Entertainment One Share Discussion Threads

[gswredland] 22/11/2016 09:32

Likewise Rivaldo. Sold yesterday afternoon but if this goes to 200 will be tempted!

[1gw] 22/11/2016 09:26

It seems to me that perhaps communication is part of the problem. Either that or the accounting matching of costs and revenues is a bit out of whack!

The story is good I think if you look. Film performing much better this year, leading ETO to invest lots and setting up a very good 2H and beyond as they hopefully rake in the money from "subsequent exploitation windows" (home entertainment sales once the cinema stint is largely over I think). But on the income statement it seems they have to show all the investment without being able to claim yet the revenue from these subsequent windows - i.e. they don't seem to have a way of "depreciating" the investment over the full period of revenues which are expected to follow on from this investment. The explanation of this is somewhat hidden away I feel, although it is there e.g. in the "Film" section: "Full year underlying EBITDA will normalise in the second half of the year as these first half theatrical titles progress through their profitable home entertainment windows"

So I hope the story is that they're investing to grow and to meet their target of doubling in size by 2020. This investment has moved from inorganic (acquisitions) to organic (e.g. investment in film) as expected.

But they've really not made a great job of explaining this, hitting casual readers of the interims with depressing hits to underlying EBITDA and PBT. Although they state that they are on track to deliver full year financial performance in line with management expectations, it is not immediately clear what these expectations are.

[steptoes yard] 22/11/2016 09:25

I don't know why I've been red ticked. I think this is a company with very good prospects, I'm just not as keen to hold as other investors at these prices. I agree some excellent investment has been made

[raffles the gentleman thug] 22/11/2016 09:06

and just too put things in context this company is investing £1,485m in content over just three years through March 2019 ...

[masurenguy] 22/11/2016 09:00

Peppa Pig owner Entertainment One reports 19% increase in revenue but profit dives in first half

Entertainment One has reported declining profits for the six months to 30 September, despite revenue climbing almost 20%.

The figures

Group revenues were up 19% to £401m from £337m this time last year. Adjusted profit before tax dropped 40% from £40m to £24m, while reported pre-tax profit was down 80% to £4m from £18m. Diluted earnings per share dropped 3.9% to 0.1p from 4p. Shares in the group dropped 3.2% in early trading.

Why it's important

Entertainment One was the target of a proposed takeover by ITV earlier this year, but avoided being bought. The firm later said it would itself ease off on acquisitions, and instead let flagship show Peppa Pig lead its growth. Today, the company said the first half saw "strong progress in the strategic goal of making Peppa Pig the world's most loved pre-school brand". The group also revealed today that finance chief Giles Willits is stepping down after almost 10 years at EOne. Joe Sparacio, ex-IMAX finance boss, will step in as interim chief financial officer with immediate effect.

What Entertainment One said

"The group's strategy to invest in content continues to bear fruit and the entertainment market's focus on quality content plays to Entertainment One's strengths ensuring that the group is ideally positioned for the future," said chief executive Darren Throop."Whilst theatrical investment has impacted profitability in the period, we will see the financial benefits of this investment delivered in the second half of the financial year. The period ahead is an exciting one. The television business has 86% of its full year revenues already delivered, contracted, or commissioned, the family business is underpinned by exceptional performance from Peppa Pig."

Throop added that animated series PJ Masks is also showing strong potential, and said the film division is set to benefit from both the second half's strong slate, and the home entertainment window for films including The BFG and The Girl on the Train. "As such, the group remains on track to deliver full year financial performance in line with management expectations," he said.

In short

EOne is putting a lot of faith in Peppa Pig to bring home the bacon.

[raffles the gentleman thug] 22/11/2016 08:58

First broker comment:

Strong revenue growth across all divisions
As indicated at the recent trading update, the first half was good operationally for eOne. Reported revenue growth of 19% reflects continued strong performances from Television (+34%) and Family (+16%) and the recovery in Film (+9%), which was buoyed by a strong box office performance. The upfront minimum guarantees (MGs) and advertising associated with the cinematic release of major titles resulted in considerable margin compression in Film and a reduction in overall EBITDA year-on-year. However, this is entirely consistent with the usual cash flow characteristics of a film’s release and eOne will reap the benefits in the second half of the year as these titles move to the more profitable secondary windows.

Good pipeline underpins forecasts for a strong H2
The outlook for the second half across all divisions looks strong. Within Television a significant proportion of full-year revenues are already commissioned or contracted. Film has a strong H2 cinema slate as well as secondary windows for The BFG and The Girl on a Train and in Family Peppa and PJ Masks continue to charm international audiences, particularly in the US where Peppa sales increased 275% in H1 and where management expects a very strong performance in H2. After 10 years at the group, CFO Giles Willits also announced his intention to step down from the board with immediate effect.

Valuation: Discount unjustified
eOne has secured access to some of the industry’s leading producers. Yet, with an EV not far off its $1.5bn library valuation (£1.1bn adjusted for minorities), there is little in the price reflecting these relationships, or the value of its sales network. With eOne trading on FY17e EV/EBITDA of 8.8x and P/E of 12x, which is a considerable discount to peers, we see scope for rating improvement. Operationally, the group is performing well across all three divisions and the outlook for the second half is strong. Structurally, eOne has made considerable progress in delivering on its strategy to become a more balanced content group that is well positioned in the dynamic markets for premium content.

[steptoes yard] 22/11/2016 08:52

I'm a buyer of ETO at a certain price range and a seller at another. I have sold this morning and will come back in a few months

[masurenguy] 22/11/2016 08:47

Disappointing half year results and the departure of a CFO will always make some people a little nervous. I still think that the future looks bright here, especially with their current film/TV slate and the global growth of PP, but they will need to deliver in H2. The content library valuation of $1.5bn (£1.2bn) also reflects the increased asset value of the additional investment they have made this year.

The share price had increased by 55% over the past 5 months as at last nights close. I have been overweight here for some time and as following todays H1 result I sold 30% of my holding this morning and have now taken an overall profit on the total of my original investment here. However, the 70% balance that I retain still makes this one of my top 3 holdings.

[raffles the gentleman thug] 22/11/2016 08:45

Most of you folks on this thread comprehensively fail to understand what you have even invested in judging by the commentary this morning - suggest you look at the investments taking place in this company ...

[salpara111] 22/11/2016 08:41

Just re read the results and decided to take my money off the table.
I really struggle to understand how they make so little money especially if the film library is really worth $1.5BN....they should be able to generate at least a 5% annual return from that alone and clearly they don't make anywhere near that amount.
I guess if the share price drops back to the £2 line we may see some of the larger shareholders more accommodating to an offer around the 250p level.

[sphere25] 22/11/2016 08:21

The only thing holding this stock up is the prospect of a bid.

All you have to do is look at those cash flow figures ---> perennial cash burner.

No free cash flow.

Debt to continue growing.

Throop is a liability.

[rivaldo] 22/11/2016 08:18

I sold on the bell at just under 244p.

Just 2.6p EPS in H1...EBITDA etc way down due to huge Film investment. They claim full year performance will be in line with "management expectations". Are these the same as market expectations? Whatever, there's a lot of catching up to do in H2 which may or may not happen.

Plus the longstanding CFO has resigned.

ETO looks good for the long-term, but there may be a long period of drift (at best) and share price falls (at worst) if the market doesn't believe the H2 catch up.

Best to protect profits etc if the story changes - which it has for the time being. Good luck all - I'll be back in (again!) if the risk/reward changes once more.

[salpara111] 22/11/2016 08:17

Hmm,
Rather underwhelming.
Most disappointed that they are guiding for "in line" for the full year as opposed to any sort of upgrade.
I just get the feeling that the "Jam Tomorrow" argument is starting to wear a bit thin..
I am tempted to exit at this stage as I don't see the upward momentum being continued on the back of this statement.

[werty5] 21/11/2016 15:14

It's ok always good to hear good news twice.

[salpara111] 18/11/2016 11:55

We already know that the figures are going to be "in line" the big question is what will forward guidance look like.
We are all hoping for upward guidance to get us past this 236p psychological bid price, once people stop focusing on that we should have a clear run up towards 300p
If we do get the hoped for bump next week to 250p then I doubt that ITV would come back as they would have to offer at least 300p and I seriously doubt that they would do that.

[masurenguy] 18/11/2016 07:57

There is no "update" due. The actual results for H1 are scheduled for release next Tuesday (22/11).

[oldvic] 17/11/2016 18:48

Salpara111

whens the update expected

[rivaldo] 17/11/2016 09:55

News - the first roll-out of PJ Masks licensing begins....toys, magazine, clothes etc:



"eOne Secures First U.K. Licensees for PJ Masks

LONDON: Entertainment One (eOne) has signed the first U.K. partners for its PJ Masks licensing program.

The rollout of the U.K. merchandise program will kick off with products from Flair’s Just Play division, which will distribute the brand’s master global toy line, starting in February 2017. The initial range will include plush, vehicles, action figures and dress-up items.

The offering of PJ Masks U.K. merchandise will grow in fall and winter of next year as publishing and apparel items debut at mass market retail. Hachette has been appointed as the master publishing partner for the territory and is on board to produce a line of publishing formats. eOne has also inked a deal with Immediate Media for a stand-alone official PJ Masks four-weekly kids’ magazine. Redan will introduce PJ Masks content into its multi-brand Fun to Learn Favourites and Fun to Learn Friends magazines. The first U.K. apparel partner is Aykroyd TDP, which will launch kids’ nightwear and underwear. eOne’s PJ Masks licensing program in the U.K. will be aimed at boys aged 4 to 6.

Katie Rollings, the head of U.K. licensing at Entertainment One, commented, “PJ Masks is quickly establishing a solid and engaged fan base across the country with viewers being drawn to the show’s heroic characters, action-packed story lines and top-class animation. We’ve had a tremendous response to the property and we’re now delighted to be welcoming a top-tier lineup of partners to the PJ Masks U.K. licensing program who we’re confident will give young fans the best possible experience of the brand.”

Simon Hedge, the managing director of GP Flair, said, “We have an extensive product lineup that we believe will perfectly emulate the action and adventure that is part of every PJ Masks episode. On previewing the collection, our retailers were keen to launch as early [as] possible, hence the early spring release of the collection. To support this we are putting together a marketing strategy, targeting both boys and girls, that will ensure awareness of the toy lines at its height from the moment the toys hit the stores.”

The animated preschool series about three pajama-clad superheroes launched on the 24-hour Disney Junior channel in the U.K. in February. The show consistently ranks in the channel’s top five rated series. The U.S. licensing program counts more than 40 partners. Merchandise began rolling out in North America this fall, including introductory toys from Just Play, publishing products from Simon & Schuster and apparel from Happy Threads. Merchandise is set to roll out across additional international territories starting next year."

[masurenguy] 17/11/2016 01:15

Re post #2118: A price of circa 250p would be roughly the equivalent of last years high of 360p after taking into account the subsequent dilution from last years rights issue. This is really the threshold that we now need to break through in order to resume a real upward growth trajectory for the shareprice.

Furthermore CPPB, the current largest shareholder, have an average share cost of circa 230p after factoring in the subsequent dilution, their take up of the discounted rights issue and some futher share purchases at a lower price. Therefore any predator would probably need to provide them with at least a 20%/25% return on their investment in order to tempt them to accept any offer. This would require a bid in the region of 275p - 285p unless a competitive bidding scenario resulted in pushing a the price higher.

[raffles the gentleman thug] 16/11/2016 21:26

On consensus earnings for next year - i.e. Year ended March 2018 its only on a multiple of 10x, so it's certainly not rated as a growth company and there is plenty of room for multiple appreciation

[salpara111] 16/11/2016 15:01

It simply wont leave the 236p bid level!
Hopefully the upcoming update will provide the catalyst for a proper breakout.

[tini5] 16/11/2016 12:22

They've certainly had a lot of activity with new deals - would be nice to see a current valuation based on results. Expecting nothing but positive but then again, I'm sitting on a big pile of shares (by my standards anyway) so am obviously biased!

[raffles the gentleman thug] 16/11/2016 10:47

Just wondered if anyone had seen any expectations for ETO results which come out next Tuesday I believe ??