Canada's Entertainment One Posts Lower First-Half Earnings on Higher Marketing Costs

TORONTO – Canadian producer/distributor Entertainment One on Monday reported that it saw a slide in earnings for the first half of its fiscal year amid higher marketing costs.

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The Toronto-based producer/distributor also said its proposed takeover of rival Alliance Films is on course to close in early 2013, subject to Canadian Competition Bureau approval.

The long-awaited acquisition of Alliance Films as part of a deal potentially worth $277 million is set to create the largest indie distributor in Canada and the U.K.

Entertainment One posted pre-tax profits of $1.58 million for the six months ended Sept. 30, compared with year-ago pre-tax earnings of $15.58 million. Revenue was up sharply to $350.7 million, compared with a year-earlier $325.2 million.

Entertainment revenue was up 16 percent to $264 million on increased film distribution business – 89 theatrical releases during the latest period, against 74 films in 2011 – and increased TV programming deliveries.

At the same time, eOne, whose shares trade on the London Stock Exchange, saw costs for release titles like Looper and The Sweeney rise 30 percent in the first half. Plus, its revenue from its  content deal with Amazon.com's LoveFilm in the U.K. was weighted more to the first half of 2011.

The company said it will benefit from the increased content investment in the second half of the year, so “full year earnings remain in line with management’s expectations.”

Its film releases in the second half of the year include The Twilight Saga: Breaking Dawn - Part 2, Nativity 2, and Bullet to the Head.

The TV business delivered 138 half hours of programming in the first half of the year, including Rookie Blue and Hell on Wheels, compared with 73 half hours in the same period of 2011.

The higher entertainment revenue offset a continuing decline in eOne’s legacy distribution business on lower physical sales of DVDs. First-half distribution revenue was down 7 percent to $129 million.

“The business is continuing to grow with Peppa Pig thriving in the U.S. and internationally, the film division performing well in the first half and securing a strong release slate across our territories, and the television team seeing success with a number of series renewals,” Entertainment One CEO Darren Throop said. “We are looking forward to a positive second half of the year in line with management’s expectations."