24 Jun 2009 07:00
Entertainment One Ltd.
Preliminary announcement for the year ended 31 March 2009
Entertainment One revenue growth of 29.6% and underlying EBITDA growth of 35.6%
Entertainment One Ltd. ('Entertainment One' or 'the Group'), the leading international entertainment content owner and distributor, today announces its preliminary results for the period ended 31 March 2009.
Financial Highlights
| - | Revenue of £342.6 million up 29.6% (2008: £264.4 million) |
| - | Underlying EBITDA¹ up 35.6% at £25.3 million (2008: £18.6 million) |
| - | Adjusted profit before tax² of £16.4 million (2008: £12.9 million) up 27.1% resulting in adjusted earnings per share² of 8.1 pence, up 12.5% |
| - | Reported loss before tax of £31.0 million (2008: £7.7 million) primarily resulting from non-cash impairment charges following significant decline in US music market |
| - | Operating cash flow of £35.9 million (2008: £28.7 million) up 25.1% |
Operational Highlights
| - | International film business released over 110 titles in the year, including box office successes Twilight and Knowing |
| - | Successful expansion into television production with strong pipeline of new shows |
| - | Content library increased to over 4,000 film titles, 2,800 hours of original television programming and 15,000 music tracks |
| - | Core markets remain resilient to the broader economic environment with a number of factors expected to drive growth going forward |
Darren Throop, Chief Executive Officer, commented :
"Overall these results demonstrate the strength of the business despite the difficult economic environment. The Group is well positioned for further growth following the increased investment in content during the year. The Film division has a high quality slate of releases for the new financial year and Television has made a strong start with particular successes in major US network commissions. The Canadian Distribution business continues to deliver robust performance while the US Music and Distribution businesses have stabilised following the restructuring.
Following the board review the directors believe that the Group remains significantly undervalued and remain committed to driving shareholder value from the current AIM listing. In the medium term, the board will continue to assess the opportunities of accessing other financial markets when broader market conditions improve."
| 1 | Underlying EBITDA is the earnings before operating one off items, share-based payment charges, interest, tax, depreciation and amortisation of intangible assets |
| 2 | Adjusted profit before tax and diluted adjusted earnings per share are adjusted for operating one off items, share based payments, amortisation of acquired intangible assets and one off items within net finance costs |
For further information, please contact:
| Quiller Consultants John Eisenhammer/Kate Law Tel: +44 (0)20 7233 9444 | |
| Entertainment One Darren Throop (CEO) Tel: +1 (905) 282 7878 dthroop@e1ent.com | Giles Willits (CFO) Tel: +44 (0)20 7004 2755 gwillits@e1ent.com |
| Singer Capital Markets Limited (Nomad and Joint Broker) James Maxwell / Richard Savage Tel: +44 (0)20 3205 7624 | Evolution Securities Limited (Joint Broker) Jeremy Ellis Tel: +44 (0)20 7071 4308 |
Cautionary Statement
This Preliminary 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. 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 Preliminary Announcement should be construed as a profit forecast.
A copy of this Preliminary Announcement for the year ended 31 March 2009 can be found on our website at www.entertainmentonegroup.com. Copies of the Annual Report for the year ended 31 March 2009 will be available to shareholders shortly. BUSINESS PERFORMANCE AND FINANCIAL REVIEW, YEAR ENDED 31 MARCH 2009
OVERVIEW
In its second year since listing on AIM Entertainment One has made excellent progress in pursuing its strategy to become the world's leading independent filmed entertainment and distribution business. The financial year to 31 March 2009 saw the first full period of ownership of the companies acquired during the previous year, alongside expansion into the Canadian TV Production market. In January 2009 the Group rebranded its businesses under one banner.
Film performed strongly in the year, supported by over 110 releases across the division and the first major releases under the Group's output agreement with Summit Entertainment. These included Twilight, the first of three teenage vampire movies based on Stephanie Myers' series of internationally bestselling novels, and Knowing starring Nicolas Cage. Both movies reached number one at the box office in the UK and Canada. In addition the increase in film investment has set up an exciting slate in all the Group's territories with more than 130 planned theatrical releases in the new financial year.
Television also performed well, delivering 139 half hours of programming in the period following acquisition. The Group currently has a number of shows airing on broadcast networks internationally and has recently enjoyed notable success, with drama series The Bridge being sold to both CTV Globemedia and to the major US network CBS, and Copper sold to Canwest Global and ABC in the US. These shows are due for broadcast in the new financial year.
Across the Group, revenue is underpinned by a content library that now incorporates over 4,000 film titles, 2,800 hours of original television programming and 15,000 music tracks, which are exploited across the five countries in which the Group operates and internationally.
Canada Distribution delivered robust results against the backdrop of a tough consumer market. The US music and distribution businesses have been restructured following a significant deterioration in the US music market during the year.
The successful refinancing of the Group's banking facilities in September 2008 has provided additional working capital to support the continued growth in content investment that will drive the delivery of the Group's strategy. The facility is underpinned by the latest valuation of the company's content library at June 2008 of $175 million.
In February 2009, after a period of significant share price underperformance, the board announced that a review would be undertaken to look at ways of increasing shareholder value. A successful partial offer by the Group's largest shareholder was followed by an improvement in the share price. However, the board continues to believe that the company remains significantly undervalued and remains focused on driving share price performance through the current AIM listing. In the medium term the board will assess the opportunity to access other public markets when broader financial market conditions improve.
OUTLOOK
The Group remains optimistic in its ability to continue to grow the business and deliver its strategy in the face of a challenging macro-economic environment.
The Film division has a high quality slate of future releases and plans to increase investment in content further, while the Television business has started the new financial year strongly and has a number of new shows due for broadcast delivery in the coming year. In total the Group plans to invest over £80 million in content and TV production in the new financial year. The Canadian Distribution business remains well positioned to absorb the impact of margin pressure through growth in volume, both from new contracts and continued expansion of its Vendor Managed Inventory programme, while the US Music and Distribution businesses have stabilised following restructuring.
STRATEGY
The Group's strategy is based on the ownership and control of film, television, kids and music rights for exploitation across all media channels. It is the Group's intention to continue to pursue its strategy both through investing in organic growth and seeking opportunities to increase its scale through corporate activity.
The strategy is focused on developing a multi-territory distribution infrastructure. This offers independent film and TV producers an alternative to the major studios model, while enabling the Group to build competitive advantage in the market and deliver improved cost efficiency at lower risk.
Television diversifies the Group's revenue across the spectrum of filmed entertainment. Supported by Canadian financing incentives and with established reach into the US and international broadcast markets, the Group's television business is well positioned to drive long-term value from original programming across multiple genres. It typically controls worldwide rights to the productions in which it is involved.
The board believes that additional opportunities exist to consolidate the Group's position within its existing geographic markets and to expand into selected new markets where the Group can further leverage its business model.
CORE MARKETS
Global film entertainment revenues now represent approximately $100 billion, with distributor revenues representing over $50 billion. The Group's markets across film and television remain robust with a number of factors expected to drive growth going forward. The US music market has experienced significant challenges as consumption models change, although underlying consumer demand remains strong.
Film
Theatrical
The Group's film businesses currently operate in markets representing more than 15% of global box office and 25% of the box office market outside the US. Global box office performance has remained resilient to the economic downturn, with most Western markets reporting record attendance and revenue figures for 2008. The current economic environment has put pressure on film financing, leaving producers with more limited options to secure funding and delivering a strong pipeline of attractive content opportunities to the Group.
Home Entertainment
Home Entertainment revenues have come under some pressure in recent years as consumer pricing has fallen. However, unit volumes remain robust and pricing levels have now stabilised. During the year Blu-ray emerged as the dominant high-definition home entertainment technology. Sales of Blu-ray discs are expected to drive growth in the short to medium term as hardware penetration rates and consumer acceptance increases. Home Entertainment remains the largest segment of the global film market, contributing more than 50% of total film revenues.
Television
The expansion in the number and variety of broadcast channels has provided increased routes to market for film rights distributors. The expansion of services such as video-on-demand have replaced the traditional rental model to some extent, but have also expanded the size of the market overall. Television broadcasters are experiencing pressure from reduced advertising revenues during the current economic cycle, but the market for movie content, particularly in the servicing of specialty and premium subscription channels, remains strong.
New Media
New media channels, including digital streaming of movies, remains in its infancy although advances in hardware and bandwidth technologies has progressed significantly over the last year. These new channels present new opportunities for rights distributors as additional routes to market. Threats from piracy and file-sharing remain, but are not expected to present comparable challenges as those experienced by the music industry due to structural differences around product characteristics, download quality, device portability and the broader consumer experience.
Television
The global market for television subscriptions and license fees is worth in excess of $150 billion annually. Within Canada alone, approximately $4.5 billion was spent on programming by local broadcasters in 2008. Through federal funding and other incentive structures, the Canadian production financing environment allows the Group to produce premium North American content across diversified genres whilst significantly mitigating risks to the Group's own capital. In the current economic climate, defined by materially reduced advertising revenues, broadcasters internationally are seeking to access premium content from new sources and outside the traditional major US production environment. The Group is ideally placed to capitalise on this trend and has a strong track record in securing US network commissions and control of the worldwide rights for its productions.
The Group also has a growing presence in the Kids TV segment in the UK and Canada which provides the opportunity to further develop its properties through licensing and merchandising.
Music
The US music market has experienced significant challenges, driven by changes in consumer behaviour towards digital sales alongside continued piracy and file-sharing threats. Business models are adapting to reflect this but have typically been slow to react across the industry. Overall demand for the consumption of music content shows no signs of deteriorating and the Group has restructured and focused its music operations on remaining profitable in the face of current market dynamics.
SUMMARY FINANCIAL PERFORMANCE
The Group's results to 31 March 2009 reflect the strategic progress in the year with revenue increasing by 29.6% from £264.4m to £342.6m. The impact of exchange translation due to the weakening in sterling contributed £36m. Adjusting for acquisitions and currency effects revenue was boosted by strong growth of 36.0% in the film division, although in total reduced by 2.3% due to a 30% sales decline in the US music and distribution businesses. The reported loss before tax was £31.0m compared to a loss of £7.7m in the prior year due to the impact of one off items of £29.7m. These include £25.2m of non cash charges, primarily relating to the impairment of the US businesses following a significant decline in the US music market.
Earnings before interest, tax, depreciation, amortisation, share based payments and one off items ('underlying EBITDA') increased strongly, by 35.6%. Adjusting for acquisitions and £2.9m of exchange translation benefit, underlying EBITDA fell by 12.2%, mainly due to the downturn in the US businesses and increased content amortisation and Print and Advertising ('P&A') spend driven by more film releases. As the Group's investment in content and release activity experiences significant growth, earnings are depressed due to the accounting requirement to recognise the full cost of P&A at the point it is incurred (on release of the film), rather than in line with revenue recognition over the exploitation life of a movie.
| Reported (audited) | Proforma, Constant Currency * (unaudited) | |||||
| 2009 | 2008 | 2009 | 2008 |
| ||
| £000 | £000 | % | £000 | £000 | % | |
|
|
|
|
| |||
| Revenue | 342,643 | 264,375 | 29.6% | 347,070 | 355,253 | -2.3% |
|
|
|
|
| |||
| Underlying EBITDA | 25,256 | 18,620 | 35.6% | 25,005 | 28,491 | -12.2% |
| P&A | 40,220 | 14,825 | 171.3% | 40,438 | 23,086 | 75.2% |
* Unless otherwise stated, in order to provide like for like comparisons, the discussion of results and analysis of comparisons to the prior year are on an unaudited proforma and constant currency basis. For the purposes of this analysis 'proforma' includes the operating results for businesses acquired by the Group as if they had been acquired on the first day of the comparative period. In addition the results are shown on a constant currency basis. Constant currencies have been calculated by retranslating the comparative figures using weighted average exchange rates for the year to 31 March 2009.
DIVISIONAL REVIEWS
The Group is split into two divisions: Entertainment and Distribution.
ENTERTAINMENT
The Entertainment division comprises the Film, TV and US Music businesses.
Film
Film comprises the businesses in the UK (formerly Contender), Benelux (formerly RCV) and Canada (formerly Seville Entertainment). It also includes the growing US Film unit. Revenue grew 36.0% to £118.4m with underlying EBITDA at £9.5m, down 11.5% on 2008. This reflects increased P&A expenditure of £33.4m (2008 : £14.8m) and higher content amortisation, driven by increased release activity, particularly in the UK and Canadian markets.
| 2009 | 2008 | 2008 - Proforma, | |||
| Film | Reported (audited) | Reported (audited) | Constant Currency (unaudited) | ||
| £000 | £000 | % | £000 | % | |
| Revenue | 118,351 | 53,036 | 123.2% | 87,053 | 36.0% |
| Underlying EBITDA | 9,488 | 7,449 | 27.4% | 10,716 | -11.5% |
| P&A | 33,360 | 8,162 | 308.7% | 14,786 | 125.6% |
| Investment in content & programmes | 35,626 | 10,616 | 235.6% | 21,329 | 67.0% |
Overall revenue growth was driven by a strong schedule of over 110 theatrical releases during the year. £35.6m was invested in content, up £14.3m compared to the previous year, to support the continued growth of the businesses.
The new branding was launched across the businesses and saw the release of the first movies under the multi-territory agreement with Summit Entertainment. In particular the opening movie in the Twilight franchise was a major success, achieving a global box office of $380m and was in the top 10 highest grossing films worldwide in 2008. The sequels New Moon and Eclipse are planned for release in both territories in November 2009 and June 2010 respectively.
In the UK revenue increased by over 20% as the business successfully launched its first major theatrical releases, Twilight, Knowing, Franklyn and Sex Drive, in the second half of the financial year. Production and licensing also performed well with strong growth in the kids category where sales more than doubled. Peppa Pig is now one of the two leading properties in the pre-school segment and the portfolio continues to expand through investment in titles such as Ben and Holly's Little Kingdom, Humf and Lost and Found. The home video business had a disappointing year due in particular to turbulence in the market following the failure of Woolworths Group plc, which resulted in a one off charge of £2.5m including a write off of amounts owing from its distribution business Entertainment UK Ltd.
A strong slate of theatrical releases is planned for the UK in 2009/10 including Bandslam (starring Vanessa Hudgens), I Love You Philip Morris (Jim Carrey and Ewan McGregor) and Away We Go (directed by Sam Mendes) while DVD releases will include the film Bronson alongside the latest series of Ashes to Ashes and Spooks. A new series of Peppa Pig and further development of Little Kingdom and Humf will continue to expand the production and licensing business.
In Canada, the film business expanded rapidly in the year, more than doubling revenue. In addition to the Summit titles (Twilight, Knowing, Sex Drive and Push) an additional 47 movies were released theatrically. These included Waltz with Bashir, Che and Sunshine Cleaning.
Maximum, the film sales and distribution business acquired in September was successfully integrated and the portfolio has also been expanded following deals with Serendipity Point Films, Christal Films and an extension to the existing distribution agreement with fitness and lifestyle company Gaiam to include video on demand and digital rights. These developments have significantly increased the scale of our Canadian business which now controls a library of more than 1,100 titles. Alongside increased theatrical release activity, DVD releases included Never Back Down, Shake Hands with the Devil, Before the Devil Knows You're Dead and Flawless while TV releases included P2, The Air I Breathe and My Winnipeg. Looking forward, in addition to New Moon, theatrical releases in 2009/10 include The Brothers Bloom, Sorority Row, Astro Boy and The Imaginarium of Dr Parnassus (starring Johnny Depp, Jude Law, the late Heath Ledger and directed by Terry Gilliam).
The Benelux business had a record year following its acquisition by the Group in January 2008. This business already has a leading position in its local market and continues to secure a strong pipeline of titles from the main independent studios in Hollywood. Theatrical releases performed well, including Defiance (starring Daniel Craig) and Bangkok Dangerous (Nicolas Cage). Home video also had a strong year, including the releases of Eastern Promises, Resident Evil and Golden Compass. TV sales were 3% weaker due in part to TV broadcasters reducing their acquisition budgets, however video on demand grew rapidly, offsetting part of this shortfall. Theatrical releases scheduled in 2009/10 include Seventeen Again (Zac Efron and Matthew Perry), Edge of Darkness (Mel Gibson and Ray Winstone) and a remake of the 1980's hit musical Fame. Home video releases include Coco Avant Chanel and My Bloody Valentine.
TV
TV comprises Television (formerly Barna-Alper Productions Inc and Blueprint Entertainment Corporation) and International Sales (formerly Oasis Pictures Inc), all of which were acquired in September 2008 and have now been fully integrated into the Group under one brand. Synergies anticipated at the time of the acquisitions, particularly in the back office, have been achieved following relocation to the Group's offices in Toronto. These businesses provide scale to the Group's Canadian content and add a substantial library of series and movies to the portfolio. These include factual programming such as Outlaw Bikers, Mega Builders, Frontiers of Construction and Turning Points of History; drama, including Da Vinci's Inquest, The Best Years and Whistler; and comedy including Kenny vs Spenny, Testees, The Dating Guy and 'Til Death Do Us Part.
In the period on a proforma basis revenues were down 4.7% on the prior year due to fewer but more profitably structured shows. Underlying EBITDA was up 33.0% to £5.6m as a result of the business retaining a greater proportion of profit participation on the shows produced.
| 2009 | 2009 | 2008 - Proforma, | ||
| TV | Reported | Proforma | Constant Currency | |
| (audited) | (unaudited) | (unaudited) | ||
| £000 | £000 | £000 | % | |
| Revenue | 23,004 | 27,432 | 28,797 | -4.7% |
| Underlying EBITDA | 5,948 | 5,595 | 4,207 | 33.0% |
| P&A | 591 | 730 | 541 | 34.9% |
| Investment in content & programmes | 7,982 | 20,801 | 11,577 | 79.7% |
Television has performed well since acquisition and a number of shows were delivered in the first calendar quarter of 2009. These included new series of Kenny vs Spenny, Best Years, and Exes and Oh's. The pilot episode of a new drama, The Bridge, was delivered to CTV Globemedia during the year and will be broadcast by CTV and CBS as a major new series, underpinning the Group's continued success in the US market. A series order for Copper marked E1 Television's second major network deal post-acquisition and is expected to air on ABC and Canwest Global in early 2010. The remaining slate for 2009/10 is also strong, with highlights including the comedy Hung which will premiere on HBO in June 2009, the drama series Shattered and the tween series Majority Rules.
Through its international sales operations, the Television group continued to exploit and build its catalogue of over 2,800 hours of programming. Performance in the period since acquisition benefited in particular from distribution of internally produced content, including the comedy series Testees and Hallmark TV 'Movies of the Week' Soccer Mom, Mail Order Bride and The Gambler, The Girl and The Gunslinger, alongside third party titles such as ReGenesis (Season 4) and Would Be Kings. Strong interest in the Group's content has been evident at recent industry fairs and the business is looking forward to continued growth in revenues by maximizing the exploitation of internally produced programming and third party content.
Music
Revenues in the Music business declined £9.3m to £16.9m reducing Underlying EBITDA by £1.7m to £0.3m. It has been a difficult year for the business driven by the significant downturn in the wider US music market, particularly in the second half. This was due to a number of factors including the impact of the deteriorating economic climate on consumer spending and an acceleration of the decline in physical CD sales resulting from the migration to digital format and a reduction in shelf space available for CD's across the retail industry. As a consequence, and despite an increase in digital sales of 27%, the market contracted by 9% in the year to 31 March due to a 20% decline in physical sales.
| 2009 | 2008 | 2008 | |||
| Music | Reported | Reported | Constant Currency | ||
| (audited) | (audited) | (unaudited) | |||
| £000 | £000 | % | £000 | % | |
| Revenue | 16,918 | 22,089 | -23.4% | 26,172 | -35.4% |
| Underlying EBITDA | 275 | 1,771 | -84.5% | 2,012 | -86.3% |
| Investment in content | 4,230 | 4,965 | -14.8% | 5,740 | -26.3% |
A restructuring programme was implemented in the second half of the financial year to ensure that the business has an appropriate cost base to continue to operate profitably into the future. This included the consolidation of a number of functions from the offices in Manhattan into the US Distribution business' Port Washington facility. The Music business will also be investing less in new artists going forward. Forthcoming releases in 2009/10 include albums by Jim Jones & Webstar, The Alchemist, DJ Khaled, Hatebreed and The Wiggles.
Costs of the restructuring, combined with a write off of advances and impairment to goodwill that was booked on acquisition of the business by E1, resulted in a one off charge of £21.6m.
DISTRIBUTION
The Distribution division comprises the Group's physical warehousing and distribution businesses in Canada and the US. Overall revenues were down 7.6% with underlying EBITDA down 18.8% primarily reflecting the challenging US market conditions.
| 2009 | 2008 | 2008 | |||
| Distribution | Reported | Reported | Constant Currency | ||
| (audited) | (audited) | (unaudited) | |||
| £000 | £000 | % | £000 | % | |
| Revenue | 212,093 | 202,508 | 4.7% | 229,587 | -7.6% |
| Underlying EBITDA | 13,376 | 14,222 | -5.9% | 16,469 | -18.8% |
Canada Distribution
The Canadian distribution business performed well given the challenging economic climate, with robust sales and underlying EBITDA. The impact of pricing pressure was offset by strong volume performance, in particular as a result of the expansion of the Vendor Managed Inventory programme which is continuing to open up new routes to market. During the year Blu-ray emerged as the dominant new high-definition home entertainment technology. Sales of Blu-ray discs have begun to show significant growth as hardware penetration increases and consumer acceptance becomes established and by March 2009 represented 9% of the home video market.
New contracts were signed during the year including an extension of the existing relationship with Warner Home Video and these will support the business into the new financial year. In addition the Canadian box office, which is a key leading indicator for the business, has held up well in the last 12 months with gross receipts increasing 3% over the same period in the previous year, underpinning expectations for performance of new DVD and Blu-ray releases in the coming months.
Costs remain under close scrutiny and following the consolidation of the facilities in Western Canada focus is on driving working capital efficiencies through effective inventory management.
US Distribution
US Distribution was impacted by the significant decline in the CD market, which resulted in a reduction in both sales and underlying EBITDA. As the move from physical to digital formats in the music market accelerates the business is increasingly looking towards video content which reached 14% of volumes in 2008/09, up from 8% in the previous year. During the year the business renewed its long-term distribution deal with Death Row Records, whose catalogue includes Tupac, Snoop Dogg and Dr Dre.
GROUP COSTS
Group costs at £3.8m (2008 : £4.0m) before one off items were broadly in line with prior year.
OTHER FINANCIAL INFORMATION
A summary of adjusted financial information is presented in order to provide information to investors and excludes the following: one off items, amortisation of acquired intangible assets, share based payments and non-recurring items within net finance charges.
Adjusted operating profit increased from £17.6m to £23.5m reflecting the growth in underlying EBITDA and the full year impact of the businesses acquired during the previous year. Adjusted profit before tax increased 27.1% to £16.4m reflecting the increased operating profit partially offset by higher finance charges.
| Adjusted (audited) | Reported (audited) | |||
| 2009 | 2008 | 2009 | 2008 | |
| £000 | £000 | £000 | £000 | |
| Underlying EBITDA | 25,256 | 18,620 | 25,256 | 18,620 |
| One off items | - | - | (29,677) | (2,249) |
| Amortisation of intangible assets | (49) | (3) | (15,168) | (11,067) |
| Depreciation | (1,699) | (1,007) | (1,699) | (1,007) |
| Share based payments | - | - | (4,171) | (5,797) |
| Operating profit / (loss) | 23,508 | 17,610 | (25,459) | (1,500) |
| Net finance charges | (7,103) | (4,747) | (5,550) | (6,176) |
| Profit / (loss) before tax | 16,405 | 12,863 | (31,009) | (7,676) |
| Taxation | (4,530) | (5,663) | 578 | (879) |
| Profit / (loss) after tax | 11,875 | 7,200 | (30,431) | (8,555) |
One Off Items
One off items totalled £29.7m. These included a large non-cash impairment in the US Music and Distribution businesses of £21.3m and write offs of £2.5m following the failure of Woolworths Group plc in the UK. The balance comprises a write off of legacy trade names following the rebranding, costs of restructuring and the proposed acquisition that was aborted in December 2008. The cash element of these items was £4.5m.
Amortisation of Intangible Assets and Depreciation
Amortisation of intangible assets increased from £11.1m to £15.2m and depreciation increased by £0.7m to £1.7m reflecting the annualised impact of the acquisitions in the previous year and inclusion of the TV businesses in the current year.
Share Options
The share based payments charge of £4.2m decreased in line with the vesting profile of the share options. £0.7m of the charge in the year ended 31 March 2009 relates to options granted in the year. The balance relates mainly to charges in respect of options granted following formation of the Group in 2007.
Net Finance Charges
Reported net finance charges decreased from £6.2m to £5.6m. A number of items impact net finance charges including movements in the fair value of financial instruments, one off costs relating to early settlement of financing facilities and, in the current year, the impact of an extension to the maturity period of the exchangeable debenture. These items totalled a £1.4m net charge in the prior year compared to a net £1.6m credit in 2009. Excluding both these items and also the impact of exchange gains of £0.7m (2008 : losses of £0.8m), the underlying net finance charges in 2009 were £7.8m compared to £3.9m in the prior year, reflecting the increase in net borrowings following the acquisitions in 2007/08. The weighted average interest cost was 7.1% compared to 7.6% in the prior year, giving an underlying interest cover of 3.3 times underlying EBITDA (2008 : 3.7 times).
Tax
The tax credit for the year was £0.6m (2008 : £0.9m charge) giving an effective rate of 1.9% compared to a negative effective rate of 11.5% in the previous year. The low effective rate arises mainly due to unrecognised tax losses in certain jurisdictions in which the group operates and is also distorted by the impact of non-deductible share based payment charges and the write off of certain brought forward deferred tax assets.
On an adjusted basis, excluding one off items, amortisation of intangible assets, share based payments and other net finance items, the effective rate was 28% (2008 : 44%).
Earnings and Loss per Share
Reported loss after tax increased from £8.6m to £30.4m due to the impact of one off items. Consequently the reported diluted loss per share was 23.2 pence (2008: 9.5 pence). On an adjusted basis profit after tax was £11.9m or 65% ahead of the prior year. The adjusted diluted earnings per share was 8.1 pence (2008: 7.2 pence), up 12.5%.
Cashflow and Financing
The Group's cash balances decreased by £6.8m during the year.
| 31 March 2009 £000 | 31 March 2008 £000 | |
| Net cash from operating activities | 35,851 | 28,718 |
| Investment in content rights and TV programmes | (47,838) | (17,362) |
| Acquisition of subsidiaries | (8,924) | (159,857) |
| Purchase of other non-current assets * | (2,931) | (2,295) |
| Net interest paid | (3,978) | (4,042) |
| Cash from other financing activities | 21,053 | 171,322 |
| Net (decrease) / increase in cash and cash equivalents | (6,767) | 16,484 |
* Other non-current assets comprise property, plant and equipment and intangible software.
Cash flows from operating activities were 25% ahead of the previous year reflecting the improved underlying EBITDA, partially offset by working capital which increased in line with the growth in the filmed entertainment business.
The Group invested £47.8m in content rights and television programmes in the year (2008 : £17.4m) and incurred cash costs relating to the acquisition of the Television businesses of £8.9m. Prior year acquisitions totalled £159.9m and principally comprised the purchase of the Entertainment One Income Fund and the filmed entertainment businesses.
The Group's net debt increased by £40.0m, from £47.4m to £87.4m at 31 March 2009, mainly reflecting the investment in content and acquisitions during the year which more than offset the operating cash flows generated.
| £'000 | £'000 | |
| At 31 March 2008 | (47,394) | |
| Cash outflows | (6,767) | |
| New loan advances | (137,006) | |
| Loan repayments | 115,953 | |
| Cash outflow adjusted for financing activity | (27,820) | |
| Debt assumed on acquisition of TV businesses | (9,607) | |
| Decrease in value of exchangeable debenture | 277 | |
| Foreign exchange movements | (2,861) | |
| At 31 March 2009 | (87,405) |
The net debt balances at 31 March 2009 comprise the following :
| £'000 | |
| Cash and other items (excl. Television Production) | (7,540) |
| JP Morgan - Senior Revolving Credit Facility | 69,097 |
| JP Morgan Net Debt | 61,557 |
| Exchangeable Debenture | 16,252 |
| Net Television Production Debt | 9,596 |
| 87,405 |
On 19 September 2008 the Group signed a new four-year multi-currency US$150 million senior credit facility led by JP Morgan. This replaced the Group's existing debt facilities and provided additional capital to the Group for continued growth alongside greater flexibility and certainty of funding for the foreseeable future. Subsequent to the year end, following the weakening in the US dollar, the Group has re-denominated its facility into local currencies and has also raised an additional US$7.5 million under its funding agreement.
Interim Production Financing arises following the acquisition of the Television production companies. These businesses source short term financing which is secured on assets and future contracted revenue streams.
Financial Position and Going Concern Basis
The Group's net assets increased from £123.6m at 31 March 2008 to £133.2m at 31 March 2009. The increase of £9.6m was mainly due a £21.5m benefit from foreign exchange on non-sterling denominated net assets and £14.3m from the issue of exchangeable shares relating to the acquisition of the Canadian TV businesses in September 2008, which was partially offset by the loss for the year.
The directors acknowledge the latest guidance issued by the Financial Reporting Council in November 2008 relating to going concern. The directors consider it appropriate to prepare the accounts on a going concern basis, as set out in Note 1 to this preliminary announcement.
Consolidated Income Statement
For the year ended 31 March 2009
| Year ended | Period ended | ||||
| 31 March | 31 March | ||||
| 2009 | 2008 | ||||
| Notes | £'000 | £'000 | |||
| Revenue | 2 | 342,643 | 264,375 | ||
| Cost of sales | (270,123) | (201,094) | |||
| Gross profit | 72,520 | 63,281 | |||
| Administrative expenses | (97,979) | (64,781) | |||
| Operating loss | (25,459) | (1,500) | |||
| Analysed as: | |||||
| Underlying EBITDA | 25,256 | 18,620 | |||
| Amortisation of intangible assets | (15,168) | (11,067) | |||
| Depreciation | (1,699) | (1,007) | |||
| Share-based payment charge | (4,171) | (5,797) | |||
| One off items | 3 | (29,677) | (2,249) | ||
| (25,459) | (1,500) | ||||
| Finance income | 4 | 4,866 | 795 | ||
| Finance costs | 4 | (10,416) | (6,971) | ||
| Loss before tax | (31,009) | (7,676) | |||
| Income tax credit / (charge) | 5 | 578 | (879) | ||
| Loss for the period | (30,431) | (8,555) | |||
| Attributable to: | |||||
| Equity holders of the parent | (30,431) | (8,555) | |||
| Loss per share | |||||
| Basic and diluted - pence | 7 | (23.2) | (9.5) | ||
Consolidated Balance Sheet
As at 31 March 2009
| 31 March | 31 March | ||||
| 2009 | 2008 | ||||
| £'000 | £'000 | ||||
| Assets | |||||
| Non-current assets | |||||
| Goodwill | 99,699 | 80,681 | |||
| Investment in programmes | 19,446 | 4,672 | |||
| Other intangible assets | 87,397 | 70,465 | |||
| Investments | 471 | 319 | |||
| Property, plant and equipment | 6,453 | 5,031 | |||
| Other receivables | 1,239 | 549 | |||
| Deferred tax assets | 3,245 | 1,006 | |||
| Total non-current assets | 217,950 | 162,723 | |||
| Current assets | |||||
| Inventories | 40,137 | 40,659 | |||
| Investment in content rights | 47,670 | 33,899 | |||
| Trade and other receivables | 75,635 | 31,585 | |||
| Current tax assets | 1,149 | - | |||
| Cash and cash equivalents | 11,767 | 16,484 | |||
| Total current assets | 176,358 | 122,627 | |||
| Total assets | 394,308 | 285,350 | |||
| Liabilities and equity | |||||
| Non-current liabilities | |||||
| Interest bearing loans and borrowings | 85,349 | 60,339 | |||
| Provisions | 124 | 272 | |||
| Other payables | 5,466 | 621 | |||
| Deferred tax liabilities | 15,953 | 9,033 | |||
| 106,892 | 70,265 | ||||
| Current liabilities | |||||
| Trade and other payables | 133,198 | 83,720 | |||
| Current tax liabilities | 3,509 | 303 | |||
| Interest bearing loans and borrowings | 13,823 | 3,539 | |||
| Provisions | 1,351 | 907 | |||
| Other financial liabilities | 2,334 | 3,038 | |||
| Total current liabilities | 154,215 | 91,507 | |||
| Total liabilities | 261,107 | 161,772 | |||
| Equity | |||||
| Share capital | 675 | 587 | |||
| Share premium | 126,352 | 126,352 | |||
| Treasury shares | (7,819) | (7,819) | |||
| Other reserves | 14,915 | 639 | |||
| Currency translation reserve | 28,161 | 6,705 | |||
| Retained earnings | (29,083) | (2,886) | |||
| Total equity | 133,201 | 123,578 | |||
| Total liabilities and equity | 394,308 | 285,350 | |||
Consolidated Cash Flow Statement
For the year ended 31 March 2009
| Year ended | Period ended | ||||
| 31 March | 31 March | ||||
| 2009 | 2008 | ||||
| Notes | £'000 | £'000 | |||
| Operating activities | |||||
| Operating loss | (25,459) | (1,500) | |||
| Adjustments for: | |||||
| Depreciation | 1,699 | 1,007 | |||
| Amortisation of other intangible assets | 14,127 | 10,102 | |||
| Amortisation of content rights | 21,137 | 10,160 | |||
| Amortisation of television programmes | 12,066 | 965 | |||
| Foreign exchange movements | (267) | (489) | |||
| Share option charge | 4,171 | 5,797 | |||
| Impairment | 24,416 | - | |||
| Decrease in inventories | 546 | 514 | |||
| Increase in trade and other receivables | (36,766) | (3,421) | |||
| Increase in trade and other payables | 19,976 | 5,743 | |||
| Increase in provisions | 296 | 886 | |||
| Net cash inflow from trading activities | 35,942 | 29,764 | |||
| Income tax paid | (91) | (1,046) | |||
| Net cash from operating activities | 35,851 | 28,718 | |||
| Investing activities | |||||
| Interest received | 260 | 722 | |||
| Acquisition of subsidiaries (net of cash acquired) | 9 | (8,924) | (159,857) | ||
| Investment in content rights | (37,639) | (15,581) | |||
| Net investment in television programmes | (10,199) | (1,781) | |||
| Purchases of property, plant and equipment | (1,661) | (1,714) | |||
| Purchases of intangible software assets | (1,270) | (581) | |||
| Net cash used in investing activities | (59,433) | (178,792) | |||
| Financing activities | |||||
| Proceeds from share issue | - | 100,002 | |||
| Loan repaid on acquisition | - | (3,875) | |||
| New loan advances | 125,419 | 79,504 | |||
| Loan repayments | (107,771) | (4,309) | |||
| Net drawdown of production financing | 3,405 | - | |||
| Interest paid | (4,238) | (4,764) | |||
| Net cash from financing activities | 16,815 | 166,558 | |||
| Net (decrease) / increase in cash and cash equivalents | (6,767) | 16,484 | |||
| Cash and cash equivalents at beginning of the period | 16,484 | - | |||
| Effects of exchange rate fluctuations on cash held | 2,050 | - | |||
| Cash and cash equivalents at end of period | 11,767 | 16,484 | |||
Consolidated Statement of Changes in Equity
For the year ended 31 March 2009
| Issued | Currency | ||||||
| share | Share | Treasury | Other | translation | Retained | Total | |
| capital | premium | shares | reserves | reserve | earnings | equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Loss for the period | - | - | - | - | - | (8,555) | (8,555) |
| Shares issued during the period | 552 | 123,238 | - | - | - | - | 123,790 |
| Consideration shares | 35 | 7,833 | - | - | - | - | 7,868 |
| Share issue costs | - | (4,719) | - | - | - | - | (4,719) |
| Purchase of own shares | - | - | (7,819) | - | - | - | (7,819) |
| Foreign currency translation | - | - | - | - | 6,705 | - | 6,705 |
| Warrants issued during the period | - | - | - | 639 | - | - | 639 |
| Share option charge | - | - | - | - | - | 5,669 | 5,669 |
| At 31 March 2008 | 587 | 126,352 | (7,819) | 639 | 6,705 | (2,886) | 123,578 |
| Loss for the year | - | - | - | - | - | (30,431) | (30,431) |
| Shares issued during the year | 88 | - | - | 14,276 | - | - | 14,364 |
| Foreign currency translation | - | - | - | - | 21,456 | - | 21,456 |
| Share option charge | - | - | - | - | - | 4,234 | 4,234 |
| At 31 March 2009 | 675 | 126,352 | (7,819) | 14,915 | 28,161 | (29,083) | 133,201 |
Notes to the Financial Statements
For the year ended 31 March 2009
1. Basis of preparation
Financial statements
The full year results for the year ended 31 March 2009 have been extracted from the audited consolidated financial statements which have not yet been dispatched to shareholders. The financial information set out in the preliminary announcement does not constitute statutory accounts but is derived from those accounts. While the financial information in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards ('IFRS'), this announcement does not itself contain sufficient information to comply with IFRS.
The statutory accounts for the year ended 31 March 2009 will be dispatched to shareholders by the end of July 2009 for approval at the Annual General Meeting on 29 September 2009. The auditors have reported on those accounts and their report was unqualified.
Non Defined measures
The Group presents one off items, underlying EBITDA, 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 'one off items', 'underlying' and 'adjusted' are not defined terms under IFRS and may therefore not be comparable with similarly titled measures reported by other companies. They are not intended to be a substitute for, or superior to, GAAP measurements of profit. The term 'underlying EBITDA' refers to operating loss excluding operating one off items, share based payment charges, depreciation and amortisation of 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 intangible assets arising on acquisition, one off items relating to the Group's financing arrangements and share based payment charges.
Going concern
The directors acknowledge the latest guidance issued by the Financial Reporting Council in November 2008 : 'An Update for Directors of Listed Companies : Going Concern and Liquidity Risk'.
The Group meets its day to day working capital requirements and funds its investment in content through a revolving credit facility ("Facility") which matures in September 2012 and is secured on assets held in the Group. Under the terms of the Facility the Group is able to draw down in the local currencies of its operating businesses. The Facility is subject to a series of covenants including fixed charge cover, net debt against EBITDA and capital expenditure. The Group has a track record of cash generation and is in full compliance with its existing bank facility covenant arrangements.
The Group is exposed to uncertainties arising from the economic climate and also in the markets in which it operates. Market conditions could lead to lower than anticipated demand for the Group's products and services and exchange rate volatility could also impact reported performance. The directors have considered the impact of these and other uncertainties and factored them into their financial forecasts and assessment of covenant headroom. The Group's forecasts and projections, taking account of reasonable possible changes in trading performance (and available mitigating actions), show that the Group will be able to operate within the expected limits of the Facility and provide headroom against the covenants for the foreseeable future.
In the directors' view, the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. For this reason the directors continue to adopt the going concern basis in preparing the financial statements. 2. Business and geographical segments
Segment information for the year ended 31 March 2009 is presented below:
| Entertainment | Distribution | Other | Eliminations | Consolidated | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | |||||
| External sales | 119,593 | 193,084 | 29,966 | - | 342,643 |
| Inter-segment sales | 37,630 | 19,009 | - | (56,639) | - |
| Total revenue | 157,223 | 212,093 | 29,966 | (56,639) | 342,643 |
| Result | |||||
| Underlying EBITDA | 15,711 | 13,376 | (108) | 95 | 29,074 |
| One off costs | (21,138) | (6,325) | (132) | - | (27,595) |
| Depreciation and amortisation | (9,593) | (7,115) | (159) | - | (16,867) |
| Segment result | (15,020) | (64) | (399) | 95 | (15,388) |
| Unallocated corporate expenses | |||||
| Group costs | (3,818) | ||||
| Share-based payments | (4,171) | ||||
| One off costs | (2,082) | ||||
| Operating loss | (25,459) | ||||
| Finance income | 4,866 | ||||
| Finance costs | (10,416) | ||||
| Loss before tax | (31,009) | ||||
| Tax | 578 | ||||
| Loss after tax | (30,431) | ||||
Segment information for the year ended 31 March 2008 is presented below :
| Entertainment | Distribution | Other | Eliminations | Consolidated | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | |||||
| External sales | 47,361 | 187,202 | 29,812 | - | 264,375 |
| Inter-segment sales | 26,527 | 15,306 | - | (41,833) | - |
| Total revenue | 73,888 | 202,508 | 29,812 | (41,833) | 264,375 |
| Result | |||||
| Underlying EBITDA | 9,220 | 14,222 | (112) | (676) | 22,654 |
| One off costs | (359) | (1,545) | - | - | (1,904) |
| Depreciation and amortisation | (6,149) | (5,823) | (102) | - | (12,074) |
| Segment result | 2,712 | 6,854 | (214) | (676) | 8,676 |
| Unallocated corporate expenses | |||||
| Group costs | (4,034) | ||||
| Share-based payments | (5,797) | ||||
| One off costs | (345) | ||||
| Operating loss | (1,500) | ||||
| Finance income | 795 | ||||
| Finance costs | (6,971) | ||||
| Loss before tax | (7,676) | ||||
| Tax | (879) | ||||
| Loss after tax | (8,555) | ||||
3. One off items
One off items are items of income and expenditure that are non-recurring and, in the judgement of management, should be disclosed separately on the basis that they are material, either by their nature or their size, to provide a further understanding of the Group's financial performance and enable comparison of financial performance between periods. Items of income or expense that are considered by management for designation as one off are as follows:
| Year ended | Period ended | ||||
| 31 March | 31 March | ||||
| 2009 | 2008 | ||||
| Notes | £'000 | £'000 | |||
| US Music and Distribution businesses | (a) | 21,648 | - | ||
| Restructuring and abortive acquisition costs | (b) | 3,878 | 1,993 | ||
| Receivership of Woolworths Group plc | (c) | 2,479 | - | ||
| Rebranding | (d) | 1,672 | - | ||
| Retention bonuses | (e) | - | 256 | ||
| 29,677 | 2,249 | ||||
(a) US Music and Distribution businesses
During the year there has been a significant acceleration in the decline in the US music market which has impacted on the Group's business. The one off cost comprises three elements: a write down of label advances of £11,355,000 which has been recorded in cost of sales; impairment of goodwill on acquisition of £9,981,000 and restructuring costs of £312,000 which have been recorded in administrative expenses. The write down of label advances follows a detailed management review of carrying values in the light of the scaling down of expected future sales and likelihood of recoupment. Impairment to goodwill is calculated in accordance with the requirements of IAS 36.
(b) Restructuring and abortive acquisition costs
Restructuring costs have been incurred in relation to the reorganisation of businesses during the year. These include completion of the rationalisation of the Western Canada warehousing footprint, which commenced in the previous financial year, and the integration of the former Koch Canada into the Distribution and Film businesses. Abortive acquisition costs include due diligence and legal costs principally relating to the proposed reverse takeover that was abandoned in December 2008. These costs have been recorded in administrative expenses.
(c) Receivership of Woolworths Group plc
On 26 November 2008 Woolworths Group plc ('Woolworths') and its wholly owned subsidiary Entertainment UK Ltd were placed into administrative receivership. At the time Woolworths comprised approximately 800 stores throughout the UK and represented a significant share of the UK DVD market. Entertainment UK was the largest distributor of DVDs in the UK serving a number of major retailers including Woolworths. All the Woolworths stores were subsequently closed and Entertainment UK ceased trading by December 2008. The financial impact of these events on the Group comprises two elements: an impairment of net irrecoverable trading receivables of £697,000 and a write down of investment in content of £1,782,000. The write down of investment in content arises as management consider the demise of Woolworths to have significantly impacted the structure of the UK market for distribution of DVDs. Consequently, following a detailed review of the content library, it has been concluded that the ability to exploit certain titles and genres has been impaired. The impairment is recorded in cost of sales.
(d) Rebranding
As part of the Group's strategy to become the leading independent entertainment content business, on 22 January 2009 the Group announced that it would be introducing consistent corporate branding throughout the business. Consequently £1,298,000 attributed to certain trade names arising on acquisition by the Group have been written off. The remaining amount comprises legal and administrative costs associated with the rebranding. These costs have been recorded in administrative expenses.
(e) Retention bonuses in the prior year were included within the terms and conditions of the employment contracts of some senior managers employed by businesses acquired in the period ended 31 March 2008.
The tax impact of one off items was £1.7 million (2008: £0.6 million).
4. Finance income and finance costs
The finance income and finance costs comprise:
| Year ended | Period ended | ||||
| 31 March | 31 March | ||||
| 2009 | 2008 | ||||
| Notes | £'000 | £'000 | |||
| Finance income | |||||
| Interest receivable | 283 | 795 | |||
| Gain on revaluation of embedded equity option | 2,432 | - | |||
| Reset of exchangeable debenture | 1,479 | - | |||
| Net foreign exchange gains | 672 | - | |||
| 4,866 | 795 | ||||
| Finance costs | |||||
| Interest payable on bank loans and overdrafts | (4,182) | (3,158) | |||
| Other interest payable | (88) | (185) | |||
| Amortisation of deferred finance charges | (1,178) | (374) | |||
| Interest payable on exchangeable debenture | (1,956) | (883) | |||
| Early settlement costs | (a) | (630) | (873) | ||
| Amortisation of exchangeable debenture | (654) | (166) | |||
| Loss on revaluation of embedded equity option | - | (100) | |||
| Decrease in fair value of derivative instruments | (1,728) | (456) | |||
| Net foreign exchange losses | - | (776) | |||
| (10,416) | (6,971) | ||||
| Net finance charges | (5,550) | (6,176) | |||
(a) The current year amount relates to accelerated amortisation of deferred finance charges on the cancellation of the previous banking facility following the refinancing. The prior year amount comprised an early settlement cost of £0.9 million following conversion of an exchangeable debenture.
5. Tax
| Year ended | Period ended | ||||
| 31 March | 31 March | ||||
| 2009 | 2008 | ||||
| £'000 | £'000 | ||||
| Current tax | 2,488 | 1,175 | |||
| Deferred tax | (3,066) | (296) | |||
| Tax (credit) / charge | (578) | 879 | |||
The (credit) / charge for the period can be reconciled to the loss in the income statement as follows:
| Year ended | Year ended | |||||
| 31 March | 31 March | |||||
| 2009 | 2008 | |||||
| £'000 | % | £'000 | % | |||
| Loss before tax | (31,009) | (7,676) | ||||
| Taxes at applicable domestic rates | (9,558) | 30.8 | (1,816) | 23.7 | ||
| Effect of income that is exempt from taxation | (1,257) | 4.1 | (231) | 3.0 | ||
| Effect of expenses that are not deductible in determining taxable profit | 1,158 | (3.7) | 1,802 | (23.5) | ||
| Effect of deferred tax write downs or reversal | 906 | (2.9) | - | - | ||
| Effect of losses/ temporary differences not recognised | 8,304 | (26.8) | 939 | (12.3) | ||
| Effect of irrecoverable withholding tax | 181 | (0.6) | 191 | (2.5) | ||
| Effect of tax rate changes | (42) | 0.1 | (6) | 0.1 | ||
| Prior year items | (270) | 0.9 | - | - | ||
| Income tax (credit) / expense and effective tax rate for the period | (578) | 1.9 | 879 | (11.5) | ||
Taxation is calculated at the rates prevailing in the respective jurisdictions. The standard tax rates in each jurisdiction are 32.8% in Canada (2008: 32.5%), 36.5% in the United States (2008: 37.5%), 28.0% in the United Kingdom (2008: 30%), 20% in Hungary (2008: 20%), 0% in Jersey (2008: 0%), and 25.5% in the Netherlands (2008: 25.5%).
6. Dividends
The directors are not recommending payment of a dividend (2008: nil).
7. Earnings / loss per share
| pence | Pence | ||||
| Basic and diluted loss per share | (23.2) | (9.5) | |||
| Adjusted basic earnings per share | 9.1 | 8.0 | |||
| Adjusted diluted earnings per share | 8.1 | 7.2 | |||
Basic and diluted loss per share have been calculated by dividing the loss attributable to shareholders by the weighted average number of shares in issue during the period after deducting Treasury shares.
The adjusted basic earnings per share calculation is based on the basic loss per share calculation above after allowing for adjusted items.
Adjusted diluted earnings per share has been calculated after adjusting the weighted average number of shares used in the adjusted basic calculation to assume the conversion of all potentially dilutive shares.
| Year ended | Period ended | ||||
| 31 March | 31 March | ||||
| 2009 | 2008 | ||||
| £'000 | £'000 | ||||
| For basic and diluted loss per share | |||||
| Loss for the financial period | (30,431) | (8,555) | |||
| For adjusted basic and diluted loss per share | |||||
| Loss for the financial period | (30,431) | (8,555) | |||
| Add back: | |||||
| One off items | 29,677 | 2,249 | |||
| Amortisation of acquired intangible assets | 15,119 | 11,064 | |||
| Share based payments | 4,171 | 5,797 | |||
| Financing net fair value movements | (704) | 556 | |||
| Early settlement cost on refinancing | 630 | - | |||
| Reset of exchangeable debenture | (1,479) | - | |||
| Early settlement cost on conversion of debenture | - | 873 | |||
| Tax effect of above items | (5,108) | (4,784) | |||
| Adjusted earnings after tax | 11,875 | 7,200 | |||
| Weighted average number of shares in issue | |||
| Basic | 131,151,599 | 90,166,431 | |
| Dilutive potential shares for adjusted earnings per share calculation | 16,152,167 | 10,167,198 | |
| Adjusted diluted | 147,303,766 | 100,333,629 | |
8. Events after the balance sheet date
Subsequent to the year end, following the weakening in the US Dollar, the Group has re-denominated its syndicated revolving credit facility into local currencies and has also raised an additional USD 7.5 million under its funding agreement.
9. Acquisitions
Acquisitions are accounted for using the purchase method of accounting and are incorporated into the Group's balance sheet at the fair value at the date of acquisition. The fair values of all acquisitions made during the current year are provisional pending final determination of balances acquired.
On 24 September 2008 the Group acquired 100% of the issued share capital of each of the following companies, involved in television production and film and television international sales and distribution:
(i) Barna-Alper Productions Inc.; (ii) Blueprint Entertainment Corporation which also includes the subsidiary Oasis Pictures Inc.; and (iii) Maximum, comprising Maximum Film Distribution Inc. and Maximum Film International Inc.
Total consideration of CAD$60.9 million (£31.9 million), comprises CAD$32.4 million (£17.0 million) to be paid in cash (excluding directly attributable acquisition costs) and CAD$28.5 million (£14.9 million) to be satisfied by the allotment of S class shares to the vendors of the acquired entities.
Barna-Alper Productions Inc.
The book value and provisional fair value of the net assets at the date of acquisition were as follows:
| Book value | Fair value | ||||
| £'000 | £'000 | ||||
| Net assets acquired: | |||||
| Intangible assets | - | 4,657 | |||
| Property, plant and equipment | 72 | 72 | |||
| Investment in programmes | 6,891 | 6,891 | |||
| Trade and other receivables | 3,976 | 3,976 | |||
| Cash and cash equivalents | 664 | 664 | |||
| Interest bearing loans and borrowings | (5,889) | (5,889) | |||
| Trade and other payables | (3,376) | (3,376) | |||
| Deferred tax liabilities | (292) | (1,676) | |||
| 2,046 | 5,319 | ||||
| Goodwill arising on acquisition | 2,501 | ||||
| Total consideration | 7,820 | ||||
| Satisfied by: | |||||
| Cash consideration and costs associated with acquisition | 2,643 | ||||
| Deferred consideration to be settled by cash and shares | 5,177 | ||||
| 7,820 | |||||
| Net cash outflow arising on acquisition: | |||||
| Cash consideration and costs associated with acquisition | 2,643 | ||||
| Less cash and cash equivalents acquired | (664) | ||||
| 1,979 | |||||
Blueprint Entertainment Corporation
The book value and provisional fair value of the net assets at the date of acquisition were as follows:
| Book value | Fair value | ||||
| £'000 | £'000 | ||||
| Net assets acquired: | |||||
| Intangible assets | - | 14,658 | |||
| Property, plant and equipment | 96 | 96 | |||
| Investments | 102 | 102 | |||
| Inventories | 23 | 23 | |||
| Investment in programmes | 7,824 | 7,824 | |||
| Investment in content rights | 1,584 | 1,584 | |||
| Trade and other receivables | 6,677 | 6,677 | |||
| Cash and cash equivalents | 1,781 | 1,781 | |||
| Interest bearing loans and borrowings | (3,718) | (3,718) | |||
| Trade and other payables | (12,556) | (12,556) | |||
| Deferred tax liabilities | (585) | (4,942) | |||
| 1,228 | 11,529 | ||||
| Goodwill arising on acquisition | 10,445 | ||||
| Total consideration | 21,974 | ||||
| Satisfied by: | |||||
| Cash consideration and costs associated with acquisition | 7,261 | ||||
| Deferred consideration to be settled by cash and shares | 14,713 | ||||
| 21,974 | |||||
| Net cash outflow arising on acquisition: | |||||
| Cash consideration and costs associated with acquisition | 7,261 | ||||
| Cash and cash equivalents acquired | (1,781) | ||||
| 5,480 | |||||
Maximum
The book value and provisional fair value of the net assets at the date of acquisition were as follows:
| Book value | Fair value | ||||
| £'000 | £'000 | ||||
| Net assets acquired: | |||||
| Intangible assets | - | 333 | |||
| Property, plant and equipment | 6 | 6 | |||
| Investment in content rights | 605 | 605 | |||
| Trade and other payables | (226) | (226) | |||
| Deferred tax liabilities | - | (99) | |||
| 385 | 619 | ||||
| Goodwill arising on acquisition | 3,939 | ||||
| Total consideration | 4,558 | ||||
| Satisfied by: | |||||
| Cash consideration and costs associated with acquisition | 1,465 | ||||
| Deferred consideration to be settled by cash and shares | 3,093 | ||||
| 4,558 | |||||
| Net cash outflow arising on acquisition: | |||||
| Cash consideration and costs associated with acquisition | 1,465 | ||||
| Cash and cash equivalents acquired | - | ||||
| 1,465 | |||||