Entertainment One Regulatory News (ETO)

Entertainment One Ltd.

Results Announcement for the Financial Year Ended 31 March 2013

Transformational Year Delivering Strong Growth

Entertainment One Ltd. ("Entertainment One", "eOne", "the Group" or "the Company"), a leading international entertainment content owner and distributor, announces its results for the financial year ended 31 March 2013.

Financial Highlights

Operational Highlights

Strategic Highlights

Darren Throop, Chief Executive Officer, commented:

"It has been a very positive year for Entertainment One and I am delighted to report another strong set of results. This clearly demonstrates the strength of our strategy of investing in world-class content and exploiting our distribution rights on a multi-territory, multi-platform basis. The successful acquisition and integration of Alliance has been a particular highlight of the year. Our application to transfer to the premium listing segment and intention to adopt a progressive dividend policy will enable us to drive value for our shareholders."

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A presentation to analysts will take place on Tuesday 21 May at 9.30am BST at Melville Room, The Montcalm London City, 52 Chiswell Street, London EC1Y 4SA.

Cautionary statement

This Results 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 Results Announcement should be construed as a profit forecast.

A copy of this Results Announcement for the year ended 31 March 2013 can be found on our website at www.entertainmentonegroup.com. Copies of the Annual Report for the year ended 31 March 2013 will be available to shareholders shortly.

BUSINESS PERFORMANCE AND FINANCIAL REVIEW

OVERVIEW

Delivering the strategy

This has been a transformational year for the Group. The business has delivered on its strategic priorities with increased investment in content driving growth in the underlying Film and Television businesses, Peppa Pig successfully delivering its first Christmas in the US and the acquisition of Alliance establishing the Group as an even stronger player in the industry. The Group's goal remains the same - to become the world's leading independent entertainment group through the production and acquisition of entertainment content rights for exploitation across all consumer media throughout the world - and the business continues to focus on its three strategic pillars:

·; Growing the Group's content portfolio through the acquisition of high-quality film and television rights alongside the development and production of television and family programming. Investment in content and programmes increased 29% to £175.0 million (2012: £135.8 million) driving a 25% increase in revenues

·; Improving investment returns by driving operational efficiencies in the Group's core territories through increased scale and growing revenues in new consumer media channels. Digital sales increased 36% year-on-year to £90.0 million and the Alliance synergies will deliver ahead of the C$20 million target and sooner than expected

·; Expanding global reach by extending the geographic footprint of the Group through corporate acquisition and partnership and increasing access for content rights to new markets. The Group expanded its operational network into Spain as part of the Alliance deal and also increased its partnership network with the addition of South Korea

The success of the Group's strategy is reflected in another strong financial performance and the business enters the new financial year with a significantly enhanced reputation and a market position that is expected to enable further developments across the Group in the future.

Acquisition of Alliance

The Group completed the acquisition of Alliance on 8 January 2013 and is now the world's largest independent film distributor with market leading positions in its two main territories, Canada and the UK. Alliance has also provided the Group with a presence in Spain, in line with the Group's strategy of expanding its distribution network internationally. Alliance contributed £69.7 million to the Group's reported revenue in the period from the date of the acquisition to 31 March 2013. If the acquisition had been completed on 1 April 2012, Group revenue for the year would have been £832.3 million.

The integration of Alliance is now substantially complete, with the businesses operating under combined leadership teams in both the UK and Canada. Our target to deliver annual synergy savings of C$20 million over a three-year period has already been surpassed, on an annualised basis, after just four months with further savings anticipated.

Premium listing

The Company is actively considering a transfer of the listing category of all of its common shares from the standard listing segment to the premium listing segment of the Official List of the Financial Conduct Authority (the "Transfer"), subject to satisfying the required eligibility criteria and has made application to the UK Listing Authority.

The FTSE Nationality Committee, which determines eligibility for the FTSE UK Index Series, is scheduled to next meet on 13 August 2013. It is anticipated that, subject to the Transfer to the premium listing segment of the Official List of the Financial Conduct Authority and other conditions being met, the Company will be considered for inclusion into the FTSE UK Index Series, which includes the FTSE 100, FTSE 250 and FTSE All-Share indices.

The Company has appointed J.P. Morgan Securities plc, which conducts its UK investment banking business as J.P. Morgan Cazenove, to act as its Sponsor in relation to the proposed Transfer and subject to the Transfer taking place, as joint corporate broker to Entertainment One.

The Board believes that a premium listing is the most appropriate listing category for the Group, providing it with exposure to a broader range of investors and enhancing the liquidity of its shares. The Board of the Company expects to make a further announcement containing full details of the Transfer in due course.

Dividend policy

The Board intends to adopt a progressive dividend policy, with an inaugural dividend payment expected to be made following the 2014 full year financial results.

The announcement of an intention to initiate dividend payments reflects the Board's confidence in Entertainment One's medium and long-term prospects and expands the universe of potential investors in the Group's common shares, further underscoring Entertainment One's position as a leading international media group.

Re-financing

In conjunction with the Alliance acquisition, the Group completed a re-financing that delivered a new five-year US$425 million syndicated debt facility. The facility ensures that the Group has access to increased funding over the next five years to support its growth plans.

Executive incentive plan

The Board has decided to put in place a new executive incentive plan for the benefit of Darren Throop, Patrice Theroux and Giles Willits (the "Incentive Plan"). The Incentive Plan, which is broadly similar to those of premium listed FTSE 250 companies, will include new proposals on salary, bonus and a long-term incentive plan ("LTIP"). It is expected that awards under the LTIP will initially be made for the benefit of Darren Throop, Patrice Theroux and Giles Willits, however awards may also be made to other employees of the Group under the LTIP. Performance will be measured against adjusted earnings per share, adjusted return on capital employed and total shareholder return. Shareholder approval will be sought in relation to the proposed adoption of the LTIP. The conditions relating to the exercise of options under the existing Management Participation Scheme (as described in more detail in Note 31 to the consolidated financial statements) have now been met, and the relevant directors have indicated an intention to exercise their put option in relation to this scheme upon Transfer subject to certain conditions. A further announcement will be made in due course.

It is the intention of management, at the time of the Company's announcement of its intention to transfer to a premium listing ("ITT Announcement"), to enter into a trading plan to sell part of their shareholding at minimum specified prices during specified periods of time, the terms of which will be agreed after the release of the ITT Announcement. Further details will be announced in due course.

Outlook

The Group started its new financial year in a very strong position. With the Alliance acquisition integrated the Group has a strong combined slate of over 250 films set for release in the coming year and a much larger library of titles. The Television division continues to grow its roster of new programming and renewals as it strengthens its network relationships, while the Family business continues to expand in line with Peppa Pig's increased international exposure.

The Board believes that the proposed move to the premium listing segment would provide it with exposure to a wider potential investor base and that its new five-year financing agreement ensures that the business has access to increased funding to support its growth plans.

DIVISIONAL REVIEWS

Following the acquisition of Alliance and the resulting restructuring of the Group's operations, the Group has updated the reporting of its divisional segments. The two new reporting segments are Film and Television.

The Film division focuses on the Group's acquisition and exploitation of film distribution rights, including physical distribution activities which were previously reported as a separate segment. The Television division focuses on the Group's Television and Family production activities and includes the results of the Group's music label.

Film Division

The completion of the Alliance acquisition in January 2013 has transformed the size and scale of the Film business which now comprises operations in the UK, Canada, the US, Spain, Benelux and Australia making it the largest independent film distributor in the world. The Group released over 200 titles (2012: 152) theatrically (including 25 Alliance titles) and grew box office takings by 79% to US$376 million (2012: US$210 million). The biggest release of the year was the fifth Twilight Saga instalment, The Twilight Saga: Breaking Dawn - Part 2, which in the UK was the highest grossing box office release of the series. Other significant releases in the year included The Impossible, Nativity 2, Quartet, The Sapphires, Silver Linings Playbook and Django Unchained.

Reported revenue increased by 25% to £518.0 million and underlying EBITDA was also up by 25% to £49.3 million supported by increased investment in content, up 57% to £95.4 million (2012: £60.9 million). Proforma revenue increased by 4% in the year to £721.2 million (2012: £693.2 million) due primarily to continuing growth in the UK and a strong performance in Australia. This drove an increase in proforma underlying EBITDA of 7% to £64.5 million (2012: £60.4 million). Proforma investment in content was £139.0 million (2012: £136.6 million). 

The Group plans to release over 250 films theatrically during the next financial year, including The Hunger Games: Catching Fire, RED 2, Now You See Me, and Ender's Game. Investment in content is expected to increase to over £175 million in the new financial year.

* 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 Alliance, which was acquired on 8 January 2013, and 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 2013. The impact of currency movements has had an immaterial impact on revenue and underlying EBITDA in the period.

Multi-territories

The Group has continued to build its slate of high profile multi-territory theatrical releases. Its multi-territory output deals now include Summit, Lionsgate, Relativity and Lakeshore. In September the Group was delighted to announce Dreamworks Films, the US production business headed up by Steven Spielberg and Stacey Snider, as its latest output partner. This increased access to high-quality content has grown the release slate significantly with multi-territory titles in the financial year including The Twilight Saga: Breaking Dawn - Part 2, Bullet to the Head, Parker, Seven Psychopaths, Warm Bodies, Safe Haven and Quartet.

Looking forward, the multi-territory slate looks strong and is expected to continue to grow in the new financial year with titles including the highly anticipated sequel, The Hunger Games: Catching Fire, science fiction action film Ender's Game (starring Harrison Ford, Abigail Breslin and Ben Kingsley), fantasy adventure The Mortal Instruments: City of Bones (Lily Collins and Jamie Cambell Bower), Princess Diana biopic Diana (starring Naomi Watts), action comedy sequel RED 2 (Bruce Willis and Helen Mirren), Anton Corbijn directed thriller A Most Wanted Man (starring Philip Seymour Hoffman), heist movie Now You See Me (Morgan Freeman, Mark Ruffalo, Jesse Eisenberg and Dave Franco) and action drama 2 Guns (Denzel Washington and Mark Wahlberg).

Film's international sales business continued to expand enhancing the Group's presence in the industry and providing additional access to content including Song For Marion and the award-winning Beasts of the Southern Wild. In the coming year the slate includes The F Word (Daniel Radcliffe) and Queen of the Night (Ryan Reynolds and Scott Speedman). The Alliance deal has also provided the Film business with increased access to quality content through its production financing activities which in the past have delivered titles such as Woman in Black and Insidious. The Group expects to facilitate the production of at least two films in the year including Suite Francaise and Insidious II.

UK

As a result of the Alliance acquisition, the business is now the largest independent film distributor in the UK. Revenue increased by 36% on a reported basis driven by strong organic growth and the post-acquisition Alliance revenues. Theatrical sales were higher, boosted by a strong box office performance which benefitted from multi-territory films and other releases which included The Impossible, Nativity 2, Song For Marion and Side Effects. In total the number of titles released increased to 29 (2012: 11).

Home video also performed strongly, releasing 85 titles driven by the larger number of theatrical releases and direct to DVD titles such as House at the End of the Street, The Courier, Crossfire, Hooligan and The Walking Dead season two. Broadcaster sales increased with Channel 4 and BBC package deals including titles such as The King's Speech and The Fighter. Digital continued to be significant with LOVEFiLM being the major contributor supported by sales to Netflix following the Alliance deal.

The new financial year is expected to see another increase in the number of theatrical releases. In addition to multi-territory titles, UK releases will include thriller Prisoners (starring Hugh Jackman, Jake Gyllenhaal and Melissa Leo), Steven Soderbergh's Liberace biopic Behind the Candelabra (Matt Damon and Michael Douglas), animated comedy Free Birds (Owen Wilson and Woody Harrelson) and Steve McQueen's latest drama Twelve Years a Slave (Michael Fassbender, Brad Pitt and Chiwetel Ejiofor). In addition to theatrically released titles, DVD releases will include the third season of hit TV series The Walking Dead, Sweet Vengeance, The Rise and Frankenstein's Army.

Canada

Following the Alliance acquisition, the eOne Film business is now Canada's largest film distributor. Overall reported revenue increased by 16% with 82 (2012: 54) theatrical releases.

In addition to the multi-territory titles, theatrical releases included Broken City, Mama, Moonrise Kingdom, Les Pee-Wee 3D, Escape From Planet Earth 3D, 21 and Over as well as Academy Award winning films Django Unchained, Zero Dark Thirty and Silver Linings Playbook. There were 191 home video releases which included films released theatrically such as The Twilight Saga: Breaking Dawn - Part 2, The Grey, Django Unchained and Zero Dark Thirty along with titles released direct to home video including Downtown Abbey and Heartland season five.

Major contracts entered into during the year included a new deal with the newly merged Acorn and Image business. Key output deals in Canada in addition to multi-territory agreements include Focus Features, IM Global, Weinstein and Miramax.

Major theatrical releases for the new financial year, in addition to multi-territory titles, will include major drama Place Beyond The Pines (starring Ryan Gosling, Bradley Cooper and Eva Mendes), Robert Redford thriller The Company You Keep (Robert Redford and Shia LaBeouf), comedy Gambit (Cameron Diaz and Colin Firth), Sofia Coppola's The Bling Ring (Leslie Mann and Emma Watson), comedy August: Osage County (Ewan McGregor, Benedict Cumberbatch, Meryl Streep and Julia Roberts), horror Jessabelle (formerly known as Ghosts), drama Only God Forgives (Ryan Gosling and Kristin Scott Thomas), Ron Howard directed action biopic Rush (Chris Hemsworth), Christmas action adventure Walking with Dinosaurs 3D, David O. Russell's thriller American Hustle (Christian Bale, Jennifer Lawrence, Bradley Cooper, Robert De Niro, Jeremy Renner and Amy Adams) and Edgar Wright directed comedy The World's End (Simon Pegg and Nick Frost). In addition straight to DVD releases will include The Protector 2, Downtown Abbey season four and Heartland season six.

The physical home entertainment wholesale business continued to experience tough trading conditions however it still grew market share year-on-year through the pick-up of new sales. The Group's new scale post the Alliance integration will put Entertainment One in an improved position to benefit from consolidation opportunities expected in the Canadian home entertainment market in the future.

Benelux

Revenue in the Benelux business increased by 9% with strong theatrical sales and the release of 58 films theatrically compared to 57 in the prior year. Lower sales in home video were offset by increases in television and digital which nearly doubled in revenues following the entrance of new local digital providers and increased sales to iTunes. The Group continues to expect that it will benefit from the expansion of the digital market through the entry of international players such as Netflix, who do not yet have a presence in Benelux.

Major theatrica lreleases included local titles Mees Kees which was number one at the box office for three weeks, De Verbouwing, Zambesia, Hope Springs and multi-territory title Looper. A reduced home video slate of 130 releases compared to 157 saw sales lower year-on-year but included successful theatrical hits Mees Kees and De Verbouwing, Ghostrider and seasons one and two of The Walking Dead.

In addition to multi-territory titles, the upcoming theatrical release slate includes comedy movie Last Vegas (starring Robert De Niro, Michael Douglas and Morgan Freeman), drama The Railway Man (Nicole Kidman and Colin Firth), Rob Reiner's new comedy And So It Goes (Michael Douglas and Diane Keaton) and the sequel to smash hit Mees Kees, Mees Kees Op Kamp. DVD releases will include Ender's Game, The Mortal Instruments, Now You See Me and RED 2.

Australia

In Australia, all revenue windows were ahead of the prior year with total revenue increasing by 80% driven by the Group's significant increase in investment following the acquisition of Hopscotch in 2011. The business released 31 films theatrically compared to 30 in the prior year. Local smash hit The Sapphires led the way and has been the business' best performer to date, along with To Rome With Love, I Give it a Year and Bachelorette.

Home video performed extremely well benefiting from the box office success of The Sapphires and from the Group's hit series The Walking Dead and Family property Peppa Pig. Over 80 titles were released, well ahead of the prior year, including notable releases Bachelorette and Seven Psychopaths. Digital revenues also increased significantly, led by The Sapphires and The Walking Dead titles.

In addition to the Group's multi-territory offerings, major theatrical releases for the new financial year will include crime drama Rush (starring Chris Hemsworth and directed by Ron Howard), Woody Allen's latest comedy Blue Jasmine (Alec Baldwin and Cate Blanchett), Grace of Monaco (Nicole Kidman) and the third film in the Before Sunrise series from Richard Linklater, Before Midnight (Ethan Hawke and Julie Delpy). DVD titles will benefit from the strong multi-territory theatrical slate along with season three of The Walking Dead and season one of Hannibal.

US

The Group's expansion in the US which commenced in the prior year saw growth in investment in content which delivered a 48% increase in total revenue. The strategy of limited-release theatrical titles resulted in eight box office titles, including A Late Quartet, Cosmopolis and Starbuck. In addition the US signed VOD deals with DirecTV and InDemand.

120 home video titles were released compared to 105 in the comparative period. Revenues also increased reflecting the higher quality of the titles and sales from theatrical releases. Major titles included Cosmopolis, Iron Sky, Katt William's comedy special Kattpacalypse and season one of eOne's television production Hell on Wheels. Digital sales also performed well and increased year-on-year, notable titles included Special Forces and Being Human: The Complete Second Season.

The Group's US strategy will continue in the new financial year with over 10 theatrical releases expected including We Are What We Are (starring Michael Parks and Kelly McGillis), comedy Cuban Fury (Chris O'Dowd, Nick Frost and Rashida Jones), drama Twice Born (Penelope Cruz and Emile Hirsch), Scatter My Ashes at Bergdorf's (Mary-Kate and Ashley Olsen and Joan Rivers) and Brian De Palma directed thriller Passion (Rachel McAdams and Noomi Rapace). DVD releases are expected to include new comedy specials from Katt Williams and Sommore, Wicked Blood and Blood of Redemption (both starring Sean Bean), limited release theatrical titles Passion and We Are What We Are, the first wide-release Peppa Pig title Princess Peppa, the second season of Hell on Wheels and the third season of Haven.

US Film includes the Group's in-house physical video and music distribution business which also represents other third-party producers and labels. Revenues increased reflecting the increased DVD release activity of the US Film business.

Spain

Spain is a new territory for the Group and was acquired as part of the Alliance transaction in January 2013. It is one of the largest independent film distribution operations in Spain. In the period since acquisition there were six theatrical releases including Silver Linings Playbook, Gambit, Parker and Beautiful Creatures. There were also eight home video releases including the Group's hit The Twilight Saga: Breaking Dawn - Part 2, Judge Dredd and Looper.

In addition to a large number of multi-territory titles, the upcoming theatrical release slate includes the Steven Soderbergh directed crime thriller Side Effects (starring Jude Law, Rooney Mara and Catherine Zeta-Jones), action blockbuster Olympus Has Fallen (Gerard Butler, Aaron Eckhart and Morgan Freeman) and Lone Survivor (Mark Wahlberg and Eric Bana).

Television Division

Television comprises the North American-based Television Production business and the UK-based Family business. It also incorporates the results of the US based music label. Revenue increased by 14% driven by strong growth in Television and Family businesses with underlying EBITDA up 2% as a result of increases in Television offset by a decline in Music. Investment in content and programmes increased by 6% to £79.7 million with 295 half hours of production (excluding Family) delivered to broadcasters compared with 237 in the previous year.

Television Production

Television Production reported another excellent year of revenue and underlying EBITDA growth and continued to hold its position as Canada's leading independent producer. Revenues were 21% ahead of the prior year due to the increase in the number of half hours of production delivered and improved library sales.

Good progress was made in obtaining renewals for existing shows and commissioning new programmes. 51% of deliveries related to new commissions (2012: 47%) indicating a very positive inflow of new production to drive future renewals. Current year renewals accounted for 49% (2012: 53%) representing 146 half hours compared to 125 in the previous year. Furthermore, the pipeline remains robust with contracted sales not yet recognised at the year-end relating to work in progress of £35 million (2012: £47 million).

Highlights of new commissions included the delivery of suspense drama Rogue starring Thandie Newton for DirecTV and medical drama Saving Hope. Other major primetime shows delivered during the year included seasons three and four of police drama Rookie Blue, season two of Hell on Wheels, season three of Haven and the fourth season of Call Me Fitz (starring Jason Priestly). Non-scripted deliveries included Sugar Stars for the Food Network, Dangerous Persuasions, Builder Boss, Perfect Storms, Mary Mary and The Sheards.

The new financial year's production slate already includes commissioned renewals for season two of Saving Hope, season three of Hell on Wheels and season four of Haven. New shows in production include Klondike, the Discovery Channel's first scripted mini-series, Bitten based on the best-selling werewolf novels of the same name, The First Martian War and Korea Hill. Television movies commissioned include Window Wonderland ordered by the Hallmark Channel and two movies based on the novels of best-selling author Mary Higgins Clark novels for GMC.

The International television sales business continued its expansion, selling the Group's own productions and third-party content. Major third-party sales during the year included all three seasons of the international hit The Walking Dead and Primeval: New World.

Family

The Family business had another year of strong licensing and merchandising sales and Peppa Pig maintained its status as the UK's number one pre-school toy licensed property. Revenue overall was up 7% with licensing and merchandising revenues increasing driven by international deals for Peppa Pig in Spain, Italy and Australia, offset by slightly lower revenues in the UK due to the timing of licensee renewals. Home video and digital sales have performed well and increased year-on-year due to strong sales in Australia and Italy.

Peppa Pig is still the Family business' key asset and saw continued progress in the financial year. In the US, prime time exposure on Nickelodeon helped underpin the retail launch of the US licencing programme with toys and DVDs available exclusively through Toys R Us. Downloads of the Peppa Pig app broke the one million mark and publishing revenues increased in the UK. Toy deals were also signed in Spain, Italy and Australia. Peppa Pig continued to expand into new broadcast territories such as Russia, Latin America and Asia. These new important markets offer the potential for further growth in the future. During the year it was agreed with creators ABD to develop a further series totalling 70 new episodes over the coming years.

Ben & Holly's Little Kingdom progressed well in the UK despite strong competition. The delivery of season two and the continued strong support of free to air television are expected to stimulate licensee demand in the forthcoming year. Ben & Holly's Little Kingdom also secured strong broadcast platforms in Spain, Italy, Germany and Benelux with merchandising launches due in the coming year in these markets.

The business is looking to expand the number of brands it manages, building on its in-house licencing and merchandising expertise, and recently acquired the exclusive worldwide distribution rights to the YouTube brand Simon's Cat.

Music

Revenue in the music label was down 9% compared to the prior year driven by a lower volume of releases in the year. Major releases on the label included new albums from DJ Drama, Dricky Graham, SWV, Joe Budden and Dwele. The new financial year will see releases from Ashanti, Michelle Williams and Pop Evil. Digital revenue continues to grow and now accounts for 70% of total revenues (2012: 53%). During the year, Entertainment One purchased the rights to the Death Row Records catalogue, representing one of the most successful urban genre catalogues in the music industry.

FINANCIAL REVIEW

The continued development of the Group's activities has delivered another year of strong growth with reported revenue up 25% to £629.1 million (2012: £502.7 million) and underlying EBITDA (Earnings before interest, tax, depreciation, amortisation of intangible assets, share-based payment charges and one-off items) up 19% to £62.5 million (2012: £52.6 million). This performance confirms the success of the Group's strategy to grow through increased investment in both our Film and Television divisions. Investment in content and programmes increased by 29% to £175.0 million (2012: £135.8 million).

On a proforma basis, which includes the full year financial results from the Alliance business which was acquired by the Group on 8 January 2013, revenue increased 6% to £832.3 million (2012: £782.0 million) and underlying EBITDA was up 6% to £77.7 million (2012: £73.5 million). Proforma investment in content and programming was up 3% to £218.6 million (2012 £211.8 million) on a proforma basis.

Adjusted operating profit (which excludes depreciation, amortisation of acquired intangibles, share-based payments and one-off items) increased 20% to £59.9 million (2012: £50.1m) reflecting the growth in underlying EBITDA. Adjusted profit before tax increased 25% to £53.8 million reflecting the increased operating profit and lower finance charges. The Group reported a loss before tax of £1.1 million compared to a profit of £16.2 million in the prior year, mainly as a result of one-off items of £26.8 million which primarily relate to the Alliance acquisition.

One-off items

One-off items totalled £26.8 million and included £19.7 million of Alliance-related restructuring and acquisition costs, £5.2 million to provide for the potential payment of the out-performance incentive plan in the future, a £1.7 million HMV and Blockbuster charge and £0.2 million of other corporate project costs.

Amortisation of intangible assets and depreciation

Amortisation of intangible assets increased £2.9 million to £19.3 million, mainly as a result of the increase in acquired intangible assets resulting from the Alliance acquisition. Depreciation was in line with the prior year at £1.5 million.

Share-based payment charge

The share-based payment charge of £1.2 million is in line with the prior year. There were no grants in the current year.

Net finance charges

Reported net finance charges increased £1.8 million to £8.2 million. Excluding the write-off of unamortised deferred finance charges on re-financing of £1.8 million and the decrease in fair value of derivative instruments of £0.3 million (2012: £0.7 million increase) finance charges were £1.0 million lower in the current year, reflecting lower average net debt levels and lower average interest rates.

The weighted average interest cost was 5.2% compared to 5.5% in the prior year, giving a cash interest cover of 9.9 times underlying EBITDA (2012: 9.2 times).

Tax

The tax charge for the year was £6.6 million (2012: £6.9 million) giving an effective tax rate of 120.0% (2012: 29.9%). The effective rate in the financial year was higher than the weighted average of the statutory rates in the jurisdictions in which the Group operates mainly due to the impact of costs incurred as part of the Alliance acquisition that are not deductible for tax purposes such as transaction costs, provisions and share-based payment charges.

On an adjusted basis, excluding operating one-off items, amortisation of acquired intangible assets, share-based payment charges and one-off items in net finance costs and taxation, the effective tax rate was 27.9% (2012: 26.0%). The year-on-year increase in the effective tax rate is due to increased non-deductible costs in the current year as well as well as recognition of deferred tax assets in the prior year.

Earnings per share

Reported basic loss per share was 0.5 pence (2012: earnings of 8.8 pence). The decrease reflects the one-off charges in the year which primarily relate to the Alliance transaction. On an adjusted basis profit after tax was £38.8 million, 22% ahead of the prior year with the adjusted diluted earnings per share at 15.9 pence (2012: 15.4 pence) ahead 3%. This reflects the impact of the increase in the number of dilutive shares following the equity raise in September 2012, the proceeds of which were used to fund the acquisition of Alliance in January 2013. Therefore the adjusted earnings per share calculation includes a period of dilution between October and December 2012 when there were no earnings from the Alliance business.

Cash flow

During the financial year there was an increase in net debt resulting from a net outflow of funds from the Group which primarily reflects the impact of the Alliance acquisition which was completed during the period.

Cash flows from operating activities at £178.0 million were 43% 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 £175.0 million in content rights and television programmes in the year (2012: £135.8 million) and £4.2 million to purchase the iconic music library assets of Death Row Records.

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

The net cash outflow from the acquisition of subsidiaries was £141.0 million. £140.7 million related to the January 2013 acquisition of Alliance and £0.3 million related to final amounts paid relating to the acquisition of Hopscotch in the prior period. As part of the acquisition of Alliance, £105.9 million of net proceeds were raised from issue of ordinary shares. The remaining £1.5 million from the issue of shares is in relation to share options exercised (£0.2 million) and the exercise of warrants by Lionsgate/Summit (£1.3 million).

Financing

The net debt balances at 31 March 2013 comprise the following:

The adjusted net debt balance was £87.8 million, up £43.7 million from the previous year end. The increase is driven primarily by the acquisition of Alliance (£140.7 million), partially offset by share placement of £107.4m, and a significant increase in investment in content rights and programmes. Adjusted net debt leverage (defined as adjusted net debt divided by underlying EBITDA) increased year-on-year and was 1.4 times at 31 March 2013 (2012: 0.8 times).

On 8 January 2013, the Group re-financed its previous bank facility which was due to mature in October 2014. The new arrangement is a US$425.0 million multi-currency, five-year secured facility which expires in January 2018. The facility comprises a revolving credit facility ("RCF") which can be funded in US dollars, Canadian dollars, pounds sterling and euros, a Canadian dollar term loan and a pounds sterling term loan. These borrowings are secured by the assets of the Group. The facility is with a syndicate of banks managed by JP Morgan Chase N.A. At 31 March 2013, the total available facility was equivalent to US$418.4 million based on closing exchange rates.

Production net debt increased by £10.6 million year-on-year to £56.7 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 Production businesses and represents shorter-term working capital financing that is arranged and secured on a production-by-production basis.

Financial position and going concern basis

The Group's net assets increased £119.1 million to £330.8 million at 31 March 2013 (2012: £211.7 million). The increase primarily reflects the acquisition of Alliance 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 3 to this Results Announcement.

Statement of Directors' Responsibility

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

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

·; properly select and apply accounting policies;

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

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

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

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

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

Responsibility statement

We confirm that to the best of our knowledge:

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

·; the Business and Financial Review on pages 3 to 14 include a fair review of the development and performance of the business and the position of the Group.

By order of the Board

Giles Willits

Director

20 May 2013

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

We have audited the consolidated financial statements of Entertainment One Ltd. for the year ended 31 March 2013 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of changes in equity and the related Notes 1 to 35. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company's members, as a body, in accordance with Disclosure and Transparency Rule 4.1. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Statement of Directors' Responsibilities, the directors are responsible for the preparation of the consolidated financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the consolidated financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the consolidated financial statements

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

Opinion on consolidated financial statements

In our opinion the consolidated financial statements:

·; give a true and fair view of the state of the Group's affairs as at 31 March 2013 and of its loss for the year then ended; and

·; have been properly prepared in accordance with IFRSs as adopted by the European Union.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, United Kingdom

20 May 2013

Consolidated Income Statement

for the year ended 31 March 2013

All activities relate to continuing operations. All of the (loss)/profit for the year is attributable to the owners of the ultimate parent company.

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2013

All of the total comprehensive income for the year is attributable to the owners of the ultimate parent company.

Consolidated Balance Sheet

at 31 March 2013

These consolidated financial statements were approved by the Board of Directors on 20 May 2013.

Giles Willits

Director

Consolidated Statement of Changes in Equity

for the year ended 31 March 2013

1 See Note 30 for further details.

Consolidated Cash Flow Statement

for the year ended 31 March 2013

Notes to the Consolidated Financial Statements

for the year ended 31 March 2013

1. Nature of operations and general information

Entertainment One Ltd. and subsidiaries ("the Group") is a leading independent entertainment group focused on the acquisition, production and distribution of film and television 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 Company has a standard listing on the London Stock Exchange. Segmental information is disclosed in Note 5.

Entertainment One Ltd. presents its consolidated financial statements in pounds sterling, which is also the functional currency of the parent company. These consolidated financial statements were approved for issue by the Board of Directors on 20 May 2013.

2. New, amended, revised and improved Standards and Interpretations

Amendments to Standards adopted during the year

During the year, the following amendments were adopted by the Group:

The above amendments have had no material impact on the Group's financial position, performance or its disclosures.

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

At the date of authorisation of these consolidated financial statements, the following Standards and Interpretations, which have not been applied in these consolidated financial statements are in issue but not yet effective for periods beginning 1 April 2012:

The directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group's financial statements in the period of initial application.

3. Significant accounting policies

Use of additional performance measures

The Group presents underlying EBITDA, one-off items, 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 underlying, one-off items, 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 acquisitions, one-off items relating to the Group's financing arrangements, share-based payment charges and, in the case of adjusted earnings per share, one-off tax items.

Basis of preparation: (i) Preparation of the consolidated financial statements on the going concern basis

The Group's activities, together with the factors likely to affect its future development are set out in the Business and Financial Review on pages 3 to 14.

The Group meets its day-to-day working capital requirements and funds its investment in content through a revolving credit facility which matures in January 2018 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 amounts drawn down by currency at 31 March 2013 are shown in Note 23.

The facility is subject to a series of covenants including fixed charge cover, gross 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. At 31 March 2013 the Group had £33.4 million of cash, £144.5 million of net debt and undrawn amounts under the facility of £153.2 million.

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.

Basis of presentation: (ii) Other

These consolidated financial statements have been prepared under the historical cost convention (except for derivative financial instruments and share-based payments that have been measured at fair value) and in accordance with applicable International Financial Reporting Standards as adopted by the EU and IFRIC interpretations (IFRS). The Group financial statements comply with Article 4 of the EU IAS Regulation.

Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company (Entertainment One Ltd.) and its subsidiaries (the Group). The financial statements of the subsidiaries are prepared for the same reporting periods as the parent company, using consistent accounting policies. Subsidiaries are fully consolidated from the date of acquisition and continue to be consolidated until the date of disposal. All intra-group balances, transactions, income and expenses and unrealised profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.

Business combinations

Business combinations are accounted for using the acquisition method. The cost of a business combination is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the acquirer measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets.

3. Significant accounting policies (continued)

The cost of a business combination is measured as the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in the consolidated income statement as incurred.

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, is recognised either in the consolidated income statement or as a change to other comprehensive income. If the contingent consideration is classified as equity, it is not re-measured until it is finally settled within equity.

Goodwill arising on a business combination is recognised as an asset and initially measured at cost, being the excess of aggregate of the consideration transferred and the amount recognised for non-controlling interests over the fair value of net identifiable assets (including other intangible assets) acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary or business acquired, any negative goodwill is recognised immediately in the consolidated income statement.

Revenue recognition

Revenue represents the amounts receivable for goods and services provided in the normal course of business, net of discounts and excluding value added tax (or equivalent). Revenue is derived from the licensing, marketing and distribution of feature films, television, video programming and music rights. Revenue is also derived from television production and licensing and merchandising sales. The following summarises the Group's main revenue recognition policies:

·; Revenue from the exploitation of film and music rights is recognised based upon the contractual terms of each agreement.

·; Revenue is recognised where there is reasonable contractual certainty that the revenue is receivable and will be received.

·; Revenue from television licensing represents the contracted value of licence fees which is recognised when the licence term has commenced, the production is available for delivery, substantially all technical requirements have been met and collection of the fee is reasonably assured.

·; Revenue from the sale of own or co-produced television productions is recognised when the production is available for delivery and there is reasonable contractual certainty that the revenue is receivable and will be received.

·; Revenue from the sale of DVD, video and audio inventory is recognised at the point at which goods are despatched. A provision is made for returns based on historical trends.

·; Revenue from licensing and merchandising sales represents the contracted value of licence fees which is recognised when the licence terms have commenced and collection of the fee is reasonably assured.

Pension costs

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.

Operating leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. Rentals payable under operating leases are charged to the consolidated income statement on a straight-line basis over the lease term.

Borrowing costs

Borrowing costs, including finance expense, are recognised in the consolidated income statement in the period in which they are incurred. Borrowing costs are accounted for using the effective interest rate method.

Borrowing costs directly attributable to the acquisition or production of a qualifying asset (such as investment in programmes) form part of the cost of that asset and are capitalised.

3. Significant accounting policies (continued)

Foreign currencies

(a) Within individual companies

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

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

(b) Retranslation within the consolidated financial statements

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at average exchange rates for the period. Foreign exchange differences arising, if any, are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognised as income or expenses in the period in which the operation is disposed of.

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, in order to provide a better understanding of the Group's financial performance and enable comparison of financial performance between periods.

Taxation

(a) Income tax

The income tax expense/credit represents the sum of the income tax currently payable and deferred tax.

The income tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's asset or liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

(b) Deferred tax assets and liabilities

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

3. Significant accounting policies (continued)

Deferred tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the consolidated income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt within equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities. This applies when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Goodwill

Goodwill arising on a business combination is recognised as an asset and initially measured at cost, being the excess of aggregate of the consideration transferred and the amount recognised for non-controlling interests over the fair value of net identifiable assets (including other intangible assets) acquired and liabilities assumed. Transaction costs directly attributable to the acquisition form part of the acquisition cost for business combinations prior to 1 January 2010 but from that date such costs are written off to the consolidated income statement and do not form part of goodwill. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Goodwill is allocated to cash generating units (CGUs) which are tested for impairment annually or more frequently if there are indications that goodwill might be impaired. The CGUs identified are the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other groups of assets. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Other intangible assets

Other intangible assets acquired by the Group are stated at cost less accumulated amortisation. Amortisation is charged to administrative expenses in the consolidated income statement on a straight-line basis over the estimated useful life of intangible fixed assets unless such lives are indefinite.

Other intangible assets mainly comprise amounts arising on consolidation of acquired subsidiaries such as exclusive content agreements and libraries, customer relationships, exclusive distribution rights, brands and trade names and non-compete agreements. They also include amounts arising in relation to costs of software.

Other intangible assets are generally amortised over the following periods:

Investment in programmes

Investment in programmes that are in development and for which the realisation of expenditure can be reasonably determined, are classified and capitalised in accordance with IAS 38 Intangible assets as productions in progress within investment in programmes. On completion of production the cost of investment is reclassified as investment in programmes. Also included within investment in programmes are programmes acquired on acquisition of subsidiaries.

Amortisation of investment in programmes, including government grants credited, is charged to cost of sales unless it arises from revaluation on acquisition of subsidiaries in which case it is charged to administrative expenses. The maximum useful life is considered to be 10 years.

3. Significant accounting policies (continued)

Government grants

A government grant is recognised and credited as part of investment in programmes when there is reasonable assurance that any conditions attached to the grant will be satisfied and the grants will be received and programme has been delivered. Government grants are recognised at fair value.

Property, plant and equipment

Property, plant and equipment are stated at original cost less accumulated depreciation. Depreciation is charged to write off cost less estimated residual value of each asset over their estimated useful lives using the following methods and rates:

The carrying amounts of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Group reviews residual values and useful lives on an annual basis and any adjustments are made prospectively.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the derecognition of the asset (determined as the difference between the sales proceeds and the carrying amount of the asset) is recorded in the consolidated income statement in the period of derecognition.

Interests in joint ventures

The Group has interests in joint ventures which are jointly controlled entities. The Group recognises its interest in joint ventures using proportionate consolidation, under which the Group combines its share of each of the assets, liabilities, income and expenses of the joint venture with similar items, line-by-line, in its consolidated financial statements. The financial statements of the Group's joint ventures are prepared for the same reporting period as the Group. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

Impairment of non-financial assets

The carrying amounts of the Group's non-financial assets are tested annually for impairment (as required by IFRS in the case of goodwill) or when circumstances indicate that the carrying amounts may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. The recoverable amount is the higher of an asset's or cash-generating unit's (CGU) fair value less costs to sell and its value-in-use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered to be impaired and is written down to its recoverable amount. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.

Inventories

Inventories are stated at the lower of cost, including direct expenditure and other appropriate attributable costs incurred in bringing inventories to their present location and condition, and net realisable value. The cost of inventories is calculated using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

3. Significant accounting policies (continued)

Investment in content rights

In the ordinary course of business the Group contracts with film producers to acquire rights to exploit films. Certain of these agreements require the Group to pay minimum guaranteed advances (MGs), the largest portion of which often becomes due when the film is received by the Group, usually some months subsequent to signing the contract. MGs are recognised in the consolidated balance sheet when a liability arises, usually on delivery of the film to the Group.

Investments in content rights are recorded in the consolidated balance sheet if such amounts are considered recoverable against future revenues. These costs are amortised to cost of sales on a revenue forecast basis over a period not exceeding 10 years from the date of initial release. Acquired libraries are amortised over a period not exceeding 20 years. Amounts capitalised are reviewed at least quarterly and any portion of the unamortised amount that appears not to be recoverable from future revenues is written off to cost of sales during the period the loss becomes evident. Balances are included within current assets if they are expected to be realised within the normal operating cycle of the business. The normal operating cycle of the business can be greater than 12 months. In general 75% of film content is amortised within 12 months of theatrical release.

Trade and other receivables

Trade receivables are generally not interest bearing and are stated at their fair value as reduced by appropriate allowances for estimated irrecoverable amounts.

Cash and cash equivalents

Cash and cash equivalents in the consolidated balance sheet comprise cash at bank and in-hand. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the consolidated balance sheet.

Interest-bearing loans and borrowings

All interest-bearing loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the consolidated income statement when the liabilities are derecognised as well as through the amortisation process.

Interim production financing relates to short-term financing for the Group's television productions. Interest payable on interim production financing loans is capitalised and forms part of the cost of production of investment in programmes.

Deferred finance charges

All costs incurred by the Group that are directly attributable to the issue of debt are initially capitalised and deducted from the amount of gross borrowings. Such costs are then amortised through the consolidated income statement over the term of the instrument using the effective interest rate method.

Should there be a material change to the terms of the underlying instrument, any remaining unamortised deferred finance charges are immediately written-off to the consolidated income statement as a one-off finance item. Any new costs incurred as a result of the change to the terms of the underlying instrument are capitalised and then amortised over the term of the new instrument, again using the effective interest rate method.

Trade and other payables

Trade payables are generally not interest-bearing and are stated at their nominal value.

3. Significant accounting policies (continued)

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, where the obligation can be estimated reliably, and where it is probable that an outflow of economic benefits will be required to settle that obligation. Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material. Where discounting is used, the increase in the provision due to unwinding the discount is recognised as a finance expense.

Derivative financial instruments and hedging

Derivative financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument.

The Group uses derivative financial instruments to reduce its exposure to foreign exchange and interest rate movements. The Group does not hold or issue derivative financial instruments for financial trading purposes.

Derivative financial instruments are classified as held-for-trading and recognised in the consolidated balance sheet at fair value. Derivatives designated as hedging instruments are classified on inception as cash flow hedges, net investment hedges or fair value hedges.

Changes in the fair value of derivatives designated as cash flow hedges are recognised in equity to the extent that they are deemed effective. Ineffective portions are immediately recognised in the consolidated income statement. When the hedged item affects profit or loss then the amounts deferred in equity are recycled to the consolidated income statement.

For net investment hedges, to the extent that movements in the fair values of these instruments effectively offset the underlying risk being hedged, they are recognised in the translation reserve until the period during which a foreign operation is disposed of or partially disposed of, at which point the cumulative gain or loss is recognised in the income statement, offsetting the cumulative difference recognised on the translation of the net investment.

Fair value hedges record the change in the fair value in the consolidated income statement, along with the changes in the fair value of the hedged asset or liability.

Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are immediately recognised in the consolidated income statement.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Treasury shares

The Entertainment One Ltd. shares held in the Employee Benefit Trust are classified in shareholders' equity as treasury shares and are recognised at cost. Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds from sale and the original cost being taken to revenue reserves. No gain or loss is recognised on the purchase, sale, issue or cancellation of equity shares.

Share-based payments

The Group issues equity-settled and cash-settled share-based payments to certain employees.

Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured by means of a binomial valuation model. The expected life used in the model has been adjusted, based on management's best estimate, for the effect of non-transferability, exercise restrictions, and behavioural considerations.

3. Significant accounting policies (continued)

For cash-settled share-based payments a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each balance sheet date.

Segmental reporting

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. The Group has two reportable segments: Film and Television, based on the types of products and services from which each segment derives its revenues.

The Film segment includes revenues from all of the Group's activities in relation to the acquisition and exploitation of film distribution rights (including those revenues earned through physical home entertainment sales, previously reported under a separate Distribution segment).

The Television segment includes revenues from all of the Group's content production activities, including the production of television and music content.

The Group has changed its reporting segments in the current year as it believes that measuring its activities in relation to film distribution rights across all media separately from its activities in relation to production of content will allow the chief operating decision maker to most effectively allocate resources to the individual segments, in order to maximise the Group's overall revenues.

4. Significant accounting judgements and key sources of estimation uncertainty

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

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

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are discussed below.

Impairment of goodwill

The Group is required to test, at least annually, whether goodwill has suffered any impairment. The recoverable amount is determined based on value-in-use calculations. The use of this method requires the estimation of future cash flows and the choice of a suitable discount rate in order to calculate the present value of these cash flows. At 31 March 2013, the carrying amount of goodwill was £218.5 million (2012: £108.9 million). Further details of goodwill are contained in Note 15.

Acquired intangible assets

The Group recognises intangible assets acquired as part of business combinations at fair value at the date of acquisition. The determination of these fair values is based upon management's judgement and includes assumptions on the timing and amount of future incremental cash flows generated by the assets and selection of an appropriate cost of capital. Furthermore, management must estimate the expected useful lives of intangible assets and charge amortisation on these assets accordingly. At 31 March 2013, the total carrying amount of the Group's acquired intangibles was £126.5 million (2012: £53.4 million). Further details of acquired intangibles are contained in Note 16.

4. Significant accounting judgements and key sources of estimation uncertainty (continued)

Investment in programmes and investment in content rights

The Group capitalises investment in programmes and investment in content rights and amortises to cost of sales on a revenue forecast basis. Amounts capitalised are reviewed at least quarterly and any that appear to be irrecoverable from future revenues are written-off to cost of sales during the period the loss becomes evident. The estimate of future revenues depends on management judgement and assumptions based on the pattern of historical revenue streams and the remaining life of each contract. At 31 March 2013, the carrying amount of investment in programmes was £56.9 million (2012: £45.6 million) and the carrying amount of investment in content rights was £215.7 million (2012: £97.7 million). Further details of investment in programmes and investment in content rights are contained in Notes 17 and 20, respectively.

Provisions for onerous film contracts

The Group recognises a provision for an onerous film title when the unavoidable costs of meeting the obligations under the contract exceed the expected benefits to be received under it. The estimate of the amount of the provision requires management to make judgements and assumptions of future cash inflows and outflows and also an assessment of the least cost of exiting the contract. To the extent that events, revenues or costs differ in the future, the carrying amount of provisions may change. At 31 March 2013, the carrying amount of onerous film contracts was £20.8 million (2012: £nil). Further details of onerous film contracts are contained in Note 26.

Share-based payments

The charge for share-based payments is determined based on the fair value of awards at the date of grant by use of the binomial model which require judgements to be made regarding expected volatility, dividend yield, risk free rates of return and expected option lives. The list of inputs used in the binomial model to calculate the fair values is provided in Note 31.

Deferred tax

Deferred tax assets and liabilities require management's judgement in determining the amounts to be recognised. In particular, judgement is used when assessing the extent to which deferred tax assets should be recognised with consideration to the timing and level of future taxable income. At 31 March 2013, the Group had a net deferred tax asset of £1.3 million (2012: liability of £1.6 million). Further details of deferred tax are contained in Note 12.

Income tax

The actual tax on the result for the year is determined according to complex tax laws and regulations. Where the effect of these laws and regulations is unclear, estimates are used in determining the liability for tax to be paid on past profits which are recognised in the financial statements. The Group considers the estimates, assumptions and judgements to be reasonable but this can involve complex issues which may take a number of years to resolve. The final determination of prior year tax liabilities could be different from the estimates reflected in the consolidated financial statements.

5. Segmental analysis

Operating segments

For internal reporting and management purposes, the Group is organised into two main reportable segments based on the types of products and services from which each segment derives its revenue - Film and Television. These divisions are the basis on which the Group reports its operating segment information.

5. Segmental analysis (continued)

The types of products and services from which each reportable segment derives its revenues are as follows:

·; Film - the acquisition and exploitation of film distribution rights across all media, including theatrical revenue, revenue from physical home entertainment sales, revenue from sales over digital platforms and revenue from sales to operators of traditional television networks.

·; Television - the production of television and music content and the exploitation of such content.

At 31 March 2012, prior to the acquisition of Alliance and subsequent Group restructuring, the Group's operating segments were Entertainment and Distribution. As a consequence of changes in reporting segments, prior year segment information has been restated to match the current year's presentation.

Inter-segment sales are charged at prevailing market prices.

Segment information for the year ended 31 March 2013 is presented below.

5. Segmental analysis (continued) 

Segment information for the year ended 31 March 2012 is presented below.

Geographical information

The Group's operations are located in Canada, the UK, the US, Spain, Benelux and Australia. The Film division is located in all of these geographies. The Group's Television operations are located in Canada, the US and the UK. The following table provides an analysis of the Group's revenue based on the location of the customer and the carrying amount of segment non-current assets by the geographical area in which the assets are located for the year ended 31 March 2013 and 2012.

1 Non-current assets by location exclude amounts relating to deferred tax assets.

6. Operating profit

Operating profit for the year is stated after charging/(crediting):

The total remuneration during the year of the Group's auditor was as follows:

Fees for corporate finance services in the table above for the year ended 31 March 2013 of £1.8 million relate to fees paid to the Group's auditor in respect of the Alliance acquisition. The amount of £0.4 million in the prior year includes fees related to the Hopscotch acquisition. See Note 33 for further details of these acquisitions.

7. Key management compensation and directors' emoluments

Key management compensation

The directors are of the opinion that the key management of the Group in the years ended 31 March 2013 and 2012 comprised the executive directors. These persons have authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly. At 31 March 2013, key management comprised three people (2012: three people).

The aggregate amounts of key management compensation are set out below:

1 Short-term employee benefits includes social security contributions of £0.2 million (2012: £0.2 million).

8. Staff costs

The average number of employees, including directors, are presented below:

The table below sets out the Group's staff costs (including directors' remuneration).

Included within total staff costs of £61.0 million for the year ended 31 March 2013 is £5.5 million of one-off staff costs, as described in further detail in Note 9.

9. 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 better understanding of the Group's financial performance and enable comparison of financial performance between years. Items of income or expense that are considered by management for designation as one-off are as follows: