Merlin Entertainments PLC Annual Report 2021

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FY2021 Annual Report · Merlin Entertainments PLC

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Registered number 12057312

MOTION JVCO LIMITED
ANNUAL REPORT AND ACCOUNTS 2021

CONTENTS

At the end of 2021 the Group
operated:

138

attractions

with

4,890

rooms

countries

Strategic report

KPIs

At a glance

Chief Executive’s introduction

Business model

Growth drivers

Financial and operating review

Principal risks

Corporate social responsibility

Section 172 statement

Governance

Corporate governance

Directors’ report

Directors’ responsibilities statement

Independent auditor’s report

Financial 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

Notes to the accounts

Motion JVco Limited Company financial statements

Notes to the Company financial statements

Additional information

Glossary

Other financial information

101

103

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

KPIs

35.2m

£1,261m

VISITORS

+59.5%

REVENUE

+100.7%

2021

2020

2019 (1)

35.2

22.1

2021

2020

1,261

629

67.0

2019 (1)

1,740

£132m

UNDERLYING
OPERATING PROFIT(2),(3)
2020 as restated: loss of £(369)m

£130m

TOTAL
OPERATING PROFIT(2),(3)
2020 as restated: loss of £(743)m

£(94)m

LOSS BEFORE TAX(2),(3)
2020 as restated: loss of £(965)m

GUEST SATISFACTION

HEALTH AND SAFETY

EMPLOYEE ENGAGEMENT

This is based on guest satisfaction surveys where our
target is a score over 90%.

Providing a high quality of experience for our guests
is our core purpose, and we are proud that we again
maintained the same high score of 94% as in 2020
and 2019.

We continue to monitor our guests’ views, engaging
with them directly and on social media to measure the
quality of their experience and drive improvements.

See more on page 7.

We have maintained our continued focus on health
and safety. Our Medical Treatment Case (MTC) rate,
that captures the rate of guest injuries requiring
external medical treatment relative to 10,000 guest
visitations, has remained constant at 0.02 from 2019
through 2021.

In 2021 we continued to operate with the enhanced
protocols we developed in 2020, when Merlin helped
lead the location based entertainment industry in
implementing new measures to enable us to trade
safely during the COVID-19 pandemic.

See more on pages 25 to 26.

As expected, there were positives and negatives;
overall, in common with other businesses in our
industry, we saw a marked reduction in our
typically high overall engagement scores prior to
the pandemic. We are taking a number of actions
to address the issues the survey identified, and
believe that these steps, combined with working
patterns returning more to normal, will lead to
improved employee engagement. We will be
delivering another Wizard Wants to Know survey
in 2022, to capture the views of as many of our

people as possible. See more on page 24.

How we report our results
Motion JVco Limited (the Company) has been the parent company of the Merlin Entertainments Limited group of companies (Merlin, Merlin Group), since acquiring
the Merlin Group in November 2019. Where the strategic report refers to longer term historic activities and strategic initiatives, these should be read as referring
to the continuing Merlin business as if the Company had been the parent company in that period. Details on the period under review and the performance measures
used are set out in the Financial and Operating Review on page 17. Terms used throughout this document are defined in the Glossary on pages 101 to 102.

(1)

(2)

(3)

2019 comparative data for the Merlin Entertainments Group has been included to provide a more meaningful comparison of performance to trading prior to the COVID-19 pandemic. This has
been extracted from the audited 2019 Merlin Entertainments Limited Annual Report and Accounts.
Details of the prior year restatement are provided in note 1.1. This has restated reported exceptional items; depreciation and amortisation; and taxation, but did not affect underlying revenue or
underlying EBITDA.
The 2020 reported results were adversely impacted by accounting adjustments in respect of inventory ‘step-ups’ in the acquisition accounting exercise in November 2019, which reduced reported
EBITDA by £27 million in 2020.

MOTION JVCO LIMITED

AT A GLANCE

ANNUAL REPORT AND ACCOUNTS 2021

A GLOBAL LEADER IN LOCATION
BASED, FAMILY ENTERTAINMENT

MERLIN IS EUROPE’S NUMBER ONE AND THE WORLD’S SECOND-LARGEST
VISITOR ATTRACTION OPERATOR AND OPERATES 138 ATTRACTIONS,
22 HOTELS AND SIX HOLIDAY VILLAGES IN 24 COUNTRIES AND ACROSS
FOUR CONTINENTS.

Our vision

To be the global leader in location based entertainment by number of visitors.

Our purpose

To deliver memorable experiences to our millions of visitors.

Our strategy

Merlin’s strategy since its inception in 1999 has been to create a high growth, high return family entertainment company based on strong
brands and a global portfolio that is naturally balanced against the impact of external factors.

Merlin operates two distinct types of visitor attraction, organised into three
Operating Groups.

Midway Attractions are high quality, branded, predominantly indoor
attractions with a typical one to two hour dwell time located in city centres,
shopping malls or resorts. We have high quality, chainable brands and are the
only company to successfully operate the Midway model on a global scale.

Theme Parks are larger multi-day outdoor destination venues, incorporating
on-site themed accommodation.

•

LEGOLAND Parks are aimed at families with younger children and have
LEGO as the central theme. Highly themed accommodation is central to
our strategy to develop the customer offering. Merlin holds the global,
exclusive rights to the LEGOLAND brand.
Resort Theme Parks are national brands aimed at families, teenagers and
young adults, with themed accommodation at all locations. They have high
brand and customer awareness in their local markets and include the
leading theme parks in the UK, Italy and Northern Germany.

Our three Operating Groups are supported by our unique in-house business
development, creative, project management and production group, Merlin
Magic Making, which includes teams across Europe, North America and the
Asia Pacific region. Merlin Magic Making is responsible for driving innovation
across our Group and creating compelling propositions for our attractions;
developing new concepts into commercially viable attractions; producing
compelling content such as LEGO models, wax figures and attraction theming;
and constructing new attractions and investment projects, including new hotels
and rides.

Our portfolio of assets and brands is highly diversified across geography,
attraction type, brand and customer demographic and well balanced between
indoor and outdoor attractions and international and domestic visitation. We
also partner with third party intellectual property owners to create new
brands which complement the portfolio and broaden our appeal across all key
target demographics.

Our footprint across 24 countries provides a high degree of diversity and a
strong platform to benefit from long term growth in leisure spending.

We have demonstrated the strength of this diversified business model over
many years, where the drivers of our performance have been;
•

investment in our existing estate, increasingly including third party and
internally created intellectual properties (IP). These investments increase
capacity, provide compelling new propositions to guests, and improve
guest satisfaction;
rolling out new Midway attractions to drive revenue growth, often
with a ‘cluster’ focus and in locations that continue our geographic
diversification;
developing new LEGOLAND resorts under a combination of operating
models. LEGOLAND New York opened in the year and other resorts
are currently under construction in Asia;
transforming our theme parks into destination resorts by adding a broad
range of themed accommodation and other second gate attractions to
improve guest satisfaction and drive multi-day visitation;
leveraging synergies and efficiencies as our scale has increased - generating
revenue from promotions and marketing; improving our customers’
online ‘digital journey’; and evolving our operating model to become
more efficient, while maintaining our focus on providing a high quality of
experience to our guests; and
acquisitions, ranging from large scale transformational transactions to
smaller add-on deals.

•

MOTION JVCO LIMITED

AT A GLANCE

ANNUAL REPORT AND ACCOUNTS 2021

A GLOBAL LEADER IN LOCATION
BASED, FAMILY ENTERTAINMENT

A GLOBAL PORTFOLIO OF ATTRACTIONS AND ACCOMMODATION, REACHING
ALL TARGET DEMOGRAPHICS

Continental
Europe

Americas

Asia Pacific

Total

Brand
Demographics

MIDWAY ATTRACTIONS
Global brands

SEA LIFE

Madame Tussauds

Dungeons

LEGOLAND Discovery Centre

Eye

Peppa Pig World of Play

Other

Total

LEGOLAND PARKS

Total

RESORT THEME
PARKS

Families and
city centre tourists

Teenagers,

young adults and

city centre tourists

Families

City centre tourists

Pre-school families

123

Windsor, UK
(209 rooms)

Billund, Denmark
(578 rooms)

California, USA
(500 rooms)

Dubai, UAE

Günzburg, Germany

(461 rooms)

Florida, USA
(468 rooms)

Johor, Malaysia
(263 rooms)

New York, USA
(250 rooms)

Nagoya, Japan
(252 rooms)

9 parks
2,981 rooms

Families

Alton Towers

Gardaland Resort,

Resort, UK
(694 rooms)

Italy

(475 rooms)

Heide Park Resort,

Germany

(329 rooms)

Chessington World
of Adventures

Resort, UK
(254 rooms)

Warwick Castle,
UK (67 rooms)

THORPE PARK

Resort, UK
(90 rooms)

Total

6 parks
1,909 rooms

Families,
teenagers

and young adults

Families

Teenagers and
young adults

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

CHIEF EXECUTIVE’S INTRODUCTION

SIGNIFICANT RECOVERY
AND STRATEGIC PROGRESS

2021 overview
2021 has been a year of significant recovery and strategic progress, despite the
ongoing challenges of the global pandemic.

Our teams across the business have shown amazing commitment and resilience
and delivered a strong trading result despite the challenging operating
environment, with rolling restrictions and closures and ongoing staff shortages
as economies started to reopen. In addition, we have continued to invest for
future growth, with the launch of nine new attractions, further investment in
compelling content across our existing estate and our continued commitment
to build on the values at the heart of Merlin’s success; customer satisfaction and
employee engagement.

Although the impact of the pandemic is likely to continue to create a number of
challenges, the strength of our brands and our continued investment, together
with the commitment and passion of our teams, provide significant confidence in
our ongoing recovery and future growth.

2021 trading
We welcomed 35 million visitors to our attractions in 2021, a significant
increase over 2020’s reported 22 million, but still some way below pre-
pandemic levels due to the uneven recovery across geographies and
demographics. We reported revenue of £1,261 million, broadly double that of
2020 (£629 million), with strong revenue per guest in many divisions.

The first half of the year was more challenging, characterised by mandated
closures, operating restrictions and suppressed demand. This resulted in many
of our attractions opening later in the season than normal, with various
operating restrictions in place. Once restrictions were eased, domestic demand
returned rapidly in many markets, supported by a degree of pent up demand for
leisure, limited opportunity for international travel, and government support and
stimulus in several jurisdictions. However, the recovery wasn’t universal.
International tourism remained suppressed and rolling restrictions across the
Asia Pacific region prevented any sustained recovery in that region.

We saw strong consumer demand in North America, the UK, and parts of
Continental Europe. This demand supported strong trading at our theme park
resorts, and regional and coastal Midway attractions, that are primarily focused
on domestic markets. At certain attractions revenues were ahead of pre-
pandemic levels, with any capacity constraints more than offset by elevated
revenues per guest.

From Q3 we began to see encouraging signs in trading across our Asia Pacific
attractions, and also in the recovery of international tourism more broadly.
However the emergence of the Omicron variant then impacted trading in a
number of locations across the estate later in Q4, and into early 2022.

Our underlying EBITDA totalled £379 million (2020: a loss of £102 million), with
positive working capital management helping to drive positive operating cash
flows of £459 million in the year (2020: £75 million outflow).

2021 also saw the achievement of another major strategic milestone with the
launch of LEGOLAND New York, our largest capital project to date. The
resort opened in late spring and ramped up operation into the summer. Despite
the challenges of opening a new theme park during a pandemic, the team have
delivered a fantastic new resort which has been well received by guests.

Outlook
As we move into 2022, we continue to deliver on several significant
developments. The construction of LEGOLAND Korea, our latest major capital
project, is nearing completion and will open in May 2022. We have launched our
first standalone Peppa Pig theme park, just steps away from the LEGOLAND
Florida Resort, while at LEGOLAND Dubai a themed hotel opened in January,
developed in partnership with the park’s owners.

On new brands and formats, we have continued our expansion of the Peppa
Pig World of Play concept with the opening of an indoor play centre in the
Netherlands in February, and announced the expansion of our Amsterdam
cluster with the addition of the ‘THIS IS HOLLAND’ flying theatre experience.
We have also recently announced our exclusive partnership to take over the
operations of Cadbury World in the UK, deepening our relationship with the
‘UK’s favourite chocolate brand’.

These significant strategic developments come together with what we expect
will be a continued recovery in trading conditions. Ongoing vaccine roll outs
give us hope that remaining COVID-19 related trading restrictions will continue
to reduce across our estate, and having demonstrated our ability to trade
strongly during 2021, we expect to maintain the momentum we generated in
our major markets.

Some trading headwinds remain from the COVID-19 pandemic as a result of the
slow pace of recovery in international tourism, and there will inevitably be some
ongoing challenges in different territories, partly impacted by the different
approaches taken to addressing COVID-19 and any potential emerging variants.

Furthermore, while our trading operations are not directly affected by the war in
Ukraine, this and other geopolitical factors could lead to reduced levels of
international tourism and lower guests’ disposable income, and further
inflationary pressure on operating costs.

We remain focused on delivering memorable experiences to our guests and
optimising revenues, while retaining operational agility and managing our costs
carefully as we respond to emerging cost pressures and challenges in
labour markets.

Strategic developments
We continue to pursue opportunities to expand our brands, formats and
geographic diversification. We have already announced projects with partners to
develop three LEGOLAND resorts in China over the next five years in Shanghai,
Shenzhen, and Sichuan province. We also continue to look at other opportunities
to build a pipeline of projects beyond this.

There are also options for theme park management contract opportunities with
other brands. In June 2021 we announced that we have entered into a formal co-
operation agreement with local partners to create a standalone Peppa Pig resort
in Mieshan, part of Sichuan Tianfu New Area in China.

Following an extensive review, we recently announced that we have partnered
with Aramark to provide the food and beverage services in seven of our UK and
US theme parks. This partnership will allow our resorts to build on the high-
quality and innovative food and beverage offering that is a key part of the
guest experience.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

CHIEF EXECUTIVE’S INTRODUCTION

SIGNIFICANT RECOVERY
AND STRATEGIC PROGRESS

Employee engagement
Our people are what makes this company special, so re-establishing our annual
‘The Wizard Wants to Know’ employee engagement survey was an absolute
must for us, having battled through the pandemic period. We relaunched this
important listening tool in 2021, using the very latest digital technology through
a new platform.

As expected, there were positives and negatives and of course differences by
country, attraction, and function. For example, natural decreases were seen in
areas such as ‘being together’ and ‘work/life balance’, while higher scores were
recorded around wellbeing and managers and teams feeling supported. The staff
engagement question ‘Would I recommend Merlin as a place to work?’ showed
only a one-point difference compared to the last pre-pandemic survey. Overall
though, in common with other businesses in our industry, we saw a marked
reduction in our typically high overall engagement scores prior to the pandemic.

Merlin is a business based around our employees being together, whether
customer-facing or in other functions. We are taking a number of actions to
address the issues the survey identified, and believe that these steps, combined
with working patterns returning more to normal, will lead to improved
employee engagement. We recognise the importance of re-establishing this
important listening tool and will be delivering another Wizard Wants to Know
survey in 2022, to capture the views of as many of our people as possible.

We have implemented long term incentive plans that put in place incentive
structures for our management teams, aligned to the strategic objectives of our
shareholders. These plans include both outstanding contribution and long service
awards available to all employees.

At the end of 2021 we launched a brand-new staff engagement concept, the
‘Merlin Super Star Awards’, a virtual awards ceremony screened around the
globe on the same day, with teams coming together to watch and celebrate the
work and actions of their fellow Merlin teammates.

I have been incredibly proud of what our teams have achieved over the last year,
delivering millions of memorable experiences to our guests despite the various
challenges created by the pandemic.

Nick Varney
Chief Executive Officer
12 April 2022

Health, safety and security
The health, safety and security of our guests and employees remains our
number one priority and we have maintained a high level of performance across
our operations. Our key performance indicator, that captures the rate of guest
injuries requiring external medical treatment relative to guest visitations, has
remained consistently positive from 2019 through 2021, despite all the
challenges of recent times.

Throughout the pandemic, Merlin has helped lead the location based
entertainment industry in implementing measures to enable attractions to trade
safely. We continued this approach through 2021 as the pandemic, and the
regulatory responses, evolved and we remain fully committed to ensuring a safe
and welcoming environment for our guests and staff.

Guest satisfaction
The guest experience is central to the success of our business and in 2021 we
continued our relentless focus on delivering memorable experiences to our
guests. We are proud that we again maintained our consistently high customer
satisfaction score of 94%, despite the challenges of operating with social
distancing measures and restrictions in some of our attractions, and with the
staff recruitment and retention challenges that have been seen across the
hospitality sector.

We continue to monitor our guests’ views by engaging with them directly, on
social media, and by monitoring online reviews. In addition to the key guest
satisfaction score noted above, we maintained a strong ‘Top Box’ score in the
percentage of guests that are ‘very satisfied’. We also continued to record a
‘Net Promoter’ score, that measures whether a guest would recommend our
attractions, above the 50% level which we consider to be ‘world class’ for
location based entertainment businesses.

Guest accessibility has seen increased focus in 2021, with a drive to ensure that
we are doing everything that we can to allow all of our guests to enjoy as much
of the Merlin experience as possible. These efforts are informed by our guests
and disability advisors, and have included new training programmes in disability
confidence for our teams, reviewing our existing rides to enhance their
accessibility, and working with ride manufacturers to improve accessibility on
new rides.

Diversity and inclusion
At Merlin we welcome everyone to our attractions and we want to reflect that
same multicultural mix inside our business. During 2021 we moved forward in
the key area of diversity and inclusion (D&I), focusing on gender equality, ethnic
diversity, and ‘inclusion for all’. Regional D&I taskforces led activities which
drove cut-through and engagement with staff members at their sites and a new
set of accessibility commitments and videos were created. Alongside this, our
teams also completed over 6,500 hours of D&I and accessibility training.

A global communications calendar of key dates was celebrated around the
world including International Women’s Day, Diwali, Black History Month (US
and UK), World Wheelchair Day, World Sign Language Day, Pride Month and
UN Day of Persons with Disabilities. We also pioneered a new ‘Zero
Tolerance - 100% Fun’ D&I awareness campaign that was translated into
14 languages. The campaign highlighted the policies and robust support systems
in place if staff experience inappropriate behaviours, either in work (from guests
or colleagues) or outside of work. The campaign was well received by our
teams across the globe.

MOTION JVCO LIMITED

BUSINESS MODEL

COMPETITIVE STRENGTHS
AND A STRONG CULTURE

ANNUAL REPORT AND ACCOUNTS 2021

COMPETITIVE STRENGTHS IN A LONG TERM
ATTRACTIVE MARKET ENVIRONMENT

A unique portfolio of strong brands and iconic assets
We operate a unique global portfolio of brands and iconic assets which are
widely recognised by consumers, enabling us to differentiate our attractions
from unbranded operators.

Our LEGOLAND parks benefit from a mutually synergistic relationship with
LEGO, the world’s number one toy brand. Our Midway attractions portfolio
includes chainable brands such as SEA LIFE and Madame Tussauds, while the
Resort Theme Parks attractions are stand-alone national brands in their
respective markets.

Together, the strength and breadth of this portfolio enable us to offer
compelling propositions through a wide variety of visitor experiences across a
broad range of geographies. This allows us to attract target demographic groups
ranging from families with young children, teenagers, young adults to older
adults. It also provides a degree of resilience to short term trading shocks arising
from a particular geography, brand or demographic.

Intellectual Property (IP) partnerships
Merlin’s global reach and multi-format expertise means we are well placed to
benefit from the growing opportunities to partner with leading owners of
intellectual property (IP) content, enabling us to deliver memorable experiences
to our visitors and offer our partners opportunities to increase engagement
with their customers.

Most significant is our core global, multi-product and exclusive relationship with
the LEGO Group, where we hold the global, exclusive rights to the
LEGOLAND brand under the licencing and co-operation agreement with
KIRKBI, our largest shareholder (see page 8).

We have multiple other IP agreements, ranging from local relationships for
specific attractions, to global, multi-product relationships. These include our
multi-territory exclusivity arrangement to develop a range of attractions based
on the Peppa Pig brand, one of the most well-known pre-school IP’s in
the world.

We also continue to develop global, regional and local IP partnerships with
brands such as Ghostbusters, The Gruffalo, Jumanji, Shrek, Kung Fu Panda and
CBeebies, the latter through our partnership with BBC Studios.

A unique portfolio of skills
Our three Operating Groups are supported by other teams including our in-
house innovation and product delivery group, Merlin Magic Making (MMM),
which includes teams across Europe, North America and the Asia Pacific region.
Together they capture a unique combination of skills, including research,
creative, production and project management. We also have specific resources
within the Operating Groups that are dedicated to researching future
opportunities, searching out locations for potential new attractions and
negotiating with local landlords, developers and civic bodies.

MMM create world class, compelling propositions and develop new concepts into
commercially viable attractions. Our in-house production capabilities include
bespoke content such as wax figures, attraction theming and LEGO model
production, thereby creating efficiencies and reducing costs. Other Merlin
teams have world class ‘in-house’ animal welfare expertise and ethical animal
husbandry skills.

We manage any scale of construction project ranging from individual rides and
attractions in our existing estate, new Midway attractions across the globe,
through to the development of full-scale LEGOLAND parks, the latter led by a
senior management team who pursue new locations for potential parks through
a range of ownership models.

Our Merlin Management Services (MMS) team leverages Merlin’s extensive
experience of developing visitor attractions across a range of brands, different
formats and size of attraction, over multiple geographies, and with our owned
and licensed IPs, to provide an opportunity for investors to develop location
based entertainment offerings. There is also the opportunity to take on the
operation of other parties’ attractions under management contracts.

Efficient and synergistic operating model
We continue to focus on operational excellence, delivering memorable
experiences for our guests, simplifying our operations and maximising the
synergies afforded by our scale.

We apply dynamic pricing and promotional strategies to manage visitor numbers
through periods of high and low attendance volume, extend the length of stay,
encourage repeat visits and enhance overall revenue. These combine with our
Merlin Annual Pass and Merlin Pass Monthly Memberships, which offer customers
a pass that enables them to visit all attractions within a particular country.

During 2020 and 2021, in response to the COVID-19 pandemic, we have re-
engineered how we operate to be more flexible as guest volumes change. The
positive results we have seen give us confidence that this more dynamic operating
model will support us operating successfully as the external environment evolves.
We have also been transforming our support functions through shared service
centre initiatives, such as our ’Finance 21’ transformation project, underpinned by
a new cloud-based finance system and shared service model, that by the end of
Q1 2022 now supports over two thirds of the Group.

Our scale also allows us to benefit from procurement cost efficiencies within
clusters, countries or regions.

Long term attractive market environment
We continue to believe that Merlin operates in an attractive marketplace,
benefiting from underlying growth characteristics and favourable dynamics.

We expect to benefit from long term increases in leisure spending, including in
emerging economies. We continue to see long term growth opportunities from
tourism which benefits our resorts and drives visitation to our gateway city
locations, where we operate our Midway attraction clusters.

We also expect to see the growth in domestic short break holidays to continue.
We are increasingly well-positioned to meet this demand through our offering of
themed, on-site accommodation and second gate attractions that extend the
duration of our visitors’ stay. Accommodation offerings also enable greater cross-
selling opportunities, drive improved levels of guest satisfaction, and lead to
increases in pre-bookings, revenue visibility and positive working capital. Our
domestically focused resort positioning also provides a partial hedge against the
impact of macro-economic or geopolitical volatility on international tourism.

MOTION JVCO LIMITED

BUSINESS MODEL

COMPETITIVE STRENGTHS
AND A STRONG CULTURE

ANNUAL REPORT AND ACCOUNTS 2021

OUR CULTURE

OUR GUESTS AND OUR PEOPLE

Merlin’s business model is underpinned by our entrepreneurial culture, a focus
on strong and effective corporate governance, and how we operate as a
responsible business. ‘The Merlin Way’ sets out these values which are
embedded throughout the business. We are proud of the inclusive environment
we create for all the people who work at Merlin and focus significant effort in
driving a culture of accountability and fairness.

Corporate governance
Merlin believes that effective corporate governance is the foundation of a well-
run company and maintains high standards of governance. We recognise that a
strong governance framework is fundamental to the execution of Merlin’s
strategic objectives, underpinned by a clear purpose and well understood
culture and values.

More details are set out on pages 32 to 35.

Health, safety and security
Merlin is dedicated to delivering best in class health, safety and security
standards that are clearly understood and implemented across the Group. This
involves adopting industry leading standards, reinforcing a rigorous safety culture
and demanding complete commitment from our teams.

These principles underpinned our response to the COVID-19 pandemic where
we were instrumental in developing best practice measures for the hospitality
and leisure industry. Where required, we continued to operate with these
protocols during 2021.

More details are set out on pages 25 to 26.

Business responsibility
Merlin has an ethical operating culture and high animal welfare standards, with a
commitment to managing environmental impacts. Our attractions operate
responsibly at the heart of their communities and contribute to local economies.
We partner with two charities. Merlin’s Magic Wand provides memorable
experiences to children faced with the challenges of serious illness, disability, and
adversity. The SEA LIFE Trust works to protect the marine environment.

More details are set out on page 29.

Guests
In 2021 we maintained our focus on providing a high quality of experience for our
guests, and continued to monitor their views, engaging with them directly and on
social media to measure the quality of their experience and drive improvements.

In territories where the labour market has become distorted in the short term,
we have experienced recruitment challenges, in common with other visitor
attraction operators, especially in recruiting seasonal workers to service strong
customer demand. This has led to some staff shortages, operational challenges
and cost pressures.

Despite these challenges, and the need to operate with certain restrictions to
help keep our guests safe, we have reported a series of strong performance
measures this year, as set out below:
•

Touchscreens at our attractions measure our guest satisfaction score -
we are proud that we maintained the same high guest satisfaction score
of 94% as in 2020 and 2019, well ahead of our 90% benchmark.

• We have an increasing focus on our ‘Top Box’ measure – the

•

touchscreen score that indicates when guests are ‘very satisfied’. This
increased by 1% over 2020.
‘Net Promoter’ scores measure whether a guest would recommend our
attractions; this score remained above the 50% level which we consider
to be ‘world class’ for location based entertainment businesses.

The Merlin Board and senior management undertake regular site visits to
ensure that the guest experience is in line with guest expectations, and we
use the ‘Yext’ platform to monitor online guest reviews and help inform how we
improve our attractions. Customer insight has also helped us as we make
significant progress on guest accessibility.

Employees
We have a diverse workforce that is committed to delivering memorable
experiences, and employee engagement continues to be one of the key elements
of our business model.

In 2020 we did not run our annual ‘The Wizard Wants to Know’ employee
engagement survey, due to mandated closures and uncertain opening schedules
across the Merlin estate. We relaunched this important listening tool in 2021.
As expected, there were positives and negatives; overall, in common with other
businesses in our industry, we saw a marked reduction in our typically high
overall engagement scores prior to the pandemic.

Merlin is a business based around our employees being together, whether
customer-facing or in other functions. We are taking a number of actions to
address the issues the survey identified, and believe that these steps, combined
with working patterns returning more to normal, will lead to improved employee
engagement. We will be delivering another Wizard Wants to Know survey in
2022, to capture the views of as many of our people as possible.

In 2021 our diversity and inclusion (D&I) programme continued, focusing on
gender equality, ethnic diversity, and ‘inclusion for all’. Four regional taskforces,
sponsored by Executive Committee members, developed plans to support
our global diversity and inclusion goals, and all people managers completed D&I
training. Each member of the Executive Committee participated in a reverse
mentoring programme.

See more on page 24.

MOTION JVCO LIMITED

BUSINESS MODEL

COMPETITIVE STRENGTHS
AND A STRONG CULTURE

ANNUAL REPORT AND ACCOUNTS 2021

OUR INVESTORS

Since November 2019 the Group has been controlled by a consortium of three
principal long term investors with the capability to support Merlin’s growth
ambitions. The consortium work together in accordance with the formal
Shareholder Investment Agreement set out at the time of the transaction. The
Shareholder Investment Agreement sets out the Board’s terms of reference and
‘matters reserved’, being certain limited matters which require the consent of
the major shareholders. Their investment is held in the Company.

Details of the investor consortium are set out below and details of their
representation on the Board of Directors are set out on pages 34 to 35.

•

KIRKBI – KIRKBI A/S is the Kirk Kristiansen family’s private holding and
investment company founded to build a sustainable future for the family
ownership of the LEGO brand through generations. KIRKBI’s work is
focused on three fundamental tasks all contributing to enabling the Kirk
Kristiansen family to succeed with the mission to inspire and develop the
builders of tomorrow. KIRKBI works to protect, develop and leverage the
LEGO brand across all the LEGO branded entities. They are committed to
a long term and responsible investment strategy to ensure a sound
financial foundation for the owner family’s activities as well as contributing
to sustainable development in the world. They are dedicated to support
the family members as they prepare for future generations to continue the
active and engaged ownership as well as supporting their private activities,
companies and philanthropic work. KIRKBI’s investment activities include
investments in energy transition, circular plastic and significant long term
investments in listed and privately held companies as well as real estate
investments in Denmark, Switzerland, Germany and the UK. See
www.KIRKBI.com for more information.
Blackstone – one of the world’s leading investment firms, that seeks to
create positive economic impact and long term value for investors, the
companies in which it invests, and the communities in which it works.
Blackstone’s asset management businesses had $881 billion in assets under
management as at 31 December 2021 across a range of investment
vehicles. Blackstone has long-standing experience investing in location
based entertainment businesses, like Merlin, as well as the wider
hospitality, travel and leisure sector. Blackstone’s investment in Merlin has
been made through its long-dated Core Private Equity Strategy, which
invests in high-quality businesses for typically ten to 15 or more years.
Canada Pension Plan Investment Board (CPP Investments) – a professional
investment management organisation that manages the CPP Fund in the
best interest of the more than 20 million contributors and beneficiaries of
the Canada Pension Plan. CPP Investments is governed and managed
independently of the Canada Pension Plan and at arm’s length from
governments. At 31 December 2021, the Fund totalled C$550.4 billion,
including approximately C$25.0 billion of assets invested in the United
Kingdom, and net investments of C$165 billion in private equity. CPP
Investments’ private equity team is a committed long term investor with
permanent capital, a focus on sizeable investments alongside aligned
partners, the ability to invest across the full spectrum of ownership, and
the ability to shape the duration and underwriting approach of investments
to support longer-date returns on investment initiatives.

MOTION JVCO LIMITED

GROWTH DRIVERS

HOW WE DRIVE
GROWTH

ANNUAL REPORT AND ACCOUNTS 2021

EXISTING ESTATE GROWTH, DRIVEN BY ACCESS TO POWERFUL INTELLECTUAL PROPERTY

We make regular, targeted investments to update and refresh the existing
estate, to grow demand and where applicable to increase capacity at
our attractions.

Each attraction has a planned investment cycle with varying capex levels over a
number of years. These help to smooth overall expenditure across the portfolio
and ensure investments are funded from operating free cash flow. Our theme
parks require relatively higher capital expenditure due to the scale and nature of
new rides and attractions, and the drive to attract repeat visitors. Midway
attractions require relatively lower capital expenditure due to the smaller scale
of the attractions.

In 2021 examples of these investments were the immersive ‘LEGO MYTHICA:
World of Mythical Creatures’ at LEGOLAND Windsor Resort, two ‘The LEGO
Movie World’ lands at the LEGOLAND Billund and LEGOLAND California
resorts, and the ‘Croc Drop’ ride at Chessington World of Adventures Resort.

In the Midway Attractions Operating Group we added updated Marvel 4D films
in five attractions within the Madame Tussauds estate, with more locations
planned for 2022.

We are increasingly able to develop these investments in partnership with leading
IP owners to provide an immersive, themed experience for our visitors. An
exciting example of this planned for 2022 will be the new ‘JUMANJI - The
Adventure’ dark ride opening at the Gardaland Resort.

NEW LEGOLAND RESORT DEVELOPMENTS

We have a successful track record of developing and operating LEGOLAND
parks globally, where we have two core operating and investment models.

Firstly, in more proven locations, we follow an 'owned and operated’ model,
securing the land and developing the infrastructure ourselves. The original parks
that Merlin acquired in 2005 had all been developed in this way, as was
LEGOLAND Florida which we opened in 2011, and now LEGOLAND
New York, that opened in the year. LEGOLAND Korea, due to open in
May 2022, has also been developed under this model (with support from the
local province).

Secondly, we work with a local partner, marrying their capabilities and expertise
with our strengths and experience to both parties’ mutual benefit. Typically, the
funding for the capital investment is provided by a third party and we operate
the park under a management contract.

We currently operate LEGOLAND Malaysia and LEGOLAND Dubai under
this model, and are actively working with a number of partners to develop
several LEGOLAND parks, with three resorts planned to open in China in the
next five years:
•

In September 2019 we announced that we had entered into an agreement
to partner in the development of LEGOLAND Sichuan Resort.
In November 2020 we announced that we had entered into a formal co-
operation agreement with the Shanghai Jinshan District Government,
CMC Inc. and KIRKBI, to develop the LEGOLAND Shanghai Resort in
the Jinshan District of Shanghai. A joint venture company has been
formed between the parties and during the year we contributed funding
to the construction and development of the project.
In August 2021 we announced the planned development of the
LEGOLAND Shenzen Resort, with Hazens Holdings as our local partner.

•

We may also pursue hybrid opportunities which could involve Merlin investing an
element of equity in the project. We maintain ongoing dialogue with a number of
potential partners to develop several LEGOLAND resorts globally.

EVOLUTION OF THEME PARKS INTO DESTINATION RESORTS

We continue to transform our theme parks into destination resorts, extending
visitor market reach and enhancing revenues from a number of sales channels.
These include primary admissions (including multi-day tickets and second gate
admission fees), and commercial spend such as the sale of food and beverages,
retail merchandise, and souvenirs such as photos.

The themed accommodation offerings in our hotels and holiday villages continue
to be very successful. They provide an integral contribution to the overall visitor
experience, helping to drive pre-bookings, increase multi-day ticket sales and
improve guest satisfaction.

There are also ongoing opportunities to add visitor attractions that are located
next to theme parks, for which additional admission fees are charged. These
attractions, such as waterparks, are referred to as second gate attractions.

This is an increasing area of focus across the two theme park Operating Groups.
In 2021 we opened the LEGOLAND Water Park at the Gardaland Resort (the
first LEGO themed water park in Europe), and in early 2022 we have launched a
standalone Peppa Pig theme park, adjacent to LEGOLAND Florida Resort.

MOTION JVCO LIMITED

GROWTH DRIVERS

HOW WE DRIVE
GROWTH

CLUSTERING OF MIDWAY ATTRACTIONS

Our growth strategy includes the roll out of our chainable Midway attractions in
new locations and countries, often creating ‘clusters’, where we develop
multiple attractions in one location.

During 2021 we opened eight new Midway attractions, all delayed from 2020 as
a result of the COVID-19 pandemic:
•

LEGOLAND Discovery Centres – four opened with two in the USA in the San
Francisco Bay Area, and New Jersey; one in Scheveningen in the
Netherlands; and one in Hong Kong.
SEA LIFE Centres – two opened in San Antonio and New Jersey in the USA.
Peppa Pig World of Play – one opened in Chicago in the USA.

•
•
• Madame Tussauds – one opened in Dubai in the UAE.

ANNUAL REPORT AND ACCOUNTS 2021

We continue to see the opportunity to open new Midway attractions, especially
using IP as a central element of the attraction.

In summer 2022, we will open the first ‘next generation’ LEGO Discovery
Centre in Brussels, Belgium. With a brand new look and design, these new
attractions, which in the future will be called LEGO Discovery Centres
(previously LEGOLAND Discovery Centres) will continue an already popular
offering of highly interactive indoor LEGO play experiences.

Of these, six either created a new cluster or were in locations where Merlin
already operates Midway attractions.

MERLIN MANAGEMENT SERVICES

Merlin’s extensive experience of developing visitor attractions across a range of
brands, different formats and size of attraction, and over multiple geographies,
means that we are well placed to leverage our expertise and provide
opportunities for investors to develop location based entertainment offerings.
This could include the use of our owned and licensed IPs. There is also the
opportunity to take on the operation of other parties’ attractions under
management contracts.

In June 2021 we announced that we have entered into a formal co-operation
agreement with local partners to create a standalone Peppa Pig resort in
Meishan, part of Sichuan Tianfu New Area in China.

ACQUISITIONS AND NEW FORMAT OPPORTUNTIES

We continue to consider acquisitions of, or investments in, visitor attractions,
sites and brands that could strategically enhance our portfolio and enable us to
grow into new geographies. We believe that there remain further attractive
acquisition opportunities that would meet our investment criteria in the future.

We announced in February 2022 our exclusive partnership to take over the
operations of Cadbury World in the UK, deepening our relationship with the
UK’s largest UK chocolate brand. We also recently took over the day to day
management of the THIS IS HOLLAND ‘flying theatre’ ride in the Netherlands.

We also develop new formats of attraction, where currently our main focus is
the roll out in the coming years of Peppa Pig branded attractions aimed at pre-
school children. These include the indoor Peppa Pig World of Play format, and
Peppa Pig theme parks, such as the attraction that opened adjacent to
LEGOLAND Florida in early 2022.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

FINANCIAL AND OPERATING REVIEW

RESPONDING TO DEMAND
AND BUILDING MOMENTUM

Total
52 weeks ended
25 December
2021

Underlying
52 weeks ended
25 December
2021

Total
52 weeks ended
26 December
2020
(restated)

Underlying
52 weeks ended
26 December
2020
(restated)

£m

1,261

376

(246)

130

(224)

(94)

(46)

(140)

£m

1,261

379

(247)

132

(224)

(92)

(46)

(138)

£m

629

(124)

(619)

(743)

(222)

(965)

146

(819)

£m

629

(102)

(267)

(369)

(222)

(591)

118

(473)

Underlying
growth
(actual
currency)

100.7%

n/m

7.5%

n/m

Revenue

EBITDA

Depreciation, amortisation and impairment

Operating profit/(loss)

Net finance costs

Loss before tax

Taxation

Loss for the year

See ‘Presentation of results’ below for how we have presented underlying comparative information.
Details of the prior year restatement are provided in note 1.1. This has restated reported exceptional items; depreciation and amortisation; and taxation; but did not affect underlying revenue or underlying EBITDA.
The 2020 results were adversely impacted by accounting adjustments in respect of inventory ‘step-ups’ in the acquisition accounting exercise relating to the acquisition of Merlin Entertainments plc on
4 November 2019, which reduced reported EBITDA by £27 million in 2020. There are no other adjustments, costs or income that affect the comparability of segment EBITDA.
See ‘How we report our results’ on page 17 for details of how we report our financial performance.

Introduction
2021 started with more than half of our attractions closed, with further
lockdowns and restrictions across much of the estate, most notably in the
UK and Continental Europe. Restrictions persisted through into Q2,
removing the early season trading for many of our year-round Midway
attractions and delaying the opening of our seasonal resorts.

However, once our attractions opened, domestic demand recovered rapidly
in most of our key markets and we built strong momentum that sustained
through the peak summer trading season. The recovery continued into early
Q4, with some initial signs of the return of international tourism, before the
emergence of the Omicron variant and a further wave of restrictions
impacted the recovery at the end of the year.

Despite the challenging start to the year, the strong domestic demand in the
US, UK and Continental Europe went some way to help offset the slow
recovery in international tourism that impacted our gateway city Midway
clusters and European resorts, and the continued impact of restrictions and
closures in the Asia Pacific region.

We have continued to manage our costs carefully as we responded to local
restrictions and mandated closures, and in the face of both challenging
labour markets and building cost pressures as countries came out of
lockdowns and economic activity returned.

The domestic market recovery and careful cost control delivered underlying
EBITDA of £379 million (2020: a loss of £102 million), which combined with
positive working capital movements to create an inflow from operating
activities of £459 million in the year (2020 as restated: £75 million outflow).

We also made significant progress with strategic investments, with the
completion and launch of LEGOLAND New York, our largest capital project
to date, together with the opening of eight new Midway attractions. The
LEGOLAND Korea project also continues to make good progress towards
its planned opening in May 2022.

We continue to monitor cash flow closely and maintain adequate liquidity.
The Group complied with all its covenants in the year and in June 2021 we
agreed with the revolving credit facility lenders to waive the financial leverage
covenant until Q3 2023. As part of this agreement the Group is required to
maintain a minimum liquidity of £75 million (to include amounts undrawn
from the revolving credit facility, and cash and cash equivalents), over the
period of the waiver.

We have recently agreed terms with the landlord for the four leasehold
Resort Theme Park locations, securing our tenure at these resorts until 2077.
We also recently announced our intention to partner with Aramark to
provide food and beverage services at seven of our theme parks in the UK
and North America.

Presentation of results
Motion JVco Limited (the Company) has been the parent company of the Merlin
Entertainments Limited group of companies (Merlin, Merlin Group), since
acquiring the Merlin Group in November 2019.

Underlying results and exceptional items
In order to present the underlying performance of the business more accurately,
the impacts of certain activities are reported within exceptional items. More
details on exceptional items can be found on page 12. Unless otherwise stated,
the commentary below refers to underlying results, that is, before the impact of
exceptional items.

The impact of the COVID-19 pandemic on our trading has all been reflected
within our underlying results.

Alternative performance measures
On page 17 we set out in more detail explanations of how we adopt certain
alternative performance measures to help present our trading performance in the
most helpful and meaningful way.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

FINANCIAL AND OPERATING REVIEW

RESPONDING TO DEMAND
AND BUILDING MOMENTUM

Performance summary
Revenues for the year increased by £632 million from £629 million to
£1,261 million. Despite the challenging start to the year, 2021 saw further
recovery in demand across the estate.

In North America, the UK and parts of Continental Europe, domestic consumer
demand built rapidly as restrictions were lifted through Q2, supported by a
degree of pent up demand coming out of lockdown, limited options for
international leisure travel, and government support and stimulus. This resulted
in a robust recovery in visitation and strong revenue per guest trends at our
theme park resorts and our regional and coastal Midway attractions. At certain
attractions, revenues were ahead of pre-pandemic levels despite some residual
restrictions on capacity.

However, there was a slower recovery of international tourism that impacted
both our Midway attractions in gateway city locations such as London and New
York, and our European theme park resorts which normally have a more
significant element of international tourist visitation. The recovery also struggled
to build any momentum across our Asia Pacific divisions, where visitor volumes
remained suppressed, reflecting reduced domestic and regional travel and rolling
local restrictions.

Foreign exchange
Merlin is exposed to fluctuations in foreign currency exchange rates on
transactions and the translation of our non Sterling earnings. Retranslating 2021
performance at 2020 rates would result in a £58 million increase in revenue. We
set this out in more detail by major currency on page 103.

Operating loss
Underlying depreciation and amortisation charges decreased by £20 million from
£267 million (as restated) to £247 million, reflecting foreign exchange movements
and the profile of assets within certain Midway attractions, offset to some extent
by the impact of new openings.

Exceptional items relating to operating activities totalled charges of £3 million
(2020 as restated: £22 million). An impairment credit of £1 million has resulted in a
total operating profit of £130 million (2020 as restated: loss of £743 million,
including £352 million of impairment related charges).

Loss before tax
As a result of the factors noted above, underlying loss before tax was £92 million
(2020 as restated: loss of £591 million) while the total loss before tax was
£94 million (2020 as restated: loss of £965 million).

In the UK, demand and revenue per guest was supported by the temporary
lower 5% VAT rate that was in place up to the start of October 2021 when the
rate increased to 12.5% (subsequently returning to 20% from 1 April 2022).

Exceptional items

Since the global COVID-19 pandemic began, we have taken steps to refine our
operating model, creating a lower and more flexible cost base that is better able
to react to any material changes in demand. We have continued to manage our
costs carefully as trading has improved, and looked to maintain the benefits of
those actions.

Staff expenses increased from £290 million to £373 million, reflecting the
increased operating days and new attractions opened in the year, offset by the
ongoing positive impact of restructuring and efficiency programmes that were
largely completed by the end of 2020. In a limited number of cases we continued
to access government support, including in relation to furloughed staff in
qualifying jurisdictions, albeit this reduced significantly as attractions reopened. In
the second half of the year we experienced challenges recruiting and retaining
operational staff in a number of locations, most notably the US and UK. This
created a number of operational challenges and in some cases limited the range
of product on offer and the capacity of attractions.

Other operating expenses increased from £252 million to £253 million. Site
related costs were higher in 2021 reflecting increased operating days and
volumes compared to 2020. Operating expenses also reflect the timing and
value of government support for operating costs in certain jurisdictions.
Operating Group margins are affected by the scale and mix of revenue in the
existing estate and the dilutive effect of new attractions and accommodation
launched in the year, as a result of the timing and costs associated with launch,
and the pace with which attractions reach maturity.

Within our central functions, as in the Operating Groups, we maintained our
focus on managing the level of underlying ongoing expenditure. Net central costs
of £43 million were £12 million lower than in 2020. This reflects an internal
restructure whereby costs of £6 million were reported in the Operating Groups
in 2021 that would have previously been shown as a central expense, combined
with higher revenues in respect of consultancy agreement contracts and lower
one-off and COVID-19 related costs.

The trading recovery and our focus on cost management together drove
underlying EBITDA of £379 million (2020: a loss of £102 million).

Underlying loss for the year

Exceptional items:

Within operating expenses

Within depreciation, amortisation and impairment

Income tax credit on exceptional items above

Loss for the year

2021

£m

2020
(restated)
£m

(138)

(473)

(3)

(22)

(352)

(140)

(819)

Exceptional items reported within operating expenses totalled £3 million before
tax credits (2020 as restated: £22 million). The Group has changed its accounting
policy relating to the capitalisation of certain software assets following the IFRS
Interpretations Committee’s agenda decision published in April 2021. This change
in accounting policy led to an increase in related exceptional operating expenses
of £3 million in the current year and £5 million for 2020. The remaining 2020
operating expenses primarily reflected restructuring activities as we took steps to
reduce our ongoing fixed cost base.

Exceptional items reported within depreciation, amortisation and impairment
totalled a credit of £1 million before tax credits (2020: £352 million). In 2020
impairment charges reflected the impact of COVID-19 on trading which was
therefore taken into account in the discounted cash flows that underpinned our
value in use calculations. The charges related to goodwill (£260 million, in respect
of the LEGOLAND Parks Operating Group), property, plant, and equipment
(£78 million), and right-of-use assets (£14 million). In particular, these impairment
charges included consideration of LEGOLAND New York where the opening
was delayed and where we were expecting shorter term headwinds. Also in
2020, impairment charges in respect of certain of the Group’s Midway attractions
arose from a review of market and economic conditions at those locations, also
reflecting the impact of COVID-19.

Further details can be found in note 2.2 of the financial statements.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

FINANCIAL AND OPERATING REVIEW

RESPONDING TO DEMAND
AND BUILDING MOMENTUM

Midway Attractions

LEGOLAND Parks

2021

2020

Growth
(actual
currency)

Like
for like
growth

Visitors (m)

Revenue (£m)

Underlying EBITDA (£m)

Operating loss (£m)

16.8

344

102

(10)

12.7

228

(17)

(146)

31.9%

51.3%

n/m

Visitors (m)

48.6%

Revenue (£m)

Underlying EBITDA (£m)

Operating profit/(loss) (£m)

2021

2020

9.4

537

172

106

5.0

228

(30)

(95)

Growth
(actual
currency)

Like
for like
growth

89.6%

135.4%

129.9%

n/m

Merlin’s Midway attractions are predominantly indoor attractions that operate
year round, with trading volumes generally higher around holiday periods.

In 2021 there was an encouraging recovery and continued momentum at
regional and coastal Midway attractions that are primarily focused on resident
markets, most notably in our regional LEGOLAND Discovery Centre and SEA
LIFE Centre attractions. In contrast, we saw a slower recovery in gateway city
locations which normally have a significant element of international tourist
visitation, and in regions where COVID-19 related trading restrictions
continued. This variation in trading is reflected in the performance of our
Midway divisions, overlayed with regional trends.

Strong demand in Midway North America, where attractions generally remained
open through 2021, drove recovery, alongside increased revenues per guest.

In the Midway UK division, attractions opened in mid-May once COVID-19
restrictions were lifted. Coastal and regional businesses recovered strongly,
benefiting from a ‘staycation’ effect and support from the temporary lower 5%
VAT rate that was in place up to the start of October when the rate increased
to 12.5% (returning to 20% from 1 April 2022). The overall UK performance
was partly held back by our attractions in London, where there was a very
limited recovery in international tourism, partly offset in the short term by
domestic visitors, where we benefit from overnight customers visiting for short
breaks. Midway Europe’s 2021 performance was affected by the later removal of
restrictions across Europe. Consistent with the UK, attractions with generally
domestic customers saw stronger demand. In Midway UK and Europe there
was some downturn later in the year as a result of restrictions being imposed in
certain territories, which continued to some extent into early 2022.

The Asia Pacific region was impacted by local restrictions (mandated business
closures having been a key feature of the region’s COVID-19 containment
approach), and disruption to international and domestic travel patterns. There
were much lower levels of cross-border travel to locations that normally
receive a significant level of international visitation, as well as significantly
reduced domestic travel within China. In Midway Australia, our attractions were
recovering up to the end of June, but trading later in the year was impacted by
extended lockdown periods. Restrictions and disruption have continued into
2022 in a number of locations.

The Operating Group has continued to make operating cost savings where
possible. Our attractions located in the US, UK and Continental Europe had
significant challenges in recruiting and retaining staff, particularly in certain key
frontline functions, as has been seen across the leisure and hospitality sector.
Although the underlying reasons for this have varied regionally, the challenge
has been felt across the Operating Group and required us to implement
specific initiatives to attract and retain staff, and in some cases restrict the
product on offer.

Merlin’s three existing LEGOLAND parks in California, Florida, and Japan are
normally open all year round. The three European parks in the UK, Denmark and
Germany typically open fully in the spring and trade through to the autumn, with
trading over the winter period focused on the accommodation offerings. All
parks see trading volumes higher around holiday periods, particularly the main
summer trading season.

In the USA, LEGOLAND California, the Operating Group’s largest resort, was
closed from mid-March 2020 to April 2021 when it reopened, operating initially
with reduced capacity and under social distancing restrictions. Since reopening
there was a strong recovery in demand, with the resort delivering a significant
contribution to the Operating Group’s improved performance on the
comparative period. LEGOLAND Florida was open throughout 2021 and traded
strongly, with revenues ahead of 2019. LEGOLAND New York, Merlin’s largest
capital project to date, opened on a phased basis, increasing capacity during May
and June.

LEGOLAND Japan continued to trade during 2021, albeit operating with
significant local restrictions which suppressed trading.

The European parks reopened in Q2 2021 as local restrictions lifted.
LEGOLAND Windsor performed strongly, consistent with our other UK
businesses that are focused on domestic visitors and short breaks. The trading
recovery at the parks in Germany and Denmark lagged the UK, reflecting both
local restrictions and a greater exposure to international tourism.

Of Merlin’s two LEGOLAND management contract locations, the LEGOLAND
Dubai park was open throughout the year with the water park opening in April.
A hotel has since opened at LEGOLAND Dubai in early 2022. LEGOLAND
Malaysia saw more disruption; the resort was closed from early May, reopening
in October.

The Operating Group has continued to make operating cost savings where
possible. As has been seen across the leisure and hospitality sector, our
attractions located in the US, UK and Continental Europe had significant
challenges in recruiting and retaining staff, particularly in certain key frontline
functions. This was most apparent at LEGOLAND New York where we had to
recruit and train a large team prior to opening. With that backdrop, the team
have done an amazing job in launching our newest LEGOLAND resort and guest
feedback has been positive. Where required, we implemented specific initiatives
across the Operating Group to attract and retain staff, and in some cases
restricted the product on offer.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

FINANCIAL AND OPERATING REVIEW

RESPONDING TO DEMAND
AND BUILDING MOMENTUM

Resort Theme Parks

Financing and tax

Visitors (m)

Revenue (£m)

Underlying EBITDA (£m)

Operating profit/(loss) (£m)

2021

2020

9.0

374

148

4.4

169

(62)

Growth
(actual
currency)

105.6%

Like
for like
growth

121.7%

124.1%

n/m

The main trading period for the Resort Theme Parks attractions, all of which
are located in Europe, normally starts during the early spring, with trading over
the winter period focused on accommodation and other limited seasonal
offerings. Trading volumes at all parks are higher around holiday periods,
particularly the main summer trading season.

During Q1 and into Q2, lockdowns and restrictions across the UK and Europe
prevented any early season trading and delayed the main season opening of all
the resorts. Since opening we saw healthy demand and encouraging
trading across the majority of resorts, with strong revenue per guest and
higher average room rates.

The UK parks and accommodation offerings opened over April and May, earlier
than in 2020 when they opened in early July. A strong recovery built rapidly
from opening, with certain attractions showing revenues ahead of 2019.
Trading benefited from the lower 5% VAT rate that was in place up to the
start of October (when the rate increased to 12.5%, returning to 20% from
1 April 2022).

Gardaland Resort in Italy opened in June (similar to 2020), while Heide Park
Resort in Germany reopened in May. Trading at both resorts was encouraging,
Gardaland Resort especially benefiting from the impact of the ‘second gate’
LEGOLAND Water Park that opened in the year.

The Operating Group has continued to make operating cost savings where
possible, albeit we have faced significant challenges in recruiting and retaining
staff, particularly in certain key frontline functions. This trend has been seen
across the leisure and hospitality sector. Where required, we implemented
specific initiatives to attract and retain staff, and in some cases restricted the
product on offer.

Finance costs
Net finance costs of £224 million were incurred in 2021 (2020: £222 million).
Underlying interest costs on external borrowings were broadly flat between the
years, reflecting a full year of interest on the €500 million senior notes that were
issued in April 2020, offset by lower drawings under the revolving credit facility.

Taxation
The effective tax rate (ETR) reflects updates to the headline UK rate, including
the effect on the measurement of deferred tax. The total tax charge of
£46 million represents an effective tax rate of (48.9)% of loss before tax.

The difference between the reported ETR of (48.9)% and the UK standard tax
rate of 19.0% is primarily attributable to the revaluation of deferred tax liabilities
due to changes in the UK tax rate and the non-recognition of tax losses.
Normally we would expect to recognise a tax credit where there is a reported
loss before tax. However, the March 2021 UK budget, which changed the
headline tax rate from 19% to 25% from 1 April 2023, increased the value of net
deferred tax liabilities. This revaluation created a tax charge that offsets the
underlying credit, and resulted in a net tax charge for the year.

The impact of the European Commission’s finding relating to the UK’s
Controlled Foreign Company rules is further detailed in note 2.4. Charging
notices from HMRC were received for £28 million in the year, which the Group
was legally obliged to pay. However, it is expected that this £28 million will
ultimately be recovered.

The Group has benefited from certain reliefs available in the Coronavirus Aid,
Relief, and Economic Security (CARES) Act in the US. This allowed operating
losses generated in 2020 to be carried back five years; as the US corporate tax
rate was higher in earlier years the Group obtained a permanent benefit from this
carry back. In September the Group received a first payment of £26 million in
respect of these claims.

Significant factors impacting the Group’s future ETR include the Group’s
geographic mix of profits and changes to local or international tax laws. In the
3 March 2021 Budget it was announced that the UK tax rate will increase to
25% from 1 April 2023. This will have a consequential effect on the Group’s
future tax charge.

The Group has a tax policy that sets out our approach in the areas of
governance, risk management, tax planning and how we deal with tax authorities.
This is available on the Merlin website.

Further detail on taxation is provided in note 2.4 to the financial statements.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

FINANCIAL AND OPERATING REVIEW

RESPONDING TO DEMAND
AND BUILDING MOMENTUM

Cash flow

Underlying EBITDA

Exceptional items

Working capital and other movements

Tax received/(paid)

Net cash inflow/(outflow) from
operating activities

Capital expenditure – existing estate

Capital expenditure – new business
development (NBD)

Other investing activities

Interest paid, net of interest received and
settlement of interest rate swaps

Other

Net cash outflow before changes in
share capital and borrowings

Proceeds from issue of share capital

Net changes in borrowings, including
shareholder loans

Net capital repayments of leases

2021

£m

379

(3)

459

(72)

(219)

(7)

(29)

(34)

(102)

(22)

(16)

(75)

(78)

(223)

306

404

(26)

122

(231)

(187)

(70)

(562)

Net cash (outflow)/inflow for the year

(133)

Operating cash flow
Net cash flow from operating activities for the year was an inflow of
£459 million (2020 as restated: £75 million outflow), resulting from total EBITDA
of £376 million, favourable working capital movements of £78 million and
net tax receipts of £5 million.

Working capital movements in the year of £78 million related to a number of
factors, mainly in respect of trading balances. These balances have increased
with the recovery of trading activity in 2021, and also reflect the ongoing shift to
online bookings, where payment is received in advance of the customer’s visit.
There was also a positive contribution from the addition of new attractions that
opened in 2021 and where there was minimal working capital in prior periods.

In April 2019 the European Commission (EC) announced its final decision that
certain elements of the UK’s Controlled Foreign Company rules partially
represent State Aid, and charging notices from HMRC were received in the
year. The Group was legally obliged to pay these charges, totalling £28 million,
but expects that this will ultimately be recovered (see note 2.4 for more
information). In September the Group received a first payment of £26 million
under the CARES Act in the US, in respect of carry back claims against taxes
paid in previous years.

Operating free cash flow (being underlying EBITDA less existing estate capital
expenditure) was an inflow of £307 million in 2021 (2020: outflow of
£180 million).

2020
(restated)
£m

Investing activities
A total of £291 million was incurred on capital expenditure in 2021 (2020:
£301 million).

New business development (NBD) investment of £219 million represented
£177 million on the longer term investments of developing new LEGOLAND
parks, substantially all relating to LEGOLAND New York and LEGOLAND
Korea. A further £1 million related to new accommodation development across
our theme park estate, and £22 million in respect of other projects. £19 million
was in respect of new Midway attractions.

Existing estate capital expenditure of £72 million for the year was lower than in
2020 (2020 as restated: £78 million). This reflects the timing of projects together
with lower activity as a result of the COVID-19 pandemic. It is lower than in
2020 when projects had been continuing in the early part of that year prior to
the implementation of lockdowns and sites being forced to close.

Financing activities
Interest payments reflect the timing of payments, including in respect of lease
arrangements. Capital repayments of leases are stated net of £25 million received
from the landlord as part of the agreement to secure tenure at three UK Resort
Theme Park locations (see note 4.4).

2021
The net change in borrowings totalled an outflow of £29 million, mainly from
the repayment of £15 million in respect of funding received in 2020 from
KIRKBI for the deferral of certain trading payments and £10 million under the
terms of the Group’s banking facilities.

The £400 million revolving credit facility was undrawn at the end of 2020
and 2021.

2020
The net change in borrowings of £404 million primarily reflected the receipt of
£133 million ($173 million) under a delayed draw down term facility and the
issue in Q2 of €500 million of 7.0% senior secured notes due 2025. This was
offset by the investor consortium converting £156 million of initial funding (that
had been made in the form of shareholder loan notes) into equity, together with
£150 million from a new minority investor.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

FINANCIAL AND OPERATING REVIEW

RESPONDING TO DEMAND
AND BUILDING MOMENTUM

Net assets

Financing and capital structure
The key terms of the Group’s borrowing facilities are summarised as follows:

Property, plant and equipment

Right-of-use assets

Brands

Goodwill and other intangible assets

Investments

Working capital

Net external debt

Shareholder loans

Lease liabilities

Corporate and deferred tax

Employee benefits

Other assets and liabilities

2021

£m

2,507

1,512

1,311

2,200

(328)

(3,369)

(1,458)

(365)

(7)

(141)

2020
(restated)
£m

2,505

1,414

1,324

2,229

(337)

(3,356)

(15)

(1,364)

(320)

(11)

(110)

Senior secured debt
•

€1,460 million and $1,358 million drawn facilities to mature in November
2026 entered into by the Company’s subsidiary Motion Finco S.à r.l. The
margins on these facilities are dependent on the Group’s adjusted leverage
ratio and at 25 December 2021 were at a margin of 3.0% (2020: 3.0%) for
EUR debt and 3.25% (2020: 3.25%) for USD debt over the floating interest
rates when drawn. The relevant floating interest rate is USD LIBOR, which
was 0.13% at 25 December 2021 (0.22% at 26 December 2020). No floating
rate is added to the EUR debt while EURIBOR is negative. The terms of the
floating rate debt facility require a repayment of 0.25% of the outstanding
principal amount of the USD borrowings every three months.
€500 million 7.0% senior secured notes due 2025 entered into by the
Company’s subsidiary Motion Finco S.à r.l.
$400 million 5.75% senior notes due 2026 entered into by the Company’s
subsidiary Merlin Entertainments Limited.
A £400 million revolving credit facility to mature in May 2026, of which £nil
was drawn in cash at the end of the reporting period. £28 million was
utilised by way of establishing certain ancillary facilities, including letters
of credit.

•

Net assets

1,886

1,978

Property, plant, and equipment increased by £2 million, primarily reflecting the
capital additions referred to previously, offset by depreciation charges, together
with the retranslation of those assets at different foreign exchange rates.

Brands, goodwill and other intangible assets reduced due to the impact of
foreign exchange rates.

The increase in investments primarily reflects the Group’s minority equity
investment in the company developing the LEGOLAND Shanghai Resort (see
note 5.1).

The increase in lease liabilities and related right-of use assets reflect the
agreements entered into that secure tenure until 2077 at certain theme park
sites. We agreed terms with the landlord for three of our UK Resort Theme
Park locations in the year, and completed the equivalent transaction in respect
of a German location shortly after the reporting period. For more details see
notes 4.4 and 5.6.

The increase in the corporate and deferred tax liabilities reflect the rate changes
in the March 2021 UK budget, as noted above, which announced the headline
tax rate will increase from 19% to 25% from 1 April 2023.

Other senior debt
•

$410 million 6.625% senior notes due 2027 and €370 million 4.5%
senior notes due 2027 entered into by the Company’s subsidiary Motion
Bondco DAC.

A reconciliation of net debt is set out in the financial statements in note 4.1.

Lenders
The Group maintains ongoing relationships with the institutions that provide
financing facilities. This includes the provision of quarterly financial information,
and presentations by the Chief Financial Officer and Group Treasurer & Director
of Tax.

Covenants
A financial covenant has existed from 30 September 2020 but is only required
when the revolving credit facility is drawn by 40% or more (net of cash).
The covenant requires the Group to maintain adjusted consolidated senior
secured leverage below 10x.

Effective June 2021, the Group agreed with its revolving credit facility lenders
to waive the leverage covenant until Q3 2023. As part of this agreement the
Group is required to maintain a minimum liquidity of £75 million (to include
amounts undrawn from the revolving credit facility, and cash and cash
equivalents), over the period of the waiver.

Further analysis of the working capital movements of £9 million is provided in
note 3.4 to the financial statements.

The Group complied with the financial covenants in the year.

The Group is also required to comply with certain non-financial covenants in
these bank facilities and notes, and these requirements were satisfied
throughout the year.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

FINANCIAL AND OPERATING REVIEW

RESPONDING TO DEMAND
AND BUILDING MOMENTUM

Summary
In 2021 we responded to customer demand and built trading momentum, while
maintaining our focus on operating efficiently in a changing environment, and
investing in projects that we believe will support future growth.

In 2022 we will continue to monitor the impact of geopolitical events and the
latest situation regarding COVID-19, and will react appropriately as these
matters evolve.

We have started 2022 with a range of strategic initiative announcements to drive
further growth, including the exclusive partnership to take over the operations of
Cadbury World in the UK, and the partnership with Aramark to be our food and
beverage partner in seven of our theme parks across the UK and USA.

Alistair Windybank
Chief Financial Officer
12 April 2022

Financial risk management
Note 4.3 to the financial statements provides information in the following areas:
•

Liquidity risk – how the Group monitors cash requirements and
actively manages surplus cash, together with details of the Group’s
contractual maturities.
Interest rate risk – how the Group manages interest rate exposure.
Foreign currency risk – how the Group manages foreign exchange
transaction and translation exposures, together with details on the
carrying value of financial assets and liabilities in foreign currencies.
Credit risk – how the Group manages risks of customers or
counterparties to financial instruments failing to meet their obligations.

•
•

•

The Group’s risk assessments have identified liquidity/cash flow risk and foreign
exchange translation risk as two of the Group’s principal risks. Details of these
and whether we believe they are increasing, decreasing, or stable, are set out on
page 23.

Going concern and liquidity
We continue to prepare the financial statements on a going concern basis and
are pleased to report that, in our judgement, there is no longer a material
uncertainty relating to the going concern assessment.

In 2020’s Annual Report and Accounts we had disclosed a material uncertainty
to going concern because of circumstances surrounding the COVID-19
pandemic. Our latest assessment reflects the strong recovery we have seen in
2021 that generated operating cash inflows of £459 million (compared to
outflows of £75 million in 2020, as restated), together with the Group’s
projected liquidity position and headroom over covenant thresholds from
existing committed financing facilities through to the end of Q3 2023. Our
projections are based on what we believe is a balanced approach. We assume
that the likelihood of significant future COVID-19 related lockdowns and
restrictions is low, reflecting the positive impact of COVID-19 vaccine roll outs,
however we do expect a slower recovery in international tourism than in
domestic markets. We will continue to monitor our liquidity regularly, following
the approach as set out elsewhere in this Annual Report.

Further details on our going concern assessment are set out in note 1.1 to the
financial statements.

How we report our results
Financial KPIs and Alternative Performance Measures (APMs) – we adopt certain APMs that in our view help present our trading performance in the most helpful and
meaningful way, and that we use consistently each year. These can be summarised as follows:
• We refer to EBITDA as it is a profit measure we use internally to measure the performance of our attractions. It is the KPI that we feel most appropriately captures the ongoing
ability of our attractions to generate operating cash flows. Reflecting IFRS 16, this measure does not include the cost of meeting the obligations under our leases, with the
exception of performance-based rentals which continue to be reported within EBITDA.

• We refer to operating free cash flow, which is underlying EBITDA less existing estate capital expenditure and which is then available to contribute to capital reinvestment to
support further growth, meet the obligations under our leases, service the Group’s debt facilities, settle our tax obligations and provide a return to our shareholders.

• We refer to ‘underlying’ results, which remove the impact of any exceptional items and provide a more direct comparison of trading performance. Details of exceptional items

•

are provided in note 2.2 to the financial statements.
To provide a more direct comparison of trading performance in the existing estate, we refer to ‘like for like’ performance. This represents growth between two years at constant
currency and accounting standards, including all businesses owned and operated before the start of the earlier year.

Period under review – in most years we report on a ‘52 week’ period. In certain years an additional week is included to ensure that the reporting date stays in line with the end
of December.

Reference to financial statements – further information regarding the Group’s segmental analysis; geographical revenues and assets; and certain operating costs are provided in
note 2.1 to the financial statements on pages 51 to 53. Those areas requiring significant judgement in the preparation of the financial statements are summarised on page 50.

MOTION JVCO LIMITED

PRINCIPAL RISKS

RISKS AND
UNCERTAINTIES

Internal control and risk management
In accordance with the delegated matters set out in the Shareholder
Investment Agreement, Merlin maintains effective internal control and risk
management systems, with Board Committees and executive management
keeping them under regular review. These activities are supported by ‘The
Merlin Way’, our corporate values, which we believe should drive good
behaviours and actions by all employees.

During 2021, we continued to see irregular trading activity as we responded to
governmental COVID-19 restrictions and employee infection rates. Investment
remained in place to make sure health and safety protocols and controls were in
place at all attractions to keep our staff and guests COVID-19 safe.

The combination of these challenges meant we needed to remain flexible in our
approach to the operational and financial control environment with a strong
focus on protecting corporate resources.

The Audit Committee and Health, Safety and Security Committee received
regular updates about changes and continued to keep the effectiveness of the
control frameworks under review.

Should governmental responses to the impact of the virus in the coming months
continue to affect the ability of our attractions to operate normally, the Merlin
Board and the sub-committees will consider the resulting risks and the required
responses to ensure that internal control and risk management systems
remain effective.

Internal control framework
The creation of an effective internal control framework helps ensure:
•
•
•

proper financial records are maintained;
the Group’s assets are safeguarded;
compliance with laws, regulations, policies and procedures including those
relating to health and safety matters; and
effective and efficient operation of business processes.

•

Merlin’s internal control framework is designed to manage, rather than
eliminate, the risk of failure to achieve the Group’s objectives and can only
provide reasonable, but not absolute, assurance against material misstatement
or loss.

The key elements of the internal control framework are described below:
• Management structure – clearly defined reporting lines, accountabilities,

•

and authority levels.
Strategic planning, risk management and business performance
monitoring – reviewed by the Merlin Board annually, with our pipeline for
the delivery of new attractions reviewed regularly to:
(i)

assess whether new compelling experiences and attractions in
development are progressing according to schedule;
identify new ideas and assess fit with our brand portfolio; and

(ii)
(iii) assess the expected commercial returns.
Business objectives and performance measures are set annually together
with budgets and forecasts. Regular business performance reviews are
conducted at Operating Group and individual attraction level.
Policies and procedures – a portfolio of policies and procedures is in place
for all areas of the business. The appropriateness and application of these
is continuously monitored to ensure they are proportionate to the risk
and are complied with. Assurance comes from several sources that include
health, safety and security (HSS), financial and operational audit activities
and self-certification.

ANNUAL REPORT AND ACCOUNTS 2021

•

Our key control activities include:
• Operational – there are a range of control measures and performance
indicators in place to ensure the effective and efficient operation of our
attractions and to give our guests safe and memorable visits.
Health, safety and security (HSS) – all our sites operate using a well-
established Safety Management System designed to ensure that they
operate in compliance with relevant regulatory and legislative requirements.
Regular HSS internal audits are undertaken to confirm this is the case,
ensuring that any safety and security matters are understood and dealt with
promptly.
Information technology – the Group has a wide range of IT technical,
security, and disaster recovery controls to ensure that it has a stable
infrastructure platform from which to operate.
Financial – our controls are designed to prevent and detect financial
misstatement or fraud and operate at three levels. Oversight controls are
typically performed by senior managers at Group and business unit level.
Month end and year end procedures are performed as part of our regular
financial reporting. Transactional level controls operate on a day-to-day
basis. To specifically address potential fraud risks at a transactional level, a
group of profit protection professionals are employed to support
management in addressing these risks at an attraction level.
Business continuity planning – disaster recovery plans and crisis
management protocols are in place to allow attractions to reinstate
performance should adverse events occur.

•

Risk management framework
The risk management framework sets out responsibilities together with the
oversight, monitoring, reporting and management processes that support their
fulfilment. The framework looks at both ‘top down’ and ‘bottom up’ approaches
to risk management whereby the Merlin Board retains overall responsibility for
risk management, while sites are responsible for identifying, assessing and
mitigating operational risks.

Risk oversight and monitoring is the responsibility of the following Committees:
•
Health, Safety and Security Committee – oversight and guidance on
management of HSS risks. Responsible for ensuring compliance with
legislation or industry standards in safeguarding guests, employees, visitors,
and contractors.
Audit Committee – oversight and guidance on financial process risk.
Responsible for assessing the effectiveness of the Group’s overall approach
to risk management and internal control.
Commercial and Strategic Risk Management Committee – oversight and
guidance on management of commercial and strategic risk. Responsible for
the treatment of animals in our care.

•

Each Committee reviews the principal risks on a regular basis and considers
whether material changes in the external landscape or recent trading trends
require alternative approaches to monitoring and managing risk. Committee
members regularly receive deep dive updates on topics related to significant
risks as well as regular reporting from internal and external assurance providers.

MOTION JVCO LIMITED

PRINCIPAL RISKS

RISKS AND
UNCERTAINTIES

ANNUAL REPORT AND ACCOUNTS 2021

•

Risk appetite
The Group’s risk appetite falls into two distinct categories:
•

Compliance risk – the requirement to comply with legislative or
regulatory requirements in all territories where the Group operates. It
includes, but is not limited to, ride safety, accounting practices, fraud and
bribery, as well as ensuring compliance with the Group’s values and ethical
principles. In these areas we are risk averse and do not countenance any
breaches in compliance obligations.
Commercial risk – commercial risks are taken to maximise profitable
growth and sustainable returns, without compromising the health, safety
and security of guests, employees, contractors, other visitors or animals.
They must be aligned with the Group’s policies on sustainability and the
environment. The Group manages these commercial risks through an
appropriate analysis of threats and opportunities together with structured
review processes, independent expert opinions and decision making
authority levels. Factors such as the scale of possible commercial upside,
the potential market size, the quantum of downside risk and timescales
involved may all be relevant to commercial risk decisions.

Quantitative and qualitative measures ensure effective governance of the
Group’s risk appetite. Quantitative measures include defined financial and non-
financial targets such as EBITDA, operating profit, and guest satisfaction scores.
Qualitative measures consider items such as reputational impact and compliance
with laws and regulations.

Effectiveness of risk management and internal control systems
Based on its review of risk management systems, both throughout the year and
annually, the Board is satisfied that the risk management and internal control
systems that were in place during 2021 were effective.

Plans for 2022
During 2022 we will continue to evolve our risk management approach to:
• monitoring and measuring the impact of climate change and associated

environmental issues affecting the territories in which our
businesses operate;
employee engagement and retention, so that we continue to be an
employer of choice; and
IT technical, security, and disaster recovery activities to deliver stable
infrastructure platforms from which to operate.

•

At the same time, we will continue our journey to standardise and automate
transactional processing activities, to deliver consistency of business process and
strengthen the internal financial control framework.

MOTION JVCO LIMITED

PRINCIPAL RISKS

RISKS AND
UNCERTAINTIES

ANNUAL REPORT AND ACCOUNTS 2021

Risk factors
COVID-19 impacts
Merlin has continued to adapt its operating model to help protect guests and staff whilst at the same time delivering the overall customer experience through revised
operating procedures and the use of personal protective equipment (PPE). Where roles permitted, we continued to support our staff in working remotely so they
could perform their roles in a safe, effective, and efficient way.

COVID-19 has continued to make a significant impact on location based entertainment businesses. We have evolved our COVID-19 counter-measures in 2021 to
ensure they remain fully aligned with the best scientific information available and evolving governmental requirements across all jurisdictions in which Merlin operates.

Whilst global vaccination programmes offer cause for optimism, to ensure the business remains on a solid footing, we continue to manage our liquidity position and
obtain all available governmental support. We continue to follow governmental guidance and operate revised safety protocols to help protect guests and staff.

Specific COVID-19 related risk factors and Merlin’s response are set out below.

The assessment of each continuing principal risk is set out on pages 21 to 23. After careful consideration, the Board concluded that these ongoing principal risk
categories would be retained as they accurately describe the risks that could impact the longer term outlook for the business.

COVID-19 risk factor

Merlin response

Without strict adherence to local regulations and appropriate safety
protocols at our attractions, there is a greater risk of COVID-19
transmission and associated reputational impact.

The COVID-19 pandemic has significantly impacted trading and for part of
the year required the closure of a substantial number of our attractions.
This caused a reduction in operating cash flows.

Operating visitor attractions under social distancing and COVID-19
related restrictions could negatively impact the guest experience.

Many office based employees were asked to work from home, increasing
demands on security for IT systems and data.

•

•
•

The implementation of strong health and safety protocols to ensure a
‘COVID-secure’ environment for guests and staff, as mandated by local
regulations, with active management and monitoring by dedicated teams to
encourage guest adherence.

Ensuring sufficient PPE was available and used appropriately.

The geographic spread of our attractions provided an element of mitigation.
Continued action to minimise non-essential expenditure, negotiate payment
holidays and deferrals, obtain government support and delay or cancel
capital projects has supported cash flow and maximized available liquidity
during the periods of mandated closure.

• We have made significant changes to how we operate our attractions and
the business more broadly to reduce both fixed and variable costs. These
changes have maximised the financial contribution made where attractions
have been permitted to open, in an environment of social distancing
restrictions and reduced demand.

•

Attraction staff worked tirelessly to meet exacting health, safety and
security standards and to help guests understand how to safely enjoy their
visit whilst reminding them of their role in ensuring the overall safety of all
guests and staff.

Acceleration in roll out of user applications with greater security features,
whilst at the same time infrastructure changes were made to help manage
cyber security risks.

MOTION JVCO LIMITED

PRINCIPAL RISKS

RISKS AND
UNCERTAINTIES

ANNUAL REPORT AND ACCOUNTS 2021

Principal risks
The Merlin Board has considered the feedback from the Board Committees and executive management on the range of risks that could impact the Group, and
has concluded that the principal risks are those set out in the table below. The gross risk trend indicator (excluding the impact of COVID-19 on the risk)
included in the table reflects the exposure before mitigation and is used to compare to the previous year as to whether significant risks are stable, increasing or
decreasing. The Merlin Board sees no significant movements in the outlook for most of the principal risks, with the exceptions of the competition for talent,
inflationary increases for labour and other operating costs, as well as threats emanating from cyber and fraud related activity. Comments in the table provide
extra detail to help illustrate the direction of specific risks.

Increasing risk

Decreasing risk

Stable

Risk

Safety

Description

How risks are managed

Serious incidents leading to guests, staff members or
contractors being harmed or becoming ill because of:
•
a failure to follow health and safety management
systems.
fire, flood, storm or utility failure, potentially driven by
extreme weather events.
substandard build quality or asset degradation;
inadequate maintenance and management of buildings,
infrastructure and vegetation.

•

Regular performance reviews by Board Committee with a
specific mandate for this area.

• Ownership of HSS risks by line management.
•

Competent operational and engineering staff monitor and
inspect facilities in accordance with a planned programme,
backed up by professional HSS teams.
Annual risk register review and action planning processes.
Regular internal and independent external auditing and review
regimes.
Contractor selection, approval and monitoring by in-house
qualified project managers.

•
•

•

Security

Reduction in guest confidence to visit the Group’s
attractions because of sabotage or a terrorist attack on a
ride or attraction leading to a guest or staff member or
animal in our care being harmed.

Commercial impact of
external threats to
location based
entertainment
operations

Personal health and security concerns that flow from
geopolitical actions, terrorist activity, public health
pandemics or climate change events, resulting in falling
visitation to a location in which the Group operates, with
displacement of both international and domestic tourists.

In extremis, such events may lead to governmental or other
regulatory instructions to close our attractions, including
over multiple geographies.

Exchange rate volatility can have a positive or adverse
impact on inbound tourism. If exchange rates work against a
country in which the Group generates significant revenue,
this can adversely impact visitation.

Innovation, brand
development and
customer satisfaction

Our growth potential could be impacted if guests:
•

consider our offerings are outdated, no longer relevant
or enjoyable; or
provide negative social media comments that adversely
influence the likelihood of a customer to visit an
attraction.

•

• Detailed security protocols before individuals access an

•

•
•
•

•

•
•

•

attraction (e.g. bag searches).
Regular infrastructure reviews to reduce the opportunity for
physical threats to guests, staff or animals.
Extensive use of CCTV.
Regularly tested major incident management plans.
Current events vigilantly monitored to identify emerging
risks.
Co-operation with local and national security forces.
Appropriate insurance cover.
Board Committee established with specific mandate for this
risk area.

Increased geographical hedging as a result of further global
diversification.
Ability to reduce variable expenditure, for example in staffing,
property and marketing costs.
Ability to defer non-essential capital expenditure.
Crisis management procedures for each attraction that set
out the appropriate response.
Ability to direct marketing and promotional activity towards
domestic or international audiences depending on tourism
trends.
Ability to promote access to a wide portfolio of attractions
using annual pass or cluster ticketing.

Customer feedback collected at every location and analysed
against challenging satisfaction targets. Actions then taken
accordingly.

• Ongoing investment in our attractions to continually refresh

•

the guest experience.
Engagement with the public and on social media to take any
requisite action.

MOTION JVCO LIMITED

PRINCIPAL RISKS

RISKS AND
UNCERTAINTIES

ANNUAL REPORT AND ACCOUNTS 2021

Risk

Description

How risks are managed

People availability and
expertise

As seen in 2021, and as noted elsewhere in this report, we
see the challenge of attracting and retaining appropriately
experienced and well-motivated customer service
orientated staff, especially in locations with significant
upwards wage pressures. This could impact:
•
•

guest satisfaction; or
the successful delivery of planned future expansion.

Competition and
Intellectual Property (IP)

Competition – for leisure time; from new or existing
providers of location based entertainment; and for IP around
which compelling propositions are created.

The commercial benefits from using third party IP may be
lost from waning interest or withdrawal of permission to use
third party IP content, where contractual obligations are not
met or partner relationships are not managed effectively.

Availability and delivery
of new sites and
attractions

The ability of the Group to grow in line with strategic
objectives could be inhibited by the lack of:
•

economically viable sites to locate Midway attractions
and LEGOLAND parks; and
timely approval of planning consent required for
building new rides, attractions and accommodation.

•

Animal welfare

Incidents or staff behaviours leading to animals in our care
being harmed as a result of:
•
•

a failure to follow prescribed welfare protocols; or
inadequate maintenance and management of buildings,
infrastructure and vegetation.

IT robustness,
technological
developments and cyber
security

The Group operates various IT systems and applications, the
obsolescence or failure of which could impede trading or
the ability to operate an attraction. Without the technical
developments necessary to meet consumer or business
expectations, the Group may fail to deliver the growth
required by the business strategy.

Failure to put in place suitable technical and organisational
measures to ensure compliant data processing in line with
global legislative requirements could lead to data loss or
inability to use IT systems for a prolonged period, a data
breach, or a security incident resulting in data protection
sanctions, investigations and enforcement actions by local
regulators and individuals themselves.

We currently see a greater incidence and impact of cyber
attacks on organisations across the globe. As noted on
page 33, the Merlin Board has considered cyber security risks
in 2021, together with the Group’s ongoing investment in
that area.

• Driving greater productivity to ensure more motivated,

•

better rewarded employees.
Personal development plans across the business to encourage
long term employment stability.
Proactively managed succession planning processes
embedded across the Group.
Annual employee survey to monitor employee engagement
and identify opportunities to develop HR policies and
processes.

• Diversification of the portfolio.
• Ongoing investment to ensure continued appeal to visitors.
•
• Dedicated in-house creative team to deliver new and

Competitor research and monitoring.

•

innovative compelling propositions and IP.
Proactive management of IP partnerships.

Experienced site search and business development teams,
working several years in advance to maintain a strong pipeline
of opportunities.
Sites regularly update development masterplans and work
closely on fostering links with local communities and planning
authorities.

• Dedicated resources used to support the Group’s roll out

strategy.

•
•

•

•
•

•

External zoo licence audits.
An internal ethics committee and the SEA LIFE Conservation,
Welfare and Engagement team monitor the treatment of
animals.
A comprehensive range of policies, standards, procedures
and guidelines.
Training programmes for all staff who interact with animals.
Planned preventative maintenance programmes to ensure
buildings, infrastructure and vegetation remain suitable for
displaying the animals in our care.

Strategic focus to ensure the long term stability of operating
systems and data security, whilst keeping pace with changing
consumer IT expectations.
Increasing resilience and stability of IT infrastructure and
security through an expanded use of secured hosting partners
and penetration testing regimes.
Further security measures to mitigate the increasing threat of
cyber security risk.
A number of data protection policies are in place to protect
the privacy rights of individuals in accordance with relevant
data protection legislation.
Independent assessment of compliance arrangements.

MOTION JVCO LIMITED

PRINCIPAL RISKS

RISKS AND
UNCERTAINTIES

ANNUAL REPORT AND ACCOUNTS 2021

Risk

Description

How risks are managed

10.

Impact of increasing
costs on operating
margins and returns on
capital

As seen in 2021, and as noted elsewhere in this report, we
currently see significant inflationary pressures in a number of
economies. This includes areas such as wages, fuel and
energy costs.

11.

Anti-bribery and
corruption

12.

Liquidity/cash flow risk

Such inflationary pressures on cost of sales, operating costs
and capital expenditure programmes may not be fully
compensated by increases in selling prices or the ability to
redesign capital projects to keep expenditure down.

While Merlin’s business model is lower risk as the majority
of transactions are of low value and typically from individual
customers, a number of the territories in which Merlin is
operating or considering entering have a greater historic
propensity for incidents of bribery and corruption. Any such
incident could lead to criminal or civil prosecution, fines and
cause reputational damage to the Group.

We believe anti-bribery and corruption risk is increasing
more widely from macro drivers such as abrupt changes in
working practices, as well as increasing pressure on
organisations, their customers and their supply chain.

A lack of liquidity could inhibit the ability of the Group to
grow in line with the strategic objectives if:
•

insufficient cash is generated during peak trading
periods to cover fixed costs, interest and tax payments
and capital investments (including strategic acquisitions,
the roll out of Midway attractions, the development of
new LEGOLAND parks and new accommodation
offerings); and
changes in the global credit market impact the Group’s
long term ability to meet current growth targets.

•

In extremis, adverse events may lead to a requirement to
seek extra sources of liquidity.

13.

Foreign exchange
translation risk

Merlin generates its main profits in Sterling, Euros and US
Dollars and has debt in Euros and US Dollars.

Merlin reports its results in Sterling and is therefore subject
to translation risk from exchange rate fluctuations when
reporting its consolidated results.

•

Strategic focus on pricing associated with changing consumer
expectations.
Increasing the proportion of the cost base that is variable in
nature or can be flexed to meet demand.
Effective financial and contractual controls regarding
procurement activities.
Redesign capital schemes to a lower cost outcome.

A well-embedded corporate culture in which fraud and
bribery at any level are not tolerated.
Global fraud and bribery training programmes and a fraud
policy sign-off for all staff.
Effective financial and contractual controls with regard to
procurement activities.
Internal audit monitors purchasing processes on a rotational
basis.
A separate profit protection team monitors for theft or other
criminal activity across the Group and ensures best practice
for protection is shared between sites.
A whistleblowing policy is in place together with an
independently operated employee hotline.

A committed £400 million multi-currency revolving credit
facility assists with liquidity and seasonal cash flow
requirements.
Review of weekly cash flow forecasts covering a period of 12
weeks assists planning for short term liquidity.
Strategic plans cover at least four future years and are
reviewed regularly to ensure sufficient financial headroom
exists or whether it needs to be created in the future. We
also monitor the impact of the plans on the covenant tests
set out in the Group’s banking facilities.

• Merlin maintains strong relationships with a number of

lenders and keeps the debt markets under review in order to
ensure that funding can be obtained at the right time and at
the right price to ensure the availability of funds to meet
strategic growth plans.

•

The Group presents constant currency figures where
appropriate to show underlying results excluding the impact
of translation differences.
Treasury policies in place and reviewed annually with regular
reviews of currency exposures.
Broad match of borrowings in the currencies of underlying
profits.
Currency exposures hedged where appropriate.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

CORPORATE SOCIAL RESPONSIBILITY

A RESPONSIBLE
BUSINESS

Our approach
Merlin’s commitment and strong social conscience drives our approach to
business responsibility and ‘being a force for good’. This is reflected in how we
treat, and care about, our visitors, our people, our suppliers, our planet, the
animals we look after and the communities in which we operate. We have
robust governance standards and practices that extend throughout the business.

In 2022 we plan to further strengthen communications tools with a ‘mobile-first’
strategy, which will focus on communicating directly with those staff who don’t
work with a PC or laptop. This updated approach will provide digital content,
including the latest reassuring health and safety information, updates from senior
leaders and celebratory content from our attractions, to help ensure our global
teams continue to feel engaged and connected with the business.

‘The Merlin Way’ is the set of values which embody everything we do, and
which provide the basis for our goals and objectives. We advocate ‘The Merlin
Way’ through many of our global engagement activities and our staff wellbeing
programmes. More details can be found on our website
(www.merlinentertainments.biz).

Additional occupational support was made available to all employees in 2021.
Employee welfare has always been a key consideration for the Group and in
response to the pandemic the Merlin Board has ensured that ahead of reopening
attractions, extensive training, using a variety of mediums, was given to all
employees. The Merlin Board receives regular HR updates at Board meetings.

We set out more details below, which include the five specific areas required
under the non-financial reporting requirements in the Companies Act 2006.
Further information can also be found on Merlin’s website and the websites of
our partner charities.

Employees
Employee engagement
Our people are what makes Merlin so special, and we continue to be proud of
our global employees. They delivered magical and memorable experiences to
millions of guests who were desperate to enjoy quality time with their friends
and family after various lockdowns.

As expected, there were positives and negatives and of course differences by
country, attraction, and function. For example natural decreases were seen in
areas such as ‘being together’ and ‘work/life balance’, while higher scores were
recorded around wellbeing and managers and teams feeling supported. The staff
engagement question ‘Would I recommend Merlin as a place to work?’ stayed
almost the same with only a one-point difference compared to the last pre-
pandemic survey. Overall though, in common with other businesses in our
industry, we saw a marked reduction in our typically high overall engagement
scores prior to the pandemic.

We have also implemented long term incentive plans that put in place incentive
structures for our management teams, aligned to the strategic objectives of our
shareholders. These plans include both outstanding contribution and long service
awards available to all employees.

Employee communication
Throughout the year, lines of communication with our employees were
maintained, ensuring that all employees were kept fully updated on business
operations on a regular basis. New tools such as our ‘MyMerlin’ intranet and
‘The Wizard’s News’, our fortnightly company digital newsletter, continued to
celebrate successes and communicate across all our sites.

At the end of 2021 we launched a brand-new staff engagement and
communication concept, the ‘Merlin Super Star Awards’, a virtual awards
ceremony screened around the globe on the same day, with teams coming
together to watch and celebrate the work and actions of their fellow Merlin
teammates. The awards were a great success and left teams on a positive high
note as they looked towards the new year.

Diversity and inclusivity
We are proud of the inclusive environment we create for all the people who
work at Merlin and focus significant effort in driving a culture of accountability and
fairness. It’s part of who we are, and we adopt several approaches to attract and
retain a diverse talent base, representative of the communities in which
we operate.

The importance of diversity, equality, accessibility and non-discrimination to
Merlin is highlighted throughout our global HR policies relating to employees;
including in our internal global recruitment and equal opportunities policies. Our
three key focus areas for 2021 were gender equality, ethnic diversity, and
‘inclusion for all’. Our four regional taskforces, each sponsored by an Executive
Committee member and led by business leaders, developed regional plans to
support our global diversity and inclusion goals. We are proud that our
commitment to equality is demonstrated throughout our culture and are
committed to ensuring our Merlin Board and senior management teams continue
to promote diversity and inclusivity.

Key dates were celebrated around the world including International Women’s
Day, Diwali, Black History Month (US and UK), World Wheelchair Day, World
Sign Language Day, Pride Month and UN Day of Persons with Disabilities. We
also pioneered a new ‘Zero Tolerance - 100% Fun’ diversity and inclusion
awareness campaign that was translated into 14 languages. The campaign
highlighted the policies and robust support systems in place if staff experience
inappropriate behaviours, either in work (from guests or colleagues) or outside
of work. The campaign was well received by our teams across the globe.

In 2021 we rolled out diversity and inclusion training for all people managers,
and each member of the Executive Committee participated in a reverse
mentoring programme.

We make no differentiation between able bodied persons and persons with
disability in terms of recruitment, training, and career progression, and will make
every effort to continue the employment and training of those persons who
become disabled while employed by the Group.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

CORPORATE SOCIAL RESPONSIBILITY

A RESPONSIBLE
BUSINESS

Gender reporting
For the majority of 2021, two of the Company’s seven Directors and one of the
Group’s eight Executive Committee members were female. At December 2021,
of the Group’s senior management positions (being attraction General Managers
up to and including the Executive Committee) 135 (36%) are female and 235
(64%) are male. This is consistent with 2020. The percentage of female
permanent employees is 49% (2020: 50%) totalling 4,165 (2020: 4,010). The even
split of male versus female employees has therefore been broadly maintained.

Merlin continues to report on UK employees under the UK gender pay gap
reporting rules, which identify differences in pay between men and women. For
the latest available reporting period to 5 April 2021, Merlin’s mean gender pay
gap (calculated as the difference between the average hourly pay of men and
women as a percentage of the average hourly pay of men) was 14.2% (2020:
4.7%), more in line with the pre-pandemic figure of 12.9% reported in 2019. The
median gender pay gap (the difference between the hourly pay of an employee
in the middle of the range of male wages and an employee in the middle of the
range of female wages), was 3.2% (2020: 3.5%, 2019: 2.4%).

The key reasons behind our gender pay gap continue to be lower numbers of
female representation in senior, higher compensated roles; relatively large
populations of employees in traditionally male-dominated roles (for example,
engineering staff and electricians); and a large proportion of females taking up
roles with greater flexibility in working hours. We are actively encouraging and
promoting more females into senior roles, and where possible, we encourage
greater female participation in occupations such as engineering. We also host a
number of initiatives to educate and inspire career progression within Merlin
among female staff.

Recruitment, training and development
Merlin runs a variety of training and development activities across all parts of the
business. These range from induction training and role specific learning (for
example in health and safety, and animal welfare), through management and
leadership programmes, and on to executive leadership development. Our
Merlin Careers website shows available roles across the business globally as well
as providing information on the apprenticeships we offer in areas such as
hospitality, engineering, management, and marketing.

In 2021 we continued to respond to the COVID-19 pandemic by creating even
more online content and self-led learning modules so that our teams could
continue to access learning opportunities remotely and whilst on furlough.
Through 2022, we will shift to a blended mix of online learning and development
and in person programmes for leadership development and critical skills such as
marketing, engineering and commercial training.

Risk management
For details of how we manage the risks of people availability and their expertise,
see page 22.

Health, safety and security
In accordance with the Shareholder Investment Agreement, the Board has
created a Health, Safety and Security Committee which together with the Merlin
Board and management, ensures that Merlin is dedicated to delivering best in
class health, safety and security (HSS) standards that are clearly understood and
implemented across the Group. These standards ensure the safety and wellbeing
of our guests, employees and contractors. To support this mission, Merlin sets
out its core HSS strategic initiatives and how these must direct and focus all
efforts in a manner that is both systematic and progressive.

To help communicate these initiatives to our key internal and external
stakeholders, Merlin publishes an informative brochure called ‘Protecting the
Magic – a Guide to Health, Safety and Security at Merlin Entertainments’. This
document is available via our corporate website and our dedicated HSS
‘ProtectingTheMagic.com’ website. Additional HSS news items and features are
also published throughout the year on Merlin’s ‘Backstage’ website.

COVID-19
Much of the world continued to be significantly impacted by the COVID-19
pandemic in 2021. National and local governments utilised many of the public
health measures that they had first deployed in 2020 in order to prevent, or
control, the spread of the virus. Such measures, including movement control
orders, curfews and temporary business closures through population lockdowns,
continued to impact both civic society and commerce.

Advances in science were able to provide governments and public health
authorities with some of the tools to effectively fight back against COVID-19.
Multiple different vaccines, treatments and therapeutics were approved and
deployed in countries around the world, allowing 2021 to become a year in
which people were able to move more positively into the next phase of the
pandemic – ‘learning to live with COVID-19’.

Through 2021, our portfolio of attractions shifted from enforced closures or
trading with specific restrictions in place, including those in which social
distancing limited our visitor capacities, through to being able to trade more
normally. Our attractions successfully maintained the important COVID-19
safety protocols and procedures we had developed and deployed in 2020.
Regular and positive liaisons with health authorities, enforcement authorities and
sector associations have helped to ensure we continue to uphold our best in
class COVID-19 safety standards.

As the world emerges from what we believe is the worst of this pandemic, new
challenges have been presenting themselves. Disruptions to global supply chains,
shortages of materials and components, or scarcities of available labour have
served to create headwinds for our attraction teams as they bounce back from
COVID-19 related restrictions. Difficult labour markets, in certain territories and
for particular professions, have required the Group to take additional steps to
avoid higher attrition rates and recruit into vacancies successfully. Our HSS
standards, including those relating to training and competency, remain important
underpins during these turbulent resourcing periods.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

CORPORATE SOCIAL RESPONSIBILITY

A RESPONSIBLE
BUSINESS

Leading indicators

Safety Inspection Certificates – Rides(1)

Safe Operating Procedures – Rides(2)

Food Safety Audits(3)

Safety Culture Survey Results(4)

HSS Committee Meetings(5)

Lagging indicators

Medical Treatment Case Rate (Guests)(6)

Medical Treatment Case Rate (Employees)(6)

2021

2020

100%

N/A

75%

N/A

100%

0.02

0.06

0.02

0.04

(1) Safety Inspection Certificates are issued annually by independent ride examiners following the thorough
inspection and testing of every theme park ride in Merlin. This % score indicates the percentage of rides
that have a valid annual Safety Inspection Certificates issued, or a formal extension granted to such
annual Inspection Certificates due to the impact of cross-border travel restrictions brought on by the
COVID-19 pandemic.

(2) Each theme park ride in operation in Merlin must have Safe Operating Procedures in place covering the
ongoing use of the ride. These procedures must state what the necessary risk controls are for each ride.
This % score indicates the percentage of rides that have Safe Operating Procedures in place.

(3) Merlin commissions an independent specialist to audit attractions for compliance with its Food Safety

Manual. This % score represents the average compliance score. Where opportunities for improvement to
local practices are identified, these are discussed with local management and plans implemented to
address them. Due to the impact of cross-border travel restrictions brought on by the COVID-19
pandemic, as well as extensive attraction temporary closures, such on-site audits were not able to take
place in 2021 or 2020.

(4) Merlin’s annual ‘The Wizard Wants to Know’ employee survey (not run in 2020), features a series of

questions relating to health and safety and this % score represents the overall safety engagement score.
We believe the 2021 results were influenced by COVID-19 related factors.

(5) Through the HSS Committee the Merlin Board provides strategic direction and performance scrutiny of

HSS matters within the business. Additionally, each Operating Group has its own HSS Steering
Committee. These forums are intended to meet quarterly and this % score indicates compliance with
this expectation.

(6) A Medical Treatment Case (MTC) is defined as an injury which requires external medical treatment

(i.e. ambulance attendance to the site or hospital visit directly from the site). The rates referenced are the
number of MTCs relative to either 10,000 guest visitations or 10,000 employee hours worked. The
Employee MTC Rate for 2021 has been impacted by fewer working hours being registered by workers as
a result of the COVID-19 pandemic and the imposition of national / local lockdowns. The increase to the
Employee MTC Rate is also reflective of some additional cases in the US being referred for external
medical treatment at walk-in Urgent Care Centre clinics.

Strategic HSS initiatives
The following strategic initiatives form the cornerstones to Merlin’s ‘Protecting
the Magic’ programme:
•

Leadership and engagement – requiring our leaders to exhibit visible,
proactive and unwavering leadership towards HSS, supported by our
people who are fully engaged with this shared responsibility. An example is
‘safety leadership walks’ which are on-site walks, both in visitor areas and
‘back of house’, by senior leaders in the business where dedicated time is
spent talking with staff about HSS matters and understanding what more
can be done.
Competency and culture – fostering a positive and proactive safety
culture, with competent and talented people focused on the effective
management of HSS risks. Rigorous training and instruction are
fundamental to Merlin’s approach to HSS across the business, with
mandatory new starter training for all employees and safety leadership
training for managers.
Assessment and control of risk – identifying, understanding and controlling
HSS risks effectively. For example, in the area of fire safety, fire engineering
surveys of our hotels have helped ensure that we continue to uphold the
highest of physical and procedural controls at all of our hotels. With regard
to food safety we adopt the best practice system of Hazard Analysis and
Critical Control Points (HACCP). We ensure traceability and assurance
over food produce sources and support our guests in their choice of
products based on their specific dietary and allergy requirements.
Standards and procedures – developing and rigorously implementing clear
and suitable standards and procedures for safe design, construction,
maintenance and operation of assets and equipment.
Assets and equipment – managing our assets and equipment to ensure they
are fit for purpose throughout their life-cycle and that no unacceptable or
uncontrolled HSS risk is created. Maintenance systems and procedures
comprise daily, weekly, monthly and annual maintenance programmes
across Merlin’s rides, buildings, facilities and estates.

•

• Monitoring and assurance – assessing and critically reviewing our

performance, in a balanced and objective manner, in order to understand,
improve and sustain our HSS performance. HSS performance, including
near-miss and incident reporting, is regularly reviewed by each attraction,
each Operating Group’s senior leadership team and the HSS Committee,
with best practice learning shared throughout the HSS management
community. All attractions undergo three types of routine health and safety
reviews (annual self-audits, independent internal audits and periodic
independent external audits), in addition to pre-opening assessments and
tactical ad-hoc audits. A comprehensive food safety audit programme is also
undertaken by third party specialists.

This process includes the use of two types of performance metric, being;
(i)

Leading indicators – which monitor the activities we undertake as part
of our HSS governance and monitoring processes. Our approach
includes arrangements by attractions for near-miss/unsafe condition
reporting, trend analysis and corrective action management.
Lagging indicators – which capture incident rates for both guests
and employees.

(ii)

The results of our monitoring and assurance activities are set out below.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

CORPORATE SOCIAL RESPONSIBILITY

A RESPONSIBLE
BUSINESS

Environmental matters
Governance
We recognise that our operations impact upon the environment and that
effective management, in line with our strategic business goals, is essential for
sustainable business success. We are committed to minimising the potentially
harmful effects of such activity.

The Executive Committee is responsible for setting strategy, policy, principles,
and guidance, with ultimate responsibility for our sustainability strategy resting
with the Chief Executive Officer, ensuring that strategic policy is implemented
and that our sites’ sustainability objectives align to our corporate sustainability
objectives. We participate in the UK Energy Savings Opportunity Scheme and
other applicable environmental regulations globally. Specific budgets are made
available each year to test and implement environmentally focused initiatives.

The Group Head of Sustainability is responsible for the development and
implementation of the strategy, policy and principles across the business in
order to ensure effective management of our climate impacts.

Each attraction has a sustainability champion or manager who is responsible for
the delivery of our sustainability objectives at a local level. More details can be
found on the ‘Policies & Reports’ section of our website where our
environmental policy is published.

2021 activities
We continue to drive awareness in our staff and guests around environmental
issues. In 2021 we were delighted to be one of only two venues to host HRH
The Duke of Cambridge, who we welcomed on the lastminute.com London
Eye, for the inaugural Earthshot Prize 2021 Awards Ceremony. This event was
broadcast globally and awarded prizes for those who have found innovative
solutions to the planet’s environmental problems.

Merlin is committed to being an environmentally responsible business and has
been a long term advocate for reducing plastic pollution as well as progressing
the positive impact our businesses and teams can make on their local
environments and communities. We continue to review all our retail stores to
remove unnecessary packaging and plastic across all of our merchandise.

Marine conservation continued to be promoted in 2021 through our SEA LIFE
brand, educating guests on the dangers of plastic pollution in our oceans and
actively contributing to raising awareness through our partner charity, the SEA
LIFE Trust. Merlin also supported the SEA LIFE Trust with its annual beach clean
activities in 2021, including 60 different beach cleans taking place across the
world. From Melbourne to Belgium, California to Cornwall – our global
network cleaned over 3,662 kg of plastic pollution from beaches and waterways.

These commitment initiatives will continue progressing in 2022 and beyond.
This includes working with our global supply chain to remove unnecessary
plastic packaging from our shops; providing opportunities for all our staff and
guests to become involved at our attractions as well as helping them
consider behavioural change in their everyday lives; and supporting the SEA LIFE
Trust in campaigning across the globe for greater protection for our marine
environment and its creatures.

Climate change
The Group has identified the following issues related to climate change, which are
set out below together with Merlin’s approach in the relevant area:

•

Energy use – the risk that using fossil fuel energy contributes to climate change.
Merlin is working on increasing its on-site renewable technologies such as
solar photovoltaic.
Energy price – the risk of fluctuation in global energy prices.
Merlin is exploring the opportunity of a Discount Energy Purchase (DEP)
scheme at a fixed tariff over a long term for a solar photovoltaic farm.
Merlin is also investing in energy efficient systems like Variable Speed Drives
and LED lighting to reduce the amount of energy we use.

• Weather – the risk of distortion in weather patterns.

Merlin operates a balance of outdoor theme park resorts and Midway
attractions which are generally indoors.

• Waste, recycling, and the use of landfill.

Merlin is diverting waste from landfill where possible through recycling and
generating energy from waste. For example, our four largest UK theme
parks recycle and recover all their waste for energy generation.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

CORPORATE SOCIAL RESPONSIBILITY

A RESPONSIBLE
BUSINESS

Streamlined energy and carbon reporting
The Company is required to report each year on its carbon dioxide emissions, which are set out in the table below. We have followed the 2019 HM Government
Environmental Reporting Guidelines. We have used the Greenhouse Gas Protocol – Corporate Standard and have used emissions factors from IEA Emissions
Factors 2021 for electricity by country and UK Government GHG Conversion Factors for Company Reporting 2021 for all other carbon activities. We have chosen
the financial control boundary method as this allows us to report on all sources of environmental impact over which we have financial control.

The KPI for measuring our carbon emissions trend is carbon emissions per £1 million of revenue. We have set ourselves a target of 2% year on year reduction on
our carbon emissions intensity. We use a rolling base year in these calculations.

Our carbon reporting period for 2021 is from September 2020 to August 2021. Our reported carbon intensity ratio, that measures the usage of CO2 equivalent
(CO2e) as compared to revenue, decreased significantly from 140 to 68 gross tCO2e per £1 million of revenue. This is largely due to the increase in 2021 revenue
compared to 2020, and reflects the fact that a significant element of our energy usage does not flex with trading volumes.

In the period covered by the report, Merlin launched a series of energy efficiency initiatives. However, due to the disruption caused by COVID-19, we were only able
to complete a life support system filtration optimisation project at LEGOLAND Windsor, and a power demand control project for air conditioner output at
LEGOLAND Japan. Together these projects are expected to save 292,575 kWh annually.

In this period, we purchased 53,905 MWh of renewable energy attributes through our energy procurement contracts. The attributes are backed by Renewable
Energy Guarantees of Origin (REGOs).

Energy consumption used to calculate emissions (MWh)

Emissions from combustion of natural gas, oil and LPG in tCO2e (Scope 1)

Emissions from combustion of fuel for transport purposes in tCO2e (Scope 1)

Emissions from use of CO2 for food and beverage purposes in tCO2e (Scope 1)

Refrigerant emissions from refrigeration systems in tCO2e (Scope 1)

Emissions from purchased electricity and district heating (Scope 2, location-based)

Emissions after applying purchased green emissions in tCO2e (Scope 2, market-based)

Emissions from business travel in rental cars or employee-owned vehicles where company
is responsible for purchasing the fuel in tCO2e (Scope 3)

Total gross in tCO2e

Group total in tCO2e

Group revenue (£m)

Intensity ratio: Group gross tCO2e / £1 million revenue

2021

2020

Global
(excluding UK)

102,993

6,659

439

679

13,297

2,063

212,657

8,450

911

2,584

63,717

84,707

4,627

423

748

12,837

1,168

217,316

6,125

945

3,290

70,771

Not reported

9,854

75,701

6,994

81,169

85,555

1,261

88,163

629

140

Table notes:
•
•
•
•
•

Scope 1 refers to direct emissions (natural gas, LPG, heating oil, refrigerants, diesel, petrol).

Scope 2 refers to indirect emissions (purchased electricity, purchased heat).

Scope 2 market based include REGOs for our UK operations.

Our annual carbon reduction target is measured based on market-based emissions.

Defra carbon reporting factors 2021 were used for all conversions to MWh based on Gross Calorific Value (CV) (except for business mileage where Net CV was applied; this is less than 0.05% of our
overall calculated energy).

•

1MWh is equivalent to 1,000kWh.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

CORPORATE SOCIAL RESPONSIBILITY

A RESPONSIBLE
BUSINESS

Social matters
Our strong social conscience informs how the Group operates, including with
regard to both the people and creatures connected to our business. This is
exemplified by areas such how we approach visitor accessibility, our ethical
animal husbandry activities, and our work together with our partner charity,
Merlin's Magic Wand, to support children faced with the challenges of serious
illness, disability and adversity.

Accessibility
In 2021 we continued our commitment to disability inclusion to ensure guests
with disabilities can access the magic of Merlin. We understand our obligations
and we care about continuously improving accessibility. An Accessibility Steering
Group has been established consisting of senior management representatives
from across the business who meet regularly to monitor guest experience in this
area, and consider initiatives to advance the accessibility agenda across the Group.

We have three guiding principles:
• We will make it fun for everyone;
• We will listen, learn and adapt; and
• We will support our people, so they can support our guests.

2021 was another strong year for Merlin’s teams who continued their welfare
and conservation work to rescue, rehabilitate and release sick or injured animals
across the globe. Over 75 grey and harbour seals were rescued across the SEA
LIFE and SEA LIFE Trust seal rescue facilities in northern Europe and the UK.
Over 120 turtles were rescued in the UK, the US, Europe and Australia, while in
the SEA LIFE Trust sanctuary in Iceland, over 30 puffins were also rescued and
released as part of continued support to the local community. There were also
two beavers rescued and rehomed at the Cornish Seal Sanctuary by the SEA
LIFE Trust.

Beluga whales Little White and Little Grey continued to do well in the SEA LIFE
Trust’s world’s first beluga whale sanctuary in Iceland and news of their new
state-of-the-art intermediate habitat was shared globally in summer 2021.

Beyond this, we also continue to support additional animal welfare initiatives at
Chessington World of Adventures Resort in the UK, and WILD LIFE Sydney
Zoo in Australia, who both maintained their long-standing commitment to animal
breeding or managed species programmes.

For details of how we manage the risks regarding animal welfare, see page 22.

Some of the key highlights in 2021 were:
• We completed over 5,000 hours of new and enhanced disability confidence

training;

• We conducted accessibility reviews of major rides across all our attractions;
• We worked with ride manufacturers to incorporate enhanced accessibility

features into new rides;

• We worked with disability experts and guests to inform improvements; and
• We hosted an accessibility roundtable with the ‘Valuable 500’ to discuss how

we can improve.

Merlin’s Magic Wand
Our dedicated children’s charity partner, Merlin’s Magic Wand (MMW), is now in
its 14th year of operation. Although 2021 continued to be a period of recovery
as a result of the COVID-19 pandemic, the charity was still able to deliver 30,180
Magical Days Out tickets to children and their families, who are facing challenges
of serious illness, disability and adversity. The charity also completed the 51st
Merlin’s Magic Spaces project based at The Nook (East Anglia Children’s
Hospice), in partnership with the SEA LIFE Great Yarmouth team, and worked
with our attraction teams to reach almost 8,200 children through the Magic on
Tour programme.

In 2022, the charity aims to provide more Magical Days Out tickets, deliver on
Magic Spaces project commitments, and pursue virtual Magic on Tour offerings,
as well as investing in key systems and technology so that more beneficiaries and
charity partners can look forward to a year full of magic.

We were once again proud to ‘light up purple’ on 3 December at our attractions
across the world to celebrate International Day of Persons with Disabilities,
marking our ongoing commitment.

Animal conservation and welfare
We operate to world class welfare standards through our animal care network
and support the work of our pioneering marine conservation charity partner, the
SEA LIFE Trust, in its mission to protect marine life and habitats across the
world. Our global SEA LIFE teams continue to deliver world class animal welfare,
as well as developing new and exciting guest experiences which will inspire future
generations to care for our oceans and all marine life.

During the pandemic we have seen a renewed interest from the public to
reconnect to nature, animals, and local activities in their community
environments. This was apparent in 2021 with an increased interest in our SEA
LIFE brand, where there was strong visitation to our SEA LIFE attractions and to
seaside sanctuaries. This improved engagement took place in person at the
attractions, as well as extensively across digital and social channels, which
continued to see millions of viewers engage with live content, animal updates and
even virtual tours which were created for those who were unable to visit
attractions. SEA LIFE responded to this upsurge in interest with pioneering
awareness campaigns including a UK-wide campaign together with the SEA LIFE
Trust; ‘Don’t Make Easter Rubbish’. This campaign highlighted the plight of
marine animals as a result of the human impact from littering on beaches and
waterways over lockdowns and holiday periods. The campaign was supported by
The Sun national newspaper, as part of their single-use plastics campaign, and in
local media outlets across the UK.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

CORPORATE SOCIAL RESPONSIBILITY

A RESPONSIBLE
BUSINESS

Other areas
Anti-corruption and anti-bribery matters
Merlin’s approach regarding the management of anti-bribery and corruption risks is
set out on page 23. Merlin has a zero tolerance approach in this area, with regular
reports on whistleblowing being provided to the Audit Committee.

Ethical sourcing
We have a responsibility to the workers in our supply chain and seek to ensure
our products are made in an appropriate environment and the products we source
are produced in accordance with international laws and legislation. More details on
this area are available on our website (www.merlinentertainments.biz).

Human rights
Merlin respects and supports human rights and is committed to the highest level of
ethical standards and sound governance arrangements. We aim to act ethically and
with integrity in all our business dealings. As part of this commitment and in
accordance with global Modern Slavery legislation, Merlin has implemented a
Human Rights Policy, guided by the International Labour Organisation Declaration
on Fundamental Principles and Rights at Work together with the OECD
Guidelines for Multinational Enterprises.

Further details and Merlin’s Modern Slavery and Human Trafficking Statement can
be found on Merlin’s website.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

SECTION 172
STATEMENT

The Board of Directors of the Company (the Board) recognises its responsibility to maintain high standards of business conduct and consider the impact on all
stakeholders when making decisions, including the likely consequences of any decision in the long term. The Company is managed by the Board, which
comprises representatives of its principal shareholders and an independent Chairman. The Board meets to provide governance over the Group and to consider
those matters requiring specific approval by the Company. The same shareholder representative Directors and the independent Chairman also meet regularly
as the Board of Merlin Entertainments Limited (the Merlin Board), alongside key members of the Merlin Executive Committee, being the Group’s Chief
Executive Officer and Chief Financial Officer, to provide leadership and set the strategy for the Group. For more information, see page 32.

The Board has considered the analysis undertaken by the Merlin Board on how the Merlin Board has exercised its duty to promote the success of Merlin during
the year with regard to the matters set out in section 172 of the Companies Act 2006. After careful consideration, bearing in mind the division of
responsibilities as noted above, and while acknowledging the need for the Board to exercise overall management and supervision of the Group and to exercise
independent judgment, the Board has adopted a section 172 statement in relation to the Company itself which is consistent with that produced by the Merlin
Board. Further information in the Annual Report on how the Merlin Board has exercised its duty to promote the success of Merlin during the year with regard
to the matters set out in section 172, including examples of how these duties have been applied, can be found throughout the Annual Report as set out below.

The Board takes its responsibility to understand the views of stakeholders seriously and will continue to consider stakeholder interests in its decision-making
processes in 2022.

Section 172 duties

Consequences of decisions in the long term
The Board and the Merlin Board approve the Group’s strategy which includes long term growth
ambitions. Accordingly, the long term consequences for the Company and its stakeholders are
always factored into strategic decisions made by the Merlin Board.

Employee interests
The Board and the Merlin Board recognise that employee engagement and a strong culture is
important to achieve the Company’s vision and objectives.

Fostering business relationships with suppliers, customers and others
The Board and the Merlin Board identify guests as key stakeholders and Merlin constantly monitors
their views to measure the quality of their experience and drive improvements. The Board and the
Merlin Board believe a collaborative approach with suppliers and business partners provides
mutually beneficial relationships, enabling engagement on matters that are in both parties’ interests.

Operational impact on community and environment
The Board and the Merlin Board promote an ethical operating culture and high animal welfare
standards, together with a commitment to managing environmental impacts. The Board and the
Merlin Board support Merlin’s partnership with two charities.

Maintaining a reputation for high standards of business conduct
The Merlin Board ensure that policies and procedures are in place to support the highest standards
of business conduct and receives regular reports to monitor compliance. The Merlin Board is
involved in the management of issues which may have a material impact on the
Company’s reputation.

Act fairly between owners of the Company
The Board and the Merlin Board act in accordance with the terms of the Shareholder
Investment Agreement.

Key examples

At a glance

Business model

Growth drivers

Financial and operating review

Principal risks

Corporate governance

Chief Executive’s introduction

Business model

Principal risks

Corporate social responsibility

At a glance

Chief Executive’s introduction

Business model

Financial and operating review

Corporate social responsibility

Business model

Principal risks

Corporate social responsibility

Principal risks

Corporate social responsibility

Corporate governance

Business model

Principal risks

Corporate social responsibility

Corporate governance

On pages 32 to 35 we set out our corporate governance framework including Board and Committee responsibilities.

Page

6 to 8

9 to 10

19, 22, 23

19, 22

4 to 5

6 to 7

27 to 30

19 to 23

25 to 26

19 to 23

MOTION JVCO LIMITED

GOVERNANCE

CORPORATE
GOVERNANCE

Overview
The Board is committed to maintaining the highest standards of governance
throughout the Group and continues to believe that effective corporate
governance is the foundation of a successful company. The Board recognises
that a strong governance framework is fundamental to achieving Merlin’s
strategic objectives by embedding a strong company culture and values globally
across the Group.

Merlin’s overriding purpose is to work with stakeholders to create truly
memorable experiences for visitors and long term value for our investors. Our
corporate governance framework has been developed to safeguard these
objectives. The Board is committed to ensuring that the procedures, policies
and practices of the business continue to be effective.

Board and Committee responsibilities
The Board and the Merlin Board
The Company is managed by its Board of Directors (the Board) which
comprises representatives of its principal shareholders and an independent
Chairman. The Board meets as required by the Shareholder Investment
Agreement (see page 8), to provide governance over the Group and to
consider those matters requiring specific approval by the Company.

The same shareholder representative Directors and the independent
Chairman meet regularly as the Board of Merlin Entertainments Limited (the
Merlin Board), alongside key members of the Merlin Executive Committee,
being the Group Chief Executive Officer and the Group Chief Financial
Officer, to provide leadership and set the strategy for the Group.

overseeing strategy, management and approval of major policies;
determining the capital structure;

The responsibilities of the Merlin Board are detailed below:
•
•
• maintaining the system of internal controls and risk management;
•

approval of the annual capital expenditure budget, major capital projects and
strategic transactions;
overseeing financial performance and reviewing financial reports;
establishing and maintaining an effective corporate governance framework,
in conjunction with the Board;
effective engagement with shareholders and other stakeholders; and
reviewing recommendations from Committees.

•
•

Board Committees
The following Committees have been in operation during the year and unless
otherwise stated, remain.

Health, Safety and Security Committee
This Committee ensures that health, safety and security (HSS) matters are
managed effectively and proactively throughout the Group, by overseeing our
policies and procedures for HSS, monitoring our processes for identifying and
managing risks, and monitoring the skills, effectiveness and levels of resource
within our HSS teams.

The Committee membership comprises an independent chair and
representatives from each of the investor consortium, two of whom are Board
members. Meetings are also attended by the Group Chief Executive Officer and
Group Chief Financial Officer, together with the Group Safety, Engineering and
Security Director, the Chief Operating Officer of the Midway Attractions
Operating Group and the Managing Director of the Resort Theme Parks
Operating Group.

ANNUAL REPORT AND ACCOUNTS 2021

Audit Committee
This Committee assists the Board in discharging its responsibilities regarding
financial reporting by monitoring the integrity of our financial statements
including considering whether the financial statements are ‘fair, balanced
and understandable’.

It assists the Board and the Merlin Board in relation to external and internal
audits, including monitoring and reviewing the effectiveness of the internal audit
function and overseeing the performance and independence of external auditors.
It also assists the Merlin Board in matters of risk management and internal
controls, including monitoring and reviewing the effectiveness of our
whistleblowing and fraud policies and our internal control and risk management.

During the year the Audit Committee considered proposals for the Group to
tender its external audit relationship, KPMG LLP having been the Group’s
auditors for many years. A comprehensive competitive tender process was
completed, and as a result Ernst & Young LLP were appointed as
external auditors.

The Committee membership comprises representatives from two members of
the investor consortium, one of whom is a Board member.

Remuneration Committee
The Remuneration Committee was created in early 2021 and the first meeting
was held in March 2021. The Remuneration Committee assists the Merlin Board
in determining its responsibilities in relation to remuneration, including making
recommendations on the policy on executive remuneration, determining the
individual remuneration and benefits package of each of the Executive Directors
and recommending and monitoring the remuneration of senior management
below Merlin Board level.

The Committee considers all material elements of Merlin’s remuneration policy,
remuneration and incentives of Executive Directors and senior management with
reference to independent remuneration research and professional advice and
make recommendations on the framework for executive remuneration. The
Committee is also responsible for making recommendations for the grants of
awards under share incentive plans.

The Remuneration Committee’s membership comprises the independent
Chairman and representatives of each of the investor consortium, all of whom
are Board members.

Other Committees
In addition to the Board Committees, there are four non-Board Committees:
•
Executive Committee – chaired by the Chief Executive Officer, this
Committee is responsible for managing the Group’s day-to-day
operations and the development of strategic plans for consideration by
the Merlin Board. It implements the Group’s strategy and ensures that
the business complies with all applicable statutory, regulatory and
governance requirements.

Three operational Committees make recommendations to the Executive
Committee and have specific areas of responsibility as follows:
•

Commercial and Strategic Risk Management Committee – maintains oversight
and guidance on management of commercial and strategic risk.
Development Board – reviews initial proposals for significant capital
expenditure and development projects.
Investment Board – appraises major capital expenditure and
development projects.

•

MOTION JVCO LIMITED

GOVERNANCE

CORPORATE
GOVERNANCE

ANNUAL REPORT AND ACCOUNTS 2021

2021 priorities
During 2021 the main area of focus for the Merlin Board continued to be
overseeing Merlin’s response to the COVID-19 pandemic, requiring ongoing
dialogue between Merlin Board members and executive management. The
Merlin Board discussed how attractions were able to reopen with a focus on
customer and guest safety, cost management and profitability. The Merlin Board
monitored the trading performance as the business recovered through the year
and focused on a number of key strategic projects.

As well as overseeing the launch of LEGOLAND New York, the Merlin Board
reviewed the development of the LEGOLAND park projects in China, and
assessed the pipeline of opportunities for future LEGOLAND parks. It
considered further strategic opportunities and approved the proposed
transaction regarding Cadbury World that was announced in early 2022.

Other areas of focus included cyber security risks and the Group’s ongoing
investment in that area. Towards the end of the year the Merlin Board approved
the Group’s five year strategic plan and the extension and modification of leases
for certain of Merlin’s Resort Theme Parks locations.

The Merlin Board also reviewed and approved the implementation of long
term incentive plans, more details of which are set out in note 4.6 to the
financial statements.

Corporate governance framework
During 2021 the Board and the Merlin Board maintained a strong corporate
governance framework and they continue to apply the Wates Corporate
Governance Principles for Large Private Companies. Details of how the
Group approaches these principles are set out below.

Principle One – Purpose and Leadership
An effective board develops and promotes the purpose of a company, and ensures that
its values, strategy and culture align with that purpose.

Since 1999, Merlin’s strategy has been to create a high growth, high return
family entertainment company. The business is based on strong brands and a
global portfolio which is naturally balanced against the impact of external factors.
This strategy is aligned with our purpose of delivering memorable experiences
to our millions of visitors and our vision of being the global leader in location
based entertainment.

The Merlin Board continues to review and challenge Merlin’s strategy,
performance, responsibility, and accountability so that every decision made is of
the highest quality, and in line with the Company’s culture. This is set out in ‘The
Merlin Way’ values which are embedded throughout the business, from day-to-
day management to Merlin Board reviews.

The Group receives feedback from guests and employees via guest satisfaction
surveys and employee engagement surveys; where relevant this feedback is
incorporated in board papers. The business model and the growth drivers of the
Group are outlined in pages 6 to 10.

Whilst the Board holds overall responsibility for developing and promoting the
purpose of the Group, the Merlin Board and the Executive Committee ensure
that the values, strategy and culture continue to be embedded globally on
their behalf.

The Board Committees review the effectiveness of our internal policies.
The Audit Committee reviews the effectiveness of the Group’s whistleblowing
and fraud policies.

Principle Two – Board Composition
Effective board composition requires an effective chair and a balance of skills,
backgrounds, experience and knowledge, with individual directors having enough
capacity to make a valuable contribution. The size of a board should be guided by the
scale and complexity of the company.

The Board is appointed in accordance with the Shareholder Investment
Agreement. Each investor has nominated suitably qualified representatives to sit
on the Board and the Merlin Board. The Directors possess a wide range of skills,
backgrounds, experience, and knowledge across a broad range of businesses. The
composition of the Board is considered appropriate for the size and complexity
of the Company. Details of the Board members can be found on pages 34 to 35.

An Audit Committee, Remuneration Committee and Health, Safety and Security
Committee have been established. They have been in operation throughout the
year. The Chairman of the Board and of each Committee is responsible for
leading and facilitating constructive meetings. The Chairman of the Board
regularly elicits feedback from other Board members on meeting effectiveness
and governance.

Careful consideration has been given to the appointment of the Chair of each
Committee. The Audit Committee is chaired by an individual with recent and
relevant financial experience. The Remuneration Committee is chaired by the
independent Chairman. The Health, Safety and Security Committee is chaired by
an independent health and safety expert. The responsibilities of the Board and
these Committees are outlined on page 32.

Until shortly before the end of the year, the Board, Merlin Board and Executive
Committee together was comprised of 12 men and three women. Details of the
gender mix of the Group and its senior management are set out on pages 24 to
25, together with details of our actions in the area of diversity and inclusivity.

Principle Three – Directors Responsibilities
The board and individual directors should have a clear understanding of their
accountability and responsibilities. The board’s policies and procedures should support
effective decision-making and independent challenge.

The Board understands its responsibility for promoting the success of the
Company for the benefit of shareholders and with consideration of its
stakeholders. This is done in a way which is consistent with its ethical, legal, and
regulatory responsibilities and the Company’s constitution. The Board, the
Merlin Board and Committees are bound by a Shareholder Investment
Agreement and respective terms of reference which give clear guidance on
matters which require Board or Committee approval. Key strategic decisions
are made by the Merlin Board and Committee terms of reference set out the
responsibilities of each Committee.

The Merlin Board met ten times during 2021 by video conference calls, due to
travel restrictions imposed as a result of the COVID-19 pandemic. The Merlin
Board are provided with appropriate board packs in advance of the meetings,
including trading updates, financial performance, employee engagement and
welfare, and management of key business risks. When making decisions, only the
shareholder representatives have voting rights.

Key financial information is collated from the Company’s accounting systems. The
Group’s financial information is externally audited and its controls are reviewed
regularly by the Group's internal audit function. The Board delegates the scrutiny
of financial information and controls to the Audit Committee. The Merlin Board
delegates authority for the day-to-day management of the Company to the
Executive Committee which meets at least eight times each year.

MOTION JVCO LIMITED

GOVERNANCE

CORPORATE
GOVERNANCE

ANNUAL REPORT AND ACCOUNTS 2021

Principle Four – Opportunity and Risk
A board should promote the long term sustainable success of the company by identifying
opportunities to create and preserve value and establishing oversight for the identification
and mitigation of risks.

Oversight of risk management is performed on an ongoing basis through
interaction with management and by risk being a regular item on Merlin Board
agendas. Two Committees have specific responsibilities in the key areas of health,
safety and security and wider risk management and internal controls activities.
Commercial risks are considered by a sub-committee of the Executive
Committee, chaired by executive management, which reports back to the
Executive Committee regularly.

The Board retains overall responsibility for risk management and the Merlin Board
approves the risk management framework which sets out the responsibilities,
oversight, monitoring, reporting and management processes. Further details
regarding the approach to risk management are set out on pages 18 to 23.

Long term strategic opportunities are highlighted through the Group’s strategic
planning processes that the Board oversees. A dedicated strategy review session
was performed during 2021 with a focus on acquisitions strategy. Other
opportunities are brought to the attention of the Board when they arise.

Principle Five – Remuneration
A board should promote executive remuneration structures aligned to the long term
sustainable success of a company, considering pay and conditions elsewhere in
the company.

Remuneration matters during the year were considered by the Remuneration
Committee. All matters relating to remuneration are considered by that body and
recommended to the Merlin Board for approval, in line with the Committee’s
terms of reference.

Board membership
The Directors currently serving are the independent Chairman and the members
of the investor consortium, who also have the right to appoint observers to the
Board, the Merlin Board and Committees. Each Director from the investor
consortium has one vote at the Board and the Merlin Board. The Group Chief
Executive Officer and the Group Chief Financial Officer are executive roles and
these positions do not have voting rights at Merlin Board meetings. The members
of the Board during the year and at the date of this report are set out below.

Roland Hernandez, Independent Chairman
Roland was appointed as a Director and independent Chairman on 7 April 2020.
He is the Founding Principal and Chief Executive Officer of Hernandez Media
Ventures, a privately held company engaged in the acquisition and management of
media assets. He has served in this capacity since January 2001.

Before founding Hernandez Media Ventures, Roland served as Chairman of
Telemundo Group, Inc., a Spanish-language television and entertainment company,
from 1998 to 2000 and as President and Chief Executive Officer from 1995 to
2000. He serves as a member of the Boards of US Bancorp, Fox Corporation, and
Take-Two Interactive Software, Inc. He serves on the advisory board of Harvard
Law School and previously served on the Board of Directors of Belmond Ltd,
MGM Resorts International, Sony Corporation, Walmart Inc, and Vail Resorts, Inc.

Roland received an A.B. in economics from Harvard College and a J.D. from
Harvard Law School.

Søren Thorup Sørensen, KIRKBI Shareholder Representative
Søren was appointed as a Director on 26 June 2019, having also been a Non-
executive Director of Merlin since 2013, prior to Merlin’s initial public offering
(IPO), representing KIRKBI. Søren has over 25 years’ experience in finance and is
currently the Chief Executive Officer of KIRKBI A/S and Director of various entities
in the KIRKBI Group.

Our remuneration policies and principles are aligned with the Group's
performance to support our overall values, purpose and strategy. A series of
key principles underpin the Merlin remuneration structure - pay should be
based on results and performance; consistent with best practice; and aligned
to the long term success of the Company.

Søren is currently Chairman of the Board of Boston Holding A/S, Deputy Chairman
of LEGO A/S and a Non-executive Director of ISS A/S, Landis+Gyr AG, Ole Kirk’s
Foundation, ATTA Foundation and Koldingvej 2, Billund A/S. Søren was formerly a
Partner, Chief Financial Officer of A.P. Moller – Maersk Group and Managing
Partner of KPMG Denmark.

During the year the Remuneration Committee focused in particular on the terms
of long term incentive plans, which were launched towards the end of the year.
These plans put in place a long term incentive structure for management which is
aligned to the Company’s strategic objectives. More details are set out in note 4.6
to the financial statements.

Jørgen Vig Knudstorp, KIRKBI Shareholder Representative
Jørgen was appointed as a Director on 26 June 2019, having previously been a
Board observer while Merlin was listed. Jørgen has been a member of the LEGO
A/S Board since 2017 and has previously served as Chairman from May 2017 to
February 2020.

Principle Six – Stakeholder Relationships and Engagement
Directors should foster effective stakeholder relationships aligned to the company’s
purpose. The board is responsible for overseeing meaningful engagement with
stakeholders, including the workforce, and having regard to their views when
taking decisions.

The Board are aware of the importance of fostering effective stakeholder
relationships to enable the long term success of the Group. Details of how Merlin
engages with stakeholders, including employees, is provided in the section 172
statement on page 31. The Group’s business model also focuses on our
interactions with customers, employees and investors; more information can be
found on pages 7 to 8.

He is the Executive Chairman of LEGO Brand Group and Deputy Chairman of
LEGO Foundation. Jørgen is also a member of the Board of Starbucks. Jørgen
joined the LEGO Group in 2001, where he served as President and Chief Executive
Officer from 2004 to 2016.

Sidsel Marie Kristensen, KIRKBI Shareholder Representative
Sidsel was appointed as a Director on 4 November 2019. Sidsel has almost
20 years’ experience as a lawyer. Sidsel joined KIRKBI A/S in 2016 and is currently
Executive Vice President and General Counsel at KIRKBI A/S and Director of
various entities in the KIRKBI Group. She is on the Board of Directors of LEGO
Foundation, Euro Cater Holding A/S and Privathospitalet Mølholm P/S. Sidsel is
Chairman of LEGO Juris A/S and a Board member of Shanghai LEGOLAND
Management Co., Ltd.

Sidsel was formerly a Partner of the Danish law firm Bech-Bruun.

MOTION JVCO LIMITED

GOVERNANCE

CORPORATE
GOVERNANCE

ANNUAL REPORT AND ACCOUNTS 2021

Joseph Baratta, Blackstone Shareholder Representative
Joseph was appointed as a Director on 4 November 2019. Joseph Baratta is
Blackstone’s Global Head of Private Equity and a member of Blackstone’s Board
of Directors. He is also a member of the firm’s Management Committee, and
serves on many of the firm’s investment committees.

Mr. Baratta joined Blackstone in 1998 and in 2001 he moved to London to help
establish Blackstone’s corporate private equity business in Europe. Since 2012,
Mr. Baratta has served as the firm’s Global Head of Private Equity and is located
in New York. Mr. Baratta has served on the boards of many past Blackstone
portfolio companies and currently serves as a member or observer on the
boards of Ancestry, Candle Media, First Eagle Investment Management and
Medline. He is also a member of the Board of Trustees of Georgetown
University, is a trustee of the Tate Foundation, and serves on the board of Year
Up, an organization focused on youth employment.

Before joining Blackstone, Mr. Baratta was with Tinicum Incorporated and
McCown De Leeuw & Company. Mr. Baratta also worked at Morgan Stanley in
its mergers and acquisitions department. Mr. Baratta graduated magna cum
laude from Georgetown University.

Peter Wallace, Blackstone Shareholder Representative
Peter was appointed as a Director on 26 June 2019. Peter Wallace is the Global
Head of Core Private Equity for Blackstone. Mr. Wallace leads Blackstone’s
private equity investments in the services, leisure, and consumer/retail sectors.

Since joining Blackstone in 1997, Mr. Wallace has led or been involved in
Blackstone’s investments in Alight Solutions, AlliedBarton Security Services,
Allied Waste, American Axel & Manufacturing, Centennial Communications,
Centerplate (formerly Volume Services America), Chamberlain Group,
CommNet Cellular, Encore Global, GCA Services, International Data Group,
LocusPoint Networks, Merlin Entertainments, Michaels Stores, New Skies
Satellites, Pinnacle Foods/Birds Eye Foods, PSSI, SeaWorld Parks &
Entertainment (formerly Busch Entertainment Corporation), Service King,
Servpro, Sirius Satellite Radio, Tradesmen International, Universal Orlando,
Vivint, Vivint Solar and the Weather Channel. He currently serves on the Board
of Directors of Alight Solutions, Chamberlain Group, Encore Global,
International Data Group, PSSI, Service King, Servpro, Tradesmen International,
and Vivint. He is a trustee of Children’s Aid Society, one of America’s oldest and
largest children’s nonprofits.

Ricardo Caupers, CPPIB Shareholder Representative (appointed 25 January 2022)
Ricardo is responsible for CPPIB’s direct private equity investments in business
services companies in Europe. He also has geographic coverage responsibility
for Southern Europe.

Prior to joining CPP Investments in 2020, Ricardo was a Partner at Palamon
Capital Partners, where he spent more than ten years focusing on investments
in fast-growing European companies. While at Palamon, Ricardo led a number
of investments in both consumer and retail as well as business services
companies, including Retail Decisions, a B2B payments company, Thomas
International, a talent assessment tools provider to small and medium sized
businesses, Feelunique, an European online retailer of branded beauty products,
and The Rug Company, an international brand of contemporary designer home
furnishings. He led the successful sale of Retail Decisions to ACI Worldwide,
and Feelunique was eventually exited by Palamon to international beauty
retailer Sephora after his departure.

Previously, he worked for The Boston Consulting Group in New York and
London from 1999 to 2008, leading strategic advisory projects for Fortune
500 corporates.

Ricardo holds a BA in Business Administration from Universidade Católica
Portuguesa and an MBA from Harvard Business School.

Key members of the Merlin Executive Committee
The key members of the Executive Committee together with the Directors
of the Board form the Merlin Board. Details of Merlin’s key executives are set
out below.

Nick Varney, Group Chief Executive Officer
Nick has 30 years’ experience in the visitor attractions industry and was
appointed Group Chief Executive Officer of Merlin Entertainments in 1999.

Nick started his career in FMCG marketing, first with Rowntree and then with
Reckitt Colman. He went on to hold senior positions within The Tussauds
Group (Pearson PLC), including Marketing Director of Alton Towers and Head
of Group Marketing, before becoming Managing Director of Vardon Attractions
and a main Board Director of Vardon plc. In 1999 Nick led the management
buyout of Vardon Attractions to form Merlin Entertainments and, in 2005,
initiated the process which led to its acquisition by Blackstone.

Mr. Wallace received a BA from Harvard College, where he graduated magna
cum laude.

Nick is a Board member of UK Hospitality, the trade body representing the
UK’s hospitality and tourism industry with a membership of over
45,000 companies.

Lori Hall-Kimm, CPPIB Shareholder Representative (resigned 20 December 2021)
Lori was appointed as a Director on 26 June 2019 and stepped down from her
role at Merlin and CPPIB shortly before the end of the year. Lori was a
Managing Director in Direct Private Equity at CPPIB and led the Consumer
Retail team since 2018. Lori initially joined CPP Investments in 2016 and was
previously a Senior Principal leading Co-investments within the Secondaries and
Co-Investments group. Prior to CPPIB, Lori was a Director in Private Capital at
Ontario Teachers’ Pension Plan from 2005 to 2015, where she established their
London office, and lead numerous European fund and co-investments from 2007
to 2015. Lori previously worked in the Consumer Retail Investment Banking
team at Goldman Sachs. Lori was previously on the Board of 99 Cents Only
Stores, Gruppo Coin, and Alexander Forbes Pty. Lori has a BBA from York
University (Schulich School of Business) and an MBA from Columbia University.

Ricardo Caupers replaced Lori Hall-Kimm as CPPIB’s representative on the
Board on 25 January 2022.

Alistair Windybank, Group Chief Financial Officer
Alistair was appointed Group Chief Financial Officer in November 2020,
including responsibility for Merlin Group IT and Procurement.

Alistair joined Merlin in 2008 and has held various senior finance roles, including
Head of Corporate Finance, Group Investor Relations Director, Senior Finance
Director – Capital Projects and most recently, Deputy Chief Financial Officer.

Prior to Merlin, Alistair worked for Deloitte in Audit & Assurance.

MOTION JVCO LIMITED

GOVERNANCE

DIRECTORS’
REPORT

ANNUAL REPORT AND ACCOUNTS 2021

The Directors have pleasure in submitting their report and the audited financial
statements for the 52 week period ended 25 December 2021. Comparative
figures relate to the 52 week period ended 26 December 2020.

Directors’ Report
The Directors’ Report itself contains the sections detailed below.

In order to make our Annual Report and Accounts more accessible, we have set
out below where certain required disclosures can be found in other areas of this
Annual Report.

Strategic Report
Non-financial reporting
Information regarding Merlin’s approach to the five topics required by the
Companies Act is set out in the Responsible Business section on pages 24 to 30.

Other information
Other information is set out as follows:
•
•

Business review and future developments – see pages 1 to 31.
Research and development – details about Merlin Magic Making are
located on page 6.

• Directors – details are on pages 34 to 35.
•

Employees – details on how we communicate with employees are on
page 24.

• Directors’ responsibilities statement – see page 38.

Governance
Wates Principles
The Company has adopted the Wates Corporate Governance Principles for
Large Private Companies. Details of the Wates Principles framework can be
viewed on the website of the Financial Reporting Council (www.frc.org.uk).

Guidelines for Disclosure and Transparency in Private Equity
Each of the consortium members is a private equity or ‘private equity-like’
investor. Accordingly, this Annual Report and Accounts complies with the
Guidelines for Disclosure and Transparency in Private Equity for UK companies in
private equity ownership.

Other information
Other information is set out as follows:
•
•

Section 172 statement – see page 31.
Corporate governance – see pages 32 to 35.

Financial statements
The financial statements contain information in the following areas:
•
•
•
•
•
•
•

Capitalised interest – see note 2.3.
Financial instruments – see note 4.3.
Financial risk management – see note 4.3.
Share-based payment transactions – see note 4.6.
Related parties – see note 5.3.
Subsequent events – see note 5.6.
Subsidiaries and joint ventures – see note 5.7.

Share capital and related matters
The Articles of Association do not contain any restrictions on the transfer of
shares in the Company other than customary restrictions applicable where any
amount is unpaid on a share (all the issued share capital of the Company as of the
date of this Annual Report and Accounts is fully paid). Each ordinary share in the
capital of the Company ranks equally in all respects. No shareholder holds shares
carrying special rights relating to the control of the Company.

Amendment to the Company’s Articles of Association
The Company’s Articles of Association may only be amended by a special
resolution of its shareholders passed at a general meeting of its shareholders.

Appointment and removal of Directors
The Company is governed by its Articles of Association and the Companies
Act 2006 and related legislation, with regard to the appointment and replacement
of Directors.

Power of Directors in respect of share capital
The Directors may exercise all the powers of the Company (including, subject
to obtaining the required authority from the shareholders in general meeting,
the power to authorise the issue of new shares and the purchase of the
Company’s shares).

Directors’ indemnities and insurance
The Articles of Association of the Company permit it to indemnify the Directors
of the Company or any Group company against liabilities arising from or in
connection with the execution of their duties or powers to the extent permitted
by law.

The Company has not given any specific indemnity in favour of the Directors
during the year, but the Company has purchased Directors’ and Officers’ Liability
Insurance, which provides cover for liabilities incurred by Directors in the
performance of their duties or powers. No amount was paid under any
Director’s indemnity or the Directors’ and Officers’ Liability Insurance during
the year.

Significant contracts
There were no contracts of significance during the year to which the Company,
or any of its subsidiary undertakings, is a party and in which a Director is or was
materially interested.

Branches outside the UK
Motion JVco Limited has no branches outside the UK.

Dividend
No dividends were paid or recommended during the financial year.

ANNUAL REPORT AND ACCOUNTS 2021

Approval of Annual Report
The Strategic Report, Corporate Governance Report and the Directors’ Report
were approved by the Board on 12 April 2022.

For and on behalf of the Board

Søren Thorup Sørensen
Director
12 April 2022

Motion JVco Limited
Registered number 12057312

MOTION JVCO LIMITED

GOVERNANCE

DIRECTORS’
REPORT

Subsequent events
In January 2022 the Group entered into an agreement to take over the
operations of the Cadbury World attraction in the UK. The transaction is
expected to complete within the next year once all conditions precedent have
been satisfied. As part of the agreement, the Group will be responsible for the
day to day running of the Cadbury World site, its employees, and all operational
decisions, as well as holding brand usage rights for Cadbury World in the UK.
The financial impact of the transaction is not expected to be material to
the Group.

We have recently agreed terms with the landlord for the four leasehold
Resort Theme Park locations, securing our tenure at these resorts until
2077. As stated in note 5.6, terms for the Continental Europe site were not
agreed until after the end of the reporting period, and as such this has been
treated as a non-adjusting post balance sheet event that does not result in
adjustment to the financial statements.

Going concern
The Directors consider that it is appropriate to adopt the going concern basis in
preparing the financial statements.

In making this statement the Directors have satisfied themselves that based on
its current base case, the Group has access to sufficient cash funds and
borrowing facilities and can reasonably expect those facilities to be available to
meet the Group’s foreseeable cash requirements.

For further details see note 1.1 to the financial statements.

Political donations
No entity in the Group made any political donations, or incurred any political
expenditure (each as defined by the Companies Act 2006) in the 52 weeks
ended 25 December 2021.

Auditors
Following a tender exercise KPMG LLP ceased to be the Company’s auditor and
Ernst & Young LLP were appointed.

As recommended by the Audit Committee, a resolution for the re-appointment
of Ernst & Young LLP as auditors to the Company will be proposed. So far as
the Directors are aware, there is no relevant audit information of which the
auditors are unaware. The Directors have taken all reasonable steps to
ascertain any relevant audit information and ensure the auditors are aware
of such information.

MOTION JVCO LIMITED

GOVERNANCE

ANNUAL REPORT AND ACCOUNTS 2021

DIRECTORS’
RESPONSIBILITIES STATEMENT

The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the parent Company’s transactions and disclose
with reasonable accuracy at any time the financial position of the parent
Company and enable them to ensure that its financial statements comply with
the Companies Act 2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error, and have
general responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Group and to prevent and detect fraud and
other irregularities.

Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report and a Directors’ Report that complies with that
law and those regulations.

The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company’s website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.

The Directors are responsible for preparing the Annual Report and the Group
and parent Company financial statements in accordance with applicable law
and regulations.

Company law requires the Directors to prepare Group and parent Company
financial statements for each financial year. Under that law the Directors have
elected to prepare the Group financial statements in accordance with
international accounting standards in conformity with the requirements of
the Companies Act 2006 and applicable law and they have elected to
prepare the parent Company financial statements in accordance with
UK accounting standards and applicable law, including FRS 101 ‘Reduced
Disclosure Framework’.

Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of affairs
of the Group and parent Company and of the Group’s profit or loss for that
period. In preparing each of the Group and parent Company financial
statements, the Directors are required to:
•
• make judgements and estimates that are reasonable, relevant, reliable

select suitable accounting policies and then apply them consistently;

•

and prudent;
provide additional disclosures when compliance with the specific
requirements in IFRSs and in respect of the parent Company financial
statements, FRS 101 is insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the
Group and Company financial position and financial performance;
for the Group financial statements, state whether they have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
for the parent Company financial statements, state whether applicable UK
accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
assess the Group and parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern; and
use the going concern basis of accounting unless they either intend to
liquidate the Group or the parent Company or to cease operations, or
have no realistic alternative but to do so.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

INDEPENDENT
AUDITOR’S REPORT

To the Members of Motion JVco Limited

Opinion
We have audited the financial statements of Motion JVco Limited (the
Company) and its subsidiaries (the Group) for the 52 weeks ended
25 December 2021 which comprise consolidated income statement, the
consolidated and Company statement of financial position, consolidated
statement of cash flows, the consolidated statement of comprehensive
income, the consolidated and Company statement of changes in equity and
the related notes, including a summary of significant accounting policies. The
financial reporting framework that has been applied in the preparation of the
Group financial statements is applicable law and international accounting
standards in conformity with the requirements of the Companies Act 2006.
The financial reporting framework that has been applied in the preparation
of the Company financial statements is applicable law and United Kingdom
Accounting Standards, including FRS 101 ‘Reduced Disclosure Framework’
(United Kingdom Generally Accepted Accounting Practice).

In our opinion:
•

the financial statements give a true and fair view of the Group’s and of
the Company’s affairs as at 25 December 2021 and of the Group’s loss
for the 52 weeks then ended;
the Group financial statements have been properly prepared in
accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006;
the Company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice; and
the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.

•

Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the auditor’s responsibilities for the
audit of the financial statements section of our report. We are independent
of the Group in accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.

Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.

•

Other information
The other information comprises the information included in the Annual
Report set out on pages 1 to 103, other than the financial statements and our
auditor’s report thereon. The Directors are responsible for the other
information contained within the Annual Report.

Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in this report, we do not
express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise
appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements themselves. If,
based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•

the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
the Strategic Report and Directors’ Report have been prepared in
accordance with applicable legal requirements.

•

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the
Company and its environment obtained in the course of the audit, we
have not identified material misstatements in the Strategic Report or
Directors’ Report.

We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
•

adequate accounting records have not been kept by the Company, or
returns adequate for our audit have not been received from branches
not visited by us; or
the Company financial statements are not in agreement with the
accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are
not made; or
we have not received all the information and explanations we require
for our audit.

Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or collectively,
may cast significant doubt on the Group and Company’s ability to continue
as a going concern for a period of 17 months from when the financial
statements are authorised for issue.

Our responsibilities and the responsibilities of the Directors with respect
to going concern are described in the relevant sections of this report.
However, because not all future events or conditions can be predicted,
this statement is not a guarantee as to the Group’s ability to continue as a
going concern.

Responsibilities of directors
As explained more fully in the Directors’ responsibilities statement set out
on page 38, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for
such internal control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement,
whether due to fraud or error.

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

INDEPENDENT
AUDITOR’S REPORT

To the Members of Motion JVco Limited

In preparing the financial statements, the Directors are responsible for
assessing the Group’s and the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors either intend to
liquidate the Group or the Company or to cease operations, or have no
realistic alternative but to do so.

•

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.

• We assessed the susceptibility of the Group and Company’s financial

statements to material misstatement, including how fraud might occur
by meeting with management and those charged with governance to
understand where there was susceptibility to fraud. We also
considered performance targets and their influence on efforts made
by management to manage earnings or influence the perceptions of
the users of the financial statements.
Based on this understanding we designed our audit procedures to
identify irregularities including fraud. We performed audit procedures,
including through testing journal entries and other adjustments for
appropriateness, which were designed to provide reasonable
assurance the financial statements were free from material fraud or
error. Our procedures involved review of Board minutes to identify
non-compliance with such laws and regulations, review of reporting to
the Audit Committee on compliance with regulations, enquiries of
legal counsel, Group management, the Audit Committee, internal audit
and subsidiary management at all full-scope components and review of
any relevant investigations undertaken.

Explanation as to what extent the audit was considered capable of
detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect irregularities, including fraud. The risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate concealment by,
for example, forgery or intentional misrepresentations, or through collusion.
The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below. However, the primary responsibility for the
prevention and detection of fraud rests with both those charged with
governance of the entity and management.

Our approach was as follows:
• We obtained an understanding of the legal and regulatory frameworks

that are applicable to the Group and Company and determined that
the most significant which are directly relevant to specific assertions in
the financial statements, are those that relate to the reporting
framework (International Accounting Standards in conformity with the
requirements of the Companies Act 2006, and FRS 101 and the
Companies Act 2006), Health and Safety regulations and the relevant
tax compliance regulations in the jurisdictions in which the Group
operates.

• We understood how Motion JVco Limited is complying with those

frameworks by making enquiries of management, those responsible for
legal and compliance procedures and the Company Secretary. We
corroborated our enquiries through our review of Board and other
relevant Committee minutes, discussions with the Audit Committee,
review of whistleblowing reports and any correspondence received
from regulatory bodies.

A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website at
www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor’s report.

Use of our report
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the Company’s
members as a body, for our audit work, for this report, or for the opinions we
have formed.

Rachel Savage (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London

12 April 2022

MOTION JVCO LIMITED

PRIMARY STATEMENTS

CONSOLIDATED INCOME
STATEMENT

For the 52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

(1)
(2)

(3)

(4)

Details of the prior year restatement are provided in note 1.1.
EBITDA – this is defined as profit before finance income and costs, taxation, depreciation, amortisation and impairment and is after taking account of attributable profit after tax of joint
controlled entities.
Loss for the year for 2021 and 2020 is wholly attributable to the owners of the Company.
Details of exceptional items are provided in note 2.2.

UnderlyingExceptionalUnderlyingExceptionaltradingitems(4)Totaltradingitems(4)TotalNote£m£m£m£m£m£mRevenue2.11,261 - 1,261 629 - 629 Cost of sales2.1(226)- (226)(159)- (159)Gross profit1,035 - 1,035 470 - 470 Staff expenses2.1(373)(1)(374)(290)(14)(304)Marketing(30)- (30)(30)- (30)Other operating expenses(253)(2)(255)(252)(8)(260)EBITDA(2)2.1379 (3)376 (102)(22)(124)Depreciation, amortisation and impairment3.1, 3.2, 4.4(247)1 (246)(267)(352)(619)Operating profit/(loss)132 (2)130 (369)(374)(743)Finance income2.32 - 2 4 - 4 Finance costs2.3(226)- (226)(226)- (226)Loss before tax(92)(2)(94)(591)(374)(965)Taxation2.4(46)- (46)118 28 146 Loss for the year(3)(138)(2)(140)(473)(346)(819)20202021Restated(1)

MOTION JVCO LIMITED

PRIMARY STATEMENTS

CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME

For the 52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

(1)

(2)

Details of the prior year restatement are provided in note 1.1.
Total comprehensive income for the year for 2021 and 2020 is wholly attributable to the owners of the Company.

20212020Restated(1)Note£m£mLoss for the year(140)(819)Other comprehensive incomeItems that cannot be reclassified to the consolidated income statementEquity investments at FVOCI - net change in fair value5.1(1)(42)Defined benefit plan remeasurement gains/(losses)5.23 (4)Income tax on items relating to components of other comprehensive income2.4- 8 2 (38)Items that may be reclassified to the consolidated income statementExchange differences on the retranslation of net assets of foreign operations47 (22)Exchange differences relating to the net investment in foreign operations(1)- 46 (22)Other comprehensive income for the year net of income tax48 (60)Total comprehensive income for the year(2)(92)(879)

MOTION JVCO LIMITED

PRIMARY STATEMENTS

CONSOLIDATED STATEMENT
OF FINANCIAL POSITION

at 25 December 2021 (2020: 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

The financial statements were approved by the Board of Directors on 12 April 2022 and were signed on its behalf by:

Søren Thorup Sørensen
Director

(1)

Details of the prior year restatement are provided in note 1.1.

20212020Restated(1)Note£m£mProperty, plant and equipment3.12,507 2,505 Right-of-use assets4.41,512 1,414 Goodwill and intangible assets3.23,511 3,553 Investments5.124 19 Other receivables3.45 15 Tax receivable29 - Deferred tax assets2.414 5 Non-current assets7,602 7,511 Inventories3.443 54 Trade and other receivables3.4113 84 Derivative financial assets1 4 Tax receivable23 60 Cash and cash equivalents4.1185 306 Current assets365 508 Total assets7,967 8,019 Interest-bearing loans and borrowings4.237 45 Lease liabilities4.434 79 Derivative financial liabilities3 1 Trade and other payables3.4484 475 Tax payable28 34 Provisions3.58 9 Current liabilities594 643 Interest-bearing loans and borrowings4.23,517 3,632 Lease liabilities4.41,424 1,285 Other payables3.420 24 Provisions3.5116 95 Employee benefits5.27 11 Deferred tax liabilities2.4403 351 Non-current liabilities5,487 5,398 Total liabilities6,081 6,041 Net assets1,886 1,978 Issued capital and reserves attributable to owners of the Company1,882 1,974 Non-controlling interest4 4 Total equity4.51,886 1,978

MOTION JVCO LIMITED

PRIMARY STATEMENTS

CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY

For the 52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

TotalNon-ShareShareCapitalTranslationRetainedparentcontrollingTotalcapitalpremiumreservereserveearningsequityinterestequityNote£m£m£m£m£m£m£m£mAt 29 December 2019 (as previously reported)26 2,653 6 (39)(84)2,562 4 2,566 Prior year restatement1.1- - - (2)(13)(15)- (15)At 29 December 2019 (as restated)26 2,653 6 (41)(97)2,547 4 2,551 Loss for the year- - - - (819)(819)- (819)Other comprehensive income forthe year net of income tax- - - (22)(38)(60)- (60)Total comprehensive income for the year- - - (22)(857)(879)- (879)Shares issued4.53 303 - - - 306 - 306 At 26 December 2020 (as restated)1.129 2,956 6 (63)(954)1,974 4 1,978 Loss for the year- - - - (140)(140)- (140)Other comprehensive income forthe year net of income tax- - - 46 2 48 - 48 Total comprehensive income for the year- - - 46 (138)(92)- (92)Transfer to retained earnings4.5- - (6)- 6 - - - At 25 December 20214.529 2,956 - (17)(1,086)1,882 4 1,886

MOTION JVCO LIMITED

PRIMARY STATEMENTS

CONSOLIDATED STATEMENT
OF CASH FLOWS

For the 52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

(1)

(2)

Details of the prior year restatement are provided in note 1.1.
Capital repayments of leases are stated net of £25 million received from the landlord as part of the lease modification at three UK Resort Theme Park locations (see note 4.4).

20212020Restated(1)Note£m£mCash flows from operating activitiesLoss for the year(140)(819)Adjustments for:Depreciation, amortisation and impairment3.1, 3.2, 4.4246 619 Finance income2.3(2)(4)Finance costs2.3226 226 Taxation2.446 (146)376 (124)Loss on sale of property, plant and equipment1 2 Movements in working capital76 60 Changes in provisions and other non-current liabilities1 3 454 (59)Tax received/(paid)5 (16)Net cash inflow/(outflow) from operating activities459 (75)Cash flows from investing activitiesInterest received1 2 Acquisition of investments5.1(7)- Purchase of property, plant and equipment(291)(301)Disposal of property, plant and equipment- 1 Net cash outflow from investing activities(297)(298)Cash flows from financing activitiesProceeds from issue of share capital4.5- 306 Proceeds from borrowings4.2- 576 Repayment of borrowings4.2(13)(9)Repayment of shareholder loans4.2(15)(156)Net capital repayment of lease liabilities(2)(34)(26)Interest paid(232)(189)Financing costs(1)(7)Net cash (outflow)/inflow from financing activities(295)495 Net (decrease)/increase in cash and cash equivalents(133)122 Cash and cash equivalents at beginning of year4.1306 176 Effect of movements in foreign exchange12 8 Cash and cash equivalents at end of year4.1185 306

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS

SECTION 1
BASIS OF PREPARATION

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

1.1

BASIS OF PREPARATION

Motion JVco Limited (the Company) is a private company limited by shares which is incorporated in the United Kingdom. Its registered office is Link House, 25 West
Street, Poole, Dorset, BH15 1LD.

The consolidated financial statements have been prepared and approved by the Directors in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006. The consolidated financial statements are also prepared in accordance with International Financial Reporting Standards
adopted pursuant to Regulation (EC) No. 1606/2002. The Company prepares its parent Company financial statements in accordance with Financial Reporting
Standard 101 Reduced Disclosure Framework (FRS 101).

This section sets out the Group’s accounting policies that relate to the financial statements as a whole. Where an accounting policy is specific to one note, the policy
is described in the note to which it relates. The accounting policies 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 25 December 2021 (2020: 52 weeks ended 26 December 2020).

The consolidated financial statements are prepared on the historical cost basis except for derivative financial instruments and certain investments which are measured
at their fair value. The consolidated financial statements are presented in Sterling. All values are stated in £ million (£m) except where otherwise indicated.

Going concern
The Group reported a loss for the year of £140 million (2020 as restated: £819 million) and generated operating cash inflows of £459 million (2020 as restated: outflow
of £75 million). The Board has assessed the Group and Company’s ability to continue as a going concern to the end of Q3 2023 (being the ‘going concern assessment
period’). The financial statements have been prepared on a going concern basis, which the Directors consider to be appropriate for the reasons set out below.

Funding
The going concern assessment considers the Group’s projected liquidity position and headroom over covenant thresholds from existing committed financing facilities
throughout the going concern assessment period. As at 25 December 2021, the Group had a cash balance of £185 million and available undrawn facilities of
£372 million relating to the Group’s revolving credit facility (RCF), with no unexpected post balance sheet changes in liquidity; we have seen cash outflows since the
end of 2021 reflecting the normal seasonality of trading combined with ongoing capital investment. The Group’s sources of financing and its net debt at the reporting
date are detailed in notes 4.1 and 4.2.

A financial covenant exists in relation to the Group’s £400 million RCF, which is required when the RCF is drawn by 40% or more (net of cash). It requires the
Group to maintain adjusted consolidated senior secured leverage below 10x. Effective June 2021, the Group agreed with its RCF lenders to waive the leverage
covenant until Q3 2023. The terms of the waiver agreement require the Group to maintain a minimum liquidity of £75 million (to include amounts undrawn from the
RCF, and cash and cash equivalents), over the period of the waiver. The Group has complied with all covenants and the terms of the waiver agreement throughout
the year.

Base case
The projections and forecasts prepared for the going concern assessment period to the end of Q3 2023 are derived from the Group’s 2022 budget and longer term
strategic plan, approved by the Merlin Board in December 2021, with relevant refinements made to reflect more recent information. This period has been selected as
the going concern assessment period to ensure that it includes the likely liquidity low point in the next trading cycle.

Our ‘base case’ forecast over the going concern assessment period is based on what we believe is a balanced approach. In this base case, extending up to the end of
Q3 2023, we have made certain key assumptions:
• We have assumed that the likelihood of any significant future COVID-19 related lockdowns and restrictions is low, reflecting, among other factors, the positive

impact of COVID-19 vaccine roll outs.

• We expect the ability of people to travel across borders will remain restricted and that there will be a slower recovery in levels of international tourism than in

domestic markets. This will impact our attractions to different extents.

• The impact of reduced visitation (versus pre COVID-19 levels) is expected to be partially offset by revenue management initiatives.
• Our new business development capital expenditure plans include the completion of LEGOLAND Korea, opening May 2022 within the going concern assessment

period. Capital expenditure on planned Midway attractions also continues to be incurred during the going concern assessment period. Essential capital
expenditure to ensure the health and safety of our guests and staff at existing attractions will continue.

• The base case specifically excludes any potential acquisitions over the period or any strategic initiatives not yet confirmed.

In this base case, there would be no breach of lending facilities taking into account the terms of the covenant calculations. There are no significant restrictions on the
ability of the Company to move cash around the Group, and no material capital repayments of debt falling due within the going concern assessment period, with the
next maturity of facilities being in respect of €500 million of 7.0% senior secured notes due 2025.

The Directors have prepared cash flow forecasts for a 17 month period from the date of approval of these financial statements up to the end of Q3 2023 which
indicate that, under the base case, the Group will have sufficient funds to meet its liabilities as they fall due.

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS

SECTION 1
BASIS OF PREPARATION CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

1.1

BASIS OF PREPARATION (CONTINUED)

Downside scenarios
It remains very difficult to assess how the COVID-19 situation will evolve. The Directors believe the base case scenario above is reasonable, assuming as it does that
the risks of potential future lockdowns and/or trading restrictions have reduced significantly, but also assuming there will be delayed recovery due to continuing
travel restrictions and reduced international tourism.

However, it is possible that the recovery profile is slower than in the base case. The Directors have therefore prepared a severe but plausible downside scenario,
with the following assumptions which differ from the base case:
• This scenario models significantly slower recovery in international tourism than that modelled in the base case, assuming no further recovery in the going

•

concern assessment period above the actual recovery experienced in the financial year ended 25 December 2021.
For those costs where the Group considers there to be inflationary risks above budgeted levels in the base case, this scenario applies increases to variable staff
costs and energy prices versus 2021.

It is also possible that other negative events may occur, including external incidents such as terrorism. Furthermore, while our trading operations are not directly
affected by the war in Ukraine, this and other geopolitical factors could lead to reduced levels of international tourism and further inflationary pressure on
operating costs. In addition, this inflationary pressure in the wider economy could reduce consumers’ discretionary spending, which could impact both visitation and
spend levels in visitor attractions.

While not modelled in the downside scenario, there are numerous mitigating actions the Group could take to mitigate both modelled and unmodelled adverse
impacts. These mitigating measures are considered to be realistically available to the Group based on historical experience, enabling us to meet our liabilities as they
fall due should this situation arise. Within the Group’s control, significant cost cutting measures could be implemented across operations and the Group could delay
uncommitted capital expenditure. While not in the direct control of the Group, we could also seek to further extend waivers to financial covenants on its borrowing
facilities, renew/replace existing facilities and/or raise further finance through cash injections from the consortium of investors in the Company. Given the Group’s
history of cash generation and the successful issue of debt securities during the COVID-19 pandemic, we would expect to be able to raise such funds as were
necessary. However, there is no guarantee that such funds will be available.

In the modelled downside scenario, and not taking into account the impact of any mitigation measures, the Group’s currently available liquidity would remain
positive, albeit reduced, throughout the going concern assessment period. Consistent with the base case, under this scenario there would be no breach of lending
facilities taking into account the terms of the covenant calculations, and it indicates that the Group would still have sufficient funds to enable it to operate within its
available facilities and settle its liabilities as they fall due through the going concern assessment period.

Conclusion
In the 2020 Annual Report and Accounts the Directors disclosed a material uncertainty, relating to circumstances surrounding the COVID-19 pandemic, that cast
significant doubt on the Group and Company’s ability to continue as a going concern.

The Directors have concluded there is no longer a material uncertainty relating to the going concern assessment.

Considering the Group and Company’s statement of financial position, available facilities, cash flow forecasts and the above modelled base case and downside
scenarios, financial projections indicate that the Group will have sufficient funds and resources to continue in operational existence, operate within its available
facilities and settle its liabilities as they fall due over the going concern assessment period. Accordingly, the Group continues to adopt the going concern basis in
preparing its consolidated Group and Company financial statements.

Basis of consolidation
The consolidated financial statements comprise the financial statements of Motion JVco Limited and its subsidiaries at the end of each reporting period (see note 5.7)
and include its share of its joint ventures’ results using the equity method.

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns through its involvement with
the entity and has the ability to affect those returns through its power over the entity. 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.

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS

SECTION 1
BASIS OF PREPARATION CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

1.1

BASIS OF PREPARATION (CONTINUED)

Foreign currency
Foreign currency transactions are translated 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 period.
• All resulting exchange differences are recognised in equity in the translation reserve.

The reporting date foreign exchange rates by major currency are provided in note 4.3.

Classification of financial instruments issued by the Group
Financial instruments are recognised on the statement of financial position when the Group becomes party to the contractual provisions of the instrument. The
accounting policy for each type of financial instrument is included within the relevant notes.

Financial assets are initially measured at fair value, unless otherwise noted, and are subsequently measured at amortised cost, fair value through other comprehensive
income or fair value through profit or loss. A financial asset is derecognised when the contractual rights to the cash flows from the asset expire or the Group
transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

Financial liabilities are initially measured at fair value, plus, in the case of other financial liabilities, directly attributable transaction costs. Other financial liabilities,
primarily the Group’s interest-bearing loans and borrowings are measured at amortised cost. Financial liabilities are measured at fair value through profit or loss and
are held on the statement of financial position at fair value. A financial liability is derecognised when the Group’s obligations are discharged, expire or are cancelled.
Finance payments associated with financial liabilities are dealt with as part of finance costs.

An equity instrument is any contract that has a residual interest in the assets of the Group after deducting all of its liabilities. Finance payments associated with
financial instruments that are classified in equity are dividends and are recorded directly in equity. The preference shares issued by the Company carry a fixed,
cumulative, preferential dividend which accrues (but is not payable) on each preference share on a daily basis from the date of issue of the relevant preference share.
Payment of these dividends is at the discretion of the Company and accordingly they have been classified as equity.

Where financial instruments consist of a combination of debt and equity, the Group will assess the substance of the arrangement in place and decide how to attribute
values to each taking into consideration the policy definitions above.

Further information on equity instruments issued by the Group is set out in note 4.5.

New standards and interpretations
A full list of new accounting standards and interpretations that have been implemented in the year, including those which have had no significant impact, can be found
in note 5.4.

Change in accounting policy – software-as-a-service (SaaS arrangements)
In April 2021, an IFRIC agenda decision was issued in relation to the accounting treatment for configuration and customisation costs in cloud computing
arrangements. This guidance clarified that in order for an intangible asset to be capitalised in relation to configuration and customisation costs in a software-as-a-
service (SaaS) arrangement, it is necessary for there to be control of the underlying software asset or for there to be a separate intangible asset which meets the
definition in IAS 38 ‘Intangible assets’.

Since 2019, the Group has undertaken numerous technology-based projects that utilise SaaS arrangements. The Group has completed its assessment of the financial
reporting impact of this IFRIC agenda decision and has updated its accounting policy in the financial statements to align with the clarified guidance within the IFRIC
agenda decision. As a result, the Group has expensed all costs previously capitalised associated with both the configuration and customisation of these SaaS
arrangements. Accordingly, the Group's consolidated statements of financial position as at 26 December 2020 and 28 December 2019 have both been restated in
accordance with IAS 8 ‘Accounting policies, changes in accounting estimates and errors’.

This change in accounting policy resulted in an overstatement of equity as at 28 December 2019 of £13 million, which has been corrected by reducing opening
retained earnings. In 2020 and 2021 adjustments relating to intangible asset costs, amounting to £5 million and £3 million respectively, increased exceptional
operating expenses in those periods (see note 2.2). The net impact of these adjustments following the reversal of underlying accumulated amortisation and the
taxation impact is an increase of costs of £3 million and a decrease of costs of £2 million in 2020 and 2021 respectively.

Prior year restatements
During 2021, the Group determined that the financial statements for prior periods contained errors, as set out below. As a result, previously reported figures have
been restated. These restatements have not impacted previously reported underlying revenue or underlying EBITDA.

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS

SECTION 1
BASIS OF PREPARATION CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

1.1

BASIS OF PREPARATION (CONTINUED)

Valuation of brands at acquisition of Merlin Entertainments plc by Motion Acquisition Limited
On 4 November 2019, the acquisition of Merlin Entertainments plc by Motion Acquisition Limited (a subsidiary of Motion JVco Limited) became effective. This
business combination was accounted for by applying the purchase method, where individually identifiable assets and liabilities acquired were valued and any remaining
balance was assigned to goodwill. As part of the purchase price allocation exercise, acquired brands were all valued in Sterling, totalling £1,316 million. During 2021,
this was reviewed, and it has been determined that it is more appropriate for certain brands to be valued in Euros to align with the functional currency of the foreign
operations acquired.

This determination has caused a change in the treatment of deferred tax liabilities relating to these brands. Deferred tax was previously calculated using UK
substantively enacted taxation rates but has now been restated using local taxation rates to align with the foreign operations to which these assets relate. The
increase in deferred tax liabilities of £20 million as at 28 December 2019 was offset by an increase in goodwill.

As a result of movements in foreign exchange rates, equity as at 28 December 2019, as previously reported, was overstated by £2 million. The opening translation
reserve has therefore been adjusted to correct this.

Additional adjustments in 2020 reflect the subsequent retranslation of these balances and changes in tax rates, resulting in a further increase to goodwill and
intangible assets of £12 million, a reduction in deferred tax liabilities of £2 million, a credit to the translation reserve of £9 million (£7 million on a cumulative basis)
and an increase in retained earnings of £5 million (see notes 2.4 and 3.2).

In aggregate the net impact of changing the currencies adopted for the valuations as at 28 December 2019 was an overstatement of equity of £2 million, and an
understatement of £14 million for the year ended 26 December 2020, with a cumulative impact of £12 million.

Taxation
Each year the Group performs a review of its deferred tax position to ensure that the principles for asset recognition are consistently applied. The review considers
if it is probable that each subsidiary undertaking with recognised deferred tax assets would have sufficient taxable profits to utilise recognised assets in the future. In
performing this year’s review the Group has revisited the 2020 balances. This resulted in a £10 million adjustment to deferred tax assets being identified. This in turn
reduced the taxation credit recognised by the Group in the prior year.

Current tax balances that have arisen in the different jurisdictions should be presented as gross receivables and payables to reflect that there is no right of net
settlement rather than being presented net. We have therefore restated the 26 December 2020 tax receivable and payable by £34 million to present these balances
on a gross basis as noted above. The error did not have an income statement impact.

At the same time, an assessment has also been performed to quantify deferred tax balances that have arisen in the same jurisdictions and are expected to unwind
over a similar timeframe and therefore should be netted rather than being presented as gross. This has resulted in a prior year reclassification of £146 million
between deferred tax assets and deferred tax liabilities. See note 2.4 for further details.

Impact of change in accounting policy and prior year restatements
The impact of the change in accounting policy for SaaS arrangements and the correction of the prior period errors had the following impact on the statement of
financial position as at 26 December 2020 and 28 December 2019:

AccountingValuation ofCurrent taxImpactedpolicy changebrands andDerecognitiongross up/Impactedline itemsfor SaaSassociatedof deferreddeferred taxline itemsas reportedarrangementsdeferred taxtax assetsnettingas restatedProperty, plant and equipment2,512 (7)- - - 2,505 Goodwill and intangible assets3,535 (12)30 - - 3,553 Deferred tax assets158 3 - (10)(146)5 Tax receivable26 - - - 34 60 Tax payable- - - - (34)(34)Deferred tax liabilities(479)- (18)- 146 (351)Impact on net assets(16)12 (10)- Translation reserve70 - (7)- - 63 Retained earnings933 16 (5)10 - 954 Impact on total equity16 (12)10 - 26 December 2020

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS

SECTION 1
BASIS OF PREPARATION CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

1.1

BASIS OF PREPARATION (CONTINUED)

The impact of the deferred tax netting has not been disclosed for the statement of financial position at 28 December 2019 given this has no impact on the net
assets presented.

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.

Judgements
Management considers the following areas to be the judgements that have the most significant effect on the amounts recognised in the financial statements. They are
explained in more detail in the related notes:
• Useful life of brands (note 3.2) - where significant brands have been recognised as part of an acquisition, they have been assessed as having indefinite useful lives

and management have considered that this judgement remains appropriate.

• Goodwill impairment reviews (note 3.3) - the level at which goodwill is initially allocated and thereafter monitored.
• Vesting period of share-based payments (note 4.6) - the Group has exercised its judgement in determining the grant date of the three schemes awarded in the year,
which has been deemed to be the date of share issuance. Considering ongoing future strategies of both the Group and the Group’s shareholders, the most likely
vesting dates for each scheme have been deemed to be in four or ten years for interim trigger events and exit respectively.

Estimates
Management considers the following areas to involve a significant degree of estimation uncertainty:
• Taxation (note 2.4) - recognition of deferred tax balances and accounting for tax risks.
• Valuation of the LEGOLAND Parks (LLP) and Resort Theme Parks (RTP) Operating Groups’ assets and impairment (note 3.3) – the estimation of future cash flows

•
•
•

together with the discount rates adopted when calculating the value in use of assets. The valuation of other assets and impairment, excluding LLP and RTP,
involves a degree of estimation uncertainty but the likelihood of a resulting change in value is less significant.
Provisions (note 3.5) - estimated outflow to settle the obligations and, where relevant, the appropriate discount and inflation rates to apply.
Lease obligations (note 4.4) - estimation of the discount rate used in the calculation of certain lease liabilities.
Share-based payments (note 4.6) - the implied enterprise value of Motion Topco Limited was calculated as at December 2021 in order to calculate share-based
payment valuations for the three schemes awarded in the year. The valuation was performed using the Monte Carlo option pricing model, the inputs to which
involve estimation uncertainty. Future valuation fluctuations could materially impact share-based payment expenses recognised in subsequent periods.

Other non-significant areas that include a degree of estimation uncertainty are:
•
•

Interest-bearing loans and borrowings (note 4.2) - expected period of borrowings when calculating the effective interest rate on those borrowings.
Lease obligations (note 4.4) - IFRS 16 defines the lease term as the non-cancellable period of a lease together with the options to extend or terminate a lease, if
the lessee were reasonably certain to exercise that option. Where a lease includes the option for the Group to extend the lease term, the Group makes a
judgement as to whether it is reasonably certain that the option will be taken.
•
Investments (note 5.1) - earnings multiples and discounted cash flows when calculating the fair value of investments.
• Employee benefits (note 5.2) - assumed discount rate, inflation rate and mortality when valuing defined benefit liabilities.

While these areas do not present a significant risk resulting in a material adjustment, they are areas of focus for management.

AccountingValuation ofImpactedpolicy changebrands andImpactedline itemsfor SaaSassociatedline itemsas reportedarrangementsdeferred taxas restated£m£m£m£mProperty, plant and equipment2,430 (7)- 2,423 Goodwill and intangible assets3,801 (9)18 3,810 Net deferred tax liabilities(413)3 (20)(430)Impact on net assets(13)(2)Translation reserve39 - 2 41 Retained earnings84 13 - 97 Impact on total equity13 2 28 December 2019

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS

SECTION 2
RESULTS FOR THE YEAR

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

2.1

PROFIT BEFORE TAX

Segmental information
An operating segment, as defined by IFRS 8 ‘Operating segments’, 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, and the Board. 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.

(1)

(2)

(3)

(4)

(5)

Revenue is disaggregated into the three categories described below.
Performance is measured based on segment EBITDA, as included in internal management reports. Segment operating profit/(loss) is included for information purposes.
Details of the prior year restatement are provided in note 1.1.
Other items include Merlin Magic Making, head office costs and various other costs, which cannot be directly attributed to the reportable segments. Following a restructure there was a reallocation
in 2021 of £6 million of costs across the Operating Groups.
Details of exceptional items are provided in note 2.2.

ResortMidwayLEGOLANDThemeSegmentOtherExceptionalAttractionsParksParksresultsitems(4)items(5)Total£m£m£m£m£m£m£m2021Visitor revenue331 380 298 1,009 - - 1,009 Accommodation revenue- 124 70 194 - - 194 Other revenue13 33 6 52 6 - 58 Revenue(1)344 537 374 1,255 6 - 1,261 EBITDA(2)102 172 148 422 (43)(3)376 Depreciation and amortisation(112)(66)(61)(239)(8)- (247)Impairment- - - - - 1 1 Operating profit(2)(10)106 87 183 (51)(2)130 2020 - as restated (3)Visitor revenue216 149 128 493 - - 493 Accommodation revenue- 62 38 100 - - 100 Other revenue12 17 3 32 4 - 36 Revenue(1)228 228 169 625 4 - 629 EBITDA(2)(17)(30)- (47)(55)(22)(124)Depreciation and amortisation(129)(65)(62)(256)(11)- (267)Impairment- - - - - (352)(352)Operating loss(2)(146)(95)(62)(303)(66)(374)(743)

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 2
RESULTS FOR THE YEAR CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

2.1

PROFIT BEFORE TAX (CONTINUED)

Geographical areas
While each Operating Group is managed on a worldwide basis, part of our strategy is to diversify geographically across the four regions shown below. The
information presented is based on the geographical locations of the visitor attractions concerned.

Geographical information

Revenue
Revenue represents the amounts received (excluding VAT and similar taxes) in the areas set out below and which have been disaggregated in the segmental
information presented above. When accounting for revenue, an assessment is made, considering the control principles of IFRS 15, as to whether parties involved in
providing goods or services to a customer are acting as a principal (if they control delivery to the customer) or, if they are arranging for those goods or services to
be provided by the other party, as an agent.

• Visitor revenue - represents admissions tickets, retail, food and beverage sales and other commercial offerings such as photos and games experiences inside an

attraction. Tickets and other services can be bought in advance, generally online, in which case they are held in deferred revenue and recognised when the visitor
uses those tickets or services or the validity period expires. Revenue from annual passes and other tickets that entitle a customer to continued visits over a
period of time is deferred and then recognised over the period that the pass is valid. Retail and food and beverage revenue, along with other similar commercial
offerings, is recognised at point of sale.

• Accommodation revenue - represents overnight stay and conference room revenue along with food and beverage revenue earned within our hotels and other

accommodation offerings. Accommodation revenue is recognised at the time when a customer stays at the accommodation.

• Other revenue - represents sponsorship, function, management and development contract revenue along with other sundry items. Sponsorship revenue is

recognised over the relevant contract term. Function revenue is recognised at the time of the event. Management contract revenue is recognised as it is earned.
Where the Group enters into contracts for attraction development, revenue is recognised over time as performance obligations under the contracts are met.

Cost of sales
Cost of sales of £226 million (2020: £159 million) represents variable expenses (excluding VAT and similar taxes) incurred from revenue generating activities. Retail
inventory, food and beverage consumables and costs associated with the delivery of accommodation are the principal expenses included within this category.

Operating expenses
Staff numbers and costs
The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:

Non-currentNon-currentRevenuesassetsRevenuesassets2021202120202020Restated£m£m£m£mUnited Kingdom461 2,935 222 2,873 Continental Europe256 1,526 169 1,625 North America425 2,179 129 2,096 Asia Pacific119 895 109 893 1,261 7,535 629 7,487 Tax receivable29 - Deferred tax (note 2.4)14 5 Investments (note 5.1)24 19 7,602 7,511 20212020Operations15,423 11,509 Attraction management and central administration2,187 2,090 17,610 13,599

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 2
RESULTS FOR THE YEAR CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

2.1

PROFIT BEFORE TAX (CONTINUED)

The aggregate payroll costs of these persons were as follows:

The total charge for the year for share-based payments is less than £1 million. Further details are provided in note 4.6.

The Group has accessed government support measures in the geographies in which it operates, including employee furlough schemes. This funding meets the
definition of a government grant and the income recognised in the year in relation to these schemes was £19 million (2020: £49 million), primarily in the UK,
Germany, Australia, and Denmark.

Government grants are recognised when there is reasonable assurance that the Group has complied with the relevant conditions within the agreement and that the
grant will be received. For each grant, the Group assesses whether it relates to either capital or operational expenditure incurred. A grant relating to expenses
already incurred is recognised in the period in which it becomes receivable, offsetting the expenses the grants are intended to compensate. The funding received is
included within the cash flows from operating activities in the consolidated statement of cash flows.

Directors’ remuneration
Directors’ remuneration for the year was £0.3 million, being the remuneration of the highest paid Director (2020: £0.2 million). There were no Company pension
contributions payable.

Related party transactions with key management personnel
The remuneration of key management, comprising the members of the Executive Committee, was as follows:

Auditor’s remuneration

During 2021 KPMG LLP resigned as auditors to the Company and Ernst & Young LLP were appointed. The 2020 comparative relates to amounts paid to KPMG LLP.

Other operating expenses
In addition to the employee furlough schemes noted above, governments worldwide introduced a number of other support measures that the Group accessed.
These totalled £19 million (2020: £8 million) and were offset against other operating expenses in the income statement. They related to arrangements whereby the
government funding provided support for operating costs. The funding received is included within the cash flows from operating activities in the consolidated
statement of cash flows.

20212020£m£mWages and salaries342 305 Social security costs40 37 Other pension costs11 11 Government support(19)(49)374 304 20212020£m£mKey management emoluments including social security costs7.3 5.4 Contributions to money purchase pension schemes- 0.2 Share-based payments and other related payments0.2 - 7.5 5.6 20212020£m£mAudit of these financial statements1.9 1.8 Audit of financial statements of subsidiaries0.5 0.4 Other assurance services- 0.1 Services relating to corporate finance transactions- 0.2 2.4 2.5

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 2
RESULTS FOR THE YEAR CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

2.2

EXCEPTIONAL ITEMS

Accounting policy
Due to their nature, certain one-off and non-trading items can be classified separately as exceptional items in order to draw them to the attention of the reader. In
the judgement of the Directors this presentation shows the underlying performance of the Group more accurately.

Exceptional items
The following items are exceptional and have been shown separately on the face of the consolidated income statement.

(1)

(2)

(3)

(4)

Certain one-off operational costs have been incurred in 2021 as the Group’s productivity and efficiency related activities that commenced in 2020 were completed. In 2020 they mainly related to
changes made to our organisational structures in attractions and support functions, primarily in response to the COVID-19 pandemic, together with the completion of long term productivity
initiatives commenced in previous years. The Group has changed its accounting policy related to the capitalisation of certain software assets following the IFRS Interpretations Committee’s agenda
decision published in April 2021. This change in accounting policy led to an increase in exceptional operating expenses relating to productivity and efficiency activities of £3 million in the current
year and £5 million for 2020. All 2020 results are restated; see note 1.1 for further details. They are separately presented as they are not part of the Group’s underlying operating expenses.
Transaction costs within other operating expenses in 2020 primarily represented professional and advisor fees incurred in connection with the acquisition of the Merlin Group in 2019, certain of
which became payable in 2020. In 2021 certain costs in respect of previous transactions were finalised leading to the release of amounts previously provided for of £1 million. They are separately
presented as they are not part of the Group’s underlying operating expenses.
Impairment charges in 2020 of £260 million were in respect of goodwill associated with the LEGOLAND Parks Operating Group. These reflected latest estimates at the end of the reporting period
of the combined future performance of the attractions within that Operating Group, taking into account reviews of the market and economic conditions at those locations. They were separately
presented as ordinarily goodwill is not amortised and therefore these charges did not form part of the underlying result.
Impairment charges in 2020 of £78 million in property, plant and equipment and £14 million in right-of-use assets were in respect of certain of the Group’s attractions. The discounted cash flows
that underpinned our value in use calculations reflected the current business plans which were updated for factors including the short term impact of COVID-19. In particular, this included
consideration of LEGOLAND New York where the opening had been delayed. In 2021 an impairment credit has been recorded in the year of £1 million in respect of one Midway location that was
subject to impairment in 2020. They are separately presented as they are not part of the Group’s underlying depreciation charge.

20212020Restated£m£mWithin staff expenses:Productivity and efficiency activities(1)1 14 Within other operating expenses:Productivity and efficiency activities(1)3 6 Transaction costs(2)(1)2 Exceptional items included within EBITDA3 22 Within depreciation, amortisation and impairment:Impairment of intangible assets(3)- 260 Impairment of property, plant and equipment and right-of-use assets(4)(1)92 Exceptional items before income tax2 374 Income tax credit on exceptional items above - (28)Exceptional items for the year2 346

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 2
RESULTS FOR THE YEAR CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

2.3

FINANCE INCOME AND COSTS

Accounting policies
Income and costs
Finance income comprises interest income from financial assets and investments, 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.

Capitalisation of borrowing costs
Where assets take a substantial time to complete, the Group capitalises borrowing costs directly attributable to the acquisition, construction or production of
those assets.

Finance income

Finance costs

Capitalised borrowing costs amounted to £8 million in 2021 (2020: £18 million), with a capitalisation rate of 4.3% (2020: 4.4%). Tax relief on capitalised borrowing
costs amounted to £2 million in 2021 (2020: £5 million).

20212020£m£mInterest income2 4 20212020£m£mInterest expense on lease liabilities52 51 Interest expense on financial liabilities measured at amortised cost165 167 Other interest expense7 2 OtherNet foreign exchange loss2 6 226 226

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 2
RESULTS FOR THE YEAR CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

2.4

TAXATION

Accounting policies
The tax charge for the year is recognised in the income statement and the statement of comprehensive income, according to the accounting treatment of the related
transaction. The tax charge comprises both current and deferred tax.

Current tax is the expected tax payable on taxable income, using tax rates 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. This assessment is made after considering a number of factors, including the Group’s future trading expectations.

Provisions for uncertain tax positions are recognised when the Group has a present obligation as a result of a past event and management judge that it is probable that
there will be a future outflow of economic benefits to settle that obligation. Uncertain tax positions are assessed and measured on an issue by issue basis within the
jurisdictions that we operate using management’s estimate of the most likely outcome. A combination of in-house tax experts, previous experience and professional firms
is used when assessing uncertain tax positions.

Recognised in the income statement

Deferred tax in 2020 has been restated following a review of the Group’s deferred tax position, and a change in the currencies used in considering the valuation of
the Group’s brands. See note 1.1 for further details.

20212020Restated£m£mCurrent tax Current year5 (54)Adjustment for prior periods(7)(13)Total current income tax(2)(67)Deferred tax Origination and reversal of temporary differences(9)(101)Changes in tax rate58 25 Adjustment for prior periods(1)(3)Total deferred tax48 (79)Total tax expense/(credit) in income statement46 (146)

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 2
RESULTS FOR THE YEAR CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

2.4

TAXATION (CONTINUED)

Reconciliation of effective tax rate

The effective tax rate (ETR) reflects updates to the headline UK rate, including the effect on the measurement of deferred tax.

The difference between the reported ETR of (48.9)% and the UK standard tax rate of 19.0% is primarily attributable to the revaluation of deferred tax liabilities due to the
change in the UK tax rate from 19% to 25% from 1 April 2023, and the non-recognition of tax losses.

In 2020, the difference between the underlying ETR (excluding exceptionals) of 20.0% (as restated) and the UK standard rate was attributable to a number of factors
including the Group’s geographic mix of profits and the benefit derived from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This was offset by the non-
recognition of tax losses and the revaluation of deferred tax liabilities due to the change in the UK tax rate when it was maintained at 19%, rather than reducing it to 17%
from 1 April 2020. In 2020 the Group benefited from certain reliefs available in the CARES Act in the US. This allowed operating losses generated in 2020 to be carried
back five years. As the US corporate tax rate was higher in the earlier years the Group obtained a permanent benefit from the carry back.

Significant factors impacting the Group’s future ETR include the Group’s geographic mix of profits and changes to local or international tax laws. In the 3 March 2021
Budget it was announced that the UK tax rate will increase to 25% from 1 April 2023. This will have a consequential effect on the Group’s future tax charge.

In April 2019 the European Commission (EC) announced its final decision that certain elements of the UK’s Controlled Foreign Company rules partially represent State
Aid. The UK Government has made an annulment application against the EC decision. Separately, the Group has made its own application. In February 2021, the Group
received charging notices from HMRC for £28 million, which have been paid. The Group expects the applications will ultimately be successful and accordingly the
payments are held as a receivable. If the applications are ultimately unsuccessful then this could result in an increase in the Group’s future effective tax rate.

Recognised directly in equity through the statement of other comprehensive income

2021202120202020RestatedRestated%£m%£mLoss before tax(94)(965)Income tax using the UK domestic corporation tax rate19.0% (18)19.0% (183)Effect of tax rates in foreign jurisdictions(5)(31)Non-deductible expenses4 36 Income not subject to tax(1)(2)Effect of changes in tax rate58 25 Unrecognised temporary differences16 25 Adjustment for prior periods(8)(16)Total tax expense/(credit) in income statement(48.9%)46 15.1% (146)20212020£m£mEquity investments at FVOCI - net change in fair value- (7)Remeasurement gains/(losses) on defined benefit plans- (1)Total tax credit in statement of other comprehensive income- (8)

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 2
RESULTS FOR THE YEAR CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

2.4

TAXATION (CONTINUED)

Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:

Other short term temporary differences primarily relate to financial assets and liabilities and various accruals and prepayments.

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.

Movement in deferred tax during the current year

In 2021 movements recognised in income were principally due to the revaluation of deferred tax liabilities due to the change in the UK tax rate offset by interest
disallowances in the UK and USA.

202120202021202020212020RestatedRestatedRestated£m£m£m£m£m£mProperty, plant and equipment22 46 (205)(197)(183)(151)Right-of-use assets / lease liabilities41 41 (78)(83)(37)(42)Other short term temporary differences55 40 (3)(2)52 38 Corporate interest restriction56 21 - - 56 21 Intangible assets22 23 (362)(300)(340)(277)Tax value of loss carry-forwards63 65 - - 63 65 Tax assets/(liabilities)259 236 (648)(582)(389)(346)Set-off tax(245)(231)245 231 - - Net tax assets/(liabilities)14 5 (403)(351)(389)(346)AssetsLiabilitiesNetRecognisedEffect of 27in othermovements25DecemberRecognisedcomprehensivein foreignDecember2020in incomeincome exchange2021Restated£m£m£m£m£mProperty, plant and equipment(151)(35)- 3 (183)Right-of-use assets / lease liabilities(42)4 - 1 (37)Other short term temporary differences38 15 - (1)52 Corporate interest restriction21 35 - - 56 Intangible assets(277)(66)- 3 (340)Tax value of loss carry-forwards65 (1)- (1)63 Net tax assets/(liabilities)(346)(48)- 5 (389)

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 2
RESULTS FOR THE YEAR CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

2.4

TAXATION (CONTINUED)

Movement in deferred tax during the previous year

In 2020 movements recognised in income were principally due to the exceptional impairment of assets held by overseas group companies, increases in losses
recognised for deferred tax and the revaluation of deferred tax liabilities held by UK companies. As substantively enacted on 17 March 2020, the UK tax rate
remained at 19% and did not change to 17% from 1 April 2020 as previously enacted on 6 September 2016.

Deferred tax balances relating to both 2019 and 2020 have been restated following a review of the Group’s deferred tax position, and a change in the currencies
used in considering the valuation of the Group’s brands. See note 1.1 for further details.

Unrecognised deferred tax assets

The unrecognised deferred tax assets relating to loss carry-forwards include £6 million (2020: £5 million) expiring in 0-5 years and £28 million (2020: £20 million)
expiring in 6-10 years. The remaining losses and other timing differences do not expire under current tax legislation.

The nature and location of the tax losses carried forward are such that there is currently no expectation that the majority of the losses will be utilised.

RecognisedEffect of 29in othermovements26DecemberRecognisedcomprehensivein foreignDecember2019in incomeincome exchange2020RestatedRestated£m£m£m£m£mProperty, plant and equipment(166)16 - (1)(151)Right-of-use assets / lease liabilities(35)(7)- - (42)Other short term temporary differences10 28 - - 38 Corporate interest restriction- 21 - - 21 Intangible assets(244)(31)- (2)(277)Tax value of loss carry-forwards5 52 8 - 65 Net tax assets/(liabilities)(430)79 8 (3)(346)20212020Restated£m£mProperty, plant and equipment1 3 Right-of-use assets / lease liabilities23 25 Other short term temporary differences21 44 Tax value of loss carry-forwards87 90 Net unrecognised tax assets132 162

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 3
OPERATING ASSETS
AND LIABILITIES
52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

3.1

PROPERTY, PLANT AND EQUIPMENT

Accounting policies
Property, plant and equipment (PPE) are stated at cost less accumulated depreciation and impairment losses.

Where components of an item of PPE have different useful lives, they are accounted for separately.

The initial cost of PPE includes all costs incurred in bringing the asset into use and includes external costs for the acquisition, construction and commissioning of the
asset, internal project costs (primarily staff expenses) and capitalised borrowing costs.

Assets acquired through business combinations
At the time of a business combination PPE is separately recognised and valued. Given the specialised nature of the PPE 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 below. Residual values are based on industry specific indices. Freehold land is valued using a market approach.

New sites
Capital expenditure on new attractions includes all the costs of bringing the items of PPE within that attraction into use ready for the opening of the attraction.
Pre-opening costs are only capitalised to the extent they are required to bring PPE into its working condition. Other pre-opening costs are expensed as incurred.

Existing sites
Subsequent expenditure on items of PPE in our existing estate can be broadly split into two categories:
• Capital expenditure which adds new items of PPE to an attraction or which extends the operational life, or enhances existing items, of PPE is accounted for as
an addition to PPE. Examples of such expenditure include new rides or displays and enhancements to rides or displays, which increase the appeal of our
attractions to visitors.

• Expenditure which is incurred to maintain the items of PPE in a safe and useable state and to maintain the useful life of items of PPE is charged to the income
statement as incurred. Examples of such expenditure include regular servicing and maintenance of buildings, rides and displays and ongoing repairs to items
of PPE.

Government grants
Government grants are recognised when there is reasonable assurance that the Group has complied with the relevant conditions within the agreement and that the
grant will be received. For each grant, the Group assesses whether it relates to either capital or operational expenditure incurred. The Group has elected to
deduct grants related to capital expenditure from the total project costs within property, plant and equipment and amortise them systematically over the useful life
of the assets.

Depreciation
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. Depreciation is then charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of PPE. Asset lives
for plant and equipment vary depending on the nature of the asset, from short life assets such as IT assets, up to long term infrastructure assets. No residual values
are typically considered.

The estimated useful lives are as follows:

Asset class

Freehold/long leasehold buildings

Leasehold buildings

Plant and equipment

Depreciation policy

50 years

20 – 50 years (dependent on life of lease)

5 – 30 years

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 3
OPERATING ASSETS
AND LIABILITIES CONTINUED
52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

3.1

PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Property, plant and equipment

Depreciation is calculated in line with the policy stated previously.

During the year the Group reviews useful economic lives and tests PPE for impairment in accordance with the Group’s accounting policy, as referred to in note 3.3.
There were no impairment charges in the year. In 2020 impairment charges of £78 million were made as the discounted cash flows that underpinned our value in use
calculations reflected our business plans which were updated for factors including the short term impact of COVID-19. In particular, this included consideration of
LEGOLAND New York where the opening had been delayed.

Capital commitments
At the year end the Group had a number of outstanding capital commitments in respect of capital expenditure at its existing attractions (including accommodation),
as well as for Midway attractions and LEGOLAND parks that are under construction. These commitments are expected to be settled within two financial years of
the reporting date. These amount to £70 million (2020: £143 million) for which no provision has been made.

Land andPlant andUnderbuildingsequipment constructionTotal£m£m£m£mCostAt 29 December 2019 (restated)1,227 835 389 2,451 Additions- 12 328 340 Disposals- (3)(2)(5)Transfers31 44 (75)- Effect of movements in foreign exchange11 7 (13)5 Balance at 26 December 2020 (restated)1,269 895 627 2,791 Additions1 18 201 220 Disposals- (2)(1)(3)Transfers293 284 (577)- Effect of movements in foreign exchange(19)(19)(18)(56)Balance at 25 December 20211,544 1,176 232 2,952 DepreciationAt 29 December 2019 (restated)10 18 - 28 Depreciation for the year 55 128 - 183 Impairment12 11 55 78 Disposals- (2)- (2)Effect of movements in foreign exchange- (1)- (1)Balance at 26 December 2020 (restated)77 154 55 286 Depreciation for the year 55 110 - 165 Disposals- (2)- (2)Transfers53 2 (55)- Effect of movements in foreign exchange(1)(3)- (4)Balance at 25 December 2021184 261 - 445 Carrying amountsAt 28 December 2019 (restated)1,217 817 389 2,423 At 26 December 2020 (restated)1,192 741 572 2,505 At 25 December 20211,360 915 232 2,507

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 3
OPERATING ASSETS
AND LIABILITIES CONTINUED
52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

3.2 GOODWILL AND INTANGIBLE ASSETS

Accounting policies
Goodwill represents the difference between the cost of an acquisition and the fair value of the identifiable net assets acquired less 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 are valued using the excess earnings method. All the significant brands acquired are assessed as having indefinite useful
economic lives. This assessment is based upon the strong historical performance of the brands over a number of economic cycles, the ability to roll out the brands,
and the Directors’ intentions regarding the future use of brands. The Directors 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 finite life on the brands. The brands are tested annually for impairment.
Other brands are amortised over a period of fifteen years.

Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense as incurred.

Other intangible assets comprise software licences deemed to be controlled by the Group, sponsorship rights and other contract or relationship 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 (up to 15 years)

Other intangible assets

Relevant contractual period (up to 30 years)

Goodwill and intangible assets

GoodwillBrandsOtherTotal£m£m£m£mCostAt 29 December 2019 (restated)2,469 1,314 27 3,810 Additions- - 5 5 Effect of movements in foreign exchange(9)11 1 3 Balance at 26 December 2020 (restated)2,460 1,325 33 3,818 Additions- - 2 2 Effect of movements in foreign exchange(28)(13)- (41)Balance at 25 December 20212,432 1,312 35 3,779 AmortisationAmortisation for the year- 1 4 5 Impairment260 - - 260 Balance at 26 December 2020 (restated)260 1 4 265 Amortisation for the year- - 5 5 Effect of movements in foreign exchange(2)- - (2)Balance at 25 December 2021258 1 9 268 Carrying amountsAt 28 December 2019 (restated)2,469 1,314 27 3,810 At 26 December 2020 (restated)2,200 1,324 29 3,553 At 25 December 20212,174 1,311 26 3,511 Intangible assets

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 3
OPERATING ASSETS
AND LIABILITIES CONTINUED
52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

3.2 GOODWILL AND INTANGIBLE ASSETS (CONTINUED)

Intangible assets are tested for impairment in accordance with the Group’s accounting policy, as referred to in note 3.3. As a result of these tests, no impairment
charges have been made in the year (2020: £260 million in respect of goodwill associated with the LEGOLAND Parks Operating Group). The impairment charge in 2020
reflected latest estimates at the end of the reporting period of the combined future performance of the attractions within that Operating Group, taking into account
reviews of the market and economic conditions at those locations.

In the year, the Group changed its accounting policy relating to software-as-a-service (SaaS) configuration and customisation costs to align with the clarified guidance
within the IFRIC agenda decision released in April 2021. This has resulted in adjustments to reduce other intangible assets in previous periods (see note 1.1 for
further details).

Goodwill
Goodwill is allocated to the Group’s operating segments which represent the lowest level at which it is monitored and tested for impairment. It is denominated in
the relevant local currencies and therefore the carrying value is subject to movements in foreign exchange rates.

Brands
The Group has valued the following brands at the time of those brands being acquired. In previous years the brands were all valued in Sterling. During 2021, this
accounting policy was reviewed, and it has been determined that it is more appropriate for certain brands to be valued in Euros to align with the functional currency
of the foreign operations acquired (see note 1.1).

20212020Restated£m£mMidway Attractions323 328 LEGOLAND Parks1,724 1,740 Resort Theme Parks127 132 2,174 2,200 20212020Restated£m£mMidway AttractionsMadame Tussauds428 428 SEA LIFE205 205 London Eye213 213 Dungeons92 92 Other7 7 945 945 Resort Theme ParksGardaland Resort168 179 Alton Towers Resort92 92 THORPE PARK Resort30 30 Heide Park Resort30 32 Chessington World of Adventures Resort28 28 Warwick Castle18 18 366 379 1,311 1,324

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 3
OPERATING ASSETS
AND LIABILITIES CONTINUED
52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

3.3

IMPAIRMENT TESTING

Accounting policies
The carrying amounts of the Group’s goodwill, intangible assets, PPE and right-of-use (ROU) assets are reviewed at the end of each reporting period to determine whether
there is any indication of impairment. If any such indication exists or if the asset has an indefinite life, 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. Impairment testing is performed first at the individual cash-generating unit (CGU) level without goodwill, with any
impairment loss recognised as required. Impairment testing for goodwill is then applied to the collection of CGUs to which the goodwill relates.

The level at which the assets concerned are reviewed varies as follows:

Asset

Goodwill

Brands

PPE

ROU assets

Goodwill is reviewed at an Operating Group level, being the relevant grouping of 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 at an individual CGU level.

PPE is reviewed at an individual CGU level, being the Group's individual attractions.

ROU assets are reviewed at an individual CGU level, being the Group's individual attractions. In doing so, the associated lease liability is
considered against the value of the ROU asset as a sale of a CGU would necessitate that a buyer takes on the lease liability.

For assets that are in continuing use but 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
In accordance with accounting standards the recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. To assess value in use,
estimated future cash flows have been discounted to their present value using pre-tax discount rates, each appropriate to the Operating Group concerned. The
Group’s internally approved five year business plans, where the first year is based on latest budgets, are used as the basis for these calculations, with cash flows
beyond the five year outlook period then extrapolated using long term growth rates.

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

Future cash flows

Growth in EBITDA

Timing and quantum of future
capital and maintenance
expenditure

Long term growth rate

Assumed to be equivalent to the operating cash flows of the businesses less the cash flows in respect of capital expenditure
and repayments of lease liabilities. The Group uses EBITDA less an allocation of central costs, in line with other recharges
which occur in the business, as a proxy for the operating cash flows of its attractions as they are not significantly impacted
by movements in working capital.

EBITDA is forecast by an analysis of both projected revenues and costs. 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.

Projections of operating costs are based on historical data, adjusted for variations in visitor numbers and planned expansion
of site activities as well as general market conditions.

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.

A growth rate of 2.5% (2020: 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.

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 3
OPERATING ASSETS
AND LIABILITIES CONTINUED
52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

3.3

IMPAIRMENT TESTING (CONTINUED)

Estimate

Discount rates to reflect the risks
involved

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. Five year average figures are used where appropriate to
reduce the impact of any short term volatility. Net present values are calculated using pre-tax discount rates derived from
this post-tax weighted average cost of capital.

Midway Attractions

LEGOLAND Parks

Resort Theme Parks

Pre-tax discount rates

Post-tax discount rates

2021

10.3%

10.4%

2020

8.8%

8.9%

9.4%

2021

8.3%

8.4%

8.3%

2020

7.4%

7.1%

7.7%

Sensitivity analysis
Impairment reviews are often sensitive to changes in key assumptions. Sensitivity analysis has therefore been performed on the calculated recoverable amounts
considering incremental changes in the key assumptions.

Particular focus is given to material amounts where headroom is more limited. This solely relates to goodwill attributed to the LEGOLAND Parks Operating
Group, where the headroom is £87 million (2020: £260 million of impairment losses were made in the year), and the Resort Theme Parks Operating Group where the
headroom is £22 million (2020: £64 million). The Midway Attractions Operating Group and the individual brands show considerable headroom and are not sensitive
to even significant changes in any of the key assumptions.

Individual site assets could have different outcomes for their impairment reviews in future periods, though the only site with impairment triggers identified this year
where this could be material to the Group would be LEGOLAND New York. The Directors do not envisage any short term factors such as the impact of COVID-19
having a longer term impact on the prospects for the resort.

In undertaking sensitivity analysis consideration has been given to movements in forecast EBITDA, increases in discount rates and reductions in long term
growth rates:
 At the reporting date the Directors consider that the forecasts used reflect the best estimate of future trading. It is noted, however, that the calculations are

inherently sensitive to the level of growth as the business recovers from the impact of the COVID-19 pandemic. This can depend on a number of factors. These
include when attractions are open, the level of any social distancing or other governmental restrictions, customer demand, people’s ability to travel across
borders, vaccine roll outs, and the wider economic trading environment. Other more normal factors such as weather patterns can also affect trading. While in
the short term slower growth would be highly unlikely to affect valuations by a substantial amount, longer term shortfalls that affect the outlook for the fifth year
of the plan (which drives the terminal value) would have a more significant impact.

 Discount rates have been derived from market data. As these rates are intended to be long term in nature they are expected to be reasonably stable in the short

term, however market discount rates could increase in future.

 The long term growth rate, which is applied to the cash flows of the final year in the business plan (2026), 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.

LEGOLAND Parks (LLP)




If EBITDA for LLP as a whole was forecast to be 3% lower than currently anticipated for 2026, headroom would be absorbed in full.
If the pre-tax discount rate used across LLP had been higher by a factor of 2% to 10.6%, headroom would have been absorbed in full.
If circumstances caused the long term growth rate to lower from 2.5% to 2.2%, headroom would be absorbed in full.

Resort Theme Parks (RTP)




If EBITDA for RTP as a whole was forecast to be 1% lower than currently anticipated for 2026, headroom would be absorbed in full.
If the pre-tax discount rate used across RTP had been higher by a factor of 2% to 10.6%, headroom would have been absorbed in full.
If circumstances caused the long term growth rate to lower from 2.5% to 2.3%, headroom would be absorbed in full.

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 3
OPERATING ASSETS
AND LIABILITIES CONTINUED
52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

3.4 WORKING CAPITAL

Accounting policies
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is measured using the first-in first-out principle and includes expenditure incurred in
acquiring the inventories and bringing them to their present location and condition. In a business combination the goods for resale held by the acquired Group are
‘stepped-up’ to a value that takes into account an estimation of the level of future sales proceeds to be generated by the acquiring Group, less estimated costs
necessary to sell the inventory.

Trade and other receivables
Trade and other receivables are recognised and carried at the original invoice amount less a loss allowance calculated using the simplified expected credit loss (ECL)
model approach. Trade receivables are written off when there is no reasonable expectation of recovery. Other receivables are stated at their amortised cost less any
impairment losses. Estimated ECLs are calculated using both actual credit loss experience and forward looking projections.

Inventories

Trade and other receivables

20212020£m£mMaintenance inventory11 13 Work in progress1 - Goods for resale31 41 43 54 2021202020212020£m£m£m£mTrade receivables21 20 - - Other receivables53 38 3 5 Prepayments and contract assets39 26 2 10 113 84 5 15 Current assetsNon-current assets

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 3
OPERATING ASSETS
AND LIABILITIES CONTINUED
52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

3.4 WORKING CAPITAL (CONTINUED)

Ageing of trade receivables
The ageing analysis of trade receivables, net of allowance for non-recoverable amounts, is as follows:

Information about the Group’s exposure to credit risk is included in note 4.3.

Trade and other payables

Accruals
Accruals comprise balances in relation to both operating and capital costs incurred at the reporting date but for which an invoice has not been received and payment
has not yet been made.

Deferred income
Deferred income comprises revenues received or invoiced at the reporting date which relate to future periods. The main components of deferred income relate to
advanced ticket revenues in respect of online bookings and annual pass purchases; pre-booked accommodation; and certain sponsorship and similar arrangements.

In 2021, at year end exchange rates, this also includes £50 million (2020: £54 million) received in respect of funding and infrastructure support for the development of
LEGOLAND Korea. Upon the opening of the park in May 2022, this will be accounted for as a capital grant and offset against the total project costs within
property, plant and equipment. Further details are provided in note 5.3.

20212020£m£mNeither past due nor impaired10 11 Up to 30 days overdue5 2 Between 30 and 60 days overdue1 1 Between 60 and 90 days overdue1 1 Over 90 days overdue4 5 21 20 2021202020212020£m£m£m£mTrade payables60 111 - - Accruals202 155 - - Deferred income190 189 - - Other payables32 20 20 24 484 475 20 24 Current liabilitiesNon-current liabilities

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 3
OPERATING ASSETS
AND LIABILITIES CONTINUED
52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

3.5

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 Directors’ 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

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. These leases are typically of a duration of between 10 and 60 years.

They are established on inception and reviewed annually. The provisions are discounted back to present value with the discount then being unwound through the
income statement as part of finance costs. The cost of establishing these provisions together with the impact of any changes in the discount rate is capitalised within
the cost of the related asset.

Other
Other provisions largely relate to future regulatory payments in connection with the modification of the UK Resort Theme Parks leases and agreements that were
entered into to secure their tenure until 2077 (see note 4.4) that may become payable at the start of the additional 35 year period. Remaining balances relate to the
estimated cost arising from open insurance claims, tax matters and legal issues.

There are no anticipated future events that would be expected to cause a material change in the timing or amount of outflows associated with the provisions.

AssetretirementprovisionsOtherTotal£m£m£mBalance at 27 December 202083 21 104 Provisions made during the year5 31 36 Utilised during the year- (6)(6)Unused amounts reversed(4)(5)(9)Unwinding of discount1 - 1 Effect of movements in foreign exchange(2)- (2)Balance at 25 December 202183 41 124 2021Current- 8 8 Non-current83 33 116 83 41 124 2020Current- 9 9 Non-current83 12 95 83 21 104

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 4
CAPITAL STRUCTURE
AND FINANCING

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

4.1 NET DEBT

Analysis of net debt
Net debt is the total amount of cash and cash equivalents less interest-bearing loans and borrowings and lease liabilities. Cash and cash equivalents comprise cash
balances, call deposits and other short term liquid investments such as money market funds which are subject to an insignificant risk of a change in value.

(1)
(2)
(3)

Net cash flows include the drawdown and repayment of loans and borrowings, interest paid relating to loans and borrowings and interest paid and capital repayments relating to leases.
Non-cash movements include the finance costs relating to loans and borrowings and leases from the income statement, together with lease additions and disposals.
A substantial proportion of the Group’s net debt is denominated in non Sterling currencies.

Effect of 27Netmovements25DecembercashNon-cashin foreignDecember2020flows(1)movements(2)exchange(3)2021£m£m£m£m£mCash and cash equivalents306 (133)- 12 185 Interest-bearing loans and borrowings(3,677)189 (173)107 (3,554)Lease liabilities(1,364)106 (228)28 (1,458)(4,735)162 (401)147 (4,827)Net debtEffect of 29Netmovements26DecembercashNon-cashin foreignDecember2019flows(1)movements(2)exchange(3)2020£m£m£m£m£mCash and cash equivalents176 122 - 8 306 Interest-bearing loans and borrowings(3,195)(246)(199)(37)(3,677)Lease liabilities(1,321)57 (89)(11)(1,364)(4,340)(67)(288)(40)(4,735)Net debt

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 4
CAPITAL STRUCTURE
AND FINANCING CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

4.2

INTEREST-BEARING LOANS AND BORROWINGS

Accounting policy
Interest-bearing loans and borrowings are initially recognised at fair value less attributable fees. These fees are then amortised through the income statement on an
effective interest rate basis over the expected life of the loan (or over the contractual term where there is no clear indication that a shorter life is appropriate). If the
Group’s estimate of the expected life based on repayment subsequently changes, the resulting adjustment to the effective interest rate calculation is recognised as a
gain or loss on re-measurement and presented separately in the income statement, in accordance with IFRS 9.

Interest-bearing loans and borrowings

Interest-bearing loans and borrowings are initially recognised at fair value, net of transaction costs and are subsequently stated at amortised cost. Any difference
between the proceeds (net of transaction costs) and the redemption amount is amortised through the income statement over the period of the borrowings using the
effective interest method. Fixed rate borrowings, which have been hedged to floating rates, are measured at amortised cost adjusted for changes in the value
attributable to the hedged risk arising from the changes in underlying market interest rates.

At 25 December 2021, the Group’s senior facilities are the following:

Senior secured debt
• €1,460 million and $1,358 million drawn facilities to mature in November 2026 entered into by the Company’s subsidiary Motion Finco S.à r.l. The margins on
these facilities are dependent on the Group’s adjusted leverage ratio and at 25 December 2021 were at a margin of 3.0% (2020: 3.0%) for EUR borrowings and
3.25% (2020: 3.25%) for USD borrowings over the floating interest rates when drawn. The relevant floating interest rate is USD LIBOR, which was 0.13% at
25 December 2021 (0.22% at 26 December 2020). No floating rate is added to the EUR borrowings while EURIBOR is negative.

• €500 million of 7.0% senior secured notes due 2025 entered into by the Company’s subsidiary Motion Finco S.à r.l. The notes are listed on The International

Stock Exchange.

• $400 million 5.75% senior notes due 2026 entered into by the Company’s subsidiary Merlin Entertainments Limited. The notes are listed on The International

Stock Exchange.

• A £400 million revolving credit facility to mature in May 2026. £28 million was utilised by way of establishing certain ancillary facilities, including letters of credit.

The relevant floating rate used for the facility was amended on 1 January 2022 from GBP LIBOR to the Sterling Overnight Index Average (SONIA).

Other senior debt
• €370 million 4.5% senior notes due 2027 and $410 million 6.625% senior notes due 2027 entered into by the Company’s subsidiary Motion Bondco DAC. The

notes are listed on The International Stock Exchange.

The terms of the floating rate debt facility require a repayment of 0.25% of the outstanding principal amount of the USD borrowings every three months.

In February 2020 the Group received $173 million under a delayed draw down term facility and in April 2020 it completed the issue of the €500 million of 7.0%
senior secured notes due 2025.

202120202021202020212020£m£m£m£m£m£m£400 million floating rate revolving creditfacility due 2026- - - - - - Floating rate bank facilities due 202610 - 2,186 2,259 2,196 2,259 €500 million fixed rate notes due 2025- - 418 443 418 443 $400 million fixed rate notes due 2026- - 311 310 311 310 €370 million fixed rate notes due 2027- - 304 323 304 323 $410 million fixed rate notes due 2027- - 297 292 297 292 Shareholder loans- 15 - - - 15 Other loans2 2 1 5 3 7 Interest payable25 28 - - 25 28 37 45 3,517 3,632 3,554 3,677 Non-current liabilitiesTotalCurrent liabilities

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 4
CAPITAL STRUCTURE
AND FINANCING CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

4.2

INTEREST-BEARING LOANS AND BORROWINGS (CONTINUED)

The Group issued £156 million of 0% subordinated unsecured shareholder loan notes in 2019. These were initially recognised at fair value of £150 million with the
difference treated as a capital contribution (see note 4.5). During 2020 the shareholder loans were repaid and the proceeds reinvested in a further issue of new
ordinary and preference shares to the existing shareholders.

Shareholder loans of £15 million in 2020 related to funding from KIRKBI Invest A/S for the deferral of certain payments. These were repaid during 2021.

Other loans of £3 million (2020: £7 million) have been taken out in respect of specific capital projects.

Covenants
A financial covenant has existed from 30 September 2020 but is only required when the revolving credit facility is drawn by 40% or more (net of cash and cash
equivalents). The covenant requires the Group to maintain adjusted consolidated senior secured leverage below 10x. Effective June 2021, the Group agreed with its
revolving facility lenders to waive the leverage covenant until Q3 2023. As part of this agreement the Group is required to maintain a minimum liquidity of £75
million (to include amounts undrawn from the revolving credit facility, and cash and cash equivalents), over the period of the waiver.

The Group complied with the financial covenants in the year. The Group is also required to comply with certain non-financial covenants in these bank facilities and
notes, and these requirements were satisfied throughout the year.

4.3

FINANCIAL RISK MANAGEMENT

Liquidity risk
Liquidity risk is the risk that the Group would not have sufficient funds to meet its financial obligations as they fall due. The Group’s Treasury department produces
short term and long term cash forecasts to identify liquidity requirements and headroom, 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 other short term liquid investments such as money market
funds. In some countries bank cash pooling arrangements are in place to optimise the use of cash. As at 25 December 2021 the Group had £185 million of cash and
cash equivalents (2020: £306 million) and access to a £400 million revolving credit facility, of which £28 million was utilised in 2021 (2020: £29 million) by way of
establishing certain ancillary facilities, including letters of credit, in order to meet its obligations and commitments that will fall due.

The following table sets out the contractual maturities of financial liabilities, including interest payments. This analysis assumes that interest rates prevailing at the
reporting date remain constant.

0 to <11 to <22 to <55 yearsContractualyearyearsyearsand overcash flows£m£m£m£m£m2021Floating rate bank facilities due 2026(82)(82)(2,541)- (2,705)€500 million fixed rate notes due 2025(27)(27)(413)- (467)$400 million fixed rate notes due 2026(17)(17)(343)- (377)€370 million fixed rate notes due 2027(14)(14)(43)(327)(398)$410 million fixed rate notes due 2027(21)(21)(62)(326)(430)Other loans(2)(1)- - (3)Lease liabilities(107)(129)(289)(2,825)(3,350)Trade payables(60)- - - (60)(330)(291)(3,691)(3,478)(7,790)

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 4
CAPITAL STRUCTURE
AND FINANCING CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

4.3

FINANCIAL RISK MANAGEMENT (CONTINUED)

Interest rate risk
The Group is exposed to interest rate risk on both interest-bearing assets and liabilities. The Group has a policy of actively managing its interest rate risk exposure
using a combination of fixed rate debt and interest rate swaps.

At 25 December 2021 the Group had £1,340 million of fixed rate debt comprising:
• €500 million of 7.0% notes to mature in 2025;
• $400 million of 5.75% notes to mature in 2026;
• €370 million 4.5% notes to mature in 2027; and
• $410 million 6.625% notes to mature in 2027.

In aggregate 37% (2020: 37%) of the year end interest-bearing loans and borrowings is at a fixed rate for a weighted average period of 5 years (2020: 6 years). If
required, to achieve the desired balance of fixed and floating interest rates across currencies, the Group may use floating to fixed interest rate swaps (which are part
of cash flow hedging relationships) and fixed to floating interest rate swaps (which are part of fair value hedging relationships). At 25 December 2021 the Group had
no interest rate swaps (2020: nil).

Sensitivity analysis
Based on the net debt position as at 25 December 2021 a 100 basis points rise in market interest rates would result in an increase in net interest paid of £14 million
(2020: £20 million) and a 100 basis points fall in market interest rates would result in an increase in net interest paid of £1 million (2020: increase of £1 million). This
has been calculated by applying the interest rate change to the Group’s variable rate cash, borrowings and derivatives.

Foreign currency risk
As the Group operates internationally, the performance of the business is sensitive to movements in foreign exchange rates. The Group’s potential currency
exposures comprise transaction and translation exposures. The Group ensures that its net exposure to foreign currency balances is kept to a minimal level by using
foreign currency swaps to exchange balances back into Sterling or by buying and selling foreign currencies at spot rates when necessary. The fair value of foreign
exchange contracts is the present value of future cash flows and is determined by reference to market rates.

At 25 December 2021 the fair value of foreign currency swap assets was £1 million (2020: £4 million) and of foreign currency swap liabilities was £3 million (2020:
£1 million), none of which are hedge accounted.

Transaction exposures
The revenue and costs of the Group’s operations are denominated primarily in the currencies of the relevant local territories. Any significant cross-border trading
exposures would be hedged by the use of forward foreign exchange contracts.

Translation exposures
The Group’s results, as presented in Sterling, are subject to fluctuations as a result of exchange rate movements. The Group does not hedge this translation
exposure to its earnings but, where material, may carry out net asset hedging by borrowing in the same currencies as the currencies of its operating units or by using
forward foreign exchange contracts. The Group’s debt (excluding lease liabilities) is therefore denominated in Euros, US Dollars and Sterling and at 25 December
2021 consisted of €2,330 million and $2,168 million. There are forward foreign exchange contracts in place in respect of JPY 14,900 million.

0 to <11 to <22 to <55 yearsContractualyearyearsyearsand overcash flows£m£m£m£m£m2020Floating rate bank facilities due 2026(86)(86)(253)(2,382)(2,807)€500 million fixed rate notes due 2025(26)(26)(434)- (486)$400 million fixed rate notes due 2026(17)(17)(52)(304)(390)€370 million fixed rate notes due 2027(15)(15)(46)(363)(439)$410 million fixed rate notes due 2027(20)(20)(61)(344)(445)Shareholder loans(15)- - - (15)Other loans(4)(2)(1)- (7)Lease liabilities(128)(101)(291)(1,519)(2,039)Trade payables(111)- - - (111)(422)(267)(1,138)(4,912)(6,739)

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 4
CAPITAL STRUCTURE
AND FINANCING CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

4.3

FINANCIAL RISK MANAGEMENT (CONTINUED)

Gains or losses arise on the retranslation of the net assets of foreign operations at different reporting dates and are recognised within the consolidated statement of
comprehensive income. They will predominantly relate to the retranslation of opening net assets at closing foreign exchange rates, together with the retranslation of
retained foreign profits for the year (that have been accounted for in the consolidated income statement at average rates) at closing rates. Exchange rates for major
currencies are set out below.

Gains or losses also arise on the retranslation of foreign currency denominated borrowings designated as effective net investment hedges of overseas net assets.
These are offset in equity by corresponding gains or losses arising on the retranslation of the related hedged foreign currency net assets. The Group also 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.

The following exchange rates have been used in the translation of the results of foreign operations:

The Sterling equivalents of financial assets and liabilities denominated in foreign currencies were:

WeightedWeightedClosingaverageClosingaverageClosingrate forrate forrate forrate forrate for20192020202020212021US Dollar1.31 1.29 1.36 1.38 1.34 Euro1.17 1.11 1.11 1.17 1.18 SterlingEuroUS DollarOtherTotal£m£m£m£m£m2021Cash and cash equivalents133 12 11 29 185 Floating rate bank facilities due 20267 (1,209)(994)- (2,196)€500 million fixed rate notes due 2025- (418)- - (418)$400 million fixed rate notes due 2026- - (311)- (311)€370 million fixed rate notes due 2027- (304)- - (304)$410 million fixed rate notes due 2027- - (297)- (297)Other loans- (3)- - (3)Lease liabilities(953)(172)(93)(240)(1,458)(813)(2,094)(1,684)(211)(4,802)2020Cash and cash equivalents240 9 17 40 306 Floating rate bank facilities due 20269 (1,283)(985)- (2,259)€500 million fixed rate notes due 2025- (443)- - (443)$400 million fixed rate notes due 2026- - (310)- (310)€370 million fixed rate notes due 2027- (323)- - (323)$410 million fixed rate notes due 2027- - (292)- (292)Shareholder loans- (15)- - (15)Other loans- (7)- - (7)Lease liabilities(824)(189)(83)(268)(1,364)(575)(2,251)(1,653)(228)(4,707)Carrying value

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 4
CAPITAL STRUCTURE
AND FINANCING CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

4.3

FINANCIAL RISK MANAGEMENT (CONTINUED)

Sensitivity analysis on foreign currency risk
A 10% strengthening of all currencies against Sterling would increase net debt by £359 million (2020: £370 million). As described above, gains or losses in the income
statement and equity are offset by the retranslation of the related foreign currency net assets or specific intercompany loan balances.

A 10% strengthening of all currencies against Sterling would reduce the fair value of foreign exchange contracts and result in a charge to the income statement of
£13 million (2020: £21 million).

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. Credit risk is
limited to the carrying value of the Group’s monetary assets. The Group has limited credit risk with its customers, the vast majority of whom pay in advance or at
the time of their visit. There are credit policies in place with regard to its trade receivables with credit evaluations 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
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. The Group robustly appraises investments before they are made to ensure the associated
credit risk is acceptable. Performance of investments are closely monitored, in some cases through Board participation, to ensure returns are in line with
expectations and credit risk remains acceptable. There were no overdue amounts in respect of investments and no impairments have been recorded (2020: £nil).

Fair values
Fair value hierarchy
The Group analyses financial instruments in the following ways:
• Level 1: uses unadjusted quoted prices in active markets.
• Level 2: uses inputs that are derived directly or indirectly from observable prices (other than quoted prices).
• Level 3: uses inputs that are not based on observable market data.

Fair value versus carrying amounts
The fair values of financial assets and liabilities are presented in the table below, together with the carrying amounts shown in the statement of financial position.
Short term receivables, payables and cash and cash equivalents have been excluded from the following disclosures on the basis that their carrying amount is a
reasonable approximation to fair value.

Fair valueCarryingCarryinghierarchyamountFair valueamountFair value£m£m£m£mHeld at amortised costFloating rate bank facilities due 2026(2,196)(2,200)(2,259)(2,224)€500 million fixed rate notes due 2025(418)(443)(443)(476)$400 million fixed rate notes due 2026(311)(313)(310)(309)€370 million fixed rate notes due 2027(304)(300)(323)(325)$410 million fixed rate notes due 2027(297)(310)(292)(310)Shareholder loans- - (15)(15)Other loans(3)(3)(7)(7)Held at fair valueDerivative financial instrumentsLevel 2(2)(2)3 3 Minority equity investmentsLevel 314 14 8 8 (3,517)(3,557)(3,638)(3,655)20202021

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 4
CAPITAL STRUCTURE
AND FINANCING CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

4.3

FINANCIAL RISK MANAGEMENT (CONTINUED)

The fair values shown above for the bank facilities and fixed rate notes have been calculated using market values. The fair value of leases are determined by reference
to incremental borrowing rates that would prevail at the reporting date. There is no difference between the carrying value and the fair value of minority equity
investments. These are accounted for as ‘fair value through other comprehensive income’ and are valued by reference to EBITDA multiples or discounted cash flows,
as appropriate to each investment.

There have been no transfers between levels in 2021 or 2020.

4.4

LEASE OBLIGATIONS

Accounting policy
Where a contract provides the right to control the use of an asset for a period of time in exchange for consideration, the contract is accounted for as a lease. In
order for lease accounting to apply, an assessment is made at the inception of the contract that considers whether;
•

the Group has the use of an identified asset, which entitles it to the right to obtain substantially all of the economic benefits that arise from the use of the
asset, and;
the right to direct the use of the asset, either through the right to operate the asset or by predetermining how the asset is used.

•

Measurement at lease inception
At the lease commencement date the Group, as the lessee, will recognise;
•
a lease liability representing its obligation to make lease payments, and:
•
an asset representing its right to use the underlying leased asset (ROU asset).

The lease liability is initially measured as the present value of future lease payments, discounted using the interest rate implicit in the lease, or if not available an
incremental borrowing rate. Future lease payments will include fixed payments, variable lease payments that depend on an index or rate (initially measured at the
rate at the commencement date, and subsequently modified as subsequent index or rates changes occur) and amounts expected to be payable by the lessee under
residual value guarantees. In relation to variable lease payments the total lease liability recognised in the statement of financial position includes the impact of any
index or rate changes that have already occurred, but does not include the impact of any future index or rate changes that have not yet taken place.

The ROU asset is initially measured at cost, which comprises the amount initially recognised as the lease liability, lease payments made at or before the
commencement date less any lease incentives received, initial direct costs incurred, and the estimated costs to be incurred at the end of the lease to restore the site
to the required condition stipulated in the lease.

In a business combination the ROU assets and lease liabilities for those leases accounted for under IFRS 16 are aligned, except where it is assessed that the cost of
the acquired historic lease commitments taken on are greater or lower than a market participant would expect to pay were equivalent leases being entered into at
the time of the transaction. Where a current market rental is estimated to be higher than that currently paid by the acquired Group, there is an upward adjustment
to the right-of-use asset, or vice-versa if the opposite applies.

On inception of a lease for a new site, where required, the estimated cost of decommissioning any additions is included within ROU assets and depreciated over
the lease term. A corresponding provision is set up as disclosed in note 3.5.

Depreciation (and any subsequent impairment) on the ROU asset, interest on the lease liability and any variable lease payments are all recognised in the
income statement.

Ongoing measurement
After the commencement date the Group measures the ROU asset using a cost model, reducing the cost through depreciation and any impairment losses.
Adjustments will be made to the ROU asset to reflect the changes in the lease liability as a result of changes to lease payments or modifications to the lease.

The lease liability is adjusted for interest on the liability, contractual lease repayments and any reassessment of the lease as a result of a contract modification, such as
changes to the contractual rent amounts, or changes to the term of the lease.

Upon lease modification, the discount rates used in the present value calculations are adjusted to reflect the appropriate rates at the date of modification for the
remaining term of the lease, with resulting adjustments to the liability and ROU asset balances. Discount rates are then not revisited during the remaining life of
the lease.

When a lease is terminated earlier than the contractual end date within the lease agreement, the remaining balances on the lease liability after any final payments due,
the ROU asset gross cost and the ROU asset accumulated depreciation are removed. Any difference between the liability balance removed and the net ROU asset
balance removed are reflected in the income statement.

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 4
CAPITAL STRUCTURE
AND FINANCING CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

4.4

LEASE OBLIGATIONS (CONTINUED)

Short term and low-value leases
The Group has taken the recognition exemptions for short term leases and leases of low-value items. Leases which fall within the Group’s defined parameters for
these exemptions are excluded from the IFRS 16 lease accounting requirements and are accounted for on a straight-line basis over the lease term.

Rent reductions and deferrals
In response to the COVID-19 pandemic, in 2020 the International Accounting Standards Board (IASB) issued amendments to IFRS 16 Leases to allow lessees not to
account for rent concessions as lease modifications if they are a direct consequence of COVID-19 and meet certain conditions. On 31 March 2021 the IASB
extended their amendments to IFRS 16 beyond 30 June 2021. Therefore, as a lessee we have applied the practical expedient for the whole of the financial year and
are not required to assess whether eligible rent concessions are lease modifications. Accordingly, where the Group has agreed concessions in the form of a one-off
reduction in rent, they have been accounted for as a variable lease payment and have been recognised in profit or loss. The total recognised in the income statement
was £1 million (2020: £1 million).

Lease arrangements
The Group’s most significant lease arrangements relate to sale and leaseback transactions originally undertaken by the Merlin Group during 2007, involving the PPE of
an attraction within the Midway Attractions Operating Group, located in the United Kingdom, and other attractions within the Resort Theme Parks Operating
Group, located within the United Kingdom and Germany.

Each of these lease agreements was for a period of 35 years from inception until 2042, and allowed for annual rent increases based on the inflationary index in the
United Kingdom and fixed increases in Continental Europe. The Group had the option, but was not contractually required, to extend each of the lease agreements
individually for two further terms of 35 years, to 2077 and then to 2102, subject to an adjustment to market rates at that time. This remains the case for the lease
that relates to the Midway attraction.

At the time of approving these financial statements, the agreements in respect of the Resort Theme Parks leases have been modified and agreements have been
entered into to secure their tenure for an additional 35 years from 2042 to 2077.

For the United Kingdom sites the modification was completed before the end of the reporting period and as a result the relevant balances have been adjusted
accordingly in the 2021 financial statements. The transaction has been treated as a lease modification. It does not meet the criteria to be treated as a separate lease.
The Group did not exercise the lease option unilaterally; instead the Group and the lessor entered into a binding agreement to extend the leases in 2042, and agreed
certain lease changes. As part of these changes the United Kingdom sites are now subject to annual rent increases linked to CPI +0.5% (with a floor of 1%, and a
maximum increase of 4%). Under the previous agreement the sites were subject to RPI based annual upwards only increases without any maximum. The minimum
1% per annum has been reflected in the modification calculation. As part of the transaction the Group received a cash payment of £25 million from the landlord and
will receive a further £3 million within the following year.

For the European site, the terms of the modification were agreed and completed after the end of the reporting period. At the reporting date it was not reasonably
certain that the modification would take place. Accordingly the modification has been reflected as a non-adjusting subsequent event in these financial statements (see
note 5.6), and will be reflected in the 2022 financial statements. As part of the transaction the Group received a payment of £6 million from the landlord after the
end of the reporting period.

At the time of the acquisition of the Merlin Group by the investor consortium in November 2019, it was determined that the implicit rate of interest for these leases
was not readily determinable, and accordingly an incremental borrowing rate (IBR) was used that reflected the Group’s financing arrangements at that time. For the
recent modification the IBR was calculated by reference to the mid yield on a composite index of debt at an appropriate duration and the same (or similar) long term
credit rating as the Company, adjusted where relevant for the sovereign yield for a similar duration to the index being used in the country/geography of that index.

The modification and securing of tenure of the UK sites has resulted in an increase to the lease liability of £149 million. The second extension option from 2077 to
2102 still remains available for the Group to exercise in the future for the United Kingdom and Continental Europe sites.

LEGOLAND Japan was opened during 2017. The park was developed under an ‘operated and leased’ model whereby a local operating company leases the site and
park infrastructure from a development partner. The development partners are related parties, being KIRKBI Invest A/S and LLJ Investco K.K, a subsidiary of KIRKBI
Invest A/S (note 5.3). KIRKBI Invest A/S holds KIRKBI’s investment as a shareholder of the Group. The lease is for a period of 50 years.

The Group also enters into leases for sites within the Midway Attractions Operating Group and central areas. These are typically of a duration between 10 and 60
years, with rent increases determined based on local market practice. In addition to a fixed rental element, rents within the Midway Attractions Operating Group can
also contain a performance related element, typically based on turnover at the site concerned. Options to renew leases exist at these sites in line with local market
practice in the territories concerned.

The key contractual terms in relation to each lease are considered when calculating the rental charge over the lease term. The potential impact on rent charges of
future performance or increases based on inflationary indices are each excluded from these calculations.

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 4
CAPITAL STRUCTURE
AND FINANCING CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

4.4

LEASE OBLIGATIONS (CONTINUED)

On certain leases the Group is required to make other contractual rent payments in addition to or instead of any fixed or minimum rent amounts, usually in the
form of rent based on a percentage of the turnover generated by the relevant attraction. These rent payments are outside of the scope of IFRS 16. They are charged
directly to the income statement and do not result in any adjustment to the lease liabilities or ROU assets as they are contingent on performance and as such
there is no future obligation until that performance occurs. As noted below, the expense relating to variable lease payments was £12 million in 2021
(2020: £6 million).

There are no significant operating restrictions placed on the Group as a result of its lease arrangements.

In the current year there was no significant impact of the amendments to IFRS 16 ‘Leases’ relating to Interest Rate Benchmark Reform (IBOR). This reform
may impact new leases and future modified leases from 2022 onwards due to the impact benchmark rate changes will have on discount rates used to calculate
lease liabilities.

Right-of-use assets

Land andPlant andbuildingsequipmentTotal£m£m£mCostAt 29 December 20191,348 111 1,459 Additions49 1 50 Movements in asset retirement provisions 2 - 2 Disposals(2)- (2)Effect of movements in foreign exchange8 2 10 Balance at 26 December 20201,405 114 1,519 Additions185 16 201 Movements in asset retirement provisions (note 3.5)12 (11)1 Disposals(7)(1)(8)Effect of movements in foreign exchange(21)(4)(25)Balance at 25 December 20211,574 114 1,688 DepreciationAt 29 December 201912 1 13 Depreciation for the year74 5 79 Impairment14 - 14 Effect of movements in foreign exchange(1)- (1)Balance at 26 December 202099 6 105 Depreciation for the year72 5 77 Impairment(1)- (1)Disposals(3)(1)(4)Effect of movements in foreign exchange(1)- (1)Balance at 25 December 2021166 10 176 Carrying amountsAt 28 December 20191,336 110 1,446 At 26 December 20201,306 108 1,414 At 25 December 20211,408 104 1,512

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 4
CAPITAL STRUCTURE
AND FINANCING CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

4.4

LEASE OBLIGATIONS (CONTINUED)

During the year the Group reviews useful economic lives and tests ROU assets for impairment in accordance with the Group’s accounting policy, as referred to in
note 3.3. An impairment credit has been recorded in the year of £1 million in respect of one Midway location that was subject to impairment in 2020. In 2020
impairment charges of £14 million were made primarily in respect of certain of the Group’s Midway attractions, arising from a review of market and economic
conditions at those locations.

Lease liabilities

The maturity analysis of lease liabilities is disclosed within note 4.3. The cash outflow for leases is disclosed within note 4.1.

Amounts recognised in the income statement

4.5

EQUITY AND CAPITAL MANAGEMENT

Capital management
The capital structure of the Group consists of debt and equity. The Group’s objective when managing capital is to: maintain a strong capital base so as to ensure
shareholder 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.

To enable the Group to meet its objective, the Merlin Board monitor returns on capital through constant review of earnings generated from the Group’s capital
investment programme and through regular budgeting and planning processes, manage capital in a manner so as to ensure that sufficient funds for capital investment
and working capital are available, and ensure that the requirements of the Group’s debt covenants are met.

20212020£m£mCurrent34 79 Non-current1,424 1,285 1,458 1,364 20212020£m£mExpense relating to variable lease payments12 6 Depreciation expense of right-of-use assets77 79 Interest expense on lease liabilities52 51 141 136

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 4
CAPITAL STRUCTURE
AND FINANCING CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

4.5

EQUITY AND CAPITAL MANAGEMENT (CONTINUED)

Share capital and reserves
Share capital

Issue of shares
The nominal value of shares in issue is shown in share capital, with any additional consideration for those shares shown in share premium.

Ordinary shares
During 2020 the Company issued 2,957,123 ordinary shares at a nominal value of one pence each, for consideration of £13 million, for general corporate purposes.

The holders of ordinary shares are entitled to receive dividends as declared from time to time.

Each ordinary share entitles the holder of that ordinary share to receive notice of and to attend and to speak and to vote at general meetings of the Company (on
the basis of one vote per ordinary share), or on any resolution proposed to members as a written resolution. Each ordinary share in the capital of the Company
ranks equally in all respects and no shareholder holds shares carrying special rights relating to the control of the Company.

Preference shares
During 2020 the Company issued 292,755,102 6% fixed cumulative preference shares at a nominal value of one pence each for a consideration of £293 million. In
accordance with the accounting policy as set out in note 1.1, these have been classed as equity.

The preference shares earn a fixed, cumulative, preferential dividend at the rate of 6% per annum on the issue price of the preference shares, which accrues (but is
not payable) on each preference share on a daily basis from the date of issue of the relevant preference share, and ends on the day preceding the redemption date,
compounding annually on each anniversary of the compounding date.

The preference shares rank ahead of the ordinary shares for all purposes and no dividend, distribution, return of capital and/or reduction of capital is paid on the
ordinary shares until the preference shares have been redeemed in full.

Each preference share entitles the holder of that preference share to receive notice of and to attend and to speak and to vote at general meetings of the Company
(on the basis of one vote per preference share), or on any resolution proposed to members as a written resolution.

Capital reserve
During 2019, the Group issued £156 million 0% subordinated unsecured shareholder loan notes due 31 October 2020.

In accordance with the accounting policy as set out in note 1.1, these were classed as financial liabilities. Reflecting the off-market interest rate attached to these loan
notes, these were initially recognised at fair value of £150 million with the difference of £6 million treated as a capital contribution (see note 4.2). The capital reserve
has been eliminated through retained earnings in the year.

Dividends
Dividends are recognised through equity on the earlier of their approval by the Company’s shareholders or their payment. The Directors of the Company have
declared their intention not to pay a dividend for the year ended 25 December 2021 (2020: £nil).

Translation reserve
The translation reserve of £(17) million (2020 as restated: £(63) million) comprises all foreign exchange differences arising from the translation of the financial
statements of foreign operations. The reporting date foreign exchange rates by major currency are provided in note 4.3.

2021202120202020Number£mNumber£mOrdinary shares of £0.01 eachAt beginning of year28,759,359 - 25,802,236 - Shares issued- - 2,957,123 - 28,759,359 - 28,759,359 - Preference shares of £0.01 eachAt beginning of year2,847,137,139 29 2,554,382,037 26 Shares issued- - 292,755,102 3 2,847,137,139 29 2,847,137,139 29 On issue and fully paid at end of year2,875,896,498 29 2,875,896,498 29

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 4
CAPITAL STRUCTURE
AND FINANCING CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

4.5

EQUITY AND CAPITAL MANAGEMENT (CONTINUED)

Reserve for own shares
In the year, the Group granted three employee share incentive plans relating to the Company’s subsidiary Motion TopCo Limited (see note 4.6). Preference B shares,
ordinary B shares and ordinary C shares of the subsidiary were issued to senior management and other employees in exchange for consideration. The total employee
investment was £4,362,865 with the nominal value of the shares subscribed for being £108,019 (2020: £nil). Upon the vesting date of the incentive plans, employees
will hold a non-controlling interest in Motion TopCo Limited of 0.16%. Until vesting, Motion TopCo Limited recognises these as treasury shares that result in a
reduction to equity; this reduction is eliminated on consolidation.

3,650,900 of the shares issued to employees as part of the share incentive plans are held in an employee benefit trust, with a nominal value of £36,509. The Group
does not have control of these shares or the trust; as such the shares are not treated as treasury shares and the trust is not consolidated into the Group.

4.6

SHARE-BASED PAYMENT TRANSACTIONS

Accounting policy
The fair value of share plans is recognised as an expense over the expected vesting period with a corresponding entry to either share-based payment liabilities for
both cash-settled plans and cash-settled elements relating to compound instruments, or retained earnings for equity-settled plans and equity-settled elements relating
to compound instruments. All entries are net of deferred tax. The fair value of share plans is determined at the date of grant. The fair value of awards granted is
measured based on observable market data, taking into account the terms and conditions upon which awards were granted. For all cash-settled awards and cash-
settled elements relating to compound instruments, the fair value is re-measured at each accounting date up to the vesting date by applying an option pricing model.
Non-market based performance conditions (including most likely exit events) are taken into account for all plans in estimating the number of awards likely to vest,
which is reviewed at each accounting date up to the vesting date, at which point the estimate is adjusted to reflect the actual awards issued. No adjustment is made
after the vesting date even if the awards are forfeited or are not exercised.

Analysis of awards
The Group operates three employee share incentive plans:

Senior Management Long Term Bonus plan (LTB)

Senior Management Equity Investment (EI)
 Management Share Scheme (MSS)

In the year, the Group issued share awards to employees, with all plans being in respect of the Company’s subsidiary entity Motion Topco Limited. Some of these
share awards issued are held in an employee benefit trust (see note 4.5).

The total charge for the year for all plans is less than £1 million, and at the reporting date, liabilities in respect of share-based payment transactions in the year are
also less than £1 million.

Performance condition(1)

25 December 2021

LTB

MSS

Method of settlement accounting

Cash-settled

Compound instrument

Part compound instrument, part
equity-settled, part cash-settled

Number of allocated awards(5)

4,770,951(2)

6,547,400(3),(4)

Date of grant

11 November 2021

Weighted average award life (years)(1)

Exercise price(6)

4.0

11 November 2021 /
23 December 2021

5.9

(1) Weighted average award life / performance conditions - the Group has exercised its judgement to conclude there is sufficient parity between all MSS awards granted to both senior

management and other employees to account for both schemes in the same manner, and accordingly have concluded that for all awards there is a non-market based performance condition that
the awards will vest on the earlier of a defined interim trigger event or exit. Using the Group’s approved five year business plan and considering ongoing future strategies of both the Group and
the Group’s shareholders, the most likely length until the events have been estimated to be four or ten years for interim trigger events and exit respectively, with the ten year vesting period
aligning to published investor exit strategies. The blend of compound, cash-settled or equity-settled instruments within each scheme therefore impacts the calculated weighted average award life.
Comprising 4,630,182 preference B shares and 140,769 ordinary B shares.
Ordinary C shares.
Inclusive of 516,500 awards entitling the employee to a cash bonus equivalent in value to a notional number of shares and 6,030,900 allocated shares.
Number of allocated awards – all awards were made during 2021 and no awards were forfeited, exercised, lapsed or expired during the year.
Exercise price - the exercise price for all plans is £nil and hence no weighted average exercise prices are presented.

(2)

(3)

(4)

(5)

(6)

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 4
CAPITAL STRUCTURE
AND FINANCING CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

4.6

SHARE-BASED PAYMENT TRANSACTIONS (CONTINUED)

Senior Management Long Term Bonus plan (LTB)
The LTB plan was granted on 11 November 2021 to eligible employees. The designated individuals of the plan are entitled to a gross cash bonus corresponding in
aggregate to an amount equal to 0.75% of the equity value of Motion Topco Limited upon vesting, which is expected to occur upon an interim trigger event. The cash
payment is based on the value of equity instruments of Motion Topco Limited (there are no equity settlement alternatives) and continuity of service, and hence falls
in scope to be cash-settled.

The fair value of this award is estimated at £15 million following consideration of future uncertainties and the volatility of business values, and it could change in
future years should the value of the Group rise over time. As the award is cash-settled, valuations calculating the expected fair value of awards are reperformed on
an annual basis.

Senior Management Equity Investment (EI)
The Senior Management Equity Investment (EI) plan was granted from Motion Topco Limited on 11 November 2021 following eligible employee investment of £0.84
per preference B share and £0.279 per ordinary B share, resulting in 4,630,182 preference B shares and 140,769 ordinary B shares being issued. The eligible
employee investment for the EI plan varies in comparison to the Management Share Schemes (MSS) as the awards are a different share category (B shares versus
ordinary C shares awarded in MSS schemes). The preference shares carry a right to a discretionary fixed, cumulative preferential dividend of 4% per annum, which
accrues (but is not payable) on each preference share on a daily basis from 1 April 2021. Payment of these dividends is at the discretion of the Board of Motion
Topco Limited. Accordingly, these awards have been classified as equity and hence fall under the scope of IFRS 2 ‘Share-based Payment’.

There is a put option for cash on up to 100% of the shares at fair market value, exercisable at the expected vesting date, which is the earlier of the interim trigger
event or exit. Hence, the interim trigger event has been used to estimate the vesting period of the plan. The option is subject to non-market based performance
conditions, being exit events which create obligations on the Group, and continuity of employment. Individuals with continued employment until exit will retain
shares to the extent the put option is not exercised; hence, the potential appreciation of value of the EI plan is treated as a compound instrument.

The weighted average fair value per award at the measurement date is £nil as the expected value at vesting based on current valuations is less than the amount paid.
This is due to the valuation of preference shares being significantly lower than that of the ordinary shares.

Management Share Scheme (MSS)
The MSS’s are accounted for as part equity-settled, part cash-settled and part compound instruments. MSS plans were granted for senior management and other
employees on 11 November 2021 and 23 December 2021 respectively following eligible employee investment of £0.072 per ordinary C share in Motion Topco
Limited. This resulted in the issuance of 6,030,900 ordinary C shares (2,380,000 of which were allocated to senior management on 11 November 2021) and 516,500
awards which entitle the employee to a cash payment equivalent to the fair value of a notional number of shares upon vesting. All such awards are classified as cash-
settled. 3,452,600 awards remain unissued and unallocated. Prior to an exit event all unallocated awards must be allocated; the Group has exercised its judgement
and assumed that all will be allocated before an interim trigger event. Hence, the total value of the MSS awards will always be equal to 10,000,000 shares regardless
of staff attrition over the vesting period. The value of 10,000,000 share awards has therefore been considered when calculating the fair value of the MSS plans. Whilst
in the case of the senior management issues, the Board has retained some flexibility on the terms of settlement, it has exercised its judgement to conclude there is
sufficient parity between MSS awards granted to both senior management and other employees to account for both plans in the same manner.

For MSS share awards, from December 2021 onwards, 12% per annum of the total award becomes eligible for cash-settlement at the expected vesting date, with the
maximum cash-settlement crystallising at 60% in December 2025 of the total value of the MSS share awards. For the purposes of calculating the accounting entries,
an interim trigger event in 2025 has been assumed to be the most likely vesting date; therefore the full 60% is assumed to become eligible for cash-settlement ('the
cash settlement option'). Should the interim trigger event occur at an earlier date the number of MSS share awards eligible for cash settlement decreases.

The 60% of MSS share awards which have a cash settlement option are subject to a put option; this option requires Motion JVco Limited to purchase the shares at
fair market value for cash upon exercise at an interim trigger event. If the put option is not exercised, ordinary C shares in Motion Topco Limited would be retained
by the employee and hence 60% of MSS share awards issued are treated as compound instruments. The equity component of the instrument is deemed to have an
expected value of £nil at vesting (as the expected benefit relating to this portion of the award is identical to the expected cash benefit), and hence the entire share-
based payment expense relating to 60% of MSS share awards issued relate to expected cash-settlement.

For the remaining 40% of MSS share awards issued, should the put option requiring Motion JVco Limited to purchase the other 60% at fair market value for cash be
exercised, the employee’s ordinary C shares would automatically convert to EI ordinary and preference B shares in quantities equivalent to fair market value at point
of exercise. If the put option is not exercised, ordinary C shares in Motion Topco Limited would be retained by the employee and would no longer be the obligation
of the Group to settle. The awards are therefore treated as equity-settled and employees would receive the benefit of these shares at a final exit event following an
interim trigger event, assuming continuity of service. The estimated fair value per award at final exit is lower than at an interim trigger event due to the increased
uncertainty surrounding a longer time horizon. Amounts due to tax authorities in respect of shares issued are the obligation of the employee to settle. Taxes due on
cash bonus awards, equivalent to the value of a notional number of shares, will be settled via payroll.

Should the employee leave service after an interim trigger event but prior to a final exit event, they will receive a cash-settlement equivalent to the fair market value
of their converted EI shares at the date of leaving (or the lower of cost and fair market value if the individual is a competing leaver). Historic attrition data for all
levels of management has been reviewed in approximating the proportions of the 40% MSS awards that will be either equity or cash settled.

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 4
CAPITAL STRUCTURE
AND FINANCING CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

4.6

SHARE-BASED PAYMENT TRANSACTIONS (CONTINUED)

The fair value per award granted and the assumptions used in the calculations are as follows:

Weighted
average fair
value per
award at
measurement
date (£)

Share
price at
grant
date (£)

n/a

14,805,130

Plan

LTB

MSS

Settlement
accounting

Cash-settled

Number of

awards Date of grant

n/a

11/11/2021

Compound

4,770,951(1)

11/11/2021

Compound

3,618,540(2)

Equity-settled

1,672,384(2)

Cash-settled

1,256,476(2),(3)

11/11/2021 /
23/12/2021

Exercise
price (£)

0.823

0.072

ANNUAL REPORT AND ACCOUNTS 2021

Expected
dividend
yield
(%)

Expected
volatility
(%)

Risk free
rate
(%)

Weighted
average
award life
(years)

0.0%

51.5%

6.72

0.0%

51.5%

0.5%

4.0

5.83

0.0%

34.3%

0.8%

10.0

7.80

0.0%

46.4%

0.6%

5.8

(1)
(2)

(3)

Comprising 4,630,182 preference B shares and 140,769 ordinary B shares.
Ordinary C shares.
Inclusive of 516,500 awards entitling the employee to a cash bonus equivalent in value to a notional number of shares. 3,452,600 MSS awards remain unallocated as at 25 December 2021.

The key assumptions in calculating the share-based payments were as follows:





The Monte-Carlo option pricing model was used to value all plans at the date of grant.
The expected volatility is based on broadly comparable quoted companies and takes into account the expected life of the relevant award.
The risk-free rate is equal to the prevailing UK Gilts rate at grant date, which is commensurate with the expected term.
Expected dividend yield assumes that preference shares will roll forward any accrued dividend on the basis that distributions are discretionary. Therefore,
dividend yield is assumed to be 0.0%.
The grant date has been determined for each plan following consideration of when there was mutual understanding between the Group and the employee on
the plan’s key terms; this date has been deemed to be the date of share issuance.
The Group has exercised its judgement to conclude there is sufficient parity between MSS awards granted to both senior management and other employees to
account for both schemes in the same manner.



MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 5
OTHER NOTES

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

5.1

INVESTMENTS

Accounting policy
The Group holds investments in two forms.

Minority equity investments are accounted for as ‘fair value through other comprehensive income’ (FVOCI), having taken the election available under IFRS 9
‘Financial instruments’. This applies to the investments in IDR Resorts Sdn. Bhd., Gangwon Jungdo Development Corporation Ltd, Shanghai LEGOLAND Co., Ltd
and Big Bus Tours Group Holdings Limited.

Associates and joint ventures are those entities over whose activities the Group has joint control or significant influence, established by contractual agreement. The
consolidated financial statements include the Group’s share of the total recognised income and expenses on an equity accounted basis, from the date that joint
control or influence commences until the date that it ceases.

Minority equity investments
IDR Resorts
The Group has a minority equity investment in IDR Resorts Sdn. Bhd. (IDR). IDR and its subsidiaries are deemed to be related parties as together they own
LEGOLAND Malaysia (see note 5.3).

Gangwon Jungdo Development Corporation
The Group has a minority equity investment in Gangwon Jungdo Development Corporation Ltd, the local company providing funding and infrastructure support to
the development of LEGOLAND Korea (see note 5.3).

Shanghai LEGOLAND Co.
The Group has a minority equity investment in Shanghai LEGOLAND Co., Ltd., the company developing the LEGOLAND Shanghai Resort.

Big Bus Tours
The Group has an investment in Big Bus Tours Group Holdings Limited (BIG BUS), held substantially all in the form of loan notes. The investment is valued adopting
a market-based approach (based on EBITDA multiples). The BIG BUS city tour business is heavily reliant on international tourists visiting city centre locations, and
therefore has been severely impacted by the COVID-19 pandemic. As a result, BIG BUS raised further funding and completed a capital restructuring exercise during
2020 whereby the priority of the Group’s investment reduced compared to other investors. Accordingly a negative adjustment of £39 million to the fair value was
reflected in 2020 taking the value to £nil. Should the business prove successful in its planned recovery, positive value adjustments could occur in the future.

The Group also holds a minority equity investment valued at £nil (2020: £nil).

Investments in associates and joint ventures
LL Dubai Hotel
The Group holds a 40% equity interest in LL Dubai Hotel LLC. This is the company that developed the hotel at LEGOLAND Dubai, which opened in January 2022.
The negative share of reserves reflects pre-opening costs for the hotel.

5.2

EMPLOYEE BENEFITS

Accounting policies
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
them. 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.

Gangwon JungdoIDRDevelopmentShanghaiLL DubaiResortsCorporationLEGOLAND CoHotelTotal£m£m£m£m£mBalance at 27 December 20205 3 - 11 19 Additions- - 7 - 7 Net change in fair value - included in OCI(1)- - - (1)Share of reserves in joint ventures- - - (1)(1)At 25 December 20214 3 7 10 24

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 5
OTHER NOTES CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

5.2

EMPLOYEE BENEFITS (CONTINUED)

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 £11 million
(2020: £11 million).

Defined benefit pension schemes
The principal scheme that the Group operates is a closed scheme for certain former UK employees of The Tussauds Group, which was acquired by the Merlin
Group in 2007. The 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 pension schemes have not directly invested in any of the Group’s own financial instruments or in properties or other assets used by the Group.

The most recent full actuarial valuation of the scheme was carried out as at 31 December 2018. As a result, it was agreed to pay annual deficit reduction
contributions of £497,800, increasing at 3% per annum, payable monthly for a period of 4 years and 8 months from 1 January 2020 to 31 August 2024. An actuarial
valuation as at 31 December 2021 is in progress.

The Group expects £1 million in ongoing contributions to be paid to its defined benefit schemes in 2022. The weighted average duration of the defined benefit
obligation at 25 December 2021 was 17 years (2020: 17 years).

The assets and liabilities of the schemes are:

Movement in the net pension liability

20212020£m£mEquities19 17 Corporate bonds and cash17 13 Pooled investment funds (property)2 5 Fair value of scheme assets38 35 Present value of defined benefit obligations(45)(46)Net pension liability(7)(11)PresentPresentvalue ofvalue ofdefinedNetschemebenefitpensionassetsobligationsliability£m£m£mAt 29 December 201935 (42)(7)Net interest1 (1)- Benefits paid(1)1 - Remeasurement loss- (4)(4)At 26 December 202035 (46)(11)Contributions by employer1 - 1 Benefits paid(1)1 - Remeasurement gain3 - 3 At 25 December 202138 (45)(7)

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 5
OTHER NOTES CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

5.2

EMPLOYEE BENEFITS (CONTINUED)

The amount recognised in the income statement was £nil (2020: £nil). The amount recognised in the statement of other comprehensive income was a profit of
£3 million (2020: a loss of £4 million).

Actuarial assumptions
Principal actuarial assumptions (expressed as weighted averages) at the year end were:

The scheme is closed to future accrual for active members and therefore there is no link to future salary increases.

Assumptions regarding future mortality are based on published statistics and mortality tables. For the Tussauds Group scheme the actuarial table used is S2PxA. The
mortality assumption adopted predicts that a current 65 year old male would have a life expectancy to age 87 and a female would have a life expectancy to age 89.

5.3

RELATED PARTY TRANSACTIONS

Identity of related parties
The Group has related party relationships with its shareholders (and their connected parties); key management personnel; joint ventures; and other co-investors.

The defined benefit pension scheme for certain former UK employees of The Tussauds Group is also a related party (see note 5.2).

Transactions with shareholders (and connected parties)
Goods and services
Transactions including the purchase and sale of goods, and the payment of fees and royalties, and trading balances outstanding at 25 December 2021 and
26 December 2020 were as follows:

Loans and borrowings
Certain shareholders (or other parties related to those shareholders), are owners of elements of the Group’s bank facilities as described in note 4.2. Balances
outstanding at 25 December 2021 are; KIRKBI Invest A/S £451 million (2020: £470 million) and funds advised by parties related to Blackstone £26 million (2020:
£32 million). Interest is paid and accrued on the same terms as described in note 4.2.

Also included in interest-bearing loans and borrowings in 2020 were shareholder loans of £15 million relating to funding from KIRKBI Invest A/S for the deferral of
certain payments which were repaid during 2021.

20212020Discount rate1.8%1.5%Rate of price inflation3.5%3.1%AmountAmountowed byPurchases andowed toSalesrelated partyroyaltiesrelated party£m£m£m£m2021KIRKBI Invest A/S1 1 14 4 LEGO Group- 2 59 4 1 3 73 8 2020KIRKBI Invest A/S1 - 6 2 LEGO Group- 1 40 3 1 1 46 5 Goods and services

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 5
OTHER NOTES CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

5.3

RELATED PARTY TRANSACTIONS (CONTINUED)

Lease arrangements
As set out in note 4.4 the Group previously entered into a lease with LLJ Investco K.K (a subsidiary of KIRKBI Invest A/S). The term of this lease is 50 years, with
45 years remaining at the reporting date. The Group’s obligations come in the form of fixed rental payments, turnover rent and service charges totalling £6 million
(2020: £6 million). The total undiscounted commitment relating to fixed rental payments is £259 million over the remaining lease term (2020: £289 million).

The Group leases land, buildings and car parking areas from KIRKBI Invest A/S (a shareholder). The term of this lease is 25 years, with 18 years remaining at the
reporting date. The Group’s obligations consist of fixed rental payments, turnover rent and service charges totalling less than £1 million (2020: less than £1 million).
The total undiscounted commitment relating to fixed rental payments is £6 million over the remaining lease term (2020: £7 million).

The Group leases land and buildings from Koldingvej 2 Billund A/S (which has a 25% shareholding in the LEGO Group). The term of this lease is 29 years, with
20 years remaining at the reporting date. The Group’s obligations consist of fixed rental payments, turnover rent and service charges totalling less than £1 million
(2020: less than £1 million). The total undiscounted commitment relating to fixed rental payments is £8 million over the remaining lease term (2020: £9 million).

The Group also previously entered into lease agreements with parties that are related parties of the Blackstone Investment Funds that are shareholders in the
Company. These parties are: Multi Corporation B.V. in relation to SEA LIFE and LEGOLAND Discovery Centre Istanbul; Shopcore in relation to LEGOLAND
Discovery Centre Chicago; NEC Group Ltd, relating to The Bear Grylls Adventure and LEGOLAND Discovery Centre attractions in Birmingham, and Network Rail
Infrastructure Limited (in relation to an area associated with the London Eye site, which particular agreement ended in 2020). The Group’s obligations for these
agreements consist of fixed rental payments, turnover rent and services charges totalling £2 million (2020: £1 million). The total undiscounted commitment relating to
fixed rental payments on these leases is £27 million over the remaining terms of each lease (2020: £27 million).

Other transactions
Included in deferred income is £2 million (2020: £10 million) received from a KIRKBI Group company (LEGO Juris A/S) to support certain development activities
being undertaken in future periods.

Transactions with key management personnel
Key management of the Group, being the Directors of the Board, the members of the Merlin Executive Committee and their immediate relatives control nil%
(2020: nil%) of the Company. The remuneration of key management is disclosed in note 2.1.

Two members of key management were provided with loans from the Group equalling £120,000 in aggregate, for use by the individuals in investing in the
Senior Management Equity Investment share-based payment plan (see note 4.6). The loans have been repaid subsequent to the year end. No interest was payable
on the loans.

Transactions with other related parties
LEGOLAND Malaysia
As part of the agreement for the development and operation of LEGOLAND Malaysia, the Group subscribed for share capital in IDR Resorts Sdn. Bhd. (IDR) which
together with its subsidiaries owns the park (see note 5.1). On this basis, IDR and its subsidiaries are deemed to be related parties.

Transactions entered into, including the purchase and sale of goods, payment of fees and trading balances outstanding at 25 December 2021 and 26 December 2020,
are as follows:

LEGOLAND Korea
The Group has a minority equity investment in and has entered into transactions with Gangwon Jungdo Development Corporation Ltd, a Korean company which
acts under the direction of the Gangwon Province and is providing funding and infrastructure support of KRW 80 billion (£50 million, at 2021 year end exchange
rates) to the development of LEGOLAND Korea, which the Group has committed to spend on costs associated with the project. All of these funds had been
received by 25 December 2021 and are recorded within deferred income. Upon the opening of the park, the funding and infrastructure support will be accounted for
as a capital grant and offset against the total project costs within property, plant and equipment. The conditions of the funding require that the Group completes the
park’s construction and operates the park for a period of time post-opening.

20212020£m£mSales to related party2 2 Amounts owed by related party2 2

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 5
OTHER NOTES CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

5.4 NEW STANDARDS AND INTERPRETATIONS

Amendments to IFRS 16 ‘COVID-19 - related rent concessions beyond 30 June 2021’ was implemented in the year, the impact of which is covered in note 4.4.

The following amendments to standards and interpretations have been implemented in the year with no significant impact to the Group:
• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 ‘Interest rate benchmark reform – Phase 2’

The IASB has also issued the following amendments to standards that will be effective for the Group for the 2022 reporting period. The Group does not expect any
significant impact on its consolidated financial statements from these amendments.

• Amendments to IAS 37 ‘Onerous contracts – cost of fulfilling a contract’
• Annual Improvements to IFRS Standards 2018-2020
• Amendments to IAS 16 ‘Property, plant and equipment - proceeds before intended use’
• Amendments to IFRS 3 ‘Reference to Conceptual Framework’

In April 2021, the IFRS Interpretations Committee published guidance in relation to the capitalisation of costs relating to configuration or customisation of application
software under software-as-a-service arrangements. See note 1.1 for further details of the impact on these financial statements.

5.5 ULTIMATE PARENT COMPANY INFORMATION

The largest group in which the results of the Company are consolidated is that headed by the Company, incorporated in the United Kingdom. No other group
financial statements include the results of the Company.

The consolidated financial statements of the Company and its subsidiaries are available to the public by visiting the Merlin corporate website at
www.merlinentertainments.biz.

5.6

SUBSEQUENT EVENTS

Lease arrangements
As stated in note 4.4, terms for the extension to 2077 and certain modifications of the leases at the Continental Europe site were not agreed until after the end of
the reporting period. As such this transaction has been treated as a non-adjusting event as it is indicative of a condition that arose after the end of the reporting
period and therefore does not result in adjustment to the financial statements.

Under the extension agreement the leases at this site will continue to be subject to fixed annual rent increases, and these have been reflected in the modification
calculation. The extension will result in a modification to the associated leases with an increase to the lease liability of £95 million, to be recognised in 2022.

The incremental borrowing rate (IBR) for the leases at this site has been calculated on the same basis as that described for the United Kingdom sites in note 4.4.

Business combinations
In January 2022 the Group entered into an agreement to take over the operations of the Cadbury World attraction in the UK. The transaction is expected to
complete within the next year once all conditions precedent have been satisfied. As part of the agreement, the Group will be responsible for the day to day running
of the Cadbury World site, its employees, and all operational decisions, as well as holding brand usage rights for Cadbury World in the UK. The financial impact of
the transaction is not expected to be material to the Group.

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 5
OTHER NOTES CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

5.7

SUBSIDIARY AND JOINT VENTURE UNDERTAKINGS

The Group has the following investments in subsidiaries and joint ventures:

Subsidiary undertaking

AAE Unit Trust

AQDEV Pty Limited

Illawarra Tree Topps Pty Ltd

LEGOLAND Discovery Centre Melbourne Pty Ltd

Living and Leisure Australia Limited

Living and Leisure Australia Management Limited

Living and Leisure Australia Trust

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

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

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

Underwater World Sunshine Coast Pty Ltd

US Fly Trust

Madame Tussauds Austria GmbH

MT Austria Holdings GmbH

Merlin Entertainments Belgium N.V. (formerly SEA LIFE Centre Belgium N.V.)

Christchurch Investment Company Limited

Merlin Entertainments (Canada) Inc

Madame Tussauds Exhibition (Beijing) Company Limited

Madame Tussauds Exhibition (Shanghai) Company Limited

Madame Tussauds Exhibition (Wuhan) Company Limited

Merlin Entertainments Hong Kong Limited

Country of
incorporation

Class of
share held

Ownership
2021

Ownership
2020

Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (2)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Australia (1)
Austria (3)
Austria (3)
Belgium (4)
British Virgin Islands (5)
Canada (6)
China (7)
China (8)
China (9)
China (10)

Ordinary

100.0%

50.0%

100.0%

50.0%

100.0%

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 5
OTHER NOTES CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

5.7

SUBSIDIARY AND JOINT VENTURE UNDERTAKINGS (CONTINUED)

Subsidiary undertaking

Merlin Entertainments (Shanghai) Company Limited

Merlin Exhibition (Chongqing) Company Limited

Merlin Exhibition (Shenyang) Company Limited

Merlin Indoor Children's Playground (Shanghai) Company Limited

Merlin (Shanghai) Management Advisory Company Limited

Shanghai Chang Feng Oceanworld Co. Ltd

Shanghai LEGOLAND Management Co., Ltd

LEGOLAND ApS

Merlin Entertainments Group Denmark Holdings ApS

SEA LIFE Helsinki Oy

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

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

Merlin Entertainments India Private Limited
Merlin Entertainments Ireland 1 Limited (a)
Merlin Entertainments Ireland 2 Limited (a)

Motion Bondco Designated Activity Company

SEA LIFE Centre Bray Limited

Gardaland S.r.l.

Gardaland Holidays 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.

LEGOLAND Japan Limited

Merlin Entertainments (Japan) Limited

Merlin Entertainments Group Luxembourg 3 S.à r.l.

Merlin Lux Finco 1 S.à r.l.

Merlin Lux Finco 2 S.à r.l.

Motion Finco S.à r.l.

Country of
incorporation

China (11)
China (12)
China (13)
China (14)
China (15)
China (16)
China (17)
Denmark (18)
Denmark (18)
Finland (19)
France (20)
Germany (21)
Germany (22)
Germany (23)
Germany (23)
Germany (21)
Germany (23)
Germany (23)
Germany (23)
Germany (21)
Germany (21)
Germany (21)
Germany (21)
Germany (22)
Germany (22)
India (24)
Ireland (25)
Ireland (25)
Ireland (26)
Ireland (25)
Italy (27)
Italy (28)
Italy (27)
Italy (27)
Italy (27)
Italy (29)
Italy (27)
Japan (30)
Japan (31)
Luxembourg (32)
Luxembourg (33)
Luxembourg (33)
Luxembourg (32)

Class of
share held

Ownership
2021

Ownership
2020

Ordinary

100.0%

85.0%

100.0%

99.9%

100.0%

100.0%
(b) 49.4%

90.4%

100.0%

99.9%

100.0%

100.0%
(b) 49.4%

90.4%

100.0%

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 5
OTHER NOTES CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

5.7

SUBSIDIARY AND JOINT VENTURE UNDERTAKINGS (CONTINUED)

Subsidiary undertaking

Motion Finco 2 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.

LEGOLAND Discovery Centre Scheveningen B.V.

Madame Tussauds Amsterdam B.V.

Merlin Entertainments Den Haag 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

Merlin Entertainments Singapore Pte. Ltd

LEGOLAND Korea LLC

Merlin Entertainments Korea Limited (c)

SLCS SEA LIFE Centre Spain S.A.

Merlin Entertainments (Thailand) Limited

Siam Ocean World Bangkok Co Ltd

Istanbul Sualti Dunyasi Turizm Ticaret A.S

Madame Tussauds Museum LLC

Merlin Holdings Limited

Alton Towers Limited

Alton Towers Resort Operations Limited

Charcoal CLG 1 Limited (company limited by guarantee)

Charcoal CLG 2 Limited (company limited by guarantee)

Charcoal Holdco Limited

Charcoal Midco 1 Limited

Charcoal Newco 1 Limited

Charcoal Newco 1a Limited

Chessington Hotel Limited

Chessington World of Adventures Limited

Chessington World of Adventures Operations Limited

Chessington Zoo Limited

CWA PropCo Limited

LEGOLAND US Holdings Limited

LEGOLAND Windsor Park Limited

London Aquarium (South Bank) Limited

London Dungeon Limited

London Eye Holdings Limited

London Eye Management Services Limited

Madame Tussaud’s Limited

Madame Tussauds Touring Exhibition Limited

Country of
incorporation

Luxembourg (32)
Malaysia (34)

Malaysia (34)

Netherlands (35)

Netherlands (36)

Netherlands (37)

Netherlands (38)

Netherlands (35)

Netherlands (39)

New Zealand (40)

Portugal (41)

Singapore (42)
South Korea (43)

South Korea (44)
Spain (45)
Thailand (46)
Thailand (47)
Turkey (48)
UAE (49)
UAE (50)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)

Class of
share held

Ownership
2021

Ownership
2020

Ordinary

100.0%

60.0%

100.0%

60.0%

100.0%

100.0%
(d) 48.0%
(d) 1.0%

100.0%

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 5
OTHER NOTES CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

5.7

SUBSIDIARY AND JOINT VENTURE UNDERTAKINGS (CONTINUED)

Subsidiary undertaking

Merlin Attractions Operations Limited

Merlin Magic Making Limited

Merlin Entertainments (Asia Pacific) Limited

Merlin Entertainments (Blackpool) Limited

Merlin Entertainments (Dungeons) Limited

Merlin Entertainments (NBD) Limited

Merlin Entertainments (SEA LIFE) Limited

Merlin Entertainments Crown (UK) Limited

Merlin Entertainments Developments Limited (e)

Merlin Entertainments Group Employee Benefit Trustees Limited

Merlin Entertainments Group Holdings Limited

Merlin Entertainments Group Limited

Merlin Entertainments Group Operations Limited

Merlin Entertainments Limited

Merlin’s Magic Wand Trustees Limited

Merlin UK Finance 1A Limited (a)

Merlin UK Finance 2A Limited (a)

Merlin UK Finco 1 Limited

Merlin UK Finco 2 Limited

Merlin US Holdings Limited

Motion Topco Limited (f)

Motion Midco Limited

Motion Acquisition Limited

SEA LIFE Centre (Blackpool) Limited

SEA LIFE Centres Limited

SEA LIFE Trustees Limited

The London Planetarium Company Limited

The Millennium Wheel Company Limited

The Seal Sanctuary Limited

The Tussauds Group Limited

Thorpe Park Operations Limited

Tussauds Attractions Limited

Tussauds Group (UK) Pension Plan Trustee Limited

Tussauds Limited

Warwick Castle Limited

Lake George Fly LLC

LEGOLAND California LLC

LEGOLAND Discovery Center Arizona LLC

LEGOLAND Discovery Center Boston LLC

LEGOLAND Discovery Center Columbus LLC

LEGOLAND Discovery Centre (Dallas) LLC

LEGOLAND Discovery Centre (Meadowlands) LLC

Country of
incorporation

Class of
share held

Ownership
2021

Ownership
2020

UK (51)

UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
UK (51)
USA (52)
USA (53)
USA (53)
USA (53)
USA (53)
USA (53)
USA (53)

Ordinary

100.0%

99.8%

100.0%

ANNUAL REPORT AND ACCOUNTS 2021

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 5
OTHER NOTES CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

5.7

SUBSIDIARY AND JOINT VENTURE UNDERTAKINGS (CONTINUED)

Subsidiary undertaking

LEGOLAND Discovery Center Michigan LLC

LEGOLAND Discovery Center Philadelphia LLC

LEGOLAND Discovery Center San Antonio LLC

LEGOLAND Discovery Center San Jose LLC

LEGOLAND Discovery Centre US LLC

LEGOLAND New York LLC

Madame Tussauds Hollywood LLC

Madame Tussaud Las Vegas LLC

Madame Tussauds Nashville LLC

Madame Tussaud’s New York LLC

Madame Tussauds Orlando LLC

Madame Tussauds San Francisco LLC

Madame Tussauds Washington LLC

Merlin Entertainments Chicago LLC

Merlin Entertainments Crown (US) Inc

Merlin Entertainments Group Florida LLC

Merlin Entertainments Group US Holdings Inc

Merlin Entertainments Group US LLC

Merlin Entertainments Group Wheel LLC

Merlin Entertainments North America LLC

Merlin Entertainments Short Breaks LLC

Merlin Entertainments US NewCo LLC

Motion Finco LLC

San Francisco Dungeon LLC

SEA LIFE Center San Antonio LLC

SEA LIFE Charlotte LLC

SEA LIFE Meadowlands LLC

SEA LIFE Michigan LLC

SEA LIFE Minnesota LLC

SEA LIFE Orlando LLC

SEA LIFE US LLC

The Tussauds Group LLC

Joint venture undertaking

LL Dubai Hotel LLC

Country of
incorporation

Class of
share held

Ownership
2021

Ownership
2020

USA (53)

USA (54)

USA (53)

Ordinary

100.0%

Country of
incorporation

Class of
share held

Ownership
2021

Ownership
2020

UAE (55)

Ordinary

40.0%

(a)

(b)

(c)

(d)

(e)

(f)

Companies in the process of voluntary strike-off.
Motion JVco Limited 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.
During 2021 Merlin Entertainments Korea Company Limited was merged with Busan Aquaria Twenty One Co. Ltd and the merged entity was renamed Merlin Entertainments Korea Limited.
Motion JVco Limited has 100% of the beneficial ownership of these entities.
Merlin Entertainments Developments Limited was dissolved on 2 May 2021.
Motion Topco Limited is held by the Company. All other subsidiaries are held by intermediate subsidiaries. Upon the vesting date of the share incentive plans, employees will hold a non-controlling
interest in Motion TopCo Limited of 0.16% (see note 4.5).

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 5
OTHER NOTES CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

5.7

SUBSIDIARY AND JOINT VENTURE UNDERTAKINGS (CONTINUED)

Registered offices

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

(14)

(15)

(16)

(17)

(18)

(19)

(20)

(21)

(22)

(23)

(24)

(25)

(26)

(27)

(28)

(29)

(30)

(31)

(32)

(33)

(34)

(35)

(36)

(37)

(38)

(39)

(40)

(41)

(42)

(43)

(44)

(45)

(46)

(47)

(48)

(49)

(50)

(51)

(52)

(53)

(54)

(55)

Suite 1, Level 11, 66-68 Goulburn Street, Sydney, New South Wales, 2000, Australia
Unit 501, 370 St Kilda Road, Melbourne, Victoria, Australia
Riesenradplatz 5-6, 1020 Wien, Vienna, Austria
Koning Albert 1 Laan 116, 8370, Blankenberge, Belgium
P.O. Box 3340, Road Town, Tortola, British Virgin Islands
Suite 5300 Commerce Court West, 199 Bay Street, Toronto, ON, M5L 1B9, Canada
No. 4, 6, 8, 10, 12, 14, 16, 18 Qianmen Avenue, Dongcheng District, Beijing, China
10/F New World Building, No 2-68 Nanjing Xi Road, Shanghai 200003, China
21, Han Street, Wuchang District, (Shops 40/41/42) Building 5, Lot J2, Wuhan, China
Shops B131, B132 & B133 of Level B1, K11 Musea Victoria Dockside, 12 Salisbury Road Tsim Sha Tsui, Kowloon Hong Kong
Room No.3F-01b&32&K1, L3 Floor, Zhihuixuhui Plaza, No.1-2 of 2389 Alley, Zhangyang Road, Shanghai Pilot Free Trade Zone, China
4-11, Fu 9, No. 133, Nanpin Road, Nan'an District, Chongqing, China
No. 2 Jia-1, Bolan Road, Heping District, Shenyang, China
L2-25, 2F, 3F Parkside Plaza, Putuo District, Shanghai, China
Room 10-1, 10th Floor, No 2-68 Nanjing West Rd, Huangpu District, Shanghai, China
189, Daduhe Road, Pu Tuo District, Shanghai, 200062, China
Room 5668, No. 19, Cao Li Road 38 Lane, Feng Jing Town, Jinshan District, Shanghai, China
Aastvej 10, 7190 Billund, Denmark
Tivolitie 10, Helsinki 00510, Finland
Centre Commercial Val d'Europe, Espace 502, 14 cours du Danube, Serris, 7711 Marne-La-Vallée, France
Kehrwieder 5, 20457 Hamburg, Germany
Heidenhof 1, 29614 Soltau, Germany
Legoland Allee, 89312, Gunzburg, Germany
No. 46, Aradhana, R. K. Puram, Sector -13, New Delhi- 110066, India
6th Floor, 2 Grand Canal Square, Dublin 2, Ireland
2nd Floor, 1-2 Victoria Buildings, Haddington Road, Dublin 4, Ireland
Via Derna 4, Castelnuovo del Garda, 37014, Verona, Italy
Via Vivaldi n.7, Castelnuovo del Garda Verona, 37014, Verona, Italy
Loc Ronchi, Castel del Garda Verona, 37014, Verona, Italy
2-2-1, Kinjoufutou Minato-ku, Nagoya-shi, Japan
Island Mall, Decks Tokyo Beach, 1-6-1 Daiba, Minato-ku, Tokyo, Japan
2-4, Rue Eugène Ruppert, L-2453, Luxembourg
2-4, Rue Eugène Ruppert, L-2453, Luxembourg
Level 13A-6, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, 50490 Kuala Lumpur, Malaysia
Rokin 78, 1012 KW Amsterdam, Netherlands
Gevers Deynootweg 970, 2586 BW Den Haag, Netherlands
Dam 20 GEBOUW P&C, 1012 NP Amsterdam, Netherlands
Jasmijn 13, Leidschendam, 2262AN, Netherlands
Strandweg 13, 2586 JK Den Haag, Netherlands
Level 11, 41 Shortland Street, Auckland 1010, New Zealand
No. 1 Rua Particular do Castelo de Queijo, 4100-379, Porto, Portugal
10 Changi Business Park Central 2, #01-02, HansaPoint, 486030, Singapore
Yoseon-dong, 8F Moorim Building, 16 Joongang-ro, Chuncheon-si, Gangwon-do, Republic of Korea
266 Haeundaehaebyun-ro, Haenudee-Gu, Busan, Republic of Korea
Puerto Marina, Benalmadena-Costa, 29630 Benalmadena, Malaga, Spain
989 Siam Discovery, #401 4 Flr., #501 5 Flr., #601 6 Flr., #701 7 Flr., Rama I Road, Pathumwan, Bangkok 10330, Thailand
B1-B2 Floor Siam Paragon, 991 Rama 1 Road, Khweng Patumwan, Bangkok 10330, Thailand
Kocatepe Mah, Pasa Cad, Forum Istanbul AVM No. 5/5, Bayrampasa, Turkey
Office 1601, 48 Burj Gate, Burj Khalifa, Dubai, United Arab Emirates
Emaar Square, Building 3, Level 5, P.O. Box 37172, Dubai, United Arab Emirates
Link House, 25 West Street, Poole, Dorset, BH15 1LD, United Kingdom
80 State Street, Albany, New York 12207-2543, United States
1209 Orange Street, Wilmington, New Castle County, Delaware, 19801, United States
200 Bellvue Parkway Suite 210, Wilmington, New Castle County, Delaware, 19809, United States
201-01 Emaar Square, PO Box 123311, Dubai, United Arab Emirates

MOTION JVCO LIMITED

NOTES TO THE ACCOUNTS
SECTION 5
OTHER NOTES CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

5.7

SUBSIDIARY AND JOINT VENTURE UNDERTAKINGS (CONTINUED)

UK registered subsidiaries exempt from audit
The following subsidiaries are taking advantage of an exemption from audit under section 479A of the Companies Act 2006. Motion JVco Limited is providing a
statutory guarantee for any outstanding liabilities of these subsidiaries. All subsidiary undertakings have been included in the consolidated financial statements
of Motion JVco Limited as at 25 December 2021.

Subsidiary undertaking

Alton Towers Resort Operations Limited

Charcoal CLG 1 Limited

Charcoal Midco 1 Limited

Charcoal Newco 1 Limited

Charcoal Newco 1a Limited

Chessington Hotel Limited

Chessington World of Adventures Operations Limited

LEGOLAND US Holdings Limited

LEGOLAND Windsor Park Limited

London Aquarium (South Bank) Limited

London Eye Holdings Limited

London Eye Management Services Limited

Company
number

06127441

06128422

06125930

06128686

06130062

05686193

06128521

06273037

02721728

06553877

05686179

02896849

Subsidiary undertaking

Merlin Entertainments (Asia Pacific) Limited
Merlin Entertainments (Blackpool) Limited
Merlin Entertainments (NBD) Limited
Merlin Entertainments Crown (UK) Limited
Merlin Entertainments Group Limited
Merlin Entertainments Group Operations Limited
Merlin UK Finco 1 Limited
Merlin UK Finco 2 Limited
Merlin US Holdings Limited
SEA LIFE Centre (Blackpool) Limited
Thorpe Park Operations Limited

Company
number

03767102

02429776

05010879

09679586

05022287

03671093

08753258

08753263

06273035

02407713

06127478

UK registered subsidiaries exempt from the preparation of accounts
The following subsidiaries are taking advantage of an exemption from the requirement to prepare individual accounts under section 394A of the Companies
Act 2006.

Subsidiary undertaking

Alton Towers Limited

Charcoal CLG 2 Limited

Charcoal Holdco Limited

Chessington World of Adventures Limited

Chessington Zoo Limited

CWA Propco Limited

London Dungeon Limited

Madame Tussaud's Limited

Company
number

02464313

06128435

06125928

03667104

02083608

06273039

06287468

02168431

Merlin Entertainments Group Employee Benefit Trustees Limited

03671050

Merlin's Magic Wand Trustees Limited

06511344

Subsidiary undertaking
SEA LIFE Trustees Limited
SEA LIFE Centres Limited
The London Planetarium Co Limited
The Millennium Wheel Company Limited
The Seal Sanctuary Ltd
The Tussauds Group Limited
Tussauds Attractions Limited
Tussauds Limited
Warwick Castle Limited

Company
number

05036964

06287526

00340209

03793329

06287590

06287588

06287489

06287589

03667101

MOTION JVCO LIMITED

MOTION JVCO LIMITED
COMPANY
FINANCIAL STATEMENTS

Company statement of financial position at 25 December 2021 (2020: 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

The notes on pages 97 to 100 form part of these financial statements.

The Company has elected to take the exemption available under s408 of the Companies Act 2006 not to present the Company statement of comprehensive income.
The Company recorded a profit for the year of £nil (2020: loss for the year of £4 million).

The parent Company financial statements were approved by the Board of Directors on 12 April 2022 and were signed on its behalf by:

Søren Thorup Sørensen
Director

20212020Note£m£mNon-current assetsInvestmentsiii2,985 2,835 Deferred tax assets1 1 2,986 2,836 Current assetsCash and cash equivalents- 150 - 150 Net assets2,986 2,986 Issued capital and reserves attributable to owners of the Companyiv2,986 2,986 Total equity2,986 2,986

MOTION JVCO LIMITED

MOTION JVCO LIMITED
COMPANY
FINANCIAL STATEMENTS

Company statement of changes in equity at 25 December 2021 (2020: 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

ShareShareCapitalRetainedTotalcapitalpremiumreserveearningsequityNote£m£m£m£m£mAt 29 December 201926 2,653 6 (1)2,684 Loss for the year- - - (4)(4)Total comprehensive income for the year- - - (4)(4)Shares issuediv3 303 - - 306 At 26 December 202029 2,956 6 (5)2,986 Total comprehensive income for the year- - - - - Transfer to retained earningsiv- - (6)6 - At 25 December 2021iv29 2,956 - 1 2,986

MOTION JVCO LIMITED

NOTES TO MOTION JVCO LIMITED
COMPANY
FINANCIAL STATEMENTS

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

ACCOUNTING POLICIES

Motion JVco Limited (the Company) is a private company limited by shares which is incorporated in the United Kingdom. Its registered office is Link House, 25 West
Street, Poole, Dorset, BH15 1LD.

The principal activity of the Company is to act as a holding company.

These financial statements were prepared in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (FRS 101).

In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of international accounting standards in
conformity with the requirements of the Companies Act 2006, but makes amendments where necessary in order to comply with Companies Act 2006 and has set
out below where advantage of the FRS 101 disclosure exemptions has been taken.

The consolidated financial statements of Motion JVco Limited are prepared in accordance with International Financial Reporting Standards and are available to the
public and may be obtained by visiting the Merlin corporate website at www.merlinentertainments.biz. Company financial statements have been prepared and
approved by the Directors in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.

In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
• Cash flow statement and related notes;
• Disclosures in respect of transactions with wholly owned subsidiaries;
• Disclosures in respect of capital management;
• The effects of new but not yet effective IFRSs;
• Disclosures in respect of the compensation of key management personnel.

As the consolidated financial statements of Motion JVco Limited include the equivalent disclosures, the Company has also taken the exemptions under FRS 101
available in respect of certain disclosures required by IFRS 13 ‘Fair value measurement’ and the disclosures required by IFRS 7 ‘Financial instrument disclosures’.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.

These financial statements have been prepared for the 52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020).

A summary of the Company’s significant accounting policies is set out below.

Investments in subsidiaries
Investments in subsidiaries are stated at cost, less provision for impairment. The carrying amount of the Company’s investments in subsidiaries is reviewed annually to
determine whether there is any indication of impairment. If any such indication exists, the investment’s recoverable amount is estimated. If the carrying value of the
investment exceeds the recoverable amount, the investment is considered to be impaired and is written down to the recoverable amount. The impairment loss is
recognised in the income statement.

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.

Taxation
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 directly in equity, or when it relates to items recognised in other comprehensive income, 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 substantively enacted at the end of the reporting period, and any
adjustment to tax payable in respect of previous periods.

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.

MOTION JVCO LIMITED

NOTES TO MOTION JVCO LIMITED
COMPANY
FINANCIAL STATEMENTS CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

ACCOUNTING POLICIES (CONTINUED)

Classification of financial instruments issued by the Company
Financial instruments are recognised on the statement of financial position when the Company becomes party to the contractual provisions of the instrument. The
accounting policy for each type of financial instrument is included within the relevant note.

Financial assets are initially measured at fair value, unless otherwise noted, and are subsequently measured at amortised cost, fair value through other comprehensive
income or fair value through profit or loss. A financial asset is derecognised when the contractual rights to the cash flows from the asset expire or the Company
transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

Financial liabilities are initially measured at fair value, plus, in the case of other financial liabilities, directly attributable transaction costs. Other financial liabilities,
primarily the Company’s interest-bearing loans and borrowings, are measured at amortised cost. Financial liabilities are measured at fair value through profit or loss
and are held on the statement of financial position at fair value. A financial liability is derecognised when the Company’s obligations are discharged, expire or are
cancelled. Finance payments associated with financial liabilities are dealt with as part of finance costs.

An equity instrument is any contract that has a residual interest in the assets of the Company after deducting all of its liabilities. Finance payments associated with
financial instruments that are classified in equity are dividends and are recorded directly in equity. The preference shares issued by the Company carry a fixed,
cumulative, preferential dividend which accrues (but is not payable) on each preference share on a daily basis from the date of issue of the relevant preference share.
Payment of these dividends is at the discretion of the Company and accordingly they have been classified as equity.

Where financial instruments consist of a combination of debt and equity, the Company will assess the substance of the arrangement in place and decide how to
attribute values to each taking into consideration the policy definitions above.

Dividends
Dividends are recognised through equity on the earlier of their approval by the Company’s shareholders or their payment.

OPERATING EXPENSES

Staff numbers and costs
The average number of persons employed by the Company during the year was seven (2020: seven), being the Directors of the Company.

The employment costs of the Directors of the Company have been borne by other Group companies for their services to the Group as a whole. The costs related
to these Directors are included within note 2.1 of the consolidated financial statements.

Auditor’s remuneration
Fees paid to Ernst & Young LLP for audit and other services to the Company are not disclosed in its individual accounts as the Group accounts are required to
disclose such fees on a consolidated basis (note 2.1 of the consolidated financial statements).

iii

INVESTMENT IN SUBSIDIARY UNDERTAKING

Shares insubsidiaryundertaking£mCost and carrying valueAt 29 December 20192,835 Additions- At 26 December 20202,835 Additions150 At 25 December 20212,985

MOTION JVCO LIMITED

NOTES TO MOTION JVCO LIMITED
COMPANY
FINANCIAL STATEMENTS CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

iii

INVESTMENT IN SUBSIDIARY UNDERTAKING (CONTINUED)

The subsidiary undertaking at the year end is as follows:

Company

Motion Topco Limited

Activity

Country of
incorporation

Shareholding

Description of
shares held

Holding company

99.8%

Ordinary

A full list of Group companies is included in note 5.7 of the consolidated financial statements on pages 88 to 93.

Upon the vesting date of the share incentive plans, employees of the Group will hold a non-controlling interest in Motion TopCo Limited of 0.16% (see note 4.5 of
the consolidated financial statements).

EQUITY

Share capital

Issue of shares
The nominal value of shares in issue is shown in share capital, with any additional consideration for those shares shown in share premium.

Ordinary shares
During 2020 the Company issued 2,957,123 ordinary shares at a nominal value of one pence each, for consideration of £13 million, for general corporate purposes.

The holders of ordinary shares are entitled to receive dividends as declared from time to time.

MOTION JVCO LIMITED

NOTES TO MOTION JVCO LIMITED
COMPANY
FINANCIAL STATEMENTS CONTINUED

52 weeks ended 25 December 2021 (2020: 52 weeks ended 26 December 2020)

ANNUAL REPORT AND ACCOUNTS 2021

EQUITY (CONTINUED)

Capital reserve
During 2019 the Company issued £156 million 0% subordinated unsecured shareholder loan notes due 31 October 2020. In accordance with the accounting policy as
set out in note i, these were classed as financial liabilities. Reflecting the off-market interest rate attached to these loan notes, these were initially recognised at fair
value of £150 million with the difference treated as a capital contribution.

During 2020 the shareholder loans were repaid and the proceeds reinvested in a further issue of new ordinary and preference shares to the existing shareholders.

The capital reserve has been eliminated through retained earnings in the year.

Retained earnings
The profit after tax for the year in the accounts of Motion JVco Limited is £nil (2020: loss of £4 million).

RELATED PARTY TRANSACTIONS

For full details of transactions and arrangements with the Company’s ultimate shareholders, see note 5.3 of the consolidated financial statements.

100

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

GLOSSARY

Board

Capex

Cluster

CWE

EBITDA

Board of Directors of the Company.

Capital expenditure.

A group of attractions located in a city close to one another.

Conservation, Welfare and Engagement. The SEA LIFE team that focuses on delivering world class animal welfare
throughout our animal care network and developing new guest experiences.

Profit before finance income and costs, taxation, depreciation, amortisation and impairment and after taking account
of attributable profit after tax of joint ventures.

Exceptional items

Due to their nature, certain one-off and non-trading items can be classified as exceptional in order to draw them to
the attention of the reader and to show the underlying business performance more accurately.

Existing estate (EE)

EE comprises all attractions other than new openings.

GDPR

Group

IPO

KPI

LBC

LCA

LDC

General Data Protection Regulation.

Intellectual Property.

Motion JVco Limited group of companies.

Initial Public Offering.

Key Performance Indicator.

Little BIG City attractions. These are part of the Midway Attractions Operating Group.

Licence and Co-operation agreement. This agreement sets out the rights granted to the Group to use the LEGO
and LEGOLAND brands.

LEGOLAND Discovery Centre attractions. These are part of the Midway Attractions Operating Group.

Like for like (LFL)

2021 LFL growth refers to the growth between 2020 and 2021 on a constant currency basis using 2020 exchange
rates and includes all businesses owned and operated before the start of 2020.

Listing

LLP

Listing on the London Stock Exchange.

LEGOLAND Parks Operating Group.

Merlin Board

The Board of Directors of Merlin Entertainments Limited.

Merlin Magic Making (MMM)

Merlin’s Magic Wand (MMW)

MMM is the unique resource that sits at the heart of everything Merlin does. It is our specialist in-house site-search
and business development; creative design; production; and project management team. MMM also pursues
acquisition and investment opportunities.

MMW forms a key element of Merlin’s Corporate Social Responsibility commitment. Our partner children’s charity
delivers magical experiences around the world to children who are facing challenges of serious illness, disability
or adversity.

Midway or Midway attractions

The Midway Attractions Operating Group and/or the Midway attractions within it. Midway attractions are typically
smaller, indoor attractions located in city centres, resorts or shopping malls.

Madame Tussauds attractions. These are part of the Midway Attractions Operating Group.

‘Net Promoter’ score

How we measure the propensity of our customers to recommend our attractions.

New Business Development (NBD)

NBD relates to attractions that are newly opened or under development for future opening, together with the
addition of new accommodation at existing sites. New openings can include both Midway attractions and new theme
parks. NBD combines with the existing estate to give the full estate of attractions.

Non-core

Attractions which Merlin has ceased the operation of during the period.

101

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

GLOSSARY

Operating free cash flow

Underlying EBITDA less existing estate capex.

Peppa Pig

Rooms

RPC

RTP

SEA LIFE Trust

Second gate

SLC

The Merlin Way

Top Box

Underlying

Visitors

We have a multi-territory exclusivity arrangement to develop a range of attractions based on the Peppa Pig brand, one of
the most well-known pre-school IP’s in the world.

A single accommodation unit at one of our theme parks, for example a hotel room, lodge or glamping tent.

Revenue per capita, defined as visitor revenue divided by number of visitors.

Resort Theme Parks Operating Group.

The SEA LIFE Trust forms a key element of Merlin’s Corporate Social Responsibility commitment. Our partner
marine conservation charity works to protect the marine environment.

A visitor attraction at an existing resort with a separate entrance and for which additional admission fees are
charged.

SEA LIFE Centre aquarium attractions. These are part of the Midway Attractions Operating Group.

The culture of the Group which encompasses our vision and values.

The highest level of customer satisfaction that we record in our customer surveys from touchscreen data at our
attractions.

Underlying information presented excludes exceptional items that are classified separately within the
financial statements.

Represents all individual visits to Merlin owned or operated attractions.

Wizard Wants to Know (WWTK) WWTK is our annual online employee survey.

Yext

A platform we used to monitor online guest reviews and help inform how we improve our attractions.

Terms used
Unless otherwise stated, the terms ‘Merlin’, ‘Merlin Entertainments’, ‘the Group’, ‘We’ and ‘Us’ refer to the Company (Motion JVco Limited) and, as applicable, its
subsidiaries and/or interests in joint ventures.

Percentages are calculated based on figures before rounding and are then rounded to one decimal place.

102

MOTION JVCO LIMITED

ANNUAL REPORT AND ACCOUNTS 2021

OTHER FINANCIAL
INFORMATION

Foreign exchange rate sensitivity
The Group’s income statement is exposed to fluctuations in foreign currency exchange rates principally on the translation of our non Sterling earnings. The tables below
show the impact on 2021 revenues of re-translating them at 2020 foreign exchange (FX) rates.

Currency

USD

EUR

AUD

Other

Increase in 2021 revenues at 2020 FX rates

2020
average
FX rates

2021
average
FX rates

%age
movement
in FX rates

Revenue
impact
£m

1.29

1.11

1.87

1.38

1.17

1.81

6.8%

4.8%

(3.2)%

(1)

103