Merlin Entertainments S.à r.l.
incorporated in Luxembourg
Registered number: B154.309
www.merlinentertainments.biz
Registered Office:
1st floor
Polaris - Vertigo Building
2-4 rue Eugene Ruppert
L-2453 Luxembourg
UK Office:
3 Market Close
Poole
BH15 1NQ
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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 2012, merlin ran 94 attractions in 21 countries across
four continents. 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 shared ownership of KirKBi and funds advised by
Blackstone since 2005, with funds advised by cVc joining
during 2010.
¬ From 2000 to 2012 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 the following year.
¬ in 2011 merlin expanded into australia and new Zealand with
the acquisition of the Sydney Attractions Group (SAG).
¬ 2012 saw the acquisition of living and leisure australia (lla),
which owned and operated nine leisure attractions in the asia
Pacific region as well as running the Dubai Aquarium through a
management contract.
¬ With over 54 million visitors in 2012 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 midway attractions and
theme parks.
¬ 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.
¬ Our theme parks portfolio consists of ‘LEGOLAND Parks’
which are aimed at families with younger children and which
have the LEGO product as their central theme; and ‘Resort
Theme Parks’ which are stand-alone national brands generally
aimed at families, teenagers and young adults.
the management of the merlin business is aligned directly to
these two attraction types and organised into three operating
Groups, being Midway Attractions, LEGOLAND Parks and Resort
Theme Parks.
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 new 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, for which 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 2012 Our financial performance
Visitors millions
Revenue £m
35.1
38.5
41.0
769
801
662
54.0
46.5
1,074
933
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
Visitors represents all visitors to Merlin owned or operated attractions.
2011 is adjusted to be based on 52 weeks to 31/12/11 (Note 1).
Revenue as reported in the consolidated income statement.
2011 is adjusted to be based on 52 weeks to 31/12/11 (Note 1).
Underlying EBITDA £m
Underlying Operating Profit £m
236
256
203
346
296
177
198
150
258
222
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
EBITDA represents ‘Underlying Trading EBITDA’ as reported in the
consolidated income statement.
2011 is adjusted to be based on 52 weeks to 31/12/11 (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 31/12/11 (Note 1).
Revenue by Operating Group
Revenue by Geography
Midway Attractions, 44%
LEGOLAND Parks, 29%
Resort Theme Parks, 27%
UK, 40%
Continental Europe, 26%
North America, 20%
Asia Pacific, 14%
Our KPIs
Like for like growth (Notes 1, 2 & 3)
Visitors
Revenue
EBITDA
Operating Profit
(1.4%)
(0.5%)
1.9%
1.0%
See commentary in the business review commencing on page 12.
Non-Financial KPIs
Target
2012
2011
Customer Satisfaction*
Staff Engagement**
90%+
80%+
✔
✔
✔
✔
*Source - customer satisfaction surveys
**Source - annual employee surveys (see page 32 for further details)
Visitors by
Operating Group
Midway Attractions
LEGOLAND Parks
Resort Theme Parks
2012
33.0m
10.5m
10.5m
2011
(Note 1)
Growth %
(Note 3)
26.8m
7.9m
11.8m
23.2%
32.7%
(11.1%)
16.1%
Total
54.0m
46.5m
Sites by
Operating Group
December
2011
New
2012
December
2012
Midway Attractions
LEGOLAND Parks
Resort Theme Parks
Total
65
5
7
77
16
1
-
17
81
6
7
94
Notes
(1) Figures presented for 2011 are based on underlying trading figures compiled on a 52 week basis for ease of comparison. Compared to the statutory
accounts for 2011 that were prepared on a 53 week basis, 2012 shows a growth of 13.6% on underlying revenue of £946 million,
growth of 13.3% on underlying EBITDA of £306 million and growth of 11.7% on underlying operating profit of £232 million.
(2) Like for like growth is based on the 52 week figures of 2011 and includes businesses owned and
opened before January 2011, at constant currency using 2012 foreign exchange rates.
(3) Percentages shown are calculated on the underlying figures before rounding
and are then rounded to one decimal place.
3
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 COnTEnTs
PArT 1
WELCOME TO MERLIN ENTERTAINMENTS
MERlIN BRANDS
MErLIn MAP
ChAIrMAn’s sTATEMEnT
BUSINESS REVIEW
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
rIsks AnD UnCErTAInTIEs
2
6
8
10
12
16
20
24
28
32
34
38
42
4
COnTEnTs
PArT 2
GOVERNANCE
MERlIN’S MANAgEMENT TEAM
COrPOrATE GOvErnAnCE
MAnAGErs’ rEPOrT
InDEPEnDEnT AUDITOr’s rEPOrT
44
48
52
54
FINANCIAL STATEMENTS
55
TABLE OF COnTEnTs
COnsOLIDATED InCOME sTATEMEnT
56
COnsOLIDATED sTATEMEnT OF COMPrEhEnsIvE InCOME 57
58
COnsOLIDATED sTATEMEnT OF FInAnCIAL POsITIOn
59
COnsOLIDATED sTATEMEnT OF ChAnGEs In EqUITy
COnsOLIDATED sTATEMEnT OF CAsh FLOws
60
61
nOTEs TO ThE ACCOUnTs
5
MERlIN
BRANDS
MErLIn EnTErTAInMEnTs hAs A UnIqUE POrTFOLIO COMPrIsInG ICOnIC GLOBAL
AND NATIoNAl BRANDS.
sEA LIFE is the world’s biggest aquarium brand. There are 45 centres across the Uk, Continental
Europe, north America and the Asia Pacific region, all of which are built around the notion of
“Amazing Discovery”. 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 13 attractions around the globe with five in Europe, four in the UsA,
three in Asia and one in Australia. 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.
In 2012 there were eight LEGOLAnD Discovery Centres (LDCs) across Europe, the UsA and
Asia, with sites in Manchester, Berlin, Duisburg, Chicago, Dallas, Atlanta, kansas City and Tokyo. Two
more centres are opening in 2013 and LDC Duisburg is transferring to Oberhausen. 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
Six lEgolAND resorts across Europe, the USA and Asia 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 Tower, falconry, ‘tableaux’ by Madame Tussauds and a Dungeon all combine to make this an
amazing day out for Uk families and overseas tourists alike.
7
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 WORLD OF
ATTRACTIONS
8
NORTH AMERICA ATTRACTIONS
®
Arizona
California
Dallas
Kansas City
Minnesota
Hollywood
Las Vegas
New York
Washington DC
California
Florida
Atlanta
Chicago
Dallas
Kansas City
EUROPE ATTRACTIONS
®
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
Milan
Oostende
WORLD Of
ATTRACTIONS
AT DECEMBER 2012
UK ATTRACTIONS
®
Birmingham
Blackpool
Brighton
Great Yarmouth
Hunstanton
Loch Lomond
London
Scarborough
Weymouth
and Tower
TM
Gweek
Oban
Blackpool
Edinburgh
London
Warwick
York
Blackpool
London
Alton
Chessington
London
Blackpool
Warwick
Windsor
Manchester
Chertsey
ASIA ATTRACTIONS
®
TM
Bangkok
Busan
Shanghai
Bangkok
Hong Kong
Shanghai
Malaysia
Tokyo
AUSTRALIA / NEW ZEALAND
ATTRACTIONS
®
TM
Manly
Sydney
Hamilton Island
Sydney
Auckland
Melbourne
Mooloolaba
Sydney
Sydney
Otway
Illawarra
Mount Hotham
Falls Creek
ChAIrMAn’s
STATEMENT
I AM PLEAsED TO rEPOrT On MErLIn’s PErFOrMAnCE FOr 2012. ThE COMPAny hAs
DELIvErED COnTInUED GrOwTh In UnDErLyInG EArnInGs, OnGOInG CAPITAL
InvEsTMEnT, FUrThEr OvErsEAs ExPAnsIOn AnD JOB CrEATIOn. ThE ChALLEnGInG
ECOnOMIC EnvIrOnMEnT, PArTICULArLy In sOUThErn EUrOPE, hAs IMPACTED ThE
GrOUP’s BUsInEssEs ThErE AnD MAnAGEMEnT hAs rEsPOnDED APPrOPrIATELy By
CUTTInG COsTs AnD rEvIEwInG sTrUCTUrEs. ThIs hAs EnABLED MErLIn TO
wIThsTAnD ThIs yEAr’s ChALLEnGEs AnD wILL ALsO sUPPOrT ITs PrOFITABLE
GrOwTh In ThE FUTUrE.
Sir John Sunderland
Non-Executive Chairman
Trading across the group has seen EBITDA growth from both the
like for like estate of businesses as well as from acquisitions and
new openings. To have achieved this in such a difficult trading
environment demonstrates the value of Merlin’s balanced
portfolio of businesses and the strength of the brands, strategy
and management team.
The Management Committee’s primary focus is on driving the
business strategy and this continued at full pace throughout 2012,
with significant progress achieved on all of our growth drivers.
Most notably, last year saw the acquisition and integration of living
and leisure Australia, which brought nine attractions to our Asia
Pacific region as well as operational responsibility for the Dubai
Aquarium. The latest LEGOLAnD hotel, which was launched last
year in Windsor, proved very popular with guests and was a
significant milestone in the evolution of our theme parks into
destination resorts. The final highlight of the year was the opening
of lEgolAND Malaysia in September, bringing the total to six
lEgolAND parks and resorts. This further demonstrates our
commitment to expanding the brand, coming so soon after
LEGOLAnD Florida which we opened in the final quarter
of 2011.
The Management Committee is responsible for risk management
through the health, safety & security and Audit Committees, both
of which I also chair. The health, safety & security Committee
scrutinises 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 risk analysis and internal
financial controls through oversight of the Internal Audit function.
2012 has seen investment in resources in each of these areas,
further strengthening the overall risk management environment.
10
ChAIrMAn’s sTATEMEnT
The role of the Management Committee also extends to
oversight of our corporate social responsibilities, covering three
areas in particular. The first of these is Merlin’s Magic wand, our
own charity, which enables disadvantaged children and their
families to enjoy a Merlin experience. We are very proud of the
work of the charity as well of Merlin’s employees who both
campaign tirelessly to raise funds and work hard to make the
children’s visits as enjoyable and memorable as possible. Emphasis
last year was placed on ‘taking the magic to the children’ through
installing Merlin themed rooms and activity areas within Children’s
homes, hospitals and other locations for children unable to visit
one of our attractions, something we will continue in the future.
Secondly, we oversee Merlin’s work on animal and marine
conservation and welfare and in this regard I am delighted to
announce the recent launch of the sEA LIFE Marine Conservation
Trust. This will be the focus for all our conservation activities in
the future. Finally, the Management Committee is very conscious
of the work that Merlin does to reduce the environmental impact
of our business and we welcome the effort that the management
team devotes to this area.
I would like to take this opportunity to thank all our employees
for their dedication to providing memorable experiences to every
single one of our guests, each and every time they visit us. our
teams have remained steadfast in their focus on customer
satisfaction and health and safety during some challenging times
throughout 2012 and can be very proud of their contribution to
the success of the Company.
2013 Outlook
Trading to date is in line with our expectations, albeit our peak
trading seasons are still to come. The outlook for the business this
year is mixed, due to a continuation of some of the challenges
that the business faced in 2012. We also face cost pressures from
increased environmental energy levies in the Uk and Germany,
legislative increases in Uk pension costs, and global input price
pressures. having said that, our growing presence in faster growing
Asian economies will provide a natural hedge against some of
these factors and the cost saving initiatives that the business has
implemented over the last twelve months will support our
future growth and profitability. we therefore enter 2013
with confidence.
Sir John Sunderland
Chairman
Merlin Entertainments
20 March 2013
Tucker (age 5) at Merlin’s Magic Wand installation,
Sunshine Village, Florida
11
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 ChIEF
ExECUTIvE’s
rEPOrT
Visitors (m)
Revenue (£m)
EBITDA (£m)
2012
54.0
1,074
346
2011(1)
46.5
933
296
Growth(3)
Like for like(2),(3)
16.1%
15.2%
16.9%
(1.4%)
(0.5%)
1.9%
(1) Figures presented for 2011 are underlying trading compiled on a 52 week basis for ease of comparison with the 52 weeks of 2012
(2) Like for like figures include businesses owned and opened before January 2011, at constant currency using 2012 foreign exchange rates
(3) Percentages are calculated based on the underlying figures before rounding and are then rounded to one decimal place
2012 MArkED AnOThEr yEAr OF sUBsTAnTIAL PrOGrEss FOr
MErLIn EnTErTAInMEnTs wITh ThE COMPAny DELIvErInG
DOUBLE DIGIT EBITDA GrOwTh AnD ExPAnDInG TO 94
ATTrACTIOns In 21 COUnTrIEs. wE ALsO AChIEvED TwO
OThEr sIGnIFICAnT LAnDMArks In ThE yEAr, sUrPAssInG
50 MIllIoN VISIToRS AND £1 BIllIoN IN REVENUE oN AN
AnnUAL BAsIs FOr ThE FIrsT TIME.
Nick Varney
Chief Executive Officer
This progress was achieved despite the year being one of the
most testing we have experienced since founding the company in
1999, with three significant external factors combining to create
very difficult trading conditions for many of our European
businesses. The second wettest year on record in the Uk (and
wettest ever in England) was matched by similarly poor weather
in other parts of the continent, adversely affecting theme park
attendances across the operating season. This was compounded
in the Uk by the Olympics which cannibalised attraction visits
across the country and deterred normal tourist visitation to
london at what is traditionally peak season. Finally the eurozone
crisis had its most profound impact in southern Europe where
austerity measures and high unemployment led to a severe
contraction in leisure spending.
In the light of this backdrop I believe it is a true reflection of the
robustness of our strategy and quality of our team that Merlin
beat its profit target for the 13th year in a row while also
increasing our customer satisfaction and staff engagement scores.
Moreover, we have made substantial progress on every one of
our six strategic growth drivers.
In terms of trading, total visitor numbers for last year were
54 million, being 7.5 million up on the comparative 52 weeks of
2011, a rise of 16.1%. our revenue growth over the same period
was 15.2%, slightly lower than our volume growth as a result of
the lEgolAND Malaysia operating contract as well as a change
in mix across our portfolio of sites. We have also introduced
online pricing initiatives which both deliver value to our customers
and drive pre-booked revenues to our businesses. Revenues at
our like for like businesses were hit last year by the adverse
factors already outlined, so we were pleased to see them virtually
flat. whilst most of our £50 million EBITDA growth has come
from new site openings and acquisitions, it is however pleasing to
note 1.9% growth from our like for like businesses despite flat
revenues, through strong cost controls, some re-engineering of
our cost base and other initiatives, including more efficient use of
our marketing budgets. Furthermore, the changes we made
during 2012 will underpin our future performance, as we will
continue to benefit from many of the efficiency savings as well as
from the advances we have made through our e-commerce
channel and dynamic pricing.
12
BUsInEss rEvIEw - ChIEF ExECUTIvE’s rEPOrT
We surpassed 50 million
visitors and £1 billion
in revenue
another phase of themed lodges at the lEgolAND
Deutschland holiday village and began construction of
our next lEgo-themed hotel to open at lEgolAND
California in 2013. we continue to see a direct correlation
between the development of on-site accommodation and the
number of multi-day visits to the parks, something which
further enhances guest satisfaction, drives repeat visitation and
delivers increased returns overall.
¬ Exploiting strategic synergies
our groupwide initiatives in e-commerce drove revenues
through this channel to increase by more than 50% in 2012, as
well as delivering pre-booked revenues for visits further in
advance than previously (see case study on page 26). The
Merlin Annual Pass was launched for the first time in the UsA
and Australia and again delivered increased sales volumes in
the Uk and Germany. we also continued to drive our strategy
of clustering sites in city locations and resorts, where we enjoy
marketing benefits and cost savings. As a result of the midway
rollout programme and our acquired businesses we now
operate in nine city cluster locations.
¬ Developing new LEGOLAND parks
I am very pleased with the performance of lEgolAND
Florida in its first full year of trading and equally delighted with
the launch of lEgolAND Malaysia in September 2012, as
mentioned above (see case study on page 22). We continue
to pursue other opportunities for lEgolAND parks and
hope to be able to announce more concrete plans very shortly.
¬ Strategic acquisitions
We completed the acquisition of living and leisure Australia
(llA) at the start of 2012 and have very quickly integrated
these businesses and their teams into Merlin (see case study
on page 18). LLA businesses in Australia, Thailand and China
were slotted in alongside our existing attractions there, whilst
the acquired site in south korea and the management contract
in Dubai represent new countries of operation for us.
opening of lEgolAND Malaysia
Among the many highlights in 2012, I was privileged to be at the
official opening ceremony of LEGOLAnD Malaysia. This is a
significant development for the Group, because it is the first
theme park we operate in Asia and means that lEgolAND
parks are now present on three continents. The event was
attended by his royal highness the sultan of Johor and the Prime
Minister of Malaysia, underlining the importance of lEgolAND
Malaysia to that country. The highlight for me was seeing 10,000
Malaysian and Singaporean visitors immersing themselves in the
lEgolAND experience with the same excitement, engagement
and energy that we see the world over. The park is truly
spectacular, was built on time and on budget and has sold the
highest number of annual passes we have ever seen.
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 2012.
¬ Growing the existing estate through planned capex cycles
We have launched imaginative new rides and attractions
across our existing estate of attractions, which have
underpinned the like for like performances across the group
this year. whilst our resort Theme Parks Operating Group
was particularly affected by the conditions in southern Europe,
we have delivered like for like growth in our other operating
business units. We again delivered our portfolio of capital
projects on time and within budget.
¬ Rolling out new midway attractions
2012 saw Merlin Entertainments open six new attractions
across three midway brands including our first permanent
presence in Japan (LEGOLAnD Discovery Centre, Tokyo). In
sydney, our innovative design and efficient use of space saw
Madame Tussauds open in the same building as the WIlD lIFE
Sydney attraction. This business was acquired as part of the
Sydney Attractions group portfolio at the start of 2011,
resulting in the original footprint now supporting two
successful businesses.
¬ Transforming our theme parks into destination resorts
our resort positioning during 2012 focused on delivering
hotels and holiday villages. Most notably, our second
lEgo-themed hotel was opened at lEgolAND Windsor
in March to great acclaim and the delight of the many families
and conference guests who have stayed there. We also added
13
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 BUsInEss rEvIEw – ChIEF ExECUTIvE’s rEPOrT
Our number one
priority is to provide a
memorable experience
for every guest
Memorable experiences for every visitor
our number one priority is to provide a memorable experience
for every guest, from booking to departure. We continually
measure our performance via the use of on-site, real-time
electronic survey kiosks and we also run an extensive externally
operated Mystery Visit programme.
We are highly competitive across our attractions which, combined
with the regular use of league tables, serves to encourage further
improvement. As a result of this focus and a cultural commitment
to excellence, our overall guest satisfaction scores defied the
significant challenges posed by a back-drop of strong cost controls
and we again exceeded our 90% target. We also view complaints
as a real opportunity to exceed expectations. As a result, our
2012 survey of previous complainants revealed that more than
four out of five had returned or intend to do so within the next
twelve months.
Health and safety
of equal importance is that our guests and employees always
enjoy a safe and secure environment. our focus is on proactive
and continuous improvement, which has ensured that we maintain
our high standards. we have shown improvements in our health
& safety measures for five years in a row, with a continuing
reduction in the overall guest incident rate and further
improvement in the already high positive scores in the
health & safety related questions in our annual employee
survey. We are certainly not complacent, however and
continue to invest in this key area.
Our winning team
The Merlin team of more than 20,000 at peak season is truly
outstanding, having again delivered guest satisfaction scores well in
excess of our 90% target throughout some challenging times in
2012. We place great importance on how staff interact with
guests and our rating for this measure has also risen again this
year, supporting our aim to have the most friendly and helpful staff
in our industry. The level of engagement of staff is measured
through our annual employee survey. our target for this measure
is 80% and our 2012 score was once again ahead of this and
higher than the score in 2011. This time around a staggering 97%
of our employees completed the survey and 96% of those said
they ‘enjoyed working here’.
I am proud of the commitment and enthusiasm of all our
employees, spread across 94 sites in 21 countries. As well as their
focus on customer care, I am also proud of their passion for our
two charities, the Merlin’s Magic Wand children’s charity and the
sEA LIFE Marine Conservation Trust, which is focused on animal
and marine conservation and welfare. I am also proud of the
contribution that Merlin makes to the local communities and
economies in which we operate by generating employment and
stimulating broader economic activity.
An example customer survey point
14
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 BUsInEss rEvIEw - ChIEF ExECUTIvE’s rEPOrT
Our unique resources
are raising the bar in
innovation and creativity
Looking ahead
With some very exciting ride and attraction launches planned
over the next few months we are approaching 2013 with
confidence. while underlying economic pressures undoubtedly
remain, the business has historically demonstrated its resilience to
all but the most extreme external impacts. Indeed this is only
increasing as the pursuit of our expansion strategy sees us
diversify geographically and by product type. While one cannot
say for certain that the weather in 2012 was a one-off, it is though
a fairly safe bet that the Uk market will not see a repeat of the
olympics effect in the immediate future.
In this context we expect to see good like for like growth in all
markets except southern Europe where we are projecting several
more years of depressed leisure spending. This growth will be
given added impetus by the progressive shift in focus of our new
openings and acquisitions to the faster growing markets of the
Asia Pacific region.
our unique resources are raising the bar in innovation and
creativity, inspiring all our hardworking teams and businesses
to bring more Merlin magic in 2013 and beyond.
Watch this space!
Nick Varney
Chief Executive Officer
Merlin Entertainments
20 March 2013
Premium Adventure room at LEGOLAnD windsor resort hotel
15
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 MIDWAY
ATTrACTIOns
16
BUsInEss rEvIEw – MIDwAy ATTrACTIOns
Visitors (m)
Revenue (£m)
EBITDA (£m)
2012
33.0
458
179
2011(1)
Growth(3)
Like for like(2),(3)
26.8
352
140
23.2%
30.1%
28.2%
0.7%
2.6%
5.9%
(1) Figures presented for 2011 are underlying trading compiled on a 52 week basis for ease of comparison with the 52 weeks of 2012
(2) Like for like figures include businesses owned and opened before January 2011, at constant currency using 2012 foreign exchange rates
(3) Percentages are calculated based on the underlying figures before rounding and are then rounded to one decimal place
2012 wAs A sUCCEssFUL yEAr FOr ThE
MIDwAy ATTrACTIOns OPErATInG GrOUP,
wITh sTrOnG GrOwTh In OUr AsIAn
MArkETs; An ACCELErATED MIDwAy
rOLL OUT PLAn; ThE sUCCEssFUL
rELAUnCh OF MAny OF ThE syDnEy
ATTrACTIOn GrOUP ATTrACTIOns AnD
ThE EFFECTIvE InTEGrATIOn OF LIvInG
AND lEISURE AUSTRAlIA.
The existing estate saw some pleasing growth with particularly
strong performances in Asia, USA, Australia and New Zealand.
The eurozone crisis had an impact on our European midway
performance, particularly in southern Europe where increased taxes
combined with unfavourable economic conditions had a negative
impact. The london olympics also had a deep but relatively brief
impact on trading at our central london attractions.
our existing estate growth was underpinned by our strategy of
planned capex cycles across each brand. lEgolAND Discovery
Centre peak capex investments included launching LEGO Forest
Pursuit Driving attractions at Manchester and Dallas and adding
laser shooting to the ride at Chicago. Our peak year sEA LIFE
capex focused on the relaunch of the acquired Sydney Attractions
group businesses, with other key investments including the
relaunch of Brighton and the addition of crocodiles in hannover.
Madame Tussauds Amsterdam was enhanced to include the
contemporary figures and theming which are prevalent in the new
launches around the world. In addition to our high year capex
investments, we also launched a number of mobile features which
move between attractions over a five year period, thereby
providing new experiences for guests and good capital efficiency for
the company. New mobile feature launches in 2012 included
touring attractions in Madame Tussauds of ‘The Beatles’ and ‘ABBA’,
with SEA lIFE adding touring ‘Turtle Shelter’ attractions to the
existing ‘Jelly Disco’, ‘Claws’ and ‘Octopus Gardens’ offerings.
We continued our rapid expansion of midway attractions around
the world, successfully launching a further six, including: a SEA lIFE
and LEGOLAnD Discovery Centre adjacent to each other in
kansas City, UsA – for the first time, sharing a common entrance;
further LEGOLAnD Discovery Centres in Atlanta, UsA and Tokyo,
our first permanent attraction in Japan; a Madame Tussauds in
Sydney, Australia and a SEA lIFE observation Tower in Weymouth,
Uk. Overall this was one of our most successful years of launching
new attractions, combining the delivery of outstanding commercial
performance together with excellent customer satisfaction scores.
Madame Tussauds mobile ‘Beatles’ attraction
Several of the Sydney Attractions group sites we acquired in 2011
have been relaunched and rebranded during 2012. We also
furthered our attraction clustering strategy by adding a new
Madame Tussauds in half of the original space of WIlD lIFE Sydney,
next door to the sEA LIFE sydney Aquarium in Darling harbour.
This was a very cost effective way of expanding the cluster in that
fabulous location. At the start of 2012, we acquired living and
leisure Australia, which brought us nine attractions across Australia
and Asia as well as a management contract in Dubai. This has
enabled us to develop our footprint of attractions in Asia Pacific
and further our effective strategy of clustering midway attractions,
which provides a proven platform for stronger growth than stand
alone sites due to our ability to dominate key markets and grow
market share. At the end of 2012, we had clusters in Amsterdam,
Bangkok, Berlin, Blackpool, Dallas, kansas City, London, shanghai and
sydney. Clustering will continue to be central to our future midway
roll out strategy.
2012 has been a year of expansion, integration and at times cost
pressure. however, underpinning our success has been some
strong customer satisfaction scores, with more of our customers
than ever before willing to recommend our attractions to their
friends and family.
Merlin Midway
Sites
December
2011
New
2012
December
2012
UK
Continental Europe
North America
Asia Pacific
Total
21
25
10
9
65
1
-
3
12
16
22
25
13
21
81
17
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 BUsInEss rEvIEw – MIDwAy ATTrACTIOns
LIVING AND LEISURE AUSTRALIA
ACqUIsITIOn OF nInE nEw ATTrACTIOns ACrOss FOUr COUnTrIEs
Y
D
U
T
S
E
S
A
C
whAT DID wE DO?
We made our first entry into the rapidly expanding
Asian aquarium market as well as expanding further
in Australia. We have also created two new cluster
cities in Bangkok and Shanghai. Overall, this
acquisition has added nine new attractions to the
Midway Operating Group comprising Melbourne
Aquarium, Hotham and Falls Creek Ski Resorts,
Illawarra and Otway Treetop Adventures, Mooloolaba
Underwater World, Siam Ocean World, Shanghai
Changfeng Ocean World and Busan Aquarium, as well
as the management contract for the Dubai Aquarium.
hOw DID wE DO IT?
We formed a team of experienced attraction
operators to integrate each function of Living and
Leisure Australia 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 successfully integrated Living and Leisure
Australia into Merlin. The Bangkok and Shanghai
attractions are now part of the newly created
cluster teams which have seen an improved
performance at the aquaria as well as at the
established Madame Tussauds attractions due to
cross selling and sharing trade contacts. We have
significantly reduced the operating cost base at the
acquired attractions whilst improving the level of
customer satisfaction. We have developed a phased
investment plan for the aquaria which will see them
relaunched as SEA LIFEs during 2013 – 2016,
starting with Melbourne Aquarium in September 2013.
The cumulative impact of cost savings, a new
marketing approach and targeted capital investment
has led to a significant increase in profitability
for the Living and Leisure Australia attractions.
18
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012
‘sDx: shark Dive xtreme’, Australia
19
lEgolAND
PArks
20
BUsInEss rEvIEw – LEGOLAnD PArks
Visitors (m)
Revenue (£m)
EBITDA (£m)
2012
10.5
308
113
2011(1)
Growth(3)
Like for like(2),(3)
7.9
250
85
32.7%
23.4%
32.9%
7.0%
5.6%
11.1%
(1) Figures presented for 2011 are underlying trading compiled on a 52 week basis for ease of comparison with the 52 weeks of 2012
(2) Like for like figures include businesses owned and opened before January 2011, at constant currency using 2012 foreign exchange rates
(3) Percentages are calculated based on the underlying figures before rounding and are then rounded to one decimal place
2012 wAs A vEry GOOD yEAr FOr ThE
LEGOLAnD PArks OPErATInG GrOUP.
ThrEE OF ThE FOUr OrIGInAL PArks
DELIvErED ThEIr BEsT rEsULTs EvEr In
TErMs OF vIsITOrs, rEvEnUE AnD EBITDA;
LEGOLAnD FLOrIDA, whICh OPEnED In
LATE 2011, hAD A FAnTAsTIC FIrsT FULL
yEAr OF TrADInG; ThE LEGOLAnD
wInDsOr hOTEL OPEnED In MArCh AnD
hAs PrOvED vEry POPULAr wITh GUEsTs
EvEr sInCE; AnD OUr vIGOrOUs
ExPAnsIOn PLAns COnTInUED wITh ThE
OPEnInG OF ThE sIxTh LEGOLAnD PArk
– AnD ThE FIrsT In AsIA – In JOhOr,
MALAysIA In sEPTEMBEr.
LEGOLAnD Malaysia is not only the first park in Asia, but also a
brand new business model. Designed by Merlin, the park has been
funded by our Malaysian partner, Themed Attractions and Resorts.
Merlin is responsible for its ongoing operation and over time will
take an increasing equity stake in the business. The park opened
on time and on budget, and achieved more than double its visitor
and revenue expectations during 2012. A 249 bedroom
LEGOLAnD hotel and a LEGOLAnD water Park are under
construction and will be added during 2013.
At the heart of our existing estate strategy is the continued
application of our planned capital expenditure cycles allied with
innovative product development. In 2012 the highlight of this was
the investment in a new ‘Polar Land’ experience in LEGOLAnD
Billund, as well as the highly successful lEgo Star Wars area
added in lEgolAND Windsor and lEgolAND Florida. our
close cooperation with lEgo also resulted in the addition of a
successful and jointly marketed lEgo Ninjago ride in
lEgolAND Deutschland. The continuing high popularity of the
lEgo brand offers us strong opportunities for cost effective
expansion and a relationship with lEgo that we plan to build
on even more strongly in the coming years.
our strategic transformation of the lEgolAND parks into
multi-day destination resorts continues at a rapid pace. During
2012 we opened the LEGOLAnD windsor hotel, which has
been a great success with our park visitors. It was a complete sell
out in the school holiday periods and was accompanied by a
New lEgo Ninjago ride at lEgolAND Deutschland
significant increase in multi-day tickets as well as guests at
the resort giving us very high customer satisfaction scores.
This demonstrates how our accommodation led strategy is
the right approach for our business.
We have already announced further accommodation
developments to come in 2013, with a 250 bedroom hotel for
LEGOLAnD California, a LEGO Castle with 34 premium
bedrooms to be added to the popular holiday village in our
german park, as well as our plans to run a campground and
cottages adjacent to lEgolAND Billund. The lEgolAND
Malaysia hotel will then follow by the end of 2013.
Alongside the commercial performance and resort expansion it is
also particularly pleasing to report another year where all parks
drove up their already high customer satisfaction scores.
After the successful opening of two new lEgolAND parks in
the last 18 months, we are now working intensively on adding
more lEgolAND resorts to our portfolio, focusing on Asia.
We intend to announce the next location very soon!
21
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 BUsInEss rEvIEw – LEGOLAnD PArks
Y
D
U
T
S
E
S
A
C
LEGOLAND
MAlAYSIA
whAT DID wE DO?
In 2008 we entered into a partnership with the regional government to develop
LEGOLAND Malaysia. The region wanted a LEGOLAND park as the flagship attraction
for its Iskandar leisure and retail development, next to the border with
Singapore, whilst we wanted a low risk way of entering the Asian market. The
deal was done and the park was built and opened on schedule in September 2012.
hOw DID wE DO IT?
Merlin provided the park design and project managed the construction which
was funded by the central and regional Malaysian governments. We deployed our
experienced LEGOLAND Development team, alongside their Merlin Magic Making
colleagues and the local partners. Together, they successfully delivered a
fantastic LEGOLAND park on the agreed date and within the agreed budget. The
teamwork and support from colleagues across all five existing LEGOLAND parks
helped us to train over 600 staff for opening. With Merlin operating the park,
LEGOLAND Malaysia is now delivering memorable LEGOLAND visitor experiences.
whAT wAs ThE rEsULT?
With the addition of the LEGOLAND Malaysia Water Park and LEGOLAND Hotel in
2013 the LEGOLAND resort is intended to become one of the anchors that will
help the region of Iskandar and Singapore become a tourism destination for
South East Asia in a similar way that Orlando is for America. The reception
to LEGOLAND Malaysia has been outstanding with visitation and revenues more
than double expectations. Annual pass sales have already exceeded those sold
by any other LEGOLAND park; a great start that we expect will continue into
2013 - and beyond.
22
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012
The foyer of
lEgolAND
windsor hotel
23
RESoRT
ThEME PArks
24
BUsInEss rEvIEw – rEsOrT ThEME PArks
Visitors (m)
Revenue (£m)
EBITDA (£m)
2012
10.5
290
73
2011(1)
11.8
328
95
Growth(3)
Like for like(2),(3)
(11.1%)
(11.1%)
(11.8%)
(8.1%)
(23.4%)
(18.4%)
(1) Figures presented for 2011 are underlying trading compiled on a 52 week basis for ease of comparison with the 52 weeks of 2012
(2) Like for like figures include businesses owned and opened before January 2011, at constant currency using 2012 foreign exchange rates
(3) Percentages are calculated based on the underlying figures before rounding and are then rounded to one decimal place
2012 hAs BEEn A ChALLEnGInG yEAr FOr rEsOrT ThEME PArks As A rEsULT
OF A nUMBEr OF ExTErnAL FACTOrs whICh hAvE AFFECTED ThE MArkETs In whICh
wE OPErATE. FInAnCIAL PErFOrMAnCE hAs BEEn hIT By ThE wOrsT wEAThEr
COnDITIOns FOr MAny yEArs DUrInG kEy TrADInG PErIODs In ThE Uk AnD
GErMAny, whILsT ThE OLyMPICs EFFECT In ThE Uk AnD ThE DEEPEr ECOnOMIC
ChALLEnGEs In ITALy MADE FOr A DIFFICULT AnD UnCErTAIn TrADInG EnvIrOnMEnT.
our resort positioning strategy also continued apace, where
multi-visit tickets combined with an overnight stay encourage
visitors to spend longer at our resorts. Within our hotel portfolio,
gardaland successfully targeted customers outside Italy and we
saw increases in leisure occupancy at the Chessington resort.
The short break strategy will continue, with further great news
that development plans for more accommodation have been
granted planning approval at Thorpe Park, Chessington world
of Adventures and Alton Towers.
our strong contingency planning enabled us to mitigate some of
the lower revenues through cost savings without compromising
on the customer experience, as evidenced by maintained, and in
some cases improved, customer satisfaction scores across all
our resorts.
Despite the external difficulties we continued with our strategy of
delivering highly compelling new attractions on a planned capex
cycle. The peak capex year investment in 2012 was at Thorpe
Park with ‘The swarm’, the Uk’s first winged coaster based on the
Raptor ride which successfully launched in gardaland in 2011.
We also continued with our strategy of working with highly
recognisable third party Intellectual Property (IP) partners.
Chessington world of Adventures introduced ‘Madagascar Live:
Prepare to Party’, a live character-based show, to coincide with
the launch of the new Madagascar film. Alton Towers and
gardaland both launched an ‘Ice Age 4D Experience’ to capitalise
on the international success of the film franchise. Alton Towers
and heide Park then also launched spin off attractions based
on strong internal IPs: ‘nemesis sub Terra,’ a ride and actor led
psychological scare attraction based on Alton Towers’ iconic
‘nemesis’ coaster and ‘krake Alive’, an actor led scare maze
based on the successful heide Park ‘krake’ dive coaster
launched in 2011.
Further advances were made during 2012 in our key strategy of
increasing pre-booked business and driving visitation to our
branded websites and mobile ‘apps’. Total revenue booked
through e-commerce platforms increased significantly and all
attractions saw increases in the percentage of pre-booked visitors.
This strategy was enhanced by the introduction of a dynamic
‘Advanced Purchase Pricing’ model on all resort websites,
providing an increased discount to customers booking in advance
(see case study overleaf). This is a strategy we will continue to
evolve in the coming years to help provide a further hedge
against poor weather and volatile market conditions.
Thorpe Park’s ‘The swarm’ wing Coaster
25
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 BUsInEss rEvIEw – rEsOrT ThEME PArks
ONLINE PRICING
whAT DID wE DO?
In order to drive our e-commerce and pre-booking strategy all our theme
parks introduced an ‘Advanced Purchase Pricing’ model for online ticket sales.
hOw DID wE DO IT?
Each website booking engine was redesigned to enable dynamic - or
demand based - pricing and provide increased discounts for those booking
further in advance of admission, as an incentive to book early. Discounts
can be altered at any time to reflect changes in levels of demand during the
season whilst always maintaining some discount for early booking. To support
this activity marketing communications were focused on the ‘book early for
best discounts’ message as a call to action and to educate visitors to
book tickets in advance.
whAT wAs ThE rEsULT?
During 2012, revenue through our branded websites grew significantly. Across
the UK parks the percentage of bookings made on the same day or one day
before visitation halved by comparison to 2011 as customers moved to
booking earlier. At the same time the number booking more than seven days
ahead more than doubled. This shift is important as it helps to deliver
guaranteed revenue streams and provides a hedge against poor weather and
volatile market conditions which can reduce visitor volumes during key
trading periods. At the same it also delivers even better value to the
increasing numbers of our customers who book early and benefit from the
discounts on offer.
Y
D
U
T
S
E
S
A
C
26
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012
BUsInEss rEvIEw – rEsOrT ThEME PArks
Ice Age themed rooms at Alton Towers resort hotel
safari themed rooms at Chessington world of Adventures resort hotel
27
MERlIN
MAGIC
MAkInG
MErLIn MAGIC MAkInG Is ThE UnIqUE
rEsOUrCE ThAT sITs AT ThE vEry hEArT
OF MErLIn EnTErTAInMEnTs. ITs PrIMAry
AIM Is TO rAIsE ThE BAr In TErMs OF
InnOvATIOn AnD CrEATIvITy, ALLOwInG
MErLIn TO sTAy AhEAD OF ThE
COMPETITIOn. nO OThEr GrOUP On ThE
PLAnET DELIvErs PrOJECTs OF sUCh
qUALITy, wITh sUCh vALUE, wIThIn ThE
TIMEsCALEs AChIEvED…Oh, AnD In OUr
sPArE TIME wE hAvE GrEAT FUn DOInG IT!
What we do
Merlin Magic Making prides itself on not taking ‘no’ for an answer.
our in-house team of creatives strive to ensure that we are at the
forefront of innovative thinking when it comes to designing
something special. We have the talent to translate those creative
ideas into reality through our ability to produce unrivalled and
amazing content for any of Merlin’s attractions; build at a speed
and value unknown to our competitors; and find new business
opportunities all over the planet.
however that talent for new thinking does not
stop at the doors of Merlin Magic Making as we
take on the responsibility for encouraging
innovative thinking across the whole of the
Merlin family.
I
C
G
A
M
E
h
T
G
n
C
U
D
O
r
P
I
DELIvErInG ThE MAGIC
28
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012
FInDInG ThE MAGIC
I
C
r
E
A
T
n
G
T
h
E
M
A
G
C
I
29
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012
FOCUs On MErLIn MAGIC MAkInG
Creating the Magic
‘CrEATIvITy Is AT ThE COrE OF EvEry PArT
OF MErLIn MAGIC MAkInG’
our dedicated creative team designs and champions our fantastic
developments with inspiring new ideas, from roller coasters with
that ‘special twist’, to developing brand new attractions for a new
generation of visitors. Dedicated to designing compelling propositions
to excite our customers’ imagination, the team is always looking
for the next new thing that can bring a new dimension to our
guests’ experience.
our experience is not just with our in-house team. We also work
closely with colleges to secure the talent pipeline for the years ahead;
with external creative thinkers to challenge our own thinking; and
with Intellectual Property owners to bring alive their fantastic brands.
Producing the Magic
‘EvEry sInGLE hAIr Is InsErTED sEPArATELy
InTO ThE wAx hEAD’
All of our fantastic creations are produced by our very own creative
builders, modellers, sculptors, themers and dedicated animal teams.
with over 200 years of experience in producing the finest wax
figures in the world, we work together with the famous and
sometimes infamous, to recreate amazing life likenesses, through
sculpting, moulding, hair and colouring and costume. Did you know
each wax figure takes up to nine months to complete and has every
single hair inserted into it, one at a time? now that takes dedication!
Y
D
U
T
S
Producing magic at Madame Tussauds
‘EVERY YEAR WE USE oVER 20 MIllIoN
BrICks TO CrEATE MODEL MAsTErPIECEs!’
E
S
A
C
with five LEGO model building facilities around the globe we can
make any model of any subject with the world famous lEgo brick.
Starting with the initial intricate design, we construct and animate
each model and finally install them into either a LEGOLAnD park
or a LEGOLAnD Discovery Centre. Every single year our talented
lEgo model builders use over 20 million bricks to create
model masterpieces!
‘ThE MOsT ExPErIEnCED TEAM OF AqUArIUM
MArInE BIOLOGIsTs In ThE wOrLD’
our displays development team boasts the most experienced,
professional team of aquarium marine biologists anywhere in the
world. Responsible for the welfare and wellbeing of the creatures in
our care, they have established a reputation for excellence that we
take great pride in. They undertake extensive research and
development around the globe, to both help us become better at
the husbandry we give and to spread our success of captive bred
creatures. 2012 saw especially significant successes, led by our ability
to now successfully breed Weedy Sea Dragons.
Weedy Sea Dragon
Finding the Magic
‘TrAILBLAzInG MErLIn’s ExPAnsIOn InTO
nEw AnD ExIsTInG TErrITOrIEs’
A small dedicated team are positioned strategically around the world,
searching for new business opportunities both for our own brand
rollout and strategic acquisitions.
They trailblaze Merlin’s expansion into new and existing territories,
finding suitable locations and negotiating hard for advantageous rental
deals, to fuel our rollout strategy, securing a pipeline that will see us
opening up to seven new midway attractions every year.
Delivering the Magic
’29 MAJOr PrOJECTs In sEvEn COUnTrIEs
InvEsTInG In ExCEss OF £140 MILLIOn’
our ability to deliver all of our development needs completely
in-house is truly unique. This means that we have the experience and
ability to deliver all of our projects on time, on budget, to the
required specification – and all at outstanding value. 2012 saw us
working on 29 major projects in seven countries where we are
investing capital in excess of £140 million. our ability to react quickly,
drive value and deliver excellence to our guests allows us to achieve
things that others only dream of!
And finally…
Merlin Magic Making is absolutely unique. We are diverse, creative,
dedicated and, most importantly, successful in helping Merlin grow
into one of the world’s best providers of location based
entertainment.
30
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012
FOCUs On MErLIn MAGIC MAkInG
KANSAS CITY CLUSTER
whAT DID wE DO?
We used the combined power of Merlin Magic Making to create a new US cluster
city with two of our biggest midway brands, SEA LIFE and LEGOLAND Discovery
Centre. From the initial negotiations it took the team just 18 months to sign
the leases, design both attractions, produce the content & select the creatures
and to build the attractions - all before we welcomed our first guests.
hOw DID wE DO IT?
CONCEPT CREATION
The project management team
coordinated in-house resources along
with external contractors to build both
attractions simultaneously, on time, on
budget and to a ver y high specification.
The team designed two bespoke and
complementar y attractions to maximise
the location benefits, then took on the
role of creative champions to ensure
the fantastic designs were delivered on
the ground.
PROJECT MANAGEMENT
PRODUCTION OF CONTENT
We located one site to accommodate
two businesses, before negotiating a
favourable rent deal in double quick
time that allowed us to get on with
the construction.
SITE FINDING/PARTNER BUILDING
The LEGO master builders turned
drawing designs into fantastic realistic
models, while the displays development
team chose the perfect creatures for a
magical SEA LIFE experience and
delivered them to site fit and healthy.
whAT wAs ThE rEsULT?
In a very short time period we launched a fantastic new cluster. We delivered
a new SEA LIFE Centre that boasts over 5,000 magical creatures and an amazing
underwater tunnel, as well as a state of the art LEGOLAND Discovery Centre
that allows children to lose themselves in playful learning. Together the
businesses have been a great success both commercially and from a customer
satisfaction perspective.
Y
D
U
T
S
E
S
A
C
31
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012
MErLIn PEOPLEMERlIN
MERlIN
PEOPLE
PEOPLE
MErLIn PEOPLE DO BUsInEss ‘ThE MErLIn wAy’, ThrOUGh ThE CULTUrE AnD
vALUEs ThAT LInk ALL OUr ATTrACTIOns wITh OnE ULTIMATE GOAL OF DELIvErInG
MEMOrABLE ExPErIEnCEs TO OUr vIsITOrs. 2012 hAs BEEn A sUCCEssFUL yEAr ACrOss
ALL ThrEE PILLArs OF OUr PEOPLE sTrATEGy, BEInG: EMPLOyEE EnGAGEMEnT; TALEnT
AnD DEvELOPMEnT; AnD COMPEnsATIOn AnD BEnEFITs. ThE OvErALL sUCCEss OF
OUr PEOPLE sTrATEGy Is shOwn In ThE OUTsTAnDInG EnGAGEMEnT sCOrE FrOM
oUR ANNUAl STAFF SURVEY.
Employee Engagement
The Wizard Wants to Know is our online annual staff survey
issued to our more than 20,000 global employees. This year 97%
of our employees completed the survey and 96% of those told us
that they enjoy working here. The overall staff engagement score
is the best indicator of how we are making Merlin a great place to
work, and is compiled from the responses to a number of key
questions in the survey. This score increased once again and was
way above our 80% target. We are proud of all these scores, as
well as improved employee awareness of our conservation and
wildlife preservation activities.
In 2012 Merlin won the world Trade Group hr Distinction
Award for Employee Engagement, reflecting the success of our
many initiatives in this area.
STAR is our online global recognition scheme. It enables
employees to celebrate success by nominating colleagues with a
‘STAR’ or a ‘Thank You’ to recognise the little things they do. With
over 70,000 STARs sent to employees worldwide this year, and
115,000 since the launch in April 2011, this great initiative has
been really embraced by our global employee population.
Spark an Idea is a new global online tool launched in 2012 to
allow every employee the chance to share their ideas, however
big or small. Employees can see all the ideas on the website,
search, ‘like’ ideas or simply look for inspiration. ‘Spark an Idea’ also
allows us to give feedback, thanking staff for their contribution and
letting them know how it will be taken forward.
Each attraction has a Creativity and Innovation Forum that
reviews ideas and decides which ones to implement locally. We
then escalate the truly outstanding ideas, share them with other
attractions and pass them to the Merlin Creativity Board, who can
support and fund exceptional ideas from conception through
to completion.
Recruitment
our aim is to attract the best talent. our recruitment strategy
sets out our approach to technology, the candidate experience
and diversity. We have introduced a new online recruitment
process to give a more structured and positive candidate
experience and a consistent selection process such that all
recruitment is done ‘The Merlin Way’. In addition, we have
continued to grow our presence on social media and promote
Merlin as an employer of choice.
In 2012 we recruited more than 2,000 new staff members,
increasing our workforce by 11% through organic growth, and
welcomed another 1,200 employees into the Merlin family with
the acquisition of living and leisure Australia.
Talent and Development
Almost a third of our manager and leader vacancies in 2012 were
new positions created by growth. Succession planning has
therefore been a key activity, as has the extension of our training
and graduate programmes into new regions.
The ‘Spark an Idea’ online portal
32
MErLIn PEOPLE
A key priority is growing our Leadership Pipeline, so we can
provide the right people with the right experience at the right
time. 2012 initiatives to further strengthen this pipeline included:
¬ A global succession planning programme for all
senior managers.
¬ A revitalised induction programme for new senior managers.
¬ A review of our global mobility policy so we can better
support country to country moves.
¬ high potential training and development programmes for
individuals identified as future leaders.
We constantly strive to make a positive difference to life at Merlin
and made progress this year promoting Gender Diversity with a
number of initiatives to support our female employees in
achieving their ambitions and career progression. Recent research
shows that companies with a more gender diverse workforce
perform better. our objective is to achieve a more inclusive
working environment, particularly with respect to gender balance,
whilst promoting females on merit. Across the year as a whole,
women represented 16% of our top executives, 35% of our
senior managers, and 47% of our total workforce; with females
represented at all levels of the business.
one of the ways we attract fresh new talent is through our XLR8
fast track graduate programme. Now in its seventh year, its
success continues to grow, with high academic achievers from top
universities around the world being recruited in the Uk, UsA,
Germany, Italy and China, as well as in our new countries of
operation in south korea, Australia and Japan. we are committed
to the long term career development of our xLr8 graduates,
supporting their tailored career path from entry into Merlin, up
through the business and on to senior leadership positions. over
the last three years we have climbed the guardian Top 300
graduate employers list, coming second for our industry in 2012.
Compensation and Benefits
We are committed to providing competitive compensation and
benefit programmes which together reflect the diverse needs
of our global employees and support the culture and business
needs. In 2012 we continued our focus on Harmonisation of local
benefit programmes on a territory by territory basis, completing
the journey in the Uk and the UsA and making significant
progress in germany.
The CEO Award Plan is aimed at extending equity participation
to as many employees as possible as recognition for long service
and/or outstanding contribution. In 2012 the Merlin CEO Award
Plan was awarded ‘Most Effective Motivation or Incentive strategy’
by Employee Benefits Magazine and has been nominated for
several other hr industry awards. Approximately 1,400
employees have already received awards and by the end of the
2012 nomination process a CEO Award will have been made to
approximately 2,000 employees.
The 2012 xLr8 recruitment campaign poster
33
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 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 approach it takes to all animals in its care. 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 at every site. This
year has seen us take two significant steps forward in our
approach to animal and marine conservation and welfare:
¬ The establishment of the SEA LIFE Marine Conservation
Trust, a registered charity that will provide a voice and focal
point for global campaigns and fundraising.
¬ Breed, Rescue, Protect, a global initiative, which actively
engages Merlin’s guests and employees in our conservation
and welfare work and helps them understand its importance
and the role they can play to meet its objectives.
SEA LIFE Marine Conservation Trust
The key objectives for Merlin in establishing this charity are:
¬ To demonstrate our commitment to the protection of marine
animals and their environments.
¬ To support our vision of becoming the leading globally
recognised voice for marine life.
Breed
our unique aquarium displays development team have pioneered
the successful breeding of many marine species, with 21 different
species and over 2,000 individual animals bred. key highlights have
included seahorses and the hatching of Big Fin Reef Squid, whilst
we continue to lead European efforts to breed the protected
Undulate Ray.
our local teams around the globe have also reported their own
successes, most notably:
¬ In Australia and New Zealand where we bred 15 gentoo and
king Penguins and initiated breeding programmes for the sand
Tiger Shark.
¬ In the USA where we successfully bred Blue Spotted Stingrays
in Dallas and commenced seahorse breeding in Minnesota.
¬ Across Europe where our breeding successes included the
birth of a Gentoo Penguin at konstanz, a Black Tip reef shark
in Scheveningen and a Zebra Shark in loch lomond, where
Asian short Clawed Otter pups were also born.
At our zoo in Chessington world of Adventures, we have bred
three of the critically endangered gentle lemurs, with the site
now holding 10% of the population across the European Union.
We have had two babies born of the vulnerable Western
lowland gorilla, in addition to working across the EU with their
breeding programmes in other locations.
Rescue
This year saw a true alliance between our European and USA
sEA LIFE teams with the release of ‘Flip’, a rare kemps ridley
turtle, back into the gulf of Mexico having been rescued in 2011
by our team at SEA lIFE Scheveningen off the Dutch coast.
34
COrPOrATE sOCIAL rEsPOnsIBILITy
In Australia and New Zealand we rescued 17 turtles most of
which will have been released back into the ocean by spring 2013.
In the USA we signed an agreement with The georgia Sea Turtle
hospital to assist in the rescue and rehabilitation of injured
marine turtles.
We have rescued more than 100 injured or orphaned seal pups
through our European seal sanctuaries and successfully returned
them back to the wild after a period of rehabilitation and care.
Protect
We continue to campaign alongside Whale and Dolphin
Conservation in the pursuit of global protection for all cetaceans
and, most importantly, for the banning of mass culls and capture
from the wild. Our Uk sEA LIFE teams have been working
alongside the Marine Conservation society to secure over
100 Marine Protection zones around the Uk coastline.
Our innovative use of GPs to tag and subsequently track sharks
and turtles in Australia has helped identify migratory and breeding
habitats and this will lead to greater protection in the coming
years. In November 2012 the Australian government chose
SEA lIFE Sydney Aquarium as the location to announce the
formal protection of 85 million hectares of ocean across the
Australian coastline, acknowledging the campaign efforts of our
team to bring this change.
The sEA LIFE team at LEGOLAnD California established a
leopard Shark tagging project to carry out behavioural and
distribution studies on the species.
This year saw the second anniversary of the Chessington
Conservation Fund, with £100,000 raised to help fund
conservation activities such as working with the World land
Trust to buy and protect 128 acres of rainforest (the size of
Chessington world of Adventures) in Ecuador, as well as
working with Ape Action Africa.
Employee conservation initiatives
Merlin firmly believes that our approach to animal and marine
conservation work is an essential ingredient of employee
engagement within the company. In 2012 we endorsed over
50 different conservation led initiatives across the globe.
Crucially these activities are initiated and led by our
employees, supported by local management.
‘Flip’ the kemps ridley turtle being released
Gorilla Baby ‘Mwana’ born this year at Chessington
35
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 COrPOrATE sOCIAL rEsPOnsIBILITy
Merlin’s Magic Wand children’s charity
2012 marks the fifth year of operation for Merlin’s Magic wand.
our charity 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 small charity team, providing office
accommodation and facilities at no cost and, most importantly,
providing free tickets to our theme parks and attractions.
This year we have arranged 28,000 memorable visits to our
attractions for disadvantaged children and their families by
providing them with tickets and travel grants. For the children and
families that we support, special time together in a fun
environment is invaluable. 2012 has been a record year for
fundraising from attractions. Events ranging from bake sales to
endurance bike rides brought in over £240,000. Since 2008, from
attraction fundraising alone, we have generated over
£680,000 worldwide.
CvC, one of our major shareholders, have also shown
considerable support for Merlin’s Magic Wand via events,
partnership activity and making a long-term financial commitment
to the charity.
successful events in 2012 included a Magical Charity Ball and our
annual Cricket Day (in the sunshine this year!). These events
helped to raise even more money, enabling us to fund four new
‘Taking the Magic to the Children’ projects which deliver bespoke
Merlin featured play and activity installations for children who,
through ill-health or disability, are unable to visit our attractions.
This year’s projects were:
¬ A lEgolAND themed cottage at Sunshine Foundation’s
holiday village for seriously ill children in the USA.
¬ A ‘Merlin London Cluster’ themed sensory room at the
Evelina Children’s hospital in London.
Themed sensory room at the Evelina Children’s hospital, London
¬ A Merlin themed minibus for the children of Brian’s house
Children’s hospice in Blackpool.
¬ An Alton Towers resort themed play area for the Children’s
ward of the University hospital of north staffordshire.
These projects are brought to life by our skilled Merlin teams and
incorporate our unique brands, bringing Merlin Magic to children
all over the world. With everyone’s help Merlin’s Magic Wand will
continue making children smile in 2013.
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. During 2012 there has been a huge
amount of such charity and community activity worldwide.
Following earthquakes in Italy in May, gardaland has been working
with other local groups to collect and provide toys for the
children affected. These were then distributed in December to
nursery schools which had to be rebuilt after the earthquakes.
Madame Tussauds in hollywood has been heavily involved with
the children at ’Childhelp’ which was established in 1959 and is
dedicated to preventing and treating child abuse, helping
approximately 200,000 children last year alone.
36
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 COrPOrATE sOCIAL rEsPOnsIBILITy
Chessington world of Adventures in the Uk ran a number of
‘taking the zoo to the children’ initiatives. Their zoo team visited
the Children’s Trust in March to enable the children to experience
our zoo animals first hand. The Trust provides care, education,
therapy and rehabilitation to children with multiple disabilities,
complex health needs and acquired brain injury. Many of its
residents are not well enough to visit Chessington whilst
undergoing treatment so they took the zoo to them; in this case
tarantulas, centipedes and meerkats. They also visited the Shooting
star ChAsE hospice in Guildford with some giant snails, snakes
and guinea pigs. In all cases, the children are given the opportunity
to handle the animals which can aid their sensory stimulation and
can help in the development of those with sensory impairment.
These are just a few highlights of what our teams have done in
the local communities. There are many and varied events going
on all year, all over the world, which is something we are very
proud of.
Social Responsibility
In addition to taking the time to understand the real needs
of our visitors in order to provide them with attractions and
experiences which combine safe, quality environments with
exciting, often educational experiences, we also:
¬ Develop our products in line with broad environmental
needs. This is reflected in our choice of location and efforts to
respect local social and environmental issues; our responsible
care and choice of the animals and marine life we exhibit; our
worldwide campaigning and rescue activities; and our choice
and management of suppliers.
¬ Work in partnership with the communities in which we
operate. we seek to develop attractions which reflect the
culture, locale and environment in which they are situated, not
to impose a ‘one size fits all’ solution on them.
¬ Apply ‘The Merlin Way’ in our dealings with our workforce,
with equal opportunities in all areas - recruitment, promotion,
development and benefits. we work as one team supporting
and trusting one another, encouraging and recognising
individual initiative and responsibility as well as respecting
individual contributions. our aim is to ensure all our colleagues
enjoy their work, develop their full potential, celebrate success
and learn from experience.
¬ Extend that respect and team approach to all our business
dealings with our business partners and advisors.
Environmental Policy
Merlin Entertainments recognises that its operations impact upon
the environment and that effective management of these impacts
is essential for business success. We are committed to monitoring
and reviewing our activities and identifying opportunities for
sustainable environmental improvement, in line with our business
goals, in order to minimise the potentially harmful effects of such
activity, wherever and whenever practicable. In particular we will:
¬ Comply with all relevant legislation and where appropriate
and practicable, exceed these requirements and apply
best practice.
¬ Promote a culture of environmental responsibility and
awareness through leadership, communication and training
for customers, employees, contractors and suppliers.
¬ Further develop our excellent standards of animal husbandry
and welfare, applying best practice across the Company’s
animal collections.
¬ Consult with relevant external groups and organisations to
meet the Company’s commitments.
¬ Consider and plan for practical and cost-effective control
measures in order to minimise environmental impacts
associated with the Company’s operations including
energy conservation, pollution prevention, waste
reduction, recycling and disposal.
A day at lEgolAND Windsor with Merlin’s Magic Wand
37
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 GrOUP
FInAnCIAL rEvIEw
DUrInG ThE 52 wEEks TO 29 DECEMBEr 2012 MErLIn AGAIn DELIvErED sTrOnG
UnDErLyInG GrOwTh, DrIvEn By ThE MIDwAy ATTrACTIOns AnD LEGOLAnD PArks
OPErATInG GrOUPs. ThIs wAs DEsPITE ThE ADvErsE ExTErnAL FACTOrs OF
ChALLEnGInG ECOnOMIC COnDITIOns, EsPECIALLy In sOUThErn EUrOPE, PArTICULArLy
POOr wEAThEr DUrInG ThE MAIn ThEME PArk OPErATInG PErIOD, As wELL As ThE
OLyMPICs ThAT BrIEFLy IMPACTED OUr LOnDOn BUsInEssEs.
Andrew Carr
Chief Financial Officer
Trading summary
Revenue
Underlying EBITDA(1)
Underlying operating
profit(2)
2012
£m
(52
weeks)
2011
£m
(52
weeks)
Growth
+/- £m
(52
weeks)
2011
£m
(53
weeks)
1,074
346
258
933
296
222
141
50
36
946
306
232
Total operating profit(2)
199
220 (21)
230
Net finance costs
Underlying profit before tax
Total profit before tax
(101)
140
98
(134)
109
96
(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.
2011 was a 53 week reporting period. In order to make a
comparison with last year, the underlying comparative operating
results in the Group financial review are therefore stated on a
comparable 52 week basis, consistent with those within the other
business review sections of this document.
38
GrOUP FInAnCIAL rEvIEw
In 2012 Merlin again
delivered strong
underlying growth
Group revenue growth of £141 million and 15.2% this year came
primarily from new businesses, predominantly from lEgolAND
Florida and the newly acquired living and leisure Australia (llA)
businesses in Asia and Australia. It was particularly pleasing that in
such a challenging year, revenues from our like for like businesses
(sites owned and opened before January 2011) held virtually flat
on a constant currency basis. This was partly achieved through
growth in revenue per capita, benefiting from the introduction of
online pricing initiatives and targeted promotional activity. Whilst
the resort Theme Parks Operating Group was particularly
affected by adverse external factors in 2012, we saw revenue
growth across the remaining business segments. Further
details are provided in note 2.1 to the consolidated
financial statements.
Group underlying EBITDA growth of £50 million and 16.9% was
mainly driven by new sites. however, on a constant currency basis
our like for like businesses also showed underlying EBITDA
growth of 1.9%, evidencing the growth in the Midway Attractions
and LEGOLAnD Parks Operating Groups as well as the strong
cost controls we implemented to mitigate the shortfall in
revenues experienced particularly by our European businesses.
Group underlying operating profit growth of £36 million and
16.5% is driven by the growth in underlying EBITDA.
Depreciation has increased following the llA acquisition and
overall continues to reflect tightly controlled capex.
Total operating profit is stated after impairment losses and
exceptional items. Total impairment losses of £53 million were
recorded in the year, being £40 million in respect of goodwill for
the resort Theme Parks Operating Group and £13 million in
aggregate in respect of property, plant and equipment at three of
the group’s midway attractions. These were all driven by lower
projected cash flows within business plans arising from adverse
economic conditions within southern Europe. other exceptional
and non-trading items of £6 million were incurred in total (2011:
£2 million). of this, £5 million was in relation to the acquisition and
subsequent integration of the llA businesses, together with
£1 million in respect of redundancy and related costs at the
gardaland Resort, Italy. Further details are provided in note 2.2.
Net finance costs of £101 million (2011: £134 million) include net
exceptional and non-trading income of £17 million as outlined in
note 2.2. On an underlying basis, net finance costs have reduced
by £5 million, reflecting facility amendments made in 2011, offset
by the increased financing costs arising from the LLA acquisition.
Cash flow
Underlying EBITDA
Decrease in cash tied up in working capital
Other operating cash flows
2012
£m
(52
weeks)
2011
£m
(53
weeks)
346
306
24
1
3
2
Exceptional and non-trading items
(6)
(2)
Net operating cash flow before tax
365
309
Tax paid
Net cash inflow from
operating activities
Capital expenditure
Acquisition of Living and Leisure Australia
(2011: Sydney Attractions Group)
(17)
(17)
348
292
(163)
(174)
(156)
(102)
Proceeds from bank loans, net of financing costs
167
99
Interest paid, net of interest received
(108)
(115)
Other
(7)
Net cash inflow / (outflow) for the year
81
(4)
(4)
39
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 GrOUP FInAnCIAL rEvIEw
Merlin continues to be highly cash-generative. During 2012
the Group generated a net operating cash flow before tax of
£365 million. This included positive cash flows arising from
working capital changes, mainly from the lEgolAND Windsor
hotel construction contract that completed in the year and
other movements in deferred income.
Net debt
Cash
2012
£m
142
2011
£m
60
Tax paid of £17 million in both 2012 and 2011 relates to direct
corporation tax only.
Capital expenditure of £163 million was incurred in order to
invest in both the like for like businesses (£81 million) and new
site openings (£82 million). In line with our strategy, Merlin’s capex
programme creates new attractions for the existing businesses
following the capex cycles laid down for each operating group,
and delivers the new business pipeline for the midway roll-out
programme. The year on year reduction was driven
predominantly by the inclusion in 2011 of lEgolAND Florida,
offset by greater levels of capex across the expanding estate. 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.
The acquisition of Living and Leisure Australia totalled
£156 million including the purchase of assets net of cash acquired
and repayment of borrowings. This was funded from £167 million
net proceeds of bank loans that included further amounts drawn
to fund our capital expenditure plans in the acquired businesses.
Further details are provided in note 3.1.
Net interest paid in 2012 reflects the shorter 52 week period
and the timing of payments at year end, together with a full year
impact of lower interest rates agreed in May 2011. This is offset
by interest costs on the extra debt drawn down to fund the
llA acquisition.
Bank loans and borrowings
(1,337)
(1,183)
Net bank debt
(1,195)
(1,123)
Finance lease obligations
(84)
(86)
Net debt
(1,279)
(1,209)
Leverage on net bank debt
to underlying EBITDA
Maturity of bank borrowing
facilities
3.5
3.7
July 2017
July 2017
Loan facilities
Merlin’s bank loans and borrowings are available until July 2017
under a Facilities Agreement which was put in place in July 2010
and amended in May 2011 to secure lower interest rates.
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 ratios of
EBITDA to both net interest payable and net debt. In addition,
there is a requirement that 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.
40
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 GrOUP FInAnCIAL rEvIEw
I am confident that we can pursue our
aggressive growth strategy and continue
our international expansion programme
Merlin has a revolving facility of £138 million (2011: £138 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 29 December 2012, £nil had been drawn down
from the revolving facility (2011: £nil).
Leverage on net bank debt at the year end equates to 3.5x
underlying EBITDA (2011: 3.7x), recognising the growth in
EBITDA during the year.
Net assets
The net assets of the Group increased in 2012 from £555
million to £617 million. This reflects £76 million profit for
the year and £4 million of new equity issued to an existing
shareholder (note 5.7), net of £18 million exchange differences
arising on the retranslation of assets denominated in
foreign currencies.
Overall I am pleased with our financial performance in 2012.
Furthermore I am confident that we can pursue our aggressive
growth strategy and continue our international expansion
programme on the basis of this strong trading and a robust
balance sheet, secure in the knowledge that we have bank loan
facilities available until 2017.
Andrew Carr
Chief Financial Officer
Merlin Entertainments
20 March 2013
41
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 rIsks
AnD UnCErTAInTIEs
MErLIn ADOPTs A PrOACTIvE APPrOACh TO ThE MAnAGEMEnT OF POTEnTIAL rIsks
AnD UnCErTAInTIEs whICh COULD hAvE A MATErIAL IMPACT On ThE GrOUP’s
PErFOrMAnCE AnD ThE 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 MAnAGEMEnT
rEPOrTs ArE CIrCULATED MOnThLy TO ThE ExECUTIvE BOArD AnD qUArTErLy TO
ThE MAnAGEMEnT COMMITTEE. ThE hEALTh, sAFETy AnD sECUrITy COMMITTEE,
ChAIrED By OUr nOn-ExECUTIvE ChAIrMAn, ALsO MEETs qUArTErLy.
The Board, the Management Committee and the Executive Board
believe appropriate processes are in place to monitor and
mitigate risks and their potential adverse consequences to Merlin.
Such risks include:
being targeted by activists. Merlin mitigates these risks by
maintaining industry leading standards of operating procedures
and training, safety and security systems, animal husbandry and
supplier auditing and intelligence.
Operational risk factors
¬ Health and safety
Merlin puts the health, safety and welfare of its customers and
employees at the forefront of its operations. The group takes
a proactive approach to its safety management and operates
to industry leading standards, with a focus on continuous
improvement to mitigate this risk. All incidents are recorded
and reviewed to determine any trends or issues that might
need to be addressed or where learning points can be applied
within the business.
¬ 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 the risk of losing key
personnel 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
¬ 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.
Through Merlin Magic Making, the group’s centre of
excellence for innovation, creativity and product development,
the group is continually seeking out new and innovative
products and means of delivering memorable experiences
to its customers.
¬ 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.
42
rIsks AnD UnCErTAInTIEs
¬ Legal and regulatory
Merlin operates in many different jurisdictions and must
comply with a variety of international, national, regional and
local laws and regulations. The risk of non-compliance with
material laws and regulations is mitigated through the
appointment of specialist legal advisers in every jurisdiction in
which the group operates or is in the process of developing
attractions. Together with the group legal Director, these
resources ensure that the Board, Executive Board,
Management Committee, other Committees and operational
management are kept updated on material legal developments
and risks and legal and regulatory compliance across the group.
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 their 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 relative competitive position
and 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. It 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 Annual Pass revenues and encourage pre-booked
business through online dynamic pricing and targeted
promotions. Each of these protect the business from the
impact of adverse weather that can influence impulse visits.
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 scrutinised by the
Management Committee and authorised by the Board.
The four key financial risks affecting the Group are:
¬ Interest rate risk
Merlin finances its operations through a combination of equity
and bank borrowings. Merlin’s bank borrowings are obtained 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 borrowings.
¬ 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.
43
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 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 ULTIMATE 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.
Board of Managers
Members of the Board of Managers during the year and at the
date of this report are as follows:
John Sutherland served throughout 2012 and remains a member
of the Board as at the date of this report. John is an independent
director who also sits on the Boards 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 over 20 years’ experience working in the
financial services industry.
Claus Andersen served throughout 2012 and remains a member
of the Board as at the date of this report. Claus joined the kIrkBI
group in 2007 where he is legal counsel and a member of the
Board of a number of kIrkBI Group subsidiaries. Prior to joining
the kIrkBI Group, he worked in Copenhagen at the law firm
DLA Piper.
Lars Boné served throughout 2012 and remains a member of the
Board as at the date of this report. Lars 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 2012 and remains a member
of the Board as at the date of this report. Emanuela joined CvC
Capital Partners in 2005 and is a Managing Director, Corporate
Administration in Luxembourg. Prior to joining CvC she worked
in the Corporate Department of société Européenne de Banque
(luxembourg). Emanuela holds a Degree in Business
Administration from Università Bocconi, Italy.
Nentcho Nentchev was appointed on 11th March 2013 and
remains a member of the Board as at the date of this report.
nentcho is a vice President in the Investor relations & Business
Development group of Blackstone. Since joining Blackstone
Nentcho has been involved in investor relations strategy and
supporting business development and fund-raising for Blackstone’s
private investment funds. Before joining Blackstone Nentcho
worked at simpson Thacher & Bartlett LLP where he was an
associate. Nentcho received a degree from the University of
Redlands and a law degree from the University of Michigan
law School.
Stef Oostvogels was appointed on 31st January 2012 and
remains a member of the Board as at the date of this report. Stef
has over 20 years’ professional experience, covering mergers and
acquisitions, private equity, banking and finance, corporate law,
international taxation and general business law. Stef has been a
member of the luxembourg Bar since 1990 and a member of the
Brussels Bar since 1987. he was a founding partner of the
Luxembourg business law firm, Oostvogels Pfister Feyten and
served as managing partner within the firm for ten years during
the period 1999-2009.
Robert L. Friedman served throughout 2012 and resigned from
the Board with effect from 11th March 2013.
Bénédicte Moens-Colleaux resigned from the Board with effect
from 31st January 2012.
44
MERlIN’S MANAgEMENT TEAM
Soren Thorup Sorensen
Member and representative of KIRKBI
Soren served throughout 2012 and remains a member of the
Management Committee as at the date of this report. soren is
the CEO of kIrkBI A/s and a Board member of a number of
kIrkBI A/s subsidiaries, LEGO A/s, Topdanmark A/s, Falck A/s, and
TDC A/s. Prior to joining the LEGO/kIrkBI 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
Thomas was appointed on 14th February 2012 and remains a
member of the Management Committee as at the date of this
report. Thomas is currently a vice President at kIrkBI A/s and was
previously a Director at EqT Partners from 2001-2010. he is a
member of the Board of nordic waterproofing AB, Founders A/s
and a number of kIrkBI A/s subsidiaries. Thomas holds an Msc in
Finance and Accounting.
Joseph Baratta
Member and representative of Blackstone
Joe served throughout 2012 and remains a member of the
Management Committee as at the date of this report. Joe is a
senior Managing Director and Global head of Private Equity at
the Blackstone Group based in new york. he is former head of
European Private Equity and a member of Blackstone’s Executive
and Management Committees. 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, he is responsible for Blackstone’s
investments in seaworld Parks and Entertainment, Center Parcs,
Tragus Group, southern Cross and ICs Group. he serves as a
Director of seaworld Parks and Entertainment, Center Parcs plc
and Tragus Group plc. Prior to joining Blackstone, Joe worked at
Tinicum Incorporated, McCowen De Leeuw & Company and at
Morgan stanley in its M&A Department.
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 served throughout 2012 as 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. he 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 served throughout 2012 and remains a member of the
Management Committee as at the date of this report. nick 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, he led the management buyout of
Vardon Attractions to form Merlin Entertainments.
Before joining Vardon Attractions, Nick held senior positions
within The Tussauds group, including Marketing Director of
Alton Towers and head of Group Marketing.
Andrew Carr
Chief Financial Officer
Andrew served throughout 2012 and 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 trained at kPMG and
subsequently became head of a regional kPMG Corporate
Finance Department.
45
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 MERlIN’S MANAgEMENT TEAM
Pev Hooper
Member and representative of CVC
Pev served throughout 2012 and remains a member of the
Management Committee as at the date of this report. he is a
Partner 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
holds an MA degree from oxford University.
Jørgen Vig Knudstorp
Former Member and representative of KIRKBI
Jørgen resigned with effect from 14th February 2012.
Dr Gerry Murphy
Member and representative of Blackstone
gerry served throughout 2012 and 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, Michaels Stores and Jack Wolfskin. Before joining
Blackstone in 2008, Gerry 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 a member of the Council of the British venture Capital and
Private Equity Association.
Rob Lucas
Member and representative of CVC
Rob served throughout 2012 and 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.
he holds a degree in Electrical Engineering from Imperial
College, London.
46
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 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
47
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 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 ThE GrOUP. 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 ultimate decision-making body.
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 the Company
and 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 and operational
management of each group company.
Board constitution and procedures
The Board is responsible for overseeing Merlin, focusing, as the
board of 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 the Merlin group, 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 the Company and
other group companies in relation to:
¬ the development of strategy and major policies.
¬ the review of management performance.
¬ the approval of the five year business plan and annual budget,
Managers’ Report 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, as well as external
advice on legal and corporate governance matters.
48
COrPOrATE GOvErnAnCE
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.
Principal Committees
There are 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, these committees
provide recommendations to Merlin 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 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.
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 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.
49
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 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 judgements.
¬ 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 matters with regard to the external auditors, as
outlined below:
(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.
(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.
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.
50
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 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.
COrPOrATE GOvErnAnCE
Remuneration Committee
The remuneration Committee is chaired by sir John sunderland.
The members of the remuneration Committee are the
Chairman, the Chief Executive Officer and representatives
of each of the major shareholders.
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 this policy is to ensure that 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.
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.
51
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 CORPORATE GOVERNANCE
MERLIN PEOPLEMANAGERS'
REPORT
The managers present their Annual Report and the consolidated
financial statements covering a trading period of 52 weeks ended
29 December 2012 (2011: 53 weeks ended 31 December 2011).
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 56 of the consolidated
financial statements.
The Company’s principal activity is that of a holding company.
Business review
Information on the results of the business and its KPIs are given
on page 3.
Managers and managers’ interests
The managers who held office during the year and up until the
date of signing these consolidated financial statements were
as follows:
John Sutherland
Claus Andersen
Lars Boné
Emanuela Brero
Nentcho Nentchev
Stef Oostvogels
Robert L. Friedman
Bénédicte Moens-Colleaux
(appointed 11 March 2013)
(appointed 31 January 2012)
(resigned 11 March 2013)
(resigned 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.
Detailed reviews of the performance of the Group for the year
are set out in the business review on pages 12 to 27 and the
Group financial review on pages 38 to 41.
Certain managers benefited from qualifying third party indemnity
provisions in place during the financial year and at the date of
this report.
Further information on the risks and uncertainties of
the business are given in the Group’s business review on
pages 42 to 43.
Substantial interests
The Company’s equity as at the date of this report is owned as
follows:
Proposed dividend
The managers do not recommend the payment of a dividend.
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.
Ordinary shares
%
31.85
KIRKBI A/S (KIRKBI)
Funds managed by Blackstone
Group International (Blackstone)
Funds managed by CVC Capital Partners (CVC)
Management
29.70
24.46
13.99
100.00
52
MANAGERS’ REPORT
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
1st floor, Polaris–Vertigo Building
2-4 rue Eugene Ruppert
L-2453 Luxembourg
20 March 2013
53
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 INDEPENDENT AUDITOR’S REPORT
To the Partners of
Merlin Entertainments S.à r.l.
1st floor
Polaris–Vertigo Building
2-4 rue Eugene Ruppert
L-2453 Luxembourg
REPORT OF THE RÉVISEUR D’ENTREPRISES AGRÉÉ
Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of Merlin Entertainments S.à r.l., which comprise the consolidated
statement of financial position as at 29 December 2012 and the consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated cash flow statement for the 52 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 about 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 29 December 2012, and of its consolidated financial performance and its consolidated cash flows for the
52 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 2013
54
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 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 INVESTMENTS
6.2 EMPLOyEE BENEFITS
6.3 RELATED PARTy TRANSACTIONS
6.4 CONTINGENT LIABILITIES
6.5 NEW STANDARDS AND INTERPRETATIONS
6.6 ULTIMATE PARENT COMPANy INFORMATION
6.7 SUBSIDIARy AND JOINT VENTURE UNDERTAKINGS
56
57
58
59
60
61
63
63
66
67
70
73
73
75
77
79
80
81
81
81
82
84
85
86
91
94
94
94
98
99
99
99
100
55
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 CONSOLIDATED INCOME STATEMENT
for the 52 weeks ended 29 december 2012
(2011: 53 weeks ended 31 December 2011)
Revenue
Cost of sales
Gross profit
staff expenses
other operating expenses
Note
2.1
2.1
2.1
Underlying
trading
£m
1,074
(163)
911
(261)
(304)
2012
Exceptional
& non-trading
items (2)
£m
-
-
-
(1)
(5)
2011
Exceptional
& non-trading
items (2)
£m
Underlying
trading
£m
Total
£m
1,074
(163)
911
946
(128)
818
(262)
(229)
(309)
(283)
EBITDA (1)
2.1
346
(6)
340
306
depreciation, amortisation
and impairment
Operating profit
finance income
finance costs
Profit before tax
Taxation
Profit for the year
Profit attributable to:
owners of the Company
non-controlling interest
Profit for the year
4.1, 4.2
5.5
5.5
2.3
(88)
258
6
(124)
140
(20)
120
120
-
120
(53)
(59)
19
(2)
(42)
(2)
(44)
(44)
-
(44)
(141)
199
25
(74)
232
5
(126)
(128)
98
(22)
76
76
-
76
109
(28)
81
80
1
81
Total
£m
946
(128)
818
(229)
(285)
304
(74)
230
8
(142)
96
(28)
68
67
1
68
-
-
-
-
(2)
(2)
-
(2)
3
(14)
(13)
-
(13)
(13)
-
(13)
(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.
56
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012
CONSOLIDATED STATEMENT OF COMPREhENSIVE INCOME
for the 52 weeks ended 29 december 2012
(2011: 53 weeks ended 31 December 2011)
Profit for the year
Other comprehensive income
Note
2012
£m
76
2011
£m
68
Exchange differences on retranslation of subsidiaries
(24)
(15)
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
5.5
6.2
2.3
6
(1)
-
1
(18)
58
59
(1)
58
6
(7)
(2)
1
(17)
51
50
1
51
57
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 29 december 2012
(2011: 31 December 2011)
Non-current assets
Property, plant and equipment
intangible assets
investments
other receivables
deferred tax assets
Current assets
inventories
Trade and other receivables
other financial assets
Cash and cash equivalents
Total assets
Current liabilities
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
2012
£m
2011
£m
4.1
4.2
6.1
4.4
2.3
4.4
4.4
5.4
5.1
5.2
5.1
5.4
4.4
4.5
5.2
5.1
4.4
4.5
6.2
2.3
5.7
1,290
1,112
970
970
-
3
34
1
4
16
2,297
2,103
23
47
-
142
212
29
42
2
60
133
2,509
2,236
4
-
63
179
19
13
278
5
2
81
142
15
9
254
1,333
1,178
84
22
36
5
134
1,614
1,892
617
613
4
617
84
19
25
5
116
1,427
1,681
555
550
5
555
58
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 CONSOLIDATED STATEMENT OF ChANGES IN EqUITy
for the 52 weeks ended 29 december 2012
(2011: 53 weeks ended 31 December 2011)
Share
capital
£m
Share
premium
£m
Capital
reserve
£m
Translation
reserve
£m
Hedging
reserve
£m
Retained
earnings
£m
Note
Total
parent
equity
£m
Non-
controlling
interest
£m
at 26 december 2010
1
1,230
(493)
(42)
Profit for the year
other comprehensive
income for the year net
of income tax
Total comprehensive
income for the year
dividends to non-
controlling interest
-
-
-
-
-
-
-
-
-
-
-
-
-
(10)
(10)
-
-
-
(6)
(6)
-
At 31 December 2011
1 1,230
(493)
(52)
(6)
(130)
550
Profit for the year
other comprehensive
income for the year net
of income tax
Total comprehensive
income for the year
shares issued
At 29 December 2012
5.7
5.7
-
-
-
-
-
-
-
4
-
-
-
-
-
-
76
76
(16)
(16)
-
(1)
(1)
-
-
(17)
76
-
59
4
1 1,234
(493)
(68)
(7)
(54)
613
Total
equity
£m
505
68
(196)
500
67
67
5
1
(1)
(17)
-
(17)
66
-
50
-
1
(1)
5
-
(1)
(1)
-
4
51
(1)
555
76
(18)
58
4
617
59
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 CONSOLIDATED STATEMENT OF CASh FLOWS
for the 52 weeks ended 29 december 2012
(2011: 53 weeks ended 31 December 2011)
Cash flows from operating activities
Profit for the year
Adjustments for:
depreciation, amortisation and impairment
finance income
finance costs
Taxation
Working capital changes
increase in provisions and other non-current liabilities
Tax paid
Net cash inflow from operating activities
Cash flows from investing activities
interest received
acquisition of subsidiaries
acquisition of property, plant and equipment
government grants received
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from bank loans
financing costs
Capital repayments of finance leases
interest paid
acquisition of foreign exchange contracts
settlement of foreign exchange contracts
Repayment of borrowings
dividends paid to non-controlling interest
Net cash outflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents, net of bank overdrafts, at beginning of year
Effect of movements in foreign exchange
Note
2012
£m
2011
£m
76
68
4.1, 4.2
5.5
5.5
2.3
3.1
141
(25)
126
22
340
24
1
365
(17)
348
2
(72)
74
(8)
142
28
304
3
2
309
(17)
292
2
(58)
(163)
(174)
-
1
(233)
(229)
175
(8)
(3)
113
(14)
(2)
(110)
(117)
-
5
(93)
-
(34)
81
60
1
(1)
-
(45)
(1)
(67)
(4)
67
(3)
60
60
Cash and cash equivalents, net of bank overdrafts, at end of year
5.1
142
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 1 BASIS OF PREPARATION
52 weeks ended 29 december 2012
Basis of preparation
Merlin Entertainments S.à r.l. (the Company) is a company incorporated in Luxembourg and its registered office is 1st floor,
Polaris–Vertigo Building, 2-4 rue Eugene Ruppert, L-2453 Luxembourg.
These consolidated financial statements were approved by the Board of Managers on 20 March 2013.
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).
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 52 weeks ended 29 December 2012 (2011: 53 weeks ended 31 December 2011). 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 £66
million (2011: £121 million), net assets of £617 million (2011: £555 million), a profit for the year of £76 million (2011: £68 million) and
operating cash inflows of £348 million (2011: £292 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. After reviewing the Group’s cash flow forecasts and trading
budgets and making appropriate enquiries, the managers 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 managers therefore have a reasonable
expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and, accordingly, the
Group continues to adopt the going concern basis in preparing its consolidated financial statements.
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.
61
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 1 BASIS OF PREPARATION (continued)
52 weeks ended 29 december 2012
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 item also involved a higher degree of judgement or complexity:
• Accounting for the acquisition of Living and Leisure Australia and the fair value of the assets and liabilities acquired (note 3.1)
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 6.5.
62
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 2 RESULTS FOR ThE yEAR
52 weeks ended 29 december 2012
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
Central and other revenue
Revenue
Midway Attractions
LEGOLAND Parks
Resort Theme Parks
Total
2012
£m
458
2011
£m
360
2012
£m
308
2011
£m
253
2012
£m
290
2011
£m
330
2012
£m
1,056
18
2011
£m
943
3
1,074
946
Midway Attractions
LEGOLAND Parks
Resort Theme Parks
Total
2012
£m
179
2011
£m
146
2012
£m
113
2011
£m
87
2012
£m
73
2011
£m
97
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
2012
£m
365
(19)
346
(6)
340
(141)
2011
£m
330
(24)
306
(2)
304
(74)
(101)
(134)
98
96
63
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 2 RESULTS FOR ThE yEAR (continued)
52 weeks ended 29 december 2012
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
investments
Revenues
2012
£m
Non-current
assets
2012
£m
Revenues
2011
£m
Non-current
assets
2011
£m
425
280
217
152
757
796
362
348
1,074
2,263
404
324
154
64
946
34
-
2,297
733
859
345
149
2,086
16
1
2,103
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 £163 million (2011: £128 million) represents variable expenses (excluding VAT and similar taxes) incurred from revenue
generating activity. Retail and food and beverage consumables are the principal expenses included under this category.
64
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 2 RESULTS FOR ThE yEAR (continued)
52 weeks ended 29 december 2012
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
social security costs
other pension costs
auditors’ remuneration
audit of these financial statements
audit of financial statements of subsidiaries
other services pursuant to such legislation
other services relating to taxation
services relating to corporate finance transactions
all other services
2012
2011
13,117
10,831
1,719
1,533
14,836
12,364
2012
£m
226
28
8
2011
£m
196
27
6
262
229
2012
£m
1.2
0.3
0.1
0.3
0.1
0.2
2.2
2011
£m
1.0
0.1
0.2
0.4
-
0.1
1.8
65
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 2 RESULTS FOR ThE yEAR (continued)
52 weeks ended 29 december 2012
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. In the judgement of the managers this presentation shows the underlying business performance of the Group
more accurately.
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:
Redundancy and related costs (1)
Within other operating expenses:
acquisition costs (2)
Within depreciation, amortisation and impairment:
impairment of intangible assets (3)
impairment of property, plant and equipment (3)
Within finance income and costs:
unrealised gain on re-measurement of financial derivatives at fair value (4)
unrealised loss on re-measurement of financial derivatives at fair value (4)
settlement of foreign exchange contracts (5)
Exceptional and non-trading items before income tax
Exceptional and non-trading items income tax charge
Exceptional and non-trading items for the year
2012
£m
2011
£m
1
1
5
5
40
13
53
(14)
2
(5)
(17)
42
2
44
-
-
2
2
-
-
-
(3)
14
-
11
13
-
13
(1) Redundancy and related costs were incurred following an internal review of the Gardaland Resort business in Italy. These are
separately presented as they are not part of the Group’s underlying operating expenses.
(2) Directly attributable acquisition and subsequent integration costs were incurred in respect of the Living and Leisure Australia
acquisition described in note 3.1. These are separately presented as they are not part of the Group’s underlying operating expenses.
(3) Total impairment losses of £53 million were incurred in the year, being £40 million in respect of goodwill for the Resort Theme
Parks Operating Group (note 4.2) and £13 million in aggregate in respect of property, plant and equipment at three of the Group’s
midway attractions (note 4.1). These were all driven by lower projected cash flows within business plans arising from adverse
economic conditions within southern Europe.
(4) 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).
(5) The Group entered into a number of foreign exchange contracts in connection with the acquisition of Living and Leisure Australia.
They were not hedge accounted and accordingly gains were recognised when they were settled. These are separately presented as
they are not part of the Group’s underlying finance income.
66
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 2 RESULTS FOR ThE yEAR (continued)
52 weeks ended 29 december 2012
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 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
2012
£m
2011
£m
Current tax expense
Current year
adjustment for prior periods
Total current income tax
Deferred tax expense
origination and reversal of temporary differences
Changes in tax rate
adjustment for prior periods
Total deferred tax
Total tax expense in income statement
Reconciliation of effective tax rate
Profit before tax
income tax using the domestic corporation tax rate
non-deductible expenses
income not subject to tax
Effect of tax rates in foreign jurisdictions
Effect of changes in tax rate
unrecognised temporary differences
adjustment for prior periods
Total tax expense in income statement
18
-
18
3
(1)
2
4
22
2012
%
28.8%
23.0%
(17.7%)
7.0%
(0.9%)
(19.2%)
1.4%
22.4%
2012
£m
98
28
22
2011
%
28.8%
12.3%
(17)
(25.8%)
7
(1)
(19)
2
22
7.4%
(3.0%)
2.5%
7.4%
29.6%
19
5
24
5
(3)
2
4
28
2011
£m
96
28
12
(25)
7
(3)
2
7
28
67
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 2 RESULTS FOR ThE yEAR (continued)
52 weeks ended 29 december 2012
2.3 Taxation (continued)
Recognised directly in equity through the 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 in statement of other comprehensive income
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
2012
£m
-
19
-
13
32
2
34
2011
£m
-
13
-
25
38
(22)
16
Liabilities
2012
£m
(83)
-
2011
£m
(88)
-
(49)
(50)
-
-
2012
£m
(1)
-
-
(1)
Net
2012
£m
(83)
19
(49)
13
2011
£m
1
(1)
(1)
(1)
2011
£m
(88)
13
(50)
25
(132)
(138)
(100)
(100)
(2)
22
-
-
(134)
(116)
(100)
(100)
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 offsetting these amounts in
the statement of financial position where the Group has the right and intention to offset these amounts.
68
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 2 RESULTS FOR ThE yEAR (continued)
52 weeks ended 29 december 2012
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
Acquired
in business
combinations
(note 3.1)
£m
1 January
2012
£m
Recognised
in other
comprehensive
income
£m
Effect of
movements
in foreign
exchange
£m
Recognised
in income
£m
29
December
2012
£m
(88)
13
(50)
25
(100)
(1)
4
-
-
3
4
3
1
(12)
(4)
-
-
-
-
-
2
(1)
-
-
1
(83)
19
(49)
13
(100)
26 December
2010
£m
Acquired
in business
combinations
(note 3.1)
£m
Recognised
in other
comprehensive
income
£m
Effect of
movements
in foreign
exchange
£m
Recognised
in income
£m
31
December
2011
£m
(61)
7
(51)
8
(97)
(1)
1
(1)
-
(1)
(26)
3
2
17
(4)
-
2
-
-
2
-
-
-
-
-
(88)
13
(50)
25
(100)
2012
£m
2011
£m
29
30
6
94
40
38
8
91
159
177
The unrecognised deferred tax assets relating to loss carry-forwards include £3 million (2011: £2 million) which expire within 5 years
and £1 million (2011: £2 million) which expire within 10 years. The remaining losses and other timing differences do not expire under
current tax legislation.
69
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 3 BUSINESS COMBINATIONS
52 weeks ended 29 december 2012
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.
2012
Living and Leisure australia
The Group’s offer to acquire all of Living and Leisure Australia (LLA) went unconditional with effect from 10 February 2012. This
included nine leisure attractions in the Asia Pacific region as well as a management contract in Dubai. The acquired businesses have been
integrated into the Group’s existing Midway Attractions Operating Group.
As part of financing this acquisition, the Group drew down new debt under its existing financing facilities, and the consideration of
£98 million was settled in cash. Directly attributable acquisition costs of £5 million were incurred on the transaction and the subsequent
integration activities.
Goodwill has arisen on this acquisition as it provides opportunities for the Group to use its knowledge to develop the profitability of
existing attractions as well as expand into new territories and facilitate the roll-out of further midway attractions.
sEa LifE London aquarium shop
The Group also acquired Cotswold Village Green Limited for £1 million in cash on 20 March 2012, which operated the shop adjacent to
the SEA LIFE London Aquarium at County hall, London. The net assets acquired were £nil. Goodwill has arisen on this acquisition as it
provides an opportunity for the Group to expand its retail offering at the SEA LIFE London Aquarium site.
70
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 3 BUSINESS COMBINATIONS (continued)
52 weeks ended 29 december 2012
3.1 Business combinations (continued)
These acquisitions had the following combined effect on the Group’s assets and liabilities:
Acquiree's net assets at the acquisition date:
Property, plant and equipment
other intangible assets
inventories
Trade and other receivables
Cash and cash equivalents
Bank loans
finance leases
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
Fair values at
acquisition
£m
132
5
2
4
27
(90)
(1)
(21)
(10)
(4)
3
47
52
99
99
99
(27)
99
72
The goodwill on these transactions is not deductible for tax purposes.
In the period to 29 December 2012 these acquisitions contributed £75 million to the consolidated revenue and a profit of £19 million
to the consolidated underlying operating profit of the Group. had the acquisitions occurred on 1 January 2012, the estimated Group
revenue would have been £1,083 million and the estimated underlying operating profit would have been £258 million.
71
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 3 BUSINESS COMBINATIONS (continued)
52 weeks ended 29 december 2012
3.1 Business combinations (continued)
2011
The Group acquired the Sydney Attractions Group of companies for £61 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 and 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.
The acquisition had the following effect on the Group’s assets and liabilities:
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
Fair values at
acquisition
£m
55
3
1
1
1
3
(44)
(6)
(4)
(2)
(1)
7
54
61
61
61
(3)
61
58
In the period to 31 December 2011 this acquisition contributed £42 million to the consolidated revenue and £10 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.
72
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 4 OPERATING ASSETS AND LIABILITIES
52 weeks ended 29 december 2012
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.
73
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 4 OPERATING ASSETS AND LIABILITIES (continued)
52 weeks ended 29 december 2012
4.1 Property, plant and equipment (continued)
Property, plant and equipment
Cost
Balance at 26 december 2010
acquisitions through business combinations (note 3.1)
additions
Movements in asset retirement provisions
disposals
Transfers
Effect of movements in foreign exchange
Balance at 31 December 2011
acquisitions through business combinations (note 3.1)
additions
Movements in asset retirement provisions
disposals
Transfers
Effect of movements in foreign exchange
Balance at 29 December 2012
Depreciation
Balance at 26 december 2010
depreciation for the year - owned assets
depreciation for the year - leased assets
disposals
Effect of movements in foreign exchange
Balance at 31 December 2011
depreciation for the year - owned assets
depreciation for the year - leased assets
impairment
disposals
Effect of movements in foreign exchange
Balance at 29 December 2012
Carrying amounts
at 26 december 2010
at 31 december 2011
At 29 December 2012
Land and
buildings
£m
Plant and
equipment
£m
Under
construction
£m
612
30
30
2
-
30
(5)
519
23
59
2
(3)
61
(3)
699
658
91
11
3
(1)
30
(21)
812
92
18
2
-
(1)
111
23
2
8
(1)
(4)
39
32
1
(8)
65
(13)
774
143
50
3
(3)
(2)
191
60
2
5
(8)
(3)
139
247
55
2
89
-
-
(91)
2
57
2
127
-
-
(95)
(1)
90
-
-
-
-
-
-
-
-
-
-
-
-
Total
£m
1,186
55
178
4
(3)
-
(6)
1,414
132
170
4
(9)
-
(35)
1,676
235
68
5
(3)
(3)
302
83
4
13
(9)
(7)
386
520
588
673
376
467
527
55
57
90
951
1,112
1,290
74
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 4 OPERATING ASSETS AND LIABILITIES (continued)
52 weeks ended 29 december 2012
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. Impairment charges have
been made in the year of £8 million in land and buildings and £5 million in plant and equipment, in respect of three of the Group’s
midway attractions, arising from a review of market and economic conditions at those locations. No impairment charges were made in
2011. 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 29 December 2012 the net carrying amount of leased buildings was £20 million
(2011: £42 million) and the net carrying amount of leased plant and machinery was £39 million (2011: £42 million).
Capital commitments
At the year end the Group has a number of outstanding capital commitments amounting to £40 million (2011: £62 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 groups of
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)
75
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 4 OPERATING ASSETS AND LIABILITIES (continued)
52 weeks ended 29 december 2012
4.2 goodwill and intangible assets (continued)
Goodwill and intangible assets
Cost
Balance at 26 december 2010
acquisitions through business combinations (note 3.1)
Effect of movements in foreign exchange
Balance at 31 December 2011
acquisitions through business combinations (note 3.1)
additions
Effect of movements in foreign exchange
Balance at 29 December 2012
Amortisation and impairment
Balance at 26 december 2010
amortisation for the year
Balance at 31 December 2011
amortisation for the year
impairment
Effect of movements in foreign exchange
Balance at 29 December 2012
Carrying amounts
at 26 december 2010
at 31 december 2011
At 29 December 2012
Intangible assets
Goodwill
£m
Brands
£m
Other
£m
Total
£m
861
54
(3)
912
52
-
(15)
949
133
-
133
-
40
-
173
728
779
776
191
3
(2)
192
-
-
(2)
190
13
-
13
-
-
(1)
12
178
179
178
18
1
1
20
5
1
(1)
25
7
1
8
1
-
-
9
11
12
16
1,070
58
(4)
1,124
57
1
(18)
1,164
153
1
154
1
40
(1)
194
917
970
970
Intangible assets were tested for impairment in accordance with the Group’s accounting policy, as referred to in note 4.3. Impairment
charges of £40 million have been made in respect of goodwill within the Resort Theme Parks operating segment (2011: £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
2012
£m
543
39
194
776
2011
£m
500
39
240
779
76
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 4 OPERATING ASSETS AND LIABILITIES (continued)
52 weeks ended 29 december 2012
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
2012
£m
2011
£m
26
16
10
8
60
47
32
15
12
12
26
16
10
8
60
48
32
15
12
12
118
178
119
179
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 annually 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 reviewed at an Operating Group level, being the relevant grouping of cash-
generating units (CGUs) at which the benefit of such goodwill arises. A CGU is the smallest
identifiable group of assets that generates largely independent cash inflows, being the Group’s
individual attractions.
Brands are reviewed individually.
PPE is reviewed at an attraction level.
77
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 4 OPERATING ASSETS AND LIABILITIES (continued)
52 weeks ended 29 december 2012
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. They are allocated first to reduce the carrying amount of goodwill, and
then to reduce the carrying amount of other intangible assets and other assets 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 five year business
plan horizon then extrapolated using a long term growth rate.
Common assumptions have been adopted for the purpose of testing goodwill across the business 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% (2011: 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. Net present values are calculated using
an appropriate pre-tax discount rate of between 9% and 12% (2011: 10% and 13%), derived
from the Group’s post-tax weighted average cost of capital of between 7% and 9%
(2011: 7% and 10%).
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 testing of the Midway Attractions and
LEGOLAND Parks Operating Groups.
Total impairment losses of £53 million were recorded in the year, being £40 million in respect of a partial impairment of goodwill for the
Resort Theme Parks Operating Group and £13 million in aggregate in respect of property, plant and equipment at three of the Group’s
midway attractions. These were all primarily driven by lower projected cash flows within business plans arising from adverse economic
conditions within southern Europe.
The key assumptions used in assessing the recoverable amount of Resort Theme Parks’ goodwill are the EBITDA forecasts and discount
rate applied. If the estimated EBITDA levels used in the value in use calculations had been 1% lower than the estimate used at 29
December 2012 the Group would have recognised a further impairment against goodwill of £10 million. A pre-tax discount rate of
11% has been used to discount the forecast cash flows in these calculations. If the discount rate used in the value in use calculations
had been 0.1% lower than the estimate used at 29 December 2012 the Group would have recognised a further impairment against
goodwill of £8 million.
78
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 4 OPERATING ASSETS AND LIABILITIES (continued)
52 weeks ended 29 december 2012
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
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:
2012
£m
6
-
17
23
2011
£m
5
12
12
29
Current assets
Non-current assets
2012
£m
12
12
23
47
2011
£m
11
4
27
42
2012
£m
2011
£m
-
-
3
3
2012
£m
7
4
1
12
-
-
4
4
2011
£m
6
3
2
11
Current liabilities
Non-current liabilities
2012
£m
33
133
13
179
2011
£m
35
100
7
142
2012
£m
-
3
19
22
2011
£m
-
4
15
19
79
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 4 OPERATING ASSETS AND LIABILITIES (continued)
52 weeks ended 29 december 2012
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 1 January 2012
acquisitions through business combinations (note 3.1)
Provisions made during the year
utilised during the year
unwinding of discount
Effect of movements in foreign exchange
Balance at 29 December 2012
2012
Current
non-current
2011
Current
non-current
Asset
retirement
provisions
£m
Other
£m
Total
£m
22
3
4
(1)
1
-
29
-
29
29
-
22
22
12
7
5
(2)
-
(2)
20
13
7
20
9
3
12
34
10
9
(3)
1
(2)
49
13
36
49
9
25
34
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.
80
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 5 CAPITAL STRUCTURE AND FINANCING
52 weeks ended 29 december 2012
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
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
2012
£m
142
2011
£m
60
1,337
1,183
1,195
1,123
-
84
2
84
1,279
1,209
Restricted funds of £6 million (2011: £6 million) are included in cash and cash equivalents.
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
secured bank loans
interest payable
Current
2012
£m
Non-current
2011
£m
2012
£m
2011
£m
Total
2012
£m
2011
£m
1
3
4
3
2
5
1,333
1,178
1,334
1,181
-
-
3
2
1,333
1,178
1,337
1,183
81
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
52 weeks ended 29 december 2012
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
interest payable
Currency
Nominal
interest rate
Year of
maturity
gBP
EuR
usd
aud
RMB
4.84%
4.22%
4.50%
7.79%
6.50%
2017
2017
2017
2017
2013
2012
2011
Principal
value
£m
Carrying
amount
£m
Principal
value
£m
Carrying
amount
£m
455
463
277
164
1
447
454
273
159
1
396
422
271
121
3
387
410
265
116
3
1,360
1,334
1,213
1,181
3
1,337
2
1,183
In May 2011 the Group amended the facility such that the loans bear interest at lower rates and now fall due in July 2017. Reflecting
management’s judgement that this was a non-substantive change to an existing facility, the Group 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.
82
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
52 weeks ended 29 december 2012
5.3 Lease obligations (continued)
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.
During the year the Group undertook a sale and leaseback transaction of the LEGOLAND Windsor hotel. The lease entered into is
being accounted for as an operating lease. The gain on the sale is deferred over the 35 year lease term.
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 2012 £76 million (2011: £71 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
2012
£m
6
24
254
284
Present
value of
minimum
lease
payments
2012
£m
Future
minimum
lease
payments
2011
£m
-
-
84
84
8
23
260
291
Present
value of
minimum
lease
payments
2011
£m
2
-
84
86
Interest
2011
£m
6
23
176
205
Interest
2012
£m
6
24
170
200
Currency
Nominal
interest rate
Year of
maturity
2012
£m
2011
£m
gBP
EuR
EuR
5.64%
3.01%
9.11%
2042
2012
2042
54
-
30
84
54
2
30
86
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
2012
£m
68
269
1,359
1,696
2011
£m
59
233
1,289
1,581
83
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
52 weeks ended 29 december 2012
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 assess based on the value attributed in recent transactions 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 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.
2012
£m
-
2011
£m
2
2012
£m
2011
£m
8
55
-
63
8
69
4
81
84
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
52 weeks ended 29 december 2012
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. Interest income and interest expense are recognised as they
accrue, using the effective interest method.
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.
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 intercompany 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 liabilities 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
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
2012
£m
2011
£m
6
14
5
25
2012
£m
122
2
2
-
126
1
3
4
8
2011
£m
126
2
10
4
142
Capitalised borrowing costs amounted to £3 million in 2012 (2011: £5 million), with a capitalisation rate of 7.5% (2011: 8.1%).
85
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
52 weeks ended 29 december 2012
5.5 finance income and costs (continued)
Recognised in consolidated statement of other comprehensive income
foreign currency translation differences relating to the net investment in foreign operations
2012
£m
(6)
2011
£m
(6)
Foreign currency translation differences relating to the net investment in foreign operations are stated before a credit of £1 million
(2011: charge of £1 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 changes in interest rates. At 29 December 2012 the Group had floating rate
debt in Sterling, Euros, US Dollars, Australian Dollars and Chinese Renminbi.
The Group hedges its exposure to its floating rate loans with interest rate swaps. At the reporting date, at year end exchange rates, 76%
(2011: 98%) of the secured bank loans were 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
2012
£m
2011
£m
(84)
(63)
(86)
(77)
(147)
(163)
142
60
(1,334)
(1,181)
(1,192)
(1,121)
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
fair value of the swaps is dependent on the fixed rate.
The Group has performed sensitivity analysis on these balances as follows:
fair value sensitivity analysis
This analysis shows the Group’s sensitivity to changes in interest rates. It is calculated 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) (2011: 50bp).
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
2012
Profit or
loss
£m
11
(11)
2011
Profit or
loss
£m
13
(13)
Equity
£m
2
(2)
Equity
£m
3
(3)
86
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
52 weeks ended 29 december 2012
5.6 financial risk factors and fair value analysis (continued)
Cash flow sensitivity analysis
This analysis shows the sensitivity of the Group’s cash flows to changes in interest rates.
It is performed by comparing the annual interest expense/income which would apply to year end balances at year end interest rates, to
the annual expense/income which would arise using year end interest rates increased by 50bp.
This analysis assumes that all other variables remain constant. Any remaining sensitivity is attributable to the Group’s exposure to interest
rates on its unhedged variable rate borrowings.
Bank loans and overdrafts
interest rate swaps
Cash and cash equivalents
Cash flow sensitivity (net)
Profit or (loss)
2012
£m
2011
£m
(7)
5
1
(1)
(6)
6
-
-
A decrease of 50bp would result in a profit of £1 million (2011: £nil).
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 million (2011: £138 million) in addition to its existing borrowings to meet any shortfalls.
At 29 December 2012, the Group had cash and cash equivalents of £142 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.
2012
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
Carrying
amount
£m
Contractual
cash flows
£m
0 to <1
year
£m
1 to <2
years
£m
2 to <5
years
£m
5 years
and over
£m
1,334
(1,671)
84
33
8
55
(205)
(33)
(9)
(63)
(67)
(6)
(33)
(4)
(27)
(67)
(1,537)
(6)
-
(5)
(27)
(18)
-
-
(9)
-
(175)
-
-
-
1,514
(1,981)
(137)
(105)
(1,564)
(175)
87
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
52 weeks ended 29 december 2012
5.6 financial risk factors and fair value analysis (continued)
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
Carrying
amount
£m
Contractual
cash flows
£m
0 to <1
year
£m
1 to <2
years
£m
2 to <5
years
£m
5 years
and over
£m
1,181
(1,577)
86
35
8
69
(211)
(35)
(11)
(73)
1,379
(1,907)
(66)
(8)
(35)
(2)
(26)
(137)
(63)
(6)
-
(4)
(23)
(96)
(201)
(17)
-
(5)
(24)
(1,247)
(180)
-
-
-
(247)
(1,427)
Foreign currency risk
The Group is exposed to foreign currency risk arising from movements in foreign exchange rates. This 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 uses a portfolio of foreign exchange trades to manage specific foreign exchange exposures on cross
border transactions where they arise.
The Group operates internationally with its operating assets, revenues and costs denominated primarily in the functional currencies of
the relevant local territories. The principal currencies are Sterling, Euros, US Dollars and Australian Dollars. The Group’s bank debt is
predominantly in those same currencies, in ratios intended to provide a match between funding requirements and the cash generation
capabilities of the Group’s operations in each of its locations.
The Group’s financial instruments are set out by currency below:
2012
Cash and cash equivalents
Trade receivables
secured bank loans
finance lease liabilities
derivatives
Trade payables
2011
Cash and cash equivalents
Trade receivables
secured bank loans
finance lease liabilities
derivatives
Trade payables
Sterling
£m
Euro
£m
US
Dollar
£m
Australian
Dollar
£m
Other
£m
Total
£m
116
5
(447)
(54)
(23)
(10)
9
2
6
2
4
2
(454)
(273)
(159)
(30)
(28)
(12)
-
(12)
(7)
-
-
(2)
(413)
(513)
(284)
(155)
36
5
10
2
8
2
3
1
(387)
(410)
(265)
(116)
(54)
(29)
(14)
(32)
(31)
(10)
-
(14)
(6)
-
(1)
(1)
(443)
(471)
(275)
(114)
7
1
(1)
-
-
(2)
5
3
1
(3)
-
-
(4)
(3)
142
12
(1,334)
(84)
(63)
(33)
(1,360)
60
11
(1,181)
(86)
(75)
(35)
(1,306)
88
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
52 weeks ended 29 december 2012
5.6 financial risk factors and fair value analysis (continued)
The Group treats certain structural intercompany loans as net investment hedging instruments. At 29 December 2012 the Group had
£552 million (2011: £563 million) in Euro denominated loans, £57 million (2011: £57 million) in Sterling denominated loans and
£40 million (2011: £42 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 shows the 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. The sensitivity analysis for
forward foreign exchange contracts uses a discounted cash flow technique applying a 10% strengthening/weakening of Sterling against
Euros, US Dollars, Danish Kroner and Australian Dollars. The analysis assumes that all other variables remain constant.
The impact of these retranslations on profit/loss has been aggregated and is as follows, split by category of financial instrument:
10% strengthening of sterling
2012
Euro
us dollars
danish Kroner
australian dollars
2011
Euro
us dollars
danish Kroner
australian dollars
Profit or (loss) impact
Secured
bank loans
£m
Derivatives
(unhedged)
£m
Total
£m
2
10
-
(2)
10
-
9
-
-
9
3
(1)
(1)
-
1
3
(1)
(1)
(3)
(2)
5
9
(1)
(2)
11
3
8
(1)
(3)
7
89
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
52 weeks ended 29 december 2012
5.6 financial risk factors and fair value analysis (continued)
10% weakening of sterling
2012
Euro
us dollars
danish Kroner
australian dollars
2011
Euro
us dollars
danish Kroner
australian dollars
Profit or (loss) impact
Secured
bank loans
£m
Derivatives
(unhedged)
£m
(2)
(10)
-
2
(10)
-
(9)
-
-
(9)
(3)
1
1
-
(1)
(3)
1
1
5
4
Total
£m
(5)
(9)
1
2
(11)
(3)
(8)
1
5
(5)
A 10% strengthening/weakening of Sterling would have no impact on the hedging reserve.
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 note 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, 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% (2011: 7.8%). For finance leases the market rate of interest is determined by reference to similar
lease agreements.
90
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 Section 5 capital Structure and financing (continued)
52 weeks ended 29 December 2012
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 assets 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 assets and liabilities:
Trade and other receivables
Cash and cash equivalents
Secured bank loans
Finance lease liabilities
Trade and other payables
2012
Carrying
amount
£m
2011
Fair
value
£m
Carrying
amount
£m
Fair
value
£m
(8)
(55)
-
-
24
142
(8)
(55)
-
-
24
142
(8)
(69)
2
(4)
15
60
(8)
(69)
2
(4)
15
60
(1,334)
(1,275)
(1,181)
(1,117)
(84)
(33)
(84)
(33)
(86)
(35)
(86)
(35)
(1,348)
(1,289)
(1,306)
(1,242)
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 29 December 2012 the Group had £63 million (2011: £79 million) of derivative financial liabilities classified as Level 2. There have
been no transfers between levels in 2012 (2011: 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.
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.
91
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
52 weeks ended 29 december 2012
5.7 Equity and capital management (continued)
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
2012
2011
156,271,845
156,249,710
495,205
22,135
156,767,050
156,271,845
2012
£m
2011
£m
1
-
1
1
-
1
1
-
1
1
-
1
issue of new shares
To assist with the acquisition and development into LEGOLAND Florida of the Cypress Gardens theme park in 2010, the Group
entered into an agreement with an existing shareholder to invest US$30 million. The agreement allowed for additional shares to be
issued at par to the shareholder should a listing or sale of the Group not take place before 31 August 2012. In 2011 it was considered
probable that such an event would not occur, and accordingly this committed share issue was recognised at a value of £4 million (as
disclosed in note 5.4). During the year 495,205 A ordinary shares were therefore issued resulting in a premium of £4 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.
92
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 5 CAPITAL STRUCTURE AND FINANCING (continued)
52 weeks ended 29 december 2012
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 (2011: 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
(2011: £169,205) and result in 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 payment transactions – equity-settled arrangements
Accounting policy
The fair value of equity-settled share-based payments is recognised as an employee expense with a corresponding increase in equity.
The fair value is measured at grant date and charged as the employees become unconditionally entitled to the rights.
Equity-settled schemes
Equity-settled schemes have been created that enable certain senior employees to acquire B class 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 and/or outstanding contribution. These shares are expected to vest on a
qualifying transaction, including a stock exchange listing.
No charge arose during the year (2011: £nil). The number of shares issued is as follows:
at beginning of year
issued during the year
forfeited during the year
At end of year
Number
2012
Number
2011
17,996,500
-
1,626,875 18,388,300
(340,225)
(391,800)
19,283,150 17,996,500
93
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 6 OThER NOTES
52 weeks ended 29 december 2012
6.1 investments
Accounting policy
Joint ventures
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
Effect of movement in foreign exchange
At end of year
6.2 Employee benefits
Accounting policies
2012
£m
2011
£m
1
(1)
-
1
-
1
defined contribution pension schemes
In the case of 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 pension 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 offset 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 in equity through other comprehensive income.
Defined contribution pension schemes
The Group operates a number of defined contribution pension schemes and the total expense relating to those schemes in the current
year was £8 million (2011: £6 million).
Defined benefit pension 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 based on a percentage of final salary for each year of service that the employee provided. The entitlement of
the retired employees under the Gardaland scheme is dependent 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.
94
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 6 OThER NOTES (continued)
52 weeks ended 29 december 2012
6.2 Employee benefits (continued)
The assets and liabilities of the schemes are:
2012
Equities
Corporate bonds and cash
Property
fair value of scheme assets
Present value of defined benefit obligations
Net pension liability
2011
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 26 december 2010
Expected return on scheme assets
actuarial losses
At 31 December 2011
Expected return on scheme assets
actuarial gains
At 29 December 2012
Tussauds
Group
£m
Gardaland
£m
Total
£m
7
3
5
15
(18)
(3)
6
5
2
13
(16)
(3)
-
-
-
-
(2)
(2)
-
-
-
-
(2)
(2)
7
3
5
15
(20)
(5)
6
5
2
13
(18)
(5)
Tussauds
Group
£m
Gardaland
£m
Total
£m
13
1
(1)
13
1
1
15
-
-
-
-
-
-
-
13
1
(1)
13
1
1
15
The actual return on scheme assets for the Tussauds Group pension scheme was a profit of £2 million (2011: £nil).
95
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 6 OThER NOTES (continued)
52 weeks ended 29 december 2012
6.2 Employee benefits (continued)
Movement in the present value of the defined benefit obligations
at 26 december 2010
interest cost
actuarial losses
At 31 December 2011
interest cost
actuarial losses
At 29 December 2012
analysis of amounts charged against profits
2012
Finance cost
interest on defined benefit pension scheme obligations
Expected return on defined benefit pension scheme assets
Total
2011
Finance cost
interest on defined benefit pension scheme obligations
Expected return on defined benefit pension scheme assets
Total
actuarial gains and losses recognised directly in other comprehensive income
Cumulative amount at 26 december 2010
net actuarial losses recognised in the year
Cumulative amount at 31 December 2011
net actuarial losses recognised in the year
Cumulative amount at 29 December 2012
Tussauds
Group
£m
Gardaland
£m
(14)
(1)
(1)
(16)
(1)
(1)
(18)
(2)
-
-
(2)
-
-
(2)
Total
£m
(16)
(1)
(1)
(18)
(1)
(1)
(20)
Tussauds
Group
£m
Gardaland
£m
Total
£m
1
(1)
-
1
(1)
-
-
-
-
-
-
-
1
(1)
-
1
(1)
-
Tussauds
Group
£m
Gardaland
£m
Total
£m
-
(2)
(2)
-
(2)
-
-
-
-
-
-
(2)
(2)
-
(2)
96
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012
SECTION 6 OThER NOTES (continued)
52 weeks ended 29 december 2012
6.2 Employee benefits (continued)
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
2012
Tussauds
Group
2011
4.5%
5.0%
3.4%
3.1%
4.7%
5.4%
3.2%
2.9%
Gardaland
2012
Gardaland
2011
2.8%
5.7%
-
-
-
-
2.0%
2.0%
To develop the expected long-term rate of return on assets assumption of 5.0%, 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 £nil (2011: £nil).
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
2012
£m
(20)
15
(5)
(1)
1
2011
£m
(18)
13
(5)
(1)
(1)
2010
£m
(16)
13
(3)
1
1
Consolidated statement of financial position reconciliation
Liability at beginning of year
amounts recognised in other comprehensive income in the financial year
Liability at end of year
The Group expects £1 million in contributions to be paid to its defined benefit schemes in 2013.
2009
£m
(16)
11
(5)
(2)
1
2012
£m
(5)
-
(5)
2008
£m
(13)
9
(4)
2
(3)
2011
£m
(3)
(2)
(5)
97
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 6 OThER NOTES (continued)
52 weeks ended 29 december 2012
6.3 Related party transactions
Identity of related parties
The Group has related party relationships with its shareholders, key management personnel, joint ventures and the companies that own
the LEGOLAND Malaysia Park.
As part of the agreement for the development and operation of LEGOLAND Malaysia, the Group is committed to subscribing for
share capital in IDR Resorts Sdn. Bhd. which together with its subsidiaries owns the park. On this basis, IDR Resorts Sdn. Bhd. and its
subsidiaries are deemed to be related parties (together “parties related to LEGOLAND Malaysia”). At 29 December 2012 the Group
had not subscribed for share capital in IDR Resorts Sdn. Bhd.
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. Transactions entered into, including purchase and sale of goods, payment of fees and royalties, and trading
balances outstanding at 29 December 2012, are as follows:
2012
KiRKBi a/s
Blackstone Capital Partners
CVC Capital Partners
LEgo
Parties related to LEgoLand Malaysia
2011
KiRKBi a/s
Blackstone Capital Partners
CVC Capital Partners
LEgo
Goods and services
Amounts
owed by
related party
£m
Sales
£m
Purchases
£m
Amounts
owed to
related party
£m
-
-
-
1
4
5
-
-
-
-
-
-
-
-
1
4
5
-
-
-
-
-
7
1
1
37
1
47
5
1
1
30
37
1
-
-
2
-
3
1
-
-
-
1
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 29 December 2012 are; KIRKBI A/S £59 million
(2011: £54 million), funds advised by parties related to Blackstone Capital Partners £38 million (2011: £45 million) and funds advised
by parties related to CVC Capital Partners £44 million (2011: £32 million).
Interest is paid and accrued on the same terms as the rest of the banking syndicate as described in note 5.2.
During 2011, and based on contractually agreed amounts, the Group recognised a derivative liability in respect of a committed share
issue to a certain shareholder which completed during 2012 with the issue of shares (note 5.7).
98
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 6 OThER NOTES (continued)
52 weeks ended 29 december 2012
6.3 Related party transactions (continued)
Transactions with key management personnel
Key management of the Group (the members of the Executive Board) and their immediate relatives control 7.1% (2011: 7.1%) 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
2012
£m
2.6
0.3
2.9
2011
£m
3.4
0.2
3.6
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 £1 million (2011: £1 million).
6.5 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 7 (Amendment) “Transfers of financial assets”;
• IAS 12 (Amendment) “Income taxes – deferred tax: recovery of underlying assets”.
EU endorsed IFRS and interpretations with effective dates after 31 December 2012 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 2013 or after. The Group does not expect any significant impact on its consolidated financial statements from
these amendments.
• IAS 19 (Amendment) “Defined benefit plans”;
• IAS 1 (Amendment) “Presentation of items of other comprehensive income”;
• IFRS 10 “Consolidated financial statements”;
• IFRS 11 “Joint arrangements”;
• IFRS 12 “Disclosure of interests in other entities”;
• IFRS 13 “Fair value measurement”;
• IAS 27 “Separate financial statements”;
• IAS 28 “Investments in associates and joint ventures”;
• IFRS 7 (Amendment) “Financial instruments: disclosures – offsetting financial assets and financial liabilities”;
• IAS 32 (Amendment) “Financial instruments: presentation – offsetting financial assets and financial liabilities”.
6.6 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.
99
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 6 OThER NOTES (continued)
52 weeks ended 29 december 2012
6.7 subsidiary and joint venture undertakings
The Group has the following investments in subsidiaries and joint ventures:
Subsidiary undertaking
aaE unit Trust
aQdEV Pty Limited
aquia Pty Ltd
australian alpine Enterprises holdings Pty Ltd
australian alpine Enterprises Pty Ltd
australian alpine Reservation Centre Pty Ltd
Christchurch investment Company Limited
falls Creek ski Lifts Pty Ltd
gebi falls Creek Pty Ltd
hotham heights developments Ltd
hotham ski services Pty Ltd
illawarra Tree Tops Pty Ltd
Limlimbu ski flats Ltd
Living and Leisure australia Limited
Living and Leisure australia Trust
Living and Leisure australia Management Limited
Living and Leisure finance Trust
LLa aquariums Pty Limited
Melbourne underwater World Pty Ltd
Melbourne underwater World Trust
ME LoanCo (australia) Pty Limited
Merlin Entertainments (australia) Pty Ltd
MhsC dP Pty Ltd
MhsC hotels Pty Ltd
MhsC Properties Pty Ltd
MhsC Transportation services Pty Ltd
Mount hotham Management and Reservation Pty Ltd
Mount hotham skiing Company Pty Ltd
MuW holdings Pty Ltd
northbank development Trust
northbank Place (Vic) Pty Ltd
oceanis australia Pty Ltd
oceanis australia unit Trust
oceanis developments Pty Ltd
oceanis foundation Pty Ltd
oceanis holdings Limited
oceanis Korea unit Trust
oceanis nB Pty Ltd
oceanis northbank Trust
oceanis unit Trust
Parkthorn Properties Pty Ltd
sydney attractions group Pty Ltd
sydney Tower observatory Pty Limited
sydney Wildlife World Pty Limited
The otway fly Pty Ltd
The otway fly unit Trust
The sydney aquarium Company Pty Limited
Class of
Country of
share held
incorporation
australia
-
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
-
australia
australia ordinary
australia
-
australia ordinary
australia ordinary
-
australia
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia
-
australia ordinary
australia ordinary
australia
-
australia ordinary
australia ordinary
australia ordinary
australia
-
australia ordinary
-
australia
australia
-
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia ordinary
australia
-
australia ordinary
Ownership
2012
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
57.0%
65.0%
100.0%
100.0%
64.0%
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%
50.0%
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
-
100.0%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100.0%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100.0%
100.0%
100.0%
-
-
100.0%
100
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 6 OThER NOTES (continued)
52 weeks ended 29 december 2012
6.7 subsidiary and joint venture undertakings (continued)
Subsidiary undertaking
underwater World sunshine Coast Pty Ltd
us fly Trust
White Crystal (Mount hotham) Pty Ltd
Madame Tussauds austria gmbh
MT austria holdings gmbh
dirk frimout Centrum n.V.
sEa LifE Centre Belgium n.V.
Merlin Entertainments (Canada) inc
Madame Tussauds Exhibition (shanghai) Company Limited
shanghai Chang feng oceanworld Co. Ltd
LEgoLand aps
LL datterselskab af december 2012 aps
Merlin Entertainments group denmark holdings aps
sEa LifE france saRL
dungeon deutschland gmbh
heide-Park soltau gmbh
LEgoLand deutschland freizeitpark gmbh
LEgoLand deutschland gmbh
LEgoLand discovery Centre deutschland gmbh
LEgoLand holidays deutschland gmbh
(formerly 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
sEa LifE Centre Bray 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.
Merlin Entertainments (Japan) Limited
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.
LEgoLand Malaysia hotel sdn. Bhd
Merlin Entertainments group (Malaysia) sdn. Bhd
Merlin Entertainments studios (Malaysia) sdn. Bhd
amsterdam dungeon B.V.
Madame Tussauds amsterdam B.V.
Merlin Entertainments holdings nederland B.V.
sEa LifE Centre scheveningen B.V.
auckland aquarium Limited
Merlin Entertainments (new Zealand) Limited
Merlin Entertainments (sEa LifE PoRTo) unipessoal Lda
Country of
incorporation
Class of
share held
australia ordinary
australia
-
australia ordinary
austria ordinary
austria ordinary
Belgium ordinary
Belgium ordinary
Canada ordinary
China ordinary
China ordinary
denmark ordinary
denmark ordinary
denmark ordinary
france ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
Ownership
2012
100.0%
100.0%
82.6%
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%
germany ordinary
100.0%
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
germany ordinary
ireland ordinary
italy ordinary
italy ordinary
italy ordinary
italy ordinary
italy ordinary
italy ordinary
italy ordinary
Japan ordinary
Luxembourg ordinary
Luxembourg ordinary
Luxembourg ordinary
Malaysia ordinary
Malaysia ordinary
Malaysia ordinary
netherlands ordinary
netherlands ordinary
netherlands ordinary
netherlands ordinary
new Zealand ordinary
new Zealand ordinary
Portugal ordinary
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%
60.0%
100.0%
100.0%
100.0%
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%
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%
60.0%
100.0%
100.0%
100.0%
101
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 6 OThER NOTES (continued)
52 weeks ended 29 december 2012
6.7 subsidiary and joint venture undertakings (continued)
Subsidiary undertaking
aquaria Twenty-one Co. Ltd
Busan aquaria Twenty one Co. Ltd
Merlin Entertainments (Korea) LLC
sLCs sEa LifE Centre spain s.a.
Merlin Entertainments (Thailand) Limited
siam ocean World Bangkok Co Ltd
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
Cotswold Village green Limited
CWa PropCo Limited
LEgoLand us holdings Limited
LEgoLand Windsor Park Limited
London aquarium (south Bank) Limited
London dungeon Limited
London Eye holdings Limited
London Eye Management services Limited
(formerly The London Eye Company 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 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
oceanic Village Limited
sEa LifE Centre (Blackpool) Limited
sEa LifE Centres Limited
sEa LifE Marine Conservation Trustees Limited
(formerly Merlin Entertainments Group Finance Limited)
Country of
Class of
incorporation
share held
south Korea ordinary
south Korea ordinary
south Korea ordinary
spain ordinary
Thailand ordinary
Thailand 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
uK ordinary
uK ordinary
Ownership
2012
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%
100.0%
100.0%
100.0%
100.0%
100.0%
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%
102
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 SECTION 6 OThER NOTES (continued)
52 weeks ended 29 december 2012
6.7 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
Lake george fly LLC
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 orlando LLC
sEa LifE us LLC
The Tussauds group LLC
Joint venture
sEa LifE helsinki oy
Pirate adventure golf Limited
Tussauds harbour Gateway Inc was dissolved during the year.
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
-
usa
-
usa
-
usa
-
usa
-
usa
-
usa
-
usa
-
usa
-
usa
-
usa
usa
-
usa ordinary
-
usa
-
usa
-
usa
-
usa
-
usa
-
usa
-
usa
Ownership
2012
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
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%
Country of
incorporation
Class of
share held
finland ordinary
uK ordinary
Ownership
2012
50.0%
50.0%
Ownership
2011
50.0%
50.0%
Merlin Entertainments S.à r.l. has a US branch with the sole activity of holding certain loan instruments assigned to it by the Company.
(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.
103103
Merlin Entertainments S.à r.l. Annual Report and Accounts 2012 Merlin Entertainments S.à r.l.
incorporated in Luxembourg
Registered number: B154.309
www.merlinentertainments.biz
Registered Office:
1st floor
Polaris - Vertigo Building
2-4 rue Eugene Ruppert
L-2453 Luxembourg
UK Office:
3 Market Close
Poole
BH15 1NQ
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