ANNUAL REPORT BEYOND 2017INTERNATIONAL For personal use only CONTENTS 4 CHAIRMAN’S REPORT 6 MANAGING DIRECTOR’S REPORT 12 CORPORATE GOVERNANCE 20 BOARD OF DIRECTORS 21 DIRECTORS’ REPORT 35 AUDITOR’S INDEPENDENCE DECLARATION 36 FINANCIAL STATEMENTS 82 DIRECTORS’ DECLARATION 83 INDEPENDENT AUDITOR’S REPORT 89 SHAREHOLDER INFORMATION 91 CORPORATE DIRECTORY For personal use only 2017 BEYOND INTERNATIONAL Love It Or List It Australia ANNUAL REPORT 2 BEYOND INTERNATIONAL ANNUAL REPORT 2017 3 CHAIRMAN’S REPORT On behalf of the Directors of Annual Report have progressed and business structure and practices. BEYOND INTERNATIONAL LIMITED TEN YEAR RESULTS Beyond International Limited (ASX new productions were completed This is partly in response to the code: BYI) I am pleased to have this and delivered by Beyond Screen BREXIT referendum and the U.K’s opportunity to comment on some of Production (in association with future access to the EU free market EBIT NET PROFIT EPS NTA TOTAL DIVIDENDS $000’S $000’S (CENTS PER PER SHARE (CENTS PER the major changes that are effecting Grace), 7Beyond and the new internal and sales to EU broadcasters. It seems EQUITY SHARE) SHARE) our businesses and we expect these Beyond Fiction unit. In addition, likely that the Dublin Office will be $000’S matters to increase and accelerate Beyond Productions and Beyond expanded to improve its capacity 2008 7,483 4,992 8.36 40.77 26,739 5.00 in the next 2-3 years. Entertainment continued to build their to deal directly with the EU and production slates and will increase operations in other locations may 2009 5,047 4,280 7.28 40.23 27,483 5.00 Mr. Mikael Borglund deals in detail their production volume in 2017-18. also require changes in response with the 2016-17 Financial Year 2010 6,205 4,939 8.40 40.55 28,903 6.00 to actual or expected legislation operating and financial results for One major difference to previous or regulatory changes. 2011 8,178 5,099 8.67 43.09 29,896 6.00 each Division during 2017-18 in the production structures is the disruption Managing Director’s Report which in the world media markets caused Apart from these legal and regulatory 2012 10,190 8,463 14.39 46.36 34,768 6.00 follows. He also discusses the 2018 by the video-on-demand streaming changes, the amount of technological outlook for each Division. services reaching critical mass in major and business model change in the 2013 10,841 9,273 15.12 56.92 40,593 7.00 markets. These platforms and content media sector that Beyond operates in The financial impact of the conversion 2014 8,837 7,975 13.00 62.48 44,158 9.00 commissioners have radically different is significant and accelerating. However, to consignment sales in Beyond Home business models to traditional over the Beyond has adapted to these changes Entertainment generated a one off 2015 5,964 5,885 9.59 62.19 44,009 10.00 air broadcasters. and is actively working with these loss of $8,182,000 to 30th June 2017 emerging content distribution platforms. 2016 5,553 5,317 8.67 61.37 43,326 10.00 compared with an EBIT of $1,526,000 The business models for commissioning original content for to 30th June, 2016, a reversal of At the same time, the opportunities 2017 (8,195) (7,469) (12.18) 44.37 32,085 2.00 $9,708,000 that overwhelmed streaming services such as Netflix, for new content production for the financial results of the other Amazon, Facebook and Apple have emerging platforms, Ultra High three divisions. resulted in changes to the order Definition and Virtual Reality content pattern and duration of content projects in major world markets, and This change in trading terms was produced from that required by international tv distribution, is growing completed in May 2017 and Beyond traditional free to air formats. rapidly with broadband availability Home Entertainment is budgeted to and increased content consumption be profitable in the 2017-18 financial Beyond’s production strategy has on portable devices. year. The change to consignment sales focused on retaining the distribution affected all major DVD distributors rights and copyright to the content that Beyond has initiated investments in and reflects the radical but expected it produces with both free to air and Music production and exploitation, changes in consumer retail business SVOD platforms. By retaining rights the music publishing and Merchandising models in Australia and New Zealand. terms of trade with the commissioning that are also expected to be new platform often require the producers potential growth activities. In this This change was partly a reaction to fund most of the cost of production context, the Directors expect to commit by major retail chains to online until delivery of the program. This all surplus cash from operations during sales growth and the entry of large significantly increases the working the next 1-2 years to re-invest in the international online retailers into the capital that producers require to core business, to fund its growth and Australian market. At the same time fund production. We expect this cash the working capital consequences of the total physical DVD market in requirement which will primarily be growth. They do not expect to raise Australia declined by 17% in the year funded by external self-liquidating debt additional share capital during this time. to 30th June 2017 and this decline is to accelerate for Beyond over the next expected to continue as the national 2-3 years as we expand production for For and on behalf of the Board broadband infrastructure improves. this growing sector. of Directors, Also in 2017, the content production Beyond has also initiated an Ian Ingram initiatives detailed in the 2016 independent review of its international Chairman For personal use only Richmond - 2017 AFL Premiers 4 CHAIRMAN’S REPORT 2017 BEYOND INTERNATIONAL ANNUAL REPORT 2017 5 MANAGING DIRECTOR’S REPORT FINANCIAL PERFORMANCE FOR THE 12 MONTH PERIOD TO 30TH JUNE 2017 REVIEW OF OPERATIONS BY SEGMENT FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2017 • Operating revenue decreased by 15% to $86,312,000; • EBIT before non-recurring adjustments for the period of $1,819,000; JUNE 2017 JUNE 2016 VARIANCE $ VARIANCE $ 000’S $ 000’S $ 000’S % • Net loss after tax and before outside equity interests of $7,337,000; • Cash flows from operating activities increased by 14.8% to $5,887,000 from $5,127,000; REVENUE • After allowing for investments and dividends, cash before borrowings decreased by $4,505,000. Productions & Copyright 50,971 38,371 12,600 32.8% • A $6,000,000 bill facility was negotiated to fund tax rebates. The facility was drawn to $5,744,000 as at 30 June 2017. Home Entertainment 2,113 24,894 (22,782) (91.5%) • Cash at bank as at 30 June 2017 was $7,645,000, an increase of $1,266,000. Distribution 21,877 25,843 (3,966) (15.3%) Digital Marketing 10,549 12,470 (1,921) (15.4%) JUNE 2017 JUNE 2016 VARIANCE $ VARIANCE $ 000’S $ 000’S $ 000’S % Other Revenue 803 60 742 NMF Operating Revenue 86,312 101,638 (15,326) (15.1%) Total Revenue 86,312 101,638 (15,326) (15.1%) Expense (94,507) (96,085) 1,578 (1.6%) OPERATING EBIT EBIT (8,195) 5,553 (13,748) NMF Productions & Copyright 7,566 9,964 (2,398) (24.1%) Net Interest Income (139) 51 (190) NMF Home Entertainment 429 1,526 (1,097) (71.9%) Profit/(Loss) Before Tax (8,334) 5,604 (13,938) NMF Distribution 845 2,020 (1,175) (58.2%) Tax Benefit/(Expense) 997 (287) 1,284 (447.4%) Digital Marketing (722) (292) (430) NMF Profit/(Loss) After Tax (7,337) 5,317 (12,654) NMF Corporate (5,702) (6,079) 377 6.2% Minority Interests (132) - (132) - 7Beyond Joint Venture (55) (404) 349 86.4% Profit/(Loss) After Tax attributable to members (7,469) 5,317 (12,786) NMF Foreign Exchange Gain / (Loss) (542) (494) (48) (9.7%) EPS (cents per share) (12.18) 8.67 (20.8) NMF Operating EBIT 1,819 6,241 (4,422) (70.9%) Dividends per Share (cents) 2.00 10.00 (8.0) (80.0%) Non Operating Items NTA (cents per share) 44.37 61.37 (17.0) (27.7%) Productions & Copyright - (91) 91 100.0% Home Entertainment (8,611) - (8,611) - Distribution (373) (350) (23) (6.6%) Digital Marketing (607) - (607) - Corporate (423) (247) (176) (71.3%) EBIT (8,195) 5,553 (13,748) NMF NMF – Not a meaningful figure For personal use only My Lottery Dream Home 6 MANAGING DIRECTOR’S REPORT 2017 BEYOND INTERNATIONAL ANNUAL REPORT 2017 7 1. TELEVISION PRODUCTIONS • early adoption of new technology • Pokémon the Movie 20: Traditional cable broadcasters are still (3Di) had a very difficult year and The joint venture has a deep slate of AND COPYRIGHT SEGMENT to gain market leadership and I Choose You!; strong worldwide and this combined the division was closed at the end of projects in development and is actively reputation. This includes the with the growth of Video on Demand the 2017 financial year. The division working with US broadcasters to Segment revenue increased by • Secret Daughter Season 2 - an production of Ultra High Definition (OTT) platforms will have a positive reported a loss before impairment develop and produce new programs $12,600,000 or 32.8% to $50,971,000 Australian drama television series (4k) content as well as Virtual impact on revenues in this division charges of $885k.