Entertainment One's (LON:ETO) positive trading update points to a building pipeline in TV and continued strong development of the Peppa Pig franchise. The film release slate is improving and margins will be supported by a restructuring of the division, which targets £10m of savings by FY18. We see considerable upside potential from the shares, which have been under pressure over the last six months following a dilutive rights issue and refinancing and persistent weakness in Film.
Television and Family remain strong
For the nine months to December 2015, revenues decreased 3% and EBITDA was up 15%, broadly as expected. Television and Family revenue grew 39% while Film was down 14%, affected by a weaker release slate over the last couple of years. In Family, the Peppa Pig franchise continues to experience very strong growth, particularly in the US where retail sales increased by c 275% in 2015. Television delivered c 60% more half-hours of content y-o-y. Adjusted net debt was £209m and is expected to fall further to c £180m by the year end.
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