REG - Entertainment OneLtd - Preliminary results for the y/e 31 March 2010 - Part 1
Released: 25/05/2010
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RNS Number : 4649M
Entertainment One Ltd
25 May 2010
Entertainment One Ltd.
Preliminary announcement for the year ended 31 March 2010
Revenue growth of 30% drives 36% increase in underlying EBITDA¹
Entertainment One Ltd. ('Entertainment One' or 'the Group'), a leading international entertainment content owner and
distributor, announces its preliminary results for the year ended 31 March 2010.
Financial Highlights
- Revenue of £444.2 million up 30% (2009: £342.6 million)
- Underlying EBITDA¹ up 36% at £34.3 million (2009: £25.3 million)
- Reported profit before tax of £6.9 million (2009: loss of £31.0 million)
- Diluted earnings per share of 4.3 pence (2009: loss of 23.2 pence)
- Adjusted diluted earnings per share² of 11.5 pence (2009: 8.6 pence), up 34%
- Operating cash flow of £85.2 million (2009: £35.9 million) up 137%
- Adjusted net debt³ down £17.1 million to £63.2 million (2009: £80.3 million)
Operational Highlights
- 123 films released theatrically in the year including the record breaking box office performance of The Twilight Saga: New Moon
- Established as the number one or number two independent film distributor in all core markets
- 213 half hours of original television programming delivered in the year including the new network shows Rookie Blue and The Bridge
- Expansion of international reach with Australia, New Zealand and France added to global network
- Move to the Main Market of the London Stock Exchange expected to complete in July 2010
Darren Throop, Chief Executive Officer, commented:
"We are extremely pleased with the strong performance of the Group this year and the progress being made positioning the
business as one of the world's leading independent entertainment companies. Growth is anticipated to continue in the
current financial year underpinned by a strong slate of film releases and television productions. We are optimistic that
the move to the Main Market of the London Stock Exchange will enable the Group to further enhance shareholder value."
1 Underlying EBITDA is earnings before operating one-off items, share-based payment charges, interest, tax, depreciation and amortisation of intangible assets. Underlying EBITDA is reconciled to Operating Profit in the 'Other Financial Information' section of this preliminary announcement.
2 Adjusted diluted earnings per share are adjusted for operating one-off items, share-based payments, amortisation of acquired intangible assets and one-off items within net finance costs.
3 Adjusted net debt includes net borrowings under the Group's senior debt facility and exchangeable notes.
For further information, please contact:
Redleaf CommunicationsEmma Kane / Rebecca Sanders-HewittTel: +44 (0)20 7566 6700
Email: eone@redleafpr.com
Entertainment One Darren Throop (CEO) Tel: +1 (416) 979 0912 Email: dthroop@e1ent.com Giles Willits (CFO) Tel: +44 (0)20 7907 3783Email: gwillits@e1ent.com
Singer Capital Markets Limited (Nomad and Joint Broker)James Maxwell / Richard Savage Tel: +44 (0)20 3205 7500 Cenkos Securities PLC(Joint Broker)Stephen Keys / Alex AylenTel: +44 (0)20 7397 8926
A presentation to analysts will take place on Tuesday 25 May at 9.30am at:
Redleaf Communications, 11-33 St John Street, London EC1M 4AA.
Cautionary Statement
This Preliminary Announcement contains certain forward-looking statements with respect to the financial condition, results,
operations and businesses of Entertainment One Ltd. These statements and forecasts involve risk and uncertainty because
they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could
cause actual results or developments to differ materially from those expressed or implied by these forward-looking
statements and forecasts. Nothing in this Preliminary Announcement should be construed as a profit forecast.
A copy of this Preliminary Announcement for the year ended 31 March 2010 can be found on our website at
www.entertainmentonegroup.com. Copies of the Annual Report for the year ended 31 March 2010 will be available to
shareholders shortly.
BUSINESS PERFORMANCE AND FINANCIAL REVIEW, YEAR ENDED 31 MARCH 2010
OVERVIEW
The financial year to 31 March 2010 saw the Group's content investment strategy delivering strong earnings growth and
positive free cashflow. Since listing on AIM in 2007 the Group has invested £140 million in content rights, transforming
the financial profile of the Group with Film and Television now representing 50% of revenue and 69% of underlying EBITDA in
the year to 31 March 2010.
Entertainment One's Film business success continued with 123 theatrical releases including The Imaginarium of Dr Parnassus,
Astroboy and The Twilight Saga: New Moon which delivered a record-breaking box office performance on its opening weekend.
The business is now established as the number one or number two independent distributor in each of its three core
territories.
The Group also continued to develop its footprint, expanding into Australia, New Zealand and France through partnership
deals with local independent distributors, extending the Group's market reach for its growing catalogue.
The continued investment in content rights helped underpin the Group's independent library valuation which increased from
US$175 million to US$220 million. Library revenues represented 28% of Film revenues in the year to 31 March 2010.
The Television business continued to expand both its production slate and the scale of its productions delivering 213 half
hours of programming including the new network series Rookie Blue and The Bridge. The business continues to win new
commissions including second series of Call Me Fitz and Hung while new drama series Haven, based on a novella by Stephen
King, is expected to premiere in the US and Canada in July 2010. This strong pipeline will help underpin future success in
the international sales markets.
Within Television, the Kids business had another strong year. Peppa Pig is now the number one girls' pre-school property
in the UK and has generated over £100 million of retail sales through its merchandising and licensing agreements. In
addition Ben & Holly's Little Kingdom, which launched on Nick Jr in April 2009, won a BAFTA for Best Pre-School Animation
and is already being broadcast in more than 70 countries.
Digital continues to represent a growing part of the business, generating almost £20 million in revenues in the year to 31
March 2010. The Group continues to embrace the exciting opportunities this channel to market has to offer and during the
year enhanced its service infrastructure and signed the first multi-territory independent film distributor deal with
iTunes. These initiatives provide a solid base from which the business will benefit as this segment of the market grows.
The Distribution business in North America performed well. The Canadian operation continues to win new business and
increase market share, while the US business grew through increased video and digital volume.
During the year the Group extended its financing facility and at 31 March 2010 (based on prevailing exchange rates) had
facilities available of US$177 million with US$58 million of headroom on its drawdown position at the year end. In
addition in January 2010 the Company raised £10.3m of equity to repurchase 74% of its exchangeable notes debt at a
significant discount for £9.0 million. As a result of the repurchase and the positive free cashflow, adjusted net debt was
down year on year resulting in a reduction in adjusted net debt leverage to 1.8 times underlying EBITDA (2009: 3.2 times).
In March the Company announced the proposed move of the Group's listing from AIM to the Main Market of the London Stock
Exchange and expects this to complete during July 2010. At the same time the Group plans to simplify the corporate
structure, and re-domicile to Canada from the Cayman Islands. The Directors believe that these steps will give the Group a
higher profile, increase liquidity and enhance the Group's reach to a wider range of investors, providing a platform for
future growth and improved shareholder value.
OUTLOOK
Looking forward, the Group remains optimistic about its expected performance in the forthcoming year. The Film business has
a strong slate of releases planned, and the Television business continues to grow its programme pipeline and successfully
build the profile of the Group internationally. Distribution continues to perform to plan.
Over the last three years the Group has established itself as a leading independent entertainment content and distribution
business and continues to target corporate acquisition opportunities and partnerships to extend its operations while
reviewing opportunities for consolidation in existing markets.
STRATEGY
The Group's strategy is based on the ownership and control of entertainment rights for exploitation across all media
channels. It is the Group's intention to continue to pursue its strategy through investing in organic growth and seeking
opportunities to increase its scale through corporate activity.
The Group's Film business offers independent film producers an alternative to the major studios' model, while enabling
Entertainment One to build competitive advantage in the market and deliver improved cost efficiency at a lower risk. With
a large portfolio of theatrical releases each year the Group manages the risk associated with any one title. Moving
forward, the business will grow the number of films it distributes by enhancing relationships with current production
partners as well as expanding the list of independent producers from which it acquires film rights. While leveraging its
established capabilities in its current markets, the business will also look to expand its multi-territory distribution
infrastructure.
Television diversifies the Group's revenue across the spectrum of filmed entertainment. With established reach into the
U.S. and international broadcast markets, the Group's television business is well positioned to drive long-term value from
original programming across multiple genres. It typically controls the worldwide rights, across all platforms, to all of
its productions.
In Canada and the U.S., the Distribution division delivers physical and digital content to more than 4,000 retail partners.
Alongside leveraging this network to market the Group's own library of content, the business provides third-party
distribution services to a wide range of content producers including the major Hollywood studios.
CORE MARKETS
The main markets that impact on the Group's businesses are Film and Television. Both markets continue to develop with a
positive outlook.
Film Market
The Film market is split into three key segments: box office, home entertainment (including home video and digital) and
television. In 2009, despite the global economic climate, the market increased by just over 1% to US$107 billion with
strong box office performance and growth in digital channels offsetting a modest decline in home video and television. The
overall market is expected to continue to grow over the next three years.
Global box office had a record year in 2009, generating revenues of US$29.7 billion, up almost 6% on the prior year. This
trend was mirrored in the key markets in which the Group operates. Canada was up 6% year on year, with the UK and Benelux
up 5% and 7% respectively. The performance of an individual title relies not only upon the health of the overall market
but also on the quality of the product and its consumer acceptance. There is, however, a strong relationship between the
box office success of a title and its future sales in the other distribution channels.
Entertainment One's share of box office in its core markets positioned the Group as either number one or number two in each
territory among independent distributors. Box office revenues are expected to continue to grow, supported by an increasing
number of digital screens in cinemas and the continued development of 3D.
The home entertainment market comprises physical media such as DVD and Blu-ray discs as well as digital channels including
internet downloads and 'video on demand'. Success in this channel is driven by the quality of product, consumer acceptance
and box office performance (where a title has previously been released theatrically). The home entertainment market
continues to represent the largest proportion of a film's revenues over the life of a title and as such the dynamics of
this segment of the market are a key driver of the performance of the Group.
The global home entertainment market was worth US$55.1 billion in 2009 compared to US$54.4 billion in 2008, with strong
growth in Blu-ray and digital broadly offsetting a 2.8% decline in the traditional DVD market. This trend is predicted to
continue with the overall market forecast to remain broadly level over the next few years with a similar profile in the
countries in which the Group operates.
Television Market
The Television market is influenced heavily by television broadcasters who derive their revenues from advertising and also
directly from consumers through license fees or subscriptions. These revenues flow into the industry as broadcasters
provide direct financing for new television productions and license content from independent producers and distributors.
The global economic downturn has had an impact on the television industry across the globe, as advertising revenues have
fallen. This has resulted in cuts to broadcaster budgets for the funding of new productions and the acquisition of content
from distributors. There are recent signs of recovery in advertising revenues and as a result broadcasters are expected to
increase expenditure in the future.
The Group's television production business in Canada continues to benefit from a robust production financing environment
supported by Government led financing initiatives. This allows the business to continue to deliver high quality content
while also maintaining the rights to the content in perpetuity. This has enabled the Group to expand its slate of
productions with the major US networks, at a time when the sector has been negatively impacted by an overall market decline
of 4% in 2009. The Television market is forecast to return to growth over the next five years.
SUMMARY FINANCIAL PERFORMANCE
The Group has reported another year of strong growth driven by the increased investment in film and television content over
the last two years. Revenue increased by 30% from £342.6 million to £444.2 million. Adjusting for the effects of currency
and prior year acquisitions, revenue increased by 18%. Reported profit before tax was £6.9 million compared to a loss of
£31.0 million in the prior year. Excluding depreciation, amortisation, share-based payments and one-off items, adjusted
profit before tax was £22.1 million compared to £16.4 million in 2009 and was driven mainly by the growth of the Film
business in the year to 31 March 2010.
Earnings before interest, tax, depreciation, amortisation, share-based payments and one-off items ('underlying EBITDA')
increased strongly, by 36%. Adjusting for exchange translation benefit and prior year acquisitions, underlying EBITDA
increased by 25%. The Group's investment in content and programmes continued to increase and as a result earnings were
depressed due to the accounting requirement to recognise the full cost of Print and Advertising ('P&A') at the point it is
incurred. P&A increased in the year from £40.2 million to £60.1 million.
2010 2009 2009 - Proforma,
Reported(audited) Reported(audited) Constant Currency (unaudited) *
£000 £000 % £000 %
Revenue 444,172 342,643 29.6% 375,642 18.2%
Underlying EBITDA 34,334 25,256 35.9% 27,579 24.5%
Print and Advertising 60,124 40,220 49.5% 43,221 39.1%
Investment in content & programmes 74,663 47,838 56.1% 63,848 16.9%
* Unless otherwise stated, in order to provide like for like comparisons, the discussion of results and analysis of
comparisons to the prior year are on an unaudited constant currency and proforma basis. For the purposes of this analysis
constant currencies have been calculated by retranslating the comparative figures using weighted average exchange rates for
the year to 31 March 2010. The proforma information used for the prior period includes the full year results of the
Television businesses that were acquired in September 2008.
DIVISIONAL REVIEWS
The Group is split into two divisions: Entertainment and Distribution.
ENTERTAINMENT
The Entertainment division comprises the Film and Television businesses.
Film
Film comprises the Group's film operations in the UK, Canada, the US and Benelux. These businesses acquire and exploit
film content through all major channels (theatrical, home entertainment, television and digital). The US film business
focuses mainly on home entertainment, including digital.
Revenue increased by 52% in the year to £208 million due in particular to growth in the UK and in Canada. Despite P&A
spend increasing by 39% to £58.0 million underlying EBITDA more than doubled from £7.7 million to £18.1 million. Investment
in content was £50.6 million as the Group continues to invest in future releases to drive growth.
2010 2009 2009
Film * Reported(audited) Reported(audited) Constant Currency (unaudited)
£000 £000 % £000 %
Revenue 208,112 127,333 63.4% 136,711 52.2%
Underlying EBITDA 18,104 7,054 156.6% 7,721 134.5%
P&A 57,994 39,059 48.5% 41,810 38.7%
Investment in content 50,607 35,918 40.9% 37,820 33.8%
* Results of the UK Kids business are now included within Television and prior year figures in the above table have been
adjusted accordingly.
The Group continues to expand its multi-territory slate and released a number of films in multiple territories in 2009/10.
These included Sorority Row, Bandslam, Astroboy, The Imaginarium of Dr Parnassus and Remember Me. In 2010/11 the
multi-territory slate is expected to continue to grow with cross-border releases of titles including family movie Furry
Vengeance (starring Brendan Fraser and Brooke Shields), romantic comedy Letters to Juliet (Amanda Seyfried, Gael Garcia
Bernal and Vanessa Redgrave) and action thriller Red (Bruce Willis, Morgan Freeman and Helen Mirren).
The business also expanded its international footprint allowing it to release content under the Group's label in Australia,
New Zealand and, just after the year end, in France following agreements with local distributors.
Following on from the success of Twilight in the previous financial year, November 2009 saw the release of the second film
in the Twilight Saga series. The Twilight Saga: New Moon was one of the top 10 grossing films globally in 2009, achieving
box office takings of over $700 million, and broke box office records in both the UK and Canadian markets, where the Group
controls distribution rights. The film was released on DVD in March 2010 and with total sales of almost two million units
in the first month of release is one of the highest selling DVDs in 2010 in both territories. The first of the Twilight
films has achieved over two million DVD sales to date in the UK and almost one million in Canada. The third film in the
five part series, The Twilight Saga: Eclipse, is due for release in June 2010.
In the UK revenue more than doubled in the first full year since the launch of its theatrical business. Ten films were
released theatrically compared to four in the previous year. In addition to the multi-territory films, other successful
releases included the BAFTA award winning and OscarTM nominated film An Education, and the Christmas themed family film
Nativity. Home video was driven by strongly performing series such as Ashes to Ashes, kids DVDs The Gruffalo andPeppa Pig
and film DVDs including Bronson, Damage and Dead Snow.
2010/11 will see another strong slate of theatrical releases. In addition to multi-territory titles, UK releases will
include the comedy The Joneses (starring Demi Moore and David Duchovny), thriller Fair Game (Sean Penn and Naomi Watts),
The Way Back (Colin Farrell, Mark Strong and Saoirse Ronan) and the company's first 3D release The Hole 3D. In addition to
the theatrically released titles, DVD releases will include Streetdance3D, Bodyguards and Assassins and The Tortured.
In Canada revenue increased by over 50% as the business continued to invest to build its catalogue. 59 titles were released
theatrically including Roman Polanski's Ghost Writer and Atom Egoyan's thriller Chloe. The home video business expanded
rapidly, growing revenues by over 70%. In addition to the multi-territory titles, DVD releases included Push, Steven
Soderbergh's Che, Ong Bak 2, Sunshine Cleaning and Universal Soldier - A New Beginning.
Major theatrical releases for 2010/11 include Splice (starring Adrien Brody and Sarah Polley), Tree of Life (Brad Pitt and
Sean Penn), The Killer Inside Me (Jessica Alba, Casey Affleck, Kate Hudson and Bill Pullman) and Barney's Version (Paul
Giamatti, Dustin Hoffman, Minnie Driver and Scott Speedman). DVD releases will include Unthinkable (Samuel L. Jackson and
Michael Sheen), Triage (Colin Farrell and Paz Vega), The Runaways (Kristen Stewart and Dakota Fanning) and Centurion
(starring Michael Fassbender).
In the Benelux revenues were in line with the strong performance in the previous year and the business maintained its
position as the leading independent distributor in the market. Theatrical sales were supported by a strong box office with
the most successful releases including Fame, 17 Again, Edge of Darkness, Paranormal Activity and local titles Terug naar de
Kust and the second in the Sinterklaas (Santa Claus) family film series. Home video revenues were broadly in line with the
prior year while sales to television broadcasters were lower due to the challenging market conditions.
Another strong slate of releases is expected during 2010/11 including Wes Craven's Scream 4 (starring Courteney Cox, David
Arquette and Neve Campbell), thriller Dream House (Daniel Craig, Rachel Weisz and Naomi Watts), dance movie Streetdance 3D
and the third film in the Sinterklaas series.
US video label revenues almost doubled, delivering 104 DVD releases including The Haunted Airman, Night Train, Motherhood,
Baby on Board and Staten Island. Forthcoming releases in 2010 include The Greatest, Love Ranch, Ellery Queen, American
Bandits and a re-release of the classic La Dolce Vita.
Film also incorporates the results of the US music label. Revenue from the US Music label, which represents just over 3%
of the Group's revenues and less than 3% of EBITDA, was down 15% compared to prior year. The lower revenues follow the
decision to reduce investment in music content following the decline in the market in the second half of the previous
financial year. A number of successful releases on the Group's music label included new albums by DJ Khaled, Slim Thug and
Brian McKnight. 2010 will see releases from artists including Jim Jones,Dorrough, Zakk Wylde and Vivian Green.
Television
Television comprises the television production and international sales businesses acquired in September 2008 and, for the
first time, the UK Kids business. On a proforma and constant currency basis, revenue increased by 21% to £43.7 million.
Investment in content was similar to the prior year.
2010 2009 2009 - Proforma,
Television * Reported(audited) Reported(audited) Constant Currency(unaudited)
£000 £000 % £000 %
Revenue 43,707 29,890 46.2% 36,268 20.5%
Underlying EBITDA 8,434 8,657 (2.6%) 8,782 (4.0%)
Investment in content & programmes 24,057 11,920 101.8% 26,028 (7.6%)
* Results of the UK Kids business are now included within the Television business and prior year figures in the above
table have been adjusted accordingly.
Underlying EBITDA was broadly flat despite the higher revenue due mainly to the profile of shows delivered in the year and
an increase in marketing and infrastructure costs to support delivery of the increased television pipeline.
2009/10 saw the delivery of 213 half hours of production compared to 163 in the prior year, including Kids. Major shows
delivered included network police drama series The Bridge and new series of established scripted titles such as Kenny Vs
Spenny and non-scripted titles such as Megabuilders, Re-Vamped, Outlaw Bikers and Party Mamas. A number of shows were
partially delivered at the end of the financial year including 9 out of 13 episodes of Rookie Blue (originally commissioned
under the working title Copper) and 4 episodes of the new crime drama Shattered. HBO comedy Hung premiered to critical
acclaim, becoming the highest rated debut series in the network's history. Three TV films were delivered during the year:
When Love is Not Enough: The Lois Wilson Story, Made and Living Out Loud and three pilots: Men With Broom, Skins and Summer
Camp. The Television business has a growing profile in the international television market and has already succeeded in
selling a number of recent titles to overseas broadcasters in Europe and Latin America.
There are a number of productions currently in the pipeline for delivery in 2010/11 including drama series Haven, based on
a novella by Stephen King, which is expected to premiere in the US and Canada in July, comedy series Call me Fitz (starring
Jason Priestly) and new series of Re-Vamped, Party Mamas and Outlaw Bikers. 2010/11 will also see delivery of the
remaining episodes of Rookie Blue which is scheduled to premiere on ABC and Canwest in June, and Shattered. Recent
commissions include second series of Call me Fitz and Hung, while the pilots of Men With Brooms and Skins have both been
ordered to series. A deal has also been announced to produce a one hour drama series based on John Grisham's bestselling
book The Firm. A number of other series have received development commissions for further scripts and at 31 March 2010
contracted revenues not yet recognised relating to work in progress were £21 million.
The Kids business had another excellent year. In the UK, Ben & Holly's Little Kingdom and Lost & Found both won BAFTA
awards while Peppa Pig, which continues in production, is now the number one girls' pre-school licensed property in the UK.
In Canada a first series was delivered of Majority Rules while a production and development deal was signed to create a
half-hour kids television comedy series based on the legendary rock band KISS. A long-term deal was also agreed with
Canadian kids production company, Amberwood Entertainment, giving the Group worldwide distribution rights to more than 240
half hours of Amberwood's catalogue of titles including The Secret World of Benjamin Bear, Rob the Robot, Hoze Houndz and
Katie and Orbie.
DISTRIBUTION
The Distribution division comprises the Group's physical warehousing and distribution businesses in Canada and the US.
Overall revenue at £231 million was in line with the prior year.
2010 2009 2009
Distribution Reported Reported Constant Currency
(audited) (audited) (unaudited)
£000 £000 % £000 %
Revenue 230,984 212,093 8.9% 231,197 (0.1%)
Underlying EBITDA 13,257 13,376 (0.9%) 14,723 (10.0%)
The Canadian business sells DVDs and other home entertainment products for the Group's own Entertainment division and also
for the major US studios and other third party producers. As a consequence its sales are impacted by the strength of the
overall home entertainment market in Canada. Revenue was broadly in line with the previous year, representing an increase
in market share as the DVD market declined 5% year on year. DVD volumes were 2.5% lower although the impact on the
business was mitigated by increased sales of higher margin Blu-ray discs and games. Vendor Managed Inventory revenues,
where the company retains ownership and management of inventory in certain retail outlets, continued to create incremental
opportunities and sales grew by more than 25% in this area.
The US business distributes DVDs, and other home entertainment products for the Group's in-house video and music labels and
other third parties. In response to the declining US music market and following the successful business restructuring in
early 2009 increasing focus is being placed on growing sales in home video in partnership with the Group's entertainment
division. Home video made up 23% of revenue compared to 14% in the previous year.
GROUP COSTS
Group costs at £4.5m (2009: £3.8m) before one-off items were higher than the prior year mainly due to the corporate
function expanding to support the growth of the Group.
OTHER FINANCIAL INFORMATION
A summary of adjusted financial information is presented in order to provide information to investors and excludes the
following: one-off items, amortisation of acquired intangible assets, share-based payments and non-recurring items within
net finance charges.
Adjusted operating profit increased 37% to £32.1 million (2009: £23.5m) reflecting the growth in underlying EBITDA.
Adjusted profit before tax increased 35% to £22.1 million reflecting the increased operating profit partially offset by
higher finance charges.
Adjusted (audited) Reported (audited)
2010 2009 2010 2009
£000 £000 £000 £000
Underlying EBITDA 34,334 25,256 34,334 25,256
One-off items - - (1,582) (29,677)
Amortisation of intangible assets (199) (49) (17,488) (15,168)
Depreciation (2,019) (1,699) (2,019) (1,699)
Share-based payments - - (2,743) (4,171)
Operating profit / (loss) 32,116 23,508 10,502 (25,459)
Net finance charges (10,033) (7,103) (3,627) (5,550)
Profit / (loss) before tax 22,083 16,405 6,875 (31,009)
Taxation (4,493) (4,530) (321) 578
Profit / (loss) after tax 17,590 11,875 6,554 (30,431)
One-off Items
One-off items totalled £1.6 million and included £0.4 million of initial costs incurred as part of the graduation to the
Main Market of the London Stock Exchange and proposed migration of the Group to Canada. This project is expected to be
completed in July 2010 and is anticipated to cost a further £1.6 million in the 2010/11 financial year. Remaining one-off
items comprise costs incurred in the year relating to completion of projects classified as one-off in the prior year.
Amortisation of Intangible Assets and Depreciation
Amortisation of intangible assets increased from £15.2 million to £17.5 million and depreciation increased by £0.3 million
to £2.0 million primarily reflecting a full year's impact of the Television businesses which were acquired in the prior
year.
Share Options
The share-based payments charge of £2.7 million decreased in line with the vesting profile of the share options. £0.1
million of the charge in the year ended 31 March 2010 relates to options granted in the year while the remainder relates to
options granted following formation of the Group in 2007, the majority of which have now vested. A new three year
incentive plan has been implemented for the Board executives from 1 April 2010.
On 24 May 2010, in association with the ongoing commercial relationship with Summit Entertainment LLC ('Summit'), 2,500,000
warrants were issued to Summit. These warrants are subject to time related vesting criteria.
Net Finance Charges
Reported net finance charges decreased from £5.6 million to £3.6 million.
A number of items impact net finance charges, in particular the impact of buying back 74% of exchangeable notes at a
discount in February 2010, which resulted in a one-off gain of £7.3 million. Other one-off items include movements in the
fair value of financial instruments and, in the prior year, the impact of an extension to the maturity period of the
exchangeable notes. Adjusting for these items net finance charges increased from £7.1 million to £10.0 million. The
increase is due mainly to higher debt balances following the increased investment in content and payments associated with
acquisition of the Television businesses in September 2008. Other factors contributing to the higher charge include £0.8
million higher amortisation of deferred finance charges, due to a full year impact following the refinancing in September
2008, and the absence of £0.7 million foreign exchange gains that were recognised in the prior year.
The weighted average interest cost was 6.3% compared to 7.1% in the prior year, giving a cash interest cover of 6.0 times
underlying EBITDA (2009: 6.3 times).
Tax
The tax charge for the year was £0.3 million (2009: £0.6 million credit) giving an effective tax rate of 4.7% compared to
an effective tax rate of 1.9% in the previous year. The low effective rate arises mainly due to the one-off gain from the
repurchase of exchangeable notes in the year. The rate is also distorted by the impact of non-deductible share-based
payment charges.
On an adjusted basis, excluding one-off items, amortisation of intangible assets, share-based payments and other net
finance items, the effective tax rate was 20% (2009: 28%). This is lower than the average tax rates of the countries in
which the Group operates due to benefits in some jurisdictions from utilising historic tax losses. The adjusted effective
rate is anticipated to increase in future years as these losses are utilised.
Earnings per Share
Reported profit after tax was £6.6 million compared to a loss in the prior year of £30.4 million reflecting the absence of
significant one-off charges in the year to 31 March 2010. Consequently the reported diluted earnings per share was 4.3
pence (2009: loss of 23.2 pence). On an adjusted basis profit after tax was £17.6 million, 48% ahead of the prior year.
The adjusted diluted earnings per share was 11.5 pence (2009: 8.6 pence), up 34%. The number of shares used in the
earnings per share calculations include the weighted impact of 19.5 million shares that were issued in February 2010 in
connection with the repurchase of exchangeable notes.
Cashflow and Financing
The Group's cash balances increased by £5.8 million during the year.
31 March2010£000 31 March2009£000
Net cash from operating activities 85,201 35,851
Investment in content rights and TV programmes (74,663) (47,838)
Purchase of other non-current assets * (1,973) (2,931)
Free cashflow 8,565 (14,918)
Acquisition of subsidiaries (5,916) (8,924)
Net interest paid (5,699) (3,978)
Net proceeds from issue of ordinary shares 10,035 -
Cash paid on repurchase of exchangeable notes (9,000) -
Cash from other financing activities 7,854 21,053
Net increase/(decrease) in cash and cash equivalents 5,839 (6,767)
* Other non-current assets comprise property, plant and equipment and intangible software.
Cash flows from operating activities at £85.2 million were significantly ahead of the previous year reflecting the improved
underlying EBITDA and strong cash generation from the Group's investments made in the last three years. Net working
capital balances were broadly unchanged compared to last year.
The Group invested £74.7 million in content rights and television programmes in the year (2009: £47.8 million) and incurred
cash costs relating to the acquisition of the Television businesses in the prior year of £5.9 million. Investment in
content rights and television programmes is anticipated to continue to increase in the new financial year.
The Group's overall net debt reduced from £89.8 million to £86.1 million as follows:
31 March2010£000 31 March2009£000
Net debt at 31 March b/f (89,795) (47,828)
Movement in cash and cash equivalents 5,839 (6,767)
Net movement in borrowings (7,854) (21,053)
Repurchase of exchangeable notes 15,586 -
Foreign exchange movements (5,534) (2,861)
Other items (4,298) (11,286)
Net debt at 31 March c/f (86,056) (89,795)
The reduction in net debt comprises a decrease in senior net debt of £4.1 million and a decrease in exchangeable notes of
£13.0 million offset by an increase of £13.4 million in net debt arising from investment in the Television Production
business. The net debt balances at 31 March 2010 comprise the following:
£'000 £'000
2010 2009
Cash and other items (excl. Television Production) (17,116) (7,420)
JP Morgan - Senior Revolving Credit Facility 74,703 69,097
Senior Net Debt 57,587 61,677
Exchangeable Notes 5,612 18,642
Adjusted Net Debt 63,199 80,319
Television Production Net Debt 22,857 9,476
86,056 89,795
Adjusted net debt leverage (defined as adjusted net debt divided by underlying EBITDA) reduced significantly during the
year and was 1.8 times at 31 March 2010 compared to 3.2 times in the prior year. The Group continues to expect to reduce
its adjusted net debt leverage in the new financial year.
Senior Net Debt
The Senior Net Debt balance was £57.6 million, down £4.1 million from the previous year end as a result of the strong
performance of the business.
In the first half of the year the Group re-denominated its US Dollar senior credit facility into local currencies and also
expanded its facility by US$7.5 million. In October 2009 the Group further expanded its facility by US$15 million. At 31
March 2010, using prevailing exchange rates, the total available facility was US$177 million. The Group does not
anticipate drawing on these additional amounts but they provide the Group with capital to pursue its strategic objectives
should opportunities become available.
Exchangeable Notes
The exchangeable notes are subordinated to the senior credit facility and do not contain covenants that would result in the
exchangeable notes becoming payable prior to the end of their term in September 2013. Interest on the exchangeable notes
is not payable in cash but accrues and is payable alongside the principal on maturity if the option to convert to equity is
not exercised.
In January 2010 the Company raised £10.3 million of equity to repurchase 74% of the exchangeable notes debt at a discount
for £9.0 million. This resulted in a one-off gain of £7.3 million.
Television Production Net Debt
Television Production net debt increased year on year to £22.9m reflecting the success of the business in growing its
production slate.
The Television Production financing is independent of the Group's senior credit facility and is not secured over all of the
Group's assets. It is attributable to individual production companies within the Television business and represents
shorter-term working capital financing that is arranged and secured on a production-by-production basis.
Financial Position and Going Concern Basis
The Group's net assets increased from £133.2 million at 31 March 2009 to £164.0 million at 31 March 2010. The increase of
£30.8 million was mainly due to the strong trading in the year and impact of the gain on repurchase of exchangeable notes.
The directors acknowledge guidance issued by the Financial Reporting Council relating to going concern. The directors
consider it appropriate to prepare the accounts on a going concern basis, as set out in Note 1 to this preliminary
announcement.
Consolidated Income Statement
For the year ended 31 March 2010
Year ended Year ended
31 March 31 March
2010 2009
Notes £'000 £'000
Revenue 2 444,172 342,643
Cost of sales (341,731) (270,123)
Gross profit 102,441 72,520
Administrative expenses (91,939) (97,979)
Operating profit/(loss) 10,502 (25,459)
Analysed as:
Underlying EBITDA 34,334 25,256
Amortisation of intangible assets (17,488) (15,168)
Depreciation (2,019) (1,699)
Share-based payment charge (2,743) (4,171)
One-off items 3 (1,582) (29,677)
10,502 (25,459)
Finance income 4 7,777 4,866
Finance costs 4 (11,404) (10,416)
Profit/(loss) before tax 6,875 (31,009)
Income tax (charge)/credit 5 (321) 578
Profit/(loss) for the year 6,554 (30,431)
Attributable to:
Equity holders of the parent 6,554 (30,431)
Earnings/(loss) per share
Basic - pence 7 4.6 (23.2)
Diluted - pence 7 4.3 (23.2)
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2010
Year ended Year ended
31 March 31 March
2010 2009
£'000 £'000
Profit/(loss) for the year 6,554 (30,431)
Exchange differences on translation of foreign operations 10,585 21,456
Fair value gains on cash flow hedges 488 -
Tax relating to components of other comprehensive income (123) -
Total comprehensive income/(loss) for the year 17,504 (8,975)
Attributable to:
Equity holders of the parent 17,504 (8,975)
Consolidated Balance Sheet
As at 31 March 2010
31 March 31 March 31 March
2010 2009 2008
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 105,045 99,699 80,681
Investment in programmes 26,014 19,446 4,672
Other intangible assets 77,366 87,397 70,465
Investments 128 471 319
Property, plant and equipment 5,397 6,453 5,031
Other receivables 1,714 1,239 549
Deferred tax assets 2,014 3,245 1,006
Total non-current assets 217,678 217,950 162,723
Current assets
Inventories 47,831 40,137 40,659
Investment in content rights 65,346 47,670 33,899
Trade and other receivables 114,187 75,635 31,585
Current tax assets 704 1,149 -
Other financial assets 488 - -
Cash and cash equivalents 18,557 11,767 16,484
Total current assets 247,113 176,358 122,627
Total assets 464,791 394,308 285,350
Liabilities and equity
Non-current liabilities
Interest bearing loans and borrowings 86,236 87,739 60,339
Provisions - 124 272
Other payables 494 3,076 621
Deferred tax liabilities 10,556 15,953 9,033
Total non-current liabilities 97,286 106,892 70,265
Current liabilities
Trade and other payables 177,582 133,198 83,720
Current tax liabilities 4,865 3,509 303
Interest bearing loans and borrowings 18,377 13,823 3,539
Provisions 492 1,351 907
Other financial liabilities 2,176 2,334 3,038
Total current liabilities 203,492 154,215 91,507
Total liabilities 300,778 261,107 161,772
Equity
Share capital 797 675 587
Share premium 138,268 126,352 126,352
Treasury shares (7,819) (7,819) (7,819)
Other reserves 13,865 14,915 639
Currency translation reserve 38,746 28,161 6,705
Retained earnings (19,844) (29,083) (2,886)
Total equity 164,013 133,201 123,578
Total liabilities and equity 464,791 394,308 285,350
Consolidated Cash Flow Statement
For the year ended 31 March 2010
Year ended Year ended
31 March 31 March
2010 2009
£'000 £'000
Operating activities
Operating profit/(loss) 10,502 (25,459)
Adjustments for:
Depreciation 2,193 1,699
Amortisation of other intangible assets 16,884 14,127
Amortisation of content rights 37,646 21,137
Amortisation of television programmes 18,759 12,066
Foreign exchange movements 138 (267)
Share-based payment charge 2,743 4,171
Impairment - 24,416
(Increase)/decrease in inventories (7,699) 546
Increase in trade and other receivables (29,975) (36,766)
Increase in trade and other payables 38,779 19,976
(Decrease)/increase in provisions (983) 296
Net cash inflow from trading activities 88,987 35,942
Income tax paid (3,786) (91)
Net cash from operating activities 85,201 35,851
Investing activities
Interest received 84 260
Acquisition of subsidiaries (net of cash acquired) (5,916) (8,924)
Investment in content rights (50,875) (37,639)
Investment in television programmes (23,788) (10,199)
Purchases of property, plant and equipment (944) (1,661)
Purchases of intangible software assets (1,029) (1,270)
Net cash used in investing activities (82,468) (59,433)
Financing activities
Proceeds on issue of shares (net of costs) 10,035 -
Increase in interest bearing loans and borrowings 34,264 125,419
Repayment of interest bearing loans and borrowings (43,209) (107,771)
Net drawdown of production financing 7,799 3,405
Interest paid (5,783) (4,238)
Net cash from financing activities 3,106 16,815
Net increase/(decrease) in cash and cash equivalents 5,839 (6,767)
Cash and cash equivalents at beginning of the year 11,767 16,484
Effects of exchange rate fluctuations on cash held 951 2,050
Cash and cash equivalents at end of year 18,557 11,767
Consolidated Statement of Changes in Equity
For the year ended 31 March 2010
Currency
Share Share Treasury Other translation Retained Total
capital premium shares reserves reserve earnings equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Total comprehensive income for the period - - - - 6,705 (8,555) (1,850)
Shares issued during the period 552 123,238 - - - - 123,790
Consideration shares 35 7,833 - - - - 7,868
Share issue costs - (4,719) - - - - (4,719)
Purchase of own shares - - (7,819) - - - (7,819)
Warrants issued during the period - - - 639 - - 639
Share-based payment charge - - - - - 5,669 5,669
At 31 March 2008 587 126,352 (7,819) 639 6,705 (2,886) 123,578
Total comprehensive income for the year - - - - 21,456 (30,431) (8,975)
Shares issued during the year 88 - - 14,276 - - 14,364
Share-based payment charge - - - - - 4,234 4,234
At 31 March 2009 675 126,352 (7,819) 14,915 28,161 (29,083) 133,201
Total comprehensive income for the year - - - 365 10,585 6,554 17,504
Shares issued during the year 122 11,916 - (1,415) - - 10,623
Share-based payment charge - - - - - 2,685 2,685
At 31 March 2010 797 138,268
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