Eros International Plc Annual Report and Accounts 2008 Corporate Office UK UAE Australia Eros International Plc Eros International Plc Eros International Ltd Eros Worldwide FZ LLC Eros Australia Pty. Limited 15-19 Athol Street Unit 23 529 Building No 8 4 Rosewood Way Isle of Man IM1 1LB Sovereign Park Dubai Media City Werrington Tel +44 (0) 8700 418 211 Coronation Road P.O. Box 502121 NSW 2747 Annual Report and Accounts 2008 Fax +44 (0) 8700 418 212 London NW10 7QP Tel +971 (0) 4390 2825 Tel +61 2 9623 3480 Tel +44 (0) 20 8963 8700 Fax +971 (0) 4390 8867 Fax +61 2 9623 3481 Fax +44 (0) 20 8963 0154 Fiji India USA Eros Pacific Limited Eros Multimedia Pvt. Ltd. Eros Entertainment Inc 27 Lodhia Street Satya Dev Building, 2nd Floor 550 County Avenue P.O. Box 1802 Off New Link Road Secaucus Nadi-Fiji Andheri (W) NJ - 07094 Tel +679 670 7722 Mumbai - 400 053 Tel +1 201 558 9001 Fax +679 670 7723 Tel: + 91 22 4053 8500 Fax +1 201 558 9002 Fax: + 91 22 4053 8540 Om Shanti Om (2007) – International box office No. 1, Eros International Plc is a global player in the rapidly honoured at the Berlin Film Festival expanding Indian media and entertainment arena which is growing at over 18% CAGR and slated to cross US$29 billion by 2012 (source: PwC). Being vertically integrated means that Eros not only produces and commissions film projects similar to how Hollywood studios operate but also distributes and exploits films across all formats globally including cinemas, home entertainment, television syndication and digital new media. Established in 1977, Eros has over three decades of market leadership in creating a global platform for Indian cinema. The Company has an enviable deeply entrenched distribution network that spans 50 countries and has offices in India, UK, USA, UAE, Australia, Fiji, Isle of Man and more recently Singapore. Eros has built a successful business model by combining the release of a portfolio of 30-40 new films every year with the exploitation of a valuable film library of over 1,900 film titles, making it undisputedly one of the largest content owners in the business. Contents 1 Highlights 22 Company Information 38 Consolidated Balance Sheet 2 Key Strengths 23 Directors’ Report 39 Consolidated Cash Flow Statement 5 Year in Review 26 Remuneration Report 40 Consolidated Statement of 6 Chairman’s and Chief Executive’s 27 Corporate Governance Changes in Equity Statement 29 Principal Accounting Policies 41 Notes to the Financial Statements 10 Market Overview 36 Report of the Independent 57 Company Balance Sheet 12 Operating Review Auditor to the Members of 58 Company Notes to the Financial 16 Financial Review Eros International Plc Statements 21 Eros Board and Management 37 Consolidated Income Statement Highlights Financial highlights • Profit before tax up 47.2% to US$45.5 million (2007: US$30.9 million) • Group revenue up 70.2% to US$113.0 million (2007: US$66.4 million) • Gross profit up 57.9% to US$63.0 million (2007: US$39.9 million) • EBITDA up 60.4% to US$77.8 million (2007: US$48.5 million) • Cash generated from operations US$89.4 million • Basic EPS per share up 2.0% to 33.5 cents (2007: 29.9 cents) 39.50 113 77.85 89.40 66.44 48.50 45.02 44.72 31.56 29 29.25 18.44 2006 2006 2007 2007 2008 2008 2006 2006 2007 2007 2008 2008 Revenue US$million EAT US$million EBITDA US$million Cash generated from operations US$million Operating highlights and growth drivers Indian box office • 16 out of 8 theatrically released films in 2008 were released globally • Five out of the top 0 box office successes were Eros releases • Worldwide theatrical revenues grew by 46.9% to US$52. million (2007: US$2. million) Television • Strong television syndication deals of new and catalogue films were concluded with Sony, Inx, Viacom, Sahara and other international TV networks • Revenues from TV syndication up 56.3% to US$33.0 million (2007: US$2. million) Digital New Media and Home Entertainment • Subscription VOD platforms increased subscribers on Comcast and Rogers and new deals entered into with Cablevision and other cable and telephone franchises • The ad-supported Eros partner channel on Google’s YouTube registered 45 million hits since launch • Revenues from Digital New Media and Home Entertainment up 6.9% to US$27.7 million (2007: US$23.7 million) Content Library and Distribution • Augmented library of ,900 films with fresh acquisitions • Investments across 60 projects giving full visibility of release schedule to 200 • Film catalogue generated revenues of US$23.0 million Eros International Plc Annual Report and Accounts 2008 Key Strengths EROS GLOBAL TELEVISION DIGITAL AYNGARAN EYEQUBE PICTURES DISTRIBUTION SYNDICATION NEW MEDIA INTERNATIONAL STUDIOS CO-PRODUCTION THEATRICAL SATELLITE SVOD PRODUCTION VFX TALENT TIE-UPS DIGITAL CINEMAS CABLE MOBILE DISTRIBUTION ANIMATION ACQUISITIONS DUBBED MARKETS DTH INTERNET TELEVISION GAMING Strong global brand founded on Unique and well developed Vertically integrated a long history of success global distribution network studio model The business of Eros was founded in 1977 Eros is the only Indian entertainment The Group operates on an integrated and has evolved into what the Directors company in the world with a deeply studio model controlling content as well as consider to be the best positioned Indian entrenched global distribution network distribution across formats on a global media and entertainment group in spanning 50 countries with over 500 platform. By releasing 30-40 new films the world. clients across five continents and every year and at least half of them global distribution offices in all the key markets. theatrical releases, the Company works on a scale very different to the other players in the sector who release less than 10 films every year. Valuable and extensive Management track record content library Eros has a strong management team in key Eros owns intellectual property rights positions with considerable specialist generally across all media formats, to a industry experience and deep rooted library of over 1,900 titles containing many relationships with the talent who have of the most successful films from India. been associated with the Group for several Just over a third of the top 50 Indian film years. This allows the Company to manage releases every year for the last decade growth and mitigates the execution risk have been Eros films. This catalogue faced by some of the new entrants in generates high margin annuity income for the market. the Company and is a key differentiator. Eros International Plc Namastey London (2007) – East meets west in this romantic comedy that was one of the biggest box office 2 Annual Report and Accounts 2008 performers of the year worldwide Year in Review December 2007 Eros’ visual effects driven production Aladin directed by Sujoy Ghosh goes on the production floor May 2007 Eros launches first official partner channel on Google’s YouTube January 2008 September 2007 Ayngaran announces a Sony Pictures and Eros co-production deal with agree to partner on slate top director Shankar of Indian films and superstar Rajnikant to make film tentatively titled Robot June 2007 Eros honoured at the 2007 Yorkshire IIFA awards for taking Indian October 2007 cinema global Eros sets up EyeQube February 2008 Studios, a state of the art visual effects facility Eros awarded the in Mumbai, to be led by Amity Corporate Charles Darby Excellence Award July 2007 Acquisition of a 5 % stake in Ayngaran and enters the Tamil films segment November 2007 Eros signs a 3-film output March 2008 deal with Mukta Arts including Salman Khan Eros concludes starrer Yuvraj syndication deals with Sony and Sahara August 2007 Kishore Lulla, Chairman Group and Chief Executive honoured at the India Splendour Awards for his contribution in popularising Indian cinema Om Shanti Om (2007) – Biggest opening week grosser Eros International Plc in the history of Indian cinema Annual Report and Accounts 2008 5 Chairman’s and Chief Executive’s Statement Strategic overview globally exploiting its ,900 plus content I am delighted to announce that the team library across all formats including cinema, at Eros has delivered another set of strong home entertainment, television and digital results to its shareholders. We became new media platforms. Since its listing on the first company within the Indian AIM, Eros set and achieved the objective entertainment sector to list on AIM in July in pioneering fashion to become one of 2006 and since then have successfully led the most dominant vertically integrated the content and distribution consolidation companies within the sector to operate within the sector to deliver two consecutive on a true studio model. years of high double digit growth propelling the Company to a different league within Eros Pictures the sector. The Company’s investment in content since listing has enabled it to secure a strong The Group revenue went up 70.2% to film slate of over 60 films for committed US$113.0 million demonstrating the release in 2009 and 200. Recognising the Company’s ability to quickly scale up the opportunity that the Indian entertainment business. The gross profit went up 57.9% to sector was poised for consolidation just US$63 million. The EBITDA went up 60.4% to like Hollywood was in the 930s, Eros Eros has successfully leveraged its US$77.8 million with cash generated from successfully executed its strategy of tying “competitive” advantage of content operations of US$89.4 million proving that up with key talent and production houses the business model generates strong cash for output deals and securing the content depth and distribution strength pipeline for the next 2-3 years to mitigate and will pursue continued growth flows.