Entertainment One: 2019: Year Of The (Peppa) Pig
Edison | Nov 20, 2018 05:25AM ET
Entertainment One Ltd (LON:ETO) interims are in line with expectations. Our FY19 and FY20 revenue forecasts are trimmed but we have lifted expected margins, leaving EBITDA and EPS broadly unchanged. This reflects the further mix shift to Family & Brands, where good momentum continues behind Peppa Pig and PJ Masks, especially in China. Film & TV is part-way through its transition from distribution to content production, with divisional EBITDA also impacted by an H2-weighted release schedule. The net effect was a group EBITDA margin of 14.8% (H118: 13.3%). Changing consumption patterns provide a strong backdrop to high-quality content providers such as eOne. We regard the shares as attractively priced on earnings and with regard to the portfolio valuation of $2.0bn.
Family in the front seat
H119 Family & Brands revenue was up 29%, on maintained EBITDA margins. The outlook is good through H219 and FY20e, buoyed by new and renewed SVOD (streaming video on demand) deals for Peppa Pig in China, along with a growing licensing and merchandising programme, a movie slated for release in early 2019 and an experiential offering with Merlin Entertainments. PJ Masks is following in the slipstream in China, having established a strong position in a short time frame in the US and UK. Ricky Zoom should launch by summer 2019, with licensing and merchandising to follow. In Film & TV, the shift to content production from lower-margin distribution continues, with less investment in acquired content. There were fewer film theatrical releases in the period, with total FY19 output now guided to 120 from 140. Film & TV revenues were down 7% on prior year, with EBITDA down 25%, with management guiding to a heavier revenue and EBITDA weighting to H2.
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Entertainment One: 2019: Year Of The (Peppa) Pig
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