Merlin Entertainments reported sales flatlining at its previously fast-growing Legoland parks in a third-quarter trading update.

However, Merlin chief executive Nick Varney reported: “Group trading has been in line with expectations.”

Merlin Entertainments is the world’s second-largest visitor attraction group after Disney and the number-one in Europe.

The group issued a profit warning this time a year ago following a fall in sales in the aftermath of terror attacks in London and Manchester.

Varney said: “The impact of terror attacks which adversely affected performance from early 2017 has stated to abate and we have seen early signs of recovery in the London tourism market over the summer.”

He forecast full-year results would be “in line with market expectations” and insisted: “The underlying fundamentals of our markets are strong.”

But he said: “The cost environment remains challenging, with tighter labour markets in many parts of the world adding to the pressures resulting from legislative changes.”

Merlin made no mention of Brexit in the trading update. However, Varney told investors that growth at the Legoland attractions had stalled, saying: “We signalled low single-digit growth and we ended up flat.”

He blamed the lengthy spell of hot weather in Europe this summer, especially in Germany.

Legoland Parks account for about 40% of Merlin’s profits. The group’s shares fell 8% following the update despite like-for-like revenues at the group rising more than 8% year on year.

Merlin operates more than 120 attractions, 18 hotels and six holiday villages in 25 countries.

The group is based in the UK but generates 70% of its profits outside Britain.

Its attractions drew more than 65 million visitors last year. These including Madame Tussauds, Sea Life and the London Eye, as well as eight Legoland Parks and six resort theme parks.