Legoland owner warns of terrorism impact to its profits

Shares in Legoland-owner Merlin Entertainments have plunged after the company said recent terrorist attacks had continued to hit visitor numbers.

Merlin, which also runs Alton Towers, said "record levels" of attacks in Europe during the summer - its peak trading season - slowed revenue growth to just 0.3% compared with last summer.

Bad weather and higher costs due to UK employment law changes also hit Merlin.

Shares dropped by 18% after the trading update for the 40 weeks to 7 October.

Analysts say Merlin's explanation for the dip in popularity of its UK attractions is at odds with official figures which show the number of foreign visitors to Britain over the summer rose.

The company is now forecasting flat growth for the rest of 2017, and expects full year earnings of £470m-£480m, below analyst estimates of £490m.

Nonetheless, chief executive Nick Varney said he remained "confident in the [firm's] longer term prospects."

The group opened Legoland Japan in April, and it has also announced plans to open a new Bear Grylls-themed attraction in Birmingham in 2018.

'And now it has Peppa'

Merlin has also signed an agreement with Entertainment One to develop new Peppa Pig-themed attractions.

The deal excludes the UK and China and Merlin said it expects to open Peppa Pig attractions in two resort theme parks next year as well as a standalone park in 2019.

Merlin said work has also begun on a Legoland park in South Korea, and it will open Legoland New York in 2020.

The firm plans to reduce spending by £100m from 2018-21 to fund more investment in accommodation and improving productivity.

"Whilst today's share price move is dramatic and investors are right to be cautious on the outlook, it is worth remembering that Merlin is barely a third of the way through a planned global expansion of Legoland," said Neil Wilson, Senior Market Analyst at ETX Capital.

"There ought to be considerable new revenue streams coming in the longer term that investors who are worried about terror threats to the UK business in the near-term may want to look more closely at. And now it has Peppa."