Los Angeles Business Journal

Visual Effects Firm Sees Future in Diversification

ENTERTAINMENT: 3-D conversion and foreign markets lift Prime Focus. market By Jonathan Polakoff Monday, July 22, 2013

New opportunities

Prime Focus has protected itself from the vagaries of the traditional effects industry in part with its 3-D conversion business, which has been growing. A conversion for a full-length feature film often costs $8 million to $12 million – and unlike traditional effects work, a conversion contract is typically awarded to just one firm.

Before moving into 3-D conversion work on a large scale a few years ago, the company was unprofitable and had revenues of just under $10 million, Malhotra said. Now, the company, which also has an animation unit, has annual revenues of more than $80 million.

However, parent company Prime Focus Ltd. reported a loss of $3.4 million on revenue of $128 million for the year ended March 31. The year prior, it had a profit of $16 million on revenue of $129 million, using current conversion rates.

But Prime Focus World’s plan has won the support of the financial community. The company paid back $79 million in debt late last year from a loan it took out in 2008 to expand into the United States and make acquisitions. It then scored a $10 million investment from Hong Kong firm AID Partners Capital to finance its Chinese expansion. After that, it raised a $53 million equity investment from Sydney’s Macquarie Capital – that sum is being doled out in two phases.

The financing will be used to look at new opportunities, including acquisitions. (Prime Focus kicked the tires of both Rhythm & Hues and Digital Doman but did not buy either, Malhotra said, because they were damaged goods.)

For now, Malhotra said he’s in the final stages of signing a joint-venture agreement to set up shop in China, where optimism is brimming due to a fast-growing movie market.

“We continue to be optimistic about the future of this business and this industry,” Malhotra said.

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