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Gaumont — Interim / Quarterly Report 2020
Sep 11, 2020
1356_ir_2020-09-11_1b86993e-3e19-4c79-a64a-6c1a0f419450.pdf
Interim / Quarterly Report
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2020 Half-year financial report
Half-year position as of June 30, 2020
The financial statements below were approved by the Board of Directors on September 10, 2020 and are the subject of a limited review report by the statutory auditors.
Half-year management report
Activities and results of the Gaumont group
The first half of 2020 saw the declaration of a health emergency in France and all other countries where Gaumont operates. This had two main impacts on operations: first, the closure of movie theaters to the public for a time that varied depending on the country; second, the temporary halt in shooting, prior to its resumption with enhanced safety measures.
This resulted in an adjustment to the movie release schedule and a postponed delivery of the group's productions. No projects under way at the start of the health crisis were permanently shelved, and operations resumed at the end of the first half-year.
Effect of this crisis on the period revenues varies depending on the media considered and is detailed in the presentation of revenue by business activity. The effects of postponed movie releases or delivery on the group's consolidated income will be more apparent in the second half of 2020.
Key figures
| 06.30.20 | 06.30.19 | ||||
|---|---|---|---|---|---|
| in | in | ||||
| thousands of euros |
as a % of revenue |
thousands of euros |
as a % of revenue |
Change | |
| Revenue | 69,900 | 100% | 47,434 | 100% | 47% |
| Income from cinema production and distribution(1) | 15,114 | 22% | 7,008 | 15% | 116% |
| Income from television production and distribution(1) | 3,206 | 5% | 998 | 2% | 221% |
| Consolidated income attributable to owners of the parent | -5,911 | -8% | -18,064 | -38% | 67% |
| Investments in cinema production | 5,529 | 8% | 14,599 | 31% | -62% |
| Investments in television production | 36,225 | 52% | 56,494 | 119% | -36% |
(1) Excluding overheads.
| 06.30.20 | 12.31.19 | Change | |
|---|---|---|---|
| Equity attributable to owners of the parent company | 219,703 | 230,192 | -5% |
| Net borrowings(1) | -10,562 | 30,362 | -135% |
(1) Excluding IFRS 16 debt.
Consolidated results
Revenue by business activity
Consolidated revenue for the first half of 2020 totaled k€69,900, versus k€47,434 as of June 30, 2019.
Revenue by business activity breaks down as follows:
Movie production and distribution
Revenue from the cinema production and distribution business came to k€38,152 as of June 30, 2020, versus k€34,472 as of June 30, 2019, and breaks down as follows:
* Primarily includes spin-off products, music publishing and the GP Archives business
Movie theater distribution
Revenue from the release of films in movie theaters in France stood at k€3,128 as of June 30, 2020, compared to k€7,359 as of June 30, 2019.
Four feature films were released during the first half of 2020:
- Play, directed by Anthony Marciano, starring Max Boublil and Alice Isaaz;
- Queens of the Field, directed by Mohamed Hamidi, starring Kad Merad, Alban Ivanov, Céline Sallette, Sabrina Ouazani and Laure Calamy;
- #IamHere, directed by Éric Lartigau, starring Alain Chabat, Doona Bae and Blanche Gardin;
- Pappy Sitter, directed by Philippe Guillard, starring Gérard Lanvin and Olivier Marchal.
These four films along with those released in 2019 and still on their run in early 2020 sold a total of 1.2 million cinema tickets, compared with 2.8 million sold by the five films released in the first half of 2019.
The distribution of Pappy Sitter was interrupted on March 15, 2020, ten days after its release, when movie theaters closed to the public due to the health emergency. This film was rescheduled after theaters reopened on June 22, 2020.
Simply Black, originally scheduled for release in April, was rescheduled for release in early July 2020. No other films were scheduled for release in the first half of 2020.
Video publishing and video on demand
Revenue from video and video on demand distribution in France amounted to k€4,031 as of June 30, 2020, versus k€4,231 as of June 30, 2019.
Physical video sales in France stood at k€1,380 as of June 30, 2020, against k€3,054 as of June 30, 2019. This decrease is mainly due to the closure of retail outlets during the lockdown.
Video on demand sales totaled k€2,651 as of June 30, 2020, compared with k€1,177 as of June 30, 2019.
The lockdown seemingly had a positive effect on video on demand sales. The best-selling films are among those released in theaters in 2019: School Life, J'accuse and The Specials. Movies released in theaters in the first quarter of 2020 qualified for an exemption from France's statutory media chronology and were able to be distributed via video on demand during the period.
Sales of television broadcasting rights
Revenue related to sales of broadcasting rights to French television channels amounted to k€21,249 as of June 30, 2020, versus k€9,940 as of June 30, 2019. French television channels increased the number of movies broadcast during the lockdown. As a result, revenue in the first half of 2020 corresponds to the opening of release windows for 140 films, compared with 88 films in the first half of 2019.
Revenue as of June 30, 2020 also includes k€3,185 in revenue from first broadcast rights for the films Three Days and a Life, Rolling to You and The Death of Stalin.
Sales by type of channel break down as follows:
International sales of rights
Revenue from international film sales was k€7,551 as of June 30, 2020, compared with k€10,609 as of June 30, 2019. The global lockdown resulted in the suspension of theatrical releases and the cancellation of major international conventions, which weighed on export sales of new releases. Revenue as of June 30, 2019 mainly included royalties from the successful American remake of Untouchable.
Other revenues from films distribution
Other revenue from movies amounted to k€2,193 as of June 30, 2020, compared with k€2,333 as of June 30, 2019. These revenues mainly correspond to the distribution of archive images by GP Archives, music publishing, and sales of spin-off products.
Production and distribution of dramas and cartoon series for television
Revenue from the television production and distribution business came to k€29,582 as of June 30, 2020, versus k€10,513 as of June 30, 2019, and breaks down as follows:
American dramas generated k€19,205 in revenue as of June 30, 2020, versus k€1,833 as of June 30, 2019. Season 4 of the series F is for Family was delivered in the first half of 2020, whereas there was no delivery in the first half of 2019.
Sales of animated films and series for younger audiences generated revenue of k€2,852 as of June 30, 2020, compared with k€2,919 as of June 30, 2019. There was no delivery in the first half of 2020, whereas Season 2 of the series Noddy was partially delivered in the first half of 2019. Revenue as of June 30, 2020 includes revenue from the production in the United States of the feature film High in the Clouds, currently being produced for Netflix.
French, German and British dramas and documentaries contributed k€7,525 to the 2020 first-half revenue, compared with k€5,761 in 2019. As in 2019, a one-off special was delivered in the first half: Nine Days Awake, delivered to Pro 7. Revenue as of June 30, 2020 includes: the production in France of the series Arsène Lupin, Move and Lords of Scam, for Netflix; in Germany, of the series The Barbarians, for Netflix; and in the United Kingdom, of the third season of Tin Star, for Sky Atlantic.
Other revenue
Income from trademark royalties paid by Les Cinémas Pathé Gaumont came to k€719 as of June 30, 2020, compared to k€1,287 as of June 30, 2019.
Other miscellaneous income amounted to k€1,447, versus k€1,162 as of June 30, 2019. This includes various services provided to third parties and income from the real estate business.
Breakdown by business
Consolidated income attributable to owners of the parent resulted in a loss of k€5,911 as of June 30, 2020, against a loss of k€18,064 as of June 30, 2019.
Income from production and distribution
Income from production and distribution, before overheads, including dedicated financing costs, stood at k€18,320 as of June 30, 2020, compared with k€8,006 as of June 30, 2019.
Income before overheads from feature films amounted to k€15,114 as of June 30, 2020, versus k€7,008 as of June 30, 2019. The increase between the first half of 2019 and the first half of 2020 is primarily due to distribution of the movie catalog, mainly sold to French television channels during the lockdown.
Income before overheads from the production and distribution of television dramas and documentaries amounted to k€2,031 as of June 30, 2020, versus k€226 as of June 30, 2019. The increase is mainly due to the delivery of Season 4 of F is for Family in the first half and the margins on titles currently in production, such as Arsène Lupin for Netflix, recognized using the percentage of completion method.
Income before overheads from the production and distribution of animated films and series for younger audiences amounted to k€1,175 as of June 30, 2020, versus k€772 as of June 30, 2019. The increase is mostly representative of the margin on High in the Clouds, currently in production for Netflix, recognized using the percentage of completion method.
Income from holding and real estate activities
Revenue before overheads from the holding and real estate businesses totaled k€762 as of June 30, 2020, versus k€701 as of June 30, 2019.
Overheads and other comprehensive income
The overheads of the various operational activities and functional and central services came to k€22,720 as of June 30, 2020, compared with k€23,684 as of June 30, 2019. This included k€1,806 in spending to support the development of European operations. In France, the United States and the United Kingdom, government support was introduced as a result of the lockdown. The impact of these subsidies on income for the period is k€373. The group also took advantage of the furlough scheme in France, which in addition to the abovementioned grants, resulted in a saving of k€417.
The costs of financing general needs came to k€1,670 as of June 30, 2020, versus k€3,173 as of June 30, 2019.
Cash and financial structure
As of June 30, 2020, Gaumont had a cash position of k€130,202, compared with k€85,624 at the beginning of the period, a positive change of k€44,578.
Cash flows from operating activities and investments
The group's business activities generated k€40,996 in net cash flows as of June 30, 2020, compared to k€33,380 as of June 30, 2019.
Net investments totaled k€-4,906 as of June 30, 2020, versus k€92,010 as of June 30, 2019. In March 2020, Pathé prepaid the final instalment of k€63,333 for the sale of the shares in Les Cinémas Gaumont Pathé, due on June 30, 2020.
Investments in cinematographic and television works
Investments in cinematographic and television works amounted to k€41,754 as of June 30, 2020, compared with k€71,093 as of June 30, 2019. Of this, films for cinema accounted for k€5,529 and television programs k€36,225. The interruption to shooting around the world due to the health crisis, particularly on Season 6 of Narcos, led to a decrease in investments during the period of around k€20,000. These investments will be carried forward to future periods as business returns to normal.
Investments in subsidiaries and equity interests
In March 2020, Gaumont purchased the remaining holdings of non-controlling shareholders in Gaumont Television USA for a net amount of k\$2,500.
Cash flows from financing activities and financial structure
In terms of financing activities, the first half of 2020 saw an increase in debt of k€1,804 and loan interest payments of k€1,566.
Equity
Consolidated equity (Group share) stood at k€219,703 as of June 30, 2020, versus k€230,192 as of December 31, 2019, giving a total consolidated financial position of k€498,783, versus k€532,952 at the end of the previous year.
Net borrowings
The group's net borrowings were negative k€10,562 as of June 30, 2020, versus k€30,362 as of December 31, 2019. This mainly includes positive k€130,355 in cash, the Gaumont SA bond for k€60,000 and k€51,402 of self-liquidating production loans based on proceeds from pre-financing and the sales of American series.
Net borrowings do not include lease liabilities under IFRS 16, which amounted to k€14,490 as of June 30, 2020, compared with k€17,310 as of December 31, 2019.
In France, based on its growth policy, Gaumont estimates that its available cash, operating cash flows, and the bond will cover its financing requirements, excluding any acquisitions.
In the United States, the Group is continuing to take out bank loans to finance its productions and uses assignments of receivables to fund new projects. These borrowings are guaranteed exclusively through assets held by the American subsidiaries without any recourse against the Group in France.
For its European subsidiaries, Gaumont is examining the possibility of taking out bank loans to finance its productions, along the lines of the model adopted for American productions.
The Group believes that it has adequate means to honor its commitments and to guarantee the continuity of its business.
Bond
For its general needs, Gaumont has a bond in the form of a listed euro private placement (EuroPP) totaling k€60,000, with three financial ratios to be met every six months. These ratios are presented in note 9.6 to the half-year consolidated financial statements.
Self-liquidating production loans
To finance American series, the production companies take out loans with American credit institutions specialized in financing the audiovisual industry. Each of these loans is exclusively allocated to financing a series and is guaranteed, until the amount borrowed, interest and related charges are recovered, by pledging the assets financed and all of the pre-sales, tax credit and sales contracts, with no further guarantee given. The loans include a completion guarantee contract signed with a company specialized in audiovisual production.
The two outstanding loans totaling k\$91,769 were granted to finance season 6 of Narcos and season 4 of F is For Family. As of June 30, 2020, there was a cumulative outstanding balance of k\$37,232 and a total available balance of k\$46,829.
Assignments of receivables
In order to finance French productions, Gaumont makes occasional use of the assignment of receivables under the Dailly Law. Assignments within the framework of these contracts are generally linked to pre-financing the production, such as pre-sales to the main broadcaster, contributions of co-producers, or allowance from the support funds to the audiovisual industry. As of June 30, 2020, no receivables were assigned on this basis in the French companies.
In the United States, Gaumont signed a receivables assignment agreement on June 2, 2020 for a maximum authorized amount of k\$50,000. The agreement expires on June 2, 2025 and replaces the previous agreement for the same amount, which expired in June 2020. This line of credit is based on the series' operating receivables, with the exception of receivables pledged to production loans. The interest is variable and Libor-based. As of June 30, 2020, the liability related to this contract amounted to k\$20,329, and the unused amount of these loans stood at k\$6,781.
Other borrowings
Other borrowings included, in particular, debt to Caisse des dépôts et consignations in respect of its investment in the back catalog restoration and digitization program, which totaled k€4,855 as of June 30, 2020.
In the United States, Gaumont has applied for funding set up for the health crisis by the federal agency responsible for supporting small businesses. The funding obtained, which amounts to k\$900, is in the form of two-year loans bearing 1% interest. Subject to the final repayment terms, which are still to be defined by the US administration, the government could take over some or all of this debt for Gaumont, which would then take the form of a subsidy.
Outlook, risks and uncertainties
The outlook for movie releases in theaters and deliveries of titles in 2020 has changed largely due to:
- the closure of movie theaters to the public in France in spring 2020;
- the temporary halt in shooting around the world;
- the time needed to arrange remote working for the production of animated works.
One film has been released in theaters since July 1, 2020:
• Simply Black, directed by Jean-Pascal Zadi and John Wax, starring Jean-Pascal Zadi and Fary. Released on July 8, the film has sold more than 700,000 tickets.
Three movies are scheduled for release in theaters before December 31, 2020:
- Bye Bye Morons, directed by Albert Dupontel, starring Virginie Efira, Albert Dupontel and Nicolas Marié;
- Aline, the Voice of Love, directed by Valérie Lemercier, starring Valérie Lemercier, Sylvain Marcel, Arnaud Préchac and Michel Drucker;
- Vicky and her Mystery, directed by Denis Imbert, starring Vincent Elbaz, Shanna Keil, Marie Gillain and Eric Elmosnino.
Four films originally slated for release in 2020 are now scheduled for 2021.
The following titles are due to be delivered in the second half of 2020:
- Bronx, a feature film directed by Olivier Marchal, to Netflix;
- The Barbarians, to Netflix;
- The Art of Crime season 4, to France 2;
- Move, to Netflix,
- Tin Star season 3, to Sky Atlantic;
- Trial 4, to Netflix.
The delivery of five drama series and one kids' animated series, originally scheduled for 2020, has been postponed until 2021.
The Art of Crime, season 4 is shooting in France at publication date whereas all other programs are in post-production or already completed. There is no particular risk of delays in the delivery schedule of the second half-year.
This lineup remains subject to the evolution of the epidemic over the upcoming months and uncertainties remain about the effects of this crisis on Gaumont annual results.
Gaumont is not aware of other risks and uncertainties than those referred above for the next six months of the fiscal year.
Half-year consolidated financial statements
Consolidated income statement
| (in thousands of euros) | Note | 06.30.20 | 06.30.19 |
|---|---|---|---|
| Revenue | 4.2 | 69,900 | 47,434 |
| Purchases | -358 | -441 | |
| Personnel costs | 4.4 | -19,243 | -15,071 |
| Other current operating income and expenses | 4.3 | -19,666 | -22,701 |
| Impairment, depreciation, amortization and provisions | -34,870 | -26,593 | |
| Current operating income (loss) | -4,237 | -17,372 | |
| Other non-current operating income and expenses | -1 | 105 | |
| Operating income (loss) | -4,238 | -17,267 | |
| Share of net income of associates | - | - | |
| Operating income after share of net income of associates | -4,238 | -17,267 | |
| Gross borrowing costs | -3,393 | -4,056 | |
| Income from cash and cash equivalents | - | - | |
| Net borrowings costs | -3,393 | -4,056 | |
| Other financial income and expenses | 9.5 | 2,323 | 3,173 |
| Net income (loss) before tax | -5,308 | -18,150 | |
| Income tax | 11 | -603 | 57 |
| NET INCOME | -5,911 | -18,093 | |
| Share attributable to non-controlling interests | - | -29 | |
| Share attributable to the shareholders of the parent company | -5,911 | -18,064 | |
| Earnings per share attributable to the shareholders of the parent company | |||
| - Average number of shares in circulation | 9.1 | 3,119,923 | 3,119,923 |
| - In euros per share | -1.89 | -5.79 | |
| Diluted earnings per share attributable to the shareholders of the parent company | |||
| - Average potential number of shares | 9.1 | 3,131,832 | 3,132,597 |
| - In euros per share | -1.89 | -5.77 |
Consolidated statement of comprehensive income
| (in thousands of euros) | 06.30.20 | 06.30.19 |
|---|---|---|
| Net income | -5,911 | -18,093 |
| Translation adjustments of foreign operations | 176 | -159 |
| Share in currency adjustments of foreign operations of associates | - | - |
| Changes in fair value of available-for-sale financial assets | - | - |
| Changes in fair value of hedging financial instruments | -3,456 | 553 |
| Share of changes in fair value of hedging financial instruments of associates | - | - |
| Income tax on gains and losses recognized directly in equity | 968 | -155 |
| Other elements of comprehensive income that could be reclassified later in net income | -2,312 | 239 |
| Changes in asset revaluation surplus | - | - |
| Actuarial gains (losses) on defined benefit plans | - | - |
| Share of actuarial gains and losses on the defined benefit plans of associates | - | - |
| Income tax on gains and losses recognized directly in equity | - | - |
| Other elements of comprehensive income that cannot be reclassified in net income | - | - |
| Total of other elements of comprehensive income after taxes | -2,312 | 239 |
| COMPREHENSIVE INCOME FOR THE PERIOD | -8,223 | -17,854 |
| Share attributable to non-controlling interests | - | -29 |
| Share attributable to the shareholders of the parent company | -8,223 | -17,825 |
Consolidated statement of financial position
| Assets (in thousands of euros) | Note | 06.30.20 | 12.31.19 |
|---|---|---|---|
| Goodwill | 3.2 | 12,035 | 12,035 |
| Films and audiovisual rights | 5.1 | 135,526 | 126,401 |
| Other intangible assets | 204 | 182 | |
| Properties measured in accordance with IAS 40 | 6.1 | 32,286 | 30,119 |
| Right-of-use assets arising from leased properties (held under operating and finance leases) |
6.1 | 12,179 | 14,820 |
| Other property, plant and equipment | 6.1 | 26,813 | 27,175 |
| Non-current financial assets | 69 | 179 | |
| Non-current deferred tax assets | 4,368 | 3,881 | |
| Non-current assets | 223,480 | 214,792 | |
| Inventories | 392 | 358 | |
| Trade receivables and contract assets | 5.2 | 93,826 | 117,971 |
| Current income tax assets | 7,600 | 4,990 | |
| Other receivables and current financial assets | 5.2 | 43,130 | 109,068 |
| Cash and cash equivalents | 9.2 | 130,355 | 85,773 |
| Current assets | 275,303 | 318,160 | |
| TOTAL ASSETS | 498,783 | 532,952 |
| Liabilities and equity (in thousands of euros) | Note | 06.30.20 | 12.31.19 |
|---|---|---|---|
| Capital | 24,959 | 24,959 | |
| Retained earnings | 194,744 | 205,233 | |
| Equity attributable to the shareholders of the parent company | 219,703 | 230,192 | |
| Non-controlling interests | - | - | |
| Equity | 9.1 | 219,703 | 230,192 |
| Non-current provisions | 10 | 4,747 | 4,519 |
| Non-current borrowings | 9.2 | 116,259 | 106,325 |
| Non-current lease liabilities | 9.2 | 11,449 | 14,319 |
| Non-current deferred tax liabilities | 3,136 | 3,014 | |
| Other non-current liabilities | 4.3 | - | - |
| Non-current liabilities | 135,591 | 128,177 | |
| Current provisions | 10 | 762 | 615 |
| Current borrowings | 9.2 | 3,534 | 9,810 |
| Current lease liabilities | 9.2 | 3,041 | 2,991 |
| Trade payables | 5.3 | 10,800 | 21,169 |
| Current income tax liabilities | - | 143 | |
| Other payables | 5.3 | 81,321 | 96,769 |
| Deferred income and contract liabilities | 5.3 | 44,031 | 43,086 |
| Current liabilities | 143,489 | 174,583 | |
| TOTAL LIABILITIES | 498,783 | 532,952 |
Consolidated statement of changes in equity
| Attributable to the shareholders of the parent company | Attributable | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Changes in equity (in thousands of euros) |
Number of shares |
Capital | Additional paid-in capital(1) |
Treasury shares |
Retained earnings |
Other comprehensive income |
Total | to non controlling interests |
Total equity |
| AS OF DECEMBER 31, 2019 | 3,119,923 | 24,959 | 5,278 | -257 | 181,850 | 18,362 | 230,192 | - | 230,192 |
| Net income for the year | - | - | - | - | -5,911 | - | -5,911 | - | -5,911 |
| Other comprehensive income | - | - | - | - | - | -2,312 | -2,312 | - | -2,312 |
| Comprehensive income for the year |
- | - | - | - | -5,911 | -2,312 | -8,223 | - | -8,223 |
| Transactions on share capital | - | - | - | - | - | - | - | - | - |
| Share-based payments | - | - | - | - | - | - | - | - | - |
| Dividends paid | - | - | - | - | - | - | - | - | - |
| Elimination of treasury shares | - | - | - | - | - | - | - | - | - |
| Other(2) | - | - | - | - | -2,266 | - | -2,266 | - | -2,266 |
| Transactions with shareholders |
- | - | - | - | -2,266 | - | -2,266 | - | -2,266 |
| AS OF JUNE 30, 2020 | 3 119 923 | 24,959 | 5,278 | -257 | 173,673 | 16,050 | 219,703 | - | 219,703 |
(1) Issue premiums, contribution premiums, merger premiums, legal reserves.
(2) Mainly the impact of the purchase of non-controlling interests of Gaumont Television USA Llc.
| Attributable to the shareholders of the parent company | Attributable | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Changes in equity (in thousands of euros) |
Number of shares |
Capital | Additional paid-in capital(1) |
Treasury shares |
Retained earnings |
Other comprehensive income |
Total | to non controlling interests |
Total equity |
| AS OF DECEMBER 31, 2018 | 3,119,923 | 24,959 | 5,278 | -257 | 223,549 | 18,558 | 272,087 | 2,911 | 274,998 |
| Net income for the year | - | - | - | - | -18,064 | - | -18,064 | -29 | -18,093 |
| Other comprehensive income | - | - | - | - | - | 239 | 239 | - | 239 |
| Comprehensive income for the year |
- | - | - | - | -18,064 | 239 | -17,825 | -29 | -17,854 |
| Transactions on share capital | - | - | - | - | - | - | - | - | - |
| Share-based payments | - | - | - | - | - | - | - | - | - |
| Dividends paid | - | - | - | - | -3,115 | - | -3,115 | -159 | -3,274 |
| Elimination of treasury shares | - | - | - | - | - | - | - | - | - |
| Other(2) | - | - | - | - | -188 | - | -188 | -2,723 | -2,911 |
| Transactions with shareholders |
- | - | - | - | -3,303 | - | -3,303 | -2,882 | -6,185 |
| AS OF JUNE 30, 2019 | 3 119 923 | 24,959 | 5,278 | -257 | 202,182 | 18,797 | 250,959 | - | 250,959 |
(1) Issue premiums, contribution premiums, merger premiums, legal reserves.
(2) Mainly the impact of transactions with non-controlling shareholders of GP Archives.
Consolidated statement of cash flows
| (in thousands of euros) | Note | 06.30.20 | 06.30.19 |
|---|---|---|---|
| Operating activities | |||
| Consolidated net income (including non-controlling interests) | -5,911 | -18,093 | |
| Net allowances for depreciation, amortization, impairment and provisions | 34,941 | 26,668 | |
| Unrealized gains and losses related to changes in fair value | 9.5 | -3,949 | 284 |
| Other calculated income and expenses | 156 | -467 | |
| Gains and losses on disposal of assets | -1,310 | -168 | |
| Share of net income of associates | - | - | |
| Cash flow from operating activities after tax and net borrowing costs | 23,927 | 8,224 | |
| Net borrowings costs | 3,393 | 4,056 | |
| Tax expenses (income) - including deferred tax | 603 | -57 | |
| Cash flow from operating activities before tax and net borrowing costs | 27,923 | 12,223 | |
| Tax paid | -190 | -90 | |
| Change in working capital requirement related to operating activities | 5.4 | 13,263 | 21,247 |
| (A) Net cash flow from operating activities | 40,996 | 33,380 | |
| Investment activities | |||
| Proceeds from sales of fixed assets | 1,425 | 694 | |
| Acquisition of fixed assets | -44,634 | -72,264 | |
| Change in liabilities on investments | -6,444 | -6,383 | |
| Net impact of changes in scope, net of cash acquired | -2,266 | -7,525 | |
| Change in liabilities and receivables on acquisitions of consolidated securities | 56,825 | -6,532 | |
| (B) Net cash flow from investment activities | 8 | 4,906 | -92,010 |
| Financing activities | |||
| Gaumont SA capital increase | - | - | |
| Dividends paid to Gaumont SA shareholders | - | -3,115 | |
| Repayment of capital to non-controlling shareholders of consolidated companies | - | -2,279 | |
| Dividends paid to non-controlling interests in consolidated companies | - | -159 | |
| Change in treasury shares | - | - | |
| Change in borrowings | 1,804 | 34,031 | |
| Interest paid on borrowings | -1,566 | -2,553 | |
| Operating and finance lease payments and related interest | -1,623 | -1,159 | |
| (C) Net cash flow from financing operations | 9 | -1,385 | 24,766 |
| (D) Impact of changes in foreign exchange rates | 61 | 83 | |
| NET CHANGE IN CASH & CASH EQUIVALENTS: (A) + (B) + (C) + (D) | 44,578 | -33,780 | |
| Cash and cash equivalents at beginning of period | 85,773 | 129,831 | |
| Bank overdraft at beginning of period | -149 | -72 | |
| Cash position at beginning of period | 85,624 | 129,759 | |
| Cash and cash equivalents at end of period | 130,355 | 96,092 | |
| Bank overdraft at end of period | -153 | -113 | |
| Cash position at end of period | 130,202 | 95,979 | |
| NET CHANGE IN CASH & CASH EQUIVALENTS | 44,578 | -33,780 |
Notes to the consolidated financial statements
1. Impact of the health crisis
The first half of 2020 saw the declaration of a health emergency in France and all other countries where the group operates. This had two main impacts on operations: first, the closure of movie theaters to the public; second, the temporary halt in shooting; which led to an adjustment to the movie release schedule and a postponed delivery of the group's productions. At this stage, the health crisis and its consequences did not result in a permanent loss of business and Gaumont considers that it has adequate means to honor its commitments and to guarantee the continuity of its business, with respect of it net available cash at the end of the period.
Effects of this crisis on the period revenues vary depending on the media considered. For better clarity, their detailed description is provided in support of the consolidated revenue figures set forth in note 4.2.
Group assets have been considered with close attention with regard to a potential loss of value due to health crisis. No indication of impairment was detected for goodwill. Relevant items of this analysis are described in note 3.2. Concerning movies and audiovisual rights, the periodic review of revenue estimates did not reveal any indication of a decrease in their recoverable value compared to December 31, 2019. As a result, no impairment has been booked as per June 30, 2020.
The other miscellaneous impacts of this crisis on financial items, including government support received, are presented in the various notes to the consolidated financial statements. Reader should particularly refer to notes 4.4, 5.2, 5.3 and 6.1.
2. Accounting principles and methods
2.1. General principles
Gaumont's half-year consolidated financial statements as of June 30, 2020 were prepared in accordance with IAS 34: "Interim financial information". They highlight the main information from the period as defined in IAS 34 and must be read in conjunction with Gaumont's consolidated financial statements for the year ended December 31, 2019, included in the Universal Registration document filed with the AMF under number D.20-0447.
The accounting principles used to prepare the half-year consolidated financial statements comply with IFRS standards and interpretations as adopted by the European Union on June 30, 2020, which are available at the website: https://eur-lex.europa.eu.
Gaumont's half-year consolidated financial statements as of June 30, 2020 were prepared using the same accounting principles and measurement methods that were used to prepare the annual consolidated financial statements for the year ended December 31, 2019, with the exception of newly applied standards and interpretations, which are listed below in Section 2.4.
The consolidated financial statements are presented in thousands of euros, unless otherwise specified.
Gaumont's half-year consolidated financial statements as of June 30, 2020 were approved by the Board of directors on September 10, 2020 and were the subject of a limited review by the Statutory auditors.
2.2. Measurement principles specifically for interim financial statements
Expenses and income determined on an annual basis were measured at the end of the period using the same principles that are used during year-end closing.
Employee benefits at the end of the period were measured based on balances showing in the statement of financial position at the beginning of the period and by using assumptions set at the beginning of the annual reporting period.
For the interim financial statements, income tax expense (current and deferred) is calculated by applying the average estimated annual rate for the year in progress to the accounting income for the period. Current income tax expense equals the amount of income tax owed to the tax authorities for the year as per tax law and as per the tax rates in force in the various countries.
2.3. Seasonal nature of the business
Gaumont would like to reiterate that its results are mainly tied to the number of releases and release schedule of its films in theaters, and to the deliveries of its new television series to broadcasters, as well as to the financing structure of its works. These elements may cause significant variations in income from one period to another.
As a result, the consolidated half-year results are not representative of the annual results.
2.4. Impact of IFRS and IFRIC interpretations applicable to the group from January 1, 2020
None of the standards and interpretations applicable from January 1, 2020 have an impact on the consolidated financial statements as of June 30, 2020.
Gaumont analyzed the doctrine provided by the IFRIC in December 2019 related to IFRS 16 - contract leases. Lease terms retained for the evaluation of commercial leases of administrative premises, representing the bulk of lease liabilities, have been comforted.
3. Scope of consolidation
3.1. Purchase of minority interests in Gaumont Television USA
On February 21, 2018, Gaumont USA Inc. acquired an additional 15% share in Gaumont Television USA Llc for k\$24,000, payable in three annual installments. The final installment of this acquisition was paid in the first half of 2020. The corresponding liability had been settled as of June 30, 2020.
In addition, in early March 2020, Gaumont USA Inc acquired the remaining holdings of non-controlling shareholders in Gaumont Television USA for a net amount of k\$2,500.
These are classified as transactions between shareholders and are presented directly in equity.
3.2. Goodwill
The production and distribution of animated films and series for younger audiences, a business with capitalized goodwill, was not materially affected by the health crisis in early 2020. The business was able to continue as normal after only a few days, which was the time it took to set up remote working in the various studios.
Therefore, no indication of impairment was detected during the first half of 2020 for goodwill with positive carrying value. No changes in Goodwill measurement occurred during the period.
3.3. Seller warranties received
For the acquisition of CDG, Gaumont received a guarantee from the sellers covering disputes and contingent liabilities arising in the period prior to the sale, as well as employee risk, defined as the potential contract termination costs of the employees transferred.
The main guarantee is for a maximum period of 24 months and a maximum amount of k€1,500, except for disputes identified at the acquisition date, which are guaranteed for the total amount of any loss.
Company and legal form Registered office Siren % interest % control Consolidation method Holding Gaumont SA 30, avenue Charles de Gaulle, 92200 Neuillysur-Seine 562 018 002 FC Gaumont USA Inc. 750 San Vincente Blvd, Suite RW 1000, West Hollywood, CA 90069 United States 100.00 100.00 FC Cinema production and distribution Gaumont Films USA Llc 750 San Vincente Blvd, Suite RW 1000, West Hollywood, CA 90069 United States 100.00 100.00 FC Gaumont Vidéo SAS 30, avenue Charles de Gaulle, 92200 Neuillysur-Seine 384 171 567 100.00 100.00 FC Gaumont Production SARL 50, avenue des Champs Elysées, 75008 Paris 352 072 904 100.00 100.00 FC Editions la Marguerite SARL 30, avenue Charles de Gaulle, 92200 Neuillysur-Seine 602 024 150 100.00 100.00 FC Gaumont Musiques SARL 30, avenue Charles de Gaulle, 92200 Neuillysur-Seine 494 535 255 100.00 100.00 FC Production of television dramas and cartoon series Gaumont Television USA Llc 750 San Vincente Blvd, Suite RW 1000, West Hollywood, CA 90069 United States 100.00 100.00 FC Gaumont Télévision SAS 30, avenue Charles de Gaulle, 92200 Neuillysur-Seine 340 538 693 100.00 100.00 FC Gaumont Animation SAS 30, avenue Charles de Gaulle, 92200 Neuillysur-Seine 411 459 811 100.00 100.00 FC Gaumont Animation USA Llc 750 San Vincente Blvd, Suite RW 1000, West Hollywood, CA 90069 United States 100.00 100.00 FC Gaumont GmbH Kämmergasse 39-41, 50676 Koln Germany 100.00 100.00 FC Gaumont Ltd 56 Berwick Street, London W1F 8SW United Kingdom 100.00 100.00 FC Gaumont Distribution TV Llc 750 San Vincente Blvd, Suite RW 1000, West Hollywood, CA 90069 United States 100.00 100.00 FC Gaumont Production Télévision SARL 50, avenue des Champs Elysées, 75008 Paris 322 996 257 100.00 100.00 FC Gaumont Production Animation SARL 49, rue Ganneron, 75018 PARIS 825 337 900 100.00 100.00 FC Audiovisual archive management GP Archives SAS 30, avenue Charles de Gaulle, 92200 Neuillysur-Seine 444 567 218 100.00 100.00 FC
3.4. Main companies included in the scope of consolidation
F.C.: Fully consolidated.
4. Transactions of the period
4.1. Segment reporting
The Group's organizational structure is based on its various businesses. Gaumont operates in three business sectors which are its operating segments:
- movie production and distribution, Gaumont's historic activity in France also exercised in the United States;
- production and distribution of television programs via its subsidiaries in France, the United States and Europe;
- the group's central real estate management and coordination activities.
Segments used for segment reporting are the same as those used by executive management, the chief operating decision maker of the Group. Operating segments are reported without any further grouping. The measurement methods for figures by operating segment are in line with the principles and policies used to prepare the consolidated financial statements.
| 06.30.20 | Movie production and distribution |
Television production and distribution |
Real estate and holding businesses |
Indirect and unallocated costs |
Total |
|---|---|---|---|---|---|
| Revenue | 38,152 | 29,582 | 1,223 | 943 | 69,900 |
| Income from operations excluding overheads | 15,114 | 3,206 | 762 | - | 19,082 |
| Overheads | -7,229 | -12,009 | - | -5,152 | -24,390 |
| Income tax | - | - | - | -603 | -603 |
| NET INCOME | 7,885 | -8,803 | 762 | -5,755 | -5,911 |
HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 06.30.19 | Movie production and distribution |
Television production and distribution |
Real estate and holding businesses |
Indirect and unallocated costs |
Total |
|---|---|---|---|---|---|
| Revenue | 34,472 | 10,513 | 1,576 | 873 | 47,434 |
| Income from operations excluding overheads | 7,008 | 998 | 701 | - | 8,707 |
| Overheads | -9,186 | -10,286 | - | -7,385 | -26,857 |
| Income tax | - | - | - | 57 | 57 |
| NET INCOME | -2,178 | -9,288 | 701 | -7,328 | -18,093 |
4.2. Revenue
As of June 30, 2020, revenue by activity is as follows:
| 06.30.20 | 06.30.19 | |||||
|---|---|---|---|---|---|---|
| France | Abroad | Total | France | Abroad | Total | |
| Movie production and distribution | 30,167 | 7,985 | 38,152 | 23,708 | 10,764 | 34,472 |
| Movie theater distribution | 3,128 | - | 3,128 | 7,359 | - | 7,359 |
| Video publishing and video on demand | 4,031 | 126 | 4,157 | 4,231 | 241 | 4,472 |
| Television broadcasting rights | 21,249 | 45 | 21,294 | 9,940 | - | 9,940 |
| International sales | - | 7,380 | 7,380 | - | 11,796 | 11,796 |
| Other movie distribution income | 1,759 | 434 | 2,193 | 2,178 | 155 | 2,333 |
| Feature film production | - | - | - | - | -1,428 | -1,428 |
| Production and distribution of television series | 7,236 | 22,346 | 29,582 | 4,143 | 6,370 | 10,513 |
| Distribution of American dramas | 728 | 18,477 | 19,205 | 64 | 1,769 | 1,833 |
| Distribution of French dramas | 61 | 40 | 101 | 1,852 | 167 | 2,019 |
| Distribution of European dramas | - | 1,796 | 1,796 | - | - | - |
| Distribution of animated films and series | 532 | 737 | 1,269 | 2,227 | 692 | 2,919 |
| Drama production | 5,915 | -287 | 5,628 | - | 3,742 | 3,742 |
| Animated series production | - | 1,583 | 1,583 | - | - | - |
| Trademark royalties | 719 | - | 719 | 1,287 | - | 1,287 |
| Other miscellaneous revenue | 1,193 | 254 | 1,447 | 873 | 289 | 1,162 |
| TOTAL | 39,315 | 30,585 | 69,900 | 30,011 | 17,423 | 47,434 |
Distribution revenue includes licensing and royalties received for proprietary or managed works.
Production income is derived from the production of works in which Gaumont retains no ownership or distribution rights.
The closure of movie theaters due to the health emergency had the effect of interrupting Pappy Sitter ten days after its release and delaying the release of Simply Black in early July. Physical video sales declined due to the closure of retail outlets, whereas the lockdown had a positive impact on video on demand sales. Sales to television channels rose sharply due to the increase in the number of movies broadcast by television channels. Export sales were impacted by the suspension of theatrical releases and the cancellation of major international conventions.
Revenue broken down per the region of the entity generating it is as follows:
| 06.30.20 | 06.30.19 | |
|---|---|---|
| French companies | 46,969 | 42,349 |
| European companies | 1,509 | 3,613 |
| American companies | 21,422 | 1,472 |
| TOTAL | 69,900 | 47,434 |
4.3. Other current operating income and expenses
| 06.30.20 | 06.30.19 | |
|---|---|---|
| Audiovisual support fund | 2,211 | 4,147 |
| Other subsidies | 924 | 84 |
| Audiovisual and cinema tax credit | 4,311 | 3,972 |
| Purchases of materials and supplies | -2,896 | -6,406 |
| Inventoried products | -23 | -5 |
| Subcontracting | -1,488 | -558 |
| Rentals and rental expenses | -1,466 | -784 |
| Outside personnel, temporary personnel and fees | -3,542 | -3,646 |
| Other external expenses | -6,131 | -8,240 |
| Taxes and similar payments | -1,345 | -1,682 |
| Foreign exchange gains and losses on operating activities | -705 | 104 |
| Copyrights, royalties and similar | -5,781 | -1,925 |
| Shares of co-producers and guaranteed minima | -6,167 | -5,600 |
| Income from the sale of operating assets | 1,311 | 63 |
| Other income and expenses | 1,121 | -2,225 |
| NET OTHER CURRENT OPERATING INCOME/EXPENSES | -19,666 | -22,701 |
As of June 30, 2020, other external expenses included k€3,243 in purchases of studies and services related to cinema and television project development, versus k€3,334 as of June 30, 2019.
Purchases of materials and supplies mainly consisted of expenses incurred related to distribution of films and series.
The change in support funds and author royalties is linked to the delivery schedule of the television programs and the success of the feature films released during the period. The audiovisual and cinema tax credits are recognized as and when the works that generate them are amortized.
Lease expenses correspond to contracts excluded from the scope of IFRS 16 owing to their duration or the absence of a commitment towards the lessor. Leases that meet the definition under IFRS 16 are capitalized in the statement of financial position.
4.4. Personnel costs
| 06.30.20 | 06.30.19 | |
|---|---|---|
| Gross compensation | -14,229 | -10,675 |
| Social security contributions | -4,587 | -3,701 |
| Employee profit-sharing | -199 | -265 |
| Pensions and similar benefits | -228 | -430 |
| Share based payments expense | - | - |
| TOTAL | -19,243 | -15,071 |
Compensation includes k€3,006 in salaries paid to contract workers employed in the production to order of films and series as of June 30, 2020, compared with k€555 as of June 30, 2019. Related social security contributions totaled k€1,280 as of June 30, 2020, versus k€348 as of June 30, 2019.
The group also took advantage of the furlough scheme in France during the first half of 2020, which resulted in a saving of k€417.
In addition, government subsidies received in connection with the health crisis in France and the United Kingdom amounted to k€373. These are presented in "other subsidies".
5. Core business assets and liabilities
5.1. Films and audiovisual rights
| Movements of the period | |||||
|---|---|---|---|---|---|
| 06.30.20 | + | - | Other(1) | 12.31.19 | |
| Films and cinema rights | 1,943,653 | 1,093 | - | 5,418 | 1,937,142 |
| Television series, dramas and broadcasting rights | 542,413 | 95 | -2,822 | 3,580 | 541,560 |
| Animated films and series | 233,696 | 1,441 | - | 10,147 | 222,108 |
| Musical productions and publishing rights | 2,942 | - | - | - | 2,942 |
| Video games | 1,525 | - | - | - | 1,525 |
| Movies in production | 20,739 | 4,436 | - | -5,418 | 21,721 |
| Television series and dramas in production | 33,306 | 24,806 | -36 | -2,243 | 10,779 |
| Animated films and series in production | 20,908 | 9,883 | - | -10,250 | 21,275 |
| Gross value | 2,799,182 | 41,754 | -2,858 | 1,234 | 2,759,052 |
| Films and cinema rights | -1,893,798 | -17,697 | 350 | - | -1,876,451 |
| Television series, dramas and broadcasting rights | -535,320 | -7,040 | 2,744 | -1,441 | -529,583 |
| Animated films and series | -229,974 | -12,182 | - | 81 | -217,873 |
| Musical productions and publishing rights | -2,929 | -14 | - | - | -2,915 |
| Video games | -1,525 | - | - | - | -1,525 |
| Movies in production | - | - | 4,194 | - | -4,194 |
| Television series and dramas in production | -110 | - | - | - | -110 |
| Animated films and series in production | - | - | - | - | - |
| Accumulated amortization and impairment losses | -2,663,656 | -36,933 | 7,288 | -1,360 | -2,632,651 |
| CARRYING VALUE | 135,526 | 4,821 | 4,430 | -126 | 126,401 |
(1) Changes in scope, transfers between items and foreign currency translation adjustments.
Investments for the period relate to films from the 2020 and 2021 line-up and series currently in production, which will be delivered in late 2020 and in 2021.
The decrease in drama and television rights mainly includes the transfer of the rights previously held in High in the Clouds under the order contract signed with the platform.
Impairment losses of k€4,194 on movies currently in production were reversed following their delivery as of June 30, 2020.
Other changes include k€1,235 in foreign exchange gains and losses on the gross values of American series and k€1,359 on the amortization of these series.
5.2. Receivables and other current assets
| 06.30.20 | 12.31.19 | |
|---|---|---|
| Trade receivables | 90,995 | 113,634 |
| Contract assets | 3,071 | 4,578 |
| Current financial assets | 581 | 492 |
| Current income tax assets | 7,600 | 4,990 |
| Current accounts | - | - |
| Receivables on asset sales | - | 64,076 |
| Other receivables | 42,157 | 44,378 |
| Prepaid expenses | 928 | 658 |
| Gross value | 145,332 | 232,806 |
| Trade receivables | -240 | -241 |
| Current financial assets | - | - |
| Current accounts | - | - |
| Other receivables | -536 | -536 |
| Accumulated impairment losses | -776 | -777 |
| CARRYING VALUE | 144,556 | 232,029 |
Outstanding trade receivables mainly consist of the portion of outstanding receivables related to pre-sales and sales of works distributed at the end of the period. The level of receivables is strongly impacted by the number and schedule for series deliveries and movie releases. Gaumont has not identified any significant deterioration in its customer risk as a result of the health crisis. The closure of movie theaters around the world, the financial repercussions of which on operators are still difficult to assess, has had
a limited impact since the films released in theaters in the first quarter were nearing the end of their release window. No significant receivables were therefore generated.
With regard to sales of licenses and broadcasting rights, customers are traditionally institutional customers presenting a low credit risk. Contracts have also traditionally included payment terms that limit the risk of default.
As of December 31, 2019, receivables on asset disposals include the amount due on the sale of the securities of Les Cinémas Pathé Gaumont, including interest. This receivable was settled in the first half of the year.
Current tax assets correspond to tax credits for 2019 which are due to be reimbursed, and tax credits calculated for production expenses in the first half of 2020.
5.3. Other payables
| 06.30.20 | 12.31.19 | |
|---|---|---|
| Payables on acquisitions | - | - |
| Other payables | - | - |
| Total other non-current liabilities | - | - |
| Trade payables | 6,863 | 10,785 |
| Liabilities on films and audiovisual rights | 3,937 | 10,384 |
| Advances and deposits received | 105 | 108 |
| Payroll liabilities | 6,905 | 6,318 |
| Tax liabilities | 2,995 | 7,462 |
| Current income tax liabilities | - | 143 |
| Payables on acquisitions | - | 7,098 |
| Liabilities on other property, plant and equipment and intangible assets | 1,999 | 1,976 |
| Payables on distribution of works | 42,860 | 49,351 |
| Other payables | 23,813 | 24,146 |
| Derivatives | 2,644 | 310 |
| Contract liabilities | 32,277 | 29,547 |
| Tax credit to be amortized | 6,290 | 6,947 |
| Deferred public grants | 451 | 352 |
| Deferred income | 5,013 | 6,240 |
| Total other current liabilities | 136,152 | 161,167 |
| TOTAL | 136,152 | 161,167 |
| Maturities: | ||
| - less than 1 year | 135,926 | 160,937 |
| - 1 to 5 years | 28 | 16 |
| - more than 5 years | 198 | 214 |
As of December 31, 2019, the amount payable on acquisitions corresponds to the balance due to non-controlling shareholders of Gaumont Television USA following the buyout in 2018. This debt was settled in the first half of 2020.
Production payables are closely linked to the production and delivery schedules of the works. The low amount of trade and production payables is due to the temporary stoppage of production and distribution campaigns for films and series on account of the health crisis.
Contract liabilities represent the consideration received by Gaumont in respect of contracts with customers for which performance obligations had not been satisfied at the end of the period. This is particularly the case where rights are sold with future distribution windows.
5.4. Changes in net operating working capital requirement
| 06.30.20 | 06.30.19 | |
|---|---|---|
| Changes in operating assets | 24,485 | 22,275 |
| Changes in operating liabilities | -11,606 | -1,515 |
| Current income tax expense | -34 | -33 |
| Tax paid | 190 | 90 |
| Pension and similar benefits allowance | 228 | 430 |
| TOTAL | 13,263 | 21,247 |
5.5. Core business commitments
| 06.30.20 | 12.31.19 | |
|---|---|---|
| Commitments given | 123,347 | 129,724 |
| Film and series development and production | 111,530 | 112,519 |
| Execution of production service agreements | 11,817 | 17,205 |
| Commitments received | 194,038 | 186,979 |
| Purchases of rights and financing of projects and productions | 180,323 | 168,495 |
| Execution of production service agreements | 13,715 | 18,484 |
6. Non-core business assets and liabilities
6.1. Changes in real estate assets
| Movements of the period | |||||
|---|---|---|---|---|---|
| 06.30.20 | + | - | Other(1) | 12.31.19 | |
| Properties measured in accordance with IAS 40 | 41,475 | 2,504 | - | - | 38,971 |
| Right-of-use assets classified as investment properties | 3,507 | - | - | 11 | 3,496 |
| Right-of-use assets arising from leased properties | 19,247 | 580 | -354 | -1,875 | 20,896 |
| Other property, plant and equipment | 51,634 | 314 | -1 | -24 | 51,345 |
| Gross value | 115,863 | 3,398 | -355 | -1,888 | 114,708 |
| Properties measured in accordance with IAS 40 | -10,538 | -122 | - | -149 | -10,267 |
| Right-of-use assets classified as investment properties | -2,158 | -222 | - | 145 | -2,081 |
| Right-of-use assets arising from leased properties | -7,068 | -1,363 | 354 | 17 | -6,076 |
| Other property, plant and equipment | -24,821 | -657 | - | 6 | -24,170 |
| Accumulated amortization and impairment losses | -44,585 | -2,364 | 354 | 19 | -42,594 |
| CARRYING VALUE | 71,278 | 1,034 | -1 | -1,869 | 72,114 |
(1) Changes in scope, transfers between items, foreign currency translation adjustments and changes in accounting policy.
The redevelopment of the Ambassade site was paused during the first half while the necessary health measures to protect workers were put in place. The costs and delays caused by this temporary stoppage are limited and the asset carrying value shows no signs of impairment. The fair value of investment properties is equivalent to that of December 31, 2019.
Operating expenses incurred during the period for leased properties are not material. Rental income during the period amounted to k€504.
Other changes in right-of-use assets arising from leased properties include the impacts of revising the expected lease term of some leases.
6.2. Real estate and other commitments
| 06.30.20 | 12.31.19 | |
|---|---|---|
| Commitments given | 8,160 | 9,980 |
| Guarantees and deposits | - | - |
| Real estate investments | 8,160 | 9,980 |
| Commitments received | 71,055 | 71,420 |
| Guarantees and deposits received | 5,088 | 5,088 |
| Lease commitments | 65,967 | 66,332 |
As of June 30, 2020, Gaumont benefited from lease commitments under leases agreed totaling k€65,967.
As part of the Ambassade development project, Gaumont has committed to building contracts totaling k€8,160. It has received various guarantees worth a total of k€5,088 from its service providers and from the future tenant.
7. Breakdown by region of non-current assets
Non-current assets other than financial instruments, deferred tax assets and assets relating to post-employment benefits, broken down depending on where the consolidated companies are located, are as follows:
| 06.30.20 | 12.31.19 | |||||||
|---|---|---|---|---|---|---|---|---|
| France | Europe | Americas | Total | France | Europe | Americas | Total | |
| Goodwill | 12,035 | - | - | 12,035 | 12,035 | - | - | 12,035 |
| Films and audiovisual rights | 81,293 | 79 | 54,154 | 135,526 | 87,026 | 1,911 | 37,464 | 126,401 |
| Other intangible assets | 195 | 9 | - | 204 | 170 | 12 | - | 182 |
| Properties measured in accordance with IAS 40 | 30,937 | - | 1,349 | 32,286 | 28,555 | - | 1,564 | 30,119 |
| Right-of-use assets arising from leased properties (held under operating and finance leases)(1) |
3,397 | 1,101 | 7,681 | 12,179 | 5,092 | 1,361 | 8,141 | 14,594 |
| Other property, plant and equipment | 25,366 | 367 | 1,080 | 26,813 | 25,851 | 416 | 1,134 | 27,401 |
| Other financial assets | 46 | 23 | - | 69 | 156 | 23 | - | 179 |
| TOTAL NON-CURRENT ASSETS | 153,269 | 1,579 | 64,264 | 219,112 | 158,885 | 3,723 | 48,303 | 210,911 |
(1) Excluding right-of-use assets classified as investment properties.
The Group does not own any assets outside of these territories.
8. Investments during the period
8.1. Acquisitions of fixed assets, excluding shares in consolidated companies
| 06.30.20 | 06.30.19 | |
|---|---|---|
| Acquisition of intangible assets | 41,816 | 71,117 |
| Acquisition of tangible assets | 2,818 | 1,087 |
| Acquisition of financial assets | - | 60 |
| TOTAL | 44,634 | 72,264 |
Rights of use assets are not comprised in these acquisitions because they do not lead to cash output when they are booked in assets of the financial position.
8.2. Acquisition of shares in consolidated companies
| 06.30.20 | 06.30.19 | |
|---|---|---|
| Price paid | 2,266 | 7,906 |
| Treasury bought | - | -381 |
| TOTAL | 2,266 | 7,525 |
8.3. Change in liabilities and receivables on investments
| Other | ||||
|---|---|---|---|---|
| 06.30.20 | Change | changes (1) | 12.31.19 | |
| Fixed assets liabilities | 5,936 | -6,444 | 20 | 12,360 |
| Liabilities on acquisition of shares | - | -7,251 | 153 | 7,098 |
| Receivables on acquisition and disposal of equity investments | - | 64,076 | - | -64,076 |
| TOTAL | 5,936 | 50,381 | 173 | -44,618 |
(1) Changes in scope and exchange loss or gain.
The change in liabilities on acquisition of securities corresponds to the payment of the final instalment for the acquisition in 2018 of 15% of the non-controlling interests of Gaumont Television USA Llc.
The amount receivable from Pathé for the sale of Les Cinémas Pathé Gaumont has been settled following payment of the final instalment for k€63,333, plus interest, in the first half of 2020.
9. Financing activities
9.1. Change in equity
Share capital of the parent company
| Movements of the period | ||||
|---|---|---|---|---|
| 06.30.20 | + | - | 12.31.19 | |
| Number of shares | 3,119,923 | - | - | 3,119,923 |
| Par value | €8 | €8 | ||
| CAPITAL (in euros) | 24,959,384 | - | - | 24,959,384 |
Earnings per share
| 06.30.20 | 06.30.19 | |
|---|---|---|
| Number of shares at January 1 | 3,119,923 | 3,119,923 |
| Capital increases (prorata temporis) | - | - |
| Average number of ordinary shares | 3,119,923 | 3,119,923 |
| Dilutive effect of stock options | 11,909 | 12,674 |
| Average potential number of ordinary shares | 3,131,832 | 3,132,597 |
Stock options with an exercise price higher than the average share price over the year are accretive. They are therefore not included in the calculation of diluted earnings per share.
Treasury shares
As of June 30, 2020, Gaumont SA held 4,649 of its own shares, purchased under its liquidity contract, and 200 registered shares. Treasury shares, including acquisition costs, are recognized as a reduction to equity.
Dividends
No dividends were paid for 2019.
Stock options
No new stock option plans were decided on during the first half of 2020. The outstanding exercisable options remain unchanged from December 31, 2019.
Equity attributable to non-controlling interests
The group no longer has any non-controlling interests.
9.2. Net borrowings and lease liabilities
Cash and cash equivalents
| 06.30.20 | 12.31.19 | |
|---|---|---|
| Cash equivalents | 34,014 | 34,012 |
| Bank accounts and petty cash | 96,341 | 51,761 |
| TOTAL | 130,355 | 85,773 |
Cash and cash equivalents include liquidity held in bank current accounts and investments in money market instruments that may be liquidated or sold in the very short term and do not entail a significant risk of loss in value in the event of interest rate changes.
Borrowings and lease liabilities
Change in debt
| Movements of the period | ||||||||
|---|---|---|---|---|---|---|---|---|
| with an impact on the cash position |
Movements of the period without an | |||||||
| 06.30.20 | + | - | Other(1) | Currency translation adjustments |
impact on the cash position Change in IFRS 16 assumptions |
Other(2) | 12.31.19 | |
| Revolving credit facility | - | - | - | - | - | - | - | - |
| Bonds | 59,930 | - | - | - | - | - | 38 | 59,892 |
| Production loans | 33,052 | 24,621 | -33,891 | - | 267 | - | 81 | 41,974 |
| Assignments of receivables | 17,613 | 40,232 | - | -684 | -263 | - | -21,672 | - |
| Financial contribution from the Caisse des dépôts |
4,531 | 582 | - | - | - | - | -137 | 4,086 |
| Other loans and borrowings | 1,133 | 816 | -42 | - | -11 | - | -3 | 373 |
| Non-current debt | 116,259 | 66,251 | -33,933 | -684 | -7 | - | -21,693 | 106,325 |
| Revolving credit facility | - | - | - | - | - | - | - | - |
| Bonds(3) | -75 | - | - | - | - | - | - | -75 |
| Production loans(3) | -228 | - | -1,615 | - | -2 | - | 194 | 1,195 |
| Assignments of receivables(3) | -124 | - | -27,962 | - | 108 | - | 21,784 | 5,946 |
| Financial contribution from the Caisse des dépôts |
324 | - | -223 | - | - | - | 137 | 410 |
| Other loans and borrowings | 1,574 | - | -30 | - | - | - | 3 | 1,601 |
| Bank overdraft | 153 | 2 | - | - | 2 | - | - | 149 |
| Accrued interest | 1,910 | - | - | - | 2 | - | 1,324 | 584 |
| Current debt | 3,534 | 2 | -29,830 | - | 110 | - | 23,442 | 9,810 |
| Non-current lease liabilities | 11,449 | - | - | - | -15 | -1,818 | -1,037 | 14,319 |
| Current lease liabilities | 3,041 | - | -1,545 | - | -22 | - | 1,617 | 2,991 |
| Lease liabilities | 14,490 | - | -1,545 | - | -37 | -1,818 | 580 | 17,310 |
| FINANCIAL LIABILITIES AND LEASE LIABILITIES |
134,283 | 66,253 | -65,308 | -684 | 66 | -1,818 | 2,329 | 133,445 |
(1) Paid loan fees.
(2) Amortization of loan fees, new leases, reclassifications and changes in accrued interest.
(3) Of which current portion of loan fees amortized over the entire term of the loan.
In the United States, Gaumont signed a receivables assignment agreement on June 2, 2020 for a maximum authorized amount of k\$50,000. The agreement expires on June 2, 2025 and replaces the previous agreement for the same amount, which expired in June 2020. This transaction was treated as a repayment of the previous loan and the arrangement of a new loan. The costs of arranging the new loan are amortized over the contractual term.
The key features of this receivables assignment agreement are identical to the previous one:
- the assigned receivables are the series' operating receivables, with the exception of receivables pledged to production loans;
- the interest rate is variable and Libor-based.
As of June 30, 2020, the outstanding receivables assigned, net of payments received, amounted to k\$54,972, of which k\$54,044 were receivables recognized as assets in the statement of the financial position and k\$928 were recognized as financing commitments given.
Repayment schedule
| Maturity date | ||||||
|---|---|---|---|---|---|---|
| 06.30.20 | < 1 year | 1 to 5 years | > 5 years | |||
| Revolving credit facility | - | - | - | - | ||
| Bonds | 59,855 | -75 | 59,930 | - | ||
| Production loans | 32,824 | -228 | 33,052 | - | ||
| Assignments of receivables | 17,489 | -124 | 17,613 | - | ||
| Financial contribution from the Caisse des dépôts | 4,855 | 324 | 2,180 | 2,351 | ||
| Other loans and borrowings | 2,707 | 1,574 | 863 | 270 | ||
| Lease liabilities | 14,490 | 3,041 | 8,058 | 3,391 | ||
| TOTAL(1) | 132,220 | 4,512 | 121,696 | 6,012 |
(1) Excluding accrued interest and bank overdraft.
Production loans and receivables assignment agreements are presented according to their contractual maturity. However, since they are repaid using the proceeds from the series, part of the loans will be repaid early.
Breakdown of liabilities by geographic area
| 06.30.20 | France | Europe | Americas | |
|---|---|---|---|---|
| Revolving credit facility | - | - | - | - |
| Bonds | 59,855 | 59,855 | - | - |
| Production loans | 32,824 | - | - | 32,824 |
| Assignments of receivables | 17,489 | - | - | 17,489 |
| Financial contribution from the Caisse des dépôts | 4,855 | 4,855 | - | - |
| Other loans and borrowings | 2,707 | 1,770 | 9 | 928 |
| Lease liabilities | 14,490 | 3,570 | 1,178 | 9,742 |
| TOTAL(1) | 132,220 | 70,050 | 1,187 | 60,983 |
(1) Excluding accrued interest and bank overdraft.
9.3. Financing commitments
| 06.30.20 | 12.31.19 | |
|---|---|---|
| Commitments given | 44,730 | 70,560 |
| Assignment of receivables as loan security | 815 | 9,396 |
| Pledging of assets | 43,915 | 61,164 |
| Commitments received | 47,109 | 71,428 |
| Unused credit facility | 47,109 | 71,428 |
Unused credit facilities consist of:
- k\$46,829 in respect of production loans arranged for US activities;
- k\$6,781 for the receivables assignment agreement entered into by Gaumont in the United States.
Pledges relating to Gaumont's assets have the same characteristics as those existing as of December 31, 2019. They cover works restored under the restoration program co-financed by the Caisse des Dépôts et Consignations and the production of American series financed by special-purpose loans. These pledges expire at the same date as the associated loans.
9.4. Financial instruments
Derivatives
The Group uses derivatives to manage and reduce its exposure to the risk of changes in interest rates and foreign exchange rates.
Derivatives included in the statement of financial position at their fair value at the reporting date are reported below.
| Currency | Counterparty | Notional amount (in thousands of currency) |
Fair value (in thousands of US dollars) |
Fair value (in thousands of euros) |
|
|---|---|---|---|---|---|
| Forward currency purchases | EUR | USD | 1,984 | 3 | - |
| Forward currency purchases | JPY | USD | 384,084 | -43 | - |
| Forward currency purchases | MXN | USD | 365,000 | -2,813 | - |
| Forward currency sales | USD | EUR | -37,470 | - | 677 |
| Forward currency sales | GBP | EUR | -2,773 | - | 65 |
| TOTAL | -2,853 | 742 |
Changes in the fair value of derivatives were recorded in financial income or other comprehensive income, in accordance with the provisions of IFRS 9.
| 06.30.20 | Other comprehensive income |
Net income | Currency translation adjustments |
12.31.19 | |
|---|---|---|---|---|---|
| Derivative instruments – assets | 838 | -943 | 1,594 | -1 | 188 |
| Derivative instruments – liabilities | -2,644 | -2,513 | 144 | 35 | -310 |
| TOTAL | -1,806 | -3,456 | 1,738 | 34 | -122 |
The ineffective portion of the instruments recognized is negligible for the period, amounting to k\$13 for contracts with a US dollar counterparty. No ineffective portion was recognized in income for contracts with a euro counterparty.
Financial instruments by category and fair value hierarchy
The table below compares, by category, the carrying amount and the fair value of all of the Group's financial instruments.
Financial assets and liabilities are measured at their fair value in the financial statements.
| 06.30.20 | Breakdown by category of instruments | |||||||
|---|---|---|---|---|---|---|---|---|
| Fair value |
Loans and | |||||||
| through | receivables | Liabilities | ||||||
| Net | profit | Available | at | at | ||||
| carrying | Fair | and | for-sale | amortized | amortized | Hierarchical | ||
| value | value | loss | assets | cost | cost | Derivatives | level | |
| Investments in non-consolidated entities |
3 | 3 | - | 3 | - | - | - | na |
| Other non-current financial assets | 66 | 66 | - | - | 66 | - | - | na |
| Other current financial assets | 142,790 | 142,790 | - | - | 142,790 | - | - | na |
| Derivative instruments – assets | 838 | 838 | - | - | - | - | 838 | 2 |
| Cash and cash equivalents | 130,355 | 130,355 | 130,355 | - | - | - | - | 1 |
| Financial assets | 274,052 | 274,052 | 130,355 | 3 | 142,856 | - | 838 | |
| Non-current financial liabilities | 116,259 | 116,259 | - | - | - | 116,259 | - | na |
| Non-current lease liabilities | 11,449 | 11,449 | - | - | - | 11,449 | - | na |
| Other non-current financial liabilities | - | - | - | - | - | - | - | na |
| Current financial liabilities | 3,534 | 3,534 | - | - | - | 3,534 | - | na |
| Current lease liabilities | 3,041 | 3,041 | - | - | - | 3,041 | - | na |
| Other current financial liabilities | 89,928 | 89,928 | 10,783 | - | - | 79,145 | - | 3/na |
| Derivative instruments – liabilities | 2,644 | 2,644 | - | - | - | - | 2,644 | 2 |
| Financial liabilities | 226,855 | 226,855 | 10,783 | - | - | 213,428 | 2,644 |
As of June 30, 2020, other current financial liabilities included a liability of k€10,783 measured at fair value through income. This liability represents Gaumont's commitment to repurchase, at the end of a five years period, the right to a share of proceeds held by the investors in the French-language feature films produced and distributed by Gaumont, as well as the residual assets and liabilities of the investment structure as of the settlement date. The fair value of this commitment was measured by applying the discounted cash flow method to the films released in movie theaters and to the asset and liability components identified as of the reporting date. As of June 30, 2020, the impact on net income of the discounted fair value of this commitment was -k€28.
No transfers in fair value hierarchy took place during the period.
9.5. Other financial income and expenses
| 06.30.20 | 06.30.19 | |
|---|---|---|
| Income from investment | - | - |
| Interest expense capitalized | -151 | 992 |
| Interest from assets and liabilities excluding cash equivalents | 1,639 | 2,028 |
| Discounting effect of liabilities and receivables | 63 | -45 |
| Proceeds from disposals of financial assets | - | - |
| Accumulated impairment losses and net financial provisions | 17 | 20 |
| Foreign exchange gains and losses | -983 | -48 |
| Changes in fair value | 1,738 | 226 |
| Other financial income and expenses | - | - |
| NET OTHER FINANCIAL INCOME/EXPENSES | 2,323 | 3,173 |
The foreign exchange gains and losses are essentially linked to Gaumont's exposure to changes in the American dollar related to the financing of the American activities.
9.6. Management of financial risks
Credit and counterparty risk
The main credit risk to which Gaumont is exposed is the risk of non-payment by its customers or financial partners involved in the production of works. Gaumont operates in France and internationally with the main market players and considers that its credit risk is very limited.
As of June 30, 2020, 87% of trade receivables and operating receivables for films were not yet due, and 9% were due for less than 90 days.
Liquidity risk
The k€60,000 bond, whose key features are described in note 8.2, comes with three covenant ratios that must be met half-yearly.
The R1 ratio requires the value of the Group's main assets to be at least equal to 2.75 times its net borrowings, plus outstanding financial advances granted by Gaumont SA to Gaumont USA Inc and its subsidiaries. The Group's main assets comprise the film catalog, the interest in Gaumont Animation and Gaumont's real estate assets.
The R2 ratio requires the Group to keep borrowings below equity.
The R3 ratio requires the Group to maintain net average revenue from its catalog at a minimum of 15% of its net borrowings at the calculation date.
For the R1, R2 and R3 ratios, borrowings are defined excluding Caisse des dépôts et consignations' financial investment and excluding American production loans, as long as they are without recourse against the Group but includes operating lease commitments.
As of June 30, 2020, given the absence of borrowings from the French entities, the R3 ratio was not applicable. The R1 and R2 ratios were respected and were respectively at 15.74 and 0.36.
Market risks
Interest rate risk
In France as in the United States, Gaumont finances its productions and general needs through fixed and variable rate loans and manages its exposure to interest rate risk using interest rate swaps and caps, if the situation warrants it.
As of June 30, 2020, the Group's interest rate exposure was as follows:
| Total | Fixed rate | Variable rate | Not exposed | |
|---|---|---|---|---|
| Financial assets (1) | 130,355 | - | 130,355 | - |
| Financial liabilities (2) | -117,883 | -64,710 | -50,466 | -2,707 |
| Net position before hedging | 12,472 | -64,710 | 79,889 | -2,707 |
| Hedging | - | - | - | - |
| Net position after hedging | 12,472 | -64,710 | 79,889 | -2,707 |
| Sensitivity (3) | 799 | - | 799 | - |
(1) Cash and cash equivalents. (2) Borrowings.
(3) Full-year impact at this level of net borrowings.
As Gaumont's exposure to interest rate risk is reversed due to the cash surplus over variable rate debt, sensitivity to this risk represents a gain or opportunity cost.
As of June 30, 2020, Gaumont no longer used interest rate instruments, given the Group's borrowing situation.
Foreign exchange risk
Operating foreign exchange risks
Gaumont is exposed to operating foreign exchange risks on commercial transactions posted on the balance sheet and on likely future transactions. When the Group produces films or television series outside the home country of the producer company, it is also exposed to foreign exchange risks on its production expenses.
As of June 30, 2020, revenue invoiced in a currency other than that of the company behind the transaction accounted for 7.6% of total consolidated revenue.
The main transaction currencies of European entities (excluding the euro) were the US dollar, Swiss franc and Japanese yen. The main transaction currencies for American entities (excluding the US dollar) were Canadian dollars and euros.
Gaumont examines on a case-by-case basis the feasibility of using foreign exchange hedges to reduce its exposure to currency movements.
| Risk related to a change in the euro value | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Total (in thousands of euros) |
USD/EUR | HUN/EUR | CAD/EUR | GBP/EUR | AUD/EUR | JPY/EUR | ILS/EUR | AUTRES/EUR | |
| Assets | 8,657 | 6,643 | 1,824 | 39 | 3 | 37 | 29 | 39 | 43 |
| Liabilities | -166 | -135 | - | - | -31 | - | - | - | - |
| Off balance sheet | 1,989 | 1,989 | - | - | - | - | - | - | - |
| Net position before hedging | 10,480 | 8,497 | 1,824 | 39 | -28 | 37 | 29 | 39 | 43 |
| Hedging | -1,989 | -1,989 | - | - | - | - | - | - | - |
| Net position after hedging | 8,491 | 6,508 | 1,824 | 39 | -28 | 37 | 29 | 39 | 43 |
| Sensitivity | -849 | -651 | -182 | -4 | 3 | -4 | -3 | -4 | -4 |
At June 30, 2020, the Group's exposure to operating foreign exchange risk was as follows:
An across-the-board 10% depreciation of each of the currencies against the euro would have a negative impact of k€849 on consolidated net income.
| Risk related to a change in the dollar value | ||||||||
|---|---|---|---|---|---|---|---|---|
| Total (in thousands of US dollars) |
GBP/USD | JPY/USD | MXN/USD | |||||
| Assets | 33 | 33 | - | - | ||||
| Liabilities | - | - | - | - | ||||
| Off balance sheet | -21,632 | - | -3,275 | -18,357 | ||||
| Net position before hedging | -21,599 | 33 | -3,275 | -18,357 | ||||
| Hedging | 21,632 | - | 3,275 | 18,357 | ||||
| Net position after hedging | 33 | 33 | - | - | ||||
| Sensitivity | -3 | -3 | - | - |
An across-the-board 10% depreciation of each of the currencies against the US dollar would have a negative impact of k\$3 on consolidated net income.
Financial foreign exchange risk
Gaumont is exposed to financial foreign exchange risk via its bank accounts and advances denominated in currencies other than the functional currency of the company concerned. The Group seeks to minimize its exposure by limiting foreign currency account balances and using hedging instruments when the situation warrants it.
At June 30, 2020, the Group's exposure to financial foreign exchange risk was as follows:
| Risk related to a change in the euro value | Risk related to a change in the dollar value |
||||
|---|---|---|---|---|---|
| Total (in thousands of euros) |
USD/EUR | GBP/EUR | Total (in thousands of US dollars) |
MXN/USD | |
| Assets | 64,543 | 61,285 | 3,258 | 293 | 293 |
| Liabilities | -249 | -249 | - | - | - |
| Off balance sheet | - | - | - | - | - |
| Net position before hedging | 64,294 | 61,036 | 3,258 | 293 | 293 |
| Hedging | -36,336 | -33,461 | -2,875 | - | - |
| Net position after hedging | 27,958 | 27,575 | 383 | 293 | 293 |
| Sensitivity | -2,796 | -2,758 | -38 | -29 | -29 |
An across-the-board 10% depreciation of each of the currencies against the euro would have a negative impact of k€2,796 on consolidated financial income. A 10% depreciation of the Mexican currency against the US dollar would have a negative impact of k\$29 on consolidated financial income.
Foreign exchange risk on foreign direct investment
As a result of its investments in subsidiaries based in the United States and in Great Britain, the Group is also exposed to foreign exchange risk when it translates its subsidiaries accounts into the reporting currency of its consolidated financial statements. The impacts of this risk are recognized in equity.
At June 30, 2020, the exchange rate exposure from foreign investments was as follows:
| (in thousands of euros) | USD/EUR | GBP/EUR |
|---|---|---|
| Assets | 196,664 | 1,716 |
| Liabilities | -289,210 | -4,152 |
| Off balance sheet | 89,453 | -113 |
| Net position before hedging | -3,093 | -2,549 |
| Hedging | - | - |
| Net position after hedging | -3,093 | -2,549 |
| Sensitivity to a 10% change | 309 | 255 |
A 10% depreciation of the dollar against the euro would have a positive impact of k€309 on the Group's equity.
Equity risk
Gaumont and its subsidiaries are not engaged in speculative stock market operations. The risk of impairment of treasury shares remains marginal in view of the amounts invested.
10. Provisions and contingencies
| Movements of the period | ||||||
|---|---|---|---|---|---|---|
| 06.30.20 | Increases | Uses | Reversals(1) | Other(2) | 12.31.19 | |
| Provisions for pension and similar benefits | 4,747 | 228 | - | - | 4,519 | |
| Non-current provisions | 4,747 | 228 | - | - | - | 4,519 |
| Provisions for legal proceedings relating to intellectual property rights over works |
30 | 30 | -50 | - | 50 | |
| Provisions for legal proceedings with personnel | 294 | 45 | -8 | - | -1 | 258 |
| Provisions for property-related expenses | - | - | - | - | - | - |
| Provisions for other costs | 438 | 131 | - | - | - | 307 |
| Current provisions | 762 | 206 | -58 | - | -1 | 615 |
| TOTAL | 5,509 | 434 | -58 | - | -1 | 5,134 |
| Impact on current operating income | 434 | -58 | - | - | ||
| Impact on non-current operating income | - | - | - | - | ||
| Impact on share of net income of associates | - | - | - | - | ||
| Impact on other comprehensive income | - | - | - | - |
(1) Unused amounts.
(2) Changes in scope, transfers between items and foreign currency translation adjustments.
In accordance with IAS 37, a provision is accounted for where an obligation exists at the reporting date towards a third party as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, without the Group receiving at least equivalent consideration, and a reliable estimate can be made of the amount of the obligation.
Gaumont is subject to legal proceedings related to its day-to-day operations. The group and its counsels had a close look at the charges set out and concluded that no provision had to be accounted for at this stage of the proceedings.
Provisions are recognized and adjusted according to changes in risk, estimated using the information available at the reporting date. Provisions recognized for contingent liabilities were measured on the basis of the amounts for which the group is being sued, where it is considered probable that it will have to pay.
11. Income tax
Gaumont and the French subsidiaries of which it owns 95% or more have elected for the tax consolidation scheme.
11.1. Breakdown of the tax expense or benefit
| 06.30.20 | 06.30.19 | |
|---|---|---|
| Current income tax | -34 | -33 |
| Deferred tax | -569 | 90 |
| TOTAL TAXES | -603 | 57 |
The tax losses of Gaumont in France and in the United States are recognized in the financial statements in such a way that the deferred tax assets do not exceed their net deferred tax liabilities.
11.2. Reconciliation of recorded tax and theoretical tax
| 06.30.20 | 06.30.19 | |
|---|---|---|
| Net income of companies before tax | -5,308 | -18,150 |
| Current tax rate applicable to the parent company | 28.00% | 28.00% |
| Theoretical tax | 1,486 | 5,082 |
| Impact of tax rate differentials on temporary differences | 14 | 6 |
| Tax rate differentials between France and abroad | -214 | -14 |
| Permanent differences | 30 | -15 |
| Impact of capping deferred tax assets at the amount of deferred tax liabilities | -1,583 | - |
| Long-term gains on disposals of consolidated shares | - | -8 |
| Change in unrecognized tax loss carryforwards | -931 | -5,460 |
| Tax consolidation | 165 | 56 |
| Tax credits in operating income (1) | 464 | 443 |
| Income tax without base and tax credits | -34 | -33 |
| Effective tax benefit (expense) | -603 | 57 |
| Effective tax rate | -11.36% | 0.31% |
(1) In the consolidated financial statements, the cinema and audiovisual tax credit and the employment competitiveness tax credit are presented in current operating income (loss).
12. Average workforce
The table below gives the workforce of the companies consolidated using the full consolidation method:
| 06.30.20 | 06.30.19 | |
|---|---|---|
| Managers | 132 | 118 |
| Supervisors | 47 | 54 |
| Employees | 69 | 61 |
| AVERAGE WORKFORCE | 248 | 233 |
13. Subsequent events
No event likely to have a material impact on the consolidated financial statements set out above has occurred since June 30, 2020
Statutory auditors' report on the half-year financial statements
To the Shareholders,
In compliance with the assignment entrusted to us by your annual general meeting and in accordance with the requirements of article L.451-1-2 III of the French monetary and financial code ("code monétaire et financier"), we hereby report to you on:
- the limited review of the accompanying condensed half-yearly consolidated financial statements of Gaumont for the period from January 1 to June 30, 2020;
- the verification of the information presented in the half-yearly management report.
These condensed half-yearly consolidated financial statements were drawn up under the responsibility of the Board of Directors, meeting on 10 September 2020, on the basis of the information available at that date in the context of the evolving COVID-19 health crisis and the difficulties in understanding its impacts and prospects for the future; Our role is to express a conclusion on these financial statements based on our review.
1. Conclusion on the financial statements
We conducted our review in accordance with the professional standards applicable in France. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the professional standards applicable in France and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed half-yearly consolidated financial statements are not prepared, in all material respects, in accordance with standard IAS 34 of the IFRS as adopted by the European Union applicable to interim financial information.
2. Specific verification
We have also verified the information presented in the half-yearly management report, dated 10 September 2020, on the condensed half-yearly consolidated financial statements subject to our review.
We have no matters to report as to its fair presentation and consistency with the condensed half-yearly consolidated financial statements.
Paris and Paris-La Défense, September 11, 2020 The statutory auditors
ADVOLIS ERNST & YOUNG et Autres Hugues de Noray Béatrice Belle
Declaration of the person responsible for the half-year report
I hereby certify that, to my knowledge, the condensed financial statements for the period ended were prepared in accordance with applicable accounting standards and give a true and fair view of the assets, financial position and results of Gaumont and of all the consolidated entities. Furthermore, the accompanying half-year management report provides a true and fair view of the significant events during the first six months of the financial year, their impact on the financial statements, and the main relatedparty transactions, and describes the principal risks and uncertainties for the remaining six months of the financial year.
Neuilly-sur-Seine, September 11, 2020
Sidonie Dumas
Chief Executive Officer