Entertainment One Ltd. Coming soon… Annual Report & Accounts 2010 Turn the page for a selection of Entertainment One’s forthcoming Film and DVD releases www.entertainmentonegroup.com Entertainment One Ltd. Annual Report & Accounts 2010 Entertainment One Ltd. is a Coming soon from Entertainment One... leading independent international entertainment group specialising Multi-territory in the acquisition, production and distribution of film and television Love Ranch Triage Baarìa The Runaways Furry Vengeance Letters to Juliet StreetDance 3D Remember Me Shelter The Twilight content across all media. Saga: Eclipse UK The Tortured The Hole 3D Rec2 Mr Nice The Big I Am Ben & Holly’s The Joneses Bodyguards and Ashes to Ashes Nativity! Little Kingdom Assassins Series 3 Canada Looking for Eric Gainsbourg The Killer Act of Dishonour Harry Brown Splice Le Petit Nicolas Agora Unthinkable The Bang Bang Inside Me Club Contents Benelux 01 Overview 08 Business & Financial Review 24 Governance 26 Directors 28 Directors’ Report 30 Directors’ Remuneration Report 32 Corporate Governance 34 Financial Statements The Men Who From Paris with Ondine The Immortal Edge of Darkness The Doors: When Kom Niet Aan Mijn Pope Joan The Last Station Sinterklaas 72 Company Information Stare at Goats Love You’re Strange Kinderen U.S. 1 2 3 4 5 6 1 Remember Me – UK and Canada 2 Edge of Darkness – Benelux 3 Astroboy – UK and Canada 4 Harry Brown – Canada American Bandits ARN The Knight Dolan’s Cadillac The Greatest Heartland La Dolce Vita Sanctuary The Secret of Suck Wake 5 Letters to Juliet – UK, Canada and Benelux Templar Moonacre 6 Ondine – Benelux Entertainment One Ltd. Overview 1 Entertainment One’s 2010 highlights: Financial highlights > 123 theatrical releases in the year positions Revenue up 30% the Film business as number one or number (2009: £342.6m) two independent in its core markets m > Television production and Kids businesses maintain growth momentum with 213 half £444.2 hours of programming delivered in 2010 Underlying EBITDA up 36%* (2009: £25.3m) > International partnerships expand global film and television distribution network m > Significantly improved leverage as net debt £34.3 reduced Film and TV investment up 56% (2009: £47.8m) > Step up to the Main Market of the London Stock Exchange anticipated in July 2010 £74.7 m Operating cash flow up 137% (2009: £35.9m) £85.2m * Underlying EBITDA refers to operating profit/(loss) excluding one-off items, share-based payment charges, depreciation and amortisation of intangible assets. The Imaginarium of Dr Parnassus Canada and Benelux Chloe Canada Entertainment One Ltd. 2 Overview Our business Film Television Revenue Entertainment One focuses on its strengths in film Distribution (incl. other) and television, where it is recognised as a leader Distribution (inc. other) in the independent distribution sector. 50% Film 41% Through successful relationships with its industry partners the Group continues to build its position £444m as a leading independent in its core markets. Television 9% Global Presence Underlying EBITDA Distribution (inc. other) 32% Film 46% £34.3m Television 22% Film & television titles in library Television library hours Library valuation 20,000 2,400 $220m Entertainment One Ltd. Overview 3 Entertainment Film Television Love Ranch, UK, Canada, Benelux and U.S. Haven, TV Entertainment One Film acquires rights to distribute Entertainment One Television is a leading production, films across multiple territories including Canada, the international sales, licensing and merchandising UK, Benelux and the United States. business operating in Canada and the UK. Rights acquired are exploited across all media windows In Canada, the business sells and distributes both its own including: and third party productions to over 500 broadcasters in 150 countries, including the major U.S. and Canadian > Theatrical distribution (box office) networks and international pay TV channels. It typically > Home entertainment (DVD/Blu-ray, rental and retail) controls the worldwide rights across all distribution > Television (broadcasters) channels to all of its productions. Through federal funding > Digital (downloading/video on demand) and other incentive structures, the Canadian production financing environment allows the business to produce Ownership of content rights over a period of up to 25 premium content across diversified genres and formats years enables Entertainment One to maximise financial whilst significantly reducing Entertainment One’s capital return through its growing library of over 20,000 film and at risk. television titles. In the UK, Entertainment One Kids creates, produces Entertainment One’s production partners include the large and distributes children’s entertainment with broadcasting Hollywood independent studios including Summit partners, including Nick Jr. and Channel 5, and across Entertainment, River Road Entertainment, Lakeshore 180 territories. Through its dedicated Licensing and Entertainment and Morgan Creek. Merchandising team the business maximises the benefits from owning Kids properties. Market position Market position With 123 theatrical releases in the year, the Film division has The Television business has established itself as the confirmed its position as a leading multi-territory distribution number one proprietary Canadian TV producer, delivering partner for independent studios and offers film producers high profile programmes into the U.S., Canadian and an alternative to the major studios. This position enables international markets. The Kids division includes the Entertainment One to build competitive advantage in the number one girls’ pre-school property in the UK, Peppa market and deliver improved cost efficiency at a lower risk. Pig, and is a recognised leader in the market. Growth opportunity Growth opportunity Moving forward, the business will increase the number of With its established reach into both the U.S. and films it distributes by enhancing relationships with current international broadcast markets plus support from production partners as well as growing the list of Canadian financing incentives, the Group’s television independent producers from which it acquires film rights. business is well positioned to drive long-term value While expanding on established capabilities in its current through expansion of its programming slate across multiple markets, the business will also look to further increase its genres and formats. Kids will leverage its success to date multi-territory distribution infrastructure – which has to expand the number of Kids properties and extend its recently been extended to include France, Australia and reach into other territories. New Zealand. Distribution The Distribution division delivers the Group’s own and Market position third party content, through both physical and digital Entertainment One’s Distribution division is the largest channels, to over 4,000 retail partners through its wholesaler of home entertainment product in Canada and extensive network across Canada and the U.S. The the largest independent distributor for video and music in division provides distribution services to a wide range of the U.S. content producers, including the major Hollywood studios. Growth opportunity The division will drive future growth through expanding its long standing relationships with the industry’s largest producers and retailers which have been built over the past 25 years. Entertainment One Ltd. 4 Overview Spotlight on Film Entertainment One Film delivered a strong performance in the year with a total of 123 releases including The Twilight Saga: New Moon, a film that set numerous new box office records in Canada and the UK. Strategic focus Film Slate Entertainment One Film has three core areas There is a strong pipeline of over 130 of focus: to increase the number of films theatrical box office releases slated for the distributed from independent producers and coming year including The Twilight Saga: through output deals; to use its extensive Eclipse in June. Other prominent releases experience to expand into new territories include: Fair Game (starring Sean Penn and through partnerships and acquisitions; and Naomi Watts), Letters to Juliet (Amanda to grow its digital business in line with the Seyfried, Gael Garcia Bernal and Vanessa development of the market. Redgrave), The Joneses (Demi Moore and David Duchovny), Furry Vengeance (Brendan Fraser and Brooke Shields), Tree of Life (Brad Pitt and Sean Penn) and Red (Bruce Willis, Morgan Freeman and Helen Mirren). The story of film distribution Film Value Chain Production Theatrical/Cinema Airlines Home Entertainment VOD/Pay per View Distribution Pay TV Acquires long term Free/Speciality TV rights from producers Markets and promotes Box Office 6 12 18 24 30 36 Up to 25 films to consumers Release Months Months Months Months Months Months years Sells to cinemas, broadcasters Indicative Film Cash Flow Profile and retailers (DVD and digital) + Consumer Pay Minimum Box Office 6 Months 12 Months 18 Months 24 Months Guarantee Release Entertainment One Ltd. Overview 5 The Twilight Saga: New Moon UK and Canada Key Performance Indicators Theatrical Releases in 2010 123 Investment in Content m in 2010 £51 Market* Digital $22.6bn The film market grew in 2009 to over $29.7bn Digital is a key part of Group strategy US$107 billion and has shown consistent and Entertainment One embraces the growth over the past five years. It is opportunity to exploit our film content forecast to continue to increase