Full-year revenue growth at animation and entertainment distribution company, DQ Entertainment, was certainly modest – largely reflecting a late start to animation production contracts. But better margins on distribution work boosted profits and the shares look far too cheaply rated.
Indeed, those better margins helped group gross profit to expand from $12.3m (£7.8m) to $16.5m, while sales in this area climbed from $4.9m to $10.8m. Although animation revenues did fall from $40.4m to $36.5m. The company has also deliberately slowed production deliveries – but that's to retain control of debtors, and to be able to switch manpower to the development of its own intellectual property (IP), starting with a television version of Jungle Book. The success of Jungle Book sent US income soaring from under $1m to $20.4m, although European turnover halved to $19.3m. Margins also benefited from a move to cheaper premises in Hyderabad’s economic zone.
DQ’s IP generated 37 per cent of group sales, up from 30 per cent in the previous year. And, once minimum income advances are covered – $3.5m for Jungle Book in the US – the company will start to receive royalty income, beginning this year. Over the next 12 months own-IP productions of Peter Pan, Lassie and Jungle Book II are on the cards.
DQE ENTERTAINMENT (DQE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 38p | MARKET VALUE: | £13.7m | |
| TOUCH: | 37-39p | 12-MONTH HIGH: | 98p | LOW: 31p |
| DIVIDEND YIELD: | nil | PE RATIO: | 4 | |
| NET ASSET VALUE: | 211¢* | NET DEBT: | 23%† | |
| Year to 31 Mar | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2008 | 24.1 | 7.41 | 60.0 | nil |
| 2009 | 32.2 | 5.15 | 12.0 | nil |
| 2010 | 36.8 | 6.46 | 13.0 | nil |
| 2011 | 45.3 | 7.24 | 12.0 | nil |
| 2012 | 47.2 | 9.81 | 16.0 | nil |
| % change | +4 | +35 | +33 | - |
Aim: media *Includes intangible assets of $70.7m, or 196¢ a share †Excludes $1.18m invested in mutual funds £1=$1.57 | ||||
