Jetix Europe N.V.

Transcription

Jetix Europe N.V.

Jetix Europe N.V.
Jetix Europe N.V.
Annual Review and Financial Statements 2005
Jetix Europe N.V.
For more information write to:
Bergweg 50, 1217 SC
Hilversum
The Netherlands
or contact:
Investor Relations
Jetix Europe Limited
3 Queen Caroline Street
Hammersmith
London W6 9PE
Tel: +44 20 8222 3600
Fax: +44 20 8222 5906
www.jetixeurope.com
Jetix Europe N.V.
Annual Review and
Financial Statements 2005
group at a
glance
Our Business Lines
Channels & Online
>>
Broadcasts in 58 countries, reaching more than 41.8 million
homes in 18 languages
contents
1
2
4
6
8
10
12
14
18
22
26
30
32
33
35
Introduction
Our Highlights
Our Content
Our Future
Our Alliance
Our History
Chief Executive Officer’s Review
Operating and Financial Review
Channels and Online
Programme Distribution
Consumer Products
Management Board
Supervisory Board
Corporate Governance
Accounts
Owns and operates fully localised children’s channels
Localised websites in 17 languages
Annual Report Copyright Notices
© (2005) Jetix Europe. JETIX name and logo © and ™ Disney Enterprises, Inc. ASTROBOY © 2004 Tezuka Productions Co., Ltd., Sony Pictures
Entertainment (Japan) Inc. and Dentsu Inc. A.T.O.M. ALPHA TEENS ON MACHINES © 2005 Jetix Europe/SIP Animation. FUNKY COPS © 2005
AnteFilms Production/M6 Metropole Television TPS Cinema/Greenlight Media. GALACTIK FOOTBALL ™ Alphanim © 2006 Alphanim, France 2.
All rights reserved. GET ED © Disney Enterprises, Inc. HOTNEWS.NL © & ™ Jetix Europe Channels B.V. OBAN STAR-RACERS © Sav! The World
Productions/Jetix Europe 2005. All rights reserved. POWER RANGERS (all series) TM & © BVS Entertainment Inc. and BVS International N.V.
All rights reserved. PUCCA © VOOZ. All rights reserved. SONIC X © SONIC Project. All rights reserved. SPIDER-MAN © 2005 New World
Animation. Underlying property TM & © Marvel Characters, Inc. All rights reserved. SUPER ROBOT MONKEY TEAM HYPER FORCE GO! © 2005
Disney Enterprises, Inc. TOTALLY SPIES! © 2005 MARATHON – MYSTERY ANIMATION INC. TOTALLY SPIES! and all related logos, names and
distinctive likeness are the exclusive property of MARATHON ANIMATION. All rights reserved. MW © 2006 Really Big Bug Movies Ltd.
>>
W.I.T.C.H © SIP Animation 2005.
>>
Designed and produced by MAGEE
Printed by the colourhouse
Distributes programmes to terrestrial broadcasters and third
party cable and satellite channels
Over 90 clients in 44 markets
Consumer Products
Licenses merchandising rights to the Jetix library and third
party properties throughout Europe and the Middle East
Local offices in 7 markets; represented in 37 countries
group at a
glance
Our Business Lines
Channels & Online
>>
contents
1
2
4
6
8
10
12
14
18
22
26
30
32
33
35
Introduction
Our Highlights
Our Content
Our Future
Our Alliance
Our History
Channels and Online
Consumer Products
Management Board
Supervisory Board
Accounts
>>
>>
Consumer Products
Welcome to Jetix Europe N.V.’s 2005
Annual Report.
We are a leading kids entertainment
company whose mission is to deliver
the best creative content to our
audiences across Europe and the
Middle East, through television,
consumer products and digital
media channels.
Our majority shareholder, Disney,
has launched the Jetix brand in Asia
and the Americas. Together we have
created Jetix as a global kids brand,
bringing our unique combination of
action, adventure and cheeky humour
to kids across the globe. Collectively
the Jetix brand reaches 275 million
households worldwide.
1
our
highlights
97.4
187.8
155.5(4)
75.2(4)
165.3
129.3(3)
120.1(1)
Continued
growth
85.9
74.8
146.8
129.3(2)
45.1(3)
58.0(2)
40.3(1)
01
02
03
04
05
01
02
03
05
04
Revenues (6)
Subscription Revenues (6), (7)
[$ million]
[$ million]
58.9(4)
58.0(11)
(3)
53.9
(1)
50.6
53.3(2)
47.1
65.5
41.4
56.0
51.0(10)
26.3(4)
29.4
13.5(3)
21.9(2)
12.3(1)
01
02
03
04
05
01
02
03
04
EBITDA (5)
Advertising Revenues (6), (8)
[$ million]
[$ million]
05
41.8
30.9
32.3(4)
30.9
20.2(4)
38.3
34.8
24.9(3)
31.4(2)
24.7(1)
(4.4)(3)
8.9(2)
10.4
02
03
(9.9)(1)
01
2
04
05
01
02
03
04
05
Operating Cash Flow
Households reached by channels
[$ million]
[million]
w?
o
n
k
ou
Did y
se
a
Chine
c
a
c
f
u
o
P
r
ughte
Pucca
a
The d ant owner, r one
r
e
restau sed with h
es
is obs e, Garu.
n
ov
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l
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o
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a glob
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s
a
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Pucca er product
m
consu
17.1(3)
19.8
16.2(1)
13.6 (11)
3.8
5.8 (10)
(28.9)(2)
(29.8)(4)
01
02(9)
03
04
05
Net income
[$ million]
(1)
Unaudited results for the year ended May 31, 2001.
Unaudited results for the year ended June 30, 2002.
(3)
Results for the 13-months ended June 30, 2001.
(4)
Results for the 15-months ended September 30, 2002.
(5)
Consistent with prior years, EBITDA is stated before programme amortisation,
impairment and depreciation. EBITDA less depreciation, amortisation and impairment
is equivalent to operating income.
(6)
Excluding our share of non-consolidated joint ventures.
(7)
Including other small non-advertising channel revenues.
(8)
Including online advertising revenues.
(9)
Before cumulative effect of change in accounting principle.
(10)
Results for the year ended September 30, 2004, as reported (i.e. including non-recurring
charge discussed below).
(11)
To enhance comparability, the Company has also provided operating results on a pro forma
basis for the year ending September 30, 2004, which exclude the impact of non-recurring
relocation charges recognised during the year. These charges relate to the relocation of
the Company’s UK and French based operations to Disney’s premises within these markets.
The Company believes that pro forma results provide additional information useful in
analysing the underlying business results.
(2)
3
our
content
check it out
A.T.O.M.
ALPHA TEENS ON MACHINES
Set in the bustling
metropolis of Landmark
City, A.T.O.M. ALPHA TEENS
ON MACHINES follows five
extreme sport-loving teens
whose rebellious spirit and
physical skills are called upon
to push the limits of high-tech
new inventions. But this ‘dream
job’ often crosses paths with
fiendish crimelords, resulting in
high-octane and high-spirited
adventures as the Alpha Teens
become unlikely saviours of the city.
4
Great quality content
is at the heart of
the company
5
our
future
In the futuristic world of Progress
City, Ed and his team of streetsmart couriers go anywhere,
anytime, and do whatever it
takes to thwart the power-mad
plans of Mr Bedlam. Get Ed is the
second global Jetix co-production
created by the Disney TV
Animation studio, and will be the
first 3D CGI series from Jetix.
This epic series chronicles the
Great Race of Oban, an intergalactic
racing competition that takes place
every 10,000 years to determine
the winner of a mysterious ultimate
prize and the balance of power
within the Galaxy. Oban Star-Racers
incorporates a significant amount
of 3D CGI, which gives the racing
and action sequences a visual
impact rarely seen on TV.
6
Future success
is built on great
new content
The latest incarnation of Power Rangers
launched in the Autumn 2005. The 13th
season is set in the Space Patrol Delta
Academy, where humans and
aliens train to become the
newest generation of
Power Rangers. The
series chronicles the
adventures of the young
cadets as they hone
their extraordinary
genetic powers and
train to become the
best of the best.
Following the huge success of Pucca
as a consumer products property, we
have commissioned a full TV series to
be produced by Canada’s Studio B.
The new series retains the visual style
of the previous shorts, whilst adding
to Pucca’s cast and world, creating
additional licensing opportunities.
This will be the first Flash animated
series for Jetix Europe.
An innovative new entry into the realm of
sophisticated fantasy drama for kids 8-14,
our new mystery series combines live action
with stunning CGI creature animation.
A contemporary setting and the teen soap
appeal of a pin-up cast of heroes are placed
against an extraordinary backdrop of giant
monsters, epic threats and tangled webs
of mystery, in true Jetix fashion. The series
represents our commitment to innovative
live action for our older audience,
encompassing all our key brand values.
Galactik Football follows the
adventures of the Snow Kids,
a football team from the planet
Akillian as they immerse themselves
in the emotion and adventure of
competing for the prestigious
‘Galactik Football Cup’. Our heroes
master the art of using Flux, a
powerful form of magic which
raises the stakes and sees the team
face both triumph and sabotage.
7
our
Jetix Europe is part
of the Jetix global
brand alliance
alliance
Jetix Europe is a partner in the Jetix global brand alliance, established in
2004 with our majority shareholder, The Walt Disney Company.
The partners in the alliance are working together to build Jetix into a
global brand targeting kids aged 6 -14, with a particular focus on action
adventure, combined with cheeky humour.
This year the Jetix brand has been rolled out across the world:
•
Jetix Europe has renamed all of its activities
•
Disney in the U.S. is broadcasting Jetix branded programme blocks
•
In Asia, Buena Vista International Television (BVITV) has sold Jetix
branded programme blocks to a number of broadcasters, and Disney is
also carrying Jetix branded blocks on parts of its own channel network
•
Disney in Latin America has renamed all of its Fox Kids
operations as Jetix
Jetix is becoming a truly global phenomenon 1
>>>
Reaching over 275 million households
>>>
In 80 countries
>>>
Broadcasting in 25 languages
1
8
Statistics refer to the Jetix alliance around the world, Jetix Europe only
owns the operations in Europe and the Middle East.
w
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series e evil agai t Monkey
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er
monst
26%
Public shareholders
74%
ABC Family Worldwide
(A subsidiary of Disney)
Jetix Europe
ownership
structure
9
our
history
y
t
r
e
p
o
r
p
hot
s
nger ue
Ra ed as a tr
r
e
w
lish
.
Po
estab
perty
ly
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TV
is firm en kids’
nese t
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e
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Inspir t made its 13th serie
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and P iles the be diences to rs
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allow r classic P
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disco first time.
e
for th
’99
Initial Public Offering
10
’00
Channels launched in Italy, Germany, Hungary,
Turkey and Middle East
Fox Kids is now the only children’s entertainment
company with a channel in every major
European market
Fox Kids Europe reaches profitability
Channels now reach 20 million households in
38 countries
’05
All operations renamed as Jetix
First year of new management team
New channel launched in Italy – GXT
New programming delivered included W.I.T.C.H.,
A.T.O.M. Alpha Teens on Machines and Super Robot
Monkey Team Hyperforce Go!
Programme distribution division began its recovery
with a return to profits growth
Consumer products restructuring led to major
development in Home Entertainment business
’01
Jetix Europe reaches 41.8 million households in
58 countries in 18 languages via 15 channel feeds
Channels launched in Israel and Greece
Hungarian channel extended to Czech Republic
and Slovakia
Disney acquires 100% of Fox Family Worldwide,
thereby becoming Fox Kids Europe’s majority
shareholder
Channels now reach 24.9 million households in
54 countries via 11 channel feeds in 16 languages
’04
Fox Kids creates Jetix, a global programming
alliance with Disney
Jetix relocates its UK and French offices to
Disney’s local premises
First two co-productions with Disney underway:
W.I.T.C.H. and Super Robot Monkey Team
Hyperforce Go!
’02
Buena Vista International Television appointed to
service Fox Kids’ programme distribution business
Fox Kids Europe now reaches 32.3 million
households in 17 languages via 12 channel feeds
’03
10 years of Power Rangers success! Power Rangers
ranked as best selling action figure brand of all
time in the US
Disney Consumer Products appointed to represent
Power Rangers; Video distribution agreement
concluded with Buena Vista Home Entertainment
11
chief executive
officer’s review
“I am delighted to be announcing
another strong set of results from
Jetix Europe. This has been a year
of change for the Company and I am
pleased that through this period of
transition we have succeeded in
delivering on our financial targets as
well as laying the foundations for
continued growth into the future.”
12
Last year we announced that we were creating a new
programming brand with our parent, The Walt Disney Company
(Disney), centred on our new name and brand – Jetix. This year
has seen the completion in Europe and the Middle East of the
first phase of this alliance, with the transition to our new name
across all of our operations: television, on-line, new digital
media and our ancillary activities. We are excited to see that
Disney has also launched the Jetix brand in the U.S., Latin
America and Asia, making us a key player in the development
of a truly global kids’ phenomenon.
It is also good to see that our strategy of introducing the new
brand gradually, through Jetix branded blocks which preceded
the full channel renaming, has worked well. The new brand has
become firmly established across Europe and the Middle East
with our audiences, commercial partners, advertisers and
distributors.
As I highlighted when I became CEO, content is at the heart
of our company. This year we have significantly improved
our production pipeline, with a focus on developing fewer,
higher quality properties. Our content strategy is centred
on ownership, either in partnership with our parent company
or the best independent producers around the world, thus
enabling our team to be heavily involved in the creative direction
of each property early on in its development. This also more
effectively sets us up to participate in the financial rewards of
hit franchises.
This has been the first full year of our programme alliance with
Disney, and during the period we have taken delivery of the first
shows which were developed specifically for the Jetix brand.
The uniquely named Super Robot Monkey Team Hyperforce Go!,
and the soon to be aired Get Ed were produced by Disney’s
Television Animation division. It is also important to note that
the content alliance with Disney is a two way process. The Jetix
Europe led co-production of W.I.T.C.H. with SIP Animation (SIP)
in France has aired across our channels in Europe as well as the
Disney owned Jetix networks and programme blocks in North
America, Latin America and Asia. In addition, since the end of
the fiscal year, we have sold two of our flagship co-productions
to Jetix in the U.S., A.T.O.M. (Alpha Teens On Machines) and
Oban Star-Racers (co-production with Sav! the World). The
success of these shows has already allowed us to commission
second seasons of Super Robot Monkey Team Hyperforce Go!,
W.I.T.C.H. and A.T.O.M. (Alpha Teens On Machines).
The improved quality of our programming can also be seen
in the first signs of recovery in our programme distribution
division, where we work with Disney’s Buena Vista International
Television, Europe’s leading kids programme distribution
company. Despite receiving fewer new episodes this year we
managed to grow our profits, and I am confident that as our
programme pipeline continues to improve we will see further
growth in this division.
Our consumer products division built on last year’s success
with another excellent year. Power Rangers continues to exceed
our expectations, supported by the strength of Disney Consumer
Products, and our home entertainment business has delivered
outstanding results following the internal reorganisation which
focused resources on this area.
During the year we have also pushed through changes in our
corporate management structure. I believe that all of this
year’s changes, and the new focused management team, has
given the company a new momentum. We are well positioned
for the next stage in our development and I remain confident
that we will continue to rise to the many challenges and
opportunities of the fast changing media world in which
we operate.
I would also like to take this opportunity to publicly thank
each and every member of the team. You have all risen to the
challenge this year, and without you, these results would not
be possible – Thank You.
Paul Taylor
Chief Executive Officer
December 2005
13
operating and
financial review
“I am pleased that we achieved strong
earnings growth in a year of significant
transition, and that operating cash flow
remained strong despite increased
programming investment.”
Dene Stratton
Chief Financial Officer
December 2005
14
Revenues
Costs and Expenses
Revenues increased by 14% to $187.8 million against the
prior year. Channels and online grew revenues by 14% to
$144.5 million, with subscription revenues increasing by 13%
to $94.0 million and advertising revenues increasing by 14%
to $47.1 million. Other channel and online revenues, mainly
live events, research and interactive, were up 13% at $3.4 million.
The primary drivers of growth in channel and online revenues
were increased distribution of our channels, strong advertising
growth, notably in Italy, CEE and Poland, and the weakening of
the dollar against the euro and the pound.
Costs and expenses increased by 7% to $122.4 million. Excluding
the non-recurring relocation expenses in the prior year, costs
rose by 14% from $107.3 million. The primary reasons for the
increase in costs included a provision for indirect taxes, the
weakening of the dollar against the euro and the pound, and
increased costs in our consumer products division. Consumer
products cost increases were driven by an increased agency fee
on one of our properties and an accrual of third party costs
primarily attributable to prior periods, which we announced
in our interim statement.
Programme distribution revenues, serviced by Buena Vista
International Television, increased by 1% to $24.9 million.
As reported in our half-year results, revenues were weighted
towards the second half of the year, with 65% of revenues in
this period. This is due to the timing of programme deliveries
during the period rather than any seasonal factor. Programme
distribution revenues have increased slightly despite a
substantial fall in the volume of programming being delivered.
This has been driven by the strong performance of our new
programming, notably Power Rangers and W.I.T.C.H., as well as
strong sales of older titles, particularly Spiderman.
Other cost increases were attributable to the upgrading of our
broadcasting facilities, a provision for settlement of pending
legal claims and marketing spend associated with the renaming
of our channel and online businesses, partly offset by reduced
programme distribution costs due to the lower volume of new
episodes delivered.
Our consumer products revenues grew strongly, increasing by
38% to $18.4 million. This was driven by a strong performance
from Power Rangers, represented by Disney Consumer Products,
as well as significant growth in our home entertainment
division, both in-house and the properties distributed by Buena
Vista Home Entertainment.
1
EBITDA1
EBITDA increased by 28% to $65.5 million. This represents
an increase of 13% on prior year adjusted for non-recurring
relocation costs. Channel and online EBITDA increased by 37%
(21% after adjusting for non-recurring costs) to $57.6 million.
This was driven by subscription and advertising revenue growth
being only partially offset by cost increases primarily due to
foreign exchange movements, increased technical and
increased marketing costs. Programme distribution increased
EBITDA by 10% (9% after adjusting for non-recurring costs) to
$17.1 million as costs were reduced due to the lower volume
of new programming delivered, and consumer products
increased EBITDA by 23% (15% after adjusting for non-recurring
costs) to $6.3 million, with strong revenue growth partially
offset by increased costs from the increased agency fees and
the accrual described above. The change in shared costs not
allocated to segments was primarily the result of a provision
for indirect taxes.
Consistent with prior years, EBITDA is stated before programme amortisation, impairment and depreciation.
EBITDA less programme amortisation, impairment and depreciation is equal to Operating Income.
15
operating and
financial review
Revenue by line of business
Programme
Distribution
13.2%
continued
Revenue by territory
Consumer
Products
9.8%
Other
13.4%
UK
29.6%
Spain
5.1%
Channels:
Advertising
25.1%
Germany
8.2%
CEE
8.3%
Channels:
Subscription & Other
51.9%
Italy
12.9%
Benelux
11.3%
France
11.2%
Amortisation, Impairment and Depreciation
Financial Income
Programme amortisation and impairment fell by 3% to
$41.7 million. This is largely due to a significantly larger
impairment charge in the prior period versus the current year,
offset by an increase in amortisation from increased revenue
in our channels and online and consumer products divisions.
Financial income increased by 142% to $2.4 million due to
higher cash balances during the period compared with prior
year, and higher interest rates.
Depreciation and impairment of property and equipment fell by
48% to $1.4 million. This is due primarily to the asset write-off
in the prior year, associated with our relocation. There has also
been a slight increase in fully depreciated assets, which has
reduced our overall depreciation rate.
Income before tax and minority interest increased by
243% from $7.6 million to $26.1 million. This is primarily
due to increased EBITDA discussed above, as well as reduced
amortisation and depreciation and increased financial income.
16
Income Before Tax and Minority Interest
Taxation
REPORTING CURRENCY
The effective tax rate was 23% compared with 26% in the prior
fiscal year. The income tax charge for the year comprised
income, withholding and capital taxes payable amounting
to $3.0 million, and a deferred tax charge of $3.0 million.
Due to the growing usage of euros since their introduction,
and the growth in our channel and online business, we expect
the euro to be the most significant currency in which our
revenues and costs will be originated for the foreseeable
future. Therefore for the fiscal year ending September 30, 2006
we will be changing our reporting currency to the euro from
the dollar.
Minority Interest
Minority interest fell by $0.6 million to an expense of $0.4 million
as our Polish channel operation moved into profitability.
Earnings per Share
Basic earnings per share increased by 234% to 23.7 cents
per share from 7.1 cents per share. Diluted earnings per share
increased by 241% to 23.5 cents per share from 6.9 cents per
share. These gains were due to the increase in income referred
to above, with no significant change in the weighted average
number of shares outstanding.
Cash Flow
Operating cash flow remained at $30.9 million. Strong
growth in operating income was offset by the combination
of increased investment in content and the non-recurrence
of a working capital benefit associated with the office
relocation in the prior year.
Cash and cash equivalents increased by $38.3 million. This
resulted primarily from operating cash flow and the exercise
of employee stock options.
CHANGE TO IFRS
The company’s primary financial reporting is currently on a
U.S. GAAP basis. Companies listed on an E.U. Stock Exchange
are required to prepare consolidated financial statements in
accordance with International Financial Reporting Standards
(IFRS) for accounting periods commencing on or after
January 1, 2005. Jetix Europe will therefore be preparing
financial statements under IFRS for our fiscal year ending
September 30, 2006.
Preparing for the transition, we have drawn up plans for
implementation, made a survey of differences between U.S. GAAP
and IFRS, prepared a preliminary October 1, 2004 opening
balance sheet and started the process of implementing
necessary changes in systems and routines.
Significant differences between current U.S. GAAP and IFRS
reporting may include, but are not limited to, programme
amortisation and impairment, proportional consolidation
of non-consolidated joint ventures, expensing of stock based
employee compensation (also required under U.S. GAAP
for fiscal 2006) and deferred tax.
17
Channels
and online
18
15 channel
feeds reaching
58 countries
broadcasting in
18 languages
41.8 million
households
reached
17 localised
websites plus
digital and
interactive
services
19
Channels
and online
continued
144.5
47.7(5)
127.3
101.6(4)
35.6(4)
104.1
58.6(2)
57.6
79.9(3)
41.2
42.1(6)
2003
2004
28.4(3)
52.6(1)
7.0(2)
5.6(1)
2001
2002
2003
2004
2005
2001
2002
Revenue (7)
EBITDA (8)
[$ million]
[$ million]
2005
“During the year the key focus for the channels and online division
has been the renaming to Jetix.”
The renaming began in the prior financial year with our French
channel in August, and since then the rest of our feeds have
changed to Jetix. The majority transitioned in January, with
our German channel being the last to change in June 2005.
We supported the renaming with a wide range of marketing
activities, from special launches to Jetix branded touring
events, all supported by major on-air and online campaigns.
The new brand has become firmly established with
our audiences, and has also built a strong presence with
our commercial partners. The transition highlighted the
successful overall strategy we pursued, with the initial launch
of branded blocks to introduce our audiences to the new
name, followed by the rolling out of the change across
our whole channel network.
The channels have continued to expand their distribution
during the year and at the year end we reached 41.8 million
households, up 3.5 million households. This has maintained our
position as one of the leading kids’ television channels across
Europe and as at September 30, 2005, we reached 58 countries,
through 15 channel feeds broadcasting in 18 languages.
During the year we have renewed key deals with pay-tv
platforms, securing distribution of our channels into the
future. Key deals renewed were with Sky Italia in Italy, NTL
and Telewest in the U.K., Sogecable in Spain and a number
of deals in Eastern Europe.
(1)
(6)
Results for the year ended September 30, 2004, as reported.
(2)
Results for the 13-months ended June 30, 2001.
(7)
Excluding our share of non-consolidated joint ventures.
(3)
(8)
(4)
Results for the 15-months ended September 30, 2002.
(5)
Pro forma stated after excluding non-recurring relocation charges of $5.6 million.
20
highlights
>>> All of the channels have been
renamed as Jetix
>>> Channel subscribers increase by
3.5 million to 41.8 million households
>>> Channels broadcasting in 58 countries
via 15 channel feeds in 18 languages
>>> Strong advertising growth in
most markets
>>> Launch of new channel franchise
in Italy – GXT
>>> New media trials underway on
mobile and ADSL VoD
>>> Key channel distribution deals renewed
Advertising revenue has grown at more than 15% in all of our
markets except the U.K. and the Netherlands. On two of our
channels, Central and Eastern Europe and Poland, advertising
more than doubled, whilst in the U.K. and the Netherlands
advertising was broadly in line with last year. In the
Netherlands we have defended our market leading position
against a strong new market entrant, and in the U.K., our
most competitive market, we maintained our position.
In May 2005 we launched a new channel brand in Italy, GXT.
GXT targets an older “teen” audience with a mix of irreverent
humour and edgy programming. To date, the channel has
performed strongly and has significantly improved our
demographic reach, opening up the opportunity to develop
new advertising clients. We are hopeful that this format
will have significant potential in the future.
During the period the market for digital media has continued
to develop rapidly. We are working with a number of partners
to trial new services and to ensure we are present wherever
new opportunities are emerging. In France we have two deals
in place to distribute our channel over mobile phones. Trials
with Orange and SFR began in June and early performance has
been positive. In Germany we secured carriage within T-Online’s
video on demand ADSL service which distributes some of our
most popular library shows, and in the UK our channel is being
carried on the Homechoice ADSL service.
21
programme
distribution
22
Serviced by
Disney’s
Buena Vista
Television
International
90
clients
Over
in
44 markets
Library
of over
6,600
episodes
1
1
Half hour equivalents, as at September 30, 2005.
23
programme
distribution
61.4(2)
continued
51.2(2)
59.0(1)
49.2(1)
(4)
43.2
28.8 (3),(4)
40.1(3)
31.4
24.7
24.9
20.4
15.7(5)
15.5(6)
2001
2002
2003
2004
2005
2001
2002
Revenue
EBITDA (7)
[$ million]
[$ million]
2003
2004
17.1
2005
“Programme distribution revenue has increased for the first time in
recent years.”
We achieved this despite a significant reduction in the number
of episodes delivered compared with the prior year. There has
been a concerted focus on the quality of programmes that we
have been producing, and we have begun implementing our
long-term strategy of moving from acquired programming to
co-productions, in which we have significant ownership and
creative influence. The improvement is also due to the global
scale and industry relationships which Buena Vista International
Television brings to servicing our distribution operation.
The quality of our programming is highlighted by the on-air
performance of a number of our key franchises during the year,
both old and new. Power Rangers maintained its market
leadership position, airing in all five of the major European
markets and leading its timeslot with the highest kids ratings in
four of them8. On the back of the most recent movie, Spiderman
returned as one of our best selling properties, airing in all five
major European markets and was the most popular programme
with boys in all markets for its timeslot. Our new shows also sold
well with W.I.T.C.H. selling in 17 countries and Sonic X selling in
19 countries. In the four major markets where W.I.T.C.H. aired it
was number one or two in its timeslot amongst kids and Sonic X
was number one for boys in its timeslot in the three major
markets in which it aired.
During the period we have sold a new branded block and a
number of notable volume and package deals 9. A new branded
block deal has been signed with Polsat in Poland, which
complements the blocks we already have in Germany, Russia,
Czech Republic and a number of other emerging markets. New
volume deals have been signed in the U.K., Ireland and Belgium;
and major package deals have been signed in Italy, Greece,
Turkey and Finland amongst others.
(1)
(5)
(2)
Results for the 13-month period ended June 30, 2001.
(6)
(3)
(7)
(4)
Results for the 15 months ended September 30, 2002.
24
highlights
>>> Revenue marginally up, reversing
>>> 137 episodes of new programming
recent trend
>>> Strong on-air performance of
delivered
>>> Significant improvement in
key shows
programme pipeline with 244
episodes in production, up 102
from September 30, 2004
>>> New branded block, volume and
package deals
We have taken delivery of 137 new episodes during the period.
This included the initial season of our first co-production with
Disney’s Television Animation unit in the U.S., Super Robot
Monkey Team Hyperforce Go!, as well as co-productions with
other studios. This year we have received the first seasons of
W.I.T.C.H. and A.T.O.M. (Alpha Teens on Machines) from SIP in
France, and acquired new series of programming such as Sonic X.
We have also received the latest season of our flagship property,
Power Rangers.
The number of episodes we have in production has significantly
increased to 244, up 102 episodes from September 30, 2004.
New productions entered into during the period include both
new seasons of our successful properties, Power Rangers, Super
Robot Monkey Team Hyperforce Go!, W.I.T.C.H. and A.T.O.M.
(Alpha Teens on Machines), as well as new original properties
such as Get Ed, Pucca and a new “mystery” live action
production. Get Ed is a new coproduction with Disney’s TVA in
the U.S., and follows the adventures of Ed, a boy genetically
created from an ancient artefact, who works as a surreptitious
cybersleuth, foiling identity thefts and other information based
crimes whilst toiling at a futuristic messenger service. Pucca has
developed from our strong consumer products franchise, and
is a kiss-chase meets kung-fu comedy following the exploits of
Pucca, the daughter of a Chinese restaurant owner, and Garu,
a loyal ninja student. Our new “mystery” live action series will
launch next year at MIP TV and is a hybrid between live action
and CGI production techniques.
Also in production at the period end was Oban Star-Racers, our
26 episode epic co-production with Sav! the World, Super RTL
and France 3. This was recently launched at the MIPCOM TV
buying market and has generated significant early interest.
8
Source: B.A.R.B. in UK; Mediametrie in France, Spain and Germany; AGB Italia – Italy;
all sources cover the key kid demographic in all television households; time period
covers when the programmes aired between October 1, 2004 and September 30, 2005.
9
A volume deal is when a broadcaster agrees to buy a defined volume of programming
over a number of years with some programmes undefined, versus a package deal
when one or more specific titles are acquired.
25
consumer
products
panEuropean
licensing
agency
Local
offices
in
7 markets
represented
in
37
countries
26
27
consumer
products
18.4
continued
5.2(2)
5.5(5)
6.3
(4)
4.9
5.2(6)
10.7(4)
9.3(2)
4.6(1)
13.3
4.4(3)
11.3
4.0
(3)
8.5(1)
2001
9.3
2002
2003
2004
2005
2001
2002
Revenue
EBITDA (7)
[$ million]
[$ million]
2003
2004
2005
“Consumer products has performed well, driven by strong sales from
Power Rangers and home entertainment.”
We exploit our consumer products properties through a dual
strategy. We have an in-house division, Jetix Consumer Products
(JCP) which represents almost all of our properties, and we
have leveraged the global reach of Disney through Disney
Consumer Products (DCP) to distribute our global hit property,
Power Rangers, and through Buena Vista Home Entertainment
(BVHE) to distribute some of our biggest selling home
entertainment titles.
on developing new products outside of the core areas, and this
has led to strong growth in a number of smaller categories,
including youth electronics and communications, sports toys
and ride-ons. Power Rangers has also become firmly established
as a core franchise within the Disney stores.
Power Rangers has again grown strongly with our royalty
revenue from DCP up more than 40%. Retail sales have
increased in all of the major European markets, and more
than doubled in Germany and Italy 8. Action figures remain
the largest category, and despite strong competition from
Star Wars, Power Rangers ranked in the top five properties
in four of the five major markets. There has also been a focus
Within the properties represented by JCP, Pucca and Sonic X
have been particularly strong. Pucca has developed into a
uniquely distinctive brand with strong categories including
fashion and apparel, as well as stationery and accessories.
Following its success as a consumer products property, Jetix is
developing Pucca into a TV series. Together with securing the
Pucca TV rights from Vooz, we have extended our consumer
products licence period for a further 20 years, ensuring that
we benefit from the value created by the TV exposure. The
terms of our agency representation were also improved.
(1)
(6)
(2)
Results for the 13-month period ended June 30, 2001.
(7)
(3)
(4)
Results for the 15-month period ended September 30, 2002.
(8)
(5)
Source: NPD Group / Eurotoys / EPoS Tracking Service
28
highlights
>>> Strong revenue and profit growth
>>> Sonic X developing well across
the region
>>> Power Rangers, represented by
Disney Consumer Products,
performing well
>>> Home entertainment significantly
increased sales as new management
structure has improved focus
>>> Pucca licensing agency agreement
improved and extended on the back
of strong performance
Sonic X, our recent major acquisition, has been licensed across
a wide range of territories. The master toy license is developing
well with product launched across the region, and the
character has been signed for a broad range of merchandise.
On the back of this success we have increased the range of
rights we are representing.
The Jetix brand has also demonstrated its potential and strong
early recognition by establishing itself as one of our leading
licensing properties. Jetix branded items include magazine
publishing, CD compilations, supermarket promotions and the
use of the Jetix logo on a range of items from cycle helmets
and bean bags through to ice cream.
Within JCP, a dedicated unit has been set up to focus on
building our home entertainment activities. This new division
has had an excellent start, more than doubling revenues year
on year. This success has been driven by both new and library
titles, Sonic X has been licensed in 24 countries, including four
of the five major European markets, and there has been a
significant increase in multi-property deals where a number
of our library titles are licensed together as packages.
We have continued to expand the range of properties we
represent and during the period have taken on the rights for
our new “mystery” live action series, and we also control the
consumer product rights within our region for our major
co-production Oban Star-Racers.
The performance of our home entertainment business has been
a notable highlight, with a strong performance from both our
in-house operation and the titles distributed by BVHE (Power
Rangers and a number of our Marvel titles). Power Rangers has
maintained its perennial popularity, and the Marvel titles have
increased sales, leveraging the interest generated by the
release of the Spiderman and Fantastic Four theatrical movies.
29
Management
board
30
PAUL TAYLOR
Dene Stratton
Chief Executive Officer
Chief Financial Officer
Paul Taylor was formally appointed Chief Executive
Officer in November 2004 having served as Interim
CEO since July 2004. In this role, he is responsible for
leading the continued growth of all Jetix Europe’s
businesses. Mr. Taylor spent 5 years at BSkyB and was
General Manager of Movies & Pay-Per-View when he
left to join Jetix Europe. Prior to that he served as
Director of Advertising Sales at UK Gold and UK
Living. Mr. Taylor also worked at Channel Four from
1992 to 1996, and held posts at various advertising
agencies including JWT, McCanns, Lowe Howard-Spink
and Geers Gross.
Dene Stratton was appointed Chief Financial Officer
and a member of the Management Board in January
2005. He is responsible for all aspects of finance,
administration, business development and investor
relations. Prior to joining Jetix Europe he worked at
Disney, as Senior Vice President, Planning & Control
at ABC Inc., having held a number of roles within
Disney since 1990. He began his career in public
accounting with Ernst & Young in Los Angeles.
Olivier Spiner
OLIVER FRYER
Executive Vice President of International Affairs
General Counsel
Olivier Spiner was appointed as a member of the
Management Board and Executive Vice President of
International Affairs in November 1999, and is
responsible for Jetix Europe’s corporate activities.
Prior to joining Jetix Europe he served as Deputy
General Manager of Saban International Paris from
1996 and before this, from 1982, he held the
positions of Deputy General Manager and Chief
Financial Officer at Créativité and Développement.
Oliver Fryer was appointed as a member of the
Management Board in September 2003. In his role,
he is responsible for all of Jetix Europe’s contractual,
legal and business affairs issues. He previously served
as Director of Legal and Business Affairs for Jetix
Europe. Before joining the company in June 2001,
Mr. Fryer worked for The Simkins Partnership and
for Zenith Entertainment plc, where for several years
he was Director of Legal and Business Affairs.
31
supervisory
board
Thomas Staggs
Etienne de Villiers
Chairman of the Supervisory Board
Etienne de Villiers was appointed as a member of the Supervisory
Board in January 2005. Mr. de Villiers is founder and senior partner
of Englefield Capital LLP, a UK based private equity fund focused on
mid-market development capital deals. He is a non-executive Director
for Pi Capital and Video Networks, as well as non-executive Chairman
of BBC Commercial Holdings Limited. He is also the newly appointed
Executive Chairman and President of the ATP, the governing body of
men’s professional tennis. Until May 2000, Mr. de Villiers served as
President and MD of Walt Disney International Europe, Middle East
and Africa and President of Walt Disney International where he was
responsible for Disney’s production, broadcasting and distribution
activities outside the USA.
Tom Staggs was appointed as Chairman of the Supervisory Board in
November 2001. He is currently Senior Executive Vice President and
Chief Financial Officer of the The Walt Disney Company and a member
of Disney’s executive management committee, with responsibility for
the company’s worldwide finance organisation, controller functions,
acquisitions, investor relations, treasury activities, information systems,
real estate and taxes. Mr. Staggs joined Disney in 1990 as Manager of
Strategic Planning. In 1995, he became Vice President of Planning and
Development and in 1998, Mr. Staggs became Executive Vice President
and Chief Financial Officer.
Andy Bird
Andy Bird was appointed as a member of the Supervisory Board in
January 2005. As president of Walt Disney International, Mr. Bird works
with all of Disney’s business unit leaders around the world, coordinating
and overseeing growth opportunities for Disney outside the United
States. He is responsible for targeting new businesses, growing and
increasing penetration of existing businesses, and leading the
development of business and operations in emerging markets. Prior
to joining Disney, Mr. Bird spent nearly a decade with Time Warner.
Peter Seymour
Peter Seymour was appointed as a member of the Supervisory Board in
September 2005. He is currently Senior Vice President of Strategy for
Disney Media Networks where he oversees strategy development for all
of Disney broadcasting and cable programming activities. Mr. Seymour
joined Disney in 1996 as Manager of Strategic Planning. In 2001 he
became Senior Vice President of Strategic Planning responsible for
Disney’s overall corporate development activities as well as strategy
and business development for the company’s technology and
broadcasting initiatives.
Supervisory Board changes
During the year Philippe Laco, Claus Holst-Gydesen, Peter Murphy and Antoine Jeancourt-Galignani resigned from the Supervisory Board, and Andy
Bird, Etienne de Villiers and Peter Seymour joined the Supervisory Board. The Company intends the Supervisory Board to have five members, two
of which will be independent from Disney. Therefore, following the end of the period under review the company has announced that it intends
to appoint, subject to shareholder approval, Wolf-Dieter Gramatke as a non-Disney director, while Tom Staggs will be replaced by Brian Spaulding.
An EGM to approve these changes has been called on January 10, 2006. Andy Bird will be taking over as Chairman.
Wolf-Dieter Gramatke has been a freelance media consultant since 2001 and acts as a supervisory board member for a number of German media
companies including Deutsche Entertainment and Pixelpark. Previously, he was Chairman and CEO of Universal in Germany, Austria and Switzerland
and President and CEO of Polygram in Germany and worked in senior management positions in a number of German and international companies
including BMW and Columbia Pictures.
Brian Spaulding is Senior Vice President and Chief Financial Officer for Walt Disney International. In this capacity, Brian oversees the finance, business
development and information technology activities for many of Disney’s international operations. Mr. Spaulding joined Disney in 1988 as a Senior
Auditor in the company’s Management Audit department. Since that time he has held a series of domestic and international positions in Disney’s
television, filmed entertainment and corporate groups.
32
Corporate
governance
This is the first year in which the Company has been subject to
the Tabakslat Code relating to Dutch Corporate Governance
(the “Code”). The Company agrees with the aims of the Code
and seeks to achieve general compliance with it. During the
course of the year a number of changes to the rules and
regulations of the Company were developed with, and approved
by the Supervisory Board and shareholders, and have been
implemented. These changes were made in order to comply
more fully with the provisions of the Code.
At the AGM, changes to the Articles of the Company were
approved by the shareholders. The shareholders also approved
a Corporate Governance Compliance Policy and Remuneration
Policy. Subsequently, new rules for the Supervisory Board and
Management Board were approved by the Supervisory Board,
together with rules for Audit, Remuneration and Appointment
Committees. A number of corporate policies relating to business,
financial conduct and whistle-blowing have also been approved
by the Supervisory Board and implemented and can be found on
the Company’s corporate website.
For the avoidance of doubt this report relating to corporate
governance is supplied by way of information only and not
in purported satisfaction of Dutch law or regulation. As is
appropriate, full reports and information required pursuant to
Dutch law and regulation will be incorporated into the Company’s
Dutch report which will be published later in the Spring.
However, as the following issues have been the subject of recent
discussion with the shareholders and were issues highlighted in
the Company’s Remuneration and Compliance Policies, we
specifically draw your attention to the following;
•
For best practice provisions I I.2.1 and I I.2.2 of principle I I.2
(Remuneration – Management Board) the Company partly
deviates from the Code, as the current option and restricted
stock schemes for the members of the Management Board
(as for employees as a whole) do not include any formal
conditional criteria following a grant of options or restricted
stock. Additionally, options can be vested and exercised over
a period of four years (while the restricted stock vests in two
equal tranches, two and four years after grant). There is no
formal requirement to retain stock following vesting or
exercise. It is not proposed to amend this scheme, as it
broadly reflects that of the majority shareholder, Disney, and
it is considered desirable by the Supervisory Board to have
generally consistent incentive arrangements for senior
management throughout both companies. To this end, the
Supervisory Board approved new Option and Restricted
Stock Scheme rules and these were approved by shareholders
in an EGM on September 13, 2005.
•
Although the Company complies with principle I I I.2
(Independence – Supervisory Board) the Board notes that
at present three of the four members of the Supervisory
Board are employees of Disney. It is intended that a further
Supervisory Board director, not employed by Disney, will
be appointed as soon as possible.
•
Although the principles of the Supervisory Board subcommittees and their rules have been approved, these
committees have not yet been implemented. This is primarily
due to recent changes in personnel on the Supervisory Board
and it is intended that once a fifth Board member is
appointed, these committees will be staffed and will begin
their work. In the meantime, the Supervisory Board as a
whole will continue to perform the broad function of these
separate committees.
33
Corporate
governance
The Supervisory Board held 5 meetings with the Management
Board present and two without as well as a large number of
more informal contacts with and without members of the
Management Board being present. The CEO of the Management
Board consults with the Chairman and other members of the
Supervisory Board and their nominees on an informal but
regular basis. The items discussed included a number of
recurring subjects, such as the Company’s strategy, the financial
position, results and forecasts, business plans, corporate
governance and remuneration (including incentive plans) and
appointments. Other subjects included an assessment of the
structure and operation of the internal risk management and
control systems. The external auditor attended the meeting in
which the 2004 results were discussed.
34
continued
accounts
Accounts contents
36
37
38
39
40
41
Report of Independent Auditors
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders’ Equity
Notes to Consolidated Financial Statements
35
Report of Independent Auditors
To the Shareholders of Jetix Europe N.V.
We have audited the accompanying consolidated balance sheets of Jetix Europe N.V. and subsidiaries (“the
Company”), as of September 30, 2005 and as of September 30, 2004 and the related consolidated statements of
operations, cash flows and shareholders’ equity for the years then ended which have been prepared on the basis
of accounting principles generally accepted in the United States of America. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America.
These standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Jetix Europe N.V. and its subsidiaries at September 30, 2005 and September 30, 2004 and the
results of their operations and their cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
This report, including the opinion, has been prepared for and only for the Company’s members as a body in order
to meet the provisions of the listing agreement with the Euronext Stock Exchange in Amsterdam and for no other
purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior
consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London, United Kingdom
January 16, 2006
36
Consolidated Balance Sheets
as of September 30, 2005 and September 30, 2004
ASSETS
2005
$’000
2004
$’000
Cash and cash equivalents
Accounts receivable, net of allowance of $2,227,000 and $2,568,000 respectively
Prepaids and other assets
Amounts due from related parties
Programme rights, net
Investments in equity affiliates
Property and equipment, net
Deferred income taxes
Goodwill, net
124,278
59,816
6,391
14,711
112,366
1,486
2,174
9,092
28,016
86,022
49,051
5,798
20,412
116,207
2,134
3,054
12,101
28,016
Total assets
358,330
322,795
2005
$’000
2004
$’000
11,267
49,645
8,703
24,433
13,247
1,720
10,253
49,035
14,033
10,477
16,200
1,184
109,015
101,182
21,876
457,170
(204,114)
6,752
(32,369)
21,629
449,751
(204,114)
6,475
(52,128)
Total shareholders’ equity
249,315
221,613
Total liabilities, minority interests and shareholders’ equity
358,330
322,795
Notes
5
15
8
6
11
7
LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS’ EQUITY
9
15
10
Accounts payable
Accrued liabilities
Deferred income
Amounts due to related parties
Other liabilities
Minority interests
Total liabilities and minority interests
18
83,966,915 (2004 – 83,196,912) ordinary shares of m0.25 each and
100 (2004 – 100) priority shares of m0.25 each
Additional paid-in capital
Other reserves
Accumulated other comprehensive income
Accumulated deficit
The accompanying notes are an integral part of these consolidated financial statements.
37
Consolidated Statements of Operations
Year ended September 30, 2005 and September 30, 2004
Notes
17
Revenues
17
Costs and expenses
Depreciation, amortisation and impairment
13
14
19
187,838
165,345
(122,371)
(43,191)
(114,394)
(45,804)
22,276
5,147
Other income/(expense):
Interest income
Interest expense
Gain on foreign exchange
Equity in income of affiliates
4,501
(2,064)
593
787
2,814
(1,809)
648
810
3,817
2,463
Income before tax and minority interest
Tax
Minority interest (expense)/income
26,093
(5,960)
(374)
7,610
(1,972)
190
Net income
19,759
5,828
2005
2004
23.7
23.5
7.1
6.9
83,502
84,065
82,618
84,156
EARNINGS PER SHARE (CENTS)
Basic Earnings per share
Diluted Earnings per share
Weighted average number of ordinary shares outstanding (’000)
– Basic
– Diluted
38
2004
$’000
Operating income
Total other income, net
11
2005
$’000
Consolidated Statements of Cash Flows
Year ended September 30, 2005 and September 30, 2004
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash generated by operating activities:
Amortisation and impairment of programme rights
Depreciation of property and equipment
Impairment of property and equipment
Provision for doubtful debts
Dividends from equity affiliates
Minority interest expense/(income)
Deferred tax
Changes in operating assets and liabilities(1):
Accounts receivable
Amounts due from related parties
Programme rights
Prepaids and other assets
Accounts payable
Accrued liabilities and deferred income
Amounts due to related parties
Other liabilities
Net cash generated by operating activities
2004
$’000
19,759
5,828
41,748
1,443
–
(341)
(787)
1,500
374
3,009
43,008
1,884
912
(472)
(810)
–
(190)
(1,331)
(10,318)
5,701
(37,907)
(593)
1,014
(4,720)
13,956
(2,953)
(5,474)
(4,082)
(33,990)
865
(2,445)
12,291
(1,331)
16,200
30,885
30,863
INVESTING ACTIVITIES
Purchases of property and equipment
(669)
(1,169)
Net cash used in investing activities
(669)
(1,169)
FINANCING ACTIVITIES
Exercise of Stock Options
7,666
4,295
Net cash generated by financing activities
7,666
4,295
NET INCREASE IN CASH AND CASH EQUIVALENTS FROM
OPERATING, INVESTING AND FINANCING ACTIVITIES
NET INCREASE IN CASH DUE TO FOREIGN CURRENCY FLUCTUATIONS
37,882
374
33,989
583
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
38,256
86,022
34,572
51,450
124,278
86,022
2,869
2,064
1,316
1,809
CASH AND CASH EQUIVALENTS, END OF YEAR
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR TAXES
CASH PAID FOR INTEREST
(1)
2005
$’000
Changes in operating assets and liabilities include the impact of foreign currency translation movements.
39
Consolidated Statements of
Shareholders’ Equity
BALANCE AT
SEPTEMBER 30, 2003
Net income
Foreign currency
translation adjustments
Share options exercised
Comprehensive income
BALANCE AT
SEPTEMBER 30, 2004
Accumulated(2)
other
comprehensive
Other(1) Accumulated
income
reserves
deficit
(loss)
$’000
$’000
$’000
Ordinary
and
priority
shares
(Note 18)
$’000
Additional
paid-in
capital
$’000
21,426
445,659
–
–
–
5,828
–
5,828
–
203
–
4,092
–
–
–
–
7,487
–
7,487
–
–
–
–
–
–
13,315
21,629
449,751
(204,114)
(204,114)
(57,956)
(52,128)
(1,012)
6,475
Net income
Foreign currency
translation adjustments
Share options exercised
–
–
–
19,759
–
19,759
–
247
–
7,419
–
–
–
–
277
–
277
–
Comprehensive income
–
–
–
–
–
20,036
21,876
457,170
BALANCE AT
SEPTEMBER 30, 2005
(204,114)
(32,369)
40
Comprehensive
income
(loss)
$’000
(1)
Deemed distribution of cash and note payable at IPO to all shareholders.
(2)
This consists solely of cumulative translation adjustments.
6,752
1.
DESCRIPTION OF BUSINESS, ORGANISATION AND BASIS OF PRESENTATION
Description of business
Jetix Europe N.V. (together with its subsidiaries, “the Company”) is a pan-European integrated children’s
entertainment company with localised television channels & online, programme distribution and consumer
products (licensing, merchandising and home entertainment) businesses.
Channel and online operations began in October 1996 with the launch of the first channel in the United
Kingdom. In the last 9 years, the Company has established operations in most European countries and
together with its affiliates is currently broadcasting 15 children’s television channel feeds in 18 different
languages in 58 countries via cable and direct to home (DTH) satellite transmission. Main channel markets
currently include France, Germany, Italy, the Netherlands, Poland, Scandinavia, Spain, the United Kingdom and
various countries in the Middle East and Central and Eastern Europe. The Company also operates 17 fully
localised websites.
The Company’s programme distribution business is based on rights to children’s programming from the Jetix
Library. The Jetix Library comprises the following rights;
•
The rights contributed by, acquired from or co-produced with ABC Family Worldwide, Inc. (ABCW) or
its affiliates.
•
Other rights acquired from or co-produced with third parties.
The Jetix Library is one of the largest and most recognised libraries of children’s programming in the world.
The Company’s consumer products business covers many European countries and includes operations in
France, Germany, Italy, Spain, the Netherlands, the United Kingdom and Israel.
Organisation
Jetix Europe N.V. (Jetix Europe) was incorporated in the Netherlands in November 1999. At the initial public
offering of the ordinary shares of Jetix Europe (IPO) in November 1999, in consideration for 62.5 million
shares in Jetix Europe, Fox Family Worldwide, Inc. (FFWW) contributed to Jetix Europe, at book value, its
interests in the subsidiaries and businesses specifically noted on page 42.
On October 24, 2001, The Walt Disney Company (Disney) concluded the acquisition of the Company’s
majority shareholder, FFWW, and thereby assumed 75.7% ownership of Jetix Europe. As of that date, FFWW
changed its name to ABCW. ABCW indirectly holds 74.4% of the shares in Jetix Europe at September 30, 2005
(75.1% at September 30, 2004).
41
1.
DESCRIPTION OF BUSINESS, ORGANISATION AND BASIS OF PRESENTATION (continued)
Basis of presentation
These consolidated financial statements are prepared under accounting standards generally accepted in the
United States of America (US GAAP) and do not constitute statutory accounts under Dutch Law. Dutch
statutory accounts are being produced and will be filed at the Chamber of Commerce, PO Box 378, 1200 AJ,
Hilversum, The Netherlands. A copy of the Dutch statutory accounts will be available from Jetix Europe’s
registered office, Bergweg 50, 1217 SC, Hilversum, The Netherlands.
The consolidated financial statements of Jetix Europe reflect the financial statements of:
Country of
Incorporation
Company Name
Jetix Entertainment Limited
Jetix Entertainment Spain SL
Jetix Europe Channels B.V.
Jetix Europe Limited(1)
Jetix Europe Properties Sarl
Jetix Hungary Financial Management Limited Liability Company
Jetix Europe GmbH (formerly Fox Kids Germany GmbH)
Jetix Israel Limited (formerly Fox Kids Israel Limited)
Jetix Italy Srl (formerly Fox Kids Italy Srl)
Jetix Poland Limited (formerly Fox Kids Poland Limited)(1)
Jetix Services B.V.
Jetix Consumer Products UK Limited(1)
Jetix Consumer Products Italy Srl(1)
Active Licensing France SAS(1)
Jetix Poland NV(1)
Kids Entertainment Services EPE
Lollipop Productions Limited (incorporated January 1, 2005)
Jetix Consumer Products Israel Limited (merged into Jetix Israel Limited
effective July 1, 2004)
Fox Kids Play B.V. (merged into Jetix Europe Channels B.V.
effective October 1, 2003)(2)
Fox Kids Israel Enterprises B.V. (merged into Jetix Europe Channels B.V.
effective October 1, 2003)
Active Licensing Germany GmbH (merged into Fox Kids Germany GmbH
effective October 1, 2003)(1)
United Kingdom
Spain
The Netherlands
United Kingdom
Luxembourg
Hungary
Germany
Israel
Italy
Isle of Man
The Netherlands
United Kingdom
Italy
France
The Netherlands
Greece
Israel
Israel
Equity Interest
(100% unless
otherwise stated)
80%
The Netherlands
The Netherlands
Germany
Fox Kids AB was liquidated as at July 5, 2004.
The Company also has the following affiliates accounted for under the equity method:
Country of
Incorporation
Company Name
Jetix España SL (formerly Fox Kids España SL)
TV10 Holdings LLC(1)
TV10 B.V.(1)
(1)
(2)
42
(1)
Equity Interest
50%
Spain
The United States
of America
50%
The Netherlands 50%
These entities were contributed to Jetix Europe by ABCW (formerly FFWW) at the IPO.
The Company sold 50% of its shares in Fox Kids Play B.V. to Visiware S.A. in December 2002. Accordingly,
Fox Kids Play B.V. was equity accounted for in the year ended September 30, 2003. On October 1, 2003,
the Company reacquired 50% of the shares in Fox Kids Play B.V. and merged it into Jetix Europe
Channels B.V.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements comprise the accounts of Jetix Europe N.V. consolidated with the
financial statements of those entities under its control, including those entities and businesses contributed
by ABCW (formerly FFWW) at the IPO.
The Company uses the equity method of accounting for investments in affiliates where it does not have the
majority of equity, but where it does exercise significant influence.
All material intercompany accounts and transactions have been eliminated.
General Presentation
In circumstances where the classification of certain balances has changed from the previous year, the prior
year comparatives have been reclassified accordingly.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of
three months or less.
Revenue recognition – Channels & Online
Subscriber fees receivable from cable operators and DTH broadcasters are recognised as revenue over the
period for which the channels are provided and to which the fees relate. Subscriber revenue is recognised
as contracted, based upon the level of subscribers. Television advertising revenue is recognised as the
commercials are aired. In certain countries, the Company commits to provide advertisers with certain rating
levels in connection with their advertising. Revenue is recorded net of estimated shortfalls, which are
usually settled by providing the advertiser additional advertising time. In accordance with EITF 99-17,
“Accounting for Advertising Barter Transactions”, barter revenues, representing the receipt of goods and
services in exchange for advertising time on a television station, are recognised upon the airing of an
advertisement, where the fair value of the advertising surrendered is determinable based on the Company’s
own historical practice of receiving cash or other consideration that is readily convertible to a known cash
amount for similar advertising from buyers unrelated to the counterparty in the barter transaction.
Revenue recognition – Programme Distribution
Programme distribution revenue is recognised in accordance with SOP 00-2 “Accounting by Producers or
Distributors of Films” when the relevant agreement has been entered into, the product is available for
delivery, collectability of the cash is reasonably assured and all the Company’s contractual obligations have
been satisfied.
Revenue recognition – Consumer Products
Revenues from home entertainment, licensing and merchandising agreements which provide for the receipt
by the Company of non-refundable guaranteed amounts, are recognised when the licence or distribution
period begins, the payments are due under the terms of the contract, collectability is reasonably assured
and all performance obligations of the Company have been fulfilled. Amounts in excess of minimum
guarantees under these agreements are recognised when earned. Amounts received in advance of being
earned are recorded as deferred revenue.
Revenue is recorded net of Value Added Tax (VAT).
43
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Advertising costs
Advertising costs are expensed as incurred. For the year ended September 30, 2005 and year ended
September 30, 2004 the Company incurred advertising costs totalling $0.9 million and $0.7 million,
respectively.
Programme rights
The Company adopted SOP 00-2 “Accounting by Producers or Distributors of Films” and SFAS No. 139
“Rescission of FASB Statement No. 53 and amendments to SFAS Nos. 63, 89 and 121” as of July 1, 2001.
Programme rights that are produced or acquired are stated at the lower of cost less accumulated
amortisation or fair value. Amortisation charge is based on the ratio of the current period’s gross revenues
to estimated remaining total gross revenues from such programmes. Each year management revises
estimates, based on historical and anticipated trends, of future revenue for each programme property.
Where television programme rights are licensed from third parties for a defined period for broadcasting on
the Company’s channels, usually for periods of between 2 and 5 years, these are amortised in accordance
with their expected usage over that defined period. Acquired television programme rights and related
liabilities are recorded when the licence period begins and the programme is available for use.
Property and equipment
Property and equipment, consisting mainly of computer equipment and office furniture and fittings, is
stated at cost less accumulated depreciation. Depreciation is provided using the straight-line method over
an estimated useful life of 3 to 10 years.
Leasehold improvements are amortised over the shorter of the term of the lease or the estimated life of
the improvements. Repair and maintenance costs are expensed as incurred.
The Company periodically reviews the carrying amount of property and equipment to determine whether
current events or circumstances warrant impairment to the carrying value and/or the estimates of useful
lives. When these events or circumstances arise that indicate that assets may be impaired, the assets are
written down to their recoverable amount, in accordance with SFAS No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets”.
Trade receivables
Accounts receivable are reported at their net realisable or expected cash value.
Goodwill
In accordance with SFAS No. 142 “Goodwill and Other Intangible Assets”, goodwill recognised on an
acquisition is calculated as the excess of the fair value of the consideration over the fair value of the assets
and liabilities acquired.
Goodwill is not amortised but tested for impairment on an annual basis and whenever indicators of impairment
arise. The Company has determined that each business segment comprises its own reporting unit. There was
no impairment charge for the year ended September 30, 2005 (year ended September 30, 2004 – $nil).
44
2.
Investments in equity affiliates
Investments in, and advances to equity affiliates, are accounted for under the equity method. Under this
method of accounting, the carrying value of the investment is increased or decreased by the Company’s
share of income or losses and decreased by any dividends.
Foreign currency translation
The functional currency of each of Jetix Europe’s subsidiaries is the currency of the primary economic
environment in which each subsidiary operates.
Accordingly, assets and liabilities recorded in foreign currencies in the balance sheets of Jetix Europe’s
subsidiaries are translated at the exchange rate between such functional currency and the US dollar at the
balance sheet date except for the share capital and reserves of those subsidiaries, which are translated at
historic rates. Revenues and expenses are translated at the average rate of exchange prevailing during the
period. Translation adjustments resulting from this process are charged or credited to accumulated other
comprehensive income.
Gains and losses arising from transactions denominated in currencies other than the functional currency are
included in determining net income for the period.
Fair value of financial instruments
SFAS No. 107, “Disclosures About Fair Value of Financial Instruments”, requires disclosure of fair value
information about financial instruments whether or not recognised in the consolidated balance sheet.
The amounts reported in the consolidated balance sheet for cash and cash equivalents, accounts receivable
and accounts payable approximate fair value due to the short-term maturity of these instruments.
Income taxes
In accordance with SFAS 109, “Accounting for Income Taxes”, deferred income taxes are recognised using
the asset and liability method. Deferred tax balances are established for the difference between the financial
reporting and income tax bases of assets and liabilities as well as operating loss and tax credit carry-forwards.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be realised. Deferred tax assets
and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Earnings per share
Basic earnings per ordinary share is calculated using income available to ordinary shareholders divided by
the weighted average number of shares outstanding. The difference between basic and diluted earnings per
share arises after giving effect to the dilutive effect of all dilutive potential ordinary shares equivalents that
were outstanding during the period.
45
2.
Use of estimates
The preparation of consolidated financial statements in conformity with US GAAP requires management of
the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Stock option plan
The Company accounts for stock-based compensation using the intrinsic value method prescribed in APB
No. 25, “Accounting for Stock Issued to Employees”, and related interpretations. There are no performance
criteria attached to the exercise of the options. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of Jetix Europe’s stock at the date of grant over
the amount an employee must pay to acquire the stock. The Company has also disclosed below the impact
on earnings that would result if stock options had been valued at their fair value at the grant date, in
accordance with SFAS No. 123, “Accounting for Stock-Based Compensation”.
The Company has adopted the disclosure provision of SFAS No. 123 and pursuant to its provision elected
to continue using the intrinsic value method of accounting for stock-based awards granted to employees in
accordance with APB 25. Accordingly, the Company has not recognised compensation expense for its stockbased awards to employees. The following table reflects pro forma net income and earnings per share had
the Company elected to adopt the fair value approach of SFAS No. 123:
2005
$’000
2004
$’000
Net income as reported
Adjustment for notional expense under FAS 123, net of tax
19,759
(967)
5,828
(3,548)
Pro forma net income
18,792
2,280
23.7
22.5
7.1
2.8
23.5
22.4
6.9
2.7
Basic earnings per share (cents)
As reported
Pro forma
Diluted earnings per share (cents)
As reported
Pro forma
These pro forma amounts may not be representative of future disclosures since the estimated fair value of
stock options is amortised to expense over the vesting period and additional options may be granted in
future years.
46
2.
In Note 2 of its 2004 annual report, the Company included a table disclosing pro forma net income and
earnings per share had it elected to account for its stock option plan under the fair value approach of SFAS
No. 123, “Accounting for Stock-Based Compensation”. Certain financial information was misreported due to
incorrect currency translation and number of options used and is corrected below in respect of the years
ended September 30, 2004:
a)
b)
c)
d)
Notional expense under SFAS No. 123 increased from $1,853,000 to $3,548,000;
Proforma net income decreased from $3,975,000 to $2,280,000;
Pro forma basic earnings per share reduced from 4.8 cents to 2.8 cents; and
Pro forma diluted earnings per share reduced from 4.7 cents to 2.7 cents.
No options were granted during the current year or during the prior year.
The estimated fair value of each option granted is calculated using the Black-Scholes option pricing model.
The weighted average assumptions used in the model were as follows:
2005
Risk free interest rate
Expected years from grant until exercise
Expected stock volatility
Dividend yield
3.
4.0%
4
60%
0%
REORGANISATION
Effective October 1, 2003, Fox Kids Play B.V. and Fox Kids Israel Enterprises B.V. were merged with Jetix
Europe Channels B.V. (formerly Fox Kids Europe Channels B.V.).
Effective October 1, 2003, Active Licensing GmbH was merged with Jetix Germany GmbH (formerly Fox Kids
Germany GmbH).
47
4.
RELOCATION EXPENSES
The Company relocated its operations in the UK and France to Disney’s premises in these markets during
the prior year. The Company incurred a charge of $8.0 million resulting from this relocation, which is
included in costs and expenses in the year ended September 30, 2004. The charge recognised included
a provision in respect of the anticipated costs of fulfilling the Company’s existing lease commitments
of $4.4 million (comprised of $3.2 million of lease exit costs and $1.2 million of refitting costs), information
technology reconfiguration of $1.2 million, move costs of $0.6 million, impairment of certain fixed assets
of $0.9 million and redundancy costs resulting from the contracting out of certain functions (see note 15)
to Disney of $0.9 million.
In order to induce the Company to relocate its operations in the UK and France, Disney provided the
Company with a $3.1 million operating lease incentive as at the year ended September 30, 2004 which,
in accordance with US GAAP, is deferred and recognised through the income statement over the term of
the operating lease to which it relates. During the year ended September 30, 2005, the provision relating to
the lease exit and refit costs was revised, resulting in an additional expense of $1.4 million in the current
year. Correspondingly, an additional operating lease incentive of $0.7 million was provided by Disney. The
amount of operating lease incentive recognised in the income statement for the year ended September 30,
2005 was $1.5 million. The operating lease incentive outstanding as at the year ended September 30, 2005
was $2.3 million.
5.
ACCOUNTS RECEIVABLE
Accounts receivable consists of the following:
Billed receivables
Accrued income
6.
2005
$’000
2004
$’000
30,229
29,587
27,689
21,362
59,816
49,051
2005
$’000
2004
$’000
13,258
1,202
12,567
1,115
14,460
(12,286)
13,682
(10,628)
2,174
3,054
PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Property and equipment
Leasehold improvements
Less accumulated depreciation and amortisation
48
7.
GOODWILL
At September 30, 2005 goodwill which totals $28.0 million (September 30, 2004 – $28.0 million), was
comprised of the goodwill of $18.3 million arising from the acquisition of the minority interest in Fox Kids
Israel Enterprises B.V. on December 19, 2002 and the goodwill of $9.7 million arising from the acquisition of
the Fox Kids Netherlands Channel on December 1, 2000.
The Company purchased the 49.5% of shares in Fox Kids Israel Enterprises B.V. not owned by the Company
from the Middle East Communications Holdings BV as well as rights to the Israel Jetix library. Goodwill
arose from the difference between the purchase consideration and the fair value of the net assets acquired.
Goodwill has been fully allocated to the Channels & Online business segment (see note 17). The goodwill is
not tax deductible.
The Company adopted SFAS No. 142 as of July 1, 2001. Accordingly there has been no amortisation charge
since that date. As a result of the annual impairment review carried out on September 30, there was no
impairment charge for the year ended September 30, 2005 (September 30, 2004 – $nil).
8.
PROGRAMME RIGHTS
Programme rights consist of the following:
2005
$’000
Programme rights cost
Less accumulated amortisation and impairment
2004
$’000
508,281
(395,915)
470,374
(354,167)
112,366
116,207
In accordance with SOP 00-2, the Company periodically performs a review of the fair value of the Jetix
library to determine whether any of the titles are impaired. This review compares the estimated remaining
ultimate profits to be earned to the net book value by title for all properties in the Jetix library. Where the
estimated remaining ultimate profits were lower than the net book value of a title, an impairment was
identified and the title was written down to fair value. During the year ended September 30, 2005 the
Company recorded an impairment charge of $1.6 million (year ended September 30, 2004 – $5.0 million).
49
8.
PROGRAMME RIGHTS (continued)
The amortisation charge relating to programme rights, excluding any impairment charge, for the years ended
September 30, 2005 and September 30, 2004, was $40.1 million and $38.0 million respectively.
Of the net book value of programme rights at September 30, 2005, $83.5 million (year ended September 30,
2004 – $89.8 million) represents the rights of the Jetix library in the Company’s territories, with the
remainder being programming licensed from third parties for broadcasting by the channels operated by the
Company. At September 30, 2005 the net book value of programme rights included programmes in
production of $4.9 million (2004 – $2.2 million).
The Company expects to amortise the net book value of its programme rights on the following timescale:
Within one year
Within three years
Within five years
9.
30-40%
55-65%
80%
ACCRUED LIABILITIES
Accrued liabilities consist of the following:
Participation and royalty costs
Accrued programme costs
Payroll liabilities
Taxation
Provision for indirect taxes
Relocation costs
Other accruals
10.
2005
$’000
2004
$’000
13,086
7,757
7,014
3,583
4,259
–
13,946
10,715
15,141
6,578
3,503
–
821
12,277
49,645
49,035
2005
$’000
2004
$’000
3,321
7,526
2,400
3,200
13,000
–
13,247
16,200
OTHER LIABILITIES
Other liabilities consist of the following:
Provision for lease exit costs
Operating lease incentive
Other provision
The operating lease incentive and provision for lease exit costs are discussed in notes 4 and 15. The other
provision is discussed in note 16.
50
11.
TAX
The (provision)/benefit for income tax consists of the following:
2005
$’000
Income taxes
Other taxes
Deferred income taxes
2004
$’000
(1,727)
(1,224)
(3,009)
(2,049)
(1,254)
1,331
(5,960)
(1,972)
and are as follows:
2005
$’000
The Netherlands
Others
– Current
– Current
– Deferred
2004
$’000
(543)
(2,408)
(3,009)
(702)
(2,601)
1,331
(5,960)
(1,972)
The components of the (provision)/benefit for income taxes for the year ended September 30, 2005 and
the year ended September 30, 2004 were based upon the following sources of pre-tax income.
The Netherlands
Others
2005
$’000
2004
$’000
1,011
25,082
368
7,242
26,093
7,610
51
11.
TAX (continued)
A reconciliation of the provision for income taxes with the amount computed by applying the statutory
income tax rate of the Netherlands of 31.5% (2004 – 34.5%) to income before provision for income taxes
and minority interest is as follows:
Income before tax and minority interests
Income before tax and minority interests multiplied by statutory rate of corporation tax
Effects of:
Permanent differences
Timing differences subject to valuation allowance
Statutory income tax difference
Adjustments to tax charge in respect of previous periods
Other taxes
Current tax charge for the year
2005
$’000
2004
$’000
26,093
7,610
8,219
2,626
(4,757)
(283)
2,382
(720)
(105)
1,224
(1,499)
(279)
3,321
(3,206)
(245)
1,254
5,960
1,972
Where the Company has provided for income taxes, the provisions have been calculated at the statutory
rates in the relevant jurisdictions.
Deferred taxes
Principal components of the deferred tax assets and liabilities are as follows:
2005
$’000
2004
$’000
Deferred tax asset
Net operating losses
Fixed assets
Other
68,429
2,867
(267)
73,370
1,896
1,980
Total
71,029
77,246
(61,937)
(65,145)
9,092
12,101
Valuation Allowance
Deferred tax
The estimated portion of the Deferred Income Tax Asset to be utilised during the year ended September 30,
2006 is $2.6 million.
Management has determined that as of September 30, 2005 approximately $61.9 million (year ended
September 30, 2004 – $65.1 million) of deferred income tax assets do not satisfy the recognition criteria
set forth in SFAS No 109 “Accounting for Income Taxes”. Accordingly a valuation allowance has been
recorded for that amount.
The above amount relating to net operating losses results from approximately $438.3 million of tax net
operating loss carryforwards as at September 30, 2005, of which approximately $118.9 million have no
expiry date and approximately $319.4 million expire between 2006 and 2012. Realisation of these net
operating losses is dependent on generating sufficient taxable income prior to the expiration of the loss
carryforwards, subject to any limitations on their use.
52
12.
PENSION PLANS
Jetix Europe Limited operates a defined contribution group personal pension plan (the “Plan”) for United
Kingdom employees. The Plan is effectively a collection of individual personal pension plans. Jetix Europe
Limited contributes a percentage of eligible employees’ annual compensation, provided that the employee
contributes a minimum percentage. The contributions to the Plan are expensed as incurred and for the year
ended September 30, 2005 were $425,000 (year ended September 30, 2004 – $484,000).
13.
INTEREST INCOME
Interest receivable on bank deposits
14.
2004
$’000
4,501
2,814
4,501
2,814
2005
$’000
2004
$’000
2,064
1,809
2,064
1,809
INTEREST EXPENSE
Interest expense
15.
2005
$’000
RELATED PARTY TRANSACTIONS
Sales to Parent Company
The Company has secured non-European distribution rights to certain properties (in addition to the
European rights). The Company in turn sold these rights to subsidiaries of its parent company ABCW.
During the year, sales to subsidiaries of ABCW were $0.3 million (year ended September 30, 2004 – $nil).
The amount receivable at September 30, 2005 was $1.2 million (September 30, 2004 – $2.1 million).
53
15.
RELATED PARTY TRANSACTIONS (continued)
Logistical Services
Buena Vista International Television (BVITV), a Disney subsidiary, provides logistical services to the Company
in connection with its third party programme distribution. The Company pays BVITV on the basis of cost
plus a margin of 5% – 10% dependent on the service performed. The amount charged in the income
statement, included in Costs and expenses, relating to services provided by BVITV for the year ended
September 30, 2005 was $3.7 million (September 30, 2004 – $3.7 million). In addition BVITV incurs
distribution expenses on behalf of the Company whilst performing its services. These expenses are
recharged back to the Company. The amount charged to the income statement relating to distribution
expenses incurred by BVITV on behalf of the Company was $1.4 million for the year ended September 30,
2005 (year ended September 30, 2004 – $2.2 million). The amount owed to BVITV as at September 30, 2005
was $8.8 million (September 30, 2004 – $5.5 million).
Arrangements with Sogecable S.A. (Sogecable)
The Jetix channel in Spain is operated by Jetix España SL, a company jointly owned by a subsidiary of
Sogecable and the Company. Sogecable and its subsidiaries provide office and sales administration,
programming and production facilities and services to Jetix Spain. The costs incurred for the services with
Sogecable for the year ended September 30, 2005 were $4.3 million (year ended September 30, 2004 –
$1.4 million). The amount owed at September 30, 2005 was $0.4 million (September 30, 2004 – $0.6 million).
The Company leases rights to the Jetix Library to Jetix España SL. The lease fee for the year ended
September 30, 2005 was $5.0 million (September 30, 2004 – $4.1 million). The amount receivable at
September 30, 2005 was $2.2 million (September 30, 2004 – $nil).
Arrangements with United Pan-Europe Communications N.V. (UPC)
The minority shareholder in Jetix Poland Limited, a subsidiary of UPC, provided certain transmission,
programming and marketing services to the Jetix channels in Poland and Central and Eastern Europe during
the year. The amount charged in the income statement, included in Costs and expenses, in relation to
these services for the year ended September 30, 2005 was $0.4 million (year ended September 30, 2004 –
$1.0 million). There were no amounts payable to UPC for these services at September 30, 2005 (September
30, 2004 – $nil).
Trademark arrangements
Disney has granted the Company a trademark licence without a fixed term to use the “Jetix” name and
related logos without material charge.
54
15.
Buena Vista Home Entertainment (BVHE)
On May 5, 2003, the Company entered into an agreement with BVHE, a subsidiary of Disney, to grant BVHE
the sole and exclusive right to exploit on VHS and DVD formats all home entertainment distribution and
exhibition rights for certain major programmes including Power Rangers and some of our programmes
based upon Marvel comics characters. The Company will receive from BVHE a minimum guarantee against
certain royalties during the term of the agreement, which ends on May 4, 2006, of which $1.4 million was
earned in the year ended September 30, 2005 (year ended September 30, 2004 – $0.7 million). The receivable
amount outstanding for the year ended September 30, 2005 was $0.4 million (year ended September 30,
2004 $0.4 million).
Disney Consumer Products (DCP)
On October 1, 2003 the Company appointed DCP, a subsidiary of Disney, to act as its licensing agent within
Europe and the Middle East in respect of the property, Power Rangers. The Company will receive from DCP a
minimum guarantee against certain royalties during the term of the agreement, which ends on September 30,
2006. The minimum guarantee received during the year ended September 30, 2005 was $7.2 million
(September 30, 2004 – $6.3 million). DCP will receive a commission of 30% of earned revenues in return for its
services and its commission earned for the year ended September 30, 2005 was $3.0 million (September 30,
2004 – $2.1 million) which was recorded as costs and expenses. During the year ended September 30, 2004,
DCP paid a marketing contribution of $1.3 million which was recorded net of costs and expenses, with no
such arrangement in the year ended September 30, 2005.
Super RTL
On September 30, 2003, the Company entered into a co-production agreement with Super RTL, a Disney
affiliate. Under the terms of the deal the Company will co-produce two series, namely W.I.T.C.H. and Oban Star
Racers, with Super RTL and a third party. W.I.T.C.H. was fully delivered in the year ended September 30, 2005
and earned revenues of $2.1 million (September 30, 2004 – $nil). The Company has also entered into a further
agreement to produce a second season of W.I.T.C.H.
55
15.
Premises and facilities
During the prior year, the Company entered into arrangements with The Walt Disney Company Limited and
The Walt Disney Company (France) SAS with respect to the lease of office and broadcast operations
facilities and the provision of certain accounting functions in the UK and France. Under these arrangements,
the amount payable for services received during the year ended September 30, 2005 was $8.9 million
(September 30, 2004 – $1.3 million).
The relocation costs incurred and the amount recharged to Disney are disclosed in note 4.
As part of these arrangements, the Company will also receive an incentive of $5.2 million from Disney over
the next three years (September 30, 2004 – $9.9 million over four years). This together with the amount
recharged to Disney of $2.3 million (September 30, 2004 – $3.1 million) as disclosed in note 4 has been
accounted for as an operating lease incentive, which, in accordance with US GAAP, is deferred and
recognised in the income statement over the period of the leases.
Of the total receivable of $7.5 million, $3.4 million will be received after one year.
Receivables
ABCW collects certain receivables on behalf of the Company. The amount owed to the Company at
September 30, 2005 was $1.2 million (September 30, 2004 – $2.0 million).
TV10 B.V.
Through a shareholder agreement with Fox TV10 Holdings, Inc. (Fox), up to December 1, 2000, the
revenues and direct costs of the daytime programming of TV10 B.V. were attributed to the Company, with
those of the evening programming being attributed to Fox. Subject to certain limits, indirect costs were
allocated between the Company and Fox in proportion to revenue. Since December 1, 2000 any material
costs as well as revenues of TV10 B.V. in which the Company has an interest, are recharged to the Company.
The revenues recharged from TV10 B.V. for the year to September 30, 2005 was $nil (September 30, 2004 –
$nil). The costs recharged from TV10 B.V. for the year to September 30, 2005 was $1.5 million (September
30, 2004 – $1.1 million). The amount payable to TV10 B.V. at September 30, 2005 was $1.1 million
(September 30, 2004 – $0.8 million).
Programme Rights
The Company acquires certain programme rights relating to its territories from ABCW. The amount payable
to ABCW at September 30, 2005 was $9.4 million (September 30, 2004 – $1.8 million). The current year has
seen the co-production with ABCW of Super Robot Monkey Hyper Force Go! and Get Ed.
56
16.
COMMITMENTS AND CONTINGENCIES
Commitments
The company leases transponders, office facilities, and certain programme related equipment. These leases
which qualify as operating leases, expire at various dates through 2010.
The Company also has various contractual commitments for the purchase of programme rights.
Contractual commitments for programme rights and non-cancellable future minimum payments for the
remainder of the non-cancellable operating lease periods are as follows:
Year Ending September 30,
2006
2007
2008
2009
2010
Thereafter
Operating
leases
$’000
Programming
rights
$’000
Total
$’000
19,485
18,619
9,963
9,219
589
–
20,950
2,036
–
–
–
–
40,435
20,655
9,963
9,219
589
–
57,875
22,986
80,861
The non-cancellable future minimum payments included in the numbers above relating to operating leases
from Disney and its subsidiaries was as follows: for the year ending September 30, 2006 – $10.5m, for the
year ending September 30, 2007 – $10.8m, for the year ending September 30, 2008 – $8.5m, for the year
ending September 30, 2009 – $8.6m, for the year ending September 30, 2010 – $nil, and thereafter – $nil.
Total operating lease expenses were approximately $14.7 million and $11.0 million for the years ended
September 30, 2005 and September 30, 2004, respectively.
Litigation
As at September 30, 2005, the Company and a subsidiary of its major shareholder are in settlement discussions
with a third party over claims relating to the exploitation of the third party’s programming. The Company
has estimated that a reserve of $2.4 million is necessary to cover the amounts of such settlement.
17.
SEGMENT INFORMATION
During the periods presented, the Company operated in three business segments based on its products and
services: Channels & Online (which principally consists of the operation and broadcast of television channels
and websites, subscription and advertising revenues), Programme Distribution (which principally consists of
the sale of programming to third parties) and Consumer Products (licensing and merchandising operations
and home entertainment).
The accounting policies of the segments are the same as those described in Note 2. In addition, for
segment reporting, the Company measures profitability based on Earnings Before Interest, Tax, Depreciation
and Amortisation (EBITDA). EBITDA is stated before interest, taxation, depreciation, programme amortisation
and impairment. EBITDA less depreciation, amortisation and impairment is equal to operating income.
57
17.
SEGMENT INFORMATION (continued)
Business Segments
Revenues
2005
$’000
2004
$’000
Channels & Online
Consumer Products
144,547
24,852
18,439
127,332
24,681
13,332
Revenues(1)
187,838
165,345
(1)
Revenues exclude our share of non-consolidated joint ventures. In order to facilitate comparison with
our prior financial statements; revenues including our share of the revenues of the non-consolidated
joint ventures was $193.1 million, compared to $170.7 million in the year ending September 30, 2004.
Our share of non-consolidated joint ventures relates entirely to Channels & Online operations.
EBITDA
2005
$’000
2004
$’000
Channels & Online
Consumer Products
Shared costs not allocated to segments
57,552
17,090
6,335
(15,510)
42,118
15,551
5,170
(11,888)
EBITDA(2)
Less: depreciation, amortisation and impairment
65,467
(43,191)
50,951
(45,804)
22,276
5,147
2005
$’000
2004
$’000
Operating income
(2)
EBITDA excludes costs related to the Company’s non-consolidated joint ventures.
Depreciation, amortisation and impairment
Channels & Online
Consumer Products
(30,677)
(8,507)
(3,934)
(73)
(28,553)
(13,295)
(3,662)
(294)
(43,191)
(45,804)
Programming and impairment charges are as follows: the Channels & Online segment had impairment
charges of $1.6 million (year ended September 30, 2004 – $3.4 million). The distribution segment had
impairment charges of $nil (year ended September 30, 2004 – $1.6 million).
Identifiable assets
Channels & Online
Consumer Products
Shared assets not allocated to segments
58
2005
$’000
2004
$’000
118,155
231,528
7,995
652
129,758
185,661
6,244
1,132
358,330
322,795
17.
Geographic Segments
Revenues
2005
$’000
2004
$’000
55,505
24,182
21,286
21,115
15,599
15,403
9,608
8,653
8,433
6,314
1,740
49,567
18,018
20,217
20,510
13,690
13,813
9,031
6,944
8,106
3,738
1,711
Revenues
187,838
165,345
EBITDA(2)
2005
$’000
2004
$’000
United Kingdom and Ireland
Italy
Benelux
France
Central and Eastern Europe
Germany
Spain and Portugal(1)
Nordic Region
Middle East
Poland
Other
Italy
Benelux
France
Central and Eastern Europe
Germany
Spain and Portugal
Nordic Region
Middle East
Poland
Other
EBITDA
Less: depreciation, amortisation and impairment
Operating income
(1)
(2)
33,434
10,309
7,057
6,223
3,956
5,921
5,545
2,105
2,636
2,594
1,197
(15,510)
25,915
7,765
7,985
4,812
2,976
3,981
4,944
732
2,871
(231)
1,089
(11,888)
65,467
50,951
(43,191)
(45,804)
22,276
5,147
Excludes the Company’s share of revenues of non-consolidated joint ventures.
EBITDA excludes costs related to the Company’s non-consolidated joint ventures.
59
17.
Geographic Segments
Identifiable assets
France
Benelux
Italy
Other
2005
$’000
2004
$’000
8,047
16,520
220,486
45,317
67,960
21,128
9,127
238,425
7,762
46,353
358,330
322,795
Revenues are attributed to geographic segments based on the destination of the sale. Assets are attributed
to geographic segments based on the location of individual assets. The programme rights and goodwill are
located in the Benelux segment.
The only customer which has had revenues greater than 10% of the revenues for at least one of the periods
presented is as follows:
Customer A
18.
Revenue
2005
$’000
%
2005
Revenue
2004
$’000
%
2004
27,125
14.4
33,049
20.0
SHARE CAPITAL
The authorised share capital of Jetix Europe consists of 349,999,900 ordinary shares with a nominal value of
m0.25 per share, and 100 priority shares, each with a nominal value of m0.25 per share. The issued shares
are as follows:
Issued at September 30, 2004
Shares issued during the year
Issued at September 30, 2005
(1)
(2)
60
Priority
shares
Number
Ordinary
shares
Number
Total
number
100
–
100
83,196,912
770,003
83,966,915
83,197,012
770,003
83,967,015
Priority(1)
shares
Nominal
value
$’000
0
–
0
Ordinary(2)
shares
Nominal
value
$’000
Total
Nominal
value
$’000
21,629
247
21,876
21,629
247
21,876
The nominal value of priority shares at September 30, 2005 is $26 (September 30, 2004 – $26).
The shares issued during the year are translated using the rate at the date of issuance.
18.
SHARE CAPITAL (continued)
The priority shares are held by BVS Entertainment, Inc. (BVSEI, formerly Saban Entertainment, Inc.) a wholly
owned subsidiary of ABCW. The priority shares can only be transferred with the approval of the Board of
Management and the Supervisory Board. The holder or holders of the priority shares have the right, inter
alia, to: nominate members for the appointment of the Board of Management and the Supervisory Board;
receive a non-cumulative preferential dividend of 5% of the nominal value of each share per annum;
propose amendments to the Articles of Association; propose the dissolution, legal merger or split-up of
Jetix Europe; and receive a preferential liquidation distribution.
The members of the board of directors of BVEI are Griffith Foxley, Marsha Reed and Joseph Santaniello.
The members of the board of directors of ABCW are Marsha Reed and David Thompson. The directors of
BVEI and ABCW are responsible for the management of their respective companies. None of the priority
shares are held by a member of the Board of Management of Jetix Europe.
19.
EARNINGS PER SHARE
The earnings per share is computed using the net income for each period divided by the weighted average
number of shares in issue in each period.
The following table sets forth the computation of basic and diluted earnings per share.
2005
2004
Numerator ($’000)
Net income
19,759
5,828
Denominator (’000)
Basic – weighted average ordinary shares outstanding
Dilutive effect of employee stock options
83,502
563
82,618
1,538
84,065
84,156
Basic earnings per share (cents)
23.7
7.1
Diluted earnings per share (cents)
23.5
6.9
For the year ended September 30, 2005, options to acquire shares totalling 30,332 (September 30, 2004 –
739,236) were excluded from diluted earnings per share, as their impact was anti-dilutive.
61
20.
STOCK OPTION PLAN
Under the Jetix Discretionary Stock Option Scheme, Jetix Europe may grant options to acquire shares to
employees at exercise prices equal to or exceeding the market price at the date of grant. Options vest
equally over a four-year period from the date of grant and expire ten years after the date of grant. Shares
available for future option grants at September 30, 2005 totalled 5,447,676 (September 30, 2004 – 4,856,281).
The following table summarises information about stock option transactions:
2005
Weighted
average
exercise
price
(Euro)
2005
Number
of
options
2004
Weighted
average
exercise
price
(Euro)
2004
Number
of
options
Awards forfeited
Awards exercised
7.33
–
5.11
7.71
2,718,045
–
(591,399)
(769,999)
6.92
–
6.88
5.28
3,927,307
–
(531,657)
(677,605)
Outstanding at September 30
8.08
1,356,647
7.33
2,718,045
13.03
476,628
13.61
715,036
Outstanding at beginning of year
Awards granted
Exercisable at September 30
The following table summarises information about stock options outstanding at September 30, 2005:
Exercise
prices – Euro
Number
of options
Outstanding
weighted
average
remaining
years of
contractual
life
3.4 – 5.4
9.1 – 13.5
911,279
415,036
30,332
7.91
4.37
4.64
16.5 – 20.2
62
Exercisable
Weighted
average
exercise
price
(Euro)
Number
of options
Weighted
average
exercise
price
(Euro)
5.32
13.41
18.18
41,260
405,036
30,332
5.43
13.41
18.18
Jetix Europe N.V.
Jetix Europe N.V.
Jetix Europe N.V.
Bergweg 50, 1217 SC
Hilversum
The Netherlands
or contact:
Investor Relations
Hammersmith
London W6 9PE
Tel: +44 20 8222 3600
Fax: +44 20 8222 5906
www.jetixeurope.com
Jetix Europe N.V.
Annual Review and
group at a
glance
Our Business Lines
Channels & Online
>>
contents
1
2
4
6
8
10
12
14
18
22
26
30
32
33
35
Introduction
Our Highlights
Our Content
Our Future
Our Alliance
Our History
Channels and Online
Consumer Products
Management Board
Supervisory Board
Accounts
>>
>>
Consumer Products
Jetix Europe N.V.
Jetix Europe N.V.
Jetix Europe N.V.
Bergweg 50, 1217 SC
Hilversum
The Netherlands
or contact:
Investor Relations
Hammersmith
London W6 9PE
Tel: +44 20 8222 3600
Fax: +44 20 8222 5906
www.jetixeurope.com
Jetix Europe N.V.
Annual Review and

Jetix Europe N.V.

Transcription

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