DQE.L Regulatory News (DQE)

DQ Entertainment plc

("DQE" or the "Company")

Results for the half year ended 30 September 2015

DQ Entertainment (DQE), a leading animation, gaming, live action entertainment production and distribution company, today announces its unaudited consolidated financial results for the half year ended 30 September 2015.

Financial highlights for the half year ended 30 September 2015:

o Revenue: INR 736 m (H1 2014: INR 733 m)

o Revenue from Production: INR 632 m (H1 2014: INR 500 m)

o Revenue from Distribution: INR 101 m (H1 2014: INR 233 m)

o EBIDTA: INR 321 m (H1 2014: 375 m)*

o Profit before tax: INR 78 m (H1 2014: INR 4 m)

o Profit after tax: INR 18 m (H 2014: INR 39 m)

*Excluding a notional foreign exchange gain for the year ended 30 September 2015 of INR 223 m (H1 2014: Foreign exchange loss of INR 73 m)

The improvement in the global market, particularly in North America, has had a positive impact on the the Company's operations, with the Company generating total revenue of INR 736 m in the half year ended 30 September 2015 (H1 2014: INR 733 m) which is in line with management expectations.

The financial performance of DQE benefited from changes in foreign exchange rates and a substantial increase in production and delivery efficiencies. For the half year ended 30 September 2015, there was a foreign exchange gain of Rs. 223 m (2014: foreign exchange loss of Rs. 73 m), due to the restatement of foreign currency balances as at 30 September 2015.

Our focus in the second quarter of the year was to improve operational efficiencies and expand human resources, to meet the demands of production in the coming months. The consolidation and expansion of artistic and technical skill sets and productivity improvements across all production processes has been initiated.

Our continuous efforts in respect of collecting receivables from customers are bringing in positive results, with remittances being received from almost all clients concerned. We are confident that these actions will enable us to report a significantly reduced debtor position by the end of the financial year.

Business Update

We are close to completing the second season of our proprietary production 'The New Adventures of Peter Pan'. The production of Season 1 of 'Miles from Tomorrow land' (Disney Junior USA) has recently been completed, with the production of Season 2 of this series commencing on a back-to-back basis, showing the confidence of our customer in our quality and delivery. The '5&IT' TV series is in production with Disney-Germany and Disney-France.

Our other productions such as 'The HIVE', Season 2 (a Disney Junior show), 'Popples' (Saban group, USA project), 'Sheriff Callie's Wild West' (Disney Junior, USA) and 'Seven and Me', a hybrid show combining high quality CGI with live action footage are also moving ahead on schedule.

We are also happy to report that our proprietary TV series 'The Jungle Book' has gone into a third season, in association with ZDF Enterprises and ZDF TV, Germany and Canal Plus, France.

During the quarter, our VFX division was also involved in the visual effects sequences within an epic feature film. Our VFX division completed the delivery of services for 'Rudrama Devi', by Gunasekhar and feature film 'Akhil', a Sresthth production containing significant amount of quality computer graphic work, which is slated for release soon. The acceptance and appreciation of our VFX work by the feature film industry has led to additional VFX orders. The division is currently engaged on certain high-end visual effects assignments for big banner feature films directed by leading directors from the Indian "Tollywood" industry.

The Company's digital platforms continue to perform satisfactorily, and we expect for third party properties to be hosted on 'Power Kids' and 'Tiny Toonz' in the near-term future.

For further information, please contact:

- Ends -

Condensed Consolidated Income Statement

Condensed Consolidated Statement of Comprehensive Income

Total comprehensive income attributable to:

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Financial Position (Continued)

These financial statements were approved by the Board of Directors and authorised for use on 9 November 2015.

Signed on behalf of the Board of Directors by:

Director Director

Condensed Consolidated Statement of Changes in Equity for the period ended 30 September 2015

Condensed Consolidated Statement of Cash Flows for the period ended 30 September 2015

Condensed Consolidated Statement of Cash Flows for the period ended 30 September, 2015 (Continued)

Notes to Condensed Consolidated Financial Statements

NOTE A - BASIS OF PREPARATION

1. General information

DQ Entertainment Plc. (the "Company" or DQ Plc.) is a Company domiciled and incorporated in the Isle of Man on 19 April 2007 and was admitted to the Alternative Investment Market of London Stock Exchange on 18 December 2007.

The condensed consolidated financial statements for the six months period ended 30 September 2015, comprises the financial information of the Company, its subsidiary and associates (together referred to as the "Group').

As on 30 September 2015 the following companies formed part of the Group:

The Company's registered address is 33-27, Athol Street, Douglas, IM1 1LB, Isle of Man.

The Group is primarily engaged in the business of providing Traditional and Digital Animation for Television, Home Video and Feature Films. The Group also is engaged in exploitation of its Distribution Rights to broadcasters, television channels, home video distributors and others.

The functional currencies of the respective Group companies are:

NOTE B - STANDARDS AND INTERPRETATIONS NOT YET APPLIED

Based on the Company's current business model and accounting policies, management does not expect any material impact on the Company's consolidated financial statements when any of the above standards or interpretations becomes effective. There are no other IFRS or IFRIC interpretations that are effective subsequent to the company's financial year end that would have a material impact on the group.

The Company does not intend to apply any of these pronouncements early.

1. Significant accounting policies

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the period ended 30 September, 2015, which have been prepared in accordance with International Financial Reporting Standards ('IFRS's)

In the opinion of management, all adjustments, which are of a normal recurring nature and necessary for a fair presentation, have been included. The Company has chosen to present the condensed consolidated financial position, condensed consolidated income statement, condensed consolidated comprehensive income statement, condensed consolidated statement of cash flows and condensed consolidated statement of changes in equity along with selected explanatory notes. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with IFRS have been condensed or omitted, although the Company believes that the disclosures made are adequate to make the information presented not misleading. These condensed consolidated financial statements have been prepared using the same accounting policies that were applied in the preparation of the Company's interim consolidated financial statements for the period ended 30 September, 2015.

The directors have had regard to the 12 month period from the date of approval of the interim financial statements and have reviewed the forecasted cash flows. The Company has sufficient resources to meet its on-going liabilities as they fall due.

NOTE C - SEGMENT REPORTING

Segment information is presented in respect of the Group's business and geographical segments. The primary format, business segments, is based on the Group's management and internal reporting structure.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Business segments

The Company comprises the following main business segments:

Animation production:

The production services rendered to production houses and training rendered for acquiring skills for production services in relation to the production of animated television series and movies.

Distribution: 

The revenue generated from the exploitation of the distribution rights of animated television series.

The following is an analysis of the Company's revenue and results by operating segment for the periods under review:

NOTE D - CASH AND CASH EQUIVALENTS

NOTE E - INTANGIBLE ASSETS

NOTE F - INTANGBILE ASSETS UNDER CONSTRUCTION

Intangible assets under construction include amounts paid to the producers for acquisition of the distribution rights and amounts incurred on internally generated intellectual property rights pending for capitalisation. These advances are transferred to distribution rights on completion of the entire production activities and when the asset is ready for exploitation.

NOTE G - INTEREST BEARING LOANS AND BORROWINGS

Interest bearing loans and borrowings comprise the following:

NOTE H - PROVISION FOR RETAKES

Retakes include creative changes to the final product delivered to the customer, performed on the specific request of the customer at the Group's own cost. Requests for retakes will be accepted from customers by the Group for a maximum period of three months from the final delivery and hence the provision is not discounted.

NOTE I - PERSONNEL COSTS

Details of personnel expenses included in cost of sales, administrative and distribution expenses are as follows:

NOTE J - NET FINANCING COSTS

NOTE K - EARNINGS PER SHARE ("EPS")

Profit attributable to ordinary shareholders

The Group does not have any dilutive instruments for any of the periods ended 30 September 2015 or 30 September 2014 and for the year ended 31 March, 2015 and as such Diluted EPS equals Basic EPS.

NOTE L - NON - CONTROLLING INTERESTS

NOTE M - EQUITY

a) Ordinary shares

DQ Plc. presently has only one class of ordinary shares. For all matters submitted to vote in the shareholders' meeting, every holder of ordinary shares, as reflected in the records of the Company on the date of the shareholders' meeting, has one vote in respect of each share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Company.

The Company has an authorized share capital of 60,000,000 equity shares of 0.1 pence each.

Issue of ordinary shares

NOTE M - EQUITY (Continued)

Share premium - The amount received by the company over and above the par value of shares issued is shown under this heading.

The share premium reserve can be utilised by the Company for the declaration of bonus shares and for offsetting incremental costs directly attributable to the issues of new shares.

b) Reserves

Translation reserve - Assets, liabilities, income, expenses and cash flows are translated into Indian Rupees (presentation currency) from US Dollars (functional currency of DQ Mauritius), Euros (functional currency of DQ Ireland and DQ Films Ltd) and Great British Pounds (functional currency of DQ Plc.). The exchange difference arising out of the period-end translation is debited or credited to foreign currency translation reserve.

 The movements in this reserve which are attributable to the controlling interests are set out below:

Exchange differences relating to the translation of the net assets of the Group's foreign operations from their functional currencies to the Group's presentation currency (i.e. INR) are recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve.

Accumulated earnings - Accumulated earnings include all current and prior period results as disclosed in the income statement which are attributable to the controlling interests. The movements in the accumulated earnings are set out below:

Other reserves - The Reverse acquisition reserve, equity component of convertible instruments and

capital redemption reserve are non-distributable in nature.

NOTE N - CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

NOTE O - RELATED PARTIES

Identity of related parties

DQ Plc. has a related party relationship with its directors, executive officers, subsidiaries and associate.

DQ Plc. does not have any ultimate controlling entity.

Related parties and their relationships

a) Subsidiaries

DQ Entertainment (Mauritius) Limited (with effect from 27 November 2007)

DQ Entertainment (International) Limited (with effect from 18 February 2008)

DQ Entertainment (Ireland) Limited (with effect from 12 November 2008)

DQ Peter Pan 2 Limited (with effect from 1st April 2013)

b) Joint Venture

DQ Entertainment (International) Films Limited (with effect from 11 March 2013)

c) Associate

Method Animation SAS (with effect from 28 March 2008)

d) Key management personnel

Mr. Tapaas Chakravarti - Director

Mr. S. Sunder Srinivasa Raghavan - Director

Ms. Rashida Adenwala - Director

e) Relatives of Key Management Personnel and Directors with whom DQ India has transactions with during the period:

Mrs. Rashmi Chakravarti (wife of Mr. Tapaas Chakravarti)

Ms Nivedita Chakravarti (daughter of Mr.Tapaas Chakravarti)

Mr Hatim Adenwala - Senior Vice President Human Resources (Husband of Rashida Adenwala)

Trading transactions

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

Revenue from production from related parties was at prices arising out of the Group's usual trade practices. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties.

Compensation of key management personnel

Directors of the company and their immediate relatives control 14.47 per cent of the voting shares of the Company.

The remuneration of directors and other members of key management during the period were as follows:

Other related party transactions

Remuneration paid to relatives of key management personnel during the period was INR 4 Mn; 30 September 2014: INR 4 Mn and 31 March 2015: INR 84 Mn.

NOTE P - OTHERS

Trade Receivables, net of discounting provisions, amounted to INR 3,534 Mn as at 30 September 2015. Whilst the ageing profile of certain Trade Receivables has increased over the last six months, management are actively following up on collections. Out of this total, debtors representing INR 2,872 Mn have made reductions in their overall balance. The remaining debtors have indicated that they will start to make payments as per their agreed payment plan.

Customers have indicated both their agreement with the outstanding balances and their intention to settle in full. The delayed payment profile has been driven by the market and industry conditions globally.

Management are of the opinion that no bad debt provision is required as at 30 September 2015 as they are in active dialogue with all debtors and there is currently no indication that the balances will not be settled in full. This area will be kept under constant review and provisions will be booked when deemed necessary.