A strong performance from Television and Family and continued recovery at the Box Office in Film put eOne on track to deliver strong growth in reported revenues and underlying EBITDA in FY17, as expected. The divisional mix may be weighted more towards Television than we had forecast but overall, we do not make any changes to our estimates.
Written by
Entertainment One |
Strong second half performance |
Trading update |
Media |
31 March 2017 |
Share price performance
Business description
Next events
Analysts
Entertainment One is a research client of Edison Investment Research Limited |
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A strong performance from Television and Family and continued recovery at the Box Office in Film put eOne on track to deliver strong growth in reported revenues and underlying EBITDA in FY17, as expected. The divisional mix may be weighted more towards Television than we had forecast but overall, we do not make any changes to our estimates.
Year end |
Revenue (£m) |
EBITDA |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/15 |
785.8 |
107.3 |
88.8 |
20.8 |
1.1 |
11.0 |
0.5 |
03/16 |
802.7 |
129.1 |
104.1 |
19.4 |
1.2 |
11.8 |
0.5 |
03/17e |
1,003.1 |
157.0 |
126.7 |
20.0 |
1.3 |
11.5 |
0.6 |
03/18e |
1,093.9 |
178.0 |
149.4 |
23.7 |
1.4 |
9.7 |
0.6 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY17 performance in line
eOne’s trading update points to strong growth in reported revenues and underlying EBITDA, underpinned by an excellent half for Television, strong growth in Family and an improved second half performance in Film, as expected. Net debt is expected to be 1.2-1.3x EBITDA, slightly higher than previously guided (1.1-1.2x).
Television and Family very strong, Film recovers
Television revenues have almost doubled (we forecast a 54% increase) with scripted productions strong at eOne Television and The Mark Gordon Company (MGC) also generating a significant increase in revenues following the success of Designated Survivor. In Family, revenues and EBITDA have increased by at least 25% (in line with our forecast), buoyed by the performance of Peppa Pig, particularly in the US, as well as a strong performance by PJ Masks, where momentum remains strong. The H117 Box Office recovery in eOne’s Film business continued into H217 with titles including The Girl on a Train, Arrival and La La Land. As expected, EBITDA margins in Film, which were affected in H117 by up-front costs associated with a film’s initial release, recovered in H217 putting Film EBITDA on track to match FY16. Going into FY18 the pipeline looks solid (Spielberg’s The Post, Sorkin’s Molly’s Game) in Film but also at MGC which has four high profile films in production. While the business mix looks likely to have a stronger weighting towards Television than we have forecast, overall we do not anticipate any material changes to our EBITDA forecasts.
Valuation: Better structure and performance
eOne has made considerable progress in delivering on its strategy to become a more balanced content group. While Film may remain the more volatile element, the stronger FY17 Box Office performance should help it offset some of the headwinds faced in the home entertainment market. Meanwhile, the investments made into Television and Family should underpin a more consistent growth profile. The FY18 EV/EBITDA of 8.3x (adjusted for minorities) is at a 33% discount to its closest US peer (Lionsgate) and we see considerable scope for this ratings gap to narrow.
Exhibit 1: Financial summary
£m |
2014 |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
823.0 |
785.8 |
802.7 |
1,003.1 |
1,093.9 |
||
Cost of Sales |
(642.3) |
(578.0) |
(610.1) |
(762.4) |
(831.4) |
||
Gross Profit |
180.7 |
207.8 |
192.6 |
240.8 |
262.5 |
||
EBITDA |
92.8 |
107.3 |
129.1 |
157.0 |
178.0 |
||
Operating Profit |
90.2 |
103.6 |
124.7 |
151.7 |
172.2 |
||
Amortisation of intangibles |
(36.0) |
(22.2) |
(27.4) |
(33.0) |
(30.0) |
||
Exceptional items |
(22.1) |
(17.9) |
(16.6) |
(7.5) |
0.0 |
||
Share based payment charge |
(2.7) |
(3.4) |
(5.7) |
(4.0) |
(4.0) |
||
JV tax, finance costs, dep'n |
0.0 |
0.1 |
(1.6) |
0.0 |
0.0 |
||
Operating Profit |
29.4 |
60.2 |
73.4 |
107.2 |
138.2 |
||
Net Interest |
(11.8) |
(14.8) |
(20.6) |
(25.0) |
(22.9) |
||
Exceptional finance items |
3.9 |
(1.4) |
(6.5) |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
78.4 |
88.8 |
104.1 |
126.7 |
149.4 |
||
Profit Before Tax (FRS 3) |
21.5 |
44.0 |
47.9 |
82.2 |
115.4 |
||
Tax (reported) |
(1.5) |
(2.7) |
(7.7) |
(16.4) |
(23.1) |
||
Tax (adjustment for normalised earnings) |
|
(18.4) |
(16.8) |
(16.2) |
(12.2) |
(10.5) |
|
Profit After Tax (before non-controlling interests) (norm) |
58.5 |
69.3 |
80.2 |
98.1 |
115.8 |
||
Profit After Tax (before non-controlling interests) (FRS3) |
20.0 |
41.2 |
40.2 |
65.8 |
92.3 |
||
Non-controlling interests |
0.0 |
0.0 |
(4.2) |
(12.6) |
(14.0) |
||
Average number of shares outstanding (m) |
318.7 |
332.9 |
379.1 |
427.3 |
429.4 |
||
EPS - normalised (p) |
18.4 |
20.8 |
19.4 |
20.0 |
23.7 |
||
EPS - FRS 3 (p) |
5.5 |
12.7 |
9.8 |
12.6 |
18.5 |
||
Dividend per share (p) |
1.0 |
1.1 |
1.2 |
1.3 |
1.4 |
||
Gross Margin (%) |
22.0 |
26.4 |
24.0 |
24.0 |
24.0 |
||
EBITDA Margin (%) |
11.3 |
13.7 |
16.1 |
15.7 |
16.3 |
||
Operating Margin (before GW and except) (%) |
11.0 |
13.2 |
15.5 |
15.1 |
15.7 |
||
BALANCE SHEET |
|||||||
Non-current Assets |
366.0 |
538.4 |
890.7 |
927.8 |
915.5 |
||
Intangible Assets (incl Investment in programmes) |
343.1 |
473.9 |
808.2 |
846.4 |
835.5 |
||
Tangible Assets |
5.5 |
6.1 |
60.1 |
64.8 |
70.0 |
||
Deferred tax/Investments |
17.4 |
58.4 |
22.4 |
16.6 |
10.1 |
||
Current Assets |
559.9 |
634.3 |
752.0 |
770.4 |
842.1 |
||
Stocks |
47.2 |
52.0 |
51.1 |
51.1 |
51.1 |
||
Investment in content rights |
230.1 |
221.1 |
241.3 |
267.9 |
282.3 |
||
Debtors |
243.7 |
289.9 |
351.3 |
401.4 |
458.7 |
||
Cash |
38.9 |
71.3 |
108.3 |
50.0 |
50.0 |
||
Current Liabilities |
(449.2) |
(488.3) |
(568.7) |
(565.1) |
(561.0) |
||
Creditors |
(401.1) |
(398.7) |
(470.7) |
(467.1) |
(463.0) |
||
Short term borrowings |
(48.1) |
(89.6) |
(98.0) |
(98.0) |
(98.0) |
||
Long Term Liabilities |
(168.6) |
(319.6) |
(413.6) |
(415.6) |
(396.8) |
||
Long term borrowings |
(155.9) |
(295.9) |
(309.1) |
(311.1) |
(292.3) |
||
Other long term liabilities |
(12.7) |
(23.7) |
(104.5) |
(104.5) |
(104.5) |
||
Net Assets |
308.1 |
364.8 |
660.4 |
717.6 |
799.9 |
||
CASH FLOW |
|||||||
Operating Cash Flow |
264.2 |
271.9 |
320.3 |
480.3 |
586.4 |
||
Net Interest |
(10.7) |
(13.4) |
(31.0) |
(25.0) |
(22.9) |
||
Tax |
(5.9) |
(10.8) |
(17.7) |
(20.0) |
(27.7) |
||
Capex |
(4.2) |
(4.8) |
(8.6) |
(10.0) |
(11.0) |
||
Acquisitions/disposals |
(6.1) |
(104.3) |
(226.0) |
(5.2) |
0.0 |
||
Investment in content rights and TV programmes |
(281.4) |
(280.8) |
(218.5) |
(475.0) |
(500.0) |
||
Proceeds on issue of shares |
0.0 |
0.0 |
194.6 |
0.0 |
0.0 |
||
Dividends |
0.0 |
(2.9) |
(4.0) |
(5.3) |
(6.0) |
||
Net Cash Flow |
(44.1) |
(145.1) |
9.1 |
(60.3) |
18.8 |
||
Opening net debt/(cash) |
144.5 |
165.1 |
314.2 |
298.8 |
359.1 |
||
Movements in exchangeable notes |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other including forex |
23.5 |
(4.0) |
6.3 |
0.0 |
0.0 |
||
Closing IFRS debt/(cash) |
165.1 |
314.2 |
298.8 |
359.1 |
340.3 |
||
ANALYSIS OF NET DEBT |
|||||||
Production finance |
54.0 |
89.3 |
118.0 |
189.8 |
215.2 |
||
Net debt |
111.1 |
224.9 |
180.8 |
169.3 |
125.1 |
||
Source: Historic – Entertainment One, Forecast – Edison Investment Research
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Nano Dimension has hit its Q117 target of six printer deliveries to beta site customers. This confirms it is on track to complete the beta testing phase in mid-2017 and to deliver a total of 50 printers during the year, around 35 to commercial customers. We leave estimates and valuation unchanged.