With the group operating within the leisure and hospitality industry, one of the industries most significantly impacted by COVID in 2020, 2021 has been a year focused on recovery. Although 2021 started with more than half of Merlin’s attractions closed due to further lockdowns and restrictions, these generally started to ease in early Q2. The group saw visitor numbers increase from 22.1m to 35.2m, although this was still some way below pre-pandemic levels (e.g. 67.0m in 2019) due to the uneven recovery across geographies and demographics. As a result of this, there was a corresponding increase in revenue from £629m to £1,261m (again lower than the 2019 level of £1,740m). Nonetheless, this improvement in revenue resulted in an underlying operating profit of £132m for 2021, compared to a (restated) loss of £369m in 2020. Note that there was an underlying operating loss of £319m reported for 2020 in last year’s financial results, however this has been restated in the 2021 financial statements due to changes in accounting policies and estimates relating to Software as a Service (SaaS) arrangements and valuation of the group’s brands.
The group has presented these key results for each of its three operating groups. Midway Attractions saw visitors up (32%) from 12.7m to 16.8m, revenue increase (51%) from £228m to £344m, and an underlying operating loss of £10m compared to a (restated) loss of £146m in 2020. This is said to have been driven by strong recovery at coastal and regional Midway Attractions (namely LEGOLAND Discovery Centre and SEA LIFE Centre attractions) which are primarily focused on resident markets. In contrast, there was slower recovery in gateway city locations where visitation is contingent on international tourism (e.g. London), and in regions where COVID-19 related trading restrictions continued (i.e. Asia Pacific region and Australia).
LEGOLAND Parks saw visitors up (90%) from 5.0m to 9.4m, revenue increase (135%) from £228m to £537m, and an underlying operating profit of £106m compared to a (restated) loss of £95m in 2020. Having been closed since March 2020, California was able to open in April 2021 and therefore made a significant contribution to the improvement on the prior year. Florida was able to open throughout 2021, and generated revenue that exceeded that of 2019. 2021 also saw the launch of LEGOLAND New York, said to be Merlin’s largest capital project to date, in late spring, which then ramped up operation into the summer. Japan operated throughout 2021 under significant local restrictions which suppressed trading. The European parks reopened in Q2 2021 as local restrictions lifted. Windsor, which saw the opening of LEGO MYTHICA: World of Mythical Creatures in 2021, is said to have performed strongly. However, the trading recovery at the parks in Germany and Denmark lagged the UK, reflecting both local restrictions and a greater exposure to international tourism.
Resort Theme Parks saw visitors up (106%) from 4.4m to 9.0m, revenue increase (122%) from £169m to £374m, and an underlying operating profit of £87m compared to a (restated) loss of £62m in 2020. 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. However, once opened, Merlin saw healthy demand and encouraging trading across the majority of resorts, with strong revenue per guest and higher average room rates. These appear to be the key factors in this operating group achieving a revenue result exceeding that of 2019, the only one of the three operating groups to do so. The UK parks opened over April and May, earlier than in 2020 when they opened in early July, and certain attractions generated revenues ahead of 2019. New attractions included Croc Drop at Chessington World of Adventures Resort, and the deferred opening of The World of David Walliams at Alton Towers Resort and Black Mirror Labyrinth at Thorpe Park Resort. Gardaland opened in June (similar to 2020), while Heide Park reopened in May, and trading at both resorts is said to have been encouraging, with Gardaland benefiting from the opening of the ‘second gate’ LEGOLAND Water Park. Merlin have recently agreed terms with the landlord for the four leasehold Resort Theme Park locations (Alton Towers, Thorpe Park, Warwick Castle and Heide Park), to increase the term of this leases by 35 years through to 2077.
Although headline performance in revenue improved on 2020, Merlin continued to manage costs carefully in response to local restrictions, challenges in recruiting and retaining staff, and building cost pressures as countries came out of lockdowns and economic activity returned. The group were able to maintain guest satisfaction at the 2019 and 2020 level of 94%, alongside continuing to operated with enhanced protocols to enable safe operation during the COVID-19 pandemic. The Medical Treatment Case rate (i.e. rate of guest injuries requiring external medical treatment relative to 10,000 guest visitations) remained constant at 0.02 from 2019 through 2021.
As the group look to 2022 and beyond, it remains the case that opening second gate attractions alongside existing Resort Theme Parks + LEGOLAND Parks remains a focus, like the stand-alone Peppa Pig Theme Park which opened at LEGOLAND Florida earlier this year. Merlin also continue to develop new brands, formats and partnerships, exemplified through the opening of a Peppa Pig World of Play in the Netherlands in February, the takeover of the ‘THIS IS HOLLAND’ flying theatre experience at the Amsterdam cluster of attractions, and the partnership with Cadbury World in the UK. Furthermore, the group maintain a strong pipeline of LEGOLAND resorts, with LEGOLAND Korea having opening in May 2022 and plans to develop another three in China over the next five years. It is noted that there are also options for theme park management contract opportunities with other brands, which could suggest that Merlin may look to acquire or enter partnerships with other theme park locations. Merlin have also partnered with Aramark to provide the food and beverage services across seven of their UK and US theme parks. It is also evident that the investment cycles have restarted at existing attractions, with Chessington World of Adventures set to open a major new area and rollercoaster in 2023 and Thorpe Park planning the UK’s tallest rollercoaster for 2024.