Germany's Senator Entertainment Restructuring After Massive Loss
German indie producer-distributor Senator Entertainment is overhauling its entire operation, looking for capital and cutting costs following a horrible year that saw revenues fall 47 percent and losses skyrocket.
Senator CEO Helge Sasse outlined the broad strokes of his company's new strategy after presenting the year-end figures. For Senator investors, they did not make for comforting reading. The Berlin-based group booked a net loss of $38 million (€27.4 million) last year, after earning nearly $7 million in 2012. Revenues fell 47.1 percent to $37.5 million (€27.1 million).
"After a difficult and disappointing year, we have decided on a comprehensive strategic realignment," said Sasse. "We see the negative development as a chance, together with our shareholders, to realign the company."
Senator's record results of 2012 were due almost entirely to the blockbuster success of French comedy The Intouchables, which earned nearly $90 million in Germany, making it the most successful French film ever in the territory. Senator and Sasse used the cash windfall to rapidly expand the company's distribution and production operations. But promising acquisitions, including David O. Russell's Silver Linings Playbook, Steven Soderbergh's Side Effects and Paul Thomas Anderson's The Master did not deliver at the German box office. Senator had to write off $15 million (€10.8 million) last year in forecast revenues from its library of film rights.
According to Sasse, Senator's "realignment" will see the company be much more selective in its acquisitions. using "clear economic and artistic standards" to provide a "transparent and standardized assessment" in the acquisition of international features.
The company will also focus more on in-house and co-productions, particularly international co-productions such as Anton Corbijn's A Most Wanted Man starring the late Philip Seymour Hoffman, which Senator co-financed. As part of this, Senator said it will continue to invest in up-and-coming talent through its sponsorship of Germany's First Steps award for young directors.
But cost-cutting will also make up a major part of Senator's realignment. Last year's loss wiped out Senator's basic capital, focusing the company to take on new loans to stay afloat. These look to include a short-term bridge loan of around $14 million (€10 million) followed by a conversion of shareholder bonds into equity and a capital increase for cash, all of which Senator says are in discussion. A reduction of overhead costs and "optimizing marketing expenses" are also on Senator's to do list.
"We took the unpleasant operative development of 2013 as an incentive to, as much as possible, clear our books of existing accounting risks," said Senator CFO Max Sturm "and to so create the conditions to build up a new, solid financial basis that will allow us to take advantage of the growing film market in the future."
Senator's board said it expects to book revenues of between $35 million to $42 million (€25 million - €30 million) this year, as the restructuring program kicks. But additional costs associated with the new strategy are expected to result in a pre-tax (EBIT) loss in the low eight-figure range.