Entertainment One (eOne) has announced that it will incur a one-off £47m exceptional charge related to the restructuring of one of its larger output deals and the accelerated restructuring of the Film division. On an underlying basis, EBITDA for FY17 is in line with previous guidance for strong growth and in line with our forecasts.
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Entertainment One |
Exceptional charge to restructure Film |
Exceptional charge |
Media |
12 May 2017 |
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Entertainment One is a research client of Edison Investment Research Limited |
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Entertainment One (eOne) has announced that it will incur a one-off £47m exceptional charge related to the restructuring of one of its larger output deals and the accelerated restructuring of the Film division. On an underlying basis, EBITDA for FY17 is in line with previous guidance for strong growth and in line with our forecasts.
Year |
Revenue (£m) |
EBITDA |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/15 |
785.8 |
107.3 |
88.8 |
20.8 |
1.1 |
12.2 |
0.4 |
03/16 |
802.7 |
129.1 |
104.1 |
19.4 |
1.2 |
13.1 |
0.5 |
03/17e |
1,003.1 |
157.0 |
126.7 |
20.0 |
1.3 |
12.7 |
0.5 |
03/18e |
1,093.9 |
178.0 |
149.4 |
23.7 |
1.4 |
10.7 |
0.6 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
eOne will incur a one-off £47m of cash exceptional costs in the FY17 results. This is £39.5m higher than the exceptional we had forecast.
$25m stems from the renegotiation of one of its larger distribution arrangements. No details have been provided, but given eOne’s strategy to reduce its reliance on larger distribution deals to bring itself closer to the production process, we expect this to be a further step in this direction.
£27m relates to the accelerated restructuring of the Film division, which the group started in FY16, targeting £10m of savings by the end of FY18.
These measures are expected to drive improved underlying profitability and cash flow and we anticipate that more information may be provided at the time of the full year results.
On an underlying basis, management has confirmed that EBITDA in FY17 is in line with previous expectations. In its March update, eOne indicated a strong performance from Television and Family and continued recovery at the Box Office in Film should result in strong growth in reported revenues and underlying EBITDA in FY17.
The FY17 results will be reported on 23 May, at which time we will update our FY18e net debt forecast (£125m) to capture the additional exceptional charge.
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Disclaimer
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SNP is acquiring BCC, one of the largest SAP partners in Central and Eastern Europe, for an undisclosed price. The deal broadens the group’s customer base, widens its expertise in the areas of SAP service and cloud provisioning and brings onboard c 250 SAP and IT consultants who can be cross-trained in transformation projects. On our estimates, the deal is value creating and earnings enhancing, with our FY18e and FY19e EPS rising by c 19%. However, we have cut our FY17 EBIT forecast, which implies a 7.3% margin, or 9.7% before the €2.65m one-off items outlined in the Q1 results. Given SNP’s strong market position in software-based transformation projects and assuming a sustained high level of activity, we believe the shares remain attractive on c 18x our FY19e earnings.