Merlin Entertainments PLC (LON:MERL) reported a dip in profits for the first half of the year as continued difficulties in its London market and adverse foreign exchange movement weighed on its earnings.
The FTSE 250 theme park operator reported underlying earnings (EBITDA) had fallen 1.3% to £143mln despite organic revenue growth of 4.5% to £694mln and visitor numbers rising 0.8% to 30mln over the period.
READ: Merlin Entertainments says terror attacks continue to dampen visitor numbers ahead of interims
The company’s pre-tax profit for the period also declined by 13.7% to £43mln, although the firm also raised its interim dividend 4.2% to 2.5p.
Most of the company’s revenue growth in the period was driven by its Resort and LEGOLAND theme parks, which saw organic revenues increases of 9.7% and 7.8% respectively, driven by favourable weather conditions and a full period benefit from LEGOLAND Japan.
Conversely, the firm’s Midway attractions. Mostly based in London, saw organic revenue decline by 1.1% as warm weather drove customers away from the mostly indoor attractions and the recovery from a period of terrorist incidents in the UK capital continued.
Looking to the second half, Merlin chief executive Nick Varney said the company was trading in line with expectations and was entering its peak season where most of its annual profit was expected to be generated, adding that the firm remained confident of its long-term prospects.
Verney added that despite the revenue decline trading at the Midway attractions was broadly satisfactory, although it was “too early to judge if there are definitive signs of a recovery in London”.
Lee Wild, head of equity strategy at interactive investor, said “a great summer like this should continue to generate bumper profits for outside venues”, but that the heatwave had been “a double-edged sword” for the company.
“It’s also taking time for revenues in the capital to make a full recovery from last year’s terror attacks, and Merlin is still not confident enough to call a recovery in the London market” Wilds said, adding that the decline in profits was mainly due to “a sharp decline in margin at mainly indoor attractions like Madame Tussauds where there is a large fixed cost base, so lower sales drop straight through to the bottom line”.
Merlin shares were up 0.2% at 391.3p.