Entertainment One no longer up for sale

Hopes that film and TV content distributor Entertainment One would put itself in the ship window have been dashed, with the firm's management keener on being the hunter rather than the hunted.

As part of the company's review of strategic options, the board has considered various proposals that have been made for all or parts of the group and has concluded that no one is prepared to pay a fair price for the company. As such, the board is no longer considering the outright sale of the business. On the contrary, it is evaluating a number of acquisition opportunities, it said.

The decision to plough on as an independent company may have been made easier by a solid end to 2011 which should ensure the company delivers full year results in line with expectations; the company's financial year runs to the end of March.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Margins have improved as the mix of profit is more heavily weighted to the Film and Television businesses, which have performed strongly and have seen 100% year-on-year growth in digital revenues, offsetting the impact of a decline in physical distribution (e.g. CDs and DVDs) consistent with the transition of the market towards digital downloads.

The disappointing performance of the group's Distribution division in the final quarter of 2011 reflected this trend. After adjusting for the closure of the group's Retail chain in March 2011, revenues for the 9 months to 31st December 2011 were 14% lower than the prior year, though this was, at least, a better performance than the market as a whole.

As for the Film business, that was going up against tough comparative figures from a year earlier when the world - well, the under-18 female section of it, anyway - was getting its teeth into the Twilight Saga, the story about young and good looking vampires.

Stripping out the effects of the Twilight products, film revenues for the nine month period to 31st December 2011 were 15% higher than the prior year on a constant currency and pro-forma basis.

Digital sales of films, which now represent over 13% of total revenues, continue to grow and have doubled compared to the prior year, reflecting benefits from the group's UK deal with LOVEFiLM and other initiatives.

On the Television side, revenues continue to be significantly ahead of the previous year, with 39% growth in the year-to-date.

The shares fell 33.5p to 165.5p on the news of the decision not to seek a buyer for the company.

jh