Entertainment One Regulatory News (ETO)

Entertainment One Ltd.

Preliminary announcement for the year ended 31 March 2012

103% increase in Profit Before Tax 

Entertainment One Ltd. ('Entertainment One', 'the Group' or 'the Company'), a leading international entertainment content owner and distributor, announces its preliminary results for the year ended 31 March 2012.

Financial Highlights - continuing operations1

Operational Highlights

Strategic Highlights

Darren Throop, Chief Executive Officer, commented:

"It has been a very positive year for Entertainment One. I am delighted to report another strong set of results, which clearly illustrate the strength of our strategy of continued investment in content. The growth in our Television business and doubling of digital sales have been particular highlights and demonstrate the success of our multi-platform strategy. I am also pleased to report that Peppa Pig's international success continues and am excited about the licensing and merchandising roll out in the US later this year. I look forward to the year ahead and we plan to continue to drive further value for our shareholders through both organic growth and acquisition opportunities."

For further information, please contact:

A presentation to analysts will take place on Monday 28 May at 9.30am BST at CityPoint, The Argentina Room, 9th Floor, 1 Ropemaker Street, London EC2Y 9AW.

Cautionary Statement

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

A copy of this Preliminary Announcement for the year ended 31 March 2012 can be found on our website at www.entertainmentonegroup.com. Copies of the Annual Report for the year ended 31 March 2012 will be available to shareholders shortly.

BUSINESS PERFORMANCE AND FINANCIAL REVIEW, YEAR ENDED 31 MARCH 2012

CHIEF EXECUTIVE'S REVIEW

We are pleased to report another year of strong growth with revenue increasing 7% to £502.7 million, profit before tax up 103% to £23.1 million and underlying EBITDA up 24% to £52.6 million compared to the previous year. This performance was driven by the increased investment in our Entertainment division, where revenue was up 21% and underlying EBITDA was up 48%.

Revenue in the Film business increased 17% to £272 million with 152 theatrical releases compared to 121 in the prior year, generating box office takings of $212 million (2011: $202 million). The highlight of the year was the fourth Twilight Saga instalment, Breaking Dawn - Part 1, which was again the number one release at the box office and on DVD in both the UK and Canada. The UK business benefited significantly from signing a five year output deal granting Amazon.com Inc's subsidiary LOVEFiLM exclusive rights to the Company's releases in the subscription video on demand Pay TV window. The Hopscotch business in Australia, acquired in May 2011, has integrated quickly into the Group and performed strongly in the period since acquisition. New initiatives to expand the Group's international sales and US Film businesses are both progressing well.

Digital revenue doubled to £66 million, with a significant proportion of this increase resulting from the LOVEFiLM deal in the UK. Digital now represents 13% of Group revenues.

The Television business also had an excellent year. Revenue increased by 43% to £97 million as the Group consolidated its position as a leading independent studio. Performance highlights included delivery of new network series Hell on Wheels and The Firm, new seasons of successful shows Call me Fitz and Haven and continued acclaim for original TV movies such as Goodnight for Justice and Whiskey Business. The third season of Rookie Blue was also delivered and premiered in the US and Canada in May 2012 with the highest opening viewer ratings of the series so far. The pipeline continues to remain strong. Recent renewals include a second season of Hell on Wheels, the first season of which achieved AMC's second highest ever ratings for a scripted series, Haven for a third season and Call me Fitz for a fourth. New commissions include hospital drama Saving Hope, suspense drama Rogue and factual series Perfect Storms. The international television sales business is making excellent progress, building on the strength and quality of the Group's growing slate. Following the huge success of The Walking Dead, where production is now into a third season, the company is actively growing its third party content slate and has recently acquired the international rights to Primeval: New World.

The Family business continued its good progress. Peppa Pig remained the number one pre-school property in the UK both in terms of viewing figures on FIVE's Milkshake and Nick Jr. and retail sales of licensed toys. In the US viewing figures continue to grow well which resulted in Nick Jr. extending the programme's broadcast slot. Preparations continue for the nationwide launch of a full toy range for the 2012 holiday season. Deals have recently been agreed with two leading US publishers to support the launch of books at the same time. Peppa Pig is also making excellent progress internationally, and is now the number one pre-school show in Australia, Spain and Italy, expanding in central Europe and plans are now being accelerated to move into the Far East and Latin America. Elsewhere a second season of Ben & Holly's Little Kingdom will start airing on Nick Jr. in the UK later this year, which will coincide with the roll out of an autumn/winter merchandising range. We are continuing to develop a strong pipeline of new shows with major international broadcasters.

In Distribution revenues were 16% down compared to the prior year, mainly due to a weak performance in Canada against a background of a declining market for physical home entertainment product and significant restructuring by the major movie studios. While the Board believes this should create consolidation opportunities in the future we are managing the current changes in the market by extending our product offering beyond our traditional product range and through rigorous cost management.

In November 2011 the Group extended its existing banking facilities and secured additional working capital to support the continued growth of the business. The facility is underpinned by the 2011 independent annual library valuation which increased by 40% to $350 million.

The strategic review undertaken by the Board during the year concluded that offers made for all or parts of the Group did not maximise value for shareholders. The Board determined that it would continue to evaluate acquisition opportunities to supplement the organic development of the Group, which could generate superior shareholder value and enhance the Group's strategic position.

The Board notes the recent speculation in the market regarding a possible acquisition of Alliance Films and the potential for an associated capital raising exercise. The Board confirms it has held discussions with the shareholders of Alliance Films but there can be no certainty this will lead to a transaction. In any event the Company would only undertake such a transaction on acceptable terms, and on the basis that the Directors believe it would be financially and strategically value enhancing for the Company and its shareholders. Should a transaction be agreed the Company would intend to raise funds through a combination of committed debt facilities and, subject to market conditions, the proceeds of an equity placing that would be fully underwritten by a limited group of institutional investors.

Outlook

The business continues to perform strongly and the strategy of investing in building the content slate across formats is expected to continue to deliver strong organic results. We will continue to reinvest the strong operating cashflows being generated into further building our Film, Television and Family businesses.

SUMMARY FINANCIAL PERFORMANCE

The Group's strategy continues to deliver increased revenue year on year and strong underlying EBITDA growth. Reported revenue from continuing activities increased by 7% to £502.7 million. Reported profit before tax from continuing activities was up 103% at £23.1 million compared to £11.4 million in the prior year. Excluding depreciation, amortisation, share-based payments and one-off items, adjusted profit before tax was up 33.1% to £43.0 million compared to £32.3 million in 2011 with continued excellent results from the Film and Television businesses more than offsetting the decline in physical distribution.

Earnings before interest, tax, depreciation, amortisation of intangible assets, share-based payment charges and one-off items ('underlying EBITDA') increased strongly, by 23.8% to £52.6 million. Adjusting for exchange translation and the impact of the Hopscotch acquisition, underlying EBITDA increased by 19.6%. A key driver of this increase was the improvement in the Group's EBITDA margin percentage, which increased to 10.5% from 9.0%, with the strong growth in the Entertainment division more than offsetting the impact of the lower margins in Distribution.

Investment in content and programmes increased by 49% to £135.8 million. This was driven by large production orders in Television resulting in a £33 million increase in investment in programmes and an increase of £12 million in investment in content as the film slate continues to expand.

* In order to provide like for like comparisons, the above table includes the results and prior year figures on a proforma and constant currency basis. For the purposes of this analysis 'proforma' includes the results of Hopscotch, which was acquired on 13 May 2011, as if that business had been acquired on the first day of the comparative period. Constant currencies have been calculated by retranslating the comparative figures using weighted average exchange rates for the period to 31 March 2012. The impact of currency movements has had an immaterial impact on revenue and underlying EBITDA in the period.

DIVISIONAL REVIEWS

The Group reports its results as two divisions, Entertainment and Distribution. Unless otherwise stated, prior year comparative information in this section is stated on a proforma and constant currency basis.

ENTERTAINMENT

The Entertainment division comprises the Film and Television businesses. On a reported basis revenue increased by 21% to £360.5 million and underlying EBITDA was up by 48% to £50.4 million.

Film

The Film business comprises operations in the UK, Canada, the US, Benelux and Australia. Revenue increased by 13% in the year to £273.3 million due to continuing growth in the UK and a strong performance in Australia. This drove an increase in Underlying EBITDA of 41% to £34.9 million (2011: £24.7 million).

Investment in content was £64.2 million (2011: £55.0 million) and increased by 17% as the business continues to expand the slate to support future earnings.

Multiple territories

The Group continued to build its slate in 2011/12 with a number of high profile theatrical releases across more than one territory. These included Man on a Ledge, We Need to Talk About Kevin, Source Code, Ghost Rider: Spirit of Vengeance, The Rum Diary and the Academy Award nominatedTinker, Tailor, Soldier, Spy and Albert Nobbs.

The fourth instalment of the blockbuster Twilight Saga franchise, The Twilight Saga: Breaking Dawn - Part 1, was released theatrically in November 2011 and onto DVD, Blu-ray and digital download in March 2012. The franchise continued to perform strongly and in the UK had the highest grossing box office of the series so far. Global box office from the films released to date now stands at $2.5 billion and the highly anticipated final instalment, The Twilight Saga: Breaking Dawn - Part 2, is due for theatrical release in November 2012.

The multi-territory slate is expected to continue to grow in 2012/13 with forthcoming titles including comedy drama The Angels' Share (directed by Ken Loach and the only British film in competition at the 2012 Cannes Film Festival), dark comedy Killer Joe (starring Matthew McConaughey and Emile Hirsch, which will open the Edinburgh Film Festival), action movie Bullet to the Head (Sylvester Stallone and Christian Slater), comedy The Big Wedding (Katherine Heigl, Robert De Niro, Dianne Keaton and Amanda Seyfried), David Cronenberg's drama Cosmopolis (Robert Pattinson, Paul Giamatti and Juliette Binoche) and thriller Parker (starring Jason Statham).

The International Film Sales business, which was expanded in the year with the opening of an office in London and appointment of a managing director, is expected to enhance the Group's presence in the industry and provide additional opportunities to extend the multi-territory slate. Recently acquired features Cut Bank and Freezing People is Easy were promoted at the 2012 Cannes film festival.

UK

In the UK revenue increased by more than 25% due in particular to digital sales resulting from the LOVEFiLM deal. This growth was partly offset by the impact of fewer releases, with 11 theatrical titles compared to 16 in the previous year. In addition to multi-territory films, other releases included The Three Musketeers, The Ides of March, Goon, and A Monster in Paris. Home video performed well, releasing 73 titles, supported by those with previous strong theatrical release such as The Twilight Saga: Breaking Dawn - Part 1 and The Ides of March.  Other DVD releases included The Killing 2, TT: Closer to the Edge, Horrid Henry: The Movie and The Gruffalo's Child. Sales to television increased significantly and at the end of the year a deal was signed with Channel 4 in the 'free TV' window for titles such as The Twilight Saga: New Moon, The Twilight Saga: Eclipse, RED, Letters to Juliet, Remember Me, I Love You Philip Morris, Love Happens and Astroboy.  

2012/13 will see an increase in the number of theatrical releases. In addition to multi-territory titles, UK releases will include a film adaptation of the popular 1970's police drama The Sweeney (starring Ray Winstone and Plan B), a sequel to the 2010 Christmas hit Nativity (David Tennant, Pam Ferris, Jessica Hynes and Joanna Page), horror movie The Pact (Caity Lotz, Casper Van Dien), action sci-fi movie Looper (Joseph Gordon-Levitt, Bruce Willis and Emily Blunt) and thriller Now You See Me (Jesse Eisenberg, Woody Harrelson and Michael Caine).

In addition to theatrically released titles, DVD releases will include the second season of hit TV series The Walking Dead, Scandinavian TV show The Bridge, thriller movie Freelancers (starring Robert De Niro, Forest Whitaker and 50 Cent), action films Recoil (Steve Austin) and The Courier (Mickey Rourke and Jeffrey Dean Morgan) and Icelandic thriller Black's Game.

Canada

In Canada revenue increased by 3% with 54 theatrical releases compared to 56 in the prior year. The business continued to consolidate its position, focusing on films with higher average box office. Twelve titles generated box office in excess of $2 million in 2011/12 compared to nine in the prior year. In addition to the multi-territory titles, theatrical releases included The Grey, Starbuck, One for the Money and A Dangerous Method as well as Academy Award nominated films Tree of Life, Monsieur Lazhar and Chris Weitz's A Better Life. There were 186 home video releases including films released theatrically such as The Twilight Saga: Breaking Dawn - Part 1, Source Code, The Lincoln Lawyer, Killer Elite and Starbuck and titles released directly to home video. These included Recoil, Halo, Hidden 3D, seasons three and four of TV show Heartland and the first two seasons of UK hit period drama Downton Abbey, which was one of the top selling TV shows on DVD in the year.

During the year the Group extended its long term deal with Summit, signed output deals with Lava Bear, Wrekin Hill and Remstar, renewed its agreement with Christal and concluded a five year output deal with pay TV broadcasters. The second half of the year also benefited from the acquisition of Vivendi's home entertainment business while a new digital deal has recently been signed with Netflix.

In addition to multi-territory titles major theatrical releases for 2012/13 will include comedy romance Seeking a Friend for the End of the World (starring Steve Carell and Keira Knightley), Wes Anderson's Moonrise Kingdom (Bruce Willis, Bill Murray and Tilda Swinton), the fourth instalment of dance franchiseStep Up Revolution, I Frankenstein (Aaron Eckhart) and Broken City (Mark Wahlberg, Catherine Zeta-Jones and Russell Crowe).

Straight to DVD releases in 2012/13 will include Universal Soldier 4, REC 3 and new seasons of TV shows Downton Abbey and eOne productions Haven and Rookie Blue.

Benelux

The Benelux business released 57 films theatrically compared to 49 in the prior year. Revenue was slightly behind with higher theatrical sales offset by lower sales in the home video and television windows. There is opportunity for growth in the digital window as there has been a delayed entry of video on demand and digital platforms into the Benelux market compared to other territories in which the Group operates, with iTunes only entering the video market in late 2011. Consequently the growth in these channels has only recently begun to mitigate the decline in the traditional home video segment.

Major theatrical releases included Insidious, the new release in the seasonal Sinterklaas (Santa Claus) family film series, local title Bende Van Oss, Scream 4 and Abduction. The business released 157 titles to home video including The Next Three Days, Source Code, The Lincoln Lawyer and the first season of The Walking Dead.

In addition to multi-territory titles the 2012/13 theatrical release slate includes dance movie StreetDance2, comedy drama Hope Springs (starring Meryl Streep, Steve Carell and Tommy Lee Jones), Bob Marley documentary Marley, action thriller Safe (Jason Statham), Dredd 3D and local title De Verbouwing. DVD releases will include Tinker, Tailor, Soldier, Spy, local television series Koen Kampioen, Ghostrider 3D and Chernobyl Diaries.

Australia

The Australian business, which was acquired in May 2011, was quickly integrated into the Group and performed strongly during the year. The business released 30 films theatrically following acquisition including Source Code, Woody Allen's Oscar winning Midnight in Paris, Incendies, A Separation and We Need to Talk about Kevin.

Home video also performed well with a strong portfolio of theatrical titles, big brand TV franchises and straight to DVD movies. Over 70 titles were released including the theatrical releases, hit TV series The Slap and three series of the UK comedy show The Inbetweeners.

Tangible benefits from the acquisition were achieved quickly with the extension of the Group's output deals with Summit and Lakeshore to Australia while more recently the business has participated in multi-territory film acquisitions and in developing the rapid growth of Peppa Pig in the local market. In November an agreement was reached with Twentieth Century Fox Home Entertainment to take over distribution of the Group's Home Entertainment product across Australia and New Zealand.

The theatrical slate for 2012/13 is expected to continue to grow with highlights including The Sapphires based on the hugely successful Australian stage musical of the same name, Bachelorette (starring Isla Fisher and Kirsten Dunst), Woody Allen's latest comedy To Rome with Love (Alex Baldwin, Penelope Cruz and Jesse Eisenberg) and Ron Howard's Formula 1 biography of Niki Lauda Rush (Daniel Bruhl and Olivia Wilde). The DVD slate is also expected to expand in particular with the release of popular TV series including new seasons of hit shows The Walking Dead and Hustle, the first two seasons of the US version of hit UK series The Inbetweeners, Hunted and the first season of Real Humans.

US

The US Film business released over 100 home video titles in the year, which was similar to the comparative period. However the closure of Borders and impact of Blockbuster's store closure programme impacted on revenues which were 17% below the prior year. Major titles included season one of eOne's television production Haven, the classic NBC series It Takes a Thief, season three of Syfy TV series Sanctuary, the first season of the US version of Being Human and movies The Bang Bang Club and Age of Heroes.

The Group has commenced its expansion of the US Film business with an increase in future release commitments. Ten limited release theatrical titles are planned for 2012/13 including Jesus Henry Christ (starring Jason Spevack, Toni Collette and Michael Sheen), sci-fi comedy Iron Sky, action thriller Special Forces (Diane Kruger and Djimon Hounsou), French language comedy Starbuck (Patrick Huard), Wish You Were Here (Joel Edgerton) and multi-territory title Cosmopolis.

DVD releases in 2012/13 are expected to include popular comedian and actor Katt Williams' comedy special Kattpacalypse, Joan Rivers' comedy special Don't Start With Me, season one of AMC's hit eOne-produced series Hell on Wheels, season two of Being Human, second seasons of eOne's hit Television series Rookie Blue and Haven and the first season of Showtime's comedy series Web Therapy (starring Lisa Kudrow). In addition, the US will launch several children's brands on home video including eOne's Peppa Pig as well as Babar and the Adventures of Badou and Guess How Much I Love You (both airing on Disney Jr.) and Poppy Cat (PBS Sprout's highest-rated programme).

Film also incorporates the results of the US music label business. Revenue from the label, which represents less than 4% of the Group's revenues and EBITDA, was up 7% compared to the prior year following a good release schedule and new genre signings. Major releases on the label during 2011/12 included the first new album in ten years from Bush and new albums from Chickenfoot, William McDowell and Jim Jones. 2012/13 will see releases from Ashanti, Bishop Paul Morton and Cassandra Wilson. Digital revenue continues to grow and is now 53% of total music label revenues (2011: 50%).

Television

Television comprises the North American-based television production and international sales businesses and the UK-based Family businesses. 2011/12 was a year of excellent revenue and underlying EBITDA growth with revenue increasing by 42% and underlying EBITDA by 40%. Investment in content and programmes increased by 83% to £72.0 million with 237 half hours of production (excluding Family) delivered to broadcasters compared to 249 in 2010/11. Although deliveries were lower than the prior year, the composition of half hours delivered reflected the evolution of product mix to higher value productions.

Television - North America and International

The Group's Television business reported another strong year as it consolidated its position as Canada's leading independent producer. Good progress was made in commissioning new programmes, renewing existing shows and growing international sales. The pipeline remains robust and contracted sales not yet recognised at the year end relating to work in progress more than doubled to £47 million (2011: £21 million).

Highlights of new commissions included contemporary western drama Hell on Wheels, which premiered in November and became the second most watched show ever on AMC, crime drama The Firm which premiered in January in the US and Canada and is selling well internationally and reality series Mary Mary, following the lives of the grammy-award winning American gospel music duo. Other major primetime shows delivered during the year included third seasons of Call me Fitz (starring Jason Priestley), police dramaRookie Blue, comedy Hung and the second season of mystery drama Haven. Non-scripted deliveries included new seasons of Mega Builders, Party Mamas and The Devil You Know, while new series included Triumph of the Will (with Kenny Hotz from Kenny vs. Spenny), Party at Tiffany's and Builder Boss. The Company also continued its success with television movies including Whiskey Business, which was the highest rated original film on CMT in over 3 years, seasonal movie It's Christmas, Carol, a second Don Cherry mini-series and two sequels to the successful wild-west television movie Goodnight for Justice starring Luke Perry.

2012/13 will see continued progress. Production has commenced on Saving Hope, a new medical drama that will premiere on NBC in the US and CTV in Canada in June 2012. Filming is also due to begin in August 2012 on suspense drama Rogue, starring award winning actress Thandie Newton, which will be broadcast on DirecTV and HBO Canada. A number of existing series have been renewed including a fourth season of Call Me Fitz, third season of Haven and second season of Hell on Wheels. New seasons of non-scripted shows include The Devil You Know and Mary Mary while the television movie Tom, Dick and Harriet has been ordered by Hallmark channel. A deal was also signed with award winning producer Steven Bochco to develop and produce a futuristic new drama,Evolution.

During the year the International television sales business expanded its activities in the UK and, as well as selling the Group's own productions, is also increasing investment in third-party content. Programmes acquired for distribution include the North American spin off of the hit UK television series, Primeval: New World, comedy Mr D and the third season of international hit The Walking Dead.

Television - Family

The Family business had another good year with strong licence renewals and the continued success of Peppa Pig. Viewing figures in the US have been strong and growing, with Peppa Pig broadcasting seven days a week on Nick Jr. This underpins the Company's expectations for a strong launch of licensing and merchandising later this year. Fisher-Price, the Company's US master-toy partner, has made excellent progress to ensure that a range of toys will feature prominently on retail shelves nationwide at Toys R Us for the 2012 holiday season. This rollout will be complemented by books, following significant agreements with two major US publishers, as well as a DVD and iTunes launch. Following the success of the broadcasting launches in Spain, Italy and Australia, Peppa Pig licensing and merchandising programmes are now in place with leading partners in all three territories. In addition Peppa Pig is expanding further internationally with plans being accelerated to enter the Far East and Latin American markets. In the UK, Peppa has consolidated its position as the UK's leading pre-school toy property for the second year in a row, continues to be the UK's number one pre-school property overall and remains the number one pre-school show on FIVE's Milkshake and Nick Jr. Despite tough retail conditions, licensing and merchandising revenue remained strong. 26 new episodes were delivered to broadcasters in the year and season six episodes are scheduled for delivery in 2012.

Elsewhere in the Family business, Ben & Holly's Little Kingdom continued its good progress in the UK and has recently moved to a higher profile 7.20am daily slot on FIVE's Milkshake. Season two, consisting of 52 episodes, is due for delivery in 2012/13. The development slate also remains extremely strong with properties in development with all major Canadian broadcasters (YTV, Teletoon, Family Channel, CBC and TVO) as well as major European terrestrial broadcasters and a major US platform. The company expects to commence full production on at least two series by the end of the year and a further two to three series next year.

DISTRIBUTION

The Distribution division combines the Group's physical home entertainment wholesale business in Canada and the music and DVD distribution business in the US. Overall revenue at £189.8 million was 16% lower than the prior year following challenging market conditions in Canada.

The Canadian business is predominantly a distributor of DVDs and Blu-ray discs, representing both the Group's Entertainment division and also third party producers including the major US studios. 2011/12 was a difficult year for the business with the overall Canadian market experiencing double digit decline in the demand for DVDs. In addition the business was impacted by changes to the Canadian operations and infrastructure of several major US studios.

While this may create consolidation opportunities in the future the business is managing the current changes in the market through extending the product offering beyond the Group's traditional product range of DVDs and CDs and continuing to focus on reducing costs where possible. In particular the Company has continued to improve its inventory management resulting in a 24% reduction in inventory levels at 31 March 2012 compared to the prior year.

The US business distributes for the Group's in-house video and music labels as well as representing other third party producers. Despite the declining market in the US, sales remained broadly flat with strong digital sales offsetting some of the general market weakness. The outlook is positive going forward with the planned expansion of the US Film business from both increased investment in content and new labels expected to bring benefits to the US distribution business.

GROUP COSTS

Group costs at £4.4 million (2011: £4.7 million) before one-off items were broadly in line with the prior year.

OTHER FINANCIAL INFORMATION

A summary of adjusted financial information is presented in order to provide useful information to investors. It comprises results from continuing operations and excludes the following: one-off items, amortisation of acquired intangible assets, share-based payment charges and non-recurring items within net finance charges and taxation.

Adjusted operating profit increased 25% to £50.1 million (2011: £40.1m) reflecting the growth in underlying EBITDA. Adjusted profit before tax increased 33% to £43.0 million reflecting the increased operating profit and lower finance charges.

One-off Items

One-off items totalled £3.8 million and included £3.1 million relating to the Group's strategic review. The remaining one-off items comprise other deal costs including the acquisition of Hopscotch in Australia which completed in May 2011.

Amortisation of Intangible Assets and Depreciation

Amortisation of intangible assets increased £1.1 million to £16.4 million, mainly as a result of the increase in intangible assets acquired as part of the Hopscotch acquisition. Depreciation decreased by £0.2 million to £1.5 million.

Share-based payment charge

The share-based payment charge of £1.4 million decreased by £1.1 million. The charge includes new grants in the year relating to the Hopscotch acquisition and ongoing charges relating to prior grants.

Net Finance Charges

Reported net finance charges decreased from £8.9 million to £6.4 million. Excluding the impact of foreign exchange and the conversion of exchangeable notes in the prior year, finance changes were £0.7 million lower in the current year, reflecting lower average net debt levels and lower average interest rates.

The weighted average interest cost was 5.5% compared to 6.1% in the prior year, giving a cash interest cover of 9.2 times underlying EBITDA (2011: 8.2 times).

Tax

The tax charge for the year was £6.9 million (2011: £4.0 million) giving an effective tax rate of 29.9% (2011: 35.1%). The effective rate in 2011/12 was higher than the average of the statutory rates in the jurisdictions in which the group operates mainly due to the impact of costs incurred that are not deductible for tax purposes such as acquisition costs, provisions and share-based payment charges.

On an adjusted basis, excluding operating one-off items, amortisation of intangible assets, share-based payment charges and one-off items in net finance costs and taxation, the effective tax rate was 26.0% (2011: 27.2%). This is lower than the simple average of tax rates of the countries in which the Group operates mainly due to benefits in some jurisdictions from recognising historic tax losses.

Earnings per Share

Reported profit after tax was £16.2 million (2011: £7.4 million). Reported diluted earnings per share from continuing operations was 7.8 pence (2011: 4.1 pence). The increase reflects the strong trading performance in the year. On an adjusted basis profit after tax was £31.8 million, 35.3% ahead of the prior year. The adjusted diluted earnings per share was 15.4 pence (2011: 13.0 pence), up 18.5% and incorporates the impact of the increase in the number of dilutive shares following the strong share price performance in the year.

Financing and Cashflow

The net debt balances at 31 March 2012 comprise the following:

The increase in net debt comprises an increase in adjusted net debt of £5.5 million and increase of £24.0 million in the Television Production business.

* Other non-current assets comprise property, plant and equipment and intangible software.

Cash flows from operating activities at £124.1 million were 18.3% ahead of the previous year reflecting the improved underlying EBITDA and strong cash generation from the Group's investment and production activities.

The Group invested £135.8 million in content rights and television programmes in the year (2011: £91.3 million) and incurred cash costs of £6.3 million relating to the May 2011 acquisition of the Hopscotch business.

Adjusted Net Debt

The Adjusted Net Debt balance was £44.1 million, up £5.5 million from the previous year end. The increase is driven primarily by the acquisition of Hopscotch (£6.3 million) and a significant increase in investment in content rights. Adjusted net debt leverage (defined as adjusted net debt divided by underlying EBITDA) further reduced year on year and was 0.8 times at 31 March 2012 (2011: 0.9 times).

During the year the Company signed an extension to its existing senior credit facility, setting a new maturity date of October 2014 and increasing the amount available from September 2012. At 31 March 2012, using prevailing exchange rates, the total available facility was US$224 million and in September 2012 this will reduce to $198 million.

Television Production Net Debt

Television Production net debt increased by £24.0 million year on year to £46.1 million reflecting the large number of high value 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 Television business 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 £20.8 million to £211.7 million at 31 March 2012 (2011: £190.9 million). The increase reflects the strong trading in the year.

The directors acknowledge guidance issued by the Financial Reporting Council relating to going concern. The directors consider it appropriate to prepare the accounts on a going concern basis, as set out in Note 1 to this preliminary announcement.

Consolidated Income Statement

For the year ended 31 March 2012

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2012

Consolidated Balance Sheet

As at 31 March 2012

Consolidated Cash Flow Statement

For the year ended 31 March 2012

Consolidated Statement of Changes in Equity

For the year ended 31 March 2012

Notes to the Financial Statements

For the year ended 31 March 2012

1. Basis of preparation

Financial statements

The full year results for the year ended 31 March 2012 have been extracted from the audited consolidated financial statements which have not yet been sent to shareholders. The financial information set out in this preliminary announcement does not constitute statutory accounts but is derived from those accounts. While the financial information in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards ('IFRS'), this announcement does not itself contain sufficient information to comply with IFRS.

The auditors have reported on the statutory accounts for the year ended 31 March 2012 and their report was unqualified.

Additional performance measures

The Group presents one-off items, underlying EBITDA, adjusted profit before tax and adjusted earnings per share information. These measures are used by the Group for internal performance analysis and incentive compensation arrangements for employees. The terms 'one-off items', 'underlying' and 'adjusted' may not be comparable with similarly titled measures reported by other companies. The term 'underlying EBITDA' refers to operating profit or loss excluding operating one-off items, share-based payment charges, depreciation and amortisation of intangible assets. The terms 'adjusted profit before tax' and 'adjusted earnings per share' refer to the reported measures excluding operating one-off items, amortisation of intangible assets arising on acquisition, one-off items relating to the Group's taxation and financing arrangements and share-based payment charges.

Going concern

The Group meets its day to day working capital requirements and funds its investment in content through a revolving credit facility ("Facility") which matures in October 2014 and is secured on assets held in the Group. Under the terms of the Facility the Group is able to draw down in the local currencies of its operating businesses. The Facility is subject to a series of covenants including fixed charge cover, net debt against EBITDA and capital expenditure. The Group has a track record of cash generation and is in full compliance with its existing bank facility covenant arrangements.

The Group is exposed to uncertainties arising from the economic climate and also in the markets in which it operates. Market conditions could lead to lower than anticipated demand for the Group's products and services and exchange rate volatility could also impact reported performance. The directors have considered the impact of these and other uncertainties and factored them into their financial forecasts and assessment of covenant headroom. The Group's forecasts and projections, taking account of reasonable possible changes in trading performance (and available mitigating actions), show that the Group will be able to operate within the expected limits of the Facility and provide headroom against the covenants for the foreseeable future. For this reason the directors continue to adopt the going concern basis in preparing the financial statements.2. Operating segments

Segment information for the year ended 31 March 2012 is presented below on a continuing basis:

Segment information for the year ended 31 March 2011 is presented below on a continuing basis:

3. One-off items

One-off items are items of income and expenditure that are non-recurring and, in the judgement of management, should be disclosed separately on the basis that they are material, either by their nature or their size, to provide a further understanding of the Group's financial performance and enable comparison of financial performance between periods. Items of income or expense that are considered by management for designation as one-off are as follows:

(a) Strategic review

During the year the company undertook a strategic review including consideration of a sale of the business. Amounts incurred comprised legal and corporate advisory costs.

(b) Acquisition-related costs

Acquisition-related costs in the current year include the final costs of acquiring the Hopscotch group of companies ("Hopscotch") further detailed in note 8. Amounts in the financial year ended 31 March 2011 mainly relate to the initial costs of acquiring Hopscotch.

(c) Other

Other one-off items in the prior year comprised the final restructuring costs incurred as part of the step up to a standard listing on the Main Market of the London Stock Exchange and concurrent corporate reorganisation.

4. Finance income and finance costs

Finance income and finance costs comprise:

(a) Items excluded from the calculation of adjusted earnings after tax in note 7.

5. Tax

The charge for the year can be reconciled to the profit in the income statement as follows:

Taxation is calculated at the rates prevailing in the respective jurisdictions. The standard tax rates in each jurisdiction are 27.8% in Canada (2011: 30.1%), 35.5% in the United States (2011: 35.5%), 26.0% in the United Kingdom (2011: 28.0%), 25.0% in the Netherlands (2011: 25.4%) and 30.0% in Australia.

6. Dividends

The directors are not recommending payment of a dividend (2011: nil).

7. Earnings per share

Basic earnings per share has been calculated by dividing the earnings attributable to shareholders by the weighted average number of shares in issue during the year, after deducting Treasury shares.

The adjusted basic earnings per share calculation is based on the basic earnings per share calculation after allowing for adjusted items. It is shown in order to highlight the underlying performance of the Group.

Diluted and adjusted diluted earnings per share have been calculated after adjusting the weighted average number of shares used in the basic and adjusted basic calculation to assume the conversion of all potentially dilutive shares.

Reconciliations of the profit and loss used in the basic and diluted earnings calculations to profit and loss used in the adjusted earnings per share calculations are set out below:

8. Business combinations

On 13 May 2011 the Group acquired 100% of the issued share capital of the Hopscotch group of companies ("Hopscotch"). Hopscotch is an Australian film distribution group based in Sydney focused on independent international titles alongside Australian content. Hopscotch was acquired in line with the Group's strategy to expand internationally thereby enhancing its multi-territory offering.

The book values and fair values of the assets and liabilities arising from the acquisition are set out below.

Net cash outflow arising on acquisition:

At 31 March 2012 £0.3m of cash consideration was owing to the vendors relating to finalisation of the completion accounts.

Goodwill of £7.0 million arising from the acquisition is attributable to anticipated profitability arising from the Group's enhanced access to the Australian market and future operating synergies from the combination. None of the goodwill recognised is expected to be deductible for income tax purposes.

The fair value of the 4,126,636 ordinary shares issued as part of the consideration paid for Hopscotch (£6.3 million) was determined based on the market price of 153 pence per share on the date of issue.

Acquisition-related costs included in administration costs in the Group's consolidated income statement, for the year ended 31 March 2012 amounted to £0.3 million and principally comprise professional fees.

Hopscotch contributed £15.8 million to the Group's revenue and £1.8 million to the Group's profit before tax for the period between the date of acquisition and 31 March 2012. If the acquisition had been completed on 1 April 2011 Group revenue would have been £503.8 million and Group profit before tax would have been £22.9 million.