Eone Annual Report 2017
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Entertainment One | 2017 Annual Report and Accounts Entertainment One | 2017 Annual Report 2017 Annual Report and Accounts Bringing the best content to the world At a glance Financial highlights 2017 Strategic progress Revenue Adjusted fully diluted earnings per share – Significant progress on the reshaping of the Film business, £1,082.7m 20.0 pence including progress on Fox and Sony partnerships and the +35% (2016: £802.7m) +3% (2016: 19.4 pence) renegotiation of a distribution arrangement with one of our 13 629.1 13 13.9 14 823.0 14 18.3 partners, with associated one-off 15 785.8 15 20.8 charges during the year 16 802.7 16 19.4 17 1,082.7 17 20.0 – Company structure evolving to underpin future growth with plans 0 200 400 600 800 1,000 0 5 10 15 20 25 £m Pence to combine Film and Television Divisions into a single studio operation, following establishment of a combined global sales team effective 1 April 2017 Underlying EBITDA Dividend – Independent library valuation increased to £160.2m 1.3 pence US$1.5 billion at 31 March 2016 +24% (2016: £129.1m) +8% (2016: 1.2 pence) (2015: >US$1 billion) – does not yet include benefit 13 62.5 13 of FY17 performance 14 92.8 14 1.0 15 107.3 15 1.1 – On track to double the size of 16 129.1 16 1.2 the business over the five years 17 160.2 17 1.3 to FY20 0 50 100 150 200 0 0.3 0.6 0.9 1.2 1.5 £m Pence – Confirmation of a new series of Peppa Pig, with 117 episodes to air over four years from Spring 2019 Profit before tax Adjusted net debt – Launch of MAKEREADY, a global content creation company with £37.2m £187.4m industry veteran Brad Weston -22% (2016: £47.9m) £6.6m higher (2016: £180.8m) 13 5.5 13 87.8 14 21.5 14 111.1 15 44.0 15 224.9 16 47.9 16 180.8 17 37.2 17 187.4 0 10 20 30 40 50 0 50 100 150 200 250 £m £m Alternative performance measures We use both statutory and adjusted measures in our strategic report. A full reconciliation between our reported and adjusted results is provided in our Appendix to the Annual Report on page 136. Strategic report Governance Financial statements Our unique model gives us access to the best talent to bring the highest quality content to the world. We source, select and sell entertainment content rights across all media platforms globally. We offer investors an attractive and risk mitigated return in a strong, dynamic and growing market. Demand for multi-channel content is growing and eOne is well positioned to capitalise. Contents Business model and strategy .............2 Board of Directors ...............................44 Chairman’s statement...........................8 Corporate governance report ..........46 Chief Executive Officer’s review ...... 10 Audit Committee ...................................51 Business review ....................................12 Nomination Committee ......................57 Television ..........................................14 Directors’ Remuneration Report ..... 60 Family .............................................. 20 Directors’ Report: additional Film ....................................................24 information .......................................... 80 Finance review .................................... 28 Independent Auditor’s Report ..........84 Principal risks and uncertainties ......33 Consolidated Financial Corporate responsibility ....................38 Statements ............................................88 Corporate governance .......................42 Notes to the Consolidated Financial Statements ......................... 92 Visit our website: entertainmentone.com 1 entertainmentone.com Our business model and strategy Our world of entertainment: we source, select and sell entertainment content rights across all media platforms globally. Sourcing Selecting Selling eOne Annual Report and Accounts 2017 2 Strategic report Governance Financial statements from world class talent We partner with the most talented producers in the world, bringing the very best content into our portfolio for monetisation the highest quality content We focus on the high value content genres and family brands that have global appeal to consumers around the world Our global sales presence enables us to sell content on a single territory, multi-territory or global basis 3 entertainmentone.com creating value through the sourcing of high quality rights from leading creative talent… Source Connect with creative talent KPIs Creating value FY13 79.6 We source our content from the most talented producers £265.3m FY14 87.1 in the world, working with them to develop, produce FY15 105.1 and monetise content most effectively across our global Investment in FY16 108.3 distribution network. By offering them a range of different content across FY17 265.3 partnership structures, we are able to capture their content Television and Family in our portfolio, driving present and future value. FY13 95.4 £142.6m FY14 189.7 FY15 175.7 Co-production deals Investment in content FY16 110.2 First Look deals in Film FY17 142.6 Overhead deals FY13 350 US$1.5bn FY14 650 Option deals FY15 801 Library valuation as FY16 1,000 Output deals at 31 March 2016 FY17 1,500 …selecting the most commercial route for bringing the content to consumers… Select Produce/acquire global rights KPIs Creating value In some cases we will acquire content for distribution but increasingly our content businesses are producing content, FY13 507 1,023 FY14 551 funded through low risk production financing secured on FY15 752 pre-sales to our customers. Television half hours FY16 998 produced and acquired FY17 1,023 By producing our own content we can take full control of ownership, globally and in perpetuity, in turn enabling us FY13 246 to maximise revenues through our sales teams. 1,083 FY14 457 FY15 635 Our partner companies: Family licences FY16 847 FY17 1,083 FY13 214 172 FY14 275 FY15 227 Film releases FY16 210 FY17 172 …maximising returns through our deep relationships, expertise across multiple platforms and global footprint… Sell Cinema – Retail – Broadcast – Digital Creating value eOne operates an integrated, international distribution team KPIs that stretches across over 150 territories, with presence in all parts of the content value chain. FY13 12.8 11.0% Our deep relationships with all of the key content buyers £62.8m FY14 14.5 11.1% and our ownership of global content rights positions us well to FY15 17.8 9.5% meet the challenges of this evolving market as our customers TV EBITDA and margin FY16 39.2 16.0% look to buy multi-territory or global content rights. FY17 62.8 13.9% Key channels FY13 5.2 29.7% Cinema Retail £55.6m FY14 10.3 29.0% FY15 23.8 39.1% Family EBITDA FY16 43.3 65.0% and margin FY17 55.6 62.8% FY13 49.3 9.5% £52.7m FY14 74.1 10.8% FY15 73.1 12.3% Broadcast Digital Film EBITDA and margin FY16 52.8 9.5% FY17 52.7 8.9% Fear the Walking Dead Peppa Pig Over 800 licences US$1.2 billion retail sales Over 10 million viewers 6 Oscar® awards US$441 million worldwide total lifetime gross La La Land …successful Deliver execution of the strategy generating improved 2017 financial returns. Performance Our business model has delivered another strong set of results in FY17. Total shareholder return (TSR) As well as robust 140 performances in 120 revenues and EBITDA 100 (up 35% and 24% 80 respectively), we have KPIs 60 once again delivered 40 strong free cash flow 2014 2015 2016 2017 (before production FY13 13.9 eOne FTSE 250 Index finance), continued our 20.0p FY14 18.3 FY15 20.8 progressive dividend Adjusted fully diluted FY16 19.4 policy and increased earnings per share (EPS) FY17 20.0 the value of our content library. Chairman’s statement Continuing to develop and evolve content markets The coming together of content services, technology and consumer demand in this way has created a vibrant and dynamic market for those who produce and own attractive content rights across multiple platforms and territories. Allan Leighton, Non-executive Chairman A vibrant market outlook Entertainment One has delivered a strong trading performance for the year, with very pleasing revenue growth from Television Seismic change has become the norm in the global content and Family, and another year of growth in underlying EBITDA. market, bringing with it both opportunities and challenges for It is particularly noteworthy that this performance includes all participants. Liberated from linear programming schedules significant organic growth and has been delivered against by technology and new digital content platforms, consumers a backdrop of a recovering Film business after two years of have embraced new ways to discover and view their favourite market volatility. This robust set of results allows the Board to shows and films. They demand, and expect, the best television increase the dividend for the year to 1.3 pence, in line with its shows and films to be delivered to them in the way they want, at progressive policy. a time they dictate and on the screen of their choice. Traditional broadcasters and networks have been challenged by these Operational highlights new demands, but many have now responded through improved functionality, pricing and choice of content. Operationally, Entertainment One has had another busy year across a number of fronts. A broad slate of successful film As the industry continues to adjust to this new market paradigm, releases, led by The BFG and The Girl on the Train, reversed two one thing remains clear: demand for quality content remains years of revenue decline and will help drive ancillary windows in high and content platforms are prepared to pay premium future years. Supporting this, action has been taken to further prices for the very best. In response we are developing optimise the film slate and drive operating efficiencies.