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Local animator deeper in the red, but Barita profit quadruples

Published:Wednesday | February 3, 2016 | 2:00 AMCamilo Thame
Ian McNaughton, managing director of Barita Investments Limited

Local cartoon production house, GSW Animation, took a $27-million loss last year.

Since start-up in 2012, the company has yet to turn a profit - it incurred losses of $7 million and $4 million in 2014 and 2013, respectively.

It did manage to increase revenue from $2.4 million at year end June 2014, to $12 million the following year, but that wasn't nearly enough to offset expenses.

The challenges the business model has been facing reflect an increasingly competitive market, according to Ian McNaughton, managing director of Barita Investments Limited.

The financial house bought an 11 per cent stake in GSW for $28 million in 2014, with the expectation that the local cartoon maker would break even within three years.

Instead, GSW's working capital deficit grew to $18 million by the end of last June, having not yet made it into the black, albeit, it is still early days for the company, which has already secured two contracts with Disney. It animated a 13-episode French TV show called Quiz Time by early 2013 and landed a contract to co-produce Spanish-animated series Lucky Fred, the production for which ramped up last financial year for the local studio.

Ultimately, GSW is going after its piece of a growing industry which is now valued at over US$200 billion annually, but it is still experiencing growing pains.

The financial loss and amortisation of Barita's interest in the animation company reduced the financial house's bottom line by $11 million last year, but Barita nearly quadrupled its earnings from year-earlier levels during the year ending September 2015. The company posted $242 million net profit for its latest financial year, up from $66 million the year before.

SUSTAINED GROWTH

Barita's net interest income declined by $40 million, or 13 per cent, but fees and commission brought in 68 per cent more, or an additional $69 million during the year.

Lower interest margins reflect a reduction in the size of the retail repo business - its repo book declined by $730 million, or by six per cent over the year - as well as lowered interest rates. Increased fee income was derived from the company's growing unit trust portfolio, which benefited from a vibrant stock market, and in part, a move by clients out of repurchase agreements into collective investment schemes.

Gains on sale of investments jumped from $97 million in the 2014 financial year to $346 million last financial year

McNaughton expects Barita to see sustained growth in its fee and commission income as the company grows its unit trust portfolio. He also expects increased liquidity from the Government's repayment of NDX bonds valued at $62 billion this month, following a near-US$200-million payout by Heineken to Red Stripe shareholders for selling their stock to the Dutch-based brewer last month, to translate into increased equity business.

camilo.thame@gleanerjm.com