Entertainment One

LN: ETO

£2306.4m market cap

465p last close

Entertainment One specialises in the development, acquisition, production, financing, distribution and sales of entertainment content. Its rights library is valued at US$2.0bn and is exploited across all media formats.

Investment summary

eOne has bought Audio Network for £165m alongside a share placing at 450p raising c £130m. Audio Network’s business model meshes very neatly, adding both music resource and a substantial recurring revenue base while giving the group’s existing artists and catalogue new revenue-generating opportunities. The price represents 15x LTM reported EBITDA and management indicates the deal should be earnings enhancing in FY20. The year-end trading update indicates financial performance in line with expectations, with the groundwork in place for good progress across both Family & Brands and Film, Television & Music. The benefits of the transition towards production in film are clear, with better margin potential, a reduced risk profile and stronger free cash flow. Our forecasts do not yet reflect Audio Network.

Y/E Mar
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2017A 1082.7 160.2 129.9 20.0 23.3 4.7
2018A 1044.5 177.3 144.4 21.9 21.2 4.4
2019E 1070.0 195.0 159.5 24.5 19.0 3.9
2020E 1195.0 215.0 183.0 27.9 16.7 3.2
Last updated on 17/05/2019
Industry outlook

SVOD is rapidly gaining share, growing at a reported 20% CAGR. Competition between platforms is driving the requirement for premium content and, despite the proliferation of non-linear distribution channels, there is still a tendency for the audiences to gravitate towards particular hits. This is driving a trend to high production values, with the real underlying competition to grab and maintain audience attention.

Last updated on 17/05/2019
Sector
TMT
Share price graph
Balance sheet
Forecast net debt (£m) 435.2
Forecast gearing ratio (%) 57
Price performance
%
1m
3m
12m
Actual (0.9) 15.2 62.6
Relative* 0.7 13.2 72.8
52-week high/low 483.4p/278.8p
*% relative to local index
Key management
Darren Throop CEO
Joe Sparacio CFO
Mitzi Reaugh Non-executive director

Content on Entertainment One