A tale of two animators

DQ up while Imagi suffers losses on 'Astro Boy'

HONG KONG -- Half-year results mark a stark contrast in the fortunes of two of Asia's biggest animation companies.
India's DQ Entertainment posted pre-tax profits of $1.1 million on revenues of $14.4 million in the six months to September, and an outstanding order book worth $92 million.
However, Hong Kong- and Los Angeles based Imagi, which recently saw the flop of its "Astro Boy," announced losses of $94 million for the half year to September, and revealed that it needs to raise $57 million of new financing to complete its next picture, "Gatchaman."
Imagi losses included an impairment loss on CG animation pictures of $51 million, prints and advertising expenses of $12.4 million and a loss on redemption of bridge loans of $19.5 million during the period. "Astro Boy" was released shortly after the reporting period and has reached $19m in a 3,200-screen Summit Entertainment release in the U.S. Other recent documents show that the firms were counting on a North American gross of more than $75 million.
DQ, which started out as an animation sub-contractor and now has deals with Universal, Disney and Moonscoop, is moving up the value chain by taking greater ownership of the intellectual property it is handling, albeit often alongside other major groups. Its titles now include "The Jungle Book," "Toomai," "Lassie," "Balkand" and "Ravan."
Imagi is "required to raise an additional minimum sum of approximately HK$447 million ($57 million), of which HK$252 million ($32.5 million) is expected to be utilized within the next 12 months, for it to complete a major CG animation picture in progress to its revenue generating stage," according to a filing. "In order to minimize funding risks, the group would be seeking project or equity financing to finance the ongoing and new projects." It expressed confidence in "Gatchaman," a now in-production superhero movie based on a Japanese property that is scheduled for delivery next October in full stereoscopic 3-D.
However the company's auditors were unable to endorse the company's prognosis. "In the absence of evidence that the group will be successful in raising the necessary funding as and when it is required, we consider that there is a material uncertainty as to whether the group will have the necessary financial resources to complete the major CG animation picture in progress, the carrying value of which at 30th September 2009 is approximately HK$419 million ($54.1 million) and thereby realize this asset in the normal course of business," they added in a note to the accounts.
Such is the scale of the fund-raising task that faces the board, the auditors chose not to rule on whether the accounts were actually prepared in accordance with Hong Kong accounting standards.