Cinema distribution generated revenue of €33.4 million in the reporting year (previous year: €47.5 million), accounting for 15 percent of total revenue. Cinema revenue therefore fell by €14.1 million compared with the previous year, when the major success of the in-house production PERFUME: THE STORY OF A MURDERER made a significant contribution.
Home entertainment generated revenue of €44.7 million (previous year: €28.1 million), an increase of 59 percent. This success was largely due to the exploitation of the strong 2006 distribution slate, with titles including PERFUME: THE STORY OF A MURDERER, HUI BUH: THE GOOFY GHOST and STEP UP, as well as the strong performance of individual titles from the 2007 cinema slate that had already reached video, such as FANTASTIC FOUR: RISE OF THE SILVER SURFER and WILD CHICKS IN LOVE. Several titles released straight to video also achieved very strong results, including LUCKY NUMBER SLEVIN and FEARLESS.
Commissioned production was again the largest source of revenue in 2007, generating €106.0 million (previous year: €123.3 million). This includes television productions from associated companies Olga Film GmbH, MOOVIE – The art of entertainment GmbH, Rat Pack Filmproduktion GmbH and Westside Filmproduktion GmbH, as well as revenue from marketing non-fiction productions by Constantin Entertainment GmbH.
Television revenue generated in 2007, meaning revenue from licensing television rights to cinema films and from licensing in-house and co-produced television productions, amounted to €32.2 million (previous year: €40.4 million).
Gross profit for 2007 amounted to €32.0 million (previous year: €33.5 million). The gross margin was 14 percent in the reporting year, around one percentage point higher than the previous year’s 13 percent.
Operating profit for 2007 was €12.4 million (previous year: €14.2 million). Adjusted for risk provisions for films in subsequent years, operating profit amounted to €12.7 million. The positive result was based on the strong performance of fictional and non-fiction television entertainment, as well as video and DVD exploitation and the licensing of television rights to cinema films. The previous year’s result could not be repeated, mainly because of weaker cinema performance. Nevertheless, the company reported solid performance and consistent growth over the past four years.
Net profit attributable to shareholders of the parent company amounted to €6.2 million (previous year: €7.7 million). Earnings per share were €0.49, compared with €0.60 in the previous year.
The financial figures in this announcement take account of changes to accounting and valuation methods made by the Constantin Group in its 2007 financial statements and corresponding adjustments to prior-year figures. These mainly concern two IFRS standards. Under IAS 20, government grants are no longer reported as revenue but offset against production costs. Under the percentage-of-completion method governed by IAS 11, commissioned productions are now recognised in revenue and profit according to their degree of completion. In total, these changes result in absolute revenue reductions and shifts in revenue and profit between individual financial years. For 2007, revenue decreases by around €24.2 million and operating profit changes by approximately minus €1.5 million. Earnings per share for the reporting period change by around minus €0.12.
At 31 December 2007, total assets amounted to €333.3 million (31 December 2006: €308.4 million) and were reported as €25.0 million lower year on year. The main effect resulted from depreciation of film assets following film exploitation and from an increase in trade receivables.
Film assets amounted to €181.7 million at 31 December 2007, an increase of six percent compared with the previous year (€170.8 million). The increase was attributed to high investments made during the reporting year, particularly in domestic productions.
Investments in film assets for in-house productions amounted to €68.9 million at 31 December 2007 (previous year: €43.9 million). Investment volume therefore changed by 57 percent year on year. Investments during the reporting year included cinema films such as THE BAADER MEINHOF COMPLEX, A WOMAN IN BERLIN, EFFI BRIEST and THE WAVE. Film assets from in-house productions increased by €26.1 million, or 23 percent, year on year to €137.5 million. In 2007, €10.2 million (previous year: €20.3 million) was invested in exploitation rights for distribution and licensing.
At 31 December 2007, the Constantin Film Group held cash and cash equivalents of €91.8 million (previous year: €79.5 million), compared with bank liabilities of €112.1 million (previous year: €119.4 million). Net debt fell by €19.6 million compared with 31 December 2006.
Equity increased by €5.8 million year on year to €74.6 million at 31 December 2007. The calculated equity ratio was 22 percent (previous year: 22 percent). Netting cash and cash equivalents and bank liabilities at 31 December 2007, and film assets against advance payments received, produced an adjusted equity ratio of 44 percent (previous year: 40 percent).
Supported by its performance and commitment in the core businesses of producing and distributing content, Constantin Film AG also aimed for positive overall business development in 2008. This was despite a market environment made increasingly difficult by greater competition in the generally challenging German cinema market and continued high cost pressure from television broadcasters on producers. In cinema distribution, in-house productions including THE WAVE, THE BAADER MEINHOF COMPLEX, URMEL FULL SPEED AHEAD and A WOMAN IN BERLIN, the co-production ASTERIX AT THE OLYMPIC GAMES, and licensed films such as STEP UP 2: THE STREETS were expected to make an impact. The company expected revenue in home entertainment and commissioned television production to be at least level with the previous year, while television licensing revenue was expected to increase because of higher international revenue.
In the coming years, the reversion of numerous film rights under unchanged market conditions was expected to provide good growth prospects in the important home-entertainment catalogue business. The gradual reversion of the Constantin Film library was also expected to continue to have a positive influence on television-rights sales, meaning the company’s licensing business.