Entertainment One Ltd.
Interim Results
for the six months ended 30 September 2014
STRONG PERFORMANCE UNDERPINS NEW STRATEGIC FOCUS
Strategy to double the size of Group in the next five years
 ‘Bringing the best content to the world’ by being:
o a true partner to the best creative talent; and
o the world’s leading independent distributor through a locally-deep, globally-connected
network
Strong margin growth
 Group underlying EBITDA up 31% to £36.9 million driven by Television and Film
 Underlying EBITDA margin 3pts higher at 10.9%
 Profit before tax up 100% to £2.4 million
 Group revenues 4% down, strong Television performance offset by Film
 Positive earnings outlook for the full year, in line with management expectations
Continued investment in content bolsters library valuation
 £147 million invested in content, with full year target of £280 million
 More than 20% growth in the Group’s library valuation to US$801 million
Creating a global television production business
 178 half hours of new programming delivered
 Growing portfolio of world-class television shows including The Walking Dead, Hell on Wheels
and Ben & Holly’s Little Kingdom
 Acquisition of Paperny Entertainment and Force Four Entertainment building multi-genre
television production capabilities
 Continued focus on acquisition opportunities
Making Peppa Pig the world’s most loved pre-school property
 Almost 200 new international broadcast and licensing deals for Peppa Pig
 Annual retail sales estimated at US$1 billion and growing strongly
Positioning Film for the future
 134 theatrical releases during the period
 New leadership refocusing Film business initiatives
 US restructured following Phase 4 Films acquisition
Enhancing digital capabilities
 Strategic investment in interactive digital agency Secret Location
Progressive dividend policy
 Inaugural dividend paid in September 2014
Increasing Group’s access to flexible capital
 J.P. Morgan and Goldman Sachs International appointed to assist us in exploring debt
financing options to support strategy execution
Interim Results
for the six months ended 30 September 2014
Darren Throop, Chief Executive, commented:
“In the seven years since Entertainment One joined the London Stock Exchange, the
management team has consistently delivered on-strategy, building one of the world’s largest
and most prolific independent Film and Television businesses.
We continue to attract and retain some of the entertainment industry’s leading players,
partner with some of its greatest creative talent and benefit from successful collaborations
that have delivered some of the last decade’s most memorable hits including The Twilight
Saga, The Hunger Games, The Walking Dead and the now pre-eminent pre-school property
Peppa Pig.
Alongside these high profile hits the breadth of our portfolio of titles across our Film and
Television businesses have delivered one of the most valuable content rights libraries in the
independent sector. Our library and our unrivalled international distribution network provide
the foundations for our business today.
It is from this position of strength that we look forward with excitement to the Group’s future
as I set out our ambitions for the next phase of eOne’s strategic development.
In Film we see an evolving marketplace, with growth in digital delivery, creating opportunities
for our business in all our markets. In particular, we see significant potential from securing
earlier access to film rights through development partnerships with producers and seeking
international growth into those territories experiencing structural growth. This is most notable
in the Latin American and Asian markets, where we will seek to find suitable entry points.
The Group is already a beneficiary of a new ‘golden age’ for premium television production
and from a base of exceptional properties such as The Walking Dead, Rookie Blue and Hell
on Wheels we are ideally positioned to deliver strong growth. Our strategy is to expand our
Television business in Canada further and to increase our production presence into the US,
the UK and Australian markets. We will achieve organic growth through the launch of a new
development fund which is being made available to support early-stage projects with
talented producers. We will also pursue acquisitions which deliver premium product and
provide the foundation on which to build a global network of relationships with the best
creative talent in the industry.
The growth of the Group over the last seven years continues to be supported by our most
successful property, Peppa Pig. Our longstanding partnership with the creative team at
Astley Baker Davies now delivers estimated retail sales of over US$1 billion every year. We
believe Peppa Pig has the potential to be the most loved pre-school property in the world
and it is our ambition to achieve that goal over the coming years while building a balanced
portfolio of complementary family brands.
Digital now forms an essential aspect in the production and exploitation of content. Our
investment in Secret Location in July 2014 has provided us with a base upon which to build
a focused strategy to develop production capabilities in short form made-for-digital content
and new interactive consumer digital experiences.
With our four strategic pillars of film, television, family and digital and our focused strategy to
achieve these ambitions we believe that we can double the size of Entertainment One in the
next five years.”
2
Interim Results
for the six months ended 30 September 2014
FINANCIAL SUMMARY
Reported results
(Unaudited)
Revenue (£m)
– Reported
– Pro forma/constant currency1
Underlying EBITDA2 (£m)
– Reported
– Pro forma/constant currency1
EBITDA margin (%)
Profit before tax3 (£m)
Investment in acquired content
and productions (£m)
Diluted earnings per share3 (p)
1
2
3
4
2014
2013
4
Change
330.5
366.1
-10%
Adjusted results
(Unaudited)
2014
2013
4
Change
338.2
353.0
-4%
36.3
28.5
+27%
11.0
2.4
7.8
1.2
+3.2pts
+100%
36.9
10.9
28.1
28.1
8.0
21.3
+31%
+2.9pts
+32%
142.3
0.4
167.3
2.7
-15%
-2.3p
147.4
7.8
161.9
5.5
-9%
+2.3p
Pro forma/constant currency financial results include the results of Phase 4 Films, Paperny Entertainment and Force Four Entertainment,
which were acquired on 3 June 2014, 31 July 2014 and 28 August 2014, respectively, as if those businesses had been acquired on the first
day of the comparative period.
Underlying EBITDA is operating profit before one-off items, share-based payment charges, depreciation and amortisation of acquired
intangibles. Underlying EBITDA is reconciled to operating profit in the ‘Other Financial Information’ section of this Interim Announcement.
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.
Comparative numbers for 2013 have been restated as a result of the adoption of IFRS 10 Consolidated Financial Statements and IFRS 11
Joint Arrangements. See Note 2 to the condensed consolidated financial statements for further detail.
Group pro forma revenues of £338.2 million were 4% lower than the previous period (2013:
£353.0 million), driven by lower revenues in the Film Division, partly offset by strong
revenues in the Television Division. Group reported revenues were 10% lower at £330.5
million (2013: £366.1 million).
Group pro forma underlying EBITDA increased by 31% to £36.9 million (2013: £28.1 million),
reflecting improved margins in both Film and Television. Group reported underlying EBITDA
was 27% higher at £36.3 million (2013: £28.5 million). Adjusted profit before tax increased
by 32% to £28.1 million, in line with increases in underlying EBITDA. The Group reported a
profit before tax of £2.4 million (2013: £1.2 million).
Group pro forma investment in acquired content rights and productions reduced 9% to
£147.4 million (2013: £161.9 million), due to changes in the release schedule and the timing
of eOne’s own film productions. On a reported basis investment in content was down by
15% to £142.3 million (2013: £167.3 million). Full year investment in acquired content rights
and productions is expected to reach a target of £280 million.
The annual independent valuation of the Group’s film, television and music library has
increased to US$801 million (2013: US$655 million).
On an adjusted basis, diluted earnings per share was 7.8 pence (2013: 5.5 pence) and
reflected a higher adjusted reported profit after tax in the current period. Reported diluted
earnings per share was 0.4 pence (2013: 2.7 pence).
3
Interim Results
for the six months ended 30 September 2014
OUTLOOK
The outlook for the remainder of the financial year remains positive, with improvements
expected in Film box office performance, strong delivery of Television programming and
continued robust progress in the Family business. The directors look forward to delivering
profit growth for the full year in line with management expectations.
As we implement our growth plans and execute our new strategy, we are actively
considering ways of optimising our debt capital structure to ensure we have sufficient
investment, acquisition and operational flexibility, and have appointed J.P. Morgan and
Goldman Sachs International to assist us in exploring debt financing options.
STRATEGY
Updated Growth Strategy
The Group’s next phase of strong growth is based on its extensive worldwide entertainment
content distribution network and a reputation for excellence in content creation. These strong
foundations will enable eOne to maintain the performance of its current businesses and
position it to pursue higher-growth, transformational opportunities which will allow the Group
to continue to build its growth trajectory.
Entertainment One’s strategy is to bring the best content to the world by being a true
partner to the best creative talent and by being the world’s leading independent
distributor through a locally-deep, globally-connected network.
A true partner to the best creative talent:
eOne’s competitive advantage is based on a strong balance sheet with access to production
financing and strong relationships with talent across all media. The Group benefits from its
independence, its scale production capabilities and an unrivalled independent international
distribution network with reach to the most prolific buyers of premium content across both
Film and Television.
To achieve this goal, eOne will:
1. Build a television production presence in the US, the UK and Australia, while
continuing to grow in Canada
2. Partner with film-makers earlier in the production process to access and control
a film’s intellectual property
3. Invest in creators of made-for-digital content and new interactive consumer
digital experiences
The world’s leading independent distributor through a locally-deep, globally
connected network:
eOne’s international presence is built on its independent distribution network, its global
television sales presence with relationships with over 500 digital and broadcast platforms
and deep film distribution relationships in six of the world’s biggest media markets. The
Group also has commercial relationships with more than 425 licensees in 14 key territories
through its Family properties and a world-class digital products capability.
4
Interim Results
for the six months ended 30 September 2014
To achieve this goal, eOne will:
1. Attract content partners to create a truly world-class television sales business
2. Drive unrivalled scale in independent film distribution
3. Nurture Peppa Pig into the world’s leading pre-school property and continue to
build a balanced Family portfolio
In executing this strategy, eOne aspires to double the Group’s size in the next five years,
which will result in a business with earnings from its film, television, family and digital
activities more equally balanced and a portfolio investment risk profile more equally allocated
between investment in content distribution rights and deficit financing for Film, Television and
Family productions.
Entertainment One has worked with strategy consultants McKinsey to develop and refine the
next steps in executing and delivering on this new strategy.
5
Interim Results
for the six months ended 30 September 2014
DIVISIONAL OPERATIONAL & FINANCIAL REVIEW
FILM
Overview
The Group’s Film Division, which comprises operations in the UK, Canada, the US, Spain,
the Benelux and Australia, is the largest independent film distributor in the world. The
business acquires exclusive film content rights and exploits these rights on a multi-territory
basis across all media channels.
eOne operates its own Film Production business which enables it to access content earlier in
the production process while retaining upside in a film’s performance, and an International
Film sales business which provides the Group with benefits from the exploitation of film
content rights on a global basis, in addition to its core territories.
In June 2014, eOne completed the acquisition of the Phase 4 Films group of companies, a
leading independent film and television distributor operating across Canada and the US.
Following the acquisition, the Group combined its US film operations with the Phase 4 US
business and refocused the operation on investing in titles designed to drive ancillary rather
than theatrical revenues, reducing print and advertising spend and increasing profitability.
The new focus of eOne’s strategy for the Film Division will be to partner more extensively
with film-makers earlier in the production process to access and control a film’s intellectual
property and to drive unrivalled scale in independent film distribution by expanding the
Group’s existing network into new high-growth territories whilst maintaining the profile and
scale of the current film business.
Under this new strategic focus, it is expected that the majority of film titles will still be
acquired on a single-territory basis and that the Group will continue to seek output deals with
other producers on commercial terms, on a multi-territory basis where appropriate. In
addition, it is expected that the Group will increasingly look to co-finance, partner or produce
films in order to access and control the intellectual property of these films at an earlier stage
in the film life cycle, and at lower costs, to improve margins.
The Group expects to expand its current international distribution footprint into new territories
to increase its attractiveness and leverage with potential film development and production
partners. To this end, the Group sees particular opportunities for corporate acquisitions and
aggregation in Latin America and South East Asia, as well as opportunities in parts of
Europe to complement eOne’s existing European presence.
In September 2014, the Group welcomed Steve Bertram as President of Film, replacing
Patrice Theroux. Steve brings a wealth of experience in the film industry having previously
held senior executive roles at companies including Paramount and Dreamworks. Steve will
lead our Film business to achieve the ambitious goals that we have set for our existing
operations and in delivering our expansion plans in new territories.
Financial Review
During the period theatrical activity was lower as a result of a different profile of titles in
comparison to the prior period and a delay in titles being delivered for release. In addition,
global theatrical market conditions have been weaker during the period, with box office
6
Interim Results
for the six months ended 30 September 2014
receipts lower across the industry. This impacted revenues which decreased by 11% to
£262.6 million (2013: £296.1 million). However, the profile of revenues, with lower theatrical
releases, has allowed the Group to benefit from reduced print and advertising and other
operational costs, to deliver improved pro forma underlying EBITDA margins of 9.2% for the
Film Division (2013: 6.8%).
The process of combining eOne’s legacy US business with Phase 4 Films has resulted in a
one-off restructuring charge of £7.6 million.
Reported (unaudited)
4
2014
2013
Change
Pro forma
5
Constant currency (unaudited)
4
2014
2013
Change
259.1
306.5
-15%
262.6
296.1
-11%
32.8
56.8
-42%
32.8
52.9
-38%
– Home entertainment
111.0
122.2
-9%
113.4
121.2
-6%
– Broadcast and Digital
97.2
100.5
-3%
98.3
97.1
+1%
– Other
18.1
27.0
-33%
18.1
24.9
-27%
Underlying EBITDA (£m)
24.1
20.9
+15%
24.2
20.0
+21%
9.3
6.8
+2.5pts
9.2
6.8
+2.4pts
83.1
100.9
-18%
83.4
96.3
-13%
Revenue (£m)
– Theatrical
EBITDA margin (%)
Investment in acquired content
and productions (£m)
5
Pro forma/constant currency financial results include the results of Phase 4 Films, which was acquired on 3 June 2014, as if that business had been acquired on
the first day of the comparative period.
Theatrical
Overall theatrical revenues decreased by 38%, driven by box office revenues which were
down by 36% to US$151 million (2013: US$236 million) as a result of some releases being
delayed into the second half of the year and because of changes in the mix of the release
slate against the previous year. 134 theatrical titles (2013: 142) were released in the period,
including Divergent, Calvary, The Expendables 3, The Giver and The Grand Seduction with
investment in acquired content and productions down by 13% to £83.4 million (2013: £96.3
million).
Box office performance is expected to improve with a stronger film slate of over 100 film
releases planned in the second half including Mr Turner, Nightcrawler, Nativity 3: Dude,
Where’s My Donkey?!, The Water Diviner, Hunger Games: Mockingjay - Part 1 and
Insurgent. Investment in acquired content and productions is set to grow to £180 million in
the current financial year.
Based on the level and quality of titles committed for the next financial year, there are good
indications of a return to a stronger theatrical release slate for FY16 which includes titles
such as The Hunger Games: Mockingjay - Part 2, Allegiant Part 1, Gods of Egypt, Insidious:
Chapter 3 and The Last Witch Hunter.
7
Interim Results
for the six months ended 30 September 2014
The Group also has six films currently in production including Suite Française, Woman in
Black: Angel of Death, Insidious: Chapter 3, Sinister 2 and Eye in the Sky. eOne’s
International Film business is leading projects including Trumbo as well as the international
distribution of eOne’s own production, Eye in the Sky.
Home entertainment
Home entertainment revenues decreased by 6%, primarily driven by the overall anticipated
market decline, reflecting the move from physical to digital formats, partly offset by a higher
number of releases. In total, 399 DVDs were released including 12 Years a Slave, Delivery
Man, Dallas Buyers Club, Need for Speed, Lone Survivor and Divergent compared to 351
releases in the prior period. More than 300 DVD titles are planned for release in the second
half of the financial year, including The Hundred Foot Journey, A Walk Among the
Tombstones, Nightcrawler and Mr Turner.
Broadcast and Digital
Combined broadcast and digital revenues now account for 37% of overall Film revenues
(2013: 33%) and the Group expects that broadcast and digital revenues will continue to
offset the decline in physical DVD sales, helping improve the Group’s overall margins.
TELEVISION
Overview
The Television Division comprises the Television Production & Sales business, the Family &
Licensing operation and also incorporates the results of the Group’s Music label. The
Division’s focus is on the production of television programming, the acquisition of television
content rights and the exploitation of branded properties through licensing and
merchandising activities.
During the period, eOne successfully completed the acquisition of Paperny Entertainment
and Force Four Entertainment. Paperny Entertainment is a leading independent television
producer business based in Canada and the US, specialising in the development and
production of non-scripted television programming, including a range of character-driven
documentaries, reality shows and comedies. Force Four Entertainment specialises in
lifestyle, reality and scripted programming. Together these companies produce around 200
half hours of programming annually. Both acquisitions strengthen the Group’s television
production capabilities in North America, supplement its content library and enhance the
Group’s international sales offering.
Under the Group’s updated strategy, Television will look to expand its production activities
into the US, the UK and Australia whilst maintaining the profile and scale of its current
television operation, which remains Canada’s leading independent television producer. In
the US, the UK and Australia, the Group expects to target strategic acquisitions to provide a
platform for growth and will create a development fund to support first-look deals, codevelopment deals and pilots, and build a global network of relationships with the best
creative talent in the industry.
8
Interim Results
for the six months ended 30 September 2014
eOne will continue to distribute its own television productions, including new content from the
US, the UK and Australia and will pursue deals with other third party producers of television
content to grow revenues, spread fixed costs and strengthen eOne’s position as a leading
distributor of television content. The Group will seek to maintain its relationship with key
partners, securing extensions to existing output deals and by exploring alternative forms of
strategic relationship.
The Family & Licensing business has seen particularly strong growth in the period, with the
continued success of Peppa Pig in traditional European markets and the continued roll-out of
the brand internationally.
Whilst focusing predominantly on making Peppa Pig the world’s most loved pre-school
property, the Family team continue to develop a balanced portfolio of complementary family
brands for other demographics that give breadth to our Family portfolio.
Financial Review
Revenues for the period were 32% higher at £90.9 million (2013: £68.9 million) driven by
continued growth in Family, and Television Production & Sales revenues in line with
expectations. Underlying EBITDA increased by 47% to £15.4 million (2013: £10.5 million),
primarily driven by the performance of the Family business. Underlying EBITDA margin
improved by 1.7pts to 16.9% for the Television Division (2013: 15.2%).
Investment in acquired content and productions was marginally lower at £64.0 million (2013:
£65.6 million). At 30 September 2014, contracted sales not yet recognised as revenue,
relating to productions in progress, were approximately £38 million (2013: £37 million on a
constant currency basis).
Reported (unaudited)
4
2014
2013
Change
Pro forma
6
Constant currency (unaudited)
4
2014
2013
Change
Revenue (£m)
86.7
72.0
+20%
90.9
68.9
+32%
– Television Production & Sales
46.1
49.7
-7%
50.3
47.3
+6%
– Family & Licensing
31.3
12.0
+161%
31.3
12.0
+161%
9.3
10.3
-10%
9.3
9.6
-3%
Underlying EBITDA (£m)
14.8
10.0
+48%
15.4
10.5
+47%
EBITDA margin (%)
17.1
13.9
+3.2pts
16.9
15.2
+1.7pts
Investment in acquired content
and productions (£m)
59.2
66.4
-11%
64.0
65.6
-2%
– Music
6
Pro forma/constant currency financial results include the results of Paperny Entertainment and Force Four Entertainment, which were acquired on 31 July 2014
and 28 August 2014, respectively, as if those businesses had been acquired on the first day of the comparative period.
9
Interim Results
for the six months ended 30 September 2014
Television Production & Sales
On a pro forma basis, Television Production delivered 178 half hours of programming,
compared to 166 half hours in the prior period. Key deliveries included 52 half hours in
relation to acquired businesses, as well as deliveries of eOne’s flagship shows including
season five of Rookie Blue, season four of Hell on Wheels, season five of Haven and
season three of Saving Hope.
Full year deliveries are expected to be almost 550 half hours (including Paperny and Force
Four), up on the prior year’s 317 half hours. Investment in acquired content and productions
is set to grow to £100 million in the current financial year.
The production slate is strong for the second half including season six of Rookie Blue and
Haven, with Turn, The Red Road and Halt and Catch Fire, the three shows delivered under
the AMC/Sundance channels output deal, having all been renewed for second seasons.
During the first half, the business has agreed the terms for the first show under the El Rey
output deal, Matador, which will deliver in the next financial year.
Family & Licensing
Family & Licensing continues to perform very strongly with continued success for Peppa Pig,
where the franchise is set to generate over US$1 billion of retail sales in 2014. Traditional
European markets continued to perform well and the roll-out of the brand internationally
expanded into new markets in Latin America and the Far East.
The first half of the financial year saw very strong progress for Peppa with almost 200 new
broadcast and licensing deals signed. In the UK, Peppa remains the number one pre-school
property with continued investment in brand management and broadcast/retail support.
In the US, the outlook remains positive, with broadcaster Nick Jr continuing to support
Peppa by airing episodes seven days a week and Nickelodeon now giving Peppa a daily
scheduled time. Our new toy partner will make initial shipments in the last quarter of the
calendar year and has secured slots with Toys’R’Us and Walmart for a mass launch in
spring 2015. Whilst existing international markets have continued to deliver strong results
(with Italy, Spain and Australia all performing well), the focus for the period has been on the
licensing roll-out of Peppa in new territories including new European markets (France and
Germany), Brazil, Russia and the Far East (China and South East Asia).
Outside the Peppa franchise, eOne’s other properties are progressing well and the Group is
continuing development work on three new shows that have been green-lit: Winston
Steinburger and Sir Dudley Ding Dong, Zak Storm and PJ Masks.
Ben & Holly’s Little Kingdom continues to have high ratings in its television slots and the UK
toy re-launch in July 2014 has been well-received by retailers with both Hamley’s and
Toys’R’Us investing in promotional displays. Ben & Holly is gaining traction internationally
with toy launches in Australia, Spain and Italy and a roll-out of a wider product range
expected. A new licensing programme for Ben & Holly’s Little Kingdom was also launched
during the period, with 50 licensees currently in place.
10
Interim Results
for the six months ended 30 September 2014
Music
The Music business was broadly in line with the prior year period, but revenues were 3%
lower driven by the timing of releases (41 in 2014, versus 44 in 2013). Our current roster of
artists continues to be strong and full year performance is in line with management
expectations.
Digital
From a digital perspective, the Group will invest in the creators of made-for-digital content for
both television and online platforms. In doing so, we hope to increase interactive
engagement with the audiences of our Television and Film assets.
The Group’s joint venture with Secret Location is the first of eOne’s digital-specific strategic
investments. The company creates interactive experiences to launch content digitally
through storytelling and will enable viewers to interact with the Group’s television
productions in a more immersive way. Our investment will support the development of
original interactive properties for both Entertainment One and existing clients of Secret
Location, and we expect the company’s business to expand significantly as we explore
opportunities in the digital space.
Going forward, we will invest in creators of made-for-digital content and develop, create and
invest in innovative technology and platforms that enhance revenues from intellectual
property or create new revenue streams.
OTHER FINANCIAL INFORMATION
Reconciliation of Reported to Adjusted Numbers
Group
Six months to 30 September
Adjusted
Reported
(Unaudited)
(Unaudited)
2014
£m
20134
£m
2014
£m
20134
£m
330.5
366.1
330.5
366.1
Underlying EBITDA
36.3
28.5
36.3
28.5
Amortisation of acquired intangibles
Depreciation
Share-based payment charge
One-off items
(1.7)
-
(1.1)
-
(11.2)
(1.7)
(1.7)
(12.8)
(20.5)
(1.1)
(0.5)
(3.4)
Operating profit
Net finance charges
Profit before tax
Tax
Profit for the period
34.6
(6.5)
28.1
(5.5)
22.6
27.4
(6.1)
21.3
(5.8)
15.5
8.9
(6.5)
2.4
(1.2)
1.2
3.0
(1.8)
1.2
6.4
7.6
Revenue
11
Interim Results
for the six months ended 30 September 2014
Adjusted operating profit (which excludes amortisation of acquired intangibles, share-based
payments and one-off items) increased by 26% to £34.6 million (2013: £27.4 million)
reflecting the growth in underlying EBITDA. Adjusted profit before tax increased by 32% to
£28.1 million, in line with increased adjusted operating profit. Reported operating profit
increased by £5.9 million to £8.9 million with the Group reporting a profit before tax of £2.4
million (2013: £1.2 million).
Amortisation of acquired intangibles
Amortisation of acquired intangibles decreased by £9.3 million to £11.2 million. This is
primarily due to certain Alliance-related intangibles having been fully amortised by 31 March
2014.
Depreciation and capital expenditure
Depreciation, which includes the amortisation of software, has increased by £0.6 million to
£1.7 million, reflecting the impact of higher capital expenditure in the second half of the prior
year which has generated a higher depreciation charge in the current period. Capital
expenditure during the period increased to £1.5 million (2013: £1.3 million), driven by
systems spending as a result of the integration of the Alliance businesses.
Share-based payment charge
The share-based payment charge has increased by £1.2 million to £1.7 million during the
period, as a result of the broadening of the number of employees to whom grants were made
under the Group’s Long Term Incentive Plan.
One-off items
One-off items totalled £12.8 million and included £7.6 million of US Film-related restructuring
costs following the acquisition of Phase 4 Films. Included within this amount is a £5.4 million
impairment charge in respect of investment in acquired content rights previously made by
Entertainment One, resulting from the refocused US Film strategy following the acquisition.
Alliance-related restructuring costs of £2.1 million were incurred in the period, covering staff
redundancies, unused office space and IT systems integration.
In addition, acquisition costs of £1.4 million were incurred in the period, relating primarily to
the acquisitions of Phase 4 Films, Paperny Entertainment and Force Four Entertainment
(which were completed in the first half), together with the joint venture investment in Secret
Location. Finally, during the period the Group incurred costs of £1.7 million related to
aborted deals. Further details of the one-off items are set out in Note 4 to the condensed
consolidated financial statements.
Net finance charges
Reported net finance charges increased by £4.7 million to £6.5 million. Excluding prior
period one-off net finance income of £4.3 million, adjusted finance charges of £6.5 million
were £0.4 million higher in the current period due to unfavourable foreign exchange
movements. The weighted average interest rate was 3.9% compared to 5.0% in the prior
period, representing lower headline interest rates in the current period.
12
Interim Results
for the six months ended 30 September 2014
Tax
On a reported basis the Group's tax charge of £1.2 million, which includes the impact of oneoff items, represents an effective rate of 46.2% compared to (2133)% in the comparative
period and 7.0% for the year to 31 March 2014. On an adjusted basis, the effective rate is
19.4% compared to 28.4% in the comparative period, driven by a different mix of the
incidence of profit by jurisdiction in the two periods, and 25.0% in the year to 31 March
2014. The adjusted effective rate for the full year is anticipated to be approximately 23%.
Cash flow
Net cash from operating activities of £79.2 million was £29.0 million less than the previous
period, reflecting the timing of working capital cash flows in the current period. Investment in
productions and acquired content rights totalled £142.3 million, compared to £167.3 million
in the prior period reflecting theatrical activity and timing. Full year spending on content
rights and productions is expected to be in line with management expectations at £280
million.
Free cash outflow was £4.8 million higher at £65.2 million (2013: £60.4 million) as a result of
lower cash from operating activities, partly offset by lower investment in acquired content
rights and productions.
(Unaudited)
30 September 2014
Adjusted
Prod’n
net debt net debt
Total
£m
£m
£m
Net debt at 1 April
30 Sep
20134
£m
(111.1)
(54.0)
(165.1)
(150.1)
39.6
39.6
79.2
108.2
(75.8)
(66.5)
(142.3)
(167.3)
(0.6)
-
(0.6)
-
(1.5)
-
(1.5)
(1.3)
(38.3)
(26.9)
(65.2)
(60.4)
(2.5)
-
(2.5)
-
(16.1)
4.3
(11.8)
(4.9)
Debt acquired
(3.7)
(5.2)
(8.9)
(2.5)
Net interest paid
(3.1)
(0.4)
(3.5)
(5.4)
Dividends paid
(2.9)
-
(2.9)
-
Amortisation of deferred finance charges
(0.8)
-
(0.8)
(0.9)
Foreign exchange
(2.0)
(0.9)
(2.9)
10.7
(180.5)
(83.1)
(263.6)
(213.5)
Net cash from operating activities
Investment in productions and acquired
content rights
Purchase of acquired intangibles
Purchase of other non-current assets
7
Free cash flow
Purchase of interests in joint ventures
Acquisition of subsidiaries, net of cash
acquired
Net debt at 30 September
7
Other non-current assets comprise property, plant and equipment and intangible software.
13
Interim Results
for the six months ended 30 September 2014
The net cash outflow from the acquisition of subsidiaries was £11.8 million. £6.6 million
related to the acquisition of Phase 4 Films (3 June 2014), £2.8 million related to Paperny
Entertainment (31 July 2014), £1.8 million to Force Four Entertainment (28 August 2014)
and £0.6 million paid into an escrow account in relation to the Alliance box office target.
The Group paid its inaugural final dividend of 1.0 pence per share in respect of the year
ended 31 March 2014 on 11 September 2014, resulting in a total distribution to shareholders
of £2.9 million. This dividend qualified as an eligible dividend for Canadian tax purposes. The
dividend was paid net of withholding tax where appropriate, based on the residency of the
individual shareholder. The directors did not recommend the payment of a dividend in
respect of the year ended 31 March 2013.
Foreign exchange movements of £2.9 million are non-cash movements and primarily relate
to the translation impact of the weakening of pounds sterling against the Canadian dollar.
Financing
Net debt balances at 30 September comprise the following:
(Unaudited)
Cash and other items (excluding production)
Senior credit facility
Adjusted net debt
Production net debt
Net debt
£m
2014
(40.0)
220.5
180.5
83.1
263.6
£m
20134
(28.5)
171.3
142.8
70.7
213.5
Adjusted net debt was £180.5 million, an increase of £37.7 million from the previous year.
The increase is driven primarily by the acquisition of the three companies that were
completed in the current period and a higher opening net debt position. Adjusted net debt at
31 March 2015 is expected to be in line with management expectations.
Production net debt increased by £12.4 million year-on-year to £83.1 million, reflecting the
acquisition of new TV Production businesses (Paperny Entertainment and Force Four
Entertainment) and the higher number of productions in progress at the period end. This
financing is independent of the Group’s senior credit facility. It is excluded from the
calculation of adjusted net debt as it is secured over the assets of individual production
companies within the Production businesses and represents shorter-term working capital
financing that is arranged and secured on a production-by-production basis.
Financial position and going concern basis
The Group’s net assets increased by £12.1 million to £326.8 million at 30 September 2014
(2013: £314.7 million4). The increase primarily reflects the £16.1 million of common shares
issued as part-consideration for the three acquisitions made in the first half of the current
financial year.
The directors acknowledge guidance issued by the Financial Reporting Council relating to
going concern. The directors consider it appropriate to prepare the interim financial
statements on a going concern basis, as set out in Note 2 to the condensed consolidated
financial statements.
14
Interim Results
for the six months ended 30 September 2014
STATEMENT OF DIRECTORS’ RESPONSIBILITY
The directors confirm that to the best of their knowledge:
a) the condensed set of financial statements has been prepared in accordance with IAS
34 Interim Financial Reporting as adopted by the European Union; and
b) the Interim Management Report includes a fair review of information required by DTR
4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the Financial
Conduct Authority.
By order of the Board
Giles Willits
Director
17 November 2014
15
Interim Results
for the six months ended 30 September 2014
A presentation to analysts will take place at 9.30am on Tuesday, 18 November at the eOne’s
UK office (45 Warren Street, London, W1T 6AG). For more information, or to register to
attend, contact Jenny Bahr at Redleaf Polhill (020 7382 4733 or eOne@redleafpr.com).
For further information please contact:
Redleaf Polhill
Emma Kane / Rebecca Sanders-Hewett
Tel: +44 (0)20 7382 4730
Email: eOne@redleafpr.com
Entertainment One
Darren Throop (CEO)
via Redleaf Polhill
Giles Willits (CFO)
via Redleaf Polhill
Patrick Yau (Director of Investor Relations)
Tel: +44(0)20 3714 7931
Email: PYau@entonegroup.com
J. P. Morgan Cazenove
(Joint Broker)
Hugo Baring / Virginia Khoo
Tel: +44 (0)12 0234 2000
Cenkos Securities plc
(Joint Broker)
Stephen Keys
Tel: +44 (0)20 7397 8926
J.P. Morgan Securities plc is acting as corporate broker to the Company and no one else
and will not be responsible to any other person for providing the protections afforded to
clients of J.P. Morgan in connection with any matter referred to herein.
Cautionary statement
This Interim Announcement contains certain forward-looking statements with respect to the
financial condition, results, operations and businesses of Entertainment One Ltd. These
statements and forecasts involve risk and uncertainty because they relate to events and
depend upon circumstances that will occur in the future. These statements are made by the
directors in good faith based on the information available to them up to the time of their
approval of this report. There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied by these forward-looking
statements and forecasts. Nothing in this Interim Announcement should be construed as a
profit forecast.
A copy of this Interim Announcement for the six months ended 30 September 2014 can be
found on our website at www.entertainmentone.com.
16
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 30 September 2014
Unaudited
Six months ended
30 September
2014
£m
(restated)
Six months ended
30 September
2013
£m
330.5
(249.1)
81.4
(72.3)
(0.2)
8.9
366.1
(285.9)
80.2
(78.1)
0.9
3.0
36.3
(11.2)
(1.7)
(1.7)
(12.8)
8.9
28.5
(20.5)
(1.1)
(0.5)
(3.4)
3.0
(6.5)
2.4
(1.2)
1.2
5.0
(6.8)
1.2
6.4
7.6
1.1
0.1
7.5
0.1
7
7
0.4
0.4
2.7
2.7
7
7
7.8
7.8
5.6
5.5
Note
Revenue
Cost of sales
Gross profit
Administrative expenses
Share of results of joint ventures
Operating profit
Analysed as:
Underlying EBITDA
Amortisation of acquired intangibles
Depreciation
Share-based payment charge
One-off items
Finance income
Finance costs
Profit before tax
Income tax (charge)/credit
3
3
3
4
5
5
6
Profit for the period
Attributable to:
Owners of the Company
Non-controlling interests
Earnings per share (pence)
Basic
Diluted
Adjusted earnings per share (pence)
Basic
Diluted
All activities relate to continuing operations. As explained in further detail in Note 2, the restatement of
the 2013 comparatives relates to the adoption of IFRS 10 Consolidated Financial Statements and
IFRS 11 Joint Arrangements.
17
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 September 2014
Unaudited
Profit for the period
Other comprehensive income/(loss) for the period:
Exchange differences on foreign operations
Fair value movements on cash flow hedges
Reclassification of cash flow hedges
Tax on cash flow hedges
Total other comprehensive income/(loss) for the period
Total comprehensive income/(loss) for the period
Attributable to:
Owners of the Company
Non-controlling interests
Six months ended
30 September
2014
£m
(restated)
Six months ended
30 September
2013
£m
1.2
7.6
1.0
0.3
2.0
(0.6)
2.7
3.9
(22.4)
(1.5)
(1.5)
0.8
(24.6)
(17.0)
3.8
0.1
(17.1)
0.1
All items of other comprehensive income for both periods may be reclassified to profit or loss in
subsequent periods. As explained in further detail in Note 2, the restatement of the 2013 comparatives
relates to the adoption of IFRS 10 Consolidated Financial Statements and IFRS 11 Joint
Arrangements.
18
CONDENSED CONSOLIDATED BALANCE SHEET
at 30 September 2014
Unaudited
30 September
2014
£m
(restated)
31 March
2014
£m
(restated)
30 September
2013
£m
213.0
102.1
103.4
6.2
3.5
13.0
7.6
448.8
191.9
91.5
58.5
5.5
1.2
12.1
5.3
366.0
205.7
113.0
90.6
4.7
2.2
12.1
15.5
443.8
51.9
216.3
266.6
56.4
3.3
2.8
597.3
47.2
230.1
241.4
38.9
0.2
2.1
559.9
47.9
227.8
223.8
36.1
4.0
0.4
540.0
1,046.1
925.9
983.8
10
255.0
6.6
0.8
7.8
270.2
155.9
6.7
2.8
3.2
168.6
207.5
7.3
6.3
12.7
233.8
10
65.0
357.2
6.3
19.2
1.4
449.1
48.1
368.7
13.2
15.9
3.3
449.2
42.1
360.7
16.5
14.0
2.0
435.3
Total liabilities
719.3
617.8
669.1
Net assets
326.8
308.1
314.7
EQUITY
Stated capital
11
Own shares
Other reserves
Currency translation reserve
Retained earnings
Equity attributable to owners of the Company
Non-controlling interests
302.1
(3.6)
9.9
(3.2)
20.8
326.0
0.8
286.0
(3.6)
8.2
(4.2)
21.0
307.4
0.7
282.4
(3.6)
8.8
19.9
6.7
314.2
0.5
Total equity
326.8
308.1
314.7
Note
ASSETS
Non-current assets
Goodwill
Other intangible assets
Investment in productions
Property, plant and equipment
Interests in joint ventures
Other receivables
Deferred tax assets
Total non-current assets
Current assets
Inventories
Investment in acquired content rights
Trade and other receivables
Cash and cash equivalents
Current tax assets
Derivative financial instruments
Total current assets
8
9
10
Total assets
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings
Other payables
Provisions
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Interest-bearing loans and borrowings
Trade and other payables
Provisions
Current tax liabilities
Derivative financial instruments
Total current liabilities
As explained in further detail in Note 2, the restatement of the 31 March 2014 and 30 September 2013
comparatives relate to the adoption of IFRS 10 Consolidated Financial Statements and IFRS 11 Joint
Arrangements.
19
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2014
Unaudited
Equity
attributable to
Other reserves
Stated
capital
£m
Own
shares
£m
Cash flow
hedge
reserve
£m
Warrants
reserve
£m
Restructuring
reserve
£m
Currency
translation
reserve
£m
Retained
earnings
£m
owners
of the
Company
£m
Noncontrolling
interests
£m
Total
equity
£m
286.0
(3.6)
(1.1)
-
9.3
(4.2)
21.0
307.4
0.7
308.1
-
-
1.7
1.7
-
-
1.0
1.0
1.1
1.1
1.1
2.7
3.8
0.1
0.1
1.2
2.7
3.9
Issue of common shares – on acquisitions
Dividends paid
Credits in respect of share-based payments
At 30 September 2014
16.1
302.1
(3.6)
0.6
-
9.3
(3.2)
(2.9)
1.6
20.8
16.1
(2.9)
1.6
326.0
0.8
16.1
(2.9)
1.6
326.8
At 1 April 2013 (restated)
282.4
(7.2)
1.1
0.6
9.3
42.3
2.3
330.8
0.4
331.2
-
-
(2.2)
-
-
(22.4)
7.5
-
7.5
(24.6)
0.1
-
7.6
(24.6)
-
-
(2.2)
-
-
(22.4)
7.5
(17.1)
0.1
(17.0)
282.4
3.6
(3.6)
(1.1)
0.6
9.3
19.9
(3.6)
0.5
6.7
0.5
314.2
0.5
0.5
314.7
At 1 April 2014 (restated)
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Profit for the period
Other comprehensive loss
Total comprehensive (loss)/income for the
period
Distribution of shares to beneficiaries of the
Employee Benefit Trust
Credits in respect of share-based payments
At 30 September 2013 (restated)
As explained in further detail in Note 2, the restatement of amounts as at 1 April 2014, 1 April 2013 and 30 September 2013 relate to the adoption of IFRS 10
Consolidated Financial Statements and IFRS 11 Joint Arrangements.
20
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 September 2014
Unaudited
Six months ended
30 September
2014
£m
(restated)
Six months ended
30 September
2013
£m
8.9
3.0
0.7
1.0
11.2
28.3
70.3
5.4
0.3
1.7
0.2
0.7
0.4
20.5
39.9
71.0
1.3
0.5
(0.9)
128.0
(0.2)
(5.9)
(28.0)
(8.9)
85.0
(5.8)
79.2
136.4
(1.5)
13.4
(30.1)
(6.5)
111.7
(3.5)
108.2
(11.8)
(2.5)
(76.3)
(4.9)
(107.4)
(66.0)
(0.6)
(0.5)
(1.0)
(158.7)
(59.9)
(0.6)
(0.7)
(173.5)
Financing activities
Drawdown of interest-bearing loans and borrowings
Repayment of interest-bearing loans and borrowings
Net drawdown of interim production financing
Interest paid
Fees paid in relation to the Group’s senior bank facility
Dividends paid
Net cash from financing activities
113.9
(41.7)
34.7
(3.5)
(2.9)
100.5
98.5
(37.2)
13.2
(5.4)
(1.0)
68.1
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Effect of foreign exchange rate changes on cash held
Cash and cash equivalents at end of the period
21.0
35.5
(0.1)
56.4
2.8
35.0
(1.7)
36.1
Note
Operating activities
Operating profit
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of software
Amortisation of acquired intangibles
Amortisation of investment in productions
Amortisation of investment in acquired content rights
Impairment of investment in acquired content rights
Foreign exchange movements
Share-based payment charge
Share of results of joint ventures
Operating cash flows before changes in working
capital and provisions
Increase in inventories
(Increase)/decrease in trade and other receivables
Decrease in trade and other payables
Decrease in provisions
Cash generated from operations
Income tax paid
Net cash from operating activities
Investing activities
Acquisition of subsidiaries, net of cash acquired
Purchase of interests in joint ventures
Purchase of investment in acquired content rights
Purchase of investment in productions, net of grants
received
Purchase of acquired intangibles
Purchase of property, plant and equipment
Purchase of software
Net cash used in investing activities
8
9
9
12
10
As explained in further detail in Note 2, the restatement of the 2013 comparatives relates to the
adoption of IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 30 September 2014
1. General information
The Entertainment One Ltd. group (“the Group”) is a leading independent entertainment group
focused on the acquisition, production and distribution of film and television content rights across all
media throughout the world. Entertainment One Ltd. (“the Company”) is the Group’s ultimate parent
company and is incorporated and domiciled in Canada. The registered office of the Company is 175
Bloor Street East, Suite 1400, North Tower, Toronto, Ontario, M4W 3R8. The Company’s common
shares are listed on the premium listing segment of the Official List of the Financial Conduct Authority.
Segmental information is disclosed in Note 3.
These condensed consolidated financial statements (“interim financial statements”) were approved for
issue by the directors on 17 November 2014.
2. Basis of preparation
Significant accounting policies
These interim financial statements have been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and International Accounting Standard 34
Interim Financial Reporting, as adopted by the European Union.
These interim financial statements have also been prepared in accordance with the accounting
policies and methods of computation which the Group expects to adopt for the 2015 year end. Except
for the adoption of new, amended and revised Standards as set out below, these policies are
consistent with the principal accounting policies which were set out in the Group’s latest annual
audited consolidated financial statements, which can be found on the Group’s website,
www.entertainmentone.com.
Use of additional performance measures
The Group presents underlying EBITDA, one-off items, adjusted profit before tax and adjusted
earnings per share information. These measures are used by the Group for internal performance
analysis and incentive compensation arrangements for employees. The terms “underlying”, “one-off
items”, and “adjusted” may not be comparable with similarly titled measures reported by other
companies. The term “underlying EBITDA” refers to operating profit or loss excluding operating oneoff items, share-based payment charges, depreciation and amortisation of other intangible assets.
The terms “adjusted profit before tax” and “adjusted earnings per share” refer to the reported
measures excluding operating one-off items, amortisation of acquired intangibles arising on
acquisitions, one-off items relating to the Group’s financing arrangements, share-based payment
charges and, in the case of adjusted earnings per share, one-off tax items.
Going concern
As part of their ongoing assessment of the Group and its future prospects the directors review regular
updates to the forecasts and plans prepared by management. The most recent forecasts, which
extend at least 12 months from the date of signing of this report and take account of reasonable
possible changes in trading performance (and mitigating actions), show that the Group will be able to
operate within the expected limits of its financing facilities and provide headroom against its banking
covenants for the foreseeable future.
For the reasons set out above, the directors believe that the Group has adequate resources to
continue in operational existence for the foreseeable future and continue to adopt the going concern
basis in preparing these interim financial statements.
22
2. Basis of preparation (continued)
New, amended and revised Standards adopted during the period
From 1 April 2014, the following were adopted by the Group:
New, amended and revised Standards
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities
Amendments to IFRS 10, IFRS 11 and IFRS 12 Consolidated Financial Statements, Joint
Arrangements and Disclosure of Interests in Other Entities: Transition Guidance
IAS 27 (as revised in 2011) Separate Financial Statements
IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures
Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities
Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets
Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting
Effective date
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
The adoption of these new, amended and revised Standards had no material impact on the Group’s
financial position, performance or its disclosures. The adoption of IFRS 10 and IFRS 11 has, however,
resulted in certain prior period amounts being restated, as described in further detail below.
Impact of adoption of IFRS 10 and IFRS 11
The adoption of IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements has
impacted these interim financial statements as follows:
Within the Film Division, certain joint arrangements of the Film Production business were previously
proportionally consolidated. These have been classified as joint ventures under IFRS 11 and have
consequently been retrospectively accounted for using the equity method. In the prior period
condensed consolidated income statement, previously reported amounts of the Group’s share of
revenue, cost of sales and administrative expenses have been aggregated in the single line item
“share of results of joint ventures”. Similarly, in the condensed consolidated balance sheets of the
prior periods presented, previously reported amounts of the Group’s share of investment in
productions, trade and other receivables, cash and cash equivalents, trade and other payables and
interest-bearing loans and borrowings have been aggregated in the single line item “interests in joint
ventures”. The restatement of amounts in the prior periods in relation to the above has had no impact
on underlying EBITDA, profit for the period or net assets.
Within the Television Division, certain production companies within the Television Production & Sales
business, which were previously accounted for as proportionally consolidated joint ventures, have
been classified as fully consolidated subsidiaries based on a reassessment under IFRS 10 of the
Group’s power and control over these entities. Consequently, in the prior period condensed
consolidated income statement, previously reported amounts of the Group’s share of revenue, cost of
sales and administrative expenses have been restated to reflect 100% of the respective balances. To
the extent any profit for the period relates to non-controlling interests, this has been presented
separately on the face of the condensed consolidated income statement. The condensed consolidated
balance sheets of the prior periods presented have also been restated to reflect 100% of any
previously proportionally consolidated balances, with amounts relating to non-controlling interests
presented separately within equity. The restatement of amounts in the prior periods in relation to the
above has increased underlying EBITDA and profit for the period for the six months ended 30
September 2013 by £0.1m and has increased net assets at 31 March 2014 and 30 September 2013
by £0.7m and £0.5m, respectively.
Other
These interim financial statements do not include all the information and disclosures required in the
annual financial statements and should be read in conjunction with the Group’s annual financial
statements for the year ended 31 March 2014 which were prepared in accordance with International
Financial Reporting Standards and International Financial Reporting Interpretations Committee
interpretations, as adopted by the European Union. These interim financial statements are unaudited
but have been reviewed by the auditors and their review opinion is included at the end of these
statements. These interim financial statements are presented in pounds sterling, which is also the
functional currency of the parent company. All values are shown in millions, rounded to the nearest
one hundred thousand pounds, except when otherwise stated.
23
3. Operating segments
For internal reporting and management purposes, the Group is organised into two main reportable
segments based on the types of products and services from which each segment derives its revenue
– Film and Television. These divisions are the basis on which the Group reports its operating segment
information.
The types of products and services from which each reportable segment derives its revenues are as
follows:

Film – the production, acquisition and exploitation of film content rights across all media.

Television – the production and exploitation of television programming, the acquisition and
exploitation of television and music content rights and the exploitation of
branded properties through licensing and merchandising activities across all
media.
Inter-segment sales are charged at prevailing market prices. Depreciation includes amortisation of
software.
Unaudited segment information for the six months ended 30 September 2014 is presented below.
Segment revenues
External sales
Inter-segment sales
Total segment revenues
Segment results
Segment underlying EBITDA
Group costs
Underlying EBITDA
Amortisation of acquired intangibles
Depreciation
Share-based payment charge
One-off items
Operating profit
Film
£m
Television
£m
Eliminations
£m
Consolidated
£m
255.7
3.4
259.1
74.8
11.9
86.7
(15.3)
(15.3)
330.5
330.5
24.1
14.8
-
38.9
(2.6)
36.3
(11.2)
(1.7)
(1.7)
(12.8)
8.9
Unaudited segment information for the six months ended 30 September 2013 is presented below.
(restated)
Segment revenues
External sales
Inter-segment sales
Total segment revenues
Segment results
Segment underlying EBITDA
Group costs
Underlying EBITDA
Amortisation of acquired intangibles
Depreciation
Share-based payment charge
One-off items
Operating profit
Film
£m
Television
£m
Eliminations
£m
Consolidated
£m
303.9
2.6
306.5
62.2
9.8
72.0
(12.4)
(12.4)
366.1
366.1
20.9
10.0
-
30.9
(2.4)
28.5
(20.5)
(1.1)
(0.5)
(3.4)
3.0
Segment information for the six months ended 30 September 2013 is presented as restated due to
the adoption of IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements, as
explained in further detail in Note 2.
24
4. One-off items
Unaudited
Restructuring costs
US Film-related restructuring costs
Alliance-related restructuring costs
Alliance-related acquisition credit
Total restructuring costs
Other items
Acquisition costs:
Completed deals
Aborted deals
Other corporate projects
Total other items
Total one-off items
Six months ended
30 September
2014
£m
Six months ended
30 September
2013
£m
7.6
2.1
9.7
7.6
(5.8)
1.8
1.4
1.7
3.1
12.8
0.2
1.4
1.6
3.4
Restructuring costs
US Film-related restructuring costs
During the six months ended 30 September 2014 and following the acquisition of Phase 4 Films (see
Note 12 for further details), the Group refocused the strategy of its combined US film operations.
The new strategy is to capitalise on Phase 4 Films’ direct relationships with various home
entertainment customers by investing in titles designed to drive ancillary, rather than theatrical,
revenue, thereby reducing print and advertising spend and increasing profitability. As a result of this
new strategy, the Group reassessed the carrying value of investment in acquired content rights (which
had previously been based on theatrically-released titles supporting the former release strategy) in
the legacy US film business. This review involved reassessing ultimate revenues in relation to the
titles previously released under a theatrical release strategy where the profile of the ultimate revenues
were judged to be no longer appropriate given the strategic change and, as a result of this review, an
acquired contents rights impairment charge of £5.4m was recorded in the condensed consolidated
income statement as a one-off item in the current period. The Group incurred other US film-related
restructuring costs of £2.2m, including £1.0m of staff redundancy costs.
Alliance-related restructuring costs
During the six months ended 30 September 2014, the Group incurred £2.1m (2013: £7.6m) of
restructuring costs related to the Alliance acquisition, which was completed in January 2013. A charge
of £0.9m (2013: £4.8m) was recorded for staff redundancy costs associated with the Group’s synergyrealisation programme. A charge of £0.2m (2013: £0.9m) has been recorded during the period in
respect of unused office space as a result of the integration of the operations in Canada. Other
restructuring costs of £1.0m have been incurred during the period, including costs associated with IT
systems integration. In the prior period, a charge of £1.9m was incurred due to higher inventory
returns arising from the inventory consolidation programme to integrate the acquired Alliance film
catalogue.
Alliance-related acquisition credit
At 30 September 2013, the Group reassessed the amount of contingent consideration payable in
respect of box office targets related to the Alliance acquisition, resulting in a credit to the condensed
consolidated income statement of £5.8m. This credit was net of a charge relating to certain box office
target film titles which significantly under-performed in the prior period, resulting in the release of the
payable amount.
25
4. One-off items (continued)
Other items
Acquisition costs – completed deals
As set out in further detail in Note 12, during the six months ended 30 September 2014, the Group
completed three acquisitions and made a strategic investment in Secret Location. The aggregate
acquisition costs of these transactions was £1.1m. These costs included fees in respect of due
diligence work performed and other advisory and legal expenses. During the period the Group also
incurred £0.3m of costs in respect of prior period acquisitions. Acquisition costs of £0.2m incurred
during the six months ended 30 September 2013 relate to the Group’s acquisition of Art Impressions
Inc., a US brand and licensing agency, on 16 July 2013.
Acquisition costs – aborted deals
During the six months ended 30 September 2014, the Group considered a number of potential
acquisitions which did not ultimately complete. The Group incurred costs of £1.7m in respect of such
items.
Other corporate projects
The prior period amount of £1.4m primarily related to transfer of the listing category of all of the
Company’s common shares from the standard listing segment to the premium listing segment of the
Official List of the Financial Conduct Authority.
5. Finance income and finance costs
Finance income and finance costs comprise:
Unaudited
Finance income
Net foreign exchange gains
Gain on fair value of derivative financial instruments
Total finance income
Finance costs
Interest on bank loans and overdrafts
Amortisation of deferred finance charges
Fees payable on amendment to senior bank facility
Net foreign exchange losses
Total finance costs
Net finance costs
Of which:
Adjusted net finance costs
One-off net finance income
Six months ended
30 September
2014
£m
Six months ended
30 September
2013
£m
-
4.1
0.9
5.0
(4.1)
(0.8)
(1.6)
(6.5)
(5.3)
(0.9)
(0.6)
(6.8)
(6.5)
(1.8)
(6.5)
-
(6.1)
4.3
One-off net finance income of £4.3m in the prior period comprised foreign exchange gains of £4.4m, a
gain of £0.9m arising on the mark-to-market valuation of derivative financial instruments, a charge of
£0.6m in respect of fees incurred on an amendment made to the Group’s senior bank facility and
£0.4m of non-cash interest charges on certain provisions.
26
6. Tax
Unaudited
Current tax (charge)/credit
Deferred tax credit
Income tax (charge)/credit
Of which:
Adjusted tax charge on adjusted profit before tax
One-off net tax credit
Six months ended
30 September
2014
£m
Six months ended
30 September
2013
£m
(4.3)
3.1
(1.2)
2.3
4.1
6.4
(5.5)
4.3
(5.8)
12.2
The reported effective income tax rate for the six months ended 30 September 2014 is 46.2% (2013:
(2,133.3)%, as restated to exclude the results of joint ventures from pre-tax profits). The rate is
calculated by applying the estimated annual effective income tax rate by tax jurisdiction to the pre-tax
profits and losses of each jurisdiction (excluding the results of joint ventures) for the six month period.
On an adjusted basis, the effective income tax rate for the six months ended 30 September 2014 is
19.4% (2013: 28.4%, as restated to exclude the results of joint ventures from pre-tax profits). The full
year effective income tax rate is expected to be approximately 23% which is higher than the adjusted
rate for the six months ended 30 September 2014 due to changes in the mix of profits between
jurisdictions with differing tax rates.
7. Earnings per share
Unaudited
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
Six months ended
30 September
2014
Pence
Six months ended
30 September
2013
Pence
0.4
0.4
7.8
7.8
2.7
2.7
5.6
5.5
Basic earnings per share is calculated by dividing earnings for the period attributable to shareholders
by the weighted average number of shares in issue during the period, excluding shares held by the
Employee Benefit Trust (“EBT”) which are classified as treasury shares and treated as cancelled.
Adjusted earnings are the profit for the period attributable to shareholders adjusted to exclude one-off
operating and finance items, share-based payment charges and amortisation of acquired intangible
assets (net of any related tax) and, where applicable, the non-controlling interests’ share of those
items.
Diluted earnings per share and adjusted diluted earnings per share are calculated after adjusting the
weighted average number of shares in issue during the period to assume the conversion of all
potentially dilutive shares.
See Note 11 for details of transactions involving common shares or potential common shares
between the reporting date and the date of authorisation of these interim financial statements.
27
7. Earnings per share (continued)
The weighted average number of shares used in the earnings per share calculations are set out
below.
Unaudited
Six months ended
30 September
2014
Million
Six months ended
30 September
2013
Million
287.6
273.7
2.6
-
3.1
2.2
290.2
279.0
Weighted average number of shares for basic earnings
per share and adjusted basic earnings per share
Effect of dilution:
Employee share awards
Share warrants
Weighted average number of shares for diluted earnings
per share and adjusted diluted earnings per share
Adjusted earnings per share
The directors believe that the presentation of adjusted earnings per share, being the diluted earnings
per share adjusted for one-off operating and finance items, share-based payments and amortisation
of acquired intangibles (net of any related tax effects) and, where applicable, the non-controlling
interests’ share of those items, helps to explain the underlying performance of the Group. A
reconciliation of the earnings used in the diluted earnings per share calculation to earnings used in
the adjusted earnings per share calculation are set out below.
Unaudited
Note
Profit for the period attributable to shareholders
Add back one-off items
Add back amortisation of acquired intangibles
Add back share-based payment charge
Deduct one-off net finance income
Deduct net tax effect of above and other one-off tax
items
Adjusted earnings
4
5
6
Six months ended
30 September
2014
Pence
per
£m
share
Six months ended
30 September
2013
Pence
per
£m
share
1.1
12.8
11.2
1.7
-
0.4
4.4
3.9
0.6
-
7.5
3.4
20.5
0.5
(4.3)
2.7
1.2
7.3
0.2
(1.5)
(4.3)
22.5
(1.5)
7.8
(12.2)
15.4
(4.4)
5.5
28
8. Investment in productions
Unaudited
Six months ended 30 September 2014
Investment in Productions
productions in progress
Total
£m
£m
£m
Cost
Balance at 1 April
Acquisitions of subsidiaries
Additions
Transfer between categories
Exchange differences
Balance at 30 September
Amortisation
Balance at 1 April
Amortisation charge for the period
Exchange differences
Balance at 30 September
Carrying amount
(restated)
Six months ended
30 September 2013
Total
£m
267.7
2.4
40.6
3.9
314.6
14.6
6.1
63.1
(40.6)
1.3
44.5
282.3
8.5
63.1
–
5.2
359.1
252.8
–
65.3
–
(19.8)
298.3
(223.8)
(28.3)
(3.6)
(255.7)
58.9
–
–
–
–
44.5
(223.8)
(28.3)
(3.6)
(255.7)
103.4
(181.9)
(39.9)
14.1
(207.7)
90.6
Prior period amounts are presented as restated due to the adoption of IFRS 10 Consolidated
Financial Statements and IFRS 11 Joint Arrangements, as explained in further detail in Note 2.
9. Investment in acquired content rights
Unaudited
Note
Balance at 1 April
Acquisition of subsidiaries
Additions
Amortisation charge for the period
Impairment charge for the period
Exchange differences
Balance at 30 September
12
4
Six months ended
30 September
2014
£m
Six months ended
30 September
2013
£m
230.1
3.5
60.4
(70.3)
(5.4)
(2.0)
216.3
202.4
105.6
(71.0)
(9.2)
227.8
29
10. Interest-bearing loans and borrowings
Unaudited
30 September
2014
£m
(restated)
31 March
2014
£m
(restated)
30 September
2013
£m
Bank overdrafts
Bank borrowings (net of deferred finance charges)
Interim production financing
Other loans
Total
220.5
99.2
0.3
320.0
3.4
136.6
63.5
0.5
204.0
171.3
77.3
1.0
249.6
Shown in the condensed consolidated balance sheet as:
Non-current
Current
255.0
65.0
155.9
48.1
207.5
42.1
30 September
2014
£m
(restated)
31 March
2014
£m
(restated)
30 September
2013
£m
Cash and other items (excluding production)
Senior credit facility
Adjusted net debt
Production net debt
Net debt
40.0
(220.5)
(180.5)
(83.1)
(263.6)
25.5
(136.6)
(111.1)
(54.0)
(165.1)
28.5
(171.3)
(142.8)
(70.7)
(213.5)
Analysed as:
Cash and cash equivalents
Interest-bearing loans and borrowings
56.4
(320.0)
38.9
(204.0)
36.1
(249.6)
The Group’s net debt is as follows:
Unaudited
Prior period amounts are presented as restated due to the adoption of IFRS 10 Consolidated
Financial Statements and IFRS 11 Joint Arrangements, as explained in further detail in Note 2.
11. Stated capital
Stated capital at 30 September 2014 totalled £302.1m (31 March 2014: £286.0m; 30 September
2013: £282.4m).
During the six months ended 30 September 2014, a total of 4,870,142 common shares (equivalent to
£16.1m) were issued as part-consideration for three acquisitions made during the period. Further
details of these acquisitions are set out in Note 12.
During the six months ended 30 September 2014, 254,000 common shares (2013: 9,677,992) were
issued to employees (or former employees) exercising share options granted under various schemes.
The total consideration received by the Company on the exercise of these options was less than
£0.1m (2013: less than £0.1m).
Consequently, the total number of common shares in issue increased from 289,164,656 at 31 March
2014 to 294,288,798 at 30 September 2014 (30 September 2013: 283,297,306). At 30 September
2014, the Company had 3,463,706 common shares (31 March 2014: 3,463,706; 30 September 2013:
3,463,706) held by the EBT which are classified as treasury shares.
In October 2014, the Company issued 5,000 common shares to former employees exercising share
options granted under various schemes. The total consideration received by the Company on the
exercise of these options was £nil. Subsequent to these transactions and at the date of authorisation
of these interim financial statements, the total number of common shares in the Company totalled
294,293,798.
30
12. Business combinations
Phase 4 Films
On 3 June 2014, the Group acquired 100% of the issued share capital of the Phase 4 Films group of
companies (“Phase 4”) for a total consideration of £12.4m, comprising £7.7m cash consideration,
£0.4m contingent consideration and £4.3m share consideration. For accounting purposes, the fair
value of the common shares issued in the Company was based on 1,412,062 common shares at the
fair value of those equity instruments at the date of exchange. This purchase was accounted for as an
acquisition.
Phase 4, a leading independent film and television distributor based in Canada and the US,
specialises in the sales, marketing, licensing and distribution of feature films, television and specialinterest content across all media in the North American market. The acquisition provides incremental
scale and growth opportunities for the Group's Film Division.
For the reasons outlined above, combined with the ability to hire the workforce of Phase 4, including
the management team, the Group paid a premium on the acquisition, giving rise to goodwill. None of
the goodwill is expected to be deductible for income tax purposes.
The following table summarises the fair values of the assets acquired, the liabilities assumed and the
total consideration transferred as part of this acquisition:
Unaudited
Note
Goodwill
Other intangible assets
Property, plant and equipment
Inventories
Investment in acquired content rights
Trade and other receivables
Cash and cash equivalents
Interest-bearing loans and borrowings
Trade and other payables
Tax:
Current tax assets
Deferred tax liabilities
Net assets acquired
Satisfied by:
Cash
Contingent consideration
Shares in Entertainment One Ltd.
Total consideration transferred
9
Fair value
£m
7.5
7.5
0.1
3.7
3.5
9.1
1.1
(3.7)
(14.8)
0.6
(2.2)
12.4
7.7
0.4
4.3
12.4
Contingent consideration represents post-acquisition tax receipts that were received by Phase 4
which, under the terms of the transaction, were payable to the vendors of Phase 4. This amount was
settled in October 2014.
The net cash outflow arising from this acquisition in the six months ended 30 September 2014 was
£6.6m, comprising cash consideration of £7.7m less cash and cash equivalents acquired of £1.1m.
Acquisition-related costs amounted to £0.4m and have been charged to the condensed consolidated
income statement within one-off items (see Note 4 for further details).
Phase 4 contributed £12.4m to the Group’s revenue and £0.8m to the Group’s profit before tax for the
period from the date of the acquisition to 30 September 2014. The acquired Phase 4 business has
been integrated into the Film CGU.
31
12. Business combinations (continued)
Paperny Entertainment
On 31 July 2014, the Group acquired 100% of the issued share capital of the Paperny Entertainment
group of companies (“Paperny”) for a total consideration of £15.4m, comprising £6.6m cash
consideration and £8.8m share consideration. For accounting purposes, the fair value of the common
shares issued in the Company was based on 2,571,803 common shares at the fair value of those
equity instruments at the date of exchange. This purchase was accounted for as an acquisition.
Paperny, a leading independent television producer business based in Canada and the US,
specialises in the development and production of non-scripted television programming, including a
range of character-driven documentaries, reality shows and comedies. In line with the Group’s
strategy of growing and diversifying its content rights portfolio, the acquisition significantly expands
the Group's non-scripted and factual production slate, helping to supplement the Group's already
diverse, multi-genre television production capabilities. The transaction also provides a platform for
further Group initiatives within non-scripted television programming across the North American
market.
For the reasons outlined above, combined with the ability to hire the workforce of Paperny, including
the management team, the Group paid a premium on the acquisition, giving rise to goodwill. None of
the goodwill is expected to be deductible for income tax purposes.
The following table summarises the fair values of the assets acquired, the liabilities assumed and the
total consideration transferred as part of this acquisition:
Unaudited
Note
Goodwill
Other intangible assets
Investment in productions
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Interest-bearing loans and borrowings
Trade and other payables
Tax:
Current tax liabilities
Deferred tax liabilities
Net assets acquired
Satisfied by:
Cash
Shares in Entertainment One Ltd.
Total consideration transferred
8
Fair value
£m
9.4
8.1
7.4
0.6
3.0
3.8
(3.0)
(9.2)
(2.6)
(2.1)
15.4
6.6
8.8
15.4
The net cash outflow arising from this acquisition was £2.8m in the six months ended 30 September
2014, comprising cash consideration of £6.6m less cash and cash equivalents acquired of £3.8m.
Acquisition-related costs amounted to £0.3m and have been charged to the condensed consolidated
income statement within one-off items (see Note 4 for further details).
Paperny contributed £1.5m to the Group’s revenue and £nil to the Group’s profit before tax for the
period from the date of the acquisition to 30 September 2014. The acquired Paperny business has
been integrated into the Television CGU.
32
12. Business combinations (continued)
Force Four Entertainment
On 28 August 2014, the Group acquired 100% of the issued share capital of the Force Four
Entertainment group of companies (“Force Four”) for total consideration of £6.0m, comprising £2.3m
cash consideration, £0.7m contingent consideration and £3.0m share consideration. For accounting
purposes, the fair value of the common shares issued in the Company was based on 886,277
common shares at the fair value of those equity instruments at the date of exchange. This purchase
was accounted for as an acquisition.
Force Four is one of Canada’s most successful and respected television production companies. Its
television programmes include lifestyle, reality and scripted programming that have sold and aired
globally. This acquisition strengthens the Group’s activity in scripted and unscripted television and
further enhances the Group’s international sales offering.
For the reasons outlined above, combined with the ability to hire the workforce of Force Four,
including the management team, the Group paid a premium on the acquisition, giving rise to goodwill.
None of the goodwill is expected to be deductible for income tax purposes.
The following table summarises the fair values of the assets acquired, the liabilities assumed and the
total consideration transferred as part of this acquisition:
Unaudited
Note
Goodwill
Other intangible assets
Investment in productions
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Interest-bearing loans and borrowings
Trade and other payables
Tax:
Current tax assets
Deferred tax liabilities
Net assets acquired
Satisfied by:
Cash
Contingent consideration
Shares in Entertainment One Ltd.
Total consideration transferred
8
Fair value
£m
2.6
2.7
1.1
0.2
3.8
0.5
(2.2)
(2.2)
0.2
(0.7)
6.0
2.3
0.7
3.0
6.0
Contingent consideration represents an estimate of post-acquisition tax receipts that will be received
by the production companies of Force Four which, under the terms of the transaction, are payable to
the vendors of Force Four. The amount recognised is the maximum amount payable.
The net cash outflow arising from this acquisition in the six months ended 30 September 2014 was
£1.8m, comprising cash consideration of £2.3m less cash and cash equivalents acquired of £0.5m.
Acquisition-related costs amounted to £0.2m and have been charged to the condensed consolidated
income statement within one-off items (see Note 4 for further details).
Force Four contributed £0.2m to the Group’s revenue and recorded a loss before tax of £0.2m for the
period from the date of the acquisition to 30 September 2014. The acquired Force Four business has
been integrated into the Television CGU.
Other disclosures in respect of business combinations
If the acquisitions of Phase 4, Paperny and Force Four had all been completed on 1 April 2014,
Group revenue for the six months ended 30 September 2014 would have been £338.2m and Group
profit before tax would have been unchanged at £2.4m.
During the six months ended 30 September 2014, the Group paid £0.6m into an escrow account in
relation to the box office target as part of the Alliance acquisition.
33
13. Seasonality
The Group’s exposure to seasonality varies by division. The results of the Film Division are impacted
by the number and timing of film releases. Release dates are not entirely within the control of the
Group and are determined largely by the production and release schedules of the film’s producers.
Revenues from television productions are driven mainly by contracted delivery dates with primary
broadcasters and can fluctuate significantly from period to period.
14. Risks and uncertainties
The Board considers risk assessment, identification of mitigating actions and internal control to be
fundamental to achieving the Group’s strategic objectives. The Corporate Governance section on
pages 34 to 39 of the Annual Report and Accounts for the year ended 31 March 2014 describes the
systems and processes through which the directors manage and mitigate risks. The Board recognises
that the nature and scope of the risks can change and so reviews the risks faced by the Group as well
as the systems and processes to mitigate them. The Board considers the principal risks to achieving
its objectives to be:







attracting and retaining the best people;
strategy execution;
regulatory/market environment;
acquisition effectiveness;
content investment opportunities;
content distribution agreements; and
financial risk management (including risks relating to interest rates, foreign exchange, liquidity
and financial covenants associated with the Group’s bank facility).
As part of financial risk management the Group monitors foreign currency movements. The movement
in foreign currency exchange rates during the period has an impact on the reporting of the financial
performance of the Group. In particular, the different functional currencies of the Group (US dollars,
Canadian dollars, euros, pounds sterling and Australian dollars) result in consolidation translation
gains and losses as the Group reports its financial results in pounds sterling. During the six months
ended 30 September 2014 a gain of £1.0m (2013: loss of £22.4m) has been credited to the currency
translation reserve, reflecting the impact of the weaker pounds sterling on translation of the Group’s
non-sterling net assets. The Group looks to balance local currency borrowings with the net assets of
individual operating units to help mitigate the impact of currency movements in relation to the Group’s
consolidated net assets.
The financial results of individual businesses within the Group are not significantly impacted by
foreign currency movements other than in relation to the investment in acquired content rights which
is generally transacted in US dollars. The Group reduces its exposure to risk in relation to foreign
currency movements in these circumstances through hedging instruments and internal currency
offsets where available.
In the view of the Board there is no material change in risk factors since 31 March 2014. Further
details of these risks are provided on pages 26 to 29 of the Annual Report and Accounts for the year
ended 31 March 2014, a copy of which is available on the Company’s website at
www.entertainmentone.com.
15. Related party transactions
The nature of related parties disclosed in the consolidated financial statements for the Group as at
and for the year ended 31 March 2014 has not changed.
34
INDEPENDENT REVIEW REPORT TO ENTERTAINMENT ONE LTD.
We have been engaged by the Company to review the condensed set of consolidated financial
statements in the half-yearly financial report for the six months ended 30 September 2014 which
comprises the condensed consolidated income statement, the condensed consolidated statement of
comprehensive income, the condensed consolidated balance sheet, the condensed consolidated
statement of changes in equity, the condensed consolidated cash flow statement and related Notes 1
to 15. We have read the other information contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material inconsistencies with the information in the
condensed set of consolidated financial statements.
This report is made solely to the Company in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity issued by the Auditing Practices Board. Our work has been
undertaken so that we might state to the Company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors’ responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The
directors are responsible for preparing the half-yearly financial report in accordance with the
Disclosure and Transparency Rules of the United Kingdom’s Financial Conduct Authority.
As disclosed in Note 2, the annual financial statements of the Group are prepared in accordance with
IFRSs, as adopted by the European Union. The condensed set of consolidated financial statements
included in this half-yearly financial report has been prepared in accordance with International
Accounting Standard 34 Interim Financial Reporting, as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of consolidated
financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK
and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of
the Entity issued by the Auditing Practices Board for use in the United Kingdom. A review of interim
financial information consists of making inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with International Standards on Auditing (UK
and Ireland) and consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed
set of consolidated financial statements in the half-yearly financial report for the six months ended 30
September 2014 is not prepared, in all material respects, in accordance with International Accounting
Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom’s Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London
17 November 2014
35