meetings. The Chief Executive Officer, assisted by the
other members of the Executive Board, is responsible for
day-to-day operations and the development of strategic plans for
consideration by the Management Committee as a whole.
Meetings of the Board are held periodically as required during the
year. Meetings of the Management Committee are held eight
times a year. Where urgent decisions are required on matters
specifically reserved for the Board or Management Committee
between meetings, there is a process in place to facilitate
discussion and decision making. The directors of all Group
companies, as well as the Board, Management Committee and
Executive Board also have access to the advice and services of
the Group Legal Director and Company Secretary.
46
CORPORATE GOVERNANCE
The Committee’s remit includes recommending to the Board and
other Group companies the appropriate policies and procedures
for ensuring the health, safety and security of visitors, employees,
suppliers and assets. The Committee is also responsible for
monitoring the adherence to such policies and procedures as well
as for making recommendations for improvements.
The Committee has access to sufficient resources to carry out
its duties, including the services of the Group Legal Director and
Company Secretary and the Group’s Health & Safety function.
Independent external legal and professional advice can also be
taken by the Committee if it believes it is necessary to do so.
Audit Committee
The Audit Committee is chaired by Sir John Sunderland.
The members of the Audit Committee are the Chairman and
a representative of each of the major shareholders (Blackstone,
CVC and KIRKBI). All members of the Audit Committee have
recent and relevant experience for their roles.
The Audit Committee meets at least twice during the financial
year at appropriate times in the audit cycle. In addition, it will
meet at such other times as the Board, Management Committee
or the Audit Committee chairman requires, or if requested by the
external auditors. Only Audit Committee members have the right
to attend its meetings but other individuals can be invited to
attend all or any part of any meeting of the Committee as and
when appropriate. The external auditors attend the Committee
meetings on a regular basis and at least twice each year.
The Executive Board meets monthly and is responsible for
overseeing the operational performance of the operating
companies in the Group as well as monitoring the progress of
capital projects and strategic transactions. The Executive Board
makes recommendations to the operating companies and the
Management Committee in relation to matters within its remit.
The Executive Board is chaired by the Chief Executive Officer
and comprises members of the senior executive management
of the Group.
Appropriate induction and subsequent training is available for new
members of the Board, Management Committee, Executive Board
and other committees.
Board Committees
The Board has three principal committees: a Health, Safety &
Security Committee, an Audit Committee and a Remuneration
Committee. All have clearly defined duties with written terms
of reference that are approved by the Board. As in the case of
the Management Committee and Executive Board, the Health,
Safety & Security Committee, Audit Committee and Remuneration
Committee provide recommendations to Merlin Entertainments
Group companies but any decisions to accept or implement these
recommendations are taken by the individual Group company boards.
Health, Safety & Security Committee
The Health, Safety & Security Committee is chaired by Sir John
Sunderland. The members of the Health, Safety & Security
Committee are the Chairman and the Group’s Chief Executive
Officer, Chief Financial Officer, Managing Director Resort Theme
Parks and Director of Health, Safety and Risk Management. Other
individuals can be invited to attend all or any part of any meeting
of the Committee as and when appropriate.
The Health, Safety & Security Committee meets at least four
times during the year and at such other times as the Board,
Management Committee or Chairman requires.
47
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 CORPORATE GOVERNANCE
The Committee has access to sufficient resources to carry out its
duties, including the services of the Group Legal Director and
Company Secretary and the Group’s Internal Audit function.
Independent external legal and professional advice can also be
taken by the Committee if it believes it is necessary to do so.
The Audit Committee’s responsibilities include:
¬ Monitoring the integrity of the financial statements of the
Group and reviewing significant financial reporting judgments.
¬ Reviewing the Group’s internal financial control system and
financial risk management systems.
¬ Monitoring and reviewing the effectiveness of the Group’s
internal audit function.
¬ Specific responsibilities with regard to the external auditors, as
outlined below:
(ii) The principle followed with regard to non-audit services
is that the auditors may not provide a service which:
• places them in a position to audit their own work
• creates a mutuality of interest
• results in the auditors developing close personal
relationships with Merlin employees
• results in the auditors functioning as a manager or
employee of Merlin or
• puts the auditors in the role of advocate for Merlin.
(iii) A report on the level of non-audit services provided by
the auditors is given to the Audit Committee annually and
parameters are set for the appropriate level thereof.
(iv) Details of the related audit and other services are set out
in note 2.1 to the consolidated financial statements.
(v) The company is not obliged to reappoint its auditors
annually and KPMG Luxembourg S.à r.l. will therefore
continue in office.
(i) The Committee regularly monitors the other services
being provided to the Group by its external auditors, and
seeks to ensure this does not impair their independence
or objectivity. The auditors are eligible for selection to
provide non-audit services only to the extent that their
skills and experience make them a competitive and most
appropriate supplier of these services. Non-audit services
are subject to market tenders or tests and are awarded to
the most appropriate provider.
If the Committee’s activities reveal any issues of concern or scope
for improvement, it will make recommendations to the Board on
actions needed to address the issue raised or make the necessary
improvement.
Merlin’s external auditors have confirmed for the year under
review that they consider themselves to be independent in their
professional judgement.
48
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 CORPORATE GOVERNANCE
Individuals do not participate in any discussions or vote in relation
to their own remuneration.
The Committee has access to sufficient resources to carry out its
duties, including the services of the Group Legal Director and
Company Secretary. Independent external legal and professional
advice can also be taken by the Committee if it believes it is
necessary to do so.
Internal controls
The Board has overall responsibility for the systems of internal
control, which are designed to manage the risk of failure to
achieve the objectives of the business, where such risk cannot be
eliminated. The Board has considered the systems of internal
control for the year under review and considers these to be
appropriate and adequate for the purposes of the Group.
Remuneration Committee
The Remuneration Committee is chaired by Sir John Sunderland.
The members of the Remuneration Committee are the Chairman
and a representative of each of the major shareholders
(Blackstone, CVC and KIRKBI).
The Committee meets at least once a year and will also meet
at such other times as the Board or Committee Chairman may
require. Only members of the Committee have the right to
attend meetings but other individuals may be invited to attend
from time to time, when appropriate.
The Committee’s remit includes recommending to the Board and
other Group companies the policy for the remuneration of the
Executive members of the Management Committee. The
objective of such policy is to ensure that the senior executive
management are provided with appropriate incentives to
encourage enhanced performance and are, in a fair and
responsible manner, rewarded for their individual contributions
to the Group’s success. In doing this the Committee considers
whether contractual terms and payments on termination are fair
to individual executive management and the employing company
and, importantly, that failure is not rewarded. The Committee also
reviews the design of share incentive and bonus plans for approval
by the Board and reviews the Group’s remuneration policies as a
whole and remuneration trends across the Group.
49
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 CORPORATE GOvERNANCE
MERLIN PEOPLEMANAGERS'
REPORT
The managers present their Annual Report and the consolidated
financial statements covering a trading period of 53 weeks ended
31 December 2011 (2010: 52 weeks ended 25 December 2010).
As part of financing this acquisition, the Group drew down new
debt under its existing financing facilities.
Principal activities
The Group’s principal activity is the operation of visitor attractions
and theme park resorts in the United Kingdom, Continental
Europe, North America and the Asia Pacific region. The Group’s
results are detailed on page 54 of the consolidated financial
statements.
Group’s likely future development
The managers consider that the Group’s existing operations will
continue, attracting increasing market share and generating profits.
Opportunities to increase its portfolio by opening new attractions
will be sought out and evaluated, and, where appropriate, the
Group will acquire other existing businesses. The Group will
continue as a market leader in branded visitor attractions.
The Company’s principal activity is that of a holding company. The
Company has established a US branch with the sole activity of
holding certain loan instruments assigned to it by the Company.
Managers and managers’ interests
The managers who held office during the year were as follows:
John Sutherland
Claus Andersen
Lars Boné
Emanuela Brero
Robert Friedman
Bénédicte Moens-Colleaux
Stef Oostvogels
(resigned 31 January 2012)
(appointed 31 January 2012)
None of the managers who held office at the end of the
financial year had any disclosable interest in the shares of
Group companies.
Certain managers benefited from qualifying third party indemnity
provisions in place during the financial year and at the date of
this report.
Business review
Information on the results of the business and its KPIs are given
on page 3.
Detailed reviews of the performance of the Group for the year
are set out in the business review on pages 12 to 25 and the
Group financial review on pages 36 to 39.
Further information on the principal risks and uncertainties of
the business are given in the Group's business review on pages
40 to 41.
Proposed dividend
The managers do not recommend the payment of a dividend.
Subsequent events
On 10 February 2012 the Group’s A$140 million takeover offer
for Living and Leisure Australia (LLA), that was announced in
December 2011, went unconditional. LLA owns and operates
nine leisure attractions in the Asia Pacific region as well as a
management contract to operate an aquarium in Dubai, through
three divisions: Oceanis Group aquaria; Australia Alpine
Enterprises ski fields; and Australian Treetop Adventures
attractions.
This acquisition offers the Group an excellent opportunity to
build on the acquisition of the Sydney Attractions Group in 2011
by increasing its network of world class international attractions in
Asia and Australia.
50
MANAGERS’ REPORT
Substantial interests
The Company’s equity as at the date of this report is owned as
follows:
KIRKBI A/S (KIRKBI)
Funds managed by Blackstone
Group International (Blackstone)
Funds managed by CvC Capital Partners (CvC)
Management
Ordinary shares
%
31.63
29.80
24.54
14.03
100.00
Financial instruments
Information on financial instruments is detailed in note 5.6 of the
consolidated financial statements.
Research and development
The Group does not engage in significant research and
development activities.
Market value of land and buildings
In the opinion of the managers, the market value of the land and
buildings of the Group is not materially different from their net
book value.
Employees
Regular informal meetings are held between management and
employees in order to keep employees informed on current
developments within the Group and to take account of their
views in making decisions likely to affect their interests. Works
councils operate at some sites. In addition a quarterly newsletter
is produced.
Essential contracts and arrangements
The right to use the LEGOLAND and LEGO brands in the
LEGOLAND Parks and LEGOLAND Discovery Centres is
granted to members of the Group by KIRKBI, a significant
shareholder in Merlin, on an exclusive, perpetual and worldwide
basis pursuant to the terms of a Licence and Co-operation
Agreement. KIRKBI has the right to terminate the use of these
brands in certain exceptional circumstances. No such
circumstances exist at the date of this report, nor are any
foreseen at this time. The company considers the risk of such
termination to be remote.
Disclosure of information to auditors
The managers who held office at the date of approval of this
managers’ report confirm that, so far as they are each aware,
there is no relevant audit information of which the company’s
auditors are unaware; and each manager has taken all the steps
that he ought to have taken as a manager to make himself aware
of any relevant audit information and to establish that the
company’s auditors are aware of that information.
Auditors
Pursuant to a partners’ resolution, the company is not obliged to
reappoint its auditors annually and KPMG Luxembourg S.à r.l. will
therefore continue in office.
By order of the Board
John Sutherland
Manager
19, rue de Bitbourg, L-1273, Luxembourg
20 March 2012
51
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011
INDEPENDENT AUDITOR’S REPORT
To the Partners of
Merlin Entertainments S.à r.l.
19, rue de Bitbourg
L-1273 Luxembourg
REPORt OF thE REviSEuR D’EntREPRiSES AGRéé
Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of Merlin Entertainments S.à r.l. for the 53 week period ended
31 December 2011, which comprise the consolidated statement of financial position as at 31 December 2011 and the consolidated
statements of income, comprehensive income, changes in equity and cash flows for the 53 week period then ended, and a summary
of significant accounting policies and other explanatory information.
Board of Managers’ responsibility for the consolidated financial statements
The Board of Managers is responsible for the preparation and fair presentation of these consolidated financial statements in accordance
with International Financial Reporting Standards as adopted by the European Union, and for such internal control as the Board of
Managers determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Responsibility of the Réviseur d’Entreprises agréé
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit
in accordance with International Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur
Financier. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the judgement of the Réviseur d’Entreprises agréé, including the assessment of the risks
of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the
Réviseur d’Entreprises agréé considers internal control relevant to the entity’s preparation and fair presentation of the consolidated
financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the Board of Managers, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of Merlin
Entertainments S.à r.l. as of 31 December 2011, and of its consolidated financial performance and its consolidated cash flows for
the 53 week period then ended in accordance with International Financial Reporting Standards as adopted by the European Union.
Report on other legal and regulatory requirements
The consolidated management report, which is the responsibility of the Board of Managers, is consistent with the consolidated
financial statements.
KPMG Luxembourg S.à r.l.
Cabinet de révision agréé
Thierry Ravasio
Luxembourg, 20 March 2012
52
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 FINANCIAL STATEMENTS - CONTENTS
PRiMaRy sTaTeMenTs
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT OF COMPREhENSIvE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF ChANGES IN EqUITy
CONSOLIDATED STATEMENT OF CASh FLOWS
seCTion 1 – Basis of PRePaRaTion
seCTion 2 – ResuLTs foR The yeaR
2.1 PROFIT BEFORE TAx
2.2 ExCEPTIONAL AND NON-TRADING ITEMS
2.3 TAxATION
seCTion 3 – Business CoMBinaTions
seCTion 4 – oPeRaTing asseTs and LiaBiLiTies
4.1 PROPERTy, PLANT AND EqUIPMENT
4.2 GOODWILL AND INTANGIBLE ASSETS
4.3 IMPAIRMENT TESTING
4.4 WORKING CAPITAL
4.5 PROvISIONS
seCTion 5 – CaPiTaL sTRuCTuRe and finanCing
5.1 NET DEBT
5.2 BORROWINGS
5.3 LEASE OBLIGATIONS
5.4 DERIvATIvE FINANCIAL INSTRUMENTS
5.5 FINANCE INCOME AND COSTS
5.6 FINANCIAL RISK FACTORS AND FAIR vALUE ANALySIS
5.7 EqUITy AND CAPITAL MANAGEMENT
seCTion 6 – oTheR noTes
6.1 INvESTMENT IN JOINT vENTURES
6.2 EMPLOyEE BENEFITS
6.3 RELATED PARTy TRANSACTIONS
6.4 CONTINGENT LIABILITIES
6.5 SUBSEqUENT EvENTS
6.6 NEW STANDARDS AND INTERPRETATIONS
6.7 ULTIMATE PARENT COMPANy INFORMATION
6.8 SUBSIDIARy AND JOINT vENTURE UNDERTAKINGS
54
55
56
57
58
59
61
61
63
65
68
70
70
72
74
76
77
78
78
78
79
81
82
83
88
92
92
92
96
98
98
98
98
99
53
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 CONSOLIDATED INCOME STATEMENT
for the 53 weeks ended 31 december 2011
(2010: 52 weeks ended 25 December 2010)
Revenue
Cost of sales
Gross profit
staff expenses
note
2.1
2.1
underlying
trading
£m
945.7
(128.2)
817.5
2.1
(228.8)
2011
Exceptional
& non-trading
items (2)
£m
-
-
-
-
total
£m
underlying
trading
£m
945.7
800.8
(128.2)
(105.0)
817.5
695.8
2010
Exceptional
& non-trading
items (2)
£m
-
-
-
total
£m
800.8
(105.0)
695.8
(228.8)
(198.9)
(20.5)
(219.4)
other operating expenses
(283.2)
(1.7)
(284.9)
(241.1)
(15.4)
(256.5)
EBitDA (1)
2.1
305.5
(1.7)
303.8
255.8
(35.9)
219.9
depreciation, amortisation
and impairment
Operating profit
finance income
finance costs
Profit before tax
Taxation
4.1, 4.2
(74.1)
-
(74.1)
(57.8)
(3.7)
(61.5)
5.5
5.5
231.4
5.7
(1.7)
229.7
198.0
(39.6)
158.4
2.5
8.2
0.6
19.1
19.7
(127.7)
(13.8)
(141.5)
(144.7)
(7.4)
(152.1)
109.4
(13.0)
96.4
53.9
(27.9)
26.0
2.3
(28.2)
(0.3)
(28.5)
(32.6)
4.3
(28.3)
(2.3)
Profit/(loss) for the year
81.2
(13.3)
67.9
21.3
(23.6)
Profit/(loss) attributable to:
owners of the Company
non-controlling interest
Profit/(loss) for the year
80.6
0.6
(13.3)
-
81.2
(13.3)
67.3
0.6
67.9
19.5
1.8
(23.6)
-
(4.1)
1.8
21.3
(23.6)
(2.3)
(1) eBiTda – this is defined as earnings before finance income and costs, taxation, depreciation, amortisation and impairment and is after taking
account of profit after tax of joint ventures.
(2) details of exceptional and non-trading items are provided in note 2.2.
54
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011
CONSOLIDATED STATEMENT OF COMPREhENSIvE INCOME
for the 53 weeks ended 31 december 2011
(2010: 52 weeks ended 25 December 2010)
Profit/(loss) for the year
Other comprehensive income
exchange differences on retranslation of subsidiaries
exchange differences relating to the net investment in foreign operations
effective portion of changes in fair value of cash flow hedges
defined benefit plan actuarial gains and losses
income tax on other comprehensive income
Other comprehensive income for the year net of income tax
total comprehensive income for the year
total comprehensive income attributable to:
owners of the Company
non-controlling interest
total comprehensive income for the year
note
5.5
6.2
2.3
2011
£m
67.9
2010
£m
(2.3)
(14.9)
(19.3)
6.2
(7.0)
(1.7)
0.6
(16.8)
51.1
50.6
0.5
51.1
24.3
(0.6)
1.5
(1.1)
4.8
2.5
0.9
1.6
2.5
55
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 december 2011
(2010: 25 December 2010)
non-current assets
Property, plant and equipment
intangible assets
investment in joint ventures
other receivables
deferred tax assets
Current assets
inventories
Trade and other receivables
other financial assets
Cash and cash equivalents
total assets
Current liabilities
Bank overdrafts
interest-bearing loans and borrowings
finance leases
other financial liabilities
Trade and other payables
Tax payable
Provisions
non-current liabilities
interest-bearing loans and borrowings
finance leases
other payables
Provisions
employee benefits
deferred tax liabilities
total liabilities
net assets
issued capital and reserves attributable to owners of the Company
non-controlling interest
total equity
note
2011
£m
2010
£m
4.1
4.2
6.1
4.4
2.3
4.4
4.4
5.4
5.1
5.1
5.2
5.1
5.4
4.4
4.5
5.2
5.1
4.4
4.5
6.2
2.3
1,111.9
970.2
0.6
3.6
16.4
951.6
916.9
0.6
3.2
16.4
2,102.7
1,888.7
28.7
42.4
2.3
59.9
16.1
48.2
2.0
67.5
133.3
133.8
2,236.0
2,022.5
-
5.2
2.1
81.3
141.6
14.9
9.0
0.4
11.5
2.2
65.0
126.6
6.4
7.3
254.1
219.4
1,177.6
1,061.6
83.9
19.7
24.9
4.8
85.9
17.4
17.4
3.1
116.5
113.2
1,427.4
1,298.6
1,681.5
1,518.0
554.5
504.5
550.0
4.5
499.2
5.3
5.7
554.5
504.5
56
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 CONSOLIDATED STATEMENT OF ChANGES IN EqUITy
for the 53 weeks ended 31 december 2011
(2010: 52 weeks ended 25 December 2010)
Share
capital
£m
Share
premium
£m
Capital
reserve
£m
translation
reserve
£m
hedging
reserve
£m
note
Reserve
for own
shares
£m
Retained
earnings
£m
total
parent
equity
£m
non
controlling
interest
£m
total
equity
£m
at 27 december 2009
1.3 1,229.9 (1,142.6)
(46.6)
Loss for the year
other comprehensive
income for the year net
of income tax
Total comprehensive
income for the year
Reverse acquisition
equity-settled share-based
transactions
Cash-settled share-based
transactions
5.7
5.7
5.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
649.5
-
-
-
-
-
4.4
(0.5)
4.4
(0.5)
-
-
-
-
(160.0)
(118.0)
3.7
(114.3)
(4.1)
(4.1)
1.8
(2.3)
1.1
5.0
(0.2)
4.8
(3.0)
0.9
1.6
2.5
-
-
-
-
-
-
(0.2)
-
-
0.2
0.3
649.5
0.3
(33.5)
(33.5)
-
-
-
649.5
0.3
(33.5)
At 25 December 2010
1.3 1,229.9 (493.1)
(42.2)
(0.5)
(0.2) (196.0) 499.2
5.3
504.5
Profit for the year
other comprehensive
income for the year net
of income tax
Total comprehensive
income for the year
shares issued
5.7
dividends to non-
controlling interest
-
-
-
-
-
-
-
-
0.2
-
-
-
-
-
-
-
-
(10.0)
(5.5)
(10.0)
(5.5)
-
-
-
-
-
-
-
-
-
67.3
67.3
0.6
67.9
(1.2)
(16.7)
(0.1)
(16.8)
66.1
50.6
0.5
51.1
-
-
0.2
-
0.2
-
(1.3)
(1.3)
At 31 December 2011
1.3 1,230.1 (493.1)
(52.2)
(6.0)
(0.2) (129.9) 550.0
4.5
554.5
57
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 4.1,4.2
5.5
5.5
2.3
3.1
CONSOLIDATED STATEMENT OF CASh FLOWS
for the 53 weeks ended 31 december 2011
(2010: 52 weeks ended 25 December 2010)
Cash flows from operating activities
Profit/(loss) for the year
Adjustments for:
depreciation, amortisation and impairment charges
finance income
finance costs
Taxation
amortisation of grants
Loss on sale of property, plant and equipment
Working capital changes
increase in provisions and other non-current liabilities
Cash-settled share-based transactions
Tax paid
net cash inflow from operating activities
Cash flows from investing activities
interest received
acquisition of subsidiaries
acquisition of intangibles
acquisition of property, plant and equipment
disposal of property, plant and equipment
government grants received
net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Proceeds from bank loans
Proceeds from shareholder loans
financing costs
Capital repayments of finance leases
interest paid
acquisition of foreign exchange contracts
Repayment of borrowings
Repayment of shareholder loans
dividends paid to non-controlling interest
net cash outflow from financing activities
net decrease in cash and cash equivalents
Cash and cash equivalents, net of bank overdrafts, at beginning of period
effect of exchange rate fluctuations
Cash and cash equivalents, net of bank overdrafts, at end of period
5.1
note
2011
£m
2010
£m
67.9
(2.3)
74.1
(8.2)
141.5
28.5
303.8
(0.4)
-
3.9
2.0
-
309.3
(17.4)
291.9
1.8
(58.6)
(0.2)
61.5
(19.7)
152.1
28.3
219.9
(0.4)
0.1
6.0
4.1
(33.9)
195.8
(12.5)
183.3
0.6
(15.6)
(0.5)
(173.9)
(103.3)
0.1
1.1
0.5
1.8
(229.7)
(116.5)
0.2
113.3
-
(13.7)
(2.4)
8.8
1,093.1
75.4
(42.7)
(2.0)
(117.1)
(109.2)
(1.2)
-
(44.8)
(1,056.9)
-
(51.7)
(0.8)
(66.5)
(4.3)
67.1
(2.9)
59.9
-
(85.2)
(18.4)
86.6
(1.1)
67.1
58
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 1 BASIS OF PREPARATION
53 weeks ended 31 december 2011
Basis of preparation
Merlin Entertainments S.à r.l. (the Company) is a company incorporated in Luxembourg and its registered office is 19, rue de Bitbourg,
L-1273, Luxembourg.
These consolidated financial statements were approved by the Board of Managers on 20 March 2012.
The consolidated financial statements have been prepared and approved by the managers in accordance with International Financial
Reporting Standards as adopted by the EU (Adopted IFRS).
In preparing these 2011 financial statements the format and layout have been changed to follow the principles outlined in the UK
Financial Reporting Council’s publication ‘Louder than words’. These changes have been made to make the Group’s financial statements
less complex, more relevant to shareholders and to provide readers with a clearer understanding of what drives the financial
performance of the Group. Notes have been grouped under key headings and each section sets out the accounting policies applied
in producing these notes together with any key judgements and estimates used. No comparative information has been restated.
The accounting policies set out in the sections below have, unless otherwise stated, been applied consistently to all periods presented
in these consolidated financial statements and have been applied consistently by all subsidiaries and joint ventures.
The Group prepares its annual consolidated financial statements on a 52 or 53 week basis. These consolidated financial statements have
been prepared for the 53 weeks ended 31 December 2011 (2010: 52 weeks ended 25 December 2010). The consolidated financial
statements are prepared on the historical cost basis except for derivative financial instruments measured at their fair value.
The consolidated financial statements have been prepared on the going concern basis. The Group has net current liabilities of £120.8
million (2010: £85.6 million), net assets of £554.5 million (2010: £504.5 million), a profit for the year of £67.9 million (2010: loss of £2.3
million) and operating cash inflows of £291.9 million (2010: £183.3 million). This basis of preparation assumes that the Group will
continue in operational existence, and will be able to meet its liabilities as they fall due, for at least twelve months from when the
consolidated financial statements were approved. As highlighted in note 5.2 the Group is funded by a bank loan facility, due for renewal
in 2017. The Group’s forecasts show that it will be able to operate within the level of that facility. The managers consider this
assumption to be reasonable because after reviewing the Group’s cash flow forecasts and trading budgets and making appropriate
enquiries, they believe the Group to be operationally and financially robust, and that it will generate sufficient cash to meet its borrowing
requirements for the next twelve months.
The consolidated financial statements are presented in Sterling based on the preference of the managers. The functional currency of the
Company is Euros.
All values are stated in £ million (£m) except where otherwise indicated.
Basis of consolidation
The consolidated financial statements comprise the financial statements of Merlin Entertainments S.à r.l. and its subsidiaries and branches
at the end of each reporting period, and include its share of its joint ventures’ results using the equity method.
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the
financial and operating policies of an entity to obtain benefits from its activities. In assessing control, potential voting rights that are
currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that control ceases.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated.
Where subsidiaries enter into financial guarantee contracts to guarantee the indebtedness of other companies within the Group, these
are considered to be insurance arrangements and accounted for as such. In this respect, the subsidiary concerned treats the guarantee
contract as a contingent liability until such time as it becomes probable that it will be required to make a payment under the guarantee.
59
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 1 BASIS OF PREPARATION (continued)
53 weeks ended 31 december 2011
foreign currency
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement,
except when deferred in equity as qualifying net investment hedges.
The results and financial position of those Group companies that do not have a Sterling functional currency are translated into
Sterling as follows:
• Assets and liabilities are translated at the closing rate at the end of the reporting period.
• Income and expenses are translated at average exchange rates during the year.
• All resulting exchange differences are recognised in equity in the translation reserve.
Classification of financial instruments issued by the group
Financial instruments often consist of a combination of debt and equity and the Group has to decide how to attribute values to
each. They are treated as equity only to the extent that they meet the following two conditions:
(i) they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets
or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and
(ii) where the instrument will or may be settled in the Group’s own equity instruments, it is either a non-derivative that includes no
obligation to deliver a variable number of the Group’s own equity instruments or is a derivative that will be settled by the Group
exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability, and where such an instrument takes
the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share capital and share
premium account exclude amounts in relation to those shares.
Finance payments associated with financial liabilities are dealt with as part of finance costs. Finance payments associated with financial
instruments that are classified in equity are dividends and are recorded directly in equity.
Judgements and estimates
The preparation of financial statements requires management to exercise judgement in applying the Group’s accounting policies. It also
requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
On an ongoing basis the following areas involve a higher degree of judgement or complexity and are explained in more detail in the
related notes:
• Recognition of deferred tax assets (note 2.3)
• Brand useful lives (note 4.2)
• Impairment testing (note 4.3)
During the year the following specific items also required a level of management judgement:
• Accounting for the acquisition of the Sydney Attractions Group and the fair value of the assets and liabilities acquired (note 3.1)
• Accounting for the Group’s amendment to its financing facilities in May 2011 (note 5.2)
new standards and interpretations
A full list of new accounting standards and interpretations that have been implemented in the year or will be implemented next year,
and which have no significant impact, can be found in note 6.6.
60
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 2 RESULTS FOR ThE yEAR
53 weeks ended 31 december 2011
2.1 Profit before tax
Segmental information
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses. The Group is managed through its three Operating Groups, which form the operating segments on which the information
shown below is prepared. The Group determines and presents operating segments based on the information that is provided internally
to the Chief Executive Officer (CEO), who is the Group’s chief operating decision maker. An operating segment’s operating results are
reviewed regularly by the CEO to make decisions about resources to be allocated to the segment and assess its performance, and for
which discrete financial information is available. Performance is measured based on segment EBITDA, as included in internal
management reports.
Information regarding the results of each operating segment is included below.
Segment revenue
360.1
273.5
252.4
215.0
330.4
310.5
942.9
799.0
Midway Attractions
LEGOLAnD Parks
Resort theme Parks
2011
£m
2010
£m
2011
£m
2010
£m
2011
£m
2010
£m
total
2011
£m
2010
£m
Central and other revenue
Revenue
2.8
1.8
945.7
800.8
Segment profit, being segment
EBitDA
Central costs
eBiTda before exceptional and
non-trading items
exceptional and non-trading items
within eBiTda (note 2.2)
Total eBiTda
depreciation, amortisation and impairment
net finance costs
Consolidated profit before tax
Midway Attractions
LEGOLAnD Parks
Resort theme Parks
2011
£m
2010
£m
2011
£m
2010
£m
2011
£m
2010
£m
total
2011
£m
2010
£m
146.1
115.8
86.9
73.7
96.7
89.0
329.7
278.5
(24.2)
(22.7)
305.5
255.8
(1.7)
(35.9)
303.8
219.9
(74.1)
(61.5)
(133.3)
(132.4)
96.4
26.0
61
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 2 RESULTS FOR ThE yEAR (continued)
53 weeks ended 31 december 2011
2.1 Profit before tax (continued)
Geographical areas
While each Operating Group is managed on a worldwide basis the information presented below is based on the geographical locations
of the visitor attractions concerned.
geographical information
united Kingdom
Continental europe
north america
asia Pacific
deferred tax assets
investments
Revenues
2011
£m
non-current
assets
2011
£m
Revenues
2010
£m
non-current
assets
2010
£m
403.8
324.3
154.0
63.6
733.1
858.9
344.7
149.0
382.3
282.0
120.0
16.5
717.5
861.7
277.2
15.3
945.7
2,085.7
800.8
1,871.7
16.4
0.6
2,102.7
16.4
0.6
1,888.7
The Company does not generate revenues or hold any significant assets in Luxembourg, which is its country of domicile.
Revenue
Revenue arises from the operation of visitor attractions and theme park resorts. Revenue represents the amounts (excluding vAT and
similar taxes) received from customers for admissions tickets, room revenue, retail and food and beverage sales. Revenue from the sale
of annual passes is deferred and then recognised over the period that the pass is valid. Ticket revenue is recognised at point of entry.
From time to time, the Group enters into service contracts for attraction development and revenue is recognised under these contracts
on a percentage completion basis. Service contract revenue in the year is not material.
Cost of sales
Cost of sales of £128.2 million (2010: £105.0 million) represents variable expenses (excluding vAT and similar taxes) incurred from
revenue generating activity. Food and beverage and retail consumables are the principal expenses included under this category.
62
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 2 RESULTS FOR ThE yEAR (continued)
53 weeks ended 31 december 2011
2.1 Profit before tax (continued)
Operating costs
staff numbers and costs
The average number of persons employed by the Group (including managers) during the year, analysed by category, was as follows:
operations
attraction management and central administration
The aggregate payroll costs of these persons were as follows:
Wages and salaries
share-based payments
social security costs
other pension costs
auditors’ remuneration
audit of these financial statements
audit of financial statements of subsidiaries pursuant to legislation
other services pursuant to such legislation
other services relating to taxation
services relating to corporate finance transactions entered into or proposed
all other services
2011
2010
10,831
1,533
9,129
1,511
12,364
10,640
2011
£m
2010
£m
196.4
179.4
-
26.5
5.9
6.4
28.3
5.3
228.8
219.4
2011
£m
1.0
0.1
0.2
0.4
-
0.1
1.8
2010
£m
0.8
0.1
0.3
0.4
0.7
0.1
2.4
2.2 exceptional and non-trading items
Accounting policy
Due to their material nature, certain exceptional and non-trading items have been classified separately in order to draw them to the
attention of the reader. They are adjustments that, in the judgement of the managers, are required in order to show the underlying
business performance of the Group more accurately.
63
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 2 RESULTS FOR ThE yEAR (continued)
53 weeks ended 31 december 2011
2.2 exceptional and non-trading items (continued)
Exceptional and non-trading items
The following items are exceptional or non-trading and have been shown separately on the face of the consolidated income statement:
Within staff expenses:
Cash-settled share-based payments and other related costs (3)
Within other operating expenses:
Costs in respect of potential iPo (4)
Costs in respect of group re-organisation (5)
acquisition costs (1)
Within depreciation, amortisation and impairment:
impairment of property, plant and equipment (note 4.1)
Within finance income and costs:
unrealised gain on re-measurement of financial derivatives at fair value (2)
unrealised loss on re-measurement of financial derivatives at fair value (2)
foreign currency translation differences for foreign operations (6)
exceptional and non-trading items before income tax
exceptional and non-trading income tax charge/(credit)
Exceptional and non-trading items for the year
2011
£m
2010
£m
-
-
-
-
1.7
1.7
-
-
(2.5)
13.8
-
11.3
13.0
0.3
13.3
20.5
20.5
4.9
8.7
1.8
15.4
3.7
3.7
(19.1)
-
7.4
(11.7)
27.9
(4.3)
23.6
2011
(1) Directly attributable acquisition costs were incurred in respect of the business combinations described in note 3.1, as well as the
transaction that completed after the year end as described in note 6.5. These are separately presented as they are not part of the
Group’s underlying operating expenses.
(2) The Group has separately presented gains and losses on derivative financial instruments, where the items are not hedge accounted,
in order to better present the underlying finance cost for the Group (note 5.5).
2010
(3) Prior to the shareholder transaction undertaken in 2010, the Group’s existing share option scheme that enabled key management
personnel and senior employees to purchase options in the Group was accounted for on an equity-settled basis, with the fair value
of options granted recognised as an employee expense together with a corresponding increase in equity. On 23 June 2010, in
anticipation of the shareholder transaction, the scheme rules were modified to enable the settlement of these options in cash.
As part of this modification the Group elected to take the resulting charge, insofar as it related to options already granted, directly
to equity. Where grants of options were made subsequent to the scheme modification and prior to the completion of the
shareholder transaction, the resulting charge was taken as part of operating expenses. These, together with other related payments
to employees, and any social insurance or other costs, were separately presented as they were not part of the Group’s underlying
operating expenses.
64
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 2 RESULTS FOR ThE yEAR (continued)
53 weeks ended 31 december 2011
2.2 exceptional and non-trading items (continued)
(4) During 2010 the Group considered a number of future financing options, including the possibility of listing shares in the Group
through an Initial Public Offering. Certain professional and advisory fees were incurred as part of this process which were
separately presented as they were not part of the Group’s underlying operating expenses.
(5) Certain professional and advisory fees were incurred in connection with the shareholder transaction, the creation of the new
holding company for the Group and subsequent group re-organisation. These were separately presented as they were not part
of the Group’s underlying operating expenses.
(6) The shareholder transaction and subsequent group re-organisation resulted in the settlement of certain intra-group loans that had
previously been treated as net investment hedging instruments. historic foreign exchange gains and losses that had been taken
direct to equity were therefore recycled through the income statement as the hedges became ineffective. These were separately
presented as they were not part of the Group’s underlying finance cost.
2.3 Taxation
Accounting policies
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement unless it relates to
items recognised directly in equity, when it is recognised through the consolidated statement of comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end
of the reporting period, and any adjustment to tax payable in respect of previous periods.
Deferred tax is provided on certain temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and taxation purposes respectively. The following temporary differences are not provided for: the initial recognition of
goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business
combination, and differences relating to investments in subsidiaries and joint ventures to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period.
After considering forecast future profits, deferred tax assets are recognised where it is probable that future taxable profits will be
available against which those assets can be utilised.
Recognised in the income statement
Current tax expense
Current year
adjustment for prior periods
Total current income tax
Deferred tax expense
origination and reversal of temporary differences
Change in tax rate
adjustment for prior periods
Total deferred tax
total tax expense in income statement
2011
£m
2010
£m
19.1
4.6
23.7
5.2
(2.9)
2.5
4.8
28.5
12.1
2.3
14.4
15.3
(1.1)
(0.3)
13.9
28.3
65
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 2 RESULTS FOR ThE yEAR (continued)
53 weeks ended 31 december 2011
2.3 Taxation (continued)
Reconciliation of effective tax rate
Profit before tax
income tax using the domestic corporation tax rate
non-deductible expenses
Tax exempt income
effect of tax rates in foreign jurisdictions
effect of changes in tax rate
unrecognised temporary differences
adjustments from prior years
total tax shown in income statement
2011
%
28.8%
12.3%
2011
£m
96.4
27.8
11.9
2010
%
29.6%
60.4%
2010
£m
26.0
7.7
15.7
(25.8%)
(24.9)
(170.0%)
(44.2)
7.4%
(3.0%)
2.5%
7.4%
29.6%
7.1
(2.9)
2.4
7.1
18.1%
(4.2%)
167.3%
7.7%
28.5
108.9%
4.7
(1.1)
43.5
2.0
28.3
2010
£m
0.8
(0.1)
0.4
1.1
Recognised directly in equity through the consolidated statement of other comprehensive income
foreign exchange translation differences relating to the net investment in foreign operations
effective portion of changes in fair value of cash flow hedges
actuarial gains and losses
total tax (income)/expense in consolidated statement of other comprehensive income
2011
£m
1.4
(1.5)
(0.5)
(0.6)
Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
other short term temporary differences
intangible assets
Tax value of loss carry-forwards
Tax assets/(liabilities)
set-off tax
net tax assets/(liabilities)
Assets
2011
£m
-
13.1
-
25.5
38.6
(22.2)
16.4
2010
£m
-
8.0
-
8.4
Liabilities
2011
£m
2010
£m
net
2011
£m
2010
£m
(88.3)
(60.7)
(88.3)
(60.7)
-
(50.4)
-
(1.3)
(51.2)
-
13.1
(50.4)
25.5
6.7
(51.2)
8.4
16.4
(138.7)
(113.2)
(100.1)
(96.8)
-
22.2
-
-
-
16.4
(116.5)
(113.2)
(100.1)
(96.8)
Other short term temporary differences primarily relate to investments, deferred foreign exchange gains, and revaluation of financial
instruments.
Set-off tax is separately presented to show deferred tax assets and liabilities by category before the effect of off-setting these amounts
in the statement of financial position where the Group has the right and intention to off-set these amounts.
66
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 2 RESULTS FOR ThE yEAR (continued)
53 weeks ended 31 december 2011
2.3 Taxation (continued)
Movement in deferred tax during the current year
Property, plant and equipment
other short term temporary differences
intangible assets
Tax value of loss carry-forwards
net tax assets/(liabilities)
Movement in deferred tax during the previous year
Property, plant and equipment
other short term temporary differences
intangible assets
Tax value of loss carry-forwards
net tax assets/(liabilities)
unrecognised deferred tax assets
Property, plant and equipment
other short term temporary differences
intangible assets
Tax value of loss carry-forwards
net tax assets
26
December
2010
£m
Acquired
in business
combinations
(note 3.1)
£m
Recognised
in other
comprehensive
income
£m
Recognised
in income
£m
(60.7)
6.7
(51.2)
8.4
(96.8)
(1.0)
0.9
(1.2)
-
(1.3)
(26.3)
3.3
1.7
16.5
(4.8)
-
2.1
-
-
2.1
Effects of
movement
in foreign
exchange
£m
(0.3)
0.1
0.3
0.6
0.7
31
December
2011
£m
(88.3)
13.1
(50.4)
25.5
(100.1)
27
December
2009
£m
Recognised
in other
comprehensive
income
£m
Effects of
movement
in foreign
exchange
£m
Recognised
in income
£m
25
December
2010
£m
(57.2)
13.2
(53.5)
10.4
(87.1)
(6.7)
(5.9)
0.8
(2.1)
-
(0.1)
-
-
(13.9)
(0.1)
3.2
(0.5)
1.5
0.1
4.3
2011
£m
39.6
38.1
7.5
91.4
(60.7)
6.7
(51.2)
8.4
(96.8)
2010
£m
30.8
28.6
5.8
80.6
176.6
145.8
The unrecognised deferred tax assets relating to loss carry-forwards include £1.6 million which expire within 5 years and £1.6 million
which expire within 10 years. The remaining losses and other timing differences do not expire under current tax legislation.
67
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 3 BUSINESS COMBINATIONS
53 weeks ended 31 december 2011
3.1 Business combinations
Accounting policies
When a business combination takes place, the managers consider the rights and intentions of the managers of both entities and the
overall controlling parties before and after acquisition to determine who the acquiring party is, and then account for business
combinations by applying the purchase method. having determined the acquiring party, any individually identifiable assets and contingent
liabilities acquired are valued. These include the property, plant and equipment and any intangible assets which can be sold separately or
which arise from legal rights regardless of whether those rights are separable, with any remaining balance being assigned to goodwill.
Given the specialised nature of the property, plant and equipment acquired, fair values are calculated on a depreciated replacement
cost basis. The key estimates are the replacement cost, where industry specific indices are used to restate original historic cost; and
depreciation, where the total and remaining economic useful lives are considered, together with the residual value of each asset.
The total estimated lives applied are consistent with those set out in note 4.1. Residual values are based on industry specific indices.
2011
The Group acquired the Sydney Attractions Group of companies for £61.3 million from village Roadshow Limited, with effect from 26
December 2010. This included the Sydney Aquarium, Sydney Wildlife World and the Sydney Tower Observatory and Skywalk, together
with Kelly Tarlton’s Antarctic Encounter Underwater World in Auckland, New Zealand. This acquisition marked the Group’s entry into
the Australian and New Zealand markets. As part of financing this acquisition, the Group drew down new debt under its existing
financing facilities, and the consideration was settled in cash. Directly attributable acquisition costs of £1.5 million were incurred on the
transaction in 2010.
The acquisition had the following effect on the Group’s assets and liabilities:
Acquiree’s
book values
£m
Fair value
adjustments
£m
Fair values at
acquisition
£m
Acquiree's net assets at the acquisition date:
Property, plant and equipment
Brands
other intangible assets
inventories
Trade and other receivables
Cash and cash equivalents
Bank loans and amounts owed to former shareholders
Trade and other payables
Provisions and employee benefits
Current tax liabilities
deferred tax assets and liabilities
net identifiable assets and liabilities
goodwill
Consideration
Analysis of consideration:
Cash
Analysis of net cash outflow:
Cash acquired
Cash paid at acquisition
net cash outflow
51.0
-
8.8
1.0
1.2
2.7
(43.8)
(5.2)
(8.6)
(1.7)
5.5
10.9
3.5
2.8
(7.6)
-
(0.1)
-
-
(0.4)
5.0
-
(6.8)
(3.6)
54.5
2.8
1.2
1.0
1.1
2.7
(43.8)
(5.6)
(3.6)
(1.7)
(1.3)
7.3
54.0
61.3
61.3
61.3
(2.7)
61.3
58.6
68
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 3 BUSINESS COMBINATIONS (continued)
53 weeks ended 31 december 2011
3.1 Business combinations (continued)
In the period to 31 December 2011 this acquisition contributed £41.9 million to the consolidated revenue and £9.8 million to the
consolidated underlying operating profit of the Group.
Goodwill has arisen on the above acquisition as it provides opportunities for the Group both to expand into new territories as well
as to facilitate the roll-out of further Midway attractions. This goodwill is not deductible for tax purposes.
2010
Cypress gardens
On 7 January 2010, the Group acquired the business and assets of Cypress Gardens, a theme park in Florida, USA, for the sum of £15.6
million. Of this £14.9 million was settled in cash at completion and £0.7 million was deferred and paid within four months of completion.
Directly attributable acquisition costs of £0.3 million were incurred on the transaction.
A significant redevelopment of the site took place and it reopened as LEGOLAND Florida in October 2011.
During the period to 25 December 2010, while the site was closed, the business incurred net costs of £1.3 million, which formed part
of the consolidated underlying operating profit of the Group. had this acquisition occurred on 27 December 2009, there would have
been no impact on the Group’s revenue or operating profit.
The acquisition had the following effect on the Group’s assets and liabilities:
Acquiree's net assets at the acquisition date:
Land and buildings
Plant and equipment
net identifiable assets and liabilities
goodwill
Consideration
Analysis of consideration:
Cash
Analysis of net cash outflow:
Cash paid at acquisition
net cash outflow
Fair values at
acquisition
£m
13.9
1.2
15.1
0.5
15.6
15.6
15.6
15.6
15.6
Goodwill arose on the above acquisition as it provided opportunities to further deliver the Group’s strategy of growth through the
creation of a fifth LEGOLAND Park.
Blackpool Tower Complex
On 31 March 2010 the Group was appointed by Blackpool Council, in the United Kingdom, to manage the redevelopment and
operations of the Blackpool Tower complex and Louis Tussauds Waxworks and subsequently took over the operations of the Blackpool
Tower in November 2010.
The business combination had no effect on the Group’s assets and liabilities. No consideration was paid and no assets were acquired,
with the sites being occupied under operating lease arrangements over the period of the development and management agreements.
69
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 4 OPERATING ASSETS AND LIABILITIES
53 weeks ended 31 december 2011
4.1 Property, plant and equipment
Accounting policies
Property, plant and equipment (PPE) are stated at cost less accumulated depreciation and impairment losses.
Where parts of an item of PPE have different useful lives, they are accounted for separately.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of PPE.
Land is not depreciated. Assets under construction are not depreciated until they come into use, when they are transferred to buildings
or plant and equipment as appropriate.
The estimated useful lives are as follows:
Asset class
Depreciation policy
freehold / long leasehold buildings
50 years
Leasehold buildings
Plant and equipment
20 – 50 years
5 – 30 years
On inception of a lease the estimated cost of decommissioning any additions is included within PPE and depreciated over the lease
term. A corresponding provision is set-up as disclosed in note 4.5.
70
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 4 OPERATING ASSETS AND LIABILITIES (continued)
53 weeks ended 31 december 2011
4.1 Property, plant and equipment (continued)
Property, plant and equipment
Cost
Balance at 27 december 2009
acquisitions through business combinations (note 3.1)
additions
Movements in asset retirement provisions
disposals
Transfers
effect of movements in foreign exchange
Balance at 25 December 2010
acquisitions through business combinations (note 3.1)
additions
Movements in asset retirement provisions
disposals
Transfers
effects of movements in foreign exchange
Balance at 31 December 2011
Depreciation
Balance at 27 december 2009
depreciation for the year - owned assets
depreciation for the year - leased assets
impairment
disposals
effect of movements in foreign exchange
Balance at 25 December 2010
depreciation for the year - owned assets
depreciation for the year - leased assets
disposals
effects of movements in foreign exchange
Balance at 31 December 2011
Carrying amounts
at 27 december 2009
at 25 december 2010
At 31 December 2011
Land and
buildings
£m
Plant and
equipment
£m
under
construction
£m
total
£m
595.0
454.4
40.5
1,089.9
13.9
4.8
(1.0)
(0.3)
16.1
(16.2)
612.3
29.6
29.9
1.8
(0.1)
30.6
(4.6)
1.2
32.8
0.7
(4.1)
43.3
(9.4)
518.9
22.9
59.3
1.8
(3.2)
60.7
(3.2)
699.5
657.2
72.8
14.2
2.1
2.7
(0.1)
0.2
91.9
18.2
1.9
-
(0.7)
108.1
37.5
2.8
1.0
(3.7)
(3.0)
142.7
50.3
2.6
(3.2)
(1.8)
111.3
190.6
-
74.4
-
-
(59.4)
(0.5)
55.0
2.0
88.4
-
-
(91.3)
3.0
57.1
-
-
-
-
-
-
-
-
-
-
-
-
522.2
520.4
346.3
376.2
40.5
55.0
15.1
112.0
(0.3)
(4.4)
-
(26.1)
1,186.2
54.5
177.6
3.6
(3.3)
-
(4.8)
1,413.8
180.9
51.7
4.9
3.7
(3.8)
(2.8)
234.6
68.5
4.5
(3.2)
(2.5)
301.9
909.0
951.6
588.2
466.6
57.1
1,111.9
71
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 4 OPERATING ASSETS AND LIABILITIES (continued)
53 weeks ended 31 december 2011
4.1 Property, plant and equipment (continued)
PPE was tested for impairment in accordance with the Group’s accounting policy, as referred to in note 4.3. No impairment charges
have been made in the year (2010: £2.7 million in land and buildings and £1.0 million in plant and equipment). The impairment in 2010 was
in respect of one of the Group’s midway attractions, arising from a review of the market conditions unique to the location. The charge
was included within depreciation, amortisation and impairment in the consolidated income statement.
The Group leases buildings and plant and equipment under finance lease agreements, secured on those assets, some of which arose as a
result of the arrangements referred to in note 5.3. At 31 December 2011 the net carrying amount of leased buildings was £41.6 million
(2010: £43.7 million) and the net carrying amount of leased plant and machinery was £41.7 million (2010: £44.5 million).
Capital commitments
At the year end the Group has a number of outstanding capital commitments amounting to £62.0 million (2010: £39.2 million), for which
no provision has been made. These commitments are expected to be settled in the following two financial years.
4.2 goodwill and intangible assets
Accounting policies
Goodwill represents the difference between the cost of an acquisition and the fair value of the net identifiable assets acquired and any
contingent liabilities assumed. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating
units and is not amortised but is tested annually for impairment. In respect of joint ventures, the carrying amount of goodwill is included
in the carrying amount of the investment in the joint venture.
Where they arise on acquisition, brands have been valued based on discounted future cash flows using the relief from royalty method,
including amounts into perpetuity. Certain brands are regarded as having indefinite useful economic lives. This is based upon the strong
historical performance of the brands over a number of economic cycles, the demonstrable ‘chaining’ of brands, and the managers’
intentions regarding the future use of brands. The managers feel this is a suitable policy for a brands business which invests in and
maintains the brands, and foresee no technological developments or competitor actions which would put a definite life on the brands.
The brands are tested annually for impairment.
Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense as incurred.
Other intangible assets comprise software licences, sponsorship rights and other contract based intangible assets. They are amortised on
a straight-line basis from the date they are available for use. They are stated at cost less accumulated amortisation and impairment losses.
The estimated useful lives of other intangible assets are as follows:
Asset class
Licences
Estimated useful life
Life of licence (from 5 to 15 years)
other intangible assets
Relevant contractual period (up to 30 years)
72
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 4 OPERATING ASSETS AND LIABILITIES (continued)
53 weeks ended 31 december 2011
4.2 goodwill and intangible assets (continued)
Goodwill and intangible assets
Cost
Balance at 27 december 2009
acquisitions through business combinations (note 3.1)
additions
effect of movements in foreign exchange
Balance at 25 December 2010
acquisitions through business combinations (note 3.1)
additions
effects of movements in foreign exchange
Balance at 31 December 2011
Amortisation and impairment
Balance at 27 december 2009
amortisation for the year
effect of movements in foreign exchange
Balance at 25 December 2010
amortisation for the year
effects of movements in foreign exchange
Balance at 31 December 2011
Carrying amounts
at 27 december 2009
at 25 december 2010
At 31 December 2011
intangible assets
Goodwill
£m
Brands
£m
Other
£m
total
£m
885.9
194.8
17.4
1,098.1
0.5
-
(25.3)
861.1
54.0
-
(2.9)
-
-
(4.6)
190.2
2.8
-
(1.1)
912.2
191.9
133.3
-
(0.1)
133.2
-
(0.1)
133.1
752.6
727.9
12.8
-
(0.3)
12.5
-
(0.1)
12.4
182.0
177.7
779.1
179.5
-
1.3
(0.1)
18.6
1.2
0.2
(0.1)
19.9
6.3
1.2
(0.2)
7.3
1.1
(0.1)
8.3
11.1
11.3
11.6
0.5
1.3
(30.0)
1,069.9
58.0
0.2
(4.1)
1,124.0
152.4
1.2
(0.6)
153.0
1.1
(0.3)
153.8
945.7
916.9
970.2
Intangible assets were tested for impairment in accordance with the Group’s accounting policy, as referred to in note 4.3. As a result,
no goodwill has been written off in the year (2010: £nil).
goodwill
Goodwill is allocated to the Group’s operating segments which represent the lowest level at which it is monitored and tested
for impairment:
Midway attractions
LegoLand Parks
Resort Theme Parks
2011
£m
500.1
39.3
239.7
779.1
2010
£m
444.8
39.6
243.5
727.9
73
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 4 OPERATING ASSETS AND LIABILITIES (continued)
53 weeks ended 31 december 2011
4.2 goodwill and intangible assets (continued)
Brands
The Group has valued the following acquired brands, all with indefinite useful economic lives. They are all denominated in their relevant
local currencies and therefore the carrying value is subject to movements in the underlying exchange rate.
Midway Attractions
Madame Tussauds
sea Life
London eye
other
Resort Theme Parks
gardaland Resort
alton Towers Resort
Thorpe Park
heide Park
other
2011
£m
26.4
16.3
9.7
8.2
60.6
48.2
32.1
14.8
11.5
12.3
2010
£m
26.4
13.5
9.7
8.2
57.8
49.0
32.1
14.8
11.7
12.3
118.9
179.5
119.9
177.7
The Madame Tussauds brand value is predominantly related to the London attraction but includes value identified with the Group’s
other Madame Tussauds attractions. The SEA LIFE brand is related to the Group’s portfolio of SEA LIFE attractions (including aquaria in
London and Sydney). The London Eye, Gardaland Resort, Alton Towers Resort, Thorpe Park and heide Park brands all arise from those
specific visitor attractions.
4.3 impairment testing
Accounting policies
The carrying amounts of the Group’s Goodwill, Intangible assets and PPE are reviewed at the end of each reporting period to
determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
The process of impairment testing is to estimate the recoverable amount of the assets concerned, and recognise an impairment loss
whenever the carrying amount of those assets exceeds the recoverable amount.
The level at which the assets concerned are reviewed varies as follows:
Asset
Goodwill
Brands
PPE
Goodwill is identified and reviewed at the level of cash-generating units (CGUs). A CGU is the
smallest identifiable group of assets that generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets. These correspond to the Group’s
operating segments as identified for segmental reporting purposes.
Brands are reviewed individually.
PPE is reviewed at an attraction level.
74
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 4 OPERATING ASSETS AND LIABILITIES (continued)
53 weeks ended 31 december 2011
4.3 impairment testing (continued)
For assets that do not generate largely independent cash inflows, the recoverable amount is determined for the CGU to which the
assets belong.
Impairment losses are recognised in the income statement, and are allocated first to reduce the carrying amount of any goodwill
allocated to CGUs, then to reduce the carrying amount of other intangible assets and the carrying amount of the other assets in
the CGU on a pro rata basis.
Calculation of recoverable amount
Management judge the recoverable amount of an asset as the greater of its value in use and its fair value less costs to sell.
To assess value in use, estimated future cash flows are discounted to their present value using an appropriate pre-tax discount rate.
The Group’s internally approved five year business plans are used as the basis for these calculations, with cash flows beyond the
5 year business plan horizon then extrapolated using a long term growth rate.
Common assumptions have been adopted for the purpose of testing goodwill across each CGU and for testing brand values as
their risk profiles are similar.
The key assumptions and estimates used when calculating the net present value of future cash flows from the Group’s businesses
are as follows:
Estimate
Growth in EBITDA
visitor numbers and revenue - Projections are based on market analysis, including the total
available market, historic trends, competition and site development activity, both in terms of
capital expenditure on rides and attractions as well as marketing activity.
Operating costs - Projections are based on historical data, adjusted for variations in visitor
numbers and planned expansion of site activities as well as general market conditions.
Timing and quantum of future capital
and maintenance expenditure
Projections are based on the attractions’ long-term development plans, taking into account the
capital investment necessary to maintain and sustain the performance of the attractions’ assets.
Long term growth rates
Discount rates to reflect the risks
involved
A growth rate of 2.5% was determined based on management’s long term expectations, taking
account of historical averages and future expected trends in both market development and
market share growth.
Based on the estimated weighted average cost of capital of a ‘market participant’ within the
main geographical regions where the Group operates, these are drawn from market data and
businesses in similar sectors, and adjusted for asset specific risks. The key assumptions of the
‘market participant’ include the ratio of debt to equity financing, risk free rates and the
medium term risks associated with equity investments. Presented on a pre-tax basis, the
discount rate used was between 10% and 13% (2010: 10% and 12%).
The managers consider that no reasonably foreseeable change in any of the above key assumptions, in particular the discount rate and
growth rate assumptions used, would significantly alter the outcome of the Group’s impairment evaluation.
75
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 4 OPERATING ASSETS AND LIABILITIES (continued)
53 weeks ended 31 december 2011
4.4 Working capital
Accounting policies
inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out principle and includes
expenditure incurred in acquiring the inventories and bringing them to their present location and condition. Where the Group is
constructing assets over a period of time for sale, as part of future development activity, they are classified as work in progress.
Trade and other receivables
Trade receivables are recognised and carried at the original invoice amount less an allowance for any amounts considered by
management to be uncollectible. Bad debts are written off when identified. Other receivables are stated at their amortised cost less
impairment losses.
inventories
Maintenance inventory
Work in progress
goods for resale
trade and other receivables
Trade receivables
other receivables
Prepayments and accrued income
neither past due nor impaired
up to 30 days overdue
Between 30 and 60 days overdue
over 60 days overdue
trade and other payables
Trade payables
accruals and deferred income
other payables
ageing of trade receivables
The ageing analysis of trade receivables, net of allowance for uncollectible amounts, is as follows:
2011
£m
4.6
11.8
12.3
28.7
Current assets
non-current assets
2011
£m
10.6
4.4
27.4
42.4
2010
£m
14.4
7.4
26.4
48.2
2010
£m
3.2
3.3
9.6
16.1
2010
£m
-
-
3.2
3.2
2010
£m
9.7
1.9
2.4
0.4
14.4
2011
£m
-
-
3.6
3.6
2011
£m
5.8
2.9
1.5
0.4
10.6
Current liabilities
non-current liabilities
2011
£m
34.6
100.0
7.0
141.6
2010
£m
32.9
86.9
6.8
126.6
2011
£m
-
3.8
15.9
19.7
2010
£m
-
3.2
14.2
17.4
76
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 4 OPERATING ASSETS AND LIABILITIES (continued)
53 weeks ended 31 december 2011
4.5 Provisions
Accounting policy
Provisions are recognised when the Group has legal or constructive obligations as a result of past events and it is probable that
expenditure will be required to settle those obligations. They are measured at the managers’ best estimates, after taking account
of information available and different possible outcomes.
If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and, where appropriate, the risks specific to the liability.
Provisions
Balance at 26 december 2010
Business combinations (note 3.1)
Provisions made during the year
utilised during the year
unused amounts reversed
unwinding of discount
effects of movements in foreign exchange
Balance at 31 December 2011
2011
Current
non-current
2010
Current
non-current
Asset
retirement
provisions
£m
14.3
3.5
3.8
-
(0.1)
0.9
-
22.4
-
22.4
22.4
-
14.3
14.3
Other
£m
10.4
0.1
3.0
(1.8)
(0.3)
-
0.1
11.5
9.0
2.5
11.5
7.3
3.1
10.4
total
£m
24.7
3.6
6.8
(1.8)
(0.4)
0.9
0.1
33.9
9.0
24.9
33.9
7.3
17.4
24.7
asset retirement provisions
Certain attractions operate on leasehold sites and these provisions relate to the anticipated costs of removing assets and restoring the
sites concerned at the end of the lease term.
They are established on inception and discounted back to present value with the discount then being unwound through the income
statement as part of finance costs. They are reviewed at least annually.
other
Other provisions largely relate to the estimated cost arising from open insurance claims, tax matters and legal issues.
77
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 5 CAPITAL STRUCTURE AND FINANCING
53 weeks ended 31 december 2011
5.1 net debt
Analysis of net debt
Net debt is the total amount of cash and cash equivalents less interest-bearing loans and borrowings and finance lease liabilities.
Cash and cash equivalents comprise cash balances and call deposits.
Cash and cash equivalents
Bank overdrafts used for cash management purposes
Cash and cash equivalents, net of bank overdrafts, per statement of cash flows
interest-bearing loans and borrowings (note 5.2)
net bank debt
Current finance leases (note 5.3)
non-current finance leases (note 5.3)
net debt
2011
£m
59.9
-
59.9
2010
£m
67.5
(0.4)
67.1
1,182.8
1,073.1
1,122.9
1,006.0
2.1
83.9
2.2
85.9
1,208.9
1,094.1
Included in cash and cash equivalents above are restricted funds of £6.1 million (2010: £5.2 million). Bank overdrafts that are repayable
on demand are included as a component of cash and cash equivalents for the purpose only of the statement of cash flows.
5.2 Borrowings
Accounting policy
interest-bearing loans and borrowings
Interest-bearing loans and borrowings are initially recognised at fair value, being consideration received less any directly attributable
transaction costs. Thereafter, interest-bearing loans and borrowings are stated at amortised cost with any difference between cost and
redemption value being recognised in the income statement over the period of the borrowings on an effective interest rate basis. To
calculate this effective interest rate the Group estimates the date of repayment, expected future gearing during the life of the facility
based on the Group’s business plans and forecasts, and expected future interest rates. This includes the amortisation of all transaction
costs over the same period.
If the Group modifies its debt arrangements, it considers how substantive the change is in determining the appropriate accounting.
This includes both qualitative analysis, and quantitative analysis of the level of change in the cash flows of the new and old arrangements.
interest-bearing loans and borrowings
Current
non-current
secured bank loans
interest payable
2011
£m
3.5
1.7
5.2
2010
£m
4.7
6.8
2011
£m
2010
£m
total
2011
£m
2010
£m
1,177.6
1,061.6
1,181.1
1,066.3
-
-
1.7
6.8
11.5
1,177.6
1,061.6
1,182.8
1,073.1
78
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
53 weeks ended 31 december 2011
5.2 Borrowings (continued)
terms and debt repayment schedule
This table provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, showing both the
principal and carrying values, which are measured at amortised cost. For more information about the Group’s exposure to interest rate,
liquidity, foreign currency and credit risks, see note 5.6.
secured bank loan
secured bank loan
secured bank loan
secured bank loan
secured bank loan
Currency
nominal
interest rate
Year of
maturity
gBP
euR
usd
aud
RMB
5.02%
5.08%
4.55%
9.03%
7.00%
2017
2017
2017
2017
2012
2011
Principal
value
£m
396.0
421.8
270.9
121.2
3.5
Carrying
amount
£m
386.6
410.1
264.8
116.1
3.5
2010
Principal
value
£m
396.0
428.9
272.5
-
4.7
Carrying
amount
£m
383.2
414.5
263.9
-
4.7
1,213.4
1,181.1
1,102.1
1,066.3
In July 2010, pre-existing financing arrangements were either legally settled or substantially modified, so that refinancing was accounted
for as an extinguishment and reissue, with new loans repayable in July 2015. In May 2011 the Group then amended this facility such that
the loans bear interest at lower rates and now fall due in July 2017. Reflecting management’s judgement that this is a non-substantive
change to an existing facility, the Group has accounted for this on a continuation accounting basis. The Group’s estimated date of
repayment remains December 2014. The loans are secured by a fixed and floating charge over the assets held by the Group.
The nominal interest rate for secured bank loans in the table above represents the floating interest rate which prevailed at the reporting
date. The Group uses interest rate swaps to hedge its interest rate exposure and these are described in note 5.4.
5.3 Lease obligations
Accounting policies
Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance
leases. Where land and buildings are held under finance leases the accounting treatment of the land is considered separately from that
of the buildings. Leased assets acquired by way of finance lease are stated at an amount equal to the lower of their fair value and the
present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses.
finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge
is allocated during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease
incentives received and predetermined non-contingent rent increases are recognised in the income statement as an integral part of the
total lease expense over the lease term.
Lease arrangements
The Group undertook a sale and leaseback transaction during 2007, involving the property, plant and equipment of certain acquired
operating units. The leases entered into are accounted for as finance or operating leases depending on the specific circumstances of
each lease.
Each of these lease agreements runs for a period of 35 years from inception and allows for annual rent increases based on the
inflationary index in the United Kingdom and fixed increases in Continental Europe. The Group has the option, but is not contractually
required, to extend each of the lease agreements individually for two further terms of 35 years, subject to an adjustment to market rates
at that time.
79
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
53 weeks ended 31 december 2011
5.3 Lease obligations (continued)
In addition, the Group also enters into operating leases for a number of its premises. These leases are typically of a duration of between
ten and 60 years, with rent increases generally determined based on local market practice. The key contractual terms in relation to each
lease are considered when calculating the rental charge over the lease term. During 2011 £70.5 million (2010: £55.3 million) was
recognised as an expense in the income statement in respect of operating leases.
The tables below set out the total lease obligations for the Group:
finance leases
These tables provide information about the future minimum lease payments and contractual terms of the Group’s finance lease liabilities,
as follows:
Less than one year
Between one and five years
More than five years
finance lease liabilities
finance lease liabilities
finance lease liabilities
Future
minimum
lease
payments
2011
£m
7.6
23.3
259.8
290.7
Present
value of
minimum
lease
payments
2011
£m
2.1
0.5
83.4
86.0
Future
minimum
lease
payments
2010
£m
7.4
24.1
262.8
294.3
interest
2011
£m
5.5
22.8
176.4
204.7
Currency
nominal
interest rate
Year of
maturity
gBP
euR
euR
5.64%
3.01%
9.11%
2042
2012
2042
Present
value of
minimum
lease
payments
2010
£m
2.2
2.6
83.3
88.1
2010
£m
54.5
4.1
29.5
88.1
interest
2010
£m
5.2
21.5
179.5
206.2
2011
£m
54.2
2.1
29.7
86.0
The nominal interest rate for finance leases in the table above represents the weighted average effective interest rate. This is used
because the table above aggregates finance leases with the same maturity date and currency.
operating leases
The minimum rentals payable as lessee under non-cancellable operating leases are as follows:
Less than one year
Between one and five years
More than five years
2011
£m
58.8
2010
£m
49.2
233.0
205.8
1,288.9
1,229.9
1,580.7
1,484.9
80
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
53 weeks ended 31 december 2011
5.4 derivative financial instruments
Accounting policies
The Group holds derivative financial instruments primarily to hedge its foreign currency and interest rate exposures.
interest rate swaps, foreign exchange contracts and committed share issues
Derivatives are recognised initially at fair value and attributable transaction costs are recognised in profit or loss as incurred. Thereafter
changes in fair value are recognised immediately in the income statement, except in specific circumstances where the Group adopts
hedge accounting as described below.
The fair value of interest rate swaps are determined by reference to market rates at the end of the accounting period. It is the estimated
amount that the Group would receive or pay to exit the swap at the end of the reporting period, taking into account current interest
rates, credit risks and bid/ask spreads.
The fair value of foreign exchange contracts is the present value of future cash flows and is determined by reference to market rates at
the end of the accounting period.
The fair value of derivative provisions for committed share issues is determined by reference to contractually agreed amounts and the value
of the shares to be issued, which the managers have assessed based on the value attributed in the last transaction of the Group’s shares.
hedge accounting
The Group has designated certain derivatives as hedges against variable cash flows resulting from fluctuations in interest rates. On initial
designation of the hedge, the Group formally documents the relationship between the hedging instruments and hedged items, including
the risk management objectives and strategy in undertaking the hedge transaction, and the methods that will be used to assess the
effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an
ongoing basis, as to whether the hedging instruments are expected to be ‘highly effective’ in offsetting the changes in the fair value or cash
flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results of each hedge
are within a range of 80-125%. Effectiveness testing is performed using regression analysis at inception and on a regular basis thereafter.
The effective portion of changes in fair value of the derivative is recognised in other comprehensive income and presented in the hedging
reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
The amount recognised in other comprehensive income is removed and included in profit or loss in the same period as the hedged cash
flows affect profit or loss, and under the same line item in the statement of comprehensive income as the hedged item.
If the hedging instrument no longer meets the criteria for hedge accounting, cumulative gains or losses previously recognised in other
comprehensive income are recognised immediately in profit or loss.
Other financial assets
derivative financial instruments - foreign exchange contracts
Other financial liabilities
Derivative financial instruments
hedge accounted interest rate swaps
non-hedge accounted interest rate swaps
non-hedge accounted foreign exchange contracts
non-hedge accounted committed share issues (note 5.7)
The Group’s exposure to interest rate, liquidity, foreign currency and credit risks is disclosed in note 5.6.
2011
£m
2.3
2011
£m
7.8
69.0
0.3
4.2
81.3
2010
£m
2.0
2010
£m
0.6
64.4
-
-
65.0
81
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
53 weeks ended 31 december 2011
5.5 finance income and costs
Accounting policies
income and costs
Finance income comprises interest income, applicable foreign exchange gains and gains on hedging instruments that are recognised in
the income statement. Finance costs comprise interest expense, finance charges on finance leases, applicable foreign exchange losses
and losses on hedging instruments that are recognised in the income statement.
Where it is probable that the Group is committed to issue shares in the future, any difference between the consideration to be received
and the value of the shares to be issued is recognised as an expense within finance costs as a loss on recognition of committed share issues.
Interest income and interest expense is recognised as it accrues, using the effective interest method.
Capitalisation of borrowing costs
The Group capitalises borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of
the cost of that asset.
net investment in foreign entities
On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other
currency instruments designated as hedges of such investments, are taken to equity. The Group treats specific inter-company loan
balances, which are not intended to be repaid in the foreseeable future, as part of its net investment. In the event of a foreign entity
being sold or a hedging item being extinguished, such exchange differences would be recognised in the income statement as part of the
gain or loss on sale.
Finance income and costs
finance income
In respect of assets not held at fair value
interest income
In respect of assets held at fair value
unrealised gain on re-measurement of financial derivatives at fair value
- interest rate swaps and foreign exchange contracts
Other
net foreign exchange gain
finance costs
In respect of liabilities not held at fair value
interest expense on financial liabilities measured at amortised cost
interest expense on shareholder loans
other interest expense
In respect of liabilities held at fair value
unrealised loss on re-measurement of financial derivatives at fair value
- interest rate swaps and foreign exchange contracts
- Committed share issues (note 5.4)
Other
net foreign exchange loss
2011
£m
1.9
2.5
3.8
8.2
2010
£m
0.6
19.1
-
19.7
2011
£m
2010
£m
126.1
-
1.6
9.6
4.2
-
141.5
114.7
32.4
1.4
-
-
3.6
152.1
Capitalised borrowing costs amounted to £4.6 million in 2011 (2010: £1.7 million), with a capitalisation rate of 8.1% (2010: 8.7%).
82
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
53 weeks ended 31 december 2011
5.5 finance income and costs (continued)
Recognised in consolidated statement of other comprehensive income
foreign currency translation differences for foreign operations
2011
£m
(6.2)
2010
£m
(24.3)
Foreign currency translation differences for foreign operations are stated before a charge of £1.4 million (2010: £0.8 million) of
attributable income tax (note 2.3).
5.6 financial risk factors and fair value analysis
interest rate risk
Interest rate risk is the risk that the Group is impacted by significant changes in interest rates. The Group has drawn floating rate debt in
Sterling, Euros, US Dollars, Australian Dollars and Chinese Renminbi.
The Group hedges its exposure to floating rate borrowings with interest rate swaps. At the reporting date, at year end exchange rates,
98% (2010: 98%) of the secured bank loans is hedged in this way. The majority of the interest rate swaps mature in 2014 in line with
the Group’s estimated date of repayment of the debt facility.
The interest rate profile of the Group’s interest-bearing financial instruments was:
Fixed rate instruments
financial liabilities - finance leases
financial liabilities - interest rate swaps
Variable rate instruments
financial assets - cash and cash equivalents
financial liabilities - bank loans and overdrafts
Carrying amount
2011
£m
2010
£m
(86.0)
(76.8)
(88.1)
(65.0)
(162.8)
(153.1)
59.9
67.5
(1,181.1)
(1,066.7)
(1,121.2)
(999.2)
Interest rate swaps have a fixed leg and a floating leg; they have been classified as fixed rate financial liabilities in the table above as the
cash flows to which the Group is currently sensitive are outflows on the fixed leg.
The Group has performed sensitivity analysis on these balances as follows:
fair value sensitivity analysis for fixed rate instruments
The Group’s sensitivity to interest rates on fixed rate instruments is calculated at the end of the reporting period by measuring the
impact on profit and loss or equity of a change in the present value of derivatives. This assumes a shift in the yield curve of +/- 50 basis
points (bp) (2010: 50bp). A change in interest rates would have no impact on the carrying value of finance leases as they are held at
amortised cost.
If interest rates had been 50bp higher/lower and all other variables were held constant, the impact would be as follows:
50bp increase in interest rates
50bp reduction in interest rates
2011
2010
Profit or
loss
£m
12.5
(12.7)
Equity
£m
2.6
(2.6)
Profit or
loss
£m
17.2
(17.6)
Equity
£m
3.1
(3.2)
83
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
53 weeks ended 31 december 2011
5.6 financial risk factors and fair value analysis (continued)
Cash flow sensitivity analysis for variable rate instruments
The cash flow sensitivity analysis demonstrates the economic hedging the Group has against variable rate financial liabilities.
It is performed by comparing the annual interest expense/income which would apply to balances held at the year end using year end interest
rates, to the annual charge which would apply using year end interest rates plus a reasonably possible parallel shift of +50bp/-50bp.
This analysis assumes that all other variables, in particular foreign currency rates, remain constant. Any remaining sensitivity is attributable
to the Group’s exposure to interest rates on its unhedged variable rate borrowings.
Variable rate liabilities
fixed rate liabilities
Variable rate assets
Cash flow sensitivity (net)
Profit or (loss)
2011
£m
(6.0)
5.9
0.3
0.2
2010
£m
(5.5)
5.4
0.3
0.2
If all other variables remain constant a decrease of 50bp (2010: 50bp) would have the equal but opposite effect to the amounts
shown above.
Liquidity risk
Liquidity risk is the risk that the Group will not have sufficient funds to meet its financial obligations as they fall due. The Group’s
Treasury Department produces weekly short-term cash forecasts and monthly long-term cash forecasts to identify liquidity
requirements and headroom over the coming twelve months, which are reviewed by the Group’s Chief Financial Officer. Surplus cash is
actively managed across Group bank accounts to cover local shortfalls or invested in bank deposits or liquidity funds in line with Group
policies on counterparty exposure. In some jurisdictions bank cash pooling arrangements are in place to optimise the use of cash. The
Group has access to a revolving credit facility of £138.0 million (2010: £125.0 million) in addition to its existing borrowings to meet any
shortfalls.
At 31 December 2011, the Group had cash and cash equivalents of £59.9 million together with these revolving credit facilities, which
can be used to meet its contractual cash flows.
The following table sets out the contractual maturities of financial liabilities, including interest payments and excluding the impact of
netting agreements. This analysis assumes that interest rates prevailing at the reporting date remain constant.
2011
Non derivative financial liabilities
secured bank loans
finance lease liabilities
Trade payables
Derivative financial liabilities
hedge-accounted interest rate swaps
non-hedge accounted interest rate swaps
non-hedge accounted foreign exchange contracts
Carrying
amount
£m
Contractual
cash flows
£m
0 to <1
years
£m
1 to <2
years
£m
2 to <5
years
£m
5 years
and over
£m
1,181.1
(1,576.9)
86.0
34.6
7.8
69.0
0.3
(211.3)
(34.6)
(11.1)
(72.5)
(0.3)
(66.4)
(7.6)
(34.6)
(1.9)
(25.7)
(0.3)
(63.5)
(5.8)
-
(4.0)
(22.9)
-
(200.5)
(1,246.5)
(17.5)
(180.4)
-
(5.2)
(23.9)
-
-
-
-
-
1,378.8
(1,906.7)
(136.5)
(96.2)
(247.1)
(1,426.9)
84
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
53 weeks ended 31 december 2011
5.6 financial risk factors and fair value analysis (continued)
2010
Non derivative financial liabilities
secured bank loans
finance lease liabilities
Bank overdrafts
Trade payables
Derivative financial liabilities
hedge-accounted interest rate swaps
non-hedge accounted interest rate swaps
non-hedge accounted foreign exchange contracts
Carrying
amount
£m
Contractual
cash flows
£m
0 to <1
years
£m
1 to <2
years
£m
2 to <5
years
£m
5 years
and over
£m
1,066.3
(1,389.5)
88.1
0.4
32.9
0.6
64.4
(2.0)
(214.3)
(0.4)
(32.9)
(4.1)
(114.1)
(1.3)
(72.1)
(7.4)
(0.4)
(32.9)
(0.5)
(34.7)
(1.3)
(56.7)
(1,260.7)
-
(7.6)
(16.4)
(182.9)
-
-
(0.7)
(27.3)
-
-
-
(2.9)
(52.1)
-
-
-
-
-
-
1,250.7
(1,756.6)
(149.3)
(92.3)
(1,332.1)
(182.9)
Foreign currency risk
The Group operates internationally and is therefore exposed to currency risk arising from movements in foreign exchange rates. Foreign
exchange risk arises from differences in the dates commercial transactions are entered into and the date they are settled; recognised
assets and liabilities; and net investments in foreign operations. The Group’s revenues and costs are primarily in the functional currencies
of the reporting entities. The Group uses a portfolio of foreign exchange trades to manage specific foreign exchange exposures on
cross border transactions where they arise.
The Group has operating assets in territories where the local currency is Sterling, Euros, US Dollars, Danish Kroner, Australian Dollars,
New Zealand Dollars, Chinese Renminbi, hong Kong Dollars and Thai Baht. It has bank debt in Sterling, Euros, US Dollars, Australian
Dollars and Chinese Renminbi in a ratio intended to provide a match between the funding requirements and cash generation
capabilities of the Group’s operations in each of its locations.
The Group’s financial instruments are set out by currency below:
2011
Cash and cash equivalents
Trade receivables
secured bank loans
finance lease liabilities
derivatives
Trade payables
2010
Cash and cash equivalents
Trade receivables
secured bank loans
finance lease liabilities
derivatives
Trade payables
Sterling
£m
35.6
5.0
Euro
£m
10.4
1.7
uS
Dollar
£m
Australian
Dollar
£m
8.0
2.0
2.5
1.0
Other
£m
3.4
0.9
total
£m
59.9
10.6
(386.6)
(410.1)
(264.8)
(116.1)
(3.5)
(1,181.1)
(54.2)
(28.3)
(14.2)
(31.8)
(31.1)
(10.1)
-
(14.3)
(5.9)
-
(1.1)
(0.8)
(442.7)
(471.0)
(275.0)
(114.5)
52.3
10.2
6.2
1.5
4.1
1.9
(383.2)
(414.5)
(263.9)
(54.5)
(26.4)
(12.8)
(33.6)
(26.4)
(16.1)
-
(10.2)
(1.7)
(414.4)
(482.9)
(269.8)
-
-
-
-
-
-
-
-
-
(3.6)
(2.8)
4.5
0.8
(86.0)
(74.8)
(34.6)
(1,306.0)
67.1
14.4
(4.7)
(1,066.3)
-
-
(2.3)
(1.7)
(88.1)
(63.0)
(32.9)
(1,168.8)
85
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
53 weeks ended 31 december 2011
5.6 financial risk factors and fair value analysis (continued)
The Group treats certain structural inter-company loans as net investment hedging instruments. At 31 December 2011 the Group had
£563.3 million (2010: £572.7 million) in Euro denominated loans, £57.3 million (2010: £57.3 million) in Sterling denominated loans and
£41.8 million (2010: £42.1 million) in US Dollar denominated loans. Translation movements on these loans are therefore shown in other
comprehensive income, see note 5.5.
foreign currency sensitivity analysis
The table below demonstrates sensitivity to a 10% strengthening/weakening of Sterling against all foreign currencies at the reporting date.
The Group’s sensitivity to foreign exchange rates is calculated by retranslating monetary assets and liabilities which are held in currencies
other than the functional currencies of the reporting entities using exchange rates which have been flexed by +/- 10% from the Sterling
exchange rates existing at the end of the reporting period. Where the Group has designated specific monetary assets or liabilities as
hedging instruments that are hedging underlying foreign exchange exposures, this has been taken account of in the table below. In
addition, the sensitivity analysis for forward foreign exchange contracts has applied a 10% strengthening/weakening of Sterling against
Euros, US Dollars, hong Kong Dollars, Australian Dollars and Swiss Francs to a discounted cash flow technique. The impact of these
retranslations on the profit/loss for the reporting entities across the Group has been aggregated and is disclosed below. The analysis
assumes that all other variables, in particular interest rates, remain constant.
The sensitivity at the reporting date, split by category of financial instrument, was as follows:
10% strengthening of sterling
2011
euro
us dollars
danish Kroner
hong Kong dollars
australian dollars
swiss francs
new Zealand dollars
Thai Baht
2010
euro
us dollars
hong Kong dollars
australian dollars
swiss francs
Cash
£m
-
(0.1)
-
-
-
-
-
-
(0.1)
(0.1)
-
-
-
-
Profit or (loss) impact
trade
receivables
£m
Secured
bank loans
£m
Derivatives
(unhedged)
£m
-
-
-
-
-
-
-
-
-
-
(0.1)
-
-
-
-
9.0
-
-
-
-
-
-
9.0
-
9.1
-
-
-
2.9
(1.1)
(0.7)
(0.1)
(3.0)
(0.1)
(0.1)
0.1
(2.1)
0.9
(5.3)
(0.6)
0.3
(0.4)
(5.1)
(0.1)
(0.1)
9.1
total
£m
2.9
7.8
(0.7)
(0.1)
(3.0)
(0.1)
(0.1)
0.1
6.8
0.8
3.7
(0.6)
0.3
(0.4)
3.8
86
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
53 weeks ended 31 december 2011
5.6 financial risk factors and fair value analysis (continued)
10% weakening of sterling
2011
euro
us dollars
danish Kroner
hong Kong dollars
australian dollars
swiss francs
new Zealand dollars
Thai Baht
2010
euro
us dollars
hong Kong dollars
australian dollars
swiss francs
Cash
£m
-
0.1
-
-
-
-
-
-
0.1
0.1
-
-
-
-
Profit or (loss) impact
trade
receivables
£m
Secured
bank loans
£m
Derivatives
(unhedged)
£m
-
-
-
-
-
-
-
-
-
-
0.1
-
-
-
-
(9.0)
-
-
-
-
-
-
(9.0)
-
(9.1)
-
-
-
(2.9)
1.3
0.8
0.1
5.1
0.2
0.1
(0.1)
4.6
(0.9)
7.1
0.7
(0.3)
0.5
7.1
0.1
0.1
(9.1)
total
£m
(2.9)
(7.6)
0.8
0.1
5.1
0.2
0.1
(0.1)
(4.3)
(0.8)
(1.9)
0.7
(0.3)
0.5
(1.8)
A 10% strengthening/weakening of Sterling would respectively increase/decrease the hedging reserve by £0.4m (2010: £nil).
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The Group has credit policies in place with regard to its trade receivables. Credit evaluations are performed on customers
requiring credit over a certain amount.
The Group manages credit exposures in connection with financing and treasury activities including exposures arising from bank deposits,
cash held at banks and financial and derivative transactions, by appraisal, formal approval and ongoing monitoring of the credit position of
counterparties. Counterparty exposures are measured against a formal transaction limit appropriate to that counterparty’s credit position.
Fair values
Basis for determining fair values
Derivatives
Derivatives are carried at fair value, as defined in section 5.4.
Non-derivative financial assets
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of
interest at the reporting date.
Non-derivative financial liabilities
The carrying value of secured bank loans is based on the present value of future cash flows over the borrowing period until the
expected repayment date in December 2014, and discounted using effective interest rates calculated following the May 2011
amendment to the bank facility. In contrast, the calculation of fair value requires that a similar calculation is undertaken but using the
contractual repayment date in July 2017 and the market rate of interest at the reporting date. The discount rate used for determining
the fair value of the secured bank loans was 7.8% (2010: 7.8%). For finance leases the market rate of interest is determined by reference
to similar lease agreements.
87
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
53 weeks ended 31 december 2011
5.6 financial risk factors and fair value analysis (continued)
fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position, are as follows:
Derivative asset and liabilities:
hedge accounted interest rate swaps
non-hedge accounted interest rate swaps
non-hedge accounted foreign exchange contracts
non-hedge accounted committed share issues
Non-derivative asset and liabilities:
Trade and other receivables
Cash and cash equivalents
secured bank loans
finance lease liabilities
Trade and other payables
Bank overdraft
2011
Carrying
amount
£m
(7.8)
(69.0)
2.0
(4.2)
Fair
value
£m
(7.8)
(69.0)
2.0
(4.2)
2010
Carrying
amount
£m
(0.6)
(64.4)
2.0
-
Fair
value
£m
(0.6)
(64.4)
2.0
-
15.0
59.9
15.0
59.9
21.8
67.5
21.8
67.5
(1,181.1)
(1,117.6)
(1,066.3)
(1,067.1)
(86.0)
(34.6)
-
(86.0)
(34.6)
-
(88.1)
(32.9)
(0.4)
(88.1)
(32.9)
(0.4)
(1,305.8)
(1,242.3)
(1,161.4)
(1,162.2)
Fair value hierarchy
The Group analyses financial instruments carried at fair value by valuation method. The different levels have been defined as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for assets or liabilities, either directly (i.e. as prices)
or indirectly (i.e. derived from prices);
• Level 3: inputs for assets or liabilities that are not based on observable market data (unobservable inputs).
At 31 December 2011 the Group had £79.0 million (2010: £63.0 million) of derivative financial liabilities classified as Level 2.
There have been no transfers between levels in 2011 (2010: nil). No other financial instruments are held at fair value.
5.7 equity and capital management
Capital management
The capital structure of the Group consists of debt which includes borrowings (see note 5.2), cash and cash equivalents and equity
attributable to equity holders of the parent company, as disclosed below. The Group’s objective when managing capital is to maintain
a strong capital base so as to maintain investor and creditor confidence and to sustain future development of the business; to provide
returns for shareholders; and to optimise the capital structure to reduce the cost of capital. There are no externally imposed capital
requirements on the Group.
The managers monitor returns on capital through constant review of earnings generated from the Group’s capital investment
programme, and manage capital in a manner so as to ensure the requirements of the Group’s debt covenants are met.
The Group does not routinely make additional issues of capital, other than for the purpose of raising finance to fund significant
acquisitions or developments intended to increase the overall value of the Group. As such, the growth of the Group does not erode
the established capital base.
88
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
53 weeks ended 31 december 2011
5.7 equity and capital management (continued)
Share schemes have been created to allow employees of the Group to participate in the ownership of the Group’s equity instruments,
in order to ensure employees are focused on growing the value of the Group to achieve the aims of all the shareholders.
To assist with the acquisition and development of the Cypress Gardens theme park in 2010, the Group entered into an agreement with
an existing shareholder to invest US$30 million in return for the issue of shares and Preferred Equity Certificates, in the previous holding
company of the Group. A clause in the share subscription agreement under which these shares were issued allows for additional shares
to be issued to the shareholder should a listing or sale of the Group not take place before 31 August 2012. In the managers’ judgement
it is considered probable that such an event will not occur, and accordingly this committed share issue has been recognised at the
reporting date at a value of £4.2 million (2010: £nil), as disclosed in note 5.4.
Share capital and reserves
share capital
on issue at beginning of year - fully paid
issued in the year
On issue at end of year - fully paid
Authorised
a ordinary shares of 0.01 each
B ordinary shares of 0.01 each
Allotted, called up and fully paid
a ordinary shares of 0.01 each
B ordinary shares of 0.01 each
Ordinary shares
2011
2010
156,249,710
156,249,710
22,135
-
156,271,845
156,249,710
2011
£m
1.1
0.2
1.3
1.1
0.2
1.3
2010
£m
1.1
0.2
1.3
1.1
0.2
1.3
issue of new shares
During the year 22,135 A ordinary shares were issued at a premium of £0.2 million. All issued shares are fully paid.
ordinary shares
Each of the classes of shares are treated as normal ordinary shares and have the same voting rights. Each share is entitled to one vote
at ordinary and extraordinary general meetings. In the event a distribution is made by the Company of amounts available under
Luxembourg law, these are made initially to the A class shareholders, up to the amount equal to the issue price of the equity plus a
preferred return of 8% per annum, and thereafter pro rata between the A and B class shares. There are no shareholder rights of
redemption of either the capital or the preferred return.
The nominal value of shares in issue is shown in share capital, with any additional consideration for those shares shown in share premium.
Capital reserve
As a result of a Group restructuring, in 2010 these consolidated financial statements were issued in the name of Merlin Entertainments
S.à r.l., but were a continuation of the consolidated financial statements of Merlin Entertainments Group Luxembourg S.à r.l.
Comparative information was adjusted as if Merlin Entertainments S.à r.l. had always been the Group’s ultimate controlling party. This
restructuring was accounted for as a reverse acquisition and resulted in the creation of a capital reserve.
89
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
53 weeks ended 31 december 2011
5.7 equity and capital management (continued)
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign
operations.
hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments
related to hedged transactions that have not yet occurred.
Reserve for own shares
By way of control of the Merlin Entertainments Employee Benefit Trust, the Group owns 20,000,000 B class (2010: 20,000,000 B class)
Treasury shares held on trust for the beneficiaries of share-based payment plans. These shares are carried at par value, being £169,205
(2010: £169,205) and are shown as a reduction to equity. These shares are legally owned by Merlin Entertainments Share Plan
Nominee Limited, a company controlled by certain key management.
Share-based payments
Accounting policies
share-based payment transactions – equity-settled arrangements
The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured
at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of
the options granted is measured using an option valuation model, taking into account the terms and conditions upon which the options
were granted.
share-based payment transactions – cash-settled arrangements
The fair value of options granted is recognised directly as an employee expense. The fair value is measured at grant date with any
subsequent changes in fair value being recognised in profit or loss.
Summary of schemes
equity-settled schemes
Equity-settled schemes have been created that enable certain senior employees to acquire B ordinary shares at market value. Market
value is determined based on an analysis of profit multiples in the Group’s industry sector. At the discretion of the CEO further shares
can also be granted in recognition of long service or exceptional performance. These shares are expected to vest on a qualifying
transaction, including an IPO.
No charge arose during the year (2010: £nil). The number of shares issued is as follows:
issued during the year
forfeited during the year
At end of year
number
2011
number
2010
18,388,300
(391,800)
17,996,500
-
-
-
equity and cash-settled scheme (closed in 2010)
During 2008 the Group had established a share option scheme that enabled key management personnel and senior employees to
purchase options in the Group. The fair value of options granted was determined on the date of the award. The share options vested
upon listing or sale of the Company and there were no performance related vesting conditions. The scheme was originally accounted
for on an equity-settled basis.
On 23 June 2010, in anticipation of a shareholder transaction, the scheme rules were modified to enable the settlement of options in
cash. This had the effect of modifying the scheme to a cash-settled scheme. The fair value on modification of the scheme was £33.5
million, which the company elected to recognise through equity. Subsequent grants were then made up until the date of the shareholder
transaction at which point all options were exercised for cash. The charge resulting from these grants was included within operating
expenses (note 2.2).
90
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
53 weeks ended 31 december 2011
5.7 equity and capital management (continued)
The number and weighted average exercise prices (WAEP) of share options were as follows:
outstanding at beginning of year
forfeited during the year
Transferred to cash-settled scheme
Outstanding at end of year
number
2010
90,510
(280)
(90,230)
-
WAEP (£)
2010
0.37
0.37
0.37
-
Cash-settled scheme
Following the change in scheme rules on 23 June 2010 noted above, the following movements in share options took place, until all
options were exercised on completion of the shareholder transaction:
Transferred from equity-settled scheme
granted during the year
exercised
Outstanding at end of year
number
2010
90,230
16,395
(106,625)
-
WAEP (£)
2010
0.37
0.37
0.37
-
share option valuation assumptions
The fair value of options granted was measured using the Black-Scholes method. The weighted average assumptions used in
determining the fair value of options granted were as follows:
share price
exercise price
expected volatility (weighted average volatility based on statistical estimates)
option life (expected weighted average life)
expected dividends
Risk-free interest rate (based on government Bonds)
Compensation expense
Total expense recognised as employee costs, within underlying trading:
equity-settled scheme: share options granted in 2008
Total expense recognised as employee costs, within exceptional and non-trading items:
Cash-settled scheme: share options granted in 2010
total expense recognised as employee costs
Cash-settled
scheme
2010
£375.81
£0.37
30%
Less than 1 year
-
4%
2010
£m
0.3
6.1
6.4
91
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011
SECTION 6 OThER NOTES
53 weeks ended 31 december 2011
6.1 investment in joint ventures
Accounting policy
Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement. The consolidated
financial statements include the Group’s share of the total recognised income and expenses of joint ventures on an equity accounted
basis, from the date that joint control commences until the date that joint control ceases.
investment in joint ventures
at beginning of year
effects of movement in foreign exchange
At end of year
Summary financial information on joint ventures is as follows, based on 100% of their results:
non-current assets
Current assets
Total assets
non-current liabilities
Current liabilities
Total liabilities
Revenue
expenses
Profit/(loss) for the year
6.2 employee benefits
Accounting policies
2011
£m
0.6
-
0.6
2011
£m
1.1
0.6
1.7
0.6
0.5
1.1
2.2
2.1
0.1
2010
£m
0.7
(0.1)
0.6
2010
£m
1.5
0.3
1.8
0.7
0.4
1.1
2.4
2.5
(0.1)
defined contribution schemes
Under the defined contribution schemes, the Group pays fixed contributions into a separate fund on behalf of the employee and has
no further obligations to employees. The risks and rewards associated with this type of scheme are assumed by the members rather
than the employer. Obligations for contributions to defined contribution pension schemes are recognised as an expense in the income
statement as incurred.
defined benefit schemes
A defined benefit scheme is a post-employment benefit scheme other than a defined contribution scheme. The Group’s net obligation
is calculated for each scheme by estimating the amount of future benefit that employees have earned in return for their service in the
current and prior periods; that benefit is discounted to determine its present value, and off-set by the fair value of any scheme assets.
The calculation is performed by a qualified actuary using the projected unit credit method.
All actuarial gains and losses are recognised in the period they occur directly into equity through other comprehensive income.
defined contribution schemes
The Group operates a number of defined contribution pension schemes, and the total expense relating to those schemes in the current
year was £5.7 million (2010: £5.2 million).
92
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 6 OThER NOTES (continued)
53 weeks ended 31 december 2011
6.2 employee benefits (continued)
Defined benefit schemes
The Group operates two defined benefit schemes: a closed scheme for certain former employees of The Tussauds Group, which was
acquired in 2007, and a closed scheme for certain employees of Gardaland. The Tussauds Group scheme entitles retired employees to
receive an annual payment equal to either 1/60 or 1/80 of final salary for each year of service that the employee provided. The
entitlement of the retired employees under the Gardaland scheme is dependant on the state laws in place at the date employment
commenced and is subject to a certain minimum period of service. The pension schemes have not directly invested in any of the
Group’s own financial instruments or in properties or other assets used by the Group.
The assets and liabilities of the schemes are:
2011
Scheme assets at fair value
equities
Corporate bonds and cash
Property
fair value of scheme assets
Present value of defined benefit obligations
net pension liability
2010
Scheme assets at fair value
equities
Corporate bonds and cash
Property
fair value of scheme assets
Present value of defined benefit obligations
net pension liability
Movement in the present value of scheme assets
at 27 december 2009
expected return on scheme assets
Contributions by employer
Contributions by scheme participants
Benefits paid
actuarial gains
At 25 December 2010
expected return on scheme assets
Contributions by employer
Contributions by scheme participants
Benefits paid
actuarial losses
At 31 December 2011
tussauds
Group
£m
Gardaland
£m
total
£m
5.7
4.5
2.4
12.6
(15.7)
(3.1)
6.2
4.1
2.1
12.4
(13.7)
(1.3)
tussauds
Group
£m
10.7
0.6
0.5
0.1
(0.3)
0.8
12.4
0.7
0.4
0.1
(0.4)
(0.6)
12.6
-
-
-
-
(1.7)
(1.7)
-
-
-
-
(1.8)
(1.8)
Gardaland
£m
-
-
-
-
-
-
-
-
-
-
-
-
-
5.7
4.5
2.4
12.6
(17.4)
(4.8)
6.2
4.1
2.1
12.4
(15.5)
(3.1)
total
£m
10.7
0.6
0.5
0.1
(0.3)
0.8
12.4
0.7
0.4
0.1
(0.4)
(0.6)
12.6
The actual return on scheme assets for the Tussauds Group Pension scheme was a profit of £0.1 million
(2010: profit of £1.4 million).
93
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 6 OThER NOTES (continued)
53 weeks ended 31 december 2011
6.2 employee benefits (continued)
Movement in the present value of the defined benefit obligations
at 27 december 2009
Current service cost
interest cost
Benefits paid
Contributions by scheme participants
actuarial gains
exchange adjustments
At 25 December 2010
Current service cost
interest cost
Benefits paid
Contributions by scheme participants
actuarial (losses)/gains
At 31 December 2011
analysis of amounts charged against profits
2011
Operating cost
Current service cost
Finance cost
interest on defined benefit pension scheme obligation
expected return on defined benefit pension scheme assets
total
2010
Operating cost
Current service cost
Finance cost
interest on defined benefit pension scheme obligation
expected return on defined benefit pension scheme assets
total
tussauds
Group
£m
(13.6)
(0.2)
(0.8)
0.3
(0.1)
0.7
-
(13.7)
(0.2)
(0.8)
0.4
(0.1)
(1.3)
(15.7)
Gardaland
£m
(2.0)
0.1
-
-
-
-
0.1
(1.8)
-
(0.1)
-
-
0.2
(1.7)
total
£m
(15.6)
(0.1)
(0.8)
0.3
(0.1)
0.7
0.1
(15.5)
(0.2)
(0.9)
0.4
(0.1)
(1.1)
(17.4)
tussauds
Group
£m
Gardaland
£m
total
£m
0.2
0.8
(0.7)
0.1
0.3
-
0.1
-
0.1
0.1
0.2
0.9
(0.7)
0.2
0.4
0.2
(0.1)
0.1
0.8
(0.6)
0.2
0.4
-
-
-
(0.1)
0.8
(0.6)
0.2
0.3
94
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 6 OThER NOTES (continued)
53 weeks ended 31 december 2011
6.2 employee benefits (continued)
actuarial gains and losses recognised directly in other comprehensive income
Cumulative amount at 27 december 2009
net actuarial gains recognised in the year
Cumulative amount at 25 December 2010
net actuarial (losses)/gains recognised in the year
Cumulative amount at 31 December 2011
actuarial assumptions
Principal actuarial assumptions (expressed as weighted averages) at the year end were:
discount rate
expected rate of return on scheme assets
future salary increases
Rate of price inflation
tussauds
Group
£m
Gardaland
£m
(2.2)
1.5
(0.7)
(1.9)
(2.6)
0.1
-
0.1
0.2
0.3
total
£m
(2.1)
1.5
(0.6)
(1.7)
(2.3)
tussauds
Group
2011
tussauds
Group
2010
4.7%
5.4%
3.2%
2.9%
5.5%
5.5%
3.7%
3.4%
Gardaland
2011
Gardaland
2010
5.7%
4.1%
-
-
-
-
2.0%
2.0%
To develop the expected long-term rate of return on assets assumption of 5.4%, the Group considered the current level of expected
returns on risk free investments (primarily government bonds), the historical level of the risk premium associated with the other asset
classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset
class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for
the portfolio.
Assumptions regarding future mortality are based on published statistics and mortality tables. For the Tussauds Group scheme the
actuarial table used is S1PA. The mortality assumption adopted predicts that a current 65 year old male would have a life expectancy to
age 86 and a female would have a life expectancy to age 89.
The assumption considered to be the most significant for the Tussauds Group scheme is the discount rate adopted. If the discount rate
were to change by 0.1% then it is predicted that the deficit in the scheme would change by £0.4 million (2010: £0.3 million).
history of actuarial gains and losses
Present value of the defined benefit obligation
fair value of scheme assets
deficit in the schemes
actuarial adjustments arising on scheme liabilities
actuarial adjustments arising on scheme assets
2011
£m
(17.4)
12.6
(4.8)
(1.1)
(0.6)
2010
£m
(15.5)
12.4
(3.1)
0.7
0.8
2009
£m
(15.6)
10.7
(4.9)
(1.7)
0.8
2008
£m
(13.4)
9.0
(4.4)
1.5
(2.9)
2007
£m
(13.7)
10.7
(3.0)
0.7
(0.5)
95
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 6 OThER NOTES (continued)
53 weeks ended 31 december 2011
6.2 employee benefits (continued)
statement of financial position reconciliation
Liability at beginning of year
Pension expense recognised in profit and loss in the financial year
amounts recognised in other comprehensive income in the financial year
employer contributions made in the financial year
exchange movements
Liability at end of year
2011
£m
(3.1)
(0.4)
(1.7)
0.4
-
(4.8)
2010
£m
(4.9)
(0.3)
1.5
0.5
0.1
(3.1)
The Group expects £0.6 million in contributions to be paid to its defined benefit schemes in 2012.
6.3 Related party transactions
Related party transactions
identity of related parties
The Group has related party relationships with its subsidiaries (note 6.8), shareholders, key management personnel and joint ventures.
All dealings with related parties are conducted on an arm’s length basis.
Transactions with shareholders
During the year the Group entered into transactions with shareholders KIRKBI A/S, Blackstone Capital Partners and funds advised by
CvC Capital Partners (via Lancelot holdings S.à r.l.). The Group also entered into transactions with CvC Capital Partners and LEGO, a
related party of KIRKBI A/S. In 2010 the Group entered into transactions with Dubai International Capital (DIC), a previous shareholder
and Tatweer, a related party of DIC. Transactions entered into, and trading balances outstanding at 31 December 2011, are as follows:
2011
KiRKBi a/s
Blackstone Capital Partners
CVC Capital Partners
Lego
2010
KiRKBi a/s
Blackstone Capital Partners
CVC Capital Partners
diC
Lego
Tatweer
Fees
Goods
Sales
£m
Charged
£m
Amounts
owed to
related
party
£m
Purchases
£m
Amounts
owed to
related
party
£m
Amounts
owed by
related
party
£m
-
-
-
-
-
-
-
-
-
-
0.2
0.2
5.3
0.9
0.7
-
6.9
4.7
1.1
0.3
0.1
-
-
6.2
0.8
0.2
0.2
-
1.2
0.2
0.2
-
-
-
-
0.4
-
-
-
29.6
29.6
-
-
-
-
21.3
-
21.3
-
-
-
-
-
-
-
-
-
0.3
-
0.3
-
-
-
-
-
-
-
-
-
1.4
-
1.4
96
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 6 OThER NOTES (continued)
53 weeks ended 31 december 2011
6.3 Related party transactions (continued)
As members of a banking syndicate, certain shareholders (or other parties related to those shareholders), are owners of elements of
the Group’s bank loan portfolio as described in note 5.2. Balances outstanding at 31 December 2011 are; KIRKBI A/S £54.3 million
(2010: £55.2 million), funds advised by parties related to Blackstone Capital Partners £44.6 million (2010: £50.6 million) and funds advised
by parties related to CvC Capital Partners £32.1 million (2010: £32.6 million).
Interest is paid and accrued on the same terms as the rest of the banking syndicate as described in note 5.2.
During the period, and based on contractually agreed amounts, the Group recognised a derivative liability in respect of a committed
share issue to a certain shareholder which is expected to complete during 2012.
Transactions with key management personnel
Key management of the Group (the members of the Executive Board) and their immediate relatives control 7.1% (2010: 0.7%) of the
voting shares of the Company.
The compensation of key management was as follows:
Key management emoluments including social security costs
Contributions to money purchase pension schemes
share-based payments and other related payments
Transactions with joint ventures
During the year the Group entered into transactions with the following joint ventures:
2011
sea Life Centre helsinki oy
2010
Pirate adventure golf Limited
sea Life Centre helsinki oy
2011
£m
3.4
0.2
-
3.6
2010
£m
3.5
0.2
20.8
24.5
Amounts
owed by
related
party (non
trading)
£m
Sales to
related
party
£m
-
-
0.1
0.2
0.3
0.3
0.3
-
0.3
0.3
97
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 6 OThER NOTES (continued)
53 weeks ended 31 december 2011
6.4 Contingent liabilities
The Group has contingent liabilities arising from local planning obligations and other obligations. The total liability under these obligations
could amount up to £0.4 million (2010: £0.4 million).
6.5 subsequent events
On 10 February 2012 the Group’s A$140 million takeover offer for Living and Leisure Australia (LLA), that was announced in
December 2011, went unconditional. LLA owns and operates nine leisure attractions in the Asia Pacific region as well as a management
contract in Dubai, through three divisions: Oceanis Group aquaria; Australia Alpine Enterprises ski fields; and Australian Treetop
Adventures attractions. An exercise to determine the fair value of the net assets and contingent liabilities acquired is still ongoing.
This acquisition offers the Group an excellent opportunity to build on the acquisition of the Sydney Attractions Group in 2011 by
increasing its network of world class international attractions in Asia and Australia.
As part of financing this acquisition, the Group drew down new debt under its existing financing facilities.
6.6 new standards and interpretations
The following standards and interpretations, issued by the International Accounting Standards Board or the International Financial
Reporting Interpretations Committee, have been adopted by the Group with no significant impact on its consolidated financial statements:
• IFRS 3 (Amendment) “Business Combinations – Transitional requirements for contingent consideration from a business combination
that occurred before the effective date of the revised IFRS”, “Measurement of non-controlling interests” and “Unreplaced and
voluntarily replaced share-based payment awards”;
• IFRS 7 (Amendment) “Financial Instruments: Disclosures – Amendments to disclosures”;
• IAS 1 (Amendment) “Presentation of Financial Statements – Presentation of statement of changes in equity”;
• IAS 24 (Revised) “Related Party Disclosures”;
• IAS 27 (Amendment) “Consolidated and Separate Financial Statements – Transition requirements for amendments made as a result
of IAS 27 (2008) to IAS 21, IAS 28 and IAS 31”;
• IAS 32 (Amendment) “Classification of Rights Issues”;
• IFRIC 13 (Amendment) “Customer Loyalty Programmes – Fair value of award credit”;
• IFRIC 14 (Amendment) “Prepayments of a Minimum Funding Requirement”;
• IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments”.
IFRS and interpretations with effective dates after 31 December 2011 relevant to the Group will be implemented in the financial year
when the standards become effective.
The IASB has issued the following standards, amendments to standards and interpretations that will be effective for the Group as from
1 January 2012 or after. The Group does not expect any significant impact of these amendments on its consolidated financial statements.
• IFRS 7 (Amendment) “Transfers of financial assets”.
6.7 ultimate parent company information
The largest Group in which the results of the Company are consolidated is that headed by Merlin Entertainments S.à r.l., incorporated
in Luxembourg. No other Group financial statements include the results of the Company.
98
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 6 OThER NOTES (continued)
53 weeks ended 31 december 2011
6.8 subsidiary and joint venture undertakings
The Group has the following investments in subsidiaries and joint ventures:
Subsidiary undertaking
Merlin entertainments group Luxembourg s.à r.l.
Merlin entertainments group Luxembourg 2 s.à r.l.
Merlin entertainments group Luxembourg 3 s.à r.l.
alton Towers Limited
alton Towers Resort operations Limited
Charcoal CLg 1 Limited (company limited by guarantee)
Charcoal CLg 2 Limited (company limited by guarantee)
Charcoal holdco Limited
Charcoal Midco 1 Limited
Charcoal newco 1 Limited
Charcoal newco 1a Limited
Chessington hotel Limited
Chessington World of adventures Limited
Chessington World of adventures operations Limited
Chessington Zoo Limited
CWa PropCo Limited
LegoLand us holdings Limited
LegoLand Windsor Park Limited
London aquarium (south Bank) Limited
London dungeon Limited
London eye holdings Limited
Madame Tussaud’s Limited
Madame Tussaud’s Touring exhibition Limited
M.e.g.h. Limited
Merlin attractions Management Limited
Merlin attractions operations Limited
Merlin entertainment Limited
Merlin entertainments (asia Pacific) Limited
Merlin entertainments (Blackpool) Limited
Merlin entertainments (dungeons) Limited
Merlin entertainments (sea Life) Limited
Merlin entertainments developments Limited
Merlin entertainments finance Limited
Merlin entertainments group employee Benefit Trustees Limited
Merlin entertainments group finance Limited
Merlin entertainments group holdings Limited
Merlin entertainments group international Limited
Merlin entertainments group Limited
Merlin entertainments group operations Limited
Merlin’s Magic Wand Trustees Limited
Merlin us holdings Limited
sea Life Centre (Blackpool) Limited
sea Life Centres Limited
The London eye Company Limited
Country of
incorporation
Class of
share held
Luxembourg ordinary
Luxembourg ordinary
Luxembourg ordinary
uK ordinary
uK ordinary
-
uK
uK
-
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
Ownership
2011
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Ownership
2010
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
99
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 6 OThER NOTES (continued)
53 weeks ended 31 december 2011
6.8 subsidiary and joint venture undertakings (continued)
Subsidiary undertaking
The London Planetarium Company Limited
The Millennium Wheel Company Limited
The seal sanctuary Limited
The Tussauds group Limited
Thorpe Park operations Limited
Tussauds (nBd) Limited
Tussauds attractions Limited
Tussauds finance Limited
Tussauds group (uK) Pension Plan Trustee Limited
Tussauds holdings Limited
Tussauds hotels Limited
Tussauds intermediate holdings Limited
Tussauds Limited
Tussauds Theme Parks Limited
Warwick Castle Limited
Wizard acquisitionCo Limited
Wizard BondCo Limited
Wizard equityCo Limited
Wizard newCo Limited
gardaland s.r.l.
incoming gardaland s.r.l.
Merlin attractions italy s.r.l.
Merlin entertainments group italy s.r.l.
Merlin Water Parks s.r.l.
Ronchi del garda s.p.a.
Ronchi s.p.a.
dungeon deutschland gmbh
heide-Park soltau gmbh
LegoLand deutschland freizeitpark gmbh
LegoLand deutschland gmbh
LegoLand discovery Centre deutschland gmbh
LLd grundstücksverwaltungs gmbh
LLd share Beteiligungs gmbh
LLd share gmbh & Co. Kg
Madame Tussauds deutschland gmbh
Merlin entertainments group deutschland gmbh
sea Life deutschland gmbh
sea Life Konstanz gmbh
Tussauds deutschland gmbh
Tussauds heide Metropole gmbh
LegoLand aps
Merlin entertainments group denmark holdings aps
amsterdam dungeon B.V.
Madame Tussauds amsterdam B.V.
Merlin entertainments holdings nederland B.V.
sea Life Centre scheveningen B.V.
dirk frimout Centrum n.V.
sea Life Centre Belgium n.V.
sea Life france saRL
Country of
incorporation
Class of
share held
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
uK ordinary
italy ordinary
italy ordinary
italy ordinary
italy ordinary
italy ordinary
italy ordinary
italy ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
denmark ordinary
denmark ordinary
netherlands ordinary
netherlands ordinary
netherlands ordinary
netherlands ordinary
Belgium ordinary
Belgium ordinary
france ordinary
Ownership
2011
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
97.8%
97.8%
100.0%
100.0%
100.0%
(1) 44.7%
88.5%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
60.0%
100.0%
100.0%
100.0%
Ownership
2010
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
97.8%
97.8%
100.0%
100.0%
100.0%
44.7%
88.5%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
60.0%
100.0%
100.0%
100.0%
100
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 SECTION 6 OThER NOTES (continued)
53 weeks ended 31 december 2011
6.8 subsidiary and joint venture undertakings (continued)
Subsidiary undertaking
sLCs sea Life Centre spain s.a.
Merlin entertainments (sea Life PoRTo) unipessoal Lda
sea Life Centre Bray Limited
Madame Tussauds austria gmbh
MT austria holdings gmbh
LegoLand California LLC
LegoLand discovery Centre (dallas) LLC
LegoLand discovery Centre (Meadowlands) LLC
LegoLand discovery Centre us LLC
Madame Tussauds hollywood LLC
Madame Tussaud Las Vegas LLC
Madame Tussaud’s new york LLC
Madame Tussauds orlando LLC
Madame Tussauds Washington LLC
Merlin entertainments group florida LLC
Merlin entertainments group us holdings inc
Merlin entertainments group us LLC
Merlin entertainments group Wheel LLC
Merlin entertainments us newCo LLC
sea Life Minnesota LLC
sea Life us LLC
The Tussauds group LLC
Tussauds harbour gateway inc
Madame Tussauds exhibition (shanghai) Company Limited
Merlin entertainments group (Malaysia) sdn Bhd
Merlin entertainments studios (Malaysia) sdn Bhd
Merlin entertainments (Thailand) Limited
Merlin entertainments (australia) Pty Limited
aQdeV Pty Limited
sydney attractions group Pty Limited
sydney Tower observatory Pty Limited
sydney Wildlife World Pty Limited
The sydney aquarium Company Pty Limited
Merlin entertainments (new Zealand) Limited
auckland aquarium Limited
Merlin entertainments (Japan) Limited
Joint venture
Pirate adventure golf Limited
sea Life helsinki oy
Country of
incorporation
Class of
share held
spain ordinary
Portugal ordinary
ireland ordinary
austria ordinary
austria ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
usa ordinary
China ordinary
Malaysia ordinary
Malaysia ordinary
Thailand ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
new Zealand ordinary
new Zealand ordinary
Japan ordinary
Country of
incorporation
Class of
share held
uK ordinary
finland ordinary
Ownership
2011
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Ownership
2011
50.0%
50.0%
Ownership
2010
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
-
100.0%
100.0%
-
-
-
-
-
100.0%
-
-
Ownership
2010
50.0%
50.0%
(1) Merlin Entertainments S.à r.l. has control over this entity via control of the immediate parent entity and the control that the immediate parent entity
has over the subsidiary entity.
101
Merlin Entertainments S.à r.l. Annual Report and Accounts 2011 Merlin entertainments s.à r.l.
incorporated in Luxembourg.
Registered number: B154.309
www.merlinentertainments.biz
Registered office:
19, rue de Bitbourg,
L-1273,
Luxembourg
uK office:
3 Market Close,
Poole,
Bh15 1Nq
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