18 Nov 2009 07:00
Entertainment One Ltd.
Interim results for the six months ended 30 September 2009
Entertainment One revenue growth of 25% and underlying EBITDA growth of 38%
Entertainment One Ltd. ("E1" or the "Group"), the leading international independent entertainment content owner and distributor, announces its interim results for the six months ended 30 September 2009.
Darren Throop, Chief Executive Officer, commented:
"These results demonstrate the start of the return from the Group's significant investment in film and television content over the last twelve months. We have continued to grow underlying EBITDA across the Group through both the expansion of our Film and TV activities and the careful management of our Distribution businesses in the face of challenging market conditions. We anticipate continued progress in the second half and our results for the full year remain in line with expectations.
We are excited by the quality of our film release slate and TV delivery schedule in the second half of the year, which should see the Group releasing over 120 movies across all of our markets in the current financial year. This weekend sees the widely anticipated release in the UK and Canada of The Twilight Saga: New Moon, the sequel to the international box office success Twilight, once again demonstrating E1's reputation and position as a leading international entertainment business."
| 1 | Underlying EBITDA is earnings before one-off operating items, share-based payment charges, interest, tax, depreciation and amortisation of intangible assets |
For further information, please contact:
| Quiller Consultants John Eisenhammer / Kate Law Tel: +44 (0)20 7233 9444 | |
| Entertainment One Darren Throop (CEO) Tel: +1 (416) 979 0912 dthroop@e1ent.com | Giles Willits (CFO) Tel: +44 (0)20 7907 3773 gwillits@e1ent.com |
| Singer Capital Markets Limited (Nomad and Joint Broker) James Maxwell / Richard Savage Tel: +44 (0)20 3205 7500 | Evolution Securities Limited (Joint Broker) Jeremy Ellis Tel: +44 (0)20 7071 4308 |
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. 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 2009 can be found on our website at www.e1entertainment.com. BUSINESS PERFORMANCE AND FINANCIAL REVIEW
SIX MONTHS TO 30 SEPTEMBER 2009
OVERVIEW
The Group has made excellent progress in the first half of the financial year, with strong revenue and underlying EBITDA growth as the increased investment in film and TV content over the last twelve months continues to drive the performance of the business.
Theatrical box office revenues in the Group's core markets have remained robust and continue to support progress in the Film division. Over 50 movies were released theatrically in the first half including Sorority Row, 17 Again, Away We Go, Coco Avant Chanel and Ghosts of Girlfriends Past. The slate remains strong for the remainder of the year with around 70 releases planned in the second half including The Twilight Saga: New Moon (the sequel to the global success Twilight), I Love you Philip Morris (starring Ewan McGregor and Jim Carrey), An Education (starring Peter Sarsgaard and Rosamund Pike), The Imaginarium of Dr Parnassus (starring the late Heath Ledger) and the Hollywood remake of the 1980's hit movie Fame. The Group has recently completed its annual independent library valuation (used to support the Group's senior credit facility), which showed a 26% increase to $220 million from $175 million last year, driven by the increased investment particularly in Canada and the UK.
The TV businesses acquired in September 2008 have had considerable success in securing new productions, including the police drama Shattered and When Love is Not Enough: The Lois Wilson Story, and renewals of existing shows such as Party Mamas, Re-Vamped and Outlaw Bikers. The growing Kids division has established itself as a leader in the UK market, recently receiving five BAFTA nominations. Peppa Pig remains the Group's best selling kids title and has now commenced production of its fourth series.
Performance in the North American Distribution businesses has been in line with our expectations in the face of challenging retail markets and the US Music business has stabilised, albeit at a lower base than last year following the restructuring earlier in 2009.
The Group continues to operate comfortably within its senior credit facility which matures in September 2012. During the first half the credit facility was expanded successfully with an additional US$7.5 million commitment. A further US$15 million has been committed subsequent to the period end. The Group does not anticipate drawing on these additional amounts during the current year but they provide the Group with additional capital to pursue its strategic objectives should opportunities become available.
OUTLOOK
The Film business is continuing to grow and has a strong slate of theatrical and DVD releases in the second half and into the next financial year. The TV business will also benefit as productions currently under development such as Copper and The Bridge are delivered to US and Canadian networks. The directors are confident that the business is performing in line with expectations and anticipate continued progress in the coming year.
GROUP RESULTS
Reported revenues were up 25% to £163.6 million (2008: £131.1 million) helping drive a 38% growth in underlying EBITDA. The underlying EBITDA growth is despite a 76% increase in Print and Advertising costs ("P&A") during the period, up from £11.3 million to £19.9 million, to support the increased number of theatrical releases throughout the Group. The reported loss before tax was £7.9 million compared to a loss of £5.5 million in the prior year reflecting increased amortisation of acquired intangible assets and financing costs during this period. Financing costs increased predominantly as a result of the impact of movements in foreign exchange and higher net debt levels in the period. On an adjusted basis, excluding amortisation of acquired intangible assets, share-based payment charges and one-off items, the Group reported a profit before tax of £2.8 million (2008: £4.1 million).
| Six months to 30 September | 2009 Reported | 2008 Reported | 2008 - Proforma, Constant Currency | ||
| £000 | £000 | % | £000 | % | |
| Revenue | 163,565 | 131,076 | 24.8% | 151,732 | 7.8% |
| Underlying EBITDA | 9,295 | 6,753 | 37.6% | 7,384 | 25.9% |
| P&A | 19,873 | 11,293 | 76.0% | 12,943 | 53.5% |
The Group's results have benefited from currency movements resulting from the weakening in sterling relative to the comparative period, particularly against the Canadian Dollar (down 9% at average rates). As a result comparisons to prior year are stated both on a reported basis and also on a proforma constant currency basis. The proforma information used for the prior year includes the full six months results of the TV businesses acquired in September 2008.
On a proforma constant currency basis revenues were up by £11.8 million or 8%, primarily driven by the results in the film business which saw revenue growth of 59%, as the increased investment in content in the last 12 months flowed through to film releases particularly in Canada and the UK. This performance also supported the £1.9 million or 26% increase in underlying EBITDA to £9.3 million at Group level. Revenues were lower in the US business following the steep decline in US physical music market sales in the second half of the 2009 financial year.
DIVISIONAL REVIEWS
The Group reports its results as two divisions, Entertainment and Distribution. Unless otherwise stated, comparative information in this section is stated on a proforma and constant currency basis. The comparative period is the six months to 30 September 2008.
ENTERTAINMENT
The Entertainment division comprises the Film, TV and Music businesses. Revenue increased by 38% to £85.6 million due to strong growth in Film. Underlying EBITDA was up 30% to £6.6 million, representing 71% of the overall Group's underlying EBITDA.
Film
The Film business operates in Canada, the UK, Benelux and the US. Revenue grew by £26.5 million or 59% as the increased investment in content over the past 12 months begins to benefit revenues and underlying EBITDA. Box office revenues in the territories in which the business operates were buoyant while DVD sales have been robust in the face of challenging market conditions. Sales to TV networks have been impacted by the reduction in broadcaster budgets as their advertising revenues contract but overall this remains a smaller proportion of sales and therefore its impact on the Group is limited.
Underlying Film EBITDA was £3.7 million or 80% higher at £8.2 million. P&A spend in the period was £16.8 million (2008: £8.5 million) while content amortisation increased from £8.5 million to £13.2 million in line with the increased release activity undertaken by the Group in the period.
| Film | 2009 Reported | 2008 Reported | 2008 Constant Currency | ||
| £000 | £000 | % | £000 | % | |
| Revenue | 71,104 | 41,103 | 73.0% | 44,653 | 59.2% |
| Underlying EBITDA | 8,245 | 4,318 | 91.0% | 4,591 | 79.6% |
| P&A | 16,814 | 7,772 | 116% | 8,544 | 96.8% |
| Investment in content & programmes | 19,159 | 12,686 | 51.0% | 13,651 | 40.3% |
UK - Revenue in the UK was up 136% compared to the prior year following release of the first major theatrical releases in the second half of the previous year and strong performances in all areas of the business. Theatrically the business released three titles: Bandslam, Away We Go and Sorority Row with Knowing also driving revenues following its release immediately prior to the previous financial year end. Home Video revenues (including rental and DVD / Blu-ray sales) benefited from the release of Twilight and Knowing, following on from their theatrical success in the second half of the prior year, alongside strong performance from other titles including Bronson, Dead Snow, Life on Mars and Ashes to Ashes.
The UK based Kids business made further progress, and has commenced production of a fourth series of Peppa Pig. The strength of the UK Kids portfolio, which also includes the titles Tractor Tom, Humf and Ben & Holly's Little Kingdom, has been underlined by BAFTA nominations in a number of categories and in particular three of the four nominations in the 'Pre-School Animation' category. In addition Peppa Pig was recently named the Best Pre-School Licensing Property at the 2009 UK Licensing Awards.
The second half of the year contains a strong slate including recently released and critically acclaimed An Education (written by Nick Hornby, starring Peter Sarsgaard and Rosamund Pike), The Twilight Saga: New Moon, Micmacs (directed by Amélie director Jean-Pierre Jeunet) and Mr Nice (starring Rhys Ifans). In total the UK business is planning ten theatrical and 21 DVD/Blu-ray releases in the second half.
Canada - Revenue in Canada more than doubled in the first half. 31 titles were released theatrically compared to 15 in the comparative period including Sorority Row, Bandslam, Les Grandes Chaleurs and A Vos Marques Party 2. Home Video benefited from prior year theatrical releases including strong performances from Twilight, Knowing, Push, Che and Sunshine Cleaning.
Theatrical releases in the second half include the animated superhero movie Astro Boy (with the voices of Charlize Theron, Nicolas Cage and Samuel L. Jackson), The Twilight Saga: New Moon, The Imaginarium of Dr Parnassus (Directed by Terry Gilliam and starring the late Heath Ledger), Last Night (starring Keira Knightley and Eva Mendes), Micmacs and kids movie Le Petit Nicolas. In total the Canadian business is planning to release over 30 movies theatrically in the second half and 120 titles to DVD.
Benelux - The Benelux business, which is the number one independent distributor in the territory, is more mature than the UK and Canadian businesses and content investment is being maintained at consistent levels. Theatrical and Home Video revenues were in line with last year, supported by releases such as 17 Again, Coco Avant Chanel, Ghosts of Girlfriends Past and Drag Me to Hell. Sales to television broadcasters fell as local networks in both the free and Pay TV markets significantly cut their film acquisition budgets.
The second half will see another strong theatrical slate including the recently released remake of the 1980's hit Fame, Law Abiding Citizen (starring Jamie Foxx and Gerard Butler), The Imaginarium of Dr Parnassus, the horror movie Paranormal Activity, a local film adaptation of the book Terug Naar de Kust ('Return to the Coast') and a sequel to last year's highly successful local kids movie Sinterklaas ('Santa Claus'). 29 theatrical releases and 40 DVD releases are planned for the second half.
US - In the US there has been some early success in the Group's strategy to grow the Home Video business with revenue up more than 40% compared to the prior year. Releases in the first half included action thriller Night Train (starring Danny Glover) and Baby on Board (Heather Graham and Jerry O'Connell). The expansion of US film is expected to continue in the second half with releases including the 2009 Academy Award ® winning Best Foreign Language Film Departures and two movies starring Twilight's Robert Pattinson, The Haunted Airman and the Salvador Dali biopic Little Ashes.
TV
TV comprises the Production and International Sales businesses acquired in September 2008. On a proforma and constant currency basis revenues were up by 35% compared to last year although underlying EBITDA was a loss of £2.2 million, reflecting the phasing of this year's larger productions where deliveries are forecast to be in the second half of the financial year, when the associated revenue and margin will be recognised. At the half year contracted revenues not yet recognised relating to work in progress were over £20 million, demonstrating the strong pipeline of future output currently in production. Full year revenues and underlying EBITDA are anticipated to be in line with expectations.
| TV | 2009 Reported | 2008 Reported | 2008 - Proforma, Constant Currency | ||
| £000 | £000 | % | £000 | % | |
| Revenue | 6,722 | 133 | n/a | 4,973 | 35.2% |
| Underlying EBITDA | (2,234) | (11) | n/a | (301) | n/a |
| P&A | 513 | - | - | 145 | 254% |
| Investment in content & programmes | 18,012 | - | - | 9,479 | 90.0% |
The first half saw delivery of 85 half hours of production, including 16 out of 22 episodes of the 'tween' series Majority Rules and ten episodes of the reality show Re-Vamped. In addition the first four episodes of the new Canadian and US network police drama The Bridge were delivered with the remaining nine episodes due for delivery in the second half of the year. A number of major series are currently in production, including the police drama, Copper and new seasons of established series titles Kenny Vs Spenny, The Dating Guy, Party Mamas and Megabuilders. The production pipeline also includes When Love is Not Enough: The Lois Wilson Story (a Hallmark Hall of Fame presentation for CBS starring Winona Ryder) and Meet Phil Fitz (for TMN and Movie Central, starring Jason Priestley). In total the TV business is expected to deliver in excess of 190 half hours of production in the full year, up from 139 in the previous year.
Music
The US music business reported lower sales following a decision to reduce investment in music content after the decline in the market in the second half of the previous financial year. Market information for the first nine months of the calendar year to September 2009 shows digital sales have increased by 17%, although the overall market contracted by almost 9% due to a 14% decline in physical album sales compared to the equivalent period in the prior year. The restructuring of the Group's music business earlier this year to adapt to these trends means that the business has continued to deliver a positive underlying EBITDA and is anticipated to meet expectations for the remainder of the year. The first half saw releases from Slim Thug, Dorrough and Hatebreed while the second half will include new releases from award-winning singer songwriter Brian McKnight, B.G. and hip hop artist DJ Khaled.
| Music | 2009 Reported | 2008 Reported | 2008 Constant Currency | ||
| £000 | £000 | % | £000 | % | |
| Revenue | 8,278 | 10,368 | -20.2% | 12,521 | -33.9% |
| Underlying EBITDA | 622 | 673 | -7.6% | 814 | -23.6% |
| Investment in content | 1,710 | 2,774 | -38.4% | 3,227 | -47.0% |
DISTRIBUTION
The Distribution division comprises the Group's wholesale and logistics businesses in Canada and the US. Revenues at £96.5 million were down 6.0%, although underlying EBITDA was broadly in line with last year reflecting robust performance in Canada and the impact of the successful restructuring in the US.
| Distribution | 2009 Reported | 2008 Reported | 2008 Constant Currency | ||
| £000 | £000 | % | £000 | % | |
| Revenue | 96,547 | 90,315 | 6.9% | 102,760 | -6.0% |
| Underlying EBITDA | 5,076 | 4,401 | 15.3% | 4,917 | 3.2% |
The Canadian distribution business had a steady first half. A buoyant Canadian box office supported DVD sales. Blu-ray DVD sales continued to grow and good progress was achieved in the ongoing expansion of the Vendor Managed Inventory initiative.
The US distribution business made progress through a shift in product mix towards Home Video which represented 30% of sales in the first half compared to 21% in the comparative period.
GROUP COSTS
Group costs at £1.8 million (2008: £2.3 million) were lower than the prior year reflecting the reduced level of corporate activity and a focus on cost control.
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 payment charges and non-recurring items within net finance charges.
Adjusted operating profit increased from £6.0 million to £8.2 million reflecting the increase in underlying EBITDA. Adjusted profit before tax decreased from £4.1 million to £2.8 million due to an increase in net finance charges, which included a £1.7 million adverse year on year movement in foreign exchange items.
| Adjusted | Reported | |||
| 2009 | 2008 | 2009 | 2008 | |
| £000 | £000 | £000 | £000 | |
| Underlying EBITDA | 9,295 | 6,753 | 9,295 | 6,753 |
| One-off items | - | - | (817) | (800) |
| Amortisation of intangible assets | (80) | (9) | (8,642) | (6,668) |
| Depreciation | (1,063) | (721) | (1,063) | (721) |
| Share-based payment charges | - | - | (1,394) | (2,347) |
| Operating profit / (loss) | 8,152 | 6,023 | (2,621) | (3,783) |
| Net finance charges | (5,342) | (1,894) | (5,287) | (1,722) |
| Profit / (loss) before tax | 2,810 | 4,129 | (7,908) | (5,505) |
| Taxation (charge) / credit | (1,303) | (1,396) | 531 | 1,059 |
| Profit / (loss) after tax | 1,507 | 2,733 | (7,377) | (4,446) |
One-off items in the current year mainly comprise remaining costs incurred relating to items classified as one-off in the prior year. In addition they include the loss on disposal of a small non-trading investment.
Amortisation of acquired intangible assets, arising from the strategic acquisition activity undertaken by the Group since 2007, increased from £6.7 million to £8.6 million and depreciation increased from £0.7 million to £1.1 million. Both these increases arise primarily due to the inclusion in the current year of the TV businesses that were acquired in September 2008.
Share-based payment charges decreased from £2.3 million to £1.4 million in line with the vesting profile of the Group's share incentive schemes, the majority of which were granted on listing of the Group on AIM in March 2007.
Net finance charges increased from £1.7 million to £5.3 million, £3.6 million higher than the prior year. In the first half of the current financial year one-off items had no material impact although the comparative period included a £0.2 million net benefit. The main increase was due to the impact of foreign exchange, which resulted in a charge of £0.3 million (2008: £1.4 million credit), and higher net debt levels in the period. Excluding the impact of foreign exchange net finance charges increased from £3.3 million to £5.0 million.
On a reported basis the Group's tax credit of £0.5 million represents an effective rate of 6.7% compared to 19.2% in the comparative period and 1.9% for the year to 31 March 2009. The overall Group effective rate continues to be significantly lower than the prevailing rates in the countries in which the Group operates due mainly to tax losses and the impact of non-deductible items such as share-based payment charges. The rate also fluctuates during the year due to the seasonality of profits in different jurisdictions.
On an adjusted basis the effective rate is 46% compared to 34% in the comparative period and 28% in the year to 31 March 2009. The increase compared to the first half last year is due to unrecognised tax losses in the US following the impairment in the second half.
Earnings and Loss per Share
The reported diluted loss per share was 5.3 pence (2008: 3.6 pence) reflecting the increased reported loss after tax of £7.4 million (2008: £4.4 million). On an adjusted basis the diluted earnings per share was 1.0 pence (2008: 2.1 pence).
Cashflow and Financing
The Group's cash balances increased by £9.0 million during the period as follows:
| Six months to 30 September 2009 £000 | Six months to 30 September 2008 £000 | |
| Net cash from operating activities | 28,625 | 5,482 |
| Investment in content rights and TV programmes | (38,881) | (17,105) |
| Acquisition of subsidiaries | (4,503) | (8,587) |
| Purchase of other non-current assets * | (1,101) | (1,791) |
| Net interest paid | (2,415) | (2,173) |
| Cash outflows before other financing activities | (18,275) | (24,174) |
| Cash from other financing activities | 27,262 | 18,847 |
| Net increase / (decrease) in cash and cash equivalents | 8,987 | (5,327) |
* Other non-current assets comprise property, plant and equipment and intangible software.
Cash flows from operating activities of £28.6 million compared to £5.5 million in the comparative period. This cash performance reflects strong trading and also a £5.0 million net working capital inflow (2008: £10.7 million outflow), partly due to collection of the high level of receivables at 31 March 2009 following release of Twilight on DVD and Knowing theatrically.
The Group invested almost £39 million in content rights and television programmes in the period (2008: £17.1 million). £16.2 million of the increase is due to inclusion of the TV businesses acquired in September 2008 and the remaining £5.6 million represents higher investment in the Film business, mainly in the UK. Acquisition of subsidiaries of £4.5 million comprises deferred payments relating to the acquisition of the TV businesses.
Net debt increased by £21.1 million, from £89.8 million at 31 March 2009 to £110.9 million at 30 September 2009, mainly reflecting investment in content which more than offset the operating cash flows generated. Foreign exchange movements also increased reported net debt due to the weakening in sterling compared to the Canadian dollar, which represents the largest portion of the Group's borrowings. Net debt at 31 March 2009 has been updated to reflect the inclusion of interest accruing on the exchangeable debenture which was previously classified within other payables.
| £'000 | £'000 | |
| At 31 March 2009 | 89,795 | |
| Cash inflows | (8,987) | |
| New loan advances (net of costs) | 22,060 | |
| Loan repayments | (2,600) | |
| Net drawdown of production financing | 7,802 | |
| Cash outflow adjusted for financing activity | 18,275 | |
| Change in debenture and deferred finance charges | 2,230 | |
| Foreign exchange movements | 577 | |
| At 30 September 2009 | 110,877 |
The net debt balances at 30 September 2009 comprised the following:
| £'000 | |
| Cash and other items (excl. Television Production) | (17,039) |
| Senior Revolving Credit Facility | 89,311 |
| Senior Net Debt | 72,272 |
| Exchangeable Debenture | 20,088 |
| Net Television Production Debt | 18,517 |
| 110,877 |
Senior Net Debt
In the first half of the year the Group re-denominated its USD senior credit facility into local currencies and also expanded its facility by US$7.5 million. In October 2009 the Group further expanded its facility by US$15 million. The Group does not anticipate drawing on these additional amounts during the current year but they provide the Group with additional capital to pursue its strategic objectives should opportunities become available. We expect senior net debt to reduce during the second half and our senior leverage to be below 2.75 times underlying EBITDA at the year end.
Exchangeable Debenture
The exchangeable debenture is subordinated to the senior credit facility and does not contain covenants that would result in the exchangeable debenture becoming payable prior to the end of its term in September 2013. Interest on the exchangeable debenture is not payable in cash but accrues and is payable alongside the principal on maturity.
Interim Production Financing
Interim Production Financing is independent of the Group's senior credit facility and is not secured over all of the Group's assets. It is attributable to the Television production companies within the TV business and represents shorter-term working capital financing relating to specific television production projects that is arranged and secured on a production-by-production basis.
The Group's net assets were £128.8 million at 30 September 2009 (31 March 2009: £133.2 million).
The directors acknowledge the latest guidance issued by the Financial Reporting Council in October 2009 relating to going concern. The directors consider it appropriate to prepare the interim statements on a going concern basis, as set out in Note 2 to this interim announcement.
Condensed Consolidated Income Statement
For the six months ended 30 September 2009
| Six months ended | Six months ended | Year ended | |||
| 30 September | 30 September | 31 March | |||
| 2009 | 2008 | 2009 | |||
| (Unaudited) | (Unaudited) | (Audited) | |||
| Notes | £'000 | £'000 | £'000 | ||
| Revenue | 3 | 163,565 | 131,076 | 342,643 | |
| Cost of sales | (123,098) | (98,083) | (270,123) | ||
| Gross profit | 40,467 | 32,993 | 72,520 | ||
| Administrative expenses | (43,088) | (36,776) | (97,979) | ||
| Operating loss | (2,621) | (3,783) | (25,459) | ||
| Analysed as: | |||||
| Underlying EBITDA | 9,295 | 6,753 | 25,256 | ||
| Amortisation of intangible assets | (8,642) | (6,668) | (15,168) | ||
| Depreciation | (1,063) | (721) | (1,699) | ||
| Share-based payment charge | (1,394) | (2,347) | (4,171) | ||
| One-off items | 4 | (817) | (800) | (29,677) | |
| (2,621) | (3,783) | (25,459) | |||
| Finance income | 5 | 512 | 2,322 | 4,866 | |
| Finance costs | 5 | (5,799) | (4,044) | (10,416) | |
| Loss before tax | (7,908) | (5,505) | (31,009) | ||
| Income tax credit | 6 | 531 | 1,059 | 578 | |
| Loss for the period | (7,377) | (4,446) | (30,431) | ||
| Attributable to: | |||||
| Equity holders of the parent | (7,377) | (4,446) | (30,431) | ||
| Loss per share | |||||
| Basic and diluted - pence | 8 | (5.3) | (3.6) | (23.2) | |
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 September 2009
| Six months ended | Six months ended | Year ended | |
| 30 September | 30 September | 31 March | |
| 2009 | 2008 | 2009 | |
| (Unaudited) | (Unaudited) | (Audited) | |
| £'000 | £'000 | £'000 | |
| Loss for the period | (7,377) | (4,446) | (30,431) |
| Exchange differences on translation of foreign operations | 1,606 | 5,326 | 21,456 |
| Total comprehensive (loss)/income for the period | (5,771) | 880 | (8,975) |
| Attributable to: | |||
| Equity holders of the parent | (5,771) | 880 | (8,975) |
Condensed Consolidated Balance Sheet
As at 30 September 2009
| 30 September | 30 September | 31 March | ||||
| 2009 | 2008 | 2009 | ||||
| (Unaudited) | (Unaudited) | (Audited) | ||||
| Notes | £'000 | £'000 | £'000 | |||
| Assets | ||||||
| Non-current assets | ||||||
| Goodwill | 100,207 | 95,794 | 99,699 | |||
| Investment in programmes | 27,060 | 18,545 | 19,446 | |||
| Other intangible assets | 80,021 | 89,642 | 87,397 | |||
| Investments | 115 | 447 | 471 | |||
| Property, plant and equipment | 5,895 | 6,419 | 6,453 | |||
| Other receivables | 316 | 789 | 1,239 | |||
| Deferred tax assets | 1,827 | 1,931 | 3,245 | |||
| Total non-current assets | 215,441 | 213,567 | 217,950 | |||
| Current assets | ||||||
| Inventories | 40,387 | 42,930 | 40,137 | |||
| Investment in content rights | 53,561 | 45,074 | 47,670 | |||
| Trade and other receivables | 72,707 | 48,541 | 75,635 | |||
| Current tax assets | 2,203 | - | 1,149 | |||
| Cash and cash equivalents | 20,844 | 11,812 | 11,767 | |||
| Total current assets | 189,702 | 148,357 | 176,358 | |||
| Total assets | 405,143 | 361,924 | 394,308 | |||
| Liabilities and equity | ||||||
| Non-current liabilities | ||||||
| Interest bearing loans and borrowings | 109,399 | 88,734 | 87,739 | |||
| Provisions | 111 | - | 124 | |||
| Other payables | 132 | 376 | 3,076 | |||
| Deferred tax liabilities | 15,100 | 14,635 | 15,953 | |||
| Total non-current liabilities | 124,742 | 103,745 | 106,892 | |||
| Current liabilities | ||||||
| Trade and other payables | 125,039 | 100,055 | 133,198 | |||
| Current tax liabilities | 1,302 | 793 | 3,509 | |||
| Interest bearing loans and borrowings | 22,322 | 10,036 | 13,823 | |||
| Provisions | 677 | 3,897 | 1,351 | |||
| Other financial liabilities | 2,280 | 2,236 | 2,334 | |||
| Total current liabilities | 151,620 | 117,017 | 154,215 | |||
| Total liabilities | 276,362 | 220,762 | 261,107 | |||
| Equity | ||||||
| Share capital | 9 | 675 | 675 | 675 | ||
| Share premium | 126,352 | 126,352 | 126,352 | |||
| Treasury shares | (7,819) | (7,819) | (7,819) | |||
| Other reserves | 14,915 | 14,915 | 14,915 | |||
| Currency translation reserve | 29,767 | 12,031 | 28,161 | |||
| Retained earnings | (35,109) | (4,992) | (29,083) | |||
| Total equity | 128,781 | 141,162 | 133,201 | |||
| Total liabilities and equity | 405,143 | 361,924 | 394,308 | |||
Condensed Consolidated Cash Flow Statement
Six months ended 30 September 2009
| Six months ended | Six months ended | Year ended | ||||
| 30 September | 30 September | 31 March | ||||
| 2009 | 2008 | 2009 | ||||
| (Unaudited) | (Unaudited) | (Audited) | ||||
| £'000 | £'000 | £'000 | ||||
| Operating activities | ||||||
| Operating loss | (2,621) | (3,783) | (25,459) | |||
| Adjustments for: | ||||||
| Depreciation | 1,063 | 721 | 1,699 | |||
| Amortisation of other intangible assets | 8,329 | 6,025 | 14,127 | |||
| Amortisation of content rights | 14,347 | 10,747 | 21,137 | |||
| Amortisation of television programmes | 4,369 | 643 | 12,066 | |||
| Foreign exchange movements | (182) | 138 | (267) | |||
| Share-based payment charge | 1,394 | 2,347 | 4,171 | |||
| Impairment | - | - | 24,416 | |||
| (Increase)/decrease in inventories | (254) | (2,248) | 546 | |||
| Decrease/ (increase) in trade and other receivables | 13,613 | (5,382) | (36,766) | |||
| (Decrease)/ increase in trade and other payables | (8,382) | (3,039) | 19,976 | |||
| (Decrease)/ increase in provisions | (744) | (186) | 296 | |||
| Net cash inflow from trading activities | 30,932 | 5,983 | 35,942 | |||
| Income tax paid | (2,307) | (501) | (91) | |||
| Net cash from operating activities | 28,625 | 5,482 | 35,851 | |||
| Investing activities | ||||||
| Interest received | 47 | 118 | 260 | |||
| Acquisition of subsidiaries (net of cash acquired) | (4,503) | (8,587) | (8,924) | |||
| Investment in content rights | (20,565) | (14,954) | (37,639) | |||
| Net investment in television programmes | (18,316) | (2,151) | (10,199) | |||
| Purchases of property, plant and equipment | (672) | (1,428) | (1,661) | |||
| Purchases of intangible software assets | (429) | (363) | (1,270) | |||
| Net cash used in investing activities | (44,438) | (27,365) | (59,433) | |||
| Financing activities | ||||||
| New loan advances (net of costs) | 22,060 | 76,159 | 125,419 | |||
| Loan repayments | (2,600) | (57,312) | (107,771) | |||
| Net drawdown of production financing | 7,802 | - | 3,405 | |||
| Interest paid | (2,462) | (2,291) | (4,238) | |||
| Net cash from financing activities | 24,800 | 16,556 | 16,815 | |||
| Net increase/(decrease) in cash and cash equivalents | 8,987 | (5,327) | (6,767) | |||
| Cash and cash equivalents at beginning of the period | 11,767 | 16,484 | 16,484 | |||
| Effects of exchange rate fluctuations on cash held | 90 | 655 | 2,050 | |||
| Cash and cash equivalents at end of period | 20,844 | 11,812 | 11,767 | |||
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 September 2009
| Currency | |||||||
| Share | Share | Treasury | Other | translation | Retained | Total | |
| capital | premium | shares | reserves | reserve | earnings | equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 31 March 2008 (Audited) | 587 | 126,352 | (7,819) | 639 | 6,705 | (2,886) | 123,578 |
| Total comprehensive income for the period | - | - | - | - | 5,326 | (4,446) | 880 |
| Shares issued during the period | 88 | - | - | 14,276 | - | - | 14,364 |
| Share-based payment charge | - | - | - | - | - | 2,340 | 2,340 |
| At 30 September 2008 (Unaudited) | 675 | 126,352 | (7,819) | 14,915 | 12,031 | (4,992) | 141,162 |
| Total comprehensive income for the period | - | - | - | - | 16,130 | (25,985) | (9,855) |
| Share-based payment charge | - | - | - | - | - | 1,894 | 1,894 |
| At 31 March 2009 (Audited) | 675 | 126,352 | (7,819) | 14,915 | 28,161 | (29,083) | 133,201 |
| Total comprehensive income for the period | - | - | - | - | 1,606 | (7,377) | (5,771) |
| Share-based payment charge | - | - | - | - | - | 1,351 | 1,351 |
| At 30 September 2009 (Unaudited) | 675 | 126,352 | (7,819) | 14,915 | 29,767 | (35,109) | 128,781 |
Notes to the Financial Statements
For the six months ended 30 September 2009
1. Nature of operations and general information
Entertainment One Ltd. ("the Company") and subsidiaries' ("the Group") principal activity is the creation, acquisition and exploitation of entertainment rights across all media. In addition, the Group owns distribution channels to retailers in territories where it can capture additional margin and improve delivery of products to consumers. The Group is a leading international independent entertainment business currently operating in Canada, the United Kingdom, the United States and the Benelux. Segmental information is disclosed in note 3.
Entertainment One Ltd. is the Group's ultimate parent company and is incorporated in the Cayman Islands and is domiciled in Jersey. Entertainment One Ltd. shares are listed on the Alternative Investment Market of the London Stock Exchange.
Entertainment One Ltd. has presented its condensed consolidated interim financial statements in Pounds Sterling (£), which is also the functional currency of the parent company. These condensed interim financial statements were approved for issue by the Board of Directors on 17 November 2009.
2. Basis of preparation
The Group's financial information has been prepared, other than items noted below, in accordance with the accounting policies and methods of computation which the Group expects to adopt for the 2010 year end. These policies are consistent with the principal accounting policies which were set out in the Group's latest annual audited financial statements, which can be found on the Group's website, www.e1entertainment.com, and are in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.
The interim financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34 "Interim Financial Reporting".
The interim financial statements, which have been approved by the directors, are unaudited but have been reviewed by the Group's auditors in accordance with the 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 United Kingdom Auditing Practices Board.
Use of 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 one-off operating 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 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 October 2009: "Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009". The basis on which funding is available to the Group, details of banking covenants and commercial and operational risks are set out in the Group's latest annual audited financial statements.
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 this reason 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 the interim financial statements.
Changes in accounting policy
In the current financial year, the Group has adopted IFRS 8 "Operating Segments" and IAS 1 "Presentation of Financial Statements" (revised 2007).
IFRS 8 requires operating segments to be identified on a basis consistent with internal management structure and reporting, and has not resulted in a change to the segments presented.
IAS 1 (revised) requires the presentation of a statement of changes in equity as a primary statement, separate from the income statement and statement of comprehensive income. IAS 1 permits the components of the income statement to continue to be presented in a separate income statement. The Group has taken this option.
Comparative information
In the most recent audited annual financial statements the Group made a change to its accounting policy relating to investment in content rights. As this change took place in the second half of the year, the comparative figures for the six months to 30 September 2008 have been adjusted in this report with the effect of reducing both investment in content and trade and other payables by £13.6 million in the balance sheet.
Interest payable accrued relating to the Group's exchangeable debenture, previously classified within 'Other payables', has been shown in interest bearing loans and borrowings at 30 September 2009. £1.4 million has been reclassified at 30 September 2008 and £2.4 million as at 31 March 2009. 3. Business segments
IFRS 8, "Operating segments", has been applied from 1 April 2009 (see Note 2). Segment information is presented below on the same basis as that which is used for internal reporting purposes by the chief operating decision maker. For management purposes, the Group is currently organised into two main reportable segments: Entertainment and Distribution.
Principal activities are as follows:
Entertainment - the acquisition and exploitation of filmed entertainment and music rights across all media and the production of television programming.
Distribution - the ownership of home entertainment distribution channels to retailers in territories and media where the Group can capture additional margin and improve delivery of products to consumers.
Included within "Other" is a non-core retail operation in Canada.
Segment information for the six months ended 30 September 2009 is presented below.
| Entertainment | Distribution | Other | Eliminations | Consolidated | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | |||||
| External sales | 63,882 | 88,552 | 11,131 | - | 163,565 |
| Inter-segment sales | 21,741 | 7,995 | - | (29,736) | - |
| Total revenue | 85,623 | 96,547 | 11,131 | (29,736) | 163,565 |
| Inter-segment sales are charged at prevailing market prices. | |||||
| Entertainment | Distribution | Other | Eliminations | Consolidated | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Result | |||||
| Underlying EBITDA | 6,633 | 5,076 | (605) | (28) | 11,076 |
| One-off costs | (214) | (306) | - | - | (520) |
| Depreciation and amortisation | (5,279) | (4,347) | (79) | - | (9,705) |
| Segment result | 1,140 | 423 | (684) | (28) | 851 |
| Unallocated corporate expenses: | |||||
| Group costs | (1,781) | ||||
| Share-based payment charges | (1,394) | ||||
| One-off costs | (297) | ||||
| Operating loss | (2,621) | ||||
| Finance income | 512 | ||||
| Finance costs | (5,799) | ||||
| Loss before tax | (7,908) | ||||
| Tax | 531 | ||||
| Loss after tax | (7,377) | ||||
Segment information for the six months ended 30 September 2008 is presented below:
| Entertainment | Distribution | Other | Eliminations | Consolidated | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | |||||
| External sales | 35,278 | 83,444 | 12,354 | - | 131,076 |
| Inter-segment sales | 15,815 | 6,871 | - | (22,686) | - |
| Total revenue | 51,093 | 90,315 | 12,354 | (22,686) | 131,076 |
| Result | |||||
| Underlying EBITDA | 4,980 | 4,401 | (239) | (94) | 9,048 |
| One-off costs | (800) | - | - | - | (800) |
| Depreciation and amortisation | (3,040) | (4,279) | (70) | - | (7,389) |
| Segment result | 1,140 | 122 | (309) | (94) | 859 |
| Unallocated corporate expenses: | |||||
| Group costs | (2,295) | ||||
| Share-based payment charges | (2,347) | ||||
| One-off costs | - | ||||
| Operating loss | (3,783) | ||||
| Finance income | 2,322 | ||||
| Finance costs | (4,044) | ||||
| Loss before tax | (5,505) | ||||
| Tax | 1,059 | ||||
| Loss after tax | (4,446) | ||||
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 payment charges | (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) | ||||
4. One-off items
| Six months ended | Six months ended | Year ended | |||
| 30 September | 30 September | 31 March | |||
| 2009 | 2008 | 2009 | |||
| Notes | £'000 | £'000 | £'000 | ||
| Loss on disposal of investment | (a) | 306 | - | - | |
| US Music and Distribution businesses | (b) | - | - | 21,648 | |
| Restructuring and abortive acquisition costs | (c) | 297 | - | 3,878 | |
| Receivership of Woolworths Group plc | (d) | - | 800 | 2,479 | |
| Rebranding | (e) | 214 | - | 1,672 | |
| 817 | 800 | 29,677 | |||
5. Finance income and finance costs
Finance income and finance costs comprise:
| Six months ended | Six months ended | Year ended | ||||
| 30 September | 30 September | 31 March | ||||
| 2009 | 2008 | 2009 | ||||
| £'000 | £'000 | £'000 | ||||
| Finance income | ||||||
| Interest receivable | 50 | 118 | 283 | |||
| Gain on revaluation of embedded equity option | - | 686 | 2,432 | |||
| Reset of exchangeable debenture | - | - | 1,479 | |||
| Increase in fair value of derivative instruments | 462 | 116 | - | |||
| Net foreign exchange gains | - | 1,402 | 672 | |||
| 512 | 2,322 | 4,866 | ||||
| Finance costs | ||||||
| Interest payable on bank loans and overdrafts | (2,717) | (1,719) | (4,182) | |||
| Other interest payable | (60) | - | (88) | |||
| Amortisation of deferred finance charges | (868) | (377) | (1,178) | |||
| Interest payable on exchangeable debenture | (1,096) | (980) | (1,956) | |||
| Amortisation of exchangeable debenture | (323) | (338) | (654) | |||
| Early settlement costs | - | (630) | (630) | |||
| Loss on revaluation of embedded equity option | (407) | - | - | |||
| Decrease in fair value of derivative instruments | - | - | (1,728) | |||
| Net foreign exchange losses | (328) | - | - | |||
| (5,799) | (4,044) | (10,416) | ||||
| Net finance charges | (5,287) | (1,722) | (5,550) | |||
6. Tax
| Six months ended | Six months ended | Year ended | |||
| 30 September | 30 September | 31 March | |||
| 2009 | 2008 | 2009 | |||
| £'000 | £'000 | £'000 | |||
| Current tax | (778) | 1,010 | 2,488 | ||
| Deferred tax | 247 | (2,069) | (3,066) | ||
| Tax credit | (531) | (1,059) | (578) | ||
Income tax for the six months ended 30 September 2009 is credited at 6.7% (30 September 2008 19.2% credit; 31 March 2009: 1.9% credit), which is the product of applying the estimated annual effective income tax rate by tax jurisdiction to the pre-tax profits and losses of each jurisdiction for the six month period.
7. Dividends
The directors are not recommending payment of an interim dividend (30 September 2008: £nil; 31 March 2009: £nil).
8. Earnings / loss per share
| Six months ended | Six months ended | Year ended | |||
| 30 September | 30 September | 31 March | |||
| 2009 | 2008 | 2009 | |||
| Pence | Pence | Pence | |||
| Basic and diluted loss per share | (5.3) | (3.6) | (23.2) | ||
| Adjusted basic earnings per share | 1.1 | 2.2 | 9.1 | ||
| Adjusted diluted earnings per share | 1.0 | 2.1 | 8.6 | ||
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.
Adjusted basic earnings per share is calculated using 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 earnings per share calculation to assume the conversion of all potentially dilutive shares.
Reconciliations of the losses used in the calculations and the loss and adjusted earnings/(loss) per share calculations are set out below.
| | | | Six months ended | Six months ended | Year ended |
| | | | 30 September | 30 September | 31 March |
| | | | 2009 | 2008 | 2009 |
| | | | £'000 | £'000 | £'000 |
| For basic and diluted loss per share | | | | | |
| Loss for the financial period | | | (7,377) | (4,446) | (30,431) |
| For adjusted basic and diluted loss per share | | | | | |
| Loss for the financial period | | | (7,377) | (4,446) | (30,431) |
| Add back: | | | | | |
| One-off items | | | 817 | 800 | 29,677 |
| Amortisation of acquired intangibles | | 8,562 | 6,659 | 15,119 | |
| Share-based payment charges | | | 1,394 | 2,347 | 4,171 |
| Financing net fair value movements | | | (55) | (802) | (704) |
| Early settlement cost on refinancing | | - | 630 | 630 | |
| Reset of exchangeable debenture | | | - | - | (1,479) |
| Tax effect of above items | (1,834) | (2,455) | (5,108) | ||
| Adjusted earnings after tax | 1,507 | 2,733 | 11,875 | ||
| Weighted average number of shares in issue | | | |
| Basic | 139,300,625 | 123,050,854 | 131,151,599 |
| Dilutive potential shares for adjusted earnings per share calculation | 7,153,348 | 4,144,750 | 7,264,279 |
| Adjusted diluted | 146,453,973 | 127,195,604 | 138,415,878 |
The weighted average number of basic shares in issue in the six months to 30 September 2008 has been adjusted to exclude shares held in Treasury, consistent with the treatment at 31 March 2009. The impact increases the basic and diluted loss per share previously reported by 0.2 pence. The number of weighted average number of dilutive potential shares for the year to 31 March 2009 has been adjusted following reclassification of certain shares to ensure consistency with the calculations at 30 September 2009. The impact increases the previously reported adjusted earnings per share for the year to 31 March 2009 by 0.5 pence.
9. Share capital
On 29 September 2009 at the Company's annual general meeting a resolution was passed to increase the authorised ordinary share capital of the Company by 50,000,000 shares of CAD$0.01 each to 250,000,000 ordinary shares of CAD$0.01 each.
10. Seasonality
The Group's exposure to seasonality varies by division. The results of the Entertainment division are impacted by the number and timing of film releases. The release dates are not entirely in the control of the Group and are determined largely by the production and releasing schedules of the film's producers. Revenues from television productions are driven by contracted delivery dates with primary broadcasters and commencement of license fee periods and can fluctuate significantly from period to period. Results of the Distribution division reflect seasonal patterns with the fourth calendar quarter providing the highest sales due to the increased consumer spending that accompanies the holiday season.
11. 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 report on page 27 of the Annual Report & Accounts for the period ended 31 March 2009 describes the systems and processes through which the directors manage and mitigate risks. The Board considers that the principal risks to achieving its objectives are set out below. 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.
- Attracting and retaining the best people
- Strategy execution
- Acquisition effectiveness
- Content investment opportunities
- Financial risk management
As part of financial risk management the Group monitors foreign currency movements. The significant 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 (USD, CAD, EUR, GBP) result in consolidation translation gains and losses as the Group reports its financial results in GBP. During the period the balance sheet translation reserve shows a gain of £1.6 million, reflecting the impact of the weaker GBP on the Group's non-sterling net assets. The Group looks to balance local currency borrowings with the net assets of the individual operating units to help mitigate the impact of currency movements in relation to the consolidated net assets of the Group.
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 film content which is generally transacted in USD. The Group will reduce 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 2009.
Further details of these risks are provided on page 18 of the Annual Report & Accounts for the year ended 31 March 2009 a copy of which is available on the Company's website at www.e1entertainment.com.
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 interim financial report for the six months ended 30 September 2009 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, the condensed consolidated statement of changes in equity and related notes 1 to 11. We have read the other information contained in the interim 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 them 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 interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 2, the annual consolidated financial statements of the group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of consolidated financial statements included in this interim 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 interim 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 interim financial report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.
Deloitte LLP
Chartered Accountants and Statutory Auditors
London, United Kingdom
17 November 2009