Entertainment One profits fall as film and TV slates 'evolve'

Entertainment One reported strong profit growth for the year to March and reiterated its confidence in doubling the size of the business in the five years to 2020.

With strong growth in both TV and family segments, group revenue grew 35% to £1.08bn, while underlying earnings before interest, tax, depreciation and amortisation increased 24% to £160m.

Television was boosted by 36% EBITDA growth from eOne Television, 82% from Mark Gordon and 185% in music, while the family division was driven by the continued barnstorming performance of Peppa Pig and a strong contribution from the initial rollout of the licensing programme for PJ Masks.

Adjusted profit before tax swelled 25% to £130m, while due to one-off charges from the reshaping of the film business, reported profit before tax shrank 23% to £37m.

After diluted earnings per share shrank 69% to 3.0p per share, or rose 3% on an adjusted basis to 20p, a full year dividend of 1.3 pence was declared, up from 1.2p a year ago.

At the beginning of April the film and television divisions were combined into a single studio operation with a combined global sales team, with these short-term charges taken as the company structure "evolves" to underpin future growth and adapt to the changing global film market.

Management said eOne would build "deep partnerships" with high quality film producers where the company has more control over the content, meaning investment in acquired film content in the new financial year is expected to increase to £150m and investment in productions is expected to be higher than the current year at over £50m.

As part of this reshaping, eOne will focus on producing and sourcing a reduced slate of premium films where it can control rights on a global basis.

So far, "progress" has been reported on integrating the physical distribution partnerships with 21st Century Fox and Sony Films and the renegotiation of a distribution arrangement with another partner, which resulted in the one-off charges in the recent year.

As for TV, outside of the 117 new Peppa Pig episodes recent announced to air over four years from 2019, the division is expected to see continued organic growth in the new financial year, with investment in acquired content for eOne Television expected to increase to over £40m and production spend expected to grow to over £170m, while investment in productions for The Mark Gordon Company is expected to decrease to around £80m.

Peppa Pig and PJ Masks to continue to be the drivers of growth for the Family business this year, with revenue and EBITDA expected to grow significantly, but margins likely to decline in percentage terms due to the increased contribution from PJ Masks which earns a lower royalty than Peppa Pig, as well as increased overheads of around £2m necessary to grow the sales platform.

"The work undertaken during the year keeps us at the centre of the positive structural change ongoing in the industry, and is in line with the source, select, sell strategy which continues to serve eOne so well, underpinning our growth trajectory," said CEO Darren Throop.