The owner of multi-award-winning Brown Bag Films recorded pre-tax losses of €4.6m last year as the business continued to be hit by the downturn in the animation content industry.
New consolidated accounts filed by Scholastic Ireland Holdings Ltd show that the group’s pre-tax losses of €4.62m were a 31% increase on the pre-tax losses of €3.5m in fiscal 2023.
Pre-tax losses increased as revenues almost halved from €58.93m to €30.18m.
However the revenues figures are skewed as the accounts are for a 10 month period to the end of May last year compared to a prior 12 month period.
The group recorded losses of €3.17m and exceptional costs of €1.44m concerning redundancy costs and impairment resulted in the pre-tax loss of €4.6m.
Numbers employed by the group reduced from 264 to 202 during the year as staff costs declined from €20m to €15m.
On the exceptional €1.44m cost, the directors state that the cost “reflects changes in the industry which left the group with the unfortunate course of action to reduce its headcount”.
The directors state that in the prior year, a decision was announced to restructure operations by downsizing which the directors feel “will allow the group to achieve efficiencies and boost profitability over the long term”.
The accounts show that the group – which operates studios in Dublin, Toronto and Bali – paid out a dividend of €1.74m last year.
The group did record a trading profit for the year after combined non-cash depreciation and amortisation costs of €8.9m are taken into account.
The Brown Bag business – which celebrated its 30th year in business last year – was founded in Dublin in 1994 by Cathal Gaffney and Darragh O’Connell.
Brown Bag Films was acquired by Canadian based 9 Story Media Group in 2015. 9 Story Media was purchased by the US based Scholastic for $185m in March of last year.
In an interview on RTE Radio One’s The Business in March 2024, Mr Gaffney spoke about the downturn in the industry.
“The market has softened quite a bit. For the last 10 years all the streamers, Apple, Netflix, Prime were all commissioning tonnes and tonnes of children’s animation,” he said.
“Now that has pulled quite a bit – they are cutting both costs and content that they produce. It is a tricky time globally, but it will bounce back, it always does. We are somewhat insulated in the work that we do is in both service and IP (Intellectual Property) work. It is not as busy as it was,” he added.
Some of the the studio’s global hit TV shows include Doc McStuffins, Daniel Tiger’s Neighborhood, Henry Hugglemonster, Bing, Peg + Cat, Peter Rabbit, Wild Kratts, Olivia, Noddy in Toyland, The Magic School Bus: Rides Again, and Octonauts.
On the risks and uncertainties facing the business, the directors state that “rapidly changing technology and platforms are altering the broadcasting landscape and existing business models and driving growth in direct-to-consumer and digital markets”.
They state that “the group believes it has sufficient experience to meet these risks while delivering profitable revenue growth”.
The pre-tax losses for last year also take account of interest payments of €492,410.
Directors’ pay reduced from €842,107 to €631,950.
Shareholder funds at the end of May last year totalled €48.53m, which included accumulated profits of €8.9m.
Cash funds increased from €8.04m to €11.46m.
Reporting by Gordon Deegan
