TIDMETO
RNS Number : 9064F
Entertainment One Ltd
23 May 2017
Entertainment One Ltd.
FULL YEAR results
for the YEAR ended 31 MARCH 2017
STRONG REVENUE AND PROFIT GROWTH DRIVEN BY TELEVISION AND
FAMILY, WITH STABLE RESULTS FROM FILM
Financial Highlights
-- Group reported revenue growth +35%; full year total GBP1,083
million (2016: GBP803 million), driven by strong performance in
both Television and Family and stable results in Film
-- Group reported underlying EBITDA growth +24%; full year total
GBP160 million (2016: GBP129 million)
-- Group adjusted profit before tax growth +25%; full year total
GBP130 million (2016: GBP104 million), Group reported profit before
tax GBP37 million (2016: GBP48 million) after one-off items
-- Diluted earnings per share was 3.0 pence per share (20.0
pence per share on an adjusted basis)
-- Net debt leverage reduces from 1.4x for FY16 to 1.2x Group underlying EBITDA for FY17
-- Full year dividend of 1.3 pence (2016: 1.2 pence) declared
Operational Highlights
-- Significant progress on the reshaping of the Film business,
including progress on Fox and Sony partnerships and the
renegotiation of a distribution arrangement with one of our
partners, with associated one-off charges during the year
-- Company structure evolving to underpin future growth with
plans to combine Film and Television Divisions into a single studio
operation, following establishment of a combined global sales team
effective 1 April 2017
-- Independent library valuation increased to US$1.5 billion at
31 March 2016 (2015: >US$1 billion) - does not yet include
benefit of FY17 performance
-- On track to double the size of the business over the five years to FY20
Post-period Highlights
-- Confirmation of a new series of Peppa Pig, with 117 episodes
to air over four years from Spring 2019
-- Launch of MAKEREADY, a global content creation company with industry veteran Brad Weston
-- Appointment of Joe Sparacio as Chief Financial Officer
COMMENTING ON THE RESULTS, ALLAN LEIGHTON, CHAIRMAN, SAID:
"Entertainment One has delivered a strong trading performance
for the year, with very pleasing revenue growth from Television and
Family, and another year of growth in underlying EBITDA. It is
particularly noteworthy that this performance includes significant
organic growth and has been delivered against a backdrop of a
recovering Film business after two years of market volatility. This
robust set of results allows the Board to increase the dividend for
the year to 1.3 pence, in line with its progressive policy."
Darren Throop, Chief Executive, commented:
"It has been another exciting year for the Group, and I am
pleased to be reporting another strong set of financial results.
The work undertaken during the year keeps us at the centre of the
positive structural change ongoing in the industry, and is in line
with the source, select, sell strategy which continues to serve
eOne so well, underpinning our growth trajectory.
The Television and Family Divisions have performed extremely
well this year, both with double-digit growth in sales and
continuing to build momentum for the future. Particular highlights
include The Mark Gordon Company illustrating its strength in
creative content production with the success of internationally
acclaimed Designated Survivor, as well as the very successful
rollout of the licensing programme for newcomer PJ Masks, which
supported another stellar year for Peppa Pig.
Film delivered a stable set of financial results with underlying
EBITDA in line with the prior year. The continued reshaping of the
Division, where initiatives undertaken included integrating our
physical distribution partnerships with Fox and Sony, and the
refocussing of our film distribution arrangements, has positioned
us well to retain our strong position catering to a changing global
film market.
The Company is in an excellent position to continue to thrive
going forward. Joe Sparacio has been permanently appointed, we are
focusing on ensuring the business is best placed to maximise return
on investment, and our significantly increased library valuation
clearly demonstrates the enduring value of premium content in a
constantly-evolving entertainment market. We are on track to
deliver our growth target of doubling the size of the business in
the five years to FY20."
FINANCIAL SUMMARY
Reported
======================
GBPm (unless specified) 2017 2016 Change
=================================== ======= ===== ======
Revenues 1,082.7 802.7 35%
Underlying EBITDA (1) 160.2 129.1 24%
Net cash from operating activities 34.0 69.3 (51%)
Investment in acquired content
and productions(2) 407.9 218.5 87%
Reported Adjusted
================== ====================
GBPm (unless specified) 2017 2016 Change 2017 2016 Change
=========================== ==== ==== ====== ===== ===== ======
Profit before tax (3) 37.2 47.9 (22%) 129.9 104.1 25%
Diluted earnings per share
(pence) (3) 3.0 9.6 (69%) 20.0 19.4 3%
--------------------------- ---- ---- ------ ----- ----- ------
1 Underlying EBITDA is operating profit before one-off items,
amortisation of acquired intangibles, depreciation and amortisation
of software, share-based payment charge, tax, finance costs and
depreciation related to joint ventures. Underlying EBITDA is
reconciled to operating profit in the "Other Financial Information"
section of this Results Announcement.
2 Investment in acquired content and productions is the sum of
"investment in productions, net of grants received" and "investment
in acquired content rights", as shown in the consolidated cash flow
statement.
3 Adjusted profit before tax is the reported measure before
amortisation of acquired intangibles, share-based payment charge,
tax, finance costs and depreciation related to joint ventures,
operating one-off items and finance one-off items. Adjusted diluted
earnings is adjusted for the tax effect of these items and other
one-off tax items.
Group reported revenues were 35% higher at GBP1,082.7 million
(2016: GBP802.7 million), driven by strong growth in Television
(85% higher), Family (33% higher) and stable financial results in
Film. Acquisitions completed during the year contributed GBP50.2
million to Group reported revenues. On a constant currency basis
(re-translating prior year reported financials at current year
foreign exchange rates), Group revenue growth was 20.5% higher,
reflecting the impact of the weaker pound sterling against the US
dollar, Canadian dollar, Australian dollar and euro during the
year.
Group reported underlying EBITDA was 24% higher at GBP160.2
million (2016: GBP129.1 million), driven by strong growth in
Television (60% higher), Family (28% higher) and stable financial
results in Film. Television Division underlying EBITDA was higher
across eOne Television (+36%), The Mark Gordon Company (+82%) and
Music (+185%). The Family Division saw excellent growth driven by
the continuing strong performance of Peppa Pig and a strong
contribution from the initial rollout of the licensing programme
for PJ Masks. Underlying EBITDA in Film was flat with a strong year
for theatrical revenues offset by the expected continued decline in
physical home entertainment.
On a constant currency basis, Group underlying EBITDA would have
increased by 14.5%, reflecting the impact of the weaker pound
sterling against the US dollar, Canadian dollar, Australian dollar
and euro during the year. Acquisitions completed during the
financial year contributed GBP1.0 million to Group underlying
EBITDA.
Net cash from operating activities amounted to GBP34.0 million
in comparison to GBP69.3 million, driven by higher investment in
content and productions, which not only supports our current
operations but also drives growth in the value of our content
library. Net leverage remains low at 1.2x Group underlying
EBITDA.
Adjusted profit before tax for the year was GBP129.9 million
(2016: GBP104.1 million), due to the increase in underlying EBITDA,
partly offset by higher interest costs. Reported profit before tax
for the year was GBP37.2 million (2016: GBP47.9 million), impacted
by previously announced one-off charges mainly in relation to the
reshaping of the Film business and higher amortisation of acquired
intangibles, partly offset by lower one-off finance costs.
Adjusted diluted earnings per share were 20.0 pence (2016: 19.4
pence). On a reported basis, diluted earnings per share were 3.0
pence (2016: 9.6 pence), impacted by higher one-off charges and
amortisation of acquired intangibles from the full year impact of
prior year acquisitions.
STRATEGY
The growth in the market for content rights is underpinned by
changes in the way content is being consumed. Entertainment One's
strategy to focus on growth through content ownership puts it at
the centre of this positive structural change.
Business model
The Group's business model remains unchanged. We continue to
build the scale of the business by focusing on the Group's three
key capabilities:
Source: Developing relationships with the best creative talent
in the film and television industries by being their partner of
choice, reflecting the quality of our people and our global
distribution capabilities
Select: Leveraging local market insight from our independent
sales network to invest in the right content for consumers across
all eOne territories, and producing content with global appeal to
service the Group's global sales operations
Sell: Using the Group's infrastructure, sales operations and
global scale to maximise investment returns, ensuring the business
is well-positioned to benefit from new and emerging broadcast and
digital distribution platforms
The Board continues to see significant opportunity for further
growth and to target doubling the size of the business over the
five years to FY20 through its strategy of:
- Developing more relationships and partnerships with top
producers and talent to increase the volume and quality of
production and content ownership
- Building the world's leading independent content rights sales
business to maximise the return on investment
The strategy focuses on building a more balanced content and
brand business which will see strong revenue and EBITDA growth in
Television and Family, while Film continues to focus on delivering
an improving investment return through a consistently high-quality
release slate and further efficiency savings.
Operationally, as well as developing a digital future across the
Group, the strategy targets our Divisions to deliver specific
drivers of growth:
Television: Building a global production and content business
and a world-class television sales network
Family: Creating everlasting childhood memories for our audience
by carefully selecting, crafting and nurturing the very best
content into global brands
Film: Developing partnerships with premium film-makers and
maximising scale and efficiency in independent film
distribution
As well as having delivered strong operational and financial
results, the Group continues to deliver strong progress against the
strategy, including:
-- Positioning the organisation for growth with the creation of
a new global Film and Television sales team and planned integration
of the Film and Television Divisions into a combined studio -
consistent with this, the Group is considering how best to report
the combined operations on a go-forward basis
-- Delivering a significant increase in the independent FY16
valuation of the Group's content library to US$1.5 billion (2015:
>US$1 billion), demonstrating the enduring value of premium
content in a constantly-evolving entertainment market, not yet
reflecting the contribution from a strong FY17
-- Completing another successful year under The Mark Gordon
Company's independent studio model with underlying EBITDA higher by
82% and Designated Survivor recently announced for a second season
and multiple projects in development
-- Ongoing delivery of season 4 of Peppa Pig and an additional
117 episodes of Peppa Pig going into production to ensure a
continuous flow of new programming content to support the longevity
of the brand from a licensing perspective
-- Reporting strong results from Peppa Pig in strategically
important markets (maturing into an evergreen property), with
further growth opportunities in the US, China, South East Asia,
France and Canada
-- Following a successful broadcast launch for PJ Masks with a
very well received licensing programme (initially in the US, with
further international expansion in the coming year), with season
two in production and season three already in development
-- Moving into production on two further Family properties
(Ricky Zoom and Cupcake and Dino: General Services), with a
development pipeline focusing on brands with truly global,
long-lasting potential
-- Announcing new ventures with top creative talent, including
the launch of MAKEREADY with Brad Weston
-- Continued reshaping of the Film Division through our physical
distribution partnerships with Fox and Sony, allowing eOne to exit
its own physical distribution activities, and focus on digital
exploitation
-- Continuing realignment of our film slate, including the
renegotiation of a larger distribution arrangement
-- Announcement of a new multi-year film and television
partnership with Megan Ellison's Annapurna Pictures
-- Bringing Secret Location fully in-house to focus on
innovation and content for emerging platforms
FY18 OUTLOOK
The Divisional Operational and Financial Reviews below include
further details on the Company's strategy and progress made during
the financial year.
In summary:
The Television Division is expected to see continued organic
growth for FY18, with investment in acquired content for eOne
Television expected to increase to over GBP40 million and
production spend expected to grow to over GBP170 million.
Investment in productions for The Mark Gordon Company is expected
to decrease to around GBP80 million.
Peppa Pig and PJ Masks to continue to be the drivers of growth
for the Family business in FY18. Revenue and EBITDA are expected to
grow significantly, but underlying EBITDA margins for Family are
anticipated to decline in percentage terms, a mix effect caused by
the increased contribution from PJ Masks which accrues a higher
level of third party participation royalties than Peppa Pig, as
well as an increased investment in overhead of around GBP2 million
necessary to grow the sales platform in our various
territories.
The Group to continue to reshape the Film business over the
coming years as it adapts to the changing global film market. eOne
to focus on continued access to high quality premium content and on
building deep partnerships with high quality film producers where
eOne has more control over the content. Investment in acquired
content is expected to increase to GBP150 million. Investment in
productions is expected to be higher than the current year at over
GBP50 million. As part of this programme, eOne to focus on
producing and sourcing a reduced slate of premium films, with
rights controlled on a global basis.
From an efficiency perspective, the Group to continue to review
opportunities to streamline its operations. The combined global
sales team is expected to lead to a more focused approach to the
sale of television and film content in windows outside of
theatrical release, while creation of a combined Film and
Television studio operation will also provide opportunities to
create more efficient functions across both front and back
offices.
DIVISIONAL OPERATIONAL & FINANCIAL REVIEW
Television
The Television Division comprises eOne Television, The Mark
Gordon Company and the Group's Music operation. It also
incorporates the operations of Secret Location, the Group's digital
content studio, which has been under full ownership since the Group
acquired the remaining 50% stake in the business in August 2016.
The Division's focus is on the development and production of high
quality television programming and the acquisition of the best
third party television content rights, for sale to broadcasters and
digital platforms globally.
GBPm 2017 2016 Change
--------------------------- ------ ------ -------
Revenue 452.7 244.7 85%
Underlying EBITDA 62.8 39.2 60%
Investment in acquired
content 37.3 21.6 73%
Investment in productions 222.9 80.9 176%
---------------------------- ------ ------ -------
Revenues for the year were 85% higher at GBP452.7 million (2016:
GBP244.7 million), driven by new production revenue in The Mark
Gordon Company, continued growth in eOne Television and the full
year impact of the prior year acquisitions of Renegade 83, Dualtone
Music Group and Last Gang Entertainment. Television revenue is
calculated net of intra-segment eliminations of GBP49.5 million
between eOne Television, The Mark Gordon Company and Music. The
financial tables below are presented gross of eliminations, in line
with eOne's management of the business.
Underlying EBITDA increased by 60% to GBP62.8 million (2016:
GBP39.2 million), driven by higher revenues. Underlying EBITDA
margin decreased by 2.1pts to 13.9% (2016: 16.0%), driven by
changes in the mix of revenues.
eOne Television
GBPm 2017 2016 Change
--------------------------- ------ ------ -------
Revenue 328.2 187.9 75%
Underlying EBITDA 30.9 22.8 36%
Investment in acquired
content 34.1 18.5 84%
Investment in productions 121.4 73.3 66%
---------------------------- ------ ------ -------
Revenues for the year increased 75% to GBP328.2 million (2016:
GBP187.9 million), driven by higher global sales of content,
international distribution sales for productions delivered by The
Mark Gordon Company and the full year impact of the Renegade 83
acquisition. Underlying EBITDA increased by 36% to GBP30.9 million
(2016: GBP22.8 million), driven by revenue growth. The underlying
EBITDA margin percentage was lower than the prior year due to a
stronger performance from lower risk/lower margin acquired content
shows and higher budgets on own-produced shows.
Investment in acquired content and productions was higher than
prior year at GBP155.5 million (2016: GBP91.8 million), driven by
the impact of the Renegade 83 acquisition, increased budgets on
own-produced shows and increased investment in AMC/Sundance shows.
1,023 half hours of new programming were produced/acquired in the
year compared to 998 half hours in the prior year, with an
increased mix of higher revenue shows. The business continues to
maintain a steady pipeline of productions as new show commissions
replace long-running series that have come to an end.
Key scripted deliveries included seasons one and two of Private
Eyes, which was the number one drama in Canada for the first
episode premiere night, season one of Ice and Cardinal, season four
of Rogue, season five of Saving Hope, and season two of You Me Her.
Other deliveries in the financial year included Ransom and Mary
Kills People.
Key content acquisitions for the year included season two of
Fear the Walking Dead with The Walking Dead maintaining its high
viewership and ratings. AMC titles Halt and Catch Fire, Turn, Hap
& Leonard and Into the Badlands continued to support revenues.
International sales for Designated Survivor were very strong,
including a worldwide streaming rights deal with Netflix outside
North America, and are expected to continue to grow over time.
The unscripted business included the impact of the Renegade 83
acquisition with deliveries of Naked and Afraid and Naked and
Afraid XL which is Discovery's number one Sunday night show. The US
reality business delivered fewer shows after a very strong FY16;
Growing Up Hip Hop continues to perform well and the new financial
year has started strongly.
During the year, the Paperny Entertainment and Force Four
Entertainment businesses in Vancouver were amalgamated and now
operate as one Canadian unscripted business to take advantage of
synergies whilst continuing to support eOne Television's goal of
building a world-class portfolio of content across all genres for
global exploitation. This amalgamation led to one-off charges of
GBP2.6 million in the year, with annualised overhead savings of
GBP1.1 million expected to be achieved going forward.
2018 Outlook for eOne Television
eOne Television is expected to see continued organic growth for
FY18.
The new financial year will see a number of current scripted
shows going into second seasons including Ice, Cardinal and Private
Eyes, season three of You Me Her and a number of new series
including The Detail, Burden of Proof and a number of other shows
waiting to be greenlit. Production has commenced on Sharp Objects,
starring Amy Adams, while the US unscripted pipeline is expected to
grow significantly in the new financial year.
For third party global sales, AMC titles including Halt &
Catch Fire, Turn, Hap & Leonard and Into the Badlands will
continue into new seasons. International sales for Fear the Walking
Dead and The Walking Dead are expected to continue at their
existing robust levels, and sales on titles from The Mark Gordon
Company are expected to increase year-on-year.
The number of half hours of programming expected to be
acquired/produced next year is expected to be around 1,000, with
over 60% of the new financial year's budget by value already
committed or greenlit. Investment in acquired content is expected
to increase to over GBP40 million and production spend is expected
to grow to over GBP170 million.
Secret Location, eOne's digital studio, currently has a number
of projects for different platforms underway, focusing on the
fast-growing virtual reality industry. VUSR, a virtual reality
content distribution platform, its biggest project in development,
has already seen commitments from a number of large media companies
including Amazon, The New York Times, CBC and Frontline. Although
still in its early stages, the business has received a number of
accolades for its innovation in the digital and virtual reality
arena including a Peabody Award in conjunction with Frontline for
Ebola Outbreak: A 360 Virtual Journey, two Webby awards for "Best
Use of Interactive Video" and "VR: Cinematic or Pre-Rendered", and
has been nominated for numerous other industry awards.
To fully leverage eOne's scale in the market and to meet the
needs of its partners and customers, the TV sales force for eOne
Television and Film has been combined into a global sales team from
1 April 2017. This is expected to lead to a more streamlined
approach to the sale of television and film content in windows
outside of theatrical release. We expect this change in structure
to yield increased revenue and profitability benefits from FY18
onwards.
The MArK Gordon company (MGC)
GBPm 2017 2016 Change
--------------------------- ------ ------ -------
Revenue 119.9 14.6 721%
Underlying EBITDA 26.2 14.4 82%
Investment in productions 101.5 7.6 1236%
---------------------------- ------ ------ -------
Revenues for the year were up 721% to GBP119.9 million (2016:
GBP14.6 million), driven by deliveries of the two productions under
the new independent studio model, Designated Survivor, ordered for
a second season, and Conviction. Underlying EBITDA increased 82% to
GBP26.2 million (2016: GBP14.4 million). Underlying profitability
in the prior year benefitted by GBP3.5 million relating to the 2015
financial year, following the full consolidation of MGC in May 2015
and its alignment with Group accounting policies. On a
like-for-like basis, underlying EBITDA for MGC was GBP15.3 million
or 140% higher.
Investment in productions increased to GBP101.5 million (2016:
GBP7.6 million) driven by investment in Designated Survivor,
Conviction and Molly's Game. Consistent with all eOne Group
television productions, the amount of investment in production does
not represent the Group's investment capital at risk, as the
significant majority of production investment risk is mitigated
through commitments received prior to greenlighting from
commissioning broadcasters and government subsidies to reduce the
Group's exposure to around 15%-20% of the investment in production
budget.
MGC has seen an increase in revenue growth year-on-year, mainly
driven by delivery of Designated Survivor and Conviction. 56 half
hours of programming were delivered during the year, including 13
episodes of Conviction and 15 episodes of Designated Survivor (from
a total of 21 episodes for season one). Designated Survivor
premiered strongly on ABC and continues to be one of the
broadcaster's most watched dramas amongst its target demographics,
beating other fan-favourites like Grey's Anatomy and Once Upon a
Time. So far, in its first season it has been recognised as TV
Guide's "Most Exciting TV Series" and the Critics' Choice "Most
Exciting New Series" and has been nominated for the People's Choice
"Favourite New TV Drama" and "Favourite Actor in a TV Series".
The studio continues to benefit from its library of television
and film titles, with relatively high margins favourably
contributing to the bottom line and cash generation. In addition,
MGC currently has five series airing on both US network and premium
cable, all with continued strong viewership including Criminal
Minds (now in season twelve and renewed for season thirteen),
Criminal Minds: Beyond Borders (now in season two), Grey's Anatomy
(now in season thirteen and renewed for season fourteen), Ray
Donovan (now in season four and renewed for season five), and
Quantico (now in season two renewed for season three), as well as
three film projects where producer fees are earned.
2018 Outlook for MGC
The Mark Gordon Company independent studio model will continue
to ramp-up and gain traction. The strong ratings for Designated
Survivor have resulted in the recent announcement of a renewal for
a second season of the show with ABC. In addition to existing TV
programmes, The Mark Gordon Company has numerous television and
film projects under development including a pilot already ordered
by Amazon, with production set to start early in FY18. Film
projects include Molly's Game, The Nutcracker and the Four Realms
and Murder on the Orient Express which have all completed principal
photography, and a number of other titles are in various stages of
development and pre-production including Chronicles of Narnia: The
Silver Chair, The Killer, All the Old Knives and Arc of
Justice.
Over 80% of the new financial year's budget by value is already
greenlit/contracted. Investment in productions in FY18 is expected
to decrease to around GBP80 million. Half hours delivered are
anticipated to increase to around 75 based on the current business
plan for FY18.
Music
GBPm 2017 2016 Change
------------------------ ----- ----- -------
Revenue 54.1 42.2 28%
Underlying EBITDA 5.7 2.0 185%
Investment in acquired
content 3.2 3.1 3%
------------------------- ----- ----- -------
Revenues for the year increased by 28% to GBP54.1 million (2016:
GBP42.2 million), driven by a strong Urban release slate and the
full year impact of the acquisitions of Dualtone Music Group and
Last Gang Entertainment. Underlying EBITDA increased 185% to GBP5.7
million (2016: GBP2.0 million) and EBITDA margin increased by 6pts,
driven by an increasing mix of higher margin digital revenues and
cost savings in the business.
The physical distribution business has experienced an expected
decline driven by the changing market, as consumer appetite shifts
from physical to digital media. To address this dynamic, eOne has
concluded a multi-year distribution partnership with ADA, a member
of Warner Music Group, which will handle all physical sales and
distribution in the US and Canada for Music. This has allowed the
Music business to exit its own US distribution facility and focus
on higher margin digital distribution. The Group's independent
label experienced year-on-year growth from its Urban releases and
library catalogue. Dualtone Music Group, acquired in FY16, released
Cleopatra, the highly anticipated second album from The Lumineers,
which reached number one on the US Billboard 200 within a week of
its release and made a significant revenue contribution.
During the year, Music also entered into a venture with Nerve
and Hardlivings, the artist management company behind British dance
music successes Riton, TIEKS and Jax Jones. Since its release in
December 2016, You Don't Know Me, by Jax Jones, has sold nearly two
million copies worldwide, reached number three on the UK official
charts and been streamed more than 150 million times on Spotify,
demonstrating Music's developing international artist management
capabilities.
The number of albums released in the year was higher at 79,
versus 64 in the prior year, and digital singles released increased
to 206, compared to 108 in the prior year, mainly driven by full
year impact of the acquisitions of Dualtone Music Group and Last
Gang Entertainment.
2018 Outlook for Music
Music will continue to build on its existing label business by
investing in profitable content and improving margins through cost
savings and a continued transition to higher margin digital
revenues. The Group will continue to develop the initiatives
launched in the current financial year to reposition eOne Music as
a worldwide brand and to grow the music publishing business.
As a result, the Group expects to see continued improvement in
the profitability of the Music business from FY18 onwards.
Family
The Family business develops, produces and distributes a
portfolio of children's properties on a worldwide basis, the
principal brand being Peppa Pig, with much of its revenue generated
through licensing and merchandising programmes across multiple
retail categories. In addition to managing the growth of Peppa Pig,
the Family business also manages and distributes a balanced
portfolio of complementary family brands including the new property
PJ Masks.
GBPm 2017 2016 Change
--------------------------- ----- ----- -------
Revenue 88.6 66.6 33%
Underlying EBITDA 55.6 43.3 28%
Investment in acquired
content 0.9 1.6 (44%)
Investment in productions 4.2 4.2 0%
---------------------------- ----- ----- -------
Revenues for the year were up 33% to GBP88.6 million (2016:
GBP66.6 million), driven by the continuing strong performance of
Peppa Pig, accelerated growth from new property PJ Masks and
contributions from other properties including delivery of Winston
Steinburger and Sir Dudley Ding Dong.
Underlying EBITDA increased 28% to GBP55.6 million (2016:
GBP43.3 million), driven by increased revenues. The underlying
EBITDA margin was marginally lower reflecting the revenue mix from
different properties.
Investment in acquired content and productions of GBP5.1 million
(2015: GBP5.8 million) was broadly in line with prior year.
Investment spend in the year included season four of Peppa Pig,
season two of PJ Masks and new productions Winston Steinburger and
Sir Dudley Ding Dong and Cupcake & Dino: General Services.
The Family business continued to perform strongly with the
ongoing success of Peppa Pig and growing portfolio of brands
including PJ Masks which has delivered a hugely successful first
season. The business generated US$1.5 billion of retail sales in
FY17 (over 25% higher than FY16) and almost 800 new and renewed
broadcast and licensing agreements were concluded in the year. The
business ended the year with almost 1,100 live licensing and
merchandising contracts across its portfolio of brands, an increase
of 28% from prior year.
Peppa Pig continued to grow with total retail sales of US$1.2
billion (2016: US$1.1 billion) and licensing and merchandising
revenue of GBP45.7 million (2016: GBP39.4 million). It remains one
of the leading pre-school brands in key territories such as the US
and the UK. The financial performance in the year was driven by the
growth in the US where licensing and merchandising revenue
increased by over 170%, following the successful wide licensing
programme launch before the Christmas period, which now makes the
US the number one licensing territory for Peppa Pig. The brand
remains a top brand in toddler apparel at Target and Kohls with
strong sell-through across the toys and clothing ranges at Walmart.
This success is backed up by strong broadcast support from Nick Jr,
where it remains a top-rated show on the channel for children
between 2-5 years old.
Since debuting in 2016 in China, the second largest licensing
market globally after the US, Peppa Pig's licensing and
merchandising revenue has increased significantly year-on-year. The
brand has solidified its position and reputation in the region and
was recently awarded "Best New Property" at the prestigious Asia
Licensing Awards in January 2017. Peppa Pig resonates well on
traditional broadcast television as well as local on-demand
platforms; surpassing 24 billion views across a roster of on-demand
platforms that includes iQiyi, Youku, Tencent and LeEco since
launch. This continued growth in China and across South East Asia
remains a key growth driver for the brand.
In the UK, the property is still considered to be an "evergreen"
brand amongst retailers and ratings on Nick Jr and Five remain
strong, with the territory remaining a key market for Peppa Pig.
The UK is a mature market along with other territories such as
Australia, Italy and Spain where the aim is to maintain a
market-leading position and generate steady revenues. The continued
roll-out of Peppa Pig into emerging territories such as France,
Russia and Latin America are showing positive results with Peppa
Pig maintaining its position as the top-rated programme on state
broadcasters France 4 and France 5.
PJ Masks has been a key driver of revenue growth for the
business in FY17 with revenue increasing over 500% year-on-year
from GBP2.2 million to GBP13.5 million. After the US broadcast
launch of PJ Masks in September 2015, season one (52 episodes) has
now been broadcast in over 85 territories across the global Disney
Junior network and France TV in France to excellent ratings. The
programme was viewed by more than 32 million individuals on Disney
Junior in the first calendar quarter of 2017 alone.
The licensing programme for the brand started in September 2016
in the US as a Toys R Us exclusive and widened to other retailers
in late December 2016 due to strong demand and positive retail
feedback. Following the successful US rollout, the licensing
programme continued to expand to the UK, France and Spain in
February 2017 and, building on this momentum, agents are being
signed across Europe, China, Latin America and Russia. Driven by
positive television ratings and a strong licensing programme,
physical home entertainment and digital revenue has also grown
year-on-year and this growth is expected to continue as new seasons
of programming are broadcast.
Following the success of the first season of PJ Masks, a second
season has been greenlit and is currently in production with
delivery expected to commence in FY19, and season three is also in
development.
The business continues to build on and expand its current
portfolio of brands by forming relationships with creative partners
and exploring different platforms through which it can monetise its
brands. Production on Winston Steinburger and Sir Dudley Ding Dong
was completed during the year and broadcast on Teletoon in Canada
and ABC in Australia, with TV rights already sold in a number EMEA
countries.
The Group is also in production on a number of other properties,
including: Ricky Zoom, a preschool vehicle-based series of 52
episodes from the same creative team as hit series PJ Masks with
major broadcasters attached in France, Italy, and Latin America and
a master toy arrangement currently in the final stages of
negotiation; and Cupcake & Dino: General Services, a high
profile 52 episodes comedy series which is in full production with
a global subscription video on demand platform and major Canadian
and Latin American channels committed. Family's ground-breaking
theatrical title Peppa Pig: My First Cinema Experience featuring
new interstitial content and never-before-seen episodes from season
four was released widely in the UK and Australia in April 2017,
taking almost GBP3.5 million at the UK box office to-date.
The business is continuing to explore and is seeing growth
potential in other platforms including mobile applications, live
shows and experiential events to engage the consumer in new
ways.
2018 Outlook for Family
Peppa Pig and PJ Masks will continue to be the drivers of growth
for the Family business in FY18.
Family continues to focus on building Peppa Pig into the most
loved pre-school brand in the world. The US, China, South East
Asia, Canada and France are expected to be the main growth
territories in FY18, with a stable level of revenue generated from
more mature markets such as the UK and Australia. China is expected
to grow from 20 licensing agreements in FY17 to 60 by the end of
FY18, thanks to the strong foundation built by exposure on
broadcast and on-demand platforms.
Production has continued on season four of Peppa Pig, with an
additional 117 episodes now confirmed for production, to ensure a
continuous flow of new programming content to support the longevity
of the brand from a licensing perspective.
PJ Masks will build upon the success of the current year with
sustained growth expected in the US and the full international
roll-out of the brand expected to be completed by the end of FY18.
The brand is generating significant interest in China and deals
with prime partners for both broadcast and licensing are close to
conclusion.
The business is expected to generate strong revenue and EBITDA
growth across the portfolio in FY18. It is also expected that
underlying EBITDA margins will decline somewhat in percentage terms
driven by the growth of PJ Masks as a proportion of total sales and
increased overhead costs of around GBP2 million necessary to
facilitate growth.
Film
eOne's Global Film Group is one of the largest independent film
businesses in the world with operations in the US, the UK, Canada,
Spain, the Benelux, Australia and New Zealand, and, together with
its global digital rights business, focuses on production and sales
of film content worldwide.
GBPm 2017 2016 Change
----------------------------------------- ------ ------ -------
Revenue 594.2 553.4 7%
----------------------------------------- ------ ------ -------
Theatrical 97.2 64.9 50%
Home entertainment 149.3 192.4 (22%)
Broadcast and digital 189.4 189.1 0%
Production and international
sales 108.0 60.4 79%
Other 54.5 48.5 12%
Eliminations (4.2) (1.9) 121%
----------------------------------------- ------ ------ -------
Underlying EBITDA 52.7 52.8 (0%)
Investment in acquired
content 143.2 98.3 46%
Investment in productions (0.6) 11.9 (105%)
----------------------------------------- ------ ------ -------
Revenues increased by 7% to GBP594.2 million (2016: GBP553.4
million), driven by higher production and international sales
revenues, as well as double-digit growth in theatrical revenues.
This was partly offset by lower home entertainment revenues which
showed the same level of decline as the prior year, a reduction of
some 22%.
Underlying EBITDA was stable year-on-year, with the underlying
EBITDA margin decreasing by 0.6pts to 8.9% (2016: 9.5%) due to the
higher contribution from the Sierra production and international
sales business, which has lower margins.
Investment in acquired content and productions was higher by
GBP32.4 million at GBP142.6 million (2016: GBP110.2 million),
driven by the higher-profile theatrical releases in the current
year.
Theatrical
Overall theatrical revenues grew by 50% versus prior year,
reflecting a much stronger box office performance, where box office
takings increased 30% to US$337 million (2016: US$259 million).
This increase was driven by a strong content release slate with
several high-profile releases, which more than offset the reduction
in volume of releases year-on-year (172 compared to 210 in 2016).
The number of unique theatrical releases was 102 compared to 125 in
2016.
The FY17 release slate included key releases in both the first
and the second half of the year such as The BFG and The Girl on the
Train, which grossed over GBP31 million and GBP24 million,
respectively, at the UK box office. These highly successful titles
come from the Company's relationship with Amblin Partners. Other
key releases included La La Land which won six Oscars(R) , Arrival
which also won an Oscar(R) , Eye in the Sky, Now You See Me 2, Bad
Moms, Woody Allen's Café Society, Light Between the Oceans, Lion,
Jackie, Denial and 20(th) Century Women.
Home entertainment
Revenues decreased by 22% driven by the continued shift from
physical to digital formats, as well as the lower number of
releases and reduced catalogue sales from weaker FY15 and FY16
slates.
The transition to eOne's new partnerships with 20th Century Fox
Home Entertainment, on a multi-territory basis, and Sony Pictures
Home Entertainment, in the US, for the physical home entertainment
marketplace progressed during the year with associated cost savings
starting to be recognised.
Overall, 366 DVDs and Blu-rays were released during the year
(2016: 569), including key titles such as The BFG, The Girl on the
Train, Spotlight, The Divergent Series: Allegiant Part 1, The
Walking Dead Season 6, Arrival and Now You See Me 2.
Broadcast and digital
The Group's combined broadcast and digital revenues were in line
with the prior year. Key broadcast/digital titles in the year
included The BFG, The Walking Dead Season 6, The Girl on the Train,
The Hateful Eight, The Last Witch Hunter and The Hunger Games:
Mockingjay Part 2.
During the year, the Group renewed its deal with Amazon Instant
Video in the UK, giving Amazon Prime members exclusive access to
all eOne new releases from its future film slate. In addition, the
Group negotiated a deal with Netflix for temporary download rights
on existing contracts in the UK and a library deal was signed with
AMC.
New deals in Canada included an exclusive deal with Netflix for
the worldwide SVOD rights for Trailer Park Boys Season 2, whilst in
Spain an SVOD deal has been agreed with HBO and an output deal
agree with Movistar+. In Australia, a new SVOD deal was signed with
Netflix.
Production and international sales
Revenues increased by 79% to GBP108.0 million (2016: GBP60.4
million). This increase is primarily due to the full year impact of
the strategic investment in Sierra Pictures in FY16 and the buy-out
of Sierra Affinity in the current year.
Sierra Pictures delivered Atomic Blonde and The Lost City of Z
in the financial year and significant international sales included
Gold, The Zookeeper's Wife and Manchester by the Sea (winner of the
Best Original Screenplay Oscar(R) and the Best Performance by an
Actor in a Leading Role Oscar(R) ).
During the year, eOne delivered David Brent; Life on the Road,
written by Ricky Gervais, which was released theatrically in the UK
and Australia by eOne with the remaining worldwide rights sold to
Netflix.
2018 Outlook for Film
The Group will continue to reshape Film activities over the
coming years as it adapts to the changing global film market. eOne
will focus on continued access to high quality premium content and
on building deep partnerships with high quality film producers
where eOne has more ownership and control over the content.
As part of this programme, eOne will focus on acquiring and
producing a reduced slate with fewer and larger films, where the
Company has a greater level of control with consistent financial
risk, including the recent Annapurna Pictures and MAKEREADY deals.
Following year end the business renegotiated a distribution
arrangement with one of its partners, leading to a significant
one-off charge accrued in the year, which it expects will improve
profitability and cash flow going forward.
From an efficiency perspective, the Film business will continue
to streamline its operations. This is already in progress for the
home entertainment operation where the partnerships with 20(th)
Century Fox Home Entertainment and Sony Pictures Home Entertainment
ensure the Group remains best-positioned to compete in the physical
home entertainment marketplace as it transitions from physical to
digital.
Additionally, the Film business will benefit from the new
combined global TV sales team that has been in place since 1 April
2017, while creation of a combined Film and Television studio
operation will also provide opportunities for efficiencies.
In FY18 we anticipate 200 film releases in total across all
territories, of which 100 are expected to be unique titles.
Investment in acquired content is expected to be slightly higher
around GBP150 million. The pipeline for the year includes Luc
Besson's Valerian and the City of a Thousand Planets, Steven
Spielberg's The Post starring Tom Hanks and Meryl Streep (from
Amblin Partners), the Aaron Sorkin written and directed Molly's
Game starring Jessica Chastain and Idris Elba and produced through
The Mark Gordon Company, and George Clooney's Suburbicon.
Investment in productions is expected to be higher than the current
year at over GBP50 million.
OTHER FINANCIAL INFORMATION
Adjusted operating profit increased by 25% to GBP155.3 million
(2016: GBP124.7 million), reflecting the growth in the Group's
underlying EBITDA. Adjusted profit before tax increased by 25% to
GBP129.9 million (2016: GBP104.1 million), in line with increased
adjusted operating profit, partly offset by higher underlying
finance charges reflecting higher interest rates following the
re-financing in December 2015. Reported operating profit decreased
by 18% to GBP61.3 million, with the Group reporting a profit before
tax of GBP37.2 million (2016: GBP47.9 million), impacted by
significant one-off charges and higher amortisation of acquired
intangibles.
Reported Adjusted
=============== ===============
2017 2016 2017 2016
Group GBPm GBPm GBPm GBPm
===================================== ======= ====== ======= ======
Revenue 1,082.7 802.7 1,082.7 802.7
Underlying EBITDA 160.2 129.1 160.2 129.1
------------------------------------- ------- ------ ------- ------
Amortisation of acquired intangibles (41.9) (27.4) - -
Depreciation and amortisation of
software (4.9) (4.4) (4.9) (4.4)
Share-based payment charge (5.0) (4.1) - -
Tax, finance costs and depreciation
related to joint ventures - (1.6) - -
One-off items (47.1) (16.6) - -
------------------------------------- ------- ------ ------- ------
Operating profit(1) 61.3 75.0 155.3 124.7
Net finance costs (24.1) (27.1) (25.4) (20.6)
------------------------------------- ------- ------ ------- ------
Profit before tax 37.2 47.9 129.9 104.1
Tax(2) (12.3) (7.7) (27.1) (24.5)
===================================== ======= ====== ======= ======
Profit for the year 24.9 40.2 102.8 79.6
===================================== ======= ====== ======= ======
1. Adjusted operating profit excludes amortisation of acquired
intangibles, share-based payment charge, tax, finance costs and
depreciation related to joint ventures and operating one-off items
and one-off items relating to the Group's financing
arrangements.
2. The Group calculates the effective tax rate after adjusting
for the share of results of joint ventures of GBP0.7 million loss
(2016: GBP3.4 million profit). The Group calculates the adjusted
effective tax rate after adjusting for the pre-tax share of results
of joint ventures of GBP0.7 million loss (2016: GBP5.0 million
gain) and the related underlying income tax charge of nil (2016:
GBP2.1 million credit, excluding tax one-off credits of GBP0.5
million credit).
JOINT VENTURES
Underlying EBITDA includes a GBP0.7 million loss related to the
Secret Location joint venture. On 15 August 2016 the Group
purchased the remaining 50% share in Secret Location. Following
completion, Secret Location has become a wholly-owned subsidiary of
the Company and its financial statements have been fully
consolidated into the Group's consolidated financial
statements.
Amortisation of acquired intangibles
Amortisation of acquired intangibles increased by GBP14.5
million to GBP41.9 million reflecting the full year impact of the
acquisitions completed during FY16, which included The Mark Gordon
Company, Astley Baker Davies Limited, Sierra Pictures, Renegade 83,
Dualtone Music Group, Last Gang Entertainment and Amblin
Partners.
Depreciation & capital expenditure
Depreciation, which includes the amortisation of software, has
increased by GBP0.5 million to GBP4.9 million, reflecting the
higher level of capital expenditure in the prior year from the
consolidation of the Group's Toronto offices.
Capital expenditure on property, plant and equipment and
software decreased GBP4.5 million to GBP3.2 million (2016: GBP7.7
million) (excluding Production capital expenditure of GBP0.3
million (2016: GBP0.9 million)). The unusually high capital
expenditure in the prior year primarily reflected the move to a new
office location in Toronto in September 2015.
Share-based payment charge
The share-based payment charge of GBP5.0 million has increased
by GBP0.9 million during the year, reflecting additional awards
issued, including the first award under the Group's Sharesave
Scheme, which is open to all employees and encourages employees
share ownership.
One-off items
During the year ended 31 March 2017 the Group continued to
restructure the physical distribution business through the closure
of a number of distribution warehouses, primarily in Port
Washington and Brampton, as well as terminating distribution
agreements with partners in the UK and the Benelux. Costs incurred
in implementing this change included GBP10.1 million relating to
the ramp-down of these facilities and GBP3.5 million of costs for
onerous rental leases on various properties. As a result, the Group
reassessed the carrying value of certain balance sheet items,
particularly physical inventory and tangible fixed assets. This
review involved, amongst other items, reassessing the titles where
the profile of the revenues was judged no longer appropriate given
the strategic change. As a result of this review, GBP5.9 million of
inventory and GBP0.9 million of property, plant and equipment was
written off. Other costs of GBP1.6 million include settlement costs
with local physical distribution partners.
There were additional costs driven by the continuing industry
shift from physical to digital content, which resulted in the
closure of major customer HMV Canada in early 2017. Due to the
resulting reduction in shelf-space the Group reduced its sales
projections for the physical distribution unit and recorded a
one-off charge of GBP1.2 million to write down certain physical
inventory titles. In addition, a GBP1.0 million one-off bad debt
expense was recorded.
In January 2017, the Group announced that it would be
integrating the Paperny Entertainment and Force Four Entertainment
businesses in Vancouver into one Canadian unscripted business and
this amalgamation was completed 1 April 2017. Costs of GBP2.6
million were incurred to facilitate the amalgamation of these two
businesses, including staff and other transition-related payments.
Other restructuring costs during the year totalled GBP1.4
million.
The initiatives implemented during the year highlighted above,
largely in relation to the restructuring of the Group's physical
distribution business, resulted in one-off charges totalling
GBP28.2 million and are expected to deliver annual cost savings of
greater than GBP10 million from FY18.
As part of the previously announced wider reshaping of the Film
Division, the Group has re-negotiated one of its larger film
distribution arrangements. The previous arrangement has been
terminated and replaced with a new distribution arrangement and,
associated with the termination the Company has made a one-time
payment of GBP20.1 million (US$25 million). Management expects
underlying profitability and cash flow to improve for films
delivered under the new distribution arrangement. Further, an
impairment charge of GBP2.2 million was recognised relating to the
write-off of unamortised signing-on fees relating to the existing
agreements, previously capitalised within investment in content,
and GBP0.5 million relating to the release of other related balance
sheet items. In total, one-off charges of GBP22.8 million were
incurred in relation to the re-negotiation of these arrangements
and associated impacts.
Acquisition gains of GBP6.4 million include a GBP2.3 million
credit related to the acquisition accounting for the purchase of
the remaining 50% stake in Secret Location and a further credit of
GBP4.0 million resulted from the re-assessment of contingent
consideration in relation to prior year acquisitions.
Other corporate project costs of GBP1.7 million relate to a
one-off foreign exchange charge relating to the alignment of the TV
business with the Group hedging process.
GBP0.8 million other one-off costs relate to costs associated
with aborted corporate projects during the year.
Net finance costs
Reported net finance costs decreased by GBP3.0 million to
GBP24.1 million due to one-off net finance credits. The one-off net
finance credits of GBP1.3 million comprise credits of GBP3.8
million credit relating to the release of interest previously
charged on a tax provision which has been reversed during the year
and a GBP1.2 million fair-value gain on hedge contracts which
reverses in April 2017. The credits were partially offset by the
charges of GBP2.9 million unwind of discounting on liabilities
relating to put options issued by the Group over the
non-controlling interest of subsidiary companies and GBP0.8 million
of costs due to an increase on interest on tax provisions for the
Group. Adjusted finance charges at GBP25.4 million were GBP4.8
million higher in the current year, reflecting higher average debt
levels year-on-year and higher interest rates following the Group's
re-financing in December 2015. The weighted average interest rate
for the Group's financing was 6.9% compared to 5.6% in the prior
year.
Tax
On a reported basis the Group's tax charge of GBP12.3 million
(2016: GBP7.7 million), which includes the impact of one-off items,
represents an effective rate of 32.5% compared to 17.3% in the
prior year. On an adjusted basis, the effective rate is lower than
prior year at 20.7% (2016: 22.6%), mainly due to a change in the
mix of profits. The FY18 effective tax rate on an adjusted basis is
expected to be approximately 22%.
CASH FLOW & NET DEBT
The table below reconciles cash flows associated with the
adjusted net debt of the Group, which excludes cash flows
associated with production activities which are reconciled in the
Production Financing section below.
2017 2016
--------------------------------------------- ---------------------------------------------
GBPm (unless
specified) Television Family Film Centre Total Television Family Film Centre Total
Underlying EBITDA 56.2 55.6 52.1 (10.9) 153.0 32.0 43.6 51.8 (6.2) 121.2
Amort'n of acquired
content rights 36.4 0.5 131.4 - 168.3 27.0 0.1 119.9 - 147.0
Purchase of
acquired
content rights (37.3) (0.9) (143.2) - (181.4) (21.5) (1.6) (98.3) - (121.4)
Amort'n of
investment
in productions 30.9 1.3 0.6 - 32.8 - 1.1 (4.4) - (3.3)
Purchase of
productions,
net of grants (31.2) (2.8) (0.2) - (34.2) (7.7) (2.7) 1.2 - (9.2)
Working capital (7.6) (3.3) (48.1) - (59.0) (15.6) (13.3) (25.3) - (54.2)
Joint venture
movements 0.6 - - - 0.6 (4.5) - - - (4.5)
------------------- ---------- ------- ------- ------ ------- ---------- ------ ------ -------- -------
Adjusted cash flow 48.0 50.4 (7.4) (10.9) 80.1 9.7 27.2 44.9 (6.2) 75.6
------------------- ---------- ------- ------- ------ ------- ---------- ------ ------ -------- -------
Cash conversion (%) 85% 91% (14%) - 52% 30% 62% 87% - 62%
------------------- ---------- ------- ------- ------ ------- ---------- ------ ------ -------- -------
(3.2) (7.7)
Capital expenditure
Tax paid (16.2) (14.4)
Net interest paid (24.2) (10.2)
--------------------------------------------------------- ------- ------------------------------- ------------
Free cash flow 36.5 43.3
One-off items (inc. financing) (17.6) (20.7)
Acquisitions, net of net debt acquired
(inc. intangibles) (9.6) (177.0)
Net proceeds of share issue - 194.5
Dividends paid (8.3) (4.0)
Foreign exchange (7.6) 8.0
--------------------------------------------------------- ------- ------------------------------- ------------
Movement (6.6) 44.1
--------------------------------------------------------- ------- ------------------------------- ------------
Net debt at the beginning of the year (180.8) (224.9)
--------------------------------------------------------- ------- ------------------------------- ------------
Net debt at the end of the year (187.4) (180.8)
--------------------------------------------------------- ------- ------------------------------- ------------
Adjusted cash flow
Adjusted cash flow at GBP80.1 million is higher than prior year
by GBP4.5 million with improved cash flows in Television and Family
partly offset by decline in Film and Centre. The underlying EBITDA
to adjusted cash flow conversion was 52% (2016: 62%).
Television
Television adjusted cash inflow improved in the year to GBP48.0
million (2016: GBP9.7 million), representing an underlying EBITDA
to adjusted cash flow conversion of 85% (2016: 30%) driven by the
increase in underlying EBITDA. Working capital movements were
broadly flat, driven by significant outflow in movements in
receivables from higher revenue mostly offset by intercompany trade
payables relating to productions from The Mark Gordon Company
(which are offset within the Television working capital movement
under production financing) and inflows from payables from higher
royalty accruals.
Family
Family adjusted cash inflow increased 85% to GBP50.4 million
(2016: GBP27.2 million), representing an underlying EBITDA to
adjusted cash flow conversion of 91% (2016: 62%). This was driven
by growth in underlying EBITDA and lower working capital outflows.
The lower cash conversion seen in FY16 reflected a working capital
outflow relating to the lower royalty payable accrual as a result
of the acquisition of Astley Baker Davies Limited, which was not
typical of the ongoing cash conversion expectations.
Film
Film adjusted cash outflow of (GBP7.4 million) delivered an
underlying EBITDA to adjusted cash conversion of (14%) (2016: 87%),
significantly lower than prior year due to higher investment in
content spend and a higher working capital outflow.
The increased investment in acquired content spend was driven by
the strong content slate of titles released during FY17 which has
resulted in higher theatrical revenues in the year and underpins
the future value of the content library.
The working capital outflow in the year of GBP48.1 million was
primarily due to a decrease in payables. This was driven by the
timing of trade payments and higher royalty payments.
Free cash flow
Positive free cash flow for the Group of GBP36.5 million was
GBP6.8 million lower than previous year due to higher interest
payments on the Group's senior secured notes.
Net debt
As at 31 March 2017 overall net debt at GBP187.4 million was
GBP6.6 million higher than prior year as the positive free cash
flow was more than offset by one-off items, acquisition spend,
dividends paid and foreign exchange movements. The net leverage
reduced from 1.4x Group underlying EBITDA in FY16 to 1.2x and is
expected to maintain at a similar level for FY18, with a leverage
target of below 1.0x by FY20.
PRODUCTION FINANCING
Overall production financing increased by GBP34.3 million
year-on-year to GBP152.3 million reflecting the adjusted cash
outflow and movement in foreign exchange. The adjusted cash flow
outflow was driven by higher production spend particularly in
MGC.
2017 2016
------------------------------------------------------ ----------------------------
GBPm Television Family Film Total Television Family Film Total
Underlying EBITDA 6.6 - 0.6 7.2 7.2 (0.3) 1.0 7.9
Amort'n of investment
in productions 138.6 0.9 41.1 180.6 79.1 0.4 34.4 113.9
Purchase of
productions,
net of grants (191.7) (1.4) 0.8 (192.3) (73.3) (1.5) (13.1) (87.9)
Working capital 4.4 0.5 (11.4) (6.5) (11.4) 0.5 3.5 (7.4)
Joint venture movements 0.1 - - 0.1 - - (0.5) (0.5)
----------------------- -------------- ------ ------ ----------- ------------ ------ ------ --------
Adjusted cash flow (42.0) 0.0 31.1 (10.9) 1.6 (0.9) 25.3 26.0
----------------------- -------------- ------ ------ ----------- ------------ ------ ------ --------
(0.3) (0.9)
Capital expenditure
Tax paid (2.2) (3.3)
Net interest paid (0.1) (0.1)
------------------------------------------------------- ----------- ----------------------------- --------
Free cash flow (13.5) 21.7
One-off items (inc. financing) (0.9) (0.6)
Acquisitions, net of production financing
acquired (0.7) (49.0)
Foreign exchange (19.2) (0.8)
------------------------------------------------------- ----------- ----------------------------- --------
Movement (34.3) (28.7)
------------------------------------------------------- ----------- ----------------------------- --------
Net production financing at the beginning
of the year (118.0) (89.3)
------------------------------------------------------- ----------- ----------------------------- --------
Net production financing at the end
of the year (152.3) (118.0)
------------------------------------------------------- ----------- ----------------------------- --------
The production cash flows relate to production financing which
is used to fund the Group's television, family and film
productions. The financing is arranged on an individual production
basis by special purpose production subsidiaries which are excluded
from the security of the Group's corporate facility. It is
short-term financing whilst the production is being made and is
paid back once the production is delivered and the sales receipts
and tax credits are received. The Company deems this type of
financing to be short term in nature and is excluded from adjusted
net debt. The Company therefore shows the cash flows associated
with these activities separately. The Company also believes that
higher production net debt demonstrates an increase in the success
of the Television, Family and Film production businesses, which
helps drive revenues for the Group and therefore increases the
generation of EBITDA and cash for the Group, which in turn reduces
the Group's net debt leverage.
Financial position and going concern basis
The Group's net assets increased by GBP98.8 million to GBP757.0
million at 31 March 2017 (31 March 2016: GBP658.2 million).
The directors acknowledge guidance issued by the Financial
Reporting Council relating to going concern. The directors consider
it appropriate to prepare the consolidated financial statements on
a going concern basis, as set out in Note 1 to the consolidated
financial statements.
Independent Auditor's Report continued
to the members of entertainment one ltd.
Opinion on the consolidated financial statements of
Entertainment One Ltd.
In our opinion the consolidated financial statements:
- give a true and fair view of the state of the Group's affairs
as at 31 March 2017 and of its profit for the year then ended;
and
- have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union.
The consolidated financial statements that we have audited
comprise, the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated balance sheet,
the consolidated statement of changes in equity, the consolidated
cash flow statement and the related notes 1 to 34.
The financial reporting framework that has been applied in their
preparation is applicable law and IFRSs as adopted by the European
Union.
summary of audit approach
Key Risks The key risks that we identified in the current year
were:
* Accounting for investment in acquired content rights
and productions;
* Carrying value of goodwill and other intangible
assets; and
* Revenue recognition.
=============== ===========================================================
Materiality The materiality that we used in the current year was
GBP3.9m which was determined on the basis of 5% of
forecast profit before tax adding back non-recurring
one-off items.
=============== ===========================================================
Scoping We completed full scope audits of the significant UK,
US and Canadian Business Units. In addition, we performed
specified audit procedures over certain Business Units
in other locations.
Together with Group functions these Business Units
represent the principal operations and account for
approximately 75% of the Group's revenue and 91% of
the Group's Underlying EBITDA.
=============== ===========================================================
Significant Last year our report included a risk which is not included
changes in our in our report this year: acquisition accounting. During
approach the FY16 audit, the accounting for acquisitions was
a key area of focus due to the number of businesses
acquired including The Mark Gordon Company, Astley
Baker Davies Limited, Sierra Pictures and Renegade
83. There were no similar significant acquisitions
in the current year.
As a result of the Group's acquisition activity in
the prior period, our FY17 scope was revisited to include
a full year of trading for The Mark Gordon Company
and Sierra Pictures, both based in Los Angeles.
=============== ===========================================================
GOING CONCERN AND THE DIRECTORS' ASSESSMENT OF THE PRINCIPAL
RISKS THAT WOULD THREATEN THE SOLVENCY OR LIQUIDITY OF THE
GROUP
We have reviewed the directors' statement regarding the
appropriateness of the going concern basis of accounting and the
directors' statement on the longer-term viability of the Group.
We are required to state whether we have anything material to
add or draw attention to in relation to:
- the directors' have confirmed that they have carried out a
robust assessment of the principal risks facing the Company,
including those that would threaten its business model, future
performance, solvency or liquidity;
- the disclosures that describe those risks and explain how they are being managed or mitigated;
- the directors' statement in Note 1 to the financial statements
about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them and their
identification of any material uncertainties to the Company's
ability to continue to do so over a period of at least twelve
months from the date of approval of the financial statements;
and
- the directors' explanation as to how they have assessed the
prospects of the Company, over what period they have done so and
why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the
Company will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any
necessary qualifications or assumptions.
We confirm that we have nothing material to add or draw
attention to in respect of these matters.
We agreed with the directors' adoption of the going concern
basis of accounting and we did not identify any such material
uncertainties. However, because not all future events or conditions
can be predicted, this statement is not a guarantee as to the
Company's ability to continue as a going concern.
Independence
We are required to comply with the Financial Reporting Council's
Ethical Standards for Auditors and confirm that we are independent
of the Company and we have fulfilled our other ethical
responsibilities in accordance with those standards.
We confirm that we are independent of the Company and we have
fulfilled our other ethical responsibilities in accordance with
those standards. We also confirm we have not provided any of the
prohibited non-audit services referred to in those standards.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below are
those that had the greatest effect on our audit strategy, the
allocation of resources in the audit and directing the efforts of
the engagement team.
How the scope of our audit
Risk responded to the risk Key observations
=========================== =========================================================== ========================
Accounting for investment Our audit approach included We are satisfied
in acquired content rights an assessment of the design with management's
and investment in and implementation of key controls process and methodology
productions related to the process for for assessing
As set out in Notes 14 estimating and maintaining the future forecast
and 17 and discussed future revenue forecasts and revenues underpinning
in the Audit Committee the mechanical calculation the investments
report, the Group has of the amortisation and royalty in acquired content
GBP160.8m (2016: GBP127.2m) charges. and productions
of investment in We have assessed management's at the balance
productions process for estimating future sheet date.
and GBP269.8m (2016: revenues, specifically by:
GBP241.3m) of investment * reviewing the expectations for a selection of titles
in acquired content on (including titles yet to be released), and assessing
the consolidated balance management's forecasts by looking at performance in
sheet at 31 March 2017. each of release windows; theatrical box office, home
Accounting for the entertainment, SVOD and TV (based on current sales
amortisation data, past performance of similar titles and other
of these assets requires specific market information and contractual
significant judgement arrangements);
as it is directly affected
by management's best
estimate of future * performing analytics over the acquired content and
revenues, production models to identify titles and shows which
and consumption through show characteristics of higher risk; and
different exploitation
windows (e.g. theatrical
release, home * assessing whether the carrying value of the balances
entertainment, are considered recoverable by analysing the assets on
TV and digital). a portfolio basis (Film - by release year, TV - by
There is a risk that show type) and comparing the carrying value as at 31
inappropriate assumptions March 2017 against current year revenue and an
are made in respect of appropriately adjusted remaining forecast of future
the forecast future revenues to determine if any indicators of impairment
revenues exist.
which could result in
the recognition of expenses
not appropriately matching
the flow of economic
benefits from the
underlying
assets.
=========================== =========================================================== ========================
Revenue recognition We assessed the design and Based on our
As described in Note implementation of controls procedures performed,
2 and discussed in the over the key revenue streams we are satisfied
Audit Committee report, in each financially significant that revenue
the Group derives its business unit. has been recognised
revenues from the Our audit procedures included: appropriately.
licensing, * assessing the Group's revenue recognition policy and
marketing, distribution confirming the consistent application of the policy
and trading of feature across the Group;
films, television, video
programming and music
rights, television and * completing detailed substantive procedures with
film production and family regards to the significant revenue streams by
licensing and merchandising agreeing to third party confirmation, royalty
sales. statements, gross box office revenues and other
The risk of material supporting information;
misstatement due to cut-off
errors will manifest
itself in different ways * reviewing significant licensing and merchandising
in each Division, depending contracts to corroborate licence period commencement
on the nature of trade and delivery dates to ensure revenue was recognised
and the respective revenue in the correct period; and
recognition policies
(e.g. early recognition
of licence fees for titles * performing detailed testing on the returns provision
where the licence period calculations, and assessing whether the methodology
has not commenced). applied is appropriate for each Business Unit based
on the historical level of returns
=========================== =========================================================== ========================
How the scope of our audit
Risk responded to the risk Key observations
============================== ============================================================ ==================
Carrying value of goodwill We assessed the design and We are satisfied
and other intangible implementation of controls that the carrying
assets over goodwill and other intangible value of goodwill
As set out in Notes 12 assets recognition and impairment. and acquired
and 13 and discussed We considered whether management's intangible assets
in the Audit Committee impairment review methodology is supportable
report, the Group carries is compliant with IAS 36 Impairment and no impairment
GBP406.9m (2016: GBP360.3m) of Assets. at the year-end
of goodwill and a further We critically challenged management's is required.
GBP302.9m (2016: GBP314.8m) assumptions used in the impairment
of other intangible assets model for goodwill and other
on the consolidated balance intangible assets. Our audit
sheet at 31 March 2017. work on the assumptions used
Management prepare a in the impairment model focussed
detailed assessment of on:
the carrying value of * considering the appropriateness of the CGUs
goodwill and other intangible identified by management and the allocation of assets
assets by cash generating to these;
unit ("CGU") using a
number of judgemental
assumptions (as described * testing the integrity of management's model;
in Note 12 to the financial
statements) including
in the 2018 Board-approved * engaging our valuation specialists to independently
budget and plans adopted establish an appropriate discount rate;
for 2019/20, discount
rates and long-term growth
rates. There is a risk * agreeing the underlying cash flow projections for
that the application each CGU to the Board-approved/adopted budget and
of inappropriate assumptions plans;
supports assets that
should otherwise be impaired.
* comparing short-term cash flow projections against
recent performance and historical forecasting
accuracy;
* considering post year end trading performance;
* assessing the long term growth rates used against
independent market data; and
* performing sensitivity analysis to assess breakeven
points and impact of reduced short term cash flow
forecasts.
============================== ============================================================ ==================
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Our application of materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Materiality GBP3.9m (2016: GBP3.6m)
=========================== =================================================
Basis for determining We determined materiality based on 5% of forecast
materiality profit before tax (2016: 5%) after adding
back one-off items as disclosed in Notes 6
and 7.
=========================== =================================================
Rationale for the benchmark Profit before tax adding back operating and
applied net financing one-off items has been used
as it is a primary measure of performance
used by the Group.
We have used this adjusted profit measure
as it excludes volatility of one-off items
in our determination, to aid consistency and
comparability of our materiality base each
year.
=========================== =================================================
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of GBP192,500 (2016:
GBP72,000), as well as differences below that threshold that, in
our view, warranted reporting on qualitative grounds. We also
report to the Audit Committee on disclosure matters that we
identified when assessing the overall presentation of the financial
statements.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including Group-wide controls, and
assessing the risks of material misstatement at the Group
level.
As a result of the Group's acquisition activity in the prior
period, we revised our scope in the current year. We focused our
Group audit scope primarily on the UK, US and Canadian Business
Units. Six (2016: six) Business Units were subject to a full scope
audit in 2017, consistent with 2016, with two (2016: nil) Business
Units being subject to further specific procedures on material
balances. The remaining Business Units were subject to analytical
review procedures performed by the Group audit team.
The six full scope divisions represent the principal Business
Units and account for 62% (2016: 70%) of the Group's revenue and
82% (2016: 87%) of the Group's Underlying EBITDA. After including
those Business Units subject to specific procedures our audit scope
increased to 75% of the Group's revenue. They were also selected to
provide an appropriate basis for undertaking audit work to address
the risks of material misstatement identified above. Our audit work
at the different locations was executed at levels of materiality
applicable to each individual entity which were lower than Group
materiality and ranged from GBP1.9m to GBP2.1m (2016: GBP1.8m to
GBP2.2m).
At the parent entity level we also tested the consolidation
process and carried out analytical procedures to confirm our
conclusion that there were no significant risks of material
misstatement of the aggregated financial information of the
remaining components not subject to audit or audit of specified
account balances.
The Group audit team continued to follow a programme of planned
visits that has been designed so that the Senior Statutory Auditor
or a senior member of the Group audit team visits each of the
locations where the Group audit scope was focused at least once
every year. During the year we visited locations in Toronto, London
and Los Angeles (2016: Toronto and London). In addition, for each
component in scope, we reviewed and challenged the key issues and
audit findings, attended the component close meetings and reviewed
formal reporting and selected work papers from the component
auditors.
Matters on which we are required to report by exception
Corporate Governance Statement We have nothing to
Under the Listing Rules we are also required report arising from
to review part of the Corporate Governance our review.
Statement relating to the Company's compliance
with certain provisions of the UK Corporate
Governance Code.
========================================================== ===========================
Our duty to read other information in the Annual
Report We confirm that we
Under International Standards on Auditing (UK have not identified
and Ireland), we are required to report to any such inconsistencies
you if, in our opinion, information in the or misleading statements.
annual report is:
* materially inconsistent with the information in the
audited financial statements; or
* apparently materially incorrect based on, or
materially inconsistent with, our knowledge of the
Company acquired in the course of performing our
audit; or
* otherwise misleading.
In particular, we are required to consider
whether we have identified any inconsistencies
between our knowledge acquired during the audit
and the directors' statement that they consider
the annual report is fair, balanced and understandable
and whether the annual report appropriately
discloses those matters that we communicated
to the Audit Committee which we consider should
have been disclosed.
========================================================== ===========================
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities
Statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). We
also comply with International Standard on Quality Control 1 (UK
and Ireland). Our audit methodology and tools aim to ensure that
our quality control procedures are effective, understood and
applied. Our quality controls and systems include our dedicated
professional standards review team and independent partner
reviews.
This report is made solely to the Company's members, as a body.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the annual
report to identify material inconsistencies with the audited
financial statements and to identify any information that is
apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London
22 May 2017
Consolidated income statement
for the year ended 31 March 2017
Year ended Year ended
31 March 31 March
2017 2016
Note GBPm GBPm
============================================== ===== ========== ==========
Revenue 2 1,082.7 802.7
Cost of sales (795.4) (569.6)
============================================== ===== ========== ==========
Gross profit 287.3 233.1
Administrative expenses (225.3) (161.5)
Share of results of joint ventures 28 (0.7) 3.4
============================================== ===== ========== ==========
Operating profit 3 61.3 75.0
Finance income 7 5.0 0.4
Finance costs 7 (29.1) (27.5)
============================================== ===== ========== ==========
Profit before tax 37.2 47.9
Income tax charge 8 (12.3) (7.7)
============================================== ===== ========== ==========
Profit for the year 24.9 40.2
============================================== ===== ========== ==========
Attributable to:
============================================== ===== ========== ==========
Owners of the Company 13.0 36.5
Non-controlling interests 11.9 3.7
============================================== ===== ========== ==========
Operating profit analysed as:
Underlying EBITDA 2 160.2 129.1
Amortisation of acquired intangibles 13 (41.9) (27.4)
Depreciation and amortisation of software 13,15 (4.9) (4.4)
Share-based payment charge 31 (5.0) (4.1)
Tax, finance costs and depreciation related
to joint ventures 28 - (1.6)
One-off items 6 (47.1) (16.6)
============================================== ===== ========== ==========
Operating profit 61.3 75.0
============================================== ===== ========== ==========
Earnings per share (pence)
Basic 11 3.1 9.8
Diluted 11 3.0 9.6
Adjusted earnings per share (pence)
Basic 11 20.3 19.7
Diluted 11 20.0 19.4
============================================== ===== ========== ==========
All activities relate to continuing operations.
Consolidated Statement of comprehensive Income
for the year ended 31 March 2017 Year ended Year ended
31 March 31 March
2017 2016
GBPm GBPm
================================================= ========== ==========
Profit for the year 24.9 40.2
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on foreign operations 75.6 25.8
Fair value movements on cash flow hedges 8.5 2.4
Reclassification adjustments for movements
on cash flow hedges (9.3) (6.0)
Tax related to components of other comprehensive
income (1.7) 0.6
================================================== ========== ==========
Total other comprehensive income for the year 73.1 22.8
================================================== ========== ==========
Total comprehensive income for the year 98.0 63.0
================================================== ========== ==========
Attributable to:
================================================= ========== ==========
Owners of the Company 78.5 59.3
Non-controlling interests 19.5 3.7
================================================== ========== ==========
Consolidated Balance Sheet
At 31 march 2017
Restated
Year ended Year ended
31 March 31 March
2017 2016
Note GBPm GBPm
============================================= ==== ========== ===========
ASSETS
Non-current assets
Goodwill 12 406.9 360.3
Other intangible assets 13 302.9 314.8
Interests in joint ventures 28 1.1 3.2
Investment in productions 14 160.8 127.2
Property, plant and equipment 15 11.9 12.0
Trade and other receivables 18 60.9 48.1
Deferred tax assets 9 28.2 19.2
============================================= ==== ========== ===========
Total non-current assets 972.7 884.8
============================================= ==== ========== ===========
Current assets
Inventories 16 48.6 51.1
Investment in acquired content rights 17 269.8 241.3
Trade and other receivables 18 464.4 341.2
Cash and cash equivalents 19 133.4 108.3
Current tax assets 1.5 1.6
Financial instruments 24 10.6 8.6
============================================= ==== ========== ===========
Total current assets 928.3 752.1
============================================= ==== ========== ===========
Total assets 1,901.0 1,636.9
============================================= ==== ========== ===========
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 22 276.6 275.5
Production financing 23 91.2 33.6
Other payables 20 41.7 51.1
Provisions 21 1.5 0.3
Deferred tax liabilities 9 53.1 53.1
============================================= ==== ========== ===========
Total non-current liabilities 464.1 413.6
============================================= ==== ========== ===========
Current liabilities
Interest-bearing loans and borrowings 22 0.5 -
Production financing 23 104.8 98.0
Trade and other payables 20 507.8 435.5
Provisions 21 30.6 3.7
Current tax liabilities 32.8 24.8
Financial instruments 24 3.4 3.1
============================================= ==== ========== ===========
Total current liabilities 679.9 565.1
============================================= ==== ========== ===========
Total liabilities 1,144.0 978.7
============================================= ==== ========== ===========
Net assets 757.0 658.2
============================================= ==== ========== ===========
EQUITY
Stated capital 30 505.3 500.0
Own shares 30 (1.5) (3.6)
Other reserves 30 (22.7) (20.2)
Currency translation reserve 79.8 11.8
Retained earnings 109.9 100.3
============================================= ==== ========== ===========
Equity attributable to owners of the Company 670.8 588.3
Non-controlling interests 86.2 69.9
============================================= ==== ========== ===========
Total equity 757.0 658.2
============================================= ==== ========== ===========
Total liabilities and equity 1,901.0 1,636.9
============================================= ==== ========== ===========
These consolidated financial statements were approved by the
Board of Directors on 22 May 2017.
DARREN THROOP
DIRECTOR
Consolidated statement of changes in equity
for the year ended 31 March 2017
Other reserves
======================================= ============ ======
Equity
Put options attributable
Cash over to the
flow non-controlling Currency owners
Stated Own hedge interests Restructuring translation Retained of the Non-controlling Total
capital shares reserve of subsidiaries reserve reserve earnings Company interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============== ======= ====== ======= =============== ============= =========== ======== ============ =============== ======
At 1 April
2015 305.5 (3.6) 4.4 - 9.3 (14.0) 63.0 364.6 0.2 364.8
Profit for the
year - - - - - - 36.5 36.5 3.7 40.2
Other
comprehensive
(loss)/income - - (3.0) - - 25.8 - 22.8 - 22.8
============== ======= ====== ======= =============== ============= =========== ======== ============ =============== ======
Total
comprehensive
(loss)/
income
for the year - - (3.0) - - 25.8 36.5 59.3 3.7 63.0
============== ======= ====== ======= =============== ============= =========== ======== ============ =============== ======
Issue of
common
shares net of
transaction
costs 194.5 - - - - - - 194.5 - 194.5
Credits in
respect
of
share-based
payments - - - - - - 4.0 4.0 - 4.0
Acquisition of
subsidiaries
(restated) - - - (30.9) - - - (30.9) 66.8 35.9
Dividends paid - - - - - - (3.2) (3.2) (0.8) (4.0)
At 31 March
2016
(restated) 500.0 (3.6) 1.4 (30.9) 9.3 11.8 100.3 588.3 69.9 658.2
============== ======= ====== ======= =============== ============= =========== ======== ============ =============== ======
Profit for the
year - - - - - - 13.0 13.0 11.9 24.9
Other
comprehensive
(loss)/income - - (2.5) - - 68.0 - 65.5 7.6 73.1
============== ======= ====== ======= =============== ============= =========== ======== ============ =============== ======
Total
comprehensive
(loss)/
income
for the year - - (2.5) - - 68.0 13.0 78.5 19.5 98.0
============== ======= ====== ======= =============== ============= =========== ======== ============ =============== ======
Credits in
respect
of
share-based
payments - - - - - - 4.9 4.9 - 4.9
Deferred tax
movement
arising on
share
options - - - - - - 0.1 0.1 - 0.1
Exercise of
share
options 1.2 - - - - - (1.2) - - -
Distribution
of shares to
beneficiaries
of the
Employee
Benefit Trust - 2.1 - - - - (2.1) - - -
Acquisition of
subsidiaries 4.1 - - - - - - 4.1 - 4.1
Dividends paid - - - - - - (5.1) (5.1) (3.2) (8.3)
============== ======= ====== ======= =============== ============= =========== ======== ============ =============== ======
At 31 March
2017 505.3 (1.5) (1.1) (30.9) 9.3 79.8 109.9 670.8 86.2 757.0
============== ======= ====== ======= =============== ============= =========== ======== ============ =============== ======
Consolidated Cash Flow Statement
for the year ended 31 March 2017
Restated
Year ended Year ended
31 March 31 March
2017 2016
Note GBPm GBPm
====================================================== ====== ========== ===========
Operating activities
Operating profit 61.3 75.0
Adjustments for:
Depreciation of property, plant and equipment 15 2.4 2.1
Disposal of property, plant and equipment 0.8 -
Amortisation of software 13 2.5 2.3
Amortisation of acquired intangibles 13 41.9 27.4
Amortisation of investment in productions 14 213.4 110.6
Investment in productions, net of grants received (226.5) (97.1)
Amortisation of investment in acquired content
rights 17 168.3 147.0
Investment in acquired content rights (181.4) (121.4)
Impairment of investment in acquired content
rights 17 2.2 3.4
Foreign exchange movements - (4.0)
Fair value gain on acquisition of subsidiary (2.3) -
Share of results of joint ventures 28 0.7 (3.4)
Share-based payment charge 31 5.0 4.1
Operating cash flows before changes in working
capital and provisions 88.3 146.0
Decrease in inventories 16 8.4 1.5
Increase in trade and other receivables 18 (102.1) (33.2)
Increase/(decrease) in trade and other payables 20 30.5 (27.5)
Increase in provisions 21 27.3 0.2
====================================================== ====== ========== ===========
Cash generated from operations 52.4 87.0
Income tax paid (18.4) (17.7)
====================================================== ====== ========== ===========
Net cash from operating activities 34.0 69.3
====================================================== ====== ========== ===========
Investing activities
Acquisition of subsidiaries and joint ventures,
net of cash acquired 25, 28 (6.8) (155.3)
Purchase of financial instruments 24 (0.7) -
Purchase of acquired intangibles (0.3) (17.9)
Purchase of property, plant and equipment 15 (1.5) (7.5)
Dividends received from interests in joint
ventures 28 - 0.2
Purchase of software 13 (2.0) (1.3)
====================================================== ====== ========== ===========
Net cash used in investing activities (11.3) (181.8)
====================================================== ====== ========== ===========
Financing activities
Net proceeds on issue of shares 30 - 194.5
Dividends paid to shareholders and to non-controlling
interests of subsidiaries 10, 29 (8.3) (4.0)
Drawdown of interest-bearing loans and borrowings 22 209.8 361.9
Repayment of interest-bearing loans and borrowings 22 (211.7) (344.5)
Drawdown of production financing 23 224.9 101.4
Repayment of production financing 23 (179.2) (140.4)
Interest paid (24.3) (10.3)
Fees paid in relation to the Group's senior
bank facility 22 (0.6) (9.9)
Other financing costs (0.1) (0.2)
Net cash from financing activities 10.5 148.5
====================================================== ====== ========== ===========
Net increase in cash and cash equivalents 33.2 36.0
Cash and cash equivalents at beginning of the
year 19 108.3 71.3
Effect of foreign exchange rate changes on
cash held (8.1) 1.0
====================================================== ====== ========== ===========
Cash and cash equivalents at end of the year 19 133.4 108.3
====================================================== ====== ========== ===========
Notes to the Consolidated Financial Statements
for the year ended 31 March 2017
1. Nature of operations and basis of preparation
Entertainment One is a leading independent entertainment group
focused on the acquisition, production and distribution of
television, family, film and music content rights across all media
throughout the world. Entertainment One Ltd. (the Company) is the
Group's ultimate parent company and is incorporated and domiciled
in Canada. The registered office of the Company is 134 Peter
Street, Suite 700, Toronto, Ontario, Canada, M5V 2H2.
Entertainment One Ltd. presents its consolidated financial
statements in pounds sterling. These consolidated financial
statements were approved for issue by the directors on 22 May
2017.
Statement of compliance
These consolidated financial statements have been prepared under
the historical cost convention, except for the revaluation of
financial instruments that have been measured at fair value at the
end of the reporting period as explained in the accounting
policies, and in accordance with applicable International Financial
Reporting Standards as adopted by the EU and IFRIC interpretations
(IFRS). The Group's consolidated financial statements comply with
Article 4 of the EU IAS Regulation.
going concern
In addition to its senior secured notes (due 2022) the Group
meets its day-to-day working capital requirements and funds its
investment in content through its cash in hand and through a
revolving credit facility which matures in December 2020 and is
secured on certain assets held by the Group. Under the terms of
this facility the Group is able to draw down in the local
currencies of its operating businesses. The amounts drawn down by
currency at 31 March 2017 are shown in Note 22. The facility is
subject to a series of covenants including interest cover charge,
gross debt against underlying EBITDA and capital expenditure.
The Group has a track record of cash generation and is in full
compliance with its bank facility and bond covenant requirements.
At 31 March 2017, the Group had GBP89.7m of cash and cash
equivalents not held repayable only to production financing (refer
to Note 19), GBP187.4m of net debt and undrawn down amounts under
the revolving credit facility of GBP116.6m (refer to Note 22).
The Group is exposed to uncertainties arising from the economic
climate and uncertainties in the markets in which it operates.
Market conditions could lead to lower than anticipated demand for
the Group's products and services and exchange rate volatility
could also impact reported performance. The directors have
considered the impact of these and other uncertainties and factored
them into their financial forecasts and assessment of covenant
headroom. The Group's forecasts and projections, taking account of
reasonable possible changes in trading performance (and available
mitigating actions), show that the Group will be able to operate
within the expected limits of the facility and provide headroom
against the covenants for the foreseeable future. For these reasons
the directors continue to adopt the going concern basis of
accounting in preparing the consolidated financial statements.
Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries (the Group).
Subsidiaries are entities that are directly or indirectly
controlled by the Group. Control of the Group's subsidiaries is
achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
The financial statements of the subsidiaries are generally
prepared for the same reporting periods as the parent company,
using consistent accounting policies. Subsidiaries are fully
consolidated from the date of acquisition and continue to be
consolidated until the date of disposal or at the point in the
future when the Group ceases to have control of the entity. All
intra-group balances, transactions, income and expenses, and
unrealised profits and losses resulting from intra-group
transactions that are recognised in assets, are eliminated in
full.
A joint venture is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the net assets of the joint venture. Joint control is the
contractually agreed sharing of control of the arrangement, which
exists only when decisions about the relevant activities require
unanimous consent of the parties sharing control. The Group
accounts for its interests in joint ventures using the equity
method. Under the equity method the investment in the entity is
stated as one line item at cost plus the investor's share of
retained post-acquisition profits and other changes in net
assets.
An associate is an entity, other than a subsidiary or joint
venture, over which the Group has significant influence.
Significant influence is the power to participate in, but not
control or jointly control, the financial and operating decisions
of an entity. These investments are accounted for using the equity
method.
Investments where the Group does not have significant influence
are deemed 'available for sale' and held on the balance sheet as an
available-for-sale financial asset and are held at fair value.
Foreign currencies
Within individual companies
The individual financial statements of each Group company are
presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial
position of each Group company are expressed in pounds sterling,
which is the functional currency of the Company and the
presentation currency for the consolidated financial
statements.
In preparing the financial statements of the individual
companies, transactions in currencies other than the entity's
functional currency are recorded at the rates of exchange
prevailing on the dates of the transactions. Foreign exchange
differences arising on the settlement of such transactions and from
translating monetary assets and liabilities denominated in foreign
currencies at year end exchange rates are recognised in the
consolidated income statement.
Retranslation within the consolidated financial statements
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the balance sheet date.
Income and expense items are translated at the exchange rate ruling
at the date of each transaction during the period. Foreign exchange
differences arising, if any, are recognised in other comprehensive
income as a separate component of equity and transferred to the
Group's translation reserve. Such translation differences are
subsequently recognised as income or expenses in the period in
which the operation is disposed of.
New Standards and amendments, revisions and improvements to
Standards adopted during the year
During the year ended 31 March 2017, the following were adopted
by the Group:
New, amended, revised and improved Standards Effective date
======================================================================== ==============
Amendments to IFRS 11 Joint arrangements - accounting for acquisitions 1 January 2016
of interests in joint operations
Amendments to IAS 16 Property, plant and equipment and IAS 38 Intangible 1 January 2016
assets - clarification of acceptable methods of depreciation and
amortisation
Amendments to IAS 27 Separate financial statements - equity method 1 January 2016
in separate financial statements
Amendments to IAS 1 Presentation of financial statements - disclosure 1 January 2016
initiatives
Annual improvements 2012-2014 cycle:
Amendments to IFRS 5 Non-current assets held for sale and discontinued 1 January 2016
operations - changes in method of disposals
Amendments to IFRS 7 Financial instruments - servicing contracts 1 January 2016
Amendments to IFRS 7 Financial instruments - applicability of the 1 January 2016
offsetting disclosures to condensed interim financial statements
Amendments to IAS 19 Employee benefits - discount rate: regional 1 January 2016
market issue
Amendments to IAS 34 Interim financial reporting - disclosure of 1 January 2016
information 'elsewhere in the interim financial statements'
======================================================================== ==============
The adoption of these new, amended and revised Standards had no
material impact on the Group's financial position, performance or
its disclosures.
Among the new Standards and IFRIC interpretations issued by the
IASB and the IFRS Interpretations Committee is an amendment to IAS
38, related to clarification of acceptable methods of depreciation
and amortisation. The application had no significant impact for the
Group. In respect of the Group's production and content rights
activities, the directors consider that using the amortisation
method based on revenues generated by these activities, according
to the estimated revenue method described in Note 14 and 17, is
appropriate because revenue and the consumption of the economic
benefits embodied in the intangible assets are highly correlated
and the directors do not consider there to be any methodology that
is more appropriate.
New, amended and revised Standards issued but not adopted during
the year
At the date of authorisation of these consolidated financial
statements, the following Standards, which have not been applied in
these consolidated financial statements, are in issue but not yet
effective for periods beginning 1 April 2016:
Effective date
Periods beginning
New, amended and revised Standards on or after
====================================================================== ==================
Amendments to IAS 12 Recognition of deferred tax assets for unrealised 1 January 2017
losses *
1 January 2017
Amendments to IAS 7 Disclosure initiative *
1 January 2018
IFRS 9 Financial instruments *
IFRS 15 Revenue from contracts with customers 1 January 2018
1 January 2019
IFRS 16 Leases *
====================================================================== ==================
* These pronouncements have been implemented by the
International Accounting Standards Board (IASB) effective from the
dates noted, but have not yet been endorsed for use in the European
Union (EU).
The Group is currently assessing the new, amended and revised
standards and currently plans to adopt the new standards on the
required effective dates as prescribed by the EU.
The Group expects an impact from IFRS 15 Revenue from contracts
with customers on the results of the Family division. The Group
currently recognises contractual minimum guarantees from licensing
arrangements when the licence terms have commenced and collection
of the fee is reasonably assured. IFRS 15 requires the Group to
assess whether the licences are either a promise to provide a right
to the entity's intellectual property at a point in time, or a
promise to provide access to the intellectual property as it exists
at any point during the licence. The Group expects the recognition
of the minimum guarantees to change and be spread over the
consumption of the intellectual property. The Group is still
assessing the extent and quantum of the impact of the adoption of
this standard to the Group.
The Group is in the process of assessing the impact of IFRS 15
on the production and exploitation of film and television
rights.
The Group expects an impact from IFRS 16 Leases on the results
of the Group. The Group currently recognises an operating lease
when substantially all the risks and rewards incident to ownership
remain with the lessor. The lease payments are recognised as an
expense in the income statement over the lease term on a
straight-line basis. IFRS 16 establishes principles for the
recognition, measurement, presentation and disclosure of leases.
Upon lease commencement a lessee recognises a right-of-use asset
and a lease liability. The right-of-use asset is initially measured
at the amount of the lease liability plus any initial direct costs
incurred by the lessee, with adjustments for lease incentives,
payments at or prior to commencement and restoration obligations.
The Group is still assessing the extent and quantum of the impact
of the adoption of this standard to the Group.
restatement of comparatives
Accounting for put options
The potential cash payments related to put options issued by the
Group over the non-controlling interest of subsidiary companies are
accounted for as financial liabilities. The amount that may become
payable under the option on exercise is initially recognised on
acquisition at present value within other payables with a
corresponding charge directly to equity. The Group restated the
consolidated financial statements for the year ended 31 March 2016,
to reflect the corresponding charge in equity attributable to
owners of the Company to better reflect the risk of ownership of
the non-controlling interests.
Accounting for acquisitions
The opening balance sheets included within the consolidated
financial statements as at 31 March 2016 for the acquisitions of
Sierra Pictures LLC and Renegade Entertainment, LLC were based upon
provisional information and management's best estimate based upon
facts and circumstances then available. The balance sheet as at 31
March 2016 has been restated to reflect adjustments to provisional
amounts to reflect new information obtained about facts and
circumstances that were in existence at the acquisition date. Refer
to Note 25 for further information.
Presentation of cash flow statement
IAS 7 Statement of Cash Flows requires that cash flows from
operating activities are primarily derived from the principal
revenue-producing activities of the business. The Group's revenue
is derived from the licensing, marketing and distribution and
trading of feature films, television, video programming and music
rights. The Group have reclassified the discretionary spend
incurred in the acquisition and creation of underlying intellectual
property rights, being the investment in productions and investment
in acquired content rights as operating cash flow.
The impact on the consolidated financial statements as at 31
March 2016 is shown below:
Restatement
to put Acquisition Classification
Previously options accounting of investment
GBPm reported accounting restatement spend Restated
========================================== ========== =========== ============ ============== ========
Group's consolidated balance sheet
Net Assets 660.4 - (2.2) - 658.2
========================================== ========== =========== ============ ============== ========
Other reserves 10.7 (30.9) - - (20.2)
========================================== ========== =========== ============ ============== ========
Equity attributable to owners of
the Company 619.2 (30.9) - - 588.3
Non-controlling interests 41.2 30.9 (2.2) - 69.9
========================================== ========== =========== ============ ============== ========
Total equity 660.4 - (2.2) - 658.2
========================================== ========== =========== ============ ============== ========
Group's consolidated cash flow statement
Net cash from operating activities 287.8 - - (218.5) 69.3
========================================== ========== =========== ============ ============== ========
Net cash used in investing activities (400.3) - - 218.5 (181.8)
========================================== ========== =========== ============ ============== ========
Net cash from financing activities 148.5 - - - 148.5
========================================== ========== =========== ============ ============== ========
Net increase in cash and cash equivalents 36.0 - - - 36.0
========================================== ========== =========== ============ ============== ========
Significant accounting judgements and key sources of estimation
uncertainty
The preparation of consolidated financial statements under IFRS
requires the Group to make estimates and assumptions that affect
the amounts reported for assets and liabilities at the balance
sheet date and amounts reported for revenues and expenses during
the year. The nature of estimation means that actual outcomes could
differ from those estimates.
Estimates and judgements are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in
which the estimate is revised if the revision affects that period
only, or in the period of the revision and future periods if the
revision affects both current and future periods.
The estimates and assumptions which have a significant risk of
causing a material adjustment to the carrying amount of assets and
liabilities are set out below.
Key sources of estimation uncertainty
- Taxation - further details are contained in Note 8 and 9.
- Impairment of goodwill - further details are contained in Note 12.
- Acquired intangibles - further details are contained in Note 13.
- Investment in productions and investment in acquired content
rights - further details of investment in productions and
investment in acquired content rights are contained in Notes 14 and
17, respectively.
- Share-based payments - further details are contained in Note 31.
Significant accounting judgements
- Control of joint ventures and subsidiaries - further details are contained in Note 29.
2. Operating analysis
Accounting policies
Revenue represents the fair value of consideration receivable
for goods and services provided in the normal course of business,
net of discounts and excluding value added tax (or equivalent).
Revenue is derived from the licensing, marketing and distribution
and trading of feature films, television, video programming and
music rights. Revenue is also derived from television and film
production and family licensing and merchandising sales. The
following summarises the Group's main revenue recognition
policies:
Revenue from the exploitation of television, film and music
rights is recognised based upon the completion of contractual
obligations relevant to each agreement. Revenue is recognised where
there is reasonable contractual certainty that the revenue is
receivable and will be received.
Theatrical
- Revenue from the theatrical release of films is recognised
when the production is exhibited.
Production
- Revenue from the sale of own or co-produced film or television
productions is recognised when the production is available for
delivery and there is reasonable contractual certainty that the
revenue is receivable and will be received.
Home entertainment
- Revenue from the sale of home entertainment and audio
inventory is recognised at the point at which goods are despatched.
A provision is made for returns based on historical trends.
Licensing and merchandising
- Revenue from licensing and merchandising sales represents the
contracted value of licence fees which is recognised when the
licence terms have commenced and collection of the fee is
reasonably assured.
Broadcast and digital
- Revenue from digital sales is recognised on transmission or
during the period of transmission of the sponsored programme or
digital channel.
- Revenue from television or digital licensing represents the
contracted value of licence fees which is recognised when the
licence term has commenced, the production is available for
delivery, substantially all technical requirements have been met
and collection of the fee is reasonably assured.
Operating segments
For internal reporting and management purposes, the Group is
organised into three main reportable segments based on the types of
products and services from which each segment derives its revenue
-Television, Family and Film. The Group's operating segments are
identified on the basis of internal reports that are regularly
reviewed by the chief operating decision maker in order to allocate
resources to the segment and to assess its performance. The Chief
Executive Officer has been identified as the chief operating
decision maker.
The types of products and services from which each reportable
segment derives its revenues are as follows:
- Television - the production, acquisition and exploitation of
television and music content rights across all media.
- Family - the production, acquisition and exploitation,
including licensing and merchandising, of family content rights
across all media.
- Film - the production, acquisition, exploitation and trading
of film content rights across all media.
Inter-segment sales are charged at prevailing market prices.
Segment information for the year ended 31 March 2017 is
presented below:
Television Family Film Eliminations Consolidated
Note GBPm GBPm GBPm GBPm GBPm
===================================== ===== ========== ====== ====== ============ ============
Segment revenues
External sales 411.3 86.3 585.1 - 1,082.7
Inter-segment sales 41.4 2.3 9.1 (52.8) -
===================================== ===== ========== ====== ====== ============ ============
Total segment revenues 452.7 88.6 594.2 (52.8) 1,082.7
===================================== ===== ========== ====== ====== ============ ============
Segment results
Segment underlying EBITDA 62.8 55.6 52.7 - 171.1
Group costs (10.9)
===================================== ===== ========== ====== ====== ============ ============
Underlying EBITDA 160.2
Amortisation of acquired intangibles 13 (41.9)
Depreciation and amortisation
of software 13,15 (4.9)
Share-based payment charge 31 (5.0)
Tax, finance costs and depreciation
related to joint ventures 28 -
One-off items 6 (47.1)
===================================== ===== ========== ====== ====== ============ ============
Operating profit 61.3
Finance income 7 5.0
Finance costs 7 (29.1)
===================================== ===== ========== ====== ====== ============ ============
Profit before tax 37.2
Income tax charge 8 (12.3)
===================================== ===== ========== ====== ====== ============ ============
Profit for the year 24.9
===================================== ===== ========== ====== ====== ============ ============
Segment assets
Total segment assets 788.7 260.3 835.2 - 1,884.2
Unallocated corporate assets 16.8
===================================== ===== ========== ====== ====== ============ ============
Total assets 1,901.0
===================================== ===== ========== ====== ====== ============ ============
Other segment information
Amortisation of acquired intangibles 13 (14.5) (12.0) (15.4) - (41.9)
Depreciation and amortisation
of software 13,15 (0.6) (0.1) (4.2) - (4.9)
Tax, finance costs and depreciation
related to joint ventures 28 - - - - -
One-off items 6 (0.9) (0.4) (45.8) - (47.1)
===================================== ===== ========== ====== ====== ============ ============
Segment information for the year ended 31 March 2016 is
presented below:
Television Family Film Eliminations Consolidated
Note GBPm GBPm GBPm GBPm GBPm
=========================================== ======= ============ ====== ====== ============ ============
Segment revenues
External sales 201.3 61.4 540.0 - 802.7
Inter-segment sales 43.4 5.2 13.4 (62.0) -
=========================================== ======= ============ ====== ====== ============ ============
Total segment revenues 244.7 66.6 553.4 (62.0) 802.7
=========================================== ======= ============ ====== ====== ============ ============
Segment results
Segment underlying EBITDA 39.2 43.3 52.8 - 135.3
Group costs (6.2)
=========================================== ======= ============ ====== ====== ============ ============
Underlying EBITDA 129.1
Amortisation of acquired intangibles 13 (27.4)
Depreciation and amortisation
of software 13,15 (4.4)
Share-based payment charge 31 (4.1)
Tax, finance costs and depreciation
related to joint ventures 28 (1.6)
One-off items 6 (16.6)
=========================================== ======= ============ ====== ====== ============ ============
Operating profit 75.0
Finance income 7 0.4
Finance costs 7 (27.5)
=========================================== ======= ============ ====== ====== ============ ============
Profit before tax 47.9
Income tax charge 8 (7.7)
=========================================== ======= ============ ====== ====== ============ ============
Profit for the year 40.2
=========================================== ======= ============ ====== ====== ============ ============
Segment assets
Total segment assets (restated) 503.7 256.6 866.8 - 1,627.1
Unallocated corporate assets 9.8
=========================================== ======= ============ ====== ====== ============ ============
Total assets (restated) 1,636.9
=========================================== ======= ============ ====== ====== ============ ============
Other segment information
Amortisation of acquired intangibles 13 (7.7) (5.7) (14.0) - (27.4)
Depreciation and amortisation
of software 13,15 (0.5) (0.1) (3.8) - (4.4)
Tax, finance costs and depreciation
related to joint ventures 28 (1.5) - (0.1) - (1.6)
One-off items 6 (3.2) (1.4) (12.0) - (16.6)
=========================================== ======= ============ ====== ====== ============ ============
Geographical information
The Group's operations are located in Canada, the UK, the US,
Australia, the Benelux and Spain. Television Division operations
are located in Canada, the US and the UK. Family Division
operations are located in the UK. Film Division operations are
located in Canada, the UK, the US, Australia, the Benelux and
Spain.
The following table provides an analysis of the Group's revenue
based on the location of the customer and the carrying amount of
segment non-current assets by the geographical area in which the
assets are located for the years ended 31 March 2017 and 2016.
Restated
External Non-current External Non-current
revenues assets revenues assets
2017 2017 2016 2016
GBPm GBPm GBPm GBPm
================== ========= =========== ========= =============
Canada 197.9 292.8 191.4 253.4
UK 153.0 289.8 167.8 286.1
US 387.0 319.3 235.0 283.9
Rest of Europe 193.4 31.3 125.5 29.5
Rest of the World 151.4 10.2 83.0 9.5
================== ========= =========== ========= =============
Total 1,082.7 943.4 802.7 862.4
================== ========= =========== ========= =============
Non-current assets by location exclude amounts relating to
interests in joint ventures and deferred tax assets.
3. Operating profit
Operating profit for the year is stated after charging:
Year ended Year ended
31 March 31 March
2017 2016
Note GBPm GBPm
=============================================== ==== ========== ==========
Amortisation of investment in productions 14 213.4 110.6
Amortisation of investment in acquired content
rights 17 168.3 147.0
Amortisation of acquired intangibles 13 41.9 27.4
Amortisation of software 13 2.5 2.3
Depreciation of property, plant and equipment 15 2.4 2.1
Impairment of investment in acquired content
rights 17 2.2 3.4
Staff costs 5 96.2 86.5
Net foreign exchange losses 0.4 2.8
Operating lease rentals 10.8 9.7
=============================================== ==== ========== ==========
The total remuneration during the year of the Group's auditor
was as follows:
Year ended Year ended
31 March 31 March
2017 2016
GBPm GBPm
================================================================= ========== ==========
Audit fees
* Fees payable for the audit of the Group's annual
accounts 0.4 0.4
* Fees payable for the audit of the Group's
subsidiaries 0.4 0.3
Other services
* Services relating to corporate finance transactions - 0.5
Total 0.8 1.2
================================================================= ========== ==========
4. Key management compensation and directors' emoluments
Key management compensation
The directors are of the opinion that the key management of the
Group in the years ended 31 March 2017 and 2016 comprised the two
executive directors. These persons had authority and responsibility
for planning, directing and controlling the activities of the
Group, directly or indirectly.
The aggregate amounts of key management compensation are set out
below:
Year ended Year ended
31 March 31 March
2017 2016
GBPm GBPm
============================= ========== ==========
Short-term employee benefits 1.6 1.5
Share-based payment benefits 0.5 0.7
============================= ========== ==========
Total 2.1 2.2
============================= ========== ==========
Short-term employee benefits comprise salary, taxable benefits,
annual bonus and pensions and include employer social security
contributions of GBP0.1m (2016: GBP0.1m).
On 21 November 2016 one former executive director resigned from
office. Payments made to this executive director after the 21
November 2016 total GBP0.2m. The above table includes all payments
made to this Director during the year. The share-based payment
options in respect to this Director which were outstanding at 21
November 2016 were forfeited and as a result the share-based
payment charge previously recognised of GBP0.3m was reversed during
the year and not included within the above table.
5. Staff costs
Accounting policy
Payments to defined contribution retirement benefit plans are
charged as an expense as they fall due. Any contributions unpaid at
the reporting date are included as a liability within the
consolidated balance sheet.
Refer to Note 31 for the accounting policy for share-based
payments.
Analysis of results for the year
The average numbers of employees, including directors, are
presented below:
Year ended Year ended
31 March 31 March
2017 2016
Number Number
============================ ========== ==========
Average number of employees
Canada 778 920
US 304 269
UK 220 205
Australia 46 46
Rest of World 76 89
Total 1,424 1,529
============================ ========== ==========
The table below sets out the Group's staff costs (including
directors' remuneration):
Year ended Year ended
31 March 31 March
2017 2016
GBPm GBPm
=========================== ========== ==========
Wages and salaries 83.6 74.9
Share-based payment charge 5.0 4.1
Social security costs 5.9 5.9
Pension costs 1.7 1.6
=========================== ========== ==========
Total staff costs 96.2 86.5
=========================== ========== ==========
Included within total staff costs is GBP7.5m (2016: GBP7.0m) of
staff-related payments in respect to the restructuring costs as
described in further detail in Note 6.
6. One-off items
accounting policy
One-off items are items of income and expenditure that are
non-recurring and, in the judgement of the directors, should be
disclosed separately on the basis that they are material, either by
their nature or their size, in order to provide a better
understanding of the Group's underlying financial performance and
enable comparison of underlying financial performance between
years.
The one-off items recorded in the consolidated income statement
include items such as significant restructuring, the costs incurred
in entering into business combinations, and the impact of the sale,
disposal or impairment of an investment in a business or an
asset.
Analysis of results for the year
Items of income or expense that are considered by management for
designation as one-off are as follows:
Year ended Year ended
31 March 31 March
2017 2016
GBPm GBPm
========================== ========== ==========
Restructuring costs
Strategy-related 28.2 12.4
Other 22.8 -
Total restructuring costs 51.0 12.4
========================== ========== ==========
Other items
Acquisition (gains)/costs (6.4) 4.2
Other items 2.5 -
Total other items (3.9) 4.2
========================== ========== ==========
Total one-off costs 47.1 16.6
========================== ========== ==========
Strategy-related restructuring costs
During the year ended 31 March 2017 the Group continued to
restructure the physical distribution business through the closure
of a number of distribution warehouses, primarily in Port
Washington and Brampton, as well as terminating distribution
agreements with partners in the UK and the Benelux. Costs incurred
in implementing this change included GBP10.1m relating to the
ramp-down of these facilities and GBP3.5m of costs for onerous
rental leases on various properties. As a result, the Group
reassessed the carrying value of certain balance sheet items,
particularly physical inventory and tangible fixed assets. This
review involved, amongst other items, reassessing the titles where
the profile of the revenues was judged no longer appropriate given
the strategic change. As a result of this review, GBP5.9m of
inventory and GBP0.9m of property, plant and equipment was written
off. Other costs of GBP1.6m include settlement costs with local
physical distribution partners.
There were additional costs driven by the continuing industry
shift from physical to digital content, which resulted in the
closure of a major customer HMV Canada in early 2017. Due to the
resulting reduction in shelf-space the Group reduced its sales
projections for the physical distribution unit and recorded a
one-off charge of GBP1.2m to write down certain physical inventory
titles. In addition, a GBP1.0m one-off bad debt expense was
recorded.
In January 2017, the Group announced that it would be
integrating the Paperny Entertainment and Force Four Entertainment
businesses in Vancouver into one Canadian unscripted business and
this amalgamation was completed 1 April 2017. Costs of GBP2.6m were
incurred to facilitate the amalgamation of these two businesses,
including staff and other transition-related payments. Other
restructuring costs during the year totalled GBP1.4m.
The initiatives implemented during the year highlighted above,
largely in relation to the restructuring of the Group's physical
distribution business, resulted in one-off charges totalling
GBP28.2m and are expected to deliver annual cost savings of greater
than GBP10m from FY18.
Other restructuring costs
As part of the previously announced wider reshaping of the Film
Division, the Group has re-negotiated one of its larger film
distribution arrangements. The previous arrangement has been
terminated and replaced with a new distribution arrangement and,
associated with the termination the Company has made a one-time
payment of GBP20.1m (US$25m). Management expects underlying
profitability and cash flow to improve for films delivered under
the new distribution arrangement. Further, an impairment charge of
GBP2.2m was recognised relating to the write-off of unamortised
signing-on fees relating to the existing agreements, previously
capitalised within investment in content, and GBP0.5m relating to
the release of other related balance sheet items. In total, one-off
charges of GBP22.8m were incurred in relation to the re-negotiation
of these arrangements and associated impacts.
Acquisition gains
Acquisition gains of GBP6.4m include a GBP2.3m credit related to
the acquisition accounting for the purchase of the remaining 50%
stake in Secret Location and a further credit of GBP4.0m resulted
from the re-assessment of contingent consideration in relation to
prior year acquisitions.
Other items
Other corporate project costs of GBP1.7m relate to a one-off
foreign exchange charge relating to the alignment of the TV
business with the Group hedging process.
GBP0.8m other one-off costs relate to costs associated with
aborted corporate projects during the year.
Prior year one-off costs
During the year ended 31 March 2016 the Group continued to
develop and progress its growth strategy, which was refreshed in
November 2014. The one-off costs incurred in the year included
costs associated with reorganising the physical distribution
business by partnering with Fox and Sony in our territories to
optimise our scale/profitability. Costs incurred in implementing
this change in approach included the closure of facilities in North
America and costs of moving physical stock from those facilities of
GBP2.1m, staff redundancies of GBP7.0m and a write-off of the
carrying value of investment in acquired content rights and other
assets of GBP2.9m throughout the Group's Home Entertainment
business, specifically relating to the closure of the Group's
UK-based international home video business, and other costs of
GBP0.4m.
Acquisition costs of GBP7.0m were incurred during the year ended
31 March 2016 relating to the Group's acquisition and investment
activities, relating to The Mark Gordon Company (fully consolidated
from 19 May 2015), Astley Baker Davies Limited (22 October 2015),
Dualtone Music Group (11 January 2016), Last Gang Entertainment (7
March 2016) and Renegade 83 (24 March 2016) as well as the
investment in Sierra Pictures (22 December 2015).
A credit of GBP2.8m related to the release of excess accruals in
relation to the Alliance transaction was recognised during the year
ended 31 March 2016.
7. Finance income and finance costs
Accounting policies
Interest costs
Borrowing costs, including finance costs, are recognised in the
consolidated income statement in the period in which they are
incurred. Borrowing costs are accounted for using the effective
interest rate method.
Deferred finance charges
All costs incurred by the Group that are directly attributable
to the issue of debt are initially capitalised and deducted from
the amount of gross borrowings. Such costs are then amortised
through the consolidated income statement over the term of the
instrument using the effective interest rate method. Should there
be a material change to the terms of the underlying instrument, any
remaining unamortised deferred finance charges are immediately
written off to the consolidated income statement as a one-off
finance item. Any new costs incurred as a result of the change to
the terms of the underlying instrument are capitalised and then
amortised over the term of the new instrument, again using the
effective interest rate method.
One-off finance items
One-off financing items are items of income and expenditure that
do not relate to underlying activities of the Group, that in the
judgement of the directors should be disclosed separately on the
basis that they are material, either by their nature or their size,
in order to provide a better understanding of the Group's
underlying financing costs and enable comparison of underlying
financial performance between years. The items include interest on
one-off tax items, the unwind of discounting on financial assets
and liabilities, and charges in relation to refinancing
activities.
Analysis of results for the year
Finance income and finance costs comprise:
Year ended Year ended
31 March 31 March
2017 2016
Note GBPm GBPm
==================================================== ==== ========== ==========
Finance income
Other finance income 3.8 0.4
Gains on fair value of derivative instruments 1.2 -
Total finance income 5.0 0.4
==================================================== ==== ========== ==========
Finance costs
Interest costs (22.8) (16.4)
Amortisation of deferred finance charges 22 (1.7) (2.2)
Other accrued interest charges (0.8) (1.1)
Write-off of deferred finance charges - (5.3)
Losses on fair value of derivative instruments - (0.5)
Unwind of discounting of financial instruments (2.9) -
Net foreign exchange losses on financing activities (0.9) (2.0)
==================================================== ==== ========== ==========
Total finance costs (29.1) (27.5)
==================================================== ==== ========== ==========
Net finance costs (24.1) (27.1)
==================================================== ==== ========== ==========
Comprised of:
==================================================== ==== ========== ==========
Adjusted net finance costs (25.4) (20.6)
One-off net finance gains/(costs) 11 1.3 (6.5)
==================================================== ==== ========== ==========
The one-off net finance credits of GBP1.3m comprise credits of
GBP3.8m relating to the release of interest previously charged on a
tax provision which has been reversed during the year and a GBP1.2m
fair-value gain on hedge contracts which reverses in April 2017.
The credits were partially offset by charges of GBP2.9m unwind of
discounting on liabilities relating to put options issued by the
Group over the non-controlling interest of subsidiary companies and
GBP0.8m of costs due to an increase on interest on tax provisions
for the Group.
The one-off net finance costs of GBP6.5m charged in the year
ended 31 March 2016 comprises a charge of GBP5.3m in respect of
deferred finance charges written off on the re-financing of the
Group's bank facility during the year, a GBP0.5m fair value loss on
derivative financial instruments broken on the refinancing, GBP1.1m
of non-cash accrued interest charges on certain liabilities and
GBP0.4m of interest receivable of certain tax refunds.
8. Tax
Accounting policy
The income tax charge/credit represents the sum of the current
income tax payable and deferred tax.
The current income tax payable is based on taxable profit for
the year. Taxable profit differs from profit as reported in the
consolidated income statement because it excludes items of income
or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The
Group's asset or liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the
balance sheet date.
Deferred tax is the tax expected to be payable or recoverable in
the future arising from temporary differences between the carrying
amounts of assets and liabilities in the consolidated financial
statements and the corresponding tax bases used in the computation
of taxable profit. It is accounted for using the balance sheet
liability method.
Provisions for open tax issues are based on management's
interpretation of tax law as supported, where appropriate, by the
Group's external advisors, and reflect the single best estimate of
likely outcome for each liability.
The level of current and deferred tax recognised in the
consolidated financial statements is dependent on subjective
judgements as to the interpretation of complex international tax
regulations and, in some cases, the outcome of decisions by tax
authorities in various jurisdictions around the world, together
with the ability of the Group to utilise tax attributes within the
limits imposed by the relevant tax legislation.
Key source of estimation uncertainty
The actual tax on the result for the year is determined
according to complex tax laws and regulations. Where the effect of
these laws and regulations is unclear, estimates are used in
determining the liability for tax to be paid on past profits which
are recognised in the consolidated financial statements. The Group
considers the estimates, assumptions and judgements to be
reasonable but this can involve complex issues which may take a
number of years to resolve. The final determination of prior year
tax liabilities could be different from the estimates reflected in
the consolidated financial statements.
Analysis of charge for the year
Year ended Year ended
31 March 31 March
2017 2016
Note GBPm GBPm
================================================ ==== ========== ==========
Current tax (charge)/credit:
* in respect of current year (26.1) (21.9)
* in respect of prior years 1.5 2.0
================================================ ==== ========== ==========
Total current tax charge (24.6) (19.9)
================================================ ==== ========== ==========
Deferred tax credit/(charge):
* in respect of current year 14.2 9.3
* in respect of prior years (1.9) 2.9
================================================ ==== ========== ==========
Total deferred tax credit 9 12.3 12.2
================================================ ==== ========== ==========
Income tax charge (12.3) (7.7)
================================================ ==== ========== ==========
Of which:
================================================ ==== ========== ==========
Adjusted tax charge on adjusted profit before
tax (27.1) (22.4)
One-off net tax credit 14.8 14.7
================================================ ==== ========== ==========
The one-off tax credit comprises tax credits of GBP6.7m (2016:
GBP2.5m) in relation to the one-off items described in Note 6,
GBP1.1m relating to changes in corporation tax rates on calculation
of deferred tax assets, tax credits of GBP7.1m (2016: GBP5.0m) on
amortisation of acquired intangibles described in Note 13, a tax
credit of GBP0.2m (2016: GBPnil) on share-based payments as
described in Note 31, a tax charge of GBP0.4m (2016: credit
GBP4.9m) relating to prior year current tax and deferred tax
adjustments, and a tax credit of GBP0.1m (2016: GBP1.7m) on other
non-recurring tax items. The one-off tax credit in the year ended
31 March 2016 also includes a tax credit of GBP0.6m on one-off net
finance items as described in Note 7.
The charge for the year can be reconciled to the profit in the
consolidated income statement as follows:
Year ended 31 Year ended 31
March 2017 March 2016
=============== ===============
GBPm % GBPm %
=========================================== ======= ====== ====== =======
Profit before tax (including joint
ventures) 37.2 47.9
Deduct share of results of joint ventures 0.7 (3.4)
=========================================== ======= ====== ====== =======
Profit before tax (excluding joint
ventures) 37.9 44.5
Taxes at applicable domestic rates (11.1) (29.3) (9.7) (21.8)
Effect of income that is exempt from
tax 6.7 17.7 3.1 7.0
Effect of expenses that are not deductible
in determining taxable profit (1.7) (4.5) (5.2) (11.7)
Effect of deferred tax recognition
of losses/temporary differences - - 3.3 7.4
Effect of losses/temporary differences
not recognised in deferred tax (7.8) (20.6) (4.3) (9.7)
Effect of non-controlling interests 0.9 2.4 0.2 0.5
Effect of tax rate changes 1.1 2.9 - -
Prior year items (0.4) (1.1) 4.9 11.0
=========================================== ======= ====== ====== =======
Income tax charge and effective tax
rate for the year (12.3) (32.5) (7.7) (17.3)
=========================================== ======= ====== ====== =======
Income tax is calculated at the rates prevailing in the
respective jurisdictions. The standard tax rates in each
jurisdiction are 26.5% in Canada (2016: 26.5%), 36.0% - 40.8% in
the US (2016: 36.0% - 40.8%), 20.0% in the UK (2016: 20.0%), 25.0%
in the Netherlands (2016: 25.0%), 30.0% in Australia (2016: 30.0%)
and 25.0% in Spain (2016: 27.3%).
Prior year items include the correction of GBP1.5m relating to
current tax credits and GBP1.9m in relation to deferred tax
charges.
Analysis of tax on items taken directly to equity
Year ended Year ended
31 March 31 March
2017 2016
Note GBPm GBPm
================================================= ==== ========== ==========
Deferred tax (charge)/credit on cash flow hedges (1.7) 0.6
Deferred tax credit on share options 0.1 -
Total (charge)/credit taken directly to equity 9 (1.6) 0.6
================================================= ==== ========== ==========
9. Deferred tax assets and liabilities
Accounting policy
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the consolidated financial statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted
for using the balance sheet liability method. Deferred tax
liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. Such assets
and liabilities are not recognised if the temporary difference
arises from the initial recognition of goodwill or from the initial
recognition of other assets and liabilities in a transaction (other
than in a business combination) that affects neither the tax profit
nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where
the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured on an
undiscounted basis at the tax rates that are expected to apply in
the period when the asset is realised or the liability is settled,
based on tax rates (and tax laws) that have been enacted or
substantively enacted by the balance sheet date. Deferred tax is
charged or credited in the consolidated income statement, except
when it relates to items charged or credited directly to equity, in
which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities. This applies when they relate to income
taxes levied by the same tax authority and the Group intends to
settle its current tax assets and liabilities on a net basis.
In the UK and the US, the Group is entitled to a tax deduction
for amounts treated as compensation on exercise of certain employee
share options or vesting of share awards under each jurisdiction's
tax rules. The deferred tax asset arising is calculated by
comparing the estimated amount of tax deduction to be obtained in
the future (based on the Company's share price at the balance sheet
date) with the cumulative amount of the share-based payment charge
recorded in the consolidated income statement. If the amount of
estimated future tax deduction exceeds the cumulative amount of the
compensation expense at the statutory rate, the excess is recorded
directly in equity, against retained earnings.
significant judgements
Deferred tax assets and liabilities require the directors'
judgement in determining the amounts to be recognised. In
particular, judgement is used when assessing the extent to which
deferred tax assets should be recognised with consideration to the
timing and level of future taxable income.
Utilisation of deferred tax assets is dependent on the future
profitability of the Group. The Group has recognised net deferred
tax assets relating to tax losses and other short-term temporary
differences carried forward as the Group considers that, on the
basis of the most recent forecasts, there will be sufficient
taxable profits in the future against which these items will be
offset.
Analysis of amounts recognised by the Group
The following are the major deferred tax assets and liabilities
recognised by the Group and movements thereon during the year:
Accelerated Other
tax intangible Unused Financing
depreciation assets tax losses items Other Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
============================ ==== ============= =========== =========== ========= ===== ======
At 1 April 2015 0.1 (17.9) 22.0 (1.3) 2.8 5.7
Acquisition of subsidiaries - (50.9) - - - (50.9)
(Charge)/credit to
income statement (0.1) 7.9 4.4 0.2 (0.2) 12.2
Charge to equity 8 - - - 0.6 - 0.6
Exchange differences - (1.9) 0.7 - (0.3) (1.5)
============================ ==== ============= =========== =========== ========= ===== ======
At 31 March 2016 - (62.8) 27.1 (0.5) 2.3 (33.9)
============================ ==== ============= =========== =========== ========= ===== ======
Acquisition of subsidiaries 25 - (0.9) 0.3 (0.1) - (0.7)
Credit/(charge) to
income statement - 7.3 6.9 (0.1) (1.8) 12.3
(Charge)/credit to
equity 8 - - - (1.7) 0.1 (1.6)
Exchange differences - (7.5) 3.7 3.2 (0.4) (1.0)
============================ ==== ============= =========== =========== ========= ===== ======
At 31 March 2017 - (63.9) 38.0 0.8 0.2 (24.9)
============================ ==== ============= =========== =========== ========= ===== ======
The category "Other" includes temporary differences on share
options, accrued liabilities, certain asset valuation provisions,
foreign exchange, investment in productions and investment in
acquired content rights.
The deferred tax balances have been reflected in the
consolidated balance sheet as follows:
Year ended Year ended
31 March 31 March
2017 2016
GBPm GBPm
========================= ========== ==========
Deferred tax assets 28.2 19.2
Deferred tax liabilities (53.1) (53.1)
========================= ========== ==========
Total (24.9) (33.9)
========================= ========== ==========
At the balance sheet date, the Group has unrecognised unused tax
losses of GBP138.2m (2016: GBP88.7m), of which the majority are
expected to expire in the years ending 2027 to 2035.
The Group has unrecognised deferred tax assets of GBP11.4m
(2016: GBP7.7m) in connection with the put and call options that
were granted over the remaining 35% non-controlling interests in
Renegade 83 and of the remaining 49% non-controlling interests in
Sierra Pictures (see Note 25 for further details). At the balance
sheet date, the aggregate amount of temporary differences
associated with undistributed earnings of subsidiaries for which
deferred tax liabilities have not been recognised was GBP19.0m
(2016: GBP11.6m).
During the year ended 31 March 2017, the corporate income tax
rate in the UK reduced to 17% with effect from 1 April 2020. During
the year ended 31 March 2016, corporate income tax rates in the UK
were reduced from 20% to 19% with effect from 1 April 2017 and 18%
with effect from 1 April 2020. These rates are reflected in the
deferred tax calculations as appropriate.
10. Dividends
accounting policy
Distributions to equity holders are not recognised in the
consolidated income statement under IFRS, but are disclosed as a
component of the movement in total equity. A liability is recorded
for a dividend when the dividend is declared by the Company's
directors.
amounts recognised by the Group
On 22 May 2017 the directors declared a final dividend in
respect of the financial year ended 31 March 2017 of 1.3 pence
(2016: 1.2 pence) per share which will absorb an estimated GBP5.6m
of total equity (2016: GBP5.1m). It will be paid on or around 8
September 2017 to shareholders who are on the register of members
on 7 July 2017 (the record date).
This dividend is expected to qualify as an eligible dividend for
Canadian tax purposes.
The dividend will be paid net of withholding tax based on the
residency of the individual shareholder.
11. Earnings per share
Basic earnings per share is calculated by dividing earnings for
the year attributable to the owners of the Company by the weighted
average number of shares in issue during the year, excluding own
shares held by the Employee Benefit Trust (EBT) which are treated
as cancelled.
Adjusted basic earnings per share is calculated by dividing
adjusted earnings for the year attributable to the owners of the
Company by the weighted average number of shares in issue during
the year, excluding own shares held by the EBT which are treated as
cancelled. Adjusted earnings are the profit for the year
attributable to the owners of the Company adjusted to exclude
one-off operating and finance items, share-based payment charge,
'tax, finance costs and depreciation' related to joint ventures and
amortisation of acquired intangibles (net of any related tax
effects).
Fully diluted earnings per share and adjusted fully diluted
earnings per share are calculated after adjusting the weighted
average number of shares in issue during the year to assume
conversion of all potentially dilutive shares. There have been no
transactions involving common shares or potential common shares
between the reporting date and the date of authorisation of these
consolidated financial statements.
Year ended Year ended
31 March 31 March
2017 2016
Pence Pence
==================================== ========== ==========
Basic earnings per share 3.1 9.8
Diluted earnings per share 3.0 9.6
Adjusted basic earnings per share 20.3 19.7
Adjusted diluted earnings per share 20.0 19.4
==================================== ========== ==========
The weighted average number of shares used in the earnings per
share calculations are set out below:
Year ended Year ended
31 March 31 March
2017 2016
Million Million
===================================================== ======= ========== ==========
Weighted average number of shares for basic earnings
per share and adjusted basic earnings per share 425.7 373.5
Effect of dilution:
Employee share awards 5.9 4.1
Contingent consideration with option to settle
in cash or shares 1.1 2.2
Weighted average number of shares for diluted
earnings per share and adjusted diluted earnings
per share 432.7 379.8
====================================================== ====== ========== ==========
The Group holds an option to settle the contingent consideration
payable in relation to the acquisitions of Renegade 83 and Last
Gang Entertainment in shares or in cash. Refer to Note 25 for
details.
As noted above, shares held by the EBT, classified as own
shares, are excluded from earnings per share and adjusted earnings
per share.
Adjusted earnings per share
The directors believe that the presentation of adjusted earnings
per share, being the fully diluted earnings per share adjusted for
one-off operating and finance items, share-based payment charge,
'tax, finance costs and depreciation' related to joint ventures and
amortisation of acquired intangibles (net of any related tax
effects), helps to explain the underlying performance of the Group.
A reconciliation of the earnings used in the fully diluted earnings
per share calculation to earnings used in the adjusted earnings per
share calculation is set out below:
Year ended 31 Year ended 31
March 2017 March 2016
================== ===================
Pence Pence
Note GBPm per share GBPm per share
============================================== ==== ====== ========== ======= ==========
Profit for the year attributable to
the owners of the Company 13.0 3.0 36.5 9.6
Add back one-off items 6 47.1 10.9 16.6 4.4
Add back amortisation of acquired intangibles 13 41.9 9.7 27.4 7.2
Add back share-based payment charge 31 5.0 1.1 4.1 1.1
Add back one-off net finance (gains)/costs 7 (1.3) (0.3) 6.5 1.7
Deduct one-off tax, finance costs and
depreciation related to joint ventures 28 - - (0.5) (0.1)
Deduct net tax effect of above and other
one-off tax items 8 (14.8) (3.4) (14.7) (3.9)
Deduct non-controlling interests' share
of above items (4.4) (1.0) (2.4) (0.6)
============================================== ==== ====== ========== ======= ==========
Adjusted earnings attributable to the
owners of the Company 86.5 20.0 73.5 19.4
============================================== ==== ====== ========== ======= ==========
Profit before tax is reconciled to adjusted profit before tax
and adjusted earnings as follows:
Year ended Year ended
31 March 31 March
2017 2016
Note GBPm GBPm
======================================================== ==== ========== ==========
Profit before tax 37.2 47.9
Add back one-off items 6 47.1 16.6
Add back amortisation of acquired intangibles 13 41.9 27.4
Add back share-based payment charge 31 5.0 4.1
Add back tax, finance costs and depreciation related
to joint ventures 28 - 1.6
Add back one-off net finance (gains)/costs 7 (1.3) 6.5
======================================================== ==== ========== ==========
Adjusted profit before tax 129.9 104.1
Adjusted tax charge 8 (27.1) (22.4)
Adjusted tax charge relating to joint ventures - (2.1)
Deduct profit attributable to non-controlling interests (11.9) (3.7)
Deduct non-controlling interests' share of adjusting
items above (4.4) (2.4)
======================================================== ==== ========== ==========
Adjusted earnings attributable to the owners of the
Company 86.5 73.5
======================================================== ==== ========== ==========
12. Goodwill
accounting policy
Goodwill arising on a business combination is recognised as an
asset and initially measured at cost, being the excess of the
aggregate of the consideration transferred and the amount
recognised for non-controlling interests over the fair value of net
identifiable assets acquired (including other intangible assets)
and liabilities assumed. Transaction costs directly attributable to
the acquisition form part of the acquisition cost for business
combinations prior to 1 January 2010, but from that date such costs
are written off to the consolidated income statement and do not
form part of goodwill. Following initial recognition, goodwill is
measured at cost less any accumulated impairment losses.
Goodwill is allocated to cash generating units (CGUs) which are
tested for impairment annually or more frequently if there are
indications that goodwill might be impaired. The CGUs identified
are the smallest identifiable group of assets that generate cash
flows that are largely independent of the cash flows from other
groups of assets. Gains or losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity
sold.
significant judgements
The Group determines whether goodwill is impaired on at least an
annual basis. This requires an estimation of the value-in-use of
the CGUs to which the goodwill is allocated. Estimating a
value-in-use amount requires the directors to make an estimate of
the expected future cash flows from the CGU and also to choose a
suitable discount rate in order to calculate the present value of
those cash flows.
analysis of amounts recognised by the group
Total
Note GBPm
======================================= ==== =====
Cost and carrying amount
At 1 April 2015 209.8
Acquisition of subsidiaries (restated) 144.2
Exchange differences 6.3
======================================= ==== =====
At 31 March 2016 (restated) 360.3
======================================= ==== =====
Acquisition of subsidiaries 25 5.8
Exchange differences 40.8
======================================= ==== =====
At 31 March 2017 406.9
======================================= ==== =====
Goodwill arising on a business combination is allocated to the
cash generating units (CGUs) that are expected to benefit from that
business combination. As explained below, the Group's CGUs are
Television, The Mark Gordon Company (MGC), Family and Film.
Impairment of non-financial assets, including goodwill
The carrying amounts of the Group's non-financial assets are
tested annually for impairment (as required by IFRS, in the case of
goodwill) or when circumstances indicate that the carrying amounts
may be impaired. If any such indication exists, or when annual
impairment testing for an asset is required, the Group makes an
estimate of the asset's recoverable amount. The recoverable amount
is the higher of an asset's or CGU's fair value less costs to sell
and its value-in-use and is determined for an individual asset,
unless the asset does not generate cash flows that are largely
independent of those from other assets or groups of assets. Where
the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered to be impaired and is written down
to its recoverable amount. In assessing value-in-use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset or CGU.
In determining fair value less costs to sell, an appropriate
valuation model is used. These calculations are corroborated by
valuation multiples or other available fair value indicators.
The Group tests goodwill annually for impairment, or more
frequently if there are indications that goodwill might be
impaired. An impairment loss is recognised if the carrying value of
a CGU exceeds its recoverable amount.
The recoverable amount of a CGU is determined from value-in-use
calculations based on the net present value of discounted cash
flows. In assessing value-in-use, the estimated future cash flows
are derived from the most recent financial budgets and plans and an
assumed growth rate. A terminal value is calculated by discounting
using an appropriate weighted discount rate. Any impairment losses
are recognised in the consolidated income statement as an
expense.
The Group has four CGUs being the smallest identifiable group of
assets that generate cash flows that are largely independent of the
cash flows from other groups of assets. The directors consider the
CGUs to be Television, Family, Film and MGC.
Key assumptions used in value-in-use calculations
Key assumptions used in the value-in-use calculations for each
CGU are set out below:
31 March 2017 31 March 2016
============================== ==============================
Period Period
Pre-tax Terminal of Pre-tax Terminal of
discount growth specific discount growth specific
rate rate cash rate rate cash
CGU % % flows % % flows
======================== --------- -------- --------- ========= ======== =========
Television 8.9 3.0 3 years 10.0 3.0 3 years
The Mark Gordon Company 10.7 3.0 3 years 11.7 3.0 3 years
Family 9.7 3.0 3 years 9.5 3.0 3 years
Film 8.1 2.1 3 years 8.8 2.8 3 years
======================== ========= ======== ========= ========= ======== =========
The calculations of the value-in-use for all CGUs are most
sensitive to the operating profit, discount rate and growth rate
assumptions.
Operating profits - Operating profits are based on
budgeted/planned growth in revenue resulting from new investment in
acquired content rights, investment in productions and growth in
the relevant markets.
Discount rates - The post-tax discount rate is based on the
Group weighted average cost of capital of 7.9% (2016: 8.2%). The
discount rate is adjusted where specific country and operational
risks are sufficiently significant to have a material impact on the
outcome of the impairment test. A pre-tax discount rate is applied
to calculate the net present value of the CGUs as shown in the
table above.
Terminal growth rate estimates - The terminal growth rates for
Television, MGC, Family and Film of 3.0%, 3.0%, 3.0% and 2.1%,
respectively (2016: Television, MGC, Family and Film of 3.0%, 3.0%,
3.0% and 2.8%, respectively), are used beyond the end of year three
and do not exceed the long-term projected growth rates for the
relevant market.
Period of specific cash flows - Specific cash flows reflect the
period of detailed forecasts prepared as part of the Group's annual
planning cycle. The period of specific cash flows has been aligned
with the Group's annual strategic planning process, which underpins
the conclusions made within the viability statement.
The carrying value of goodwill, translated at year end exchange
rates, is allocated as follows:
Restated
Year ended Year ended
31 March 31 March
2017 2016
CGU GBPm GBPm
======================== ---------- ===========
Television 64.3 50.7
The Mark Gordon Company 78.3 67.3
Family 57.3 57.3
Film 207.0 185.0
Total 406.9 360.3
======================== ========== ===========
Sensitivity to change in assumptions
Television - The Television calculations show that there is
significant headroom when compared to carrying values at 31 March
2017 and 31 March 2016. An 853% (7.6 percentage point) increase in
the pre-tax discount rate would reduce the recoverable amount to
the carrying amount. Consequently, the directors believe that no
reasonable change in the above key assumptions would cause the
carrying value of this CGU to exceed its recoverable amount.
The Mark Gordon Company - The MGC calculations show that there
is significant headroom when compared to carrying values at 31
March 2017 and 31 March 2016. A 137% (14.8 percentage point)
increase in the pre-tax discount rate would reduce the recoverable
amount to the carrying amount. Consequently, the directors believe
that no reasonable change in the above key assumptions would cause
the carrying value of this CGU to exceed its recoverable
amount.
Family - The Family calculations show that there is significant
headroom when compared to carrying values at 31 March 2017 and 31
March 2016. A 250% (24.0 percentage point) increase in the pre-tax
discount rate would reduce the recoverable amount to the carrying
amount. Consequently, the directors believe that no reasonable
change in the above key assumptions would cause the carrying value
of this CGU to exceed its recoverable amount.
Film - The Film calculations show that there is significant
headroom when compared to carrying values at 31 March 2017 and 31
March 2016. A 42% (3.4 percentage point) increase in the pre-tax
discount rate would reduce the recoverable amount to the carrying
amount. Consequently, the directors believe that no reasonable
change in the above key assumptions would cause the carrying value
of this CGU to exceed its recoverable amount.
13. Other intangible assets
accounting policy
Other intangible assets acquired by the Group are stated at cost
less accumulated amortisation. Amortisation is charged to
administrative expenses in the consolidated income statement on a
straight-line basis over the estimated useful life of intangible
fixed assets unless such lives are indefinite.
Other intangible assets mainly comprise amounts arising on
consolidation of acquired subsidiaries such as exclusive content
agreements and libraries, trade names and brands, exclusive
distribution agreements, customer relationships and non-compete
agreements. Other intangible assets also include amounts relating
to costs of software.
Other intangible assets are generally amortised over the
following periods:
Exclusive content agreements and libraries 3-14 years
Trade names and brands 1-15 years
Exclusive distribution agreements 9 years
Customer relationships 9-10 years
Non-compete agreements 2-5 years
Software 3 years
========================================== ==========
significant judgements
The Group recognises intangible assets acquired as part of a
business combination at fair value at the date of acquisition. The
determination of these fair values is based upon the directors'
judgement and includes assumptions on the timing and amount of
future incremental cash flows generated by the assets and selection
of an appropriate cost of capital. Furthermore, the directors must
estimate the expected useful lives of intangible assets and charge
amortisation on these assets accordingly.
analysis of amounts recognised by the group
Acquired intangibles
=======================================================================
Exclusive
content Trade Exclusive
agreements names distribution Customer Non-compete
and libraries and brands agreements relationships agreements Software Total
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
==================== ==== ============== =========== ============= ============== =========== ======== =======
Cost
At 1 April 2015 102.3 36.5 24.8 44.7 16.7 9.6 234.6
Acquisition of
subsidiaries
(restated) 71.2 161.8 - - - - 233.0
Additions 16.8 - - - - 1.5 18.3
Disposals - - - - - (0.1) (0.1)
Exchange differences 7.1 0.7 0.4 0.4 0.2 0.1 8.9
==================== ==== ============== =========== ============= ============== =========== ======== =======
At 31 March 2016
(restated) 197.4 199.0 25.2 45.1 16.9 11.1 494.7
==================== ==== ============== =========== ============= ============== =========== ======== =======
Acquisition of
subsidiaries 25 11.3 - - - - - 11.3
Additions - - - - - 2.0 2.0
Disposals (2.9) - - - - (0.2) (3.1)
Exchange differences 25.2 3.8 3.8 5.9 1.6 1.4 41.7
==================== ==== ============== =========== ============= ============== =========== ======== =======
At 31 March 2017 231.0 202.8 29.0 51.0 18.5 14.3 546.6
==================== ==== ============== =========== ============= ============== =========== ======== =======
Amortisation
At 1 April 2015 (50.6) (28.1) (23.8) (24.4) (14.2) (5.9) (147.0)
Amortisation charge
for the year 3 (14.7) (6.1) (0.3) (4.6) (1.7) (2.3) (29.7)
Disposals - - - - - 0.1 0.1
Exchange differences (1.5) (0.6) (0.4) (0.4) (0.2) (0.2) (3.3)
==================== ==== ============== =========== ============= ============== =========== ======== =======
At 31 March 2016 (66.8) (34.8) (24.5) (29.4) (16.1) (8.3) (179.9)
==================== ==== ============== =========== ============= ============== =========== ======== =======
Amortisation charge
for the year 3 (23.1) (12.4) (0.3) (5.3) (0.8) (2.5) (44.4)
Disposals 0.6 - - - - 0.2 0.8
Exchange differences (6.9) (2.9) (3.8) (4.0) (1.6) (1.0) (20.2)
==================== ==== ============== =========== ============= ============== =========== ======== =======
At 31 March 2017 (96.2) (50.1) (28.6) (38.7) (18.5) (11.6) (243.7)
==================== ==== ============== =========== ============= ============== =========== ======== =======
Carrying amount
At 31 March 2016
(restated) 130.6 164.2 0.7 15.7 0.8 2.8 314.8
==================== ==== ============== =========== ============= ============== =========== ======== =======
At 31 March 2017 134.8 152.7 0.4 12.3 - 2.7 302.9
==================== ==== ============== =========== ============= ============== =========== ======== =======
The amortisation charge for the year ended 31 March 2017
comprises GBP41.9m (2016: GBP27.4m) in respect of acquired
intangibles.
As part of the acquisition of Sierra Pictures on 22 December
2015 an intangible asset was acquired representing the share of
jointly held assets in Sierra Affinity. As part of the acquisition
of Sierra Affinity on 30 September 2016 this asset was treated as
if it were disposed of and re-acquired as part of the net assets of
Sierra Affinity. Refer to Note 25 for further details.
Included within trade names and brands is a carrying value of
GBP146.3m relating to the value placed on the 50% of the Peppa Pig
brand acquired as part of the acquisition of Astley Baker Davies
Limited in October 2015, which is being amortised on a straight
line basis over a useful life of 15 years.
Included within exclusive content agreements and libraries is a
carrying value of GBP49.2m relating to the value placed on the
current libraries acquired as part of the acquisition of the stake
in The Mark Gordon Company in May 2015, which is being amortised
over a useful life of 10 years.
14. Investment in productions
accounting policy
Investment in productions that are in development and for which
the realisation of expenditure can be reasonably determined are
capitalised as productions in progress within investment in
productions. On delivery of a production, the cost of investment is
reclassified as productions delivered. Also included within
investment in productions are films and television programmes
acquired on acquisition of subsidiaries.
Production financing interest directly attributable to the
acquisition or production of a qualifying asset (such as investment
in productions) forms part of the cost of that asset and are
capitalised.
Amortisation of investment in productions, net of government
grants, is charged to cost of sales using a model that reflects the
consumption of the asset as it is released through different
exploitation windows (e.g. Theatrical Release, Home Entertainment,
and Broadcast licences) and the expected revenue earned in each of
those stages of release over a period not exceeding 10 years form
the date of its initial release, unless it arises from revaluation
on acquisition of subsidiaries in which case it is charged to
administrative expenses. Amounts capitalised are reviewed at least
quarterly and any portion of the unamortised amount that appears
not to be recoverable from future net revenues is written off to
cost of sales during the period the loss becomes evident.
A government grant is recognised and credited as part of
investment in productions when there is reasonable assurance that
any conditions attached to the grant will be satisfied and the
grants will be received and the programme has been delivered.
Government grants are recognised at fair value.
Key source of estimation uncertainty
The Group capitalises investment in productions and then
amortises these balances on a revenue forecast basis, recording the
amortisation charge in cost of sales. Amounts capitalised are
reviewed at least quarterly and any amounts that appear to be
irrecoverable from future net revenues are written off to cost of
sales during the period the loss becomes evident. The estimate of
future net revenues is determined based on the pattern of
historical revenue streams and the remaining life of each
contract.
amounts recognised by the group
Restated
Year ended Year ended
31 March 31 March
2017 2016
Note GBPm GBPm
======================================= ==== ========== ===========
Cost
Balance at 1 April 542.8 386.1
Acquisition of subsidiaries (restated) 25 0.6 52.8
Additions 230.0 99.1
Exchange differences 72.9 4.8
======================================= ==== ========== ===========
Balance at 31 March (restated) 846.3 542.8
======================================= ==== ========== ===========
Amortisation
Balance at 1 April (415.6) (300.6)
Amortisation charge for the year 3 (213.4) (110.6)
Exchange differences (56.5) (4.4)
======================================= ==== ========== ===========
Balance at 31 March (685.5) (415.6)
======================================= ==== ========== ===========
Carrying amount 160.8 127.2
======================================= ==== ========== ===========
Borrowing costs of GBP6.6m (2016: GBP4.1m) related to Television
and Film production financing have been included in the additions
during the year.
Included within the carrying amount as at 31 March 2017 is
GBP73.4m (2016: GBP75.5m) of productions in progress, which
includes additions from the acquisition of subsidiaries of GBP0.6m
(2016: GBP57.7m).
15. Property, plant and equipment
accounting policy
Property, plant and equipment are stated at original cost less
accumulated depreciation. Depreciation is charged to write off cost
less estimated residual value of each asset over their estimated
useful lives using the following methods and rates:
Over the term of
Leasehold improvements the lease
20%-30% reducing
Fixtures, fittings and equipment balance
================================ ================
The carrying amounts of property, plant and equipment are
reviewed for impairment when events or changes in circumstances
indicate that the carrying amounts may not be recoverable. The
Group reviews residual values and useful lives on an annual basis
and any adjustments are made prospectively.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on
derecognition of the asset (determined as the difference between
the sales proceeds and the carrying amount of the asset) is
recorded in the consolidated income statement in the period of
derecognition.
Analysis of amounts recognised by the group
Fixtures,
fittings
Leasehold and
improvements equipment Total
Note GBPm GBPm GBPm
================================= ==== ============= ========== ======
Cost
At 1 April 2015 4.6 12.4 17.0
Acquisition of subsidiaries - 0.2 0.2
Additions 6.4 1.1 7.5
Disposals - (0.1) (0.1)
Exchange differences 0.4 0.2 0.6
================================= ==== ============= ========== ======
At 31 March 2016 11.4 13.8 25.2
================================= ==== ============= ========== ======
Acquisition of subsidiaries 25 - 0.2 0.2
Additions 0.7 0.9 1.6
Disposals (1.2) (7.1) (8.3)
Exchange differences 1.3 2.0 3.3
================================= ==== ============= ========== ======
At 31 March 2017 12.2 9.8 22.0
================================= ==== ============= ========== ======
Depreciation
At 1 April 2015 (1.7) (9.2) (10.9)
Depreciation charge for the year 3 (0.9) (1.2) (2.1)
Disposals - 0.1 0.1
Exchange differences (0.1) (0.2) (0.3)
================================= ==== ============= ========== ======
At 31 March 2016 (2.7) (10.5) (13.2)
================================= ==== ============= ========== ======
Depreciation charge for the year 3 (1.3) (1.1) (2.4)
Disposals 1.2 6.4 7.6
Exchange differences (0.4) (1.7) (2.1)
================================= ==== ============= ========== ======
At 31 March 2017 (3.2) (6.9) (10.1)
================================= ==== ============= ========== ======
Carrying amount
At 31 March 2016 8.7 3.3 12.0
================================= ==== ============= ========== ======
At 31 March 2017 9.0 2.9 11.9
================================= ==== ============= ========== ======
16. Inventories
accounting policy
Inventories are stated at the lower of cost, including direct
expenditure and other appropriate attributable costs incurred in
bringing inventories to their present location and condition, and
net realisable value. The cost of inventories is calculated using
the weighted average method. Net realisable value is the estimated
selling price in the ordinary course of business, less estimated
costs of completion and the estimated costs necessary to make the
sale.
Analysis of amounts recognised by the group
Inventories at 31 March 2017 comprise finished goods of GBP48.6m
(2016: GBP51.1m).
17. Investment in acquired content rights
accounting policy
In the ordinary course of business the Group contracts with film
and television programme producers to acquire content rights for
exploitation. Some of these agreements require the Group to pay
minimum guaranteed advances (MGs). MGs are recognised in the
consolidated balance sheet when a liability arises, usually on
delivery of the film or television programme to the Group.
Investments in acquired content rights are recorded in the
consolidated balance sheet if such amounts are considered
recoverable against future revenues. These amounts are amortised to
cost of sales using a model that reflects the consumption of the
asset as it is released through different exploitation windows
(e.g. Theatrical Release, Home Entertainment, and Broadcast
licences) and the expected revenue earned in each of those stages
of release over a period not exceeding 10 years form the date of
its initial release, unless it arises from revaluation on
acquisition of subsidiaries in which case it is charged to
administrative expenses. Acquired libraries are amortised over a
period not exceeding 20 years. Amounts capitalised are reviewed at
least quarterly and any portion of the unamortised amount that
appears not to be recoverable from future net revenues is written
off to cost of sales during the period the loss becomes
evident.
Balances are included within current assets as they are expected
to be realised within the normal operating cycle of the Television,
Family and Film businesses. The normal operating cycle of these
businesses can be greater than 12 months. In general 65%-75% of
film and television programme content is amortised within 12 months
of theatrical release/delivery.
Key source of estimation uncertainty
The Group capitalises investment in acquired content rights and
then amortises these balances on a revenue forecast basis,
recording the amortisation charge in cost of sales. Amounts
capitalised are reviewed at least quarterly and any amounts that
appear to be irrecoverable from future net revenues are written off
to cost of sales during the period the loss becomes evident. The
estimate of future net revenues is determined based on the pattern
of historical revenue streams and the remaining life of each
contract.
amounts recognised by the group
Year ended Year ended
31 March 31 March
2017 2016
Note GBPm GBPm
================================= ==== ========== ==========
Balance at 1 April 241.3 221.1
Acquisition of subsidiaries - 0.1
Additions 177.2 164.2
Amortisation charge for the year 3 (168.3) (147.0)
Impairment charge for the year 3 (2.2) (3.4)
Exchange differences 21.8 6.3
================================= ==== ========== ==========
Balance at 31 March 269.8 241.3
================================= ==== ========== ==========
The impairment charge recognised during the year ended 31 March
2017 of GBP2.2m relates to the write off of unamortised signing-on
fees relating to certain distribution agreements which were
renegotiated during the year, which had previously been capitalised
within investment in content.
The impairment charge recognised during the prior year ended 31
March 2016 of GBP3.4m was in respect of a write-off of the carrying
value of investment in acquired content rights on the closure of
the Group's Home Entertainment business, specifically relating to
the closure of the Group's UK-based international home video
business.
18. Trade and other receivables
accounting policy
Trade receivables are generally not interest-bearing and are
stated at their fair value as reduced by appropriate allowances for
estimated irrecoverable amounts.
Amounts are recognised as non-current when the balance is
recoverable in a period of greater than 12 months from the
reporting date.
Provisions for doubtful debts are based on estimated
irrecoverable amounts, determined by reference to past default
experience and an assessment of the current economic
environment.
Analysis of amounts recognised by the group
Restated
31 March 31 March
2017 2016
Current Note GBPm GBPm
=================================== ==== ======== =========
Trade receivables 146.4 136.8
Less: provision for doubtful debts (1.9) (2.3)
=================================== ==== ======== =========
Net trade receivables 26 144.5 134.5
Prepayments 16.6 21.3
Accrued income 26 198.5 95.3
Amounts owed from joint ventures 0.2 0.7
Tax credits receivable 67.9 65.3
Other receivables 36.7 24.1
=================================== ==== ======== =========
Total 464.4 341.2
=================================== ==== ======== =========
Non-current
=================================== ==== ======== =========
Trade receivables 14.2 10.9
Less: provision for doubtful debts (0.4) -
=================================== ==== ======== =========
Net trade receivables 26 13.8 10.9
Accrued income 26 46.0 35.7
Other receivables 1.1 1.5
=================================== ==== ======== =========
Total 60.9 48.1
=================================== ==== ======== =========
Trade receivables are generally non-interest bearing. The
average credit period taken on sales, excluding the effect of
acquisitions, is 60 days (2016: 70 days).
Tax credits receivable relate to government assistance in the
form of Canadian and US tax credits. During the year GBP49.7m
(2016: GBP34.4m) in government assistance was received.
As at 31 March 2017 and 2016 current trade receivables are aged
as follows:
Restated
31 March 31 March
2017 2016
GBPm GBPm
============================== ======== =========
Neither impaired nor past due 119.4 110.8
Less than 60 days 11.2 10.7
Between 60 and 90 days 6.2 3.9
More than 90 days 7.7 9.1
============================== ======== =========
Total 144.5 134.5
============================== ======== =========
Trade receivables that are past due and not impaired do not have
a significant impact on the credit quality of the counterparty. All
these amounts are still considered recoverable. The Group does not
hold any collateral over these balances.
The movements in the provision for doubtful debts in years ended
31 March 2017 and 2016 were as follows:
Year ended Year ended
31 March 31 March
2017 2016
GBPm GBPm
================================= ========== ==========
Balance at 1 April (2.3) (2.6)
Provision recognised in the year (1.7) (1.0)
Provision reversed in the year 0.8 0.7
Utilisation of provision 1.2 0.7
Exchange differences (0.3) (0.1)
================================= ========== ==========
Balance at 31 March (2.3) (2.3)
================================= ========== ==========
In determining the recoverability of a trade receivable the
Group considers any change to the credit quality of the trade
receivable from the date credit was initially granted up to the
reporting date.
Management has credit policies in place and the exposure to
credit risk is monitored by individual operating divisions on an
ongoing basis. The Group has no significant concentration of credit
risk, with exposure spread over a large number of counterparties
and customers. Refer to Note 26 for further details.
The table below sets out the ageing of the Group's impaired
receivables:
31 March 31 March
2017 2016
GBPm GBPm
======================= ======== ========
Less than 60 days - (0.3)
Between 60 and 90 days (0.1) -
More than 90 days (2.2) (2.0)
======================= ======== ========
Total (2.3) (2.3)
======================= ======== ========
Trade and other receivables are held in the following currencies
at 31 March 2017 and 2016. Amounts held in currencies other than
pounds sterling have been converted at their respective exchange
rates ruling at the balance sheet date.
Pounds Canadian US
sterling Euros dollars dollars Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
============================ ========= ===== ======== ======== ===== =====
Current 59.0 38.0 137.9 214.2 15.3 464.4
Non-current 6.5 2.8 7.3 44.0 0.3 60.9
============================ ========= ===== ======== ======== ===== =====
At 31 March 2017 65.5 40.8 145.2 258.2 15.6 525.3
============================ ========= ===== ======== ======== ===== =====
Current (restated) 54.2 35.9 122.1 115.5 13.5 341.2
Non-current 9.3 4.2 7.0 27.2 0.4 48.1
============================ ========= ===== ======== ======== ===== =====
At 31 March 2016 (restated) 63.5 40.1 129.1 142.7 13.9 389.3
============================ ========= ===== ======== ======== ===== =====
The directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
19. Cash and cash equivalents
Accounting policy
Cash and cash equivalents in the consolidated balance sheet
comprise cash at bank and in hand. For the purpose of the
consolidated cash flow statement, cash and cash equivalents consist
of cash and cash equivalents as defined above, net of outstanding
bank overdrafts. Bank overdrafts are shown within borrowings in
current liabilities on the consolidated balance sheet.
Analysis of amounts recognised by the group
Production financing facilities are secured by the assets and
future revenue of the individual television, family and film
production subsidiaries and are non-recourse to other Group
companies or assets. Cash held only for production financing
relates to monies received for the secured revenues and can only be
used for repayment of the specific production financing
facility.
Cash and cash equivalents are held in the following currencies
at 31 March 2017 and 2016. Amounts held in currencies other than
pounds sterling have been converted at their respective exchange
rates ruling at the balance sheet date.
31 March 31 March
2017 2016
Note GBPm GBPm
=============================================== ==== ======== ========
Cash and cash equivalents:
Pounds sterling 13.0 42.8
Euros 9.8 2.7
Canadian dollars 20.0 34.4
US dollars 88.1 25.8
Australian dollars 2.4 2.5
Other 0.1 0.1
=============================================== ==== ======== ========
Cash and cash equivalents per the consolidated
balance sheet 26 133.4 108.3
Held repayable only for production financing 43.7 13.6
Other 89.7 94.7
=============================================== ==== ======== ========
Cash and cash equivalents 133.4 108.3
=============================================== ==== ======== ========
The Group had no cash equivalents at either 31 March 2017 or
2016.
20. Trade and other payables
Accounting policy
Trade payables are generally not interest-bearing and are stated
at their nominal value.
The potential cash payments related to put options issued by the
Group over the non-controlling interest of subsidiary companies are
accounted for as financial liabilities. The amount that may become
payable under the option on exercise is initially recognised on
acquisition at present value with a corresponding charge directly
to equity. Such options are subsequently measured at amortised
cost, using the effective interest rate method, in order to accrete
the liability up to the amount payable under the option at the date
at which it first becomes exercisable; the charge arising is
recorded as a financing cost. In the event that the option expires
unexercised, the liability is derecognised with a corresponding
adjustment to equity.
Amounts are recognised as non-current when the balance is
payable in a period of greater than 12 months from the reporting
date.
Analysis of amounts recognised by the group
Restated
31 March 31 March
2017 2016
Current Note GBPm GBPm
============================================= ==== ======== =========
Trade payables 26 120.3 117.6
Accruals 325.8 261.1
Deferred income 43.7 39.6
Payable to joint ventures - 0.1
Contingent consideration payable 26 4.0 3.4
Other payables 26 14.0 13.7
============================================= ==== ======== =========
Total 507.8 435.5
============================================= ==== ======== =========
Non-current
============================================= ==== ======== =========
Deferred income 0.7 0.7
Contingent consideration payable 26 2.0 9.9
Put liabilities on partly owned subsidiaries 26 39.0 30.9
Other payables 26 - 9.6
============================================= ==== ======== =========
Total 41.7 51.1
============================================= ==== ======== =========
Trade and other payables principally comprise amounts
outstanding for trade purchases and ongoing costs. For most
suppliers no interest is charged, but for overdue balances interest
may be charged at various interest rates.
The movements in contingent consideration payable during the
year ended 31 March 2017 were as follows:
Sierra Force
Renegade Affinity Dualtone Last Gang Four Alliance Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================ ======== ========= ======== ========= ===== ======== =====
At 1 April 2016 7.4 0.2 0.6 1.0 0.7 3.4 13.3
============================ ======== ========= ======== ========= ===== ======== =====
Utilised during the
year - - - - (0.6) (3.4) (4.0)
Reversed during the
year (4.5) - - - - - (4.5)
Exchange differences 1.1 - 0.1 0.1 (0.1) - 1.2
============================ ======== ========= ======== ========= ===== ======== =====
At 31 March 2017 4.0 0.2 0.7 1.1 - - 6.0
============================ ======== ========= ======== ========= ===== ======== =====
Expected payment period 2018 2018-19 2019 2019 N/a N/a
============================ ======== ========= ======== ========= ===== ======== =====
Total maximum consideration N/a 4.0 0.8 1.2 N/a N/a
============================ ======== ========= ======== ========= ===== ======== =====
Shown in the consolidated
balance sheet as:
============================ ======== ========= ======== ========= ===== ======== =====
Current 4.0 - - - - - 4.0
Non-current - 0.2 0.7 1.1 - - 2.0
============================ ======== ========= ======== ========= ===== ======== =====
The maximum contractual consideration payable is calculated
undiscounted and using the foreign exchange rates prevailing as at
31 March 2017. The consideration payable for Renegade is based upon
adjusted EBITDA performance to 31 December 2016. Amounts in the
range of GBP3.4m - GBP4.0m will be payable relating to the
acquisition of Renegade 83 due, subject to audit, during the year
ended 31 March 2018. The contingent consideration can be settled,
at the option of the Group, in cash or in a combination of 60% of
such amount in cash and 40% in shares of Entertainment One Ltd.
The movements in put liabilities on partly owned subsidiaries
payable during the year ended 31 March 2017 were as follows:
Total
: GBPm
================================================ =====
Put liabilities on partly owned subsidiaries at
1 April 2016 30.9
================================================ =====
Unwind of discounting 2.9
Exchange differences 5.2
================================================ =====
Put liabilities on partly owned subsidiaries at
31 March 2017 39.0
================================================ =====
Trade and other payables are held in the following currencies.
Amounts held in currencies other than pounds sterling have been
converted at their respective exchange rates ruling at the balance
sheet date.
Pounds Canadian US
sterling Euros dollars dollars Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
============================ ========= ===== ======== ======== ===== =====
Current 81.3 18.9 109.2 291.7 6.7 507.8
Non-current - - 1.6 40.0 0.1 41.7
============================ ========= ===== ======== ======== ===== =====
At 31 March 2017 81.3 18.9 110.8 331.7 6.8 549.5
============================ ========= ===== ======== ======== ===== =====
Current (restated) 72.0 24.5 165.2 165.2 8.6 435.5
Non-current - - 1.8 49.1 0.2 51.1
============================ ========= ===== ======== ======== ===== =====
At 31 March 2016 (restated) 72.0 24.5 167.0 214.3 8.8 486.6
============================ ========= ===== ======== ======== ===== =====
The directors consider that the carrying amount of trade and
other payables approximates to their fair value.
21. Provisions
Accounting policy
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event,
where the obligation can be estimated reliably, and where it is
probable that an outflow of economic benefits will be required to
settle that obligation. Provisions are measured at the directors'
best estimate of the expenditure required to settle the obligation
at the balance sheet date, and are discounted to present value
where the effect is material. Where discounting is used, the
increase in the provision due to unwinding the discount is
recognised as a finance expense.
Key source of estimate uncertainty
The Group recognises a provision for an onerous film and
television contract when the unavoidable costs of meeting the
obligations under the contract exceed the expected benefits to be
received under it. The estimate of the amount of the provision
requires management to make judgements and assumptions on future
cash inflows and outflows and also an assessment of the least cost
of exiting the contract. To the extent that events, revenues or
costs differ in the future, the carrying amount of provisions may
change.
amounts recognised by the group
Onerous Restructuring
contracts and redundancy Total
GBPm GBPm GBPm
============================================ ========== =============== =====
At 31 March 2015 2.7 0.4 3.1
============================================ ========== =============== =====
Acquisitions of subsidiaries - 0.7 0.7
Provisions recognised in the year 2.3 3.3 5.6
Utilisation of provisions (3.4) (2.1) (5.5)
Exchange differences (0.1) 0.2 0.1
============================================ ========== =============== =====
At 31 March 2016 1.5 2.5 4.0
-------------------------------------------- ---------- --------------- -----
Provisions recognised in the year 1.5 33.3 34.8
Provision reversed in the year (0.6) - (0.6)
Utilisation of provisions (0.7) (5.7) (6.4)
Exchange differences - 0.3 0.3
============================================ ========== =============== =====
At 31 March 2017 1.7 30.4 32.1
============================================ ========== =============== =====
Shown in the consolidated balance sheet as:
-------------------------------------------- ---------- --------------- -----
Non-current 0.6 0.9 1.5
Current 1.1 29.5 30.6
-------------------------------------------- ---------- --------------- -----
Onerous contracts
Onerous contracts represent provisions in respect of:
- Provisions for onerous leasehold property leases which
comprise onerous commitments on leasehold properties that were
expected to be utilised over the remaining contract period. These
provisions are expected to be utilised within 3 years from the
balance sheet date.
- Provisions for onerous contracts in respect of loss-making
film titles are recognised when the unavoidable costs of meeting
the obligations under the contract exceed the economic benefits
expected to be received under it and the general recognition
criteria of IAS 37 Provisions, contingent liabilities and
contingent assets are met.
- Provisions for onerous contracts in respect of loss-making
film titles represent future cash flows relating to film titles
which are forecast to make a loss over their remaining lifetime at
the balance sheet date. As required by IFRS, before a provision for
an onerous film title is recognised, the Group first fully writes
down any related assets (generally these are investment in acquired
content rights balances). These provisions are expected to be
utilised within one year (2016: three years) from the balance sheet
date.
Restructuring and redundancy
Restructuring and redundancy provisions represent future cash
flows related to the cost of redundancy plans, outplacement,
supplementary unemployment benefits and senior staff benefits. Such
provisions are only recognised when restructuring or redundancy
programmes are formally adopted and announced publicly and the
general recognition criteria of IAS 37 Provisions, contingent
liabilities and contingent assets are met. These provisions are
expected to be utilised within two years (2016: one year) from the
balance sheet date.
22. Interest-bearing loans and borrowings
Accounting policy
All interest-bearing loans and borrowings are initially
recognised at the fair value of the consideration received less
directly attributable transaction costs. Gains and losses are
recognised in the consolidated income statement when the
liabilities are derecognised, as well as through the amortisation
process.
amounts recognised by the group
The combination of the Group's non-amortising, fixed-rate debt
financing and revolving credit facility provides the Group with a
long-term capital structure appropriate for its strategic
ambitions. In addition, the re-financing permits greater
flexibility by relieving constraints and costs the Group
historically incurred when undertaking acquisitions and other
corporate activity, and allows the Group to react swiftly to
commercial opportunities, whilst also removing other restrictions
typical of bank loan-based financing structures.
31 March 31 March
2017 2016
GBPm GBPm
Senior secured notes 285.0 285.0
Deferred finance charges (8.4) (9.5)
Other 0.5 -
Total 277.1 275.5
============================================= ======== ========
Shown in the consolidated balance sheet as:
============================================ ======== ========
Non-current 276.6 275.5
Current 0.5 -
============================================= ======== ========
The weighted average interest rates on all bank borrowings are
not materially different from their nominal interest rates. The
weighted average interest rate on all interest-bearing loans and
borrowings is 6.6% (2016: 5.6%).
Bank borrowings
The Group holds a super senior revolving credit facility (RCF)
which matures in December 2020. Any amounts still outstanding at
such date must be repaid in full provided that some or all of the
lenders under the RCF may elect to extend their commitments subject
to terms and conditions to be agreed among the relevant
parties.
The RCF is subject to a number of financial covenants including
interest cover charge, gross debt against underlying EBITDA and
capital expenditure.
At 31 March 2017, the Group had available GBP116.6m of undrawn
committed bank borrowings under the RCF (2016: GBP106.1m),
consisting of funds available in Canadian dollars, euros, pounds
sterling and US dollars.
Senior secured notes
The Group have issued GBP285.0m senior secured notes (Notes)
bearing interest at a rate of 6.875% per annum which mature in
December 2022.
The Notes are subject to a number of financial covenants
including interest cover charge and gross debt against underlying
EBITDA.
The Notes are subject to mandatory repayments as follows:
31 March 31 March
2017 2016
Period GBPm GBPm
======================== ======== ========
Greater than five years 285.0 285.0
======================== ======== ========
Total 285.0 285.0
======================== ======== ========
The fair value of the Senior Secured Notes as at 31 March 2017
is GBP312.4m (2016: GBP285.0m).
The Notes are secured against the assets of various Group
subsidiaries which make up the 'Restricted Group'. Unaudited
financial data of the Restricted Group as at 31 March 2017 can be
found in the appendix to the consolidated financial statements.
Deferred finance charges
During the prior year ended 31 March 2016 the Group paid GBP9.9m
in respect of fees incurred for the issuance of the Group's Notes
and re-financing of the debt facility. The fees were capitalised to
the consolidated balance sheet and are amortised on a straight line
to the date of expiry. During the year ended 31 March 2017 a
further GBP0.6m of fees were capitalised relating to the financing
in the prior year.
foreign currencies
The carrying amounts of the Group's gross borrowings at 31 March
2017 and 2016 are denominated in the following currencies. Amounts
held in currencies other than pounds sterling are converted at
their respective exchange rates ruling at the balance sheet
date.
Pounds Canadian US
sterling Euros dollars dollars Total
GBPm GBPm GBPm GBPm GBPm
===================== ========= ===== ======== ======== =====
Senior secured notes 285.0 - - - 285.0
Other - - 0.5 - 0.5
--------------------- --------- ----- -------- -------- -----
At 31 March 2017 285.0 - 0.5 - 285.5
===================== ========= ===== ======== ======== =====
Bank borrowings 285.0 - - - 285.0
At 31 March 2016 285.0 - - - 285.0
===================== ========= ===== ======== ======== =====
23. production financing
Accounting policy
Production financing relates to short-term financing for the
Group's television, family and film productions. Production
financing interest directly attributable to the acquisition or
production of a qualifying asset forms part of the cost of that
asset and is capitalised.
amounts recognised by the group
Production financing is used to fund the Group's television,
family and film productions. The financing is arranged on an
individual production basis by special purpose production
subsidiaries which are excluded from the security of the Group's
corporate facility. The production financing facilities are secured
by the assets and future revenue of the individual television,
family and film production subsidiaries and are non-recourse to
other Group companies or assets.
It is short-term financing, typically having a maturity of less
than two years, whilst the production is being made and is paid
back once the production is delivered and the government subsidies,
tax credits, broadcaster pre-sales, international sales and/or home
entertainment sales are received. The Company deems this type of
financing to be working capital in nature, as it is timing-based
and is excluded from net debt. The Company therefore shows the cash
flows associated with these activities separately. In connection
with the production of a film or television programme, the Group
typically records initial cash outflows due to its investment in
the production and concurrently record initial positive cash inflow
from the production financing it normally obtains.
The Company also believes that higher production financing
demonstrates an increase in the success of the Television, Family
and Film production businesses, which helps drive revenues for the
Group and therefore increases the generation of EBITDA and cash for
the Group, which in turn reduces the Group's net debt leverage.
31 March 31 March
2017 2016
GBPm GBPm
============================================ ======== ========
Production financing 190.8 130.6
Other loans 5.2 1.0
Total 196.0 131.6
============================================= ======== ========
Shown in the consolidated balance sheet as:
============================================ ======== ========
Non-current 91.2 33.6
Current 104.8 98.0
============================================= ======== ========
Interest is charged at bank prime rate plus a margin. The
weighted average interest rate on all production financing is 3.0%
(2016: 3.7%).
The Group has Canadian dollar and US dollar production credit
facilities with various banks. Amounts held in currencies other
than pounds sterling have been converted at their respective
exchange rates ruling at the balance sheet date. The carrying
amounts of the Group's production financing are denominated in the
following currencies.
Canadian US
dollars dollars Total
GBPm GBPm GBPm
================= ======== ======== =====
At 31 March 2017 66.9 129.1 196.0
================= ======== ======== =====
At 31 March 2016 50.9 80.7 131.6
================= ======== ======== =====
24. financial instruments
Accounting policy
The Group may use derivative financial instruments to reduce its
exposure to foreign exchange and interest rate movements. The Group
does not hold or issue derivative financial instruments for
financial trading purposes.
Derivative financial assets and liabilities are recognised when
the Group becomes a party to the contractual provisions of the
instrument.
Derivative financial instruments are classified as
held-for-trading and recognised in the consolidated balance sheet
at fair value. Derivatives designated as hedging instruments are
classified on inception as cash flow hedges, net investment hedges
or fair value hedges. Changes in the fair value of derivatives
designated as cash flow hedges are recognised in equity to the
extent that they are deemed effective. Ineffective portions are
immediately recognised in the consolidated income statement. When
the hedged item affects profit or loss then the amounts deferred in
equity are recycled to the consolidated income statement.
Fair value hedges record the change in the fair value in the
consolidated income statement, along with the changes in the fair
value of the hedged asset or liability. Changes in the fair value
of any derivative instruments that do not qualify for hedge
accounting are immediately recognised in the consolidated income
statement.
Analysis of amounts recognised by the group
31 March 31 March
2017 2016
GBPm GBPm
==================================================== ======== ========
Financial assets
Derivative financial instruments - foreign exchange
forward contracts 9.9 6.3
Available-for-sale financial assets 0.7 2.3
Total 10.6 8.6
==================================================== ======== ========
Financial liabilities
Derivative financial instruments - foreign exchange
forward contracts (3.4) (3.1)
Total (3.4) (3.1)
==================================================== ======== ========
Net derivative financial instruments 7.2 5.5
==================================================== ======== ========
Foreign exchange forward contracts
The Group uses forward currency contracts to hedge transactional
exposures. The majority of these contracts are denominated in the
subsidiaries' functional currency and primarily cover minimum
guaranteed advances (MG) payments in the US, Canada, the UK,
Australia, the Benelux and Spain and hedging of other significant
financial assets and liabilities.
At 31 March 2017, the total notional principal amount of
outstanding currency contracts was US$220.7m, EUR51.9m, C$49.2m,
A$50.4m, GBP27.6m and R$1.8m (2016: US$306.9m, EUR53.1m, C$17.3m,
A$32.5m, GBP1.8m and R$3.4m). The forward currency contracts are
all expected to be settled within two years.
The GBP2.5m loss (2016: GBP3.0m loss) recognised in other
comprehensive income during the period all relates to the effective
portion of the revaluation gain or loss associated with these
contracts. During the year ended 31 March 2017 there was a gain of
GBP1.0m (2016: GBP0.6m gain) recycled to the consolidated income
statement and a GBP10.3m loss (2015: GBP5.4m gain) transferred to
the carrying value of hedged assets held on the consolidated
balance sheet.
25. Business combinations
Accounting policy
Business combinations are accounted for using the acquisition
method. The consideration transferred in a business combination is
measured at fair value, which is calculated as the sum of the
acquisition-date fair values of assets transferred by the Group,
liabilities incurred by the Group to the former owners of the
acquiree and the equity interest issued by the Group in exchange
for control of the acquiree. Acquisition-related costs are written
off in the consolidated income statement as incurred.
Goodwill arising on a business combination is recognised as an
asset and initially measured at cost, being the excess of the
aggregate of the consideration transferred and the amount
recognised for non-controlling interests over the fair value of net
identifiable assets acquired (including other intangible assets)
and liabilities assumed. If this consideration is lower than the
fair value of the net assets of the subsidiary or business
acquired, any negative goodwill is recognised immediately in the
consolidated income statement.
Any contingent consideration to be transferred by the acquirer
is recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration which is
deemed to be an asset or liability are recognised either in the
consolidated income statement or as a change to the consolidated
income statement.
Contingent payments made to selling shareholders, to the extent
they are linked to continuing service conditions, are treated as
remuneration and expenses within the consolidated income statement.
The Group considers such payments to be capital in nature and are
recognised as an adjustment to the Group's underlying EBITDA.
When a business combination is achieved in stages, the Group's
previously-held interests in the acquired entity is remeasured to
its acquisition date fair value and the resulting gain or loss, if
any, is recognised in the consolidated income statement. Amounts
arising from interests in the acquiree prior to the acquisition
date that have previously been recognised in other comprehensive
income are reclassified to the consolidated income statement, where
such treatment would be appropriate if that interest were disposed
of.
Year ended 31 March 2017
The following table summarises the fair values, as at the
acquisition date, of the assets acquired, the liabilities assumed
and the total consideration transferred as part of the acquisitions
made during the year ended 31 March 2017. Information provided
below is calculated based on current information available.
Sierra Secret
Affinity Location Total
Note GBPm GBPm GBPm
====================================== ==== ========= ========= ======
Acquired intangibles 13 7.7 3.6 11.3
Investment in productions 14 - 0.6 0.6
Property, plant and equipment 15 - 0.2 0.2
Trade and other receivables (1) 16.2 3.2 19.4
Cash and cash equivalents 0.3 - 0.3
Interest-bearing loans and borrowings - (2.5) (2.5)
Trade and other payables (18.5) (2.0) (20.5)
Deferred tax liabilities 9 - (0.7) (0.7)
Total net assets acquired 5.7 2.4 8.1
======================================= ==== ========= ========= ======
Satisfied by:
Cash 2.8 - 2.8
Shares in Entertainment One Ltd. - 4.1 4.1
Contingent consideration 0.5 - 0.5
Assets forgiven 0.1 - 0.1
Total consideration transferred 3.4 4.1 7.5
======================================= ==== ========= ========= ======
Add: Fair value of previously held
equity interest 2.3 4.1 6.4
Less: Fair value of identifiable net
assets of the acquiree (5.7) (2.4) (8.1)
======================================= ==== ========= ========= ======
Goodwill 12 - 5.8 5.8
======================================= ==== ========= ========= ======
1. The trade and other receivables shown are considered to be at
their fair value. No amounts recorded are expected to be
uncollectable.
Secret Location
On 28 May 2014, the Group acquired 50% of the share capital of
Secret Location, a Canadian digital agency, for cash consideration
of C$4.5m. As part of the purchase agreement, put and call options
were agreed between the parties after a lock-up period to 2017. On
15 August 2016 the Group entered into an agreement with the other
shareholders to waive the lock-up period to enable eOne to exercise
its call option. The remaining 50% share capital was purchased for
consideration of C$6.9m.
By virtue of the acquisition, the Group has increased its
interest in the company from 50% to 100%. The Group previously
accounted for the investment in Secret Location as a joint venture
under IFRS 11. Following completion Secret Location has become a
subsidiary of the Company and its financial statements have been
fully consolidated into the Group's consolidated financial
statements.
Secret Location contributed GBP2.3m to the Group's revenue and
GBP0.5m loss to the Group's profit before tax for the period from
the date of acquisition on 15 August 2016 to 31 March 2017.
Key terms
The Group purchased the remaining 50% share in Secret Location
for consideration of C$6.9m (equivalent of GBP4.1m), funded through
the issue of 1,728,794 common shares in Entertainment One Ltd.
settled as at 15 August 2016.
Provisional acquisition accounting
Prior to control being obtained, the investment in the equity
interest of Secret Location was accounted for in accordance with
IAS 28 Investments in Associates and Joint Ventures. eOne held an
equity interest previously in Secret Location which qualified as a
joint venture under IFRS 11. As part of accounting for the business
combination the equity interest is treated as if it were disposed
of and re-acquired at fair value on the acquisition date.
Accordingly, the 50% equity interest held in Secret Location at
book value of GBP1.8m was re-measured to its acquisition-date fair
value of GBP4.1m, resulting in a GBP2.3m gain recognised in the
consolidated income statement (see Note 6).
Acquired intangibles of GBP3.6m have been identified which
represent the value of technologies in development. The resulting
goodwill of GBP5.8m represents the value placed on the opportunity
to grow the content and formats produced by the company. None of
the goodwill is expected to be deductible for income tax
purposes.
The acquired Secret Location business has been integrated into
the Television CGU.
Sierra Affinity
On 22 December 2015 the Group acquired 51% of the share capital
of Sierra Pictures LLC (Sierra Pictures), a leading independent
film production and international sales company which aims to
consistently deliver high-quality, commercially viable feature
films for a global audience. Sierra capitalises on the
ever-evolving global film marketplace representing sales of third
party films and commercial films designed to appeal to both the
North American market as well as top markets internationally.
Sierra Pictures held a 33% interest in Sierra/Affinity LLC
(Sierra Affinity), with the remaining 67% held between two other
parties. Sierra Affinity is an LA sales company who acts as the
exclusive provider of international sales and other services for
motion pictures produced or financed by any of the members of the
LLC.
On 30 September 2016, Sierra Pictures purchased the remaining
67% equity interest in Sierra Affinity for total consideration of
GBP3.4m.
Sierra Affinity contributed GBP47.9m to the Group's revenue and
GBP1.5m to the Group's profit before tax for the period from the
date of acquisition on 30 September 2016 to 31 March 2017.
Key terms
Sierra Pictures purchased the remaining 67% share in Sierra
Affinity for total consideration of GBP3.4m consisting of cash
consideration of US$3.6m (equivalent of GBP2.8m), which was settled
in full during October/November 2016, contingent consideration of
GBP0.5m representing amounts payable dependent on future sales fees
generated by the company on specific titles and GBP0.1m of assets
forgiven relating to trade receivables due to Sierra Pictures from
Sierra Affinity which were forgiven as part of the transaction.
Provisional acquisition accounting
Prior to control being obtained, the investment in the equity
interest of Sierra Affinity was accounted for as a joint operation
under IFRS 11. As part of accounting for the business combination
the equity interest is treated as if it were disposed of and
re-acquired at fair value on the acquisition date. Accordingly, it
is re-measured to its acquisition-date fair value, which is
considered to be equal to its carrying amount, and as such no gain
or loss was recognised.
Acquired intangibles of GBP7.8m have been identified which
represent the value of the acquired exclusive content
agreements.
The acquired Sierra Affinity business has been integrated into
the Film CGU.
Other disclosures in respect of business combinations
If the acquisitions of Secret Location and Sierra Affinity had
all been completed on 1 April 2016, Group revenue for the year
ended 31 March 2017 would have been GBP1,094.9m and Group adjusted
EBITDA would have been GBP158.7m.
Year ended 31 March 2016
The opening balance sheets included within the consolidated
financial statements as at 31 March 2016 for the acquisitions of
Sierra Pictures, LLC and Renegade Entertainment, LLC were based
upon provisional information and management's best estimate based
upon facts and circumstances then available. The balance sheet as
at 31 March 2016 has been restated to reflect adjustments to
provisional amounts to reflect new information obtained about facts
and circumstances that were in existence at the acquisition
date.
The following table summarises the changes made to the fair
values of acquired assets and liabilities. Information provided
below is calculated based on current information available:
Previously
reported Restatement Restated
as at to put as at
31 March options Sierra Last Gang 31 March
2016 accounting Pictures Renegade Entertainment 2016
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ---------- ----------- --------- -------- -------------- ---------
Goodwill 353.9 - (2.5) 8.4 0.5 360.3
Acquired intangibles 320.5 - 7.2 (12.9) - 314.8
Investment in productions 133.8 - (2.1) (4.5) - 127.2
Trade and other receivables 341.1 - (0.5) 0.6 - 341.2
Trade and other payables (439.1) - 0.2 3.9 (0.5) (435.5)
----------------------------- ---------- ----------- --------- -------- -------------- ---------
Net assets 660.4 - 2.3 (4.5) - 658.2
----------------------------- ---------- ----------- --------- -------- -------------- ---------
Non-controlling interests 41.2 30.9 2.3 (4.5) - 69.9
----------------------------- ---------- ----------- --------- -------- -------------- ---------
Sierra Pictures LLC
Update to provisional acquisition accounting
Sierra Pictures' opening balance sheet included within the
consolidated financial statements as at 31 March 2016 was based
upon provisional information and management's best estimate based
upon facts and circumstances available at that date. The balance
sheet as at 31 March 2016 has been restated to reflect adjustments
to provisional amounts based on new information obtained about
facts and circumstances that were in existence at the acquisition
date.
Acquired intangibles have increased by GBP7.2m and goodwill has
decreased by GBP2.5m from the provisional amounts disclosed within
the consolidated financial statements as at 31 March 2016 (restated
balances of GBP15.6m and GBP3.0m respectively) based upon the final
purchase price allocation valuation exercise.
The final acquired intangibles of GBP15.3m represent two
identified intangibles. GBP12.8m representing acquired content, and
GBP2.5m representing Sierra Pictures' share of jointly held assets
through its 33% interest in Sierra/Affinity LLC. The resultant
goodwill represents the value placed on the opportunity to grow the
content and formats produced by the company. All the goodwill is
expected to be tax deductible for income tax purposes.
Investment in productions has decreased by GBP2.1m from the
provisional amounts disclosed within the consolidated financial
statements as at 31 March 2016 (restated balance of GBP42.8m) to
reflect the fair value of capitalised film investment in
productions.
Renegade Entertainment, LLC
On 24 March 2016 the Group acquired a 65% controlling stake in
Renegade Entertainment, LLC (Renegade 83), a television production
company. Based in Los Angeles, Renegade 83 is a fast-growing and
successful non-scripted television production company delivering
multiple hit shows including Naked and Afraid, Naked and Afraid XL,
Fit to Fat, The 4400, The Kennedy Detail and Blind Date.
Update to provisional acquisition accounting
Renegade 83's opening balance sheet included within the
consolidated financial statements as at 31 March 2016 was based
upon provisional information and management's best estimate based
upon facts and circumstances available at that date. The balance
sheet as at 31 March 2016 has been restated to reflect adjustments
to provisional amounts to reflect new information obtained about
facts and circumstances that were in existence at the acquisition
date.
Acquired intangibles have decreased by GBP12.9m and goodwill has
increased by GBP8.4m from the provisional amounts disclosed within
the consolidated financial statements as at 31 March 2016 (restated
balances of GBP2.7m and GBP21.0m respectively) based upon the final
purchase price allocation valuation exercise.
The final acquired intangibles of GBP2.7m represent the value of
television show concepts and back end royalties following the end
of a series production. The resultant goodwill represents the value
placed on the opportunity to grow the content and formats produced
by the company. All the goodwill is expected to be tax deductible
for income tax purposes.
Investment in productions have decreased by GBP4.5m, trade and
other receivables have increased by GBP0.6m and trade and other
payables have decreased by GBP3.9m from the provisional amounts
disclosed within the consolidated financial statements as at 31
March 2016 (restated balances of GBP9.8m, GBP1.4m and GBP12.4m,
respectively). These balance sheet movements represent the
alignment of Renegade 83's financial statements to the Group's
accounting policies.
At 31 March 2016 a liability of GBP7.4m was recorded in the
consolidated balance sheet representing the contingent
consideration expected to be transferred in the future. At 31 March
2017 this liability, which had increased due to changes in foreign
exchange rates, was re-assessed and reduced to GBP4.0m resulting in
a GBP4.1m credit to the consolidated profit and loss account.
26. Financial risk management
The Group's overall risk management programme seeks to minimise
potential adverse effects on its financial performance and focuses
on mitigation of the unpredictability of financial markets as they
affect the Group.
The Group's activities expose it to certain financial risks
including interest rate risk, foreign currency risk, credit risk
and liquidity risk. These risks are managed by the Chief Financial
Officer under policies approved by the Board, which are summarised
below.
Interest rate risk management
When the Group is exposed to fluctuating interest rates the
Group considers whether to fix portions of debt using interest rate
swaps, in order to optimise net finance costs and reduce excessive
volatility in reported earnings. Requirements for interest rate
hedging activities are monitored on a regular basis.
Interest rate sensitivity
The Group holds GBP285.0m in aggregate principal amount of
6.875% senior secured notes (Notes), due December 2022, and a
GBP100m super senior revolving credit facility (RCF) which matures
in December 2020. The net proceeds from the Notes have primarily
been used to repay the Company's previous credit facilities in
full, and pay fees and expenses related to the Notes and the
RCF.
At year end the Group held no floating rate loans and
borrowings.
Foreign currency risk management
The Group is exposed to exchange rate fluctuations because it
undertakes transactions denominated in foreign currency and it is
exposed to foreign currency translation risk through its investment
in overseas subsidiaries.
The Group manages transactions with foreign exchange exposures
by undertaking foreign currency hedging using forward foreign
exchange contracts for significant transactions (principally MG
payments). The implementation of these forward contracts is based
on highly probable forecast transactions and qualifies for cash
flow hedge accounting. The Group further manages its exposure to
fair value movements on foreign currency assets and liabilities
through using forward foreign exchange contracts for significant
exposures.
The majority of the Group's operations are domestic within their
country of operation. The Group seeks to create a natural hedge of
this exposure through its policy of aligning approximately the
currency composition of its net borrowings with its forecast
operating cash flows.
Foreign exchange rate sensitivity
The following table illustrates the Group's sensitivity to
foreign exchange rates on its derivative financial instruments.
Sensitivity is calculated on financial instruments at 31 March 2017
denominated in non-functional currencies for all operating units
within the Group. The sensitivity analysis includes only
outstanding foreign currency denominated monetary items including
external loans. The percentage movement applied to each currency is
based on management's measurement of foreign exchange rate
risk.
31 March 31 March
2017 2016
Impact Impact
on on
consolidated consolidated
income income
statement statement
Percentage movement +/- GBPm +/- GBPm
========================================== ============= =============
10% appreciation of the US dollar 8.8 0.8
10% appreciation of the Canadian dollar (0.6) (0.9)
10% appreciation of the euro 0.9 1.2
10% appreciation of the Australian dollar 0.3 0.9
========================================== ============= =============
Credit risk management
Credit risk arises from cash and cash equivalents, deposits with
banks and financial institutions, as well as credit exposures to
customers, including outstanding receivables and committed
transactions. The Group manages credit risk on cash and deposits by
entering into financial instruments only with highly credit-rated,
authorised counterparties which are reviewed and approved regularly
by management. Counterparties' positions are monitored on a regular
basis to ensure that they are within the approved limits and there
are no significant concentrations of credit risk. Trade receivables
consist of a large number of customers spread across diverse
geographical areas. Ongoing credit evaluation is performed on the
financial condition of counterparties.
As at 31 March 2017 the Group had two (2016: three) customers
that owed the Group more than 5% of the Group's total amounts
receivables which accounted for approximately 35% (2016: 30%) of
the total amounts receivable.
The Group considers its maximum exposure to credit risk as
follows:
Restated
31 March 31 March
2017 2016
Note GBPm GBPm
========================== ==== ======== =========
Cash and cash equivalents 19 133.4 108.3
Net trade receivables 18 158.3 145.4
Accrued income 18 244.5 131.0
========================== ==== ======== =========
Total 536.2 384.7
========================== ==== ======== =========
Liquidity risk management
The Group maintains an appropriate liquidity risk management
position by having sufficient cash and availability of funding
through an adequate amount of committed credit facilities.
Management continuously monitors rolling forecasts of the Group's
liquidity reserve on the basis of expected cash flows in the short,
medium and long-term. At 31 March 2017, the undrawn committed
borrowings under the RCF is equivalent to GBP116.6m (2016:
GBP106.1m). The facility was entered into in December 2015 (see
Note 22) and matures in 2020.
Analysis of the maturity profile of the Group's financial
liabilities including interest payments, which will be settled on a
net basis at the balance sheet date, is shown below:
Interest-
bearing
Trade loans
and and
other borrowings Production
payables (1) financing Total
Amount due for settlement at 31 March 2017 GBPm GBPm GBPm GBPm
=========================================== ========= =========== ========== =====
Within one year 138.3 20.1 104.8 263.2
One to two years - 19.6 91.2 110.8
Two to five years 2.0 58.8 - 60.8
After five years - 304.6 - 304.6
=========================================== ========= =========== ========== =====
Total 140.3 403.1 196.0 739.4
=========================================== ========= =========== ========== =====
Amount due for settlement at 31 March 2016
=========================================== ========= =========== ========== =====
Within one year (restated) 134.7 19.6 98.0 252.3
One to two years 19.5 19.6 33.6 72.7
Two to five years - 58.8 - 58.8
After five years - 324.2 - 324.2
Total (restated) 154.2 422.2 131.6 708.0
=========================================== ========= =========== ========== =====
1. Amounts for interest-bearing loans and borrowings include
interest payments.
Capital risk management
The Group manages its capital to ensure that entities in the
Group will be able to continue as going concerns while maximising
the return to shareholders through the optimisation of the debt and
equity balance. The Group's overall strategy remains unchanged from
the year ended 31 March 2016.
The capital structure of the Group consists of net debt, being
the interest bearing loans and borrowings disclosed in Note 22
after deducting cash and bank balances which are not held repayable
only for production financing (disclosed in Note 19), and equity of
the Group (comprising issued capital, reserves, retained earnings
and non-controlling interests as disclosed in Note 30).
The Group's objectives when managing capital are to safeguard
its ability to continue as a going concern in order to grow the
business, provide returns for shareholders, provide benefits for
other stakeholders and optimise the weighted average cost of
capital and optimise efficiencies.
The objectives are subject to maintaining sufficient financial
flexibility to undertake its investment plans. There are no
externally imposed capital requirements. The management of the
Group's capital is performed by the Board. In order to maintain or
adjust the capital structure, the Group may issue new shares or
sell assets to reduce debt.
Financial instruments at fair value
Under IFRS, fair value measurements are categorised into Level
1, 2 or 3 based on the degree to which the inputs to the fair value
measurements are observable and the significance of the inputs to
the fair value measurement in its entirety, which are described as
follows:
Level Fair value measurements are derived from unadjusted quoted
1 prices in active markets for identical assets or liabilities.
Level Fair value measurements are derived from inputs, other than
2 quoted prices included within Level 1, that are observable
for the asset or liability, either directly (as prices) or
indirectly (derived from prices).
Level Fair value measurements are derived from valuation techniques
3 that include inputs for the asset or liability that are not
based on observable market data.
===== ==============================================================
At 31 March 2017, the Group had the following derivative
financial instrument assets and liabilities grouped into Level
2:
31 March 31 March
2017 2016
Note GBPm GBPm
============================================ ==== ======== ========
Derivative financial instrument assets 24 9.9 6.3
Derivative financial instrument liabilities 24 (3.4) (3.1)
Available-for-sale financial assets 24 - 2.3
============================================ ==== ======== ========
At 31 March 2017, the Group had the following derivative
financial instrument assets and liabilities grouped into Level
3:
31 March 31 March
2017 2016
Note GBPm GBPm
============================================= ==== ======== ========
Put liabilities on partly-owned subsidiaries 20 39.0 30.9
Contingent consideration payable 20 6.0 13.3
Available-for-sale financial assets 24 0.7 -
============================================= ==== ======== ========
Some of the Group's financial assets and financial liabilities
are measured at fair value at the end of each reporting period. The
following table gives information about how the fair values of
these financial assets and financial liabilities are
determined.
Valuation technique Significant unobservable Relationship of unobservable
and key inputs input inputs to fair value
=================== =========================== ============================ =============================
Level 2: Discounted cash flow N/a N/a
Derivative - Future cash flows
financial are estimated based
instruments on forward exchange
rates (from observable
forward exchange
rates at the end
of the reporting
period) and contract
forward rates, discounted
at a rate that reflects
the credit risk of
various counterparties.
------------------- --------------------------- ---------------------------- -----------------------------
Level 3: Income approach - The value of the An EBITDA multiple
Put liabilities in this approach, put and call options is derived dependant
on partly the discounted cash are dependent on on the compound annual
owned subsidiaries flow method was used future performance growth rate during
to capture the present of the business. the option period.
value of the expected Long-term EBTIDA The higher the EBITDA
future economic benefits growth rates, taking growth rate, the
to be derived from into account management's higher the fair value.
the ownership of experience and knowledge If the EBITDA growth
these investees. of market conditions was 5% higher or
The expected cash of the specific industries. lower while all other
flow is based on variables were held
the Group's board-approved constant, the carrying
budget and plans amount would increase
adopted for the three by GBP3.6m and decrease
years to 31 March by GBP9.2m respectively.
2020 and a long-term
growth rate for subsequent
periods.
------------------- --------------------------- ---------------------------- -----------------------------
Level 3: Income approach - The value of the The higher the EBITDA
Contingent in this approach, contingent consideration growth rate, the
consideration the discounted cash is dependent on future higher the value
payable flow method was used performance of the of contingent consideration
to capture the present business. payable.
value of the expected EBTIDA for a period The consideration
future economic benefits of up to two years payable for Renegade
to be derived from is used taking into is based upon adjusted
the ownership of account management's EBITDA performance
these investees. experience and knowledge to 31 December 2016.
The expected cash of market conditions Amounts in the range
flow is based on of the specific industries. of GBP3.4m - GBP4.0m
the Group's board-approved will be payable,
budget and plans subject to audit.
adopted for the applicable The amounts payable
period. under the other contingent
consideration relationships
is capped at GBP6.0m.
------------------- --------------------------- ---------------------------- -----------------------------
Level 3: Income approach - Long-term performance The greater the cash
Available-for-sale in this approach, of the available-for-sale generation of the
financial the discounted cash investments, taking investment over time,
assets flow method was used into account management's the higher the fair
to capture the present experience and knowledge value.
value of the expected of market conditions
future economic benefits of the specific industries.
to be derived from
the ownership of
these investees.
=================== =========================== ============================ =============================
27. Subsidiaries
The Group's principal wholly-owned subsidiary undertakings are
as follows:
Name Country of incorporation Principal activity
============================== ======================== ==================================
Entertainment One Films Canada
Inc. Canada Content ownership and distribution
Entertainment One Limited
Partnership Canada Content ownership and distribution
Entertainment One Television Sales and distribution of
International Ltd. Canada films and television programmes
Entertainment One Television Production of television
Productions Ltd. Canada programmes
Videoglobe 1 Inc. Canada Content distribution
Entertainment One UK Limited England and Wales Content ownership
Alliance Films (UK) Limited England and Wales Content ownership
Entertainment One UK Holdings
Limited England and Wales Holding company
Entertainment One US LP US Content ownership and distribution
Entertainment One Television Sales and distribution of
USA Inc. US films and television programmes
============================== ======================== ==================================
All of the above subsidiary undertakings are 100% owned and are
owned through intermediate holding companies. The proportion held
is equivalent to the percentage of voting rights held.
All of the above subsidiary undertakings have been consolidated
in the consolidated financial statements under the acquisition
method of accounting.
28. Interests in joint ventures
Accounting policy
A joint venture is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the net assets of the joint venture. Joint control is the
contractually agreed sharing of control of the arrangement, which
exists only when decisions about the relevant activities require
unanimous consent of the parties sharing control.
The Group's interests in its joint ventures are accounted for
using the equity method. The investment is initially recognised at
cost and is subsequently adjusted to recognise changes in the
Group's share of net assets of the associate or joint venture since
the acquisition date. The share of results of its joint ventures
are shown within single line items in the consolidated balance
sheet and consolidated income statement, respectively.
The financial statements of the Group's joint ventures are
generally prepared for the same reporting period as the Group.
Where necessary, adjustments are made to bring the accounting
policies in line with those of the Group.
Year ended 31 March 2017
Details of the Group's joint ventures at 31 March 2017 are as
follows:
Proportion
Name Country of incorporation held Principal activity
================================= ======================== ========== =========================
Suite Distribution Ltd England and Wales 50% Production of films
Squid Distribution LLC US 50% Production of films
Automatik Entertainment LLC US 40% Film development
The Girlaxy LLC US 50% Content ownership and
distribution
LVK Distribution Limited England and Wales 50% Dormant company
Eat St. Digital Inc Canada 50% Production of television
programmes
Creative England-Entertainment England and Wales 50% Development of television
One Global Television Initiative shows
Limited
================================= ======================== ========== =========================
Contractual arrangements establish joint control over each joint
venture listed above. No single venturer is in a position to
control the activity unilaterally.
The movements in the carrying amount of interests in joint
ventures in the years ended 31 March 2017 and 2016 were as
follows:
31 March 2017 31 March 2016
================================================== ================ ===============
MGC Other MGC Other
GBPm GBPm GBPm GBPm
================================================== ======== ====== ======== =====
Carrying amount of interests in joint ventures - 3.2 87.8 3.2
Transfer from joint venture to fully consolidated
subsidiary - (1.8) (89.9) -
Acquisition related costs - - (1.0) -
Group's share of results of joint ventures
for the year - (0.7) 3.1 0.3
Dividends received from joint ventures - - - (0.2)
Foreign exchange - 0.4 - (0.1)
================================================== ======== ====== ======== =====
Carrying amount of interests in joint ventures - 1.1 - 3.2
================================================== ======== ====== ======== =====
The transfer from joint venture to fully consolidated subsidiary
during the year ended 31 March 2017 relates to the carrying value
of equity in Secret Location on acquisition of the remaining 50% of
the share capital on 15 August 2016 to fully consolidate Secret
Location into the Group's consolidated financial statements. See
Note 25 for further details.
The transfer from joint venture to fully consolidated subsidiary
during the year ended 31 March 2016 relate to the carrying value of
equity in MGC on amendment of the accounting treatment on 19 May
2015 to fully consolidate MGC into the Group's consolidated
financial statements.
The Group's share of results of joint ventures for the year of
GBP0.7 loss (2016: GBP3.4m gain) includes a charge of GBPnil
relating to the Group's share of tax, finance costs and
depreciation (2016: GBP1.6m charge).
The following presents, on a condensed basis, the effects of
including joint ventures in the consolidated financial statements
using the equity method. Each joint venture in the other category
is considered individually immaterial to the Group's consolidated
financial statements.
Year ended
31 March Year ended
2017 31 March 2016
Other MGC Other Total
GBPm GBPm GBPm GBPm
==================================================== ========== ===== ===== =====
Revenue 3.2 9.3 5.0 14.3
(Loss)/profit for the year (1.1) 6.2 0.6 6.8
==================================================== ========== ===== ===== =====
(Loss)/profit attributable to the Group (0.7) 3.1 0.3 3.4
==================================================== ========== ===== ===== =====
Dividends received from interests in joint ventures - - 0.2 0.2
==================================================== ========== ===== ===== =====
As a result of the purchase of the remaining 50% of Secret
Location, Secret Location has been fully consolidated into the
Group's consolidated financial statements as a subsidiary from 15
August 2016 going forward and as a result Secret Location is not
presented in the table below.
31 March 31 March
2017 2016
GBPm GBPm
================================================== ======== ========
Non-current assets 2.4 1.5
Current assets (including GBP0.3m (2016: GBP0.2m)
of cash and cash equivalents) 2.1 6.9
Non-current liabilities (0.7) -
Current liabilities (1.8) (5.8)
================================================== ======== ========
Net assets of other joint ventures 2.0 2.6
================================================== ======== ========
29. Interests in partly-owned subsidiaries
Accounting policy
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries (the Group). Control
of the Group's subsidiaries is achieved when the Group is exposed,
or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its
power over the investee.
The financial statements of the subsidiaries are generally
prepared for the same reporting periods as the parent company,
using consistent accounting policies. Subsidiaries are fully
consolidated from the date of acquisition and continue to be
consolidated until the date of disposal or at the point in the
future in which the Group ceases to have control of the entity. All
intra-group balances, transactions, income and expenses, and
unrealised profits and losses resulting from intra-group
transactions that are recognised in assets, are eliminated in
full.
Significant judgements
In the process of applying the Group's accounting policies, the
Group is required to make a judgement as to whether the Group
controls each non-wholly owned company. The Group assessed whether
or not the Group has control based on whether the Group has the
practical ability to direct the relevant activities of the company.
In making their judgement, the directors considered the substantive
rights held over the direction of the relevant activities. To
account for the company as a subsidiary the directors have
concluded that the Group has sufficient substantive rights to
direct the relevant activities of the company that most affect the
company's returns.
Principal SUBSIDiARIES with non-controlling interests
The Group's principal subsidiaries that have non-controlling
interests are provided below:
Country of Proportion
Name incorporation held Principal activity
=============================== ============== ========== ===================================
England and
Astley Baker Davies Limited Wales 70% Ownership of IP
Renegade Entertainment,
LLC US 65% Production of television programmes
Insomnia VR Productions
Inc Canada 50% Ownership of IP
The Mark Gordon Company
group companies
Deluxe Pictures (dba The Production of films and television
Mark Gordon Company) US 51% programmes
MG's Game, Inc US 51% Production of films
Molly's Movie, Inc US 51% Production of films
Warm Cases Financing, LLC US 51% Production of films
Designated 1 Financing,
LLC US 51% Production of television programmes
Sierra Pictures group companies
Production and international
Sierra Pictures, LLC US 51% sales of films
999 Holdings, LLC US 51% Production of films
999 NY Productions, Corp US 51% Production of films
999 Productions, LLC US 51% Production of films
Blunderer Holdings, LLC US 51% Production of films
Blunderer NY Productions,
Corp US 51% Production of films
Blunderer Productions, LLC US 51% Production of films
Coldest City Productions,
LLC US 51% Production of films
Coldest City, LLC US 51% Production of films
LCOZ Holdings, LLC US 51% Production of films
LCOZ NY Productions, Corp. US 51% Production of films
England and
LCOZ Productions Limited Wales 51% Production of films
Osprey Distribution, LLC US 51% Production of films
PPZ Holdings, LLC US 51% Production of films
PPZ NY Productions, Corp US 51% Production of films
PPZ Productions Canada Ltd. Canada 51% Production of films
England and
PPZ Productions Ltd Wales 51% Production of films
Sierra Pictures Development,
LLC US 51% Production of films
Sierra/Engine Television,
LLC US 51% Production of films
Sierra/Affinity, LLC US 51% International sales of films
Television production companies
Westventures IV Productions
Ltd * Canada 50% Production of television programmes
She-Wolf Season 2 Productions
Inc * Canada 51% Production of television programmes
She-Wolf Season 3 Productions
Inc * Canada 51% Production of television programmes
JCardinal Productions Inc
* Canada 50% Production of television programmes
Cardinal Blackfly Productions
Inc * Canada 51% Production of television programmes
Oasis Shaftesbury Releasing
Inc * Canada 50% Production of television programmes
Bon Productions (NS) Inc
* Canada 49% Production of television programmes
Da Vinci Releasing Inc * Canada 49% Production of television programmes
Hope Zee One Inc * Canada 49% Production of television programmes
Hope Zee Two Inc * Canada 49% Production of television programmes
Hope Zee Three Inc * Canada 51% Production of television programmes
Hope Zee Four Inc * Canada 51% Production of television programmes
HOW S3 Productions Inc * Canada 49% Production of television programmes
HOW S4 Productions Inc * Canada 49% Production of television programmes
HOW S5 Productions Inc * Canada 49% Production of television programmes
Klondike Alberta Productions
Inc * Canada 49% Production of television programmes
Amaze Film + Televisions
Inc * Canada 33% Production of television programmes
iThentic Canada Inc * Canada 33% Production of television programmes
FD Media 2 Inc. * Canada 50% Production of television programmes
FD Media Inc. * Canada 50% Production of television programmes
The Shopping Bags Media
Inc * Canada 50% Production of television programmes
Seedling Productions 2 Inc
* Canada 49% Production of television programmes
Union Station Media LLC
* US 50% Production of television programmes
* These production companies within the Television Division have
been classified as fully consolidated subsidiaries based on an
assessment that, under IFRS 10, the Group has power and control
over the activities of the companies. Through these companies, the
Group produces or co-produces television programmes. These
production companies are structured in such a way that the Group
retains the risks and rewards of ownership and has the ability to
vary the return it receives from the production company. At the end
of the co-production, the production company has zero or minimal
net income and zero or minimal tax and other obligations. As such
the directors do not consider the production companies to have a
material effect on the consolidated financial statements. The
impact of the non-controlling interests on the consolidated income
statement for the year ended 31 March 2017 for these entities is
GBPnil (31 March 2016: GBP0.2m loss).
The following presents, on a condensed basis, the effects of
including other partly-owned subsidiaries in the consolidated
financial statements for the years ended 31 March 2017 and 31 March
2016:
Astley
Baker The Mark
Davies Gordon Sierra Renegade
Limited Company Pictures 83
Year ended 31 March 2017 GBPm GBPm GBPm GBPm
============================================ ======== ======== ========= ========
Revenue 18.0 119.9 91.6 28.6
Profit for the year 6.9 14.2 2.8 3.2
============================================ ======== ======== ========= ========
Profit attributable to the Group 4.8 7.2 1.4 2.1
============================================ ======== ======== ========= ========
Dividends paid to non-controlling interests 2.7 - 0.5 -
============================================ ======== ======== ========= ========
Non-current assets 150.2 96.7 22.7 8.4
Current assets 12.3 106.4 34.3 6.2
Non-current liabilities (25.5) (84.4) - -
Current liabilities (2.9) (49.6) (38.9) (7.0)
============================================ ======== ======== ========= ========
Net assets of partly owned subsidiaries 134.1 69.1 18.1 7.6
============================================ ======== ======== ========= ========
Astley
Baker The Mark Restated Restated
Davies Gordon Sierra Renegade
Limited Company Pictures 83
Year ended 31 March 2016 GBPm GBPm GBPm GBPm
============================================= ======== ======== ========= =========
Revenue 12.8 14.6 20.2 -
Profit for the period from acquisition to 31
March 2016 6.5 2.9 1.3 -
============================================= ======== ======== ========= =========
Profit attributable to the Group 4.5 1.5 0.7 -
============================================= ======== ======== ========= =========
Dividends paid to non-controlling interests 0.8 - - -
============================================= ======== ======== ========= =========
Non-current assets 157.1 55.3 48.7 12.5
Current assets 10.2 15.7 16.3 3.2
Non-current liabilities (28.8) (19.3) - -
Current liabilities (2.2) (4.3) (51.3) (12.4)
============================================= ======== ======== ========= =========
Net assets of partly owned subsidiaries 136.3 47.4 13.7 3.3
============================================= ======== ======== ========= =========
30. Stated capital, own shares and other reserves
Accounting policy
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are recorded
at the proceeds received, net of direct issue costs.
Own shares
The Entertainment One Ltd. shares held by the Trustees of the
Company's Employee Benefit Trust (EBT) are classified in total
equity as own shares and are recognised at cost. Consideration
received for the sale of such shares is also recognised in equity,
with any difference between the proceeds from sale and the original
cost being taken to reserves. No gain or loss is recognised on the
purchase, sale, issue or cancellation of equity shares.
Analysis of amounts recognised by the group
Stated capital
Year ended 31 Year ended 31
March 2017 March 2016
=============== ===============
Number Number
of of
shares Value shares Value
'000 GBPm '000 GBPm
====================================== ======== ===== ======== =====
Balance at 1 April 427,343 500.0 295,682 305.5
Shares issued on exercise of share
options 575 1.2 185 -
Shares issued as part-consideration
for acquisitions 1,729 4.1 - -
Shared issued as part of rights issue - - 131,476 194.5
Balance at 31 March 429,647 505.3 427,343 500.0
====================================== ======== ===== ======== =====
At 31 March 2017 and 31 March 2016 the Company had common shares
only.
During the years ended 31 March 2017 and 31 March 2016, the
Group issued the following stated capital:
- 574,921 common shares (2016: 185,044) were issued to employees
(or former employees) exercising share options granted under the
Long Term Incentive Plan (see Note 31). The total consideration
received by the Company on the exercise of these options was GBPnil
(2016: less than GBP0.1m).
- 1,728,794 common shares (equivalent to GBP4.1m) were issued as
at 15 August 2016 as consideration for the purchase of the
remaining 50% share in Secret Location. Further details of these
acquisitions are set out in Note 25.
- On 20 October 2015, to fund the acquisition (and associated
acquisition costs) of Astley Baker Davies Limited, the Group
completed a fully underwritten 4 for 9 rights issue of 131,476,173
new common shares at 153.0 pence per new common share. Net of
expenses, the total amount raised was GBP194.5m. The fees in
relation to the equity raise of GBP6.7m have been capitalised to
Equity.
In total, the net proceeds received by the Company during the
year on the issue of new common shares was GBPnil (2016:
GBP194.5m).
Subsequent to these transactions, and at the date of
authorisation of these consolidated financial statements, the
Company's stated capital comprised 429,646,877 common shares (2016:
427,343,162).
Own shares
At 31 March 2017, 1,599,674 common shares (2016: 3,910,328
common shares) were held as own shares by the Employee Benefit
Trust (EBT) to satisfy the exercise of future options under the
Group's share option schemes (see Note 31 for further details). The
book value of own shares at 31 March 2017 was GBP1.5m (2016:
GBP3.6m).
During the year ended 31 March 2017, 2,310,654 shares (2016:
nil) were issued to employees (or former employees) exercising
share options granted under the Long Term Incentive Plan (see Note
31). The total consideration received by the Company on the
exercise of these options was GBPnil.
Other reserves
Other reserves comprise the following:
- a cash flow hedging reserve at 31 March 2017 of debit balance
GBP1.1m (2016: credit balance of GBP1.4m).
- a permanent restructuring reserve of GBP9.3m at 31 March 2017
and 2016 which arose on completion of the Scheme of Arrangement in
2010 and represents the difference between the net assets and share
capital and share premium in the ultimate parent company
immediately prior to the Scheme.
- put options over non-controlling interests of subsidiaries
reserve which represents the potential cash payments related to put
options issued by the Group over the non-controlling interest of
subsidiary companies and are accounted for as financial
liabilities. The amount that may become payable under the option on
exercise is initially recognised on acquisition at present value
within other payables with a corresponding charge directly to
equity.
31. Share-based payments
Accounting policy
The Group issues equity-settled share-based payments to certain
employees. Equity-settled share-based payments are measured at fair
value at the date of grant of equity-settled share-based payments.
The fair value is expensed on a straight-line basis over the
vesting period, based on the Group's estimate of shares that will
eventually vest. Fair value is measured by means of a binomial or
monte carlo valuation model with the assistance of external
advisors. The expected life used in the model has been adjusted,
based on management's best estimate, for the effect of
non-transferability, exercise restrictions, and behavioural
considerations.
Key area of estimation uncertainty
The charge for share-based payments is determined based on the
fair value of awards at the date of grant by use of models which
requires judgements to be made regarding expected volatility,
dividend yield, risk free rates of return and expected option
lives. The list of inputs used in the binomial model to calculate
the fair values is provided below.
Equity-settled share schemes
At 31 March 2017, the Group had four equity-settled share-based
payment schemes approved for its employees (including the executive
directors). These are the Long Term Incentive Plan (LTIP), the
Executive Share Plan (ESP), the Executive Incentive Scheme (EIS)
and the Employee Save-As-You-Earn scheme (SAYE).
The ESP is now closed and no further awards will be made from
the scheme. The EIS was approved at the Group's AGM on 16 September
2015. No awards have been granted during the year under the
EIS.
The total charge in the year relating to the Group's
equity-settled schemes was GBP5.0m (2016: GBP4.1m), inclusive of a
charge of GBP0.1m (2016: credit of GBP0.1m) relating to movements
in associated social security liabilities.
Long Term Incentive Plan (LTIP)
On 28 June 2013, an LTIP for the benefit of employees (including
executive directors) of the Group was approved by the Company's
shareholders. A summary of the arrangements is set out below:
Nature Grant of nil cost options
Performance period Up to five years
Performance conditions (i) Annualised adjusted fully diluted earnings per
(examples of existing share growth over the performance period, average
performance conditions return on capital employed over the performance period
shown) and total shareholder return over the performance
period;
(ii) 50% vesting over the three-year performance period
and 50% vesting dependent on performance against annual
Group underlying EBITDA targets;
(iii) Pre-determined share price growth targets;
(iv) Time only.
Maximum term 10 years
======================= ========================================================
During the year, grants were made under the LTIP. The fair value
of each grant was measured at the date of grant using either a
binomial model or a monte carlo model.
The assumptions used in the model were as follows:
Grant date Fair value Number Performance Share price Exercise Expected Expected Dividend Risk
at of options period on date price volatility life yield free
measure-ment granted (period of grant interest
date (pence) ending) (pence) rate
----------- ------------ ----------- ----------- ----------- -------- ----------- -------- -------- ---------
24 May 2016 174.6 745,000 May 2019 178.2 Nil n/a 10 years 0.8% 0.9%
24 May 2016 66.5 750,000 Apr 2020 178.2 Nil 26% 5 years 0.8% 0.9%
15 August
2016 196.0 150,001 May 2019 255.0 Nil n/a 10 years 0.8% 0.9%
15 August
2016 197.0 120,000 Aug 2021 255.0 Nil n/a 10 years 0.8% 0.9%
Other
ad-hoc
grants (1) 196.0 111,000 May 2019 199.9 Nil n/a 10 years 0.8% 0.9%
----------- ------------ ----------- ----------- ----------- -------- ----------- -------- -------- ---------
1. The options were granted on various days between 4 April 2016
and 14 November 2016. The information presented has been calculated
using the weighted average for the individual grants.
The expected volatility is based on the Company's share price
from the period since trading first began, adjusted where
appropriate for unusual volatility. Actual future dividend yields
may be different from the assumptions made in the above valuations.
Details of share options granted and outstanding at the end of the
year are as follows:
2017 2016
Weighted Weighted
average average
2017 exercise 2016 exercise
Number price Number price
Million Pence Million Pence
============================== ======== ========= ======== =========
Outstanding at 1 April 11.4 - 4.0 -
Exercised (2.9) - - -
Granted 1.9 - 6.8 -
Granted (rights issue uplift) - - 0.8 -
Forfeited (0.4) - (0.2) -
Lapsed (1.6) - - -
============================== ======== ========= ======== =========
Outstanding at 31 March 8.4 - 11.4 -
============================== ======== ========= ======== =========
Exercisable 1.5 - - -
============================== ======== ========= ======== =========
The weighted average contractual life remaining of the LTIP
options in existence at the end of the year was 6.7 years (2016:
7.4 years).
Employee Save-As-You-Earn Scheme (SAYE)
On 30 September 2016, an SAYE for the benefit of employees
(including executive directors) of the Group was approved by the
Company's shareholders. Employees make a monthly contribution,
depending on jurisdiction, for up to 3 years. At the end of the
savings period the employee has the opportunity to retain their
savings, in cash, or to buy shares in eOne at a price fixed at the
date of grant. A summary of the arrangement is set out below:
Nature Grant of options, with an exercise price of 151.9 pence
Performance Up to three years
period
Performance 100% of the options vest on the completion of 3 years'
conditions service in every territory with the exception of the
US which vest on the completion of 2 years' service.
Maximum term 3 years. The options expire six months after vesting.
============ =======================================================
During the year, grants were made under the SAYE. The fair value
of each grant was measured at the date of grant using either a
binomial model or a monte carlo model. The assumptions used in the
model were as follows:
Grant date Fair value Number Performance Share Exercise Expected Expected Dividend Risk free
at of options period price price volatility life yield interest
measure-ment granted (period on date rate
date (pence) ending) of grant
(pence)
----------- -------------- ----------- ----------- --------- -------- ----------- -------- -------- ---------
28 April
2016 54.8 2,068,452 April 2019 193.5 151.9 n/a 3 years 0.8% 0.97%
28 April
2016 50.7 127,562 April 2018 193.5 151.9 n/a 2 years 0.8% 0.97%
=========== ============== =========== =========== ========= ======== =========== ======== ======== =========
The expected volatility is based on the Company's share price
from the period since trading first began, adjusted where
appropriate for unusual volatility. Actual future dividend yields
may be different from the assumptions made in the above valuations.
Details of share options granted and outstanding at the end of the
year are as follows:
Details of share options exercised, lapsed and outstanding at
the end of the year are as follows:
2017
Weighted
average
2017 exercise
Number price
Million Pence
======================== ======== =========
Outstanding at 1 April - -
Granted (2.2) 151.9
Exercised - -
Forfeited - -
Outstanding at 31 March (2.2) 151.9
======================== ======== =========
Exercisable - -
======================== ======== =========
The weighted average contractual life remaining of the SAYE
options in existence at the end of the year was 2.1 years.
32. Commitment and contingencies
Accounting policy
The determination of whether an arrangement is, or contains, a
lease is based on the substance of the arrangement at inception
date, whether fulfilment of the arrangement is dependent on the use
of a specific asset or assets or the arrangement conveys a right to
use the asset, even if that right is not explicitly specified in an
arrangement. Rentals payable under operating leases are charged to
the consolidated income statement on a straight-line basis over the
lease term.
Operating lease commitments
The Group operates from properties in respect of which
commercial operating leases have been entered into.
At the balance sheet date, the Group had outstanding commitments
for future minimum lease payments under non-cancellable operating
leases, which fall due as follows:
31 March 31 March
2017 2016
GBPm GBPm
============================================= ======== ========
Within one year 9.6 10.2
Later than one year and less than five years 17.9 21.9
After five years 28.9 29.0
============================================= ======== ========
Total 56.4 61.1
============================================= ======== ========
Future COMMITMENTS
31 March 31 March
2017 2016
GBPm GBPm
===================================================== ======== ========
Investment in acquired content rights contracted for
but not provided 190.3 254.2
===================================================== ======== ========
contingent liabilities
The Group holds an option to purchase the remaining 49% stake in
The Mark Gordon Company after an initial seven-year term. The value
of which is to be based upon a commercially negotiated price at the
time of purchase. No liability has been recorded within the
consolidated financial statements of the Group, as the decision to
exercise the option will be determined by the commercial viability
at the time and therefore the probability of a payment being made
is not known at the balance sheet date.
33. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this Note.
Canada Pension Plan Investment Board (CPPIB) held 84,597,069
common shares in the Company at 31 March 2017 (2016: 84,597,069),
amounting to 19.69% (2016: 19.80%) of the issued capital of the
Company. CPPIB is deemed to be a related party of Entertainment One
Ltd. by virtue of this significant shareholding. The Group pays
CPPIB an annual fee equivalent to the annual fee paid by the Group
to its other non-executive directors in consideration for CPPIB
allowing Scott Lawrence to allocate time to his role as a
non-executive director of the Company. The fee payable to CPPIB in
respect of Scott Lawrence's services for the year ended 31 March
2017 was C$91,700 (2016: C$22,500).
At 31 March 2017 the amounts outstanding payable to CPPIB was
C$7,500 (2016: C$22,500).
With the exception of the items noted above, the nature of
related parties disclosed in the consolidated financial statements
for the Group as at and for the year ended 31 March 2016 has not
changed.
34. post balance sheet events
On 17 May 2017 the Group entered into an agreement with industry
veteran Brad Weston to launch MAKEREADY, a new global content
creation company. MAKEREADY will develop and produce original
feature films and high-end television programmes for premium cable,
OTT and emerging platforms on a worldwide basis.
Under the terms of the agreement, the Group is funding
MAKEREADY's launch, including new content that the partnership
greenlights. The Group will have distribution of MAKEREADY films in
its territories and MAKEREADY television worldwide, providing the
Group with a pipeline of premium content created by and starring
top tier talent. The agreements with Brad Weston contain certain
customary puts and calls and other exit events, including an
opportunity for the Group to acquire up to 100% of MAKEREADY, upon
certain events, for consideration to be determined in the
future.
As part of the previously announced wider reshaping of the Film
Division, Entertainment One has re-negotiated one of its larger
film distribution arrangements. The previous arrangement has been
terminated and replaced with a new distribution arrangement and,
associated with the termination, the Company will make a one-time
payment of GBP20.1m (US$25m) which has been included in the Group's
consolidated financial statements for the year ended 31 March 2017.
Management expects underlying profitability and cash flow to
improve for films delivered under the new distribution
arrangement.
Appendix to the annual report (unaudited)
for the year ended 31 March 2017
Reconciliation of additional performance measures
Underlying EBITDA
The Group presents underlying EBITDA, one-off items, adjusted
profit before tax and adjusted earnings per share information.
These measures are used by the directors for internal performance
analysis and incentive compensation arrangements for employees. The
terms "underlying", "one-off items" and "adjusted" may not be
comparable with similarly titled measures reported by other
companies.
The term "underlying EBITDA" refers to operating profit or loss
excluding amortisation of acquired intangibles; depreciation;
amortisation of software; share-based payment charge; tax, finance
costs and depreciation related to joint ventures; and operating
one-off items.
The Group presents revenue and underlying EBITDA on a constant
currency basis, which is calculated by retranslating the
comparative figures using weighted average exchange rates for the
current year.
The Group presents underlying Group revenue and EBITDA growth
(excluding acquisitions) on a constant currency basis which is
defined as the underlying revenue or EBITDA growth on a constant
currency, excluding the revenue or EBITDA derived from the
acquisitions from the date of acquisition to the year-end date.
Adjusted Profit before Tax and Adjusted Earnings
The terms "adjusted profit before tax" and "adjusted earnings
per share" refer to the reported measures excluding amortisation of
acquired intangibles; share-based payment charge; tax, finance
costs and depreciation related to joint ventures; operating one-off
items; finance one-off items; and, in the case of adjusted earnings
per share, one-off tax items. Refer to Note 11.
Return on Capital Employed
The Group presents the term "Return on capital employed" as the
"Adjusted net operating profit" as a percentage of "Average capital
employed".
Adjusted net operating profit is defined as the adjusted profit
for the period adding back Underlying income tax charge relating to
joint ventures, interest cost relating to the Group's bank
facilities, net financing foreign exchange gain or loss,
amortisation of deferred finance charges and the tax effect of the
above finance charges (at the Group's adjusted effective tax
rate).
Average capital employed is defined as the average of the
current period and prior period adjusted total assets less adjusted
current liabilities. Total assets are adjusted by deducting the
cash and cash equivalents relating to the Group's net debt group.
Current liabilities are adjusted by deducting interest bearing
loans and borrowings and including non-current production
financing.
This measure is used by the directors for internal performance
analysis and incentive compensation arrangements for the executive
directors.
The Groups' Return on capital employed is calculated as
follows:
31 March 31 March
2017 2016
GBPm GBPm
================================== ======== ========
Adjusted net operating profit 122.9 95.5
Average capital employed 992.1 778.4
Return on capital employed (ROCE) 12.4% 12.3%
================================== ======== ========
The reconciliation of adjusted net operating profit to profit
for the year is as follows:
31 March 31 March
2017 2016
Note GBPm GBPm
--------------------------------------------------------- ---- -------- --------
Profit before tax 37.2 47.9
Add back:
One-off net finance costs 7 (1.3) 6.5
Amortisation of acquired intangibles 13 41.9 27.4
Share-based payment charge 31 5.0 4.1
Tax, finance costs and depreciation relating to joint
ventures 28 - 1.6
One-off items 6 47.1 16.6
--------------------------------------------------------- ---- -------- --------
Adjusted profit before tax for the year 129.9 104.1
Adjusted tax 8 (27.1) (22.4)
Add back: Underlying income tax charge relating to joint
ventures - (2.1)
--------------------------------------------------------- ---- -------- --------
Interest cost on Group bank facilities 7 22.8 16.4
Net financing foreign exchange loss 7 0.9 2.0
Amortisation of deferred finance charges 7 1.7 2.2
--------------------------------------------------------- ---- -------- --------
Add back total finance charges 7 25.4 20.6
Tax effect of finance charges (at the Group's adjusted
effective tax rate of 20.7% (2016: 22.6%)) (5.3) (4.7)
--------------------------------------------------------- ---- -------- --------
Adjusted net operating profit 122.9 95.5
--------------------------------------------------------- ---- -------- --------
The reconciliation of average capital employed to the
consolidated financial statements is as follows:
Restated
31 March 31 March 31 March Average Average
2017 2016 2015 2016-17 2015-16
Note GBPm GBPm GBPm GBPm GBPm
------------------------------ ---- -------- --------- -------- -------- --------
Total assets 1,901.0 1,636.9 1,172.7
Less: Cash and cash
equivalents 19 (133.4) (108.3) (71.3)
Add: Cash held only
for production financing 19 43.7 13.6 27.6
============================== ==== ======== ========= ======== ======== ========
Average total assets 1,811.3 1,542.2 1,129.0 1,676.8 1,335.6
============================== ==== ======== ========= ======== ======== ========
Current liabilities (679.9) (565.1) (488.3)
Less: Current interest
bearing loans and borrowings 22 0.5 - 19.9
Add: Non-current production
financing 23 (91.2) (33.6) (47.2)
============================== ==== ======== ========= ======== ======== ========
Average total liabilities (770.6) (598.7) (515.6) (684.7) (557.2)
============================== ==== ======== ========= ======== ======== ========
Average capital employed 1,040.7 943.5 613.4 992.1 778.4
============================== ==== ======== ========= ======== ======== ========
Library valuation
Underpinning eOne's focus on growth through content ownership,
the Group commissions an annual independent library valuation
calculated using a discounted cash flow model (discounted using the
Group's published post-tax weighted average cost of capital) for
all of eOne's television, family, film and music assets on a
rateable basis with eOne's ownership of such assets. The cash flows
represent forecast of future amounts which will be received from
the exploitation of the assets, net of payments made as royalties
or non-controlling interests and an estimate of the overheads
required to support such exploitation.
Currency and acquisition related adjustments
The Group presents revenue and underlying EBITDA on a constant
currency basis, which is calculated by retranslating the
comparative figures using weighted average exchange rates for the
current year.
A reconciliation of the revenue growth on a constant currency
basis is shown below:
31 March 31 March
2017 2016 Change
GBPm GBPm %
------------------------------------------ -------- -------- ------
Revenue for year ended 31 March (per IFRS
consolidated profit and loss account) 1,082.7 802.7 34.9%
Currency adjustment - 95.6
------------------------------------------ -------- -------- ------
Revenue for year ended 31 March (constant
currency) 1,082.7 898.3 20.5%
------------------------------------------ -------- -------- ------
A reconciliation of the underlying EBITDA growth on a constant
currency basis is shown below:
31 March 31 March
2017 2016 Change
GBPm GBPm %
------------------------------------------------- -------- -------- ------
Underlying EBITDA for year ended 31 March
(per IFRS consolidated profit and loss account) 160.2 129.1 24.1%
Currency adjustment - 10.8
------------------------------------------------- -------- -------- ------
Revenue for year ended 31 March (constant
currency) 160.2 139.9 14.5%
------------------------------------------------- -------- -------- ------
Restricted Group financial data
The Notes are secured against the assets of various Group
subsidiaries which make up the 'Restricted Group'. The Restricted
Group financial data as at 31 March 2017 is as follows:
As of As of
and for and for
the year the year
ended ended
31 March 31 March
2017 2016
GBPm GBPm
Revenue 843.3 698.5
Underlying EBITDA 126.5 109.4
Cash and cash equivalents 89.7 94.7
Net debt (187.4) (180.8)
--------------------------- --------- ---------
cash flow and net debt
The table below reconciles cash flows associated with the net
debt of the Group. It excludes cash flows associated with
production activities which are reconciled in the Cash Flow and
Production Financing section below.
Year ended Year ended
31 March 2017 31 March 2016
GBPm GBPm
================================================= =============== ==============
Underlying EBITDA 153.0 121.2
Adjustments for:
Tax, finance costs and depreciation related
to joint ventures - (1.5)
One-off items (44.4) (16.0)
Disposal of property, plant and equipment 0.8 -
Amortisation of investment in productions 32.8 (3.3)
Investment in productions, net of grants
received (34.2) (9.2)
Amortisation of investment in acquired content
rights 168.3 147.0
Investment in acquired content rights (181.4) (121.4)
Impairment of investment in acquired content
rights 2.2 3.4
Foreign exchange movements - (5.2)
Fair value gain on acquisition of subsidiary (2.3) -
Share of results of joint ventures 0.6 (3.0)
------------------------------------------------- --------------- --------------
Operating cash flows before changes in working
capital and provisions 95.4 112.0
Working capital movements (31.2) (50.5)
Income tax paid (16.2) (14.4)
------------------------------------------------- --------------- --------------
Net cash from operating activities 48.0 47.1
------------------------------------------------- --------------- --------------
Cash one-off items 15.9 14.1
Purchase of PP&E and software (3.2) (7.7)
Interest paid (24.2) (10.2)
Free cash flow 36.5 43.3
------------------------------------------------- --------------- --------------
Cash one-off items (15.9) (14.1)
Financing items (1.7) (6.6)
Acquisitions, net of debt acquired (including
purchase of intangibles) (9.6) (177.0)
Net proceeds from issue of ordinary shares - 194.5
Dividends paid (8.3) (4.0)
Net increase in net debt 1.0 36.1
------------------------------------------------- --------------- --------------
Net debt at the beginning of the period (180.8) (224.9)
Net increase in net debt 1.0 36.1
Effect of foreign exchange fluctuations
on net debt held (7.6) 8.0
Net debt at the end of the period (187.4) (180.8)
------------------------------------------------- --------------- --------------
The table below reconciles the movement in net debt to movement
in cash associated with net debt of the Group:
Year ended Year ended
31 March 2017 31 March 2016
GBPm GBPm
=========================================== ============== ==============
Net increase in net debt 1.0 36.1
Net drawdown of interest bearing loans and
borrowings (1.9) 17.4
Fees paid on refinancing of Group's bank
facilities (0.6) (9.9)
Acquisitions, debt acquired 2.5 -
Amortisation of deferred finance charges 1.7 2.2
Write off of deferred finance charges and
other items (0.1) 4.2
Net decrease in cash 2.6 50.0
------------------------------------------- -------------- --------------
CAsh flow and Production financing
Production financing cash flows relate to financing which is
used to fund the Group's television, family and film productions.
The financing is arranged on an individual production basis by
special purpose production subsidiaries which are excluded from the
security of the Group's corporate facility. It is short-term
financing whilst the production is being made and is paid back once
the production is delivered from the sales receipts and tax credits
associated with that production. The Company deems this type of
financing to be working capital in nature, as it is timing-based.
The Company therefore shows the cash flows associated with these
activities separately. The Company also believes that higher
production financing demonstrates an increase in the success of the
Television, Family and Film production businesses, which helps
drive revenues for the Group and therefore increases the generation
of EBITDA and cash for the Group, which in turn reduces the Group's
net debt leverage.
The table below reconciles cash flows associated with the
production financing taken out by the Group.
Year ended Year ended
31 March 31 March 2016
2017 GBPm
GBPm
====================================================== ==============
Underlying EBITDA 7.2 7.9
Adjustments for:
Tax, finance costs and depreciation related
to joint ventures - (0.1)
One-off items (2.7) (0.6)
Amortisation of investment in productions 180.6 113.9
Investment in productions, net of grants received (192.3) (87.9)
Foreign exchange movements - 1.2
Share of results of joint ventures 0.1 (0.4)
--------------
Operating cash flows before changes in working
capital and provisions (7.1) 34.0
Working capital movements (4.7) (8.5)
Income tax paid (2.2) (3.3)
--------------
Net cash from operating activities (14.0) 22.2
--------------
Cash one-off items 0.9 0.5
Purchase of PP&E and software (0.3) (0.9)
Interest paid (0.1) (0.1)
Free cash flow (13.5) 21.7
--------------
Cash one-off items (0.9) (0.5)
Financing items - (0.1)
Acquisitions, net of production financing acquired
(including purchase of intangibles) (0.7) (49.0)
Net (increase)/decrease in production financing (15.1) (27.9)
--------------
Production financing at the beginning of the
period (118.0) (89.3)
Net (increase)/decrease in production financing (15.1) (27.9)
Effect of foreign exchange fluctuations on production
financing (19.2) (0.8)
Production financing at the end of the period (152.3) (118.0)
The table below reconciles the movement in production financing
to the movement in cash associated with production financing taken
out by the Group:
Year ended Year ended
31 March 2017 31 March 2016
GBPm GBPm
=================================================
Net (increase)/decrease in production financing (15.1) (27.9)
Acquisitions, debt acquired - 52.7
Net drawdown/(repayment) of production financing 45.7 (39.0)
Other items - 0.2
Net increase in cash 30.6 (14.0)
-------------------------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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May 23, 2017 02:02 ET (06:02 GMT)
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