A spate of UK terror attacks and poor weather may have affected demand for Merlin Entertainment’s (MERL) theme parks, yet its like-for like sales growth of 0.7% for the year to 30 December 2017 was better than expected.

The news sends its share price up 10.1% to 374.4p.

Barclays analyst Vicki Stern says like-for-like growth beat consensus of 0.1% thanks to an improved fourth quarter performance, particularly at Legoland.

Organic revenue growth at Legoland hit 18.2%, which partially benefitted from the opening of Legoland Japan and the Lego Ninjago Movie being a popular hit with the public and encouraging people to visit one of the Legoland theme parks.

Full year pre-tax profit rose 4.8% to £271m over the same period. This was better than consensus expectations of no growth at all, according to AJ Bell investment director Russ Mould.

ACCOMODATION ROLLOUT VITAL FOR GROWTH

Mould says Merlin’s focus on investing in accommodation will make the theme park experience more immersive.

The company is forecast to spend £700m over the next three years to generate long-term value in its Legoland and Resort Theme Parks divisions.

‘Getting guests to stay on site overnight increases their propensity to spend more money both in the evening and the next day,’ comments Mould.

We note that Merlin’s return on capital employed slipped in the year from 9.6% to 9.1%.

The firm says it is making good progress launching themed, on-site accommodation and new attractions overseas, as well as cutting costs.

Activist investor ValueAct Capital’s recent 5.4% stake in Merlin could also impact its future, prompting speculation the company could be broken up.

We recently wrote in-depth about the troubles affecting Merlin and what it could do to reignite growth.

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Issue Date: 01 Mar 2018