DQ Entertainment Posts Year-End Earnings

Indian powerhouse animation, gaming, entertainment production and distribution company DQ Entertainment has announced its audited results for the year ended March 31, 2015. The company shows adjusted pre-tax profits of INR195 million (US$306.2 million), up from last year’s earnings of INR191 million (US$299.9 million). Operating profit before financing costs and foreign exchange rose to INR614 million (US$964.2 million) from INR412 million (US$647 million).

Revenues fell to INR1828 million (US$285.9 million) from INR2397 million (US$376.4 million) due to a slowdown in production and delay in the commencement of new projects. However, due to cost efficiencies, operating profit before tax, finance costs and foreign exchange is up by 33 percent compared to last year. The company posts an after-tax loss of INR202 million (US$317.2 million) against last year’s profit of INR376 million (US$590.5 million).

The company has recovered INR945 million (US$148.4 million) in receivables from September 2014 through May 2015, which is nearly 36 percent of the old outstanding debtors reported on August 31, 2014.

The reduction in turnover is primarily due to a slowdown in production and delay in the commencement of new projects. However, due to cost efficiencies, operating profit before tax, finance costs and foreign exchange is up by 33 percent compared to last year.

Five companies have cleared all the payments, while the balance debtors are paying up the amounts as committed. The company is now very hopeful of recovering most of the aged debtors of over 240 days in the current financial year.

DQE's 'Robin Hood'

Operating Highlights:

• DQE has completed the production and delivery of Lassie and Friends, co-produced with DreamWorks Classics USA and Super Prod France, and is airing successfully on international networks such as TF1 France, Telequebec Canada, ZDF Germany, Sun TV India, Media Corp Singapore, Noga Israel and several other networks globally.
• DQE's VFX foray has been successful and the division has contracted and delivered high quality VFX for several domestic feature films.
• DQE's feature film division has closed a US$30 million print and advertisement deal on a proposed theatrical release scheduled for autumn 2017. Jungle Book has attracted important distributors and sales agents in the U.S. and Europe. Distribution contracts are under negotiation.
• The Licensing and Distribution division has negotiated 37 audio visual distribution deals and 14 licensing and merchandising deals worth US$6.29 million in the year ending March 31, 2015, and a further US$4 million worth is in the pipeline.
• Power Kids and Tiny Toons, DQE's digital channels, have recorded an average of 150,000 daily online views, resulting in increased revenues through both these channels.
• DQE has developed capabilities to exploit the latest advancements in technology and geared to meet increased demand for high quality stereoscopic, 2K and 4K content and is currently producing a unique hybrid CGI show combining live action with CGI animation called 7 Dwarfs and Me.

“The media and entertainment industry is undergoing a deep transformation,” commented DQE chairman and CEO Tapaas Chakravarti. “New platforms and ways to access and consume entertainment are redefining the rules of the game. On the other hand, newer delivery platforms impose new challenges relating to rights management, delivery formats and consumption behavior. We are focused on adapting our business model with strategies to remain competitive on a global scale. Flexibility, adaptability and scalability have become more critical than ever. Our focus on developing IP ownership for global audiences with international marquee partners has forged the way for additional revenue streams to accelerate growth and profitability.”

Reade the full report on DQE’s Animation, VFX, Digital, and Licensing and Distribution divisions below:

Animation

Our teams continue to deliver high quality CGI and traditional TV series. In FY 2014-15 we have completed the production of several high quality shows and also commenced several new productions. These include Sheriff Callies' Wild West, a work-for-hire series being produced for Disney Junior, and 7 Dwarfs and Me, a unique hybrid TV show combining CGI characters and backgrounds with live action sequences with real actors which is being produced with Method Animation France.

Some of the other projects in production include Peter Pan season II, Miles from Tomorrow Land, Popples, 7 Dwarfs and Me and Shabiyat, while production of new IPs such as 5 & IT, Robin Hood - Mischief in Sherwood Season 2, Wind in the Willows and Pinocchio - The After Story, will commence soon.

DQE currently has a production order book worth approximately $76 million for the next 30 months.

DQE recently secured up to US$50m from the issue of senior secured convertible bonds, mainly to fund the development of owned-intellectual property and co-production projects currently in the pipeline for production over the next two years, which are set out above.

Completed Projects

• Robin Hood, Mischief in Sherwood Season 1- 52 x 11' - CGI TV series with Method Animation and TF1 France, ZDF Germany, ATV Turkey, DeA Kids Italy
• Lassie & Friends - 52 x 11' 2D HD TV series with Dreamworks Classic Media USA, Super Prod & TF1 France, ZDF Germany
• Delicious Valley - 30 minute DVD with Team Entertainment
• Little Prince - Season 3- 26 x 22' CGI TV series with Method Animation

Ongoing Projects

• Peter Pan Season 2 - 26 x 22' CGI TV series with ZDF Germany, De Agostini Italy, Method Animation and France TV
• Miles from Tomorrow Land - 22 X 22' CGI for Disney Junior, USA
• Popples - 52 x 11' CGI with Method Animation, France & Saban Group, USA
• Lady Bug -  4 x 11' CGI with Zag Toons, USA
• Sheriff Callie’s Wild West - 52 x 11' CGI for Disney Junior, USA
• 7 Dwarfs & Me - 52 x 11' live action and CGI with ZDF, FTV, RAI and Method Animation, France
• Shabiyate season 10 - 15 x 13' CGI TV series with Fanar Productions, UAE
• Hive season II - TV series with Lupus Films UK
• Chimpoo & Simpoo - 26 x 22' 2D TV series with ZeeQ Network, India

Upcoming Projects

• Jungle Book Season 3 - CGI TV Series with Story Board Animation and ZDF Germany
• Eshafan - 15 x 13' 2D TV Series with Fanar Productions, UAE
• PegHeads - 52 x 11' CGI TV Series with Story Animation LLC, Florida
• Pio the Chick - 2D TV Series with RAI, Italy and Gruppo Alcuni
• 5 & IT - 52 x 11' CGI TV Series with Disney/Method Animation
• Robin Hood season 2- 52 x 11' CGI TV Series with Method Animation

Visual Effects (VFX)

The foray by your company into VFX for live action films has been successful with the team successfully producing VFX for several domestic live action films. The VFX pipeline has been strengthened with the addition of highly skilled talent, ready to take on international VFX film works in the near future. The Company has completed 5 projects in VFX and 3 more are currently in productions.

Licensing and Distribution

DQE has been distributing and licensing content owned and produced by the Company as well as co-produced content for which we hold rights in certain territories. The performance has been satisfactory with more than 37 audio visual distribution deals and 14 licensing and merchandising deals worth US$6.29 million signed in FY 14-15 and US$4.0 million worth and more in the pipeline.

Going forward we strive to focus more on the revenues derived from licensing and merchandising for our owned and co-owned properties. With the recently concluded deal with Discovery family channel in the United States, we are confident of achieving success in this market which represents a large potential in terms of licensing revenues globally.

Digital

Among many other initiatives, our digital kids entertainment channels launched during the  last quarter of 2014 have gathered momentum and are generating revenues. Power Kids and Tiny Toonz are expanding their subscriber bases on a continual basis. Power Kids showcases animated content for children aged five and above, whereas Tiny Toonz is aimed at younger children. Both channels have now started to gain traction and have witnessed over 150,000 average daily online views resulting in increased revenues through both these channels.

Review of Financial Performance

Although our revenues are down by nearly 23% as compared to the previous year, our earnings before tax, finance costs and foreign exchange increased by 33% as compared to the previous year. This is because of the various cost efficiency measures taken by the Company. The EBITDA margin also improved from 43% in the previous year to 58% in FY15 under review.

Source: DQ Entertainment

Formerly Editor-in-Chief of Animation World Network, Jennifer Wolfe has worked in the Media & Entertainment industry as a writer and PR professional since 2003.