Entertainment One | 2016 Annual Report and Accounts Entertainment One | 2016 Annual Report Entertainment for every Entertainment One | 2016 Annual Report and Accounts Entertainment for every Contents Highlights ............................................................................................................................. 1 Our business at a glance .....................................................2 Our global sales footprint ...................................................4 Chairman’s statement ....................................................................6 Chief Executive Officer’s review .....................8 Business model and strategy ..............................12 Key performance indicators ..................................... 13 Business review Television ........................................................................................................15 Family .........................................................................................................................21 Film .................................................................................................................................. 27 Finance review .............................................................................................32 Principal risks and uncertainties ................37 Corporate responsibility ...................................................42 Corporate governance .........................................................46 Board of Directors ..............................................................................48 Corporate governance report .........................50 Audit Committee .................................................................................... 55 Nomination Committee .......................................................61 Directors’ Remuneration Report ................63 Directors’ Report: additional information .............................................................................................................. 80 Independent Auditor’s Report .........................83 Consolidated Financial Statements ............................................................................................................... 87 Notes to the Consolidated Financial Statements ....................................................................91 Company information ...........................................................135 Visit our website entertainmentone.com Entertainment One’s goal is to bring the best content to the world 2016 strategic progress – Strong organic growth and key strategic acquisitions in Television – Ramping-up of activity in The Mark Gordon Company – Acquisition of a controlling stake in Astley Baker Davies Limited, the creator of Peppa Pig – Expanded Film relationship with Amblin Partners and strategic investment in Sierra Pictures – Long-term funding put in place to support the organic growth strategy 2016 Financial highlights Revenue Underlying EBITDA Profit before tax £802.7m £129.1m £47.9m +2% (2015: £785.8m) +20% (2015: £107.3m) +9% (2015: £44.0m) £m £m £m 1,000 160 60 823.0 129.1 802.7 47.9 785.8 750 120 45 44.0 107.3 629.1 92.8 500 502.7 80 30 62.5 23.1 21.5 52.6 250 40 15 5.5 0 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 Adjusted fully diluted Dividend Adjusted net debt earnings per share 19.4 pence 1.2 pence £180.8m -7% (2015: 20.8 pence) +9% (2015: 1.1 pence) £44.1m lower (2015: £224.9m) Pence Pence £m 1.2 24 1.2 240 224.9 1.1 20.8 1.0 19.4 18.3 18 0.9 180 180.8 13.9 13.7 12 0.6 120 111.1 87.8 6 0.3 60 44.1 0 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 eOne Annual Report and Accounts 2016 1 Our business at a glance Quality entertainment for a global audience 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. Content Rights Develop relationships with the best creative talent by being their partner of choice Global sales Use the Group’s infrastructure, sales operations and global scale to maximise investment returns 2 entertainmentone.com A growing content portfolio of television, family and film assets Television Family Film Entertainment One is one of the major Family focuses on building a portfolio Entertainment One is a market leader independent producers of television of children’s properties spearheaded in the territories where we operate, content commissioned primarily by the by Peppa Pig, one of the world’s leading including Canada, the UK, Spain, North American broadcast networks. pre-school brands. In addition to Peppa Australia/New Zealand and the Benelux. This content is then sold through our Pig, we own a number of launched and In addition, through eOne Productions, in-house television sales teams to developing children’s brands including we use our scale to produce a small broadcasters globally and leading PJ Masks. number of titles every year, enabling us digital platforms. to participate in a film’s global success. 998 500+ 210 Half hours of new programming Broadcast and licensing and Box office releases during the year acquired/produced during the year merchandising contracts signed in FY16 500+ 847 £10m Broadcasters sold to in 150 territories Live licensing and merchandising Annual cost savings programme contracts across the brand portfolio implemented, delivering by FY18 Revenue by segment Underlying EBITDA Investment in acquired by segment content/productions 28% 29% 64% £802.7m 39% £129.1m 50% £218.5m 47% 8% 32% 3% Television Family Film For further details see the Business review section commencing on page 15. eOne Annual Report and Accounts 2016 3 Our global sales footprint Quality entertainment for a global audience Partnering with the world’s best talent to deliver quality entertainment to every corner of the globe Acquisition of Last Gang Five-year output deal with TVA, the leading French Canadian broadcaster New deal with Shomi Strategic investment in Sierra in Canada, adding 175 Pictures in December 2015 films to its catalogue Strategic investment in Amblin Partners New series MGC wins two US network debut Acquisition of Acquisition commissions for new straight-to- of PJ Masks Renegade 83 of Dualtone eOne Television series commissions (Private Eyes, (Designated Cardinal, Mary Kills Survivor and People, You Me Her, Conviction) Ransom) 4 entertainmentone.com Acquisition of Amazon Instant Acquisition of ABD Peppa Pig debuts in The Enfield Haunting Video deal renewed China on CCTV and David in the UK Attenborough’s Great Barrier Reef MGC partners with Pegasus Media Group and China Film Group in its first US-China co-production New digital deals with Youku and iQIYI Winston Steinburger and Sir Dudley Ding Dong set to air in Australia in Autumn 2016 SVOD deals with Consumer roll-out SVOD deals with Sale of Fear The Movistar and of Peppa Pig in proximus and Walking Dead across Netflix signed in France planned BETV signed in multiple territories Spain for FY17 Benelux to Amazon Instant Video eOne Annual Report and Accounts 2016 5 Chairman’s statement Telling the world’s best stories Consumers today can discover and enjoy content in ways never before possible. Allan Leighton, Non-executive Chairman Whether through traditional means (such as going to the In tandem with this solid financial performance, the Group has cinema or watching network television) or across new digital also delivered robust operational milestones. Entertainment subscription or multi-channel platforms, content is now widely One Television delivered almost one thousand produced available to viewers, offering them unparalleled choice. In and acquired half hours of television content for the first time, addition to the many ways content can now be discovered with non-scripted shows now forming a greater part of the and viewed, it can also be compiled into personalised channels overall mix following full year contributions from Paperny which can be carried anywhere with the consumer on their Entertainment and Force Four Entertainment. After a year smartphone or tablet device. The coming together of content of developing new shows for both pay-TV and digital SVOD services, technology and consumer demand in this way has networks, The Mark Gordon Company is now moving into created a vibrant and dynamic market for those who produce production on a number of projects for delivery over the and own attractive content rights across multiple platforms next 12 months. The demand we are currently experiencing and territories. for our productions bodes well for future growth. Entertainment One has once more reported increased underlying EBITDA and has raised its progressive dividend by 9% to 1.2 pence per share. This has been achieved in a year which saw difficult trading conditions in the global independent film markets as our indie releases were crowded out by an exceptional year of Hollywood blockbuster titles. 6 entertainmentone.com Momentum in the Family Division remains strong with Peppa Following the exit of Marwyn Investment Management from our Pig rolled out into a number of new broadcast territories around share register, non-executive director James Corsellis resigned the world and consumer revenues in key markets such as from the Board of Directors. In his place Scott Lawrence, Head the US now coming through. In addition to solid progress with of Relationship