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Merlin looks to Peppa Pig to revive fortunes as terrorism hurts trading

(c) Sky News 2017: <a href="http://news.sky.com/story/terror-hit-merlin-shares-plunge-despite-peppa-pig-deal-11084762">Merlin looks to Peppa Pig to revive fortunes as terrorism hurts trading</a>
 

Shares (Berlin: DI6.BE - news) in London Eye operator Merlin plunged by 20% after it said the scale of terrorism "at record levels of intensity in Europe" was having a major impact on its performance.

Merlin also announced new developments including a tie-up with children's TV character Peppa Pig, but it is cutting £100m of investment in existing attractions amid pressures on the business.

The UK-based FTSE 100 group, which also operates Alton Towers and Madame Tussauds, said its sites in the capital and European theme parks experienced "difficult summer trading" after a series of terror attacks and poor weather.

Visitor numbers in London had been boosted early in the year thanks to the weak pound, but demand fell back following the Westminster Bridge attack and a series of other terrorist incidents - with Merlin warning the trend looked likely to continue.

Chief (Taiwan OTC: 3345.TWO - news) executive Nick Varney said: "Our markets continue to be impacted by certain external shocks, not least terrorism which is currently at record levels of intensity in Europe."

He also blamed employment legislation in the UK for contributing to "significant cost pressures".

Mr Varney said the group had decided to "adjust the tiller" on its plans by reallocating spending from existing sites to its accommodation roll-out and productivity strategy.

Merlin announced a deal with Peppa Pig maker Entertainment One (Other OTC: ENTMF - news) to open themed attractions and accommodation in a number of countries.

But it does not include the UK, where there is already a Peppa Pig World in Hampshire, while in China rights will be licensed to Merlin on a non-exclusive basis.

Peppa Pig areas will open in existing theme parks in 2018 with the first standalone attraction expected in 2019.

Merlin has also agreed a tie-up with survival expert Bear Grylls - with the first Bear Grylls Adventure site to open in Birmingham next year.

The group set out its latest plans in a trading update for the 40 weeks to 7 October.

Like-for-like sales crept up by 0.3% thanks to growth at its Legoland attractions while sales fell in other parts of the business.

Merlin said trading in recent weeks had "remained mixed" and revenue for the full year was expected to remain flat compared to 2016.

It offered a gloomy prognosis for next year, saying: "Whilst it is too early to predict the outlook for 2018, it is likely that the recent trends experienced in London will persist for the foreseeable future."

Merlin still expects to see full-year earnings rise this year but Steve Clayton, manager of a Hargreaves Lansdown (Frankfurt: DMB.F - news) fund that holds Merlin stock, said the cut in spending on existing attractions was a concern.

"The worry is that the decision to reduce investment in standing assets risks hitting attendance levels in future years," Mr Clayton said.

Merlin shares closed the day 16% lower.