New Peppa Pig episodes and shift to film production drive eOne in first half
Entertainment One updated the market on its performance as it completed the six-month period ending 30 September on Thursday, reporting that trading for first six months had been “consistent” with the trends it outlined at the start of the financial year.
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The FTSE 250 company said it anticipated full-year financial performance to be in line with management expectations, with a similar first and second half weighting to the 2018 financial year.
It said its family and brands operations continued to perform strongly, driven by ongoing consumer product roll-outs across a growing number of licensing contracts and SVOD deals.
The business delivered revenue and earnings growth during the first half of the year, with almost 1,700 live licensing contracts across the portfolio of brands, up from more than 1,300 year-on-year.
Peppa Pig remained “strong” in its core markets, benefiting from the delivery of new episodes of the show to broadcasters in the 2018 financial year, with additional new Peppa Pig episodes to be delivered in spring 2019, further supporting the group's licensing activities.
In China, Peppa Pig episodes currently aired on the CCTV and Hunan TV networks and across major VOD platforms Tencent, Youku and iQIYI.
A broader licensing programme was launched to consumers in the territory, supported by licensees including Alpha Toys, Penguin, Unilever and Kimberly-Clark and with retail sales generated from 74 live licensing agreements continuing to ramp up, eOne reported.
The theatrical release of Peppa Pig: My First Movie Experience was being co-produced with Chinese conglomerate Alibaba and would benefit from a “wide launch” in theatres in early 2019, just ahead of celebrations for the Chinese Year of the Pig.
Entertainment One said its partnership with Merlin Entertainments also continued to develop, with Peppa Pig-themed areas and accommodation already in place in Merlin parks in Italy and Germany, and both parks having experienced increased attendance in Peppa Pig's target demographic.
New standalone Peppa Pig ‘World of Play’ interactive play areas were set to launch in Shanghai and Dallas later in the year, with roll-outs in Beijing, Michigan and New York anticipated during 2019.
PJ Masks was also growing in its markets, with a full licensing programme rolled out internationally supported by new content.
Season 2 was currently broadcasting on Disney Junior, achieving all-time high ratings for the show, and season 3 was currently in production.
“PJ Masks has made a strong broadcast start in China, airing on the major VOD platforms and generating 1.4 billion views in the first five months,” eOne explained.
“The Chinese consumer products programme for the brand will be launched in October 2018, led by toy licensee Alpha Toys and supported by a limited range of publishing and apparel products.
“A wider consumer launch will take place in China in 2019.”
The group said it had also made progress in launching new family brands.
Cupcake & Dino General Services started broadcasting on Netflix in July, and Ricky Zoom would make its broadcast debut in the spring and summer of 2019 with a soft launch of toy lines in autumn 2019 from master toy partner Tomy.
Eight other properties were currently in development.
Over in the film and television division, eOne said a number of new scripted and unscripted television series were delivered during the period, with a “robust pipeline” of new series set up for development with partners.
Film had continued to transition from distribution to production activities, which the firm said reflected ongoing changes across the industry
The group said it was focussed on controlling content rights around the world, with its “pure-play” content approach enabling it to sell to all buyers while the ongoing transition in film to production activities reduced the risks associated with the lower-margin film distribution business.
In line with its previously-communicated strategic plans, eOne continued to align its management teams across film and television, as well as across The Mark Gordon Company and Sierra/Affinity, in a bid to drive operating efficiencies across physical production, finance, accounting, legal and operations.
In the scripted drama business, Sharp Objects premiered on HBO and ranked as the network's second highest rating drama of the season-to-date, just behind Westworld, with the finale bringing in a series high of 2.6 million viewers in the US.
The Rookie, starring Nathan Fillion, was set to premiere on ABC on 16 October, was sold around the world by eOne and was supported by “strong” international sales.
Designated Survivor season 3 received a 10-episode order from Netflix, and was expected to be released globally in 2019 as a Netflix Original.
Canadian series Burden of Truth season 1 premiered in the US on The CW and in the UK on Universal, while CBC in Canada renewed the series for a second season.
Additional scripted series on air included Ransom season 2 and Private Eyes season 3.
The non-scripted businesses had a “very busy” first half of the year, eOne said, with key franchise series including Ex on the Beach, Siesta Key and Growing Up Hip Hop, and new series including Ladygang, Hustle in Brooklyn, Ladies Night and The Campbells.
Renegade83 continued the delivery of its Naked and Afraid franchise, with three new shows commissioned in the half-year.
“Overall, the Group has 60 television shows set up for development with various broadcast, network and digital platforms, with over 1,000 half hours of produced/acquired content currently anticipated to be delivered in the full year,” the board said.
Entertainment One was continuing to decrease the number of theatrical releases in line with previous guidance, explaining that as a result of the ongoing transition from lower-margin film distribution towards production activities, it released 59 films theatrically, down 17 from the same period during the prior year.
Key releases included the comedy I Feel Pretty, starring Amy Schumer and Michelle Williams, and family feature The House with a Clock in its Walls from Amblin, based on the children's book series and starring Jack Black and Cate Blanchett.
Overall year-to-date box office revenues in eOne's distribution territories were $64m, down from $82m, with average box office per title slightly up due to a focus on fewer, more impactful properties.
It said it had a “strong slate” for the second half including Green Book from Participant Media, Vice from Annapurna Pictures, and eOne-produced film Stan and Ollie which would be released by Sony Pictures Classics in the US, eOne in its direct territories and sold throughout the rest of the world by the newly-consolidated Sierra/Affinity.
eOne's Makeready would begin shooting its next feature, Queen and Slim, in January.
Its music operation continued its strategy of diversifying its portfolio beyond recorded product to include music publishing and artist management, while “laying the foundations” for a growing live division.
In recorded music there were number one albums from artists across a number of genres including World Music, Gospel, Metal and R&B.
“The recorded catalogue from artists such as The Lumineers, Dr. Dre, DJ Khaled, and Snoop Dogg continues to contribute significant margin as the streaming universe continues to grow,” eOne said.
“Management client Jax Jones has sustained his radio success with his fourth consecutive hit single Ring Ring which has achieved over 50 million streams globally since release.”
The group's live division, Round Room, announced two new events during the period - the Thank You Canada tour and The Nelson Mandela Exhibit, launching in London in February.
In addition, it continued to experience success with the PJ Masks live show Time to be a Hero with sell-out shows across the US and tickets now on sale for shows in Australia.
Entertainment One’s independent library valuation increased to $2bn as at 31 March, from $1.7bn a year earlier, which included the impact of a £64m one-off charge of which £60m was non-cash, largely related to the impairment of certain assets in the film distribution business.
Looking ahead, eOne said the outlook for the underlying financial performance for the full year remained in line with management expectations.
Group net debt-to-EBITDA was anticipated to be about 1.8x at the end of the current financial year, in line with previous guidance.
“Entertainment One continues to execute its strategy to build a portfolio of the highest quality content,” said chief executive officer Darren Throop.
“We continue to seek out strong creative partnerships, in line with our vision of building the leading talent-driven entertainment company in the world.”
Throop said the company’s momentum remained “strong”, supported by long-term industry trends and new territorial opportunities.
“The group's ongoing commitment to investing in its content portfolio has driven current year earnings and created future value, reflected in another increase in the independent library valuation.
“The financial performance of the business remains in line with management expectations for the year.”