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Small-screen success for Entertainment One

Gains in television offset sustained weakness in film at Entertainment One
November 20, 2015

Filmgoers flocked to Jurassic World and other blockbusters this summer instead of lower-budget films such as Southpaw and The Age of Adaline, weighing on Entertainment One (ETO). The film and TV distributor and producer reported underlying cash profits of £52.3m for the six months to September - down 5 per cent, adjusting for acquisitions, despite strong television sales.

IC TIP: Buy at 232p

Pro-forma film revenues slid 13 per cent as Entertainment One's film studio partners delayed releases to avoid being crowded out by crowd-pleasers. The group rolled out just 96 films into theatres, down from 134. The corollary is that it should benefit from a stronger second-half slate that includes The Hateful Eight and the final installment of The Hunger Games. Management also renewed a multi-year deal with Amazon Instant Video to offer all new releases on the streaming platform.

In the TV business, underlying cash profits leapt a quarter to £42.4m - four-fifths of the group total - as the division produced more series and acquired the sixth season of The Walking Dead through an exclusive deal with AMC. Management also launched Peppa Pig on Chinese television and expects to license out broadcasting and merchandising rights in 2016.

Broker Numis expects EPS of 19.8p in the current financial year, rising to 21.9p in the year to March 2017 (FY 2015: 20.6p).

ENTERTAINMENT ONE (ETO)
ORD PRICE:232pMARKET VALUE:£991m
TOUCH:231.7-232.4p12-MONTH HIGH:328pLOW: 210p
DIVIDEND YIELD:0.5%PE RATIO:13
NET ASSET VALUE:84p*NET DEBT:86%

Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20143312.40.4nil
201533718.14.6nil
% change+2---

*Includes intangible assets of £391m, or 91p a share