Elliott Auckland's  Instablog

2011 was a mixed year for Gaumont, after having 3 terrible quarters where revenues plunged over 30%, they turned it around with hit Intouchables ending up the year with record profit despite poor figures from most segments of the group. I had some worries about 2012, wondering whether the weakness shown in the first three quarters would continue as a structural trend, or whether it was purely cyclical in nature.

2012 Q1 turned out to be a blockbuster quarter, for what is usually the weakest in the year. Revenues were up 53% from the depressed 16.2million to 24.8million. Although, Q1 showed the continued success of Intouchables (which reached 15million viewers abroad, and an additional 2.5million domestically) the core business excluding effects of Intouchables picked up dramatically: Sales of films to Television channels were up 142% and sales from Gaumont Pathe archives division were up 100%.

The Annual Report for 2011 came out earlier this week. It highlighted several positives for 2012, most notably being Intouchables. However, one aspect unforeseen by myself was that the cartoon division incurred all its production costs in 2011 (and thus being loss making) while the showing and sales will be benefiting 2012. This alongside the continued success of recently developed US based Gaumont International Television - which has already signed two deals with Netflix and NBC. Gives 2012 the potential to be even bigger than 2011, with the core business returning to normal levels, Intouchables still having a positive effect and small pluses coming from several segments such as International TV and cartoon.

The shares are still trading lightly in the 44-48 euro range, valuing them on around 7x 2011's Earnings with a 2.8% dividend (which has yet to go ex-dividend). They are 0.76x book value, which as discussed previously is well understated. While Gaumont do not give Q1 profits, I believe the profits to be fairly large given the lack of investments into films this year and the nature of the revenues received (sales of existing films to tv are without cost). It seems likely that Q1 profit was somewhere in the region of 10-14million Euros, setting 2012 up for an even bigger year - given that Q1 is usually a period of break-even.