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Prime Focus returns to black in 12-month period

MUMBAI:  Helped by forex gains amid restructuring of business processes, VFX and 3D conversion service provider Prime Focus returned to black for the financial year ended March 2014. The company’s board of directors approved the extension of the current financial year by three months to June 2014. Hence, Prime Focus’ current fiscal period will comprise fifteen months.

For the 12 months ended 31 March 2014, Prime Focus recorded a net profit of Rs 32.96 crore (Rs 329.62 million) compared to a net loss of Rs 16.84 crore (Rs 168.47 million) in the year-ago period.

Although the company had initiated steps to spruce up its performance, it managed to achieve little top line gain which grew 9.5 per cent to Rs 834.88 crore (Rs 8.35 billion).

Interestingly, during the period under review, Prime Focus initiated several measures including the sell-off of its 2D-to-3D conversion business to its Netherlands-based subsidiary to boost performance. The move has partly paid off, but the restructuring processes are yet to yield the desired results as far as achieving costs efficiency is concerned.

Except for a drop in technician fees-which is obviously due to transfer of labour-intensive jobs to overseas companies-other expenses remained at elevated levels.

Employee benefits during the period grew 12.9 per cent to Rs 348.27 crore (Rs 3.48 billion), whereas other expenses vaulted 19.3 per cent to Rs 240.96 crore (Rs 2.41 billion).

EBITDA profit at Rs 80.26 crore (Rs 802.6 million) grew a miniscule 6.4 per cent, providing little solace as EBITDA margin stood almost unchanged at 9.6 per cent.

Meanwhile, exchange gains of Rs 29.21 crore (Rs 292.1 million) during the period under review was, as against Rs 6.75 crore (Rs 67.5 million) in the corresponding previous year, came in handy.

Fourth-quarter performance

Prime Focus’ income from operations in the fiscal fourth quarter expanded 32 per cent to Rs 58.69 crore (Rs 586.9 million) as opposed to Rs 44.46 crore (Rs 444.6 million) recorded in the corresponding quarter of the previous fiscal. This was by far among the best quarterly showings that the company displayed in recent times.

Expenses growing at a relatively slower pace and a drop in finance costs bolstered the company’s profitability besides helping it to return to black.

Total expenses gained 26.7 per cent to Rs 52.12 crore (Rs 521.2 million), compared to previous period’s Rs 41.11 crore (Rs. 411.1 million). Sharp rise in employee benefit expenses to Rs 15.74 crore (Rs 157.4 million), up 62 per cent, and stronger other expenses at Rs 8.90 crore (Rs 89 million), up 5.5 per cent, restricted EBTDA growth.

The company, nevertheless, witnessed marked improvement in its operational efficiency which saw its operating profit almost doubling to Rs 6.57 crore (Rs 65.7 million).

Prime Focus provides a complete spectrum of innovative creative and technical solutions to the film, broadcast, advertising and media industries. It also offers end-to-end services from pre-production to final delivery, including VFX, creative 3D conversion, animation, video and audio post-production, digital content management and distribution, digital intermediate, versioning and adaptation, and equipment rental.

The company recently received shareholders’ nod to sell its backend business comprising conversion of 2D audio visual/moving images into stereo 3D audio visual/moving images business to Prime Focus World N.V.

It also transferred the business of providing computer-generated VFX services to Prime Focus World Creative Services via a slump sale for a total consideration of $38 million.

Prime Focus’ cloud technology service arm, Prime Focus Technologies (PFT), recently raised Rs 45 crore (Rs 450 million) through private placement of optionally convertible debentures.