Entertainment One jumps on exponential top-line growth from PJ Masks

Entertaintment One posted a sharp rise in first half profits as its Peppa Pig franchise continued to deliver and on the back of the exponential growth in sales from its PJ Masks kids show.

The television show and film producer said group revenue for the six months to 30 September fell from £401m in the year ago period to £396m.

Yet on an adjusted basis, profits before tax improved 53% to reach £36m thanks to a strong showing from its Family and Television units which offset a weaker performance at its Film arm.

Commenting on the company's latest financials, Entertainment One chief, Darren Throop said: "The period ahead is an exciting one. The Television business has 82% of the full year's expected margin already committed or greenlit; the Family business is underpinned by exceptional performance from Peppa Pig and newly launched PJ Masks; and the Film Division continues to focus investment on new partnerships to reshape the business. As such, the group remains on track to deliver full year financial performance in line with management expectations."

Sales at the Family unit, which produces and distributes children's content, such as the highly-successful Peppa Pig franchise, soared 64% to £62.1m driven by strong licensing and merchandising sales for that brand in China and the continued strong appetite for the show in the US and UK.

In parallel, the Television division, which includes eOne Television, The Mark Gordon Company, its music operations and the operations of Secret Location, sported a rise in sales of 17% to hit £168.5m.

At the Film unit on the other hand, revenues dropped 29% to £171.8m, amid a broad decline in most segments - theatrical, home entertainment, broadcast and digital and production and international sales - which Entertainment One attributed to a weaker slate versus a year ago as it 'resets' the division.

In terms of the outlook, the group anticipated it would be in-line with management expectations, as it continued to merge its Film and TV divisions, in order to leverage the group's strengths and cut costs.

Synergies from that change in strategy were expected to result in £8.0m of annual cost savings by fiscal year 2020.

Following the results, Steve Liechti at Investec highlighted the strong showing put in by PJ Masks, Peppa Pig and Mark Gordon, especially the exponential rate of growth in sales at the former.

Liechti also stressed that he saw "content value" and a valuation discount versus the outfit's US peers.

"The recent library valuation update increased the value to $1.7bn (+13%), underpinning our content-led investment case."

Entertainment One shares were trading on an EV/EBITDA multiple of 9.5 versus 13.0 for Lionsgate, he said.

The analyst had a 'buy' recommendation and 335p target price on the shares.

As of 1525 GMT, shares of Entertainment One were 5.11% higher to 306.40p - a fresh 52-week high.