Jetix Europe N.V. Annual Review 2005


	Jetix Europe N.V. Annual Review and Financial Statements 2005 > HOME > INTRODUCTION > GROUP AT A GLANCE > 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
	PREVIOUS NEXT

Revenues
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.

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.

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.

Costs and Expenses
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.

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.

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.

1 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.

Revenue by line of business	Revenue by territory

Amortisation, Impairment and Depreciation
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.

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.

Financial Income
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.

Income Before Tax and Minority Interest
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.

Taxation
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.

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.

REPORTING CURRENCY
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.

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.

Dene Stratton
Chief Financial Officer
December 2005