Entertainment One reports decline in profits as sales costs soar

Entertainment One, an entertainment content owner and distributor, has posted a significant year-on-year decline in profits during the six months ended September 30th.

On an adjusted basis, pre-tax profit fell £10.0m to £8.8m year-on-year, while on a reported basis it fell to £1.0m, down from £9.8m the same period the previous year.

Revenue was 8.0% ahead of the previous year at £220.5m (2011: £204.6m), driven primarily by a strong performance from the group's increased investment in the Entertainment businesses. However, this was offset by the cost of sales, which leapt from £146.7m in 2011 to £172.9m this year.

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Underlying earnings before interest, tax, depreciation and amortisation [EBITDA] came in at £13.4m (2011: £23.6m), with the decrease mainly due to the timing of higher prints and advertising costs associated with the increased number of theatrical releases in the period and a greater weighting of LOVEFiLM digital sales in the UK to the second half compared to the prior year, in line with management expectations.

In the Entertainment division revenue was up 16%, driven by a strong release schedule in the Film business and increased television programming deliveries. During the half year period the company saw a 46% rise in box office takings with the release of 89 films, compared to 74 the previous year.

The Television business had a very strong first half, delivering 138 half hours of programming compared to 73 half hours in the prior period.

The Family business performed well in the first half, led by Peppa Pig's US licensing and merchandising launch.

The Distribution division recorded lower revenues than the prior period, in line with management's expectations. The firm said that despite falling sales the business again outperformed the market in Canada and continues to benefit from new business opportunities as the market consolidates.

In a statement the company said: "The outlook for the remainder of the financial year remains positive with the Film business set for another strong slate of releases and the television business on track to deliver a similar volume of programming to the first half. The directors look forward to delivering year-on-year profit growth in line with management's expectations."

NR