Heavy investment in film and TV product is taking a bite out of Entertainment One, as the Canadian producer posted a higher six-month loss Wednesday.

But E1 CEO Darren Throop said higher debt costs and amortization charges associated with newly acquired movies and TV series production will eventually fuel strong cash generation as the company transitions from physical media wholesaling to digital filmed entertainment.

‘The investment that we’re making is starting to come through in our results now,’ he said.

E1 saw its pre-tax loss for the half-year to Sept. 30 rise to $13.5 million, against a loss of $9.3 million in 2008, despite revenues rising 24.8% to $290.5 million, against a year-earlier $233.2 million. E1 issues twice-yearly reports because it trades on the London Stock Exchange’s AIM market.

North American music, DVD and video game wholesaling remains the biggest part of E1’s business, as it posted overall revenue down 6% to $171.5 million in a challenging retail market.

E1’s entertainment division, which produces and distributes film, TV and music product, posted revenues up 73% to $126.5 million.

The widened half-year loss is due in part to steep non-cash amortization charges and higher debt costs associated with the acquisition of film product for its Canadian and European indie distribution network, and producing TV series like The Bridge, Copper and Hung for international broadcast sale.

The Toronto-based producer poured $69 million into content rights and TV shows during its last six-month reporting period, against $30.4 million during the same period of 2008.

That content investment lifted E1’s overall debt load to $197 million at Sept. 30, compared to $158 million at March 31, 2009.

E1 has delivered four episodes of The Bridge to CBS, with the rest set to be delivered in early 2010, as will episodes of Copper to ABC.

Throop pointed to underlying EBITDA up 38% to $16.5 million during the last six months, and an independent library valuation rising 26% to $233 million as proof E1 was on a path to longer-term profit growth.

‘Over the next year or two, you’re going to see substantial cash generation, you’re going to see continued EBITDA growth,’ he reported.