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Eros International Plc Reports Second Quarter FY 2019 Results

Reports strong Adjusted EBITDA(1) growth of 44.2%

Eros Now paying subscribers grew 28.7% to 13.0 million

Release of highly successful Eros Now originals – Smoke and Side Hero

ISLE OF MAN, United Kingdom--(BUSINESS WIRE)--Nov. 15, 2018-- Eros International Plc (NYSE:EROS) (“Eros” or “the Company”), a leading global Indian film and digital studio, today announced unaudited financial results for the three and six months ended September 30, 2018.

Financial Highlights:

 
Q2 FY 2019 Highlights
  • Gross revenue(1) of $72.2 million, compared to $65.4 million in Q2 FY2018, which represents a year-over-year increase of 10.4%.
  • Adjusted EBITDA(1) of $24.8 million, compared to $17.2 million in Q2 FY2018, a 44.2% increase year-over-year.
  • Adjusted EBITDA margin expanded to 39.1%, compared to 27.2% in Q2 FY2018.
  • Reported net debt of $162.1 million at September 30, 2018, compared to $189.2 million at March 31, 2018 and net leverage ratio of 1.58x.
 

(1) A reconciliation of the non-GAAP financial measures discussed within this release to our IFRS revenue and net income is included at the end of this release. See also “Non-GAAP Financial Measures”.

Key Business Highlights:

  • Eros Now worldwide paying subscribers reached 13.0 million, an increase of 251.4% year-over-year and 28.7% since last quarter. The Company is reiterating its previous guidance of 16 million paying subscribers by fiscal year end 2019.
  • As of September 30, 2018, Eros Now has exceeded 128 million registered users worldwide across APP, WAP and Web.
  • Eros Now premiered 16 films in Q2 FY2019 as well as 380 original short-form content pieces, including critically acclaimed short films.
  • Eros Now premiered two original series, Side Hero and Smoke, to critical and commercial success.
  • Eros Now announced a ground-breaking partnership with iQiyi, the largest Chinese online video streaming service. With this partnership, Eros Now becomes the first South Asian OTT player to penetrate the Chinese digital space.
  • Eros Now reinforced its mission of non-stop entertainment, anytime, anywhere, with one-of-a-kind brand campaign ‘Bolo Kya Dekhogey.’ The campaign, which rolled out three television commercials across 86 channels worldwide, reiterates Eros Now’s leadership position in the premium entertainment category, offering an extensive multi language movie library.
  • Eros released 17 films in Q2 FY2019 (four medium budget and 13 low budget films) as compared to seven films in Q2 FY2018 (two medium budget and five low budget films). This is consistent with Eros’ strategy of developing its own intellectual property and concentrating on content-driven films rather than high budget star-driven films.
  • Revenues for the quarter were driven by releases of: Side Hero (Hindi), Happy Phirr Bhag Jayegi (Hindi), Manmarziyan (Hindi), Patakha (Hindi), Saakshyam (Telugu), Tc.Gn - Take Care Good Night (Marathi), Batti Gul Meter Chalu (Hindi) Blackmail and Nawabzaade (Hindi).

Kishore Lulla, Eros’ Group Executive Chairman and Chief Executive Officer, stated:

“We are pleased to announce another strong performance this quarter, highlighted by sequential revenue growth, improving margins and a solid capital structure. We also delivered strong growth at Eros Now, crossing 13 million paying subscribers, a sequential increase of 28.7%, and now have over 128 million registered users as of September 30, 2018. The media market in India is robust and growing, driven by rapid technological and socio-economic changes. We benefit from all areas of this growth, from ticket sales, digital downloads and advertising to pay television. While digital continues to be the main driver of our future growth, it’s important to remember that the television market in India is still growing at a strong pace – forecasted at c. 15% for the next few years, which provides strong tailwinds to our TV syndication business.

Being part of the largest independent Indian film studio with the biggest content library, we are well positioned to establish and maintain our role as a leader in the Indian OTT space given our brand-name, know-how and long-term relationships. As the most established Indian film studio, we also have one the deepest and richest content libraries. Over the last 10 years, Eros has been responsible for 36 out of the top 110 highest grossing Indian films at the box office. We are fortunate to have complete control over the content we create and benefit from the fact that our in-house content gives us the ability to create strong franchises, support and nurture new talent and ultimately give consumers the best possible entertainment choices. Eros Now pioneered online video streaming in India and we believe there is significant opportunity ahead as consumers continue to discover and consume entertainment they enjoy and we want to be there to help them on their journey.”

Rishika Lulla, Chief Executive Officer, Eros Digital, commented:

“Our latest results are a reflection of the Eros promise to deliver viewers a premium entertainment offering at the right price around the world. The recent launch of Eros Now originals, Smoke and Side Hero, is a testament to our strategy of delivering quality cinematic narratives to audiences on digital. We are humbled and excited by the audience appreciation and adoption of the originals, which have received several accolades and important “firsts.” Of note, Side Hero was the first Indian original series to generate 10 million views of a trailer and has the highest IMDB ratings of any original in India, while Smoke was the only original from India to be screened at Mipcom 2018 in Cannes earlier this year.

We remain focused on the OTT consumer and have an exciting pipeline of cutting edge original content lined-up for the rest of the year. This is in line with the Eros strategy of developing its own intellectual property and concentrating on content-driven films rather than high budget star-driven films.

According to our proprietary data, overall platform engagement continues to increase. Long form content continues to deliver the highest levels of engagement with the majority of Eros Now films being viewed in less than two sessions. An “engaged” viewer also returns at least three times a week, spending a minimum of 40 minutes on the platform. During the second quarter alone, we’ve seen a 25% increase in the number of sessions per subscriber. Our registered user base of over 128 million people gives us a unique opportunity to both monitor and learn from viewing habits as well as the ability to convert a portion of this base into monthly paying subscribers. Our large registered user base also represents a new revenue opportunity for us in the form of online advertising. We look forward to rolling out over 100 originals over the next 18 months in multiple languages, further bringing the Indian entertainment ecosystem together.”

Prem Parameswaran, Group Chief Financial Officer and President of North America, also commented:

“I am pleased with our second quarter performance as the business delivered strong EBITDA growth and margin expansion, continued balance sheet strength and exceptional Eros Now paying subscriber additions, outperforming market expectations. Our strong operating performance this quarter, as well as the previously announced investment from Reliance Industries, has helped reduce our net debt position to $162.1 million. This represents a comfortable net debt leverage ratio of 1.58x. In addition, our trade accounts receivable balance has reduced by $26.9 million and now stands at $198.0 million. Our strong operating performance coupled with our conservative balance sheet has us poised for growth in the coming fiscal years.

As our business evolves the majority of our future EBITDA will come from Eros Now. We therefore expect our adjusted EBITDA margins to continue to improve and target 35-40% margins for fiscal year 2020. Having reached over 13.0 million paying subscribers in Eros Now through the end of the second quarter, we are confident we can continue to grow our subscriber base over the next few years, especially given our premium content offering coupled with the large Indian and global market opportunities. To that end we have planned approximately $750 million in content investments over the next three years, which we expect to generate a meaningful ROI for our business.

On the strategic front we continue to look to identify ways to simplify our corporate and operating structure, with a view towards providing a clear and accessible investment proposition for investors. To that end, our internal senior management team has formed an internal committee to explore all potential options. We look forward to giving an update on our progress over the coming quarters.”

Eros Now

Partnerships & Distribution:

  • This quarter Eros Now continued its focus on large screen distribution deals in India with many leading television, ISP/Broadband and Android/Hybrid box partners. The Company also sharpened its focus on international distribution with several partnerships announced across Southeast Asia, South Asia and the Middle East. In total, Eros Now has 23 live distribution partners outside of India, 10 of which were signed in the quarter ended September 30, 2018. Expect to see more international distribution partnerships announced in the coming quarters, with a particular emphasis on UK, U.S., Middle East and Africa.
  • Eros Now has expanded its footprint into the fast-growing Chinese market through a content partnership with Chinese online video-streaming service, iQiyi. iQiyi is one of the largest online video sites in the world, with nearly 6 billion hours spent on its service each month and over 500 million active monthly users. Eros Now has entered into a content licensing agreement with iQiyi to license its vast catalogue of Bollywood content with Eros Now branding that will be showcased on iQiyi. With this partnership, Eros Now becomes the first South Asian OTT player to make inroads into the Chinese digital space.
  • Eros Now has extended its presence in the Malaysian market by partnering with leading Malaysian telecom player, Celcom Axiata Berhad, for their subscribed data plan “Video Walla.” Eros Now and Celcom’s partnership will further enhance the entertainment experience by providing Malaysian customers access to Eros Now’s vast library of original shows, music videos and more.
  • Eros Now has entered the Indonesia market through a strategic distribution partnership with Xiaomi, a global technology leader. As previously announced in July of this year, Eros Now entered a strategic tie-up with Xiaomi’s Mi TV to offer an immersive content experience to consumers in India. With this new stage in the partnership, Eros Now will strengthen its presence and connectivity with Xiaomi’s users in key international markets like Indonesia.
  • Eros Now partnered with FreeCharge, one of India's leading digital marketplaces for financial services and products. Through this association, Eros Now will facilitate a free month of access to its vast library of movies, original shows, music videos and more for FreeCharge customers recharging pre-paid packages via the FreeCharge app.
  • Eros Now entered into a strategic partnership with E-Vision, a fully-owned subsidiary of Etisalat, for its SVOD offering “eLife Video Packs.” This partnership further strengthens Eros Now’s existing presence in MENA region (Middle East and North Africa).With an ardent fan-base of Indian content including films, music and TV series, MENA countries have always been positively receptive towards Indian content. Bollywood content is also popular with the local Middle Eastern population in dubbed and subtitled formats – both of which are offered on Eros Now.
  • Eros Now has entered into a partnership with leading fashion and lifestyle channel, FashionTV (“FTV”). With this association, Eros Now will be the first OTT player to venture into the fashion and lifestyle segment by providing consumers access to FTV’s 12+ live TV Channels and 145+ hours of VOD content.
  • Eros Now has entered into a partnership with Grofers, a leading Indian online supermarket. As part of the association, Grofers’ Smart Bachat Club (SBC) Annual Plan will now have access to Eros Now’s rich library of over 11,000 film titles, original shows and music videos. The offer is available to both existing and new customers of Grofers SBC annual pack subscribers, which is currently priced at 449 Rupees per year.
  • Eros Now reinforced its mission of non-stop entertainment, anytime, anywhere with one-of-a-kind brand campaign ‘Bolo Kya Dekhogey.’ The campaign, which rolled out three television commercials, reiterated Eros Now’s leadership position in the movie category, offering its extensive movie library across languages.

Content:

This quarter Eros Now successfully premiered 16 movies across seven Indian languages: Hindi, Marathi, Tamil, Telegu, Bengali, Kannada and Gujarati. Eros continues to invest in a diverse range of content to fulfil penetration across 100 cities in India.

 
Eros Now Q2 FY19 Premieres
Film Title       Language
Aav Taru Kari Nakhu       Guajarati
Madura Veeran       Tamil
Gavthi       Marathi
Oru Kidayin Karunai Manu       Tamil
Conditions Apply       Marathi
Band Baaja Babuchak       Guajarati
Aavuj Reshe       Guajarati
Karaar       Marathi
Asehi Ekada Vhave       Marathi
Baranda       Bengali
Tamburo       Guajarati
Commrade       Bengali
Dr. Tatya Lahane - Angaar..Power is within       Marathi
Alifa       Bengali
Kulfi       Kannada
Dharasnan       Bengali
     

Eros Now successfully premiered two cutting-edge originals recently, Side Hero and Smoke.

  • Side Hero is a fictionalized take on actor Kunaal Roy Kapur’s life in Bollywood as a perennially neglected side-actor. The eight episode series received much praise for its humorous take on Kunaal’s life, as his ambition to grab the leading role is constantly thwarted and he ends up being the sidekick. The leading digital portal Web Hash recently gave Side Hero the Best Web Series Award, and also gave Kunal Roy Kapoor the Best Actor award. The teaser trailer for Side Hero generated over 10 million views in less than one week, making it the most watched trailer of any Indian original.
  • Smoke is a gritty crime drama in the spirit of Netflix’s Narcos. The crime drama is directed by Neel Guha and stars an eclectic ensemble cast of Kalki Koechlin, Mandira Bedi, Jim Sarbh, Amit Sial, Gulshan Devaiah, Satyadeep Mishra, Neal Bhoopalam, Prakash Belawadi, and others. The 11 episode series centers around a double-murder in the idyllic setting of Goa and pits an aggressive police chief against an underworld crime boss. Smoke premiered at MIPCOM in Cannes, and is the first Indian OTT original to be featured at the industry event. Smoke has since gone on to garner a 9.4 IMDB rating in just a few weeks of its release.

Given the recent launches of Smoke and Side Hero, as well as increased marketing efforts and distribution partnerships, Eros Now believes the next quarter will be a good point to measure the effectiveness of the launch of its originals. In the meantime, there are many interesting and exciting things to look forward to in Q3 FY2019 including:

  • Launch of 12 Fashion TV Channels and Original English Programming onto the Network
  • Pakistani humor and television content will be introduced and promoted to audiences in India
  • Launch of the cross genre series with Operation Cobra in Dec 2018
  • Screening of three Eros Now short films at the Berlin Film Festival, and the screening of the award winning The Monsoon Date at MAMI 2018

Over the coming months, Eros Now will launch a stable of feature films, made-for-digital originals films and over 20 original episodic programs, all of which will be available exclusively on Eros Now to paying subscribers. Global concepts that will entertain audiences are being produced internally. A selection of upcoming Eros Now original titles include:

  • Dashavatarwith Anirudh Pathak:When mankind became corrupt and greedy, Vishnu, the protector of the realms, is incarnated to vanquish evil and save the world. Dashavatar tells this fascinating story of Vishnu’s reincarnations. (Target release December 2018/January 2019)
  • Ponnyin Selvin with Krish Jagarlamudi: A multi-seasonal, multi-lingual show based on the famous Tamil novels. Written in five volumes, Ponniyin Selvan narrates the story of Arulmozhivarman – later crowned as Rajaraja Chola I - one of the kings of the Chola Dynasty, during the 10th and 11th centuries. (Target release March 2019)
  • Flesh with Siddharth Anand: An eight-year-old girl goes missing and her NRI parents are forced to seek the help of a suspended female cop in their search for her. An ex-human trafficker is blackmailed to join the search or risk his sinful past catching with him. (Target release March 2019)
  • Mrityulok with Zeishan Qadri: A story that shows a mirror to the ruthless, selfish face of the society and how we all are culprits in a system that offers no incentive to “be good.” (Target release March 2019)
  • Bhumi with Pavan Kripilani: A survival thriller set in a dystopian version of Delhi which begs the question, how far is our reality from this supposedly fictional dystopia? (Target release April 2019)
  • Crisiswith Nikhil Advani and Gaurav Chawla: On the day of his 50th birthday, Dr Gopichand Wadhwani – one of India’s top cardiologists – decides to follow his childhood dream and become a rapper. Crisis is a story of two generations coming together to help each other get from life what they want. (Target release May 2019)
  • Sanyasi Raja with Prakash Jha: A fictional depiction of the infamous Bhawal case of West Bengal, in which a possible imposter claimed to be the prince of Bhawal, who was at that point presumed dead for over a decade. (Target release June 2019)
  • Kurukshetra: The tribals thought they were Gods. The army thought they were militants. What they turn out to be, are five children with ‘superpowers’ emerging from a genetic mutation. And with destinies that, almost uncannily, resemble the trajectory of the Mahabharata. (Target release TBD)
  • Blue Oak Academy: A teen-drama thriller that follows one young boy’s quest to exact revenge with the most prestigious academic institution of the nation. (Target release June 2019)

Apart from this, Eros also has a selection of upcoming short form content and short film anthologies to accompany this slate.

Technology:

As a brand, Eros Now remains committed to continuously improving the user experience through best-in-class technology and also adding several new and innovative features to the consumer viewing experience. This quarter Eros Now is undergoing an overhaul of the entire technology ecosystem and a new interface will be launched for large screen consumer devices. The Eros Now development team is devoting large resources to data sciences and analytics with the goal of being able to deepen insights from structured analysis of 1st party, 2nd party and 3rd party data to develop business intelligence across key business functions of content, marketing and subscriber monetization. This quarter Eros Now rolled out a significant refresh of the handheld device user-experience to the next major upgrade, based on data science’s learnings on customer journey and behavior patterns. Eros Now also launched a refreshed Apple TV interface with new functionality as well as an overhaul of the experience across mobile handsets.

Eros International Theatrical Release Slate

Eros has a solid stable of upcoming theatrical releases covering many genres and regional languages. Selected key titles include:

                             
Film Name       Star Cast/(Director/Producer)       Language       Tentative Release
Ottakkoru Kamukan       Jojo, Shine Tom Chacko and others (Dazzling Movie Land)       Malayalam       FY2019
Kaptan       Saif Ali Khan, Zoya and others (Navdeep Singh / ColourYellow Productions)       Hindi       FY2019
Mumbai Pune Mumbai 3       Swapnil Joshi, Mukta Barve       Marathi       FY2019
Cobra       Gautam Ghulati, Tarun Khanna, Nyra Banerjee, Ruhi Singh, Director - Munesh Rawal       Hindi       FY2019
Kaamiyab       Drishyam Films       Hindi       FY2019
Amar Akbar Anthony       Ravi Teja, Illeana D'Cruz       Telegu       FY2019
Ticket to Bollywood       Amyra Dastoor, Diganth Manchale / (Eros)       Hindi       FY2019
Haathi Mere Saathi       Rana Dugabatti (Prabhu Soloman)       Hindi / Tamil / Telugu       FY2020
Guru Tegh Bahadur       (Harry Baweja)       Punjabi       FY2020
Jaita       Harman Baweja (Harry Baweja)       Hindi       FY2020
Untitled       Ravi Vasudevan       Malayalam       FY2020
Untitled       Vijith Nambiar       Malayalam       FY2020
Untitled       (Homi Adajania / Maddock Films)       Hindi       FY2020
Ankhen 2       Amitabh Bachchan & Others       Hindi       FY2020
Nervazhi       Nayanthara (Bharath Krishna)       Tamil       FY2020
Shubh Mangal Savdhan - 2       (Colour Yellow Productions)       Hindi       FY2020
Panda (Indo-China)       (Kabir Khan)       Hindi       FY2020
Tannu Weds Manu 3       Anand L Rai       Hindi       FY2020
Roam Rom Mein       Nawazuddin Siddiqui & others (Tanishtha Chatterjee / Rising Star Entertainment)       Hindi       FY2020
The Body       Emraan Hashmi, Rishi Kapoor (Viacom18 Motion)       Hindi       FY2020
Time to Dance       Sooraj Pancholi, Isabelle Kaif (Super Cassettes Industries)       Hindi       FY2020
Raw       John Abraham (Viacom18 Motion)       Hindi       FY2020
Untitled       Kartik Aaryan (Anees Bazmee) (Next Gen Films)       Hindi       FY2020
Untitled- (Hindi remake of Kirik Party)       Kartik Aaryan / Jacqueline Fernandez (Kyta Productions)       Hindi       FY2020
Chandamama Door Ke       Sushant Singh Rajput, Nawazuddin Siddiqui (Sanjay Puran Singh)       Hindi       FY2020
Pitch White       (Vipul Shah)       Hindi       FY2020
Untitled       (Rahul Dholakia / Next Gen Films)       Hindi       FY2020
Heer       (Colour Yellow Productions)       Hindi       FY2020
Fake       (Raj & DK)       Hindi       FY2020
Re-Union       (Sujoy Ghosh)       Hindi       FY2020
Hera Pheri -3       Suniel Shetty and others       Hindi       FY2020
Phobia 2       (Next Gen Films - Pawan Kriplani)       Hindi       FY2020
2 Guns       (Krishna Jagarlamudi)       Hindi       FY2020
R. Rajkumar 2       (PrabhuDeva / Next Gen Films)       Hindi       FY2020
Khalifey       Sanjay Dutt, SaifAli Khan, Arshad Warsi (Prakash Jha)       Hindi       FY2020
Make in India       (Next Gen Films)       Hindi       FY2020
Jugaadu       Harman Baweja       Hindi       FY2020
1234 (Part 2)       SunielShetty, Paresh Rawal (Ashwni Dhir)       Hindi       FY2020
                 

The above list is indicative and subject to change and does not include all projected releases

Eros International’s Catalogue Includes Largest Box Office Hits

Eros’ catalogue includes many of the most popular and commercially successful films released in India. Over the last 10 years, Eros has been responsible for 36 out of the top 110 highest grossing Indian films at the box office. These include:

                     
Film Name       Release Year       IMDB Rank
Bajrangi Bhaijaan       2015       8.1
Bajirao Mastani       2015       7.2
Tanu Weds Manu Returns       2015       7.7
Ra.One       2011       4.8
Goliyon Ki Raasleela Ram - Leela       2013       6.4
Housefull 3       2016       5.2
Housefull 2       2012       5.4
Jai Ho       2014       5.3
Ready       2011       4.7
Welcome Back       2015       4.2
Zindagi Na Milegi Dobara       2011       8.1
Om Shanti Om       2007       6.7
Son of Sardaar       2012       3.9
Grand Masti       2013       4.3
Cocktail       2012       6.2
Love Aaj Kal       2009       6.8
Dishoom       2016       5.1
Housefull       2010       5.4
Rockstar       2011       7.6
Partner       2007       5.7
R... Rajkumar       2013       5.2
Ki & Ka       2016       5.8
Raanjhanaa       2013       7.6
Kambakkht Ishq       2009       4
Heyy Babyy       2007       6.1
Bhool Bhulaiyaa       2007       7.3
De Dana Dan       2009       5.2
Desi Boyz       2011       5.9
Badlapur       2015       7.5
English Vinglish       2012       7.9
Namastey London       2007       7.3
Vicky Donor       2012       7.8
Happy Bhaag Jayegi       2016       6.5
Cheeni Kum       2007       6.8
Newton       2017       7.8
Chalo Dilli       2011       6.8
           

Eros International Plc Financial Highlights :

           
Three Months Ended
September 30
Six Months Ended
September 30
(dollars in millions) 2018       2017       % change 2018       2017       % change
 
Revenue $

63.4

$ 63.3   0.2 $ 123.6 $ 124.1   (0.4 )
   
Gross profit   25.3   28.2   (10.3 )   49   54   (9.3 )
 
Operating profit   8.4   11.4   (26.3 )   18.8   23.1   (18.6 )
 
Gross Revenue (1)   72.2   65.4   10.4   138.8   126.2   10.0
                   
Adjusted EBITDA(1) $ 24.8 $ 17.2   44.2 $ 50.4 $ 33.1   52.3
                       
Adjusted Gross EBITDA(1) $ 56.7 $ 45.9   23.5 $ 110.7 $ 93.8   18.01
 
(1) A reconciliation of the non-GAAP financial measures discussed within this release to our IFRS revenue and net income is included at the end of this release. See also “Non-GAAP Financial Measures”.

Financial Results for the Three and Six Months Ended September 30, 2018

Revenue

In the three months ended September 30, 2018, the Eros film slate was comprised of 17 films of which four were medium budget and 13 were low budget as compared to seven films in the three months ended September 30, 2017, of which two were medium budget and five were low budget. In addition Eros Now released one original series titled Side Hero during the three months ended September 30, 2018.

In the three months ended September 30, 2018, the Company’s slate of 17 films comprised of five Hindi film,11 regional films and one Tamil/Telugu as compared to the same period last year where its slate of seven films comprised four Hindi films and three regional films.

In the six months ended September 30, 2018, the Eros film slate was comprised of 31 films of which five were medium budget and 26 were low budget films as compared to 12 films in the six months ended September 30, 2017, of which one film was high budget, three were medium budget and eight were low budget. In addition Eros Now released one original series titled Side Hero during the six months ended September 30, 2018.

In the six months ended September 30, 2018, the Company’s slate of 31 films comprised of eight Hindi films, two Tamil/Telugu film and 21 regional films as compared to the same period last year where its slate of 12 films comprised of five Hindi films, one Tamil/Telugu films and six regional films.

                           
Three months ended High       Medium       Low       Total
September 30, 2018 0 4 13 17
September 30, 2017 0 2 5 7
 
                           
Six months ended High       Medium       Low       Total
September 30, 2018 0 5 26 31
September 30, 2017 1 3 8 12
 

Gross revenue for three months and six months ended September 30, 2018, respectively are $72.2 million and $138.8 million compared to $65.4 million and $ 126.2 million for the three and six months ended September 30, 2017, respectively. Gross revenue for the three months and six months ended September 30, 2018, respectively have been adjusted towards significant financing component on account of adoption of new accounting pronouncements (refer note 12 of the accompanying unaudited interim consolidated financial statements).

Accordingly, our reported revenue for three months and six months ended September 30, 2018 are $63.4 million and $123.6 million, respectively compared to $ 63.3 million and $ 124.1 million for the three and six months ended September 30, 2017, respectively. Adjustment to reported revenues upon adoption of new accounting pronouncements for three months and six months ended September 30, 2018 is as below.

           
Three months ended September 30, Six months ended September 30,
2018       2017 2018       2017
(in millions)
 
Revenue (GAAP) $ 63.4 $ 63.3 $ 123.6 $ 124.1
Adjustment towards significant financing component   8.8   2.1  

15.2

  2.1
Gross Revenue (Non-GAAP) $ 72.2 $ 65.4 $ 138.8 $ 126.2
 

For the three months ended September 30, 2018, aggregate theatrical revenues decreased by 3.1% to $18.8 million from $19.4 million for the three months ended September 30, 2017 and in the six months ended September 30, 2018, revenue decreased by 21.6% to $33.7 million, compared to $43.0 million for the six months ended September 30, 2017. The decrease in theatrical revenue is primarily due to mix of films.

For the three months ended September 30, 2018, aggregate revenues from television syndication decreased by 24.6% to $17.5 million from $23.2 million for the three months ended September 30, 2017 and in the six months ended September 30, 2018, revenue decreased by 11.3% to $36.1 million, compared to $40.7 million for the six months ended September 30, 2017. The decrease is mainly due to lower catalogue sales during the period.

For the three months ended September 30, 2018, the aggregate revenues from digital and ancillary increased by 31.6% to $27.1 million from $20.6 million for the three months ended September 30, 2017 and in the six months ended September 30, 2018, revenue increased by 32.8% to $53.8 million, compared to $40.5 million for the six months ended September 30, 2017. The increase in revenue is primarily on account of contribution from catalogue revenues and digital business.

Revenue from India increased by 0.4% to $25.5 million in the three months ended September 30, 2018, compared to $25.4 million in the three months ended September 30, 2017 and in the six months ended September 30, 2018, revenue from India decreased by 6.7% to $47.4 million, compared to $50.8 million for the six months ended September 30, 2017. The decrease in revenue for six months ended September 30, 2018, is primarily due to mix of films.

Revenue from Europe increased by 205.9% to $15.6 million in the three months ended September 30, 2018, compared to $5.1 million in the three months ended September 30, 2017 and in the six months ended September 30, 2018, revenue from Europe increased by 111.6% to $30.9 million, compared to $14.6 million for the six months ended September 30, 2017. This was due to higher contribution from the monetization of catalogue films.

Revenue from North America was $0.4 million in the three months ended September 30, 2018, compared to $0.4 million in the three months ended September 30, 2017and in the six months ended September 30, 2018, revenue from North America increased by 16.7% to $0.7 million, compared to $0.6 million for the six months ended September 30, 2017.

Revenue from the rest of the world decreased by 32.4% to $21.9 million in the three months ended September 30, 2018, compared to $32.4 million in the three months ended September 30, 2017and in the six months ended September 30, 2018, revenue from rest of world decreased by 23.4% to $44.6 million, compared to $58.2 million for the six months ended September 30, 2017. This was due to lower catalogue sales and partially offset by theatrical revenue from mix of films.

Cost of sales

For the three months ended September 30, 2018, cost of sales increased by 8.2% to $38.1 million compared to $35.2 million in the three months ended September 30, 2017 and in the six months ended September 30, 2018, cost of sales increased by 6.6% to $74.7 million, compared to $70.1 million for the six months ended September 30, 2017. The increase was mainly due to higher marketing, advertising and distribution costs.

Gross profit

For the three months ended September 30, 2018, gross profit decreased by 10.3% to $25.3 million, compared to $28.2 million in the three months ended September 30, 2017. The decrease was mainly due to increase in amortization, marketing, advertising and distribution costs which was partially offset by additional adjustment on account of adoption of new accounting standards for three months ended September 30, 2018.

In the six months ended September 30, 2018, gross profit decreased by 9.3% to $49 million, compared to $54 million for the six months ended September 30, 2017. The decrease was mainly due to increase in marketing, advertising and distribution costs which was partially offset by additional adjustment on account of adoption of new accounting standards for six months ended September 30, 2018

Adjusted EBITDA (Non- GAAP)

For the three months ended September 30, 2018, Adjusted EBITDA increased by 44.2% to $24.8 million compared to $17.2 million in the three months ended September 30, 2017. The increase in Adjusted EBITDA is on account of additional adjustment arising upon adoption of new accounting standards for three months ended September 30, 2018, which is partially offset by increase in share based payments adjustment.

In the six months ended September 30, 2018, adjusted EBITDA increased by 52.3% to $50.4 million, compared to $33.1 million for the six months ended September 30, 2017. The increase in Adjusted EBITDA is on account of additional adjustment arising upon adoption of new accounting standards for six months ended September 30, 2018 which is partially offset by increase in share based payments adjustment.

Net finance costs

For the three months ended September 30, 2018, net finance costs decreased by 105.8% to $(0.3) million, compared to $5.2 million in the three months ended September 30, 2017 mainly due to unwinding of credit impairment loss reserve by $4 million and reduction in borrowing costs.

In the six months ended September 30, 2018, net finance costs decreased by 80.2% to $2.1 million, compared to $10.6 million for the six months ended September 30, 2017 mainly due to unwinding of credit impairment loss reserve by $6.1 million and reduction in borrowing costs.

Income tax expense

For the six months ended September 30, 2018, income tax expenses increased by 21.1% to $4.6 million, compared to $3.8 million in the six months ended September 30, 2017. Effective income tax rates were 11.6% and 20.0% for September 30, 2018 and September 30, 2017, respectively excluding non-deductible share-based payment charges and gain/loss on fair valuation of derivative liabilities. The change in effective rate principally reflects a change in the mix of the profits earned from taxable and non- taxable jurisdictions.

Trade Receivables

As of September 30, 2018, Trade Receivables decreased to $198.0 million from $225.0 million as of March 31, 2018 after considering expected credit loss reserve upon adoption of new accounting standards during the period.

Net Debt

As of September 30, 2018, net debt decreased by 14.3% to $162.1 million from $189.2 million as of March 31, 2018 primarily on account of additional equity infusion during the period.

Conference Call:

The Company will host a conference call on Thursday, November 15th, 2018, at 8:30 AM Eastern Standard Time.

To access the call please dial 323-794-2094 or 800-263-0877 from the United States, or +44 (0)330 336 9125 or (0)800 358 6377 from outside the U.S. The conference call I.D. number is 6142911. Participants should dial in 5 to 10 minutes before the scheduled time.

A replay of the call can be accessed through November 22, 2018 by dealing 719-457-0820 or 888-203-1112 from the U.S., or +44 (0) 207 660 0134 or 0 808 101 1153 from outside the U.S. The conference call I.D. number is 6142911. The call will be available as a live webcast, which can be accessed at Eros’ Investor Relations website.

About Eros International Plc

Eros International Plc (NYSE: EROS) is a leading global company in the Indian film entertainment industry that acquires, co-produces and distributes Indian films across all available formats such as cinema, television and digital new media. Eros International Plc became the first Indian media company to list on the New York Stock Exchange. Eros International has experience of over three decades in establishing a global platform for Indian cinema. The Company has an extensive and growing movie library comprising of over 3,000 films, which include Hindi, Tamil, and other regional language films. The Company also owns the rapidly growing OTT platform Eros Now which has rights to over 11,000 films across Hindi and regional languages. For further information, please visit: www.erosplc.com.

EROS INTERNATIONAL PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Amounts in thousands, except share and per share data)

                 
Note September 30,
2018
March 31,
2018
ASSETS
Non-current assets
Property and equipment $ 9,229 $ 10,013
Goodwill 3,800 3,800
Intangible assets — trade name 14,000 14,000
Intangible assets — content 5 1,038,040 998,543
Intangible assets — others 4,448 5,280
Investments 27,337 27,257
Trade and other receivables 1 7,850 9,144
Income tax receivable 1,114 1,269
Restricted deposits 1,712 1,100
Deferred tax   64   351
Total non-current assets $ 1,107,594 $ 1,070,757
 
Current assets
Inventories $ 346 $ 353
Trade and other receivables 1 213,681 245,079
Cash and cash equivalents 88,254 87,762
Investments 1,000
Restricted deposits   53,341   6,368
Total current assets   356,622   339,562
Total assets $ 1,464,216 $ 1,410,319
 
LIABILITIES
Current liabilities
Trade and other payables $ 59,220 $ 72,142
Acceptances 3 7,039 8,898
Short-term borrowings 2 200,538 151,963
Current income tax payable   9,456   6,324
Total current liabilities $ 276,253 $ 239,327
 
Non-current liabilities
Long-term borrowings 2 $ 96,489 $ 124,983
Other long-term liabilities 2,746 3,073
Deferred income tax liabilities   32,870   39,519
Total non-current liabilities $ 132,105 $ 167,575
Total liabilities $ 408,358 $ 406,902
 
EQUITY
Share capital 4 $ 37,943 $ 35,334
Share premium 546,136 453,997
Reserves 415,672 422,992
Other components of equity (63,126 ) (48,649 )
JSOP reserve (15,985 ) (15,985 )
Share application pending allotment   4,980   18,000
Equity attributable to equity holders of Eros International Plc $ 925,620 $ 865,689
Non-controlling interest   130,238   137,728
Total equity $ 1,055,858 $ 1,003,417
Total liabilities and shareholder’s equity $ 1,464,216 $ 1,410,319
 

EROS INTERNATIONAL PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except share and per share data)

                 
Three Months Ended
September 30,
Six Months Ended
September 30,
Note 2018       2017 2018       2017
 
Revenue 8 $ 63,425 $ 63,308 $ 123,637 $ 124,140
Cost of sales   (38,114 )   (35,155 )   (74,685 )   (70,110 )
Gross profit 25,311 28,153 48,952 54,030
Administrative cost   (16,894 )   (16,715 )   (30,113 )   (30,901 )
Operating profit 8,417 11,438 18,839 23,129
Financing costs (4,395 ) (5,715 ) (9,322 ) (11,533 )
Finance income   4,679   546   7,258   980
Net finance costs 284 (5,169 ) (2,064 ) (10,553 )
Other gains/(losses) 9   6,426   (3,222 )   (8,259 )   (4,745 )
Profit before tax 15,127 3,047 8,516 7,831
Income tax   (1,711 )   (831 )   (4,590 )   (3,817 )
Profit for the period $ 13,416 $ 2,216 $ 3,926 $ 4,014
 
Attributable to:
Equity holders of Eros International Plc $

12,569

$ (1,404 ) $ (1,022 ) $ (2,731 )
Non-controlling interest  

847

  3,620   4,948   6,745
 
Earning/(loss) per share(cents)
Basic earning/(loss) per share 7 17.7 (2.3 ) (1.5 ) (4.5 )
Diluted earning/(loss) per share 7 17.0 (2.5 ) (1.6 ) (4.8 )
 

EROS INTERNATIONAL PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands, except share and per share data)

           
Three Months Ended
September 30,
Six Months Ended
September 30,
2018       2017 2018       2017
 
Profit for the period $ 13,416 $ 2,216 $ 3,926 $ 4,014
 
Other comprehensive loss:
Items that will be subsequently reclassified to profit or loss
Exchange differences on translating foreign operations (12,803 ) (1,393 ) (23,950 ) (1,791 )
Reclassification of the cash flow hedge to the statement of operations, net of tax         187
 
Total other comprehensive income/(loss) for the period $ (12,803 ) $ (1,393 ) $ (23,950 ) $ (1,604 )
Total comprehensive income for the period, net of tax $ 613 $ 823 $ (20,024 ) $ 2,410
 
Attributable to:
Equity holders of Eros International Plc $

4,776

 

$ (2,318 ) $ (15,465 ) $ (3,607 )
Non-controlling interest  

(4,163

)

  3,141   (4,559 )   6,017
 

EROS INTERNATIONAL PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands, except share and per share data)

           
Six Months Ended
September 30,
Note 2018       2017
Cash flows from operating activities:
Profit before tax $ 8,516 $ 7,831
Adjustments for:
Depreciation 527 533
Share based payments 6 11,116 7,471
Amortization of intangible film and content rights 60,323 60,716
Amortization of other intangibles assets 759

 

725
Other non-cash items 10 22,460 9,673
Net finance costs

8,175

10,553
Loss on sale of property and equipment 4
Movement in trade and other receivables (75,829 ) (49,776 )
Movement in inventories (25 ) 11
Movement in trade and other payables  

(11,816

)   (13,520 )
Cash generated from operations 24,204 34,221
Interest paid (4,248 ) (11,155 )
Income taxes paid   (3,131 )   429
Net cash generated from operating activities $ 16,825 $ 23,495
 
Cash flows from investing activities:
Purchases of property and equipment (400 ) (125 )
Investment in restricted deposits held with banks (48,367 ) (8,185 )
Purchase of intangible film rights and content rights (54,060 ) (43,004 )
Investments (1,000 )
Purchase of other intangible assets (171 ) (9 )
Interest received   1,815   2,006
Net cash (used in) investing activities $ (102,183 ) $ (49,317 )
 
Cash flows from financing activities:
Proceeds from issue of shares by subsidiary 20 466
Proceeds from issue of share capital, net of transaction costs 54,782 78
Proceeds from sale of shares of a subsidiary 40,221
Proceeds from short-term debt 65,920 23,200
Repayment of short-term debt (27,294 ) (17,513 )
Proceeds from long-term debt 176 10,708
Repayment of long-term debt (6,362 ) (5,503 )
(Repayment of)/ proceeds from/ short term debt with maturity less than three months (net)   1,224   (28,062 )
Net cash generated from financing activities $ 88,466 $ 23,595
 
Net decrease in cash and cash equivalents 3,108 (2,227 )
Effect of exchange rate changes on cash and cash equivalents (2,616 ) 3,276
Cash and cash equivalents at beginning of period   87,762   112,267
Cash and cash equivalents at end of period $ 88,254 $ 113,316
 

The cash outflow towards intangible film and content right includes, interest paid and capitalized $6,418 (September 30, 2017: $5,239).

Reconciliation of Liabilities arising from Financing activities:

                 
Long term
debt(*)
Short term
debt
Total
As at March 31, 2018 $ 188,909 $ 87,755 $ 276,664
Considered in cash flow (net) (6,186 ) 39,850 33,664
Finance cost in relation to convertible notes 5,689 5,689
Movement in derivative financial instruments 282 282
Borrowing for purchase of property and equipment 91 91
Shares issued in lieu of convertible note (19,391 ) (19,391 )

Shares to be issued in lieu of convertible note

(4,980 ) (4,980 )

Change in fair value of convertible notes measured at fair value through profit and loss

19,743 19,743
Amortization of debt issuance cost 253 253
Exchange adjustment   (8,138 )   (6,850 )   (14,988 )
As at September 30, 2018 $ 176,272 $ 120,755 $ 297,027
 

(*) including current portion and derivative financial instruments

EROS INTERNATIONAL PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands, except share and per share data)

                                         
Other components of equity Reserves
Share
capital
Share
premium
account
Currency
translation
reserve
      Available
for sale
fair value reserves
      Revaluation
reserve
      Hedging
reserve
Reverse
acquisition
reserve
      Merger
reserve
    Retained
earnings
JSOP
reserve
Share
Application Reserve
Equity
Attributable to
Shareholders
of EROS
International
PLC
    Non-
controlling
interest
    Total
equity
(in thousands)
Balance as at March 31, 2018 $ 35,334 $ 453,997 $ (56,722 ) $ 6,238 $ 1,835 $ $ (22,752 ) $ 70,484 $ 375,260 $ (15,985 ) $ 18,000 $ 865,689 $ 137,728 $ 1,003,417
 

Adoption of IFRS 9/15 (Refer Note 12)

      (34 )             (14,270 )       (14,304 )   (3,520 )   (17,824 )
 
Balance as at April 1, 2018 $ 35,334 $ 453,997 $ (56,756 ) $ 6,238 $ 1,835 $ $ (22,752 ) $ 70,484 $ 360,990 $ (15,985 ) $ 18,000 $ 851,385 $ 134,208 $ 985,593
 
(Loss)/Profit for the period (1,022 ) (1,022 ) 4,948 3,926
 
Other comprehensive income/(loss) for the period       (14,443 )                   (14,443 )   (9,507 )   (23,950 )
 
Total comprehensive income/(loss) for the period (14,443 ) (1,022 ) (15,465 ) (4,559 ) (20,024 )
 
Shares to be issued in lieu of convertible notes 4,980 4,980 4,980
Issue of shares 1,948 70,718 (18,000 ) 54,666 54,666
 
Shares issued on exercise of employee stock options and awards 82 2,609 (2,575 ) 116 116
 
Share based Compensation 10,806 10,806 310 11,116
 
Changes in ownership interests in subsidiaries that do not result in a loss of control (259 ) (259 ) 279 20
 
Shares issued in lieu of convertible notes 579 18,812 19,391 19,391
 

Balance as at September 30, 2018

$ 37,943   546,136   (71,199 )   6,238   1,835     (22,752 )   70,225   368,199   (15,985 )   4,980   925,620   130,238   1,055,858
 

EROS INTERNATIONAL PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands, except share and per share data)

                                   
Other components of equity Reserves
Share
capital
Share
premium
account
Currency
translation
reserve
    Available
for sale
fair value reserves
      Revaluation
reserve
      Hedging
reserve
Reverse
acquisition
reserve
    Merger
reserve
      Retained
earnings
JSOP
reserve
Equity
Attributable to
Shareholders
of EROS
International
PLC
Non-
controlling
interest
Total
equity
(in thousands)
Balance as at April 1, 2017 $ 31,877 $ 399,686 $ (55,810 ) $ 6,238 $ 1,829 $ (375 ) $ (22,752 ) $ 70,275 $ 389,474 $ (15,985 ) $ 804,457 $ 79,091 $ 883,548
 
(Loss)/)Profit for the period (2,731 ) (2,731 ) 6,745 4,014
 
Other comprehensive income/(loss) for the period       (1,072 )     9   187           (876 )   (728 )   (1,604 )
 
Total comprehensive income/(loss) for the period (1,072 ) 9 187 (2,731 ) (3,607 ) 6,017 2,410
 
Share based compensation 7,208 7,208 263 7,471
 
Shares issued on exercise of employee stock options and awards 119 3,920 (3,961 ) 78 78
 
Changes in ownership interests in subsidiaries that do not result in a loss of control 1,055 1,055 39,632 40,687
 

Balance as at September 30, 2017

$ 31,996   403,606   (56,882 )   6,238   1,838   (188 )   (22,752 )   71,330   389,990   (15,985 )   809,191   125,003   934,194
 

EROS INTERNATIONAL PLC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

1. TRADE AND OTHER RECEIVABLES
     
As at
September 30,
2018
      March 31,
2018
 
Trade accounts receivables $ 229,219 $ 235,191
Credit impairment (loss)   (31,219 )   (10,193 )
Trade accounts receivables net 198,000 224,998
 
Other receivables 19,455 20,933
Prepaid charges 411 2,700
Accrued revenues   3,665   5,592
Trade and other receivables $ 221,531 $ 254,223
 
Current 213,681 245,079
Non-current   7,850   9,144
$ 221,531 $ 254,223
 
2. BORROWINGS

An analysis of long-term borrowings is shown in the table below.

                 
As at
Nominal
Interest Rate
Maturity September 30,
2018
      March 31,
2018
 
Asset backed borrowings
Vehicle loan 7.5% - 10.25% 2017-21 $ 481 $ 560
Term loan 9.12% - 11.66% 2018-22 128
Term loan BPLR+2.85% 2019-20 2,067 3,453
Term loan BPLR+2.55% - 3.4% 2020-21 6,437 8,767
Term loan 13.75% 2022-23 7,132 9,580
Term loan MCLR+3.45% 2021-22   8,705   11,976

$

24,950

$ 34,336
 
Unsecured borrowings
Retail bond 6.5% 2021-22 $ 65,145 70,055
Convertible notes 14.2% 2020-21   87,071   86,010

$

152,216

$ 156,065
 
Nominal value of borrowings $ 177,166 $ 190,401
Cumulative effect of unamortized costs (894) (1,210)
Installments due within one year   (79,783)   (64,208)
Long-term borrowings

$

96,489

$

124,983

 

Bank prime lending rate (“BPLR”) and Marginal Cost based lending rate (“MCLR”) is the Indian equivalent to LIBOR. Asset backed borrowings are secured by fixed and floating charges over certain Group assets.

Analysis of short-term borrowings

           
As at

Nominal
interest rate (%)

September 30,
2018
        March 31,
2018
 
Asset backed borrowings
Export credit bill discounting and overdraft BPLR+1-3.5% $ 52,308 $ 43,518
Export credit and overdraft LIBOR+4.5% 20,249 21,226
Foreign currency loan 0.59% 36,822
Short term loan 13-14.25% 11,376 11,537
Other short term loan 10.20%     11,474
$ 120,755 $ 87,755
Unsecured borrowings
Installments due within one year on long-term borrowings   79,783   64,208
Short-term borrowings $ 200,538 $ 151,963
 
3. ACCEPTANCES
           
September 30,
2018
March 31,
2018
(in thousands)
Payable under the film financing arrangements $ 7,039 $ 8,898
$ 7,039 $ 8,898
 

Acceptances comprise of credit availed from financial institutions for payment to film producers for film co-production arrangement entered by the group. The carrying value of acceptances are considered a reasonable approximation of fair value.

4. ISSUED SHARE CAPITAL
           
Number of
Shares
GBP
Authorized    
Ordinary shares of 30p each at March 31, 2018   100,000,000   30,000
Ordinary shares of 30p each at September 30, 2018(*)   100,000,000   30,000
 

(*) The Company increased authorized number of shares to 150,000,000 on October 25, 2018.

         

 

Number of Shares USD
Allotted, called up and fully paid A Ordinary
30p Shares(*)
      B Ordinary
30p Shares(*)
(in thousands)
As at March 31, 2017   41,312,202   19,379,382 $ 31,877
Issue of shares in the quarter ended June 30, 2017   12,000   5
Issue of shares in the quarter ended September 30, 2017 288,291 114
Issue of shares in the quarter ended December 31, 2017 1,681,520 657
Transfer of B Ordinary to A Ordinary share 9,666,667 (9,666,667 )
Issue of shares in the quarter ended Mar 31, 2018 2,757,743 2,681
           
As at March 31, 2018 55,718,423 9,712,715 $ 35,334
Issue of shares in the quarter ended June 30, 2018 2,747,645 $ 1,138
Issue of shares in the quarter ended September 30, 2018   3,773,385   $ 1,471
As at September 30, 2018   62,239,453   9,712,715   37,943
 

The Company issued A Ordinary shares as follows:

     
Number of Shares
September 30,       March 31,
2018       2017 2018
Issuance to Founders Group (**)   1,769,911     1,421,520
Issuance towards settlement of Convertible notes 1,436,369 2,624,668

Exercise against Restricted Share Unit/ Management scheme (*****)

194,079 300,291 683,158
Issuance towards Reliance Industries Limited (***) 3,111,088
2015 Share Plan (****)   9,583     10,208
Total   6,521,030   300,291   4,739,554
 

(*) Each A ordinary shares is entitled to one vote on all matters and each B shares is entitled to ten votes.

(**) Average exercise price of $14.69 (September 2017 Nil and March 2018$11.6)

(***) Average exercise price of $15 (September 2017 Nil and March 2018 $Nil)

(****) Average exercise price of $7.93 (September 2017 Nil and March 2018$8.71)

(*****) Certain shares exercised price at $ 0.39 (September 2017 Nil and March 2018 Nil)

The Company issued 402,249 ‘A’ ordinary shares on October 3, 2018 towards settlement of Convertible notes.

5. INTANGIBLE ASSETS – CONTENT
                 
Gross
Content
Assets
Accumulated
Amortization
Content
Assets
 
As at September 30, 2018
Film and content rights $ 1,532,417 $ (861,841 ) $ 670,576
Content advances 357,164 357,164
Film productions   10,300     10,300
Non-current content assets $ 1,899,881 $ (861,841 ) $ 1,038,040
 
As at March 31, 2018
Film and content rights $ 1,493,099 $ (854,991 ) $ 638,108
Content advances 349,568 349,568
Film productions   10,867     10,867
Non-current content assets $ 1,853,534 $ (854,991 ) $ 998,543
 
6. SHARE BASED COMPENSATION PLANS

The compensation cost recognized with respect to all outstanding plans and by grant of shares, which are all equity settled instruments, is as follows:

           
Three months ended
September 30,
Six months ended
September 30,
2018       2017 2018         2017
 
IPO India Plan $ 351 $ 349 $ 779 $ 719
JSOP Plan 615
Option award scheme 2012 96 197
2014 Share Plan 125 47 384
2015 Share Plan(*) 2,345 31 2,352 67
Other share option awards (**) 1,894 414 3,355 1,762
Management scheme (staff share grant)   2,096   1,267   4,583   3,727
$ 6,686 $ 2,282 $ 11,116 $ 7,471
 

(*) includes of 955,399 options granted towards 2015 Share Plan 2015 during six months ended September 30, 2018 at an average exercise price of $16.08 per share and average grant date fair value $2.13 per share.

(**) includes Restricted Share Unit (RSU) and Other share option plans.

In respect of 50,149 units/options granted towards RSU during six months ended September 30, 2018, grant date fair value approximates intrinsic value.

7. EARNINGS/(LOSS) PER SHARE
           
Three months ended September 30, Six months ended September 30,
2018       2017 2018       2017
Basic       Diluted Basic       Diluted Basic       Diluted Basic       Diluted
Earnings/(loss) attributable to the equity holders of the parent $

12,569

 

12,569

$ (1,404 )   (1,404 ) $ (1,022 )   (1,022 ) $ (2,731 )   (2,731 )
Potential dilutive effect of senior convertible bonds     1,109            
Potential dilutive effect related to share based compensation scheme in subsidiary undertaking     (36 )     (120 )     (142 )     (237 )
Adjusted earnings/(loss) attributable to equity holders of the parent $

12,569

 

13,642

$ (1,404 )   (1,524 ) $ (1,022 )   (1,164 ) $ (2,731 )   (2,968 )
       
Number of shares
Weighted average number of shares 71,000,987 71,000,987 60,698,517 60,698,517 69,174,427 69,174,427 60,839,680 60,839,680
Potential dilutive effect related to share based compensation scheme     9,457,270     1,178,111     2,034,547     1,140,748
Adjusted weighted average number of shares   71,000,987   80,458,257   60,698,517   61,876,628   69,174,427   71,208,974   60,839,680   61,980,428
 
Earnings per share
Earning attributable to the equity holders of the parent per share (cents)   17.7   17.0   (2.3 )   (2.5 )   (1.5 )   (1.6 )   (4.5 )   (4.8 )
 

The above table does not split the earnings per share separately for the ‘A’ ordinary 30p shares and the ‘B’ ordinary 30p shares as there is no variation in their entitlement to participate in undistributed earnings.

8. BUSINESS SEGMENTAL DATA
           
Three months ended
September 30,
Six months ended
September 30,
2018       2017 2018       2017
 
Revenue by customer's location
India $ 30,952 $ 27,570 $ 56,783 $ 54,569
Europe 144 818 456 2,044
North America 1,060 1,090 2,409 2,259
Rest of the world   31,269   33,830   63,989   65,268
Total Revenue $ 63,425 $ 63,308 $ 123,637 $ 124,140
 
           
Three months ended
September 30,
Six months ended
September 30,
2018       2017 2018       2017
 
Revenue by group's operation
India $ 25,451 $ 25,403 $ 47,405 $ 50,771
Europe

15,582

5,067 30,878 14,633
North America 449 397 746 577
Rest of the world  

21,943

  32,441   44,608   58,159
Total Revenue $ 63,425 $ 63,308 $ 123,637 $ 124,140
 
           
Three months ended
September 30,
Six months ended
September 30,
2018       2017 2018       2017(1)
 
Revenue by source
Theatrical $ 18,829 $ 19,422 $ 33,721 $ 43,008
Satellite Content licensing 17,495 23,238 36,146 40,652
Digital and other ancillary   27,101   20,648   53,770   40,480
Total Revenue $ 63,425 $ 63,308 $ 123,637 $ 124,140
 

(1) As noted above, prior period amounts have not been adjusted under the modified retrospective method.

9. OTHER GAINS/(LOSSES)
           
Three months ended
September 30,
Six months ended
September 30,
2018       2017 2018       2017
 
Foreign exchange (loss)/gain,net $ 328 $ (2,230 ) $ 3,689 $ (3,932 )
(Loss) on sale of property and equipment (4 )
Reversal of expected credit (loss) 5,982 10,563
Net losses on derecognition of financial assets measured at amortized cost, net(*) (1,464 ) (1,778 ) (2,768 ) (1,778 )
 
(Loss)/Gain on financial liability (convertible notes) measured at fair value through profit and loss 1,580 (19,743 )
Net Gain on held for trading financial liabilities     786     969
$ 6,426 $ (3,222 ) $ (8,259 ) $ (4,745 )
 

(*) arising on assignment and novation of trade receivables and trade payables with no-recourse. Derecognition of aforesaid financial assets/liabilities measured at amortized cost is to mitigate both credit risk and liquidity risk

10. NON-CASH EXPENSE/(INCOME)

Significant non-cash expenses except loss on sale of assets, share based compensation, depreciation, derivative interest and amortization were as follows:

     
Six months ended
September 30,
2018       2017
(in thousands)
 
Net gains on held for trading financial liabilities $ $ (969 )
Provisions for trade and other receivables 1,795
 
Credit impairment losses, net 3,571 3,007
Loss on financial liability (convertible notes) measured at fair value through profit and loss 19,743
Net Losses on derecognition of financial assets measured at amortized cost,net 2,768 1,778
Unrealized foreign exchange loss/(gain)

(3,776

) 4,062
Others   154  
$ 22,460 $ 9,673
 

EROS INTERNATIONAL PLC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

11.NON GAAP FINANCIAL MEASURES

Gross Revenue (Non-GAAP)

           
Three months ended September 30, Six months ended September 30,
2018       2017 2018       2017
(in millions)
 
Revenue (GAAP) $ 63.4 $ 63.3 $ 123.6 $ 124.1
Adjustment towards significant financing component   8.8   2.1  

15.2

  2.1
Gross Revenue (Non -GAAP) $ 72.2 $ 65.4 $ 138.8 $ 126.2
 

Adjusted EBITDA (Non-GAAP)

           
Three months ended September 30, Six months ended September 30,
2018       2017 2018       2017
(in thousand)
Net income (GAAP) $ 13,416 $ 2,216 $ 3,926 $ 4,014
Income tax expense 1,711 831 4,590 3,817
Net finance costs (284 ) 5,169 2,064 10,553
Depreciation 279 270 527 533
Amortization(1)   288   356   759   725
EBITDA 15,410 8,842 11,866 19,642
Share based payments(2) 6,686 2,282 11,116 7,471
Credit impairment losses/(gains)(3) (5,982 ) 3,007 (10,563 ) 3,007
Adjustment towards arisen significant discounting, component (3) 8,837 2,118 15,247 2,118
Net losses on de-recognition of financial assets measured at amortized cost, net 1,464 1,778 2,768 1,778
Loss/(Gain) on financial liability (convertible notes) measured at fair value through profit and loss (1,580 ) 19,743
Closure of derivative asset 249
Loss on sale of property and equipment 4
Net losses/(gains) on held for trading financial liabilities     (786 )     (969 )
Adjusted EBITDA (Non-GAAP) $ 24,835 $ 17,241 $ 50,426 $ 33,051
Amortizaton of intangible and content rights   31,828   28,704   60,323   60,716
Gross Adjusted EBITDA $ 56,663 $ 45,945 $ 110,749 $ 93,767
 

(1) Includes only amortization of intangible assets other than intangible content assets.

(2) Consists of compensation costs recognized with respect to all outstanding plans and all other equity settled instruments.

(3) Comparatives number have been reclassified on account of adoption of IFRS 15.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

12.

NEW STANDARDS ADOPTED AS AT APRIL 1, 2018

Adoption of IFRS 15, "Revenue from Contracts with Customers"

On April 1, 2018, the Group adopted IFRS 15, “Revenue from Contracts with Customers” (‘IFRS 15’), using the modified retrospective method applied to all contracts as of April 1, 2018. Results for reporting periods beginning after April 1, 2018 are presented under IFRS 15, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under IAS 18, Revenue (‘IAS 18’).

Revenue arises mainly from production and distribution of media content, television syndication or satellite rights and digital and ancillary rights.

The Group determines revenue recognition through the following steps:

1. Identification of the contract, or contracts, with a customer

2. Identification of the performance obligations in the contract

3. Determination of the transaction price

4. Allocation of the transaction price to the performance obligations in the contract

5. Recognition of revenue when, or as, a performance obligation/s are satisfied.

In all cases, the total transaction price for a contract is allocated amongst the various performance obligations based on their relative stand-alone selling prices. The transaction price for a contract, excludes any amounts collected on behalf of third parties.

EROS INTERNATIONAL PLC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised goods or services to its customers in an amount that reflects the consideration that it expects to receive in exchange for those services.

At contract inception, the Group assesses the services promised in the contracts with customers and identifies a performance obligation for each promise to transfer to the customer a service (or bundle of services) that is distinct. To identify the performance obligations, the Group considers all of the services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.

The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts within ‘Trade and other payables’ in the Statement of Financial Position. Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or accrued receivable within ‘Trade and other receivables’ in the Statement of Financial Position, depending on whether something other than the passage of time is required before the consideration is due.

For certain content licensing arrangements, the Group’s collection period range between 2 – 3 years from contract inception date. Under IFRS 15, an entity needs to adjust the promised amount of consideration for the effects of the time value of money if the timing of payments agreed to by the parties to the contract (either explicitly or implicitly) provides the customer or the entity with a significant benefit. As such, for arrangements where the implied collection period (or normal credit term) is considered to be more than 1 year, revenue is recognised after adjusting the promised amount of consideration for a significant financing component, using the discount rate that would be reflected in a separate financing transaction between the entity and its customer at contract inception. The effects of financing, i.e. unwinding of the financing component, is recognised separately from revenue from contracts with customers in the Statement of Income, within ‘Finance income’. Any subsequent change in collection date from the anticipated collection date considered on the contract inception date has been recognised separately in the Statement of Income, within ‘Other gains/(losses), net.

For the six months ended September 30, 2018, revenue amounting $7,258 included in the contract liability balance at the beginning of the period.

In case of television syndication rights, as on September 30, 2018, there were certain films in respect of which rights have not been transferred either because the delivery of the content has not been made or effective date mentioned in the contract has not arrived as on the reporting date. The aggregate amount of license fees allocated to the above movies for the six months ended September 30, 2018 is $5,317

As such, the Group has performance obligations associated with fixed commitments in customer contracts for future services that have not yet been recognized in our condensed interim consolidated financial statements is $3,397 as of September 30, 2018. The Company expects to recognize revenue on approximately 80% of these remaining performance obligations by 12 months with the balance recognition thereafter.

Practical Expedients and Exemptions

We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses.

Adoption of IFRS 9, "Financial Instruments"

On April 1, 2018, the Company adopted IFRS 9, “Financial Instruments” (‘IFRS 9’), using the modified retrospective method applied as of April 1, 2018. IFRS 9 Financial Instruments replaces IAS 39 ‘Financial Instruments: Recognition and Measurement’ requirements with effect from April 1, 2018. When adopting IFRS 9, the Group elected not to restate prior periods. Rather, differences arising from the adoption of IFRS 9 in relation to classification, measurement, and impairment are recognized in opening retained earnings as of 1 April 2018.

Major changes in IFRS 9 as compared to IAS 39 is on account of introduction of the expected credit loss model and the changes in categories of financial assets and financial liabilities.

The adoption of IFRS 9 has mostly impacted the following areas:

The classification and measurement of the Group’s financial assets. Management holds most financial assets to hold and collect the associated cash flows.

The impairment of financial assets applying the expected credit loss model. This applies now to the Group’s trade and other receivables. For contract assets arising from IFRS 15 and trade receivables, the Group applies a simplified model of recognising lifetime expected credit losses as these items do not have a significant financing component. For all other financial assets, expected credit losses are measured at an amount equal to the twenty-four month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL.

The measurement of available for sale equity investments at cost less impairment. This investment is now measured at fair value with changes in fair value presented in other comprehensive income.

The recognition of gains and losses arising from the Group’s from own credit risk. The Group continues to elect the fair value option for certain financial liabilities which means that fair value movements from changes in the Group’s own credit risk are now presented in other comprehensive income rather than profit or loss.

Details showing the Classification and measurement of the Company’s financial instruments on adoption of IFRS 9 as of 1 April 2018.

                       
IAS 39 Category IFRS 9 Category Total
carrying value
Total
fair value
Financial Assets    
Cash and cash equivalents Loans and Receivables At amortized cost 87,762 87,762
Restricted deposits Loans and Receivables At amortized cost 7,468 7,468
Investment in equity instruments Available for sale financial assets Financial assets at FVTOCI* 27,257 27,257
Trade and other receivables Loans and Receivables At amortized cost   235,726   235,726
Total   358,213   358,213
 
                       
IAS 39 Category IFRS 9 Category Total
carrying value
Total
fair value
Financial Liabilities    
Total borrowings (excluding convertible notes) At amortized cost At amortized cost 190,936 174,533
Convertible notes Financial liabilities at FVTPL Financial liabilities at FVTPL** 86,010 86,010
Trade and other payables At amortized cost At amortized cost 72,142 72,142
Acceptances At amortized cost At amortized cost   8,898   8,898
Total   357,986   341,583
 

* FVTOCI – Fair value through other comprehensive income.

** FVTPL - Fair value through profit and loss.

The cumulative effect of the changes made to the consolidated interim Statement of Financial Position as of April 1, 2018 in respect of the adoption of IFRS 15 and IFRS 9 were as follows:

                 
Assets As of
March 31,
2018
(Reported)

IFRS 9/15

As of
April 1,
2018
Trade and other receivables $ 254,223 $ (18,497 ) $ 235,726
Liabilities and Shareholders' Equity
Currency translation reserve (56,722 ) (34 ) (56,756 )
Retained earnings 375,260 (14,270 ) 360,990
Deferred income tax liabilities 39,519 (673 ) 38,846
Non-controlling interests 137,728 (3,520 ) 134,208
 

EROS INTERNATIONAL PLC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

The Impact adoption of IFRS 15 and IFRS 9 on our consolidated statement of financial position as at September 30, 2018 were as follows:

                 
Assets

Balance at
September 30, 2018
(without adoption
of IFRS 9/15)

IFRS/ 9/15

Balance at
September 30, 2018
(Reported)

Trade and other receivables $ 222,585 $ (24,585 ) $ 198,000
Liabilities and Shareholders' Equity
Currency translation reserve (71,808 ) 609 (71,199 )
Retained earnings

389,861

(21,662

) 368,199
Deferred income tax liabilities 33,543 (673 ) 32,870
Non-controlling interests

133,097

(2,859

) 130,238
 

The impact of adoption of IFRS 15 and IFRS 9 on the consolidated interim statement of income for three month ended September 30, 2018 was as follow.

                 
September 30, 2018
(reported)
IFRS 9/15 September 30, 2018
(without adoption
of IFRS 15/ 9)
Revenue   63,425 $ 6,549   69,974
Cost of sales   (38,114 )     (38,114 )
Gross profit 25,311 6,549 31,860
Administrative cost   (16,894 ))   3,318   (13,576 )
Operating profit 8,417 9,867 18,284
Financing costs (4,395 ) (4,395 )
Finance income   4,679   (1,344 )   3,335
Net finance costs 284 (1,344 ) (1,060 )
Other gains/ (losses)   6,426   (5,982 )   444
(Loss)/Profit before tax 15,127 2,541 17,668
Income tax   (1,711 )     (1,711 )
(Loss)/ Profit for the period 13,416 2,541 15,957
 
Attributable to:
Equity holders of Eros International Plc

12,569

2,701

15,270

Non-controlling interest

847

(160)

687

 

EROS INTERNATIONAL PLC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

The impact of adoption of IFRS 15 and IFRS 9 on the consolidated interim statement of income for the six month ended September 30, 2018 was as follow.

                   
September 30, 2018
(reported)
IFRS 9/15 September 30, 2018
(without adoption
of IFRS 15/ 9)
Revenue   123,637   10,679   134,316
Cost of sales   (74,685 )     (74,685 )
Gross profit 48,952 10,679 59,631
Administrative cost   (30,113 )   4,998   (25,115 )
Operating profit 18,839 15,677 34,516
Financing costs (9,322 ) (9,322 )
Finance income   7,258   1,616   8,874
Net finance costs (2,064 ) 1,616 (448 )
Other gains/ (losses)   (8,259 )   (10,562 )   (18,821 )
(Loss)/Profit before tax 8,516 6,731 15,247
Income tax   (4,590 )     (4,590 )
(Loss)/ Profit for the period 3,926 6,731 10,657
 
Attributable to:
Equity holders of Eros International Plc (1,022 ) 7,287 6,265
Non-controlling interest 4,948

(556

)

4,392
 

Source: Eros International Plc

Mark Carbeck
Chief Corporate and Strategy Officer
Eros International PLC
mark.carbeck@erosintl.com
+44 207 258 9909
or
Erica Bartsch
Sloane & Company
212-446-1875
ebartsch@sloanepr.com