DHX Media - Year-end Results Show 65% Revenue Growth



    www.dhxmedia.com
    AIM and TSX: DHX

    HALIFAX, Sept. 28 /CNW/ - DHX Media Ltd. ("DHX Media" or the "Group")
(AIM & TSX ticker: "DHX"), a leading independent international producer and
distributor of television programming and interactive content, announces its
audited financial results for the year to June 30, 2007 (a copy of which are
available on SEDAR at www.sedar.com).
    DHX Media produces, distributes and exploits the rights for television
and film programming, with a primary focus on children's and youth
productions. The Group has 14 children's series currently in first window
broadcast on multiple major cable and broadcast networks in the UK, US and
Canada, including, Bo on the Go, Lunar Jim, Franny's Feet, The Save-Ums and
Naturally Sadie. Its Franny's Feet property was recently licensed to Hasbro,
Inc.'s PLAYSKOOL division for toy and game merchandising worldwide.

    
    Highlights:

     - Revenue $26.0 million (2006: $15.8 million, which included only
       43 days of activities after the Decode acquisition), an increase
       of 65%;

    - Gross margin 37% (2006: 18%) or $9.7 million (2006: $2.8 million), an
      increase of 245% driven by the inclusion of the company's Decode
      subsidiary's distribution unit and better margins throughout the Group;

    - EBITDA(1),(2) $4.5 million (2006: $0.5 million), an increase of 772%;

    - Net income(2) $1.2 million (2006: loss of $0.9 million);

    - Basic earnings per share(2) $0.04 (2006: loss $0.06), based on 32.7m
      weighted average shares outstanding for fiscal 2007, versus 32.8m
      shares outstanding at year end;

    - Cash and short-term investments at year-end $5.3 million
      ($8.8 million);

    - Record quarterly net income(2) for 2007 Q4 $1.0 million (2006 Q4:
      $0.4 million);

    - Growth in content library of programs to close to 1,800 half hours
      (2006: 1,150);

    - Six new commissions and five production renewals for the company;

    - Number of delivered half-hours of production for which license periods
      had commenced increased by 77% to 126 from 71. Another 42 half-hours of
      production were delivered during the year, but their license periods
      had not commenced by June 30 2007; and

    - Contracts in place at year end for 200 half-hours of proprietary
      programs with more than 50 more half-hours currently under negotiation
      with various broadcasters.


    Michael Donovan, Chairman and CEO, DHX Media commented:

    "We are pleased with our results for our first full year as a combined
group, and achieving profitability. Our results show the revenue, gross margin
and net income acceleration which has resulted from both our organic and
acquisitive growth. These positive results are a validation of our strategy to
date, as well as of our momentum leading into future periods."
    "For the year ended, we achieved EBITDA(1) of $4.5 million and net income
of $1.2 million. Our gross margin rose from 18% to 37% as we began to exploit
the significant distribution capabilities that were acquired in fiscal 2006.
Furthermore, cash flow from operations increased to $20.4 million from 
$13.2 million, before our reinvestment in film and television programs of
$41.1 million for 2007 (2006: $17.6 million)."
    "DHX Media has a stable balance sheet which will enable the Company to
continue to grow. This is bolstered by the newly secured $70 million revolving
interim production financing credit facility, as announced on September 27,
2007 which will provide the Group with additional funds to help the business
grow.
    Please also see the 'Outlook' section of the below MD&A for more detailed
information.
    The full financial statements and MD&A can be found below and are also
available on SEDAR at www.sedar.com.

    About DHX Media Ltd.

    DHX Media Ltd. is a leading international producer and distributor of
television programming and interactive content with an emphasis on children,
family and youth markets. DHX Media Ltd. shares trade on AIM and are listed on
the TSX, the Toronto Stock Exchange. DHX Media's production companies, Decode
Entertainment and Halifax Film, are the producers or co-producers of
14 original television series and theatrical releases currently commissioned
for production and maintain a growing library of close to 1,800 half-hours of
mostly children and youth-oriented television productions.

    www.dhxmedia.com

    Disclaimer

    Certain statements herein may constitute forward-looking statements,
including those identified by the expressions "may", "will", "should",
"could", "anticipate", "believe", "plan", "estimate", "potential", "expect",
"intend" and similar expressions to the extent they relate to the Company or
its Management. These statements reflect the Company's current expectations
and are based on information currently available to Management. These
forward-looking statements are subject to a number of risks, uncertainties,
assumptions and other factors that could cause actual results or events to
differ materially from current expectations, including the matters discussed
under "Risk Factors" contained in the Company's prospectus dated May 12, 2006.
These forward-looking statements are made as of the date hereof, and the
Company assumes no obligation to update or revise them to reflect new events
or circumstances.

    --------------
    (1) EBITDA represents net earnings (loss) of the company before
        amortization expense, interest income (expense), non-controlling
        interest, equity income (loss), development expenses and stock-based
        compensation expense
    (2) Inclusive of income from strategic investments


    CHAIRMAN AND CHIEF EXECUTIVE'S REVIEW

    Overview

    The board of DHX Media Ltd. (the "Group") is pleased to announce the
results for the year ending June 30, 2007 which reflects the first full year
of combined activities with our subsidiary Decode Entertainment Inc
("Decode"), as well as our first full year of profitable results.
    In Fiscal 2007, DHX Media made a number of strides toward achieving its
strategy of building a significant library of children's high quality
television program rights that can be leveraged across multiple revenue
platforms internationally in the future. Most significant were the completion
of a number of merchandising and licensing deals for our property Franny's
Feet, our acquisition of a library of over 500 half-hours of content and our
continued organic growth with the commissioning of six new productions and the
renewal of another five. The Group is confident that the rewards of its
continued operating and financial growth will be realised in future periods.
To that end, they serve as positive indicators of the Company's future
performance.
    Following on the international success of Franny's Feet, one of the
Group's newest productions, Bo on the Go, a children's show focused on
promoting physical activity and coordination among viewers, commenced
broadcast on Canada's CBC in September and has already generated very positive
reviews. As part of the library acquired in December of last year, DHX Media
acquired rights to the back catalogue of This Hour Has 22 Minutes which the
company has already succeeded in securing an exclusive multi-year distribution
license for specialty television broadcasting.
    In 2007, music and royalty and new media revenues were up to $0.9 million
(2006 $0.1 million) and $0.4 million (2006 $0.2 million), respectively,
largely as a result of the inclusion of these revenue streams for the Decode
division. The Company anticipates further revenue growth, specifically in the
category of music and royalty revenues, as it embarks upon its merchandising
and licensing ("M&L") relationships with PLAYSKOOL, a division of Hasbro,
Inc., for the Company's preschool property, Franny's Feet, and Alliance
Atlantis for another preschool property, Lunar Jim. The Company is also
focused on expanding into other M&L relationships for other existing
proprietary properties.
    DHX Media continues to be well positioned to grow with cash flow from
operations of $20.4 million before our re-investments in film and television
programs of $41.1 million in 2007 (2006: $17.6 million), cash and short-term
investments of $5.3 million at year end, and less than $3 million in long-term
debt for 2007. Additionally, DHX Media secured a $70 million revolving master
interim production financing credit facility from the Royal Bank of Canada as
was announced on September 27, 2007.
    DHX Media's strategy continues to be to build a library of primarily
children's television content that can be exploited beyond its initial
commissioned window of distribution over and across multiple distribution
platforms, licensing periods, media and merchandising and licensing platforms
with a view to generating healthy returns on invested capital.

    Financial Performance

    Revenues for the year ended June 30, 2007 were $26.0 million (2006:
$15.8 million). The increase is due to greater production, distribution, music
royalties, new media revenue and increases in other categories. The company is
pleased with the growth in revenue attributable to and the successful
integration of Decode into the company. We expect this integration to continue
into the next fiscal year and to result in further synergies and revenue
growth for 2008.
    Proprietary production revenues were $13.5 million (2006: $13.5 million)
reflecting the 126 half-hours (2006: 71 half-hours) of television production
that were delivered and for which the license periods had commenced by June
30, 2007. In addition, another 42 half-hours of production were delivered
during the year,but their license periods had not commenced by June 30, 2007.
Therefore, the associated revenue could not be included in these results.
    Distribution revenues were up significantly to $9.8 million (2006: 
$0.6 million). The distribution team from Decode successfully placed some
20 titles from the Group's current production slate and its library in
multiple territories throughout the world.

    Other key financial indicators were as follows:

    - Gross margin was $9.7 million; representing 37% of revenue and
      increasing considerably from $2.8 million or 18% in 2006.

    - Operating expenses were $8.4 million (2006: $2.8 million). The increase
      included the non-cash items of amortization of $0.6 million (2006: nil)
      and a write down of development fees of $0.4 million (2006:
      $0.2 million). SG&A was $7.3 million (2006: $2.6 million) including the
      full year of Decode's activities and the expansion of our production
      and development slate.

    - EBITDA for Fiscal 2007 was $4.5 million, an increase of 772% as
      compared to $0.5 million for Fiscal 2006. EBITDA included $1.7 million
      in income from strategic investments (2006: $0.2 million).

    - Interest expense, net of interest income was $0.3 million (2006:
      $0.7 million). Interest expense consists of interest and bank fees of
      $0.5 million (2006: $6.0 thousand), which was off-set by interest
      income of $0.2 million (2006: $0.2 million), and non-cash items for the
      accretion of interest on the Class A Preferred Shares of nil in 2007
      (2006: $0.7 million) and nil for amortization of deferred financing
      fees (2006: $0.2 million).

    - Net income for Fiscal 2007 was $1.2 million, an improvement of
      $2.1 million over the $0.9 million net loss for Fiscal 2006.

    - Basic and fully diluted earnings per share were $0.04 and $0.03,
      respectively (2006: loss of $0.06 and loss of $0.06, respectively).
      These were based on the weighted average number of shares outstanding
      in Fiscal 2007 of 32.7 million and 35.7 million, respectively. As of
      June 30, 2007, the Group had 32.8 million shares outstanding.

    - Cash at June 30, 2007 was $3.4 million compared to $6.1 million as at
      June 30, 2006. Cash flow from operating activites was use of cash of
      $20.7 million for 2007, net of investment in film and television
      programs of $41.1 million.


    OPERATIONAL REVIEW

    New Commissions

    Fiscal 2007 saw several new commissions, including The Latest Buzz, Super
Why, Clang Invasion, The Truth About and Mighty Jungle, as well as renewals of
The Latest Buzz, Naturally Sadie, This Hour Has 22 Minutes, Mighty Jungle and
co-production Lunar Jim.
    Also during Fiscal 2007, principal photography was completed on our film
unit's theatrical adaptation of General Romeo Dallaire's Shake Hands With the
Devil: the Failure of Humanity in Rwanda. The film premiered at the Toronto
International Film Festival in September 2007 and is scheduled to open in
theatres across Canada on September 28, 2007. The film is a co-production
between DHX Media, Barna Alper Productions Inc. and Seville Productions and
was delivered after the Fiscal 2007 year-end.

    Distribution

    The company made significant sales both domestically and globally of
previously-commissioned and third-party programs during the year, highlighting
the enduring value potential of the Group's library.

    Notable sales included the following titles:

    - Angela Anaconda Seasons I to III;
    - Delilah & Julius Season I;
    - Franny's Feet Seasons I and II;
    - Naturally Sadie Seasons I to III;
    - The Save-Ums Seasons I and II;
    - Girlstuff-Boystuff seasons I and II;
    - POKO Seasons I to III; and
    - Planet Sketch Season I.

    The Company anticipates further revenue growth in distribution revenue for
2008.

    Merchandising and Licensing

    Merchandising and licensing (M&L) continues to be the key area of focus
for the full exploitation of our preschool and children's properties. Our
approach to M&L is to first secure distribution for properties in key
territories, including the US, the UK, France and Germany, which lays the
groundwork for exploitation of merchandising and licensing rights in the
future. Programs for which merchandising and licensing arrangements have been
secured include Franny's Feet, The Save-Ums, Chop Socky Chooks and Lunar Jim.
    As an example, PLAYSKOOL has acquired the worldwide toy and game
merchandising rights for Franny's Feet, while major publishing houses Penguin
Group (USA) and Simon & Schuster were appointed publishing licensees. Pursuant
to the appointments, DHX Media will receive a minimum guarantee advance from
both licensees with additional royalty payments expected to commence in late
fiscal 2008. For Lunar Jim, a co-production with Alliance Atlantis
Communications, DHX Media participates in a share of the net receipts from
consumer products licensing, which is being exploited by Fisher-Price. DHX
Media's co-production partner, Alliance Atlantis, is the distributor and
licensing agent for Lunar Jim.

    New Platform Exploitation

    The ability to exploit the Group's productions across new technological
platforms presents an important opportunity and is the focus of Decode's
interactive unit. The Group's new media strategy is to build upon its website
production expertise and to create content for new platforms such as mobile
phones, handsets and non-traditional broadcast media. The approach is to
actively pursue opportunities to repurpose existing content for Internet
applications as well as to develop original content for emerging platforms.
    For example, DHX Media has partnered with PBS to develop a Franny's Feet
preview site on www.pbskids.org/frannysfeet/index_flash.html, in conjunction
with the broadcast premiere. The site is expected to engage viewers in a
variety of entertaining and educational games in order to build their affinity
for Franny's Feet.
    The Group believes that it will continue to expand its business with some
of its existing international customers as they evolve from broadcasters of
children's programs to become multi-media aggregators of children's content.
Furthermore, as the youth market is attracting attention for new digital
applications, we believe that its new media expertise, combined with its
library of children's brands, will enable it to generate new revenue streams
for the business.

    Subsequent Events

    Subsequent to the Company's June 30 year end, there have been a number of
developments including:

    - Secured the worldwide television and home entertainment distribution
      rights to Turner Broadcasting's My Spy Family (26x22'), produced by
      Kindle Entertainment;

    - Completed a licensing sale of 254 thirty minute episodes of the hit
      Canadian comedy show, "This Hour Has 22 Minutes" to The Comedy Network
      of Canada for exclusive specialty television broadcast and non-
      exclusive broadband rights for Canada for approximately three years;

    - Appointed Rocket Licensing to be the UK licensing agent for our hit
      preschool property Franny's Feet. This complements the completed deal
      for costume characters with Rainbow Productions for Europe;

    - Secured the worldwide television distribution rights (excluding US) to
      the groundbreaking animated preschool series Super Why, as announced on
      September 24, 2007. The agreement includes 65 half hour episodes of the
      series, which will be launched at the annual industry trade fair,
      MIPCOM, in October 2007; and

    - Completed the arrangement of a $70 million revolving credit facility
      with the Royal Bank of Canada to replace and expand upon the previous
      15 production financing facilities held by DHX Media's two production
      subsidiaries, as announced on September 27, 2007.
    

    Current Trading and Outlook

    The Group's first full year of growth, synergy realisation and profit
demonstrates the potential of the DHX Media business model. DHX is able to
produce audience-winning programming while minimizing financial risk and
retaining the maximum exploitation rights associated with a production, in
order to generate multiple revenue streams. For Fiscal 2008 and beyond, the
Group has a very strong pipeline of 200 half-hours of contracted productions,
several promising children's properties for which the merchandising and
licensing rights are un-exploited, and a growing library which will
increasingly generate recurring revenue from existing and emerging
distribution platforms. We expect growth to continue, particularly in our
proprietary, distribution and merchandising and licensing segments as we begin
to see the benefits of the licensing arrangement with Hasbro, Inc. for
Franny's Feet. Furthermore, we will continue to implement and expand on our
strategy of growing the number of our productions for which we own the rights,
with a view to growing our library and building on the growth, margins and
profits delivered to date.

    Michael Donovan

    Chairman and Chief Executive Officer
    %SEDAR: 00023380E




For further information:

For further information: DHX Media Ltd.: Dana Landry, Chief Financial
Officer, (902) 423-0260; David A. Regan, EVP, Corporate Development & IR,
(902) 423-0260; AIM Nominated Advisors: Canaccord Adams Limited, +44 (0) 20
7050 6500, Neil Johnson, Erin Needra

Organization Profile

DHX Media Ltd.

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