Entertainment One (eOne) has had a strong first half operationally and, with a good pipeline in Television, Film and the ongoing roll-out of the Family brands internationally, is on track to deliver on its underlying full year expectations. The annual independent library valuation has been updated and has increased by approximately 50% to $1.5bn (£1.2bn), covering the greater part of eOne’s market value, leaving little in the rating for its extensive production and sales network.
eOne has had a strong operating performance in the first half of the year, with the underlying trends of each division developing in line with management’s expectations for the full year. All divisions have had a good period: Television is on track to deliver 1,100 half-hours of content for the full year, benefiting from three new commissions, the Renegade acquisition and a strong performance from international sales. The Mark Gordon Company (MGC) has started delivery of the first show under the new independent studio model, Designated Survivor, which has debuted very well. In Family, Peppa continues its international roll-out with the US merchandising programme ahead of plan, a good start in China and newer brand, PJ Masks, also developing well. Film has had a number of high-profile releases in H1 and management continues to work towards its FY18 target of £10m of annualised cost savings.
The pipeline for Television and Film looks promising, as is the outlook for Peppa, which will start airing its new 52-episode series in the autumn and has laid strong foundations in the US and China. We are retaining our underlying forecasts for the group, but amend them to capture sterling’s depreciation. Overall, this leads to an increase in our FY17 and FY18 EPS forecasts by 4% and 2% respectively.
eOne has also reported a significant increase in the independent valuation of its library, to $1.5bn (as of 31 March 2016) from c $1bn. The main component of the increase relates to last year’s acquisition of a further 35% share of the Peppa Pig brand, along with a strong underlying performance in Family. This valuation is now almost the same as eOne’s current enterprise value, leaving very little in the rating for the value of ‘front-list’ titles or the value of eOne’s extensive production and sales network.