eOne’s FY18 trading update puts the group on track to deliver to expectations with continued excellent momentum in Family, a solid performance from Television and a better second half in Film.
Written by
Entertainment One |
On track for full year |
Trading update |
Media |
4 April 2018 |
Share price performance
Business description
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eOne’s FY18 trading update puts the group on track to deliver to expectations with continued excellent momentum in Family, a solid performance from Television and a better second half in Film.
Year end |
Revenue (£m) |
EBITDA (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/16 |
802.7 |
129.1 |
104.1 |
19.4 |
1.2 |
14.7 |
0.4 |
03/17 |
1,082.7 |
160.2 |
129.9 |
20.0 |
1.3 |
14.3 |
0.5 |
03/18e |
1,076.1 |
175.1 |
145.7 |
22.1 |
1.4 |
12.9 |
0.5 |
03/19e |
1,172.1 |
196.6 |
160.6 |
24.5 |
1.5 |
11.6 |
0.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY18 in line with expectations
The Family division’s strong momentum continued into H2 with FY revenues and EBITDA expected to increase by approximately 50%, helped by continued strong performance of Peppa Pig in both established and developing markets, along with the global consumer roll-out of PJ Masks, which is tracking ahead of plan. In Television, eOne Television will produce about 850 half-hours of content for the full year – a little light compared to the initial plan, but still expected to deliver growth overall, as will MGC, where delivery of Season 2 of Designated Survivor was the principal contributor. As expected, a smaller volume of films (145 vs 172 in FY17) and a smaller Box Office mean Film revenues will decrease in the full year despite a better second half, mitigated to an extent at the EBITDA level by cost savings realised from reshaping the division.
Promising FY19 outlook
In Family, the closure of Toys R Us may have some impact in the short term in the US and the UK; however, outside these stores the brands performed well in Q417 and we believe eOne’s largest family brands – Peppa Pig and PJ Masks – have significant room for growth in major markets including the US, Japan and China. Following the acquisition of the remaining 49% of MGC in January this year, Television and Film operate under the same operational and management structure. The line-up for the year ahead looks promising, with a stronger distribution and production pipeline in Film, and a number of MGC’s new television projects in production for delivery during FY19.
Valuation: Mini-major
Continued momentum in Family, a relatively promising pipeline in Television and Film, and the potential for additional cost savings from FY20 following the full integration of MGC provide us with comfort regarding our FY19 forecasts. The shares have fallen 12% from their January peak and trade on an 8.6x FY19 (March) EV/EBITDA and 11.6x PE, a 25% discount to DHX Media and Lionsgate, its closest peers. As one of the few ‘mini-majors’, we see scope for the discount to peers to narrow, realising upside to our SOTP valuation of 380p per share.
Exhibit 1: Financial summary
£m |
2015 |
2016 |
2017 |
2018e |
2019e |
|||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|||
PROFIT & LOSS |
||||||||
Revenue |
785.8 |
802.7 |
1,082.7 |
1,076.1 |
1,172.1 |
|||
Cost of Sales |
(578.0) |
(610.1) |
(822.9) |
(817.9) |
(890.8) |
|||
Gross Profit |
207.8 |
192.6 |
259.8 |
258.3 |
281.3 |
|||
EBITDA |
107.3 |
129.1 |
160.2 |
175.1 |
196.6 |
|||
Operating Profit |
103.6 |
124.7 |
155.3 |
169.6 |
190.1 |
|||
Amortisation of intangibles |
(22.2) |
(27.4) |
(41.9) |
(40.0) |
(40.0) |
|||
Exceptional items |
(17.9) |
(16.6) |
(47.1) |
(3.3) |
(2.5) |
|||
Share based payment charge |
(3.4) |
(5.7) |
(5.0) |
(5.0) |
(5.0) |
|||
JV tax, finance costs, dep'n |
0.1 |
(1.6) |
0.0 |
0.0 |
0.0 |
|||
Operating Profit |
60.2 |
73.4 |
61.3 |
121.3 |
142.6 |
|||
Net Interest |
(14.8) |
(20.6) |
(25.4) |
(23.9) |
(29.5) |
|||
Exceptional finance items |
(1.4) |
(6.5) |
1.3 |
(11.8) |
0.0 |
|||
Profit Before Tax (norm) |
88.8 |
104.1 |
129.9 |
145.7 |
160.6 |
|||
Profit Before Tax (FRS 3) |
44.0 |
47.9 |
37.2 |
85.6 |
113.1 |
|||
Tax (reported) |
(2.7) |
(7.7) |
(12.3) |
(18.8) |
(26.0) |
|||
Tax (adjustment for normalised earnings) |
|
(16.8) |
(16.8) |
(16.1) |
(13.2) |
(10.9) |
||
Profit After Tax (before non-controlling interests) (norm) |
69.3 |
79.6 |
101.5 |
113.7 |
123.7 |
|||
Profit After Tax (before non-controlling interests) (FRS3) |
41.2 |
40.2 |
24.9 |
66.8 |
87.1 |
|||
Non-controlling interests |
0.0 |
(3.7) |
(11.9) |
(16.5) |
(9.4) |
|||
Average Number of Shares, Diluted (m) |
332.9 |
379.8 |
433.4 |
440.0 |
466.4 |
|||
EPS - normalised (p) |
20.8 |
19.4 |
20.0 |
22.1 |
24.5 |
|||
EPS - FRS 3 (p) |
12.7 |
9.8 |
3.0 |
11.6 |
16.8 |
|||
Dividend per share (p) |
1.1 |
1.2 |
1.3 |
1.4 |
1.5 |
|||
Gross Margin (%) |
26.4 |
24.0 |
24.0 |
24.0 |
24.0 |
|||
EBITDA Margin (%) |
13.7 |
16.1 |
14.8 |
16.3 |
16.8 |
|||
Operating Margin (before GW and except) (%) |
13.2 |
15.5 |
14.3 |
15.8 |
16.2 |
|||
BALANCE SHEET |
||||||||
Non-current Assets |
538.4 |
890.7 |
972.7 |
1,094.3 |
1,082.5 |
|||
Intangible Assets (incl Investment in programmes) |
473.9 |
808.2 |
870.6 |
993.7 |
978.4 |
|||
Tangible Assets |
6.1 |
60.1 |
72.8 |
78.3 |
81.8 |
|||
Deferred tax/Investments |
58.4 |
22.4 |
29.3 |
22.3 |
22.3 |
|||
Current Assets |
634.3 |
752.0 |
928.3 |
917.8 |
989.0 |
|||
Stocks |
52.0 |
51.1 |
48.6 |
48.6 |
48.6 |
|||
Investment in content rights |
221.1 |
241.3 |
269.8 |
297.8 |
302.4 |
|||
Debtors |
289.9 |
351.3 |
476.5 |
496.4 |
563.0 |
|||
Cash |
71.3 |
108.3 |
133.4 |
75.0 |
75.0 |
|||
Current Liabilities |
(488.3) |
(568.7) |
(679.4) |
(637.8) |
(636.2) |
|||
Creditors |
(398.7) |
(470.7) |
(574.6) |
(533.0) |
(531.4) |
|||
Short term borrowings |
(89.6) |
(98.0) |
(104.8) |
(104.8) |
(104.8) |
|||
Long Term Liabilities |
(319.6) |
(413.6) |
(464.6) |
(550.4) |
(540.4) |
|||
Long term borrowings |
(295.9) |
(309.1) |
(368.3) |
(454.1) |
(444.1) |
|||
Other long term liabilities |
(23.7) |
(104.5) |
(96.3) |
(96.3) |
(96.3) |
|||
Net Assets |
364.8 |
660.4 |
757.0 |
823.8 |
894.9 |
|||
CASH FLOW |
||||||||
Operating Cash Flow |
271.9 |
320.1 |
438.4 |
477.2 |
621.8 |
|||
Net Interest |
(13.4) |
(31.0) |
(25.0) |
(23.9) |
(29.5) |
|||
Tax |
(10.8) |
(17.7) |
(18.4) |
(22.6) |
(31.2) |
|||
Capex |
(4.8) |
(8.6) |
(3.8) |
(11.0) |
(10.0) |
|||
Acquisitions/disposals |
(104.3) |
(226.0) |
(7.5) |
(134.0) |
0.0 |
|||
Investment in content rights and TV programmes |
(280.8) |
(218.5) |
(408.1) |
(473.0) |
(530.0) |
|||
Proceeds on issue of shares |
0.0 |
194.6 |
0.0 |
53.2 |
0.0 |
|||
Dividends |
(2.9) |
(4.0) |
(8.3) |
(10.0) |
(11.0) |
|||
Net Cash Flow |
(145.1) |
8.9 |
(32.7) |
(144.1) |
10.0 |
|||
Opening net debt/(cash) |
165.1 |
314.2 |
299.0 |
339.7 |
484.0 |
|||
Movements in exchangeable notes |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Other including forex |
(4.0) |
6.3 |
(8.0) |
(0.1) |
0.0 |
|||
Closing IFRS debt/(cash) |
314.2 |
299.0 |
339.7 |
484.0 |
473.9 |
|||
Source: eOne accounts, Edison Investment Research
|
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