Entertainment One Regulatory News (ETO)

Entertainment One Ltd.

Full Year Results

for the year ended 31 March 2015

On track to double the size of the business

Strong financial performance

· Group underlying EBITDA up 16% to £107.3 million (up 11% to £117.2 million on a pro forma basis)

· Group profit before tax doubles to £44.0 million (up 13% to £88.8 million on an adjusted basis)

· Diluted earnings per share up 99% to 14.1p per share (up 12% to 23.5p per share on an adjusted basis)

· Group revenues down 5% (down 4% on a pro forma basis), strong Television performance offset by Film

· Significantly improved cash conversion from the business, with adjusted free cash flow increasing to £41.0 million (2014: £18.8 million)

Strategy on track to double the size of the business over the next five years

· Acquired 51% stake in The Mark Gordon Company, with two US network series already in production

· Reality business strengthened with the acquisition of Force Four Entertainment and Paperny Entertainment

· Secret Location joint venture positions the Group for digital opportunities

Making Peppa Pig the world's most loved pre-school property

· US$1 billion of retail sales delivered this financial year

· Over 600 licensing deals globally

· US retail roll-out underway and broadcast launch in China planned this year

Creating a global television business

· 572 half hours of new programming delivered with over 850 half hours expected for next year

· 44% increase in acquisition of programming driving growth in international sales business

· Significant new deals with digital platforms, including Amazon Prime and Foxtel

Positioning Film for the future

· Launch of Entertainment One Features, focused on production and international sales, delivering growing slate of eOne productions for the new financial year

· 227 theatrical releases, with underlying EBITDA stable despite revenue decline

· New multi-territory partnerships with film producers, moving Film closer to creative talent

Progressive dividend policy

· 10% increase in dividend to 1.1p per share (2014: 1.0p per share)

Positive Outlook

· Scale driving unparalleled opportunities

Darren Throop, Chief Executive, commented:

The Group's model to source, select and sell has once again underpinned both a strong set of results and significant operational progress including new deals with digital platforms, the acquisition of the stake in The Mark Gordon Company and further progress internationally for Peppa Pig. During the year we set out our updated growth strategy and since its launch have made solid progress against this across each pillar.

Scale is key, fundamental to attract and partner with more of the world's best creative talent to produce the best content for distribution across our global network, which drives an improved financial return for the Group. This, alongside our portfolio approach which mitigates against concentration risk, ensures that eOne is well positioned for the coming year and beyond.

Great content is at the heart of Entertainment One. Consumer demand for high quality content continues to grow, with a variety of digital media platforms emerging to service this demand. As these platforms enhance their offering and reach a wider global audience, we anticipate that audiences will increasingly focus on the quality of the content that they consume, gravitating towards premium television series, film and speciality genres. This market dynamic plays to Entertainment One's strengths and supports our strategy to double the size of the Group within five years.

FINANCIAL SUMMARY

Group pro forma revenues of £793.5 million were 4% lower than the previous year (2014: £829.6 million), driven by lower revenues in the Film Division, partly offset by strong revenue growth, up 32%, in the Television Division. Group reported revenues were 5% lower at £785.8 million (2014: £823.0 million).

Group pro forma underlying EBITDA increased by 11% to £117.2 million (2014: £105.3 million), reflecting revenue increases and improved margins in Television, and lower costs in Film as the business proactively managed box office performance. Group reported underlying EBITDA was 16% higher at £107.3 million (2014: £92.8 million). Adjusted profit before tax increased by 13% to £88.8 million (2014: £78.4 million), in line with increases in underlying EBITDA.

Group pro forma investment in acquired content and productions increased 3% to £285.5 million (2014: £276.0 million). On a reported basis investment in acquired content and productions was broadly in line with the prior year at £280.8 million (2014: £276.8 million). The annual independent valuation of the Group's film, television and music library dated as at 31 March 2014 had increased to US$801 million (2013: US$655 million). It is anticipated that this valuation will increase again as a result of the investment activity in the current financial year, including the acquisitions completed and the investment in The Mark Gordon Company.

The Group reported a 105% higher profit before tax of £44.0 million (2014: £21.5 million), reflecting higher underlying EBITDA, partly offset by higher financing costs.

Adjusted free cash flow is significantly improved at £41.0 million (2014: £18.8 million), reflecting strong growth in Television driven by Family performance.

On an adjusted basis, diluted earnings per share increased 12% to 23.5 pence (2014: 21.0 pence) and reflected a higher adjusted profit after tax in the current year. Reported diluted earnings per share were up 99% to 14.1 pence (2014: 7.1 pence). In line with the Group's progressive dividend policy, the directors have declared a final dividend up 10% to 1.1p per share (2014: 1.0p per share).

OUTLOOK

The Television Production & Sales operation will be further enhanced by the first full-year contributions from Paperny Entertainment and Force Four Entertainment and anticipates producing over 850 half hours of content for distribution through the Group's global sales network in the new financial year. This will be supported by the AMC output deal and other third party television content deals.

Family continues to focus on building Peppa Pig into the most loved pre-school property in the world while continuing to develop and build new brands across the Family portfolio, including Ben and Holly's Little Kingdom.

As the film market continues to recover in 2015, driven by a strong slate from the major studios, a pick-up is expected in the Group's box office performance. The Film Division plans to release around 250 films in the next financial year, in line with its profile of annual investment of over £200 million in new film content over the next three to five years. This consistent profile of investment is anticipated to drive significant cash generation in the coming years.

The growth in the market for content rights is underpinned by changes in the way content is being consumed. Entertainment One's strategy to focus on growth through content ownership puts it at the centre of this positive structural change and the directors look forward to the new financial year with confidence.

STRATEGY

Updated growth strategy

Entertainment One has come a long way in the last five years and is proud to have delivered significant growth and substantial shareholder value to investors over this period. Since 2010, Group revenues have doubled, underlying EBITDA has more than trebled and adjusted diluted earnings per share have doubled.

Business model

The Group's business model remains unchanged going forward. We continue to build the scale of the business by focusing on the Group's three key capabilities:

Source: Developing relationships with the best creative talent in the film and television industries by being their partner of choice

Select: Leveraging local market insight from our independent distribution network to invest in the right content for consumers across all eOne territories, and producing content with global appeal to service the Group's international sales operations

Sell: Using the Group's distribution network, sales operations and global scale to maximise investment returns ensuring the business is well-positioned to benefit from new and emerging broadcast and digital distribution platforms

Looking ahead, the Board continues to see significant opportunity for further growth and in November 2014 set new targets to double the size of the Group within the next five years through its updated growth strategy which aims to 'bring the best content to the world' by:

· partnering with the best creative talent

· being the world's leading independent distributor through a locally-deep, globally connected network

The strategy focuses on building a more balanced content and brand business which will see significant revenue growth in the Television Division in both Production & Sales and Family, while Film continues to focus on improving its operating margins.

This strategy is underpinned by detailed organic growth plans and will be supported by targeted acquisitions.

Scale creates competitive advantage

Scale remains a critical differentiator in the content markets and, as one of the largest independent content companies, Entertainment One can take advantage of the benefits this critical mass brings, to drive the Group's financial performance. As our profile continues to strengthen, the Group is better able to attract and partner with more of the world's best creative talent to produce the best content for distribution across our global network, which drives an improved financial return for the Group.

Portfolio approach mitigates investment risk

To mitigate against concentration risk and changing audience tastes, the Group diversifies its content investment over a large number of films and television shows, across different geographies, different genres and across different media platforms. This approach means that there is no significant individual investment risk in its content acquisitions. The Group's content portfolio comprises over 40,000 film and television titles, 4,500 hours of television programming and 45,000 music tracks.

Strategic progress

Since launching the strategy, the Group has delivered solid progress towards its goals.

Television

During the 2015 financial year, the Group strengthened its reality television business with the acquisitions of television production companies Paperny Entertainment and Force Four Entertainment, which have extended the Group's capabilities in non-scripted entertainment programming and diversified the base of the production business. Together, these companies produce over 200 half hours of content a year in genres such as documentaries, comedies and reality television.

The Group's acquisition of a 51% stake in The Mark Gordon Company in January 2015, which significantly increased the profile of eOne in the global television production market, brought one of the world's most prolific and successful producers of television and film content to the Group.

In addition, the deal provides eOne with exclusive rights to distribute all new content from The Mark Gordon Company on a worldwide basis. Through the acquisition, the Group also benefits in the cash generation of the company's existing content library, which includes titles such as Grey's Anatomy, Criminal Minds and Ray Donovan.

Since the acquisition, two new series have been green-lit by major US networks for first seasons: Quantico on ABC and Criminal Minds: Beyond Borders on CBS. These represent the first two shows from a significant slate of programmes currently under development.

Further, on 19 May 2015, the Group is pleased to announce that to enhance the operation of The Mark Gordon Company ("MGC"), in partnership with Mark Gordon, modifications in the shareholder agreement have been agreed that result in a change in the accounting treatment for the venture. As a result, from 19 May 2015, MGC will be fully consolidated in eOne's consolidated financial statements as a subsidiary, rather than being treated as a joint venture. The change in accounting treatment delivers a pro forma increase of £8.9 million to the Group's underlying EBITDA, with the overall pro forma contribution of MGC amounting to £18.2 million, representing 100% of the underlying EBITDA of MGC in the current financial year. The effect of this change is to increase, for comparative purposes, the Group's pro forma underlying EBITDA to £126.1 million in the current financial year.

Family

Family & Licensing continues to perform very strongly with continued success for Peppa Pig, where the franchise generated over US$1 billion of retail sales in the current financial year. Entertainment One owns half of the property's underlying rights, but controls the worldwide exploitation of the brand. Traditional European markets have continued to perform well and the roll-out of the brand internationally has expanded into new markets in Latin America and the Far East. Peppa Pig ended the year with over 600 licensing deals globally.

Film

In Film, there has been significant success in developing closer relationships with creative talent and in the last twelve months the Group has entered into new partnerships with film makers including Open Road, Endurance Media, Rumble Films, Hammer Films and The Ink Factory, with additional producer partnerships currently being negotiated. Further, the partnership with The Mark Gordon Company brings new film projects including All the Old Knives and the studio has a number of film productions underway including the biopic Steve Jobs at Universal and Arms and the Dudes at Warner Bros.

eOne Features is the umbrella for eOne's production and international sales business and has been successful in developing a new production slate which will deliver exciting new film projects to the Group in the new financial year.

Digital

The Group derives a significant proportion of its revenue from the sale of its film and television content digitally. In the current financial year digital revenues represented 23% of pro forma Group revenues (2014: 21%).

During the year, the Group increased its traction in the digital space by entering into a joint venture with digital agency, Secret Location. The company creates interactive experiences to launch content digitally to enable consumers to interact with the Group's and third party programming in a more engaging way. Secret Location is also producing original scripted series for digital platforms, and it provides the Group with the optimum vehicle to explore opportunities in the digital space to take advantage of the structural changes in the industry.

DIVISIONAL OPERATIONAL & FINANCIAL REVIEW

FILM

Overview

The Group's Film Division is comprised of its multi-territory distribution business and Entertainment One Features, its production and international sales business.

Film Distribution has operations in the UK, Canada, the US, Spain, Benelux and Australia/New Zealand, and is one of the largest independent film distributors in the world. The business acquires exclusive film content rights and exploits these rights on a multi-territory basis across all media channels. Entertainment One acquires film rights both through output deals with independent production studios or through single picture acquisitions. The Group expects that the majority of film titles will continue to be acquired on a single-picture basis but will also seek output deals with other producers on commercial terms, where appropriate.

Entertainment One Features looks to access content earlier in the production process while benefitting from upside in a film's performance, and provides the Group with benefits from the exploitation of film content rights on a global basis, in addition to in its core territories.

Strategy

The Film Division's strategic initiatives build on the Group's goal to bring the best content to the world. At the core of these initiatives is the development of closer relationships with the best creative talent in the film industry, giving the Group access to the best new independent film projects. In this way, we are able to source film content sooner in the production process, securing the content earlier and at lower cost, so that the Group can benefit from the exploitation of film content rights on a territorial and/or global basis. Where eOne Features takes on a project, the Group benefits from being able to participate in the upside of the global success of a film in our role as equity owners and/or partners in the production, while the Group risk profile remains similar.

Our strategy also focuses on increasing the size and scale of the Group's global distribution network, which is an important competitive advantage in the film industry. As one of the largest independent distributors, the Group commands a strong position, enabling it to work with the world's largest independent studios and consumer platforms. The quality and size of our filmed content portfolio makes us an important partner to retailers, broadcasters and digital content service providers. The Group will continue to take advantage of ongoing economies of scale and ensure that the business is well-positioned for the markets of tomorrow. This will help support margin growth across our Film business.

In each of our operations we aim to account for significant independent market share, to cement the competitive advantage driven by the scale of our business and the deep relationships with the stakeholders across the various film release windows. The knowledge we gain from operating directly in local markets further supports our content selection processes, reinforcing the benefit of having a locally-deep and globally-connected distribution network.

As such, the Group will look for opportunities to grow its international distribution footprint into new territories. The Group is focused on seeking corporate partnerships or acquisitions in Latin America and South East Asia, as well as opportunities in parts of Western Europe to complement eOne's existing European presence.

The Group's acquisition of Phase 4 Films, a leading independent film and family content distribution business operating across Canada and the US, has allowed the Group to consolidate its US film operations. This acquisition refocused the Group's US business to capitalise on Phase 4 Films' direct relationships with key home entertainment customers by investing in titles primarily designed to drive ancillary, rather than theatrical revenue, thereby reducing print and advertising spend and increasing profitability. The acquisition supports our aim of building incremental scale and growth opportunities for the US Film business in the on-demand space, on home entertainment, cable, satellite and digital platforms.

Financial Review

Film pro forma revenues were down 13% to £595.9 million (2014: £683.8 million) driven primarily by Distribution. Film pro forma underlying EBITDA was down only 3% year-on-year driven by lower underlying EBITDA in eOne Features, partly offset by higher Distribution underlying EBITDA. Adjusted free cash flow at £20.5 million reflected an underlying EBITDA to adjusted free cash flow conversion of 28%, broadly consistent with the prior year.

Film Distribution

Film Distribution pro forma revenues decreased by 12% to £584.8 million (2014: £664.2 million). This was driven by the lower theatrical activity, down 34%, and the resulting impact on home entertainment (down 15%). Film Distribution underlying EBITDA was marginally higher year-on-year reflecting the reduction in print and advertising and other operational costs as a result of reduced theatrical activity, and increased contribution from the mix of higher margin ancillary windows. As a result, pro forma underlying EBITDA margins were 13% for the Film Distribution (2014: 11%). Pro forma investment in acquired content was 17% lower at £151.6 million (2014: £183.1 million).

Adjusted free cash flow was £15.3 million (2014: £25.3 million), representing an underlying EBITDA to adjusted free cash flow conversion of 21% (2014: 35%).

Theatrical

Overall theatrical pro forma revenues decreased reflecting lower box office takings, which were down by 34% to US$308 million (2014: US$465 million). This was driven by a combination of factors including a reduced volume of releases year-on-year (227 compared to 275 in 2014), and title underperformance in a challenging year for the global box office. Key releases included The Divergent Series: Divergent, The Expendables 3, Foxcatcher, Paddington, Pompeii, Mr Turner, A Walk Among the Tombstones, The Hunger Games: Mockingjay - Part 1 and The Divergent Series: Insurgent.

The global movie market is anticipated to improve from 2015 and beyond, with a broad range of major movies set for release over the coming months. In tandem, the Group's box office performance is also expected to improve, with a stronger film slate and an increased number of releases to around 250 film releases planned in the next financial year. Investment in acquired content is set to grow to around £170 million.

Entertainment One's theatrical release slate for FY16 includes a number of strong titles, such as The Hunger Games: Mockingjay - Part 2, The Divergent Series: Allegiant - Part 1, The Hateful Eight (the eighth film from Quentin Tarantino), Gods of Egypt, Masterminds, The Last Witch Hunter and Insidious: Chapter 3.

Home entertainment

Home entertainment pro forma revenues decreased by 15%, reflecting the continuing migration from physical to digital formats and the impact of lower theatrical activity in the year. In total, 718 DVDs were released (2014: 738) including Lone Survivor, The Hunger Games: Mockingjay Part 1, The Divergent Series: Divergent, The Expendables 3, Pompeii, Philomena and Escape Plan. 12 Years a Slave, A Walk Among the Tombstones and Mr Turner DVD releases hit number one in the UK in their first week of release and The Walking Dead season four has performed strongly in all territories.

Over 600 titles are planned for release in the next financial year including The Theory of Everything, Paddington, The Divergent Series: Insurgent, The Water Diviner, No Escape and The Cobbler.

Broadcast and Digital

The Group's combined broadcast and digital revenues were broadly in line with the prior year, and now account for 37% of overall Film revenues (2014: 33%).

Key broadcast/digital releases in the year included The Twilight Saga: Breaking Dawn Part 2, Looper, 12 Years A Slave, American Hustle, Trailer Park Boys, Pompeii, Silver Linings Playbook and Chronicles of Riddick: Dead Man.

In addition, significant new deals were signed with Foxtel in Australia, and Shomi, a new video on demand service launched in Canada by Rogers and Shaw Media.

Entertainment One Features

eOne Features pro forma revenues decreased by 28% to £20.9 million (2014: £29.0 million) and underlying EBITDA was down year-on-year reflecting a reduced film production slate against a strong comparable period, which included the release of hit Insidious: Chapter 2. Adjusted free cash flow increased to £5.2 million (2014: outflow of £2.5 million).

In the year, Suite Française and Woman in Black: Angel of Death were released generating global box office revenues of US$62 million to-date (2014: US$162 million, driven mainly by the success of Insidious: Chapter 2). The Group has four films currently in production or pre-release: Eye in the Sky, Message from the King, Sinister 2 and Insidious: Chapter 3. Leading up to the Cannes Film Festival, the Group announced that it was co-financing Life on the Road, a feature film starring Ricky Gervais as David Brent from BBC television series The Office, one of the most successful British comedies of all time.

In addition, eOne Features is representing the worldwide rights on projects including Trumbo, as well as the international distribution of eOne's own productions Eye in the Sky and Message from the King. In Cannes, the business has enjoyed significant success in selling Spotlight to international distributors, including to Sony Pictures Worldwide Acquisitions for a large number of key international territories around the world. Further, it has secured distribution rights on award-winning director Xavier Dolan's latest project It's Only the End of the World.

Investment in content in eOne Features is expected to grow to around £40 million in the next financial year.

TELEVISION

Overview

The Television Division comprises the Production & Sales business, the Family & Licensing operation and also incorporates the results of the Group's Music label. The Division's focus is on the production of television programming, the acquisition of television content rights, and the exploitation of branded properties through licensing and merchandising activities.

The strategy focuses on partnering with the best creative talent through building on the success of the business in Canada to expand its television production activities into the US, the UK and Australia. Strategic acquisitions will provide a platform for growth, both in own productions but also by acting as territorial hubs for partnerships with other creative producers. The first significant step in this strategy was the acquisition of a 51% stake in The Mark Gordon Company in January 2015. This high profile studio produces and finances premium television and film content for the major US networks and international distribution. eOne will exclusively distribute new content created by the studio on a worldwide basis.

The Group has also continued to expand the business's production capabilities in Canada and during the year, eOne successfully completed the acquisition of Paperny Entertainment and Force Four Entertainment. Both companies specialise in the development and production of non-scripted television programming, including a range of character-driven documentaries, comedies and reality series. Together these companies produced over 200 half hours of programming in the current financial year.

These acquisitions strengthen the Group's television production capabilities in North America, supplement its content library and enhance the Group's international sales offering.

The Group's international sales distribution capability is a key competitive advantage for eOne, with our current network reaching over 500 broadcasters in more than 150 territories. As well as distributing our own productions, we also sell content from output deal partners such as AMC and Sundance TV and other third party acquisitions across this infrastructure. In this market, digital platforms are becoming increasingly important and the Group recently signed a multi-year agreement with Amazon Prime to distribute a range of content across its platform in the UK and Germany.

Within Family, Peppa Pig continues to develop, in line with our strategy to make the property the world's most loved pre-school brand. The brand was rolled out into a range of new markets during the year, with broadcasting agreements supported by licensing and merchandising programmes. As traction for the brand grows among consumers we carefully manage the retail programmes to ensure we maximise the brand's longevity. The Group looks forward to a continuing international roll-out of Peppa Pig in the new financial year, targeting attractive markets in the Asia Pacific region such as China. Finally, the US consumer roll-out continues in spring 2015 in Walmart stores, which will be followed by a launch in Target during the summer.

In addition to managing the growth of Peppa Pig, the Family business is also developing a balanced portfolio of complementary family brands for other demographics. Ben & Holly's Little Kingdom has been launched into a number of new territories during the year and is showing positive signs of consumer traction. The Group is also in production with a number of new brands which will be launched in 2016, and beyond, with major broadcasting partners.

Financial Review

Pro forma revenues for the year were 32% higher at £231.9 million (2014: £175.3 million) driven by continued growth in Family and Television Production & Sales revenues. Pro forma underlying EBITDA increased by 41% to £51.4 million (2014: £36.4 million), primarily driven by the performance of the Family business. Pro forma underlying EBITDA margin improved by 1.4pts to 22.2% for the Television Division (2014: 20.8%). Adjusted free cash flow increased to £31.5 million representing an underlying EBITDA to adjusted free cash flow conversion of 76% (2014: 12%), driven by Family.

Pro forma investment in acquired content and productions was 18% higher at £109.5 million (2014: £92.5 million). At 31 March 2015, contracted sales not yet recognised as revenue, relating to productions in progress, were approximately £66 million on a pro forma basis (2015 reported: £60 million; 2014 reported: £15 million).

Production & Sales

Pro forma revenues for the year were up 27% to £152.7 million (2014: £120.2 million) driven by increased production and higher international sales. Pro forma underlying EBITDA increased to £26.2 million (2014: £24.0 million). Pro forma investment in acquired content and productions increased 18% to £105.1 million (2014: £89.4 million). Adjusted free cash flow increased to £3.0 million representing an underlying EBITDA to adjusted free cash flow conversion of 18% (2014: -86%).

On a pro forma basis, Production delivered 572 half hours of programming, compared to 507 half hours in the prior year. Key deliveries included deliveries of eOne's flagship shows including season five and six of Rookie Blue, season four of Hell on Wheels, season five and six of Haven, season two of Bitten, season three of Saving Hope, as well as mini-series The Book of Negroes. This also included 215 half hours of programming which was delivered by Paperny Entertainment and Force Four Entertainment which were acquired in the year. Programming delivered by these acquisitions included season two of Chopped and Timber Kings, and season three of Border Security: Canada's Frontline, and led to significant growth in the Group's North American reality television business. In total, pro forma investment in productions increased 14% to £95.9 million (2014: £83.8 million).

The year also benefitted from the delivery of three shows, Turn, The Red Road and Halt and Catch Fire, under the AMC Sundance output deal, all of which have been renewed for second seasons and have sold well internationally. In total, over 200 half hours of programming was acquired by the Division, which invested £9.2 million in acquired content (2014: £5.6 million).

The production slate is strong for the next year including season five of Hell on Wheels and season four of Rogue. Deliveries in the next financial year are expected to be over 850 half hours and investment in acquired content and productions is set to grow to around £140 million.

Family & Licensing

Pro forma revenues for the year were up 71% to £60.8 million (2014: £35.5 million) driven by significant growth in Peppa Pig. Underlying EBITDA increased to £23.8 million (2014: £10.3 million). Adjusted free cash flow increased to £26.3 million representing an underlying EBITDA to adjusted free cash flow conversion of 111% (2014: 106%).

Family & Licensing continues to perform very strongly with the continued success of Peppa Pig, where the franchise generated over US$1 billion of retail sales in the financial year. Peppa Pig ended the year with over 600 licensing deals globally.

Peppa Pig won Best Licensed Toy Range and Best Pre-School Licensed Property at the British Licensing Awards 2014, for the fifth year running, consolidating its position as the leading UK pre-school brand, and Best Pre-School and Consumer's Preferred Brand at the Brazil Licensing Expo.

In new territories consumers have responded positively to Peppa Pig licensed products to generate strong retail sell-through. This will continue into the new financial year as we look forward to brand launches in large markets such as China and France.

In the US, the outlook is very positive, with broadcaster Nick Jr continuing to support Peppa Pig by airing episodes seven days a week on prime slots. The brand recently launched with a small number of product lines in Walmart, which will grow steadily over time and is expected to mirror the growth profile achieved in the UK. There is also a product launch in Target planned for the summer of 2015.

Whilst existing international markets have continued to deliver strong results (with Italy, Spain and Australia all performing well), the focus for the year has been on the licensing roll-out of Peppa Pig in new territories including new European markets (France and Germany), Brazil and the Far East (China and South East Asia). In particular, in Brazil, the growth has been accelerated with a wide launch programme. An initial limited licensing and merchandising toy and clothing rollout has also occurred in France, and Germany, with mass rollouts to be launched in spring/summer 2016. Additionally, Peppa Pig is being aired on prime time slots in France.

In addition to Peppa Pig, Family is developing a portfolio of other children's brands aimed at different age groups across both girls and boys. Ben & Holly's Little Kingdom continues to have high ratings in its television slots and the UK toy re-launch in July 2014 has been well-received by retailers, with both Hamley's and Toys'R'Us investing in promotional displays. Ben & Holly is gaining traction internationally with toy launches in Australia, Spain and Italy and a roll-out of a wider product range expected.

Other eOne Family properties are progressing well. Two shows that were green-lit in previous years, Winston Steinburger and Sir Dudley Ding Dong and PJ Masks, are currently in production with broadcast launches planned later this year.

Music

Pro forma revenues for the year were broadly in line with the prior year at £18.4 million (2014: £19.6 million), with pro forma underlying EBITDA lower at £1.4 million (2014: £2.1 million). Adjusted free cash flow reduced to £2.2 million representing an underlying EBITDA to adjusted free cash flow conversion of 157% (2014: 133%).

The number of releases were marginally lower at 74 in 2015, versus 77 in 2014. The Group's current roster of artists continues to be strong and are expected to deliver a content release schedule that is consistent year-on-year.

OTHER FINANCIAL INFORMATION

Summary Income Statement

Adjusted operating profit (which excludes amortisation of acquired intangibles, share-based payment charge, 'tax, finance costs and depreciation' on joint ventures and one-off items) increased by 15% to £103.6 million (2014: £90.2 million) reflecting growth in underlying EBITDA. Adjusted profit before tax increased by 13% to £88.8 million, in line with increased adjusted operating profit. Reported operating profit increased by £30.8 million to £60.2 million with the Group reporting a profit before tax of £44.0 million (2014: £21.5 million).

Amortisation of acquired intangibles

Amortisation of acquired intangibles decreased by £13.8 million to £22.2 million. This is primarily due to certain Alliance-related intangibles that had been fully amortised by 31 March 2014, offset partly by increased amortisation due to intangibles acquired on the acquisition of Phase 4 Films, Paperny Entertainment and Force Four Entertainment.

Depreciation and capital expenditure

Depreciation, which includes the amortisation of software, has increased by £1.1 million to £3.7 million, reflecting the full year impact of higher capital expenditure in the prior year, which has generated a higher depreciation charge in the current year. Capital expenditure during the year decreased to £3.3 million (2014: £4.2 million). Expenditure was mainly driven by new investment in Film operating systems, including finance systems.

Share-based payment charge

The share-based payment charge has increased by £0.7 million to £3.4 million during the year, as a result of the ongoing effect of the broadening of the number of employees to whom grants were made under the Group's Long Term Incentive Plan.

One-off items

One-off items totalled £17.9 million and included £11.3 million of strategy-related restructuring costs. Following the announcement of the Group's updated growth strategy in November 2014, £11.3 million of costs were incurred in the development and implementation of this strategy, including following the acquisition of Phase 4 Films. The US Film strategy was refocused, to capitalise on Phase 4 Films' direct relationships with key home entertainment customers and included a £5.4 million impairment charge in respect of investment in acquired content rights previously made by Entertainment One, and £3.0 million of staff and other US film-related restructuring costs.

Alliance-related restructuring costs of £3.1 million were incurred in the year, covering staff redundancies, unused office space and IT systems integration. Going forward, Alliance-related costs are expected to be minimal and will be charged within underlying EBITDA.

In addition, acquisition costs of £1.8 million were incurred in the year, relating primarily to the acquisitions of Phase 4 Films, Paperny Entertainment and Force Four Entertainment, together with the joint venture investment in Secret Location. Finally, during the year the Group incurred costs of £1.7 million related to aborted deals. Further details of the one-off items are set out in Note 9 to the consolidated financial statements.

Net finance charges

Reported net finance charges increased by £8.3 million to £16.2 million. Excluding one-off net finance charges of £1.4 million in the current year (2014: £3.9m one-off net finance income), adjusted finance charges of £14.8 million were £3.0 million higher in the current year, reflecting higher senior debt levels and unfavourable foreign exchange movements during the year. The weighted average interest rate was 4.0% compared to 5.1% in the prior year, representing lower headline interest rates in the current year.

Tax

On a reported basis the Group's tax charge of £2.7 million, which includes the impact of one- off items, represents an effective rate of 6.2% compared to 7.0% in the prior year. On an adjusted basis, the effective rate is 22.6% compared to 24.5% in the prior year, driven by a different mix of profit by jurisdiction (with different statutory rates of tax) in the two years.

Cash flow

Cash generated from operations of £271.9 million was £7.3 million higher than the previous year, reflecting the growth in underlying operating profit, offset by the timing of working capital movements in the current year. Investment in acquired content and productions totalled £280.8 million, compared to £276.8 million in the prior year, reflecting higher investment in eOne Features and Television, partly offset by lower theatrical activity in Film. Free cash outflow was improved against the prior year at £13.7 million (2014: £16.4 million).

The net cash outflow from the acquisition of joint ventures was £86.5 million. £84.0 million related to the acquisition of 51% of the Mark Gordon Company (7 January 2015) and £2.5 million related to the acquisition of 50% of Secret Location (28 May 2014).

The net cash outflow from the acquisition of subsidiaries was £9.1 million. £6.1 million related to the acquisition of Phase 4 Films (3 June 2014), £2.8 million related to Paperny Entertainment (31 July 2014) and £1.8 million to Force Four Entertainment (28 August 2014), offset by £1.6 million received from escrow in relation to the Alliance box office target.

The Group paid its inaugural final dividend of 1.0p per share in respect of the year ended 31 March 2014 on 10 September 2014, resulting in a total distribution to shareholders of £2.9 million. This dividend qualified as an eligible dividend for Canadian tax purposes. The dividend was paid net of withholding tax where appropriate, based on the residency of the individual shareholder.

Exchange differences of £1.4 million (2014: £25.1 million) occurred during the year. In the prior year, the movements primarily related to the translation impact of the weakening of pounds sterling against the Canadian dollar.

Adjusted free cash flow

Adjusted free cash flow increased by £22.2 million to £41.0 million in the year, reflecting strong growth in Television driven by Family performance, offset by working capital outflows in Film and Television, and an increased content and production investment/amortisation gap driven by higher production investment in Film.

The Film underlying EBITDA to adjusted free cash flow conversion ratio is broadly consistent with the comparative year at 28% (2014: 31%) which reflects a higher investment/amortisation gap from increased investment in productions in the current year and higher working capital outflows - due to an increase in non-recurring acquisition adjustments, offset by an increase in drawdowns of interim production financing.

Television underlying EBITDA to adjusted free cash flow conversion ratio has increased significantly from 12% in 2014 to 76% in 2015 driven by the strong performance in Family during the year.

The cash impact of one-off items was significant in the prior year at £38.0 million, following the acquisition of Alliance Films in January 2013. In 2015 the one-offs associated with restructuring and acquisitions have been lower, driven by the relative size of the acquisitions in the year.

Financing

Net debt balances at 31 March comprise the following:

Adjusted net debt was £224.9 million, an increase of £113.8 million from the previous year. The increase is driven primarily by the acquisition of the three companies and two joint ventures that were completed in the current year.

Net interim production financing increased by £35.3 million year-on-year to £89.3 million, reflecting the acquisition of new TV Production businesses (Paperny Entertainment and Force Four Entertainment) and the higher number of film and television productions in progress at the year end. This financing is independent of the Group's senior credit facility. It is excluded from the calculation of adjusted net debt as it is secured over the assets of individual production companies within the Production businesses and represents shorter-term working capital financing that is arranged and secured on a production-by-production basis.

Financial position and going concern basis

The Group's net assets increased by £56.7 million to £364.8 million at 31 March 2015 (2014: £308.1 million). The increase primarily reflects the £19.4 million of common shares issued as part-consideration for the three acquisitions made in the first half of the current financial year.

The directors acknowledge guidance issued by the Financial Reporting Council relating to going concern. The directors consider it appropriate to prepare the consolidated financial statements on a going concern basis, as set out in Note 3 to the consolidated financial statements.

Statement of Directors' Responsibility

The directors are responsible for preparing the Annual Report and Accounts and the consolidated financial statements in accordance with applicable law and regulations.

The directors are required to prepare the consolidated financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and Article 4 of the IAS Regulation. The directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing these consolidated financial statements, International Accounting Standard 1 requires that directors:

· properly select and apply accounting policies;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

· make an assessment of the Group's ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

· the consolidated financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group as a whole;

· the Business Performance and Financial Review includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that they face; and

· the Annual Report and Accounts and the consolidated financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's performance, business model and strategy.

By order of the Board

Giles Willits

Director

18 May 2015

Opinion on the consolidated financial statements of Entertainment One Ltd.

In our opinion:

Ø the consolidated financial statements give a true and fair view of the state of the Group's affairs as at 31 March 2015 and of the Group's profit for the year then ended; and

Ø the Group's consolidated financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The consolidated financial statements comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related Notes 1 to 36. The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.

Going concern

As required by the Listing Rules we have reviewed the directors' statement contained within the Directors' report that the Group is a going concern. We confirm that:

Ø we have concluded that the directors' use of the going concern basis of accounting in the preparation of the consolidated financial statements is appropriate; and

Ø we have not identified any material uncertainties that may cast significant doubt on the Group's ability to continue as a going concern.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group's ability to continue as a going concern.

Our assessment of risks of material misstatement

The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team.

Independent Auditor's Report to the Members of Entertainment One Ltd.(continued)

Independent Auditor's Report to the Members of Entertainment One Ltd.(continued)

The description of risks above should be read in conjunction with the significant issues considered by the Audit Committee as discussed in their Report.

Our audit procedures relating to these matters were designed in the context of our audit of the consolidated financial statements as a whole, and not to express an opinion on individual accounts or disclosures. Our opinion on the consolidated financial statements is not modified with respect to any of the risks described above, and we do not express an opinion on these individual matters.

Independent Auditor's Report to the Members of Entertainment One Ltd. (continued)

Our application of materiality

We define materiality as the magnitude of misstatement in the consolidated financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

We determined materiality for the Group to be £3.2m (2014: £2.9m), which is approximately 5% (2014: 7.5%) of profit before tax after adding back operating and net financing one-off items. We use this as a base for materiality as it is a key measure of underlying business performance for the Group.

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £64,000 (2014: £58,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the consolidated financial statements.

An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material misstatement at the group level. Based on that assessment, we focused our Group audit scope primarily on the UK and Canadian business units. Five of these were subject to a full audit, whilst the remaining twelve were subject to specified audit procedures where the extent of our testing was based on our assessment of the risks of material misstatement and of the materiality of the Group's operations at those locations. The five full scope divisions represent the principal business units and account for 69% (2014: 70%) of the Group's revenue and 90% (2014: 93%) of the Group's adjusted profit before tax. They were also selected to provide an appropriate basis for undertaking audit work to address the risks of material misstatement identified above. Our audit work at the different locations was executed at levels of materiality applicable to each individual entity which were lower than Group materiality and ranged from 50% to 65% of Group materiality.

At the parent entity level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject to audit or audit of specified account balances.

The Group audit team continued to follow a programme of planned visits that has been designed so that the Senior Statutory Auditor or a senior member of the Group audit team visits each of the locations where the Group audit scope was focused at least once every year.

Matters on which we are required to report by exception

Corporate Governance Statement

Under the Listing Rules we are also required to review the part of the Corporate Governance Statement relating to the company's compliance with ten provisions of the UK Corporate Governance Code. We have nothing to report arising from our review.

Our duty to read other information in the Annual Report

Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:

Ø materially inconsistent with the information in the audited consolidated financial statements; or

Ø apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course of performing our audit; or

Ø otherwise misleading.

Independent Auditor's Report to the Members of Entertainment One Ltd. (continued)

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors' statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed. We confirm that we have not identified any such inconsistencies or misleading statements.

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the consolidated financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the consolidated financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. We also comply with International Standard on Quality Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that our quality control procedures are effective, understood and applied. Our quality controls and systems include our dedicated professional standards review team and independent partner reviews.

This report is made solely to the company's members, as a body, in accordance with Disclosure and Transparency Rule 4.1. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's 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 and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Scope of the audit of the consolidated financial statements

An audit involves obtaining evidence about the amounts and disclosures in the consolidated financial statements sufficient to give reasonable assurance that the consolidated financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's and the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the consolidated financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited consolidated financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London

18 May 2015Consolidated Income Statement

for the year ended 31 March 2015

All activities relate to continuing operations.

As explained in further detail in Note 2, the restatement of the 2014 comparatives relates to the adoption of IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements.

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2015

As explained in further detail in Note 2, the restatement of the 2014 comparatives relates to the adoption of IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements.

Consolidated Balance Sheet

at 31 March 2015

As explained in further detail in Note 2, the restatement of the 2014 comparatives relates to the adoption of IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements.

These consolidated financial statements were approved by the Board of Directors on 18 May 2015.

Giles Willits

Director

Consolidated Statement of Changes in Equity

for the year ended 31 March 2015

1 See Note 33 for further details.

As explained in further detail in Note 2, the restatement of amounts as at 1 April 2013 and 31 March 2014 relate to the adoption of IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements.

Consolidated Cash Flow Statement

for the year ended 31 March 2015

As explained in further detail in Note 2, the restatement of the 2014 comparatives relates to the adoption of IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements.

Notes to the Consolidated Financial Statements

for the year ended 31 March 2015

1. Nature of operations and general information

Entertainment One is a leading independent entertainment group focused on the acquisition, production and distribution of film, television, family and music content rights across all media throughout the world. Entertainment One Ltd. ("the Company") is the Group's ultimate parent company and is incorporated and domiciled in Canada. The registered office of the Company is 175 Bloor Street East, Suite 1400, North Tower, Toronto, Ontario, M4W 3R8. Segmental information is disclosed in Note 5.

Entertainment One Ltd. presents its consolidated financial statements in pounds sterling, which is also the functional currency of the parent company. These consolidated financial statements were approved for issue by the directors on 18 May 2015.

2. New, amended, revised and improved Standards

New Standards and amendments, revisions and improvements to Standards adopted during the year

During the year ended 31 March 2015, the following were adopted by the Group:

The adoption of these new, amended and revised Standards had no material impact on the Group's financial position, performance or its disclosures. The adoption of IFRS 10 and IFRS 11 has, however, resulted in certain prior period amounts being restated, as described in further detail below.

Impact of adoption of IFRS 10 and IFRS 11

The adoption of IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements has impacted these consolidated financial statements as follows:

Within the Film Division, certain joint arrangements relating to film production were previously proportionally consolidated. These have been classified as joint ventures under IFRS 11 and have consequently been retrospectively accounted for using the equity method. In the prior period consolidated income statement, previously reported amounts of the Group's share of revenue, cost of sales and administrative expenses have been aggregated in the single line item "share of results of joint ventures". Similarly, in the consolidated balance sheets of the prior periods presented, previously reported amounts of the Group's share of investment in productions, trade and other receivables, cash and cash equivalents, trade and other payables and interest-bearing loans and borrowings have been aggregated in the single line item "interests in joint ventures". The restatement of amounts in the prior periods in relation to the above has had no impact on underlying EBITDA, profit for the period or net assets.

2. New, amended, revised and improved Standards (continued)

Within the Television Division, certain production companies which were previously accounted for as proportionally consolidated joint ventures, have been classified as fully consolidated subsidiaries based on a reassessment under IFRS 10 of the Group's power and control over these entities. Consequently, in the prior period consolidated income statement, previously reported amounts of the Group's share of revenue, cost of sales and administrative expenses have been restated to reflect 100% of the respective balances. To the extent any profit for the period relates to non-controlling interests, this has been presented separately on the face of the consolidated income statement. The consolidated balance sheets of the prior periods presented have also been restated to reflect 100% of any previously proportionally consolidated balances, with amounts relating to non-controlling interests presented separately within equity.

The impact of the above changes on the consolidated income statement for the year ended 31 March 2014 was an increase in underlying EBITDA of £0.5m and an increase in profit by £0.3m. The impact on the consolidated balance sheet as at 31 March 2014 was an increase of net assets by £0.7m. A summary of the changes is detailed below:

New, amended and revised Standards issued but not adopted during the year

At the date of authorisation of these consolidated financial statements, the following Standards, which have not been applied in these consolidated financial statements, are in issue but not yet effective for periods beginning 1 April 2014: