INTRODUCTION TO MERLIN ENTERTAINMENTS MARCH 2015 1 WHAT IS MERLIN? Global leader in location based entertainment with world class brands Midway Attractions No. 1 in Europe and No. 2 only to Disney worldwide1 Two products Midway: indoor, up to two hour dwell time, located in city centres or resorts LEGOLAND Parks Theme parks: outdoor, 1 – 2 day destination venues increasingly with on-site accommodation Three Operating Groups2 Midway Attractions (92 attractions, 42% of 2014 revenue) LEGOLAND Parks (6 parks, 31% of revenue) Resort Theme Parks Resort Theme Parks (6 parks3, 27% of revenue) Supported by Merlin Magic Making, our unique creative and production resource 1 2 | Based on number of visitors as reported by AECOM 2013 Theme Index 2 Number of attractions as at 27 December, 2014 3 Excluding Gardaland Water park in Milan 1 UNIQUE PORTFOLIO OF FAMILY ENTERTAINMENT BRANDS AND ICONIC ASSETS High quality, chainable international brands with global appeal Brands positioned across all key target demographics Portfolio provides substantial benefits “Amazing Discovery” “Famous Fun” “Playful Learning” Midway Natural hedge across geographic markets and target demographics Attractions Opportunities to create “clusters” Ability to leverage scale and synergies Significant roll out opportunity - “100+ potential sites identified” “Scary Fun” “Inspiring Perspective” Potential to expand portfolio with further brands “Playful Learning” Leading global brands (LEGO, LEGOLAND) Attractive target demographic (families with children 2 – 12) LEGOLAND High levels of repeat visitation Parks Mutually synergistic relationship with LEGO Substantial potential to develop new markets / parks National brands with high brand and customer awareness Leading market positions Resort 4 of Europe’s largest top 20 theme parks (6 including LLPs)¹ Theme “Fantastical Escapism” “Wild Adventure” “Big Fantasy Adventure” Leading theme parks in UK, Italy, and Northern Germany Parks arks 3 of the top 4 theme parks in the UK (4 including LLW)¹ Each theme park is pre-eminent in their market “Extraordinary Adventure” “Insane Fun” “Ultimate Castle” Positioned to appeal across various target demographics COMPELLING BRANDS AND DIVERSE BUSINESS WITH HIGH GROWTH AND RETURN CHARACTERISTICS 3 | 1 Based on number of number of visitors as reported by AECOM 2013 Theme Index. LLW refers to LEGOLAND Windsor. LLP refers to LEGOLAND Parks Operating Group. See appendix for further definitions 2 ATTRACTIVE MARKET TRENDS Leisure spending CAGR of Increase in International Tourism3 Growth in 6% over 2009-13 and Leisure Spending forecast to grow by c.5% Merlin present in 12 p.a. from 2013-181 of the top 30 Gateway London Paris New York cities 4 attractions 1 attraction 2 attractions Vienna 16.8m 15.2m 11.9m 1 attraction Income growth, increase 8.6% 4.6% Shanghai Expansion in 2.0% 5.2m vacation days, and greater 2 attractions Leisure Time “spare time” 4.5% Income growth, increase Los Angeles 6.1m vacation days, and greater 1 attraction (6.5)% “spare time” 5.0m Istanbul Expansion of the Number of Chinese middle 1.1% Amsterdam 1 attraction class households expected to 2 attractions Hong Kong Middle Class in increase to 225m by 2022, Las Vegas 10.5m 5.2m 1 attraction 2 1 attraction Emerging Economies an 18% CAGR from 2012 11.8% 6.0m 1.2% 25.6m 7.6% (0.8)% Bangkok Singapore Growth in leisure time and 2 attractions 1 attraction Increase in expansion of middle classes 17.5m has driven increased 22.5m International Tourism # of Midway attractions 10.4% international tourism 5.4% 2013 International Arrivals 2013 Growth in International Arrivals UK Domestic Short Breaks – share gain opportunity in a £8bn4, growing market Growth in Cultural and financial factors driving growth in Short Breaks short breaks 12 UK Domestic short break value 10 Merlin UK leisure hotel 5 (£bn) 8 and park spend Outside of the large Theme 6 £10.2bn Market Park companies, the private £8.2bn Fragmentation visitor attractions market 4 Merlin Share gain remains highly fragmented <1% share opportunity 2 in a growing market 0 1 Marketline “Global Hotels, Restaurants & Leisure” report (2014) 2014 2018 2 Derived from McKinsey, “Mapping China’s Middle Class” (June 2013). “Middle class” defined as urban households with annual disposable income of $16,000 and above 3 4 | Euromonitor International Top City Destination Ranking 4 Mintel 3 5 Represents UK hotel revenue from leisure guests, and their in-park spend. Excludes non-leisure spend, and day visit revenue. CLEAR COMPETITIVE ADVANTAGES Technical and Scarcity Value and Brands #1 #2 Creative Expertise #3 Capital Requirements Significant initial capital requirements Identify new sites for new parks Lease negotiation Average new theme park requires minimum c.£200m in capital investment Funds also required to cover lengthy lead times New products (e.g. rides, hotels etc) Regulatory and planning restrictions Develop IP content creating significant lead times for new parks Potentially 3 – 4 years required to obtain all the necessary approvals New wax figures New LEGO models Overall lead times of 4 – 6 years to Marine displays complete the process of designing, funding and obtaining approvals Scarcity of sites for new parks 2014: Over £230m Few available spaces in highly attractive of projects across markets (e.g. UK) 12 countries REINFORCING A SUSTAINABLE BUSINESS MODEL AND LEADING MARKET POSITIONS 5 | 4 STRATEGY SINCE 1999 Revenue by Geography1 Revenue by Weather exposure1 Asia Pacific Outdoor 13% UK 39% 60% Long term ambition 57% of of even split between revenue1 from North Europe, Americas and sites open all America Asia Pacific year round 22% Indoor 40% Continental Europe 26% Visitors by Tourist / Domestic2 Pre-booked Revenue3 Tourist 36% Same day 51% Increasing levels of pre- booked Not reliant upon revenue leads to the ‘fly-in’ market reduced site-level Pre-booked volatility and Annual Domestic Pass 49% 64% Online bookings 21% of admission revenue “TO CREATE A HIGH GROWTH, HIGH RETURN, FAMILY ENTERTAINMENT COMPANY BASED ON STRONG BRANDS AND A GLOBAL PORTFOLIO THAT IS NATURALLY HEDGED AGAINST THE IMPACT OF EXTERNAL FACTORS” 6 | 1 Total revenue, 2014 2 Total 2014 visitors, based on touchscreen data 3 Total admissions revenue, 2014 7 | SIX STRATEGIC GROWTH DRIVERS 1 Existing estate growth via capex Mid-single digit 1 Existing estate growth via capex Mid-Likesingle for digit Like Like forEBITDA Like EBITDAGrowth Growth 2 Strategic synergies 2 Strategic synergies + + >15% ROIC on Accommodation>15% ROIC on 33 TransformationTransformation of themeof theme parks parks into intoshort short break break destinations destinations Accommodation 44 MidwayMidway roll roll out out >20% >20%ROIC ROIC 55 DevelopingDeveloping new new LEGOLAND LEGOLAND parks parks SynergisedSynergised 66 StrategicStrategic acquisitions acquisitions >20%>20% ROIC ROIC 8 | 2014 PROGRESS ON Capex cycle – successful new rides and STRATEGIC GROWTH attractions at Heide Park, Alton Towers and LEGOLAND California DRIVERS Synergies – Relaunch of UK MAP, progress on CRM and next-generation ticketing Destination positioning – New accommodation at Chessington, Thorpe Park, LEGOLAND Deutschland and LEGOLAND Billund Midway roll out – Six new openings and the announcement of the new ‘Shrek’s Adventure!’ attraction in London LEGOLAND Parks Development – Announcement of LEGOLAND Japan and LEGOLAND Korea to open in 2017 9 | 2015 STRATEGIC OUTLOOK ‘Star Wars’ coming to 1. Existing estate capex-led growth Madame Tussauds London and Berlin in New features at every attraction 2015 ‘Star Wars’ themed area and figures at MT London and Berlin ‘LEGO Friends’ at LEGOLAND Windsor, Florida and California ‘Oblivion – The Black Hole’ roller coaster at Gardaland 2. Strategic synergies Development of full CRM database in UK, Germany and USA Strong ongoing third party promotion 3. Theme park resort positioning 152 room LEGOLAND Florida hotel 4. Midway roll out 120 lodges and 5 premium tree houses at Alton Towers 7 new sites planned for 2015, 7 planned for 2016 Includes Dreamworks IP Shrek pilot in 2015 2016 includes 3-4 in Asia 5. LEGOLAND Parks Developments Dubai to open in 2016 (management contract) Japan to open in summer 2017 South Korea to open in 2017 Medium-term opportunities in: China (management contract) USA (operated and leased / owned) 10 | 6. Strategic Acquisitions New for 2015 ‘Oblivion – The Black Hole’ at Gardaland Pursuing opportunities to acquire attractions and brands to support core drivers 9 FINANCIAL DYNAMICS P&L Analysis (2014) Margin Revenue Seasonality Cost flexibility 1 (181) 2014 Revenue Wk 27-36: 35% 2014 EBITDA 1,200 85% c20% of costs vary directly with revenue (574) H1 – 41% H1 – 29% c30% of rents have a turnover element Wk 19-26: H2 – 71% 1,000 H2 – 59% 17%1 c40% of costs can be varied in the short / Wk 1-18: 24%1 Wk 37-52: 24%1 medium - term 800 1,249 600 1,068 40% (83) 33% (100) 400 25% 494 411 311 200 Revenue Cost of Gross Opex (ex EBITDAR Rent EBITDA D&A Operating sales profit Rent) Profit J F M A M J J A S O N D Revenue Analysis Spend and Margins …by Op. Group …by Type … by Tenure Revenue Admissions/ EBITDAR EBITDA Op. Profit per capita Secondary2 Margin Margin Margin 8%4% 21% 27% Midway £13.35 80/20 50.9% 40.5% 31.5% 42% 40% 29% 59% LLP £29.97 54/46 37.4% 36.9% 31.0% 39% 31% RTP £22.75 60/40 33.9% 26.3% 18.2% Adm. Sec. Freehold Long leasehold Group £18.15 68/32 39.5% 32.9% 24.9% Midway LLP RTP Accomm. Non-per cap Short leashold Greater opportunity for F&B / Retail revenue in theme parks Margins impacted by tenure of property