Entertainment One Full-Year Profit Rises 9 Percent as TV Growth Offsets Lower Film Results
Sales of television series such as kids brand 'Peppa Pig' helped compensate for a decline in film revenue from the distributor of 'The Hunger Games: Mockingjay — Part 2.'
Entertainment One on Tuesday reported higher full fiscal-year earnings amid growth at its television unit that offset lower film results due to fewer releases and some box-office disappointments.
The company's stock, which trades on the London Stock Exchange, was down 5 percent in early trading. It had risen last month after a report that U.K. TV giant ITV was considering acquiring the company. Entertainment One said at the time that “no approach has been received," while ITV said, "We do not comment on speculation."
The Toronto-based independent producer and distributor saw pre-tax profits for the year ending March 31 increase 8.9 percent to $69.3 million (£47.9 million) from £44.0 million. Earnings before interest, taxes, depreciation and amortization, another profitability metric used by analysts, rose 20 percent to $186.9 million (£129 million) from £107.3 million, with the company citing organic growth in its TV and family business and the benefit of acquisitions.
eOne in the fall agreed to acquire a 70 percent stake in Astley Baker Davies, the U.K. producer of kids TV show Peppa Pig, with which it co-owns the animated hit franchise, for $212 million.
The company's full-year revenue edged up 2.2 percent to $1.16 billion (£802.7 million) from £785.8 million. TV revenue increased 27 percent, with earnings before interest, taxes, depreciation and amortization up 44 percent. Film revenue fell 7 percent, and earnings before interest, taxes, depreciation and amortization dropped 28 percent. Family unit revenue was up 10 percent in the latest year, with earnings rising 82 percent, boosted by the Astley acquisition.
Peel Hunt analyst Malcolm Morgan had forecast revenue of £788.1 million and earnings before interest, taxes, depreciation and amortization of £121.3 million.
On the film side, eOne's slate included the likes of The Hunger Games: Mockingjay — Part 2, The Divergent Series: Allegiant — Part 1, The Hateful Eight and Insidious: Chapter 3. The final chapter in the Hunger Games franchise trailed slightly behind its predecessor, and eOne released fewer films last year — 210 against 227 in 2014. The result was a 19 percent drop in box office revenue and a 22 percent fall in home entertainment revenue for the year. The company cited "lower theatrical activity and title-specific underperformance."
But eOne is bullish about its 2016 slate, which includes around 220 titles, among them Steven Spielberg's The BFG, the first film under eOne's new partnership with Steven Spielberg's Amblin Partners, and David Brent: Life on the Road, Ricky Gervais' feature film sequel to his hit BBC series The Office.
"As the independent film market continues to recover in 2016, the group's exciting film slate is expected to deliver a significant pick-up in the group's box office performance, which will drive revenues in ancillary content release windows in future years," the company said.
eOne reiterated that a previously unveiled restructuring program would yield annual cost savings of $14.5 million (£10 million) starting in fiscal year 2018, including the previously announced home entertainment partnerships with 20th Century Fox Home Entertainment and Sony Pictures Home Entertainment.
On the TV side, the year's results included the financials from such shows as Hell on Wheels and Saving Hope, as well as the acquisition of a majority stake in the Mark Gordon Co., the production firm behind Grey’s Anatomy and Saving Private Ryan.
"eOne has delivered solid financial results at the group level, driven by strong organic growth in television and family, and the impact of acquisitions completed during the year, despite weakness in the film division continuing into the second half," said CEO Darren Throop. "The benefit of the group's diversified model is apparent with growth in television and family providing a greater balance to the group's portfolio, enhancing the mix of eOne's revenues toward higher-margin activities and protecting the bottom line against the cyclical film market."