Entertainment One Ltd. Annual Report and Accounts 2015

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Entertainment One Ltd. Annual Report and Accounts 2015 Entertainment One Ltd. Ltd. One Entertainment Annual Report and Accounts 2015 Annual Report Entertainment One Ltd. Annual Report and Accounts 2015 ONE YEAR Entertainment One’s goal is to bring the best content to the world by: – being a true partner to the best creative talent – being the world’s leading independent distributor through a locally-deep, globally-connected network Entertainment One’s updated strategy aims to double the size of the Group in the next five years. CONTENTS Highlights ...........................................................................................................................................................1 Chairman’s statement ...................................................................................................12 Chief Executive’s review ........................................................................................14 Business review Film .............................................................................................................................................................. 18 Television .......................................................................................................................................23 Financial review........................................................................................................................... 29 Principal risks and uncertainties ........................................................ 33 Corporate responsibility ....................................................................................... 36 Corporate governance .............................................................................................40 Board of Directors ..............................................................................................................42 Corporate governance report ................................................................44 Audit Committee ..................................................................................................................49 Nomination Committee ....................................................................................... 55 Directors’ remuneration report ...........................................................57 Directors’ report .......................................................................................................................76 Independent auditor’s report .....................................................................79 Consolidated financial statements..............................................82 Company information ............................................................................................ 128 Visit our website entertainmentone.com STRATEGIC REPORT STRATEGIC HIGHLIGHTS 2015 has been a significant year for the Group with acquisitions and strategic investments, helping to ensure that it is in an excellent position to deliver its ambitious growth targets. CORPORATE GOVERNANCE CORPORATE AUGUST 2014 Acquisition of JUNE 2014 Force Four Entertainment Acquisition of Phase 4 Films FINANCIAL STATEMENTS FINANCIAL NOVEMBER 2014 Growth strategy update MAY 2014 Strategic investment in Secret Location JULY 2014 JANUARY 2015 Acquisition of Acquisition of stake in Paperny Entertainment The Mark Gordon Company FINANCIAL HIGHLIGHTS REVENUE PROFIT BEFORE TAX ADJUSTED NET DEBT £785.8m £44.0m £224.9m £793.5m (pro forma) £88.8m (adjusted) +£113.8m (2014: £111.1m) -5% (2014: £823.0m) +105% (2014: £21.5m) -4% (2014 pro forma: £829.6m) +13% (2014 adjusted: £78.4m) UNDERLYING EBITDA ADJUSTED FULLY DILUTED DIVIDEND EARNINGS PER SHARE £107.3m 23.7 pence 1.1 pence £117.2m (pro forma) +13% (2014: 20.9 pence) +10% (2014: 1.0 pence) +16% (2014: £92.8m) +11% (2014 pro forma: £105.3m) eOne Annual Report and Accounts 2015 | 1 ONE GROUP LEVERAGING SCALE AND REACH YUKON GOLD THE HIT SHOW IS NOW IN ITS FOURTH SERIES AND IS SOLD IN OVER 140 TERRITORIES GLOBALLY. 2 | entertainmentone.com STRATEGIC REPORT STRATEGIC OUR GROUP We source, select and sell entertainment content rights across all media platforms globally. We offer investors an attractive and risk mitigated way to benefit from the long-term trend of rising consumer demand for film and television content. Through critical mass and scale Film is now poised to generate strong cash flows and Television is in a market where structural GOVERNANCE CORPORATE changes are creating significant growth opportunities. A GROWING CONTENT PORTFOLIO 2015 PRO FORMA REVENUE FINANCIAL STATEMENTS FINANCIAL 28% £793.5m 72% Film Television Entertainment One is a market leader Entertainment One is one of the major in the territories where we operate, independent producers of television including Canada, the US, the UK, content commissioned primarily by the Spain, Australia/New Zealand and North American broadcast networks. 2015 PRO FORMA the Benelux. This content is then sold through UNDERLYING EBITDA In addition, through eOne Features, we our in-house television sales teams use our scale to produce and sell a small to over 500 broadcasters in 150 number of titles every year, enabling us territories globally. to participate in a film’s global success Our Family operations sit within the 41% with no change in overall risk profile. Television Division, with our children’s £117.2m properties spearheaded by Peppa Pig, 59% one of the world’s leading pre-school brands. In addition to Peppa Pig, we own a number of launched and developing children’s brands. 2015 PRO FORMA INVESTMENT IN AQUIRED 40,000+ 4,500+ CONTENT AND PRODUCTIONS film and television titles hours of television programming 38% £285.5m 37% 600+ 62% of pro forma Film Distribution Family licensing revenue through broadcast and agreements globally Film digital platforms Television eOne Annual Report and Accounts 2015 | 3 ONE WORLD BUILDING A GROUP OF GLOBAL PRESENCE GENERATED OVER US$1 BILLION OF RETAIL SALES IN 2015. 4 | entertainmentone.com STRATEGIC REPORT STRATEGIC OUR GLOBAL FOOTPRINT We are extending our reach into new geographies and enhancing our product offering across many markets, through multiple delivery channels. We are well placed globally to maximise opportunities from a growing demand for quality content. CORPORATE GOVERNANCE CORPORATE 9 1 2 STATEMENTS FINANCIAL 3 8 7 5 4 eOne territories 1. Canada 2. United Kingdom 3. Benelux 4. Spain 5. United States 6. Australia/New Zealand 10 6 eOne partners 7. France 8. Germany 9. Scandinavia 10. South Africa GLOBAL HIGHLIGHTS CONTENT LIBRARY DIGITAL REVENUES EXTERNAL REVENUES BY VALUATION AS A PROPORTION GEOGRAPHIC SEGMENT OF TOTAL GROUP US$801m 23% £785.8m US$XXXm US$XXXm External Revenue by Geographic segments 33% 23 9% Canada 21 UK 801 14% US 16 650 14 Europe 13 ROW 25% 19% 350 250 220 2013201220112010 2014 201320122011 2014 2015 eOne Annual Report and Accounts 2015 | 5 ONE FOCUS BRINGING THE BEST CONTENT TO THE WORLD MR. TURNER ACHIEVED £7 MILLION AT THE UK BOX OFFICE AND WAS NOMINATED FOR FIVE BAFTAS AND FOUR OSCARS. 6 | entertainmentone.com STRATEGIC REPORT STRATEGIC OUR BUSINESS MODEL AND STRATEGY Following a period of sustained growth in size and value, we refreshed and updated our strategy in the year. We will continue to drive economies of scale, take advantage of growing consumer content platforms and focus on producing the best content in high value genres. By partnering with the best creative talent and aiming to be the world’s leading independent distributor, we intend to double GOVERNANCE CORPORATE the size of the Group within the next five years. FINANCIAL STATEMENTS FINANCIAL SOURCE: CONNECT WITH CREATIVE TALENT A TRUE PARTNER TO THE BEST CREATIVE TALENT SCALE SELECT: PRODUCE / ACQUIRE GLOBAL RIGHTS REACH THE WORLD’S LEADING INDEPENDENT DISTRIBUTOR SELL: CINEMA RETAILER BROADCASTER DIGITAL The detailed strategy is presented in the Chief Executive’s review on pages 14-17. eOne Annual Report and Accounts 2015 | 7 ONE GOAL DOUBLING THE SIZE OF THE GROUP WITHIN FIVE YEARS THE HUNGER GAMES: MOCKINGJAY – PART 1 ACHIEVED US$337m GLOBAL BOX OFFICE REVENUES. 8 | entertainmentone.com STRATEGIC REPORT STRATEGIC OUR VALUE CREATION: KEY PERFORMANCE INDICATORS Successful execution of our strategy builds scale and reach, in turn generating attractive financial returns. The performance of the Group across our three core capabilities can be measured by clear performance indicators. Key performance indicator Progress INVESTMENT IN CONTENT LIBRARY VALUATION In 2015, the Group increased GOVERNANCE CORPORATE SOURCE / eOne aims to create value ACROSS FILM AND TV (£m)* ** (AS AT 31 MARCH 2014) (US$m) investment in content, with through the sourcing of £286m US$801m Film investment 4% lower high quality rights from leading reflecting reduced activity and 286 Television increasing by 18% as film and TV creative talent. 276 801 markets continue to expand. 650 175 136 91 350 250 220 201320122011 2014 2015 20142013201220112010 PF PF SELECT NUMBER OF TELEVISION HALF The Group released a lower STATEMENTS FINANCIAL eOne produces or acquires FILM RELEASES* HOURS PRODUCED** number of films during the the best content from 227 572 year, reflecting industry its creative partnerships, conditions, but a mix of 572 selecting the most 275 acquisitions and a higher level 507 227 commercial route for bringing 214 of underlying organic activity resulted in a 13% increase in the content to consumers. 152 295 269 121 237 the number of half hours of television content produced. 201320122011 2014 2015 201320122011 2014 2015 PF PF PF PF SELL FILM EBITDA AND MARGIN (£m)* TV EBITDA AND
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