At a headline level film and TV business Entertainment One’s (ETO) full year results look good with headline earnings up more than 20% despite a dip in revenue and the dividend hiked 7.1% to 1.5p. Why then are its shares 3.7% to 443.6p at the last count?

One possible answer lies in the weaker than expected revenue performance, another could be the significant adjustments from the statutory numbers. These show pre-tax profit down 43% to £36.8m and earnings per share down nearly 80%.

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The difference can be explained by several items including increased share-based bonuses, some standard accounting adjustments and £68m worth of one-off items.

These mainly relate to impairments in its home entertainment business, which has been hit by the shift from buying physical DVD or Blu-Ray to watch TV and movies to streaming. Most of these impairments were flagged in its half-year results, so arguably not ‘new’ news.

The company also books some costs related to a reorganisation of its Film, Television & Music division.

The need to reshape this business is reflected in its laggard status in the wider group, where the star remains Family & Brands, driven by kids TV smash Peppa Pig and PJ Masks.

Family & Brands revenue is up 28% to £158.5m while it is down 13% in the Film, Television & Music arm. The company’s strategy on the film side has been to acquire the rights to fewer films and focus on a smaller number of its own productions.

Numis analyst Steve Liechti remains positive. He says: ‘We see better, higher quality content/IP plus higher long term returns in a growing market.’

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Issue Date: 21 May 2019