A World of Entertainment Entertainment One Ltd
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A world of entertainment Entertainment One Ltd. Annual Report and Accounts 2014 We are Entertainment One. Contents Strategic Report 1 Highlights Entertainment One’s goal is to be 2 Group at a Glance 4 Chairman’s Statement the world’s leading independent 6 Chief Executive’s Summary 8 Group Objectives and Strategy entertainment group, through the 10 Business Model 12 Market Overview production and acquisition of 14 Film Review 18 Television Review entertainment content rights for 22 Financial Review 26 Principal Risks and Uncertainties exploitation across all consumer 30 Corporate Social Responsibility media throughout the world. Corporate Governance 32 Board of Directors 34 Corporate Governance 40 Audit Committee Report 44 Directors’ Remuneration Report 61 Nomination Committee Report 62 Directors’ Report: Additional Information 64 Statement of Directors’ Responsibilities Consolidated Financial Statements 65 Index to the Consolidated Financial Statements 66 Independent Auditor’s Report 69 Consolidated Income Statement 69 Consolidated Statement of Comprehensive Income 70 Consolidated Balance Sheet 71 Consolidated Statement of Changes in Equity 72 Consolidated Cash Flow Statement 73 Notes to the Consolidated Financial Statements Television Chief Executive’s Summary Film Review Darren Throop’s review of the year A review of our Film Division for the is set out on pages 6 and 7. year is set out on pages 14 to 17. Television Review A review of our Television Division for the year is set out on pages 18 to 21. Film entertainmentone.com ANNUAL REPORT AND ACCOUNTS 2014 Highlights Operational Highlights Strategic Highlights Growth in revenues and The Television Division delivered The Company transferred the underlying EBITDA reflecting a 317 half hours of television listing category of all of its strong underlying performance programming (2013: 295 half common shares from the across the Group, including hours) and signed new distribution standard listing segment to the the first full year of results for agreements with AMC Networks premium listing segment of the Alliance which was acquired and El Rey Network, and has a Official List of the Financial on 8 January 2013 strong pipeline of new network Conduct Authority on 1 July 2013 orders and renewals already The Film Division released 275 commissioned Entertainment One became titles theatrically (2013 pro a constituent member of forma1: 311), delivering improved Peppa Pig continues to grow the UK’s FTSE 250 Index margins driven by the realisation its international presence with on 23 September 2013 of Alliance synergies and has a licensing agreements now strong slate of films in place for numbering more than 300 The directors have declared future years, including those globally – and is expanding a final dividend for the financial from the renewal of key output further into new markets including year of 1.0 pence per share, agreements and its own Latin America, China, South-East being the Company’s inaugural production slate Asia, France and Germany dividend Financial Highlights Revenue Adjusted diluted earnings per share3 £819.6m +30% (2013: £629.1m) 20.9 pence +2% (2013 pro forma1: £800.7m) +31% (2013: 15.9 pence) Adjusted profit before tax3 £77.9m +45% (2013: £53.8m) Underlying EBITDA2 Adjusted net debt4 £92.3m £111.1 m +48% (2013: £62.5m) +£23.3m (2013: £87.8m) +24% (2013 pro forma1: £74.6m) 1 Pro forma includes the results of Alliance, which was acquired on 8 January 2013 as if that business had been acquired on the first day of the comparative period. 2 Underlying EBITDA is operating profit before operating one-off items, share-based payment charges, depreciation and amortisation of acquired intangibles. Underlying EBITDA is reconciled to operating profit in the “Financial Review” section on page 22. 3 Adjusted profit before tax is profit before tax before operating one-off items, share-based payment charges, amortisation of acquired intangibles and one-off items within net finance charges; adjusted diluted earnings is adjusted for the tax effect of these items. 4 Adjusted net debt includes net borrowings under the Group’s senior debt facility but excludes production net debt. 1 ENTERTAINMENT ONE LTD. Group at a Glance Acquire. Produce. Market. Distribute. Film revenue eOne is the largest independent global distributor of films in the industry, exploiting content rights across all consumer media platforms – movie theatres, DVD/Blu-ray, £686.9m digitally and on television. –1% (2013 pro forma: £696.4m) The Group’s multi-territory film distribution Film network occupies strong market positions in Canada, the UK, the Benelux, Spain and Australia, as well as a presence in the US and Film underlying EBITDA distribution partnerships in France, Germany, Scandinavia, South Africa and South Korea. eOne is also focused on expanding its Film Production and International Film activities, £74.1m enabling it to move up the film value chain to +19% (2013 pro forma: £62.5m) increase its access to quality content and further enhance profitability. Films released theatrically 311 275 200 152 2012 2013 2013PF 2014 PF – pro forma, see page 16 for further details. Group Strategy Grow Extend Enhance Achieve the content global content investment long-term portfolio reach returns financial goals Create future Expand reach of Use size and scale value by growing a content by both to drive improved diversified film and geography and financial returns TV rights portfolio content platform 2 entertainmentone.com ANNUAL REPORT AND ACCOUNTS 2014 Produce. Acquire. Distribute. License. Television revenue eOne operates a leading independent television business with operations in the US, Canada and the UK. The Group produces high-quality scripted drama and non-scripted £162.2m format programming, owning all rights to this +28% (2013: £126.6m) content in perpetuity across all geographies. Television Additional content is brought into the Group through co-production, co-development, first-look and output deals with leading Television underlying EBITDA content partners. These rights are exploited across well- established in-house distribution networks into North American and international markets £24.3m across all media formats. +44% (2013: £16.9m) eOne also develops and produces award- winning family content which is currently broadcast in many territories around the world, supported by global brand Television half hours delivered management expertise with licensing and 317 merchandising operations in the UK, 295 Australia and North America. 237 2012 2013 2014 Our territories eOne territories 1 Canada 9 2 UK 1 2 3 3 Benelux 7 8 5 4 Spain 4 11 5 US 6 Australia Partner territories 7 France 8 Germany 9 Scandinavia 10 South Africa 11 South Korea 10 6 3 ENTERTAINMENT ONE LTD. Chairman’s Statement Demand for the Group’s content from “an expanding number of entertainment networks and platforms is being driven by long-term, global consumer trends.” Allan Leighton Non-executive Chairman FTSE 250 Index membership in September 2013 1.0 pence dividend per share 4 entertainmentone.com ANNUAL REPORT AND ACCOUNTS 2014 I am delighted to be joining Entertainment One The last 12 months have also seen important at a time when the business is in robust health. corporate milestones achieved. In July 2013, Demand for the Group’s content from an the Company’s shares were premium listed on expanding number of entertainment networks the Official List in London, enabling the stock and platforms is being driven by long-term, to become a constituent of the FTSE 250 global consumer trends. Index in September 2013. The increased investor attention this brought helped the Technology is enabling innovative and more Company to reach a market capitalisation in convenient ways to consume content, in turn excess of £1 billion for the first time, a creating new revenue opportunities for the remarkable achievement given the Company’s business. In a changing media landscape, £90 million market value when it listed on AIM access to high-quality and differentiated just seven years ago. Another first for the content that consumers demand remains Group has been the announcement of its key to success. Against this backdrop, the inaugural dividend alongside this year’s Group’s strategy remains as potent today as financial results. ever before. This success has also been built on the people Entertainment One continues to develop, and the unique culture that exists within the produce, acquire and distribute a broad range Group, something we have not lost sight of of film, television and family content, creating a as we have grown. Indeed, the establishment substantial (and growing) portfolio of rights. of a set of core values across the Group This strategy has been supported by the full (which are set out on page 30) underlines integration of Alliance during the year, giving our commitment to maintaining the highest the enlarged Group the scale and reach possible levels of professionalism and In a changing media to drive both competitive advantage and responsibility, both internally and externally. “landscape, access to high- operational efficiencies. The Group has also Our two London offices have been developed expertise in the licensing and successfully brought together under one roof quality and differentiated merchandising markets, adding new teen in a new facility, with similar plans to bring all of content that consumers lifestyle brands for exploitation through the the Toronto teams together in a single building demand remains key to acquisition of Art Impressions during the year. in the city’s entertainment district in 2015. success. Against this Balancing acquisitive expansion, the Group The achievements of the last year have given backdrop, the Group’s has also been growing organically to secure us much to be proud of and we dedicate this strategy remains as potent content for exploitation across its networks. successful year to everyone across our today as ever before. In Film, Entertainment One has partnership businesses for their tireless work. In particular, ” agreements with many of the leading we recognise the experience, expertise and independent producers through output deals stewardship that James Corsellis has brought and single picture acquisitions.