Entertainment One Regulatory News (ETO)

ENTERTAINMENT ONE LTD. (eOne)

HALF YEAR RESULTS (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

ROBUST FAMILY & BRANDS PERFORMANCE HIGHLIGHT FIRST HALF,

CONSOLIDATED FULL YEAR ON TRACK

FINANCIAL HIGHLIGHTS

OPERATIONAL HIGHLIGHTS

ALLAN LEIGHTON, ChAIRMAN, commented:

"Entertainment One continues to execute its strategy well, with the Group delivering solid financial results and successfully bringing additional high-profile creative and management talent into the business during the period. The content development pipeline is exciting across our businesses and we are poised to launch Ricky Zoom to the world in the spring/summer 2019. The Group continues to be optimistic amidst ongoing evolution in the industry and we look forward to the rest of the year with confidence."

Darren Throop, ChIef executive officer, commented:

"The first half performance saw strong growth in Family & Brands, scripted drama, non-scripted and SVOD revenues in Film & Television. This was achieved as we continued to transition our film distribution activities towards production, EBITDA increased as the margin mix improved.

Once again our library has increased in value, underlining our commitment to invest in the best quality content and unlock the value and power of creativity across our businesses. In an industry where content is increasingly valuable, this positions us well for the future.

Looking ahead, we anticipate further progress for the Family & Brands properties in China and around the globe, a number of initiatives for Peppa Pig will consolidate its position as one of the leading pre-school brands in the world, as well as the wider merchandising phase for PJ Masks in China. The Film & Television Division has 74% of the full year's expected TV programming margin already greenlit or committed. There is also a full pipeline of development projects across Film & Television which will help drive future growth. Prospects remain bright and eOne is on track to deliver FY19 financial performance in line with management expectations."

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 Interim 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 condensed 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 Interim Announcement for a reconciliation of adjusted profit before tax and Note 6 in the condensed consolidated financial statements for the adjusted diluted earnings per share reconciliation.

4. Reported 2017 amounts have been restated, refer to Note 2 in the condensed consolidated financial statements for further details.

Group reported revenue was broadly in line with the prior period at £404.9 million (2017: £412.7 million), positively impacted by robust growth in Family & Brands (29% higher), offset by decline in Film & Television (7% lower) driven by fewer film releases and deliveries and the accelerated decline of the home entertainment market. On a constant currency basis (re-translating prior period reported financials at current period foreign exchange rates), Group revenue would have been flat, reflecting the net strengthening of the pound sterling against the US dollar, Canadian dollar and Australian dollar during the period.

Group reported underlying EBITDA was 10% higher at £60.1 million (2017: £54.5 million), driven by continued strong growth in Family & Brands (29% higher) and a decrease in Film & Television (25% lower). The Family & Brands Division financial performance was driven by continued strong performance of Peppa Pig, significant growth from PJ Masks and delivery of new show, Cupcake & Dino: General Services. The Film & Television Division underlying EBITDA is reflective of the lower revenue, title mix and cost savings of approximately £2 million. The underlying EBITDA margin % increased by 1.6pts to 14.8% (2017: 13.2%) as the higher margin Family & Brands Division is a greater proportion of the Group's underlying EBITDA than prior period. On a constant currency basis, Group underlying EBITDA would also have increased by 10%.

Net cash used in operating activities amounted to £24.7 million in comparison to £74.5 million in the prior period, reflecting lower investment in acquired content and productions spend and timing of tax payments, partly offset by higher working capital outflows in the period. Investment in acquired content was lower versus the prior period reflecting the transition of film from distribution to production activities. The investment in productions was lower versus the prior period due to timing of productions and higher tax credits received in the current period.

Adjusted profit before tax for the period was up £2.8 million to £42.0 million (2017: £39.2 million), due to the increase in underlying EBITDA, partly offset by higher interest costs. Reported loss before tax for the period was £40.1 million (2017: £2.3 million profit), impacted by one-off items of £59.4 million in the current period (2017: £3.4 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.

Adjusted diluted earnings per share were 6.1 pence (2017: 5.1 pence). On a reported basis, diluted losses per share were 9.9 pence (2017: 0.5 pence) reflecting the higher one-off charges.

FY19 SUMMARY OUTLOOK

The Group anticipates that full year financial performance will be in line with management expectations.

FAMILY & BRANDS

Peppa Pig and PJ Masks will continue to drive the growth of eOne's Family & Brands Division in the second half of the financial year. The business expects to have almost 1,900 live licensing and merchandising contracts by the end of FY19.

Peppa Pig is expected to remain strong in its core markets, 117 episodes are currently in production with the original creators of the show; these will air from spring 2019 through to 2023.

Asia will be the key region of growth for Peppa Pig in the second half of the year. There is clear demand for the brand in China with growth expected in licensing and merchandising revenue aided by a new toy partnership with Alpha Toys and the ongoing publishing relationship with Penguin. In anticipation of the 15th anniversary of Peppa Pig and the Chinese New Year for the Year of the Pig, the Family & Brands business has planned an exciting calendar of events and has partnered with Alibaba for a Peppa Pig Chinese feature film which will launch in cinemas in early 2019.

PJ Masks will continue to build on its growth following a wider international licensing rollout. After a successful video on demand (VOD) launch in China, a consumer products programme for the brand launched in summer 2018, led by toy licensee Alpha Toys. This will be supported by a limited range of publishing and apparel products through the rest of the year. Season 3 is in production and season 4 is in development to boost and sustain brand growth worldwide.

A further 13 episodes of Cupcake and Dino: General Services will be delivered to Netflix in the second half and Ricky Zoom will make its broadcast debut in spring/summer 2019. In addition to this new content, Family & Brands currently has eight other projects in development.

The Division is expected to generate strong revenue and underlying EBITDA growth across the portfolio in FY19.

FILM & TELEVISION

The second half of the financial year is anticipated to be strong for Film & Television, with underlying EBITDA more skewed to the second half, as expected.

With the transition towards production underway, we anticipate around 120 total film releases in the full year, lower than the 140 previously guided, of which around 60 are expected to be unique. This transition is in line with the Group's strategy to move away from distribution to own-produced and multi-territory releases. Film investment in acquired content is expected to be approximately £90 million. The theatrical release slate is expected to be much stronger in the second half of the financial year including Green Book, Vice, On the Basis of Sex, If Beale Street Could Talk and Stan & Ollie.

Film investment in productions is expected to be £50 million as the Group continues to transition from distribution to production activities. The production slate includes Makeready's Queen and Slim and post-production titles include Scary Stories to Tell in the Dark, Official Secrets and Poms.

The television slate for the second half of the year is also expected to be strong. Key scripted shows include Designated Survivor season 3, The Rookie season 1, Burden of Truth season 2, Ransom season 3 and the remaining episodes of season 3 of Private Eyes. Non-scripted deliveries of Siesta Key, Ex on the Beach, Ladygang, Naked and Afraid and America Says are in the second half. For international television distribution, sales of third party content are expected for Fear The Walking Dead season 5, The Walking Dead season 9, and Into the Badlands season 3.

The number of half hours of acquired/produced TV programming is still expected to be over 1,000 for the year with around 74% of the year's expected margins already committed or greenlit. Overall, there are 60 unique television shows set up for development with various broadcast, network and digital platforms. Television investment in acquired content is expected to be over £45 million and television production spend is expected to be £275 million in the full year.

Music revenue is expected to continue to grow in the second half with releases expected from Arkells, Royce Da 5'9" and Wu-Tang. The Group's live events business announced two new events during the period: The Thank You Canada Tour (a national tour featuring the Canadian Figure Skating team) and The Nelson Mandela Exhibit, launching in London in February 2019.

The integration of the Film and Television Divisions 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. We still anticipate approximately half of these savings to be realised through FY19. 

STRATEGY

The growth in the market for content rights is being driven by rapid changes in consumer behaviour, fuelling the demand for high quality content. Entertainment One's strategy to focus on growth through content ownership puts it at the centre of this positive structural change. This strategy aims to build a balanced content and brand business which will see strong revenue and underlying EBITDA growth.

Business model

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

Operationally, as well as developing a digital future across the Group, the strategy targets our Divisions to deliver specific drivers of growth:

STRATEGIC PROGRESS

In tandem with the financial performance during the period, the Group has made good strategic progress:

CORPORATE

As part of our financing strategy, we continuously monitor the international debt markets for financing opportunities that may be suitable for our business. In anticipation of the first call date on 15 December 2018 of our senior secured notes due 2022, the Group is currently evaluating financing options which would enable a of refinance the senior secured notes.

The Group continues to assess and respond to the implications of Brexit and expects there to be no significant exposures.

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 29% to £76.0 million (2017: £58.7 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 29% to £47.2 million (2017: £36.6 million), in line with increased revenues. The underlying EBITDA margin was broadly in line with the prior period.

Investment in acquired content and productions of £3.4 million (2017: £5.2 million) was £1.8 million lower than the prior period due to higher spend on Cupcake & Dino: General Services and spend on the PJ Masks stage show in the prior period. Investment spend in the period included the new episodes of Peppa Pig, season 2 of PJ Masks and new properties Cupcake & Dino: General Services and Ricky Zoom.

Family & Brands continued to achieve strong growth with the ongoing success of Peppa Pig and strong performance of PJ Masks. The business generated retail sales of US$1.3 billion in the period (2017: US$1.2 billion) and the outlook for the second half is very encouraging due to expected growth in China driven by the extensive rollout of the licensing programme in the autumn. More than 380 new and renewed broadcast and licensing agreements were concluded in the period and as at 30 September 2018 the business had over 1,600 live licensing and merchandising contracts across its portfolio of brands (2017: over 1,300).

Peppa Pig has continued to grow in the period with revenue of £41.7 million (2017: £35.4 million). This growth was driven by SVOD and AVOD revenues. New and renewed SVOD deals were signed in China with Mango TV, Youku, iQIYI and Tencent. Peppa Pig has now surpassed 100 billion VOD views since launch in October 2015 in China across all platforms. China continues to be a territory of strong growth and a broader licensing programme was launched to consumers in the territory, supported by licensees including Alpha Toys, Penguin, Unilever and Kimberly-Clark; and with retail sales generated from 74 licensing agreements continuing to ramp up.

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. Peppa Pig recently won the Classic Licensed Property Award at the UK 2018 Licensing Awards, further cementing its evergreen status; and 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. The brand also launched for the first time in Japan on TV Tokyo.

PJ Masks has continued its strong growth trajectory and remains a key driver for the business with revenue increasing to £29.9 million (2017: £20.8 million) in the period. Growth has mainly arisen from licensing and merchandising revenue, with successful licensing rollouts in all categories and territories. PJ Masks is the fastest growing pre-school property in both the US and the UK. There has been a strong broadcast start in China with PJ Masks airing on the major VOD platforms and generating 1.4 billion views in its first five months. Season 2 of PJ Masks is currently being broadcast globally on the Disney Jr. network, achieving all time high ratings in the US.

New show Cupcake & Dino: General Services successfully launched worldwide on Netflix and Teletoon in Canada in the period. Ricky Zoom, a pre-school vehicle-based series of 52 episodes will make its broadcast debut in the spring/summer of 2019 with a soft launch of toy lines in autumn 2019.

2019 OUTLOOK FOR FAMILY & BRANDS

Peppa Pig and PJ Masks will continue to drive the growth of eOne's Family & Brands Division in the second half of the financial year. The business expects to have almost 1,900 live licensing and merchandising contracts by the end of the financial year. The business continues to invest in the size of the team in order to maximise the opportunities globally for existing and new brands.

Peppa Pig is expected to remain strong in its core markets, benefitting from the delivery of new episodes of the show to broadcasters in the year. 117 episodes of Peppa Pig are currently in production with the original creators of the show, which will air from spring 2019 through to 2023. This new content (launching to coincide with the brand's 15th anniversary) will introduce new characters, storylines and themes to keep the series relevant to each new generation of pre-school fans and support the longevity of the brand from a licensing perspective.

Asia will be the key region of growth for Peppa Pig in the second half. There is clear demand for the brand in China building on the growing popularity of the brand thanks to strong broadcast and VOD exposure in the region with growth expected in licensing and merchandising revenue aided by a new toy partnership with Alpha Toys and ongoing publishing relationship with Penguin. In anticipation of the 15th anniversary of Peppa Pig and the Chinese New Year for the Year of the Pig, the Family & Brands business has planned an exciting calendar of events and has partnered with Alibaba for a Peppa Pig Chinese feature film which will launch in cinemas in early 2019.

Entertainment One's partnership with Merlin Entertainments continues to develop with Peppa Pig themed areas and accommodation already in place in Merlin Parks in Italy and Germany; both parks have experienced increased attendance in Peppa Pig's target demographic. The new ticketed interactive play format Peppa Pig World of Play has launched in Shanghai, with Dallas opening later this year and rollouts in Beijing, Detroit and New York anticipated during 2019.

PJ Masks will continue to build on its growth on the back of a wider international licensing rollout. Following on from a successful VOD launch in China, a consumer products programme for the brand launched in summer 2018, led by toy licensee Alpha Toys and will be supported by a limited range of publishing and apparel products through the rest of the year. New content is being produced and developed to boost and sustain brand growth worldwide. Season 3 is in production and season 4 is in development.

A further 13 episodes of Cupcake and Dino: General Services will be delivered to Netflix in the second half. Cupcake and Dino: General Services was conceived as a broadcast-centric brand, and therefore is not expected to develop through licensing and merchandising deals. Ricky Zoom will make its broadcast debut in spring/summer 2019. In addition to this new content, Family & Brands currently has eight other projects in development including Ninja Express with major platforms attached in multiple territories around the world.

The Division is expected to generate strong revenue and underlying EBITDA growth across the portfolio in FY19. 

FILM & TELEVISION

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

Revenue in the period decreased by 7% to £331.5 million (2017: £356.5 million) due to lower theatrical, transactional and production and other revenue driven by fewer releases and deliveries in the current period and the acceleration of decline in the home entertainment market, partly offset by strong film and television SVOD revenue, higher television broadcast revenues and music growth.

Underlying EBITDA decreased, reflecting the lower revenue partly offset by cost savings of approximately £2 million. There was a decline in underlying EBITDA margin of 1.2pts due to change in title mix. The restructuring at the beginning of the financial year focused on combining television creative teams across the Division integrating The Mark Gordon Company and leveraging physical production, finance and operations across all film and television content. The Group acquired the outstanding stake in Sierra/Affinity and appointed Nick Meyer as President of Film, further centralising content creation under executives with strong industry track records and excellent talent relationships.

Film investment in acquired content was lower by £32.6 million at £31.0 million (2017: £63.6 million) due to a lower volume of titles released in the current period, consistent with the Group's strategy to continue to reshape the film business and reduce the number of releases. Film investment in productions was lower by £16.7 million at £12.5 million (2017: £29.2 million), reflecting fewer production starts in the period, as the Group aligns the creative teams across The Mark Gordon Company and Sierra/Affinity.

Television investment in acquired content increased by £9.1 million to £30.0 million (2017: £20.9 million) due to timing of spend on the AMC/Sundance shows. Television investment in productions was lower by £27.2 million at £78.8 million (2017: £106.0 million) due to timing of production spend and higher level of tax credits received in the current period, partly offset by increased investment in non-scripted shows. For the full financial year, television investment in productions is expected to be £275 million, an increase of 22% year-on-year. 462 half hours of new programming were acquired/produced in the period compared to 304 in the previous period of which 335 half hours related to non-scripted compared to 115 in the prior period which are produced at a lower cost than scripted titles.

At the start of the financial year, the Division acquired a majority stake in Whizz Kid Entertainment, a UK based non-scripted television production company, with which it has partnered on the US adaptation of Ex on the Beach for MTV.

THEATRICAL

Theatrical revenue decreased by 19%, reflecting the reduced level of box office receipts, which were also 19% lower at US$67 million (2017: US$83 million) as a result of fewer releases (59 compared to 76) in the period. The number of unique theatrical releases was 35 in the first half compared to 48 in the prior period. The number of theatrical releases was consistent with the ongoing strategic transition from lower margin film distribution towards fewer and larger productions with potential for distribution across multiple territories.

The average box office per title was marginally higher period-on-period due to a focus on fewer, more impactful properties. Releases in the period included The House with a Clock in its Walls from Amblin, based on the best-selling children's book, starring Jack Black and Cate Blanchett and I Feel Pretty, starring Amy Schumer and Michelle Williams.

TRANSACTIONAL

Transactional revenue decreased by 45% to £33.2 million (2017: £60.9 million), reflecting the acceleration of the decline of the home entertainment markets in all of eOne's territories as well as fewer DVD releases period-on-period due to fewer theatrical releases at the end of last financial year.

As discussed in the Group's trading update, given the accelerated home entertainment market decline the Group has recorded a one-off charge of £57.0 million (of which £53.0 million is non-cash) primarily reflecting the impairment of certain film distribution assets in the period. This has been charged as a one-off item and therefore is not included in the table above. Please refer to the one-off items within the Other Financial Information section of this Interim Announcement for details.

In total, 80 DVDs and Blu-rays were released during the period (2017: 122) including key titles such as I Feel Pretty, The Post, Finding Your Feet, The Death of Stalin and Molly's Game. There is an increasing portion of transactional revenue arising from digital channels with 42% of transactional revenue from digital in the current period compared to 40% in the prior period. This will lead to improving margins as the proportion of digital revenue increases.

BROADCAST AND LICENSING

Broadcast and licensing revenues increased by 20% to £174.9 million (2017: £145.2 million), due to higher film and television SVOD revenues and strong television scripted broadcast sales.

The film production How It Ends, an action disaster thriller directed by David M. Rosenthal starring Theo James, Kat Graham and Nancy Sorel, was delivered to Netflix in the period. Netflix has worldwide rights to the film.

Key scripted television deliveries in the period included the last two episodes of Sharp Objects starring Amy Adams, which premiered on HBO and ranked as the network's #2 drama of the 2017/18 season-to-date, the finale bringing in a series high of 2.6 million viewers in the US; the first episode of The Rookie, starring Nathan Fillion which premiered on ABC on 16 October, and has recently received a seven episode back order; two episodes of Designated Survivor season 2; the remaining eight episodes of Ransom season 2; and the first two episodes of Private Eyes season 3.

International sales for seasons 1 and 2 of Designated Survivor remained strong including US SVOD sales for season 2 in the period. Designated Survivor season 3 received a 10 episode order from Netflix during the period and is expected to release globally in 2019 as a Netflix Original.

Key acquired content driving performance in the first half included season 3 of Into the Badlands, seasons 3 and 4 of Fear the Walking Dead, season 8 of The Walking Dead and seasons 2 and 3 of Hap & Leonard.

PRODUCTION AND OTHER

Revenue for production and other decreased by 26% to £76.5 million (2017: £103.9 million) as there were no new film production titles delivered in the current period compared to Atomic Blonde, Lost City of Z, and The Ritual in the prior period, which has been partly offset by higher activity in the television non-scripted business. For the full year film production deliveries are expected to include Stan & Ollie and Poms.

The television non-scripted business had a very strong first half of the year with the number of half hours delivered increasing from 115 in the prior period to 335 in the current period. Key franchise series include: Ex on the Beach, Siesta Key and Growing Up Hip Hop. New series include: Ladygang, Hustle in Brooklyn, Ladies Night and The Campbells. Renegade83 continued delivery on its Naked and Afraid franchise, with three shows commissioned in the half year: Buried in the Backyard season 2, Uncovered and Forbidden Love.

MUSIC

Revenue for the period increased by 19% to £27.8 million (2017: £23.4 million), due to higher digital revenue on recorded music, higher artist management and music publishing, partly offset by lower physical revenues.

In recorded music there were number one albums from artists across a number of genres including world music, gospel, metal and R&B. Key titles during the period included continued strong performance of The Lumineers' highly successful first and second albums, The Lumineers and Cleopatra, Bryant Myers La Oscuridad, DJ Kass' Scooby Doo Papa, Tamia's Passion Like Fire, The Blue Stones Black Holes, Todd Dulaney's Your Great Name, Snoop Dogg's Doggystyle and Dr Dre's The Chronic demonstrating the strength of both new and catalogue music within the Group's music operations.

The number of albums released in the period decreased slightly with 37 releases in the current period versus 40 in the prior period. Single releases increased significantly at 164 compared to 110 in the prior period as we continue to release digital singles due to the shift in the market from physical.

Artist management had a strong first half. Jax Jones sustained his radio success with his fourth consecutive hit single Ring Ring which has achieved over 50 million streams globally since release.

FULL YEAR 2019 OUTLOOK FOR FILM & TELEVISION

The second half of the financial year is anticipated to be strong for the Film & Television Division, with underlying EBITDA more skewed to the second half, as expected.

With the transition to production underway, we anticipate around 120 film releases in the full year (lower than the 140 previously guided) in total across all territories, of which around 60 are expected to be unique. Film investment in acquired content is expected to be approximately £90 million. The theatrical release slate is expected to be much stronger in the second half of the financial year including Green Book starring Viggo Mortensen and Mahershala Ali, which premiered at the Toronto International Film Festival and won the People's Choice Award; Vice, from Annapurna Pictures starring Amy Adams, Christian Bale, Steve Carell and new Oscar© winner Sam Rockwell; On the Basis of Sex, from Amblin starring Felicity Jones as Ruth Bader Ginsberg and Armie Hammer as her husband, Marty; If Beale Street Could Talk directed by Barry Jenkins, which premiered at the Toronto International Film Festival; and Stan & Ollie, an eOne production, starring Steve Coogan and John C. Reilly, which had its world premiere at the BFI London Film Festival and which will be released by Sony Pictures Classics in the US and sold throughout the rest of the world by Sierra/Affinity. Makeready has produced Class of Lies, a short form series of 12 five minute episodes on Snapchat Discovery which premiered on 10 October 2018.

Film investment in productions is expected to be £50 million as the Group continues to transition from distribution to production activities. The production slate includes Makeready's Queen and Slim, written and produced by Emmy-award winner Lena Waithe, and starring Daniel Kaluuya, which is due to start shooting in January and will be released by eOne in its direct territories and by Universal in the rest of the world, next financial year. The Group just wrapped production on Scary Stories to Tell in the Dark which is being produced by Academy award-winner Guillermo del Toro and is co-financed by CBS, with eOne distributing in its direct territories and Sierra/Affinity managing sales throughout the rest of the world. Other post-production titles include Official Secrets, starring Kiera Knightley and Matt Smith and Poms, starring Diane Keaton.

The television slate for the second half of the year is also expected to be strong. It will include new seasons of key scripted shows including Designated Survivor season 3, The Rookie season 1, season 2 of Burden of Truth, season 3 of Ransom and the remaining episodes of season 3 of Private Eyes. The television non-scripted business will continue to have deliveries of Siesta Key, Ex on the Beach, Ladygang, Naked and Afraid and America Says in the second half. For international television distribution, sales of third party content are expected for Fear The Walking Dead season 5, The Walking Dead season 9, and Into the Badlands season 3.

The number of half hours of TV programming acquired/produced is still expected to be over 1,000 for the year with around 74% of the year's expected TV programming margins already committed or greenlit. Overall, there are approximately 60 unique television shows set up for development with various broadcast, network and digital platforms. Makeready is in development with Hulu on a series, Old City Blues, starring and produced by Kerry Washington, and directed by Gore Verbinski. A pilot, Run, is in production with HBO, a dark romantic comedic thriller from Killing Eve creator Phoebe Waller-Bridge and her frequent collaborator Vicky Jones. eOne has also recently entered a multi-year deal with Netflix and The C.S. Lewis Company to develop classic stories from across the Narnia universe into series and films for its members worldwide. Television investment in acquired content is expected to be over £45 million and television production spend is expected to be £275 million in the full year.

Music revenue is expected to continue to grow in the second half with releases expected from Arkells, Royce Da 5'9" and Wu-Tang. Music will continue its strategy of diversifying its portfolio beyond recorded product to include music publishing and artist management while laying the foundations for a growing live events business. The Group's live events business announced two new events during the period: The Thank You Canada Tour (a national tour featuring the Canadian Figure Skating team) and The Nelson Mandela Exhibit, launching in London in February 2019.

The integration of the Film and Television Divisions 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. We anticipate approximately half of these savings to be realised through FY19.

OTHER FINANCIAL INFORMATION

Adjusted operating profit increased by 12% to £58.7 million (2017: £52.6 million), reflecting the growth in the Group's underlying EBITDA. Adjusted profit before tax increased by 7% to £42.0 million (2017: £39.2 million), in line with increased adjusted operating profit, partly offset by higher underlying finance charges in the period. Reported operating loss of £28.3 million, (2017: profit £23.4 million) reflects the impact of an operating one-off charge of £59.4 million primarily related to the impairment of certain assets within its film distribution businesses and related costs.

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

AMORTISATION OF ACQUIRED INTANGIBLES, DEPRECIATION AND AMORTISATION OF SOFTWARE

Amortisation of acquired intangibles, depreciation and amortisation of software has decreased by £0.4 million due to a number of assets being fully amortised in the Film & Television Division in the current period.

SHARE-BASED PAYMENT CHARGE

The share-based payment charge of £7.5 million has increased by £1.7 million during the period, reflecting additional awards issued in the period and also due to the fair value of the awards increasing as a result of the increase in the Entertainment One Ltd. share price in the period.

ONE-OFF ITEMS

Restructuring costs

Changes in consumer behaviour within the content industry are accelerating at an unprecedented level and in the six months ended 30 September 2018, 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 £57.0 million in the period which includes the following:

Further one-off charges of £3.5 million are associated with the integration of the Film and Television Divisions and include £3.1 million related to severance and staff costs and £0.2 million related to consultancy fees.

Other items

Acquisition costs of £0.2 million relates to costs associated with corporate projects during the year.

Other one-off credits of £1.3 million include a £1.6 million settlement received on a tax warranty relating to a prior year acquisition and is partially offset by £0.3 million of legal costs for certain corporate projects.

Prior period

In the prior period, one-off items resulted in a net charge of £3.4 million which consisted of £0.7 million of costs associated with the integration of the Film and Television Divisions, £0.2 million of foreign exchange movement on accrued restructuring costs and the adoption of IFRS 15 Revenue from contracts with customers, acquisition costs of £2.2 million and other corporate project costs of £0.3 million.

NET FINANCE CHARGES

Reported net finance costs decreased by £9.3 million to £11.8 million. Excluding one-off net finance credits of £4.9 million in the current period, adjusted finance charges at £16.7 million (2017: £13.4 million) were £3.3 million higher in the current period, reflecting the higher average debt levels period-on-period primarily due to the net debt arising from The Mark Gordon Company transaction in March 2018. The weighted average interest rate for the Group's financing was 6.5% which is in line with the prior period.

The one-off net finance credit of £4.9 million (2017: charge £7.7 million) comprises:

TAX

On a reported basis, the Group's tax charge of £4.6 million (2017: credit £0.2 million), which includes tax credits on one-off items, represents an effective rate of (11.5%) compared to 8.7% in the prior period. On an adjusted basis, the effective rate is 25.5% compared to 24.2% in the prior period. The adjusted effective tax rate for the full year is expected to be approximately 20%.

CASH FLOW & NET DEBT

The table below reconciles cash flows associated with the net debt of the Group, which excludes cash flows associated with production activities funded using production financing. Refer to the Production Financing section below.

ADJUSTED CASH FLOW

Adjusted cash outflow at £57.1 million is higher than prior period by £25.2 million driven by greater outflows in the Film & Television Division.

FAMILY & BRANDS

Family & Brands adjusted cash inflow was marginally higher than the prior period at £26.9 million (2017: £26.2 million). This was driven by the increase in underlying EBITDA but partly offset by the higher working capital outflow. The working capital outflow was higher than the prior period mainly as a result of higher receivables due to timing of certain SVOD deals which were executed in the latter part of the current period and higher accrued income relating to increased royalty performance in the last quarter.

FILM & TELEVISION

Film & Television adjusted cash outflow of £75.7 million was higher compared to the prior period (2017: £53.5 million), driven by the higher working capital outflow.

The working capital outflow of £67.4 million in the period was largely driven by a decrease in payables driven by the timing of payments in the film distribution territories, reduction of deferred income in particular due to delivery of How It Ends and outflows relating to intercompany trade with Film & Television production financing.

Investment in acquired content rights was lower than the prior period by £22.4 million driven by the lower volume of theatrical releases in the period. This was partly offset by an increase in investment in productions of £17.7 million compared to the prior period driven by the higher activity of the television non-scripted business in the current period.

FREE CASH FLOW

Free cash outflow for the Group of £88.1 million was £21.5 million higher due to the higher adjusted cash outflow and higher net interest paid due to a higher level of debt partly offset by lower tax payments due to timing.

NET DEBT

As at 30 September 2018 net debt of £433.0 million was £120.2 million higher than the prior period. This was driven by the higher net debt at the beginning of the period driven by net cash outflows in the financial year ended 31 March 2018 which included the impact of The Mark Gordon Company transaction of £72.1 million. The net debt movement in the period was £6.9 million better than the prior period due to lower cash one-off items, partly offset by the higher free cash outflow and acquisition spend in the period for Sierra/Affinity and Whizz Kid Entertainment.

Refer to the Appendix to this Interim Announcement for the definition of adjusted cash flow and free cash flow and for a reconciliation to net cash from operating activities.

PRODUCTION FINANCING

Overall production financing decreased by £67.1 million period-on-period to £74.7 million reflecting the lower opening production financing balance at March 2018 and the higher adjusted cash inflow in the period reflecting lower investment in productions in the period. The investment in productions was lower due to fewer film production starts in the period as the Group aligns creative teams across The Mark Gordon Company and Sierra/Affinity and lower television spend due to timing of productions and higher level of tax credits received in the period. Investment spend and production deliveries are expected to ramp up in the second half of the financial year leading to an increase in production financing.

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 through special purpose production subsidiaries which are excluded from the security of the Group's corporate facility. It is short-term financing whilst 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 excluded from net debt.

FINANCIAL POSITION AND GOING CONCERN BASIS

The Group's net assets decreased by £5.0 million to £661.1 million at 30 September 2018 (31 March 2018: £666.1 million). The principal risks impacting the Group have been discussed in Note 9 of the condensed consolidated financial statements.

The directors acknowledge guidance issued by the Financial Reporting Council relating to going concern. The directors consider it appropriate to prepare the condensed consolidated financial statements on a going concern basis, as set out in Note 2 to the condensed consolidated financial statements.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors confirm that to the best of their knowledge:

By order of the Board

JOSEPH SPARACIO

Director

19 November 2018

A presentation to analysts will take place at 9.30am on Tuesday, 20 November 2018 at eOne's UK office (45 Warren Street, London, W1T 6AG). For more information, or to register to attend, contact Alma PR (+44 7961 075 844 or rsh@almapr.co.uk).

A video overview of the results from CEO Darren Throop is available to watch here: http://bit.ly/ETO_h118

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

CAUTIONARY STATEMENT

This Interim Announcement contains certain forward-looking statements with respect to the financial condition, results, operations and businesses of Entertainment One Ltd. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this Interim Announcement should be construed as a profit forecast.

A copy of this Interim Announcement for the six months ended 30 September 2018 can be found on the Group's website at www.entertainmentone.com.

Condensed Consolidated Income Statement

for the six months ended 30 September 2018

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 30 September 2018

¹ Certain figures in comparative periods have been restated. Refer to Note 2 for full details.

Condensed Consolidated Balance Sheet

at 30 September 2018

These condensed consolidated financial statements were approved by the Board of Directors on 19 November 2018.

JOSEPH SPARACIO

DIRECTOR

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30 September 2018

Condensed Consolidated Cash Flow Statement

for the six months ended 30 September 2018

Notes to the Condensed Consolidated Financial Statements

for the six months ended 30 September 2018

1. NATURE OF OPERATIONS AND GENERAL INFORMATION

Entertainment One is a leading independent entertainment group focused on the acquisition, production and distribution of family, television, film 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 134 Peter Street, Suite 700, Toronto, Ontario, M5V 2H2, Canada.

The Company's common shares are listed on the premium listing segment of the Official List of the Financial Conduct Authority.

2. BASIS OF PREPARATION

SIGNIFICANT ACCOUNTING POLICIES

These condensed consolidated financial statements included within the Interim Announcement, have been prepared in accordance with International Accounting Standards (IAS) 34 Interim Financial Reporting, as adopted by the European Union. These condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's consolidated financial statements for the year ended 31 March 2018 which were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and IFRS Interpretation Committee.

Other than new standards effective during the year as described below and income taxes which are accrued using the tax rate that is expected to be applicable for the full financial year, the policies are consistent with the principal accounting policies which were set out in the Group's consolidated financial statements for the year ended 31 March 2018.

These condensed consolidated financial statements are unaudited but have been reviewed by the Group's auditor and their review opinion is included at the end of these statements.

These condensed consolidated financial statements are presented in pounds sterling, which is also the functional currency of the parent company. All values are shown in millions, rounded to the nearest one hundred thousand pounds, except when otherwise stated.

These condensed consolidated financial statements were approved for issue by the Board of Directors on 19 November 2018.

GOING CONCERN

In addition to its senior secured notes (due 2022) the Group meets its day-to-day working capital requirements and funds its investment in content through its cash in hand and through a revolving credit facility which matures in December 2020 and is secured on certain assets held by the Group. Under the terms of this facility the Group is able to drawdown in the local currencies of its significant operating businesses. The facility and senior secured notes are subject to a series of covenants including interest cover charge, gross debt against underlying EBITDA and capital expenditure.

The Group has a track record of cash generation and is in full compliance with its bank facility and bond covenants requirements.

At 30 September 2018, the Group had £43.4m of cash and cash equivalents (excluding cash held by production subsidiaries). The Group has £433.0m of net debt and undrawn amounts under the revolving credit facility of £63.8m.

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 existing financing and provide headroom against the covenants for a period of at least twelve months from the date of approval of these condensed consolidated financial statements. For these reasons the directors continue to adopt the going concern basis of accounting in preparing these condensed consolidated financial statements.

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, 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 Interim Announcement for definitions of these terms.

PRIOR PERIOD RESTATEMENTS

Put options over non-controlling interests

Put and call options were granted over the non-controlling interests of prior year acquisitions with the options exercisable in FY21 based on average EBITDA for FY19-FY21. During the compilation of the consolidated financial statements for the year ended 31 March 2018, the Group identified that the option liability as at 31 March 2017 was overstated by £6.3m principally driven by the use of an incorrect foreign exchange rate. A restatement was made in the consolidated financial statements for the year ended 31 March 2018. This error was also included in the results for the period to 30 September 2017 and has been corrected in comparative figures in these condensed consolidated financial statements.

Consistent with the 31 March 2018 financial statements, the Group has concluded the prior period error was not fundamental to any of the Group's previously issued condensed consolidated financial statements and therefore the interim statements for the period ended 30 September 2017 have not been reissued. The Group has corrected the prior period error retrospectively by restating the comparative amounts for the prior period presented and restated the balance sheet as at 30 September 2017, as required under IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The correction has resulted in an increase in operating one-off expenses by £1.3m for the period ended 30 September 2017 and a £5.0m increase in the net assets as at 30 September 2017.

Reclassification of Investments in Productions and Investment in Content

During the period, the Group concluded that the Investment in acquired content rights of the Family & Brands Division was more 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 periods have been restated by £5.9m as at 31 March 2018 and £3.9m as at 30 September 2017.

IMPACT OF NEW ACCOUNTING STANDARDS

The Group has applied, 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 34, 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 focussed on the following items:

The cumulative impact of prior period restatements on previously presented financial statements

Several other amendments and interpretations apply for the first time in 2018, but do not have an impact on the interim condensed consolidated financial statements of the Group.

NEW, AMENDED AND REVISED STANDARDS ISSUED BUT NOT ADOPTED DURING THE YEAR

IFRS 16 Leases is effective for reporting periods commencing after 1 January 2019. IFRS 16 requires lessees to recognise a lease liability reflecting future lease payments and a right-of-use asset for lease contracts, subject to limited exceptions for short-term leases and leases of low value assets. The quantitative impact of IFRS 16 on the Group's net assets and results is in the process of being assessed with an initial data set to determine the impact on the Group. IFRS 16 will have an impact on the balance sheet as both assets and liabilities will increase, and also an impact on components within the income statement, as operating lease rental charges will be replaced by depreciation and finance costs. Please refer to Note 32 to the Group's consolidated financial statements for the year ended 31 March 2018 which gives an indication of the Group's total operating lease commitments. IFRS 16 will not have any impact on cash flows. The impact of the transitional arrangements is under review.

ESTIMATES

The preparation of condensed consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, income and expenses. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 March 2018.

3. SEGMENTAL ANALYSIS

SEASONALITY OF OPERATIONS

The Group's business is normally subject to seasonal variations based on the timing of film cinema releases, physical home entertainment and television and digital content releases. Release dates are determined by several factors, including timing of holiday periods, the US release date of films and television series and competition in the market. In addition, revenues for the Group's licensed consumer products are influenced by seasonal consumer purchasing behaviour. Accordingly, if a short-term negative impact on the Group's business occurs during a time of high seasonal demand, the effect could have a disproportionate effect on the Group's results for the period.

The Group's exposure to seasonality varies by Division. The results of the Family & Brands Division are affected by the timing of royalties earned on properties driven by timing of holiday periods. Within the Film & Television Division, revenues from television series are driven by contracted delivery/release dates with primary broadcasters and can fluctuate significantly from period-to-period. Film release dates are not entirely in the control of the Group and are determined largely by the production and release schedules of each film's producer and the timing of holiday periods.

OPERATING SEGMENTS

On 1 April 2018 the Group combined its Film Division and Television Division into one reporting segment, Film & Television, which is in line with broader developments within the media and entertainment industry. The Group is now organised for internal reporting and management purposes into:

The Group's operating segments are identified on the basis of internal reports that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. The Chief Executive Officer has been identified as the chief operating decision maker.

Inter-segment sales are charged at prevailing market prices.

Segment information for the period ended 30 September 2018 is presented below with the comparative restated for the reorganisation of the Group:

Segment information for the period ended 30 September 2017 is presented below restated for the reorganisation of the Group and the impact of IFRS 15: