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The following information is from the 2021 Annual Report and Accounts for the Merlin Group.

Overview

The Board is committed to maintaining the highest standards of governance throughout the Group and continues to believe that effective corporate governance is the foundation of a successful company. The Board recognises that a strong governance framework is fundamental to achieving Merlin’s strategic objectives by embedding a strong company culture and values globally across the Group.

Merlin’s overriding purpose is to work with stakeholders to create truly memorable experiences for visitors and long term value for our investors. Our corporate governance framework has been developed to safeguard these objectives. The Board is committed to ensuring that the procedures, policies and practices of the business continue to be effective.

Board and Committee responsibilities

The Board and the Merlin Board

The Company is managed by its Board of Directors (the Board) which comprises representatives of its principal shareholders and an independent Chairman. The Board meets as required by the Shareholder Investment Agreement, to provide governance over the Group and to consider those matters requiring specific approval by the Company.

The same shareholder representative Directors and the independent Chairman meet regularly as the Board of Merlin Entertainments Limited (the Merlin Board), alongside key members of the Merlin Executive Committee, being the Group Chief Executive Officer and the Group Chief Financial Officer, to provide leadership and set the strategy for the Group.

The responsibilities of the Merlin Board are detailed below:

  • overseeing strategy, management and approval of major policies;
  • determining the capital structure;
  • maintaining the system of internal controls and risk management;
  • approval of the annual capital expenditure budget, major capital projects and strategic transactions;
  • overseeing financial performance and reviewing financial reports;
  • establishing and maintaining an effective corporate governance framework, in conjunction with the Board;
  • effective engagement with shareholders and other stakeholders; and
  • reviewing recommendations from Committees.

Board Committees

The following Committees have been in operation during the year and unless otherwise stated, remain.

Health, Safety and Security Committee

This Committee ensures that health, safety and security (HSS) matters are managed effectively and proactively throughout the Group, by overseeing our policies and procedures for HSS, monitoring our processes for identifying and managing risks, and monitoring the skills, effectiveness and levels of resource within our HSS teams.

The Committee membership comprises an independent chair and representatives from each of the investor consortium, two of whom are Board members. Meetings are also attended by the Group Chief Executive Officer and Group Chief Financial Officer, together with the Group Safety, Engineering and Security Director, the Chief Operating Officer of the Midway Attractions Operating Group and the Managing Director of the Resort Theme Parks Operating Group.

Audit Committee

This Committee assists the Board in discharging its responsibilities regarding financial reporting by monitoring the integrity of our financial statements including considering whether the financial statements are ‘fair, balanced and understandable’.

It assists the Board and the Merlin Board in relation to external and internal audits, including monitoring and reviewing the effectiveness of the internal audit function and overseeing the performance and independence of external auditors. It also assists the Merlin Board in matters of risk management and internal controls, including monitoring and reviewing the effectiveness of our whistleblowing and fraud policies and our internal control and risk management.

During the year the Audit Committee considered proposals for the Group to tender its external audit relationship, KPMG LLP having been the Group’s auditors for many years. A comprehensive competitive tender process was completed, and as a result Ernst & Young LLP were appointed as external auditors.

The Committee membership comprises representatives from two members of the investor consortium, one of whom is a Board member.

Remuneration Committee

The Remuneration Committee was created in early 2021 and the first meeting was held in March 2021. The Remuneration Committee assists the Merlin Board in determining its responsibilities in relation to remuneration, including making recommendations on the policy on executive remuneration, determining the individual remuneration and benefits package of each of the Executive Directors and recommending and monitoring the remuneration of senior management below Merlin Board level.

The Committee considers all material elements of Merlin’s remuneration policy, remuneration and incentives of Executive Directors and senior management with reference to independent remuneration research and professional advice and make recommendations on the framework for executive remuneration. The Committee is also responsible for making recommendations for the grants of awards under share incentive plans.

The Remuneration Committee’s membership comprises the independent Chairman and representatives of each of the investor consortium, all of whom are Board members.

Other Committees

In addition to the Board Committees, there are four non-Board Committees:

  • Executive Committee

    – chaired by the Chief Executive Officer, this Committee is responsible for managing the Group’s day-to-day operations and the development of strategic plans for consideration by the Merlin Board. It implements the Group’s strategy and ensures that the business complies with all applicable statutory, regulatory and governance requirements.

Three operational Committees make recommendations to the Executive Committee and have specific areas of responsibility as follows:

  • Commercial and Strategic Risk Management Committee

    – maintains oversight and guidance on management of commercial and strategic risk.
  • Development Board

    – reviews initial proposals for significant capital expenditure and development projects.
  • Investment Board

    – appraises major capital expenditure and development projects.

2021 priorities

During 2021 the main area of focus for the Merlin Board continued to be overseeing Merlin’s response to the COVID-19 pandemic, requiring ongoing dialogue between Merlin Board members and executive management. The Merlin Board discussed how attractions were able to reopen with a focus on customer and guest safety, cost management and profitability. The Merlin Board monitored the trading performance as the business recovered through the year and focused on a number of key strategic projects.

As well as overseeing the launch of LEGOLAND New York, the Merlin Board reviewed the development of the LEGOLAND park projects in China, and assessed the pipeline of opportunities for future LEGOLAND parks. It considered further strategic opportunities and approved the proposed transaction regarding Cadbury World that was announced in early 2022.

Other areas of focus included cyber security risks and the Group’s ongoing investment in that area. Towards the end of the year the Merlin Board approved the Group’s five year strategic plan and the extension and modification of leases for certain of Merlin’s Resort Theme Parks locations.

The Merlin Board also reviewed and approved the implementation of long term incentive plans.

Corporate governance framework

During 2021 the Board and the Merlin Board maintained a strong corporate governance framework and they continue to apply the Wates Corporate Governance Principles for Large Private Companies. Details of how the Group approaches these principles are set out below.

Principle One – Purpose and Leadership

An effective board develops and promotes the purpose of a company, and ensures that its values, strategy and culture align with that purpose.

Since 1999, Merlin’s strategy has been to create a high growth, high return family entertainment company. The business is based on strong brands and a global portfolio which is naturally balanced against the impact of external factors. This strategy is aligned with our purpose of delivering memorable experiences to our millions of visitors and our vision of being the global leader in location based entertainment.

The Merlin Board continues to review and challenge Merlin’s strategy, performance, responsibility, and accountability so that every decision made is of the highest quality, and in line with the Company’s culture. This is set out in ‘The Merlin Way’ values which are embedded throughout the business, from day-to-day management to Merlin Board reviews.

The Group receives feedback from guests and employees via guest satisfaction surveys and employee engagement surveys; where relevant this feedback is incorporated in board papers. The business model and the growth drivers of the Group are outlined in pages 6 to 10 of the Annual Report and Accounts.

Whilst the Board holds overall responsibility for developing and promoting the purpose of the Group, the Merlin Board and the Executive Committee ensure that the values, strategy and culture continue to be embedded globally on their behalf.

The Board Committees review the effectiveness of our internal policies. The Audit Committee reviews the effectiveness of the Group’s whistleblowing and fraud policies.

Principle Two – Board Composition

Effective board composition requires an effective chair and a balance of skills, backgrounds, experience and knowledge, with individual directors having enough capacity to make a valuable contribution. The size of a board should be guided by the scale and complexity of the company.

The Board is appointed in accordance with the Shareholder Investment Agreement. Each investor has nominated suitably qualified representatives to sit on the Board and the Merlin Board. The Directors possess a wide range of skills, backgrounds, experience, and knowledge across a broad range of businesses. The composition of the Board is considered appropriate for the size and complexity of the Company.

An Audit Committee, Remuneration Committee and Health, Safety and Security Committee have been established. They have been in operation throughout the year. The Chairman of the Board and of each Committee is responsible for leading and facilitating constructive meetings. The Chairman of the Board regularly elicits feedback from other Board members on meeting effectiveness and governance.

Careful consideration has been given to the appointment of the Chair of each Committee. The Audit Committee is chaired by an individual with recent and relevant financial experience. The Remuneration Committee is chaired by the independent Chairman. The Health, Safety and Security Committee is chaired by an independent health and safety expert. Until shortly before the end of the year, the Board, Merlin Board and Executive Committee together was comprised of 12 men and three women. Details of the gender mix of the Group and its senior management are set out on pages 24 to 25 of the Annual Report and Accounts, together with details of our actions in the area of diversity and inclusivity.

Principle Three – Directors Responsibilities

The board and individual directors should have a clear understanding of their accountability and responsibilities. The board’s policies and procedures should support effective decision-making and independent challenge.

The Board understands its responsibility for promoting the success of the Company for the benefit of shareholders and with consideration of its stakeholders. This is done in a way which is consistent with its ethical, legal, and regulatory responsibilities and the Company’s constitution. The Board, the Merlin Board and Committees are bound by a Shareholder Investment Agreement and respective terms of reference which give clear guidance on matters which require Board or Committee approval. Key strategic decisions are made by the Merlin Board and Committee terms of reference set out the responsibilities of each Committee.

The Merlin Board met ten times during 2021 by video conference calls, due to travel restrictions imposed as a result of the COVID-19 pandemic. The Merlin Board are provided with appropriate board packs in advance of the meetings, including trading updates, financial performance, employee engagement and welfare, and management of key business risks. When making decisions, only the shareholder representatives have voting rights.

Key financial information is collated from the Company’s accounting systems. The Group’s financial information is externally audited and its controls are reviewed regularly by the Group's internal audit function. The Board delegates the scrutiny of financial information and controls to the Audit Committee. The Merlin Board delegates authority for the day-to-day management of the Company to the Executive Committee which meets at least eight times each year.

Principle Four – Opportunity and Risk

A board should promote the long term sustainable success of the company by identifying opportunities to create and preserve value and establishing oversight for the identification and mitigation of risks.

Oversight of risk management is performed on an ongoing basis through interaction with management and by risk being a regular item on Merlin Board agendas. Two Committees have specific responsibilities in the key areas of health, safety and security and wider risk management and internal controls activities. Commercial risks are considered by a sub-committee of the Executive Committee, chaired by executive management, which reports back to the Executive Committee regularly.

The Board retains overall responsibility for risk management and the Merlin Board approves the risk management framework which sets out the responsibilities, oversight, monitoring, reporting and management processes. Further details regarding the approach to risk management are set out on pages 18 to 23 of the Annual Report and Accounts.

Long term strategic opportunities are highlighted through the Group’s strategic planning processes that the Board oversees. A dedicated strategy review session was performed during 2021 with a focus on acquisitions strategy. Other opportunities are brought to the attention of the Board when they arise.

Principle Five – Remuneration

A board should promote executive remuneration structures aligned to the long term sustainable success of a company, considering pay and conditions elsewhere in the company.

Remuneration matters during the year were considered by the Remuneration Committee. All matters relating to remuneration are considered by that body and recommended to the Merlin Board for approval, in line with the Committee’s terms of reference.

Our remuneration policies and principles are aligned with the Group's performance to support our overall values, purpose and strategy. A series of key principles underpin the Merlin remuneration structure - pay should be based on results and performance; consistent with best practice; and aligned to the long term success of the Company.

During the year the Remuneration Committee focused in particular on the terms of long term incentive plans, which were launched towards the end of the year. These plans put in place a long term incentive structure for management which is aligned to the Company’s strategic objectives. More details are set out in note 4.6 to the financial statements.

Principle Six – Stakeholder Relationships and Engagement

Directors should foster effective stakeholder relationships aligned to the company’s purpose. The board is responsible for overseeing meaningful engagement with stakeholders, including the workforce, and having regard to their views when taking decisions.

The Board are aware of the importance of fostering effective stakeholder relationships to enable the long term success of the Group. Details of how Merlin engages with stakeholders, including employees, is provided in the section 172 statement below. The Group’s business model also focuses on our interactions with customers, employees and investors; more information can be found on pages 7 to 8 of the Annual Report and Accounts.

Section 172 Statement for Motion JVCO Limited and Merlin Entertainments Limited for the 52 weeks ended 25 December 2021

The Board of Directors of the Company (the Board) recognises its responsibility to maintain high standards of business conduct and consider the impact on all stakeholders when making decisions, including the likely consequences of any decision in the long term. The Company is managed by the Board, which comprises representatives of its principal shareholders and an independent Chairman. The Board meets to provide governance over the Group and to consider those matters requiring specific approval by the Company. The same shareholder representative Directors and the independent Chairman also meet regularly as the Board of Merlin Entertainments Limited (the Merlin Board), alongside key members of the Merlin Executive Committee, being the Group’s Chief Executive Officer and Chief Financial Officer, to provide leadership and set the strategy for the Group. For more information, see above.

The Board has considered the analysis undertaken by the Merlin Board on how the Merlin Board has exercised its duty to promote the success of Merlin during the year with regard to the matters set out in section 172 of the Companies Act 2006. After careful consideration, bearing in mind the division of responsibilities as noted above, and while acknowledging the need for the Board to exercise overall management and supervision of the Group and to exercise independent judgment, the Board has adopted a section 172 statement in relation to the Company itself which is consistent with that produced by the Merlin Board. Further information on how the Merlin Board has exercised its duty to promote the success of Merlin during the year with regard to the matters set out in section 172, including examples of how these duties have been applied, can be found throughout the Annual Report and Accounts as set out below.

The Board takes its responsibility to understand the views of stakeholders seriously and will continue to consider stakeholder interests in its decision-making processes in 2022.

Most recent Section 172 Statements for other companies in the Group

These will be updated as soon as reasonably practical following the approval of the companies’ annual reports for subsequent years.

Merlin Entertainments (SEA LIFE) Limited - Section 172 Statement

Merlin Attractions Operations Limited - Section 172 Statement