Entertainment One Regulatory News (ETO)

ENTERTAINMENT ONE LTD. (eOne)

FULL YEAR RESULTS

FOR THE YEAR ENDED 31 MARCH 2019

STRONG EARNINGS GROWTH DELIVERED, CONFIDENT OUTLOOK 

FINANCIAL HIGHLIGHTS

OPERATIONAL HIGHLIGHTS

CORPORATE POST YEAR END ACQUISITION

ALLAN LEIGHTON, CHAIRMAN, COMMENTED:

"FY19 has been another year of impressive earnings growth for Entertainment One, with the Group's streamlined structure and talent-driven approach positioning it well in vibrant and dynamic content markets. Our focus on developing relationships with the best creatives in the industry and our deep customer reach give me confidence for the year ahead and beyond. As such, the Board is pleased to increase the dividend by 7% to 1.5 pence per share, in line with its progressive dividend policy."

DARREN THROOP, CHIEF EXECUTIVE OFFICER, COMMENTED:

"The work and organisational shifts that we have accomplished over the last few years have positioned the business well in the marketplace, as we reinforced our content creation and ownership anchor and expanded our end-to-end capabilities to ensure we maximise our ability to unlock the power and value of creativity.

Our underlying EBITDA for FY19 is testament to our future-facing strategy, the breadth of our portfolio and platform-agnostic approach and reflects our stronger position in the market. We remain focused on building the leading talent-driven entertainment company in the world and are confident that in the period ahead we will continue to attract outstanding talent and deliver the highest quality content across all areas of our business."

GROUP FINANCIAL SUMMARY

1. Underlying EBITDA is operating profit or loss excluding amortisation of acquired intangibles; depreciation; amortisation of software; share-based payment charge; tax, finance costs and depreciation related to joint ventures; and operating one-off items. Underlying EBITDA is reconciled to operating profit in the Other Financial Information section of this Announcement.

2. Investment in acquired content and productions is the sum of "investment in productions, net of grants received" and "investment in acquired content rights", as shown in the consolidated cash flow statement.

3. Adjusted profit before tax and adjusted diluted earnings per share are the reported measures excluding amortisation of acquired intangibles; share-based payment charge; tax, finance costs and depreciation related to joint ventures; operating one-off items; finance one-off items; and, in the case of adjusted diluted earnings per share, one-off tax items. Refer to the Other Financial Information section of this Announcement for a reconciliation of adjusted profit before tax and Note 12 of the consolidated financial statements for the adjusted diluted earnings per share reconciliation.

4. Reported 2018 amounts have been restated for IFRS 15 Revenue from Contracts with Customers, refer to Note 1 of the consolidated financial statements for further details.

Group reported revenue of £941.2 million (2018: £1,029.0 million) was 9% lower year-on-year (also 9% lower on a constant currency basis retranslating prior year reported financials at current year foreign exchange rates) reflecting strong growth in Family & Brands (28% higher) and lower revenue in Film, Television & Music (13% lower) expected as part of the Group's transition to a production focus. The growth in Family & Brands was driven by continued strong performance of Peppa Pig, significant growth from PJ Masks and the delivery of new show, Cupcake & Dino: General Services. The decline in Film, Television & Music was predominantly the result of fewer film releases, home entertainment market decline and scripted television slate composition, partly offset by a 30% increase in music revenue.

Group reported underlying EBITDA was 21% higher at £197.6 million (2018: £163.6 million), driven by strong growth in Family & Brands (37% higher) and increase in Film, Television & Music (9% higher). Alongside the increase in revenue, the growth in Family & Brands was driven by improved underlying EBITDA margin as a larger portion of revenue was generated from AVOD and SVOD platforms which have higher margins. The Film, Television & Music increase was driven by the improved profitability on television shows, increased high margin royalty income from television library participations, increased music revenue and operating costs savings of around £5 million (approximately £6 million in aggregate through FY19). This was partly offset by the impact of the lower transactional revenue driven by fewer releases and market decline. The underlying EBITDA margin increased by 510 basis points driven by the increased margin in both Divisions and as the higher margin Family & Brands Division is a greater proportion of the Group's underlying EBITDA than the prior year. On a constant currency basis, Group underlying EBITDA increased by 19%.

Net cash generated from operating activities amounted to £30.0 million in comparison to £14.9 million in the prior year, reflecting lower investment in content and increase in operating performance.

Adjusted profit before tax for the year was up £25.7 million to £155.9 million (2018: £130.2 million), due to the increase in underlying EBITDA, partly offset by increased net finance costs reflecting the higher average debt levels year-on-year primarily arising from the March 2018 acquisition of the remaining 49% interest in The Mark Gordon Company. Reported profit before tax for the year was £36.8 million (2018: £64.9 million), impacted by higher one-off charges of £68.0 million (2018: £7.1 million) with the increase primarily relating to the impairment of certain assets within the film distribution businesses which is detailed in the Other Financial Information section of this Announcement, partly offset by the increased underlying EBITDA.

Adjusted diluted earnings per share were 25.0 pence (2018: 19.3 pence). On a reported basis, diluted earnings per share were 2.5 pence (2018: 12.0 pence) reflecting the higher one-off charges.

FY20 OUTLOOK SUMMARY

FAMILY & BRANDS

The Division is expected to continue to generate strong revenue and underlying EBITDA growth across the portfolio in FY20. It is also expected that underlying EBITDA margin will be slightly reduced due to revenue stream mix and investment in additional infrastructure necessary to facilitate continued growth and to support brand longevity.

Key operational drivers for Peppa Pig:

Key operational drivers for PJ Masks:

Ricky Zoom is scheduled for its broadcast debut in China on SVOD platform Youku in summer 2019, to be followed by a global broadcast launch in autumn/winter 2019 in all other territories simultaneously. The consumer products launch of the brand is anticipated to be spring/summer 2020 with global toy partner TOMY.

New comedy shows currently in production include Ninja Express, which already has major platforms attached in multiple territories around the world, and Alien TV for a global SVOD platform. Further properties are in development, across pre-school and older demographics.

FILM, TELEVISION & MUSIC

The integration of the Film & Television operations is on track to generate £13-15 million of annualised cost savings by the end of FY20, from business efficiencies and centralisation of support functions from the combined operations to form a single, streamlined operating structure. Broadcast and licensing revenue is expected to increase driven by the ramp up of the scripted and unscripted television businesses and music is also expected to continue to grow organically and through the recent acquisition of Audio Network.

Key operational drivers:

Following the end of the financial year, in April 2019, eOne acquired UK based Audio Network, one of the world's largest independent creators and publishers of original high quality music for use in film, television, advertising and digital media. Audio Network enhances eOne's presence in a rapidly growing sector within music, delivering attractive growth that is complementary to eOne's music, film, television and family brands businesses.

FINANCIAL METRICS

Key financial metrics are summarised as follows:

1. Does not yet reflect amortisation for Audio Network. Purchase price allocation to be completed.

2. Including £52 million additional debt related to Audio Network acquisition.

STRATEGY

The market for content rights continues to be driven by rapid changes in consumer behaviour, as audiences today expect the best content to be delivered to them in a format and at a time they dictate. As industry participants adapt their businesses to service this demand, the ability to offer the very best content becomes a critical success factor and plays to the Group's strengths as a leading independent integrated platform-agnostic content creator.

Focused on building the leading talent-driven entertainment company in the world, Entertainment One's strategy to unlock the power and value of content is grounded by four key pillars:

The successful implementation of this strategy has enabled us to build a balanced content and brand business with sustainable revenue and underlying EBITDA growth across both of our Divisions.

BUSINESS MODEL

The Group's business model remains unchanged as we continue to operate across attractive growth markets through two Divisions

STRATEGIC PROGRESS

In tandem with the financial performance during the period, the Group has made solid progress against its strategy:

Family & Brands

Film, Television & Music

Library

CORPORATE

Acquisition of Audio Network - post year end

In April 2019 eOne acquired UK based Audio Network, one of the world's largest independent creators and publishers of original high quality music for use in film, television, advertising and digital media. The Group paid consideration of £179 million (which included £13 million of cash and cash equivalents on Audio Network's balance sheet), financed through a mix of new equity issuance and debt. Audio Network enhances eOne's presence in a rapidly growing sector within music, delivering attractive growth that is complementary to eOne's music, film, television and family brands businesses. Audio Network's business model is based on generating revenues through synchronisation ('sync') fees and music publishing royalties. This attractive mix of recurring, high margin revenues enables Audio Network to deliver underlying EBITDA margins of around 35% and achieved a conversion rate of underlying EBITDA to free cash flow of approximately 90% in FY18.

Audio Network brings longstanding partnerships with more than 1,000 artists and composers and a high quality library of over 150,000 instrumental and orchestral tracks to eOne's library of around 40,000 commercial songs. We are excited by the prospect of integrating these libraries together on Audio Network's proprietary music publishing platform to simplify music rights management and to generate incremental sync placement opportunities for eOne's commercial artists. We can also now utilise Audio Network's music content in eOne's own film, television and family productions, bringing this activity largely in-house.

DIVISIONAL OPERATIONAL & FINANCIAL REVIEW

The Divisional tables below are presented gross of inter-segment eliminations. For further information refer to Note 2 in the consolidated financial statements.

FAMILY & BRANDS

The Family & Brands Division develops, produces and distributes a portfolio of children's television properties on a worldwide basis, its principal brands being Peppa Pig and PJ Masks. A significant proportion of its revenue is generated through high margin licensing and merchandising programmes across multiple retail categories.

Revenue for the year was up 28% to £158.5 million (2018: £123.9 million), driven by the continued strong performance of Peppa Pig, significant growth from PJ Masks and the delivery of a new show, Cupcake & Dino: General Services.

Underlying EBITDA increased 37% to £97.0 million (2018: £71.0 million), driven by increased revenue. The underlying EBITDA margin was 390 basis points higher reflecting the larger portion of revenue generated from high margin AVOD and SVOD platforms (transactional and broadcast and licensing revenue grew 24% and 144%, respectively) which help to drive awareness of our brands.

Investment in productions of £6.4 million (2018: £9.6 million) was £3.2 million lower than the prior year due to higher spend on Cupcake & Dino: General Services and PJ Masks in the prior period. Investment spend in the current year included the new episodes of Peppa Pig, season 2 and 3 of PJ Masks, new property Ricky Zoom and new show Alien TV.

Licensing and merchandising revenue grew by 13% to £89.4 million (2018: £78.8 million) reflecting the US$2.52 billion of retail sales in the year (2018: US$2.38 billion). Retail sales during the year were impacted by the slower, more measured roll out of merchandise in China and the closure of Toys R Us particularly in the US. More than 1,100 new and renewed broadcast and licensing agreements were concluded in the year, an increase of 5% year-on-year. At 31 March 2019, the business had over 1,600 live licensing and merchandising contracts across its portfolio of brands (2018: almost 1,500) driven by the managed roll out.

Peppa Pig has continued to grow in the year with revenue growth of 20% at £90.2 million (2018: £75.2 million). This growth was driven by SVOD and AVOD revenues as well as TV broadcast renewals in the year. New and renewed SVOD deals for seasons 1 to 6 were signed in China with Mango TV, Youku, iQIYI and Tencent. Retail sales were up 4% at US$1.35 billion (2018: US$1.30 billion) but were impacted by the slower than anticipated roll out in China and the closure of Toys R Us in the US. The theatrical release of Peppa Pig Celebrates Chinese New Year in January 2019 generated a high level of social media buzz globally and drove strong brand awareness across the territory. Peppa Pig won the Young Property of the Year at the China Licensing Awards in October 2018.

The brand continues to be strong in key territories such as the US and the UK, remaining one of the leading pre-school brands in these markets. In the US the brand remains a top-rated show for children between 2-5 years old where it currently airs multiple times daily on Nick Jr. as well as weekdays on the Nickelodeon channel. Peppa Pig relaunched in Germany following a change in broadcaster to Super RTL and has seen growth in licensing revenue in the year. A total of 264 episodes are currently airing daily across 180 territories. Global location-based entertainment partner Merlin Entertainments opened two Peppa Pig World of Play centres during the second half of the financial year, in Shanghai and Dallas; with Michigan opening in early April 2019 on the back of very strong sales in Dallas and further launches anticipated. These developments further energise the brand awareness and reinforce Peppa Pig's status as an evergreen property.

PJ Masks has gone from strength to strength across its markets with revenue increasing by 39% to £59.5 million (2018: £42.7 million) and retail sales increasing 10% to US$1.15 billion (2018: US$1.05 billion). Licensing and merchandising revenues continued to be a fundamental growth driver with an overall increase of 37% in the year driven by further successful roll outs in all categories across all territories. Growth has been particularly strong in North America, Australia and Germany. PJ Masks remains the second biggest pre-school toy property in the US and the third biggest in the UK. The roll out in China has begun with an expansion anticipated for FY20.

PJ Masks is now broadcasting in all key territories on Disney Junior with excellent ratings, particularly after the launch of season 2 earlier this year. The brand also has a strong digital presence with an ongoing worldwide SVOD deal with Netflix and Mango TV in China which has provided SVOD revenue and enhanced brand exposure in addition to presence on Youku, iQIYI and Tencent.

New show Cupcake & Dino debuted globally on Netflix, Teletoon in Canada and Disney XD in Brazil during the year. All 26 episodes have been fully delivered, the first 13 episodes were aired in July 2018 with the second 13 episodes airing from May 2019.

2020 OUTLOOK FOR FAMILY & BRANDS

There is expected to be continued growth for Peppa Pig and PJ Masks in FY20 with a contribution from new brand Ricky Zoom. The business is expecting to have close to 1,800 live licensing and merchandising contracts by the end of FY20. The Division will continue to invest in its team in order to maximise the opportunities globally for existing and new brands.

Peppa Pig licensing and merchandising growth is expected from wider consumer product roll outs in China, rest of Asia and Germany. The US is expected to grow incrementally supported by retail promotions for the toy category and new clothing licensees on board. The brand has entered its 15th year anniversary in the UK which will see opportunities for new clothing lines and new publishing titles being released in FY20. The 117 episodes of Peppa Pig currently in production with the original creators of the show, will air from spring 2019 through to 2023, bringing the total number of available episodes to 381, which will increase brand awareness and help maintain presence globally. Peppa Pig SVOD and AVOD revenues are expected to remain at a robust level as season 7 launches.

PJ Masks is also expected to grow licensing and merchandising revenue across most regions. Season 3 airs on Disney Channel in North America from April 2019 and throughout the year for other territories. Season 4 has been greenlit and is now in pre-production. We anticipate additional free to air exposure in FY20 opening a new audience segment of the market in our existing territories which will further help to drive brand penetration. Continued success is expected in the US where the brand will build upon its popularity as #2 ranked pre-school brand in the US toy market from new ancillary toy lines. In China, the property has been successfully rolled out across the major digital platforms and is now also being carried on the national free to air channel CCTV increasing brand exposure. A wider consumer launch will take place in China in FY20 following on from the free to air broadcast.

Ricky Zoom, a new pre-school vehicle-based series, is scheduled for its broadcast debut in China on SVOD platform Youku in summer 2019, to be followed by a global broadcast launch in autumn/winter 2019 in all other territories simultaneously. The consumer products launch of the brand is anticipated to be spring/summer 2020 with global toy partner TOMY.

Also in production are comedy shows Ninja Express which already has major platforms attached in multiple territories around the world and Alien TV for a global SVOD platform. Further properties are in development across pre-school and older demographics.

The Division is expected to continue to generate strong revenue and underlying EBITDA growth across the portfolio in FY20. It is also expected that underlying EBITDA margin will be slightly reduced due to revenue stream mix and investment in additional infrastructure which are necessary to facilitate growth and support brand longevity. 

FILM, TELEVISION & MUSIC

The Film, Television & Music Division focuses on controlling high quality, premium film, television and music content rights around the world and selling this content globally.

Revenue in the year decreased by 13% to £789.4 million (2018: £911.1 million) due to lower transactional, broadcast and licensing and production and other revenue driven by lower film release volume, home entertainment market decline and scripted television slate composition. This was partly offset by growth in theatrical and music.

Underlying EBITDA increased by 9% driven by improved profitability on television shows, increased high margin royalty income from television library participations, increased music revenue and additional operating cost savings of around £5 million (approximately £6 million in aggregate through FY19). These positive trends more than offset the impact of lower transactional revenue driven by fewer releases and significant market decline. There was an underlying EBITDA margin improvement of 300 basis points driven by the change in mix to higher margin television revenue and the impact of the operating cost savings generated from the restructuring and further integration of the Film and Television Divisions.

Film investment in acquired content reduced by £32.4 million to £72.1 million (2018: £104.5 million) due to the lower volume film slate as expected and in line with our strategy to shift investment from acquisitions to productions. Film investment in productions was lower by £23.8 million at £35.0 million (2018: £58.8 million) due to the timing of productions.

Television investment in acquired content increased by £7.8 million to £43.5 million (2018: £35.7 million) due to timing of spend on the AMC/Sundance shows. Television investment in productions was lower by £11.5 million at £213.3 million (2018: £224.8 million) due to the timing of production including a higher level of tax credits received. 1,142 half hours of new programming were acquired/produced in the year compared to 887 in the previous year of which 708 related to unscripted compared to 350 in the prior year.

Theatrical

Theatrical revenue increased by 7% to £60.9 million (2018: £57.1 million) as a result of strong box office receipts in the second half of the year driven by key titles Green book, Vice and Stan & Ollie. Box office receipts were up 5% from US$207.6 million in 2018 to US$217.5 million in 2019. Average revenue per release was up substantially more to 56%. The total number of unique releases was 57 in the year, down from 85 in the prior year, reflecting the strategic transition from lower margin film distribution towards fewer high quality film productions distributed across the direct distribution footprint.

Academy Award® winning Green Book, from our partners DreamWorks and Participant Media, was an incredible success for eOne. The film has a worldwide box office of over US$300 million, with eOne's territories delivering close to US$60 million of the gross box office combined. BAFTA-nominated Stan & Ollie, an eOne production, achieved UK box office revenue of over £10 million in its first eight weeks of release. Other key releases in the year included The House with a Clock in Its Walls from Amblin, Vice from Annapurna Pictures and I Feel Pretty.

Transactional

Transactional revenue decreased by 49% to £67.6 million (2018: £133.8 million) across both physical and digital driven by lower release volume reflecting the Group's strategy to focus on fewer high quality films that can be released across the entire theatrical distribution footprint and a secular decline in the industry.

As announced at the half year, given the accelerated home entertainment market decline the Group recorded a one-off charge primarily reflecting the impairment of certain film distribution assets. The one-off charge for the full year was £61.0 million (of which £56.1 million was non-cash). Please refer to the details on one-off items within the Other Financial Information section of this Announcement.

In total, 160 DVDs and Blu-ray titles were released during the year (2018: 255), a decrease of 37%. Key titles included The House with a Clock in Its Walls, The Post, Finding Your Feet, season 9 of The Walking Dead, I Feel Pretty, A Simple Favor, Molly's Game and The Spy Who Dumped Me.

Broadcast and licensing

Broadcast and licensing revenue decreased 15% to £380.9 million (2018: £448.3 million) due to scripted television slate composition including fewer episodes of the third season of Designated Survivor (10 episodes compared to 22) and change in timing of placement for new shows. Revenue from third party television titles also reduced due to lower revenue for the Fear the Walking Dead franchise.

Key scripted television deliveries in the year included the first season of The Rookie, which premiered in October 2018 across a number of territories and was CTV's #1 new drama and ABC's #3 drama for the 2018-19 season to date; Designated Survivor season 3 was sold to Netflix and will air in summer 2019; Ransom season 3; You Me Her season 4; Burden of Truth season 4; and Private Eyes season 3.

Key acquired television content included season 3 of Into the Badlands, season 4 of Fear the Walking Dead and The Walking Dead season 9.

Film broadcast and licensing revenues included the film production How It Ends sold to Netflix on a worldwide basis. Broadcast and licensing sales on theatrical titles included The BFG, The Girl on the Train, Finding Your Feet, The Death of Stalin, I Feel Pretty, A Simple Favor and Molly's Game.

Production and other

Production and other revenue decreased by 3% to £215.6 million (2018: £223.1 million) driven by lower number of film productions, with Stan & Ollie released in the year compared to four titles released in the prior year and lower revenue on third party international film sales. This was partly offset by growth in unscripted television and increased royalty income from television library participations.

Unscripted television performed very well during the year successfully led by Ex on the Beach, Siesta Key, America Says, Ladies Night and Naked and Afraid. The business acquired a majority stake in Whizz Kid Entertainment, a UK based unscripted television production company, at the start of the financial year.

The television library participations included Grey's Anatomy which is now the longest ever running US medical drama; and Criminal Minds which is currently airing season 14. This revenue is at high margins and favourably contributes to cash generation.

Music

Revenue for the year increased by 30% to £64.4 million (2018: £49.4 million), due to higher digital revenue on recorded music reflecting the industry-wide growth of streaming, higher live and exhibition revenues and higher artist management, partly offset by lower physical revenues. Underlying EBITDA grew by 46% to £8.9 million (2018: £6.1 million).

In the recorded music business there were number one albums from artists across a number of genres including world music, gospel, metal and R&B. Key titles during the year included a mix of new and catalogue titles including continued strong performance of The Lumineers' highly successful first and second albums, The Lumineers and Cleopatra, 2 Pac's All Eyez On Me, Blueface's Famous Cryp, Dr Dre's The Chronic and Snoop Dogg's Doggystyle. The number of albums released in the year decreased with 65 releases in the current year versus 84 in the prior year. Single releases increased significantly at 294 compared to 205 in the prior year as we continue to release digital singles due to the shift in the market from physical. Blueface's hit song Thotiana had over 400 million streams and featured on various music charts across the world and artist DJ Kass has been certified platinum twice for streams and sales for his viral hit Scooby Doo Pa Pa.

The live events business had successful tours with PJ Masks Live! Show and the Thank You Canada tour, while successfully launching the Mandela Exhibit in London. Artist management had a good year with Jax Jones releasing his fifth consecutive hit single Play which has achieved over 13 million streams on Spotify alone since release.

The music business won 3 Grammy awards for Best Performance (High On Fire), Best World Album (Soweto Gospel Choir) and Best Dance Recording (producer Riton).

2020 OUTLOOK FOR FILM, TELEVISION & MUSIC

The Film, Television & Music strategy continues to be focused on ensuring early access to high quality premium content of all types by working with the best talent in the business. Broadcast and licensing revenue is expected to increase driven by the ramp up of the scripted and unscripted television businesses and music is also expected to continue to grow organically and through the post year end acquisition of Audio Network.

Film operations continue to transition from distribution to owned and produced multi-territory releases. This transition will result in fewer, but larger theatrical releases with 50 unique titles expected. Unique titles are expected to decrease even further over the coming years as we aim towards a run-rate of 35-40 unique titles per annum. A greater proportion of theatrical revenue is expected to come from eOne production titles like Queen & Slim starring David Kaluuya, produced by Makeready and released by eOne in its direct territories and Universal in the US and rest of world; Poms starring Diane Keaton and Jacki Weaver sold to STX in the US, released by eOne in the UK and Canada and sold by Sierra internationally; Scary Stories to Tell in the Dark produced by Academy award winner Guillermo del Toro, co-produced with CBS and released by eOne in its direct territories; and Wild Rose starring Jessie Buckley sold to NEON in the US, released by eOne in its territories and sold by Sierra internationally. Output partner titles will include Amblin's 1917 starring Benedict Cumberbatch and directed by Sam Mendes and A Dog's Journey the sequel to A Dog's Purpose; and Annapurna Picture's Booksmart directed by Olivia Wilde. Key third party titles will include John Wick: Chapter 3, Blinded by the Light and Late Night.

Investment in film acquired content is expected to be lower at approximately £55 million with investment in film production expected to be higher than the current year at around £95 million reflecting the strategic shift towards content production. eOne films in production include Happiest Season a co-production with Sony starring Kristen Stewart; and Den of Thieves 2 a sequel to the hit film starring Gerard Butler and Curtis "50 Cent" Jackson. Key development titles include Sovereign starring Mahershala Ali, directed by Marc Mundenand produced with 21 Laps; Come From Away based on the Tony Award winning hit musical; and Awake.

FY20 will include the sub-distribution arrangements announced in the second half of FY19. Our Australian and Benelux territories have moved to sub-distribution arrangements with Universal Pictures International and WW Entertainment, respectively, as we continue to focus our direct distribution effort on fewer, more targeted theatrical releases. We will also transition to Universal Pictures Home Entertainment (UPHE) in the first half of FY20 which will bring all home entertainment activities under a single global partnership, with UPHE serving as the home entertainment distributor for film, television and select family content across transactional physical and digital formats. This will allow us to streamline our business in light of declines in the transactional business and benefit from Universal's broader portfolio of assets and related leverage at retail.

Television scripted and unscripted revenue is expected to grow in FY20, driven by both new shows and renewals. The scripted television slate for FY20 includes Run (HBO), a new romantic comedic thriller written by Vicky Jones, executive produced by Phoebe Waller-Bridge (Fleabag and Killing Eve), and stars Merritt Wever and Domhnall Gleeson; Nurses (Global in Canada and sold by eOne internationally), a new primetime medical drama executive produced by Ilana Frank (Rookie Blue) and Vanessa Piazza; Albedo (Vudu, expected delivery in FY21) a mystery drama series starring Evangeline Lilly and directed by Bill Peyton (Rampage and San Andreas); Deputy (Fox in the US and sold by eOne internationally), a new scripted drama primetime network series starring Stephen Dorff (True Detective); and renewals of The Rookie (season 2), You Me Her (season 5) and Cardinal (season 4).

The unscripted business is expected to continue to grow organically as well through Renegade 83 and Whizz Kid, and first-look deals with Tommy Mottola, MGMT.Entertainment and documentary makers Amy Ziering and Kirby Dick. Key titles include the Growing Up Hip Hop franchise, Siesta Key, Ex on the Beach, Naked and Afraid and Lady Gang. International distribution of third party television titles will reduce as the AMC output deal has now ended for new productions. FY20 will include Fear the Walking Dead season 5 and The Walking Dead season 10. The television library participations are expected to remain robust in FY20.

The number of half hours of TV programming to be acquired/produced next year is expected to be over 1,200, with around 35% of the new financial year's budgeted margins already committed or greenlit. The Division currently has more than 60 television projects in funded development with major broadcasters, cable networks and digital platforms. Investment in acquired television content is expected to be around £30 million and television production spend is expected to grow to £350 million.

The integration of the Film & Television operations (including The Mark Gordon Company and Sierra/Affinity) is on track to generate £13-15 million of annualised cost savings by the end of FY20, as previously guided, from business efficiencies and centralisation of support functions from the combined operations to form a single, streamlined operating structure.

The music business is expected to continue grow and develop new initiatives to provide its artists and partners with an unprecedented range of services and opportunities unequalled by any independent music company. Organic growth is expected in the recorded music business through higher digital streaming revenue. Key new releases include The Lumineers third album III, a new album by Wu-Tang and new music from guitar legend Zakk Wylde. Artist management expects to grow through the success of its artist portfolios within its management groups. The live events business will continue to benefit from shows launched in FY19 and will have many new shows announcing for FY20.

Following the end of the financial year, in April 2019, eOne acquired UK based Audio Network, one of the world's largest independent creators and publishers of original high quality music for use in film, television, advertising and digital media. Audio Network enhances eOne's presence in a rapidly growing sector within music, delivering attractive growth that is complementary to eOne's music, film, television and family brands businesses. Audio Network's business model is based on the monetisation of a library of owned global music rights. It generates revenues through synchronisation ('sync') fees paid by content creators for access to music for their shows (with 60% of these fees in the form of annual subscriptions) and music publishing royalties. This attractive mix of recurring, high margin revenues enables Audio Network to deliver underlying EBITDA margins of around 35% and achieved a conversion rate of underlying EBITDA to free cash flow of approximately 90% in FY18.

The combination of Audio Network with our existing music operations is expected to create scale, end-to-end synergies and revenue opportunities across eOne. Audio Network brings longstanding partnerships with more than 1,000 artists and composers and a high quality library of over 150,000 instrumental and orchestral tracks to eOne's library of around 40,000 commercial songs. We are excited by the prospect of integrating these libraries together on Audio Network's proprietary music publishing platform to simplify music rights management and to generate incremental sync placement opportunities for eOne's commercial artists. We can also now utilise Audio Network's music content in eOne's own film, television and family productions, bringing this activity largely in-house.

OTHER FINANCIAL INFORMATION

Adjusted operating profit increased by 21% to £193.9 million (2018: £160.0 million), reflecting the growth in the Group's underlying EBITDA. Adjusted profit before tax increased by 20% to £155.9 million (2018: £130.2 million), in line with increased adjusted operating profit, partly offset by higher underlying finance charges in the year. Reported operating profit of £70.7 million (2018: £100.7 million) reflects the impact of an operating one-off charge of £68.0 million primarily related to the impairment of certain assets within the film distribution businesses and related costs.

1. Adjusted operating profit excludes amortisation of acquired intangibles, share-based payment charge and operating one-off items.

2. Reported 2018 amounts have been restated for IFRS 15 Revenue from Contracts with Customers, refer to Note 1 of the consolidated financial statements for further details.

AMORTISATION OF ACQUIRED INTANGIBLES, DEPRECIATION AND AMORTISATION OF SOFTWARE

Amortisation of acquired intangibles, depreciation and amortisation of software is £42.7 million and is consistent with the prior year.

SHARE-BASED PAYMENT CHARGE

The share-based payment charge of £16.2 million has increased by £3.6 million during the year, reflecting additional awards issued in the year and also due to the fair value of the current year awards increasing as a result of the increase in the Company's share price in the year.

ONE-OFF ITEMS

Home entertainment

As previously announced, changes in consumer behaviour within the content industry are accelerating at an unprecedented level and in the year ending 31 March 2019, the home entertainment markets in all of the Group's operating territories experienced significant challenges. As a result the Group has recorded a one-off charge of £61.0 million in the year which included the following:

Strategy related

During the year ending 31 March 2019 the Group combined its Film Division and Television Division (which included Music) into one reporting segment, Film, Television & Music, which is in line with broader developments within the media and entertainment industry. This integration is largely complete and the costs arising from the integration have been included as a one-off charge of £8.4 million, they include the following:

Other items

Acquisition gains of £0.5 million include a cost of £0.6 million for completed deals during the year and a £1.1 million credit due to the release of Last Gang Entertainment contingent consideration which is no longer payable.

Other one-off credits of £0.9 million include a £1.7 million settlement received on a tax warranty relating to a prior year acquisition and is partially offset by £0.8 million of legal costs for certain corporate projects and aborted corporate transactions during the year.

Prior year costs

In 2018, restructuring costs were as follows:

The restructuring costs of £8.0 million comprises:

Acquisition gains of £1.9 million included:

Other costs of £1.0 million in 2018 primarily related to costs associated with aborted corporate projects during the prior year.

NET FINANCE COSTS

Reported net finance costs decreased by £1.9 million to £33.9 million in the year. Excluding one-off net finance income of £4.1 million, adjusted finance costs of £38.0 million (2018: £29.8 million) were £8.2 million higher in the year, reflecting the higher average debt levels year-on-year primarily arising from the March 2018 acquisition of the remaining 49% interest in The Mark Gordon Company (refer to Note 27 for details). The weighted average interest rate for the Group's financing was 6.5% which is consistent with the prior year.

The one-off net finance income of £4.1 million (2018: charge £6.0 million) comprises:

Put Options

Foreign Exchange Gains & Losses

Tax Provisions

Deferred Finance Charges

TAX

On a reported basis, the Group's tax charge of £21.5 million (2018: credit of £3.9 million), represents an effective rate of 58.4% and primarily reflects the impact of the operating one-off items. On an adjusted basis, the effective rate is 20.0% compared to 18.7% in the prior year, driven by a different mix of profit by jurisdiction (with different statutory rates of tax) and by increase in the US tax rates in the year. The FY20 effective tax rate on an adjusted basis is expected to be approximately 22%.

CASH FLOW & NET DEBT

The table below reconciles cash flows associated with the Net Debt entities of the Group, which excludes cash flows associated with production activities which are reconciled in the Production Financing section. The Production Financing section also includes the impact of eliminations between the entities forming part of the Net Debt group and the Production Financing group.

ADJUSTED CASH FLOW

Adjusted cash inflow at £74.1 million was higher than prior year by £14.6 million primarily reflecting the increase in underlying EBITDA of the entities forming part of the Net Debt Group by £44.2 million during the year and reduction in investment in acquired content rights of £22.6 million. This is partially offset by an increased working capital outflow of £37.7 million in the year and increased investment in production spend of £6.8 million. The underlying EBITDA to cash flow conversion was 41% (2018: 43%).

Family & Brands

Family & Brands adjusted cash inflow increased to £84.6 million (2018: £81.3 million) representing an underlying EBITDA to adjusted cash flow conversion of 88% (2018: 113%), driven by the increase in underlying EBITDA and offset to a large extent by an increase working capital outflow during the year. Working capital outflows increased year-on-year principally driven by the increase in receivables as a result of higher broadcast and licensing revenue associated with Peppa Pig and PJ Masks in the year. The investment in productions spend related to the new episodes of Peppa Pig, season 2 and 3 of PJ Masks, new property Ricky Zoom and new show Alien TV.

Film, Television & Music

Film, Television & Music adjusted cash inflow of £6.4 million was higher than prior year (2018: outflow £12.2 million) primarily driven by a reduction in investment in acquired content by £22.6 million. Film, Television & Music's adjusted cash inflow represents an underlying EBITDA to adjusted cash flow conversion of 6% (2018: (15%)).

The reduced investment in acquired content rights reflects the ongoing shift towards production activities and the lower volume of theatrical releases.

FREE CASH FLOW

Free cash inflow for the Group of £12.4 million was £12.8 million higher than the previous year due to higher adjusted cash inflow as detailed above and a reduction in cash tax payments primarily on account of timing tax payments in the US and Canada. This is partially offset by an increase in net interest cost reflecting the higher average debt levels year-on-year primarily arising from the March 2018 acquisition of the remaining 49% interest in the Mark Gordon Company.

NET DEBT

At 31 March 2019, overall net debt of £341.5 million was £27.0 million higher than the prior year closing balance due to dividend payments of £13.4 million, acquisition spending of £14.0 million (refer to Note 27 of the consolidated financial statements for details) and cash outflow on operating and finance one-off items of £13.0 million, partly offset by the higher free cash flow.

Refer to the Appendix to the consolidated financial statements for the definition of "adjusted cash flow", "free cash flow", and "net debt" and for a reconciliation to net cash from operating activities.

PRODUCTION FINANCING & OTHER

The Production Financing cash flows relate to non-recourse production financing which is used to fund the Group's productions. The financing is arranged on an individual production basis by special purpose production subsidiaries which are excluded from the security of the Group's corporate facility. It is short-term financing while the production is being made and is generally paid back once the production is delivered and the sales receipts and tax credits are received. The Company deems this type of financing to be short term in nature and it is therefore excluded from Net Debt.

Overall production financing increased by £21.4 million year-on-year to £140.1 million. The movements primarily reflect the timing of programming activities. The movement is primarily driven by working capital outflow of £24.1 million in the Film, Television & Music Division which is largely driven by the timing of deliveries of Designated Survivor season 3.

FINANCIAL POSITION AND GOING CONCERN BASIS

The Group's net assets increased by £48.6 million to £714.7 million at 31 March 2019 (31 March 2018: £666.1 million).

The directors acknowledge guidance issued by the Financial Reporting Council relating to going concern and consider it appropriate to prepare the consolidated financial statements on a going concern basis, as set out in Note 1 to the consolidated financial statements.

A presentation to analysts will take place at 9.00am on Tuesday, 21 May 2019 at eOne's UK office (45 Warren Street, London, W1T 6AG). For more information, or to register to attend, contact Alma PR (eone@almapr.co.uk).

A video overview of the results from CEO Darren Throop is available to watch here: http://bit.ly/ETO_FY19

For further information please contact:

Alma PR

Rebecca Sanders-Hewett

Tel: +44 7961 075 844

Email: rsh@almapr.co.uk

Entertainment One

Darren Throop (CEO)Joe Sparacio (CFO)

via Alma PR

Patrick Yau (Director of Investor Relations)

Tel: +44 20 3714 7931

Email: PYau@entonegroup.com

Independent auditor's report to the members of Entertainment One Ltd.

REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

OPINION

In our opinion, Entertainment One Ltd.'s Group financial statements (the "financial statements"):

· give a true and fair view of the state of the Group's affairs as at 31 March 2019 and of its profit and cash flows for the year then ended; and

· have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

We have audited the financial statements, included within the Annual Report and Accounts (the "Annual Report"), which comprise: the Consolidated Balance Sheet as at 31 March 2019; the Consolidated Income Statement and Consolidated Statement of Comprehensive Income, the Consolidated Cash Flow Statement, and the Consolidated Statement of Changes in Equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC's Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

OUR AUDIT APPROACH

Overview

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

Key audit matters

Key audit matters are those matters that, in the auditors' professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which it operates.

The Group has two reporting segments being Family & Brands and Film, Television & Music. Within these reporting segments are a number of different Business Units that are primarily split across the geographic locations of Canada, the US and the UK. The Group consolidated financial statements are a consolidation of approximately 90 reporting units, representing these operating business units and certain centralised functions and consolidation units.

The reporting units vary in size and we identified six reporting units which, in our view, required an audit of their complete financial information due to their individual size. These reporting units where we performed a full audit of their financial information were in Canada (three reporting units), the UK (two reporting units) and the US (one reporting unit). These reporting units, together with the specific financial statement line items audits and Group consolidation adjustments accounted for 76% of revenue and 56% of Group profit before tax.

Audits of specific financial statement line items, including revenue, intangibles and the associated amortisation and external borrowings were performed on additional reporting units. These reporting units were in the US (one reporting unit), the UK (one reporting unit) and certain head office entities (four reporting units). We also performed specific audit procedures over central functions such as the consolidation, and certain key areas of focus, including goodwill, other intangible assets and treasury, at the Group level.

The Canadian and US reporting units were audited by our Canadian component audit team and the UK and head office reporting units were audited by the Group team. The Group engagement team attended the year end audit clearance meeting of the component team, maintained regular contact with the component team and were involved in the oversight of work in respect of significant/judgemental areas. Finally the Group audit team performed a detailed review of the working papers of the component team to ensure the work performed was appropriate.

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was £2.5 million to £3.8 million.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.2 million (2018: £0.2 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Going concern

In accordance with ISAs (UK) we report as follows:

REPORTING ON OTHER INFORMATION

The other information comprises all of the information in the Annual Report other than the financial statements and our auditors' report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.

Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below (required by ISAs (UK) unless otherwise stated).

RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT

Responsibilities of the directors for the financial statements

As explained more fully in the Statement of Directors' Responsibilities, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors' report.

Uses of this report

This report, including the opinions, has been prepared for and only for the parent company's members as a body to enable the directors to meet obligations under the Disclosure Guidance and Transparency Rules sourcebook of the UK Financial Conduct Authority and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

OTHER VOLUNTARY REPORTING

Directors' remuneration report

The Company voluntarily prepares a Directors' Remuneration Report in accordance with the provisions of the Companies Act 2006. The directors requested that we audit the part of the Directors' Remuneration Report specified by the Companies Act 2006 to be audited as if the Company were a quoted company subject to the Companies Act 2006.

In our opinion, the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

Philip Stokes

For and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants

London

20 May 2019

Consolidated Income Statement

for the year ended 31 March 2019

1. See Note 1 'Prior period restatements' for details.

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2019

1. See Note 1 'Prior period restatements' for details.

Consolidated Balance Sheet

at 31 March 2019

1. See Note 1 'Prior period restatements' for details.

These consolidated financial statements were approved by the Board of Directors on 20 May 2019.

Joseph Sparacio

Director

Consolidated Statement of Changes in Equity

for the year ended 31 March 2019

1. See Note 1 'Prior period restatements' for details.

Consolidated Cash Flow Statement

for the year ended 31 March 2019

1. See Note 1 'Prior period restatements' for details.

Notes to the Consolidated Financial Statements

for the year ended 31 March 2019

1. NATURE OF OPERATIONS AND BASIS OF PREPARATION

Entertainment One is a leading independent entertainment group focused on the acquisition, production and distribution of family, television, music and film content rights across all media throughout the world. Entertainment One Ltd. (the Company) is the Group's ultimate parent company and is incorporated and domiciled in Canada, and is limited by shares. The registered office of the Company is 134 Peter Street, Suite 700, Toronto, Ontario, Canada, M5V 2H2.

Entertainment One Ltd. presents its consolidated financial statements in pounds sterling. These consolidated financial statements were approved for issue by the directors on 20 May 2019.

STATEMENT OF COMPLIANCE

These consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of financial instruments that have been measured at fair value at the end of the reporting period as explained in the accounting policies, and in accordance with applicable International Financial Reporting Standards (IFRS) as adopted by the EU and IFRS Interpretations Committee (IFRIC) interpretations. The Group's consolidated financial statements comply with Article 4 of the EU IAS Regulation.

GOING CONCERN

The Group's activities, together with the factors likely to affect its future development, are set out in the Business and Finance Review of this Announcement.

In addition to its senior secured notes (due 2022) the Group meets its day-to-day working capital requirements and funds its investment in production and investment in acquired content rights through its cash in hand and through a revolving credit facility which matures in December 2023 and is secured on certain assets held by the Group. Under the terms of this facility the Group can draw down in the local currencies of its operating businesses. The amounts drawn down by currency at 31 March 2019 are shown in Note 23. The facility is subject to a series of covenants including interest cover charge, and net debt against underlying EBITDA.

The Group has a track record of cash generation and is in full compliance with its bank facility and bond covenant requirements. At 31 March 2019, the Group had £51.6 million of cash and cash equivalents (excluding cash held by production subsidiaries) (refer to Note 20), £393.1 million of gross debt and undrawn amounts under the revolving credit facility of £156.8 million (refer to Note 23).

The Group is exposed to uncertainties arising from the economic climate and uncertainties 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 its bank facility and provide headroom against the covenants for the foreseeable future. The forecasts and projections include the impact of the Group's acquisition of Audio Network Limited which was completed on 18 April 2019. See Note 36 for details. For these reasons the directors continue to adopt the going concern basis of accounting in preparing the consolidated financial statements.

BASIS OF CONSOLIDATION

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries (the Group). Subsidiaries are entities that are directly or indirectly controlled by the Group. Control of the Group's subsidiaries is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The financial statements of the subsidiaries are generally prepared for the same reporting periods as the parent company, using consistent accounting policies. Subsidiaries are fully consolidated from the date of acquisition and continue to be consolidated until the date of disposal or at the point in the future when the Group ceases to have control of the entity. All intra-group balances, transactions, income and expenses, and unrealised profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of the arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The Group accounts for its interests in joint ventures using the equity method. Under the equity method the investment in the entity is stated as one line item at cost plus the investor's share of retained post-acquisition profits and other changes in net assets.

An associate is an entity, other than a subsidiary or joint venture, over which the Group has significant influence. Significant influence is the power to participate in, but not control or jointly control, the financial and operating decisions of an entity. These investments are accounted for using the equity method.

Investments where the Group does not have significant influence and held on the balance sheet as a financial asset and are recorded at fair value. See Note 26 for additional details.

FOREIGN CURRENCIES

Within individual companies

The individual financial statements of each Group company are recorded in the currency of the primary economic environment in which it operates (its functional currency). For the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. Foreign exchange differences arising on the settlement of such transactions and from translating monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in the consolidated income statement.

Retranslation within the consolidated financial statements

In the consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the exchange rate ruling at the date of each transaction during the period. Foreign exchange differences arising, if any, are recognised in other comprehensive income as a separate component of equity and transferred to the Group's translation reserve. Such translation differences are subsequently recognised as income or expenses in the period in which the operation is disposed of.

USE OF ADDITIONAL PERFORMANCE MEASURES

The Group uses a number of non-IFRS financial measures that are not specifically defined under IFRS or any other generally accepted accounting principles, including underlying EBITDA, one-off items, adjusted profit before tax, adjusted diluted earnings per share, adjusted cash flow, free cash flow, net debt, adjusted net debt and production financing. These non-IFRS financial measures are presented because they are among the measures used by management to measure operating performance and as a basis for strategic planning and forecasting, and the Group believes that these measures are frequently used by investors in analysing business performance. Refer to the Appendix to the consolidated financial statements for definitions of these terms.

ACCOUNTING JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY

The preparation of consolidated financial statements under IFRS requires the Group to make estimates and assumptions that affect the amounts reported for assets and liabilities at the balance sheet date and amounts reported for revenues and expenses during the year. The nature of estimation means that actual outcomes could differ from those estimates.

Estimates and judgements are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects that period only, or in the period of the revision and future periods if the revision affects both current and future periods.

Key sources of estimation uncertainty:

PRIOR PERIOD RECLASSIFICATIONS

Reclassification of investments in productions and investment in acquired content rights

During the year, the Group concluded that the investment in acquired content rights of the Family & Brands Division was appropriate to be included within investment in productions, as the Group owns the underlying intellectual property and has perpetual rights to the Family & Brands content. As such the comparative balance sheets have been restated by £5.9 million as at 31 March 2018 and £2.9 million at 31 March 2017.

NEW STANDARDS AND AMENDMENTS, REVISIONS AND IMPROVEMENTS TO STANDARDS ADOPTED DURING THE YEAR

The Group has adopted, for the first time, IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments that require restatement of previous financial statements. As required by IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the nature and effect of these changes are disclosed below.

IFRS 15 Revenue from Contracts with Customers was effective for reporting periods commencing after 1 January 2018. The Group adopted IFRS 15 on 1 April 2018 on a fully retrospective basis, and comparative periods have been restated.

IFRS 15 does not have any impact on the cash flows generated. The Group has presented a restatement of the comparative periods below.

IFRS 9 Financial Instruments is effective for reporting periods commencing after 1 January 2018. The Group has applied IFRS 9 prospectively, with the initial application date of 1 April 2018. The Group has applied the limited exemption in IFRS 9 and has elected not to restate comparative information in the year of initial adoption. As a result, the comparative information provided will continue to be measured in accordance with the Group's previous accounting policy. The impact was focussed on the following items:

Several other amendments and interpretations apply for the first time in FY19, but do not have an impact on the consolidated financial statements of the Group.

IMPACT OF PRIOR PERIOD RESTATEMENTS ON PREVIOUSLY PRESENTED FINANCIAL STATEMENTS