Television and film rights and distribution outfit Entertainment One (ETO) gains 3.3% to 233p as first half earnings beat forecasts and it says it is on track to double the size of the business by 2020.

The Canadian firm, which owns the rights to blockbuster kids TV show Peppa Pig, has endured a tough autumn sparked by a rights issue, currency headwinds and disappointing cash flow performance. These results, covering the six months to 30 September, show a 43% increase in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to £52 million.

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We are admirers of the content Entertainment One has at its disposal. The £200 million 4-for-9 rights issue supported the £140 million purchase of Peppa Pig TV producer ABD translating into 85% effective ownership of the beloved porcine cartoon and the ability to control the brand’s strategic development. A full roll-out in China is planned for 2016.

Delayed release schedules mean a relatively weak contribution from the film division with just 96 theatrical releases in the period covered by the results (against 134 in 2014). In all 210 releases are expected for the full year.

Investec stays at buy, putting its price target under review, and notes improved cash generation. ‘Net debt is expected to be lower on lower content spend – this implies FY16 net debt of c. £250m (vs our £287m) – an encouraging cash performance, after historic disappointments.’

Issue Date: 17 Nov 2015