As streaming services such as Netflix and Amazon Prime gradually corner the distribution market for films and TV Shows, Entertainment One (ETO) has been shifting its focus towards producing content. This can be seen in plans to escalate investments in production across its family and brands and film, television and music divisions, while the spend on acquired content dwindles.
The financial picture is mixed. Impairments on distribution assets led to a sharp uptick in one-off charges, leading to a sharp drop in statutory earnings. However, on an underlying basis, the numbers looked more positive, with cash profits up by more than a fifth to £198m with a 510 basis point margin expansion.
The ever-reliable Peppa Pig series, along with strong growth in PJ Masks and the launch of new show Cupcake & Dino: General Services combined to deliver 28 per cent revenue growth in the family and brands division. However, the shift towards production means fewer, more significant theatrical releases in the film, television and music business which, along with “significant challenges” in the home entertainment market, led group sales to fall overall.
The number of releases is expected will continue to fall, reaching 50 next year, compared to 57 in 2019. Still, Bloomberg consensus forecasts suggest earnings to grow, with adjusted EPS reaching 26.7p in 2020, up from 25p in 2019.
| ENTERTAINMENT ONE (ETO) | ||||
| ORD PRICE: | 435p | MARKET VALUE: | £2.16bn | |
| TOUCH: | 432.2-435p | 12-MONTH HIGH: | 485p | LOW: 277p |
| DIVIDEND YIELD: | 0.3% | PE RATIO: | 174 | |
| NET ASSET VALUE: | 137p* | NET DEBT: | 48% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 0.79 | 44.0 | 12.7 | 1.1 |
| 2016 | 0.80 | 47.9 | 9.8 | 1.2 |
| 2017 | 1.08 | 35.9 | 2.7 | 1.3 |
| 2018 (restated) | 1.03 | 64.9 | 12.4 | 1.4 |
| 2019 | 0.94 | 36.8 | 2.5 | 1.5 |
| % change | -9 | -43 | -80 | +7 |
| Ex-div: | 11 Jul | |||
| Payment: | 6 Sep | |||
| *Includes intangible assets of £617m, or 124p a share | ||||
